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MINDANAO SAVINGS AND LOAN ASSOCIATION, INC.

, represented by its Liquidator, THE PHILIPPINE


DEPOSITINSURANCE CORPORATION v. EDWARD WILLKOM; GILDA GO; REMEDIOS UY; MALAYO
BANTUAS, in his capacity as the Deputy Sheriff of RTC, Branch 3, Iligan City; and the REGISTER OF
DEEDS of Cagayan de Oro City, Respondent
2010 Oct 202nd Division G.R. No. 178618 NACHURA, J.:
FACTS
First Iligan Savings and Loan Association, Inc. (FISLAI) and Davao Savings and Loan Association, Inc.
(DSLAI) are entities duly registered with the SEC primarily engaged in the business of granting loans and
receiving deposits from the general public, and treated as banks. In 1985, FISLAI and DSLAI entered into
a merger, with DSLAI as the surviving corporation but their articles of merger were not registered with
the SEC due to incomplete documentation. DSLAI changed its corporate name to MSLAI by way of an
amendment to its Articles of Incorporation which was approved by the SEC.
In 1986, the Board of Directors of FISLAI passed and approved Board Resolution assigning its assets in
favor of DSLAI which in turn assumed the formers liabilities. The business of MSLAI, however, failed.
Hence, the Monetary Board of the Central Bank of the Philippines ordered its liquidation with PDIC as its
liquidator. Prior to the closure of MSLAI, Uy filed with the RTC of Iligan City, an action for collection of
sum of money against FISLAI. The RTC issued a summary decision in favor of Uy, directing FISLAI to pay.
As a consequence, 6 parcels of land owned by FISLAI were levied and sold to Willkom.
In 1995, MSLAI, represented by PDIC, filed before the RTC a complaint for the annulment of the Sheriffs
Sale alleging that the sale on execution of the subject properties was conducted without notice to it and
PDIC. Respondents, in its answer, averred that MSLAI had no cause of action because MSLAI is a
separate and distinct entity from FISLAI on the ground that the unofficial merger between FISLAI and
DSLAI (now MSLAI) did not take effect considering that the merging companies did not comply with the
formalities and procedure for merger or consolidation as prescribed by the Corporation Code of the
Philippines. RTC dismissed the case for lack of jurisdiction. CA affirmed but ruled that there was no
merger between FISLAI and MSLAI (formerly DSLAI) for their failure to follow the procedure laid down
by the Corporation Code for a valid merger or consolidation.
ISSUE
Was the merger between FISLAI and DSLAI (now MSLAI) valid and effective?
HELD: NO.
In merger, one of the corporations survives while the rest are dissolved and all their rights, properties,
and liabilities are acquired by the surviving corporation. Although there is dissolution of the absorbed or
merged corporations, there is no winding up of their affairs or liquidation of their assets because the
surviving corporation automatically acquires all their rights, privileges, and powers, as well as their
liabilities. The merger, however, does not become effective upon the mere agreement of the
constituent corporations. Since a merger or consolidation involves fundamental changes in the

corporation, as well as in the rights of stockholders and creditors, there must be an express provision of
law authorizing them. The steps necessary to accomplish a merger or consolidation, as provided for in
Sections 76, [24] 77, [25] 78, [26] and 79[27] of the Corporation Code, are:
( 1) the board of each corporation draws up a plan of merger or consolidation. Such plan must include
any amendment, if necessary, to the articles of incorporation of the surviving corporation, or in case of
consolidation, all the statements required in the articles of incorporation of a corporation;
( 2) Submission of plan to stockholders or members of each corporation for approval. A meeting must be
called and at least two (2) weeks notice must be sent to all stockholders or members, personally or by
registered mail. A summary of the plan must be attached to the notice. Vote of two-thirds of the
members or of stockholders representing two-thirds of the outstanding capital stock will be needed.
Appraisal rights, when proper, must be respected;
(3) Execution of the formal agreement, referred to as the articles of merger or consolidation, by the
corporate officers of each constituent corporation. These take the place of the articles of incorporation
of the consolidated corporation, or amend the articles of incorporation of the surviving corporation;
(4) Submission of said articles of merger or consolidation to the SEC for approval;
(5) If necessary, the SEC shall set a hearing, notifying all corporations concerned at least two weeks
before;
(6) Issuance of certificate of merger or consolidation. Clearly, the merger shall only be effective upon the
issuance of a certificate of merger by the SEC, subject to its prior determination that the merger is not
inconsistent with the Corporation Code or existing laws.
In this case, it is undisputed that the articles of merger between FISLAI and DSLAI were not registered
with the SEC due to incomplete documentation. Consequently, the SEC did not issue the required
certificate of merger. Even if it is true that the Monetary Board of the Central Bank of the Philippines
recognized such merger, the fact remains that no certificate was issued by the SEC. Such merger is still
incomplete without the certification.
The issuance of the certificate of merger is crucial because not only does it bear out SECs approval but it
also marks the moment when the consequences of a merger take place. By operation of law, upon the
effectivity of the merger, the absorbed corporation ceases to exist but its rights and properties, as well
as liabilities, shall be taken and deemed transferred to and vested in the surviving corporation.
The same rule applies to consolidation which becomes effective not upon mere agreement of the
members but only upon issuance of the certificate of consolidation by the SEC. When the SEC, upon
processing and examining the articles of consolidation, is satisfied that the consolidation of the
corporations is not inconsistent with the provisions of the Corporation Code and existing laws, it issues a
certificate of consolidation which makes the reorganization official. The new consolidated corporation
comes into existence and the constituent corporations are dissolved and cease to exist.

There being no merger between FISLAI and DSLAI (now MSLAI), for third parties such as respondents,
the two corporations shall not be considered as one but two separate corporations. A corporation is an
artificial being created by operation of law. It possesses the right of succession and such powers,
attributes, and properties expressly authorized by law or incident to its existence. It has a personality
separate and distinct from the persons composing it, as well as from any other legal entity to which it
may be related. Being separate entities, the property of one cannot be considered the property of the
other.
Thus, in the instant case, as far as third parties are concerned, the assets of FISLAI remain as its assets
and cannot be considered as belonging to DSLAI and MSLAI, notwithstanding the Deed of Assignment
wherein FISLAI assigned its assets and properties to DSLAI, and the latter assumed all the liabilities of
the former. As provided in Article 1625 of the Civil Code, an assignment of credit, right or action shall
produce no effect as against third persons, unless it appears in a public instrument, or the instrument is
recorded in the Registry of Property in case the assignment involves real property. The certificates of
title of the subject properties were clean and contained no annotation of the fact of assignment.
Respondents cannot, therefore, be faulted for enforcing their claim against FISLAI on the properties
registered under its name. Accordingly, MSLAI, as the successor-in-interest of DSLAI, has no legal
standing to annul the execution sale over the properties of FISLAI. With more reason can it not cause the
cancellation of the title to the subject properties of Willkom and Go.
Alabang Development Corporation v. Alabang Hills Village Association and Rafael Tinio, G.R. No.
187456, June 2, 2014.
Corporations; capacity to sue of dissolved corporations. The trustee of a corporation may continue to
prosecute a case commenced by the corporation within three years from its dissolution until rendition
of the final judgment, even if such judgment is rendered beyond the three-year period allowed by
Section 122 of the Corporation Code. However, there is nothing in the said cases which allows an
already defunct corporation to initiate a suit after the lapse of the said three-year period. On the
contrary, the factual circumstances in the above cited cases would show that the corporations involved
therein did not initiate any complaint after the lapse of the three-year period. In fact, as stated above,
the actions were already pending at the time that they lost their corporate existence.
In the present case, petitioner filed its complaint not only after its corporate existence was terminated
but also beyond the three-year period allowed by Section 122 of the Corporation Code. Thus, it is clear
that at the time of the filing of the subject complaint petitioner lacks the capacity to sue as a
corporation. To allow petitioner to initiate the subject complaint and pursue it until final judgment, on
the ground that such complaint was filed for the sole purpose of liquidating its assets, would be to
circumvent the provisions of Section 122 of the Corporation Code.
Aderito Z. Yujuico and Bonifacio C. Sumbilla v. Cezar T. Quiambao and Eric C. Pilapil, G.R. No. 180416,
June 2, 2014.
Corporations; refusal to allow inspection is a criminal offense. We find inaccurate the pronouncement
of the RTC that the act of refusing to allow inspection of the stock and transfer book is not a punishable

offense under the Corporation Code. Such refusal, when done in violation of Section 74(4) of the
Corporation Code, properly falls within the purview of Section 144 of the same code and thus may be
penalized as an offense.
Corporations; persons who may be held liable under Section 74. A perusal of the second and fourth
paragraphs of Section 74, as well as the first paragraph of the same section, reveal that they are
provisions that obligates a corporation: they prescribe what books or records a corporation is required
to keep; where the corporation shall keep them; and what are the other obligations of the corporation
to its stockholders or members in relation to such books and records. Hence, by parity of reasoning, the
second and fourth paragraphs of Section 74, including the first paragraph of the same section, can only
be violated by a corporation. It is clear then that a criminal action based on the violation of the second
or fourth paragraphs of Section 74 can only be maintained against corporate officers or such other
persons that are acting on behalf of the corporation. Violations of the second and fourth paragraphs of
Section 74 contemplates a situation wherein a corporation, acting thru one of its officers or agents,
denies the right of any of its stockholders to inspect the records, minutes and the stock and transfer
book of such corporation.
The problem with the petitioners complaint and the evidence that they submitted during preliminary
investigation is that they do not establish that respondents were acting on behalf of STRADEC. Quite the
contrary, the scenario painted by the complaint is that the respondents are merely outgoing officers of
STRADEC who, for some reason, withheld and refused to turn-over the company records of STRADEC;
that it is the petitioners who are actually acting on behalf of STRADEC; and that STRADEC 1s actually
merely trying to recover custody of the withheld records. In other words, petitioners are not actually
invoking their right to inspect the records and the stock and transfer book of STRADEC under the second
and fourth paragraphs of Section 74. What they seek to enforce is the proprietary right of STRADEC to
be in possession of such records and book. Such right, though certainly legally enforceable by other
means, cannot be enforced by a criminal prosecution based on a violation of the second and fourth
paragraphs of Section 74. That is simply not the situation contemplated by the second and fourth
paragraphs of Section 74 of the Corporation Code. (Aderito Z. Yujuico and Bonifacio C. Sumbilla v. Cezar
T. Quiambao and Eric C. Pilapil, G.R. No. 180416, June 2, 2014.)
Bank of Commerce v. Radio Philippines Network, Inc., et al., G.R. No. 195615, April 21, 2014
Corporations; merger; concept. Merger is a re-organization of two or more corporations that results in
their consolidating into a single corporation, which is one of the constituent corporations, one
disappearing or dissolving and the other surviving. To put it another way, merger is the absorption of
one or more corporations by another existing corporation, which retains its identity and takes over the
rights, privileges, franchises, properties, claims, liabilities and obligations of the absorbed corporation(s).
The absorbing corporation continues its existence while the life or lives of the other corporation(s) is or
are terminated.
Corporations; merger; de facto merger. A de facto merger can be pursued by one corporation acquiring
all or substantially all of the properties of another corporation in exchange of shares of stock of the

acquiring corporation. The acquiring corporation would end up with the business enterprise of the
target corporation; whereas, the target corporation would end up with basically its only remaining
assets being the shares of stock of the acquiring corporation. (Bank of Commerce v. Radio Philippines
Network, Inc., et al., G.R. No. 195615, April 21, 2014.)
Indubitably, it is clear that no merger took place between Bancommerce and TRB as the requirements
and procedures for a merger were absent. A merger does not become effective upon the mere
agreement of the constituent corporations. All the requirements specified in the law must be complied
with in order for merger to take effect. Section 79 of the Corporation Code further provides that the
merger shall be effective only upon the issuance by the Securities and Exchange Commission (SEC) of a
certificate of merger.
Here, Bancommerce and TRB remained separate corporations with distinct corporate personalities.
What happened is that TRB sold and Bancommerce purchased identified recorded assets of TRB in
consideration of Bancommerces assumption of identified recorded liabilities of TRB including booked
contingent accounts. There is no law that prohibits this kind of transaction especially when it is done
openly and with appropriate government approval. Indeed, the dissenting opinions of Justices Jose
Catral Mendoza and Marvic Mario Victor F. Leonen are of the same opinion. In strict sense, no merger or
consolidation took place as the records do not show any plan or articles of merger or consolidation.
More importantly, the SEC did not issue any certificate of merger or consolidation.
The dissenting opinion of Justice Mendoza finds, however, that a "de facto" merger existed between
TRB and Bancommerce considering that (1) the P & A Agreement between them involved substantially
all the assets and liabilities of TRB; (2) in an Ex Parte Petition for Issuance of Writ of Possession filed in a
case, Bancommerce qualified TRB, the petitioner, with the words "now known as Bancommerce;" and
(3) the BSP issued a Circular Letter (series of 2002) advising all banks and non-bank financial
intermediaries that the banking activities and transaction of TRB and Bancommerce were consolidated
and that the latter continued the operations of the former.
The idea of a de facto merger came about because, prior to the present Corporation Code, no law
authorized the merger or consolidation of Philippine Corporations, except insurance companies, railway
corporations, and public utilities. And, except in the case of insurance corporations, no procedure
existed for bringing about a merger. Still, the Supreme Court held in Reyes v. Blouse, that authority to
merge or consolidate can be derived from Section 28 (now Section 40) of the former Corporation Law
which provides, among others, that a corporation may "sell, exchange, lease or otherwise dispose of all
or substantially all of its property and assets" if the board of directors is so authorized by the affirmative
vote of the stockholders holding at least two-thirds of the voting power. The words "or otherwise
dispose of," according to the Supreme Court, is very broad and in a sense, covers a merger or
consolidation.
But the facts in Reyes show that the Board of Directors of the Corporation being dissolved clearly
intended to be merged into the other corporations. Said this Court:

It is apparent that the purpose of the resolution is not to dissolve the [company] but merely to transfer
its assets to a new corporation in exchange for its corporation stock. This intent is clearly deducible from
the provision that the [company] will not be dissolved but will continue existing until its stockholders
decide to dissolve the same. This comes squarely within the purview of Section 28 of the corporation
law which provides, among others, that a corporation may sell, exchange, lease, or otherwise dispose of
all its property and assets, including its good will, upon such terms and conditions as its Board of
Directors may deem expedient when authorized by the affirmative vote of the shareholders holding at
least 2/3 of the voting power. [The phrase] "or otherwise dispose of" is very broad and in a sense covers
a merger or consolidation."
In his book, Philippine Corporate Law, Dean Cesar Villanueva explained that under the Corporation
Code, "a de facto merger can be pursued by one corporation acquiring all or substantially all of the
properties of another corporation in exchange of shares of stock of the acquiring corporation. The
acquiring corporation would end up with the business enterprise of the target corporation; whereas, the
target corporation would end up with basically its only remaining assets being the shares of stock of the
acquiring corporation."
No de facto merger took place in the present case simply because the TRB owners did not get in
exchange for the banks assets and liabilities an equivalent value in Bancommerce shares of stock.
Bancommerce and TRB agreed with BSP approval to exclude from the sale the TRBs contingent judicial
liabilities, including those owing to RPN, et al.
Corporations; merger; effectivity. It is clear that no merger took place between Bancommerce and TRB
as the requirements and procedures for a merger were absent. A merger does not become effective
upon the mere agreement of the constituent corporations. All the requirements specified in the law
must be complied with in order for merger to take effect. Section 79 of the Corporation Code further
provides that the merger shall be effective only upon the issuance by the Securities and Exchange
Commission (SEC) of a certificate of merger. (Bank of Commerce v. Radio Philippines Network, Inc., et
al.,G.R. No. 195615, April 21, 2014.)
Corporations; nationality. The control test is still the prevailing mode of determining whether or not a
corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled
to undertake the exploration, development and utilization of the natural resources of the Philippines.
When in the mind of the Court there is doubt, based on the attendant facts and circumstances of the
case, in the 60-40 Filipino-equity ownership in the corporation, then it may apply the grandfather rule.
(Narra Nickel Mining and Development Corp., et al. v. Redmont Consolidated Mines, G.R. No. 195580,
April 21, 2014.)
Applying the control test, the Supreme Court recently recognized corporate layering in the case of Narra
Nickel Mining and Development Corp. v. Redmont Consoidated Mines Corp. (G.R. No. 195580, April 21,
2014).
The control test basically provides that shares belonging to corporations or partnerships at least 60
percent of the capital of which is owned by Filipino citizens shall be considered of Philippine nationality.

At the same time, the Supreme Court said that while *c+orporate layering is admittedly allowed by the
*Foreign Investments Act+ if it is used to circumvent the Constitution and pertinent laws, then it
becomes illegal.
In such case, the grandfather rule will be used to determine compliance with the nationality
requirement prescribed by our Constitution and laws.
Under the grandfather rule, the citizenship of the individuals who ultimately own or control the shares
of stock of the corporation must be looked into for purposes of determining compliance with the Filipino
ownership requirement.
According to the Supreme Court, where the 60-40 Filipino-foreign equity ownership is not in doubt, the
Grandfather Rule will not apply.
But where there exists doubt as to the proper representation of the Filipino-foreign equity participation,
the grandfather rule will be used in lieu of the control test to determine compliance with the nationality
requirement.
In Redmont, the Supreme Court found serious doubt as to the true nationality of the corporations
involved due to the following: 1) the presence of a common major investor, a one hundred percent
Canadian corporation, in three mining corporations; 2) the similarities of the corporate structures of the
corporations; 3) the presence of the same nominal shareholders in the corporations; and 4) the paid-in
capital of the corporate owners being paid only by the foreign investor, among many other indicators
showing the desire to circumvent the nationality requirement in mining activities.
After a scrutiny of the evidence extant on record, the Court finds that this case calls for the application
of the grandfather rule since doubt prevails and persists in the corporate ownership of petitioners.
Also, doubt is present in the 60-40 Filipino equity ownership of petitioners Narra, McArthur and
Tesoro, since their common investor, the 100% Canadian corporation, MBMI, funded them, the
Supreme Court said.
Thus, the Supreme Court ruled that the foreign corporation, MBMI, owns majority of the common
stocks of the mining corporations through a web of corporate layering, in violation of the nationality
requirement prescribed by our Constitution for mining companies.
As shown above, the control test is still the general rule. Only when there exists genuine doubt as to the
true ownership of the stockholdings in a corporation will the grandfather rule be used to determine
compliance with the Filipino ownership requirement prescribed by our Constitution and laws.

G.R. No. 176579 PLDT foreign ownership case


The Supreme Court (SC) upheld its 2011 decision against Philippines Long Distance Telephone Co.
(PLDT), directing the Securities and Exchange Commission (SEC) to probe into the telecoms giants
possible breach of the 40 percent constitutional limit for foreign ownership of utility firms.

The high court affirmed its June 28, 2011 ruling that 64.27 percent of the total common shares of PLDT
are owned by foreigners, while only 35.73 percent are owned by Filipinos.
Common shares are those shares which grant the right to vote in company elections. While Filipino
investors own 99.44 percent of preferred shares in PLDT, these shares do not have voting rights and
constitute a mere 1/170 of the total revenues generated by common shares, the SC said.
Sections 10 and 11 of Article XII of the 1987 Philippine Constitution state that at least 60 percent of the
capital of any public utility corporation, such as PLDT, should be owned by Filipinos. The term capital,
however, must be interpreted only as common shares and must exclude preferred or non-voting shares,
the high tribunal explained.
Any other meaning of the term capital openly invites alien domination of economic activities reserved
exclusively to Philippine nationals [and] will ultimately result in handing over effective control of our
national economy to foreigners making Filipinos second-class citizens in their own country, read the
SC decision.
Foreign ownership
The landmark case was initially filed before the SC by late PLDT stockholder and human rights lawyer
Wilson Gamboa, who sought to revoke the sale of 111,415 PLDT shares by state-owned Philippine
Telecommunications Investment Corporation to Hong Kong-based regional conglomerate First Pacific
Co. (FPC) Ltd. The said sale allowed FPC to increase its stake in PLDT from 30.7 to 37 percent and the
total foreign ownership to 81.47 percent, Gamboa said.
After the SC ruled in favor of Gamboa, PDLT Chairman Manuel Pangilinan, along with the SEC and the
Philippine Stock Exchange, then submitted a motion for reconsideration in July 2011.
In a 50-page appeal, Pangilinan questioned the high courts definition of capital as voting shares and
claimed the Constitution did not adopt inherent restrictions on foreign capital ownership because of the
dire economic condition and pressing need for investments.
The SC dismissed the appeal, saying the core purpose of the 2011 ruling is to ensure that Filipinos have
effective control of the Philippine national economy.
While the SEC has yet to finalize the draft Memorandum Circular outlining the guidelines, rules, and
regulation consistent with the SC decision, the PLDT board of directors has moved to preempt the
investigation directed by the SCs ruling.
By authorizing the sale of 150 million new shares to PLDTs own Beneficial Trust Fund Holdings Inc. for
P150 million, or P1 a share, the PLDT board of directors intend to reduce the number of foreign-owned
shares from the current 64.27 percent to about 35 percent.
The Supreme Court issued an entry of judgment on its ruling in June 2011 on the issue of foreign
ownership in PLDT where it held that the 60-40 (percent) nationality requirement in public utility
corporations, in favor of Filipinos, refers to common shares entitled to vote in the election of directors,

not to the totality of the companys capital stock. the instant entry bore the note that the 40 percent
foreign ownership cap relates only to common shares and not to total outstanding capital stock
(common and non-voting preferred shares).
For one, the SEC has to take a close look at its approach in determining the nationality of corporations
for purposes of verifying compliance with the ownership benchmark.
At present, it uses two methods in addressing this issue: the control test and grandfather rule.
Under the control test, if, on the basis of the documents submitted, it can be seen that at least 60
percent of a corporations capital is owned by Filipinos, the corporation will be considered of Philippine
nationality.
Once the 60 percent Filipino ownership is established, no further inquiries will be made on the citizenship
of the rest of the stockholders.
The grandfather rule, on the other hand, provides that the nationality of the stockholders is material or
critical in determining the nationality of a corporation or its compliance with our laws on permissible
foreign investments.
Criteria
Under this rule, the stocks owned by or registered in the name of foreigners are sorted out and added to
determine if they meet the allowable maximum percentage of foreign ownership in nationalized
businesses, e.g., 30 percent for advertising companies, 25 percent for recruitment agencies and 60
percent for financing companies.
The past rulings of the SEC show that it applies the control test in determining a corporations
nationality, unless there are questions about the true character of such ownership.
If there are, the corporation is grandfathered, meaning, the nationality of the owners of the stocks
under question is examined to determine if it meets the nationality requirements.
With the PLDT ruling already in force, the SEC may have to set aside the control test and apply the
grandfather rule to corporations engaged in nationalized businesses.
For this purpose, it can require the key officials of the affected companies to submit sworn statements of
their compliance with the minimum requirement on ownership of common shares by Filipino citizens.

Corporation; doing business without a license. The appointment of a distributor in the Philippines is
not sufficient to constitute doing business unless it is under the full control of the foreign corporation.
On the other hand, if the distributor is an independent entity which buys and distributes products, other
than those of the foreign corporation, for its own name and its own account, the latter cannot be
considered to be doing business in the Philippines. It should be kept in mind that the determination of
whether a foreign corporation is doing business in the Philippines must be judged in light of the
attendant circumstances.

In the case at bench, it is undisputed that DISI was founded in 1979 and is independently owned and
managed by the spouses Leandro and Josephine Bantug. In addition to Steelcase products, DISI also
distributed products of other companies including carpet tiles, relocatable walls and theater settings.
The dealership agreement between Steelcase and DISI had been described by the owner himself as:
basically a buy and sell arrangement whereby we would inform Steelcase of the volume of the products
needed for a particular project and Steelcase would, in turn, give special quotations or discounts after
considering the value of the entire package. In making the bid of the project, we would then add out
profit margin over Steelcases prices. After the approval of the bid by the client, we would thereafter
place the orders to Steelcase. The latter, upon our payment, would then ship the goods to the
Philippines, with us shouldering the freight charges and taxes.
This clearly belies DISIs assertion that it was a mere conduit through which Steelcase conducted its
business in the country. From the preceding facts, the only reasonable conclusion that can be reached is
that DISI was an independent contractor, distributing various products of Steelcase and of other
companies, acting in its own name and for its own account. (Steelcase, Inc. vs. Design International
Selections, Inc. G.R. No. 171995, April 18, 2012.)

Corporation; doing business without a license; estoppel. As shown in the previously cited cases, this
Court has time and again upheld the principle that a foreign corporation doing business in the
Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine entity
that had derived some benefit from their contractual arrangement because the latter is considered to
be estopped from challenging the personality of a corporation after it had acknowledged the said
corporation by entering into a contract with it.
In Antam Consolidated, Inc. v. Court of Appeals, this Court had the occasion to draw attention to the
common ploy of invoking the incapacity to sue of an unlicensed foreign corporation utilized by
defaulting domestic companies which seek to avoid the suit by the former. The Court cannot allow this
to continue by always ruling in favor of local companies, despite the injustice to the overseas
corporation which is left with no available remedy. (Steelcase, Inc. vs. Design International Selections,
Inc., G.R. No. 171995, April 18, 2012.)
Corporations; doctrine of apparent authority. The doctrine of apparent authority provides that a
corporation will be estopped from denying the agents authority if it knowingly permits one of its
officers or any other agent to act within the scope of an apparent authority, and it holds him out to the
public as possessing the power to do those acts. The doctrine of apparent authority does not apply if
the principal did not commit any acts or conduct which a third party knew and relied upon in good faith
as a result of the exercise of reasonable prudence. Moreover, the agents acts or conduct must have
produced a change of position to the third partys detriment. (Advance Paper Corporation and George

Haw, in his capacity as President of Advance Paper Corporation v. Arma Traders Corporation, Manuel
Ting, et al., G.R. No. 176897, December 11, 2013.)
Corporations; doctrine of apparent authority . In Peoples Aircargo and Warehousing Co., Inc. v. Court
of Appeals, we ruled that the doctrine of apparent authority is applied when the petitioner, through its
president Antonio Punsalan Jr., entered into the First Contract without first securing board approval.
Despite such lack of board approval, petitioner did not object to or repudiate said contract, thus
clothing its president with the power to bind the corporation. Inasmuch as a corporate president is
often given general supervision and control over corporate operations, the strict rule that said officer
has no inherent power to act for the corporation is slowly giving way to the realization that such officer
has certain limited powers in the transaction of the usual and ordinary business of the corporation.
In the absence of a charter or bylaw provision to the contrary, the president is presumed to have the
authority to act within the domain of the general objectives of its business and within the scope of his or
her usual duties. (Advance Paper Corporation and George Haw, in his capacity as President of Advance
Paper Corporation v. Arma Traders Corporation, Manuel Ting, et al., G.R. No. 176897, December 11,
2013.)