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CORPO DIGEST:

LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC., petitioner,


vs. HON. COURT OF APPEALS, HOMEINSURANCE AND GUARANTY
CORPORATION, EMDEN ENCARNACION and HORATIO AYCARDO, respondents.

ISSUE:

First, whether or not LGVHAIs failure to file its by-laws within the period prescribed by Section 46 of
the Corporation Code resulted in the automatic dissolution of LGVHAI.

Second, whether or not two homeowners associations may be authorized by the HIGC in one sprawling
subdivision. However, in the Decision of August 23, 1994 being assailed here, the Court of Appeals
affirmed the Resolution of the HIGC Appeals Board.

HELD:

In resolving the first issue, the Court of Appeals held that under the Corporation Code, a private
corporation commences to have corporate existence and juridical personality from the date the
Securities and Exchange Commission (SEC) issues a certificate of incorporation under its official
seal. The requirement for the filing of by-laws under Section 46 of the Corporation Code within one
month from official notice of the issuance of the certificate of incorporation presupposes that it is
already incorporated, although it may file its by-laws with its articles of incorporation. Elucidating on
the effect of a delayed filing of by-laws, the Court of Appeals said:

We also find nothing in the provisions cited by the petitioner, i.e., Sections 46 and 22, Corporation
Code, or in any other provision of the Code and other laws which provide or at least imply that failure
to file the by-laws results in an automatic dissolution of the corporation. While Section 46, in
prescribing that by-laws must be adopted within the period prescribed therein, may be interpreted as a
mandatory provision, particularly because of the use of the word must, its meaning cannot be stretched
to support the argument that automatic dissolution results from non-compliance.

We realize that Section 46 or other provisions of the Corporation Code are silent on the result of the
failure to adopt and file the by-laws within the required period. Thus, Section 46 and other related
provisions of the Corporation Code are to be construed with Section 6 (1) of P.D. 902-A. This section
empowers the SEC to suspend or revoke certificates of registration on the grounds listed therein.
Among the grounds stated is the failure to file by-laws (see also II Campos: The Corporation Code,
1990 ed., pp. 124-125). Such suspension or revocation, the same section provides, should be made
upon proper notice and hearing. Although P.D. 902-A refers to the SEC, the same principles and
procedures apply to the public respondent HIGC as it exercises its power to revoke or suspend the
certificates of registration or homeowners associations. (Section 2 [a], E.O. 535, series 1979,
transferred the powers and authorities of the SEC over homeowners associations to the HIGC.)

On the second issue, the Court of Appeals reiterated its previous ruling [5] that the HIGC has the
authority to order the holding of a referendum to determine which of two contending associations
should represent the entire community, village or subdivision.
Undaunted, the South Association filed the instant petition for review on certiorari. It elevates as
sole issue for resolution the first issue it had raised before the Court of Appeals, i.e., whether or not the
LGVHAIs failure to file its by-laws within the period prescribed by Section 46 of the Corporation
Code had the effect of automatically dissolving the said corporation.
The Government of the Philippine Islands vs. El Hogar Filipino

ISSUE: Whether the acts of respondent corporation merit its dissolution or deprivation of its corporate
franchise and to exclude it from all corporate rights and privileges

HELD: SUSTAINED only as to administering of real property not owned by it and when permitted by
contract.

Causes of action:
1) Alleged illegal holding of real property for a period exceeding five years from receipt of title-
Cause of delay is not respondent’s fault

2) That respondent is owning and holding a business lot with the structure thereon in excess of
its reasonable requirements and in contravention of Sec. 13(5) of Corpo. Law- WITHOUT
MERIT
Every corporation has the power to purchase, hold and lease such real property as the
transaction would of the lawful business may reasonably and necessarily require.

3) That respondent is engaged in activities foreign to the purposes for which the corporation was
created and not reasonably necessary to its legitimate ends-VALID
The administration of property, payment of real estate taxes, causing necessary
repairs, managing real properties of non-borrowing shareholders is more befitting to
the business of a real estate agent or a trust company than a building and loan
association.

4) That the by-laws of the association stating that, “the board of directors by the vote of an
absolute majority of its members is empowered to cancel shares and to return the balance to
the owner by reason of their conduct or any other motive or liquidation” is in direct conflict
with Sec. 187 of the Corporation Law which provides that the board of directors shall not
have the power to force the surrender and withdrawal of unmatured stock except in case of
liquidation or forfeiture of stock for delinquency-WITHOUT MERIT
There is no provision of law making it a misdemeanor to incorporate an invalid provision in the
by-laws of a

GOKONGWEI, jr. vs. SEC

ISSUE: W/N the amended by-laws of SMC disqualifying a competitor from nomination
or election to the Board of Directors of SMC are valid and reasonable.
HELD/RATIONALE: Amendments are valid.
The validity or reasonableness of a by-law of a corporation is purely a question of law.
Petitioner claims that the amended by-laws are invalid and unreasonable because they were tailored to
suppress the minority and prevent them from having representation in the Board", at the same time
depriving petitioner of his "vested right" to be voted for and to vote for a person of his choice as
director.
Any person "who buys stock in a corporation does so with the knowledge that its affairs are
dominated by a majority of the stockholders and that he impliedly contracts that the will of the majority
shall govern in all matters within the limits of the act of incorporation and lawfully enacted by-laws
and not forbidden by law."
Pursuant to section 18 of the Corporation Law, any corporation may amend its articles of
incorporation by a vote or written assent of the stockholders representing at least two-thirds of the
subscribed capital stock of the corporation. If the amendment changes, diminishes or restricts the rights
of the existing shareholders, then the dissenting minority has only one right, viz.: "to object thereto in
writing and demand payment for his share." Under section 22 of the same law, the owners of the
majority of the subscribed capital stock may amend or repeal any by-law or adopt new by-laws. It
cannot be said, therefore, that petitioner has a vested right to be elected director, in the face of the fact
that the law at the time such right as stockholder was acquired contained the prescription that the
corporate charter and the by-law shall be subject to amendment, alteration and modification.
Although in the strict and technical sense, directors of a private corporation are not regarded
as trustees, there cannot be any doubt that their character is that of a fiduciary insofar as the corporation
and the stockholders as a body are concerned. As agents entrusted with the management of the
corporation, they should act for the collective benefit of the stockholders.
It is a settled state law in the United States that corporations have the power to make by-laws
declaring a person employed in the service of a rival company to be ineligible for the corporation's
Board of Directors. ". . . (A)n amendment which renders ineligible, or if elected, subjects to removal, a
director if he be also a director in a corporation whose business is in competition with or is antagonistic
to the other corporation is valid." This is based upon the principle that where the director is so
employed in the service of a rival company, he cannot serve both, but must betray one or the other.
Such an amendment "advances the benefit of the corporation and is good."
The doctrine of "corporate opportunity" is precisely a recognition that fiduciary standards
could not be upheld where the fiduciary was acting for two entities with competing interests. It is not
denied that a member of the Board of Directors of the San Miguel Corporation has access to sensitive
and highly confidential information.
It is obviously to prevent the creation of an opportunity for an officer or director of San
Miguel Corporation, who is also the officer or owner of a competing corporation, from taking
advantage of the information which he acquires as director to promote his individual or corporate
interests to the prejudice of San Miguel Corporation and its stockholders, that the questioned
amendment of the by-laws was made. Certainly, where two corporations are competitive in a
substantial sense, it would seem improbable, if not impossible, for the director, if he were to discharge
effectively his duty, to satisfy his loyalty to both corporations and place the performance of his
corporation duties above his personal concerns.
In the absence of any legal prohibition or overriding public policy, wide latitude may be
accorded to the corporation in adopting measures to protect legitimate corporate interests. The test
must be whether the business does in fact compete, not whether it is capable of an indirect and highly
unsubstantial duplication of an isolated or non-characteristic activity.

GRACE HS VS CA

ISSUE: Whether or not the representative from Grace Christian High School should be allowed to
have a permanent seat in the board of directors.
HELD: No. The Corporation Code is clear when it provides that members of the board of a
corporation must be elected by the stockholders (stock corporation) or the members (non-stock
corporation). Admittedly, there are corporations who allow some of their directors to sit in the board
without being elected – but such practice cannot prevail over provisions of law. Practice, no matter
how long continued, cannot give rise to any vested right if it is contrary to law. Further, there is no
reason as to why a representative from GCHS should be given an automatic seat. It should therefore go
through the process of election. It cannot also be argued that the draft of the by-laws in 1975 was
ratified when GCHS was allowed to take its seat for 15 years without an election. In the first place, the
proposal was merely a draft and even if passed and approved by the general membership, it cannot be
given effect because it is void and contrary to the law. GCHS’ seat in the corporate board is at best
merely tolerated by GVAI.

SALAFRANCA VS. PHILAMLIFE


ISSUE: Whether or not Salafranca was illegally dismissed.
HELD: Yes. At that time, Salafranca already enjoys security of tenure because he is already a regular
employee. It is true that PVHAI has the right to amend its by-laws but such amendment must not
impair existing contracts or rights. In this case, the provision that Salafranca’s position shall be co-
terminus with the appointing Board impairs his right to security of tenure which has already vested
even prior to the amendment of the by-laws in 1987.
CHINA BANKING VS CA

Issue:
Whether or not the assignment of the right of redemption made by Alfonso Roxas Chuain favor of
private respondent Paulino was done to defraud his creditors and may be rescindedunder Article 1387
of the Civil Code.
Held:
Existence of fraud or intent to defraud creditors may either be presumed in accordancewith Article
1387 of the Civil Code or duly proved as the case may be.After his conjugal share inTCT 410603 was
foreclosed by Metrobank, the only property that Alfonso Roxas Chua had washis right to redeem the
same, it forming part of his patrimony. "Property" under civil lawcomprehends every species of title,
inchoate or complete, legal or equitable. In the case at bar,the presumption that the conveyance is
fraudulent has not been overcome. At the time a judgment was rendered in favor of China Bank against
Alfonso and the corporation, Paulino wasstill living with his parents in the subject property. Paulino
himself admitted that he knew hisfather was heavily indebted and could not afford to pay his debts. The
transfer was undoubtedlymade between father and son at a time when the father was insolvent and had
no other propertyto pay off his creditors. Hence, it is of no consequence whether or not Paulino had
given valuableconsideration for the conveyance. Petition is granted

Valley golf and country club vs. rosa vda. De caram

ISSUE:

WON a non-stock corporation seize and dispose of the membership share of a fully-paid member
on account of its unpaid debts to the corporation when it is authorized to do so under the
corporate by-laws but not by the Articles of Incorporation?

RULING:

The Supreme Court ruled that there is a specific provision under Title XI on Non-Stock Corporations
of the Corporation Code dealing with the termination of membership in a non-stock corporation such
as Valley Golf.

Section 91 of the Corporation Code provides:

SEC. 91. Termination of membership.—Membership shall be terminated in the manner and


for the causes provided in the articles of incorporation or the by-laws. Termination of
membership shall have the effect of extinguishing all rights of a member in the corporation or
in its property, unless otherwise provided in the articles of incorporation or the by-laws.
(Emphasis supplied)

A share can only be deemed delinquent and sold at public auction only upon the failure of the
stockholder to pay the unpaid subscription. Delinquency in monthly club dues was merely an ordinary
debt enforceable by judicial action in a civil case. A provision creating a lien upon shares of stock for
unpaid debts, liabilities, or assessments of stockholders to the corporation, should be embodied in the
Articles of Incorporation, and not merely in the by-laws. Moreover, the by-laws of petitioner should
have provided formal notice and hearing procedure before a member’s share may be seized and
sold.

The procedure for stock corporation’s recourse on unpaid subscription is not applicable in
member’s shares in a non-stock corporation.

SC proceeded to declare the sale as invalid. SC found that Valley Golf acted in bad faith when it sent
the final notice to Caram under the pretense they believed him to be still alive, when in fact they had
very well known that he had already died. The Court stated:

Whatever the reason Caram was unable to respond to the earlier notices, the fact remains that
at the time of the final notice, Valley Golf knew that Caram, having died and gone, would not
be able to settle the obligation himself, yet they persisted in sending him notice to provide a
color of regularity to the resulting sale.

That reason alone, evocative as it is of the absence of substantial justice in the sale of the Golf Share, is
sufficient to nullify the sale and sustain the rulings of the SEC and the Court of Appeals.

Moreover, the utter and appalling bad faith exhibited by Valley Golf in sending out the final notice
to Caram on the deliberate pretense that he was still alive could bring into operation Articles 19, 20 and
21 under the Chapter on Human Relations of the Civil Code. These provisions enunciate a general
obligation under law for every person to act fairly and in good faith towards one another. Non-stock
corporations and its officers are not exempt from that obligation.

CALATAGAN GOLF CLUB VS. CLEMENTE

Issue: W/N Calatagan is liable for damages under Art. 19 of the Civil Code.
Ruling: Sec. 69 of the Corporation Code refers specifically to unpaid subscriptions to capital stock. The
sale of delinquent stock is the non-payment of the subscription price for the share of stock itself and the
stockholder has yet to fully pay for the value of the shares subscribed. Clemente had already fully paid
for the share and Calatagan no longer had any outstanding obligation to deprive him of full title to his
share. Section 69 will only be applicable if Clemente still has not fully paid for the share and the non-
stock corporation decided to sell such share as a consequence which is not the case at bar. Sec. 91 of
the Corp. Code provides that termination of membership in non-stock corporations are governed by its
articles of incorporation or by-laws. In accordance with it's by-laws, Calatagan sent the third and final
demand letter with the warning but it was sent ot the mailing address which Calatagan knew was
already closed. The Corporate Secretary under its by-laws is required by law to keep a record of the
addresses of all stockholder and that the Secretary needs to notify the shareholder of the order to sell at
auction of said shareholder's stock. The Corporate Secretary being a lawyer is knowledgeable on the
law and of corporate records and should have known that the third demand letter would still have been
sent back to them. Due diligence was not exercised by the Corporate Secretary, there was even no
inquiry as to the mailing address or verification of the other addresses on record provided by Clemente
and knowing that the PO box was already closed it still persisted in sending the final demand and
warning letter to the same PO box which constituted bad faith. Calatagan's bad faith and failure to
observe its own by-laws resulted not merely in the loss of Clemente's privilege to enjoy Calatagan's
facilities but also in significant pecuniary damage to him. Knowing as Clemente did that Calatagan was
in possession of his home address as well as residence and office telephone numbers, he had every
reason to assume that the club would not be at a loss should it need to contact him. A non-stock
corporation like Calatagan is not exempt from the obligation laid down by Articles 19-21 which
obliges under law every person to act fairly and in good faith towards one another. Clemente has
sustained pecuniary injry by reason of Calatagan's wrongful violation of its own by-laws and CA's
award of moral and exemplary damages as well as attorney's fees are warranted. Calatagan was cited in
violation of Art. 32 of the CC by CA which allows recovery of damages from any private individual
who directly or indirectly obstructs, defeats, violates or in any manner impeded or impairs the right
against deprivation of property without due process of laws. CA's decision is affirmed with costs
against Calatagan.

PMI COLLEGES VS. NLRC

I. Whether the money claims of private respondent representing salaries/wages as contractual instructor
for class instruction, on-the-job training and shipboard and plant visits have valid legal and factual
bases;
II. Whether claims for salaries/wages for services relative to on-the-job training and shipboard and
plant visits by instructors, assuming the same were really conducted, have valid bases;
III. Whether the petitioner was denied its right to procedural due process; and
IV. Whether the NLRC findings in its questioned resolution have sound legal and factual support.
We see no compelling reason to grant petitioner’s plea; the same must, therefore, be dismissed.
At once, a mere perusal of the issues raised by petitioner already invites dismissal for demonstrated
ignorance and disregard of settled rules on certiorari. Except perhaps for the third issue, the rest
glaringly call for a re-examination, evaluation and appreciation of the weight and sufficiency of factual
evidence presented before the Labor Arbiter. This, of course, the Court cannot do in the exercise of
its certiorari jurisdiction without transgressing the well-defined limits thereof. The corrective power
of the Court in this regard is confined only to jurisdictional issues and a determination of whether there
is such grave abuse of discretion amounting to lack or excess of jurisdiction on the part of a tribunal or
agency. So unyielding and consistent are the decisional rules thereon that it is indeed surprising why
petitioner’s counsel failed to accord them the observance they deserve.

SAWADJAAN VS. CA

Issue:
Whether or not the failure of AIIBP to file its by-laws within the period prescribed results to a nullity
of all actions and proceedings it has initiated.
Ruling: NO.
The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts business, has
shareholders, corporate officers, a board of directors, assets, and personnel. It is, in fact, here
represented by the Office of the Government Corporate Counsel, “the principal law office of
government-owned corporations, one of which is respondent bank.” At the very least, by its failure to
submit its by-laws on time, the AIIBP may be considered a de facto corporation whose right to exercise
corporate powers may not be inquired into collaterally in any private suit to which such corporations
may be a party.
Moreover, a corporation which has failed to file its by-laws within the prescribed period does not ipso
facto lose its powers as such. The SEC Rules on Suspension/Revocation of the Certificate of
Registration of Corporations, details the procedures and remedies that may be availed of before an
order of revocation can be issued. There is no showing that such a procedure has been initiated in this
case.

SMC VS. MANDAUE

iled a motion to dismiss the petition for certification election on the sole ground that herein respondent
is not listed or included in the roster of legitimate labor organizations based on the certification issued
by the Officer-In representative, then right to be represented by a bargaining agent should not be
denied to other members of the bargaining unit.”
HELD

1. NO. Ratio EFFECT NON-PARTICIPIATION PREVIOUS ELECTION. No law, administrative rule


or precedent prescribes forfeiture of the right to vote by reason of neglect to exercise the right in past
certification elections.

2. NO. Ratio RELIGION/PAST NON-PARTICIPATION. Neither law, administrative rule nor


jurisprudence requires that only employees affiliated with any labor organization may take part in a
certification election. On the contrary, the plainly discernible intendment of the law is to grant the right
to vote to all bona fide employees in the bargaining unit, whether they are members of a labor
organization or not.

LONG VS. BASA

Issue: Whether the expulsion of Joseph Lim, Liu Yek See, Alfredo Long and Felix Almeria from the
membership of the CHURCH by its Board of Directors through a resolution issued on August 30, 1993
is in accordance with law.

Held: The By-laws of the CHURCH, which the members have expressly adhered to, does not require
the Board of Directors to give prior notice to the erring or dissident members in cases of expulsion. In
the By-law provision, the only requirements before a member can be expelled or removed from the
membership of the CHURCH are: (a) the Board of Directors has been notified that a member has failed
to observe any regulations and By-laws of the CHURCH, or the conduct of any member has been
dishonorable or improper or otherwise injurious to the character and interest of the CHURCH, and (b)
a resolution is passed by the Board expelling the member concerned, without assigning any reason
therefor. Thus, a member who commits any of the causes for expulsion enumerated in paragraph 4 of
Article VII may be expelled by the Board of Directors, through a resolution, without giving that erring
member any notice prior to his expulsion. The resolution need not even state the reason for such action.
The CHURCH By-law provision on expulsion, as phrased, may sound unusual and objectionable as
there is no requirement of prior notice to be given to an erring member before he can be expelled; but
that is how peculiar the nature of a religious corporation is vis-a-vis an ordinary corporation organized
for profit. It must be stressed that the basis of the relationship between a religious corporation and its
members is the latter's absolute adherence to a common religious or spiritual belief . Once this basis
ceases, membership in the religious corporation must also cease. Thus, generally, there is no room for
dissension in a religious corporation. And where any member of a religious corporation is expelled
from the membership for espousing doctrines and teachings contrary to that of his church, the
established doctrine in this jurisdiction is that such action from the church authorities is conclusive
upon the civil courts. Obviously recognizing the peculiarity of a religious corporation, the Corporation
Code leaves the matter of ecclesiastical discipline to the religious group concerned. Section 91 of the
Corporation Code, which has been made explicitly applicable to religious corporations by the second
paragraph of Section 109 of the same Code, provides for the termination of membership. It provides
that "Membership shall be terminated in the manner and for the causes provided in the articles of
incorporation or the by-laws. Termination of membership shall have the effect of extinguishing all
rights of a member in the corporation or in its property, unless otherwise provided in the articles of
incorporation or the by-laws." In fact, Long, et al. really have no reason to bewail the lack of prior
notice in the By-laws. They have waived such notice by adhering to those By-laws. They became
members of the CHURCH voluntarily. They entered into its covenant and subscribed to its rules. By
doing so, they are bound by their consent. Even assuming that Long, et al.'s expulsion falls within the
Constitutional provisions on "prior notice" or "due process," still the Court can not conclude that Basa,
et al. committed a constitutional infraction. Long, et al. were given more than sufficient notice of their
impending expulsion, as shown by the records.