CORPORATION

SUMMARY OF CASES

(FINALS)

CASES DOCTRINE
1. STOCKHOLDERS OF F. GUANSON AND SONS, INC. v. REGISTER While shares of stock constitute personal property, they do not represent property of the
OF DEEDS OF MANILA corporation [i.e., they are properties of the stockholders who own them]. A share of
stock only typifies an aliquot part of the corporation’s property, or the right to share in
its proceeds to that extent when distributed according to law and equity, but the holder
is not the owner of any part of the capital [properties] of the corporation, nor is he
entitled to the possession of any definite portion of its assets. The stockholder is not a
co-owner of corporate property.

2. MAJORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORP. v. Pre-emptive right under Section 39 refers to the right of a stockholder of a stock
LIM corporation to subscribe to all issues or disposition of shares of any class, in proportion
to their respective shareholdings. Although it can validly be withdrawn, it cannot be
done in breach of fiduciary duties such as to perpetuate control over the corporation.

3. FOREST HILLS GOLF & COUNTRY CLUB v. VERTEX SALES AND Shares of stock of a corporation are not owned or are the assets of the corporation – they
TRADING CORP. are owed by the stockholders of record. The corporation whose shares of stock are the
subject of transfer transaction (through sale, assignment, donation, or any other mode of
conveyance) need not be a part to transaction to be valid; however, to bind the
corporation as well as third parties, it is necessary that the transfer is recorded in the
books of the corporation

4. INTERPORT RESOURCES CORP. v. SSI When the subscriber under a Subscription Agreement assigns the shares to another
party, the same partakes of the nature of a novation through the substitution of the person
of the debtor, which is effective only with the consent of the creditor; but that in the case
of the corporation issuing the shares, such assignment would be valid and binding upon
notice by the transferee of the transfer of the shares coupled with a tender of the balance
of the unpaid subscription pursuant to the call made by the corporation. The provisions
of Section 63 of the Corporation Code to the effect that a transfer of shares does not
bind the corporation unless it is registered in the corporate books cannot apply in this
case since formal notice of the transfer was given to the corporation.

5. LAMBERT v. FOX A contractual undertaking on restriction of transfer of shares that has a reasonable
business purpose and limited in coverage is valid and binding.

6. FLEISHER v. BOTICA NOLASCO A stock corporation in adopting by-laws governing the transfer of shares of stock should
take into consideration the specific provisions of the Corporation Law. The by-laws of
corporations should be made to harmonize with the provisions of the Corporation Law.
By-laws must not be inconsistent with the provisions of the Corporation Law. By-laws
of a corporation are valid if they are reasonable and calculated to carry into effect the
objects of the corporations provided they are not contradictory to the general policy of
 the laws of the land. Under a statute authorizing by-laws for the transfer of stock of a
corporation, it can do more than prescribe a general mode of transfer on the corporate
books and cannot justify an unreasonable restriction upon the right to sell. The shares of
stock of a corporation are personal property and the holder thereof may transfer the same
without unreasonable restrictions.

Section 63 contemplates no restriction as to whom the stocks may be transferred. It does

not suggest that any discrimination may be created by the corporation in favor of, or
against a certain purchaser. The owner of shares, as owner of personal property, is at
liberty, under said section to dispose them in favor of whomever he pleases, without
limitation in this respect, than the general provisions of law.

7. PADGETT v. BABCOCK & TEMPLETON, INC. In the absence of a similar contractual obligation and of a legal provision applicable
thereto, it is logical to conclude that it would be unjust and unreasonable to compel the
corporation to comply with a non-existent or imaginary obligation.

8. HAGER v. BRYAN Mandamus will not lie to compel the corporate secretary to register the transfer of shares
in the corporate books when the petitioner is not the registered stockholder nor does he
hold a power of attorney from the latter. This is under the general rule that as between
the corporation and its shareholders, the corporation looks only to its books for the
purpose of determining who its shareholders are, so that a mere indorsee of a certificate
of stock, claiming to be the owner, will not necessarily be recognized as such by the
corporation and its officers, in absence of express instructions of the registered owner
to make such transfer to the indorsee, or a power of attorney authorizing such transfer.
9. ANDAYA v. RURAL BANK OF CABADBARAN It is already settled jurisprudence that the registration of a transfer of shares of stock is
a ministerial duty on the part of the corporation. Aggrieved parties may then resort to
the remedy of mandamus to compel corporations that wrongfully or unjustifiably refuse
to record the transfer or to issue new certificates of stock. This remedy is available even
upon the instance of a bona fide transferee who is able to establish a clear legal right to
the registration of the transfer.

Registration of a transfer of shares of stock is a ministerial duty on the part of the

corporation. Aggrieved parties may then resort to the remedy of mandamus to compel
corporations that wrongfully or unjustifiably refuse to record the transfer or to issue new
certificates of stock. This remedy is available even upon the instance of a bona fide
transferee who is able to establish a clear legal right to the registration of the transfer.

10. BATONG BUHAY GOLD MINES v. CA The claim for damages of what the shares could have sold had the demand for their
registration in the name of the buyer been complied with is deemed to be speculative
damage and non-recoverable

11. LEE v. CA A VTA separates the voting rights and other rights covered of the stock from other
attributes of ownership, intended to be irrevocable for a definite period of time and the
purpose of which is to give to the trustee to acquire voting control of the corporation.
12. GOKONGWEI, JR. v. SEC The stockholder's right of inspection of the corporation's books and records is based
upon their ownership of the assets and property of the corporation. It is, therefore, an
incident of ownership of the corporate property, whether this ownership or interest be
termed an equitable ownership, a beneficial ownership, or a quasi-ownership.

The inspection has to be germane to the petitioner's interest as a stockholder and has to
be proper and lawful in character and not inimical to the interest of the corporation. On
application for mandamus to enforce the right, it is proper for the court to inquire into
and consider the stockholder's good faith and his purpose and motives in seeking
inspection. The right given by statute is not absolute and may be refused when the
information is not sought in good faith or is used to the detriment of the corporation.
The corporation has the burden of proving impropriety of purpose or motive."

13. CHUA v. PEOPLE (2016) The right to inspect remains valid and enforceable during the 3year liquidation period
provided under Sections 122 and 145 of the Corporation Code

14. GONZALES v. PNB As contrasted from the old Corporation Law, the law now provides for

(a) express limitations on the right to inspect, and

(b) now requires as a condition for such examination that one requesting it must not
have been guilty of using improperly any information secured through a prior
examination, and
(c) that the person asking for such examination must be acting in good faith and for a
legitimate purpose in making his demand.

The exercising stockholder must set forth the reasons and the purposes for which he
desires such inspection.

15. PASAR v. LIM In general officers and directors have no legal authority to close the office doors against
shareholders for whom they are only agents, and withhold from them the right to inspect
the books which furnishes the most effective method of gaining information which the
law has provided, on mere doubt or suspicion as to the motives of the shareholder. While
there is some conflict of authority, when an inspection by a shareholder is contested, the
burden is usually held to be upon the corporation to establish a probability that the
applicant is attempting to gain inspection for a purpose not connected with his interests
as a shareholder, or that his purpose is otherwise improper.

16. ANG-ABAYA v. ANG The defense of improper use or motive is in the nature of a justifying circumstance.
Where the corporation denies inspection on the ground of improper motive or purpose,
the burden of proof is taken from the shareholder and placed on the corporation.

17. CHUA v. PEOPLE (2004) In the absence of a special authority from the Board of Directors to institute a derivative
suit for and in behalf of the corporation, the president or managing director is
disqualified by law to sue in her own name or for the corporation. The power to sue and
be sued is lodged in the Board. The suing stockholder is regarded as a nominal party,
with the corporation as the real party in interest.
18. LOPEZ REALTY, INC. v. SPS. TANJANGCO In Cua v. Tan, the Court said that by virtue of ratification, the acts of the BOD become
the acts of the stockholders themselves, even if those acts were, at the outset,
unauthorized. By ratification, even an unauthorized act of an agent becomes the
authorized act of the principal. To declare the Board resolution null and void will serve
no practical use or value, or affect any of the rights of the parties, because the subsequent
stockholders’ resolution approving and ratifying the said acquisition and the manner in
which PRCI shall constitute the JTH BOD will still remain valid and binding.

19. CHING v. SUBIC BAY GOLF AND COUNTRY CLUB, INC.
Minority stockholders do not have any statutory right to override the business judgments
of the officers and Boards of Directors. It is settled that a stockholder's right to institute
a derivative suit is not based on any express provision of the Corporation Code, or even
the Securities Regulation Code, but is impliedly recognized when the said laws make
corporate directors or officers liable for damages suffered by the corporation and its
stockholders for violation of their fiduciary duties

20. YU v. YUKAYGUAN Section 1, Rule 8 of the Interim Rules lays down the following requirements which a
stockholder must comply with in filing a derivative suit: A stockholder or member may
bring an action in the name of a corporation or association, as the case may be, provided,
that:

(1) He was a stockholder or member at the time the acts or transactions subject of the
action occurred and at the time the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation, by-laws,
laws or rules governing the corporation or partnership to obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of; and
(4) The suit is not a nuisance or harassment suit.

21. PASCUAL v. OROZCO The relators must be stockholders both at time of occurrence of the events constituting
the cause of action and at the time of the filing of the derivative suit

22. VILLAMOR, JR. v. UMALE An allegation that appraisal rights were not available for the acts complained of is
another requisite for filing derivative suits under Rule 8, Section 3(1) of the Interim
Rules. Also a distinction must be made between an individual stockholder’s suit, a class
suit for stockholders from derivative suits

23. ANG v. ANG Nuisance and harassment suits are prohibited, and in determining whether a suit is a
nuisance or harassment suit, the court shall consider , among others, the follow:
(a) The extent of the shareholding or interest of the initiating stockholder or
member
(b) Subject matter of the suit
(c) Legal and factual basis of the complaint
(d) Availability of appraisal rights for the act or acts complained of
(e) Prejudice or damage to the corporation

24. REPUBLIC PLANTERS BANK v. AGANA
25. BAYLA v. SILANG TRAFFIC CO., INC.
26. LINGAYEN GULF ELECT POWER v. BALTAZAR
27. TAN v. SYCIP
28. TAN v. SEC
29. BITONG v. CA
30. MAKATI SPORTS CLUB, INC. v. CHENG
In case of nuisance or harassments suits, the court may motu proprio or upon dismiss
the case
Even for preferred shares issued with a 1% dividend rate, the stockholders do not
become entitled to the payment thereof as a matter of right without the necessity of a
prior declaration of dividends which can only come from existing retained earnings
Whether a particular contract is a subscription, or a sale of stock is a matter of
construction and depends upon its terms and the intention of the parties. "A subscription,
properly speaking, is the mutual agreement of the subscribers to take and pay for the
stock of a corporation, while a purchase is an independent agreement between the
individual and the corporation to buy shares of stock from it at stipulated price
A valid and binding subscription for shares cannot be cancelled so as to release the
subscriber from liability thereon without the consent of all the stockholders.
A valid & binding subscription for shares cannot be cancelled so as to release the
subscriber from liability thereon without the consent of all the stockholders.
A stock certificate is not necessary to render one a stockholder in a corporation;
nevertheless, it is the paper representative or tangible evidence of the stock itself and
the various interests therein. The stock certificate expresses the contract between the
corporation and the stockholder, but it is not essential to the existence of a share or the
creation of the relationship with the shareholder
From the outline: The rule is that the endorsement of the certificate of stock by the owner
or his attorney-in-fact or any other person legally authorized to make the transfer shall
be sufficient to effect the transfer of shares only if the same is coupled with delivery.
The delivery of the stock certificate duly endorsed by the owner is the operative act of
transfer of shares from the lawful owner to the new transferee. But to be valid against
third parties, the transfer must be recorded in the books of the corporation.
From the case: Thus, for a valid transfer of stocks, the requirements are as follows:
(a) There must be delivery of the stock certificate;
(b) The certificate must be endorsed by the owner or his attorney-in-fact or other persons
legally authorized to make the transfer; and,
(c) to be valid against third parties, the transfer must be recorded in the books of the
corporation.
A stock certificate is not the stock itself – it merely is a tangible evidence of ownership
of shares of stock. Even without the covering certificate of stock having been issued,
yet, the registered subscriber to the shares may validly and legally transact with the
shares, and sell and dispose of them to any interest buyer thereof provided he complies
with the right of refusal provided for in the bylaws
31. DE LOS SANTOS v. REPUBLIC
32. BALTAZAR v. LINGAYEN GULF ELECTRIC POWER CO.
33. J. SANTAMARIA v. HONGKONG AND SHANGHAI BANKING
CORP.
34. NEUGENE MARKETING INC. v. CA
35. TENG v. CA
36. LANUZA v. CA
Since certificates of stock are only quasi-negotiable instruments, a transferee in good
faith under a forged assignment acquires no title which can be asserted against the true
owner, unless the true owner’s own negligence has been such as to create an estoppel
against him.
The rule is that the endorsement of the certificate of stock by the owner or his attorney-
in-fact or any other person legally authorized to make the transfer shall be sufficient to
effect the transfer of shares only if the same is coupled with delivery. The delivery of
the stock certificate duly endorsed by the owner is the operative act of transfer shares
from the lawful owner to the new transferee. But to be valid against third parties, the
transfer must be recorded in the books of the corporation.
A bona fide pledgee or transferee of a stock from the apparent owner is not chargeable
with knowledge of the limitations laced on said certificates by the real owner, or of any
secret agreement relating to the use, which might be made of the stock by the holder.
When a stock certificate has been endorsed in blank by the owner thereof, it becomes a
“street certificate” so that upon its face the holder is entitled to demand its transfer into
his name from the issuing corporation. As such the certificate is quasi-negotiable and
the transferee thereof is justified in believing that it belongs to the older and transferor.
In this case, HSBC is the transferee of the stock certificate and this certificate was
endorsed to HSBC in blank by R.J. Campos Company. Therefore, the stock certificate
became a street certificate, granting the right to transfer the name of the certificate to the
holder from the issuing corporation, which was the Woo, Uy-Tioco, and Naftaly Firm.
Even assuming that the certificate was named under Santamaria, if the certificate was
endorsed in blank, it is considered as quasi-negotiable and HSBC is justified in believing
that it actually belonged to R.J. Campos Company
When the stock certificates have been endorsed in blank for purposes of showing the
nominee relations, the eventual delivery and registration of the shares in violation of the
trust relationship and after their having been stolen, would be void, even when such
transfers have been registered in the stock and transfer book.
Section 63 of the Corporation Code prescribes the manner by which a share of stock
may be transferred. Said provision is essentially the same as Section 35 of the old
Corporation Law, which, as held in Fleisher v. Botica Nolasco Co., defines the nature,
character and transferability of shares of stock. Fleisher also stated that the provision on
the transfer of shares of stocks contemplates no restriction as to whom they may be
transferred or sold. As owner of personal property, a shareholder is at liberty to dispose
of them in favor of whomsoever he pleases, without any other limitation in this respect,
than the general provisions of law.
An STB is the book which records the names and addresses of all stockholders arranged
alphabetically, the installments paid and unpaid on all stock for which subscription has
been made, and the date of payment thereof; a statement of every alienation, sale or
transfer of stock made, the date thereof and by and to whom made; and such other entries
 as may be prescribed by law. An STB, like other corporation books and records, is not
in any sense a public record, and thus is not exclusive evidence of the matters and things
which ordinarily are or should be written therein.

37. BATANGAS LAGUNA TAYABAS BUS COMPANY, INC. v. As to the nature:

BITANGA Sales and other dispositions of shares of stock must under Sec.63 be registered in the
stock and transfer book:
(a) to enable the corporation to know at all times who are the actual stockholders, and
who have standing to exercise the rights pertaining to the shares;
(b) to afford the corporation an opportunity to object or refuse its consent to such transfer
when it has claims against such shares; and
(c) to avoid fictitious or fraudulent transfers. (as cited in Escano v. Filipinas Mining)

As to the effect of non-registration of transfer in STB:

Until challenged in a proper proceeding, a stockholder of record has a right to participate
in any meeting; his vote can be properly counted to determine whether a stockholders’
resolution was approved, despite the claim of the alleged transferee. On the other hand,
a person who has purchased stock, and who desires to be recognized as a stockholder
for the purpose of voting, must secure such a standing by having the transfer recorded
on the corporate books. Until the transfer is registered, the transferee is not a stockholder
but an outsider

As to my personal take-away:
The purpose of registration, is two-fold:
a. to enable the transferee to exercise all the rights of a stockholder, including the right
to vote and to be voted for, and
b. to inform the corporation of any change in share ownership so that it can ascertain the
persons entitled to the rights and subject to the liabilities of a stockholder

38. FUA CUB v. SUMMERS Chattel mortgages on shares of stock and other choses in action are valid as between the
parties and that the recording of the mortgage will furnish constructive notice to third
parties.

Sec 72. of the Corporation Code provides expressly that "[h]olders of subscribed shares
not fully paid which are not delinquent shall have all the rights of a stockholders."
Clearly therefore, it is subscription to shares of stock that creates the legal relationship
between the stockholder and the corporation; it is subscription, and not the payment of
such subscription, that grants to the stockholder the statutory and common rights granted
to stockholders.

39. MONSERRAT v. CERAN When the shares are covered by a stock certificate issued in the name of the usufructuary
by the original owner with the agreement between them that they should not be disposed
or sold, but the registered owner had pledged the shares by endorsement and delivery of
the certificate to one who took them in good faith and for value, the latter shall be
preferred since registration of a security arrangement covering shares of stock does not

40. CHUA GUAN v. SAMAHANG MAGSASAKA
41. BACHRACH MOTOR CO. v. LACSON LEDESMA
42. NAVA v. PEERS MARKETING CORP.
43. MR HOLDINGS, LTD. V. BAJAR
44. GARCIA v. JOMOUAD
45. EDWARD J. NELL CO. v. PACIFIC
46. CALTEXT INC. v. PNOC SHIPPING AND TRANSPORT CORP.
47. Y-I LEISURE PHILS., INC. v. YU
require, for its validity and binding effect on the world, to be registered in the stock and
transfer book.
In order for the chattel mortgage on shares of stock to be valid and binding on third
parties, registration thereof in the stock and transfer book is not required and not legally
effective. What is necessary is that the chattel mortgage over the shares be registered in
the Registry of Deeds of the principal place of business of the corporation, as well as in
the Registry of Deeds of the stockholders’ domicile.
The pledge of shares of stock covered by a certificate is valid and binding on third
parties, when the certificate of stock has been endorsed and delivered to the creditor,
notwithstanding the fact that the contract does not appear in a public instrument.
“Certificates of stock … are quasi-negotiable instruments in the sense that they may be
given in pledge or mortgage to secure an obligation.”
Only fully paid shares for which certificates of stock have been issued are subject to the
registration requirement in the stock and transfer of book in cases dealing with their
sales and absolute disposition.
The process of registering lis pendens is inapplicable to shares of stock which are
personal properties, however, formal notice given to the Corporate Secretary of claims
to the shares of stock shall be deemed equivalent of registration of encumbrance or
assignment of shares on the corporate books, and by virtue of such registration through
notice to the corporation, pending litigation, 3rd parties, or potential transferees pendent
lite, may therefore be charged with constructive notice of claimants title over the subject
shares and the pending litigation involving the same
All transfers not so entered on the books of the corporation are absolutely void; not
because they are without notice or fraudulent in law or fact, but because they are made
so void by statute.
Theory to the effect that a corporation is an alter ego of another, negates such
consolidation or merger, for a corporation cannot be its own alter ego.
The disposition of the assets of a corporation shall be deemed to cover substantially all
the corporate property and assets, if thereby the corporation would be rendered
incapable of continuing the business or accomplishing the purposes for which it was
incorporated. Such a sale or disposition must be understood as valid only if it does not
prejudice the creditors of the assignor, which necessarily implies that the assignee
assumes the debts of the assignor. Even under the provisions of the Civil Code, a creditor
has a real interest to go after any person to whom the debtor fraudulently transferred its
assets.
Nelle Doctrine - Generally, where one corporation sells or otherwise transfers all of its
assets to another corporation, the transferee is not liable for the debts and liabilities of
the transferor, EXCEPT:

48. PHIVIDEC v. CA
49. BANK OF COMMERCE v. RPN
50. SUNDOWNERS DEV. CORP. v. DRILON
1. Where the purchaser expressly or impliedly agrees to assume such debts; 2. Where
the transaction amounts to a consolidation or merger of the corporations;
3. Where the transaction is entered into fraudulently in order to escape liability for such
debts.
4. Where the purchasing corporation is merely a continuation of the selling corporation
An evaluation of our contract and corporation laws validates that the Nell Doctrine is
fully supported by Philippine statutes. The general rule expressed by the doctrine
reflects the principle of relativity under Article 1311 to 34 of the Civil Code. Contracts,
including the rights and obligations arising therefrom, are valid and binding only
between the contracting parties and their successors-in-interest. Thus, despite the sale
of all corporate assets, the transferee corporation cannot be prejudiced as it is not in
privity with the contracts between the transferor corporation and its creditors. x x x
Jurisprudence has held that in a business-enterprise transfer, the transferee is liable for
the debts and liabilities of his transferor arising from the business enterprise conveyed.
Many of the application of the business-enterprise transfer have been related by the
Court to the application of the piercing doctrine
The disposition by the controlling shareholder of all of its equity in the corporation
warrants the application of the alter ego piercing doctrine since it shows that the
transferor had complete control of the corporation. Therefore, if a parent-holding
company (PHIVIDEC in the present case) assumes complete control of the operations
of its subsidiary's business (Phividec Railways in the present case), the separate
corporate existence of the subsidiary must be disregarded, such that the holding
company will be responsible for the negligence of the employees of the subsidiary as if
it were the holding company's own employees.
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 bank’s assets and liabilities an equivalent value in
Bancommerce shares of stock. Bancommerce and TRB agreed with BSP approval to
exclude from the sale the TRB's contingent judicial liabilities, including those owing to
RPN.
GENERAL RULE: The purchaser of the assets or enterprise is not legally bound to
absorb in its employ the employers of the seller of such assets or enterprise.
EXCEPTION: The parties are liable to the employees if the transaction between the
parties is colored or clothed with bad faith.
51. CENTRAL AZUCARERA DEL DANAO v. CA There is no law requiring that the purchaser should absorb the employees of the selling
company. Well-established is the principle “that it is within the employer’s legitimate
sphere of management control of the business to adopt economic policies to make some
changes or adjustments in their organization or operations that would insure profit to
itself or protect the investments of its stockholders. As in the exercise of such
management prerogative, the employer may merge or consolidate its business with
another, or sell or dispose all or substantially all of its assets and properties which may
bring about the dismissal or termination of its employees in the process.

By way of reminder, employers should exercise caution and care in dealing with its
employees to prevent suspicion that the adoption of certain corporate combinations such
as merger or consolidation or outright sale or disposition of assets is but a scheme to
evade payment of termination pay to its employees.

Under the Termination Pay Law —an employee may be terminated with or without
just cause.

If there is just cause, the employer is not required to neither serve any notice nor pay
termination pay to employees concerned. If the termination -is without just cause, the
employer must serve notice to the employee, otherwise the employer must pay
termination pay, except where other applicable statutes provide a different remedy as in
unfair labor practice.

52. PEPSI-COLA BOTTLING CO., v. NLRC Although a corporation may have ceased business operations and an entirely new
company has been organized to take over the same type of operations, it does not
necessarily follow that no one may now be held liable for illegal acts committed by the
earlier firm

53. MANLIMOS v. NLRC Where transfer of ownership is in good faith, the transferee is under no legal duty to
absorb the transferor’s employees as there is no law compelling such absorption. For
reasons of public policy and social justice, transferee may give preference to the
qualified separated employees in the filling of vacancies in the facilities of the purchaser.

54. FILIPINAS PORT SERVICES v. NLRC (1991) In the case of merger or consolidation, the employees have a right to their retirement
benefits computed from the time worked with the predecessor-constituent corporations,
saying there was no break in the employer-employee relationship.

55. FILIPINAS PORT SERVICES v. NLRC (1989) Employees of the of a predecessor-constituent corporation cannot avail of their previous
tenure when determining their termination benefits with the surviving corporation in the
merger.

56. BPI v. BPI EMPLOYEES UNION It is more in keeping with the dictates of social justice of according full protection to
labor to deem employment contracts as automatically assumed by the surviving
corporation in a merger, even in the absence of an express stipulation in the articles of
merger or the merger plan. This ruling strengthens judicial protection of the right to
 security of tenure of employees affected by a merger and avoids confusion regarding
the status of their various benefits.

Section 80 of the Corporation code, constitutionally declared policies on work, labor,

and employment and the current case, should point the SC to a declaration that in a
corporate merger situation, where there is total takeover by one corporation over another
and there is silence in the merger agreement on the fate of the human resource
complement shall not be left in legal limbo and should be properly provided for by
compelling the surviving entity to absorb the new employees. This is what Section 80
commands.

57. VESAGAS v. CA A board resolution to dissolve the corporation does not operate to so dissolve the
juridical entity, since to be effective “the requirements mandated by the Corporation
Code should have been strictly complied with”

58. VIGILLA v. PHILIPPINE COLLEGE OF CRIMINOLOGY, INC.
The executed releases, waivers and quitclaims involving labor claims are valid and
binding notwithstanding that they were executed 6 years after the revocation of the
corporation’s certificate of incorporation – the revocation does not result in the
termination of its liabilities. Section 122 and 145 provide for a 3 year winding up period
for a corporation whose charter is annulled by forfeiture or otherwise ro continue as a
body corporate, among others, of settling and closing its affairs.

59. GELANO v. CA For purposes of dissolution and liquidation of a corporation, the term “trustee” should
include counsel of record who may be deem to have authority to pursue pending
litigation after the expiration of the 3-year liquidation period

60. CLEMENTE v. CA If a 3 year extended life has expired without a trustee or receiver having been designated,
the Board of Directors itself, following the rationale of the decision in Gelano, may be
permitted to so continue as “trustee” to complete liquidation; and in the absence of a
Board, those having pecuniary interest in the assets, including the shareholders and the
creditors of the corporation, acting for and in its behalf, might make proper
representations with the appropriate body for working out a final settlement of the
corporate concerns

61. ALABANG DEV. CORP. v. ALABANG HILLS VILLAGE
ASSOCIATION
The trustee may continue to prosecute a case commenced by the corporation within 3
years from its dissolution until rendition of the final judgment, even if such judgment is
rendered beyond the 3-year period allowed by Sec. 122. However, there is nothing in
the said cases that allows an already defunct corporation to initiate a suit after the lapse
of the said 3-year period. 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 Sec. 122 of the
Corporation Code.

62. CHUNG KA BIO v. IAC REINCORPORATION: The procedures on the sale of all or substantially all of the
assets of the corporation, allows stockholders to transfer the assets and business

63. MANUAL R. DULAY ENTERPRISES v. CA
64. SERGIO F. NAGUIAT v. NLRC
65. SAN JUAN STRUCTURAL v. CA
66. ONG YONG v. TIU
enterprise of the dissolved corporation to a newly registered entity bearing the same
corporate name.
In ordinary parlance, the said entity is loosely referred to as a "family corporation". The
nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the
parochial instincts of the individual members of such an aggrupation of which Manuel
R. Dulay Enterprises, Inc. is typical: four-fifths of its incorporators being close relatives
relatives namely, three (3) children and their father whose name identifies their
corporation
Court cannot lose sight of the fact that the Manuel R. Dulay Enterprises, Inc. is a closed
family corporation where the incorporators and directors belong to one single family. It
cannot be concealed that Manuel R. Dulay as president, treasurer and general manager
almost had absolute control over the business and affairs of the corporation
Moreover, petitioners also conceded that both CFTI and Naguiat Enterprises were "close
family corporations"[34] owned by the Naguiat family. Section 100, paragraph 5, (under
Title XII on Close Corporations) of the Corporation Code, states: (5) To the extent that
the stockholders are actively engaged in the management or operation of the business
and affairs of a close corporation, the stockholders shall be held to strict fiduciary duties
to each other and among themselves. Said stockholders shall be personally liable for
corporate torts unless the corporation has obtained reasonably adequate liability
insurance."
The articles of incorporation of Motorich Sales Corp. does not contain any provision
required under Sec. 96, and therefore from its very articles of incorporation, it is not a
close corporation. It does not become one either, just because Spouses Reynaldo and
Nenita Gruenberg owned 99.866% of its subscribed capital stock. The “[m]ere
ownership by a single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personalities.”
Sec. 104. Deadlocks. - Notwithstanding any contrary provision in the AI or by-laws or
agreement of stockholders of a close corporation, if the directors or stockholders are so
divided respecting the management of the corporation's business and affairs that the
votes required for any corporate action cannot be obtained, with the consequence that
the business and affairs of the corporation can no longer be conducted to the advantage
of the stockholders generally, the SEC, upon written petition by any stockholder, shall
have the power to arbitrate the dispute
Book: SEC decision reached the SC not having laid down the critical premise that its
decisions and the reliefs given therein were under “close corporation setting” which
prevented the SC from evaluating the proper application of the deadlock provisions
under Sec. 104, Corp. Code, and instead apply the general principles of trust fund
doctrine and the business judgment rule applicable to publicly-held corporations.
67. VALLE GOLF & COUNTRY CLUB v. VDA. DE CARAM
68. AVON INSURANCE PLC v. CA
69. MARSHALL-WELLS v. ELSER
70. HOME INSURANCE CO. v. EASTERN SHIPPING LINES
71. MENTHOLATUM v. MANGALIMAN
72. MARUBENI NEDERLAND B.V. v. TENSUAN
A non-stock corporation may seize and dispose of the membership share of a fully-paid
member on account of his unpaid monthly dues, when such corporation is authorized to
do so under the by –laws, even when no provision on the matter appears in the articles
of incorporation, and in spite of the fact that Section 67 on delinquency sale pertains to
payment of shares subscription. Section 91 provides that membership shall be
terminated in the manner and for causes provided in the articles of incorporation or the
by-laws of a non-stock corporation, then the right of a non-stock corporation to expel a
member through the forfeiture of such member’s share may be established in the by-
laws alone, and need not be embodied in the articles of incorporation.
A foreign corporation, is one which owes its existence to the laws of another state, and
generally has no legal existence within the state in which it is foreign. A foreign
corporation illegally doing business here because of its refusal or neglect to obtain the
required license and authority to do business may successfully though unfairly plead
such neglect or illegal act so as to avoid service and thereby impugn the jurisdiction of
the local courts. The same danger does not exist among foreign corporations that are
indubitably not doing business in the Philippines. Indeed, if a foreign corporation does
not do business here, there would be no reason for it to be subject to the States regulation.
As we observed, in so far as State is concerned, such foreign corporation has no legal
existence. Therefore, to subject such corporation to the court’s jurisdiction would violate
the essence of sovereignty
Section 69 of old Corporation Law was intended to subject the foreign corporation doing
business in the Philippines to the jurisdiction of our courts, not to prevent the foreign
corporation from performing single acts, but to prevent it from acquiring domicile for
the purpose of business without taking the necessary steps to render it amenable to suit
in the local courts
The contract itself is valid, but it is the standing to sue of the foreign corporation that is
missing, which can be remedied with the subsequent obtaining of license to do business
Jurisprudential Concepts of “Doing Business”: It implies a continuity of commercial
dealings and arrangements and the performance of acts or works or the exercise of some
of the functions normally incident to the purpose or object of a foreign corporation’s
organization.
“Territoriality Rule” – Doing business in the Philippines requires that the contract
must be perfected or consummated… of business contracts constitutes doing business
in the Philippines.
It must be emphasized that a corporation doing business in the PH with or without
license is subject to process and jurisdiction of the local courts. If such corp is properly
licensed, then well and good but it shall not be allowed, under any circumstances, to
invoke its lack of license to impugn the jurisdiction of our courts.
73. AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD. V. Although each case must be judged in light of attendant circumstances, jurisprudence
INTEGRATED SILICON TECHNOLOGY PHIL. CORP. has evolved several guiding principles for the application of these tests. “By and large,
to constitute ‘doing business,’ the activity to be undertaken in the Philippines is one that
is profit-making.

74. GRANGER ASSOCIATES v. MICROWAVE SYSTEMS, INC. If a corporation performs acts for which it was created or exercises some of the functions
for which it was organized, the amount or volume of the business is immaterial and a
single act of that character may constitute doing business.

The purpose of the rule requiring foreign corporations to secure a license to do business
in the Philippines is to enable us to exercise jurisdiction over them for the regulation of
their activities in this country. If a foreign corporation operates in the Philippines
without submitting to our laws, it is only just that it not be allowed to invoke them in
our courts when it should need them later for its own protection. While foreign investors
are always welcome in this land to collaborate with us for our mutual benefit, they must
be prepared as an indispensable condition to respect and be bound by Philippine law in
proper cases, as in the one at bar.

75. WESTERN EQUIPMENT & SUPPLY CO. v. REYES The right to corporate name and trade name of a foreign corporation is a property right
in rem , which it may assert and protect in any of the courts of the world even in countries
where it does not personally transact any business

76. ANTAM CONSOLIDATED v. CA The performance of services auxiliary to an existing isolated contract of sale which are
not on a continuing basis do not constitute “doing business in the Philippines”.

77. ATLANTIC MUTUAL INC. v. STEVEDORING CO. The fact that a foreign corporation is not doing business in the Philippines must be
alleged if a foreign corporation desires to sue in Philippines courts under the “isolated
transactions rule.”

78. COMMUNICATION MATERIALS v. CA The filing of an action by a foreign corporation before Philippine Courts would mean
that by voluntary appearance, the local courts have actually obtained jurisdiction over
the “person” of the foreign corporation

79. TOP-WELL MFG. v. ECED Discredited Pari Delicto Doctrine: The local party to a contract with a foreign
corporation that does business in the Philippines without license to do business cannot
maintain suit against the foreign corporation just as the foreign corporation cannot
maintain suit, under principle of pari delicto

80. MERILL LYNCH FUTURES, INC. v. CA Under the principle of estoppel, a foreign corporation doing business in the Philippines
may sue in Philippine courts even without license to do business against a Philippine
citizen who had contracted with and been benefited by said corporation and knew it to
be without the necessary license to do business

81. ERIKS LTD. v. CA Foreign corporations which conduct regular business should be denied any access to
courts until they secure a license so as to ensure that they will abide by the decisions of
our courts, even if adverse to it. Dismissal of the petition would be without prejudice to
 the foreign corporation subsequently re-filing the case when it has obtained the requisite
license

82. GENERAL CORP. OF THE PHIL. V. UNION INSURANCE SOCIETY A foreign corporation with a Philippine settling agent which issues twelve marine
OF CANTON, LTD. policies covering different shipments to the Philippines is doing business here.

Participation of a foreign corporation’s counsel in the trial process, e.g., cross-

examination of witnesses, agreement and objection to documentary evidence, and the
introduction of witnesses and documentary evidence would prevent the plea of lack of
jurisdiction over the person of such foreign corporation

83. FACILITIES MANAGEMENT CORP. v. DE LA OSA Indeed, if a foreign corporation, not engaged in business in the Philippines, is not barred
from seeking redress from the courts in the Philippines, a fortiori, that same corporation
cannot claim exemption from being sued in Philippine courts for acts done against a
person or persons in the Philippines

84. SIGNETICS CORP. v. CA Evidence is not necessary to establish that a foreign corporation is doing business in the
Philippines. The minimum requirement for one to sue a foreign corporation is to
ALLEGE FACTS in the complaint that the corporation is doing business in the
Philippines.

Sine qua non requirement for service of summons and other legal processes or any such
agent or representative is that the foreign corporation is doing business in the Philippines

85. LINGER & FISHER GMBH v. IAC When the contract sued upon has a venue clause within the Philippines, it is deemed a
confirmation by the foreign corporation, even though not doing business in the
Philippines, to be sued in local courts.