Following are some of the notable changes made in the Revised Corporation Code:

1. INCORPORATORS: Removal of the minimum number of incorporators.

2. MINIMUM CAPITAL STOCK: Imposition of a Php1,000,000.00 minimum capital
stock on stock corporations. This effectively increases the minimum paid-up
capital to Php62,500.00
3. CORPORATE TERM: Removal of the fifty (50)-year corporate term. This means
that unless there is a provision in the Articles of Incorporation with regard to the
term of corporate existence, the corporation will exist perpetually unless sooner
dissolved.
4. ONE-PERSON CORPORATION: Allowance for a single person – whether
natural or judicial, to organize and put up a corporation. However, this is subject
to the requirement of a minimum capital stock of Php1,000,000.00 to b paid up in
a lump sum at the time of incorporation.
5. CORPORATE OFFICERS: Chief Executive Officer is made the alternative title to
President and Chief Financial Officer is made the alternative title to Treasurer.
Also, the inclusion of Compliance Officer as a mandatory corporate officer on top
of the President/CEO, Treasurer/CFO, and Corporate Secretary.
6. BOARD MEETINGS: Allowance of remote communication methods in attending
board meetings subject to provisions of corporate by-laws.
7. NATIONALITY OF A CORPORATION: Formalization of the test in determining
the nationality of a corporation, i.e. the control test.
8. REMOVAL OF A MEMBER OF THE BOARD OF DIRECTORS OR TRUSTEES:
Empowering the Securities and Exchange Commission (SEC) to remove
disqualified members of the Board of Directors or Trustees.
9. DIGITAL MEANS: The new code introduces provisions that permit the electronic
filing of reportorial requirements and attendance in meetings via remote
communication or in absentia, among others – practices that were not
recognized in the old law.

I. INTRODUCTION
The Revised Corporation Code regulates various but intertwined corporate and personal
relationships, mainly:
a. Between or among shareholders or members whether controlling, majority, minority,
nominal, legal and/or beneficial owners
b. Between shareholders and the corporation, as represented by the directors or trustees
c. Between the corporation and/or shareholders and stakeholders, including employees,
creditors, suppliers, contractors and other third parties
d. The corporation and the State.
Intra-corporate relations
When persons, natural or juridical, subscribe to the capital of a corporation, there is an
assumption that they agree with, and bind themselves to, the lawful terms and conditions set by
the incorporators. While such terms and conditions may be found in the articles of incorporation,
it is the code that provides the basic framework of their relationship, and governs the proper
implementation of their articles and valid exercise of corporate powers.
a. The code ensures that each action or process involved in the selection of management
is in accordance with and in furtherance of the will of the majority.
b. The shareholders may receive dividends from the unrestricted retained earnings of the
corporation or from net assets upon liquidation. However, shareholders are subordinate
to corporate creditors. Corporate capital, after all, is regarded as a trust fund.
c. The board may initiate changes in the corporate term, structure, relationships,
operations, or financial condition, but subject to the approval of the prescribed number of
shareholders or members in accordance with the Code. If the changes are material, the
Code gives them the option to divest and receive the fair value of their shares, out of
unrestricted earnings, from the corporation.
d. Corporate actions may only be undertaken following the collective decision of the board
and/or shareholders at a properly called meeting with prior notice, except only where
written assent is allowed specifically in the amendment of the articles of incorporation.
The purpose of the re-enactment is to align the country’s primary law on corporations with the
rest of the world’s, by updating through:
1. The adoption of international best practices on corporate governance
2. The use of technology for more ease of doing business
3. The protection of minority stockholdrers’ rights
4. The management and reduction of corporate risks
5. The inclusion of specific and effective enforcement provisions
6. Enhance the inclusion of specific and effective enforcement provisions to
a. Enhance compliance
b. Avoid regulatory capture

II. DEFINITION/ATTRIBUTES OF A CORPORATION

A. Artificial Being (Sec. 2 RCCP & Art.44 (3) NCC)
Sec. 2. Corporation Defined – A corporation is an artificial being created by operation of
law, having the right of succession and the powers, attributes, and properties expressly
authorized by law or incidental to its existence.

Art. 44 (3) - (3) Corporations, partnerships and associations for private interest or
purpose to which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member.

Doctrine of distinct and separate juridical personality -

The corporation is regarded as a person. Hence, it may own properties, raise capital
and deal, on its own or independently of its shareholders or members, with third parties.
Iit has its own term of existence of any of its shareholders or members.

Instances when shareholders may answer for corporate creditors –

As a rule, the liability of a corporation is no the liability of its shareholders. However, law
and jurisprudence provide the exceptions.
1. A creditor may require a shareholder to pay his unpaid subscription, which
represents claim or receivable of the corporation.
2. A rehabilitation or insolvency court may order the commingling of assets of related
corporations, when deemed beneficial to all concerned parties in a rehabilitation
or insolvency proceedings.
3. A rehabilitation or insolvency court may nullify any unreasonable or unusual
transfer of funds or assets to the shareholders during the 90-day pre-zone
insolvency.
4. A creditor may hold the concerned directors or trustees accountable for breach of
their fiduciary duties. The same is true in a close corporation when its
shareholders assume the functions of management.
5. A court may pierce the corporate veil under certain conditions. However, this
should be done with caution by courts that “should be mindful of the milieu where
it is to be applied. The wrong doing must be clearly and convincingly established,
since it cannot be presumed.

Piercing the veil of corporate fiction

The grant of legal personality, being a mere privilege, can be revoked anytime. When
the “Veil” of corporate personality is pierced, the concerned shareholders or members
may be held personally liable to creditors or persons prejudiced by the improper use of
the corporate veil.

a.) Commencement of Juridical Personality for:

The persons who seek a corporate franchise must meet the prescribed requirements, not only
at the time of incorporation but during the corporation’s existence. Title II provides the basic
requirements in order to secure a corporate or primary franchise, such as the privilege to
acquire a juridical personality and deal with third parties.
1. Corporations
i. If created by Special law/ Charter
ii. If registered with SEC
Prescribed Number
The law limits the number of incorporators. It should not be more than
15. The code removed the prescribed minimum number of
incorporators. A single person may form a corporation sole or one-
person corporation. The requirement for a limited number of
incorporators is demanded by practicality and convenience. The law
generally requires the same number of members of the board.
However, the number of trustees may be more than 15.

Role of incorporators
Incorporators form the corporation. The attest to the truthfulness of their
proposed corporate charter. They may be held civilly and/or criminally
liable should their representations turn out to be inaccurate. They do
not lose their status as incorporators even when they subsequently
disassociate themselves from the corporation.

Incorporators, not the same as initial subscribers or contributors

While the law limits the number of incorporators, it does notlimit the
number of original subscribers orcontributors. The latter are not
required to verify the corporate charter. It is sufficient the articles of
incorporation indicate their names, nationalities, residence, and their
capital contributions.

Prescribed Qualifications
Unlike in the old code, incorporators need not be natural persons.
Juridical entities in whatever form may qualify as incorporators.
In all cases, the incorporators must be subscribers. They must have
financial interest in the corporation.

Corporate Term
Represents the duration of corporate relations.

Change in legislative policy

It is presumed that shareholders when they incorporated assented to
the perpetual character of their contract. Their corporate relations will
only end upon agreement between or among the prescribed number of
shareholders or involuntarily upon the court’s or Commission’s
determination. However, despite a perpetual term, the commission is
not ousted from its regulatory authority to periodically or as the need
arises, monitor compliance and impose sanctions.

Corporations with expired terms

By law and jurisprudence, the assets of a dissolved corporation rmain
to be under the care of the receiver, assignee, trustee, member of the
last board, or the controlling shareholders or members. Logically, they
have the personality to file with the Commission the corresponding
application for revival. Should the controlling shareholders or members
wish to file the application, they must represent the prescribed number
of shareholders or members who may file the application for voluntary
dissolution.

CHANGES
(1.) For newly established corporations, the same will automatically
have a perpetual term, unless their articles of incorporation
specifically indicate a specific corporate term
 (2.) For existing corporations, their articles of incorporation shall be
deemed amended toreflect their perpetual term, unless the
corporation elects to retain its existing term.
(3.) For corporations with expired terms, thy may apply with the
commission for their revival. Upon the Commission’s approval,
they will have perpetual term unless they prefer a fixed term as
indicated in their application.
(4.) For corporations with a limited term, the period within which to
file an application for extension of such term has been shortened
to three years prior to the expiration of term, unless there are
justifiable reasons for an earlier extension.
iii. If a Corporation sole – 110 RCCP
Sec. 110. Submission of the Articles of Incorporation. – The articles of
incorporation must be verified, by affidavit or affirmation of the chief
archbishop, bishop, priest, minister, rabbi, or presiding elder, as the
case may be, and accompanied by a copy of the commission,
certificate of election or letter of appointment of such chief archbishop,
bishop, priest, minister, rabbi, or presiding elder, duly certified to be
correct by any notary public.
From and after filing with the Commission of the said articles of
incorporation, verified by affidavit or affirmation, and accompanied by
the documents mentioned in the preceding paragraph, such chief
archbishop, bishop, priest, minister, rabbi, or presiding elder shall
become a corporation sole and all temporalities, estate and properties
of the religious denomination, sect or church theretofore administered
or managed as such chief archbishop, bishop, priest, minister, rabbi, or
presiding elder shall be personally held in trust as a corporation sole,
for the use, purpose, exclusive benefit and on behalf of the religious
denomination, sect or church, including hospitals, schools, colleges,
orphan asylums, parsonages, and cemeteries thereof.

The mere filing with the Commission of its articles of incorporation, with
the prescribed attestations, creates the Corporation sole. From then on,
the corporation sole takes the place of the applicant head or presiding
elder in administering and managing the temporalities, estate and
properties of his religious denomination, sect or church.
2. Partnerships (relate Art.1784 to Arts 1772 and 1768 of NCC)
Art. 1768. The partnership has a judicial personality separate and distinct from
that of each of the partners, even in case of failure to comply with the
requirements of Article 1772, first paragraph.
Art. 1772. Every contract of partnership having a capital of three thousand
pesos or more, in money or property, shall appear in a public instrument, which
must be recorded in the Office of the Securities and Exchange Commission.

Failure to comply with the requirements of the preceding paragraph shall not
affect the liability of the partnership and the members thereof to third persons.
 Art. 1784. A partnership begins from the moment of the execution of the
contract, unless it is otherwise stipulated.

i. If registered with SEC

ii. If not registered with SEC
It does not affect the establishment of the partnership. The contract of
partnership shall still be valid, and the partnership maintains its juridical
personality.
3. Associations – Art II, Sec 8, Constitution
SECTION 8. The right of the people, including those employed in the public and
private sectors, to form unions, associations, or societies for purposes not
contrary to law shall not be abridged.
4. Sole proprietorship
i. Mangila V. CA
Facts:
Petitioner Anita Mangila, a resident of Pampanga, is a single proprietor
exporting sea foods and doing business under the name and style of Seafoods
Products. Private respondent Loreta Guina is single proprietor providing freight
forwarding service doing business as Air Swift International, with office address
in Pasay.
Mangila contracted the freight forwarding services of Guina for shipment of sea
food products to Guam where Mangila maintains an outlet. Mangila agreed to
pay Guina cash on delivery.
On the first shipment, Mangila requested for seven days within which to pay
Guina. However, for the next three shipments, Mangila failed to pay Guina the
shipping charges.
Despite several demands, Mangila never paid Guina. Thus, Guina filed before
the Regional Trial Court of Pasay City a case for collection of sum of money.
Mangila filed a Motion to Dismiss on the ground of improper venue. Guina’s
invoice for the freight forwarding service stipulates that if court litigation
becomes necessary to enforce collection, the agreed venue for such action is
Makati.
Guina filed an Opposition asserting that although Makati appears as the
stipulated venue, the same was merely an inadvertence by the printing press.
Moreover, Guina claimed that Mangila knew that Guina was holding office in
Pasay City and not in Makati.
The trial court, finding credence in private respondents assertion, denied the
Motion to Dismiss and allowed the case to proceed.
The trial court thereafter ruled in favor of Guina, ordering Mangila to pay her
outstanding balance.
ISSUE: W/N there was improper venue.
RULING: Yes.
The case should be dismissed for improper venue, but not for the reason
stated by Mangila. Mangila raised the issue of improper venue due to the
stipulation in the invoice that any litigation’s agreed venue is Makati. However,
the stipulation does not limit the venue exclusively to Makati. Nevertheless,
Pasay is not the proper venue for this case. Under the Rules of Court, venue in
personal actions is where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff. The exception to this rule is when the parties agree on
an exclusive venue other than the places mentioned in the rules. But, as
discussed, this exception is not applicable in this case. Hence, following the
general rule, the case may be brought in the place of residence of the plaintiff
or defendant, at the election of the plaintiff.
In the instant case, the residence of Guina was not alleged in the complaint.
Rather, what was alleged was the postal address of her sole proprietorship, Air
Swift International. It was only during trial that she mentioned her residence to
be in Paranaque City.
In the instant case, it was established in the lower court that petitioner resides
in San Fernando, Pampanga while private respondent resides in Paranaque
City. However, this case was brought in Pasay City, where the business of
Guina is found. This would have been permissible had Guina’s business been
a corporation. However, as Guina admitted in her Complaint in the trial court,
her business is a sole proprietorship, and as such, does not have a separate
juridical personality that could enable it to file a suit in court. In fact, there is no
law authorizing sole proprietorships to file a suit in court.
A sole proprietorship does not possess a juridical personality separate and
distinct from the personality of the owner of the enterprise. The law merely
recognizes the existence of a sole proprietorship as a form of business
organization conducted for profit by a single individual and requires its
proprietor or owner to secure licenses and permits, register its business name,
and pay taxes to the national government. The law does not vest a separate
legal personality on the sole proprietorship or empower it to file or defend an
action in court.[42]

Thus, not being vested with legal personality to file this case, Air Swift
International is not the plaintiff in this case but rather Loreta Guina in her
personal capacity.
ii. Excellent Quality Apparel V. Win Multiple Rich Builders
Facts:
 In 1996, petitioner Excellent Quality Apparel entered into a contract with Multi
Rich Builders, a registered sole proprietorship, for the construction of a
garment factory. In 1997, herein respondent Win Multi Rich Builders was
incorporated with the SEC. It then filed a complaint for sum of money against
petitioner. In a hearing held, the counsel of respondent Win moved that that its
name in the case be changed to that of Multi Rich Builders. Petitioner noticing
the variance in the name moved to dismiss the case asserting Win was not the
contractor neither a party to the contract, thus it cannot institute the case.
Issue:
Whether or not Win has legal personality to institute the case.
Ruling: NO.
Win admitted that the contract was executed between Multi-Rich and petitioner.
It further admitted that Multi-Rich was a sole proprietorship with a business
permit issued by the Office of the Mayor of Manila. A sole proprietorship is the
oldest, simplest, and most prevalent form of business enterprise. It is an
unorganized business owned by one person. The sole proprietor is personally
liable for all the debts and obligations of the business. A sole proprietorship
does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise. The law does not vest a separate
legal personality on the sole proprietorship or empower it to file or defend an
action in court.
The original petition was instituted by Win, which is a SEC-registered
corporation. It filed a collection of sum of money suit which involved a
construction contract entered into by petitioner and Multi-Rich, a sole
proprietorship. The counsel of Win wanted to change the name of the plaintiff
in the suit to Multi-Rich. The change cannot be countenanced. The plaintiff in
the collection suit is a corporation. The name cannot be changed to that of a
sole proprietorship. Again, a sole proprietorship is not vested with juridical
personality to file or defend an action.

In order for a corporation to be able to file suit and claim the receivables of its
predecessor in business, in this case a sole proprietorship, it must show proof
that the corporation had acquired the assets and liabilities of the sole
proprietorship. Win could have easily presented or attached any document
e.g., deed of assignment which will show whether the assets, liabilities and
receivables of Multi-Rich were acquired by Win. Having been given the
opportunity to rebut the allegations made by petitioner, Win failed to use that
opportunity. Thus, we cannot presume that Multi-Rich is the predecessor-in-
business of Win and hold that the latter has standing to institute the collection
suit.

b.) Rights of Juridical Person

1. Art. 46 NCC
Art. 46. Juridical persons may acquire and possess property of all kinds, as well
as incur obligations and bring civil or criminal actions, in conformity with the laws
and regulations of their organization.
2. Art. III, Secs 1 and 2, Constitution
SECTION 1. No person shall be deprived of life, liberty, or property without due
process of law, nor shall any person be denied the equal protection of the laws.

SECTION 2. The right of the people to be secure in their persons, houses,

papers, and effects against unreasonable searches and seizures of whatever
nature and for any purpose shall be inviolable, and no search warrant or warrant
of arrest shall issue except upon probable cause to be determined personally by
the judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be searched
and the persons or things to be seized.
3. Bache V. Ruiz 1971
Facts:
On 24 February 1970, Misael P. Vera, Commissioner of Internal Revenue, wrote
a letter addressed to Judge Vivencio M. Ruiz requesting the issuance of a
search warrant against Bache & Co. (Phil.), Inc. and Frederick E. Seggerman for
violation of Section 46(a) of the National Internal Revenue Code (NIRC), in
relation to all other pertinent provisions thereof, particularly Sections 53, 72, 73,
208 and 209, and authorizing Revenue Examiner Rodolfo de Leon to make and
file the application for search warrant which was attached to the letter.
In the afternoon of the following day, De Leon and his witness, Arturo Logronio,
went to the Court of First Instance (CFI) of Rizal. They brought with them the
following papers: Vera’s letter-request; an application for search warrant already
filled up but still unsigned by De Leon; an affidavit of Logronio subscribed before
De Leon; a deposition in printed form of Logronio already accomplished and
signed by him but not yet subscribed; and a search warrant already
accomplished but still unsigned by Judge. At that time the Judge was hearing a
certain case; so, by means of a note, he instructed his Deputy Clerk of Court to
take the depositions of De Leon and Logronio.
After the session had adjourned, the Judge was informed that the depositions
had already been taken. The stenographer, upon request of the Judge, read to
him her stenographic notes; and thereafter, the Judge asked Logronio to take
the oath and warned him that if his deposition was found to be false and without
legal basis, he could be charged for perjury.
The Judge signed de Leon’s application for search warrant and Logronio’s
deposition. Search Warrant 2-M-70 was then signed by Judge and accordingly
issued. 3 days later (a Saturday), the BIR agents served the search warrant to
the corporation and Seggerman at the offices of the corporation on Ayala
Avenue, Makati, Rizal.
The corporation’s lawyers protested the search on the ground that no formal
complaint or transcript of testimony was attached to the warrant. The agents
nevertheless proceeded with their search which yielded 6 boxes of documents.
On 3 March 1970, the corporation and Seggerman filed a petition with the Court
of First Instance (CFI) of Rizal praying that the search warrant be quashed,
dissolved or recalled, that preliminary prohibitory and mandatory writs of
injunction be issued, that the search warrant be declared null and void, and that
Vera, Logronio, de Leon, et. al., be ordered to pay the corporation and
Seggerman, jointly and severally, damages and attorney’s fees.
After hearing and on 29 July 1970, the court issued an order dismissing the
petition for dissolution of the search warrant. In the meantime, or on 16 April
1970, the Bureau of Internal Revenue made tax assessments on the corporation
in the total sum of P2,594,729.97, partly, if not entirely, based on the documents
thus seized.
The corporation and Seggerman filed an action for certiorari, prohibition, and
mandamus.
Issue:
Whether the corporation has the right to contest the legality of the seizure
of documents from its office.
Held:
The legality of a seizure can be contested only by the party whose rights have
been impaired thereby, and that the objection to an unlawful search and seizure
is purely personal and cannot be availed of by third parties. In Stonehill, et al. vs.
Diokno, et al. (GR L-19550, 19 June 1967; 20 SCRA 383) the Supreme Court
impliedly recognized the right of a corporation to object against unreasonable
searches and seizures; holding that the corporations have their respective
personalities, separate and distinct from the personality of the corporate officers,
regardless of the amount of shares of stock or the interest of each of them in
said corporations, whatever, the offices they hold therein may be; and that the
corporate officers therefore may not validly object to the use in evidence against
them of the documents, papers and things seized from the offices and premises
of the corporations, since the right to object to the admission of said papers in
evidence belongs exclusively to the corporations, to whom the seized effects
belong, and may not be invoked by the corporate officers in proceedings against
them in their individual capacity.
The distinction between the Stonehill case and the present case is that: in the
former case, only the officers of the various corporations in whose offices
documents, papers and effects were searched and seized were the petitioners;
while in the latter, the corporation to whom the seized documents belong, and
whose rights have thereby been impaired, is itself a petitioner.
On that score, the corporation herein stands on a different footing from the
corporations in Stonehill. Moreover, herein, the search warrant was void
inasmuch as First, there was no personal examination conducted by the Judge
of the complainant (De Leon) and his witness (Logronio).
The Judge did not ask either of the two any question the answer to which could
possibly be the basis for determining whether or not there was probable cause
against Bache & Co. and Seggerman. The participation of the Judge in the
proceedings which led to the issuance of Search Warrant 2-M-70 was thus
limited to listening to the stenographer’s readings of her notes, to a few words of
 warning against the commission of perjury, and to administering the oath to the
complainant and his witness. This cannot be consider a personal examination.
Second, the search warrant was issued for more than one specific offense. The
search warrant was issued for at least 4 distinct offenses under the Tax Code.
The first is the violation of Section 46(a), Section 72 and Section 73 (the filing of
income tax returns), which are interrelated. The second is the violation of
Section 53 (withholding of income taxes at source).
The third is the violation of Section 208 (unlawful pursuit of business or
occupation); and the fourth is the violation of Section 209 (failure to make a
return of receipts, sales, business or gross value of output actually removed or to
pay the tax due thereon). Even in their classification the 6 provisions are
embraced in 2 different titles: Sections 46(a), 53, 72 and 73 are under Title II
(Income Tax); while Sections 208 and 209 are under Title V (Privilege Tax on
Business and Occupation).
Lastly, the search warrant does not particularly describe the things to be seized.
Search Warrant No. 2-M-70 tends to defeat the major objective of the Bill of
Rights, i.e., the elimination of general warrants, for the language used therein is
so all-embracing as to include all conceivable records of the corporation, which,
if seized, could possibly render its business inoperative. Thus, Search Warrant
2-M-70 is null and void.
4. Bataan Shipyard V. PCGG
FACTS

Challenged in this special civil action of certiorari and prohibition by a private

corporation known as the Bataan Shipyard and Engineering Co., Inc. are: (1)
Executive Orders Numbered 1 and 2, promulgated by President Corazon C.
Aquino on February 28, 1986 and March 12, 1986, respectively, and (2) the
sequestration, takeover, and other orders issued, and acts done, in accordance
with said executive orders by the Presidential Commission on Good Government
and/or its Commissioners and agents, affecting said corporation.

The sequestration order which, in the view of the petitioner corporation, initiated
all its misery was issued on April 14, 1986 by Commissioner Mary Concepcion
Bautista.

On the strength of the above sequestration order, Mr. Jose M. Balde, acting for
the PCGG, addressed a letter dated April 18, 1986 to the President and other
officers of petitioner firm, reiterating an earlier request for the production of
certain documents such as Stock Transfer Book and other Legal documents
(Articles of Incorporation, By-Laws, etc.)

Orders were also issued in connection with the sequestration and takeover, such
as termination of Contract for Security Services and abortion of contract for
Improvement of Wharf at Engineer Island; Change of Mode of Payment of Entry
Charges; Operation of Sesiman Rock Quarry, Mariveles, Bataa; disposal of
scrap, etc.; and the provisional takeover by the PCGG of BASECO, “the
Philippine Dockyard Corporation and all their affiliated companies.”
While BASECO concedes that “sequestration without resorting to judicial action,
might be made within the context of Executive Orders Nos. 1 and 2 before
March 25, 1986 when the Freedom Constitution was promulgated, under the
principle that the law promulgated by the ruler under a revolutionary regime is
the law of the land, it ceased to be acceptable when the same ruler opted to
promulgate the Freedom Constitution on March 25, 1986 wherein under Section
I of the same,y Article IV (Bill of Rights) of the 1973 Constitution was adopted
providing, among others, that “No person shall be deprived of life, liberty and
property without due process of law.” (Const., Art. I V, Sec. 1).”

It declares that its objection to the constitutionality of the Executive Orders “as
well as the Sequestration Order * * and Takeover Order * * issued purportedly
under the authority of said Executive Orders, rests on four fundamental
considerations: First, no notice and hearing was accorded * * (it) before its
properties and business were taken over; Second, the PCGG is not a court, but
a purely investigative agency and therefore not competent to act as prosecutor
and judge in the same cause; Third, there is nothing in the issuances which
envisions any proceeding, process or remedy by which petitioner may
expeditiously challenge the validity of the takeover after the same has been
effected; and Fourthly, being directed against specified persons, and in
disregard of the constitutional presumption of innocence and general rules and
procedures, they constitute a Bill of Attainder.”

It argues that the order to produce corporate records from 1973 to 1986, which it
has apparently already complied with, was issued without court authority and
infringed its constitutional right against self-incrimination, and unreasonable
search and seizure. 14

BASECO further contends that the PCGG had unduly interfered with its right of
dominion and management of its business affairs.

ISSUE

Whether or not the sequestration order dated April 14, 1986, and all other
orders subsequently issued and acts done on the basis thereof, inclusive
of the takeover order of July 14, 1986 and the termination of the services of
the BASECO executives are valid;

DECISION

Yes. The petition cannot succeed. The writs of certiorari and prohibition prayed
for will not be issued. Other evidence submitted to the Court by the Solicitor
General proves that President Marcos not only exercised control over BASECO,
but also that he actually owns well nigh one hundred percent of its outstanding
stock.
Executive Orders Not a Bill of Attainder – In the first place, nothing in the
executive orders can be reasonably construed as a determination or declaration
of guilt. On the contrary, the executive orders, inclusive of Executive Order No.
14, make it perfectly clear that any judgment of guilt in the amassing or
acquisition of “ill-gotten wealth” is to be handed down by a judicial tribunal, in this
case, the Sandiganbayan, upon complaint filed and prosecuted by the PCGG. In
the second place, no punishment is inflicted by the executive orders, as the
merest glance at their provisions will immediately make apparent. In no sense,
therefore, may the executive orders be regarded as a bill of attainder.

No Violation of Right against Self-Incrimination and Unreasonable Searches and

Seizures – It is elementary that the right against self-incrimination has no
application to juridical persons. While an individual may lawfully refuse to answer
incriminating questions unless protected by an immunity statute, it does not
follow that a corporation, vested with special privileges and franchises, may
refuse to show its hand when charged with an abuse ofsuchprivileges * *

Scope and Extent of Powers of the PCGG – PCGG cannot exercise acts of
dominion over property sequestered, frozen or provisionally taken over. AS
already earlier stressed with no little insistence, the act of sequestration; freezing
or provisional takeover of property does not import or bring about a divestment
of title over said property; does not make the PCGG the owner thereof.

The PCGG may thus exercise only powers of administration over the property or
business sequestered or provisionally taken over, much like a court-appointed
receiver, such as to bring and defend actions in its own name; receive rents;
collect debts due; pay outstanding debts; and generally do such other acts and
things as may be necessary to fulfill its mission as conservator and
administrator.

Powers over Business Enterprises Taken Over by Marcos or Entities or Persons

Close to him; Limitations Thereon – Now, in the special instance of a business
enterprise shown by evidence to have been “taken over by the government of
the Marcos Administration or by entities or persons close to former President
Marcos,” the PCGG is given power and authority, as already adverted to, to
“provisionally take (it) over in the public interest or to prevent * * (its) disposal or
dissipation;” and since the term is obviously employed in reference to going
concerns, or business enterprises in operation, something more than mere
physical custody is connoted; the PCGG may in this case exercise some
measure of control in the operation, running, or management of the business
itself. But even in this special situation, the intrusion into management should be
restricted to the minimum degree necessary to accomplish the legislative will,
which is “to prevent the disposal or dissipation” of the business enterprise.

Voting of Sequestered Stock; Conditions Therefor – So, too, it is within the

parameters of these conditions and circumstances that the PCGG may properly
exercise the prerogative to vote sequestered stock of corporations, granted to it
 by the President of the Philippines through a Memorandum dated June 26, 1986.
In the case at bar, there was adequate justification to vote the incumbent
directors out of office and elect others in their stead because the evidence
showed prima facie that the former were just tools of President Marcos and were
no longer owners of any stock in the firm, if they ever were at all.

No Sufficient Showing of Other Irregularities -As to the other irregularities

complained of by BASECO, i.e., the cancellation or revision, and the execution
of certain contracts, inclusive of the termination of the employment of some of its
executives, this Court cannot, in the present state of the evidence on record,
pass upon them. It is not necessary to do so. The issues arising therefrom may
and will be left for initial determination in the appropriate action.

WHEREFORE, the petition is dismissed. The temporary restraining order issued

on October 14, 1986 is lifted.
5. Art III Sec. 11, Constitution
SECTION 11. Free access to the courts and quasi-judicial bodies and adequate
legal assistance shall not be denied to any person by reason of poverty.
Good Shepherd Foundation, Inc. A.M. No. 09-6-9 SC
FACTS:

In his letter dated May 22, 2009 addressed to the Chief Justice, Mr. Roger C.
Prioreschi, administrator of the Good Shepherd Foundation, Inc., wrote that it be
granted the same exemption from paying docket fees as that of poor litigants.

ISSUE:

Should an incorporated foundation (serving indigent litigants) be

exempted from paying docket fees?

RULING:

NO. The Good Shepherd Foundation, Inc., being a corporation invested by the
State with a juridical personality separate and distinct from that of its members,
is a juridical person. Among others, it has the power to acquire and possess
property of all kinds as well as incur obligations and bring civil or criminal
actions, in conformity with the laws and regulations of their organization. As a
juridical person, therefore, it cannot be accorded the exemption from legal and
filing fees granted to indigent litigants.

There are other reasons that warrant the rejection of the request for exemption
in favor of a juridical person. For one, extending the exemption to a juridical
person on the ground that it works for indigent and underprivileged people may
be prone to abuse (even with the imposition of rigid documentation
requirements), particularly by corporations and entities bent on circumventing
the rule on payment of the fees. Also, the scrutiny of compliance with the
 documentation requirements may prove too time-consuming and wasteful for the
courts.
c.) Criminal Liability of a Corporation
1. Sec 171 RCCP
Section 171. Liability of Directors, Trustees, Officers, or Other Employees.
- If the offender is a corporation, the penalty may, at the discretion of the court,
be imposed upon such corporation and/or upon its directors, trustees,
stockholders. members, officers, or employees responsible for the violation or
indispensable to its commission.
2. Penal provisions of Anti-Money Laundering Act
Section 14. Penal Provisions. –

(a) Penalties for the Crime of Money Laundering. The penalty of

imprisonment ranging from seven (7) to fourteen (14) years and a fine of not
less than Three million Philippine pesos (Php 3,000,000.00) but not more than
twice the value of the monetary instrument or property involved in the offense,
shall be imposed upon a person convicted under Section 4(a) of this Act.

The penalty of imprisonment from four (4) to seven (7) years and a fine of not
less than One million five hundred thousand Philippine pesos (Php
1,500,000.00) but not more than Three million Philippine pesos (Php
3,000,000.00), shall be imposed upon a person convicted under Section 4(b) of
this Act.

The penalty of imprisonment from six (6) months to four (4) years or a fine of
not less than One hundred thousand Philippine pesos (Php 100,000.00) but not
more than Five hundred thousand Philippine pesos (Php 500,000.00), or both,
shall be imposed on a person convicted under Section 4(c) of this Act.

(b) Penalties for Failure to Keep Records. The penalty of imprisonment from
six (6) months to one (1) year or a fine of not less than One hundred thousand
Philippine pesos (Php 100,000.00) but not more than Five hundred thousand
Philippine pesos (Php 500,000.00), or both, shall be imposed on a person
convicted under Section 9(b) of this Act.

(c) Malicious Reporting. Any person who, with malice, or in bad faith, report or
files a completely unwarranted or false information relative to money laundering
transaction against any person shall be subject to a penalty of six (6) months to
four (4) years imprisonment and a fine of not less than One hundred thousand
Philippine pesos (Php 100,000.00) but not more than Five hundred thousand
Philippine pesos (Php 500,000.00), at the discretion of the court: Provided, That
the offender is not entitled to avail the benefits of the Probation Law.

If the offender is a corporation, association, partnership or any juridical person,

the penalty shall be imposed upon the responsible officers, as the case may be,
who participated in the commission of the crime or who shall have knowingly
permitted or failed to prevent its commission. If the offender is a juridical
 person, the court may suspend or revoke its license. If the offender is an alien,
he shall, in addition to the penalties herein prescribed, be deported without
further proceedings after serving the penalties herein prescribed. If the offender
is a public official or employee, he shall, in addition to the penalties prescribed
herein, suffer perpetual or temporary absolute disqualification from office, as the
case may be;

Any public official or employee who is called upon to testify and refuses to do
the same or purposely fails to testify shall suffer the same penalties prescribed
herein.

(d) Breach of Confidentiality. The punishment of imprisonment ranging from

three (3) to eight (8) years and a fine of not less than Five hundred thousand
Philippine pesos (Php 500,000.00) but not more than One million Philippine
pesos (Php 1,000,000.00), shall be imposed on a person convicted for a
violation under Section 9(c).
3. Trust receipts Law (Sec. 13, PD 115, in relation to estafa under Art. 315,
RPC)
Section 13. Penalty clause. The failure of an entrustee to turn over the
proceeds of the sale of the goods, documents or instruments covered by a trust
receipt to the extent of the amount owing to the entruster or as appears in the
trust receipt or to return said goods, documents or instruments if they were not
sold or disposed of in accordance with the terms of the trust receipt shall
constitute the crime of estafa, punishable under the provisions of Article Three
hundred and fifteen, paragraph one (b) of Act Numbered Three thousand eight
hundred and fifteen, as amended, otherwise known as the Revised Penal Code.
If the violation or offense is committed by a corporation, partnership,
association or other juridical entities, the penalty provided for in this Decree
shall be imposed upon the directors, officers, employees or other officials or
persons therein responsible for the offense, without prejudice to the civil
liabilities arising from the criminal offense.
Article 315. Swindling (estafa). - Any person who shall defraud another by
any of the means mentioned hereinbelow shall be punished by:

Xxxxx

1. With unfaithfulness or abuse of confidence, namely:

(a) By altering the substance, quantity, or quality or anything of value which the
offender shall deliver by virtue of an obligation to do so, even though such
obligation be based on an immoral or illegal consideration.

(b) By misappropriating or converting, to the prejudice of another, money,

goods, or any other personal property received by the offender in trust or on
commission, or for administration, or under any other obligation involving the
duty to make delivery of or to return the same, even though such obligation be
totally or partially guaranteed by a bond; or by denying having received such
money, goods, or other property.

(c) By taking undue advantage of the signature of the offended party in blank,
and by writing any document above such signature in blank, to the prejudice of
the offended party or of any third person.

2. By means of any of the following false pretenses or fraudulent acts executed

prior to or simultaneously with the commission of the fraud:

(a) By using fictitious name, or falsely pretending to possess power, influence,

qualifications, property, credit, agency, business or imaginary transactions, or
by means of other similar deceits.

(b) By altering the quality, fineness or weight of anything pertaining to his art or
business.

(c) By pretending to have bribed any Government employee, without prejudice

to the action for calumny which the offended party may deem proper to bring
against the offender. In this case, the offender shall be punished by the
maximum period of the penalty.

(d) By post-dating a check, or issuing a check in payment of an obligation when

the offender therein were not sufficient to cover the amount of the check. The
failure of the drawer of the check to deposit the amount necessary to cover his
check within three (3) days from receipt of notice from the bank and/or the
payee or holder that said check has been dishonored for lack of insufficiency of
funds shall be prima facie evidence of deceit constituting false pretense or
fraudulent act. (As amended by R.A. 4885, approved June 17, 1967.)

(e) By obtaining any food, refreshment or accommodation at a hotel, inn,

restaurant, boarding house, lodging house, or apartment house and the like
without paying therefor, with intent to defraud the proprietor or manager thereof,
or by obtaining credit at hotel, inn, restaurant, boarding house, lodging house,
or apartment house by the use of any false pretense, or by abandoning or
surreptitiously removing any part of his baggage from a hotel, inn, restaurant,
boarding house, lodging house or apartment house after obtaining credit, food,
refreshment or accommodation therein without paying for his food, refreshment
or accommodation.

3. Through any of the following fraudulent means:

(a) By inducing another, by means of deceit, to sign any document.

(b) By resorting to some fraudulent practice to insure success in a gambling

game.
 (c) By removing, concealing or destroying, in whole or in part, any court record,
office files, document or any other papers.
4. Ching V. Sec of Justice
FACTS:
Sept-Oct 1980: PBMI, through Ching, Senior VP of Philippine Blooming Mills,
Inc. (PBMI), applied with the Rizal Commercial Banking Corporation (RCBC) for
the issuance of commercial letters of credit to finance its importation of assorted
goods
RCBC approved the application, and irrevocable letters of credit were issued in
favor of Ching.
The goods were purchased and delivered in trust to PBMI.
Ching signed 13 trust receipts as surety, acknowledging delivery of the goods
Under the receipts, Ching agreed to hold the goods in trust for RCBC, with
authority to sell but not by way of conditional sale, pledge or otherwise
In case such goods were sold, to turn over the proceeds thereof as soon as
received, to apply against the relative acceptances and payment of other
indebtedness to respondent bank.
In case the goods remained unsold within the specified period, the goods were
to be returned to RCBC without any need of demand.
goods, manufactured products or proceeds thereof, whether in the form of
money or bills, receivables, or accounts separate and capable of identification -
RCBC’s property
When the trust receipts matured, Ching failed to return the goods to RCBC, or
to return their value amounting toP6,940,280.66 despite demands.
RCBC filed a criminal complaint for estafa against petitioner in the Office of the
City Prosecutor of Manila.
December 8, 1995: no probable cause to charge petitioner with violating P.D.
No. 115, as petitioner’s liability was only civil, not criminal, having signed the
trust receipts as surety
RCBC appealed the resolution to the Department of Justice (DOJ) via petition
for review
On July 13, 1999: reversed the assailed resolution of the City Prosecutor
execution of said receipts is enough to indict the Ching as the official
responsible for violation of P.D. No. 115
April 22, 2004: CA dismissed the petition for lack of merit and on procedural
grounds
Ching filed a petition for certiorari, prohibition and mandamus with the CA
ISSUE: W/N Ching should be held criminally liable.

HELD: YES. DENIED for lack of merit

There is no dispute that it was the Ching executed the 13 trust receipts.
law points to him as the official responsible for the offense
Since a corporation CANNOT be proceeded against criminally because it
CANNOT commit crime in which personal violence or malicious intent is
required, criminal action is limited to the corporate agents guilty of an act
amounting to a crime and never against the corporation itself
execution by Ching of receipts is enough to indict him as the official responsible
for violation of PD 115
RCBC is estopped to still contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like those imported by PBM, for use
in manufacture.
Moreover, PD 115 explicitly allows the prosecution of corporate officers ‘without
prejudice to the civil liabilities arising from the criminal offense’ thus, the civil
liability imposed on respondent in RCBC vs. Court of Appeals case is clearly
separate and distinct from his criminal liability under PD 115
Ching’s being a Senior Vice-President of the Philippine Blooming Mills does not
exculpate him from any liability
The crime defined in P.D. No. 115 is malum prohibitum but is classified as
estafa under paragraph 1(b), Article 315 of the Revised Penal Code, or estafa
with abuse of confidence. It may be committed by a corporation or other
juridical entity or by natural persons. However, the penalty for the crime is
imprisonment for the periods provided in said Article 315.
law specifically makes the officers, employees or other officers or persons
responsible for the offense, without prejudice to the civil liabilities of such
corporation and/or board of directors, officers, or other officials or employees
responsible for the offense
rationale: officers or employees are vested with the authority and responsibility
to devise means necessary to ensure compliance with the law and, if they fail to
do so, are held criminally accountable; thus, they have a responsible share in
the violations of the law
If the crime is committed by a corporation or other juridical entity, the directors,
officers, employees or other officers thereof responsible for the offense shall be
charged and penalized for the crime, precisely because of the nature of the
crime and the penalty therefor. A corporation cannot be arrested and
imprisoned; hence, cannot be penalized for a crime punishable by
imprisonment. However, a corporation may be charged and prosecuted for a
crime if the imposable penalty is fine. Even if the statute prescribes both fine
and imprisonment as penalty, a corporation may be prosecuted and, if found
guilty, may be fined
When a criminal statute designates an act of a corporation or a crime and
prescribes punishment therefor, it creates a criminal offense which, otherwise,
would not exist and such can be committed only by the corporation. But when a
penal statute does not expressly apply to corporations, it does not create an
offense for which a corporation may be punished. On the other hand, if the
State, by statute, defines a crime that may be committed by a corporation but
prescribes the penalty therefor to be suffered by the officers, directors, or
employees of such corporation or other persons responsible for the offense,
only such individuals will suffer such penalty. Corporate officers or employees,
through whose act, default or omission the corporation commits a crime, are
themselves individually guilty of the crime. The principle applies whether or not
the crime requires the consciousness of wrongdoing. It applies to those
corporate agents who themselves commit the crime and to those, who, by virtue
of their managerial positions or other similar relation to the corporation, could be
 deemed responsible for its commission, if by virtue of their relationship to the
corporation, they had the power to prevent the act. Benefit is not an operative
fact.
5. Tupaz IV V. CA
Signing as corporate representative, can it hold you personally liable for the
debt you are signing for in behalf of the company in a commercial credit
transaction? Not if it's stipulated.

Facts:

Jose C. Tupaz IV - VP for Operations and Petronila C. Tupaz -VP/Treasurer of

EL ORO Engraver Corporation, entered into a contract with the AFP - Armed
Forces Of The Philippines to supply the latter with “survival bolos.”
To finance the purchase of the raw materials for the bolos, Jose Tupaz and
Petronila Tupaz on behalf of EL ORO Corporation, applied with respondent
bank BPI - Bank of the Philippine Islands for 2 commercial Letters of Credit.
The LCs were in favor of El Oro Corporation’s suppliers, TANCHAOCO
Manufacturing Incorporated.
Simultaneous with the issuance of the LCs, the 2 Tupazes (sama yata
pakinggan) Jose Tupaz and Petronila Tupaz.. ,(okay) petitioners hereto signed
TRUST RECEIPTS in favor of respondent bank BPI.
Now here comes the issue. Jose C. Tupaz IV signed, in his personal capacity,
a trust receipt corresponding to a Letter of Credit for P564,871.
The problem was, petitioners did not comply with their undertaking under the
TRUST RECEIPTS. Respondent bank naturally made several demands for
payments but EL ORO Corporation made partial payments only.
So as a consequence, respondent bank BPI sent final demand letters to EL
ORO Corporation where EL ORO replied that it could not fully pay its debt
because the AFP (Armed Forces of the Philippines) had delayed paying for the
survival bolos. (in short, naipit sya)

Issue:

Did Petitioners herein stated bind themselves personally with regard to

the company debt herein described when they signed the Trust Receipts?

Held:

NO.

A CORPORATE REPRESENTATIVE signing as a solidary guarantee as

corporate representative did not undertake to guarantee personally the payment
of the corporation’s debts.

In the aforementioned trust receipt, petitioners signed below its clause as

officers of El Oro Corporation. Thus, under petitioner Petronila Tupaz’s
signature are the words “Vice-Pres–Treasurer” and under petitioner Jose
 Tupaz’s signature are the words “Vice-Pres–Operations.” By so signing that
trust receipt, PETITIONERS DID NOT BIND THEMSELVES PERSONALLY
LIABLE FOR EL ORO CORPORATION’S OBLIGATION.

In Ong v. Court of Appeals, a corporate representative signed a solidary

guarantee clause in two trust receipts in his capacity as corporate
representative. There, the Court held that the corporate representative did not
undertake to guarantee personally the payment of the corporation’s debts.
A corporation, being a juridical entity, may act only through its directors,
officers, and employees. Debts incurred by these individuals, acting as such
corporate agents, are not theirs but the direct liability of the corporation they
represent.

(exception)
As an exception, directors or officers are personally liable for the corporation’s
debts only if they so contractually agree or stipulate.
The 'Tupazes' won this case.
d.) Liability for Torts / Negligence
1. PNB V. CA 1978
2. Secosa V. Heirs of Francisco
Facts:

Traveling behind the motorcycle driven by Francisco was a sand and gravel
truck, which in turn was being tailed by the Isuzu truck driven by Secosa.

The three vehicles were traversing the southbound lane at a fairly high speed.
When Secosa overtook the sand and gravel truck, he... bumped the motorcycle
causing Francisco to fall. The rear wheels of the Isuzu truck then ran over
Francisco, which resulted in his instantaneous death. Fearing for his life,
petitioner Secosa left his truck and fled the scene of the collision.

Issues:

Hence the present petition, based on the following arguments:

I.

THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT AFFIRMED THE

DECISION OF THE TRIAL COURT THAT PETITIONER DASSAD DID NOT
EXERCISE THE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE
SELECTION AND SUPERVISION OF ITS EMPLOYEES WHICH IS NOT IN
ACCORDANCE WITH ARTICLE 2180 OF

THE NEW CIVIL CODE AND RELATED JURISPRUDENCE ON THE MATTER.

Ruling:
Based on the foregoing provisions, when an injury is caused by the negligence
of an employee, there instantly arises a presumption that there was negligence
on the part of the employer either in the selection of his employee or in the
supervision over him after such selection.

The presumption, however, may be rebutted by a clear showing on the part of

the employer that it exercised the care and diligence of a good father of a family
in the selection and supervision of his employee. Hence, to evade solidary
liability for quasi-delict committed by an... employee, the employer must adduce
sufficient proof that it exercised such degree of care.[6]

In the selection of prospective employees, employers are required to

examine them as to their qualifications, experience, and service records.
[13]

On the other hand, with respect to the supervision of employees, employers

should formulate... standard operating procedures, monitor their
implementation, and impose disciplinary measures for breaches thereof. To
establish these factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary evidence.

Principles:

Article 2176 of the Civil Code provides:

Whoever by act or omission causes damage to another, there being fault or

negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by... the provisions of this Chapter.

On the other hand, Article 2180, in pertinent part, states:

The obligation imposed by article 2176 is demandable not only for one's own
acts or omissions, but also for those of persons for whom one is responsible x x
x.

Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry x x x.

The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family
to prevent damage.

Petitioner's attempt to prove its "deligentissimi patris familias" in the selection

and supervision of employees through oral evidence must fail as it was unable
to buttress... the same with any other evidence, object or documentary, which
 might obviate the apparent biased nature of the testimony.[10]... employers
must submit concrete proof, including documentary evidence.
3. Professional Services, Inc. V. CA
FACTS:

Enrique Agana told his wife Natividad Agana to go look for their neighbor, Dr.
Ampil, a surgeon staff member of Medical City, a prominent and known hospital
Natividad suffered from injury due to 2 gauges left inside her body so they sued
Professional Inc. (PSI)
Despite, the report of 2 missing gauzes after the operation PSI did NOT initiate
an investigation
ISSUE: W/N PSI should be liable for tort.

HELD: YES. 15M + 12% int. until full satisfaction.

While PSI had no power to control the means/method by which Dr. Ampil
conducted the surgery on Natividad, they had the power to review or cause the
review
PSI had the duty to tread on as captain of the ship for the purpose of ensuing
the safety of the patients availing themselves of its services and facilities
PSI defined its standards of corporate conduct:
Even after her operation to ensure her safety as a patient
NOT limited to record the 2 missing gauzes
Extended to determining Dr. Ampils role in it, bringing the matter to his attention
and correcting his negligence

Admission bars itself from arguing that its corp. resp. is NOT yet in existence at
the time Natividad underwent treatment
Dr. Ampil - medial negligence
PSI - Corporate Negligence
NOTE:
Liability unique to this case because of implied agency and admitted corporate
duty
26 years already and Dr. Ampil's status could no longer be ascertained
4. Calatagan Golf Club V. Clemente
-Clemente failed to pay his monthly dues for his membership (1 share of stock
for P120K) in Calatagan Golf Corp. CGC subsequently sold Clemente’s share
after notifying him by mail that his share would be sold at a public auction.
However, Calatagan was sending the notices to a closed addres and therefor
failed to inform Clemente. It was after 7 years when Clemente knew about the
sale. SEC dismissed Clemente’s complaint citing S69 of the Corpo Code which
gives him 4 months to question such sale. CA reversed. SC ruled in favor of
Clemente staing that S91 of Corpo Code should be applied in this case and not
S69.That the by-laws of CGC should govern, however, CGC was in bad faith
when it sent a 3rd and final demand to a closed address knowing fully that no
one was there to receive the notices.
-S69 of the Corpo Code refers specifically to unpaid subscriptions to capital
stock. The sale of delinquent stock is the nonpayment 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 long er had any outstanding obligation to deprive him of full title to
his share. S69 will only be applicable if Clemente still has not fully paid for the
share and the nonstock corp decided to sell such share as a consequence
which is not the case at bar. S91 of the Corpo Code provides that termination of
membership in nonstock corporations are governed by its Articles of
Incorporation or by-laws.
e.) Entitlement to Moral Damages
1. ABS-CBN Corp V. CA
- Abs cbn and Viva executed a Film Exhibition Agreement whereby Viva gave
Abs cbn an exclusive right to exhibit some Viva films. Accordingto the
agreement, Abs cbn shall have the right of first refusal to 24 Viva films for Tv
telecast under such terms as may be agreed upon by the parties. However,
such right shall be exercised by Abs cbn from the actual offer in writing.
Viva, thru Del Rosario (Exec. Prod.) offered Abs cbn thru VP Santos-Concio a
list of 3 film packages from which Abs cbn may exercise its right of first refusal.
Abs cbn however tick off only 10 titles. Del Rosario approached Santos- Concio
with another list consisting 52 movie titles and 104 re runs, proposing Abs cbn
airing right for P60M(30- cash; 30- worth of tv spots). Did not agree.
4 days later, Del Rosario and Gozon(Senior VP of RBS) discussed the terms
and conditions of Viva’s offer. A day after, Santos- Concio sent the draft of the
contract between Abs cbn and Viva which contained a counter porposal
covering 53 films for P35M. Board of Directors(Viva) rejected.
-Under Corporation Code, unless otherwise provided by said Code, corporate
powers, such as the power; to enter into contracts; are exercised by the Board
of Directors. However, the Board may delegate such powers to either an
executive committee or officials or contracted managers. The delegation,
except for the executive committee, must be for specific purposes, Delegation
to officers makes the latter agents of the corporation; accordingly, the general
rules of agency as to the bindings effects of their acts would apply. For such
officers to be deemed fully clothed by the corporation to exercise a power of the
Board, the latter must specially authorize them to do so. That Del Rosario did
not have the authority to accept ABS-CBN's counter-offer was best evidenced
by his submission of the draft contract to VIVA's Board of Directors for the
latter's approval.
-The award of moral damages cannot be granted in favor of a corporation
because, being an artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no senses, It cannot, therefore,
experience physical suffering and mental anguish, which call be experienced
only by one having a nervous system.
The statement in People v. Manero and Mambulao Lumber Co. v. PNB that a
corporation may recover moral damages if it "has a good reputation that is
debased, resulting in social humiliation" is an obiter dictum. On this score alone
the award for damages must be set aside, since RBS is a corporation.
2. Jardine Davies V. CA
 - During the height of the power crisis in 1992 which the country was
experiencing,
Purefoods Corpo decided to install (2) 1500 KW generators in its food
processing plant in San Roque Marikina City to remedy and curtail further
losses due to the series of power failures. November 1992, bidding for the
supply and installation of the generators was held. Out
of the 8 prospective bidders, Far East Mills Supply Corp won the bid. In a letter
addressed to FEMSCO Pres. Po, Purefoods confirmed the award of the
contract to Femsco. However, in a letter dated Dec 22 1992, Purefoods
unilaterally cancelled the award due to alleged significant factors and re-bid of
the project, Consequently, Femsco protested the cancellation of the award.
Before the matter could be resolved, Purefoods already awarded the project
and entered into a contract with Jardine Nell, a division of Jardine Davies.
-It is very evident that Purefoods thought that by the expedient means of merely
writing a letter would automatically cancel or nullify the existing contract entered
into by both parties after a process of bidding. This, to the Court’s mind, is a
flagrant violation of the express provisions of the law and is contrary to fair and
just dealings to which every man is due. This Court has awarded in the past
moral damages to a corporation whose reputation has been besmirched. In the
instant case, respondent FEMSCO has sufficiently shown that its reputation
was tarnished after it immediately ordered equipment from its suppliers on
account of the urgency of the project, only to be canceled later.

3. Crystal et. Al V. BPI

FACTS: On March 28, 1978, spouses Crystal obtained a P300,000 loan in

behalf of Cebu Contractors Consortium Co. from the BPI BPI-Butuan. The loan
was secured by a chattel mortgage on heavy equipment and machinery of
CCCC. On the same date, the spouses executed in favor of BPI a Continuing
Suretyship where they bound themselves as surety of CCCC in the aggregate
principal sum of not exceeding P300,000. Thereafter, on March 29,1979,
Raymundo Crystal executed a promissory note for the amount of P300,000,
also in favor of BPI. Sometime in August 1979, CCCC renewed a previous loan,
this time from BPI-Cebu. However, CCCC had no real property to offer as
security for the loan; hence, the spouses executed a real estate mortgage over
their own real property. They executed another real estate mortgage over the
same lot in favor of BPI-Cebu, to secure an additional loan of P20,000 of
CCCC. CCCC failed to pay its loan to both BPI-Butuan and BPI-Cebu when
they became due. CCC, as well as the spouses, failed to pay their obligations
despite demands. Thus, BPI resorted to foreclosure of the chattel mortgage and
the real estate mortgage. BPI then filed a complaint for sum of money against
CCCC and the spouses before the RTC, seeking to recover the deficiency of
loan. Before the Court, petitioners who are the heirs of the spouses argue that
the failure of the spouses to pay the BPI-Cebu loan of P120,000 was due to
BPI’s illegal refusal to accept payment for the loan unless the P300,000 loan
from BPI-Butuan would also be paid. Consequently, in view of BPI’s unjust
 refusal to accept payment of the BPI-Cebu loan, the loan obligation of the
spouses was extinguished, as contended by the petitioners

ISSUE: Whether or not the obligation of the spouses is extinguished

Whether or not BPI is entitled to moral damages

HELD: (1) No, the obligation is not yet extinguished. Under Art 1236 of the Civil
Code, the creditor is not bound to accept payment or performance by a third
person who has no interest in the fulfillment of the obligation, unless there is a
stipulation to the contrary.
(2) No, BPI is not entitled to moral damages. A juridical person is generally not
entitled to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings, serious
anxiety, mental anguish or moral shock. The court held in the case of
Mambulao Lumber Co. vs PNB, an artificial person like herein Applicant
Corporation cannot experience physical suffering, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation which are
basis of moral damages. A corporation may have good reputation which, if
besmirched may also be a ground for the award of moral damages.
Nevertheless, in the more recent cases of ABS-CBN Corpo vs CA, the court
held that the statements in Mambulao were mere obiter dicta, implying that the
award of moral damages to corporations is not a hard and fast rule. It is not
automatically granted; there must still be proof of the existence of factual basis
of the damage and its causal relation to the defendant’s acts. This is so
because moral damages, though incapable of pecuniary estimation, are in the
category of an award designed to compensate the claimant for actual injury
suffered and not to impose penalty on the wrongdoer.

4. Filipinas broadcasting network V. AMEC-BCCM

- Expos is a radio documentary program hosted by Rima and Alegre. Expos is

aired every morning over DZRC-AM which is owned by Filipinas Broadcasting
Net. Expos is heard over Legazpi City, the Albay municipalities and other Bicol
areas. December 1989, Rima and Alegre exposed various alleged complaints
from students, teachers, and parents against Ago Medical and Educational
Center-Bicol Christian College Christian College of Medicine and its
administrators. Claiming that the broadcasts were defamatory, Amec and Ago
(Dean), filed a complaint for damages against Filipinas Broadcasting, Rima and
Alegre.
-A juridical person is generally not entitled to moral damages because, unlike a
natural person, it cannot experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish or moral shock. The Court of
Appeals cites Mambulao Lumber Co. v. PNB, et al. to justify the award of moral
damages. However, the Court’s statement in Mambulao that “a corporation may
have a good reputation which, if besmirched, may also be a ground for the
award of moral damages” is an obiter dictum. Nevertheless, AMEC’s claim for
moral damages falls under item 7 of Article 2219 of the Civil Code. This
 provision expressly authorizes the recovery of moral damages in cases of libel,
slander or any other form of defamation. Article 2219(7) does not qualify
whether the plaintiff is a natural or juridical person. Therefore, a juridical person
such as a corporation can validly complain for libel or any other form of
defamation and claim for moral damages. Moreover, where the broadcast is
libelous per se, the law implies damages

5. Mere Obiter dictum

i. Mambulao Lumber V. PNB
P failed to pay the amortization and the amounts released to and
received by it.
Repeated demands were made but upon inspection it was found that P
stopped operation. R sent a letter to R sheriff of Camarines Norte
requesting him to take possession of the parcel of land and the chattels
and to sell them at public auction. R sheriff issued corresponding notice
of extrajudicial sale and sent copy to P. P sent a bank draft for to PNB
allegedly full settlement of the obligation after the application of the sum
representing the proceeds of the foreclosure sale of the parcel of land. P
averred that the foreclosure of chattel mortgage is no longer needed for
being fully paid and that it could not be legally effected at a place other
than City of Manila, the place agreed and stipulated in their contract.
-P’s claim for moral damages seems to have no legal or factual basis.
Obviously, an
artificial person like herein P corporation cannot experience physical
sufferings, mental anguish, fright, serious anxiety, wounded feelings,
moral shock or social humiliation which are basis of moral damages. A
corporation may have a good reputation which, if besmirched, may also
be a ground for the award of moral damages. The same cannot be
considered under the facts of this case, however, not only because it is
admitted that herein appellant had already ceased in its business
operation at the time of the foreclosure sale of the chattels, but also for
the reason that whatever adverse effects of the foreclosure sale of the
chattels could have upon its reputation or business standing would
undoubtedly be the same whether the sale was conducted at Jose
Panganiban, Camarines Norte, or in Manila which is the place agreed
upon by the parties in the mortgage contract.

ii. PP V. Manero, Jr.

FACTS: This was a gruesome murder in a main thoroughfare an hour

before sundown. A hapless foreign religious minister was riddled with
bullets, his head shattered into bits and pieces amidst the reveling of his
executioners as they danced and laughed around their quarry, chanting
the tune “Mutya Ka Baleleng”, a popular regional folk song, kicking and
scoffing at his prostrate, miserable, spiritless figure that was gasping its
last. In the aftermath of the murder, police authorities launched a
 massive manhunt which resulted in the capture of the perpetrators
except 3 individuals who remain at large.

The court held that moral damages in the sum of P100,000 be awarded
to the congregation Fr. Tulio Favali belonged

ISSUE: W/N the moral damages should be awarded

HELD: The award of moral damages in the amount of P100,000 to the

congregation, the Pontifical Institute of Foreign Mission (PIME) Brothers,
is not proper. There is nothing on record which indicates that the
deceased effectively severed his civil relations with his family, or that he
disinherited any member thereof, when he joined his religious
congregation. As a matter of fact, Fr Geremias of the same
congregation, who was then a parish priest of Kidapawan, testified that
“the religious family belongs to the natural family of origin”. As held by
the court, a juridical person is not entitled to moral damages, because
not being a natural person, it cannot experience physical suffering or
such sentiments as wounded feelings, serious anxiety, mental anguish
or moral shock. It is only when a juridical person has a good reputation
that is debased, resulting in social humiliation, that the moral damages
may be awarded.
Neither can we award moral damages to the heirs of the deceased who
may otherwise be lawfully entitle thereto pursuant to par (3), Art. 2206 of
the Civil Code, for the reason that the heirs never presented any
evidence showing that they suffered mental anguish; much less did they
take the witness stand. It has been held that moral damages and their
causal relation to the defendant’s acts should be satisfactorily proved by
the claimant. It is elementary that in order that moral damages may be
awarded there must be proof of moral suffering. However, considering
that the brutal slaying was attended by cruelty and ignominy, exemplary
damages may be awarded to the lawful heirs.

B. Created by Operation of Law

a.) Private Corporations
1. Distinguish from public corporations
2. Distinguish from quasi-public corporations
3. Art. 44 (1) and (2), NCC
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose,
created by law; their personality begins as soon as they have been constituted
according to law
4. Special types of Corporations
Special Corporations
The code has three special corporations: 1. One person Corporation, 2.
Educational Corporation, 3. Religious Corporation.
b.) GOCCs
1. Distinguish from Govt. Instrumentalities
2. Examples
3. Manila International Airport Authority V. CA
-Petitioner Manila International Airport Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA) As operator of the international airport,
MIAA administers the land, improvements and equipment within the NAIA
Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of
land. The MIAA Charter further provides that no portion of the land transferred
to MIAA shall be disposed of through sale or any other mode unless specifically
approved by the President of the Philippines. The OGCC opined that the Local
Government Code of 1991 withdrew the exemption from real estate tax granted
to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with
respondent City of Parañaque to pay the real estate tax imposed by the City.
MIAA then paid some of the real estate tax already due. MIAA received Final
Notices of Real Estate Tax Delinquency from the City of Parañaque The Mayor
of the City of Parañaque threatened to sell at public auction the Airport Lands
and Buildings should MIAA fail to pay the... real estate tax delinquency.
-We rule that MIAA's Airport Lands and Buildings are exempt from real estate
tax imposed by local governments. First, MIAA is not a government-owned or
controlled corporation but an instrumentality of the National Government and
thus exempt from local taxation. Second, the real properties of MIAA are owned
by the Republic of the Philippines and thus... exempt from real estate tax. There
is no dispute that a government-owned or controlled corporation is not exempt
from real estate tax. However, MIAA is not a government-owned or controlled
corporation. Since MIAA is neither a stock nor a non-stock corporation, MIAA
does not qualify as a government-owned or controlled corporation. MIAA is a
government instrumentality vested with corporate powers to perform efficiently
its governmental functions. MIAA is like any other government instrumentality,
the only difference is that MIAA is vested with corporate powers. When the law
vests in a government instrumentality corporate powers, the instrumentality
does not become a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a government
instrumentality exercising not only... governmental but also corporate powers.
Thus, MIAA exercises the governmental powers of eminent domain, police
authority, and the levying of fees and charges. At the same time, MIAA
exercises "all the powers of a corporation under the Corporation Law, insofar as
these powers are not inconsistent with the provisions of this Executive Order."
4. Boy Scouts of the Philippines V. COA

FACTS: The COA issued COA Resolutions No. 99-011 in which the said
resolution state that the BSP was created as a public corporation under
Commonwealth Act No. 111, as amended by Presidential Decree No. 460 and
R.A. No. 7278; that in Boy Scouts of the Philippines vs National Labor Relations
Commission, the Supreme Court ruled that the BSP, as constituted under its
charter, was a “government-controlled corporation within the meaning of Art. IX
(B)(2)(1) of the Constitution; and that “the BSP is appropriately regarded as a
government instrumentality under the 1987 Administrative Code. The BSP
sough reconsideration of the COA Resolution in a letter signed by the BSP
National President, Jejomar Binay. He claimed that RA 7278 eliminated the
“substantial government participation” in the National Executive Board by
removing: (i) the President of the Philippines and executive secretaries, with the
exception of Secretary of Education, as members thereof; and (ii) the
appointment and confirmation power of the President of the Philippines, as
Chief Scout, over the members of the said Board. The BSP further claimed that
the 1987 Administrative Code itself, of which the BSP’s NLRC relied on for
some terms, defines governments-owned and controlled corporations as
agencies organized as stock or non-stock corporations which the BSP, under its
present charter, is not. And finally, they claim that the Government, like in other
GOCC’s, does not have funds invested in the BSP. The BSP is not an entity
administering special funds. The BSP is neither a unit of the Government; a
department which refers to an executive department as created by law; nor a
bureau which refers to any principal subdivision or unit of any department

ISSUE: Whether the BSP falls under the COA’s audit jurisdiction

HELD: Yes. The BSP is a public corporation and its funds are subject to the
COA’s audit jurisdiction. The BSP Charter created the BSP as a “public
corporation. There are three classes of juridical persons under Art. 44 of the
Civil Code and the BSP, as presently constituted under RA 7278, falls under the
second classification.
“Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose
created by law; their personality begin as soon as they have been constituted
according to law;
(3) Corporations, partnerships and associations for private interest or purpose
to which the law grants a juridical personality, separate and distinct from that of
each shareholder, partner or member.

The BSP, which is a corporation created for a public interest or purpose, is

subject to the law creating it under Article 45 of the Civil Code, which provides:
Art. 45.Juridical persons mentioned in Nos. 1 and 2 of the preceding article are
governed by the laws creating or recognizing them. Private corporations are
regulated by laws of general application on the subject. Partnerships and
associations for private interest or purpose are governed by the provisions of
this Code concerning partnerships. The purpose of the BSP as stated in its
amended charter shows that it was created in order to implement a State policy
declared in Article II, Section 13 of the Constitution, which reads:
“Section 13. The State recognizes the vital role of the youth in nation-building
and shall promote and protect their physical, moral, spiritual, intellectual, and
social well-being. It shall inculcate in the youth patriotism and nationalism, and
encourage their involvement in public and civic affairs.”
 Evidently, the BSP, which was created by a special law to serve a public
purpose in pursuit of a constitutional mandate, comes within the class of "public
corporations" defined by paragraph 2, Article 44 of the Civil Code and governed
by the law which creates it, pursuant to Article 45 of the same Code.

Corporation by Prescription - define

C. Right of Succession
a.) Rationale
b.) Compare with
1. Partnership
2. Sole Proprietorship
c.) Secs. 124-126 RCCP on One Person Corporations
Sec. 124. Nominee and Alternate Nominee. – The single stockholder shall
designate a nominee and an alternate nominee who shall, in the event of the single
stockholder’s death or incapacity, take the pledge of the single stockholder as
director and shall manage the corporation’s affairs.
The articles of incorporation shall state the names, residence addresses and
contact details of the nominee and alternate nominee, as well as the extent and
limitations of their authority in managing the affairs of the One Person Corporation.
The written consent of the nominee and alternate nominee shall be attached to the
application for incorporation. Such consent may be withdrawn in writing any time
before the death or incapacity of the single stockholder.

Sec. 125. Term of Nominee and Alternate Nominee. – When the incapacity of the
single stockholder is temporary, the nominee shall sit as director and manage the
affairs of the One Person Corporation until the stockholder, by self-determination,
regains the capacity to assume such duties.
In case of death or permanent incapacity of the single stockholder, the nominee
shall sit as director and manage the affairs of the One Person Corporation until the
legal heirs of the single stockholder have been lawfully determined, and the heirs
have designated one of them or have agreed that the estate shall be the single
stockholder of the One Person Corporation.
The alternate nominee shall sit as director and manage the One Person
Corporation in case of the nominee’s inability, incapacity, death, or refusal to
discharge the functions as director and manager of the corporation, and only for the
same term and under the same conditions applicable to the nominee.

Sec. 126. Change of Nominee or Alternate Nominee. – The single stockholder

may, at any time, change its nominee and alternate nominee by submitting to the
Commission the names of the new nominees and their corresponding written
consent. For this purpose, the articles of incorporation need not be amended.
D. Express/Implied/Incidental powers
a.) Distinguish and Give Examples Alternatively
b.) General (Sec 35) and Specific Powers (Sec. 36-43)

General Powers
Sec. 35. Corporate Powers and Capacity. – Every corporation incorporated under
this Code has the power and capacity:
(a) To sue and be sued in its corporate name;
(b) To have perpetual existence unless the certificate of incorporation provides
otherwise;
(c) To adopt and use a corporate seal;
(d) To amend its articles of incorporation in accordance with the provisions of this
Code;
(e) To adopt by-laws, not contrary to law, morals, or public policy, and to amend or
repeal the same in accordance with this Code;
(f) In case of stock corporations, to issue or sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this Code; and to admit
members to the corporation if it be a non-stock corporation;
(g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage
and otherwise deal with such real and personal property, including securities and
bonds of other corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution;
(h) To enter into a partnership, joint venture, merger, consolidation, or any other
commercial agreement with natural and juridical persons;
(i) To make reasonable donations, including those for public welfare or for hospital,
charitable, cultural, scientific, civic, or similar purposes: Provided, That no foreign
corporation shall give donations in aid of any political party or candidate or for
purposes of partisan political activity;
(j) To establish pension, retirement, and other plans for the benefit of its directors,
trustees, officers and employees; and
(k) To exercise such other powers as may be essential or necessary to carry out its
purpose or purposes as stated in the articles of incorporation.

Specific Powers
Sec. 36. Power to Extend or Shorten Corporate Term. – A private corporation
may extend or shorten its term as stated in the articles of incorporation when
approved by a majority vote of the board of directors or trustees, and ratified at a
meeting by the stockholders or members representing at least two-thirds (2/3) of
the outstanding capital stock or of its members. Written notice of the proposed
action and the time and place of the meeting shall be sent to stockholders or
members at their respective place of residence as shown in the books of the
corporation, and must be deposited to the addressee in the post office with postage
prepaid, served personally, or when allowed in the bylaws or done with the consent
of the stockholder, sent electronically in accordance with the rules and regulations
of the Commission on the use of electronic data messages. In case of extension of
corporate term, a dissenting stockholder may exercise the right of appraisal under
the conditions provided in this Code.
Sec. 37. Power to Increase or Decrease Capital Stock; Incur, Create or
Increase Bonded Indebtedness – No corporation shall increase or decrease its
capital stock or incur, create or increase any bonded indebtedness unless approved
by a majority vote of the board of directors and by two-thirds (2/3) of the
outstanding capital stock at a stockholder’s meeting and the purpose for said
meeting must be sent to the stockholders at their places of residence as shown in
the books of the corporation and served on the stockholders personally, or through
electronic means recognized in the corporation’s bylaws and/or the Commission’s
rules as a valid mode for service of notices.
A certificate must be signed by a majority of the directors of the corporation and
countersigned by the chairperson and secretary of the stockholder’s meeting,
setting forth:
(a) That the requirements of this section have been complied with;
(b) The amount of the increase or decrease of the capital stock;
(c) In case of an increase of the capital stock, the amount of capital stock or
number of shares of no-par stock thereof actually subscribed, the names,
nationalities and addresses of the person subscribing, the amount of capital stock
or number of no-par stack subscribed by each, and the amount paid by each on the
subscription in cash or property, or the amount of capital stock or number of shares
of no-par stock allotted to each stockholder if such increase is for the purpose of
making effective stock dividend thereof authorized;
(d) Any bonded indebtedness to be incurred, created or increased;
(e) The amount of stock represented at the meeting; and
(f) The vote authorizing the increase or decrease of the capital stock, or the
incurring, creating or increasing of any bonded indebtedness.
Any increase or decrease in capital stock or the incurring, creating or increasing
of any bonded indebtedness shall require prior approval of the Commission, and
where appropriate, of the Philippine Competition Commission. The application with
the Commission shall be made within six (6) months from the date of approval the
board of directors and stockholders, which period may be extended for justifiable
reasons.
Copies of the certificate shall be kept on file in the office of the corporation and
filed with the Commission and attached to the original articles of incorporation. After
approval by the Commission and the issuance by the Commission of its certificate
of filing, the capital stock shall be deemed increased or decreased and the
incurring, creating or increasing of any bonded indebtedness authorized, as the
certificate of filling may declare: Provided, That the Commission shall not accept for
filing any certificate of increase capital treasurer of the corporation lawfully holding
office at the time of the filing of the certificate, showing that at least twenty-five
percent (25%) of the increase in capital stock has been subscribed and that at least
twenty-five percent (25%) of the amount subscribed has been paid in actual cash to
the corporation or that property, the valuation of which is equal to twenty-five
percent (25%) of the subscription, has been transferred to the corporation:
Provided, further, That no decrease in capital stock shall be approved by the
Commission of its effect shall prejudice the rights of corporate creditors.
Nonstock corporations may incur, create or increase bonded indebtedness when
approved by a majority of the board of trustees and of at least two-thirds (2/3) of the
members in a meeting duly called for the purpose.
Bonds issued by a corporation shall be registered with the Commission, which
shall have the authority to determine the sufficiency of the terms thereof.
Sec. 38. Power to Deny Preemptive Right – All stockholders of a stock
corporation shall enjoy pre-emptive right to subscribe to all issues or disposition of
shares of any class, in proportion to their respective shareholdings, unless such
right is denied by the articles of incorporation or an amendment thereto: Provided,
That such pre-emptive right shall not extend to shares to be issued in compliance
with laws requiring stock offerings or minimum stock ownership by the public; or to
shares to be issued in good faith with the approval of the stockholders representing
two-thirds (2/3) of the outstanding capital stock, in exchange for property needed
for corporate purposes or in payment of a previously contracted debt.
Sec. 39. Sale or Other Disposition of Assets. – Subject to the provisions of
Republic Act No. 10667, otherwise known as “Philippine Competition Act”, and
other related laws, a corporation may, by a majority vote of its board of directors or
trustees, sell, lease, exchange, mortgage, pledge, or otherwise dispose of its
property and assets, upon such terms and conditions and for such consideration,
which may be money, stocks, bonds, or other instruments for the payment of
money or other property or consideration, as its board of directors or trustees may
deem expedient. A sale of all or substantially all of the corporation’s properties and
assets, including its goodwill, must be authorized by the vote of the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or at least
two-thirds (2/3) of the members, in a stockholders’ or members’ meeting duly called
for the purpose. In nonstock corporations where there are no members with voting
rights, the vote of at least a majority of the trustees in office will be sufficient
authorization for the corporation to enter into any transaction authorized by this
section. The determination of whether or not the sale involves all or substantially all
of the corporation’s properties and assets must be computed based on its net asset
value, as shown in its latest financial statements. A sale or other disposition 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 purpose for which it was incorporated. Written notice of the
proposed action and of the time and place for the meeting shall be addressed to
stockholders or members at their places of residence as shown in the books of the
corporation and deposited to the addressee in the post office with postage prepaid,
served personally, or when allowed by the bylaws or done with the consent of the
stockholder, sent electronically: Provided, That any dissenting stockholder may
exercise the right of appraisal under the conditions provided in this Code. After
such authorization or approval by the stockholders or members, the board of
directors or trustees may, nevertheless, in its discretion, abandon such sale, lease,
exchange, mortgage, pledge, or other disposition of property and assets, subject to
the rights of third parties under any contract relating thereto, without further action
or approval by the stockholders or members. Nothing in this section is intended to
restrict the power of any corporation, without the authorization by the stockholders
or members, to sell, lease, exchange, mortgage, pledge, or otherwise dispose of
any of its property and assets if the same is necessary in the usual and regular
course of business of the corporation or if the proceeds of the sale or other
disposition of such property and assets shall be appropriated for the conduct of its
remaining business.
Sec. 40. Power to Acquire Own Shares. - Provided that the corporation has
unrestricted retained earnings in its books to cover the shares to be purchased or
acquired, a stock corporation shall have the power to purchase or acquire its own
shares for a legitimate corporate purpose or purposes, including the following
cases:
(a) To eliminate fractional shares arising out of stock dividends;
(b) To collect or compromise an indebtedness to the corporation, arising out of
unpaid subscription, in a delinquency sale, and to purchase delinquent shares sold
during said sale; and
(c) To pay dissenting or withdrawing stockholders entitled to payment for their
shares under the provisions of this Code.
Sec. 41. Power to Invest Corporate Funds in Another Corporation or Business
or for Any Other Purpose. - – Subject to the provisions of this Code, a private
corporation may invest its funds in any other corporation, business, or for any
purpose other than the primary purpose for which it was organized, when approved
by a majority of the board of directors or trustees and ratified by the stockholders
representing at least two-thirds (2/3) of the outstanding capital stock, or by at least
two thirds (2/3) of the members in the case of nonstock corporations, at a meeting
duly called for the purpose. Notice of the proposed investment and the time and
place of the meeting shall be addressed to each stockholder or member at the
place of residence as shown in the books of the corporation and deposited to the
addressee in the post office with postage prepaid, served personally, or sent
electronically in accordance with the rules and regulations of the Commission on
the use of electronic data message, when allowed by the bylaws or done with the
consent of the stockholders: Provided, That any dissenting stockholder shall have
appraisal right as provided in this Code: Provided, however, That where the
investment by the corporation is reasonably necessary to accomplish its primary
purpose as stated in the articles of incorporation, the approval of the stockholders
or members shall not be necessary.
Sec. 42. Power to Declare Dividends - The board of directors of a stock
corporation may declare dividends out of the unrestricted retained earnings which
shall be payable in cash, property, or in stock to all stockholders on the basis of
outstanding stock held by them: Provided, That any cash dividends due on
delinquent stock shall first be applied to the unpaid balance on the subscription plus
costs and expenses, while stock dividends shall be withheld from the delinquent
stockholders until their unpaid subscription is fully paid: Provided, further, That no
stock dividend shall be issued without the approval of stockholders representing at
least two-thirds (2/3) of the outstanding capital stock at a regular or special meeting
duly called for the purpose. Stock corporations are prohibited from retaining surplus
profits in excess of one hundred percent (100%) of their paid-in capital stock,
except: (a) when justified by definite corporate expansion projects or programs
approved by the board of directors; or (b) when the corporation is prohibited under
any loan agreement with financial institutions or creditors, whether local or foreign,
from declaring dividends without their consent, and such consent has not yet been
secured; or (c) when it can be clearly shown that such retention is necessary under
special circumstances obtaining in the corporation, such as when there is need for
special reserve for probable contingencies.
 Sec. 43. Power to Enter into Management Contract. - No corporation shall
conclude a management contract with another corporation unless such contract is
approved by the board of directors and by stockholders owning at least the majority
of the outstanding capital stock, or by at least a majority of the members in the case
of a nonstock corporation, of both the managing and the managed corporation, at a
meeting duly called for the purpose: Provided, That (a) where a stockholder or
stockholders representing the same interest of both the managing and the
managed corporations own or control more than one-third (1/3) of the total
outstanding capital stock entitled to vote of the managing corporation; or (b) where
a majority of the members of the board of directors of the managing corporation
also constitute a majority of the members of the board of directors of the managed
corporation, then the management contract must be approved by the stockholders
of the managed corporation owning at least two-thirds (2/3) of the total outstanding
capital stock entitled to vote, or by at least two-thirds (2/3) of the members in the
case of a nonstock corporation. These shall apply to any contract whereby a
corporation undertakes to manage or operate all or substantially all of the business
of another corporation, whether such contracts are called service contracts,
operating agreements or otherwise: Provided, however, That such service contracts
or operating agreements which relate to the exploration, development, exploitation
or utilization of natural resources may be entered into for such periods as may be
provided by the pertinent laws or regulations. No management contract shall be
entered into for a period longer than five (5) years for any one (1) term.

c.) Intra Vires and Ultra Vires Acts of a Corporation (Sec. 44)
Sec. 44. Intra Vires and Ultra Vires Acts of a Corporation - No corporation shall
possess or exercise corporate powers other than those conferred by this Code or
by its articles of incorporation and except as necessary or incidental to the exercise
of the powers conferred.

III. COMPARISON/DISTINCTIONS