CASE LIST

General Provisions
Sections 1-9 of the Revised Corporation Code of the Philippines
Cases:
1. Harden v. Benguet Consolidated Mining Co., GR No. L-37331, 18 March 1933 Wilbur
Doctrine: Sociedad anonima is a form of partnership, but subject to the provisions of the Corporation Law "so far as
such provisions may be applicable".

Facts: Benguet Consolidated Mining Co. was organized in June, 1903, as a sociedad anonima in conformity with the
provisions of Spanish law. Balatoc Mining Co. was organized in December 1925, as a corporation, in conformity with
the provisions of the Corporation Law (Act No. 1459). Both were organized for mining of gold. Balatoc capital stock
consists of one million shares of the par value of one peso (P1) each. When the Balatoc was first organized, its
properties were largely undeveloped. To improve its operations, the company’s committee approached A. W.
Beam, then president and general manager of the Benguet Company, to secure the capital necessary to the
development of the Balatoc property. A contract was entered into wherein Benguet will (1) construct a milling plant
for the Balatoc mine, of a capacity of 100 tons of ore per day, and with an extraction of at least 85 per cent of the
gold content; (2) erect an appropriate power plant. In return, Benguet will receive from Balatoc shares of a par
value of P600,000. A certificate for 600,000 shares of the stock of the Balatoc Company was given to Benguet.
Harden, the owner of thousands of shares of Balatoc, questioned the transfer of 600,000 shares to Benguet.

Issue: W/N, the Benguet Company, which was organized as a sociedad anonima, is a corporation within the
meaning of the language used by the Congress of the United States. If in the affirmative, is a mining corporation
prohibited from becoming interested in another mining corporation?

Held: Yes. In section 75 of the Corporation Law, a provision is found making the sociedad anonima subject to the
provisions of the Corporation Law "so far as such provisions may be applicable", and giving to the sociedades
anonimas previously created in the Islands the option to continue business as such or to reform and organize under
the provisions of the Corporation Law. A sociedad anonima is something very much like the English joint stock
company, with features resembling those of both the partnership as shown in the fact that sociedad, the generic
component of its name in Spanish, is the same word that is used in that language to designate other forms of
partnership, and in its organization it is constructed along the same general lines as the ordinary partnership.

The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine Bill), generally prohibiting corporations
engaged in mining and members of such from being interested in any other corporation engaged in mining, was
amended by section 7 of Act No. 3518 of the Philippine Legislature, approved by Congress March 1, 1929. The
change in the law effected by this amendment was in the direction of liberalization. Thus, the inhibition contained
in the original provision against members of a corporation engaged in agriculture or mining from being interested in
other corporations engaged in agriculture or in mining was so modified as merely to prohibit any such member
from holding more than fifteen per centum of the outstanding capital stock of another such corporation.

2. Benguet Consolidated Mining Co. v. Pineda, GR No. L-7231, 28 March 1956

Doctrine: The prohibition contained in section 18 of Act No. 1459, against extending the period of corporate
existence by amendment of the original articles, was intended to apply, and does apply, to sociedades anonimas,
already formed, organized and existing at the time of the effectivity of Act No. 1459). A sociedad anonima, existing
before the Corporation Law, that continues to do business as such for a reasonable time after its enactment, is
deemed to have made its election and may not subsequently claim to reform into a corporation under section 75 of
Act No. 1459.

Facts: Benguet Consolidated Mining Company was organized in 1903 under the Spanish Code of Commerce of 1886
as a sociedad anonima. It was agreed by the incorporators that Benguet Mining was to exist for 50 years. In 1906,
Act 1459 (Corporation Law) was enacted which superseded the Code of Commerce of 1886. Act 1459 essentially
introduced the American concept of a corporation. The purpose of the law, among others, is to eradicate the
Spanish Code and make sociedades anonimas obsolete. In 1953, the board of directors of Benguet Mining
submitted to the Securities and Exchange Commission an application for them to be allowed to extend the life span
of Benguet Mining. Then Commissioner Mariano Pineda denied the application as it ruled that the extension
requested is contrary to Section 18 of the Corporation Law of 1906 which provides that the life of a corporation
shall not be extended by amendment beyond the time fixed in their original articles. Benguet Mining contends that
they have a vested right under the Code of Commerce of 1886 because they were organized under said law; that
under said law, Benguet Mining is allowed to extend its life by simply amending its articles of incorporation.

Issue: Whether or not Benguet Mining is allowed to extend its life by amendment to articles of incorporation
 Held: No. Benguet Mining has no vested right to extend its life. It is a well settled rule that no person has a vested
interest in any rule of law entitling him to insist that it shall remain unchanged for his benefit. Had Benguet Mining
agreed to extend its life prior to the passage of the Corporation Code of 1906 such right would have vested. But
when the law was passed in 1906, Benguet Mining was already deprived of such right. To allow Benguet Mining to
extend its life will be inimical to the purpose of the law which sought to render obsolete sociedades anonimas. If
this is allowed, Benguet Mining will unfairly do something which new corporations organized under the new
Corporation Law can’t do – that is, exist beyond 50 years. Further, under the Corporation Code of 1906, existing
sociedades anonimas during the enactment of the law must choose whether to continue as such or be organized as
a corporation under the new law. Once a sociedad anonima chooses one of these, it is already proscribed from
choosing the other. Evidently, Benguet Mining chose to exist as a sociedad anonima hence it can no longer elect to
become a corporation when its life is near its end.

3. Trustees of Darmouth College v. Woodward, 17 U.S. (4 Wheat.) 518 (1819)

Doctrine: A corporation was early defined by the Supreme Court of the United States as an artificial being, invisible,
intangible, and existing only in contemplation of law." A charter granted by a State to a corporation is a binding
contract and could not be altered by the State without the consent of the corporation.

Facts: In 1769 King George III of Great Britain granted a charter to Dartmouth College. This document spelled out
the purpose of the school, set up the structure to govern it, and gave land to the college. In 1816, the New
Hampshire legislature attempted to change Dartmouth College-- a privately funded institution--into a state
university. The legislature changed the school's corporate charter by transferring the control of trustee
appointments to the governor. In an attempt to regain authority over the resources of Dartmouth College, the old
trustees filed suit against William H. Woodward, who sided with the new appointees.

Issue: WN all corporations established for purposes of charity and education can be subject to the control of the
legislature.

Held: Under its charter, Dartmouth College was a private, and not a public, corporation. That a corporation is
established for purposes of general charity, or for education generally does not, per se, make it a public
corporation, liable to the control of the legislature. The Court held that the College's corporate charter qualified as
a contract between private parties, with which the legislature could not interfere. The fact that the government had
commissioned the charter did not transform the school into a civil institution.

4. International Express Travel & Tour Services, Inc. v. CA, GR No. 119002, 19 October 2000
Doctrine: The doctrine of corporation by estoppel applies to a third party only when he tries to escape liabilities on
a contract from which he has benefited on the irrelevant ground of defective incorporation.

Facts: International Express Travel and Tour Services, Inc., through its managing director, wrote a letter to the
Philippine Football Federation (Federation), through its president private respondent Henri Kahn, wherein the
former offered its services as a travel agency to the latter, which was accepted. Petitioner secured the airline tickets
for the trips of the athletes and officials of the Federation which amounted to P449,654.83. For failure to pay the
unpaid amount after demands, the petitioner filed a collection case against Henri Kahn in his personal capacity and
as President of the Federation and impleaded the Federation as an alternative defendant. Kahn denied liability and
averred that it merely acted as the agent of the Federation which has a separate and distinct juridical personality.
The trial court ruled in favor of the petitioner and declared Henri Kahn personally liable for the unpaid obligation of
the Federation. CA reversed the trial court.

Issue: Whether or not Kahn is personally liable, in relation to the doctrine of corporation by estoppel

Held: YES. Kahn avers that he should not be made personally liable because it should be the Federation, as a
corporation having juridical existence, which must be held liable. He merely acted as an agent of the latter. The
Court was not persuaded. It ruled that under R.A. 3135, and the Department of Youth and Sports Development
under P.D. 604, for a Federation to acquire juridical existence it is a requirement that the federation must be
recognized by the accrediting organization, the Philippine Amateur Athletic Federation. And Kahn failed to prove
that such requirement was complied with by the Federation. It is a settled principal in corporation law that any
person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges
and becomes personally liable for contract entered into or for other acts performed as such agent. As president of
the Federation, Henri Kahn is presumed to have known about the corporate existence or non-existence of the
Federation. The application of the doctrine applies to a third party only when he tries to escape liability on a
contract from which he has benefited on the irrelevant ground of defective incorporation. In the case at bar, the
petitioner is not trying to escape liability from the contract but rather is the one claiming from the contract.

5. Philippine Overseas Telecommunications Corp. v. Sandiganbayan, GR No. 174462, 10 February

 2016
Doctrine: Corporation, as a legal entity distinct and separate from its stockholders, must be impleaded as
defendants, giving it the opportunity to be heard. A suit against individual stockholders is not a suit against the
corporation.

Facts: President Corazon Aquino, exercising revolutionary government powers issued Executive Order Nos. 1 and 2,
creating the PCGG to recover properties amassed by the unseated President Marcos and his cronies. PCGG
Commissioner ordered the sequestration and takeover POTC and PHILCOMSAT among others. POTC is a private
corporation, which is a main stockholder of PHILCOMSAT, a government-owned and controlled corporation. The
Office of the Solicitor General (OSG), filed a Complaint for Reconveyance, Reversion, Accounting and Restitution,
and Damages, docketed as Civil Case No. 0009, against Jose L. Africa, Manuel H. Nieto, Jr., Ferdinand E. Marcos,
Imelda R. Marcos, Ferdinand R. Marcos, Jr., Roberto S. Benedicto, Juan Ponce Enrile, and Potenciano Ilusorio.

Issue: WON the failure to properly implead POTC and PHILCOMSAT, having separate legal personality, as
defendants is a fatal jurisdictional error.

Held: Yes. Failure to implead POTC and PHILCOMSAT is a violation of the fundamental principle that a corporation
has a legal personality distinct and separate from its stockholders; that, the filing of a complaint against a
stockholder is not ipso facto a complaint against the corporation. Corporation, as a legal entity distinct and separate
from its stockholders, must be impleaded as defendants, giving it the opportunity to be heard. The failure to
properly implead POTC and PHILCOMSAT not only violates the latter’s legal personality, but is repugnant on POTC's
and PHILCOMSAT's right to due process. Failure to implead these corporations as defendants and merely annexing
a list of such corporations to the complaints is a violation of their right to due process for it would in effect be
disregarding their distinct and separate personality without a hearing. As already settled, a suit against individual
stockholders is not a suit against the corporation.

6. Stockholders of Guanzon & Sons, Inc. v. Register of Deeds of Manila, GR No. L-18216, 30
October 1962
Doctrine: Where the purpose of the liquidation, as well as the distribution of the assets of the corporation, is to
transfer their title from the corporation to the stockholders in proportion to their shareholdings, that transfer
cannot be affected without the corresponding deed of conveyance from the corporation to the stockholders, and
the certificate should be considered as one in the nature of a transfer or conveyance.

Facts: Sept 19, 1960: 5 stockholders of the F. Guanzon and Sons, Inc. executed a certificate of liquidation of the
assets of the corporation, dissolution and distribution among themselves in proportion to their shareholdings, as
liquidating dividends, corporate assets, including real properties. Register of Deeds of Manila denied the
registration of the certificate of liquidation on the following grounds: (1) the number of parcels not certified to in
the acknowledgment; (2) P430.50 Reg. fees need be paid; (3) P940.45 documentary stamps need be attached to the
document; (4) the judgment of the Court approving the dissolution and directing the disposition of the assets of the
corporation need be presented. The stockholders appealed and argued that the certificate of liquidation is not a
conveyance or transfer but merely a distribution of the assets of the corporation which has ceased to exist for
having been dissolved.

ISSUE: W/N certificate merely involves a distribution of the corporation's assets (or should be considered a transfer
or conveyance)

HELD: NO. The SC affirmed the resolution. Corporation is a juridical person distinct from the members composing it.
Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its
members. While shares of stock constitute personal property they do not represent property of the corporation. A
share of stock only typifies an aliquot part of the corporation's property, or the right to share in its proceeds to that
extent when distributed according to law and equity but its holder is NOT the owner of any part of the capital of
the corporation nor entitled to possession. The stockholder is not a co-owner or tenant in common of the corporate
property

7. Litonjua, Jr. v. Eternit Corporation, GR No. 144805, 8 June 2006 Dana

8. Lim v. Court of Appeals GR No. 124716, 24 January 2000
9. Union Bank of the Philippines v. Spouses Ong, GR No. 152347, 21 June 2006
10. De Lima v. Gois, GR No. 178352, 17 June 2008
11. Asia’s Emerging Dragon Corporation v. Department of Transportation and Communication, 549
SCRA 44 (2008)
12. Secosa, et al. v. Heirs of Francisco, GR No. 160039, 29 January 2004

13. Edward A. Keller & Co., Ltd. V. COB Group Marketing Inc. GR No. L-68907, 16 January 1986 Sherwin
 14. Heirs of Fely Tan, Uy v. International Exchange Bank GR Nos. 166282 and 166283, 13 February
2013
15. General Credit Corporation v. Alsons Development and Investment Corporation, GR No. 154975,
29 January 2007
16. Manacop v. Equitable PCI Bank GR No. 162814, 25 August 2005
17. Lanuza Jr. v. BF Corporation GR No. 174938, 1 October 2014
18. Francisco v. GSIS, GR Nos. L-18287 and 18155, 30 March 1963

19. Narra Nickel Mining and Development Corp. v. Redmont Consolidated Mines, GR No. 195580, 28 Javee
January 2015
20. Stonehill et al. v. Diokno, et al., GR No. L-19550, 19 June 1957
21. Bataan Shipyard & Engineering Co., Inc. v. PCGG, GR No. L-75885, 27 May 1987
22. Time Inc. v. Reyes, GR No. L-28882, 31 May 1971
23. Sia v. The People of the Philippines, GR No. L-30896, 28 April 1983

Incorporation and Organization of Private Corporations

Sections 10-23 of the Revised Corporation Code of the Philippines
Cases:
1. Fong v. Duenas GR No. 185592, 15 June 2015

2. Government of the Philippine Islands v. The Manila Railroad Company and Jose Paez, GR No. Lei
30646, 30 January 1929
3. Samahan ng Manggagawa sa Hanjin Shipyard v. Bureau of Labor Relations, GR No. 211145, 14
October 2015
4. Universal Mills Corporation v. Universal Textile Mills, Inc., 78 SCRA 62 (1977)

Sections 24-34 of the Revised Corporation Code of the Philippines

1. Tan v. Sycip, GR No. 153468, 17 August 2006

2. Lopez Realty Inc. v. Sps Tanjanco, GR No. 154291, 12 November 2014
3. Legaspi Towers 300, Inc. v. Muer, GR No. 170783, 18 June 2012

4. Trans Middle East (Phils.) v. Sandiganbayan, GR No. 172556, 9 June 2006 Lex
5. Gomez v. PNOC Development and Management Corp., GR No. 174044, 27 November 2009
6. Matling Industrial and Commercial Corporation v. Coros, GR No. 157802, 15 October 2010
7. Easycall Communications Philippines, Inc. v. King, GR No. 145901, 15 December 2005
8. Carag v. NLRC, GR No. 147590, 2 April 2007
9. Sanchez v. Republic of the Philippines, GR No. 172885, 9 October 2009
10. Tupas IV v. CA, GR No. 145578, 18 November 2005

Powers of Corporations Luis

Sections 35 – 44 of the Revised Corporation Code of the Philippines
Cases:
1. Advance Paper Corporation v. Arma Traders Corporation et al., GR No. 176897, 11 December
2013

Doctrine:
The doctrine of apparent authority provides that a corporation will be estopped from denying the
agent’s authority if it knowingly permits one of its officers or any other agent to act within the
scope of an apparent authority, and it holds him out to the public as possessing the power to do
those acts.

The doctrine of apparent authority does not apply if the principal did not commit any acts or
conduct which a third party knew and relied upon in good faith as a result of the exercise of
reasonable prudence. Moreover, the agent’s acts or conduct must have produced a change of
position to the third party’s detriment.

Or

Apparent authority is derived not merely from practice. Its existence may be ascertained through
(1) the general manner in which the corporation holds out an officer or agent as having the power
to act or, in other words the apparent authority to act in general, with which it clothes him; or (2)
the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
within or beyond the scope of his ordinary powers. It requires presentation of evidence of similar
act(s) executed either in its favor or in favor of other parties. It is not the quantity of similar acts
which establishes apparent authority, but the vesting of a corporate officer with the power to bind
the corporation.

Facts:

Petitioner Advance Paper engaged in the business of producing, printing, manufacturing,

distributing and selling of various paper products..

Respondent Arma Traders is also a domestic corporation engaged in the wholesale and
distribution of school and office supplies, and novelty products. Respondent Antonio Tan (Tan)
was formerly the President while respondent Uy Seng Kee Willy (Uy) is the Treasurer of Arma
Traders.7 They represented Arma Traders when dealing with its supplier, Advance Paper, for
about 14 years.8

Private individual respondents are officers of Arma Traders as Vice-President, General Manager
and Corporate Secretary, respectively.

On various dates from September to December 1994, Arma Traders purchased on credit
notebooks and other paper products amounting to ₱7,533,001.49 from Advance Paper.

Upon the representation of Tan and Uy, Arma Traders also obtained three loans from Advance
Paper in November 1994 in the amounts of ₱3,380,171.82, ₱1,000,000.00, and ₱3,408,623.94 or a
total of ₱7,788,796.76.

Advance paper extended loans with Arma to pay its maturing debt.

As payment for the purchases on credit and the loan transactions, Arma Traders issued 82
postdated checks payable to cash or to Advance Paper. Tan and Uy were Arma Traders’ authorized
bank signatories who signed and issued these checks which had the aggregate amount of
₱15,130,636.87.15.

Advance Paper presented the checks to the drawee bank but these were dishonored either for
"insufficiency of funds" or "account closed." Despite repeated demands, however, Arma Traders
failed to settle its account with Advance Paper.

On December 29, 1994, the petitioners filed a complaint for collection of sum of money.

Issue: Is Arma Traders liable to pay the loans?

Held: Yes, Arma Traders should pay Advance paper with interest.

Arma Traders’ Articles of Incorporation provides that the corporation may borrow or raise money
to meet the financial requirements of its business by the issuance of bonds, promissory notes and
other evidence of indebtedness. Likewise, it states that Tan and Uy are not just ordinary corporate
officers and authorized bank signatories because they are also Arma Traders’ incorporators along
with respondents Ng and Ting, and Pedro Chao.

Furthermore, the respondents, through Ng who is Arma Traders’ corporate secretary,

incorporator, stockholder and director, testified that the sole management of Arma Traders was
left to Tan and Uy and that he and the other officers never dealt with the business and
management of Arma Traders for 14 years. He also confirmed that since 1984 up to the filing of
the complaint against Arma Traders, its stockholders and board of directors never had its meeting.

Thus, Arma Traders bestowed upon Tan and Uy broad powers by allowing them to transact with
third persons without the necessary written authority from its non-performing board of directors.
Arma Traders failed to take precautions to prevent its own corporate officers from abusing their
powers. Because of its own laxity in its business dealings, Arma Traders is now estopped from
denying Tan and Uy’s authority to obtain loan from Advance Paper.

2. Montelibano v. Bacolod Murcia Milling Co., Inc., GR No. L-15092, 18 May 1962
Doctrine:

In determining the validity of act of a corporation: It is a question, therefore, in each case of the
logical relation of the act to the corporate purpose expressed in the charter. If that act is one
which is lawful in itself, and not otherwise prohibited, is done for the purpose of serving corporate
ends, and is reasonably tributary to the promotion of those ends, in a substantial, and not in a
remote and fanciful sense, it may fairly be considered within charter powers. The test to be
applied is whether the act in question is in direct and immediate furtherance of the corporation's
business, fairly incident to the express powers and reasonably necessary to their exercise. If so,
the corporation has the power to do it; otherwise, not.

Facts:
The plaintiffs (planters) and the respondent company (millers) entered unto milling contracts.
Sometime in 1936, it was proposed to execute amended milling contracts, increasing the planters'
share to 60% of the manufactured sugar and resulting molasses, besides other concessions, but
extending the operation of the milling contract from the original 30 years to 45 years. To this
effect, a printed Amended Milling Contract form was drawn up. On August 20, 1936, the Board of
Directors Bacolod-Murcia Milling Co., Inc., adopted a resolution (Acts No. 11, Acuerdo No. 1)
granting further concessions to the planters over and above those contained in the printed
Amended Milling Contract.

Acta no. 11. Section 9 contain: That if, during the term of this Amended Milling contract, the sugar
mills of Negros Occidental, whose annual production of centrifuged sugar is more than a third of
the total production of all the sugar mills of Negros Occidental, grant their planters better
conditions than stipulated in this contract, then those better conditions will be granted and hereby
understood to be granted to the planters that have granted this Amended Grinding Contract.
(original text is in Spanish)

In 1953, the appellants initiated this action, contending that three Negros sugar centrals (La
Carlota, Binalbagan-Isabela and San Carlos), with a total annual production exceeding one-third of
the production of all the sugar central mills in the province, had already granted increased
participation (of 62.5%) to their planters, and that under paragraph 9 of the resolution, heretofore
quoted, the appellee had become obligated to grant similar concessions to the plaintiffs.

Bacolod-Murcia Milling Co., inc., resisted the claim, and defended by urging that the stipulations
contained in the resolution were made without consideration; that the resolution in question was,
therefore, null and void ab initio, being in effect a donation that was ultra vires and beyond the
powers of the corporate directors to adopt.

Issue: Should the respondent corporation duty bound to grant increase to plaintiffs?

Held: Yes, the Bacolod-Murcia Milling Company is, under the terms of its Resolution duty bound to
grant similar increases to plaintiffs,

There is no doubt that the directors of the company had authority to modify the proposed terms
of the Amended Milling Contract for the purpose of making its terms more acceptable to the other
contracting parties.

As the resolution in question was passed in good faith by the board of directors, it is valid and
binding, and whether or not it will cause losses or decrease the profits of the central, the court has
no authority to review them.

They hold such office charged with the duty to act for the corporation according to their best
judgment, and in so doing they cannot be controlled in the reasonable exercise and
performance of such duty. Whether the business of a corporation should be operated at a loss
during depression, or close down at a smaller loss, is a purely business and economic problem
to be determined by the directors of the corporation and not by the court. It is a well-known
rule of law that questions of policy or of management are left solely to the honest decision of
officers and directors of a corporation, and the court is without authority to substitute its
judgment of the board of directors; the board is the business manager of the corporation, and
so long as it acts in good faith its orders are not reviewable by the courts. (Fletcher on
Corporations, Vol. 2, p. 390).

3. Majority Stockholders of Ruby International Corporation v. Lim, GR No. 165887, 6 June 2011

Doctrines:

When the corporate life as stated in the articles of incorporation expired, without a valid extension
having been effected, the corporation was deemed dissolved by such
expiration without need of further action on the part of the corporation or the State.

Or:

A stock corporation is expressly granted the power to issue or sell stocks. The power to issue
shares of stock in a corporation is lodged in the board of directors and no stockholders’ meeting is
required to consider it because additional issuances of shares of stock does not need approval of
the stockholders. What is only required is the board resolution approving the additional issuance
of shares.

Or:

The SEC’s jurisdiction does not extend to the liquidation of a corporation. While the SEC has
jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of the
corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC,
in its 29 November 2000 Omnibus Order, directed that "the proceedings on and implementation
of the order of liquidation be commenced at the Regional Trial Court to which this case shall be
transferred." This is the correct procedure because the liquidation of a corporation requires the
settlement of claims for and against the corporation, which clearly falls under the jurisdiction of
the regular courts. The trial court is in the best position to convene all the creditors of the
corporation, ascertain their claims, and determine their preferences.

Or

A derivative action is a suit by a shareholder to enforce a corporate cause of action. It is a remedy

designed by equity and has been the principal defense of the minority shareholders against abuses
by the majority. For this purpose, it is enough that a member or a minority of stockholders file a
derivative suit for and in behalf of a corporation. An individual stockholder is permitted to institute
a derivative suit on behalf of the corporation wherein he holds stock in order to protect or
vindicate corporate rights, whenever officials of the corporation refuse to sue or are the ones to
be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded
as the nominal party, with the corporation as the party in interest.

Facts: Ruby Industrial Corporation is in deep financial trouble and under a rehabilitation program.

The SEC hearing created Management Committee to rehabilitate the Ruby Corp. 2 rehabilitation
plans were submitted: The BENHAR/Ruby Plan- by majority of the stockholders and the Alternative
Plan of the minority of the stockholders.

BENHAR Ruby plan requires that the management of the RUBY, upon its approval, will be given to
benhar- a separate corporation- for a management fee of 7.5% and a 60million credit line will be
authorized from the China Bank to Ruby. This was opposed by the minority (40%) stockholders.

The Alternative Plan of RUBY’s minority stockholders proposed to: (1) pay all RUBY’s creditors
without securing any bank loan; (2) run and operate RUBY without charging management fees; (3)
buy-out the majority shares or sell their shares to the majority stockholders; (4) rehabilitate
RUBY’s two plants; and (5) secure a loan at 25% interest,

BENHAR/Ruby was approved and the minority filed for the suspension of the implementation of
the BENHAR/Ruby plan. SEC issued TRO for the implementation. The Majority questioned the
order of SEC before the CA.

While pending resolution of the case Ruby’s management implement the Benhar/Ruby plan subtly
by paying secured creditors, assignment of credits and rights in favor of BENHAR.

The SEC and CA denied the petition of the majority BENHAR/RUBY project. Hence, this petition.

Issue: Whether or not Ruby Corporation shall be liquidated?

Held: Yes, the SC affirmed the Decision of CA that include the:

a. the infusion of additional capital made by the majority stockholders be declared null and void
and restoring the capital structure of Ruby to its original structure prior to the time the
injunction was issued
b. the extension of corporate life of Ruby null and void
c. implementing the invalidation of any and all illegal assignments of credit/purchase of credits
and the cancellation of mortgages connected therewith made by the creditors of Ruby
Industrial Corporation
d. Ordering SEC to supervise the liquidation of Ruby Industrial.

Records likewise revealed that the SEC chose to keep silent and failed to assist the MANCOM and
minority stockholders in their efforts to demand compliance from the majority stockholders or Yu
Kim Giang (who headed the first MANCOM) with the December 22, 1989 Order directing them to
turn over the cash, financial records and documents of RUBY, including certificates of title over
RUBY’s real properties, and render an accounting of all moneys received and payments made by
RUBY. On January 18, 2002, the MANCOM even filed a Motion57 to require Yu Kim Giang to
render report/accounting of RUBY from 1983 to the 1st quarter of 1990, stating that despite a
commitment from Mr. Giang, he has seemingly delayed his compliance, hence frustrating the
desire of MANCOM to submit a comprehensive and complete report for the whole period of 1983
up to the present.

The other ground invoked by Lim and MANCOM for the propriety of liquidation is the expiration of
RUBY’s corporate term. The SEC, however, held that the filing of the amendment of articles of
incorporation by RUBY in 1996 complied with all the legal requisites and hence the presumption of
regularity stands. Records show that the validity of the infusion of additional capital which
resulted in the alleged increase in the shareholdings of petitioners majority stockholders in
October 1991 was questioned by MANCOM and Lim even before the majority stockholders filed
their motion to dismiss in the year 2000.

The SEC remained indifferent to the reliefs sought by the minority stockholders, saying that the
issue of the validity of the additional capital infusion was belatedly raised. Even assuming the
October 2, 1991 board meeting indeed took place, the SEC did nothing to ascertain whether
indeed, as the minority claimed: (1) the minority stockholders were not given notice as required
and reasonable time to exercise their pre-emptive rights; and (2) the capital infusion was not for
the purpose of rehabilitation but a mere ploy to divest the minority stockholders of their 40.172%
shareholding and reduce it to a mere 25.25%.

The validity of issuance of additional shares may be questioned if done in breach of trust by the
controlling stockholders. Thus, even if the pre-emptive right does not exist, either because the
issue comes within the exceptions in Section 39 or because it is denied or limited in the articles of
incorporation, an issue of shares may still be objectionable if the directors acted in breach of trust
and their primary purpose is to perpetuate or shift control of the corporation, or to "freeze out"
the minority interest.

There can be no gainsaying the well-established rule in corporate practice and procedure that the
will of the majority shall govern in all matters within the limits of the act of incorporation and
lawfully enacted by-laws not proscribed by law. It is, however, equally true that other stockholders
are afforded the right to intervene especially during critical periods in the life of a corporation like
reorganization, or in this case, suspension of payments, more so, when the majority seek to
impose their will and through fraudulent means, attempt to siphon off Ruby’s valuable assets to
the great prejudice of Ruby itself, as well as the minority stockholders and the unsecured
creditors.

The SC, stated that no error was committed by the CA when it set aside the September 18, 2002
Order of the SEC and declared the nullity of the acts of majority stockholders in implementing
capital infusion through issuance of additional shares in October 1991, the board resolution
approving the extension of RUBY’s corporate term for another 25 years, and any illegal assignment
of credit executed by RUBY’s creditors in favor of third parties and/or conduits of the controlling
stockholders. The CA likewise correctly ordered the delivery of all documents relative to the said
assignment of credits to the MANCOM or the Liquidator, the unwinding of these void deeds of
assignment, and their full accounting by the majority stockholders.

4. SME Bank, Inc. et al. v. De Guzman, et al., GR Nos. 184517 and 186641, 8 October 2013

Doctrine: Corporate officers are, as a general rule, not personally liable for their official acts,
because a corporation, by legal fiction, has a personality separate and distinct from its officers,
stockholders and members. However, this fictional veil may be pierced whenever the corporate
personality is used as a means of perpetuating a fraud or an illegal act, evading an existing
obligation, or confusing a legitimate issue. In cases of illegal dismissal, corporate directors and
officers are solidarily liable with the corporation, where terminations of employment are done
with malice or in bad faith.

Not being corporate directors or officers, spouses Samson were not in legal control of the bank
and consequently had no power to dismiss its employees

Facts:

Respondent employees, De Guzman et. al., were employee of Small and Medium Enterprise Bank,
Incorporated (SME Bank).

In June 2001, SME Bank experienced financial difficulties. To remedy the situation, the bank
officials proposed its sale to Abelardo Samson. The negotiation to transfer the bank to Samson,
formal offer was made to Samson, with the following preconditions:

All retirement benefits, if any of the above officers/stockholders/board of directors are hereby
waived upon consummation of the above sale. The retirement benefits of the rank and file
employees including the managers shall be honored by the new management in accordance with
B.R. No. 10, S. 1997.

Agustin and De Guzman accepted the terms and conditions proposed by Samson and signed the
conforme portion of the Letter Agreements.

Simeon Espiritu (Espiritu), then the general manager of SME Bank, held a meeting with all the
employees of the head office and of the Talavera and Muñoz branches of SME Bank and
persuaded them to tender their resignations, with the promise that they would be rehired upon
reapplication. His directive was allegedly done at the behest of petitioner Olga Samson.

The respondents, relying on this representation tendered their resignations.

On September 2001, 87% of the shares of stock of SME Bank was sold to Spouses Samson. And the
respondents were not hired by the new principal shareholders.

Respondent-employees demanded the payment of their respective separation pays, but their
requests were denied.

Aggrieved by the loss of their jobs, respondent employees filed a Complaint before the National
Labor Relations.

Labor Arbiter ruled that the buyer of an enterprise is not bound to absorb its employees, unless
there is an express stipulation to the contrary. However, he also found that respondent employees
were illegally dismissed, because they had involuntarily executed their resignation letters after
relying on representations that they would be given their separation benefits and rehired by the
new management. Accordingly, the labor arbiter decided the case against Agustin and De Guzman,
but dismissed the Complaint against the Samson Group.

The NLRC found that there was only a mere transfer of shares – and therefore, a mere change of
management – from Agustin and De Guzman to the Samson Group. As the change of management
was not a valid ground to terminate respondent bank employees, the NLRC ruled that they had
indeed been illegally dismissed. It further ruled that Agustin, De Guzman and the Samson Group
should be held jointly and severally liable for the employees’ separation pay and backwages.

Filed appeal with the CA. CA denied the petition, affirming the decision of NLRC.
Then appealed before the SC. Affirmed the illegal dismissal.

Issue: Whether or not Spouses Samson and Aurelio Villaflor are personally liable?

Held:

In a number of cases on this point, the rule has been laid down that the sale or disposition must be
motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee
of a business establishment has no liability to the employees of the transfer or to continue
employer them. Nor is the transferee liable for past unfair labor practices of the previous owner,
except, when the liability therefor is assumed by the new employer under the contract of sale, or
when liability arises because of the new owner’s participation in thwarting or defeating the rights
of the employees.

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

Since the petitioners were effectively separated from work due to a bona fide change of
ownership and they were accordingly paid their separation pay, which they freely and voluntarily
accepted, the private respondent corporation was under no obligation to employ them; it may,
however, give them preference in the hiring.

The transfer only involved a change in the equity composition of the corporation. To reiterate,
the employees are not transferred to a new employer, but remain with the original corporate
employer, notwithstanding an equity shift in its majority shareholders. This being so, the
employment status of the employees should not have been affected by the stock sale. A change
in the equity composition of the corporate shareholders should not result in the automatic
termination of the employment of the corporation’s employees. Neither should it give the new
majority shareholders the right to legally dismiss the corporation’s employees, absent a just or
authorized cause.

Therefore, we conclude that, as the employer of the illegally dismissed employees before and after
the equity transfer, petitioner SME Bank is liable for the satisfaction of their claims

Agustin and De Guzman are corporate directors who have acted in bad faith, they may be held
solidarily liable with SME Bank for the satisfaction of the employees’ lawful claims.

Spouses Samson, not being corporate directors or officers, spouses Samson were not in legal
control of the bank and consequently had no power to dismiss its employees.

5. PLDT v. NTC, GR No. 152685, 4 December 2007

Doctrine:

Trust Fund Doctrine - fund in trust for creditors in case of liquidation, the actual value of the
subscriptions and the value of stock dividends distributed may not be decreased or increased by
the fluctuating market value of the stocks.

Power of the corporation to declare dividends in whatever form, cash, property, script, and stock
but subject to trust fund doctrine.
Facts:

National Telecommunications Commissions was authorized to collect from public

telecommunications companies Supervision and Regulation Fees (SRF) of PhP 0.50 for every PhP
100 or a fraction of the capital and stock subscribed or paid for of a stock corporation, partnership
or single proprietorship of the capital invested, or of the property and equipment, whichever is
higher through Public Service Act Sec. 40, pursuant to BP 325.

SRF assessments was sent to PLDT starting sometime in 1988. The SRF assessments were based on
the market value of the outstanding capital stock, including stock dividends, of PLDT. PLDT
protested the assessments contending that the SRF ought to be based on the par value of its
outstanding capital stock.

NTC contends that stock dividends are covered by SRF while PLDT contends that such stock
dividends should not be subject to SRF.

Court of Appeals favored NTC.

Issue: Whether or not stock dividends are subject by SRF?

Held: Yes, the SC decided that the value transferred from the unrestricted retained earnings of
PLDT to the capital stock account pursuant to the issuance of stock dividends is the proper basis
for the assessment of the SRF, which the NTC correctly assessed.

The stockholders by receiving stock dividends are forced to exchange the monetary value of their
dividend for capital stock, and the monetary value they forego is considered the actual payment
for the original issuance of the stocks given as dividends. Therefore, stock dividends acquired by
shareholders for the monetary value they forego are under the coverage of the SRF and the basis
for the latter is such monetary value as declared by the board of directors.

The declaration of stock dividends is akin to a forced purchase of stocks. By declaring stock
dividends, a corporation ploughs back a portion or its entire unrestricted retained earnings either
to its working capital or for capital asset acquisition or investments. It is simplistic to say that the
corporation did not receive any actual payment for these. When the dividend is distributed, it
ceases to be a property of the corporation as the entire or portion of its unrestricted retained
earnings is distributed pro rata to corporate shareholders.

Furthermore, the actual payment is the cash value from the unrestricted retained earnings that
each shareholder foregoes for additional stocks/shares which he would otherwise receive as
required by the Corporation Code to be given to the stockholders subject to the availability and
conditioned on a certain level of retained earnings. Elsewise put, where the unrestricted retained
earnings of a corporation are more than 100% of the paid-in capital stock, the corporate Board of
Directors is mandated to declare dividends which the shareholders will receive in cash unless
otherwise declared as property or stock dividends, which in the latter case the stockholders are
forced to forego cash in lieu of property or stocks.

6. Republic Planters Bank v. Agana, Robes-Francisco Realty & Development Corporation and adalia
f. Robes 269 SCRA 1 (1997)

Doctrine:

A corporation may issue preferred share of stock and common stock. A preferred share has
preference as to assets, as to dividends, and as redeemable or callable depending on the rights
vested in the very wordings of the terms and conditions in said stock certificates

A redemption by the corporation of its stock is, in a sense, a repurchase of it for cancellation. The
present Code allows redemption of shares even if there are no unrestricted retained earnings on
the books of the corporation. This is a new provision which in effect qualifies the general rule that
the corporation cannot purchase its own shares except out of current retained earnings. However,
while redeemable shares may be redeemed regardless of the existence of unrestricted retained
earnings, this is subject to the condition that the corporation has, after such redemption, assets in
its books to cover debts and liabilities inclusive of capital stock. Redemption, therefore, may not
be made where the corporation is insolvent or if such redemption will cause insolvency or inability
of the corporation to meet its debts as they mature.

Or:

In limiting the exercise of a right (right to redeem) granted by law to a corporate entity, may thus
be considered as an exercise of police power.

Facts:

On September 18, 1961, private respondent Corporation secured a loan from petitioner in the
amount of P120,000.00. As part of the proceeds of the loan, preferred shares of stocks were
issued to private respondent Corporation.
In other words, instead of giving the legal tender totaling to the full amount of the loan, which is
P120,000.00, petitioner lent such amount partially in the form of money and partially in the form
of stock certificates numbered 3204 and 3205, each for 400 shares with a par value of P10.00 per
share, or for P4,000.00 each, for a total of P8,000.00. Said stock certificates were in the name of
private respondent Adalia F. Robes and Carlos F. Robes, who subsequently, however, endorsed his
shares in favor of Adalia F. Robes

Stock certificates of stock bear the following terms and conditions:

The Preferred Stock shall have the following rights, preferences, qualifications and limitations, to
wit:

1. Of the right to receive a quarterly dividend of One Per Centum (1%), cumulative and
participating.

xxx xxx xxx

2. That such preferred shares may be redeemed, by the system of drawing lots, at any time after
two (2) years from the date of issue at the option of the Corporation. . . .

Issue: Can the respondent judge order the redemption of share of stocks?

Held: No, the terms and conditions set forth in the stock certificate clearly indicate that
redemption of the preferred shares may be made at any time after the lapse of two years from the
date of issue, private respondents should have taken it upon themselves, after the lapse of the
said period, to inquire from the petitioner the reason why the said shares have not been
redeemed. As it is, not only two years had lapsed, as agreed upon, but an additional sixteen years
passed before the private respondents saw it fit to demand their right.

The redemption of said shares cannot be allowed. As pointed out by the petitioner, the Central
 Bank made a finding that said petitioner has been suffering from chronic reserve deficiency, and
that such finding resulted in a directive, issued on January 31, 1973 by then Gov. G.S. Licaros of the
Central Bank, to the President and Acting Chairman of the Board of the petitioner bank prohibiting
the latter from redeeming any preferred share, on the ground that said redemption would reduce
the assets of the Bank to the prejudice of its depositors and creditors. Redemption of preferred
shares was prohibited for a just and valid reason. The directive issued by the Central Bank
Governor was obviously meant to preserve the status quo, and to prevent the financial ruin of a
banking institution that would have resulted in adverse repercussions, not only to its depositors
and creditors, but also to the banking industry as a whole. The directive, in limiting the exercise of
a right granted by law to a corporate entity, may thus be considered as an exercise of police
power. The respondent judge insists that the directive constitutes an impairment of the obligation
of contracts. It has, however, been settled that the Constitutional guaranty of non-impairment of
obligations of contract is limited by the exercise of the police power of the state, the reason being
that public welfare is superior to private rights.

7. Republic of the Philippines v. Acoje Mining Company, Inc. GR No. L-18062, 28 February 1963 Noel
8. Pirovano v. De La Rama Steamship Company, Inc. GR Nos. 163356-57 and 163368-69, 1 July
2015

By-Laws
Sections 45 – 47 of the Revised Corporation Code of the Philippines
Case: Loyola Grand Villas Homeowners (South) Association, Inc. v. Hon. Court of Appeals, et al., GR
No. 117188, 7 August 1997

Meetings
Sections 48-58 of the Revised Corporation Code of the Philippines
Case: Gabucan v. Hon. Manta, GR No. L-51546, 28 January 19880

Stocks and Stockholders

Sections 59-72 of the Revised Corporation Code of the Philippines
Cases:
1. Lao v. Lao, GR No. 170585, 6 October 2008
2. Commissioner of Internal Revenue v. First Express Pawnshop Company, Inc., GR Nos. 172045-
46, 16 June 2009

3. National Exchange Company v. Dexter, 51 Phil. 601, 25 February 1928 Mariz

4. Andaya v. Rural Bank of Cabadbaran, Inc. GR No. 188769, 3 August 2016
5. Bank of America NT & SA v. CA, GR No. 78017, 8 June 1990
6. Teng v. SEC, GR No. 184332, 17 February 2016
7. Legaspi Towers 300, Inc. v. Muer, GR No. 170783, 18 June 2012

Merger and Consolidation

Sections 75-79 of the Revised Corporation Code of the Philippines
Cases:
1. PNB v. Andrada Electric, GR No. 142936, 17 April 2002
2. Bank of Commerce v. Radio Philippines Network, Inc., GR No. 195615, 21 April 2014
Appraisal Right Ian
Sections 80 – 85 of the Revised Corporation Code of the Philippines
Case: Cua Jr. v. Ocampo Tan, GR Nos. 181455-56, 4 December 2006
CASE DOCTRINE:

Appraisal right means that a stockholder who dissented and voted against the proposed
corporate action, may choose to get out of the corporation by demanding payment of the fair market
value of his shares. When a person invests in the stocks of a corporation, he subjects his investment
to all the risks of the business and cannot just pull out such investment should the business not come
out as he expected. He will have to wait until the corporation is finally dissolved before he can get
back his investment, and even then, only if sufficient assets are left after paying all corporate
creditors. His only way out before dissolution is to sell his shares should he find a willing buyer. If
there is no buyer, then he has no recourse but to stay with the corporation. However, in certain
specified instances, the Code grants the stockholder the right to get out of the corporation even
before its dissolution because there has been a major change in his contract of investment with
which he does not agree and which the law presumes he did not foresee when he bought his shares.
Since the will of two-thirds of the stocks will have to prevail over his objections, the law considers it
only fair to allow him to get back his investment and withdraw from the corporation.

FACTS: (sorry guys mahaba talaga yung case)

PRCI is a corporation organized and established under Philippine laws to carry on the business
of a race course in all its branches and, in particular, to conduct horse races or races of any kind, to
accept bets on the results of the races, and to construct grand or other stands, booths, stablings,
paddocks, clubhouses, refreshment rooms and other erections, buildings, and conveniences, and to
conduct, hold and promote race meetings and other shows and exhibitions.
PRCI owns only two real properties, each covered by several transfer certificates of title. One
is known as the Sta. Ana Racetrack located in Makati City, and the other is located in the towns of
Naic and Tanza, Cavite. Following the trend in the development of properties in the same area, PRCI
wished to convert its Makati property from a racetrack to urban residential and commercial use.
Given the location and size of its Makati property, PRCI believed that said property was severely
under-utilized.

Hence, PRCI management decided to transfer its racetrack from Makati to Cavite. Now as to
its Makati property, PRCI management decided that it was best to spin off the management and
development of the same to a wholly owned subsidiary, so that PRCI could continue to focus its
efforts on pursuing its core business competence of horse racing. Instead of organizing and
establishing a new corporation for the said purpose, PRCI management opted to acquire another
domestic corporation, JTH Davies Holdings, Inc. The Board agreed to acquire the stocks of latter
company through an exchange of their Makati property. Said move was made into a resolution but
was opposed by some stockholders. The Board and petitioners continued to acquire the company,
which was surrounded by fraud as alleged by the respondents. The petitioners proceeded with the
plan despite the demand by respondents to appraise the stocks of JTH Davies Holdings. A case was
filed by respondents and was granted by the RTC.

ISSUE: WON appraisal rights are available for the acts complained?

RULING: NO.

The availability or unavailability of appraisal rights should be objectively based on the subject
matter of the complaint, i.e., the specific act or acts performed by the board of directors, without
regard to the subjective conclusion of the minority stockholder instituting the derivative suit that
such act constituted mismanagement, misrepresentation, fraud, or bad faith.

Respondents Miguel, et al., themselves admitted that the property-for-shares exchange

between PRCI and JTH, approved by majority of the PRCI Board of Directors in the Resolution dated
11 May 2007, involved all or substantially all of the properties and assets of PRCI

The Court finds specious the averment of respondents Miguel, et al., that appraisal rights
were not available to them, because appraisal rights may only be exercised by stockholders who had
voted against the proposed corporate action; and that at the time respondents Miguel, et al.,
instituted Civil Case, PRCI stockholders had yet to vote on the intended property-for-shares exchange
between PRCI and JTH. Respondents Miguel, et al., themselves caused the unavailability of appraisal
rights by filing the Complaint in Civil Case No. 07-610, in which they prayed that the 11 May 2007
Resolution of the Board of Directors approving the property-for-shares exchange between PRCI and
JTH be declared null and void, even before the said Resolution could be presented to the PRCI
stockholders for approval or rejection.

Dissolution
Sections 133 – 139 of the Revised Corporation Code of the Philippines
Cases:
1. Eriberto S. Masangkay v. People, GR No. 16443, 28 June 2010
CASE DOCTRINE:

The petition for involuntary dissolution about the nature of the Deed of Exchange are
conclusions of law, and not factual statements which are susceptible of truth or falsity. They are his
opinion regarding the legal character of the Deed of Exchange. He opined that the Deed of Exchange
was fictitious or simulated under Article 1409 of the Civil Code, because MFI supposedly did not
perform its reciprocal obligation to issue stocks to Gilberto in exchange for his land. His opinion or
legal conclusion may have been wrong, but it is an opinion or legal conclusion, nevertheless. An
opinion or a judgment cannot be taken as an intentional false statement of facts.

FACTS:
Respondent Elizabeth A. Masangkay prepared a Secretary’s Certificate which states: That at a
special meeting of the Board of Directors of the said corporation held at its principal office on
December 5, 1992, a resolution by unanimous votes of the directors present at said meeting which
constituted a quorum was approved and adopted a secretary certificate for exchange of property for
shares of stocks of the corporation. Said secretary’s certificate is absolutely fictitious and simulated
because the alleged meeting of the Board of Directors did not actually materialize. Using the said
falsified document, respondents executed another fictitious document known as the "Deed of
Exchange with Cancellation of Usufruct". The contract purporting to be a transfer of 3,700 shares of
stock of MFI in return for a piece of a land located at Canlalay, Biñan, Laguna and owned by minor
child Gilberto Ricaros Masangkay is void. Claiming that Eriberto lied under oath when he said that
there was no meeting of the Board held on December 5, 1992 and that the Deed of Exchange with
Cancellation of Usufruct is a fictitious instrument, the respondent in the SEC case, Cesar, filed a
complaint for perjury against Eriberto before the Office of the Provincial Prosecutor of Rizal. Eriberto
argued that what is involved is primarily an intra-corporate controversy; hence, jurisdiction lies with
the SEC pursuant to Section 6 of PD 902-A, as amended by PD No. 1758. He also insisted that there
was a prejudicial question because the truth of the allegations contained in his petition for
involuntary dissolution has yet to be determined by the SEC. It was however reinstated upon petition
for review before the Department of Justice. Chief State Prosecutor Zenon L. De Guia held that the
petition for involuntary dissolution is an administrative case only and thus cannot possibly constitute
a prejudicial question to the criminal case.  It was then found out that in the City of Mandaluyong, the
above-named accused, did then and there, willfully, unlawfully and feloniously commit acts of perjury
in his Petition for Involuntary Dissolution of Megatel Factors, Inc. based on violation of Section 6 of
Presidential Decree 902-A against Megatel Factors, Inc.

ISSUE: WON there was deliberate assertion of falsehood

RULING:
NO, Petitioner filed a petition for involuntary dissolution of MFI based on Section 105 of the
Corporate Code. The statements for which the petitioner is tried for perjury are the very grounds he
relied upon in his petition for corporate dissolution. They refer to acts of the MFI directors which are
allegedly fraudulent, illegal and prejudicial, and which would allegedly justify corporate dissolution
under Section 105 of the Corporation Code. Evidently, these statements are material to his petition
for involuntary dissolution. We have held before that a conviction for perjury cannot be obtained by
the prosecution by merely showing the inconsistent or contradictory statements of the accused, even
if both statements are sworn. The prosecution must additionally prove which of the two statements
is false and must show the statement to be false by evidence other than the contradictory statement.

2. Majority Stockholders of Ruby Industrial Corporation v. Lim, GR No. 165887, 6

June 2011

CASE DOCTRINE:
Upon winding up of the corporate affairs, any asset distributable to any creditor or
stockholder or member who is unknown or cannot be found shall be escheated to the city or
municipality where such assets are located. Except by decrease of capital stock and as otherwise
allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful
dissolution and after payment of all its debts and liabilities.

FACTS:
Ruby is a domestic corporation engaged in glass manufacturing. Reeling from severe liquidity
problems beginning in 1980, RUBY filed on December 13, 1983 a petition for suspension of payments
with the SEC. On December 20, 1983, the SEC issued an order declaring RUBY under suspension of
payments and enjoining the disposition of its properties pending hearing of the petition, except
insofar as necessary in its ordinary operations, and making payments outside of the necessary or
legitimate expenses of its business. On August 10, 1984, the SEC Hearing Panel created the
management committee for RUBY, composed of representatives from Allied Leasing and Finance
Corporation, Philippine Bank of Communications, China Bank, Pilipinas Shell, and RUBY represented
by Mr. Yu Kim Giang. There were two (2) rehabilitation plans were submitted to the SEC: the
BENHAR/RUBY Rehabilitation Plan of the majority stockholders led by Yu Kim Giang, and the
Alternative Plan of the minority stockholders represented by Miguel Lim (Lim). Both plans were
endorsed by the SEC to the MANCOM for evaluation. Over 90% of the creditors objected to the
revised plan. Instead, they endorsed the minority stockholders’ alternative plan. Despite the
objections of 90% of RUBYs creditors and three members of the MANCOM, the SEC Hearing Panel
approved the Revised BENHAR/RUBY Plan and dissolved the existing management committee. It also
created a new management committee and appointed BENHAR as one of its members. In addition to
the powers originally conferred to the management committee under P.D. No. 902-A, the new
management committee was tasked to oversee the implementation by the Board of Directors of the
revised rehabilitation plan for RUBY.

ISSUE: WON, SEC has the authority to supervise the liquidation of Ruby?

RULING: NO. SEC’s jurisdiction does not extend to the liquidation of a corporation. While the SEC has
jurisdiction to order the dissolution of a corporation, jurisdiction over the liquidation of the
corporation now pertains to the appropriate regional trial courts. This is the reason why the SEC, in its
29 November 2000 Omnibus Order, directed that "the proceedings on and implementation of the
order of liquidation be commenced at the Regional Trial Court to which this case shall be
transferred." This is the correct procedure because the liquidation of a corporation requires the
settlement of claims for and against the corporation, which clearly falls under the jurisdiction of the
regular courts. The trial court is in the best position to convene all the creditors of the corporation,
ascertain their claims, and determine their preferences.

3. Viva Shipping Lines, Inc. v. Keppel Philippines Mining, Inc., GR No. 177382, 17
February 2016
CASE DOCTRINE:
Corporate rehabilitation is one of many statutorily provided remedies for businesses that
experience a downturn. Rather than leave the various creditors unprotected, legislation now provides
for an orderly procedure of equitably and fairly addressing their concerns. Corporate rehabilitation
allows a court-supervised process to rejuvenate a corporation.... It provides a corporation's owners a
sound chance to reengage the market, hopefully with more vigor and enlightened services, having
learned from a painful experience. Necessarily, a business in the red and about to incur tremendous
losses may not be able to pay all its creditors. Rather than leave it to the strongest or most
resourceful amongst all of them, the state steps in to equitably distribute the corporation's limited
resources.

FACTS:

On October 4, 2005, petitioner filed a petition for Corporate Rehabilitation before the RTC of
Lucena City, which was initially denied for failure of the former to comply with the requirements. In
their amended petition, the allegations made by Viva shipping regarding their total properties’
assessed value were contrary to the attached documents. According to the petitioner, the
devaluation of the PH peso, increased competition, and mismanagement of its business made it
difficult to pay its debts as they became due, their rehabilitation plan focuses on selling their old
vessels which are already outdated and unmanageable. They intend to use the proceeds to buy new
vessels for their business. During the initial hearing, respondents, City of Batangas, Keppel
Philippines Marine Inc, and MetroBank, filed their respective oppositions and formal notice of claim
to petitioner’s amended petition. RTC denied Viva shipping lines’ amended petition, CA dismissed
their petition for review.

ISSUE: WON, the corporate rehabilitation is proper?

RULING:
NO, the first rule breached by the petitioner is to implead all the indispensable parties.
Petitioner failed to interpose reasons why its prayer to be excused from compliance of the procedural
law. A Corporate Rehabilitation case cannot be decided without the creditor’s participation. The
court’s role is to balance the interest of the corporation, the creditors and the general public.
Petitioner’s rehabilitation plan should have shown that corporation has enough serviceable assets to
be able to continue business. Yet the petitioners plan showed that the source of funding would be to
sell petitioner’s old vessels. Disposing of the assets constituting petitioner’s main business cannot
result in rehabilitation. A business primarily engaged as a shipping line cannot operate without its
ships. On the other hand, the plan to purchase new vessel sacrifices the corporation’s cashflow. This
is contrary to the goal of corporate rehabilitation, which is to allow present value recovery for
creditors.

Foreign Corporations
Sections 140 – 153 of the Revised Corporation Code of the Philippines
Cases:
 1. Philippine Deposit Insurance Corporation v. Citibank, N.A., GR No. 170290, 11
April 2012
CASE DOCTRINE:
Where a bank maintains branches, each branch becomes a separate business entity with
separate books of account. Nevertheless, when considered with relation to the parent bank they are
not independent agencies; they are, what their name imports, merely branches, and are subject to
the supervision and control of the parent bank, and are instrumentalities whereby the parent bank
carries on its business, and are established for its own particular business, and are established for its
own particular purposes, and their business conduct and policies are controlled by the parent bank
and their property assets belong to the parent bank, although nominally held in the names of the
particular branches. Ultimate liability for a debt of a branch would rest upon the parent bank.
FACTS:
PDIC, a government instrumentality, conducted an examination of the books of account of
Citibank and Bank of America which are both duly organized and existing under the laws of the
United States of America and duly licensed to do business in the Philippines. During the examination
of the books, PDIC discovered that both banks received from their head offices huge amount of
dollars which were not reported to PDIC as deposit liabilities subject to assessment for insurance.
Believing that litigation would inevitably arise from this dispute, respondents each filed a petition for
declaratory relief, stating that the money placements that they received from their head office and
other foreign branches were not deposits and did not give rise to insurable deposit liabilities under
the PDIC charter and, as a consequence, the deficiency assessments made by PDIC were improper
and erroneous.

ISSUE: WON, branches have separate juridical personality with their head office/main corporation?

RULING:
NO, PDIC argues that the head offices of Citibank and BA and their individual foreign branches
are separate and independent entities, that under American jurisprudence, a bank’s head offices and
its branches have a principal-agent relationship only if they operate in the same jurisdiction.
However, under Philippine jurisprudence and Philippine banking laws, states that a foreign bank and
its branches are considered as one legal entity. Hence, there is no need to complicate that matter
when it can be solved by simple logic bolstered by law and jurisprudence. It is clear that the head
office of a bank and its branches are considered as one under the eyes of the law. While branches are
treated as separate business units for commercial and financial reporting purposes, in the end the
head office remains responsible and answerable for the liabilities of its branches which are under is
supervision and control.

2. Mentholatum Co. v. Mangaliman, 72 Phil 524

CASE DOCTRINE:
Foreign corporations; meaning of "doing" or "engaging in" or "transacting" business. No
general rule or governing principles can be laid down as to what constitutes "doing" or "engaging in"
or "transacting" business. Indeed, each case must be judged in the light of its peculiar environmental
circumstances. The rule test, however, seems to be whether the foreign corporation is continuing the
body or substance of the business or enterprise for which it was organized or whether it has
substantially retired from it and turned it over to another.

FACTS:
The petitioner, a foreign corporation, and the Philippine-American Drug Co. the former’s
exclusive distributing agent of the product “Mentholatum” in the Philippines, instituted an action
against the respondents, Anacleto Mangaliman, Florencio Mangaliman and the Director of the
Bureau of Commerce for infringement of trademark and unfair competition, praying for the issuance
of an order restraining respondents Mangaliman from selling their product and to pay for damages.
Although petitioner is not licensed to do business in the Philippines, it claims that they have not sold
personally any of their products and that it was merely imported from them by local entities including
Philippine-American Drug under their own account.

ISSUE:
WON, the petitioner is allowed to prosecute its action?

RULING:
NO, under Section 69 of Act No. 1459 provides that “No foreign corporation or corporation
formed, organized, or existing under any laws other than those of the Philippine Islands shall be
permitted to… maintain by itself or assignee any suit for the recovery of any debt, claim, or demand
whatever, unless it shall have the license.” The Mentholatum Co., Inc., being a foreign corporation
doing business in the Philippines without the license required by section 68 of the Corporation Law, it
may not prosecute this action for violation of trademark and unfair competition. Neither may the
Philippine-American Drug Co., Inc., maintain the action here for the reason that the distinguishing
features of the agent being his representative character and derivative authority.

3. Expertravel & Tours, Inc. v. CA, GR No. 152392, 26 May 2005

CASE DOCTRINE:

SEC. 127. Who may be a resident agent. ' A resident agent may either be an individual residing
in the Philippines or a domestic corporation lawfully transacting business in the Philippines: Provided,
that in the case of an individual, he must be of good moral character and of sound financial standing.

SEC. 128. Resident agent; service of process. - The Securities and Exchange Commission shall
require as a condition precedent to the issuance of the license to transact business in the Philippines
by any foreign corporation that such corporation file with the Securities and Exchange Commission a
written power of attorney designating some persons who must be a resident of the Philippines, on
whom any summons and other legal processes may be served in all actions or other legal proceedings
against such corporation, and consenting that service upon such resident agent shall be admitted and
held as valid as if served upon the duly-authorized officers of the foreign corporation as its home
office

FACTS:
Korean Airlines (KAL) is a corporation established and registered in the Republic of South
Korea and licensed to do business in the Philippines. Its general manager in the Philippines is Suk
Kyoo Kim, while its appointed counsel was Atty. Mario Aguinaldo and his law firm.
KAL, through Atty. Aguinaldo, filed a Complaint against ETI with the Regional Trial Court (RTC)
of Manila, for the collection of a sum of money. The verification and certification against forum
shopping were signed by Atty. Aguinaldo, who indicated therein that he was the resident agent and
legal counsel of KAL and had caused the preparation of the complaint.
On the other hand, ETI filed a motion to dismiss the complaint on the ground that Atty.
Aguinaldo was not authorized to execute the verification and certificate of non-forum shopping by
the Rules of Court. KAL later submitted an Affidavit executed by its general manager Suk Kyoo Kim,
alleging that the board of directors conducted a special teleconference, which he and Atty. Aguinaldo
attended. It was also averred that in that same teleconference, the board of directors approved a
resolution authorizing Atty. Aguinaldo to execute the certificate of non-forum shopping and to file the
complaint. Suk Kyoo Kim also alleged, however, that the corporation had no written copy of the
aforesaid resolution. 

ISSUE: WON, Atty Aguinaldo is authorized to execute the requisite certification against forum
shopping?

RULING:
NO, under Section 127, in relation to Section 128 of the Corporation Code, the authority of the
resident agent of a foreign corporation with license to do business in the Philippines is to receive, for
and in behalf of the foreign corporation, services and other legal processes in all actions and other
legal proceedings against such corporation.