EXAM 1

1. Yes. Abante Tonight is considered a corporation by estoppel.

Under Section 20 of the RCCP, it provides that when any such ostensible corporation is
sued on any transaction entered by it as a corporation or on any tort committed by it as
such, it shall not be allowed to use on any its lack of corporate personality as a defense.

In a similar case ruled by the Supreme Court, it upheld the ruling of the CA that an
incorporated association which represents itself to be a corporation will be estopped
from denying its corporate capacity in a suit against it by a third person who relies in
good faith on such representation.

Here, Abante Tonite is a corporation by estoppel as the result of representing itself

to the reading public as a corporation despite its not being incorporated.

2. Radio Philippines Network, Inc is not a government owned or controlled corporation.

A Government-owned or controlled corporation has a personality of its own, distinct and

separate from that of the government, and the intervention in a transaction does not
change the independent existence of a government entity. The government, through the
PCGG, may not lawfully intervene and participate in the management and operations of
a private mass media to maintain its freedom and independence as guaranteed by the
constitution. The PCGG may thus exercise only the 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,
collects 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.

Thus, in case of sequestered businesses generally, the essential role is that of a

conservator, caretaker, watchdog or overseer. It is not that of manager, or innovator,
much less an owner.

3.
A.

Grandfather Rule ensures compliance with the constitutional limitations of

corporations engaging in nationalized activities. The nationality of a corporation
must be determined by ascertaining if 60% of the investing corporation’s
outstanding capital stock is owned by “Filipino citizens”, or as interpreted, by
natural or individual Filipino citizens. If such investing corporation is in turn owned
to some extent by another investing corporation, the same process must be
observed.
 B. Yes. The Grandfather rule is applicable in this case.

The rule applies if in the mind of the Court there is doubt, based on the attendant facts
and circumstances of the case, in the 60-40 Filipino equity ownership in the corporation,
then it may apply the "grandfather rule".

In the case at bar, it calls for the application of the grandfather rule since there is a
doubt in the 60-40 Filipino equity ownership of petitioners Narra, McArthur and Tesoro
because of their common investor, the 100% Canadian corporation which is the MBMI.

C. Yes. Petitioners are considered a foreign corporation.

The ultimate Filipino ownership of the shares must first be determined to the level of the
Investing Corporation and added to the shares directly owned in the Investee
Corporation. Petitioners McArthur, Tesoro and Narra are not Filipino since MBMI, a
100% Canadian corporation, owns 60% or more of their equity interests. MBMI has joint
venture agreements with, practically exercising majority control over the corporations
mentioned. In effect, whether looking at the capital structure or the underlying
relationships between and among the corporations, petitioners are not Filipino nationals
and must be considered foreign since 60% or more of their capital stocks or equity
interests are owned by MBMI.

D. In determining the nationality of a corporation, the control test uses the nationality of
the controlling stockholders or members of the corporation.

4. MONDAY

doctrine of “Piercing the Veil of Corporate Identity”;

This legal doctrine provides that the veil of corporate fiction shall not be used as a shield
to perpetuate fraud, to defeat public convenience, justify wrong or defend crime (Cruz v.
Dalisay).

Hence even if a corporation is a legal entity distinct from the persons composing it this
fiction shall be disregarded and the individuals composing it will be treated inorder to
avoid justifying a wrongful act.
 (B)

ANS:No.The mere fact that a corporation owns all of the stocks of another corporation,
taken alone is not sufficient to justify their being treated as one entity. If used to
perform legitimate functions, a subsidiary's separate existence may be respected, and
the liability of the parent corporation as well as the subsidiary will be confined to those
arising in their respective business. It is noteworthy in the present case that aside from
the fact that PNB-IFL is a wholly owned subsidiary of petitioner PNB, there is no showing
of the indicative factors that the former corporation is a mere instrumentality of the
latter are present. Neither is there a demonstration that any of the evils sought to be
prevented by the doctrine of piercing the corporate veil exists. Inescapably, therefore,
the doctrine of piercing the corporate veil based on the alter ego or instrumentality
doctrine finds no application in the case at bar.
5. Yes. AMEC is entitled to moral damages.

As a general rule, juridical entities are not entitled to moral damages because it incapable
of physical suffering, mental anguish, anxiety, wounded feelings and other similar injuries.
However, a corporation may recover moral damages under the New Civil Code’s provision
which expressly authorizes the recovery of moral damages in cases of libel, slander, or any
other form of defamation without qualifying natural or juridical entities. Moreover, it is also
a well-settled exception that when the corporation has a reputation that is debased,
resulting in its humiliation in the business realm it may claim for moral damages.

Here, the case is one of libel and the defamatory broadcasts of FBNI and its hosts
besmirched the reputation of AMEC.

Hence, AMEC can validly claim for moral damages.

6. Yes, Candida Santos can be held solidarily liable with Arco Pulp and Paper.

A director, officer or employee of a corporation is generally not held liable for obligations
incurred by the corporation. However, the legal fiction may be disregarded if it is used to
perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes , or to confuse legitimate issues. As in the case that the
officer is guilty of negligence or bad faith, and such negligence or bad faith was clearly and
convincingly proven.

In this case, Though Santos was not the prime mover for such outstanding corporate
liability, She deliberately issued an unfunded check. She, moreover, contracted with a third
party in an effort to shift petitioner Arco Pulp and Paper’s liability, and such acts clearly
amount to bad faith.Thus, the corporate veil may be pierced, and petitioner Santos can be
held solidarily liable with petitioner Arco Pulp and Paper.
8. A. No. University of Mindanao is not bound by the real estate mortgage secured by
Saturnino.

Under the corporation code, corporate acts that are outside those express definitions under
the law or articles of incorporation or those committed outside the object for which a
corporation is created are ultra vires and are voidable unless ratified by stockholders.

In this case, University of Mindanao, as an educational institution, does not have the power
to mortgage its properties in order to secure loans of other persons. It is not a corporation
engaged in the business of securing loans of others. Hence, the real mortgage secured by
Saturnino in behalf of University of Mindanao is an ultra vires act.

Further, Saturnino is not vested with any authority to mortgage UM’s property as there was
no board resolution to that effect. Thus, the mortgages executed by Saturnino are
unenforceable.

No act by petitioner can be interpreted as anything close to ratification. Petitioner even

adduced that it did not issue a resolution ratifying the execution of the mortgage contracts,
it did not receive proceeds of the loans secured by the mortgage contracts and that the
certification was anomalous.

Hence, University of Mindanao is not bound by the real estate mortgage secured by
Saturnino.

B. Ultra Vires acts refer to acts which are outside or beyond express, implied and incidental
corporate powers. It is one committed outside the object for which a corporation is created
as defined by the law or its organization and therefore beyond the power conferred upon it
by law.

An illegal act is an act which is contrary to law, morals, public order, or public policy and is
considered void. An illegal act cannot be ratified. On the other hand, an ultra vires act is on
that is not illegal but merely voidable being an act done beyond the scope of corporate
power vested by law or its objectives as a corporation. Ultra vires act can be ratified by the
stockholders or directors.

8. A. Splitting of deposits occurs when a deposit account of more than P500,000 under the
name of a person is broken down and transferred into two or more accounts in the names
of person or entities with no beneficial ownership within 120 days immediately preceding or
during a bank holiday, or a closure order issued by the Monetary Board of the BSP for the
purpose of availing of the maximum deposit insurance coverage.

B. Single Borrower’s Limit is a limitation imposed upon banks with respect to its loan
function. As a general rule, the total amount of loans, credit accommodations and
guarantees that the bank could grant should at no time exceed 25% of the bank’s net
worth. The exceptions to the general rule are as follows: A) As the Monetary Board may
otherwise prescribe for reasons of national interest and B) Deposits of rural banks with
GOCC financial institutions like LBP, DBP, and PNB.

C. Under the Financial Rehabilitation and Insolvency Act, Corporate Rehabilitation refers to
the restoration of the debtor to a condition of successful operation and solvency, if it is
shown that its continuance of operation is economically feasible and its creditors can
recover by way of the present value of payments projected in the plan, more if the debtor
continues as a going concern than if it is immediately liquidated.

9. MONDAY

9.

The following are the tests to determine an intra-corporate conflict.

Relationship Test- It takes into account whether an issue involves particular corporate
relationships.

In the case of Union Glass & Container Corporation v. Securities and Exchange Commission
the court enumerated the following relationships:

[a] between the corporation, partnership or association and the public;

[b] between the corporation, partnership or association and its stockholders, partners,
members, or officers;

[c] between the corporation, partnership or association and the state in so far as its
franchise, permit or license to operate is concerned; and

[d] among the stockholders, partners or associates themselves.

For as long as any of these intra-corporate relationships exist between the parties, the
controversy would be characterized as intra-corporate.

Nature of Controversy test- It entails that the controversy must not only be rooted in the
existence of an intra-corporate relationship, but must pertain to the enforcement of the
parties’ correlative rights and obligations under the Corporation Code and the internal and
intra-corporate regulatory rules of the corporation.

(Reyes vs. Zenith Insurance Corp.)

10. A. A Covered Transaction is a transaction in cash or other equivalent monetary

instrument involving a total amount in excess of five hundred thousand pesos
(Php500,000.00) within one (1) banking day. Whereas, a Suspicious transaction are
transactions with covered institutions, regardless of the amounts involved, where there are
circumstances that exist such as : there is no underlying legal or trade obligation, purpose
or economic justification, or the client is not properly identified; or the amount involved is
not commensurate with the business or financial capacity of the client, or taking into
account all known circumstances, it may be perceived that the client’s transaction is
structured to avoid being the subject of reporting requirements under this act.

B. In Bank Inquiry, there is no duration as to when to inquire on the particular account.

Whereas in a freeze order, there is an initial period of 20 days, which will be included in the
counting if granted for an extension of 6 months.

In Bank Inquiry, no notice will be given to the depositor. Whereas, in a freeze order, there
must be a notice given to the depositor to inform him of such order.

Bank Inquiry involves gathering of evidence. Whereas a freeze order prevents monetary
from dissipating.

C. In Conservatorship, the management of the bank is still with its board of directors and
management. However, the conservator may revoke their actions. Whereas in receivership,
the receiver takes over the management of the bank.

In Conservatorship, the conservator is a natural person to be appointed by the MB.

Whereas in Receivership, the receiver is generally the Philippine Deposit Insurance
Corporation (PDIC).

In Conservatorship, the ground for such is when the corporation is in a state of continuing
inability or unwillingness to maintain a condition of liquidity deemed adequate to protect
the interest of depositors and creditors. Whereas a Receivership, it is the inability to pay
liabilities as they fall due.

11. Butbot Bank should report to the AMLC that Jerry Co has transacted a Suspicious
Transaction.

Under Anti-Money Laundering Act, covered transaction is a transaction in cash or other

equivalent monetary instrument involving a total amount in excess of PHP 500,000 within
one (1) banking day.

Also, one of the enumerated Suspicious Transactions under the AMLA is when there is no
underlying legal or trade obligation, purpose or economic justification, regardless of the
amounts involved.

In the case at bar, Jerry Co deposited a total amount in excess of PHP 500,000 in one
banking day which was on March 19, 2021. Such transaction is considered as Covered
Transaction under the AMLA. However, with such transaction, it was also not shown in the
deposit any legal or trade obligation, purpose or economic justification. Hence, can be
considered also as Suspicious Transaction. It is settled that should the transaction be
determined to be both a Covered Transaction and a Suspicious Transaction, the covered
institution shall be required to report the same as Suspicious Transaction.