MACASAET VS.

FRANCISCO
FACTS: Respondent sued pertitioners, including Abante Tonite, claiming damages because of an
allegedly libelous article petitioner published said tabloid. RTC issued summons to be served on each
petitioners, including Abante Tonite, at their business address. RTC Sheriff Medina proceeded to the
address to effect the personal service of the summons. But his efforts to personally serve each were
futile because the petitioners were out of the office and unavailable. He returned in the afternoon on
the same day to make a second attempt at serving the summons, but he was informed that petitioners
were still out of the office. He decided to resort to substituted service of the summons.

Petitioners moved for dismissal of the complaint alleging lack of jurisdiction over their persons because
of the invalid and ineffectual substituted service of summons asserting that sheriff made no prior
attempt to serve the summons personally, and that Abante Tonite, being neither a natural nor a juridical
person, could not be made a party in the action. RTC denied the motion to dismiss. Considering that
summonses cannot be served within a reasonable time to the persons of all the defendants, hence
substituted service of summonses was validly applied. More importantly, "Abante Tonite" is a daily
tabloid of general circulation. The information written on the said newspaper will affect the person,
natural as well as juridical, who was stated or implicated in the news. All of these facts imply that
"Abante Tonite" falls within the provision of the New Civil Code on juridical persons. Assuming arguendo
that "Abante Tonite" is not registered with the SEC, it is deemed a corporation by estoppel considering
that it possesses attributes of a juridical person, otherwise it cannot be held liable for damages and
injuries it may inflict to other persons. CA affirmed RTC’s decision

ISSUE: Whether Abante Tonite can be considered as a corporation by estoppel.

RULING: (YES) Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a
defendant due to its not being either a natural or a juridical person. In rejecting their contention, the CA
categorized Abante Tonite as a corporation by estoppel as the result of its having represented itself to
the reading public as a corporation despite its not being incorporated. Thereby, the CA concluded that
the RTC did not gravely abuse its discretion in holding that the non-incorporation of Abante Tonite with
the Securities and Exchange Commission was of no consequence, for, otherwise, whoever of the public
who would suffer any damage from the publication of articles in the pages of its tabloids would be left
without recourse. We cannot disagree with the CA, considering that the editorial box of the daily tabloid
disclosed that basis, nothing in the box indicated that Monica Publishing Corporation had owned Abante
Tonite.

P
 CHUNG KA BIO VS. IAC

FACTS:

PThe Philippine Blooming Mills Company was incorporated in 1952 for a term of 25 years which expired
on January 19, 1977. On May 14, 1977, the BOD executed a deed of assignment of all of the accounts
receivables, properties, obligations and liabilities of the old PBM in favor of Chung Siong Pek in his
capacity as treasurer of the new PBM, then in the process of reincorporation. After two months, the
new PMB was issued a certificate of incorporation. On May 5, 1981, Chung Ka Bio and the other
petitioners herein, all stockholders of the old PBM, filed with the SEC a petition for liquidation (but not
for dissolution) of both the old and the new PBM. The allegation was that the former had become legally
non-existent for failure to extend its corporate life and that the latter had likewise been ipso facto
dissolved for non-use of the charter and continuous failure to operate within 2 years from incorporation.
The case was dismissed for lackP of cause of action. On appeal to the SEC en banc, it remanded to a new
panel of hearing officers for further proceedings, including the proper accounting of the assets and
liabilities of the old PBM. This order was appealed to the questioning the authority of the SEC in Case
No. 055 to adjudicate a matter not properly raised on appeal or resolved in the order appealed from.
Alfredo Ching, a director of the old PBM who executed the deed of assignment, filed with the IAC a
separate petition for certiorari questioning the same order and SEC’s decision in AC Case No. 055. He
alleged that SEC had gravely erred in not dismissing the petition for liquidation since the action
amounted to a quo warranto proceeding which only the state could institute through the Solicitor
General. Earlier, on April 1, 1982, the new PBM and Alfredo Ching had filed with the SEC a petition for
suspension of payment, which was opposed by Chung Ka Bio, et al., on the ground that the SEC had no
jurisdiction over a petition for suspension of Ppayments initiated by a mere individual. The opposition
was rejected and the case was set for hearing. Chung Ka Bio elevated the matter to the SEC en banc on
certiorari with preliminary injunction and receivership praying for the annulment and setting aside of
the proceedings. The case was remanded to the hearing officers for further proceedings. Chung Ka Bio
came to this Court but we referred his case to the IAC. The three cases, viz., PBM v. SEC; Chung Ka Bio,
et al. v. SEC; and Alfredo Ching, et al. v. SECP were then consolidated in the respondent court which
issued the decision now challenged on certiorari by the petitioners in the case at bar. The decision
affirmed the orders issued by the SEC in the said cases except the requirement for the accounting of the
assets of the old PBM, which was set aside.

ISSUES:

1. Whether or not the BOD of an already dissolved corporation does not have the inherent power,
without the express consent of the stockholders, to convey all its assets to a new corporation.

HELD:

1. The petitioners insist that no stockholders' meeting had been convened to discuss the deed of
assignment and the 2/3 vote required to authorize such conveyance had not been obtained. The
Court mentioned Sec. 77 and Sec. 28-1/2 of the Corporation Code now Sections 122 and 40 with
modifications of the Corporation Code. The Court held that there is the presumption of
regularity which must operate in favor of the private respondents, who insist that the proper
 authorization was duly obtained at a meeting called for the purpose. The authorization was
embodied in a unanimous resolution which was reproduced verbatim in the deed of assignment.
Otherwise, the new PBM would not have been issued a certificate of incorporation, which
should also be presumed to have been done regularly. It must also be noted that under Section
28-1/2, "any stockholder who did not vote to authorize the action of the board of directors may,
within 40 days after the date upon which such action was authorized, object thereto in writing
and demand payment for his shares." The record does not show, nor have the petitioners
alleged or proven, that they filed a written objection and demanded payment of their shares
during the reglementary forty-day period. This circumstance should bolster the private
respondents' claim that the authorization was unanimous. It is not unlawful for the old board of
directors to negotiate and transfer the assets of the dissolved corporation to the new
corporation intended to be created as long as the stockholders have given their consent. It was
expressly allowed by Section 28-1/2 of the Corporation Act. What the Court finds especially
intriguing in this case is the fact that although the deed of assignment was executed in 1977, it
was only in 1981 that it occurred to the petitioners to question its validity. All of four years had
elapsed. The new PBM was in full operation, conducting the same with the same personnel who
worked for the old PBM. Laches has operated against them. To begin with, what gave rise to the
situation now complained of by the petitioners was the adoption of the deed of assignment by
the directors of the old PBM allegedly without the consent of its stockholders and the
acceptance of the deeded assets by the new PBM. Secondly, there was delay on the petitioners'
part since it took them nearly four years, i.e., from May 14, 1977 to May 5,1981, before they
made their move to assail the transfer despite complete knowledge of the transaction. To note,
Chung Siong Pek, acted not only as director of the old PBM but also as treasurer of the new PBM
in the transaction. Finally, the injury or prejudice in the event relief is granted is obvious as all
the transactions of the new PBM will have to be undone, including credits extended and
commitments made to third parties in good faith

YAO KA SIN TRADING VS. CA

FACTS:

Constancio B. Maglana, President and Chairman of the Board of private respondent Prime White
Cement Corporation (PWCC) sent a letter-offer (Exhibit “A”) to Yao Ka Sin Trading (YKS) which describes
itself as a business concern of single proprietorship, and is represented by its manager, Mr. Henry Yao
regarding the delivery of bags of white cement. However, after the signing of the letteroffer, the Board
of Directors of PWCC disapproved the same. YKS then filed with the then Court of First Instance of Leyte
a complaint for Specific Performance with Damages against PWCC. PWCC denied under oath the
material averments in the complaint and alleged that: (a) YKS “has no legal personality to sue having no
legal personality even by fiction to represent itself;” (b) Mr. Maglana, its President and Chairman, was
lured into signing Exhibit “A”; (c) such signing was subject to the condition that Exhibit “A” be approved
by the Board of Directors of PWCC, as corporate commitments are made through it; (d) the latter
disapproved it, hence Exhibit “A” was never consummated and is not enforceable against PWCC; (e) it
agreed to sell 10,000 bags of white cement, not under Exhibit “A”, but under a separate contract
prepared by the Board; (f) the rejection by the Board of Exhibit “A” was made known to YKS through
various letters sent to it, copies of which were attached to the Answer as Annexes 1, 2 and 3;[18] (g) YKS
knew, per Delivery Order[19] and Official Receipt[20] issued by PWCC, that only 10,000 bags were sold
to it, without any terms or conditions, at P24.30 per bag FOB Asturias, Cebu; (h) YKS is solely to blame
for the failure to take complete delivery of 10,000 bags for it did not send its boat or truck to PWCC's
plant; and (i) YKS has, therefore, no cause of action.

ISSUE: Whether or not the letter-offer, as accepted by YKS, is a contract that binds the PWCC.

HELD: No, The respondent Court correctly ruled that Exhibit “A” is not binding upon the private
respondent. Mr. Maglana, its President and Chairman, was not empowered to execute it. Since a
corporation, such as the private respondent, can act only through its officers and agents, “all acts within
the powers of said corporation may be performed by agents of its selection; and, except so far as
limitations or restrictions may be imposed by special charter, by-law, or statutory provisions, the same
general principles of law which govern the relation of agency for a natural person govern the officer or
agent of a corporation, of whatever status or rank, in respect to his power to act for the corporation;
and agents when once appointed, or members acting in their stead, are subject to the same rules,
liabilities and incapacities as are agents of individuals and private persons.” Moreover, “x x x a corporate
officer or agent may represent and bind the corporation in transactions with third persons to the extent
that authority to do so has been conferred upon him, and this includes powers which have been
intentionally conferred, and also such powers as, in the usual course of the particular business, are
incidental to, or may be implied from, the powers intentionally, conferred, powers added by custom and
usage, as usually pertaining to the particular officer or agent, and such apparent powers as the
corporation has caused persons dealing with the officer or agent to believe that it has conferred.”

PAULIE TAN VS. PAUL SYCIP

Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation with
fifteen (15) regular members, who also constitute the board of trustees. During the annual members’
meeting held on April 6, 1998, there were only eleven (11) living member-trustees, as four (4) had
already died. Out of the eleven, seven (7) attended the meeting through their respective proxies. The
meeting was convened and chaired by Atty. Sabino Padilla Jr. over the objection of Atty. Antonio C.
Pacis, who argued that there was no quorum. In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo,
Virginia Khoo, and Judith Tan were voted to replace the four deceased member-trustees. When the
controversy reached the Securities and Exchange Commission (SEC), petitioners maintained that the
deceased member-trustees should not be counted in the computation of the quorum because, upon
their death, members automatically lost all their rights (including the right to vote) and interests in the
corporation. SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and void for
lack of quorum. She held that the basis for determining the quorum in a meeting of members should be
their number as specified in the articles of incorporation, not simply the number of living members. She
explained that the qualifying phrase "entitled to vote" in Section 24 of the Corporation Code, which
provided the basis for determining a quorum for the election of directors or trustees, should be read
together with Section 89.

ISSUE: Whether dead members should still be counted in the determination of the quorum, for
purposes of conducting the annual members’ meeting.

HELD:
NO, The quorum in a members’ meeting is to be reckoned as the actual number of members of the
corporation, the next question to resolve is what happens in the event of the death of one of them. In
stock corporations, shareholders may generally transfer their shares. On the other hand, membership in
and all rights arising from a nonstock corporation are personal and non-transferable, unless the articles
of incorporation or the bylaws of the corporation provide otherwise. In other words, the determination
of whether or not "dead members" are entitled to exercise their voting rights (through their executor or
administrator), depends on those articles of incorporation or bylaws. Under the By-Laws of GCHS,
membership in the corporation shall, among others, be terminated by the death of the member. Section
91 of the Corporation Code further provides that termination extinguishes all the rights of a member of
the corporation, unless otherwise provided in the articles of incorporation or the bylaws. Applying
Section 91 to the present case, we hold that dead members who are dropped from the membership
roster in the manner and for the cause provided for in the By-Laws of GCHS are not to be counted in
determining the requisite vote in corporate matters or the requisite quorum for the annual members’
meeting. With 11 remaining members, the quorum in the present case should be 6. Therefore, there
being a quorum, the annual members’ meeting, conducted with six members present, was valid.

While a majority of the remaining corporate members were present, however, the "election" of the four
trustees cannot be legally upheld for the obvious reason that it was held in an annual meeting of the
members, not of the board of trustees. We are not unmindful of the fact that the members of GCHS
themselves also constitute the trustees, but we cannot ignore the GCHS bylaw provision, which
specifically prescribes that vacancies in the board must be filled up by the remaining trustees. In other
words, these remaining member-trustees must sit as a board in order to validly elect the new one.

MAJORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORPORATION VS MIGUEL LIM

Ruby Industrial Corporation 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 which was granted. The SEC Hearing Panel created the management
committee (MANCOM) for Ruby, composed of representatives from Ruby’s creditors. Subsequently, two
rehabilitation plans were submitted to the Securities and Regulations Commission (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. However, the implementation of both
majority plans has been enjoined. Notwithstanding the injunction order, SEC issued an Order approving
the Revised BENHAR/RUBY Plan and creating a new management committee to oversee its
implementation.

The Revised BENHAR/RUBY Plan had proposed the calling for subscription of unissued shares through a
Board Resolution from the P11.814 million of theP23.7 million Authorized Capital Stock. basis and that
should any of the stockholders fail to exercise their rights to buy the number of shares they are qualified
to buy by making the first installment payment of 25% on or before October 13, 1991, then the other
stockholders may buy the same and that only when none of the present stockholders are interested in
the shares may there be a resort to selling them by public auction. The minority directors claimed they
were not notified of said board meeting.

ISSUE:

Whether or not the additional capital infusion is valid.

HELD:

NO. The issuance of additional shares was done in breach of trust by the controlling stockholders. Here,
the majority sought 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 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. In this case, the following relevant observations should have signaled greater circumspection
on the part of the SEC -- upon the third and last remand to it pursuant to the January 20, 1998 Decision
-- to demand transparency and accountability from the majority stockholders, in view of the illegal
assignments and objectionable features of the Revised BENHAR/RUBY Plan, as found by the CA and as
affirmed by the Supreme Court.

HI-YIELD RELTY INC. VS CA

Roberto H. Torres (Roberto), for and on behalf of Honorio Torres & Sons, Inc. (HTSI), filed a Petition for
Annulment of Real Estate Mortgage and Foreclosure Sale with the RTC of Makati, the court where
principal office of HTSI was registered, over two parcels of land located in Marikina and Quezon City
against Leonora, Ma. Theresa, Glenn and Stephanie, all surnamed Torres and Hi-Yield Realty, Inc. (Hi-
Yield), among others. Hi-Yield contends that the rule on venue under the Rules of Court prevails over the
rule prescribing the venue for intra-corporate controversies. As such, HTSI erred when it filed the suit in
Makati when the lands subject of the case are in Marikina and Quezon City. Furthermore, Hi-Yield
argues that the caption of the case, substance of the allegations, and relief prayed for revealed that the
main thrust of the action is to recover the lands not mainly as a derivative suit with annulment of real
estate mortgage and foreclosure sale as merely incidental. Roberto, on the other hand, maintains that
the action is primarily a derivative suit to redress the alleged unauthorized acts of its corporate officers
and major stockholders in connection with the lands. The nullification of the mortgage and foreclosure
sale would just be a logical consequence of a decision adverse to the said officers and stockholders.

ISSUE:

Whether the action is in the form of a derivative suit although captioned as a petition for annulment of
real estate mortgage and foreclosure sale.

HELD:

YES, (A) A derivative action is a suit by a shareholder to enforce a corporate cause of action. Under the
1980 Corporation Code, where a corporation is an injured party, its power to sue is lodged with its board
of directors or trustees. However, an individual stockholder may be permitted to institute a derivative
suit on behalf of the corporation in order to protect or vindicate corporate rights whenever the officials
of the corporation refuse to sue, or are the ones to be sued, or hold control of the corporation. In such
actions, the corporation is the real party-in-interest while the suing stockholder, on behalf of the
corporation, is only a nominal party. The Court finds that Roberto had satisfied the requirements in
paragraph 5 of his petition which states that “Individual petitioner, being a minority stockholder, is
instituting the instant proceeding by way of a derivative suit to redress wrongs done to petitioner
corporation and vindicate corporate rights due to the mismanagement and abuses committed against it
by its officers and controlling stockholders, especially by Leonora who, without authority from the Board
of Directors, arrogated upon herself the power to bind petitioner corporation from incurring loan
obligations and later allow company properties to be foreclosed”

UNIVERSITY OF MINDANAO INC. VS BSP

University of Mindanao is an educational institution. Its Board of Trustees was chaired by Guillermo B.
Torres. His wife, Dolores P. Torres, sat as University of Mindanao’s Assistant Treasurer. Before 1982,
Guillermo B. Torres and Dolores P. Torres incorporated and operated two (2) thrift banks: (1) First Iligan
Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings and Loan Association, Inc. (DSLAI).
Guillermo B. Torres chaired both thrift banks. He acted as FISLAI’s President, while his wife, Dolores P.
Torres, acted as DSLAI’s President and FISLAI’s Treasurer. Upon Guillermo B. Torres’ request, Bangko
Sentral ng Pilipinas issued a P1.9 million standby emergency credit to FISLAI. The release of standby
emergency credit was evidenced by three (3) promissory notes in the amounts of P500,000.00,
P600,000.00, and P800,000.00, respectively. All these promissory notes were signed by Guillermo B.
Torres, and were co-signed by either his wife, Dolores P. Torres, or FISLAI’s Special Assistant to the
President, Edmundo G. Ramos, J.

Guillermo B. Torres died on March 2, 1989. MSLAI failed to recover from its losses and was liquidated on
May 24, 1991. On June 18, 1999, Bangko Sentral ng Pilipinas sent a letter to University of Mindanao,
informing it that the bank would foreclose its properties if MSLAI’s total outstanding obligation of
P12,534,907.73 remained unpaid. University of Mindanao, through its Vice President for Accounting,
Gloria E. Detoya, denied that University of Mindanao’s properties were mortgaged. It also denied having
received any loan proceeds from Bangko Sentral ng Pilipinas

ISSUE:

Whether petitioner is bound by the real estate mortgage secured by Saturnino.

HELD:

NO, 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. The only
exception to this rule is when acts are necessary and incidental to carry out a corporation’s purposes,
and to the exercise of powers conferred by the Corporation Code and under a corporation’s articles of
incorporation. Securing FISLAI’s loans by mortgaging petitioner’s properties does not appear to have
even the remotest connection to the operations of petitioner as an educational institution. Securing
loans is not an adjunct of the educational institution’s conduct of business. It does not appear that
securing third-party loans was necessary to maintain petitioner’s business of providing instruction to
individuals.

ASSOCIATED BANK VS. CA

Associated Banking Corporation and Citizens Bank and Trust Company (CBTC) merged to form just one
banking corporation known as Associated Citizens Bank (later renamed Associated Bank), the surviving
bank. After the merger agreement had been signed, but before a certificate of merger was issued,
respondent Lorenzo Sarmiento, Jr. executed in favor of Associated Bank a promissory note, promising to
pay the bank P2.5 million on or before due date at 14% interest per annum, among other accessory
dues. For failure to pay the amount due, Sarmiento was sued by Associated Bank.

ISSUE:

Whether or not Associated Bank, the surviving corporation, may enforce the promissory note made by
private respondent in favor of CBTC, the absorbed company, after the merger agreement had been
signed

HELD:

The merger, however, does not become effective upon the mere agreement of the constituent
corporations. The procedure to be followed is prescribed under the Corporation Code. 12 Section 79 of
said Code requires the approval by the Securities and Exchange Commission (SEC) of the articles of
merger which, in turn, must have been duly approved by a majority of the respective stockholders of the
constituent corporations. The same provision further states that the merger shall be effective only upon
the issuance by the SEC of a certificate of merger. The effectivity date of the merger is crucial
fordetermining when the merged or absorbed corporation ceases to exist; and when its rights,
privileges, properties as well as liabilities pass on to the surviving corporation.

PC JAVIER & SONS VS CA

Plaintiff Corporation, P.C. Javier and Sons Services, Inc., applied with First Summa Savings and Mortgage
Bank, later on renamed as PAIC Savings and Mortgage Bank, Defendant Bank, for short, for a loan
accommodation under the Industrial Guarantee Loan Fund (IGLF) for ₱1.5 Million. On March 21, 1981,
Plaintiff Corporation through Plaintiff Pablo C. Javier, Plaintiff Javier for short, was advised that its loan
application was approved and that the same shall be forwarded to the Central Bank (CB) for processing
and release. Plaintiff Corporation defaulted in the payment of its IGLF loan with Defendant Bank hence
Defendant Bank sent a demand letter dated reminding Plaintiff Javier to make payments because their
accounts have been long overdue; Defendant Bank sent another demand letter to Plaintiff spouses
informing them that since they have defaulted in paying their obligation, their mortgage will now be
foreclosed; that when Plaintiffs still failed to pay, Defendant Bank initiated extrajudicial foreclosure of
the real estate mortgage executed by Plaintiff spouses and accordingly the auction sale of the property
covered by TCT No. 473216 was scheduled by the Ex–Officio Sheriff

ISSUE;

Whether First Summa Savings and Mortgage Bank and PAIC Savings and Mortgage Bank, Inc. are one
and the same entity

HELD: YES, It cannot be denied that petitioner corporation was aware of First Summa Savings and
Mortgage Bank’s change of corporate name to PAIC Savings and Mortgage Bank, Inc. Knowing fully well
of such change, petitioner corporation has no valid reason not to pay because the IGLF loans were
applied with and obtained from First Summa Savings and Mortgage Bank. First Summa Savings and
Mortgage Bank and PAIC Savings and Mortgage Bank, Inc., are one and the same bank to which
petitioner corporation is indebted. A change in the corporate name does not make a new corporation,
whether effected by a special act or under a general law. It has no effect on the identity of the
corporation, or on its property, rights, or liabilities.

YAMAMOTO VS MISHIMO LEATHER INDUSTRIES

In 1983, petitioner, Ryuichi Yamamoto (Yamamoto), a Japanese national, organized under Philippine
laws Wako Enterprises Manila, Incorporated (WAKO), a corporation engaged principally in leather
tanning, now known as Nishino Leather Industries, Inc. (NLII), one of herein respondents. In 1987,
Yamamoto and the other respondent, Ikuo Nishino (Nishino), also a Japanese national, forged a
Memorandum of Agreement under which they agreed to enter into a joint venture wherein Nishino
would acquire such number of shares of stock equivalent to 70% of the authorized capital stock of
WAKO. Eventually, Nishino and his brother Yoshinobu Nishino (Yoshinobu) acquired more than 70% of
the authorized capital stock of WAKO, reducing Yamamoto’s investment therein to, by his claim, 10%,
less than 10% according to Nishino. The corporate name of WAKO was later changed to, as reflected
earlier, its current name NLII. Negotiations subsequently ensued in light of a planned takeover of NLII by
Nishino who would buy-out the shares of stock of Yamamoto. In the course of the negotiations,
Yoshinobu and Nishinos counsel Atty. Emmanuel G. Doce (Atty. Doce) advised Yamamoto by letter dated
October 30, 1991

On the basis of such letter, Yamamoto attempted to recover the machineries and equipment which
were, by Yamamoto’s admission, part of his investment in the corporation, but he was frustrated by
respondents, drawing Yamamoto to file on January 15, 1992 before the Regional Trial Court (RTC) of
Makati a complaint against them for replevin. RTC of Makati issued a writ of replevin after Yamamoto
filed a bond.

ISSUE:

Whether based on the letter of Nishino’s counsel, Yamamoto may retrieve the machineries and
equipment, which admittedly was part of his investment, bound the corporation.

HELD: NO, It is settled that the property of a corporation is not the property of its stockholders or
members. Under the trust fund doctrine, the capital stock, property, and other assets of a corporation
are regarded as equity in trust for the payment of corporate creditors which are preferred over the
stockholders in the distribution of corporate assets. The distribution of corporate assets and property
cannot be made to depend on the whims and caprices of the stockholders, officers, or directors of the
corporation unless the indispensable conditions and procedures for the protection of corporate
creditors are followed. The machineries and equipment, which comprised Yamamoto’s investment in
NLII, thus remained part of the capital property of the corporation.