The Missionary Sisters of Our Lady of Fatima (Peach Sisters of Laguna) represented by Rev. Mother Ma. Concepcion R.

Realon, et. al. vs Amando V. Alzona, et. al.

G.R. No. 224307, August 06, 2018

FACTS:
The Missionary Sisters of Our Lady of Fatima is a religious and charitable group whose primary mission is to take care of the
abandoned and neglected elderly persons. In October 1999,  through a letter, Purificacion, a spinster donated her parcels of
land to petitioner Missionary through Mother Concepcion, the petitioner’s Superior General who took care of her during her
illness.

Mother Concepcion was advised by a lawyer to register their group to the Securities and Exchange Commission. She applied
for the registration of the Missionary. The next day, Purificacion executed a Deed of Donation Intervivos in favor of petitioner
conveying her properties. Two days later, the Certificate of Incorporation was issued by the SEC.

ISSUE:
Whether or not the donation was valid.

RULING:
Yes, the donation was valid and has complied with all the requisites of a valid donation.

In spite of the fact that the Missionary was not yet registered with the SEC when the properties were donated,   the donation
would still be valid because Purificacion, applying the doctrine of corporation by estoppel, was aware that the Missionary
was not yet incorporated and registered with the SEC. Purificacion dealt with the petitioner as if it were a corporation. This is
evident from the fact that Purificacion executed two (2) documents conveying her properties in favor of the petitioner. She is
estopped to deny the Missionary’s legal existence in any action involving the transfer of her property by way of donation.
She has assumed an obligation in favor of a non-existent corporation, having transacted with the latter as if it was duly
incorporated. The doctrine of corporation by estoppel is founded on principles of equity and is designed to prevent injustice
and unfairness. It applies when a non-existent corporation enters into contracts or dealings with third persons.The doctrine
of corporation by estoppel applies for as long as there is no fraud.
International Express Travel And Tour Services Inc. vs Court of Appeals
GR No. 119002 October 19, 2000

Facts: 

International Express Travel and Tours Services Inc. wrote a letter to the Philippine Football Federation through its President
Henri Kahn, wherein the former offered its services as a travel agency to the latter. The offer was accepted. Petitioner
secured the airline tickets for the trips of the athletes and officials of the Federation to the South East Asian Games in Kuala
Lumpur as well as various other trips to the People’s Republic of China and Brisbane. The total cost of the tickets amounted
to Php449,654.83. For the tickets received, the Federation made two partial payments, both in September of 1989 in the
total amount of Php176,467.50.

Petitioner wrote the Federation, through the private respondent a demand letter requesting for the amount of
Php265,844.33. The Federation, through the project gintong alay, paid the amount of Php31,603. Henri Kahn issued a
personal check in the amount of Php50,000 as partial payment for the outstanding balance of the Federation. Thereafter, no
further payments were made despite repeated demands.

Issue: 

Whether or not private respondent can be made personally liable for the liabilities of the Philippines Football Federation.

Ruling:

 Yes. A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify a contract.
The contract entered into by its officers or agents on behalf of such association is binding or, as enforceable against it. The
officers or agents are themselves personally liable.

In attempting to prove the juridical existence of the Federation, Henri Kahn attached to his motion for reconsideration before
the trial court a  copy of the constitution and by-laws of the Philippine Football Federation. Unfortunately, the same does not
prove that said Federation has indeed been recognized and accredited by either the Philippine Amateur Athletic Federation
or the Department of Youth and Sports Development. Accordingly, we rule that the Philippine Football Federation is not a
national sports association within the purview of the aforementioned laws and does not have corporate existence of its own.

Thus being said, it follows that Henri Kahn should be liable for the unpaid obligations of the unincorporated Philippine
Football Federation. It is a settled principle in corporation law that any person acting or purporting to act on behalf of the
corporation which has no valid existence assumed such privileges and becomes personally liable for contract entered into or
for other acts performed as such agent.
Lim Tong v. PFGI, Inc.

GR No. 136448, November 3, 1999

FACTS: 

Lim Tong Lim requested Peter Yao and Antonio Chuato engage in commercial fishing with him. The three agreed to purchase
two fishing boats but since they do not have the money they borrowed from one Jesus Lim the brother of Lim Tong Lim.

Subsequently, they again borrowed money for the purchase of fishing nets and other fishing equipments. Yao and Chua
represented themselves as acting in behalf of “Ocean Quest Fishing Corporation” (OQFC) and they contracted with Philippine
Fishing Gear Industries (PFGI) for the purchase of fishing nets amounting to more than P500k. However, they were unable to
pay PFGI and hence were sued in their own names as Ocean Quest Fishing Corporation is a non-existent corporation. Chua
admitted his liability while Lim Tong Lim refused such liability alleging that Chua and Yao acted without his knowledge and
consent in representing themselves as a corporation.

ISSUE: 

Whether or not Lim Tong Lim is liable as a partner 

HELD: 

Yes. It is apparent from the factual milieu that the three decided to engage in a fishing business. Moreover, their
Compromise Agreement had revealed their intention to pay the loan with the proceeds of the sale and to divide equally
among them the excess or loss. The boats and equipment used for their business entails their common fund. The
contribution to such fund need not be cash or fixed assets; it could be an intangible like credit or industry. That the parties
agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that
they had indeed formed a partnership. The principle of corporation by estoppel cannot apply in the case as Lim Tong Lim also
benefited from the use of the nets in the boat, which was an asset of the partnership. Under the law on estoppel, those
acting in behalf of a corporation and those benefited by it, knowing it to be without valid existence are held liable as general
partners. Hence, the question as to whether such was legally formed for unknown reasons is immaterial to the case.
Albert v. University Publishing
GR No. L-19118, January 30, 1965
Facts:
The University Publishing Co. Inc. through its President Jose Aruego entered into a contract with Mariano Albert.
The corporation failed to pay the second installment thereby making the whole amount due and demandable.
Albert then sued the corporation.
The lower court rendered judgment in favor of Albert and a writ of execution was issued against the corporation.
Albert however, petitioned for a writ of execution against Aruego, as the real defendant, stating that there is no
such entity as University Publishing Co. Inc. Albert annexed to his petition a certification from the SEC saying that
their records contain no such registered corporation.
The corporation countered by saying that Aruego is not a party to this case, and that therefore, Albert’s petition
should be denied. The corporation, actually did not want Aruego to be declared a party to the present case is
because there would be no need to institute a separate action against Aruego; and if this is done, Aruego can set
up the defense of prescription under the Statute of Limitations. 
Issue: WON the non-registration of University Publishing Co., Inc. in the SEC is an existing corporation with an
independent juridical personality.
 
Ruling: 
No. On account of the non-registration it cannot be considered a corporation, not even a corporation de facto. It
has therefore no personality separate from Jose M. Aruego; it cannot be sued independently.
In the case at bar, Aruego represented a non-existent entity and induced not only Albert but the court to believe in
such representation. Aruego, acting as representative of such non-existent principal, was the real party to the
contract sued upon, and thus assumed such privileges and obligations and became personally liable for the
contract entered into or for other acts performed as such agent.
The Supreme Court likewise held that the doctrine of corporation by estoppel cannot be set up against Albert since
it was Aruego who had induced him to act upon his willful representation that University had been duly organized
and was existing under the law.
Loyola Grand Villas v. CA
GR no. 11788, August 7, 1997
FACTS:
Loyola Grand Villas Homeowners Association (LGVHA) is the sole homeowners' association in Loyola Grand
Villas, duly registered subdivision revoked the certificates of registration issued to Loyola Grand Villas homeowners
(North) Association Incorporated and Loyola Grand Villas Homeowners (South) Association Incorporated for failure
to file its corporate by-laws.
These developments prompted the officers of the LGVHAI to lodge a complaint with the HIGC. They questioned
the revocation of LGVHAI's certificate of registration without due notice and hearing and concomitantly prayed for
the cancellation of the certificates of registration of the North and South Associations by reason of the earlier
issuance of a certificate of registration in favor of LGVHAI.
ISSUE:
Whether or not the doctrine of estoppels is applicable in this case.
Ruling:
No. The failure to file its by-laws presupposes that the corporation is already incorporated and has the effect only
of suspension or revocation pursuant to PD 902–A after proper notice and hearing.
It necessarily follows that failure to file the by-laws within that period does not imply the "demise" of the corporation.
By-laws may be necessary for the "government" of the corporation but these are subordinate to the articles of
incorporation as well as to the Corporation Code and related statutes. In the absence of charter or statutory
provisions to the contrary, by-laws are not necessary either to the existence of a corporation or to the valid
exercise of the powers conferred upon it, certainly in all cases where the charter sufficiently provides for the
government of the body; and even where the governing statute in express terms confers upon the corporation the
power to adopt by-laws, the failure to exercise the power will be ascribed to mere nonaction which will not render
void any acts of the corporation which would otherwise be valid.
The mere fact, however, of the existence of power in the corporation to adopt by-laws does not ordinarily and of
necessity make the exercise of such power essential to its corporate life, or to the validity of any of its acts.
Bustos v. Millan Shoes
G.R. No. 185024, April 24, 2017
FACTS:
Spouses Fernando and Amelia Cruz owned a 464-square-meter lot. The City Government of Marikina levied the property for
non-payment of real estate taxes. Petitioner then applied for the cancellation of TCT of the property. Marikina City RTC,
rendered a final and executory Decision ordering the cancellation of the previous title and the issuance of a new one under
the name of petitioner.
Petitioner moved for the exclusion of the subject property from the Stay Order. He claimed that the lot belonged to Spouses
Cruz who were mere stockholders and officers of MSL He further argued that since he had won the bidding of the property
before the annotation of the title, the auctioned property could no longer be part of the Stay Order. The RTC denied the
entreaty of petitioner.
Petitioner moved for reconsideration, but to no avail. He then filed an action for certiorari before the CA. petitioner
maintains three points: (1) the Spouses Cruz are not liable for the debts of MSI; (2) the Stay Order undermines the taxing
power of Marikina City; and (3) the time bar rule does not apply to him, because he is not a creditor of MSI. Respondents
assert that as stockholders and officers of a close corporation, they are personally liable for its debts and obligations.
Furthermore, they argue that since the Rehabilitation Plan of MSI has been approved, petitioner can no longer assail the
same.
ISSUE:
Whether or not the CA correctly considered the properties of Spouses Cruz answerable for the obligations of MSI.
Ruling:
Yes. In finding the subject property answerable for the obligations of MSI, the CA characterized respondent spouses as
stockholders of a close corporation who, as such, are liable for its debts. To be considered a close corporation, an entity must
abide by the requirements laid out in Section 96 of the Corporation Code.
However, Section 97 of the Corporation Code only specifies that "the stockholders of the corporation shall be subject to all
liabilities of directors." Nowhere in that provision do we find any inference that stockholders of a close corporation are
automatically liable for corporate debts and obligations.
Cagayan Valley Drug Corp v. CIR
GR No. 151413, February 13, 2008
FACTS:
Petitioner, a corporation duly organized and existing under Philippine laws, is a duly licensed retailer of medicine
and other pharmaceutical products. It operates two drugstores, under the name and style of “Mercury Drug.”
Petitioner alleged that in 1995, it granted 20% sales discounts to qualified senior citizens on purchases of medicine
pursuant to RA 74323 and its implementing rules and regulations. In compliance with Revenue Regulation No. (RR)
2-94, petitioner treated the 20% sales discounts granted to qualified senior citizens in 1995 as deductions from the
gross sales in order to arrive at the net sales, instead of treating them as tax credit as provided by Section 4 of RA
7432.
However, petitioner filed with the BIR a claim for tax refund/tax credit of the full amount of the 20% sales discount
it granted to senior citizens for the year 1995.
The BIR’s inaction on petitioner’s claim for refund/tax credit compelled petitioner to file a petition for review
before the CTA in order to forestall the two-year prescriptive period provided under Sec. 2304 of the 1977 Tax
Code, as amended. Thereafter, petitioner amended its petition for review.
ISSUE:
Whether or not petitioner’s president can sign the subject verification and certification sans the approval of its
Board of Directors.
RULING:
It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that all
corporate powers are exercised, all business conducted, and all properties controlled by the board of directors. A
corporation has a separate and distinct personality from its directors and officers and can only exercise its
corporate powers through the board of directors. Thus, it is clear that an individual corporate officer cannot solely
exercise any corporate power pertaining to the corporation without authority from the board of directors.
In a slew of cases, however, the Court recognized the authority of some corporate officers to sign the verification
and certification against forum shopping.
Concept Builders v. NLRC
GR No. 108734, May 29, 1996
FACTS:
Concept Builders, Inc., (CBI) a domestic corporation, is engaged in the construction business while. On November
1981, Marabe, et. al., were served individual written notices of termination of employment by CBI, effective on 30
November 1981. It was stated in the individual notices that their contracts of employment had expired and the
project in which they were hired had been completed.
The NLRC found it to be, the fact, however, that at the time of the termination of Marabe, et.al.'s employment,
the project in which they were hired had not yet been finished and completed. CBI had to engage the services of
sub-contractors whose workers performed the functions of Marabe, et. al.
Aggrieved, Marabe, et. al. filed a complaint for illegal dismissal. The Labor Arbiter rendered judgment ordering CBI
to reinstate Marabe et. al. and to pay them back wages. The NLRC dismissed the motion for reconsideration. Labor
Arbiter issued a writ of execution directing the sheriff to execute the Decision. The writ was partially satisfied
through garnishment of sums from CBI's debtor.
An Alias Writ of Execution was issued by the Labor Arbiter directing the sheriff to collect from CBI the sum of P117,
414.76, representing the balance of the judgment award, and to reinstate Marabe, et. al. to their former positions.
Upon motion of Marabe, et. al., the Labor Arbiter issued a second alias writ of execution.
Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied
upon by the sheriff were owned by HPPI, of which he is the Vice-President.
Marabe, et. al. filed a “Motion for Issuance of a Break-Open Order," alleging that HPPI and CBI were owned by the
same incorporator/stockholders. Thereafter, it directed the sheriff to proceed with the auction sale of the
properties already levied upon. It dismissed the thirdparty claim for lack of merit. CBI moved for reconsideration
but the motion was denied by the NLRC in a Resolution.
ISSUE:
Whether the NLRC was correct in issuing the break-open order to levy the HPPI properties.
RULING:
Yes. It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its
stock holders and from other corporations to which it may be connected. But, this separate and distinct
personality of a corporation is merely a fiction created by law for convenience and to promote justice. So, when
the notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or
defend crime, or is used as a device to defeat the labor laws, this separate personality of the corporation may be
disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an adjunct,
a business conduit or an alter ego of another corporation. The conditions under which the juridical entity may be
disregarded vary according to the peculiar facts and circumstances of each case.
First International Bank v. CA
GR No. 115849, January 24, 1996
FACTS:
In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six parcels of land
with a total area of 101 hectares. The property used to be owned by BYME Investment and Development
Corporation which had them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio
Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated negotiations for that purpose.
In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's legal counsel, Jose
Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management Department of the
defendant bank. The meeting was held pursuant to plaintiffs' plan to buy the property. After the meeting, plaintiff
Janolo, following the advice of defendant Rivera, made a formal purchase offer to the bank for (P3, 500,000.00)
PESOS, in cash.
Rivera made on behalf of the bank a formal reply by letter stating among others that the bank's counter-offer is at
P5.5 million for more than 101 hectares on lot basis. Plaintiffs thru a letter stating that they would like to amend
my previous offer and I now propose to buy the said lot at P4.250 million in CASH.
There was no reply to Janolo's foregoing letter. What took place was a meeting between the plaintiffs and Luis Co,
the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the meeting.
Two days later, Janolo sent to the bank, through Rivera, stating that they are accepting his offer to purchase the
property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a total price of P5,500,000.00.
The conservator of the bank was replaced by an Acting Conservator, Leonida T. Encarnacion. Rivera wrote plaintiff
saying that your proposal to buy the properties the bank foreclosed from Byme investment Corp. located at Sta.
Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the newly
designated Acting Conservator of the bank. What thereafter transpired was a series of demands by the plaintiffs
for compliance by the bank with what plaintiff considered as a perfected contract of sale.
ISSUE:
Whether or not the bank conservator have the unilateral power to repudiate the authority of the bank officers
and/or to revoke the said contract
RULING:
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the Philippines
during the time that the negotiation and perfection of the contract of sale took place. The issue of the
Conservator's alleged authority to revoke or repudiate the perfected contract of sale was raised for the first time
in this Petition — as this was not litigated in the trial court or Court of Appeals. As already stated earlier, issues not
raised and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be raised for the first time on
appeal as it would be offensive to the basic rules of fair play, justice and due process." In the second place, there is
absolutely no evidence that the Conservator, at the time the contract was perfected, actually repudiated or
overruled said contract of sale. The Bank's acting conservator at the time, Rodolfo Romey, never objected to the
sale of the property to Demetria and Janolo. What petitioners are really referring to is the letter of Conservator
Encarnacion, who took over from Romey after the sale was perfected on September 30, 1987 which unilaterally
repudiated — not the contract — but the authority of Rivera to make a binding offer — and which unarguably
came months after the perfection of the contract.
Hence, the conservator merely takes the place of a bank's board of directors. What the said board cannot do —
such as repudiating a contract validly entered into under the doctrine of implied authority — the conservator
cannot do either.
Delpher Trades v. IAC
G.R. No. L-69259, January 26, 1988
FACTS:
Delfin Pacheco and sister Pelagia were the owners of a parcel of land in Polo (now Valenzuela). They leased to
Construction Components International Inc. the property and providing for a right of first refusal should it decide
to buy the said property. Construction Components International, Inc. assigned its rights and obligations under the
contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed conformity and consent of Delfin and
Pelagia. In 1976, a deed of exchange was executed between lessor’s Delfin and Pelagia Pacheco and defendant
Delpher Trades Corporation whereby the Pacheco’s conveyed to the latter the leased property together with
another parcel of land also located in Malinta Estate, Valenzuela for 2,500 shares of stock of defendant
corporation.
On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease
agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance of the lot.
ISSUE:
Whether or not the Deed of Exchange of the properties executed by the Pacheco’s and the Delpher Trades
Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the Hydro Phil’s right of
first refusal over the leased property included in the “deed of exchange”
RULING:
No. By their ownership of the 2,500 no par shares of stock, the Pacheco’s have control of the corporation. Their
equity capital is 55% as against 45% of the other stockholders, who also belong to the same family group. In effect,
the Delpher Trades Corporation is a business conduit of the Pacheco’s. What they really did was to invest their
properties and change the nature of their ownership from unincorporated to incorporated form by organizing
Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes. The
“Deed of Exchange” of property between the Pacheco’s and Delpher Trades Corporation cannot be considered a
contract of sale. There was no transfer of actual ownership interests by the Pacheco’s to a third party. The
Pacheco family merely changed their ownership from one form to another. The ownership remained in the same
hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract.
Cordon v. Balicanta
A.C. No. 2797, October 4, 2002
FACTS:
When her husband Felixberto C. Jaldon died, Rosaura Cordon and her daughter Rosemarie inherited the
properties. Respondent enticed complainant and her daughter to organize a corporation that would develop the
said real properties into a high-scale commercial complex with a beautiful penthouse for complainant. Relying on
these apparently sincere proposals, complainant and her daughter assigned 19 parcels of land to Rosaura
Enterprises, Incorporated, a newly-formed and duly registered corporation in which they assumed majority
ownership. The subject parcels of land were then registered in the name of the corporation. Thereafter,
respondent single-handedly ran the affairs of the corporation in his capacity as Chairman of the Board, President,
General Manager and Treasurer.
Complainant and her daughter made several demands on respondent for the delivery of the real properties they
allegedly assigned to the corporation, for an accounting of the proceeds of the LBP loan and as well as the
properties sold, and for the rentals earned by BCC. But the demands remained unheeded. Hence, complainant and
her daughter, terminated the services of respondent as their lawyer and repeated their demands for accounting
and turn-over of the corporate funds, and the return of the 19 titles that respondent transferred to the
corporation.
For his defense, respondent denied employing deceit and machination in convincing complainant and her
daughter to assign their real properties to the corporation; that they freely and voluntary executed the deeds of
assignment and the voting trust agreement that they signed.
ISSUE:
Whether or not the accused can raise the separate personality of the corporation as a defense.
RULING:
No. The fraudulent acts he carried out against his client followed a well thought of plan to misappropriate the
corporate properties and funds entrusted to him. At the very outset, he embarked on his devious scheme by
making himself the President, Chairman of the Board, Director and Treasurer of the corporation; although he
knew he was prohibited from assuming the position of President and Treasurer at the same time. As Treasurer, he
accepted in behalf of the corporation the 19 titles that complainant and her daughter co-owned. The other
treasurer appointed, Farnacio Bucoy, did not appear to be a stockholder or director in the corporate records. The
minutes of the meetings supposedly electing him and Bucoy as officers of the corporation actually bore the
signatures of respondent and the secretary only, contrary to his claim that they were signed by the directors and
stockholders.
Tan Boon Bee v. Jarencio
GR No. L- 41337, June 30, 1988
FACTS:
Petitioner herein, doing business under the name and style of Anchor Supply Co., sold on credit to herein private
respondent Graphic Publishing, Inc. (GRAPHIC ) paper products as evidenced by a promissory note. When Graphic
failed to fulfill its obligation, petitioner filed a collection suit. After trial, the court ruled in favor of petitioner, thus,
issuing a writ of execution over a printing machine which was levied by the sheriff. However, respondent
Philippine American Drug Company (PADCO) had informed the sheriff that the printing machine is its property and
not that of GRAPHIC but the sheriff proceeded with the auction sale. Thus, respondent judge issued an order
declaring the sale to be null and void and ordered the return of the machine to PADCO.
ISSUE:
Whether or not respondent judge committed grave abuse of discretion in not piercing the veil of corporate fiction
RULING:
It is true that a corporation, upon coming into being, is invested by law with a personality separate and distinct
from that of the persons composing it as well as from any other legal entity to which it may be related. However,
such separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases
where it is used as a cloak or cover for fraud or illegality, or to work an injustice, or where necessary to achieve
equity or when necessary for the protection of creditors. Corporations are composed of natural persons and the
legal fiction of a separate corporate personality is not a shield for the commission of injustice and inequity.
Likewise, this is true when the corporation is merely an adjunct, business conduit or alter ego of another
corporation. In such case, the fiction of separate and distinct corporation entities should be disregarded.
In the instant case, petitioner's evidence established that PADCO was never engaged in the printing business; that
the board of directors and the officers of GRAPHIC and PADCO were the same; and that PADCO holds 50% share of
stock of GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the printing machine in
question had been in the premises of GRAPHIC since May, 1965, long before PADCO even acquired its alleged title
on July 11, 1966 from Capitol Publishing. That the said machine was allegedly leased by PADCO to GRAPHIC on
January 24, 1966, even before PADCO purchased it from Capital Publishing on July 11, 1966, only serves to show
that PADCO's claim of ownership over the printing machine is not only farce and sham but also unbelievable.
Considering the aforestated principles and the circumstances established in this case, respondent judge should
have pierced PADCO's veil of corporate Identity.
Gokongwei v. SEC
GR No. L- 45911, April 11, 1979
FACTS:
The Universal Robina Corporation, a corporation engaged in business competitive to that of respondent
corporation, began acquiring shares therein until September 1976 when its total holding amounted to 622,987
shares: that in October 1972, the Consolidated Foods Corporation (CFC) likewise began acquiring shares in
respondent corporation until its total holdings amounted to P543,959.00 in September 1976; that on January 12,
1976, petitioner, who is president and controlling shareholder of Robina and CFC (both closed corporations)
purchased 5,000 shares of stock of respondent corporation, and thereafter, in behalf of himself, CFC and Robina,
"conducted malevolent and malicious publicity campaign against SMC" to generate support from the stockholder
"in his effort to secure for himself and in representation of Robina and CFC interests, a seat in the Board of
Directors of SMC", that in the stockholders' meeting, petitioner was rejected by the stockholders in his bid to
secure a seat in the Board of Directors on the basic issue that petitioner was engaged in a competitive business
and his securing a seat would have subjected respondent corporation to grave disadvantages; that "petitioner
nevertheless vowed to secure a seat in the Board of Directors at the next annual meeting; that thereafter the
Board of Directors amended the by-laws as afore-stated.
Petitioner, as stockholder of San Miguel Corporation, filed with the SEC a petition for "declaration of nullity of
amended by-laws, cancellation of certificate of filing of amended by- laws, injunction and damages with prayer for
a preliminary injunction" against the majority of the members of the Board of Directors and San Miguel
Corporation as an unwilling petitioner.
ISSUE:
Whether or not the amended by-laws of SMC of disqualifying a competitor from nomination or election to the
Board of Directors of SMC are valid and reasonable.
RULING:
The exclusion of a competitor from the Board is legitimate corporate purpose, considering that being a
competitor, petitioner cannot devote an unselfish and undivided Loyalty to the corporation; that it is essentially a
preventive measure to assure stockholders of San Miguel Corporation of reasonable protective from the
unrestrained self-interest of those charged with the promotion of the corporate enterprise; that access to
confidential information by a competitor may result either in the promotion of the interest of the competitor at
the expense of the San Miguel Corporation, or the promotion of both the interests of petitioner and respondent
San Miguel Corporation, which may, therefore, result in a combination or agreement in violation of Article 186 of
the Revised Penal Code by destroying free competition to the detriment of the consuming public.
Thus, it has been held that an officer of a corporation cannot engage in a business in direct competition with that
of the corporation where he is a director by utilizing information he has received as such officer, under "the
established law that a director or officer of a corporation may not enter into a competing enterprise which cripples
or injures the business of the corporation of which he is an officer or director. It is also well established that
corporate officers "are not permitted to use their position of trust and confidence to further their private
interests."
Tam v. Hon. Makasiar,
G.R. No. 122452, January 29, 2001
FACTS:
Petitioner, in his capacity as director of Concord-World Properties, Inc., a domestic corporation, filed an
affidavitcomplaint charging Vic Ang Siong with violation of B.P. Blg. 22. The complaint alleged that a check for the
amount of P83, 550,000.00, issued by Vic Ang Siong in favor of Concord, was dishonored when presented for
encashment.
Vic Ang Siong sought the dismissal of the case on two grounds: First, that petitioner had no authority to file the
case on behalf of Concord, the payee of the dishonored check, since the firm’s board of directors had not
empowered him to act on its behalf. Second, he and Concord had already agreed to amicably settle the issue after
he made a partial payment of P19, 000, 000.00 on the dishonored check.
ISSUE:
Whether or not petitioner had the capacity to sue in behalf of Concord.
RULING:
No. The Court held that it is not disputed in the instant case that Concord, a domestic corporation, was the payee
of the bum check, not petitioner. Therefore, it is Concord, as payee of the bounced check, which is the injured
party. Since petitioner was neither a payee nor a holder of the bad check, he had neither the personality to sue
nor a cause of action against Vic Ang Siong.
Under Section 36 of the Corporation Code, read in relation to Section 23, it is clear that where a corporation is an
injured party, its power to sue is lodged with its board of directors or trustees. Note that petitioner failed to show
any proof that he was authorized or deputized or granted specific powers by Concord’s board of director to sue
Victor Ang Siong for and on behalf of the firm.
Clearly, petitioner as a minority stockholder and member of the board of directors had no such power or authority
to sue on Concord’s behalf. Nor can the Court upheld his act as a derivative suit. For a derivative suit to prosper, it
is required that the minority stockholder suing for and on behalf of the corporation must allege in his complaint
that he is suing on a derivative cause of action on behalf of the corporation and all other stockholders similarly
situated who may wish to join him in the suit. There is no showing that petitioner has complied with the foregoing
requisites. It is obvious that petitioner has not shown any clear legal right which would warrant the overturning of
the decision of public respondents to dismiss the complaint against Vic Ang Siong.
Pilipinas Loan Company, Inc. v. SEC
GR No. 104720, April 4, 2001
FACTS:
Filipinas Pawnshop, Inc. is a duly organized corporation registered with the SEC. The AI of private respondent
states that its primary purpose is to extend loans at legal interest on the security of either personal properties or
on the security of real properties, and to finance installment sales of motor vehicles, home appliances and other
chattels.
Petitioner is a lending corporation duly registered with the SEC. Private respondent filed a complaint against
petitioner. The complaint alleged that petitioner, contrary to the restriction set by the Commission, has been
operating and doing business as a pawnbroker, pawnshop or "sanglaan" in the same neighborhood where private
respondent has had its own pawnshop for 30 years in violation of its primary purpose and without the imprimatur
of the Central Bank to engage in the pawnshop business thereby causing unjust and unfair competition with
private respondent.
ISSUE:
Whether or not private respondent can engage in pawnbroking.
RULING:
No. The Court held that a corporation, under the Corporation Code, has only such powers as are expressly granted
to it by law and by its articles of incorporation, those which may be incidental to such conferred powers, those
reasonably necessary to accomplish its purposes and those which may be incident to its existence. In the case at
bar, the limit of the powers of petitioner as a corporation is very clear, it is categorically prohibited from "engaging
in pawnbroking as defined under PD 114".
Moreover, a careful examination and analysis of the records of this case indicates that petitioner has indeed
engaged in the business of pawnbroking. It is not argued that petitioner does lend money on the security of
personal property. Thus, the use of such word by petitioner was more calculated to attract customers who will
acquire loans on the security of personal properties alone. Moreover, the supposed "promissory note" evidencing
a customer’s transaction with petitioner, is more of a pawnticket than what it represents.
Luneta Motors v. Santos
GR No. L-17716 July 31, 1962
FACTS:
To secure payment of a loan evidenced by a promissory note executed by Nicolas Concepcion in favor of
petitioner, Concepcion executed a chattel mortgage covering the above mentioned certificate in favor of
petitioner. The certificate was later sold to Francisco Benitez, Jr., who resold it to Rodi Taxicab Company.
Petitioner filed an action to foreclose the chattel mortgage executed in its favor by Concepcion in view of the
failure of the latter and his guarantor, Placido Esteban, to pay their overdue account.
The CFI of Manila adjudged Concepcion indebted to petitioner and ordered that the certificate of public
convenience subject matter of the chattel mortgage be sold at public auction in accordance with law. Accordingly,
said certificate was sold at public auction to petitioner, and six days thereafter the Sheriff of the City of Manila
issued in its favor the corresponding certificate of sale. Thereupon petitioner filed the application for the approval
of the sale. Respondent A.D. Santos, Inc. opposed petitioner's application, filed a motion to dismiss based on the
ground that under the petitioner's Articles of Incorporation, it was not authorized to engage in the taxicab
business or operate as a common carrier.
ISSUE:
Whether or not under the Corporation Law and petitioner's AOI, it may acquire by purchase a certificate of public
convenience and after its acquisition.
RULING:
No. It is not denied that under Section 13 (5) of the Corporation Law, a corporation created thereunder may
purchase, hold, etc., and otherwise deal in such real and personal property is the purpose for which the
corporation was formed may permit, and the transaction of its lawful business may reasonably and necessarily
require.
The Court found nothing in the legal provision and the provisions of petitioner's AI relied upon that could justify
petitioner's contention in this case. To the contrary, they are precisely the best evidence that it has no authority at
all to engage in the business of land transportation and operate a taxicab service. That it may operate and
otherwise deal in automobiles and automobile accessories; that it may engage in the transportation of persons by
water does not mean that it may engage in the business of land transportation — an entirely different line of
business. If it could not thus engage in the line of business, it follows that it may not acquire an certificate of public
convenience to operate a taxicab service, such as the one in question, because such acquisition would be without
purpose and would have no necessary connection with petitioner's legitimate business.
Teresa Electric v. PSC
GR No. L- 21804, September 25, 1967
FACTS:
The Teresa Electric Light and Power Co., Inc. is a domestic corporation operating an electric plant in Teresa, Rizal,
under a subsisting certificate of public convenience and necessity issued on June 2, 1960, while the respondent
Filipinas is likewise a domestic corporation engaged in the manufacture and sale of cement.
Filipinas filed an application with the Public Service Commission for a certificate of public convenience to install,
maintain and operate an electric plant in sitio Kaysapon of barrio Pamanaan, municipality of Teresa, Rizal, for the
purpose of supplying electric power and light to its cement factory and its employees living within its compound.
ISSUE:
Whether under its articles of incorporation Filipinas is authorized to operate and maintain an electric plant.
RULING:
Yes. It appears that the Articles of Incorporation of Filipinas (paragraph 7) provide for authority to secure from any
governmental, state, municipality, or provincial, city or other authority, and to utilize and dispose of in any lawful
manner, rights, powers, privileges, franchises and concessions — obviously necessary or at least related to the
operation of its cement factory. Moreover, said Articles of Incorporation also provide that the corporation may
generally perform any and all acts connected with the business of manufacturing portland cement or arising
therefrom or incidental thereto.
It can not be denied that the operation of an electric light, heat and power plant is necessarily connected with the
business of manufacturing cement. If in the modern world where we live today electricity is virtually a necessity
for our daily needs, it is more so in the case of industries like the manufacture of cement.
ANTHONY POWERS et. al vs. DONALD I. MARSHALL et. Al
G.R. No. L-48064. May 09, 1988
FACTS:
All associate members of the International School, Inc., filed an action for injunction in the CFI of Rizal, against the
ten (10) members of the Board of Trustees of the school. The suit was precipitated by a letter which Donald I.
Marshall, president of the Board of Trustees of the International School in Makati, Metro-Manila, addressed to the
parents of the students, giving notice that the Board of Trustees had decided to embark on a program to construct
new buildings and remodel existing ones to accommodate the increasing enrollment in the school, and that it was
necessary for the school to raise P35, 000,000.00 for this purpose. The Board intended to raise the needed funds
primarily through subscriptions to capital notes and prepayment certificates, and any deficiency from these
sources would be covered by collecting a so-called "development fee" of P2,625 from each enrollee starting with
the school year 1975-1976 and continuing up to the school year 1986-1987.
The school superintendent, Dr. Max Snyder, acting under instructions from the Board of Trustees, wrote a letter to
the parents of returning students, enclosing an Application for Admission which specifically advised that the
payment of the development fee was a pre-requisite for re-enrollment.
The plaintiffs protested against the imposition of the development fee. They requested the Board of Trustees to
suspend the implementation of the requirement of payment. The plaintiffs filed a complaint for injunction against
the school.
ISSUE:
Whether or not the Board of Trustees has the power to implement the development plan.
RULING:
Yes. The Court held that the by-laws of the school authorized the BOT to exercise such powers which may be
lawfully exercised by the corporation, subject to applicable laws, the Articles of Incorporation and the by-lays.
The law authorizes the BOT to determine the amount of fees which may reasonably be imposed to maintain or
conform to the school standard of education upon consultation and approval of the Secretary of Education. Aside
from the authority emanating from both the law and the by-laws, the development plan and the consequential
increase of school fees had been approved by the school’s Board and by the Secretary of Education. Thus, the
questioned act is a valid exercise of Board power.
R Transport Corp. v. CA
GR No. 111187 February 1, 1995
FACTS:
A complaint for damages arising from breach of contract of carriage was filed against petitioner with the RTC. The
trial court upon ex parte motion of private respondent, declared petitioner in default and appointed a
commissioner to receive evidence ex parte. Petitioner filed a Motion to Dismiss and to Stop Ex Parte Reception of
Evidence. It asserted that it was not properly served with summons and consequently, the trial court did not
acquire jurisdiction over its person. The trial court denied petitioner's motion and allowed private respondent to
adduce its evidence ex parte. Petitioner filed a motion for reconsideration giving as an additional ground therefor
that summons was served at Sucat, Parañaque, where its bus terminal was located, and not at its principal office
at No. 4474 Singian Street, Makati, Metro Manila, where its president, general manager, secretary, agent and
directors hold office. Petitioner asked, inter alia, that the trial court direct "the Clerk of Court to issue another
summons together with a copy of the complaint and serve such summons to the President, General Manager,
Cashier, or any of its Directors, with offices at Rizal Towers, 4474 Singian St., Makati, Metro Manila, who are
authorized by law to receive these summons on behalf of the defendant corporation". The trial court denied
petitioner's motion for reconsideration for lack of merit.
ISSUE:
Whether or not there was valid service of summons for it to be liable for the case filed.
RULING:
As a general rule, service of summons must be made on the persons named in Section 13, Rule 14 of the Revised
Rules of Court which provides: Service upon private domestic corporation or partnership. If the defendant is a
corporation organized under the laws of the Philippines or a partnership duly registered, service may be made on
the president, manager, secretary, cashier, agent or any of its directors. Thus service on persons other than those
mentioned in said Rule has been held as improper.
The rationale of all rules for service of process on corporations is that service must be made on a representative so
integrated with the corporation sued as to make it a priori supposable that he will realize his responsibilities and
know what he should do with any legal papers served on him.
Thus, the Court held that service of summons on petitioner's Operations Manager was valid. He is an officer who
may be relied upon to appreciate the importance of the papers served on him. The purpose of Section 13 of Rule
14 was served. The fact that service was made at petitioner's bus terminal at the address stated in the summons
and not at its office in Makati does not render the service of summons invalid.
Director of Lands v. CA
G.R. No. L-56613. March 14, 1988
FACTS:
The CFI of Cavite granted Iglesia ni Cristo’s application for registration of title. It found that respondent and its
predecessors-in-interest had been in continuous, open and adverse possession of the subject property in the
concept of owner for more than forty years and that the land was not within any military and naval reservation,
nor covered by any kind of public land application or patent, as it is within the proposed alienable or disposable
block of the proposed LC Project No. 5-A of Amadeo, Cavite.
The Director of Lands appealed the decision of the land registration court to the CA believing that respondent did
not sufficiently Identify the land in question by reason of its failure to submit the original tracing cloth plan thereof
and that it was disqualified from holding, except by lease, alienable lands of the public domain under Section 11,
Article XIV of the 1973 Constitution.
ISSUE:
Whether or not Iglesia ni Cristo, a corporation sole, may have the said land registered in its name under the 1973
Constitution.
RULING:
Yes. The land under consideration was acquired by private respondent from Aquelina de la Cruz in 1947, who, in
turn, acquired by same by purchase from the Ramos brothers and sisters in 1936.
If in 1966, the land in question was converted ipso jure into private land, it remained so in 1974 when the
registration proceedings were commenced. This being the case, the prohibition under the 1973 Constitution would
have no application. Otherwise construed, if in 1966, private respondent could have its title to the land confirmed,
then it had acquired a vested right thereto, which the 1973 Constitution can neither impair nor defeat.
Maria Clara Pirovana Et Al. vs. The De La Rama Steamship Co.
G.R. No. L-5377 December 29, 1954
FACTS:
Defendant is a corporation duly organized in accordance with law and with an authorized capital of P500, 000,
divided into 5,000 shares, with a par value of P100 each share. When Enrico Pirovano became the president of the
corporation and at the time of his execution during the Japanese ccupation,said corporation grew and progressed
until it became a multimillion corporation. Thus, the Defendant Corporation’s Board of Directors adopted a
resolution entitled “SPECIAL PAYMENT TO MINORS HEIRS OF THE LATE ENRICO PIROVANO” granting to the
Pirovano children the proceeds of the insurance policies taken on his life by the defendant company. However, the
Corporation assailed the same contending that it is ultra vires.
Plaintiffs herein are the minor children of the late Enrico Pirovano represented by their mother and judicial
guardian Estefania R. Pirovano. They seek to enforce the resolutions adopted by the Board of Directors and
stockholders of the defendant company giving to said minor children of the proceeds of the insurance policies
taken on the life of their deceased father Enrico Pirovano with the company as beneficiary.
ISSUE:
Whether or not the corporation can give by way of donation the proceeds of said insurance policies to the minor
children of the late Enrico Pirovano under the law or its articles of corporation, or is that donation an ultra vires
act.
RULING:
Since it is not contended that the donation under consideration is illegal, or contrary to any of the express
provision of the articles of incorporation, nor prejudicial to the creditors of the defendant corporation, we cannot
but logically conclude, on the strength of the authorities we have quoted above, that said donation, even if
ultravires in the supposition we have adverted to, is not void, and if voidable its infirmity has been cured by
ratification and subsequent acts of the defendant corporation. The defendant corporation, therefore, is now
prevented or estopped from contesting the validity of the donation.
Indeed, how can the stockholders now pretend to revoke the donation which has been partly consummated?
How can the corporation now set at naught the transfer made to Mrs. Pirovano of the property in New York,
U.S.A., the price of which was paid by her but of the proceeds of the insurance policies given as donation. To allow
the corporation to undo what it has done would only be most unfair but would contravene the well-settled
doctrine that the defense of ultra vires cannot be set up or availed of in completed transactions.
Madrigal v. Zamora
GR No. L-48237, June 30, 1987
FACTS:
By an alleged resolution of its stockholders, the petitioner reduced its capital stock from 765,000 shares to
267,366 shares.This was effected through the distribution of the marketable securities owned by the petitioner to
its stockholders in exchange for their shares in an equivalent amount in the corporation.
By yet another alleged stockholders' action, the petitioner reduced its authorized capitalization from 267,366
shares to 110,085 shares, again, through the same scheme.
After the petitioner's failure to sit down with the respondent union, the latter, on August 28, 1974, commenced
Case No. LR-5415 with the National Labor Relations Commission on a complaint for unfair labor practice. Pending
the resolution, the petitioner, in a letter, informed the Secretary of Labor that Rizal Cement Co., Inc., "from which
it derives income" "as the General Manager or Agent" had "ceased operating temporarily." "In addition, "because
of the desire of the stockholders to phase out the operations of the Madrigal & Co., Inc. due to lack of business
incentives and prospects, and in order to prevent further losses,"it had to reduce its capital stock on two occasions
"As the situation, therefore, now stands, the Madrigal & Co., Inc. is without substantial income to speak of,
necessitating a reorganization, by way of retrenchment, of its employees and operations." The letter, however,
was not verified and neither was it accompanied by the proper supporting papers. For this reason, the Department
of Labor took no action on the petitioner's request.
ISSUE:
Whether or not petitioner can use as a defense the reduction of its capital stock in the labor case.
RULING:
The Court agrees with the NLRC that "the dividends received by the company are corporate earnings arising from
corporate investment." Indeed, as found by the Commission, the petitioner had entered such earnings in its
financial statements as profits, which it would not have done if they were not in fact profits.
Moreover, it is incorrect to say that such profits — in the form of dividends — are beyond the reach of the
petitioner's creditors since the petitioner had received them as compensation for its management services in favor
of the companies it managed as a shareholder thereof. As such shareholder, the dividends paid to it were its own
money, which may then be available for wage increments. It is not a case of a corporation distributing dividends in
favor of its stockholders, in which case, such dividends would be the absolute property of the stockholders and
hence, out of reach by creditors of the corporation. Here, the petitioner was acting as stockholder itself, and in
that case, the right to a share in such dividends, by way of salary increases, may not be denied its employees.
PHILIPPINE TRUST COMPANY v. MARCIANO RIVERA
G.R. No. L-19761. January 29, 1923
FACTS:
In 1918 the Cooperativa Naval Filipina was duly incorporated under the laws of the Philippine Islands, with a
capital of P100,000, divided into one thousand shares of a par value of P100 each. Among the incorporators of this
company was numbered the defendant Mariano Rivera, who subscribed for 450 shares representing a value of
P45,000, the remainder of the stock being taken by other persons. The articles of incorporation were duly
registered in the Bureau of Commerce and Industry on October 30 of the same year.
In the course of time the company became insolvent and went into the hands of the Philippine Trust Company, as
assignee in bankruptcy; and by it this action was instituted to recover one-half of the stock subscription of the
defendant, which admittedly has never been paid.
ISSUE:
Whether or not defendant was still liable for the unpaid balance of his subscription.
RULING:
Yes. It is established doctrine that subscription to the capital of a corporation constitute a find to which creditors
have a right to look for satisfaction of their claims and that the assignee in insolvency can maintain an action upon
any unpaid stock subscription in order to realize assets for the payment of its debts. A corporation has no power
to release an original subscriber to its capital stock from the obligation of paying for his shares, without a valuable
consideration for such release; and as against creditors a reduction of the capital stock can take place only in the
manner an under the conditions prescribed by the statute or the charter or the articles of incorporation.
Moreover, strict compliance with the statutory regulations is necessary.
In the case before us the resolution releasing the shareholders from their obligation to pay 50 per centum of their
respective subscriptions was an attempted withdrawal of so much capital from the fund upon which the
company's creditors were entitled ultimately to rely and, having been effected without compliance with the
statutory requirements, was wholly ineffectual.
Datu Benito v. SEC
GR No L- 56655, July 25, 1983
FACTS:
Respondent Corporation filed a certificate of increase of its capita stock from P200, 000.00 to P1, 000,000.00 for
which P 110, 980 worth of shares were subsequently issued by the corporation from the unissued portion of the
authorized capital stock.
Petitioner filed a petition alleging that the additional issue worth P 110, 980.00 of previously subscribed shares of
the corporation was made in violation of his pre-emptive right to said additional shares and that the increase in
the authorized capital stock on the corporation from P200, 000.00 to P1, 000,000.00 was illegal as there was no
notice given to the stockholders of the meeting wherein the proposed increase was the agenda.
ISSUE:
Whether or not there was a denial of pre-emptive right.
RULING:
No. Pre-emptive rights are recognized only with respect to new issue of shares, and not with respect to additional
issues of originally authorized shares as in this case. This is on the theory that when a corporation at its inception
offers its first shares, it is presumed to have presumed to have offered all of those which it is authorized to issue.
An original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of
the whole number of authorized shares. When the shares left unsubscribed are later re-offered, he cannot
therefore claim a dilution of interest.
Dee v. SEC
G.R. No. L-63922, July 16, 1991
FACTS:
NATELCO entered into a contract with Communication Services, Inc. for the "manufacture, supply, delivery and
installation" of telephone equipment. In accordance with this contract, NATELCO issued 24,000 shares of common
stocks to CSI on the same date as part of the downpayment.
Another 12,000 shares of common stocks were issued to CSI. In both instances, no prior authorization from the
Board of Communications, now the National Telecommunications Commission, was secured pursuant to the
conditions imposed by the decision in BOC Case NO. 74-84.
The stockholders of the Natelco held their annual stockholders' meeting to elect their seven directors to their
Board of Directors, for the year 1979-1980. In this election Pedro Lopez Dee was unseated as Chairman of the
Board and President of the Corporation, but was elected as one of the directors, together with his wife, Amelia
Lopez Dee.
In the election, CSI was able to gain control of NATELCO, when the latter's legal counsel, Atty. Luciano Maggay won
a seat in the Board with the help of CSI. During the tenure of the Maggay Board, it did not reform the contract of
April 12, 1977, and entered into another contract with CSI for the supply and installation of additional equipment
but also issued to CSI 113,800 shares of common stock. These shares were claimed to be issued by the corporation
against the pre-emptive rights of the stockholders.
ISSUE:
Whether or not the Natelco stockholders have a right of pre-emption to the 113, 800 shares.
RULING:
No. The questioned issuance of the 113,800 stocks is not invalid even assuming that it was made without notice to
the stockholders as claimed by the petitioner. The power to issue shares of stocks in a corporation is lodged in the
board of directors and no stockholders meeting is required to consider it because additional issuance of shares of
stocks does not need approval of the stockholders. Consequently, no pre-emptive right of Natelco stockholders
was violated by the issuance of the 113,800 shares to CSI.
PCGG v. SEC
G.R. No. 77816, June 30, 1988
FACTS:
Edward T. Marcelo as president of Marcelo Fiberglass Corporation entered into a Contract to Buy and Sell with the
Philippine Navy represented by Rear Admiral Simeon M. Alejandro, then Flag Officer in Command, for the
construction and delivery by the former of 55 units of fiberglass high-speed patrol boats at P7,200,000 each plus
spare parts amounting to P29,700,000 for a total contract price of P425,700,000. It was stipulated in the contract
that the patrol boats would be delivered within 36 months from the date the Philippine Navy pays to private
respondent the stipulated down payment of 30% of the contract price.
Philippine Navy, with the approval of former President Marcos paid private respondent the amount of
P127,710,000 representing the 30% initial down payment stipulated in the contract through Land Bank of the
Philippines Cashier's Check No. 009369 in violation of the contract which required that payment shall be made by
confirmed, irrevocable, divisible letter of credit established by the Philippine Navy in favor of private respondent.
ISSUE:
Whether or not there was a denial of pre-emptive right.
RULING:
No. The sequestration of the assets of MFC is in accordance with the powers and functions of the PCGG. Suffice it
to say that the matters involved in these cases are orders of the PCGG issued in the exercise of its powers and
functions for they involve the sequestration of the assets of private respondent Marcelo Fiberglass Corporation
and Edward T. Marcelo, its president. The propriety of said sequestration and any incident arising from, incidental
or related to such sequestration is within the exclusive jurisdiction of the Sandiganbayan.
Republic v. Sandiganbayan
G.R. No. 118661, JUNE 30, 1988
FACTS:
This case revolves around the corporations organized and the investments acquired or funded allegedly from the
coconut levy fund. While it came from levies on the sale of copra or equivalent coconut products exacted for the
most part from coconut farmers, the Fund went or was known under various names, such as Coconut Consumers
Development Fund, Coconut Industry Investment Fund and Coconut Industry Stabilization Fund (CISF).
Through the years, a part of the Fund went to various projects, was converted into different assets or invested.
Among the assets allegedly acquired thru the direct or indirect use of the Fund was a block of San Miguel
Corporation (SMC) shares of stock. This case sought by the PCGG to set aside the joint petition for approval of a
compromise agreement and settlement interposed by certain corporations involving sequestered SMC shares of
stocks. The said stocks are in the name of the CIIF Corporations, independent of the transaction involving the
contracting parties in the Compromise Agreement and it appearing further that the said sequestered SMC shares
of stock have not been taken over by the PCGG.
The PCGG and the Government Service Insurance System (GSIS) entered into a Stock Purchase Agreement in which
the PCGG, thereat styled as "owner" "with clear title" over a block of SMC shares consisting of 14,519,996 shares
of stock – the arbitration fee shares and their stock dividends – sold the same to the GSIS for the total
consideration of P1.452 Billion. Cojuangco, Jr. and the COCOFED-Lobregat group, having learned of the conclusion
of the aforesaid Stock Purchase Agreement opposed and moved for the annulment of the sale.
ISSUE:
Whether or not there is a violation of pre-emptive right.
RULING:
No. First, the subject 33.1 million SMC shares sold by the apparent owners thereof, the CIIF Holding Companies, to
Soriano III "for himself and as agent of several persons," which later became the subject of the Compromise
Agreement between the UCPB group and the SMC group are sequestered shares. They appear to be still
sequestered. Petitioner PCGG, no less, admits the sequestered character of the subject shares.
Second, the sequestered character of the original 5.5 Million transferred shares necessarily attaches on the fruits
or dividends accruing thereon. These shares are alleged to be part of the alleged ill-gotten wealth which are
property in custodia legis. It is not yet known whether the shares are part of the alleged ill-gotten wealth of former
President Marcos and his ‘cronies.’ Any Compromise Agreement concerning these sequestered shares has to be
approved by the Sandiganbayan.
PNB v. Andrada Electric
GR No. 142936, April 17, 2002
FACTS:
Plaintiff is engaged in the business of general construction for the repairs and/or construction of different kinds of
machineries and buildings; that PNB acquired the assets of the defendant PASUMIL that were earlier foreclosed by
the DBP; that the defendant PNB organized NASUDECO to take ownership and possession of the assets and
ultimately to nationalize and consolidate its interest in other PNB controlled sugar mills; that prior to, PASUMIL
engaged the services of plaintiff for electrical rewinding and repair, most of which were partially paid by PASUMIL,
leaving several unpaid accounts with the plaintiff; that finally, the plaintiff and the defendant PASUMIL entered
into a contract for the plaintiff and aside from the work contract the defendant PASUMIL required the plaintiff to
perform extra work, and provide electrical equipment and spare parts.
That out of the total obligation of P777,263.80, the defendant PASUMIL had paid only P250,000.00, leaving an
unpaid balance, amounting to P527,263.80, as shown in the Certification of the chief accountant of the PNB; that
out of said unpaid balance of P527,263.80, the defendant PASUMIL made a partial payment to the plaintiff of
P14,000.00, in broken amounts, covering the period from January 5, 1974 up to May 23, 1974, leaving an unpaid
balance of P513,263.80; that the defendant PASUMIL and the defendant PNB, and now the defendant NASUDECO,
failed and refused to pay the plaintiff their just, valid and demandable obligation.
ISSUE:
Whether or not PNB is liable for the unpaid debts of PASUMIL to respondent.
RULING:
Petitioners posit that they should not be held liable for the corporate debts of PASUMIL, because their takeover of
the latter’s foreclosed assets did not make them assignees. On the other hand, respondent asserts that petitioners
and PASUMIL should be treated as one entity and, as such, jointly and severally held liable for PASUMIL’s unpaid
obligation.
As a rule, a corporation that purchases the assets of another will not be liable for the debts of the selling
corporation, provided the former acted in good faith and paid adequate consideration for such assets.
Islamic Directorate v. CA
GR No. 117897, May 14, 1997
FACTS:
IDP-Tamano Group alleges that Islamic leaders of all Muslim major tribal groups in the Philippines headed by Dean Cesar
Adib Majul organized and incorporated the ISLAMIC DIRECTORATE OF THE PHILIPPINES (IDP), the primary purpose of which is
to establish an Islamic Center in Quezon City for the construction of a "Mosque, Madrasah, and other religious
infrastructures" so as to facilitate the effective practice of Islamic faith in the area.
According to the petitioner, after the purchase of the land by the Libyan government in the name of IDP, Martial
Law was declared by the late President Ferdinand Marcos. Most of the members of the 1971 Board of Trustees
like Senators Mamintal Tamano, Salipada Pendatun, Ahmad Alonto, and Congressman Al-Rashid Lucman flew to
the Middle East to escape political persecution.
Thereafter, two Muslim groups sprung, the Carpizo Group, and the Abbas Group,. Both groups claimed to be the
legitimate IDP. Significantly, the SEC, in a suit between these two contending groups, came out with a Decision in
SEC Case declaring the election of both the Carpizo Group and the Abbas Group as IDP board members to be null
and void.
ISSUE:
Whether or not the sale by Carpizo Group-INC was valid.
RULING:
No. The Carpizo Group-INC sale is further deemed null and void ab initio because of the Carpizo Group's failure to
comply with Section 40 of the Corporation Code pertaining to the disposition of all or substantially all assets of the
corporation. The Tandang Sora property, it appears from the records, constitutes the only property of the IDP.
Hence, its sale to a third-party is a sale or disposition of all the corporate property and assets of IDP falling
squarely within the contemplation of the foregoing section. These twin requirements were not met as the Carpizo
Group which voted to sell the Tandang Sora property was a fake Board of Trustees, and those whose names and
signatures were affixed by the Carpizo Group together with the sham Board Resolution authorizing the negotiation
for the sale were, from all indications, not bona fide members of the IDP as they were made to appear to be.
All told, the disputed Deed of Absolute Sale executed by the fake Carpizo Board and private respondent INC was
intrinsically void ab initio.
Lopez Realty v. Fontecha
GR No. 76801, August 11, 1995
FACTS:
Lopez Realty, Inc., is a corporation engaged in real estate business, while petitioner Asuncion Lopez Gonzales is
one of its majority shareholders. Except for Arturo F. Lopez, the rest of the shareholders also sit as members of the
Board of Directors. Arturo Lopez submitted a proposal relative to the distribution of certain assets of Petitioner
Corporation among its three (3) main shareholders.
It appears that petitioner corporation approved two (2) resolutions providing for the gratuity pay of its employees.
At that time, however, petitioner Asuncion Lopez Gonzales was still abroad. Allegedly, while she was still out of the
country, she sent a cablegram to the corporation, objecting to certain matters taken up by the board in her
absence, such as the sale of some of the assets of the corporation. Upon her return, she filed a derivative suit with
the Securities and Exchange Commission (SEC) against majority shareholder Arturo F. Lopez
ISSUE:
Whether or not the private respondents are entitled to receive their gratuity pay under the assailed board
resolutions.
RULING:
Yes. The assailed resolutions cover a subject which concerns the benefit and welfare of the company's employees.
To stress, providing gratuity pay for its employees is one of the express powers of the corporation under the
corporation Code, hence, petitioners cannot invoke the doctrine of ultra vires to avoid any liability arising from the
issuance the subject resolutions.
It will be observed that, except for Arturo Lopez, the stockholders of Petitioner Corporation also sit as members of
the board of directors. Under the circumstances in field, it will be illogical and superfluous to require the
stockholders' approval of the subject resolutions. Thus, even without the stockholders approval of the subject
resolutions, petitioners are still liable to pay private respondents' gratuity pay.
Dela Rama v. Ma-ao Sugar
GR No. L-17504 & L-17506, February 28, 1969
FACTS:
MSCCI, through its President, J. Amado, subscribed for P300k worth of capital stock of the PFPC. Payments of the
subscription were made on 3 installments. At the time the first two payments were made there was no board
resolution authorizing the investment. It was only on November 26, 1951, that J. Amado was so authorized by the
BOD, by the way, making the third payment made in March 1952 authorized. In addition, 355k shares of PFPC,
owned by LIC were transferred to MSCCI. Again, the investment was made without prior board resolution, the
authorizing resolution having been subsequently approved only on June 4, 1952. A derivative suit was filed by 4
minority SHs of MSCCI.
ISSUE:
Whether or not the lower court erred in holding that the investment of corporate funds of the MSCCI in the PFPC
Inc. was not a violation of sec. 17-½ of the Corporation Law.
RULING:
The Court agrees with the finding of the Lower Court that the investment in question does not fall under the
purview of Sec. 17- ½ of the Corporation Law.