THE FRATERNAL ORDER OF UTOPIA

ATENEO DE MANILA UNIVERSITY

SCHOOL OF LAW
SINCE 1964

“For tomorrow shall cast a myriad of mighty storms that only

those with firm determination and Utopian vision do survive.”
What is an insurable interest?

It is that interest which a person has over the subject matter insured, where he has a
relation or connection or concern in it, such that the person will derive pecuniary benefit or
advantage from the preservation of the subject matter insured and will suffer pecuniary loss
or damage from its destruction, termination, or injury by the happening of the event insured
against. (Lalican v. Insular Life, G.R. No. 183526)

Distinguish between insurable interest in life insurance and property insurance.

Life Insurance Property Insurance

Generally, it is immaterial where the policy It is limited to the actual value of the
is procured by the person whose life is interest in the property. (Insurance Code,
insured. (Insurance Code, Sec. 10) Sec. 17)

However, where life insurance is taken out

by a creditor on the life of the debtor, it is
limited to the amount of the debt. (Dela
Fuente v. Fortune Life Insurance, G.R. No.
224863)

It must exist at the time the policy takes It must exist twice, both at the time the
effect and need not exist thereafter. policy takes effect and at the time of loss.
(Insurance Code, Sec. 19) However, it need not exist in the period in
between. (Insurance Code, Sec. 19)

What is the extent of the insurable interest of a mortgagor and a mortgagee?

1. The mortgagor of property, as the owner, has an insurable interest to the extent of
its value, even though the mortgage debt is equal to such value; and
2. The mortgagee, as such, has an insurable interest in the mortgaged property to the
extent of the debt secured, and such interest continues until the mortgage debt is
extinguished. (Geagonia v. CA, G.R. No. 114427)

What is the no fault indemnity clause?

It is a clause where the insurer is required to pay a third party injured or killed in an
accident without the necessity of proving fault or negligence on the part of the insured.
(Insurance Code, Sec. 391)

In what instances is the insurer liable in case the insured commits suicide?

1. When it is committed after the policy has been in force for a period of two (2) years
from the date of its issue or of its last reinstatement, unless the policy provides a
shorter period; and
2. When it is committed in the state of insanity, regardless of the date of suicide.
(Insurance Code, Sec. 183)

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What are the requisites for incontestability of a life insurance policy?

1. It must be payable upon the death of the insured; and

2. It must be in force during the lifetime of the insured for at least two (2) years from
its date of issue or of its last reinstatement. (Insurance Code, Sec. 4)

Must concealment be intentional on the part of the insured to entitle the insurer to
rescind the policy?

No. Whether intentional or unintentional, concealment entitles the injured party to rescind a
contract of insurance. An intentional and fraudulent omission on the part of an insured, or
communicated information of matters proving or tending to prove the falsity of the
warranty, entitles the insurer to rescind the policy. (Insular Life Assurance v. Alvarez, G.R.
No. 207526)

Distinguish between concealment from misrepresentation.

Concealment Misrepresentation

Proof of fraudulent intent is unnecessary for There is a need for proof of fraudulent
the rescission of an insurance contract on intent in cases of misrepresentation.
account of concealment. A concealment,
regardless of actual intent to defraud, is
equivalent to a false representation.
(Insular Assurance v. Alvarez, G.R. No. 207526)

What is the prescriptive period for the insurer-subrogee to claim its rights after
the insured claims from the policy by reason of a tort?

For purposes of computing the prescription for insurer-subrogees, the relevant periods are
reckoned in Vector Shipping v. American Home Assurance and Henson v. UCPB. Vector was
binding on July 3, 2013 while Henson reached finality on Aug. 14, 2019. Hence, the
following guidelines are as follows:

Four (4) Years Ten (10) Years

Actions filed and If filed prior to Vector, If filed during Vector,

currently pending before insurer has four (4) years insurer has ten (10) years
finality of Henson. from the commission of the from the insurer’s payment
tort. of the claim.

Actions that have not yet The insurer has four (4) years provided that the total
been filed before finality period to file the action shall not exceed ten (10) years.
of Henson.

Actions filed upon or It is four (4) years from the N/A

after finality of Henson. commission of the tort.
(Henson v. UCPB General Insurance, G.R. No. 223134)

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What are the elements of a common carrier?

1. It must be engaged in the business of carrying goods for others as a public

employment and must hold itself out as ready to engage in the transportation of
goods generally as a business and not as a casual occupation;
2. It must undertake to carry goods of the kind that to which its business is confined;
3. It must undertake to carry by the method by which his business is conducted, and
over its established roads; and
4. It must be for hire. (First Philippine Industrial Corporation v. CA, G.R. No. 125948)

Distinguish between a common carrier and a private carrier.

Common Carrier Private Carrier

It holds itself out for all people It engages only with particular individuals
indiscriminately. or groups.

It is governed by the Civil Code provisions It is governed by the Civil Code provisions
on Common Carriers, the Public Service on Obligations and Contracts.
Act, Code of Commerce, and other special
laws regarding transportation.

It must observe extraordinary diligence. It should only observe ordinary diligence.

It is presumed to be at fault or negligence No presumption of fault or negligence is

in cases of losses or the effects of the present.
passengers or injuries caused to
passengers.
(Sps. Pereña v. Sps. Zarate, G.R. No. 157917)

When are common carriers not liable in case of loss, destruction, or deterioration
in the carriage of goods?

In case the loss, destruction, or deterioration of goods is due to:

1. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the containers; or
5. Order or act of competent public authority. (Civil Code, Art. 1734)

What constitutes a prima facie case of fault or negligence in the carriage of goods?

Mere proof of delivery of goods in good order to the common carrier and the arrival of the
same goods in bad order at their destination constitutes a prima facie case of fault or
negligence against the carrier. (Belgian Overseas Chartering and Shipping N.V. v. Philippine
First Insurance Co., Inc., G.R. No. 143133)

Distinguish between the duration of the duty to exercise extraordinary diligence of

common carriers in the carriage of goods and carriage of passengers.

Carriage of 1. From the time the goods are unconditionally placed in the possession
Goods of and received by the carrier until they are delivered, actually or

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constructively, to the consignee or to the person who has a right to

receive them and a reasonable time is given to remove the goods.
(Nedlloyd B.V. Rotterdam v. Glow Laks, G.R. No. 156330)
2. When the goods are temporarily unloaded or stored in transit, unless
the shipper used the right of stoppage in transitu. (Civil Code, Art.
1737)
3. Even during the time the goods are stored in a warehouse of the
carrier at the place of destination, until the consignee has been
advised of its arrival and reasonable opportunity to remove or dispose
them. (Civil Code, Art. 1738)

It terminates when the passenger alights from the vehicle at the place of
Carriage of destination and the passenger has a reasonable opportunity to leave the
Passengers common carrier’s premises. (Aboitiz Shipping Corporation v. CA, G.R. No.
84458)

Distinguish between stipulations limiting liability in a contract of carriage of goods

and carriage of passengers.

Carriage of Goods Carriage of Passengers

A stipulation limiting the liability for the Generally, a stipulation dispensing or

loss, destruction, or deterioration of goods lessening the liability for the safety of
to a degree less than extraordinary passengers is void. (Civil Code, Art. 1757)
diligence is valid, provided that:
1. It is in writing and signed by the However, a stipulation limiting the liability
shipper or owner; for passengers carried gratuitously is valid
2. It is supported by a valuable for negligence, but not for wilful acts or
consideration other than the service gross violence. (Civil Code, Art. 1758)
rendered by the common carrier;
and
3. It must be reasonable, just, and not
contrary to public policy. (Civil Code,
Art. 1744)

Distinguish between the liability of the common carrier arising from acts of an
employee and acts of passengers and strangers.

Employee of Common Carrier Passenger or Stranger

Common carriers are liable for the death or
injuries to passengers through its
employees’ negligence or willful acts, which
exists even if the employees may have
acted beyond the scope of their authority or
in violation of the orders of the common
carriers. (Civil Code, Art. 1759)
Common carriers are responsible for
injuries to passengers caused by other
passengers or strangers if the carrier’s
employees could have prevented or stopped
the act causing the injury through the
exercise of the diligence of a good father of
a family. (Civil Code, Art. 1763)

Where may a plaintiff sue for breach of contract of air carriage under the Warsaw
Convention?

1. The carrier’s principal residence;

2. The carrier’s primary location of business;
3. The place of business where the contract is made; or

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4. Where the flight is intended to have its final destination or the passenger’s place of
destination. (Lhuiller v. British Airways, G.R. No. 171092)

Distinguish between the control test and the grandfather rule.

Control Test Grandfather Rule

Shares belonging to corporations or It is applied when the 60-40 Filipino-foreign

partnerships at least sixty percent (60%) of equity ownership is in doubt as a result of
the capital of which is owned by Filipino various indicia that beneficial ownership and
voting control of a subject corporation does
citizens shall be considered of Philippine
not in fact reside with Filipino shareholders,
nationality. This test is straightforward and but in foreign stakeholders through the
does not scrutinize further the ownership of medium or practice of corporate layering.
the Filipino shareholdings.
(Narra Nickel Mining v. Redmont Consolidated Mines Co., G.R. No. 195580)

Does the Filipino ownership of capital apply to both voting and non-voting stock?

Yes. The required Filipino ownership shall be applied to both:

1. The total number of outstanding shares of stock entitled to vote in the election of
directors; and
2. The total number of outstanding shares of stock, whether or not entitled to vote in
the election of directors. (SEC Memorandum Circular No. 8, s. 2013)

What are the elements of fraud piercing?

1. There must have been fraud or evil motive in the affected transaction and the mere
proof of control of the corporation by itself would not authorize piercing;
2. The corporate entity has been used in the perpetration of the fraud or in the
justification of wrong or to defend a crime; and
3. The main action should seek the enforcement of pecuniary claims pertaining to the
corporation against corporate officers or stockholders, or vice-versa. (Concept
Builders, Inc. v. NLRC, G.R. No. 108734)

Distinguish among the three tests used for alter-ego piercing.

Control Test Fraud Test Harm Test

There is complete control or
dominion of the corporate
entity as to render it without
a separate mind, will, or
existence of its own.
Such control must have The control and breach of
been used by the defendant duty must be the proximate
to commit fraud or wrong in cause of the injury or unjust
contravention of the loss complained of.
plaintiff's legal rights.
(Maricalum Mining Corp. v. Florentino, G.R. No. 221813)

Distinguish a de facto corporation from a corporation by estoppel.

De facto corporation Corporation by estoppel

1. A valid law under which it is Persons who assume to act as a corporation

incorporated; knowing it to be without authority to do so
are liable as general partners for all debts,

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2. An attempt in good faith to incorporate liabilities, and damages incurred or arising

or colorable compliance; as a result thereof. Anyone who assumes an
3. The assumption of corporate powers; obligation to an ostensible corporation
and cannot resist performance thereof on the
4. The issuance of certificate of ground that there was in fact no
incorporation. (Hall v. Piccio, G.R. No. corporation. (RCC, Sec. 20)
L-2598)

What are the limitations on the stockholder’s power of pre-emptive rights?

Generally, stockholders have the pre-emptive right to subscribe to all issues or disposition of
shares by the corporation of any class in proportion to their shareholdings, unless:
1. It is denied by the Articles of Incorporation or an amendment thereto;
2. The shares are issued in compliance with laws requiring minimum stock ownership
by the public;
3. The shares issued in good faith in exchange for property for corporate purposes
approved by 2/3 of the OCS; or
4. The shares in payment of previously contracted debts are approved by 2/3 of the
OCS. (RCC, Sec. 38)

What is the requirement in order to acquire treasury shares?

Apart from reacquiring the shares through some lawful means, a corporation has the power
to purchase or acquire its own shares. The corporation must have unrestricted retained
earnings in its books to cover the shares to be purchased or acquired. (Agapito A. Salido, Jr.
v. Aramaywan Metals Development Corporation G.R. No. 233857)

Define the trust fund doctrine.

A corporation has no legal capacity to release an original subscriber to its capital stock from
the obligation of paying for his shares, in whole or in part, fraudulently or without a valuable
consideration, to the prejudice of creditors. (Jennifer M. Enano-Bote v. Jose Ch. Alvarez.
G.R. No. 223572)

What are the requisites for the removal of directors, trustees, or officers?

1. It must take place either at a regular meeting or special meeting of the stockholders
or members called for the purpose;
2. There must be previous notice to the stockholders or members of the intention to
remove;
3. The removal must be by a vote of the stockholders representing 2/3 of the
outstanding capital stock or 2/3 of the members, as the case may be; and
4. The director may be removed with or without cause unless he was elected by the
minority, in which case, it is required that there is cause for removal. (RCC, Sec. 27)

What is the doctrine of corporate opportunity?

Corporate officers are prohibited to use their position of trust and confidence to further their
private interests. Courts recognize that fiduciary standards could not be upheld where the
fiduciary was acting for two entities with competing interests. It rests on the unfairness of
an officer or director taking advantage of an opportunity for his personal profit when the
interest of the corporation justly calls for protection. (Gokongwei v. SEC, G.R. No. L-45911)

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What is the doctrine of apparent authority?

Under the doctrine of apparent authority, if a corporation knowingly permits one of its
officers or any other agent to act within the scope of an apparent authority, it holds the
agent out to the public as possessing the power to do those acts; thus the corporation will,
as against anyone who has in good faith dealt with it through such agent, be estopped from
denying the agent's authority. (Agro Food and Processing Corp. v. Vitarich Corp., G.R. No.
217454)

In what instances may directors or trustees be held solidarily liable?

Directors or trustees who:

1. Willfully and knowingly vote for or assent to patently unlawful acts of the
corporation;
2. Are guilty of gross negligence or bad faith in directing the affairs of the corporation;
or
3. Acquire any personal or pecuniary interest in conflict with their duty as such directors
or trustees. (Pioneer Insurance Surety Corp. v. Morning Star Travel & Tours, Inc.,
G.R. No. 198436)

Distinguish between the effect of proxies for establishing a quorum and vote in a
Board of Directors meeting and stockholders meeting.

Board of Directors Meeting Stockholders Meeting

Proxies are not counted to form a quorum Stockholders and members may vote in
and they cannot vote. (RCC, Sec. 52) person or proxy in all meetings of
stockholders or members. (RCC, Sec. 57)

What is the right of appraisal?

It is when a stockholder, who dissents from certain corporate actions, has the right to
demand payment of the fair value of his or her shares. It may be exercised when there is a
fundamental change in the charter or articles of incorporation substantially prejudicing the
rights of the stockholders. (Turner v. Lorenzo Shipping, G.R. No. 157479)

What is the extent of a stockholder’s pre-emptive right?

Generally, the pre-emptive right is recognized only with respect to new issues of shares, and
not with respect to additional issues of originally authorized shares. This is based on the
theory that when a corporation at its inception offers its first shares, it is presumed to have
offered all of those which it is authorized to issue. (Dee v. SEC, G.R. No. L-60502)

What are the tests in determining whether a suit is intra-corporate in character?

Relationship Test Nature of the Controversy Test

When the controversy pertains to: When the controversy pertains to the
1. The corporation and the public; enforcement of the parties' correlative
2. The corporation and its members; rights and obligations under the Corporation
Code and the internal and intra-corporate

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3. The corporation and the state in regulatory rules of the corporation. (Aguirre
relation to franchise, permit or v. FQB+7 Inc., G.R. No. 170770)
license; or
4. Among the stockholders themselves.
(Vesagas v. CA, G.R. No. 142924)

Distinguish among individual, representative, and derivative suits.

Individual Representative Derivative

Where a stockholder or Where the wrong is done to An individual stockholder is

member is denied the right a group of stockholders, as
of inspection, his suit would where preferred
be individual because the stockholders' rights are
wrong is done to him violated, a class or
personally and not to the representative suit will be
other stockholders or the proper for the protection of
corporation. all stockholders belonging to
the same group.
(Legaspi Towers v. Muer, G.R. No. 170783)
permitted to institute the
suit on behalf of the
corporation wherein he
holds stock in order to
protect or vindicate
corporate rights, whenever
officials of the corporation
refuse to sue or are the
ones to be sued or hold the
control of the corporation.

Does the presentation of the stock certificate indicate ownership?

No. The certificate is not a stock in the corporation but is merely evidence of the holder's
interest and status in the corporation, his ownership of the share is represented thereby, but
is not in law the equivalent of such ownership. (Borgona v. Abra Valley, G.R. No. 204089)

What are the grounds for the dissolution of the corporation?

1. Non-use of the corporate charter;

2. Continuous inoperation of a corporation;
3. Upon receipt of a lawful court order dissolving the corporation;
4. Upon finding by final judgment that the corporation procured its incorporation
through fraud; or
5. Upon finding by final judgment that the corporation:
a. Was created for the purpose of committing, concealing, or aiding the SEC of
securities violations, smuggling, tax evasion, money laundering, or graft and
corrupt practices;
b. Committed or aided in the SEC of securities violations, smuggling, tax
evasion, money laundering, or graft and corrupt practices, and its
stockholders knew of the same; or
c. Repeatedly and knowingly tolerated the SEC of graft and corrupt practices or
other fraudulent or illegal acts by its directors, trustees, officers, or
employees. (RCC, Sec. 138)

What are the rules regarding a foreign corporation’s right to bring suit in the
Philippines?

1. If doing business without a license, then it cannot sue in Philippine courts;

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2. If not doing business in the Philippines, it can sue on an isolated transaction or a

cause of action independent of any business transaction;
3. If doing business in the Philippines without a license but a Philippine citizen or entity
has contracted with or benefited from the foreign corporation, it can sue before
Philippine courts due to estoppel; or
4. If doing business in the Philippines with a license, it can sue before Philippine courts
on any transaction. (Agilent Technologies v. Integrated Silicon, G.R. No. 154618)

Distinguish between a corporation sole and a one-person corporation.

Corporation Sole One-Person Corporation

It is formed by the chief archbishop, bishop, A corporation with a single stockholder.

priest, minister, rabbi, or other presiding Only a natural person, trust, or an estate
elder of a religious denomination, sect, or may form a one person corporation. (RRC,
church for the purpose of administering and Sec. 116)
managing, as trustee, the affairs, property,
and temporalities of such religious
denomination, sect or church. (RRC, Sec.
108)

Distinguish between the merger and consolidation of corporations.

Merger Consolidation

A corporation absorbs another and remains The constituent corporations are

in existence while the other is dissolved. extinguished and a new corporation is
created.
(PNB v. Andrada Electric and Engineering Co., G.R. No. 142936)

What are non-patentable inventions?

1. Discoveries, scientific theories, and mathematical methods;

2. Schemes, rules, and methods of performing mental acts, playing games or doing
business, and programs for computers;
3. Methods for treatment of the human or animal body by surgery or therapy and
diagnostic methods practiced on the human or animal body;
4. Plant varieties or animal breeds or essentially biological processes for the production
of plants or animals. However, this provision shall not apply to micro-organisms and
non-biological and microbiological processes.
5. Aesthetic creations; and
6. Anything which is contrary to public order or morality. (IP Code, Sec. 22)

When is a trademark acquired?

It is the fact of registration that confers ownership of the mark and enables the owner
thereof to exercise the rights expressed in the IP Code. Prior use no longer determines the
acquisition of ownership of a mark. However, the certificate of registration is merely prima
facie proof that the registrant is the owner of the registered mark or trade name. (Zuneca v.
Natrapharm, G.R. No. 211850)

What is the controlling test in determining the resemblance of marks?

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The Dominancy test prevails. The question is whether the use of the marks involved is likely
to cause confusion or mistake in the mind of the public or deceive purchasers. Duplication or
imitation is not necessary. As a result, the Holistic Test has now been abandoned. (Kolin
Electronics Co., Inc. v. Kolin Philippines International, Inc., G.R. No. 228165)

What are the elements to establish trademark infringement?

1. The trademark being infringed is registered in the Intellectual Property Office;

2. The trademark is reproduced, counterfeited, copied, or colorably imitated by the
infringer;
3. The infringing mark is used in connection with the sale, offering for sale, or
advertising of any goods, business, or services; or the infringing mark is applied to
labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to
be used upon or in connection with such goods, business, or services;
4. The use or application of the infringing mark is likely to cause confusion or mistake
or to deceive purchasers or others as to the goods or services themselves or as to
the source or origin of such goods or services or the identity of such business; and
5. It is without the consent of the trademark owner or the assignee thereof. (Zuneca v.
Natrapharm, G.R. No. 211850)

What are the factors to determine if there was a fair use of copyright?

1. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;
2. The nature of the copyrighted work;
3. The amount and substantiality of the portion used in relation to the copyrighted work
as a whole; and
4. The effect of the use upon the potential market for or value of the copyrighted work.
(ABS-CBN v. Gozon, G.R. No. 195956)

What are the presumptions relating to proceedings involving electronic

signatures?

1. It is the signature of the person to whom it correlates; and

2. It is affixed by that person with the intention of signing or approving the electronic
document unless the person relying on the signature is aware of the defect in such
signature. (Electronic Commerce Act, Sec. 9)

Can the internet be used as a medium to publish laws, rules, and regulations?

No. The law considered electronic data messages and/or electronic documents as the
functional equivalent of a written document only for evidentiary purposes. It does not make
the internet a medium for publication of laws. (Garcillano v. House of Representatives
Committees on Public Information, G.R. Nos. 170338 & 179275)

What is the obligation of confidentiality?

It states that any person who obtained access to any electronic key, electronic data
message or electronic document, book, register, correspondence, information, or other
material pursuant to any powers conferred under the Electronic Commerce Act, shall not
convey to or share the same with any other person. (Electronic Commerce Act, Sec 32)

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What is the safe harbor provision under the AMLA?

It states that no administrative, criminal, or civil proceedings, shall lie against any person
for having made a covered transaction report in the regular performance of his duties and in
good faith, whether or not such reporting results in any criminal prosecution or any other
Philippine law. (Anti-Money Laundering Act, Sec. 9)

Distinguish between voluntary and involuntary liquidation.

Voluntary Liquidation Involuntary Liquidation

An insolvent debtor may apply for
liquidation by filing a petition for liquidation
with the court. The petition shall be
verified, shall establish the insolvency of
the debtor, and shall contain, whether as an
attachment or as part of the body of the
petition:
1. A schedule of the debtor's debts and
liabilities including a list of creditors
with their addresses, amounts of claims
and collaterals, or securities, if any;
2. An inventory of all its assets including
receivables and claims against third
parties; and
3. The names of at least three (3)
nominees to the position of liquidator.
When three (3) or more creditors the
aggregate of whose claims is at least either
One Million Pesos (Php 1,000,000,00) or at
least twenty-five percent (25%) of the
subscribed capital stock or partner's
contributions of the debtor, whichever is
higher, may apply for and seek the
liquidation of an insolvent debtor by filing a
petition for liquidation of the debtor with
the court. The petition shall show that:
1. There is no genuine issue of fact or law
on the claims/s of the petitioner/s, and
that the due and demandable payments
thereon have not been made for at
least one hundred eighty (180) days or
that the debtor has failed generally to
meet its liabilities as they fall due; and
2. There is no substantial likelihood that
the debtor may be rehabilitated.
(FRIA Secs. 90-91)

When may a debtor file a petition for suspension of payments?

An individual debtor who, possessing sufficient property to cover all his debts but foreseeing
the impossibility of meeting them when they respectively fall due, may file a verified petition
that he be declared in the state of suspension of payments by the court of the province or
city in which he has resided for six (6) months prior to the filing of his petition. (FRIA, Sec.
94)

Under the FRIA, what is the effect of a stay order from the rehabilitation court?

1. Suspend all actions or proceedings, in court or otherwise, for the enforcement of

claims against the debtor;
2. Suspend all actions to enforce any judgment, attachment, or other provisional
remedies against the debtor;
3. Prohibit the debtor from selling, encumbering, transferring, or disposing in any
manner any of its properties except in the ordinary course of business; and
4. Prohibit the debtor from making any payment of its liabilities outstanding as of the
commencement date except as may be provided herein. (FRIA, Sec. 16)

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In court-supervised rehabilitation, what is effect of a commencement order in the

enforcement of claims against a debtor?

It shall suspend the action, in court or otherwise, for the enforcement of claims against the
debtor. (Kaizen Builders v. CA, G.R. No. 226894)

When is a rehabilitation plan considered rejected by the creditors?

It shall be deemed rejected unless approved by all classes of creditors whose rights are
adversely modified or affected by it. It is deemed to have been approved by a class of
creditors if members of the said class holding more than fifty percent (50%) of the total
claims of the said class vote in favor of it. (FRIA, Sec. 64)

What is the cram-down power of the rehabilitation court?

It is the power to approve and implement a rehabilitation plan even over the opposition of
the creditors holding a majority of the corporation’s total liabilities if there is a showing that
rehabilitation is feasible and the opposition of the creditors is manifestly unreasonable. (BPI
v. Sarabia Manor Hotel, G.R. No. 175844)

Can a creditor compel a debtor who is undergoing rehabilitation proceedings to

liquidate?

Yes. At any time during the pendency of or after a rehabilitation court-supervised or

pre-negotiated rehabilitation proceedings, creditors may compel a debtor who is undergoing
rehabilitation to liquidate. (FLSP Rules, Rule 2, Sec. 6)

What is the right to set-off in liquidation proceedings?

If the debtor and creditor are mutually a debtor and creditor of each other, one debt shall be
set-off against the other and only the balance, if any, shall be allowed in the liquidation
proceedings. (FLSP Rules, Rule 4, Sec. 18)

Distinguish the different voting requirements for corporate acts, corporate

powers, acts on the AOI and By-laws, and dissolution or winding up.

Corporate Act Board Stockholders’

Approval Approval

ARTICLES OF INCORPORATION AND BY-LAWS

Amendment of the Articles of Incorporation Yes 2/3 of the

(RCC, Sec. 15) Outstanding Capital
Stock (OCS)

Extending or shortening the Corporate Term Yes 2/3 of the OCS

(RCC, Sec. 36)

Increase or decrease of the Capital Stock Yes 2/3 of the OCS

(RCC, Sec. 37)

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 THE FRATERNAL ORDER OF UTOPIA
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Bar Operations 2022

Determination of issue price of no-par value Yes, if Majority of the OCS if

shares (RCC, Sec. 61) authorized by the board is not
the AOI or authorized by AOI.
By-laws

Approval or amendment of the plan of merger Yes 2/3 of the OCS

or consolidation (RCC, Sec. 76)

Amendment/Repeal of by-laws or adoption of Yes Majority of OCS

new by-laws (RCC, Sec. 47)

CORPORATE POWERS/ACTS

Create, increase, or incur bonded indebtedness Yes 2/3 of the OCS

(RCC, Sec. 37)

Sale, lease, exchange, mortgage, pledge or Yes 2/3 of the OCS

other disposition of all or substantially all of
the corporate property (RCC, Sec. 39)

Investment of Corporate funds germane to the Yes 2/3 of the OCS

secondary purpose of the corporation (RCC,
Sec. 41)

Issuance of Stock Dividends (RCC, Sec. 42) Yes 2/3 of the OCS

MANAGEMENT CONTRACTS

Management Contracts in General Yes Majority of OCS

Management Contracts where: Yes 2/3 of the OCS of the

1. 1/3 of the total OCS in the managing managed corporation
corporation is owned or controlled by
the same interest in both corporations;
or
2. Majority of both Boards are the same
persons; or
3. Corporation undertakes to manage or
operate all or substantially all of the
business of another corporation
regardless of nomenclature. (RCC, Sec.
43)

DISSOLUTION AND WINDING-UP

Voluntary dissolution where no creditors are Yes Majority of OCS

affected (RCC, Sec. 134)

Voluntary dissolution where creditors are Yes 2/3 of the OCS

affected(RCC, Sec. 135)

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