TITLE VIII to speak, an equivalent of such ownership.
It expresses the contract
1 – Ponce vs Alcons Cement Corp GR NO. 139802
Ponente: Quisimbing
TOPIC: Sec 74- Books to be kept; Stock Transfer Agent
Effect of ETB Registration
DOCTRINE:
Pursuant to Sec. 63 of the Corporation Code, a transfer of shares of
stock not recorded in the stock and transfer book of the corporation is
non-existent as far as the corporation is concerned. As between the
corporation on the one hand, and its shareholders and third persons on
the other, the corporation looks only to its books for the purpose of
determining who its shareholders are. It is only when the transfer has
been recorded in the stock and transfer book that a corporation may
rightfully regard the transferee as one of its stockholders. From this
time, the consequent obligation on the part of the corporation to
recognize such rights as it is mandated by law to recognize arises.
Hence, without such recording, the transferee may not be regarded by
the corporation as one among its stockholders and the corporation
may legally refuse the issuance of stock certificates in the name of the
transferee even when there has been compliance with the
requirements of Section 64 of the Corporation Code. This is the import
of Section 63 which states that "No transfer, however, shall be valid,
except between the parties, until the transfer is recorded in the books
of the corporation showing the names of the parties to the transaction,
the date of the transfer, the number of the certificate or certificates and
the number of shares transferred." Unless and until such recording is
made the demand for the issuance of stock certificates to the alleged
transferee has no legal basis.
EMERGENCY RECIT:
Vicente C. Ponce and Fausto Gaid, incorporator of Victory Cement
Corporation (VCC), executed a “Deed of Undertaking” and
“Indorsement” whereby Gaid acknowledges that Ponce is the owner of
the shares and he was therefore assigning/endorsing it to Ponce, VCC
was renamed Floro Cement Corporation (FCC) and then to Alsons
Cement Corporation (ACC). No certificates of stock corresponding to
the 239,500 subscribed and fully paid shares of Gaid were issued in
the name of Fausto G. Gaid and/or the plaintiff. Despite repeated
demands, the ACC refused to issue the certificates of stocks. SEC
Hearing Officer Enrique L. Flores, Jr. granted the motion to dismiss.
Upon appeal, the Commission En Banc reversed the decision of the
Hearing Officer Ponce. Petitioner filed a complaint with the SEC for
mandamus. CA: mandamus should be dismissed for failure to state a
cause of action
Issue: WON the cert. of stocks of Gaid can be transferred to Ponce
(No)
SC: No shares of stock against which the corporation holds any unpaid
claim shall be transferable in the books of the corporation. (See
doctrine)
The stock and transfer book is the basis for ascertaining the persons
entitled to the rights and subject to the liabilities of a stockholder.
Where a transferee is not yet recognized as a stockholder, the
corporation is under no specific legal duty to issue stock certificates in
the transferee’s name. In a case such as that at bar, a mandamus
should not issue to compel the secretary of a corporation to make a
transfer of the stock on the books of the company unless it affirmatively
appears that he has failed or refused so to do, upon the demand either
of the person in whose name the stock is registered, or of some person
holding a power of attorney for that purpose from the registered owner
of the stock. mere indorsee of a stock certificate, claiming to be the
owner, will not necessarily be recognized as such by the corporation
and its officers, in the absence of express instructions of the registered
owner to make such transfer to the indorsee, or a power of attorney
authorizing such transfer. mandamus - proper remedy to make him the
rightful owner and holder of a stock certificate to be issued in his name
A certificate of stock is not necessary to render one a stockholder in a
corporation. But a certificate of stock is the tangible evidence of the
stock itself and of the various interests therein. The certificate is the
evidence of the holder's interest and status in the corporation, his
ownership of the share represented thereby. The certificate is in law, so
between the corporation and the stockholder, but it is not essential to
the existence of a share in stock or the creation of the relation of
shareholder to the corporation. In fact, it rests on the will of the
stockholder whether he wants to be issued stock certificates, and a
stockholder may opt not to be issued a certificate.
2 – Escano v Filipinas Mining Corp (1944)
Ponente:
TOPIC: Effect of STB registration
DOCTRINE:
Section 35 of the Corporation Law, which requires the registration of
transfers of shares of stock upon the books of the corporation as a
condition precedent to their validity against the corporation and third
parties, is also applicable to unissued shares held by the corporation in
escrow.
EMERGENCY RECIT:
Petitioner Escano obtained a judgment against a certain Silverio
whereby the latter was ordered to transfer and deliver to the former his
shares in escrow of the Filipinas Mining Corporation. A writ of
garnishment was served by the sheriff of Manila upon the Filipinas
Mining Corporation to satisfy the said judgment. However, it appears
that before judgment was rendered therein Salvosa sold to Bengzon all
his right, title, and interest in and to 18,580 shares of stock of the
Filminas Mining Corporation held in escrow which the said Salvosa
was entitled to receive, and which Bengzon in turn subsequently sold
and transferred to the present defendant-appellant, Standard
Investment of the Philippines. Neither Salvosa's sale to Bengzon nor
Bengzon's sale to the Standard Investment of the Philippines was
notified to and recorded in the books of the Filipinas Mining
Corporation until, more than three years after the escrow shares in
question were attached by garnishment served on the Filipinas Mining
Corporation as hereinbefore set forth. The issue now is whether the
transfers of the unissued shares binds Escano. The supreme court
held that no, transfers of shares, issued or unissued, has to be
registered to bind third parties. See doctrine.
3 - BLTB v. Bitanga, (2001)
Ponente:
TOPIC: Effect of STB registration
DOCTRINE:
The purpose of registration, therefore, is two-fold:
1. to enable the transferee to exercise all the rights of a
stockholder, including the right to vote and to be voted for
2. and to inform the corporation of any change in share
ownership so that it can ascertain the persons entitled to the
rights and subject to the liabilities of a stockholder.
EMERGENCY RECIT:
Potenciano sold to herein respondents Bitanga their shares
in Batangas Laguna Tayabas Bus Company. The Bitanga group now
owns 50.2% of BLTB shares, however, the sale was never registered.
Subsequently thereafter, respondents were elected as directors.
Another stockholder meeting however was done without the Bitanga
group and re-electing the potenciano group as directors. An injuction
case was filed with the SEC assailing the validity of the stockholders
meeting reelecting the potenciano group for lack of quorum. The SC
ruled that there was quorum because the shares of Bitanga group
cannot be counted for not having been registered. The SEC En Banc is
correct in saying that is not disputed that the transfer of the shares of
the group of Dolores Potenciano to the Bitanga group has not yet been
recorded in the books of the corporation. Hence, the group of Dolores
Potenciano, in whose names those shares still stand, were the ones
entitled to attend and vote at the stockholders’ meeting.
Until registration is accomplished, the transfer, though valid
between the parties, cannot be effective as against the corporation.
Thus, the unrecorded transferee, the Bitanga group in this case,
cannot vote nor be voted for. The purpose of registration, therefore, is
two-fold: to enable the transferee to exercise all the rights of a
stockholder, including the right to vote and to be voted for, and to
inform the corporation of any change in share ownership so that it can
ascertain the persons entitled to the rights and subject to the liabilities
of a stockholder. Until challenged in a proper proceeding, a stockholder
of record has a right to participate in any meeting; his vote can be
properly counted to determine whether a stockholders’ resolution was
approved, despite the claim of the alleged transferee. On the other
hand, a person who has purchased stock, and who desires to be
recognized as a stockholder for the purpose of voting, must secure
such a standing by having the transfer recorded on the corporate
books. Until the transfer is registered, the transferee is not a
stockholder but an outsider.
4. Manuel Torres v. CA
G.R. No. 120138, 5 September 1997
Kapunan, J.
Topic: Responsibilities of the Corporate Secretary
Doctrine: It is the corporate secretary’s duty and obligation to register
valid transfers of stocks and if said corporate officer refuses to comply,
the transferor-stockholder may rightfully bring suit to compel
performance. In the absence of (any) provision to the contrary, the
corporate secretary is the custodian of corporate records—he keeps
the stock and transfer book and makes proper and necessary entries
therein.
Facts: Pursuant to Tormil Corporation’s 1987 annual stockholder’s
meeting and election of directors, Torres (President and Chairman of
Tormil Board of Directors) assigned from his own shares, 1 share each
to his nominees for directorship. These assigned shares were in the
nature of “qualifying shares,” for the sole purpose of meeting the legal
requirement to be able to elect Torres’ nominees as directors. It was
Torres himself who recorded said assignment of shares.
Issue: Was the assignment and recording by Torres, who is not a
corporate secretary, of “qualifying shares” valid?
Held: NO. Settled is the rule that it is the corporate secretary’s duty
and obligation to register valid transfers of stocks and if said secretary
refuses to comply, the transferor-stockholder may rightfully bring suit to
compel performance. In this case, contrary to the generally accepted
corporate practice, the stock and transfer book of TORMIL was not
kept by the corporate secretary but by Torres, the President and
Chairman of the Board of Directors of TORMIL. This is in contravention
to the provisions of law. Moreover, the stock and transfer book was not
kept at the principal office of the corporation, but at the place of
respondent Torres. In other words, there are remedies within the law
that Torres [and petitioners] could have availed of, instead of taking the
law into their own hands.
5 – Terelay Investment and Dev’t Corp vs. Cecilia Yulo (2015)
GR NO. 160924
Ponente: Bersamin, J.
TOPIC: Requisites of valid by-laws; consistent with articles
DOCTRINE: Under Section 74, par 3 of the Corp Code, the only time
when the demand to examine and copy the corporation’s records and
minutes could be refused is when the corporation puts up as a defense
to any action that “the person demanding” had “improperly used any
information secured through any prior examination of the records or
minutes of such corporation or of any other corporation, or was not
acting in good faith or for a legitimate purpose in making his demand.
EMERGENCY RECIT:
Asserting her right as a stockholder, In two separate instances, Cecila
Yulo (Yulo) wrote a letter addressed to Terelay Investment and
Development Corporation (TERELAY) requesting that she be allowed
to examine its books and records on September 17, 1999 at 1:30pm in
latter’s office at 25th floor, Citibank Tower, Makati City. She clarified
that the request for examination of the corporate records was for the
purpose fo inquiring into the financial condition of TERELAY and the
conduct of its affairs by the principal officers. TERELAY denied both
the requests and instead demanded that she show proof that she was
a bona fide stockholder. This prompted Yulo to file before SEC a
Petition for Issuance of a Writ of Mandamus with prayer for Damages
against TERELAY. RTC ruled in favor of Yulo pursuant to Rule 7 of the
Interim Rules in relation to Section 74 and 75 of the Corporation Code.
CA, upon MR, affirmed the decision.
ISSUE: WON CA erred in allowing Yulo to inspect its corporate
records.despite her shareholding being .001% interest.
Ruling: No. .Under Section 74, par 3 of the Corp Code, the only time
when the demand to examine and copy the corporation’s records and
minutes could be refused is when the corporation puts up as a defense
to any action that “the person demanding” had “improperly used any
information secured through any prior examination of the records or
minutes of such corporation or of any other corporation, or was not
acting in good faith or for a legitimate purpose in making his demand.”
The right of the shareholder to inspect the books and records of the
petitioner should not be made subject to the condition of a showing of
any particular dispute or of proving any mismanagement or other
occasion rendering an examination proper, but if the right is to be
denied, the burden of proof is upon the corporation to show that the
purpose of the shareholder is improper, by way of defense.
Accordingly, Yulo as the right to be fully informed of TERELAY’s
corporate condition and the manner its affairs are being managed. It is
well-settled that the ownership of shares of stock gives stockholders
the right under the law to be protected from possible mismanagement
by its officers. This right is predicated upon self-preservation. In any
case, TERELAY did not adduce sufficient proof that Yulo was in bad
faith or had an ulterior motive in demanding her right under the law
6 - Philpotts v. Philippine Manufacturing Co. and Berry (1919)
GR NO. 15568
Ponente: J. Street
TOPIC: Right to Inspect /right to be furnished financial statements
DOCTRINE:
Stockholder’s right of inspection can be exercised either by himself or
by any proper representative or attorney in fact, and either with or
without the attendance of the stockholder.
EMERGENCY RECIT
W.G. Philpotts, a stockholder of Phil. Manufacturing, filed for the
issuance of a writ of mandamus to compel the company to permit him,
in person or by some authorized agent or attorney, to inspect and
examine the records of the business transacted by the company since
1918. The company filed a demurrer and countered that the right of
examination must be exercised in person. The issue is whether the
right of a stockholder to inspect the records can be exercised by a
proper agent or attorney of the stockholder as well as by the
stockholder in person. The SC, ruling in favor of Philpotts, held that the
right of inspection given to a stockholder can be exercised either by
himself or by any proper representative or attorney in fact, and either
with or without the attendance of the stockholder. This is in conformity
with the rule that what a man may do in person he may do through
another. The demurrer was overruled; the writ of mandamus was
issued.
7 – Pardo v Hercules Lumber 47 Phil 964 (1924);
GR NO. L-22442
Ponente: STREET, J.
TOPIC: Right to Inspect /right to be furnished financial statements
DOCTRINE: Statute declares that the right of inspection can be
exercised "at reasonable hours." This means at reasonable hours on
business days throughout the year, and not merely during some
arbitrary period of a few days chosen by the directors.
EMERGENCY RECIT:
Antonio Pardo (Petitioner) is a stockholder in the Hercules Lumber
Company, Inc. (Company), one of the respondents herein. Petitioner
seeks to obtain a writ of mandamus to compel the respondents to
permit the plaintiff and his duly authorized agent and representative to
examine the records and business transactions of said company. The
Company in its Answer asserts that in article 10 of the By-laws of the
respondent corporation it is declared that "Every shareholder may
examine the books of the company and other documents pertaining to
the same upon the days which the board of directors shall annually fix."
It is further averred that at the directors' meeting of the respondent
corporation, the board passed a resolution: “X x x with notice to the
shareholders that the books of the company are at their disposition
from the 15th to 25th of the same month for examination, in
appropriate hours.” Issue is WON Resolution is valid in so far as it
restricts a shareholder’s right to inspect the corporate books only
during the specified period. The Court held that said restriction is
unlawful --- The officials in charge of a corporation may deny
inspection when sought at unusual hours or under other improper
conditions; but neither the executive officers nor the board of directors
have the power to deprive a stockholder of the right altogether. Statute
declares that the right of inspection can be exercised "at reasonable
hours." This means at reasonable hours on business days throughout
the year, and not merely during some arbitrary period of a few days
chosen by the directors. The motive of the shareholder exercising the
right is immaterial. Thus, the writ of mandamus will issue as prayed.
8 – Gokongwei Jr. v. SEC (1979)
GR NO. L-45911
Ponente: J. Antonio
TOPIC: Right to inspect
DOCTRINE: The books and records of a subsidiary wholly owned by a
corporation may be inspected by a stockholder of the parent
corporation, even if he is not a stockholder of the subsidiary.
EMERGENCY RECIT:
John Gokongwei, Jr. filed a motion for production and inspection of
documents against the members of the Board of Directors of San
Miguel Corporation (SMC). Gokongwei requested, among others, the
balance sheet of San Miguel International (SMI), SMC’s wholly owned
foreign subsidiary. The Board members opposed the motion,
contesting that, since Gokongwei is not a stockholder of SMI, he has
no right to demand the balance sheet of SMI. The Supreme Court,
however, granted Gokongwei access to SMI’s balance sheet. Several
jurisprudence have held proper the right to inspect both the
subsidiary's and the parent corporation's books upon proof of sufficient
control or dominion by the parent, showing the relation of principal-
agent or something similar thereto. In this case, SMI is wholly owned
by SMC. Thus, Gokongwei may be granted authority to inspect the
books and records of SMI, including the financial statement of the
same.
9 – Victor Africa v. PCGG (1992)
GR NO. 83831
Ponente: Regalado
TOPIC: Sec. 75 – Right to Financial Statements
DOCTRINE:
The only express limitation on the right of inspection, according to the
Court, is that
(1) the right of inspection should be exercised at reasonable hours on
business days;
(2) the person demanding the right to examine and copy excerpts from
the corporate records and minutes has not improperly used any
information secured through any previous examination of the records
of such corporation; and
(3) the demand is made in good faith or for a legitimate purpose.
EMERGENCY RECIT:
4 cases were consolidated because they involve issues arising from,
incidental, or related to the sequestration of Eastern
Telecommunications Philippines, Inc. (ETPI) by the PCGG. In one of
the cases, Victor Africa, who claims to be an employee of ETPI holding
the positions of VP, General counsel (on leave without pay), corporate
secretary, and special assistant to the chairman (and president),
instituted before the Sandiganbayan an action for injunction and
damages. He questioned the acts and orders of the PCGG leading to
the election of the defendants to the ETPI Board of Directors. Claiming
to be the duly elected members of the ETPI Board of Directors, he,
together with the other petitioners, prayed that defendants be removed
from their ETPI positions. The Clerk of Court of the Sandiganbayan
issued, upon the request of the petitioner’s counsel, a subpoena duces
tecum and ad testificandum ordering the PCGG or its representatives
to appear and testify before the Sandiganbayan and to produce the
stock and transfer book and all stubs of the outstanding stock
certificates of ETPI. Another subpoena duces tecum was issued
ordering the respondents to produce the “minutes of all meetings of the
Board of Directors and Stockholders of ETPI held from January 29,
1988 to date.” Petitioners also contended that the defendants
committed invalid, illegal, and immoral acts whoch have caused and
are still causing ETPI damages.
Issue: WON the acts and orders of the PCGG which led to the
nomination and election of the new members of the Board of directors
and officers of the ETPI are correct - Yes
The issue relating to the validity of the issuance by the Sandiganbayan
of the subpoena duces tecum and ad testificancum ordering the PCGG
to testify and produce the stock and transfer book, and the minutes of
all the metings of the board of directors and stockholders of ETPI was
laid to rest by our joint resolution in two cases both entitled Republic v.
Sandiganbayan and Eduardo Cojuanco, Jr., which applies squarely in
the instant petition. In upholding the right of a stockholder of a
sequestered company to inspect and/or examine the records of a
corporation pursuant to Section 74 of the Corporation Code, the Court
found nothing in Executive Orders Nos. 1, 2 and 14, as well as in
BASECO, to indicate an implied amendment of the Corporation Code,
much less an implied modification of a stockholder's right of inspection
as guaranteed by Section 74 thereof. The only express limitation on
the right of inspection, according to the Court, is that (1) the right of
inspection should be exercised at reasonable hours on business days;
(2) the person demanding the right to examine and copy excerpts from
the corporate records and minutes has not improperly used any
information secured through any previous examination of the records
of such corporation; and (3) the demand is made in good faith or for a
legitimate purpose.
10 – Ang-Abaya v. Ang, (2008)
GR NO. 178511
Ponente:Ynares-Santiago
TOPIC: Right to inspect corporate books
DOCTRINE:
The stockholder’s right of inspection of the corporation’s book and
records is based upon their ownership of the assets and property of
the corporation. It is, therefore, an incident of ownership of the
corporate property, whether this ownership or interest be termed an
equitable ownership, a beneficial ownership, or a quasi –ownership.
This right is predicated upon the necessity of self-protection. The
inspection has to be germane to the petitioner’s interest as a
stockholder, and has to be proper and lawful in character and not
inimical to the interest of the corporation.
EMERGENCY RECIT:
In this case, petitioners denied the request of Eduardo (respondents)
to inspect the corporate books (during the pendency of a cause filed by
petitioners against respondents) because they allege that Eduardo
would use the information obtained from said inspection for purposes
inimical to the corporations’ interest. Because of petitioner’s refusal to
grant Eduardo’s request, the latter filed an affidavit-complaint against
petitioners, charging them with violation of Section 74 (corporation
code). Petitioners deny violating section 74 and allege that Eduardo
and his cohorts constantly created trouble by intervening in the daily
operations of the corporations without the knowledge or consent of the
board of directors.
The issue before the court is whether petitioner corporation violated
Section 74 of the Corporation Code. The Supreme Court ruled in the
negative. The stockholder’s right to inspect corporate books is not
without limitation. It is now expressly required as a condition for such
examination that the one requesting it must not have been guilty of
using improperly any information secured through a prior examination,
or that the person asking for such examination must be acting in good
faith and for a legitimate purpose in making his demand.
TITLE IX
11 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
12 – San Miguel Corp. Employees Union-PTWGO v. Sec. Of Labor
Confessor
GR NO. 111262
Ponente: Kapunan
TOPIC: Stock purchase or equity transfer v asset purchase v
business enterprise transfers v spin offs
DOCTRINE:
Resulting Spin-offs:
1. Each of the companies are run by, supervised and controlled
by different management teams including separate human
resource/personnel managers.
2. Each Company enforces its own administrative and
operational rules and policies and are not dependent on
each other in their operations.
3. Each entity maintains separate financial statements and are
audited separately from each other.
Magnolia and SMFI became distinct entities with separate juridical
personalities. Thus, they cannot belong to a single bargaining unit.
EMERGENCY RECIT:
San Miguel Union (Union) entered a CBA with San Miguel
Corporation (SMC) which shall be effective for 5 years. A year
after such agreement, SMC informed its employees that four
divisions: (1) Beer, (2) Packaging, (3) Feeds, (4) Magnolia, and
(5) Agri-Business would undergo a restructuring thereby
affecting its employees. After several negotiations between
SMC and Union failed to resolve any disputes SOLE
(Confessor) assumed jurisdiction over the case, as it is a vital
industry. SOLE sided with SMC citing Art. 253-A Labor Code
(Insofar as economic provisions are concerned, CBA shall be
renegotiated after 3 years) In addition, employees of Magnolia
and SMFI (Agri) argues that they will lose their tenure, will
weaken Union’s membership and will have their pay reduced.
The Court established that it was a management prerogative
of SMC to reorganize its business operations and that they
could not pierce the corporate veil absent any bad faith, since
SMC informed Union, or if the exercise of such is contrary to
law, public morals, or public policy. In addition, there is a
direct link between the voluntary recognition by the company
of the continuing representative status of the unions after the
spin-offs and the stand of the company for a 3-year
renegotiated cycle when the economic provisions of the
existing CBAs in order to maintain stability and avoid
confusion when the umbilical cord of the two divisions were
severed from their parent. These two cannot be considered
independently of each other for they were intended to
reinforce one another. The company conceded to face the
same union notwithstanding the spin-offs in order to preserve
industrial peace during the infancy of the two corporations. If
the union would insist on a shorter renegotiated term, then all
the advantages gained by both parties in this regard, would
be disregarded. WHEREFORE, the petition is DISMISSED for
lack of merit.
13 – Bank of Commerce v. RPN (2014)
GR NO. 195615
Ponente: Abad
TOPIC: De facto merger
DOCTRINE: A de facto merger can be pursued by one corporation
acquiring all or substantially all of the properties of another corporation
in exchange of shares of stock of the acquiring corporation. The
acquiring corporation would end up with the business enterprise of the
target corporation; whereas, the target corporation would end up with
basically its only remaining assets being the shares of stock of the
acquiring corporation.
EMERGENCY RECIT:
Bancommerce entered into a Puchase and Assumption (P&A)
Agreement with Traders Royal Bank (TRB) and acquired its specified
assets and liabilities, excluding liabilities arising from judicial actions
which were to be covered by the BSP-mandated escrow of ₱50 million.
Shortly after, RPN filed a Motion for Execution whereby it described
TRB as “now Bank of Commerce” based on the assumption that TRB
merged with Banccommerce. The SC ultimately ruled that there was
no merger between the two corporations because the requirements
provided under the Code are not present. There was also no de facto
merger that took place simply because [See doctrine] Whereas, in the
present case, the TRB owners did not get in exchange for the bank’s
assets and liabilities an equivalent value in Bancommerce shares of
stock. Bancommerce and TRB agreed with BSP approval to exclude
from the sale the TRB’s contingent judicial liabilities, including those
owing to RPN, et al. Futhermore, TRB did not lose its juridical entity on
the account of such sale. The SC ruled that the transaction was merely
a “sale of assets with assumption of liabilities”.
14 - Mindanao Savings and Loan Association, PDIC v Edward Willkon, et al
GR 178618 Oct 20, 2010
Ponente: Nachura
TOPIC: SEC approval and effectivity of merger and consolidation
DOCTRINE:
The issuance of the certificate of merger is crucial because not only
does it bear out SEC’s approval but it also marks the moment when
the consequences of a merger take place. By operation of law, upon
the effectivity of the merger, the absorbed corporation ceases to exist
but its rights and properties, as well as liabilities, shall be taken and
deemed transferred to and vested in the surviving corporation.
EMERGENCY RECIT: (Apologies for the length. The facts are too
relevant to omit for the topic. )
The First Iligan Savings and Loan Association, Inc. (FISLAI) and the
Davao Savings and Loan Association, Inc. (DSLAI) are two distinct
corporations.
Sometime, FISLAI and DSLAI entered into a merger, with DSLAI as
the surviving corporation.The articles of merger were not registered
with the SEC due to incomplete documentation. Subsequently, DSLAI
changed its corporate name to MSLAI by way of an amendment to
Article 1 of its Articles of Incorporation, but the amendment was
approved by the SEC. Afterwards, the Board of Directors of FISLAI
passed and approved a Board Resolution assigning its assets in favor
of DSLAI which in turn assumed the former’s liabilities.
The business of MSLAI, however, failed. Hence, the Monetary Board of
the Central Bank of the Philippines ordered its closure and placed it
under receivership. The Monetary Board ordered the liquidation of
MSLAI, with Philippine Deposit Insurance Corporation (PDIC) as its
liquidator
It appears that prior to the closure of MSLAI, private respondent Uy, a
creditor, filed with the RTC an action for collection of sum of money
against FISLAI. RTC and CA Ruled in favor of Uy and the sheriff
levied on six (6) parcels of land owned by FISLAI.
MSLAI, represented by PDIC, filed before the RTC a complaint for
Annulment of Sheriff’s Sale, Cancellation of Title and Reconveyance of
Properties against respondents. MSLAI alleged that the sale on
execution of the subject properties was conducted without notice to it
and PDIC; that PDIC only came to know about the sale for the first
time while discharging its mandate of liquidating MSLAI’s assets; that
the execution of the RTC decision was illegal and contrary to law and
jurisprudence, not only because PDIC was not notified of the execution
sale, but also because the assets of an institution placed under
receivership or liquidation such as MSLAI should be deemed in
custodia legis and should be exempt from any order of garnishment,
levy, attachment, or execution.
Respondents contend that MSLAI had no cause of action against them
in the complaint for the annulment or the right to recover the subject
properties because MSLAI is a separate and distinct entity from
FISLAI; that the "unofficial merger" between FISLAI and DSLAI (now
MSLAI) did not take effect considering that the merging companies did
not comply with the formalities and procedure for merger or
consolidation as prescribed by the Corporation Code of the Philippines;
that FISLAI is still a SEC registered corporation and could not have
been absorbed by petitioner.
Held: RESPONDNENTS ARE CORRECT. THE MERGER WAS NOT
EFFECTIVE.
The steps necessary to accomplish a merger or consolidation, as
provided for in Sections 76-78 of the corporation code, are, among
others:
(4) Submission of said articles of merger or consolidation to
the SEC for approval.
(6) Issuance of certificate of merger or consolidation.
In this case, it is undisputed that the articles of merger between FISLAI
and DSLAI were not registered with the SEC due to incomplete
documentation. Consequently, the SEC did not issue the required
certificate of merger. Even if it is true that the Monetary Board of the
Central Bank of the Philippines recognized such merger, the fact
remains that no certificate was issued by the SEC. Such merger is still
incomplete without the certification.
The issuance of the certificate of merger is crucial because not only
does it bear out SEC’s approval but it also marks the moment when
the consequences of a merger take place. By operation of law, upon
the effectivity of the merger, the absorbed corporation ceases to exist
but its rights and properties, as well as liabilities, shall be taken and
deemed transferred to and vested in the surviving corporation.
The same rule applies to consolidation which becomes effective not
upon mere agreement of the members but only upon issuance of the
certificate of consolidation by the SEC. When the SEC, upon
processing and examining the articles of consolidation, is satisfied that
the consolidation of the corporations is not inconsistent with the
provisions of the Corporation Code and existing laws, it issues a
certificate of consolidation which makes the reorganization official.The
new consolidated corporation comes into existence and the constituent
corporations are dissolved and cease to exist.
There being no merger between FISLAI and DSLAI (now MSLAI), for
third parties such as respondents, the two corporations shall not be
considered as one but two separate corporations
Thus, in the instant case, as far as third parties are concerned, the
assets of FISLAI remain as its assets and cannot be considered as
belonging to DSLAI and MSLAI, notwithstanding the Deed of
Assignment wherein FISLAI assigned its assets and properties to
DSLAI, and the latter assumed all the liabilities of the former
15 – Associated Bank v. CA, Sarmiento GR NO. 123793
Ponente: Panganiban
TOPIC: Merger – Sec. 80 – effects of Mergers
DOCTRINE:
The merger does not become effective upon the mere agreement of
the constituent corporations the merger shall be effective only upon
the issuance by the SEC of a certificate of merge.
EMERGENCY RECIT:
Associated Bank and Citizen’s Bank merged into Associated Bank. The
merger agreement is dated SEPT 16 1975. 2 years later, respondent
Sarmiento obtained a loan and executed a PN in favor of Citizen’s
Bank. Respondent failed to pay the obligation. Petitioner filed a
collection suit, respondent raised the defense that Associated Bank
has no personality to collect because the PN was issued in favor of
Citizen’s Bank, not Petitioner (LOL).
WON Petitoner can collect the proceeds of the PN. SC said YES. The
records did not show when exactly does the merger approved by SEC,
but from the agreement itself, it is stated that all contracts - irrespective
of the date of execution - entered into in the name of CBTC shall be
understood as pertaining to the surviving bank, herein petitioner. Even
if the payee in the PN is Citizen’s Bank, it is understood that such
reference is as if reference to petitioner by virtue of the Merger
Contract.
TITLE X
16 – Turner v. Lorenzo Shipping Corporation, (Nov. 24, 2010)
GR NO. 157479
Ponente: Bersamin, J.
TOPIC: Appraisal Right - Sec. 82 – How Right is Exercised
DOCTRINE: A stockholder who dissents from certain corporate actions
has the right to demand payment of the fair value of his or her shares.
This right, known as the right of appraisal. The right of appraisal may
be exercised when there is a fundamental change in the charter or
articles of incorporation substantially prejudicing the rights of the
stockholders.
EMERGENCY RECIT:
Spouses Turner held 1, 010, 000 shares of stock of Lorenzo Shipping
Corp. (LSC). LSC decided to amend its articles of incorporation to
remove the stockholders’ pre-emptive rights to newly issued shares of
stock. Turners voted against the amendment and demanded payment
of their shares at the rate of P2.276/share based on the book value or
a total of P2,298,760. LSC found the fair value of the shares
demanded unacceptable. It insisted that the market value on the date
before the action to remove the pre-emptive right was taken should be
the value, or P0.41/share or P414,100, and that payment could be
made only if LSC had unrestricted earnings in its books to cover the
value of the shares. The disagreement on the valuation of the shares
led the parties to constitute an appraisal committee pursuant to Sec.
82. Of the Corp. Code. The appraisal committee reported its valuation
of P2.54/share, for an aggregate value of P 2, 565, 400.Turners
demanded payment but LSC refused on the ground that stockholders
exercising their appraisal rights could be paid only when the
corporation had unrestricted retained earnings to cover the fair value of
the shares, but it had no retained earnings at the time of Turner’s
demand. Turners sued LSC for collection and damages before RTC.
RTC granted, CA reversed. The issue is whether or not Turners can
exercise their appraisal right. The SC held that YES, however, it was
prematurely filed. A stockholder who dissents from certain corporate
actions has the right to demand payment of the fair value of his or her
shares. This right, known as the right of appraisal. The right of
appraisal may be exercised when there is a fundamental change in the
charter or articles of incorporation substantially prejudicing the rights of
the stockholders, but no payment shall be made to any dissenting
stockholder unless the corporation has unrestricted retained earnings
in its books to cover the payment.
TITLE XI
17 - Valley Golf & Country Club Inc v Caram (2009)
GR NO. 158805
Ponente: J. Tinga
TOPIC: Non-stock corporations; termination of membership
DOCTRINE: The cause for termination of membership in a non-stock
corporation may be established through the by-laws alone and need
not be set forth in the articles of incorporation.
EMERGENCY RECIT: Valley Golf is a duly constituted non-stock, non-
profit corporation which operates a golf course. Valley Golf sold
Caram’s share in a public auction after 5 letters informing him of his
delinquency and the inevitable sale of the share, went unheeded.
Respondent (widow of Congressman Caram, Jr., the named
stockholder) filed an action for reconveyance of the share with
damages before the SEC and the hearing officer ruled in her favor. The
SEC hearing officer did entertain Valley Golf’s argument that the sale
was authorized under the by-laws, yet Sec. 6 of the Corporation Code
provides that a lien upon unpaid debts of a stockholder to a corporation
should be embodied in the articles of incorporation and not merely in
the by-laws. This was affirmed by the SEC En banc and the CA. Issue:
May a non-stock corporation seize and dispose of the membership
share of a fully-paid member on account of its unpaid debts to the
corporation when it is authorized to do so under the corporate by-laws
but not by the Articles of Incorporation? Held: Yes, since Sec. 91
provides that membership (in a non-stock corp) shall be terminated in
the manner and causes provided for in the articles of incorporation OR
by-laws. However, the petition was denied because the by-laws of
Valley Golf did not provide for a clear mode for due notice which
resulted in deprivation of property rights.
18 – Calatagan v Clemente (2009)
GR NO. 165443
Ponente:Tinga, J.
TOPIC: Delinquency of member in paying dues
DOCTRINE: The sale of delinquent stock is the non-payment of the
subscription price for the share of stock itself. The stockholder or
subscriber has yet to fully pay for the value of the share or shares
subscribed.
EMERGENCY RECIT:
Sixto Clemente purchased one share of stock of Calatagan. Ater
paying P120,000 for the share, Calatagan issued him a certificate of
stock. Calatagan charges monthly dues on its members to meet
expenses for general operations, costs for upkeep and improvement of
the grounds and facilities. The provision on monthly dues is
incorporated in the Articles of Incorporation and By-Laws. Such
provision is also reproduced at the back of each certificate of stock. At
some point in time, Clemente ceased paying the dues. At that point, his
balance amounted to P400. Calatagan sent two demand letters to
Clemente’s mailing address. However, both letters were sent back to
sender with the postal note that the address has been closed.
Calatagan declared Clemente delinquent for having failed to pay his
monthly dues, which amounted to P5,600. Calatagan also included
Clemente’s name in the list of delinquent members. Calatagan’s board
of directors adopted a resolution authorizing the foreclosure of shares
of delinquent shares, including Clemente’s; and the public auction of
the shares. Calatagan sent a third and final demand letter to Clemente,
which contains a warning that unless Clemente settles his outstanding
dues, his share would be included among the delinquent shares to be
sold at a public auction. Again, the letter was sent to Clemente’s
mailing address that had already been closed. The auction took place
and Clemente’s share was purchased by Nestor Virata. A notice of
foreclosure was published. Clemente learned of the sale of his share
four years after the sale. He filed a claim with the SEC seeking
restoration of his shareholding with Calatagan. SEC dismissed
Clemente’s complaint. It cited Sec. 69, which provides that the sale of
shares at an auction sale can only be questioned within 6 months.
Hence, Clemente’s claim which was filed after four years had already
prescribed. CA reversed the decision of SEC. It restored Clemente’s
one share. Citing Caram v Valley Gold Country Club Inc., it held that
Sec. 69 specifically refers to unpaid subscriptions to capital sotck, and
not any other debt of stockholders. It does not apply to unpaid
membership dues in non-stock corporations. The issue is W/N
Calatagan was correct in declaring Clemente’s share as delinquent for
having failed to pay the monthly dues?
The SC ruled that the sale of delinquent stock is the non-payment
of the subscription price for the share of stock itself. The
stockholder or subscriber has yet to fully pay for the value of the share
or shares subscribed. In this case, Clemente had already fully paid for
the share in Calatagan and no longer had any outstanding obligation to
deprive him of full title to his share. Perhaps the analogy could have
been made if Clemente had not yet fully paid for his share and the non-
stock corporation, pursuant to an article or by-law provision designed
to address that situation, decided to sell such share as a consequence.
But that is not the case here, and there is no purpose for us to apply
Section 69 to the case at bar. It is plain that Calatagan had endeavored
to install a clear and comprehensive procedure to govern the payment
of monthly dues, the declaration of a member as delinquent, and the
constitution of a lien on the shares and its eventual public sale to
answer for the member’s debts. The petition must fail because
Calatagan had failed to duly observe both the spirit and letter of its own
by-laws. The by-law provisions were clearly conceived to afford due
notice to the delinquent member of the impending sale, and not just to
provide an intricate façade that would facilitate Calatagan’s sale of the
share. But then, the bad faith on Calatagan’s part is palpable. As found
by the Court of Appeals, Calatagan very well knew that Clemente’s
postal box to which it sent its previous letters had already been closed,
yet it persisted in sending that final letter to the same postal box.
19 - Tan v. Sycip, (2006)
GR NO. 153468
Ponente: C.J. Panganiban
TOPIC: Dead Members
DOCTRINE: Dead members who are dropped from the membership
roster in the manner and for the cause provided for in the By-Laws of
Grace Christian High School, a nonstock corporation, are not to be
counted in determining the requisite vote in corporate matters or the
requisite quorum.
EMERGENCY RECIT:
Grace Christian High School (GCHS) is a nonstock, nonprofit
educational corporation with 15 regular members who are also the
board of trustee. In 1998, there were only 11 living members-trustees.
During the meeting, 7 attended the meeting through their respective
proxies and it was chaired by Atty. Padilla. Atty. Pacis objected to the
meeting since there is allegedly no quorum since he alleges that the
deadmembers should also be included in the counting. Tan et. Al.
Claims that the dead members should not be included in the counting
for the quorum. The SEC declared the meeting null and void since
there is no quorum since the SEC ruled that the quorum in a meeting
of members should be their number as specified in the articles of
incorporation, not simply the living members. The issue is WON the
dead members should also be considered in determining the quorum.
The SC ruled that the meeting was valid and that dead members are
not needed to account for the quorum. Under the By-Laws of GCHS,
membership in the corporation shall, among others, be terminated by
the death of the member. Section 91 of the Corporation Code further
provides that termination extinguishes all the rights of a member of the
corporation, unless otherwise provided in the articles of incorporation
or the bylaws. Applying Section 91 to the present case, we hold that
dead members who are dropped from the membership roster in the
manner and for the cause provided for in the By-Laws of GCHS are not
to be counted in determining the requisite vote in corporate matters or
the requisite quorum for the annual members’ meeting. With 11
remaining members, the quorum in the present case should be 6.
Therefore, there being a quorum, the annual members’ meeting,
conducted with six members present, was valid.
TITLE XII
20 – San Juan Structural and Steel Fabricators Inc. v. CA, 296
SCRA 631 (19xx)
GR NO. 129459
Ponente: CJ Panganiban
TOPIC: Close Coporations; Sec.96 Definition and Applicability of
Title
DOCTRINE: The corporate fiction should be set aside when it
becomes a shield against liability for fraud, illegality or inequity
committed on third persons. The question of piercing the veil of
corporate fiction is essentially, then, a matter of proof. In the present
case, however, the Court finds no reason to pierce the corporate veil of
Respondent Motorich. Petitioner utterly failed to establish that said
corporation was formed, or that it is operated, for the purpose of
shielding any alleged fraudulentor illegal activities of its officers or
stockholders; or that the said veil was used to conceal fraud, illegality
or inequity at the expense of third persons, like petitioner.
EMERGENCY RECIT:
Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc.'s
entered into an agreement with defendant for the transfer to it of a
parcel of land identified in the District of Murphy, Quezon City. Plaintiff-
appellant paid the downpayment in the sum of One Hundred Thousand
(P100,000.00) Pesos, the balance to be paid thereafter. Mr. Andres T.
Co, president of plaintiff corporation, wrote a letter to defendant broker.
Plaintiff-appellant was ready with the amount corresponding to the
balance, covered by Metrobank Cashier's Check payable to defendant-
appellee Motorich Sales Corporation. When the plaintiff and the
defendant were supposed to meet in the office of plaintiff, the
defendant’s treasurer did not appear. Despite repeated demands,
defendant Motorich Sales Corporation had refused to execute the
Transfer of Rights/Deed of Assignment which is necessary to transfer
the certificate of title. Defendant ACL Development Corp. is impleaded
as a necessary party since the TCT of the subject property is still in the
name of said defendant. Another defendant NM Realty & Development
Corp. is likewise impleaded as a necessary party in view of the fact
that it is the transferor of right in favor of defendant Motorich Sales
Corporation. Defendant ACL Development Corporation and Motorich
Sales Corporation entered into a Deed of Absolute Sale whereby the
former transferred to the latter the subject property. By reason of said
transfer, the Registry of Deeds of Quezon City issued a new title in the
name of Motorich Sales Corporation, represented by defendant Nenita
Lee Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate
of Title. As a result of defendants-appellees Nenita Lee Gruenberg and
Motorich Sales Corporation's bad faith in refusing to execute a formal
Transfer of Rights/Deed of Assignment, plaintiff-appellant suffered
moral and nominal damages which may be assessed against
defendants. Defendants counterered that the President and Chairman
of Motorich did not sign the agreement entered into because Mrs.
Gruenberg's signature on the agreement is inadequate to bind
Motorich. What is required is the signature of Mr. Reynaldo Gruenberg,
President and Chairman of Motorich. The plaintiff dratfed the
agreement and insisted that Mrs. Gruenberg accept the P100,000.00
as earnest money. However, there was no payment within the
stipulated period. There was an understanding between Mrs.
Gruenberg and plaintiff that the Transfer of Rights/Deed of Assignment
will be signed only upon receipt of cash payment. They agreed that if
the payment be in check, they will meet at a bank designated by
plaintiff-appellant where they will encash the check and sign the
Transfer of Rights/Deed. However, plaintiff informed Mrs. Gruenberg of
the alleged availability of the check, by phone, only after banking
hours.
The SC ruled on the issue on WON Motorich is a close corporation
which does not need to be sound by its principa. First into the
arguments. Petitioner also argues that the veil of corporate fiction of
Motorich should be pierced, because the latter is a close corporation.
Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg
owned all or almost all or 99.866% to be accurate, of the subscribed
capital stock" of Motorich, petitioner argues that Gruenberg needed no
authorization from the board to enter into the subject contract. It adds
that, being solely owned by the Spouses Gruenberg, the company can
be treated as a close corporation which can be bound by the acts of its
principal stockholder who needs no specific authority. The SC ruled
that Motorich is not a close corporation.Gruenberg, treasurer of
Motorich, and Andres Co signed the contract but that cannot bind
Motorich, because it never authorized or ratified such sale or even the
receipt of the earnest money. A corporation is a juridical person
separate and distinct from its stockholders or members. San Juan
failed to prove otherwise. The document is a hand-written one, not a
corporate receipt, and it bears only Nenita Gruenberg's signature. The
general rule is the acts of corporate officers within the scope of their
authority are binding on the corporation. But when these officers
exceed their authority, their actions "cannot bind the corporation,
unless it has ratified such acts or is estopped from disclaiming them.
Statutorily granted privilege of a corporate veil may be used only for
legitimate purposes. It is utilized as a shield to commit fraud, illegality
or inequity; defeat public convenience; confuse legitimate issues; or
serve as a mere alter ego or business conduit of a person or an
instrumentality, agency or adjunct of another corporation and it is none
here. The articles of incorporation of Motorich Sales Corporation does
not contain any provision stated in Sec. 96. Mere ownership by a
single stockholder or by another corporation of all or capital stock of a
corporation is not of itself sufficient ground for disregarding the
separate corporate personalities. A narrow distribution of ownership
does not, by itself, make a close corporation. Even if veil is pierced it
will then be a sale of conjugal property which Nenita alone could not
have effected. Gruenberg did not represent herself as authorized by
Respondent Motorich despite the receipt issued by the former
specifically indicating that she was signing on behalf of Motorich. The
amount paid as "earnest money" was not proven to have redounded to
the benefit of Motorich. Such was deposited with the account of Aren
Commercial c/o Motorich. Andres Co being a President of San Juan for
more than 10 years cannot feign ignorance of the scope of the
authority of a corporate treasurer. However, Nenita Gruenberg should
be ordered to return to petitioner the amount she received as earnest
money, as "no one shall enrich himself at the expense of another.
21 – BUSTOS V MILLIANS SHOE, INC. (2017)
GR NO. 185024
Ponente: CJ, Sereno
TOPIC: SEC. 97 Articles of Incorporation - Directors
DOCTRINE
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.
EMERGENCY RECIT
Spouses Fernando and Amelia Cruz lot which was levied by the
Marikina government for non-payment of real estate taxes. The RTC
ordered 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 said parcel of land which secured several mortgage liens for the
account of MSI remains to be an asset of the Cruz Spouses, who are
the stockholders and officers of MSI, a close corporation.
Incidentally, as an exception to the general rule, in a close corporation,
the stockholders and/or officers usually manage the business of the
corporation and are subject to all liabilities of directors, i.e. personally
liable for corporate debts and obligations.
Thus, the Cruz Spouses being stockholders of MSI are personally
liable for the latter's debt and obligations. 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. In their Comment, respondents do not contest that Spouses Cruz
own the subject property. Rather, 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. The SC ruled
that the properties of the Spouses Cruz are answerable for the
obligations of MSI. It 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, which
reads: Sec. 96. Definition and applicability of Title. - A close
corporation, within the meaning of this Code, is one whose articles of
incorporation provide that: (1) All the corporation's issued stock of all
classes, exclusive of treasury shares, shall be held of record by not
more than a specified number of persons, not exceeding twenty (20);
(2) all the issued stock of all classes shall be subject to one or more
specified restrictions on transfer permitted by this Title; and (3) The
corporation shall not list in any stock exchange or make any public
offering of any of its stock of any class. Notwithstanding the foregoing,
a corporation shall not be deemed a close corporation when at least
twothirds (2/3) of its voting stock or voting rights is owned or controlled
by another corporation which is not a close corporation within the
meaning of this Code.
CA seriously erred in portraying the import of Section 97 of the
Corporation Code. Citing that provision, the CA concluded that "in a
close corporation, the stockholders and/or officers usually manage the
business of the corporation and are subject to all liabilities of directors,
i.e. personally liable for corporate debts and obligations."
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.
TITLE XIII
22 - Roman Catholic Apostolic Church v LRC 102 Phil 596 (1957)
GR NO. L-8451
Ponente: J. Felix
TOPIC: Corporation Sole* - Sec 110 (distinguish from one person
corporation)
DOCTRINE:
Sec. 110. Corporation sole. - For the purpose of administering and
managing, as trustee, the affairs, property and temporalities of any
religious denomination, sect or church, a corporation sole may be
formed by the chief archbishop, bishop, priest, minister, rabbi or other
presiding elder of such religious denomination, sect or church. (154a)
In this case, corporation sole is composed of only one person, usually
the head or bishop of the diocese, a unit which is not subject to
expansion for the purpose of determining any percentage whatsoever.
Only the administrator and not the owner of the temporalities located in
the territory comprised by said corporation sole and such temporalities
are administered for and on behalf of the faithful residing in the diocese
or territory of the corporation sole. It has no nationality and the
citizenship of the incumbent and ordinary has nothing to do with the
operation, management or administration of the corporation sole, nor
effects the citizenship of the faithful connected with their respective
dioceses or corporation sole.
EMERGENCY RECIT:
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of
the City of Davao, executed a deed of sale of a parcel of land located
in the same city covered by Transfer Certificate No. 2263, in favor of
the Roman Catholic Apostolic Administrator of Davao Inc.,(RCADI) is
corporation sole organized and existing in accordance with Philippine
Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual
incumbent. Registry of Deeds Davao (RD) required RCADI to submit
affidavit declaring that 60% of its members were Filipino Citizens. As
the RD entertained some doubts as to the registrability of the deed of
sale, the matter was referred to the Land Registration Commissioner
(LRC) en consulta for resolution. LRC hold that pursuant to provisions
of sections 1 and 5 of Article XII of the Philippine Constitution, RCADI
is not qualified to acquire land in the Philippines in the absence of
proof that at least 60% of the capital, properties or assets of the RCADI
is actually owned or controlled by Filipino citizens. LRC also denied the
registration of the Deed of Sale in the absence of proof of compliance
with such requisite. RCADI’s Motion for Reconsideration was denied.
Aggrieved, the latter filed a petition for mandamus. Whether or not
RCADI is qualified to acquire private agricultural lands in the
Philippines pursuant to the provisions of Article XIII of the Constitution.
SC ruled that RCADI is qualified. A corporation sole consists of one
person only, and his successors (who will always be one at a time), in
some particular station, who are incorporated by law in order to give
them some legal capacities and advantages, particularly that of
perpetuity, which in their natural persons they could not have had. In
this sense, the king is a sole corporation; so is a bishop, or dens,
distinct from their several chapters
Constitution demands that in the absence of capital stock, the
controlling membership should be composed of Filipino citizens.
(Register of Deeds of Rizal vs. Ung Sui Si Temple). Undeniable proof
that the members of the Roman Catholic Apostolic faith within the
territory of Davao are predominantly Filipino citizens. Presented
evidence to establish that the clergy and lay members of this religion
fully covers the percentage of Filipino citizens required by the
Constitution. The fact that the law thus expressly authorizes the
corporations sole to receive bequests or gifts of real properties (which
were the main source that the friars had to acquire their big haciendas
during the Spanish regime), is a clear indication that the requisite that
bequests or gifts of real estate be for charitable, benevolent, or
educational purposes, was, in the opinion of the legislators, considered
sufficient and adequate protection against the revitalization of religious
landholdings. As in respect to the property which they hold for the
corporation, they stand in position of TRUSTEES and the courts may
exercise the same supervision as in other cases of trust.
23 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
24 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
25 - Canete v CA 171 SCRA 13(1989);
GR NO. 45330
Ponente:
TOPIC: Effect of separation
DOCTRINE:
Citing Watson v. Jones, in a similar case, this Court ruled that the use
of properties of a "religious congregation" in case of schism, is
controlled by the numerical majority of the members. The minority
in choosing to separate themselves into a distinct body, and
refusing to recognize the authority of the government body, can
claim no rights in the property from the fact that they once had
been members. ||
EMERGENCY RECIT:
FACTS: Early 1900's, a certain Inocenta de Veyra from Tanauan, Leyte
founded the "Cofradia de Nuestra Señora de Belen", a voluntary
religious group of hermanas mayores. Inocenta donated to the
Cofradia the disputed images of the Holy Infant Jesus and of the
Blessed Virgin (de Belen), respectively. The Cofradia is responsible for
the material care of the religious icons, as well as for the ceremonies
and rites which culminate in the annual observance of the fiesta. Said
religious group has been largely governed through the years by
customs and traditions. It is not known if there are by-laws within the
association. CdIt was the unbroken practice in the Cofradia that the
hermana mayor, during her incumbency, would keep in her custody as
trustee, the two images, the vestments, garments and standarte,
including the cash contributions of its members, with the tacit
understanding that the said religious images and the unspent funds
would be turned over to the next hermana mayor on the first day of the
succeeding year.
Petitioner Exaltacion Cañete was elected as the hermana mayor and
as such she took possession of the subject religious articles and funds
of the Cofradia. Because of the quarrel between the parish priest of
Tanauan, Fr. Manuel Gomez and Bishop Salvador of the Diocese,
resulting in the suspension and relief of the former, the Cofradia, an
erstwhile cohesive group of women devotees, had been drawn into the
controversy and was now split into two camps: one loyal to the ex-
parish priest Fr. Gomez, and the other, identified with the newly-
designated parish priest Fr. Parilla. The Cofradia members with Fr.
Gomez elected Sofia Cavite as thehermana mayor for 1973, replacing
Exaltacion Cañete, while the group with Fr. Parilla chose Bienvenida
Casas. Exaltacion Cañete surrendered the images to Sofia Cavite.
Claiming to be members of the Cofradia and owners in common of its
properties including the disputed images of the Blessed Virgin (de
Belen) and the Holy Infant Jesus, respondents, originally twenty-one in
number, brought an action against Exaltacion Cañete and Sofia Cavite
for the "Recovery of Personal Properties with Writ of Attachment and
Damages" Petitioners countered that the subject images were
ecclesiastical properties and therefore outside the province of the civil
courts, and that respondents, as members of an unregistered
organization, had no legal personality to sue. On the other hand, the
plaintiffs (private respondents herein) maintain that these chattels are
properties of their Cofradia. TC’ judgment is hereby rendered
declaring the plaintiffs, as members of the Cofradia de Nuestra Señora
de Belen of Tanauan, the true owners with right to possession of the
images, vestments, standards and funds in question;||
ISSUE: Who of the two factions would be entitled to possession of the
properties in litigation, all of them being members of the same
association||
HELD: As correctly ruled by the trial court, the question which came
before it concerns rights of property held by a religious society, strictly
independent of the church. Hence, the rights of such an organization to
the use of its property must accordingly be determined by the ordinary
principles which govern voluntary association.
Citing Watson v. Jones, in a similar case, this Court ruled that the use
of properties of a "religious congregation" in case of schism, is
controlled by the numerical majority of the members. The minority in
choosing to separate themselves into a distinct body, and refusing to
recognize the authority of the government body, can claim no rights in
the property from the fact that they once had been members.
||
26 – IEMELIF (Iglesia Evangelica Metodista En Las Islas Filipinas) v.
Bishop Lazaro (2010)
GR NO. 184088
Ponente: ABAD, J.
TOPIC: Conversion to religious corporation
PRELIMINARY NOTE ON THE TERM “MEMBER”: The language of
the case is confusing because it says that there is only “one member”
in a Corporation Sole. However, such “one member” needs a two-
thirds vote of the “members of the corporation” to amend its articles.
For purposes of distinction, think of the “one member” as the
occupant of the sole office and “members of the corporation” as
the members or followers of the religious society (a Corporation Sole
is a religious society under Secs. 109 and 110 of the Code).
DOCTRINE: Section 109 of the Corporation Code allows the
application to religious corporations of the general provisions
governing non-stock corporations. For non-stock corporations, the
power to amend its articles of incorporation lies in its members. The
code requires two-thirds of their votes for the approval of such an
amendment.
[In a corporation sole, the] one member, here the General
Superintendent, is but a trustee, according to Section 110 of the
Corporation Code, of its membership. The one member, with the
concurrence of two-thirds of the membership of the organization
for whom he acts as trustee, can self-will the amendment.
EMERGENCY RECIT: The primary contention here involves the
proper procedure for conversion from a Corporation Sole to a
Corporation Aggregate. Petitioner religious corporation was
established in 1909 and, decades later, was incorporated as a
Corporation Sole. In 1973, the general membership voted for its
conversion into a corporation aggregate. However, the papers were not
processed and the SEC, in 2001, advised it to do so to formalize such
conversion. Thus, the occupant of the sole office (the General
Superintendent) sought and received a favorable vote from more than
two-thirds of all the religious society’s followers to file an amended
Articles of Incorporation to cause the conversion. A faction that
opposes the General Superintendent filed for injunction with the RTC
saying that the proper process was to, first, dissolve the corporation
sole, and then later, re-incorporate as a corporation aggregate. RTC,
as affirmed by CA and SC, denied the application for injunction. SC
said the General Superintendent followed the correct procedure (see
DOCTRINE). As SC said, the “[one member / occupant of the office /
General Superintendent], with the concurrence of two-thirds of the
membership of the organization for whom he acts as trustee, can self-
will the amendment.”
27 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
TITLE XIV
28 - Alhambra Cigar and Cigarette Manufacturing v SEC 24 (1968)
Ponente: Sanchez
TOPIC: Expiration of Corporate Term
DOCTRINE: A corporation cannot extend its life by amendment of its
Articles of Incorporation effected during the 3 year statutory period for
liquidation when its original term of existence had already expired.
Since the privilege of extension is purely statutory, all of the statutory
conditions precedent must be complied with in order that the extension
may be effectuated. And, generally, these conditions must be complied
with, and the steps necessary to effect the extension must be taken,
during the life of the corporation, and before the expiration of its term of
existence as originally fixed by its charter or the general law, since, as
a rule, the corporation is dissolved as soon as that time expires.
EMERGENCY RECIT:
FACTS:
 January 5, 1912 – Petitioner Alhambra was duly
incorporated under Philippine laws (by corporate articles, will
exist for 50 years from incorporation) Expiration: January 15,
1962
 On January 15, 1962, it ceased transacting business and
entered into liquidation. The new corporation, Alhambra
Industries, Inc. was formed to carry on the business of
Alhambra. Angel S. Gamboa was named trustee to take
charge of its liquidation
 June 20, 1963 – RA 3531 was enacted into law (it was
enacted within Alhambra’s 3-year statutory period for
liquidation, amended Section 18 of Corporation Law and
empowered domestic private corporations to extend their
corporate life beyond the period but not to exceed 50 years
in any one instance
 || previous Law, maximum non-extendible term of such
corporation was 50 years ||
  Alhambra’s board of directors resolved to amend paragraph
“Fourth” of its articles of incorporation to extend its corporate
life for an additional of 50 years
ISSUE: WON corporation may extend its life by amendment of its
articles of incorporation effected during the 3-year statutory period for
liquidation when its original term of existence had already expired.
(NO)
SC: The continuance of a “dissolved corporation as a body corporate
for 3 years has for its purpose the final closure of its affairs, and no
other; the corporation is specifically enjoined from “continuing the
business for which it was established.” The liquidation of the
corporation’s affairs became necessary precisely because its life has
ended. For this reason alone, the corporate existence and juridical
personality of that corporation to do business may no longer be
extended. Thus, the moment a corporation’s right to exist as an
“artificial person” ceases, its corporate powers are terminated “just as
the powers of a natural person to take part in mundane affairs cease to
exist upon his death. There is a broad distinction between the
extension of a charter and the grant of a new one. To renew a charter
is to revive a charter which has expired, or, in other word, ‘to give a
new existence to one which has been forfeited, or which has lost its
vitality by lapse of time.” To extend a charter is to “increase the time for
the existence of one which would otherwise reach its limit at an earlier
period.” Nowhere in our statute do we find the word “renew” in
reference to the authority given to corporations to protract their lives.
Our law limits itself to extension of corporate existence. Extension may
be made only before the term provided in the corporate charter
expires. Expansive construction is possible only when there is
something to expand. At the time of the passage of RA 3531,
Alhambra’s corporate life had already expired. It had overstepped the
limits of its limited existence.
29 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
30 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
31. JAMES REBURIANO AND URBANO REBURIANO V. COURT
OF APPEALS AND PEPSI COLA
G.R. NO. 102965, 21 JANUARY 1999
MENDOZA, J.
DOCTRINE: The board of directors may be permitted to
complete the corporate liquidation by continuing as “trustees”
by legal implication.
Since the law specifically allows a trustee to manage the
affairs of the corporation in liquidation, any supervening fact,
such as the dissolution of the corporation, repeal of a law, or
any other fact of similar nature would not serve as an effective
bar to the enforcement of such right.
EMERGENCY RECIT
Facts: Petitioners Reburiano were ordered by the RTC to
solidarily pay Pepsi 55K less whatever empty bottle case
(worth 55 pesos each) that may be returned. CA modified the
ruling removing the 55-peso worth empty bottle case part. The
judgment had become final and executory and a writ of
execution was issued. Before the said judgment’s
promulgation, Pepsi amended its articles to shorten its term—
which was approved by the SEC. Thereafter, petitioners
moved to quash the writ of execution on the ground that the
decisions of the RTC and CA are a nullity because of lack of
jurisdiction and Pepsi’s lack of capacity to sue and be sued by
virtue of its cessation. Pepsi countered that when the
complaint was filed, it was still an existing corporation so that
the mere fact it was dissolved was yet to be resolved did not
warrant the dismissal of the case.
Issue: Can a dissolved and non-existing corporation be
represented by a lawyer and therefore litigate still?
Held: Yes!
A corporation that has a pending action and which cannot be
terminated within the three-year period after its dissolution is
authorized to convey all its property to trustees to enable it to
prosecute and defend suits by or against the corporation
beyond the three-year period. The counsel who prosecuted and
defended the interest of the corporation in the instant case and
who in fact appeared in behalf of the corporation may be
considered a trustee of the corporation at least with respect to
the matter in litigation only.
The trustee may commence a suit which can proceed to final
judgment even beyond the three-year period. No reason can be
conceived why a suit already commenced by the corporation
itself during its existence, not by a mere trustee who, by
fiction, merely continues the legal personality of the dissolved
corporation should not be accorded similar treatment allowed
—to proceed to final judgment and execution thereof.”
There is, therefore, no reason why the suit filed by Pepsi
should not be allowed to proceed to execution.
32 - Alabang Dev Corp v Alabang Hills Village Ass (2014)
GR NO.187456
Ponente: Peralta, J.
TOPIC: Methods of Liquidation
DOCTRINE:
EMERGENCY RECIT: Alabang Development Corporation (ADC) is the
developer of Alabang Hills Village (AHVAI) and still owns certain parcel
of land that are yet to be sold, as well as those open spaced that have
not yet been donated to Local Government of Muntinlupa or to
Homeowner’s association. ADC filed a complaint for Injunction and
Damages against AVHAI and its president, Rafael for allegedly starting
the construction of a multi-purpose hall and a swimming pool on one of
the parcels of land still owned by ADC, without the latter’s consent and
approval, and despite demand, failed to desist from constructing
thereof. In its answer with counter-claim, AHVAI denied ADC’s
allegations and made the following claims: a) That ADC has no legal
capacity to sue because its corporate existence was already dissolved
by SEC on May 26, 2003; b) That ADC has no cause of action as it
was merely holding the property in trust for AHVAI as beneficial owner
thereof; c) That the lot is part of the open space required by law to be
provided in the subdivision. RTC dismissed ADC’s complaint.
ISSUE: WON ADC has no legal capacity to sue
HELD: It is to be noted that the time during which the corporation,
through its own officers, may conduct the liquidation of its assets and
sue and be sued as a corporation is limited to three years from the
time the period of dissolution commences; but there is no time limit
within which the trustees must complete a liquidation placed in their
hands. It is provided only that the conveyance to the trustees must be
made within the three-year period. It may be found impossible to
complete the work of liquidation within the three-year period or to
reduce disputed claims to judgment. The authorities are to the effect
that suits by or against a corporation abate when it ceased to be an
entity capable of suing or being sued; but trustees to whom the
corporate assets have been conveyed pursuant to the authority of Sec.
78 [now Sec. 122] may sue and be sued as such in all matters
connected with the liquidation. In this case, ADC’s corporate
registration was revoked on May 26, 2003. Iit had three years, or until
May 26, 2006, to prosecute or defend any suit by or against it. The
subject complaint, however, was filed only on October 19, 2006, more
than three years after such revocation. It is likewise not disputed that
the subject complaint was filed by petitioner corporation and not by its
directors or trustees. Thus, it is clear that at the time of the filing of the
subject complaint petitioner lacks the capacity to sue as a corporation.
To allow petitioner to initiate the subject complaint and pursue it until
final judgment, on the ground that such complaint was filed for the sole
purpose of liquidating its assets, would be to circumvent the provisions
of Section 122 of the Corporation Code.
33 Republic v. Marsman Development Company (1972)
GR NO. L-18956
Ponente: J. Barredo
TOPIC: Methods of liquidation
DOCTRINE/S:
While sec. 77 of the Corporation Law provides for a 3 year period for
the continuation of the corporate existence of the for purposes of
liquidation, an action for the recovery of the corporation’s debts against
the liquidator thereof even after the lapse of the said 3-year period can
still be sustained.
EMERGENCY RECIT
Marsman was a timber licensee with concessions in Camarines Norte.
The CIR discovered that Marsman was liable for forest charges,
deficiency sales tax, surcharges and penalties, so 3 assessments
totaling P59k were made. The 1st assessment was made on Oct. 15,
1953. Meanwhile, Marsman was extra-judicially dissolved on April 23,
1954. 2 more assessments from the CIR were made on Sept. 13, 1954
and Nov. 8, 1954. Then, the CIR filed the original complaint for
collection on Sept. 5, 1958. This was amended on Aug. 26, 1959 to
include as party defendant Mr. Burgess, the liquidator of Marsman.
Marsman contended that the CIR’s action for collection is already
barred by Sec. 77, which allows the corporate existence to continue for
only 3yrs after its dissolution for closing its affairs, since it has extra-
judicially dissolved on April 23, 1954; and the filing of both the original
complaint on Sept. 5, 1958 and the amended complaint on Aug. 26,
1959 was beyond the 3-yr period. The SC, ruling against Marsman,
held that the CIR’s action is not yet barred. It pointed out that CIR’s 1st
assessment was before Marsman’s dissolution and the 2 others were
made not later than 6 months after such dissolution. Thus, the
Government became the creditor of Marsman before the completion of
its dissolution by the liquidation of its assets. Burgess, whom it chose
as liquidator, became in law the trustee of all its assets for the benefit
of all persons enumerated in Sec. 78, including its creditors, among
whom is the Government, for the taxes herein involved.
34 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
TITLE XV
35 – Roy III v. Chairperson Teresita Herbosa
GR NO. 207246
Ponente: Caguioa
TOPIC: Voting Control Test v. Beneficial Ownership Test
DOCTRINE: As defined in the SRC-IRR, “[b]eneficial owner or
beneficial ownership means any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (which includes the power to
vote or direct the voting of such security) and/or investment returns or
power (which includes the power to dispose of, or direct the disposition
of such security).”
The “beneficial owner or beneficial ownership” definition in the SRC-
IRR is understood only in determining the respective nationalities of
the outstanding capital stock of a public utility corporation in order to
determine its compliance with the percentage of Filipino ownership
required by the Constitution.
EMERGENCY RECIT: In 2011, The Court issued the Gamboa
Decision clarifying the defines “capital” in Sec 11, Art 12 of the 1987
Constitution, which refers only to shares of stock entitled to vote in the
election of directors (in that case, only to common shares, and not the
total outstanding capital stock). In 2013, the SEC, through Respondent
Herbosa, issued SEC-MC No. 8. Petitioner Roy filed a petition
assailing the validity of SEC-MC No. 8 for not conforming to the letter
and spirit of Gamboa Decision and Resolution for having been issued
by the SEC with grave abuse of discretion. The Court ruled that SEC-
MC No. 8 have been issued in accordance to the Gamboa Decision
and Resolution. Sec 2 of SEC-MC No. 8 clearly incorporates the Voting
Control Test or the controlling interest requirement. In fact, it goes
beyond requiring a 60-40 ratio in favor of Filipino nationals in the voting
stock. As to the Beneficial Ownership Test, even though it was not
expressly mentioned in the memorandum, it does not follow that the
SEC will not apply this test in determining the shares claimed to be
owned by Philippine nationals are Filipino. To be sure, the SEC takes
its guiding lights also from the FIA, and its IRRs, and the SRC.
Facts:
On June 28, 2011, the Court issued the Gamboa Decision, the
dispositive portion of which reads:
WHEREFORE, we PARTLY GRANT the petition and rule
that the term "capital" in Section 11, Article XII of the 1987
Constitution refers only to shares of stock entitled to vote in
the election of directors, and thus in the present case only
to common shares, and not to the total outstanding
capital stock (common and non-voting preferred
shares). Respondent Chairperson of the Securities and
Exchange Commission is DIRECTED to apply this definition
of the term "capital" in determining the extent of allowable
foreign ownership in respondent Philippine Long Distance
Telephone Company x x x
The Gamboa decision attained finality on Oct. 18, 2012. The SEC
posted 2 Notices in its website inviting the public to attend a public
dialogue and to submit comments on the draft memorandum circular
on the guidelines to be followed in determining the compliance with the
Filipino ownership requirement in public utilities. Petitioner Atty. Jose
M. Roy III submitted his written comments.
On May 20, 2013, the SEC, through Chairperson Herbosa, issued
SEC-MC No. 8 entitled "Guidelines on Compliance with the Filipino-
Foreign Ownership Requirements Prescribed in the Constitution and/or
Existing Laws by Corporations Engaged in Nationalized and Partly
Nationalized Activities." Section 2 of SEC-MC No. 8 provides:
Section 2. All covered corporations shall, at all times,
observe the constitutional or statutory ownership
requirement. For purposes of determining compliance
therewith, the required percentage of Filipino ownership
shall be applied to BOTH (a) the total number of outstanding
shares of stock entitled to vote in the election of directors;
 AND (b) the total number of outstanding shares of stock,
whether or not entitled to vote in the election of directors.
On June 10, 2013, Petitioner Roy, as a lawyer and taxpayer, filed the
Petition on the following grounds:
1. assailing the validity of SEC-MC No. 8 for not
conforming to the letter and spirit of the Gamboa
Decision and Resolution and for having been issued by
the SEC with grave abuse of discretion.
2. He seeks to apply the 60-40 Filipino ownership requirement
separately to each class of shares of public utility
corporation, whether common, preferred non-voting,
preferred voting or any other class of shares.
3. He prays that the Court declare SEC-MC No. 8
unconstitutional and direct the SEC to issue new guidelines
regarding the determination of compliance with Section 11,
Article XII of the Constitution in accordance with Gamboa.
Respondent Chairperson Herbosa sought the dismissal of the petitions
on the following grounds: 1) SEC did not abuse its discretion; and 2)
The petitioners’ challenge is premature considering that the SEC has
not yet issued a definitive ruling thereon.
Issues:
1. WON the SEC’s issuance of SEC-MC No. 8 is tainted with grave
abuse of discretion – NO
2. WON the SEC gravely abused its discretion in ruling that PLDT is
compliant with the constitutional limitation on foreign ownership –
NO
Held:
1. To determine whether the SEC acted with grave abuse of discretion,
the Court resorted to the issue and to decretal portion of the Gamboa
Decision and Resolution.
Issue in Gamboa Case: “Whether the term ‘capital’ in Sec. 11, Art XII of
the Constitution refers to the total common shares only or to the total
outstanding capital stock (combined total of common and non-voting
preferred shares) of PLDT, a public utility”
The Court directly answered the issue and consistently defined the
term "capital" in Section 11, Article XII of the Constitution refers only to
shares of stock entitled to vote in the election of directors, and thus in
the present case only to common shares, and not to the total
outstanding capital stock comprising both common and non-voting
preferred shares.
The term “full beneficial ownership” found in the FIA-IRR is to be
understood in the context of the entire paragraph defining the term
“Philippine national.” Mere legal title is not enough to meet the required
Filipino equity, which means that it is not sufficient that a share is
registered in the name of a Filipino citizen or national, i.e., he should
also have full beneficial ownership of the share.
Both the Voting Control Test and the Beneficial Ownership Test must
be applied to determine whether a corporation is a "Philippine
national". A "Philippine national," as defined in the Foreign Investments
Act of 1991 (FIA) and all its predecessor statutes, is "a Filipino citizen,
or a domestic corporation "at least sixty percent (60%) of the
capital stock outstanding and entitled to vote," is owned by Filipino
citizens. A domestic corporation is a "Philippine national" only if at least
60% of its voting stock is owned by Filipino citizens."
Section 2 of SEC-MC No. 8 clearly incorporates the Voting Control Test
or the controlling interest requirement. In fact, Section 2 goes
beyond requiring a 60-40 ratio in favor of Filipino nationals in the
voting stocks; it moreover requires the 60-40 percentage
ownership in the total number of outstanding shares of stock,
whether voting or not. The SEC formulated SEC-MC No. 8 to adhere
to the Court's unambiguous pronouncement that "[f]ull beneficial
ownership of 60 percent of the outstanding capital stock, coupled with
60 percent of the voting rights is required." Clearly, SEC-MC No. 8
cannot be said to have been issued with grave abuse of
discretion.
While SEC-MC No. 8 does not expressly mention the Beneficial
Ownership Test or full beneficial ownership of stocks requirement in
the FIA, this will not, as it does not, render it invalid — meaning, it does
not follow that the SEC will not apply this test in determining whether
the shares claimed to be owned by Philippine nationals are Filipino.
The pronouncement of the Court in the Gamboa Resolution — the
constitutional requirement to "apply uniformly and across the board to
all classes of shares, regardless of nomenclature and category,
comprising the capital of a corporation — is clearly an obiter dictum
that cannot override the Court's unequivocal definition of the term
"capital" in both the Gamboa Decision and Resolution. Nowhere in the
discussion of the definition of the term "capital" in Section 11, Article XII
of the 1987 Constitution in the Gamboa Decision did the Court mention
the 60% Filipino equity requirement to be applied to each class of
shares. The Gamboa Decision and Resolution Doctrine did NOT
make any definitive ruling that the 60% Filipino ownership
requirement was intended to apply to each class of share. With the
foregoing disquisition, the Court rules that SEC-MC No. 8 is not
contrary to the Court's definition and interpretation of the term "capital."
Accordingly, the petitions must be denied for failing to show grave
abuse of discretion in the issuance of SEC-MC No. 8.
2. The Court disposes of the second issue for being without merit. The
SEC already clarified that it has not yet issued a definitive ruling anent
PLDT’s compliance with the foreign ownership imposed under the
Constitution. Thus, in the absence of a definitive ruling by the SEC on
the PLDT’s compliance with the capital requirement pursuant to the
Gamboa Decision and Resolution, any question relative to the
inexistent ruling is premature.
36 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
37 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
38 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT:
39 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
GR NO.
Ponente:
TOPIC:
DOCTRINE:
EMERGENCY RECIT: PHILIPPINES, INC. Both of the Shipping companies did not heed the
demand of Home Insurance. Hence, Home Insurance filed a case to
recover these sums. In their complaint, Home Insurance alleged that it
is a foreign insurance company duly authorized to do business in the
40 - Petitioner v. Respondent, 123 SCRA 736 (19xx) Philippines through Mr. Victor Bello. It must be noted that at the time
GR NO. the insurance were executed over the goods shipped, Home Insurance
Ponente:
is not yet licensed to do business in the Philippines. The Respondents
TOPIC:
in this case, alleged that the contract is null and void and that Home
DOCTRINE:
Insurance has no capacity to sue in the Philippines. NOTE: At the time
EMERGENCY RECIT: Home Insurance initiated the action, it was able to acquire a license to
do business in the Philippines. The issue in this case is WON the
subsequent acquisition of a license enabled Home Insurance to avail
remedies in the Philippines.
41 - Petitioner v. Respondent, 123 SCRA 736 (19xx) The SC ruled that the lack of capacity at the time of the execution of
GR NO. the contracts was cured by the subsequent registration is also
Ponente: strengthened by the procedural aspects of these cases. The prohibition
TOPIC: against doing business without first securing a license is now given
DOCTRINE: penal sanction which is also applicable to other violations of the
Corporation Code under the general provisions of Section 144 of the
EMERGENCY RECIT: Code. It is, therefore, not necessary to declare the contract null and
void even as against the erring foreign corporation. The penal sanction
for the violation and the denial of access to our courts and
administrative bodies are sufficient from the viewpoint of legislative
42 - Petitioner v. Respondent, 123 SCRA 736 (19xx) policy.
GR NO.
Ponente: 47 – Facilities Management Corp. v. De la Osa, 89 SCRA 131
TOPIC: (1979)
DOCTRINE: GR NO. L-38649
Ponente: Justice Makasiar
EMERGENCY RECIT: TOPIC: Foreign Corporation; Subsequent Compliance
DOCTRINES:
A. The object of sections 68 and 69 of the Corporation Law was not to
prevent the foreign corporation from performing single acts, but to
43 - Petitioner v. Respondent, 123 SCRA 736 (19xx) prevent it from acquiring a domicile for the purpose of business without
GR NO. taking the steps necessary to render it amenable to suit in the local
Ponente: courts. It was never the purpose of the legislature to exclude a foreign
TOPIC: corporation which happens to obtain an isolated order for business
DOCTRINE: from the Philippine, from securing redress in the Philippine courts.
B. If a foreign corporation, not engaged in business in the Philippines is
EMERGENCY RECIT: not barred from seeking redress from courts in the Philippines, a
fortiori, that same corporation cannot claim exemption from being sued
in the Philippine courts for acts done against a person or persons in
the Philippines.
44 - Petitioner v. Respondent, 123 SCRA 736 (19xx) C. The act by a non-resident foreign corporation of recruiting Filipino
GR NO. workers for its own use abroad constitutes in the law doing business in
Ponente: the Philippines.
TOPIC:
DOCTRINE: EMERGENCY RECIT:
Facilities Management Corporation and J. S. Dreyer are domiciled in
EMERGENCY RECIT: Wake Island while J. V. Catuira is an employee of FMC stationed in
Manila. Leonardo dela Osa was employed by FMC in Manila, but
rendered work in Wake Island, with the approval of the Department of
Labor of the Philippines. De la Osa was employed as (1) painter with
45 - Petitioner v. Respondent, 123 SCRA 736 (19xx)
an hourly rate of $1.25 from March 1964 to November 1964, inclusive;
GR NO.
Ponente: (2) houseboy with an hourly rate of $1.26 from December 1964 to
TOPIC: November 1965, inclusive; (3) houseboy with an hourly rate of $1.33
DOCTRINE: from December 1965 to August 1966, inclusive; and (4) cashier with an
hourly rate of $1.40 from August 1966 to March 27 1967, inclusive. He
EMERGENCY RECIT: further averred that from December, 1965 to August, 1966, inclusive,
he rendered overtime services daily, and that this entire period was
divided into swing and graveyard shifts to which he was assigned, but
he was not paid both overtime and night shift premiums despite his
46 - Home Insurance Company v. EAstern Shipping Lines, (1983) repeated demands from FMC, et al. In a petition filed on 1 July 1967,
GR NO. L-34382 dela Osa sought his reinstatement with full backwages, as well as the
Ponente: J. Gutierres Jr. recovery of his overtime compensation, swing shift and graveyard shift
TOPIC: Subsequent Compliance differentials.
DOCTRINE: Lack of capacity to sue by foreign corporation at time of The SC ruled in the issue on WON the plaintiff appellant has been
execution of contract cured by its subsequent registration here. doing business in the Philippines, considering the fact that it has no
EMERGENCY RECIT: license to transact business in the Philippines as a foreign corporation.
This case involves 2 cases for maritime damages. Both of the products The SC ruled in the negative. The object of Sections 68 and 69 of the
which were shipped were insured by Home Insurance Company. Some Corporation Law was not to prevent the foreign corporation from
of the items shipped were damaged and Home Insurance paid the performing single acts, but to prevent it from acquiring a domicile for
Consignees for the damage and is now seeking reimbursement from the purpose of business without taking the steps necessary to render it
Eastern shipping and N. V. NEDLLOYD LIJNEN/COLUMBIAN amenable to suit in the local courts. It was never the purpose of the
Legislature to exclude a foreign corporation which happens to obtain
an isolated order for business from the Philippines, from securing
redress in the Philippine courts. It cannot be said that the Aetna
Casualty & Surety Company is transacting business of insurance in the
Philippines for which it must have a license. The Contract of insurance
was entered into in New York, U.S.A., and payment was made to the
consignee in its New York branch. It appears from the list of cases
issued by the Clerk of Court of the Court of First Instance of Manila
that all the actions, except two (2) cases filed by Smith, Beer & Co.,
Inc. against the Aetna Casualty & Surety Company, are claims against
the shipper and the arrastre operators just like the case at bar.
Consequently, since the appellant Aetna Casualty & Surety Company
is not engaged in the business of insurance in the Philippines but is
merely collecting a claim assigned to it by the consignee, it is not
barred from filing the instant case although it has not secured a license
to transact insurance business in the Philippines.
48 – SIGNETICS CORPORATION V CA (1993)
Ponente: Vitug, J.
GR NO. 105141
TOPIC: SEC. 133 Doing Business without a license – Instances
when unlicensed foreign corporations may be allowed to sue
DOCTRINE: Service of Summons on Foreign Corporations
Summons may be served upon an agent of the defendant who may not
necessarily be its "resident agent designated in accordance with law."
The term "agent", in the context it is used in Section 14, refers to its
general meaning, i.e., one who acts on behalf of a principal. The rule is
that, a foreign corporation, although not engaged in business in the
Philippines, may still look up to our courts for relief; reciprocally, such
corporation may likewise be "sued in Philippine courts for acts done
against a person or persons in the Philippines"
EMERGENCY RECIT:
The petitioner, Signetics was organized under the laws of the United
States of America. Through Signetics Filipinas Corporation (SigFil), a
wholly-owned subsidiary, Signetics entered into lease contract over a
piece of land with Fruehauf Electronics Phils., Inc. (Freuhauf).
Freuhauf sued Signetics for damages, accounting or return of
certain machinery, equipment and accessories, as well as the transfer
of title and surrender of possession of the buildings, installations and
improvements on the leased land claiming that Signetics caused SigFil
to insert in the lease contract the words "machineries, equipment and
accessories," the defendants were able to withdraw these assets from
the cost-free transfer provision of the contract. Service of summons
was made on Signetics through TEAM Pacific Corp. on the basis of
the allegation that Signetics is a "subsidiary of US PHILIPS
CORPORATION, and may be served summons at Philips Electrical
Lamps, Inc., Las Piñas, Metro Manila. Petitioner filed a motion to
dismiss the complaint on the ground of lack of jurisdiction over
its person. Invoking Section 14, Rule 14, of the Rules of Court and the
rule laid down in Pacific Micronisian Line, Inc., v. Del Rosario and
Pelington to the effect that the fact of doing business in the Philippines
should first be established in order that summons could be validly
made and jurisdiction acquired by the court over a foreign corporation.
It was denied. The petitioner argues that what was effectively alleged
in the complaint as an activity of doing business was "the mere equity
investment" of petitioner in SigFil, which the petitioner insists, had
theretofore been transferred to TEAM holdings, Ltd.
SC ruled that it correctly assumed jurisdiction over the petitioner,
a foreign corporation, on its claim in a motion to dismiss, that it
had since ceased to do business in the Philippines. As explained
by the Court in Pacific Micronisian, summons may be served upon an
agent of the defendant who may not necessarily be its "resident agent
designated in accordance with law." The term "agent", in the context it
is used in Section 14, refers to its general meaning, i.e., one who acts
on behalf of a principal. The allegations in the complaint have thus
been able to amply convey that not only is TEAM Pacific the business
conduit of the petitioner in the Philippines but that, also, by the charge
of fraud, is none other than the petitioner itself. The rule is that, a
foreign corporation, although not engaged in business in the
Philippines, may still look up to our courts for relief; reciprocally, such
corporation may likewise be "sued in Philippine courts for acts done
against a person or persons in the Philippines" (Facilities Management
Corporation v. De la Osa), provided that, in the latter case, it would not
be impossible for court processes to reach the foreign corporation, a
matter that can later be consequential in the proper execution of
judgment. Hence, a State may not exercise jurisdiction in the absence
of some good basis (and not offensive to traditional notions of fair play
and substantial justice) for effectively exercising it, whether the
proceedings are in rem, quasi in rem or in personam.
49 - Avon Insurance PLC v CA 227 (1997)
G.R. No. 97642. August 29, 1997
Ponente: J. Torres Jr.
TOPIC: Instances When Unlicensed Foreign Corporations May Be
Allowed to Sue
DOCTRINE:
Before a foreign corporation can transact business in the
country, it must first obtain a license to transact business here and
secure the proper authorizations under existing law. If a foreign
corporation engages in business activities without the necessary
requirements, it opens itself to court actions against it, but it shall not
be allowed maintain or intervene in an action, suit or proceeding for its
own account in any court or tribunal or agency in the Philippines.
EMERGENCY RECIT:
Respondent Yupangco Cotton Mills engaged to secure with Worldwide
Security and Insurance Co. several of its properties which were then
covered by reinsurance treaties between Worldwide Security and
several foreign reinsurance companies, including herein petitioners.
These reinsurance agreements had been made through an
international broker acting for Worldwide Security. While the policies
are in effect, Yupangco’s properties were razed in fire giving rise to
their indemnification. Worldwide acknowledged a remaining balance
and assigned to Yupangco all reinsurance proceeds still collectible
from all the reinsurance companies. Thus, as assignee and original
insured, Yupangco instituted a collection suit against petitioners.
Petitioners averred that they are foreign corporations not doing
business in the Philippines therefore cannot be subject to the
jurisdiction of its courts. CA ruled in favor of Yupangco.
SC held that the petitioners are foreign corporations not doing
business in the Philippines. To qualify the petitioners’ business of
reinsurance within the Philippine forum, resort must be made to the
established principles in determining what is meant by “doing business
in the Philippines.” The term ordinarily implies a continuity of
commercial dealings and arrangements, and contemplates, to that
extent, the performance of acts or works or the exercise of the
functions normally incident to and in progressive prosecution of the
purpose and object of its organization.
As it is, private respondent has made no allegation or demonstration of
the existence of petitioners’ domestic agent, but avers simply that they
are doing business not only abroad but in the Philippines as well. It
does not appear at all that the petitioners had performed any act which
would give the general public the impression that it had been
engaging, or intends to engage in its ordinary and usual business
undertakings in the country. The reinsurance treaties between the
petitioners and Worldwide Surety and Insurance were made through
an international insurance broker, and not through any entity or means
remotely connected with the Philippines. Moreover, there is authority to
the effect that a reinsurance company is not doing business in a
certain state merely because the property or lives which are insured by
the original insurer company are located in that state. The reason for
this is that a contract of reinsurance is generally a separate and distinct
arrangement from the original contract of insurance, whose contracted
risk is insured in the reinsurance agreement. Hence, the original
insured has generally no interest in the contract of reinsurance.
Indeed, if a foreign corporation does not do business here, there would
be no reason for it to be subject to the State’s regulation. As we
observed, in so far as the State is concerned, such foreign corporation
has no legal existence. Therefore, to subject such corporation to the
courts’ jurisdiction would violate the essence of sovereignty.
 TITLE XVI

50 - Petitioner v. Respondent, 123 SCRA 736 (19xx)

GR NO.
Ponente:
TOPIC:
DOCTRINE:

EMERGENCY RECIT:

51 - Petitioner v. Respondent, 123 SCRA 736 (19xx)

GR NO.
Ponente:
TOPIC:
DOCTRINE:

EMERGENCY RECIT: