SU College of Law

JD 204/302
Practical Exercises
January 3, 2014
Problem I - Francis
Te !oca !ola !om"any o# $tlanta, %&$ '!o(e %&$) entere* into a +oint
,enture to #orm a cor"oration or-ani.e* un*er te la/s o# te Pili""ines, name* !oca
!ola 0ottlers Pils1 Inc1, '!ocaPil), /it e2uity o# 4031 Its +oint ,enture "artners /ere
Fili"ino citi.ens an* resi*ents controllin- 403 o# !ocaPil1 153 o# !ocaPil /as el*
by te exclusi,e local im"orter an* *istributor o# !oca !ola concentrates in te
Pili""ines, /ic obtaine* a loan #rom !o(e %&$ to "ay #or its 153 e2uity in !ocaPil1
Te loan /as secure* by a ,otin- trust a-reement, /ereby te ol*er o# te 153 e2uity
in !ocaPil boun* imsel# to al/ays ,ote is sares /it !o(e %&$1 Te remainin- 453
/as subscribe* by &an 6i-uel !or"oration1 Te +oint ,enture "ro,e* to be ,ery
"ro#itable1 7o/e,er, a#ter 15 years in o"eration, tere /as a #allin- out bet/een te +oint
,enture "artners /ic le* to a series o# suits1
a1 8ne suit in,ol,e* te &olicitor 9eneral /ic callen-e* te le-al status o#
!ocaPil in a quo warranto "rocee*in- on te -roun* tat it #aile* to "ass te
nationality re2uirement1 !an te &olicitor 9eneral "ro,e tat te local *istributor
is a mere *ummy an* not a bona fide in,estor: I# so, o/: $ssumin- tis #act is
"ro,e*, is !o(e %&$ *oin- business in te Pili""ines: Determine its status,
ri-ts an* liabilities: Deci*e an* *iscuss #ully /it le-al citations an* autorities1
b1 &u""ose te local *istributor ,ote* /it &an 6i-uel !or"oration to oust te
Presi*ent /o #a,ore* !o(e %&$1 6ay !o(e %&$ in,o(e te ,otin- trust: I# so,
o/ may !o(e %&$ en#orce its ri-ts un*er te ;otin- Trust $-reement: 6ay
te local *istributor re"u*iate te ,otin- trust on te -roun* tat it ,iolates te
nationality re2uirements #or te cor"oration: <at are teir res"ecti,e ri-ts:
Deci*e an* *iscuss #ully /it le-al citations an* autorities1
c1 &u""ose tat te local *istributor execute* a continuin- "roxy in #a,or o# !o(e
%&$ #or its sares in !ocaPil1 6ay it re-ain its ,otin- "o/er #rom !o(e %&$:
I# no, /y not: I# yes, *etail te "roce*ures to be ta(en1 &u""ose te local
in,estor in*orse* its stoc( certi#icate to te 153 e2uity in blan( to !o(e %&$,
<oul* your ans/er remain te same: Does !o(e %&$ a,e te ri-t to *eman*
o# te !or"orate &ecretary tat it be re-istere* in te cor"orate stoc( an* trans#er
boo( as te o/ner o# tese sares: <y or /y not: I# your ans/er is no, /at
are !o(e %&$=s reme*ies: Deci*e an* *iscuss #ully /it le-al citations an*
autorities1
Problem II> - 6ousy
Plan a strate-y #or an antici"ate* "roxy #i-t in !om"any 6acF1 Te stoc(s are
*istribute* as #ollo/s>
?our client> 510 common sares 100 "re#erre* sares
Te o""osition> 300 common sares @00 "re#erre* sares
8ters> 1@0 common sares 0 "re#erre* sares
a. Tere are @ seats in te 0oar*1 ?our ob+ecti,e is to elect 4 Directors to ensure
tat you can control 2/3 o# te 0oar*1 Pre"are cumulati,e ,otin- simulations
#or your client an* a*,ise im on te best strate-y to solicit "roxies #rom
oters an* o/ many more sares trou- "roxies nee* to be tar-ete*1
b. &u""ose, asi*e #rom te election, tere is a "ro"osal to amen* te $rticles
trou- an increase in te autori.e* ca"ital stoc(1 ?our client o""oses te
amen*ment1 7o/ /oul* you a*,ise your client on te strate-y to *e#eat te
,ote: In te e,ent your client #ails, /at /oul* you a*,ise im: (Now you
must represent the minority and oppose the increase.)
Problem: Why would you oppose the increase in the capital stock if you
are the majorityt!s absurd that the client who is in control" turn around
and oppose the increase of the authori#ed capital stock.
$odified: client!s preferred shares should be increased: %&'( opposition
reduced to )*' preferred shares+,-.,//0" there is a problem in the
number of common and preferred shares. .lient!s shares should be
majority
Problem III - Aelrose
a1 !om"any $ is en-a-e* in te manu#acture o# atletic an* s"orts soes1 8ne o#
te *i,isions, 0, ma(es s"orts ba-s as a com"lement to te soes1 Te 0oar*
o# !om"any $ *eci*es to s"in-o## 0 as a +oint ,enture com"any /it !,
/ereby $ sall ol* 403 an* ! 403 o# te e2uity o# 01 8utline te
necessary ste"s to e##ect te s"in-o##1 Pro,i*e *etails /it exam"les1
b1 $s 0 be-ins to o"erate an in*e"en*ent an* bona fide o"eration1 D, a #ormer
contractor o# $ #or leater, can,ass an* nylon, 2uestions te s"in-o## on te
-roun* tat it is a mere subter#u-e to a,oi* contractual liabilities, consi*erin-
tat D, in antici"ation o# a bi- contract /it $, ire* a**itional em"loyees1
Discuss te im"lications o# tis situation1
Problem I; B 9retel 'real case o# &oli*ban()
0an( & is currently controlle* by 6, a Fili"ino -rou", an* A, a !ana*ian 0an(1
To remain com"etiti,e, & nee*s #res ca"ital in#usion1 6, o/e,er, /oul* rater
sell its sares tan "ut in more money1 A is /illin- an* able to "ut in all te
money nee*e*, but tere is te "roblem o# & becomin- a #orei-n-o/ne* ban(1 A
*oes not /ant & con,erte* into an o##-sore ban(1 Pre"are a counselor=s brie# on
all te acce"table le-al o"tions a,ailable to A1 !ite "ertinent la/s an* autorities1
Problem ;
$0!, Inc1 o/ns a "rime "arcel o# lan* in !alin*a-an1 DEF !o1
a""roaces it an* "ro"oses a +oint ,enture to *e,elo" a i--en* con*o-tel1 %n*er
te terms o# tis +oint ,enture, $0!=s only ex"osure sall be te lan*, /ile DEF
sall #inance te *e,elo"ment #rom its o/n resources, /itout usin- te lan* as
collateral #or a loan1 To "ursue te +oint ,enture, te "arties or-ani.e a ne/
cor"oration, 6onticello $rms 7otel !or"oration, /it $0! ol*in- 303 o# te
e2uity an* DEF controllin- C031 &ares /ere *i,i*e* into common an* "re#erre*
sares1 &oon a#ter te +oint ,enture com"any is #orme*, DEF re2uires $0! to
assi-n its lan* to te +oint ,enture com"any1 $0! is reluctant at #irst, because it
/oul* li(e to assi-n its "ro"erty only /en DEF sall a,e also "ut in a
substantial "ortion o# te ca"ital nee*e* to im"lement te "ro+ect1 7o/e,er, DEF
is ,ery "ersuasi,e, so $0! e,entually assi-ns te "ro"erty e,en /itout DEF=s
counter"art ca"ital1
$ conse2uence o# tis assi-nment, o/e,er, is tat $0! tem"orarily
ac2uires control o# te +oint ,enture com"any1 Tis is because, un*er te Internal
De,enue !o*e '&ec1 35, c12), a tax-#ree excan-e can only be e##ecte* i# te
stoc(ol*er excan-in- its "ro"erty #or stoc( retains at least ma+ority control o#
te cor"oration to /ic te "ro"erty as been trans#erre*1
In te meantime, DEF still as not "ut in its ca"ital, altou- it as
succee*e* in interestin- a #e/ in,estors to ac2uire sares #rom te +oint ,enture
com"any1 Te "rocee*s o# tese sales a,e been *e"osite* in te +oint ,enture
com"any=s ban( account1 Tecnically, o/e,er, te sares tat a,e been sol* to
in,estors soul* "ertain to DEF=s sares, because te +oint ,enture com"any as
not o"ene* #or subscri"tion a**itional sares #rom its autori.e* ca"ital stoc(,
neiter as $0! /ai,e* its "re-em"ti,e ri-t to te a**itional subscri"tion, i#
tere e,er /as any a,ailable1 To com"licate matters, DEF, at te time /en it /as
still in control o# te +oint ,enture com"any, issue* stoc( certi#icates to tese
in,estors, $0! an* itsel#1 $-ain, tis ,iolate* te "ro,ision in te !or"oration
!o*e tat no stoc( certi#icate may be issue* until te #ull subscri"tion #or a batc
o# sares as been #ully "ai*1 Te issuance o# te certi#icates /as also *e#ecti,e,
because> 11 Te certi#icates /ere not issue* in seriesE tus in,estors /ere issue*
certi#icates numbers 1-@, /ile $0!=s certi#icates /ere alrea*y numbere* 33-45E
21 Te stoc( certi#icates *i* not contain te restrictions in*icate* in te 0y Fa/sE
an* 31 Te certi#icates /ere issue* in a sin-le series /itout any *istinction as to
/eter tey /ere issue* #or common or "re#erre* sares1
<en DEF still #aile* to "rocee* /it te *e,elo"ment, $0! exercise* its
controllin- interest an* con,ince* DEF to /it*ra/ #rom its role as *e,elo"er an*
allo/ te +oint ,enture com"any to *irectly "ursue te "ro+ect1 !onse2uently, a
ne/ a-reement /as #or-e*, an* DEF a-ree* to remain a mere minority in,estor in
te +oint ,enture com"any1
<it tis reor-ani.ation, te +oint ,enture com"any a/ar*e* te
construction contract #or te "ro+ect to 97I !onstruction on a sare s/a" basis
'#or "re#erre* sares only)1 $#ter te -roun*brea(in-, o/e,er, 97I #ails to
"rocee* /it te /or(s1 !oncerne* about te *elay, $0! ste"s in an* *oes te
/or( #or 97I1 Due to ,ery limite* resources, o/e,er, te /or( mo,es ,ery
slo/ly1 Tis -i,es DEF an o""ortunity to com"lain to $0! tat it /as in con#lict-
o#-interest because it /as *oin- business /it te +oint ,enture com"any as a sub-
contractor o# 97I1 $0! i-nore=s DEF=s com"laint1
In te meantime, $0! *isco,ers tat, a#ter te reor-ani.ation, DEF close*
te ban( account o# te +oint ,enture com"any an* /it*re/ all te remainin-
cas1 Aee*less to state, DEF *i* tis /itout autority #rom te 0oar* o#
Directors o# te +oint ,enture com"any, altou- DEF=s re"resentati,es /ere still
autori.e* si-natories o# te ban( account1
!onclu*in- tat #rau* /as bein- committe* by DEF, $0! initiates a
secon* reor-ani.ation o# te +oint ,enture com"any1 Tis time, all o# DEF=s
re"resentati,es to te 0oar* are ouste* an* re"lace* by $0!=s nominees1 DEF
"rotests, an* claims tat all its actions /ere consistent /it its role as *e,elo"er
un*er te ori-inal a-reement1 DEF also insists tat $0! is in breac o# te +oint
,enture a-reement #or not "rotectin- its re"resentati,es= ri-t to sit on te 0oar*
as a-ree* u"on by te "arties1
a1 $ Fa/ Firm is bein- en-a-e* by DEF to #ile an action to "re,ent te
ne/ 0oar* #rom actin- on beal# o# te +oint ,enture com"any, /ile
anoter Fa/ Firm is en-a-e* by $0! *e#en* it a-ainst te com"laint
#ile* by DEF1
b1 $ tir* Fa/ Firm is en-a-e* by te $0!=s stoc(ol*ers in te +oint
,enture com"any to "er"etually *is2uali#y DEF=s nominees to te
0oar* #or ultra 1ires acts /ic as "ro,en inimical to te interests o#
te +oint ,enture com"anyE an* to re+ect all claims by in,estors
trou- DEF1
c1 $ #ourt Fa/ Firm is en-a-e* by 97I to *eman* its "ro"ortionate
sare o# "re#erre* stoc(s #rom te +oint ,enture com"any base* on
/at it a* accom"lise* be#ore it /as terminate*E an* to "rotect itsel#
a-ainst "otential actions by DEF a-ainst $0! an* itsel# on te alle-e*
Gcon#lict-o#-interestH sub-contractin- *eal1
*1 $ #i#t Fa/ Firm is en-a-e* by I?J, an in,estor trou- DEF, to
com"el te +oint ,enture com"any to onor its in,estment in te +oint
,enture com"any, /ic as been re"u*iate* an* cancelle* by te ne/
0oar* on te -roun* tat te com"any ne,er recei,e* te in,estment
trou- DEF
Problem ;I - 9us
&tar 6ar(etin- !or"oration '&tar) is a "ublicly tra*e* com"any /it $
'exclusi,ely tra*e* #or citi.ens only) K 0 'o"enly tra*e*)1 It is classi#ie* as a
Fili"ino multinational cor"oration1 Its ma+or stoc(ol*ers are as #ollo/s>
&antos -rou" @ 3 $
23 0
Julueta -rou" C3 $
C3 0
&&& C3 $
9&I& C3 $
0PI Trust 53 $
6etroban( Trust 53 $
Dobertson &umma !or"1 53 $
$FP Detirement Fun* 23 $
7&0! Trust 11 3 0
!iticor" In,estments @3 0
De"ublic o# In*onesia 53 0
PP&T$ 23 $
&tar Em"loyees Detirement Fun* 33 $
&tar 8##icers= Detirement Fun* 33 $
In*i,i*ual in,estors/stoc(ol*ers 13 $
In*i,i*ual In,estors/stoc(ol*ers 13 0
P!99 43 $
De"ublic o# Aauru 53 0
1003
&tar is currently controlle* by te &antos -rou", su""orte* by its relati,es,
te Julueta 9rou"1 Dobertson &umma !or"1, a com"etitor an* a /olly-o/ne*
subsi*iary o# Jonatan 9ran-er International, a #orei-n cor"oration license* to *o
business in te Pili""ines, as ma*e a bi* #or a seat on te 0oar* o# &tar1 Te
current mana-ement /ants to bloc( te mo,e on te -roun* tat com"any secrets
/oul* be ex"ose* to its com"etition an* -i,e it an un*ue a*,anta-e1
In te mi*st o# tis im"en*in- "roxy an* le-al battle, te Julueta 9rou"
*eclares tat it inten*s to /rest control o# mana-ement #rom te &antos 9rou"1
0y /ay o# secret bac(*oor ne-otiations, bro(ere* by a i- 6alacaLan-
"ersonality, te Dobertson &uma !or"1 intimates "ossible com"romise
arran-ements> sale o# its interest in &tar, a mer-er /it &tar on a 40 '&tar) B 40
'Dobertson &umma) basis to #orm te &tar Dobertson &umma !o,1 Inc1 'GAe/
!o1H), or buy out by &tar o# Dobertson &umma resultin- in ma(in- te latter a
subsi*iary o# te #ormer1 Inci*entally, te alliance, in /ate,er #orm, may result in
a near mono"oly o# te business by te sur,i,in- entity1
a1 8ne Fa/ Firm is en-a-e* by te &antos 9rou", /ile anoter is
en-a-e* by te Doberston &umma !or"1 0ot clients re2uest teir res"ecti,e
counsel to "re"are a le-al strate-y 'le-al basis, a*,ice, "roce*ures/ste"s, *ra#t
*ocumentations) to a**ress te #ollo/in- o"tions>
11 En-a-in- te o""osition 'tis soul* inclu*e te Julueta -rou" #or bot
"arties) in a "roxy /ar '#rom solicitin- "roxies, to
"resentin-/callen-in- "roxies, to te stoc(ol*ers= meetin-/election o#
*irectors, to "ost-election contro,ersies)1
21 &ellin- all or substantially all o# cor"orate assets '#rom cor"orate
actions, to re"ortin- re2uirements, to a**ressin- a""raisal ri-t
callen-es)1
31 Potential quo warranto #ile* by te &olicitor 9eneral #or ille-al
combinations in restraint o# tra*e1
41 &ellin-/ac2uirin- all or te controllin- interest in te oter com"any
'#rom cor"orate actions, to ban( syn*ication #or #inancin-, to escro/
$rran-ements #or "ayment, to *ue *ili-ence ins"ections)1
51 6er-er resultin- in Ae/ !o1 '#rom cor"orate actions, to or-ani.ation o#
Ae/ !o, to "roce*ure #or retirement o# existin- sares an* *istribution
o# ne/ ones, to ,aluation o# sares Mi1e1, 3 #or e,ery 2, etc1N)1
Problem ;II - !ielo
J is a non-stoc(, non-"ro#it e*ucational #oun*ation1 Due to se,ere
economic *i##iculties, te #oun*ation -oes trou- its *issolution "rocess1 $#ter
satis#yin- all te liabilities an* obli-ations o# te #oun*ation, se,eral assets
remain1 Tese assets may be classi#ie* as>
(a) 2he school!s library collection donated by the 3-,4 upon a condition
requirin5 return" transfer or con1eyance to the donor or 5rantor upon
dissolution(
(b) 2he school!s 5ymnasium which is subject to limitations permittin5 its use
only for educational purposes" without any condition to return to the 5rantor
or donor upon dissolution( and
(c) , forklift" 6 dump trucks" the ,7- 8 /aw buildin5s" and assorted ,pple
$acs" 9Pads" and the radio station with its broadcast franchise and license"
which are held without any apparent or implied limitations.
&e,eral te members o# te #oun*ation claim o/nersi" o,er any o# its assets
*urin- te /in*in- u" "rocess: Discuss #ully o/ tese assets may be *istribute*
by te #oun*ation an*, an* i# so, to /om an* un*er /at con*itions1
Problem ;III - !laire
$ #amily-o/ne* cor"oration controls an* o"erates a scool1 %n*er its
$rticles o# Incor"oration, te cor"oration=s "rimary "ur"ose is to establis an*
o"erate te scool1 %n*er its current set-u", te scool=s Presi*ent is sim"ly an
a*ministrati,e em"loyee an* not te cor"oration=s cie# executi,e o##icer1 Tis
situation as arisen, because te 0y Fa/s o# te cor"oration *o not re2uire tat
te Presi*ent soul* be cosen #rom amon- te members o# te 0oar* o#
Directors/Trustees1 Discuss #ully tat "ro"riety/re-ularity, on te one an*, or te
in#irmity/irre-ularity o# tis situation1 Exten* your *iscussion to bot stoc( an*
non-stoc( e*ucation cor"orations1
Problem II> - DJ
$0! !or"1, a close cor"oration, alrea*y as 20 stoc(ol*ers1 It nee*s to ex"an*
an* tere#ore nee*s an a**itional ca"ital C03 more o# /at it alrea*y as1 I?J
!or"1 a""roaces $0! !or"1 an* o##ers to co,er te a**itional ca"ital1 $0!
!or"1 see(s your le-al a*,ice, an* ma(es it clear tat it /ants to maintain
exclusi,e control o,er te mana-ement o# te business1
Problem I - E*-ar
&mart 6acines !or"oration '&6!) is "ublicly liste* in te 6a(ati &toc(
Excan-e '6&E)1 It is controlle* an* o"erate* by &antia-o /o ol*s 113 o#
&6!=s stoc(s1 7is cousin, Joilo, is o"enly callen-in- &antia-o #or control o# te
com"any an* is acti,ely buyin- &6! sares tra*e* at te 6&E1 Fac(in- te
resources to #en* o## Joilo=s callen-e, &antia-o enlists !arlos as is G/ite
(ni-tH by arran-in- to sell 103 o# is &6! sares to !arlos1 !arlos, in turn,
"romises to matc Joilo=s a--ressi,e "urcase o# &6! sares at te 6&E1
&antia-o a-rees to sell te sares to !arlos at
P 25/sare1 Te sares are currently bein- tra*e* at te 6&E #or P 20/sare1 Tey
a-ree tat tey /ill instruct teir res"ecti,e bro(ers to buy an* sell te sares
simultaneously at 10 am on February 1C, 200@1 &antia-o=s arran-ement /it
!arlos is tat e /ill continue to be Presi*ent o# &6!, /ile !arlos /oul* be te
ne/ !airman1 Doberto, &antia-o=s Finance 8##icer, /o is "ri,y to te
con#i*ential ne-otiations, also instructs is bro(er to sell is o/n &6! sares,
/ic is about 13 o# &6!=s outstan*in- stoc(, at
P 25/sare at 11 am, on February 1C, 200@, at te 6&E1 <en te &6! stoc(s are
tra*e* at 10 am on February 1C, 200@, tey o"en at P 25/sare an* attract in,estor
interest so tat te "rice closes at P 2C150/sare on tat *ay1 Te #ollo/in- *ay,
/en *eman* #or te sares *ramatically *ecreases, te "rice "er sare closes at
P 1@1501
a1 Discuss #ully /eter te transaction o# &antia-o an* !arlos ,iolates te
De,ise* &ecurities !o*e1
b1 Discuss #ully /eter Doberto ,iolate* te De,ise* &ecurities !o*e1
c1 <at scemes to *e#rau* te in,estin- "ublic are consi*ere* ,iolations o# te
De,ise* &ecurities !o*e: 9i,e exam"les an* *iscuss eac #ully1
*1 Discuss #ully /eter te #ailure o# a "re-nee* com"any to ma(e -oo* on its
commitments to "lanol*ers is actionable un*er te De,ise* &ecurities !o*e1
e1 <at is a pon#i scheme: $ssume a G*ouble-your-moneyH "romo o# a
com"any is a pon#i sceme, *iscuss #ully /eter it is actionable un*er te
De,ise* &ecurities !o*e1
Problem XI - Kichi
a. J is te "aris "riest o# 6en*o.a1 Te curc at 6en*o.a as ac2uire* se,eral
"ro"erties, so tese /ere all title* in te name o# J1 J *ie* su**enly1 Durin- te settlement
o# is estate, is eirs a*+u*icate te "ro"erties title* in is name to temsel,es1 Te
"arisioners come to you #or le-al a*,ise1 Discuss their options fully.
b1 Part o# te "ro"erties liste* in J=s estate is "ro"erty e inerite* as ca"ital #rom
is #ater1 Te "aris social action center as been built on tis "ro"erty as an annex to
te curc an* is use* acti,ely #or te ministry acti,ities o# te "aris1 7o/ /oul* you
caracteri.e J=s title to tis "ro"erty1
c. Can a corporation sole be converted? Discuss fully.
Problem XII - Julo
a1 $l#onso 6e*iTools, Inc1 '$l#onso), #rom 6anila, contracte* /it 0ernar*
7os"ital &ystems !or"oration '0ernar*), #rom Ae/ ?or(, to im"ort me*ical
a""aratus1 Tey conclu*e* teir a-reement o,er te internet1 0ernar* burne* te co"y
o# te contract in a com"act *isc1 Tis became te only co"y o# te contract bet/een
te "arties1 $ *is"ute arose bet/een tem1 0ernar* sues $l#onso #or breac o#
contract in a 6anila court1 $ssume teir relationsi" is limite* to tis isolate*
transaction1 <en 0ernar*=s la/yer "resents te !D as "roo# o# te contract,
$l#onso=s la/yer ob+ects on te -roun* tat te contents o# te !D are not a*missible
in e,i*ence #or not a,in- been re*uce* in /ritin-, *uly si-ne* by te "arties, an* #or
not bein- notari.e* an* autenticate* be#ore te Pili""ine consul o# Ae/ ?or(1
Deci*e1
b1 I# te +u*-e *enies te ob+ection, /at oter sustainable ob+ections can you
raise on beal# o# $l#onso: Discuss #ully1
c1I# te "lace o# execution is material to te en#orceability o# te contract, /ere
/as te transaction in "roblem Ao1 1 abo,e execute*: Discuss #ully1
*1 Tere is an 11 our time *i##erence bet/een 6anila an* Ae/ ?or(1 I# te *ate
o# execution is material to im"lementation o# te contract, /at is te -o,ernin-
e##ecti,e *ate o# execution: Discuss #ully1
e1 &ection 25 o# te !or"oration !o*e "ro,i*es> ::: a majority of the number of
directors ::: shall constitute a quorum for the transaction of corporate business :::1
To autori.e $l#onso to enter into te contract /it 0ernar*, a 0oar* meetin- /as
el* at its cor"orate ea*2uarters1 Present in "erson at te 0oar* Doom /ere 4
*irectors o# a 15-man 0oar*1 $lso "resent by tele an* ,i*eo con#erence e2ui"ment in
te 0oar* Doom /ere 1 *irector in Duma-uete, an* 2 *irectors #rom !ebu1 Te oter
*irectors *i* not "artici"ate1 <as tis a ,ali* meetin-: I# yes, *iscuss te
*ocumentation re2uirements /ic soul* be obser,e*1
Problem IIII - Deynil
6FFI, a #orei-n cor"oration, trou- 6FFP, a local com"any, sol* commo*ity
#utures to te "ublic /itout te "ro"er license to *o business1 6FFI #ile* a case in
court a-ainst a local in,estor1 Te local in,estor, a/are tat 6FFI a* no license,
ar-ues tat it as no le-al stan*in- in Pili""ine courts1 Deci*e1
Problem II; - $cas
Pilsu-ar is o/ne* 403 by $merican &u-ar, a %& com"any, an* Fu.on International
Tra*in-, a Pili""ine cor"oration /it 403 #orei-n e2uity1 It as a 0oar* o# 51 T/o
are Fili"inos an* T/o are $mericans1 Te #i#t *irector is nominate* by te 40-40
Pili""ine cor"oration on a rotation basis> #or 1 year, a Fili"inoE te next, an
$merican1 Its business is te manu#acture o# su-ar /ic is to be ex"orte* 10031
$!TI, a com"etitor, callen-es Pilsu-ar #or #ailin- to obtain a license to *o
business #rom te &E!1 Pilsu-ar counters by assertin- tat it is a Pili""ine
Aational1 Deci*e1
Problem I; - $rman
Te 7os"ital Tools, %&$ "uts out -eneral a*,ertisements in national ne/s"a"ers1
&e,eral os"ital an* me*ical laboratories "lace or*ers *irectly to te %&$1 $s a
result, 7os"ital Tools, %&$ arran-es to train te "ersonnel o# tese client os"itals
an* laboratories in te use o# te e2ui"ment, all ex"enses "ai*, at teir
manu#acturin- "lant in te %&$1 Pili""ine Instrumentation, Inc1, a local com"any,
callen-es 7os"ital Tools, %&$ #or not bein- license* to *o business in te
Pili""ines an* sues to cancel te latter=s contracts /it te os"itals an*
laboratories1 7os"ital Tools, %&$ ar-ues tat its acts *o not constitute *oin-
business1 Deci*e1
Problem I;I - Dea
T<I, a #orei-n com"any, enters into a licensin- an* re"resentati,e a-reement /it
T<Pil, a local com"any1 Te a-reements are structure* in a /ay tat T<I is
allo/e* to buy an* *istribute only T<I "ro*ucts to te "ublic, an*, as an exce"tion,
o# oter local manu#acturers /it /ic T<Pil is a##iliate* trou- interloc(in-
*irectorsi"s an* common e2uity control1 Te DTI *eman*s tat T<I soul* a""ly
#or a license to *o business /it te &E!1 T<I ar-ues tat T<Pil is an in*e"en*ent
entity /ic transacts business in its o/n name an* #or its o/n account an* is not in
any /ay consi*ere* T<I=s alter e5o1 Deci*e1
Problem I;II B Oyle
? com"any, base* in Ja"an, manu#actures ball bearin-s un*er te tra*e name bolas1 It
a""ointe* ? Distribution, Inc1, a *omestic cor"oration, to be its exclusi,e *istributor
in te Pili""ines1 ? *i* not sell any o# its "ro*ucts *irectly to Fili"ino consumers1
0ecause o# te "o"ularity o# bolas in te mar(et, Estoy Oen(oy, a Fili"ino
entre"reneur #rom Danao create* bulas /it essentially te same "ac(a-in-1 <en
te sale o# bulas be-ins to a##ect te mar(et sare o# bolas, ? a""oints Pe*ro
Pen*u(o as its resi*ent a-ent in te Pili""ines an* "rom"tly #iles suit a-ainst
Oen(oy #or un#air com"etition1 Te 2uestion o# le-al stan*in- is raise* as a *e#ense1
Deci*e1
Problem I;III - 9esta
J is a non-stoc(, non-"ro#it e*ucational #oun*ation1 Its cam"us sits on "rime real
estate in te city1 6e-a Deal Estate !om"any ma(es an o##er tru, !, one o# te
members-*irectors to buy substantially all o# te assets o# te #oun*ation1 !
con,inces te oters to sell on te "romise tat te "rocee*s o# te sale /ill be
*i,i*e* amon- tem1 In s"ite o# te "rotests o# D, te sale is a""ro,e* an*
consummate*1 <en ! claims #or a sare in te "rocee*s o# te sale, J *enies te
claim sayin- tat te "rocee*s /ill -o to te scolarsi" #un* an* to te ac2uisition o#
"ro"erty #or a ne/ cam"us1 ! #iles a suit to com"el J to "ay on te -roun* tat te
latter is a #amily an* a close cor"oration1 Deci*e1
Problem III - $ila
EJ$ cor"oration /as or-ani.e* /it an autori.e* ca"ital stoc( o# P 1,000,0001
P 250,000 o# tis /as *uly subscribe* an* "ai* #or1 DF! subscribe* to P50,000 /ort
o# te sares1 &ubse2uently, te 0oar* *eci*e* to o"en #or subscri"tion te remainin-
PC50,000 /ort o# sares an* te same /ere *uly subscribe* an* "ai* #or by TDD1
DF! "roteste* TDD=s subscri"tion on te -roun* tat no stoc(ol*ers= meetin- /as
*uly calle* #or te "ur"ose o# o"enin- #or subscri"tion te unissue* sares, an* #or
not bein- able to exercise is "re-em"ti,e ri-ts to te issuance1 Deci*e1
Problem II
Te 7os"ital Tools, %&$ "uts out -eneral a*,ertisements in national ne/s"a"ers1
&e,eral os"ital an* me*ical laboratories "lace or*ers *irectly to te %&$1 $s a
result, 7os"ital Tools, %&$ arran-es to train te "ersonnel o# tese client os"itals
an* laboratories in te use o# te e2ui"ment, all ex"enses "ai*, at teir manu#acturin-
"lant in te %&$1 Pili""ine Instrumentation, Inc1, a local com"any, callen-es
7os"ital Tools, %&$ #or not bein- license* to *o business in te Pili""ines an* sues
to cancel te latter=s contracts /it te os"itals an* laboratories1 7os"ital Tools,
%&$ ar-ues tat its acts *o not constitute *oin- business1 Is $!TI correct:
Problem III - $lex
a1 Te $merican &tan*ar* !om"any, %&$ entere* into a +oint ,enture in a
cor"oration or-ani.e* un*er te la/s o# te Pili""ines, name* &anitary <ares, Inc1
'&ani/ares), /it an e2uity o# 4@31 Its +oint ,enture "artners /ere Fili"ino citi.ens
an* resi*ents controllin- 513 o# &ani/ares1 23 o# &ani/ares '"art o# te 513) /as
el* by te exclusi,e local im"orter an* *istributor o# $merican &tan*ar* in te
Pili""ines, /ic obtaine* a loan #rom $merican &tan*ar* to "ay #or its e2uity in
&ani/ares1 Te loan /as secure* by a ,otin- trust a-reement, /ereby te ol*er o#
te 23 e2uity in &ani/ares boun* imsel# to al/ays ,ote is sares /it $merican
&tan*ar*1 Te +oint ,enture "ro,e* to be ,ery "ro#itable1 7o/e,er, a#ter 15 years in
o"eration, tere /as a #allin- out bet/een te +oint ,enture "artners /ic le* to a
series o# suits1 8ne suit in,ol,e* te &olicitor 9eneral /ic callen-e* te le-al
status o# &ani/ares in a quo warranto "rocee*in- on te -roun* tat it #aile* to "ass
te nationality re2uirement1 Deci*e1
b1 &u""ose, te local *istributor ,ote* /it te oter Fili"ino in,estors to oust te
Presi*ent /o #a,ore* $merican &tan*ar*1 6ay $merican &tan*ar* in,o(e te ,otin-
trust: 6ay te local *istributor re"u*iate te ,otin- trust on te -roun* tat it
,iolates te nationality re2uirements #or te cor"oration: <at are teir res"ecti,e
ri-ts: $ssumin- te local *istributor is a mere *ummy an* not a bona fide in,estor,
is $merican &tan*ar* *oin- business in te Pili""ines: Determine its status, ri-ts
an* liabilities:
Problem IIII - 6ar+ 'issue> "iercin- te ,eil)
Te Pili""ine 6otor !or"oration is a *omestic cor"oration en-a-e* in te
im"ortation an* *istribution o# luxury cars1 It sareol*ers are Jose, $ntonio, Pe*ro,
!arlos an* Aicolas1 Fi,e years later, Pablo, son o# Jose, !armen, /i#e o# $ntonio,
Deynal*o, broter-in-la/ o# Pe*ro, !arlos an* Aicolas, or-ani.e* te Fancy !ars,
Inc1, a *omestic cor"oration en-a-e* in te sellin- o# luxury cars1 %"on its
incor"oration, te Pili""ine 6otor !or"oration a""ointe* te Fancy !ars, Inc1 as its
exclusi,e *istributor in te ;isayas an* 6in*anao1 &ales taxes #or te ori-inal sale o#
eac im"orte* car to te Fancy !ars, Inc1 /ere *uly "ai* by te Pili""ine 6otor
!or"oration1 Te Fancy !ars, Inc1 *i* not "ay sales taxes #or its subse2uent sale o#
cars to te "ublic on te "remise tat teir sales *i* not constitute ori-inal sales1 Te
0ureau o# Internal De,enue, alle-in- tat te Fancy !ars, Inc1 is a mere subsi*iary o#
te Pili""ine 6otor !or"oration, assesse* te latter #or *e#iciency sales taxes1
Deci*e1
Problem IIIII - !arolyn
$nselmo /as te "resi*ent an* "rinci"al stoc(ol*er o# !ity Trans"ort, Inc1 7e
lease* to te cor"oration 3 +ee"neys #or ire1 I-nacio, an em"loyee o# !ity Trans"ort,
Inc1, /ile *ri,in- one o# te +ee"neys, #i-ure* in an acci*ent resultin- in in+ury to
6auro1 I-nacio /as con,icte* #or rec(less ne-li-ence, but coul* not "ay te
*ama-es1 6auro sue* $nselmo, claimin- tat !ity Trans"ort is is mere alter e5o an*
is subsi*iarily liable #or te *ama-es incurre*1 Deci*e1
Problem III;
Domulus, Demus, 7ercules, %lysses an* $cilles /ere te stoc(ol*ers o# Titans,
Inc1 /ic o/ne* consi*erable real estate1 Tey *eci*e* to *issol,e te com"any an*
entere* into a "artition a-reement as a conse2uence o# te *issolution1 <en tey
submitte* te "lan o# "artition to te De-ister o# Dee*s, te latter re+ecte* it an*
re#use* to re-ister it1 Deci*e1
Problem II;- $n*re/
Fla,io a* te i*ea o# startin- a ne/ business an* en-a-e* Fran(lin to "re"are a
#easibility stu*y1 <en te stu*y /as *one, Fla,io sent it out to "ros"ecti,e in,estors
to -et tem intereste*1 Teo*oro an* Eusebio /ere amon- tose /o in,este*
substantially in te cor"oration, /ic /as e,entually or-ani.e*1 <en Fran(lin /as
not "ai* #or is ser,ices, e sue* Fla,io, Teo*oro, Eusebio an* te com"any as +oint
an* soli*ary *ebtors1 Deci*e1