OUTLINE ON PHILIPPINE CORPORATE LAW

From the Outline of Atty. CESAR L VILLANUEVA

Textbook:
PHILIPPINE CORPORATE LAW (Latest Edition)
by: Atty. Cesar L Villanueva

Grading System:
Recitation - 30%
Quizzes - 10%
Prelim - 20%
Midterms - 20%
Finals - 20%

I HISTORICAL BACKGROUND
1 Philippine Corporate Law:1[2] Sort of Codification of American Corporate
Law
Harden v Benguet Consolidated Mining, 58 Phil 141 (1933)
2 The Corporation Law
3 The Corporation Code
4 Proper Treatment of Philippine Corporate Law

II CONCEPTS

1 Definition (Section 2; Articles 44(3), 45, 46, and 1775, Civil Code)
Monfort Hermanos Agricultural Dev. Corp. v. Monfort III, 434 SCRA 27 (2004)
2 Tri-Level Existence of the Corporation
(a) Aggregation of Assets and Resources
(b) Business Enterprise or Economic Unit
(c) Juridical Entity
3 Relationships Involved in a Corporate Setting
(a) Juridical Entity Level
(b) Contractual Relationship Level
Between the corporation and its agents or representatives
Between the corporation and its shareholders or members
Between and among the shareholders in a common venture
Between the corporation and third-parties or "outsiders"
4 Theories on the Formation of Corporation:
(a) Theory of Concession
Tayag v Benguet Consolidated, 26 SCRA 242 [1968])
International Express Travel & Tour Services, Inc v Court of Appeals, 343
SCRA 674 (2000)
Torres v Court of Appeals, 278 SCRA 793 (1997)
Ang Pue & Co v Sec of Commerce and Industry, 5 SCRA 645 (1962)
(b) Theory of Enterprise Entity

Arnold v Willets and Patterson, Ltd, 44 Phil 634 (1923)

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 PSE v Court of Appeals, 281 SCRA 232 (1997)
Tan Boon Bee & Co, Inc v Jarencio, 163 SCRA 205 (1988)
5 Four Attributes of a Corporation from its Statutory Definition:
(a) A corporation is an artificial being
(b) Created by operation of law
(c) With right of succession
(d) Has the powers, attributes and properties expressly authorized by
law or incident to its existence
Reynoso IV v. Court of Appeals, 345 SCRA 335 (2000)
Shipslide, Inc. v Court of Appeals, 352 SCRA 334 (2001)
6 Advantages and Disadvantages of Corporate Form:
(a) Four Basic Advantageous Characteristics of Corporate Organization:
(i) STRONG LEGAL PERSONALITY
Remo, Jr v IAC, 172 SCRA 405 (1989)
PLDT v. NTC, 190 SCRA 717 (1990)
DBP v. NLRC, 186 SCRA 841 (1990)
(ii) LIMITED LIABILITY TO INVESTORS AND OFFICERS
Edward Keller v. COB Group Marketing, 141 SCRA 86 (1986)
PNB v. Hydro Resources Contractors Corp., 693 SCRA 294 (2013)
Halley v. Printwell, Inc. 649 SCRA 116 (2011)
Land Bank of the Philippines v. Court of Appeals, 364 SCRA 375 (2001)
San Juan Structural and Steel Fabricators, Inc v Court of Appeals, 296
SCRA 631 (1998)
Consolidated Bank and Trust Corp v Court of Appeals, 356 SCRA 671(2001)
Malayang Samahan ng mga Manggagawa sa M Greenfield v Ramos, 357
SCRA 77 (2001)
(iii) FREE TRANSFERABILITY OF UNITS OF OWNERSHIP FOR INVESTORS
(iv) CENTRALIZED MANAGEMENT
(b) Disadvantages:
(i) Abuse of corporate management
(ii) Abuse of limited liability feature
(iii) Cost of maintenance
(iv) Double taxation Sec 24(B)(2), 1997 NIRC; Sec 27(D)(4), 1997 NIRC;
Sec 29, 1997 NIRC
7 COMPARED WITH OTHER BUSINESS MEDIA
4 Distribution of Risk, Profit and Control 4
(a) Sole Proprietorships
(b) Partnerships and Other Associations (Arts 1768 and 1775, Civil Code)
- Can a defective attempt o form a corporation result at least in the
formation of a partnership?
Pioneer Insurance v Court of Appeals, 175 SCRA 668 (1989)
(c) Joint Ventures
Kilosbayan, Inc v Guingona, Jr, 232 SCRA 110 (1994)
(d) Cooperatives (Art 3, RA No 6938)
Corpuz v Grospe, 333 SCRA 425 (2000)
(e) Business Trusts (Article 1442, Civil Code)
(f) Sociedades Annimas

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 Mead v McCullough, 21 Phil 95,106 (1911)
Benguet Consolidated Mining Co v Pineda, 98 Phil 711 (1956)
Phil Product Co v Primateria Societe Anonyme, 15 SCRA 301 (1965)
(g) Cuentas En Participacion - Article 239 of the Code of Commerce
Bourns v Carman, 7 Phil 117 (1906)

III NATURE AND ATTRIBUTES OF A CORPORATION

1 Nature of Power to Create a Corporation (Sec 16, Article XII, 1987
Constitution)
NDC v Philippine Veterans Bank, 192 SCRA 257 (1990)
Feliciano v. Commission on Audit, 419 SCRA 363 (2004)
2 CORPORATION AS A PERSON :
(a) Entitled to Due Process
Albert v University Publishing Co, 13 SCRA 84 [1965]
Smith Bell & Co v Natividad, 40 Phil 136, 144 (1920)
(b) Equal Protection Clause
Smith Bell & Co v Natividad, 40 Phil 136 [1920])
(c) Unreasonable Searches and Seizure
Stonehill v Diokno, 20 SCRA 383 (1967)
Bache & Co (Phil), Inc v Ruiz, 37 SCRA 823, 837 (1971)
(d) But Not Entitled to Privilege Against Self incrimination
Bataan Shipyard & Engineering v PCGG, 150 SCRA 181 (1987)
3 Liability for Torts
PCIBank v. Court of Appeals, 350 SCRA 446 (2001)
Professional Services, Inc. v. Court of Appeals, 611 SCRA 282 (2010)
PNB v Court of Appeals, 83 SCRA 237 (1978)
Sergio F Naguiat v NLRC, 269 SCRA 564 (1997)
4 Corporate Criminal Liability
Republic Gas Corp. v. Petron Corp, 698 SCRA 666 (2013)
Espiritu v. Petron Corp., 605 SCRA 245 (2009)
Ching v. Secretary of Justice, 481 SCRA 602 (2006)
Tupaz IV v. Court of Appeals, 476 SCRA 398 (2005)
The Executive Secretary v. Court of Appeals, 429 SCRA 81 (2004)
West Coast Life Ins Co v Hurd, 27 Phil 401 (1914)
People v Tan Boon Kong, 54 Phil 607 [1930]
Sia v Court of Appeals, 121 SCRA 655 [1983]

Articles 102 and 103, Revised Penal Code

Times, Inc v Reyes, 39 SCRA 303 (1971)

People v Concepcion, 44 Phil 129 (1922)
Cometa v Court of Appeals, 301 SCRA 459 (1999)

5 Recovery of Moral and Other Damages

Solid Homes, Inc. v. Court of Appeals, 275 SCRA 267 (1997)
Meralco v. T.E.A.M. Electronics Corp., 540 SCRA 62 (2007)

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 Filipinas Broadcasting Network v. Ago Medical and Educational Center, 448
SCRA 413 (2005)
Acebedo Optical Co. v. Court of Appeals, 329 SCRA 314 (2000)
Mambulao Lumber Co v Philippine National Bank, 22 SCRA 359 (1968)
APT v Court of Appeals, 300 SCRA 579 (1998)
Prime White Cement Corp v IAC, 220 SCRA 103 (1993)
LBC Express, Inc v Court of Appeals, 236 SCRA 602 (1994)
Acme Shoe, Rubber & Plastic Corp v Court of Appeals, 260 SCRA 714 (1996)
Solid Homes, Inc v Court of Appeals, 275 SCRA 267 (1997)
ABS-CBN Broadcasting Corp v Court of Appeals, 301 SCRA 589 (1999)

6 CORPORATE NATIONALITY: UNDER WHOSE LAWS INCORPORATED (Sec 123)

EXCEPTIONS: TEST OF CONTROLLING OWNERSHIP
Gamboa v. Teves, 652 SCRA 690 (2011); 682 SCRA 397 (2012)
1. DOJ-SEC Control Test: DOJ Opinion No. 020, s. 2005
2. The Grandfather Rule: (Opinion of DOJ No 18, s 1989, dated 19 January
1989; SEC Opinion, dated 6 November 1989, XXIV SEC QUARTERLY BULLETIN
(No 1- March 1990); SEC Opinion, dated 14 December 1989, XXIV SEC
QUARTERLY BULLETIN (No 2 -June 1990)
Up to what level do you apply the grandfather rule?
Palting v San Jose Petroleum Inc, 18 SCRA 924 [1966]
3. FIA Test of Philippine National: Section 3 (a) and (b) of FIA (R.A. 7042)
4. SEC Control Test: SEC Memorandum Circular No. 8, s. 2013

Rule Against Unlawful Corporate Layering

Narra Nickel Mining and Dev. Corp. v. Redmont Consolidated Mines Corp., G.R. No.
195580, April 21, 2014

Controlling Ownership Applies In:

(a) Exploitation of Natural Resources (Sec 140; Sec 2, Article XII, 1987
Constitution)
Narra Nickel Mining and Dev. Corp. v. Redmont Consolidated Mines Corp., G.R. No.
195580, April 21, 2014
Strategic Alliance Development Corporation v. Redstock Securities Ltd., 607 SCRA
413
J.G. Summit Holdings, Inc. v. Court of Appeals, 450 SCRA 169
Roman Catholic Apostolic Administrator of Davao, Inc v The LRC and the Register
of Deeds of Davao, 102 Phil 596 [1957])
Register of Deeds of Rizal v Ung Sui Si Temple, 97 Phil 58 (1955)

(b) Public Utilities (Sec 11, Article XII, 1987 Constitution)

People v Quasha, 93 Phil 333 [1953])
JRS Business Corp v Imperial Insurance, 11 SCRA 634 (1964)
Tatad v. Garcia, Jr, 243 SCRA 436 (1995)
(c) Mass Media (Sec 11(1), Art XVI, 1987 Constitution)
Sources: PD 36, as amended by PDs 191 and 197; DOJ Opinion No 120, s
of 1982; Section 2, PD 576; SEC Opinion dated 24 March 1983;

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 DOJ Opinion 163, s 1973; SEC Opinion dated 15 July 1991, XXV
SEC QUARTERLY BULLETIN, (No 4December, 1991), at p 31
Cable Industry
(d) Advertising Business (Sec 11(2), Art XVI, 1987 Constitution)
(e) War-Time Test
Filipinas Compania de Seguros v Christern, Huenefeld & Co, Inc, 89 Phil 54
[1951]
Davis Winship v Philippine Trust Co, 90 Phil 744 [1952]
Haw Pia v China Banking Corp, 80 Phil 604 [1948]
(f) Investment Test as to "Philippine Nationals" (Sec 3(a) &(b), RA 7042,
Foreign Investments Act of 1992)
(g) Special Classifications (Sec 140)