 purchase price to be paid 5% upon the

execution of the contract and the remainder

in installments of 5%, payable within the 1st
month of each and every quarter
startingJuly 1, 1935, w/ interest on deferred
payments at 6%/annum until paid
 They also agreed to forfeit in favor of seller
in case of default w/o court proceedings
 BOD resolution Aug 1, 1937: rescinding the
agreement
 Petitoners filed an action in the CFI against
Silang Traffic Co. Inc to recover certain sum
of money w/c they had paid severally to the
corp. on account of shares of stock they
indiv. agreed to take and pay for under
certain conditions
 Defenses:

1. That the resolution is not applicable to the

petitioners Sofronio T. Bayla, Josefa Naval,
and Paz Toledo because on the date
thereof "their subscribed shares of stock
had already automatically reverted to the
defendant, and the installments paid by
them had already been forfeited"
2. that said resolution of August 1, 1937,
was revoked and cancelled by a
subsequent resolution

 RTC: absolved defendant. BOD resolution

cancelled
 Petitioners appealed
ISSUES:
1. W/N the subsequent BOD resolution is
valid
2. W/N under the contract between the
parties the failure of the purchaser to pay
any of the quarterly installments on the
purchase price automatically gave rise to
the forfeiture of the amounts already paid
and the reversion of the shares to the
corporation
HELD: NO. CA reversed. Silang Traffic to pay
petitioners
1. NO
 noted agreement is entitled "Agreement for
Installment Sale of Shares in the Silang
Traffic Company, Inc.,"; that while the
purchaser is designated as "subscriber," the
corporation is described as "seller"
 Whether a particular contract is a
subscription or a sale of stock is a matter of
construction and depends upon its terms
and the intention of the parties
 subscription - mutual agreement of the
subscribers to take and pay for the stock of
a corporation
 purchase - independent agreement bet. the
individual and the corp. to buy shares of
stock from it at stipulated price
 rules governing subscriptions and sales of
shares are different
Corporate Law Case Digest: Bayla V.  Corporation Law regarding calls for unpaid
Silang Traffic Co. (1942) subscription and assessment of stock
(sections 37-50) do not apply to a purchase
G.R. Nos. L-48195 and 48196 May 1, of stock
1942  corporation has no legal capacity to release
Lessons Applicable: Purchase Agreement an original subscriber to its capital stock
(Corporation Law) from the obligation to pay for his shares, is
inapplicable to a contract of purchase of
FACTS: shares.
 Petitioners purchased the following:  The contract in question being one of
purchase and not subscription as we have
Sofronio T.
8 shares P360 heretofore pointed out, we see no legal
Bayla.......
impediment to its rescission by agreement of
the parties
Venancio
8 shares 375  We may add that there is no intimation in
Toledo........
this case that the corporation was insolvent,
or that the right of any creditor of the same
Josefa
15 shares 675 was in any way prejudiced by the rescission.
Naval..............
 The attempted revocation of said rescission
by the resolution of August 22, 1937, was
invalid, it not having been agreed to by the
petitioners.
2. NO
 The provision regarding interest on deferred
payments would not have been inserted if it
had been the intention of the parties to
provide for automatic forfeiture and
cancelation of the contract
 contract did not expressly provide that the
failure of the purchaser to pay any
installment would give rise to forfeiture and
cancelation without the necessity of any
demand from the seller
 Art. 1100 of the Civil Code: persons obliged
to deliver or do something are not in default
until the moment the creditor demands of
them judicially or extrajudicially the
fulfillment of their obligation, unless
(1) the obligation or the law expressly
provides that demand shall not be necessary
in order that default may arise
(2) by reason of the nature and
circumstances of the obligation it shall
appear that the designation of the time at
which that thing was to be delivered or the
service rendered was the principal
inducement to the creation of the obligation.
Velasco vs. PoizatG.R. No. L-11528; March
15, 1918
FACTS:
Poizat subscribed to 20 shares but only
paid for 5. Board made a call for payment
through a resolution.
Poizat refused to pay. Corporation became
insolvent.
Assignee in insolvency sued Poizat whose
defense was that the call was invalid for lack of
publication.
ISSUE: WON Poizat is liable to the unpaid
subscription.
HELD: YES. A stock subscription is subsisting li
ability from the time the subscription
is made, since it requires the subscriber to pay
interest quarterly from that date unless he
is relieved from such liability by the by-
laws of thecorporation. The subscriber is as
much bound to pay the amount of the share
subscribed by him as he would be to
pay any other debt, and the right of the
company to demand payment is no less
incontestable. The Board call became immaterial
when insolvencysupervenes, all unpaid
subscriptions become at once due and
enforceable.
Philippine National Bank vs. Bitulok
Sawmill, Inc.
23 SCRA 1366 (1968)
FACTS:
The Philippine Lumber Distributing Agency, Inc.,
according to the lower court,
"was organized sometime in the early part of
1947 upon the initiative and
insistence of the late President Manuel Roxas of
the Republic of the Philippines
who for the purpose, had called several
conferences between him and the
subscribers and organizers of the Philippine
Lumber Distributing Agency, Inc."
The purpose was praiseworthy, to insure a
steady supply of lumber, which could
be sold at reasonable prices to enable the war
sufferers to rehabilitate their
devastated homes. At the beginning, the lumber
producers were reluctant to
organize the cooperative agency as they believed
that it would not be easy to
eliminate from the retail trade the alien
middlemen who had been in this
business from time immemorial, but because the
late President Roxas made it
clear that such a cooperative agency would not
be successful without a
substantial working capital which the lumber
producers could not entirely
shoulder, and as an inducement he promised
and agreed to finance the agency
by making the Government invest P9.00 by way
of counterpart for every peso
that the members would invest therein."
Accordingly, "the late President Roxas
instructed the Hon. Emilio Abello, then
Executive Secretary and Chairman of the
Board of Directors of the Philippine National
Bank, for the latter to grant said
agency an overdraft in the original sum of
P250,000.00 which was later
increased to P350,000.00, which was approved
by said Board of Directors of the
Philippine National Bank on July 28, 1947,
payable on or before April 30, 1958,
with interest at the rate of 6% per annum, and
secured by the chattel mortgages
on the stock of lumber of said agency." The
Philippine Government did not
invest the P9.00 for every peso coming from
defendant lumber producers. The
loan extended to the Philippine Lumber
Distributing Agency by the Philippine
National Bank was not paid.
ISSUE:
Whether or not the non-compliance with a plain
statutory command,
considering the persuasiveness of the plea that
defendants-appellees would "not
have subscribed to the capital stock" of the
Philippine Lumber Distributing
Agency "were it not for the assurance of the then
President of the Republic that
the Government would back it up by investing
P9.00 for every peso" subscribed,
a condition which was not fulfilled, such
commitment not having been complied
with, be justified.
RULING:
NO.
It would be unwarranted to ascribe to the late
President Roxas the view that the
payment of the stock subscriptions, as thus
required by law, could be condoned
368
in the event that the counterpart fund to be
invested by the Government would
not be available. Even if such were the case,
however, and such a promise were
in fact made, to further the laudable purpose to
which the proposed corporation
would be devoted and the possibility that the
lumber producers would lose
money in the process, still the plain and specific
wording of the applicable legal
provision as interpreted by this Court must be
controlling. It is a well-settled
principle that with all the vast powers lodged in
the Executive, he is still devoid of
the prerogative of suspending the operation of
any statute or any of its terms
G.R. No. L-30646 January 30, 1929
THE GOVERNMENT OF THE PHILIPPINE
ISLANDS, petitioner,
vs.
THE MANILA RAILROAD COMPANY and JOSE
PAEZ as Manager of said Company,
respondents
Facts:
The government of the Philippines entered into a
contract with the manila rail road company
under a special charter act no. 1510. The
government of the Philippines is now demanding
from the defendant that it should provide and
equip its telegraph poles with crosspieces to
carry six telegraph wires of the Government.
This claim is based on the provisions of section
84 of act No. 1459. Act No. 1459 is the General
Corporation Law and was adopted by the United
States Philippine Commission on March 1, 1906.
(Vol. 5, Pub. Laws, pp. 224-268.) Section 84 of
the said Act provides:
The railroad corporation shall establish
along the whole length of the road a
telegraph line for the use of the railroad.
The posts of this line may be used for
Government wires and shall be of
sufficient length and strength and
equipped with sufficient crosspiece to
carry the number of wires which the
Government may consider necessary for
the public service. The establishment,
protection, and maintenance of the
wires and stations necessary for the
public service shall be at the cost of the
Government. (Vol. 5, P. L., p. 247.)
The defense of the defendant is that it is not
bound by the provisions of the corporation code
because it has a charter of his own Act. No
1510. Under that act the government is entitled
to place on the poles of the company four wires
only.
Issue:
Whether or not the provisions of the corporation
law apply between the parties.
Ruling:
Inasmuch as Act No. 1510 is the charter of
Manila Railroad Company and constitute a
contract between it and the Governmemnt, it
would seem that the company is governd by its
contract and not by the provisions of any general
law upon questions covered by said contract.
From a reading of the said charter or contract it
would be seen that there is no indication that
the Government intended to impose upon said
company any other conditions as obligations not
expressly found in said charter or contract. If
that is true, then certainly the Government
cannot impose upon said company any
conditions or obligations found in any general
law, which does not expressly modify said
contract.
Section 84 of the Corporation Law (Act No. 1459)
was intended to apply to all railways in the
Philippine Islands which did not have a special
charter contract. Act No. 1510 applies only to
the Manila Railroad Company, one of the
respondents, and being a special charter of said
company, its adoption had the effect of
superseding the provisions of the general
Corporation Law which are applicable to
railraods in general. The special charter (Act No.
1510) had the effect of superseding the general
Corporation Law upon all matters covered by
said special charter. Said Act, inasmuch as it
contained a special provision relating to the
erection of telegraph and telephone poles, and
the number of wires which the Government
might place thereon, superseded the general law
upon that question.
Act No. 1510 of the United States Philippine
Commission (vol. 5, P. L., pp. 350-358), and that
under the provisions of said Act No. 1510 the
Government is entitled to place on the poles of
the company four wires only.
. Rural Bank of Salinas, Inc. v. CA
210 SCRA 510
FACTS: Clemente G. Guerrero, President of
the Rural Bank of Salinas, Inc., executed a
Special Power of Attorney in favor of his
wife, Melania to sell or otherwise dispose of
and/or mortgage 473 shares of stock of the
Bank registered in his name (represented
by the Bank's stock certificates nos. 26, 49
and 65), to execute the proper documents
therefor, and to receive and sign receipts for
the dispositions. Melania, as Attorney-in-
Fact, executed a Deed of Assignment for
472 shares out of the 473 shares, in favor
of private respondents Luz Andico (457
shares), Wilhelmina Rosales (10 shares)
and Francisco Guerrero, Jr. (5 shares).
Melania Guerrero presented to Rural Bank
of Salinas the 2 Deeds of Assignment for
registration with a request for the transfer
in the Bank's stock and transfer book of the
473 shares of stock so assigned, the
cancellation of stock certificates in the
name of Clemente, and the issuance of new
stock certificates in the name of the new
owners thereof., Rural Bank denied such
request. Melania filed with the SEC an
action for mandamus against Rural Bank of
Salinas, its President and Corporate
Secretary.
The Bank in their Answer with
counterclaim alleged that upon the death
of Clemente, his 473 shares of stock
became the property of his estate, and his
property and that of his widow should first
be settled and liquidated in accordance
with law before any distribution can be
effected so that petitioners may not be a
party to any scheme to evade payment of
estate or inheritance tax and in order to
avoid liability to any third persons or
creditors of the late Clemente.
Maripol Guerrero filed a motion for
intervention (legally adopted daughter of
the late Clemente and Melanie) stating that
a Petition for the administration of the
estate of Clemente had been filed but her
motion was denied. She then filed before
the CFI of Rizal, against Melanie for the
annulment of the Deeds of Assignment for
being fictitious, void or simulated. The
Bank then filed a motion to
dissmiss/suspend hearing pending
resolution of the case for annulment.
However, SEC denied such motion.
SEC rendered a Decision granting the writ
of Mandamus and directing petitioners to
cancel stock certificates of the Bank, and to
issue new certificates in the names of
private respondents, except Melania
Guerrero. Appealed to the CA but CA
affirmed the decision of SEC.
ISSUES:
1. WON SEC has the power to adjudicate
the case. -Yes
2. WON corporatons may by its board, its
by-laws, or the act of its officers create
restrictions in stock transfers.No.
3. WON the Bank being a corporation may
refuse to transfer and register stocks. No.
HELD: 1. Section 5 (b) of P.D. No. 902-A
grants to the SEC the original and exclusive
jurisdiction to hear and decide cases
involving intracorporate controversies. An
intracorporate controversy has been defined
as one which arises between a stockholder
and the corporation. There is no distinction,
qualification, nor any exception whatsoever
(Rivera vs. Florendo, 144 SCRA 643 [1986]).
The case at bar involves shares of stock,
their registration, cancellation and
issuances thereof by petitioner Rural Bank
of Salinas. It is therefore within the power
of respondent SEC to adjudicate.
2. A corporation, either by its board, its by-
laws, or the act of its officers, cannot create
restrictions in stock transfers, because:. .
Restrictions in the traffic of stock must have
their source in legislative enactment, as the
corporation itself cannot create such
impediment. By-laws are intended merely
for the protection of the corporation, and
prescribe regulation, not restriction; they are
always subject to the charter of the
corporation. The corporation, in the absence
of such power, cannot ordinarily inquire into
or pass upon the legality of the transactions
by which its stock passes from one person to
another, nor can it question the
consideration upon which a sale is based. . .
. (Tomson on Corporation Sec. 4137, cited in
Fleisher vs. Nolasco, Supra).
The only limitation imposed by Section 63
of the Corporation Code is when the
corporation holds any unpaid claim against
the shares intended to be transferred,
which is absent here.
3. The right of a transferee/assignee to
have stocks transferred to his name is an
inherent right flowing from his ownership of
the stocks. Respondent SEC correctly ruled
in favor of the registering of the shares of
stock in question in private respondent's
names. Such ruling finds support under
Section 63 of the Corporation Code, to wit:
Sec. 63. . . . Shares of stock so issued are
personal property and may be transferred
by delivery of the certificate or certificates
indorsed by the owner or his attorney-in-fact
or other person legally authorized to make
the transfer. No transfer, however, shall be
valid, except as between the parties, until
the transfer is recorded in the books of the
corporation . . .
The corporation's obligation to register is
ministerial.
In transferring stock, the secretary
of a corporation acts in purely
ministerial capacity, and does not
try to decide the question of
ownership. (Fletcher, Sec. 5528,
page 434).
The duty of the corporation to
transfer is a ministerial one and if it
refuses to make such transaction
without good cause, it may be
compelled to do so by mandamus.
(See. 5518, 12 Fletcher 394)
Red Line Transport vs. Rural Transit
Red Line Transportation Co. vs. Rural
Transit Co.
GR No. 41570 | Sept. 6, 1934
Facts:
· This is a petition for review of an order of the
Public Service Commission granting to the Rural
Transit Company, Ltd., a certificate of public
convenience to operate a transportation service
between Ilagan in the Province of Isabela and
Tuguegarao in the Province of Cagayan, and
additional trips in its existing express service
between Manila Tuguegarao.
· On June 4, 1932, Rural Transit filed an
application for certification of a new service
between Tuguegarao and Ilagan with the Public
Company Service Commission (PSC), since the
present service is not sufficient
· Rural Transit further stated that it is a holder
of a certificate of public convenience to operate a
passenger bus service between Manila and
Tuguegarao
· Red Line opposed said application, arguing
that they already hold a certificate of public
convenience for Tuguegarao and Ilagan, and is
rendering adequate service. They also argued
that granting Rural Transit’s application would
constitute a ruinous competition over said route
· On Dec. 21, 1932, Public Service Commission
approved Rural Transit’s application, with the
condition that "all the other terms and
conditions of the various certificates of public
convenience of the herein applicant and herein
incorporated are made a part hereof."
· A motion for rehearing and reconsideration
was filed by Red Line since Rural Transit has a
pending application before the Court of First
Instance for voluntary dissolution of the
corporation
· A motion for postponement was filed by Rural
Transit as verified by M. Olsen who swears "that
he was the secretary of the Rural Transit
Company, Ltd
· During the hearing before the Public Service
Commission, the petition for dissolution and the
CFI’s decision decreeing the dissolution of Rural
Transit were admitted without objection
· At the trial of this case before the Public
Service Commission an issue was raised as to
who was the real party in interest making the
application, whether the Rural Transit
Company, Ltd., as appeared on the face of the
application, or the Bachrach Motor Company,
Inc., using name of the Rural Transit Company,
Ltd., as a trade name
· However, PSC granted Rural Transit’s
application for certificate of public convenience
and ordered that a certificate be issued on its
name
· PSC relied on a Resolution in case No. 23217,
authorizing Bachrach Motor to continue using
Rural Transit’s name as its tradename in all its
applications and petitions to be filed before the
PSC. Said resolution was given a retroactive
effect as of the date of filing of the application or
April 30, 1930
Issue: Can the Public Service Commission
authorize a corporation to assume the name of
another corporation as a trade name?
Ruling: NO
· The Rural Transit Company, Ltd., and the
Bachrach Motor Co., Inc., are Philippine
corporations and the very law of their creation
and continued existence requires each to adopt
and certify a distinctive name
· The incorporators "constitute a body politic
and corporate under the name stated in the
certificate."
· A corporation has the power "of succession by
its corporate name." It is essential to its existence
and cannot change its name except in the
manner provided by the statute. By that name
alone is it authorized to transact business.
· The law gives a corporation no express or
implied authority to assume another name that
is unappropriated: still less that of another
corporation, which is expressly set apart for it
and protected by the law. If any corporation
could assume at pleasure as an unregistered
trade name the name of another corporation,
this practice would result in confusion and open
the door to frauds and evasions and difficulties
of administration and supervision.
In this case, the order of the commission
authorizing the Bachrach Motor Co.,
Incorporated, to assume the name of the Rural
Transit Co., Ltd. likewise incorporated, as its
trade name being void. Accepting the order of
December 21, 1932, at its face as granting a
certificate of public convenience to the applicant
Rural Transit Co., Ltd., the said order last
mentioned is set aside and vacated on the
ground that the Rural Transit Company, Ltd., is
not the real party in interest and its application
was fictitious
Philippine First Insurance Company, Inc.
v. Ma. Carmen Hartigan, CGH and O.
Engkee (Formation and Org
of Corporation)
MissIdea Uncategorized February 20,
2018 3 Minutes
G.R. No. L-26370, 31 July 1970 (74 SCRA
252)
Philippine First Insurance Company, Inc. v.
Ma. Carmen Hartigan, CGH and O. Engkee
Barredo, J.:
FACTS:
Plaintiff was originally organized as an
insurance corporation under the name of ‘The
Yek Tong Lin Fire and Marine Insurance Co.,
Ltd.,’ in 1953. But on 26 May 1961, its Articles
of Incorporation were amended changing the
name of the corporation to ‘Philippine First
Insurance, Co., Inc.’.
The case arose when plaintiff, acting in the
name of Yek Tong, signed as co-maker together
with defendants, a promissory note in favor of
China Banking Corporation. Subsequently, as
form of security, defendants signed an indemnity
agreement in favor of plaintiff in case damages
or loses arises thereof.
Defendant Hartigan failed to pay, hence, the
complaint for collection of sum of money with
interest and other fees.
Defendants deny the allegations, claiming,
among others that there is no privity of contract
between them and plaintiff since the plaintiff did
not conduct its business under the name of Yek
Tong Insurance, hence not entitled to the
indemnification agreement which is named in
favor of Yek Tong.
Decision of the CFI: The Court of First Instance
of Manila dismissed the action against plaintiff
PFIC, based on the following grounds, among
others:
1. The change of name of the Yek Tong Lin
Fire & Marine Insurance Co. to PFIC is of
dubious validity, because such change in
effect dissolved the original corporation by
a process of dissolution not authorized by
the Corporation Law;
2. Assuming the change is valid, Yek Tong is
considered dissolved, hence, at the time
the indemnity agreement was signed, it has
no capacity to enter into such agreement
anymore;
3. Assuming further that the chance is valid,
Yek Tong is deemed as continuing as a
body corporate for three (3) years for the
purpose of prosecuting and defending
suits, hence, Yek Tong should be the
proper party in interest.
Its Motion for Reconsideration having been
denied, the plaintiff filed this present case.
ISSUE: Whether or not a Philippine Corporation
may change its name and still retain its original
personality and individuality?
RULING: YES.
RATIO:
Under section 18 of the Corporation Code, the
law authorizes corporations to amend their
charter, its procedure and restrictions for such
amendments. There is restriction on the term of
their existence and the increase or decrease of
the capital stock but there is no prohibition
against the change of name.
The general rule as to corporations is that each
corporation shall have a name by which it is to
sue and be sued and do all legal acts. The name
of a corporation in this respect designates the
corporation in the same manner as the name of
an individual designates the person.” Since an
individual has the right to change his name
under certain conditions, there is no compelling
reason why a corporation may not enjoy the
same right.
Further, the Court held that a change of
corporate name is not against public policy. As
such, what is held to be contrary to public policy
is the use by one corporation of the name of
another corporation as its trade name.
Likewise, it was ruled that change of name does
not result in a corporation’s dissolution. In
settled jurisprudence, the Court held that an
authorized change in the name of a corporation
has no more effect upon its identity as a
corporation than a change of name of a natural
person has upon his identity. It does not affect
the rights of the corporation or lessen or add to
its obligations. After a corporation has effected a
change in its name it should sue and be sued in
its new name.
From the foregoing, the Court believes that the
lower court erred in holding that plaintiff is not
the right party in interest to sue defendants-
appellees. As correctly pointed out by appellant,
the approval by the stockholders of the
amendment of its articles of incorporation
changing the name “The Yek Tong Lin Fire &
Marine Insurance Co., Ltd.” to “Philippine First
Insurance Co., Inc.” on March 8, 1961, did not
automatically change the name of said
corporation on that date. Hence, the lower court
likewise erred in dismissing appellant’s
complaint.
WHEREFORE, judgment of the lower court is
reversed, and this case is remanded to the trial
court for further proceedings consistent
herewith with costs against appellees.
Universal Mills Corporation vs Universal
Textile Mills, Inc.
78 SCRA 62 – Business Organization –
Corporation Law – Tradenames
In 1953, Universal Textile Mills, Inc. (UTMI) was
organized. In 1954, Universal Hosiery Mills
Corporation (UHMC) was also organized. Both
are actually distinct corporations but they
engage in the same business (fabrics). In 1963,
UHMC petitioned to change its name to
Universal Mills Corporation (UMC). The
Securities and Exchange Commission (SEC)
granted the petition.
Subsequently, a warehouse owned by UMC was
gutted by fire. News about the fire spread and
investors of UTMI thought that it was UTMI’s
warehouse that was destroyed. UTMI had to
make clarifications that it was UMC’s warehouse
that got burned. Eventually, UTMI petitioned
that UMC should be enjoined from using its
name because of the confusion it brought. The
SEC granted UTMI’s petition. UMC however
assailed the order of the SEC as it averred that
their tradename is not deceptive; that UTMI’s
tradename is qualified by the word “Textile”,
hence, there can be no confusion.
ISSUE: Whether or not the decision of the SEC
is correct.
HELD: Yes. There is definitely confusion as it
was evident from the facts where the investors of
UTMI mistakenly believed that it was UTMI’s
warehouse that was destroyed. Although the
corporate names are not really identical, they
are indisputably so similar that it can cause, as
it already did, confusion. The SEC did not act in
abuse of its discretion when it order UMC to
drop its name because there was a factual
evidence presented as to the confusion. Further,
when UMC filed its petition for change of
corporate name, it made an undertaking that it
shall change its name in the event that there is
another person, firm or entity who has obtained
a prior right to the use of such name or one
similar to it. That promise is still binding upon
the corporation and its responsible officers.
G.R. No. L-15429 December 1, 1919
UY SIULIONG, MARIANO LIMJAP, GACU
UNG JIENG, EDILBERTO CALIXTO and
UY CHO YEE, petitioners,
vs.
THE DIRECTOR OF COMMERCE AND
INDUSTRY, respondent.
FACTS:
The purpose of this action is to obtain the
writ of mandamus to require the respondent
to file and register, upon the payment of the
lawful fee, articles of incorporation, and to
issue to the petitioners as the incorporators
of a certain corporation to be known as
"Siuliong y Compañia, Inc.,"
a certificate under the seal of the office of
said respondent, certifying that the articles
of incorporation have been duly filed and
registered in his office in accordance with
the law. That prior to the presentation of
the petition, petitioners associated together
as partners, which partnership was known
as "mercantil regular colectiva, under the
name of "Siuliong y Cia.;" Petitioners have
been members of said partnership of
"Siuliong y Cia.," desired to dissolve the
partnership and to form a corporation
composed of the same persons as
incorporators, to be known as "Siulong y
Compañia, Incorporada;" That the purpose
of said corporation, "Siuliong y Cia., Inc.,"
is to acquire the business of the
partnership theretofore known as Siuliong
& Co., and to continue said business with
some of its objects or purposes; An
examination of the articles of incorporation
of the said "Siuliong y Compañia,
Incorporada" (Exhibit A) shows that it is to
be organized for the purchase and sale,
importation and exportation, of the
products of the country as well as of foreign
countries; To discount promissory notes,
bills of exchange, and other negotiable
instruments; The purchase and sale of bills
of exchange, bonds, stocks, or joint account
of mercantile and industrial associations
and of all classes of mercantile documents;
commissions, consignments;"xxx.. The
respondent contends (a) that the proposed
articles of incorporation presented for file
and registry permitted the petitioners to
engage in a business which had for its end
more than one purpose; (b) that it permitted
the petitioners to engage in the banking
business, and (c) to deal in real estate, in
violation of the Act of Congress of July 1,
1902. The petitioners, insisted that said
proposed articles of incorporation do not
permit it to enter into the banking business
nor to engage in the purchase and sale of
real estate in violation of said Act of
Congress, expressly renounced in open
court their right to engage in such business
under their articles of incorporation, even
though said articles might be interpreted in
a way to authorize them to so to do.
ISSUE : Whether or not a corporation
organized for commercial purposes in the
Philippine Islands can be organized for
more than one purpose?
HELD: YES. Considering the purposes and
objects of the proposed articles of
incorporation which are enumerated, we
are of the opinion that it contains nothing
which violates in the slightest degree any of
the provisions of the laws of the Philippine
Islands, and the petitioners are, therefore,
entitled to have such articles of
incorporation filed and registered as prayed
for by them and to have issued to them
a certificate under the seal of the office of
the respondent, setting forth that such
articles of incorporation have been duly
filed in his office. (Sec. 11, Act No. 1459.)
Therefore, the petition prayed for is hereby
granted, and without any finding as to
costs, it is so ordered.
CLAVECILLA Radio System v. Hon.
Agustin Antillon
Facts:
1.
New Cagayan Grocery (NECAGRO) filed a
complaint for damages against Clavecilla Radio
system. They alleged
that Clavecilla omitted the word “NOT” in the
letter addressed to NECAGRO for transmittal at
Clavecilla Cagayande Oro Branch.2.
NECAGRO alleged that the omission of the word
“not” between the word WASHED and
AVAILABLE altered the
contents of the same causing them to
suffer from damages.3.
Clavecilla filed a motion to dismiss on the
ground of failure to state a cause of action and
improper venue.4.
City Judge of CDO denied the MTD. Clavecilla
filed a petition for prohibition with preliminary
Injunction with the CFI praying that the City
Judge be enjoined from further proceeding with
the case because of improper venue.5.
CFI
dismissed the case and held that Clavecilla may
be sued either in Manila (principal office) or in
CDO (branchoffice).6.
Clavecilla appealed to the SC contending that
the suit against it should be filed in Manila
where it holds its principal office
Issue:
WON the present case against Clavecilla should
be filed in Manila where it holds its principal
office.
Held: YES
It is clear that the case from damages is based
upon a written contract. Under par. (b)(3) Sec. 1
Rule 4 of the New Rules of Court, when an
action is not upon a written contract then the
case should be filed in the municipality where
the defendant or any of the defendant resides or
maybe served upon with summons. In corpo.
Law, the residence of the corporation is the place
whe
re the principal office is established. Since
Clavecilla’s
principal office is in Manila, then the suit
against it may properly be file in the City of
Manila. As stated in Evangelista v. Santos, the
laying of the venue of an action is not left to
plaintiff
’s caprice because the matter is
Regulated by the Rules of Court.
Alhambra Cigar & Cigarette
Manufacturing Company, Inc. vs
Securities and Exchange Commission
24 SCRA 269 – Business Organization –
Corporation Law – Corporate Lifespan
On January 15, 1912, Alhambra Cigar &
Cigarette Manufacturing Company, Inc. was
incorporated. Its lifespan was for 50 years so on
January 15, 1962, it expired. Thereafter, its
Board authorized its liquidation. Under the
prevailing law, Alhambra has 3 years to
liquidate.
In 1963, while Alhambra was liquidating,
Republic Act 3531 was enacted. It amended
Section 18 of the Corporation Law; it empowered
domestic private corporations to extend their
corporate life beyond the period fixed by the
articles of incorporation for a term not to exceed
fifty years in any one instance. Previous to
Republic Act 3531, the maximum non-
 extendible term of such corporations was fifty
years.
Alhambra now amended its articles of
incorporation to extend its lifespan for another
50 years. The Securities and Exchange
Commission (SEC) denied the amended articles
of incorporation.
ISSUE: Whether or not a corporation under
liquidation may still amend its articles of
incorporation to extend its lifespan.
HELD: No. Alhambra cannot avail of the new
law because it has already expired at the time of
its passage. When a corporation is liquidating
pursuant to the statutory period of three years
to liquidate, it is only allowed to continue for the
purpose of final closure of its business and no
other purposes. In fact, within that period, the
corporation is enjoined from “continuing the
business for which it was established”. Hence,
Alhambra’s board cannot validly amend its
articles of incorporation to extend its lifespan.
Benguet Consolidated Mining Co. vs
Mariano Pineda
dard
98 Phil 711 – Business Organization –
Corporation Law – Sociedad Anonima – Corporate
Existence
Benguet Consolidated Mining Company was
organized in 1903 under the Spanish Code of
Commerce of 1886 as a sociedad anonima. It
was agreed by the incorporators that Benguet
Mining was to exist for 50 years.
In 1906, Act 1459 (Corporation Law) was
enacted which superseded the Code of
Commerce of 1886. Act 1459 essentially
introduced the American concept of a
corporation. The purpose of the law, among
others, is to eradicate the Spanish Code and
make sociedades anonimas obsolete.
In 1953, the board of directors of Benguet
Mining submitted to the Securities and
Exchange Commission an application for them
to be allowed to extend the life span of Benguet
Mining. Then Commissioner Mariano Pineda
denied the application as it ruled that the
extension requested is contrary to Section 18 of
the Corporation Law of 1906 which provides that
the life of a corporation shall not be extended by
amendment beyond the time fixed in their
original articles.
Benguet Mining contends that they have a
vested right under the Code of Commerce of
1886 because they were organized under said
law; that under said law, Benguet Mining is
allowed to extend its life by simply amending its
articles of incorporation; that the prohibition in
Section 18 of the Corporation Code of 1906 does
not apply to sociedades anonimas already
existing prior to the Law’s enactment; that even
assuming that the prohibition applies to
Benguet Mining, it should be allowed to be
reorganized as a corporation under the said
Corporation Law.
ISSUE: Whether or not Benguet Mining is
correct.
HELD: No. Benguet Mining has no vested right
to extend its life. It is a well settled rule that no
person has a vested interest in any rule of law
entitling him to insist that it shall remain
unchanged for his benefit. Had Benguet Mining
agreed to extend its life prior to the passage of
the Corporation Code of 1906 such right would
have vested. But when the law was passed in
1906, Benguet Mining was already deprived of
such right.
To allow Benguet Mining to extend its life will be
inimical to the purpose of the law which sought
to render obsolete sociedades anonimas. If this
is allowed, Benguet Mining will unfairly do
something which new corporations organized
under the new Corporation Law can’t do – that
is, exist beyond 50 years. Plus, it would have
reaped the benefits of being a sociedad anonima
and later on of being a corporation. Further,
under the Corporation Code of 1906, existing
sociedades anonimas during the enactment of
the law must choose whether to continue as
such or be organized as a corporation under the
new law. Once a sociedad anonima chooses one
of these, it is already proscribed from choosing
the other. Evidently, Benguet Mining chose to
exist as a sociedad anonima hence it can no
longer elect to become a corporation when its life
is near its end.
NORBERTO ASUNCION, ET AL. vs.
MANUEL DE YRIARTE
Posted on July 25, 2013 by winnieclaire
[G.R. No. 9321. September 24, 1914.]
FACTS: The proposed incorporators began an
action in the CFI to compel the chief of the
division of archives to receive and register said
articles of incorporation and to do any and all
acts necessary for the complete incorporation of
the persons named in the articles. The court
below found in favor of the defendant and
refused to order the registration of the articles
mentioned, maintaining and holding that the
defendant, under the Corporation Law, had
authority to determine both the sufficiency of
the form of the articles and the legality of the
object of the proposed corporation. This appeal
is taken from that judgment
The chief of the division of archives, the
respondent, refused to file the articles of
incorporation, upon the ground that the object
of the corporation, as stated in the articles, was
not lawful and that, in pursuance of section 6 of
Act No. 1459, they were not registerable.
Hence, this action to obtain a writ of mandamus.
ISSUE: Whether or not the chief of the division
of archives has authority, under the Corporation
Law, on being presented with articles of
incorporation for registration, to decide not only
as to the sufficiency of the form of the articles,
but also as to the lawfulness of the purposes of
the proposed corporation.
HELD: YES.
CORPORATION LAW; POWERS AND DUTIES OF
CHIEF OF DIVISION OF ARCHIVES,
EXECUTIVE BUREAU. — The chief of the
division of archives, for and on behalf of the
division, has authority under the Corporation
Law (Act No. 1459) to determine the sufficiency
of the form of articles of incorporation offered for
registration with the division.
Section 6 of the Corporation Law reads in part as
follows:
“Five or more persons, not exceeding fifteen, a
majority of whom are residents of the Philippine
Islands, may form a private corporation for any
lawful purpose by filing with the division of
archives, patents, copyrights, and trademarks of
the Executive Bureau articles of incorporation
duly executed and acknowledged before a notary
public, . . .”
Simply because the duties of an official
happen to be ministerial, it does not
necessarily follow that he may not, in the
administration of his office, determine
questions of law. We are of the opinion that it is
the duty of the division of archives, when articles
of incorporation are presented for registration, to
determine whether the objects of the corporation
as expressed in the articles are lawful. We do not
believe that, simply because articles of
incorporation presented for registration are
perfect in form, the division of archives must
accept and register them and issue the
corresponding certificate of incorporation no
matter what the purpose of the corporation may
be as expressed in the articles. The chief of the
division of archives, on behalf of the division,
has also the power and duty to determine from
the articles of incorporation presented for
registration the lawfulness of the purposes of the
proposed corporation and whether or not those
purposes bring the proposed corporation within
the purview of the law authorizing corporations
for given purposes.
MANDAMUS TO COMPEL HIM TO PERFORM
DUTIES. — The duties of the chief of the division
of archives, so far as relates to the registration of
articles of incorporation, are purely ministerial
and not discretional; and mandamus will lie to
compel him to perform his duties under the
Corporation Law if, in violation of law, he refuse
to perform them
On the contrary, there is no incompatibility in
holding, as we do hold, that his duties are
ministerial and that he has no authority to
exercise discretion in receiving and registering
articles of incorporation. He may exercise
judgment — that is, the judicial function — in
the determination of the question of law referred
to, but he may not use discretion. The question
whether or not the objects of a proposed
corporation are lawful is one that can be decided
one way only. If he err in the determination of
that question and refuse to file articles which
should be filed under the law, that decision is
subject to review and correction and, upon
proper showing, he will be ordered to file the
articles.
Discretion, it may be said generally, is a
faculty conferred upon a court or other
official by which he may decide a question
either way and still be right. The power
conferred upon the division of archives with
respect to the registration of articles of
incorporation is not of that character. It is of
the same character as the determination of a
lawsuit by a court upon the merits. It can be
decided only one way correctly.
Case Digest: Loyola Grand Villas Homeowners
(South) Association v. CA
LOYOLA GRAND VILLAS HOMEOWNERS
(SOUTH) ASSOCIATION, INC., petitioner,
vs. HON. COURT OF APPEALS, HOME
INSURANCE AND GUARANTY CORPORATION,
EMDEN ENCARNACION and HORATIO
AYCARDO, respondents.
G.R. No. 117188 August 7, 1997
ROMERO, J.:
Loyola Grand Villas Homeowners Association,
Inc. (LGVHAI) was organized on 8 February 1983
as the homeoenwers' association for Loyola
Grand Villas. It was also registered as the sole
homeowners' association in the said village with
the Home Financing Corporation (which
eventually became Home Insurance Guarantee
Corporation ["HIGC"]). However, the association
was not able file its corporate by-laws.
The LGVHAI officers then tried to registered its
By-Laws in 1988, but they failed to do so. They
then discovered that there were two other
homeowners' organizations within the
subdivision - the Loyola Grand Villas
Homeowners (North) Association, Inc. [North
Association] and herein Petitioner Loyola Grand
Villas Homeowners (South) Association,
Inc.["South Association].
Upon inquiry by the LGVHAI to HIGC, it was
discovered that LGVHAI was dissolved for its
failure to submit its by-laws within the period
required by the Corporation Code and for its
non-user of corporate charter because HIGC had
not received any report on the association's
activities. These paved the way for the formation
of the North and South Associations.
LGVHAI then lodged a complaint with HIGC
Hearing Officer Danilo Javier, and questioned
the revocation of its registration. Hearing Officer
Javier ruled in favor of LGVHAI, revoking the
registration of the North and South Associations.
Petitioner South Association appealed the ruling,
contending that LGVHAI's failure to file its by-
laws within the period prescribed by Section 46
of the Corporation Code effectively automatically
dissolved the corporation. The Appeals Board of
the HIGC and the Court of Appeals both rejected
the contention of the Petitioner affirmed the
decision of Hearing Officer Javier.
Issue: W/N LGVHAI's failure to file its by-laws
within the period prescribed by Section 46 of the
Corporation Code had the effect of automatically
dissolving the said corporation.
Ruling: No.
The pertinent provision of the Corporation Code
that is the focal point of controversy in this case
states:
Sec. 46. Adoption of by-laws. - Every corporation
formed under this Code, must within one (1)
month after receipt of official notice of the
issuance of its certificate of incorporation by the
Securities and Exchange Commission, adopt a
code of by-laws for its government not
inconsistent with this Code.
Ordinarily, the word "must" connotes an
imposition of duty which must be enforced.
However, the word "must" in a statute, like
"shall," is not always imperative. It may be
consistent with an ecercise of discretion. If the
language of a statute, considered as a whole
with due regard to its nature and object, reveals
that the legislature intended to use the words
"shall" and "must" to be directory, they should
be given that meaning.
The legislative deliberations of the Corporation
Code reveals that it was not the intention of
Congress to automatically dissolve a corporation
for failure to file the By-Laws on time.
Moreover, By-Laws may be necessary to govern
the corporation, but By-Laws are still
subordinate to the Articles of Incorporation and
the Corporation Code. In fact, there are cases
where By-Laws are unnecessary to the corporate
existence and to the valid exercise of corporate
powers.
The Corporation Code does not expressly provide
for the effects of non-filing of By-Laws. However,
these have been rectified by Section 6 of PD 902-
A which provides that SEC shall possess the
power to suspend or revoke, after proper notice
and hearing, the franchise or certificate of
registration of corporations upon failure to file
By-Laws within the required period.
This shows that there must be notice and
hearing before a corporation is dissolved for
failure to file its By-Laws. Even assuming that
the existence of a ground, the penalty is not
necessarily revocation, but may only be
suspension.
By-Laws are indispensable to corporations, since
they are required by law for an orderly
management of corporations. However, failure to
file them within the period prescribed does not
equate to the automatic dissolution of a
corporation.
PMI Colleges vs National Labor Relations
Commission
277 SCRA 462 – Business Organization –
Corporation Law – By-laws and Innocent Third
Persons
In 1991, PMI Colleges hired the services of
Alejandro Galvan for the latter to teach in said
institution. However, for unknown reasons, PMI
defaulted from paying the remunerations due to
Galvan. Galvan made demands but were ignored
by PMI. Eventually, Galvan filed a labor case
against PMI. Galvan got a favorable judgment
from the Labor Arbiter; this was affirmed by the
National Labor Relations Commission. On
appeal, PMI reiterated, among others, that the
employment of Galvan is void because it did not
comply with its by-laws. Apparently, the by-laws
require that an employment contract must be
signed by the Chairman of the Board of PMI. PMI
asserts that Galvan’s employment contract was
not signed by the Chairman of the Board.
ISSUE: Whether or not Galvan’s employment
contract is void.
HELD: No. PMI Colleges never even presented a
copy of the by-laws to prove the existence of
such provision. But even if it did, the
employment contract cannot be rendered invalid
just because it does not bear the signature of the
Chairman of the Board of PMI. By-Laws operate
merely as internal rules among the
stockholders, they cannot affect or prejudice third
persons who deal with the corporation, unless
they have knowledge of the same. In this case,
PMI was not able to prove that Galvan knew of
said provision in the by-laws when he was
employed by PMI.
Case Digest: Peña v. CA
ROSITA PEÑA petitioner, vs. THE COURT OF
APPEALS, SPOUSES RISING T. YAP and
CATALINA YAP, PAMPANGA BUS CO., INC.,
JESUS DOMINGO, JOAQUIN BRIONES,
SALVADOR BERNARDEZ, MARCELINO
ENRIQUEZ and EDGARDO A. ZABAT,
respondents.
G.R. No. 91478 February 7, 1991
GANCAYCO, J.:
Antecedents facts:
PAMPANGA BUS CO., INC. (PAMBUSCO) is the
owner of the three lots in dispute. PAMBUSCO
mortgaged the lots to the Development Bank of
the Philippines (DBP), which were later on
foreclosed.
Rosita Peña was awarded the lots in a
foreclosure sale for being the highest bidder. The
certificate of sale was later issued to her and
registered in her name.
Subsequently, the Board of Directors of
PAMBUSCO, through three out of its five
directors, issued a resolution to assign its right
of redemption over the lots in favor of any
interested party. The right of redemption was
later on assigned to Marcelino Enriquez, who
redeemed the property.
Enriquez then sold the lots to spouses Rising T.
Yap and Catalina Lugue-Yap.
Meanwhile, a case involving the validity of the
sale to the spouses Yap was pending, and
despite the protestations of Peña as to validity of
the PAMBUSCO's assignment of the right of
redemption, the lots were somehow registered in
the name of spouses Yap. Despite the
registration of the lots to spouses Yap, Peña
retained possession of the property.
Main Case:
Spouses Yap sought to recover the possession of
the lots from Peña. The latter countered that she
is now the legitimate owner of the subject lands
for having purchased the same in a foreclosure
proceeding instituted by the DBP against
PAMBUSCO and no valid redemption having
been effected within the period provided by law.
The defense was that since the deed of
assignment executed by PAMBUSCO in favor of
Enriquez was void ab initio for being an ultra
vires act of its board of directors and for being
without any valuable consideration, it could not
have had any legal effect.
(It should be noted that the by-laws of
PAMBUSCO provide that four out of five
directors must be present in a special meeting of
the board to constitute a quorum, and that the
corporation has already ceased to operate.)
CFI ruled in favor of Petitioner Peña, but the
same was overturned by the CA.
Issue: W/N there Peña is entitled to the lots.
Ruling: Yes.
The by-laws of a corporation are its own private
laws which substantially have the same effect as
the laws of the corporation. They are in effect,
written, into the charter. In this sense they
become part of the fundamental law of the
corporation with which the corporation and its
directors and officers must comply.
Apparently, only three (3) out of five (5) members
of the board of directors of respondent
PAMBUSCO convened by virtue of a prior notice
of a special meeting. There was no quorum to
validly transact business since it is required
under its by-laws that at least four (4) members
must be present to constitute a quorum in a
special meeting of the board of directors.
Under Section 25 of the Corporation Code of the
Philippines, the articles of incorporation or by-
laws of the corporation may fix a greater number
than the majority of the number of board
members to constitute the quorum necessary for
the valid transaction of business. Any number
less than the number provided in the articles or
by-laws therein cannot constitute a quorum and
any act therein would not bind the corporation;
all that the attending directors could do is to
adjourn.
Moreover, the records show that respondent
PAMBUSCO ceased to operate for about 25 years
prior to the board meeting. Being a dormant
corporation for several years, it was highly
irregular, for a group of three (3) individuals
representing themselves to be the directors of
respondent PAMBUSCO to pass a resolution
disposing of the only remaining asset of the
corporation in favor of a former corporate officer.
As a matter of fact, the three (3) alleged directors
who attended the special meeting on November
19, 1974 were not listed as directors of
respondent PAMBUSCO in the latest general
information sheet. Similarly, the latest list of
stockholders of respondent PAMBUSCO on file
with the SEC does not show that the said alleged
directors were among the stockholders of
respondent PAMBUSCO, in contravention of the
rule requiring a director to own one (1) share in
their to qualify as director of a corporation.
Further, under the Corporation Law, the sale or
disposition of any and/or substantially all
properties of the corporation requires, in
addition to a proper board resolution, the
affirmative votes of the stockholders holding at
least two-thirds (2/3) of the voting power in the
corporation in a meeting duly called for that
purpose. This was not complied with in the case
at bar.
At the time of the passage of the questioned
resolution, respondent PAMBUSCO was
insolvent and its only remaining asset was its
right of redemption over the subject properties.
Since the disposition of said redemption right of
respondent PAMBUSCO by virtue of the
questioned resolution was not approved by the
required number of stockholders, the said
resolution, as well as the subsequent
assignment and sale, were null and void.
Lastly, for lack of consideration, the assignment
should be construed as a donation. Under
Article 725 of the Civil Code, in order to be valid,
such a donation must be made in a public
document and the acceptance must be made in
the same or in a separate instrument. In the
latter case, the donor shall be notified of the
acceptance in an authentic form and such step
must be noted in both instruments. Since
assignment to Enriquez shows that there was no
acceptance of the donation in the same and in a
separate document, the said deed of assignment
is thus void ab initio.
Santos vs. NLRC Case Digest
Santos vs. National Labor Relations
Commission
[GR 101699, 13 March 1996]
Facts: Melvin D. Millena, on 1 October 1985,
was hired to be the project accountant for Mana
Mining and Development Corporation's (MMDC)
mining operations in Gatbo, Bacon, Sorsogon.
On 12 August 1986, Millena sent to Mr. Gil
Abaño, the MMDC corporate treasurer, a
memorandum calling the latter's attention to the
failure of the company to comply with the
withholding tax requirements of, and to make
the corresponding monthly remittances to, the
Bureau of Internal Revenue (BIR) on account of
delayed payments of accrued salaries to the
company's laborers and employees. In a letter,
dated 8 September 1986, Abaño advised Millena
that it was the board's decision that it stop
porduction (operation) in Sorsogon due to the
upcoming rainy seasons and the deterioration of
the peace and order in the said area; that the
corporation will undertake only necessary
maintenance and repair work and will keep
overhead down to the minimum manageable
level; and that the corporation will not need a
project accountant until the corporaton resumes
full-scale operations. Millena expressed "shock"
over the termination of his employment.
He complained that he would not have resigned
from the Sycip, Gores & Velayo accounting firm,
where he was already a senior staff auditor, had
it not been for the assurance of a "continuous
job" by MMDC's Eng. Rodillano E. Velasquez.
Millena requested that he be reimbursed the
"advances" he had made for the company and be
paid his "accrued salaries/claims." The claim
was not heeded. On October 1986, Millena filed
with the NLRC Regional Arbitration, Branch No.
V, in Legazpi City, a complaint for illegal
dismissal, unpaid salaries, 13th month pay,
overtime pay, separation pay and incentive leave
pay against MMDC and its two top officials,
namely, Benjamin A Santos (the President) and
Rodillano A. Velasquez (the executive vice-
president). In his complaint-affidavit (position
paper), submitted on 27 October 1986, Millena
alleged, among other things, that his dismissal
was merely an offshoot of his letter of 12 August
1986 to Abaño about the company's inability to
pay its workers and to remit withholding taxes
to the BIR. On 27 July 1988, Labor Arbiter
Fructouso T. Aurellano, finding no valid cause
for terminating complaint's employment,
ruledthat a partial closure of an establishment
due to losses was a retrenchment measure that
rendered the employer liable for unpaid salaries
and other monetary claims.
The Labor Arbiter ordered Santos, et. al. to pay
Millena the amount of P37,132.25 corresponding
to the latter's unpaid salaries and advances:
P5,400.00 for petitioner's 13th month pay;
P3,340.95 as service incentive leave pay; and P5,
400.00 as separation pay. Santos, et. al. were
further ordered to pay Millena 10% of the
monetary awards as attorney's fees. Alleging
abuse of discretion by the Labor Arbiter, the
company and its co-respondents filed a "motion
for reconsideration and /or appeal." 8 The
motion/appeal was forthwith indorsed to the
Executive Director of the NLRC in Manila. In a
resolution, dated 04 September 1989, the NLRC
affirmed the decision of the Labor Arbiter. A writ
of execution correspondingly issued; however, it
was returned unsatisfied for the failure of the
sheriff to locate the offices of the corporation in
the addressed indicated. Another writ of
execution and an order of garnishment was
thereupon served on Santos at his residence.
Contending that he had been denied due
process, Santos filed a motion for
reconsideration of the NLRC's resolution along
with a prayer for the quashal of the writ of
execution and order of garnishment. He averred
that he had never received any notice, summons
or even a copy of the complaint; hence, he said,
the Labor Arbiter at no time had acquired
jurisdiction over him. On 16 August 1991, the
NLRC dismissed the motion for reconsideration.
Santos filed the petition for certiorari.
Issue: Whether Santos should be made
solidarily liable with MMDC.
Held: A corporation is a judicial entity with legal
personality separated and distinct from those
acting for and in its behalf and, in general, from
the people comprising it. The rule is that
obligations incurred by the corporation, acting
through its directors, officers and employees, are
its sole liabilities. Nevertheless, being a mere
fiction of law, peculiar situations or valid
grounds can exist to warrant, albeit done
sparingly, the disregard of its independent being
and the lifting of the corporate veil. As a rule,
this situation might arise a corporation is used
to evade a just and due obligation or to justify a
wrong, to shield or perpetrate fraud, to carry out
similar other unjustifiable aims or intentions, or
as a subterfuge to commit injustice and so
circumvent the law. Without necessarily piercing
the veil of corporate fiction, personal civil
liability can also be said to lawfully attach to a
corporate director, trustee or officer; to wit:
When (1) He assents (a) to a patently unlawful
act of the corporation, or (b) for bad faith or
gross negligence in directing its affairs, or (b) for
conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
(2) He consents to the issuance of watered
stocks or who, having knowledge thereof, does
not forthwith file with the corporate secretary his
written objection thereto; (3) He agrees to hold
himself personally and solidarily liable with the
corporation; or (4) He is made, by a specific
provision of law, to personally answer for his
corporate action. The case of Santos is way of
these exceptional instances. It is not even shown
that Santos has had a direct hand in the
dismissal of Millena enough to attribute to
Santos a patently unlawful act while acting for
the corporation. Neither can Article 289 of the
Labor Code be applied since this specifically
refers only to the imposition of penalties under
the Code. It is undisputed that the termination
of Millena's employment has, instead, been due,
collectively, to the need for a further mitigation
of losses, the onset of the rainy season, the
insurgency problem, in Sorsogon and the lack of
funds to further support the mining operation in
Gatbo. It is basic that a corporation is invested
by law with a personally separate and distinct
from those of the persons composing it as well
as from that of any, other legal entity to which it
may be related. Mere ownership by a single
stockholder or by another corporation of all
nearly all of the capital stock of a corporation is
not of itself sufficient ground for disregarding
the separate corporate personally. Similar to the
case of Sunio vs. National Labor Relations
Commission, Santos should not have been made
personally answerable for the payment of
Millena's back salaries.
Corporate Law Case Digest: Stockholders
Of F. Guanzon And Sons, Inc V. Register
Of Deeds Of Manila (1962)
G.R. No. L-18216 October 30, 1962
Lessons Applicable: Strong Juridical Personality
(Corporate Law)
FACTS:
 Sept 19, 1960: 5 stockholders of the F.
Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the
corporation, dissolution and distribution
among themselves in proportion to their
shareholdings, as liquidating dividends,
corporate assets, including real properties
 Register of Deeds of Manila denied the
registration of the certificate of liquidation:
1. The number of parcels not certified to in
the acknowledgment;
2. P430.50 Reg. fees need be paid;
3. P940.45 documentary stamps need be
attached to the document;
4. The judgment of the Court approving the
dissolution and directing the disposition of
the assets of the corporation need be
presented
 Commissioner of Land Registration
overruled ground No. 7 and sustained
requirements Nos. 3, 5 and 6.
 Stockholders appealed
 contend that the certificate of liquidation is
not a conveyance or transfer but merely a
distribution of the assets of the corporation
which has ceased to exist for having been
dissolved
ISSUE: W/N certificate merely involves a
distribution of the corporation's assets (or
should be considered a transfer or conveyance)
HELD: NO. affirm the resolution appealed from
 Corporation - juridical person distinct from
the members composing it.
 Properties registered in the name of the
corporation are owned by it as an entity
separate and distinct from its members.
 While shares of stock constitute personal
property they do not represent property of
the corporation.
 A share of stock only typifies an aliquot part
of the corporation's property, or the right to
share in its proceeds to that extent when
distributed according to law and equity but
its holder is NOT the owner of any part of
the capital of the corporation nor entitled to
possession
 The stockholder is not a co-owner or tenant
in common of the corporate property
Manila Gas vs. Collector
FACTS: This is an action brought by the Manila
Gas Corporation against the Collector of
Internal Revenue for the recovery of
P56,757.37, which the plaintiff was required
by the defendant to deduct and withhold from
the various sums paid it toforeign corporations
as dividends and interest on bonds and other
indebtedness and which the plaintiff paid under
protest.
ISSUES: Won the Collector of Internal Revenue
was justified in withholding income taxes on
interest on bonds and other indebtedness paid
to nonresident corporations
RULING:
YES. The approved doctrine is that no state
may tax anything not within its jurisdiction
without violating the due process clause of the
constitution.
The taxing power of a state does not extend
beyond its territorial limits, but within such it
may tax persons, property, income, or business.
If an interest in property is taxed, the sit us of
either the property or interest must be found
within the state.
If an income is taxed, the recipient thereof
must have a domicile within the state or the
property or business out of which the income
issues must be situated within the state so
that the income may be said to have a situs
therein. Personal property may be separated
from its owner, and he may be taxed on its
account at the place where the property is
although it is not the place of his own domicile
and even though he is not a citizen or resident
of the state which imposes the tax.
But debts owing by corporations are obligations
of the debtors, and only possess value in the
hands of the creditors. The Manila Gas
Corporation operates its business entirely
within the Philippines. Its earnings, therefore
come from local sources. The place of material
delivery of the interest to the foreign
corporations paid out of the revenue of the
domestic corporation is of no particular moment.
The place of payment even if conceded to be
outside of the country cannot alter the fact that
the income was derived from the Philippines.
The word "source" conveys only one idea, that
of origin, and the origin of the income was the
Philippines.
Magsaysay-Labrador vs CA Case Digest
Magsaysay-Labrador, et. al. vs. Court of
Appeals
[GR 58168, 19 December 1989]
Facts: On 9 February 1979, Adelaida Rodriguez-
Magsaysay, widow and special administratix of
the estate of the late Senator Genaro Magsaysay,
brought before the then Court of First Instance
of Olongapo an action against Artemio
Panganiban, Subic Land Corporation (SUBIC),
Filipinas Manufacturer's Bank (FILMANBANK)
and the Register of Deeds of Zambales, for the
annulment of the Deed of Assignment executed
by the late Senator in favor of SUBIC (as a result
of which TCT 3258 was cancelled and TCT
22431 issued in the name of SUBIC), for the
annulment of the Deed of Mortgage executed by
SUBIC in favor of FILMANBANK (dated 28 April
1977 in the amount of P 2,700,000.00), and
cancellation of TCT 22431 by the Register of
Deeds, and for the latter to issue a new title in
her favor. On 7 March 1979, Concepcion
Magsaysay-Labrador, Soledad Magsaysay-
Cabrera, Luisa Magsaysay-Corpuz, Felicidad
Magsaysay, and Mercedes Magsaysay-Diaz,
sisters of the late senator, filed a motion for
intervention on the ground that on 20 June
1978, their brother conveyed to them 1/2 of his
shareholdings in SUBIC or a total of 416,566.6
shares and as assignees of around 41 % of the
total outstanding shares of such stocks of
SUBIC, they have a substantial and legal
interest in the subject matter of litigation and
that they have a legal interest in the success of
the suit with respect to SUBIC. On 26 July
1979, the trial court denied the motion for
intervention, and ruled that petitioners have no
legal interest whatsoever in the matter in
litigation and their being alleged assignees or
transferees of certain shares in SUBIC cannot
legally entitle them to intervene because SUBIC
has a personality separate and distinct from its
stockholders.
On appeal, the Court of Appeals found no
factual or legal justification to disturb the
findings of the lower court. The appellate court
further stated that whatever claims the
Magsaysay sisters have against the late Senator
or against SUBIC for that matter can be
ventilated in a separate proceeding. The motion
for reconsideration of the Magsaysay sisters was
denied. Hence, the petition for review on
certiorari.
Issue: Whether the Magsaysay sister, allegedly
stockholders of SUBIC, are interested parties in
a case where corporate properties are in
dispute.
Held: Viewed in the light of Section 2, Rule 12 of
the Revised Rules of Court, the Magsaysay
sisters have no legal interest in the subject
matter in litigation so as to entitle them to
intervene in the proceedings. To be permitted to
intervene in a pending action, the party must
have a legal interest in the matter in litigation,
or in the success of either of the parties or an
interest against both, or he must be so situated
as to be adversely affected by a distribution or
other disposition of the property in the custody
of the court or an officer thereof . Here, the
interest, if it exists at all, of the Magsaysay
sisters is indirect, contingent, remote,
conjectural, consequential and collateral. At the
very least, their interest is purely inchoate, or in
sheer expectancy of a right in the management
of the corporation and to share in the profits
thereof and in the properties and assets thereof
on dissolution, after payment of the corporate
debts and obligations. While a share of stock
represents a proportionate or aliquot interest in
the property of the corporation, it does not vest
the owner thereof with any legal right or title to
any of the property, his interest in the corporate
property being equitable or beneficial in nature.
Shareholders are in no legal sense the owners of
corporate property, which is owned by the
corporation as a distinct legal person.
GOOD EARTH EMPORIUM VS CA (194
SCRA 544)
Good Earth Emporium Inc. vs Court of
Appeals
194 SCRA 544 [GR No. 82797 February
27, 1991]
Facts: A lease contract, dated October 16, 1981,
was entered into by and between Roces-Reyes
Realty Inc. as lessor, and Good Earth Emporium
Inc. (GEE) as lessee for a term of three years
beginning November 1, 1981 and ending October
31, 1984 at a monthly rental of Php65,000. The
building which was the subject of the contract of
lease is a five story building located at the corner
of Rizal Avenue and Bustos Street in Sta. Cruz,
Manila. From March 1983 up to the complaint
was filed, the lessee had defaulted in the
payment of rentals, as a consequence of which,
private respondent Roces-Reyes Realty Inc. filed
on October 14, 1984 an ejectment case against
herein petitioners, Good Earth Emporium Inc.
and Lim Ka Ring. After the latter had tendered
their responsive pleading, the lower court on
motion of Roces rendered judgement on the
pleadings dated April 17, 1984 to which
petitioners were ordered to vacate the premises
and surrender the same to the plaintiffs. On May
16, 1984, Roces filed a motion for execution
which was opposed by petitioners on May 28,
1984 simultaneous with the latter’s filing of a
notice of appeal. However, on August 15, 1984,
GEE thru counsel filed a motion to withdraw
said appeal citing as reason that they are
satisfied with the decision of the lower court.
Issue: Whether or not the payment made by
GEE to the Roces brothers constitute payment
to private respondent corporation which would
result to the extinguishment of the obligation.
Held: No. Under article 1240 of the civil code of
the Philippines – Payment shall be made to the
person in whose favor the obligation has been
constituted, on his successor in interest or any
person authorized to receive it.
In the case at bar, the supposed payments were
not made to Roces-Reyes Realty Inc. or to its
successors in interest nor is there positive
evidence that payment was made to a person
authorized to receive it. No such proof was
submitted but merely inferred by the RTC from
Marcos Roces having signed the lease contract
as President which was witnessed by Jesus
Marcos Roces. The later, however, was no longer
President or even an officer of the Roces-Realty
Inc at the time he received the money and signed
the sale with pacto de retro. He, in fact denied
being in possession of authority to receive
payment for the respondent corporation nor
does the receipt show that he signed in the same
capacity as he did in the lease contract at a time
when he was President for respondent
corporation.
A corporation has a personality distinct and
separate from its individual stockholders or
members. Being an officer or stockholder of a
corporation does not make one’s property also of
the corporation, and vice-versa, for they are
separate entities. Share owners are in no legal
sense the owners corporate property which is
owned by the corporation as a distinct legal
person. As a consequence of the separate
juridical personality of a corporation, the
corporate debt or credit is not the debt or credit
of the stockholder, nor is the stockholder’s debt
or credit that of the corporation.
Tayko vs Capistrano
G.R. No. L-30188 October 2,
1928
FELIPE TAYKO, EDUARDO BUENO,
BAUTISTA TAYKO, BERNARDO SOLDE
and VICENTE ELUM, petitioners,
vs.
NICOLAS CAPISTRANO, acting as Judge
of First Instance of Oriental Negros.
ALFREDO B. CACNIO, as Provincial
Fiscal of Oriental Negros, and JUAN
GADIANI, respondents.
FACTS:
This is a petition for a writ of prohibition
enjoining the respondent judge from making
cognizance of certain civil and criminal election
cases in which the petitioners are parties.
The ground upon which the petition rests may
be reduced to three propositions.
(1) That the assignment of the Auxiliary Judge,
Sixto de la Costa, to Dumaguete was made with
the understanding that the he was to hear and
take cognizance of all election contests and
criminal causes for violation of the election law
and that the respondent judge was to take
cognizance of the ordinary cases and that there
was an understanding between them that this
arrangement was to be followed.
(2) That the respondent judge took great interest
and an active part in the filing of the criminal
charges against the petitioners herein to the
unjustifiable extent of appointing a deputy fiscal
who filed the proper informations when the
regular provincial fiscal refused to file them for
lack of sufficient evidence.
(3) That the respondent judge is already over 65
years of age and has, therefore, automatically
ceased as judge of the Court of First Instance of
Oriental Negros and that he is neither a judge de
jure nor de facto.
To this petition the respondents demur on the
ground that the facts stated in that (1) none of
the facts alleged in the petition divest the
respondent judge of his jurisdiction to take
cognizance of the cases referred to in the
complaint, and (2) even admitting as true, for
the sake of this demurrer, the facts alleged in
paragraph 7 of the petition, the respondent
judge is still a de facto judge and his title to the
office and his jurisdiction to hear the cases
referred to in the petition cannot be questioned
by prohibition, as this writ, even when directed
against persons acting as judges, cannot be
treated as a substitute for quo warranto, or be
rightfully called upon to perform any of the
functions of that writ.
ISSUE: W/N the decision of a de facto judge is
valid and binding.
HELD: Briefly defined, a de facto judge is one
who exercises the duties of a judicial office
under color of an appointment or election
thereto. He differs, on the one hand, from a mere
usurper who undertakes to act officially without
any color of right, and on the other hand, from a
judge de jure who is in all respects legally
appointed and qualified and whose term of office
has not expired.
Applying the principles stated to the facts set
forth in the petition before us, we cannot escape
the conclusion that, on the assumption that said
facts are true, the respondent judge must be
considered a judge de facto. His term of office
may have expired, but his successor has not
been appointed, and as good faith is presumed,
he must be regarded as holding over in good
faith. The contention of counsel for the
petitioners that the auxiliary judge present in
the district must be considered the regular judge
seems obviously erroneous.
Accordingly, it is a well established
principle, dating from the earliest period and
repeatedly confirmed by an unbroken current
of decisions, that the official acts of a de
facto judge are just as valid for all purposes
as those of a de jure judge, so far as the
public or third persons who are interested
therein are concerned. The rule is the same in
civil criminal cases. The principle is one founded
in policy and convenience, for the right of no one
claiming a title or interest under or through the
proceedings of an officer having an apparent
authority to act would be safe, if it were
necessary in every case to examine the legality of
the title of such officer up to its original source,
and the title or interest of such person were held
to be invalidated by some accidental defect or
flaw in the appointment, election or qualification
of such officer, or in the rights of those from
whom his appointment or election emanated;
nor could the supremacy of the laws be
maintained, or their execution enforced, if the
acts of the judge having a colorable, but not a
legal title, were to be deemed invalid. As in the
case of judges of courts of record, the acts of a
justice de facto cannot be called in question in
any suit to which he is not a party.
The official acts of a de facto justice cannot b
attacked collaterally. An exception to the general
rule that the title of a person assuming to act as
judge cannot be questioned in a suit before him
is generally recognized in the case of a special
judge, and it is held that a party to an action
before a special judge may question his title to
the office of a judge on the proceedings before
him, and that the judgment will be reversed on
appeal, where proper exceptions are taken, if the
person assuming to act as special judge is not a
judge de jure.
The title of a de facto officer cannot be indirectly
questioned in a proceeding to obtain a writ of
prohibition to prevent him from doing an official
act nor in a suit to enjoin the collection of a
judgment rendered by him. Having at least
colorable right to the office his title can be
determined only in a quo warranto proceeding or
information in the nature of a quo warranto at
suit of the sovereign.”
Fernandez vs. Court of Appeals GR No. L-
80231. October 18, 1988 case digest
Facts:
· The controversy here revolves around the
appropriate reading of a clause in a lease
contract that was executed about fifteen years
ago.
· July 31, 1973. Miguel Tajangco (respondent
and lessor) and Celso Fernandez (petitioner and
lessee) entered into a ten-year Contract of Lease
over a piece of land situated along Kahilum
Street, Pandacan, Manila, where Fernandez
would put up the then proposed New Zamora
Market. The parties agreed that the lease, which
was scheduled to end on 1 July 1983, would be
"renewable for another ten (10) years at the
option of both parties under such terms,
conditions and rental reasonable at that time"
and that, upon expiration of the lease, whatever
improvements were then existing thereon should
automatically belong to Miguel without having to
pay Fernandez.
· Before the term ended, asshole Miguel said to
Fernandez that he is no longer willing to renew
the contract. Fernandez being a hardass, replied
that he wants to renew the contract so he could
recover the expenses he had made. Miguel not
giving in, replied through his lawyer, advised
that Miguel could not accept Fernandez's
unilateral action to renew the lease because,
under the contract, any renewal or extension
thereof was possible only "at the option of both
parties.
· June 12, 1983. Fernandez filed an action
against Miguel. He said that he was entitled to
renew the lease contract, under paragraph 3
Section 2 thereof, for another ten (10) years,
which paragraph in the contract should be
construed in a liberal manner and with justice.
In his prayer, he sought to compel Miguel to
renew the lease agreement for another term, or
asked the court to consider the original contract
as renewed for another ten (10) years or to fix
another period for the renewal contract.
· Miguel the asshole replied that judicial
interpretation is not needed, the contract is so
simple worded that even Homer Simpson can
understand it.
· The trial court held its decision in favor of
Fernandez. Miguel, being an asshole and won’t
accept defeat, appealed with the CA. The CA
reversed the decision of the trial court. BOOM!
HEIRARCHY YOW!
Issue: W/ON the condition of the contract is
clear or not.
Held: Shit is clear. The CA said that the contract
language as comprising, not technical terms or
terms of legal art, but rather just plain and
ordinary words. SC affirmed the decision of the
CA
HALL vs. PICCIO DIGEST
DECEMBER 21, 2016 ~ VBDIAZ
ARNOLD HALL vs. EDMUNDO PICCIO
G.R. No. L-2598 / June 29, 1950
FACTS:
On May 28, 1947, the petitioners C. Arnold Hall
and Bradley P. Hall, and the respondents Fred
Brown, Emma Brown, Hipolita D. Chapman and
Ceferino S. Abella, signed and acknowledged in
Leyte, the articles of incorporation of the Far
Eastern Lumber and Commercial Co., Inc.,
organized to engage in a general lumber
business to carry on as general contractors,
operators and managers, etc. Attached to the
articles was an affidavit of the treasurer stating
that 23,428 shares of stock had been subscribed
and fully paid with certain properties transferred
to the corporation described in a list appended
thereto.
Director of the Bureau of Commerce and
Industry which calls a corporation into being.
The immunity of collateral attack is granted to
corporations ‘claiming in good faith to be a
corporation under this act.’
Further, this is not a suit in which the
corporation is a party.
This is a litigation between stockholders of the
alleged corporation, for the purpose of obtaining
its dissolution. Even the existence of a de
jure corporation may be terminated in a private
suit for its dissolution between stockholders,
without the intervention of the state.
WHEREFORE, the petition is dismissed.

Immediately after the execution of said articles

of incorporation, the corporation proceeded to do
business with the adoption of by-laws and the
election of its officers. On December 2, 1947, the
said articles of incorporation were filed in the
office of the Securities and Exchange
Commission for the issuance of the
corresponding certificate of incorporation.

On March 22, 1948, pending action on the

articles of incorporation by the SEC,
respondents Fred Brown, Emma Brown,
Hipolita D. Chapman and Ceferino S. Abella filed
a suit against petitioners before the Court of
First Instance of Leyte alleging among other
things that the Far Eastern Lumber and
Commercial Co. was an unregistered
partnership; that they wished to have it
dissolved because of bitter dissension among the
members, mismanagement and fraud by the
managers and heavy financial losses.

The defendants in the suit, namely, C. Arnold

Hall and Bradley P. Hall, filed a motion to
dismiss, contesting the court’s jurisdiction and
the sufficiency of the cause of action.
After hearing the parties, the Hon. Edmundo S.
Piccio ordered the dissolution of the company;
and at the request of plaintiffs, appointed the
respondent Pedro A. Capuciong as receiver of
the properties thereof, upon the filing of a
P20,000 bond.

The defendants therein (petitioners herein)

offered to file a counter-bond for the discharge of
the receiver, but the respondent judge refused to
accept the offer and to discharge the receiver.
Hence, this petition.

ISSUE:

Whether or not the trial court has jurisdiction

over the case?

HELD:

No. The court had no jurisdiction in civil case

No. 381 to decree the dissolution of the
company, because it being a de
facto corporation, dissolution thereof may only
be ordered in a quo warranto proceeding
instituted in accordance with section 19 of the
Corporation Law.

Under our statute it is to be noted that it is the

issuance of a certificate of incorporation by the