mercantile law} corpo, cred trans, insurance, ipc, nil & transpo} case survey up to 2001 } made 2

7/27/2019 Mercantile Law} Corpo, Cred Trans, Insurance, IPC, NIL & Transpo} Case Survey Up to 2001 } Made 2

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C O M M E R C I A L L A W D I G E S T S A T E N E O C E N T R A L B A R O P E R A T I O N S 2 0 0 2

CORPORATION LAW

2001

TCL Sales Corporation v. CA & Ting Ping Lay [349 SCRA 35 (Jan.5, !!"#$

J%risi'tion o t)e S*C

Rig)ts o a S)are)oler+%ty o Corporate Se'retary to enter transer o S)ares in Corporate oo-s

Facts: Ting Ping Lay, not one of the original subscribers of the shares of stock of TCL SalesCorporation, acquired his shares by purchasing those of some of the original subscribers. norder to protect his shareholdings !ith TCL, Lay requested "nna Teng, TCL CorporateSecretary to enter the transfer of shares of stock for proper recording of his acquisitions in theStock # Transfer $ook of TCL. %e too demanded issuance of ne! certificates of stock in hisfa&or.

TCL, ho!e&er, e&en after repeated demands, refused. Lay filed a case !ith the S'C formandamus against TCL and Teng. This !as in turn granted by the S'C denying a later () as!ell. The C" dismissed TCL*s petition as !ell for being filed out of time.

ssues: +- /0 S'C has 1urisdiction o&er the petition for mandamus filed by Lay.+2- /0 the alleged transfer of shares in fa&or of Lay are &alid and can be

ordered recorded.

%eld: Denied and C" decision affirmed. '&en if Lay !ere not a Share %older, he is still amember of the public !hose in&estment in the corporate the la! seeks to protect andencourage, as his purchase of shares of stock has been established. Principal function of S'Cis super&ision and control of corps, partnerships, assoc !ith the &ie! of protecting andencouraging in&estments for the protection of economic de&elopment. S'C has po!er ofcontrol # super&ision o&er all corps to encourage acti&e public participation in the affairs ofpri&ate corps through in&estments.

3urisdiction o&er an action for mandamus lies !ith the S'C e&en if the proponent is not yet aS% of record, as in the case of Abejo v. de la Cruz. S'C by e4press mandate has absolute

1urisdiction to enforce the pro&isions of the Corp Code among !hich is the stock purchaser*sright to secure the corresponding certificate of stock in his name.

5etermination of !hether or not a Share %older is entitled to e4ercise the rights of a Share%older is !ithin 1urisdiction of the S'C. The S'C en bancfound that TCL did not refute the&alidity of the transfers of the shares of stock 6 they conceded that they could not assail thedocuments e&incing the transfer of the shares to Lay. Lay !as able to establish prima facieo!nership through the deeds of transfer of shares of stock of TCL. " listing of TCL*s Share%olders # their respecti&e shares before # after the e4ecution of a certain deed of assignmentsho!s that Lay is indeed listed as a Share %older of TCL. The dispute is an intra7corpcontro&ersy in&ol&ing Share %olders of TCL.

"s held in Lim Tay v. CA, the duty of the corporate secretary to record transfers of stocks isministerial. t ho!e&er, cannot be compelled !hen the transferee*s title has no prima facie&alidity or is uncertain. (andamus !ill not issue to establish a right but only to enforce onealready established.

"lthough during the trial before the S'C, TCL admitted that they ignored Lay*s request !asbased simply on the fact that they did not !ant to grant it. %a&ing been capricious, !himsical #un!arranted, it constitutes bad faith. %o!e&er, the S'C en banc modified # deleted the saida!ard for damages imposed on the corp. The matter of damages no! concerns only Teng, thecorporate secretary. t !as Teng*s refusal as corp secretary to record the transfer of the shares,!ithout e&idence that such refusal !as authori8ed by TCL*s $/5, that caused damage. 0oerror !as committed by the respondent court in refusing to disturb the S'C*s findings.

nion an- o t)e P)ilippines v. S*C [J%ne /, !!"$Revise Se'%rities A't

Facts: /n "pril 9, ;, petitioner +a- +?- of the)e&ised Securities "ct !hich e4empts securities issued or guaranteed by banking institutionsfrom the registration requirement pro&ided by Section 9 of the same "ct.


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Chairman =asay replied and informed the petitioner that !hile the requirements ofregistration do not apply to securities of banks !hich are e4empt under Section >+a- +?- of the)e&ised Securities "ct, ho!e&er, banks !ith a class of securities listed for trading on thePhilippine Stock '4change, nc. are co&ered by certain )e&ised Securities "ct )ules go&erningthe filing of &arious reports !ith respondent Commission.

/n 3uly ;, ;, respondent Commission !rote petitioner, en1oining the latter to sho!cause !hy it should not be penali8ed for its failure to submit a Pro4y@nformation Statement in

connection !ith its annual meeting held on (ay 2?, ;, in &iolation of respondentCommission*s AFull (aterial 5isclosure )ule.*

BFailing to respond to the aforesaid communication, petitioner !as gi&en a A2ndSho! Cause!ith "ssessment* by respondent Commission on 3uly 2, ;. Petitioner !as then assessed afine of P>,. plus P>. for e&ery day that the report D!asE not filed, or a total of P,. as of 3uly 2, ;. Petitioner !as like!ise ad&ised by respondent Commission tosubmit the required reports and settle the assessment, or submit the case to a formal hearing.

The S'C issued an order:Bn &ie! of the foregoing, the appeal filed by the of the )e&ised Securities "ct states that:Sec >. Exempt Securities. +a- '4cept as e4pressly pro&ided, the requirement of registrationunder subsection +a- of Section four of this "ct shall not apply to any of the follo!ingclasses of securities:4444 +?- "ny security issued or guaranteed by any banking institution authori8ed to dobusiness in the Philippines, the business of !hich is substantially confined to banking,or a financial institution licensed to engage in quasi7banking, and is super&ised by the

Central $ank.This pro&ision e4empts from registration the securitiesissued by banking or financial

institutions mentioned in the la!. 0o!here does it state or e&en imply that petitioner, as alisted corporation, is e4empt from complying !ith the reports required by the assailed )S"mplementing )ules.

t must be emphasi8ed that petitioner is a commercial banking corporation listed in thestock e4change. Thus, it must adhere not only to banking and other allied special la!s, butalso to the rules promulgated by )espondent S'C, the go&ernment entity tasked not only!ith the enforcement of the )e&ised Securities "ct, but also !ith the super&ision of allcorporations, partnerships or associations !hich are grantees of go&ernment7issuedprimary franchises and@or licenses or permits to operate in the Philippines.

That petitioner is under the super&ision of the $angko Sentral ng Pilipinas +$SP- and the

Philippine Stock '4change +PS'- does not e4empt it from complying !ith the continuingdisclosure requirements embodied in the assailed )ules. Petitioner, as a bank, is primarilysub1ect to the control of the $SPG and as a corporation trading its securities in the stock market,it is under the super&ision of the S'C. t must be pointed out that e&en the PS' is under thecontrol and super&ision of respondent. There is no o&er7super&ision here. 'ach regulatingauthority operates !ithin the sphere of its po!ers. That stringent requirements are imposed isunderstandable, considering the paramount importance gi&en to the interests of the in&estingpublic.

/ther!ise stated, the mere fact that in regard to its banking functions, petitioner is alreadysub1ect to the super&ision of the $SP does not e4empt the former from reasonable disclosureregulations issued by the S'C. These regulations are meant to assure full, fair and accuratedisclosure of information for the protection of in&estors in the stock market. mposing such

regulations is a function !ithin the 1urisdiction of the S'C. Since petitioner opted to trade itsshares in the e4change, then it must abide by the reasonable rules imposed by the S'C.

2000

Cyana0i P)ilippines, 1n'. vs CA, CTA an Co00issioner o 1nternal Reven%eJan%ary !, !!!

2


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A''%0%lation o Proits

Facts: Petitioner is a corporation organi8ed under Philippine la!s and is a !holly o!nedsubsidiary of "merican Cyanamid Co. based in (aine, of the 0)C, and that the

petitioner is not among those e4empted.The C" affirmed the CT"Js decision.

ssue: hether or not the accumulation of income !as 1ustified.

%eld: n order to determine !hether profits are accumulated for the reasonable needs of thebusiness to a&oid the surta4 upon the shareholders, it must be sho!n that the controllingintention of the ta4payer is manifested at the time of the accumulation, not intentionssubsequently, !hich are mere afterthoughts. The accumulated profits must be used !ithinreasonable time after the close of the ta4able year. n the instant case, petitioner did notestablish by clear and con&incing e&idence that such accumulated !as for the immediate needsof the business.

To determine the reasonable needs of the business, the


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the corporations themsel&es. She cites that Pastor Lim during his lifetime organi8ed and !hollyo!ned the > corporations.

ssue: hether or not a corporation in its uni&ersality be the proper sub1ect of and be included inthe in&entory of the estate of a deceased personM

%eld: The real properties included in the in&entory of the estate of the late Pastor Lim are in

the possession of and are registered in the name of pri&ate respondent corporations, !hichunder the la! possess a personality separate and distinct from their stockholders and in theabsence of any cogency to shred the &eil of corporate fiction, the presumption of conclusi&enessof said titles in fa&or of pri&ate respondents should stand. t is settled that a corporation isclothed !ith personality separate and distinct from that of persons composing it. t may notgenerally be held liable for that of the persons composing it. t may not be held liable for thepersonal indebtedness of its stockholders or those of the entities connected !ith it. "corporation by legal fiction and con&enience is an entity shielded by a protecti&e mantle andimbued by la! !ith a character alien to the persons comprising it. $ut K!hen the fiction is urgedas a means of perpetrating a fraud or an illegal act or as a &ehicle for the e&asion of an e4istingobligation, the circum&ention of statutes, the achie&ement or perfection of a monopoly orgenerally the perpetration of kna&ery or crime, the &eil !ith !hich the la! co&ers and isolates

the corporation from...!ill be lifted to allo! for its consideration merely as an aggregation ofindi&iduals.K First Philippine nternational $ank &s C" +2>2 SC)" 2>-

The test in determining the applicability of piercing the &eil of corporation fiction is asfollo!s: - Control, not mere ma1ority or complete stock control but complete domination notonly of finances but of policy and business practice in respect to the transaction attacked so thatthe corporate entity as of this transaction had at the time no separate mind, !ill or e4istence ofits o!n. 2- Such control must ha&e been used by the defendant to commit fraud or !rong, toperpetuate the &iolation of a statutory or other positi&e legal duty, or dishonest and un1ust act incontra&ention of plaintiffJs legal right. ?- The control and breach of duty must pro4imately causethe in1ury. The absence of these elements pre&ent the piercing. Petitioner failed to adducee&idence that !ould 1ustify such piercing. (ere o!nership by a single stockholder or by acorporation of all or nearly all of the capital stock is not sufficient reason for disregarding the

fiction of separate corporate personalities.

ran'is'a al%yot vs Pa%l 6olgan7a an t)e 8i'e o t)e 802%s0an (isayas#represente 2y Art%ro oi'a, +ir. irginia Plan'a:Santiago an ;rat 1nvestigation8i'er Anna arie ilitante (e2r%ary 9, !!!#1n'orporation Test to eter0ine


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charter !as amended to &est in it the authority to secure loans, be e4empted from payment ofall duties, ta4es, fees and other charges of all kinds on all importations and purchases for itse4clusi&e use, on donations for its disaster relief !ork and other ser&ices and in its benefits andfund raising dri&es...K Clearly then, public respondent has 1urisdiction o&er the matter.

Anres Lao vs. CA, t)e Asso'iate Anglo:A0ei'an Ta2a''o Corp. an *ste2an Co.e2r%ary ">, !!!

Corporate 8i'ers not personally lia2le or A%t)ori7e Corporate A'tsFacts: n O> a Contract of Sales "gent !as entered by the "ssociation of "nglo7"mericanTobacco Corporation !ith "ndres Lao. Lao !as to sell cigarettes manufactured and shipped bythe Corporation to his address in Tacloban, and he !ould remit the sales proceeds. Lao !ouldrecei&e commission for those sold, !ith a monthly salary and operational allo!ance. n OHLaoJs attention !as called to his enormous accounts and the difficulty in obtaining a tally despitehis a&o!al of regular remittance of collections. n O it !as established that his liabilityamounted to P>2>,>?. "lso, the Corp. disco&ered that Lao !as engaged in a constructionbusiness and suspecting that he di&erted the sale proceeds to such business, it ga&e a demandletter for payment of his obligations. t also found that contrary to his allegations, he did notha&e a huge collectible from customers and nothing !as due to the Corporation. From then on,the Corp. no longer sent him shipments. n ;, "ndres, 3ose and Tomas Lao brought a

complaint for accounting and damages against the Corp.. The court ordered both to undergo acourt super&ised accounting but also ordered the Corporation to pay the LaoJs actual loss ofearnings, moral damages, e4emplary damages, atty. fees and cost of suit. Later the court ga&ea supplemental decision dismissing LaoJs claim of o&erpayment. The Corp. and the LaoJsappealed. The C" found the Corp. liable for actual damages of loss of earnings, moraldamages and e4emplary damages. t also ordered the Corp. to pay the claim of o&erpaymentby Lao. The Corp. file a motion for reconsideration and during its pendency, 'steban Co, thene! P of the Corp. filed a complaint !ith the fiscal alleging Lao failed to remit an amount !hichhe allegedly misappropriated and con&erted to his o!n personal use. Pending the criminalcase, Lao filed against the Corp. and 'steban Co a complaint for malicious prosecution. Thefiscal found that Lao did not commit estafa and that his liability !as ci&il. The trial court foundthe Corp and 'steban Co guilty of malicious prosecution. They appealed. Co asserts that he

cannot be held 1ointly and se&erally liable !ith the Corp. as he !as acting as e4ecuti&e &icepresident and his action !as !ithin the scope of his authority as such corporate officer.

ssue: hether or not Co should be held solidarily liable !ith the Corp.

%eld: " perusal of his affida&it re&eals that at the time he filed the complaint on 3une ;9, Co!as &ice president of the Corp. "s a corporate officer, his po!er to bind the Corp as its agentmust be sought from statute, charter, by7la!s, a delegation of authority to a corporate officer, orfrom the acts of the board of directions, e4pressed or implied from custom of doing business. nthis case, no such sources of CoJs authority from !hich to deduce !hether or not he !as actingbeyond the scope of his responsibilities are mentioned, or pro&en. t is logical to conclude thatthe board or by7la!s of the Corp. &ested Co !ith certain e4ecuti&e duties, one of !hich is the

case for the Corp. That Co !as authori8ed to institute the estafa case is buttressed by the factthe Corp failed to make an issue out of his authority to file the case. The defense should ha&ebeen specially pleaded by the Corp. ts failure to interpose such defense could only mean thatthe filing of Co !as !ith consent and authority of the Corp. Thus, Co may not be heldpersonally liable for acts performed by him in pursuance of an authority.

Pilipinas an- vs CA an Ri'aro Silverio (e2r%ary , !!!#S*C J%risi'tion, Re?%ire0ent o Proo o Relations)ip o Parties an S%2e't atter

Facts: n , Pilipinas bank filed a complaint against Sil&erio to secure payment of t!o loanshe obtained from petitioner !hen he !as still its ma1ority stockholder. Sil&erio contends that it isthe S'C and not the regular courts that has 1urisdiction o&er the suit !hich is an intra7corporate

contro&ersy bet!een the $ank and its stockholder and that there is a pending case in the S'C!herein the petitioner may plead his claim.The $ank in ans!er to a request for admission, admits that Sil&erio !as a stockholder,

that it instituted a case for Specific Performance and $reach of Contract before the S'C. t alsoadmits that Sil&erio had a capital infusin of 2> million credited to paid in surplus in its books butthe same !as !ritten off against losses of the $ank, in the same may equities of otherstockholders !ere proportionately !ritten off. The court granted the motion to dismiss anddenied the $anks motion for reconsideration. The $ank filed for certiorari !ith the C", !hich

>


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found the case to be intra7corporate and dismissed the case. t cited Sec. > of P.5. 27a.(otion for reconsideration denied.

ssue: hether or not the establishment of a relationship bet!een a stockholder andcorporation in a dispute necessarily &est 1urisdiction in the S'C.

%eld: The $ank in&oke the ruling of the cases of iray &s. C" !herein the Court ruled that the

establishment of the relationship does not al!ays confer 1urisdiction on the S'C. The betterpolicy is determining !hich body has 1urisdiction !ould be to consider not only the status or therelationship of the parties but also the nature of the question. "nd in (acapalan s. atalbas7(oscardon, the Court held that simple money claims, !ithout any a&erment of fraud ormisrepresentation committed by the corporations in&ol&ed, are cogni8able by the ordinarycourts.

%o!e&er, there is no question that the present case instituted by the $ank to collectloans obtained by Sil&erio !ho in turn seeks to reco&er his 2> million deposit in paid7in surplus!hich !as !ritten off by the $ank , is an intra7corporate contro&ersy. Considering therelationship of the parties and the sub1ect matter of the contro&ersy, 1urisdiction is !ith the S'C.Question !hich arise, such as: !hether the loans obtained by Sil&erio !ere in his personalcapacity or as accommodation, he ha&ing been the ma1ority stockholder and !hether the !rite7

off !as applied for his loan accounts or for a proportionate reduction of his equity, call for anin&estigation of specific matters !ithin the e4clusi&e competence and authority of the S'C topass upon.

Presiential Co00ission on ;oo ;overn0ent v. T)e 6on. Sanigan2ayane2r%ary 3, !!!Pier'ing eil o Corporate i'tion to re'over 1ll:;otten @ealt)

Facts: orld


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obtained against C5CP. $oth corporations are Cuenca7o!ned and under sequestration.%ence there is &alid ground for PCNN to e&aluate the &alidity of


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Leyson, '4. ice Pres. /f TTC filed !ith the /ffice of the /mbudsman against Torralba.n another complaint, petitioner charged "ntiporda as Chairman of I of


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ssue: hether or not (olina is personally liable for his act of applying amounts payable toT$SS to losses suffered by ")$C due to T$SS security guards. +hether or not (olina !asacting in his capacity as an officer of ")$C-

%eld: The Court agrees !ith ")$C and (olina. The C", affirming the order of the )TC, ruledthat (olina by his actions imputed pretended and fabricated &iolations, blaming T$SS foralleged losses and deducting the &alues from T$SSJ billings. t like!ise held that since all these

accusations and imputations !ere made by (olica such are sufficient cause of action against(olina in his personal capacity.

%o!e&er, it is basic that a corporation is in&ested by la! !ith a personality separate anddistinct from those of the persons composing it as !ell as from that of any other legal entity to!hich it may be related. "s a general rule, a corporation may not be made to ans!er for acts orliabilities of its stockholders or those of the legal entities it may be connected an &ice &ersa.%o!e&er, the &eil of corporate fiction may be pierced !hen it is used as a shield to further anend sub&ersi&e of 1usticeG or for purposes that could not ha&e been intended by the la! thatcreated itG or to defeat public con&enience, 1ustify a !rong, protect fraud or defend crimeG or toperpetuate deceptionG or as an alter ego, ad1unct or business conduit for the sole benefit o thestockholders.

The general rule is that officers of a corporation are not personally liable for their official

acts unless it is sho!n that they ha&e e4ceeded their authority. +"rt. ? of the Corporate Code.-"bsent any proof of bad faith or malice, (olina cannot be held 1ointly and se&erally liable for anyobligation !hich ")$C may be held accountable for.

Jarine +avies 1n'. vs. CA an ar *ast ills S%pply Corporation P%re oosCorporation vs CA (J%ne "9, !!!#Corporation entitle to oral +a0ages (rep%tation 2es0ir')e#

Facts: n 2 Purefoods decided to install 2 generators in its food processing plant in San)oque, (arikina. " bidding for the supply and installation !as held among the bidders !as Far'ast (ills Supply Corporation +F'(SC/-. Thereafter, in a letter addressed to F'(SC/

president, Purefoods confirmed the a!ard of the contract. mmediately F'(SC/ submitted therequirements such as a performance bond and all risk insurance policy as !ell as purchasingthe necessary materials. %o!e&er, in another letter, Purefoods unilaterally cancelled the a!ardciting Ksignificant factorsK !hich !ere unco&ered and brought to their attention K!hich dictate thecancellation and !arrant a total re&ie! and re7bid of the pro1ect.K F'(SC/ protested thecancellation but before the matter could be resol&e, Purefoods a!arded the pro1ect !ith 3ardine0ell, a di&ision of 3ardine 5a&ies.

F'(SC/ sued both Purefoods and 3ardine. The )TC granted 3ardine*s demurrer toe&idence but found in fa&or of F'(SC/ against Purefoods and order indemnification.F'(SC/ appealed the granting of the demurrer filed by 3ardine and Purefoods appealed thedecision of the court. The C" affirmed the decision of the )TC but ordered 3ardine to payF'(SC/ damages for inducing Purefoods to &iolate the contract as such, 3ardine must pay

moral damages. n addition, Purefoods !as also directed to pay F'(SC/ moral damages ande4emplary damages $oth Purefoods and 3ardine filed motions for reconsideration !hich !eredenied.

ssue: hether or not moral damages may be granted to a corporationM

%eld: The Court has a!arded in the past moral damages to a corporation !hose reputation hasbeen besmirched. +"sset Pri&ati8ation Trust &. C", ? SC)" ?;- n this case, respondentF'(SC/ has sufficiently sho!n that its reputation !as tarnished after it immediately orderedequipment from its suppliers on account of the urgency of the pro1ect, only to be canceled later.The Court thus, sustained respondent appellate courtJs a!ard of moral damages. %o!e&er, asthere is no sho!ing !hatsoe&er that 3ardine induced Purefoods, the decision of the C" is

modified. The order to 3ardine 5a&ies to pay F'(SC/ moral damages is re&ersed and setaside.

R%22erBorl (P)ils.# vs.


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corporation. /n "ugust 2O, 9, )ubber!orld filed !ith the 5epartment of Labor andemployment a notice of temporary shutdo!n of operations to take effect on September 2O,9. $efore the effecti&ity date, ho!e&er, )ubber!orld !as forced to prematurely shutdo!n itsoperations.

/n 0o&ember , 9, pri&ate respondents filed !ith the 0L)C a complaint againstpetitioner for illegal dismissal and non7payment of separation pay. /n 0o&ember 22, 9,)ubber!orld filed !ith the S'C a petition for declaration of suspension of payments !ith a

proposed rehabilitation plan./n 5ecember 2H, 9, S'C issued an order suspending all actions for claims against

)ubber!orld in accordance !ith P.5. 27". 5espite this order, ho!e&er, the Labor "rbiterruled against )ubber!orld, declaring its shutdo!n illegal and making the corporation liable fordamages and payment of separation pay. The 0L)C affirmed the decision of the Labor "rbiter.%ence, )ubber!orld filed !ith the SC a petition to annul the 0L)C resolution.

ssue: hether or not 0L)C acted !ithout or in e4cess of its 1urisdictionM

%eld: P.5. 27" is clear that Ball actions for claims against corporations, partnerships, orassociations under management or recei&ership pending before any court, tribunal, board orbody shall be suspended accordingly. 0L)C thus acted !ithout an in e4cess of its 1urisdiction

!hen it proceeded to decide the case despite the suspension order. "s a consequence, anyresolution decisions or order that is rendered !ithout 1urisdiction is a nullity.

A Savings an- vs. Sia [33/ SCRA 44 ((J%ly >,!!!#$PoBers o t)e oar o +ire'tors

Facts: The Court of "ppeals issued a )esolution denying due course to a Petition for Certiorarifiled by $" Sa&ings $ank, on the ground that Athe Certification on anti7forum shoppingincorporated in the petition !as signed not by the duly authori8ed representati&e of thepetitioner, as required under Supreme Court Circular 2H7 but by its counsel.444 " (otion for)econsideration !as filed by petitioner, attached to it !as a $" Sa&ings $ank CorporateSecretary*s Certificate. The Certificate sho!ed that the petitioner*s $oard of directors appro&ed

a resolution authori8ing the petitioners la!yers to represent it in any action or proceeding beforeany court, tribunal or agencyG and to sign the Certificate of 0on7forum Shopping, among others.The () !as denied.

ssue: hether or not the Supreme Court )e&ised Circular 0o. 2H7 allo!s a corporation toauthori8e its counsel to e4ecute a certificate of non7forum shopping in its behalf

%eld: =es. The resolution of the $oard of 5irectors !as sufficient to &est petitioner*s la!yers!ith authority to bind the corporation and !as specific enough as to the acts they !ereempo!ered to do. n the case of natural persons, Circular 2H7 requires the pattiesthemsel&es to sign the certificate of non7forum shopping. %o!e&er, such requirement cannot beimposed on artificial persons, like corporations, for the reason that they cannot do the task

themsel&es. Corporations act only through their officers and duly authori8ed agents. TheCircular does not require corporate officers to sign the certificate. Further, there is noprohibition against authori8ing agents to do so.

Pas'%al vs. Co%rt o Appeals [339 SCRA ""> (A%g. 5, !!!#$

J%risi'tion o t)e S*C

Facts: Pri&ate respondents filed an action for recon&eyance of a piece of land and foraccounting and damages against petitioners. Petitioners filed a motion to dismiss on the groundof lack of 1urisdiction. They claim that the case in&ol&es an intra7corporate dispute and thus, theS'C has 1urisdiction and not the regular courts. The trial court denied the motion to dismiss andruled that the case does not in&ol&e an intra7corporate dispute. The C" affirmed. %ence, this

petition.

ssue: hether or not this case in&ol&es an intra7corporate dispute and !hether or not the S'Chas 1urisdiction o&er itM

%eld: Pursuant to ).". H;, >.2, !hich took effect on "ugust H, 2, the 1urisdiction of theSec to decide cases in&ol&ing intra7corporate dispute !as transferred to courts of general

1urisdiction. Thus, the question as to !hether this case in&ol&es an intra7corporate dispute is


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no! only of academic interest. '&en if the case in&ol&es an intra7corporate dispute, it !ould beremanded to the )TC 1ust the same.

anila 6otel Corp. v. I of the capital stock of (%CL is not enough to pierce the &eil. '&en if !e assume: 0L)Chad 1urisdiction o&er the case # (%CL !as liable for Santos* retrenchment, still (%C, as aseparate # distinct 1uridical entity, cannot be held liable. Piercing the &eil is an equitableremedy. hen the notion of legal entity is used to defeat public con&enience, 1ustify !rong,protect fraud, or defend crime, the la! !ill regard the corp as an association of persons. t isdone only !hen the corp is a mere alter ego or business conduit of a person or another corp.

Clear # con&incing e&idence is needed to pierce the &eil of corporate fiction. There is no

such e&idence to sho! that (%CL # (%C are # the same entity. Test to enable piercing of the &eil, e4cept in e4press agency, estoppel or direct tort:

a-Control, not mere ma1ority or complete dominationG b-Such control must ha&e eUbeenused by the defendant to commit fraud or !rong, etc.G c-The aforesaid control # breachof duty must appro4imately cause the in1ury or un1ust loss complained of.

Fact that the Palace %otel is a member of the (anila %otel Nroup is not enough topierce the corporate &eil 6 there is no e&idence to sho! that they are # the sameentity.

Contrary to !hat Santos claims that (%CL signed his employment contract, (%CLice7President signed as a mere !itness under the !ord Anoted*. Furthermore, there isno '') bet!een Santos # (%CL.

Transar0 & Co., 1n'. v. +aeBoo Corporation [343 SCRA 4"! (8't.">, !!!#$

J%risi'tion o S*C

Facts: 5ae!oo Corp +5ae!oo- entered into a 1oint &enture agreement !ith Transfarm # Co.+Transfarm- for the deli&ery, assembly, production # distribution of 5ae!oo cars in the country.Transdae!oo "utomoti&e (anufacturing Company !as to be incorporated !ith Transfarmo!ning ;I # 5ae!oo ?I. Transfarm # T"(C !ere then to enter into a separate agreementthat !ould name Transfarm as the e4clusi&e distributor in the country of 5ae!oo cars.

Parties stipulated that contro&ersies or claims arising out of the 1oint &enture itself shouldbe settled by arbitration conducted in %ong ong but the 1oint &enture agreement itself !as tobe go&erned # construed in accordance !ith Philippine la!s.

hen the agreement !ent a!ry, Transfarm # T"(C filed a complaint !ith the )TCagainst 5ae!oo # 5ae!oo (otor Co., Ltd. +5(CL-, a corp organi8ed under orean la!s # notdoing business in the Phils, praying that 5ae!oo # 5(CL be ordered to refrain from doingbusiness here. "n (T5 !as filed on the ground that !hat !as field !as an intracorpcontro&ersy hence cogni8able by the S'C. )TC denied such (T5. C" dismisses the case #says that 1urisdiction is !ith the S'C. ith a subsequent () rebuffed, Transfarm no! files apetition !ith the SC.

5uring the pendency of the petition !ith the SC, )"H; !as enacted.


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ssue: /0 S'C has 1urisdiction o&er the dispute.

%eld: CA decision set aside # case remanded back to )TC. The Securities )egulation Code +)" H;- transferred to the courts of general

1urisdiction the S'C*s 1urisdiction o&er all cases enumerated under Sec.> of P5 27".The S'C shall retain 1urisdiction o&er pending cases in&ol&ing intra7corp disputes

submitted for final resolution !hich shall be resol&ed !ithin year from the enactment of)" H;. The S'C shall retain 1urisdiction o&er pending suspension of payments@rehabilitation cases filed as of ? 3une 2 until finally disposed.

The instant case, neither filed nor pending !ith the S'C, let alone ready for finalresolution by it, is clearly cogni8able by the )TC.

'T)": Statutes regulating court 1urisdiction # procedure are generally construed to be

applicable to actions pending # undetermined at the time of the passage of saidenactments.

1nternational *Dpress Travel & To%r Servi'es, 1n'. v. CA, Ea)n & P)ilippine oot2all

eeration [343 SCRA />4 (8't."9, !!!#$Creation o Separate Corporate PersonalityLia2ility o Person A'ting or nin'orporate *ntity+o'trine o *stoppel

Facts: 'TTS !rote a letter to the Federation through its president, ahn, offering its ser&icesas a tra&el agency. This !as accepted by the Federation. 'TTS secured airline tickets for thetrips of the athletes # officials of the Federation to the South 'ast "sian Names in ula Lumpuras !ell as other trips to China # $risbane. " demand letter !as sent to the Federation re:payment of the tickets. "fter ? partial payments, ahn issued a personal check as partialpayment for the Federation*s balance. 0o further payments !ere made, causing 'TTS to file aci&il case before the )TC against ahn in his personal capacity on the ground that he allegedlyguaranteed the said obligation # as President of the Federation, impleading the Federation asan alternati&e defendant.

ahn filed a counterclaim against 'TTS a&erring that it had no cause of action againsthim either in his personal nor official capacity as he did not guarantee the payment but merelyacted as an agent of the Federation !@c has a separate # distinct 1uridical personality. TheFederation, in failing to file its ans!er, !as declared in default.

The )TC found ahn personally liable since a &oluntary unincorporated association, likethe Federation, doesn*t ha&e the po!er to enter nor ratify a contract. The contract thus enteredinto by its officers or agents on its behalf is not binding on the association nor enforceableagainst it 6 but against the officers or agents in their personal capacity. /n appeal to the C",decision !as re&ersed saying that 'TTS failed to pro&e that ahn guaranteed the obligation,hence this petition.

ssues: +- /0 the Federation has a separate 1uridical personality.+2- /0 ahn can be held personally liable for the unpaid obligations of theFederation

%eld: CA decision reversed & set aside. )TC decision reinstated.)" ??> # P5 O9 recogni8ed the 1uridical e4istence of national sports associations.

The po!er to purchase, sell, lease # encumber property are acts !@c may only be done bypersons, !hether natural or artificial, !ith 1uridical capacity and these ha&e been granted tonational sports associations, clearly indicating their 1uridical personality. %o!e&er, such doesnot automatically take place by mere passage of the la!s.

$efore a corp may acquire 1uridical personality, the State must gi&e its consent either inthe form of a special la! or a general enabling act. 0o!here can it be found in )" ??> # P5O9 any pro&ision creating the Philippine Football Federation. These la!s merely recogni8edthe e4istence of national sports associations # pro&ided the manner by !hich they may acquire

1uridical personality.The statutory pro&isions require that before an entity may be considered as a national

sports association, such must be recogni8ed by the accrediting organi8ation, the Philippine"mateur "thletic Federation under )" ??> # the 5epartment of =outh # Sports 5e&elopment

2


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under P5 O9. n attempting to pro&e 1uridical e4istence of the Federation, ahn attached acopy of the constitution # by7la!s of the Federation this doesn*t pro&e the said Federation hasbeen recogni8ed # accredited.

"ny person acting or purporting to act on behalf of a corp !@c has no &alid e4istenceassumes such pri&ileges # obligations # becomes personally liable for contracts entered into orfor such other acts performed as such agent. %ence, ahn should be liable for the unpaidobligations of the unincorporated Federation. %e is presumed to ha&e kno!n of the corpe4istence or non7e4istence of the Federation.

5octrine of Corporation by 'stoppel 6 applies to third persons only !hen he tries toescape liability on a contract from !@c he has benefited on the irrele&ant ground of defecti&ecorporation. %ere, 'TTS is not trying to escape liability from the contract but rather is the claiming from it.

6eirs o Ra0on +%rano, Sr. v. y [344 SCRA 3 (8't.4, !!!#$

Separate J%rii'al PersonalityAlter *goF Pier'ing t)e eil o Corporate i'tion

Facts: )amon 5urano # !ife instituted an action for damages against


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n applying the instrumentality or alter ego doctrine, the courts are concerned !@ reality# not form, !@ ho! the corp operated # the indi&idual defendant*s relationship to that operation.

hether a corporation is a mere alter ego is purely one of fact. Shortly after the sale byCepco to 5urano # Co., the latter sold the property to 5urano , !ho immediately procured theregistration of the property in his name. /b&iously, 5urano # Co. !as used by 5urano ,etc.as an instrumentality to appropriate the disputed property for themsel&es.

Test to enable piercing of the &eil, e4cept in e4press agency, estoppel or direct tort:a-Control, not mere ma1ority or complete dominationG b-Such control must ha&e eUbeen used bythe defendant to commit fraud or !rong, etc.G c-The aforesaid control # breach of duty mustappro4imately cause the in1ury or un1ust loss complained of.

Sec.H )ule > indicates that the C" is not limited to re&ie!ing only those errors assignedby appellant but also those closely related to or dependent on an assigned error. C" isimbued !@ sufficient discretion to re&ie! matters.

/rdinary acquisiti&e prescription, in the case of immo&able property, requires possessionof the thing in good faith # !@ 1ust title for a period of years.

)emedies of an o!ner on !hose land somebody has built in bad faith: a- appropriate!hat has been built !@o any obligation to pay indemnityG b- demand that the builderremo&e !hat he had builtG c- compel the builder to pay the &alue of the land. n any

case, lando!ner is entitled to damages +"rt.9>-

Reynoso 1 v. CA & ;eneral Creit Corporation [345 SCRA 335 (


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mother corporation, is placed beyond the legal reach of the 1udgment creditor !ho afterprotracted litigation, has been found entitled to positi&e relief. Courts ha&e been organi8ed toput an end to contro&ersy. This should not be negated by an inapplicable and !rong use of thefiction of the corporate &eil.

The defense of separateness !ill be disregarded !here the business affairs of asubsidiary corporation are so controlled by the mother corporation to the e4tent that it becomesan instrument or agent of its parent. $ut e&en !hen there us dominance o&er the affairs of thesubsidiary, the doctrine of piercing the &eil of corporate fiction applies only !hen used to defeatpublic con&enience, 1ustify !rong, protect fraud, or defend crime.

Factually # legally, CCC had dominant control of the business operations of CCC7QC:a. the e4clusi&e management contract insured that CCC7QC !ould be managed #

controlled by CCC # not de&iate from the commands of the mother corpb. CCC appointed its o!n employee as the resident manager of CCC7QCc. Salaries, pensions, benefits, etc !ere from CCC, !hich later became NCCd. SCRA 4/3 (+e'., !!!#$S%i'ien'y o Proo to Pier'e t)e eil o Corporate i'tionJ%risi'tion o t)e S*C

Facts: Commercial Credit Corporation +CCC-, a general financing # in&estment firm, decided toorgani8e franchise companies in different parts of the country, !herein it shall the franchisecompany shall be managed by CCC*s resident manager, management fee equi&alent to I ofnet profit before ta4es shall be paid to CCC, all e4penses shall be borne by the franchisecompany e4cept salary of the resident manager # cost of credit in&estigation, CCC shall setprime rates for discounting or rediscounting of recei&ables. 'ach in&estor, )amoso included,!as asked to sign a continuing guarantee for bad accounts that might be incurred by CCC.

5ue to the 5/S) )ule prohibiting lending of funds by a corp to its directors, officers,

Share %olders # other persons !ith related interests therein, CCC decided to form CCC 'quityCorporation, a !holly7o!ned subsidiary to !hich CCC di&ested its equity in the franchisecompanies but continued to pro&ide a discounting line for recei&ables of the franchisecompanies through CCC 'quity. CCC mean!hile became kno!n as Neneral CreditCorporation.


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appropriately pleaded. The burden of pro&ing is on the party seeking to ha&e the court piercethe &eil of corporate fiction.

"ny taint of bad faith on the part of a financing # in&estment corp in enticing in&estorsmay be resol&ed in ordinary courts since this is in the nature of a contractual relationship.)amoso signed the continuing guaranty of the franchise companies* bad debts in their o!npersonal capacities. %ence they are responsible for their indi&idual acts. The liabilities of)amoso arose out of the regular financing &enture of the franchise companies, there is noe&idence that these bad debts !ere fraudulently incurred. Changing their subsidiary liability bycon&erting them to guarantors of bad debts cannot be done by piercing the &eil of corp identity.

0ot e&ery conflict bet!een a corporate # its Share %olders in&ol&es corporate mattersthat only the S'C can resol&e. '4pedient as the policy may be to &est in administrati&e bodiespo!er to ad1udicate matters that fall !ithin their particular field of e4pertise, it should not depri&ethe courts of 1ustice the po!er to decide ordinary cases in accordance !ith the general la!s thatdo not require any particular e4pertise or training to interpret # apply. The franchisedcompanies* accounts discounted by NCC !ould arise e&en if there is no intra7corporaterelationship bet!een the parties 6 hence it did not arise out of the parties* relationships asShare %olders. The matter is better left to the regular courts in !hich suits ha&e been filed toenforce the suretyship agreements.

" close scrutiny of the facts sho!s that the disputed decision of the hearing officer dealtmainly !ith control of NCC o&er the franchises 6 this is not enough to pierce the &eil. Thecircumstances leading to bankruptcy should also be taken into consideration 6 !as there fraud,dishonesty, etc.

Test to enable piercing of the &eil, e4cept in e4press agency, estoppel or direct tort:a-Control, not mere ma1ority or complete dominationG b-Such control must ha&e eUbeen used bythe defendant to commit fraud or !rong, etc.G c-The aforesaid control # breach of duty mustappro4imately cause the in1ury or un1ust loss complained of.

1999

Re2%riano vs. CA [3!" SCRA 34 (Jan " "999#$Contin%ation o %rii'al personality or 3 years ater issol%tion o 'orporation orli0ite p%rpose

Facts: )TC rendered 1udgment in fa&or of Pepsi Cola $ottling Co. ordering )eburiano to payP>>, !ith interest for the unpaid bottles of softdrinks it recei&ed from the company. )TCissued a !rit of e4ecution. %o!e&er, before the promulgation of the decision of the )TC, Pepsiamended its articles of incorporation to shorten its term of e4istence. The )TC !as not notifiedof this fact.

)eburiano then mo&ed to quash the !rit of e4ecution on the ground that Pepsi no longerhad 1uridical personality, hence, it could no longer sue and be sued.

)TC denied )eburiano*s petition to quash the !rit of e4ecution. "n appeal !as made.C" dismissed the appeal. %ence, this petition for re&ie! on certiorari.

ssue: hether or not Pepsi still had 1uridical personality to pursue its case against )eburianoafter a shortening of its corporate e4istence.

%eld: ='S. Sec. 22 of the Corporation Code pro&ides that e&ery corporation !hose chartere4pires by its o!n limitation or is annulled by forfeiture or other!ise, or !hose corporatee4istence for other purposes is terminated in any other manner, shall ne&ertheless be continuedas a body corporate for ? years after the time !hen it !ould ha&e been so dissol&ed, for the

purpose of prosecuting and defending suits by or against it and enabling it to settle and close itsaffairs, to dispose of and con&ey its property and to distribute its assets, but not for the purposeof continuing the business for !hich it !as established.

%o!e&er, )eburiano further argues that !hen Pepsi undertook a &oluntary dissolution,there !as no sho!ing that a recei&er or trustee !as e&er appointed. %e contends that Sec. 22of the Corporation Code abo&e cited does not authori8e a corporation, after the ? yearliquidation period, to continue actions instituted by it !ithin said period of ? years. SC held thatin the case of Nelano &s. C", a corporation that has a pending action and !hich cannot be

O


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terminated !ithin the ? year period after dissolution is authori8ed to con&ey all its property totrustees to enable it to prosecute and defend suits by or against the corporation beyond the ?year period. 0o reason could be concei&ed !hy a suit already commenced by the corporationitself during its e4istence, not by a mere trustee !ho, by fiction, merely continues the legalpersonality of the dissol&ed corporation, should not be accorded similar treatment allo!ed toproceed to final 1udgment and e4ecution thereof.

Counsel of the dissol&ed corporation can be considered a trustee. "lso, the board of

directors may be permitted to complete the corporate liquidation by continuing as trustees bylegal implication.

(oreo&er, the Corporation Code pro&ides:Sec. !"# $ Amendment or epeal $ %o ri't or remedy in (avor o( or aainst any

corporation) its stoc*'olders) members) directors) trustees) or o((icers) nor any liability incurredby any suc' corporation) stoc*'olders) members) directors) trustees) or o((icers) s'all beremoved or impaired eit'er by t'e subse+uent dissolution o( said corporation or by anysubse+uent amendment or repeal o( t'is Code or o( any part t'ereo(.

AS C< roa'asting Corporation vs. CA [3!" SCRA 5> (Jan " "999#$PoBer o t)e oar o +ire'tors+elegation to *De'%tive Co00ittee

Facts: n , "$S C$0 and i&a e4ecuted a Film '4hibition "greement !hereby i&a ga&e"$S C$0 an e4clusi&e right to e4hibit some i&a films. Said agreement contained a stipulationthat "$S shall ha&e the right of first refusal to the ne4t 29 i&a films for T telecast, pro&idedthat such right shall be e4ercised by "$S from the actual offer in !riting.

%ence, through this agreement, i&a offered "$S a list of ?O films from !hich "$S maye4ercise its right of first refusal. "$S ho!e&er, through P Concio, did not accept the list sinceshe could only tick off films. This re1ection !as embodied in a letter.

n 2, i&a again approached "$S !ith a list consisting of >2 original films !here i&aproposed to sell these airing rights for PO(.

i&a*s ic del )osario and "$S* general manager 'ugenio Lope8 met at the TamarindNrill to discuss this package proposal. hat transcribed at that meeting !as sub1ect to

conflicting &ersions."ccording to Lope8, he and del )osario agreed that "$S !as granted e4clusi&e film

rights to 9 films for P?O(, and that this !as put in !riting in a napkin, signed by Lope8 andgi&en to del )osario. /n the other hand, del )osario denied the e4istence of the napkin in!hich Lope8 !rote something, and insisted that !hat he and Lope8 discussed !as i&a*s filmpackage of the >2 original films for PO( stated abo&e, and that Lope8 refused said offer,allegedly signifying his intent to send a counter proposal. hen the counter proposal arri&ed,i&a*s $o5 re1ected it, hence, he sold the rights to the >2 original films to )$S.

Thus, "$S filed before )TC a complaint for specific performance !ith prayer for T)/against )$S and i&a. )TC issued the T)/ en1oining the airing of the films sub1ect ofcontro&ersy. "fter hearing, )TC rendered its decision in fa&or of )$S and i&a contending thatthere !as no meeting of minds on the price and terms of the offer. The agreement bet!een

Lope8 and del )osario !as sub1ect to i&a $o5 appro&al, and since this !as re1ected by theboard, then, there !as no basis for "$S* demand that a contract !as entered into bet!eenthem. That the "greement !ith the right of first refusal !as already e4ercised by (s.Concio !hen it re1ected the offer, and such "greement !as an entirely ne! contract otherthan the 2 alleged agreement at the Tamarind Nrill. C" affirmed. %ence, this petition forcertiorari !ith SC.

Lope8 claims that it had not fully e4ercised its right of first refusal o&er 29 films since itonly chose . %e insists that SC gi&e credence to his testimony that he and del )osariodiscussed the airing of the remaining 9 films under the right of first refusal agreement inTamarind Nrill !here there !as a contract !ritten in the alleged napkin.

ssue: hether or not there !as a perfected contract bet!een Lope8 and del )osario.

%eld: 0/. " contract is a meeting of minds bet!een 2 persons !hereby one binds himself togi&e something or to render some ser&ice to another for a consideration. There is no contractunless the follo!ing requisites concur: +- consent of the contracting parties +2- ob1ect certain!hich is the sub1ect of the contract +?- cause of the obligation, !hich is established.

Contracts that are consensual in nature are perfected upon mere meeting of the minds./nce there is concurrence bet!een the offer and the acceptance upon the sub1ect matter,consideration, and terms of payment, a contract is produced. The offer must be certain. To

;


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con&ert the offer into a contract, the acceptance must be absolute and must not qualify theterms of the offerG it must be plain, unequi&ocal, unconditional, and !ithout &ariance of any sortfrom the proposal. " qualified acceptance, or one that in&ol&es a ne! proposal, constitutes acounter offer and is a re1ection of the original offer. Consequently, !hen something is desired!hich is not e4actly !hat is proposed in the offer, such acceptance is not sufficient to generateconsent because any modification or &ariation from the terms of the offer annuls the offer.

n the case at bar, !hen del )osario met !ith Lope8 at the Tamarind Nrill, the package

of >2 films !as i&a*s offer to enter into a ne! '4hibition "greement. $ut "$S, through itscounter proposal sent to i&a, actually made a counter offer. Clearly, there !as no acceptance.The acceptance should be unqualified. hen i&a*s $o5 re1ected the counter proposal, thenno contract could ha&e been e4ecuted. "ssuming arguendo that del )osario did enter into acontract !ith Lope8 at Tamarind Nrill, this acceptance did not bind i&a since there !as noproof !hatsoe&er that del )osario had specific authority to do so.


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S'C, through its Prosecution and 'nforcement 5epartment issued a resolution directingthe $oard of Trustees to call !ithin ? days a general membership meeting for the election of ;ne! members of the board. Petitioners ob1ected to this. S'C denied their motion forreconsideration.

Petitioners !ent to the C" contending that the S'C Prosecution and 'nforcement5epartment !as !ithout 1urisdiction to entertain and ad1udicate corporate election contests. C"!as unpersuaded. %ence, this petition before the SC.

ssue: hether or not the Prosecution and 'nforcement 5epartment of the S'C has 1urisdictionto in&estigate the letter complaint filed by %uk&ets.

%eld: =es.+- S'C has both regulatory and ad1udicati&e functions. )elati&e to the latter, S'C has originaland e4clusi&e 1urisdiction to hear and decide contro&ersies and cases in&ol&ing +a- intra7corporate and partnership relations bet!een the corporation, officers and stockholders,including elections or appointmentsG +b- state and corporate affairs in relation to the legale4istence of the corporation, partnership or to their franchisesG +c- in&estors and corporateaffairsG +d- petitions for suspension of payments.+2- The Prosecution and 'nforcement 5epartment of the S'C has the inherent po!er,

according to Sec. O of P.5. ;>H amending P.5. 27", to in&estigate, on complaint or motupropio, any act or omission of the $oard of 5irectors@Trustees of corporations, theirstockholders, officers or partners, including any fraudulent de&ices, schemes or representations,in &iolation of any la!.

%ence, S'C, under its ad1udicati&e 1urisdiction, has the po!er to hear and decidecontro&ersies in&ol&ing intra7corporate relations bet!een and among members and officers of acorporation. The Prosecution and 'nforcement 5epartment !as established as its ad1udicati&earm. "s such, it is &ested !ith the authority to in&estigate, on complaint or motu propio, any actor omission of the $oard of 5irectors of corporations, as in the case at bar.

A7'or an%a't%ring 1n'. vs.


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Facts: 0eugene !as duly registered !ith S'C to engage in trading business. Pri&ate)espondents Sy, =ang, and Suen, holders of >2> shares or 2@? of the outstanding capitalstock sent notice to the $o5 for a board meeting. n this meeting, they appro&ed a resolutiondissol&ing 0eugene.

S'C thus issued a Certificate of 5issolution of 0eugene. Petitioners Tan, (artin,(oreno and Lee brought an action to annul said S'C Certification contending that they !ere thema1ority stockholders of the corporation, and that prior to the board meeting, the pri&ate

respondents had already di&ested themsel&es of their stockholdings by endorsing them in blankand deli&ering them to the


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during rehabilitation proceedings, the purpose of !hich is to enable the company to gain a ne!lease on life and thereby allo! creditors to be paid their claims from its earnings.

SC also noted that P5 27" does not pro&ide for the duration of the automatic stay."nd in the case at bar, the S'C order neither contains such. %ence, the suspensi&e effect inthis case had no time limit and remained in force as long as reasonably necessary toaccomplish the purpose of the S'C order.

1998

itong vs. CA [9 SCRA 5!3 (J%ly "3 "99#$8Bners)ip o Corporate S)ares= Sto'- Certii'atesF ali 1ss%an'eFacts: $itong !as the treasurer and member of the $o5 of (r. # (rs. Corporation. She filed acomplaint !ith the S'C to hold respondent spouses "postol liable for fraud, misrepresentation,disloyalty, e&ident bad faith, conflict of interest and mismanagement in directing the affairs of thecorporation to the pre1udice of the stockholders. She alleges that certain transactions enteredinto by the corporation !ere not supported by any stockholder*s resolution.

The complaint sought to en1oin "postol from further acting as president7director of thecorporation and from disbursing any money or funds. "postol contends that $itong !as merely

a holder7in7trust of the 3"" shares of the corporation, hence, not entitled to the relief she praysfor. S'C %earing Panel issued a !rit en1oining "postol.

"fter hearing the e&idence, S'C %earing Panel dissol&ed the !rit and dismissed thecomplaint filed by $itong. $itong appealed to the S'C en banc. The latter re&ersed S'C%earing Panel decision. "postol filed petition for re&ie! !ith the C". C" re&ersed S'C enbanc ruling holding that $itong !as not the o!ner of any share of stock in the corporation andtherefore, not a real party in interest to prosecute the complaint. %ence, this petition !ith theSC.

ssue: hether or not $itong !as the real party in interest.

%eld: $ased on the e&idence presented, it could be gleaned that $itong !as not a bona fide

stockholder of the corporation. Se&eral corporate documents disclose that the true party ininterest !as 3"".

"lthough her buying of the shares !ere recorded in the Stock and Transfer $ook of thecorporation, and as pro&ided by Sec. O? of the Corp Code that no transfer shall be &alid e4ceptas bet!een the parties until the transfer is recorded in the books of the corporation, and upon itsrecording the corporation is bound by it and is estopped to deny the fact of transfer of saidshares, this pro&ision is not conclusi&e e&en against the corporation but are prima faciee&idence only. Parol e&idence may be admitted to supply the omissions in the records, e4plainambiguities, or sho! !hat transpired !here no records !ere kept, or in some cases !here suchrecords !ere contradicted. $esides, the pro&ision en&isions a formal certificate of stock !hichcan be issued only upon compliance !ith certain requisites: +- certificates must be signed bythe president or &ice president, countersigned by the secretary or assistant secretary, and

sealed !ith the seal of the corporation, +2- deli&ery of the certificateG +?- the par &alue, as to par&alue shares, or the full subscription as to no par &alue shares, must be first fully paidG +9- theoriginal certificate must be surrendered !here the person requesting the issuance of acertificate is a transferee from a stockholder.

These considerations are founded on the basic principle that stock issued !ithoutauthority and in &iolation of the la! is &oid and confers no rights on the person to !hom it isissued and sub1ects him to no liabilities. here there is an inherent lack of po!er in thecorporation to issue the stock, neither the corporation nor the person to !hom the stock isissued is estopped to question its &alidity since an estoppel cannot operate to create stock!hich under the la! cannot ha&e e4istence.

Li0 Tay vs. CA [93 SCRA /34 (A%g 5 "99#$

*sta2lis)e 8Bners)ip o Corporate S)ares= Sto'- Certii'ates ne'essary to 2e entitleto rig)ts o s)are)oler

Facts: Sy Nuiok and Sy Lim secured a loan from Lim Tay in the amount of P9,. This !assecured by a contract of pledge !hereby the former pledged their ? shares of stock each inNo Fay # Company to the latter. %o!e&er, they failed to pay their respecti&e loans. %ence,Lim Tay filed a petition for mandamus against No Fay # Company !ith the S'C praying that an

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order be issued directing the corporate secretary of the said corporation to register the stocktransfers and issue ne! certificates in fa&or of Lim Tay.

No Fay # Company filed its ans!er contending that S'C had no 1urisdiction to entertainthe complaint on the ground that since Lim Tay !as not a stockholder of the company, no intracorporate contro&ersy took placeG and furthermore, that the default of payment of Sy Nuiok andSy Lim did not automatically &est in Lim Tay the o!nership of the pledged shares.

S'C dismissed the complaint. /n appeal to the C", it affirmed S'C*s decision. %ence,

this petition for certiorari !ith the SC.

ssue: hether or not S'C had 1urisdiction.

%eld: 0o. The registration of shares in a stockholder*s name, the issuance of stock certificates,and the right to recei&e di&idends !hich pertain to the said shares are all rights that flo! fromo!nership. The determination of !hether or not a shareholder is entitled to e4ercise the abo&ementioned rights falls !ithin the 1urisdiction of the S'C. %o!e&er, if o!nership of the shares isnot clearly established and is still unresol&ed at the time the action for mandamus is filed, then

1urisdiction lies !ith the regular courts.n the case at bar, reading into the contract of pledge, the stipulation sho!s that Lim Tay

!as merely authori8ed to foreclose the pledge upon maturity of the loans, not to o!n them.

Such foreclosure !as not automatic, for it must be done in a public or pri&ate sale. 0o!here!as it mentioned that he e4ercised his right of foreclosure. %ence, his status !as still a merepledgee, and under ci&il la!, this does not entitle him to o!nership of the shares of stock inquestion.


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allegedly asked to be submitted a computation of the balance due to (otorich. The latter,despite repeated demands, refused to e4ecute the 5eed of "ssignment of the land. San 3uandisco&ered that (otorich entered into a 5eed of "bsolute Sale of the land to "CL 5e&elopmentCorporation. %ence, San 3uan filed a complaint !ith the )TC.

/n the other hand, (otorich contends that since 0enita Nruenberg !as only thetreasurer of said corporation, and that its president, )eynaldo Nruenberg, did not sign theagreement entered into by San 3uan and (otorich, the treasurer*s signature !as inadequate to

bind (otorich to the agreement. Furthermore, 0enita contended that since San 3uan !as notable to pay !ithin the stipulated period, no deed of assignment could be made. The deed !asagreed to be e4ecuted only after receipt of the cash payment, and since according to 0enita, nocash payment !as made on the due date, no deed could ha&e been e4ecuted.

)TC dismissed the case holding that 0enita Nruenberg !as not authori8ed by (otorichto enter into said contract !ith San 3uan, and that a ma1ority &ote of the $o5 !as necessary tosell assets of the corporation in accordance !ith Sec. 9 of the Corporation Code. C" affirmedthis decision. %ence, this petition !ith SC.

ssues: +- hether or not there !as a &alid contract e4isting bet!een San 3uan and (otorich.+2- hether or not the &eil of corporate fiction could be pierced.

%eld: +- 0o. The contract entered into bet!een 0enita and San 3uan cannot bind (otorich,because the latter ne&er authori8ed nor ratified such sale. " corporation is a 1uridical personseparate and distinct from its stockholders or members. "ccordingly, the property of thecorporation is not the property of its stockholders and may not be sold by them !ithout e4pressauthori8ation from the corporation*s $o5. This is in accordance !ith Sec. 2? of the CorporationCode.

ndubitably, a corporation can only act through its $o5 or, !hen authori8ed either by itsby la!s or by its board resolution, through its officers or agents in the normal course ofbusiness. The general principles of agency go&ern the relation bet!een the corporation and itsofficers or agents, sub1ect to the "o, by la!s, or rele&ant pro&isions of la!. " corporate officeror agent may represent and bind the corporation in transactions !ith ?rdpersons to the e4tentthat the authority to do so has been conferred upon him, and this includes po!ers !hich ha&e

been intentionally conferred, and also such po!ers as, in the usual course of the particularbusiness, are incidental to, or may be implied from, the po!ers intentionally conferred, po!ersadded by custom and usage, as usually pertaining to the particular officer or agent, and suchapparent po!ers as the corporation has caused persons dealing !ith the officer or agent tobelie&e that it has conferred. Furthermore, persons dealing !ith an assumed agent, !hetherthe assumed agency be a general or special one, are bound at their peril, if they !ould hold theprincipal liable, to ascertain not only the fact of agency but also the nature and e4tent ofauthority, and in case either is contro&erted, the burden of proof is upon them to establish it.! (8't > "99#$

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PoBer o oar o +ire'tors to in Corporation

Facts: PeopleJs "ircargo is a domestic corporation organi8ed to operate a customs bonded!arehouse. To obtain a license for the corporation from the $ureau of Customs, Punsalan, itsPresident, solicited a proposal from Sano for the preparation of a feasibility study. Sanosubmitted a letter proposal to Punsalan of the terms and conditions of the contract, amountingto P?>,.. Punsalan sent a letter to Sano confirming to their agreement. "ccordingly,

Sano prepared the feasibility study. Sano !as paid in full.Thereafter, a 2nd contract !as entered into for consultancy ser&ices. %ence, the $ureau

of Customs issued a license to PeopleJs "ircargo. Sano !as not paid for this 2nd contract.%ence, he filed a collection case against the corporation. (ean!hile, Punsalan sold his sharesin PeopleJs "ircargo andresigned as president.

PeopleJs "ircargo denied that there !ere consultancy ser&ices rendered by Sano. talleged that the 2nd contract entered into bet!een him and Punsalan !as !ithout authority.

)TC ad1udged in fa&or of Sano. C" affirmed. %ence, this petition.

ssue: hether or not the Punsalan had apparent authority to bind PeopleJs "ircargo to the 2ndcontract.

%eld: =es. The general rule is that, in the absence of authority from the $o5, no person, note&en its officers, can &alidly bind a corporation. " corporation is a 1uridical person, separate anddistinct from its stockholders and members, ha&ing po!ers, attributes and properties e4presslyauthri8ed by la! or incident to its e4istence. $eing a 1uridical entity, a corporation may actthrough its $o5, !hich e4ercises almost all corporate po!ers, lays do!n all corporate businesspolicies and is responsible for the efficiency of management as is under Sec. 2? of theCorporation Code.

The po!er and responsibility to decide !hether the corporation should enter into acontract that !ill bind the corporation is lodged in the board, sub1ect to "o, by la!s, or rele&antpro&isions of la!. %o!e&er, 1ust as a natural person may authori8e another to do certain actsfor and on his behalf, the $o5 may &alidly delegate some of its functions and po!ers to officers,committees or agents. The authority of such indi&iduals to bind the corporation is generally

deri&ed from la!, corporate by la!s or authori8ation from the board, either e4pressly orimpliedly by habit, custom or acquiescence in the general course of business.

n the case at bar, since the corporation had pre&iously allo!ed Punsalan to enter intothe first contract !ith Sano !ithout a board resolution e4pressly authori8ing him, thus, it hadclothed its president !ith apparent authority to e4ecute the sub1ect 2nd contract.

f a corporation kno!ingly permits one of its officers, or any other agent, to act !ithin thescope of an apparent authority, it holds him out to the public as possessing the po!er to dothose acts, and thus, the corporation !ill, as against anyone !ho has in good faith dealt !ith itthrough such agent, be estopped from denying the agentJs authority.

@SS vs. CA [9> SCRA > (8't > "99#$A'ts o Corporate 8i'erF *e'ts o Ratii'ation 2y oar

FactsG (SS leased 2H hectares of its land to C%NCC for 2> years !ith a stipulationallo!ing the latter to e4ercise a right of first refusal should the sub1ect property be made openfor sale. The terms and conditions of C%NCC*s purchase !as nonetheless sub1ect topresidential appro&al.

Then Pres. (arcos directed (SS to negotiate the cancellation of this lease agreementbet!een (SS and C%NCC. %o!e&er, (SS* general manager, lustre, informed C%NCCthat the property !as up for sale, and that as per their contract, C%NCC had the preferentialright to buy said property. %ence, the property !as purchased, and Pres. (arcos later onappro&ed this sale. Then, $oT of (SS also appro&ed the sale by passing a resolution.C%NCC sold the land to "yala.

years later, (SS filed an action against C%NCC and "yala in )TC praying for the

declaration of nullity of the (SS7C%NCC sales agreement. )TC dismissed the petition. C"affirmed. %ence, this petition for certiorari !ith SC. (SS holds that lustre !as ne&er gi&enthe authority by the $oT to enter into the initial agreement, and therefore, the sale of theproperty !as null and &oid.

ssue: hether or not the sale !as &alid.

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%eld: =es. "ssuming that lustre !as not gi&en the ample authority to enter into the agreement,this infirmity !as cured by ratification. So settled is the precept that ratification can be made bythe corporate board either e4pressly or impliedly. mplied ratification may take &arious forms 6like silence or acquiescence, by acts sho!ing appro&al or adoption of the contract, or byacceptance and retention of benefits flo!ing therefrom. $oth modes of ratification ha&e beenmade in this case. There !as e4press ratification made by the $oT of (SS !hen it passed aresolution appro&ing the sale of the sub1ect property to C%NCC, authori8ing lustre to sign for

and in behalf of (SS the contract papers relati&e thereto. mplied ratification by silence oracquiescence is re&ealed from the acts of (SS in sending ? demand letters for the paymentof the purchase price, accepting P2>( as do!n payment, and accepting a letter of credit for thebalance. Furthermore, (SS did not return any of these amounts co&ering the purchase priceat any point in time. This is indicati&e of (SS* acceptance and retention of benefits flo!ingfrom the sales transactions !hich is another form of implied ratification.

1997

Hahn v. Co!" o# A$$%a&' // SCRA 53> (Jan%ary , "99>#$J%risi'tion 8ver oreign Corporation+oing %siness in t)e P)ilippines @it)o%t a Li'ense

Facts: Petitioner is a Filipino citi8en doing business under the name of B%ahn7(anila. Pri&aterespondent $( is a non7resident corporation incorporated in Nermany. Petitioner e4ecuted infa&or of pri&ate respondent a B5eed of "ssignment !ith a Special Po!er of "ttorney !hichconstituted petitioner as the e4clusi&e dealer of pri&ate respondent as long as the assignment ofits trademark and de&ice subsisted. %o!e&er, no formal contract !as dra!n bet!een the t!oparties. Thereafter, petitioner !as informed that $( !as arranging to grant the e4clusi&edealership of $( cars and products to Columbia (otors Corp. +C(C-. $( e4presseddissatisfaction !ith &arious aspect of petitioner*s business but nonetheless also e4pressed!illingness to continue business relations !ith petitioner on the basis of a standard $(contract other!ise, if said offer !as unacceptable to petitioner then $( !ould terminate

petitioner*s e4clusi&e dealership. Petitioner refused $(s offer in !hich case $( !ithdre! itsalternati&e offer and terminated petitionerJs e4clusi&e dealership. Petitioner therefore filed anaction for specific performance and damages against $( to compel it to continue thee4clusi&e dealership.

$( mo&ed to dismiss the case contending that the trial court did not acquire1urisdiction o&er it through the ser&ice of summons on 5T because $( is a foreigncorporation and is not doing business in the Philippines. The trial court deferred the resolution ofthe motion for dismissal until after trial on the merits for the reason that the grounds ad&ancedby $( did not seem indubitable. $( appealed said order to the C". The C" resol&ed that$( !as not doing business in the country and therefore 1urisdiction o&er it could not ha&ebeen acquired through the ser&ice of summons on 5T and it dismissed the petition.

ssue: @0 $( is doing business in the Philippines so as to enable the court to acquire1urisdiction o&er it through the ser&ice of summons on the 5T.

%ed: )" ;92 enumerates !hat acts are considered as Bdoing business. Section ?+d-enumerating such acts includes the phrase Bappointing representati&es or distributors in thePhilippines but not !hen the representati&e or distributor Btransacts business in his o!n namefor his o!n account. n the case at bar, petitioner is pri&ate respondent $(*s agent and notmerely a broker. The record re&eals that pri&ate respondent e4ercised control o&er petitioner*sacti&ities as a dealer and made regular inspections of petitioner*s premises to enforce itsstandards. Since $( is considered as doing business in the Philippines, the trial court &alidlyacquired 1urisdiction o&er it by &irtue of the ser&ice of summons on the 5T. Furthermore, it isno! settled that, for purposes of ha&ing summons ser&ed on a foreign corporation inaccordance !ith the )ules of Court, it is sufficient that it be alleged in the complaint that theforeign corporation is doing business in the Philippines. The court need not go beyond theallegations in the complaint in order to determine !hether or not it acquired 1urisdiction. Suchdetermination that the foreign corporation is doing business in the Philippines is only tentati&eand only for the purpose of enabling the court to acquire 1urisdiction. " contrary determinationmay be made based on the court*s findings or e&idence presented.

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*ri-s PT*., Lt. v. Co%rt o Appeals [e2r%ary /, "99>$*e't o +oing %siness in P)ilippines Bit)o%t a Li'enseF arre ro0 A''ess toCo%rts

Facts:. Petitioner 'riks Pte., Ltd. is a nonresident foreign corporation engaged in the manufacture

and sale of elements used in sealing pumps, &al&es and pipes for industrial purposes, andPC pipes and fittings for industrial uses.

2. Pri&ate respondent 5elfin 'nrique8, 3r., doing business under the name and style of 5elrene'$ Controls Center and@or '$ armine Commercial, ordered and recei&ed from petitioner&arious elements used in sealing pumps, &al&es, pipes and control equipment, PC pipesand fittings.

?. The transfer of goods !ere perfected in Singapore for pri&ate respondent*s account !ith a7day credit term. Subsequently, demands !ere made by petitioner upon pri&aterespondent to settle his account, but the latter failed@refused to do so.

9. Petitioner corporation filed !ith the )TC a complaint for the reco&ery of . /n appeal, the respondent court affirmed the )TC as it deemed the series of transactionsbet!een petitioner corporation and pri&ate respondent not to be an Bisolated or casualtransaction. Thus, respondent court found petitioner to be !ithout legal capacity to sue.

ssue: s a foreign corporation !hich sold its products O times o&er a >7month period to thesame Filipino buyer !ithout first obtaining a license to do business in the Philippines, prohibitedfrom maintaining an action to collect payment therefor in Philippine courtsM n other !ords, issuch foreign corporation Bdoing business in the Philippines !ithout the required license andthus barred access to our court systemM

%eld:.The Corporation Code pro&ides:

BSection ??. Doin business ,it'out a license - 0o foreign corporation transactingbusiness in the Philippines !ithout a license, or its successors or assigns, shall be permittedto maintain or inter&ene in any action, suit or proceeding in any court or administrati&eagency of the PhilippinesG but such corporation may be sued or proceeded against beforePhilippine courts or administrati&e tribunals on any &alid cause of action recogni8ed underPhilippine la!s. The aforementioned pro&ision prohibits, not merely absence of theprescribed license, but it also bars a foreign corporation Bdoing business in the Philippines!ithout such license access to our courts. " foreign corporation !ithout such license is notipso (acto incapacitated from bringing an action. " license is necessary only if it is

transactin or doin business/ in the country.2. The test to determine !hether a foreign company is Bdoing business in the Philippines,

thus: K4 4 4 The true test, ho!e&er, seems to be !hether the foreign corporation iscontinuing the body or substance of the business or enterprise for !hich it !as organi8ed or!hether it has substantially retired from it and turned it o&er to another. The term implies acontinuity of commercial dealings and arrangements, and contemplates, to that e4tent, theperformance of acts or !orks or the e4ercise of some of the functions normally incident to,and in progressi&e prosecution of, the purpose and ob1ect of its organi8ation +(entholaturnCo., nc. &. (angaliman-.

?. The accepted rule in 1urisprudence is that each case must be 1udged in the light of itsen&ironmental circumstances. t should be kept in mind that the purpose of the la! is tosub1ect the foreign corporation doing business in the Philippines to the 1urisdiction of our

courts. t is not to pre&ent the foreign corporation from performing single or isolated acts, butto bar it from acquiring a domicile for the purpose of business !ithout first taking the stepsnecessary to render it amenable to suits in the local courts.

9. Thus, !e hold that the series of transactions in question could not ha&e been isolated orcasual transactions. hat is determinati&e of Kdoing businessK is not really the number orthe quantity of the transactions, but more importantly, the intention of an entity to continuethe body of its business in the country. The number and quantity are merely e&idence of

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such intention. The phrase Kisolated transaction has a definite and fi4ed meaning, i.e. atransaction or series of transactions set apart from the common business of a foreignenterprise in the sense that there is no intention to engage in a progressi&e pursuit of thepurpose and ob1ect of the business organi8ation. hether a foreign corporation is Bdoingbusiness does not necessarily depend upon the frequency of its transactions, but moreupon the nature and character of the transactions.

>. "ccordingly, petitioner must be held to be incapacitated to maintain the action a +uo againstpri&ate respondent. $y this 1udgment, !e are not foreclosing petitioner*s right to collectpayment. )es 1udicata does not set in a case dismissed for lack of capacity to sue, becausethere has been no determination on the merits. (oreo&er, this Court has ruled thatsubsequent acquisition of the license !ill cure the lack of capacity at the time of thee4ecution of the contract. $y securing a license, a foreign entity !ould be gi&ing assurancethat it !ill abide by the decisions of our courts, e&en if ad&erse to it.

Rep%2li' Planters an- vs. Agana, Sr. [ar') 3, "99>$

Rig)ts o 6olers o Pererre S)ares

Legality o 1nterest earing S)ares

. Pri&ate respondent )obes Francisco )ealty # 5e&*t Corp. secured a loan from petitioner inthe amount of P2,.. "s part of the proceeds of the loan, preferred shares of stocks !ereissued to pri&ate respondent corporation. n other !ords, instead of gi&ing the legal tendertotaling to the full amount of the loan !hich is P2,., petitioner lent such amount partiallyin the form of stock certificates numbered ?29 and ?2>, each for 9 shares !ith a par &alueof P. per share, or for P9, each, for a total of PH,.. Said stock certificates !ere inthe name of pri&ate respondent "dalia )obes and Carlos )obes, !ho, ho!e&er, subsequentlyendorsed his shares in fa&or of "dalia )obes.

Said certificates of stock bear the follo!ing terms and conditions:. The right to recei&e a quarterly di&idend of I, cumulati&e and participating.2. That such preferred shares may be redeemed, by the system of dra!ing lots, at any time

after 2 years from the date of issue at the option of the Corporation.

Pri&ate respondents proceeded against petitioner and filed a complaint anchored onpri&ate respondents* alleged rights to collect di&idends under the preferred shares in questionand to ha&e petitioner redeem the same under the terms and conditions of the stock certificates.

The trial court ordered the petitioner to pay pri&ate respondents the face &alue of thestock certificates as redemption price, plus I quarterly interest. %ence this petition.

ssue: @0 respondents ha&e the right to collect di&idends and !hether they can compelpetitioner to redeem the preferred shares.

%eld:. " preferred share of stock is one !hich entitles the holder thereof to certain preferences

o&er the holders of common stock. The preferences are designed to induce persons tosubscribe for shares of a corporation. Preferred shares take a multiplicity of forms. The mostcommon forms may be classified into t!o: +- preferred shares as to assetsG and +2-preferred as to di&idends. The former is a share !hich gi&es the holder thereof thepreference in the distribution of the assets of the corporation in case of liquidationG the latteris a share the holder of !hich is entitled to recei&e di&idends on said share to the e4tentagreed upon before any di&idends at all are paid to the holders of common stock. There isno guarantee, ho!e&er, that the share !ill recei&e any di&idends.

2. Preferences granted to preferred stockholders do not gi&e them a lien upon the property ofthe corporation nor make them creditors of the corporation, the right of the former beingal!ays subordinate to the latter. Shareholders, both common and preferred are consideredrisk takers !ho in&est capital in the business arid !ho can look only to !hat is left after

corporate debts and liabilities are fully paid.?. )edeemable shares are shares usually preferred, !hich by their terms are redeemable at a

fi4ed date, or at the option of either issuing corporation, or the stockholder, or both at certainredemption priceG redemption may not be made !here the corporation is insol&ent or if suchredemption !ill cause insol&ency or inability of the corporation to meet its debts as theymature.

9. hile the stock certificates in the case at bar does allo! redemption, the option to do so

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!as clearly &ested in the petitioner bank. The redemption is therefore optional.>. The redemption of said shares cannot be allo!ed. The Central $ank made a finding that

said petitioner has been suffering from chronic reser&e deficiency, and that such findingresulted in the directi&am

mercantile law} corpo, cred trans, insurance, ipc, nil & transpo} case survey up to 2001 } made 2

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