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CORPORATION LAW Explain briefly the CONCESSION THEORY. Under this theory, a corporation is a creature without any existence until it has received the imprimatur of the state acting according to law.
Can a private corporation bring a suit for libel or any other for of !efaation an! clai oral !aages" YES. Article Article 221!"# 221!"# does not $ualify whether the plaintiff plaintiff is a natural natural or %uridical %uridical person. &herefore, a %uridical person such as a corporation corporation can validly complain for li'el or any other form of defamation and claim for moral damages. (oreover, (oreover, where the 'roadcast is li'elous per se, se, the law implies damages. )n such a case, evidence of an honest mista*e or the want of chara characte cterr or reputa reputatio tion n of the party party li'ele li'eled d goes goes only only in mitiga mitigatio tion n of damage damages. s. #$I%I&IN'S (RO')C'STIN* NET+ NET+OR OR,,- INC. INC. vs. vs. '*O '*O E)I E)IC' C'% % 'N) 'N) E) E)/C /C'T 'TIO ION' N'% % CENTER0(ICO% CHRISTI'N CHRISTI'N CO%%E*E O$ E)ICINEE)ICINE- *.R. No. 121332- 14 5anuary 67789
Explain briefly b riefly the t he )OCTRINE )OCTRIN E O$ RE%'TION RE%'TIO N . Unde Underr this this doct doctri rine ne,, when when the the dela delay y in effe effect ctin ing g or fili filing ng the the amen amende ded d arti articl cles es of incorpor incorporatio ation n for the extension extension of corpora corporate te term is due to an insupera insupera'le 'le interferen interference ce occurring without the corporation+s intervention which could not have 'een prevented 'y prudence, diligence, and care, the same will 'e treated as having 'een effected 'efore the expiration of the original term of the corporation.
+hat shares coul! be !eprive! of voting rights" Section of the orporation ode explicitly provides that -no share may 'e deprived of voting rights rights except except those classified classified and issued issued as -preferred -preferred or -redeema' -redeema'le le shares, shares, unless otherwise provided in this ode, and that -there shall always 'e a class or series of shares which have complete voting rights. &here is nothing in the articles of incorporation or an iota of evidence on record that shows that class -/ shares were categori0ed as either preferred or redeema'le redeema'le shares. shares. #C'STI%%O #C'STI%%O-- et. al. vs. 'N*E%ES 'N*E%ES ('%IN*H' ('%IN*H'S'Y S'Y-- et. al.- *R No. 18734:- 1; October 67729
Explain the )OCTRINE O$ Ee the stoc>hol!er the o=ner of its properties or entitle hi to the possession of any !efinite portion of the corporate properties" 3. A corporation is a %uridical person distinct from the mem'ers composing it. 4roperties registered in the name of the corporation are owned 'y it as an entity separate and distinct from its mem'ers. hile shares of stoc* constitute personal property, they do not represent property of the corporation. &he corporation has property of its own which consists chiefly of real estate. A share of stoc* only typifies an ali$uot part of the corporation5s property, or the right to share in its proceeds to that extent when distri'uted according to law and e$uity, 'ut its holder is not the owner of any part of the capital of the corporation. or is he entitled to the possession of any definite portion of its property or assets. &he stoc*holder is not a co6owner or tenant in common of the corporate property. #SI%?ERIO- 5R.- et al. vs. $I%I&INO (/SINESS CONS/%T'NTS- INC.- *.R. No. 12@@16- 16 'ugust 67789
+here- at the height of a labor !ispute- properties of the corporation =ere sol! to another copany o=ne! by the !aughter of a aAor stoc>hol!er of the forer- coul! the separate i!entities of the t=o corporations be !isregar!e! in or!er to satisfy the labor clais of !isisse! =or>ers" YES. &he sale of franchise and certificates of pu'lic convenience as well as most of its 'us units to a company owned 'y the daughter of one of the ma%or stoc*holder of the corporation, right in the middle of a la'or dispute is highly suspicious. )t is evident that the transaction was made in order to remove the remaining assets of the first company from the reach of any %udgment that may 'e rendered in the U74 cases filed against it. State the reBuisites that ust be establishe! for the legal existence of a subsi!iary to be !isregar!e!. hile a corporation may 'e a su'sidiary of another, it does not necessarily follow that its corporate legal existence can %ust 'e disregarded. A su'sidiary has an independent and separate %uridical personality, distinct from that of its parent company8 hence, any claim or suit against the latter does not 'ind the former, and vice versa. )n applying the doctrine, the following re$uisites must 'e esta'lished9 !1# control, not merely ma%ority or complete stoc* control8 !2# such control must have 'een used 'y the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest acts in contravention of plaintiff+s legal rights8 and !:# the aforesaid control and 'reach of duty must proximately cause the in%ury or un%ust loss complained of. #5ar!ine )avis- Inc. vs. 5R( Realty- *.R. No. 1812@;- 18 5uly 67789 Explain the Instruentality Rule. here one corporation is so organi0ed and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or ad%unct of the other, the fiction of the corporate entity of the ;instrumentality+ may 'e disregarded. &he control necessary to invo*e the rule is not ma%ority or even complete stoc* control 'ut such domination of finances, policies and practices that the controlled corporation has, so to spea*, no separate mind, will or existence of its own, and is 'ut a conduit for its principal. )t must 'e *ept in mind that the control must 'e shown to have 'een exercised at the time the acts complained of too* place. (oreover, the control and 'reach of duty must
proximately cause the in%ury or un%ust loss for which the complaint is made. #Concept (uil!ers vs. N%RC- *.R. No. 17;4@2- 63 ay 133:9 +hen the corporate as> is reove!- is the corporate character necessarily abrogate!" 3. &he corporate mas* may 'e removed and the corporate veil pierced when a corporation is the mere alter ego of another. here 'adges of fraud exist, where pu'lic convenience is defeated, where a wrong is sought to 'e %ustified there'y, or where a separate corporate identity is used to evade financial o'ligations to employees or to third parties, the notion of separate legal entity should 'e set aside and the factual truth upheld. When that happens, the corporate character is not necessarily abrogated. )t continues for other legitimate o'%ectives. #&'&%ON' &%'NT'TION CO&'NY- INC et al. vs. TIN*HI%- et al.*.R. No. 183161- 7@ $ebruary 67789
Shoul! !ebtors be forally notifie! for the change of corporate nae to be vali! an! bin!ing" &he ourt cannot impose on a 'an* that changes its corporate name to notify a de'tor of such change a'sent any law, circular or regulation re$uiring it. Such act would 'e %udicial legislation. &he formal notification is, therefore, discretionary on the 'an*. Unless there is a law, regulation or circular from the SE or /S4 re$uiring the formal notification of all de'tors of 'an*s of any change in corporate name, such notification remains to 'e a mere internal policy that 'an*s may or may not adopt. #&.C. 5'?IER SONS- INC.- ET '%. vs. CO/RT O$ '&&E'%S- ET '%. #*.R. No. 163886- 63 5une 67789
Coul! the corporation provi!e liitations on the voting rights of the ebers of a non0 stoc> corporation"
YES. Section < of the orporation ode pertaining to non6stoc* corporations provides that =!t#he right of the mem'ers of any class or classes !of a non6stoc* corporation# to vote may 'e limited, 'roadened or denied to the extent specified in the articles of incorporation or the 'y6laws.= &his is an exception to Section > of the same code where it is provided that =no share may 'e deprived of voting rights except those classified and issued as preferred or redeema'le shares, unless otherwise provided in this ode. ?nece, the stipulation in the /y6 7aws providing for the election of the /oard of @irectors 'y districts is a form of limitation on the voting rights of the mem'ers of a non6stoc* corporation as recogni0ed under the aforesaid Section <. Section 2 of the ode, which re$uires the presence of a ma%ority of the mem'ers entitled to vote in the election of the 'oard of directors, applies only when the directors are elected 'y the mem'ers at large, such as is always the case in stoc* corporations 'y virtue of Section >. #%/IS 'O0'S- et al. vs. CO/RT O$ '&&E'%S- et al.- *.R. No. 16;2:2- 67 5une 677:9. Explain briefly the (/SINESS 5/)*ENT R/%E. Buestions of policy or of management are left solely to the honest decisions of officers and directors of a corporation, and so long as they act in good faith, their orders are not reviewa'le 'y the courts. !S'(ER vs. CO/RT O$ '&&E'%S- *.R. No. 1@63;1- 'ugust @167729
/n!er =hat con!itions coul! a private corporation sell its real properties through an agent" hile a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to 'e with the 'oard of directors through its officers and agents as authori0ed 'y a 'oard resolution or 'y its 'y6laws. An unauthori0ed act of an officer of the corporation is not 'inding on it unless the latter ratifies the same expressly or impliedly 'y its 'oard of directors. Any sale of real property of a corporation 'y a person purporting to 'e an agent thereof 'ut without written authority from the corporation is null and void. &he declarations of the agent alone are generally insufficient to esta'lish the fact or extent of hisCher authority #E)/'R)O ?. %INTON5/' 5R.- et al. vs. ETERNIT COR&OR'TION- ET '%.*.R. No. 122;78- 7; 5une 677:9.
In =hat instances are officers- !irectors- or trustees personally liable for corporate acts" &he instances are9 when D 1. ?e assents !a# to a patently unlawful act of the corporation, or !'# for 'ad faith or gross negligence in directing its affairs, or !c# for conflict of interest, resulting in damages to the corporation, its stoc*holders or other persons8 2. ?e consents to the issuance of watered stoc*s or who, having *nowledge thereof, does not forthwith file with the corporate secretary his written o'%ection thereto8 :. ?e agrees to hold himself personally and solidarily lia'le with the corporation8 or . ?e is made, 'y a specific provision of law, to personally answer for his corporate action. ! RE&/(%IC vs. INSTIT/TE $OR SOCI'% CONCERN- $E%I&E S/D'R' 'N) R'ON *'RCI'- *.R. NO. 18:@7: 5anuary 6;- 6778 SO%I)('N, COR&OR'TION vs. IN)'N'O $ERRO'%%OY COR&OR'TION- et al.- *.R. No. 18@8@8- 6; 5uly 67789
Explain the )OCTRINE O$ '&&'RENT '/THORITY.
hen a corporation *nowingly permits one of its officers, or any other agent, to act within the scope of an apparent authority, it holds him out to the pu'lic as possessing the power to do those acts8 and thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, 'e estopped from denying the agent+s authority. #%'&/0%'&/ $O/N)'TION vs. C'- 63 5anuary 67729
If- in a contract- the NI' '!inistrator has been epo=ere! to grant or !eny foreign !ifferential clais- =oul! such authority carry =ith it the po=er to verify coputation of such clais" YES. )t would 'e preposterous for the )A Administrator to have the power of granting claims without the authority to verify the computation of such claims. Even assuming for the sa*e of argument that the Administrator had no authority to 'ind )A, the latter is already estopped after repeatedly representing that the Administrator had such authority. A corporation may 'e estopped from denying as against third persons the authority of its officers or agents who have 'een clothed 'y it with ostensi'le or apparent authority. Although an officer or agent acts without, or in excess of, his actual authority 'ut acts within the scope of an apparent authority with which the corporation has clothed him 'y holding him out or permitting him to appear as having such authority, the corporation is 'ound there'y in favor of a person who deals with him in good faith in reliance on such apparent authority. #HY)RO RESO/RCES CONTR'CTORS COR&OR'TION vs. NI'- *.R. No. 1:761817 Noveber 67729
In a resolution- the (oar! of )irectors authoriFe! its presi!ent to sell %ot 6- at a price an! un!er such ters an! con!itions =hich he !eee! ost reasonable an! a!vantageous to the corporation. The presi!ent agree! to give the buyer a right of =ay over %ot 1 an! in case such right of =ay is insufficient- a portion of %ot 1 =ill be sol! to the buyer. )eterine =hether the authority to sell %ot 6 inclu!es the authority to sell portion of % ot 1.
&he authority to sell 7ot 2 did not include authority to sell portion of 7ot 1. either may such authority 'e implied from the authority granted to sell 7ot 2 -on such terms and conditions which he deems most reasona'le and advantageous. #+OO)CHI%) HO%)IN*S- INC. vs. ROG'S E%ECTRIC 'N) CONSTR/CTION CO&'NY- INC.- *.R. No. 127::4- 16 'ugust 67729
+here an officer of a construction copany revise! an! !eviate! fro the structural plan of the buil!ing in or!er to re!uce the costs =ithout notice to or approval by the clients- coul! personal liability for !aages attach to such officer" YES. As a general rule, the officers of a corporation are not personally lia'le for their official acts unless it is shown that they have exceeded their authority. ?owever, the personal lia'ility of a corporate director, trustee or officer, along with corporation, may so validly attach when he assents to a patently unlawful act of the corporation or for 'ad faith or gross negligence in directing its affairs. )ndeed, 'ad faith exists when a material deviation from the structural plan was made without the clients 'eing consulted first especially where it appears that the act was done to lower the cost of construction. !S&O/SES )'?I) an! COOR)IN'TE) *RO/&- INC. vs. CONSTR/CTION IN)/STRY 'N) 'R(ITR'TION COISSION an! S&S. N'RCISO 'I)' e Au!icial notice of boar! resolutions on a corporate officers authority to execute verification an! certification against foru shopping" 3. ourts are not expected to ta*e %udicial notice of corporate 'oard resolutions on corporate officer+s authority to represent a corporation. &hus, the failure to su'mit a certified true copy of the 'oard resolution authori0ing an officer to represent the corporation is a sufficient ground for the dismissal thereof. #)E?E%O&ENT ('N, O$ THE &HI%I&&INES vs. HON. CO/RT O$ '&&E'%S- et.al.- *R No. 124614- 74 October 67729
Is teleconferencing no= legally perissible" YES. )n this age of modern technology, the courts may ta*e %udicial notice that 'usiness transactions may 'e made 'y individuals through teleconferencing. )n the 4hilippines, teleconferencing and videoconferencing of mem'ers of 'oard of directors of private corporations is a reality, in light of epu'lic Act o. <"2. &he Securities and Exchange ommission issued SE (emorandum ircular o. 1F, on ovem'er :G, 2GG1, providing the guidelines to 'e complied with related to such conferences. ! EG&ERTR'?E% TO/RS- INC. vs. CO/RT O$ '&&E'%S an! ,ORE'N 'IR%INES- *.R. No. 186@36- 6: ay 67789
In case the by0la=s coul! not be file! =ithin the prescribe! perio!- =oul! Auri!ical existence autoatically cease" 3. A corporation would not ipso facto lose its powers for failure to file the re$uired 'y6 laws. #%OYO%' *R'N?I%%'S HOEO+NERS 'SSOCI'TION vs. C'- 64: SCR' :;19 At the very least, the corporation may 'e considered a !e facto corporation whose right to exist may not 'e in$uired into in a collateral manner. #S'+')5''N vs. C'- ; 5une 67789 In the 'greeent- the foreign copanys activities in the &hilippines =ere confine! to #19 aintaining a stoc> of goo!s solely for the purpose of having the sae processe! by another copany an! #69 consignent of eBuipent =ith such copany to be use! in the processing of pro!ucts for export. Coul! such foreign corporation be consi!ere! !oing business in the &hilippines" 3. /y and large, to constitute -doing 'usiness, the activity to 'e underta*en in the 4hilippines is one that is for profit6ma*ing. Under Section 1 of the )mplementing ules and egulations of the Horeign )nvestment Act, the foregoing activities do not constitute doing 'usiness. #'*I%ENT TECHNO%O*IES SIN*'&ORE #&TE9 %T). vs INTE*R'TE) SI%ICON- *R 182:1;- 12 'pril 67729
Explain the TR/ST $/N) )OCTRINE. Under this doctrine, the capital stoc*, property and other assets of a corporation are regarded as e$uity in trust for the payment of the corporate de'ts. ?ence, no disposition of corporate funds to the pre%udice of creditors is allowed. /n!er =hat con!itions coul! the &C** vote seBuestere! shares" )t is settled that as a general rule, the registered owner of the shares of a corporation, even if they are se$uestered 'y the government through the 4II, exercises the right and the privilege of voting on them. &he 4II as a mere conservator cannot, as a rule, exercise acts of dominion 'y voting these shares. &he registered owner of se$uestered shares may only 'e deprived of these voting rights, and the 4II authori0ed to exercise the same, only if it is a'le to esta'lish that !1# there is prima facie evidence showing that the said shares are ill6gotten and thus 'elong to the State8 and !2# there is an imminent danger of dissipation, thus necessitating the continued se$uestration of the shares and authority to vote thereupon 'y the 4II while the main issue is pending 'efore the Sandigan'ayan. #TR'NS I))%E E'ST #&HI%S.9 vs. S'N)I*'N('Y'N- et al.- *.R. No. 14688:- 73 5une677:9
Is the issuance of a certificate of erger by the SEC a con!ition prece!ent to the transfer of shares of the absorbe! corporation to the surviving corporation" A merger does not 'ecome effective upon the mere agreement of the constituent corporations. As specifically provided under Section " of the orporation ode, the merger shall only 'e effective upon the issuance of a certificate of merger 'y the Securities and
Exchange ommission !SE#, su'%ect to its prior determination that the merger is not inconsistent with the ode or existing laws. here a party to the merger is a special corporation governed 'y its own charter, the ode particularly mandates that a favora'le recommendation of the appropriate government agency should first 'e o'tained. The issuance of the certificate of erger is crucial because not only does it bear out !"C#s appro$al but also ar%s the oent &hereupon the conse'uences of a erger ta%e place. /y operation of law, upon the effectivity of the merger, the a'sor'ed corporation ceases to exist 'ut its rights, and properties as well as lia'ilities shall 'e ta*en and deemed transferred to and vested in the surviving corporation #&O%I'N) IN)/STRI'% %T). vs. N'TION'% )E?E%O&ENT CO.- et al.- *.R. Nos. 12@;:: 12@;44- 66 'ugust 67789.
+oul! participation in a bi!!ing for the !evelopent an! operation of a o!ern arine container terinal constitute !oing business in the &hilippines for =hich a license ust be secure!" 4articipating in the 'idding process constitutes -doing 'usiness 'ecause it shows the foreign corporation+s intention to engage in 'usiness here. &he 'idding for the concession contract is 'ut an exercise of the corporation+s reason for its existence. xxx it is the performance 'y a foreign corporation of the acts for which it was created, regardless of the volume of 'usiness, that determines whether a foreign corporation needs a license or not. #H/TCHISON &ORTS &HI%I&&INES %IITE) vs S('- *R 1@1@:4- @1 'ugust 6777 E/RO&E'N RESO/RCES 'N) TECHNO%O*IES- INC- et al. vs. IN*ENIE/(/RO (IR,H'HNet al.- *.R. No. 1838;:- 6: 5uly 67729
+hat are the general tests to !eterine =hether a foreign corporation is !oing business in the &hilippines" !ubstance Test J whether the foreign corporation is continuing the 'ody of the 'usiness or enterprise for which it was organi0ed or whether it has su'stantially retired from it and turned it over to another. Continuity Test J continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or wor*s or the exercise of some of the functions normally incident to, and in the progressive prosecution of, the purpose and o'%ect of its organi0ation #'*I%ENT TECHNO%O*IES SIN*'&ORE #&TE9 %T). vs INTE*R'TE) SI%ICON*R 182:1;- 12 'pril 67729
)o the po=ers of a resi!ent agent inclu!e the authority to execute a certification against foru0shopping on behalf of the foreign copany" 3. &his is 'ecause while a resident agent may 'e aware of actions filed against his principal !a foreign corporation doing 'usiness in the 4hilippines, 'eing the one authori0ed to receive services and other legal processes on its 'ehalf# , such resident may not 'e aware of actions initiated 'y its principal, whether in the 4hilippines against a domestic corporation or private individual, or in the country where such corporation was organi0ed and registered, against a 4hilippine registered corporation or a Hilipino citi0en. !EG&ERTR'?E%
TO/RS- INC. vs. CO/RT O$ '&&E'%S an! ,ORE'N 'IR%INES- *.R. No. 186@36- 6: ay 67789
+here the insure! #a foreign corporation !oing business =ithout license9 is incapacitate! to sue before the &hilippine courts- =oul! it follo= that its insurer- in exercising its right of subrogation- li>e=ise suffer such incapacity" 3. ights inherited 'y a su'rogee pertain only to the o'ligations not to capacity. )ncapacity of the insured will not affect the capacity of the insurer exercising its right of su'rogation 'ecause capacity is personal to its holder. )t is conferred 'y law and not 'y the parties. #%ORENDO SHI&&IN* vs. CH/(( SONS- ; 5une 67729 Coul! a foreign corporation not engage! an! license! to !o business in the &hilippines aintain a cause of action for unfair copetition" YES. &he crime of unfair competition punisha'le under Article 1< of the evised 4enal ode is a pu'lic crime. )t is essentially an act against the State and it is the latter which principally stands as the in%ured party. &he complainant5s capacity to sue in such case 'ecomes immaterial. #E%('ROSE R. S'SOT- ET.'%. vs. &EO&%E O$ THE &HI%I&&INES- *.R. No. 12@13@- 63 5une 67789
+oul! a pen!ing intra0corporate case against an officer preclu!e the filing of a criinal action against the sai! officer" &he filing of the civilCintra6corporate case 'efore the SE !now &# does not preclude the simultaneous and concomitant filing of a criminal action 'efore the regular courts8 such that, a fraudulent act may give rise to lia'ility for violation of the rules and regulations of the SE cogni0a'le 'y the SE itself, as well as criminal lia'ility for violation of the evised 4enal ode cogni0a'le 'y the regular courts, 'oth charges to 'e filed and proceeded independently, and may 'e simultaneously with the other. A dispute involving the corporation and its stoc*holders is not necessarily an intra6corporate dispute cogni0a'le only 'y the Securities and Exchange ommission. or does it ipso facto negate the %urisdiction of the egional &rial ourt over the su'%ect cases. )t should 'e o'vious that not every conflict 'etween a corporation and its stoc*holders involves corporate matters that only the SE can resolve in the exercise of its ad%udicatory or $uasi6 %udicial powers. &he 'etter policy in determining which 'ody has %urisdiction over a case would 'e to consider not only the relationship of the parties 'ut also the nature of the $uestions raised in the su'%ect of the controversy. ! &EO&%E vs. $ERN'N)ED an! H'5IE /ED'+'- *R No. 12327@- 72 arch 67789
)iscuss the effects of the creation of a anageent coittee. &he appointment will result in suspension of all actions against the corporation, the avowed o'%ective of which is to ena'le such management committee or reha'ilitation receiver to effectively exercise its powers free from any %udicial or extra6%udicial interference that might unduly hinder or prevent the rescue of the distressed company. !TYSONS S/&ER CONCRETE- INC.- et al. vs. CO/RT O$ '&&E'%S- et al.- *.R. No. 1277;1- 6@ 5une 67789
+hat coul! prevent the suspension of actions follo=ing the creation of a anageent coittee or rehabilitation receiver" hen proceedings have already 'een pending for almost ten years and have already reached the Supreme ourt, the management committee has 'een unduly 'urdened enough, its time and resources wasted 'y the proceedings that too* place 'efore the lower courts. ?ence, to order the annulment of the previous proceedings in the lower courts will only result in further delay. &he greater interest of %ustice demands that the issues raised in the present petition should 'e disposed of. !TYSONS S/&ER CONCRETE- INC.- et al. vs. CO/RT O$ '&&E'%S- et al.- *.R. No. 1277;1. 5une 6@- 67789
Explain the an!atory Close Out Rule &he rule vests upon a 'ro*er or dealer, the o'ligation, not %ust the right, to cancel or otherwise li$uidate a customer+s order, if payment is not received within three days from the date of purchase. &he word =shall= as opposed to the word =may,= is imperative and operates to impose a duty, which may 'e legally enforced. #'('C/S SEC/RITIES COR&OR'TION vs. '&I%- *.R. No. 1:771:- 64 $ebruary 677:9
