1.

The Missionary Sisters of Our Lady of Fatima (Peach Sisters of Laguna), In donations made to a person for services rendered to the donor, the
represented by Rev. Mother Ma. Concepcion R. Realon, et al. Vs Amando V. donor's will is moved by acts which directly benefit him. The motivating cause is
Alzona, et al., August 6, 2018, G.R. No. 224307 gratitude, acknowledgment of a favor, a desire to compensate. A donation made to
one who saved the donor's life, or a lawyer who renounced his fees for services
SUMMARY: The SC upheld petitioner’s personality to accept the donation in its rendered to the donor, would fall under this class of donations.
favor despite the fact that the donation was made before its articles of
incorporation were submitted to the SEC on the ground of corporation by ---
estoppel.
The principle and essence of implied ratification require that the
DOCTRINE: Under Article 737 of the Civil Code, "[t]he donor's capacity shall be principal has full knowledge at the time of ratification of all the material facts and
determined as of the time of the making of the donation." By analogy, the legal circumstances relating to the act sought to be ratified or validated. Also, it is
capacity or the personality of the donee, or the authority of the latter's important that the act constituting the ratification is unequivocal in that it is
representative, in certain cases, is determined at the time of acceptance of the performed without the slightest hint of objection or protest from the donor or the
donation. Article 738, in relation to Article 745, of the Civil Code provides that all donee, thus producing the inevitable conclusion that the donation and its
those who are not specifically disqualified by law may accept donations either acceptance were in fact confirmed and ratified by the donor and the donee.
personally or through an authorized representative with a special power of
attorney for the purpose or with a general and sufficient power. ---

Jurisprudence settled that "[t]he filing of articles of incorporation and the [P]rivity in estate denotes the privity between assignor and assignee,
issuance of the certificate of incorporation are essential for the existence of a de donor and donee, grantor and grantee, joint tenant for life and remainderman or
facto corporation." In fine, it is the act of registration with SEC through the reversioner and their respective assignees, vendor by deed of warranty and a
issuance of a certificate of incorporation that marks the beginning of an entity's remote vendee or assignee. A privy in estate is one, it has been said, who derives
corporate existence. his title to the property in question by purchase; one who takes by conveyance. In
fine, respondents, as successors-in-interest, derive their right from and are in the
The doctrine of corporation by estoppel is founded on principles of equity same position as their predecessor in whose shoes they now stand.
and is designed to prevent injustice and unfairness. It applies when a non-existent
corporation enters into contracts or dealings with third persons. In which case, FACTS:
the person who has contracted or otherwise dealt with the non-existent
The Missionary Sisters of Our Lady of Fatima (petitioner), otherwise
corporation is estopped to deny the latter's legal existence in any action leading
known as the Peach Sisters of Laguna, is a religious and charitable group
out of or involving such contract or dealing. While the doctrine is generally
established under the patronage of the Roman Catholic Bishop of San Pablo on
applied to protect the sanctity of dealings with the public, nothing prevents its
May 30, 1989. Mother Ma. Concepcion R. Realon (Mother Concepcion) is the
application in the reverse, in fact the very wording of the law which sets forth the
petitioner's Superior General. The respondents, on the other hand, are the legal
doctrine of corporation by estoppel permits such interpretation. Such that a
heirs of the late Purificacion Y. Alzona (Purificacion).
person who has assumed an obligation in favor of a non- existent corporation,
having transacted with the latter as if it was duly incorporated, is prevented from Purificacion, a spinster, is the registered owner of parcels of land covered
denying the existence of the latter to avoid the enforcement of the contract. by Transfer Certificate of Title (TCT) Nos. T-57820* and T-162375; and a co-
owner of another property covered by TCT No. T-162380, all of which are located
Jurisprudence dictates that the doctrine of corporation by estoppel
in Calamba City, Laguna.
applies for as long as there is no fraud and when the existence of the association is
attacked for causes attendant at the time the contract or dealing sought to be In 1996, Purificacion, impelled by her unmaterialized desire to be nun,
enforced was entered into, and not thereafter. decided to devote the rest of her life in helping others. In the same year, she then
became a benefactor of the petitioner by giving support to the community and its BIR was presented for registration. The Register of Deeds, however, denied the
works. registration on account of the Affidavit of Adverse Claim dated September 26,
2001 filed by the brother of Purificacion, respondent Amando Y. Alzona
In 1997, during a doctor's appointment, Purificacion then accompanied (Amando).
by Mother Concepcion, discovered that she has been suffering from lung cancer.
Considering the restrictions in her movement, Purificacion requested Mother On October 30, 2001, Purificacion died without any issue, and survived
Concepcion to take care of her in her house, to which the latter agreed. only by her brother of full blood, Amando, who nonetheless died during the
pendency of this case and is now represented and substituted by his legal heirs,
In October 1999, Purificacion called Mother Concepcion and handed her a joined as herein respondents.
handwritten letter dated October 1999. Therein, Purificacion stated that she is
donating her house and lot at F. Mercado Street and Riceland at Banlic, both at On April 9, 2002, Amando filed a Complaint before the RTC, seeking to
Calamba, Laguna, to the petitioner through Mother Concepcion. On the same annul the Deed executed between Purificacion and the petitioner, on the ground
occasion, Purificacion introduced Mother Concepcion to her nephew, Francisco that at the time the donation was made, the latter was not registered with the SEC
Del Mundo (Francisco), and niece, Ma. Lourdes Alzona Aguto-Africa (Lourdes). and therefore has no juridical personality and cannot legally accept the donation.
Purificacion, instructed Francisco to give a share of the harvest to Mother
Concepcion, and informed Lourdes that she had given her house to Mother RTC dismissed the petition. CA modified, declaring the donation void.
Concepcion.
ISSUES:
Sometime in August 2001, at the request of Purificacion, Mother
 WoN petitioner has the requisite legal personality to accept the donation
Concepcion went to see Atty. Nonato Arcillas (Atty. Arcillas) in Los Bañ os, Laguna.
o YES. At the outset, it must be stated that as correctly pointed out by the CA,
During their meeting, Atty. Arcillas asked Mother Concepcion whether their group
the RTC erred in holding that the petitioner is a de facto corporation.
is registered with the SEC, to which the latter replied in the negative. Acting on the
o Petitioner filed its Articles of Incorporation and by-laws on August 28,
advice given by Atty. Arcillas, Mother Concepcion went to SEC and filed the
corresponding registration application on August 28, 2001. 2001. However, the SEC issued the corresponding Certificate of
Incorporation only on August 31, 2001, two (2) days after Purificacion
On August 29, 2001, Purificacion executed a Deed of Donation Inter Vivos executed a Deed of Donation on August 29, 2001. Clearly, at the time the
(Deed) in favor of the petitioner, conveying her properties covered by TCT Nos. T- donation was made, the Petitioner cannot be considered a corporation de
67820 and T-162375, and her undivided share in the property covered by TCT No. facto.
T-162380. The Deed was notarized by Atty. Arcillas and witnessed by o Rather, a review of the attendant circumstances reveals that it calls for the
Purificacion's nephews Francisco and Diosdado Alzona, and grandnephew, Atty. application of the doctrine of corporation by estoppel as provided for under
Fernando M. Alonzo. The donation was accepted on even date by Mother Section 21 of the Corporation Code.
Concepcion for and in behalf of the petitioner. o In this controversy, Purificacion dealt with the petitioner as if it were a
corporation. This is evident from the fact that Purificacion executed two (2)
Thereafter, Mother Concepcion filed an application before the Bureau of documents conveying her properties in favor of the petitioner – first, on
Internal Revenue (BIR) that the petitioner be exempted from donor's tax as a October 11, 1999 via handwritten letter, and second, on August 29, 2001
religious organization. The application was granted by the BIR through a letter through a Deed; the latter having been executed the day after the petitioner
dated January 14, 2002 of Acting Assistant Commissioner, Legal Service, Milagros filed its application for registration with the SEC.
Regalado. o In this case, while the underlying contract which is sought to be enforced is
that of a donation, and thus rooted on liberality, it cannot be said that
Subsequently, the Deed, together with the owner's duplicate copies of
Purificacion, as the donor failed to acquire any benefit therefrom so as to
TCT Nos. T-57820, T-162375, and T-162380, and the exemption letter from the
prevent the application of the doctrine of corporation by estoppel. To recall,
 the subject properties were given by Purificacion, as a token of appreciation by the petitioner. In fact, the latter affirms and supports the authority of
for the services rendered to her during her illness. In fine, the subject deed Mother Concepcion to accept the donation on their behalf; as she is, after all
partakes of the nature of a remuneratory or compensatory donation, having the congregation's Superior General. Furthermore, the petitioner's avowal
been made "for the purpose of rewarding the donee for past services, which of Mother Concepcion's authority after their SEC registration is a
services do not amount to a demandable debt." ratification of the latter's authority to accept the subject donation as the
o Precisely, the existence of the petitioner as a corporate entity is upheld in petitioner's representative.
this case for the purpose of validating the Deed to ensure that the primary
objective for which the donation was intended is achieved, that is, to convey
the property for the purpose of aiding the petitioner in the pursuit of its
charitable objectives.
o Further, apart from the foregoing, the subsequent act by Purificacion of re-
conveying the property in favor of the petitioner is a ratification by conduct
of the otherwise defective donation.
o In this controversy, while the initial conveyance is defective, the genuine
intent of Purificacion to donate the subject properties in favor of the
petitioner is indubitable. Also, while the petitioner is yet to be incorporated,
it cannot be said that the initial conveyance was tainted with fraud or
misrepresentation. Contrarily, Purificacion acted with full knowledge of
circumstances of the Petitioner. This is evident from Purificacion's act of
referring Mother Concepcion to Atty. Arcillas, who, in turn, advised the
petitioner to apply for registration. Further, with the execution of two (2)
documents of conveyance in favor of the petitioner, it is clear that what
Purificacion intended was for the sisters comprising the petitioner to have
ownership of her properties to aid them in the pursuit of their charitable
activities, as a token of appreciation for the services they rendered to her
during her illness. To put it differently, the reference to the petitioner was
merely a descriptive term used to refer to the sisters comprising the
congregation collectively. Accordingly, the acceptance of Mother
Concepcion for the sisters comprising the congregation is sufficient to
perfect the donation and transfer title to the property to the petitioner.
Ultimately, the subsequent incorporation of the petitioner and its
affirmation of Mother Concepcion's authority to accept on its behalf cured
whatever defect that may have attended the acceptance of the donation.
o The Deed sought to be enforced having been validly entered into by
Purificacion, the respondents' predecessor-in-interest, binds the
respondents who succeed the latter as heirs.
 WoN Mother Concepcion has the authority to act as representative for and in
behalf of the petitioner
o YES. Foremost, the authority of Mother Concepcion was never questioned
2. Dutch Movers, Inc. vs. Lequin, 824 SCRA 310, G.R. No. 210032 April 25, execution, provided that such persons deliberately used the corporate vehicle to
2017 unjustly evade the judgment obligation, or resorted to fraud, bad faith, or malice
in evading their obligation. 
Piercing the veil of corporate fiction is allowed, and responsible persons may be
impleaded, and be held solidarily liable even after final judgment and on execution, In this case, petitioners were impleaded from the inception of this case. They had
provided that such persons deliberately used the corporate vehicle to unjustly evade ample opportunity to debunk the claim that they illegally dismissed respondents,
the judgment obligation, or resorted to fraud, bad faith, or malice in evading their and that they should be held personally liable for having controlled DMI and
obligation.  actively participated in its management, and for having used it to evade legal
obligations to respondents.
FACTS:
While it is true that one's control does not by itself result in the disregard of
An illegal dismissal Complaint was filed by Lequin. et. al against Dutch Movers, corporate fiction; however, considering the irregularity in the incorporation of
Inc. (DMI), and/or Spouses Lee, its alleged President/Owner, and Manager DMI, then there is sufficient basis to hold that such corporation was used for an
respectively. NLRC ruled that they were illegally dismissed. Pending the illegal purpose, including evasion of legal duties to its employees, and as such, the
resolution of the Writ of Execution, Lequin. et. al filed a Manifestation and Motion piercing of the corporate veil is warranted. The act of hiding behind the cloak of
to Implead stating that upon investigation, they discovered that DMI no longer corporate fiction will not be allowed in such situation where it is used to evade
operates. They, nonetheless, insisted that Spouses Lee — who managed and one's obligations, which "equitable piercing doctrine was formulated to address
operated DMI, and consistently represented to respondents that they were the and prevent." 
owners of DMI — continue to work at Toyota Alabang, which they also own and
operate. They further averred that the Articles of Incorporation (AOI) of DMI Clearly, petitioners should be held liable for the judgment awards as they resorted
ironically did not include petitioners as its directors or officers; and those named to such scheme to countermand labor laws by causing the incorporation of DMI
directors and officers were persons unknown to them. They likewise claimed that but without any indication that they were part thereof. While such device to
per inquiry with the SEC and the DOLE, they learned that DMI did not file any defeat labor laws may be deemed ingenious and imaginative, the Court will not
notice of business closure; and the creation and operation of DMI was attended hesitate to draw the line, and protect the right of workers to security of tenure,
with fraud making it convenient for petitioners to evade their legal obligations to including ensuring that they will receive the benefits they deserve when they fall
them. victims of illegal dismissal.

ISSUE:

Whether or not the corporate fiction can be pierced even after the judgment
against it has become final and executory.

RULING:

YES. The veil of corporate fiction must be pierced and accordingly, petitioners
should be held personally liable for judgment awards because the peculiarity of
the situation shows that they controlled DMI; they actively participated in its
operation such that DMI existed not as a separate entity but only as business
conduit of petitioners. As will be shown below, petitioners controlled DMI by
making it appear to have no mind of its own, and used DMI as shield in evading
legal liabilities, including payment of the judgment awards in favor of
respondents. 

Piercing the veil of corporate fiction is allowed, and responsible persons may be
impleaded, and be held solidarily liable even after final judgment and on
3. Wesleyan University-Philippines vs. Maglaya, Sr., 815 SCRA 171, G.R. No.
212774 January 23, 2017 LA: In favour of WUP; Since Maglaya was appointed as President of the University
by the Board, he was a corporate officer and not a mere employee. The instant
Doctrine: An office is created by the charter of the corporation and the officer is case involves intra- corporate dispute, which was definitely beyond the
elected by the directors or stockholders, while an employee usually occupies no jurisdiction of the labor tribunal.
office and generally is employed not by action of the directors or stockholders but
by the managing officer of the corporation who also determines the compensation NLRC: In favor of Maglaya; The illegal dismissal falls within the jurisdiction of the
to be paid to such employee. labor tribunals since the Board did not elect Maglaya but merely appointed him.

Facts: Issue: Whether Maglaya is a corporate officer whose complaint for dismissal
Petitioner is a non-stock, non-profit, nonsectarian educational should be filed with the trial courts or is he a mere employee under the
corporation duly organized and existing under Philippine law on April 28, 1948. jurisdiction of the labor tribunals

Respondent, on the other hand, was an appointed corporate member Held: Corporate officer- RTC jurisdiction
since January 1. 2004. He was elected President of the University for a five-year
term on 2005 and was re-elected as a trustee on 2007. The Court ruled that NLRC erred in assuming jurisdiction over Maglaya’s
complaint for illegal dismissal against WUP since the subject matter of the instant
In a Memorandum dated November 28, 2008, the incumbent Bishops of case is an intra-corporate controversy which the NLRC has no jurisdiction.
the United Methodist Church (Bishops) apprised all the corporate members of the
expiration of their terms on December 31, 2008, unless renewed by the former. Corporate officer in the context of Presidential Decree No. 902-A are
The said members, including Maglaya, sought the renewal of their membership in those officers of the corporation who are given that character by the
the WUP’s Board, and signified their willingness to serve the corporation. Corporation Code or by the corporation’s bylaws.

On January 10, 2009, Dr. Dominador Cabasal, Chairman of the Board, The president, vice president, secretary and treasurer are commonly
informed the Bishops of the cessation of corporate terms of some of the trustees regarded as the principal or executive officers of a corporation, and they are
since the by-laws provided that vacancy shall only be filed by the Bishops upon usually designated as the officers of the corporation. However, other officers are
the recommendation by the Board. Thereafter, the Bishops appointed the sometimes created by the charter or bylaws of a corporation, or the board of
incoming corporate members and trustees who were formally introduced on April directors may be empowered under the bylaws of a corporation to create
24, 2009., the new President informed Maglaya of the termination of his service additional offices as may be necessary. The Court expounded that an office is
and authority as President of the University on April 27, 2009. created by the charter of the corporation and the officer is elected by the directors
or stockholders, while an employee usually occupies no office and generally is
Maglaya and other former member of the Board filed a complaint for employed not by action of the directors or stockholders but by the managing
injunction and damages before the trial court. The RTC dismissed the complaint officer of the corporation who also determines the compensation to be paid to
declaring the same as nuisance or harassment suit prohibited by Sec. 1(b) Rule 1 such employee.
of the Interim Rules for Intra-Corporate Controversies. Upon appeal, the CA and
the SC both dismissed the complaint and affirmed decision of RTC. From the foregoing, that the creation of the position is under the
corporation’s charter or bylaws, and that the election of the officer is by the
Thereafter, Maglaya filed on the present illegal dismissal case against directors or stockholders must concur in order for an individual to be considered
WUP with the Labor Arbiter. He claimed that he was a mere employee of the a corporate officer, as against an ordinary employee or officer. It is only when the
University and was unceremoniously dismissed in a wanton, reckless, oppressive, officer claiming to have been illegally dismissed is classified as such corporate
and malevolent manner. officer that the issue is deemed an intra-corporate dispute which falls within the
jurisdiction of the trial courts.
WUP asseverated that the dismissal or removal of Maglaya being a It is apparent from the bylaws of WUP that the president was one of the officers of
corporate officer and not a regular employee is a corporate act or intra-corporate the corporation, and was an honorary member of the Board. He was appointed by
controversy under the jurisdiction of the RTC. the Board and not by a managing officer of the corporation.
 4. Belo Medical Group, Inc. vs. Santos, 838 SCRA 142, G.R. No. 185894 August
The alleged appointment of 30, 2017
Maglaya instead of election as provided by
the bylaws neither convert the president of university as a mere employee, nor
A conflict between two (2) stockholders of a corporation does not automatically
amend its nature as a corporate officer. A corporate officer’s dismissal is always a
render their dispute as intra-corporate. The nature of the controversy must also be
corporate act, or an intra -corporate controversy which arises between a
examined.
stockholder and a corporation, and the nature is not altered by the reason or
wisdom with which the Board of Directors may have in taking such action.
FACTS:
The issue of the alleged termination involving a corporate officer, not a
Petitioner Belo Medical Group (BMG) filed a Complaint for Interpleader and
mere employee, is not a simple labor problem but a matter that comes within the
Supplemental Complaint for Declaratory Relief against respondents Jose Santos
area of corporate affairs and management and is a corporate controversy in
and Victoria Belo.
contemplation of the Corporation Code.
Respondent Santos filed a request to Belo Medical Group for an inspection of
Moreover, it is long established rule that jurisdiction over a subject
corporate records. He claims that he is a registered shareholder and co-owner of
matter is conferred by law. According to Sec.5 (c) of PD 902-A as amended by
Victoria Belo’s shares which he acquired while they cohabited as husband and
Subsection 5.2, Section 5 of Republic Act No. 8799, the regional trial courts
wife. His repeated attempts to inspect the corporate books were all denied.
exercise exclusive jurisdiction over all controversies in the election or
appointment of directors, trustees, officers or managers of corporations,
Belo claims that she paid for the shares and Santos only held the shares in his
partnerships or associations.
name in trust for her. She further claims that Santos, allegedly a majority owner of
Obagi Clinics, would be inspecting the BMG records in bad faith as it was to obtain
a competitor’s business information.

BMG thus filed a Complaint for Interpleader to protect its interest and compel
respondents to litigate their conflicting claims of ownership over the shares and
the right of inspection. It later filed a Supplemental Complaint seeking to bar
Santos permanently from inspecting its books due to his business interest in a
competitor.

On the other hand, Santos filed a Motion to Dismiss the case.

The complaints were raffled to a special commercial court and thus classified as
intra-corporate. The trial court recognized the case as intra-corporate controversy
but granted respondent Santos’ Motion to Dismiss.

ISSUE:

Whether or not the proceeding between the parties was an intra-corporate

controversy.

RULING:

YES, the case for interpleader filed by BMG was essentially an intra-corporate
controversy based on the relationship test and the nature of controversy test.
 The dismissal of the intra-corporate case is thus reversed. The case is remanded
Herein, it is necessary to determine whether an intra-corporate dispute exists as to the commercial court of origin for further proceedings.
under A.M. No. 01-2-04-SC or the Interim Rules of Procedure Governing Intra-
Corporate Controversies, such a controversy (enumerated in Sec. 1[a]) would
prohibit the filing of a motion to dismiss (prohibited pleadings in Sec. 8).

The Court now uses both the relationship test and the nature of the controversy
test to determine if an intra-corporate controversy is present.

Relationship Test

Under the “relationship test discussed in Union Glass & Container Corp. v. SEC, the
presence of any of the following relationships between the parties would
characterize it as intra-corporate:
[a] Between the corporation, partnership or association and the public;
[b] Between the corporation, partnership or association and its stockholders,
partners, members, or officers;
[c] Between the corporation, partnership or association and the state in so far as
its franchise, permit or license to operate is concerned; and
[d] Among the stockholders, partners or associates themselves.

In this case, both Belo and Santos are named shareholders of BMG’s Articles of
Incorporation. Since the conflict involves two shareholders then it is clearly intra-
corporate. Although the ownership of stocks of Santos is questioned, the court
continues to recognize him as a stockholder until a decision is rendered on the
true ownership of the 25 shares of stock in his name.

Nature of Controversy Test

In addition, DMRC Enterprises v. Este del Sol Mountain Reserve Inc. used the
“nature of controversy test” which looks into the conflict between the parties.

In this case, the intra-corporate dispute is evident in the Complaint for

Interpleader wherein the goal of both BMG and Belo is not just to determine the
true owner of the shares of stock but ultimately to stop Santos from inspecting the
corporate books. Even if Santos is declared the owner, BMG would then base his
disqualification on bad faith.

Based on the facts of this case and applying the relationship and nature of the
controversy tests, the case is centered around a registered stockholder’s right to
inspect corporate books and is therefore an intra-corporate dispute. As such,
Santos should not have been allowed to file a Motion to Dismiss. The trial court
should have treated the case as an intra-corporate dispute.
5. Andaya vs. Rural Bank of Cabadbaran, Inc., 799 SCRA 325, G.R. No. 188769 issue new certificates of stock.
August 3, 2016

Facts: Andaya has been able to establish that he is a bona fide transferee of Chute's
shares of stock. He presented to the RTC tha notarized Sale of Shares of Stocks, a
Andaya bought from Concepcion Chute 2,200 shares of stock in the Rural Bank of Documentary Stamp Tax Declaration/Return, a Capital Gains Tax Return and
Cabadbaran for Php220,000, evidenced by a notarized document denominated as stock certificates covering the subject shares duly endorsed by Chute. There is no
Sale of Shares of Stocks. Chute endorsed and delivered the certificates of stock to doubt that Andaya had the standing to initiate an action for manadamus to compel
Andaya and requested the bank to register the transfer in the bank's stock and the bank to record the transfer of shares in its stock and transfer book and to
transfer book and to issue new stock certificates in favor of the latter. issue new stock certificates in his name.

However, the bank's corporate secretary Demosthenese Oraiz denied the request, Moreover, the Section 98 of the Corporation Code, upon which the bank relies,
stating that under a stockholders' Resolution, existing stockholders have a right of applied only to close corporations.
first refusal in the event shares of other stockholders are offered for sale. Andaya
opposed the denial and claimed that the restriction did not appear in the bank's SECTION 98. Validity restrictions on transfer of shares. - Restrictions on the
Articles of Incorporation, by-laws, or certificates of stock. right to transfer shares must appear in the articles of incorporation and in
the by-laws as well as in the certificate of stock;
The bank eventually denied to register the transfer to Andaya due to conflict of
interest. It claimed that Andaya was then president and CEO of the Green bank of otherwise, the same shall not be binding on any purchaser thereof in good
Caraga, a competitor bank, and that the purchase “could be the beginning of a faith. Said restrictions shall not be more than onerous than granting the existing
hostile bid to take-over control” of the bank. It also maintained that stockholders stockholders or the corporation the option to purchase the shares of the
have a right of first refusal. transferring stockholder with such reasonable terms, conditions or period stated
therein. If upon the expiration of said period, the existing stockholders or the
Andaya instituted an action for mandamus and damages against the bank, its corporation fails to exercise the option to purchase, the transferring stockholder
corporate secretary, Oraiz and its legal counsel, Ricardo Gonzales to compel them may sell his shares to any third person. (Emphases supplied)
to record the transfer and to issue new certificates in his name.
There must first be a factual determination that the bank is indeed a close
The RTC dismissed the complaint on the ground that Andaya had no standing for corporation before the abovementioned section can be applied in the instant case.
failing to show that he was authorized by Chute to make the transfer. Andaya filed
a petition for review to the SC on pure questions of law.

Issue:

Whether or not Andaya, the transferee of shares of stock, may compel the bank to
record the transfer of shares and issue new stock certificates in his name

Ruling:

Yes. A bona fide transferee, who is able to establish a clear legal right to the
registration of the transfer, may resort to the remedy of mandamus to compel
corporations that wrongfully or unjustifiably refuse to record the transfer or to
6. Ient vs. Tullett Prebon (Philippines), Inc., 814 SCRA 184, G.R. No. 189158, "penalized" under Section 144 should be interpreted as referring to criminal
G.R. No. 189530 January 11, 2017 penalty, such as fine or imprisonment, and that it could not possibly contemplate
"civil" penalties such as damages, accounting or restitution.
The Corporation Code was intended as a regulatory measure, not primarily as a
penal statute. ISSUE: Whether the application of Section 144 of the Corporation Code to Sections
31 and 34 of the same statute will result to criminal liability in the event of
FACTS: Petitioner Ient is a British national and the Chief Financial Officer of violation of Sections 31 and 34.
Tradition Asia Pacific Pte. Ltd. (Tradition Asia) in Singapore. Petitioner Schulze is
a Filipino/German who does Application Support for Tradition Financial Services RULING: NO. Respondent urges this Court to strictly construe Section 144 as
Ltd. in London (Tradition London).Tradition Asia and Tradition London are contemplating only penal penalties. However, a perusal of Section 144 shows that
subsidiaries of Compagnie Financiere Tradition and are part of the "Tradition it is not a purely penal provision. When it is a corporation that commits a violation
Group." The Tradition Group is allegedly the third largest group of Inter-dealer of the Corporation Code, it may be dissolved in appropriate proceedings before
Brokers (IDB) in the world while the corporate organization, of which respondent the Securities and Exchange Commission. The involuntary dissolution of an erring
Tullett is a part, is supposedly the second largest. corporation is not imposed as a criminal sanction, but rather it is an
administrative penalty.
Sometime in August 2008, in line with Tradition Group's motive of expansion and
diversification in Asia, petitioners Ient and Schulze were tasked with the Giving a broad and flexible interpretation to the term "penalized" in Section 144
establishment of a Philippine subsidiary of Tradition Asia to be known as only has utility if there are provisions in the Corporation Code that specify
Tradition Financial Services Philippines, Inc. (Tradition Philippines).Tradition consequences other than "penal" or "criminal" for violation of, or non-compliance
Philippines was registered with the Securities and Exchange Commission (SEC) on with, the tenets of the Code. Petitioners point to the civil liability prescribed in
September 19, 2008 with petitioners Ient and Schulze, among others, named as Sections 31 and 34.
incorporators and directors in its Articles of Incorporation.
Also, quite apart that no legislative intent to criminalize Sections 31 and 34 was
On October 15, 2008, Tullett, through one of its directors, Gordon Buchan, filed a manifested in the deliberations on the Corporation Code, it is noteworthy from the
Complaint-Affidavitwith the City Prosecution Office of Makati City against the same deliberations that legislators intended to codify the common law concepts of
officers/employees of the Tradition Group for violation of the Corporation Code. corporate opportunity and fiduciary obligations of corporate officers as found in
Impleaded as respondents in the Complaint-Affidavit were petitioners Ient and American jurisprudence into said provisions. In common law, the remedies
Schulze, Jaime Villalon (Villalon), who was formerly President and Managing available in the event of a breach of director's fiduciary duties to the corporation
Director of Tullett, Mercedes Chuidian (Chuidian), who was formerly a member of are civil remedies. If a director or officer is found to have breached his duty of
Tullett's Board of Directors, and other John and Jane Does. Villalon and Chuidian loyalty, an injunction may be issued or damages may be awarded. A corporate
were charged with using their former positions in Tullett to sabotage said officer guilty of fraud or mismanagement may be held liable for lost profits. A
company by orchestrating the mass resignation of its entire brokering staff in disloyal agent may also suffer forfeiture of his compensation. There is nothing in
order for them to join Tradition Philippines. With respect to Villalon, Tullett the deliberations to indicate that drafters of the Corporation Code intended to
claimed that the former held several meetings between August 22 to 25, 2008 deviate from common law practice and enforce the fiduciary obligations of
with members of Tullett's Spot Desk and brokering staff in order to convince them directors and corporate officers through penal sanction aside from civil liability.
to leave the company. Villalon likewise supposedly intentionally failed to renew On the contrary, there appears to be a concern among the drafters of the
the contracts of some of the brokers. Corporation Code that even the imposition of the civil sanctions under Section 31
and 34 might discourage competent persons from serving as directors in
The proceedings can be summed up as follows: Petitioners posit that Section 144 corporations.
(Violations of this Code) only applies to the provisions of the Corporation Code or
its amendments "not otherwise specifically penalized" by said statute and should The Corporation Code was intended as a regulatory measure, not primarily as a
not cover Sections 31 (Liability of Directors, Trustees or Officers) and 34 penal statute. Sections 31 to 34 in particular were intended to impose exacting
(Disloyalty of a Director) which both prescribe the "penalties" for their violation; standards of fidelity on corporate officers and directors but without unduly
namely, damages, accounting and restitution of profits. On the other hand, impeding them in the discharge of their work with concerns of litigation.
respondent and the appellate court have taken the position that the term Considering the object and policy of the Corporation Code to encourage the use of
the corporate entity as a vehicle for economic growth, we cannot espouse a strict elected as follows:
construction of Sections 31 and 34 as penal offenses in relation to Section 144 in
the absence of unambiguous statutory language and legislative intent to that 1. Atty. Jeffrey Jaminola - Chairman of the Board and President
effect. When Congress intends to criminalize certain acts it does so in plain,
categorical language, otherwise such a statute would be susceptible to 2. Ms. Joji Milanes - Vice-President
constitutional attack.
3. Ms. Clothilda Ann Roman - Treasurer
7. Lim vs. Moldex Land, Inc., 815 SCRA 619, G.R. No. 206038 January 25, 2017
4. Mr. Edgardo Macalintal - Corporate Secretary
Facts
5. Atty. Ma. Rosario Bernardo - Asst. Corporate Secretary
Lim is a registered unit owner of 1322 Golden Empire Tower (Golden Empire
Tower), a condominium project of Moldex Land, Inc. (Moldex), a real estate 6. Atty. Mary Rose Pascual - Asst. Corporate Secretary
company engaged in the construction and development of high-end condominium
7. Atty. Jasmin Cuizon - Asst. Corporate Secretary
projects and in the marketing and sale of the units thereof to the general public.
Condocor, a non-stock, non-profit corporation, is the registered condominium Consequently, Lim filed an election protest before the RTC. Said court, however,
corporation for the Golden Empire Tower. Lim, as a unit owner of Golden Empire dismissed the complaint holding that there was a quorum during the July 21, 2012
Tower, is a member of Condocor. annual membership meeting; that Moldex is a member of Condocor, being the
registered owner of the unsold/unused condominium units, parking lots and
Lim claimed that the individual respondents are non-unit buyers, but all are
storage areas; and that the individual respondents, as Moldex's representatives,
members of the Board of Directors of Condocor, having been elected during its
were entitled to exercise all membership rights, including the right to vote
organizational meeting in 2008. They were again elected during the July 21, 2012
and to be voted. In so ruling, the trial court explained that the presence or
general membership meeting. Moldex became a member of Condocor on the basis
absence of a quorum in the subject meeting was determined on the basis of the
of its ownership of the 220 unsold units in the Golden Empire Tower. The
voting rights of all the units owned by the members in good standing. The total
individual respondents acted as its representatives.
voting rights of unit owners in good standing was 73,376 and, as certified by the
On July 21, 2012, Condocor held its annual general membership meeting. Its corporate secretary, 83.33% of the voting rights in good standing were present in
corporate secretary certified, and Jaminola, as Chairman, declared the existence of the said meeting, inclusive of the 5 8,504 voting rights of Moldex.
a quorum even though only 29 of the 1088 unit buyers were present. The
Issues
declaration of quorum was based on the presence of the majority of the voting
rights, including those pertaining to the 220 unsold units held by Moldex through 1) whether the July 21, 2012 membership meeting was valid. NO
its representatives. Lim, through her attorney-in-fact, objected to the validity of 2) whether Moldex can be deemed a member of Condocor. YES
the meeting. The objection was denied. Thus, Lim and all the other unit owners 3) whether a non-unit owner can be elected as a member of the Board of Directors
present, except for one, walked out and left the meeting. of Condocor. NO

Despite the walkout, the individual respondents and the other unit owner
proceeded with the annual general membership meeting and elected the new Ruling
members of the Board of Directors for 2012-2013. All four (4) individual
1. NO. The basis in determining the presence of quorum in non-stock
respondents were voted as members of the board, together with three (3) others
corporations is the numerical equivalent of all members who are entitled to
whose election was conditioned on their subsequent confirmation. Thereafter, the vote, unless some other basis is provided by the By-Laws of the corporation.
newly elected members of the board conducted an organizational meeting and The qualification "with voting rights" simply recognizes the power of a non-stock
proceeded with the election of its officers. The individual respondents were corporation to limit or deny the right to vote of any of its members. To include
these members without voting rights in the total number of members for There is no provision in P.D. No. 957 which states that an owner-developer of
purposes of quorum would be superfluous for although they may attend a a condominium project cannot be a member of a condominium corporation.
particular meeting, they cannot cast their vote on any matter discussed therein. Section 30 of P.D. No. 957 determines the purposes of a homeowners association -
Similarly, Section 6 of Condocor's By-Laws reads: "The attendance of a simple
to promote and protect the mutual interest of the buyers and residents, and to
majority of the members who are in good standing shall constitute a quorum
assist in their community development. A condominium corporation, however, is
... x x x." The phrase, "members in good standing," is a mere qualification as to
not just a management body of the condominium project. It also holds title to the
which members will be counted for purposes of quorum. As can be gleaned from
common areas, including the land, or the appurtenant interests in such areas.
Condocor's By-Laws, there are two (2) kinds of members: 1) members in good
Hence, it is especially governed by the Condominium Act. Clearly, a homeowners
standing; and 2) delinquent members. Section 6 merely stresses that delinquent
association is different from a condominium corporation. P.D. No. 957 does not
members are not to be taken into consideration in determining quorum. In
regulate condominium corporations and, thus, cannot be applied in this case.
relation thereto, Section 7 of the By-Laws, referring to voting rights, also qualified
that only those members in good standing are entitled to vote. Delinquent Section 2 of the Condominium Act states: Title to the common areas, including the
members are stripped off their right to vote. Clearly, contrary to the ruling of land, or the appurtenant interests in such areas, may be held by a corporation
the RTC, Sections 6 and 7 of Condocor's By-Laws do not provide that majority of specially formed for the purpose (hereinafter known as the "condominium
the total voting rights, without qualification, will constitute a quorum. corporation") in which the holders of separate interest shall automatically be
members or shareholders, to the exclusion of others, in proportion to the
The By-Laws of Condocor has no rule different from that provided in the
appurtenant interest of their respective units in the common areas.
Corporation Code with respect the determination of the existence of a quorum.
The quorum during the July 21, 2012 meeting should have been majority of In Sunset View, the Court elucidated on what constitutes "separate interest," in
Condocor's members in good standing. Accordingly, there was no quorum relation to membership, as mentioned in the Condominium Act, to wit: By
during the July 21, 2012 meeting considering that only 29 of the 108 unit necessary implication, the "separate interest" in a condominium, which
buyers were present. entitles the holder to become automatically a shareholder in the
condominium corporation, as provided in Section 2 of the Condominium Act, can
As there was no quorum, any resolution passed during the July 21, 2012
be no other than ownership of a unit. This is so because nobody can be a
annual membership meeting was null and void and, therefore, not binding
shareholder unless he is the owner of a unit and when he ceases to be the
upon the corporation or its members. The meeting being null and void, the
owner, he also ceases automatically to be a shareholder.
resolution and disposition of other legal issues emanating from the null and void
July 21, 2012 membership meeting has been rendered unnecessary. Thus, law and jurisprudence dictate that ownership of a unit entitles one to
become a member of a condominium corporation. The Condominium Act does
2. YES. Membership in a condominium corporation is limited only to the unit
not provide a specific mode of acquiring ownership. Thus, whether one
owners of the condominium project. This is provided in Section 10 of the
becomes an owner of a condominium unit by virtue of sale or donation is of no
Condominium Act which reads: When a member or stockholder ceases to own a
moment. It is erroneous to argue that the ownership must result from a sale
unit in the project in which the condominium corporation owns or holds the
transaction between the owner-developer and the purchaser. Such interpretation
common areas, he shall automatically cease to be a member or stockholder of
would mean that persons who inherited a unit, or have been donated one, and
the condominium corporation.
properly transferred title in their names cannot become members of a
Although the Condominium Act provides for the minimum requirement for condominium corporation.
membership in a condominium corporation, a corporation's articles of
Moldex, as a member, may appoint a duly authorized representative. A
incorporation or by-laws may provide for other terms of membership, so long as
corporation can act only through natural persons duly authorized for the purpose
they are not inconsistent with the provisions of the law, the enabling or master
or by a specific act of its board of directors. Thus, in order for Moldex to exercise
deed, or the declaration of restrictions of the condominium project.
its membership rights and privileges, it necessarily has to appoint its
representatives.

Section 58 [now Sec 57] of the Corporation Code mandates: Stockholders and 8. Jose A. Bernas v. Jovencio F. Cinco G.R. Nos. 163356-57/163368-69; July
members may vote in person or by proxy in all meetings of stockholders or 10, 2015
members. Relative to the above provision is Section 1, Article II of Condocor's By-
Laws, which grants registered owners the right to designate any person or SUMMARY: The Bernas Group are the incumbent Members of the Board of
entity to represent them in Condocor, subject to the submission of a written Directors and Officers of Makati Sports Club whose terms were to expire either in
notification to the Secretary of such designation. Further, the owner's 1998 or 1999. The Cinco Group, meanwhile, are the members and stockholders of
representative is entitled to enjoy and avail himself of all the rights and the MSC during the December 17, 1997 Special Stockholders Meeting.
privileges, and perform all the duties and responsibilities of a member of the
Because of rumors regarding the corporate funds, the MSC Oversight Committee
corporation. Prescinding therefrom, Moldex had the right to send duly
(MSCOC), composed of past presidents of the club, demanded from the Bernas
authorized representatives to represent it during the questioned general
Group to resign from their positions to pave the way for the election of the new
membership meeting. Records showed that, pursuant to a Board Resolution, as
set of officers. Thus, MSCOC called for a Special Stockholders’ Meeting and the
certified by Sandy T. Uy, corporate secretary of Moldex, the individual
Cinco Group were elected. And in the Annual Stockholders’ Meeting in 1998, the
respondents were instituted as Moldex's representatives.
removal of the Barnas Group and the election of their replacements were ratified.
3. NO. Section 23 of the Corporation Code provides: Trustees of non-stock
corporations must be members thereof. While Moldex may rightfully Due to the filing of several petitions for and against the removal of the Bernas
designate proxies or representatives, the latter, however, cannot be elected Group from the Board pending before the SEC resulting in the piling up of legal
as directors or trustees of Condocor. First, the Corporation Code clearly controversies involving MSC, the SEC resolved to supervise the holding of the
provides that a director or trustee must be a member of record of the corporation. 1999 Annual Stockholders’ Meeting. During that meeting, it was once again
Further, the power of the proxy is merely to vote. If said proxy is not a member ratified. And ratified again in the 2000 meeting.
in his own right, he cannot be elected as a director or proxy.
Section 25 of the Corporation Code mandates that the President shall be a SICD rendered a Decision in the SEC case finding that the December 17, 1997
director. As previously discussed, Jaminola could not be elected as a director. Stockholders Meeting and the subsequent meetings ratifying it invalid. It likewise
Consequently, Jaminola's election as President was null and void. nullified the expulsion of Bernas from the corporation and the sale of his share at
the public auction. This was because the said special meeting was prematurely or
The same provision allows the election of such other officers as may be provided
invalidly called by the Cinco Group, thus failing to produce legal effect and did not
for in the by-laws. Condocor's By-Laws, however, require that the Vice-President
remove the Bernas Group as directors of the MSC. SC held that the December 17,
shall be elected by the Board from among its member-directors in good standing,
1997 Meeting was invalid for being improperly called.
and the Secretary may be appointed by the Board under the same circumstance.
Like Jaminola, Milanes and Macalintal were not directors and, thus, could not be DOCTRINE: A distinction should be made between corporate acts or contracts
elected and appointed as Vice-President and Secretary, respectively. which are illegal and those which are merely ultra vires.  The former
contemplates the doing of an act which are contrary to law, morals or public
Insofar as Roman's election as Treasurer is concerned, the same would have been
policy or public duty, and are, like similar transactions between individuals, void. 
valid, as a corporate treasurer may or may not be a director of the corporation's
They cannot serve as basis of a court action nor acquire validity by performance,
board. The general membership meeting of Condocor, however, was null and void.
ratification or estoppel.  Mere ultra vires acts, on the other hand, or those which
As a consequence, Roman's election had no legal force and effect.
are not illegal or void ab initio, but are not merely within the scope of the articles
In fine, the July 21, 2012 annual general membership meeting of Condocor of incorporation, are merely voidable and may become binding and enforceable
being null and void, all acts and resolutions emanating therefrom are likewise when ratified by the stockholders. The 17 December 1997 Meeting belongs to the
null and void. category of the latter, that is, it is void ab initio and cannot be validated.
FACTS: Section 25 of the MSC by-laws merely authorized the Corporate
Secretary to issue notices of meetings and nowhere does it state that
 Makati Sports Club (MSC) is a domestic corporation duly organized and such authority solely belongs to him. 
existing under Philippine laws for the primary purpose of establishing, o It would be useless to course the request to call a meeting through
maintaining, and providing social, cultural, recreational and athletic activities the Corporate Secretary because he repeatedly refused to call a
among its members. special stockholders’ meeting despite demands and even filed a suit
 Petitioners in G.R. Nos. 163356-57 (Case 1), Jose A. Bernas (Bernas), Cecile H. to restrain the holding of a special meeting.
Cheng, Victor Africa, Jesus Maramara, Jose T. Frondoso, Ignacio T. Macrohon o The newly elected directors initiated an investigation on the alleged
and Paulino T. Lim (BERNAS GROUP) were among the Members of the Board anomalies in administering the corporate affairs and after finding
of Directors and Officers of the corporation whose terms were to expire either Bernas guilty of irregularities, the Board resolved to expel him from
in 1998 or 1999. the club by selling his shares at public auction.
 Petitioners in G.R. Nos. 163368-69 (Case 2) Jovencio Cinco, Ricardo Librea  Due to the filing of several petitions for and against the removal of the Bernas
and Alex Y. Pardo (CINCO GROUP) are the members and stockholders of the Group from the Board pending before the SEC resulting in the piling up of
corporation who were elected Members of the Board of Directors and Officers legal controversies involving MSC, the SEC En Banc resolved to supervise the
of the club during the 17 December 1997 Special Stockholders Meeting. holding of the 1999 Annual Stockholders’ Meeting. 
 Alarmed with the rumored anomalies in handling the corporate funds, the  During the said meeting, the stockholders once again approved, ratified and
MSC Oversight Committee (MSCOC), composed of the past presidents of the confirmed the holding of the 17 December 1997 Special Stockholders’
club, demanded from the Bernas Group, who were then incumbent officers of Meeting.
the corporation, to resign from their respective positions to pave the way for o The conduct of the 17 December 1997 Special Stockholders’ Meeting
the election of new set of officers. was likewise ratified by the stockholders during the 2000 Annual
o Agreeing with this, were the stockholders of the corporation representing Stockholders’ Meeting which was held on 17 April 2000.
at least 100 shares who sought the assistance of the MSCOC to call for a  SICD rendered a decision finding, among others, that the 17 December 1997
special stockholders meeting for the purpose of removing the sitting Special Stockholders’ Meeting and the Annual Stockholders’ Meeting
officers and electing new ones. Pursuant to such request, the MSCOC called conducted on 20 April 1998 and 19 April 1999 are invalid.  The SICD likewise
a Special Stockholders’ Meeting and sent out notices to all stockholders and nullified the expulsion of Bernas from the corporation and the sale of his
members stating therein the time, place and purpose of the meeting.  share at the public auction. 
o For failure of the Bernas Group to secure an injunction before the  CA: declared that 17 December 1997 Special Stockholders’ Meeting invalid for
Securities Commission (SEC), the meeting proceeded wherein Bernas, being improperly called but affirmed the actions taken during the Annual
Cheng, Africa, Maramara, Frondoso, Macrohon, Jr. and Lim were removed Stockholders’ Meeting held on 20 April 1998, 19 April 1999 and 17 April
from office and, in their place and stead, Cinco, Librea, Pardo, Aguiling, 2000.
Villarosa, David, Maronilla, de Leon-Herlihy and Altura, were elected.  BERNAS GROUP: Agrees with the disquisition of the appellate court that the
 Aggrieved by the turn of events, the BERNAS GROUP sought the nullification Special Stockholders’ Meeting is invalid for being called by the persons not
of the 17 December 1997 Special Stockholders Meeting on the ground that it authorized to do so, they urge the Court to likewise invalidate the holding of
was improperly called before the Securities Investigation and Clearing the subsequent Annual Stockholders’ Meetings invoking the application of the
Department (SICD) of the SEC. Citing Section 28 of the Corporation Code. holdover principle. 
 BERNAS GROUP: The authority to call a meeting lies with the Corporate  CINCO GROUP: Insists that the holding of 17 December 1997 Special
Secretary and not with the MSCOC which functions merely as an oversight Stockholders’ Meeting is valid and binding underscoring the overwhelming
body and is not vested with the power to call corporate meetings. ratification made by the stockholders during the subsequent annual
 For being called by the persons not authorized to do so, the Bernas Group stockholders’ meetings and the previous refusal of the Corporate Secretary to
urged the SEC to declare the 17 December 1997 Special Stockholders’ call a special stockholders’ meeting despite demand.  
Meeting, including the removal of the sitting officers and the election of new
ones, be nullified.
 CINCO GROUP: insisted that the 17 December 1997 Special Stockholders’ Whether or not the CA erred in ruling that December 17, 1997 Special
Meeting is sanctioned by the Corporation Code and the MSC by-laws.  Stockholders’ Meeting is invalid—YES. It is invalid.
o In justifying the call effected by the MSCOC, they reasoned that
 The 17 December 1997 Special Stockholders’ Meeting is null and void and control and direct the affairs of the corporation from them.  The board of
produces no effect; the resolution expelling the Bernas Group from the directors, in drawing to itself the power of the corporation, occupies a
corporation and authorizing the sale of Bernas’ shares at the public auction is position of trusteeship in relation to the stockholders, in the sense that the
likewise null and void.  board should exercise not only care and diligence, but utmost good faith in
 The Corporation Code laid down the rules on the removal of the Directors of the management of the corporate affairs.
the corporation by providing, inter alia, the persons authorized to call the  The underlying policy of the Corporation Code is that the business and affairs
meeting and the number of votes required for the purpose of removal: of a corporation must be governed by a board of directors whose members
o Sec. 28. Removal of directors or trustees. - Any director or trustee of a have stood for election, and who have actually been elected b
corporation may be removed from office by a vote of the stockholders  the stockholders, on an annual basis.  The shareholder vote is critical to the
holding or representing at least two-thirds (2/3) of the outstanding capital theory that legitimizes the exercise of power by the directors or officers over
stock, or if the corporation be a non-stock corporation, by a vote of at least the properties that they do not own.
two-thirds (2/3) of the members entitled to vote: Provided, That such  SEC. 23. The Board of Directors or Trustees. – Unless otherwise
removal shall take place either at a regular meeting of the corporation or at a provided in this Code, the corporate powers of all the corporations
special meeting called for the purpose, and in either case, after previous formed under this Code shall be exercised, all business conducted and all
notice to stockholders or members of the corporation of the intention to property of such corporations controlled and held by the board of
propose such removal at the meeting. A special meeting of the directors and trustees
stockholders or members of a corporation for the purpose of removal  A corporation’s board of directors is understood to be that body which
of directors or trustees, or any of them, must be called by the secretary (1) exercises all powers provided for under the Corporation Code; (2)
on order of the president or on the written demand of the stockholders conducts all business of the corporation; and (3) controls and holds all
representing or holding at least a majority of the outstanding capital the property of the corporation.  Its members have been characterized as
stock, or, if it be a non-stock corporation, on the written demand of a trustees or directors clothed with fiduciary character.
majority of the members entitled to vote. Should the secretary fail or refuse  It is ineluctably clear that the fiduciary relation is between the
to call the special meeting upon such demand or fail or refuse to give the stockholders and the board of directors and who are vested with the
notice, or if there is no secretary, the call for the meeting may be addressed power to manage the affairs of the corporation. 
directly to the stockholders or members by any stockholder or member of  The ordinary trust relationship of directors of a corporation and
the corporation signing the demand. Notice of the time and place of such stockholders is not a matter of statutory or technical law.
meeting, as well as of the intention to propose such removal, must be given  It springs from the fact that directors have the control and guidance of
by publication or by written notice prescribed in this Code. Removal may be corporate affairs and property and hence of the property interests of the
with or without cause: Provided, that removal without cause may not be stockholders.
used to deprive minority stockholders or members of the right of  Equity recognizes that stockholders are the proprietors of the corporate
representation to which they may be entitled under Section 24 of this Code. interests and are ultimately the only beneficiaries thereof. Should the
 Textually, only the President and the Board of Directors are authorized by the board fail to perform its fiduciary duty to safeguard the interest of the
by-laws to call a special meeting.  In cases where the person authorized to call stockholders or commit acts prejudicial to their interest, the law and the
a meeting refuses, fails or neglects to call a meeting, then the stockholders by-laws provide mechanisms to remove and replace the erring director.
representing at least 100 shares, upon written request, may file a petition to  It is apt to recall that illegal acts of a corporation which contemplate the
call a special stockholder’s meeting. doing of an act which is contrary to law, morals or public order, or
 In the instant case, there is no dispute that the 17 December 1997 Special contravenes some rules of public policy or public duty, are, like similar
Stockholders’ Meeting was called neither by the President nor by the Board of transactions between individuals, void. The same principle can apply in
Directors but by the MSCOC.  While the MSCOC, as its name suggests, is the present case. The void election of 17 December 1997 cannot be
created for the purpose of overseeing the affairs of the corporation, nowhere ratified by the subsequent Annual Stockholders’ Meeting.
in the by-laws does it state that it is authorized to exercise corporate powers,  A distinction should be made between corporate acts or contracts
such as the power to call a special meeting, solely vested by law and the MSC which are illegal and those which are merely ultra vires.  The former
by-laws on the President or the Board of Directors. contemplates the doing of an act which are contrary to law, morals or
 The board of directors is the directing and controlling body of the public policy or public duty, and are, like similar transactions between
corporation.  It is a creation of the stockholders and derives its power to individuals, void.  They cannot serve as basis of a court action nor acquire
 validity by performance, ratification or estoppel.  Mere ultra vires acts, corporation except ratification of actions that are deemed void from the
on the other hand, or those which are not illegal or void ab initio, but are beginning.
not merely within the scope of the articles of incorporation, are merely  Considering that a new set of officers were already duly elected in 1998 and
voidable and may become binding and enforceable when ratified by the 1999 Annual Stockholders Meetings, the Bernas Group cannot be permitted to
stockholders. The 17 December 1997 Meeting belongs to the category of use the holdover principle as a shield to perpetuate in office.  Members of the
the latter, that is, it is void ab initio and cannot be validated. group had no right to continue as directors of the corporation unless
 Consequently, such Special Stockholders’ Meeting called by the Oversight reelected by the stockholders in a meeting called for that purpose every year.
Committee cannot have any legal effect.  The Cinco Group cannot invoke They had no right to hold-over brought about by the failure to perform the
the application of de facto officership doctrine to justify the actions taken duty incumbent upon them.
after the invalid election since the operation of the principle is limited to
third persons who were originally not part of the corporation but became 9. Y-I Leisure Philippines, Inc., Yats Internationa Ltd. and Y-I Clubs and
such by reason of voting of government- sequestered shares. Resorts, Inc. v. James Yu G.R. No. 207161, September 08, 2015
 Where there is an officer authorized to call a meeting and that officer
refuses, fails, or neglects to call a meeting, the SEC can assume FACTS:
jurisdiction and issue an order to the petitioning stockholder to call a
meeting pursuant to its regulatory and administrative powers to Respondent Yu, a businessman interested in purchasing golf and country club
implement the Corporation Code. This is clearly provided for by Section shares, bought 500 golf and 150 country club shares from Mt. Arayat
50 of the Corporation Code1 Development Co. Inc. (MADCI) a real estate development corporation.
Whether or not the Court of Appeals erred in failing to nullify the holding of
the annual stockholders’ meeting on 20 April 1998, 19 April 1999 and 17 However, upon full payment of the shares to MADCI, Yu visited the supposed site
of the golf and country club and discovered that it was non-existent. He filed with
April 2000—NO
the RTC a complaint for collection of sum of money and damages with prayer for
preliminary attachment against MADCI and its president Rogelio Sangil (Sangil) to
 The subsequent Annual Stockholders’ Meeting held on 20 April 1998, 19 April
recover his payment for the purchase of golf and country club shares.
1999 and 17 April 2000 are valid and binding except the ratification of the
removal of the Bernas Group and the sale of Bernas’ shares at the public In its Answer, MADCI claimed that it was Sangil who defrauded Yu. It invoked the
auction effected by the body during the said meetings.  The expulsion of the Memorandum of Agreement (MOA) entered into by MADCI, Sangil and petitioner
Bernas Group and the subsequent auction of Bernas’ shares are void from the Yats International Ltd. (YIL). Under the MOA, Sangil undertook to redeem MADCI
very beginning and therefore the ratifications effected during the subsequent proprietary shares sold to third persons or settle in full all their claims for refund
meetings cannot be sustained.  A void act cannot be the subject of ratification. of payments. Thus, it was MADCI's position that Sangil should be ultimately liable
 The 19 April 1999 Annual Stockholders Meeting is likewise valid because in to refund the payment for shares purchased.
addition to the fact that it was conducted in accordance to Section 8 of the
MSC bylaws, such meeting was supervised by the SEC in the exercise of its After the pre-trial, Yu filed an Amended Complaint, wherein he also impleaded
regulatory and administrative powers to implement the Corporation Code. petitioner YIL, Y-I Leisure Phils., Inc. (YILPI) and Y-I Club & Resorts, Inc. (YICRI).
 Needless to say, the conduct of SEC supervised Annual Stockholders Meeting According to Yu, he discovered in the Registry of Deeds of Pampanga that,
gave rise to the presumption that the corporate officers who won the election substantially, all the assets of MADCI, consisting of one hundred twenty (120)
were duly elected to their positions and therefore can be rightfully considered hectares of land located in Magalang, Pampanga, were sold to YIL, YILPI and
as de jure officers.  As de jure officials, they can lawfully exercise functions and YICRI. The transfer was done in fraud of MADCI's creditors, and without the
legally perform such acts that are within the scope of the business of the required approval of its stockholders and board of directors under Section 40 of
the Corporation Code.
1 Sec. 50.  Regular and special meetings of stockholders or members. – x x x RTC Ruling - because MADCI did not deny its contractual obligation with Yu, it
must be liable for the return of his payments. However, it exonerated YIL, YILPI
Whenever, for any cause, there is no person authorized to call a meeting, the Securities and Exchange Commission, upon petition of a and YICRI from liability because they were not part of the transactions between
stockholder or member, and on a showing of good cause therefore, may issue an order to the petitioning stockholder or member
directing him to call a meeting of the corporation by giving proper notice required by this Code or by the by-laws.  The petitioning
MADCI and Sangil, on one hand and Yu, on the other hand.
stockholder or member shall preside thereat until at least majority of the stockholders or members present have chosen one of their
member[s] as presiding officer
CA Ruling - partly granted the appeals and modified the RTC decision by holding corporation, or (2) if the proceeds of the sale or other disposition of such property
YIL and its companies, YILPI and YICRI, jointly and severally, liable for the and assets will be appropriated for the conduct of its remaining business. Thus,
satisfaction of Yu's claim. the litmus test to determine the applicability of Section 40 would be the
capacity of the corporation to continue its business after the sale of all or
Now, petitioners counter that they did not assume such liabilities because the substantially all its assets.
transfer of assets was not committed in fraud of the MADCI's creditors.
Based on these factual findings, the Court is convinced that MADCI indeed had
ISSUES: assets consisting of 120 hectares of landholdings in Magalang, Pampanga, to be
developed into a golf course, pursuant to its primary purpose. Because of its
1. Whether or not the transfer of all or substantially all the assets of a alleged violation of the MOA, however, MADCI was made to transfer all its assets
corporation under Section 40 of the Corporation Code carries with it the to the petitioners. No evidence existed that MADCI subsequently acquired other
assumption of corporate liabilities? lands for its development projects. Thus, MADCI, as a real estate development
2. Whether or not the petitioner indeed became a continuation of MADCI's corporation, was left without any property to develop eventually rendering it
business? incapable of continuing the business or accomplishing the purpose for which it
was incorporated. Section 40 must apply.
HELD:
10. Anna Teng v. Securities Exchange Commission and Ting Ping Lay G.R. No.
184332, February 17, 2016
1. Yes. While the Corporation Code allows the transfer of all or
substantially all of the assets of a corporation, the transfer should not
RECIT-READY:
prejudice the creditors of the assignor corporation.
This case originated from the case of TCL Sales Corp v. CA. Respondent Ting Ping
purchased shares of TCL Sales Corporation (TCL) from Chiu, his brother Teng
Under the business-enterprise transfer, the petitioners have consequently Ching Lay (President and operations manager of TCL), and Maluto. Teng Ching
inherited the liabilities of MADCI because they acquired all the assets of the died. Ting Ping, to protect his shareholdings with TCL, requested petitioner Teng
latter corporation. The continuity of MADCI's land developments is now in the (TCL's Corporate Secretary), to enter the transfer in the Stock and Transfer Book
hands of the petitioners, with all its assets and liabilities. There is absolutely no of TCL for the proper recording of his acquisition. He also demanded the issuance
certainty that Yu can still claim its refund from MADCI with the latter losing all its of new certificates of stock in his favor. TCL and Teng refused despite repeated
assets. To allow an assignor to transfer all its business, properties and assets demands. Ting Ping filed mandamus with the SEC which was granted. SEC issued a
without the consent of its creditors will place the assignor's assets beyond the writ of execution. Teng argued that prior to registration of stocks in the corporate
reach of its creditors. Thus, the only way for Yu to recover his money would be to books, it is mandatory that the stock certificates are first surrendered because a
assert his claim against the petitioners as transferees of the assets. corporation will be liable to a bona fide holder of the old certificate if, without
demanding the said certificate, it issues a new one. On the other hand, Ting Ping
The protection of the creditors of the transferor corporation, and does not depend
argued that Section 63 of the Corporation Code does not require the surrender of
on any deceit committed by the transferee -corporation, fraud is certainly not an
the stock certificate to the corporation, nor make such surrender an indispensable
element of the business enterprise doctrine.
condition before any transfer of shares can be registered in the books of the
2. Yes, Section 40 refers to the sale, lease, exchange or disposition of all or corporation. The only limitation imposed by Section 63 is when the corporation
substantially all of the corporation's assets, including its goodwill. The holds any unpaid claim against the shares intended to be transferred.
sale under this provision does not contemplate an ordinary sale of all
corporate assets; the transfer must be of such degree that the Whether or not the surrender of the certificates of stock is a requisite before
transferor corporation is rendered incapable of continuing its business registration of the transfer may be made in the corporate books and for the
or its corporate purpose. issuance of new certificates in its stead--NO.

It must be clarified, however, that not every transfer of the entire corporate assets To compel Ting Ping to deliver to the corporation the certificates as a condition
would qualify under Section 40. It does not apply (1) if the sale of the entire for the registration of the transfer would amount to a restriction on the right of
property and assets is necessary in the usual and regular course of business of Ting Ping to have the stocks transferred to his name, which is not sanctioned by
law.
  Ting Ping filed an Ex Parte Motion for the Issuance of Alias Writ of Execution
In a sale of shares of stock, physical delivery of a stock certificate is one of the for the partial satisfaction of SEC en banc Order directing TCL and Teng to
essential requisites for the transfer of ownership of the stocks purchased." The record the shares he acquired from Chiu and Maluto, and for payment of the
delivery contemplated in Section 63, however, pertains to the delivery of the damages.
certificate of shares by the transferor to the transferee, that is, from the  Teng and TCL filed their respective motions to quash, which was opposed by
original stockholder named in the certificate to the person or entity the Ting Ping, who also expressed his willingness to surrender the original stock
stockholder was transferring the shares to, whether by sale or some other valid certificates of Chiu and Maluto to facilitate and expedite the transfer of the
form of absolute conveyance of ownership. "[S]hares of stock may be transferred shares in his favor.
by delivery to the transferee of the certificate properly indorsed. Title may be  Teng’s arguments:
vested in the transferee by the delivery of the duly indorsed certificate of stock." o Prior to registration of stocks in the corporate books, it is mandatory
that the stock certificates are first surrendered because a corporation
Nevertheless, to be valid against third parties and the corporation, the transfer will be liable to a bona fide holder of the old certificate if, without
must be recorded or registered in the books of corporation. Upon registration of demanding the said certificate, it issues a new one.
the transfer in the books of the corporation, the transferee may now then exercise o The annexes in Ting Ping's opposition did not include the subject
all the rights of a stockholder, which include the right to have stocks transferred certificates of stock, surmising that they could have been lost or
to his name. destroyed.
o There is a discrepancy between the total shares of Maluto based on
COMPREHENSIVE: the annexes, which is only 1305 shares, as against the 1440 shares
acquired by Ting Ping based on the SEC Order
FACTS:  Ting Ping’s arguments:
 This case originated from the case of TCL Sales Corporation and Anna Teng v. o Section 63 of the Corporation Code does not require the surrender of
Hon. Court of Appeals and Ting Ping Lay. the stock certificate to the corporation, nor make such surrender an
 Respondent Ting Ping purchased 480 shares of TCL Sales Corporation (TCL) indispensable condition before any transfer of shares can be
from Chiu; 1,400 shares from his brother Teng Ching Lay (Teng Ching), who registered in the books of the corporation. The only limitation
was also the president and operations manager of TCL; and 1,440 shares from imposed by Section 63 is when the corporation holds any unpaid
Maluto. claim against the shares intended to be transferred.
 Upon Teng Ching's death, his son Henry Teng (Henry) took over the o (in response to Teng’s 2nd argument) Claimed that his counsel Atty.
management of TCL. Simon V. Lao already communicated with TCL's counsel regarding
 Respondent Ting Ping, to protect his shareholdings with TCL, requested the surrender of the said certificates of stock.
petitioner Teng, TCL's Corporate Secretary, to enter the transfer in the Stock  SEC denied the motions to quash.
and Transfer Book of TCL for the proper recording of his acquisition. He also  Teng filed a petition for certiorari and prohibition under Rule 65 with the CA
demanded the issuance of new certificates of stock in his favor. which was denied.
 TCL and Teng refused despite repeated demands.  Hence, the present petition.
 Ting Ping filed a petition for mandamus with the SEC which was granted →
SEC en banc affirmed → Petition for review with the CA but was denied →  ISSUE:
petition for review on certiorari with the SC under Rule 45 but was denied.
 Whether or not the surrender of the certificates of stock is a requisite before
 SEC issued a writ of execution. registration of the transfer may be made in the corporate books and for the
 Teng filed a complaint for interpleader with the RTC of Manila to compel issuance of new certificates in its stead
Henry and Ting Ping to interplead and settle the issue of ownership over the
1,400 shares, which were previously owned by Teng Ching.  HELD: NO. To compel Ting Ping to deliver to the corporation the certificates
o RTC found Henry to have a better right to the shares of stock as a condition for the registration of the transfer would amount to a
formerly owned by Teng Ching, except as to those covered by Stock restriction on the right of Ting Ping to have the stocks transferred to his
Certificate No. 011 covering 262.5 shares, among others. (***Note name, which is not sanctioned by law. The right of a transferee/assignee to
that as a consequence, the subject of the orders of execution issued have stocks transferred to his name is an inherent right flowing from his
by the SEC pertained only to Chiu's and Maluto's respective shares.) ownership of the stocks. The only limitation imposed by Section 63 is when
 the corporation holds any unpaid claim against the shares intended to be  The right of a transferee/assignee to have stocks transferred to his name is an
transferred. inherent right flowing from his ownership of the stocks.
o A corporation, either by its board, its by-laws, or the act of its officers,
 A certificate of stock is a written instrument signed by the proper officer of a cannot create restrictions in stock transfers. In transferring stock, the
corporation stating or acknowledging that the person named in the document secretary of a corporation acts in purely ministerial capacity, and
is the owner of a designated number of shares of its stock. does not try to decide the question of ownership.
o It is prima facie evidence that the holder is a shareholder of a o If a corporation refuses to make such transfer without good cause, it
corporation. may, in fact, even be compelled to do so by mandamus.
o A certificate, however, is merely a tangible evidence of ownership of  Ting Ping's definite and uncontested titles to the subject shares were already
shares of stock. It is not a stock in the corporation and merely determined in the case of TCL Sales Corp v. CA
expresses the contract between the corporation and the stockholder. o Ting Ping Lay was able to establish prima facie ownership over the
o The shares of stock evidenced by said certificates, meanwhile, are shares of stocks in question, through deeds of transfer of shares of
regarded as property and the owner of such shares may, as a general stock of TCL Corporation. Hence, the transfer of shares to him must
rule, dispose of them as he sees fit, unless the corporation has been be recorded on the corporation's stock and transfer book.
dissolved, or unless the right to do so is properly restricted, or the  Moreover, Teng cannot refuse registration of the transfer on the pretext that
owner's privilege of disposing of his shares has been hampered by his the photocopies of Maluto's certificates of stock submitted by Ting Ping
own action. covered only 1,305 shares and not 1,440.
o As earlier stated, the respective duties of the corporation and its
 On the Registration of Transfer secretary to transfer stock are purely ministerial
 Section 63 of the Corporation Code prescribes the manner by which a share of o The discrepancy was also not attended with fraud but a mere product
stock may be transferred. of the failure of the corporation to register with the [SEC] the
o Certain minimum requisites must be complied with for there to be a increase in the subscribed capital stock by 4000 shares.
valid transfer of stocks, to wit: (a) there must be delivery of the stock  Nevertheless, to be valid against third parties and the corporation, the
certificate; (b) the certificate must be endorsed by the owner or his transfer must be recorded or registered in the books of corporation.
attorney-in-fact or other persons legally authorized to make the  Upon registration of the transfer in the books of the corporation, the
transfer; and (c) to be valid against third parties, the transfer must be transferee may now then exercise all the rights of a stockholder, which
recorded in the books of the corporation. include the right to have stocks transferred to his name.
o It is the delivery of the certificate, coupled with the endorsement
by the owner or his duly authorized representative that is the  On the Issuance of a New Certificate
operative act of transfer of shares from the original owner to the  The surrender of the original certificate of stock is necessary before the
transferee. issuance of a new one so that the old certificate may be cancelled.
o The delivery contemplated in Section 63, however, pertains to the o A corporation is not bound and cannot be required to issue a new
delivery of the certificate of shares by the transferor to the certificate unless the original certificate is produced and
transferee, that is, from the original stockholder named in the surrendered.
certificate to the person or entity the stockholder was transferring o Surrender and cancellation of the old certificates serve to protect not
the shares to, whether by sale or some other valid form of absolute only the corporation but the legitimate shareholder and the public as
conveyance of ownership. well, as it ensures that there is only one document covering a
 The delivery or surrender adverted to by Teng, i.e., from Ting Ping to TCL, is particular share of stock.
not a requisite before the conveyance may be recorded in its books.  In the present case, Ting Ping manifested from the start his intention to
 To compel Ting Ping to deliver to the corporation the certificates as a surrender the subject certificates of stock to facilitate the registration of the
condition for the registration of the transfer would amount to a restriction on transfer and for the issuance of new certificates in his name.
the right of Ting Ping to have the stocks transferred to his name, which is not o It would be sacrificing substantial justice if the Court were to grant
sanctioned by law. The only limitation imposed by Section 63 is when the the petition simply because Ting Ping is yet to surrender the subject
corporation holds any unpaid claim against the shares intended to be certificates for cancellation instead of ordering in this case such
transferred. surrender and cancellation, and the issuance of new ones in his name.
 The Supreme Court declared that the dissolution of the corporation does
10. Aguirre II vs. FQB+7, Inc., 688 SCRA 242, G.R. No. 170770 January 9, 2013 not render the corporation’s board of directors functus officio. The board of
directors still has actual legal authority to direct the affairs of the corporation with
Facts:
respect to the winding up and liquidation of corporate affairs.
Vitaliano filed in his individual capacity and on behalf of FQB+7 a
The High Court explained that Section 122 of the Corporation Code allows
complaint for intra-corporate dispute, injunction, inspection of corporate books
the corporation to continue its existence for these limited purposes. It is necessary
and records and damages against Nathaniel and Priscila Aguirre and Antnio De
that the corporation retains the board which should continue to act in its behalf
Villa. Vitaliano discovered that the General Information Sheet (GIS) of FQB+7, a
while winding up its business and liquidating its remaining assets, if any, within
dissolved corporation in SEC filed by Francisco Q. Bocobo;s heirs, Nathaniel and
three (3) years from dissolution.
Priscila, as FQB+7’s president and secretary/treasurer, respectively had
substantive discrepancies respecting the composition of directors and subscribers Thus, the Complaint by Vitiliano is properly allowed to be heard only for
of FQB+7. This prompted Vitaliano to write to the “real” Board of Directors (the relief purposes for it does not seek to continue the corporate’s business. Its aim is
directors reflected in the Articles of Incorporation), represented by Fidel N. to determine and vindicate an alleged stockholder’s right to the return of his
Aguirre (Fidel). Vitaliano questioned the validity and truthfulness of the alleged stockholdings and to participate in the election of directors, and a corporation’s
stockholders meeting. The “real” Board allegedly ignored Vitaliano’s request. right to remove usurpers and strangers from its affairs.

RTC granted Vitaliano’s complaint due to the failure of the respondents to

attend the hearing.
(2) YES. R.A. 8799 conferred jurisdiction over intra-corporate controversies on
Upon appeal, CA postulated that by virtue of Section 122, it determined RTC. The Court elaborated that an intra-corporate case exists (a) if the issue arose
that Vitaliano’s Complaint, being geared towards the continuation of FQB+7 out of intra-corporate or partnership relations; and (b) if the controversy is
business, should be dismissed because the corporation has lost its juridical intrinsically connected with the regulation of the corporation or the enforcement
personality. Moreover, the CA held that the trial court does not have jurisdiction of the parties’ rights and obligations under the Corporation Code and the internal
to entertain an intra-corporate dispute when the corporation is already dissolved regulatory rules of the corporation. The Court held that these two elements exist
in this case even though FQB had been dissolved.
Hence, this petition.
In addition, Section 145 of the Corporation Code assures an aggrieved
party that the corporation’s dissolution will not impair, much less remove, his/her
Issue: (1) Whether a corporation’s board is rendered functus officio after rights or remedies against the corporation, its stockholders, directors or officers.
dissolution.
The dissolution of the corporation simply prohibits it from continuing its
(2) Whether the RTC has jurisdiction over an intra-corporate dispute business. The dissolution of the corporation simply prohibits it from continuing
involving a dissolved corporation. its business. parties. Thus, a cause of action involving an intra-corporate
controversy remains and must be filed as an intra- corporate dispute despite the
Held: NO. Petition partially granted. subsequent dissolution of the corporation.

Ruling: 11. Carolina Que Villongco, et al., v. Cecilia Que Yabut, et al., G.R. No. 225022,
February 05, 2018
(1) NO. Section 122 of the Corporation Code prohibits a dissolved corporation
from continuing its business, but allows it to continue with a limited personality in The total outstanding capital stocks, without distinction as to disputed or
order to settle and close its affairs, including its complete liquidation. undisputed shares of stock, is the basis in determining the presence of quorum.
 for review, the Supreme Court held that the total outstanding capital stocks,
FACTS: without distinction as to disputed or undisputed shares of stock, is the basis in
determining the presence of quorum.
Phil-Ville Development and Housing Corporation (Phil-Ville) is a family
corporation founded by Geronima Gallego Que, who died on August 31, 2007. By Section 52 of the Corporation Code states that:
virtue of the Sale of Shares of Stocks dated June 11, 2005 purportedly executed by
Cecilia as the attorney-infact of Geronima, Cecilia allegedly effected an inequitable Section 52. Quorum in meetings. — Unless otherwise provided for in this
distribution of the 3,140 shares that belonged to Geronima, to wit: Code or in the by-laws, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock or a majority of
On January 15, 2014, Eumir Carlo sent a Notice of Annual Stockholders' Meeting the members in the case of non-stock corporations.
to all the stockholders of Phil-Ville, notifying them of the setting of the annual
stockholders' meeting on January 25, 2014 at 5:00 P.M. During the meeting, While Section 137 of the same Code defines "outstanding capital stock," thus:
respondents Cecilia, Ma. Corazon and Eumir Carlo were elected as directors and
later elected themselves to the following positions: Cecilia as Chairperson/Vice Section 137. Outstanding capital stock defined. — The term "outstanding
President/Treasurer; Ma. Corazon as Vice-Chairperson/President/General capital stock," as used in this Code, means the total shares of stock issued
Manager; and Eumir Carlo as Corporate Secretary/Secretary. under binding subscription agreements to subscribers or stockholders,
whether or not fully or partially paid, except treasury shares.
Consequently, on February 10, 2014, petitioners filed a case against respondents
before the RTC of Malabon City, praying, among others, that the election of The right to vote is inherent in and incidental to the ownership of corporate
respondents as directors be declared void considering the invalidity of the holding stocks. It is settled that unissued stocks may not be voted or considered in
of the meeting for lack of quorum therein. They claimed that the basis for determining whether a quorum is present in a stockholders' meeting. Only stocks
determining quorum should have been the total number of undisputed shares of actually issued and outstanding may be voted. 23 Thus, for stock corporations, the
stocks of Phil-Ville due to the exceptional nature of the case since the 3,140 shares quorum is based on the number of outstanding voting stocks. 24 The distinction of
of the late Geronima and the fractional .67, .67, and .66 shares of Eumir Que undisputed or disputed shares of stocks is not provided for in the law or the
Camara, Paolo Que Camara and Abimar Que Camara are the subject of another jurisprudence. Ubi lex non distinguit nec nos distinguere debemus — when the law
dispute filed before the RTC. Thus, excluding the 3,142 shares from the 200,000 does not distinguish we should not distinguish. Thus, the 200,000 outstanding
outstanding capital stock, the proper basis of determining the presence of quorum capital stocks of Phil-Ville should be the basis for determining the presence of a
should be 196,858 shares of stocks. quorum, without any distinction. Therefore, to constitute a quorum, the presence
of 100,001 shares of stocks in Phil-Ville is necessary.
The RTC rendered a Decision declaring the election of Cecilia Que, et al. as void
and of no effect considering the lack of quorum during the annual stockholders' 12. F&S Velasco vs. Madrid, G.R. No. 2018844, November 10, 2015
meeting. On appeal, the CA declared the RTC decision void for violating Section 14,
Article VIII of the Constitution. However, the CA declared the annual stockholders DOCTRINE All transfers of shares of stock must be registered in the corporate books
meeting conducted by Cecilia Que void for lack of quorum. in order to be binding on the corporation.

Hence, both parties filed separate petitions for review on certiorari. Facts:

ISSUE: FSVCI was duly organized and registered as a corporation with Francisco,
Simona and Angela, herein respondent Madrid, and petitioner Saturnino as its
Whether the total undisputed shares of stocks in Phil-Ville should be the basis in
incorporators. When Simona and Francisco, respectively, their daughter, Angela,
determining the presence of a quorum.
inherited their shares, giving her control of 70.82% of FSVCI's total shares of
RULING: stock. Madrid, as Angela's spouse, executed an Affidavit of Self-Adjudication
covering the latter's estate which includes her 70.82% ownership of FSVCI's
NO. In affirming the Court of Appeals and denying the parties’ respective petitions shares of stock. Believing that he is already the controlling stockholder of FSVCI
by virtue of such self-adjudication, Madrid called for a Special Stockholders' and number of the certificate or certificates and the number of shares transferred.
Re-Organizational Meeting to be held on November 18, 2009. On November 10, Verily, all transfers of shares of stock must be registered in the corporate
2009 and in preparation for said meeting, Madrid executed separate deeds of books in order to be binding on the corporation. Specifically, this refers to
assignment transferring one share each to Vitaliano B. Ricafort and to the the Stock and Transfer Book, which is described in Section 74 of the same
respondents. Consequently FSVCI corporate secretary, sent a Notice of an Code. Moreover, in the case of Batangas Laguna Tayabas Bus Co., v. Bitanga
Emergency Meeting to FSVCI's remaining stockholders for the purpose of electing instructs that an owner of shares of stock cannot be accorded the rights
a new president and vice-president, as well as the opening of a bank account. Such pertaining to a stockholder - such as the right to call for a meeting and the right to
meeting was held on November 6, 2009 which was attended by Saturnino, Seva, vote, or be voted for - if his ownership of such shares is not recorded in the Stock
and Sunico, during which, Saturnino was recognized as a member of the FSVCI and Transfer Book.
Board of Directors and thereafter, as FSVCI President, while Scribner was elected
FSVCI Vice-President (Saturnino Group).Despite the election conducted by the In the case at bar, records reveal that at the time Madrid called for the
Saturnino Group, the Madrid Group proceeded with the Special Stockholders' and November 18, 2009 Meeting, as well as the actual conduct thereof, he was already
Re-Organizational Meeting on November 18, 2009. Saturnino Group then filed a the owner of 74.98% shares of stock of FSVCI as a result of his inheritance of
petition for Declaration of Nullity of Corporate Election with Preliminary Angela's 70.82% ownership thereof. However, records are bereft of any
Injunction and Temporary Restraining Order against the Madrid Group before the showing that the transfer of Angela's shares of stock to Madrid had been
RTC in view of the November 18, 2009 meeting. registered in FSVCFs Stock and Transfer Book when he made such call and
when the November 18, 2009 Meeting was held. Thus, the CA erred in holding
RTC declared both meeting null and void because and held that until a that Madrid complied with the required registration of transfers of shares of stock
probate court conducting the settlement proceedings of Angela's estate through mere reliance on FSVCI's GIS dated November 18, 2009.
determines the rightful owner of Angela's properties, Madrid only has an
equitable right over Angela's 70.82% ownership of FSVCI's shares of stock. As 13. Global Business Holdings, Inc. v. Surecomp Software, B.V., G.R. No.
such, Madrid cannot exercise the rights accorded to such ownership, hence, 173463, October 13, 2010
making his call for a meeting. CA, on the contrary held that Madrid's execution of
Doctrine: Surecomp entered into a software license agreement with Asian Bank
the Affidavit of Self-Adjudication already conferred upon him the ownership of Corp for use of petitioner’s IMEX Software. ABC merged with Global with Global as
Angela's 70.82% ownership of FSVCI's shares of stock, resulting in total the surviving corp. Global then decided that the software was unworkable and will
ownership of 74.98% shares of stock inclusive of his original 4.16% ownership. no longer be using it. Global stopped paying Surecomp. Surecomp sued. Global
files MTD because of lack of capacity to sue. SC stated that Global is estopped from
Issue: Whether or not Madrid’s execution of the Affidavit of Self-Adjudication assailing capacity because it is considered as the one who contracted with
already conferred upon him the ownership of Angela's 70.82% ownership of Surecomp.
FSVCI's shares of stock.
Facts:
Held: No.
 Surecomp, a foreign corporation duly organized and existing under the
laws of the Netherlands, entered into a software license agreement with
Ratio:
Asian Bank Corporation (ABC), a domestic corporation, for the use of its
IMEX Software System (System) in the bank's computer system for a
Madrid's inheritance of Angela's shares of stock does not ipso facto afford
period of twenty (20) years
him the rights accorded to such majority ownership of FSVCI's shares of stock.  ABC merged with petitioner Global Business Holdings. Global took over
Section 63 of the Corporation Code governs the rule on transfers of shares of operations and found the system unworkable and informed Surecomp of
stock. It reads: No transfer, however, shall be valid, except as between the its decision to discontinue with the agreement and stop payment.
parties, until the transfer is recorded in the books of the corporation showing Surecomp filed a complaint against Global for failure to pay.
the names of the parties to the transaction, the date of the transfer, the  Surecomp alleges that it is suing as a foreign corp on an isolated
 transaction. Global filed MTD on the ground of lack of capacity to sue. albeit a foreign corporation (w/out a license to do business in the PH) can file an
 RTC denied the MTD stating that Global is estopped from assailing action against Intra Strata for NMC’s breach of contract.
capacity of Surecomp because it is a party to the contract as successor of
ABC. DOCTRINE
Under Article 123 of the Corporation Code, a foreign corporation must first obtain
Ruling: a license and a certificate from the appropriate government agency before it can
W/N Surecomp has capacity to sue – Yes, because of estoppel transact business in the Philippines. Where a foreign corporation does business in
the Philippines without the proper license, it cannot maintain any action or
proceeding before Philippine courts as provided under Section 133 of the
A corporation has a legal status only within the state or territory in which it was Corporation Code.
organized.
 For this reason, a corp organized in another country has no personality to FACTS
file suits in the Philippines. 1. Cargill, Inc. (Delaware corporation) and Northern Mindanao Corp. or NMC
 In order to subject a foreign corp to the jurisdiction of our courts, it must (domestic corporation) entered into a contract.
acquire a license from the SEC and appoint an agent for service of  Cargill bought 20k-24k metric tons of molasses from NMC;
process. Without the license, it cannot institute a suit in the Philippines.  To be delivered from Jan 1-June 30, ’90 at the price of $44/metric ton.
2. The contract provides that Cargill would open a Letter of Credit (LOC) w/
EXCEPTION: Estoppel. Global is estopped from challenging Surecomp’s capacity to BPIL.
sue.
 Under the “red clause” of the LOC, NMC was permitted to draw up to
 A party is estopped from challenging the personality of a corp after $500k representing the minimum price of the contract.
having acknowledged the same by entering into a contract with it. 3. The contract was amended 3x 2, w/c included a need for NMC to put up a
 The principle is applied to prevent a person contracting with a foreign performance bond.
corp from later taking advantage of its noncompliance with the statutes,  Complying w/ the 3rd amendment, Intra Strata Assurance Corporation
chiefly in cases where such person has received the benefits of the (respondent; NMC’s surety) issued a performance bond (P11,287,500) to
contract. guarantee NMC’s delivery of the 10,500 tons of molasses, and a surety
bond (P9,978,125) to guarantee the repayment of downpayment.
In the merger of two corps, one of the corps survives and continues, while the 4. NMC was only able to deliver 219,551 metric tons out of the 10,500mt agreed
other is dissolved, and all rights, properties, and liabilities are acquired by the upon.
surviving corp.
 Cargill sent demand letters to Intra Strata (as surety).claiming payment
 Global’s merger with ABC made it as if it was the one which entered into under the performance and surety bonds.
contract with Surecomp.
 Intra Strata refused to pay.
 Global assumed all the liabilities of ABC as if it had incurred such 5. So Cargill filed a complaint for sum of money against NMC and Intra Strata.
liabilities itself. Also, Global has the right to exercise all defenses, rights, 6. Cargill, NMC, and Intra Stata entered into a compromise agreement w/c the
privileges, and counter-claims which ABC may have. trial court approved. It provided that:
 NMC would pay Cargill P3M upon signing of the compromise agreement
14. Cargill vs. Intra Strata Assurance, G.R. No. 168266, March 15, 2010 and would deliver to Cargill 6,991 metric tons of molasses from Dec 16-
31 1991.
Cargill, a foreign corporation, bought several metric tons of molasses from NMC, a 7. But NMC still failed to comply w/ its obligation under the compromise
domestic corp (w/c acquired the services of Intra Strata as surety). NMC failed to agreement.
deliver the agreed upon amount and so Cargill went after Intra Strata for its 8. Hence, trial proceeded against NMC. Trial court ruled in favor of Cargill
claims. Intra Strata interposed the defense that Cargill cannot file an action in the ordering NMC and Intra Strata to pay P16,993,200.
PH because it is a foreign corporation doing business here w/out a license (per 9. On appeal, the CA reversed the trial court’s decision. Hence, this petition.
Sec. 133, Corp Code). The SC found that Cargill isn’t actually doing business here,
thus, it doesn’t fall under the prohibition of Sec. 133. This means that Cargill, 2 1st: Increasing the purchase price to $47.50/metric ton (Jan 11, 1990); 2nd: Reducing quantity of the molasses to 10,500
metric tons and increasing price to $55/metric ton (June 18, ’90); 3rd: Providing for the shipment of 5, 250 metric tons of
molasses and requiring NMC to put up a performance bond (Aug. 22, 1990)
  Cargill does not have the capacity to file suit since it’s a foreign  Sec. 3(d), RA 70425 (Foreign Investments Act of 1991) enumerated
corporation doing business in the PH WITHOUT the requisite not only acts/activities constituting “doing business” but also those
license. activities that are not deemed “doing business.
 Cargill’s purchases of molasses were in pursuance of its basic business 3. Intra Strata relies on Sec. 133 to bar Cargill from maintaining an action in Phil.
and not just mere isolated an incidental transactions. courts, it has the burden of proving that Cargill’s business activities in the
Phils. are not just casual or occasional, but so systematic and regular as to
ISSUE with HOLDING: Whether Cargill, an unlicensed foreign corporation, manifest contiuity and permanence of activity to constitute “doing business”
has the legal capacity to use before Philippine courts. – YES. in the Phils.
1. Under Article 1233 of the Corporation Code, a foreign corporation must first  SC found that Intra Strata failed to prove that Cargill’s activities in
obtain a license and a certificate from the appropriate government agency the Phils. constitute doing business as would prevent it from brining
before it can transact business in the Philippines. Where a foreign action.
corporation does business in the Philippines without the proper license, 4. Determining w/n a foreign corporation is doing business in the PH must be
it cannot maintain any action or proceeding before Philippine courts as based on the FACTS OF EACH CASE.
provided under Section 133 of the Corporation Code:  Antam Consolidated, Inc. v. CA – a foreign corp filed an action for collection
of sum of money against Antam for damages and loss sustained for its
“Sec. 133. Doing business without a license.—No foreign corporation failure to deliver coconut crude oil. The Court emphasized the importance
transacting business in the Philippines without a license, or its successors or of the element of continuity of commercial activities to constitute doing
assigns, shall be permitted to maintain or intervene in any action, suit or business in the Phils.
proceeding in any court or administrative agency of the Philippines; but such 5. Cargill is NOT doing business in the Phils.
corporation may be sued or proceeded against before Philippine courts or  There is no showing that the transactions between Cargill and NMC
administrative tribunals on any valid cause of action recognized under signify the intent of the former to establish a continuous business or
Philippine laws. extend its operations in
the Philippines.
2. Thus, the threshold question is Was Cargill doing business in the Philippines?  Section 1(f), Rule I, IRR of RA 7042 (Foreign Investments Code) provide
(NO.) that “doing business doesn’t include the ff.:
If it WAS (and it was doing so w/out a license) – then it can’t sue (1) Mere investment as a shareholder by a foreign entity in domestic
If it WASN’T (then it doesn’t fall under Art. 123 – then it CAN sue corporations duly registered to do business, and/or the exercise of
 There is no exact legal definition of “doing business” but Sec. 1, RA 5455 rights as such investor;
and Art. 44, Omnibus Investment Code provides acts that constitute (2) Having a nominee director or officer to represent its interests in such
“doing business4. corporation;
(3) Appointing a representative or distributor domiciled in the
Philippines which transacts business in the representative’s or
distributor’s own name and account;
(4) The publication of a general advertisement through any print or
broadcast media;
(5) Maintaining a stock of goods in the Philippines solely for the purpose
3 SEC. 123. Definition and rights of foreign corporations.—For the purpose of this Code, a foreign corporation is
oneformed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens of having the same processed by another entity in the Philippines;
and corporations to do business in its own country or state. It shall have the right to transact business in the Philippines after (6) Consignment by a foreign entity of equipment with a local company
it shall have obtained a license to transact business in this country in accordance with this Code and a certificate of authority
from the appropriate government agency
to be used in the processing of products for export;
4 “x x x the phrase “doing business” shall include soliciting orders, purchases, service contracts, opening (7) Collecting information in the Philippines; and
offices, whether called ‘liaison’ offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a period or periods
totalling one hundred eighty days or more; participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines; and any other act or acts that imply a 5 “x x x Provided, however, That the phrase ‘doing business’ shall not be deemed
continuity of commercial dealings or arrangements, and contemplate to that extent the to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to
performance of acts or works, or the exercise of some of the functions normally incident to, and do business, and/or the exercise of rights as such investor; nor having a nominee director or officer to
in progressive prosecution of, commercial gain or of the purpose and object of the business represent its interests in such corporation; nor appointing a representative or distributor domiciled in the
organization.” Philippines which transacts business in its own name and for its own account.”
 (8) Performing services auxiliary to an existing isolated contract of sale Thus, CA’s finding that Cargill was doing business in the PH is not supported by
which are not on a continuing basis, such as installing in the evidence.
Philippines machinery it has manufactured or exported to the
Philippines, servicing the same, training domestic workers to operate DISPOSITIVE PORTION
it, and similar incidental services. Petition is GRANTED. Trial court’s decision is reinstated, Cargill wins.
 National Sugar Trading Corp. v. CA – activities within Philippine
jurisdiction that do not create earnings or profits to the foreign OTHER NOTES
corporation do not constitute doing business in the Philippines.
In this case, it was NMC (the domestic corporation) that derived Upon review of the records of the case, Intra Strata had no legal excuse to refuse
income from the transaction and not Cargill (foreign corp w/c merely to pay Cargill’s claims under performance and surety bond.
bought from NMC).
15. Dr. Gil Rich v. Guillermo Paloma III, G.R. No. 210538, March 07, 2018
 Besides, under Section 3(d) of RA 7042, “soliciting purchases” has
been deleted from the enumeration of the acts/activities w/c constitute
Facts:
“doing business”
Sometime in 1997, Dr. Gil Rich (petitioner) lent P1,000,000.00 to his brother,
6. Other factors w/c support that Cargill is NOT doing business in the PH:
(1) It does not have an office in the Philippines; Estanislao Rich (Estanislao). The agreement was secured by a real estate
(2) It imports products from the PH through its nonexclusive local broker, mortgage over a 1000-square-meter parcel of land with improvements. By reason
whose authority to act on behalf of Cargill is limited to soliciting purchases of of default, petitioner foreclosed the mortgage in which he was declared as the
products from suppliers engaged in the sugar trade in the PH; and highest bidder in a public auction. Without his knowledge however, the same
(3) The local broker is an independent contractor and not an agent of Cargill. property was subsequently mortgaged in favor of Maasin Traders Lending
Corporation to secure another loan prior to the foreclosure on the year 2005. By
7. B. Van Zuiden Bros., Ltd. v. GTVL Marketing Industries, Inc. - An exporter in one
reason of the second mortgage, respondent was able to acquire a deed of
country may export its products to many foreign importing countries without
performing in the importing countries specific commercial acts that would redemption in his favor. This prompted petitioner to file for the annulment of the
constitute doing business in the importing countries. It can’t be forced to deed of redemption alleging that since the corporation on which respondent
secure a license in every foreign country from w/c it exports its products. Servacio was the president was already dissolved by the SEC on 2003, the
Otherwise, it would be deleterious to global trade. corporation has no juridical personality to effect the equitable redemption.
8. To be doing or “transacting business in the Philippines” for purposes of
Section 133 of the Corporation Code, the foreign corporation must actually
transact business in the Philippines, that is, perform specific business
transactions within the Philippine territory on a continuing basis in its own Issue:
name and for its own account. Actual transaction of business within the
Philippine territory is an essential requisite for the Philippines to to acquire WON the corporation may still redeem the property despite having it dissolved?
jurisdiction over a foreign corporation and thus require the foreign
corporation to secure a Philippine businesslicense. If a foreign corporation Ruling:
does not transact such kind of business in the Philippines, even if it exports
its products to the Philippines, the Philippines has no jurisdiction to require Once a corporation is dissolved, be it voluntarily or involuntarily, liquidation,
such foreign corporation to secure a Philippine business license. which is the process of settling the affairs of the corporation, will ensue. This
9. In the present case, Cargill is a foreign company merely importing
consists of (1) collection of all that is due the corporation, (2) the settlement and
molasses from a Philippine exporter. A foreign company that merely
imports goods from a Philippine exporter, without opening an office or adjustment of claims against it, and (3) the payment of its debts. Yu more
appointing an agent in the Philippines, is not doing business in the particularly described this process as that which entails the following:
Philippines.
"Winding up the affairs of the corporation means the collection of all assets, the
payment of all its creditors, and the distribution of the remaining assets, if any
among the stockholders thereof in accordance with their contracts, or if there be estate mortgage is not part of the liquidation powers that could have been
no special contract, on the basis of their respective interests. The manner of extended to MTLC. It could not have been for the purposes of "prosecuting and
liquidation or winding up may be provided for in the corporate by-laws and this defending suits by or against it and enabling it to settle and close its affairs, to
would prevail unless it is inconsistent with law." dispose of and convey its property and to distribute its assets." It is, in fact, a new
business in which MTLC no longer has any business pursuing.
These pronouncements draw their basis from Section 122 of the Corporation
Code, which empowers every corporation whose corporate existence has been 16. The Phil. Geothermal Employees Union vs. Unocal Phils, G.R. No. 190187,
legally terminated to continue as a body corporate for three (3) years after the September 28, 2016
time when it would have been dissolved. This continued existence would only be
for the purposes of "prosecuting and defending suits by or against it and enabling Facts: Philippine Geothermal, Inc. Employees Union is a legitimate labor union
that stands as the bargaining agent of the rank-and-file employees of Unocal
it to settle and close its affairs, to dispose of and convey its property and to
Philippines. Unocal Philippines, formerly known as Philippine Geothermal, Inc., is
distribute its assets." a foreign corporation incorporated under the laws of the State of California,
United States of America, licensed to do business in the Philippines for the
This continuance of its legal existence for the purpose of enabling it to close up its “exploration and development of geothermal resources as alternative sources of
business is necessary to enable the corporation to collect the demands due it as energy.” It is a wholly owned subsidiary of Union Oil Company of California
well as to allow its creditors to assert the demands against it. (Unocal California), which, in turn, is a wholly owned subsidiary of Union Oil
Corporation (Unocal Corporation). 
In addition, and as expressly mentioned by the Corporation Code, this extended
authority necessarily excludes the purpose of continuing the business for which it Unocal Philippines operates two (2) geothermal steam fields in Tiwi, Albay and
was established. The reason for this is simple: the dissolution of the corporation Makiling, Banahaw, Laguna, owned by the National Power Corporation. 
carries with it the termination of the corporation's juridical personality. Any new
business in which the dissolved corporation would engage in, other than those for On April 4, 2005, Unocal Corporation executed an Agreement and Plan of Merger
the purpose of liquidation, "will be a void transaction because of the non- (Merger Agreement) with Chevron Texaco Corporation (Chevron) and Blue
existence of the corporate party." Merger Sub, Inc. (Blue Merger). Blue Merger is a wholly owned subsidiary of
Chevron. Under the Merger Agreement, Unocal Corporation merged with Blue
Two things must be said of the foregoing in relation to the facts of this case. First, Merger, and Blue Merger became the surviving corporation. Chevron then became
the parent corporation of the merged corporations: After the merger, Blue Merger,
if MTLC entered into the real estate mortgage agreement with Estanislao after its
as the surviving corporation, changed its name to Unocal Corporation.
dissolution, then resultantly, such real estate mortgage agreement would be void
ab initio because of the non-existence of MTLC's juridical personality. On January 31, 2006, Unocal Philippines executed a Collective Bargaining
Agreement with the Union.
Second, if, however, MTLC entered into the real estate mortgage agreement prior
to its dissolution, then MTLC's redemption of the subject property, even if already However, on October 20, 2006, the Union wrote Unocal Philippines asking for the
after its dissolution (as long as it would not exceed three years thereafter), would separation benefits provided for under the Collective Bargaining Agreement.
still be valid because of the liquidation/winding up powers accorded by Section According to the Union, the Merger Agreement of Unocal Corporation, Blue
122 of the Corporation Code to MTLC. Merger, and Chevron resulted in the closure and cessation of operations of Unocal
Philippines and the implied dismissal of its employees.
Respondent Corporation that Estanislao executed the Real Estate Mortgage in
favor of the Corporation on 2005, long after it was dissolved by the SEC. From the Issue: Whether or not the the merger resulted to cessation of employees.
foregoing, it is clear that, by the time MTLC executed the real estate mortgage
agreement, its juridical personality has already ceased to exist. The agreement is Held: No. A merger is a consolidation of two or more corporations, which results
void as MTLC could not have been a corporate party to the same. To be sure, a real in one or more corporations being absorbed into one surviving corporation. The
separate existence of the absorbed corporation ceases, and the surviving
corporation “retains its identity and takes over the rights, privileges, franchises, shall be impaired by such merger or consolidation. (Emphasis supplied)
properties, claims, liabilities and obligations of the absorbed corporation(s).” 
Although this provision does not explicitly state the merger’s effect on the
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of employees of the absorbed corporation, Bank of the Philippine Islands v. BPI
Unocal Corporation, then the merger of Unocal Corporation with Blue Merger and Employees Union-Davao Chapter Federation of Unions in BPI Unibank has ruled
Chevron does not affect respondent or any of its employees. Respondent has a that the surviving corporation automatically assumes the employment contracts
separate and distinct personality from its parent corporation. of the absorbed corporation, such that the absorbed corporation’s employees
become part of the manpower complement of the surviving corporation.
Nonetheless, if respondent is indeed a party to the merger, the merger still does
not result in the dismissal of its employees. Merger is not one of the circumstances where the employees may claim
separation pay. The only instances where separation pay may be awarded to
The effects of a merger are provided under Section 80 of the Corporation Code: petitioner are: (a) reduction in workforce as a result of redundancy; (b)
retrenchment or installation of labor-saving devices; or (c) closure and cessation
SEC. 80. Effects of merger or consolidation. — The merger or consolidation, as of operations.
provided in the preceding sections shall have the following effects:
The terms do not provide that a merger is one of the instances where petitioner
1. The constituent corporations shall become a single corporation which, in case may claim separation benefits for its members. Neither can these circumstances
of merger, shall be the surviving corporation designated in the plan of merger; be interpreted as to contemplate a merger with another corporation. In any case,
and, in case of consolidation, shall be the consolidated corporation designated in if the parties intended that petitioner ought to be granted separation pay in case
the plan of consolidation; of a merger, it should have been explicitly provided for in the contract. Absent this
express intention, petitioner cannot claim separation pay.been explicitly provided
for in the contract. Absent this express intention, petitioner cannot claim
2. The separate existence of the constituent corporations shall cease, except that separation pay.
of the surviving or the consolidated corporation;
17. Tan vs. Sycip 17 August 2006
3. The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and For stock corporations, the quorum referred to in Section 52 of the Corporation
liabilities of a corporation organized under this Code; Code is based on the number of outstanding voting stocks. For nonstock
corporations, only those who are actual, living members with voting rights shall be
4. The surviving or the consolidated corporation shall thereupon and thereafter counted in determining the existence of a quorum during members meetings. Dead
possess all the rights, privileges, immunities and franchises of each of the members shall not be counted.
constituent corporations; and all property, real or personal, and all receivables
due on whatever account, including subscriptions to shares and other choses in Facts: 
action, and all and every other interest of, or belonging to, or due to each
constituent corporation, shall be taken and deemed to be transferred to and Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit
vested in such surviving or consolidated corporation without further act or deed; educational corporation with fifteen (15) regular members, who also constitute
and the board of trustees. During the annual members meeting held on April 6, 1998,
there were only eleven (11) living member-trustees, as four (4) had already died.
5. The surviving or the consolidated corporation shall be responsible and liable Out of the eleven, seven (7) attended the meeting through their respective
for all the liabilities and obligations of each of the constituent corporations in the proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr. over the
same manner as if such surviving or consolidated corporation had itself incurred objection of Atty. Antonio C. Pacis, who argued that there was no quorum. In the
such liabilities or obligations; and any claim, action or proceeding pending by or meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan
against any of such constituent corporations may be prosecuted by or against the were voted to replace the four deceased member-trustees.
surviving or consolidated corporation, as the case may be. Neither the rights of
creditors nor any lien upon the property of any of such constituent corporations When the controversy reached the Securities and Exchange Commission (SEC),
petitioners maintained that the deceased member-trustees should not be counted settlement and division of the estate is effected, the stocks of the decedent are
in the computation of the quorum because, upon their death, members held by the administrator or executor.
automatically lost all their rights (including the right to vote) and interests in the
corporation. On the other hand, membership in and all rights arising from a nonstock
corporation are personal and non-transferable, unless the articles of
SEC Hearing Officer Malthie G. Militar declared the April 6, 1998 meeting null and incorporation or the bylaws of the corporation provide otherwise. In other words,
void for lack of quorum. She held that the basis for determining the quorum in a the determination of whether or not dead members are entitled to exercise their
meeting of members should be their number as specified in the articles of voting rights (through their executor or administrator), depends on those articles
incorporation, not simply the number of living members. of incorporation or bylaws.

Issue: Under the By-Laws of GCHS, membership in the corporation shall, among others,
be terminated by the death of the member. Section 91 of the Corporation Code
Whether or not in NON-STOCK corporations, dead members should still be further provides that termination extinguishes all the rights of a member of the
counted in determination of quorum for purpose of conducting the Annual corporation, unless otherwise provided in the articles of incorporation or the
Members Meeting. bylaws.

Ruling: Applying Section 91 to the present case, we hold that dead members who are
dropped from the membership roster in the manner and for the cause provided
 The Right to Vote in Nonstock Corporations for in the By-Laws of GCHS are not to be counted in determining the requisite vote
in corporate matters or the requisite quorum for the annual members meeting.
In nonstock corporations, the voting rights attach to membership. Members vote
With 11 remaining members, the quorum in the present case should be 6.
as persons, in accordance with the law and the bylaws of the corporation. Each
Therefore, there being a quorum, the annual members meeting, conducted with
member shall be entitled to one vote unless so limited, broadened, or denied in
six members present, was valid.
the articles of incorporation or bylaws. We hold that when the principle for
determining the quorum for stock corporations is applied by analogy to nonstock 18. Air Canada vs. Commissioner of Internal Revenue, 778 SCRA 131, G.R. No.
corporations, only those who are actual members with voting rights should be
169507 January 11, 2016
counted.

Under Section 52 of the Corporation Code, the majority of the members FACTS:
representing the actual number of voting rights, not the number or numerical
constant that may originally be specified in the articles of incorporation, Air Canada is a foreign corporation organized and existing under the laws of
constitutes the quorum. Canada. On April 24, 2000, it was granted an authority to operate as an offline
carrier by the Civil Aeronautics Board, subject to certain conditions, which
Section 25 of the Code specifically provides that a majority of the directors or authority would expire on April 24, 2005. As an off-line carrier, Air Canada does
trustees, as fixed in the articles of incorporation, shall constitute a quorum for the not have flights originating from or coming to the Philippines and does not
transaction of corporate business (unless the articles of incorporation or the
operate any airplane in the Philippines.
bylaws provide for a greater majority). If the intention of the lawmakers was to
base the quorum in the meetings of stockholders or members on their absolute
On July 1, 1999, Air Canada engaged the services of Aerotel Ltd., Corp. (Aerotel) as
number as fixed in the articles of incorporation, it would have expressly specified
so. Otherwise, the only logical conclusion is that the legislature did not have that its general sales agent in the Philippines. Aerotel sells Air Canada’s passage
intention. documents in the Philippines.

Effect of the Death of a Member or Shareholder For the period ranging from the third quarter of 2000 to the second quarter of
2002, Air Canada, through Aerotel, filed quarterly and annual income tax returns
In stock corporations, shareholders may generally transfer their shares. Thus, on and paid the income tax on Gross Philippine Billings in the total amount of
the death of a shareholder, the executor or administrator duly appointed by the
₱5,185,676.77.
Court is vested with the legal title to the stock and entitled to vote it. Until a
On November 28, 2002, Air Canada filed a written claim for refund of alleged
erroneously paid income taxes amounting to ₱5,185,676.77 before the Bureau of The Court in Commissioner of Internal Revenue v. British Overseas Airways
Internal Revenue (BIR). It’s basis was found in the revised definition of Gross Corporation declared British Overseas Airways Corporation, an international air
Philippine Billings under Section 28(A)(3)(a) of the 1997 National Internal carrier with no landing rights in the Philippines, as a resident foreign corporation
Revenue Code (NIRC)6. engaged in business in the Philippines through its local sales agent that sold and
issued tickets for the airline company. According to said case, there is no specific
To prevent the running of the prescriptive period, Air Canada filed a Petition for criterion as to what constitutes “doing” or “engaging in” or “transacting” business.
Review before the Court of Tax Appeals (CTA). Each case must be judged in the light of its peculiar environmental circumstances.
The term implies a continuity of commercial dealings and arrangements, and
The CTA denied the petition. It found that Air Canada was engaged in business in
contemplates, to that extent, the performance of acts or works or the exercise of
the Philippines through a local agent that sells airline tickets on its behalf. As such,
some of the functions normally incident to, and in progressive prosecution of
it held that while Air Canada was not liable for tax on its Gross Philippine Billings
commercial gain or for the purpose and object of the business organization.
under Section 28(A)(3), it was nevertheless liable to pay the 32% corporate
income tax on income derived from the sale of airline tickets within the
An offline carrier is “any foreign air carrier not certificated by the Civil
Philippines pursuant to Section 28(A)(1). On appeal, the CTA En Banc affirmed the
Aeronautics Board, but who maintains office or who has designated or appointed
ruling of the CTA First Division.
agents or employees in the Philippines, who sells or offers for sale any air
If not, whether Air Canada is a resident foreign corporation engaged in trade transportation in behalf of said foreign air carrier and/or others, or negotiate for,
or business and thus, can be subject to the regular corporate income tax of or holds itself out by solicitation, advertisement, or otherwise sells, provides,
32% pursuant to Section 28(A)(1); furnishes, contracts, or arranges for such transportation.”

YES. Petitioner falls within the definition of resident foreign corporation under Petitioner is undoubtedly “doing business” or “engaged in trade or business” in
Section 28(A)(1)7, thus, it may be subject to 32% tax on its taxable income. the Philippines. In the case at hand, Aerotel performs acts or works or exercises
functions that are incidental and beneficial to the purpose of petitioner’s business.
6 SEC. 28. Rates of Income Tax on Foreign Corporations. -
(A) Tax on Resident Foreign Corporations. - The activities of Aerotel bring direct receipts or profits to petitioner. Further,
.... petitioner was issued by the Civil Aeronautics Board an authority to operate as an
(3) International Carrier. - An international carrier doing business in the Philippines shall pay a tax offline carrier in the Philippines for a period of five years. Petitioner is, therefore,
of two and one-half percent (2 1/2%) on its ‘Gross Philippine Billings’ as defined hereunder:
(a) International Air Carrier. - ‘Gross Philippine Billings’ refers to the amount of gross revenue a resident foreign corporation that is taxable on its income derived from sources
derived from carriage of persons, excess baggage, cargo and mail originating from the within the Philippines.
Philippines in a continuous and uninterrupted flight, irrespective of the place of sale or issue
and the place of payment of the ticket or passage document: Provided, That tickets 19. Eriks vs. CA, 267 SCRA 567
revalidated, exchanged and/or indorsed to another international airline form part of the
Gross Philippine Billings if the passenger boards a plane in a port or point in the Philippines:
Provided, further, That for a flight which originates from the Philippines, but transshipment of FACTS:
passenger takes place at any port outside the Philippines on another airline, only the aliquot
portion of the cost of the ticket corresponding to the leg flown from the Philippines to the Petitioner is a non-resident foreign corporation engaged in the
point of transshipment shall form part of Gross Philippine Billings. (Emphasis supplied) manufacture and sale of elements used in sealing pumps, valves and pipes for
7 SEC. 28. Rates of Income Tax on Foreign Corporations. - industrial purposes, valves and control equipment used for industrial fluid control
and PVC pipes and fittings for industrial uses.
(A) Tax on Resident Foreign Corporations. -

(1) In General. - Except as otherwise provided in this Code, a corporation organized, the Philippines: Provided, That effective January 1, 1998, the rate of income tax shall be
authorized, or existing under the laws of any foreign country, engaged in trade or business thirty-four percent (34%); effective January 1, 1999, the rate shall be thirty-three percent
within the Philippines, shall be subject to an income tax equivalent to thirty-five percent (33%); and effective January 1, 2000 and thereafter, the rate shall be thirty-two percent
(35%) of the taxable income derived in the preceding taxable year from all sources within (32%). (Emphasis supplied)
 On various dates, private respondent Delfin Enriquez, Jr., doing business sufficiently prove said allegation will not significantly affect the finding of the
under the name and style of Delrene EB Controls Center and/or EB Karmine courts below.
Commercial, ordered and received from petitioner various elements used in Thus, the court holds that the series of transactions in question could not
sealing pumps, valves, pipes and control equipment, PVC pipes and fittings. have been isolated or casual transactions. What is determinative of "doing
The transfers of goods were perfected in Singapore, for private business" is not really the number or the quantity of the transactions, but more
respondent's account, F.O.B. Singapore, with a 90-day credit term. Subsequently, importantly, the intention of an entity to continue the body of its business in the
demands were made by petitioner upon private respondent to settle his account, country. The number and quantity are merely evidence of such intention.
but the latter failed/refused to do so.

ISSUE: 20. Narra Nickel Mining and Development Corporation v. Redmont

Consolidated Mines, Corporation, G.R. No. 195580, January 28, 2015
Whether Petitioner Corporation may maintain an action in Philippine
courts considering that it has no license to do business in the country. Facts:

RULING: Narra and its co-petitioner corporations – Tesoro and MacArthur, filed a motion
before the SC to reconsider its April 21, 2014 Decision which upheld the denial of
YES.
their MPSA applications. The SC affirmed the CA ruling that there is a doubt to
The resolution of this issue depends on whether petitioner's business their nationality, and that in applying the Grandfather Rule, the finding is that
with private respondent may be treated as isolated transactions. Granting that MBMI, a 100% Canadian-owned corporation, effectively owns 60% of the
there is no distributorship agreement between herein parties, yet by the mere fact common stocks of petitioners by owning equity interests of the petitioners’ other
that plaintiff, each time that the defendant posts an order delivers the items as majority corporate shareholders. Narra, Tesoro and MacArthur argued that the
evidenced by the several invoices and receipts of various dates only indicates that application of the Grandfather Rule to determine their nationality is erroneous
plaintiff has the intention and desire to repeat the said transaction in the future in and allegedly without basis in the Constitution, the FIA, the Philippine Mining Act,
pursuit of its ordinary business. Furthermore, "and if the corporation is doing that
and the Rules issued by the SEC. These laws and rules supposedly espouse the
for which it was created, the amount or volume of the business done is immaterial
and a single act of that character may constitute doing business. application of the Control Test in verifying the Philippine nationality of corporate
More than the sheer number of transactions entered into, a clear and entities for purposes of determining compliance with Sec. 2, Art. XII of the
unmistakable intention on the part of petitioner to continue the body of its Constitution that only corporations or associations at least 60% of whose capital
business in the Philippines is more than apparent. As alleged in its complaint, it is is owned by such Filipino citizens may enjoy certain rights and privileges, like the
engaged in the manufacture and sale of elements used in sealing pumps, valves, exploration and development of natural resources.
and pipes for industrial purposes, valves and control equipment used for
industrial fluid control and PVC pipes and fittings for industrial use. Thus, the sale Issue: W/N the application by the SC of the grandfather resulted to the
by petitioner of the items covered by the receipts, which are part and parcel of its abandonment of the ‘control test’
main product line, was actually carried out in the progressive prosecution of
commercial gain and the pursuit of the purpose and object of its business, pure Held:
and simple.
Further, its grant and extension of 90-day credit terms to private
respondent for every purchase made, unarguably shows an intention to continue
transacting with private respondent, since in the usual course of commercial
transactions, credit is extended only to customers in good standing or to those on
whom there is an intention to maintain long-term relationship.
This being so, the existence of a distributorship agreement between the
parties, as alleged but not proven by private respondent, would, if duly
established by competent evidence, be merely corroborative, and failure to
No. The ‘control test’ can be applied jointly with the Grandfather Rule to Narra Nickel Mining and Development Corp. vs. Redmont Consolidated Mines
determine the observance of foreign ownership restriction in nationalized Corp. (G.R. No. 195580), “the Grandfather test was originally intended to look into
economic activities. The Control Test and the Grandfather Rule are not the citizenship of the individuals who ultimately own and control the shares of
incompatible ownership-determinant methods that can only be applied stock of a corporation for purposes of determining compliance with the
alternative to each other. Rather, these methods can, if appropriate, be used constitutional requirement of Filipino ownership”.
cumulatively in the determination of the ownership and control of corporations
engaged in fully or partly nationalized activities, as the mining operation involved The shareholdings should ideally be traced (i.e. grandfathered) to the point where
in this case or the operation of public utilities. natural persons hold the shares. However, this may be impractical and a limit
must be set when tracing through the corporate layers to attribute nationality.
The Grandfather Rule, standing alone, should not be used to determine the Citing a memorandum from the Securities and Exchange Commission (SEC), the
Filipino ownership and control in a corporation, as it could result in an otherwise Supreme Court noted the suggestion of the SEC to apply the Grandfather Rule on
foreign corporation rendered qualified to perform nationalized or partly two levels of corporate relations for publicly-held corporations or where shares
nationalized activities. Hence, it is only when the Control Test is first complied are traded in the stock exchange, and to three levels for closely held ones or those
with that the Grandfather Rule may be applied. Put in another manner, if the which are not traded in any stock exchange. Clearly, the limits should not go
subject corporation’s Filipino equity falls below the threshold 60%, the beyond the level of what is reasonable.
corporation is immediately considered foreign-owned, in which case, the need to
resort to the Grandfather Rule disappears. The Supreme Court clarified the role of these tests in determining compliance
with the required Filipino equity threshold. The Court explained that the use of
In this case, using the ‘control test’, Narra, Tesoro and MacArthur appear to have the Grandfather Rule is a supplement to the Control Test in implementing the
satisfied the 60-40 equity requirement. But the nationality of these corporations wisdom of the “Filipinization” provisions of the Constitution.
and the foreign-owned common investor that funds them was in doubt, hence, the
need to apply the Grandfather Rule. The Supreme Court recognized the intention of the framers of the Constitution to
apply the Grandfather Rule in cases where there is corporate layering. It likewise
NOTE: Article ito, pero mukhang okay discussion: noted that corporate layering, while admittedly allowed by the Foreign
Investment Act, becomes illegal if used to circumvent the Constitution and other
In determining compliance with the minimum Filipino equity requirement, there applicable laws.
are two acknowledged tests. One is the control test or the liberal rule. The other is
the Grandfather Rule, which is known to be the stricter and more stringent test. In The Court further discussed that the Grandfather Rule applies only when the 60-
applying these tests, there had been confusion as to whether one method excludes 40 Filipino-foreign ownership is in doubt or where there is reason to believe that
the use of the other. there is non-compliance with the provisions of the Constitution on the nationality
restriction.
The control test provides that shares belonging to corporations or partnerships at
least 60% of the capital of which is owned by Filipino citizens shall be considered How then we do we determine the existence of doubt? In its Resolution, the high
of Philippine nationality. This test is straightforward and does not scrutinize court clarified that “doubt” does not automatically mean the mere failure of the
further the ownership of the Filipino shareholdings. Filipino ownership to meet the 60% threshold of the corporation’s equity. “Doubt”
refers to various indicia that the “beneficial ownership” and “control” of the
On the other hand, the Grandfather Rule determines the actual Filipino ownership corporation do not in fact reside in Filipino shareholders but in foreign
and control in a corporation by tracing both the direct and indirect shareholdings stakeholders.
in the corporation.
To demonstrate these signs of doubt, the Court referred to the indicators of a
According to the January 2015 Resolution of the Supreme Court in the case of dummy status as identified in a Department of Justice Opinion on the Anti-Dummy
Law. These would be where the foreign investors provide practically all the funds DOCTRINE: A member of the Board of Directors of a corporation, cannot, by mere
and technological support for a joint venture undertaken with their Filipino reason of such membership, be held liable for the corporation’s probable violation
partners, and where such foreign investors get to manage the company even while of Batas Pambansa (BP) Blg. 3. As clearly enunciated in Ty v. NBI Supervising
being minority stockholders. Agent De Jemil, 638 SCRA 671 (2010), a member of the Board of Directors of a
corporation, cannot, by mere reason of such membership, be held liable for the
In the Narra Nickel Mining case, the Supreme Court found that while the corporation’s probable violation of BP 33. If one is not the President, General
petitioning corporations complied with the Control Test, factual circumstances Manager or Managing Partner, it is imperative that it first be shown that he/she
nonetheless raise doubt as to their true nationality and therefore requires the falls under the catch-all “such other officer charged with the management of the
application of the Grandfather Rule. Some of the indicators of “doubt” found by business affairs,” before he/she can be prosecuted.
the Court in the said case are the following: (1) the three mining corporations had
the same 100% Canadian owned foreign investor, (2) the similar corporate FACTS:
structure and shareholder composition of the three corporations, (3) a major 1. PET sought assistance from CIDG in the surveillance, investigation,
Filipino shareholder within the corporate layering did not pay any amount with apprehension, and prosecution of certain persons and establishments within
Metro Manila reportedly committing acts violative of Batas Pambansa Blg. 3333),
respect to its subscription, and (4) the dubious act of the foreign investor in
as amended by Presidential Decree No. 1865 (PD 1865), to wit: (1) refilling of
conveying its interests in the mining corporations to another domestic Liquefied Petroleum Gas (LPG) cylinders branded as Shellane, Petron Gasul,
corporation, among others. These instances demonstrate that corporate layering Caltex, Totalgaz and Superkalan Gaz without any written authorization from the
was utilized to allow a foreign corporation to gain control of these mining companies which own the said brands in violation of Section 2(a), (2) underfilling
corporations in the Philippines. of LPG products or possession of underfilled LPG cylinders for the purpose of sale,
distribution, transportation, exchange or barter in violation of Section 2(c), and
After applying the Grandfather Rule, the Supreme Court was able to trace and (3) refilling LPG cylinders without giving any receipt therefor, or giving out
conclude that the Filipino shareholders did not actually have the required amount receipts without indicating the brand name, tare weight, gross weight and/or
of control and beneficial ownership in the mining companies, and consequently price thereof, among others, again in violation of Section 2(a).
failed to comply with the nationality requirement under the Constitution.
2. Atty. Adarlo again wrote the CIDG-AFCCD informing the latter of its
confirmation that ACCS Ideal Gas Corporation (ACCS), which allegedly has been
In a fitting ending, the Supreme Court enunciated its original April 2014 decision
refilling branded LPG cylinders in its refilling plant at 882 G. Araneta Avenue,
that “the Control Test is still the prevailing mode of determining whether or not a Quezon City, has no authority to refill per certifications from gas companies
corporation is a Filipino corporation”. It is only in case of doubt, based on the owning the branded LPG cylinders.
attendant facts and circumstances of the case, that the Grandfather Rule is
applied. 3. A group composed of P/Supt. Francisco M. Esguerra (P/Supt. Esguerra) and
PO2 Joseph R. Faeldonia (PO2 Faeldonia), both of the CIDG-AFCCD, and a team of
21. Federated LPG Dealers Association vs. Ma. Cristina l. del Rosario, et al., paralegal investigators having extensive training and experience in LPG matters
G.R. No. 202639; November 9, 2016 led by Bernabe C. Alajar (Alajar), mapped out a plan for the surveillance and
investigation of ACCS. On July 15, 2006, they conducted a test-buy operation.
SUMMARY: Federated LPG Dealers sought assistance from the CIDG regarding
ACCS Ideal Gas, allegedly refilling branded LPG cylinders without authority, in 4. Having reasonable grounds to believe that ACCS was in violation of BP 33,
P/Supt. Esguerra filed with the Regional Trial Court (RTC) of Manila applications
violation of BP 33. Complaints were thus filed against ACCS’ officers (Gen Manager
for search warrant against the officers of ACCS, to wit: Antonio G. Del Rosario
Antonio, RESPs). RESPs contend that they were merely incorporators and did not (Antonio) and, respondents Ma. Cristina L. Del Rosario, Celso E. Escobido II, and
have active participation in the management of ACCS and that ACCS did not Shiela M. Escobido.
commit a BP 33 violation. DOJ found probable cause as against GM Antonio, but
not the respondents, which the CA affirmed. The SC ruled that ACCS’ BOD may not 5. In his Counter-Affidavit,19 Antonio admitted that he was the General Manager
be held liable, citing Ty vs. De Jemil. of ACCS but denied that the company was engaged in illegal trading and
underfilling. He claimed that ACCS was merely a dealer of LPG products to various and respondents are criminally liable for the same.
retailers in Quezon City and that the alleged refilling plant in G. Araneta Avenue,
Quezon City was only being used by ACCS as storage of LPG products intended for 11. DOJ found probable cause for the charge of illegal trading only against
distribution. He also denied that ACCS has anything to do with the persons Antonio. The CA sustained the SOJ decision. Hence, this petition
allegedly in-charge of refilling activities
ISSUE:
6. Antonio likewise asserted that the herein respondents were merely Can respondents, as members of the Board of Directors of ACCS, be criminally
incorporators of ACCS who have no active participation in the operation of the prosecuted for the latter’s alleged violation/s of BP 33 as amended? NO.
business of the corporation.
HELD:
7. Respondents, for their part, filed a Joint Counter-Affidavit corroborating the Respondents cannot be prosecuted for ACCS’ alleged violations of BP 33. They were
statements of Antonio that they were merely incorporators/stockholders of ACCS thus correctly dropped as respondents in the complaints.
who have no active participation in the operation, management, and control of the
business; that ACCS was only engaged in the distribution of LPG products and not 1. The Court finds no need to be labor this point as it has already made a definite
in the refilling of LPG cylinders; and, that ACCS did not commit any violation of BP pronouncement on an identical issue in Ty v. NBI Supervising Agent De Jemil.
33 as amended.
2. In the said case, therein petitioners were members of the Board of Directors of
8. P/Supt. Esguerra filed a Reply-Affidavit wherein he pointed out that during the Omni Gas Corporation (Omni), which was found by operatives of the National
test-buy operation, his team was issued ACCS Control Receipts. To him, this Bureau of Investigation (NBI) as allegedly engaged in illegal trading of LPG and
negated the claim of Antonio and respondents that ACCS was not engaged in the underfilling of LPG cylinders. While the State Prosecutor found probable cause
refilling of cylinder tanks and that the persons-in-charge thereof were not ACCS against therein petitioners, the Secretary of Justice, however, reversed and set
employees. P/Supt. Esguerra likewise stressed that pursuant to Section 4 of BP 33, aside the said finding. On certiorari petition by the Office of the Solicitor General,
the President, General Manager, Managing Partner, or such other officer charged the CA granted the same and consequently reinstated the finding of probable
with the management of the business affairs of the corporation, or the employee cause of the State Prosecutor. Naturally, petitioners brought the matter to this
responsible for the violation shall be criminally liable. Thus, Antonio, being the Court through a Petition for Review on Certiorari where one of the core issues
General Manager, is criminally liable. Anent the respondents, P/Supt. Esguerra raised was whether therein petitioners could be held liable for the corporation’s
averred that the Articles of Incorporation (AOI) of ACCS provides that there shall alleged violations of BP 33.
be five incorporators who shall also serve as the directors. Considering that
respondents were listed in the AOI as incorporators, they are thus deemed as the 3. As clearly enunciated in Ty, a member of the Board of Directors of a
directors of ACCS. And since the By-Laws of ACCS provides that all business shall corporation, cannot, by mere reason of such membership, be held liable for the
be conducted and all property of the corporation controlled and held by the Board corporation’s probable violation of BP 33. If one is not the President, General
of Directors, and also pursuant to Section 23 of the Corporation Code, respondents Manager or Managing Partner, it is imperative that it first be shown that he/she
are likewise criminally liable. falls under the catch-all “such other officer charged with the management of the
business affairs,” before he/she can be prosecuted. However, it must be stressed,
that the matter of being an officer charged with the management of the business
9. In their Joint Rejoinder-Affidavit, Antonio and respondents reiterated that ACCS affairs is a factual issue which must be alleged and supported by evidence. Here,
was only a dealer and distributor of petroleum products and not engaged in there is no dispute that neither of the respondents was the President, General
refilling activities. They also stressed, among others, that respondents cannot be Manager, or Managing Partner of ACCS. Hence, it becomes incumbent upon
held liable under BP 33 as amended since the AOI of ACCS did not state that they petitioner to show that respondents were officers charged with the management
were the President, General Manager, Managing Partner, or such other officer of the business affairs. However, the Complaint-Affidavit38 attached to the
charged with the management of business affairs. What the AOI plainly indicated records merely states that respondents were members of the Board of Directors
was that they were the incorporating stockholders of the corporation and nothing based on the AOI of ACCS. There is no allegation whatsoever that they were in-
more. charge of the management of the corporation’s business affairs.

10. However, P/Supt. Esguerra in his Sur-Rejoinder Affidavit24 insisted that ACCS 4. At any rate, the Court has gone through the By-Laws of ACCS and found nothing
committed illegal trading of petroleum products and underfilling and that Antonio
therein which would suggest that respondents were directly involved in the day- in a business venture with Petitioner Lim Tong Lim, who however was not a
to-day operations of the corporation. True, Section 1 of Article III thereof contains signatory to the agreement. They, however, failed to pay; hence, private
a general statement that the corporate powers of ACCS shall be exercised, all respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim
business conducted, and all property of the corporation controlled and held by the with a prayer for a writ of preliminary attachment. The suit was brought against
Board of Directors. Notably, however, the same provision likewise significantly the three in their capacities as general partners, on the allegation that "Ocean
vests the Board with specific powers that were generally concerned with policy Quest Fishing Corporation" was a nonexistent corporation
making from which it can reasonably be deduced that the Board only concerns Yao and Chua admitted liability while Lim filed his answer. Trial court
itself in the business affairs by setting administrative and operational policies. It is rendered decision ruling that Philippine Fishing Gear Industries was entitled to
actually the President under Section 2, Article IV of the said bylaws who is vested the Writ of Attachment and that Chua, Yao and Lim, as general partners, were
with wide latitude in controlling the business operations of the corporation. jointly liable to pay respondent.
Among others, the President is specifically empowered to supervise and manage
the business affairs of the corporation, to implement the administrative and ISSUE:
operational policies of the corporation under his supervision and control, to
appoint, remove, suspend or discipline employees of the corporation, prescribe Whether or not Lim should be made jointly liable with Yao and Chua.
their duties, and determine their salaries. With these functions, the President
appears to be the officer charged with the management of the business affairs of RULING:
ACCS. But since there is no allegation or showing that any of the respondents was
the President of ACCS, none of them, therefore, can be considered as an officer YES.
charged with the management of the business affairs even in so far as the By-Laws
of the subject corporation is concerned. Clearly, therefore, it is only Antonio, who Lim asserts that he should not be made liable because there was no
undisputedly was the General Manager — a position among those expressly partnership existing between them.
mentioned as criminally liable under paragraph 4, Section 3 of BP 33, as amended The court ruled that there exist a partnership between them. It is clear
— can be prosecuted for ACCS’ perceived violations of the said law. Respondents that Chua, Yao and Lim had decided to engage in a fishing business, which they
who were mere members of the Board of Directors and not shown to be charged started by buying boats worth P3.35 million, financed by a loan secured from
with the management of the business affairs were thus correctly dropped as Jesus Lim who was petitioner's brother. In their Compromise Agreement, they
respondents in the complaints. subsequently revealed their intention to pay the loan with the proceeds of the sale
of the boats, and to divide equally among them the excess or loss. These boats, the
DISPOSITIVE: purchase and the repair of which were financed with borrowed money, fell under
WHEREFORE, the Petition for Review on Certiorari is PARTLY GRANTED. The the term "common fund" under Article 1767. The contribution to such fund need
assailed April 27, 2012 Decision and July 6, 2012 Resolution of the Court of not be cash or fixed assets; it could be an intangible like credit or industry. That
Appeals in C.A.-G.R. S.P. No. 115750 are AFFIRMED with MODIFICATION that the the parties agreed that any loss or profit from the sale and operation of the boats
State Prosecutor is ORDERED to take cognizance of the Complaint-Affidavit for would be divided equally among them also shows that they had indeed formed a
Underfilling under Section 2(c), BP 33, as amended, docketed as I.S. No. 2006- partnership.
1173, but only insofar as Antonio G. Del Rosario is concerned. Moreover, it is clear that the partnership extended not only to the
SO ORDERED. purchase of the boat, but also to that of the nets and the floats. The fishing nets
and the floats, both essential to fishing, were obviously acquired in furtherance of
their business. It would have been inconceivable for Lim to involve himself so
22. Lim Tong Lim vs. Philippine Fishing Gear Industries, Inc., 317 SCRA 728, much in buying the boat but not in the acquisition of the aforesaid equipment,
G.R. No. 136448 November 3, 1999 without which the business could not have proceeded.

FACTS:

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter

Yao entered into a Contract for the purchase of fishing nets of various sizes from
the Philippine Fishing Gear Industries, Inc. They claimed that they were engaged