Doctrine of Separate Personality

- Corporations are juridical persons to which the law grants a juridical personality , separate
and distinct from that of each other (Civil Code Art 44)

- The separate and distinct personality of a corporation are merely a ction created by law
(Rehouse Corp vs CA)

Doctrine of Corporate Negligence

- The corporation is held directly and primarily liable for its own negligence under the principle
of bonum pater familias and not merely subsidiary under the concept of respondent superior.

Right to Moral Damages

- GR: the award for moral damages cannot be granted in favor of a corporation because being
an arti cial being and having existence only in legal contemplation

- XPN: A corporation may have a good reputation which is besmirched may also be a ground
for the award of moral damages. (Mambulao Lumber vs. PNB, 1968)

- XPN: Art 2216 (7) of the Civil Code expressly authorizes the recovery of moral damages in
cases of libel, slander or any other form of defamation

DOCTRINE OF LIMITED CAPACITY

- in the corporate form of business. Unlike a natural person, it can only do such acts and things
as the law allows it to do.

Thus, the de nition that it has the powers, attributes and properties expressly authorized by
law or incident to its existence.

DOCTRINE OF SECONDARY MEANING

- A word or phrase originally incapable of exclusive appropriation because they are generic
words with reference to an article in the market because of geographically, otherwise
descriptive, might nevertheless have been used so long or so exclusively by one good user or
service provider that is with reference to the article or service that in that trade or in that branch
of the purchasing public, the word or phrase has become to mean that the article or service is
his own.

CORPORATE OPPORTUNITY DOCTRINE

- Places a director of a corporation in the position of a Fiduciary, and prohibits him from seizing
a business opportunity and of developing it at the expense of the facilities of the corporation.

- He cannot appropriate to himself a business opportunity, which in fairness, should belong to

the corporation.

Doctrine of Piercing the Veil of Corporate entity

- Though the corporation has separate and distant personality from its stockholders, such
personality may be disregarded, or veil of corporate ction may be pierced, attaching
personal liability to the responsible person, if the personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or use to defeat labor laws (Dutch
Movers Inc vs Edilberto Lequin)

- The corporate mask may be removed or the corporate veil pierced when the corporation is
just an “alter ego” of a person or another corporation. For reasons of public policy and in the
interest of justice, the corporate veil will justi ably be impaled only when it becomes a shield
for fraud, illegality, or inequity committed agains third persons (Sarona vs NLRC)

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 INSTRUMENTALITY RULE
- There must be Absolute Control

Not mere majority or even complete stock ownership, but Domination, not only of nances but
also of the policy and business practices in respect to the transaction attack so that the
corporate entity has, at that time, no separate mind, will/existence of its own

- Control must have been used by to commit Fraud or Wrong to perpetuate a violation of the
plainti ’s legal right.

- The aforesaid Control must be Proximately cause the Injury or Unjust Loss complained of.

Absence of any one (1) of these elements would prevent piercing the veil of corporate ction.
(PNB vs. Ritrato Group, Yamamoto vs. Shino Leather Industries)

Cases of Piercing the Corporate Veil:

- Fraud Piercing

- Alter Ego Piercing

- Public Convenience Piercing

- Equity Cases

Grounds to Pierce not presumed

- To disregard the separate judicial personality of a corporation, the wrongdoing must be
clearly and convincingly established. It cannot be presumed. (Luxuria Homes Inc vs CA)

Personality not Abrogated

- when the veil of corporate ction is pierced in proper cases, the corporate character is not
necessarily abrogated. It continues for legitimate objectives (Reynoso IV vs CA)

Priority Adoption Rule

- the corporation that rst adopts a corporation name has the right thereto, and a subsequent
corporation cannot use the same name (De la Salle Montessori Intl of Malls vs De la Salle
Brothers inc)

Trust Fund Doctrine

- it provides that subscriptions to the capital stock of a corporation constitute a fund to which
the creditors have a right to look for the satisfaction of their claims (Ong Yong vs Tiu)

Accomplished Fact Rule

- there are provisions of the AOI that cannot be amended because they are accomplished
facts (example: names of the incorporators)

Doctrine of Equality of Shares

- each share shall be equal in all respects to every other share

Doctrine of Centralized Management

- the BOD or trustees shall exercise the corporate powers, conduct all business and control all
properties of the corporation

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 Pre emotive right
- refers to the right granted to the stockholders to have the rst option to subscribe to any
issuance or disposition of shares from the capital stock in proportion to their respective
shareholdings in the corporation.

Thus, the pre-emptive right is not available when:

- Right is denied in the Articles of Incorporation;

- Shares are issued in compliance with laws requiring stock o erings or minimum stock
ownership by the public; and

- Shares are issued in good faith with the approval of the stockholders representing 2/3 of the
outstanding capital stock, in exchange for property needed for corporate purposes or in
payment of a previously contracted debt.

Another instance when the pre-emptive right of a stockholder cannot be exercised is when he
or she waives such right.

Appraisal Right

Under Section 80 of the Revised Corporation Code, Appraisal Right refers to the right of any
stockholder of a corporation to dissent and demand payment of the fair value of his or her
shares in the corporation.

Such appraisal right may be exercised in the following instances:

- In case an amendment to the articles of incorporation has the e ect of changing or restricting
the rights of any stockholder or class of shares, or of authorizing preferences in any respect
superior to those of outstanding shares of any class, or of extending or shortening the term of
corporate existence;

-In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets as provided in the Revised Corporation
Code;

-In case of merger or consolidation; and

-In case of investment of corporate funds for any purpose other than the primary purpose of
the corporation.

The dissenting stockholder who voted against a proposed corporate action may exercise his
or her right of appraisal by making a written demand on the corporation for the payment of the
fair value of shares held. Said written demand shall be made within thirty (30) days from the
date on which the vote was taken. If the dissenting stockholder failed to make demand within
30 days from the date on which the vote was taken, the dissenting stockholder shall be
deemed to have waived his or her appraisal right. If the proposed corporate action is
implemented, the corporation shall pay the stockholder the fair value of his or her shares upon
surrender of the certi cate or certi cates of stock representing the stockholder’s shares. The
basis of the value of the shares of the dissenting stockholder shall be the day before the vote
was taken excluding any appreciation or depreciation in anticipation of such corporate action.

If, within sixty (60) days from the approval of the corporate action by the stockholders, the
withdrawing stockholder and the corporation cannot agree on the fair value of the shares, it
shall be determined and appraised by three (3) disinterested persons. One of whom shall be
named by the withdrawing stockholder, another by the corporation. The third member of the
appraisers shall be chosen by both the withdrawing stockholder and the corporation. The
ndings of the majority of the appraisers shall be nal, and their award shall be paid by the
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corporation within thirty (30) days after such award is made. However, please take note that
payment by the corporation of the value of the shares to the withdrawing stockholder shall be
made only when the corporation has unrestricted retained earnings in its books to cover
such payment.  Upon payment by the corporation of the agreed or awarded price, the
stockholder shall transfer the shares to the corporation.