Escolar Documentos
Profissional Documentos
Cultura Documentos
It is elementary that a corporation has a personality distinct and separate from its
individual stockholders or members. Being an officer or stockholder of a corporation
does not make one's property the property also of the corporation, for they are separate
entities (Adelio Cruz vs. Quiterio Dalisay, A.M. No. R-181-P, July 31, 1987)
Traders Royal Bank vs. Court of Appeals, G.R. No. 78412, September 26, 1989
Good Earth Emporium, Inc. vs. Court of Appeals, G.R. No. 82797, February 27, 1991
wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws,
this separate personality of the corporation may be disregarded or the veil of corporate
fiction pierced. This is true likewise when the corporation is merely an adjunct, a
business conduit or an alter ego of another corporation.
Concept Builders, Inc. vs. National Labor Relations Commission, G.R. No. 108734, May
29, 1996
The question of whether one corporation is merely an alter ego of another is purely
one of fact generally beyond the jurisdiction of this Court. . . . Also, the fact that Mar
Fishing's officers remained as such in Miramar does not by itself warrant a conclusion
that the two companies are one and the same. As this Court held in Sesbreo v. Court
of Appeals, the mere showing that the corporations had a common director sitting in
all the boards without more does not authorize disregarding their separate juridical
personalities. Neither can the veil of corporate fiction between the two companies be
pierced by the rest of petitioners' submissions, namely, the alleged take-over by
Miramar of Mar Fishing's operations and the evident similarity of their businesses. At
this point, it bears emphasizing that since piercing the veil of corporate fiction is
frowned upon, those who seek to pierce the veil must clearly establish that the
separate and distinct personalities of the corporations are set up to justify a wrong,
protect a fraud, or perpetrate a deception.
Vivian T. Ramirez, et al. vs. Mar Fishing Co., Inc., et al., G.R. No. 168208, June 13,
2012 citing Kukan International Corp. vs. Reyes, G.R. No. 182729, September 29, 2010
When applicable
The rule is that the veil of corporate fiction may be pierced when made as a shield
to perpetrate fraud and/or confuse legitimate issues (Jacinto vs. CA, G.R. No. 80043,
June 6, 1991). The theory of corporate entity was not meant to promote unfair
objectives or otherwise, to shield them (Villanueva vs. Adre, G.R. No. 80863, April
27, 1989). Likewise, where it appears that two business enterprises are owned,
conducted, and controlled by the same parties, both law and equity will, when
necessary to protect the rights of third persons, disregard the legal fiction that two
corporations are distinct entities, and treat them as identical (Phil. Veterans
Investment Development Corp. vs. CA, G.R. No. 85266, January 30, 1990)
Sibagat Timber Corp. vs. Adolfo B. Garcia, G.R. No. 98185, December 11, 1992
A.C. Ransom Labor Union-CCLU vs. National Labor Relations Commission, G.R. No.
L-69494, May 29, 1987
It is apparent, therefore, that the doctrine has no application to this case where the
purpose is not to hold the individual stockholders liable for the obligations of the
corporation but, on the contrary, to hold the corporation liable for the obligations of a
stockholder or stockholders. Piercing the veil of corporate entity means looking
through the corporate form to the individual stockholders composing it.
Quintin Robledo vs. National Labor Relations Commission, G.R. No. 110358,
November 9, 1994
Adelio C. Cruz vs. Quiterio L. Dalisay, A.M. No. R-181-P, July 31, 1987
[The general manager] cannot be held personally liable for the obligation of the
corporation. . . . This Court upholds the doctrine of separate juridical personality of
corporate entities. . . . A corporation is a juridical entity with a legal personality
separate and distinct from those acting for and on its behalf and, in general, of the
Copyright 2015
people comprising it. Hence, the obligations incurred by the corporation, acting
through its officers such as in this case, are its sole liabilities.
Mercy Vda. de Roxas vs. Our Lady's Foundation, Inc., G.R. No. 182378, March 6, 2013
citing Santos vs. NLRC, 325 Phil. 145 (1996)
Grandfather rule
Pedro R. Palting vs. San Jose Petroleum Incorporated, G.R. No. L-14441, December
17, 1966
Copyright 2015
A corporation can act only through its officers and agents, and where the business
itself involves a violation of the law, the correct rule is that all who participate in it are
liable (Grall and Ostrander's Case, 103 Va., 855, and authorities there cited)
People of the Phils. vs. Tan Boon Kong, G.R. No. 32652, March 15, 1930
A corporation is vested by law with a personality separate and distinct from the
people comprising it. Ownership by a single or small group of stockholders of nearly
all of the capital stock of the corporation is not by itself a sufficient ground to
disregard the separate corporate personality. Thus, obligations incurred by corporate
officers, acting as corporate agents, are direct accountabilities of the corporation they
represent.
Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-Industrial Corp., G.R. Nos. 168756 &
171476, December 7, 2009
Water districts are distinct from corporations organized under the Corporation
Code.
The juridical entities known as water districts created by PD 198, although
considered as quasi-public corporations and authorized to exercise the powers, rights
and privileges given to private corporations under existing laws, are entirely distinct
from corporations organized under the Corporation Code. The Corporation Code has
nothing whatever to do with their formation and organization, all the terms and
conditions for their organization and operation being particularly spelled out in PD
198.
Marilao Water Consumers Association, Inc. vs. IAC, G.R. No. 72807, September 9,
1991
Copyright 2015
Chief of Finance falls under the term 'agent' authorized to receive processes.
An Administrative Chief is responsible for the management of the corporation
which places him on the level of a manager contemplated by the Rules. As Chief of
Finance, he is conferred with vital and sensitive functions and responsibilities. Under
corporate and management organizational structure, a finance officer even holds a
higher position than that of a cashier. Otherwise stated, he is not one of the lesser
officers of the corporation who would not have been able to appreciate the importance
of the papers delivered to him. On the contrary, he falls squarely under the term Agent
who is authorized by law to receive the processes of the Court for the corporation.
Far Corporation vs. Ricardo J. Francisco, G.R. No. L-57218, December 12, 1986
Service of summons upon Assistant General Manager for Corporations serves the
purpose of the law.
Service of summons upon a corporation's Assistant General Manager for
Corporations who was a former President and General Manager thereof serves the
purpose of the law. Should he refuse to receive the summons, tender unto him is
sufficient to confer jurisdiction over the corporation.
Villa Rey Transit, Inc. vs. Far East Motor Corp., G.R. No. L-31339, January 31, 1978
Test to determine the applicability of the doctrine of piercing the veil of corporate
fiction
The Supreme Court laid down the test in determining the applicability of the
doctrine of piercing the veil of corporate fiction, to wit:
1.
Control, not mere majority or complete control, but complete domination, not
only of finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time no separate
mind, will or existence of its own.
2.
Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest and, unjust act in contravention of plaintiffs legal rights; and,
3.
Copyright 2015
The aforesaid control and breach of duty must proximately cause the injury or
CD Technologies Asia, Inc. and Accesslaw, Inc.
Copyright 2015
Shares of stock in corporations may be divided into voting shares and non-voting
shares, which are generally issued as "preferred" or "redeemable" shares.
Voting rights are exercised during regular or special meetings of stockholders;
regular meetings to be held annually on a fixed date, while special meetings may be
held at any time necessary or as provided in the by-laws, upon due notice. The
Corporation Code provides for a whole range of matters which can be voted upon by
stockholders, including a limited set on which even non-voting stockholders are
entitled to vote on. On any of these matters which may be voted upon by stockholders,
the proxy device is generally available.
GSIS vs. Court of Appeals, et al., G.R. Nos. 183905 & 184275, April 16, 2009
Preferred shares
A preferred share of stock is one which entitles the holder thereof to certain
preferences over the holders of common stock. The preferences are designed to induce
persons to subscribe for shares of a corporation. Preferred shares take a multiplicity of
forms. The most common forms may be classified into two: (1) preferred shares as to
assets; and (2) preferred shares as to dividends. The former is a share which gives the
holder thereof preference in the distribution of the assets of the corporation in case of
liquidation; the latter is a share the holder of which is entitled to receive dividends on
said share to the extent agreed upon before any dividends at all are paid to the holders
of common stock. There is no guaranty, however, that the share will receive any
dividends.
Republic Planters Bank vs. Enrique A. Agana, Sr., G.R. No. 51765, March 3, 1997
Copyright 2015
Redeemable shares
Redeemable shares are shares usually preferred, which by their terms are
redeemable at a fixed date, or at the option of either issuing corporation, or the
stockholder, or both at a certain redemption price. A redemption by the corporation of
its stock is, in a sense, a repurchase of it for cancellation. The present Code allows
redemption of shares even if there are no unrestricted retained earnings on the books
of the corporation. This is a new provision which in effect qualifies the general rule
that the corporation cannot purchase its own shares except out of current retained
earnings. However, while redeemable shares may be redeemed regardless of the
existence of unrestricted retained earnings, this is subject to the condition that the
corporation has, after such redemption, assets in its books to cover debts and liabilities
inclusive of capital stock. Redemption, therefore, may not be made where the
corporation is insolvent or if such redemption will cause insolvency or inability of the
corporation to meet its debts as they mature.
Republic Planters Bank vs. Enrique A. Agana, Sr., G.R. No. 51765, March 3, 1997
Copyright 2015
10
Paid-up capital
MSCI-NACUSIP vs. NWPC, G.R. No. 125198, March 3, 1997
11
IEMELIF, et al. vs. Nathanael Lazaro, et al., G.R. No. 184088, July 6, 2010
Corporate name
Industrial Refractories Corporation of the Philippines vs. Court of Appeals, G.R. No.
122174, October 3, 2002
Parties organizing a corporation must choose a name at their peril; and the use of a
name similar to one adopted by another corporation, whether a business or a nonprofit
organization, if misleading or likely to injure in the exercise of its corporate functions,
regardless of intent, may be prevented by the corporation having a prior right, by a suit
for injunction against the new corporation to prevent the use of the name.
Ang Mga Kaanib Sa Iglesia Ng Dios Kay Kristo Hesus vs. Iglesia Ng Dios Kay Cristo
Jesus, G.R. No. 137592, December 12, 2001
Copyright 2015
12
Right of corporation to use its corporate and trade name is a property right.
A corporation's right to use its corporate and trade name is a property right, a right
in rem, which it may assert and protect against the world in the same manner as it may
protect its tangible property, real or personal, against trespass or conversion. It is
regarded, to a certain extent, as a property right and one which cannot be impaired or
defeated by subsequent appropriation by another corporation in the same field.
Philips Export B.V. vs. Court of Appeals, G.R. No. 96161, February 21, 1992
Western Equipment and Supply Co. vs. Fidel A. Reyes, G.R. No. 27897, December 2,
1927
Copyright 2015
13
14
may be done even before the filing of the by-laws, which under Section 46 of the
Corporation Code, must be adopted "within one month after receipt of official notice
of the issuance of its certificate of incorporation."
Chung Ka Bio vs. Intermediate Appellate Court, G.R. No. L-71837, July 26, 1988
De facto corporation
C. Arnold Hall vs. Edmundo S. Piccio, G.R. No. L-2598, June 29, 1950
Municipality of Malabang vs. Pangandapun Benito, G.R. No. L-28113, March 28, 1969
Emeterio A. Rodriguez vs. Court of Appeals, G.R. No. L-28734, March 28, 1969
Corporation by estoppel
Mariano A. Albert vs. University Publishing Co., Inc., G.R. No. L-19118, January 30,
1965
When a third person has entered into a contract with an association which
represented itself to be a corporation, the association will be estopped from denying
its corporate capacity in a suit against it by such third person. It cannot allege lack of
capacity to be sued to evade responsibility on a contract it had entered into and by
virtue of which it received advantages and benefits.
Christian Children's Fund vs. National Labor Relations Commission, G.R. No. 84502,
June 30, 1989
15
Where there is no third person involved and the conflict arises only among those
assuming the form of a corporation, who therefore know that it has not been registered
there is no corporation by estoppel.
Reynaldo M. Lozano vs. Eliezer R. De Los Santos, G.R. No. 125221, June 19, 1997
Lim Tong Lim vs. Phil. Fishing Gear Industries, G.R. No. 136448, November 3, 1999
Merrill Lynch Futures, Inc. vs. Court of Appeals, G.R. No. 97816, July 24, 1992
People of the Phil. vs. Patricio Botero, G.R. No. 117010, April 18, 1997
Copyright 2015
16
Term is distinguished from tenure in that an officer's "tenure" represents the term
during which the incumbent actually holds office. The tenure may be shorter (or, in
case of holdover, longer) than the term for reasons within or beyond the power of the
incumbent.
Valle Verde Country Club, Inc., et al. vs. Victor Africa, G.R. No. 151969, September 4,
2009
The holdover period constitutes part of a director's tenure, and not part of his term
of office.
The term of the members of the board of directors shall be only for one year; their
term expires one year after election to the office. The holdover period that time
from the lapse of one year from a member's election to the Board and until his
successor's election and qualification is not part of the director's original term of
office, nor is it a new term; the holdover period, however, constitutes part of his
tenure. Corollary, when an incumbent member of the board of directors continues to
serve in a holdover capacity, it implies that the office has a fixed term, which has
expired, and the incumbent is holding the succeeding term.
Valle Verde Country Club, Inc., et al. vs. Victor Africa, G.R. No. 151969, September 4,
2009
As a general rule, officers and directors of a corporation hold over after the
expiration of their terms until such time as their successors are elected or appointed.
The holdover doctrine has, to be sure, a purpose which is at once legal as it is
practical. It accords validity to what would otherwise be deemed as dubious corporate
acts and gives continuity to a corporate enterprise in its relation to outsiders.
Hans Christian M. Seeres vs. COMELEC, et al., G.R. No. 178678, April 16, 2009
The board of directors may validly delegate some of its functions and powers to
officers, committees or agents.
The power and the responsibility to decide whether the corporation should enter
into a contract that will bind the corporation are lodged in the board of directors,
subject to the articles of incorporation, by-laws, or relevant provisions of law.
However, just as a natural person may authorize another to do certain acts for and on
his behalf, the board of directors may validly delegate some of its functions and
Copyright 2015
17
powers to officers, committees or agents. The authority of such individuals to bind the
corporation is generally derived from law, corporate by-laws or authorization from the
board, either expressly or impliedly by habit, custom or acquiescence in the general
course of business.
Cebu Mactan Members Center, Inc. vs. Masahiro Tsukahara, G.R. No. 159624, July 17,
2009
People's Aircargo and Warehousing Co., Inc. vs. Court of Appeals, G.R. No. 117847,
October 7, 1998, 357 Phil. 850
The corporate powers of a corporation, including the power to sue and be sued in
its corporate name, are exercised by the board of directors. The physical acts of the
corporation, like the signing of documents such as verification and certification of
non-forum shopping, can only be performed by natural persons duly authorized for the
purpose by corporate by-laws or by a specific act of the board of directors.
Marylou B. Tolentino vs. Shenton Realty Corp., G.R. No. 162103, June 19, 2009
18
separate and distinct personality from its directors and officers and can only exercise
its corporate powers through the board of directors. Thus, it is clear that an individual
corporate officer cannot solely exercise any corporate power pertaining to the
corporation without authority from the board of directors. This has been our constant
holding in cases instituted by a corporation.
Cagayan Valley Drug Corp. vs. Commissioner of Internal Revenue, G.R. No. 151413,
February 13, 2008
Indubitably, a corporation may act only through its board of directors or, when
authorized either by its bylaws or by its board resolution, through its officers or agents
in the normal course of business. The general principles of agency govern the relation
between the corporation and its officers or agents, subject to the articles of
incorporation, bylaws, or relevant provisions of law. Thus, this Court has held that "'a
corporate officer or agent may represent and bind the corporation in transactions with
third persons to the extent that the authority to do so has been conferred upon him, and
this includes powers which have been intentionally conferred, and also such powers
as, in the usual course of the particular business, are incidental to, or may be implied
from, the powers intentionally conferred, powers added by custom and usage, as
usually pertaining to the particular officer or agent, and such apparent powers as the
corporation has caused persons dealing with the officer or agent to believe that it has
conferred.' "
05plpecda
San Juan Structural and Steel Fabricators vs. Court of Appeals, G.R. No. 129459,
September 29, 1998
Since a corporation, such as the private respondent, can act only through its officers
and agents, "all acts within the powers of said corporation may be performed by
agents of its selection; and, except so far as limitations or restrictions may be imposed
by special charter, by-law, or statutory provisions, the same general principles of law
which govern the relation of agency for a natural person govern the officer or agent of
a corporation, of whatever status or rank, in respect to his power to act for the
corporation; and agents when once appointed, or members acting in their stead, are
subject to the same rules, liabilities and incapacities as are agents of individuals and
private persons." Moreover, ". . . a corporate officer or agent may represent and bind
the corporation in transactions with third persons to the extent that authority to do so
has been conferred upon him, and this includes powers which have been intentionally
conferred, and also such powers as, in the usual course of the particular business, are
incidental to, or may be implied from, the powers intentionally conferred, powers
added by custom and usage, as usually pertaining to the particular officer or agent,
Copyright 2015
19
and such apparent powers as the corporation has caused persons dealing with the
officer or agent to believe that it has conferred."
Yao Ka Sin Trading vs. Court of Appeals, G.R. No. 53820, June 15, 1992
Sps. Constante & Azucena Firme vs. Bukal Enterprises and Dev't. Corp., G.R. No.
146608, October 23, 2003
Inter-Asia Investments Industries, Inc. vs. Court of Appeals, G.R. No. 125778, June 10,
2003
Rebecca Boyer-Roxas vs. Court of Appeals, G.R. No. 100866, July 14, 1992
20
course of its business by an agent acting within the general scope of his authority even
though, in the particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other person, for his own
ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR
1021). "Application of these principles is especially necessary because banks have a
fiduciary relationship with the public and their stability depends on the confidence of
the people in their honesty and efficiency. Such faith will be eroded where banks do
not exercise strict care in the selection and supervision of its employees, resulting in
prejudice to their depositors."
First Philippine International Bank vs. Court of Appeals, G.R. No. 115849, January 24,
1996
Apparent authority is derived not merely from practice. Its existence may be
ascertained through (1) the general manner in which the corporation holds out an
officer or agent as having the power to act or, in other words, the apparent authority to
act in general, with which it clothes him; or (2) the acquiescence in his acts of a
particular nature, with actual or constructive knowledge thereof, whether within or
beyond the scope of his ordinary powers. It requires presentation of evidence of
similar act(s) executed either in its favor or in favor of other parties. It is not the
quantity of similar acts which establishes apparent authority, but the vesting of a
corporate officer with the power to bind the corporation.
People's Aircargo and Warehousing Co. Inc. vs. Court of Appeals, G.R. No. 117847,
October 7, 1998
Inter-Asia Investments Industries, Inc. vs. Court of Appeals, G.R. No. 125778, June 10,
2003
21
Hence, the action of the stockholders in such matters is only advisory and not in any
wise binding on the corporation.
Luzviminda Visayan vs. NLRC, G.R. No. 69999, April 30, 1991
Alberto Barreto vs. La Previsora Filipina, G.R. No. 34719, December 8, 1932
Derivative Suit
It is well settled in this jurisdiction that where corporate directors are guilty of a
Copyright 2015
22
23
The power and the responsibility to decide whether the corporation should enter
into a contract that will bind the corporation are lodged in the board, subject to the
articles of incorporation, bylaws, or relevant provisions of law. In the absence of
authority from the board of directors, no person, not even its officers, can validly bind
a corporation. However, just as a natural person may authorize another to do certain
acts for and on his behalf, the board of directors may validly delegate some of its
functions and powers to its officers, committees or agents. The authority of these
individuals to bind the corporation is generally derived from law, corporate bylaws or
authorization from the board, either expressly or impliedly by habit, custom or
acquiescence in the general course of business.
Violeta Tudtud Banate, et al. vs. Phil. Countryside Rural Bank (Liloan, Cebu), Inc., et al.,
G.R. No. 163825, July 13, 2010
The authority of a corporate officer or agent in dealing with third persons may be
actual or apparent. Actual authority is either express or implied. The extent of an
agent's express authority is to be measured by the power delegated to him by the
corporation, while the extent of his implied authority is measured by his prior acts
which have been ratified or approved, or their benefits accepted by his principal. The
doctrine of "apparent authority," on the other hand, with special reference to banks,
had long been recognized in this jurisdiction. The existence of apparent authority may
be ascertained through:
1)
the general manner in which the corporation holds out an officer or agent
as having the power to act, or in other words, the apparent authority to act
in general, with which it clothes him; or
2)
Copyright 2015
24
Accordingly, the authority to act for and to bind a corporation may be presumed
from acts of recognition in other instances when the power was exercised without any
objection from its board or shareholders.
Violeta Tudtud Banate, et al. vs. Phil. Countryside Rural Bank (Liloan, Cebu), Inc., et al.,
G.R. No. 163825, July 13, 2010
25
persons who in fact are not the beneficial owners of the shares registered in their
names on the books of the corporation becomes formally legalized. Hence, this is a
clear indication that in order to be eligible as a director, what is material is the legal
title to, not beneficial ownership of, the stock as appearing on the books of the
corporation.
05plpecda
Corporate Officers
Dily Dany Nacpil vs. International Broadcasting Corp., G.R. No. 144767, March 21,
2002
Before a dismissal or removal could properly fall within the jurisdiction of the
SEC, it has to be first established that the person removed or dismissed was a
corporate officer. "Corporate officers" in the context of Presidential Decree No.
902-A are those officers of the corporation who are given that character by the
Corporation Code or by the corporation's by-laws. There are three specific officers
whom a corporation must have under Section 25 of the Corporation Code. These are
the president, secretary and the treasurer. The number of officers is not limited to
these three. A corporation may have such other officers as may be provided for by its
by-laws like, but not limited to, the vice-president, cashier, auditor or general
manager. The number of corporate officers is thus limited by law and by the
corporation's by-laws.
Virgilio R. Garcia vs. Eastern Telecommunications Phil., Inc., et al., G.R. Nos. 173115 &
173163-64, April 16, 2009
26
A greater number than the majority may be fixed by the articles or by-laws to
constitute a quorum.
The articles of incorporation or by-laws of the corporation may fix a greater
number than the majority of the number of board members to constitute the quorum
necessary for the valid transaction of business. Any number less than the number
provided in the articles or by-laws therein cannot constitute a quorum and any act
therein would not bind the corporation; all that the attending directors could do is to
adjourn.
05plpecda
Rosita Pea vs. Court of Appeals, G.R. No. 91478, February 7, 1991
27
Valle Verde Country Club, Inc., et al. vs. Victor Africa, G.R. No. 151969, September 4,
2009
The director's wrongdoing must be a patently unlawful act, i.e. an act declared
unlawful by law.
For a wrongdoing to make a director personally liable for debts of the corporation,
the wrongdoing approved or assented to by the director must be a patently unlawful
act. Mere failure to comply with the notice requirement of labor laws on company
closure or dismissal of employees does not amount to a patently unlawful act. Patently
unlawful acts are those declared unlawful by law which imposes penalties for
commission of such unlawful acts. There must be a law declaring the act unlawful and
penalizing the act.
Antonio C. Carag vs. NLRC, et al., G.R. No. 147590, April 2, 2007
Copyright 2015
28
Article 212 (e) of the Labor Code, by itself, does not make a corporate officer
personally liable for the debts of the corporation because Section 31 of the
Corporation Code is still the governing law on personal liability of officers for the
debts of the corporation.
Armando David vs. National Federation of Labor Unions, et al., G.R. Nos. 148263 &
148271-72, April 21, 2009
PEA-PTGWO, et al. vs. NLRC, et al., G.R. Nos. 170689 & 170705, March 17, 2009
29
for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with
gross negligence in directing the corporate affairs; (c) are guilty of conflict of interest
to the prejudice of the corporation, its stockholders or members, and other persons; (2)
When a director or officer has consented to the issuance of watered stocks or who,
having knowledge thereof, did not forthwith file with the corporate secretary his
written objection thereto; (3) When a director, trustee or officer has contractually
agreed or stipulated to hold himself personally and solidarily liable with the
corporation; or (4) When a director, trustee or officer is made, by specific provision of
law, personally liable for his corporate action.
Andrea Uy, et al. vs. Arlene Villanueva, et al., G.R. No. 157851, June 29, 2007
Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-Industrial Corp., G.R. Nos. 168756 &
171476, December 7, 2009
Liability of directors
Edsa Shangri-La Hotel and Resort, Inc., et al. vs. BF Corporation, G.R. Nos. 145842 &
145873, June 27, 2008
Cebu Country Club, Inc., et al. vs. Ricardo F. Elizagaque, G.R. No. 160273, January 18,
2008
National Food Authority vs. Court of Appeals, G.R. No. 96453, August 4, 1999
Elena F. Uichico vs. NLRC, G.R. No. 121434, June 2, 1997
REAHS Corp. vs. NLRC, G.R. No. 117473, April 15, 1997
Aurora Land Projects Corp. vs. NLRC, G.R. No. 114733, January 2, 1997
Benjamin A. Santos vs. National Labor Relations Commission, G.R. No. 101699, March
13, 1996
MAM Realty Development Corporation vs. National Labor Relations Commission, G.R.
No. 114787, June 2, 1995
Tramat Mercantile, Inc. vs. Court of Appeals, G.R. No. 111008, November 7, 1994
Businessday Information Systems and Services, Inc. vs. NLRC, G.R. No. 103575, April
5, 1993
Section 31 makes a director personally liable for corporate debts if he willfully and
knowingly votes for or assents to patently unlawful acts of the corporation. Section 31
also makes a director personally liable if he is guilty of gross negligence or bad faith
in directing the affairs of the corporation. The bad faith or wrongdoing of the director
Copyright 2015
30
A corporation is vested by law with a personality separate and distinct from the
people comprising it. Ownership by a single or small group of stockholders of nearly
all of the capital stock of the corporation is not by itself a sufficient ground to
disregard the separate corporate personality. Thus, obligations incurred by corporate
officers, acting as corporate agents, are direct accountabilities of the corporation they
represent.
Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-Industrial Corp., G.R. Nos. 168756 &
171476, December 7, 2009
The general rule is that obligations incurred by the corporation, acting through its
directors, officers, and employees, are its sole liabilities. However, solidary liability
may be incurred, but only under the following exceptional circumstances:
1.
2.
3.
4.
31
2010
Self-dealing director
Prime White Cement Corporation vs. Intermediate Appellate Court, G.R. No. 68555,
March 19, 1993
32
Corporation Code cured the lapse under Corporation Law involving directors'
disloyalty to corporation.
True, at that time, the Corporation Law did not prohibit a director or any other
person occupying a fiduciary position in the corporate hierarchy from engaging in a
venture which competed with that of the corporation. But as a lawyer, private
respondent should have known that while some acts may appear to be permitted
through sheer lack of statutory prohibition, these acts are nevertheless circumscribed
upon ethical and moral considerations. And had he turned to American jurisprudence
which then, as now, wielded a persuasive influence on our law on corporations, he
would have known that it was unfair for him or for Porter, acting as fiduciary, to take
advantage of an opportunity when the interest of the corporation justly calls for
protection. Parenthetically, this lapse in the old Corporation Law is now cured by
sections 31 and 34 of the Corporation Code.
Erlinda L. Ponce vs. Valentino L. Legaspi and Court of Appeals, G.R. No. 79184, May 6,
1992
33
19, 1993
34
act or transaction complained of, the number of his shares not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made a
demand on the board of directors for the appropriate relief but the latter has
failed or refused to heed his plea; and
c) the cause of action actually devolves on the corporation, the
wrongdoing or harm having been, or being caused to the corporation and not
to the particular stockholder bringing the suit.
Filipinas Port Services, Inc., et al. vs. Victoriano S. Go, et al., G.R. No. 161886, March
16, 2007
35
provision of the Corporation Code, or even the Securities Regulation Code, but is
impliedly recognized when the said laws make corporate directors or officers liable
for damages suffered by the corporation and its stockholders for violation of their
fiduciary duties. In effect, the suit is an action for specific performance of an
obligation, owed by the corporation to the stockholders, to assist its rights of action
when the corporation has been put in default by the wrongful refusal of the directors
or management to adopt suitable measures for its protection. The basis of a
stockholder's suit is always one of equity. However, it cannot prosper without first
complying with the legal requisites for its institution.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
36
relating to the affairs of the corporation, but not in the course of, or connected with,
the performance of authorized duties of such director, are not binding on the
corporation.
Eduardo V. Lintonjua Jr., et al. vs. Eternit Corp., et al., G.R. No. 144805, June 8, 2006
Under these provisions, the power to purchase real property is vested in the
board of directors or trustees. While a corporation may appoint agents to negotiate
for the purchase of real property needed by the corporation, the final say will have to
be with the board, whose approval will finalize the transaction. A corporation can
only exercise its powers and transact its business through its board of directors and
through its officers and agents when authorized by a board resolution or its by-laws.
Riosa v. Tabaco La Suerte Corp., G.R. No. 203786, October 23, 2013, citing Spouses
Firme v. Bukal Enterprises and Development Corp., 460 Phil. 321 (2003)
To validly increase its authorized capital stock, corporation must issue at least
25% of such stock.
Copyright 2015
37
The corporation must issue at least twenty-five percent (25%) of the newly or
contemporaneously authorized capital stock in the course of complying with the
requirements of the Corporation Code for increasing its authorized capital stock.
Nestle Philippines, Inc. vs. CA and SEC, G.R. No. 86738, November 13, 1991
Pre-emptive right
Datu Tagoranao Benito vs. Securities and Exchange Commission, G.R. No. L-56655,
July 25, 1983
Sale of assets
Islamic Directorate of the Phils. vs. Court of Appeals, G.R. No. 117897, May 14, 1997
Chung Ka Bio vs. Intermediate Appellate Court, G.R. No. L-71837, July 26, 1988
While the Corporation Code allows the transfer of all or substantially all the
properties and assets of a corporation, the transfer should not prejudice the creditors
of the assignor. The only way the transfer can proceed without prejudice to the
creditors is to hold the assignee liable for the obligations of the assignor. The
acquisition by the assignee of all or substantially all of the assets of the assignor
necessarily includes the assumption of the assignor's liabilities, unless the creditors
who did not consent to the transfer choose to rescind the transfer on the ground of
fraud. To allow an assignor to transfer all its business, properties and assets without
the consent of its creditors and without requiring the assignee to assume the assignor's
obligations will defraud the creditors. The assignment will place the assignor's assets
beyond the reach of its creditors.
Copyright 2015
38
Strategic Alliance Development Corp. vs. Radstock Securities Limited, et al., G.R. Nos.
178158 & 180428, December 4, 2009
39
802.) A corporation has no power to release an original subscriber to its capital stock
from the obligation of paying for his shares, without a valuable consideration for such
release; and as against creditors a reduction of the capital stock can take place only in
the manner and under the conditions prescribed by the statute or the charter or the
articles of incorporation. Moreover, strict compliance with the statutory regulations is
necessary (14 C. J., 198, 620).
Philippine Trust Co. vs. Marciano Rivera, G.R. No. 19761, January 29, 1923
A distinction should be made between corporate acts or contracts which are illegal
and those which are merely ultra vires. The former contemplates the doing of an act
which is contrary to law, morals, or public order, or contravene some rules of public
policy or public duty, and are, like similar transactions between individuals, void.
They cannot serve as basis of a court action, nor acquire validity by performance,
ratification, or estoppel. Mere ultra vires acts, on the other hand, or those which are
not illegal and void ab initio, but are not merely within the scope of the articles of
incorporation, are merely voidable and may become binding and enforceable when
ratified by the stockholders.
05plpecda
Maria Carla Pirovano vs. The De La Rama Steamship Co., G.R. No. L-5377, December
29, 1954
Ultra vires
Copyright 2015
40
Apex Investment and Financing Corp. vs. Intermediate Appellate Court, G.R. No.
L-69723. October 18, 1988
Nature of by-laws
China Banking Corp. vs. Court of Appeals, G.R. No. 117604, March 26, 1997
Copyright 2015
41
Contents of by-laws
Grace Christian High School vs. Court of Appeals, G.R. No. 108905, October 23, 1997
Rosita Pea vs. Court of Appeals, G.R. No. 91478, February 7, 1991
47(5)
John Gokongwei, Jr. vs. Securities and Exchange Commission, G.R. No. L-45911, April
11, 1979
A voting trust transfers only voting or other rights pertaining to the shares subject
of the agreement, or control over the stock.
National Investment and Dev't. Corp. vs. Benjamin Aquino, G.R. No. L-34192, June 30,
Copyright 2015
42
1988
Voting trust agreements, if entered into not to circumvent the law, may confer other
rights in addition to voting rights.
A voting trust agreement may confer upon a trustee not only the stockholder's
voting rights but also other rights pertaining to his shares as long as the voting trust
agreement is not entered "for the purpose of circumventing the law against
monopolies and illegal combinations in restraint of trade or used for purposes of
fraud." Thus, the traditional concept of a voting trust agreement primarily intended to
single out a stockholder's right to vote from his other rights as such and made
irrevocable for a limited duration may in practice become a legal device whereby a
transfer of the stockholders shares is effected subject to the specific provision of the
voting trust agreement. The execution of a voting trust agreement, therefore, may
create a dichotomy between the equitable or beneficial ownership of the corporate
shares of a stockholder, on the one hand, and the legal title thereto on the other hand.
Ramon C. Lee vs. Court of Appeals, G.R. No. 93695, February 4, 1992
Pre-subscription agreement
Ong Yong vs. David S. Tiu, G.R. No. 144476, February 1, 2002
David S. Tiu vs. Ong Yong, G.R. No. 144629, February 1, 2002
Subscription contract
National Exchange Company, Ltd. vs. Jose S. Ramos, G.R. No. 27850, December 24,
1927
Copyright 2015
43
44
For a valid transfer of stocks, the requirements are as follows: (a) there must be
delivery of the stock certificate; (b) the certificate must be endorsed by the owner or
his attorney-in-fact or other persons legally authorized to make the transfer; and (c) to
be valid against third parties, the transfer must be recorded in the books of the
corporation.
Vicente C. Ponce vs. Alsons Cement Corporation, G.R. No. 139802, December 10,
Copyright 2015
45
2002
We have uniformly held that for a valid transfer of stocks, there must be strict
compliance with the mode of transfer prescribed by law. The requirements are: (a)
There must be delivery of the stock certificate: (b) The certificate must be endorsed by
the owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and (c) To be valid against third parties, the transfer must be recorded in the
books of the corporation.
The Rural Bank of Lipa City vs. Honorable Court of Appeals, G.R. No. 124535,
September 28, 2001
Simply stated, the transfer of title by means of succession, though effective and
valid between the parties involved (i.e., between the decedent's estate and her heirs),
does not bind the corporation and third parties. The transfer must be registered in the
books of the corporation to make the transferee-heir a stockholder entitled to
recognition as such both by the corporation and by third parties.
Oscar C. Reyes vs. RTC of Makati, et al., G.R. No. 165744, August 11, 2008
46
Certificate of stock
Nora A. Bitong vs. Court of Appeals, G.R. No. 123553, July 13, 1998 ([CA-G.R. No.
33291])
Copyright 2015
47
Unpaid claim
China Banking Corp. vs. Court of Appeals, G.R. No. 117604, March 26, 1997
Rural Bank of Salinas, Inc. vs. Court of Appeals, G.R. No. 96674, June 26, 1992
48
granted to a stockholder that the one requesting it must not have been guilty of using
improperly any information secured through a prior examination, and that the person
asking for such examinations must be "acting in good faith and for a legitimate
purpose in making his demand."
Ramon A. Gonzales vs. PNB, G.R. No. L-33320, May 30, 1983
49
self-protection. After all, a shareholder has the right to be intelligently informed about
corporate affairs. Such right rests upon the stockholder's underlying ownership of the
corporation's assets and property.
Similarly, only stockholders of record are entitled to receive dividends declared by
the corporation, a right inherent in the ownership of the shares.
Joselito Musni Puno vs. Puno Enterprises, Inc., G.R. No. 177066, September 11, 2009
Manuel A. Torres, Jr. vs. Court of Appeals, G.R. No. 120138, September 5, 1997
Sec. 74(2)
The stockholder's right of inspection of the corporation's books and records is
based upon their ownership of the assets and property of the corporation. It is,
therefore, an incident of ownership of the corporate property, whether this ownership
or interest be termed an equitable ownership, a beneficial ownership, or a
quasi-ownership. This right is predicated upon the necessity of self-protection. It is
generally held by majority of the courts that where the right is granted by statute to the
stockholder, it is given to him as such and must be exercised by him with respect to
his interest as a stockholder and for some purpose germane thereto or in the interest of
the corporation. In other words, the inspection has to be germane to the petitioner's
interest as a stockholder, and has to be proper and lawful in character and not inimical
to the interest of the corporation.
John Gokongwei, Jr. vs. Securities and Exchange Commission, G.R. No. L-45911, April
11, 1979
Right of inspection under the Corporation Code does not apply in a supplementary
capacity to PNB charter.
The Philippine National Bank is not an ordinary corporation. Having a charter of its
own, it is not governed, as a rule, by the Corporation Code. It is not correct to claim,
therefore, that the right of inspection under Section 74 of the new Corporation Code
may apply in a supplementary capacity to the charter of the respondent bank.
Ramon A. Gonzales vs. PNB, G.R. No. L-33320, May 30, 1983
Copyright 2015
50
A stockholder may exercise his statutory right of inspection, the only express
limitation being that (1) the right of inspection should be exercised at reasonable
hours on business days; (2) the person demanding to examine and copy excerpts from
the corporation's records and minutes has not improperly used any information
secured through any previous examination of the records of such corporation; and (3)
the demand is made in good faith or for a legitimate purpose.
Rep. of the Phil. (PCGG) vs. Sandiganbayan, et al., G.R. No. 88809, July 10, 1991
Victor Africa vs. PCGG, G.R. No. 83831, January 9, 1992
Ma. Belen Flordeliza C. Ang-Abaya, et al. vs. Eduardo G. Ang, G.R. No. 178511,
December 4, 2008
Definition of merger
Cesar Reyes vs. Max Blouse, G.R. No. L-4420, May 19, 1952
Copyright 2015
51
The Corporation Code does not mandate the absorption of the employees of the
non-surviving corporation by the surviving corporation in the case of a merger. The
rule is that unless expressly assumed, labor contracts such as employment contracts
and collective bargaining agreements are not enforceable against a transferee of an
enterprise, labor contracts being in personam, thus binding only between the parties.
A labor contract merely creates an action in personam and does not create any real
right which should be respected by third parties. This conclusion draws its force from
the right of an employer to select his employees and to decide when to engage them as
protected under our Constitution, and the same can only be restricted by law through
the exercise of the police power.
BPI vs. BPI Employees Union-Davao Chapter-Federation of Unions in BPI Unibank,
G.R. No. 164301, August 10, 2010, citing Sundowner Development Corp. vs. Drilon,
G.R. No. 82341, December 6, 1989
BPI vs. Carlito Lee, G.R. No. 190144, August 1, 2012
Sec. 80(4)
Associated Bank vs. Court of Appeals, G.R. No. 123793, June 29, 1998
52
explained thus: . . . [Appraisal right] means that a stockholder who dissented and
voted against the proposed corporate action, may choose to get out of the corporation
by demanding payment of the fair market value of his shares. When a person invests
in the stocks of a corporation, he subjects his investment to all the risks of the
business and cannot just pull out such investment should the business not come out as
he expected. He will have to wait until the corporation is finally dissolved before he
can get back his investment, and even then, only if sufficient assets are left after
paying all corporate creditors. His only way out before dissolution is to sell his shares
should he find a willing buyer. If there is no buyer, then he has no recourse but to stay
with the corporation. However, in certain specified instances, the Code grants the
stockholder the right to get out of the corporation even before its dissolution because
there has been a major change in his contract of investment with which he does not
agree and which the law presumes he did not foresee when he bought his shares. Since
the will of two-thirds of the stocks will have to prevail over his objections, the law
considers it only fair to allow him to get back his investment and withdraw from the
corporation.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
Derivative Suit
[T]he corporation is the real party in interest in a derivative suit, and the suing
stockholder is only a nominal party: An individual stockholder is permitted to institute
a derivative suit on behalf of the corporation wherein he holds stocks in order to
protect or vindicate corporate rights, whenever the officials of the corporation refuse
to sue, or are the ones to be sued, or hold the control of the corporation. In such
actions, the suing stockholder is regarded as a nominal party, with the corporation as
the real party in interest.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
For a derivative suit to prosper, it is required that the minority stockholder suing for
and on behalf of the corporation must allege in his complaint that he is suing on a
derivative cause of action on behalf of the corporation and all other stockholders
similarly situated who may wish to join him in the suit. It is a condition sine qua non
that the corporation be impleaded as a party because not only is the corporation an
indispensable party, but it is also the present rule that it must be served with process.
The judgment must be made binding upon the corporation in order that the
Copyright 2015
53
corporation may get the benefit of the suit and may not bring subsequent suit against
the same defendants for the same cause of action. In other words, the corporation must
be joined as party because it is its cause of action that is being litigated and because
judgment must be a res adjudicata against it.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
Settled is the doctrine that in a derivative suit, the corporation is the real party in
interest while the stockholder filing suit for the corporation's behalf is only a nominal
party. The corporation should be included as a party in the suit. An individual
stockholder is permitted to institute a derivative suit on behalf of the corporation
wherein he holds stock in order to protect or vindicate corporate rights, whenever the
officials of the corporation refuse to sue, or are the ones to be sued or hold the control
of the corporation. In such actions, the suing stockholder is regarded as a nominal
party, with the corporation as the real party in interest.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
Although the shareholdings of petitioners are indeed only two out of the 409
alleged outstanding shares or 0.24%, the Court has held that it is enough that a
member or a minority of stockholders file a derivative suit for and in behalf of a
corporation.
Ching v. Subic Bay Golf and Country Club, Inc., G.R. No. 174353, September 10, 2014
It is a condition sine qua non that the corporation be impleaded as a party because
. . . . Not only is the corporation an indispensable party, but it is also the present
rule that it must be served with process. The reason given is that the judgment must be
made binding upon the corporation and in order that the corporation may get the
benefit of the suit and may not bring a subsequent suit against the same defendants for
the same cause of action. In other words the corporations must be joined as party
Copyright 2015
54
because it is its cause of action that is being litigated and because judgment must be a
res ajudicata against it.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
The reasons given for not allowing direct individual suit are: (1) . . . "the
universally recognized doctrine that a stockholder in a corporation has no title legal or
equitable to the corporate property; that both of these are in the corporation itself for
the benefit of the stockholders." In other words, to allow shareholders to sue
separately would conflict with the separate corporate entity principle; (2). . . that the
prior rights of the creditors may be prejudiced. Thus, our Supreme Court held in the
case of Evangelista v. Santos, that "the stockholders may not directly claim those
damages for themselves for that would result in the appropriation by, and the
distribution among them of part of the corporate assets before the dissolution of the
corporation and the liquidation of its debts and liabilities, something which cannot be
legally done in view of Section 16 of the Corporation Law . . .;" (3) the filing of such
suits would conflict with the duty of the management to sue for the protection of all
concerned; (4) it would produce wasteful multiplicity of suits; and (5) it would
involve confusion in ascertaining the effect of partial recovery by an individual on the
damages recoverable by the corporation for the same act.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
55
corporation. However, in certain specified instances, the Code grants the stockholder
the right to get out of the corporation even before its dissolution because there has
been a major change in his contract of investment with which he does not agree and
which the law presumes he did not foresee when he bought his shares. Since the will
of two-thirds of the stocks will have to prevail over his objections, the law considers it
only fair to allow him to get back his investment and withdraw from the corporation.
Santiago Cua, Jr., et al. vs. Miguel Ocampo Tan, et al., G.R. Nos. 181455-56 & 182008,
December 4, 2009
Sec. 87 - Definition
MIAA is also not a non-stock corporation because it has no members. Section 87 of
the Corporation Code defines a non-stock corporation as "one where no part of its
income is distributable as dividends to its members, trustees or officers". A non-stock
corporation must have members. Even if we assume that the Government is
considered as the sole member of MIAA, this will not make MIAA a non-stock
corporation. Non-stock corporations cannot distribute any part of their income to their
members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its
annual gross operating income to the National Treasury. This prevents MIAA from
qualifying as a non-stock corporation.
Manila International Airport Authority vs. City of Pasay, et al., G.R. No. 163072, April 2,
2009
Sec. 88 - Purposes
Section 88 of the Corporation Code provides that non-stock corporations are
"organized for charitable, religious, educational, professional, cultural, recreational,
fraternal, literary, scientific, social, civil service, or similar purposes, like trade,
industry, agriculture and like chambers". MIAA is not organized for any of these
purposes. MIAA, a public utility, is organized to operate an international and domestic
airport for public use.
Copyright 2015
56
Manila International Airport Authority vs. City of Pasay, et al., G.R. No. 163072, April 2,
2009
57
Definition
San Juan Structural and Steel Fabricators vs. Court of Appeals, G.R. No. 129459,
September 29, 1998
58
Copyright 2015
59
Corporate liquidation
Chung Ka Bio vs. Intermediate Appellate Court, G.R. No. L-71837, July 26, 1988
What is provided in Section 122 of the Corporation Code is that the conveyance to
the trustees must be made within the three-year period. But it may be found
impossible to complete the work of liquidation within the three-year period or to
Copyright 2015
60
reduce disputed claims to judgment. The trustees to whom the corporate assets have
been conveyed pursuant to the authority of Section 122 may sue and be sued as such
in all matters connected with the liquidation.
Premiere Development Bank vs. Alfredo C. Flores, et al., G.R. No. 175339, December
16, 2008
A corporation that has a pending action and which cannot be terminated within the
three-year period after its dissolution is authorized under Section 78 to convey all its
property to trustees to enable it to prosecute and defend suits by or against the
corporation beyond the three-year period. Although private respondent did not appoint
any trustee, yet the counsel who prosecuted and defended the interest of the
corporation in the instant case and who in fact appeared in behalf of the corporation
may be considered a trustee of the corporation at least with respect to the matter in
litigation only.
Carlos Gelano, et al. vs. Court of Appeals, G.R. No. L-39050, February 24, 1981
61
62
There can be no distribution of assets among the stockholders without first paying
corporate creditors.
The requirement of unrestricted retained earnings to cover the shares is based on
the trust fund doctrine which means that the capital stock, property and other assets of
a corporation are regarded as equity in trust for the payment of corporate creditors.
The reason is that creditors of a corporation are preferred over the stockholders in the
distribution of corporate assets. There can be no distribution of assets among the
stockholders without first paying corporate creditors. Hence, any disposition of
corporate funds to the prejudice of creditors is null and void. "Creditors of a
corporation have the right to assume that so long as there are outstanding debts and
liabilities, the board of directors will not use the assets of the corporation to purchase
its own stock . . ."
Boman Environmental Development Corp. vs. CA and Nilcar Y. Fajilan, G.R. No.
77860, November 22, 1988
C.H. Steinberg vs. Gregorio Velasco, G.R. No. 30460, March 12, 1929
63
The phrase "give Philippine nationals reciprocal rights" distinguished from "allow
Filipino citizens and corporations to do business in its own country or state".
Section 123 does not say that it is required that the laws under which foreign
corporations are formed "give Philippine nationals reciprocal rights." What it does say
is that the laws of the country or state under which a foreign corporation is "formed,
organized or existing . . . allow Filipino citizens and corporations to do business in its
own country or state," which is not quite the same thing.
State Investment House, Inc. vs. Citibank, N.A., G.R. Nos. 79926-27, October 17, 1991
Copyright 2015
64
65
Doctrine of Estoppel
The rule is that a party is estopped to challenge the personality of a corporation
after having acknowledged the same by entering into a contract with it. And the
"doctrine of estoppel to deny corporate existence applies to foreign as well as to
domestic corporations;" "one who has dealt with a corporation of foreign origin as a
corporate entity is estopped to deny its corporate existence and capacity." The
principle "will be applied to prevent a person contracting with a foreign corporations
from later taking advantage of its noncompliance with the statutes, chiefly in cases
where such person has received the benefits of the contract (Sherwood v. Alvis, 83
Ala 115, 3 So 307, limited and distinguished in Dudley v. Collier, 87 Ala 431, 6 So
304; Spinney v. Miller 114 Iowa 210, 86 NW 317), where such person has acted as
agent for the corporation and has violated his fiduciary obligations as such, and where
the statute does not provide that the contract shall be void, but merely fixes a special
penalty for violation of the statute. . . ."
Merrill Lynch Futures, Inc. vs. Court of Appeals, G.R. No. 97816, July 24, 1992
Converse Rubber Corporation vs. Universal Rubber Products, Inc., G.R. No. L-27906,
January 8, 1987
This Court has held in a long line of cases that a foreign corporation not engaged in
business in the Philippines may exercise the right to file an action in Philippine courts
for an isolated transaction. When the allegations in the complaint have a bearing on
the plaintiffs capacity to sue and merely state that the plaintiff is a foreign corporation
existing under the laws of the United States, such averment conjures two alternative
possibilities: either the corporation is engaged in business in the Philippines, or it is
not so engaged. In the first, the corporation must have been duly licensed in order to
maintain the suit; in the second, and the transaction sued upon is singular and isolated,
no such license is required. In either case, compliance with the requirement of license,
or the fact that the suing corporation is exempt therefrom, as the case may be, cannot
Copyright 2015
66
be inferred from the mere fact that the party suing is a foreign corporation. The
qualifying circumstance being an essential part of the plaintiffs capacity to sue must
be affirmatively pleaded. Hence, the ultimate fact that a foreign corporation is not
doing business in the Philippines must first be disclosed for it to be allowed to sue in
Philippine courts under the isolated transaction rule
New York Marine Managers, Inc. vs. Court of Appeals, G.R. No. 111837, October 24,
1995
Lingner & Fisher GMBH vs. Intermediate Appellate Court, G.R. No. L-63557, October
28, 1983
Wang Laboratories, Inc. vs. Rafael T. Mendoza, G.R. No. L-72147, December 1, 1987
Foreign corporation may sue for trademark infringement although not doing
business in the Philippines.
A foreign corporation may sue in this jurisdiction for infringement of trademark
and unfair competition although it is not doing business in the Philippines because the
Philippines was a party to the Convention of the Union of Paris for the Protection of
Industrial Property.
Converse Rubber Corp. vs. Universal Rubber Products, Inc., L-27906, January 8, 1987
67
Commissioner of Customs v. K.M.K Gani, G.R. No. 73760, February 26, 1990
68
upon the directors or trustees who voted for such refusal; and,
Fourth. Where the officer or agent of the corporation sets up the defense that the
person demanding to examine and copy excerpts from the corporation's records and
minutes has improperly used any information secured through any prior examination
of the records or minutes of such corporation or of any other corporation, or was not
acting in good faith or for a legitimate purpose in making his demand, the contrary
must be shown or proved.
Sy Tiong Shiou, et al. vs. Sy Chim, et al., G.R. Nos. 174168 & 179438, March 30, 2009
Ang-Abaya, et al. v. Ang, et al., G.R. Nos. 180055 & 183005, July 31, 2009
69
Copyright 2015
70