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CHUNG KA BIO vs.

INTERMEDIATE To the officers’ consternation, they discovered


APPELLATE COURT that there were two other organizations within
G.R. No. 71837 July 26, 1988 the subdivision – the North Association and the
South Association. When one of the officers
Facts: Philippine Blooming Mills Company, Inc. inquired about the status of LGVHAI, the head of
was incorporated for a term of 25 years. The the legal department of the HIGC, informed him
members of its board of directors executed a deed that LGVHAI had been automatically dissolved for
of assignment of all of the accounts receivables, two reasons. First, it did not submit its by-laws
properties, obligations and liabilities of the old within the period required by the Corporation
PBM in favor of Chung Siong Pek in his capacity as Code and, second, there was non-user of
treasurer of the new PBM, then in the process of corporate charter because HIGC had not received
reincorporation. The new PMB was issued a any report on the association’s activities.
certificate of incorporation by the Securities and
Exchange Commission. Chung Ka Bio and the Issue: Whether or not the LGVHAI’s failure to file
other petitioners herein, all stockholders of the its by-laws within the period prescribed by
old PBM, filed with the SEC a petition for Section 46 of the Corporation Code had the effect
liquidation of both the old PBM and the new PBM. of automatically dissolving the said corporation?
The allegation was that the former had become
legally non-existent for failure to extend its Held: No. There can be no automatic corporate
corporate life and that the latter had likewise dissolution simply because the incorporators
beenipso facto dissolved for non-use of the failed to abide by the required filing of by-laws
charter and continuous failure to operate within embodied in Section 46 of the Corporation Code.
2 years from incorporation. There is no outright “demise” of corporate
existence. Proper notice and hearing are cardinal
Issue: Whether or not the new corporation has components of due process in any democratic
not substantially complied with the two-year institution, agency or society. In other words, the
requirement of Section 22 of the new Corporation incorporators must be given the chance to explain
Code on non-user because its stockholders never their neglect or omission and remedy the same.
adopted a set of by-laws. Non-filing of the by-laws will not result in
automatic dissolution of the corporation. In fact,
Held: No. Non-filing of the by-laws will not result under the rules and regulations of the SEC, failure
in automatic dissolution of the corporation. to file the by-laws on time may be penalized
Under Section 6(i) of PD 902-A, the SEC is merely with the imposition of an administrative
empowered to “suspend or revoked, after proper fine without affecting the corporate existence of
notice and hearing, the franchise or certificate of the erring firm.
registration of a corporation” on the ground inter
alia of “failure to file by-laws within the required ERNESTINA CRISOLOGO-JOSE vs. COURT OF
period.” It is clear from this provision that there APPEALS
must first of all be a hearing to determine the G.R. No. 80599 September 15, 1989
existence of the ground, and secondly, assuming
such finding, the penalty is not necessarily Facts: Plaintiff Ricardo S. Santos, Jr. was the vice-
revocation but may be only suspension of the president of Mover Enterprises, Inc. in-charge of
charter. In fact, under the rules and regulations of marketing and sales; and the president of the said
the SEC, failure to file the by-laws on time may be corporation was Atty. Oscar Z. Benares. Atty.
penalized merely with the imposition of an Benares, in accommodation of his clients, the
administrative fine without affecting the spouses Jaime and Clarita Ong, issued check
corporate existence of the erring firm. against Traders Royal Bank, payable to defendant
Ernestina Crisologo-Jose. Since the check was
LOYOLA GRAND VILLAS HOMEOWNERS under the account of Mover Enterprises, Inc., the
(SOUTH) ASSOCIATION, INC. vs. COURT OF same was to be signed by its president, Atty. Oscar
APPEALS Z. Benares, and the treasurer of the said
G.R. No. 117188. August 7, 1997 corporation. However, since at that time, the
treasurer of Mover Enterprises was not available,
Facts: LGVHAI was organized as the association Atty. Benares prevailed upon the plaintiff, Ricardo
of homeowners and residents of the Loyola Grand S. Santos, Jr., to sign the aforesaid check. The
Villas. It was organized by the developer of the check was issued to defendant Ernestina
subdivision and its first president was Victorio V. Crisologo-Jose in consideration of the waiver or
Soliven, himself the owner of the developer. For quitclaim by said defendant over a certain
unknown reasons, however, LGVHAI did not file property which the Government Service
its corporate by-laws. The officers of the LGVHAI Insurance System (GSIS) agreed to sell to the
tried to register its by-laws. They failed to do so. spouses Jaime and Clarita Ong, with the
understanding that upon approval by the GSIS of Engr. Ranulfo C. Feliciano vs. Commission on
the compromise agreement with the spouses Ong, Audit
the check will be encashed accordingly. Since the G.R. No. 147402 January 14, 2004
compromise agreement was not approved within
the expected period of time, the aforesaid check Facts: COA assessed Leyte Metropolitan Water
was replaced by Atty. Benares. This replacement District (LMWD) auditing fees. Petitioner
check was also signed by Atty. Oscar Z. Benares Feliciano, as General Manager of LMWD,
and by the plaintiff Ricardo S. Santos, Jr. When contended that the water district could not pay
defendant deposited this replacement check with the said fees on the basis of Sections 6 and 20 of
her account at Family Savings Bank, Mayon P.D. No. 198 as well as Section 18 of R.A. No. 6758.
Branch, it was dishonored for insufficiency of He primarily claimed that LMWD is a private
funds. The petitioner filed an action against the corporation not covered by COA's jurisdiction.
corporation for accommodation party. Petitioner also asked for refund of all auditing
fees LMWD previously paid to COA. COA
Issue: Whether or not the corporation can be held Chairman denied petitioner’s requests. Petitioner
liable as accommodation party? filed a motion for reconsideration which COA
denied. Hence, this petition.
Held: No. Accommodation party liable on the
instrument to a holder for value, although such Issue: Whether a Local Water District (“LWD”)
holder at the time of taking the instrument knew created under PD 198, as amended, is a
him to be only an accommodation party, does not government-owned or controlled corporation
include nor apply to corporations which are subject to the audit jurisdiction of COA or a
accommodation parties. This is because the issue private corporation which is outside of COA’s
or indorsement of negotiable paper by a audit jurisdiction.
corporation without consideration and for the
accommodation of another is ultra vires. Hence, Held: Petition lacks merit. The Constitution
one who has taken the instrument with under Sec. 2(1), Article IX-D and existing laws
knowledge of the accommodation nature thereof mandate COA to audit all government agencies,
cannot recover against a corporation where it is including government-owned and controlled
only an accommodation party. If the form of the corporations with original charters. An LWD is a
instrument, or the nature of the transaction, is GOCC with an original charter.
such as to charge the indorsee with knowledge
that the issue or indorsement of the instrument The Constitution recognizes two classes of
by the corporation is for the accommodation of corporations. The first refers to private
another, he cannot recover against the corporations created under a general law. The
corporation thereon. By way of exception, an second refers to government-owned or
officer or agent of a corporation shall have the controlled corporations created by special
power to execute or indorse a negotiable paper in charters. Under existing laws, that general law is
the name of the corporation for the the Corporation Code.
accommodation of a third person only if
specifically authorized to do so. Corollarily, Obviously, LWD’s are not private corporations
corporate officers, such as the president and vice- because they are not created under the
president, have no power to execute for mere Corporation Code. LWD’s are not registered with
accommodation a negotiable instrument of the the Securities and Exchange Commission. Section
corporation for their individual debts or 14 of the Corporation Code states that “all
transactions arising from or in relation to matters corporations organized under this code shall file
in which the corporation has no legitimate with the SEC articles of incorporation x x x.” LWDs
concern. Since such accommodation paper cannot have no articles of incorporation, no
thus be enforced against the corporation, incorporators and no stockholders or members.
especially since it is not involved in any aspect of There are no stockholders or members to elect
the corporate business or operations, the the board directors of LWDs as in the case of all
inescapable conclusion in law and in logic is that corporations registered with the SEC. The local
the signatories thereof shall be personally liable mayor or the provincial governor appoints the
therefor, as well as the consequences arising from directors of LWDs for a fixed term of office. The
their acts in connection therewith. board directors of LWDs are not co-owners of the
LWDs. The board directors and other personnel
of LWDs are government employees subject to
civil service laws and anti-graft laws. Clearly, an
LWD is a public and not a private entity, hence,
subject to COA’s audit jurisdiction.
Concept Builders Inc. vs National Labor identity that will justify the application of the
Relations Commission doctrine of piercing the corporate veil, to wit:
G.R. No. 108734, May 29, 1996
1. Stock ownership by one or common
Facts: Petitioner Concept Builders Inc., a ownership of both corporations.
domestic corporation with principal office at 355 2. Identity of directors and officers.
Maysan Road, Valenzuela, Metro Manila is 3. The names of keeping corporate books
engaged in the construction business. Private and records
respondents were employed by said company as 4. Methods of conducting the business.
laborers, carpenters, and niggers. On November
1981, private respondents were served with Where one corporation is so organized and
individual written notices of termination of controlled and its affairs are conducted so that, it
employment by petitioner, effective on November is in fact, a mere instrumentality or adjunct of the
30, 1981. It was stated in the individual notices other, the fiction of the corporate entity of the
that their contracts of employment had expired instrumentality may be disregarded. The control
and the project in which they were hired had been necessary to invoke the rule is not majority or
completed. Public respondent found it to be the even complete stock control but such domination
fact, however, at the time of the termination of of instances, policies and practices that the
private respondents’ employment, the project in controlled corporation has, so to speak, no
which they were hired had not yet been finished separate mind, will or existence of its own and is
and completed. Petitioner had to engage the but a conduit for its principal. It must be kept in
services of the subcontractors whose workers mind that the control must be shown to have been
performed the functions of private respondents. exercised at the time the acts complained of took
Aggrieved, private respondents filed a complaint place. Moreover, the control and breach of duty
for illegal dismissal, unfair labor practices and must proximately cause the injury or unjust loss
non-payment of their holiday pay, overtime pay, for which the complaint is made.
and 13th month pay against petitioners. The labor
arbiter rendered decision in favor of the private The test in determining the applicability of the
respondents. When the same became final and doctrine of piercing the veil of corporate fiction as
executory, a writ of execution was issued, follows:
however, the same was refused by the security
guard on duty on the ground that the petitioners 1. Control, not mere majority or complete
no longer occupied the premises. A break-open stock control but complete domination,
order was then recommended. not only of finances but of policy and
business practice in respect to the
Issue: Whether or not the alias writ of execution transaction attacked so that the corporate
can be issued against the sister company of the entity as to this transaction had at the time
petitioners, HPPI. no separate mind, will on exercise of its
own;
Held: Yes. It is a fundamental principle of 2. Such control must have been used by the
corporation law that a corporation is an entity defendant to commit fraud or wrong, to
separate and distinct from its stockholders and perpetuate the violation of a statutory or
from other corporations to which it may be other positive legal duty or dishonest and
connected. But, this separate and distinct unjust act in contravention of plaintiff’s
personality of a corporation is merely a fiction legal rights.
created by law for convenience and to promote 3. The aforesaid control and breach of duty
justice. So, when the notion of separate juridical must proximately cause the injury or
personality is used to defeat public convenience, unjust loss complained of.
justify wrong, protect fraud, or defend crime, or is
used as a device to defeat labor laws, this separate The absence of any of these elements prevents
personality of the corporation may be “piercing the corporate veil” of the corporation. In
disregarded or the veil of corporate fiction applying the instrumentality or “alter ego”
pierced. This is true likewise when the doctrine, the courts are concerned with reality
corporation is merely an adjunct, a business and not form, with how the corporation operated
conduit or an alter ego of another corporation. and the individual defendant’s relationship to
that operation.
The conditions under which the juridical entity
may be disregarded vary according to the
peculiar facts and in circumstances laid down, but
certainly there are some probative factors of
ESTELITA BURGOS LIPAT and ALFREDO that it was signed for the benefit and under the
LIPAT vs. Pacific Banking Corporation name of BET. We are thus constrained to rule that
G.R. No. 142435 April 30, 2003 the Court of Appeals did not err when it applied
the instrumentality doctrine in piercing the
Facts: Petitioner spouses Lipat owned Bela’s corporate veil of BEC.
Export Trading (BET) a single proprietorship
engaged in the manufacture of garments for LYCEUM OF THE PHILIPPINES, INC., vs. COURT
domestic and foreign consumption. The spouses OF APPEALS
by virtue of an SPA appointed and authorized G.R. No. 101897, March 5, 1993
their daughter to obtain loan from respondent
Pacific Bank. A loan was secured and as security Facts: Petitioner is an educational institution
therefore a REM was executed over the property duly registered with the SEC since Sept 1950.
of the spouses. Sometime after, BET was Before the case at bar, Petitioner commenced a
incorporated into a family corporation named proceeding against Lyceum of Baguio with the
Bela’s Export Corporation (BEC) and the loan was SEC to require it to change its corporate name and
restructured in its name. Subsequent loans were adopt a new one not similar or identical to the
obtained in behalf of BEC all secured by the Petitioner. SEC granted noting that there was
previous REM. BEC defaulted in its payments substantial because of the dominant word
which led to the foreclosure and sale of the “Lyceum”. CA and SC affirmed. Petitioner filed
mortgaged property. The spouses moved to annul similar complaint against other schools and
the sale alleging that BEC is a distinct and obtain a favorable decision from the hearing
separate personality from them and that the REM officer. On appeal, SEC En banc reversed the
was executed only to secure BET’s loan. Both trial decision and held that the word Lyceum have not
court and CA ruled to pierce the corporate veil to become so identified with the petitioner and that
hold petitioner spouses liable for BEC’s the use thereof will cause confusion to the general
obligations. public.

Issue: Whether or not the doctrine of piercing the Issue/s: (1) Whether or not the corporate names
veil of corporate fiction is applicable in this case. of the private respondents are identical with or
deceptively similar to that of the petitioner (2)
Ruling: YES. We find that the evidence on record Whether or not the use by the petitioner of
demolishes, rather than buttresses, petitioners’ Lyceum in its corporate name has been for such
contention that BET and BEC are separate length of time and with such exclusivity as to have
business entities. Note that Estelita Lipat become associated or identified with the
admitted that she and her husband, Alfredo, were petitioner institution in the mind of the general
the owners of BET and were two of the public (Doctrine of Secondary meaning).
incorporators and majority stockholders of BEC.
It is also undisputed that Estelita Lipat executed a Held: No (Both). True enough, the corporate
special power of attorney in favor of her daughter, names of the parties carry the word “Lyceum” but
Teresita, to obtain loans and credit lines from confusion and deception are precluded by the
Pacific Bank on her behalf. Incidentally, Teresita appending of geographic names. Lyceum
was designated as executive-vice president and generally refers to a school or an institution of
general manager of both BET and BEC, learning and it is natural to use this word to
respectively. designate an entity which is organized and
operating as an educational institution.
It could not have been coincidental that BET and
BEC are so intertwined with each other in terms Doctrine of Secondary meaning is a word of
of ownership, business purpose, and phrase originally incapable of exclusive
management. Apparently, BET and BEC are one appropriation, might nevertheless have been
and the same and the latter is a conduit of and used so long and so exclusively by one producer
merely succeeded the former. Petitioners’ with reference to his article that, in trade and to
attempt to isolate themselves from and hide that branch of the purchasing public, the word or
behind the corporate personality of BEC so as to phrase has come to mean that the article was his
evade their liabilities to Pacific Bank is precisely product.
what the classical doctrine of piercing the veil of
corporate entity seeks to prevent and remedy. Lyceum of the Philippines has not gained
exclusive use of “Lyceum” by long passage of time.
In our view, BEC is a mere continuation and The number alone of the private respondents
successor of BET and petitioners cannot evade suggests strongly that the use of Lyceum has not
their obligations in the mortgage contract been attended with the exclusivity essential for
secured under the name of BEC on the pretext the applicability of the doctrine. It may be noted
that one of the respondents – Western of directors. It has the inherent power to adopt
Pangasinan Lyceum used such term 17 years by-laws for its internal government, and to
before the petitioner registered with the SEC. regulate the conduct and prescribe the rights and
Moreover, there may be other schools using the duties of its members towards itself and among
name but not registered with the SEC because themselves in reference to the management of its
they have not adopted the corporate form of affairs. A corporation, under the Corporation law,
organization. may prescribe in its by-laws the qualifications,
duties and compensation of directors, officers,
JOHN GOKONGWEI, JR. vs. SECURITIES AND and employees. Any person who buys stock in a
EXCHANGE COMMISSION corporation does so with the knowledge that its
G.R. No. L-52129 April 21, 1980 affairs are dominated by a majority of the
stockholders and he impliedly contracts that the
Facts: Petitioner, stockholder of San Miguel Corp. will of the majority shall govern in all matters
filed a petition with the SEC for the declaration of within the limits of the acts of incorporation and
nullity of the by-laws etc. against the majority lawfully enacted by-laws and not forbidden by
members of the BOD and San Miguel. It is stated law. Any corporation may amend its by-laws by
in the by-laws that the amendment or the owners of the majority of the subscribed
modification of the by-laws may only be stock. It cannot thus be said that petitioners has
delegated to the BODs upon an affirmative vote of the vested right, as a stock holder, to be elected
stockholders representing not less than 2/3 of the director, in the face of the fact that the law at the
subscribed and paid uo capital stock of the time such stockholder's right was acquired
corporation, which 2/3 could have been contained the prescription that the corporate
computed on the basis of the capitalization at the charter and the by-laws shall be subject to
time of the amendment. Petitioner contends that amendment, alteration and modification. A
the amendment was based on the 1961 Director stands in a fiduciary relation to the
authorization, the Board acted without authority corporation and its shareholders, which is
and in usurpation of the power of the characterized as a trust relationship. An
stockholders n amending the by-laws in 1976. He amendment to the corporate by-laws which
also contends that the 1961 authorization was renders a stockholder ineligible to be director, if
already used in 1962 and 1963. He also contends he be also director in a corporation whose
that the amendment deprived him of his right to business is in competition with that of the other
vote and be voted upon as a stockholder (because corporation, has been sustained as valid. This is
it disqualified competitors from nomination and based upon the principle that where the director
election in the BOD of SMC), thus the amended by- is employed in the service of a rival company, he
laws were null and void. While this was pending, cannot serve both, but must betray one or the
the corporation called for a stockholder’s meeting other. The amendment in this case serves to
for the ratification of the amendment to the by- advance the benefit of the corporation and is
laws. This prompted petitioner to seek for good. Corporate officers are also not permitted to
summary judgment. This was denied by the SEC. use their position of trust and confidence to
In another case filed by petitioner, he alleged that further their private needs, and the act done in
the corporation had been using corporate funds furtherance of private needs is deemed to be for
in other corps and businesses outside the primary the benefit of the corporation. This is called the
purpose clause of the corporation in violation of doctrine of corporate opportunity.
the Corporation Code.
CARLOS GELANO and GUILLERMINA
Issue: Are amendments valid? MENDOZA DE GELANO vs. COURT OF APPEALS
G.R. No. L-39050 February 24, 1981
Held: The validity and reasonableness of a by-law
is purely a question of law. Whether the by-law is Facts: Insular Sawmill, Inc. (ISI) is a corporation
in conflict with the law of the land, or with the organized on 17 September 1945 with a
charter of the corporation or is in legal sense corporate life of 50 years, or up to 17 September
unreasonable and therefore unlawful is a 1995, with the primary purpose of carrying on a
question of law. However, this is limited where general lumber and sawmill business. To carry on
the reasonableness of a by-law is a mere matter of this business, ISI leased the paraphernal property
judgment, and one upon which reasonable minds
of Carlos Gelano's wife Guillermina Mendoza-
must necessarily differ, a court would not be
Gelano at the corner of Canonigo and Otis, Paco,
warranted in substituting its judgment instead of
the judgment of those who are authorized to Manila for P1,200.00 a month. It was while ISI was
make by-laws and who have exercised authority. leasing the aforesaid property that its officers and
The Court held that a corporation has authority directors had come to know Carlos Gelano who
prescribed by law to prescribe the qualifications received from the corporation cash advances on
account of rentals to be paid by the corporation trial court was not notified of the amendment
on the land. Between 19 November 1947 to 26 shortening the corporate existence and no
December 1950 Carlos Gelano obtained from ISI substitution of party was ever made. On 20
cash advances of P25,950.00. The said sum was November 1964 and almost 4 years after the
taken and received by Carlos Gelano on the dissolution of the corporation, the trial court
agreement that ISI could deduct the same from rendered a decision in favor of ISI ordering Carlos
Gelano to pay ISI the sum of P19,650.00 with
the monthly rentals of the leased premises until
interest thereon at the legal rate from the date of
said cash advances are fully paid. Out of the
the filing of the complaint on 29 May 1959 until
aforementioned cash advances in the total sum of said sum is fully paid; and P4,106.00, with
P25,950.00, Carlos Gelano was able to pay only interest thereon at the legal rate from the date of
P5,950.00 thereby leaving an unpaid balance of the filing of the complaint until said sum is fully
P20,000.00 which he refused to pay despite paid; and the sum of P2,000.00 attorney's fees.
repeated demands by ISI. Guillermina M. Gelano The Court also ordered the spouses to solidarily
refused to pay on the ground that said amount pay ISI the sum of P946.46, with interest thereon
was for the personal account of her husband at the agreed rate of 12% per annum from 6
asked for by, and given to him, without her October 1946, until said sum is fully paid;
knowledge and consent and did not benefit the P550.00, with interest thereon at the legal rate
family. from the date of the filing of the complaint until
the said sum is fully paid; and costs of the suit.
On various occasions from 4 May 1948 to 11
September 1949 the Spouses Gelano also made The court dismissed the counterclaims of the
credit purchases of lumber materials from ISI spouses. Both parties appealed to the Court of
with a total price of P1,120.46 in connection with Appeals, with ISI ppealing because it insisted that
the repair and improvement of the spouses' both Carlos Gelano and Guillermina Gelano
residence. On 9 November 1949 partial payment should be held liable for the substantial portion of
was made by the spouses in the amount of P91.00 the claim. On 23 August 1973, the Court of
and in view of the cash discount in favor of the Appeals rendered a decision modifying the
spousesin the amount of P83.00, the amount due judgment of the trial court by holding the spouses
ISI on account of credit purchases of lumber jointly and severally liable on ISI's claim and
materials is P946.46 which the spouses failed to increasing the award of P4,106.00 to P8,160.00.
pay. On 14 July 1952, in order to accommodate After the spouses received a copy of the decision
and help the spouses renew previous loans on 24 August 1973, they came to know that the ISI
obtained by them from the China Banking was dissolved way back on 31 December 1960.
Corporation, ISI, through Joseph Tan Yoc Su,
executed a joint and several promissory note with Hence, the spouses filed a motion to dismiss the
Carlos Gelano in favor of said bank in the amount case and or reconsideration of the decision of the
of P8,000.00 payable in 60 days. For failure of Court of Appeals on grounds that the case was
Carlos Gelano to pay the promissory note upon prosecuted even after dissolution of ISI as a
maturity, the bank collected from the ISI the corporation and that a defunct corporation
amount of P9,106.00 including interests, by cannot maintain any suit for or against it without
debiting it from the corporation's current account first complying with the requirements of the
with the bank. Carlos Gelano was able to pay ISI winding up of the affairs of the corporation and
the amount of P5,000.00 but the balance of the assignment of its property rights within the
P4,106.00 remained unsettled. Guillermina M. required period. Incidentally, after the receipt of
Gelano refused to pay on the ground that she had the spouses' motion to dismiss and/or
no knowledge about the accommodation made by reconsideration or on 28 October 1973, ISI thru
ISI in favor of her husband. its former directors filed a Petition for
Receivership before the Court of First Instance of
On 29 May 1959, ISI, thru Atty. German Lee, filed Manil (Special Proceedings 92303), which
a complaint for collection against the spouses petition is still pending before said court. On 5
before the Court of First Instance of Manila. Trial November 1973, ISI filed a comment on the
was held and when the case was at the stage of motion to dismiss and/or reconsideration and
submitting memorandum, Atty. Lee retired from after the parties have filed reply and rejoinder,
active law practice and Atty. Eduardo F. Elizalde the Court of Appeals on 5 July 1974 issued a
took over and prepared memorandum. In the resolution denying the aforesaid motion. The
meantime, ISI amended its Articles of spouses filed the petition for review.
Incorporation to shorten its term of existence up
to 31 December 1960 only. The amended Articles Issue: Whether a corporation, whose corporate
of Incorporation was filed with, and approved by life had ceased by the expiration of its terms of
the Securities and Exchange Commission, but the existence, could still continue prosecuting and
defending suits after its dissolution and beyond Judge Vega continued with the liquidation
the period of 3 years provided for under Act 1459, proceedings of the bank alleging further that RA
otherwise known as the Corporation Law, to wind 7169 became effective only on March 10, 1992 or
up its affairs, without having undertaken any step 15 days after its publication in the Official Gazette
to transfer its assets to a trustee or assignee. on February 24, 1992.

Held: When ISI was dissolved on 31 December ISSUE: Whether or not RA 7169 became effective
1960, under Section 77 of the Corporation Law, it on January 2, 1992.
still has the right until 31 December 1963 to
prosecute in its name the present case. After the RULING: Yes. RA 7169 expressly provided that it
expiration of said period, the corporation ceased should take effect upon its approval. Aquino
to exist for all purposes and it can no longer sue signed it into law on January 2, 1992. Thereafter,
or be sued. However, a corporation that has a said law became effective on said date. Its
pending action and which cannot be terminated subsequent publication was not necessary for its
within the 3-year period after its dissolution is effectivity. RA 7169 is of internal nature and not
authorized under Section 78 to convey all its have general application thus it took effect on the
property to trustees to enable it to prosecute and date provided for and hence was rightfully
defend suits by or against the corporation beyond invoked by the petitioners. The Supreme Court
the 3-year period. Although ISI did not appoint upheld that while as a rule laws take effect after
any trustee, yet the counsel who prosecuted and 15 days following completion of their publication
defended the interest of the corporation in the in the Official Gazette or in a newspaper of general
present case and who in fact appeared in behalf of circulation in the Philippines, the legislature has
the corporation may be considered a trustee of the authority to provide for exceptions as
the corporation at least with respect to the matter indicated in the clause “unless otherwise
in litigation only. Said counsel had been handling provided”.
the case when the same was pending before the
trial court until it was appealed before the Court
of Appeals and finally to the Supreme Court.
Therefore, there was a substantial compliance
with Section 78 of the Corporation Law and as
such, ISI could still continue prosecuting the
present case even beyond the period of 3 years
from the time of its dissolution. Further, the case
was instituted on 29 May 1959, during the time
when the corporation was still very much alive.
Any litigation filed by or against it instituted
within the period, but which could not be
terminated, must necessarily prolong that period
until the final termination of said litigation as
otherwise corporations in liquidation would lose
what should justly belong to them or would be
exempt from the payment of just obligations
through a mere technicality, something that
courts should prevent.

PHILIPPINE VETERANS BANK EMPLOYEES


UNION-N.U.B.E. vs. HONORABLE BENJAMIN
VEGA
G.R. No. 105364 June 28, 2001

FACTS: On January 2, 1992, the Congress enacted


R.A. 7169 providing for the rehabilitation of
Philippine Veterans Bank. It was published in the
Official Gazette in February 24, 1992. Thereafter,
petitioners filed with the labor tribunals their
residual claims for benefits and for reinstatement
upon reopening the bank.

In May 1992, the Central Bank issued a certificate


of authority allowing the PVB to reopen despite
the late mandate for rehabilitation and reopening,