CORPORATION LAW (2018-2019)
ATTY. BUSMENTE
Midterm Doctrines
1. Good Earth Emporium vs. CA
• A Corporation has a personality separate and distinct from
its individual stockholders or members. The corporate debt
of credit is not the debt or credit of the stockholders and vice
versa.
2. Cruz vs. Dalisay
• A corporation has a personality separate and distinct from
its individual stockholders or members. The mere fact that
one is president of the corporation does not render the
property he owns the property of the corporation.
3. Bank of America vs. CA
• The SC pierced the veil of corporate entity because it was
used to defeat public convenience and to preclude
multiplicity of suit.
4. Avon Dale Garments, Inc. vs. CA
• Two entities cannot be deemed as separate and distinct
where there is showing that one is merely the continuation
of the other. It has no effect on the identity of the
corporation, or in its property, rights, or liabilities.
5. Concept builders, Inc. vs. NLRC
• When the notion of separate and distinct juridical
personality is used to defeat public convenience, justify a
wrong, protect fraud or defend crime, this separate
personality may be disregarded, or the veil of corporate
fiction pierced.
• Factors to justify the application of the doctrine of piercing
the corporate veil:
o Stock ownership by one or common ownership of
both corporation
o Identity of directors and officers
o The manner of keeping corporate books and
records
o Methods of conducting the business
• Test in determining the applicability of the doctrine of
piercing the corporate veil:
o Control, not mere majority or complete stock
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;
o 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 plaintiff's legal rights; and
o The aforesaid control and breach of duty must
proximately cause the injury or unjust loss
complained of.
6. First Phil. International Bank vs. CA
• Corporate veil cannot be used to shield an otherwise blatant
violation of the prohibition against forum-shopping
7. Francisco Motors Corp. vs. CA
• The rationale behind piercing a corporation's identity to
remove the barrier between the corporation and the
persons comprising it, to thwart the fraudulent and illegal
schemes of those who use the corporate personality as a
shield for undertaking certain proscribed activities
8. Bibiano Reynoso vs. CA, 345 SCRA 335
• When the fiction is urged as a means of evading an existing
obligation, the veil with which the law covers and isolates
the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely
as an aggregate of individuals
9. Simeon De Leon vs. NLRC, 358 SCRA 274
• when the concept of separate legal entity is used to defeat
public convenience, justify wrong, protect fraud or defend
crime, the law will regard the corporation as an association
of persons, or in case of two corporations, merge them into
one.
10. PNB vs. Andrada Electric & Engr. Co.
• a corporation that purchases the assets of another will not
be liable for the debts of the selling corporation, provided
the former acted in good faith and paid adequate
consideration for such assets, except when any of the
following circumstances is present: (1) where the purchaser
expressly or impliedly agrees to assume the debts, (2) where
the transaction amounts to a consolidation or merger of the
corporations, (3) where the purchasing corporation is
merely a continuation of the selling corporation, and (4)
where the transaction is fraudulently entered into in order
to escape liability for those debts.
11. Estelita Burgos Lipat vs. Pacific Banking Corp.
• Doctrine of piercing the veil of corporate fiction is applicable
where one corporation merely succeeds as the other's 'alter
ego’.
12. International Travel Express & Tours Inc. v. CA
• Before a corporation may acquire juridical personality, the
State must give its consent either in the form of a special law
or a general enabling act.
13. Lim Tong Lim vs. Phil. Fishing Gear Industries Inc. 317 SCRA
728
• All persons who assume to act as a corporation knowing it to
be without authority to do so shall be liable as general
partners for all debts, liabilities and damages incurred or
arising as a result thereof.
14. Lozano vs. De Los Santos 273 SCRA 452
• SEC has jurisdiction over controversies arising out of intra-
corporate relations between and among stockholders.
15. Lyceum of the Philippines, Inc. vs. CA G.R. No. 1018097,
March 5, 1993
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• No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to
existing laws.
16. Industrial Refratories Corp. vs. CA
• The Code expressly prohibits the use of a corporate name
which is identical or deceptively or confusingly similar to that
of any existing corporation or to any other name already
protected by law.
17. Hall v. Piccio
• The personality of a corporation begins to exist only from the
moment a certificate of incorporation is issued and not
before.
18. Seventh Day Adventist v. Northeastern Mindanao
• Corporate existence begins only from the moment a
certificate of incorporation is issued. No such certificate was
ever issued to the petitioners and their predecessors-in-
interest at the time of the donation
19. Grace Christian High School vs. CA
• the corporate powers of all corporations formed under this
Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the
board of directors or trustees to be elected from among the
holders of stocks, or where there is no stock, from among
the members of the corporation, who shall hold office for
one (1) year and until their successors are elected and
qualified.
20. Gokongwei vs. SEC
• every corporation has the inherent power to adopt by-laws
for its internal government, and to regulate the conduct and
prescribe the rights and duties of its members towards itself
and among themselves in reference to the management of
its affairs.
21. Inter-Asia Investments vs. CA
• Doctrine of Apparent Authority – by allowing the president
to sign the agreement on its behalf, the corporation clothed
him with apparent authority to perform acts which are
expressly, impliedly, and inherently stated therein.
22. Nacpil vs. International Broadcasting
• by-laws may and usually do provide for such other officers,"
and that where a corporate office is not specifically indicated
in the roster of corporate offices in the by- laws of a
corporation, the board of directors may also be empowered
under the by-laws to create additional officers as may be
necessary.
23. Western Institute of Technology vs. Salas
• Members of the board may receive compensation as an
OFFICER or when they render services to the corporation in
a capacity other than as director or trustee, but not as a
director or BOD member only
24. Santos v. NLRC
• personal civil liability can also be said to lawfully attach to a
corporate director, trustee or officer; to wit: When —
a. He assents
§ to a patently unlawful act of the corporation, or
§ for bad faith or gross negligence in directing its
affairs, or
§ for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
b. He consents to the issuance of watered stocks or who,
having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto;
c. He agrees to hold himself personally and solidarily
liable with the corporation; or
d. He is made, by a specific provision of law, to personally
answer for his corporate action.
25. Sps. David et. al. vs. Construction Industry
• General Rule: The corporate directors, trustee or officers are
not personally liable for the acts of the corporation
Exception: He assents to a patently unlawful act of a
corporation or for bad faith or gross negligence in directing
its affairs
26. Malayang Samahan ng mga Manggagawa sa M. Greenfield
vs. Ramos
• personal civil liability can also be said to lawfully attach to a
corporate director, trustee or officer; to wit: When —
a. He assents
§ to a patently unlawful act of the corporation, or
§ for bad faith or gross negligence in directing its
affairs, or
§ for conflict of interest, resulting in damages to the
corporation, its stockholders or other persons;
b. He consents to the issuance of watered stocks or who,
having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto;
c. He agrees to hold himself personally and solidarily
liable with the corporation; or
d. He is made, by a specific provision of law, to personally
answer for his corporate action.
27. Prime White Cement Corp. vs. IAC
• All corporate powers shall be exercised by the BOD, except
as otherwise provided by law
28. Dee vs. SEC (GR No. 60502, July 16, 1991)
• RIGHT OF PRE-EMPTION – whenever the corporation would
issue new shares, they should offer it to the Shareholders
before the public.
29. McLeod vs. NLRC
• General Rule: a corporation that purchases the assets of
another will not be liable for the debts of the selling
corporation, provided the former acted in good faith and
paid adequate consideration for such assets
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• The failure of the corporation to file its bylaws within 1

Exception: when any of the following circumstances is
present:
a. where the purchaser expressly or impliedly agrees
to assume the debts,
 35. China Banking Corp vs. CA
b. where the transaction amounts to a consolidation
or merger of the corporations,
c. where the purchasing corporation is merely a
continuation of the selling corporation, and

d. where the transaction is fraudulently entered into
in order to escape liability for those debts.
30. Islamic Directorate of the Philippines vs. CA
• a corporation may, by a majority vote of its board of
directors or trustees, sell, lease, exchange, mortgage, pledge
or otherwise dispose of all or substantially all of its property
and assets for such consideration as its board of directors or
trustees may deem expedient,
requirements:
o 2/3 vote of the OCS
o Stockholders’ meeting called for that purpose
o Dissenting stockholders should have appraisal
rights
31. PNB v. Andrada Electric
• Piercing the veil of corporate fiction may be allowed only if
the following elements concur:
o control — not mere stock control, but complete
domination — not only of finances, but of policy
and business practice in respect to the transaction
attacked, must have been such that the corporate
entity as to this transaction had at the time no
separate mind, will or existence of its own;
o such control must have been used by the
defendant to commit a fraud or a wrong to
perpetuate the violation of a statutory or other
positive legal duty, or a dishonest and an unjust
act in contravention of plaintiff's legal right; and
o the said control and breach of duty must have
proximately caused the injury or unjust loss
complained of.
month does not result in the automatic dissolution of the
corporation, it is only a ground for revocation of its
registration after proper notice and hearing
• third persons are not bound by the contents of the by-laws
except when they have knowledge of its provisions either
actually or constructively
36. Salafranca vs. Philamlife (Pamplona) Village Homeowners
Association
• Amended by-laws shall not impair existing obligations and
contracts
37. Republic of the Philippines vs. COCOFED
• The 2-tiered test does not apply in cases of sequestered
shares purchased with public funds or prima facie public
funds or at least funds affected with public interest even
though the case is still pending
38. Chua vs. CA (GR No. 150793 November 19, 2004)
• A derivative suit may be filed by a Shareholder on behalf of
the corporation as the real party in interest only when the
Board of directors do NOT file a case.
• The 2 requirements of a derivative suit are:
o It must be alleged that it is a derivative suit,
meaning it is filed on behalf of the corporation
o It must include all indispensable parties, meaning
that the corporation itself must be impleaded
39. Expert Travel & Tours vs. CA
• In light of SEC Memo #15, teleconferencing and
videoconferencing of members of the BOD or private
corporation is allowed. Board meetings can be conducted
through teleconference or video conference

32. Nielson and Co. Inc. vs. Lepanto Mining

• A corporation may legally issue shares of stock in
consideration of services rendered to it by a person not a
stockholder, or in payment of its indebtedness. A share of
stock issued to pay for services rendered is equivalent to a
stock issued in exchange of property, because services is
equivalent to property.

33. Hydro Resources Contractors Corp. vs. NIA

• A corporation may be held in estoppel from denying as
against third persons the authority of its officers or agents
who have been clothed by it with ostensible or apparent
authority.

34. Loyola Grand Villas Homeowners Association vs. CA

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