Corporation Law Case Digest

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In Partial Fulfilment

Of the Requirements for the Subject

Law 321 (Corporation Law)

Corporation Law

Case Digest

Submitted to:

Atty. Maria Lulu G. Reyes

Submitted by:

ARUMIN, Lesley Jane B.

BAGUIDUDOL, Valentin Jr. G.

BAGUILAT, Lauriz G.

BUENO, Marc Crisante C.

CAMSOL, Haryeth M.

LUBANTE, Jessica B.

ORALLO, Joanna Marie C.

ORAS, Phylian Corazon W.

SANTOS, Hyacinth B.

SECTEL, Florence O.

TUGUIC, Joshua B.

Date Submitted:

March 8, 2014

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CORPORATION CODE OF THE PHILIPPINES

(Batas Pambansa Blg. 68)

I. FORMATION AND ORGANIZATION OF CORPORATIONS

A. General Principles

1. History of Business Organizations 2. Constitutional Basis, Art. XII, Sec. 16 3. Definitions of Corporation (Sec. 2) 4. Attributes of Corporation  Petron v. NCBA, 516 S 168 ___________________________________20  APT v. CA, 300 S 582 ________________________________________21  Mambulao Lumber v. PNB, 22 S 359  Hanil v. CA, 362 S 1

 Bache and Co. v. Ruiz , 637 S 823

 Sulo ng Bayan v. Araneta, 72 S 347

B. Classification of Corporations

1. Private v. Public Corporation

 Boy Scout of the Phil. v. COA, June 7, 2011 ____________________26

 Liban v. Gordon, July 15, 2009

 Baluyot v. Holganza, 325 S 526

 Vet. Fel. Of the Phil. v. Reyes, 483 S 526

 MIA v. CA, 495 S 591

2. Stock (Sec. 3) v. non-Stock (Sec. 3 and 87) 3. Open v. Close Corporation (Sec. 96 et. seq.)

4. Domestic v. foreign Corporation (Sec. 123 et. seq.) 5. Special Charter Corporation

6. Educational (Sec. 106 et. seq.)

7. Religious sole and aggregate (Sec. 109 et. seq.)

C. Stages in the Formation/Organization of a Corporation

1. Promotion

 March II Marketing v. Joson, December 12, 2011 _______________32

 Cagayan Fishing v. Sandiko, 65 P 223

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 Pioneer Insurance v. CA, 175 S 668

 Rizal Light v. Municipality of Morong, 25 S 258

2. Incorporation 3. Organization

D. Articles of Incorporation (Sec. 14 and 15): Contents

 Lanuza v. CA, 454 S 54

______________________________________37

1. Corporate Name (Sec. 18)

 Alonso v. Cebu, 417 S 115

___________________________________38

 Industrial Refractories v. CA, 390 S 252

 Ang mga Kaanib sa Iglesia ng Diyos v. Iglesia, December 12, 2001

 Universal Mills v. Universal Textile Mills, 78 S 62

 Lyceum of the Phil. v. CA, 219 S 610

 Indiana Aerospace University v. CHED, April 4, 2001

 Philips Export BV v. CA, 206 S 457

2. Primary Purpose (Sec. 14)

 Gala v. Ellice, 418 S 431

_____________________________________45

 Heirs of Pael v. CA, December 7, 2001

 Uy Siulong v. Director, 40 P 541

 Asuncion v. De Yriarte, 28 P 67

3. Secondary Purpose/s (Sec. 14)

4. Principal Office/Domicile (Sec. 14)

 Davao Light and Power Co. v. CA, August 20, 2001 _____________49

 Clavecilla Radio Sytem v. Antillon, 19 S 379

 Sy v. Tyson Enterprise, 119 S 367

 Young Auto Supply v. CA, 223 S 670

5. Term (Sec. 11 in rel. to Sec. 37, 81 and 120)

 Alhambra Cigar and Cigarette Mfg. v. SEC, 24 S 269 _____________53

6. Incorporators (Secs. 10 and 5)

4 | P a g e 8. Capital Stock

a) Authorized (Sec. 12) b) Subscribed (Sec. 13) c) Paid-up (Sec 13)

 MISCI-NACUSIP Local Chapter v. NWPC, 269 S 173 ______________54

d) Outstanding (Sec. 143)

e) Minimum Requirements for Incorporation

9. Classification of Shares (Sec. 6) a) Common v. Preferred

b) Par value v. No par value shares c) Voting v. Non-voting

d) Founder’s Shares (Sec. 7) e) Redeemable Preferred (Sec. 8) f) Treasury (Sec. 9)

10. Subscribers (Sec. 14)

11. Treasurer-in-trust (Sec. 15) 12. Special Provisions

a) “No Transfer” Clause

13. Amendment and/or rejection of Articles of Incorporation (Secs. 16 and 17)

 Republic Planters Bank v. CA, 216 S 738 _______________________55

E. Commencement of Corporate Existence (Sec. 19)/Theory of Concession

F. Doctrine of Corporate Entity

G. Doctrine of Piercing the Veil of Corporate Fiction: Instances

1. Public Convenience Cases; 2. Fraud Cases;

3. Alter Ego/Instrumentality Cases.

 PNB v. Hydro Resources, March 13, 2013 ______________________57

 Ramirez v. Mar Fishing, Inc., June 13, 2012

 Sarona v. NLRC, January 18, 2012

 Gold Line Tours v. heirs of Lacsa, June 18, 2012

 Hacianda Luisita v. Presidential Agrarian Council, January 22, 2011

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 Cagayan Valley Drug Corp v. CIR, 545 S 10

 Heirs of Pajarillo v. CA, 537 S 96

 Petron v. NLRC, 505 S 596

 China Banking v. Dyne-Sem, 494 S 493

 Marubeni v. Lirag, August 10, 2001

 Francisco v. Mejia, August 14, 2001

 PNB v. Andrada Electric, 382 S 244

 AZCOR Mfg. v. NLRC, 303 S 26

 Claparols v. CIR, 65 S 613

 CIR v. Norton and Harrison, August 31, 1964

 Concept Builders v. NLRC, 257 S 149

 Complex Electronics Employees Assoc. v. NLRC, 310 S 403

 Cordon v. Balicanta, October 4, 2002

 Delpher Trades v. IAC, January 2, 1988

 Del Rosario v. NLRC, July 24, 1990

 First International Bank v. CA, 252 S 259

 Francisco Motors v. CA, 309 S 73

 Laguio v. NLRC, 262 S 709

 Lim v. CA, 323 S 102

 Matuguina Integrated Wood Products v. CA, 263 S 490

 Manila Hotel Corp. v. NLRC, October 13, 2000

 Norton and Harrison v. Collector, 11 S 74

 San Juan Structural v. CA, 296 S 634

 Tan Boon Bee v. Jarencio, 163 S 205

 Telephone Eng’g and Service Co. v. WCC, 104 S 354

 Umali v. CA, September 13, 1990

 Vlason Enterprises v. CA, 310 S 26

 Villa Rey transit v. Ferrer, October 29, 1968

H. De Facto Corporation (Sec. 20)

 Hall v. Piccio, 86 P 603

______________________________________90

I. Corporation by Estoppel (Sec. 21)

 International Express v. CA, 343 S 74 __________________________91

 Lim Tiong v. PFGI, Inc., 317 S 728

 Albert v. University Publishing, 13 S 84

J. Non-user of Charters v. Continuous Inoperation (Sec. 22)

 Loyola Grand Villas v. CA, 276 S 681 __________________________94

II. BOARD OF DIRECTORS (SEC. 22 ET. SEQ.)

6 | P a g e B. Requirements

1. Qualifications/Qualifying shares (Sec. 24)

 Villafuerte v. Moreno, October 2, 2009 ________________________95

 Baguio v. CA, 26S 366

 Detective and Protective Bureau v. Cloribel, 26 S 255

 Grace Christian HS. CA, 281 S 133

 Lee v. CA, 205 S 752 2. Disqualifications (Sec. 27)  Brias v. Hord, 24 P 286 _____________________________________100 3. Residence 4. Nationality C. Election (Sec. 24) 1. Quorum 2. Voting

 Aurbach v. Sanitary Wares, 180 S 131 ________________________101

 Bataan Shipyard v. PCGG, 150 S 181

D. Report on Election (Sec. 26)

 Premium Marble v. CA, 264 S 11 _____________________________103

E. Term of Office/Holdover

 Seneres v. COMELEC and Robles, April 16, 2009 _______________104

F. How removed (Sec. 28)

 Lambert v. Fox, 26 P 588

___________________________________105

G. How Vacancy filled (Sec. 29)

 Valle Verde Country Club v. Africa, September 4, 209 __________106

H. How Compensated (Sec. 30)

 Singson, et al. v. COA, August 9, 2010 ________________________107

 Western institute v. Salas, 278 S 216

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 Lingayen Gulf v. Baltazar, 93 P 404

I. Authority of the Board of Directors (Sec. 24)



La Buga’al v. Ramos, 421 S 148

_________________________111



Shipside v. CA, 352 S 334



ABS-CBN v. CA, 301 S 573



Asset Privatization Trust v. CA, 300 S 582



BA Savings Bank v. Sia, 336 S 484



Montelibano v. Bacolod Murcia, 5 S 36



Powers v. Marshall, May 9, 1988



Premium Marble v. CA, 264 S 11

J. Delegation of Authority to Corporate Officers

1. Corporate Officers/meaning of “Office” vis-à-vis Employment

 Real v. Sangu Phil., January 19, 2011 _________________________120

 Matling v. Coros, October 13, 2010

 Manila Metal v. PNB, 511 S 444

 Ongkiko v. NLRC, 270 S 613

 Lao v. CA, 325 S 694

 De Tevera v. Phil. Tuberculosis Society, 112 S 243

2. Corporate Officers (Sec. 25); Qualifications and Disqualifications; Authority and Liabilities

 Matling v. Coros, October 13, 2010 __________________________126

 Okol v. Slimmers World, December 11, 2011

 Gomez v. PNOC DMC, November 27, 2009

 E.B. Villarosa and Partners, Co. v. Benito, 312 S 65

 SSPC v. Bardaje, 522 S 155

 Cagayan Valley Drug Corp v. CIR, 545 S 10

 Pabon v. NLRC, 296 S 8

 Vlason Enterprise v. CA, 310 S 26

 Prime White Cement v. IAC, 220 S 103

 Louis Vuitton SA v. Villanueva, 216 S 121 3. Executive Committee (Sec. 35)

4. “Doctrine of Apparent Authority’

 Banate v. Philippine Countryside, July 13, 2010 ________________136

 Sargasso v. PPA, July 5, 2010

 Associated Bank v. Sps. Ponstroller, 3 September 2009

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 Board of Liquidators v. Kalaw, 20 S 987

 Francisco v. GSIS, 7 S 577

 Rural Bank v. Ocfemia, 325 S 99

K. Three-Fold Duties of Directors and Officers: Diligence, Loyalty and Obedience

1. Duties (Sec. 31): Business Judgment Rule

2. Personal Liability of Directors and other Corporate Officers

 Ever Electrical v. Samahang Manggagawa, 13 June 2012 ________143

 Harpoon v. Francisco, 2 March 2011

 Ty v. NBI, 15 December 2010

 Queensland-Tokyo Commodities v. George, 8 September 2010

 Wensha Spa Center v. Yung, 16 August 2010

 Cebu Mactan v. Masahiro, 17 July 2009

 David v. National Federation of Labor Unions, 21 April 2009

 Soriano v. People, BSP and PDIC, 30 June 2009

 Cebu Country Club v. Elizagaque, 542 SCRA 65

 Caltex Inc. v. NLRC, 536 SCRA 175

 Atrium Management v. CA, 353 SCRA 23

 ARB Construction v. CA 332 SCRA 426

 Lim v. CA, 232 SCRA 102

 Francisco v. Mejia, 14 August 2001

 DBP v. CA, 16 August 2001

 AHS Philippines v. CA, 257 SCRA 319

 Complex Electronics v. NLRC, 310 SCRA 403

 Crisologo-Jose v. CA, 15 September 1989

 FCY Construction v. CA, 324 SCRA 270

 Llamado v. CA, 270 SCRA 423

 MAM Realty Development v. NLRC, 244 SCRA 797

 Naguiat v. NLRC, 269 SCRA 564

 Progress Homes v. NLRC, 269 SCRA 274

 REAHS Corporation v. NLRC, 271 SCRA 247

 Santos v. NLRC, 254 SCRA 673

 Sia v. People, 121 SCRA 655

 Tramat Mercantile v. CA, 238 SCRA 14

3. Self-Dealing Director/Officer

 Cojuangco v. Republic, 12 April 2011 _________________________170

 Mead v. McCullough, 21 P 95

 Prime White Cement v. IAC, 220 SCRA 103

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 Palting v. San Jose Petroleum, 18 SCRA 924 ____________________173

 DBP v. CA, 363 SCRA 307

5. Disloyalty

 Gokongwei Jr. V. SEC, 89 SCRA 336 __________________________175

 Strong v. Repide, 41 P 947

6. Watered Stocks

 Lirag Textile Mills v. SSS, 31 August 1987 ______________________177

 Nava v. Peers Marketing, 25 November 1976

7. Derivative Suit: Remedies to Enforce Personal Liability

 Ang v. Ang, 19 June 2013

__________________________________179

 Legaspi Towers 300 v. Muer, et. al, 18 July 2012

 Lisam Enterprises v. BDO, 23 April 2012

 STRADEC v. Radstock & PNCC, 4 December 2009

 Yu v. Yukayguan, 18 June 2009

 Gochan v. Young, 12 March 2001

 Western Institute v. Salas, 278 SCRA 216

 First International Bank v. CA, 252 SCRA 259

 Commart Philippines v. SEC, 198 SCRA 73

 Chase v. Buencamino, 136 SCRA 367

 San Miguel Corporation v. Kahn, 11 August 1989

 Everett v. Asia Banking, 49 P 512

 Gamboa v. Victoriano, 90 SCRA 40

 Reyes v. Tan, 3 SCRA 198

 Pascual v. Orozco, 19 P 84

III. POWERS OF CORPORATION (SECS. 36, ET. SEQ.)

A. In General (Sec. 36 in rel. to Arts. 44-46 of the Civil Code of the Philippines)

1. Theory of Special Capacities v. Theory of General Capacities

 Acebedo Optical v. CA, 31 March 2000 _______________________193

2. Express, Implied and Incidental Powers, Distinguished

 Pilipinas v. SEC, 356 SCRA 193 _______________________________194

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 Luneta Motors v. Santos, 5 SCRA 809

 Teresa Electric v. PSC, 21 SCRA 199

 Powers v. Marshall, 9 May 1988

3. Power to Have/Use Corporate Name and Seal

 Laureano Investment v. CA, 272 SCRA 253 ____________________198

4. Power to sue and be sued

 Tam v. Hon. Makasiar, 29 January 2001 _______________________199

 Bitong v. CA, 292 SCRA 503

 Special Services Corporation v. Centro La Paz, 28 April 1983

 R Transport Corporation v. CA, 241 SCRA 76

5. Power to acquire, dispose, encumber property Art. XII, Section 2-3, 1987 Constitution

 Director of Lands v. CA, 14 March 1988 _______________________203

6. Power to Make Donations

 Pirovano v. Dela Rama Steamship Co., 96 P 335 ________________204

7. Other Powers

B. To Increase or Decrease Capital Stock (Sec. 38)

 Madrigal V. Zamora, 51 S 355

______________________________________205

 Philtrust v. Rivera, 44 P 469

C. To Incur, Create, Or Increase Bonded Indebtedness (Sec. 38)

D. To Deny Pre-Emptive Rights (Sec. 39)

 Datu Benito v. SEC, 123 S 722 and __________________________________207

 Dee v. SEC, 199 S 238 as clarified through

 SEC Letter Opinion, 10 March 2000

 PCGG v. SEC, 30 June 1988

 Republic v. Sandiganbayan, 4 December 2000

E. To Sell Or Otherwise Dispose Of All or Substantially All Of Corporate

Assets (Sec. 40)

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 PNB v. Andrada Electric, 381 S 244 __________________________________211

 Islamic Directorate v. CA, 272 S 454

 Edward J. Nell Co. v. Pacific Farms, 15 S 415

 Esguerra v. CA, 3 February 1997

 Lopez Realty v. Fontecha, 247 S 183

F. To Invest Corporate Funds In Another Corporation or Business (Sec. 42)

 Gokongwei v. SEC, 89 S 336

_______________________________________216

 Dela Rama v. Ma-ao Sugar, 7 S 247

G. To Acquire Own Shares (Sec. 41)

 Boman Environmental v. CA, 22 November 1988 _____________________218

 Steinberg v. Velasco, 52 P 953

H. To Declare Dividends

1. Kinds: Cash, Stock, Property, Scrip

 Conjuangco v. Republic, 24 April 2009 ________________________220

2. Declaration, Payment and Record Dates

 Cojuangco, et al v. Sandiganbayan, 24 April 2009 _______supra (220)

3. Limitation on Retention of Surplus Profits

 Steinberg v. Velasco, 52 P 953 _______________________________222

 Nielson v. Lepanto, 26 S 540

 CIR v. Manning, 66 S 14

 Madrigal v. Zamora, 151 S 355

 Republic Planters v. Agana, 269 S 1

 Bitong v. CA, 292 S 503

 CIR v. CA, 301 S 152

I. To Enter into a Management Contract (Sec. 44)

 Aurbach v. Sanitary Wares, 180 S 131 (joint venture) __________________229

 PNB v. Producers’ Warehouse, 42 P 608

 Nielson and Co. v. Lepanto Mining, 26 S 541

 Tuason v. Bolanos, 28 May 1954

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 Heirs of Pael v. CA, 371 S 587

______________________________________233

 Pilipinas Loan v. SEC, 356 S 193

 Crisologo v. Ca, 117 S 594

 Carlos v. Mindoro Sugar, 57 P 343

 Pirovano v. Dela Rama Steamship Co., 96 P 335

 Republic v. Acoje Mining, 7 S 361

 Republic v. Security Credit and Acceptance Corp., 19 S 58

IV. BY-LAWS (Sec. 46, et. seq)

A. Function

 Nakpil v. IBC, 370 S 653

___________________________________________240

 PMI Colleges v. NLRC, 277 S 462

 Loyola Grand Villas v. CA, 276 S 681

 Citibank NA v. Chua, 220 S 75

B. Kinds

C. When to adopt and file (Sec. 46)

 Loyola Grand Villas v. Ca, 276 S 681 _________________________________244

D. Contents (Sec. 47)

1. SEC policy on date of annual stockholders’ meeting

2. Authority to elect additional by-laws officers

 Fleischer v. Botica Nolasco, 47 P 583 __________________________245

 Gokongwei Jr. v. SEC, 89 S 336

 Government v. El Hogar Filipino, 50 P 399

E. Amendment and/or rejection of By Laws

 Salafranca v. PhilAmLife, 300 S 469 _________________________________248

V. MEETINGS OF STOCKHOLDERS AND THE BOARD OF DIRECTORS

A. Kinds (Sec. 49)



Pena v CA, 193 S 717

13 | P a g e B. When and where held (Secs. 50, 51 and 52 in rel. to Sec 93)

C. Notice required (Secs. 50 and 53)

 Board of Liquidators v. Tan, 105 P 426 _______________________________250

D. Quorum required (Secs. 25 and 52)

 Javellana v. Tayo, 29 December 1962 _______________________________251

E. Who presides (Sec. 54)

F. Who could attend and vote (Secs. 25 and 58)

 Sales v. SEC, 13 January 1989

______________________________________252

 Ponce v. Encarnacion, 94 P 81

 Lopez v. Ericta, 45 S 539

VI. VOTING

A. Who May Exercise

 Gamboa v. Teves, 28 June 2011

____________________________________255

 COCOFED, et al. vs. Republic, 11 February 2010 ______________________257

 Republic v. COCOFED, 372 S 462

 Lee v. CA, 205 S 752

 Republic v. Sandiganbayan, 402 S 84

B. Pledgors, mortgagors, executors, receivers and administrators (Sec. 55)

C. Joint owners of stack, ITF shares, and/or shares (Sec. 56) D. Non-voting shares (Sec. 6)

E. Treasury Shares (Sec. 57 in rel. to Sec. 9) F. Proxies (Sec. 58)

G. Voting trust agreement (Sec. 59)

 Cordon v. Balicanta, 4 October 2002 ________________________________261

 NIDC v. Aquino, 163 S 153

 Lambert v. Fox, 26 P 588

VII. CAPITAL STRUCTURE STOCKS AND STOCKHOLDERS

14 | P a g e 1. Distinguished from Capital

2. Authorized (Sec. 12)

3. Subscribed (Sec. 13)

4. Paid-up (Sec. 13)

5. Outstanding (Sec. 143)

6. Pre-requisites to Incorporation (Sec. 13)

7. As Legal/Stated Capital: Trust Fund Doctrine

 PLDT v. NTC, 539 S 365

_____________________________________264

 NTC v CA, 370 P 538 (1999)

8. As Nationality Basis: Control Test vs. “Grandfather” Rule

9. Voting Control Test v. Beneficial Control Test

R.A. 7042, Foreign Investment Act, as amended

SEC Letter-Opinion dated 28 November 2007

___________266

 Express Investment v. BayanTel, 5 December 2012 _____________268

 Redmont Consolidated v. McArthur Mining, SEC En Banc Case No. 09-09-177, 25 March 2010

_____________________________________270

 Agan v. PIATCO, 21 January 2004 ____________________________271

B. Classification of Shares (Sec. 6)

1. Par Value v. No Par Value Shares 2. Voting v. Non-voting

 Gamboa v. Teves, 28 June 2011 _______________________supra (266)

 Castillo v. Balinghasay, 18 October 2004 ______________________272

 Sales v. SEC, 169 S 109

3. Common v. Preferred 4. Kinds of Preferred Shares 5. Founders’ Shares (Sec. 7)

15 | P a g e 6. Redeemable Preferred (Sec. 8)

 Republic Planters’ Bank v. Agana, 269 S 1 _____________________274

7. Treasury (Sec. 9)

 CIR v. Manning, 66 S 14

_____________________________________275

 San Miguel Corporation v. Sandiganbayan, 14 September 2000

C. Trust Fund Doctrine

 National Telecommunications Commission v. SEC, 311 S 509 ________277

 Ong v. Tiu, 401 S 1

D. What is an “issue”

E. What is a “subscription” (Sec. 60)

 Ong v. Tiu, 401 S 1

____________________________________________279

 Bayla v. Silang Traffic, 73 P 557

 Salmon, Dexter and Co. v. Unson, 47 P 649

 Sunset View Condominium v. Campos, 104 S 295

 Velasco v. Poizat, 37 P 802

F. Acquisition and Ownership of Shares in a Corporation; Extent of Proprietary Right/Doctrine of Limited Liability

 Cojuangco v. Republic, 12 April 2011 ____________________________284

 Espiritu v. Petron, 24 November 2009

 Crisostomo v. SEC, 179 S 146

 Garcia v. Lim, 59 P 562

 Magsaysay-Labrador v. CA, 180 S 266

 Nicolas v. CA, 27 March 1998

 Ramos v. CA, 179 S 719

 Saw v. CA, 195 S 740

G. Pre-incorporation Subscriptions (Sec. 61)

H. Consideration for Stocks (Sec. 62)

 Apodaca v. NLRC, 172 S 442

____________________________________292

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 National Exchange Co. v. Dexter, 51 P 601

 Nielson and Co. v. Lepanto Mining, 26 S 541

 Trillana v. Quezon College, 93 P 383

I. Unpaid Subscriptions

1. Interest on unpaid subscriptions (Sec. 66) 2. Right of unpaid shares (Sec. 72)

3. Collection of unpaid subscription

a) Call: When necessary (Sec. 67)

 Garcia v. Suarez, 67 P 441 _________________________297

 PNB v. Bitulok Sawmill, 23 S 1366

 Velasco v. Poizat, 37 P 802

b) Court action (Sec. 70)

 Lumanlan v. Cura, 59 P 746 ________________________300

 Edward Keller v. COB Group Marketing, 16 January 1986

4. How shares become delinquent (Sec. 67)

5. Effect of Delinquency (Sec. 71 in rel. to Sec. 43)

 Valley Golf & Country Club, Inc. v. Caram, 16 April 2009 ______302

 Calatagan Golf Club, Inc. v. Clemente, Jr., 16 April 2009

6. Delinquency Sale (Sec. 68)

7. Grounds to Question Delinquency Sale (Sec. 69)

J. Issuance of Certificates of Stock (Sec. 64)

 Fua Cun v. Summers, 44 P 705 as compared with __________________304

 Baltazar v. Lingayen Gulf, 14 S 522

 Tan v. SEC, 206 S 740

 Embassy Farms v. CA, 188 S 492

K. Right to Transfer of Shares/Validity of Restrictions on Right (Sec. 98 in rel. to S15)

 Makati Sports Club v. Cheng, 16 June 2010 _______________________308

 Fleischer v. Botica Nolasco, 47 P 583

 Padgett and Babcock v. Templeton, 59 P 232

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 Thompson v. CA, 298 S 280

 Yuchengco v. Velayo, 115 S 307

 Lim Tay v. CA, 293 S 634

L. Transfer of Shares of Stock and Registration (Sec. 63)

 Musni Puno v. Puno Enterprises, 11 September 2009 _______________315

 Cojuangco, et al v. Sandiganbayan, 24 April 2009

 Republic v. Sandiganbayan, 402 S 84

 Rural Bank of LIpa v. CA, 366 S 188

 BLTB v. Bitanga, 10 August 2001

 Abejo v. Dela Cruz, 149 S 643

 Batong Buhay Gold Mines v. CA, 147 S 4

 Chemphil Export v. CA, 251 S 257

 Chua Guan v. Samahang Magsasaka , 62 P 472

 CIR v. Anglo-California Bank, 106 P 903

 Delos Santos v. Republic, 96 P 577

 De Erquiaga v. CA, 27 September 1989

 Garcia v. Jomouad, 26 January 2000

 Lopez v. CA, 114 S 671

 Monserrat v. Ceron, 58 P 469

 Puyat v. De Guzman, 113 S 31

 Razon v. IAC, 207 S 234

 Rivera v. Florendo, 144 S643

 Santamaria v. Hongkong and Shanghai Bank, 89 P781

 Torres v. CA, 278 S 793

 Won v. Wack-wack Golf and Country Club, 104 P 466

M. Lost or Destroy Certificates (Sec. 73)

 PHILEX Mining v. Reyes, 118 S602 _______________________________336

VIII. CORPORATE BOOKS AND RECORDS

A. Books to be kept (Sec. 74)

1. Stock and transfer book

 Bitong v. CA, 292 S 503

__________________________________337

2. Stock transfer agent (Sec. 74) 3. Minutes book

4. Record of Business transactions

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 Sy, et al. v. 30 March 2009

______________________________________338

 Africa v. PCGG, 205 S39

 RP V. Sandiganbayan, 199 S 39

 Gokongwei v. SEC, 89 S 336

 Gonzales v. PNB, 122 S 489

 Pardo v. Hercules Lumber, 47 P 964

 Philpotts v. Philippine Manufacturing Co, 40 P 471

 Republic v. Sandiganbayan, 199 S 39

C. Right to financial statements (Sec. 75)

IX. MERGER AND CONSOLIDATION

A. Corporate Combinations, Purposes and Methods

B. “Constituent” corporation vs. “consolidated” corporation (Sec. 76) C. Corporate approvals required (Sec. 77)

D. Plan of merger or consolidation (Sec. 76) E. Articles of merger or consolidation (Sec. 78)

F. Effects of merger or consolidation (Sec. 80)

 BPI v. BPI Employees Union, 18 August 2010 ______________________346

 PNB v. Andrada Electric, 381 S 244

 Babst v. CA, 135 S 37

 Associated Bank v. CA, 290 S 639

 Alger Electric v. CA, 135 S 37

 CIR v. Norton and Harrison, 11 S 714

 CIR v. Rufino, 27 February 1987

 CIR v. Bio Hong, 8 April 1991

X. APPRAISAL RIGHT

A. Instances of appraisal right (Sec. 81)

B. Requirements of exercise of appraisal right (Sec. 82 and 86) C. Effect of demand (Sec. 83)

D. Who bears costs of appraisal (Sec. 85)

E. Notation on stock certificates of dissenting stockholders (Sec. 86)

XI. NON-STOCK CORPORATIONS

A. Purposes (Sec. 88)

 Chinese YMCA v. Ching, S 460

__________________________________354

19 | P a g e B. Distribution of Income (Sec. 87)

C. Scope to right to vote (Sec. 89)

D. Voting (Sec. 89)

 Litonjua v. CA, 286 S136

_______________________________________356

 PPSTA v. Apostol, 55 S 743

E. Transferability of interest or membership (Sec. 90) F. Governing Board (Sec. 92)

1. Number 2. Term

G. Election of Officers (Sec. 92) H. Place of meetings (Sec. 93)

I. Distribution of assets in case of dissolution (Sec. 94)

XII. CLOSE CORPORATIONS

A. Requirements for formation (Sec. 96)

 Dulay Enterprises v. CA, 225 S 658 _______________________________358

 San Juan Structural Steel v. CA, 296 S 63

 Naguiat v. NLRC, 269 S 54

B. Restrictions on formation of close corporations (Sec. 96)

C. Distinctions from regular corporations 1. Management (Sec. 97)

2. Meetings (Sec. 101) 3. Voting (Sec. 97) 4. Quorum (Sec. 97)

5. Board authority (Sec. 97) 6. Pre-emptive rights (Sec. 102) 7. Buy back of shares

8. Resolutions of deadlocks (Sec. 104)

D. Provisional director (Sec. 104)

E. Appraisal right in regular corporations vs. withdrawal right of a stockholder of a close corporation (Sec. 105)

XIII. SPECIAL CORPORATIONS

A. Educational corporations

20 | P a g e 2. Art. IV, Sec. 28 (3) in rel. to Art. XIV, Sec. 4 (2)(3)(4), 1987

Constitution

B. Religious corporations

1. Art. IV, Sec. 28 (3) and Art. 29 (2), 1987 Constitution

 RP v. IAC, 15 January 1988

_______________________________361

 Director of Lands v. CA, 14 March 1988

2. Corporation sole

3. Corporation aggregate

 IEMELIF, Inc., et al. v. Bishop Lazaro, et al., 6 July 2010 _______363

 IEMELIF, Inc., et al. v. Juane, 18 September 2009

XIV. DISSOLUTION OF CORPORATIONS

A. Methods

1. Voluntary

a. Where creditors are not affected (Sec. 118)

 Vesagas v. CA, 5 December 2001 ___________________365

b. Where creditors are affected (Sec. 119)

 Avon Dale Garments v. NLRC, 246 S 733 ____________366

 Daguhoy Enterprises v. Ponce, 96 P 15

2. Involuntary (Sec. 121 in rel. to Sec. 6, par. N, PD 902-A)

 PNB v. CFI of Pasig, 209 S 294 ____________________________368

3. Shortening of corporate term (Sec. 120 in rel. to Secs. 16 and 37)

B. Liquidation (Sec. 122)

1. Methods

 Metropolitan v. Centro Development, 13 June 2012 _________369

 Metropolitan Bank Inc. v. Riverside Mills, 8 September 2010

 Yam v. CA, 303 S 1

 Alhambra Cigar and Cigarette Mfg. v. 24 S 269

21 | P a g e

 Republic v. Marsman Dev., 27 April 1972

 Tan Tiong Bio v. CIR, 4S 986

2. Duration

 Reynolds, Phil. V. ca, 169 s 220 ___________________________376

 Mambulao v. PNB, 22 S 359

3. Powers of corporation at liquidation

 Aguirre v. FQB7, 9 January 2013 __________________________378

 Catmon Sales v. Liquidator, 15 January 2010

 Knecht v. United Cigarette, 384 S 45

 Chua v. NLRC, 190 S 558

 Clemente v. CA, 242 S 717

 Gelano v. CA, 103 S 90

 Reburian v. CA, 301 S 344

 Republic Planters Bank v. CA, 216 S 738

XV. FOREIGN CORPORATIONS

A. Definition and Rights

 Avon v. Court of Appeals, August 29, 1997 ________________________386

 San Jose Petroleum v. Court of Appeals, 18 SCRA 591

B. Requirements for the Establishment of a Branch/License to do Business in

the Philippines

1. Documentary

 Georg Grotjahn vs. Isnani, 235 SCRA 216 __________________388

2. Deposit

3. Appointment of Resident Agent

 New York Marine Managers vs. CA, 249 S 417 ______________389

C. Applicable laws

D. Amendment of License

 Aetna Casualty vs. Pacific Star, 29 December 1977 __________________390

22 | P a g e

 Shmid and Oberly vs RJL, 18 October 1988

E. “Doing business” with or without license: Suits By or Against Foreign Corporation

 AM No. 11-3-6-SC New Rule on Service Summons on Foreign Juridical Entities

 Steelcase, Inc. vs. Desing International, 18 April 2012 _______________393

 PDIC vs. Citibank, 11 April 2012

 Cargill, Inc. vs. Intra Strata, 15 March 2010

 Sehwani vs. In and Out Burger, 536 S 225

 MR Holdings vs. Bajar, 380 S 617

 Commissioner of Customs vs. KMK Gani, 182 S 591

 Communications an Materials Designs vs. CA, 260 S 144

 Columbia Pictures vs. Court of Appeals, 261 S 144

 Eriks PTE Ltd. Vs. CA, 276 S 567

 Far East International vs. Nnkai Kogyo, 6 S 725

 Facilities Management vs. Dela Osa, 89 S 131

 HB Zachray and Co. vs. Court of Appeals, 232 S 29

 Hutchison Ports vs. SBMA, 31 August 2000

 La Chemise Lacoste vs. Fernandez, 129 S 373

 Marubeni Nederlands vs. Tensuan, 28 September 1990

 Phil. Columbia vs. Lantin, 39 S 376

 Philip Morris vs. Fortune Tobacco, 493 S 333

 Puma vs. IAC, 158 S 233

 SBMA vs. Universal International, 14 September 2000

 Tibe vs. Reyes, 39 S 304

 Universal Rubber vs. Court of Appeals, 130 S 104

 Van Zuiden vs. GTVL Industries, 523 S 233

SECURITIES AND EXCHANGE COMMISSION LAW

(P.D. No. 902-A, as Amended by R.A. No. 8799 or Securities Regulation Code)

I. STRUCTURE OF THE SECURITIES AND EXCHANGE COMMISSION

II. ENTITIES UNDER ABSOLUTE JURISDICTION, SUPERVISION AND CONTROL OF THE SEC

A.

B. Investment Houses C. Financing Companies

III.

 SEC vs. PFEC, 495 S 579

_______________________________________________415

23 | P a g e

 Quasha vs. SEC, 83 S 557

 Traders’ Royal Bank vs. Court of Appeals, 26 September 1989

 VICMAR Development vs. Court of Appeals, 185 S 634

IV. ORIGINAL AND EXCLUSIVE JURISDICTION OF THE REGIONAL TRIAL COURTS

 Orendain vs. BF Homes, 506 S 634

_____________________________________420

 Pascual vs. Court of Appeals, 339 S 117

A. Devices of schemes amounting to fraud of misrepresentation

 Fabia vs. Court of Appeals, 388 S 574 ____________________________422

 A & A continental vs. SEC, 225 S 314

 Alleje vs. Court of Appeals, 240 S 495

 Banez vs. Dimensional Construction , 140 S 249

 Sesbreno vs. Court of Appeals, 240 S 606

B. Controversies arising out of intra-corporate of partnership relations

 Aguirre vs. FQB7, 9 January 2013 _______________________________427

 Go, Lim, et al. vs. Distinction Properties, 25 April 2012

 Strategic Alliance vs. Star Infrastructure, 17 November 2010

 GD Express vs. Court of Appeals, 8 May 2009

 Iglesia vs. Juane 18 September 2009

 GD Express Worldwide N.V. vs. Court of Appeals, 8 May 2009

 Intestate Estate of Ty vs. Court of Appeals, 356 S 661

 Fabia vs. Court of Appeals, 363 S 427

 Vesagas vs. Court of Appeals, 371 S 508

 Abejo vs. Dela Cruz, 149 S 654

 Aguinaldo vs. SEC, 163 S 262

 Pereyra vs. IAC, 181 S 244

 Mainland Construction vs. Molvilla, 250 S 290

 SEC vs. Court of Appeals, 201 S 124

 Sunsetview Condominum vs. Campos, 104 S 295

 Western Institute of Technology vs. Salas, 21 August 1997

C. Controversies in the Election or appointment of corporate officers

 Real v. Sangu Phil., 19 January 2011 _____________________________442

 March II marketing v. Joson, 12 December 2011

 Matling v. Coros, 13 October 2010

 Garcia v. Eastern Telecom, 1 April 2009

 De Rossi v. NLRC, 314 S 245

 Espino v. NRC, 240 S 52

 Estrada v. NLRC, 262 S 709

 Islamic Directorate v. CA 272 S 454

24 | P a g e

 Paguio v. NLRC, 253 S 166

 Pearson and George v. NLRC, 253 S 136

 Apodaca v. NLRC, 172 S 442

 PSBA v. Leano, 127 S 778

 Tabang v. NLRC, 266 S 462

 Union Motors v. NLRC, 314 S 531

D. Petitions for declaration in the state of suspension of payments R.A. 10142 – The Financial Rehabilitation and Insolvency Act of 2010 A.M. No. 12-12-11-SC 2013 Financial Rehabilitation Rules of Procedure

 Express Investment v. Bayantel, 5 December 2012 _________________457

 Advent Capital v. Alcantara, 25 January 2012

 Siochi Fichery v. BPI, 19 October 2011

 Panililio v. RTC, 2 February 2011

 Castillo v. Uniwide Warehouse, 30 April 2010

 Pacific Wide v. Puerto Asul, 25 November 2009

 PNB and ECPIB v. CA, 20 January 2009

 Pryce Corp. v. CA, 543 S 657

 Uniwide v. Jandecs Corp. 541 S 158

 BPI v. SEC, 541 S 294

 Ching v. Land Bank of the Philippines, 201 S 191

 PCIB v. CA, 18 April 1989

 Radiola-Toshiba v. IAC, 18 July 1991

 RCBC v. IAC, 213 S 223

 Rubberworld v. NLRC, 305 S 722

25 | P a g e

SECURITIES REGULATIONS CODE

(Republic Act No. 8799)

I. OVERVIEW OF THE FINANCIAL MARKETS

A. Capital Markets

1. Equities Capital (e.g. stock market)

2. Debt Capital (e.g. money market or bond market)

B. Non-Capital Markets

1. Commodities Market 2. Foreign Exchange Market 3. Options Market

II. REGISTRATION OF SECURITIES

A. Securities Defined (Sec. 3.1)

B. Elements of an Investment Contract

 Securities and Exchange Commission v. W.J. howey Co., 328 U.S. 293 (1946)

 Securities and Exchange Commission v. prosperity.Com, Inc., 25 January 2012

 Power homes Unlimited v. SEC and Manero, 2 February 2008

 SFC v. Performance, 495 S 579

 Suzuki v. De Guzman, 496 S 651

 Baviera v. Paglinawan, 515 S 170

C. What securities are required to be registered (Sec. 8)

 Timeshare Realty v. Lao, 544 S 254

 Makati Stock Exchange v. SEC, 14 S 620

26 | P a g e

 Philippine Stock Exchenge v. SEC, 281 S 232

D. Exempt Securities (Sec. 9)

E. Exempt Transactions 9Sec 10)

 Timeshare Realty Co. v. Lao, 522 S 254

 Nestle Phils. V. CA, 203 S 504

F. Public Companies

 Philippine Veterans Bank v. Callangan, 3 August 2011

G. Registration Statement (Sec. 12) 1. Contents (Sec. 12.1-2.3) 2. Attachments

3. Signature (Sec. 12.4)

H. Grounds for Rejection of Registration Statement (Sec. 13)

I. False Registration (Sec. 56)

J. Limitations on Actions for False Registration Statement (Sec. 62)

III. TRADING IN SECURITIES

A. Margin Requirements (Sec. 48) and Restrictions on Borrowings (Sec. 49)

 Carolina Industries v. CMS Stock Brokerage, 97 S 734

B. Brokers/Dealers: Chinese Wall; Self-Regulatory Organizations; Stock Exchange

C. Regulation of Options Trading (Sec. 25) 1. Option

2. Put 3. Call

4. Straddle or Spread

D. Manipulations of Security Prices; Devices and Practices (Sec. 24) 1. Boiler Room Operations

2. Wash Sales 3. Daisy Chain 4. Painting the Tape 5. Marketing the Close 6. Hype and Dump 7. Short Sale 8. Matched Order 9. Stop-Loss Order

27 | P a g e E. Fraudulent Transactions (Sec. 26)

 Phil. Asso. Of Stock Transfer and Agencies v. CA

 SEC v. CA, 246 S 738

 Onapal v. CA, 218 S 281

F. Insider’s Duty to Disclose When Trading (Sec. 27) 1. Insider Defined

2. Material or Significant Facts



Strong v. Repide, 41 P 947

3. Disclosure Regulations for Publicly-Listed Shares



Union Bank of the Phil. v. SEC, June 2001

IV. PROTECTION OF SHAREHOLDER’S INTEREST

A. Tender Offers (Sec. 19)

 CEMCO v. National Life, 7 August 2007

B. Transactions of Directors, Officers and Principal Stockholders (Sec 23)

V. LIABILITIES

A. Administrative Sanctions (Sec. 54) B. Civil Liabilities (Secs. 58-61)

1. Amount and Kinds of Damages (Sec. 63.1) 2. Solidary Liability (Secs. 63.2 and 63.3) 3. Limitation of Actions (Sec. 62)

C. Criminal Liabilities (Sec. 73)

D. Settlements/Nolo Contendere or Consent Decree (Sec. 55)

CORPORATION CODE

(Batas Pambansa Blg. 68)

28 | P a g e

Formation and Organization of Corporations

Attributes of Corporation

PETRON CORPORATION vs.

NATIONAL COLLEGE OF BUSINESS AND ARTS G.R. No. 155683. February 16, 2007 FACTS:

The V. Mapa properties owned by Felipe and Enrique Monserrat, Jr., were mortgaged to DBP as part of the security for the loan of P5.2 million by MYTC and Monserrat Co. MYTC mortgaged four parcels of land located in Manila. One-half of Felipe‘s undivided interest in the V. Mapa properties was levied upon in execution of a money judgment rendered by the RTC in the Manila case. DBP challenged the levy through a third-party claim asserting that the V. Mapa properties were mortgaged to it and were, for that reason, exempt from levy or attachment. The RTC quashed it. MYTC and the Monserrats got DBP to accept a dacion en pago arrangement whereby MYTC conveyed to the bank the four mortgaged Quiapo properties as full settlement of their loan obligation. But despite this agreement, DBP did not release the V. Mapa properties from the mortgage. Felipe, acting for himself and as Enrique‘s attorney-in-fact, sold the V. Mapa properties to respondent NCBA. The Monserrats failed to comply with this undertaking. This instigated the civil action filed by NCBA.

During the pendency of the case, ½ of Enrique‘s undivided interest in the V. Mapa properties was levied on in execution of a judgment of the Makati case holding him liable to Petron on a 1972 promissory note. Petron, the highest bidder, acquired both Felipe‘s and Enrique‘s undivided interests in the property. Petron intervened in the NCBA case.

ISSUE:

Whether or not Petron should be held liable for exemplary damages and attorney‘s fees.

RULING: NO.

Article 2208(5) contemplates a situation where one refuses unjustifiably and in evident bad faith to satisfy another‘s plainly valid, just and demandable claim, compelling the latter needlessly to seek redress from the courts. In such a case, the law allows recovery of money the plaintiff had to spend for a lawyer‘s assistance in suing the defendant – expenses the plaintiff would not have incurred if not for the defendant‘s refusal to comply with the most basic rules of fair dealing. It does not mean, however, that the losing party should be made to pay attorney‘s fees merely because the court finds his legal position to be erroneous and upholds that of the other party, for that would be an intolerable transgression of the policy that no one should be penalized for exercising the right to have contending claims settled by a court of law. In fact, even a clearly untenable defense does not justify an award of attorney‘s fees unless it amounts to gross and evident bad faith.

No gross and evident bad faith could be imputed to Petron merely for intervening in NCBA‘s suit against DBP and the Monserrats in order to assert what it believed and had good reason to believe. The rule in this jurisdiction is that the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may even consider the question of whether exemplary damages should be awarded. No exemplary damages may be awarded without the plaintiff‘s right to moral, temperate, liquidated or compensatory damages having first been established.

ASSET PRIVATIZATION TRUST vs.

29 | P a g e COURT OF APPEALS, JESUS S. CABARRUS, SR., JESUS S. CABARRUS, JR., JAIME T. CABARRUS, JOSE MIGUEL CABARRUS, ALEJANDRO S. PASTOR, JR., ANTONIO U. MIRANDA, and MIGUEL M. ANTONIO, as Minority Stock-Holders of

Marinduque Mining and Industrial Corporation G.R. No. 121171. December 29, 1998 FACTS:

MMIC, PNB and DBP executed a Mortgage Trust Agreementwhereby MMIC, as mortgagor, agreed to constitute a mortgage in favor or PNB and DBP as mortgagees, over all MMIC's assets. Article IV of the Mortgage Trust Agreement provides for Events of Default, which expressly includes the event that the MORTGAGOR shall fail to pay any amount secured by this Mortgage Trust Agreement when due. In various requests for advances/remittances of loans if huge amounts, Deeds of Undertaking, Promissory Notes, Loan Documents, Deeds of Real Estate Mortgages, MMIC invariably committed to pay either on demand or under certain terms the loans and accommodations secured from or guaranteed by both DBP and PNB. Because of the tremendous loans obtained, a financial restructuring plan (FRP) designed to reduce MMIC's interest expense through debt conversion to equity was drafted SGV, however, it was never adopted.

The various loans and advances made by DBP and PNB to MMIC had become overdue and since any restructuring program relative to the loans was no longer feasible, and in compliance with the directive of Presidential Decree No. 385, DBP and PNB as mortgagees of MMIC assets, decided to exercise their right to extrajudicially foreclose the mortgages in accordance with the Mortgage Trust Agreement. The assets were eventually transferred to APT. SHs of MMIC thereafter filed a derivative suit against DBP and PNB praying that the foreclosure be annulled, that the FRP be followed and damages. In arbitration proceedings, MMIC obtained a favorable decision. Court of Appeals denied due course and dismissed the petition for certiorari. ISSUE:

Whether or not the MMIC is entitled to moral damages. RULING:

NO.

As a rule, a corporation exercises its powers, including the power to enter into contracts, through its board of directors. While a corporation may appoint agents to enter into a contract in its behalf, the agent should not exceed his authority. In the case at bar, there was no showing that the representatives of PNB and DBP in MMIC even had the requisite authority to enter into a debt-for-equity swap. And if they had such authority, there was no showing that the banks, through their board of directors, had ratified the FRP.

Further, how the MMIC could be entitled to a big amount of moral damages when its credit reputation was not exactly something to be considered sound and wholesome. Under Article 2217 of the Civil Code, moral damages include besmirched reputation which a corporation may possibly suffer. A corporation whose overdue and unpaid debts to the Government alone reached a tremendous amount of P22 Billion Pesos cannot certainly have a solid business reputation to brag about.

MAMBULAO LUMBER COMPANY vs.

30 | P a g e PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy Provincial

Sheriff of Camarines Norte G.R. No.L-22973.January 30, 1968 FACTS:

Plaintiff applied for an industrial loan of P155, 000.00 with the PNB and the former offered real estate, machinery, logging and transportation equipment as collaterals. The application was approved for a loan of P100, 000.00 only. To secure the payment of the loan, the plaintiff mortgaged to defendant PNB a parcel of land, together with the buildings and improvements existing thereon, situated in the province of Camarines Norte, and covered by TCT No. 381 of the land records of said province, as well as various sawmill equipment, rolling unit and other fixed assets of the plaintiff, all situated in its compound in the aforementioned municipality.

PNB released from the approved loan the sum of P27, 500.00, for which the plaintiff signed a promissory note wherein it promised to pay to the PNB. PNB made another release of P15, 500.00 as part of the approved loan granted to the plaintiff and so on the said date, the latter executed another promissory note. Plaintiff failed to pay the amortization on the amounts released to and received by it. Repeated demands were made upon the plaintiff to pay its obligation but it failed or otherwise refused to do so. Upon inspection and verification made by employees of the PNB, it was found that the plaintiff had already stopped operation.

PNB initiated steps to have the properties extrajudicially foreclosed. The Plaintiff opposed. The foreclosure sale of the parcel of land, together with the buildings and improvements thereon, was held and the said property was sold to the PNB for the sum of P56, 908.00, subject to the right of the plaintiff to redeem the same within a period of one year. PNB sold the properties to Mariano Bundok. The Security guard of the properties refused to let PNB‘s successor in interest to retrieve properties inside the premises of the property bought by them.

RTC sentenced the Mambulao Lumber Company to pay to the defendant PNB. Mambulao therefore appealed.

ISSUE:

Whether or not a corporation can be awarded moral damages. RULING:

NO.

An artificial person like herein appellant corporation cannot experience physical sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or social humiliation which are basis or moral damages.

A Corporation may have a good reputation if besmirched, may also be a ground for the award of moral damages. The same cannot be considered under the facts of this case, however, not only because it is admitted that herein appellant had already ceased in its business operation at the time of the foreclosure sale of the chattels, but also for the reason that whatever adverse effects of the foreclosure sale of the chattels could have upon its reputation or business standing would undoubtedly be the same whether the sale was conducted at Camarines Norte, or in Manila which is the place agreed upon by the parties in the mortgage contract.

But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines Norte in proceeding with the sale in utter disregard of the agreement to have the chattels sold in Manila as provided for in the mortgage contract, to which their attentions were timely called by herein appellant, and in disposing of the chattels in gross for the miserable amount of P4, 200.00, herein appellant should be awarded exemplary damages in the sum of P10, 000.00. The circumstances of the case also warrant the award of P3, 000.00 as attorney's fees for herein appellant.

HANIL DEVELOPMENT CO., LTD. vs.

31 | P a g e COURT OF APPEALS AND M.R. ESCOBAR EXPLOSIVE ENGINEERS, INC.

G.R. No. 113176.July 30, 2001 FACTS:

MPWH awarded petitioner Hanil the contract to construct the 200-kilometer Iligan-Cagayan de Oro-Butuan Highway Project. Hanil sub-let the rock-blasting work portion of the contract to private respondent Escobar. For the duration of the contract, it worked on the segments of the construction undertaking designated in the agreement as A-2, B-2, B-3, B-4, and C-1. It was fully paid for the areas A-2 and B-4. It claimed, however, that Hanil still partially owes it one million three hundred forty one thousand seven hundred twenty-seven and 40/100 (P1, 341, 727.40) pesos for blastings done in the B-2, B-3 and C-1 areas. The claim was predicated on the theory that the rocks it caused to explode in the contested areas were solid in nature, and therefore the volume should be computed using the cross-section approach.

Escobar filed an action for recovery of a sum of money with damages against Hanil in the CFI. CFI ordered Hanil to pay P1, 341, 727.40 for the value of rocks blasted by Escobar; 10% of the amount due for attorney's fees; and the costs of suit. CFI garnished the bank accounts of Hanil and levied its equipment. CFI also granted Escobar's Ex-parte Motion to Deposit Cash praying that the Finance Manager of the NAPOCOR be directed to withdraw Hanil's funds from the NAPOCOR and deposit the same with the Clerk of Court. Hanil challenged the Orders before the CA, who voided said orders.

ISSUE:

Whether or not Hanil should be awarded a much higher grant of nominal damages and attorney‘s fees and whether they are entitled to moral and exemplary damages.

RULING: NO.

As to the temperate damages in form of nominal damages, Hanil is not entitled for it failed to prove that it deserves a grant of a higher amount. Thus, P20, 000.00 is just. Hanil failed to prove the actual value of pecuniary injury which it sustained as a consequence of Escobar's institution of an unfounded civil suit. The testimony of one of its witnesses presented in the CFI, to the effect that "the filing of the complaint affected Hanil's reputation and that it affected the management and engineers working in the site," is not enough proof. The institution of the suit, unfounded though it may be, does not always lead to pecuniary loss as to warrant an award of actual or temperate damages. The link between the cause (the suit) and the effect (the loss) must be established by the required proof.

Its demand for payment of moral damages must also fail. The rule is that moral damages cannot be granted in favor of a corporation. Being an artificial person and having existence only in legal contemplation, a corporation has no feelings, no emotions, and no senses. It cannot, therefore, experience physical suffering, mental anguish, fright, serious anxiety, wounded feelings or moral shock or social humiliation, which can be suffered only by one having a nervous system. Hanil's prayer for exemplary damages must likewise be denied. It must be remembered that this kind of damages cannot be recovered as a matter of right. Its allowance rests in the sound discretion of the court, and only upon a showing of its legal foundation. Under the Civil Code, the claimant must first establish that he is entitled to moral, temperate, compensatory or liquidated damages before it may be imposed in his favor. Hanil failed to do so, hence, it cannot claim exemplary damages.

BACHE & CO. (PHIL.), INC. and FREDERICK E. SEGGERMAN vs.

32 | P a g e HON. JUDGE VIVENCIO M. RUIZ, MISAEL P. VERA, in his capacity as

Commissioner of Internal Revenue, et al. G.R. No.L-32409. February 27, 1971 FACTS:

Misael P. Vera, CIR wrote a letter to respondent Judge Vivencio M. Ruiz requesting the issuance of a search warrant against petitioners for violation of Section 46(a) of the National Internal Revenue Code, in relation to all other pertinent provisions thereof, particularly Sections 53, 72, 73, 208 and 209, and authorizing Revenue Examiner Rodolfo de Leon, one of herein respondents, to make and file the application for search warrant which was attached to the letter. De Leon and his witness, respondent Arturo Logronio, went to the Court of First Instance of Rizal. They brought with them the following papers: respondent Vera‘s aforesaid letter-request; an application for search warrant already filled up but still unsigned by respondent De Leon; an affidavit of respondent Logronio subscribed before respondent De Leon; a deposition in printed form of respondent Logronio already accomplished and signed by him but not yet subscribed; and a search warrant already accomplished but still unsigned by respondent Judge. Judge was hearing a certain case so he instructed his Deputy Clerk of Court to take the depositions of respondents De Leon and Logronio. After the session had adjourned, respondent Judge was informed that the depositions had already been taken. Respondent Judge signed respondent de Leon‘s application for search warrant and respondent Logronio‘s deposition, Search Warrant No. 2-M-70 was then sign by respondent Judge and accordingly issued.

BIR agents served the search warrant petitioners at the offices of petitioner corporation. Petitioners‘ lawyers protested the search on the ground that no formal complaint or transcript of testimony was attached to the warrant. The agents nevertheless proceeded with their search which yielded six boxes of documents. ISSUES:

Whether or not a corporation is entitled to protection against unreasonable search and seizures.

RULING: YES.

Although, for the reasons above stated, the Supreme Court is of the opinion that an officer of a corporation which is charged with a violation of a statute of the state of its creation, or of an act of Congress passed in the exercise of its constitutional powers, cannot refuse to produce the books and papers of such corporation, the Court does not wish to be understood as holding that a corporation is not entitled to immunity against unreasonable searches and seizures. A corporation is, after all, but an association of individuals under an assumed name and with a distinct legal entity. In organizing itself as a collective body it waives no constitutional immunities appropriate to such body. Its property cannot be taken without compensation. It can only be proceeded against by due process of law, and is protected against unlawful discrimination.

SULO NG BAYAN INC. vs.

33 | P a g e GREGORIO ARANETA, INC., PARADISE FARMS, INC., NATIONAL WATERWORKS & SEWERAGE AUTHORITY, HACIENDA CARETAS, INC, and REGISTER OF DEEDS

OF BULACAN

G.R. No.L-31061. August 17, 1976 FACTS:

Sulo ng Bayan, Inc. filed an accion de revindicacion with the CFI against defendants-appellees to recover the ownership and possession of a large tract of land. The complaint specifically alleged that plaintiff is a corporation organized and existing under the laws of the Philippines, with its principal office and place of business at San Jose del Monte, Bulacan; that its membership is composed of natural persons residing at San Jose del Monte, Bulacan; that the members of the plaintiff corporation, through themselves and their predecessors-in-interest, had pioneered in the clearing of the fore-mentioned tract of land, cultivated the same since the Spanish regime and continuously possessed the said property openly and public under concept of ownership adverse against the whole world.

ISSUE:

Whether or not plaintiff corporation may institute an action in behalf of its individual members for the recovery of certain parcels of land allegedly owned by said members; for the nullification of the transfer certificates of title issued in favor of defendants appellees covering the aforesaid parcels of land; for a declaration of "plaintiff's members as absolute owners of the property" and the issuance of the corresponding certificate of title; and for damages.

RULING: NO.

It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members. The property of the corporation is its property and not that of the stockholders, as owners, although they have equities in it. Properties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. Conversely, a corporation ordinarily has no interest in the individual property of its stockholders unless transferred to the corporation, "even in the case of a one-man corporation. The mere fact that one is president of a corporation does not render the property which he owns or possesses the property of the corporation, since the president, as individual, and the corporation are separate similarities. Similarly, stockholders in a corporation engaged in buying and dealing in real estate whose certificates of stock entitled the holder thereof to an allotment in the distribution of the land of the corporation upon surrender of their stock certificates were considered not to have such legal or equitable title or interest in the land, as would support a suit for title, especially against parties other than the corporation.

It must be noted, however, that the juridical personality of the corporation, as separate and distinct from the persons composing it, is but a legal fiction introduced for the purpose of convenience and to subserve the ends of justice. This separate personality of the corporation may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work -an injustice, or where necessary to achieve equity.

Clearly, no right of action exists in favor of plaintiff corporation, for as shown heretofore it does not have any interest in the subject matter of the case which is material and, direct so as to entitle it to file the suit as a real party in interest.

34 | P a g e BOY SCOUTS OF THE PHILIPPINES

vs.

COMMISSION ON AUDIT G.R. No. 177131.June 7, 2011 FACTS:

The COA maintains that the functions of the BSP that include, among others, the teaching to the youth of patriotism, courage, self-reliance, and kindred virtues, are undeniably sovereign functions enshrined under the Constitution and discussed by the Court in Boy Scouts of the Philippines v. National Labor Relations Commission. The COA contends that any attempt to classify the BSP as a private corporation would be incomprehensible since no less than the law which created it had designated it as a public corporation and its statutory mandate embraces performance of sovereign functions. The COA claims that the only reason why the BSP employees fell within the scope of the Civil Service Commission even before the 1987 Constitution was the fact that it was a government-owned or controlled corporation; that as an attached agency of the Department of Education, Culture and Sports (DECS), the BSP is an agency of the government; and that the BSP is a chartered institution under Section 1(12) of the Revised Administrative Code of 1987, embraced under the term government instrumentality. The COA concludes that being a government agency, the funds and property owned or held by the BSP are subject to the audit authority of the COA pursuant to Section 2(1), Article IX (D) of the 1987 Constitution.

BSP claims that it has a unique characteristic which "neither classifies it as a purely public nor a purely private corporation"; that it is not a quasi-public corporation; and that it may belong to a different class altogether.

ISSUE:

Whether or not the BSP is public corporation. RULING:

YES.

BSP is a public corporation and its funds are subject to the COA‘s audit jurisdiction. It is a public corporation or a government agency or instrumentality with juridical personality, which does not fall within the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to its charter. Not all corporations, which are not government owned or controlled, are ipso facto to be considered private corporations as there exist another distinct class of corporations or chartered institutions which are otherwise known as "public corporations." These corporations are treated by law as agencies or instrumentalities of the government which are not subject to the tests of ownership or control and economic viability but to different criteria relating to their public purposes/interests or constitutional policies and objectives and their administrative relationship to the government or any of its Departments or Offices.

Note that the Administrative Code of 1987 designates the BSP as one of the attached agencies of the Department of Education, Culture and Sports ("DECS"). An "agency of the Government" is defined as referring to any of the various units of the Government including a department, bureau, office, and instrumentality, government-owned or -controlled corporation, or local government or distinct unit therein. BSP still remains an instrumentality of the national government. It is a public corporation created by law for a public purpose, attached to the DECS pursuant to its Charter and the Administrative Code of 1987. It is not a private corporation which is required to be owned or controlled by the government and be economically viable to justify its existence under a special law.

35 | P a g e DANTE V. LIBAN, REYNALDO M. BERNARDO, and SALVADOR M. VIARI

vs.

RICHARD J. GORDON G.R. No. 175352.July 15, 2009 FACTS:

Petitioners filed with this Court a Petition to Declare Richard J. Gordon as Having Forfeited His Seat in the Senate. Petitioners are officers of the Board of Directors of the Quezon City Red Cross Chapter while respondent is Chairman of the Philippine National Red Cross (PNRC) Board of Governors.

During respondent‘s incumbency as a member of the Senate of the Philippines, he was elected Chairman of the PNRC during the February 23, 2006 meeting of the PNRC Board of Governors. Petitioners allege that by accepting the chairmanship of the PNRC Board of Governors, respondent has ceased to be a member of the Senate as provided in Section 13, Article VI of the Constitution, which reads: ―No Senator or Member of the House of Representatives may hold any other office or employment in the Government, or any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries, during his term without forfeiting his seat. Neither shall he be appointed to any office which may have been created or the emoluments thereof increased during the term for which he was elected.‖

ISSUE:

Whether or not the office of the PNRC Chairman is a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the Constitution.

RULING: NO.

PNRC is a Private Organization Performing Public Functions. The Republic of the Philippines, adhering to the Geneva Conventions, established the PNRC as a voluntary organization for the purpose contemplated in the Geneva Convention of 27 July 1929. The PNRC must not appear to be an instrument or agency that implements government policy; otherwise, it cannot merit the trust of all and cannot effectively carry out its mission as a National Red Cross Society. It is imperative that the PNRC must be autonomous, neutral, and independent in relation to the State. To ensure and maintain its autonomy, neutrality, and independence, the PNRC cannot be owned or controlled by the government. Indeed, the Philippine government does not own the PNRC. The PNRC does not have government assets and does not receive any appropriation from the Philippine Congress. The PNRC is financed primarily by contributions from private individuals and private entities obtained through solicitation campaigns organized by its Board of Governors. The government does not control the PNRC. Under the PNRC Charter, as amended, only six of the thirty members of the PNRC Board of Governors are appointed by the President of the Philippines.

The PNRC is not government-owned but privately owned. The vast majority of the thousands of PNRC members are private individuals, including students. Under the PNRC Charter, those who contribute to the annual fund campaign of the PNRC are entitled to membership in the PNRC for one year. Thus, the PNRC is a privately owned, privately funded, and privately run charitable organization. Hence, the office of the PNRC Chairman is not a government office or an office in a government-owned or controlled corporation for purposes of the prohibition in Section 13, Article VI of the 1987 Constitution. However, since the PNRC Charter is void insofar as it creates the PNRC as a private corporation, the PNRC should incorporate under the Corporation Code and register with the Securities and Exchange Commission if it wants to be a private corporation.