CORP Case Digests

Corporation Law Atty. Quimson

Frances Lipnica Pabilane ALS 2012

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Section Title of the Case

Details of the Case (mainly ratio)

1 I – General Provisions

Harden v. Benguet Consolidated

Corporation Law (Act No. 1459 of the Philippine Commission)

Corporation as differentiated from sociedad anonima of the Spanish Law


Guanzon v. Register of Deeds

Certificate of liquidation, though it involves distribution of the corporation’s assets, represents a transfer of said assets from the corporation to the stockholders


Palacio v. Fely Transportation

Isabelo Calingasan and defendant Fely Corporation may be regarded as the same person.

Corporate fiction cannot be invoked here, to avoid civil liability


Remo v. IAC Remo, as member of the board cannot be held liable. There is no need to pierce the corporate veil (not intended for fraud.)

The change of name of the corporation was not meant for fraud.


Pamplona v. Tinghil

Pamplona Plantation and Pamplona Plantation Leisure Corporation appear to be separate corporate entities.

The principle requiring the piercing of the corporate veil mandates courts to see through the protective shroud that distinguishes one corporation from a seemingly separate one.


Jardine Davis v. JRB Realty

Aircon is subsidiary of Jardine

Piercing the veil of corporate fiction applies only when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime.

3 Requisites: (1) Control; (2) Been used to commit fraud, etc; (3) Control and breach of duty was proximate cause of injury


CIR v. Club Filipino de Cebu

Club Manila is a non-stock corporation. The bar-restaurant was a necessary incident to the operation of the club and golf-course.

Whatever profits it had were used to defray its overhead expenses and to improve its golf-course.


Gonzales v. PNB

Right of stockholder to inspect

PNB is not an ordinary corporation. It has its own charter. As a rule, it is not governed by the Corporation Code.


Sunset View v. Campos

Sale of condominium in instalment and membership in the Condominium Corporation

Ownership of a unit is a condition sine qua non to being a shareholder in the condominium corporation.


Castillo v. Balinghasay

Class A and Class B Shares. All shareholders, other than holders of preferred or redeemable shares, are



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entitled to vote and to be elected as corporate directors or officers.

Since Class B shareholders are not classified as holders of either preferred or redeemable shares, then it necessarily follows that they are entitled to vote and to be voted for as directors or officers.

11 II – Incorporation and Organization of Private Corporations

Alhabmbra Cigar v. SEC

A corporation cannot extend its life by amendment of its articles of incorporation effected during the three-year statutory period for liquidation when its original term of existence had already expired.


Lanuza v. CA It is the 1952 Articles of Incorporation that determines the quorum for a stockholder's meeting.


Philippine First Insurance Company v. Hartigan

Yek Tong Lin changed name to PFIC by amending the articles of incorporation.

Actions brought by a corporation after it has changed its name should be brought under the new name although for the enforcement of rights existing at the time the change was made.


PC Javier & Sons v. CA

A change in the corporate name does not make a new corporation, whether affected by a special act or under a general law.

The corporation, upon its change in its name is in no sense a new corporation, nor the successor of the original corporation.


Cagayan Fishing Development Company v. Sandiko

The contract itself referred to the plaintiff as "una sociedad en vias de incorporacion." It was not even a de facto corporation at the time. Not being in legal existence then, it did not possess juridical capacity to enter into the contract.


Pilipinas Loan v. SEC

A violation by a corporation of its franchise is properly within the jurisdiction of the SEC. Pilipinas Loan is registered with the SEC as a lending corporation.

SC concluded that the petitioner contravened its articles of incorporation when it held itself out to the public as a pawnshop.


Hall v. Piccio Persons acting as a corporation may not claim rights of a de facto corporation if they have not obtained a certificate of incorporation.

An entity whose certificate of incorporation had not been obtained may be terminated in a private suit for its dissolution between stockholders, without the intervention of the state.



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Sawadjaan v. CA

Sawadjaan discovered that by the time he was terminated, the by-laws was not yet approved.

At the very least, by its failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation.

A corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers as such.


Municipality of Malabang v. Benito

The rule disallowing collateral attack applies only where the municipal corporation is at least a de facto corporation.

When it is neither a de jure or de facto but a nullity, the rule is that its existence may be questioned collaterally or directly in any action or proceeding by any one whose rights are affected.

Requisites: (1) valid law enacted; (2) valid on its face - upheld for a time or not yet declared void


Albert v. University Publishing

Aruego, acting as representative of such non-existent principal was the real party to the contract sued upon and thus assumed such privileges and obligations and became primarily liable for the contract entered into or for other acts as such agent.


Lozano v. Delos Santos

Jurisdiction of SEC for intracorporate relations: (1) status of relationship of the parties; (2) nature of the question that is subject of their controversy.

Where there is no third person involved and the conflict arises only among those assuming the form of a corporation, who therefore know that it has not been registered, there is no corporation by estoppel.


Georg Grotjahn v. Isnani

It is a foreign corporation doing business in the Philippines. It had capacity to sue and be sued.

Principle of estoppel: Acknowledged the corporation by entering into a contract with it.

23 III – Board of Directors/ Trustees/ Officers

Ramirez v. Orientalist

There is little for the stockholders to do beyond electing directors, making by-laws and exercising certain other special powers defined by law.

It is settled that contract between a corporation and a third person must be made by the director and not by the stockholders.


Gokongwei v. SEC 1979

In this jurisdiction, under Section 21 of the Corporation Law, a corporation may prescribe its by-laws the qualifications, duties and compensation of directors, offices and employees.

A director has a fiduciary relationship to the corporation and its stockholders. The Board's action



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of protecting the company from a competitor is thus reasonable.


San Juan Structural Steel v. CA

Acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers exceed their authority, their actions cannot bind the corporation unless it has ratified such acts or estopped from disclaiming them.


Ong Yong v. Tiu

The records show that the President Wilson Ong, supervised the collection and receipt of rentals in the Masagana Citimall.

Section 25 of the Corporation Code prohibits the President from acting concurrently as Treasurer of the corporation.


Yao Ka Sin Trading v. CA

By-Laws do not in any way confer upon the President the authority to enter into contracts for the corporation independently, of the Board of Directors. The power is exclusively lodged in the latter.


Board of Liquidators v. Heirs of Kalaw

Kalaw is the chairman of NACOCO. He entered into contracts without prior approval of the board. Contracts are valid. They are in accordance with the nature of the copra business. Also, Kalaw was in good faith in the execution of the contracts.


Premium Marble v. CA

The info sheet filed with the SEC showed that Belen, Nograles, Reyes were members of the board. Same list as the 1981 set of board members. There was no proof that the 1982 election was reported to the SEC. [Required to submit within the period of 30 days to SEC, according to Sec. 26]

In the absence of an authority from the board of directors, no person, not even the officers of the corporation, can validly bind the corporation.


Roxas v. Dela Rosa

The present board of directors are de facto incumbents of the office whose acts will be valid until they shall be lawfully removed from the office or cease from the discharge of their functions.

Where it appears that a corporation already has a duly functioning board of directors, without any existing vacancies, the election of a new board of directors at a called meeting is irregular.


Valle Verde Countryclub v. Africa

The holdover period is not part of the term of office of a member of the board of directors.

Term (the time during which the officer may claim to hold the office as a right) Tenure (term during which the incumbent actually holds office)


Central Cooperative Exchange v. Tibe

Where the by-laws of the corporation explicitly reserved unto the stockholders the power to determine the compensation of members of the board of directors and the stockholders did restrict such



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compensation, it is not within the power of the board of directors to enact a resolution providing for themselves compensation for additional duties.


Western Institute v. Salas

2 Ways to be granted compensation: (1) provision in the by-laws; (2) stockholders representing majority of outstanding capital stock at a regular or special stockholders' meeting agree

Limit by Section 30: The directors shall not receive any compensation as such directors. In this case, as Chairman, V-Chairman, etc.


Tramat Mercantile v. CA

Ong is not liable. He acted as an officer of TRAMAT, and not in his personal capacity.

Personal liability: (1) assents, unlawful, BF, gross negligence, conflict of interest, damages; (2) consents to issuance of watered stocks; (3) agrees to personal and solidary liability; (4) made by law to personally answer for corporate action


Llamado v. CA Llamado is treasurer of corporation. He signed a check in blank and charged under BP 22.

BP 22: Where the check is drawn by a corporation, company or entity, the person or persons who actually signed the check in behalf of such drawer shall be liable under this Act.


Pascual v. Orozco

A stockholder in a banking corporation has a right to maintain a suit for and on behalf of the corporation, but the extent of such right depends upon when and for what the purpose he acquired the shares of stock of which the is the owner.

Only for relief of violation of rights: (1) certificate of status as stockholder; (2) vote at meetings; (3) receive proportionate share of profits; (4) participate proportionately in distribution of the corporate assets upon the dissolution or winding up


Republic Bank v. Cuaderno

An individual stockholder may institute a derivative or representative suit on behalf of the corporation in order to protect or vindicate corporate rights whenever the officials of the corporation refuse to sue or are the ones to be sued or hold control of the corporation.


Prime White Cement v. IAC

Te was guilty of disloyalty to the corporation. He was attempting to enrich himself at the expense of the corporation. The contract was not valid.

A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation.

A director's contract with his corporation is not in all instances void or voidable. If the contract is fair and reasonable, it may be ratified by the stockholders provided a full disclosure of his adverse interest is made.



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36 IV – Powers of Corporations

Montelibano v. Bacolod-Murcia

Directors of the company had authority to modify the proposed terms of the Amended Milling Contract.

Test is whether the act in question is in direct and immediate furtherance of the corporation's business, fairly incident to the express powers and reasonably necessary to their exercise.


Alhambra Cigar v. SEC

When a corporation's term has ended, it dissolved. It only continues as body corporate for 3 more years for the purpose of final closure of its affairs.


Philippine Trust v. Rivera

A corporation has no power to release an original subscriber to its capital stock from the obligation of paying for his share, without a valuable consideration for such release.

As against creditors a reduction of the capital stock can take place only in the manner and under the conditions prescribed by the statute or the charter or the articles of incorporation.


Benito v. SEC The power to issue shares of stocks in corporation is lodged in the board of directors and no stockholders' meeting is necessary to consider it because additional issuance of shares of stocks does not need approval of the stockholders.

General rule is that the pre-emptive right is recognized only with respect to new issue of shares and not with respect to additional issues of originally authorized shares.


Islamic Directorate v. CA

The Carpizo Group-INC sale is further deemed null and void ab initio because of the Carpizo Group's failure to comply with Section 40 of the Corporation Code pertaining to the disposition of all or substantially all assets of the corporation --> majority vote of the Board and concurred by 2/3 bona fide members


Steinberg v. Velasco

The creditors of a corporation have the right to assume that so long as there are debts and liabilities, the board of directors of the corporation will not use its assets to purchase its own stock or to declare dividends to its stockholders when thee corporation is insolvent.


Dela Rama v. Ma-ao Sugar Central

When the investment is necessary to accomplish its purpose or purposes as stated in its articles of incorporation, the approval of the stockholders is not necessary.

When the investment is done solely for investment and not to accomplish purpose of incorporation, the vote of approval of stockholders is necessary.

42 IV – Powers of

Gokongwei v. SEC

There is no vested right to be elected a director. The stockholder knows and impliedly consents that the



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Corporations majority may change the qualifications for being a director at any time it wants.


Nielson v. Lepanto Consolidated

A stock dividend is any dividend payable in shares of stock of the corporation declaring or authorizing such dividend.

So, a stock dividend is actually two things: (1) dividend; (2) enforced use of the dividend money to purchase additional shares of stock at par

Considerations for which shares of stock may be issued are: (1) cash; (2) property; (3) undistributed profits


Pivorano v. Dela Rama

A distinction should be made between corporate acts which are illegal and those which are merely ultra vires.

Illegal contemplates an act contrary to law, morals, public policy or public duty. They are void.

Ultra vires acts are not illegal and void, but merely beyond the scope of the articles of incorporation. They are merely voidable and may be ratified by the stockholders.


Republic v. Acoje Mining

That the responsibility of the defendant corporation is not just of a guarantor but of a principal is clear from the resolution of its Board of Directors in which the corporation assumed full responsibility for all cash received by the Postmaster.


Japanese War Notes v. SEC

The registration of war notes and the collection of fees therefor is not prohibited by the corporation law and the authority of the petitioner to engage therein is implied from its articles of incorporation.

46 V – By-Laws

Loyola Grand Villas Homeowners v. CA

The word "must" in a statute like shall is not always imperative. This exchange of view demonstrates clearly that automatic corporate dissolution for failure to file the by-laws on time was never the intention of the legislature.

46 V – By-Laws

Salafranca v. Philamlife

The right to amend the by-laws lies solely in the discretion of the employer, this being in the exercise of management prerogative or business judgment. However, this right cannot impair the obligation of existing contracts or rights.

46 V – By-Laws

Grace Christian v. CA

Grace Christian HS representative is a permanent Director of the Association. The proposed amendment to the by-laws was never approved by the majority of the members of the association as required by these provisions of the law and by-laws.

Tolerance of having the school representative as permanent Director cannot be considered ratification. It is contrary to law.

47 V – By- Gokongwei v. A corporation may prescribe in its by-laws the



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Laws SEC qualifications, duties and compensation of directors, officers and employees. This means that it can impose qualifications in addition to that specified by Section 30 of the Corporation Law.

50 VI - Meetings

Board of Directors v. Tan

The constitution and by-laws of the association provide that notice of a special meeting of members should be given at least five days before the date of meeting.

When it appears that a fair election cannot be had, the court in the exercise of its equity jurisdiction may appoint a committee with the authority to call, conduct and supervise the election of the directors of the association.

52 VI - Meetings

Lanuza v. CA The stock and transfer of PMMSI cannot be used as the sole basis for determining the quorum as it does not reflect the totality of shares which have been subscribed, more so when the articles of incorporation show a significantly larger amount of shares issued and outstanding as compared to that listed in the stock and transfer book.

57 VI - Meetings

Commissioner v. Manning

Treasury shares are stocks issued and fully paid for and re-acquired by the corporation either by purchase, donation, forfeiture or other means.

59 VI - Meetings

Lee v. CA It is clear that in order to be eligible as a director, what is material is the legal title to, not the beneficial ownership of, the stock as appearing on the books of the corporation.

60 VII – Stocks and Stockholders

Bayla v. Silang Traffic

A subscription is the mutual agreement of the subscribers to take and pay for the stock of a corporation while a purchase is an independent agreement between the individual and the corporation to buy shares of stock from it at stipulated price.

Failure to pay any of the installments on the purchase price does not automatically give rise to the forfeiture of the amounts already paid and the reversion of the shares to the corporation.


Trillana v. Quezon College

There is nothing in record to show that Quezon College accepted the term of payment suggested by Damasa Crisostomo.

The condition (after harvesting fish) is dependent upon her sole will and facultative in nature, rendering the obligation void.


National Exchange v. Dexter

The stipulation is unlawful because it takes away the obligation of the subscriber to pay for the shares except dividends that may accrue upon the stock. Such relieves subscriber from liability in case no dividends were paid and creates a discrimination in favor of a particular subscriber.



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Escano v. Philippine Mining

Section 63 applies even to sale of unissued shares held in escrow. No transfer shall be valid as between the parties, until the transfer is entered and noted upon the books of the corporation.


Razon v. IAC Since the certificate of stock covering the questioned 1500 shares of stock registered in the name of the late Juan Chuidian was never indorsed to the petitioner, the inevitable conclusion is that the questioned shares of stock belong to Chuidian.


Bank of Salinas v. CA

Whenever a corporation refuses to transfer and register stock in cases like the present, mandamus will lie to compel the officers of the corporation to transfer said stock in the books of the corporation.

The corporation’s obligation to register is ministerial.


Chinabank v. CA

VGCCI cannot claim that dues to Calapatia's failure to settle his delinquent accounts, it had the right to sell the share in question in accordance with the express provisions found in its by-laws.

The term "unpaid claim" refers to any unpaid claim arising from unpaid subscription, and not to any indebtedness which a subscriber or stockholder may owe the corporation arising from any other transaction.


Fua Cun v. Summers

A subscriber for a certain number of shares of stock does not upon payment of one-half of the subscription price, become entitled to the issuance of certificates for one-half the number of shares subscribed for.

The subscriber's right consists only in an equity entitling him to a certificate for the total number of shares subscribed for by him upon payment of the remaining portion of the subscription price.


Lao v. Lao A certificate of stock is the evidence of a holder's interest and status in a corporation (not the General Information Sheet)

As between the General Information Sheet and the corporate books, it is the latter that is controlling.


Apodaca v. NLRC

NLRC has no jurisdiction to determine intra-corporate disputes.

The unpaid subscriptions are not due and payable until a call is made by the corporation for payment.


PNB v. Bitulok Sawmill

A corporation has no power to release an original subscriber to its capital stock from the obligation of paying for his shares, without a valuable consideration for such release; and as against creditors a reduction of the capital stock can take place only in the manner and under the conditions prescribed by the statute or the charter or the articles of incorporation.

67 VII – Velasco v. A stock subscription is a contract between the



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Stocks and Stockholders

Poizat corporation and the subscriber, and courts will enforce it for or against either.

Assignee of insolvent corporation succeeds to all the corporate rights of action vested in the corporation prior to its insolvency

When insolvency supervenes all unpaid subscriptions become at once due and enforceable.

74 VIII – Corporate Books and Records

Pardo v. Hercules Lumber

A by-law unduly restricting the right of inspection is undoubtedly invalid.

Right of inspection can be exercised at reasonable hours --> Right of inspection may be exercised at reasonable hours on business days throughout the year, and not merely during an arbitrary period of a few days chosen by the directors.


Veraguth v. Isabela Sugar

A director or stockholder has no absolute right to secure certified copies of the minutes of the corporation until these minutes have been written up and approved by the directors.


Philpotts v. PMC

The right of inspection given to a stockholder can be exercised by himself or by any proper representative or attorney in fact, and either with or without the attendance of the stockholder.


Gonzales v. PNB

The confidential information clause provided in PNB's charter prevails over the right to inspection in Se. 74 of the Corporation Code.


Lanuza v. CA A stock and transfer book is the book which records the names and addresses of all stockholders arranged alphabetically, the instalments paid and unpaid on all stock for which subscription has been made, and the date of payment thereof; a statement of every alienation, sale or transfer of stock made, the date thereof and by and to whom made and such other entries as may be prescribed by law.

80 IX – Merger and Consolidation

Associated Bank v. CA

The agreement itself clearly provides that all contracts - irrespective of the date of execution - entered into in the name of CBTC shall be understood as pertaining to the surviving bank.

91 XI(I) – Non-Stock Corporations (Members)

Chinese YMCA v. Ching

The court cannot strip a member of a non-stock, non-profit corporation of his membership therein without cause. Otherwise, that would be an unwarranted and undue interference with the well-established right of a corporation to determine its membership.

92 XI(II) – Non-Stock Corporations (Members and Officers)

Lions Clubs International v. Amores

The findings upon the evidence submitted and examined at the hearing of the election protest before the Committee personally attended by both So and Josefa may not be disturbed by the courts.

The decision of the Association's tribunal, the



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International Board of Directors is controlling since respondent Josefa alleges no invasion of this property or civil rights and neither is it claimed that the government of the Association is not fairly and honestly administered in conformity with its laws and the law of the land.

96 XII – Close Corporations

San Juan Structural & Stee v. CA

Motorich is not a close corporation. The fact that the Gruenbergs own 99.866% is not enough to say that it is a close corporation.

Assuming arguendo that the corporate veil should be pierced, the property would have been treated as conjugal property.

101 XII – Close Corporations

Manuel Dulay v. CA

The veil of corporate fiction may be pierced when it is used to defeat public convenience to justify wrong, protect fraud or defend crime.

A corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation.

109 XIII – Special Corporations

Barlin v. Ramirez

The exclusive right to such possession was in the Roman Catholic Church and such right has continued since such cession and now exists. The Roman Catholic Church is a juridical person in the Philippine Islands.


IEMELIF v. Juane

A corporation sole consists of a single member, formed by chief archbishop (etc.) for the purpose of managing or administering as trustee the affairs, properties and temporalities of such religious denomination or church.

A corporation aggregate consists of two or more persons.

If the transformation did not materialize, the corporation sole would still be Bishop Lazaro, who himself performed the questioned acts of removing Juane as Resident Pastor of the Tondo Congregation.

If the transformation did materialize, the corporation aggregate would be composed of the Highest Consistory of Elders which nevertheless approved the very same acts.


Santos v. Roman Catholic Bishop of Nueva Caceres

The court may take judicial notice of the fact that the corporation sole, the Roman Catholic Bishop of a diocese, in which temporalities of the Roman Catholic Church are situated, is the administrator of such temporalities and that the parish priests, as such, have no control thereover.


Roman Catholic Archbishop of Davao v. LRC

The land can be registered even if the incumbent is not a Filipino citizen



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The Roman Catholic Church in the Philippines has no nationality and that the framers of the Constitution did not have in mind the religious corporation sole when they provided that 60 per centum of the capital thereof be owned by Filipino citizens.


Republic v. IAC, RC Bishop of Lucena

The land has become private property when the application for confirmation of title was filed in 1979.

Section 113 of the Corporation code explicitly allows a corporation sole to acquire and alienate property. There is a distinction between a corporation sole and an ordinary private corporation.


Director of Lands v. CA

The crucial factor to be determined therefore is the length of time private respondent and its predecessors-in-interest had been in possession of the land in question prior to the institution of the instant registration proceedings.

If in 1966 Iglesia could have its title to the land confirmed, then it had acquired a vested right thereto, which the 1973 Constitution can neither impair nor defeat.

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CORP Case Digests