1. PHILIP TURNER and ELNURNER v.

LORENZO SHIPPING CORPORATION

G.R. No. 157479, November 24, 2010

FACTS:
Philip Turner and Elnora Turner (the Turners) held 1,010,000 shares of stock of Lorenzo Shipping
Corp. (LSC). LSC decided to amend its articles of incorporation to remove the stockholders pre-
emptive rights to newly issued shares of stock. Feeling that the corporate move would be
prejudicial to their interest as stockholders, the Turners voted against the amendment and
demanded payment of their shares. LSC found the fair value of the shares demanded by the Turners
unacceptable. The disagreement on the valuation of the shares led the parties to constitute an
appraisal committee pursuant to Section 82 of the Corporation Code. Subsequently, the Turners
demanded payment based on the valuation of the appraisal committee, plus 2%/month penalty
from the date of their original demand for payment, as well as the reimbursement of the amounts
advanced as professional fees to the appraisers. LSC however refused the Turners demand,
explaining that pursuant to the Corporation Code, the dissenting stockholders exercising their
appraisal rights could be paid only when the corporation had unrestricted retained earnings to
cover the fair value of the shares, but that it had no retained earnings at the time of the petitioners
demand, as borne out by its Financial Statements for Fiscal Year 1999 showing a deficit of
P72,973,114.00 as of December 31, 1999. Upon the LSC’s refusal to pay, the Turners sued the
latter for collection and damages (Civil Case No. 01-086) in the Regional Trial Court (RTC).
Thereafter, the Turners filed their motion for partial summary judgment which was opposed by
LSC.

ISSUE: Whether or not the Turners’ cause of action was premature.

RULING: YES.
That LSC had indisputably no unrestricted retained earnings in its books at the time the
Turners commenced Civil Case No. 01-086 on January 22, 2001 proved that LSC’s legal
obligation to pay the value of the Turners shares did not yet arise. Thus, the CA did not err in
holding that the petitioners had no cause of action, and in ruling that the RTC did not validly
render the partial summary judgment.

The RTC’s construal of the Corporation Code was unsustainable, because it did not take
into account the petitioners’ lack of a cause of action against the respondent. In order to give rise
to any obligation to pay on the part of the respondent, the petitioners should first make a valid
demand that the respondent refused to pay despite having unrestricted retained earnings.
Otherwise, the respondent could not be said to be guilty of any actionable omission that could
sustain their action to collect

Notwithstanding the foregoing, no payment shall be made to any dissenting

stockholder unless the corporation has unrestricted retained earnings in its books
to cover the payment. In case the corporation has no available unrestricted
retained earnings in its books, Section 83 of the Corporation Code provides that
if the dissenting stockholder is not paid the value of his shares within 30 days
after the award, his voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained
earnings to fund the payment of the shares of stocks of the withdrawing
stockholders. Under the doctrine, the capital stock, property, and other assets of
a corporation are regarded as equity in trust for the payment of corporate
creditors, who are preferred in the distribution of corporate assets. The creditors
of a corporation have the right to assume that the board of directors will not use
the assets of the corporation to purchase its own stock for as long as the
corporation has outstanding debts and liabilities. There can be no distribution of
assets among the stockholders without first paying corporate debts. Thus, any
disposition of corporate funds and assets to the prejudice of creditors is null and
void.

2. LEGASPI TOWERS 300, INC., LILIA MARQUINEZ PALANCA, ROSANNA D. IMAI,

GLORIADOMINGO and RAY VINCENT, Petitioners, vs. AMELIA P. MUER, SAMUEL
M. TANCHOCO, ROMEO TANKIANG, RUDEL PANGANIBAN,DOLORES AGBAYANI,
ARLENEDAL A. YASUMA, GODOFREDO M. CAGUIOA and EDGARDO
M.SALANDANAN, Respondents.

FACTS:

Pursuant to the by-laws of Legaspi Towers 300, Inc., petitioners, the incumbent Board of
Directors, set the annual meeting of the members of the condominium corporation and
the election of the new Board of Directors at the lobby of Legaspi Towers 300, Inc. The
Committee on Elections of Legaspi Towers 300, Inc., however, found most of the proxy
votes, at its face value, irregular, thus, questionable; and for lack of time to authenticate
the same, petitioners adjourned the meeting for lack of quorum. However, the group of
respondents challenged the adjournment of the meeting. Despite petitioners’ insistence
that no quorum was obtained during the annual meeting held on April 2, 2004,
respondents pushed through with the scheduled election and were elected as the new
Board of Directors and officers of Legaspi Towers 300, Inc. and subsequently submitted
a General Information Sheet to the Securities and Exchange Commission (SEC). On
plaintiffs’ motion to admit amended complaint to include Legaspi Towers 300, Inc. as
plaintiff),the RTC ruled denying the motion for being improper. Then, petitioners filed with
the Court of Appeals and held that Judge Antonio I. De Castro of the Regional Trial Court
(RTC) of Manila, did not commit grave abuse of discretion in issuing the Orders denying
petitioners’ Motion to Admit Second Amended Complaint and that petitioners the justified
the inclusion of Legaspi Towers 300, Inc. as plaintiff by invoking the doctrine of derivative
suit. Petitioners’ motion for reconsideration was denied by the Court of Appeals thereafter.
Hence this petition.

ISSUE: Whether or not Derivative Suit proper in this case?

RULING: The Supreme Court DENIED the petition and AFFIRMED the Decision of the
Court of Appeals. Derivative Suit is not applicable. Since it is the corporation that is the
real party-in-interest in a derivative suit, then the reliefs prayed for must be for the benefit
or interest of the corporation. When the reliefs prayed for do not pertain to the corporation,
then it is an improper derivative suit. The requisites for a derivative suit are as follows:

1. a) the party bringing suit should be a shareholder as of the time of the act or
transaction complained of, the number of his shares not being material;
2. b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the
board of directors for the appropriate relief but the latter has failed or refused to heed
his plea; and
3. c) the cause of action actually devolves on the corporation, the wrongdoing or harm
having been, or being caused to the corporation and not to the particular stockholder
bringing the suit.

As stated by the Court of Appeals, petitioners’ complaint seek to nullify the said election,
and to protect and enforce their individual right to vote. The cause of action devolves on
petitioners, not the condominium corporation, which did not have the right to vote. Hence,
the complaint for nullification of the election is a direct action by petitioners, who were the
members of the Board of Directors of the corporation before the election, against
respondents, who are the newly-elected Board of Directors. Under the circumstances, the
derivative suit filed by petitioners in behalf of the condominium corporation in the Second
Amended Complaint is improper.

3. Simny G. Guy, Geraldine G. Guy, Gladys G. Yao, and Heirs of the late Grace
G. Cheu vs. Gilbert G. Guy (respondent) and Simny G. Guy, Geraldine G. Guy,
Gladys G. Yao,

and Heirs of the late Grace G. Cheu vs. Hon. Ofelia C. Calo (and Gilbert G. Guy

September 5, 2012
Topics Covered: Corporation Law (1) intra-corporate controversy; (2) money claim; (3)
endorsement of stock certificate

Facts:
Gilbert G. Guy son of spouses Simny and Francisco Guy, claims to own 80% of their
multi-million family corporation GoodGold Realty Development Inc, stating that he owns
519, 997 shares (fully paid upon incorporation) out of the 650,000 subscribed capital
stock. His mother Simny however contends that it was she and her husband who
established the corporation and only placed the bulk of the shares in Gilberts name
because being their son, they had entrusted to him the future of their corporations. She
further claims that during the incorporation of GoodGold, they were advised by their
lawyers to issue the stock certificates with corresponding blank endorsements signed by
Francisco as President and Atty. Paras as Corporate Secretary.; including Stock
Certificate Nos. 004-014 under Gilberts name. In 1999, Francisco gave instructions to
redistribute the shares of the corporation evenly among his children while maintaining a
proportionate share for himself and Simny. Hence, GoodGolds certificates were cancelled
and new ones were issued showing that the 4 siblings had 65,000 shares each while the
spouses had 195,000 shares each. Five years after the redistribution, Gilbert brought an
action against his mother Simny and his sisters for the annulment of the said transfers of
shares along with some corporate documents, alleging fraud and that his signatures at
the back of the stock certificates which purportedly endorsed the same were forged and
must be nullified. NBI reports on the examination of signatures however showed them to
be authentic. Gilbert withdrew his complaint. Three years thereafter, a new action was
filed by Gilbert with the caption Intra-corporate Controversy: For the Declaration of Nullity
of Fraudulent Transfers of Shares of Stock Certificates, Fabricated Shares of Stocks,
Falsified General Information Sheets, Minutes of Meetings, etc against his mother and
sisters.
Gilbert claims that he is unaware of any document signed by him that would justify and
support the transfer of his shares to herein petitioners. Simny and daughters filed their
manifestation that the action filed by Gilbert was a mere nuisance and harassment suit
under Sec 1(b), Rule 1 of the Interim Rules of Procedure on Intra-Corporate
Controversies. RTC dismissed the case as a nuisance and harassment suit, CA reversed
RTC.

Held:
Allegations of deceit, machination, false pretenses, misrepresentation, and threats
are largely conclusions of law that, without supporting statements of the facts to which
the allegations of fraud refer, do not sufficiently state an effective cause of action. Tested
against established standards, we find that the charges of fraud which Gilbert accuses
his siblings are not supported by the required factual allegations. Not every allegation of
fraud done in a corporate setting or perpetrated by corporate officers will bring the case
within the special commercial courts jurisdiction. To fall within this jurisdiction, there must
be sufficient nexus showing that the corporations nature, structure, or powers, were used
to facilitate the fraudulent device or scheme.
Failure to specifically allege the fraudulent acts in intra-corporate controversies is
indicative of a harassment or nuisance suit and may be dismissed motu proprio.
In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute
a ground for dismissal since such a defect can be cured by a bill of particulars. A bill of
particulars may be ordered as to a defense of fraud or mistake if the circumstances
constituting fraud or mistake are not stated with the particularity required by the rule. The
above-stated rule, however, does not apply to intra-corporate controversies In cases
governed by the Interim Rules of Procedure on Intra-
corporate Controversies, a bill of particulars is a prohibited pleading This is because fraud
in intra-corporate controversies must be based on devises and schemes, employed by,
or any act of, the board of directors, business associates, officers or partners, amounting
to fraud or misrepresentation which may be detrimental to the interest of the public and/or
of the stockholders, partners, or members of any corporation, partnership, or association,
as stated under Rule 1, Section 1 (a)(1) of the Interim Rules. The act of fraud or
misrepresentation complained of becomes a criterion in determining whether the
complaint on its face has merits, or within the jurisdiction of special commercial court, or
merely a nuisance suit.
When a stock certificate is endorsed in blank by the owner thereof, it constitutes what is
termed as a street certificate, so that upon its face the holder is entitled to demand its
transfer to his name from the issuing corporation.
With Gilberts failure to allege specific acts of fraud in his complaint and his failure to rebut
the NBI report, this court pronounces, as a consequence thereof, that the signatures
appearing on the stock certificates, including his blank endorsement thereon were
authentic. With the stock certificates having been endorsed in blank by Gilbert which he
himself delivered to his parents, the same can be cancelled and transferred in the names
of herein petitioners.

4. Mindanao Savings and Loan Association, Inc. (MSLAI) vs Willkom

Facts:-
The First Iligan Savings and Loan Association, Inc. (FISLAI) and the Davao Savingsand Loan
Association, Inc. (DSLAI) are entities duly registered with the Securities andExchange Commission,
primarily engaged in the business of granting loans andreceiving deposits from the general public, and
treated as banks.- 1985, FISLAI and DSLAI entered into a merger, DSLAI being the surviving
corporation. The articles of merger were not registered with the SEC due toincomplete
documentation. DSLAI changed its corporate name to MSLAI.- May 26, 1986, The Board of Directors
of FSLAI approved the assignment of assetsin favor of DSLAI, which assumed FISLAI's liabilities (the
novation in question)- MSLAI's business failed and the Monetary Board of the Central Bank of the
Philippines ordered its closure. The Monetary Board found that MSLAI was insolventand to continue
business would involve probable loss to its depositors and creditors. The Monetary Board ordered the
liquidation of MSLAI with PDIC as its liquidator.- Prior to MSLAI's closure, Uy filed an action for
collection of sum of moneyagainst FISLAI. RTC rendered a decision in favor of Uy and ordered
defendants(including FISLAI) to pay the sum of P136,801.70 plus interest, 25% attorney's feesand the
costs of suit. CA modified the decision by ordering the third party defendantto reimburse the payments
that would be made by defendants.- April 28, 1993, sheriff Bantuas levied on 6 parcels of land of
FSLAI in Cagayande Oro, and during the public auction, Willkom was the highest bidder. A certificate
of sale was issued, and was registered with the Register of Deeds. September 20, 1994,Willkom sold
one of the parcels of land to Go.- June 14, 1995, MSLAI, represented by PDIC, filed a complaint for
theAnnulment of the Sale, Cancellation of Title and Reconveyance of theproperties, stating that
the sale was conducted without notice given to them andPDIC. PDIC came to know about the sale,
almost two years after, while liquidatingMSLAI's assets. MSLAI stated that the sale was illegal
not only due to lack of notice,but also because the assets under liquidation should be deemed in
custodia legis andexempt from garnishment, levy, attachment or execution.- Respondents stated that
MSLAI had no cause of action; MSLAI is a separateentity from FSLAI, further stating that the
mergerwasunofficiall and did not complywith formalities and procedure.- RTC: dismissed the case for a
supposed lack of jurisdiction.- CA affirmed the dismissal but stated that accdg. to Associated Bank vs
CA, therewas no merger between FISLAI and MSLAI for failure to follow procedure for a validmerger,
but even if there was a de facto merger, Willkom was an innocent purchaserand had a superior
right. The assignment of assets and liabilities was not binding onthird parties because it wasn't
registered. The validity of the auction sale could not beinvalidated by the fact that the sheriff had no
authority to conduct the sale.
Issue:1. Whether the merger between FISLAI and DSLAI valid and effective

Held:1. No. A merger does not become effective upon the mere agreement of thecorporations. There
must be an express provision of law authorizing them. There is aprocedure to be followed as stated in
the Corporation Code. The board of eachcorporation draws up a plan of merger and is submitted to
stockholders or membersfor approval. The formal agreement is executed (the articles of merger) and
issubmitted to the SEC for approval. If approved, the SEC issues a certificate of merger. The merger
shall only be effective upon the issuance of the certificate. (An exception would be if a party to a
merger is a special corporation governed by its own charter, then a favorable recommendation of the
appropriate government agencyshould first be obtained.) In this case,
nocertificatewasissuedandsuchmergerisincompletewithoutit. The certificate is important because it
bears the approval of the SEC anditmarks the momentwhenthe consequences ofa merger take place.
Sincethere is no valid merger, FISLAI and MSLAI are still considered as two separatecorporations. ASs
far as third parties are concerned, FISLAI's assets still belongs tothem, not MSLAI

5. Bank of Commerce vs Radio Philippines Network, Inc.

G.R. No. 195615 April 21, 2014

Facts: In late 2001 the Traders Royal Bank (TRB) proposed to sell to petitioner Bank of
Commerce (Bancommerce) for P10.4 billion its banking business consisting of specified
assets and liabilities. Bancommerce agreed subject to prior Bangko Sentral ng Pilipinas’
(BSP’s) approval of their Purchase and Assumption (P & A) Agreement. On November 8,
2001 the BSP approved that agreement subject to the condition that Bancommerce and
TRB would set up an escrow fund of P50 million with another bank to cover TRB liabilities
for contingent claims that may subsequently be adjudged against it, which liabilities were
excluded from the purchase.

Specifically, the BSP Monetary Board Min. No. 58 (MB Res. 58) decided as follows:

1. To approve the revised terms sheet as finalized on September 21, 2001 granting
certain incentives pursuant to Circular No. 237, series of 2000 to serve as a basis for the
final Purchase and Assumption (P & A) Agreement between the Bank of Commerce
(BOC) and Traders Royal Bank (TRB); subject to inclusion of the following provision in
the P & A:

The parties to the P & A had considered other potential liabilities against TRB, and to
address these claims, the parties have agreed to set up an escrow fund amounting to
Fifty Million Pesos (P50,000,000.00) in cash to be invested in government securities to
answer for any such claim that shall be judicially established, which fund shall be kept for
15 years in the trust department of any other bank acceptable to the BSP. Any deviation
therefrom shall require prior approval from the Monetary Board.
Following the above approval, on November 9, 2001 Bancommerce entered into a P & A
Agreement with TRB and acquired its specified assets and liabilities, excluding liabilities
arising from judicial actions which were to be covered by the BSP-mandated escrow of
P50 million.

REPORT THIS AD

Issue: Whether or not the P & A Agreement constituted as a merger of the two
corporations.

Held: No. Merger is a re-organization of two or more corporations that results in their
consolidating into a single corporation, which is one of the constituent corporations, one
disappearing or dissolving and the other surviving. To put it another way, merger is the
absorption of one or more corporations by another existing corporation, which retains its
identity and takes over the rights, privileges, franchises, properties, claims, liabilities and
obligations of the absorbed corporation(s). The absorbing corporation continues its
existence while the life or lives of the other corporation(s) is or are terminated.

The Corporation Code requires the following steps for merger or consolidation:

(1) The board of each corporation draws up a plan of merger or consolidation. Such plan
must include any amendment, if necessary, to the articles of incorporation of the surviving
corporation, or in case of consolidation, all the statements required in the articles of
incorporation of a corporation.

(2) Submission of plan to stockholders or members of each corporation for approval. A

meeting must be called and at least two (2) weeks’ notice must be sent to all stockholders
or members, personally or by registered mail. A summary of the plan must be attached
to the notice. Vote of two-thirds of the members or of stockholders representing twothirds
of the outstanding capital stock will be needed. Appraisal rights, when proper, must be
respected.

(3) Execution of the formal agreement, referred to as the articles of merger o[r]
consolidation, by the corporate officers of each constituent corporation. These take the
place of the articles of incorporation of the consolidated corporation, or amend the articles
of incorporation of the surviving corporation.

(4) approval.

(5) Submission of said articles of merger or consolidation to the SEC for If necessary,
the SEC shall set a hearing, notifying all corporations concerned at least two weeks
before.

(6) Issuance of certificate of merger or consolidation.

Indubitably, it is clear that no merger took place between Bancommerce and TRB as the
requirements and procedures for a merger were absent. A merger does not become
effective upon the mere agreement of the constituent corporations. All the requirements
specified in the law must be complied with in order for merger to take effect. Section 79
of the Corporation Code further provides that the merger shall be effective only upon the
issuance by the Securities and Exchange Commission (SEC) of a certificate of merger.

Here, Bancommerce and TRB remained separate corporations with distinct corporate
personalities. What happened is that TRB sold and Bancommerce purchased identified
recorded assets of TRB in consideration of Bancommerce’s assumption of identified
recorded liabilities of TRB including booked contingent accounts. There is no law that
prohibits this kind of transaction especially when it is done openly and with appropriate
government approval. Indeed, the dissenting opinions of Justices Jose Catral Mendoza
and Marvic Mario Victor F. Leonen are of the same opinion. In strict sense, no merger or
consolidation took place as the records do not show any plan or articles of merger or
consolidation. More importantly, the SEC did not issue any certificate of merger or
consolidation.

The idea of a de facto merger came about because, prior to the present Corporation
Code, no law authorized the merger or consolidation of Philippine Corporations, except
insurance companies, railway corporations, and public utilities. And, except in the case
of insurance corporations, no procedure existed for bringing about a merger. Still, the
Supreme Court held in Reyes v. Blouse, that authority to merge or consolidate can be
derived from Section 28 1/2 (now Section 40) of the former Corporation Law which
provides, among others, that a corporation may “sell, exchange, lease or otherwise
dispose of all or substantially all of its property and assets” if the board of directors is so
authorized by the affirmative vote of the stockholders holding at least two-thirds of the
voting power. The words “or otherwise dispose of,” according to the Supreme Court, is
very broad and in a sense, covers a merger or consolidation.

No de facto merger took place in the present case simply because the TRB owners did
not get in exchange for the bank’s assets and liabilities an equivalent value in
Bancommerce shares of stock. Bancommerce and TRB agreed with BSP approval to
exclude from the sale the TRB’s contingent judicial liabilities, including those owing to
RPN, et al.
 1. G.R. No. 91889 August 27, 1993

MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO

REDOVAN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR.,
MARIA THERESA V. VELOSO AND CASTRENSE C. VELOSO, respondents.

Facts:
· Manuel R. Dulay Enterprises, Inc, a domestic corporation obtained various loans
for the construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel).
· Manuel Dulay by virtue of Board Resolution No 18 sold the subject property to
spouses Maria Theresa and Castrense Veloso.
· Maria Veloso (buyer), without the knowledge of Manuel Dulay, mortgaged the
subject property to private respondent Manuel A. Torres. #fluffypeaches Upon the
failure of Maria Veloso to pay Torres, the property was sold to Torres in an extrajudicial
foreclosure sale.
· Torres filed an action against the corporation, Virgilio Dulay and against the
tenants of the apartment.
· RTC ordered the corporation and the tenants to vacate the building.
· Petitioners: RTC had acted with GAD when it applied the doctrine of piercing the
veil of corporate entity considering that the sale has no binding effect on corporation as
Board Resolution No. 18 which authorized the sale of the subject property was resolved
without the approval of all the members of the board of directors and said Board
Resolution was prepared by a person not designated by the corporation to be its
secretary.
Issue:
· WON the sale to Veloso is valid notwithstanding that it was resolved without the
approval of all the members of the board of directors. (YES)
Ruling
· Section 101 of the Corporation Code of the Philippines provides:
Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws
provide otherwise, any action by the directors of a close corporation without a meeting
shall nevertheless be deemed valid if:
1. Before or after such action is taken, written consent thereto is signed by all the
directors, or
2. All the stockholders have actual or implied knowledge of the action and make no
prompt objection thereto in writing; or
3. The directors are accustomed to take informal action with the express or implied
acquiese of all the stockholders, or
4. All the directors have express or implied knowledge of the action in question and
none of them makes prompt objection thereto in writing.
If a directors' meeting is held without call or notice, an action taken therein within the
corporate powers is deemed ratified by a director who failed to attend, unless he
promptly files his written objection with the secretary of the corporation after having
knowledge thereof.
· Dulay Inc. is classified as a close corporation and consequently a board
resolution authorizing the sale or mortgage is not necessary to bind the corporation
for the action of its president. #fluffypeaches At any rate, 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 after having knowledge of the meeting which, in his case, Virgilio
Dulay failed to do.

· Although a corporation is an entity which has a personality distinct and separate

from its individual stockholders or members, the veil of corporate fiction may be pierced
when it is used to defeat public convenience justify wrong, protect fraud or defend
crime.

2. G.R. No. 184088 July 6, 2010

IGLESIA EVANGELICA METODISTA EN LAS ISLAS FILIPINAS (IEMELIF) (Corporation Sole),

INC., REV. NESTOR PINEDA, REV. ROBERTO BACANI, BENJAMIN BORLONGAN, JR.,
DANILO SAUR, RICHARD PONTI, ALFREDO MATABANG and all the other members of the
IEMELIF TONDO CONGREGATION of the IEMELIF CORPORATION SOLE, Petitioners,
vs.
BISHOP NATHANAEL LAZARO, REVERENDS HONORIO RIVERA, DANIEL MADUCDOC,
FERDINAND MERCADO, ARCADIO CABILDO, DOMINGO GONZALES, ARTURO LAPUZ,
ADORABLE MANGALINDAN, DANIEL VICTORIA and DAKILA CRUZ, and LAY LEADER
LINGKOD MADUCDOC and CESAR DOMINGO, acting individually and as members of the
Supreme Consistory of Elders and those claiming under the Corporation
Aggregate, Respondents.

Facts:
Apparently, although the IEMELIF remained a corporation sole on paper, it had always
acted like a corporation aggregate. The Consistory exercised IEMELIF’s decision-
making powers without ever being challenged. Subsequently, during its 1973 General
Conference, the general membership voted to put things right by changing IEMELIF’s
organizational structure from a corporation sole to a corporation aggregate. On May 7,
1973 the Securities and Exchange Commission (SEC) approved the vote. For some
reasons, however, the corporate papers of the IEMELIF remained unaltered as a
corporation sole.
Only in 2001, about 28 years later, did the issue reemerge. In answer to a query from
the IEMELIF, the SEC replied on April 3, 2001 that, although the SEC Commissioner
did not in 1948 object to the conversion of the IEMELIF into a corporation aggregate,
that conversion was not properly carried out and documented. The SEC said that the
IEMELIF needed to amend its articles of incorporation for that purpose.1

The Issue Presented

whether a corporation sole may be converted into a corporation aggregate by mere
amendment of its articles of incorporation.

The Court’s Ruling

There is no point to dissolving the corporation sole of one member to enable the
corporation aggregate to emerge from it. Whether it is a non-stock corporation or a
corporation sole, the corporate being remains distinct from its members, whatever be
their number. The increase in the number of its corporate membership does not change
the complexion of its corporate responsibility to third parties. The one member, with the
concurrence of two-thirds of the membership of the organization for whom he acts as
trustee, can self-will the amendment. He can, with membership concurrence, increase
the technical number of the members of the corporation from "sole" or one to the
greater number authorized by its amended articles.
ISSUE:
3. G.R. No. 147905 May 28, 2007

B. VAN ZUIDEN BROS., LTD., Petitioner,

vs.
GTVL MANUFACTURING INDUSTRIES, INC., Respondent.

Facts:

Petitioner, B.Van Zuiden (Zuiden, for brevity) is a corporation, incorporated under the
laws of Hong Kong, and engaged in the importation and exportation of several products,
including lace products.

On 13 July 1999, petitioner filed a complaint for sum of money against respondent
GTVL Mfg. (GTVL for brevity).

It appears that on several occasions, GTVL purchased lace products from Petitioner. In
their transaction, the agreement was that ZUIDEN delivers the products purchased by
GTVL, to a certain Hong Kong corporation, known as Kenzar Ltd. (KENZAR), and the
products are then considered as sold, upon receipt by KENZAR of the goods purchased
by GTVL. Thereafter, KENZAR had the obligation to deliver the products to the
Philippines and/or to follow whatever instructions GTVL had on the matter.

However, commencing October 31, 1994 until the filing of the complaint, GTVL has
failed and refused to pay the agreed purchase price for several deliveries ordered by it
and delivered by ZUIDEN, the obligation amounts to U.S.$32,088.02 [inclusive of
interest].

Instead of filing an answer, respondent filed a Motion to Dismiss on the ground that
petitioner has no legal capacity to sue. Respondent alleged that petitioner is doing
business in the Philippines without securing the required license. Accordingly, petitioner
cannot sue before Philippine courts.

On 10 November 1999, the trial court dismissed the complaint; the decision which the
Court of Appeals sustained.

The Court of Appeals found that the parties entered into a contract of sale whereby
petitioner sold lace products to respondent in a series of transactions. While petitioner
delivered the goods in Hong Kong to Kenzar, another Hong Kong company, the party
with whom petitioner transacted was actually respondent, a Philippine corporation, and
not Kenzar. The Court of Appeals believed Kenzar is merely a shipping company. The
Court of Appeals concluded that the delivery of the goods in Hong Kong did not exempt
petitioner from being considered as doing business in the Philippines.

In the present controversy, petitioner is a foreign corporation which claims that it is not
doing business in the Philippines. As such, it needs no license to institute a collection
suit against respondent before Philippine courts. Respondent argues otherwise.
Issue:

Whether or not petitioner, an unlicensed foreign corporation, has a legal capacity to sue
before the Philippine courts?

Held: YES.

Ruling:

Section 133 of the Corporation Code provides:

Doing business without license. No foreign corporation transacting business in the

Philippines without a license, or its successors or assigns, shall be permitted to maintain
or intervene in any action, suit or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or proceeded against before
Philippine courts or administrative tribunals on any valid cause of action recognized
under Philippine laws.

The law is clear. An unlicensed foreign corporation doing business in the

Philippines cannot sue before Philippine courts. On the other hand, an unlicensed
foreign corporation not doing business in the Philippines can sue before
Philippine courts.

Likewise, under Section 3(d) of Republic Act No. 7042 (RA 7042) or “The Foreign
Investments Act of 1991,” the phrase “doing business” includes:

x x x soliciting orders, service contracts, opening offices, whether called “liaison” offices
or branches; appointing representatives or distributors domiciled in the Philippines or
who in any calendar year stay in the country for a period or periods totalling one
hundred eighty (180) days or more; participating in the management, supervision or
control of any domestic business, firm, entity or corporation in the Philippines; and any
other act or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of, commercial gain or
of the purpose and object of the business organization: Provided, however, That the
phrase “doing business” shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do business,
and/or the exercise of rights as such investor; nor having a nominee director or officer to
represent its interests in such corporation; nor appointing a representative or distributor
domiciled in the Philippines which transacts business in its own name and for its own
account.

The series of transactions between petitioner and respondent cannot be classified as

“doing business” in the Philippines under Section 3(d) of RA 7042. An essential
condition to be considered as “doing business” in the Philippines is the actual
performance of specific commercial acts within the territory of the Philippinesfor
the plain reason that the Philippines has no jurisdiction over commercial acts performed
in foreign territories.

In this case, there is no showing that petitioner performed within the Philippine territory
the specific acts of doing business mentioned in Section 3(d) of RA 7042. Petitioner did
not also open an office here in the Philippines, appoint a representative or distributor, or
manage, supervise or control a local business. While petitioner and respondent entered
into a series of transactions implying a continuity of commercial dealings, the perfection
and consummation of these transactions were done outside the Philippines.
Considering the given facts, it is worthy to note that the sale of lace products was
consummated in Hong Kong.

The Court also finds no single activity which petitioner performed here in the Philippines
pursuant to its purpose and object as a business organization. Moreover, petitioner’s
desire to do business within the Philippines is not discernible from the allegations of the
complaint or from its attachments. Therefore, there is no basis for ruling that petitioner is
doing business in the Philippines.

We disagree with the Court of Appeals’ ruling that the proponents to the transaction
determine whether a foreign corporation is doing business in the Philippines, regardless
of the place of delivery or place where the transaction took place.

For example, in exporting. An exporter in one country may export its products to many
foreign importing countries without performing in the importing countries specific
commercial acts that would constitute doing business in the importing countries. The
mere act of exporting from one’s own country, without doing any specific
commercial act within the territory of the importing country, cannot be deemed as
doing business in the importing country. Otherwise exporters, by the mere act alone
of exporting their products, could be considered by the importing countries to be doing
business in those countries and will require them to secure a business license in every
foreign country where they usually export their products. Such a legal concept will have
a deleterious effect not only on Philippine exports, but also on global trade.

Considering that petitioner is not doing business in the Philippines, it does not need a
license in order to initiate and maintain a collection suit against respondent for the
unpaid balance of respondent’s purchases.
4.. GR No. 110910, Jul 17, 1995 ]
NATIONAL SUGAR TRADING CORPORATION v. CA

FACTS:
Petitioner National Sugar Trading Corporation (NASUTRA) was a domestic corporation
created for the purpose of engaging in the trading of sugar, and was a subsidiary of the
Philippine Sugar Commission (PSC), an entity owned and controlled by the Philippine
government. The NASUTRA and PSC were phased out respectively by P.D. No. 1971
in 1985 and E.O. No. 18 in 1986, which at the same time created petitioner Sugar
Regulatory Administration (SRA) to administer over the sugar industry. Respondent
Eastern Sugar Corporation is a corporation organized and existing under the laws of
Hongkong.

On August 7, 1991, private respondent filed a complaint against petitioners before the
Regional Trial Court, Branch 91, Quezon City for "Specific Performance and Partial
Rescission of Contract and Damages," docketed as Civil Case No. Q-91-9975. The
complaint alleged that: (1) Private respondent is a foreign corporation with principal
office at Flat 1609 Connaught Place, Hongkong and is not doing business in the
Philippines; (2) On October 14, 1980, private respondent and NASUTRA entered into a
"Contract for the Purchase and Sale of Sugar"

On September 26, 1991, NASUTRA and SRA moved for extension of time to file
responsive pleading, which was granted. On September 27, NASUTRA filed a motion
for production and inspection of documents. Private respondent submitted a Comment
dated October 9, 1991 and later filed its Submission dated October 16, 1991, attaching
thereto a copy of the purported letter of credit and its amendments.

On October 31, 1991, NASUTRA filed a second motion for extension of time to file
responsive pleading. On even date, SRA filed a Motion to Dismiss alleging (1) lack of
capacity to sue by private respondent on the ground that it is a foreign corporation doing
business in the Philippines without a license; (2) lack of a cause of action against SRA,
it not being a party to the contract; and (3) non-availment of arbitration provided under
the contract.

On November 18, 1991, the trial court denied NASUTRA's motion for production and
inspection of documents. NASUTRA, however, filed on the same day a Motion to
Dismiss basically on the same grounds alleged by SRA in its own motion.

Private respondent then filed a consolidated Opposition to the two motions,

On June 8, 1992, the trial court dismissed the complaint on the ground of lack of
capacity to sue by private respondent. Upon motion for reconsideration of private
respondent the trial court reversed and set aside the previous order and directed
petitioners to file their answer to the complaint.

Petitioners questioned this order before the Court of Appeals in a petition under Rule 65
of the Revised Rules of Court. On June 30, 1993, the Court of Appeals rendered a
decision, dismissing the petition.

Petitioners filed the petition before this Court under Rule 45 of the Revised Rules of
Court.

II

A preliminary issue to resolve is private respondent's submission that this action could
not prosper due to petitioners' failure to file the requisite motion for reconsideration of
the questioned decision.

There is no dispute that private respondent is a foreign corporation unlicensed to do

business in the Philippines.

Petitioners do not dispute private respondent's claim that NASUTRA entered into the
Contract of Purchase and Sale of Sugar with the latter in 1980 (Rollo, pp. 58, 69). In
fact, in its Motion to Dismiss filed below, petitioner SRA admits the partial delivery of the
sugar and the issuance of SRA Resolution No. 68-87-A recognizing payment and
receipt by NASUTRA of the purchase price for the said sugar, and NASUTRA's existing
obligation over the undelivered portion (Rollo, p. 63).

Given these preliminary facts and assuming that petitioner NASUTRA was aware from
the outset that private respondent had no license to do business in this country, it would
appear quite inequitable for NASUTRA, a state-owned corporation, to evade payment of
an otherwise legitimate indebtedness due and owing to private respondent upon the
plea that the latter should have obtained a license first before perfecting a contract with
the Philippine government (Merrill Lynch Futures, Inc. v. Court of Appeals, 211 SCRA
824 [1992]).

Furthermore, private respondents did not, under the subject transaction, sell sugar and
derive income from the Philippines. Private respondent specifically purchased sugar
from the Philippine government and allegedly paid for it in full.

"The doctrine of lack of capacity to sue based on failure to acquire a local license is based
on considerations of sound public policy. The license requirement was imposed to
subject the foreign corporation doing business in the Philippines to the jurisdiction of its
courts. It was never intended to favor domestic corporations who enter into solitary
transactions with unwary foreign firms and then repudiate their obligations simply
because the latter are not licensed to do business in this country. The petitioners in this
case are engaged in the exportation of coconut oil, an export item so vital in our country's
 economy. They filed this petition on the ground that Stokely is an unlicensed foreign
corporation without a bare allegation or showing that their defenses in the collection case
are valid and meritorious. We cannot fault the two courts below for acting as they did" (at
p. 297; Underscoring supplied).

Private respondent has already filed its answer to the complaint after twice moving for
extension of time to file the same (Rollo, pp. 264, 283). With all the more reason should
the trial court continue with the proceedings below.

WHEREFORE, the petition for certiorari is DENIED and the Decision of the Court of
Appeals dated June 30, 1993 in CA-G.R. No. SP 29781 is AFFIRMED.

5. READ!!!
G.R. No. 168266 March 15, 2010

CARGILL, INC.,
vs.
INTRA STRATA ASSURANCE CORPORATION

Facts:
•Cargill ( foreign) is a corporation organized and existing under the laws of theState of Delaware.
• Cargill executed a contract with Northern Mindanao Corporation (NMC )( domestic ), whereby
NMC agreed to sell to petitioner 20,000 to 24,000 metrictons of molasses to be delivered from Jan
1 to 30 1990 for $44 per metric ton
• The contract provided that CARGILL was to open a Letter of Credit with theBPI. NMC was
permitted to draw up 500,000 representing the minimum priceof the contract
• The contract was amended 3 times (in relation to the amount and the price).But the third
amendment required NMC to put up a performance bond whichwas intended to guarantee NMC’s
performance to deliver the molasses duringthe prescribed shipment periods
• In compliance, INTRA STRATA issued a performance bond to guaranteeNMC’s delivery.
• NMC was only able to deliver 219551 metric tons out of the agreed 10,500.Thus CARGILL sent
demand letters to INTRA claiming payment under theperformance and surety bonds. When INTRA
failed to pay, CARGILL filed acomplaint.
• CARGILL NMC and INTRA entered into a compromise agreement approvedby the court, such
provided that NMC would pay CARGILL 3 million uponsigning and would deliver to CARGILL 6,991
metric tons of molasses. ButNMC still failed to comply
• RTC – in favor of CARGILL
• CA – CARGILL does not have the capacity to file suit since it was a foreigncorporation doing
business in the PH without the requisite license. Thepurchase of molasses were in pursuance of
its basic business and not just mereisolated and incidental transactions

Issue:
Whether or not petitioner is doing or transacting business in the Philippines incontemplation of the
law and established jurisprudence/ Whether or not CARGILL,an unlicensed foreign corporation,
has legal capacity to sue before Philippine courts.

Held: YES
• According to Article 123 of the Corporation Code, a foreign corporation mustfirst obtain a license
and a certificate from the appropriate government agencybefore it can transact business in the
Philippines. Where a foreign corporationdoes business in the Philippines without the proper license,
it cannot maintainany action or proceeding before Philippine courts, according to Article 133 of
the Corporation Code
• “Doing Business” o ….. and any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to thatextent the performance of acts or works, or the exercise
of some of the functions normally incident
to, and in progressive prosecutionof, commercial gain or of the purpose and object of the
businessorganization. ”
• Since INTRA is relying on Section 133 of the Corporation Code to barpetitioner from maintaining
an action in Philippine courts, INTRA bears theburden of proving that CARGILL was doing business
in the PH. In this case,we find that INTRA failed to prove that CARGILL’s activities in thePhilippines
constitute doing business as would prevent it from bringing an action.
• There is no showing that the transactions between petitioner and NMC signifythe intent of
petitioner to establish a continuous business or extend itsoperations in the Philippines.
• In this case, the contract between petitioner and NMC involved the purchaseof molasses by
petitioner from NMC. It was NMC, the domestic corporation,which derived income from the
transaction and not petitioner. To constitute“doing business,” the activity undertaken in the
Philippines should involve profit-making.
• Other factors which support the finding that petitioner is not doingbusiness in the Philippines are:
(1) petitioner does not have an office inthe Philippines; (2) petitioner imports products from the
Philippinesthrough its non-exclusive local broker, whose authority to act on behalf of petitioner is
limited to soliciting purchases of products from suppliersengaged in the sugar trade in the
Philippines; and (3) the local broker isan independent contractor and not an agent of petitioner.
• To be doing or “transacting business in the Philippines” for purposes of Section 133 of the
Corporation Code, the foreign corporation must actuallytransact business in the Philippines , that
is, perform specific businesstransactions within the Philippine territory on a continuing basis in its
ownname and for its own account

• CARGILL is a foreign company merely importing molasses from a Philipineexporter. A

foreign company that merely imports goods from a Philippineexporter, without opening an
office or appointing an agent in the Philippines,is not doing business in the Philippines
“activities within Philippine jurisdiction that do not create earnings or profits to the foreign
corporation do not constitute doing business in the Philippines. – cargil

6. READ!!!
G.R. No. 171995 April 18, 2012

STEELCASE, INC.,
vs.
DESIGN INTERNATIONAL SELECTIONS, INC.,

FACTS
Steelcase, Inc. (Steelcase) granted Design International Selections, Inc. (DISI) the right
to market, sell, distribute, install, and service its products to end-user customers within
the Philippines.Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign
Investments Act of 1991 (FIA) expressly states that the phrase doing business excludes
the appointment by a foreign corporation of a local distributor domiciled in the Philippines
which transacts business in its own name and for its own account. On the other hand,
DISI argues that it was appointed by Steelcase as the latter’s exclusive distributor of
Steelcase products. The dealership agreement between Steelcase and DISI had been
described by the owner himself as basically a buy and sell arrangement.

ISSUE
Whether Steelcase had been doing business in the Philippines.
RULING
NO.
[T]he appointment of a distributor in the Philippines is not sufficient to constitute
doing business unless it is under the full control of the foreign corporation. On the other
hand, if the distributor is an independent entity which buys and distributes products,
other than those of the foreign corporation, for its own name and its own account, the
latter cannot be considered to be doing business in the Philippines. Here, DISI was
an independent contractor which sold Steelcase products in its own name and for its own
account. As a result, Steelcase cannot be considered to be doing business in
the Philippines by its act of appointing a distributor as it falls under one of the exceptions
under R.A. No. 7042.
7. G.R. No. 170770 January 9, 2013

VITALIANO N. AGUIRRES II and FIDEL N. AGUIRRE,

vs.
FQB+7, INC., NATHANIEL D. BOCOBO, PRISCILA BOCOBO and ANTONIO DE VILLA

FACTS:

On October 5, 2004, Vitaliano filed, in his individual capacity and on behalf of

FQB+7, Inc., a Complaint for intra-corporate dispute, injunction, inspection of
corporate books and records, anddamages, against respondents Nathaniel D.
Bocobo, Priscila D. Bocobo and Antonio De Villa. TheComplaint alleged that
FQB+7 was established in 1985 with the following directors and subscribers,as
reflected in its Articles of Incorporation.The substant ive change s f ound in the
G IS, respect in g the compositi on of dire ct ors and subscribers of FQB+7,
prompted Vitaliano to write to the "real" Board of Directors (the directorsreflected
in the Articles of Incorporation), represented by Fidel N. Aguirre. In this letter dated April
29,2004, Vitaliano questioned the validity and truthfulness of the alleged stockholders
meeting held onSeptember 3, 2002. He asked the "real" Board to rectify what he
perceived as erroneous entries inthe GIS, and to allow him to inspect the corporate
books and records. The "real" Board allegedlyignored Vitaliano’s request

ISSUE: Whether or not dissolved corporation may continue as a body corporate for the
limited purposeof liquidating the corporate assets and distributing them to its creditors,
stockholders, and others ininterest.

RULING:YES.

A corporation’s board of directors is not rendered functus officio by its

dissolution. SinceSection 122 allows a corporation to continue its existence for a
limited purpose, necessarily theremust be a board that will continue acting for
and on behalf of the dissolved corporation for thatpurpose. In fact, Section 122
authorizes the dissolved corporation’s board of directors to conduct itsliquidation
within three years from its dissolution. Jurisprudence has even recognized the
board’sauthority to act as trustee for persons in interest beyond the said
three-year period. Thus, thedetermination of which group is the bona fide or
rightful board of the dissolved corporation will stillprovide practical relief to the parties
involved.The same is true with regard to Vitaliano’s shareholdings in the dissolved
corporation. A party’sstockholdings in a corporation, whether existing or
dissolved, is a property right which he mayvindicate against another party who
has deprived him thereof. The corporation’s dissolution does notextinguish such
property right. Further, Intra-corporate disputes remain even when the corporation is
dissolved

FACTS:
Vitaliano filed a Complaint for intra-corporate dispute, injunction, inspection of corporate
books and records, and damages, against respondents Nathaniel, Priscila and Antonio
for the usurpation of the management powers and prerogatives of the "real" Board of
Directors. The application was granted when the respondents failed to attend the hearing.
The respondents filed a Petition for Certiorari and Prohibition before the CA seeking the
annulment of all the proceedings. The CA postulated that Section 122 of the Corporation
Code allows a dissolved corporation to continue as a body corporate for the limited
purpose of liquidating the corporate assets and distributing them to its creditors,
stockholders, and others in interest. It does not allow the dissolved corporation to continue
its business. That being the state of the law, the CA determined that Vitalianos Complaint,
being geared towards the continuation of FQB+7, Inc.s business, should be dismissed
because the corporation has lost its juridical personality. Moreover, the CA held that the
trial court does not have jurisdiction to entertain an intra-corporate dispute when the
corporation is already dissolved.
ISSUE:Whether the RTC has jurisdiction over an intra-corporate dispute involving a
dissolved corporation. YES.
HELD:Intra-corporate disputes remain even when the corporation is dissolved.
Jurisdiction over the subject matter is conferred by law. R.A. No. 8799 conferred
jurisdiction over intra-corporate controversies on courts of general jurisdiction or RTCs,
to be designated by the Supreme Court. Thus, as long as the nature of the controversy
is intra-corporate, the designated RTCs have the authority to exercise jurisdiction over
such cases.

8. G.R. No. 118843 February 6, 1997

ERIKS PTE. LTD.,

vs.
COURT OF APPEALS, and DELFIN F. ENRIQUEZ, JR.
9. ABRERA vs HON. ROMEO F. BARZA
G.R. No. 171681 September 11, 2009
10. G.R. No. 142399 June 19, 2007

PHILIPPINE AIRLINES, INCORPORATED,

vs.
PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA)
11. G.R. No. 165675 September 30, 2005

SPOUSES EDUARDO SOBREJUANITE and FIDELA SOBREJUANITE, Petitioners,

vs.
ASB DEVELOPMENT CORPORATION,

FACTS OF THE CASE

1. On March 7, 2001, spouses Eduardo and Fidela Sobrejuanite
(Sobrejuanite) filed a Complaint for rescission of contract, refund of
payments and damages, against ASB Development Corporation
(ASBDC) before the Housing and Land Use Regulatory Board
(HLURB).
2. Sobrejuanite alleged that they entered into a Contract to Sell with
ASBDC over a condominium unit and a parking space in the BSA
Twin Tower-B Condominum located at Bank Drive, Ortigas Center,
Mandaluyong City. They averred that despite full payment and
demands, ASBDC failed to deliver the property on or before
December 1999 as agreed. They prayed for the rescission of the
contract; refund of payments amounting to P2,674,637.10;
payment of moral and exemplary damages, attorney’s fees,
litigation expenses, appearance fee and costs of the suit.
3. ASBDC filed a motion to dismiss or suspend proceedings in view
of the approval by the Securities and Exchange Commission (SEC)
on April 26, 2001 of the rehabilitation plan of ASB Group of
Companies, which includes ASBDC, and the appointment of a
rehabilitation receiver. The HLURB arbiter however denied the
motion and ordered the continuation of the proceedings.
ISSUE:
Whether the SEC’s approval of the corporate rehabilitation plan
has the effect of suspending the proceeding before HLURB.
RULING:
Yes. Section 6(c) of PD No. 902-A empowers the SEC:
c) To appoint one or more receivers of the property, real and
personal, which is the subject of the action pending before the
Commission … whenever necessary in order to preserve the rights
of the parties-litigants and/or protect the interest of the investing
public and creditors: … Provided, finally, That upon appointment of
a management committee, rehabilitation receiver, board or body,
pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership
pending before any court, tribunal, board or body shall be
suspended accordingly.
The purpose for the suspension of the proceedings is to prevent a
creditor from obtaining an advantage or preference over another
and to protect and preserve the rights of party litigants as well as
the interest of the investing public or creditors. Such suspension is
intended to give enough breathing space for the management
committee or rehabilitation receiver to make the business viable
again, without having to divert attention and resources to litigations
in various fora.
The suspension would enable the management committee or
rehabilitation receiver to effectively exercise its/his powers free
from any judicial or extra-judicial interference that might unduly
hinder or prevent the “rescue” of the debtor company.
To allow such other action to continue would only add to the burden
of the management committee or rehabilitation receiver, whose
time, effort and resources would be wasted in defending claims
against the corporation instead of being directed toward its
restructuring and rehabilitation
12. G.R. No. 175109 August 6, 2008

PARAMOUNT INSURANCE CORP., petitioner, vs.

A.C. ORDOÑEZ CORPORATION and FRANKLIN SUSPINE
The petition lacks merit.
Section 11, Rule 14 sets out an exclusive enumeration of the officers who can receive
summons on behalf of a corporation. Service of summons to someone other than the
corporation's president, managing partner, general manager, corporate secretary,
treasurer, and in-house... counsel, is not valid.
The designation of persons or officers who are authorized to receive summons for a
domestic corporation or partnership is limited and more clearly specified in the new rule.
The phrase `agent, or any of its directors' has been conspicuously deleted.
We have ruled that the new rule, as opposed to Section 13, Rule 14 of the 1964 Rules
of Court, is restricted, limited and exclusive, following the rule in statutory construction
that expressio unios est... exclusio alterius.
Thus, the service of summons to respondent corporation's Receiving Section through
Samuel D. Marcoleta is defective and not binding to said corporation.
On its face, the return shows that the summons was received by an employee who is
not among the responsible officers enumerated by law. Such being invalid, petitioner
should have sought the issuance and proper service of new summons instead of
moving for a declaration of... default.
Consequently, the motions for declaration of default filed on May 19, 2000 and June 30,
2000 were both premature.
Although it was filed beyond the extension period requested by respondent corporation,
however, Sec. 11, Rule 11 grants discretion to the trial court to allow... an answer or
other pleading to be filed after the reglementary period, upon motion and on such terms
as may be just
There is likewise no merit in petitioner's claim that respondent corporation lacks legal
personality to file an appeal. Although the cancellation of a corporation's certificate
of registration puts an end to its juridical personality, Sec. 122 of the Corporation
Code, however... provides that a corporation whose corporate existence is terminated in
any manner continues to be a body corporate for three years after its dissolution for
purposes of prosecuting and defending suits by and against it and to enable it to settle
and close its affairs.
Moreover, the rights of a corporation, which is dissolved pending litigation, are accorded
protection by law pursuant to Sec. 145 of the Corporation Code, to wit:
Section 145. Amendment or repeal. No right or remedy in favor of or against any
corporation, its stockholders, members, directors, trustees, or officers, nor any liability
incurred by any such corporation, stockholders, members, directors, trustees, or...
officers, shall be removed or impaired either by the subsequent dissolution of said
corporation or by any subsequent amendment or repeal of this Code or of any part
thereof. (Emphasis ours)
Dissolution or even the expiration of the three-year liquidation period should not
be a bar to a corporation's enforcement of its rights as a corporation.
13. South African Airways V. CIR (2010)
14. G.R. No. 133608 August 26, 2008 ---- TIONG ROSARIO, vs. ALFONSO CO,
Whether a criminal case against a corporate officer could be suspended on account of the pendency of a
petition for suspension of payments filed by that officer’s corporation with the SEC. NO.

Section 6 (c) of P.D. No. 902-A, as amended, provides:

Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following
powers:
xxx

c) To appoint one or more receivers of the property, real or personal, which is the subject of
the action pending before the Commission in accordance with the pertinent provisions of the Rules of Court
in such other cases whenever necessary in order to preserve the rights of the parties-litigants and/or protect
the interest of the investing public and creditors: ... Provided, finally, That upon appointment of a
management committee, the rehabilitation receiver, board or body, pursuant to this Decree, all actions
for claims against corporations, partnerships, or associations under management or receivership
pending before any court, tribunal, board or body shall be suspended accordingly.(italics supplied)

As early as Finasia Investment and Finance Corp. v. Court of Appeals, this Court clarified that the word
“claim” used in Sec. 6 (c) of P.D. No. 902-A, as amended, refers to debts or demands of a pecuniary nature
and the assertion of a right to have money paid. It is used in special proceedings like those before AN
administrative court on insolvency. In Arranza v. B.F. Homes, Inc. “claim” was defined as an action
involving monetary considerations. Clearly, the suspension contemplated under Sec. 6 (c) of
P.D. No. 902-A refers only to claims involving actions which are pecuniary in nature.

16. Calleja vs Panday GR No 168696 28 February 2006

Calleja v. Panday,[52] while on facts the other way around, i.e., a branch of the RTC
exercising jurisdiction over a subject matter within theSpecial Commercial Court’s
authority, dealt squarely with the issue:
Whether a branch of the Regional Trial Court which has no jurisdiction to try and decide
a case has authority to remand the same to another co-equal Court in order to cure the
defects on venue and jurisdiction.

Calleja ruled on the issue, thus:

Such being the case, RTC Br. 58 did not have the requisite authority or power to order the
transfer of the case to another branch of the Regional Trial Court. The only action that
RTC-Br. 58 could take on the matter was to dismiss the petition for lack of jurisdiction.

Facts: Jose Pierre Panday, with the aid of 14 armed men usurped the powers which
supposedly belonged to respondents (Calleja, Tabora, et al) and took away the daily
hospital collection from St. John Hospital in Naga City. Calleja, et al filed a petition with the
RTC of San Jose, Camarines Sur for quo warranto with Damages and Prayer for Mandatory
and Prohibitory Injunction, Damages and Issuance of Temporary Restraining Order against
Panday, et al.
Decision: “Evidently, the RTC-Br. 58 in San Jose, Camarines Sur is bereft of jurisdiction
over respondents petition for quo warranto. Based on the allegations in the petition, the
case was clearly one involving an intra-corporate dispute. The trial court should have
been aware that under R.A. No. 8799 and the aforementioned administrative issuances of
this Court, RTC-Br. 58 was never designated as a Special Commercial Court; hence, it
was never vested with jurisdiction over cases previously cognizable by the SEC.
Such being the case, RTC-Br. 58 did not have the requisite authority or power to order the
transfer of the case to another branch of the Regional Trial Court. The only action that RTC-
Br. 58 could take on the matter was to dismiss the petition for lack of jurisdiction

17. G.R. No. 171815 August 7, 2007

READ!!!!

CEMCO HOLDINGS, INC.,

vs.
NATIONAL LIFE INSURANCE COMPANY OF THE PHILIPPINES, INC

FACTS:
Union Cement Corporation (UCC), a publicly-listed company, has two principal
stockholders – UCHC, a non-listed company, with shares amounting to 60.51%, and
petitioner Cemco with17.03%. Majority of UCHC’s stocks were owned by BCI with
21.31% and ACC with 29.69%. Cemco, on the other hand, owned 9% of UCHC stocks.
In a disclosure letter, BCI informed the Philippine Stock Exchange (PSE) that it and its
subsidiary ACC had passed resolutions to sell to Cemco BCI’s stocks in UCHC equivalent
to 21.31% and ACC’s stocks in UCHC equivalent to 29.69%.

As a consequence of this disclosure, the PSE inquired as to whether the Tender Offer
Rule under Rule 19 of the Implementing Rules of the Securities Regulation Code is not
applicable to the purchase by petitioner of the majority of shares of UCC. The SEC en
banc had resolved that the Cemco transaction was not covered by the tender offer rule.
Feeling aggrieved by the transaction, respondent National Life Insurance Company of the
Philippines, Inc., a minority stockholder of UCC, sent a letter to Cemco demanding the
latter to comply with the rule on mandatory tender offer. Cemco, however, refused.
Respondent National Life Insurance Company of the Philippines, Inc. filed a complaint
with the SEC asking it to reverse its 27 July 2004 Resolution and to declare the purchase
agreement of Cemco void and praying that the mandatory tender offer rule be applied to
its UCC shares.
The SEC ruled in favor of the respondent by reversing and setting aside its 27 July
2004Resolution and directed petitioner Cemco to make a tender offer for UCC shares to
respondent and other holders of UCC shares similar to the class held by UCHC in
accordance with Section 9(E), Rule 19 of the Securities Regulation Code.
On petition to the Court of Appeals, the CA rendered a decision affirming the ruling of the
SEC. It ruled that the SEC has jurisdiction to render the questioned decision and, in any
event, Cemco was barred by estoppel from questioning the SEC’s jurisdiction.
It, likewise, held that the tender offer requirement under the Securities Regulation Code
and its Implementing Rules applies to Cemco’s purchase of UCHC stocks. Cemco’s
motion for reconsideration was likewise denied.

ISSUES:
1. Whether or not the SEC has jurisdiction over respondent’s complaint and to require
Cemco to make a tender offer for respondent’s UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect acquisition
of shares in a listed company, in this case, the indirect acquisition by Cemco of 36% of
UCC, a publicly-listed company, through its purchase of the shares in UCHC, a non-listed
company.

HELD:
1. YES. In taking cognizance of respondent’s complaint against petitioner and eventually
rendering a judgment which ordered the latter to make a tender offer, the SEC was
acting pursuant to Rule19(13) of the Amended Implementing Rules and Regulations
of the Securities Regulation Code, to wit:
“ 13. Violation If there shall be violation of this Rule by pursuing a purchase of equity
shares of a public company at threshold amounts without the required tender offer, the
Commission, upon complaint, may nullify the said acquisition and direct the holding of a
tender offer. This shall be without prejudice to the imposition of other sanctions under the
Code.”
The foregoing rule emanates from the SEC’s power and authority to regulate, investigate
or supervise the activities of persons to ensure compliance with the Securities Regulation
Code, more specifically the provision on mandatory tender offer under Section 19thereof.
Moreover, petitioner is barred from questioning the jurisdiction of the SEC. It must be
pointed out that petitioner had participated in all the proceedings before the SEC and had
prayed for affirmative relief.

2. YES. Tender offer is a publicly announced intention by a person acting alone or in

concert with other persons to acquire equity securities of a public company.
A public company is defined as a corporation which is listed on an exchange, or a
corporation with assets exceeding P50,000,000.00 and with 200 or more stockholders, at
least 200 of them holding not less than 100 shares of such company .
Stated differently, a tender offer isan offer by the acquiring person to stockholders of a
public company for them to tender their shares therein on the terms specified in the offer.
Tender offer is in place
to protect minority shareholders against any scheme that dilutes the share value of their
investments. It gives the minority shareholders the chance to exit the company
under reasonable terms, giving them the opportunity to sell their shares at the same price
as those of the majority shareholders. The SEC and the Court of Appeals ruled that the
indirect acquisition by petitioner of 36% of UCC shares through the acquisition of the non-
listed UCHC shares is covered by the mandatory tender offer rule. The legislative intent
of Section 19 of the Code is to regulate activities relating to acquisition of control of the
listed company and for the purpose of protecting the minority stockholders of a listed
corporation. Whatever may be the method by which control of a public company
isobtained, either through the direct purchase of its stocks or through an indirect means,
mandatory tender offer applies. As appropriately held by the Court of Appeals:
The petitioner posits that what it acquired were stocks of UCHC and not UCC. By
happenstance, as a result of the transaction, it became an indirect owner of UCC. We
are constrained, however, to construe ownership acquisition to mean both direct and
indirect. What is decisive is the determination of the power of control. The legislative
intent behind the tender offer rule makes clear that the type of activity intended to be
regulated is the acquisition of control of the listed company through the purchase of
shares. Control may [be] effected through a direct and indirect acquisition of stock, and
when this takes place, irrespective of the means, a tender offer must occur. The bottom
line of the law is to give the shareholder of the listed company the opportunity to decide
whether or not to sell in connection with a transfer of control. x x x

READ!!!
Long vs. Basa
[GRs 134963-64, 27 September 2001];
Lim Che Boon vs. Basa [GRs 135152-53], Lim Che Boon vs. Basa [GR 137135]

Issue: Whether the expulsion of Joseph Lim, Liu Yek See, Alfredo Long and Felix Almeria from the
membership of the CHURCH by its Board of Directors through a resolution issued on August 30, 1993
is in accordance with law.

Held: The By-laws of the CHURCH, which the members have expressly adhered to, does not require
the Board of Directors to give prior notice to the erring or dissident members in cases of expulsion

Section 91 of the Corporation Code, which has been made explicitly applicable to religious
corporations by the second paragraph of Section 109 of the same Code, provides for the termination
of membership. It provides that "Membership shall be terminated in the manner and for the causes
provided in the articles of incorporation or the by-laws. Termination of membership shall have the
effect of extinguishing all rights of a member in the corporation or in its property, unless otherwise
provided in the articles of incorporation or the by-laws." In fact, Long, et al. really have no reason to
bewail the lack of prior notice in the By-laws. They have waived such notice by adhering to those By-
laws. They became members of the CHURCH voluntarily. They entered into its covenant and
subscribed to its rules. By doing so, they are bound by their consent. Even assuming that Long, et al.'s
expulsion falls within the Constitutional provisions on "prior notice" or "due process," still the Court can
not conclude that Basa, et al. committed a constitutional infraction. Long, et al. were given more than
sufficient notice of their impending expulsion, as shown by the records

GR No. 180064, Sep 16, 2013 ]

JOSE U. PUA v. CITIBANK

FACTS: Petitioners filed before the RTC a Complaint for declaration of nullity of contract
& sums of money w/ damages against respondent. Petitioners had been depositors of
Citibank Binondo. Chingyee Yau, VP of Citibank HK, came to the Philippines to sell
securities to Jose. Yau required him to open an account with Citibank HK as a condition
for the sale.Yau then offered & sold to petitioners numerous securitiesissued by public
limited companies established in Jersey, Channel Isands. The offer, sale, & signing of the
subscription agreements of said securities were all made & perfected at Citibank
Binondo.Petitioners later discovered that the securities were not registered w/ the SEC &
that the terms & conditions were not submitted to the SEC for evaluation, approval, &
registration. Alleging a violation of the Securities Regulation Code, Petitioners assailed
the validity of the subscription agreements & the terms & conditions thereof for being
contrary to law and/or public policy. Respondent filed a motion to dismissalleging violation
of the doctrine of primary jurisdiction. It alleged that petitioners complaint should first be
filed with the SEC & not before the RTC. The RTC denied the motion to dismiss saying
that the complaint was one for declaration of nullity of contract and sums of money w/
damages so it has jurisdiction.The legal questions or issues arising from petitioners
causes of action against respondent are more appropriate for the judiciary than for an
administrative agency to resolve. CA reversed dismissed complaint for violation of
doctrine of primary jurisdiction. Since the case would largely depend on the issue of
whether or not the latter violated the provisions of the SRC, the matter is within the special
competence or knowledge of the SEC.

ISSUE: Whether or not petitioners action falls within the primary jurisdiction of the SEC

HELD: Respondents reliance on the Baviera ruling is erroneous considering that what
was involved there was a criminal prosecution while the instant case involves a civil suit.
SRC provisions governing criminal suits are separate & distinct from those pertaining to
civil suits. On the one hand, Sec. 53 (Investigations, Injunctions and Prosecution of
Offenses) of the SRC governs criminal suits involving violations of the said law. On the
other hand, Secs 56, 57, 58, 59, 60, 61, 62, & 63 of the SRC pertain to civil suits involving
violations of the same law. Sec. 57 provides that any person who offers to sell or sells a
security in violation of Chap. III or offers to sell or sells a security, whether or not exempted
by the provisions of the Code, by the use of any means or instruments of transportation
or communication, by means of a prospectus or other written or oral communication,
which includes an untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements, in the light of the circumstances under which
they were made, not misleading (the purchaser not knowing of such untruth or omission),
and who shall fail in the burden of proof that he did not know, and in the exercise of
reasonable care could not have known, of such untruth or omission, shall be liable to the
person purchasing such security from him, who may sue to recover the consideration paid
for such security with interest thereon, less the amount of any income received thereon,
upon the tender of such security, or for damages if he no longer owns the security.
Moreover, Sec. 63.1 states that All suits to recover damages pursuant to Sections 56,57,
58, 59, 60 and 61shall be brought before the Regional Trial Court which shall have
exclusive jurisdiction to hear and decide such suits. The Court is hereby authorized to
award damages in an amount not exceeding triple the amount of the transaction plus
actual damages.
Therefore, civil suits falling under the SRC are under the exclusive original jurisdiction of
the RTC & hence, need not be first filed before the SEC, unlike criminal cases wherein
the latter body exercises primary jurisdiction. Petitioners' filing of a civil suit against
respondent was properly filed directly before the RTC. Petition isGRANTED.