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9 Landmark Cases

Corporation Law


G.R. No. 102965 January 21, 1999
FACTS: RTC rendered judgment in favor of Pepsi Cola Bottling Co. ordering Reburiano to
pay55,000.00 with interest for the unpaid bottles of soft drinks it received from the company.
RTC issued a writ of execution. However, before the promulgation of the decision of the RTC,
Pepsi amended its articles of incorporation to shorten its term of existence. The RTC was not
notified of this fact. Reburiano then moved to quash the writ of execution on the ground that
Pepsi no longer had juridical personality, hence, it could no longer sue and be sued. RTC
denied Reburiano’s petition to quash the writ of execution. An appeal was made. CA dismissed
the appeal. Hence, this petition for review on certiorari.
HELD: Yes. Sec. 122 of the Corporation Code provides that every corporation whose charter
expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate
existence for other purposes is terminated in any other manner, shall nevertheless be continued
as a body corporate for 3years after the time when it would have been so dissolved, for the
purpose of prosecuting and defending suits by or against it and enabling it to settle and close its
affairs, to dispose of an convey its property and to distribute its assets, but not for the purpose
of continuing the business for which it was established. However, Reburiano further argues that
when Pepsi undertook a voluntary dissolution, there was no showing that a receiver or trustee
was ever appointed. He contends that Sec. 122 of the Corporation Code above cited does not
authorize a corporation, after the 3 year liquidation period, to continue actions instituted by it
within said period of 3 years. SC held that in the case of Gelano vs. CA, a corporation that has a

1979: annual stockholders' meeting to elect their 7 directors to their BOD for the year 1979-1980  Pedro Lopez Dee (Dee) was unseated as Chairman of the Board and President but was elected as one of the directors. its stockholders. Dee V. merely continues the legal personality of the dissolved corporation. should not be accorded similar treatment allowed to proceed to final judgment and execution thereof. Atty. Natelco entered into a contract with Communication Services. Also.pending action and which cannot be terminated within the 3 year period after dissolution is authorized to convey all its property to trustees to enable it to prosecute and defend suits by or against the corporation beyond the 3 year period. No reason could be conceived why a suit already commenced by the corporation itself during its existence. or officers.. Inc. Natelco filed an application for the approval of the increased authorized capital with the then Board of Communications (BOC)  January 8.00  As required by the Public Service Act. (CSI) for the "manufacture. was organized with P100K authorized capital  1974: Natelco decided to increase its authorized capital to P3. together with his wife. Justino de Jesus. Counsel of the dissolved corporation can be considered a trustee.000. Maggay attended . both at a par value of P10/shares  April 12. 145 –Amendment or Repeal – No right or remedy in favor or against any corporation. shall be removed or impaired either by the 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."  Natelco filed its Amended Articles of Incorporation with the SEC  the original authorized capital of P100K was already paid  increased capital of P2.000. 1991 FACTS:  1954: Naga Telephone Company (Natelco). trustees. the board of directors may be permitted to complete the corporate liquidation by continuing as trustees by legal implication. Inc. Amelia Lopez Dee  CSI was able to gain control when their legal counsel. by fiction. "after which no further issues will be made without previous authority from this Board. supply.9M the subscribers subscribed to P580K of which P145K was fully paid  capital stock of Natelco was divided into 213K CS and 87K PS. the Corporation Code provides: Sec. 1979: issued another 12K shares of CS to CSI  May 19. delivery and installation" of telephone equipment  Natelco issued 24K shares of CS to CSI as downpayment  May 5. Pedro Lopez Dee and Mrs Amelia C. 1975: approved with conditions:  That the issuance of the shares of stocks will be for a period of one year from the date hereof. not by a mere trustee who. Moreover. Lopez Dee never attended the Maggay Board thereby only Maggay representatives and Atty. members. Luciano Maggay (Maggay) won a seat in the Board  Atty. Maggay became president upon reorganization  Among the directors: Mr. directors. Sr. Mr. 1977: Without no prior authorization from the BOC (now National Telecommunications Commission) (NTC). SEC (1991) GR L-60502 July 16.

NO 2. 1982: CSI group filed a petition for certiorari and prohibition with preliminary injunction or restraining order against the CFI  April 14. 1982: SEC issued another order directing the hold-over directors and officers to turn over their respective posts and directing the Sheriff of Naga City and other enforcement agencies to enforce its order  May 29. 1982: restraining order dwas issued by the lower court commanding desistance from the scheduled election until further orders  May 22. guilty of contempt of court  September 17. 1982: controlling majority of the stockholders proceeded with the elections under the supervision of the SEC representatives  May 25. 902-A does not confer jurisdiction to SEC over all matters affecting corporations  The jurisdiction of the SEC is limited to deciding the controversy in the election of the directors and officers of Natelco   . 1982: hold-over officers peacefully vacated  June 2. 1982 election was valid HELD: Dismissed for lack of merit 1.as per contract they issued 113.D. Desiderio Saavedra. W/N the May 22. 1982: Antonio Villasenor filed w/ the CFI claiming that he was an assignee of an option to repurchase 36K shares of CS of Natelco under a Deed of Assignment executed in his favor  May 21. 20 (h) of the Public Service Act . 1981: Dee filed a petition for certiorari/appeal with the SEC en banc  SEC en banc: dismissed for lack of merit  May 20. Justino De Jesus and Julio Lopez Dee kept insisting no elections were held and refused to vacate their positions  May 28. 1982: SEC recognized the election and the duly elected directors  Lopez Dee group headed by Messrs.800 shares 3. restraining order was restrained  resulted in the unseating of the Maggay group from the BOD in a "hold-over" capacity  SEC: ordering the holding of special stockholder' meeting to elect the new members of the BOD based on its findings of who are entitled to vote  June 23. 1982: Villasenor filed a charge for contempt  September 7.800 shares of stock in favor of CSI Dee having been unseated filed a petition in the SEC questioning the validity of the elections  ground: no valid list of stockholders through which the right to vote could be determined  As prayed for a restraining order was issued by the SEC placing officers of the 19781979 Natelco Board in hold-over capacity  Upon elevation to the SC: dismissed the petition for being premature. W/N SEC has the power and jurisdiction to declare null and void shares of stock issued by NATELCO to CSI for violation of Sec. Augusto Federis and Ernesto Miguel. 1983: IAC: Annuling contempt charge ISSUES: 1. W/N Natelco stockholders have a right of preemption to the 113. 1982: lower court rendered CSI Nilda Ramos. partnerships and associations and those dealing with internal affairs of such entities. P. NO  The jurisdiction of the SEC is limited to matters intrinsically connected with the regulation of corporations. Luciano Maggay.

the private respondents were charged of falsification of public documents and estafa. The ten per centum of the net profits shall be distributed equally among the ten members of the Board of Trustees. are not entitled to salary or other compensation when they perform nothing more than the usual and ordinary duties of their office. disobedience thereto did not constitute contempt Western Institute of Technology vs Salas (1997) 113032 Aug 21. 1979. 1986.CSI was in control of voting shares and the Board The power to issue shares of stocks in a corporation is lodged in the board of directors and no stockholders meeting is required to consider it because additional issuance of shares of stocks does not need approval of the stockholders .no violation of preemptive right 3. 1979 . a date not covered by the corporation’s fiscal year 1985-1986. . the board of directors amended their by laws giving the members of board of directors a compensation. and that the return upon their shares adequately furnishes the motives for service.D. 1997 Facts: Private respondents are the majority and controlling members of the Board of Trustees of Western Institute of Technology. as the case may be. NO There is distinction between: an order to issue shares on or before May 19. Inc. of an educational institution. There is no argument that directors or trustees. without compensation. Issue: WON the compensation of the board of directors as stated in their by laws violates the corporation code? Held: NO. and actual issuance of the shares after May 19. This rule is founded upon a presumption that directors/trustees render service gratuitously. After a full-blown hearing TC handed down a verdict of acquittal on both counts without imposing any civil liability against the accused therein. the same was actually passed on June 1. Then. among others. 2. a stock corporation engaged in the operation. The charge for falsification of public document was anchored on the private respondents’ submission of WIT’s income statement for the fiscal year 1985-1986 with the Securities and Exchange Commission (SEC) reflecting therein the disbursement of corporate funds making it appear that the same was passed by the board on March 30. Clear from records that it was held within the jurisdiction of the lower court as it does not involve an intra-corporate matter but merely a claim of a private party of the right to repurchase common shares of stock of Natelco and that the restraining order was not meant to stop the election duly called for by the SEC and a matter purely within the exclusive jurisdiction of the SEC temporary restraining order amounted to an injunctive relief against the SEC since the trial judge in the lower court did not have jurisdiction in issuing the questioned restraining order. Few years later. when in truth.         The SEC is empowered by P. 1986. 902-A to decide intra-corporate controversies and that is precisely the only issue in this case. YES.

and (2) when the stockholders representing a majority of the outstanding capital stock at a regular or special stockholders’ meeting agree to give it to them. The license requirement was imposed to subject the foreign corporation doing business in the Philippines to the jurisdiction of its courts. however NASUTRA failed to completely delivered the stipulated quantity of sugar. there are only two (2) ways by which members of the board can be granted compensation apart from reasonable per diems: (1) when there is a provision in the bylaws fixing their compensation. The private respondent filed a complaint against petitioner for specific performance. a government-own corporation to evade payment of a legitimate indebtedness owing to private respondent upon the plea that they should have acquired a license first before perfecting a contract with the Philippine government. It was never intended to favor domestic corporation who enters into solitary transaction with unwary foreign firms and then repudiate their obligation simply because the latter are not licensed to do business in this country. CA 211 SCRA 824. that National Sugar Trading (NASUTRA) and the respondent entered into contract for the purchase and sale of sugar. NASUTRA failed to perform its obligation to private respondent. Vice-Chairman. ISSUE: WON the private respondent has the capacity in a domestic court being a foreign corporation not doing business in the Philippines? RULING: Affirmative. Despite repeated demands. National Sugar Trading Corp. Furthermore. Inc. 48. Merrill Lynch Futures. essentially functioning as broker. 1995 FACTS: The respondent in the case is a corporation organized and existing under the laws of Hongkong. It describes itself as a “futures commission merchant”. v. It would be inequitable for NASUTRA.. 17. The complaint allege that they are a corporation not doing business in the Philippines with the principal office at Hongkong. Treasurer and Secretary of Western Institute of Technology. Payment was made. 1992 FACTS: The petitioner is a foreign corporation not doing business in the Philippines filed a complaint against the private respondent for the recovery of a debt and interest with damages and attorney’s fees. 1986 granted monthly compensation to private respondents not in their capacity as members of the board. s. the prohibition with respect to granting compensation to corporate directors/trustees as such under Section 30 is not violated in this particular case. Resolution No.Under the foregoing section. therefore. In the case at bench. CA GR # 110910 July. orders to buy and sell futures contracts received from its customers on . but rather as officers of the corporation. more particularly as Chairman. Clearly. GR # 97816 July 24. v. the doctrine of lack of capacity to sue based on failure to acquire a local license is based on considerations of sound public policy.

“US futures exchange”. to the exclusion of all others. The complaint was accordingly amended and in addition to the relief prayed for in the original complaint. ARSENIO P. respondent Perkins prayed that herein petitioners be adjudged without interest in the shares of stock in question and excluded from any claim they assert thereon. DIZON FACTS: The respondent. G. where such person has acted as agent for the corporation and has violated his fiduciary obligation as such. instituted an action in the Court of First Instance of Manila against the Benguet Consolidated Mining Company for dividends amounting to P71. The trial court ordered respondent Eugene Arthur Perkins to include in his complaint as party. and that thereafter all such parties be required to interplead and settle the rights among themselves.90 on 52. pursuant to the order of the trial court. 1939 IDONAH SLADE PERKINS vs. Thereafter. payment of which was being withheld by the company. for the recognition of his right to the control and disposal of said shares. 46631 November 16. The trial court dismiss the case sustaining the motion to dismiss. Inc. No. And the “doctrine of estoppel to deny corporate existence applies to foreign as well as domestic corporation”. ISSUE AND RULING: WON the Court has acquired jurisdiction over the person of the present petitioner as non-resident defendant. .379. The principle will be applied to prevent a person contracting with a foreign corporation from latter taking advantage of its non-compliance with the statutes. The company filed its answer with prayer that the adverse claimants be made parties to the action and served with notice thereof by publication. The private respondent incurred a debt with the petitioner and the same was not paid alleging that ML Futures has no capacity because it has no license to operate. and. Engelhard. summons by publication were served upon the non-resident defendants. It alleged that the private respondents had been transacting with them for four years. RULING: Affirmative. Idonah Slade Perkins and George H.874 shares of stock registered in his name. but merely fixes a special penalty for violation of the statute. Eugene Arthur Perkins. The appeal in CA also affirmed the trial court’s decision. chiefly in case where such person has received the benefits of the contract. one who has dealt with a corporation of a foreign origin or a corporate entity is estopped to deny its corporate existence and capacity. The respondent filed a motion to dismiss on the complaint averring that ML Futures is not the same corporation they are dealing since the one named in the contract is one Merrill Lynch Pier Femer and Smith. ISSUE: WON the plaintiff has capacity to sue in the Philippine Court.R. The rule is that a party is estopped to challenge the personality of a corporation after having acknowledged the same by entering into contract with it. and where the statute does not provide that the contract shall be void.

Idonah Slade Perkins. that the action relates to real or personal property within the Philippines in which said defendant has or claims a lien or interest. relying upon the provisions of Republic Act 4363 (Amending the libel provision of the Revised Penal Code). N. The rule provides that when a non-resident defendant is sued in the Philippine courts and it appears. Petitioner received the summons and a copy of the complaint at its offices in New York. No. That property consists in certain shares of stocks of the Benguet Consolidated Mining Company. by the complaint or by affidavits. In the aforesaid Civil Case.R. The situs of the shares is in the jurisdiction where the corporation is created. is an American corporation with principal offices at Rocketfeller Center. summons has been served upon her by publication. or in which the relief demanded consists. In order to satisfy the constitutional requirement of due process. Under these circumstances. however. seeks to exclude her from any interest in a property located in the Philippines. organized in the Philippines under the provisions of the Spanish Code of Commerce. in its issue of 18 August 1967. a sociedad anonima. Villegas and Juan Ponce Enrile seek to recover from the herein petitioner damages upon an alleged libel arising from a publication of Time (Asia Edition) magazine.. L-28882 May 31. The respondent judge issued an order re-affirming the previous order of deferment for the reason that "the rule laid down under Republic Act. INC. entitled "Corruption in Asia". "it fixes and settles the title to the property in controversy and to that extent partakes of the nature of the judgment in rem. Y. does not allege the petitioner's legal capacity to sue in the courts of the Philippine. amending Article 360 of the Revised . In an order. and is the publisher of "Time"." The action being in quasi in rem. of an essay. No. therein plaintiffs (herein respondents) Antonio J. ANDRES REYES FACTS: The petition alleges that petitioner Time. Inc. actual or contingent. 4363. the petition.Affirmative. the respondent court deferred the determination of the motion to dismiss until after trial of the case on the merits. service of summons maybe made by publication. G. In the instant case. wholly or in part. whether the certificated evidencing the ownership of those shares are within or without that jurisdiction. vs. for while the judgement that may be rendered therein is not strictly a judgment in rem. It filed a motion to dismiss the complaint for lack of jurisdiction and improper venue. a weekly news magazine. we hold that the action thus brought is quasi in rem. New York City. The Court of First Instance of Manila has jurisdiction over the person of the non-resident.. Private respondents opposed the motion. with its principal office in the City of Manila and which conducts its mining activities therein. in excluding such person from any interest therein. there can be no question that the action brought by herein respondent in his amended complaint against the petitioner. 1971 TIME. Petitioner moved for reconsideration of the deferment private respondents again opposed.

(Litton) entered into an agreement with Empire Sales Philippines Corporation (Empire). [G. Negative. consisting of 2. Herein respondents could not file a criminal case for libel against a non-resident defendant does not make Republic Act No. A fifth shipment. Inc. No. ISSUE AND RULING: WON the failure to allege the capacity of the foreign corporation is fatal.770 dozens of the soccer jersey. At any rate. but Empire refused to issue the required certificate of inspection.110 dozens of the jerseys. Alleging that Empire’s refusal to issue a certificate .Penal Code. INC. 4363 incongruous of absurd. Inc. a corporation organized under the laws of the United States. Empire Sales. directly bind or affect property or persons beyond the limits of the state. the case filed by respondents-plaintiffs is case for damages. vs. by writ of prohibition. and no court which is only a creature of the state. seek relief against the wrongful assumption of jurisdiction. May 15.R.770 dozens of soccer jerseys. Litton must present an inspection certificate issued by Gelhaar’s agent in the Philippines. for a foreign corporation may.. can by its judgments or decrees. . The agreement stipulated that before it could collect from the bank on the letter of credit. no criminal action can lie against it. 6 whether such corporation or resident or nonresident. Negative. as well as disruption of public service do not appear indubitable. And a foreign corporation seeking a writ of prohibition against further maintenance of a suit. but if the accused is a corporation. and because questions involving harassment and inconvenience.1996] LITTON MILLS. whereby Litton agreed to supply Gelhaar 7. that it has jurisdiction. Petitioner's failure to aver its legal capacity to institute the present petition is not fatal." ISSUE AND RULING: WON the libel case is applicable where the action is against non-existent corporation Times. 94980. that the goods were in satisfactory condition. COURT OF APPEALS FACTS: Petitioner Litton Mills. for such inability to file a criminal case against a non-resident natural person equally exists in crimes other than libel.. on a motion to quash service of summons. 5 Not only this. on the ground of want of jurisdiction in which jurisdiction is not bound by the ruling of the court in which the suit was brought. It is a fundamental rule of international jurisdiction that no state can by its laws. was inspected by Empire from. as local agent of private respondent Gelhaar Uniform Company (Gelhaar). is not applicable to actions against non-resident defendants. Litton sent four shipments totalling 4.

The trial court issued the writ. RULING: Affirmative.770 dozens of soccer jerseys from Litton and for this purpose Gelhaar caused the opening of an irrevocable letter of credit in favor of Litton is a sufficient allegation that Gelhaar was doing business in the Philippines. but its motion was denied. (2) if there is no resident agent. This fact must first be established in order that summons can be made and jurisdiction acquired. Gelhaar filed a motion for reconsideration.110 dozen jerseys and the recovery of compensatory and exemplary damages. attorney’s fees and other just and equitable relief. the Empire Sales Philippines Corp. service upon Gelhaar could be made in three ways: (1) by serving upon the agent designated in accordance with law to accept service of summons. the allegation that Empire. ISSUE: WON the contract with Litton was a single. costs. There was. Litton filed a complaint with the Regional Trial Court of Pasig for specific performance. In the case at bar. so that the cargo was shipped on time. Empire issued the inspection certificate. be established by appropriate allegations in the complaint. isolated and does not constitute doing business in the Philippines. ordered 7. by service on the government official designated by law to that effect. a valid service of summons on Gelhaar. that where a single act or transaction of a foreign corporation is not merely incidental or casual but is of such character as distinctly to indicate a purpose on the part of the foreign corporation to do other business in the state. in order that service may be effected. It held that Gelhaar was doing business in thePhilippines. RULING: Negative. The trial court issued an order denying for lack of merit Gelhaar’s motion to dismiss and to quash the summons. Here. The defendants answer objecting to the jurisdiction of the court over Gelhaar. and that the service of summons on Gelhaar was therefore valid. The Court referred to acts which were in the ordinary course of business of the foreign corporation. such act will be considered as constituting doing business. Litton sought the issuance of a writ of preliminary mandatory injunction in performing its duty to compel Empire to issue the inspection certificate covering the 2. The next day. ISSUE: WON jurisdiction over Gelhaar was acquired by the trial court by service of summon through Gelhaar’s agent. in the first place. sufficient to confer on the trial court jurisdiction over the person of Gelhaar.was without valid reason. and (3) by serving on any officer or agent of said corporation within the Philippines. This is a sine qua non requirement. The fact of doing business must then. for and in behalf of Gelhaar. therefore. service was made through Gelhaar’s agent. . In accordance with the Rule. it is required the foreign corporation be one which is doing business in the Philippines.

Moral damages are recoverable only where the dismissal of the employee was attended by bad faith or fraud. to her former position as clinic coordinator after a year of serving as principal.NLRC FACTS: The respondent Teresita M. however. respondent was offered the position of principal which proposal. respondent filed a case for illegal dismissal and damages against Brent. respondent and Mrs. should she desire. After continuous prodding and with the assurance that she could return. on the other hand. It appears that the principal and a number of faculty members of Brent’s School of Midwifery (BSM) resigned and sought lucrative jobs abroad.00. Fernandez was employed by petitioner Zamboanga Brent Hospital (Brent) as a staff nurse and thereafter discharged functions in different capacities until she was promoted as acting clinic coordinator. For allegedly violating the policy laid down by petitioner regarding the imposition and collection of coordinator’s fee of P350. crippling its operations.R. good customs or public policy. the Board of Directors of BSM conducted an inquiry wherein respondent was duly notified of the charges imputed against her. good customs or public policy. or was done in a manner contrary to morals. It must be noted that. After hearing the two sides of the controversy.In the case at bar. She also presented before the Board an itemized account of the expenses incurred. she agreed to accompany them to Manila as coordinator. No. with the latter assuring her of the funds essential for their continued stay thereat until the duration of the Board exams. The acts noted above are of such a character as to indicate a purpose to do business. G. she initially rejected. Pada were terminated from their respective employments. obtains in the instant case. however. or was done in a manner contrary to morals. Some of the parents suspected that respondent may have pocketed the money collected while the others were even grateful for what she had done. None of the circumstances. 1998 BRENT HOSPITAL INC. July 10. Exemplary damages. respondent was ordered relieved of her post as principal. In the course of the investigation. In view of . thus. While the latter sought reconsideration from the Board’s decision. The minutes of the meeting reveal that the sentiments of the parents in attendance were divided. ISSUE AND RULING: WON the moral damage is recoverable in dismissal of the employee. respondent explained that upon the request of the reviewees. or constituted an act oppressive to labor. NO. 117593. Consequently. may be awarded if the dismissal constituted an act oppressive to labor. she was finally prevailed upon to accept the offer. vs. the trial court was certainly correct in holding that Gelhaar’s act in purchasing soccer jerseys to be within the ordinary course of business of the company considering that it was engaged in the manufacture of uniforms.

A corporation. may act only through its directors. we find respondent to have been afforded her statutory rights to notice and hearing. the dismissal being premised on the honest belief that she violated the policy of petitioner Brent regarding the collection of coordinator’s fees. acting as corporate agents. being a juridical entity. officers and employees and obligations incurred by them. Thus.the factual milieu of this case. He has cause of action. who exposed the controversy and filed the case. are not theirs but the direct accountabilities of the corporation they represent. has no cause of action and should be held individually liable. her dismissal could not be characterized as having been effected in a wanton. . oppressive or malevolent manner. ISSUE AND RULING: The petitioner Morlito Apuzen (Hospital Administrator).