CORPORATION LAW CASES

Third Batch

Cua vs CA (Derivative Suit)

Requisites of Derivative Suit: (1) He was a stockholder or member at the time the
acts or transactions subject of the action occurred and at the time the action was
filed; (2) He exerted all reasonable efforts, and alleges the same with particularity
in the complaint, to exhaust all remedies available under the articles of
incorporation, bylaws, laws or rules governing the corporation or partnership to
obtain the relief he desires; (3) No appraisal rights are available for the act or
acts complained of; and (4) The suit is not a nuisance or harassment suit.

Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals (Non-stock

Corporation)

In the instant case, petitioner corporation is classified as a close corporation and

consequently a board resolution authorizing the sale or mortgage of the subject
property is not necessary to bind the corporation for the action of its president. At
any rate, a corporate action taken at a board meeting without proper call or notice
in a close corporation is deemed ratified by the absent director unless the latter
promptly files his written objection with the secretary of the corporation after
having knowledge of the meeting which, in this case, petitioner Virgilio Dulay failed
to do.
Long vs. Basa (Termination of membership; Religious corporation)
The CHURCH By-law provision on expulsion, as phrased, may sound unusual and
objectionable to petitioners as there is no requirement of prior notice to be given to
an erring member before he can be expelled. But that is how peculiar the nature of a
religious corporation is vis-a-vis an ordinary corporation organized for profit. It
must be stressed that the basis of the relationship between a religious corporation
and its members is the latters absolute adherence to a common religious or
spiritual belief. Once this basis ceases, membership in the religious corporation
must also cease. Thus, generally, there is no room for dissension in a religious
corporation. And where, as here, any member of a religious corporation is expelled
from the membership for espousing doctrines and teachings contrary to that of his
church, the established doctrine in this jurisdiction is that such action from the
church authorities is conclusive upon the civil courts.

PADCOM vs Ortigas Center (Non-stock corporation)

As lot owner, PADCOM is a regular member of the Association. No application for
membership is necessary. If at all, acceptance by the Board of Directors is a
ministerial function considering that PADCOM is deemed to be a regular member
upon the acquisition of the lot pursuant to the automatic membership clause
annotated in the Certificate of Title of the property and the Deed of Transfer.
Neither are we convinced by PADCOMs contention that the automatic membership
clause is a violation of its freedom of association. PADCOM was never forced to join
the association. It could have avoided such membership by not buying the land from
TDC. Nobody forced it to buy the land when it bought the building with the
annotation of the condition or lien on the Certificate of Title thereof and accepted
the Deed. PADCOM voluntarily agreed to be bound by and respect the condition,
and thus to join the Association.
RCBC vs IAC (Suspension of payments; status of secured creditors)
1. All claims against corporations, partnerships, or associations that are pending
before any court, tribunal, or board, without distinction as to whether or not a
creditor is secured or unsecured, shall be suspended effective upon the
appointment of a management committee, rehabilitation receiver, board, or
body in accordance with the provisions of Presidential Decree No. 902-A.
(Comment: Not upon filing of petition)
2. Secured creditors retain their preference over unsecured creditors, but
enforcement of such preference is equally suspended upon the appointment of a
management committee, rehabilitation receiver, board, or body. In the event that
the assets of the corporation, partnership, or association are finally liquidated,
however, secured and preferred credits under the applicable provisions of the
Civil Code will definitely have preference over unsecured ones.
San Juan Structural and Steel Fabricators, Inc. vs. Court of Appeals (Close
Corporation)
The articles of incorporation of Motorich Sales Corporation does not contain any
provision stating that (1) the number of stockholders shall not exceed 20, or (2) a
preemption of shares is restricted in favor of any stockholder or of the corporation,
or (3) listing its stocks in any stock exchange or making a public offering of such

stocks is prohibited. From its articles, it is clear that Respondent Motorich is not a
close corporation. Motorich does not become one either, just because Spouses
Reynaldo and Nenita Gruenberg owned 99.866% of its subscribed capital stock. The
[m]ere ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not of itself sufficient ground for 36
disregarding the separate corporate personalities. So, too, a narrow distribution of
ownership does not, by itself, make a close corporation.
Petitioner cites Manuel R. Dulay Enterprises, Inc. v. Court of Appeals wherein the
Court ruled that x x x petitioner corporation is classified as a close corporation and,
consequently, a board resolution authorizing the sale or mortgage of the subject
property is not necessary to bind the corporation for the action of its president.38
But the factual milieu in Dulay is not on all fours with the present case. In Dulay,
the sale of real property was contracted by the president of a close corporation with
the knowledge and acquiescence of its board of directors. In the present case,
Motorich is not a close corporation, as previously discussed, and the agreement was
entered into by the corporate treasurer without the knowledge of the board of
directors.
Sobrejuanite vs. ASB Development Corporation (Suspension of payments)
Finasia Investments and Finance Corp. v. Court of Appeals and Arranza v. B.F.
Homes, Inc. were promulgated prior to the effectivity of the Interim Rules of
Procedure on Corporate Rehabilitation on December 15, 2000. The interim rules
define a claim as referring to all claims or demands, of whatever nature or character
against a debtor or its property, whether for money or otherwise. The definition is
all-encompassing as it refers to all actions whether for money or otherwise. There
are no distinctions or exemptions.
Clearly then, the complaint filed by Sobrejuanite is a claim as defined under the
Interim Rules of Procedure on Corporate Rehabilitation. Even under our rulings in
Finasia Investments and Finance Corp. v. Court of Appeals and Arranza v. B.F.
Homes, Inc., the complaint for rescission with damages would fall under the
category of claim considering that it is for pecuniary considerations.
Clarion Printing House vs NLRC (Suspension of payments)
With the appointment of a management receiver in September 1997, however, all
claims and proceedings against CLARION, including labor claims, were deemed

suspended during the existence of the receivership. The labor arbiter, the NLRC, as
well as the CA should not have proceeded to resolve respondents complaint for
illegal dismissal and should instead have directed respondent to lodge her claim
before the then duly-appointed receiver of CLARION.
Garcia vs PAL (Suspension of payments)
Upon appointment by the SEC of a rehabilitation receiver, all actions for claims
against the corporation pending before any court, tribunal or board shall ipso jure
be suspended. The purpose of the automatic stay of all pending actions for claims is
to enable the rehabilitation receiver to effectively exercise its/his powers free from
any judicial or extrajudicial interference that might unduly hinder or prevent the
rescue of the corporation. More importantly, the suspension of all actions for claims
against the corporation embraces all phases of the suit, be it before the trial court or
any tribunal or before this Court. No other action may be taken, including the
rendition of judgment during the state of suspension. It must be stressed that what
are automatically stayed or suspended are the proceedings of a suit and not just the
payment of claims during the execution stage after the case had become final and
executory. The actions that are suspended cover all claims against the corporation
whether for damages founded on a breach of contract of carriage, labor cases,
collection suits or any other claims of a pecuniary nature.
Lingkod Manggagawa sa Rubberworld, Adidas-Anglo vs. Rubberworld
(Phils.), Inc. (Suspension of payments)

The Labor Arbiter completely disregarded and violated Section 6(c) of Presidential
Decree 902-A, as amended, which categorically mandates the suspension of all
actions for claims against a corporation placed under a management committee by
the SEC. Thus, the proceedings before the Labor Arbiter and the order and writ
subsequently issued by the NLRC are all null and void for having been undertaken
or issued in violation of the SEC suspension Order dated December 28, 1994.
The law is clear: upon the creation of a management committee or the appointment
of a rehabilitation receiver, all claims for actions shall be suspended accordingly.
No exception in favor of labor claims is mentioned in the law. Since the law makes
no distinction or exemptions, neither should this Court. Ubi lex non distinguit nec
nos distinguere debemos.

Second Batch
Nava vs. Peers Marketing Corporation (Certificate of Stock)
Under the facts of the case, there is no clear legal duty on the part of the officers of
the corporation to register the twenty shares in Navas name. Hence, there is no
cause of action for mandamus, x x x As already stressed, in this case no stock
certificate was issued to Po. Without the stock certificate, which is the evidence of
ownership of corporate stock, the assignment of corporate shares is effective only
between the parties to the transaction (Davis vs. Wachter, 140 So. 361). The delivery
of the stock certificate, which represents the shares to be alienated, is essential for
the protection of both the corporation and its stockholders (Smallwood vs. Moretti,
128
So.
2d
628).
Lim Tay vs CA (Ownership of shares)
The registration of shares in a stockholders name, the issuance of stock certificates,
and the right to receive dividends which pertain to the said shares are all rights
that flow from ownership. The determination of whether or not a shareholder is
entitled to exercise the above-mentioned rights falls within the jurisdiction of the
SEC. However, if ownership of the shares is not clearly established and is still
unresolved at the time the action for mandamus is filed, then jurisdiction lies with
the regular courts.
Petitioners status as a mere pledgee does not, under civil law, entitle him to
ownership of the subject shares.
Rural Bank of Lipa vs CA (Ownership of Shares)
We have uniformly held that for a valid transfer of stocks, there must be strict
compliance with the mode of transfer prescribed by law. The requirements are: (a)
There must be delivery of the stock certificate; (b) The certificate must be endorsed
by the owner or his attorney-in-fact or other persons legally authorized to make the
transfer; and (c) To be valid against third parties, the transfer must be recorded in
the books of the corporation. As it is, compliance with any of these requisites has not
been clearly and sufficiently shown.

Ponce vs Alson Cement (Recording of transfer)

In Rivera vs. Florendo, 144 SCRA 643, 657 (1986), we reiterated that a mere
indorsement by the supposed owners of the stock, in the absence of express
instructions from them, cannot be the basis of an action for mandamus and that the
rights of the parties have to be threshed out in an ordinary action. That Hager and
Rivera involved petitions for mandamus to compel the registration of the transfer,
while this case is one for issuance of stock, is of no moment. It has been made clear,
thus far, that before a transferee may ask for the issuance of stock certificates, he
must first cause the registration of the transfer and thereby enjoy the status of a
stockholder insofar as the corporation is concerned. A corporate secretary may not
be compelled to register transfers of shares on the basis merely of an indorsement of
stock certificates. With more reason, in our view, a corporate secretary may not be
compelled to issue stock certificates without such registration.
(From the time of incorporation of VCC up to the present, no certificates of stock
corresponding to the 239,500 subscribed and fully paid shares of Gaid were issued
in the name of Fausto G. Gaid (transferor) and/or the plaintiff. Action for
Mandamus unwarranted no clear legal right.