BA SAVINGS BANK vs ROGER T.

SIA

b)

While the reduction in capital stock created an apparent need for

retrenchment, it was, by all indications, just a mask for the purge of
union members for wage increases.

They were nothing but a premature and plain distribution of

corporate assets to obviate a just sharing to labor of the
vast profits obtained by its joint efforts with capital through
the years

CA = denied petition for certiorari filed by BS Savings Bank = Grounds:

* Certification on anti-forum shopping incorporated in the petition was signed
not by the duly authorized representative of the Bank
* It was signed by its Counsel
BA Savings Bank filed MR attached Corporate Secretarys Certificate containing:
* Resolution prior to filing of the case = authorizing the counsels to sign,
execute and deliver the Certificate of Non-forum Shopping
Still Denied = Hence appeal.
Issue:
WON Circular No. 28-91 allows a corporation to authorize its counsel to execute
a certificate of non-forum shopping for and on its behalf?
Held: YES
1.
A corporation, such as the petitioner, has no powers except those
expressly conferred on it by the Corporation Code and those that are
implied by or are incidental to its existence.

corporation exercises said powers through its board of

directors and/or its duly authorized officers and agents

Physical acts = can be performed only by natural persons

duly authorized for the purpose by corporate bylaws or by a
specific act of the board of directors

Rule: All acts within the powers of a corporation may be

performed by agents of its selection; and, except so far
as limitations or restrictions which may be imposed by
special charter, by-law, or statutory provisions
2.

Circular 28-91 requires the parties themselves to sign the certificate of

non-forum shopping. However, such requirement cannot be imposed on
artificial persons

Reason = they cannot personally do the task themselves

does not require corporate officers to sign the certificate

MADRIGAL & COMPANY, INC vs HON. RONALDO B. ZAMORA

Madrigal & Company = engaged in the management of Rizal Cement Co (sister
companies )
= owned by the same or practically the same
stockholders
Madrigal Central Office Employees Union = sought for the renewal of its CBA

ROSITA PEA vs CA
PAMBUSCO mortgaged lots to DBP = foreclosed
Rosita Pea as highest bidder
BOD of PAMBUSCO by 3 of 5 votes = assigned its right of redemption Atty.
Briones "to execute and sign a Deed of Assignment for and in behalf of
PAMBUSCO in favor of any interested party
Assigned to Marcelino Enriquez = redeemed it and sold it to spouses Yap
Certificate of sale issued by the Sheriff to Pea
Pea notified the sheriff that the redemption was not valid = Grounds:
** it was made under a void deed of assignment
Meanwhile, TCTs were recorded in the name of Yap
Pea remained in possession = Yap were prompted to file the instant case
unlawful detainer of the property
Peas Defenses:
1.
deed of assignment was void ab initio for being an ultra vires act
of its BOD
2.
without any valuable consideration = NO LEGAL EFFECT
3.
all the acts which flowed from it likewise void
Trial Court ruled in favor of Pena. Yap appealed to CA and it was reversed.
Hence petition for certiorari.
Issue:
WON the resolution assigning the redemption right is valid?
Held: NO

1.

Madrigal Co. = requested for a deferment in the negotiations

By resolution of its stockholders = reduced its capital stock and authorized
capitalization
** Through = distribution of the marketable securities owned by the petitioner
to its stockholders in exchange for their shares
Union = filed w/ NLRC complaint for unfair labor practice
Madrigal Co = answered by alleging:
1.
operational losses
2.
Rizal Cement Co., Inc., "from which it derives income" had "ceased
operating temporarily.
3.
the desire of the stockholders to phase out the operations of the
Madrigal & Co. in order to prevent further losses
labor arbiter ruled in favor of the union = granted backwages

2.

By laws provides = at least four Directors are present

It having been approved in a meeting attended by only 3 of

the 5 members

Hence = the deed of assignment subsequently executed in

favor of Marcelino Enriquez is VOID

The by-laws of a corporation are its own private laws which

substantially have the same effect as the laws of the
corporation
Section 40 of the present Corporation Code in addition to a proper
board resolution, the affirmative votes of the stockholders holding
at least two-thirds (2/3) of the voting power in the corporation in a
meeting duly called for that purpose

not confirmed at a subsequent stockholders meeting duly

called for the purpose

ISLAMIC DIRECTORATE OF THE PHILIPPINES vs COURT OF APPEALS

Madrigal Co. = applied for clearance to terminate the services of a number of

employees

IDP-Tamano Group alleges = Islamic leaders of all Muslim major tribal groups
organized and incorporated the ISLAMIC DIRECTORATE OF THE PHILIPPINES
(IDP)

Union = complain of illegal lockout against the petitioner w/ D of Labor

Libyan government donated money to the IDP to purchase land

DOLE = Ordered reinstatement. Appealed to Office of the President, it was

dismissed. Hence this petition.

After the purchase = Martial Law was declared

Issue:
WON economic benefits granted are unfair and violative of the PD 525 and
ignoring the fact that Madrigal had already virtually ceased operation after
decreasing its capital stocks twice, therefore not financially capable to absorb
awards of benefits?
Held: NO
a)
reducing its capital = DOES NOT necessarily mean that they are
phasing out its operations

whatever may be the reason behind such reductions = it is

indicative of an intention to keep the company a going
concern
So much so that until now almost four (4) years later, it is
still very much in existence and operational as before

Two Muslim groups sprung = Carpizo Group and Abbas Group claiming to be the
legitimate IDP
SEC declaring the election of both the Carpizo Group and the Abbas Group as
IDP board members to be null and void
** ORDERED = to prepare and adopt their by-laws for submission to the
Commission.
Neither group took the necessary steps prescribed by the SEC
STILL Carpizo Group caused to be signed an alleged Board Resolution =
authorizing the sale of the subject two parcels of land to INC
IDP Board of Trustees filed a petition before the SEC seeking to declare the sale
Null and Void
INC filed an action for Specific Performance against Carpizo Group

During pendency of SEC Case = Trial court ordered IDP-Carpizo Group to

comply with its obligation
SEC ruled that since there was NO BOD the resolution of sale was Null and
void
INC appealed to CA = set aside the ruling made. Hence IDP-Tamano Group
petitioned for certiorari
Issue:
WON CA erred in setting aside SECs ruling?
Held: YES
1.
all acts carried out by the Carpizo Board = have to be struck down for
having been done without the consent of the IDP thru a legitimate
Board of Trustees

consent is essential for the existence of a contract

the IDP, owner of the subject parcels of land, never gave its
consent, thru a legitimate Board of Trustees

NO CONSENT = hence void and produces no effect

whatsoever.
2.

Carpizo Group-INC sale is further deemed null and void ab initio

because of the Carpizo Group's failure to comply with Section 40 of
the Corporation Code

Tandang Sora property = constitutes the only property of

the IDP

Falls w/in the sale or disposition of all the corporate

property

Requires: ( Both not Met)

1.
majority vote of the legitimate Board

2.

PHILIPPINE TRUST COMPANY vs MARCIANO RIVERA

Mariano Rivera = one of the incorporators of Cooperativa Naval Filipina
The corporation became insolvent = Phil Trust became the ASSIGNEE during
bankruptcy
Phil Trust instituted to recover one-half of the stock subscription of the defendant
( w/c was NOT PAID by Mariano )
Reason for non-payment = resolution was made
1.
capital should be reduced by 50 per centum
2.
subscribers released from the obligation to pay any unpaid balance of
their subscription in excess of 50 per centum of the same
Trial judge ruled resolution relied upon was without effect and was still liable for
the unpaid balance.
Hence appeal.
Issue:
WON recovery of the subscription of Mariano valid?
Held: YES
1.
subscription to the capital of a corporation constitute a find to which
creditors have a right to look for satisfaction of their claims and that the
assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts
2.

concurred in by the vote of at least 2/3 of

the bona fide members of the corporation

DATU TAGORANAO BENITO vs SEC

Jamiatul Philippine-Al Islamia, Inc. = filed AOI w/ SEC
= Out of P200k ---- P80,580.00 were
subscribed
Datu Tagoranao Benito subscribed to 460 shares
Corporation filed a certificate of increase of its capital stock agreed upon in the
stockholders' meeting
P111,000.00 worth of shares were issued were subsequently issued by the
corporation from the unissued portion of the authorized capital stock
Datu filed with SEC petition alleging
** that the additional issue = of previously subscribed shares of the
corporation was made in violation of his pre- emptive right
SEC ruled that
** petitioner has not waived his pre-emptive right to subscribe to the
increased capitalization = ALLOWED DATU TO SUBSCRIBED
Hence, this petition for review by way of appeal

3.

Gen RULE: A corporation has no power to release an original

subscriber to its capital stock from the obligation of paying for his
share
Exception: 1. valuable consideration for such release
2. as against creditors a reduction of the capital stock can
take place only in the manner an under the
conditions prescribed by the statute or the
charter or the articles of incorporation
Resolution was wholly ineffectual

an attempted withdrawal of so much capital from the fund

upon which the company's creditors were entitled
ultimately to rely

effected without compliance with the statutory

requirements

BOMAN ENVIRONMENTAL DEVELOPMENT CORPORATION vs COURT OF

APPEALS
Nilcar Y. Fajilan = wanted to resigned as President and Member of BOD of
Boman Environmental Development Corporation
(BEDECO)
= offered to sell all his shares IN EXCHANGE = 300k + Truck
Board meeting = resignation & offer to sell his shares = accepted
= Elected new officers

Issue:
WON is Datu allowed to exercise his pre-emptive right?

Alfredo Pangilinan = New BEDECO President

= executed promissory note

Held: PARTLY YES

1.
The power to issue shares of stocks in a corporation is lodged in the
board of directors and no stockholders' meeting is necessary to
consider it because additional issuance of shares of stocks does not
need approval of the stockholders.

Partial payment and defaulted

2.

the general rule is that pre-emptive right is recognized only with

respect to new issue of shares, and not with respect to additional
issues of originally authorized shares

3.

THEORY = when a corporation at its inception offers its

first shares = presumed to have offered all of those which it
is authorized to issue
original subscriber is deemed to have taken his shares
knowing that they form a definite proportionate part of
the whole number of authorized shares
EXCEPTION = When the shares left unsubscribed are
later re-offered, he cannot therefore claim a dilution of
interest

he may still be allowed to subscribe to the increased capital stock

proportionate to his present shareholdings

he had not waived his pre-emptive right to subscribe = he

was not present at the meeting and had not executed a
waiver
He may be allowed Due to = Not having waived such right
and for reasons of equity

Fajilan filed a complaint in RTC for collection of that balance

Dismissed the complaint for lack of jurisdiction = Grounds:
** controversy arose out of intracorporate relations = SEC has original and
exclusive jurisdiction to hear and decide it
Appeal to CA = set aside ruling of RTC Grounds: was merely suing on the
balance of the promissory note
Issue:
WON Securities and Exchange Commission (SEC) or a regular court has
jurisdiction over the action?
Held: SEC
Fajilan's suit against the corporation to enforce the latters promissory note or
compels the corporation to pay for his shareholdings is cognizable by the SEC
alone = determine whether such payment will not constitute a distribution
of corporate assets to a stockholder in preference over creditors of the
corporation.
The SEC has exclusive supervision, control and regulatory jurisdiction to: (as
provided in Sections 41 of the Corpo Code)
a)
investigate whether the corporation has unrestricted retained earnings
to cover the payment for the share
b)
whether the purchase is for a legitimate corporate purpose

*** existing law enters into and forms part of a valid contract without need for the
parties' expressly making reference to it
requirement of unrestricted retained earnings to cover the shares is based on the
trust fund doctrine

no distribution of assets among the stockholders without first

paying corporate creditors

RAMON DE LA RAMA vs MA-AO SUGAR CENTRAL CO

Derivative suit = by minority stockholders against the Ma-ao Sugar Central Co.,
Inc and its officers namely Araneta
= illegal and ultra-vires acts consisting of unauthorized
investments
Lower Court rendered its Decision = ordered to refrain from making investments
to company whose purpose
is not connected with the
Sugar Central business
= BUT UPHELD THE
INVESTMENT MADE IN Philippine Fiber
Reason: Ma-ao was engaged in the manufacture of sugar bags = perfectly
legitimate to invest in another corporation engaged in said manufacture
Hence Appeal = Grounds:
** There should be authorized by two-thirds of the voting power of the
stockholders

2.

Assuming no notice = resolutions passed by the board during the

said meetings were NOT ultra vires

definition = one which is not within the corporate powers

conferred by the Corporation Code or articles of
incorporation or not necessary or incidental in the exercise
of the powers so conferred

concerns the benefit and welfare of the company's

employees

(X) invoked = to avoid any liability arising from the

issuance the subject resolutions.

3.

Section 40 of the Corporation Code = REFERS to sale, lease, exchange

or disposition of all or substantially all of the corporation's assets of all or
substantially all of the corporation's assets

stockholders of petitioner corporation also sit as members of

the board of directors

Issue:
WON the investments made were valid?
Held: NO
The Law should be understood to mean = that it is prohibited to the Corporation
to invest in shares of another corporation unless such an investment is
authorized by two-thirds of the voting power of the stockholders IF the
purpose of the corporation in which investment is made is foreign to the purpose
of the investing corporation
BUT IF the investment is made in a corporation whose business is important to
the investing corporation and would aid it in its purpose = to require authority of
the stockholders would be to unduly curtail the Power of the Board of
Directors

J. M. TUASON vs QUIRINO BOLAOS

FACTS: This was an action to recover possession of a parcel of land where
theplaintiff was represented by a corporation.
Issue:
WON the case should be dismissed on the ground that the case was notbrought
by the real property in interest
Held: No

Such an act, if done in pursuance of the corporate purpose, does not need the
approval of the stockholders; but when the purchase of shares of another
corporation is done solely for investment and not to accomplish the purpose of its
incorporation, the vote of approval of the stockholders is necessary.
LOPEZ REALTY, INC., AND ASUNCION LOPEZ GONZALES vs FLORENTINA
FONTECHA
Arturo Lopez proposed distribution of certain assets of Lopez Realty among its
three (3) main shareholders
= One of the purpose is to the reduction of
employees with provision for their
gratuity pay.
Lopez Realty = approved two (2) resolutions providing for the gratuity pay of its
employees

Asuncion Lopez Gonzales CONTESTED the resolution made = flied a derivative

suit with SEC against Arturo F. Lopez
Meanwhile = first 2 installments were paid
= 3rd installments = were cancelled by Asuncion Gonzales
Fontecha filed case with labor arbiter = FAVORED Fontecha
Gonzales APPEALED = Grounds:
1.
that said board resolutions were not ratified by the stockholders of the
corporation ( Sec 40 Corpo Code )
2.
resolutions passed by the board of directors = ultra vires for lack of
notice
Issue:
WON Fontecha et al are entitled to receive their gratuity pay under the assailed
board resolutions?
Held:
1.

GR: a corporation, through its board of directors, should act in the

manner and within the formalities, if any, prescribed by its charter or by
the general law
Exception: ratified either
a)
Expressly = by the action of the directors in
subsequent legal meeting OR
b)
Impliedly = by the corporation's subsequent course of
conduct

Lopez Realty = did not issue any resolution revoking nor

nullifying the board resolutions granting gratuity pay and

There is nothing to the contention that the present action is not

brought bythe real party in interest, that is, by J. M. Tuason and Co.,
Inc. What the Rules of Court require is that an action be brought in
the name of, but not necessarily by , the real party in interest.
(Section 2, Rule 2.)

The complaint is signed by the law firm of Araneta and Araneta,

"counsel for plaintiff" and commences with the statement "comes now
plaintiff, through its undersigned counsel." It is true that the complaint
also states that the plaintiff is "represented herein by its Managing
Partner Gregorio Araneta, Inc.", another corporation

There is nothing against one corporation being represented

byanother person, natural or juridical, in a suit in court.

The contention that Gregorio Araneta Inc. cannot act as managing

partner for plaintiff on the theory that it is illegal for two corporations
to enter into a partnership is without merit, for the true rule is that
though a corporation has no power into a partnership, it may
nevertheless enter into a joint venture with another where the nature
of that venture is in line with the business authorized by its charter.

There is nothing in the record to indicate that the venture in which

plaintiff is represented by Gregorio Araneta, Inc. as "its managing
partner" is not in line with the corporate business of either of them.

While Asuncion Lopez Gonzales was then abroad:

Members of BOD = made resolution = full payment on those who will be laid off
and partial payment for those retained
Requested for the full payment of their gratuity pay = Granted

resolutions INSTEAD = paid the first 2 installments of gratuity

pay
she was aware of the corporation's obligation under the
said resolutions
Asuncion Lopez Gonzales affixed her signature on Cash
Voucher

NOTE: Point of the case is about joint ventures being treated separately from
partnerships. Tuason does not explain why there was a difference in treatment
of corporate involvement in partnerships as compared to that when it come to
joint ventures