CORPORATION LAW

Background of Enactment
HARDEN v BENGUET CONSOLIDATED MINING COMPANY
G.R. No. L-37331, March 18, 1933
FACTS: Benguet Consolidated Mining Co. was organized in June, 1903, as a sociedad anonima in conformity with the provisions of
Spanish law. Balatoc Mining Co. was organized in December 1925, as a corporation, in conformity with the provisions of the
Corporation Law (Act No. 1459). Both were organized for mining of gold and their respective properties are located only a few miles
apart in Benguet. Balatoc capital stock consists of one million shares of the par value of one peso (P1) each.
When the Balatoc was first organized, its properties were largely undeveloped. To improve its operations, the companys committee
approached A. W. Beam, then president and general manager of the Benguet Company, to secure the capital necessary to the
development of the Balatoc property. A contract was entered into wherein Benguet will (1) construct a milling plant for the Balatoc mine,
of a capacity of 100 tons of ore per day, and with an extraction of at least 85 per cent of the gold content; (2) erect an appropriate power
plant. In return, Benguet will receive from Balatoc shares of a par value of P600,000.
The total cost incurred by Benguet in developing Balatoc was P1,417,952.15. A certificate for 600,000 shares of the stock of the Balatoc
Company was given to Benguet and the excess value was paid to Benguet by Balatoc in cash. Due to the improvements made by
Benguet, the value of shares of Balatoc increased in the market (from P1 to more than P11) and dividends enriched its stockholders.
Harden, the owner of thousands of shares of Balatoc, questioned the transfer of 600,000 shares to Benguet with the success of the
development.
ISSUE: W/N it is unlawful for Benguet Company to hold any interest in a mining corporation.
W/N, assuming the first question to be answered in the affirmative, the Benguet Company, which was organized as a sociedad
anonima, is a
corporation within the meaning of the language used by the Congress of the United States, and later by the Philippine
Legislature, prohibiting a
mining corporation from becoming interested in another mining corporation.
RULING:
1st Issue: The defendant Benguet Company has committed no civil wrong against the plaintiffs, and if a public wrong has been
committed, the directors of the Balatoc Company, and the plaintiff Harden himself, were the active inducers of the commission of that
wrong. The contract, supposing it to have been unlawful in fact, has been performed on both sides.
2nd Issue: Having shown that the plaintiffs in this case have no right of action against the Benguet Company for the infraction of law
supposed to have been committed, we forego any discussion of the further question whether a sociedad anonima created under
Spanish law, such as the Benguet Company, is a corporation within the meaning of the prohibitory provision already so many times
mentioned.
A sociedad anonima is something very much like the English joint stock company, with features resembling those of both the
partnership is shown in the fact that sociedad, the generic component of its name in Spanish, is the same word that is used in that
language to designate other forms of partnership, and in its organization it is constructed along the same general lines as the ordinary
partnership.
In section 75 of the Corporation Law, a provision is found making the sociedad anonima subject to the provisions of the Corporation
Law "so far as such provisions may be applicable", and giving to the sociedades anonimas previously created in the Islands the option
to continue business as such or to reform and organize under the provisions of the Corporation Law.
The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine Bill), generally prohibiting corporations engaged in mining
and members of such from being interested in any other corporation engaged in mining, was amended by section 7 of Act No. 3518 of
the Philippine Legislature, approved by Congress March 1, 1929. The change in the law effected by this amendment was in the
direction of liberalization. Thus, the inhibition contained in the original provision against members of a corporation engaged in
agriculture or mining from being interested in other corporations engaged in agriculture or in mining was so modified as merely to
prohibit any such member from holding more than fifteen per centum of the outstanding capital stock of another such corporation.
Moreover, the explicit prohibition against the holding by any corporation (except for irrigation) of an interest in any other corporation
engaged in agriculture or in mining was so modified as to limit the restriction to corporations organized for the purpose of engaging in
agriculture or in mining.

Corporate Name
Red Line Transportation Co. vs. Rural Transit Co.
GR No. 41570 | Sept. 6, 1934

Facts:
This is a petition for review of an order of the Public Service Commission granting to the Rural Transit Company, Ltd., a certificate of
public convenience to operate a transportation service between Ilagan in the Province of Isabela and Tuguegarao in the Province of
Cagayan, and additional trips in its existing express service between Manila Tuguegarao.
On June 4, 1932, Rural Transit filed an application for certification of a new service between Tuguegarao and Ilagan with the Public
Company Service Commission (PSC), since the present service is not sufficient
Rural Transit further stated that it is a holder of a certificate of public convenience to operate a passenger bus service between Manila
and Tuguegarao

Red Line opposed said application, arguing that they already hold a certificate of public convenience for Tuguegarao and Ilagan, and is
rendering adequate service. They also argued that granting Rural Transits application would constitute a ruinous competition over said
route
On Dec. 21, 1932, Public Service Commission approved Rural Transits application, with the condition that "all the other terms and
conditions of the various certificates of public convenience of the herein applicant and herein incorporated are made a part hereof."
A motion for rehearing and reconsideration was filed by Red Line since Rural Transit has a pending application before the Court of First
Instance for voluntary dissolution of the corporation
A motion for postponement was filed by Rural Transit as verified by M. Olsen who swears "that he was the secretary of the Rural
Transit Company, Ltd
During the hearing before the Public Service Commission, the petition for dissolution and the CFIs decision decreeing the dissolution
of Rural Transit were admitted without objection
At the trial of this case before the Public Service Commission an issue was raised as to who was the real party in interest making the
application, whether the Rural Transit Company, Ltd., as appeared on the face of the application, or the Bachrach Motor Company, Inc.,
using name of the Rural Transit Company, Ltd., as a trade name
However, PSC granted Rural Transits application for certificate of public convenience and ordered that a certificate be issued on its
name
PSC relied on a Resolution in case No. 23217, authorizing Bachrach Motor to continue using Rural Transits name as its tradename in
all its applications and petitions to be filed before the PSC. Said resolution was given a retroactive effect as of the date of filing of the
application or April 30, 1930
Issue: Can the Public Service Commission authorize a corporation to assume the name of another corporation as a trade name?

Ruling: NO
The Rural Transit Company, Ltd., and the Bachrach Motor Co., Inc., are Philippine corporations and the very law of their creation and
continued existence requires each to adopt and certify a distinctive name
The incorporators "constitute a body politic and corporate under the name stated in the certificate."
A corporation has the power "of succession by its corporate name." It is essential to its existence and cannot change its name except in
the manner provided by the statute. By that name alone is it authorized to transact business.
The law gives a corporation no express or implied authority to assume another name that is unappropriated: still less that of another
corporation, which is expressly set apart for it and protected by the law. If any corporation could assume at pleasure as an unregistered
trade name the name of another corporation, this practice would result in confusion and open the door to frauds and evasions and
difficulties of administration and supervision.
In this case, the order of the commission authorizing the Bachrach Motor Co., Incorporated, to assume the name of the Rural Transit
Co., Ltd. likewise incorporated, as its trade name being void. Accepting the order of December 21, 1932, at its face as granting a
certificate of public convenience to the applicant Rural Transit Co., Ltd., the said order last mentioned is set aside and vacated on the
ground that the Rural Transit Company, Ltd., is not the real party in interest and its application was fictitious
Corporate Name
Red Line Transportation Co. vs. Rural Transit Co.
GR No. 41570 | Sept. 6, 1934

Facts:
This is a petition for review of an order of the Public Service Commission granting to the Rural Transit Company, Ltd., a certificate of
public convenience to operate a transportation service between Ilagan in the Province of Isabela and Tuguegarao in the Province of
Cagayan, and additional trips in its existing express service between Manila Tuguegarao.
On June 4, 1932, Rural Transit filed an application for certification of a new service between Tuguegarao and Ilagan with the Public
Company Service Commission (PSC), since the present service is not sufficient
Rural Transit further stated that it is a holder of a certificate of public convenience to operate a passenger bus service between Manila
and Tuguegarao
Red Line opposed said application, arguing that they already hold a certificate of public convenience for Tuguegarao and Ilagan, and
is rendering adequate service. They also argued that granting Rural Transits application would constitute a ruinous competition over
said route
On Dec. 21, 1932, Public Service Commission approved Rural Transits application, with the condition that "all the other terms and
conditions of the various certificates of public convenience of the herein applicant and herein incorporated are made a part hereof."
A motion for rehearing and reconsideration was filed by Red Line since Rural Transit has a pending application before the Court of
First Instance for voluntary dissolution of the corporation
A motion for postponement was filed by Rural Transit as verified by M. Olsen who swears "that he was the secretary of the Rural
Transit Company, Ltd
During the hearing before the Public Service Commission, the petition for dissolution and the CFIs decision decreeing the dissolution
of Rural Transit were admitted without objection
At the trial of this case before the Public Service Commission an issue was raised as to who was the real party in interest making the
application, whether the Rural Transit Company, Ltd., as appeared on the face of the application, or the Bachrach Motor Company, Inc.,
using name of the Rural Transit Company, Ltd., as a trade name
However, PSC granted Rural Transits application for certificate of public convenience and ordered that a certificate be issued on its
name
PSC relied on a Resolution in case No. 23217, authorizing Bachrach Motor to continue using Rural Transits name as its tradename in
all its applications and petitions to be filed before the PSC. Said resolution was given a retroactive effect as of the date of filing of the
application or April 30, 1930

Issue: Can the Public Service Commission authorize a corporation to assume the name of another corporation as a trade name?

Ruling: NO
The Rural Transit Company, Ltd., and the Bachrach Motor Co., Inc., are Philippine corporations and the very law of their creation and
continued existence requires each to adopt and certify a distinctive name
The incorporators "constitute a body politic and corporate under the name stated in the certificate."
A corporation has the power "of succession by its corporate name." It is essential to its existence and cannot change its name except
in the manner provided by the statute. By that name alone is it authorized to transact business.
The law gives a corporation no express or implied authority to assume another name that is unappropriated: still less that of another
corporation, which is expressly set apart for it and protected by the law. If any corporation could assume at pleasure as an unregistered
trade name the name of another corporation, this practice would result in confusion and open the door to frauds and evasions and
difficulties of administration and supervision.
In this case, the order of the commission authorizing the Bachrach Motor Co., Incorporated, to assume the name of the Rural Transit
Co., Ltd. likewise incorporated, as its trade name being void. Accepting the order of December 21, 1932, at its face as granting a
certificate of public convenience to the applicant Rural Transit Co., Ltd., the said order last mentioned is set aside and vacated on the
ground that the Rural Transit Company, Ltd., is not the real party in interest and its application was fictitious
Principal Place of Business
Under the corporation law, the residence of a corporation is the place where its head or main office is situated
CLAVECILLA RADIO SYSTEM vs. ANTILLON
19 SCRA 39 [1967]
FACTS: Clavecilla was sued in Cagayan de Oro City. Clavecilla questioned the venue because its head office is in Manila. The
plaintiff argued that it can be sued because it has a branch in Cagayan.
ISSUE: Is a corporation a resident of any city or province wherein it has an office or branch?
HELD: NO. Any person, whether natural or juridical, can only have one residence. Therefore, a corporation cannot be allowed to file
personal actions in a place other than its principal place of business unless such a place is also the residence of a co-plaintiff or
defendant.
Young Auto Supply vs. Court of Appeals
[GR 104175, 25 June 1993]
Facts: On 28 October 1987, Young Auto Supply Co. Inc. (YASCO) represented by Nemesio Garcia, its president, Nelson Garcia and
Vicente Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to George C. Roxas. The
purchase price was P8,000,000.00 payable as follows: a down payment of P4,000,000.00 and the balance of P4,000,000.00 in four
postdated checks of P1,000,000.00 each. Immediately after the execution of the agreement, Roxas took full control of the four markets
of CMDC. However, the vendors held on to the stock certificates of CMDC as security pending full payment of the balance of the
purchase price. The first check of P4,000,000.00, representing the down payment, was honored by the drawee bank but the four other
checks representing the balance of P4,000,000.00 were dishonored. In the meantime, Roxas sold one of the markets to a third party.
Out of the proceeds of the sale, YASCO received P600,000.00, leaving a balance of P3,400,000.00.
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of the CMDC shares to
Nemesio Garcia. On 10 June 1988, YASCO and Garcia filed a complaint against Roxas in the Regional Trial Court, Branch 11, Cebu
City, praying that Roxas be ordered to pay them the sum of P3,400,000.00 or that full control of the three markets be turned over to
YASCO and Garcia. The complaint also prayed for the forfeiture of the partial payment of P4,600,000.00 and the payment of attorney's
fees and costs. Failing to submit his answer, and on 19 August 1988, the trial court declared Roxas in default. The order of default was,
however, lifted upon motion of Roxas. On 22 August 1988, Roxas filed a motion to dismiss. After a hearing, wherein testimonial and
documentary evidence were presented by both parties, the trial court in an Order dated 8 February 1991 denied Roxas' motion to
dismiss. After receiving said order, Roxas filed another motion for extension of time to submit his answer. He also filed a motion for
reconsideration, which the trial court denied in its Order dated 10 April 1991 for being pro-forma. Roxas was again declared in default,
on the ground that his motion for reconsideration did not toll the running of the period to file his answer. On 3 May 1991, Roxas filed an
unverified Motion to Lift the Order of Default which was not accompanied with the required affidavit of merit. But without waiting for the
resolution of the motion, he filed a petition for certiorari with the Court of Appeals. The Court of Appeals dismissal of the complaint on
the ground of improper venue. A subsequent motion for reconsideration by YASCO was to no avail. YASCO and Garcia filed the
petition.
Issue: Whether the venue for the case against YASCO and Garcia in Cebu City was improperly laid.
Held: A corporation has no residence in the same sense in which this term is applied to a natural person. But for practical purposes, a
corporation is in a metaphysical sense a resident of the place where its principal office is located as stated in the articles of
incorporation. The Corporation Code precisely requires each corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the Philippines." The purpose of this requirement is to fix the
residence of a corporation in a definite place, instead of allowing it to be ambulatory. Actions cannot be filed against a corporation in any

place where the corporation maintains its branch offices. The Court ruled that to allow an action to be instituted in any place where the
corporation has branch offices, would create confusion and work untold inconvenience to said entity. By the same token, a corporation
cannot be allowed to file personal actions in a place other than its principal place of business unless such a place is also the residence
of a co-plaintiff or a defendant. With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal
place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of Cebu City and whether Roxas was
in estoppel from questioning the choice of Cebu City as the venue. The decision of the Court of Appeals was set aside.
Corporate Term
Benguet Consolidated Mining Co. v. Pineda
98 Phil 711 Business Organization Corporation Law Sociedad Anonima Corporate Existence
Benguet Consolidated Mining Company was organized in 1903 under the Spanish Code of Commerce of 1886 as a sociedad
anonima. It was agreed by the incorporators that Benguet Mining was to exist for 50 years.
In 1906, Act 1459 (Corporation Law) was enacted which superseded the Code of Commerce of 1886. Act 1459 essentially introduced
the American concept of a corporation. The purpose of the law, among others, is to eradicate the Spanish Code and make sociedades
anonimas obsolete.
In 1953, the board of directors of Benguet Mining submitted to the Securities and Exchange Commission an application for them to be
allowed to extend the life span of Benguet Mining. Then Commissioner Mariano Pineda denied the application as it ruled that the
extension requested is contrary to Section 18 of the Corporation Law of 1906 which provides that the life of a corporation shall not be
extended by amendment beyond the time fixed in their original articles.
Benguet Mining contends that they have a vested right under the Code of Commerce of 1886 because they were organized under said
law; that under said law, Benguet Mining is allowed to extend its life by simply amending its articles of incorporation; that the prohibition
in Section 18 of the Corporation Code of 1906 does not apply to sociedades anonimas already existing prior to the Laws enactment;
that even assuming that the prohibition applies to Benguet Mining, it should be allowed to be reorganized as a corporation under the
said Corporation Law.
ISSUE: Whether or not Benguet Mining is correct.
HELD: No. Benguet Mining has no vested right to extend its life. It is a well settled rule that no person has a vested interest in any rule
of law entitling him to insist that it shall remain unchanged for his benefit. Had Benguet Mining agreed to extend its life prior to the
passage of the Corporation Code of 1906 such right would have vested. But when the law was passed in 1906, Benguet Mining was
already deprived of such right.
To allow Benguet Mining to extend its life will be inimical to the purpose of the law which sought to render obsolete sociedades
anonimas. If this is allowed, Benguet Mining will unfairly do something which new corporations organized under the new Corporation
Law cant do that is, exist beyond 50 years. Plus, it would have reaped the benefits of being a sociedad anonima and later on of
being a corporation. Further, under the Corporation Code of 1906, existing sociedades anonimas during the enactment of the law must
choose whether to continue as such or be organized as a corporation under the new law. Once a sociedad anonima chooses one of
these, it is already proscribed from choosing the other. Evidently, Benguet Mining chose to exist as a sociedad anonima hence it can no
longer elect to become a corporation when its life is near its end.