Ongkingco vs NLRC

doctrine: When the by-laws of the condominium corporation specifically includes the position of
“Superintendent/Administrator” in is roster of corporate officers, then such position is clearly a corporate officer
position and issues of reinstatement would be within the jurisdiction of the SEC and not the NLRC.

Magallanes Condo BOD = appointed guilas as administrator/ superintendent for the common areas of condo the by laws
of the condominium stated that

Resolution was passed and he was not re-appointed by the board = HENCE he filed a case with the nlrc

Labor arbiter dismissed it stating SEC has jurisdiction over the said case being a corporate creation.

Nlrc reversed stated that they have jurisdiction stating that, CA affirmed NLRC jurisdiction

nlrc followed the argument of ongkinco that as a mere employee of petitioner corporation being tasked mainly, as
administrator/superintendent, with the upkeep of the condominium's common areas. He, thus, maintains that private
respondent cannot be deemed a corporate officer because "it is the nature of one's functions and not the nomenclature
or title given to one's job which determines one's status in a corporation."

issue:
WON SEC or NLRC has jurisdiction?

ruling:
SEC has jurisdiction because under sec 5 it stated that SEC have exclusive original jurisdiction over “c) Controversies in
the election or appointment of directors, trustees, officers, or managers of such corporations, partnerships or
associations.

Furthermore The by laws of the corporation stated that the Board shall appoint a superintendent or administrator if
such funds warrant it.

Being appointed by the board he is deemed a corporate officer Perforce, Section 5(c) of Presidential Decree No. 902-A,
which provides that the SEC exercises exclusive jurisdiction over controversies in the election or appointment of
directors, trustees, officers or managers of corporations, partnerships or associations, applies in the present dispute.
Accordingly, jurisdiction over the same is vested in the SEC, and not in the Labor Arbiter or the NLRC.

A corporate officer's dismissal is always a corporate act and/or an intra-corporate controversy and that nature is not
altered by the reason or wisdom which the Board of Directors may have in taking such action.

Based on the foregoing, we must rule that private respondent was indeed a corporate officer. He was appointed directly
by the Board of Directors not by any managing officer of the corporation and his salary was, likewise, set by the same
Board. Having thus determined, his dismissal or non-appointment is clearly an intra-corporate matter and jurisdiction,
therefore, properly belongs to the SEC and not the NLRC.
TABANG VS NLRC

doctrine: BOD may be empowered under by laws to create additional officers as may be necessary

An “office” is created by the charter of the corporation and the officer is elected by the directors or stockholders. On
the other hand, an “employee” usually occupies no office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also determines the compensation to be paid such
employee.

Facts:

Tabang is a member of the board and was appointed by board of trustees as medical director and hospital administrator
, sometime after he was informed of a board resolution of his removal. He filed an illegal dismissal case with the NLRC
but it was dismissed for lack of jurisdiction stating SEC has jurisdiction.

Issue:
WON nlrc or SEC has jurisdiction

Ruling:
SEC has jurisdiction his services being an office and not merely an emloyee

In this case, tabang was appointed by the Board of Trustees to offices stated in the by-laws. She is deemed an officer
of the corporation. An officer’s dismissal is always a corporate act, or an intra-corporate controversy, and the nature is
not altered by the reason or wisdom which the Board of Directors may have in taking such action. Renumeration comes
within the area of corporate affairs and management and is a corporate controversy
Gurrea vs Lezama

doctrine : who is an officer in a corporation? we can only regard as officers of a corporation those who are given that
character either by the Corporation Law or by its by-laws. The rest can be considered merely as employees or
subordinate officials.

Facts:
Gurrea was the manager of the ice plant, he was removed from position through a board resolution, Gurrea contested
that a 2/3 vote of SH is needed

issue:
WON guerra was validly removed from his position as manager through a board resolution

Ruling:
YES he was validly removed under sec 33 of the corporation code because he is a manager and not an officer.

“Immediately after the election, the directors of a corporation must organize by the election of a president, who must
be one of their number, a secretary or clerk who shall be a resident of the Philippines . . . and such other officers as may
be provided for in the by- laws.”

The law states the primary officers as well as those to be provided in the by laws. Guerra a manager is not one of them.
The manager is not included although the latter is mentioned as the person in whom the administration of the
corporation is vested, and with the exception of the president, the by-laws provide that the officers of the corporation
may be removed or suspended by the affirmative vote of 2/3 of the corporation. Power to appoint comes with power to
remove

One distinction between officers and agents of a corporation lies in the manner of their creation. An officer is created by
the charter of the corporation, and the officer is elected by thedirectors or the stockholders. An agency is usually
created by the officers, or one or more of them, and the agent is appointed by the same authority. It is clear that the
two terms officersand agents are by no means interchangeable.
Psba vs Leano

doctrine: who is an officer in a corporation

Facts: Tan is a director and evp of PSBA , a meeting was called for and it was declared that all position except pres and
chairman are vacant, tan was not elected as EVP. Tan filed illegal dismissal in NLRC, damages in TC, and validity of
election in SEC. They ordered submission of documents.

Issue: WON NLRC or SEC has jurisdiction?

WON there was valid election?

Ruling:

SEC has jurisdiction

it is clear that it is intra-corporate in nature what is being talked about here is the validity of the election

The relationship of a person to a corporation, whether as officer or as agent or employee, is not determined by the
nature of the services performed, but by the incidents of the relationship as they actually exist.

(malabo ung case kulang facts sa case itself)

pearson & george vs NLRC , Lorente

facts: llorente was a director he was elected as vice chairman of the board as well as managing director for a term of 1
year until his successor is elected according to its by-laws. Llorente was suspended for alleged suspicious transaction. On
a regular SH meeting an election was made and he was not elected. The new set of BOD abolished his office.

Llorente filed a case in the nlrc. NLRC ordered damages be paid.

Issue: WON SEC or NLRC has jurisdiction

ruling:
the removal of Llorente as Managing Director is purely an intra-corporate dispute which falls within the exclusive
jurisdiction of the SEC and not of the NLRC.

Llorente was not dismissed, he was not reelected as director during SH meeting and a prerequisite of being a MD is that
you need to be a director.

Any question should be resolved in an action under sec5 b c of PD 902A

reahs corporation vs NLRC

doctrine: reviewed the A.C. Ransom doctrine of imposing solidarily liability on the highest officers of the corporation
for judgment on labor claims rendered against the corporation pursuant to Art. 283 of the Labor Code, and reviewed
its application in subsequent cases of Maglutac, Chua, Gudezand Pabalan.

It reiterated the main doctrine of separate personality of a corporation which should remain as the guiding rule in
determining corporate liability to its employees, and that at the very least, to justify solidary liability, “there must be
an allegation or showing that the officers of the corporation deliberately or maliciously designed to evade the
financial obligation of the corporation to its employees,” or a showing that the officers indiscriminately stopped its
business to perpetuate an illegal act, as a vehicle for the evasion of existing obligations, in circumvention of statutes,
and to confuse legitimate issue

FACTS: Soledad domingo sold rainbow sauna to reahs corporation and converted it to a singalong coffee shop and
massage parlor. Reahs corporation due to business losses Reahs corporation closed down. Its employees filed with the
nlrc for backwages and was granted. Reahs corporation stated that it has valid reason to shut down namely business
losses. NLRC ruled in favor of employees stating that there was illegal dismissal.

issue:
WON officers can be solidary liable?

Ruling: YES, As a general rule established by legal fiction, the corporation has a personality separate and distinct from its
officers, stockholders and members. Hence, officers of a corporation are not personally liable for their official acts
unless it is shown that they have exceeded their authority. This fictional veil, however, can be pierced by the very same
law which created it when "the notion of the legal entity is used as a means to perpetrate fraud, an illegal act, as a
vehicle for the evasion of an existing obligation, and to confuse legitimate issues". Under the Labor Code, for instance,
when a corporation violates a provision declared to be penal in nature, the penalty shall be imposed upon the guilty
officer or officers of the corporation

The Solicitor General, in behalf of private respondents, argues that the doctrine laid down in the case of A.C. Ransom
Labor Union - CCLU v. NLRC[8] should be applied to the case at bar. In that case, a judgment against a corporation (A.C.
Ransom) to reinstate its dismissed employees with back wages was declared to be a continuing solidary liability of the
company president and all who may have thereafter succeeded to said office after the records failed to identify the
officer or agents directly responsible for failure to pay the back wages of its employees. The Court noted Ransom's
subterfuge in organizing another family corporation while the case was on litigation with the intent to phase out the
existing corporation in case of an adverse decision, as what actually happened when it ceased operations a few months
after the labor arbiter ruled in favor of Ransom's employees.

This uncaring attitude on the part of the officers of Reah's gives credence to the supposition that they simply ignored the
side of the workers who, more or less, were only demanding what is due them in accordance with law. In fine, these
officers were conscious that the corporation was violating labor standard provisions but they did not act to correct these
violations; instead, they abruptly closed business. Neither did they offer separation pay to the employees as they
conveniently resorted to a lame excuse that they suffered serious business losses, knowing fully well that they had no
substantial proof in their hands to prove such losses.
smith vs van gorkom

doctrine:. Under the business judgment rule, a business judgment is presumed to be an informed judgment, but the
judgment will not be shielded under the rule if the decision was unadvised.

Brief Fact Summary. Plaintiffs, Alden Smith and John Gosselin, brought a class action suit against Defendant corporation,
Trans Union, and its directors, after the Board approved a merger proposal submitted by the CEO of Trans Union, fellow
Defendant Jerome Van Gorkom.

Facts: Facts. Trans Union had large investment tax credits (ITCs) coupled with accelerated depreciation deductions with
no offsetting taxable income. Their short term solution was to acquire companies that would offset the ITCs, but the
Chief Financial Officer, Donald Romans, suggested that Trans Union should undergo a leveraged buyout to an entity that
could offset the ITCs. The suggestion came without any substantial research, but Romans thought that a $50-60 share
price (on stock currently valued at a high of $39 ½) would be acceptable. Van Gorkom did not demonstrate any interest
in the suggestion, but shortly thereafter pursued the idea with a takeover specialist, Jay Pritzker. With only Romans’
unresearched numbers at his disposal, Van Gorkom set up an agreement with Pritzker to sell Pritzker Trans Union shares
at $55 per share. Van Gorkom also agreed to sell Pritzker one million shares of Trans Union at $39 per share if Pritzker
was outbid. Van Gorkom also agreed not to solicit other bids and agreed not to provide proprietary information to other
bidders. Van Gorkom only included a couple people in the negotiations with Pritzker, and most of the senior
management and the Board of Directors found out about the deal on the day they had to vote to approve the deal. Van
Gorkom did not distribute any information at the voting, so the Board had only the word of Van Gorkom, the word of
the President of Trans Union (who was privy to the earlier discussions with Pritzker), advice from an attorney who
suggested that the Board might be sued if they voted against the merger, and vague advice from Romans who told them
that the $55 was in the beginning end of the range he calculated. Van Gorkom did not disclose how he came to the $55
amount. On this advice, the Board approved the merger, and it was also later approved by shareholders.

issue:
whether the business judgment by the Board to approve the merger was an informed decision.

Held. The Delaware Supreme Court held the business judgment to be gross negligence, which is the standard for
determining whether the judgment was informed. The Board has a duty to give an informed decision on an important
decision such as a merger and can not escape the responsibility by claiming that the shareholders also approved the
merger. The directors are protected if they relied in good faith on reports submitted by officers, but there was no report
that would qualify as a report under the statute. The directors can not rely upon the share price as it contrasted with the
market value. And because the Board did not disclose a lack of valuation information to the shareholders, the Board
breached their fiduciary duty to disclose all germane facts.

Dissent. The dissent believed that the majority mischaracterized the ability of the directors to act soundly on the
information provided at the meeting wherein the merger vote took place. The credentials of the directors demonstrated
that they gave an intelligent business judgment that should be shielded by the business judgment rule.

Discussion. The court noted that a director’s duty to exercise an informed business judgment is a duty of care rather
than a duty of loyalty. Therefore, the motive of the director can be irrelevant, so there is no need to prove fraud, conflict
of interests or dishonesty
ALFREDO MONTELIBANO, ET AL. vs BACOLOD-MURCIA MILLING CO. #8

Alfredo Montelibano et al are sugar planters under identical milling contracts w/ BACOLOD-MURCIA MILLING CO.

Executed amendments to the milling contracts = granting further concessions to the planters

Montelibano et al signed and executed the printed Amended Milling Contract 21 days after the amendments were made

Montelibano et al filed a case = Grounds:

1. contending that three Negros sugar centrals had already granted increased participation to their planters
2. under paragraph 9 of the resolution Bacolod is obligated to grant similar concessions to them

Bacolod = resisted the claim --- Grounds:

1. stipulations contained in the resolution were made without consideration
2. being in effect a donation that was ultra vires and beyond the powers of the corporate directors
3. therefore, null and void ab initio

Trial court dismissed the complaint. Hence Appeal

Issue:
WON the resolution made by the board is an ultra vires act?

Held: NO
There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the
Amended Milling Contract for the purpose of making its terms more acceptable to the other contracting parties.

NOTE = The test to be applied is whether the act in question is in direct and immediate furtherance of the corporation's
business, fairly incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the
power to do it; otherwise, not.

Doctrine = Whether or not a valid & binding Resolution passed by the Board will cause losses or decrease the profits of
the corporation may not be reviewed by the courts, because the board is the business manager of the corporation,
and so long as it acts in good faith its orders.
BOARD OF LIQUIDATORS VS KALAW,ESTATE

Maximo Kalaw = GM and Chairman of NACOCO

4 typhoons that hit the country = NACOCO was unable to fulfill its obligations

Louis Dreyfus ltd = filed a suit against NACOCO

NACOCOC was subsequently abolished by EO 372 = giving the Board of Liquidators the function of settling and closing its
affairs

BOL now seeks to recover from GM Kalaw and the other two directors = Grounds:
1. Negligence for having approved and entered into the aforementioned unprofitable contracts
2. by-laws required prior approval of the board
3. Kalaw entered into the contracts alone as general manager and without the board’s prior approval

Issue:
WON Kalaw and the rest of the board were guilty negligence and bad faith and/or breach of trustfor having entered into
the unprofitable contracts?

Held: NO
Kalaw’s acts were valid corporate acts.
 GR: laws required that a general manager first procure approval of the board members before entering into
contracts that would bind the corporation
Exception: contrary practice ratified by the Board
 Evidence = it was the practice of the corporation to allow its general manager to negotiate contracts
 copra trading for and in NACOCO’s behalf = without prior board approval

Supplementary Notes:
 It is possible for an express provision of the by-laws to be violated and the Board may, in certain corporate
actions, bind the corporation in spite of the fact that it is contrary to the by-law provision

 There are 2 ways by which corporate actions may come about through its Board of Directors:
a) The board may empower or authorize the act or contract
b) Ratification from the board
 As long as there is approval by the board, express or implied, it is valid to bind the corporation.
mead vs mccullough

Mead, McCullough and three others = organized the Philippine Engineering and Construction Company.
= 5 of them were the only stockholders and also the directors of the company

Mead = elected as the GM of the company.

= During his term = the company failed in their undertaking to raise sunken Spanish fleet

Then Mead resigned= accept the position of engineer of the Canton and Shanghai Railway Company

the remaining directors = unanimously assigned all the rights and interests of the company to McCullough
= formed the Manila Salvage Association.

Mead alleging = he is entitled to receive:

1. salary as general manager
2. profits made before the assignment and the value of his personal property which he have left and sold by the
defendants

Issue:
Whether or not the remaining directors have the power to sell or transfer to one of its members the assets of the
corporation?

Held: Yes.
A majority of the stockholders or directors have the power to sell or transfer to one of its members the corporate
property, where the stockholders or directors have general ordinary powers, and where there is nothing in the articles
of incorporation which prohibit such a sale.

Whether a private corporation remains solvent or is insolvent, there is no reason why a director or officer, by authority
of the majority of its stockholders or board of managers, may not deal with the corporation, loan it money, or buy
property from it in like manner as a stranger. But in all cases, such officer or director must act in good faith and pay an
adequate consideration.
Prime White Cement v. IAC

Prime White and Te (Director of Prime White ) = entered into a dealership agreement wherein the former will supply Te
with 20,000 bags of cement per month at 9.70 per bag.

Te = advertise that he was the exclusive dealer of the white cement

= use the said cement to contract with third parties.

BOD decided to impose the ff. conditions:

 only 8000 bags would be delivered for a period of 3 months
 price will be Php 13.30 per bag
 price may be unilaterally adjusted by Prime White

Despite demands to enforce the dealership agreement = Prime White refused

Te filed a case w/ RTC = adjudged Prime White liable for damages. CA affirmed

Issue:
WON the dealership agreement was a valid and enforceable contract

Held: NO.
Board may delegate its powers to any of its officers and that contracts entered into by such officers are binding upon
the corporation = apply only when the corporation deals with a third person.
 In this case, Te was also a director of Prime White. He holds a position of trust and as such, he owes a duty of
loyalty to his corporation.
 "self-dealing" director = director or officer is dealing with his own corporation
 director of a corporation holds a position of trust and as such
 he owes a duty of loyalty to his corporation
 he cannot sacrifice the corporation to his own advantage and benefit

contract was neither fair nor reasonable = He knew of the real market prices of cement
 A director's contract with his corporation is not in all instances void or voidable
 contract = fair and reasonable  may be ratified by the stockholders provided a full disclosure of his adverse
interest is made.
PNB vs. Andrada Electric & Engineering Co

PNB = acquired the assets of the Pampanga Sugar Mills (PASUMIL) ---- ( foreclosed by the DBP )
= organized NASUDECO to nationalize and consolidate its interest in other PNB controlled sugar mills

PASUMIL engaged the services of the Andrada Electric = NOT FULLY PAID

Andrada now claims from PNB and NADUSECO = Reason:

** LOI = authorized PASUMIL and PNB to merge or consolidate

Issue:
WON there was merger and consolidation?

Held: NO
There was NO merger or consolidation with respect to PASUMIL and PNB.
 consolidation = the union of two or more existing entities to form a new entity called the consolidated
corporation
 merger = a union whereby one or more existing corporations are absorbed by another corporation that survives
and continues the combined business
 (X) effective upon the mere agreement = requirements:
1. express provision of law authorizing them
2. articles = approved by a majority of the respective stockholders of the constituent corporations
3. approval by the SEC of the articles of merger or consolidation is required
 PASUMIL’s corporate existence, as correctly found by the CA, had not been legally extinguished or terminated
** corporate separateness between PASUMIL and PNB remains
 PNB DID NOT expressly or impliedly agree to assume the debt of PASUMIL
Associated Bank vs CA

Associated Bank and CBCT = merged to form Associated Citizens Bank

 agreed that all assets and liability as of the effective date of the [m]erger shall be vested in ACB
 Effectivity Date = necessary papers to carry out this [m]erger shall have been approved by SEC

before a certificate of merger was issued = Lorenzo Sarmiento Jr loaned from Associated Bank

Despite repeated demands = Sarmiento failed to pay

Associated Bank = Filed a case  trial court ordered Sarmiento to pay the bank

Respondent argued that the plaintiff is not the proper party in interest because the promissory note was executed in
favor of CBTC

Issue:
Whether In a merger, the surviving corporation has a right to enforce a contract entered into by the absorbed company
subsequent to the date of the merger agreement, but prior to the issuance of a certificate of merger by the Securities
and Exchange Commission?

Held: YES
merger shall be effective only upon the issuance by the SEC of a certificate of merger
 effectivity date of the merger is crucial for determining:
1. when the merged or absorbed corporation ceases to exist
2. when its rights, privileges, properties as well as liabilities pass on tothe surviving corporation
 in merger = one of the combining corporations survives and continues the combined business
 RULE = Although there is a dissolution of the absorbed corporations, there is no winding up of their affairs or
liquidation of their assets, because the surviving corporation automatically acquires all their rights, privileges
and powers, as well as their liabilities
 The fact that the promissory note was executed after the effectivity date of the merger does not militate against
the bank

assuming that the effectivity date of the merger was the date of its execution = CBCT still has interest over it
 agreement clearly provides = ALL CONTRACTS -- irrespective of the date of execution — entered into in the
name of CBTC shall be understood as pertaining to the surviving bank, herein petitioner
 although the subject promissory note names CBTC as the payee = provisions of the merger agreement, as a
reference to petitioner bank
FILIPINAS PORT SERVICES vs NLRC

As result of the merger = PPA Administrative Order Filport to draw its personnel complements from the merging
operators

Liboon et al = filed a complaint with the Department of Labor

= asking for retirement benefits differential

Labor Arbiter found Filport a mere alter ego of the different integrating corporations = for retirement benefits due
Liboon et al

Filport petitioned for certiorari = Grounds:

1. claiming that it is an entirely new corporation distinct from the integrating corporation
2. Filport is not a successor-employer
3. Hence NOT LIABLE

Issue:
WON they are liable for the benefits of the absorbed employees?

Held: YES
By the fact of the merger = a succession of employment rights and obligations had occurred between Filport and the
private respondents
 Section 3 of Act No. 2772 = mandated that Filport shall absorb all labor force and necessary personnel
complement of the merging operators
 exonerating Filport from any liability arising from and as a result of the merger is contrary to public policy and is
violative of the workers' right to security of tenure
 THEREFORE = Filport has the obligation not only to absorb the workers of the dissolved companies but also to
include the length of service earned by the absorbed employees with their former employees as well
Philippine Veterans Bank Employees Union vs Vega

Central Bank of the Philippines = filed for Assistance in the Liquidation of the Philippine Veterans Bank

PVBEU-NUBE = filed claims for accrued and unpaid employee wages and benefits

RA 7169 = provided for the rehabilitation of the Philippine Veterans Bank

= Rehabilitation Committee submitted the proposed Rehabilitation Plan of the PVB to the Monetary Board

PVB filed a Motion to Terminate Liquidation of Philippine Veterans Bank with Judge Vega

Meanwhile Monetary Board approved the Rehabilitation Plan and allowed PVB to reopen

DESPITE THE Legislative Mandate = Judge Vega continued with the liquidation proceedings of the bank

Issue:
Whether a liquidation court can continue with liquidation proceedings of the Philippine Veterans Bank (PVB) when
Congress had mandated its rehabilitation and reopening?

Held: NO
The enactment of Republic Act 7169 = rendered the liquidation court functus officio
 Judge Vega has been stripped of the authority to issue orders involving acts of liquidation
 Liquidation = process of reducing assets to cash, discharging liabilities and dividing surplus or loss
 rehabilitation = connotes a reopening or reorganization
= contemplates a continuance of corporate life and activities in an effort to restore and reinstate
the corporation to its former position of successful operation and solvency
 RULE = concept of liquidation is diametrically opposed or contrary to the concept of rehabilitation, such that
both cannot be undertaken at the same time
PAL vs SPOUSES SADIC

Respondents boarded a PAL flight = unable to retrieve their checked-in luggages

= filed a complaint due to negligence in the custody of the missing luggages

Filed a petition for the approval of a rehabilitation plan w/ SEC = Grounds: suffered serious business losses

SEC granted the petition

PD 902 = declared the suspension of all actions for money claims against PAL

PAL moved for the suspension of the proceedings w/ the court = Dismissed

Issue:
WON the proceedings should have been suspended when rehabilitation was granted under PD 902?

Held: YES
The stay order is effective from the date of its issuance until the dismissal of the petition or the termination of the
rehabilitation proceedings.
 pursuant to this Decree, all actions for claims against corporations = shall be suspended accordingly
 claim = a right to payment
 claim of private respondents against petitioner PAL = money claim for the missing luggages
 THEREFORE = the law requires to be suspended pending the rehabilitation proceedings
RCBC vs IAC

BF Homes filed a “Petition for Rehabilitation and for Declaration of Suspension of Payments” with the SEC

RCBC moved to extra-judicially foreclose its real estate mortgage of BF Homes

BF Homes opposed the auction sale == SEC ordered the issuance of a writ of preliminary injunction

Sheriff withheld the delivery to RCBC

RCBC sheriff withheld the delivery to RCBC = Hence filed petition for Mandamus = Granted

CA reversed the decision = Ground:

** whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments, preferred creditors
may no longer assert such preference but stand on equal footing with other creditors.

Issue:
1. When should the suspension of actions for claims against BF Homes take effect?
2. WON Upon rehabilitation and suspension of payments, preferred creditors may no longer assert such
preference but stand on equal footing with other creditors?

Held:
1. only upon the appointment of a management committee, rehabilitation receiver, board or body
 Provided under Section 6, par (c) of PD 902-A

2. NO. Suspension shall not prejudice or render ineffective the status of a secured creditor as compared to a
totally unsecured creditor
 ONLY provides is that all actions for shall be suspended
 RULE = In the event that rehabilitation is no longer feasible and claims against the distressed corporation
would eventually have to be settled, the secured creditors shall enjoy preference over the unsecured
creditors subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit
Republic v. Bisaya Land Transportation

Bisaya Land Transportation = organized by the Cuencos in 1935

= principal purpose of engaging in the business of land and water transportation.

The Solicitor General = petition for quo warranto  for the dissolution due to violations of the Corporation Law such as:
1. false reconstitution of its articles of incorporation to include purposes not originally included like lumber
concessions, cattle ranch, etc
2. acquisition of public land and timber concession in violation of law
3. operation of a general merchandise store unrelated to its principal purpose, etc.

Miguel Cuenco = filed a cross-claim alleging that the corporation issued stock dividends and he did not receive any

They ask for an appointment of a receiver = granted

Solicitor General = filed a motion for dismissal of the quo warranto proceedings which was granted by the Court.

Miguel Cuenco is now questioning such dismissal.

Issue:
WON there are sufficient grounds to dissolve the corporation in a petition for quo warranto based on the evidence
submitted by Miguel Cuenco?

Held: NO
the controversy between the parties was more personal than anything else and did not at all affect public interest.
 irregularities were committed more particularly by Manuel Cuenco and Jose Velez = PERSONALLY LIABLE
 the case involved personal controversies among the Cuencos and their relatives
 the grounds does not really warrant a quo warranto by the State = SINCE that the corporate acts or omissions
complained of did not result in substantial injury to the public
 RULE = Relief by dissolution will be awarded only where no other adequate remedy is available and is not
available where the rights of the stockholders can be, or are, protected in some other way.

Supplementary Notes:
 Private controversies must be ventilated in appropriate stockholders’ suit
 (X) occupy the time and attention of government officials which can be better devoted to matters of more direct
public interest.
 RULE = Personal controversies not affecting public interest do not constitute a ground for quo warranto
proceedings for dissolution of a corporation.
Government v. Phil. Sugar Estate Co

Phil. Sugar = contracted with the Tayabas Land Co.

= Purpose = purchasing lands along the right of way of the Manila Railroad and reselling the same at a profit

Phil. Sugar delivered 304K to Tayabas

** Government asserts = contribution of Phil. Sugar to the capital of Tayabas
** Phil. Sugar insists = loan for the purchase of the said parcels of land

The Attorney-General = filed a quo warranto proceeding against Phil. Sugar for the purpose of having its charter
declared forfeited.

Grounds for its charter to be declared forfeited:

1. authorized it to buy shares of certain companies and to engage in any mercantile or industrial enterprise
2. authorized to place funds and loans in public securities, in stocks or shares of corporations
3. These powers are limited by Act No. 1459 = prohibits corporation from buying and selling real estate except
such as necessary to carry out the purposes for which it was created.

Another contract entered into = showed that Phil. Sugar shall take part in the business of Tayabas
The lower court dismissed quo warranto proceedings and held:
** ordered Phil. Sugar only to abstain in the future from engaging in the business of buying and selling

Issue:
Whether the franchise granted to Phil. Sugar should be withdrawn?

Held: Yes.
The acts of Phil Sugar increased the burden of the people by way of additional taxation
 Phil Sugar buys lands and increase in the price to gain profit
 IN EFFECT = added to the costs of construction thus increasing the burden imposed on the people
 PURPOSE = was to enrich itself at the expense of the taxpayers

Supplementary Notes:
 Sec. 198, Act No. 190 provides that an action may be maintained by the government against a corporation:
(a) offended against the provision of an act for its creation / renewal or any act altering or amending such act;
(b) forfeited its privileges and franchise by nonuser;
(c) committed or omitted an act which amounts to a surrender of its corporate rights and privileges
(d) misused a franchise conferred upon it by law
(e) exercise a franchise in contravention of law.

 While it is true that courts are given a wide discretion in ordering the dissolution of corporations for violations of
its franchises, yet when such abuses and violations constitute or threaten a substantial injurty to the public or
such as to amount to a violation of the charter by which the franchises were granted and thus defeat the
purposes of the grant, then the power of the courts should be exercised for the protection of the people.
Republic v. Security Credit & Acceptance Corp

The Solicitor General = initiated a quo warranto proceeding against Security Credit & Acceptance Bank
= failing to comply with the requirements of the General Banking Act.

Security Credit = engaged in banking operations.

1. regularly lending funds obtained from the receipt of deposits and/or sale of securities
2. Therefore is performing functions as contemplated in the General Banking Act.

The SEC required Security Credit to comply first with the requirements of the General Banking Act.

Security Credit still pursued with performing the functions and activities constituting banking activities in violation of
Sections 2 and 6 of the Act.

Issue:
WON the petition for the dissolution of Security Credit is proper?

Held: YES
Security Credit has violated the law by engaging in banking without securing the administrative authority required in
the General Banking Act
 Security Credit admitted that it has not secured the required authority to engage in banking
 Banking Operations = the lending of funds obtained from the public through the receipt of deposits or the sale of
bonds, securities and obligations of any kind
 60,000 deposits over its 73 branches, which deposits are being lent out to various persons and corporations.
 transactions clearly fit with the definition of banking institutions
 THEREFORE = the violation as sufficient to warrant the corporation’s dissolution

Supplementary Notes:
 One of the grounds in dissolving a corporation is its failure to comply with the requirements of laws affecting its
franchise