BUS. ORG.

2 (2018)– OUTLINE 1-4

(Prof. M.I.P. Romero)

I. INTRODUCTION -- History (Roman, Medieval, England, USA, PH)

II. DEFINITION / ATTRIBUTES OF A CORPORATION

A. Artificial Being - Sec. 2, Corp. Code; Art. 44 (3), Civil Code

a) Commencement of juridical personality (JP) for:

1. Corporations – a) if created by special law/charter

b) if registered w/ SEC
c) if a corporation sole - 112 Corp. Code

2. Partnerships – a) if registered w/ SEC

b) if not registered w/ SEC
Note: Relate Art. 1784 to Arts. 1772 and 1768

3. Associations – Art. III, Sec 8, Constitution

4. Sole proprietorship
a. Mangila v. CA
b. Excellent Quality Apparel v. Win Multiple Rich Builders

b) Rights of a juridical person

Art. 46, New Civil Code

Art. III, Secs.1 and 2, Constitution
1. Bache & Co. (Phils.), Inc. v. Ruiz
2. Bataan Shipyard v. PCGG

Art. III, Sec. 11, Constitution

1. Good Shepherd Foundation, Inc.

c) Criminal Liability of a Corporation

See penal provisions of:
Anti-money Laundering Act (Sec. 14)
Trust Receipts Law (Sec. 13, PD 115, in relation to estafa under Art. 315 , RPC)
1. Ching v. Sec. of Justice
2. Tupaz IV v. CA

d) Liability for Torts / Negligence

1. PNB v. CA
2. Secosa v. Heirs of Francisco
3. Professional Services, Inc. v. CA

e) Entitlement to Moral Damages

1. ABS-CBN Corp. V. CA
2. Jardine Davies v. CA
3. Crystal, et. al v. BPI
4. Filipinas Broadcasting Network v. AMEC-BCCM
Note: Mere obiter dictum ---
a. Mambulao Lumber v. PNB;
b. Pp. v. Manero, Jr.;
B. Created by Operation of Law – Art. XII, Sec. 16, Constitution

1. Private corporations
i. Distinguish from public corporations
ii. Distinguish from quasi-public corporations
iii. Art.44 (1) and (2), NCC
iv. Special types of corporations - close corp., educational, religious, ecclesiastical, lay, eleemosynary,
civil, holding corp., parent, subsidiary, affiliate, stock, non-stock, aggregate, corp. sole, de jure, de
facto, by estoppel.

2. GOCCs - distinguish from Govt. instrumentalities

– Give examples of GOCCs and Gis
1. Mla. Int’l Airport Authority v. CA
2. Boy Scouts of the Phil. v. COA

3. Corp. by prescription --- define

C. Right of Succession –
1. Rationale
2. Compare with:
- partnership (delectus personae)
- sole proprietorship

D. Express/Implied/Incidental Powers - Sec. 45, 36-44

- Distinguish and Give Examples
Alternatively --- General (Sec. 36) and Specific powers (37- 44)
Intra vires and ultra vires acts of a corporation
- Distinguish from illegal acts
- Distinguish from ultra vires acts of the board or officers
To be discussed more fully and w/ cases in subsequent Outline

III. COMPARISONS/DISTINCTIONS --- Corporations/Partnerships

Sole proprietorships

IV. DOCTRINE OF CORPORATE ENTITY

A. Doctrine/ Effects:

1. Magsaysay-Labrador v. CA.
2. Stockholders of Guanzon v. RD
3. Tramat Mercantile v. CA
4. Palay, Inc. v. Clave
5. JG Summit Holdings v. CA
6. San Juan Structural v. CA

B. Piercing the Corporate Veil:

1. Villa Rey Transit v. Ferrer

2. Marvel Bldg. v. David
3. Concept Builders v. NLRC
4. Claparols v. CIR
 C. Parent-Subsidiary Relationship:

1. Yutivo v. CTA
2. Jardine Davis Inc. v. JRB Realty
3. PNB v. Ritratto Group
4. Pantranco v. NLRC.

D. OTHERS:

1. Almocera v. Ong

V. CLASSES OF CORPORATIONS UNDER THE CORP. CODE

A. Sec. 3, 87, 88 --- stock and non-stock corporation

1. Valley Golf Club v. Vda. De Caram
2. Coll. of Int. Rev. v. Club Filipino

B. Other classes of corporations under the Corporation Code:

i. Close corporation – Sec. 96
ii. Special corporations – Educational, religious (Title XIII)
iii. Foreign corporations --- Sec. 123

Others: subsidiary (wholly-owned v. majority owned), affiliate, parent/holding company, joint venture
corporation, open vs. close, lay vs. religious, eleemosynary vs. civil corp., etc.

GOVERNED primarily by specific titles, then suppletory by the other applicable provisions of the Corp. Code

VI. CREATION OF CORPORATION

A. Promotion (relate to Sec. 3.10. of Securities Regulation

1. McArthur v. Times Printing Co.
2. Cagayan Fishing v. Sandiko
3. Caram v. CA

B. Incorporation

1) Steps in incorporation
2) Sections 5, 10 –19, 88, 96, 97
3) Articles of Incorporation–
a) Sec. 14, 15
b) Amendment of A/I – Sec. 16, Relate to:
i. Sec. 36.4 – power to amend
ii. Sec. 6 – voting rights of non-voting shares
iii. Sec. 81[1]--- appraisal right
iv. Secs. 37, 38, 103 – re written assent
c) Binding effect of amendment
1. Phil. Trust Co. v. Rivera
2. Marcus v. RH Macy
3. Iglesia Evangelica v. Bishop Lazaro
i. (see dissent of J. Carpio)
 4) Citizenship requirements --- Sec. 140
a) pertinent provisions of the 1987 Constitution
b) meaning of CAPITAL under Sec. 11, Art. 12 of the Constitution
1. Gamboa v. Teves, et al
2. SEC Memo Circ. No. 8, s2013 (Guidelines in Fil-Foreign ownership)
3. Roy v. Herbosa
 Foreign Investments Act (FIA) of 1991, as amended
 other laws imposing maximum foreign equity
 “Philippine national” under the FIA
 Phil. corporation under the Corp. Code
 Foreign corporation under the Corp. Code
4. Control Test v. Grandfather Rule
A. Narra Nickel Mining v. Redmont
(see dissent of J. Leonen)

5. Nationality of corporation sole

A. Roman Catholic Apostolic Admin. of Davao

5) Residence of corporation
1. Young Auto Supply Co. v. CA

6) Name of corporation – (SEC Memo Circ. 14, Series of 2000)

1. Republic Planters Bank v. CA
2. Armco Steel Corp. v. SEC
3. P.C. Javier & Sons, Inc. v. CA
4. Industrial Refractories Corp. v. CA
5. Ang Kaanib sa Iglesia ng Dios kay Kristo Hesus v. Iglesia ng Dios kay Cristo Jesus

7) De jure corporations – requisites, powers, liabilities, validity

8) De facto corporations – Sec. 20 (requisites, basis, powers, rights, liabilities, validity )
1. Pioneer Insurance v. CA
2. Municipality of Malabang v. Benito
3. Hall v. Piccio
4. Cagayan Fishing. v. Sandiko
5. Harill v. Davis

9) Corporation by Estoppel – Sec. 21 (rationale, liabilities, validity)

1. Chiang Kai Shek School v. CA
2. Lim Tong Lim v. Phil. Fishing Gear
3. Int’l Express Travel v. CA
4. Paz v. New Int'l Environmental Universality, Inc."

10) Corps. that are neither de jure, de facto, nor by estoppel

C. Formal organization versus commencement of business – Sec. 19

Vll. INTERNAL ORGANIZATION OF CORPORATIONS

1) By-laws – Sec. 36 (5); Secs. 46, 47, 48

a. Concept of by-laws
b. By-laws vs. Articles of Incorporation
c. Contents of by-laws – Sec. 47
d. Procedure for adoption –
i. (b.1) before incorporation
ii. (b.2) after incorporation
e. Effect of non-adoption
f. Requisites for validity
g. Binding effect of by-laws
h. Amendment of by-laws and effectivity date
i. Delegation of power to amend B/L
j. Revocation of delegated power

Cases:

1. Loyola Grand Villas v. CA (1997)

2. Govt. of P. I. v. El Hogar Filipino
3. Gokongwei Jr. v. SEC, et al.
4. Grace Christian HS v. CA
5. Salafranca v. Philamlife Homeowners Asso.
6. China Banking Corp. v. CA
7. Valley Golf Club v. Vda. De Caram
8. Calatagan v. Clemente
9. PMI Colleges v. NLRC
10. Sawadjaan v. CA
11. SMC v. Mandaue Packing Products
12. Long v. Basa

2) Commencement of Business ---- Sec. 22

3) Election of Directors & Officers --- Sec. 23 and 25
 BUSORG2 OUTLINE 6 (2018)
Prof. M.I.P. Romero

Xl. CORPORATE POWERS

1) Express, Implied, Inherent - Sections 36 to 45

Y-1 Leisure v, Yu

2) Ultra Vires Doctrine --- Sec. 45; Legal Consequences

RP v. Acoje Mining
National Power Corp. v. Vera
Govt. of the P.I. v. El Hogar Filipino
Pirovano, et al v. De la Rama
Harden, et al v. Benguet
Bissel v. Michigan Southern
Gokongwei Jr. v. SEC, et al.

XlI. CONTROL & MANAGEMENT

1) Board of Directors/Trustees

a) Sections 23, 27 (qualifications/disqualifications)

Ramirez v. Orientalist Co. & Fernandez

Expert Travel & Tours, Inc v. CA
-- RA 8792 and SEC MEMO Circ. 15
Citibank NA v. Chua
Boyer-Roxas v. CA
Govt. of P. I. v. El Hogar Filipino
Gokongwei v. SEC

b) Non-stock corp. – Sec. 92

c) Close corp. - Secs. 97 (par.1, no.2), 97 (par.2), Sec.104

d) Special corporations – Educational --- Sec. 108

Religious – Sec. 110-113, Sec. 116 (6)
 e) Meetings – Sec. 25, 49, 53, 54
Close corp. – Sec. 97(3), 101

f) Elections of DIR/TEES - Sec. 24, 26, 27

Stock and non-stock corp – manner of voting

Removal – Sec. 28
Vacancy – Sec. 29; 111(4) and 114 on corp. sole

Rev. Ao-as v. CA
Tan v. Sycip
Valle Verde v. Africa

2) Officers – Sec. 25, 92 (par. 3), 97 (last par.), 26, 27, 31, 32

Yu Chuck v. Kong Li Po
Woodchild Holdings v. Roxas Electric
Bd. Of Liquidators v. Heirs of Kalaw
Inter-Asia Investment v. CA
Zamboanga Transpo. V. Bachrach Motors .
Marc ll v. Joson
E.B. Villarosa v. Benito
Cagayan Valley Drug v. CIR

3) Board Committees versus Executive Committee - Sec. 35

Hayes v. Canada Atlantic & Plant S.S. Co., Ltd.

US Circuit CA, First Circuit
Filipinas Port Services, Inc. v. Go

4) Stockholders –

a) Sec. 23 and other provisions requiring SHs’ action

b) Meetings – Sec. 49, 50, 51, 52, 54, 55, 56, 57, 93
Tan v. Sycip

c) Deadlocks in close corps – Sec. 104; provisional director

5) Members – Sec. 89
 SEC Memo Circ. No. 4, series of 2004.
Distinguish from Sec. 24 (election of trustees)

PADCOM Condominium v. Ortigas

Sta. Clara Homeowners v. Gaston