Case Digests: Corporate Term - Stockholders and Members Cases

Corporate Term

1. Benguet Consolidated Mining Co., vs. Pineda

[G.R. No. L-7231. March 28, 1956.]

BENGUET CONSOLIDATED MINING CO., Petitioner, vs. MARIANO PINEDA, in his capacity as Securities
and Exchange Commissioner, Respondent. CONSOLIDATED MINES, INC., Intervenor.

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In 1906, Act 1459 (Corporation Law) was enacted which superseded the Code of Commerce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 Law’s 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 can’t 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.

2. Alhambra Cigar and Cigarette Mgf. Co., Inc. Vs. SEC

G.R. No. L-23606 July 29, 1968

ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC., petitioner,

vs.
SECURITIES & EXCHANGE COMMISSION, respondent.

On January 15, 1912, Alhambra Cigar & Cigarette Manufacturing Company, Inc. was
incorporated. Its lifespan was for 50 years so on January 15, 1962, it expired. Thereafter, its
Board authorized its liquidation. Under the prevailing law, Alhambra has 3 years to liquidate.
In 1963, while Alhambra was liquidating, Republic Act 3531 was enacted. It amended Section
18 of the Corporation Law; it empowered domestic private corporations to extend their
corporate life beyond the period fixed by the articles of incorporation for a term not to exceed
fifty years in any one instance. Previous to Republic Act 3531, the maximum non-extendible
term of such corporations was fifty years.
Alhambra now amended its articles of incorporation to extend its lifespan for another 50 years.
The Securities and Exchange Commission (SEC) denied the amended articles of
incorporation.
ISSUE: Whether or not a corporation under liquidation may still amend its articles of
incorporation to extend its lifespan.
HELD: No. Alhambra cannot avail of the new law because it has already expired at the time
of its passage. When a corporation is liquidating pursuant to the statutory period of three
years to liquidate, it is only allowed to continue for the purpose of final closure of its business
and no other purposes. In fact, within that period, the corporation is enjoined from “continuing
the business for which it was established”. Hence, Alhambra’s board cannot validly amend
its articles of incorporation to extend its lifespan.

3. Majority Stockholders of Ruby Industrial Corp. Vs. Lim

G.R. No. 165887 June 6, 2011

MAJORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORPORATION, Petitioners,

vs.
MIGUEL LIM, in his personal capacity as Stockholder of Ruby Industrial Corporation and
representing the MINORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORPORATION and the
MANAGEMENT COMMITTEE OF RUBY INDUSTRIAL CORPORATION, Respondents.

x-----------------------x

G.R. No. 165929

CHINA BANKING CORPORATION, Petitioner,

vs.
MIGUEL LIM, in his personal capacity as a stockholder of Ruby Industrial Corporation and
representing the MINORITY STOCKHOLDERS OF RUBY INDUSTRIAL
CORPORATION, Respondent.

MAJORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORPORATION, Petitioners, vs. MIGUEL LIM, in his
personal capacity as Stockholder of Ruby Industrial Corporation and representing the MINORITY STOCKHOLDERS
OF RUBY INDUSTRIAL CORPORATION and the MANAGEMENT COMMITTEE OF RUBY INDUSTRIAL
CORPORATION, Respondents. [J. Villarama, 2011]

Short Summary: This lengthy case involves the validity of the infusion of additional capital effected by the board of
directors, the questionable issuance of shares of stock by the majority stockholders and the extension of RUBY’s
corporate term. As described by the SC, the present action has been instituted for the purpose of protecting the true
and legitimate interests of Ruby against the Majority Stockholders.

RUBY has been experiencing severe liquidity problem. The majority stockholders wanted to infuse more capital into
the corporation through issuance of additional shares. Hence, the Revised BENHAR/RUBY Rehabilitation Plan of the
majority stockholders proposed to call for subscription of unissued shares for P11.814M. This led to the special meeting
of RUBY’s board meeting whose resolution authorized the issuance of the unissued portion of the authorized capital
stocks of the corporation in the form of common stocks. However, the minority stockholders contended, among others,
that they were not given notice as required and reasonable time to exercise their pre-emptive rights. Hence, the minority
stockholders wanted to nullify the acts of the majority stockholders in implementing the capital infusion. Pre-emptive
right refers to the right of a stockholder of a stock corporation to subscribe to all issues or disposition of shares of any
class, in proportion to their respective shareholdings. SC ruled in favor of the minority stockholders.

Facts:
- Ruby Industrial Corporation (RUBY) is a domestic corporation engaged in glass manufacturing. Reeling from severe
liquidity problems beginning in 1980, RUBY filed on December 13, 1983 a petition for suspension of payments with the
SEC which was granted.
- On August 10, 1984, the SEC Hearing Panel created the management committee (MANCOM) for RUBY, composed
of representatives from Ruby’s creditors. One of the many task of MANCOM is study, review and evaluate the proposed
rehabilitation plan for RUBY.
- Subsequently, two (2) rehabilitation plans were submitted to the SEC the BENHAR/RUBY Rehabilitation Plan of the
majority stockholders led by Yu Kim Giang, and the Alternative Plan of the minority stockholders represented by Miguel
Lim (Lim). But the implementation of both majority plans has been enjoined by the SEC and CA. Later, the SC issued
a final injunction on the implementation.
- Sept 18, 1991: Notwithstanding the injunction order, SEC issued an Order approving the Revised BENHAR/RUBY
Plan and creating a new management committee to oversee its implementation. It also dissolves the MANCOM.
- The Revised BENHAR/RUBY Plan had proposed the calling for subscription of unissued shares through a Board
Resolution from the P11.814 million of theP23.7 million ACS “in order to allow the long overdue program of the REHAB
Program.”
- Oct 2, 1991: To implement the Revised plan, RUBY’s board of directors held a special meeting and took up the capital
infusion of P11.814 Million representing the unissued and unsubscribed portion of the present ACS of P23.7 Million.
- The Board resolved that: The corporation be authorized to issue out of the unissued portion of the authorized capital
stocks of the corporation in the form of common stocks 11.8134.00 [Million] to be subscribed and paid in full by the
present stockholders in proportion to their present stockholding in the corporation on staggered basis…and that should
any of the stockholders fail to exercise their rights to buy the number of shares they are qualified to buy by making the
first installment payment of 25% on or before October 13, 1991, then the other stockholders may buy the same and
that only when none of the present stockholders are interested in the shares may there be a resort to selling them by
public auction.
- The minority directors claimed they were not notified of said board meeting.
- Sept 1, 1996: Lim receive a Notice of Stockholders’ Meeting scheduled on September 3, 1996. The matters that will
be taken up in said meeting include the extension of RUBY’s corporate term for another twenty-five (25) years and
election of Directors.
- Sept 3, 1996: Lim together with other minority stockholders, appeared in order to put on record their objections on the
validity of holding thereof and the matters to be taken therein. Specifically, they questioned the percentage of
stockholders present in the meeting which the majority claimed stood at 74.75%(from 59.829%) of the outstanding
capital stock of RUBY. Lim argued that the majority stockholders claimed to have increased their shares to 74.75% by
subscribing to the unissued shares of the authorized capital stock (ACS). Lim pointed out that such move of the majority
was in implementation of the BENHAR/RUBY Plan which calls for capital infusion of P11.814 Million representing the
unissued and unsubscribed portion of the present ACS of P23.7 Million.
- Jan 20, 1998: the SC affirmed CA decision setting aside the SEC orders approving the Revised BENHAR/RUBY Plan
because it not only recognized the void deeds of assignments entered into with some of RUBY’s creditors in violation
of the CA’s decision in CA-G.R. SP No. 18310, but also maintained a financing scheme which will just make the
rehabilitation plan more costly and create a worse situation for RUBY.
- Mar 17, 2000, Lim filed a Motion informing the SEC of acts being performed by BENHAR and RUBY. Allegedly, the
implementation of the new percentage stockholdings of the majority stockholders and the calling of stockholders’
meeting and the subsequent resolution approving the extension of corporate life of RUBY for another twenty-five (25)
years, were all done in violation of the decisions of the CA and this Court, and without compliance with the legal
requirements under the Corporation Code. There being no valid extension of corporate term, RUBY’s corporate life had
legally ceased. Consequently, Lim moved that the SEC: (1) declare as null and void the infusion of additional capital
made by the majority stockholders and restore the capital structure of RUBY to its original structure prior to the time
injunction was issued; and (2) declare as null and void the resolution of the majority stockholders extending the
corporate life of RUBY for another twenty-five (25) years.
- Sept 18, 2002, the SEC overruled the objections raised by the minority stockholders regarding the questionable
issuance of shares of stock by the majority stockholders and extension of RUBY’s corporate term because the filing of
the amendment of articles of incorporation by RUBY in 1996 complied with all the legal requisites and hence the the
presumption of regularity in the act of a government entity stands. It pointed out that Lim raised the issue only in the
year 2000. Moreover, the SEC found that notwithstanding his allegations of fraud, Lim never proved the illegality of the
additional infusion of the capitalization by RUBY so as to warrant a finding that there was indeed an unlawful act.
- Before the CA, Lim demonstrated the following evidence to rebut the presumption of regularity:
(1) it was the board of directors and not the stockholders which conducted the meeting without the approval of the
MANCOM; (2) there was no written waivers of the minority stockholders’ pre-emptive rights and thus it was irregular to
merely notify them of the board of directors’ meeting and ask them to exercise their option; (3) there was an existing
permanent injunction against any additional capital infusion on the BENHAR/RUBY Plan, while the CA and this Court
both rejected the Revised BENHAR/RUBY Plan; (4) there was no General Information Sheet reports made to the SEC
on the alleged capital infusion, as per certification by the SEC.

CA Decision (which is cited by SC in its decision):

- SEC erred in not finding that the October 2, 1991 meeting held by RUBY’s board of directors was illegal because the
MANCOM was neither involved nor consulted in the resolution approving the issuance of additional shares of RUBY.
The CA further noted that the October 2, 1991 board meeting was conducted on the basis of the September 18, 1991
order of the SEC Hearing Panel approving the Revised BENHAR/RUBY Plan, which plan was set by CA and SC.
- The CA pointed out that records confirmed the proposed infusion of additional capital for RUBY’s rehabilitation,
approved during said meeting, as implementing the Revised BENHAR/RUBY Plan. Necessarily then, such capital
infusion is covered by the final injunction against the implementation of the revised plan.
- The CA likewise faulted the SEC in relying on the presumption of regularity on the matter of the extension of RUBY’s
corporate term through the filing of amended articles of incorporation. SEC should have invalidated the resolution
extending the corporate term of RUBY for another twenty-five (25) years. With the expiration of the RUBY’s corporate
term, the CA ruled that it was error for the SEC in not commencing liquidation proceedings.

Issue: WON the additional capital infusion is valid? [No because the issuance of additional shares was done in
breach of trust by the controlling stockholders. Here, the majority sought to impose their will and, through fraudulent
means, attempt to siphon off Ruby’s valuable assets to the great prejudice of Ruby itself, as well as the minority
stockholders and the unsecured creditors.]

Ratio: A stock corporation is expressly granted the power to issue or sell stocks. The power to issue shares of stock in
a corporation is lodged in the board of directors and no stockholders’ meeting is required to consider it because
additional issuances of shares of stock do not need approval of the stockholders. What is only required is the board
resolution approving the additional issuance of shares. The corporation shall also file the necessary application with
the SEC to exempt these from the registration requirements under the Revised Securities Act (now the Securities
Regulation Code).

But CA found, which the Court affirmed, that: the foregoing payment schedules as embodied in the said Revised plan
which gives Benhar undue advantage over the other creditors goes against the very essence of rehabilitation, which
requires that no creditor should be preferred over the other. One of the salient features of the Revised Benhar/Ruby
Plan is to Call on unissued shares forP11.814 M and if minority will take up their pre-emptive rights and dilute minority
shareholdings.

With the nullification of the Revised BENHAR/RUBY Plan by both CA and SC on Jan 20, 1998, the legitimate concerns
of the minority stockholders and MANCOM who objected to the capital infusion which resulted in the dilution of their
shareholdings, the expiration of RUBY’s corporate term and the pending incidents on the void deeds of assignment of
credit – all these should have been duly considered and acted upon by the SEC when the case was remanded to it for
further proceedings. With the final rejection of the courts of the Revised BENHAR/RUBY Plan, it was grave error for
the SEC not to act decisively on the motions filed by the minority stockholders who have maintained that the issuance
of additional shares did not help improve the situation of RUBY except to stifle the opposition coming from the MANCOM
and minority stockholders by diluting the latter’s shareholdings. Worse, the SEC ignored the evidence adduced by the
minority stockholders indicating that the correct amount of subscription of additional shares was not paid by the majority
stockholders and that SEC official records still reflect the 60%-40% percentage of ownership of RUBY.

The SEC remained indifferent to the reliefs sought by the minority stockholders, saying that the issue of the validity of
the additional capital infusion was belatedly raised. Even assuming the October 2, 1991 board meeting indeed took
place, the SEC did nothing to ascertain whether indeed, as the minority claimed: (1) the minority stockholders were not
given notice as required and reasonable time to exercise their pre-emptive rights; and (2) the capital infusion was not
for the purpose of rehabilitation but a mere ploy to divest the minority stockholders of their 40.172% shareholding and
reduce it to a mere 25.25%.

Pre-emptive right under Sec. 39 of the Corporation Code refers to the right of a stockholder of a stock corporation to
subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings. The right
may be restricted or denied under the articles of incorporation, and subject to certain exceptions and limitations. The
stockholder must be given a reasonable time within which to exercise their preemptive rights. Upon the expiration of
said period, any stockholder who has not exercised such right will be deemed to have waived it.

The validity of issuance of additional shares may be questioned if done in breach of trust by the controlling stockholders.
Thus, even if the pre-emptive right does not exist, either because the issue comes within the exceptions in Section 39
or because it is denied or limited in the articles of incorporation, an issue of shares may still be objectionable if the
directors acted in breach of trust and their primary purpose is to perpetuate or shift control of the corporation, or to
“freeze out” the minority interest. In this case, the following relevant observations should have signaled greater
circumspection on the part of the SEC -- upon the third and last remand to it pursuant to our January 20, 1998 decision
-- to demand transparency and accountability from the majority stockholders, in view of the illegal assignments and
objectionable features of the Revised BENHAR/RUBY Plan, as found by the CA and as affirmed by this Court:

There can be no gainsaying the well-established rule in corporate practice and procedure that the will of the
majority shall govern in all matters within the limits of the act of incorporation and lawfully enacted by-laws not
proscribed by law. It is, however, equally true that other stockholders are afforded the right to intervene especially
during critical periods in the life of a corporation like reorganization, or in this case, suspension of payments, more
so, when the majority seek to impose their will and through fraudulent means, attempt to siphon off Ruby’s valuable
assets to the great prejudice of Ruby itself, as well as the minority stockholders and the unsecured creditors.

Certainly, the minority stockholders and the unsecured creditors are given some measure of protection by the law
from the abuses and impositions of the majority, more so in this case, considering the give-away signs of private
respondents’ perfidy strewn all over the factual landscape. Indeed, equity cannot deprive the minority of a remedy
against the abuses of the majority, and the present action has been instituted precisely for the purpose of protecting
the true and legitimate interests of Ruby against the Majority Stockholders. On this score, the Supreme Court, has
ruled that:
 “Generally speaking, the voice of the majority of the stockholders is the law of the corporation, but there are
exceptions to this rule. There must necessarily be a limit upon the power of the majority. Without such a limit
the will of the majority will be absolute and irresistible and might easily degenerate into absolute tyranny. x x
x”[67] (Additional emphasis supplied.)

Lamentably, the SEC refused to heed the plea of the minority stockholders and MANCOM for the SEC to order RUBY
to commence liquidation proceedings, which is allowed under Sec. 4-9 of the Rules on Corporate Recovery. Under the
circumstances, liquidation was the only hope of the minority stockholders for effecting an orderly and equitable
settlement of RUBY’s obligations, and compelling the majority stockholders to account for all funds, properties and
documents in their possession, and make full disclosure on the nullified credit assignments.

In fine, no error was committed by the CA when it set aside the September 18, 2002 Order of the SEC and declared
the nullity of the acts of majority stockholders in implementing capital infusion through issuance of additional shares in
October 1991 and the board resolution approving the extension of RUBY’s corporate term for another 25 years.

Commencement of Corporate Existence

1. Marc II Marketing, Inc. Vs. Joson

G.R. No. 171993 December 12, 2011

MARC II MARKETING, INC. and LUCILA V. JOSON, Petitioners,

vs.
ALFREDO M. JOSON, Respondent.

FACTS

Before petitioner corporation was officially incorporated, respondent has already been engaged by petitioner Lucila,
in her capacity as President of Marc Marketing, Inc., to work as the General Manager of petitioner corporation. It
was formalized through the execution of a Management Contract under the letterhead of Marc Marketing, Inc. as
petitioner corporation is yet to be incorporated at the time of its execution. It was explicitly provided therein that
respondent shall be entitled to 30% of its net income for his work as General Manager. Respondent will also be
granted 30% of its net profit to compensate for the possible loss of opportunity to work overseas. On 15 August
1994, petitioner corporation was officially incorporated and registered with the SEC. Accordingly, Marc Marketing,
Inc. was made non-operational. Respondent continued to discharge his duties as General Manager under petitioner
corporation. Pursuant to Section 1, Article IV of petitioner corporation’s by-laws, its corporate officers are as follows:
Chairman, President, one or more Vice-President(s), Treasurer and Secretary. Its Board of Directors, however, may,
from time to time, appoint such other officers as it may determine to be necessary or proper. Per an undated
Secretary’s Certificate, petitioner corporation’s Board of Directors conducted a meeting on 29 August 1994 where
respondent was appointed as one of its corporate officers with the designation or title of General Manager to
function as a managing director with other duties and responsibilities that the Board of Directors may provide and
authorized. Nevertheless, on 30 June 1997, petitioner corporation decided to stop and cease its operations due to
poor sales collection aggravated by the inefficient management of its affairs. On the same date, it formally informed
respondent of the cessation of its business operation. Concomitantly, respondent was apprised of the termination
of his services as General Manager since his services as such would no longer be necessary for the winding up of its
affairs. Feeling aggrieved, respondent filed a Complaint for Reinstatement and Money Claim against petitioners
before the Labor Arbiter. On 1 October 2001, the Labor Arbiter rendered his Decision in favor of respondent.
Aggrieved, petitioners appealed the aforesaid Labor Arbiters Decision to the NLRC. In its Resolution dated 15 October
2002, the NLRC ruled in favor of petitioners by giving credence to the Secretary’s Certificate, which evidenced
petitioner corporations Board of Directors meeting in which a resolution was approved appointing respondent as its
corporate officer with designation as General Manager. Therefrom, the NLRC reversed and set aside the Labor
Arbiters Decision dated 1 October 2001 and dismissed respondents Complaint for want of jurisdiction. When
respondents Motion for Reconsideration was denied in another Resolution dated 23 January 2003, he filed a Petition
for Certiorari with the Court of Appeals ascribing grave abuse of discretion on the part of the NLRC. On 20 June 2005,
the Court of Appeals rendered its Decision declaring that the Labor Arbiter has jurisdiction over the present
controversy. It upheld the finding of the Labor Arbiter that respondent was a mere employee of petitioner
corporation, who has been illegally dismissed from employment without valid cause and without due process.
Nevertheless, it ordered the records of the case remanded to the NLRC for the determination of the appropriate
amount of monetary awards to be given to respondent. Hence, this Petition. Petitioners fault the Court of Appeals
for having sustained the Labor Arbiters finding that respondent was not a corporate officer under petitioner
corporations by-laws. They insist that there is no need to amend the corporate by-laws to specify who its corporate
officers are. The resolution issued by petitioner corporations Board of Directors appointing respondent as General
Manager, coupled with his assumption of the said position, positively made him its corporate officer. More so,
respondents position, being a creation of petitioner corporations Board of Directors pursuant to its by-laws, is a
corporate office sanctioned by the Corporation Code and the doctrines previously laid down by this Court. Thus,
respondents removal as petitioner corporations General Manager involved a purely intra-corporate controversy
over which the RTC has jurisdiction.

ISSUE Whether the respondent, as the General Manager of petitioner corporation, is a corporate officer or a mere
employee.

RULING The respondent is a mere employee of the respondent corporation. In Easycall Communications Phils., Inc.
v. King, this Court held that in the context of Presidential Decree No. 902-A, corporate officers are those officers of
a corporation who are given that character either by the Corporation Code or by the corporations by-laws. Section
25 of the Corporation Code specifically enumerated who are these corporate officers, to wit: (1) president; (2)
secretary; (3) treasurer; and (4) such other officers as may be provided for in the by-laws. The aforesaid Section 25
of the Corporation Code, particularly the phrase such other officers as may be provided for in the by-laws, has been
clarified and elaborated in this Courts recent pronouncement in Matling Industrial and Commercial Corporation v.
Coros, where it held that a position must be expressly mentioned in the [b]y-[l]aws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or under a [b]y-[l]aw enabling provision is not enough
to make a position a corporate office. Thus, pursuant to the above provision (Section 25 of the Corporation Code),
whoever are the corporate officers enumerated in the by-laws are the exclusive Officers of the corporation and the
Board has no power to create other Offices without amending first the corporate [b]y-laws. However, the Board may
create appointive positions other than the positions of corporate Officers, but the persons occupying such positions
are not considered as corporate officers within the meaning of Section 25 of the Corporation Code and are not
empowered to exercise the functions of the corporate Officers, except those functions lawfully delegated to them.
Their functions and duties are to be determined by the Board of Directors/Trustees. A careful perusal of petitioner
corporations by-laws would explicitly reveal that its corporate officers are composed only of: (1) Chairman; (2)
President; (3) one or more VicePresident; (4) Treasurer; and (5) Secretary. The position of General Manager was not
among those enumerated. Paragraph 2, Section 1, Article IV of petitioner corporations by-laws, empowered its Board
of Directors to appoint such other officers as it may determine necessary or proper. It is by virtue of this enabling
provision that petitioner corporations Board of Directors allegedly approved a resolution to make the position of
General Manager a corporate office, and, thereafter, appointed respondent thereto making him one of its corporate
officers. All of these acts were done without first amending its by-laws so as to include the General Manager in its
roster of corporate officers. With the given circumstances and in conformity with Matling Industrial and Commercial
Corporation v. Coros, this Court rules that respondent was not a corporate officer of petitioner corporation because
his position as General Manager was not specifically mentioned in the roster of corporate officers in its corporate
by-laws. The enabling clause in petitioner corporations bylaws empowering its Board of Directors to create
additional officers, i.e., General Manager, and the alleged subsequent passage of a board resolution to that effect
cannot make such position a corporate office. Matling clearly enunciated that the board of directors has no power
to create other corporate offices without first amending the corporate by-laws so as to include therein the newly
created corporate office. Though the board of directors may create appointive positions other than the positions of
corporate officers, the persons occupying such positions cannot be viewed as corporate officers under Section 25 of
the Corporation Code. In view thereof, this Court holds that unless and until petitioner corporations by-laws is
amended for the inclusion of General Manager in the list of its corporate officers, such position cannot be considered
as a corporate office within the realm of Section 25 of the Corporation Code.

Definition of Intra-Corporate Disputes

Under Section 5 of Presidential Decree No. 902-A, intra-corporate controversies are those controversies arising out
of intra-corporate or partnership relations, between and among stockholders, members or associates; between any
or all of them and the corporation, partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the State insofar as it concerns their
individual franchise or right to exist as such entity. It also includes controversies in the election or appointments of
directors, trustees, officers or managers of such corporations, partnerships or associations. Accordingly, in
determining whether the SEC (now the RTC) has jurisdiction over the controversy, the status or relationship of the
parties and the nature of the question that is the subject of their controversy must be taken into consideration.

Incorporators

1. Nautica Canning Corp. Vs. Yumul

G.R. No. 164588 October 19, 2005

NAUTICA CANNING CORPORATION, FIRST DOMINION PRIME HOLDINGS, INC. and

FERNANDO R. ARGUELLES, JR., Petitioners
vs.
ROBERTO C. YUMUL, Respondent.

Corporation Law; Stockholders; As between the corporation on the one hand, and its shareholders and
third persons on the other, the corporation looks only to its books for the purpose of determining who
its shareholders are.—It is possible for a business to be wholly owned by one individual. The validity of
its incorporation is not affected when such individual gives nominal ownership of only one share of stock
to each of the other four incorporators. This is not necessarily illegal. But, this is valid only between or
among the incorporators privy to the agreement. It does bind the corporation which, at the time the
agreement is made, was non-existent. Thus, incorporators continue to be stockholders of a corporation
unless, subsequent to the incorporation, they have validly transferred their subscriptions to the real
parties in interest. As between the corporation on the one hand, and its shareholders and third persons
on the other, the corporation looks only to its books for the purpose of determining who its shareholders
are.

Same; Same; A transfer of shares of stock not recorded in the stock and transfer book of the corporation
is non-existent as far as the corporation is concerned.—We held in Ponce v. Alsons Cement Corp. that:...
[A] transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-
existent as far as the corporation is concerned. As between the corporation on one hand, and its
shareholders and third persons on the other, the corporation looks only to its books for the purpose of
determining who its shareholders are. It is only when the transfer has been recorded in the stock and
transfer book that a corporation may rightfully regard the transferee as one of its stockholders. From
this time, the consequent obligation on the part of the corporation to recognize such rights as it is
mandated by law to recognize arises. Hence, without such recording, the transferee may not be regarded
by the corporation as one among its stockholders and the corporation may legally refuse the issuance of
stock certificates[.]

Corporation Law; Statutes; Section 23 of Batas Pambansa (BP) Blg. 68 or the Corporation Code of the
Philippines requires that every director must own at least one share of the capital stock of the
corporation of which he is a director. Before one may be elected president of the corporation, he must
be a director.—Section 23 of Batas Pambansa (BP) Blg. 68 or The Corporation Code of the Philippines
requires that every director must own at least one share of the capital stock of the corporation of which
he is a director. Before one may be elected president of the corporation, he must be a director. Since
Yumul was elected as Nautica’s Director and as President thereof, it follows that he must have owned at
least one share of the corpora tion’s capital stock. Thus, from the point of view of the corporation, Yumul
was the owner of one share of stock. As such, the SEC correctly ruled that he has the right to inspect the
books and records of Nautica, pursuant to Section 74 of BP Blg. 68 which states that the records of all
business transactions of the corporation and the minutes of any meetings shall be open to inspection by
any director, trustee, stockholder or member of the corporation at reasonable hours on business days
and he may demand, in writing, for a copy of excerpts from said records or minutes, at his expense.

FACTS:

Yumul was appointed Chief Operating Officer/General Manager of Nautica. First Dominion Prime
Holdings, Inc., Nautica’s parent company, through its Chairman Alvin Y.Dee, granted Yumul an Option to
Purchase up to 15% of the total stocks it subscribed from Nautica. A Deed of Trust and Assignment was
executed between First Dominion Prime H o l d i n g s, I n c . a n d Y u m u l w h e r e b y t h e f o r m e r a
s s i g n e d 14, 999 of its subscribed shares in Nautica to the latter. After Yumul’s resignation from
Nautica, he wrote a letter to Dee requesting the latter to formalize his offer to b u y Y u mu l ’ s 1 5 % s h
a r e i n N a u t i c a a n d d e m a n d i ng t h e issuance of the corresponding certificate of shares in his
name should Dee refuse to buy the same. Dee denied the r e q u e s t c l a i m i n g t h a t Y u m u l w a s
notastockholderofNautica.YumulrequestedthattheDeedofTrustand
Assignment be recorded in the Stock and Transfer Book of Nautica, and that he, as a stockholder, is
allowed to inspect its books and records. Yumul’s requests were denied. Yumul filed a petition for
mandamus praying that the Deed of Trust and Assignment be recorded in the Stock and Transfer Book
of Nautica and that the certificate of stocks corresponding thereto be issued in his name.

ISSUE: WON Yumul is a stockholder. (Proof of Ownership of Shares)

HELD: YES. Indeed, it is possible for a business to be wholly owned by one individual. The validity of its
incorporation is not affected when such individual gives nominal ownership o f o n l y o n e s h a r e o f s
t o c k t o e a c h o f t h e o t h e r f o u r incorporators. This is not necessarily illegal. But, this is valid only
between or among the incorporators privy to the agreement. It does bind the corporation which, at the
time t h e a g r e e m e n t i s m a d e , w a s n o n - e x i s t e n t . T h u s , incorporators continue to be
stockholders of a corporation unless, subsequent to the incorporation, they have validly transferred
their subscriptions to the real parties in interest. A transfer of shares of stock not recorded in the stock
and transfer book of the corporation is non-existent as far as the corporation is concerned. As between
the corporation on one hand, and its shareholders and third persons on the other, the corporation looks
only to its books for the purpose of determining who its shareholders are. It is only when the transfer
has been recorded in the stock and transfer book that a corporation may rightfully regard the transferee
as one of its stockholders. From this time, the consequent obligation on the part of the corporation to
recognize such rights as it is mandated by law to recognize arises
Corporate Term

1. Benguet Consolidated Mining Co., vs. Pineda

[G.R. No. L-7231. March 28, 1956.]

BENGUET CONSOLIDATED MINING CO., Petitioner, vs. MARIANO PINEDA, in his capacity as
Securities and Exchange Commissioner, Respondent. CONSOLIDATED MINES, INC., Intervenor.

2. Alhambra Cigar and Cigarette Mgf. Co., Inc. Vs. SEC

G.R. No. L-23606 July 29, 1968

ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC., petitioner,

vs. SECURITIES & EXCHANGE COMMISSION, respondent.

3. Majority Stockholders of Ruby Industrial Corp. Vs. Lim

G.R. No. 165887 June 6, 2011

MAJORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORPORATION, Petitioners,

vs. MIGUEL LIM, in his personal capacity as Stockholder of Ruby Industrial Corporation and
representing the MINORITY STOCKHOLDERS OF RUBY INDUSTRIAL CORPORATION and the
MANAGEMENT COMMITTEE OF RUBY INDUSTRIAL CORPORATION, Respondents.

x-----------------------x

G.R. No. 165929

CHINA BANKING CORPORATION, Petitioner,

vs. MIGUEL LIM, in his personal capacity as a stockholder of Ruby Industrial Corporation and
representing the MINORITY STOCKHOLDERS OF RUBY INDUSTRIAL
CORPORATION, Respondent.

Commencement of Corporate Existence

 2. Marc II Marketing, Inc. Vs. Joson

G.R. No. 171993 December 12, 2011

MARC II MARKETING, INC. and LUCILA V. JOSON, Petitioners,
vs. ALFREDO M. JOSON, Respondent.

Incorporators

2. Nautica Canning Corp. Vs. Yumul

G.R. No. 164588 October 19, 2005

NAUTICA CANNING CORPORATION, FIRST DOMINION PRIME HOLDINGS, INC. and FERNANDO
R. ARGUELLES, JR., Petitioners vs. ROBERTO C. YUMUL, Respondent.

By-Laws

1. Gokongwei, Jr. Vs. SEC

G.R. No. L-45911 April 11, 1979

JOHN GOKONGWEI, JR., petitioner,
vs. SECURITIES AND EXCHANGE COMMISSION, ANDRES M. SORIANO, JOSE M. SORIANO,
ENRIQUE ZOBEL, ANTONIO ROXAS, EMETERIO BUNAO, WALTHRODE B. CONDE, MIGUEL
ORTIGAS, ANTONIO PRIETO, SAN MIGUEL CORPORATION, EMIGDIO TANJUATCO, SR., and
EDUARDO R. VISAYA, respondents.

2. Loyola Grand Villas Homeowners (South) Association, Inc. Vs. CA

G.R. No. 117188 August 7, 1997

LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH) ASSOCIATION, INC., petitioner,
vs. HON. COURT OF APPEALS, HOME INSURANCE AND GUARANTY CORPORATION, EMDEN
ENCARNACION and HORATIO AYCARDO, respondents.

3. China Banking Corp. Vs. Court of Appeals

G.R. No. 117604 March 26, 1997

 CHINA BANKING CORPORATION, petitioner,
vs. COURT OF APPEALS, and VALLEY GOLF and COUNTRY CLUB, INC., respondents.

4. Grace Christian High School vs. Court of Appeals

G.R. No. 108905 October 23, 1997

GRACE CHRISTIAN HIGH SCHOOL, petitioner,

vs. THE COURT OF APPEALS, GRACE VILLAGE ASSOCIATION, INC., ALEJANDRO G. BELTRAN,
and ERNESTO L. GO, respondents.

5. Barba vs. Liceo de Cagayan

G.R. No. 193857 November 28, 2012

Ma. Mercedes L. Barba vs. Liceo De Cagayan University

6. Fleischer vs. Botica Nolasco

G.R. No. L-23241 March 14, 1925

HENRY FLEISCHER, plaintiff-appellee, vs. BOTICA NOLASCO CO., INC., defendant-appellant.

7. PMI Colleges vs. NLRC

G.R. No. 121466 August 15, 1997

PMI COLLEGES, petitioner, vs. THE NATIONAL LABOR RELATIONS COMMISSION and
ALEJANDRO GA LVA N, respondents.

8. Sawadjaan vs. Court of Appeals

G.R. No. 141735 June 8, 2005

SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE CIVIL
SERVICE COMMISSION and AL-AMANAH INVESTMENT BANK OF THE PHILIPPINES, respondents.
Corporate Powers and Authority

1. Shipside, Inc. Vs. Court of Appeals

G.R. No. 143377 February 20, 2001

SHIPSIDE INCORPORATED, petitioner, vs.

THE HON. CA [Special Former Twelfth Division], HON. REGIONAL TRIAL COURT, BRANCH 26
(San Fernando City, La Union) & The REPUBLIC OF THE PHILIPPINES, respondents.

2. Monfort Hermanos Agricultural Dev. Corp. Vs. Monfort

G.R. No. 152542 July 8, 2004

Monfort Hermanos Agricultural Development Corporation, as represented by MA. ANTONIA M.

SALVATIERRA, petitioner,
vs. Antonio B. Monfort Iii, Ma. Luisa Monfort Ascalon, Ildefonso B. Monfort, Alfredo B. Monfort,
Carlos M. Rodriguez, Emily Francisca R. Doliquez, Encarnacion Cecilia R. Paylado, Jose Martin M.
Rodriguez And Court Of Appeals, respondents.

G.R. No. 155472 July 8, 2004

Antonio B. Monfort Iii, Ma. Luisa Monfort Ascalon, Ildefonso B. Monfort, Alfredo B. Monfort,
Carlos M. Rodriguez, Emily Francisca R. Doliquez, Encarnacion Cecilia R. Paylado, Jose Martin M.
Rodriguez, petitioners,
vs. Hon. Court Of Appeals, Monfort Hermanos Agricultural Development Corporation, as
represented by Ma. Antonia M. Salvatierra, and Ramon H. Monfort, respondents.

3. Reyes vs. RCPI Employees Credit Union

[ G.R. No. 146535, August 18, 2006 ]

Natividad G. Reyes,Petitioner, VS. Rcpi Employees Credit Union, INC., Respondent.

4. Manila Metal Container Corp. Vs. PNB

G.R. No. 166862 December 20, 2006

 Manila Metal Container Corporation, petitioner, Reynaldo C. Tolentino, intervenor,
vs. Philippine National Bank, respondent, Dmci-Project Developers, Inc., intervenor.

5. Tam Wing Tak vs. Makasiar

G.R. No. 122452 January 29, 2001

Tam Wing Tak, petitioner, vs. Hon. Ramon P. Makasiar (in his Capacity as Presiding Judge of the
Regional Trial Court of Manila, Branch 35) and Zenon De Guia (in his capacity as Chief State
Prosecutor), respondents.

6. United Paragon Mining Corp. Vs. Court of Appeals

G.R. No. 150959 August 4, 2006

United Paragon Mining Corporation, Petitioner, vs. Court Of Appeals, former 12th DIVISION, ATTY.
Murly P. Mendez and Cesario 1 F. Ermita,Respondents.

7. Yu vs. Yukayguan

G.R. No. 177549 June 18, 2009

Anthony S. Yu, Rosita G. Yu and Jason G. YU, Petitioners,

vs. Joseph S. Yukayguan, Nancy L. Yukayguan, Jerald Nerwin L. Yukayguan, and Jill Neslie L.
Yukayguan, [on their own behalf and on behalf of] Winchester Industrial Supply, Inc.,Respondents.

8. Philippine Airlines, Inc. Vs. Flight Attendance and Stewards Association of the Philippines
(FASAP)

G.R. No. 143088 January 24, 2006

Philippine Airlines, Inc., Manolo Aquino, Jorge Ma. Cui, Jr. and Patricia Chiong, Petitioners,
vs. Flight Attendants And Stewards Association Of The Philippines (Fasap) and Leonardo
Bhagwani, Respondents.

9. Athena Computers, Inc. Vs. Reyes

G.R. No. 156905 September 5, 2007

Athena Computers, Inc. and Joselito R. Jimenez, petitioners, vs. Wesnu A. Reyes, respondent.
 10. Cunanan vs. Jumping Jap Trading Corp

G.R. No. 173834 April 24, 2009

Isabelita Cunanan, Carolyn Cunanan and Carmencita F. Nemoto, Petitioners, vs. Jumping Jap
Trading Corporation, represented by Reuben M. Protacio, Respondent.

11. BPI Leasing Corp. Vs. Court of Appeals

G.R. No. 127624 November 18, 2003

BPI Leasing Corporation, petitioner, vs. CA, CTA And Commissioner Of Internal
Revenue, respondents.

12. Asean Pacific Planners vs. City of Urdaneta

G.R. No. 162525 September 23, 2008

Asean Pacific Planners, APP CONSTRUCTION AND DEVELOPMENT CORPORATION* And Cesar
Goco, petitioners, mvs. City Of Urdaneta, Ceferino J. Capalad, Waldo C. Del Castillo, Norberto M.
Del Prado, Jesus A. Ordono And Aquilino Maguisa,**, respondents.

13. DBP vs. Court of Appeals

G.R. No. 147217 October 7, 2004

DBP and Nilo C. Galorport, petitioners,

vs. CA (Former First Division), Hon. Achilles L. Melicor (as Presiding Judge, Regional Trial Court,
Branch 4, Tagbilaran City), Bibiana Gurea Vda. De Azarcon, Heirs Of Inocentes Azarcon, namely,
PERLA ROÑO, INOCENTES AZARCON, JR., LORENZITA CALAMBA, ELSA ANGALOT, MANUELA
B. TUASON, DARIETTA AZARCON And DONALITA A. ALONSO (For Herself and as Attorney-In-
Fact of her Co-heirs), respondents.

14. Firme vs. Bukal Enterprises and Dev. Corp.

 G.R. No. 146608 October 23, 2003

Spouses Constante Firme And Azucena E. Firme, petitioners,

vs. UKAL Enterprises And Development Corporation, respondent.

15. Montelibano vs. Bacolod-Murcia Milling Co., Inc.

G.R. No. L-15092 May 18, 1962

Alfredo MontelibanO, ET AL., plaintiffs-appellants,

vs. Bacolod-Murcia Milling Co., Inc., defendant-appellee.

16. Caltex (Phils.), Inc. Vs. PNOC Shipping and Transport Corp.

G.R. No. 150711 August 10, 2006

CALTEX (PHILIPPINES), INC., Petitioner,

vs. PNOC Shipping And Transport Corporation, Respondent.

Directors, Trustees and Officers

1. Hornilla vs. Salunat

A.C. No. 5804 July 1, 2003

Benedicto Hornilla and Atty. Federico D. Ricafort, complainants,

vs. Atty. Ernesto S. Salunat, respondent

2. AF Realty Dev., Inc. Vs. Dieselman Freight Services

G.R. No. 111448 January 16, 2002

AF Realty & Development, INC. and Zenaida R. Ranullo, petitioners,

vs. Dieselman Freight Services, CO., Manuel C. Cruz, JR. and Midas Development
Corporation, respondents.

3. Banate vs. Philippine Countryside Rural Bank

 G.R. No. 163825 July 13, 2010

Violeta Tudtud Banate, Mary Melgrid M. Cortel, Bonifacio Cortel, Rosendo Maglasang, And
Patrocinia Monilar, Petitioners, vs. Philippine Countryside Rural Bank (LILOAN, CEBU), INC. And
Teofilo Soon, JR., Respondents.

4. Prime White Cement Corp. Vs. Intermediate Appelate Court

G.R. No. L-68555 March 19, 1993

Prime White Cement Corporation, petitioner,

vs. IAC and Alejandro Te, respondents.

5. Philippine Airlines, Inc. Vs. Flight Attendance and Stewards Association of the Philippines
(FASAP)

- Supra –

6. San Juan Structural and Steel Fabricators, Inc. Vs. CA

G.R. No. 129459 September 29, 1998

SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., petitioner,

vs. CA, Motorich Sales Corporation, Nenita Lee Gruenberg, Acl Development Corp. and JNM Realty
And Development Corp., respondents.

7. Cebu Mactan Members Center, Inc. Vs. Tsukahara

G.R. No. 159624 July 17, 2009

CEBU MACTAN MEMBERS CENTER, INC., Petitioner, vs. MASAHIRO TSUKAHARA, Respondent.

8. Zomer Development Corp. Vs. International Exchange Bank

G.R. No. 150694 March 13, 2009

 Zomer Development Company, INC. Petitioner,
vs. International Exchange Bank and Sheriff Iv Arthur R. Cabigon, Respondents.

Doctrine of Estoppel or Ratification

1. Lipat vs. Pacific Banking Corp.

G.R. No. 142435 April 30, 2003

Estelita Burgos Lipat and Alfredo Lipat, petitioners,

vs. Pacific Banking Corporation, Register Of Deeds, Rtc Ex-Officio Sheriff Of Quezon City and the
Heirs of Eugenio D. Trinidad, respondents.

2. People’s Aircargo and Warehousing Co., Inv. Vs. Court of Appeals

G.R. No. 117847 October 7, 1998

PEOPLE'S AIRCARGO AND WAREHOUSING CO. INC., petitioner, vs. CA and STEFANI
SAÑO, respondents.

3. Aguenza vs. Metropolitan Bank & Trust Company

G.R. No. 74336 April 7, 1997

J. Antonio Aguenza, petitioner,

vs. Metropolitan Bank & Trust Co., Vitaliado P. Arrieta, Lilia Perez, Patricio Perez and
IAC, respondents.

4. DBP vs. Ong

G.R. No. 144661 and 144797 June 15, 2005

DBP, petitioner, vs. SPOUSES FRANCISCO ONG And LETICIA ONG, respondents.

5. Yasuma vs. Heirs of Cecilio S. De Villa

 G.R. No. 150350 August 22, 2006

KOJI YASUMA, Petitioner, vs. HEIRS OF CECILIO S. DE VILLA and EAST CORDILLERA MINING
CORPORATION, Respondents.

6. Westmont Bank vs. Inland Construction and Dev. Corp

G.R. No. 123650 March 23, 2009

Westmont Bank (formerly Associated Citizens Bank and now United Overseas Bank, Phils.) AND
The Provincial Sheriff Of Rizal, Petitioners,
vs. Inland Construction And Development Corp., Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 123822 March 23, 2009

Westmont Bank (formerly Associated Citizens Bank and now United Overseas Bank,
Phils.),Petitioner, vs. CA and Inland Construction And Development CorP., Respondents.

7. Yao Ka Sin Trading vs. Court of Appeals

G.R. No. L-53820 June 15, 1992

Yao Ka Sin Trading, owned and operated by Yao Ka Sin, petitioner, vs. CA and Prime White Cement
Corporation, represented by its President-Chairman, Constancio B. Malagna, respondents.

8. Safic Alcan &Cie vs. Imperial Vegetable Co.

G.R. No. 126751 March 28, 2001

Safic Alcan & Cie, petitioner, vs. Imperial Vegetable Oil Co., Inc., respondent.

Case on Stockholders and Members

1. Cojuangco, Jr. Vs. Roxas

G.R. No. 91925 April 16, 1991

Eduardo M. Cojuangco, Jr., Manuel M. Cojuangco and Rafael G. Abello, petitioners,

vs. Antonio J. Roxas, Jose L. Cuisia, Jr., Oscar Hilado, Presidential Commission on Good
 Government (PCGG), San Miguel Corporation (SMC) and Sandiganbayan (First
Division), respondents.

G.R. No. 93005 April 16, 1991

Eduardo M. Cojuangco, Jr., Enrique M. Cojuangco and Manuel M. Cojuangco, petitioners,

vs. Adolfo Azcuna, Edison Coseteng, Patricio Pineda, Presidential Commission on Good
Government (PCGG), and San Miguel Corporation (SMC), respondents.

2. Lim Tay vs. Court of Appeals

G.R. No. 126891 August 5, 1998

Lim Tay, petitioner,

vs. CA, Go Fay And Co. Inc., SY GUIOK, And THE ESTATE OF ALFONSO LIM, respondents.

3. Lao vs. Lao, G.R. No. 170585

G.R. No. 170585 October 6, 2008

DAVID C. LAO and JOSE C. LAO, petitioners, vs. DIONISIO C. LAO, respondents.

4. Puno vs. Puno Enterprises, Inc.

G.R. No. 177066 September 11, 2009

Joselito Musni Puno (as heir of the late Carlos Puno), Petitioner,
vs. Puno Enterprises, Inc., represented by Jesusa Puno, Respondent.

5. Florete vs. Florete

GR. No. 174909 January 20, 2016

MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO and RAUL A. MUYCO, Petitioners,
vs. ROGELIO M. FLORETE, IMELDA C. FLORETE, DIAMEL CORPORATION, ROGELIO C. FLORETE
JR., and MARGARET RUTH C. FLORETE, Respondents.
x-----------------------x
G.R. No. 177275

ROGELIO M. FLORETE SR., Petitioner,

vs. MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO AND RAUL A. MUYCO, Respondents.