COMMERCIAL LAW REVIEW: CORPORATION
LAW circumstances:
Grandfather Rule
1. Narra Nickel Mining and Dev. Corp. vs.
Redmont Consolidated Mines, G.R. No. 195580,
Apr. 21, 2014
Issue: Whether the grandfather rule is the
correct approach in determining the
nationality of the petitioners Narra,
Tesoro, and McArthur?
Held: YES. While the “control test” is still
the prevailing mode of determining
whether or not a corporation is a Filipino
corporation, within the ambit of Sec. 2, Art.
II of the 1987 Constitution, entitled to
undertake the exploration, development
and utilization of the natural resources of
the Philippines, when in the mind of the
Court there is doubt in the 60-40
Filipino-equity ownership in the
corporation, based on the attendant
facts and circumstances of the case such
as where corporate layering is present,
then it may apply the “grandfather rule.”
Here, doubt prevails and persist in the
corporate ownership of the petitioners.
Applying the grandfather rule the SC found
that the petitioners are foreign
corporations.
Separate Personality/ Piercing the Veil
2. Shrimp Specialists, Inc., vs. Fuji-Triumph
Agri-Ind’l Corp., G.R. No. 168756, Dec. 7, 2009
Short facts: Fuji filed a civil complaint for sum
of money against Shrimp Specialists and
Eugene Lim (President) pursuant to their
Distributorship Agreement.
Issue: Whether Eugene Lim, as the President
of Shrimp Specialists, is solidarily liable for
the obligations of the corporation.
Held: No. The general rule is that obligations
incurred by the corporation, acting through
its directors, officers, and employees, are its
sole liabilities. Solidary liability may be
incurred only under the following exceptional
1) When directors and trustees or, in
appropriate cases, the officers of a
corporation:
a. vote for or assent to patently
unlawful acts of the
corporation;
b. act in bad faith or with gross
negligence in directing the
corporate affairs;
c. are guilty of conflict of
interest to the prejudice of
the corporation, its
stockholders or members,
and other persons;
2) When a director or officer has
consented to the issuance of watered
stocks or who, having knowledge
thereof, did not forthwith file with the
corporate secretary his written
objection thereto;
3) When a director, trustee or officer has
contractually agreed or stipulated to
hold himself personally and solidarily
liable with the corporation; or
4) When a director, trustee or officer is
made, by specific provision of law,
personally liable for his corporate
action.
Here, none of these exceptional circumstances
is present. Lim’s mere act of signing in behalf of
the corporation is not sufficient to hold him
solidary liable, ofcourse the corporation
cannot sign for itself, it must be done by its
representative.
3. Edsa Shangri-La Hotel and Resort, Inc. v. BF
Corp., G.R. No. 145842, June 27, 2008
Issue: Whether Roxas-del Castillo, as director
of ESHRI, is solidarily liable for any breach of
contract entered into by the corporation.
Held: No. Obligations incurred by corporate
officers, acting as corporate agents, are not
theirs but direct accountabilities of the
corporation they represent. Solidary liability
on the part of the corporate officers may at
times attach, but only under exceptional
circumstances, such as when they act with
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 malice or in bad faith. Also, in appropriate
cases, the veil of corporate fiction shall be
disregarded when the separate juridical
personality of a corporation is abused or used
to commit fraud and perpetuate a social
injustice, or used as a vehicle to evade
obligations. In this case, no act of malice or like
dishonest purpose is ascribed on petitioner
Roxas-del Castillo as to warrant the lifting of
the corporate veil.
4. Pantranco Employees Asso. (PEA-PTGWO) v.
NLRC, G.R. No. 170689, March 17, 2009
Short facts: PNEI transferred all its assets to
PNB. In a labor case filed by the employees of
PNEI some of the properties that were
attached were properties of PNB and PNB-
Madecor- a subsidiary of PNB.
Issue: Whether the properties bought by PNB
from PNEI and the Pantranco properties of
PNB-Madecor may be attached to satisfy the
unpaid labor claims of PNEI employees.
Held: No. The general rule is that a
corporation has a personality separate and
distinct from those of its stockholders and
other corporations to which it may be
connected. Obviously, PNB, PNB-Madecor, and
PNEI are corporations with their own
personalities. Neither can we merge the
personality of PNEI with PNB simply because
the latter acquired the former. Settled is the
rule that where one corporation sells or
otherwise transfers all its assets to another
corporation for value, the latter is not, by that
fact alone, liable for the debts and liabilities of
the transferor. Hence, properties of PNB
cannot be attached.
Now, even assuming that PNB may be held
liable for the debts of PNEI, petitioners still
cannot proceed against the Pantranco
properties, owned by PNB-Madecor. Because
even if PNB-Madecor was a subsidiary of
PNB, the general rule remains that PNB-
Madecor has a personality separate and
distinct from PNB. The mere fact that a
corporation owns all of the stocks of another
corporation, taken alone, is not sufficient to
justify their being treated as one entity. If
used to perform legitimate functions, a
subsidiary’s separate existence shall be
respected, and the liability of the parent
corporation as well as the subsidiary will be
confined to those arising in their respective
businesses.
Note: **so kahit subsidiary corporation my
separate personality from the mother
corporation.
Additional note:
The doctrine of piercing the corporate veil
applies only in three basic areas, namely: 1)
defeat of public convenience as when the
corporate fiction is used as a vehicle for the
evasion of an existing obligation; 2) fraud cases
or when the corporate entity is used to justify
a wrong, protect fraud, or defend a crime; or 3)
alter ego cases, where a corporation is merely
a farce since it is a mere alter ego or business
conduit of a person, or where the corporation
is so organized and controlled and its affairs
are so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of
another corporation.
5. Manuel C. Espiritu, Jr., et al. vs. Petron Corp.,
et al., G.R. No. 170891, Nov. 24, 2009
Short facts: Both Bicol Gas and KPE were
engaged in distributing LPGs. One day, Jose
(KPE’s manager) saw the Bicol Gas
representative illegally filling up registered
cylinder tanks. This prompted KPE to file
complaint for violations of R.A. No. 623 for
illegally filling up registered cylinder tanks and
Sections 155 (infringement of trademarks) and
169.1 (unfair competition) of the Intellectual
Property Code (R.A. No. 8293). The complaint
also charged the directors, officers, and
stockholders of Bicol Gas.
Issue: Whether the stockholders of Bicol Gas
are solidarily liable with its employees.
Held: No. Bicol Gas is a corporation and as
such, it is an entity separate and distinct from
the persons of its officers, directors, and
stockholders. Despite the separate
personality, the corporate officers or
employees, through whose act, default or
omission the corporation commits a crime,
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 may themselves be individually held
answerable for the crime. Note that, the
owners of a corporate organization are its
stockholders and they are to be distinguished
from its directors and officers.
In a corporation, the management of its
business is generally vested in its board of
directors, not its stockholders. Before a
stockholder may be held criminally liable for
acts committed by the corporation, it must
be shown that he had knowledge of the
criminal act committed in the name of the
corporation and that he took part in the
same or gave his consent to its commission,
whether by action or inaction.
7. Eric Godfrey Stanley Livesey vs. Binswanger
Here, despite the fact that Jose heard Llona
Phils., Inc., et. al., G.R. No. 177493, Mar. 19, 2014
(representative of Bicol Gas) say that he was
going to consult the owners of Bicol Gas
regarding the offer to swap additional
captured cylinders, no indication was given as
to which Bicol Gas stockholders Llona
consulted. It would be unfair to charge all the
stockholders involved, some of whom were
proved to be minors. No evidence was
presented establishing the names of the
stockholders who were charged with running
the operations of Bicol Gas. Hence, they cannot
be held liable with Bicol Gas.
6. Queensland-Tokyo Commodities, Inc., et al.
vs. Thomas George, G.R. No. 172727, Sept. 8,
2010
Short facts: Queensland-Tokyo Commodities,
Inc. (QTCI) is a duly licensed broker engaged in
the trading of commodity futures. Due to
unlawful execution of customers’ orders and
allowing unlicensed commodity futures
salesmen to deal with the investors, SEC issued
a Cease-and Desist Order.
Issue: Whether the piercing the veil of
corporate doctrine is proper to hold Lau, as
president of QCTI, liable.
Held: Yes. The general rule is that, a
corporation is invested by law with a
personality separate and distinct from those of
the persons composing it, such that, corporate
officers who entered into contracts in behalf of
the corporation cannot be held personally
liable for the liabilities of the corporation. One
of the exceptions to this general rule is that,
the corporate director, trustee, or officer
may be personally liable if he is guilty of bad
faith or gross negligence in directing its
affairs. Here, Lau is guilty of gross negligence
because if only he exercised a modicum of care
and discretion in supervising the operations of
QTCI, he could have detected and prevented
the unlawful acts of Collado and Mendoza.
Thus, although Lau may not have participated
nor been aware of the unlawful acts, he is
however deemed to have been grossly
negligence in directing the affairs of QTCI
making him personally liable with the
corporation.
Short facts: CBB Phil. and its employee Livesey
entered into a compromise agreement. The
agreement involves that CBB pay Livesey a
certain amount of money. Upon failure of CBB
to pay the court issued a writ of execution.
Livesey contend that the writ of execution
must be enforced as well against Binswanger
which CBB and its President allegedly
organized to avoid CBBs liabilities. He claimed
that there was evidence showing that CBB and
Binswanger are one and the same corporation.
He invoked the doctrine of piercing the veil of
corporate fiction.
Issue: Whether there is sufficient ground to
pierce the veil of corporate fiction of
Binswanger to make it liable to Livesey for
CBB’s liability.
Held: Yes. Under the doctrine of piercing the
veil of corporate fiction.”, the corporate
existence may be disregarded where the entity
is formed or used for non–legitimate purposes,
such as to evade a just and due obligation, or to
justify a wrong, to shield or perpetrate fraud or
to carry out similar or inequitable
considerations, other unjustifiable aims or
intentions, in which case, the fiction will be
disregarded and the individuals composing it
and the two corporations will be treated as
identical.
Here, there is an indubitable link between
CBB’s closure and Binswanger’s incorporation.
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 CBB ceased to exist only in name; it re-emerged
in the person of Binswanger for an urgent
purpose to avoid payment by CBB of the last
two installments of its monetary obligation to
Livesey, as well as its other financial liabilities.
Freed of CBB’s liabilities, especially that owing
to Livesey, Binswanger can continue, as it did
continue, CBB’s real estate brokerage business.
Livesey’s evidence, whose existence
Binswanger and its President never denied,
converged to show this continuity of business
operations from CBB to Binswanger. Therefore
Binswanger and Elliot are jointly and severally
liable for CBB’s unfulfilled obligation to
Livesey.
8. Gerardo Lanuza, Jr., et. al. vs. BF Corporation,
et. al, G.R. No. 174938, October 1, 2014
Issue: Whether the Directors of Shangri-La
should be made parties to the arbitration
proceedings despite the fact that they are non-
parties to Shangri-La and BF Corporation
agreement and have separate personalities
from Shangri-La.
Held: Yes. The rule is that, in cases where there
are allegations of bad faith or malice against
the directors of the corporation, it becomes the
duty of courts or tribunals to determine if these
persons and the corporation should be treated
as one. A trial must be conducted to determine
whether the veil of corporate fiction should be
pierced.
Here, BF Corporation alleged that there was
bad faith on the part of the Petitioners in
directing the affairs of Shangri-La Corporation,
calling for the piercing of the corporate veil.
Therefore, the Petitioners who are normally
treated as distinct individuals should be made
to participate in the arbitration proceedings in
order to determine if such distinction should
indeed be disregarded and, if so, to determine
the extent of their liabilities.
Note: Here, the reason of making the directors
parties to the arbitration was to determine
whether they acted with bad faith and malice
in directing the affairs given that there was
allegation of badfaith, and if yes, saka pa lang
ipipierce ung corporate viel.
9. Irene Martel Francisco vs. Numeriano Mallen,
Jr., G.R. No. 173169 Sept. 22, 2010
Issue: Whether the petitioner, as Vice-
President of VIPS Coffee Shop and Restaurant,
is personally liable for the monetary awards
granted in favor of respondent arising from his
alleged illegal termination.
Held: No. To hold a director or officer
personally liable for corporate obligations,
two requisites must concur: (1) complainant
must allege in the complaint that the
director or officer assented to patently
unlawful acts of the corporation, or that the
officer was guilty of gross negligence or bad
faith; and (2) complainant must clearly and
convincingly prove such unlawful acts,
negligence or bad faith. Here, here was no
evidence whatsoever to show petitioner’s
participation in respondent’s alleged illegal
dismissal. Clearly, the twin requisites of
allegation and proof of bad faith, necessary to
hold petitioner personally liable for the
monetary awards to respondent, are lacking.
10. Pacific Rehouse Corp. vs. Court of Appeals,
et. al. G.R. No. 199687, Mar. 24, 2014 (memorize
the definition of “control”)
Short facts: EIB Securities made an
unauthorized sale of DMCI shares of Pacific
Rehouse, et al. A case against EIB was filed
before the RTC. RTC ruled against EIB. A writ
of execution was then issued. When the Writ
was returned unsatisfied, Pacific Rehouse et. al
moved for the issuance of an alias writ of
execution to hold EI- Bank, Inc. liable for the
judgment obligation as EIB Securities is “a
wholly-owned controlled and dominated
subsidiary of EI-Bank, Inc., and is, thus, a mere
alter ego and business conduit of the latter.”
EIB Securities opposed the motion, arguing
that it has a corporate personality that is
separate and distinct from EI- Bank, Inc.
Issue: Whether the veil of corporate fiction
may be pierced.
Held: No. The rule is that, a corporation is an
entity separate and distinct from its
stockholders and from other corporations to
which it may be connected. This separate
personality of the corporation may be
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 disregarded or the veil of corporate fiction
pierced only in exceptional circumstances
such as when the corporation is merely an
adjunct, a business conduit or an alter ego of
another corporation.
To determine whether the corporation is
merely an alter ego of the other corporation, it
must be proven that such corporation is so
organized and controlled and its affairs are
conducted so that it is, in fact, a mere
instrumentality or adjunct of the other. The
control necessary to invoke the rule is not
majority or even complete stock control but such
domination of finances, policies and practices
that the controlled corporation has, so to speak,
no separate mind, will or existence of its own,
and is but a conduit for its principal. It must be
kept in mind that the control must be shown to
have been exercised at the time the acts
complained of took place. Also, there must be a
perpetuation of fraud behind the control or at
least a fraudulent or illegal purpose behind the
control in order to justify piercing the veil of
corporate fiction.
Here, while there is control in financial and
operational concerns of a subsidiary, the
fraudulent intent behind the control was not
proven. There was nothing on record
demonstrative of EI Bank’s wrongful intent in
setting up a subsidiary, EIB Securities. Note
that, a subsidiary’s separate personality from
its parent corporation must be respected if
used to perform legitimate functions.
11. Heirs of Fe Tan Uy , et. al. vs. Int’l Exchange
Bank, et. al., G.R. No. 166282, Feb. 13, 2013
Short facts: iBank granted loans to Hammer
Corp. pursuant to a letter agreement where
Hammer Corp was represented by its
President and Gen. Manager Chua. The loan
was secured by a real estate mortgage
executed by Goldkey Corp. Upon failure to pay,
real estate was sold. There was still deficiency,
which Hammer failed to pay. iBank then filed a
Complaint for sum of money on against
Hammer Corp., Chua and Uy (treasurer and
stockholder of Hammer) and Goldkey Corp.
Issues:
1) Whether Uy, as treasurer and
stockholder of Hammer, can be held
personally liable for the corporation’s
loan obligation.
2) Whether Goldkey is an alter ego of
Hammer hence liable for the latter’s
obligation.
Held:
1) No. A director, officer or employee of a
corporation is generally not held
personally liable for obligations incurred
by the corporation unless such director or
officer assented to patently unlawful acts
of the corporation, or that the officer was
guilty of gross negligence or bad faith; and
the complainant clearly and convincingly
prove such unlawful acts, negligence or
bad faith. Here, there is no showing that Uy
committed gross negligence. Hence, Uy is
not liable.
2) Yes, Goldkey is a mere alter ego of Hammer
hence liable. Under a variation of the
doctrine of piercing the veil of corporate
fiction, when two business enterprises are
owned, conducted and controlled by the
same parties, both law and equity will,
when necessary to protect the rights of
third parties, disregard the legal fiction
that two corporations are distinct entities
and treat them as identical or one and the
same. While the conditions for the
disregard of the juridical entity may vary,
the following are some probative factors of
identity that will justify the application of
the doctrine of piercing the corporate veil,
as laid down in Concept Builders, Inc. v.
NLRC: (1) Stock ownership by one or
common ownership of both corporations;
(2) Identity of directors and officers; (3)
The manner of keeping corporate books
and records, and (4) Methods of
conducting the business. These factors are
present in the case of Goldkey and
Hammer.
12. PNB vs. Hydro Resources Contractors Corp.,
G.R. No. 167530, Mar. 13, 2013
Issue: WON NMIC is a mere adjunct, business
conduit or alter ego of both DBP and PNB, to
find the application of the Doctrine of Piercing
the corporate veil of NMIC.
Held: NO, NMIC is not a mere alter ego of DBP
and PNB. Piercing the corporate veil based
on the alter ego theory requires the
concurrence of three elements: 1) control of
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 the corporation by the stockholder or Parent
Corporation (control test); 2) fraud or
fundamental unfairness imposed on the
plaintiff (fraud test); and 3) harm or damage
caused to the plaintiff by the fraudulent or
unfair act of the corporation (harm test).
The absence of any of these elements
prevents piercing the corporate veil.
Here, the SC finds that none of the tests has
been satisfactorily met in this case, for
instance, nothing in the records shows that the
corporate finances, policies and practices of
NMIC were dominated by DBP and PNB in such
a way that NMIC could be considered to have
no separate mind, will or existence of its own.
13. Kukan Int’l Corp. vs. Hon. Amor Reyes, et. al.
G.R. No. 182729, Sept. 29, 2010\
Issue: WON KIC is a mere alter ego of Kukan to
validly execute the writ of execution against
Kukan to the properties owned by KIC.
Held: No. Court pierced the veil of corporate
fiction of two corporations, there was a
confluence of the following factors:
a. A first corporation is dissolved;
b. The assets of the first corporation
is transferred to a second
corporation to avoid a financial
liability of the first corporation;
and
c. Both corporations are owned and
controlled by the same persons
such that the second corporation
should be considered as a
continuation and successor of the
first corporation.
Here, the second and third factors are
conspicuously absent. There is, therefore, no
compelling justification for disregarding the
fiction of corporate entity separating Kukan,
Inc. from KIC.
14. Timoteo Sarona vs. NLRC, Royale Security
Agency, et al., G.R. No. 185280, Jan. 18, 2012
Issue: Whether Royale’s corporate fiction
should be pierced for the purpose of
compelling it to recognize the petitioner’s
length of service with Sceptre and for holding
it liable for the benefits that have accrued to
him arising from his employment with Sceptre.
Held: Yes. The corporate mask may be
removed or the corporate veil pierced when
the corporation is just an alter ego of a person
or of another corporation. Here, evidence
shows that Royale is a mere continuation or
successor of Sceptre and fraudulent objectives
are behind Royale’s incorporation and the
petitioner’s subsequent employment therein.
It was found out that Aida exercises control
and supervision over the affairs of both Sceptre
and Royale. Also, Sceptre and Royale have the
same principal place of business. The
respondents do not likewise deny that Royale
and Sceptre share the same officers and
employees. Royale also claimed a right to the
cash bond which the petitioner posted when he
was still with Sceptre. Therefore, Royale’s
corporate fiction should be pierced in this case
and petitioner’s length of service with Sceptre
should be recognized.
15. Vivian T. Ramirez, et al. vs. Mar Fishing Co.,
Inc,. et al., G.R. No. 168208, June 13, 2012
Short facts: Mar Fishing is engaged in the
business of fishing and canning of tuna. It sold
its principal assets to co-respondent
corporation Miramar Fishing. After the sale,
respondent Mar Fishing notified its workers, as
well as DOLE, of the closure of its business
operations by the end of the month.
Issue: Whether Miramar Fishing is merely an
alter ego of Mar Fishing making them solidarily
liable to the monetary claims of petitioner.
Held: NO. The question of whether one
corporation is merely an alter ego of another is
purely one of fact. Here, Miramar and Mar
Fishing are separate and distinct entities,
based on the marked differences in their stock
ownership. Also, the fact that Mar Fishing’s
officers remained as such in Miramar does not
by itself warrant a conclusion that the two
companies are one and the same.
Neither can the veil of corporate fiction
between the two companies be pierced by the
alleged take-over by Miramar of Mar Fishing’s
operations and the evident similarity of their
businesses. At this point, it bears emphasizing
that since piercing the veil of corporate fiction
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 is frowned upon, those who seek to pierce the
veil must clearly establish that the separate
and distinct personalities of the corporations
are set up to justify a wrong, protect a fraud, or
perpetrate a deception. This, unfortunately,
petitioners have failed to do.
16. China Banking Corporation vs. Dyne-Sem
Electronics Corp. G.R. No. 149237, June 11, 2006
Short facts: Dynetics and Lim borrowed from
petitioner China Bank evidenced by 6 PN. Upon
failure to pay, China Bank filed a complaint for
sum of money. Summons was not served on
Dynetics because it had already closed down.
Lim, on the other hand, filed his answer
denying that "he promised to pay [the
obligations] jointly and severally to
[petitioner]." China Bank amended complaint
was filed by petitioner impleading respondent
Dyne-Sem Corporation (Dyne-Sem) and its
stockholders. Petitioner alleged that
respondent was formed and organized to be
Dynetics' alter ego.
Issue: WON Dyne-Sem is a mere alter ego of
Dynetics' to warrant the piercing of corporate
veil, treat the 2 corporations as 1 and thus
make Dyne-Sem liable to the obligation of
Dynetics.
Held: No. The similarity of business of the
two corporations did not warrant a
conclusion that Dyne-Sem was but a conduit
of Dynetics. Likewise, respondent's
acquisition of some of the machineries and
equipment of Dynetics was not proof that
Dyne-Sem was formed to defraud petitioner.
As the CA found, no merger took place between
Dynetics and Dyne-Sem. What took place was a
sale of the assets of the former to the latter.
Also, the fact that Dyne-Sem hired the former
VP of Dynatics is not sufficient to prove that
Dyne-Sem is mere alter ego because even the
overlapping of incorporators and stockholders
of two or more corporations will not
necessarily lead to such inference and justify
the piercing of the veil of corporate fiction.
Much more has to be proven.
Residence of a corporation
17. Hyatt Elevators Inc. vs. Goldstar Elevators.
Phils., G.R. No. 161026, Oct. 24, 2005
Short facts: HYATT filed a case of unfair trade
practices against LG Industrial System Co. Ltd.
(LGISC) and LG International Corporation
(LGIC) for breaching their Exclusive
Distributorship Agreement before RTC
Mandaluyong.
Issue: WON the venue was properly laid in
Mandaluyong City considering the fact that
none of the parties reside in Mandaluyong.
Held: No, venue is improper. Jurisprudence
has settled that the principal place of
business of the corporation is the one stated
in its Articles of Incorporation (AOI). Here,
the principal place of business of HYATT is
Makati, as indicated in its AOI. HYATT cannot
argue that it had closed its Makati office and
relocated to Mandaluyong City and that the
respondent was well aware of those
circumstances because the fact remains that, in
law, the latter’s residence was still the place
indicated in its AOI. Hence, the venue was
improper in Mandaluyong City.
Claim for Moral Damages
18. ABS-CBN Broadcasting Corp. vs. CA,
301SCRA 589, G.R. No. 128690. Jan. 21,
1999
Issue: WON a corporation such as RBS in this
case is entitled to moral damages.
Held: NO. RBS is not entitled to moral
damages. Award for Moral damages is
designed to compensate the claimant for actual
injury suffered and not to impose a penalty on
the wrongdoer. Moral damages are awarded to
enable the injured party to obtain means,
diversion, or amusements that will serve to
obviate the moral suffering he has undergone.
The award of moral damages cannot be
granted in favor of a corporation because,
being an artificial person and having existence
only in legal contemplation, it has no feelings,
no emotions, no senses, It cannot, therefore,
experience physical suffering and mental
anguish, which can be experienced only by one
having a nervous system.
Doctrine of Apparent Authority
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19. Advance Paper Corp, et.al., vs. Arma
Traders Corp, et. al. G.R. No.176897, Dec.
11, 2013
Issue: Whether Arma Traders is liable to pay
the loans obtained by Tan and Uy (its President
and Treasuere respectively during the time the
loan was obtained) applying the doctrine of
apparent authority.
Held: Yes. The doctrine of apparent authority
provides that a corporation will be estopped
from denying the agent’s authority if it
knowingly permits one of its officers or any
other agent to act within the scope of an
apparent authority, and it holds him out to the
public as possessing the power to do those
acts. The existence of apparent authority may
also be ascertained through the acquiescence
of the corporation to the acts of the agent, with
actual or constructive knowledge thereof,
within or beyond the scope of the agent’s
ordinary powers.
Here, Tan and Uy were not just ordinary
corporate officers and authorized bank
signatories for they are also Arma Traders’
incorporators. It was also proven that the sole
management of Arma Traders’ was left to Tan
and Uy for 14 years and that since 1984 its
stockholders and BOD never had its meeting.
21. Wilson P. Gamboa vs. Finance Sec.
Clearly, Arma Traders bestowed upon Tan and
Uy broad powers by allowing them to transact
with third persons without the necessary
written authority from its non-performing
board of directors. Hence, applying the
doctrine of apparent authority, Arma Traders
is now estopped from denying Tan and Uy’s
authority to obtain loan from Advance Paper
and his liability to the latter.
Trust Fund Doctrine
20. Donnina C. Halley vs. Printwell, Inc., G.R. No.
157549, May 30, 2011
Short facts: Printwell sued BMPI for the
collection of its unpaid debt. It impleaded as
defendants all the original stockholders and
incorporators (including the Petitioner) to
recover on their unpaid subscriptions.
22. Valle Verde Country Club, Inc. vs. Victor
Issue: WON the Petitioner (stockholder of
BMPI) is personally liable under the trust fund
doctrine.
Held: Yes, The trust fund doctrine enunciates
a rule that the property of a corporation is a
trust fund for the payment of creditors. Here,
the petitioner is liable pursuant to the trust
fund doctrine for the obligation of BMPI by
virtue of her subscription being still unpaid.
Printwell, as BMPI’s creditor, had a right to
reach her unpaid subscription in satisfaction of
its claim.
But take note that, the trust fund doctrine is not
limited to reaching the stockholders unpaid
subscriptions. The scope of the doctrine when
the corporation is insolvent encompasses not
only the capital stock, but also other property
and assets generally regarded in equity as a
trust fund for the payment of corporate debts.
All assets and property belonging to the
corporation held in trust for the benefit of
creditors that were distributed or in the
possession of the stockholders, regardless of
full payment of their subscriptions, may be
reached by the creditor in satisfaction of its
claim.
Capital
Margarito B. Teves, et. al., G.R. No. 176579,
June 28, 2011
Issue: Whether the term capital in Section 11,
Article XII of the Constitution refers to the total
common shares only or to the total outstanding
capital stock (combined total of common and
non-voting preferred shares) of PLDT, a public
utility.
Held: No. The term capital in Section 11,
Article XII of the Constitution refers only to
shares of stock entitled to vote in the election
of directors, and thus in the present case only
to common shares, and not to the total
outstanding capital stock comprising both
common and non-voting preferred shares.
Board of Directors/Power of the BOD
Africa G.R. No. 151969, Sept. 4, 2009
F.Castro
 Issue: Whether the remaining directors of the
still constituting a quorum, can elect another
director to fill in a vacancy caused by the
resignation of a hold-over director.
Held: No, the business and affairs of a
corporation must be governed by a board of
directors whose members have stood for
election, and who have actually been elected by
the stockholders. The law authorizes the
remaining members of the board to fill in a
vacancy only in specified instances, so as not to
retard or impair the corporation’s operations;
yet, in recognition of the stockholders’ right to
elect the members of the board, it limited the
period during which the successor shall serve
only to the unexpired term of his predecessor
in office. When the vacancy is created by the
expiration of a term, it shall be the
corporation’s stockholders who shall
possess the authority to fill in the said
vacancy.
Here, when the remaining members of the
VVCC Board elected Ramirez to replace
Makalintal, there was no more unexpired term
to speak of, as Makalintal’s one-year term had
already expired. Pursuant to law, the authority
to fill in the vacancy caused by Makalintal’s
leaving lies with the VVCC’s stockholders, not
the remaining members of its board of
directors.
23. Filipinas Port Services vs. Go G.R. No.
161886, March 16, 2007
Short facts: Cruz, the newly-ousted President
of Filport filed a derivative suit against its new
BOD for alleged acts of mismanagement
detrimental to the interest of the corporation
and its shareholders by: (1) Creating an
Executive Committee even though such
creation is not provided in the Corporate by-
laws; (2) Increasing the emoluments of
principal officers of the Corporation; (3) Re-
creating the Assistant Vice President positions;
and (4) Creating additional positions. The
respondent BODs alleged that the above acts
are valid exercise of their powers.
Issue: WON the acts of the BOD are considered
valid corporate acts
Held: Yes. Under Sec 23 of the Corporation
Code, the governing body of a corporation
is its board of directors. Thus, the board of
directors or trustees has the sole authority
to determine policies, enter into contracts,
and conduct the ordinary business of the
corporation within the scope of its charter,
i.e., its articles of incorporation, by-laws
and relevant provisions of law.
Indeed, the concentration in the board of the
powers of control of corporate business and of
appointment of corporate officers and
managers is necessary for efficiency in any
large organization. Stockholders are too
numerous, scattered and unfamiliar with the
business of a corporation to conduct its
business directly. And so the plan of corporate
organization is for the stockholders to choose
the directors who shall control and supervise
the conduct of corporate business In the
present case, the acts of the BODs are
considered in accordance with the regular
business operations of Filport and/or within
the powers of the BOD.
Corporate Officer
24. Matling Ind’l and Commercial Corp., et. al.
Ricardo R. Coros, G.R. No. 157802 Oct. 13,
2010
Issue: WON the Ricardo, Matling Corp’s Vice
President for Finance and Adminstration is a
corporate officer considering that his position
was created by the Board of Directors though
its President.
Held: No. The rule is that, the corporate
officers are only those officers of a
corporation who were given that character
either by the Corporation Code or by the By-
Laws of the Corporation. Here, the position of
Ricardo as Vice President for Finance and
Adminstration is not among the corporate
officers under the Corporation Code not under
the by-laws of Matling Corp. Note that,
Matling’s By-Law No. III listed only four
corporate officers, namely: President,
Executive Vice President, Secretary, and
Treasurer. Hence, even if the office was created
pursuant to or under a By-Law enabling
provision, it is not enough to make a position a
F.Castro
 corporate office, again, it must be indicated
under the by-law that such position is a
corporate office.
25. MARC II Marketing, Inc. vs. Alfredo M. Joson
G.R. No. 171993, Dec. 12, 2011
Short facts: MARC Marketing, Inc. by-laws
provide that, 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. During
the BOD’s meeting, Alfredo was appointed
as General manager. When Alfredo was
terminated he filed a case for Reinstatement
and Money Claim against petitioners before
the Labor Arbiter. MARC Marketing, filed a
motion to dismiss arguing that since Alfredo is
a corporate officer, the case is an
intracorporate dispute, it is the RTC not the LA
which has jurisdiction.
Issue: WON Alfredo is a Corporate Officer.
Held: No. A position must be expressly
mentioned in the by-laws in order to be
considered as a corporate office. Thus, the
creation of an office pursuant to or under a by-
law enabling provision is not enough to make a
position a corporate office. Here, the position
of General Manager is not among the corporate
office indicated in the by-laws of MARC
Marketing, hence, such position is not a
corporate office. The complaint therefore is not
an intracorporate dispute and LA has
jurisdiction.
26. Leslie Okol vs. Slimmers World
International, et al., G.R. No. 160146,
December 11, 2009
Short facts: Slimmers World employed Okol as
a management trainee. She rose up the ranks
to become Head Office Manager and then
Director and Vice President. The petitioner
was preventively suspended and later on was
dismissed when the undervalued equipment
seized by the Bureau of Customs was placed
under the names of Okol and two customs
brokers. Petitioner then filed for illegal
suspension, illegal dismissal before the NLRC.
Issue: WON the petitioner is a Corporate
Officer in which case the NLRC has no
jurisdiction since there is no employer-
employee relationship.
Held: Yes. Section 25 of the Corporation Code
enumerates corporate officers as the
president, secretary, treasurer and such
other officers as may be provided for in the
by-laws. Here, the Art. 3 of the Amended By-
Laws of Slimmers World provides that the VP
are among its corporate officers. Since a
corporate officer’s dismissal is always a
corporate act, or an intra-corporate
controversy which arises between a
stockholder and a corporation, the NLRC has
no jurisdiction over the case, it is the RTC
which has jurisdiction.
27. Gloria V. Gomez vs. PNOC Dev. and Mngt.
Corp. (PDMC), G.R. No. 174044, Nov. 27,
2009
Issue: Whether Gomez was, in her capacity as
administrator of respondent PDMC, is a
corporate officer.
Held: No. Ordinary company employees are
generally employed not by action of the
directors and stockholders but by that of the
managing officer of the corporation who also
determines the compensation to be paid such
employees. On the other hand, corporate
officers are elected or appointed by the
directors or stockholders, and are those who
are given that character either by the
Corporation or by the corporation’s by-laws.
Here, it was the PDMC president who
appointed petitioner Gomez as administrator,
not its board of directors or the stockholders.
Moreover, the administrator was not among
the corporate officers mentioned in the PDMC
by-laws. Hence, in the illegal dismissal case
filed by Gomez, it is the NLRC which has
jurisdiction because he is an ordinary
employee not a corporate officer.
Liability of Corporate Officer
28. Rodolfo Laborte, et al. v. Pagsanjan Tourism
Consumers’ Coop., et al., G.R. No. 183860,
Jan. 15, 2014
Short facts: Laborte, the Area Manager of PTA
served a written notice to PTCC (a cooperative)
F.Castro
 to cease the operations of its restaurant
business and boat ride services over the PTA
complex. PTCC filed a complaint for
Prohibition, Injunction and Damages with TRO
and Preliminary Injunction against Laborte.
The RTC rendered a decision ordering Laborte
and PTA jointly and severally to pay the PTCC
damages.
Issue: Whether Laborte can be held personally
and solidarily liable for damages to PTCC?
Held: No. As a general rule, “the officer cannot
be held personally liable with the
corporation, whether civilly or otherwise, for
the consequences of his acts, if acted for and
in behalf of the corporation, whether civilly
or otherwise, for the corporation, within the
scope of his authority and in good faith.”
Here, Laborte was simply implementing the
lawful order of the PTA Management to notify
respondent PTCC to cease business operations
at the complex in view of the intended
renovation and repair of the restaurant facility
at the complex. Thus, the Court finds no basis
to hold petitioner Laborte liable.
29. MAM Realty Development Corporation v.
NLRC, 314 Phil. 838 (1995)
Short facts: Celso filed a complaint with LA
against MAM Realty Development Corporation
("MAM") and its VP Centeno, for wage
differentials, "ECOLA," overtime pay, incentive
leave pay, 13th month pay, holiday pay and
rest day pay.
Issue: WON Centeno may be held jointly and
severally liable with MAM corporation.
Held: No, In labor cases, the Court has held
corporate directors and officers solidarily
liable with the corporation for the termination
of employment of employees done with malice
or in bad faith. Here, there is nothing
substantial on record that can justify Centeno's
solidary liability with the corporation, bad
faith or malice on his part was not proven
30. Harpoon Marine Services, Inc., et al. v.
Fernan H. Francisco, G.R. No. 167751,
March 2, 2011
Short facts: Petitioner Harpoon hired
respondent Fernan Francisco as its Yard
Supervisor. Respondent was dismissed by
petitioner Rosit. He was informed that the
company could no longer afford his salary and
that he would be paid his separation pay and
accrued commissions. However, only
separation pay was paid. After several
unheeded request, respondent filed an illegal
complaint against the petitioners. Petitioner
Harpoon and its President were held solidarily
liable to respondent.
Issue: Whether petitioner Rosit can be held
solidarily liable with petitioner Harpoon.
Held: No. corporation has a legal personality
separate and distinct from the persons
comprising it, to warrant the piercing of the
veil of corporate fiction, the officers bad faith
or wrongdoing must be established clearly and
convincingly as bad faith is never presumed.
Here, it was not proven that Rosit acted in bad
fath with gross or inexcusable negligence, or
that he acted outside the scope of his authority
as company president. At the most, Rosit’s
actuation only show the illegality of the
manner of effecting respondent’s termination
from service due to absence of just or valid
cause and non-observance of procedural due
process but do not point to any malice or bad
faith on his part. Hence, Rosit is not solidary
liable with the Corporation.
31. SPI Technologies, Inc., et al. v. Victoria K.
Mapua, G.R. No. 199022, April 7, 2014
Short facts: In 2003 Mapua was employed by
SPI Technologies, Inc. (SPI). In 2007 Raina
(Corporate Officer) informed Mapua over the
phone that her position was considered
redundant and that she is terminated from
employment effective immediately. Mapua
however found out that there was no
redundancy, in fact SPI listed in its
advertisement that her position is among the
vacancies in the company. SPI was found guilty
for illegal dismissal.
Issue: Whether the corporate officers of SPI
technologies can be held solidary liable with
the corporation for Mapua’s illegal dismissal.
F.Castro
 Held: NO. Personal liability of corporate
directors, trustees or officers attaches only
when:
a) they assent to a patently unlawful act
of the corporation, or when they are
guilty of bad faith or gross negligence
in directing its affairs, or when there is
a conflict of interest resulting in
damages to the corporation, its
stockholders or other persons;
b) they consent to the issuance of
watered down stocks or when, having
knowledge of such issuance, do not
forthwith file with the corporate
secretary their written objection;
c) they agree to hold themselves
personally and solidarily liable with
the corporation; or
d) are made by specific provision of law
personally answerable for their
corporate action.
Here, Mapua failed to establish the existence of
any of the enumerated circumstance. Hence,
the corporate officers are not personally liable
for Mapuas’s illegal dismissal.
32. Mirant [Phils.] Corp., et al. v. Joselito A.
Caro,G.R. No. 181490, April 23, 2014
Short facts: Caro, an employee of Mirant
(Philippines) was not able to undergo the
random drug test which the company
conducted because when he was scheduled to
take the test, he had to leave the office to
ascertain the whereabouts and condition of his
wife in relation to a bombing incident. Caro
was then dismissed from work due to his
unjustified refusal to submit to random drug
testing. Caro filed a complaint for illegal
dismissal and money claims against Mirant and
its President, Edgardo Bautista. Both the Labor
Arbiter and the Court of Appeals held Bautista
personally liable jointly and severally with
Mirant as its President.
Issue: Whether Bautista, as Mirant’s President,
can be personally held liable to Caro’s illegal
dismissal.
Held: NO. A corporation has a personality
separate and distinct from its officers and
board of directors who may only be held
personally liable for damages if it is proven
that they acted with malice or bad faith in
the dismissal of an employee. Here, there was
no evidence that Bautista acted maliciously or
in bad faith in effecting the termination of Caro,
plus the apparent lack of allegation in the
pleadings of Caro that petitioner Bautista acted
in such manner, the doctrine of corporate
fiction dictates that only Mirant (the
corporation) should be held liable for the
illegal dismissal of Caro.
Stockholders
33. Joselito Musni Puno vs. Puno Enterprises,
Inc., et. al., G.R. No. 177066, Sept. 11, 2009
Short facts: Carlos Puno was a stockholder of
Puno Enterprise when he died. Upon his death
his alleged illegitimate son Joselito claimed
that he is entitled to the rights and privileges of
his late father as a stockholder and demanded
that he be allowed to inspect Puno Enterprises
corporate book, render an accounting of all the
transactions it entered into from 1962, and
give him all the profits, earnings, dividends, or
income pertaining to the shares of Carlos Puno.
Issue: WON upon the death of the stockholder,
his heir automatically becomes the
stockholder of the Corporation.
Held: NO. Upon the death of a shareholder, the
heirs do not automatically become
stockholders of the corporation, (1) the stocks
must be distributed first to the heirs in estate
proceedings, and (2) the transfer of the
stocks must be recorded in the books of the
corporation pursuant to Section 63 of the
Corporation Code. Here, the Petitioner was
neither recognized as the heir of Carlos Puno in
the estate proceedings nor the Respondent’s
transfer book indicate that some of the shares
owned by Carlos Puno were transferred to him.
Hence, the Petitioner is not entitled to the
rights and privileges of his late father as a
stockholder of the Respondent.
34. David C. Lao and Jose C. Lao vs. Dionisio C.
Lao, G.R. No. 170585, October 6, 2008
F.Castro
 Short facts: Petitioners here are claiming that
they are stockholders of PFSC based on the
General Information Sheet (GIS) filed with the
SEC, in which they are named as stockholders
and directors of the corporation. Records,
however, disclose that petitioners have no
certificates of shares in their name and their
names were not in the corporate books.
Issue: Whether the mere inclusion as
shareholder in the General Information Sheet
(GIS) of a corporation constitutes as a
sufficient proof that one is a shareholder in
such corporation.
Held: NO. The GIS is not a sufficient proof of
who are the shareholders of the company. It is
the corporate books which is controlling in
determining who the shareholders are. The
information in the GIS must be correlated with
the corporate books. Here, the names of the
petitioners were not in the corporate books.
Hence, they were not considered as
stockholders of the corporation.
By-Laws
35. Loyola Grand Villas Homeowners Asso. Inc.
vs. CA, et. al., G.R. No. 117188, Aug. 7, 1997
Short facts: SEC automatically dissolved the
Petitioner LGVHAI due to its failure to submit
its by-laws.
Issue: WON the failure of the Corporation to
submit its by-laws within the period required
by the Corporation Code would amount to its
automatic dissolution.
Held: NO. The requirement under Section 46
of the Corporation Code that the Corporation
must adopt a set of bylaws within 1 month
after receipt of notice of the issuance of the
certificate of incorporation is NOT
MANDATORY (**despite the word “must”).
While the by-laws are necessary for the
government of the corporation these are
subordinate to the Articles of Incorporation,
Corp. Code and related laws. Hence, Failure to
file the by-laws within that period does not
imply the “demise” of the corporation. Proper
notice and hearing as part of due process must
be complied with and the Incorporators must
be given the chance to explain their neglect or
omission for the failure to file the by-laws and
remedy the same.
Note: The effect of the failure to submit by-
laws would result to the forfeiture of the
franchise of the Corporation or would subject
the negligent corporate officers from
administrative liabilities.
36. Petronilo J. Barayuga vs. Adventist Univ. of
the Phils. (AUP), G.R. No. 168008, Aug. 17,
2011
Short facts: The Petitioner was appointed as
President of Adventist University of the Phil.
(AUP). Under the amended by-laws of AUP the
term of the members of the Board of Trustees
is limited to 2 years. Due to Petitioners
violations of the rules and procedure in the
disbursement and use of funds he was
removed. The Petitioner is now complaining
that his removal is invalid and that he was
entitled to serve for five (5) years as indicated
in the Corporation Code.
Issue: Whether the Petitioner is correct that
since the Corp Code set the term of the
members of Board of Trustees at 5 years he
cannot be removed before such term despite
the fact that the by-laws limits their term to 2
years.
Held: NO. While it is true that Sec 108 of the
Corp Code sets the term of the members of the
BOT at 5 years, it expressly provides that the
duration is subject to the articles of
incorporation or by-laws of the educational
corporation- that the provision in the AOI or
by-laws controls the term of the office. Here,
the by-laws provide that the term is 2 years.
Hence, it must control despite the provision in
the Corp Code. Hence, the removal is valid.
37. Valley Golf & Country Club, Inc., Rosa O. Vda.
De Caram, G.R. No. 158805, April 16, 2009
Short facts: Caram purchased Golf share with
Valley Golf- a non-stock, non-profit
corporation. He paid it in full and was issued
Stock Certificate. Due to his failure to pay
monthly dues, his share was sold at public
auction.
F.Castro
 Issues:
1) WON Valley golf can validly impose a lien
on the golf share on the ground of failure
to pay monthly dues.
2) WON the right of a non-stock corporation
to expel a member through the forfeiture
of such member’s share may be
established in the by-laws alone.
Held:
1) No. The rule is that, the power to
constitute such lien on the share should
be provided in the articles of
incorporation, and not merely in the by-
laws. Hence, Valley Golf cannot argue that
by virtue of the by-law provisions a lien is
created on the shares of its members to
ensure payment of dues, charges and other
assessments on the members.
2) Yes. As provided under Sec. 91 of the
Corporation Code, the right of a non-stock
corporation to expel a member through
the forfeiture of such member’s share may
be established in the by-laws alone.
Clearly, the right of a non-stock
corporation such as Valley Golf to expel a
member through the forfeiture of the Golf
Share may be established in the by-laws
alone, as is the situation in this case.
Note: Vda. Caram won in this case. The SC
found that there was violation of due process
here. Valley Golf acted in clear bad faith when
it sent the final notice to Caram despite the fact
that they already know that Caram is dead.
Such notice carried the final threat that his Golf
Share would be sold at public auction should
he fail to settle his account on or before 31 May
1987, they could have addressed it to the
estate.
Derivative Suit
38. Juanito Ang, et. al. vs. Sps. Roberto and
Rachel Ang, G.R. No. 201675, June 19, 2013
Short facts: Juanio, stockholder of SMBI, filed
a stockholder derivative suit alleging that the
refusal of Sps. Roberto and Rachel Ang (former
Stockholders) to settle 50% of their loan to
SMBI would affect the financial viability of
SMBI.
Issue: WON the case is a derivative suit.
Held: NO. A derivative suit is an action
brought by a stockholder on behalf of a
corporation to enforce corporate rights
against the corporation’s directors, officers
or other insiders. In a derivative suite, the real
party in interest is the corporation while the
SH is mere nominal party. In other words, a
derivative suit is one that seek redress for
injury of the corporation, and not the SH.
Here, complaint failed to show how the acts of
Rachel and Robert would detriment the
corporation, in fact it was proven that the loan
was not a corporate obligation. Since the
damage to the corporation was not proven, the
complaint cannot be considered a bona fide
derivative suit.
39. Legaspi Towers 300, Inc., et. al. vs. Amelia P.
Muer, et. al., G.R. No. 170783, June 18, 2012
Short facts: Petitioners are incumbent BOD of
Legaspi Towers 300. They filed a case for the
nullification of the election of the respondents
as board of directors alleging that the meeting
was already adjourned due to lack of quorum.
When they amended their complaint they
include Legaspi Towers 300 as party-plaintiff
allegedly making it a derivative suit.
Issue: WON the complaint filed by the
Petitioners is a derivative suit.
Held: NO. To be a derivative suit, the
corporation must be the real party in
interest, the reliefs prayed for must be for
the benefit or interest of the Corporation
(**NOT of the Stockholders who filed the case).
When the reliefs prayed do not pertain to the
corporation, then it is an improper derivative
suit. Here, the petitioners are praying that the
election of the respondents be declared null
and void. Clearly, it is these stockholders right
to vote and be voted upon were directly
affected by the election of the new set of BOD
and not that of the Corporation
(**Corporations do not have the right to vote).
In other words, the reliefs prayed for is for the
benefit or interest of the Petitioner
Stockholders, not of the Corporation. Hence,
the derivative suit filed by the petitioners in
behalf of the corporation in its amended
complaint is improper.
F.Castro
40. Maj. Stockholders of Ruby Ind’l. Corp. vs.
Miguel Lim, et. al. , G.R. No. 165887, June 6,
2011
Short facts: WON the case filed by Lim (a
minority stockholder) against the majority SH
of Ruby Intl. Corp for proceeding with the
BENHAR/RUBY rehabilitation plan despite the
fact that it would be prejudicial to the
corporation is a proper derivative suit.
Held: YES. An individual SH is permitted to
institute a derivative suit on behalf of the
corporation wherein he holds stock in order
to protect or vindicate corporate rights, in a
derivative suite, the corporation is the party
in interest and the SH is regarded as the
nominal party. Here, in the case filed by Lim,
he is advancing the interest of the corporation
itself. He consistently taken the position that
the Corporation’s assets should be preserved
for the equal benefit of all its creditors. Clearly,
the case is a proper derivative suit.
Transfer of Stock Ownership
41. Simny G. Guy, et. al. vs. The Hon. Ofelia C.
Calo, G.R. No. 189486, Sept. 5, 2012
Short facts: Gilbert who owned 80 percent of
the subscribed capital stock of Good Gold
Corporation. Pursuant to the instruction of his
father, he endorsed in blank the stock
certificates and delivered it to his father who in
turn distributed it to his other children. The
shares were then transferred to Gilbert’s
mother and sisters.
Issue: Whether the holder of a stock certificate
endorsed in blank by the original owner is
entitled to demand its transfer to his name
from the issuing corporation.
Held: YES. A stock certificate endorsed in
blank by the owner constitutes what is termed
as street certificate. The rule is that, an
endorsement in blank of the stock
certificates coupled with its delivery, entitles
the holder thereof to demand the transfer of
said stock certificates in his name from the
issuing corporation. Here, Gilbert endorsed in
blank the stock certificates and delivered it to
his father, clearly, such certificates upon its
face entitles the holder (now his mother and
sisters because his father died) to demand its
transfer into their name from the issuing Good
Gold Corporation.
42. Fil-Estate Gold and Dev. Inc., et al. v. Vertex
Sales and Trading, Inc., G.R. No. 202079,
June 10, 2013
Short facts: Vertex bought common shares
from FEGDI. Vertex then enjoyed the
membership privileges. Despite Vertex full
payment, no stock certificate was issued.
Issue: WON there was a valid transfer of share
despite the non-delivery of the stock certificate
to Vertex.
Held: No. Under Sec. 63 of the Corporation
Code “Shares of stock so issued are personal
property and may be transferred by delivery
of the certificate or certificate indorsed by
the owner or his attorney-in-fact or other
person legally authorized to make the
transfer…” In other words, the delivery of the
stock certificate is needed to transfer stock
ownership because the law requires specific
form to transfer ownership. Here, since no
delivery of stock certificate was made in favour
of Vertex, the sale of the subject shares was not
consummated.
Sale of Delinquent Stocks
43. Calatagan Golf Club, Inc. vs. Sixto Clemente,
JR., G.R. No. 16544, April 16, 2009
Short facts: Clemente owns one share of stock
of Calatagan where he was issued a Certificate
of Stock (** fully paid na niya ung shares).
Calatagan charges monthly dues on its
members. Clemente failed to pay monthly dues
hence Calatagan declared Clemente
delinquent. Clemente’s share was then sold at
public auction. Clemente then filed for the
restoration of his shareholding with SEC
(**after 4 years). Calatagan argues that
Clemente’s action is barred by prescription
citing Section 69 of the Corporation Code.
Issue: Whether Sec. 69 of the Corporation
Code, which provides that the sale of shares at
an auction sale can only be questioned within
six (6) months from the date of sale, is
F.Castro
 applicable to paid subscription such as the
share of Clemente here.
Held: NO. Section 69 of the Code provides
that an action to recover delinquent stock
sold must be commenced by the filing of a
complaint within six (6) months from the
date of sale. What is covered here is the sale of
delinquent stocks, delinquent stocks are
those unpaid stocks. In other words, those
who are holding delinquent stocks are those
who did not pay the subscription price yet. The
stockholder or subscriber has yet to fully pay
for the value of the share or shares subscribed.
This is not the case here because Clemente had
already fully paid for the share in Calatagan
and no longer had any outstanding obligation.
Hence there is no purpose to apply Sec. 69 of
the Corporation Code.
45. Philip Turner, et. al. vs. Lorenzo Shipping
Note: There is a different between delinquent
stocks and delinquent shareholders. Here,
Clemente is a delinquent shareholder because
of his failure to pay his dues but since his
shares are fully paid, the shares are not
delinquent stocks.
Quorum
44. Paul Lee Tan, et. al. vs. Paul Sycip, et. al.,
August 17, 2006
Short facts: WON the dead members of Grace
Christian High School- a non-stock
corporation, non-profit educational
corporation should still be counted in the
determination of the quorum, for purposes of
conducting its annual members’ meeting.
Held: NO. Under Section 52 of the Corporation
Code, unless otherwise provided for in this
Code or in the by-laws, a quorum shall consist
of the stockholders representing a majority
of the outstanding capital stock or a
majority of the members in the case of non-
stock corporations. In a non-stock
corporations, the voting rights attach to
membership in accordance with the law and
the bylaws of the corporation. Each member
shall be entitled to one vote unless so limited,
broadened, or denied in the articles of
incorporation or bylaws. Note that, only those
who are actual members should be counted in
determining the quorum. The determination of
whether or not “dead members” are entitled to
exercise voting rights, depends on those
articles of incorporation or by laws. Here, the
by-laws of GCHS provides that membership in
the corporation is terminated by the death of
the member. Therefore, the dead members are
not counted in determining quorum.
Note:
Stock Corporation- quorum is consist of the
stockholders representing a majority of the
outstanding capital stock
Non-stock Corporation- quorum is consist of
majority of the members
Appraisal Right
Corp., G.R. No. 157479, Nov.24, 2010
Short facts: When the respondent corporation
decided to amend its articles of incorporation
to remove the stockholders’ pre-emptive
rights to newly issued shares of stock. The
petitioners (stockholders) voted against the
amendment and demanded payment of their
shares. The corporation refused because the it
has no retained earnings at the time of the
petitioners demand.
Issue: Whether the Petitioners can compel
Respondent Corporation to pay the value of
their shares by exercising their appraisal right
despite the fact that Respondent Corporation
has no retained earnings.
Held: NO. The appraisal right of the
stockholder is found under Sec. 81 of the
Corporation Code. It provides that, a
stockholder who dissents from certain
corporate actions has the right to demand
payment of the fair value of his or her shares.
The right of appraisal may be exercised when
there is a fundamental change in the charter or
articles of incorporation substantially
prejudicing the rights of the stockholders.
However, Section 41 of the Corporation Code
provides that the corporation can only
purchase the subject shares if such corporation
has unrestricted retained earnings in its books
to cover the payment. Here, the Corporation
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 has no available unrestricted retained earnings
in its books hence the stockholders here
cannot compel the corporation to pay.
Note: Section 83 of the Corporation Code
provides that if the dissenting stockholder is
not paid the value of his shares within 30 days
after the award, his voting and dividend rights
shall immediately be restored.
Corporate Books and Right to Inspect
46. Ma. Belen Flordeliza Ang-Abaya, et. al. vs.
Eduardo G. Ang, G.R. No. 178511, Dec. 4,
2008
Issue: WON the stockholder’s right of
inspection of the corporate books and records
under Section 74 of the Corporation Code is
absolute.
Held: NO. The stockholder's right of inspection
of the corporation's books and records is based
upon their ownership of the assets and
property of the corporation. The inspection
has to be germane to the petitioner's interest
as a stockholder, and has to be proper and
lawful in character and not inimical to the
interest of the corporation. In other words, the
one requesting must not have been guilty of
using improperly any information secured
through a prior examination, or that the
person asking for such examination must be
acting in good faith and for a legitimate
purpose in making his demand. Here, it was
proven that the respondent was not acting in
good faith and for a legitimate purpose in
making his demand for inspection of the
corporate books.
47. Aderito Z. Yujuico , et. al. vs. Cezar T.
Quiambao et. al., G.R. No. 180416, June 2,
2014
Issue: Whether the respondents who are the
outgoing officers of STRADEC can be held
criminally liable under the Corporation Code
for their failure to turnover the company
records of STRADEC to the Petitioners who are
the newly elected corporate officers.
Held: No. A criminal action based on the
violation of a stockholder’s right to examine
or inspect the corporate records and the
stock and transfer book of a corporation can
only be maintained against corporate
officers or any other persons acting on
behalf of such corporation. Here, the
respondents were not acting on behalf of
STRADEC. They are no longer corporate
officers but are merely outgoing officers of
STRADEC who, for some reason, withheld and
refused to turn over the company records of
STRADEC. Hence, the respondents cannot be
held criminally liable. (Sec 144 of the
Corporation Code will not apply to them).
Merger and consolidation
48. Bank of Commerce v. Radio Phils. Network,
Inc., et al.,G.R. No. 195615, Apr. 21, 2014
Issue: Won there was a valid merger between
TRB and Bank of Commerce despite the fact
that there was no certificate of merger issued
by the SEC so that the judgment against TRB
can be also enforced against Bank of
Commerce.
Held. NO, there was no merger. Merger is the
absorption of one or more corporations by
another existing corporation, which retains its
identity and takes over the rights, privileges,
franchises, properties, claims, liabilities and
obligations of the absorbed corporations. The
absorbing corporation continues its existence
while the life or lives of the other corporation
is terminated. Merger does not become
effective upon the mere agreement of the
constituent corporations. It shall be effective
only upon the issuance of the SEC of a
certificate of merger. Here, despite the
agreement between TRB and Bank of
Commerce, since there was no certificate of
merger from SEC, there is no merger.
Consequently, TRB and Bank of Commerce
remain to be separate corporations, hence
court’s decision against TRB may not be
enforced against Bank of Commerce.
49. Mindanao Savings and Loan Asso., vs.
Edward Willkom, et. al, G.R. No. 178618 Oct.
11, 2010
Short facts: FISLAI and DSLAI entered into a
merger. However, the articles of merger were
not registered with the SEC due to incomplete
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 documentation. Pursuant to a court order, the
sheriff levied on six parcels of land owned by
FISLAI which were then sold at public auction.
This prompted DSLAI (now MSLAI), to file a
complaint for Annulment of Sale and
Reconveyance of property of FISLAI arguing
that it was not notified of the subject auction
sale.
Issue: Whether there is a valid merger
between FISLAI and DSLAI (now MSLAI) giving
MSLAI the right to demand notice of the
auction sale of the properties owned by FISLAI.
Held: NO, there was no valid merger. Merger
shall only be effective upon the issuance of a
certificate of merger by the SEC. Here, since
the articles of merger between FISLAI and
DSLAI were not registered with the SEC the
SEC did not issue the required certificate of
merger. Consequently, FISLAI and DSLAI (now
MSLAI) remained separate corporations,
therefore MSLAI has no right to demand notice
of the auction sale involving the property of
FISLAI.
Additional Note:
Effect of Issuance of Certificate of Merger
The issuance of the certificate of merger marks
the moment when the consequences of a
merger take place. Upon the effectivity of the
merger, the rights and properties, as well as
liabilities of the absorbed corporation are
deemed transferred to and vested in the
surviving corporation.
50. Bank of Commerce v. Radio Philippines
Network, Inc., et al.,G.R. No. 195615, April
21, 2014 (discussed)
Corporate Dissolution
51. Metrobank vs. The Board of Trustees of
Riverside Mills Corp., et al., G.R. No. 176959,
Sept. 8, 2010
Short facts: RMC (non-stock corporation)
ceased operation. Despite its closure, the
Board of Trustees (BOT) of RMC issued a Board
resolution authorizing the release of the
retirement funds being held by Metrobank to
its beneficiaries, the former employees.
Metrobank contends that, the BOT of RMC can
no longer act on behalf of RMC because RMC
already ceased operation.
Issue: WON the Board of Trustees validly
issued the board resolution despite the fact
that RMC already ceased operation.
Held: YES. Section 122 of the Corporation Code
provides that a dissolved corporation shall
continue as a body corporate for three (3)
years for the purpose of prosecuting and
defending suits by or against it and enabling
it to settle and close its affairs, to dispose and
convey its property and to distribute its
assets, but not for the purpose of continuing
the business for which it was established.
Thus, a trustee of a dissolved corporation may
commence a suit which can proceed to final
judgment even beyond the three (3)-year
period of liquidation. Here, the resolution was
issued within 3 years after its dissolution. The
Boards act of issuing the Resolution
authorizing petitioner to release the Fund to its
beneficiaries is still part of the liquidation
process, that is, satisfaction of the liabilities of
the Plan, and does not amount to doing
business. Hence, it was properly within the
Boards power to promulgate.
Note: A corporation’s board of directors is not
rendered functus officio by its dissolution.
52. Vitaliano N. Aguirre II , et. al. vs. FQB+, Inc.,
et. al., G.R. No. 170770, Jan. 9, 2013
Issue: WON the complaint filed by the
petitioner Stockholder will prosper despite
the fact that the Corporation was already
dissolved.
Held: Yes. Section 122 of the Corporation
Code prohibits a dissolved corporation from
continuing its business, but allows it to
continue with a limited personality in order
to settle and close its affairs, including its
complete liquidation.
Here, the case will prosper because the
purpose is not to continue the business. The
complaint does not seek to enter into a
contracts, issue new stocks, acquire properties,
or execute business transactions. Its aim is not
F.Castro
 to continue the corporate business, but to
determine and vindicate an alleged
stockholder’s right to the return of his
stockholdings as part of the liquidation process
and a corporation’s right to remove usurpers
and strangers from its affairs.
Also, an existing intracorporate dispute which
does not constitute a continuation of corporate
business is not affected by the subsequent
dissolution of the corporation.
53. Paramount Insurance Corp. vs. A.C.
Ordonez Corp., et. al., G.R. No. 175109,
August 6, 2008
Issue: Whether the respondent corporation
which was dissolved pending litigation may file
an appeal.
Held: Yes. Sec. 122 of the Corporation Code
provides that a corporation whose corporate
existence is terminated in any manner
continues to be a body corporate for three
years after its dissolution for purposes of
prosecuting and defending suits by and
against it and to enable it to settle and close
its affairs. Moreover, the rights of a
corporation, which is dissolved pending
litigation, are accorded protection pursuant to
Section 1451 of the Corporation Code.
Dissolution or even the expiration of the three-
year liquidation period should not be a bar to a
corporation’s enforcement of its rights as a
corporation.
54. Alabang Dev. Corp. v. Alabang Hills Village
Asso. et. al., G.R. No. 187456, June 2, 2014
Issue: WON Alabang Dev. Corporation may
still institute an action against or sue
Respondent AHVAI even beyond three (3)
years after its dissolution.
Held: NO. The rule is that, within 3 years after
dissolution, the trustee of the corporation may
prosecute for and in behalf of the corporation.
1
No right or remedy in favor of or against any
corporation, its stockholders, members, directors,
trustees, or officers, nor any liability incurred by any
such corporation, stockholders, members, directors,
It means that, the case must be instituted
within 3 years (not beyond 3 years). When
the action is instituted within 3 years, such
trustee may pursue it until final judgement
which may extend beyond the 3 year period.
Here, the case was filed more than 3 years after
the dissolution of the Corporation. Therefore,
even if it is for the sole purpose of liquidating
its assets, it will not prosper.
Foreign Corporation
55. Steelcase, Inc. vs. Design International
Selections, Inc.,G.R. No. 171995 April 18,
2012
Short facts: Petitioner Steelcase, Inc.
(Steelcase) is a foreign corporation existing
under the laws of Michigan, U.S.A. Steelcase
and DISI (domestic corporation) orally entered
into a dealership agreement whereby Steelcase
granted DISI the right to market, sell,
distribute, install, and service its products to
customers within the Philippines. Due to DISI’s
unpaid account Steelcase filed a complaint for
sum of money against DISI. DISI moved for the
dismissal of the case on the ground that
Steelcase lacks capacity to sue because it is a
foreign corporation doing business in the
Philippines without a license.
Issue: WON Steelcase has the capacity to sue
DISI here in the Philippines despite the fact
that it does not have the license to do business
here.
Held: Yes, Steelcase may sue DISI. First, the
general rule that if foreign corporations do
business in the Philippines without a license,
they cannot sue, is not applicable in this case
because Steelcase is not doing business in the
Philippines. (* meaning, even if they don’t have
a license if they are not doing business they can
sue.) Second, even if assuming arguendo
Steelcase is doing business, DISI is estopped
from challenging the Steelcase’s legal capacity
to sue.
trustees, or officers, shall be removed or impaired
either by the subsequent dissolution of said
corporation or by any subsequent amendment or
repeal of this Code or of any part thereof.
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 On the first argument, Steelcase may sue DISI
here in the Philippines because it is not doing
business here in the Philippines. It has been
held that appointing a representative or
distributor domiciled in the Philippines
which transacts business in the
representative's or distributor's own name
and account shall NOT be deemed "doing
business" in the Philippines. Here, Steelcase
appointed DISI as its distributor and DISI is not
controlled by Steelcase but rather an
independent entity which buys and distributes
products, other than those of Steelcase’s, and
transacts business for its own name and its
own account.
On the second argument, the rule is that,
foreign corporation doing business in the
Philippines may sue in Philippine Courts
although not authorized to do business here
against a Philippine citizen or entity who had
contracted with and benefited by said
corporation. To put it in another way, a party
is estopped to challenge the personality of a
corporation after having acknowledged the
same by entering into a contract with it.
Here, DISI is estopped from challenging
Steelcase's capacity to sue after entering into a
dealership agreement with it and even
benefiting from it despite the knowledge that it
doesn’t have a license.
56. Global Business Holdings, Inc. v. Surecomp
Software, B.V., G.R. No. 173463, Oct. 13,
2010
Short facts: Surecomp, a foreign corporation
duly organized and existing under the laws of
the Netherlands, entered into a software
license agreement with Asian Bank
Corporation (now Global), a domestic
corporation. Upon failure of Global to pay its
obligations under the agreement despite
demands, Surecomp filed a complaint for
breach of contract with damages. Global, now
is questioning the personality of Surecomp to
sue here in the Philippines.
Issue: Whether Surecomp, an unlicensed
foreign corporation has the capacity to sue
Global in the Philippines.
Held: Yes. As a rule, unlicensed foreign non-
resident corporations doing business in the
Philippines cannot file suits in the Philippines.
A corporation has a legal status only within the
state or territory in which it was organized. For
this reason, a corporation organized in another
country has no personality to file suits in the
Philippines. The exception to this rule is the
doctrine of estoppel. The doctrine provides
that, a foreign corporation doing business in
the Philippines without license may sue in
Philippine courts a Filipino citizen or a
Philippine entity that had contracted with
and benefited from it. Here, Global is
estopped because it contracted with
Surecomp despite the fact that Surecomp
doesn’t have a license and even benefited
from the contract. Hence, despite the fact the
Surecomp doesn’t have a license, it may still
sue Global here in the Philippines pursuant to
the doctrine of estoppel.
57. Cargill, Inc. vs. Intra Strata Assurance Corp.,
G.R. No. 168266 March 15, 2010
Issue: Whether Cargill has legal capacity to sue
under Philippine Courts considering that it is
an unlicensed foreign corporation.
Held: YES, Cargill has legal capacity to sue
under Philippine Courts notwithstanding the
absence of a license since it is not doing
business in the Philippines. Article 133 of the
Corporation Code, which provides that an
unlicensed foreign corporation cannot
maintain any action or proceeding before
Philippine courts is applicable only if such
unlicensed foreign corporation is actually
transacting business in the Philippines, i.e.,
perform specific business transactions within
the Philippine territory on a continuing basis in
its own name and for its own account. Here,
Cargill is a foreign company merely importing
molasses from a Philippine exporter. A foreign
company that merely imports goods from a
Philippine exporter, without opening an
office or appointing an agent in the
Philippines, is not doing business in the
Philippines hence, Art 133 will not apply.
Corporation Sole
F.Castro
58. Iglesia Evangelica Metodista En Las Islas
Filipinas, Inc. v. Juane, G.R. Nos. 172447,
Sept 18, 2009
Issue: Whether Juane is correct in saying that
since the transformation of the IEMELIF, a
corporate sole2 to a corporation aggregate 3
was legally defective, the elders had no
authority to expel him from the cathedral
complex.
Held: No. Even if the transformation of
IEMELIF from a corporation sole to a
corporation aggregate was legally defective, its
head or governing body, i.e., Bishop Lazaro,
whose acts were approved by the Highest
Consistory of Elders, still did not change. As
either Bishop Lazaro or the Highest Consistory
of Elders had the authority to appoint Juane as
Resident Pastor of the IEMELIF Tondo
Congregation, it also had the power to remove
him as such or transfer him to another
congregation.
Intra-corporate Dispute
59. Strategic Alliance Dev. Corp. vs. Star Infra
Dev. Corp. et. al., G.R. No. 187872, Nov. 17,
2010
Short facts: Quiambao (President and
Chairman of the BOD of STRADEC) filed a
petition before the RTC (Batangas) sitting as a
Special Commercial Court alleging that the
officers who contracted a loan agreement and
to pledged STRADEC’s entire shareholdings in
SIDC were not authorized to enter into such
loan.
2
A corporation sole is one formed by the chief
archbishop, bishop, priest, minister, rabbi or other
presiding elder of a religious denomination, sect, or
church, for the purpose of administering or
managing, as trustee, the affairs, properties and
temporalities of such religious denomination, sect or
church. A corporation sole is consists of a single
member
3 5
A corporation aggregate consists of two or more
persons
4
Applying the relationship test, intra-corporate
disputes involve suits: (a) between the corporation,
Issue: WON the causes of action of the
Petitioner qualify as intra-corporate dispute.
Held: Yes. An intra-corporate dispute is a suit
arising from intra-corporate relations or
between or among stockholders or between
any or all of them and the corporation. In
determining whether the case involves an
intra-corporate dispute, there are two test to
be considered: the relationship test 4 and the
controversy test5. Under the nature of the
controversy test, the dispute must not only be
rooted in the existence of an intra-corporate
relationship, but must also refer to the
enforcement of the parties' correlative rights
and obligations under the Corporation Code as
well as the internal and intra-corporate
regulatory rules of the corporation.
Here, STRADEC and Wong are incorporators
and/or stockholders of SIDC and the causes of
action relate to STRADEC’s status as a
stockholder and the alleged fraudulent
divestment of its stockholding in SIDC.
Therefore, applying both the relationship test
and the controversy test, the causes of action
qualify as intra-corporate dispute.
60. Renato Real vs. Sangu Philippines, Inc., et.
al., G.R. No. 168757, Jan. 19, 2011
Short facts: Petitioner Real was the Manager
of Sangu Philippines, Inc. Petitioner filed an
illegal dismissal case against the respondent
corporation alleging that he was neither
notified of the Board Meeting during which the
board resolution of his termination was passed
nor formally charged with any infraction.
partnership or association and the public; (b)
between the corporation, partnership or association
and its stockholders, partners, members, or officers;
(c) between the corporation, partnership or
association and the State insofar as its franchise,
permit or license to operate is concerned; and, (d)
among the stockholders, partners or associates
themselves.
the nature of the question that is the subject of
their controversy
F.Castro
 Issue: Whether petitioner’s complaint for
illegal dismissal constitutes an intra-corporate
controversy and thus, beyond the jurisdiction
of the Labor Arbiter.
Held: NO. To determine whether a case
involves an intra-corporate controversy, two
elements must concur: (a) the status or
relationship of the parties, and (2) the nature
of the question that is the subject of their
controversy.
Here, both are not present. First, in applying
the relationship test, it is necessary to
determine if petitioner is a corporate officer.
Corporate officers are those officers of the
corporation who are given that character by
the Corporation Code or by the by-laws. Here,
the petitioner’s appointment as a manager was
not proven to be made pursuant to the
provision of respondent corporations By-
Laws. Second, applying the nature of
controversy test, this is a case of termination of
employment which is a labor controversy and
not an intra-corporate dispute for the
petitioner filed a complaint for illegal dismissal
and sought reinstatement, backwages, moral
damages and attorney’s fees.
61. Chateau De Baie Condominium Corp. v. Sps.
Moreno, G.R. No. 186271, Feb. 23, 2011
Short facts: Mrs. Moreno is the registered
owner of a penthouse unit and two parking
slots in Chateau Condominium. Due to its
failure to pay the association dues, its unit and
parking lot were sold at public auction.
Pursuant to this, Moreno spouses filed before
the RTC a complaint for intra-corporate
dispute against the petitioner to question how
it calculated the dues assessed against them,
and to ask an accounting of the association
dues.
Issue: Whether the RTC has jurisdiction
because the case filed by Moreno is an inter-
corporate dispute.
Held: Yes, dispute as to the validity of the
assessment dues is purely an intracorporate
dispute. Remember that, the owner of unit in a
condominium is a Stockholder of the
Condominium Corporation. Here, Sps. Moreno
were asking for an accounting of the
association dues and were questioning the
manner the petitioner calculated the dues
assessed against them. Clearly, the case is an
intracorporate dispute which is within the
jurisdiction of RTC.
62. Wack Wack Condominium Corp., et al. v. CA,
et al., G.R. No. 78490, Nov. 23, 1992, 215
SCRA 850
Short facts: Bayot, having fully paid for her
unit with Wack Wack Condominium Corp.,
was issued Condominium Certificate of Title
727, and became a stockholder of Wack Wack.
Later, Wack Wack issued assessments against
Bayot's unit which the latter refused to pay on
the ground that they were unreasonable,
arbitrary and/or unauthorized by their
contract of sale. Wack Wack filed a petition for
extrajudicial sale of Bayot's unit to answer for
the outstanding assessments which had
remained unpaid. Bayot, through counsel, filed
a petition before the SEC for Injunction and
Damages.
Issue: WON the case filed by Bayot is an
intracorporate dispute.
Held: YES. The dispute as to the validity of the
assessments is purely an intra-corporate
matter between Wack Wack and its
stockholder.
63. Raul C. Cosare v. Broadcom Asia, Inc., et al.,
G.R. No. 201298, Feb. 5, 2014
Issue: WON the complaint for illegal dismissal
filed by Cosare is an intracorporate dispute
considering that Cosare was a stockholder and
an officer at the time the controversy.
Held: NO, in determining whether the dispute
is an intracorporate dispute the two tests must
be considered: the relationship test and the
controversy test.
As regards the relationship test, it must be
noted that ‘Corporate officers’ are those
officers of the corporation who are given that
character by the Corporation Code (i.e.,
president, secretary and the treasurer) or by
the corporation’s by-laws.
F.Castro
For an individual to be considered a corporate
officer these must concur: (1) the creation of
the position is under the corporation’s charter
or by-laws; and (2) the election of the officer is
by the directors or stockholders.

Here, Cosare failed to establish that the

position of AVP for Sales was created by virtue
of an act of Broadcom’s board, and that Cosare
was specifically elected or appointed to such
position by the directors. No board resolutions
to establish such facts form part of the case
records.

As regards the controversy test, considering

that the dispute relates to Cosare’s rights and
obligations as a regular officer, instead of as a
stockholder, the controversy cannot be
deemed intra-corporate. This is consistent
with the "controversy test" whereby the
incidents of that relationship must also be
considered for the purpose of ascertaining
whether the controversy is intra-corporate.

Clearly, the case is not an intracorporate

dispute, hence it is the Labor Arbiter not the
RTC which has jurisdiction.

F.Castro