CORPORATE CONTRACT LAW

1. Pre-Incorporation Contracts
(a) Who Are Promoters?
(Sec. 3.10, Securities Regulation Code [R.A. 8799])
(b) Nature of Pre-incorporation Agreements (Secs. 59 and 60; Bayla v. Silang Traffic Co., Inc., 73 Phil. 557
[1942]).
(c) Theories on Liabilities for Promoter's Contracts (Cagayan Fishing Dev. Co., Inc. v. Teodoro Sandiko,
65 Phil. 223 [1937]; Rizal Light & Ice Co., Inc. v. Public Service Comm., 25 SCRA 285 [1968];
Caram, Jr. v. CA, 151 SCRA 372 [1987]).
2. De Facto Corporation (Sec. 19)
(a) Elements:
Hall v. Piccio, 86 Phil. 634 (1950).
Sawadjaan v. Court of Appeals, 459 SCRA 516 (2005).
3. Corporation by Estoppel (Sec. 20; Salvatierra v. Garlitos, 103 Phil. 757 [1958]; Albert v. University
Publishing Co., 13 SCRA 84 [1965]; Asia Banking Corp. v. Standard Products, 46 Phil. 145 [1924]; Madrigal
Shipping Co., v. Ogilvie, 55 O.G. No. 35, p. 7331)
(a) Nature of Doctrine
Lozano v. De Los Santos, 274 SCRA 452 (1997)
Ohta Dev. Co. v. Steamship Pompey, 49 Phil. 117 (1926).
Christian Children’s Fund v. NLRC, 174 SCRA 681 (1989).
Int’l Express Travel v. Court of Appeals, 343 SCRA 674 (2000).
Lim Tong Lim v. Philippine Fishing Gear Industries, Inc., 317 SCRA 728 (1999).
(b) Two Levels: (i) With “Fraud;” and (ii) Without “Fraud”

People v. Garcia, 271 SCRA 621 (1997)

4. TRUST FUND DOCTRINE
(a) Commercial/Common Law Premise: Equity versus Debts (Art. 2236, Civil Code)
(b) Nature of Doctrine:
Comm. of Internal Revenue v. Court of Appeals, 301 SCRA 152 (1999).
NTC v. Court of Appeals, 311 SCRA 508 (1999).
Boman Environmental Dev. Corp. v. CA, 167 SCRA 540 (1988).
(c) To Purchase Own Shares (Secs. 8, 40, 42 and 139; Phil. Trust Co. v. Rivera, 44 Phil. 469 [1923]; Steinberg
v. Velasco, 52 Phil. 953 [1929])
(d) Rescission of Subscription Agreement Based on Breach
Ong Yong v. Tiu, 401 SCRA 1 (2003).
(e) Distribution of Corporate Assets
Ong Yong v. Tiu, 401 SCRA 1 (2003).
ARTICLES OF INCORPORATION
1. Nature of Charter:
Government of P.I. v. Manila Railroad Co., 52 Phil. 699 (1929).
Lanuza v. Court of Appeals, 454 SCRA 54 (2005).
2. Procedure and Documentary Requirements (Sec. 13 and 14)
(a) As to Number and Residency of Incorporators (Sec. 10)
Nautica Canny Corp. v. Yumul, 473 SCRA 415 (2005).
(b) Corporate Name (Secs. 17, 13(a); Red Line Trans. v. Rural Transit, 60 Phil. 549).

Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus v. Iglesia ng Dios Kay Dristo Jesus, 372 SCRA 171
(2001).
Universal Mills Corp. v. Universal Textile Mills Inc., 78 SCRA 62 (1977).
Lyceum of the Philippines v. Court of Appeals, 219 SCRA 610, 615 (1993).
Laureano Investment and Dev. Corp. v. Court of Appeals, 272 SCRA 253 (1997).
Republic Planters Bank v. Court of Appeals, 216 SCRA 738 (1992)
(c) Purpose Clause (Secs. 13(b) and 41; Uy Siuliong v. Director of Commerce and Industry, 40 Phil. 541
[1919])
Gala v. Ellice Agro-Industrial Corp., 418 SCRA 431 (2003).
(d) Corporate Term (Sec. 11)

Alhambra Cigar v. SEC, 24 SCRA 269 (1968).

NHA v. Court of Appeals, 456 SCRA 17 (2005).
(e) Principal Place of Business (Sec. 50)

Hyatt Elevators and Escalators Corp. v. Goldstar Elevators, Phils., Inc., 473 SCRA 705 (2005).
Clavecilla Radio System v. Antillon, 19 SCRA 379 (1967)
(f) Minimum Capitalization (Sec. 12)
- Why is maximum capitalization required to be indicated?
(g) Subscription and Paid-up Requirements (Sec. 13, Corporation Code; cf Revised Corporation Code)
Lanuza v. Court of Appeals, 454 SCRA 54 (2005).
(h) Steps and Documents Required in SEC
3. Grounds for Disapproval (Sec. 16)
Asuncion v. De Yriarte, 28 Phil. 67 (1914).
Gala v. Ellice Agro-Industrial Corp., 418 SCRA 431 (2003).
4. Amendments to the Articles of Incorporation (Sec. 15).
5. Commencement of Corporate Existence (Sec. 18).
BY-LAWS
1. Nature and Functions (Gokongwei v. SEC, 89 SCRA 337 [1979]; Peña v. CA, 193 SCRA 717 [1991])
San Miguel Corp. v. Mandaue Packing Products Plants Union-FFW, 467 SCRA 107 (2005).
Loyola Grand Villas Homeowners v. CA, 276 SCRA 681 (1997).
(a) Common Law Limitations on By-Laws
(i) By-Laws Cannot Be Contrary to Law and Charter
Grace Christian High School v. Court of Appeals, 281 SCRA 133 (1997).
(ii) By-Law Provisions Cannot Be Unreasonable or Be Contrary to the Nature of By-laws.
Government of P.I. v. El Hogar Filipino, 50 Phil. 399 (1927).
Thomson v. Court of Appeals, 298 SCRA 280 (1998).
Rural Bank of Salinas, Inc. v. CA, 210 SCRA 510 (1992).
(iii) By-Law provisions cannot discriminate
(b) Binding Effects on By-laws:China Banking Corp. v. Court of Appeals, 270 SCRA 503
PMI Colleges v. NLRC, 277 SCRA 462 (1997).
2. Adoption Procedure (Sec. 45)

Loyola Grand Villas Homeowners v. CA, 276 SCRA 681 (1997).

Sawadjaan v. Court of Appeals, 459 SCRA 516 (2005).
3. Contents (Sec. 46)
4. Amendments (Sec. 47)
Salafranca v. Philamlife (Pamplona) Village Homeowners, 300 SCRA 469 (1998).