Corporation
Which of the following is NOT a Government-Owned and Controlled Corporation:
a. Boy Scout of the Philippines
b. Manila Economic and Cultural Office
c. Radio Philippines Network
d. All of the above
D. All of the above
Boy Scout of the Philippines - public corporation/ government instrumentality (BSP v. COA, G.R. No. 177131)
MECO - it is a sui generis private entity entrusted by the government with the facilitation of unofficial relations with the people in Taiwan (Funa v. MECO, G.R. No. 193462)
RPN - A corporation is considered a government-owned or -controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock. Consequently, RPN is not a GOCC because the government’s total RPN capital stock share is only 32.4% (Carandang v. Desierto, G.R. No. 148076)
Which of the following corporate names does NOT have a confusing similarity:
a. De La Salle Montessori International of Malolos Inc and De La Salle Brothers Inc.
b. GSIS Family Bank- A Thrift Bank and BPI Family Bank
c. Indian Chamber of Commerce Phils Inc and Filipino Induan Chamber of Commerce in the Philippines
d. None of the above
D. None of the above
Which of the following cases did NOT apply the doctrine of apparent authority:
a. Rural Bank of Milaor v. Ocfemia, G.R. No. 137686
b. Games and Garment Developers v. Allied Banking Corporation, G.R. No. 181426
c. Del Rama v. Maao Sugar Central, G.R. No. 17504
d. Engineering Geoscience Inc v. Philippine Savings Bank, G.R. No. 187262
c. Del Rama v. Maao Sugar Central, G.R. No. 17504
TRUE OR FALSE
Petitioners, together with respondents Jochico, Steffens and Viriya, were incorporators and directors of Nephro, with Raniel acting as Corporate Secretary and Administrator. The conflict started when petitioners questioned respondents' plan to enter into a joint venture with the Butuan Doctors' Hospital and College, Inc. Because of this, petitioners claim that respondents tried to compel them to waive and assign their shares with Nephro but they refused. Thereafter, Raniel sought an indefinite leave of absence due to stress, but this was denied by Jochico, as Nephro President. Raniel, nevertheless, did not report for work, causing Jochico to demand an explanation from her why she should not be removed as Administrator and Corporate Secretary. Raniel replied, expressing her sentiments over the disapproval of her request for leave and respondents' decision with regard to the Butuan venture. Jochico issued a Notice of Special Board Meeting. Despite receipt of the notice, petitioners did not attend the board meeting. In said meeting, the Board passed several resolutions ratifying the disapproval of Raniel's request for leave, dismissing her as Administrator of Nephro, declaring the position of Corporate Secretary vacant, appointing Otelio Jochico as the new Corporate Secretary and authorizing the call of a Special Stockholders' Meeting for the purpose of the removal of petitioners as directors of Nephro. Otelio Jochico issued the corresponding notices for the Special Stockholders' Meeting to be held. Again, they did not attend the meeting. The stockholders who were present removed the petitioners as directors of Nephro. The SEC ruled in favor of the respondents and explained that the Board of Directors had sufficient ground to remove Raniel as officer due to loss of trust and confidence, as her abrupt and unauthorized leave of absence exhibited her disregard of her responsibilities as an officer of the corporation and disrupted the operations of Nephro. The SEC also held that the Special Board Meeting held was valid and the resolutions adopted therein are binding on petitioners. The corporation, acting through its Board of Directors, can validly remove its corporate officers, particularly complainant Nectarina S. Raniel as corporate secretary, treasurer and administrator of the Dialysis Clinic.
The removal is valid.
TRUE
A director or trustee may be removed from office. The removal may be carried out by the stockholders or the SEC. Within the corporation, only stockholders or members have the power to remove the directors of trustees elected by them. The board of directors or trustees may remove an officer but not a director or trustee. In this case, petitioner Raniel was removed as a corporate officer through the resolution of Nephro's Board of Directors adopted in a special meeting. As correctly ruled by the SEC, petitioners' removal was a valid exercise of the powers of Nephro's Board of Directors. Raniel’s request for an indefinite leave, immediately effective yet without prior notice, reveals a disregard of the critical responsibilities pertaining to the sensitive positions she held in the corporation. Notwithstanding the absence of complainants from the meeting, a quorum was validly constituted.
Based on its articles of incorporation, Nephro has five directors – two of the positions were occupied by complainants and the remaining three are held by respondents. This being the case, the presence of all three respondents in the Special Meeting of the Board established a quorum for the conduct of business. The unanimous resolutions carried by the Board during such meeting are therefore valid and binding against complainants (Raniel v. Jochico, G.R. No. 153413)
Which of the following cases was held to be improper for failure to meet the fifth requisite for the filing of a derivative suit (it should be filed in the name of the corporation to enforce a corporate right or cause of action)
a. Lim v. Lim-Yu, G.R. No. 138343
b. Reyes v. RTC of Makati, G.R. No. 165744
c. Legaspi Towers 300, Inc v. Muer, G.R. No. 170783
d. All of the above
D. All of the above
TRUE OR FALSE
The rule that a juridical person is not entitled to moral damages because it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish, or moral shock is absolute.
FALSE
In Filipinas Broadcasting Network, Inc., v. AGO Medicall and Educational Center-Bicol Christian College of Medicine, a radio broadcaster uttered libelous remarks against an educational center. The SC held that AMEC's claim for moral damages falls under item 7 of Article 2219 of the Civil Code which expressly authorizes the recovery of moral damages in cases of libel, slander, or any other form of defamation. Article 2219(7) of the Civil Code does not qualify whether the plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly complain for libel or any other form of defamation and claim for moral damages.
TRUE OR FALSE
Acebedo International Inc, as a juridical person is engaged in the practice of optometry.
FALSE.
It stated that the fact that private respondent hires optometrists who practice their profession in the course of their employment in its optical shops does not translate into a practice of optometry by private respondent.
In fact, Acebedo is a corporation created and organized for the purpose of conducting the business of selling optical lenses of eyeglasses, among others. Moreover, the Court pointed out that R.A. No. 1998 is clear that the law does not even prohibit optometry corporations from hiring optometrists (Samahang Optometrists sa Pilipinas v. Acebedo International Corporation, G.R. No. L-20993)
TRUE OR FALSE
National Power Corporation is empowered, under its charter, to undertake stevedoring and arrastre services.
TRUE
The stevedoring services which involve the unloading of the coal shipments into the NPC pier for its eventual conveyance to the power plant were considered incidental and indispensable to the operation of the plant. The Court ruled that a corporation is not restricted to the exercise of powers expressly conferred upon by its charter, but has the power to do what is reasonably necessary or proper to promote the interest or welfare of the corporation (National Power Corporation v. Vera, G.R. No. 83558)
TRUE OR FALSE
All the directors of VVCC were serving in a hold-over capacity. Two directors resigned. The remaining directors, still constituting a quorum, elected two other persons to fill in the vacancy created by the resignations.
The vacancy was properly filled.
FALSE
A vacancy resulting from the resignation of an officer in a hold-over capacity, by the terms of Section 29 of the Corporation Code, must be filled by the stockholders in a regular or special meeting called for that purpose (Valle Verde Country Club, Inc. v. Africa, G.R. No. 151969)
TRUE OR FALSE
In Lee v. Court of Appeals, G.R. No. 93695, the Supreme Court ruled that a trustee, under a voting trust agreement, can qualify as a director, and that in order to be eligible as a director, what is material is legal title to, and not beneficial ownership of, the stock as appearing on the books of the corporation.
TRUE
What is the doctrine of reverse piercing of the corporate veil?
In reverse piercing, the plaintiff seeks to reach the assets of the corporation to satisfy claims against corporate insider. Reverse piercing flows in the opposite direction and makes the corporation liable for the debt of the shareholders or members. This doctrine was applied in the case of I/AME v. Litton and Company Inc., G.R. No. 191525
Robert Yumul was appointed Chief Operating Officer/General Manager of Nautica and on the same day, Nautica’s parent company (First Dominion Prime Holdings, Inc.) granted Yumul an Option to Purchase up to 15% of the total stocks it subscribed from Nautica through its Chairman Alvin Dee. A Deed of Trust and Assignment was executed between Nautica’s parent company whereby the former assigned 14,999 of its subscribed shares in Nautica to the latter. Nautica declared a P35,000,000 cash dividend, P 8,250,000 of which was paid to Yumul representing 15% share. Upon Yumul's resignation, he wrote a letter to Chairman Dee requesting to formalize his offer to buy Yumul’s 15% share in Nautica but Chairman Dee, through his counsel, denied the request claiming that Yumul was not a stockholder of Nautica. Yumul’s request to inspect the books and records of Nautica were denied because it was alleged that he neither exercised the option to purchase nor paid for the acquisition price and that the cash dividend received is held by him only in trust for Nautica’s parent company. Is Robert Yumul a stockholder of Nautica?
YES. 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 corporation's capital stock.
Moreover, 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. Nautica's Articles of Incorporation and By-laws, as well as the General Information Sheet filed with the SEC indicated that Yumul was an incorporator and subscriber of one share (Nautica Canning Corporation v. Yumul, G.R. No. 164588).
Can the trust fund of a pre-need company be used to satisfy its outstanding obligations to its creditors?
NO. In respect of pre-need companies, the trust fund is set up from the planholders' payments to pay for the cost of benefits and services, termination values payable to the planholders and other costs necessary to ensure the delivery of benefits or services to the planholders as provided for in the contracts. The trust fund is to be treated as separate and distinct from the paid-up capital of the company, and is established with a trustee under a trust agreement approved by the SEC to pay the benefits as provided in the pre-need plans.
Even assuming that the obligations were incurred by the company in order to infuse sufficient money in the trust fund to correct its deficiencies, such obligations should be paid for by its assets, not by the trust fund. Indeed, Sec. 30 of R.A. No. 9829 expressly stipulates that the trust fund is to be used at all times for the sole benefit of the planholders, and cannot ever be applied to satisfy the claims of the creditors of the company (SEC v. College Assurance Plan Philippines In, G.R. No. 202052)
Ching was the Senior Vice-President of PBMI. PBMI, through Ching, applied with the RCBC for the issuance of commercial letters of credit to finance its importation of assorted goods. It was approved and irrevocable letters of credit were issued in favor of Ching. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13 trust receipts as surety, acknowledging delivery of the goods.
When the trust receipts matured, Ching failed to return the goods to respondent bank, or to return their value despite demands. Thus, RCBC filed a criminal complaint for estafa in relation to PD 115 (Trust Receipts Law) against petitioner.
Petitioner posits that, except for his being the Senior Vice-President of the PBMI, there is no iota of evidence that he was a participes crimines in violating the trust receipts sued upon; and that his liability, if at all, is purely civil because he signed the said trust receipts merely as a surety and not as the entrustee. Is the petitioner correct?
NO. If the violation or offense is committed by a corporation, partnership, association or other judicial entities, the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from the criminal offense.
Petitioner executed the thirteen (13) trust receipts. As such, the law points to him as the official responsible for the offense. Since a corporation cannot be proceeded against criminally because it cannot commit crime in which personal violence or malicious intent is required, criminal action is limited to the corporate agents guilty of an act amounting to a crime and never against the corporation itself. Thus, the execution by respondent of said receipts is enough to indict him as the official responsible for violation of PD 115 (Ching v. Secretary of Justice, G.R. No. 164317)
What is the doctrine in the case of Majority of Stockholders of Ruby Industrial Corporation v. Lim, G.R. No. 165887?
Even if the pre-emptive right does not exist either because the issue comes within the exception in Section 39 of the OCC (now Section 38 of the RCC) or because it is denied 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 The issuance of unissued shares out of the original authorized capital stock pursuant to a rehabilitation plan the propriety and validity of which was on question by the minority stockholders and subsequently disapproved by the court amounts to unlawful dilution of the minority shareholdings.
DBP and PNB foreclosed on certain mortgages made on the properties of Marinduque Mining and Industrial Corporation (MMIC). As a result of the foreclosure, DBP and PNB acquired all the assets of MMIC substantially and resumed the business operations of the defunct MMIC by organizing Nonoc Mining and Industrial Corporation (NMIC).
NMIC engaged the services of Hercon, Inc. Thereafter, the latter found that NMIC still has an unpaid balance of ₱8,370,934.74. Hercon, Inc. made several demands on NMIC and when these were not heeded, a complaint for sum of money was filed in the RTC to hold NMIC, DBP, and PNB solidarily liable for the amount owing Hercon, Inc.
RTC pierced the corporate veil of NMIC and held that NMIC is a mere adjunct, business conduit, or alter ego of both DBP and PNB hence they are solidarily liable. CA affirmed.
Was it proper to disregard NMIC’s juridical personality separate from DBP and PNB?
NO. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality. SC has likewise ruled that the existence of interlocking directors, corporate officers and shareholders is not enough justification to pierce the veil of corporate fiction in the absence of fraud or other public policy considerations.
Where two banks foreclosed mortgages on certain properties of a mining company and resumed business operations thereof by organizing a different company to which the banks transferred the foreclosed assets, the banks are not liable to a contractor which was engaged by the re-organized mining company even though the latter is wholly-owned by the two banks and they have interlocking directors, officers, and stockholders (PNB v. Hydro Resources Contractors Corporation)
Petitioner is an educational institution at Grace Village. Grace Village Association, Inc., on the other hand, is an organization of lot and/or building owners, lessees and residents at Grace Village, while private respondents were its president and chairman of the committee on election when this suit was brought. Adopted in 1968, the by-laws of the association provides that each member of the Board of Directors shall have 1 year of service. In 1975, a committee of the board drafted of an amendment stating that Grace Christian High School representative is a permanent director of the association. This draft was never presented to the general membership for approval. Nevertheless, after it was presumably submitted to the board, petitioner was given a permanent seat in the board of directors of the association. The association’s committee on election in a letter informed the principal of the school that directors shall be elected because making a person or entity a permanent director would deprive the right of voters to vote for the 15 members of the Board. Petitioner requested the chairman of the election committee to change the notice of election by following the procedure in previous elections, claiming that the notice issued for the 1990 elections ran "counter to the practice in previous years" and was "in violation of the by-laws (of 1975)" and "unlawfully deprive[d] Grace Christian High School of its vested right [to] a permanent seat in the board." As the association denied its request, the school brought suit for mandamus in the Home Insurance and Guaranty Corporation to compel the board of directors of the association to recognize its right to a permanent seat in the board. Petitioner based its claim on the following portion of the proposed amendment in 1975 which, it contended, had become part of the by-laws of the association. Is the contention of the school correct?
NO. The Supreme Court held that a provision in the bylaws which allots a permanent seat in the board to a non-member of the association is contrary to law. Similarly, the fact that said permanent seat was held for 15 years cannot give rise to a vested right and estoppel cannot forestall a challenge against an act that it is contrary to law.
It is probable that, in allowing petitioner's representative to sit on the board, the members of the association were not aware that this was contrary to law. It should be noted that they did not actually implement the provision in question except perhaps insofar as it increased the number of directors from 11 to 15, but certainly not the allowance of the petitioner's representative as an unelected member of the board of directors. It is more accurate to say that the members merely tolerated the petitioner's representative and tolerance cannot be considered ratification.
Nor can the petitioner claim a vested right to sit on the board based on "practice." Practice, no matter how long continued, cannot give rise to any vested right if it is contrary to law. Even less tenable is the petitioner's claim that its right is "co-terminus with the existence of the association." (Grace Christian High School v. CA, G.R. No. 108905)
PAMBUSCO, mortgaged specific lots to the DBP which was foreclosed and awarded to Rosita Peña as the highest bidder. Thereafter, the Board of Directors of PAMBUSCO through 3 out of 5 directors resolved to assign its right of redemption to one of its members, Atty. Briones. Briones executed a Deed of Assignment of PAMBUSCO’s redemption right over the subject lots in favor of Enriquez, who later on redeemed the properties. A day after the certificate was issued, Enriquez executed a deed of absolute sale in favor of Spouses Yap. Although there was a pending case regarding the validity of the sale to Spouses Yap and there were protests on the part of Peña, the lots were still registered in favor of Spouses Yap. Peña maintained its possession over the lots which prompted Spouses Yap to file a petition to recovery the land from Peña. Is the resolution assigning its right of redemption to Atty. Briones by the Board of Directors of PAMBUSCO valid?
NO. The three (3) alleged directors who attended the special meeting were not listed as directors of respondent PAMBUSCO in the latest general information sheet of respondent PAMBUSCO filed with the SEC dated. Similarly, the latest list of stockholders ofPAMBUSCO on file with the SEC does not show that the said alleged directors were among the stockholders of respondent PAMBUSCO.
Under Section 30 of the then applicable Corporation Law, only persons who own at least one (1) share in their own right may qualify to be directors of a corporation. Further, under Section 28 1/2 of the said law, the sale or disposition of all and/or substantially all properties of the corporation requires, in addition to a proper board resolution, the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the corporation in a meeting duly called for that purpose. No doubt, the questioned resolution was not confirmed at a subsequent stockholde rs meeting duly called for the purpose by the affirmative votes of the stockholders holding at least two-thirds (2/3) of the voting power in the corporation. The same requirement is found in Section 40 of the present Corporation Code (Pena v. Court of Appeals, G.R. No. 91478)
NAFLU and MACLU, on behalf of all of MAC’s rank and file employees, filed complaint against MAC for illegal dismissal brought about by its illegal closure of business. During the proceedings, complainants moved to implead Carag in his official capacity as Chairman of the Board along with David as President and as owners of MAC because of their failure to observe the notice requirement in closing the company. Can Carag be held personally liable for the debts of the Corporation?
NO, the rule is that a director is not personally liable for the debts of the corporation, which has a separate legal personality of its own. To hold a director personally liable for debts of the corporation, and thus pierce the veil of corporate fiction, the bad faith or wrongdoing of the director must be established clearly and convincingly. Neither does bad faith arise automatically just because a corporation fails to comply with the notice requirement of labor laws on company closure or dismissal of employees. The failure to give notice is not an unlawful act because the law does not define such failure as unlawful. Such failure to give notice is a violation of procedural due process but does not amount to an unlawful or criminal act. Such procedural defect is called illegal dismissal because it fails to comply with mandatory procedural requirements, but it is not illegal in the sense that it constitutes an unlawful or criminal act.
For a wrongdoing to make a director personally liable for debts of the corporation, the wrongdoing approved or assented to by the director must be a patently unlawful act. Mere failure to comply with the notice requirement of labor laws on company closure or dismissal of employees does not amount to a patently unlawful act. Patently unlawful acts are those declared unlawful by law which imposes penalties for commission of such unlawful acts. There must be a law declaring the act unlawful and penalizing the act (Carag v. NLRC)
MC Home Depot occupied a prime property (Rockland area) in Pasig. The property was part of the area owned by Mid-Pasig Development Corporation (Mid- Pasig). PPC obtained an option to lease portions of Mid-Pasig's property, including the Rockland area. PPC's board of directors issued a resolution waiving all its rights, interests, and participation in the option to lease contract in favor of the law firm of Atty. Alfredo Villamor, Jr. (Villamor). PPC, represented by Villamor, entered into a memorandum of agreement
(MOA) with MC Home Depot. Under the MOA, MC Home Depot would continue to occupy the area as PPC's sublessee for four (4) years, renewable for another four (4) years. In compliance with the terms of the MOA, MC Home Depot issued 20 post-dated checks representing rental payments for one year and the goodwill money. The checks were given to Villamor who did not turn these or the equivalent amount over to PPC, upon encashment. Hernando Balmores, a stockholder and director of PPC, filed with the Regional Trial Court an intra-corporate controversy complaint. Balmores prayed that a receiver be appointed from his list of nominees. He also prayed for petitioners' prohibition from selling, encumbering, transferring or disposing in any manner any of PPC's properties, including the MC Home Depot checks and/or their proceeds. He prayed for the accounting and remittance to PPC of the MC Home Depot checks or their proceeds and for the annulment of the board's resolution waiving PPC's rights in favor of Villamor's law firm. Is Balmores' action a derivative suit?
NO. A derivative suit is an action filed by stockholders to enforce a corporate action. It is an exception to the general rule that the corporation's power to sue is exercised only by the board of directors or trustees. Individual stockholders may be allowed to sue on behalf of the corporation whenever the directors or officers of the corporation refuse to sue to vindicate the rights of the corporation or are the ones to be sued and are in control of the corporation. It is allowed when the directors or officers are guilty of breach of trust, and not of mere error of judgment.
In derivative suits, the real party in interest is the corporation, and the suing stockholder is a mere nominal party. Moreover, it is important that the corporation be made a party to the case. While it is true that the basis for allowing stockholders to file derivative suits on behalf of corporations is based on equity, the above legal requisites for its filing must necessarily be complied with for its institution.
Respondent Balmores did not bring the action for the benefit of the corporation. Instead, he was alleging that the acts of PPC's directors, specifically the waiver of rights in favor of Villamor's law firm and their failure to take back the MC Home Depot checks from Villamor, were detrimental to his individual interest as a stockholder. In filing an action, therefore, his intention was to vindicate his individual interest and not PPC's or a group of stockholders (Villamor v. Umale, G.R. No. 172843).
Natividad Nisce has a dollar account with PCIB. She asked PCIB to transfer $20,000 to her account with PCI Capital. The Spouses Nisce contracted several loans with Equitable Bank. Later on, Equitable Bank and PCIB were merged under the corporate name Equitable PCI Bank.
Having defaulted in their obligation, the bank instituted extrajudicial foreclosure. The spouses alleged that since they were creditors and debtors with respect to each other, their obligations should have been offset by legal compensation to the extent of their account with the bank. The bank alleged that the spouses had no cause of action for legal compensation since PCI Capital was a different corporation with a separate and distinct personality. Whose contention is correct?
The bank is correct. PCI Capital is a subsidiary of Equitable PCI Bank. Even then, PCI Capital had an independent and separate juridical personality from that of Equitable PCI, its parent company. Hence, any claim against the subsidiary is not a claim against the parent company and vice versa. The evidence on record shows that PCIB, which had been merged with Equitable Bank, owns almost all of the stocks of PCI Capital. However, the 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 shall be confined to those arising in their respective business. A corporation has a separate personality distinct from its stockholders and from other corporations to which it may be conducted. This separate and distinct personality of a corporation is a fiction created by law for convenience and to prevent injustice (Sps. Nisce v. Equitable PCI Bank, G.R. No. 167434)
To prevent the entry of Marlo Enriquez, whom it considered as one antagonistic to its interests, into its Board of Directors, Bayan Corporation amended its articles of incorporation and bylaws to add certain qualifications of stockholders to be elected as members of its Board of Directors. When presented for approval at a meeting of its stockholders duly called for the purpose, the amendments were overwhelmingly ratified. Marlo Enriquez brought a suit against Bayan Corporation to question the amendments. Would the action prosper?
No. Corporations have the power to make bylaws declaring a person employed in the service of a rival company to be ineligible for the corporation's Board of Directors. An amendment which renders ineligible or if elected, subjects to removal, a director if he be also a director in a corporation whose business is in competition with or antagonistic to the other corporation is valid. An officer of a corporation cannot engage in a business in direct competition with that of the corporation where he is a director by utilizing information he has received as such officer, under the established law that a director or officer of a corporation may not enter into a competing enterprise which cripples or injures the business of the corporation of which he is an officer or director (Gokongwei, Jr. v. Securities and Exchange Commission)
Halley was an incorporator and original director of Business Media Philippines, Inc. ("BMPI") which originally had an authorized capital stock of P3,000,000.00 with a par value of P10.00 of which P75,000.00 were initially subscribed. BMPI commissioned Printwell for the printing of a magazine that BMPI published and sold. For that purpose, Printwell extended 30-day credit accommodations.
BMPI then placed with Printwell several orders on credit totaling P316,342.76. Considering that the former paid only P25,000.00, the latter sued the former for the collection of the unpaid balance. Impleaded as defendants are all the original stockholders and incorporators of BMPI to recover on their unpaid subscriptions.
May Printwell collect the unpaid subscription of Halley?
YES. The scope of the trust fund 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. The creditor is allowed to maintain an action upon any unpaid subscriptions (in the same collection suit against the corporation) and thereby steps into the shoes of the corporation for the satisfaction of the debt. To make out a prima facie case in a suit against stockholders of an insolvent corporation to compel them to contribute to the payment of its debts by making good the balances upon their subscriptions, it is only necessary to establish that the stockholders have not in good faith paid the par value of the stocks of the corporation. Subscriptions to the capital stock of a corporation constitute a fund to which creditors have the right to look for the satisfaction of their claims (Halley v.Printwell, G.R. No. 157549)
At the time of the annual meeting of the Board of Trustees of petitioner corporation, only 11 were living member-trustees because the other 4 were already dead. The meeting was objected to on the ground that there was no quorum. In the meeting, petitioners were voted to replace the 4 dead member-trustees. Upon reaching the SEC, it was argued that the deceased member-trustees should not be counted for purposes of quorum because upon their death, their rights and interests in the corporation has automatically terminated. The SEC declared the meeting null and void for not having a quorum, ruling that the basis for determining the quorum should be the number as specified in the AOI and not simply the number of living members.
a. Should dead members in nonstock corporations still be counted for purposes of quorum?
b. Is the election of the four new trustees valid?
a. NO. For determining the quorum for nonstock, the same principle is applied just like in stock corporations, only those who are actual members with voting rights should be counted. Membership in and all rights arising from a nonstock corporation are personal and non-transferable unless the AOI or the bylaws provide otherwise. The determination whether dead members are entitled to exercise their voting rights depends on the articles or bylaws.
Under the bylaws of petitioner corporation, membership in the corporation shall be terminated by the death of a member. Therefore, dead members of petitioner corporation are not to be counted in determining the quorum. With 11 remaining members, the quorum in the present case should be 6. Therefore, there being a quorum, the annual member’s meeting, conducted with 6 members present, was valid.
b. NO. While a majority of the remaining corporate members were present, the election of the 4 trustees cannot be upheld because it was held in an annual meeting of the members, not of the board of trustees. Petitioner’s bylaws specifically provides that vacancies must be filled up by the remaining trustees. Therefore, the remaining member-trustees must sit as a board in order to validly elect new trustees (Tan v. Sycip, G.R No. 153468)
PSI was organized in 1970 with an authorized capital stock of P2,000,000.00, divided into 20,000 shares with a par value of P100 per share. Out of this authorized capital stock, 4,600 shares were subscribed and paid up. Seng, King's father, had the most number of subscribed shares. Before his death, he sought, and was granted, the approval of the PSI board of directors to transfer his shares to King.Since then, King had been consistently elected as a member of the PSI board of directors. During the special stockholders' meeting in 1998, Lim was elected President and King was Vice President.
Lao, the former president, refused to acknowledge the newly elected directors and officers as well as King's ownership of 1,200 PSI shares. Lao issued a Secretary's Certificate stating that a board meeting was held on the same date wherein the board of directors resolved to nullify the transfer to King of the shares owned by his father. Subsequently, King discovered that a stockholders' meeting was conducted in 1999, wherein Lao, Lian, Ong, and Sy were elected as new members of the board of directors. King filed a petition before the Securities and Exchange Commission "to enjoin the new members from representing themselves as officers and members of the board of directors of the Philadelphia School, Inc. and to nullify all acts done and resolutions passed by them. Meanwhile, in 2002, a general stockholders' meeting was held wherein Lao, Ong, Henry Sy, Sy Tian Tin, Sy Tian Tin, Jr. and Paul Chua were elected as members of the board of directors, with Chua Lian as chairman of the board. The RTC and CA held that there were valid grounds to nullify the March 15, 2002 stockholders' meeting. The CA considered the March 15, 2002 stockholders' meeting as a special meeting and that the meeting was not properly called due to the failure of the notice to state the meeting’s purpose and to meet the 2-week notice requirement. It ruled that the Notice of the March 15, 2002 meeting sent to the stockholders did not comply with the requirement set forth in Article VIII (5) of the PSI's by-laws. It explained that in case of a special meeting, the corporate by-laws require that the notice shall state the object and purpose for which the meeting is called; however, there was no mention in the notice as to the purpose for calling the March 15, 2002 stockholders' meeting. Is the 2002 Meeting a regular one and noncompliance with the 2 week notice renders it void on such ground?
NO. The agenda for the meeting, which includes the elections of the new board of directors and ratification of acts of the incumbent board of directors and management, was the standard order of business in a regular annual meeting of stockholders of a corporation. Thus, the March 15, 2002 annual stockholders' meeting was a regular meeting. Hence, the requirement to state the object and purpose in case of a special meeting as provided for in Article VIII (5) of the PSI’s by-laws does not apply to the Notice for the March 15, 2002 annual stockholders' meeting.
Regarding the time for serving notice of the meeting to all the stockholders, Section 50 of Batas Pambansa Blg. 68 reads in part:
Section 50. Regular and Special Meetings of Stockholders or Members. — Regular meetings of stockholders or members shall be held annually on a date fixed in the by-laws, or if not so fixed, on any date in April of every year as determined by the board of directors or trustees: Provided, That written notice of regular meetings shall be sent to all stockholders or members of record at least two (2) weeks prior to the meeting, unless a different period is required by the by-laws.
Under PSI's by-laws, notice of every regular or special meeting must be mailed or personally delivered to each stockholder not less than five (5) days prior to the date set for the meeting.
In this case, the PSI's by-laws providing only for a five (5)-day prior notice must prevail over the two (2)-week notice under the Corporation Code. By its express terms, the Corporation Code allows "the shortening (or lengthening) of the period within which to send the notice to call a special (or regular) meeting." Thus, the mailing of the Notice to respondents on March 5, 2002 calling for the annual stockholders' meeting to be held on March 15, 2002 is not irregular, since it complies with what was stated in PSI's bylaws (Lao v. Lim, G.R. No. 201306)