Chung Ka Bio vs Intermediate Appellate Court (1988)

Facts: Philippine Blooming Mills Company, Inc. was incorporated for a term of 25 years. The members of its board of directors executed a deed of assignment of all of the accounts receivables, properties, obligations and liabilities of the old PBM in favor of Chung Siong Pek in his capacity as treasurer of the new PBM, then in the process of reincorporation. The new PMB was issued a certificate of incorporation by the Securities and Exchange Commission. Chung Ka Bio and the other petitioners herein, all stockholders of the old PBM, filed with the SEC a petition for liquidation of both the old PBM and the new PBM. The allegation was that the former had become legally non-existent for failure to extend its corporate life and that the latter had likewise beenipso facto dissolved for non-use of the charter and continuous failure to operate within 2 years from incorporation.


Issue: WON, The new corporation has not substantially complied with the two-year requirement of Section 22 of the new Corporation Code on non-user because its stockholders never adopted a set of by-laws. Continue reading


Loyola Grand Villas Homeowners (South) Association vs Court of Appeals (1997)

Facts:  LGVHAI was organized as the association of homeowners and residents of the Loyola Grand Villas. It was organized by the developer of the subdivision and its first president was Victorio V. Soliven, himself the owner of the developer.  For unknown reasons, however, LGVHAI did not file its corporate by-laws. The officers of the LGVHAI tried to register its by-laws. They failed to do so. To the officers’ consternation, they discovered that there were two other organizations within the subdivision – the North Association and the South Association. When one of the officers inquired about the status of LGVHAI, the head of the legal department of the HIGC, informed him that LGVHAI had been automatically dissolved for two reasons.  First, it did not submit its by-laws within the period required by the Corporation Code and, second, there was non-user of corporate charter because HIGC had not received any report on the association’s activities.


Issue: WON the LGVHAI’s failure to file its by-laws within the period prescribed by Section 46 of the Corporation Code had the effect of automatically dissolving the said corporation?


Held: No. There can be no automatic corporate dissolution simply because the incorporators failed to abide by the required filing of by-laws embodied in Section 46 of the Corporation Code. There is no outright “demise” of corporate existence. Proper notice and hearing are cardinal components of due process in any democratic institution, agency or society. In other words, the incorporators must be given the chance to explain their neglect or omission and remedy the same. Non-filing of the by-laws will not result in automatic dissolution of the corporation. In fact, under the rules and regulations of the SEC, failure to file the by-laws on time may be penalized merely with the imposition of an administrative fine without affecting the corporate existence of the erring firm.

Crisologo-Jose vs Court of Appeals (1989)

Facts: Plaintiff Ricardo S. Santos, Jr. was the vice-president of Mover Enterprises, Inc. in-charge of marketing and sales; and the president of the said corporation was Atty. Oscar Z. Benares. Atty. Benares, in accommodation of his clients, the spouses Jaime and Clarita Ong, issued check against Traders Royal Bank, payable to defendant Ernestina Crisologo-Jose. Since the check was under the account of Mover Enterprises, Inc., the same was to be signed by its president, Atty. Oscar Z. Benares, and the treasurer of the said corporation. However, since at that time, the treasurer of Mover Enterprises was not available, Atty. Benares prevailed upon the plaintiff, Ricardo S. Santos, Jr., to sign the aforesaid check. The check was issued to defendant Ernestina Crisologo-Jose in consideration of the waiver or quitclaim by said defendant over a certain property which the Government Service Insurance System (GSIS) agreed to sell to the spouses Jaime and Clarita Ong, with the understanding that upon approval by the GSIS of the compromise agreement with the spouses Ong, the check will be encashed accordingly. Since the compromise agreement was not approved within the expected period of time, the aforesaid check was replaced by Atty. Benares. This replacement check was also signed by Atty. Oscar Z. Benares and by the plaintiff Ricardo S. Santos, Jr. When defendant deposited this replacement check with her account at Family Savings Bank, Mayon Branch, it was dishonored for insufficiency of funds. The petitioner filed an action against the corporation for accommodation party.

Issue: WON the corporation can be held liable as accommodation party? Continue reading

Francisco vs GSIS (1963)

Facts: The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant, Government Service Insurance System a parcel of land known as Vic-Mari Compound, located at Baesa, Quezon City. The System extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her monthly instalments. The System itself was the buyer of the property in the foreclosure sale. The plaintiff’s father, Atty. Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter the System approved the request of Francisco to redeem the land through a telegram. Defendant received the payment and it did not, however, take over the administration of the compound. The System then sent a letter to Francisco informing of his indebtedness and the 1 year period of redemption has been expired. And the System argued that the telegram sent to Francisco saying that the System has approved the request in redeeming the property is incorrect due to clerical problems.

Issue: WON the System is liable for the acts of its employees regarding the telegram? Continue reading

Ramirez vs Orientalist Co. (1918)

Facts: Orientalist Company was engaged in the business of maintaining and conducting a theatre in the city of Manila for the exhibition of cinematographic films. engaged in the business of marketing films for a manufacturer or manufacturers, there engaged in the production or distribution of cinematographic material. In this enterprise the plaintiff was represented in the city of Manila by his son, Jose Ramirez. The directors of the Orientalist Company became apprised of the fact that the plaintiff in Paris had control of the agencies for two different marks of films, namely, the “Eclair Films” and the “Milano Films;” and negotiations were begun with said officials of the Orientalist Company by Jose Ramirez, as agent of the plaintiff. The defendant Ramon J. Fernandez, one of the directors of the Orientalist Company and also its treasure, was chiefly active in this matter. Ramon J. Fernandez had an informal conference with all the members of the company’s board of directors except one, and with approval of those with whom he had communicated, addressed a letter to Jose Ramirez, in Manila, accepting the offer contained in the memorandum the exclusive agency of the Eclair films and Milano films. In due time the films began to arrive in Manila, it appears that the Orientalist Company was without funds to meet these obligations. Action was instituted by the plaintiff to Orientalist Company, and Ramon J. Fernandez for sum of money.

Issue: WON the Orientalist Co. is liable for the acts of its treasurer, Fernandez? Continue reading

Carlos vs Mindoro Sugar Co. (1932)

Facts: This is an action to recover from the defendants the value of four bonds with due and unpaid interest thereon, issued by the Mindoro Sugar Company and placed in trust with the Philippine Trust Company. Mindoro Sugar Company is a corporation constituted in accordance with the laws of the country. According to its articles of incorporation one of its principal purposes was to acquire and exercise the franchise granted by Act No. 2720 to George H. Fairchild, to substitute the organized corporation. Philippine Trust Company is another domestic corporation its principal purpose, then, as its name indicates, is to engage in the trust business. The board of directors of the Philippine Trust Company, adopted a resolution authorizing its president, among other things, to purchase the bonds in the Mindoro Sugar Company that was about to issue, and to resell them, with or without the guarantee of said trust corporation, at a price not less than par, and to guarantee to the Philippine National Bank the payment of the indebtedness to said bank by the Mindoro Sugar Company. Pursuance of this resolution, the Mindoro Sugar Company executed in favor of the Philippine Trust Company the deed of trust transferring all of its property to it in consideration of the bonds it had issued. Philippine Trust Company sold thirteen bonds, to Ramon Diaz. The Philippine Trust Company paid the appellant, upon presentation of the coupons, the stipulated interest from the date of their maturity then it stopped payments; and thenceforth it alleged that it did not deem itself bound to pay such interest or to redeem the obligation because the guarantee given for the bonds was illegal and void.

Issue: WON PTC has the power to guarantee and does this act constitute an ultra vires act? Continue reading

Montelibano vs Bacolod-Murcia Milling (1962)

Facts: Plaintiffs-appellants, Alfredo Montelibano, Alejandro Montelibano, and the Limited co-partnership Gonzaga and Company, had been and are sugar planters adhered to the defendant-appellee’s sugar central mill under identical milling contracts. Originally executed in 1919, said contracts were stipulated to be in force for 30 years starting with the 1920-21 crop, and provided that the resulting product should be divided in the ratio of 45% for the mill and 55% for the planters. Sometime in 1936, it was proposed to execute amended milling contracts, increasing the planters’ share to 60% of the manufactured sugar and resulting molasses, besides other concessions, but extending the operation of the milling contract from the original 30 years to 45 years. The Board of Directors of the appellee Bacolod-Murcia Milling Co., Inc., adopted a resolution granting further concessions to the planters over and above those contained in the printed Amended Milling Contract. The appellants initiated the present action, contending that three Negros sugar centrals with a total annual production exceeding one-third of the production of all the sugar central mills in the province, had already granted increased participation (of 62.5%) to their planters, and that under the resolution the appellee had become obligated to grant similar concessions to the plaintiffs. The appellee Bacolod-Murcia Milling Co., inc., resisted the claim, and defended by urging that the stipulations contained in the resolution were made without consideration; that the resolution in question was, therefore, null and void ab initio, being in effect a donation that was ultra vires and beyond the powers of the corporate directors to adopt.

Issue: WON the board resolution is an ultra vires act and in effect a donation from the board of directors?

Held: No. There can be no doubt that the directors of the appellee company had authority to modify the proposed terms of the Amended Milling Contract for the purpose of making its terms more acceptable to the other contracting parties. As the resolution in question was passed in good faith by the board of directors, it is valid and binding, and whether or not it will cause losses or decrease the profits of the central, the court has no authority to review them. Whether the business of a corporation should be operated at a loss during depression, or close down at a smaller loss, is a purely business and economic problem to be determined by the directors of the corporation and not by the court. The appellee Bacolod-Murcia Milling Company is, under the terms of its Resolution of August 20, 1936, duty bound to grant similar increases to plaintiffs-appellants herein.