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CORPORATION LAW
HARDEN V. BENGUET CONSOLIDATED MINING COMPANY (G.R. No. L-37331,
March 18, 1933)
FACTS:






Benguet Consolidated Mining Co. was organized in June, 1903, as a sociedad
anonima in conformity with the provisions of Spanish law. Balatoc Mining Co.
was organized in December 1925, as a corporation, in conformity with the
provisions of the Corporation Law (Act No. 1459). Both were organized for
mining of gold. Balatoc capital stock consists of one million shares of the par
value of one peso (P1) each.
When the Balatoc was first organized, its properties were largely undeveloped.
To improve its operations, the company’s committee approached A. W. Beam,
then president and general manager of the Benguet Company, to secure the
capital necessary to the development of the Balatoc property. A contract was
entered into wherein Benguet will (1) construct a milling plant for the Balatoc
mine, of a capacity of 100 tons of ore per day, and with an extraction of at least
85 per cent of the gold content; (2) erect an appropriate power plant. In return,
Benguet will receive from Balatoc shares of a par value of P600,000.
The total cost incurred by Benguet in developing Balatoc was P1,417,952.15. A
certificate for 600,000 shares of the stock of the Balatoc Company was given to
Benguet and the excess value was paid to Benguet by Balatoc in cash. Due to
the improvements made by Benguet, the value of shares of Balatoc increased in
the market (from P1 to more than P11) and dividends enriched its stockholders.
Harden, the owner of thousands of shares of Balatoc, questioned the transfer of
600,000 shares to Benguet with the success of the development.

within the meaning of the prohibitory provision already so many times
mentioned.
A sociedad anonima is something very much like the English joint stock
company, with features resembling those of both the partnership is shown in
the fact that sociedad, the generic component of its name in Spanish, is the
same word that is used in that language to designate other forms of
partnership, and in its organization it is constructed along the same general
lines as the ordinary partnership.
In section 75 of the Corporation Law, a provision is found making the sociedad
anonima subject to the provisions of the Corporation Law "so far as such
provisions may be applicable", and giving to the sociedades anonimas
previously created in the Islands the option to continue business as
such or to reform and organize under the provisions of the Corporation
Law.
The provision in Section 75 of the Act Congress of July 1, 1902 (Philippine Bill),
generally prohibiting corporations engaged in mining and members of such from
being interested in any other corporation engaged in mining, was amended by
section 7 of Act No. 3518 of the Philippine Legislature, approved by Congress
March 1, 1929. The change in the law effected by this amendment was in the
direction of liberalization. Thus, the inhibition contained in the original provision
against members of a corporation engaged in agriculture or mining from being
interested in other corporations engaged in agriculture or in mining was so
modified as merely to prohibit any such member from holding more
than fifteen per centum of the outstanding capital stock of another
such corporation. Moreover, the explicit prohibition against the holding by
any corporation (except for irrigation) of an interest in any other corporation
engaged in agriculture or in mining was so modified as to limit the restriction to
corporations organized for the purpose of engaging in agriculture or in mining.

ISSUE:
W/N, assuming the first question to be answered in the affirmative, the Benguet
Company, which was organized as a sociedad anonima, is a corporation within the
meaning of the language used by the Congress of the United States, and later by the
Philippine Legislature, prohibiting a mining corporation from becoming interested in
another mining corporation.
HELD:
Having shown that the plaintiffs in this case have no right of action against the
Benguet Company for the infraction of law supposed to have been committed,
we forego any discussion of the further question whether a sociedad anonima
created under Spanish law, such as the Benguet Company, is a corporation

PALACIO V. FELY TRANSPORTATION (G.R. No. L-15121 August 31, 1962)
FACTS:
About December, 1952, the Fely Transportaton hired Alfredo Carillo as a driver
of jeep owned and operated by the said defendant company.
That on December 24, 1952, at about 11:30 a.m., while the driver Carillo was
driving the jeep at Halcon Street, Quezon City, wilfully, unlawfully and
feloniously and in a negligent, reckless and imprudent manner, run over Mario
Palacio, child of the herein plaintiff Gregorio Palacio. That on account of the

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aforesaid injuries, Mario Palacio suffered a simple fracture of the right tenor,
complete third, thereby hospitalizing him at the Philippine Orthopedic Hospital
from December 24, 1952, up to January 8, 1953, and continued to be treated for
a period of five months thereafter.
That the plaintiff Gregorio Palacio herein is a welder by occupation and owner of
a small welding shop and because of the injuries of his child he has abandoned
his shop where he derives income of P10.00 a day for the support of his big
family. That during the period that Mario was in the hospital and was under
treatment for five months, in order to meet the needs of his big family, Gregorio
was forced to sell one air compressor (heavy duty) and one heavy duty electric
drill, for a sacrifice sale of P150.00 which could easily sell at P350.00. That as a
consequence of the negligent and reckless act of the driver Carillo, the herein
plaintiffs were forced to litigate this case in Court for an agreed amount of
P300.00 for attorney's fee.

purpose in forming the corporation was to evade his subsidiary civil
liability resulting from the conviction of his driver, Alfredo Carillo. This
conclusion is borne out by the fact that the incorporators of the Fely
Transportation are Isabelo Calingasan, his wife, his son, Dr. Calingasan, and his
two daughters. We believe that this is one case where the defendant
corporation should not be heard to say that it has a personality
separate and distinct from its members when to allow it to do so would
be to sanction the use of the fiction of corporate entity as a shield to
further an end subversive of justice. Furthermore, the failure of the
defendant corporation to prove that it has other property than the jeep
strengthens the conviction that its formation was for the purpose above
indicated.
Accordingly, defendants Fely Transportation and Isabelo Calingasan should be
held subsidiarily liable for P500.00 which Alfredo Carillo was ordered to pay in
the criminal case and which amount he could not pay on account of insolvency.

That the herein plaintiffs have now incurred the amount of P500.00 actual
expenses for transportation, representation and similar expenses for gathering
evidence and witnesses; and that because of the nature of the injuries of
plaintiff Mario Palacio and the fear that the child might become a useless
invalid, the herein plaintiff Gregorio Palacio has suffered moral damages which
could be conservatively estimated at P1,200.00.
IN VIEW OF THE FOREGOING, the Court finds the accused Carillo guilty and
sentenced to suffer imprisonment for a period of Two Months & One Day of
Arresto Mayor; to indemnify the offended party, by way of consequential
damages, in the sum of P500.00.
On the basis of these facts, the lower court held that under Article 103 of the
Revised Penal Code, the person subsidiarily liable to pay damages is Isabel
Calingasan, the employer, and not the defendant corporation.
Subsequently, Isabel Calingasan sold and transferred the jeep to the Fely
Transportation.
ISSUE:
W/N the sale of the jeep by Isabel Calisangan was done to evade her subsidiary
liability.
HELD:
Isabelo Calingasan and defendant Fely Transportation may be regarded as one
and the same person. It is evident that Isabelo Calingasan's main

REMO V. IAC (G.R. No. L-67626 April 18, 1989)
FACTS:
December, 1977: the BOD of Akron Customs Brokerage Corporation (Akron),
composed of Jose Remo, Jr., Ernesto Bañares, Feliciano Coprada, Jemina
Coprada, and Dario Punzalan with Lucia Lacaste as Secretary, adopted a
resolution authorizing the purchase of 13 trucks for use in its business to be
paid out of a loan the corporation may secure from any lending institution.

January 25, 1978: Feliciano Coprada, as President and Chairman of Akron,
purchased the trucks from E.B. Marcha Transport Company, Inc. (Marcha) for P
525K as evidenced by a deed of absolute sale. Parties agreed on a
downpayment in the amount of P50K and that the balance of P 475K shall be
paid within 60 days from the date of the execution of the agreement. They also
agreed that until balance is fully paid, the down payment of P 50K shall accrue
as rentals and failure to pay the balance within 60 days, then the balance shall
constitute as a chattel mortgage lien covering the cargo trucks and the parties
may allow an extension of 30 days and Marcha may ask for a revocation of the
contract and the reconveyance of all trucks.


The obligation is further secured by a promissory note executed by Coprada in
favor of Akron. It is stated that the balance shall be paid from the proceeds of
a loan obtained from the Development Bank of the Philippines (DBP) within 60
days.

2



After the lapse of 90 days, Marcha tried to collect from Coprada but the
Coprada promised to pay only upon the release of the DBP loan.



Marcha found that no loan application was ever filed by Akron with DBP.



Akron paid rentals of P 500/day pursuant to a subsequent agreement, from
April 27, 1978 (the end of the 90-days to pay the balance) to May 31, 1978.
Thereafter, no more rental payments were made.



June 17, 1978: Coprada wrote Marcha begging for a grace period of until the
end of the month to pay the balance of the purchase price; that he will update
the rentals within the week; and in case he fails, then he will return the 13
units should Marcha elect .



August 1, 1978: Marcha through counsel, wrote Akron demanding the return of
the 13 trucks and the payment of P 25K back rentals from June 1 to August 1,
1978.



August 8, 1978: Coprada asked for another grace period of up to August 31,
1978 to pay the balance, stating as well that he is expecting the approval of
his loan application from a financing company, and that 10 trucks have been
returned to Bagbag, Novaliches.



December 9, 1978: Coprada informed Marcha that he had returned 10 trucks
to Bagbag and that a resolution was passed by the board of directors
confirming the deed of assignment to Marcha of P 475K from the proceeds of a
loan obtained by Akron from the State Investment House, Inc.



In due time, Marcha filed a compliant for the recovery of P 525K or the return
of the 13 trucks with damages against Akron and its officers and directors



Remo Jr. sold all his shares in Akron to Coprada. It also appears that Akron
amended its articles of incorporation thereby changing its name to Akron
Transport International, Inc. which assumed the liability of Akron to Marcha.
ISSUE:
W/N Remo Jr. should be held personally liable together with Akron Transport
International, Inc.
HELD:
NO.

The environmental facts of this case show that there is no cogent basis to pierce
the corporate veil of Akron and hold Remo personally liable.

While it is true that in December, 1977 petitioner was still a member of the
board of directors of Akron and that he participated in the adoption of a
resolution authorizing the purchase of 13 trucks for the use in the brokerage
business of Akron to be paid out of a loan to be secured from a lending
institution, it does not appear that said resolution was intended to
defraud anyone.

Coprada, President and Chairman of Akron, who negotiated , the word "WE' in
the said promissory note must refer to the corporation which Coprada




represented in the execution of the note and not its stockholders or
directors. Petitioner did not sign the said promissory note so he cannot be
personally bound thereby.
The new corporation confirmed and assumed the obligation of the old
corporation. There is no indication of an attempt on the part of Akron to evade
payment of its obligation
It is his inherent right as a stockholder to dispose of his shares of
stock anytime he so desires.

PAMPLONA PLANTATION CO. V. TINGHIL (G.R. No. 159121 February 3,
2005)
FACTS:

Pamplona Plantations Company, Inc. was organized for the purpose of taking
over the operations of the coconut and sugar plantation of Hacienda Pamplona
located in Pamplona, Negros Oriental.

It appears that Hacienda Pamplona was formerly owned by a certain Mr. Bower
who had in his employ several agricultural workers. When the company took
over the operation of Hacienda Pamplona in 1993, it did not absorb all the
workers of Hacienda Pamplona. Some, however, were hired by the company as
seasonal workers.

Pamplona Plantation Leisure Corporation was then established for the purpose
of engaging in the business of operating the golf course constructed on one part
of the plantation, and other leisure activities. Pamplona Plantation Labor
Independent Union conducted an organizational meeting wherein several who are
either union members or officers participated in said meeting. Upon learning that
some of the respondents attended the said meeting, Petitioner Jose Luis Bondoc, manager
of the company, did not allow respondents to work anymore in the plantation.
Thereafter, on various dates, respondent filed their respective complaints with
the NLRC, for illegal dismissal. Respondent Carlito Tinghil amended his
complaint to implead Pamplona Plantation Leisure Corporation.

Labor Arbiter Jose G. Gutierrez rendered a decision finding respondents to be
entitled to separation pay. On appeal to NLRC, the same reversed the ruling of
the LA and ruled that petitioners except Carlito Tinghil, failed to implead
Pamplona Plantation Leisure Corporation, an indispensable party and that there
exist no employer-employee relation between the parties.

CA reversed the ruling of the NLRC.
ISSUE:
Whether the case should be dismissed for the non-joinder of the Pamplona
Plantation Leisure Corporation.
HELD:

No. For both the coconut plantation and the golf course, there is only one
management which the laborers deal with regarding their work. The weekly
payrolls issued by petitioner-company bore the name 'Pamplona Plantation
Co., Inc. It is also a fact that respondents all received their pay from
the same person, Petitioner Bondoc -- the managing director of the company.
Since the workers were working for a fi r m k n o w n a s Pa m p l o n a
P l a n t a t i o n C o . , I n c . , t h e reason they sued their employer through that
name was natural and understandable.

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True, the Petitioner Pamplona Plantation Co., Inc., and the
Pamplona Plantation Leisure Corporation appear to be separate
corporate entities. But it is settled that this fi ction of law
cannot be invoked to further an end subversive of justice. The
principle requiring the piercing of the corporate veil mandates
courts
to
see
through
the
protective
shroud
that
d i s t i n g u i s h e s o n e c o r p o r a t i o n f r o m a seemingly separate one.
The corporate mask may be r e m o v e d a n d t h e c o r p o r a t e v e i l
p i e r c e d w h e n a corporation is the mere alter ego of another.
Where badges of fraud exist, where public convenience is defeated, w h e r e a
w r o n g i s s o u g h t t o b e j u s t i f i e d thereby, or where a separate
corporate identity is used to evade financial obligations to employees or to
third parties, the notion of separate legal entity s h o u l d b e s e t a s i d e
a n d t h e f a c t u a l t r u t h u p h e l d . When that happens, the corporate
character is not necessarily abrogated. It continues for other legitimate
objectives. However, it may be pierced in any of the instances cited in
order to promote substantial justice.
In the present case, the corporations have basically the same incorporators and
directors and are headed by the same official. Both use only one office and one
payroll and are under one management. Respondents allege that they
worked under the supervision and control of Petitioner Bondoc – the
common managing director of both the petitioner-company and the
leisure corporation.

JARDINE DAVIS V. JRB REALTY, INC. (G.R. No. 151438 July 15, 2005)
FACTS:
In 1979-1980, respondent JRB Realty, Inc. built a nine-storey building, named
Blanco Center, on its parcel of land located at 119 Alfaro St., Salcedo Village,
Makati City. An air conditioning system was needed for the Blanco Law Firm
housed at the second floor of the building.
On March 13, 1980, the JRB’s Executive Vice-President, Jose R. Blanco, accepted
the contract quotation of Mr. A.G. Morrison, President of Aircon and Refrigeration
Industries, Inc. (Aircon), for two (2) sets of Fedders Adaptomatic 30,000 kcal air
conditioning equipment with a net total selling price of P99,586.00. Thereafter,
two (2) brand new packaged air conditioners of 10 tons capacity each to deliver
30,000 kcal or 120,000 BTUH were installed by Aircon. When the units with
rotary compressors were installed, they could not deliver the desired cooling
temperature.
 Despite several adjustments and corrective measures, the respondent
conceded that Fedders Air Conditioning USA's technology for rotary
compressors for big capacity conditioners like those installed at the Blanco
Center had not yet been perfected.
The parties thereby agreed to replace the units with reciprocating/semihermetic compressors instead. In a Letter dated March 26, 1981, Aircon stated
that it would be replacing the units currently installed with new ones using
rotary compressors, at the earliest possible time. Regrettably, however, it could
not specify a date when delivery could be effected.

Temp Control Systems, Inc. (a subsidiary of Aircon until 1987) undertook the
maintenance of the units, inclusive of parts and services. In October 1987, the
respondent learned, through newspaper ads, that Maxim Industrial and
Merchandising Corporation (Maxim, for short) was the new and exclusive
licensee of Fedders Air Conditioning USA in the Philippines for the manufacture,
distribution, sale, installation and maintenance of Fedders air conditioners.
The respondent requested that Maxim honor the obligation of Aircon, but the
latter refused. Considering that the ten-year period of prescription was fast
approaching, to expire on March 13, 1990, the respondent then instituted, on
January 29, 1990, an action for specific performance with damages against
Aircon & Refrigeration Industries, Inc., Fedders Air Conditioning USA, Inc., Maxim
Industrial & Merchandising Corporation and petitioner Jardine Davies, Inc.
The latter was impleaded as defendant, considering that Aircon was its
subsidiary. The trial court ruled that Aircon was a subsidiary of the petitioner,
and concluded that: at the time it contracted with Aircon on March 13, 1980 and
on the date the revised agreement was reached on March 26, 1981, Aircon was
a subsidiary of Jardine. The phrase "A subsidiary of Jardine Davies, Inc." was
printed on Aircon's letterhead of its March 13, 1980 contract with plaintiff as
well as the Aircon's letterhead of Jardine's Director and Senior Vice-President
A.G. Morrison and Aircon's President in his March 26, 1981 letter to plaintiff
confirming the revised agreement. Aircon's newspaper ads of April 12 and 26,
1981 and a press release on August 30, 1982 also show that defendant Jardine
publicly represented Aircon to be its subsidiary.
Records from the Securities and Exchange Commission (SEC) also reveal that as
per Jardine's December 31, 1986 and 1985 Financial Statements that "The
company acts as general manager of its subsidiaries". Jardine's Consolidated
Balance Sheet as of December 31, 1979 filed with the SEC listed Aircon as its
subsidiary by owning 94.35% of Aircon. Also, Aircon's reportorial General
Information Sheet as of April 1980 and April 1981 filed with the SEC show that
Jardine was 94.34% owner of Aircon and that out of seven members of the
Board of Directors of Aircon, four (4) are also of Jardine. Jardine's witness, Atty.
Fe delos Santos-Quiaoit admitted that defendant Aircon, renamed Aircon &
Refrigeration Industries, Inc. "is one of the subsidiaries of Jardine Davies" and
that Jardine nominated, elected, and appointed the controlling majority of the
Board of Directors and the highest officers of Aircon.
The petitioner filed its notice of appeal with the CA, alleging that the trial court
erred in holding it liable because it was not a party to the contract between JRB
Realty, Inc. and Aircon, and that it had a personality separate and distinct from
that of Aircon.
ISSUE:
W/N Aircon was a mere alter ego of Jardine.
HELD:

4







While it is true that Aircon is a subsidiary of the petitioner, it does not
necessarily follow that Aircon's corporate legal existence can just be
disregarded. The Court categorically held in another case that a
subsidiary has an independent and separate juridical personality,
distinct from that of its parent company; hence, any claim or suit
against the latter does not bind the former, and vice versa.
In applying the doctrine, the following requisites must be established: (1)
control, not merely majority or complete stock control; (2) such control must
have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest acts in
contravention of plaintiff's legal rights; and (3) the aforesaid control and breach
of duty must proximately cause the injury or unjust loss complained of.
The records bear out that Aircon is a subsidiary of the petitioner only
because the latter acquired Aircon's majority of capital stock. It,
however, does not exercise complete control over Aircon; nowhere can
it be gathered that the petitioner manages the business affairs of
Aircon. Indeed, no management agreement exists between the
petitioner and Aircon, and the latter is an entirely different entity from
the petitioner. In the instant case, there is no evidence that Aircon was
formed or utilized with the intention of defrauding its creditors or evading its
contracts and obligations.

COLLECTOR OF INTERNAL REVENUE V. CLUB FILIPINO (G.R. No. L-12719
May 31, 1962)
FACTS:
(Club Filipino owns and operates a club house, a sports complex, and a bar
restaurant, which is incident to the operation of the club and its gold course. The
club is operated mainly with funds derived from membership fees and dues. The BIR
seeks to tax the said restaurant as a business.)

The "Club Filipino, Inc. de Cebu," (Club) is a civic corporation organized under
the laws of the Philippines with an original authorized capital stock of
P22,000.00, which was subsequently increased to P200,000.00. Neither in the
articles or by-laws is there a provision relative to dividends and their
distribution, although it is covenanted that upon its dissolution, the Club's
remaining assets, after paying debts, shall be donated to a charitable Philippine
Institution in Cebu.

The Club owns and operates a club house, a bowling alley, a golf course and a
bar-restaurant where it sells wines and liquors, soft drinks, meals and short
orders to its members and their guests. The bar-restaurant was a necessary
incident to the operation of the club and its golf-course. The club is operated
mainly with funds derived from membership fees and dues. Whatever profits it
had, were used to defray its overhead expenses and to improve its golf-course.



In 1951, as a result of a capital surplus, arising from the re-valuation of its real
properties, the value or price of which increased, the Club declared stock
dividends; but no actual cash dividends were distributed to the stockholders.

In 1952, a BIR agent discovered that the Club has never paid percentage tax on
the gross receipts of its bar and restaurant, although it secured B-4, B-9(a) and
B-7 licenses. In a letter dated December 22, 1852, the Collector of Internal
Revenue assessed against and demanded from the Club percentage tax from
the operation of its bar and restaurant.
ISSUE:
Whether or not the respondent Club is a non-stock corporation.
HELD:
The Club was organized to develop and cultivate sports of all class and
denomination for the healthful recreation and entertainment of its stockholders
and members. There was in fact, no cash dividend distribution to its
stockholders and whatever was derived on retail from its bar and restaurants
used were to defray its overhead expenses and to improve its golf course.

It is conceded that the Club derived profit from the operation of its bar
and restaurant, but such fact does not necessarily convert it into a
profit-making enterprise. The bar and restaurant are necessary
adjuncts of the Club to foster its purposes and the profits derived
there from are necessarily incidental to the primary object of
developing and cultivating sports for the healthful recreation and
entertainment of the stockholders and members. That a Club makes
some profit, does not make it a profit-making Club.

The facts that the capital stock of the respondent Club is divided into shares,
does not detract from the finding of the trial court that it is not engaged in the
business of operator of bar and restaurant.
Moreover, for a stock corporation to exist, 2 requisites must be complied
with:
(1) a capital stock divided into shares
(2) an authority to distribute to the holders of such shares, dividends or
allotments of the surplus profits on the basis of shares held.

In the case at bar, nowhere in the AOI or by-laws of Club Filipino could
be found an authority for the distribution of its dividends or surplus
profits. Strictly speaking, it cannot, therefore, be considered a stock
corporation, within the contemplation of the corporation law.
GONZALES V. PNB (GR L-33320, 30 May 1983)
FACTS:

Ramon A. Gonzales initially instituted several cases in the Supreme Court
questioning different transactions entered into by the Bank with other parties.
However, the personality of of Gonzales to sue the bank and question the
letters of credit it has extended for the importation by the Republic of public
works equipment intended for the massive development program of the
President was raised.

In view thereof, he expressed and made known his intention to acquire one
share of stock from Congressman Justiniano Montano which, on the following
day, was transferred in his name in the books of the Bank. Subsequent to his
aforementioned acquisition of one share of stock of the Bank, Gonzales, in his
dual capacity as a taxpayer and stockholder, filed numerous cases involving the
bank or the members of its Board of Directors.

On 11 January 1969, Gonzales addressed a letter to the President of the Bank,
requesting submission to look into the records of its transactions covering the

5

purchase of a sugar central by the Southern Negros Development Corp. to be
financed by Japanese suppliers and financiers; its financing of the Cebu-Mactan
Bridge to be constructed by V.C. Ponce, Inc. and the construction of the Passi
Sugar Mills in Iloilo.

On January 23, 1969, the Asst. Vice President and Legal Counsel of theBank
answered petitioner's letter denying his request for being not germane to his
interest as a one share stockholder and for the cloud of doubt as to his real
intention and purpose in acquiring said share.

In view of the Bank's refusal, Gonzales instituted the petition for mandamus.
ISSUE:
Whether the inspection sought to be exercised by Gonzales would be violative of the
provisions of PNB's charter.
HELD:
The inspection sought to be exercised by the petitioner would be violative of the
provisions of its charter.

Sec. 15, 16 and 30 of the bank’s charter provides for the rule regarding the
inspection of banks transactions and only the Superintendent of Banks and the
Auditor General, or other officers designated by law to inspect or investigate the
condition of the National Bank are allowed to inspect them and they can only
reveal the information to the President of the Philippines, the Secretary of
Finance, and the Board of Directors the details of the inspection or investigation.
Section 16 also provides that they give any information relative to the funds in
its custody, its current accounts or deposits belonging to private individuals,
corporations, or any other entity, except by order of a Court of competent
jurisdiction.

The Philippine National Bank is not an ordinary corporation. Having a
charter of its own, it is not governed, as a rule, by the Corporation
Code of the Philippines.

The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation
Code with respect to the right of a stockholder to demand an inspection or
examination of the books of the corporation may not be reconciled with the
above quoted provisions of the charter of the respondent bank. It is not
correct to claim, therefore, that the right of inspection under Section 74 of the
new Corporation Code may apply in a supplementary capacity to the charter of
the respondent bank.
SUNSET VIEW V. CAMPOS (G.R. No. L-52361 April 27, 1981)
FACTS:

This is a consolidation of two cases having identical facts and raising same
question of law to which in both cases, respondents admitted that they have not
fully paid the purchase price of the respective units.

In the first case, respondent Aguilar-Bernares Realty (ABR), owned by Spouses
Emmanuel and Zenaida Aguilar was the assignee of Solana, in the Sunset View
Condominium Project and La Perla Commercial (LPC) as the assignor. LPC then
bought the said unit from the Tower Builders, Inc. Thereafter, petitioner filed a
collection of assessment levied against the unit of ABR before the CFI of Pasay
City. The respondent filed a Motion to Dismiss(MTD) alleging thereto that there
is no cause of action and the court lacks jurisdiction over the subject matter.
The MTD was granted and judge ruled that the case should be tried in the
Securities and Exchange Commission(SEC). The MTD having been denied,
petitioner filed a petition for certiorari.

In the second case, petitioner Sunset View Condominium Corporation filed
before the CFI of Pasay City a collection of overdue accounts on assessments

and insurance premiums and the interest thereon amounting to P6,168 against
respondent Lim Siu Leng to whom was assigned on July 11, 1977 a unit called
"Alegria" of the Sunset View Condominium Project. As a response, respondent
filed a MTD alleging that the court has no jurisdiction over the subject matter
considering that the dispute arises from a intra-corporate relationship thus
jurisdiction is before the SEC. However, the said MTD was denied. The
respondent move for reconsideration but it was likewise denied. Aggrieved,
respondent appealed, hence, petitioner move to dismiss the aforesaid appeal on
the ground that the decision appealed from is interlocutory. However, this was
denied by the court. The court rendered its decision favoring respondent and
direct the parties to ventilate their case with the SEC. The petitioner move to
reconsider but it was denied. Hence, this petition on certiorari.
ISSUE:
Whether or not the regular courts has jurisdiction to try over the case.
HELD:
The court ruled that since it was proven that the private respondents have not yet
fully paid the purchase price of their units, they are not shareholders of the
petitioner condominium corporation. Thus, instant cases for collection cannot
be a controversy arising out of intra-corporate or partnership or association of which
they are stockholders, members or associates, respectively which controversy under
the original and exclusive jurisdiction of the Securities and Exchange Commission,
pursuant to Section 5 (b) of P.D.No. 902 A. The subject matters of the instant cases
according to the allegations of the complaints are under the jurisdiction of the
regular courts.
CASTILLO V. BALINGHASAY (G.R. No. 150976 October 18, 2004)
FACTS:

Petitioners and the respondents are stockholders of MCPI (Medical Center
Parañaque,Inc.) with the former holding Class “B” shares and the latter owning
Class “A” shares. MCPI is a domestic corporation organized sometime in
September 1977. At the time of its incorporation, Act No. 1459, the old
Corporation Law was still in force and effect. Article VII of MCPI’s original
Articles of Incorporation, as approved by the Securities and Exchange
Commission (SEC) on October 26, 1977, contained a provision that read as
follows: Only holders of Class A shares can have the right to vote and
the right to be elected as directors or as corporate officers.

On September 9, 1992, Article VII was again amended to provide as follows:
Except when otherwise provided by law, only holders of Class “A”
shares have the right to vote and the right to be elected as directors
or as corporate officers.

On February 9, 2001, the shareholders of MCPI held their annual stockholders’
meeting and election for directors. During the course of the proceedings,
respondent Rustico Jimenez, citing Article VII, as amended, and notwithstanding
MCPI’s history, declared over the objections of herein petitioners, that no Class
“B” shareholder was qualified to run or be voted upon as a director.

In the past, MCPI had seen holders of Class “B” shares voted for and serve as
members of the corporate board and some Class “B” share owners were in fact
nominated for election as board members. Nonetheless, Jimenez went on to
announce that the candidates holding Class “A” shares were the winners of all
seats in the corporate board. The petitioners protested, claiming that Article VII
was null and void for depriving them, as Class “B” shareholders, of their right to
vote and to be voted upon, in violation of the Corporation Code (Batas
Pambansa Blg. 68), as amended.

6



On March 22, 2001, after their protest was given short shrift, herein petitioners
filed a Complaint for Injunction, Accounting and Damages, docketed as Civil
Case No. CV-01-0140 before the RTC of Parañaque City, Branch 258.

In their Answer, the respondents claimed that the exclusivity of the right
granted to Class “A” holders cannot be defeated or impaired by any subsequent
legislative enactment, e.g. the New Corporation Code, as the Articles of
Incorporation is an intra-corporate contract between the corporation and its
members; between the corporation and its stockholders; and among the
stockholders. They submit that to allow Class “B” shareholders to vote and be
elected as directors would constitute a violation of MCPI’s franchise or charter
as granted by the State.
ISSUE:
Whether or not holders of Class “B” shares of the MCPI may be deprived of the right
to vote and be voted for as directors in MCPI.
HELD:
When Article VII of the Articles of Incorporation of MCPI was amended in 1992,
the phrase “except when otherwise provided by law” was inserted in the
provision governing the grant of voting powers to Class “A” shareholders. This
particular amendment is relevant for it speaks of a law providing for exceptions
to the exclusive grant of voting rights to Class “A” stockholders. Which law was
the amendment referring to? The determination of which law to apply is
necessary. There are two laws being cited and relied upon by the parties in this
case. In this instance, the law in force at the time of the 1992 amendment was
the Corporation Code (B.P. Blg. 68), not the Corporation Law (Act No. 1459),
which had been repealed by then.

We find and so hold that the law referred to in the amendment to Article VII
refers to the Corporation Code and no other law. At the time of the
incorporation of MCPI in 1977, the right of a corporation to classify its shares of
stock was sanctioned by Section 5 of Act No. 1459. The law repealing Act No.
1459, B.P. Blg. 68, retained the same grant of right of classification of stock
shares to corporations, but with a significant change. Under Section 6 of B.P.
Blg. 68, the requirements and restrictions on voting rights were explicitly
provided for, such that “no share may be deprived of voting rights except
those classified and issued as “preferred” or “redeemable” shares,
unless otherwise provided in this Code” and that “there shall always
be a class or series of shares which have complete voting rights.”
Section 6 of the Corporation Code being deemed written into Article VII
of the Articles of Incorporation of MCPI, it necessarily follows that
unless Class “B” shares of MCPI stocks are clearly categorized to be
“preferred” or “redeemable” shares, the holders of said Class “B”
shares may not be deprived of their voting rights. Note that there is
nothing in the Articles of Incorporation nor an iota of evidence on record to
show that Class “B” shares were categorized as either “preferred” or
“redeemable” shares. The only possible conclusion is that Class “B”
shares fall under neither category and thus, under the law, are allowed
to exercise voting rights.

7

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