Quimson)
Harden v. Benguet Consolidated Mining Co. Doctrine: As it was the intention of our lawmakers to stimulate the introduction of the American corporation into Philippine law in the place of sociedad anonima, it was necessary to make certain adjustments resulting from the continued co-existence for a time of the 2 forms of commercial entities. A sociedad anonima is something very much like the English joint stock company, with features resembling those of both partnership and the corporation. However, with the enactment of Act No. 1459, or the Corporation Law, there is an evident purpose to introduce American corporation into the Philippines as a standard commercial entity and to hasten the day when the sociedad anonima of the Spanish law would be obsolete. Facts: Benguet Consolidated Mining Co was organized in the year 1903 as a sociedad anonima in conformity with the provisions of the Spanish law; while the Balatoc Mining Co. was organized in December 1925 as a corporation in conformity with the provisions of the Corporation Law. Balatoc Mining, being largely undeveloped, entered into a contract with Benguet Consolidated to secure the capital necessary to develop their property. The principal features of said contract were that Benguet company was to proceed with the development and construction of a milling plant for the Balatoc Mine and to construct an appropriate power plant for a consideration that Benguet Company was to receive shares of a par value of P600,000 in payment. In compensation for the work, a certificate of stock worth 600,000 was delivered to Benguet Company. But as soon as the success of the development had become apparent, Balatoc Mining filed an action in court for the principal purpose of restoration of the sum of money it paid to Benguet and the annulment of their contract on the ground that the Corporation Law of the country makes it unlawful for any member of a corporation engaged in agriculture or mining and for any corporation organized for any purpose except irrigation to be in any wise interested in any other corporation engaged in agriculture and mining. Whether or not Benguet Company, organized as a sociedad anonima, is a corporation within the meaning of the language used by the Congress and later by the Legislature, prohibiting a mining corporation from being interested in another mining corporation. Ratio: When the Philippine Bill was approved in 1902, the congress inserted certain provisions (section 74 and 75 of the Act) were inserted. Section 75, which still remains in the law, as amended reads, "it shall be unlawful for any member of a corporation engaged in agriculture or mining and for any corporation organized for any purpose except irrigation to be in any wise interested in any other corporation engaged in agriculture or mining". Subsequently, the Corporation law was passed with the evident purpose of setting up the corporation as the standard commercial entity of the country. The word corporation has been used loosely to refer to sociedad anonima. But when the word corporation is used in the sense of a sociedad anonima, it should be associated with the Spanish expression either in parenthesis or connected by the word "or". This device has been adopted in the aforequoted provision. In drafting the Corporation Law, the words in Section 75 have been inserted bodily and it is of course obvious that whatever meaning originally attached to the provision, the same significance should be attached to Section 13 of the Corporation Law insofar as such provisions may be applicable. Sociedad anonimas previously created in the islands are given the option to continue business as such or to reform and organize under the provisions of the Law. If a sociedad anonima continues to operate as such, instead of reforming and reorganizing under the Corporation Law, it will be continued to be governed by the laws that were in force prior to the passage of this Act in relation to their organization and method of transacting business , but their relations to the public and public officials shall be governed by the provisions of this act. As to other issues, the court held that Benguet Company has committed no civil wrong against the plaintiffs, and if a public wrong was committed, that Balatoc was an active inducer of the commission of that wrong in that a contract is performed on both sides. Balatoc was found to have no right of action against Benguet.
Erandio, Athena Louise 2A | Batch 2014 | 1
a decision ordering the stockholders to jointly and severally pay Marcha Transpo the amount of the contract plus damages. Issue: Whether or not the corporate fiction should be disregarded in this case and hold Remo personally liable for the obligation of the Corporation Ratio: There is no cogent basis to pierce the corporate veil of Akron and hold petitioner personally liable for its obligation to private respondent. While it is true that at the time the contract was entered into, Remo was a member of the Board of the corporation and that he participated in the adoption of the resolution, it does not appear that said resolution was intended to defraud anyone and more particularly private respondent. It was Coprada who negotiated with said respondent for the purchase of the trucks and it was also Coprada who signed the promissory note to secure the obligation. If there was any fraud or misrepresentation, it is Coprada who should account for the same and not Remo. Fraud must be established by clear and convincing evidence. If at all, the principal character on whom fault should be attributed is Coprada, whom private respondent dealt with personally all through out. As to the amendment of the articles of incorporation, the new corporation confirmed and assumed the obligation of the old corporation. There is no indication that Akron did this in order to evade the payment of its obligation to private respondent. Pamplona Plantation Company v. Tinghil Doctrine: The corporate mask may be removes and the corporate veil pierced when a corporation is the mere alter ego of another. Where badges of fraud exist, where public convenience is defeated, where a wrong is sought to be justified 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 should be set aside and the factual truth upheld.
Ratio: Yes. In this case, the movement of the market requires that sales agreement be entered into even though the goods are not yet in the hands of the seller. To NACOCO, forward sales were a necessity. Copra could not stay long in its hands; it would lose weight and its value decreases. Copra contracts had to be executed on short notice at times, even within 24 hours. To be appreciated then is the difficulty of calling a formal meeting of the board. Long before the contracts disputed herein came into being, it ha already been the practice of Kalaw as general manager to sig contracts without prior authority from the Board. Obviously the, the forward sales were left to the sound discretion of NACOCO's general manager. There are even instances in the case where the contracts executed were submitted to the board after their consummation, not before. Where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization by the board of directors. Existence of such authority is established by proof of the course of business, the usage and practices of the company and by the knowledge which the board of director has, or must be presumed to have, of acts and doings of its subordinates in and about the affairs of the corporation. Thus, when in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied form the manner in which he has been permitted by the directors to manage its business. In this case, the practice of NACOCO has been to allow the manager to negotiate and execute contracts in its copra trading activities in the corporation's behalf. If the by-laws are to be followed, prior approval on all corporate contracts is required. But that board itself, by its acts and through acquiescence, practically laid aside the by-law requirement of prior approval.
damages. Meanwhile, by virtue of the sequestration, PCGG ordered the issuance of qualified stocks to 7 individuals, including Eduardo de los Angeles from the sequestered shares for them to hold in trust. Therafter, the Board passed a resolution, assuming the loans incurred by Neptunia for the purchase of the aforementioned stocks. They found that there was nothing illegal in such assumption of debt since Neptunia was an indirectly wholly owned subsidiary of SMC and that there was no additional expense or exposure for the SMC. It was for this reason that Eduardo de los Santos brought the present action before the SEC. Respondent directors alleged that de los Angeles has no legal standing having been merely imposed by the PCGG and that the twenty (20) shares owned by him personally cannot fairly and adequately represent the interest of the minority. Issue: Whether or not Eduardo de los Angeles has legal capacity to file this derivative suit. Ratio: Yes. The theory that he has no personality to bring suit in behalf of the corporation because of his miniscule stockholdings and that there is a conflict of interest between him and the PCGG cannot be sustained. The implicit argument herein that a stockholder must hold a substantial interest or significant block of stocks to bring a derivative suit finds no support whatever in law. The requirements of a derivative suit are as follows: 1. That the party bringing the suit should be a shareholder at the time of the act or transaction being complained of, the number of his stocks not being material. 2. He has tried to exhaust the intra-corporate remedies, but to no avail. 3. The cause of action devolves on the corporation, the wrongdoing or harm having been, or being caused to the corporation and not to the particular stockholder bringing the suit.
shares of the corporation was made in violation of his preemptive right to said additional issue and that the increase in the authorized capital stock was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda. Issue: Whether or not the increase in the authorized capital stock is illegal. Whether or not there was a violation of Benito's pre-emptive right Ratio: The issuance of the unsubscribed portion of the capital stock worth P110,980 is not invalid even if assuming that it was made without notice to the stockholders as claimed by the petitioner. The power to issue shares of stocks in a corporation is lodged in the BOD (Board of Directors) and no stockholders' meeting is necessary to consider it because additional issuance of shares of stocks does not need the approval of stockholders. The fact that he was not able to exercise his pre-emptive right because of the absence of such notice to stockholders cannot serve to invalidate the issuance. The general rule is that a pre-emptive right is recognized only with respect to new issues of shares and not with respect to additional issued or originally authorized shares on the theory that when a corporation at inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue. A subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares. When the unsubscribed shares are later reoffered, he cannot therefore claim a dilution of interest. However, since petitioner herein was able to prove the fact that he was not notified of the said meeting and that he never attended the same since he was out of the country at the time, as far as petitioner is concerned, he had not waived his pre-emptive right to subscribe as he could not have done so by reason that he was not present at the meeting and had not executed a waiver thereof. Not having waived such right and for reasons of equity, he may still be allowed to subscribe to the increased capital stock proportionate to his present shareholdings.
Subsequent to this, Gokongwei also filed an urgent motion for production and inspection of documents alleging that the secretary refused to allow him to inspect its records despite the request made. He posits that the corporation had been attempting to suppress information from the stockholders. While the petition was pending to be heard, the corporation, nevertheless, held a special stockholders' meeting for the purpose of ratification and confirmation of the amended by laws. This prompted Gokongwei to ask the SEC for a summary judgment on the ground that by calling a meeting, the board admitted the invalidity of the amendments of 1976. Subsequently, after the denial of the restraining order and summary judgment, the board of directors ratified the by-laws.
Pursuant to this management contract, it was shown that Subsequent to this, Lepanto declared stock dividends totaling to P3,000,000. In its decision, the court ordered Lepanto to issue and deliver to Nielson those shares of stocks (amounting to 10%) as well as the fruits or dividends that accrued to said shares. Lepanto, however, contends that this payment to Nielson stock dividends as compensation for its services under the management contract is a violation of the Corporation Code and that it was not, and could not be, the intention of Lepanto and Nielson that the services of Nielson should be paid in shares of stock taken out of stock dividends declared by Lepanto. Issue: Whether or not the court erred in ordering Lepanto to issue and deliver to Nielson 10% of the stock dividends declared. Ratio: Nielson should receive the equivalent of 10% of the amount of the dividends declared and paid not the dividends itself. Under the Corporation Code, the consideration for which shares of stocks may be issued are 1) cash; 2) property; and 3) undistributed profits. Shares of stock are given the name "stock dividends" only if they are issued in lieu of undistributed profits. If the shares are issued in exchange of cash or property then those shares do not fall under the category of stock dividends. A corporation may legally issue shares of stock in consideration of services rendered to it by a person not a stockholder or in payment of its indebtedness. But a share of stock thus issued should be part of the original capital stock of the corporation upon its organization, or part of the stocks issued when the increase of the capitalization of a corporation is properly authorized. In other words, it is the shares of stock that are originally issued by the corporation forming part of the capital that can be exchanged for cash or services rendered or property that is, if the corporation has original shares of stock unsold or unsubscribed either coming from the original capitalization or from the
office in their mining site did not come from the government. The company signified its own willingness to comply with the requirements of the government that it furnish free quarters and all the essential equipment required for the operation including the assignment of an employee who will perform the duties of a postmaster. It is evident that the company cannot now be hear to complain that it is not liable for the irregularity committed by its employee. It cannot now go back on its word on the ground of estoppel. While an ultra vires act is one committed outside the object for which the corporation is created and defined by the law of its organization and therefore beyond the powers conferred upon it by law, there are certain corporate acts that may be performed outside the scope of its powers if they are necessarily to promote the interest or welfare of the corporation. In this case, the post office is a vital improvement in the living conditions of the employees and laborers in the mining camp. Japanese War Notes v. SEC Facts: In this case, the Japanese War Notes (JWNCA) was issued an order by the SEC requiring them to show cause why they should not be proceeded against for making misrepresentations to the public about the need of registering and depositing Japanese war notes. On the investigation, they tried to show that there was actually no misrepresentation and that the representations were made in good faith and was later retracted and rectified. Notwithstanding, the commissioner of the SEC found that petitioner JWNCA, as a civic non-stock corporation, should not engage in business for profit and that it had received war notes for deposit and upon payment of fees, without authority in its articles to do so. Despite this prohibition, the SEC found that it has done so in the guise of service fees. Petitioner however contends that the registration of war notes and the collection of fees therefor (which it committed) is not prohibited by the corporation law and was under the authority implied from its articles of incorporation.