Petronilo J. Barayuga, petitioner v.

Adventist University of the Philippines, through its

Board ofTrustees, represented by its chairman, Nestor D. Dayson, respondents
Facts: This is a petition to review the decision promulgated by Court of Appeals which
nullifiedand set aside the writ of preliminary injunction issued by Imus, Cavite RTC to
prevent Adventist University of the Philippines from removing the petitioner.In a conference
held from November 27 to December 1, 2000, the North Philippine UnionMission elected the
members of the Board of Trustees of AUP, including the chairman and thesecretary. Dayson
was elected chairman while Barayuga was chosen secretary. In January 2001,the Board of
Trustees appointed Barayuga as president of AUP.An audit was conducted in November
2002 where it was revealed that the petitioner hadcommitted serious violations of
fundamental rules and procedure in the disbursement and use offunds.In January 2003, a
special meeting was held wherein the members of the Board ofTrustees, by secret ballot,
voted to remove him as President based on the findings of the audit, toappoint an interim
committee consisting of 3 members to assume the powers and functions of president, and to
recommend him to the NPUM for consideration as Associate Director ofSecondary
Education.Barayuga asked for reconsideration; however, it was denied by the Board
because hisr easons were not meritorious. He brought a suit for injunction and damages in
the RTC praying forthe issuance of a temporary restraining order against AUP and its Board
of Trustees, which was granted by the RTC. The respondents filed a petition for certiorari in
the CA, which rendered its decision nullifying the RTCs writ of preliminary injunction.
Issues: Whether or not his term as President was five years, as he insists, or only two years,
as theuniversity insists.
Decision: Section 108 of the Corporation Code determines the membership and number of
trustees inan educational corporation, from 5 to 15 as long as the number of trustees be in
multiples of 5
unless provided for by the articles of incorporation or by-laws of the institution. Unless
otherwiseprovided in the articles of Incorporation, the term of office of 1/5 of the Board of
Trustees shallexpire every year.Under the amended By-Laws of AUP, the term of office of
the members of the Board ofTrustees was only of two years; and the officers, who included
the President, were to be electedfrom among the members of the Board during their
organizational meeting, which was held duringthe election of the Board of Trustees every
two years, which means the officers, including thePresident, were to exercise the powers
vested by the amended By-Laws of AUP for a term of only 2years, not five.The petitioner,
having assumed as President of AUP on January 2001, could serve for only 2years or until
January 2003. By the time of his removal for cause as President, he was alreadyoccupying
the office in a hold-over capacity, and could be removed at any time, without cause,upon the
election or appointment of his successor. This, his removal as President of AUP, beingmade
in accordance with the AUP Amended By-Laws, was valid.
Corporate Law Case Digest: San Juan Structural V. CA (1998)
G.R. No. 129459 September 29, 1998
Lessons Applicable: Definition of a Close Corporation (Corporate Law)
FACTS:
February 14 1989: San Juan Structural and Steel Fabricators, Inc.'s (San Juan) entered into
an agreement with Motorich Sales Corporation (Motorich) for the transfer to it of a parcel of
land containing an area of 414 square meters
San Juan paid the down payment of P100,000, the balance to be paid on or before March 2,
1989

March 1, 1989: Mr. Andres T. Co, president of San Juan, wrote a letter course through
Motorich's broker requesting for a computation of the balance to be paid
Linda Aduca, who wrote the computation of the balance
March 2, 1989: San Juan was ready with the amount corresponding to the balance, covered
by Metrobank Cashier's Check, payable to Motorich
they were supposed to meet in the office of San Juan but Motorich's treasurer, Nenita Lee
Gruenberg, did not appear
Motorich refused to execute the Transfer of Rights/Deed of Assignment which is necessary
to transfer the certificate of title
ACL Development Corp. (ACL) is impleaded as a necessary party since Transfer Certificate
of Title No. (362909) 2876 is still in its name
JNM Realty & Development Corp. (JNM) is impleaded as a necessary party in view of the
fact that it is the transferor of right in favor of Motorich
April 6, 1989: ACL and Motorich entered into a Deed of Absolute Sale
the Registry of Deeds of Quezon City issued a new title in the name of Motorich Sales
Corporation, represented by Nenita Lee Gruenberg and Reynaldo L. Gruenberg, under
Transfer Certificate of Title No. 3571
as a result of Nenita Lee Gruenberg and Motorich's bad faith in refusing to execute a formal
Transfer of Rights/Deed of Assignment, San Juan suffered moral and nominal damages of
P500,000 and exemplary damages of P100,000.00 and P100,000 attorneys fees
San Juan lost the opportunity to construct a residential building in the sum of P100,000.00
Pesos
CA affirmed RTC for dismissing
San Juan argues that the veil of corporate fiction of Motorich should be pierced because it is
a close corporation.
Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg owned all or almost all or
99.866% to be accurate, of the subscribed capital stock" of Motorich, San Juan argues that
Gruenberg needed no authorization from the board to enter into the subject contract.
being solely owned by the Spouses Gruenberg, the company can treated as a close
corporation which can be bound by the acts of its principal stockholder who needs no
specific authority
ISSUE: W/N Motorich is a close corp. which does not need to be bound by its principal SH
HELD: NO. petition is hereby DENIED
Gruenberg, treasurer of Motorich, and Andres Co signed the contract but that cannot bind
Motorich, because it never authorized or ratified such sale or even the receipt of the earnest
money
A corporation is a juridical person separate and distinct from its stockholders or members

San Juan failed to prove otherwise

The document is a hand-written one, not a corporate receipt, and it bears only Nenita
Gruenberg's signature
GR: acts of corporate officers within the scope of their authority are binding on the
corporation. But when these officers exceed their authority, their actions "cannot bind the
corporation, unless it has ratified such acts or is estopped from disclaiming them.
statutorily granted privilege of a corporate veil may be used only for legitimate purposes
utilized as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse
legitimate issues; or serve as a mere alter ego or business conduit of a person or an
instrumentality, agency or adjunct of another corporation - none here
Sec. 96. Definition and Applicability of Title. A close corporation, within the meaning of
this Code, is one whose articles of incorporation provide that: (1) All of the corporation's
issued stock of all classes, exclusive of treasury shares, shall be held of record by not more
than a specified number of persons, not exceeding twenty (20); (2) All of the issued stock of
all classes shall be subject to one or more specified restrictions on transfer permitted by this
Title; and (3) The corporation shall not list in any stock exchange or make any public offering
of any of its stock of any class. Notwithstanding the foregoing, a corporation shall be
deemed not a close corporation when at least two-thirds (2/3) of its voting stock or voting
rights is owned or controlled by another corporation which is not a close corporation within
the meaning of this Code. . . . .
The articles of incorporation of Motorich Sales Corporation does not contain any provision
stated in Sec. 96
mere ownership by a single stockholder or by another corporation of all or capital stock of a
corporation is not of itself sufficient ground for disregarding the separate corporate
personalities
A narrow distribution of ownership does not, by itself, make a close corporation
Even if veil is peice it will then be a sale of conjugal property which Nenita alone could not
have effected
Gruenberg did not represent herself as authorized by Respondent Motorich despite the
receipt issued by the former specifically indicating that she was signing on behalf of Motorich
The amount paid as "earnest money" was not proven to have redounded to the benefit of
Motorich
it was deposited with the account of Aren Commercial c/o Motorich
Andres Co being a President of San Juan for more than 10 years cannot feign ignorance of
the scope of the authority of a corporate treasurer
However, Nenita Gruenberg should be ordered to return to petitioner the amount she
received as earnest money, as "no one shall enrich himself at the expense of another.
Naguiat v. NLRC
Naguiat v. NLRC (1997) / Panganiban
Facts

CFTI [Sergio as President; Antolin as VP] held a concessionaires contract with AAFES for
the operation of taxi services in Clark Air Base. Respondents were previously employed by
CFTI as taxi drivers. However, AAFES was dissolved as a result of the US military bases
phase-out. During the negotiations between AAFES Taxi Drivers Association and CFTI re:
separation benefits, it was agreed that separated drivers will be given P500/year of service.
Other drivers accepted the amount, but respondents refused to accept it.
The respondents, through NOWM, filed a complaint against S. Naguiat (NE), AAFES,
and AAFES TDA. They alleged that they were hired by CFTI and then assigned to NE which
managed, controlled, and supervised their employment. They averred that they were entitled
to separation pay based on their earnings of $15 for working 16 days/month. CFTIs defense
that the cessation of business was due to financial losses and lost business opportunity.
Labor Arbiter ruled in favor of the respondents, ordering CFTI to pay respondents
P1,200/year of service for humanitarian consideration. NLRC affirmed LAs decision with
modification by granting separation pay $120/year of service, and held that Naguiat
Enterprises, S. Naguiat, and A. Naguiat are jointly and severally liable with CFTI. NLRC
issued a second resolution denying the MfR of the petitioners.
Issues and Holding
Amount of separation pay
Labor Arbiter correctly found that CFTI stopped the taxi business because of the phase-out
of the US military bases, and NOT due to great financial loss as the business was earning
profitably at the time of closure.
LC 283: separation pay = 1 month pay or at least 1/2 month pay/year of service, whichever
is higher
NLRC did not commit GAD in ruling that respondents were entitled to separation pay of
$120 (half of $240 monthly pay) per year of service
Liability of NE, CFTI and officers
NE not liable
LA found that respondents were employees of CFTI as they received salary from said office,
etc. (upheld by SC)
S. Naguiat was presumed to be managing and controlling taxi business on behalf of NE; S.
Naguiat, in supervising taxi drivers, was carrying out his responsibilities as CFTI
NE is a separate corporation completely (trading business); it is neither respondents indirect
employer nor labor-only contractor
Constitution of CFTI-AAFES TDA provided that members are CFTI employees and that for
collective bargaining purposes, the definite employer is CFTI
CFTI president solidarily liable [S. Naguiat]
A.C. Ransom Labor Union-CCLU v. NLRC family-owned corporation filed application for
clearance to cease operations. Backwages were computed; however, none of the motions
for execution could be implemented for failure to find leviable assets. LA granted unions
prayer that officers and agents be personally held liable for payment of backwages. NLRC
however said that officers of a corporation are not personally liable for official acts unless
they exceeded scope of authority. SC however reversed NLRC and upheld LA, saying that if
the policy of the law were otherwise, the employer can have ways for evading payment of
backwages.
Employer any person acting in the interest of an employer, directly or indirectly (LC 212c)
Applying the ruling on A.C. Ransom, S. Naguiat falls within the meaning of employer who
may be held jointly and severally liable for the obligations of the corporation to the dismissed
employees
Both CFTI and NE were close family corporations (Corp. Code Sec. 100, par. 5) [To the
extent that the stockholders are actively engaged in the management or operation of the
business [] Said stockholders shall be personally liable for corporate torts unless the
corporation has obtained reasonably adequate liability insurance]
cf. MAM Realty Development v. NLRC: director / officer may still be held solidarily liable with
a corporation by a specific provision of law
WON there was corporate tort. YES
TORT violation of a right given or the omission of a duty imposed by law; breach of legal
duty

S. Naguiat is solidarily liable for corporate tort because he actively engaged in CFTIs
management or operation
CFTI VP not personally liable [A. Naguiat]
Was not shown that he acted in the capacity of a GM
No evidence on the extent of his participation in the management, operation of business
NOWMs personality to represent respondents
Petitioners held in estoppel for not raising issue before LA or NLRC
No denial of due process since the Naguiats availed of the chance to present positions
before LA
Manuel Dulay Enterprises, Inc. v. CA, Torres [Aug 27, 1993]
Facts:

Manuel R. Dulay Enterprises, Inc, a domestic corporation obtained various loans for
the construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel).

Manuel Dulay by virtue of Board Resolution No 18 sold the subject property to

spouses Maria Theresa and Castrense Veloso.

Maria Veloso (buyer), without the knowledge of Manuel Dulay, mortgaged the subject
property to private respondent Manuel A. Torres. #fluffypeaches Upon the failure of Maria
Veloso to pay Torres, the property was sold to Torres in an extrajudicial foreclosure sale.

Torres filed an action against the corporation, Virgilio Dulay and against the tenants of
the apartment.

RTC ordered the corporation and the tenants to vacate the building.

Petitioners: RTC had acted with GAD when it applied the doctrine of piercing the
veil of corporate entity considering that the sale has no binding effect on corporation as
Board Resolution No. 18 which authorized the sale of the subject property was resolved
without the approval of all the members of the board of directors and said Board
Resolution was prepared by a person not designated by the corporation to be its secretary.
Issue:

WON the sale to Veloso is valid notwithstanding that it was resolved without the
approval of all the members of the board of directors. (YES)

Ruling

Section 101 of the Corporation Code of the Philippines provides:

Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws
provide otherwise, any action by the directors of a close corporation without a meeting shall
nevertheless be deemed valid if:
1. Before or after such action is taken, written consent thereto is signed by all the directors,
or
2. All the stockholders have actual or implied knowledge of the action and make no prompt
objection thereto in writing; or
3. The directors are accustomed to take informal action with the express or implied acquiese
of all the stockholders, or
4. All the directors have express or implied knowledge of the action in question and none of
them makes prompt objection thereto in writing.
If a directors' meeting is held without call or notice, an action taken therein within the
corporate powers is deemed ratified by a director who failed to attend, unless he promptly
files his written objection with the secretary of the corporation after having knowledge
thereof.

Dulay Inc. is classified as a close corporation and consequently a board resolution

authorizing the sale or mortgage isnot necessary to bind the corporation for the action of
its president. #fluffypeaches At any rate, corporate actiontaken at a board meeting without
proper call or notice in a close corporation is deemed ratified by the absent director
unless the latter promptly files his written objection with the secretary of the
corporation after having knowledge of the meeting which, in his case, Virgilio Dulay failed
to do.

Although a corporation is an entity which has a personality distinct and separate from
its individual stockholders or members, the veil of corporate fiction may be pierced
when it is used to defeat public convenience justify wrong, protect fraud or defend
crime.

Section 109
TITLE
Barlin v. Ramirez

Section 113
TITLE
Roman Catholic
Apostolic Adm. Of
Davao, Inc. v. Land
Registration
Commission

FACTS
In 1869, the church and convent in the pueblo
of Lagonoy were burned. They were rebuilt by
the people of the municipality and financed in
part by the church and in part by the people.
After completion, Ramirez was appointed by
Barlin, the parish priest, to administer the
church.
In 1902, Ramirez was instructed by Barlin to
turn over and deliver to Fr. Pisino, his
successor, the church, convent, cemetery, and
other property of the Church. Ramirez replied
that he is unable to obey as the people of the
pueblo decided to separate from the Pope at
Rome and instead join the Filipino Church,
because the Pope refused to either recognize
or grant rights to the Filipino clergy.
Barlin, therefore, instituted this action alleging
that the Roman Catholic Church was the
owner of the church building, the convent, etc.
and praying that the same be turned over by
Ramirez.
Ramirez claimed that it is the municipality of
Lagonoy who owned the properties.
FACTS
On October 4, 1954, Mateo L. Rodis, a Filipino
citizen and resident of the City of Davao,
executed a deed of sale of a parcel of land
located in the same city in favor of the Roman
Catholic Administrator of Davao, Inc., (RCAD)
a corporation sole organized and existing in
accordance with Philippine laws, with Msgr.
Clovis Thibault, a Canadian citizen, as actual
incumbent.
The Commissioner of the LRC denied RCADs
request to register the parcel of land in its
name, holding that in view of the provisions of
Sections 1 and 5 of Article XIII of the
Philippine Constitution, RCAD was not
qualified to acquire private lands in the
Philippines in the absence of proof that at
least 60 per centum of the capital, property, or
assets of the Roman Catholic Administrator of
Davao, Inc., was actually owned or controlled
by Filipino citizens, there being no question
that the present incumbent of the corporation
sole was a Canadian citizen.
The RCAD argued that a corporation sole,
irrespective of the citizenship of its incumbent,
is not prohibited or disqualified to acquire and
hold real properties. The Corporation Law and
the Canon Law are explicit in their provisions
that a corporation sole or "ordinary" is not the

ISSUE/S
Who owns the properties?

HELD
Prior to the cession of the Philippines to the
United States the King of Spain was not the
owner of the consecrated churches therein and
had no right to the possession thereof. The
exclusive right to such possession was in the
Roman Catholic Church and such right has
continued since such cession and now exists.

Whether or not the Roman

Catholic Church has legal
personality in the
Philippines

The Roman Catholic Church is a juridical

person in the Philippine Islands.

ISSUE/S
Whether or not the LRC
may be compelled to
register the land in
RCADs name

DOCTRINE
The Roman Catholic Church is a juridical
person in the Philippine Islands.

Since the latter half of the third century, and

more particularly since the year 313, when
Constantine, by the edict of Milan, inaugurated
an era of protection for the church, the latter
gradually entered upon the exercise of such
rights as were required for the acquisition,
preservation and transmission of property the
same as any other juridical entity under the
laws of the Empire.

HELD
YES. Lands held in trust for specific purposes
may be subject of registration, and the
capacity of a corporation sole, like RCAD, to
register lands belonging to it is acknowledged,
and title thereto may be issued in its name.
The bishops or archbishops, as the case may
be, as corporation's sole are merely
administrators of the church properties that
come to their possession, and which they hold
in trust for the church.
Through this legal fiction, church properties
acquired by the incumbent of a corporation
sole pass, by operation of law, upon his death
not to his personal heirs but to his successor
in office.
Although a branch of the Universal Roman
Catholic Apostolic Church, every Roman
Catholic Church in different countries, if it
exercises its mission and is lawfully
incorporated in accordance with the laws of
the country where it is located, is considered
an entity or person with all the rights and
privileges granted to such artificial being under
the laws of that country, separate and distinct
from the personality of the Roman Pontiff or
the Holy See, without prejudice to its religious
relations with the latter which are governed by
the Canon Law or their rules and regulations.

DOCTRINE
A corporation sole consists of one person
only, and his successors (who will always
be one at a time), in some particular
station, who are incorporated by law in
order to give them some legal capacities
and advantages, particularly that of
perpetuity, which in their natural persons
they could not have had. In this sense,
the king is a sole corporation; so is a
bishop, or deans, distinct from their
several chapters
Characteristics of corporation sole:
(1) the corporation sole, unlike the
ordinary corporations which are formed
by no less than 5 incorporators, is
composed of only one person, usually
the head or bishop of the diocese, a unit
which is not subject to expansion for the
purpose of determining any percentage
whatsoever;
(2) the corporation sole is only the
administrator and not the owner of the
temporalities located in the territory
comprised by said corporation sole;
(3) such temporalities are administered
for and on behalf of the faithful residing
in the diocese or territory of the
corporation sole; and

owner of the properties that he may acquire

but merely the administrator thereof.
The Canon Law also specified that church
temporalities are owned by the Catholic
Church as a "moral person" or by the dioceses
as minor "moral persons" with the ordinary or
bishop as administrator.
And elaborating on the composition of the
Catholic Church in the Philippines, RCAD
explained that as a religious society or
organization, it is made up of 2 elements or
divisions the clergy or religious members
and the faithful or lay members.
The 1948 figures of the Bureau of Census and
Statistics showed that there were 277,551
Catholics in Davao and aliens residing therein
numbered 3,465. Even granting that all these
foreigners are Catholics, RCAD contends that
Filipino citizens form more than 80 per cent of
the entire Catholics population of that area.

When the specific provision of the Constitution

invoked by respondent Commissioner (section
1, Art. XIII), was under consideration, the
framers of the same did not have in mind
corporations sole (prohibition limited to foreign
corporation).
The corporation sole by reason of their
peculiar constitution and form of operation
have no designed owner of its temporalities,
although by the terms of the law it can be
safely implied that they ordinarily hold them in
trust for the benefit of the Roman Catholic
faithful of their respective locality or diocese.
They can not be considered as aliens because
they have no nationality at all. In determining,
therefore, whether the constitutional provision
requiring 60 per centum Filipino capital is
applicable to corporations sole, the nationality
of the constituents of the diocese, and not the
nationality of the actual incumbent of the
parish, must be taken into consideration. In the
present case, even if the question of
nationality be considered, the aforesaid
constitutional requirement is fully met and
satisfied, considering that the corporation sole
in question is composed of an overwhelming
majority of Filipinos.

(4) the latter, as such, has no nationality

and the citizenship of the incumbent
Ordinary has nothing to do with the
operation, management or administration
of the corporation sole, nor affects the
citizenship of the faithful connected with
their respective diocese or corporation
sole.

Republic v. IAC