Renato Tayag vs Benguet

Consolidated, Inc.
26 SCRA 242 Business Organization Corporation Law Domicile of a Corporation By
Laws Must Yield To a Court Order Corporation is an Artificial Being
In March 1960, Idonah Perkins died in New York. She left behind properties here and
abroad. One property she left behind were two stock certificates covering 33,002 shares of
stocks of the Benguet Consolidated, Inc (BCI). Said stock certificates were in the
possession of the Country Trust Company of New York (CTC-NY). CTC-NY was the
domiciliary administrator of the estate of Perkins (obviously in the USA). Meanwhile, in
1963, Renato Tayag was appointed as the ancillary administrator (of the properties of
Perkins she left behind in the Philippines).
A dispute arose between CTC-NY and Tayag as to who between them is entitled to possess
the stock certificates. A case ensued and eventually, the trial court ordered CTC-NY to turn
over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a
petition to have said stock certificates be declared lost and to compel BCI to issue new
stock certificates in replacement thereof. The trial court granted Tayags petition.
BCI assailed said order as it averred that it cannot possibly issue new stock certificates
because the two stock certificates declared lost are not actually lost; that the trial court as
well Tayag acknowledged that the stock certificates exists and that they are with CTC-NY;
that according to BCIs by laws, it can only issue new stock certificates, in lieu of lost,
stolen, or destroyed certificates of stocks, only after court of law has issued a final and
executory order as to who really owns a certificate of stock.
ISSUE: Whether or not the arguments of Benguet Consolidated, Inc. are correct.
HELD: No. Benguet Consolidated is a corporation who owes its existence to Philippine
laws. It has been given rights and privileges under the law. Corollary, it also has obligations
under the law and one of those is to follow valid legal court orders. It is not immune from
judicial control because it is domiciled here in the Philippines. BCI is a Philippine
corporation owing full allegiance and subject to the unrestricted jurisdiction of local courts.
Its shares of stock cannot therefore be considered in any wise as immune from lawful court
orders. Further, to allow BCIs opposition is to render the court order against CTC-NY a
mere scrap of paper. It will leave Tayag without any remedy simply because CTC-NY, a
foreign entity refuses to comply with a valid court order. The final recourse then is for our
local courts to create a legal fiction such that the stock certificates in issue be declared lost
even though in reality they exist in the hands of CTC-NY. This is valid. As held time and
again, fictions which the law may rely upon in the pursuit of legitimate ends have played an
important part in its development.
Further still, the argument invoked by BCI that it can only issue new stock certificates in
accordance with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the
order of the court it simply refused to turn over the stock certificates hence ownership can
be said to have been settled in favor of estate of Perkins here. Also, assuming that there
really is a conflict between BCIs bylaws and the court order, what should prevail is the

lawful court order. It would be highly irregular if court orders would yield to the bylaws of a
corporation. Again, a corporation is not immune from judicial orders.

Corporate Law Case Digest: Stockholders Of

F. Guanzon And Sons, Inc V. Register Of
Deeds Of Manila (1962)
G.R. No. L-18216

October 30, 1962

Lessons Applicable: Strong Juridical Personality (Corporate Law)

FACTS:

Sept 19, 1960: 5 stockholders of the F. Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the corporation, dissolution and distribution
among themselves in proportion to their shareholdings, as liquidating dividends,
corporate assets, including real properties
Register of Deeds of Manila denied the registration of the certificate of

liquidation:
1.

The number of parcels not certified to in the acknowledgment;

2.

P430.50 Reg. fees need be paid;

3.

P940.45 documentary stamps need be attached to the document;

4.

The judgment of the Court approving the dissolution and directing the disposition
of the assets of the corporation need be presented

Commissioner of Land Registration overruled ground No. 7 and sustained

requirements Nos. 3, 5 and 6.

Stockholders appealed
contend that the certificate of liquidation is not a conveyance or transfer
but merely a distribution of the assets of the corporation which has ceased to exist
for having been dissolved

ISSUE: W/N certificate merely involves a distribution of the corporation's assets (or
should be considered a transfer or conveyance)

HELD: NO. affirm the resolution appealed from

Corporation - juridical person distinct from the members composing it.

Properties registered in the name of the corporation are owned by it as an

entity separate and distinct from its members.

While shares of stock constitute personal property they do not represent

property of the corporation.

A share of stock only typifies an aliquot part of the corporation's

property, or the right to share in its proceeds to that extent when distributed
according to law and equity but its holder is NOT the owner of any part of the capital
of the corporation nor entitled to possession
The stockholder is not a co-owner or tenant in common of the

corporate property

Pioneer Insurance & Surety

Corporation vs Court of Appeals
November 18, 2012
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ADVERTISEMENTS

175 SCRA 668 Business Organization Corporation Law When De Facto Partnership
Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim
convinced Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border
Machinery and Heavy Equipment Company (BORMAHECO) to contribute funds and to buy
two aircrafts which would form part a corporation which will be the expansion of Southern
Air Lines. Maglana et al then contributed and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the
knowledge of Maglana et al, made an agreement with Pioneer Insurance for the latter to
insure the two aircrafts which were brought in installment from Japan Domestic Airlines
(JDA) using said aircrafts as security. So when Lim defaulted from paying JDA, the two
aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.
HELD: No. There was no de facto partnership. Ordinarily, when co-investors agreed to do
business through a corporation but failed to incorporate, a de facto partnership would have
been formed, and as such, all must share in the losses and/or gains of the venture in
proportion to their contribution. But in this case, it was shown that Lim did not have the
intent to form a corporation with Maglana et al. This can be inferred from acts of unilaterally
taking out a surety from Pioneer Insurance and not using the funds he got from Maglana et
al. The record shows that Lim was acting on his own and not in behalf of his other would-be
incorporators in transacting the sale of the airplanes and spare parts.

Lim Tong Lim vs Philippine

Fishing Gear Industries, Inc.
July 8, 2012
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Business Organization Partnership, Agency, Trust Corporation by Estoppel

It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing
with him and one Antonio Chua. The three agreed to purchase two fishing boats but since
they do not have the money they borrowed from one Jesus Lim (brother of Lim Tong Lim).
They again borrowed money and they agreed to purchase fishing nets and other fishing
equipments. Now, Yao and Chua represented themselves as acting in behalf of Ocean
Quest Fishing Corporation (OQFC) they contracted with Philippine Fishing Gear Industries
(PFGI) for the purchase of fishing nets amounting to more than P500k.
They were however unable to pay PFGI and so they were sued in their own names because
apparently OQFC is a non-existent corporation. Chua admitted liability and asked for some
time to pay. Yao waived his rights. Lim Tong Lim however argued that hes not liable
because he was not aware that Chua and Yao represented themselves as a corporation;
that the two acted without his knowledge and consent.
ISSUE: Whether or not Lim Tong Lim is liable.
HELD: Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim
had decided to engage in a fishing business, which they started by buying boats worth
P3.35 million, financed by a loan secured from Jesus Lim. In their Compromise Agreement,
they subsequently revealed their intention to pay the loan with the proceeds of the sale of
the boats, and to divide equally among them the excess or loss. These boats, the purchase
and the repair of which were financed with borrowed money, fell under the term common
fund under Article 1767. The contribution to such fund need not be cash or fixed assets; it
could be an intangible like credit or industry. That the parties agreed that any loss or profit
from the sale and operation of the boats would be divided equally among them also shows
that they had indeed formed a partnership.
Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be
imputed to Yao and Chua. Unquestionably, Lim Tong Lim benefited from the use of the nets
found in his boats, the boat which has earlier been proven to be an asset of the partnership.
Lim, Chua and Yao decided to form a corporation. Although it was never legally formed for
unknown reasons, this fact alone does not preclude the liabilities of the three as contracting
parties in representation of it. Clearly, under the law on estoppel, those acting on behalf of a
corporation and those benefited by it, knowing it to be without valid existence, are held
liable as general partners.