GEORG GROTJAHN GMBH & CO. vs .Hon.

ISNANI
G.R. No. 109272 August 10, 1994 Page 4

FACTS: Petitioner is a multinational company organized and existing under the laws of the Federal Republic of
Germany. On July 6, 1983, petitioner filed an application with the SEC for the establishment of a RAH in the
Philippines. The application was approved by the BOI on Sep. 6, 1983. Consequently, on Sep. 20, 1983, the SEC
issued a Certificate of Registration and License to petitioner. Private respondent Romana Lanchinebre was a sales
representative of petitioner. On March 1992,she secured a loan of P25,000.00 from petitioner. Subsequently she
made additional cash advances in the sum of P10,000.00. Of the total amount, P12,170.37 remained
unpaid. Despite demand, private respondent Romana failed to settle her obligation. On September 2, 1992,
petitioner filed a Complaint for collection of sum of money against private respondents spouses Romana and Teofilo
Lanchinebre w/ the RTC. Instead of filing their Answer, private respondents moved to dismiss the Complaint. This
was opposed by petitioner.

ISSUE: Whether or not the petitioner has capacity to sue and be sued in the Philippines despite the fact that
petitioner is duly licensed by the SEC to set up and operate a RAH in the country and that it has continuously
operated as such for the last 9 years.

RULING: YES. It is clear that petitioner is a foreign corporation doing business in the Philippines. Hence, Petitioner is
covered by the Omnibus Investment Code of 1987. Petitioner does not engage in commercial dealings or activities in
the country because it is precluded from doing so by P.D. No. 218, under which it was established. Nonetheless, it
has been continuously, since 1983, acting as supervision, communications and coordination center for its home
office's affiliates in Singapore, and in the process has named its local agent and has employed Philippine nationals
like private respondent Romana Lanchinebre (an employee).From this uninterrupted performance by petitioner of
acts pursuant to its primary purposes and functions as a regional/area headquarters for its home office, it is clear that
petitioner is doing business in the country. Moreover, private respondents are estopped from assailing the personality
of petitioner. The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the doctrine of estoppel to deny corporate existence
applies to foreign as well as to domestic corporations. One who has dealt with a corporation of foreign origin as a
corporate entity is estopped to deny its corporate existence and capacity. The principle will be applied to prevent a
person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes
chiefly incases where such person has received the benefits of the contract.

LEON J. LAMBERT vs. T. J. FOX

1914 Jan 29, G.R. No. 7991 Page 10

FACTS: Due to financial crisis the petitioner and the defendant were able to acquire the bulk of the stocks of John R.
Edgar & Co. as the latter’s creditors. Hence, upon incorporating said company, the parties entered into an agreement
that either of them will not sell or transfer their respective shares till after one year from the date of agreement.
However, less than a year, defendant Fox sold his stock in the said corporation to E. D. McCullough of the firm of E.
C. McCullough & Co. of Manila, a strong competitor of the said John R. Edgar & Co., Inc. This sale was made by the
defendant against the protest of the plaintiff and with the warning that he would be held liable under the contract
hereinabove set forth and in accordance with its terms. In fact, the defendant Fox offered to sell his shares of stock to
the plaintiff for the same sum that McCullough was paying for them less P1, 000, the penalty specified in the contract.
The trial Court rendered judgment in favor of defendant.

ISSUE: Whether or not the stipulation not to sell is valid.

RULING: YES. The suspension of the power to sell has a beneficial purpose, results in the protection of the
corporation as well as of the individual parties to the contract, and is reasonable as to the length of time of the
suspension. The intention of parties to a contract must be determined, in the first instance, from the words of the
contract itself. It is to be presumed that persons mean what they say when they speak plain English. Interpretation
and construction should by the instruments last resorted to by a court in determining what the parties agreed to.
Where the language used by the parties is plain, then construction and interpretation are unnecessary and, if used,
result in making a contract for the parties. In this jurisdiction, there is no difference between a penalty and liquidated
damages, so far as legal results are concerned. Whatever differences exists between them as a matter of language,
they a retreated the same legally. In either case the party to whom payment is to be made is entitled to recover the
sum stipulated without the necessity of proving damages. Indeed one of the primary purposes in fixing a penalty or in
liquidating damages is to avoid such necessity.
 GARCIA vs. SUAREZ
G.R. No. L-45493 April 21, 1939 Page 11
FACTS: On October 4, 1924, the appellant subscribed to sixteen shares of the capital stock of the Compañia
Hispano-Filipina, Inc., a corporation which is duly formed and organized. Of the sixteen subscribed shares, at the par
value of P100 each, the appellant only paid P400, the value of four shares. On June 5, 1931, the plaintiff-appellee
was appointed by the court receiver of the Compañia Hispano-Filipina, Inc., to collect all the credits of said
corporation, pay its debts and dispose of the remainder of its assets and of its properties. On June 18, 1931, the
plaintiff-appellee in vain made demand upon the defendant-appellant to pay the balance of his subscription. On July
10, 1933, the plaintiff, as receiver, brought an action in the Court of First Instance of Manila to recover from the
defendant-appellant and other shareholders the balance of their subscriptions, but the complaint was dismissed for
lack of prosecution. On October 10, 1935, a similar complaint was filed against the appellant, and after trial,
judgment was rendered therein ordering the said defendant to pay to the plaintiff, as receiver of Compañia Hispano-
Filipina, Inc., the sum of P1,200, with legal interest thereon from October 4, 1924, and the costs. The defendant
appealed and in this instance contends that the trial court erred in holding that the action of the plaintiff-appellee has
not prescribed, and that the appellant has not been released from his obligation to pay the balance of his
subscription.

ISSUE: Whether or not the obligation contracted by the appellant to pay the value of his subscription was
demandable from the date of subscription in the absence of any stipulation to the contrary.

RULING: NO. Section 37 of the Corporation Law provides when the obligation to pay interest arises and when
payment should be made, but it is absolutely silent as to when the subscription to a stock should be paid. Of course,
the obligation to pay arises from the date of the subscription, but the coming into being of an obligation should not be
confused with the time when it becomes demandable. In a loan for example, the obligation to pay arises from the time
the loan is taken; but the maturity of that obligation, the date when the debtor can be compelled to pay, is not the date
itself of the loan, because this would be absurd. The date when payment can be demanded is necessarily distinct
from and subsequent to that the obligation is contracted. By the same token, the subscription to the capital stock of
the corporation, unless otherwise stipulation, is not payable at the moment of the subscription but on a subsequent
date which may be fixed by the corporation. Hence, section 38 of the Corporation Law, amended by Act No. 3518,
provides that: The board of directors or trustees of any stock corporation formed, organized, or existing under this Act
may at any time declare due and payable to the corporation unpaid subscriptions to the capital stock. The board of
directors of the Compañia Hispano-Filipino, Inc., not having declared due and payable the stock subscribed by the
appellant, the prescriptive period of the action for the collection thereof only commenced to run from June 18, 1931
when the plaintiff, in his capacity as receiver and in the exercise of the power conferred upon him by the said section
38 of the Corporation Law, demanded of the appellant to pay the balance of his subscription. The present action
having been filed on October 10,1935, the defense of prescription is entirely without basis.

APODACA vs. NATIONAL LABOR RELATIONS COMMISSION

G.R. No. 80039 April 18, 1989 Page 11
FACTS: Petitioner was employed in respondent corporation. On August 28, 1985, respondent Jose M. Mirasol
persuaded petitioner to subscribe to 1,500 shares of respondent corporation at P100.00 per share or a total of
P150,000.00. He made an initial payment of P37,500.00. On September 1, 1975, petitioner was appointed President
and General Manager of the respondent corporation. However, on January 2,1986, he resigned. On December 19,
1986, petitioner instituted with the NLRC a complaint against private respondents for the payment of his
unpaid wages, his cost of living allowance, the balance of his gasoline and representation expenses and his bonus
compensation for 1986. Petitioner and private respondents submitted their position papers to the labor arbiter. Private
respondents admitted that there is due to petitioner the amount of P17,060.07 but this was applied to the unpaid
balance of his subscription in the amount of P95,439.93. Petitioner questioned the set-off alleging that there was no
call or notice for the payment of the unpaid subscription and that, accordingly, the alleged obligation is not
enforceable. In a decision dated April 28, 1987, the labor arbiter sustained the claim of petitioner forP17,060.07 on
the ground that the employer has no right to withhold payment of wages already earned under Article 103 of the
Labor Code. Upon the appeal of the private respondents to public respondent NLRC, the decision of the labor arbiter
was reversed in a decision dated September 18, 1987. The NLRC held that a stockholder who fails to pay his
unpaid subscription on call becomes a debtor of the corporation and that the set-off of said obligation against the
wages and others due to petitioner is not contrary to law, morals and public policy.

ISSUE: Whether or not an obligation arising from non-payment of stock subscriptions to a corporation can be offset
against a money claim of an employee against the employer.
RULING: NO. The unpaid subscriptions are not due and payable until a call is made by the corporation for payment.
Private respondents have not presented a resolution of the board of directors of respondent corporation calling for the
payment of the unpaid subscriptions. It does not even appear that a notice of such call has been sent to petitioner by
the respondent corporation. What the records show is that the respondent corporation deducted the amount due to
petitioner from the amount receivable from him for the unpaid subscriptions. No doubt such set-off was without lawful
basis, if not premature. As there was no notice or call for the payment of unpaid subscriptions, the same is not yet
due and payable. Lastly, assuming further that there was a call for payment of the unpaid subscription, the NLRC
cannot validly set it off against the wages and other benefits due petitioner. Article 113 of the Labor Code allows such
a deduction from the wages of the employees by the employer, only in three instances, to wit: No employer, in his
own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except in certain
cases.

EMBASSY FARMS, INC. vs. COURT OF APPEALS

G.R. No. 80682 August 13, 1990 Page 10
FACTS: It appears on record that sometime on August 2, 1984, Alexander G. Asuncion (AGA for short)and Eduardo
B. Evangelists (EBE for short) entered into a Memorandum of Agreement (Annex "A" of the petition). Under said
agreement EBE obligated himself to transfer to AGA 19 parcels of agricultural land registered in his name with an
aggregate area of 104,447 square meters located in Loma de Gato, Marilao, Bulacan, together with the stocks,
equipment and facilities of a piggery farm owned by Embassy Farms, Inc., a registered corporation wherein ninety
(90) per cent of its shares of stock is owned by EBE.EBE also obligated himself to cede, transfer and convey "in a
manner absolute and irrevocable any and all of his shares of stocks" in Embassy Farins Inc. to AGA or his nominees
"until the total of said shares of stock so transferred shall constitute 90% of the paid-in-equity of said corporation"
within a reasonable time from signing of the document. Likewise, EBE obligated to turnover to AGA the effective
control and management of the piggery upon the signing of the agreement .On the other hand, AGA obligated
himself, upon signing of the agreement to pay to EBE the total sum of close to P8,630,000.00. Within reasonable time
from signing of the agreement AGA obligated himself to organize and register a new corporation with an authorized
capital stock of P10,000,000.00which upon registration will take over all the rights and liabilities of AGA.

ISSUE: Whether or not there has been an effective transfer of shares of stock from AGA to other persons.

RULING: NO. There being no delivery of the indorsed shares of stock AGA cannot therefore effectively transfer to
other person or his nominees the undelivered shares of stock. For an effective transfer of shares of stock the mode
and manner of transfer as prescribed by law must be followed (Navea v. Peers Marketing Corp., 74 SCRA 65). As
provided under Section 3 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines,
shares of stock may be transferred by delivery to the transferee of the certificate properly indorsed. Title may be
vested in the transferee by the delivery of the duly indorsed certificate of stock (18 C.J.S. 928, cited in Rivera v.
Florendo, 144 SCRA 643). However, no transfer shall be valid, except as between the parties until the transfer is
properly recorded in the books of the corporation. In the case at bar the indorsed certificate of stock was not actually
delivered to AGA so that EBE is still the controlling stockholder of Embassy Farms despite the execution of the
memorandum of agreement and the turn over of control and management of the Embassy Farms to AGA on August
2,1984.When AGA filed on April 10, 1986 an action for the rescission of contracts with damages the Pasig Court
merely restored and established the status quo prior to the execution of the memorandum of agreement by the
issuance of a restraining order on July 10, 1987 and the writ of preliminary injunction on July 30, 1987. It would be
unjust and unfair to allow AGA and his nominees to control and manage the Embassy Farms despite the fact that
AGA who is the source of their supposed shares of stock in the corporation is not asking for the delivery of the
indorsed certificate of stock but for the rescission of the memorandum of agreement. Rescission would result in
mutual restitution (Magdalena Estate v. Myrick,71 Phil. 344) so it is but proper to allow EBE to manage the farm.

RAMON A. GONZALES vs.THE PHILIPPINE NATIONAL BANK

G.R. No. L-33320 May 30, 1983 Page 11

FACTS: Petitioner Ramon A. Gonzales instituted in the erstwhile Court of First Instance of Manila a special civil
action for mandamus against the herein respondent praying that the latter be ordered to allow him to look into the
books and records of the respondent bank in order to satisfy himself as to the truth of the published reports that the
respondent has guaranteed the obligation of Southern Negros Development Corporation in the purchase of a US$ 23
million sugar-mill to be financed by Japanese suppliers and financiers; that the respondent is financing the
construction of the P 21 million Cebu-Mactan Bridge to be constructed by V.C. Ponce, Inc., and the construction of
Passi Sugar Mill at Iloilo by the Honiron Philippines, Inc., as well as to inquire into the validity of Id transactions. The
petitioner has alleged this written request for such examination was denied by the respondent. The trial court having
dismissed the petition for mandamus, the instant appeal to review the said dismissal was filed.
ISSUE: Whether or not the denial for the request of petitioner for inspection valid.

RULING: YES. Although the petitioner has claimed that he has justifiable motives in seeking the inspection of the
books of the respondent bank, he has not set forth the reasons and the purposes for which he desires such
inspection, except to satisfy himself as to the truth of published reports regarding certain transactions entered into by
the respondent bank and to inquire into their validity. The circumstances under which he acquired one share of stock
in the respondent bank purposely to exercise the right of inspection do not argue in favor of his good faith and proper
motivation. Admittedly he sought to be a stockholder in order to pry into transactions entered into by the respondent
bank even before he became a stockholder. His obvious purpose was to arm himself with materials which he can use
against the respondent bank for acts done by the latter when the petitioner was a total stranger to the same. He could
have been impelled by a laudable sense of civic consciousness, but it could not be said that his purpose is germane
to his interest as a stockholder. We also find merit in the contention of the respondent bank that the inspection sought
to be exercised by the petitioner would be violative of the provisions of its charter. The Superintendent of Banks and
the Auditor General, or other officers designated by law to inspect or investigate the condition of the National Bank,
shall not reveal to any person other than the President of the Philippines, the Secretary of Finance, and the Board of
Directors the details of the inspection or investigation, nor shall 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. Any director, officer, employee, or agent of the Bank, who violates or
permits the violation of any of the provisions of this Act, or any person aiding or abetting the violations of any of the
provisions of this Act, shall be punished by a fine not to exceed ten thousand pesos or by imprisonment of not more
than five years, or both such fine and imprisonment. 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.

BANK OF THE PHILIPPINE ISLANDS vs. BPI EMPLOYEES UNION-DAVAO CHAPTER-

FEDERATION OF UNIONS IN BPI UNIBANK
G.R. No. 164301 August 10, 2010 Page 11
FACTS: The Bangko Sentral ng Pilipinas approved the Articles of Merger executed on January 20, 2000by and
between BPI, herein petitioner, and FEBTC. This Article and Plan of Merger was approved by the Securities and
Exchange Commission on April 7, 2000. Pursuant to the Article and Plan of Merger, all the assets and liabilities of
FEBTC were transferred to and absorbed by BPI as the surviving corporation. FEBTC employees, including those in
its different branches across the country, were hired by petitioner as its own employees, with their status and tenure
recognized and salaries and benefits maintained. Respondent BPI Employees Union-Davao Chapter -
Federation of Unions in BPI Unibank is the exclusive bargaining agent of BPI’s rank and file employees in
Davao City. The former FEBTC rank-and-file employees in Davao City did not belong to any labor union at the time of
the merger. Prior to the effectivity of the merger, or on March 31, 2000, respondent Union invited said FEBTC
employees to a meeting regarding the Union Shop Clause of the existing CBA between petitioner BPI and
respondent Union. After the meeting called by the Union, some of the former FEBTC employees joined the Union,
while others refused. Later, however, some of those who initially joined retracted their membership.

ISSUE: Whether or not the FEBTC employees were automatically absorbed by petitioner upon the merger between
FEBTC and BPI covered by the Union Shop Clause found in the existing CBA between petitioner and respondent
Union.

RULING: NO. In legal parlance, however, human beings are never embraced in the term "assets and liabilities.
"Moreover, BPI’s absorption of former FEBTC employees was neither by operation of law nor by legal consequence
of contract. There was no government regulation or law that compelled the merger of the two banks or the absorption
of the employees of the dissolved corporation by the surviving corporation. Had there been such law or regulation,
the absorption of employees of the non-surviving entities of the merger would have been mandatory on the surviving
corporation. In the present case, the merger was voluntarily entered into by both banks presumably for some mutually
acceptable consideration. In fact, the Corporation Code does not also mandate the absorption of the employees of
the non-surviving corporation by the surviving corporation in the case of a merger. Significantly, too, the Articles of
Merger and Plan of Merger dated April 7, 2000 did not contain any specific stipulation with respect to the employment
contracts of existing personnel of the non-surviving entity which is FEBTC. Unlike the Voluntary Arbitrator,
this Court cannot uphold the reasoning that the general stipulation regarding transfer of FEBTC assets and
liabilities to BPI as set forth in the Articles of Merger necessarily includes the transfer of all FEBTC employees into
the employ of BPI and neither BPI nor the FEBTC employees allegedly could do anything about it. Even if it is so, it
does not follow that the absorbed employees should not be subject to the terms and conditions of employment
obtaining in the surviving corporation.

ASSOCIATED BANK vs. HON. COURT OF APPEALS, PROVINCE OF TARLAC and

PHILIPPINE NATIONAL BANK
G.R. No. 107382/G.R. No. 107612 January 31, 1996 Page 11
FACTS: The Province of Tarlac maintains a current account with the Philippine National Bank (PNB) Tarlac Branch
where the provincial funds are deposited. Checks issued by the Province are signed by the Provincial Treasurer and
countersigned by the Provincial Auditor or the Secretary of the Sangguniang Bayan. A portion of the funds of the
province is allocated to the Concepcion Emergency Hospital. The allotment checks for said government hospital
are drawn to the order of "Concepcion Emergency Hospital, Concepcion, Tarlac" or "The Chief, Concepcion
Emergency Hospital, Concepcion, Tarlac." The checks are released by the Office of the Provincial Treasurer and
received for the hospital by its administrative officer and cashier. In January 1981, the books of account of the
Provincial Treasurer were post-audited by the Provincial Auditor. It was then discovered that the hospital did not
receive several allotment checks drawn by the Province. On February 19, 1981, the Provincial Treasurer requested
the manager of the PNB to return all of its cleared checks which were issued from 1977 to 1980 in order to verify the
regularity of their encashment. After the checks were examined, the Provincial Treasurer learned that 30 checks
amounting to P203,300.00 were encashed by one Fausto Pangilinan, with the Associated Bank acting as collecting
bank. It turned out that Fausto Pangilinan, who was the administrative officer and cashier of payee hospital until his
retirement on February 28, 1978, collected the questioned checks from the office of the Provincial Treasurer. He
claimed to be assisting or helping the hospital follow up the release of the checks and had official receipts.
Pangilinan sought to encash the first check with Associated Bank.

ISSUE: Whether or not there is merger in this case.

RULING: YES. Ordinarily, in the merger of two or more existing corporations, one of the combining corporations
survives and continues the combined business, while the rest are dissolved and all their rights, properties and
liabilities are acquired by the surviving corporation. Although there is dissolution of the absorbed corporations, there
is no winding up of their affairs or liquidation of their assets, because the surviving corporation automatically acquires
all their rights, privileges and powers, as well as their liabilities. The merger, however, does not become effective
upon the mere agreement of the constituent corporations. The procedure to be followed is prescribed under the
Corporation Code. Section 79 of said Code requires the approval by the Securities and Exchange Commission (SEC)
of the articles of merger which, in turn, must have been duly approved by a majority of the respective stockholders of
the constituent corporations. The effectivity date of the merger is crucial for determining when the merged or
absorbed corporation ceases to exist; and when its rights, privileges, properties as well as liabilities pass on to the
surviving corporation. Consistent with the aforementioned Section 79, the September 16, 1975 Agreement of Merger,
which Associated Banking Corporation (ABC) and Citizens Bank and Trust Company (CBTC) entered into, provided
that its effectivity "shall, for all intents and purposes, be the date when the necessary papers to carry out this merger
shall have been approved by the Securities and Exchange Commission."

CEBU COUNTRY CLUB et al.vs. RICARDO ELIZAGAQUE

GR 160273, 18 January 2008 Page 13

FACTS: Sometime in 1987, San Miguel Corporation, a special company proprietary member of CCCI, designated
respondent Ricardo F. Elizagaque, its Senior Vice President and Operations Manager for the Visayas and Mindanao,
as a special non-proprietary member. The designation was thereafter approved by the CCCI’s Board of Directors. In
1996, respondent filed with CCCI an application for proprietary membership. As the price of a proprietary share was
around the P5 million range, Benito Unchuan, then president of CCCI, offered to sell respondent a share for only P3.5
million. Respondent, however, purchased the share of a certain Dr. Butalid for only P3 million. Consequently, on
September 6, 1996, CCCI issued Proprietary Ownership Certificate No. 1446 to respondent. On August 1, 1997,
respondent received a letter from Julius Z. Neri, CCCI’s corporate secretary, informing him that the Board
disapproved his application for proprietary membership. On August 6, 1997, Edmundo T. Misa, on behalf of
respondent, wrote CCCI a letter of reconsideration. As CCCI did not answer, respondent, on October 7, 1997,
wrote another letter of reconsideration. Still, CCCI kept silent. On November 5, 1997, respondent again sent CCCI
a letter inquiring whether any member of the Board objected to his application. Again, CCCI did not reply.

ISSUE: Whether or not the Board of Directors of Cebu Country Club are liable to Elizagaque for damages.
RULING: YES. There is bad faith among the members of the board. As shown by the records, the Board adopted a
secret balloting known as the “black ball system” of voting wherein each member will drop a ball in the ballot box. A
white ball represents conformity to the admission of an applicant, while a black ball means disapproval. Pursuant to
Section 3(c), as amended, cited above, a unanimous vote of the directors is required. When respondent’s application
for proprietary membership was voted upon during the Board meeting on July 30, 1997, the ballot box contained one
(1) black ball. Thus, for lack of unanimity, his application was disapproved. Obviously, the CCCI Board of Directors,
under its Articles of Incorporation, has the right to approve or disapprove an application for proprietary membership.
But such right should not be exercised arbitrarily. It is thus clear that respondent was left groping in the dark
wondering why his application was disapproved. He was not even informed that a unanimous vote of the Board
members was required. When he sent a letter for reconsideration and an inquiry whether there was an objection to
his application, petitioners apparently ignored him. Certainly, respondent did not deserve this kind of treatment.
Having been designated by San Miguel Corporation as a special non-proprietary member of CCCI, he should have
been treated by petitioners with courtesy and civility. At the very least, they should have informed him why his
application was disapproved. The exercise of a right, though legal by itself, must nonetheless be in accordance with
the proper norm. When the right is exercised arbitrarily, unjustly or excessively and results in damage to another, a
legal wrong is committed for which the wrongdoer must be held responsible.

Roman Catholic Apostolic Administrator of Davao, Inc. v. The Land Registration

Commission and the Register of Deeds of Davao City,
G.R. No. L-8451, December 20,1957 Page 13
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 covered by Transfer Certificate No. 2263, in favor of the Roman Catholic
Apostolic Administrator of Davao Inc.,(RCADI) is corporation sole organized and existing in accordance with
Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent. Registry of Deeds Davao (RD)
required RCADI to submit affidavit declaring that 60% of its members were Filipino Citizens. As the RD entertained
some doubts as to the registerability of the deed of sale, the matter was referred to the Land Registration
Commissioner (LRC) en consulta for resolution. LRC hold that pursuant to provisions of sections 1 and 5 of Article XII
of the Philippine Constitution, RCADI is not qualified to acquire land in the Philippines in the absence of proof that at
leat 60% of the capital, properties or assets of the RCADI is actually owned or controlled by Filipino citizens. LRC
also denied the registration of the Deed of Sale in the absence of proof of compliance with such requisite. RCADI’s
Motion for Reconsideration was denied. Aggrieved, the latter filed a petition for mandamus.

Issue:

Whether or not the Universal Roman Catholic Apostolic Church in the Philippines, or better still, the corporation sole
named the Roman Catholic Apostolic Administrator of Davao, Inc., is qualified to acquire private agricultural lands in
the Philippines pursuant to the provisions of Article XIII of the Constitution.

Ruling:

RCADI is qualified.

While it is true and We have to concede that in the profession of their faith, the Roman Pontiff is the supreme head;
that in the religious matters, in the exercise of their belief, the Catholic congregation of the faithful throughout the
world seeks the guidance and direction of their Spiritual Father in the Vatican, yet it cannot be said that there is a
merger of personalities resultant therein. Neither can it be said that the political and civil rights of the faithful, inherent
or acquired under the laws of their country, are affected by that relationship with the Pope. The fact that the Roman
Catholic Church in almost every country springs from that society that saw its beginning in Europe and the fact that
the clergy of this faith derive their authorities and receive orders from the Holy See do not give or bestow the
citizenship of the Pope upon these branches. Citizenship is a political right which cannot be acquired by a sort of
“radiation”. We have to realize that although there is a fraternity among all the catholic countries and the dioceses
therein all over the globe, the universality that the word “catholic” implies, merely characterize their faith, a uniformity
in the practice and the interpretation of their dogma and in the exercise of their belief, but certainly they are separate
and independent from one another in jurisdiction, governed by different laws under which they are incorporated, and
entirely independent on the others in the management and ownership of their temporalities. To allow theory that the
Roman Catholic Churches all over the world follow the citizenship of their Supreme Head, the Pontifical Father, would
lead to the absurdity of finding the citizens of a country who embrace the Catholic faith and become members of that
religious society, likewise citizens of the Vatican or of Italy. And this is more so if We consider that the Pope himself
may be an Italian or national of any other country of the world. The same thing be said with regard to the nationality
or citizenship of the corporation sole created under the laws of the Philippines, which is not altered by the change of
citizenship of the incumbent bishops or head of said corporation sole.

We must therefore, declare that 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.

It has been shown before that: (1) the corporation sole, unlike the ordinary corporations which are formed by no less
than 5 incorporators, is composed of only one persons, 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 (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 effects the citizenship of
the faithful connected with their respective dioceses or corporation sole.

In view of these peculiarities of the corporation sole, it would seem obvious that 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 or overlooked this particular form of corporation. If this were so, as the facts and
circumstances already indicated tend to prove it to be so, then the inescapable conclusion would be that this
requirement of at least 60 per cent of Filipino capital was never intended to apply to corporations sole, and the
existence or not a vested right becomes unquestionably immaterial.

FAR EAST INTERNATIONAL vs. NANKAI KOGYOL

13525 NOVEMBER 3, 1962 Page 15
FACTS: Far East entered into a contract of sale of steel scrap with Nankai , a foreign corporation incorporated under
Japanese laws. Nankai opened a letter of credit with the China Banking Corporation issued by Nippon Kangyo. Four
days before the expiration of the Far East license, three boats of Nankai arrived. Upon the expiration of the export
license, only 1, 058.6 metric tons of steel scrap was loaded on the SS Mina. The license was never renewed. On
April 27, 1957, Nankai confirmed and acknowledged delivery of the 1,058.6 metric tons of steel scrap, but asked for
damages amounting to $148,135.00 consisting of dead freight charges, damages, bank charges, phone and cable
expenses. On May 4, 1957, Far East wrote the Everett Steamship Corporation, requesting the issuance of a
complete set of the Bill of Lading for the shipment, in order that payment thereof be effected against the Letter of
Credit. Under date of May 7, 1957, the Everett informed Far East that they were not in a position to comply because
the Bill of Lading was issued and signed in Tokyo by the Master of the boat, upon request of the Charterer, defendant
herein. As repeated requests, both against the shipping agent and the buyers (Nankai), for the issuance of the of Bill
Lading were ignored, Far East filed on May 16, 1957, the present complaint for Specific Performance, damages, a
writ of preliminary mandatory injunction directed against Nankai and the shipping company, to issue and deliver to the
plaintiff, a complete set of negotiable of Lading for the1,058.6 metric tons of scrap and a writ of preliminary injunction
against the China Banking Corporation and the Nankai to maintain the Letter Credit. Far East filed for the issuance of
a complete set of Bill of Lading in order that payment be effected against the Letter of Credit. The respondent
refused.

ISSUE: Whether or not the court had jurisdiction over the subject matter and the person of the defendant.

RULING: YES. Mr. Ishida who personally signed the contract for the purpose of selling scrap in question in behalf on
Nankai Kogyo is the Trade Manager of the said corporation. Mr. Tominaga was the Chief of the Petroleum Section of
the same company and Mr. Yoshida was the man- in- charge of the Import Section of the company’s Tokyo branch.
All of these officers are served with summons. The testimony of Atty. Pablo Ocampo that appellant was doing
business in the Philippines was corroborated by no less than Nabuo Yoshida, one of the appellant’s officers, that he
was sent to the Philippines by his company to look into the operation of mines, thereby revealing the defendant’s
desire to continue engaging business in the Philippines, after receiving the shipment of the scrap iron under
consideration, making the Philippines a base thereof. That a single act may bring the corporation within the purview
of the statute where it is an act of the ordinary business of the corporation. The single act or transaction is not merely
incidental or casual, but is of such character as distinctly to indicate a purpose on the part of the foreign corporation
to do other business in the state, and to make the state a basis of operations for the conduct of a part of the
corporation’s ordinary business.

FACILITIES MANAGEMENT CORPORATION vs. DE LA OSA

G.R. No. L-38649 March 26, 1979 Page 15
FACTS: Leonardo dela Osa sought his reinstatement with full back wages, as well as the recovery of his overtime
compensation, swing shift and graveyard shift differentials. Petitioner alleged that he was employed by respondents
as follows: (1) painter (2) houseboy with an hourly rate of $1.26 from December, 1964 to November, 1965,
inclusive; (3) houseboy with an hourly rate of $1.33 from December, 1965 to August, 1966, inclusive; and
(4) cashier with an hourly rate of $1.40 from August,1966 to March 27, 1967, inclusive. He further averred that from
December, 1965 to August, 1966, inclusive, he rendered overtime services daily, and that this entire period was
divided into swing and graveyard shifts to which he was assigned, but he was not paid both overtime and night shift
premiums despite his repeated demands from respondents. Respondents filed on August 7, 1967 their letter- answer
without substantially denying the material allegations of the basic petition but interposed the following special
defenses, namely: That respondents Facilities Management Corporation and J. S. Dreyer are domiciled in Wake
Island which is beyond the territorial jurisdiction of the Philippine Government; that respondent J. V. Catuira, though
an employee of respondent corporation presently stationed in Manila, is without power and authority of legal
representation; and that the employment contract between petitioner and respondent corporation carries-the approval
of the Department of Labor of the Philippines.

ISSUE: Whether or not the mere act by a non-resident foreign corporation of recruiting Filipino workers for its own
use abroad is in law doing business in the Philippines.

RULING: YES. "Under the rules and regulations promulgated by the Board of Investments which took effect Feb.3,
1969, implementing Rep. Act No. 5455, which took effect Sept. 30, 1968, the phrase 'doing business' has been
exemplified with illustrations, among them being as follows: "the performance within the Philippines of any act or
combination of acts enumerated in section 1(1) of the Act shall constitute 'doing business' therein. In particular,
'doing business' includes: "(1)Soliciting orders, purchases (sales) or service contracts. Concrete and specific
solicitations by a foreign firm, not acting independently of the foreign firm, amounting to negotiation or fixing of the
terms and conditions of sales or service contracts, regardless of whether the contracts are actually reduced to writing,
shall constitute doing business even If the enterprise has no office or fixed place of business in the Philippines.
"(2)Appointing a representative or distributor who is domiciled in the Philippines, unless said representative or
distributor has an independent status, i.e., it transacts business in its name and for its own account, and not in the
name or for the account of the principal. "(4)Opening offices, whether called 'liaison' offices, agencies or
branches, unless proved otherwise. "(10)Any other act or acts that imply a continuity of commercial dealings or
arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, or in the progressive prosecution of, commercial gain or of the purpose and objective
of the business organization."

HATHIBHAI BULAKHIDAS vs. HONORABLE PEDRO L. NAVARRO

L-49695 April 7, 1986 Page 15
FACTS: Petitioner, a foreign partnership, filed a complaint against a domestic corporation, DSC, before the CFI of
Rizal for the recovery of damages allegedly caused by the failure of the said shipping corporation to deliver the goods
shipped to it by petitioner to their proper destination. Paragraph 1 of said complaint alleged that plaintiff is "a foreign
partnership firm not doing business in the Philippines" and that it is "suing under an isolated transaction." Defendant
filed a motion to dismiss the complaint on the ground that plaintiff has no capacity to sue and that the complaint does
not state a valid cause of action against defendant. Acting on said motion to dismiss, the CFI dismissed the complaint
on the ground that plaintiff being "a foreign corporation or partnership not doing business in the Philippines it cannot
exercise the right to maintain suits before our Courts."

ISSUE: Whether a foreign corporation “not engaged in business in the Philippines” can institute an action before
Philippine courts.

RULING: YES. It is settled that if a foreign corporation is not engaged in business in the Philippines, it may not be
denied the right to file an action in Philippine courts for isolated transactions. The object of Sections68 and 69 of the
Corporation law was not to prevent the foreign corporation from performing single acts, but to prevent it from
acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in
the local courts. It was never the purpose of the Legislature to exclude a foreign corporation which happens to obtain
an isolated order for business from the Philippines, from securing redress in the Philippine courts. No general rule or
governing principle can be laid down as to what constitutes 'doing' or' engaging' in or 'transacting' business. Indeed,
each case must be judged in the light of its peculiar environmental circumstances. The true test, however, seems to
be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was
organized or whether it has substantially retired from it and turned it over to another. The term implies a continuity of
commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the
exercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its
organization. While plaintiff is a foreign corporation without license to transact business in the Philippines, it does not
follow that it has no capacity to bring the present action. Such license is not necessary because itis not engaged in
business in the Philippines. A foreign corporation not engaged in business in the Philippines is not barred from
seeking redress from the courts of the Philippines.

COMMUNICATION MATERIALS and DESIGN, INC. vs. COURT OF APPEALS

G.R. No. 102223 August 22, 1996 Page 15
FACTS: Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and ASPAC MULTI-
TRADE INC., (ASPAC, for brevity) are both domestic corporations, while petitioner Francisco S. Aguirre is their
President and majority stockholder. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for
brevity) are corporations duly organized and existing under the laws of the State of Alabama, United States of
America. There is no dispute that ITEC is a foreign corporation not licensed to do business in the Philippines. ITEC
entered into a contract with petitioner ASPAC referred to as "Representative Agreement". ITEC engaged ASPAC as
its "exclusive representative" in the Philippines for the sale of ITEC's products, in consideration of which, ASPAC was
paid a stipulated commission. ASPAC was able to incorporate and use the name "ITEC" in its own name. Thus ,
ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines).ASPAC sold electronic
products, exported by ITEC, to their sole customer, the Philippine Long Distance Telephone Company, (PLDT, for
brevity). ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE COMMUNICATIONS, INC.
(DIGITAL, for brevity), the President of which is likewise petitioner Aguirre, of using knowledge and
information of ITEC's products specifications to develop their own line of equipment and product support, which
are similar, if not identical to ITEC's own, and offering them to ITEC's former customer.

ISSUE: Whether or not private respondent ITEC is an unlicensed corporation doing business in the Philippines, and if
it is, whether or not this fact bars it from invoking the injunctive authority of our courts.

RULING: YES. Generally, a "foreign corporation" has no legal existence within the state in which it is foreign. This
proceeds from the principle that juridical existence of a corporation is confined within the territory of the state under
whose laws it was incorporated and organized, and it has no legal status beyond such territory. Such foreign
corporation may be excluded by any other state from doing business within its limits, or conditions may be imposed
on the exercise of such privileges. The purpose of the law in requiring that foreign corporations doing business in the
Philippines be licensed to do so and that they appoint an agent for service of process is to subject the foreign
corporation doing business in the Philippines to the jurisdiction of its courts. The object is not to prevent the foreign
corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without
taking steps necessary to render it amenable to suit in the local courts. The implication of the law is that it was never
the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business
from the Philippines, and thus, in effect, to permit persons to avoid their contracts made with such foreign
corporations. With the above stated precedents in mind, we are persuaded to conclude that private respondent had
been "engaged in" or "doing business" in the Philippines for some time now. This is the inevitable result after a
scrutiny of the different contracts and agreements entered into by ITEC with its various business contacts in the
country, particularly ASPAC and Telephone Equipment Sales and Services, Inc.

LA CHEMISE LACOSTE, S. A. vs. FERNANDEZ

G.R. No. L-65659 May 21, 1984 Page 15
FACTS: The petitioner is a foreign corporation, organized and existing under the laws of France and not doing
business in the Philippines. It is the actual owner of the abovementioned trademarks used on clothing and other
goods specifically sporting apparels sold in many parts of the world and which have been marketed in the Philippines
since 1964. The main basis of the private respondent's case is its claim of alleged prior registration.

In 1975, Hemandas & Co., a duly licensed domestic firm applied for and was issued Reg. No.SR-2225
(SR stands for Supplemental Register) for the trademark "CHEMISE LACOSTE &CROCODILE DEVICE"
by the Philippine Patent Office for use on T-shirts, sportswear and other garment products of the company. Two
years later, it applied for the registration of the same trademark under the Principal Register. The Patent
Office eventually issued an order which granted the application." Thereafter, Hemandas & Co. assigned to
respondent Gobindram Hemandas all rights, title, and interest in the trademark "CHEMISE LACOSTE & DEVICE".
The petitioner filed its application for registration of the trademark "Crocodile Device" and" Lacoste". The former was
approved for publication while the latter was opposed by Games and Garments. The petitioner filed with the National
Bureau of Investigation (NBI) a letter-complaint alleging therein the acts of unfair competition being committed by
Hemandas and requesting their assistance in his apprehension and prosecution.

ISSUE: Whether or not petitioner has the capacity to sue.

RULING: YES. The petitioner is a foreign corporation not doing business in the Philippines. The marketing of its
products in the Philippines is done through an exclusive distributor, Rustan Commercial Corporation. The latter is an
independent entity which buys and then markets not only products of the petitioner but also many other products
bearing equally well-known and established trademarks and tradenames. In other words, Rustan is not a mere agent
or conduit of the petitioner. The court finds and concludes that the petitioner is not doing business in the Philippines.
Rustan is actually a middleman acting and transacting business in its own name and or its own account and not in the
name or for the account of the petitioner. More important is the nature of the case which led to this petition. What
preceded this petition for certiorari was a letter-complaint filed before the NBI charging Hemandas with a criminal
offense, i.e., violation of Article 189 of the Revised Penal Code. If prosecution follows after the completion of the
preliminary investigation being conducted by the Special Prosecutor the information shall be in the name of the
People of the Philippines and no longer the petitioner which is only an aggrieved party since a criminal offense is
essentially an act against the State .It is the latter which is principally the injured party although there is a private right
violated. Petitioner's capacity to sue would become, therefore, of not much significance in the main case. We cannot
allow a possible violator of our criminal statutes to escape prosecution upon a far-fetched contention that the
aggrieved party or victim of a crime has no standing to sue. In upholding the right of the petitioner to maintain the
present suit before our courts for unfair competition or infringement of trademarks of a foreign corporation, we are
moreover recognizing our duties and the rights of foreign states under the Paris Convention for the Protection of
Industrial Property to which the Philippines and France are parties.

PUMA SPORTS vs. INTERMEDIATE APPELLATE COURT

G.R. NO. 75067 FEBRUARY 26, 1988 Page 15

FACTS: On July 25, 1985, petitioner PUMA SPORTSSCHUFABRIKEN, a German corporation

manufacturing “PUMA PRODUCTS”, filed a complaint for infringement of patent or trademark with a prayer for the
issuance of a writ preliminary injunction against the private respondent Mil-Oro Manufacturing Corp.
before the RTC of Makati. On July 31, 1985, the trial court issued a temporary restraining order, restraining the
private respondent and the Director of Patents from using the trademark "PUMA' or any reproduction, counterfeit
copy or colorable imitation thereof, and to withdraw from the market all products bearing the same trademark.

ISSUE: Whether or not the Court of Appeals erred in holding that petitioner had no legal capacity to sue.

RULING: YES. Petitioner maintains that it has substantially complied with the requirements of Section 21-A of
Republic Act (RA) No. 166, as amended. According to the petitioner, its complaint specifically alleged that it is not
doing business in the Philippines and is suing under the said Republic Act. Said Section 21-Arequires that “the
country of which the said corporation or juristic person is a citizen, or in which it is domiciled, by treaty, convention or
law, grants a similar privilege to corporate or juristic persons of the Philippines” but does not mandatorily require that
such reciprocity between the Federal Republic of Germany and the Philippines be pleaded. Such reciprocity
arrangement is embodied in and supplied by the Union Convention for the Protection of industrial Property (Paris
Convention) to which both the Philippines and Federal Republic of Germany are signatories and that since the Paris
Convention is a treaty which, pursuant to our constitution, forms part of the law of the land, our courts are bound to
take judicial notice of such treaty ,and, consequently, this fact need not be averred in the complaint. The Convention
of the Union of Paris for the Protection of Industrial Property to which the Philippines became a party on September
27, 1965 provides in its Article 8 thereof that” a trade name(corporation name) shall be protected in all the countries
of the Union without the obligation of filing or registration, whether or not it forms part of the trademark.” Thus,
petitioner had the legal capacity to file the action.

TIME, INC. vs. REYES

G.R. No.L-28882 May 31, 1971 Page 15
FACTS: This is a petition by Time, Inc. for certiorari and prohibition, with preliminary injunctions, to annul certain
orders of the respondent CFI of Rizal, issued in its Civil Case No. 10403, entitled “ Antonio J. Villegas and Juan
Ponce Enrile vs. Time, Inc.,” and to prohibit the said Rizal court from further proceeding with the said civil case
contending that it is the Manila CFI which has the jurisdiction. The petition alleges that the petitioner time, Inc., is an
American Corporation with principal offices at Rockefeller Center, New York City, N.Y., and is the publisher of “Time”,
a weekly magazine; the petition, however, does not alleged the petitioner’s legal capacity to sue in the
courts of the Philippines. In said civil case, therein plaintiffs Antonio J. Villegas and Juan Ponce Enrile seek to
recover from the therein petitioner damages upon an alleged of libel arising from a publication of time(Asia Edition)
magazine, in its issue of 18 August 1967, of an essay, entitled “Corruption in Asia”.

ISSUE: Whether or not the petition will prosper.

RULING: YES. The dismissal of the present petition is asked on the ground that the petitioner foreign corporation
failed to allege its capacity to sue in the courts of the Philippines. The Court failed to see how these doctrines can be
a propos in the case at bar, since the petitioner is not maintaining any suit” but is merely defending one against itself;
it did not file any complaint but only a corollary defensive petition to prohibit the lower court from further proceeding
with a suit that it had no jurisdiction to entertain. Petitioner’s failure to aver its legal capacity to institute the present
petition is not fatal, for a foreign corporation may by writ of prohibition, seek relief against the wrongful
assumption of jurisdiction. And a foreign corporation seeking a writ of prohibition against further maintenance a suit,
on the ground of want jurisdiction, is not bound by the ruling of the court in which the suit was brought, on the motion
to quash service of summons, that it has jurisdiction”. The writs applied for are granted: the respondent Court of First
Instance of Rizal is declared without jurisdiction to take cognizance of its Civil Case No. 10403; and its orders issued
in connection therewith are hereby annulled and set aside. Respondent court is further commanded to desist from
further proceedings in Civil case No. 10403 aforesaid.

PHILIPPINE NATIONAL BANK vs. CIF OF RIZAL

G.R. NO. 63201 MAY 27, 1992 Page 14

FACTS: On March 1, 1954, private respondents entered into a contract of lease with Philippine Blooming Mills, Co.,
Inc., (PBM for brevity) whereby the letter shall lease the aforementioned parcels of land as factory site. PBM was duly
organized and incorporated on January 19, 1952 with a corporate term of twenty-five (25) years. This leasehold right
of PBM covering the parcels of land was duly annotated at the back of the above stated certificates of title as Entry
No. 9367/T-No. 32843. The contract of lease provides that the term of the lease is for twenty years beginning from
the date of the contract and "is extendable for another term of twenty years at the option of the LESSEE should its
term of existence be extended in accordance with law." On October 11, 1963, PBM executed in favor of Philippine
National Bank (PNB for brevity),petitioner herein, a deed of assignment, conveying and transferring all its rights and
interests under the contract of lease which it executed with private respondents. The assignment was for and in
consideration of the loans granted by PNB to PBM. The deed of assignment was registered and annotated at the
back of the private respondents' certificates of title as Entry No. 85215/T-No. 32843.

ISSUE: Whether or not the cancellation of the entries on respondent's certificates of title valid and proper.

RULING: YES. The contract of lease expressly provides that the term of the lease shall be twenty years from the
execution of the contract but can be extended for another period of twenty years at the option of the lessee should
the corporate term be extended in accordance with law. Clearly, the option of the lessee to extend the lease for
another period of twenty years can be exercised only if the lessee as corporation renews or extends its corporate
term of existence in accordance with the Corporation Code which is the applicable law. Thus, in the instant case, the
initial term of the contract of lease which commenced on March 1, 1954ended on March 1, 1974. PBM as lessee
continued to occupy the leased premises beyond that date with the acquiescence and consent of the respondents as
lessor. Records show however, that PBM as a corporation had a corporate life of only twenty-five (25) years which
ended an January 19, 1977. It should be noted however that PBM allowed its corporate term to expire without
complying with the requirements provided by law for the extension of its corporate term of existence. There is no
need for the institution of a proceeding for quo warranto to determine the time or date of the dissolution of a
corporation because the period of corporate existence is provided in the articles of incorporation. When such period
expires and without any extension having been made pursuant to law, the corporation is dissolved automatically
insofar as the continuation of its business is concerned. Considering the foregoing in relation to the contract of lease
between the parties herein, when PBM's corporate life ended on January 19, 1977 and its 3-year period for winding
up and liquidation expired on January 19, 1980, the option of extending the lease was likewise terminated on January
19,1977 because PBM failed to renew or extend its corporate life in accordance with law. From then on, the
respondents can exercise their right to terminate the lease pursuant to the stipulations in the contract.
 ARNALDO F. DE SILVA vs. ABOITIZ & COMPANY, INC
March 31, 1923 G.R. No. L-19893 Page 11
Facts: De Silva subscribed for 650 shares of stock of Aboitiz of the value of P500 each. He only paid for the value of
200 shares, for which he became indebted to the corporation in the amount of P255,000, representing the unpaid
value of his subscription. The secretary of the corporation notified him of the resolution passed by its Board, declaring
the unpaid subscriptions to have become due and demandable. The resolution also stated that all such shares which
remain unpaid will be declared delinquent, and will be advertised for sale at public auction. De Silva thus filed a
complaint in the CFI against the corporation, asking the court to enjoin the corporation from holding such sale. He
said that the corporation exceeded its authority, as he said that its By-laws stated that the unpaid shares shall be paid
out of the 70% of the profit obtained, which shall be distributed among the subscribers, who shall not receive any
dividend until the shares are paid in full. Further, he contends that the By-laws provide an operative way of paying for
the shares continuously until their full amortization. The CFI dismissed the case.

Issue: Whether the corporation may declare the unpaid shares delinquent and/or collect their value by another
method different from that prescribed in the By-laws.

Held: In the By-laws, it is stated that the directors are authorized to create a special emergency fund or extraordinary
reserve fund, when, in its judgment, and in case all the shares subscribed to have been fully paid. The directors are
given the discretion to do whatever is stated in the By-laws relative to the application of the 70% profit. They may
decide whether or not such profit shall be used to pay for the unpaid subscriptions. If the Board of Directors does not
wish to make use of such authority, it has 2 other remedies for accomplishing the purpose, as enunciated in Velasco
v Poizat: : 1) to sell the stock for the account of the delinquent subscriber, and 2) to bring a legal action against him
for the amount due. In this case, BoDs elected to avail themselves of the first remedy granted to it by law, and
declared that payment of De Silva’s subscription to 450 shares which had not been fully paid by him was due, and
that said shares were delinquent, and performed all the other acts subsequent to said declaration, as it deemed it
disadvantageous to the corporation to apply a part of the profit realized or to be realized to the payment of his
subscription. De Silva has no right to prevent the Board from following, any other method than that mentioned in the
law, for the very reason that the law does not give stockholders any right in connection with the determination of the
question whether or not there should be deducted from the 70% of the profit distributable among the stockholders
such amount as may be deemed fit for the payment of subscriptions due and unpaid.

EUGENIO VERAGUTH vs. ISABELA SUGAR COMPANY

.
FACTS:
The parties to this action are Eugenio Veraguth (director and stockholder of Isabela Sugar Company, Inc.), and the
Isabela Sugar Company, Inc., Gil Montilla (acting president) and Agustin B. Montilla (secretary). Petitioner
prays:
- That the respondents be required within five days from receipt of notice of this petition to show cause why they
refuse to notify the petitioner, as director, of the regular and special meetings of the BOD;
- That a final and absolute writ of mandamus be issued to each and all of the respondents to notify immediately the
petitioner within the reglamentary period, of all regular and special meetings of the board of directors of the Isabela
Sugar Central Company; and
- To place at his disposal at reasonable hours the minutes, documents, and books of said corporation for his
inspection as director and stockholder, and to issue immediately, upon payment of the fees, certified copies of any
documentation in connection with said minutes, documents, and the books of the aforesaid corporation.

ISSUE/S:
1) Whether there was a malicious attempt to keep Director Veraguth from attending a special meeting of the BOD at
which the compensation of the attorneys of the company was fixed, or whether Director Veraguth, in a spirit of
antagonism, has made this merely a pretext to cause trouble.
2) Whether a director has the unqualified right to inspect the books and records of the corporation.

RULING:
1) Speaking to the first point relating to the alleged failure of the secretary to notify the petitioner of a special meeting,
whether there was a malicious attempt to keep Director Veraguth from attending a special meeting of the BOD at
which the compensation of the attorneys of the company was fixed, or whether Director Veraguth, in a spirit of
antogonism, has made this merely a pretext to cause trouble, we are unable definitely to say. This much, however,
can appropriately be stated and is decisive, and this is that the meetingin question is in the past and, therefore, now
merely presents an academic question; that no damage was caused to Veraguth by the action taken at the special
meeting which he did not attend, since his interests were fully protected by the Philippine National Bank; and that as
to meetings in the future it is to be presumed that the secretary of the company will fulfill the requirements of the
resolutions of the company pertaining to regular and special meetings. It will, of course, be incumbent upon Veraguth
to give formal notice to the secretary of his post-office address if he desires notice sent to a particular residence.

2) On the second question pertaining to the right of inspection of the books of the company, the Corporation Law,
Section 51, provides that:

“All business corporations shall keep and carefully preserve a record of all business transactions, and a minute of all
meetings of directors, members, or stockholders, in which shall be set forth in detail the time and place of holding the
meeting was regular or special, if special its object, those present and absent, and every act done or ordered done at
the meeting. . . . The record of all business transactions of the corporation and the minutes of any meeting shall be
open to the inspection of any director, member, or stockholder of the corporation at reasonable hours.”