Alabang Development Co. v. Alabang Hills Village Association

Doctrine: SEC. 122. Corporate liquidation.– Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. x x x

Facts: The Complaint alleged that ADC is the developer of Alabang Hills Village and still owns certain parcels of land therein that are yet to be sold, as well as those considered open spaces that have not yet been donated to [the] local government of Muntinlupa City or the Homeowner's Association. Sometime in September [2006], ADC learned that AHVAI started the construction of a multi-purpose hall and a swimming pool on one of the parcels of land still owned by ADC without the latter's consent and approval, and that despite demand, AHVAI failed to desist from constructing the said improvements. ADC thus prayed that an injunction be issued enjoining defendants from constructing the multi-purpose hall and the swimming pool at the Alabang Hills Village.

AHVAI denied ADC's asseverations and claimed that the latter has no legal capacity to sue since its existence as a registered corporate entity was revoked by the SEC on May 26, 2003; that ADC has no cause of action because by law it is no longer the absolute owner but is merely holding the property in question in trust for the benefit of AHVAI as beneficial owner thereof; and that the subject lot is part of the open space required by law to be provided in the subdivision. As counterclaim, it prayed that an order be issued divesting ADC of the title of the property and declaring AHVAI as owner thereof; and that ADC be made liable for moral and exemplary damages as well as attorney's fees.

RTC Muntinlupa City rendered judgment dismissing herein petitioner's complaint on the grounds (1) that the latter has no personality to file the same; (2) that the subject property "is a reserved area for the beneficial use of the homeowners, as mandated by law;" and (3) that the Housing and Land Use Regulatory Board (HLURB), not the RTC, has exclusive jurisdiction over the dispute between petitioner and respondents.

Aggrieved, herein petitioner filed a Notice of Appeal of the RTC decision. Herein respondent AHVAI, on the other hand, moved that it be allowed to prosecute its compulsory counterclaim praying, for this purpose, that the RTC decision be amended accordingly. RTC approved petitioner's notice of appeal but dismissed respondent AHVAI’s counterclaim on the ground that it is dependent on petitioner's complaint. Respondent AHVAI then filed an appeal with the CA.

CA dismissed both appeals of petitioner and respondent, and affirmed the decision of the RTC.

Issue: Whether the CA gravely erred in finding lack of capacity of the petitioner in filing the case.

Ruling: No. Section 122 of the Corporation Code provides as follows:

SEC. 122. Corporate liquidation.– Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established.

At any time during said three (3) years, said corporation is authorized and empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interest, all interest which the corporation had in the property terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.

Upon winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated to the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its assets or property except upon lawful dissolution and after payment of all its debts and liabilities.

In the instant case, there is no dispute that petitioner's corporate registration was revoked on May 26, 2003. Based on the above-quoted provision of law, it had three years, or until May 26, 2006, to prosecute or defend any suit by or against it. The subject complaint, however, was filed only on October 19, 2006, more than three years after such revocation. It is likewise not disputed that the subject complaint was filed by petitioner corporation and not by its directors or trustees. In fact, it is even averred, albeit wrongly, in the first paragraph of the Complaint that "[p]laintiff is a duly organized and existing corporation under the laws of the Philippines, with capacity to sue and be sued. x x x”

In the present case, petitioner filed its complaint not only after its corporate existence was terminated but also beyond the three-year period allowed by Section 122 of the Corporation Code. Thus, it is clear that at the time of the filing of the subject complaint petitioner lacks the capacity to sue as a corporation. To allow petitioner to initiate the subject complaint and pursue it until final judgment, on the ground that such complaint was filed for the sole purpose of liquidating its assets, would be to circumvent the provisions of Section 122 of the Corporation Code.

ABSCBN v. CA

Doctrine: The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish, which call be experienced only by one having a nervous system.

Facts: In 1990, ABS-CBN and Viva executed a Film Exhibition Agreement whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December 1991, in accordance with paragraph 2.4 [sic] of said agreement stating that — 

1.4 ABS-CBN shall have the right of first refusal to the next 24 Viva films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN from the actual offer in writing.

Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of 3 film packages (36 title) from which ABS-CBN may exercise its right of first refusal under the afore-said agreement. ABS-CBN, however through Mrs. Concio, "can tick off only 10 titles" (from the list) "we can purchase" and therefore did not accept said list. 

Then, Del Rosario approached ABS-CBN's Ms. Concio, with a list consisting of 52 original movie titles as well as 104 re-runs from which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which P30,000,000.00 will be in cash and P30,000,000.00 worth of television spots.

Del Rosario and ABS-CBN general manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of Viva. What transpired in that lunch meeting is the subject of conflicting versions. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABS-CBN was granted exclusive film rights to 14 films for a total consideration of P36 million; that he allegedly put this agreement as to the price and number of films in a "napkin'' and signed it and gave it to Mr. Del Rosario. On the other hand, Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopez discussed at the lunch meeting was Viva's film package offer of 104 films (52 originals and 52 re-runs) for a total price of P60 million. Mr. Lopez promising [sic]to make a counter proposal which came in the form of a proposal contract..

Del Rosario and Mr. Graciano Gozon of RBS Senior vice-president for Finance discussed the terms and conditions of Viva's offer to sell the 104 films, after the rejection of the same package by ABS-CBN. Del Rosario received through his secretary, a handwritten note from Ms. Concio, which reads: "Here's the draft of the contract. I hope you find everything in order," to which was attached a draft exhibition agreement a counter-proposal covering 53 films, 52 of which came from the list sent by defendant Del Rosario and one film was added by Ms. Concio, for a consideration of P35 million. The said counter proposal was however rejected by Viva's Board of Directors as Viva would not sell anything less than the package of 104 films for P60 million pesos, and such rejection was relayed to Ms. Concio.

RBS was granted the exclusive right to air 104 Viva-produced and/or acquired films including the 14 films subject of the present case. 

ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of preliminary injunction and/or temporary restraining order against private respondents Republic Broadcasting Corporation (RBS), Viva Production, and Vicente Del Rosario.

As the parties failed to enter into an amicable settlement RBS posted a counterbond, which the RTC approved in its Order. ABS-CBN filed a motion for reconsideration. The RTC conducted a pre-trial. Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of Appeals a petition challenging the RTC's Orders of 3 August and 15 October 1992 and praying for the issuance of a writ of preliminary injunction to enjoin the RTC from enforcing said orders. The CA dismissed the petition for being premature.

In the meantime the RTC received the evidence for the parties in Civil Case No. Q-192-1209. Thereafter, it rendered a decision in favor of RBS and VIVA and against ABS-CBN.

According to the RTC, there was no meeting of minds on the price and terms of the offer. The alleged agreement between Lopez III and Del Rosario was subject to the approval of the VIVA Board of Directors, and said agreement was disapproved during the meeting of the Board. Hence, there was no basis for ABS-CBN's demand that VIVA signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under the 1990 Film Exhibition Agreement had previously been exercised per Ms. Concio's letter to Del Rosario ticking off ten titles acceptable to them, which would have made the 1992 agreement an entirely new contract.

The SC denied ABS-CBN's petition for review as no reversible error was committed by the Court of Appeals in its challenged decision and the case had "become moot and academic in view of the dismissal of the main action by the court a quo in its decision”.

Aggrieved, ABS-CBN appealed to the CA claiming that there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also appealed seeking moral and exemplary damages and additional attorney's fees. CA denied VIVA and Del Rosario's appeal because it was "RBS and not VIVA which was actually prejudiced when the complaint was filed by ABS-CBN."

Issue: Whether moral damages may be awarded to a corporation.

Ruling: No. Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered. and not to impose a penalty on the wrongdoer. The award is not meant to enrich the complainant at the expense of the defendant, but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate then moral suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and should be proportionate to the suffering inflicted. Trial courts must then guard against the award of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption on the part of the trial court.

The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses, It cannot, therefore, experience physical suffering and mental anguish, which call be experienced only by one having a nervous system. The statement in People v. Manero and Mambulao Lumber Co. v. PNB that a corporation may recover moral damages if it "has a good reputation that is debased, resulting in social humiliation" is an obiter dictum. On this score alone the award for damages must be set aside, since RBS is a corporation.

It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasi-contract, delict, or quasi-delict, Hence, the claims for moral and exemplary damages can only be based on Articles 19, 20, and 21 of the Civil Code. There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was honestly convinced of the merits of its cause after it had undergone serious negotiations culminating in its formal submission of a draft contract. Settled is the rule that the adverse result of an action does not per se make the action wrongful and subject the actor to damages, for the law could not have meant to impose a penalty on the right to litigate. If damages result from a person's exercise of a right, it is damnum absque injuria.

Eizmendi, Jr. v. Fernandez

Facts: In a petition before this Court, Valle Verde points out that it is not challenging the validity of proxies, but merely the respondents’ unlawful misrepresentation of corporate office. It stresses that the election did not take place since the annual meeting was already adjourned prior to the respondents’ declaration as winners in the “election.” Consequently, its complaint is not an election contest as there were actually no winning candidates on February 23, 2013. It also argues that it is a real party-in-interest in this case because the respondents’ misrepresentation causes confusion among its members and employees, and disrupts its operations.

Issue: Whether or not the proxies and the manner of election are valid.

Held: Section 2, Rule 6 of the Interim Rules on Intra-Corporate Controversies defines an election contest as “any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close corporation or by members of a non-stock corporation where the article of incorporation or by-laws so provide.”

The present complaint falls under the definition of election contest because it raises the issues of the validation of proxies, and the manner and validity of elections. Furthermore, a reading of Valle Verde’s allegations, as well as its prayers in the complaint, shows that the complaint is essentially for the nullification of the election on the ground that the election was unlawfully conducted due to the adjournment of the meeting for lack of quorum.

The determination of the validity of the proxies and of the manner and validity of elections is necessary in adjudicating whether the respondents are the lawful directors and officers of Valle Verde. Consequently, Valle Verde cannot claim that it did not raise these factual issues because no election was conducted last February 23, 2013 due to the adjournment of the meeting for lack of quorum. Valle Verde’s assertion that there was no election is merely an effect of the declaration of the nullity of the election if the current petition would be found meritorious.

Tolentino v. Philippine Postal Savings Bank

Facts: Marylou Tolentino filed a complaint for the collection of a sum of money against PPSBI. She alleged that Enrique, on behalf of Shekinah Construction, obtained a loan from PPSBI for the purpose  of developing a low-cost housing project. The loan stipulated that PPSBI shall initially release 50% of the loan to Enrique, with the remaining balance to be released upon the completion of a certain percentage of the housing project. Marylou was in the business of short-term private lending. In order to hasten the completion of the project, Enrique borrowed from Marylou. It was payable in 60 days with 5% interest per month. PPSBI Loans and Evaluations Manager, Amante, issued a letter stating that PPSBI would remit the amount in favor of Marylou within 60 days from her loan to Enrique. Later, Enrique and Marylou executed a Deed of Assignment, with the conformity of Amante, acting on behalf of PPSBI, in which Enrique agreed to assign the loan proceeds of Shekinah Construction to Marylou. Marylou was released to Enrique. Upon the lapse of 60 days, PPSBI did not pay the agreed amount to Marylou.  Marylou further learned that PPSBI allegedly released the amount to Enrique-not to her.  Marylou demanded payment from PPSBI but her request remained unheeded.

RTC dismissed the complaint. CA granted Marylou’s appeal. Both parties moved for reconsideration but both were denied. 

Issue: Whether or not PPSBI is liable to Marylou.

Held: Yes. As a contract within the authorized functions of the bank, PPSBI cannot now claim that the actions of Amante only bind him in his personal capacity.  Under the doctrine of apparent authority, Marylou can rightfully rely on the representations of Amante. Of particular relevance herein are our pronouncements in BPI Family Savings Bank. Inc. v. First Metro Investment Corporation, citing Prudential  Bank v. Court of Appeals and Francisco v. Government Service Insurance System:

We have held that if a corporation knowingly permits its officer, or any other agent, to perform acts within the scope of an apparent authority, holding him out to the public as possessing power to do those acts, the corporation will, as against any person who has dealt in good faith with the corporation through such agent, be estopped from denying such authority. 

East West Banking Corporation v. Victorias Milling Company

Facts: VMC filed with the SEC, a Petition for Declaration of Suspension of Payments; the Approval of a Rehabilitation Plan; and the Appointment of a Management Committee. SEC’s Securities Investigation and Clearing Department issued an Order that suspended all actions or claims against VMC pending before any court, tribunal, office, board, and /or the SEC.

The appointed Management Committee of VMC submitted a Rehabilitation Plan, which was approved by the SICD. The said Rehabilitation Plan was amended. The SICD approved the Alternative Rehabilitation Plan proposed by the VMC Management Committee. 

To restructure VMC’s outstanding loan obligation pursuant to the ARP, VMC and its creditors, which include East West Bank, executed a Debt Restructuring Agreement. 

VMC was able to settle all its restructured loans. Hence, VMC started to pay/redeem the CNs from the respective holders thereof pursuant to the ARP and DRA. All creditors accepted VMC’s payment/redemption except for East West Bank. VMC repeatedly sent written notices to East West Bank as regards its payment/redemption of the CN. East West Bank, however, refused to accept such payment/redemption and insisted on its right to convert the CN to VMC common shares. East West Bank informed VMC that it will not avail of VMC’s partial offer of redemption and as such, it returned the two checks. East West Bank reiterated to VMC that its Board of Directors had approved the sale of the CN and published the required notice therefor. 

East West Bank notified VMC that it was exercising its option to convert 13% of its outstanding unconverted CN in accordance with Section 16(h)(v) of the DRA and paragraph 5 of the CN. It was granted. SEC En Banc reversed and set aside the Panel’s Order. The SEC En Banc examined the ARP, DRA, and CN and found that, contrary to the Panel’s ruling, there was nothing in the DRA and CN that states that East West Bank is not obligated to accept the payment/redemption made by VMC. CA affirmed the SEC En Banc decision.

Issue: Whether or not VMC had already effectively exercised its option to pay/redeem the CN.

Held: In this case, VMC delivered written notices and checks several times to East West Bank to exercise its option to pay/redeem. Records, however, show no instance when East West Bank refused to accept the same for not being a legal tender. What East West Bank continuously refused to accept is VMC’s exercise of its option to pay/redeem the CN, which refusal, as we have established, is improper and unfounded. East West Bank cannot, therefore, be allowed to use such afterthought as an excuse to justify its unfounded refusal to allow VMC to pay/redeem the CN. Thus, we still hold that VMC had already effectively exercised its option to pay/redeem the CN which East West Bank cannot validly refuse.

In all, the SEC En Banc, as affirmed by the CA, unerringly denied East West Bank’s Motion to Compel VMC to convert the CN into shares. VMC had effectively exercised its option to pay/redeem the subject CN and East West Bank has no legal or contractual basis to refuse to accept VMC’s payment/redemption, much less, to insist on the conversion of the subject CN to VMC’s common shares.

Ago Realty & Development Corp. v. Ago

Facts: ARDC is a close corporation. Its stockholders are petitioners and respondents. Angelita introduced improvements on Lot No. H-3, titled in the name of ARDC, without the proper resolution from the corporation's Board of Directors. 

ARDC and Emmanuel filed a complaint before RTC Legazpi. The case was dismissed. CA affirmed the RTC decision. 

Issue: Whether or not Emmanuel, et al. may sue on behalf of ARDC absent a resolution or any other grant of authority from its Board of Directors sanctioning the institution of the case.

Held: While corporations are subjected to the State's broad regulatory powers, it is their directors and officers who are tasked with addressing questions of internal policy and management. The business of a corporation is conducted by its board of directors, and so long as the board acts in good faith, the State, through the courts, may not interfere with its management decisions.

Grounded on equity, the derivative suit has proven to be an effective tool for the protection of minority shareholders. Such actions have for their object the vindication of a corporate injury, even though they are not brought by the corporation, but by its stockholders. That said, derivative suits remain an exception. As a general rule, corporate litigation must be commenced by the corporation itself, with the imprimatur of the board of directors, which, pursuant to the law, wields the power to sue. Therefore, since the derivative suit is a remedy of last resort, it must be shown that the board, to the detriment of the corporation and without a valid business consideration, refuses to remedy a corporate wrong. A derivative suit may only be instituted after such an omission. Simply put, derivative suits take a back seat to board-sanctioned litigation whenever the corporation is willing and able to sue in its own name. 

Since it is settled that she introduced improvements on ARDC's property without its consent, it follows that the complaint was not baseless at all. However, because the case was not brought by the corporation, but by its stockholders, its dismissal was properly decreed by the trial court.

Terp Construction Corporation v. Banco Filipino Savings and Mortgage Bank

Facts: Sometime in 1995, Terp Construction planned to develop a housing project called the Margarita Eastville and a condominium called Margarita Plaza. To finance the projects, Terp Construction, Home Insurance Guaranty Corporation, and Planters Bank agreed to raise funds through the issuance of bonds worth P400 million called the Margarita Bonds. The three companies entered into a Contract of Guaranty in which they agreed that Terp Construction would sell the Margarita Bonds and convey the funds generated into an asset pool named the Margarita Asset Pool Formation and Trust Agreement. Planters Bank, as trustee, would be the custodian of the assets in the asset pool with the corresponding obligation to pay the interests and redeem the bonds at maturity. Home Insurance Guaranty Corporation, as guarantor, would pay investors the value of the bond at maturity plus 8.5% interest per year. Banco Filipino purchased Margarita Bonds for P100 million. It asked for additional interest other than the guaranteed 8.5% per annum, based on the letters written by Terp Construction Senior Vice President Escalona.

Terp Construction began constructing Margarita Eastville and Margarita Plaza. After the economic crisis in 1997, however, it suffered unrealized income and could not proceed with the construction. When the Margarita Bonds matured, the funds in the asset pool were insufficient to pay the bond holders. Pursuant to the Contract of Guaranty, Planters Bank conveyed the asset pool funds to Home Insurance Guaranty Corporation, which then paid Banco Filipino interest earnings of 8.5% per year. Banco Filipino, however, sent Terp Construction a demand letter alleging that it was entitled to a 15.5% interest on its investment and that it was entitled to a 7% remaining unpaid interest. Terp Construction refused to pay the demanded interest. 

Terp Construction filed a Complaint for declaration of nullity of interest, damages, and attorney's fees against Banco Filipino. RTC ruled in favor of Terp Construction. CA set aside the RTC decision.

Issue: Whether or not the Terp Construction expressly agreed to be bound to respondent Banco Filipino Savings Mortgage Bank for additional interest in the bonds it purchased.

Held: A corporation's repeated payment of an allegedly unauthorized obligation contracted by one of its officers effectively ratifies that corporate officer's allegedly unauthorized act.

A corporation exercises its corporate powers through its board of directors. This power may be validly delegated to its officers, committees, or agencies. "The authority of such individuals to bind the corporation is generally derived from law, corporate bylaws or authorization from the board, either expressly or impliedly by habit, custom or acquiescence in the general course of business[.]”

The authority of the board of directors to delegate its corporate powers may either be: (1) actual; or (2) apparent. Actual authority may be express or implied. Express actual authority refers to the corporate powers expressly delegated by the board of directors. Implied actual authority, on the other hand, "can be measured by his or her prior acts which have been ratified by the corporation or whose benefits have been accepted by the corporation.”

Petitioner's subsequent act of twice paying the additional interest Escalona committed to during the term of the Margarita Bonds is considered a ratification of Escalona's acts. Petitioner's only defense that they were "erroneous payment[s]" since it never obligated itself from the start cannot stand. Corporations are bound by errors of their own making.

Vive Eagle Land, Inc. v. National Home Mortgage Finance Corporation

Facts: Petitioner Vive Eagle Land, Inc., a corporation engaged in the realty business and represented by its President, Virgilio O. Cervantes, filed a complaint for declaration of nullity of rescission, declaration of suspension of payment of purchase price and interest, and other reliefs against respondents NHMFC, a government corporation created by virtue of Presidential Decree No. 1267, Joseph Peter S. Sison, President of NHMFC, and Cavacon Corporation, a domestic corporation engaged in the business of construction. It alleged that it entered into a Deed of Sale of Rights, Interests, and Participation Over Foreclosed Assets, whereby it agreed to purchase NHMFC's rights, interests, and participation in the foreclosed property of Alyansa ng mga Maka-Maralitang Asosasyon at Kapatirang Organisasyon, Inc. located at Barangay Sta. Catalina, Angeles City.

Vive paid the first installment but failed to pay the subsequent installements because it was prevented from exercising its right to avail of a developmental loan under Section 8 of the Deed of Sale due to issues on the subject property, particularly: (1) the issuance of numerous certificates of land awards over the same; and (2) the classification of the same as agricultural, subjecting it to the coverage of the CARP. Vive requested NHMFC for a moratorium or suspension of the period of payment, the corresponding waiver of interest, and a 10% reduction of the purchase price for litigation costs it incurred.  NHMFC initially agreed.

Notwithstanding the agreement, NHMFC, through Sison, notified Vive through a letter of the rescission/cancellation and/or revocation of the Deed of Sale due to the alleged non-payment of the balance of the purchase price.

RTC ruled in favor of NHMFC. 

Issue: Whether or not NHMFC can be faulted for selling the property to Cavacon

Held: No. NHMFC, being a juridical person, cannot conduct its business, make decisions, or act in any manner without action from its board of directors. Said board must act as a body in order to exercise corporate powers. As such, no person, not even its officers, can validly bind a corporation without the authority of the corporation's board of directors. Nevertheless, the corporation may delegate through a board resolution its corporate powers or functions to a representative, subject to limitations under the law and the corporation's articles of incorporation. Accordingly, without delegation by the board of directors or trustees, acts of a person — including those of the corporation's directors, trustees, shareholders, or officers — executed on behalf of the corporation are generally not binding on the corporation. As such, no person, not even its officers, can validly bind a corporation without the authority of the corporation's board of directors. Nevertheless, the corporation may delegate through a board resolution its corporate powers or functions to a representative, subject to limitations under the law and the corporation's articles of incorporation. Accordingly, without delegation by the board of directors or trustees, acts of a person — including those of the corporation's directors, trustees, shareholders, or officers — executed on behalf of the corporation are generally not binding on the corporation. In view of the absence of a resolution from NHMFC's Board of Directors authorizing Atty. Salud to grant any kind of moratorium, NHMFC is not liable under the same.

NHMFC cannot be faulted for selling the property to Cavacon. The subsequent transaction entered into between NHMFC and Cavacon is, therefore, valid.

ABS-CBN Broadcasting Corporation v. Hilario

Facts: ABS-CBN's Scenic Department initially handled the design, construction and provision of the props and sets for its different shows and programs. Subsequently, petitioner engaged independent contractors to create, provide and construct its different sets and props requirements. One of the independent contractors engaged by petitioner was Ty. CCI was formed and incorporated by Ty together with some officers of petitioner. It was organized to engage in the business of conceptualizing, designing and constructing sets and props for use in television programs, theater presentations, concerts, conventions and/or commercial advertising. 

Ty decided to retire as Managing Director of CCI. His decision was prompted by his intention to organize and create his own company. While Ty and the directors of his company were still in the process of setting up the company, Ty entered into a Consultancy Agreement. Without Ty to manage and lead CCI, and considering that CCI was not generating revenue but was merely "breaking even", the Board of Directors of CCI decided to close the company down by shortening its corporate term.

In August 2003, Ty organized and created DWVEI. Like CCI, DWVEI is primarily engaged in the business of conceptualizing, designing and constructing sets and props for use in television programs and similar projects. Petitioner engaged the services of DWVEI.

Respondents filed a complaint for illegal dismissal, illegal deduction, non-payment of meal allowances, with prayer for damages against CCI and petitioner before the NLRC Arbitration Branch. Respondents claimed that the closure of CCI was not due to any of the authorized causes provided by law but was done in bad faith for the purpose of circumventing the provisions of the Labor Code, as CCI was still conducting operations under the guise of DWVEI. The LA ruled that respondents were illegally dismissed. NLRC affirmed the LA’s decision. CA affirmed the LA’s decision.

Issue: Whether or not petitioner should be held jointly and severally liable with CCI for payment of monetary award to respondents.

Held:  Yes. In PNB v. Hydro Resources Contractors Corp., the Court said that:

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: (1) defeat public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or (3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

The present case falls under the third instance where a corporation is merely a farce since it is a mere alter ego or business conduit of person or in this case a corporation. "The corporate mask may be removed or the corporate veil pierced when the corporation is just an alter ego of a person or of another corporation.” By looking at the circumstances surrounding the creation, incorporation, management and closure and cessation of business operations of CCI, it cannot be denied that CCI's existence was dependent upon Ty and petitioner.

Department of Labor and Employment v. Kentex Manufacturing Corp.

Facts: A fire broke out in the factory located in Valenzuela City owned by Kentex. The fire claimed 72 lives and injured a number of workers. As part of its standard procedures, personnel of DOLE­ CAMANAVA Field Office went to Kentex's premises. For its part, the DOLE-NCR also assessed Kentex's compliance with the occupational health and safety standards. Tt was discovered that Kentex had contracted with CJC Manpower Services (CJC) for the deployment of workers. The DOLE-NCR directed Kentex and CJC to attend the mandatory conference. Notably, Kentex, its Chairman and Chief Executive Officer Beato Ang, and the corporation's Chief Finance Officer Ong, were made parties to this case before the DOLE-NCR.

DOLE-NCR ruled against Kentex Manufacturing Corporation and/or Beato C. Ang and/or Ong King Guan. 

CA modified the ruling that Ong, as a company officer, he could not be personally held liable for the debts of Kentex without a showing of bad faith or wrongdoing on his part for the corporation's unlawful act.

Issue: Whether or not the CA erred in releasing Ong from monetary liability because a corporate officer has a juridical personality entirely separate and distinct from the corporation.

Held: Yes. CA committed serious error when it ordered the discharge or release of Ong from the obligations of Kentex. The reason is elemental in its simplicity: contrary to settled, unrelenting jurisprudence, it unconsciously and egregiously sought to alter and modify, as indeed it altered and modified, an already final and executory verdict.

Here, instead of filing an appeal with the DOLE Secretary, Ong moved for a reconsideration of the subject Order; needless to say, this did not halt or stop the running of the period to elevate the matter to the DOLE Secretary.

Filipinas Eslon Manufacturing Corp. v. Heirs of Basillo Llanes

Facts: Atty. Busico, the counsel for respondents, wrote a Letter to the management of FEMCO informing them that its plant site may have encroached into his clients' properties.  Atty. Gerardo Padilla, counsel for FEMCO, replied that his client's property is covered by a valid certificate of title. He also discovered that the property which is registered in the name of Basilio Llanes is spurious.

FEMCO management received a letter from Atty. Tampus, apparently the new counsel for the Heirs of Basilio Llanes, informing them that that they had erroneously fenced a portion of his clients' lot. The letter demanded that the fence be removed immediately and for FEMCO to pay a rental fee until the fence shall have been removed.

Atty. Padilla wrote Atty. Tampus a Letter informing him that "per cadastral record, the only persons who filed answers to Lot 1911 were Messrs. Pio Echavez and Pedro Q. Solosa. Basilio Llanes never claimed or filed an answer to said lot. Also, per Form No. 36, Record of Cadastral Answer, Lot 1911 is not yet decreed in favor of any person, let alone in the name of Basilio Llanes. The only inevitable conclusion is that the title of your clients is faked (sic)."

RTC ruled in favor of petitioner. CA granted the appeal.

Issue: Whether or not there is a defect in the verification and certification of non-forum shopping.

Held: No. According to Section 5, Rule 7, of the Rules of Court, and as held by a catena of cases decided by the Court, it is the plaintiff or principal party who should execute the certification of non-forum shopping under oath. In the case of the corporations, the physical act of signing may be performed, on behalf of the corporate entity, only by specifically authorized individuals for the simple reason that corporations, as artificial persons, cannot personally do the task themselves.

It is crystal clear from the Secretary's Certificate dated November 9, 2010 attached by petitioner FEMCO in its Petition that Calvin H. Tabora is "authorized to sign the Verification and Certification of Non-Forum Shopping of the above petition."

GSIS Family Bank Employees Union vs. Villanueva

Facts: Royal Savings Bank filed an application with the Central Bank of the Philippines for the appointment of a conservator. The application was denied, prohibited it from doing business, and placed it under receivership. Royal Savings Bank filed several complaints against the Central Bank for grave abuse of discretion. To amicably settle the cases, then Central Bank Governor Jose B. Fernandez, Jr. offered to reopen and rehabilitate Royal Savings Bank if it would drop all its complaints against the Central Bank and transfer all its shares of stock to Commercial Bank of Manila, a wholly-owned subsidiary of GSIS. Royal Savings Bank and Commercial Bank of Manila entered into a Memorandum of Agreement to rehabilitate and infuse capital into Royal Savings Bank. Royal Savings Bank was renamed Comsavings Bank.

GSIS transferred its holdings from Commercial Bank of Manila to Boston Bank. Comsavings Bank was not included in the transfer. Due to Boston Bank’s acquisition of Commercial Bank of Manila, GSIS took over the control and management of Comsavings Bank.

Comsavings Bank and GSIS executed a Memorandum of Agreement where the latter committed to infuse an additional capital of P2.5 billion into Comsavings Bank. After the infusion of funds, GSIS effectively owned 99.55% of Comsavings Bank’s outstanding shares of stock. Comsavings Bank changed its name to GSIS Family Bank.

President Benigno S. Aquino III issued Executive Order No. 7, which placed an indefinite moratorium on increases in salaries and benefits of employees in GOCCs and government financial institutions. President Aquino also signed into law RA No. 10149, or the GOCC Governance Act of 2011. The law created the Governance Commission for GOCCs.

The Governance Commission clarified that GSIS Family Bank was classified as a government financial institution. Moreover, as a government financial institution, GSIS Family Bank was unauthorized to enter into a collective bargaining agreement with its employees “based on the principle that the compensation and position classification system is provided for by law and not subject to private bargaining.” Also further clarified that the right to strike of GSIS Family Bank’s employees was not guaranteed by the Constitution, as they were government officers and employees. 

GSIS Union sent GSIS Family Bank a demand letter for the payment of Christmas bonus to its members, as stipulated in their CBA. GSIS Union accused GSIS Family Bank of evading its contractual obligation to its employees by invoking the Governance Commission’s opinion that it was no longer authorized to grant incentives and other benefits to its employees, unless authorized by the President of the Philippines. GSIS Union alleged that Republic Act No. 10149 does not apply to GSIS Family Bank, as it was a private bank created and established under the Corporation Code.

Issue: Whether or not GSIS Family Bank is a private bank, outside the coverage of the RA.

Held: No. A GOCC is: (1) established by original charter or through the general corporation law; (2) vested with functions relating to public need whether governmental or proprietary in nature; and (3) directly owned by the government or by its instrumentality, or where the government owns a majority of the outstanding capital stock. Possessing all 3 attributes is necessary to be classified as a GOCC. There is no doubt that GSIS Family Bank is a GOCC since 99.55% of its outstanding capital stock is owned and controlled by GSIS.

Steelcase, Inc. v. Design International Selections, Inc.

 Doctrines: 

• The appointment of a distributor in the Philippines is not sufficient to constitute “doing business” unless it is under the full control of the foreign corporation; It should be kept in mind that the determination of whether a foreign corporation is doing business in the Philippines must be judged in light of the attendant circumstances. 
• A foreign corporation doing business in the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine entity that had derived some benefit from their contractual arrangement because the latter is considered to be estopped from challenging the personality of a corporation after it had acknowledged the said corporation by entering into a contract with it. 

Facts: Steelcase is a foreign corporation existing under the laws of Michigan, USA, and engaged in the manufacture of office furniture with dealers worldwide. Respondent is a corporation existing under Philippine Laws and engaged in the furniture business, including the distribution of furniture.

Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership agreement whereby Steelcase granted DISI the right to market, sell, distribute, install, and service its products to end-user customers within the Philippines. The business relationship continued smoothly until it was terminated sometime in January 1999 after the agreement was breached with neither party admitting any fault.

Steelcase filed a complaint against DISI. Despite a showing that DISI transacted with the local customers in its own name and for its own account, it was of the opinion that any doubt in the factual environment should be resolved in favor of a pronouncement that a foreign corporation was doing business in the Philippines, considering the twelve-year period that DISI had been distributing Steelcase products in the Philippines. 

Steelcase moved for reconsideration but it was denied by the RTC. 

Steelcase elevated the case to the CA which affirmed the Decision of the RTC. 

Issue: Whether or not Steelcase is doing business in the Philippines without a license 

Held: The rule that an unlicensed foreign corporations doing business in the Philippine do not have the capacity to sue before the local courts is well-established. the appointment of a distributor in the Philippines is not sufficient to constitute “doing business” unless it is under the full control of the foreign corporation. On the other hand, if the distributor is an independent entity which buys and distributes products, other than those of the foreign corporation, for its own name and its own account, the latter cannot be considered to be doing business in the Philippines. It should be kept in mind that the determination of whether a foreign corporation is doing business in the Philippines must be judged in light of the attendant circumstances. 

A foreign corporation doing business in the Philippines without a license may still sue before the Philippine courts a Filipino or a Philippine entity that had derived some benefit from their contractual arrangement because the latter is considered to be estopped from challenging the personality of a corporation after it had acknowledged the said corporation by entering into a contract with it.

While it is essential to uphold the sound public policy behind the rule that denies unlicensed foreign corporations doing business in the Philippines access to our courts, it must never be used to frustrate the ends of justice by becoming an all-encompassing shield to protect unscrupulous domestic enterprises from foreign entities seeking redress in our country.

Cargill v. Intra Strata Assurance Co.

Doctrines: 

• Where a foreign corporation does business in the Philippines without the proper license, it cannot maintain any action or proceeding before Philippine Courts. 
• The determination of whether a foreign corporation is doing business in the Philippines must be based on the facts of each case; Court gives emphasis to the importance of the element of continuity of commercial activities to constitute doing business in the Philippines. 
• A foreign company that merely imports goods from a Philippines exporter, without opening an office or appointing an agent in the Philippines is not doing business in the Philippines. 

Facts: Petitioner is a corporation organized and existing under the laws of the State of Delaware, USA. Petitioner and Northern Mindanao Corporation (NMC) executed a contract whereby NMC agreed to sell to petitioner 20,000 to 24,000 metric tons of molasses. The contract was amended three times.

In compliance with the terms of the third amendment of the contract, respondent Intra Strata Assurance Corporation issued a a performance bond to guarantee NMC’s delivery of the molasses, and a surety bond to guarantee the repayment of downpayment as provided in the contract. 

NMC was only able to deliver 219.551 metric tons of molasses out of the agreed 10,500 metric tons. Thus, petitioner sent demand letters to respondent claiming payment under the performance and surety bonds. When respondent refused to pay, petitioner filed a complaint for sum of money against NMC and respondent. 

NMC and respondent entered into a compromise agreement which the trial court approved. However, NMC still failed to comply with its obligation. The trial court ruled in favor of Cargill and ordered Intra Strata to solidarily pay Cargill. CA reversed the decision.

Issue: Whether or not petitioner is doing or transacting business in the Philippines in contemplation of the law and established jurisprudence

Held: No. In this case, petitioner and NMC amended their contract three times to give a chance to NMC to deliver to petitioner the molasses, considering that NMC already received the minimum price of the contract. There is no showing that the transactions between petitioner and NMC signify the intent of petitioner to establish a continuous business or extend its operations in the Philippines. 

The contract between petitioner and NMC involved the purchase of molasses by petitioner from NMC. It was NMC, the domestic corporation, which derived income from the transaction and not petitioner. To constitute “doing business,” the activity undertaken in the Philippines should involve profit-making. Besides, under Section 3(d) of RA 7042, “soliciting purchases” has been deleted from the enumeration of acts or activities which constitute “doing business.” 

Petitioner is a foreign company merely importing molasses from a Philipine exporter. A foreign company that merely imports goods from a Philippine exporter, without opening an office or appointing an agent in the Philippines, is not doing business in the Philippines.