8/9/2019 corpo chap6,7,8

1/14

ALICIA E. GALA, GUIA G. DOMINGO and RITA G.BENSON vs. ELLICE AGRO-INDUSTRIALCORPORATION, MARGO MANAGEMENT ANDDEVELOPMENT CORPORATION, RAUL E. GALA,VITALIANO N. AGUIRRE II, ADNAN V. ALONTO,ELIAS N. CRESENCIO, MOISES S. MANIEGO,RODOLFO B. REYNO, RENATO S. GONZALES,VICENTE C. NOLAN, NESTOR N. BATICULON

Facts

. Spouses Manuel and Alicia Gala, their children GuiaDomingo, Ofelia Gala, Raul Gala, and Rita Benson, andtheir encargados Virgilio Galeon and Julian Jaderformed and organied the !llice Agro"#ndustrial$orporation.

. &he Gala spouses transferred se'eral parcels of landlocated in the pro'inces of (ueon and )aguna to!llice. #n 1*+%, Manuel Gala, Alicia Gala and Ofelia Galasuscried to an additional -,%** shares, 1,/0%.0shares and %+/.0 shares, respecti'el. On June %+,1*+%, Manuel Gala and Alicia Gala ac2uired anadditional 00 shares and %+1 shares, respecti'el.

. Suse2uentl, on Septemer 1/, 1*+%, Guia Domingo,Ofelia Gala, Raul Gala, Virgilio Galeon and Julian Jaderincorporated the Margo Management and De'elopment$orporation 3Margo4. On 5o'emer 1, 1*+%, ManuelGala sold 1-,-16 of his shares in !llice to Margo. AliciaGala transferred 1, of her shares in !llice to acertain Victor de Villa on March %, 1*+-. &hat sameda, de Villa transferred said shares to Margo. A fe7months later, on August %+, 1*+-, Alicia Galatransferred +06.- of her shares to Ofelia Gala, 0 toGuia Domingo and 0 to Raul Gala. 8ears later, on9eruar +, 1*++, Manuel Gala transferred all of hisremaining holdings in !llice, amounting to %,1/6shares, to Raul Gala. On Jul %, 1*++, Alicia Galatransferred 1, of her shares to Margo.

On June %-, 1**, a special stoc:holders; meeting ofMargo 7as held, 7here a ne7 oard of directors 7aselected. &hat same da, the ne7l"elected oardelected a ne7 set of onanciallosses and the dissipation of assets, doc:eted as S!$$ase 5o. -=6=. &he petition 7as amended to deletethe praer for the appointment of a managementcommittee or recei'er and for the dissolution of !llice.

Additionall, respondents praed that the e allo7edto inspect the corporate oo:s and documents o!llice.

On 5o'emer -, 1**+, the S!$ rendered a JointDecision in S!$ $ases 5os. -=6= and 6%=.

1. Dismissing the petition in S!$ $ase 5o. -=6=,

%. #ssuing the follo7ing orders in S!$ $ase 5o. 6%=@

3a4 !noining herein respondents to perform corporateacts of oth !llice and Margo, as directors and o

8/9/2019 corpo chap6,7,8

2/14

8/9/2019 corpo chap6,7,8

3/14

person or persons, >rm, association orpartnership shall e aected the fact thatan director or orm, associationor partnership@ and >nall, that all and an ofthe persons 7ho ma ecome director orocate of pulic con'enience to

operate a transportation ser'ice et7een #lagan in thero'ince of #saela and &uguegarao in the ro'ince of$agaan, and additional trips in its e?isting e?pressser'ice et7een Manila &uguegarao.

On June 6, 1*-%, Rural &ransit >led an application forcerti>cation of a ne7 ser'ice et7een &uguegarao and#lagan 7ith the ulic $ompan Ser'ice $ommission3S$4, since the present ser'ice is not sucate of pulic con'enience to operate apassenger us ser'ice et7een Manila and &uguegarao

Red )ine opposed said application, arguing that thealread hold a certi>cate of pulic con'enience fo&uguegarao and #lagan, and is rendering ade2uate

ser'ice. &he also argued that granting Rural &ransit;sapplication 7ould constitute a ruinous competition o'esaid route

On Dec. %1, 1*-%, ulic Ser'ice $ommission appro'edRural &ransit;s application, 7ith the condition that Halthe other terms and conditions of the 'ariouscerti>cates of pulic con'enience of the hereinapplicant and herein incorporated are made a parthereof.H

A motion for rehearing and reconsideration 7as >led Red )ine since Rural &ransit has a pending applicationefore the $ourt of 9irst #nstance for 'oluntardissolution of the corporation

A motion for postponement 7as >led Rural &ransitas 'eri>ed M. Olsen 7ho s7ears Hthat he 7as thesecretar of the Rural &ransit $ompan, )td

During the hearing efore the ulic Ser'ice$ommission, the petition for dissolution and the $9#;sdecision decreeing the dissolution of Rural &ransit 7ereadmitted 7ithout oection

At the trial of this case efore the ulic Ser'ice$ommission an issue 7as raised as to 7ho 7as the reapart in interest ma:ing the application, 7hether theRural &ransit $ompan, )td., as appeared on the face ofthe application, or the Bachrach Motor $ompan, #nc.using name of the Rural &ransit $ompan, )td., as atrade name

Co7e'er, S$ granted Rural &ransit;s application focerti>cate of pulic con'enience and ordered that a

certi>cate e issued on its name S$ relied on a Resolution in case 5o. %-%1=

authoriing Bachrach Motor to continue using Rura&ransit;s name as its tradename in all its applicationsand petitions to e >led efore the S$. Said resolution7as gi'en a retroacti'e eect as of the date of >ling ofthe application or April -, 1*-

Iss!" $an the ulic Ser'ice $ommission authorie acorporation to assume the name of another corporationas a trade nameK

R!$&n% NO

8/9/2019 corpo chap6,7,8

4/14

&he Rural &ransit $ompan, )td., and the BachrachMotor $o., #nc., are hilippine corporations and the 'erla7 of their creation and continued e?istence re2uireseach to adopt and certif a distincti'e name

&he incorporators Hconstitute a od politic andcorporate under the name stated in the certi!cate.H

A corporation has the po7er Hof succession %y itscorporate name.H #t is essential to its e?istence andcannot change its name e?cept in the manner pro'ided the statute. B that name alone is it authoried to

transact usiness.&he la7 gi'es a corporation no e?press or impliedauthorit to assume another name that isunappropriatedI still less that of another corporation,7hich is e?pressl set apart for it and protected thela7. #f an corporation could assume at pleasure as anunregistered trade name the name of anothercorporation, this practice 7ould result in confusion andopen the door to frauds and e'asions and dicate of pulic con'enience to the applicantRural &ransit $o., )td., the said order last mentioned isset aside and 'acated on the ground that the Rural&ransit $ompan, )td., is not the real part in interestand its application 7as >ctitious

G.R. N+. L-;cateof appro'al on June 1, 1*/-.

&he contro'ers arose 7hen a >re incidenthappened 7hich gutted EM$;s spinning mills inasig, Rial.

E&M# alleged that as a result of this incident,confusion arose among its an:ers, friends,stoc:holders and customers 7ho 7ere ale tohear the ne7s, ecause of the similarit of itsname to that of EM$.

On the other hand, it is the position of EM$that although there ma e similarit in theircompan name to that of the E&M#;s, it is notconfusing or decepti'e.

&he S!$ ruled that it is necessar under thecircumstances to enoin the EM$ from furtherusing its present corporate name. &he S!$found that confusion is not onl apparent, utpossile. #t highlighted its dut to pre'ent suchconfusion at all times and under alcircumstances not onl for the purpose oprotecting the corporations in'ol'ed ut moreso for the protection of the pulic.

ISSUEO5 the order of the S!$ enoining petitionerto its corporate name constitutes gra'e ause odiscretion.

#ELDNO

#n todas modern usiness life 7here peoplego trade names and corporate images, thecorporate name ecomes the more important.

Esuall, it is the sound of all the other 7ordscomposing the names of usiness corporationsthat stic:s to the mind of those 7ho deal 7iththem.

&he 7ord Hte?tileH in Eni'ersal &e?tile Mills, #nc.cannot possil assure the e?clusion of alother entities 7ith similar names from the mindof the pulic especiall so, if the usiness the

are engaged in are the same, li:e in the instantcase.

hen EM$ >led the amendment changing itsname, it correspondingl >led a 7rittenunderta:ing promising to change its name inthe e'ent that there is another person, >rm orentit 7ho has otained a prior right to the useof such name or one similar to it. &hat promiseis still inding upon the corporation and itsresponsile onishing and selling offarics of all :inds in 7hich E&M# had eenengaged for more than a decade ahead oEM$.

P'&$&)s E>)+*t B. V. vs. CA

9actsI

1. etitioner hilips !?port B. V. 3!BV4, a foreigncorporation organied under the la7s of the5etherlands, although not engaged in usinesshere, is the registered o7ner of the trademar:sC#)#S and C#)#S SC#!)D !MB)!M.

%. etitioners hilips !lectrical )amps, #nc. 3hilips!lectrical4, and hilips #ndustrial De'elopment#nc. 3hilips #ndustrial4, authoried users of thetrademar:s C#)#S and C#)#S SC#!)D!MB)!M, 7ere incorporated on Aug %*, 1*0/and Ma %0, 1*0/. All petitioner corporationselong to the C#)#S Group of $ompanies.

-. Respondent Standard hilips $orporation3Standard hilips4 7as issued a $erti>cate oRegistration respondent $ommission on Ma1*, 1*+%.

6. etitioners >led a letter complaint 7ith the S!$as:ing for the cancellation of the 7ordLC#)#S and the logo LC#)#S SC#!)D

8/9/2019 corpo chap6,7,8

5/14

!MB)!M in the name of etitioner !BV, andthe pre'ious registration of etitioners hilips!lectrical and hilips industrial 7ith the S!$.

0. ri'ate respondent refused to amend.etitioners >led 7ith the S!$ a petition praingfor the issuance of a 7rit of preliminarinunction, alleging that ri'ate Respondent;suse of the 7ord C#)#S amounts to aninfringement and clear 'iolation of etitioners;e?clusi'e right to use the same consideringthat oth parties engage in the same usiness.

/. #n its ans7er, pri'ate respondent counteredthat etitioner !BV has no legal capacit tosue@ t'at &ts !s" + &ts c+*)+*at" na1" &sn+t at a$$ s&1&$a* t+ )"t&t&+n"*s? t*ad"1a*@P#ILIPS '"n c+ns&d"*"d &n &ts "nt&*"t.

=. S!$ ruled against the issuance of such 7rit.etition 7as dismissed for lac: of merit.

Section 1& of the Corporation Code isapplica%le only when the corporatenames in uestion are identical. 'ere,there is no confusing similarity%etween petitioners and pri(aterespondents corporate names.

+. Motion for reconI D!5#!D

*. Appeal to S!$ en ancI a

8/9/2019 corpo chap6,7,8

6/14

#ELDa4 etitioner contends that the $ourt of Appealserred in holding that the 7ords HAng &iaH hadac2uired a secondar meaning. #n 'ie7 of theconclusion 7e ha'e reached upon the >rst assignmentof error, it is unnecessar to appl here the doctrine ofHsecondar meaningH in trade"mar: parlance. &hisdoctrine is to the eect that a 7ord or phrase originallincapale of e?clusi'e appropriation 7ith reference toan article of the mar:et, ecause geographicall orother7ise descripti'e, might ne'ertheless ha'e eenused so long and so e?clusi'el one producer 7ithreference to his article that, in that trade and to thatranch of the purchasing pulic, the 7ord or phrasehas come to mean that the article 7as his product. eha'e said that the phrase HAng &ia,H eing neithergeographic nor descripti'e, 7as originall capale ofe?clusi'e appropriation as a trade"mar:. But 7ere itnot so, the application of the doctrine of secondarmeaning made the $ourt of Appeals couldne'ertheless e full sustained ecause, in an e'ent, respondents long and e?clusi'e use of said phrase7ith reference to his products and his usiness, it hasac2uired a proprietar connotation.

4 8es, pants and shirts are goods closel similar to

shoes and slippers. &he elong to the same class ofmerchandise as shoes and slippers. &he are closelrelated goods. &he Supreme $ourt arst on Ma 1+, 1*+1 and second on 5o'.%1, 1*+1. 9rom the %nd tranche release,%0,. 7as deducted and deposited inthe lainti $orporation;s name under a timedeposit. &o this, plainti claimed dela on theloan releases and that the 7ere not allo7ed to7ithdra7 the loan proceeds of %0,.under time deposit.

6. On the other hand, defendant an: contendsthat the dela 7as due to the % ndtranche eingreleased to them onl on 5o'. %, 1*+1 due tothe shortfall in the collateral of the corporationto co'er the loan 7here such tranche 7asreleased onl after petitioner;s commitment toco'er the collateral de>cienc opening thistime deposit using the loan proceeds o%0,.. 9urther, to secure the loan, Ja'iere?ecuted chattel mortgage o'er somemachiner in fa'or of the an:.

0. #n the meantime, the an: changed its name toA#$ Sa'ings and Mortgage Ban: #nc&hereafter, the corporation failed to pa@ thisprompted the Ban: to mo'e for thee?traudicial foreclosure of the mortgages.

/. $ Ja'ier >led an action to restrain thee?traudicial foreclosure on the ground tha9irst Summa and A#$ Ban: are separateentities and that the ha'e ne'er recei'ed anformal notice of the alleged change ocorporate name of 9irst Summa Sa'ings andMortgage Ban: to A#$ Sa'ings N MortgageBan:, #nc.

Iss!" hether the detor should e formall noti>edof the corporate creditor;s change of name.

#"$d 5O. &here is no such re2uirement under the$orporation $ode, Ban:ing la7s, or an regulations andcirculars of oth S!$ and Bang:o Sentral ng ilipinas3BS4 ordering a an: that changes its corporate nameto formall notif all its detors. &his

$ourt cannot impose on a an: to notif a detor osuch change in its corporate name asent an la7circular or regulation re2uiring it. Such act 7ould eudicial legislation.

&he formal noti>cation is, therefore

discretionar on the an:. Enless there is a la7regulation or circular from the S!$ or BS re2uiringthe formal noti>cation of all detors of an:s ofan change in corporate name, such noti>cationremains to e a mere internal polic that an:s ma orma not adopt.

A change in the corporate name does not ma:ea ne7 corporation, 7hether eected a special act orunder a general la7. #t has no eect on the identit ofthe corporation, or on its propert, rights, or liailities&he corporation, upon such change in its name, is in nosense a ne7 corporation, nor the successor of theoriginal corporation. #t is the same corporation 7ith adierent name, and its character is in no respectchanged.

#n the case at ar, there 7ere e'idencessho7ing that petitioner had notice or :no7ledge in thechange of name of the an:. &hese 7ereI 1. )etterdated Jul 1/, 1*+- signed petitioner;s accountantRamundo Blanco@ %. Board Reso of petitioner corpsigned alo Ja'ier to e?ecute a chattel mortgage toA#$@ -. Secretar;s $ert. signed the $orporation;sSec. 9ortunato Gariel@ and, 6. Endated letter signed alo Ja'ier and addressed to A#$ authoriingGeneral Manager Victor Ja'ier to secure from A#$certain documents for his signature. B thesedocuments 7hich 7ere e?ecuted etitioner$orporation, it 7as then 7ell a7are that 9irst Summa

8/9/2019 corpo chap6,7,8

7/14

Sa'ings and Mortgage Ban:, #nc. are one and the sameentit, ut it pretended other7ise. #t used thispurported ignorance as an e?cuse to renege on itsoligation to pa its loans after the ecame due andafter demands for pament 7ere made, claiming that itne'er otained the loans from respondent an:. &hus,it sho7ed ad faith in this instance@ hence, the a7ardof actual and compensator damages.

Ind!st*&a$ R"*act+*&"s C+*)+*at&+n + t'"

P'&$&))&n"s vs. C+!*t + A))"a$s

Facts1. Respondent, Refractories $orporation of thehilippines 3R$4 7as organied on 1*=/ for thepurpose of engaging in the usiness of manufacturing,producing, selling, e?porting and other7ise dealing inan and all refractor ric:s and "products andderi'ati'es@%. etitioner #nternational Refractories $orporation ofthe hilippines 3#R$4 7as incorporated on 1*=* 7iththe name Snclaire Manufacturing $orp, and later on31*+04 change its corporate name into #R$@-. R$ upon :no7ing that #R$ use such name >led7ith S!$ a petition to compel #R$ to change its

corporate name@6. S!$ ruled in fa'or of R$ ordered #R$ remo'e R$on its name, appealed to S!$ en anc ahich acation"order to delete the7ord refractories onl@0. On appeal, $A upheld the urisdiction of S!$ o'erthis matter and ruled that oth names are confusinglsimilar and that R$ has prior right to use theHrefractoriesH on its corporate name...

Iss!"I #. O5, S!$ has urisdiction o'er the said case.##. O5, there is confusing similarit et7een theircorporate names.

#"$d1.Y"s, urisdictiin of S!$ is not merel con>nedto the adudicati'e functions pro'ided Sec 0 D *%"A. B e?press mandate it has asolute urisdiction,super'ision and control o'er all corporations. #t alsoe?ercises regulator and administrati'e po7er toimplement and enforcement $orporation $ode, one of7hich is Sec 1+...

Sec 1&. Corporate *ame ) *o corporate name may %eallowed %y the SEC if the proposed name is identical ordecepti(ely or confusingly similar to that of anyeisting corporation or to any other name alreadyprotected %y law or is patently decepti(e,confusing or contrary to eisting laws. /hen a changein the corporate name is appro(ed, the Commission

shall issue an amended certi!cate of incorporationunder the amended name.

%. S!$s dut to pre'ent confusion in the use ofcorporate names not onl for the protection of thecorporations in'ol'ed ut more so for theprotection of the pulic, and it has authorit toderegister at all times and under allcircumstances corporate names 7hich in estimationare li:el to generate confusion.

##. Y"s, Sec 1+ of the $orporation $ode prohiits theuse of a corporate name 7hich is Hidentical ordecepti'el or confusingl similar to that of an

e?isting corporation or to an other name alreadprotected la7 or is patentl decepti'econfusing or contrar e?isting la7sH. &his is to a'oidfraud upon the pulic that ill ha'e occasion to dea7iththe entit concerned, the e'asion of legaoligations and duties, and the reduction of dinished lo7 cost houses, there7ere no sustantial de'elopments therein. Summonstogether 7ith the complaint, 7ere ser'ed upon thedefendant, through its Branch Manager at the statedaddress at $agaan de Oro $it ut the Sheris Returnof Ser'ice stated that the summons 7as dul ser'edHupon defendant !.B. Villarosa N artner $o., )td. thru

http://www.scribd.com/doc/54521818/E-B-Villarosa-Partners-Co-Ltd-v-Benito-312-SCRA-65-1999http://www.scribd.com/doc/54521818/E-B-Villarosa-Partners-Co-Ltd-v-Benito-312-SCRA-65-1999

8/9/2019 corpo chap6,7,8

8/14

its Branch Manager !ngr. at their ne7 oled an Opposition to DefendantsMotion to Dismiss. lainti >led a Motion to DeclareDefendant in Default. the trial court issued an Orderdening defendants Motion to Dismiss as 7ell asplaintis Motion to Declare Defendant in Default.defendant, >led a Motion for Reconsideration allegingthat Sec.11, Rule 16 of the ne7 Rules did not lieralieut, on the contrar, restricted the ser'ice of summonson persons enumerated therein@ and that the ne7pro'ision is 'er speci>c and clear in that the 7ordHmanagerH 7as changed to Hgeneral managerH,HsecretarH to Hcorporate secretarH, and e?cludingtherefrom agent and director. Defendants Motion for

Reconsideration 7as denied, hence this petition.

#ssueI hether or not the trial court ac2uiredurisdiction o'er the person of petitioner upon ser'iceof summons on its Branch Manager

C!)DI 5O. &he court agrees 7ith the contention ofVillarosa. !arlier cases ha'e uphold ser'ice ofsummons upon a construction proect manager@ acorporations assistant manager@ ordinar cler: of acorporation@ pri'ate secretar of corporate e?ecuti'es@retained counsel@ oc'an%"C+11&ss&+n

GR L-073//, // A)*&$ /323

FactsS!$ $ase 1-=0 On %% Octoer 1*=/, JohnGo:ong7ei Jr., as stoc:holder of San Migue$orporation, >led 7ith the Securities and !?change$ommission 3S!$4 a petition for Hdeclaration of nullitof amended "la7s, cancellation of certi>cate of >lingof amended "la7s, inunction and damages 7ithpraer for a preliminar inunctionH against themaorit of the memers of the Board of Directors andSan Miguel $orporation as an un7illing petitioner. As a>rst cause of action, Go:ong7ei alleged that on 1+Septemer 1*=/, Andres Soriano, Jr., Jose M. Soriano!nri2ue Toel, Antonio Ro?as, !meterioBuaoalthrode B. $onde, Miguel Ortigas, and Antonio rieto

8/9/2019 corpo chap6,7,8

9/14

amended la7s of the corporation, asing theirauthorit to do so on a resolution of the stoc:holdersadopted on 1- March 1*/1, 7hen the outstandingcapital stoc: of the corporation 7as onl=,1-*.=6., di'ided into 0,01-,*=6 commonshares at 1. per share and 10, preferredshares at 1. per share. At the time of theamendment, the outstanding and paid up sharestotalled -,1%=,6-, 7ith a total par 'alue of-1,%=,6-..

#t 7as contended that according to section %% of the$orporation )a7 and Article V### of the "la7s of thecorporation, the po7er to amend, modif, repeal oradopt ne7 "la7s ma e delegated to the Board ofDirectors onl the acation and depri'edhim of his 'ested right as afore"mentioned, hence theamended "la7s are null and 'oid. As additionalcauses of action, it 7as alleged that corporations ha'eno inherent po7er to dis2ualif a stoc:holder fromeing elected as a director and, therefore, the2uestioned act is ultra 'ires and 'oid@ that Andres M.Soriano, Jr. andPor Jose M. Soriano, 7hile representingother corporations, entered into contracts 3speci>calla management contract4 7ith the corporation, 7hich7as a'o7ed ecause the 2uestioned amendment ga'ethe Board itself the prerogati'e of determining 7hetherthe or other persons are engaged in competiti'e orantagonistic usiness@ that the portion of the amended

"la7s 7hich states that in determining 7hether ornot a person is engaged in competiti'e usiness, theBoard ma consider such factors as usiness andfamil relationship, is unreasonale and oppressi'eand, therefore, 'oid@ and that the portion of theamended "la7s 7hich re2uires that Hall nominationsfor election of directors shall e sumitted in 7riting tothe Board of Directors at least >'e 304 7or:ing dasefore the date of the Annual MeetingH is li:e7iseunreasonale and oppressi'e. #t 7as, therefore, praedthat the amended "la7s e declared null and 'oidand the certi>cate of >ling thereof e cancelled, andthat Soriano, et. al. e made to pa damages, inspeci>ed amounts, to Go:ong7ei. On %+ Octoer 1*=/,

in connection 7ith the same case, Go:ong7ei >led 7iththe Securities and !?change $ommission an HErgentMotion for roduction and #nspection of DocumentsHalleging that the Secretar of the corporation refusedto allo7 him to inspect its records despite re2uestmade Go:ong7ei for production of certaindocuments enumerated in the re2uest, and that thecorporation had een attempting to suppressinformation from its stoc:holders despite a negati'erepl the S!$ to its 2uer regarding their authoritto do so.

&he motion 7as opposed Soriano, et. al. &he$orporation, Soriano, et. al. >led their ans7er, andtheir opposition to the petition, respecti'elMean7hile, on 1 Decemer 1*=/, 7hile the petition7as et to e heard, the corporation issued a notice ofspecial stoc:holders meeting for the purpose oHrati>cation and con>rmation of the amendment to theB"la7sH, setting such meeting for 1 9eruar 1*==&his prompted Go:ong7ei to as: the S!$ for asummar udgment insofar as the >rst cause of actionis concerned, for the alleged reason that calling aspecial stoc:holders meeting for the aforesaidpurpose, Soriano, et. al. admitted the in'alidit of the

amendments of 1+ Septemer 1*=/. &he motion forsummar udgment 7as opposed Soriano, et. alending action on the motion, Go:ong7ei >led anHErgent Motion for the #ssuance of a &emporarRestraining OrderH, praing that pending thedetermination of Go:ong7eis application for theissuance of a preliminar inunction and oGo:ong7eis motion for summar udgment, atemporar restraining order e issued, restrainingSoriano, et. al. from holding the special stoc:holdersmeeting as scheduled. &his motion 7as dul opposed Soriano, et. al. On 1 9eruar 1*==, $remationissued an order dening the motion for issuance otemporar restraining order. After receipt of the orderof denial, Soriano, et. al. conducted the specia

stoc:holders meeting 7herein the amendments to the"la7s 7ere rati>ed. On 16 9eruar 1*==, Go:ong7e>led a consolidated motion for contempt and fonulli>cation of the special stoc:holders meeting. Amotion for reconsideration of the order deningGo:ong7eis motion for summar udgment 7as >led Go:ong7ei efore the S!$ on 1 March 1*==.

S!$ $ase 16%- Go:ong7ei alleged that, ha'ingdisco'ered that the corporation has een in'estingcorporate funds in other corporations and usinessesoutside of the primar purpose clause of thecorporation, in 'iolation of section 1="1P% of the$orporation )a7, he >led 7ith S!$, on % Januar

1*==, a petition see:ing to ha'e Andres M. Soriano, Jrand Jose M. Soriano, as 7ell as the corporationdeclared guilt of such 'iolation, and ordered toaccount for such in'estments and to ans7er fodamages. On 6 9eruar 1*==, motions to dismiss7ere >led Soriano, et. al., to 7hich a consolidatedmotion to stri:e and to declare Soriano, et. al. indefault and an opposition ad aundantioremcautelam7ere >led Go:ong7ei. Despite the fact that saidmotions 7ere >led as earl as 6 9eruar 1*==, the$ommission acted thereon onl on %0 April 1*==, 7henit denied Soriano, et. al.s motions to dismiss and ga'ethem t7o 3%4 das 7ithin 7hich to >le their ans7erand set the case for hearing on April %* and Ma -,

8/9/2019 corpo chap6,7,8

10/14

1*==. Soriano, et. al. issued notices of the annualstoc:holders meeting, including in the Agenda thereof,the Hrealed 7ith theS!$ an urgent motion for the issuance of a 7rit ofpreliminar inunction to restrain Soriano, et. al. fromta:ing up #tem / of the Agenda at the annualstoc:holders meeting, re2uesting that the same e setfor hearing on - Ma 1*==, the date set for the secondhearing of the case on the merits. &he S!$, ho7e'er,cancelled the dates of hearing originall scheduled andreset the same to Ma 1/ and 1=, 1*==, or after thescheduled annual stoc:holders meeting. 9or thepurpose of urging the $ommission to act, Go:ong7ei>led an urgent manifestation on - Ma 1*==, ut thisnot7ithstanding, no action has een ta:en up to thedate of the >ling of the instant petition.

Go:ong7ei >led a petition for petition for certiorari,

mandamus and inunction, 7ith praer for issuance of7rit of preliminar inunction, 7ith the Supreme $ourt,alleging that there appears a delierate and concertedinailit on the part of the S!$ to act.

Iss!"

1. hether the corporation has the po7erto pro'ide for the 3additional4 2uali>cations ofits directors.

%. hether the dis2uali>cation of acompetitor from eing elected to the Board ofDirectors is a reasonale e?ercise of corporateauthorit.

-. hether the S!$ gra'el aused itsdiscretion in dening Go:ong7eis re2uest foran e?amination of the records of San Miguel#nternational, #nc., a full o7ned susidiar ofSan Miguel $orporation.

6. hether the S!$ gra'el aused itsdiscretion in allo7ing the stoc:holders of SanMiguel $orporation to ratif the in'estment ofcorporate funds in a foreign corporation.

#"$d1. #t is recognied all authorities that He'ercorporation has the inherent po7er to adopt "la7sfor its internal go'ernment, and to regulate theconduct and prescrie the rights and duties of its

memers to7ards itself and among themsel'es inreference to the management of its aairs.H #n thisurisdiction under section %1 of the $orporation )a7, acorporation ma prescrie in its "la7s Hthe2uali>cations, duties and compensation of directors,ocation in addition to that speci>ed section- of the $orporation )a7, 7hich pro'ides that He'erdirector must o7n in his right at least one share of thecapital stoc: of the stoc: corporation of 7hich he is adirector.H An person H7ho us stoc: in a corporationdoes so 7ith the :no7ledge that its aairs aredominated a maorit of the stoc:holders and thathe impliedl contracts that the 7ill of the maorit shall

go'ern in all matters 7ithin the limits of the act ofincorporation and la7full enacted "la7s and notforidden la7.H &o this e?tent, therefore, thestoc:holder ma e considered to ha'e Hparted 7ithhis personal right or pri'ilege to regulate thedisposition of his propert 7hich he has in'ested in thecapital stoc: of the corporation, and surrendered it tothe 7ill of the maorit of his fello7 incorporators. #tcan not therefore e ustl said that the contracte?press or implied, et7een the corporation and thestoc:holders is infringed an act of the former 7hichis authoried a maorit.H ursuant to section 1+ ofthe $orporation )a7, an corporation ma amend itsarticles of incorporation a 'ote or 7ritten assent ofthe stoc:holders representing at least t7o"thirds of thesuscried capital stoc: of the corporation. #f theamendment changes, diminishes or restricts the rightsof the e?isting shareholders, then the dissentingminorit has onl one right, 'i.I Hto oect thereto in7riting and demand pament for his share.H Endesection %% of the same la7, the o7ners of the maoritof the suscried capital stoc: ma amend or repeaan "la7 or adopt ne7 "la7s. #t cannot e said,therefore, that Go:ong7ei has a 'ested right to eelected director, in the face of the fact that the la7 at

the time such right as stoc:holder 7as ac2uiredcontained the prescription that the corporate charterand the "la7 shall e suect to amendmentalteration and modi>cation.

%. Although in the strict and technical sense, directorsof a pri'ate corporation are not regarded as trusteesthere cannot e an dout that their character is thatof a >duciar insofar as the corporation and thestoc:holders as a od are concerned. As agentsentrusted 7ith the management of the corporation fothe collecti'e ene>t of the stoc:holders, Hthe occupa >duciar relation, and in this sense the relation is oneof trust.H H&he ordinar trust relationship of directors ofa corporation and stoc:holders is not a matter o

statutor or technical la7. #t springs from the fact thatdirectors ha'e the control and guidance of corporateaairs and propert and hence of the propertinterests of the stoc:holders. !2uit recognies thastoc:holders are the proprietors of the corporateinterests and are ultimatel the onl ene>ciariesthereof.H A director is a >duciar. &heir po7ers arepo7ers in trust. Ce 7ho is in such >duciar positioncannot ser'e himself >rst and his cestuis second. Cecannot manipulate the aairs of his corporation to theirdetriment and in disregard of the standards of commondecenc. Ce cannot the inter'ention of a corporateentit 'iolate the ancient precept against ser'ing t7omasters. Ce cannot utilie his inside information and

strategic position for his o7n preferment. Ce cannot'iolate rules of fair pla doing indirectl through thecorporation 7hat he could not do so directl. Ce cannot'iolate rules of fair pla doing indirectl through thecorporation 7hat he could not do so directl. Ce cannotuse his po7er for his personal ad'antage and to thedetriment of the stoc:holders and creditors no matterho7 asolute in terms that po7er ma e and nomatter ho7 meticulous he is to satisf technicare2uirements. 9or that po7er is at all times suect tothe e2uitale limitation that it ma not e e?ercised forthe aggrandiement, preference, or ad'antage of the>duciar to the e?clusion or detriment of the cestuis&he doctrine of Hcorporate opportunitH is precisel a

8/9/2019 corpo chap6,7,8

11/14

recognition the courts that the >duciar standardscould not e upheld 7here the >duciar 7as acting fort7o entities 7ith competing interests. &his doctrinerests fundamentall on the unfairness, in particularcircumstances, of an odential information, suchasI 3a4 mar:eting strategies and pricing structure@ 34udget for e?pansion and di'ersi>cation@ 3c4 researchand de'elopment@ and 3d4 sources of funding,a'ailailit of personnel, proposals of mergers or tie"ups 7ith other >rms. #t is o'iousl to pre'ent thecreation of an opportunit for an odelit to the corporation, for the polic of thela7 is to encourage and enforce responsile corporatemanagement.

-. ursuant to the second paragraph of section 01 ofthe $orporation )a7, H3t4he record of all usinesstransactions of the corporation and minutes of anmeeting shall e open to the inspection of an director,memer or stoc:holder of the corporation atreasonale hours.H &he stoc:holders right of inspectionof the corporations oo:s and records is ased upontheir o7nership of the assets and propert of thecorporation. #t is, therefore, an incident of o7nership of

the corporate propert, 7hether this o7nership orinterest e termed an e2uitale o7nership, a ene>cialo7nership, or a 2uasi"o7nership. &his right ispredicated upon the necessit of self"protection. #t isgenerall held maorit of the courts that 7here theright is granted statute to the stoc:holder, it isgi'en to him as such and must e e?ercised him7ith respect to his interest as a stoc:holder and forsome purpose germane thereto or in the interest of thecorporation. #n other 7ords, the inspection has to egermane to the petitioners interest as a stoc:holder,and has to e proper and la7ful in character and notinimical to the interest of the corporation. &he Hgeneralrule that stoc:holders are entitled to full information as

to the management of the corporation and the mannerof e?penditure of its funds, and to inspection to otainsuch information, especiall 7here it appears that thecompan is eing mismanaged or that it is eingmanaged for the personal ene>t of o

8/9/2019 corpo chap6,7,8

12/14

in'estment and its rati>cation said stoc:holdersoliterates an defect 7hich it ma ha'e had at theoutset. Besides, the in'estment 7as for the purchaseof eer manufacturing and mar:eting facilities 7hich isapparentl rele'ant to the corporate purpose. &hemere fact that the corporation sumitted the assailedin'estment to the stoc:holders for rati>cation at theannual meeting of 1 Ma 1*== cannot e construedas an admission that the corporation had committed anultra 'ires act, considering the common practice ofcorporations of periodicall sumitting for therati>cation of their stoc:holders the acts of theirdirectors, oled petitioner, he alleged that thecorporation had eenusing corporate funds in other corps and usinessesoutside the primar purpose clause of the corporation in 'iolation of the $orporation $ode.

Iss!"Are amendments 'alidK

#"$d&he 'alidit and reasonaleness of a "la7 ispurel a 2uestion of la7. hether the "la7 is inconict 7ith the la7 of the land, or 7ith the charter ofthe corporation or is in legal sense unreasonale andtherefore unla7ful is a 2uestion of la7. Co7e'er, this is

limited 7here the reasonaleness of a "la7 is a merematter of udgment, and one upon 7hich reasonaleminds must necessaril dier, a court 7ould not e7arranted in sustituting its udgment instead ofthe udgment of those 7ho are authoried to ma:e "la7s and 7ho ha'e e?ercised authorit. &he $ourt heldthat a corporation has authorit prescried la7 toprescrie the 2uali>cations of directors. #t has theinherent po7er to adopt "la7s for its internalgo'ernment, and to regulate the conduct and prescriethe rights and duties of its memers to7ards itself andamong themsel'es in reference to the management ofits aairs. A corporation, under the $orporation la7,ma prescrie in its "la7s the 2uali>cations, duties

and compensation of directors, ot of the corporation and is good$orporate odence to further their pri'ateneeds, and the act done in furtherance of pri'ateneeds is deemed to e for the ene>t of thecorporation. &his is called the doctrineof corporate opportunit.

F$"&sc'"* v B+t&ca N+$asc+ C+. Inc.

A %y)law of a corporation which pro(ides that transfersof stoc0 shall not %e (alid without %oard appro(alcannot defeat the rights of third persons.

Facts1. Manuel Gonales assigned his 0 shares of Botica

5olasco stoc: to 9leischer in consideration of adet he o7ed to the latter. Gonales re2uestedBotica 5olasco to transfer the shares to 9leischer;sname.

%. &he treasurer of Botica 5olasco oered to u theshares from 9leischer for 1 each 3total 049leischer refused the oer.

-. 9leischer >led an action for mandamus against theoard of directors of Botica 5olasco.

6. 9leischer 7anted Botica 5olasco toa. Register in its oo:s 0 shares of stoc:

under his name

. a him the sum of 0 for damages0. Botica 5olasco refused to accede to 9leischer;sdemands pursuant to article 1% of its "la7s3Lpreferential right to u shares from retiringstoc:holders4.

a. According to article 1%, it had thepreferential right to u the shares from9leischer at the par 'alue of 1 peshare, 7ith * as di'idends, and that9leischer refused the oer

/. &he lo7er court ruled that article 1% 7as in conict7ith the pro'isions of the $orporation )a7

a. Article 1% creates in fa'or of Botica5olasco a preferential right to u the

http://coffeeafficionado.blogspot.com/2012/01/gokongwei-vs-sec-89-scra-336-1979.htmlhttp://coffeeafficionado.blogspot.com/2012/01/gokongwei-vs-sec-89-scra-336-1979.html

8/9/2019 corpo chap6,7,8

13/14

shares of a retiring shareholder 3in thiscase, Botica 5olasco has a preferentialright to u Gonales; shares o'er9leischer.4

Iss!"Hs1. #s article 1% in conict 7ith the $orporation )a7K

8!S

#"$dHRat&+/. B-$a a*t&c$" /; &s &n c+n&ct &t' t'"

C+*)+*at&+n La ("ca!s" &t &s a *"st*a&nt+ t*ad" n+t c+nt"1)$at"d ( S"c :7 +t'" C+*)+*at&+n La. 6'&$" &t as va$&d$c*"at"d !nd"* t'" )*+v&s&+ns + S"c /:2,&t &s n+t &n 'a*1+n &t' S"c :7.

;. M+*"+v"*, F$"&sc'"* 'ad n+ @n+$"d%" +a*t&c$" /; '"n G+nJa$"s ass&%n"d t'"s'a*"s t+ '&1. #" as n+t a )*&v t+ t'"c+nt*act and +(ta&n"d t'" s'a*"s &n %++da&t' and +* va$!a($" c+ns&d"*at&+n.

:. According to Sec 1-3=4 and Sec -0 of the$orporation )a7, "la7s relating to transfer ofstoc: should e in harmon 7ith the la7 on thesuect of transfer of stoc:.

a. 1-3=4S!$. 1-. !'er corporation has thepo7erI3=4 &o ma:e "la7s, not inconsistent7ith an e?isting la7, for the >?ing orchanging of the numer of its o

8/9/2019 corpo chap6,7,8

14/14

#"$d 5o. &he former and present corporation la7lea'es no room for dout as to their meaningI theoard of directors of corporations must e elected fromamong the stoc:holders or memers. &here ma ecorporations in 7hich there are unelected memers inthe oard ut it is clear that in the e?amples cited petitioner the unelected memers sit as eociomemers, i.e., 'irtue of and for as long asthe hold a particular o