Corporation Law Digested Cases

The Court of First Instance of Manila decided that the Stock Certificates was considered lose because of the refusal of the domestic administrator In New York to give such certificates to the ancillary administrator here in the Philippines and ordered Bungee Consolidated Inc to issue New Stock Certificates to the Ancillary administrator. Bungee refuses to obey the order of the COIF of Manila on the ground that it is in violation of the Corporation By Laws. Issue: Whether or not the Bungee Consolidated Inc is covered by the orders of the COURT.

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Plaintiff Company filed a petition for declaratory relief contending their original articles of partnership provided that they could extend the term of their partnership; that it constitutes a property right of which the partners can not be deprived without due process or without their consent; and that the revisions of RA 1180 cannot adversely affect them. Lower court dismissed their petition. Plaintiff Co. Interposed an appeal.

Issue: WON extension of the partnership established before the enactment of RA 1180, Is In violation of the said act. Held: The which may be enjoyed under the terms provided by state / law. When the partners amended the articles of partnership, the provisions of RA 1180 were already in force, and so the right claimed by plaintiff-appellants to extend the original term of their partnership to another five years would be in violation of the clear intent and purpose of the said law. . National Development Company and New Agric vs..

Philippine Veterans Bank Agric Marketing executed in favor of respondent a real estate mortgage over three parcels of land. Agric later on went bankrupt. In order to rehabilitate the company, then President Marco’s issued Presidential Decree 1717 which mandated, among others, the extinguishing of all the mortgages and liens attaching to the property of Agric, and creating a Claims Committee to process claims against the company to be administered mainly by AND. Respondent thereon filed a claim against the company on the committee.

Petitioners however filed a petition with the ROTC of Callable, Laguna invoking the provision of the law which cancels all mortgage liens against it. Respondent took measures to extrajudicial foreclose which the petitioners opposed by filing another case in the same court. These cases were consolidated. The ROTC held in favor of the respondent on the ground of unconstitutionality of the decree; mainly violation of the separation of powers, impairment of obligation of contracts, and violation of the equal protection clause.

Hence this petition. Is the respondent stopped from questioning the constitutionality of the law since hey first abided by it by filing a claim with the Committee? Is PDP 1717 unconstitutional? Ruling: On the issue of estoppels, the Court held that it could not apply in the present case since when the respondent filed his claim, President Marco’s was the supreme ruler of the country and they could not question his acts even before the courts because of his absolute power over all government institutions when he was the President.

The creation of New Agric as mandated by the decree was also ruled as unconstitutional since it violated the prohibition that the Batsman Bananas Congress) shall not provide for the formation, organization, or regulation of private corporations unless such corporations are owned or controlled by the government. PDP 1717 was held as unconstitutional on the other grounds that it was an invalid exercise of police power, It had no lawful subject and no lawful method.

It violated due process by extinguishing all mortgages and liens and interests which are property rights unjustly taken. It also violated the equal protection clause by lumping contracts, even though it only involved purely private interests. 4. JARS Business Corporation vs.. Imperial Insurance FACTS: J. R. S. Business Corporation, an establishment duly franchised by the Congress of the Philippines, to conduct a messenger and delivery express service. The respondent Imperial Insurance, Inc. Presented with the COIF of Manila a complaint for sum of money against the petitioner corporation. After the defendants therein have submitted their Answer, the parties entered into a Compromise Agreement, assisted by their respective counsels. The lower court rendered judgment embodying the contents of the said compromise agreement. One day after the date fixed in the compromise agreement, within which the judgment debt would be paid, but was not, respondent Imperial Insurance Inc. Filed a “Motion for the Insurance of a Writ of Execution”. A Writ of Execution was issued by respondent Sheriff, Notices of Sale were sent out for the auction of the personal properties of the petitioner J. R. S. Business Corporation. A Notice of Sale of the “whole capital stocks of the defendants JARS Business Corporation, the business name, right of operation, the whole assets, furniture and equipments, the total liabilities, and Net Worth, books of accounts, etc. , etc. ” of the petitioner corporation was, handed down.

Petitioner, thru counsel, presented an “Urgent Petition for Postponement of Auction Sale and for Release of Levy on the Business Name and Right to Operate of Defendant JARS Business Corporation”, stating that petitioners were busy negotiating for a loan with which to pay the Judgment debt; that the Judgment was for money only and, therefore, plaintiff (respondent Insurance Company) was not authorized to take over and appropriate for its own use, the business name of the defendants; that the right to operate under the franchise, was not transferable and could not be considered a personal or immovable, property, subject to levy and sale.

In the sale which was conducted in the premises of the JARS Business Corporation, all the properties of said corporation contained in the Notices of Sale, were bought by respondent Imperial Insurance, Inc. ISSUE: WON the business name or trade name, franchise (right to operate) and capital stocks of the petitioner are properties or property rights which could be the subject of levy, execution and sale. HELD: Sec. 6 of the Corporation Law provides: Any franchise granted to a corporation to collect tolls or to occupy, enjoy, or use public property or any portion of the public domain or any right of way over public reporter or the public domain, and any rights and privileges acquired under such franchise may be levied upon and sold under execution, together with the property necessary for the enjoyment, the exercise of the powers, and the receipt of the any other property to satisfy any Judgment against the corporation: Provided, That the sale of the franchise or right of way and the property necessary for the enjoyment, the exercise of the powers, and the receipt of the proceeds of said franchise or right of way is especially decreed and ordered in the Judgment: And provided, further, That the sale shall not become effective until confirmed by the rout after due notice.

A franchise is a special privilege conferred by governmental authority, and which does not belong to citizens of the country generally as a matter of common right. Its meaning depends more or less upon the connection in which the word is employed and the property and corporation to which it is applied. It may have different significations. “For practical purposes, franchises, so far as relating to corporations, are divisible into (1) corporate or general franchises; and (2) special or secondary franchises. The former is the franchise to exist as a corporation, while the latter are retain rights and privileges conferred upon existing corporations, such as the right to use the streets of a municipality to lay pipes or tracks, erect poles or string wires. The primary franchise of a corporation that is, the right to exist as such, is vested “in the individuals who compose the corporation and not in the corporation itself” but the specify or secondary franchises of a corporation are vested in the corporation and may ordinarily be conveyed or mortgaged under a general power granted to a corporation to dispose of its property, except such special or secondary franchises as re charged with a public use The right to operate a messenger and express delivery service, by virtue of a legislative enactment, is admittedly a secondary franchise, and, as such, under our corporation law, is subject to levy and sale on execution together and including all the property necessary for the enjoyment thereof. The law, however, indicates the procedure under which the same (secondary franchise and the properties necessary for its enjoyment) may be sold under execution. Said franchise can be sold under execution, when such sale is especially decreed and ordered in he Judgment and it becomes effective only when the sale is confirmed by the Court after due notice. The compromise agreement and the Judgment based thereon, do not contain any special decree or order making the franchise answerable for the judgment debt. The same thing may be stated with respect to petitioner’s trade name or business name and its capital stock.

Incidentally, the trade name or business name corresponds to the initials of the President of the petitioner corporation and there can be no serious dispute regarding the fact that a trade name or business name and capital stock are necessarily included in the enjoyment of the ranching. Like that of a franchise, the law mandates, that property necessary for the enjoyment of said franchise, can only be sold to satisfy a Judgment debt if the decision especially so provides. As We have stated heretofore, no such directive appears in the decision. Moreover, a trade name or business name cannot be sold separately from the franchise, and the capital stock of the petitioner corporation or any other corporation, for the matter, represents the interest and is the property of stockholders in the corporation, who can only be deprived thereof in the manner provided by law

One of the incorporation, Mr.. Could help in its expansion plans. On August 15, 1962, AS’, a foreign corporation domiciled in Delaware, United States entered into an Agreement with Janissaries and some Filipino investors whereby ASS and the Filipino investors agreed to participate in the ownership of an enterprise which would engage primarily in the business of manufacturing in the Philippines and selling here and abroad vitreous china and sanitary wares. The parties agreed that the business operations in the Philippines shall be carried on by an incorporated enterprise and that the name of the corporation shall initially be “Sanitary Wares Manufacturing Corporation.

At the request of AS’, the agreement contained provisions designed to protect it as a minority group, including the grant of veto powers over a number of corporate acts and the right to designate certain officers, such as a member of the Executive Committee whose vote was required for important corporate transactions. Later, the 30% capital stock of ASS was increased to 40%. The corporation was also registered with the Board of Investments for available of incentives with the condition that at least 60% of the capital stock of the corporation shall be owned by Philippine nationals. The Joint enterprise thus entered into by the Filipino investors and the American corporation prospered. Unfortunately, with the business successes, there came a deterioration of the initially harmonious relations between the two groups.

According to the Filipino group, a basic disagreement was due to their desire to expand the export operations of the company to which ASS objected as it apparently had other subsidiaries of Joint Joint venture groups in the countries where Philippine exports were contemplated. On March 8, 1983, the annual stockholders’ meeting was held. The meeting was presided by Baldwin Young. The minutes were taken by the Secretary, Pavilion Cruz. After disposing of the preliminary items in the agenda, the stockholders then proceeded to the election of the members of the board of directors. The ASS group nominated three persons namely; Wolfgang Rhubarb, John Griffin and David P. Whetting.

Judgment affirmed-?plaintiff can’t be granted registry. ) RD: Act No. 2761, in denying to corporations such as Smith, Bell & Co. Ltd. , the right to register vessels in the Philips. Coastwise trade, falls within the authorized exceptions. Specifically within the purview of the police power. Literally and absolutely, steamship lines are the arteries of the commerce in the Philips. If one be severed, the general welfare is sustained. 8. Stonewall vs.. Domino Facts: Upon application of the officers of the government (Special Prosecutors) Judges of COIF and Municipal Courts issued, on different dates, a total of 42 search warrants against Harry S. Stonewall et.

AY and/or the corporations of which they were officers, directed to any peace officer, to search the said persons and/or the premises of their offices, warehouses and/or residences, and to seize and take possession of the allowing personal property to wit: “Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, Journals, portfolios, credit Journals, typewriters, and other documents and/or papers showing all business transactions including disbursements receipts, balance sheets and profit and loss statements and Bobbins (cigarette wrappers)” as “the subject of the offense; stolen or embezzled and proceeds or fruits of the offense,” or “used or intended to be used as the means of committing the offense,” which is described in the applications adverted to above as Immolation of Central Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and the Revised Penal Code. ” Alleging that the search warrants are null and void, as contravening the Constitution and the Rules of Court, Stonewall, et. Al. Filed with the Supreme Court the original action for certiorari, prohibition, mandamus and injunction.

On 22 March 1962, the Supreme Court issued the writ of preliminary injunction prayed for in the petition. However, by resolution dated 29 June 1962, the writ was partially lifted or dissolved, insofar as the papers, documents and things sized from the offices of the corporations are concerned; but, the injunction was maintained as regards the papers, documents and things found and seized in the residences of Stonewall, et. Al. Issue: WON the search warrants issued were valid. Held: The Court held that the warrants for the search of 3 residences are null and void since it is in the nature of general warrant; The requisites provided by the Rules of Court was not met. 9. Beach and Company vs..

Iris 37 SACRA 823 FACTS: Respondent Commissioner of the Internal Revenue wrote a request letter for the issuance of a search warrant by the Respondent Judge against petitioner reparation for the alleged violation of Sec. 46(a) of the NRC, in relation to Sections 53, 72, 73, 208 and 209, and authorizing Revenue Examiner De Leon to make and file the application for search warrant. In the following day, De Leon and his witness went to court and brought with them an application for warrant of arrest but still unsigned by him, an affidavit and deposition of the witness and a search warrant already accomplished but still not signed by the Judge. At that time, respondent Judge was still in a hearing, thus, he Just instructed his Deputy Clerk to take the depositions of De Leon and the witness.

After the Judge requested that the stenographic notes be read aloud to him and thereafter he asked the witness to take his oath and warned him that he can be held liable for perjury if his deposition was found to be false and without legal basis. Respondent signed De Loon’s application and the witness deposition and a corresponding Search Warrant was issued. Three days later, BIRR agents served the warrant on Petitioner’s office. The latter filed with the issuing court a petition to quash said warrant but was denied. Thus, a petition to the Supreme Court to declare null and void the search warrant issued against them by the respondent Judge was filed. ISSUE: Whether or not the search warrant is valid. HELD: The search warrant is invalid.

The Judge failed to personally examine the complainant and the witness as required by the Constitution. The Constitution provides: “Section 3. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and whatever purpose shall not be violated, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined by the Judge, or such other expansible officer as maybe authorized by law, after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched, and the persons or things to be seized. The examination of the complainant and witnesses should be conducted by the judge himself and not by others. Personal examination by the Judge of the complainant and his witnesses is necessary to determine whether or not probable cause exists. In the case at bar, the participation of the Judge was limited only to listening to the stenographer’s reading of her notes and Just giving a warning to the tiniest. This cannot be considered personal examination. Furthermore, the search warrant is invalid because it is a general warrant. It does not conform to the requirement that a search warrant shall particularly describe the person or things to be seized.

Such warrant should have at least mentioned the dates, amounts, persons, etc. However, such pertinent data was not issued in the challenged warrant. 10. Bataan Shipyard vs. PEG (GAR 75885, May 27, 1987) Pursuant to the Executive Order No. 1 and 2 promulgated by President Aquinas, the PEG was ordered to recover ill-gotten wealth amassed by former President Marco’s, ends. Consequently, the Presidential Commission on Good Government issued a sequestration order against petitioner BASSES. Incidental to this, the petitioner was ordered to produce its corporate records from 1973 to 1986. In assailing this order, petitioner contended that this violates its constitutional right against self- incrimination.

Is a corporation entitled to the right against self-incrimination afforded to individuals by the Constitution? The Court held in the negative. The Court found that BASSES was owned by President Marco’s through the use of dummies and alter egos, most notable evidence Ewing the recovery of the deed of assignments of shares in the company in the Malignant after the flight of the Narcoses. It was the ruling of the Court that the right against self-incrimination has no application to Juridical person. In addition, an officer of a company cannot refuse the production of records on the ground of it incriminating him or the company. The Court quoted the ruling of Wilson vs.. US, to the effect that the corporation is a mere creature of the state.