De Facto Corporation

1. SAWADJAAN VS. COURT OF APPEALS

The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts business,
has shareholders, corporate officers, a board of directors, assets, and personnel. It is, in fact,
here represented by the Office of the Government Corporate Counsel, "the principal law office
of government-owned corporations, one of which is respondent bank." At the very least, by its
failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation whose
right to exercise corporate powers may not be inquired into collaterally in any private suit to
which such corporations may be a party.
Moreover, a corporation which has failed to file its by-laws within the prescribed period does
not ipso facto lose its powers as such.
http://www.lawphil.net/judjuris/juri2005/jun2005/gr_141735_2005.html
Nationality of corporations
2. WILSON GAMBOA VS. SEC. MARGARITO TEVES
To construe broadly the term capital as the total outstanding capital stock, including both
common and non-voting preferred shares, grossly contravenes the intent and letter of the
Constitution

that

the

State

shall

develop

self-reliant

and

independent

national

economy effectively controlled by Filipinos. A broad definition unjustifiably disregards who

owns the all-important voting stock, which necessarily equates to control of the public utility.
We shall illustrate the glaring anomaly in giving a broad definition to the term capital. Let us
assume that a corporation has 100 common shares owned by foreigners and 1,000,000 nonvoting preferred shares owned by Filipinos, with both classes of share having a par value of one
peso (P1.00) per share. Under the broad definition of the term capital, such corporation would
be considered compliant with the 40 percent constitutional limit on foreign equity of public
utilities since the overwhelming majority, or more than 99.999 percent, of the total outstanding
capital stock is Filipino owned. This is obviously absurd.
In the example given, only the foreigners holding the common shares have voting rights in the
election of directors, even if they hold only 100 shares. The foreigners, with a minuscule equity
of less than 0.001 percent, exercise control over the public utility. On the other hand, the
Filipinos, holding more than 99.999 percent of the equity, cannot vote in the election of
directors and hence, have no control over the public utility. This starkly circumvents the intent
of the framers of the Constitution, as well as the clear language of the Constitution, to place
the control of public utilities in the hands of Filipinos. It also renders illusory the State policy
of an independent national economy effectively controlled by Filipinos.

http://sc.judiciary.gov.ph/jurisprudence/2011/june2011/176579.html
Doctrine of separate juridical personality
3. CEASE VS. COURT OF APPEALS
A rich store of jurisprudence has established the rule known as the doctrine of disregarding or
piercing the veil of corporate fiction. Generally, a corporation is invested by law with a
personality separate and distinct from that of the persons composing it as well as from that of
any other legal entity to which it may be related. By virtue of this attribute, a corporation may
not, generally, be made to answer for acts or liabilities of its stockholders or those of the legal
entities to which it may be connected, and vice versa. This separate and distinct personality is,
however, merely a fiction created by law for convenience and to promote the ends of justice. For
this reason, it may not be used or invoked for ends subversive of the policy and purpose behind
its creation or which could not have been intended by law to which it owes its. This is
particularly true where the fiction is used to defeat public convenience, justify wrong, protect
fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or
otherwise circumvent the law. This is likewise true where the corporate entity is being used as
an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another
corporate entity.
In any of these cases, the notion of corporate entity will be pierced or disregarded, and the
corporation will be treated merely as an association of persons or, where there are two
corporations, they will be merged as one, the one being merely regarded as part or the
instrumentality of the otter.
http://www.lawphil.net/judjuris/juri1979/oct1979/gr_l_33172_1979.html
Doctrine of Piercing the Veil of Corporate Entity
4. CIR VS. NORTON AND HARRISON
Norton and Harrison, while not denying the presence of the set up stated above, tried to
explain that the control over the affairs of Jackbilt was not made in order to evade payment of
taxes; that the loans obtained by it which were given to Jackbilt, were necessary for the
expansion of its business in the manufacture of concrete blocks, which would ultimately
benefit both corporations; that the transactions and practices just mentioned, are not unusual
and extraordinary, but pursued in the regular course of business and trade; that there could
be no confusion in the present set up of the two corporations, because they have separate
Boards, their cash assets are entirely and strictly separate; cashiers and official receipts and
bank accounts are distinct and different; they have separate income tax returns, separate
balance sheets and profit and loss statements. These explanations notwithstanding an over-all
appraisal of the circumstances presented by the facts of the case, yields to the conclusion that
the Jackbilt is merely an adjunct, business conduit or alter ego, of Norton and Harrison and

that the fiction of corporate entities, separate and distinct from each, should be disregarded.
This is a case where the doctrine of piercing the veil of corporate fiction, should be made to
apply.
http://www.lawphil.net/judjuris/juri1964/aug1964/gr_l-17618_1964.html
5. MCLEOD VS. NLRC
As a rule, a corporation that purchases the assets of another will not be liable for the debts of
the selling corporation, provided the former acted in good faith and paid adequate
consideration for such assets, except when any of the following circumstances is present: (1)
where the purchaser expressly or impliedly agrees to assume the debts, (2) where the
transaction amounts to a consolidation or merger of the corporations, (3) where the purchasing
corporation is merely a continuation of the selling corporation, and (4) where the selling
corporation fraudulently enters into the transaction to escape liability for those debts.
Consolidation is the union of two or more existing corporations to form a new corporation
called the consolidated corporation. It is a combination by agreement between two or more
corporations by which their rights, franchises, and property are united and become those of a
single, new corporation, composed generally, although not necessarily, of the stockholders of
the original corporations.
Merger, on the other hand, is a union whereby one corporation absorbs one or more existing
corporations, and the absorbing corporation survives and continues the combined business.
The parties to a merger or consolidation are called constituent corporations. In consolidation,
all the constituents are dissolved and absorbed by the new consolidated enterprise. In merger,
all constituents, except the surviving corporation, are dissolved. In both cases, however, there
is no liquidation of the assets of the dissolved corporations, and the surviving or consolidated
corporation acquires all their properties, rights and franchises and their stockholders usually
become its stockholders.
The surviving or consolidated corporation assumes automatically the liabilities of the dissolved
corporations, regardless of whether the creditors have consented or not to such merger or
consolidation.
To reiterate, a corporation is a juridical entity with legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it. The rule is that
obligations incurred by the corporation, acting through its directors, officers, and employees,
are its sole liabilities.
Personal liability of corporate directors, trustees or officers attaches only when (1) they assent
to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross

negligence in directing its affairs, or when there is a conflict of interest resulting in damages to
the corporation, its stockholders or other persons; (2) they consent to the issuance of watered
down stocks or when, having knowledge of such issuance, do not forthwith file with the
corporate secretary their written objection; (3) they agree to hold themselves personally and
solidarily liable with the corporation; or (4) they are made by specific provision of law
personally answerable for their corporate action.
It is basic that a corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity to which it may
be related. Mere ownership by a single stockholder or by another corporation of all or nearly all
of the capital stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality. Petitioner Sunio, therefore, should not have been made
personally answerable for the payment of private respondents back salaries.
Thus, the rule is still that the doctrine of piercing the corporate veil applies only when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend
crime. In the absence of malice, bad faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made personally liable for corporate liabilities.
Neither Article 212(c) nor Article 272 of the Labor Code expressly makes any corporate officer
personally liable for the debts of the corporation.
http://www.lawphil.net/judjuris/juri2007/jan2007/gr_146667_2007.html
6. DE ASIS AND CO. VS. COURT OF APPEALS
If the transaction contemplated by the parties herein is that of a personal loan to Francisco de
Asis, then plaintiff could have simply written out a check in the latter's name or deposited the
amount of the loan in his personal account.
http://www.lawphil.net/judjuris/juri1985/may1985/gr_l61549_1985.html
7. MARTINEZ VS. COURT OF APPEALS
Mere ownership by a single stockholder or by another corporation of all or nearly all of the
capital stocks of a corporation is not by itself a sufficient ground to disregard the separate
corporate personality. The substantial identity of the incorporators of two or more corporations
does not warrantly imply that there was fraud so as to justify the piercing of the writ of
corporate fiction. To disregard the said separate juridical personality of a corporation, the
wrongdoing must be proven clearly and convincingly.
The test in determining the application of the instrumentality or alter ego doctrine is as follows:
1. Control, not mere majority or complete stock control, but complete domination, not
only of finances but of policy and business practice in respect to the transaction

attacked so that the corporate entity as to this transaction had at the time no separate
mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and
unjust act in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust
loss complained of.
The absence of any one of these elements prevents "piercing the corporate veil." In applying the
"instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form,
with how the corporation operated and the individual defendants relationship to that
operation.
http://www.lawphil.net/judjuris/juri2004/sep2004/gr_131673_2004.html
8. SOLIDBANK CORPORATION VS. MINDANAO CORPORATION
Consistent with the foregoing principles, we sustain the CAs ruling that Respondent Guevara
was not personally liable for the contracts. First, it is beyond cavil that he was duly authorized
to act on behalf of the corporation; and that in negotiating the loans with petitioner, he did so
in his official capacity. Second, no sufficient and specific evidence was presented to show that
he had acted in bad faith or gross negligence in that negotiation. Third, he did not hold himself
personally and solidarily liable with the corporation. Neither is there any specific provision of
law making him personally answerable for the subject corporate acts.
On the other hand, Respondents Cu and Hong signed the Promissory Note without the word by
preceding their signatures, atop the designation Maker/Borrower and the printed name of the
corporation, as follows:
__(Sgd) Cu/Hong__
(Maker/Borrower)
MINDANAO FERROALLOY
While their signatures appear without qualification, the inference that they signed in their
individual capacities is negated by the following facts: 1) the name and the address of the
corporation appeared on the space provided for Maker/Borrower; 2) Respondents Cu and Hong
had only one set of signatures on the instrument, when there should have been two, if indeed
they had intended to be bound solidarily -- the first as representatives of the corporation, and
the second as themselves in their individual capacities; 3) they did not sign under the spaces

provided for Co-maker, and neither were their addresses reflected there; and 4) at the back of
the Promissory Note, they signed above the words Authorized Representative.

http://sc.judiciary.gov.ph/jurisprudence/2005/jul2005/153535.htm
9. YAMAMOTO VS. NISHINO LEATHER INC.
The machineries and equipment, which comprised Yamamotos investment in NLII, thus
remained part of the capital property of the corporation.
It is settled that the property of a corporation is not the property of its stockholders or
members. Under the trust fund doctrine, the capital stock, property, and other assets of a
corporation are regarded as equity in trust for the payment of corporate creditors which are
preferred over the stockholders in the distribution of corporate assets. The distribution of
corporate assets and property cannot be made to depend on the whims and caprices of the
stockholders, officers, or directors of the corporation unless the indispensable conditions and
procedures for the protection of corporate creditors are followed.
http://sc.judiciary.gov.ph/jurisprudence/2008/april2008/150283.htm
10. ASJ CORPORATION VS. SPS. EVANGELISTA
Furthermore, although no hard and fast rule can be accurately laid down under which the
juridical personality of a corporate entity may be disregarded, the following probative factors of
identity justify the application of the doctrine of piercing the veil of corporate fiction in this
case: (1) San Juan and his wife own the bulk of shares of ASJ Corp.; (2) The lot where the
hatchery plant is located is owned by the San Juan spouses; (3) ASJ Corp. had no other
properties or assets, except for the hatchery plant and the lot where it is located; (4) San Juan
is in complete control of the corporation; (5) There is no bona fide intention to treat ASJ Corp.
as a different entity from San Juan; and (6) The corporate fiction of ASJ Corp. was used by San
Juan to insulate himself from the legitimate claims of respondents, defeat public convenience,
justify wrong, defend crime, and evade a corporations subsidiary liability for damages. These
findings, being purely one of fact, should be respected. We need not assess and evaluate the
evidence all over again where the findings of both courts on these matters coincide.
http://sc.judiciary.gov.ph/jurisprudence/2008/feb2008/158086.htm
Entitlement to Constitutional Rights
11. ALBERT VS. UNIVERSITY PUBLISHING INC.
The University Publishing Co., Inc. speculated on a favorable decision based on the issue that
Jose M. Aruego, not being a formal party defendant in this case, a writ of execution against

him was not in order. It, therefore, preferred to suppress vital documents under its possession
and control rather than to rebut the certification issued by the Securities and Exchange
Commission that according to its records University Publishing Co., Inc. was not registered. If
the lower court's order is sustained, collection of damages becomes problematical. If a new suit
is filed against Aruego, prescription might be considered as effective defense, aside from the
prospect of another ten years of pending litigation. Such are the possible reasons for adopting
the position of speculation of our decision. Our ruling appeared to be unfavorable to such
speculation. It was only after the receipt of the adverse decision promulgated by this Court that
University Publishing Co., Inc., disclosed its registration papers. For purposes of this case only
and according to its particular facts and circumstances, we rule that in view of the late
disclosure of said papers by the University Publishing Co., Inc., the same can no longer
considered at this stage of the proceedings.
http://www.lawphil.net/judjuris/juri1965/jun1965/gr_l-19118_1965.html
Entitlement to Moral Damages
12. ABS-CBN VS. COURT OF APPEALS
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.

http://www.lawphil.net/judjuris/juri1999/jan1999/gr_128690_1999.html
13. COASTAL PACIFIC TRADING VS. SOUTHERN ROLLING MILLS

As a rule, a corporation is not entitled to moral damages because, not being a natural person,
it cannot experience physical suffering or sentiments like wounded feelings, serious anxiety,
mental anguish and moral shock. The only exception to this rule is when the corporation has a
good reputation that is debased, resulting in its humiliation in the business realm. In the
present case, the records do not show any evidence that the name or reputation of petitioner
has been sullied as a result of the Consortium's fraudulent acts. Accordingly, moral damages
are not warranted.
http://www.lawphil.net/judjuris/juri2006/jul2006/gr_118692_2006.html
Libel
14. FILIPINAS BROADCASTING VS. AGO MEDICAL CENTER
A libel is a public and malicious imputation of a crime, or of a vice or defect, real or imaginary,
or any act or omission, condition, status, or circumstance tending to cause the dishonor,
discredit, or contempt of a natural or juridical person, or to blacken the memory of one who is
dead.
[F]air commentaries on matters of public interest are privileged and constitute a valid defense
in an action for libel or slander. The doctrine of fair comment means that while in general every
discreditable imputation publicly made is deemed false, because every man is presumed
innocent until his guilt is judicially proved, and every false imputation is deemed malicious,
nevertheless, when the discreditable imputation is directed against a public person in his
public capacity, it is not necessarily actionable. In order that such discreditable imputation
to a public official may be actionable, it must either be a false allegation of fact or a
comment based on a false supposition. If the comment is an expression of opinion, based
on established facts, then it is immaterial that the opinion happens to be mistaken, as long as
it might reasonably be inferred from the facts.
http://www.lawphil.net/judjuris/juri2005/jan2005/gr_141994_2005.html
Liability for Torts
15. PNB VS. COURT OF APPEALS
While petitioner had the ultimate authority of approving or disapproving the proposed lease
since the quota was mortgaged to the Bank, the latter certainly cannot escape its responsibility
of observing, for the protection of the interest of private respondents, that degree of care,
precaution and vigilance which the circumstances justly demand in approving or disapproving
the lease of said sugar quota. The law makes it imperative that every person "must in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith, This petitioner failed to do. Certainly, it knew that the
agricultural year was about to expire, that by its disapproval of the lease private respondents

would be unable to utilize the sugar quota in question. In failing to observe the reasonable
degree of care and vigilance which the surrounding circumstances reasonably impose,
petitioner is consequently liable for the damages caused on private respondents. Under Article
21 of the New Civil Code, "any person who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate the latter for the
damage." The afore-cited provisions on human relations were intended to expand the concept of
torts in this jurisdiction by granting adequate legal remedy for the untold number of moral
wrongs which is impossible for human foresight to specifically provide in the statutes.
http://www.lawphil.net/judjuris/juri1978/may1978/gr_27155_1978.html
Doctrine of Corporate Negligence
16. PROFESSIONAL SERVICES INC. VS. COURT OF APPEALS
Corollary to its non-delegable undertaking to review potential incidents of negligence
committed within its premises, PSI had the duty to take notice of medical records prepared by
its own staff and submitted to its custody, especially when these bear earmarks of a surgery
gone awry. Thus, the record taken during the operation of Natividad which reported a gauze
count discrepancy should have given PSI sufficient reason to initiate a review. It should not
have waited for Natividad to complain.
As it happened, PSI took no heed of the record of operation and consequently did not initiate a
review of what transpired during Natividads operation. Rather, it shirked its responsibility and
passed it on to others to Dr. Ampil whom it expected to inform Natividad, and to Natividad
herself to complain before it took any meaningful step. By its inaction, therefore, PSI failed its
own standard of hospital care. It committed corporate negligence.
It should be borne in mind that the corporate negligence ascribed to PSI is different from the
medical negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those of
the doctor-consultant practicing within its premises in relation to the patient; hence, the failure
of PSI to fulfill its duties as a hospital corporation gave rise to a direct liability to the Aganas
distinct from that of Dr. Ampil.
All this notwithstanding, we make it clear that PSIs hospital liability based on ostensible
agency and corporate negligence applies only to this case, pro hac vice. It is not intended to set
a precedent and should not serve as a basis to hold hospitals liable for every form of negligence
of their doctors-consultants under any and all circumstances. The ruling is unique to this
case, for the liability of PSI arose from an implied agency with Dr. Ampil and an admitted
corporate duty to Natividad.
http://www.lawphil.net/judjuris/juri2010/feb2010/gr_126297_2010.html

17. KUKAN INTERNATIONAL CORPORATION VS. REYES

The fact that Kukan, Inc. entered into a PhP 3.3 million contract when it only had a paid-up
capital of PhP 5,000 is not an indication of the intent on the part of its management to defraud
creditors. Paid-up capital is merely seed money to start a corporation or a business entity. As
in this case, it merely represented the capitalization upon incorporation in 1997 of Kukan,
Inc. Paid-up capitalization of PhP 5,000 is not and should not be taken as a reflection of the
firms capacity to meet its recurrent and long-term obligations. It must be borne in mind that
the equity portion cannot be equated to the viability of a business concern, for the best test is
the working capital which consists of the liquid assets of a given business relating to the nature
of the business concern.
Neither should the level of paid-up capital of Kukan, Inc. upon its incorporation be viewed as a
badge of fraud, for it is in compliance with Sec. 13 of the Corporation Code, which only
requires a minimum paid-up capital of PhP 5,000.
The suggestion that KIC is but a continuation and successor of Kukan, Inc., owned and
controlled as they are by the same stockholders, stands without factual basis. It is true that
Michael Chan, a.k.a. Chan Kai Kit, owns 40% of the outstanding capital stock of both
corporations. But such circumstance, standing alone, is insufficient to establish identity. There
must be at least a substantial identity of stockholders for both corporations in order to
consider this factor to be constitutive of corporate identity.
http://sc.judiciary.gov.ph/jurisprudence/2010/september2010/182729.htm
Subscription contract
18. JAKA INVESTMENTS CORPORATION VS. CIR
A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business
transacted but is an excise upon the privilege, opportunity or facility offered at exchanges for
the transaction of the business. It is an excise upon the facilities used in the transaction of the
business separate and apart from the business itself. Documentary stamp taxes are levied on
the exercise by persons of certain privileges conferred by law for the creation, revision, or
termination of specific legal relationships through the execution of specific instruments.
Thus, we have held that documentary stamp taxes are levied independently of the legal
status of the transactions giving rise thereto. The documentary stamp taxes must be paid
upon the issuance of the said instruments, without regard to whether the contracts which
gave rise to them are rescissible, void, voidable, or unenforceable.
Petitioner claims overpayment of the documentary stamp tax but its basis for such is not clear
at all. While insisting that the documentary stamp tax it had paid for was not based on the

original issuance of JEC shares as provided in Section 175 of the 1994 Tax Code, petitioner
failed in showing, even through a mere basic computation of the tax base and the tax rate, that
the documentary stamp tax was based on the transfer of shares under Section 176 either. It
would have been helpful for petitioners cause had it submitted proof of the par value of the
shares of stock involved, to show the actual basis for the documentary stamp tax
computation. For comparison, the original Subscription Agreement ought to have been
submitted as well.
All that petitioner submitted to back up its claim were the certifications issued by then RDO
Esquivias. As correctly pointed out by respondent, however, the amounts in the RDO
certificates were the amounts of documentary stamp tax representing the equivalent of each
group of shares being applied for payment. The purpose for issuing such certifications was to
allow registration of transfer of shares of stock used in partial payment for petitioners
subscription to the original issuance of JEC shares. It should not be used as evidence of
payment of documentary stamp tax. Neither should it be the lone basis of a claim for a
documentary stamp tax refund.
http://sc.judiciary.gov.ph/jurisprudence/2010/july2010/147629.htm
19. ONG YONG VS. TIU
The Trust Fund Doctrine, first enunciated by this Court in the 1923 case of Philippine Trust Co.
vs. Rivera, provides that subscriptions to the capital stock of a corporation constitute a fund to
which the creditors have a right to look for the satisfaction of their claims. This doctrine is the
underlying principle in the procedure for the distribution of capital assets, embodied in the
Corporation Code, which allows the distribution of corporate capital only in three instances: (1)
amendment of the Articles of Incorporation to reduce the authorized capital stock, (2) purchase
of redeemable shares by the corporation, regardless of the existence of unrestricted retained
earnings, and (3) dissolution and eventual liquidation of the corporation. Furthermore, the
doctrine is articulated in Section 41 on the power of a corporation to acquire its own shares
and in Section 122 on the prohibition against the distribution of corporate assets and property
unless the stringent requirements therefor are complied with.
The distribution of corporate assets and property cannot be made to depend on the whims and
caprices of the stockholders, officers or directors of the corporation, or even, for that matter, on
the earnest desire of the court a quo to prevent further squabbles and future litigations unless
the indispensable conditions and procedures for the protection of corporate creditors are
followed. Otherwise, the corporate peace laudably hoped for by the court will remain nothing
but a dream because this time, it will be the creditors turn to engage in squabbles and
litigations should the court order an unlawful distribution in blatant disregard of the Trust
Fund Doctrine.
In the instant case, the rescission of the Pre-Subscription Agreement will effectively result in
the unauthorized distribution of the capital assets and property of the corporation, thereby
violating the Trust Fund Doctrine and the Corporation Code, since rescission of a subscription

agreement is not one of the instances when distribution of capital assets and property of the
corporation is allowed.
http://sc.judiciary.gov.ph/jurisprudence/2003/apr2003/144476.htm
Corporate Term
20. ALHAMBRA CIGAR & CIGARETTE VS. SEC
Not that we are alone in this view. Fletcher has written: "Since the privilege of extension is
purely statutory, all of the statutory conditions precedent must be complied with in order that
the extension may be effectuated. And, generally these conditions must be complied with, and
the steps necessary to effect the extension must be taken, during the life of the corporation, and
before the expiration of the term of existence as original fixed by its charter or the general law,
since, as a rule, the corporation is ipso facto dissolved as soon as that time expires. So where the
extension is by amendment of the articles of incorporation, the amendment must be adopted
before that time. And, similarly, the filing and recording of a certificate of extension after that
time cannot relate back to the date of the passage of a resolution by the stockholders in favor of
the extension so as to save the life of the corporation. The contrary is true, however, and the
doctrine of relation will apply, where the delay is due to the neglect of the officer with whom
the certificate is required to be filed, or to a wrongful refusal on his part to receive it. And
statutes in some states specifically provide that a renewal may be had within a specified time
before or after the time fixed for the termination of the corporate existence"
On this point, we again draw from Fletcher: "There is a broad distinction between the extension
of a charter and the grant of a new one. To renew a charter is to revive a charter which has
expired, or, in other words, "to give a new existence to one which has been forfeited, or which
has lost its vitality by lapse of time". To "extend" a charter is "to increase the time for the
existence of one which would otherwise reach its limit at an earlier period". Nowhere in our
statute Section 18, Corporation Law, as amended by Republic Act 3531 do we find the
word "renew" in reference to the authority given to corporations to protract their lives. Our law
limits itself to extension of corporate existence. And, as so understood, extension may be
made only before the term provided in the corporate charter expires.
http://www.lawphil.net/judjuris/juri1968/jul1968/gr_l-23606_1968.html
21. PNB VS. CA
The contract of lease expressly provides that the term of the lease shall be twenty years from
the execution of the contract but can be extended for another period of twenty years at the
option of the lessee should the corporate term be extended in accordance with law. Clearly, the
option of the lessee to extend the lease for another period of twenty years can be exercised only
if the lessee as corporation renews or extends its corporate term of existence in accordance
with the Corporation Code which is the applicable law. Contracts are to be interpreted

according to their literal meaning and should not be interpreted beyond their obvious
intendment. Thus, in the instant case, the initial term of the contract of lease which
commenced on March 1, 1954 ended on March 1, 1974. PBM as lessee continued to occupy the
leased premises beyond that date with the acquiescence and consent of the respondents as
lessor. Records show however, that PBM as a corporation had a corporate life of only twenty-five
(25) years which ended in January 19, 1977. It should be noted however that PBM allowed its
corporate term to expire without complying with the requirements provided by law for the
extension of its corporate term of existence.
http://www.lawphil.net/judjuris/juri1992/may1992/gr_63201_1992.html
22. SEVENTH DAY ADVENTIST VS. NORTHEASTERN MINDANAO
http://sc.judiciary.gov.ph/jurisprudence/2006/july2006/G.R.%20No.%20150416.htm