MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K.

SPENCER,
CATHERINE SPENCER, AND ALEX MANCILLA
vs.
RICARDO R. COROS
G.R. No. 157802, October 13, 2010

FACTS:

The respondent filed a case for illegal dismissal against Matling and some of its corporate
officers (petitioners) in the NLRC. He was the Vice President for Finance and Administration when he
was dismissed. The petitioner opposed said complaint on the ground that the issue at hand is an
intra- corporate dispute which falls under the jurisdiction of the SEC. The respondent opposed the
same contending that his being in the position was doubtful that he had not been formally elected as
such. The LA ruled in favor of petitioner but the same was reversed by the NLRC, and to which the
CA affirmed.

ISSUE:

Whether or not respondent is a corporate officer.

RULING:

NO.

The petitioners contend that the position of Vice President for Finance and Administration was
a corporate office, having been created by Matling’s President pursuant to the by-Law.
However, the Court explained that an "office" is created by the charter of the corporation and
the officer is elected by the directors or stockholders. On the other hand, an employee occupies no
office and generally is employed not by the action of the directors or stockholders but by the managing
officer of the corporation who also determines the compensation to be paid to such employee. In this
case, respondent was appointed vice president for nationwide expansion by Malonzo, petitioner’'s
general manager, not by the board of directors of petitioner. Also his compensation was paid by
Malonzo. Thus, respondent was an employee, not a "corporate officer.
Also, the Board of Directors of Matling could not validly delegate the power to create a corporate
office to the President, in light of Section 25 of the Corporation Code requiring the Board of Directors
itself to elect the corporate officers. Verily, the power to elect the corporate officers was a discretionary
power that the law exclusively vested in the Board of Directors, and could not be delegated to
subordinate officers or agents.The office of Vice President for Finance and Administration created by
Matling’s President pursuant to the by- law was an ordinary, not a corporate, office.

MARC II MARKETING, INC. and LUCILA V. JOSON

vs.
ALFREDO M. JOSON
G.R. No. 171993.December 12, 2011

FACTS:

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 Marc II Marketing, Inc. and Lucila Joson is assailing the decision of the CA for reversing and
settling aside the Resolution of the National Labor Relations Commission. Marc II Marketing, Inc. is
a corporation duly organized and existing under and by virtue of the laws of the Philippines. It is
primarily engaged in buying, marketing, selling and distributing in retail or wholesale for export or
import household appliances and products and other items. Petitioner Lucila is the President and
majority stockholder of the corporation. Before Marc II Marketing, Inc. was officially incorporated,
Alfredo has already been engaged by Lucila, in her capacity as President, to work as General Manager
of the corporation and it was formalized through the execution of a Management Contract dated in
1994 under Marc Marketing, Inc., as Marc II Marketing, Inc. was yet to be incorporated. For occupying
the said position, respondent was among the corporation’s corporate officers by the express provision
of Section 1, Article IV of its by-laws.
Alfredo was appointed as one of its officers with the designation or title of General Manager to
function as a managing director with other duties and responsibilities that the Board may provide
and authorized. However, in 1997, Marc II Marketing Inc. decided to stop and cease its operation as
evidenced by an Affidavit of Non-Operation due to poor sales collection aggravated by the inefficient
management of its affairs. Alfredo was informed of the cessation of its business operations and the
termination of his services as General Manager. He filed action for reinstatement and money claim
against petitioners.

ISSUE:

Whether or not Marc II Marketing Inc.’s Board of Directors could create a position for corporate
officers through an enabling clause found in its corporate by-laws.

RULING:

YES.

Accordingly, in determining whether the SEC (now the RTC) has jurisdiction over the
controversy, the status or relationship of the parties and the nature of the question that is the subject
of their controversy must be taken into consideration. With all the foregoing, this Court is fully
convinced that, indeed, respondent, though occupying the General Manager position, was not a
corporate officer of Petitioner Corporation rather he was merely its employee occupying a high-ranking
position.
Accordingly, respondent’s dismissal as Petitioner Corporation’s General Manager did not
amount to an intra-corporate controversy. Jurisdiction therefor properly belongs with the Labor
Arbiter and not with the RTC.
Having established that respondent was not Petitioner Corporation’s corporate officer but
merely its employee, and that, consequently, jurisdiction belongs to the Labor Arbiter.

Wilson P. Gamboa
vs.
Finance Secretary Margarito Teves, et al.,
G.R. No. 176579, June 28, 2011

FACTS:

This is a petition to nullify the sale of shares of stock of Philippine Telecommunications

Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting through
the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc. (MPAH), an affiliate
of First Pacific Company Limited (First Pacific), a Hong Kong-based investment management and
holding company and a shareholder of the Philippine Long Distance Telephone Company (PLDT). The

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petitioner questioned the sale on the ground that it also involved an indirect sale of 12 million shares
(or about 6.3 percent of the outstanding common shares) of PLDT owned by PTIC to First Pacific. With
the this sale, First Pacific’s common shareholdings in PLDT increased from 30.7 percent to 37 percent,
thereby increasing the total common shareholdings of foreigners in PLDT to about 81.47%. This,
according to the petitioner, violates Section 11, Article XII of the 1987 Philippine Constitution which
limits foreign ownership of the capital of a public utility to not more than 40%, thus: Section 11. No
franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall
such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the general public. The participation
of foreign investors in the governing body of any public utility enterprise shall be limited to their
proportionate share in its capital, and all the executive and managing officers of such corporation or
association must be citizens of the Philippines. (Emphasis supplied)

ISSUE:

Whether or not the term “capital” in Section 11, Article XII of the Constitution refer to the total
common shares only, or to the total outstanding capital stock (combined total of common and non-
voting preferred shares) of PLDT, a public utility.

HELD:

YES.

Considering that common shares have voting rights which translate to control, as opposed to
preferred shares which usually have no voting rights, the term “capital” in Section 11, Article XII of
the Constitution refers only to common shares. However, if the preferred shares also have the right
to vote in the election of directors, then the term “capital” shall include such preferred shares because
the right to participate in the control or management of the corporation is exercised through the right
to vote in the election of directors. In short, the term “capital” in Section 11, Article XII of the
Constitution refers only to shares of stock that can vote in the election of directors.
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 a 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.
Holders of PLDT preferred shares are explicitly denied of the right to vote in the election of
directors. PLDT’s Articles of Incorporation expressly state that “the holders of Serial Preferred Stock
shall not be entitled to vote at any meeting of the stockholders for the election of directors or for any
other purpose or otherwise participate in any action taken by the corporation or its stockholders, or
to receive notice of any meeting of stockholders.” On the other hand, holders of common shares are
granted the exclusive right to vote in the election of directors. PLDT’s Articles of Incorporation state
that “each holder of Common Capital Stock shall have one vote in respect of each share of such stock
held by him on all matters voted upon by the stockholders, and the holders of Common Capital Stock
shall have the exclusive right to vote for the election of directors and for all other purposes.”
It must be stressed, and respondents do not dispute, that foreigners hold a majority of the
common shares of PLDT. In fact, based on PLDT’s 2010 General Information Sheet (GIS), which is a
document required to be submitted annually to the Securities and Exchange Commission, foreigners
hold 120,046,690 common shares of PLDT whereas Filipinos hold only 66,750,622 common
shares. In other words, foreigners hold 64.27% of the total number of PLDT’s common shares, while
Filipinos hold only 35.73%. Since holding a majority of the common shares equates to control, it is
clear that foreigners exercise control over PLDT. Such amount of control unmistakably exceeds the

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allowable 40 percent limit on foreign ownership of public utilities expressly mandated in Section 11,
Article XII of the Constitution.
As shown in PLDT’s 2010 GIS, as submitted to the SEC, the par value of PLDT common shares
is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other words,
preferred shares have twice the par value of common shares but cannot elect directors and have only
1/70 of the dividends of common shares. Moreover, 99.44% of the preferred shares are owned by
Filipinos while foreigners own only a minuscule 0.56% of the preferred shares. Worse, preferred
shares constitute 77.85% of the authorized capital stock of PLDT while common shares constitute
only 22.15%. This undeniably shows that beneficial interest in PLDT is not with the non-voting
preferred shares but with the common shares, blatantly violating the constitutional requirement of
60 percent Filipino control and Filipino beneficial ownership in a public utility.

FIRST PHILIPPINE INTERNATIONAL BANK

vs.
COURT OF APPEALS
G.R. No. 115849. January 24, 1996

FACTS:

In the course of its banking operations, the defendant Producer Bank of the Philippines
acquired six parcels of land. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted
to purchase the property and thus initiated negotiations for that purpose.
Negotiations happened between the parties. However, petitioner bank reneged their agreement
because it offered the same lot to different buyers. Plaintiffs then filed a suit for specific performance
with damages against the bank, its Manager Rivers and Acting Conservator Encarnacion. The basis
of the suit was that the transaction had with the bank resulted in a perfected contract of sale.
Subsequently, Henry L. Co, filed a motion to intervene in the trial court, alleging that as owner
of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting the
complaint. The trial court issued an order denying the motion to intervene on the ground that it was
filed after trial had already been concluded. Henry Co did not appeal the denial of his motion for
intervention.
During the pendency of the proceedings in the Court of Appeals, Henry Co and several other
stockholders of the Bank, filed an action purportedly a "derivative suit" with the RTC Branch 134,
against Encarnacion, Demetria and Janolo to declare any perfected sale of the property as
unenforceable and to stop Ejercito from enforcing or implementing the sale. In his answer, Janolo
argued that the Second Case was barred by litis pendentia by virtue of the case then pending in the
Court of Appeals.

ISSUE:

Whether or not the juridical personalities of the two corporations be pierced.

RULING:

YES.

In addition to the many cases where the corporate fiction has been disregarded, we now add
the instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise

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blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court
processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously
prosecuting or defending corporate causes and in using and applying remedies available to it. To rule
otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent
the stringent rules against forum shopping.

LYCEUM OF THE PHILIPPINES, INC.

vs.
COURT OF APPEALS, ET AL.
G.R. No. 101897 March 5, 1993

FACTS:

Lyceum of the Philippines is an educational institution duly registered with the Securities and
Exchange Commission. Petitioner instituted proceedings before the SEC to compel the private
respondents, which are also educational institutions, to delete the word "Lyceum" from their corporate
names and permanently to enjoin them from using "Lyceum" as part of their respective names. The
SEC hearing officer rendered a decision sustaining petitioner's claim to an exclusive right to use the
word "Lyceum." The hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case and
held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an
enforceable exclusive right to the use of that word.
On appeal, however, by private respondents the SEC En Banc did not consider the word
"Lyceum" to have become so identified with petitioner as to render use thereof by other institutions
as productive of confusion about the identity of the schools concerned in the mind of the general
public. Unlike its hearing officer, the SEC En Banc held that the attaching of geographical names to
the word "Lyceum" served sufficiently to distinguish the schools from one another, especially in view
of the fact that the campuses of petitioner and those of the private respondents were physically quite
remote from each other.

ISSUE:

Whether or not the word Lyceum has not acquired a secondary meaning.

RULING:

NO.

The Articles of Incorporation of a corporation must, among other things, set out the name of
the corporation. The policy underlying the prohibition in Section 18 against the registration of a
corporate name which is "identical or deceptively or confusingly similar" to that of any existing
corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws," is
the avoidance of fraud upon the public which would have occasion to deal with the entity concerned,
the evasion of legal obligations and duties, and the reduction of difficulties of administration and
supervision over corporations.
"Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive
appropriation with reference to an article in the market, because geographical or otherwise descriptive
might nevertheless have been used so long and so exclusively by one producer with reference to this
article that, in that trade and to that group of the purchasing public, the word or phrase has come to
mean that the article was his produce. The appellant failed to satisfy the requisites. No evidence was

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ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum'
has indeed acquired secondary meaning in favor of the appellant.

ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS, HSK SA BANSANG PILIPINAS
INC.
vs.
IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG KATOTOHANAN
GR 137592, 12 DECEMBER 2001

FACTS:

The Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (IDCJ-HSK; Church of
God in Christ Jesus, the Pillar and Ground of Truth), is a non-stock religious society or corporation
registered in 1936. Sometime in 1976, one Eliseo Soriano and several other members of said
corporation disassociated themselves from the latter and succeeded in registering on 30 March 1977
a new non-stock religious society or corporation, named Iglesia ng Dios Kay Kristo Hesus, Haligi at
Saligan ng Katotohanan (IDKJ-HSK). On 16 July 1979, IDCJ-HSK filed with the SEC a petition to
compel IDKJ-HSK to change its corporate name.
The SEC rendered judgment in favor of IDCJ-HSK, ordering IDKJ-HSK to change its corporate
name to another name that is not similar or identical to any name already used by a corporation,
partnership or association registered with the Commission.

ISSUE:

Whether the corporate names of AK[IDKH-HSK]BP and IDCH-HSK are confusingly similar.

RULING:

YES.

The additional words "Ang Mga Kaanib " and "Sa Bansang Pilipinas, Inc." in AK[IDKH-HSK]BP's
name are merely descriptive of and also referring to the members, or kaanib, of IDCH-HSK who are
likewise residing in the Philippines. These words can hardly serve as an effective differentiating
medium necessary to avoid confusion or difficulty in distinguishing AK[IDKH-HSK]BP from IDCH-
HSK. This is especially so, since both AK[IDKH-HSK]BP and IDCH-HSK are using the same acronym
— H.S.K.; not to mention the fact that both are espousing religious beliefs and operating in the same
place. Parenthetically, it is well to mention that the acronym H.S.K. used by AK[IDKH-HSK]BP stands
for "Haligi at Saligan ng Katotohanan." Then, too, the records reveal that in holding out their corporate
name to the public, AK[IDKH-HSK]BP highlights the dominant words "IGLESIA NG DIOS KAY KRISTO
HESUS, HALIGI AT SALIGAN NG KATOTOHANAN," which is strikingly similar to IDCH-HSK's
corporate name, thus making it even more evident that the additional words "Ang Mga Kaanib" and
"Sa Bansang Pilipinas, Inc.", are merely descriptive of and pertaining to the members of IDCH-HSK.
Significantly, the only difference between the corporate names of AK[IDKH-HSK]BP and IDCH-HSK
are the words SALIGAN and SUHAY. These words are synonymous — both mean ground, foundation
or support. Hence, the Court ruled that the corporate names Universal are indisputably so similar
that even under the test of "reasonable care and observation" confusion may arise.
The wholesale appropriation by AK[IDKH-HSK]BP of IDCH-HSK's corporate name cannot find
justification under the generic word rule. A contrary ruling would encourage other corporations to
adopt verbatim and register an existing and protected corporate name, to the detriment of the public.
The fact that there are other non-stock religious societies or corporations using the names Church of
the Living God, Inc., Church of God Jesus Christ the Son of God the Head, Church of God in Christ
& By the Holy Spirit, and other similar names, is of no consequence. It does not authorize the use by

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AK[IDKH-HSK]BP of the essential and distinguishing feature of IDCH-HSK's registered and protected
corporate name.

Seventh Day Adventist Conference Church of Southern Philippines vs. North Eastern Mindanao
Mission of Seventh Day Adventist, Inc. (496 SCRA 215)

FACTS:
Spouses Felix Cosio and Felisa Cuysona donate a parcel of land to South Philippine [Union] Mission
of Seventh Day Adventist Church, and was received by Liberato Rayos, an elder of the Seventh Day
Adventist Church, on behalf of the donee.

However, twenty years later, the spouses sold the same land to the Seventh Day Adventist Church of
Northeastern Mindanao Mission.

Claiming to be the alleged donee’s successors-in-interest, petitioners asserted ownership over the
property. This was opposed by respondents who argued that at the time of the donation, SPUM-SDA
Bayugan could not legally be a donee because, not having been incorporated yet, it had no juridical
personality. Neither were petitioners members of the local church then, hence, the donation could
not have been made particularly to them.

ISSUE:
Should the Seventh Day Adventist Church of Northeastern Mindanao Mission's ownership of the lot
be upheld?

HELD:
We answer in the affirmative.

Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership
of a property may be transferred by tradition as a consequence of a sale.

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of
another person who accepts it. The donation could not have been made in favor of an entity yet
inexistent at the time it was made. Nor could it have been accepted as there was yet no one to accept
it.

The deed of donation was not in favor of any informal group of SDA members but a supposed SPUM-
SDA Bayugan (the local church) which, at the time, had neither juridical personality nor capacity to
accept such gift.

(With questions regarding de facto corporation and law of sales.)

Petition Denied.

FILIPINAS BROADCASTING NETWORK, INC. vs. AGO MEDICAL & EDUCATIONAL CENTER -
BICOL CHRISTIAN COLLEGE OF MEDICINE
G. R. No. 141994, January 17, 2005, 448 SCRA 413

FACTS: “Expose” is a radio documentary program aired over DZRC-AM which is owned by petitioner
FBNI. In two (2) mornings, the program exposed various alleged complaints from students, teachers
and parents against respondent AMEC and its administrators. Claiming that the broadcasts were
defamatory, AMEC and Ago, Dean of AMEC’s College of Medicine, filed a complaint for damages
against FBNI. Respondent corporation alleged, among others, that due to the libelous statements, it
is entitled for moral damages.

ISSUE: Whether a corporation is entitled to moral damages.

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HELD: YES. A juridical person is generally not entitled to moral damages because, unlike a natural
person, it cannot experience physical suffering or such sentiments as wounded feelings, serious
anxiety, mental anguish or moral shock. Nevertheless, AMEC’s claim for moral damages falls under
item 7 of Article 2219 of NCC. This provision expressly authorizes the recovery of moral damages in
cases of libel, slander or any other form of defamation. Article 2219 (7) does not qualify whether the
plaintiff is a natural or juridical person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral damages. Moreover, where the
broadcast is libelous per se, the law implies damages. In such a case, evidence of an honest mistake
or the want of character or reputation of the party libeled goes only in mitigation of damages. Neither
in such a case is the plaintiff required to introduce evidence of actual damages as a condition
precedent to the recovery of some damages. In this case, the broadcasts are libelous per se. Thus,
AMEC is entitled to moral damages.

CORPORATION NOT LIABLE FOR THE OBLIGATION

OF ITS SUBSIDIARY DESPITE BEING A MAJORITY
STOCKHOLDER OF THE LATTER

A corporation, upon coming into existence, is invested by law with a personality separate and distinct
from those persons composing it as well as from any other legal entity to which it may be related. The
veil of corporate fiction may only be disregarded in cases where the corporate vehicle is being used to
defeat public convenience, justify a wrong, protect fraud or defend crime. Mere ownership by a single
stockholder 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. To disregard the separate
juridical personality of a corporation, the wrong doing must be clearly and convincingly established
(Construction and Development Corporation vs. Rodolfo Cuenca, G.R. No. 163981, August 12, 2005,
446 SCRA 714 )

BOARD RESOLUTION AUTHORIZING CORPORATE OFFICERS

TO SELL PROPERTIES BELONGING TO THE CORPORATON NECESSARY TO MAKE THE SALE
BINDING AGAINST THE CORPORATION

While a corporation may appoint agents to negotiate for the sale of its real properties, the final say
will have to be with the board of directors through its officers and agents as authorized by a board
resolution or by by-laws. An unauthorized act of an officer of the corporation is not binding on it
unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real
property of a corporation by a person purporting to be an agent thereof but without written authority
from the corporation is null and void. The declarations of the agent alone are generally insufficient to
establish the fact or extent of his/her authority. (Eduardo Litonjua vs. Eternit Corporation, G.R. No.
144805, June 8, 2006, 490 SCRA 204).

**** The certificate of non-forum shopping may be signed, for and on behalf of a corporation, by a
specifically authorized lawyer who has personal knowledge of the facts required to be disclosed in
such document. (BPI Leasing vs. Court of Appeals, G.R. No. 127624, November 18, 2004)

QUESTION: X Corporation declared cash dividends, upon approval of the Board of Directors. A, a
stockholder, questions the declaration on the ground that the approval of the stockholders
representing not less than 2/3 of the outstanding capital is necessary for such act. Is A correct?

ANSWER: NO. A corporation may validly declare cash or property dividends, upon approval of the
Board of Directors alone. It is only when stock dividends are declared that the consent of the
stockholders is needed.

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