DULAY ENTERPRISE VS CA

ISSUE:
WON the petitioner corp is liable for the act of manuel dulay and the sale is valid
and binding
HELD:
Section 101 of the Corporation Code of the Philippines provides:
Sec. 101.
When board meeting is unnecessary or improperly held. Unless the
by-laws provide otherwise, any action by the directors of a close corporation
without a meeting shall nevertheless be deemed valid if:
1. Before or after such action is taken, written consent thereto is signed by all
the directors, or
2. All the stockholders have actual or implied knowledge of the action and make
no prompt objection thereto in writing; or
3. The directors are accustomed to take informal action with the express or
implied acquiese of all the stockholders, or
4. All the directors have express or implied knowledge of the action in question
and none of them makes prompt objection thereto in writing.
If a directors' meeting is held without call or notice, an action taken therein within
the corporate powers is deemed ratified by a director who failed to attend, unless
he promptly files his written objection with the secretary of the corporation after
having knowledge thereof.
In the instant case, petitioner corporation is classified as a close corporation and
consequently a board resolution authorizing the sale or mortgage of the subject
property is not necessary to bind the corporation for the action of its president. At
any rate, corporate action taken at a board meeting without proper call or notice
in a close corporation is deemed ratified by the absent director unless the latter
promptly files his written objection with the secretary of the corporation after
having knowledge of the meeting which, in his case, petitioner Virgilio Dulay failed
to do.
****Consequently, petitioner corporation is liable for the act of Manuel
Dulay and the sale of the subject property to private respondents by
Manuel Dulay is valid and binding. As stated by the trial court:
. . . the sale between Manuel R. Dulay Enterprises, Inc. and the spouses Maria
Theresa V. Veloso and Castrense C. Veloso, was a corporate act of the former
and not a personal transaction of Manuel R. Dulay. This is so because
Manuel R. Dulay was not only president and treasurer but also the
general manager of the corporation. The corporation was a closed family
corporation and the only non-relative in the board of directors was Atty.
Plaridel C. Jose who appeared on paper as the secretary. There is no
denying the fact, however, that Maria Socorro R. Dulay at times acted as
secretary. . . ., the Court can not lose sight of the fact that the Manuel R.
Dulay Enterprises, Inc. is a closed family corporation where the
incorporators and directors belong to one single family. It cannot be
concealed that Manuel R. Dulay as president, treasurer and general
manager almost had absolute control over the business and affairs of
the corporation. 24

Moreover, the appellate courts will not disturb the findings of the trial judge
unless he has plainly overlooked certain facts of substance and value that, if
considered, might affect the result of the case, 25 which is not present in the
instant case.
FINANCING CORP VS TEODORO
ISSUE:
WON THE STOCKHOLDERS CAN FILE AN ACTION FOR THE DISSOLUTION OF A
CORPORATION
HELD:
the general rule is that the minority stockholders of a corporation
cannot sue and demand its dissolution. However, there are cases that
hold that even minority stockholders may ask for dissolution, this, under
the theory that such minority members, if unable to obtain redress and
protection of their rights within the corporation, must not and should
not be left without redress and remedy.
This was what probably prompted this Court to state in the case of Hall, et al. vs.
Judge Piccio,* G.R. No. L-2598 (47 Off. Gaz. No. 12 Supp., p. 200) that even the
existence of a de jure corporation may be terminated in a private suit for its
dissolution by the stockholders without the intervention of the State. It was
therein further held that although there might be some room for argument on the
right of minority stockholders to ask for dissolution,-that question does not affect
the court's jurisdiction over the case, and that the remedy by the party
dissatisfied was to appeal from the decision of the trial court.
****We repeat that although as a rule, minority stockholders of a corporation
may not ask for its dissolution in a private suit, and that such action
should be brought by the Government through its legal officer in a quo
warranto case, at their instance and request, there might be exceptional
cases wherein the intervention of the State, for one reason or another,
cannot be obtained, as when the State is not interested because the
complaint is strictly a matter between the stockholders and does not
involve, in the opinion of the legal officer of the Government, any of the
acts or omissions warranting quo warranto proceedings, in which
minority stockholders are entitled to have such dissolution.
When such action or private suit is brought by them, the trial court had
jurisdiction and may or may not grant the prayer, depending upon the
facts and circumstances attending it. The trial court's decision is of
course subject to review by the appellate tribunal. Having such
jurisdiction, the appointment of a receiver pendente lite is left to the
sound discretion of the trial court. As was said in the case of Angeles vs.
Santos (64 Phil., 697), the action having been properly brought and the
trial court having entertained the same, it was within the power of said
court upon proper showing to appoint a receiver pendente lite for the
corporation; that although the appointment of a receiver upon
application of the minority stockholders is a power to be exercised with
great caution, nevertheless, it should be exercised necessary in order
not to entirely ignore and disregard the rights of said minority
stockholders, especially when said minority stockholders are unable to
obtain redress and protection of their rights within the corporation
itself.

THE CAUSES: (1) imminent danger of insolvency; (2) fraud and mismanagement
(3) violations of the corporation law and the by-laws of the corporation (4) failure
to achieve the fundamental purpose of the corporation; (5) if administration,
possession and control of the affairs, books, etc. of defendant corporation are left
in the hands of the defendant Araneta and the present corporate officials, under
his power and influence, the remaining assets of the corporation are in danger of
being further dissipated, wasted or lost and of becoming ultimately unavailable
for distribution among its stockholders; and (6) the best means to protect and
preserve the assets of defendant corporation is the appointment of a receiver.
he trial court through respondent Judge Teodoro had jurisdiction and
properly entertained the original case; that he also had jurisdiction to
appoint a receiver pendente lite, and considering the allegations made
in connection with the petition for the appointment of a receiver, he
neither exceeded his jurisdiction nor abused his discretion in appointing
a receiver. The petition for certiorari is hereby denied, with costs. The
writ of preliminary injunction heretofore issued is hereby ordered
dissolved.
CAGAYAN FISHING DEVELOPMENT VS SANDIKO
ISSUE:
HELD:
****the transfer was made almost five months before the incorporation
of the company.
Unquestionably, a duly organized corporation has the power to purchase
and hold such real property as the purposes for which such corporation
was formed may permit and for this purpose may enter into such
contracts as may be necessary. But before a corporation may be said to
be lawfully organized, many things have to be done. Among other
things, the law requires the filing of articles of incorporation.
In the case before us it can not be denied that the plaintiff was not yet
incorporated when it entered into a contract of sale, Exhibit A. Not being
in legal existence then, it did not possess juridical capacity to enter into
the contract.
Boiled down to its naked reality, the contract here (Exhibit A) was entered
into not between Manuel Tabora and a non-existent corporation but
between the Manuel Tabora as owner of the four parcels of lands on the
one hand and the same Manuel Tabora, his wife and others, as mere
promoters of a corporations on the other hand.
****For reasons that are self-evident, these promoters could not have
acted as agent for a projected corporation since that which no legal
existence could have no agent. A corporation, until organized, has no life
and therefore no faculties. It is, as it were, a child in ventre sa mere.
This is not saying that under no circumstances may the acts of
promoters of a corporation be ratified by the corporation if and when
subsequently organized. There are, of course, exceptions, but under the
peculiar facts and circumstances of the present case we decline to
extend the doctrine of ratification which would result in the commission
of injustice or fraud to the candid and unwary.
It should be observed that Manuel Tabora was the registered owner of the four
parcels of land, which he succeeded in mortgaging to the Philippine National Bank

so that he might have the necessary funds with which to convert and develop
them into fishery. He appeared to have met with financial reverses. He formed a
corporation composed of himself, his wife, and a few others. From the
articles of incorporation, Exhibit 2, it appears that out of the P48,700,
amount of capital stock subscribed, P45,000 was subscribed by Manuel
Tabora himself and P500 by his wife, Rufina Q. de Tabora; and out of the
P43,300, amount paid on subscription, P42,100 is made to appear as
paid by Tabora and P200 by his wife. Both Tabora and His wife were
directors and the latter was treasurer as well. In fact, to this day, the
lands remain inscribed in Tabora's name. The defendant always regarded
Tabora as the owner of the lands. He dealt with Tabora directly. Jose
Ventura, president of the plaintiff corporation, intervened only to sign
the contract, Exhibit B, in behalf of the plaintiff. Even the Philippine
National Bank, mortgagee of the four parcels of land, always treated
Tabora as the owner of the same. (See Exhibits E and F.) Two civil suits
(Nos. 1931 and 38641) were brought against Tabora in the Court of First
Instance of Manila and in both cases a writ of attachment against the
four parcels of land was issued.
The Philippine National Bank threatened to foreclose its mortgages. Tabora
approached the defendant Sandiko and succeeded in the making him
sign Exhibits B, C, and D and in making him, among other things, assume
the payment of Tabora's indebtedness to the Philippine National Bank.
The promisory note, Exhibit C, was made payable to the plaintiff
company so that it may not attached by Tabora's creditors, two of whom
had obtained writs of attachment against the four parcels of land.
****If the plaintiff corporation could not and did not acquire the four
parcels of land here involved, it follows that it did not possess any
resultant right to dispose of them by sale to the defendant, Teodoro
Sandiko.
RIZAL LIGHT CASE VS MUNICIPALITY OF MORONG
ISSUE:
WON RESPONDENT HAS LEGAL PERSONALITY WHEN A FRANCHISE WAS GRANTED
TO IT
HELD:
Petitioner's contention that Morong Electric did not yet have a legal personality on
May 6, 1962 when a municipal franchise was granted to it is correct. The
juridical personality and legal existence of Morong Electric began only
on October 17, 1962 when its certificate of incorporation was issued by
the SEC. 24 Before that date, or pending the issuance of said certificate of
incorporation, the incorporators cannot be considered as de facto corporation. 25
But the fact that Morong Electric had no corporate existence on the day
the franchise was granted in its name does not render the franchise
invalid, because later Morong Electric obtained its certificate of
incorporation and then accepted the franchise in accordance with the
terms and conditions thereof.
***The incorporation of Morong Electric on October 17, 1962 and its
acceptance of the franchise as shown by its action in prosecuting the
application filed with the Commission for the approval of said franchise,
not only perfected a contract between the respondent municipality and
Morong Electric but also cured the deficiency pointed out by the
petitioner in the application of Morong EIectric. Thus, the Commission
did not err in denying petitioner's motion to dismiss said application and

in proceeding to hear the same. The efficacy of the franchise, however,

arose only upon its approval by the Commission on March 13, 1963.
The conclusion herein reached regarding the validity of the franchise granted to
Morong Electric is not incompatible with the holding of this Court in Cagayan
Fishing Development Co., Inc. vs. Teodoro Sandiko 27 upon which the petitioner
leans heavily in support of its position. In said case
****This Court held that a corporation should have a full and complete
organization and existence as an entity before it can enter into any kind
of a contract or transact any business. It should be pointed out,
however, that this Court did not say in that case that the rule is absolute
or that under no circumstances may the acts of promoters of a
corporation be ratified or accepted by the corporation if and when
subsequently organized. Of course, there are exceptions. It will be noted
that American courts generally hold that a contract made by the
promoters of a corporation on its behalf may be adopted, accepted or
ratified by the corporation when organized.
CARAM JR VS CA AND ALBERTO ARELLANO
ISSUE:
WON the petitioners themselves are also and personally liable for such expenses
and, if so, to what extent.
HELD:
the petitioners were not involved in the initial stages of the organization
of the airline, which were being directed by Barretto as the main
promoter. It was he who was putting all the pieces together, so to speak. The
petitioners were merely among the financiers whose interest was to be invited
and who were in fact persuaded, on the strength of the project study, to invest in
the proposed airline.
Significantly, there was no showing that the Filipinas Orient Airways was a
fictitious corporation and did not have a separate juridical personality, to justify
making the petitioners, as principal stockholders thereof, responsible for its
obligations.
**** As a bona fide corporation, the Filipinas Orient Airways should alone
be liable for its corporate acts as duly authorized by its officers and
directors.
In the light of these circumstances, we hold that the petitioners cannot
be held personally liable for the compensation claimed by the private
respondent for the services performed by him in the organization of the
corporation. To repeat, the petitioners did not contract such services. It
was only the results of such services that Barretto and Garcia presented
to them and which persuaded them to invest in the proposed airline. The
most that can be said is that they benefited from such services, but that
surely is no justification to hold them personally liable therefor.
Otherwise, all the other stockholders of the corporation, including those
who came in later, and regardless of the amount of their share holdings,
would be equally and personally liable also with the petitioners for the
claims of the private respondent.

The petition is rather hazy and seems to be flawed by an ambiguous ambivalence.

Our impression is that it is opposed to the imposition of solidary responsibility
upon the Carams but seems to be willing, in a vague, unexpressed offer of
compromise, to accept joint liability. While it is true that it does here and there
disclaim total liability, the thrust of the petition seems to be against the
imposition of solidary liability only rather than against any liability at all, which is
what it should have categorically argued.
Categorically, the Court holds that the petitioners are not liable at all,
jointly or jointly and severally, under the first paragraph of the
dispositive portion of the challenged decision. So holding, we find it
unnecessary to examine at this time the rules on solidary obligations,
which the parties-needlessly, as it turns out have belabored unto death.
WHEREFORE, the petition is granted. The petitioners are declared not liable under
the challenged decision, which is hereby modified accordingly. It is so ordered.
TRILLIANA VS QUEZON COLLEGE
ISSUE:
WON QC COLLEGE ACCEPTED THE TERM OF PAYMENT BY DAMASA
HELD:
It appears that the application sent by Damasa Crisostomo to the Quezon College,
Inc. was written on a general form indicating that an applicant will enclose an
amount as initial payment and will pay the balance in accordance with law and
the regulations of the College. On the other hand, in the letter actually sent by
Damasa Crisostomo, the latter (who requested that her subscription for 200
shares be entered) not only did not enclose any initial payment but stated that
"babayaran kong lahat pagkatapos na ako ay makapagpahuli ng isda."
There is nothing in the record to show that the Quezon College, Inc.
accepted the term of payment suggested by Damasa Crisostomo, or that
if there was any acceptance the same came to her knowledge during her
lifetime. As the application of Damasa Crisostomo is obviously at variance with
the terms evidenced in the form letter issued by the Quezon College, Inc., there
was absolute necessity on the part of the College to express its
agreement to Damasa's offer in order to bind the latter. Conversely, said
acceptance was essential, because it would be unfair to immediately
obligate the Quezon College, Inc. under Damasa's promise to pay the
price of the subscription after she had caused fish to be caught.
***In other words, the relation between Damasa Crisostomo and the Quezon
College, Inc. had only thus reached the preliminary stage whereby the
latter offered its stock for subscription on the terms stated in the form
letter, and Damasa applied for subscription fixing her own plan of
payment, a relation, in the absence as in the present case of
acceptance by the Quezon College, Inc. of the counter offer of Damasa
Crisostomo, that had not ripened into an enforceable contract.
Indeed, the need for express acceptance on the part of the Quezon
College, Inc. becomes the more imperative, in view of the proposal of
Damasa Crisostomo to pay the value of the subscription after she has
harvested fish, a condition obviously dependent upon her sole will and,
therefore, facultative in nature, rendering the obligation void, under
article 1115 of the old Civil Code which provides as follows: "If the
fulfillment of the condition should depend upon the exclusive will of the debtor,

the conditional obligation shall be void. If it should depend upon chance, or upon
the will of a third person, the obligation shall produce all its effects in accordance
with the provisions of this code." It cannot be argued that the condition solely is
void, because it would have served to create the obligation to pay, unlike a case,
exemplified by Osmea vs. Rama (14 Phil., 99), wherein only the potestative
condition was held void because it referred merely to the fulfillment of an already
existing indebtedness.
In the case of Taylor vs. Uy Tieng Piao, et al. (43 Phil., 873, 879), this Court already
held that "a condition, facultative as to the debtor, is obnoxious to the
first sentence contained in article 1115 and renders the whole obligation
void."
BAYLA VS SILANG TRAFFIC
ISSUE:
WON THE CONTRACT IS A SUBSCRIPTION CONTRACT OR CONTRACT OF SALE
HELD:
The parties litigant, the trial court, and the Court of Appeals have interpreted or
considered the said agreement as a contract of subscription to the capital stock of
the respondent corporation. It should be noted, however, that said agreement is
entitled "Agreement for Installment Sale of Shares in the Silang Traffic Company,
Inc.,"; that while the purchaser is designated as "subscriber," the corporation is
described as "seller"; that the agreement was entered into on March 30, 1935,
long after the incorporation and organization of the corporation, which took place
in 1927; and that the price of the stock was payable in quarterly installments
spread over a period of five years. It also appears that in civil case No. 3125 of the
Court of First Instance of Cavite mentioned in the resolution of August 1, 1937, the
right of the corporation to sell the shares of stock to the person named in said
resolution (including herein petitioners) was impugned by the plaintiffs in said
case, who claimed a preferred right to buy said shares.
Whether a particular contract is a subscription or a sale of stock is a matter of
construction and depends upon its terms and the intention of the parties (4
Fletcher, Cyclopedia of Corporation [permanent edition], 29, cited in Salmon,
Dexter & Co. vs. Unson (47 Phil. 649, 652). In the Unson case just cited, this Court
held that a subscription to stock in an existing corporation is, as
between the subscriber and the corporation, simply a contract of
purchase and sale.
*****It seems clear from the terms of the contracts in question that they
are contracts of sale and not of subscription. The lower courts erred in
overlooking the distinction between subscription and purchase "A
subscription, properly speaking, is the mutual agreement of the
subscribers to take and pay for the stock of a corporation, while a
purchase is an independent agreement between the individual and the
corporation to buy shares of stock from it at stipulated price." (18 C. J.
S., 760.) In some particulars the rules governing subscriptions and sales
of shares are different. For instance, the provisions of our Corporation
Law regarding calls for unpaid subscription and assessment of stock
(sections 37-50) do not apply to a purchase of stock. Likewise the rule
that corporation has no legal capacity to release an original subscriber
to its capital stock from the obligation to pay for his shares, is
inapplicable to a contract of purchase of shares.