NATURE AND FORMATION
orders of the COURT.
Corporation an artificial being created by operations of law having
the right of succession and the powers, attributes and properties
expressly authorized by law or incident to its existence.
Tri-level Existence in the Corporate Setting
First, the corporation as a juridical entity or a juridical fiction, which
views the relationship between the State and the corporation.
Second, the corporate setting provides for contractual relationships
on four (4) sub-levels, namely:
(a) Between the corporation and its agents or representatives
to act in the real world, such as its directors and its
officers, governed suppletorily by the Law on Agency.
(b) Between the corporation and its shareholders or
members;
(c) Between and among the shareholders in a common
venture; and
(d) Between the corporation and third parties or outsiders,
which is essentially governed by Contract Law, and Labor
Law when it comes to relationship with officers and
employees.
Third, the corporation becomes in its operation a business economic
unit, a business enterprise, or what is called in Accounting as a
going concern.
Being well-aware of the tri-level existence in the corporate
setting provides a better way to both understand and
explain the varying and interweaving doctrines prevailing
in Corporate Law.
NATURE OF CORPORATIONS
1. Corporate Attributes
a. Theories in the formation of a corporation
Tayag vs. Benguet consolidated INC
26 SCRA 242
Facts: Idonah Slade Perkins died in New York on March 1960, the
domestic administrator in New York refused to give the Stock
Certificates owned by Perkins in the Benguet Consolidated Inc. to the
Ancillary administrator here in the Philippines for the purpose of
satisfying the legitimate claims of local creditors. 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 ancilliary administrator
here in the Philippines and ordered Benguet Consolidated Inc to
issue New Stock Certificates to the Ancilliary administrator. Benguet
refuses to obey the order of the CFI of Manila on the ground that it is
in violation of the Corporation By Laws.
Montaos, Heidi Jean I. Page 1
Issue: Whether the Benguet Consolidated Inc is covered by the
Held: The Supreme Court Held that a corporation is an artificial
being created by operation of law, it owes its life to the state, its
birth being purely dependent on its will. It is logically inconceivable
therefore that it will have rights and privileges of a higher priority
than that of its creator. More than that, it cannot legitimately
REFUSE to yield obedience to acts of its state organs, certainly not
excluding the JUDICIARY, whenever called. It is not immune to
judicial control in those instances, where a duty under the law as
ascertained in an appropriate legal proceeding is cast upon it.
Ang Pue & Co vs. Secretary of Commerce
Facts: Ang Pue and Tan Siong organized a partnership for a term of
5 years. Their agreement provides that they can extend the
partneship for another 5 years by mutual consent.
In 1954, RA 1180 was enacted to regulate the retail business. Said
law provided that, after its enactment, a partnership not wholly
formed by Filipinos could continue to engage in the retail business
until the expiration of its term so registration of said Ang was refused
on the ground that the extension was in violation of the aforesaid
Act.
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 provisions of RA 1180 cannot
adversely affect them. Lower court dismissed their petition. Plaintiff
Co. interposed an appeal.
Issue: Whether the extension of the partnership established before
the enactment of RA 1180, is in violation of the said act.
Held: The SC ruled that organizing a corporation is not a matter of
right but a mere privilege 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.
(1) Theory of Concession
- Looks at a corporation simply as a creature of the State
and of limited powers and capabilities, completely within
the control of the State.
- Applies within the juridical entity level, and the issues to
be resolved arise between the State and its
instrumentalities and the corporation.
- Tayag v. Benguet Consolidated, Inc., characterized a
corporation as an artificial being, created by operation of
law, and that it owes its life to the state, its birth purely
dependent on its will.
- Ang Pue & Co. v. Secretary of Commerce and Industry,
would hold that to organize a corporation that could
claim a juridical personality of its own and transact
 business as such, is not a matter of absolute right but a
privilege which may be enjoyed only under such terms as
the State may deem necessary to impose.
(2) Theory of Enterprise Entity
- The corporate entity is viewed as taking its significant
primarily from the reality of the underlying enterprise,
formed or in formation; that the States approval of the
corporate form sets up a prima facie case that the assets,
liabilities and operations of the corporation are those of
the enterprise.
- Is meant to cover the situations where the courts have
either: (a) erected corporate personality which the State
had not granted; or (b) disregarded corporate personality
where the State had granted it; both for the purpose of
giving legal effect to factual relationships set up between
an economic entity and an outsider.
- The corporation is not merely an artificial being, but more
of an aggregation of persons doing business, or an
underlying business unit.
- The enterprise entity theory hinges itself on the fact that
there can be no corporate existence without persons to
compose it; there can be no association without its
associates.
b. Creature of the Law
1. Constitution
- Sec. 16, Article XII of the Constitution states that The
Congress shall not, except by general law, provides for
formation, organization or regulation of private
corporation. GOCC may be created or established by
special charters in the interest of the common good &
subject to the test of economic viability. Consequently, it
has been held that a private corporation created pursuant
to a special law is a nullity, and such special law is void for
being in violation of the Constitution.
2. Civil Code
- Under Article 44 of the Civil Code of the Philippines, other
than the State and its political subdivisions, and other
corporations, institutions and entities for public interest or
purposes, the law recognizes corporations, partnerships
and associations for private interest or purpose to which
are granted a juridical personality, separate and distinct
from that of each shareholder, partner or member.
- Under Article 45, the juridical persons organized as public
corporations are governed by the laws creating or
recognizing them, while private corporations are regulated
by laws of general application on the subject.
3. Franchise
- J.R.S. Business Corp v. Imperial Insurance, Inc., recognized
the differences between the primary franchise and
secondary franchise of a corporation, thus:
For practical purposes, franchises, so far as relating to corporations,
are divisible into a (a) corporate or general franchises; and (b) special
Montaos, Heidi Jean I. Page 2
or secondary franchises. The former is the franchise to exist as a
corporation, while the latter are certain 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 and cannot be conveyed
in the absence of a legislative authority so to do. But the special 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 are charged with public use.
JRS 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 CFI 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 JRS Business
Corporation, the business name, right of operation, the whole
assets, furnitures 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 JRS 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 JRS Business
Corporation, all the properties of said corporation contained in the
Notices of Sale, were bought by respondent Imperial Insurance, Inc.
ISSUE: Whether 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. 56 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 property 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
proceeds of such franchise or right of way, in the same manner and
with like effect as 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 court 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 certain 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 are 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 the 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 franchise. 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
Montaos, Heidi Jean I. Page 3
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
c. Four attributes of a corporation
(1) It is an artificial being with separate and distinct
personality
- it is the fiction of law which creates the person of the
corporation, with the same attributes of an individual with
full capacity to enter into contractual relations.
1. Created by operation of law
- The juridical existence of a corporation is dependent on
the consent or grant of the State. From a strict legal point
of view, and under the theory of concession, a corporation
cannot come into being by mere consent of the parties;
there must be a law granting it, and once granted, forms
the primary franchise of the corporation.
2. It enjoys the right of success
- By specific definition under Section 2 of the Corporation
Code granting it the right of succession, a corporation has
the capacity for continuous existence despite the death or
replacement of its shareholders or members, for it has a
personality separate and distinct from those who compose
it.
3. It has the powers, attributes and properties expressly
authorized by law or incident to its existence
- It defines every corporation to be a creature of limited
powers.
- Under the classic concession theory, once a corporation
has been granted juridical personality by the State, it is
allowed and can legally exercise only such powers granted
by the law for its creation, as opposed to a natural person,
who has the ability to exercise any power and enter into
any business activity and the only limitation would be that
an individual has no right to enter into an act or
transaction that is contrary to law, morals and public
policy.
d. Advantages of the Corporate Medium
(1) Strong Juridical Personality
- It has a strong juridical personality having a separate and
distinct personality from the members composing it,
unaffected by the death, incapacity, withdrawal, or
insolvency of any of its stockholders or members.
(2) Centralized Management
- Centralized in the Board of Directors, to whom also are
granted all corporate powers under Section 23 of the
Corporation Code. Shareholders are not agents of the
corporation, nor can they bind the corporations.
- Imbues the corporate medium with stable and efficient
system of governance and dealings with third parties, since
management prerogatives are centralized in its Board of
Directors. By imposition of law, and except in particularly
 designated instances, stockholders are bound by the
management decisions and transactions of the Board of
Directors of the corporation, whether they like it or not.
(3) Limited Liability to Investors
- The liability of investors in a corporation is limited to their
shares as distinguished from partnerships where even if
the assets of the partnership are already exhausted,
creditors can still go after the individual properties of the
partners.
- Affords a more efficient means to encouraging investments
in the venture, and traditional economic cost is spent only
when parties attempt to go around the limited liability
feature.
(4) Free Transferability of Units of Investment
- In a corporate setting, as a general rules, the shares of
stocks can be transferred without the consent of the other
stockholders. This would assure investors of a ready
mechanism to dispose of their investments when their
personal or financial situation may require it.
- Presumes a well-developed market for shares of stocks
(5) Advantages Over Unregistered Associations
- It enjoys perpetual succession under is corporate name
and in an artificial form; it has the capacity to take and
grant property, and contract obligations; it can sue and be
sued in its corporate name as a juridical person; it has the
capacity to receive and enjoy common grants of privileges
and immunities; and its stockholders or members have
generally no personal liability beyond the value of their
shares.
- Subject to the application of the corporation by estoppels
doctrine.
Disadvantages of the Corporate Medium
(1) Complicated and Costly Formation and Maintenance
- The corporation entails relatively high cost of formation,
operation, and maintenance. There is a greater degree of
governmental control and supervision than in other forms
of business organizations.
- For example, corporate entities, especially banking and
insurance institutions, are subjected to more reportorial
and record-keeping obligations under the Anti-Money
Laundering Act. They are likewise subjected to greater
responsibilities to expanded stakeholders under regulatory
rules on corporate governance.
(2) Lack of Personal Element and Abuse of Corporate
Management
- There is ordinarily lack of personal elements in view of the
transferability of shares, and the vesting of management
powers in the Board of Directors who may be professional
manages. Under the theory that those vested with
corporate powers have no personal or proprietary stake in
the corporate business enterprise.
Montaos, Heidi Jean I. Page 4
- Investors have very little voice over the conduct of
business of the corporation.
(3) Limited Liability Hits Innocent Victims
- The limited liability feature of the corporation has often
been abused by business in order to avoid having to
provide adequate protection and compensation for victims
of the business ventures they undertake. Also the limited
liability feature has tended to increase transaction costs by
the parties being forced to enter in to contractual schemes
skirting the limited liability features of the corporation
when it is a party to a transaction.
(4) Double Taxation
- The corporation has traditionally been subjected to heavier
taxation than other forms of business organizations; the
profits of the corporation which are already subjected to
corporate income tax when declared and distributed as
dividends to the stockholders are again subjected to
further income tax.
- Tax Reform Act of 1997 imposed starting in 1998 the
following tax burdens:
Re-imposition of final tax on cash and property dividends
received by individuals from domestic corporations.
Imposition of minimum corporate income tax at 2% of
gross income on the fourth taxable year from
commencement of business operations, when the
minimum income tax is greater than the regular corporate
income tax
Re-imposition of improperly accumulated earnings tax at
the rate of 10% of the defined improperly accumulated
taxable income.
e. The Corporate entity compared with other business
endeavors
(1) Sole Proprietorships
- Where the business enterprise is not endowed with a
separate juridical personality is less saddled with the many
requirement and regulations to which corporations are
often subjected to by law, rules and regulations. The owner
is in command of his whole business and in the event the
business venture goes bankrupt, he stands to lose as much
as he puts in and even more to the extent of all his
personal holdings. Consequently, the doctrine of limited
liability does not apply to a sole proprietorship that will
limit the claims of business creditors to the assets of the
business enterprise. This is in contrast to a corporation
where control of the corporate enterprise is vested in the
Board of Directors, and there is limited liability on the
part of the shareholders.
- Represents the highest form of unlimited liability when
it comes to the sole proprietor because he has in his
person not only the prerogatives of management but also
the benefits of ownership, and the flow of transactions
 and income is not limited within the confines of the
business enterprise.
(2) Partnership (1768, 1772, and 1775 of the Civil Code)
- Article 1768 of the Civil Code provides that the partnership
has a juridical personality separate and distinct from that
of each of the partners, even in case of failure to comply
with the registrations requirements of the said Code.
- The most important distinction between the corporation
and the partnership is in their legal capacities. With the
right of succession, a corporation has a stronger legal
personality, enabling it to continue despite the death,
incapacity, withdrawal or insolvency of any of its
stockholders or members. In a partnership, the
withdrawal, death, incapacity or insolvency of any
partner would automatically bring about the dissolution
of the partnership.
- Limited liability is a main feature in a corporate setting,
whereas partners are liable personally for partnership
debts not only to what they have invested in the
partnership but even as to their other properties.
- Generally, every partner is an agent of the partnership
and by his sole act, he can bind the partnership, whereas
in a corporation, only the Board of Directors or its agents
can bind the corporation.
- In a partnership setting, although a partner has the power
to sell or dispose of his capital interest or proprietary
interest, the buyer or transferee does not assume
transferors position as partner, but merely has a right to
demand for accounting or distribution of the profits
pertaining thereto. The principle of delectus personae
prevails in the partnership setting. In a corporate setting,
every stockholder has the right to transfer his shares in
the corporation, and the buyer or transferee assumes the
role of stockholder of said shares when the transfer has
been duly registered in the corporate books. Free
transferability of the units of ownership is a hallmark
feature in the corporate setting.
Tuason v. Bolanos
Facts: This is an appeal in the decision of the Court of Fuist Instance
of Rizal regarding the action brought by the plaintiff, Tuason as
represented by its managing partner Gregorio Araneta pf Araneta
and Araneta to recover possession of registered land situated in
barrio Tatalon Quezon City.
The plaintiff appellee in this case contends that the case
was not brought by the real party in interest which is JM Tuason and
Co. Inc. because the complaint was signed by Gregorio Araneta, Inc.
its managing partner. It also claims that Gregorio Araneta Inc. cannot
act as managing partner of plaintiff on theory that it is illegal for two
corporations to enter into a partnership.
Montaos, Heidi Jean I. Page 5
Issue: Whether or not the contention of the plaintiff appellee
regarding the real party in interest is correct?
Held: It is true that the complaint also states that the plaintiff is
"represented herein by its Managing Partner Gregorio Araneta, Inc.",
another corporation, but there is nothing against one corporation
being represented by another person, natural or juridical, in a suit in
court.
The contention that Gregorio Araneta, Inc. can not act as managing
partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership is without merit, for the true
rule is that "though a corporation has no power to enter into a
partnership, it may nevertheless enter into a joint venture with
another where the nature of that venture is in line with the business
authorized by its charter."
It is true that the complaint also states that the plaintiff is
"represented herein by its Managing Partner Gregorio Araneta, Inc.",
another corporation, but there is nothing against one corporation
being represented by another person, natural or juridical, in a suit in
court. The contention that Gregorio Araneta, Inc. can not act as
managing partner for plaintiff on the theory that it is illegal for two
corporations to enter into a partnership is without merit, for the true
rule is that "though a corporation has no power to enter into a
partnership, it may nevertheless enter into a joint venture with
another where the nature of that venture is in line with the business
authorized by its charter."
(3) Joint Venture
- The concept of a joint venture is of common law origin,
and has no precise legal definition. Under Philippine Law, a
joint venture is a form of partnership and should thus be
governed by the Law on Partnerships, which would then
include the features of separate juridical personality,
mutual agency among the co-venturers, and unlimited
liability.
- Defined as an association of persons or companies jointly
undertaking some commercial enterprise; generally all
contribute assets and share risks. It requires a community
of interest in the performance of the subject matter, a
right to direct and govern the policy in connection
therewith, and duty, which may be altered by agreement
to share both in profit and losses. The acts of working
together in a joint project.
AURBACH VS. SANITARY WARES MANUFACTURING
CORPORATION
FACTS: In 1961, Saniwares, a domestic corporation was
incorporated for the primary purpose of manufacturing
and marketing sanitary wares. One of the incorporators,
Mr. Baldwin Young went abroad to look for foreign
partners, European or American who could help in its
expansion plans. On August 15, 1962, ASI, a foreign
corporation domiciled in Delaware, United States
entered into an Agreement with Saniwares and some
Filipino investors whereby ASI 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 ASI, 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 ASI was increased
to 40%. The corporation was also registered with the
Board of Investments for availment 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 ASI 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, Avelino Cruz. After
disposing of the preliminary items in the agenda, the
Montaos, Heidi Jean I. Page 6
stockholders then proceeded to the election of the
members of the board of directors. The ASI group
nominated three persons namely; Wolfgang Aurbach,
John Griffin and David P. Whittingham. The Philippine
investors nominated six, namely; Ernesto Lagdameo, Sr.,
Raul A. Boncan, Ernesto R. Lagdameo, Jr., George F. Lee,
and Baldwin Young. Mr. Eduardo R, Ceniza then
nominated Mr. Luciano E. Salazar, who in turn
nominated Mr. Charles Chamsay. The chairman, Baldwin
Young ruled the last two nominations out of order on
the basis of section 5 (a) of the Agreement, the
consistent practice of the parties during the past annual
stockholders' meetings to nominate only nine persons
as nominees for the nine-member board of directors,
and the legal advice of Saniwares' legal counsel.
ISSUE: WHETHER THE PARTIES TO A PARTICULAR
CONTRACT HAVE THEREBY ESTABLISHED AMONG
THEMSELVES A JOINT VENTURE?
RULING:
The rule is that whether the parties to a
particular contract have thereby established among
themselves a joint venture or some other relation
depends upon their actual intention which is
determined in accordance with the rules governing the
interpretation and construction of contracts. In the
instant cases, our examination of important provisions
of the Agreement as well as the testimonial evidence
presented by the Lagdameo and Young Group shows
that the parties agreed to establish a joint venture and
not a corporation. The history of the organization of
Saniwares and the unusual arrangements which govern
its policy making body are all consistent with a joint
venture and not with an ordinary corporation. Premises
considered, we believe that under the Agreement there
are two groups of stockholders who established a
corporation with provisions for a special contractual
relationship between the parties, i.e., ASI and the other
stockholders. (pp. 4-5)
Section 5 (a) of the agreement uses the word
"designated" and not "nominated" or "elected" in the
selection of the nine directors on a six to three ratio.
Each group is assured of a fixed number of directors in
the board.

Moreover, ASI in its communications referred to the

enterprise as joint venture. Baldwin Young also testified
that Section 16(c) of the Agreement that "Nothing
herein contained shall be construed to constitute any of
the parties hereto partners or joint venturers in respect
of any transaction hereunder" was merely to obviate
the possibility of the enterprise being treated as
partnership for tax purposes and liabilities to third
parties.

(4) Business Trusts (Article 1441 of the Civil Code)

Art. 1441. Trusts are either express or implied. Express
trusts are created by the intention of the trustor or of the
parties. Implied trusts come into being by operation of
law.
- As compared to a corporation, A business trust is created
under the terms of a deed of trust which is easier and less
expensive to constitute for it is not bounded by any legal
requirements like the former. It does not have a separate
juridical personality, and is mainly governed by contractual
doctrines and the common law principles on trust.
- It requires the fourth requisite of delivery; trust is crated
when ownership over the property subject thereof (the
corpus) is split between the trustee who assumes legal or
naked title, and the beneficiary who has beneficial title.
- The naked title to the corporate properties are held by the
Board of Directors pursuant to the provisions of Section 23
of the Corporation Code; whereas, the beneficial title to
the corporate enterprise is vested with the group of
stockholders.
- The Board of Directors basically acts as trustee with full
powers to manage the corporate enterprise as the corpus
of the legal relationship, with the stockholders as the
beneficiary group with certain legal powers to enforce the
fiduciary obligations of the Board.

Montaos, Heidi Jean I. Page 7