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Issue: Whether or not the claims of Barge and VanderHorck can be To allow the set-off in the case at bat, it will be
equitable set-off against the claims of Gallagher as against Germania tantamount to totally ignoring the legal doctrine, or
Brewin Corp.? fiction, that a corporation is an entity separate and
distinct from the body of its stockholders. It has been Fiction
Held:No. Their claims against Westphal are not subjects of equitable absolutely essential, for the administration of justice, entity separate and distinct from the
set-off to a claim against the defendant corporation. to treat a corporation as a collective entity, without body of its stockholders
regard to its individual shareholders. If the rights or
In the case at bar, to allow such set-off would be tantamount to totally
liabilities of a corporation could be affected by the
ignoring the legal doctrine that a corporation is an entity separate and
acts of the stockholders, except when acting in the
distinct from the body of its stockholders. The recognition of a
Gallagher v Germania Brewing Co. corporate name, it can easily be seen into what
corporation as a collective entity without regard to its individual
54 N.W. 115 (1893) confusion and chaos corporate affairs would
shareholders has been absolutely essential for the administration of
inevitably fall.
justice. If the rights or liabilities of a corporation could be affected by the
acts of the stockholders, except when acting in the corporate name, it
can easily be seen into what confusion and chaos corporate affairs
would inevitably result in.
ISSUE: Whether or not petitioners can intervene in the case? A share of stock represents a proportionate or
aliquot interest in the property of the corporation, it
does not vest the owner thereof with any legal right Distinct legal personality
Ruling: While a share of stock represents a proportionate or aliquot or title to any of the property, his interest in the
interest in the property of the corporation, it does not vest the owner corporate property being equitable or beneficial in
thereof with any legal right or title to any of the property, his interest in nature. Shareholders are in no legal sense the
the corporate property being equitable or beneficial in nature. owners of corporate property, which is owned by the
Shareholders are in no legal sense the owners of corporate property, corporation as a distinct legal person.
which is owned by the corporation as a distinct legal person.
Magsaysay - Labrador v CA When can a shareholder intervene in a case involving the corporation as
180 SCRA 266 (1989) a separate entity?
ISSUE: Whether or not properties registered in the name of the A corporation is a juridical person distinct from the
corporation are owned by it as an entity separate and distinct from its members composing it. Properties registered in the
members. name of the corporation are owned by it as an entity Juridical person
separate and distinct from its members. Distinct from its members composing
Yes. A corporation is a juridical person distinct from the members it
composing it. Properties registered in the name of the corporation are Properties registered in its name are
owned by it as an entity separate and distinct from its members. While owned by it
shares of stock constitute personal property they do not represent
property of the corporation. The corporation has property of its own
Group 1 Reporting: Abucay l Galeno l Gomez l Grajo l Lite 2
which consists chiefly of real estate. A share of stock only typifies an
aliquot part of the corporation's property, or the right to share in its
proceeds to that extent when distributed according to law and equity, but
its holder is not the owner of any part of the capital of the corporation.
Stockholders of Guanzon v Reg of Nor is he entitled to the possession of any definite portion of its property
Deeds or assets. The stockholder is not a co-owner or tenant in common of the
6 SCRA 373 (1962) corporate property.
It was, nevertheless, an error to hold David Ong jointly and severally 1. He assents (a) to a patently unlawful
liable with TRAMAT to de la Cuesta under the questioned act of the corporation, or
transaction. Ong had there so acted, not in his personal capacity, but as (b) for bad faith, or gross negligence in
Tramat Mercantile v CA
an officer of a corporation, TRAMAT, with a distinct and separate directing its affairs, or (c) for conflict of
238 SCRA 14 (1987)
personality. As such, it should only be the corporation, not the person interest, resulting in damages to the
acting for and on its behalf, that properly could be made liable thereon. corporation, its stockholders or other
persons;
RULING:
Dulay Enterprises v CA Issue: Whether the sale of the mortgaged property without approval of Exception to rule that sale of property must be
225 SCRA 678 (1993) all the members of the Board of Directors is valid. approved by all the members by the BOD: a close
corporation and consequently a board resolution Exception:
Ruling: Petitioner corporation is classified as a close corporation and authorizing the sale or mortgage of the subject close corporation and consequently a
consequently a board resolution authorizing the sale or mortgage of the property is not necessary to bind the corporation for board resolution authorizing the sale
subject property is not necessary to bind the corporation for the the action of its president. At any rate, a corporate or mortgage of the subject property is
action of its president. At any rate, a corporate action taken at a board action taken at a board meeting without proper call not necessary to bind the corporation
meeting without proper call or notice in a close corporation is deemed or notice in a close corporation is deemed ratified by for the action of its president.
ratified by the absent director unless the latter promptly files his written the absent director unless the latter promptly files his
objection with the secretary of the corporation after having written objection with the secretary of the a corporate action taken at a board
knowledge of the meeting which, in this case, petitioner corporation after having knowledge of the meeting. meeting without proper call or notice
Virgilio Dulay failed to do. in a close corporation is deemed
ratified by the absent director unless
"Sec. 101. When board meeting is unnecessary or improperly held. the latter promptly files his written
Unless the by-laws provide otherwise, any action by the directors of a objection with the secretary of the
close corporation without a meeting shall nevertheless be deemed valid corporation after having
if: knowledge of the meeting.
"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 acquiesce 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 proper 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."
Definition:
A corporation is a legal or juridical person with a personality separate and distinct from its individual stockholders or member and from any other legal entity to
which it may be connected. As a result, Properties registered in its own name are owned by and the Corporation may not be held to answer the liability of its
shareholders or members and, in the same way, shareholders cannot be held personally liable for the obligation of the former except:
3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action.
Although, a corporate officer acting can bind the corporation to any transactions within his authorized power, alienation of property of a corporation such as in a
sale and mortgage of property must be approved by the BOD to be valid and binding to the corporation, except in closed corporation.