chapter 3 - persons and family relations

7/31/2019 Chapter 3 - Persons and Family Relations

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Chapter 3 Juridical Persons

Art. 44. The followin g are juridical persons:( 1 ) T h e S t a t e a n d i t s p o l i t i c a l s u b d i v i s i o n s ;(2 ) Other corporations, ins titutions and entities for public interest or purpose, created by law; their

personality begins as soon as they have been constituted according to law;(3 ) Corporations, partnerships and associations for private interest or purpose to which the law

grants a juridical personality, separate and distinct from that of each shareholder, partner ormember.

Juridical Person - a being of legal existence susceptible of rights and obligations, or of being the subject of juridicalrelations.

State - a sovereign person with the people composing it viewed as an organized corporate society under a

government with the legal competence to exact obedience of its commands.

- the political organization of a society legally supreme within and independent of legal control from without

- the state can enter into treaties and contracts.

- In default of persons entitled to succeed to the estate of a deceased person, the State shall inherit his whole estate

(Article 1011 of the Civil Code)

- fundamental rule: the state cann ot be sued withou t its consent (Article XVI, Section 2 of the 1987 Philippine

Constitution).

o Express consent may be embodied in a general law or a s pecial law.

o Implied consent - when the government enters into business contracts, thereby descending to the

level of the other contracting party, and also when the State files a complaint, thus opening itself to

a counterclaim.

Suability depends on the consent of the state to be suedLiability depends on the applicable law and the established facts** The circumstance that a state is suable does not necessarily mean that it is liable; on the other hand, it cannever be h eld liable if it does not first consent to be sued.

Political subdivisions - are municipal corporations and, in the Philippines, consist of the provinces, cities andmunicipalities

Municipal corporations- suable because their charters grant them the competenc e to sue and be sued.- genera lly not liable for torts committed by them in the discharge of governmental functions and can be held

answerable only if it can be shown that they were ac ting in a proprietary capacity. - exist in a dual capacity, and their functions are two-fold; should enjoy the sovereign immunity from suit

1. They exercise the right springing from sovereignty, and while in the performance of the dutiespertaining thereto, their acts are political and governmental.

o Their off icers and agents in such capacity, though elected or appointed by them, arenevertheless public functionaries performing a public service, and as such they areofficers, agents and servants of the state.

2. The municipalities exercise a private, proprietary or corporate right, arising from their existence as legalpersons and not as public agencies.

o Their officers and agents in the performance of such functions act in behalf of themunicipalities in their corporate or individual capacity, and not for the state of sovereignpower

Corporation - an artifi cial b eing c reated by operation of law, having the right of succession and the powers, attributes,and properties expressly authorized by law or incident to its existence (Section 2, Batas Pambansa Blg. 68).

Partnership - By the contract of partnership, two or more persons bind themselves to contribute money, property, orindustry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may alsoform a partnership for the exercise of a profession (Article 1767 of the Civil Code).

Corporations, partnerships and associations for private interest and purpose may be granted by law a juridicalpersonality, separate and distinct from that of each shareholder, partner or member. Hence, the obligation of thecorporation is not the obligation of the stockholders and vice versa.

Classification of Juridical Persons

(a ) P u b l i c j u r i d i c a l p e r s o n s1. Publ ic corporat ions l ike the province and the ci ty

- those formed or organized for the Government of a portion of the State2 . T h e s t a t e i t s e l f

(b ) P r i v a t e j u r i d i c a l p e r s o n s1 . P r i v a t e c o r p o r a t i o n s


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- those formed for some private purpose, benefit, aim, or end, as distinguished from publiccorporations which have for their purpose the general good and welfare.

2 . P a r t n e r s h i p s3 . F o u n d a t i o n s

When Personality of Private Juridical Persons Begins

from the moment a certificate of incorporation is granted

certificate is issued upon filing the articles of incorporation with the Securities and ExchangeCommission.

a corporation cannot be regarded as possessed of a personality separate and distinct from itsmembers - to allow it would be to sanction the use of the fiction of corporate identity as a shield tofurther an end subversive of justice.

to organize a corporation or a partnership that could claim a juridical personality of its own andtransact business as such is NOT a matter of absolute right but a PRIVILEGE which may beenjoyed only under such terms as the State may deem necessary to impose.

a partnership, even if not registered is a juridical person, provided that it has been validly constituted.

a limited partnership, to be valid as such, must be registered with the Securities and ExchangeCommission.

The Church

The Roman Catholic Church in the Philippines is a person.

It is an entity or person separate and distinct from the personality of the Pope or the Holy See. TheRoman Catholic Church, or any of its corporation soles, duly incorporated in the Philippines, can

therefore acquire lands in our country. The Roman Catholics of a parish are not a juridical person, there being no provision of law for their

organization as one.

Art. 45. Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the lawscreating or recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partne rship s an d ass ociati ons for p rivate intere st o r purpose are governed by the provisions of this Codeconcerning partnerships. (36 and 37a)

Determination of Nationality of Juridical Persons

The nationalityof a corporation is generally determined by the place of its incorporation.

Two exceptions to this rule:1. For the grant of the rights in the Constitution to the operation of public utilities, and for the

acquisition of land and other natural resources, a corporation, even if incorporated here, cannotacquire said rights unless 60% of its capital be Philippine-owned.

2. During war, we may pierce the veil of corporate identity, and go to the very nationality of thecontrolling stockholders regardless of where the incorporation had been made. Thus a German-controlled corporation, even if incorporated in the Philippines, was considered an enemy corporationduring the war for the purpose of freezing its assets. A contrary rule may endanger Philippinesecurity.

3.Converse Rubber Corp. v. Universal Rubb er Products, Inc . ( L-27906, Jan. 8, 1987)- Even if a foreign corporationis not doing business in the Philippines, and even if not licensed, it may su e here in our country.

Georg Grotjahn GMBH & Co v. Hon. L ucia Violag o Is nani , e t a l. (GR 109272, Aug. 10, 1994 54 SCAD 289)- There is

no general rule or governing principle as to what constitutes doing or engaging in or transacting business in thePhilippines.

Art. 46. Juridical persons may acquire and possess property of all kinds, as well as incur obligationsand bring civil or criminal actions, in conformity with the laws and regulations of their organization.(38a)

Rights of Juridical Persons(a ) To acquire and possess property of all kinds.( b) T o i n c u r o b l i g a t i o n s .(c) To br ing c iv i l o r c r imina l ac t ions.

A corporation being a juridical person, by itself can be held liable without any personal liability on the part ofthe stockholders, still said stockholders may be held for obligations contracted by the corporation whenevercircumstances have shown that the corporate entity is being used as an alter ego(other self) or business conduit

for the sole benefit of the stockholders. A corporation is civilly liable in the manner as natural persons for torts committed by its of cers or agents.

The fact that one or more corporations are owned and controlled by a single stockholder is NOT sufficient fordisregarding separate corpor ate ent ities


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Where a corporation is a dummy, is unreal, or a sham and serves no business purpose and is intendedonly as a blind, the corporate form may be ignored, for the law cannot countenance a form that is amischievous fiction.

Philips Expa B.V. v. CA (GR 96161, Feb. 21, 1992) -The general rule is that a corporation is entitled to use a name,but not in violation of the rights of others.

A Corporation may not form a partnership due to the (1) absence of mutual trust and confidence , and (2)if the corporation can be a partner, any other partner may bind it, and this is contrary to the Corporation Law(now Corporation Code), which says that a corporation can be bound only by the act of its Board of Directors.

It may enter into joint venture with another co rporation where the nature of venture is in line with thebusiness authorized by its charter.

C a p a c i t y t o A c q u i r e L a n d s

A religious corporation not controlled by Filipinos cannot acquire lands, otherwise alien religious landholdings inthis country would be revived.

Roman Catholic Church in the Philippines can acquire lands.

An Americancitizen, under the Parity Amendment, can acquire lands in the Philippines, exploit our naturalresources, and operate public utilities, only if in his particular state in the United States, Filipinos aregranted RECIPROCAL parity rights.

C a p a c i t y t o E n g a g e i n R e t a i l T r a d e

RA 1180 - persons not citizens of the Philippines; and associations, partnerships, or corporations thecapital of which is not owned wholly by citizens of the Philippines, are prohibited from engaging in the

retail trade directly or indirectly. This is in view of the exercise of police power.

There is no class legislation here - all those in the same category are equally affected.

A Non-Ex is ten t Corpora t ion Cannot Sue

The mere grouping together do not give corporate life to the group formed. It cannot act as acorporation. Neither can it create agents or exercise b y itself authority in its behalf.

A Non-Ex is ten t Par tnersh ip Cannot Sue

If a partnership does not lawfully exist, it cannot sue, but it may be sued, otherwise third persons may beprejudiced.

Where two persons represented themselves as co-managers of an alleged partnership, they cannot lateron impugn a chattel mortgage on two vehicles executed by them in behalf of the firm, by stating orproving that in truth there was NO partnership between them, but a mere co-ownership.

An Unregistered Labor Organization Cannot Sue

The cancellation of a labor unions registration certi ficate (for failure to comply with important requirementswould not entail a dissolution of said association or its suspension.

The EXISTENCE of the organization would not be affected by said cancellation, although its juridicalpersonality and its statutory rights and privileges as distinguished from those conferred by theConstitution would be suspended thereby.

Estoppel

A person who contracts with a corporation cannot later deny its personality.

The person who represents himself as the agent of a non-existing corporation cannot prevent the person whohas been misled from suing the agent personally, since a non-registered corporation does not have aju rid ical personal ity.

A Dissolved Corporation Even if a corporation has been dissolved, it can still continueprosecuting (as plaintiff) or defending (as a

defendant) for the next three years, thru its legal counsel, who may be considered a trustee for thispurpose.

Art. 47. Upon the dissolution of corporations, institutions and other entities for public interest or purposementioned in No. 2 of Article 44, their property and other assets shall be disposed of in pursuance oflaw or the charter creating them. If nothing has been speci fied on this point, the property and otherassets shall be applied to similar purposes for the benefit of the region, province, city or municipality whichduring the existence of the institution derived the principal benefits from the same. (39a)

(1) Rule If Public Juridical Persons Are Dissolved

(a) This Article refers to publiccorporations or associations.(b) How asse ts a re to be d i s t r i bu ted :

1) First apply the provisions of the law or charter creat ing them.

2) If there is no such provision, the assets will be for the benefit of the place which was already receivingthe principal benefits during the existence of the corporation or association.

Laws or charters governing the dissolutions of the following corporations:

Private corporations - Title IV of the Corporation Code.


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Corporations for public interest or purposes created by a charter - in accordance with the provisions of theirrespective charters and in the absence of any such provision, by the provis ion o f the Corporat ion Code.

Partnership - Title IX, Chapter 3 of the Civil Code

(2) How a Corporation Can Exercise Its Powers and Transact Busines s

Only thru its board of directors, officers, and agents when authorized by a board resolution or its by-laws.

(3) Effect When a Corporation Is a Mere Alter Ego or Business Conduit of a Person Separate Personalityof the Corporation May be Pierced

to warrant resort to the extraordinary remedy of piercing the veil of corporate fiction, there must be proofthatthe corporation is being used as a cloak or cover fo r fraud or illegalit y, or to work injustice.

books and rewards of the corporation are, ordinarily, the best evidence of corporate acts and proceedings.

Close corporation -organized for the purpose of running a family business or managing family property; has formedthe backbone of Philippine Commerce and Industry.

It should serve as a rallying point for family uni ty and pros perity not a s a fl ashpoint for familial strife concept of social contract -decision on the direction of the course of the corporate business is vested in the

board and not with courts

( 4 ) Signatory of the Certification of Non -Forum Shopping for Corporations

Certification of non-forum shopping should be executed and signed by the plaintiff or the principal counsel cannot sign said certification unless clothed with special authority to do so.

For corporations, the physical act of signing may be performed, on behalf of the corporate entity, only by

specifically-authorized individuals for the simple reasons that corporations, as arti ficial persons, cannotpersonally do the task themselves.

Powers of corporations are exercised thru their board of directors and/or duly-authorized of ficers and agents,physical acts, like the signing of documents, can be performed only by NATURAL persons duly-authorized forthe purpose by a corporate by-laws or by speci fic ac ts o f the board of directors.

chapter 3 - persons and family relations

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