1. Richard owns 90% of the shares of the capital stock of GOM Co.
On one occasion, GOM
represented by Richard as President and General manager executed a contract to sell a
subdivision lot in favor of Tomas. For failure of GOM to develop a subdivision, Tomas filed an
action for rescission and damages against GOM and Richard. Will the action prosper?
In Section 2 corporation is defined as an artificial being, it may own properties, transact and
commit acts expressly authorized by law or incidental to its existence. Corporation has a
separate and distinct personality. The action may prosper against GOM Corporation but
definitely not against Richard. Richard has a legal personality separate and distinct from that of
GOM Corporation. If he signed the contract to sell, he did so as the President and General
Manager of GOM Corporation and not in his personal capacity. Mere ownership by Richard of
90% of the capital stock of GOM Corporation is not of itself sufficient ground to disregard his
separate legal personality absent a showing, for example, that he acted maliciously or in bad
faith
2. As a result of perennial business losses, a corporation’s net worth has been wiped out. In
fact, it is now in negative territory. Nonetheless, the stockholders did not give up. Creditor-
banks, however, do not share the confidence of the stockholders and refuse to grant more
loans.
1. What tools are available to the stockholders to replenish capital?
2. Assuming that the corporation continues to operate even with depleted capital, would
the stockholders or the manager be solidarily liable for the obligations incurred by the
corporation?
a) In the face of the refusal of the creditor-banks to grant more loans, the following are tools
available to the stockholders to replenish capital, to wit:1) additional subscription to shares
of stock of the corporation by stockholders or by investors;2) advances by the stockholders
to thecorporation;3) payment of unpaid subscription by the stockholders.
b) No. As a general rule, the stockholders or the managers cannot be held solidarily liable for
the obligations incurred by the corporation. The corporation has a separate and distinct
personality from that of the stockholders or managers. The latter are presumed to be acting
in good faith in continuing the operation of the corporation. The obligations incurred by the
corporation are those of the corporation which alone is liable therefor. However, when the
corporation is already insolvent, the directors and officers become trustees of the business
and assets of the corporation for the benefit of the creditors and are liable for negligence or
mismanagement
3. Is a corporation that changes its corporate name a new corporation?
Under Section 17 Corporation Name, If the corporation comply with the determination of the
Commission with regards to the name of the partnership. It may summarily order the
corporation to immediately cease and desist using such name and may require the
corporation to register a new one. If the body corporate under the name stated in the articles
of incorporation for the period of time mentioned therein, unless said period is extended or
the corporation is sooner dissolved in accordance with law.
4. X Corp. operates a call center that received orders for pizzas on behalf of Y Corp. which
operates a chain of pizza restaurants. The two companies have the same set of
corporate officers. After two (2) years, X Corp. dismissed its call agents for no apparent
reason. The agents filed a collective suit for illegal dismissal against both X Corp. and Y
Corp. based on the doctrine of piercing the veil of corporate fiction. The latter set up the
defense that the agents in the employ of X Corp. which is a separate juridical entity. Is
this defense appropriate?
Yes, it is not shown that one company completely dominates the finances, policies, and
business practices of the other. The veil of corporate fiction may be pierced by proving in court
that the notion of legal entity is being used to defeat public convenience, justify wrong, protect
fraud, or defend crime or the entity is just an instrument or alter ego or adjunct of another entity
or person
5. Can a corporation recover moral damages?
This provision expressly authorizes the recovery of moral damages in cases of libel, slander or
any other form of defamation. Article 2219 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.
