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digestsbymarianpurpleink · 3 months

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Lopez Realty, Inc. vs. Spouses Tanjangco, 739 SCRA 644 (2014)

Topic: Ratification, in relation to Article 1910 of the New Civil Code.

Doctrine

Ratification means that the principal voluntarily adopts, confirms and gives sanction to some unauthorized act of its agent on its behalf. The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ratification can be made either expressly or impliedly. Implied ratification may take various forms—like silence or acquiescence, acts showing approval or adoption of the act, or acceptance and retention of benefits flowing therefrom.

Other important concepts mentioned in the case:

SEC shall have jurisdiction when there is concurrence of:

1. The status or relationship of the parties.

This element requires that the controversy must arise out of intracorporate or partnership relations between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchises.; and

2. The nature of the question that is the subject of their controversy.

This requires that the dispute among the parties be intrinsically connected with the regulation of the corporation, partnership or association or deal with the internal affairs of the corporation, partnership or association.

Requisites for a shareholder/board of director to have legal personality to file suit on behalf of the corporation (derivative suits):

The party bringing suit be a shareholder as of the time of the act or transaction complained of;

He has exhausted intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea; and

The cause of action actually devolves on the corporation, the wrongdoing or harm having been caused to the corporation and not to the particular stockholder bringing the suit.

C. Rules on compliance with requirements or formalities of the law (RCC)

General Rule

A corporation, through its board of directors, should act in the manner and within the formalities, if any, prescribed by its charter or by the general law.

Thus, directors must act as a body in a meeting called pursuant to the law or the corporation’s bylaws, otherwise, any action taken therein may be questioned by any objecting director or shareholder.

Exception

- Ratification. The actions taken in such a meeting by the directors or trustees may be ratified expressly or impliedly.

TN: This case was held as an exception to the rule enunciated in the case People v. Dumlao, 580 SCRA 409 (2009).

General rule.

Signature of corporate secretary enough. There is no provision in Corporation Code that requires that the minutes of the meeting should be signed by all the members of the Board—the signature of the corporate secretary gives the minutes the probative value and credibility.

Prima facie evidence of what happened in the meeting. The entries contained in the minutes are prima facie evidence of what actually took place during the meeting, pursuant to Sec. 44, Rule 130 of the Revised Rule on Evidence.

Exception. When there is evidence to show that other directors and the corporate secretary refused to sign the minutes, then the presumption in Dumlao does not prevail. Lopez Realty, Inc. v. Spouses Tanjangco, 739 SCRA 644 (2014).

It seems that People v. Dumlao is an important case, but Atty. did not include it in the case list. I included this concept for recitation purposes:Resolution versus Minutes: A resolution is distinct and different from the minutes of the meeting. A Board resolution is a formal action by a corporate board of directors or other corporate body authorizing a particular act, transaction, or appointment; while minutes are a brief statement not only of what transpired at a meeting, usually of shareholders/members or directors/trustees, but also at a meeting of an executive committee. People v. Dumlao, 580 SCRA 409 (2009).

SUPER SUMMARY

Lopez Realty, Inc. (LRI) and Dr. Jose Tanjangco (Jose) were the registered co-owners of three parcels of land and the building erected thereon known as the "Trade Center Building". LRI held a special meeting in July 27, 1981 to discuss the sale of the one-half share of LRI in the Trade Center Building. Atty. Benjamin B. Bernardino informed the body that the selling price is pegged at 4 Million Pesos, and the Spouses Tanjangcos (son and daughter-in-law of Dr.Jose Tanjangco) are offering 3.6 Million Pesos plus 50% of the receivables or a total of 3.8 Million Pesos. Asuncion Lopez, one of the BOD/Shareholder and secretary, countered for a selling price of 5 Million Pesos. At this point, Teresita and Benjamin offered to Asuncion that they (she) accept (equal) the Spouses Tanjangco’s offer. She called and talked with the spouses over the phone three (3) times and offered the selling price at 5 Million Pesos but the latter did not move from their original offer. On August 18, 1981, the board held a meeting and approved the resolution authorizing the sale of the said parcels of land to Spouses Tanjangco, without notice to Asuncion. On October of 1981, the sale went through.

On July 30, 1982, the board ratified the August 18, 1981 resolution, however Asuncion refused to sign it. After which, Asuncion filed a complaint alleging the invalidity of the sale. According to Asuncion, the defects of the August 18, 1981, which authorized Arturo to negotiate the sale, was not cured by the July 30, 1982 since the latter was not valid due to the lack of required vote. Therefore, the sale is still invalid. Is the contention meritorious?

HELD: Negative. In sum, whatever defect there was on the sale to the spouses Tanjangco pursuant to the August 17, 1981 Board Resolution, the same was cured through its ratification in the July 30, 1982 Board Resolution. It is of no moment whether Arturo was authorized to merely negotiate or to enter into a contract of sale on behalf of LRI as all his actions in connection to the sale were expressly ratified by the stockholders holding 67% of the outstanding capital stock.

Furthermore, Asuncion’s contention that the July 30, 1982 Board Resolution did not ratify the Board Resolution dated August 17, 1981 for lack of the required number of votes because Juanito is not entitled to vote while Leo voted "no" to the ratification of the sale, even if the minutes stated otherwise, is untenable. Upon examination of the July 30, 1982 minutes of the meeting, it can be deduced that the meeting is a joint stockholders and directors’ meeting. The Court takes into account that majority of the board of directors except for Asuncion, had already approved of the sale to the spouses Tanjangco prior to this meeting. As a consequence, the power to ratify the previous resolutions and actions of the board of directors in this case lies in the stockholders, not in the board of directors. It would be absurd to require the board of directors to ratify their own acts—acts which the same directors already approved of beforehand.

[Simplehan lang natin. Basically the issues were on the invalidity of the August 1981 meeting due to the non-notice to Asuncion of the meeting and the latter’s contention that the July 1982 resolution did not validly ratify the defect in the August 1981 reso due to lack of the required number of votes. Usually, when a certain act of a corporation is being questioned, the Court peruse the minutes. In this case, the minutes were found to be useless.The Court explained that the presumption enunciated in the case of Dumlao that the signature of the secretary gives the minutes of the meeting probative value and credibility is not applicable here because it was stated in the minutes that Asuncion refused to sign it. However, the Court further declared that such defect has been cured by the ratification or the affirmative vote of the major stockholders to the July 30, 1982 resolution, which has essentially ratified all the defects, including the non-notice to Asuncion of the August 18, 1981 meeting, the authorization to Arturo and absence of her signature in the minutes of the July 30, 1982 resolution. That’s how powerful ratification is.

Now, on the contention of Asuncion that the required vote was not met. The Court declared that since the July 1982 meeting was a joint stockholders and directors’ meeting, the power to ratify the previous resolutions and actions of the board of directors in this case lies in the stockholders, not in the board of directors. It would be absurd to require the board of directors to ratify their own acts—acts which the same directors already approved of beforehand. It likewise appears that in the aforesaid July 30, 1982 meeting, Asuncion was present and was clearly outvoted by the other stockholders (Sony, Bernjamin, Rosendo, Leo, and Juanito).]

FACTS:

Lopez Realty, Inc. (LRI) and Dr. Jose Tanjangco (Jose) were the registered co-owners of three parcels of land and the building erected thereon known as the "Trade Center Building".

At the time material to this case, the stockholders of record of LRI were the following:

a. Asuncion Lopez-Gonzalez (Asuncion) – 7,831 shares;

b. Arturo F. Lopez (Arturo) – 7,830 shares;

c. Teresita Lopez-Marquez (Teresita) – 7,830 shares;

d. Rosendo de Leon (Rosendo) – 5 shares

e. Benjamin Bernardino (Benjamin) – 1 share;

f. Augusto de Leon (Augusto) – 1 share; and

g. Leo Rivera (Leo) – 1 share

Except for Arturo and Teresita, the rest of the stockholders were members of the Board of Directors. Asuncion was LRI’s Corporate Secretary.

July 27, 1981

A special meeting of the stockholders was held to discuss the sale of the one-half share of LRI in the Trade Center Building. Atty. Benjamin B. Bernardino informed the body that the selling price is pegged at 4 Million Pesos, and the Spouses Tanjangcos are offering 3.6 Million Pesos plus 50% of the receivables or a total of 3.8 Million Pesos.

Asuncion countered for a selling price of 5 Million Pesos. At this point, Teresita and Benjamin offered to Asuncion that they (she) accept (equal) the Spouses Tanjangco’s offer.

Asuncion called and talked with the spouses over the phone three (3) times and offered the selling price at 5 Million Pesos but the latter did not move from their original offer as above-stated.

It was finally agreed by the body that Asuncion be given the priority to accept [equal] the TANJANGCO offer and the same to be exercised within ten (10 accept) days. Failure on her part to act on the offer, the said offer will be deemed accepted.

August 17, 1981

Asuncion failed to exercise her option to purchase the subject properties within the stated period. Thus, on August 17, 1981, while Asuncion was abroad, the remaining directors: Rosendo, Benjamin and Leo convened in a special meeting. Upon motion duly seconded, Mr. ARTURO F. LOPEZ had been authorized by the Board to immediately negotiate with the Tanjangcos on the matter of the latter’s offer to purchase ½ of the Trade Center Building and in connection there with he is given full power and authority by the Board to carry out the complete termination of the sale terms and conditions as embodied in the Resolution of July 27, 1981 and in connection therewith is likewise authorized to sign for and in behalf of Lopez Realty Incorporated.

September 1, 1981

The Board had a special meeting where the following resolution was passed and approved: RESOLUTION Series of 1981

"In view of the cable of Ms. Asuncion Lopez, the [B]oard decided to postpone [the] final action on the sale of Lopez Realty, Inc. share in Trade Center Building to the Tanjangcos that she can be enlightened on all proceedings of the Board during her absence”

September 16, 1981

Upon Asuncion’s arrival, the Board had a meeting on September 16, 1981, where she moved for the repeal and/or amendment of the August 17, 1981, and August 24, 1981 Board Resolutions. While Benjamin opposed Asuncion’s motion, the members of the Board agreed to defer action on the matter until such time when Arturo and Asuncion have conferred or settled the matter.

October 5, 1981

Arturo executed a Deed of Sale similar to that which was executed on August 25,1981 in favor of the spouses Tanjangco. The spouses Tanjangco paid LRI the amount of ₱1,800,000.00, which the latter accepted by issuing Official Receipt No. 723.15 The spouses Tanjangco then registered the Deed of Sale with the Register of Deeds of Manila.

November 4, 1981

LRI and Asuncion filed with the then Court of First Instance of Manila, a Complaint for annulment of sale, cancellation of title, reconveyance and damages with prayer for the issuance of temporary restraining order (TRO) and/or writ of preliminary injunction against the spouses Tanjangco, Arturo and the Registrar of Deeds of Manila.

Essentially, it was alleged that the sale is not binding on LRI as the August 17, 1981 Board Resolution, authorizing Arturo to sell the corporation’s one-half interest in the subject properties, is invalid for lack of notice to Asuncion. It was also alleged that the said board resolution had already been revoked by the Board of Directors in their September 1, 1981 and September 16, 1981 Resolutions.

November 21, 1981 [Not really important but still included it in case Atty. asks about how corporations institute a case.]

The spouses Tanjangco filed a motion for the production of a copy of the board resolution authorizing Asuncion to file the complaint on LRI’s behalf. In her Comment, Asuncion claimed that the action is a derivative suit she initiated as LRI’s minority stockholder, for which no authorization from LRI’s Board of Directors is necessary. [The Court affirmed Asuncion’s argument. Why? Court cited American jurisprudence which states that: where corporate directors have committed a breach of trust either by their frauds, [ultra] vires acts, or negligence, and the corporation is unable or unwilling to institute suit to remedy the wrong, a single stockholder may institute that suit, suing on behalf of himself and other stockholders and for the benefit of the corporation, to bring about a redress for the wrong done directly to the corporation and indirectly to the stockholders.]

December 7, 1981

Arturo moved to dismiss the complaint on the grounds of lack of jurisdiction and litis pendentia. With regard to the first ground, Arturo alleged that the case essentially involves an intra-corporate dispute, which falls within the exclusive jurisdiction of the SEC.

July 30, 1982

The stockholders of LRI had a meeting where they voted on whether to ratify and confirm the sale of the subject properties to the spouses Tanjangco. The minutes of such meeting state:

At this juncture, Juanito Santos moved for the ratification and confirmation of the sale of Trade Center Building to the [spouses Tanjangco] and thereby ratifying and confirming all minutes relative to the sale made to the [spouses Tanjangco], and the same being seconded. [Leo, Rosendo, Juanito and Benjamin voted in the affirmative]

After the ratification and confirmation of the sale of Trade Center Building, Asuncion Lopez stated that she is not preparing the minutes of today’s meeting as well as that of June 29, 1982 and prior ones, but she was reminded that if she refuses to do what is incumbent upon her as Secretary, the same would be prepared and if she refuses to sign, that’s up to her, for the corporation is governed by the Board of Directors coupled by the majority of the stockholders who ratify the acts of the Board

Contention of Asuncion – one of the petitioners, on the invalidity of the July 30, 1982 resolution:

She claims that the July 30, 1982 Board Resolution did not ratify the Board Resolution dated August 17, 1981 for lack of the required number of votes because Juanito is not entitled to vote while Leo voted "no" to the ratification of the sale even if the minutes stated otherwise. Asuncion assails the authority of Juanito to vote because he was not a director and he did not own any share of stock which would qualify him to be one. On the contrary, Juanito defends his right to vote as the representative of Teresita’s estate.

ISSUE/S:

WON the August 17, 1981 meeting, where the Resolution authorizing Arturo to negotiate for the sale of the subject properties was approved, is illegal for lack of notice to Asuncion as required under Section 50 of the Corporation Code;

WON the July 30, 1982 resolution ratified the defects of, if there is any, the August 17, 1981 resolution.

WON the SEC has jurisdiction over the case.

RULING:

The Court ruled in the AFFIRMATIVE.

The Court agrees with the petitioners that the August 17, 1981 Board Resolution did not give Arturo the authority to act as LRI’s representative in the subject sale, as the meeting of the board of directors where such was passed was conducted without giving any notice to Asuncion. Section 53 (Now, Sec. 52) of the Corporation Code provides for the following:

SEC. 53. Regular and special meetings of directors or trustees.— xxx

Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least one (1) day prior to the scheduled meeting, unless otherwise provided by the by-laws. A director or trustee may waive this requirement, either expressly or impliedly.

The general rule is that a corporation, through its board of directors, should act in the manner and within the formalities, if any, prescribed by its charter or by the general law. Thus, directors must act as a body in a meeting called pursuant to the law or the corporation’s bylaws, otherwise, any action taken therein may be questioned by any objecting director or shareholder. 38 However, the actions taken in such a meeting by the directors or trustees may be ratified expressly or impliedly.

The Court ruled in the AFFIRMATIVE.

In the present case, the ratification was expressed through the July 30, 1982 Board Resolution. Asuncion’s contention that the July 30, 1982 Board Resolution did not ratify the Board Resolution dated August 17, 1981 for lack of the required number of votes because Juanito is not entitled to vote while Leo voted "no" to the ratification of the sale even if the minutes stated otherwise is untenable. Upon examination of the July 30, 1982 minutes of the meeting, it can be deduced that the meeting is a joint stockholders and directors’ meeting. The Court takes into account that majority of the board of directors except for Asuncion, had already approved of the sale to the spouses Tanjangco prior to this meeting. As a consequence, the power to ratify the previous resolutions and actions of the board of directors in this case lies in the stockholders, not in the board of directors. It would be absurd to require the board of directors to ratify their own acts—acts which the same directors already approved of beforehand. It likewise appears that in the aforesaid July 30, 1982 meeting, Asuncion was present and was clearly outvoted by the other stockholders (Sony, Bernjamin, Rosendo, Leo, and Juanito).

Contrary to the position adopted by the CA, only those whose signatures appear on the minutes of the meeting can be said to have voted in favor of the ratification. This case must be differentiated from the Court’s ruling in People v. Dumlao, et al. In Dumlao, the Court ruled that the signing of the minutes by all the directors is not a requisite and that the lack of signatures on the minutes does not mean that the resolution was not passed by the board. However, there is a notable disparity between the facts in Dumlao and the instant case. In Dumlao, the corporate secretary therein recorded, prepared and certified the correctness of the minutes of the meeting despite the fact that not all directors signed the minutes. In this case, it could not even be established who recorded the minutes in view of Asuncion’s refusal to do so.

In sum, whatever defect there was on the sale to the spouses Tanjangco pursuant to the August 17, 1981 Board Resolution, the same was cured through its ratification in the July 30, 1982 Board Resolution. It is of no moment whether Arturo was authorized to merely negotiate or to enter into a contract of sale on behalf of LRI as all his actions in connection to the sale were expressly ratified by the stockholders holding 67% of the outstanding capital stock.

The Court ruled in the NEGATIVE.

Since the Spouses Tanjangcos, are not connected to Lopez Realty, Inc., then the SEC has no jurisdiction over the case.

#commercial law #corporation and basic securities law

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remfry · 4 months

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#law firm #corporate law #commercial law #Remfry & Sagar

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anythingeverything0000 · 5 months

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Insider Trading and Ethics: Exploring the Impact on Commercial Law with Barristers

Insider trading and its implications

The world of finance is often shrouded in mystery, with whispers of insider trading and clandestine deals swirling around the boardrooms of Wall Street and beyond. But what exactly is insider trading, and why does it matter? In this article, we delve into the murky waters of commercial law to explore the implications of insider trading, shedding light on its impact on the market, investors, and the very fabric of our financial systems. As barristers specializing in commercial law navigate the complex web of regulations and ethical considerations surrounding insider trading, we uncover the fascinating intersection between morality and legality within the realm of high-stakes investments. Join us as we unravel this enigmatic practice and unravel its far-reaching consequences for businesses, shareholders, and aspiring entrepreneurs.

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Ethical considerations: Moral implications of insider trading

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Experienced commercial law barristers are often at the forefront of delving into the complex ethical dilemmas posed by insider trading. They grapple with balancing individual freedom with societal responsibilities, seeking to navigate through intricate legal frameworks to ensure justice is upheld. Furthermore, they play a crucial role in advocating for transparency and accountability within corporate structures, driving home the message that unethical practices such as insider trading will not be tolerated. Ultimately, by addressing these ethical considerations head-on, commercial law barristers can pave the way for a more just and equitable financial landscape that benefits all participants in the market.

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Case studies: Notable examples of insider trading cases

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Another intriguing example is the Galleon Group case, where Raj Rajaratnam, a prominent hedge fund manager, was found guilty of insider trading through extensive illicit networks. This case highlighted the pervasive nature of insider trading in the financial industry and demonstrated the significant impact it can have on market integrity. These high-profile cases serve as cautionary tales and underscore the imperative for robust regulatory enforcement and corporate compliance measures to safeguard against insider trading.

Examining these cases from a commercial law perspective underscores the need for comprehensive education, vigilant monitoring, and rigorous enforcement within corporate structures to prevent insider trading. By navigating these complex examples with a critical eye, commercial law specialists can gain valuable insights into establishing effective compliance protocols that protect businesses and investors alike while upholding market transparency and fairness.

Conclusion: Balancing legal, ethical, and commercial interests

In the dynamic landscape of commercial law, finding the delicate balance between legal mandates, ethical considerations, and commercial interests is crucial. While legal requirements provide a framework for conducting business, ethical standards form the moral compass guiding decision-making. It’s essential for businesses to navigate these elements thoughtfully to uphold reputational integrity while pursuing commercial success.

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#commercial law #commercial barristers #london #commercial law barristers

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qldbusinesspropertylawyersau · 5 months

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QLD Business Property Lawyers

QLD Business Property Lawyers offers specialized legal services in business and property law. With over 75 years of experience, they provide expert advice on various legal matters, including compensation, litigation, wills, and estates law, catering to clients both in Australia and internationally.

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#Business Law #Property Law #Legal Services #Brisbane Lawyers #Commercial Law #Real Estate Law #Legal Consultation #Queensland Legal Services #Law Firm #Legal Expertise

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rich-info · 6 months

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Navigating Success: Our Lawyers Paving the Way with Commercial Law Expertise

In the dynamic landscape of modern business, having a reliable partner to guide you through the intricacies of Commercial Law is indispensable. At Our Lawyers, we take pride in not just offering legal services, but in being true collaborators in the success stories of businesses.

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#Commercial Law #Business lawyer

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davidkehr08 · 8 months

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Commercial Law Assignment Help

Commercial law assignments can be challenging for some students, but they are also an opportunity for students to learn about the practical application of commercial law. By completing a commercial law assignment, students can develop their research, writing, and analytical skills. students get online commercial law assignment help services to complete their assignments. There are many benefits to using academic writing services. First, it can help you to save time. When you are struggling to complete an assignment, it can be tempting to procrastinate. However, this can lead to stress and anxiety, and it can also hurt your grade. By getting help with your commercial law assignment, you can free up your time to focus on other things, such as studying for exams or participating in extracurricular activities.

#Commercial Law #Assignments #Law Student #Academic Writing #Services #Legal Studies #Commercial Law Help

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aiolegalservices · 8 months

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Completing a lease agreement can be both exciting and daunting for tenants. As you prepare to move on to a new chapter, one crucial aspect is ensuring the return of your security deposit. Understanding the steps involved in recovering your deposit is essential to avoid unnecessary disputes with your landlord. In this article, we’ll outline the key strategies you can employ to secure the return of…

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rhythm-plate20 · 10 months

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Ep13 | #Bread4SoulConvos | Katlego Malatji

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Topic: Music law & contracts

#rhythm plate #bread4soul #bread4soul convos #podcasts #music #south africa #music law #entertainment law #commercial law #contracts #contract validity

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dakotalawyer · 1 year

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Started on my commercial law summative essay, due 23/02. It's actually quite nice not leaving everything to the last minute. This has a 2500 word limit and I've just done my first draft for the introduction (currently at 152 words). My notes taken from class that apply to this essay are 8 pages long and I'm relatively confident that I can chip away at this assignment over the next few days and get it completed to a high standard. The essay is only 50% of my grade, with the other 50% coming in May from a summative exam [and I am so much better at exams]. Hoping for a 68-72 in this module overall, as I know the lecturer is a harsh marker.

#law school #lawblr #commercial law #summative essay #summative exam #finals season #deadline #uniblr #studyblr

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pen2print · 1 year

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Chris Brummer Named Jones Day Professor in Commercial Law at Singapore Management University

Thought leader Chris Brummer was named the 2022 Jones Day Professor in Commercial Law at Singapore Management University’s Yong Pung How School of Law. A prestigious honor, the professorship was established in 2012 and made possible by a $500,000 grant from the Jones Day Foundation, funded by the eponymous global law firm. It aims to streamline efforts to aid in the development of commercial law…

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#Commercial Law #Management University #university

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digestsbymarianpurpleink · 3 months

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Concept Builders, Inc. vs. NLRC, 257 SCRA 149 (1996)

Topic: Doctrine of Piercing the Veil

Doctrine

The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter ego of a person or of another corporation. Where badges of fraud exist; where public convenience is defeated; where a wrong is sought to be justified thereby, the corporate fiction or the notion of legal entity should come to naught. The law in these instances will regard the corporation as a mere association of persons and, in case of two corporations, merge them into one.

Thus, where a sister corporation is used as a shield to evade a corporation's subsidiary liability for damages, the corporation may not be heard to say that it has a personality separate and distinct from the other corporation. The piercing of the corporate veil comes into play.

Important concepts mentioned in the decision (Cited in the case of Pacific Rehouse)

Instrumentality Rule*

Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the "instrumentality" may be disregarded. The control necessary to invoke the rule is not majority or even complete stock control but such domination of instances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal. It must be kept in mind that the control must be shown to have been exercised at the time the acts complained of took place. Moreover, the control and breach of duty must proximately cause the injury or unjust loss for which the complaint is made.

*Rule often applied by the Court in disregarding the separate juridical personality of corporations.

The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: CCD-CF-PC

Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own;

Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty or dishonest and unjust act in contravention of plaintiff's legal rights; and

The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.

The absence of any one of these elements prevents "piercing the corporate veil." In applying the "instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant's relationship to that operation.

SUPER SUMMARY

Concept Builders Inc. was impleaded before the NLRC for unlawful dismissal. The latter ruled in favor of the private respondents and ordered the sheriff to execute the decision. When ordered to satisfy the remaining balance of the judgment award, it was found out that Concept Builders Inc. no longer exists, and a new corporation has occupied the premises - HPPI. Cuyegkeng, VP of HPPI, filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned by Hydro (Phils.), Inc. HPPI is engaged in the manufacture and sale of steel, concrete and iron pipes, a business which is distinct and separate from petitioner's construction business. Hence, it is of no consequence that petitioner and HPPI shared the same premises, the same President and the same set of officers and subscribers. Is the petitioner’s contention meritorious?

HELD: Negative. As stated by the NLRC, Both information sheets were filed by the same Virgilio O. Casiño as the corporate secretary of both corporations. It would also not be amiss to note that both corporations had the same president, the same board of directors, the same corporate officers, and substantially the same subscribers. Petitioner ceased its business operations in order to evade the payment to private respondents of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner corporation, and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner corporation.

FACTS:

Petitioner Concept Builders, Inc., a domestic corporation, with principal office at 355 Maysan Road, Valenzuela, Metro Manila, is engaged in the construction business. Private respondents were employed by said company as laborers, carpenters and riggers.

On November, 1981, private respondents were served individual written notices of termination of employment by petitioner, effective on November 30, 1981. It was stated in the individual notices that their contracts of employment had expired and the project in which they were hired had been completed.

NLRC found it to be, the fact, however, that at the time of the termination of private respondent's employment, the project in which they were hired had not yet been finished and completed. Petitioner had to engage the services of sub-contractors whose workers performed the functions of private respondents.

Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practice and non-payment of their legal holiday pay, overtime pay and thirteenth-month pay against petitioner. The Labor Arbiter rendered judgment ordering petitioner to reinstate private respondents and to pay them back wages equivalent to one year or three hundred working days.

Not long thereafter, a writ of execution was rendered directing the sheriff to execute the Decision. The writ was partially satisfied through garnishment of sums from petitioner's debtor, the Metropolitan Waterworks and Sewerage Authority, in the amount of P81,385.34. On July of 1989, the sheriff issued a report stating that he tried to serve the alias writ of execution on petitioner, to satisfy the remaining balance of the judgment award, through the security guard on duty but the service was refused on the ground that petitioner no longer occupied the premises.

On November 6, 1989, a certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned by Hydro (Phils.), Inc. (HPPI) of which he is the Vice-President. Petitioner further contends that HPPI is engaged in the manufacture and sale of steel, concrete and iron pipes, a business which is distinct and separate from petitioner's construction business. Hence, it is of no consequence that petitioner and HPPI shared the same premises, the same President and the same set of officers and subscribers.

ISSUE/S

Whether or not the doctrine of piercing the corporate veil should not have been applied, in this case, in the absence of any showing that it created HPPI to evade its liability to private respondents.

RULING

The Court ruled in the NEGATIVE.

It is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders and from other corporations to which it may be connected. But, this separate and distinct personality of a corporation is merely a fiction created by law for convenience and to promote justice. So, when the notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter ego of another corporation.

The conditions under which the juridical entity may be disregarded vary according to the peculiar facts and circumstances of each case. No hard and fast rule can be accurately laid down, but certainly, there are some probative factors of identity that will justify the application of the doctrine of piercing the corporate veil, to wit:

Stock ownership by one or common ownership of both corporations.

Identity of directors and officers.

The manner of keeping corporate books and records.

Methods of conducting the business.

In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations on April 29, 1986, it filed an Information Sheet with the Securities and Exchange Commission on May 15, 1987, stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI, the third-party claimant, submitted on the same day, a similar information sheet stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila.

Furthermore, the NLRC stated that:

Both information sheets were filed by the same Virgilio O. Casiño as the corporate secretary of both corporations. It would also not be amiss to note that both corporations had the same president, the same board of directors, the same corporate officers, and substantially the same subscribers.

From the foregoing, it appears that, among other things, the respondent (herein petitioner) and the third-party claimant shared the same address and/or premises. Under these circumstances, (sic) it cannot be said that the property levied upon by the sheriff were not of respondents.

Clearly, petitioner ceased its business operations in order to evade the payment to private respondents of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner corporation and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner corporation.

#commercial law #corporation and basic securities law

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edupediapublications · 1 year

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Chris Brummer Named Jones Day Professor in Commercial Law at Singapore Management University

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#Commercial Law #Management University #university

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anythingeverything0000 · 5 months

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#commercial law #civil law #professional

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qldbusinesspropertylawyersau · 5 months

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Lessor floored: make good costs reduced by windfall benefit

Landlords and tenants squabbling over make good costs in commercial leases should consider this dispute relating to an industrial warehouse leased to a heavy machinery hire company.

Kingston Industries took up occupation of the western Sydney premises in August 2010 and after its lease extensions expired in July 2017, it continued occupation on a month-to-month basis until December that year.

Landlord Diana Morabito claimed Kingston was responsible for the make good cost of replacing concrete surfaces in the warehouse and the car park which she claimed had been shattered by the tenant’s steel track earthmoving equipment.

She demanded the former tenant pay $344,000 in make good costs plus lost rent of $295,000 for the 18-month period between when Kingston departed and the date the premises were re-let in June 2019.

The lease – which specified a permitted use of “Plant Hire/Distribution” – contained the usual provisions in relation to the tenant’s maintenance and repair obligations but excluded damage caused by the landlord’s negligence or which occurred “outside its control” from the realm of tenant’s responsibility.

The terms also prohibited the tenant from “allowing the floor to be broken or damaged by overloading”.

The landlord was obliged to “maintain the structure of the premises in good repair” but it gave no warranty or representation that they were suitable for the tenant’s use.

When Kingston refused to pay, the landlord filed proceedings to recover her make good costs in the NSW Supreme Court.

Morabito contended that the permitted use did not extend to moving steel tracked equipment on the concrete surfaces without using protective measures of mapping or steel plates.

Justice Elisabeth Peden had to consider whether machinery with steel tracks was “plant”- and therefore permitted – that would ordinarily be expected to be moved around.

She saw no need to resort to the principle that lease covenants including those in relation to permitted use “are strictly construed against a lessor” because the word “plant” unambiguously included the tenant’s steel tracked equipment – some of over 22 tonnes in weight – of which the landlord had been aware.

Suspecting that the concrete surfaces were defective, Kingston engaged engineers to inspect and test the damaged paving.

Kingston managed to locate Fernando Algorry, the engineer who originally designed the concrete surfaces who swore that – because he was not provided with instructions about the type required – he had adopted a standard specification for concrete suitable for light to medium industry and machinery with pneumatic tyres only.

He also attested that the concrete supplied to the job – by reference to the few cartage delivery documents the landlord produced in discovery – was even inferior to the grade of product he had specified.

And had he known what was actually supplied, he “would not have certified” the low grade concrete that had been supplied.

This allowed Kingston to argue the failure in the concrete fell into one of the exceptions to its maintenance and repair obligations because it was caused by the landlord’s negligence; beyond its control; or it had occurred as a result of “fair wear and tear”.

Justice Peden accepted Kingston’s submission that Ms Morabito’s failure to produce many missing cement truck delivery dockets entitled the court to conclude they would not benefit her case and that it should conclude all batches delivered had been of low grade.

She went on to conclude that the paving damage had not been caused by Kingston’s machinery or overloading but rather by “a matter beyond its control and for which it ought not be liable”.

She went on to consider the validity of landlord’s figures to decide the damages to which she would be entitled should an appeal court decide otherwise regarding the concrete defects.

In the absence of the landlord taking reasonable steps to mitigate her loss by promptly recruiting a replacement tenant, her claim for lost rent was dismissed.

The court also decreed that any damages for the cost to replace the damaged paving should be reduced by “the betterment obtained from the new concrete”. That benefit was – having regard to the projected 50 year “life” of the new concrete paving – an additional 7.5 years.

“A successful plaintiff should not be awarded a windfall amount by reason of obtaining a better outcome, than had the defendant performed its obligations”. Similar reductions apply if a landlord gains “greater efficiency or productivity” from the repairs conducted from make good funds.

Thus Kingston – if it were to be liable at all – would have had to pay the replacement cost for the slabs, reduced in proportion by such “betterment”.

And a $58,000 claim for other make good items was reduced to $3,320 because Mrs Morabito had not demonstrated the damage was caused by Kingston as opposed to “fair wear and tear”.

ORIGINALLY FOUND ON- Source: QLD Business Property Lawyers(https://qldbusinesspropertylawyers.com.au/blog/lessor-floored-make-good-costs-reduced-by-windfall-benefit/)

#Business Law #Property Law #Legal Services #Brisbane Lawyers #Commercial Law #Real Estate Law #Legal Consultation #Queensland Legal Services #Law Firm #Legal Expertise

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