Commercial Law, 2018 Bar — Question XII-a

ESSAY

Yashtag Holdings, Inc.'s (Yashtag Holdings) AOI states that its primary purpose is “to invest in real and personal properties of every kind or otherwise acquire and deal with stocks, bonds, and other securities or evidence of indebtedness of any other corporation, and to hold or to own, use, sell, and dispose of any such stock.” It further states that it has an authorized capital stock of PhP1 million, all of which have been fully subscribed and paid up. Yashtag Holdings' President, Mr. Yokada, convinced Yeh, Yah and Yo to lend/invest money with Yashtag, which money will be invested in a sister company, Yashtag Realty, Inc. (Yashtag Realty), a corporation that develops premium real estate projects in the Philippines. For the amount loaned/invested, Yashtag Holdings issued two (2) postdated checks to each lender/investor, one representing the principal amount, and the other covering the guaranteed interest that ranged between 18-32% p.a. On the maturity dates of the checks, the individual lender/investor can review the loans/investment, and may either collect only the interest or roll over the same with the principal amounts. Eventually, the bursting of the real estate bubble brought about a serious financial crisis around the world including the Philippines. Yashtag Realty collapsed and with it Yashtag Holdings defaulted in the payment of its loans/investments, as well as the dishonor of the tens of thousands of postdated checks issued to its various lenders/investors. Yeh, Yah and Yo filed several charges against Yashtag Holdings and its President, making them solidarily liable for the investments they failed to recover. Yeh, Yah and Yo proved that Yashtag Holdings, acting through Mr. Yokada, was able to get a total of PhP800 million of loans/investments from the public under the scheme, and from which Mr. Yokada, as the controlling stockholder, was able to withdraw a total amount of PhP300 million for his personal account and entered into the books of Yashtag Holdings as “Advances to Stockholders.” Mr. Yokada pleads as a defense that he cannot be made personally liable on the claim of the group under the doctrines of “Separate Juridical Personality” and “Limited Liability.” (a) What are the doctrines of “Separate Juridical Personality” and “Limited Liability”?

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