Corporation Cases 2 Digest

7/24/2019 Corporation Cases 2 Digest

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Smith, Bell & Company (Ltd.), pet vs.Joaquin Natividad, Collector of Customs of the port ofCeu, resp.

This is a petition for a writ of mandamus led by the petitioner to compel

Natividad to issue a certicate of Philippine registry in favor of the former forits motor vessel Bato.

!acts"Smith, Bell & Co, !"td#, is a corporation organi$ed and e%isting under thelaws of the Philippine slands ' ma(ority of its stoc)holders are Britishsub(ects t is the owner of a motor vessel )nown as the Bato built for it in thePhilippine slands in *+*, of more than fteen tons gross The Bato wasbrought to Cebu in the present year for the purpose of transporting plainti-.smerchandise between ports in the slands 'pplication was made at Cebu,the home port of the vessel, to the Collector of Customs for a certicate ofPhilippine registry The Collector refused to issue the certicate, giving as hisreason that all the stoc)holders of Smith, Bell & Co, "td, were not citi$enseither of the /nited States or of the Philippine slands The instant action isthe resultCounsel argues that 'ct No 01* denies to Smith, Bell & Co, "td, the e2ualprotection of the laws because it, in e-ect, prohibits the corporation fromowning vessels, and because classication of corporations based on theciti$enship of one or more of their stoc)holders is capricious, and that 'ct No01* deprives the corporation of its property without due process of lawbecause by the passage of the law company was automatically deprived ofevery benecial attribute of ownership in the Bato and left with the na)edtitle to a boat it could not use

#ssue"3hether the 4overnment of the Philippine slands, through its "egislature,can deny the registry of vessel in its coastwise trade to corporations havingalien stoc)holders

$ulin%"5es 'ct No 01* provides6Investigation into character of vessel 7 No application for a certicate ofPhilippine register shall be approved until the collector of customs is satisedfrom an inspection of the vessel that it is engaged or destined to be engagedin legitimate trade and that it is of domestic ownership as such ownership isdened in section eleven hundred and seventy8two of this CodeCerticate of Philippine register 7 /pon registration of a vessel of domesticownership, and of more than fteen tons gross, a certicate of Philippineregister shall be issued for it f the vessel is of domestic ownership and of


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fteen tons gross or less, the ta)ing of the certicate of Philippine registershall be optional with the owner3hile Smith, Bell & Co "td, a corporation having alien stoc)holders, isentitled to the protection a-orded by the due8process of law and e2ualprotection of the laws clause of the Philippine Bill of 9ights, nevertheless, 'ct

No 01* of the Philippine "egislature, in denying to corporations such asSmith, Bell & Co "td, the right to register vessels in the Philippinescoastwise trade, does not belong to that vicious species of class legislationwhich must always be condemned, but does fall within authori$ede%ceptions, notably, within the purview of the police power, and so does noto-end against the constitutional provision

arry Stonehill,$oert Broo's, John Broo's and arl Bec',petitionervs.on. Jose io'no as Sec of Justice, *rosecutors and

Jud%es, respondentsThis is a petition for certiorari, prohibition, mandamus and in(unction torestrain the respondent8Prosecutors, their agents and:or representativesfrom using the e-ects sei$ed by the police o;cers from the petitioners&u$# is t#e seriousness of t#e irre"ularities $ommitted in $onne$tion wit#

t#e dis%uted sear$# warrants, t#at t#is Court deemed it fit to amend &e$tion - of Rule 122 of t#e

former Rules of Court t#at ?a sear$# warrant s#all not issue but u%on %robable $ause in

$onne$tion wit# one s%e$ifi$ offense3 *ot satisfied wit# t#is !ualifi$ation, t#e Court added

t#ereto a %ara"ra%#, dire$tin" t#at ?no sear$# warrant s#all issue for more t#an one s%e$ifi$offense3

-3 #e sear$# warrant does not %arti$ularl+ des$ribe t#e t#in"s to be seied3

#e do$uments, %a%ers and effe$ts sou"#t to be seied are des$ribed in t#e &ear$# :arrant

>@nre"istered and %rivate boos of a$$ounts (led"ers, 8ournals, $olumnars, re$ei%ts and

disbursements boos, $ustomers led"ers)6 re$ei%ts for %a+ments re$eived6 $ertifi$ates of sto$s

and se$urities6 $ontra$ts, %romissor+ notes and deeds of sale6 tele and $oded messa"es6 business

$ommuni$ations, a$$ountin" and business re$ords6 $#e$s and $#e$ stubs6 re$ords of ban

de%osits and wit#drawals6 and re$ords of forei"n remittan$es, $overin" t#e +ears 19'' to 19703A

#e des$ri%tion does not meet t#e re!uirement in 5rt III, &e$3 1, of t#e Constitution, and of &e$3

-, Rule 12' of t#e Revised Rules of Court, t#at t#e warrant s#ould %arti$ularl+ des$ribe t#e

t#in"s to be seied3

5 sear$# warrant ma+ be said to %arti$ularl+ des$ribe t#e t#in"s to be seied w#en t#e des$ri%tion

t#erein is as s%e$ifi$ as t#e $ir$umstan$es will ordinaril+ allow or w#en t#e des$ri%tion e%resses

a $on$lusion of fa$t not of law b+ w#i$# t#e warrant offi$er ma+ be "uided in main" t#e sear$#

and seiure or w#en t#e t#in"s des$ribed are limited to t#ose w#i$# bear dire$t relation to t#e

offense for w#i$# t#e warrant is bein" issued3

Bataan Shipyard & -n%ineerin% Co., #nc. vs *residential Commission on

ood overnment

150 SCRA 181 Business Organization Corporation Law A Corporation Cannot Invoke

the Right Against Sel!In"ri#ination

When President Corazon Aquino took power, the Presidential Commission on Good

Government (PCGG) was formed in order to recover ill gotten wealth allegedl acquired !

former President "arcos and his cronies# Aquino then issued two e$ecutive orders in %&'

and pursuant thereto, a sequestration and a takeover order were issued against ataan

*hipard + engineering Co#, nc# (A*-C.)# A*-C. was alleged to !e in actualit owned


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and controlled ! the "arcoses through the /omualdez famil, and in turn, through dumm

stockholders#

0he sequestration order issued in %&' required, among others, that A*-C. produce

corporate records from %&12 to %&' under pain of contempt of the PCGG if it fails to do so#

A*-C. assails this order as it avers, among others, that it is against A*-C.3s right

against self incrimination and unreasona!le searches and seizures#

ISSUE: Whether or not A*-C. is correct#

HELD: 4o# 5irst of all, PCGG has the right to require the production of such documents

pursuant to the power granted to it# *econd, and more importantl, right against self6

incrimination has no application to 7uridical persons# 0here is a reserve right in the

legislature to investigate the contracts of a corporation and find out whether it has e$ceeded

its powers# t would !e a strange anomal to hold that a state, having chartered acorporation like A*-C. to make use of certain franchises, could not, in the e$ercise of

sovereignt, inquire how these franchises had !een emploed, and whether the had !een

a!used, and demand the production of the corporate !ooks and papers for that purpose#

4either is the right against unreasona!le searches and seizures applica!le here# 0here

were no searches made and no seizure pursuant to an search was ever made# A*-C.

was merel ordered to produce the corporate records#

*#L#**#N- S/C#-01 !/$ 0- *$-+-N0#/N /! C$2-L01 0/ 3N#43LS vs.C/3..$. No. 56789: Septemer :9, :;;8

!acts"The petitioner was incorporated as a (uridical entity over one hundred years ago byvirtue of 'ct No *0@A, enacted on =anuary *+, *+A, by the Philippine Commission

The petitioner, at the time it was created, was composed of animal acionados andanimal propagandists The ob(ects of the petitioner, as stated in Section 0 of itscharter, shall be to enforce laws relating to cruelty inicted upon animals or theprotection of animals in the Philippine slands, and generally, to do and perform all

things which may tend in any way to alleviate the su-ering of animals and promotetheir welfare

't the time of the enactment of 'ct No *0@A, the original Corporation "aw,'ct No *>A+, was not yet in e%istence 'ct No *0@A antedated both theCorporation "aw and the constitution of the Securities and D%change Commissionmportant to note is that the nature of the petitioner as a corporate entity isdistinguished from the sociedad anonimas under the Spanish Code of Commerce


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Eor the purpose of enhancing its powers in promoting animal welfare andenforcing laws for the protection of animals, the petitioner was initially imbuedunder its charter with the power to apprehend violators of animal welfare laws naddition, the petitioner was to share one8half !*:0# of the nes imposed andcollected through its e-orts for violations of the laws related thereto 's originallyworded, Sections > and A of 'ct No *0@A provide6

Subse2uently, however, the power to ma)e arrests as well as the privilege toretain a portion of the nes collected for violation of animal8related laws wererecalled by virtue of Commonwealth 'ct !C'# No *>@, which reads, in its entirety,thus6

mmediately thereafter, then President ?anuel " Fue$on issued D%ecutive Grder!DG# No H dated November *0, *+H, portions of which provide6

3hereas, during the rst regular session of the National 'ssembly, Commonwealth'ct Numbered Gne Iundred Eorty Dight was enacted depriving the agents of theSociety for the Prevention of Cruelty to 'nimals of their power to arrest persons who

have violated the laws prohibiting cruelty to animals thereby correcting a seriousdefect in one of the laws e%isting in our statute boo)s

3hereas, the cruel treatment of animals is an o-ense against the State,penali$ed under our statutes, which the 4overnment is duty bound to enforceJ

By this when the CG' was to perform an audit on them they refuse to do so, by thereason that they are a private entity and not under the said commission Gn theother hand the CG' decided that they are a government entity

#ssue"is the said petitioner a private entityK

$ulin%"

Eirst, the Court agrees with the petitioner that the Lcharter testM cannot beapplied Dssentially, the Lcharter testM as it stands today provides6

TOhe test to determine whether a corporation is government owned or controlled,or private in nature is simple s it created by its own charter for the e%ercise of apublic function, or by incorporation under the general corporation lawK Those withspecial charters are government corporations sub(ect to its provisions, and itsemployees are under the (urisdiction of the Civil Service Commission, and arecompulsory members of the 4overnment Service nsurance System

The petitioner is correct in stating that the charter test is predicated, at best, on thelegal regime established by the *+HA Constitution, Section 1, 'rticle , whichstates6

Sec 1 The National 'ssembly shall not, e%cept by general law, provide forthe formation, organi$ation, or regulation of private corporations, unless such


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corporations are owned or controlled by the 4overnment or any subdivision orinstrumentality thereof

Quring the formulation of the *+HA Constitution, the Committee on Eranchisesrecommended the foregoing proscription to prevent the pressure of special interestsupon the lawma)ing body in the creation of corporations or in the regulation of the

same To permit the lawma)ing body by special law to provide for the organi$ation,formation, or regulation of private corporations would be in e-ect to o-er to it thetemptation in many cases to favor certain groups, to the pre(udice of others or tothe pre(udice of the interests of the country

'nd since the underpinnings of the charter test had been introduced by the *+HAConstitution and not earlier, it follows that the test cannot apply to the petitioner,which was incorporated by virtue of 'ct No *0@A, enacted on =anuary *+, *+ASettled is the rule that laws in general have no retroactive e-ect, unless thecontrary is provided 'll statutes are to be construed as having only a prospectiveoperation, unless the purpose and intention of the legislature to give them aretrospective e-ect is e%pressly declared or is necessarily implied from the

language used n case of doubt, the doubt must be resolved against theretrospective e-ect

There are a few e%ceptions Statutes can be given retroactive e-ect in thefollowing cases6 !*# when the law itself so e%pressly providesJ !0# in case of remedialstatutesJ !H# in case of curative statutesJ !># in case of laws interpreting othersJ and!A# in case of laws creating new rights None of the e%ceptions is present in theinstant case

's a curative statute, and based on the doctrines so far discussed, C' No*>@ has to be given retroactive e-ect, thereby freeing all doubt as to which class ofcorporations the petitioner belongs, that is, it is a 2uasi8public corporation, a )ind of

private domestic corporation, which the Court will further elaborate on under thefourth point

The general principle of prospectivity of the law li)ewise applies to 'ct No *>A+,otherwise )nown as the Corporation "aw, which had been enacted by virtue of theplenary powers of the Philippine Commission on ?arch *, *+, a little over a yearafter =anuary *+, *+A, the time the petitioner emerged as a (uridical entity Dventhe Corporation "aw respects the rights and powers of (uridical entities organi$edbeforehand

Second, a reading of petitioner


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Section * 'nna " de, Rate S 3right, =ohn " Chamberlain, 3illiam E Tuc)er, ?aryS Eergusson, 'masa S Crosseld, Spencer Cosby, Sealy B 9ossiter, 9ichard PStrong, =ose 9obles "ahesa, =osena 9 de "u$uriaga, and such other persons as maybe associated with them in conformity with this act, and their successors, arehereby constituted and created a body politic and corporate at law, under the name

and style of LThe Philippines Society for the Prevention of Cruelty to 'nimalsM

's incorporated by this 'ct, said society shall have the power to add to itsorgani$ation such and as many members as it desires, to provide for and choosesuch o;cers as it may deem advisable, and in such manner as it may wish, andto remove members as it shall provide

t shall have the right to sue and be sued, to use a common seal, to receivelegacies and donations, to conduct social enterprises for the purpose ofobtaining funds, to levy dues upon its members and provide for their collection tohold real and personal estate such as may be necessary for the accomplishment ofthe purposes of the society, and to adopt such by8laws for its government as may

not be inconsistent with law or this charter

% % % %

Sec H The said society shall be operated under the direction of its o;cers, inaccordance with its by8laws in force, and this charter

% % % %

Sec The principal o;ce of the society shall be )ept in the city of ?anila, and thesociety shall have full power to locate and establish branch o;ces of the societywherever it may deem advisable in the Philippine slands, such branch o;ces to be

under the supervision and control of the principal o;ce

Third The employees of the petitioner are registered and covered by theSocial Security System at the latter


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Eourth The respondents contend that the petitioner is a Lbody politicMbecause its primary purpose is to secure the protection and welfare of animalswhich, in turn, redounds to the public good

This argument, is, at best, specious The fact that a certain (uridical entity isimpressed with public interest does not, by that circumstance alone, ma)e the

entity a public corporation, inasmuch as a corporation may be private although itscharter contains provisions of a public character, incorporated solely for the publicgood This class of corporations may be considered 2uasi8public corporations,which are private corporations that render public service, supply public wants, orpursue other eleemosynary ob(ectives 3hile purposely organi$ed for the gain orbenet of its members, they are re2uired by law to discharge functions for thepublic benet D%amples of these corporations are utility, railroad, warehouse,telegraph, telephone, water supply corporations and transportation companies tmust be stressed that a 2uasi8public corporation is a species of private corporations,but the 2ualifying factor is the type of service the former renders to the public6 if itperforms a public service, then it becomes a 2uasi8public corporation

'uthorities are of the view that the purpose alone of the corporation cannot beta)en as a safe guide, for the fact is that almost all corporations are nowadayscreated to promote the interest, good, or convenience of the public ' ban), fore%ample, is a private corporationJ yet, it is created for a public benet Privateschools and universities are li)ewise private corporationsJ and yet, they arerendering public service Private hospitals and wards are charged with heavy socialresponsibilities ?ore so with all common carriers Gn the other hand, there maye%ist a public corporation even if it is endowed with gifts or donations from privateindividuals

The true criterion, therefore, to determine whether a corporation is public orprivate is found in the totality of the relation of the corporation to the State f the

corporation is created by the State as the latter@ revo)ed thepowers of the petitioner to arrest o-enders of animal welfare laws and the power toserve processes in connection therewith

Eifth The respondents argue that since the charter of the petitioner re2uiresthe latter to render periodic reports to the Civil 4overnor, whose functions havebeen inherited by the President, the petitioner is, therefore, a governmentinstrumentality

This contention is inconclusive By virtue of the ction that all corporationsowe their very e%istence and powers to the State, the reportorial re2uirement isapplicable to all corporations of whatever nature, whether they are public, 2uasi8


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public, or private corporations7as creatures of the State, there is a reserved right inthe legislature to investigate the activities of a corporation to determine whether itacted within its powers n other words, the reportorial re2uirement is the principalmeans by which the State may see to it that its creature acted according to thepowers and functions conferred upon it These principles were e%tensivelydiscussed in Bataan Shipyard & Dngineering Co, nc v Presidential Commission on

4ood 4overnment Iere, the Court, in holding that the sub(ect corporation couldnot invo)e the right against self8incrimination whenever the State demanded theproduction of its corporate boo)s and papers, e%tensively discussed the purpose ofreportorial re2uirements, vi$6

% % % The corporation is a creature of the state t is presumed to be incorporated forthe benet of the public t received certain special privileges and franchises, andholds them sub(ect to the laws of the state and the limitations of its charter tspowers are limited by law t can ma)e no contract not authori$ed by its charter tsrights to act as a corporation are only preserved to it so long as it obeys the laws ofits creation There is a reservedO right in the legislature to investigate its contracts

and nd out whether it has e%ceeded its powers t would be a strange anomaly tohold that a state, having chartered a corporation to ma)e use of certain franchises,could not, in the e%ercise of sovereignty, in2uire how these franchises had beenemployed, and whether they had been abused, and demand the production of thecorporate boo)s and papers for that purpose The defense amounts to this, that ano;cer of the corporation which is charged with a criminal violation of the statutemay plead the criminality of such corporation as a refusal to produce its boo)s Tostate this proposition is to answer it 3hile an individual may lawfully refuse toanswer incriminating 2uestions unless protected by an immunity statute, it does notfollow that a corporation vested with special privileges and franchises may refuse toshow its hand when charged with an abuse of such privileges !3ilson v /nitedStates, AA "aw Dd, 11*, 1@#

REGISTER OF DEEDS vs UNG SIU SI TEMPLE

GR. No. L-6776 May 21,1955

F!TS:

5 Fili%ino $itien ee$uted a deed of donation in favor of t#e @n" &iu &i em%le, an unre"istered reli"ious

or"aniation t#at o%erated t#rou"# t#ree trustees all of C#inese nationalit+3 #e Re"ister of eeds refused to

re$ord t#e deed of donation ee$uted in due form ar"uin" t#at t#e Consitution %rovides t#at a$!uisition of land

is limited to Fili%ino $itiens, or to $or%orations or asso$iations at least '0B of w#i$# is owned b+ su$#

$itiens3

ISSUE::#et#er a deed of donation of a %ar$el of land ee$uted in favor of a reli"ious or"aniation w#ose founder,

trustees and administrator are C#inese $itiens s#ould be re"istered or not3

RULING:

S"#. 5, $%. 1& o' %(" !o)s%*%+%*o) $ov*"s %(a% sav" *) #as"s o' ("$"*%a$y s+##"ss*o), )o $*va%"

a$*#+/%+$a/ /a) s(a// 0" %$a)s'"$$" o$ ass*)" "#"% %o *)*v*+a/s, #o$o$a%*o)s, o$ asso#*a%*o)s


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+a/*'*" %o (o/ /a)s o' %(" +0/*# o3a*) *) %(" P(*/**)"s. T(" !o)s%*%+%*o) o"s )o% 3a4" a)y

"#"%*o) *) 'avo$ o' $"/**o+s asso#*a%*o)s3

#e fa$t t#at a%%ellant #as no $a%ital sto$ does not eem%t it from t#e Constitutional in#ibition, sin$e its

member are of forei"n nationalit+3 #e %ur%ose of t#e '0B re!uirement is to ensure t#at $or%orations or

asso$iations allowed to a$!uire a"ri$ultural lands or to e%loit natural resour$es s#all be $ontrolled b+

Fili%inos6 and %(" s*$*% o' %(" !o)s%*%+%*o) "3a)s %(a% *) %(" a0s")#" o' #a*%a/ s%o#4, #o)%$o//*)3"30"$s(* s(o+/ 0" #o3os" o' F*/**)o #*%*")s.

5s to t#e $om%laint t#at t#e dis!ualifi$ation under 5rt3 1- of t#e Constitution violated t#e freedom of reli"ion,

t#e Court was not $onvin$ed t#at land tenure is indis%ensable to t#e free eer$ise and en8o+ment of reli"ious

%rofession or wors#i%3

*eople +. 6;99 June 5:, 579=

Lessons 3pplicale" *ulic 2tilities (Corporate La?)

E'CTS6 3illiam I Fuasha

a member of the Philippine bar, committed a crime of

falsication of a public and commercial document for causing it to appear

that 'rsenio Baylon, a Eilipino citi$en, had subscribed to and was the

owner of A of the subscribed capital stoc) of


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%# An private individual who shall commit an of the falsifications enumerated in the ne$t

precedingarti$le in an+ %ubli$ or offi$ial do$ument or letter of e$#an"e or an+ ot#er ind of

$ommer$ial do$ument3

I&&@/ :* Guas#a s#ould be $riminall+ liable

H/ *O3 5$!uitted3

falsifi$ation $onsists in not dis$losin" in t#e arti$les of in$or%oration t#at ;a+lon was a

mere trustee ( or dumm+ as t#e %rose$ution $#ooses to $all #im) of #is 5meri$an $o=

in$or%orators, t#us "ivin" t#e im%ression t#at ;a+lon was t#e owner of t#e s#ares subs$ribed

to b+ #im

For t#e mere formation of t#e $or%oration su$# revelation was not essential, and t#e

Cor%oration aw does not re!uire it

#e moment for determinin" w#et#er a $or%oration is entitled to o%erate as a %ubli$

utilit+ is w#en it a%%lies for a fran$#ise, $ertifi$ate, or an+ ot#er form of aut#oriation for t#at%ur%ose3

t#at $an be done after t#e $or%oration #as alread+ $ome into bein" and not w#ile it

is still bein" formed

So far as 'merican citi$ens are concerned, the said act has ceased to

be an o-ense within the meaning of the law, so that defendant can no

longer be held criminally liable therefor

!ilipinas Compania de Se%uros v. Christern uenefeld

o ' corporation borrows its citi$enship from the citi$enship of ma(ority ofits stoc)holders, regardless of the country under whose laws it was organi$ed

and created

FACTS:

Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de Seguros to

cover merchandise contained in a building. During the Japanese military occupation, this same

merchandise and the building were burned, so Huenefeld filed a claim under the policy.

Filipinas Compania refused to pay, alleging that the policy had ceased to be in force when the USdeclared war against Germany. Filipinas Compania contended that Huenefeld, although organized and

created under Philippine laws, is a German subject, and hence, a public enemy, since majority of its

stockholders are Germans. On the other hand, Filipinas Compania is under American jurisdiction.

However, the Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas

Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of that sum paid.


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ISSUES:

o 3:N Christern Iuenefeld is a 4erman sub(ect because ma(ority of its stoc)holders are

under 4erman (urisdiction, despite the fact that it was organi$ed and created under

Philippine lawso f so, 3:N the re insurance policy is enforceable against an enemy state

HELD:

The Court of Appeals ruled that a private corporation is a citizen of the country or state by and under the

laws of which it was created or organized. It rejected the theory that nationality of a private corporation is

determined by the character or citizenship of its controlling stockholders.

But the Supreme Court held that Christern Huenefeld is an enemy corporation since majority of its

stockholders are German subjects. The two American cases relied up by the Court of Appeals have lost

their force in view of a newer case where the control test was adopted.

The Philippine Insurance Law provides that anyone, except a public enemy, may be insured. It stands to

reason that an insurance policy ceases to be allowable as soon as the insured becomes a public enemy.

Since Christern Huenefeld became a public enemy on Dec. 10, 1941, then the policy has ceased to be

enforcible and therefore Huenefeld is not entitled to indemnity. However, elementary rules of justice

require that the premium paid from Dec. 11, 1941 should be returned.

Thus, Filipinas Compania is allowed to recover the sum paid but only its equivalent in actual Philippine

currency, minus the premium that Huenefeld paid after Dec. 11.

Corporate Law Case Digest: Roman Catholic Apostolic Administrator Of Davao !

LRC "#$%&'

49 No "8@>A* Qecember 0, *+A1

"esson 'pplicable6 D%ploitation of Natural 9esources !Corporate "aw#

E'CTS6 O$tober 4, 194 ?ateo " 9odis, a Eilipino citi$en and resident of the City

of Qavao, e%ecuted a deed of sale of a parcel of land in favor of the

9oman Catholic 'postolic 'dministrator of Qavao nc!9oman#, a

corporation sole organi$ed and e%isting in accordance with Philippine

"aws, with ?sgr Clovis Thibault, a Canadian citi$en, as actual incumbent
http://www.philippinelegalguide.com/2013/05/jurisprudence-gr-no-l-8451-december-20.htmlhttp://www.philippinelegalguide.com/2013/05/jurisprudence-gr-no-l-8451-december-20.html


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The 9egister of Qeeds of Qavao for registration, having in mind a

previous resolution of the CE in Carmelite Nuns of Qavao were made to

prepare an a;davit to the e-ect that of the members of their corp

were Eilipino citi$ens when they sought to register in favor of their

congregation of deed of donation of a parcel of land, re2uired it to submita similar a;davit declaring the same

June 2., 194 9oman in the letter e%pressed willingness to submit an

a;davit but not in the same tenor as the Carmelite Nuns because it had

ve incorporators while as a corporation sole it has only one and it was

ownership through donation and this was purchased

5s t#e Re"ister of t#e and Re"istration Commissioner (RC) eeds #as some doubts

as to t#e re"isterabilit+, t#e matter was referred to t#e and Re"istration Commissioner en

$onsulta for resolution (se$tion 4 of Re%ubli$ 5$t *o3 111)

RC

In view of t#e %rovisions of &e$tion 1 and of 5rti$le III of t#e


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23 onl+ t#e administrator and not t#e owner of t#e tem%oralities lo$ated in t#e territor+

$om%rised b+ said $or%oration sole and su$# tem%oralities are administered for and on

be#alf of t#e fait#ful residin" in t#e dio$ese or territor+ of t#e $or%oration sole

-3 #as no nationalit+ and t#e $itiens#i% of t#e in$umbent and ordinar+ #as not#in" to do

wit# t#e o%eration, mana"ement or administration of t#e $or%oration sole, nor effe$ts t#e$itiens#i% of t#e fait#ful $onne$ted wit# t#eir res%e$tive dio$eses or $or%oration sole3

Constitution demands that in the absence of capital stoc), the

controlling membership should be composed of Eilipino citi$ens !Re"ister of

eeds of Rial vs3 @n" &ui &i em%le)

undeniable proof that the members of the 9oman Catholic 'postolic

faith within the territory of Qavao are predominantly Eilipino citi$ens

presented evidence to establish that the clergy and lay members

of this religion fully covers the percentage of Eilipino citi$ens re2uired by

the Constitution

fact that the law thus e%pressly authori$es the corporations sole

to receive be2uests or gifts of real properties !which were the main source

that the friars had to ac2uire their big haciendas during the Spanish

regime#, is a clear indication that the re2uisite that be2uests or gifts of

real estate be for charitable, benevolent, or educational purposes, was, in

the opinion of the legislators, considered su;cient and ade2uate

protection against the revitali$ation of religious landholdings

as in res%e$t to t#e %ro%ert+ w#i$# t#e+ #old for t#e $or%oration, t#e+ stand in %osition of

R@&//& and t#e $ourts ma+ eer$ise t#e same su%ervision as in ot#er $ases of trust

RE(U)LIC O* +HE (HILI((I,ES- represented ./ the Director of Lands,petitioner!

appellant, vs. 0UD1E CA,DIDO (! ILLA,UEA- of the Co2rt of *irst Instance of )2lacan-

3alolos )ranch II- and I1LESIA ,I CRIS+O- as a corporation sole- represented ./

ERA4O 1! 3A,ALO- as E5ec2tive 3inister,respon'ents!appellees#

G#/# 4o# =6::8' >une 8&, %&'8

*AC+S:

n %&22, glesia ni Cristo, private respondent, a corporation sole dul e$isting under

Philippine laws, acquired two lots with a total area of 2%2 square meters from Andres Perez,


16/21

who had possessed the propert since %&22 and had declared the same for ta$ purposes# .n

*eptem!er %2, %&11, private respondent filed an application for registration of the two lots

pursuant to *ection ?'(!) of the Pu!lic =and =aw alleging that it and its predecessor6in6interest

had possessed the land for more than 2; ears# 0he /epu!lic of the Philippines opposed the

application on the ground that the glesia 4i Cristo, as a corporation sole, is disqualified under

the Constitution to hold aliena!le lands of the pu!lic domain and that the land applied for is a

pu!lic land# After hearing, the trial court ordered the registration of the two lots in the name of

private respondent# @ence, this appeal ! the /epu!lic#

ISSUE:

Whether or not glesia ni Cristo ma acquire or hold lands of pu!lic domain#

HELD:

0he *upreme Court held that the Constitution prohi!its a corporation sole or a 7uridical

person like the glesia 4i Cristo from acquiring or holding lands of the pu!lic domain that said

church is not entitled to avail of the !enefits of *ection ?'(!) of the Pu!lic =and =aw which

applies onl to 5ilipino citizens or natural persons and that the su!7ect lots are not private lands

!ecause possession ! the applicant and his predecessors6in6interest has not !een since time

immemorial and !ecause land registration proceeding under *ection ?'(!) of the Pu!lic =and

=aw presupposes that the land is pu!lic#

0he provision in the Constitution that B4o private corporation or association ma hold

aliena!le lands of the pu!lic domain e$cept ! lease not to e$ceed one thousand hectares in

area Art# D, *ec# of the Constitution is not the decisive consideration for the denial of the

registration in favor of appellee# t is the view that the ill of /ights provision on religious

freedom which !ans the enactment of an law prohi!iting its free e$ercise, the Ben7oment of

religious profession and worship without discrimination or preference# (!eing) forever # # #


17/21

allowed#B @ere the glesia 4i Cristo, as a corporation sole, seeks the registration# 0he area

involved in the two parcels of land in question is 2%2 square meters# As admitted in the opinion

of the Court, a chapel is therein located# t is that !asic consideration that leads to the

conclusion that the !alancing process, which finds application in constitutional law ad7udication,

equall requires that when two provisions in the Constitution ma!e relevant to a certain factual

situation, it calls for the affirmance of the decision of respondent >udge allowing the registration#

1!R! ,o! L6#7$ 3a/ 8#- #$97

+HE COLLEC+OR O* I,+ER,AL REE,UE-petitioner,vs#

+HE CLU) *ILI(I,O- I,C! DE CE)U-respondent#

!3C0S"

0his is a petition to review the decision of the Court of 0a$ Appeals, reversing the decision of the Collector of nternal

/evenue, assessing against and demanding from the BClu! 5ilipino, nc# de Ce!uB, the sum of P%8,;'#'? as fi$ed

and percentage ta$es, surcharge and compromise penalt, allegedl due from it as a keeper of !ar and restaurant#

As found ! the Court of 0a$ Appeals, the BClu! 5ilipino, nc# de Ce!u,B (Clu!, for short), is a civic corporation

organized under the laws of the Philippines with an original authorized capital stock of P88,;;;#;;, which was

su!sequentl increased to P8;;,;;;#;;, among others, to it Bproporcionar, operar, mantener un campo de golf,

tenis, gimnesio (gmnasiums), 7uego de !olos (!owling alles), mesas de !illar pool, toda clase de 7uegos no

prohi!idos por lees generales ordenanzas generales desarollar cultivar deportes de toda clase

denominacion cualquiera para el recreo entrenamiento saluda!le de sus miem!ros accionistasB (sec# 8, -scritura

de ncorporacion del Clu! 5ilipino, nc# -$h# A)# 4either in the articles or !6laws is there a provision relative to

dividends and their distri!ution, although it is covenanted that upon its dissolution, the Clu!Es remaining assets, after

paing de!ts, shall !e donated to a charita!le Philippine nstitution in Ce!u (Art# 81, -statutos del Clu!, -$h# A6a#)#

0he Clu! owns and operates a clu! house, a !owling alle, a golf course (on a lot leased from the government), and

a !ar6restaurant where it sells wines and liquors, soft drinks, meals and short orders to its mem!ers and their guests#

0he %ar!restaurantwas a necessar incident to the operation of the clu! and its golf6course# 0he clu! is operated

mainl with funds derived from mem!ership fees and dues# Whatever profits it had, were used to defra its overhead

e$penses and to improve its golf6course# n %&:%# as a result of a capital surplus, arising from the re6valuation of its

real properties, the value or price of which increased, the Clu! declared stock dividends !ut no actual cash dividends

were distri!uted to the stockholders# n %&:8, a / agent discovered that the Clu! has never paid percentage ta$ on

the gross receipts of its !ar and restaurant, although it secured 6?, 6&(a) and 61 licenses#

0he Clu! wrote the Collector, requesting for the cancellation of the assessment# 0he request having !een denied, the

Clu! filed the instant petition for review#

#SS2-S

%# Whether the respondent Clu! is lia!le for the pament of the sum of %8,;'#'?, as fi$ed and percentageta$es and surcharges prescri!ed in sections %'8, %'2 and %&% of the 0a$ Code, under which theassessment was made, in connection with the operation of its !ar and restaurant, during the periodsmentioned a!ove

8# Whether it is lia!le for the pament of the sum of P:;;#;; as compromise penalt#2# W.4, Clu! 5ilipino is a stock corporation


18/21

RULI,1

%# 4o# Section #7-of the 0a$ Code states, BFnless otherwise provided, ever person engaging in a !usiness on whichthe percentage ta$ is imposed shall pa in full a fi$ed annual ta$ of ten pesos for each calendar ear or fractionthereof in which such person shall engage in said !usiness#B Section #8provides in general that Bthe percentageta$es on !usiness shall !e paa!le at the end of each calendar quarter in the amount lawfull due on the !usinesstransacted during each quarter etc#B And section #$#-same 0a$ Code, provides BPercentage ta$ # # # eepers ofrestaurants, refreshment parlors and other eating places shall pa a ta$ three per "entu#, and keepers of !ar andcafes where wines or liquors are served fiveper "entu#of their gross receipts # # #B#

It has .een held that the lia.ilit/ for fi5ed and percentage ta5es- as provided ./ these sections- doesnot ipso facto attach ./ mere reason of the operation of a .ar and resta2rant! *or the lia.ilit/ to attach- theoperator thereof m2st .e engaged in the .2siness as a .ar;eeper and resta2rate2r# 0he plain and ordinarmeaning of businessis restricted to activities or affairs where profit is the p2rpose or livelihood is the motive-and the term !usiness when used without qualification, should !e construed in its plain and ordinar meaning,

restricted to activitiesor proit or livelihood (0he Coll# of nt# /ev# v# "anila =odge 4o# 1% of the P.- H"anila -lks

Clu!I + Court of 0a$ Appeals, G#/# 4o# =6%%%1, >une 8&, %&:&

@aving found as a fact that the Clu! was organized to develop and cultivate sports of all class and denomination, for

the healthful recreation and entertainment of its stockholders and mem!ers that upon its dissolution, its remaining

assets, after paing de!ts, shall !e donated to a charita!le Philippine nstitution in Ce!u that it is operated mainl

with funds derived from mem!ership fees and dues that the Clu!Es !ar and restaurant catered onl to its mem!ers

and their guests that there was in fact no cash dividend distri!ution to its stockholders and that whatever was derived

on retail from its !ar and restaurant was used to defra its overall overhead e$penses and to improve its golf6course

(cost6plus6e$penses6!asis), it stands to reason that the Cl2. is not engaged in the .2siness of an operator of.ar and resta2rant "same a2thorities- cited a.ove)# t is conceded that the Clu! derived profit from the operation ofits !ar and restaurant, !ut such fact does not necessaril convert it into a profit6making enterprise# # 0hat a Clu!

makes some profit, does not make it a profit6making Clu!# As has !een remarked a clu! should alwas strive,

whenever possi!le, to have surplus (>esus *acred @eart College v# Collector of nt# /ev#, G#/# 4o# =6';1, "a 8?,

%&:? Collector of nt# /ev# v# *inco -ducational Corp#, G#/# 4o# =6&81, .ct# 82, %&:)#1(wph)1*+,t

8# 4o# @aving arrived at the conclusion that respondent Clu! is not engaged in the !usiness as an operator of a !arand restaurant, and therefore, not lia!le for fi$ed and percentage ta$es - it follows that it is not lia.le for an/penalt/- m2ch less of a compromise penalt/!

2# +he facts that the capital stoc; of the respondent Cl2. is divided into shares- does not detract from thefinding of the trial co2rt that it is not engaged in the .2siness of operator of .ar and resta2rant!


19/21

*acts:"anuel /#Jula -nterprises, nc#, a domestic corporation with the following as mem!ers ofits oard of Jirectors< "anuel /# Jula with %&,&; shares and designated as president, treasurer

and general manager Att# Dirgilio -# Jula with %; shares and designated as vice6president =inda

-# Jula with %; shares Celia Jula6"endoza with %; shares and Att# Plaridel C# >ose with %;

shares and designated as secretar, owned a propert covered ! 0C0 %1''; ? and known asJula Apartment consisting of % apartment units on a '& square meter lot, more or less, located at

*eventh *treet (now uendia -$tension) and 5## @arrison *treet, Pasa Cit# 0he corporation

through its president, "anuel Jula, o!tained various loans for the construction of its hotel pro7ect,

Jula Continental @otel (now 5rederick @otel)# t even had to !orrow mone from Dirgilio Jula to !e

a!le to continue the hotel pro7ect# As a result of said loan, Dirgilio Jula occupied one of the unit

apartments of the su!7ect propert since %&12 while at the same time managing the Jula Apartment

as his shareholdings in the corporation was su!sequentl increased ! his father#

.n 82 Jecem!er %&1, "anuel Jula ! virtue of oard /esolution %' of the corporation sold the

su!7ect propert to spouses "aria 0heresa and Castrense Deloso in the amount of P2;;,;;;#;; as

evidenced ! the Jeed of A!solute *ale# 0hereafter, 0C0 %1''; was cancelled and 0C0 8288: wasissued to "aria 0heresa Deloso# *u!sequentl, "anuel Jula and the spouses Deloso e$ecuted a

"emorandum to the Jeed of A!solute *ale of 82 Jecem!er %&1 dated & Jecem!er %&11 giving

"anuel Jula within 8 ears or until & Jecem!er %&1& to repurchase the su!7ect propert for

P8;;,;;;#;; which was, however, not annotated either in 0C0 %1''; or 0C0 8288:# .n 8?

Jecem!er %&1, "aria Deloso, without the knowledge of "anuel Jula, mortgaged the su!7ect

propert to "anuel A# 0orres for a loan of P8:;,;;;#;; which was dul annotated as -ntr '%2& in

0C0 8288:# Fpon the failure of "aria Deloso to pa 0orres, the su!7ect propert was sold on : April

%&1' to 0orres as the highest !idder in an e$tra7udicial foreclosure sale as evidenced ! the

Certificate of *heriffEs *ale issued on 8; April %&1'#

.n 8; >ul %&1', "aria Deloso e$ecuted a Jeed of A!solute Assignment of the /ight to /edeem in

favor of "anuel Jula assigning her right to repurchase the su!7ect propert from 0orres as a result

of the e$tra7udicial sale# As neither "aria Deloso nor her assignee "anuel Jula was a!le to redeem

the su!7ect propert within the one ear statutor period for redemption, 0orres filed an Affidavit of

Consolidation of .wnership %2 with the /egistr of Jeeds of Pasa Cit and 0C0 8?1&& was

su!sequentl issued to 0orres on 82 April %&1 .n % .cto!er %&1&, 0orres filed a petition for the

issuance of a writ of possession against spouses Deloso and "anuel Jula in =/C Case %1?86P#

@owever, when Dirgilio Jula appeared in court to intervene in said case alleging that "anuel Jula

was never authorized ! the corporation to sell or mortgage the su!7ect propert, the trial court

ordered 0orres to implead the corporation as an indispensa!le part !ut the latter moved for the

dismissal of his petition which was granted in an .rder dated ' April %&';# .n 8; >une %&';, 0orres

and -dgardo Pa!alan, real estate administrator of 0orres, filed an action against the corporation,Dirgilio Jula and 4epomuceno /edovan, a tenant of Jula Apartment Fnit 4o# '6A for the recover

of possession, sum of mone and damages with preliminar in7unction in Civil Case '%&'6P with the

then Court of 5irst nstance of /izal#

.n 8% >ul %&';, the corporation filed an action against spouses Deloso and 0orres for the

cancellation of the Certificate of *heriffEs *ale and 0C0 8?1&& in Civil Case '81'6P with the then


20/21

Court of 5irst nstance of /izal# .n 8& >anuar %&'%, Pa!alan and 0orres filed an action against

spouses 5lorentino and -lvira "analastas, a tenant of Jula Apartment Fnit 4o# 16, with the

corporation as intervenor for e7ectment in Civil Case 2'6'% with the "etropolitan 0rial Court of Pasa

Cit which rendered a decision on 8: April %&':, in favor of Pa!alan, et al#, ordering the spouses

"analastas and all persons claiming possession under them to vacate the premises and to pa the

rents in the sum of P:;;#;; a month from "a %&1& until the shall have vacated the premises with

interest at the legal rate and to pa attorneEs fees in the sum of P8,;;;#;; and P%,;;;#;; as othere$penses of litigation and for them to pa the costs of the suit#

0hereafter or on %1 "a %&':, the corporation and Dirgilio Jula filed an action against the presiding

7udge of the "etropolitan 0rial Court of Pasa Cit, Pa!alan and 0orres for the annulment of said

decision with the /egional 0rial Court of Pasa in Civil Case 8'';6P# 0hereafter, the 2 cases were

7ointl tried and the trial court rendered a decision in favor of Pa!alan and 0orres# 4ot satisfied with

said decision, the corporation, et al# appealed to the Court of Appeals which rendered a decision on

82 .cto!er %&'&, affirming the trial court decision# .n ' 4ovem!er %&'&, the corporation, et al# filed

a "otion for /econsideration which was denied on 8 >anuar %&&;# 0he corporation, et al# filed the

petition for review on certiorari# Juring the pendenc of the petition, 0orres died on 2 April %&&% asshown in his death certificate and named 0orres6Pa!alan /ealt + Jevelopment Corporation as his

heir in his holographic will dated 2% .cto!er %&'#

Iss2e:Whether the sale of the su!7ect propert !etween spouses Deloso and "anuel Jula has no!inding effect on the corporation as oard /esolution %' which authorized the sale of the su!7ect

propert was resolved without the approval of all the mem!ers of the !oard of directors and said

oard /esolution was prepared ! a person not designated ! the corporation to !e its secretar#

Held: *ection %;% of the Corporation Code of the Philippines provides that BWhen !oard meeting isunnecessar or improperl held# Fnless the !6laws provide otherwise, an action ! the directors ofa close corporation without a meeting shall nevertheless !e deemed valid if< (%) efore or after such

action is taken, written consent thereto is signed ! all the directors or (8) All the stockholders have

actual or implied knowledge of the action and make no prompt o!7ection thereto in writing or (2) 0he

directors are accustomed to take informal action with the e$press or implied acquiesce of all the

stockholders or (?) All the directors have e$press or implied knowledge of the action in question and

none of them makes prompt o!7ection thereto in writing# f a directorsE meeting is held without proper

call or notice, an action taken therein within the corporate powers is deemed ratified ! a director

who failed to attend, unless he promptl files his written o!7ection with the secretar of the

corporation after having knowledge thereof#B @erein, the corporation is classified as a close

corporation and consequentl a !oard resolution authorizing the sale or mortgage of the su!7ect

propert is not necessar to !ind the corporation for the action of its president# At an rate, a

corporate action taken at a !oard meeting without proper call or notice in a close corporation is

deemed ratified ! the a!sent director unless the latter promptl files his written o!7ection with the

secretar of the corporation after having knowledge of the meeting which, in this case, Dirgilio Jula

failed to do# 0he corporationEs claim that the sale of the su!7ect propert ! its president, "anuel

Jula, to spouses Deloso is null and void as the alleged oard /esolution %' was passed without

the knowledge and consent of the other mem!ers of the !oard of directors cannot !e sustained#

Dirgilio -# JulaEs protestations of complete innocence to the effect that he never participated nor

was even aware of an meeting or resolution authorizing the mortgage or sale of the su!7ect


21/21

premises is difficult to !elieve# .n the contrar, he is ver much priv to the transactions involved# 0o

!egin with, he is an incorporator and one of the !oard of directors designated at the time of the

organization of "anuel /# Jula -nterprises, nc# n ordinar parlance, the said entit is loosel

referred to as a Bfamil corporation#B 0he nomenclature, if imprecise, however, fairl reflects the

cohesiveness of a group and the parochial instincts of the individual mem!ers of such an

aggrupation of which "anuel /# Jula -nterprises, nc# is tpical< four6fifths of its incorporators !eing

close relatives namel, 2 children and their father whose name identifies their corporation# esides,the fact that Dirgilio Jula on 8? >une %&1: e$ecuted an affidavit that he was a signator witness to

the e$ecution of the post6dated Jeed of A!solute *ale of the su!7ect propert in favor of 0orres

indicates that he was aware of the transaction e$ecuted !etween his father and 0orres and had,

therefore, adequate knowledge a!out the sale of the su!7ect propert to 0orres# Consequentl, the

corporation is lia!le for the act of "anuel Jula and the sale of the su!7ect propert to 0orres !

"anuel Jula is valid and !inding#

Documents

Corporation Cases 2 Digest