National Coal Co. v. CIR Facts: The National Coal Co.

(NCC) was created by a special law and was enacted by virtue of Act 2705 in order to develop a coal industry. It was engaged in coal mining on reserved lands belonging to the government. The National Coal Co.(NCC) filed a case against the CIR for the recovery of sum of money it paid on protest as specific tax on 24,089 tons of coals claiming exemption to tax pursuant to Sec. 14 and 15 of Act 2719. Issue: Whether or not NCC is a private corporation? Held: Plaintiff is a private corporation. The mere fact that the government is a majority stockholder of the corporation does not make the corporation. Act 2705 as amended by Act 2822 makes it subject to all the provision of the corporation law. As a private corporation, it has no greater rights, powers or privileges than any other corporation which may be organized for the same purpose under the corporation law and certainly it was not the intention of the legislature to give preference or right or privilege over other legitimate private corporation in the mining of coal. NCC is required to pay taxes pursuant to Section 1496 of the Administrative Code. Moreover, Act 2719 is applicable only to lessee or owner of coal bearing lands which NCC is not.

PHILIPPINE SOCIETY v COA Facts: Petitioner was incorporated as a juridical entity over 100 years ago by virtue of Act No. 1285. The petitioner at the time it was created, was composed of animal aficionados and animal propagandists. At the time of the enactment of Act No. 1285, the original Corporation Law Act No. 1459, was not yet in existence. Act No. 1285 antedated both Corporation Law and the Constitution of SEC. When COA sought to conduct an audit survey. The petitioner protested on the ground that it was a private entity hence, not under the jurisdiction of COA. Issue: Whether petitioner qualifies as a government agency that may be subject to audit by COA. Ruliing: No. The fact that a certain juridical entity is impressed with public interest does not ipso facto make the entity a public corporation. The true criterion to determine whether a corporation is private or public is found in the totality of the relation of the corporation to the State.

DAVAO CITY WATER DISTRICT VS. CIVIL SERVICE COMMISSION FACTS: Petitioners are among the more than five hundred (500) water districts existing throughout the country formed pursuant to the provisions of Presidential Decree No. 198, as amended by Presidential Decrees Nos. 768 and 1479, otherwise known as the "Provincial Water Utilities Act of 1973." Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of his legislative power under Proclamation No. 1081. It authorized the different local legislative bodies to form and create their respective water districts through a resolution they will pass subject to the guidelines, rules and regulations therein laid down. The decree further created and formed the "Local Water Utilities Administration" (LWUA), a national agency attached to the National Economic and Development Authority (NEDA), and granted with regulatory power necessary to optimize public service from water utilities operations. ISSUE: WHETHER OR NOT THE LOCAL WATER DISTRICTS FORMED AND CREATED PURSUANT TO THE PROVISIONS OF P.D. 198, AS AMENDED, ARE GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS WITH ORIGINAL CHARTER FALLING UNDER THE CIVIL SERVICE LAW AND/OR COVERED BY THE VISITORIAL POWER OF THE COMMISSION ON AUDIT? RULING: After a fair consideration of the parties' arguments coupled with a careful study of the applicable laws as well as the constitutional provisions involved, We rule against the petitioners and reiterate Our ruling in Tanjay case declaring water districts government-owned or controlled corporations with original charter. Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to the different water districts created pursuant thereto. In all its essential terms, it is obvious that it pertains to a special purpose which is intended to meet a particular set of conditions and cirmcumstances. The fact that said decree generally

restricting the acquisition of public agricultural lands and other natural resources to "corporations or associations at least sixty per centum of the capital of which is owned by such citizens" (of the Philippines). but on the contrary. donated a parcel of residential land in Caloocan in favor of the unregistered religious organization "Ung Siu Si Temple". and that the purpose for making this false statement was to circumvent the constitutional mandate that no corporation shall be authorized to operate as a public utility in the Philippines unless 60 per cent of its capital stock is owned by Filipinos. since it is admitted that its members are of foreign nationality. UNG SIU SI TEMPLE FACTS:Jesus Dy. they were created pursuant to a special law and are governed primarily by its provision. of Chinese nationality. a corporation organized for the purpose of engaging in business as a common carrier. are similar to those which are actually contained in other corporate charters. and the spirit of the Constitution demands that in the absence of capital stock. By "government-owned or controlled corporation with original charter. as amended. a Filipino citizen. it is clear that what has been excluded from the coverage of the CSC are those corporations created pursuant to the Corporation Code. a Filipino citizen. is the very law which gives a water district juridical personality. the truth being that the owner of the portion of the capital stock subscribed to by Baylon and the money paid thereon were American citizen whose name did not appear in the article of incorporation.005 per cent of the subscribed capital stock of the corporation when in reality such was not the case. ISSUE: Whether or not the act of the Register of Deeds in refusing to register the donation of a parcel of land executed in favor of a religious organization whose founder. The donation was duly accepted by Yu Juan.applies to all water districts throughout the country does not change the fact that PD 198 is a special law. In other words. trustees and administrator are Chinese citizens is proper. had subscribed to and was the owner of 60. Significantly. The Constitution makes no exception in favor of religious associations. founder and deaconess of the Temple. acting in representation and in behalf of the latter and its trustees. hence this appeal. the controlling membership should be composed of Filipino citizens. this Court is of the opinion that said resolution cannot be considered as its charter. REGISTER OF DEEDS vs. PD 198. . Quasha is a lawyer representing Pacific Airways Corporation. The fact that the appellant religious organization has no capital stock does not suffice to escape the Constitutional inhibition. the same being intended only to implement the provisions of said decree. Baylon was merely their trustee. operating through three trustees all of Chinese nationality. The lower court found him guilty. as amended. Quasha Facts: William H. petitioners are not created under the said code. From the foregoing pronouncement. While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district. The conclusion is inescapable that the said decree is in truth and in fact the charter of the different water districts for it clearly defines the latter's primary purpose and its basic organizational set-up. Accordingly. HELD: The act of the Register of Deeds is proper. The purpose of the sixty per centum requirement is obviously to ensure that corporations or associations allowed to acquire agricultural land or to exploit natural resources shall be controlled by Filipinos. The Register of Deeds refused to record such donation." We mean government owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines. People v. Quasha was charged with the crime of falsification of a public and commercial document for having been entrusted with the preparation and registration of the article of incorporation which he caused to appear in said article of incorporation that one Arsenio Baylon. Neither is there any such saving found in sections 1 and 2 of Article XIII. this Court's resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby abandoned. The provisions of PD 198.

The moment for determining whether a corporation is entitled to operate as a public utility is when it applies for a franchise. 1947. which placed Americans on the same footing as Filipino citizens with respect to the right to operate public utilities in the Philippines. It rejected the theory that nationality of private corporation is determine by the character or citizenship of its controlling stockholders. 1941. For a corporation to be entitled to operate a public utility it is not necessary that it be organized with 60 per cent of its capital owned by Filipinos from the start. therefore. FILIPINAS COMPAÑIA DE SEGUROS vs. provides that "anyone except a public enemy may be insured. covering merchandise contained in a building located at Roman Street.. the respondent Corporation (though organized under and by virtue of the laws of the Philippines) being controlled by the German subjects and the petitioner being a company under American jurisdiction when said policy was issued on Oct. the total loss suffered by the respondent was fixed at P92. HUENEFELD & CO. 1.650.) in Sec.000. Defendant was. PETITIONERS CONTENTION. Christern Huenefeld. the Revised Administrative Code if it is a common carrier by water.33. During the Japanese military occupation. CHRISTERN.650. certificate. CFI of Manila dismissed the action without pronouncement as to costs.650. the said act has ceased to be an offense within the meaning of the law. but also with the requirements of the Civil Aviation Law if it is a common carrier by air. and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure. that should be returned by the petitioner for the unexpired term of the policy. In the absence of such obligation and of the allege wrongful intent. obtained from the petitioner. thus doing away with the prohibition in section 8. Philippine Executive Commission. Phil. Phil.." It stands to reason that an insurance policy ceases to be allowable as soon as an insured . 1941. that the insured merchandise were burned up after the policy issued in 1941 in favor of the respondent corporation has ceased to be effective because of the outbreak of the war between the United States and Germany on Dec. still with the approval of the Party Amendment to the Constitution in March. currency. ISSUE: W/N the fire policy became null and void upon the declaration of war between US and Germany (Dec. so that defendant can no longer be held criminally liable therefor. 11. In pursuance of the order of the Director of Bureau of Financing. Inc. 8. de Seguros. INC. however. currency. Binondo Manila. beginning Dec. after deducting their value. relying on English and American cases which held that a corporation is a citizen of the country or state by and under the laws of which it was created or organized. The petitioner refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared war against Germany. the building and insured merchandise were burned. CA affirmed the judgment of the lower court with costs. LESS the amount of the premium.Issue: Whether or not the accused can be charged with having wrongfully intended to circumvent that fundamental law by not revealing in the articles of incorporation that Baylon was a mere trustee of his American co-incorporation and that for that reason the subscribed capital stock of the corporation was wholly American? Held: The court reversed the decision of the lower court. The salvage goods were sold at public auction and. 1941). & Co. A corporation formed with capital that is entirely alien may subsequently change the nationality of its capital through transfer of shares to Filipino citizens. And at that moment. FACTS: On Oct. The present action was filed in the CFI of Manila for the purpose of recovering from the respondent the sum of P92. 1. The court stated that such revelation was not essential. . HELD: SC reversed CA's decision and respondent corporation is ordered to pay to the petitioner hte sum of P77. and the Corporation Law does not require it. Article XIV of the Constitution in so far as American citizens are concerned. It overruled petitioner's contention that the respondent corporation became an enemy when the United States declared war against Germany. defendant cannot be legally convicted of the crime with which he is charged. the corporation must show that it has complied not only with the requirement of the Constitution as to the nationality of its capital. In due time the respondent submitted to the petitioner its claim under the policy. And that can be done after the corporation has already come into being and not while it is still being formed. 1941. after payment of corresponding premium. or any other form of authorization for that purpose. 10. a corporation originally formed with Filipino capital may subsequently change the national status of said capital through transfer of shares to foreigners. 2427. Filipinas Cia. under no obligation to make it. as amended. fire policy in the sum of P1000. are also of the opinion that. conversely. petitioner paid respondent the sum of P92. The Philippine Insurance Law (Act No. and the Public Service Law if it is a common carrier by land or other kind of public service. even supposing that the act imputed to the defendant constituted falsification at the time it was perpetrated. The majority of the court. the respondent corporation. 10.208. 1941.

The respondents averred that a corporation actually exercising all rights of ownership over the properties. should be made by means of crossed check. Both the Corporation Law and the Canon Law are explicit in their provisions that a corporation sole or ordinary is not the owner of the properties that he may acquire but merely the administrator thereof and holds the same in trust for the church to which the corporation is an organized and constituents part. or for some other specified term it is plain that when the parties become alien enemies. vs Land Reg. 8451 Facts: Meteo L.R. The payment of said claim. Being mere administrator the constitutional provision of 60% Filipino ownership is not applicable. should be returned by the petitioner. 1941. the constitutional requirement is fully met and satisfied. The Register of Deeds of the City of Davao is ordered to register the deed of sale in favor of the petitioner. elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from Dec. G. The petitioner contends that a corporation sole irrespective of the citizenship of its incumbent.. if this constitutional provision were not intended for corporation sole.] Roman Catholic Adm. However. by the petitioner (a Philippine corporation) had ceased to be valid and enforcible. it is obvious that this could not be regulated or restricted by said provision. 1941. HOWEVER. the respondent was not entitled to any indemnity under said policy from the petitioner. lost. 11. you are hereby ordered to pay the claim of Messrs. In determining whether the constitutional provision requiring 60% Filipino capital is applicable in Corporation sole. . 10. the contractual tie is broken and the contractual rights of the parties. 1943. 159 of the Corporation Law. 1943 copy of which was sent to your office and the concurrence therein of the Financial Department of the Japanese Military Administration. however. a corporation sole organized in accordance with Philippine laws.becomes a public enemy. as may be seen from the following: "In view of the findings and conclusion of this office contained in its decision on Administrative Case dated February 9. Inc. Inc. [Factually. Com. Christern. Thus. Issue: Whether or not the petitioner is qualified to acquire agricultural lands in the Phlippines? Held: The Roman Catholic Apostolic Church has no nationality and that the framers of the Constitution did not have in mind the religious corporation sole when they provided that 60% of the capital thereof be owned by Filipino citizens. in accordance with the rate fixed in the Ballantyne scale. is not prohibited or disqualified to acquired and hold real properties. and since the insured goods were burned after Dec. in actual Philippines currency of P92. in ordering the petitioner to pay the claim of the respondent. The respondent having become an enemy corporation on Dec. The land Registration Commissioner and the Registration of Deeds of Davao deny the registration in the absence of proof that at least 60% of its capital is owned by Filipino citizens in view of Sec. 1941. the insurance policy issued in its favor on Oct. there can be no doubt that the Director of the Bureau of Financing. with Msgr. the nationality of the constituents of the diocese and not the nationality of the actual incumbent of the parish must be taken into consideration." It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on this case. and during the war. In the case of an ordinary fire policy. merely obeyed the instruction of the Japanese Military Administration. The Corporation Law and the Canon Law are explicit in their provisions that a corporation sole or ordinary is not the owner of the properties but merely the administrator thereof.650 paid on April 19. 10. 1 and 5 of Art. Clovis Thibault a Canadian national as actual incumbent. XIII of the Constitution and Sec. Huenefeld & Co. 1941. 1. Rodis executed a deed of sale of a parcel of land in favor of Roma Catholic Administrator of Davao. Of Davao. so far as not vested. considering that the corporation sole in question is composed of an overwhelming majority of Filipinos. which grants insurance only from year. and following the instruction of said authority. Inc. the petitioner will be entitled to recover only the equivalent. Even if the question of nationality is considered.

1957. under the Land Register Act. Ung Siu Si Temple.—Judicial confirmation of imperfect or incomplete titles. Article XIV of the Constitution that "no private corporation or association may hold alienable lands of the public domain except by lease not to exceed one thousand hectares in area". 1942. and notorious possession and occupation of agricultural lands of the public domain. 97 Phil. to wit: xxx xxx xxx (b) Those who by themselves or through their predecessors-in-interest have been in open. Land Registration Commission. which provides: Chapter VIII. E). exclusive and notorious possession of the land since June 12. in the name of the Iglesia Ni Cristo. 49 of the Public Land Law). opposed the application on the grounds that applicant. located at Barrio Dampol. as a private corporation. The said lots were already possessed by Perez in 1933. On September 13. 58 and sec. 1953 from Andres Perez in exchange for a lot with an area of 247 square meters owned by the said church (Exh. A corporation sole (an "unhappy freak of English law") has no nationality (Roman Catholic Apostolic Adm. a corporation sole can acquire private land? Held: After hearing. of Davao. Quezon City. vs. 596. but whose titles have not been perfected or completed. as described in Plan Ap-04-001344 (Exh. continuous. They are not included in any military reservation. Manalo. approved on June 22. duly existing under Philippine laws." (As amended by Republic Act No. The land had been declared for realty tax purposes. represented by Executive Minister Eraño G. 102 Phil. Plaridel. N). for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. with office at the corner of Central and Don Mariano Marcos Avenues. exclusive. The following-described citizens of the Philippines. xxx xxx xxx SEC.“Republic Vs Villanueva” Facts: This case involves the prohibition in section 11. occupying lands of the public domain or claiming to own any such lands or an interest therein. As correctly contended by the Solicitor General. They are inside an area which was certified as alienable or disposable by the Bureau of Forestry in 1927. 1945. the Iglesia Ni Cristo. The lots are planted to santol and mango trees and banana plants. that the land applied for is public land not susceptible of private appropriation and that the applicant and its predecessors-in-interest have not been in the open. See Register of Deeds vs. filed with the Court of First Instance of Bulacan an application for the registration of the two lots. through the Direct/r of Lands.350 were acquired by the Iglesia Ni Cristo on January 9. Issue: Whether or not Iglesia Ni Cristo. a corporation sole. Inc. It alleged that it and its predecessors-in-interest had possessed the land for more than thirty years. a corporation sole. 1977. as a corporation sole or a juridical person. the trial court ordered the registration of the two lots. like the two lots in question. Lots Nos. the Iglesia Ni Cristo. The appeal should be sustained. . is disqualified to acquire or hold alienable lands of the public domain. under a bona fide claim of acquisition of ownership. continuous. 48. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter. D). From that decision. because of the constitutional prohibition already mentioned and because the said church is not entitled to avail itself of the benefits of section 48(b) which applies only to Filipino citizens or natural persons. Bulacan. with an area of 313 square meters and an assessed value of P1.) The Republic of the Philippines. the Republic of the Philippines appealed to this Court under Republic Act No. Realty taxes had been paid therefor (Exh. may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefore. A chapel exists on the said land. 568 and 569. It invoked section 48(b) of the Public Land Law. 5440. is disqualified to hold alienable lands of the public domain.

Maria Veloso. vs. with the corporation as intervenor for ejectment Metropolitan Trial Court of Pasay City which rendered a decision in favor of . a bowling alley. a tenant of Dulay Apartment for the recovery of possession. much less of a compromise penalty. arising from the re-valuation of its real properties. Dulay designated as president. Torres and Edgardo Pabalan. a golf course (on a lot leased from the government). Manuel Dulay by virtue of Board Resolution 18 of the corporation sold the subject property to spouses Maria Theresa and Castrense Veloso. de Cebu. a domestic corporation with the following as members of its Board of Directors: Manuel R. filed an action against the corporation. therefore. two requisites must be complied with. 1459).Collector of Internal Revenue vs. treasurer and general manager. the value or price of which increased. Manuel Dulay. a BIR agent discovered that the Club has never paid percentage tax on the gross receipts of its bar and restaurant. it follows that it is not liable for any penalty. a tenant of Dulay Apartment. not annotated. the "Club Filipino. meals and short orders to its members and their guests. and a bar-restaurant where it sells wines and liquors. although it secured B-4. the Club declared stock dividends. 1852. giving Manuel Dulay within 2 years to repurchase the subject property which was. however. as a result of a capital surplus. The bar-restaurant was a necessary incident to the operation of the club and its golf-course. Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem in favor of Manuel Dulay assigning her right to repurchase the subject property from Torres as a result of the extrajudicial sale. Inc. The corporation through its president. Issue: Whether or not the Club is a stock-corporation? If so. The corporation filed an action against spouses Veloso and Torres for the cancellation of the Certificate of Sheriff's Sale. Upon the failure of Maria Veloso to pay Torres. DULAY ENTERPRISES. In a letter dated December 22. The bar and restaurant are necessary adjuncts of the Club to foster its purposes and the profits derived therefrom are necessarily incidental to the primary object of developing and cultivating sports for the healthful recreation and entertainment of the stockholders and members. Act No. the Collector of Internal Revenue assessed against and demanded from the Club. Inc. The club is operated mainly with funds derived from membership fees and dues. Subsequently. B-9(a) and B-7 licenses. Pasay City. it cannot. Celia Dulay-Mendoza and Atty.B. INC. As a result of said loan.000. mortgaged the subject property to Manuel A. without the knowledge of Manuel Dulay. Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas. not liable for fixed and percentage taxes. Linda E. real estate administrator of Torres. Virgilio E. to wit: (1) a capital stock divided into shares and (2) an authority to distribute to the holders of such shares. dividends or allotments of the surplus profits on the basis of the shares held (sec.000. and therefore. Manuel Dulay and the spouses Veloso executed a Memorandum to the Deed of Absolute Sale.00. COURT OF APPEALS FACTS: Dulay Enterprises. the subject property was sold to Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of Sheriff's Sale. for short). Virgilio Dulay and Nepomuceno Redovan. within the contemplation of the corporation law. Torres filed a petition for the issuance of a writ of possession against spouses Veloso and Manuel Dulay in LRC. but no actual cash dividends were distributed to the stockholders. is a civic corporation organized under the laws of the Philippines with an original authorized capital stock of P22. Dulay. Virgilio Dulay occupied one of the unit apartments of the subject property since 1973 while at the same time managing the Dulay Apartment as his shareholdings in the corporation was subsequently increased by his father. nowhere in its articles of incorporation or by-laws could be found an authority for the distribution of its dividends or surplus profits. obtained various loans for the construction of its hotel project. In 1951. be considered a stock corporation. As neither Maria Veloso nor her assignee Manuel Dulay was able to redeem the subject property within the one year statutory period for redemption. soft drinks. Dulay designated as vicepresident. Strictly speaking. Torres filed an Affidavit of Consolidation of Ownership with the Registry of Deeds of Pasay City.00. In the case at bar. Club Filipino Inc. 3. However. which was subsequently increased to P200. In 1952. De Cebu Facts: As found by the Court of Tax Appeals. sum of money and damages with preliminary injunction. when Virgilio Dulay appeared in court to intervene in said case alleging that Manuel Dulay was never authorized by the corporation to sell or mortgage the subject property.. The Club owns and operates a club house. Atty. the trial court ordered Torres to implead the corporation as an indispensable party but the latter moved for the dismissal of his petition which was granted. can it be subject to tax? Held: For a stock corporation to exist. owned a property known as Dulay Apartment located at Seventh Street (now Buendia Extension) and F. It even had to borrow money from Virgilio Dulay to be able to continue the hotel project. Jose designated as secretary. Torres. Dulay Continental Hotel (now Frederick Hotel)." (Club. Plaridel C. Harrison Street. Having arrived at the conclusion that respondent Club is not engaged in the business as an operator of a bar and restaurant.

Inc. Alfredo Yulo as such receiver with a bond of P50. If a directors' meeting is held without proper call or notice. The corporation. fairly reflects the cohesiveness of a group and the parochial instincts of the individual members of such an aggrupation of which Manuel R. Dulay Enterprises. Thereafter. the corporation and Virgilio Dulay filed an action against the presiding judge of the Metropolitan Trial Court of Pasay City. Dulay Enterprises. he is an incorporator and one of the board of directors designated at the time of the organization of Manuel R. Amado Araneta. HELD: Section 101 of the Corporation Code of the Philippines provides that "When board meeting is unnecessary or improperly held. the fact that Virgilio Dulay on 24 June 1975 executed an affidavit that he was a signatory witness to the execution of the post-dated Deed of Absolute Sale of the subject property in favor of Torres indicates that he was aware of the transaction executed between his father and Torres and had. Torres died and named Torres-Pabalan Realty & Development Corporation as his heir in his holographic will. FINANCING CORPORATION OF THE PHILIPPINES VS. adequate knowledge about the sale of the subject property to Torres. the defendants in said case. if imprecise. or (3) The directors are accustomed to take informal action with the express or implied acquiesce of all the stockholders. et al. filed the petition for review on certiorari. written consent thereto is signed by all the directors.. in this case.000." The nomenclature. a corporate action taken at a board meeting without proper call or notice in a close corporation is deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the corporation after having knowledge of the meeting which. and asking that the corporation be dissolved. the trial court presided by respondent Judge Jose Teodoro. During the pendency of the petition. Over the strong objection of the defendants. and to pay attorney's fees as other expenses of litigation and for them to pay the costs of the suit. the 3 cases were jointly tried and the trial court rendered a decision in favor of Pabalan and Torres. Pabalan and Torres for the annulment of said decision with the Regional Trial Court of Pasay. have filed the present petition for certiorari with preliminary injunction to revoke and set aside the order. TEODORO FACTS: The minority stockholders of the Financing Corporation of the Philippines. Virgilio Dulay failed to do. Besides. 3 children and their father whose name identifies their corporation. Amado Araneta. et al. its president and general manager. Manuel Dulay. ISSUE: Whether the sale of the subject property between spouses Veloso and Manuel Dulay has no binding effect on the corporation as Board Resolution 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary. Unless the by-laws provide otherwise. unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof. The corporation's claim that the sale of the subject property by its president. is typical: four-fifths of its incorporators being close relatives namely. the corporation is liable for the act of Manuel Dulay and the sale of the subject property to Torres by Manuel Dulay is valid and binding. or (4) All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing. granted the petition for the appointment of a receiver and designated Mr. Inc. Financing Corporation of the Philippines and J. Amado Araneta. and that he be required to account for said assets. that J. Virgilio E. the said entity is loosely referred to as a "family corporation.Pabalan. and that pending trial and disposition of the case on its merits a receiver be appointed to take possession of the books. In ordinary parlance. an action taken therein within the corporate powers is deemed ratified by a director who failed to attend. to spouses Veloso is null and void as the alleged Board Resolution 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained. Thereafter. however. Failing to secure a reconsideration of the order appointing a receiver." Herein. as petitioners. and to pay the rents until they shall have vacated the premises with interest at the legal rate. ordering the spouses Manalastas and all persons claiming possession under them to vacate the premises. or (2) All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing. claiming among other things alleged gross mismanagement and fraudulent conduct of the corporate affairs of the defendant corporation by J. he is very much privy to the transactions involved. Consequently. records and assets of the defendant corporation preparatory to its dissolution and liquidation and distribution of the assets. the corporation is classified as a close corporation and consequently a board resolution authorizing the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president. filed a complaint against the said corporation and J. any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if: (1) Before or after such action is taken. To begin with. Dulay's protestations of complete innocence to the effect that he never participated nor was even aware of any meeting or resolution authorizing the mortgage or sale of the subject premises is difficult to believe. ISSUE/S: . On the contrary. At any rate. Amado Araneta be declared personally accountable for the amounts of the unauthorized and fraudulent disbursements and disposition of assets made by him. therefore.

We repeat that although as a rule. vs. et al. Santos (64 Phil. especially when said minority stockholders are unable to obtain redress and protection of their rights within the corporation itself. No. minority stockholders of a corporation may not ask for its dissolution in a private suit. Gaz. 12 Supp. any of the acts or omissions warranting quo warranto proceedings. The trial court's decision is of course subject to review by the appellate tribunal. The transaction in reality was between Tabora as owner of the parcels of land and the same Manuel Tabora and others as mere promoters of the corporation. A third mortgage was then also executed in favor of Severina Buzon. It was therein further held that although there might be some room for argument on the right of minority stockholders to ask for dissolution. 697). Ruling: . as such.. at their instance and request. L-2598 (47 Off. have no right or personality to maintain the action for dissolution? RULING: True it is that the general rule is that the minority stockholders of a corporation cannot sue and demand its dissolution. The first and second mortgages over the parcels of land were in favor of Philippine National Bank. this. as when the State is not interested because the complaint is strictly a matter between the stockholders and does not involve. and a deed of mortgage over the parcels of land to secure the payment of the promissory note. Issue: Is the transaction between Tabora and the company transferring the parcels of land in favor of the company valid? The Court held in the negative. depending upon the facts and circumstances attending it. the appointment of a receiver pendente lite is left to the sound discretion of the trial court. This sale was subject to the mortgages and to the condition that the title to the land shall not be transferred in the name of the company unless Tabora’s obligations be fully and completely satisfied. there might be exceptional cases wherein the intervention of the State. As was said in the case of Angeles vs. These promoters could not have acted as agents for a projected corporation since that which had no legal existence could have no agent. He executed three mortgages to secure three different loans.-that question does not affect the court's jurisdiction over the case. WHETHER OR NOT the appointment of a receiver made by the respondent judge has no basis? WHETHER OR NOT the suit for the dissolution of a corporation can be brought and maintained only by the State through its legal counsel. and that the remedy by the party dissatisfied was to appeal from the decision of the trial court. that he also had jurisdiction to appoint a receiver pendente lite.1.R. Defendant failed to pay the sum of the promissory note and so plaintiff then brought this sought for the sum plus interest in the Court of First Instance of Manila. for one reason or another. that although the appointment of a receiver upon application of the minority stockholders is a power to be exercised with great caution. and considering the allegations made in connection with the petition for the appointment of a receiver. The petition for certiorari is hereby denied. 200) that even the existence of a de jure corporation may be terminated in a private suit for its dissolution by the stockholders without the intervention of the State. it possessed no juridical capacity to enter into contracts. Having such jurisdiction. Judge Piccio. who ruled in favor of the defendant. the company sold the parcels of land to defendant-appellee Teodoro Sandiko. No. When such action or private suit is brought by them. the trial court had jurisdiction and may or may not grant the prayer. This was what probably prompted this Court to state in the case of Hall. it was within the power of said court upon proper showing to appoint a receiver pendente lite for the corporation. a promissory note drawn by defendant in favor of plaintiff. Sandiko Facts: Manuel Tabora is the registered owner of four parcels of land. the action having been properly brought and the trial court having entertained the same. in the opinion of the legal officer of the Government. Three documents were executed: a deed of sale over the parcels of land in favor of the defendant. and that respondents. Cagayan Fishing Development Co. there are cases that hold that even minority stockholders may ask for dissolution. The transfer was made by Tabora in favor of the company was made before the company was incorporated. must not and should not be left without redress and remedy. under the theory that such minority members. A year after it was incorporated. which was then still in the process of incorporation.. nevertheless. cannot be obtained. if unable to obtain redress and protection of their rights within the corporation.* G. much less the minority stockholders of said corporation. he neither exceeded his jurisdiction nor abused his discretion in appointing a receiver. p. and that such action should be brought by the Government through its legal officer in a quo warranto case. it should be exercised necessary in order not to entirely ignore and disregard the rights of said minority stockholders. He then subsequently sold the parcels of land to plaintiff company. with costs. in which minority stockholders are entitled to have such dissolution. In conclusion. we hold that the trial court through respondent Judge Teodoro had jurisdiction and properly entertained the original case. It was not yet in legal existence then. 2. The writ of preliminary injunction heretofore issued is hereby ordered dissolved. However. vs.

The motion to dismiss was denied by the Commission on the premise that applicant Morong Electric was a de facto corporation. The defendant always regarded Tabora as the owner of the parcels of land. and that applicant Morong Electric had no legal personality when it filed its application on September 10. ISSUE: Whether or not the issuance of certificate of public convenience and necessity in favor of Morong Electric is valid. Fermin Caram and Rosa Caram. These circumstances. Rizal. the Commission approved the application of Morong Electric and ordered the issuance in its favor of the corresponding certificate of public convenience and necessity. Petitioner's contention that Morong Electric did not yet have a legal personality on May 6. Petitioner moved to dismiss the application of Morong Electric mainly on the ground that it is a holder of a certificate of public convenience to operate an electric light. vs. CARAM VS CA FACTS: During the organization of Filipinas Orient Airways. . defendants Barretto and Garcia requested private respondent Alberto Arellano to undertake a project study and the pre-organizational services that will be used for presentation to prospective investors. the Commission found that there was an absence of electric service in the municipality of Morong and that applicant Morong Electric. 1962 when its certificate of incorporation was issued by the SEC. light and power service in said municipality — approved by the Provincial Board of Rizal on August 31. MORONG FACTS:Morong Electric. Since the plaintiff company did not acquire the parcels of land. because its certificate of incorporation was issued by the Securities and Exchange Commission only on October 17. having been granted a municipal franchise on May 6. because later Morong Electric obtained its certificate of incorporation and then accepted the franchise in accordance with the terms and conditions thereof. In this case. heat and power service in the same municipality of Morong. 1962 by respondent municipality to install. The promissory note was ade payable to the plaintiff so that it may not be attached by its creditors. it follows that it did not possess any right to dispose the same in favor of defendant Sandiko. has the financial capacity to maintain said service. the case was heard on the merits and both parties presented their respective evidence. 1962 when a municipal franchise was granted to it is correct. Consequently.. Thus. who then had obtained writs of attachment to the four parcels of land. HELD: The issuance is valid. INC. Before that date. almost all of the capital stock of the company is owned by Tabora. a Filipino-owned corporation duly organized and existing under the laws of the Philippines. the Commission did not err in the issuance of certificate of public convenience and necessity in favor of Morong Electric.Under the peculiar facts of the case the Court did not extend the doctrine of ratification since it would result in the commission of fraud to the unwary. The juridical personality and legal existence of Morong Electric began only on October 17. operate and maintain an electric heat. the incorporators cannot be considered as de facto corporation. On the basis of the evidence adduced. 1962. considered together. But the fact that Morong Electric had no corporate existence on the day the franchise was granted in its name does not render the franchise invalid. or pending the issuance of said certificate of incorporation. 1962 — filed with the Commission an application for a certificate of public convenience and necessity for said service. The airline was eventually organized on the basis of the project study with petitioners as major stockholders and. The incorporation of Morong Electric on October 17. 1962 and its acceptance of the franchise as shown by its action in prosecuting the application filed with the Commission for the approval of said franchise. one of those investors were petitiners herein. not only perfected a contract between the respondent municipality and Morong Electric but also cured the deficiency pointed out by the petitioner in the application of Morong Electric. RIZAL LIGHT & ICE CO. 1962.

on the strength of the project study. However. in the absence as in the present case of acceptance by the College of the counter offer of Crisostomo. Inc. in view of the proposal of Crisostomo to pay the value of the subscription after she had harvested fish. hence. that had not ripened into an enforceable contract. 1948. Significantly. as principal officers. As a bona fide corporation. the Filipinas Orient Airways should alone be liable for its corporate acts as duly authorized by its officers and directors. as principal stockholders thereof.000. representing the value of the subscription to the capital stock of the Quezon College. Inc. in the letter actually sent by Damasa Crisostomo. facultative in nature. x x x” Damasa Crisostomo died on October 26. The petitioners were merely among the financiers whose interest was to be invited and who were in fact persuaded. the filing of this case. so to speak. presented a claim before the CFI of Bulacan in her estate proceeding. to invest in the proposed airline. On the other hand. Inc. to justify making the petitioners. Petitioners were not involved in the initial stages of the organization of the airline. issued an order dismissing the claim of Quezon College. ISSUE: Whether or not petitioners can be held personally liable for the expenses incurred in connection with the organization of Filipinas Orient Airways RULING: The Supreme Court held that petitioners Caram are not personally liable for the expenses incurred in the pre-organization of the corporation. or that if there was any acceptance the same came to her knowledge during her lifetime. Inc. This claim was opposed by the administrator of the estate. the need for express acceptance on the part of the College becomes the more imperative. Indeed. there was no showing that the Filipinas Orient Airways was a fictitious corporation and did not have a separate juridical personality. The relation between Crisostomo and the College had only thus reached the preliminary stage whereby the latter offered its stock for subscription on terms stated in the form letter. which were being directed by Barretto as the main promoter. Trillana vs. . It was he who was putting all the pieces together. for the collection of P20. Inc. Quezon College. the Quezon College. a condition obviously dependent upon her sole will and.a relation. and the court after hearing. (Subscription Contracts: Sections 60 and 72 of the Corporation Code) FACTS: Damasa Crisostomo sent the following letter to the board of Trustees of the Quezon College: “Gentlemen: “Please enter my subscription to dalawang daan (200) shares of your capital stock with a par value of P100 each. HELD: It appears that the application sent by Crisostomo to the College was written on a general form indicating that an applicant will enclose an amount as initial payment and will pay the balance in accordance with law and the rules or regulations of the College. As no payment appears to have been made on the subscription mentioned in the foregoing letter. responsible for its obligations.” There is nothing in the record to show that the Quezon College. therefore.-. Enclosed you will find (Babayaran kong lahat pagkatapos na ako ay makapaghuli ng isda) pesos as my initial payment and the balance payable in accordance with law and the rules and regulations of the Quezon College. and Damasa applied for subscription fixing her own plan of payment. the latter (who requested that her subscription for 200 shares be entered) not only did not enclose any initial payment but stated that “babayaran kong lahat pagkatapos na ako ay makapanghuli ng isda. accepted the term of payment suggested by Crisostomo. Filipinas Orient Airways was unable to pay the private respondent for the services rendered.together with Barretto and Garcia. rendering the obligation void under the Civil Code.

al paid the respondent corporation for shares of stock they agreed to take under certain specified terms and conditions. rescission can be done by agreement of the parties. in case he should refuse to make such payment. He also claimed that. Subsequently.At the hearing of the Court of First Instance. Inc. as assignee in insolvency of "The Philippine Chemical Product Company" (Ltd. Issue: Whether or not the agreement is a contract of subscription or of sale.500. The resolution further provided that. he cannot be compelled to pay because the board failed to make a call. Issue: Whether or not Poizat is liable upon his subscription? . The contract did not expressly provide that failure of the purchaser to pay any installment would give rise to forfeiture and cancellation without necessity of demand from the seller. Jean M. judgment was rendered in favor of the defendant. Infante. except the aforesaid 15 shares subscribed by himself and another 15 shares owned by Jose R. Poizat. The agreement provides that the shares shall be paid in installment. Petitioner defaulted in the payment and so the BOD of respondent corporation issued a resolution regarding forfeiture of subject shares/subscription.Bayla vs. the company in a proposition was to effect that Juan [Jean] M.agreement is entitled “Agreement for Installment Sale of Shares. Poizat (defendant) Facts: The plaintiff. Silang Traffic Co. The lower court absolved the corporation and declared them the owner of the shares of stock in question. Poizat questioned the resolution claiming that his decision not to pay was based on poor opinion which he entertain of the business and the faint hope of ever recovering any money invested. Contract of sale/purchase-is an independent agreement between the individual and the corporation to buy shares of stock from it at a stipulated price. The action was brought to recover the amount subscribed upon the remaining shares.contract was entered into before the incorporation and organization of the corporation. Further. Had it been the intention of the parties to provide for automatic forfeiture/cancellation. the provision regarding interest on deferred payments should not have been inserted. and for sometime acted as its treasurer and manager.) is seeking to recover of the defendant. 2. upon a subscription made by him to the corporate stock of said company. and the complaint was dismissed.Whileserving in this capacity he called in and collected all subscriptions to the capital stock of the company. an paid in upon his subscription the sum of P500. Note: Distinction between contract of sale and subscription. the sum of P1. failure to pay the same shall mean forfeiture of payment and shares shall revert to the seller. 1914. the par value of 5 shares . who was absent. Facts: Petitioners Bayla et. Contract of subscription-is the mutual agreement of the subscribers to take and pay for the stock of a corporation. Velasco(plaintiff) v. Defendant was a stockholder in the company from the inception of the enterprise. Since the contract in question is one of sale. Respondent Corporation was ordered to refund the petitioners of the amount they paid. From this action the plaintiff has appealed. petitioners filed an action to recover the amount they paid. Held: SC held that the agreement between the parties is a contract of sale because of the ff. should be required to pay the amount of his subscription upon the 15 shares for which he was still indebted to the company. The defendant subscribed for 20 shares of the stock of the company. Both parties filed an appeal. the management of the corporation should be authorized to undertake judicial proceedings against him.. CA reversed the said decision declaring that petitioners’ subscription is not cancelled/forfeited in favor of the corporation. Poizat. On July 13. reasons: 1.

When one enters into a subscription agreement. ISSUE: May PNB collect the balance on the subscription in spite of the conditions attached thereto which were not fulfilled? HELD: The Court held that it is a well-settled principle that with all the vast powers lodged in the President. which has indicated that the obligation for the payment of subscription by the defendants shall be governed by the Corporation Law. when one enters into a subscription agreement. The legislature was not able to appropriate the counterpart fund to be put up by the government. hence. and courts will enforce it for or against either. FACTS: President Roxas organized the Philippine Lumber Distributing Agency for the purpose of insuring the steady supply of lumber to enable the war sufferers to rehabilitate their devastated homes. It is indeed a species of the Law on Contracts.00 for every peso the members would invest. President Roxas instructed PNB to grant loan to the Philippine Distributing Agency. Bitulok Sawmill. even when the corporation becomes insolvent. The President promised and agreed to finance the agency by making the government invest P9. 1459) given recognition of two remedies for the enforcement of stock subscriptions.The defendant is liable for P1. that a subscription for shares of stock does not require an express promise to pay the amount subscribed. PNB vs. Inc. the obligation must be treated as due upon demand. The first and most special remedy given by the statute consists in permitting the corporation to put up the unpaid stock for sale and dispose of it for the account of the delinquent subscriber.The provisions of the Corporation Law (Act No. since it requires the subscriber to pay interest quarterly from that date unless he is relieved from such liability by the by-laws of the corporation. the amount of his subscription upon the unpaid shares. . Under section 36 of the Corporation Law he is also liable for interest at the lawful rate from the date of his subscription. and when the original model of making the call becomes impracticable. therefore. but the principles in Corporate Law prevail. no call or assessment is necessary before the institution of suits to collect unpaid balances on subscription. The other remedy is by action in court. and the right of the company to demand payment is no less incontestable. A stock subscription is a contract between the corporation on one side. as the law implies a promise to pay on the part of the subscriber. Roxas convinced the lumber producers to form a lumber cooperative and to pool their resources together. 1968 Fernando. the principles of Corporate Law become part and parcel of the contract. J.Held: The Court held him to be liable. Relying on the assurance. The subscriber is as much bound to pay the amount of the share subscribed by him as he would be to pay any other debt. This case gives the essence of a subscription contract.500. The obligation to pay then becomes a purely simple obligation. and the subscriber on the other. It is a rule. Section 36 of the Corporation Law clearly recognizes that a stock subscription is subsisting liability from the time the subscription is made. Bitulok and several others subscribed to the stocks of Philippine Distributing Agency. one cannot deny the obligation to pay. The President could not suspend the effectivity of the Corporation Law. It evidently cannot be permitted that a subscriber should escape from his lawful obligation by reason of the failure of the officers of the corporation to perform their duty in making a call. When the corporation becomes insolvent. One of the principles in Corporate law is that. the defendants remain liable to the balance of their subscription. It does not avoid the subscription agreement but avoids the condition. The loan was not paid as a consequence. unless relieved from this liability by the by-laws of the company. The power of suspending laws is lodged with the Legislature. When insolvency supervenes all unpaid subscriptions become at once due and enforceable. he is still devoid of the prerogative of suspending the operation of any statute or any of its terms. The lumber producers are therefore liable for the balance of their respective subscriptions. The cases therefore hold that any contradiction to modify the condition of the obligation to pay is essentially void. with proceedings instituted by creditors to wind up and distribute its assets. (Subscription Contracts: Release from Subscription Obligation) 23 SCRA 1366 June 29. accepted by the Supreme Court of the United States. PNB filed a suit on their subscriptions to the Philippine Distributing Agency.

Decision reversed and cases remanded to lower court for judgment. .