REGISTER OF DEEDS vs.

UNG SIU SI TEMPLE

G.R. No. L-6776
May 21, 1955
FACTS Jesus Dy, a Filipino citizen, donated a parcel
of residential land in Caloocan in favor of the
unregistered religious organization "Ung Siu
Si Temple", operating through three trustees
all of Chinese nationality. The donation as
duly accepted !y "u Juan, of Chinese
nationality, founder and deaconess of the
Temple, acting in representation and in
!ehalf of the latter and its trustees. The
#egister of Deeds refused to record such
donation.
ISSUE $hether or not the act of the #egister of
Deeds in refusing to register the donation of
a parcel of land e%ecuted in favor of a
religious organization hose founder,
trustees and administrator are Chinese
citizens is proper.
!ELD The act of the #egister of Deeds is proper.
The Constitution ma&es no e%ception in
favor of religious associations. 'either is
there any such saving found in sections (
and ) of *rticle +,,,, restricting the
ac-uisition of pu!lic agricultural lands and
other natural resources to "corporations or
associations at least si%ty per centum of the
capital of hich is oned !y such citizens"
.of the /hilippines0.
The fact that the appellant religious
organization has no capital stoc& does not
suffice to escape the Constitutional
inhi!ition, since it is admitted that its
mem!ers are of foreign nationality. The
purpose of the si%ty per centum re-uirement
is o!viously to ensure that corporations or
associations alloed to ac-uire agricultural
land or to e%ploit natural resources shall !e
controlled !y Filipinos1 and the spirit of the
Constitution demands that in the a!sence of
capital stoc&, the controlling mem!ership
should !e composed of Filipino citizens.
P"o#$" v. %&as'a
Facts2 $illiam 3. 4uasha is a layer representing
/acific *irays Corporation, a corporation organized
for the purpose of engaging in !usiness as a common
carrier. 4uasha as charged ith the crime of
falsification of a pu!lic and commercial document for
having !een entrusted ith the preparation and
registration of the article of incorporation hich he
caused to appear in said article of incorporation that
one *rsenio 5aylon, a Filipino citizen, had su!scri!ed
to and as the oner of 67.778 per cent of the
su!scri!ed capital stoc& of the corporation hen in
reality such as not the case, the truth !eing that the
oner of the portion of the capital stoc& su!scri!ed to
!y 5aylon and the money paid thereon ere
*merican citizen hose name did not appear in the
article of incorporation, and that the purpose for
ma&ing this false statement as to circumvent the
constitutional mandate that no corporation shall !e
authorized to operate as a pu!lic utility in the
/hilippines unless 67 per cent of its capital stoc& is
oned !y Filipinos. 5aylon as merely their trustee.
The loer court found him guilty, hence this appeal.
,ssue2 $hether or not the accused can !e charged
ith having rongfully intended to circumvent that
fundamental la !y not revealing in the articles of
incorporation that 5aylon as a mere trustee of his
*merican co9incorporation and that for that reason the
su!scri!ed capital stoc& of the corporation as holly
*merican:
3eld2 The court reversed the decision of the loer
court.
The court stated that such revelation as not
essential, and the Corporation ;a does not re-uire
it. Defendant as, therefore, under no o!ligation to
ma&e it. ,n the a!sence of such o!ligation and of the
allege rongful intent, defendant cannot !e legally
convicted of the crime ith hich he is charged.
For a corporation to !e entitled to operate a
pu!lic utility it is not necessary that it !e organized
ith 67 per cent of its capital oned !y Filipinos from
the start. * corporation formed ith capital that is
entirely alien may su!se-uently change the nationality
of its capital through transfer of shares to Filipino
citizens. conversely, a corporation originally formed
ith Filipino capital may su!se-uently change the
national status of said capital through transfer of
shares to foreigners.
The moment for determining hether a
corporation is entitled to operate as a pu!lic utility is
hen it applies for a franchise, certificate, or any other
form of authorization for that purpose. *nd that can !e
done after the corporation has already come into
!eing and not hile it is still !eing formed. *nd at that
moment, the corporation must sho that it has
complied not only ith the re-uirement of the
Constitution as to the nationality of its capital, !ut also
ith the re-uirements of the Civil *viation ;a if it is a
common carrier !y air, the #evised *dministrative
Code if it is a common carrier !y ater, and the /u!lic
Service ;a if it is a common carrier !y land or other
&ind of pu!lic service.
(
. The ma<ority of the court, hoever, are also
of the opinion that, even supposing that the act
imputed to the defendant constituted falsification at
the time it as perpetrated, still ith the approval of
the /arty *mendment to the Constitution in =arch,
(>?@, hich placed *mericans on the same footing as
Filipino citizens ith respect to the right to operate
pu!lic utilities in the /hilippines, thus doing aay ith
the prohi!ition in section A, *rticle +,B of the
Constitution in so far as *merican citizens are
concerned, the said act has ceased to !e an offense
ithin the meaning of the la, so that defendant can
no longer !e held criminally lia!le therefor.
FILIPINAS COMPA(IA DE SEGUROS vs.
C!RISTERN, !UENEFELD ) CO. INC.
F*CTS2
Cn Cct. (, (>?(, the respondent corporation,
Christern 3uenefeld, D Co., ,nc., after payment of
corresponding premium, o!tained from the petitioner,
Filipinas Cia. de Seguros, fire policy in the sum of
/(777,777, covering merchandise contained in a
!uilding located at #oman Street, 5inondo =anila.
During the Japanese military occupation, the
!uilding and insured merchandise ere !urned. ,n
due time the respondent su!mitted to the petitioner its
claim under the policy. The salvage goods ere sold
at pu!lic auction and, after deducting their value, the
total loss suffered !y the respondent as fi%ed at
/>),687. The petitioner refused to pay the claim on
the ground that the policy in favor of the respondent
had ceased to !e in force on the date the United
States declared ar against Eermany, the respondent
Corporation .though organized under and !y virtue of
the las of the /hilippines0 !eing controlled !y the
Eerman su!<ects and the petitioner !eing a company
under *merican <urisdiction hen said policy as
issued on Cct. (, (>?(.
,n pursuance of the order of the Director of
5ureau of Financing, /hilippine F%ecutive
Commission, petitioner paid respondent the sum of
/>),687.
The present action as filed in the CF, of
=anila for the purpose of recovering from the
respondent the sum of />),687.
/FT,T,C'F#S CC'TF'T,C', that the
insured merchandise ere !urned up after the policy
issued in (>?( in favor of the respondent corporation
has ceased to !e effective !ecause of the out!rea& of
the ar !eteen the United States and Eermany on
Dec. (7, (>?(, and that the payment made !y the
petitioner to the respondent corporation during the
Japanese military occupation as under pressure.
CF, of =anila dismissed the action ithout
pronouncement as to costs.
C* affirmed the <udgment of the loer court
ith costs. ,t overruled petitionerGs contention that the
respondent corporation !ecame an enemy hen the
United States declared ar against Eermany, relying
on Fnglish and *merican cases hich held that a
corporation is a citizen of the country or state !y and
under the las of hich it as created or organized. ,t
re<ected the theory that nationality of private
corporation is determine !y the character or
citizenship of its controlling stoc&holders.
,SSUF2
$H' the fire policy !ecame null and void
upon the declaration of ar !eteen US and
Eermany .Dec. (7, (>?(0.
3F;D2
SC reversed C*Gs decision and respondent
corporation is ordered to pay to the petitioner hte sum
of /@@,)7A.II, /hil. currency, ;FSS the amount of
the premium, /hil. currency, that should !e returned
!y the petitioner for the une%pired term of the policy,
!eginning Dec. ((, (>?(.
The /hilippine ,nsurance ;a .*ct 'o. )?)@,
as amended,0 in Sec. A, provides that "anyone e%cept
a pu!lic enemy may !e insured." ,t stands to reason
that an insurance policy ceases to !e alloa!le as
soon as an insured !ecomes a pu!lic enemy.
The respondent having !ecome an enemy
corporation on Dec. (7, (>?(, the insurance policy
issued in its favor on Cct. (, (>?(, !y the petitioner .a
/hilippine corporation0 had ceased to !e valid and
enforci!le, and since the insured goods ere !urned
after Dec. (7, (>?(, and during the ar, the
respondent as not entitled to any indemnity under
said policy from the petitioner. 3C$FBF#,
elementary rules of <ustice .in the a!sence of specific
provision in the ,nsurance ;a0 re-uire that the
premium paid !y the respondent for the period
covered !y its policy from Dec. ((, (>?(, should !e
returned !y the petitioner.
,n the case of an ordinary fire policy, hich
grants insurance only from year, or for some other
specified term it is plain that hen the parties !ecome
alien enemies, the contractual tie is !ro&en and the
contractual rights of the parties, so far as not vested.
lost.
JFactually, there can !e no dou!t that the
Director of the 5ureau of Financing, in ordering the
petitioner to pay the claim of the respondent, merely
o!eyed the instruction of the Japanese =ilitary
*dministration, as may !e seen from the folloing2 ",n
vie of the findings and conclusion of this office
contained in its decision on *dministrative Case dated
Fe!ruary >, (>?I copy of hich as sent to your
office and the concurrence therein of the Financial
Department of the Japanese =ilitary *dministration,
and following the instruction of said authority, you are
here!y ordered to pay the claim of =essrs. Christern,
3uenefeld D Co., ,nc. The payment of said claim,
hoever, should !e made !y means of crossed
chec&."
,t results that the petitioner is entitled to
recover hat paid to the respondent under the
)
circumstances on this case. 3oever, the petitioner
ill !e entitled to recover only the e-uivalent, in actual
/hilippines currency of />),687 paid on *pril (>,
(>?I, in accordance ith the rate fi%ed in the
5allantyne scale.K
Ro*a+ Ca,'o$-. A/*. O0 Davao, I+.. vs La+/ R"1.
Co*. G.R. 2351
Fa.,s
=eteo ;. #odis e%ecuted a deed of sale of a parcel of
land in favor of #oma Catholic *dministrator of
Davao, ,nc. a corporation sole organized in
accordance ith /hilippine las, ith =sgr. Clovis
Thi!ault a Canadian national as actual incum!ent.
The land #egistration Commissioner and the
#egistration of Deeds of Davao deny the registration
in the a!sence of proof that at least 67L of its capital
is oned !y Filipino citizens in vie of Sec. ( and 8 of
*rt. +,,, of the Constitution and Sec. (8> of the
Corporation ;a. The petitioner contends that a
corporation sole irrespective of the citizenship of its
incum!ent, is not prohi!ited or dis-ualified to ac-uired
and hold real properties. The Corporation ;a and
the Canon ;a are e%plicit in their provisions that a
corporation sole or ordinary is not the oner of the
properties !ut merely the administrator thereof. The
respondents averred that a corporation actually
e%ercising all rights of onership over the properties.
Iss&" $hether or not the petitioner is -ualified to
ac-uire agricultural lands in the /hlippines:
!"$/
The #oman Catholic *postolic Church has no
nationality and that the framers of the Constitution did
not have in mind the religious corporation sole hen
they provided that 67L of the capital thereof !e
oned !y Filipino citizens. Thus, if this constitutional
provision ere not intended for corporation sole, it is
o!vious that this could not !e regulated or restricted
!y said provision. ,n determining hether the
constitutional provision re-uiring 67L Filipino capital
is applica!le in Corporation sole, the nationality of the
constituents of the diocese and not the nationality of
the actual incum!ent of the parish must !e ta&en into
consideration. Fven if the -uestion of nationality is
considered, the constitutional re-uirement is fully met
and satisfied, considering that the corporation sole in
-uestion is composed of an overhelming ma<ority of
Filipinos.
5oth the Corporation ;a and the Canon ;a are
e%plicit in their provisions that a corporation sole or
ordinary is not the oner of the properties that he may
ac-uire !ut merely the administrator thereof and holds
the same in trust for the church to hich the
corporation is an organized and constituents part.
5eing mere administrator the constitutional provision
of 67L Filipino onership is not applica!le.
The #egister of Deeds of the City of Davao is ordered
to register the deed of sale in favor of the petitioner.
4R"#&5$-. 6s 6-$$a+&"va7 8&9-"$:
Facts2
This case involves the prohi!ition in section ((, *rticle
+,B of the Constitution that "no private corporation or
association may hold aliena!le lands of the pu!lic
domain e%cept !y lease not to e%ceed one thousand
hectares in area".
;ots 'os. 86A and 86>, located at 5arrio Dampol,
/laridel, 5ulacan, ith an area of I(I s-uare meters
and an assessed value of /(,I87 ere ac-uired !y
the ,glesia 'i Cristo on January >, (>8I from *ndres
/erez in e%change for a lot ith an area of )?@
s-uare meters oned !y the said church .F%h. D0.
The said lots ere already possessed !y /erez in
(>II. They are not included in any military
reservation. They are inside an area hich as
certified as aliena!le or disposa!le !y the 5ureau of
Forestry in (>)@. The lots are planted to santol and
mango trees and !anana plants. * chapel e%ists on
the said land. The land had !een declared for realty
ta% purposes. #ealty ta%es had !een paid therefor
.F%h. '0.
Cn Septem!er (I, (>@@, the ,glesia 'i Cristo, a
corporation sole, duly e%isting under /hilippine las,
filed ith the Court of First ,nstance of 5ulacan an
application for the registration of the to lots. ,t
alleged that it and its predecessors9in9interest had
possessed the land for more than thirty years. ,t
invo&ed section ?A.!0 of the /u!lic ;and ;a, hich
provides2
Chapter B,,,.MJudicial confirmation
of imperfect or incomplete titles.
%%% %%% %%%
SFC. ?A. The folloing9descri!ed
citizens of the Philippines,
I
occupying lands of the pu!lic
domain or claiming to on any such
lands or an interest therein, !ut
hose titles have not !een
perfected or completed, may apply
to the Court of First ,nstance of the
province here the land is located
for confirmation of their claims and
the issuance of a certificate of title
therefore, under the ;and #egister
*ct, to it2
%%% %%% %%%
.!0 Those ho !y themselves or
through their predecessors9in9
interest have !een in open,
continuous, e%clusive, and
notorious possession and
occupation of agricultural lands of
the pu!lic domain, under a bona
fide claim of ac-uisition of
onership, for at least thirty years
immediately preceding the filing of
the application for confirmation of
title e%cept hen prevented !y ar
or force ma<eure. These shall !e
conclusively presumed to have
performed all the conditions
essential to a Eovernment grant
and shall !e entitled to a certificate
of title under the provisions of this
chapter." .*s amended !y #epu!lic
*ct 'o. (>?), approved on June
)), (>8@.0
The #epu!lic of the /hilippines, through the DirectHr
of ;ands, opposed the application on the grounds that
applicant, as a private corporation, is dis-ualified to
hold aliena!le lands of the pu!lic domain, that the
land applied for is pu!lic land not suscepti!le of
private appropriation and that the applicant and its
predecessors9in9interest have not !een in the open,
continuous, e%clusive and notorious possession of the
land since June (), (>?8.
,ssue2 $hether or not ,glesia 'i Cristo, a corporation
sole can ac-uire private land:
3eld2 *fter hearing, the trial court ordered the
registration of the to lots, as descri!ed in /lan *p9
7?977(I?? .F%h. F0, in the name of the ,glesia 'i
Cristo, a corporation sole, represented !y F%ecutive
=inister FraNo E. =analo, ith office at the corner of
Central and Don =ariano =arcos *venues, 4uezon
City, From that decision, the #epu!lic of the
/hilippines appealed to this Court under #epu!lic *ct
'o. 8??7. The appeal should !e sustained.
*s correctly contended !y the Solicitor Eeneral, the
,glesia 'i Cristo, as a corporation sole or a <uridical
person, is dis-ualified to ac-uire or hold aliena!le
lands of the pu!lic domain, li&e the to lots in
-uestion, !ecause of the constitutional prohi!ition
already mentioned and !ecause the said church is not
entitled to avail itself of the !enefits of section ?A.!0
hich applies only to Filipino citizens or natural
persons. * corporation sole .an "unhappy frea& of
Fnglish la"0 has no nationality .#oman Catholic
*postolic *dm. of Davao, ,nc. vs. ;and #egistration
Commission, (7) /hil. 8>6. See #egister of Deeds
vs. Ung Siu Si Temple, >@ /hil. 8A and sec. ?> of the
/u!lic ;and ;a0.
Co$$".,o9 o0 I+,"9+a$ R"v"+&" vs. C$&5 F-$-#-+o I+..
D" C"5& 8&9-"$:
Facts2
*s found !y the Court of Ta% *ppeals, the
"Clu! Filipino, ,nc. de Ce!u," .Clu!, for short0, is a
civic corporation organized under the las of the
/hilippines ith an original authorized capital stoc& of
/)),777.77, hich as su!se-uently increased to
/)77,777.77.
The Clu! ons and operates a clu! house, a
!oling alley, a golf course .on a lot leased from the
government0, and a !ar9restaurant here it sells
ines and li-uors, soft drin&s, meals and short orders
to its mem!ers and their guests. The !ar9restaurant
as a necessary incident to the operation of the clu!
and its golf9course. The clu! is operated mainly ith
funds derived from mem!ership fees and dues.
,n (>8(. as a result of a capital surplus,
arising from the re9valuation of its real properties, the
value or price of hich increased, the Clu! declared
stoc& dividends1 !ut no actual cash dividends ere
distri!uted to the stoc&holders.
,n (>8), a 5,# agent discovered that the
Clu! has never paid percentage ta% on the gross
receipts of its !ar and restaurant, although it secured
59?, 59>.a0 and 59@ licenses. ,n a letter dated
Decem!er )), (A8), the Collector of ,nternal #evenue
assessed against and demanded from the Clu!.
,ssue2 $hether or not the Clu! is a stoc&9corporation:
,f so, can it !e su!<ect to ta%:
?
3eld2
For a stoc& corporation to e%ist, to
re-uisites must !e complied ith, to it2 .(0 a capital
stoc& divided into shares and .)0 an authority to
distri!ute to the holders of such shares, dividends or
allotments of the surplus profits on the !asis of the
shares held .sec. I, *ct 'o. (?8>0. ,n the case at !ar,
nohere in its articles of incorporation or !y9las
could !e found an authority for the distri!ution of its
dividends or surplus profits. Strictly spea&ing, it
cannot, therefore, !e considered a stoc& corporation,
ithin the contemplation of the corporation la.
The !ar and restaurant are necessary
ad<uncts of the Clu! to foster its purposes and the
profits derived therefrom are necessarily incidental to
the primary o!<ect of developing and cultivating sports
for the healthful recreation and entertainment of the
stoc&holders and mem!ers.
3aving arrived at the conclusion that
respondent Clu! is not engaged in the !usiness as an
operator of a !ar and restaurant, and therefore, not
lia!le for fi%ed and percentage ta%es, it follos that it
is not lia!le for any penalty, much less of a
compromise penalty.
DULA; ENTERPRISES, INC. vs. COURT OF
APPEALS
G.R. No. 91229
A&1&s, 27, 199<
FACTS Dulay Fnterprises, ,nc., a domestic
corporation ith the folloing as mem!ers of
its 5oard of Directors2 =anuel #. Dulay
designated as president, treasurer and
general manager1 *tty. Birgilio F. Dulay
designated as vice9president1 ;inda F.
Dulay1 Celia Dulay9=endoza and *tty.
/laridel C. Jose designated as secretary,
oned a property &non as Dulay *partment
located at Seventh Street .no 5uendia
F%tension0 and F.5. 3arrison Street, /asay
City. The corporation through its president,
=anuel Dulay, o!tained various loans for the
construction of its hotel pro<ect, Dulay
Continental 3otel .no Frederic& 3otel0. ,t
even had to !orro money from Birgilio
Dulay to !e a!le to continue the hotel
pro<ect. *s a result of said loan, Birgilio
Dulay occupied one of the unit apartments of
the su!<ect property since (>@I hile at the
same time managing the Dulay *partment
as his shareholdings in the corporation as
su!se-uently increased !y his father.
=anuel Dulay !y virtue of 5oard #esolution
(A of the corporation sold the su!<ect
property to spouses =aria Theresa and
Castrense Beloso. Su!se-uently, =anuel
Dulay and the spouses Beloso e%ecuted a
=emorandum to the Deed of *!solute Sale,
giving =anuel Dulay ithin ) years to
repurchase the su!<ect property hich as,
hoever, not annotated. =aria Beloso,
ithout the &noledge of =anuel Dulay,
mortgaged the su!<ect property to =anuel *.
Torres. Upon the failure of =aria Beloso to
pay Torres, the su!<ect property as sold to
Torres as the highest !idder in an
e%tra<udicial foreclosure sale as evidenced
!y the Certificate of SheriffGs Sale. =aria
Beloso e%ecuted a Deed of *!solute
*ssignment of the #ight to #edeem in favor
of =anuel Dulay assigning her right to
repurchase the su!<ect property from Torres
as a result of the e%tra<udicial sale. *s
neither =aria Beloso nor her assignee
=anuel Dulay as a!le to redeem the
su!<ect property ithin the one year statutory
period for redemption, Torres filed an
*ffidavit of Consolidation of Cnership ith
the #egistry of Deeds of /asay City. Torres
filed a petition for the issuance of a rit of
possession against spouses Beloso and
=anuel Dulay in ;#C. 3oever, hen
Birgilio Dulay appeared in court to intervene
in said case alleging that =anuel Dulay as
never authorized !y the corporation to sell or
mortgage the su!<ect property, the trial court
ordered Torres to implead the corporation as
an indispensa!le party !ut the latter moved
for the dismissal of his petition hich as
granted. Torres and Fdgardo /a!alan, real
estate administrator of Torres, filed an action
against the corporation, Birgilio Dulay and
'epomuceno #edovan, a tenant of Dulay
*partment for the recovery of possession,
sum of money and damages ith preliminary
in<unction. The corporation filed an action
against spouses Beloso and Torres for the
cancellation of the Certificate of SheriffGs
Sale. /a!alan and Torres filed an action
against spouses Florentino and Flvira
=analastas, a tenant of Dulay *partment,
ith the corporation as intervenor for
e<ectment =etropolitan Trial Court of /asay
City hich rendered a decision in favor of
/a!alan, et al., ordering the spouses
=analastas and all persons claiming
possession under them to vacate the
premises1 and to pay the rents until they
shall have vacated the premises ith interest
at the legal rate1 and to pay attorneyGs fees
as other e%penses of litigation and for them
to pay the costs of the suit. Thereafter, the
corporation and Birgilio Dulay filed an action
against the presiding <udge of the
=etropolitan Trial Court of /asay City,
/a!alan and Torres for the annulment of
said decision ith the #egional Trial Court of
8
/asay. Thereafter, the I cases ere <ointly
tried and the trial court rendered a decision
in favor of /a!alan and Torres. The
corporation, et al. filed the petition for revie
on certiorari. During the pendency of the
petition, Torres died and named Torres9
/a!alan #ealty D Development Corporation
as his heir in his holographic ill.
ISSUE $hether the sale of the su!<ect property
!eteen spouses Beloso and =anuel Dulay
has no !inding effect on the corporation as
5oard #esolution (A hich authorized the
sale of the su!<ect property as resolved
ithout the approval of all the mem!ers of
the !oard of directors and said 5oard
#esolution as prepared !y a person not
designated !y the corporation to !e its
secretary.
!ELD Section (7( of the Corporation Code of the
/hilippines provides that "$hen !oard
meeting is unnecessary or improperly held.
Unless the !y9las provide otherise, any
action !y the directors of a close corporation
ithout a meeting shall nevertheless !e
deemed valid if2 .(0 5efore or after such
action is ta&en, ritten consent thereto is
signed !y all the directors1 or .)0 *ll the
stoc&holders have actual or implied
&noledge of the action and ma&e no prompt
o!<ection thereto in riting1 or .I0 The
directors are accustomed to ta&e informal
action ith the e%press or implied ac-uiesce
of all the stoc&holders1 or .?0 *ll the directors
have e%press or implied &noledge of the
action in -uestion and none of them ma&es
prompt o!<ection thereto in riting. ,f a
directorsG meeting is held ithout proper call
or notice, an action ta&en therein ithin the
corporate poers is deemed ratified !y a
director ho failed to attend, unless he
promptly files his ritten o!<ection ith the
secretary of the corporation after having
&noledge thereof." 3erein, the corporation
is classified as a close corporation and
conse-uently a !oard resolution authorizing
the sale or mortgage of the su!<ect property
is not necessary to !ind the corporation for
the action of its president. *t any rate, a
corporate action ta&en at a !oard meeting
ithout proper call or notice in a close
corporation is deemed ratified !y the a!sent
director unless the latter promptly files his
ritten o!<ection ith the secretary of the
corporation after having &noledge of the
meeting hich, in this case, Birgilio Dulay
failed to do. The corporationGs claim that the
sale of the su!<ect property !y its president,
=anuel Dulay, to spouses Beloso is null and
void as the alleged 5oard #esolution (A as
passed ithout the &noledge and consent
of the other mem!ers of the !oard of
directors cannot !e sustained. Birgilio F.
DulayGs protestations of complete innocence
to the effect that he never participated nor
as even aare of any meeting or resolution
authorizing the mortgage or sale of the
su!<ect premises is difficult to !elieve. Cn
the contrary, he is very much privy to the
transactions involved. To !egin ith, he is an
incorporator and one of the !oard of
directors designated at the time of the
organization of =anuel #. Dulay Fnterprises,
,nc. ,n ordinary parlance, the said entity is
loosely referred to as a "family corporation."
The nomenclature, if imprecise, hoever,
fairly reflects the cohesiveness of a group
and the parochial instincts of the individual
mem!ers of such an aggrupation of hich
=anuel #. Dulay Fnterprises, ,nc. is typical2
four9fifths of its incorporators !eing close
relatives namely, I children and their father
hose name identifies their corporation.
5esides, the fact that Birgilio Dulay on )?
June (>@8 e%ecuted an affidavit that he as
a signatory itness to the e%ecution of the
post9dated Deed of *!solute Sale of the
su!<ect property in favor of Torres indicates
that he as aare of the transaction
e%ecuted !eteen his father and Torres and
had, therefore, ade-uate &noledge a!out
the sale of the su!<ect property to Torres.
Conse-uently, the corporation is lia!le for
the act of =anuel Dulay and the sale of the
su!<ect property to Torres !y =anuel Dulay
is valid and !inding.
FINANCING CORPORATION OF THE
PHILIPPINES VS. TEODORO
FACTS:
The minority stockholders of the Financing Corporation of
the Philippines, filed a complaint against the said
corporation and J. Amado Araneta, its president
and general manager, claiming among other
things alleged gross mismanagement and
fraudulent conduct of the corporate affairs of the
defendant corporation by J. Amado Araneta, and
asking that the corporation be dissolved; that J.
Amado Araneta be declared personally
accountable for the amounts of the unauthoried
and fraudulent disbursements and disposition of
assets made by him, and that he be re!uired to
account for said assets, and that pending trial and
disposition of the case on its merits a receiver be
appointed to take possession of the books,
records and assets of the defendant corporation
preparatory to its dissolution and li!uidation and
6
distribution of the assets. "ver the strong
ob#ection of the defendants, the trial court
presided by respondent Judge Jose Teodoro,
granted the petition for the appointment of a
receiver and designated $r. Alfredo %ulo as such
receiver &ith a bond of P'(,(((. Failing to secure
a reconsideration of the order appointing a
receiver, the defendants in said case, Financing
Corporation of the Philippines and J. Amado
Araneta, as petitioners, have filed the present
petition for certiorari &ith preliminary in#unction
to revoke and set aside the order.
ISSUE/S:
). *+,T+,- "- ."T the appointment of a
receiver made by the respondent #udge has
no basis/
0. *+,T+,- "- ."T the suit for the
dissolution of a corporation can be brought
and maintained only by the 1tate through its
legal counsel, and that respondents, much
less the minority stockholders of said
corporation, 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. +o&ever, there are cases
that hold that even minority stockholders may ask
for dissolution, this, under the theory that such
minority members, if unable to obtain redress and
protection of their rights &ithin the corporation,
must not and should not be left &ithout redress
and remedy. This &as &hat probably prompted
this Court to state in the case of +all, et al. vs.
Judge Piccio,
2
3.-. .o. 450'67 89: "ff. 3a. .o.
)0 1upp., p. 0((; that even the e<istence of a de
jure corporation may be terminated in a private
suit for its dissolution by the stockholders
&ithout the intervention of the 1tate. =t &as
therein further held that although there might be
some room for argument on the right of minority
stockholders to ask for dissolution,5that !uestion
does not affect the court>s #urisdiction over the
case, and that the remedy by the party dissatisfied
&as to appeal from the decision of the trial court.
*e repeat that although as a rule, minority
stockholders of a corporation may not ask for its
dissolution in a private suit, and that such action
should be brought by the 3overnment through its
legal officer in a !uo &arranto case, at their
instance and re!uest, there might be e<ceptional
cases &herein the intervention of the 1tate, for
one reason or another, cannot be obtained, as
&hen the 1tate is not interested because the
complaint is strictly a matter bet&een the
stockholders and does not involve, in the opinion
of the legal officer of the 3overnment, any of the
acts or omissions &arranting quo warranto
proceedings, in &hich minority stockholders are
entitled to have such dissolution. *hen such
action or private suit is brought by them, the trial
court had #urisdiction and may or may not grant
the prayer, depending upon the facts and
circumstances attending it. The trial court>s
decision is of course sub#ect to revie& by the
appellate tribunal. +aving such #urisdiction, the
appointment of a receiver pendente lite is left to
the sound discretion of the trial court. As &as
said in the case of Angeles vs. Santos 8?9 Phil.,
?6:;, the action having been properly brought
and the trial court having entertained the same, it
&as &ithin the po&er of said court upon proper
sho&ing to appoint a receiver pendente lite for
the corporation; that although the appointment of
a receiver upon application of the minority
stockholders is a po&er to be e<ercised &ith great
caution, nevertheless, it should be e<ercised
necessary in order not to entirely ignore and
disregard the rights of said minority stockholders,
especially &hen said minority stockholders are
unable to obtain redress and protection of their
rights &ithin the corporation itself.
=n conclusion, &e hold that the trial court through
respondent Judge Teodoro had #urisdiction and
properly entertained the original case; that he also
had #urisdiction to appoint a receiver pendente
lite, and considering the allegations made in
connection &ith the petition for the appointment
of a receiver, he neither e<ceeded his #urisdiction
nor abused his discretion in appointing a receiver.
The petition for certiorari is hereby denied, &ith
costs. The &rit of preliminary in#unction
heretofore issued is hereby ordered dissolved.
Cagayan Fishing Devel!"en# C. vs. San$i%
Facts@
$anuel Tabora is the registered o&ner of four parcels of
land. +e e<ecuted three mortgages to secure three
different loans. The first and second mortgages
over the parcels of land &ere in favor of
Philippine .ational Aank. A third mortgage &as
then also e<ecuted in favor of 1everina Auon.
+e then subse!uently sold the parcels of land to
plaintiff company, &hich &as then still in the
process of incorporation. This sale &as sub#ect to
the mortgages and to the condition that the title to
the land shall not be transferred in the name of
the company unless TaboraBs obligations be fully
and completely satisfied.
A year after it &as incorporated, the company sold the
parcels of land to defendant5appellee Teodoro
@
1andiko. Three documents &ere e<ecuted@ a deed
of sale over the parcels of land in favor of the
defendant, a promissory note dra&n by defendant
in favor of plaintiff, and a deed of mortgage over
the parcels of land to secure the payment of the
promissory note.
Cefendant 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 =nstance of
$anila, &ho ruled in favor of the defendant.
=ssue@
=s the transaction bet&een Tabora and the company
transferring the parcels of land in favor of the
company valid/
-uling@
The Court held in the negative. The transfer &as made by
Tabora in favor of the company &as made before
the company &as incorporated. =t &as not yet in
legal e<istence then, as such, it possessed no
#uridical capacity to enter into contracts. The
transaction in reality &as bet&een Tabora as
o&ner of the parcels of land and the same $anuel
Tabora and others as mere promoters of the
corporation. These promoters could not have
acted as agents for a pro#ected corporation since
that &hich had no legal e<istence could have no
agent. Dnder the peculiar facts of the case the
Court did not e<tend the doctrine of ratification
since it &ould result in the commission of fraud
to the un&ary. =n this case, almost all of the
capital stock of the company is o&ned by Tabora.
The defendant al&ays regarded Tabora as the
o&ner of the parcels of land. The promissory note
&as ade payable to the plaintiff so that it may not
be attached by its creditors, &ho then had
obtained &rits of attachment to the four parcels of
land. 1ince the plaintiff company did not ac!uire
the parcels of land, it follo&s that it did not
possess any right to dispose the same in favor of
defendant 1andiko.
RI=AL LIG!T ) ICE CO., INC. vs. MORONG
G.R. No. L-2>99<
RI=AL LIG!T ) ICE CO., INC. vs. PU?LIC
SER6ICE COMMISSION a+/ MORONG ELECTRIC
CO., INC.
G.R. No. L-21221
S"#,"*5"9 22, 1962
FACTS =orong Flectric, having !een granted a
municipal franchise on =ay 6, (>6) !y
respondent municipality to install, operate
and maintain an electric heat, light and
poer service in said municipality M
approved !y the /rovincial 5oard of #izal on
*ugust I(, (>6) M filed ith the
Commission an application for a certificate of
pu!lic convenience and necessity for said
service.
/etitioner moved to dismiss the application
of =orong Flectric mainly on the ground that
it is a holder of a certificate of pu!lic
convenience to operate an electric light, heat
and poer service in the same municipality
of =orong, #izal, and that applicant Morong
Electric had no legal personality when it filed
its application on September 1, 1!"#,
because its certificate of incorporation was
issued by the Securities and E$change
%ommission only on &ctober 1', 1!"#.
The motion to dismiss as denied !y the
Commission on the premise that applicant
=orong Flectric as a de facto corporation.
Conse-uently, the case as heard on the
merits and !oth parties presented their
respective evidence. Cn the !asis of the
evidence adduced, the Commission found
that there as an a!sence of electric service
in the municipality of =orong and that
applicant =orong Flectric, a Filipino9oned
corporation duly organized and e%isting
under the las of the /hilippines, has the
financial capacity to maintain said service.
These circumstances, considered together,
the Commission approved the application of
=orong Flectric and ordered the issuance in
its favor of the corresponding certificate of
pu!lic convenience and necessity.
ISSUE $hether or not the issuance of certificate of
pu!lic convenience and necessity in favor of
=orong Flectric is valid.
!ELD The issuance is valid.
/etitionerGs contention that =orong Flectric
did not yet have a legal personality on =ay
6, (>6) hen a municipal franchise as
granted to it is correct. The <uridical
personality and legal e%istence of =orong
Flectric !egan only on Ccto!er (@, (>6)
hen its certificate of incorporation as
issued !y the SFC. 5efore that date, or
pending the issuance of said certificate of
incorporation, the incorporators cannot !e
considered as de facto corporation. 5ut the
fact that =orong Flectric had no corporate
e%istence on the day the franchise as
granted in its name does not render the
franchise invalid, !ecause later =orong
Flectric o!tained its certificate of
A
incorporation and then accepted the
franchise in accordance ith the terms and
conditions thereof.
The incorporation of =orong Flectric on
Ccto!er (@, (>6) and its acceptance of the
franchise as shon !y its action in
prosecuting the application filed ith the
Commission for the approval of said
franchise, not only perfected a contract
!eteen the respondent municipality and
=orong Flectric !ut also cured the deficiency
pointed out !y the petitioner in the
application of =orong Flectric. Thus, the
Commission did not err in the issuance of
certificate of pu!lic convenience and
necessity in favor of =orong Flectric.
CARAM 6S CA
FACTS
During the organization of Filipinas Crient
*irays, defendants 5arretto and Earcia re-uested
private respondent *l!erto *rellano to underta&e a
pro<ect study and the pre9organizational services that
ill !e used for presentation to prospective investors,
one of those investors ere petitiners herein, Fermin
Caram and #osa Caram. The airline as eventually
organized on the !asis of the pro<ect study ith
petitioners as ma<or stoc&holders and, together ith
5arretto and Earcia, as principal officers. 3oever,
Filipinas Crient *irays as una!le to pay the private
respondent for the services rendered, hence, the filing
of this case.
ISSUE
$hether or not petitioners can !e held
personally lia!le for the e%penses incurred in
connection ith the organization of Filipinas Crient
*irays
RULING
The Supreme Court held that petitioners Caram
are not personally lia!le for the e%penses incurred in
the pre9organization of the corporation.
/etitioners ere not involved in the initial
stages of the organization of the airline, hich ere
!eing directed !y 5arretto as the main promoter. ,t
as he ho as putting all the pieces together, so to
spea&. The petitioners ere merely among the
financiers hose interest as to !e invited and ho
ere in fact persuaded, on the strength of the pro<ect
study, to invest in the proposed airline.
Significantly, there as no shoing that the
Filipinas Crient *irays as a fictitious corporation
and did not have a separate <uridical personality, to
<ustify ma&ing the petitioners, as principal
stoc&holders thereof, responsi!le for its o!ligations.
*s a bona fide corporation, the Filipinas Crient
*irays should alone !e lia!le for its corporate acts
as duly authorized !y its officers and directors.
>