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Adriatico, Paul Julius H.

Topic: Concession Theory and Corporate Franchises

16-4099 #01
G.R. No. 23145. November 29, 1968

 Renato Tayag (Tayag) is the ancillary administrator of the estate of the deceased Idonah
Slade Perkins (Perkins) in the Philippines, who died in New York on 27 March 1960;
 County Trust Company of New York (County) on the other hand is the domiciliary
administrator of Perkins, which is in possession of the Perkins’ two (2) stock certificates
covering 33,002 shares in Benguet Consolidated, Inc. (BCI);
 In order to satisfy Perkins’ local creditors and for Tayag to fulfill his duty as
administrator, Tayag requested that the stock certificates be given to him through a
judicial decree given by the trial court, to which however County refused to deposit and
produce said certificates;
 Due to this refusal, Tayag asked to court to declare the certificates as lost and to order
BCI to issue new ones in lieu of it, to which the court issued an order, and County did not
 BCI refused to issue new ones and appealed, claiming that it is against the requirements
of their by-laws as a corporation and that it cannot be considered lost for it is in reality in
the possession of County.

ISSUE: Whether or not a corporation’s by-laws are controlling over a judicial order

RULING: No, a corporation’s by-laws are not controlling over a judicial order. Sec. 2 of the
Corporation Code defines a corporation as an artificial being created by operation of law, it owes
its existence to the State’s sovereign power, and this is known as the Concession Theory. A
corporation may only come to existence if it complies with the statutory requirements. The
judiciary is one of the branches of the government, an organ, to which a corporation must abide,
and in fact is the branch to which corporations are more often in touch with.

BCI’s refusal to a judicial order cannot be affirmed for it then places corporations as superior
over the State, to which BCI owes its existence to. BCI’s fear that its issuing can cause
contingent liability is misplaced for the fear of such does not exist and BCI in the first place
cannot refuse such an order.

On the other hand, the claim that BCI cannot issue because in reality the certificates exist is
untenable. This is an example of legal fiction, to which is for a long time had been used by the
judiciary in order to uphold justice. While it is admittedly factual that the certificates do exist, the
Court declared as lost said certificates in order to satisfy the local creditors of Perkins and for
Tayag to fulfill his duty. Without this fiction, justice cannot be upheld. In fact, a domiciliary and
ancillary administrator’s authority does not extend to jurisdictions outside of his own, that the
certificates are made in the local jurisdiction of the Philippines it must be covered by Tayag’s
ancillary administration, and hence the Court decreed its issuance in accordance with Tayag’s
power and duty to administer.