ALICIA E. GALA, GUIA G. DOMINGO and RITA G. BENSON, petitioners, vs.

ELLICE
AGRO-INDUSTRIAL CORPORATION, MARGO MANAGEMENT AND DEVELOPMENT
CORPORATION, RAUL E. GALA, VITALIANO N. AGUIRRE II, ADNAN V. ALONTO,
ELIAS N. CRESENCIO, MOISES S. MANIEGO, RODOLFO B. REYNO, RENATO S.
GONZALES, VICENTE C. NOLAN, NESTOR N. BATICULON, respondents.

2003-12-11 | G.R. No. 156819

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court, seeking the reversal of the decision dated
November 8, 2002[1] and the resolution dated December 27, 2002[2] of the Court of Appeals in CA-G.R. SP
No. 71979.

On March 28, 1979, the spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala, Raul Gala,
and Rita Benson, and their encargados Virgilio Galeon and Julian Jader formed and organized the Ellice
Agro-Industrial Corporation.[3] The total subscribed capital stock of the corporation was apportioned as
follows:

Name Number of Shares Amount

Manuel R. Gala 11,700 1,170,000.00

Alicia E. Gala 23,200 2,320,000.00
Guia G. Domingo 16 1,600.00
Ofelia E. Gala 40 4,000.00
Raul E. Gala 40 4,000.00
Rita G. Benson 2 200.00
Virgilio Galeon 1 100.00
Julian Jader 1 100.00

TOTAL 35,000 P3,500,000.00[4]

As payment for their subscriptions, the Gala spouses transferred several parcels of land located in the
provinces of Quezon and Laguna to Ellice. [5]

In 1982, Manuel Gala, Alicia Gala and Ofelia Gala subscribed to an additional 3,299 shares, 10,652.5 shares
and 286.5 shares, respectively. [6]

On June 28, 1982, Manuel Gala and Alicia Gala acquired an additional 550 shares and 281 shares,
respectively. [7]

Subsequently, on September 16, 1982, Guia Domingo, Ofelia Gala, Raul Gala, Virgilio Galeon and Julian
Jader incorporated the Margo Management and Development Corporation (Margo). [8] The total subscribed
capital stock of Margo was apportioned as follows:

Name Number of Shares Amount

Raul E. Gala 6,640 66,400.00

Ofelia E. Gala 6,640 66,400.00
Guia G. Domingo 6,640 66,400.00
| Page 1 of 9
 Virgilio Galeon 40 40.00
Julian Jader 40 40.00

TOTAL 20,000 P200,000.00[9]

On November 10, 1982, Manuel Gala sold 13,314 of his shares in Ellice to Margo. [10]

Alicia Gala transferred 1,000 of her shares in Ellice to a certain Victor de Villa on March 2, 1983. That same
day, de Villa transferred said shares to Margo. [11] A few months later, on August 28, 1983, Alicia Gala
transferred 854.3 of her shares to Ofelia Gala, 500 to Guia Domingo and 500 to Raul Gala. [12]

Years later, on February 8, 1988, Manuel Gala transferred all of his remaining holdings in Ellice, amounting to
2,164 shares, to Raul Gala. [13]

On July 20, 1988, Alicia Gala transferred 10,000 of her shares to Margo. [14]

Thus, as of the date on which this case was commenced, the stockholdings in Ellice were allocated as follows:

Name Number of Shares Amount

Margo 24,312.5 2,431,250.00

Alicia Gala 21,480.2 2,148,020.00
Raul Gala 2,704.5 270,450.00
Ofelia Gala 980.8 98,080.00
Gina Domingo 516 51,600.00
Rita Benson 2 200.00
Virgilio Galeon 1 100.00
Julian Jader 1 100.00
Adnan Alonto 1 100.00
Elias Cresencio 1 100.00

TOTAL 50,000 P5,000,000.00

On June 23, 1990, a special stockholders' meeting of Margo was held, where a new board of directors was
elected. [15] That same day, the newly-elected board elected a new set of officers. Raul Gala was elected as
chairman, president and general manager. During the meeting, the board approved several actions, including
the commencement of proceedings to annul certain dispositions of Margo's property made by Alicia Gala. The
board also resolved to change the name of the corporation to MRG Management and Development
Corporation. [16]

Similarly, a special stockholders' meeting of Ellice was held on August 24, 1990 to elect a new board of
directors. In the ensuing organizational meeting later that day, a new set of corporate officers was elected.
Likewise, Raul Gala was elected as chairman, president and general manager.

On March 27, 1990, respondents filed against petitioners with the Securities and Exchange Commission
(SEC) a petition for the appointment of a management committee or receiver, accounting and restitution by
the directors and officers, and the dissolution of Ellice Agro-Industrial Corporation for alleged mismanagement,
diversion of funds, financial losses and the dissipation of assets, docketed as SEC Case No. 3747. [17] The
petition was amended to delete the prayer for the appointment of a management committee or receiver and
for the dissolution of Ellice. Additionally, respondents prayed that they be allowed to inspect the corporate
books and documents of Ellice. [18]

In turn, petitioners initiated a complaint against the respondents on June 26, 1991, docketed as SEC Case No.
| Page 2 of 9
4027, praying for, among others, the nullification of the elections of directors and officers of both Margo
Management and Development Corporation and Ellice Industrial Corporation; the nullification of all board
resolutions issued by Margo from June 23, 1990 up to the present and all board resolutions issued by Ellice
from August 24, 1990 up to the present; and the return of all titles to real property in the name of Margo and
Ellice, as well as all corporate papers and records of both Margo and Ellice which are in the possession and
control of the respondents. [19]

The two cases were consolidated in an Order dated November 23, 1993. [20]

Meanwhile, during the pendency of the SEC cases, the shares of stock of Alicia and Ofelia Gala in Ellice were
levied and sold at public auction to satisfy a judgment rendered against them by he Regional Trial Court of
Makati, Branch 66, in Civil Case No. 42560, entitled "Regines Condominium v. Ofelia (Gala) Panes and Alicia
Gala." [21]

On November 3, 1998, the SEC rendered a Joint Decision in SEC Cases Nos. 3747 and 4027, the dispositive
portion of which states:

WHEREFORE, premises considered, judgment is hereby rendered, as follows:

1. Dismissing the petition in SEC Case No. 3747,

2. Issuing the following orders in SEC Case No. 4027;

(a) Enjoining herein respondents to perform corporate acts of both Ellice and Margo, as directors and officers
thereof.

(b) Nullifying the election of the new sets of Board of Directors and Officers of Ellice and Margo from June 23,
1990 to the present, and that of Ellice from August 24, 1990 to the present.

(c) Ordering the respondent Raul Gala to return all the titles of real properties in the names of Ellice and
Margo which were unlawfully taken and held by him.

(d) Directing the respondents to return to herein petitioners all corporate papers, records of both Ellice and
Margo which are in their possession and control.

SO ORDERED. [22]

Respondents appealed to the SEC En Banc, which, on July 4, 2002, rendered its Decision, the decretal
portion of which reads:

WHEREFORE, the Decision of the Hearing Officer dated November 3, 1998 is hereby REVERSED and
SET ASIDE and a new one hereby rendered granting the appeal, upholding the Amended Petition in
SEC Case No. 3747, and dismissing the Petition with Prayer for Issuance of Preliminary Restraining
Order and granting the Compulsory Counterclaim in SEC Case No. 4027.

Accordingly, appellees Alicia Gala and Guia G. Domingo are ordered as follows:

(1) jointly and solidarily pay ELLICE and/or MARGO the amount of P700,000.00 representing the
consideration for the unauthorized sale of a parcel of land to Lucky Homes and Development
Corporation (Exhs. "N" and "CCC");

(2) jointly and severally pay ELLICE and MARGO the proceeds of sales of agricultural products
averaging P120,000.00 per month from February 17, 1988;

| Page 3 of 9
 (3) jointly and severally indemnify the appellants P90,000.00 as attorney's fees;

(4) jointly and solidarily pay the costs of suit;

(5) turn over to the individual appellants the corporate records of ELLICE and MARGO in their
possession; and

(6) desist and refrain from interfering with the management of ELLICE and MARGO.

SO ORDERED. [23]

Petitioners filed a petition for review with the Court of Appeals which dismissed the petition for review and
affirmed the decision of the SEC En Banc. [24]

Hence, this petition, raising the following issues:

I
WHETHER OR NOT THE LOWER COURT ERRED IN NOT DECLARING AS ILLEGAL AND
CONTRARY TO PUBLIC POLICY THE PURPOSES AND MANNER IN WHICH RESPONDENT
CORPORATIONS WERE ORGANIZED - WHICH WERE, E.G. TO (1) "PREVENT THE GALA ESTATE
FROM BEING BROUGHT UNDER THE COVERAGE (SIC)" OF THE COMPREHENSIVE AGRARIAN
REFORM PROGRAM (CARP) AND (2) PURPORTEDLY FOR "ESTATE PLANNING."

II
WHETHER OR NOT THE LOWER COURT ERRED (1) IN SUSPICIOUSLY RESOLVING THE CASE
WITHIN TWO (2) DAYS FROM RECEIPT OF RESPONDENTS' COMMENT; AND (2) IN NOT
MAKING A DETERMINATION OF THE ISSUES OF FACTS AND INSTEAD RITUALLY CITING THE
FACTUAL FINDINGS OF THE COMMISSION A QUO WITHOUT DISCUSSION AND ANALYSIS;

III
WHETHER OR NOT THE LOWER COURT ERRED IN RULING THAT THE ORGANIZATION OF
RESPONDENT CORPORATIONS WAS NOT ILLEGAL FOR DEPRIVING PETITIONER RITA G.
BENSON OF HER LEGITIME.

IV
WHETHER OR NOT THE LOWER COURT ERRED IN NOT PIERCING THE VEILS OF CORPORATE
FICTION OF RESPONDENTS CORPORATIONS ELLICE AND MARGO. [25]

In essence, petitioners want this Court to disregard the separate juridical personalities of Ellice and Margo for
the purpose of treating all property purportedly owned by said corporations as property solely owned by the
Gala spouses.

The petitioners' first contention in support of this theory is that the purposes for which Ellice and Margo were
organized should be declared as illegal and contrary to public policy. They claim that the respondents never
pursued exemption from land reform coverage in good faith and instead merely used the corporations as tools
to circumvent land reform laws and to avoid estate taxes. Specifically, they point out that respondents have
not shown that the transfers of the land in favor of Ellice were executed in compliance with the requirements
of Section 13 of R.A. 3844.[26] Furthermore, they alleged that respondent corporations were run without any
of the conventional corporate formalities. [27]

At the outset, the Court holds that petitioners' contentions impugning the legality of the purposes for which
Ellice and Margo were organized, amount to collateral attacks which are prohibited in this jurisdiction. [28]

| Page 4 of 9
The best proof of the purpose of a corporation is its articles of incorporation and by-laws. The articles of
incorporation must state the primary and secondary purposes of the corporation, while the by-laws outline the
administrative organization of the corporation, which, in turn, is supposed to insure or facilitate the
accomplishment of said purpose. [29]

In the case at bar, a perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the allegedly
illegal purposes that petitioners are complaining of. It is well to note that, if a corporation's purpose, as stated
in the Articles of Incorporation, is lawful, then the SEC has no authority to inquire whether the corporation has
purposes other than those stated, and mandamus will lie to compel it to issue the certificate of incorporation.
[30]

Assuming there was even a grain of truth to the petitioners' claims regarding the legality of what are alleged to
be the corporations' true purposes, we are still precluded from granting them relief. We cannot address here
their concerns regarding circumvention of land reform laws, for the doctrine of primary jurisdiction precludes a
court from arrogating unto itself the authority to resolve a controversy the jurisdiction over which is initially
lodged with an administrative body of special competence.[31] Since primary jurisdiction over any violation of
Section 13 of Republic Act No. 3844 that may have been committed is vested in the Department of Agrarian
Reform Adjudication Board (DARAB),[32] then it is with said administrative agency that the petitioners must
first plead their case. With regard to their claim that Ellice and Margo were meant to be used as mere tools for
the avoidance of estate taxes, suffice it say that the legal right of a taxpayer to reduce the amount of what
otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted.
[33]

The petitioners' allegation that Ellice and Margo were run without any of the typical corporate formalities, even
if true, would not merit the grant of any of the relief set forth in their prayer. We cannot disregard the corporate
entities of Ellice and Margo on this ground. At most, such allegations, if proven to be true, should be
addressed in an administrative case before the SEC. [34]

Thus, even if Ellice and Margo were organized for the purpose of exempting the properties of the Gala
spouses from the coverage of land reform legislation and avoiding estate taxes, we cannot disregard their
separate juridical personalities.

Next, petitioners make much of the fact that the Court of Appeals promulgated its assailed Decision a mere
two days from the time the respondents filed their Comment. They alleged that the appellate court could not
have made a deliberate study of the factual questions in the case, considering the sheer volume of evidence
available. [35] In support of this allegation, they point out that the Court of Appeals merely adopted the factual
findings of the SEC En Banc verbatim, without deliberation and analysis. [36]

In People v. Mercado, [37] we ruled that the speed with which a lower court disposes of a case cannot thus
be attributed to the injudicious performance of its function. Indeed, magistrates are not supposed to study a
case only after all the pertinent pleadings have been filed. It is a mark of diligence and devotion to duty that
jurists study a case long before the deadline set for the promulgation of their decision has arrived. The
two-day period between the filing of petitioners' Comment and the promulgation of the decision was sufficient
time to consider their arguments and to incorporate these in the decision. As long as the lower court does not
sacrifice the orderly administration of justice in favor of a speedy but reckless disposition of a case, it cannot
be taken to task for rendering its decision with due dispatch. The Court of Appeals in this intra-corporate
controversy committed no reversible error and, consequently, its decision should be affirmed. [38] Verily, if
such swift disposition of a case is considered a non-issue in cases where the life or liberty of a person is at
stake, then we see no reason why the same principle cannot apply when only private rights are involved.

Furthermore, well-settled is the rule that the factual findings of the Court of Appeals are conclusive on the
parties and are not reviewable by the Supreme Court. They carry even more weight when the Court of
Appeals affirms the factual findings of a lower fact-finding body.[39] Likewise, the findings of fact of

| Page 5 of 9
administrative bodies, such as the SEC, will not be interfered with by the courts in the absence of grave
abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by
substantial evidence. [40]

However, in the interest of equity, this Court has reviewed the factual findings of the SEC En Banc, which
were affirmed in toto by the Court of Appeals, and has found no cogent reason to disturb the same. Indeed,
we are convinced that the arguments raised by the petitioners are nothing but unwarranted conclusions of law.
Specifically, they insist that the Gala spouses never meant to part with the ownership of the shares which are
in the names of their children and encargados, and that all transfers of property to these individuals are
supposedly void for being absolutely simulated for lack of consideration.[41] However, as correctly held by the
SEC En Banc, the transfers were only relatively simulated, inasmuch as the evident intention of the Gala
spouses was to donate portions of their property to their children and encargados. [42]

In an attempt to bolster their theory that the organization of the respondent corporations was illegal, the
petitioners aver that the legitime pertaining to petitioners Rita G. Benson and Guia G. Domingo from the
estate of their father had been subject to unwarranted reductions as a result thereof. In sum, they claim that
stockholdings in Ellice which the late Manuel Gala had assigned to them were insufficient to cover their
legitimes, since Benson was only given two shares while Domingo received only sixteen shares out of a total
number of 35,000 issued shares. [43]

Moreover, the reliefs sought by petitioners should have been raised in a proceeding for settlement of estate,
rather than in the present intra-corporate controversy. If they are genuinely interested in securing that part of
their late father's property which has been reserved for them in their capacity as compulsory heirs, then they
should simply exercise their actio ad supplendam legitimam, or their right of completion of legitime.[44] Such
relief must be sought during the distribution and partition stage of a case for the settlement of the estate of
Manuel Gala, filed before a court which has taken jurisdiction over the settlement of said estate. [45]

Finally, the petitioners pray that the veil of corporate fiction that shroud both Ellice and Margo be pierced,
consistent with their earlier allegation that both corporations were formed for purposes contrary to law and
public policy. In sum, they submit that the respondent corporations are mere business conduits of the
deceased Manuel Gala and thus may be disregarded to prevent injustice, the distortion or hiding of the truth
or the "letting in" of a just defense. [46]

However, to warrant resort to the extraordinary remedy of piercing the veil of corporate fiction, there must be
proof that the corporation is being used as a cloak or cover for fraud or illegality, or to work injustice, [47] and
the petitioners have failed to prove that Ellice and Margo were being used thus. They have not presented any
evidence to show how the separate juridical entities of Ellice and Margo were used by the respondents to
commit fraudulent, illegal or unjust acts. Hence, this contention, too, must fail.

On June 5, 2003, the petitioners filed a Reply, where, aside from reiterating the contentions raised in their
Petition, they averred that there is no proof that either capital gains taxes or documentary stamp taxes were
paid in the series of transfers of Ellice and Margo shares. Thus, they invoke Sections 176 and 201 of the
National Internal Revenue Code, which would bar the presentation or admission into evidence of any
document that purports to transfer any benefit derived from certificates of stock if the requisite documentary
stamps have not been affixed thereto and cancelled.

Curiously, the petitioners never raised this issue before the SEC Hearing Officer, the SEC En Banc or the
Court of Appeals. Thus, we are precluded from passing upon the same for, as a rule, no question will be
entertained on appeal unless it has been raised in the court below, for points of law, theories, issues and
arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by
a reviewing court, as they cannot be raised for the first time at that late stage. Basic considerations of due
process impel this rule.[48] Furthermore, even if these allegations were proven to be true, such facts would
not render the underlying transactions void, for these instruments would not be the sole means, much less the

| Page 6 of 9
best means, by which the existence of these transactions could be proved. For this purpose, the books and
records of a corporation, which include the stock and transfer book, are generally admissible in evidence in
favor of or against the corporation and its members. They can be used to prove corporate acts, a
corporation's financial status and other matters, including one's status as a stockholder. Most importantly,
these books and records are, ordinarily, the best evidence of corporate acts and proceedings.[49] Thus,
reference to these should have been made before the SEC Hearing Officer, for this Court will not entertain
this belated questioning of the evidence now.

It is always sad to see families torn apart by money matters and property disputes. The concept of a close
corporation organized for the purpose of running a family business or managing family property has formed
the backbone of Philippine commerce and industry. Through this device, Filipino families have been able to
turn their humble, hard-earned life savings into going concerns capable of providing them and their families
with a modicum of material comfort and financial security as a reward for years of hard work. A family
corporation should serve as a rallying point for family unity and prosperity, not as a flashpoint for familial strife.
It is hoped that people reacquaint themselves with the concepts of mutual aid and security that are the
original driving forces behind the formation of family corporations and use these tenets in order to facilitate
more civil, if not more amicable, settlements of family corporate disputes.

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision dated November 8, 2002 and
the Resolution dated December 27, 2002, both of the Court of Appeals, are AFFIRMED. Costs against
petitioners.

SO ORDERED.

Davide, Jr., C.J., Panganiban, Carpio, and Azcuna, JJ., concur.

[1] CA Rollo, p. 452; penned by Associate Justice Martin S. Villarama, Jr., concurred in by Associate Justices
Godardo A. Jacinto and Mario L. Guariña III.

[2] Id.

[3] CA Rollo, pp. 101-101, 452.

[4] Id., p. 102.

[5] Id., p. 91.

[6] Id., p. 454.

[7] Id.

[8] Id., pp. 111, 453.

[9] Id., p. 112.

[10] Id., p. 454.

[11] Id.

[12] Id.

[13] Id.

| Page 7 of 9
[14] Id.

[15] Id., p. 136.

[16] Id., p. 140.

[17] Id., p. 455..

[18] Id., p. 155-156..

[19] Id., p. 180..

[20] Id., p. 208; penned by SEC Hearing Officer Alberto P. Atas..

[21] Id., p. 455..

[22] Rollo, pp. 144-145; penned by SEC Hearing Officer Juanito B. Almosa, Jr.

[23] Id., pp. 170-171; docketed as SEC AC No. 642. Singed by Chairperson Lilia R. Bautista, Commissioners
Fe Eloisa C. Gloria, Josela J. Poblador, Ma. Juanita A. Cueto and Jesus G. Martinez Enrique.

[24] CA Rollo, p. 466.

[25] Rollo, p. 37 (Emphasis in the original).

[26] Id., pp. 40-41.

Section 13, of R.A. 3844 provides:

SEC. 13. Affidavit Required in Sale of Land Subject to Right to Preemption.- No deed of sale of agricultural
land under cultivation by an agricultural lessee or lessees shall be recorded in the Registry of Property unless
accompanied by an affidavit of the vendor that he has given the written notice required in Section eleven of
this chapter or that the land is not worked by an agricultural lessee.

[27] Rollo, p. 40..

[28] CORPORATION CODE, SEC 20.

[29] Jesus Sacred Heart College v. Collector of Internal Revenue, 95 Phil. 16, 22 (1954); cited in
Commissioner of Internal Revenue v. Court of Appeals, 358 Phil. 562, 584 (1998), dissenting opinion of
Senior Associate Justice Josue N. Bellosillo.

[30] I Campos, The Corporation Code: Comments, Notes and Selected Cases 75-76 (1990 ed.); citing
Asuncion v. Yriarte, 28 Phil. 67 (1914).

[31] Machete v. Court of Appeals, 320 Phil. 227 (1995); citing Vidad v. Regional Trial Court of Negros Oriental,
G.R. No. 98084, 18 October 1993, 227 SCRA 271.

Corporation Code, sec. 144; Pres. Dec. No. 902-A, sec. 6 (i), Rep. Act No. 8799, sec. 5 (d) and (f).

[32] Rep. Act No. 6657, sec. 50.

[33] Delpher Trades Corporation v. Intermediate Appellate Court, G.R. No. 69259, 26 January 1988, 157

| Page 8 of 9
SCRA 349, 356; citing Liddell & Co., Inc. v. The Collector of Internal Revenue, G.R. No. 9687, 30 June 1961,
2 SCRA 632, 641.

[34] Corporation Code, sec. 144; Pres Dec. No. 902-A, sec 6 (i), Rep. Act No. 8799, sec. 5 (d) and (f).

[35] Rollo, p. 43.

[36] Id., p. 45.

[37] G.R. No. 116239, 29 November 2000, 346 SCRA 256.

[38] People v. Mercado, G.R. No, 116239, 29 November 2000. 346 SCRA 256.

[39] Collegio de San Juan de Letran-Calamba v. Villas, G.R. No. 137795, 26 March 2003; citing Spouses Uy
v. Court of Appeals, 411 Phil. 788 (2001).

[40] Gokongwei v. Securities and Exchange Commission, G.R. No. 52129, 21 April 1980, 97 SCRA 78; citing
Central Bank v. Cloribel, G.R. No. 26971, 11 April 1972, 44 SCRA 307.

[41] Id.

[42] CA Rollo, p. 89.

[43] Rollo, pp. 54-55, 287.

[44] Civil Code, art. 906; Ruben F. Balane, Jottings and Jurisprudence in Civil Law: Succession 328-329
(1998).

[45] Rules of Court, Rule 73, sec. 1 and Rule 90, sec. 1.

[46] Rollo, p. 56.

[47] Ong Yong v. Tiu, G.R. No. 144476, 8 April 2003.

[48] Del Rosario v. Bonga, G.R. No. 136308, 23 January 2001, 350 SCRA 101 cited in Twin Towers
Condominium Corporation v. Court of Appeals, G.R. No. 123552 27 February 2003.

[49] Bitong v. Court of Appeals, 354 Phil. 516, 536 (1998).

| Page 9 of 9
HEIRS OF ANTONIO PAEL and ANDREA ALCANTARA and CRISANTO PAEL,
petitioners, vs. COURT OF APPEALS, JORGE H. CHIN and RENATO B. MALLARI,
respondents.

2001-12-07 | G.R. No. 133547

RESOLUTION

YNARES-SANTIAGO, J.:

For resolution are the Motions for Reconsideration of our Decision dated February 10, 2000, filed by
petitioners Heirs of Antonio Pael, Andrea Alcantara and Crisanto Pael in G.R. No 133547, and petitioner
Maria Destura in G.R. No 133843 Likewise, the University of the Philippines filed a motion for
intervention.

It is at once apparent that no new issues are raised in the motions for reconsideration. The arguments
presented are a mere rehash of what have been said and reiterated in the pleadings, all of which have
been considered and found without merit in the Decision now assailed.

Be that as it may, it bears reiterating that the title of PFINA Properties, Inc., Transfer Certificate of Title
No. 186662, was irregularly and illegally issued. As such, the reinstatement of the titles of private
respondents was proper and did not constitute a collateral attack on the title of PFINA. It should be
recalled that the transfer of title from the Heirs of Pael in favor of PFINA was replete with badges of fraud
and irregularities which rendered nugatory and inoperative the existing doctrines on land registration and
land titles. More important, the Heirs of Pael had earlier disposed of their rights. There was nothing to
transfer to PFINA. The transfer was not only fictitious, it was void.

PFINA claims that it acquired the properties from the Heirs of Pael by virtue of a deed of assignment
dated January 25, 1983, hence, it filed a motion to intervene before the Court of Appeals. It is worthy to
note, however, that before it filed its motion for intervention, or for a long period of fifteen (15) years,
PFINA and the Heirs of Pael were totally silent about the alleged deed of assignment. No steps were
taken by either of them to register the deed or secure transfer certificate of title evidencing the change of
ownership during this long period of time.

Furthermore, at the time PFINA acquired the disputed properties in 1983, its corporate name was PFINA
Mining and Exploration, Inc., a mining company which had no valid grounds to engage in the highly
speculative business of urban real estate development.

Both the decisions of the Court of Appeals and this Court show that the alleged transfer in 1983 was not
only dubious and fabricated; it could produce no legal effect. As stated above, the Paels were no longer
owners of the land they allegedly assigned.

In the Decision, we affirmed the factual findings of the Court of Appeals because they are amply
supported by the evidence on record. Well established is the rule that if there is no showing of error in
the appreciation of facts by the Court of Appeals, this Court treats them as conclusive. The conclusions
of law which the Court of Appeals drew from those facts are likewise accurate and convincing.

Insofar as the original parties in G.R. Nos. 133547 and 133843 are concerned, the motions for
reconsideration are, therefore, denied with finality. No further pleadings from them will be entertained.

| Page 1 of 4
During the pendency of the motions for reconsideration, the University of the Philippines filed a motion
for intervention, alleging that the properties covered by TCT No. 52928 and No. 52929 in the name of
respondents Chin and Mallari form part of the vast tract of land that is the U.P. Campus, which is
registered in the name of U.P. under TCT No. 9462. Therefore, any pronouncement by this Court
affecting the properties would create a cloud over U.P.'s title, for which reason it had a right to intervene
in these proceedings.

While as a rule, the intervention of a new party at this late stage should no longer be allowed, there is in
the cases at bar an inescapable issue waiting to be resolved, and which issue can be taken up herein
without the necessity of separate proceedings.

In Director of Lands vs. Court of Appeals,[1] this Court stated:

But Rule 12 of the Rules of Court like all other Rules therein promulgated, is simply a rule of procedure,
the whole purpose and object of which is to make the powers of the Court fully and completely available
for justice. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application
of justice to the rival claims of contending parties. It was created not to hinder and delay but to facilitate
and promote the administration of justice. It does not constitute the thing itself which courts are always
striving to secure to litigants. It is designed as the means best adopted to obtain that thing. In other
words, it is a means to an end.

The denial of the motions for intervention arising from the strict application of the rule due to alleged lack
of notice to, or the alleged failure of, movants to act seasonably will lead the Court to commit an act of
injustice to the movants, to their successors-in-interest and to all purchasers for value and in good faith
and thereby open the door to fraud, falsehood and misrepresentation, should intervenors' claims be
proven to be true. For it cannot be gainsaid that if the petition for reconstitution is finally granted, the
chaos and confusion arising from a situation where the certificates of title of the movants covering large
areas of land overlap or encroach on properties the title to which is being sought to be reconstituted by
private respondent, who herself indicates in her Opposition that, according to the Director of Lands, the
overlapping embraces some 87 hectares only, is certain and inevitable. xxx xxx xxx.

Likewise in the case of Mago v. Court of Appeals,[2] it was held:

These matters should have been taken into account by the courts a quo for being of utmost importance
in ruling on petitioners' motion for intervention. The permissive tenor of the provision on intervention
shows the intention of the Rules to give to the court the full measure of discretion in permitting or
disallowing the same. But needless to say, this discretion should be exercised judiciously and only after
consideration of all the circumstances obtaining in the case.

But it is apparent that the courts a quo only considered the technicalities of the rules on intervention and
of the petition for relief from judgment. The denial of their motion to intervene arising from the strict
application of the rule was an injustice to petitioners whose substantial interest in the subject property
cannot be disputed. It must be stressed that the trial court granted private respondent's petition for
prohibition with injunction without petitioners being impleaded, in total disregard of their right to be heard,
when on the face of the resolution of the Community Relations and Information Office (CRIO) sought to
be enjoined, petitioners were the ones directly to be affected. We need not belabor the point that
petitioners are indeed indispensable parties with such an interest in the controversy or subject matter
that a final adjudication cannot be made in their absence without affecting, nay injuring, such interest.

Therefore, notwithstanding its belated filing, the motion for intervention of U.P. is granted, albeit the
adjudication thereof shall be limited to a determination of the alleged overlapping or encroachment
| Page 2 of 4
between U.P.'s title, on the one hand, and respondents' TCT Nos. 52928 and 52929, on the other hand.

In its comment, intervenor U.P. cites several cases decided by this Court wherein its title to the property
contested in these cases has long been upheld, namely:

1) Tiburcio v. PHHC and U.P., 106 Phil. 477;

2) Galvez and Tiburcio v. Tuason, dela Paz, U.P. and PHHC, 10 SCRA 344;

3) PHHC and U.P. v. Mencias, 20 SCRA 1031;

4) Katigbak v. IAC, Director of Lands and U.P., G.R. No. L67414, December 7, 1988;

5) Varsity Hills, Inc. v. Mariano, 163 SCRA 132;

6) Roberto A. Pael, et al. v. Court of Appeals, et al., G.R. No. 97277, April 15, 1992; and

7) Krus na Ligas Farmers Multi-Purpose Cooperative v. U.P. and Office of the Presidential Legal
Assistant, G.R. No. 107622, March 23, 1993.

Intervenor U.P. specifically cites the decision in Roberto A. Pael et al. v. Court of Appeals, et al., supra,
wherein the title of the Paels was declared to be of dubious origin and a fabrication. Hence, since
respondents derive their titles from a defective title, their titles should also be null and void.

By way of historical backgrounder, intervenor U.P. narrates that its titles previously covered by TCT No.
9462 emanated from a sale by the Commonwealth of the Philippines to the University in 1949. Prior to
that, the U.P. title can be traced back to OCT No. 730 in the name of Mariano Severo Tuason and others
as early as 1914.

On the other hand, respondents Chin and Mallari contend that their titles, TCT Nos. 52928 and 52929,
cover lands which are outside of the properties validly and legitimately owned by, and titled in the name
of, U.P. They claim that there is neither encroachment nor overlapping.

Considering the conflicting claims by U.P. and respondents, the ascertainment of boundaries of the
lands they respectively claim becomes imperative. The instant cases have altogether taken more than
eight (8) years. Despite the exceedingly voluminous records, the boundaries of the properties covered by
the disputed titles of respondents and the boundaries of the lands covered by the title of U.P. are not
discussed therein. In order to avoid the institution of new cases and thus obviate further litigation, we
deem it best to have any conflict and dispute on this matter speedily resolved through an intervention.
Concomitantly, there is a need for reception of further evidence which, however, can not be done before
this Court. Hence, this case should be remanded to the Court of Appeals for reception of evidence
relevant to determining the boundaries of the conflicting claims between U.P. and respondents Chin and
Mallari over the property in dispute.

WHEREFORE, in view of the foregoing, the motion for intervention of the University of the Philippines is
GRANTED. The case is REMANDED to the Court of Appeals for reception of evidence on the conflicting
claims over the property covered by TCT Nos. 52928 and 52929 between the intervernor University of
the Philippines, on the one hand, and respondents Jorge H. Chin and Renato B. Mallari, on the other
hand. The motions for reconsideration filed by petitioners are DENIED for lack of merit. This denial is
FINAL and no further pleadings from petitioners will be entertained.

| Page 3 of 4
SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.

[1] 93 SCRA 238 [1979].

[2] 303 SCRA 600 [1999].

| Page 4 of 4
UY SIULIONG, MARIANO LIMJAP, GACU UNG JIENG, EDILBERTO CALIXTO and
UY CHO YEE, petitioners, vs. THE DIRECTOR OF COMMERCE AND INDUSTRY,
respondent.

1919-12-01 | G.R. No. 15429

DECISION

JOHNSON, J .:

The purpose of this action is to obtain the writ of mandamus to require the respondent to file and register,
upon the payment of the lawful fee, articles of incorporation, and to issue to the petitioners as the
incorporators of a certain corporation to be known as "Siuliong y Compania, lnc.," a certificate under the
seal of the office of said respondent, certifying that the articles of incorporation have been duly filed and
registered in his office in accordance with the law.

To the petition the respondent demurred and the cause was finally submitted upon the petition and
demurrer. The important facts necessary for the solution of the question presented, which are found in
the petition, may be stated as follows:

1. That prior to the presentation of the petition the petitioners had been associated together as partners,
which partnership was known as a "mercantile regular colectiva," under the style and firm name of
"Siuliongy Cia.;"

2. That the petitioners herein, who had theretofore been members of said partnership of "Siuliong y
Cia.," desired to dissolve said partnership and to form a corporation composed of the same persons as
incorporators, to be known as "Siuliong y Compania, Incorporada;"

3. That the purpose of said corporation, "Siuliong y Cia., Inc.," is (a) to acquire the business of the
partnership theretofore known as Siuliong & Co., and (b) to continue said business with some of its
objects or purposes;

4. That an examination of the articles of incorporation of the said "Siuliong y Compania, Incorporada"
(Exhibit A) shows that it is to be organized for the following purposes:

(a) The purchase and sale, importation and exportation, of the products of the country as well as of
foreign countries;

(b) To discount promissory notes, bills of exchange, and other negotiable instruments;

(c ) The purchase and sale of bills of exchange, bonds, stocks, or "participaciones de sociedades
mercantiles e industriales [joint account of mercantile and industrial associations]," and of all classes of
mercantile documents; "comisiones [commissions] ;" "consignaciones [consignments];"

(d) To act as agents for life, marine, and fire insurance companies;

(e) To purchase and sell boats of all classes "y fletamento de los mismos tand charterage of same] ;"
and

(f) To purchase and sell industrial and mercantile establishments.

| Page 1 of 5
While the articles of incorporation of "Siuliong y Cia., Inc." states that its purpose is to acquire and
continue the business, with some of its objects or purposes, of Siuliong & Co., it will be found upon an
examination of the purposes enumerated in the proposed articles of incorporation of "Siuliong y Cia.,
Inc.," that some of the purposes of the original partnership of "Siuliong y Cia." have been omitted. For
example, the articles of partnership of "Siuliong y Cia. gave said company the authority to purchase and
sell all classes "de fincas rusticas y urbanas [of rural and city real estate]" as well as the right to act as
agents for the establishment of any other business which it might esteem convenient for the interests of
"la compania [the company] ". (Exhibit C).

The respondent in his argument in support of the demurrer contends (a) that the proposed articles of
incorporation presented for file and registry permitted the petitioners to engage in a business which had
for its end more than one purpose; (b) that it permitted the petitioners to engage in the banking business,
and (c) to deal in real estate, in violation of the Act of Congress of July 1, 1902.

The petitioners, in reply to said argument of the respondent, while insisting that said proposed articles of
incorporation do not permit it to enter into the banking business nor to engage in the purchase and sale
of real estate in violation of said Act of Congress, expressly renounced in open court their right to
engage in such business under their articles of incorporation, even though said articles might be
interpreted in a way to authorize them so to do. That renouncement on the part of the petitioners
eliminates from the purposes of said proposed corporation (of "Siuliong y Cia., Inc.") any right to engage
in the banking business as such, or in the purchase and sale of real estate.

We come now to the consideration of the principal question raised by the respondent, to wit: that the
proposed articles of incorporation of "Siuliong y Cia., Inc.," permits it to engage in a business with more
than one purpose.

If upon an examination of the articles of incorporation we find that its purpose is to engage in a business
with but one principal purpose, then that contention of the respondent will have been answered and it will
be unnecessary to discuss at length the question whether or not a corporation organized for commercial
purposes in the Philippine Islands can be organized for more than one purpose.

The attorney for the respondent, at the time of the argument, admitted in open court that corporations in
the Philippine Islands might be organized for both the "importation and exportation" of merchandise and
that there might be no relation between the kind of merchandise imported with the class of merchandise
exported.

Referring again to the proposed articles of incorporation, a copy of which is united with the original
petition and marked Exhibit A, it will be seen that the only purposes of said corporation are those
enumerated in subparagraphs (a), (b), (c), (d), (e) and (f) of paragraph 4 above. While said articles of
incorporation are somewhat loosely drawn, it is clear from a reading of the same that the principal
purpose of said corporation is to engage in a mercantile business, with the power to do and perform the
particular acts enumerated in said subparagraphs above referred to.

Without discussing or deciding at this time whether a corporation organized under the laws of the
Philippine Islands may be organized for more than one purpose, we are of the opinion and so decide that
a corporation may be organized under the laws of the Philippine Islands for mercantile purposes, and to
engage in such incidental business as may be necessary and advisable to give effect to, and aid in, the
successful operation and conduct of the principal business.

In the present case we are fully persuaded that all of the power and authority included in the articles of
incorporation of "Siuliong J Cia., Inc.," enumerated above in paragraph 4 (Exhibit A) are only incidental
| Page 2 of 5
to the principal purpose of said proposed incorporation, to wit: "mercantile business." The purchase and
sale, importation and exportation of the products of the country, as well as of foreign countries, might
make it necessary to purchase and discount promissory notes, bills of exchange, bonds, negotiable
instruments, stock, and interest in other mercantile and industrial associations. It might also become
important and advisable for the successful operation of the corporation to act as agent for insurance
companies as well as to buy, sell and equip boats and to buy and sell other establishments. and
industrial and mercantile businesses.

While we have arrived at the conclusion that the proposed articles of incorporation do not authorize the
petitioners to engage in a business with more than one purpose, we do not mean to be understood as
having decided that corporations under the laws of the Philippine Islands may not engage in a business
with more than one purpose. Such an interpretation might work a great injustice to corporations
organized under the Philippine laws. Such an interpretation would give foreign corporations, which are
permitted to be registered under the laws here and which may be organized for more than one purpose,
a great advantage over domestic corporations. We do not believe that it was the intention of the
legislature to give foreign corporations such an advantage over domestic corporations.

Considering the particular purposes and objects of the proposed articles of incorporation which are
specially enumerated above, we are of the opinion that it contains nothing which violates in the slightest
degree any of the provisions of the laws of the Philippine Islands, and the petitioners are, therefore,
entitled to have such articles of incorporation filed and registered as prayed for by them and to have
issued to them a certificate under the seal of the office of the respondent, setting forth that such articles
of incorporation have been duly filed in his office. (Sec. 11, Act No. 1459.)

Therefore, the petition prayed for is hereby granted, and without any finding as to costs, it is so ordered.

Arellano, C. J., Torres and Avanceña, JJ., concur.

Separate Opinions

STREET, J., concurring:

The petitioners in this case are desirous of forming a corporation to take over and continue a business
which for a number of years has been conducted in the city of Manila as an ordinary collective mercantile
partnership under the name of "Siuliong y Compania." To this end it is necessary that the articles of
incorporation should be filed in the office of the Director of Commerce and Industry, who, it appears, has
withheld approval of the articles submitted to him and has refused to file the same in his office.

The position taken by the Director of Commerce and Industry is that the articles of the proposed
corporation state more than one corporate purpose, contrary to the provisions of Act No. 1459 (the
Corporation Law). In order to ascertain whether this contention is sound it becomes necessary to
examine the provision contained in the proposed articles in relation with the requirements of the Act
mentioned.

The purposes for which the corporation is to be formed are stated in the second clause of the proposed
articles in the following language:

"Second. That the object for which said corporation is organized are: to acquire the business of the
regular partnership 'Siuliong y Compania,' and to continue operating said business in all its parts, and,
incidental to the principal object, the corporation shall have powers to transact the following: the buying
and selling, importation and exportation, of native as well as foreign merchandise; the discount of
| Page 3 of 5
promissory notes, bills of exchange and other negotiable instruments; the buying and selling of bills of
exchange, bonds, shares, and interests in mercantile and industrial partnerships; commissions;
consignments; life, maritime, and fire insurance: the buying and selling of vessels of all kinds and
charterage of same; and the buying and selling of industrial or mercantile plants."

This language is substantially a reproduction of the fourth clause of the partnership articles under which
the business of Siuliong & Company is being now conducted, as may be seen by a comparison with the
wording of said fourth clause, which is as follows:

"Fourth. The object of the partnership shall be the continuation of all the business of the partnership
'Siuliong y Compania' which is dissolved on this date, June 30 1916, or rather the buying and selling, the
importation and exportation, of native as well as foreign products; the buying and selling of bills of
exchange and of all kinds of commercial documents; commissions; consignments; maritime and fire
insurance; the buying and selling of all kinds of rural and city real estate, as well as vessels of all kinds
and their charterage; and the manager is hereby authorized to organize any other kind of business which
he may deem convenient for the company's interest."

It must be admitted that the second clause of the proposed articles of incorporation is expressed in a
way which invites criticism; and if I may be permitted so to suggest the provision would have been better
conceived if it had started off something like this:

"The general object of this corporation is to engage in commercial activities, such as the buying and
selling of merchandise and commodities of every kind; the importation and exportation thereof; the
conduct of the business of commission merchants, consignees, and insurance agencies; the buying and
selling of boats and the chartering thereof, as well as the buying and selling of industrial and mercantile
plants; etc., etc."

In setting out the corporate purpose with a view to defining the legitimate range of the faculties of the
corporation, it is undesirable to state that its primary purpose is to take over the business of some
existing concern. Undoubtedly a corporation may obtain its capital and draw its resources from a prior
enterprise, but it acquires such business by transfer; and the nature of the activities of the older business
has no bearing on the faculties of the new corporation. All the powers that a corporation can lawfully
exercise are derived from the state by virtue of the laws governing the creation and conduct of
corporations.

Now, what are the limits upon the activities for which a corporation may be created? The answer is to be
found, if anywhere, in the Corporation Law. The first chapter of that law deals with corporations in
general and contains the provisions common to all corporations. In the second chapter are found various
special provisions applicable to particular forms of corporate activities. Of these there are several
varieties, to wit, railroad corporations, savings and mortgage banks, banking corporations, trust
corporations, domestic insurance corporations, religious corporations, colleges and institutions of
learning, and building and loan corporations.

It is obvious that no single corporation can be permitted to exercise the mixed functions of more than one
of these classes; and the Director of Commerce and Industry would be clearly acting within his power in
rejecting any proposed articles of a corporation which confers or appears to confer powers particularly
appropriate to more than one of these forms of corporate enterprise.

Aside from the lines that are laid down in the fundamental classification contained in the Corporation Law,
there seems to be no limit upon the legitimate activities of corporate enterprise. For instance, a
corporation organized for commercial purposes can lawfully engage in any one of the thousand or more
| Page 4 of 5
activities which may be imagined under the head of commercial; but it must abstain from activities
peculiar to the forms of corporate enterprise for which special provisions are made.

This implies that the word "purpose" as used in the expression "the purpose for which the corporation is
formed," in subsection 2 of section 6 of the Corporation Law, may properly be conceived as including the
plural as well as the singular. But the purposes, when there are more than one, must be capable of being
lawfully combined, that is not obnoxious to the classification created by the law.

It is not necessary, and indeed will rarely be found desirable, to attempt to set out in the articles of
incorporation the multitude of activities in which the corporation can engage incidentally, as reasonably
necessary to accomplish the purpose or purposes for which the corporation was primarily formed. There
is general authority for the exercise of all such implied powers in section 13 of the Corporation Law, and
they need not be expressed.

Returning now to the second clause of the proposed articles of incorporation for "Siuliong y Compania,
Incorporated." I entertain a doubt as to the propriety of admitting into that document the words "discount
of notes, bills, and other negotiable documents" and "the buying and selling of bills, bonds, stocks, and
shares of mercantile and industrial partnerships, as well as mercantile documents of every sort." The
reason simply is that in so far as it is necessary to engage in these activities for the accomplishment of
the general purposes of the corporation, it may all be done in the exercise of the implied power
expressed in section 13; and the insertion into the articles of the words quoted may give rise to the
inference that the incorporators may desire to engage in a line of business appropriate only to
corporations created for banking purposes. (See sec. 116 of Act No. 1459.) On the other hand, it may be
said that the activities expressed in the words quoted are those peculiar to the business of stock-brokers;
and one reason is apparent why the business of stock-broking might not be lawfully combined under one
corporate charter with the other mercantile activities mentioned in the second clause of the articles.

On the whole, as I understand the opinion written by Justice Johnson, this court intends to hold that the
second clause of the proposed articles, when properly interpreted, means that the company to be formed
intends primarily to dedicate itself to industrial and mercantile activities, as its principal object, and that
the other activities mentioned are purely subordinate. I have no special criticism to make of this view;
and inasmuch as the interpretation which the court thus places upon the proposed charter removes the
possibility that the corporation may, under the protection thereof, engage in illegitimate lines of interprise,
I am content to express my concurrence in the result reached by the court. But I really think the
proposed articles ought to be amended.

MALCOLM, J., concurs in the result, reserving his opinion concerning the suggestion in the third
paragraph from the last of the principal decision.

| Page 5 of 5
NORBERTO ASUNCION, ET AL., petitioners-appellants, vs. MANUEL DE YRIARTE,
respondent-appellee.

1914-09-24 | G.R. No. 9321

DECISION

MORELAND, J.:

This is an action to obtain a writ of mandamus to compel the chief of the division of archives of the
Executive Bureau to file certain articles of incorporation.

The chief of the division of archives, the respondent, refused to file the articles of incorporation,
hereinafter referred to, upon the ground that the object of the corporation, as stated in the articles, was
not lawful and that, in pursuance of section 6 of Act No. 1459, they were not registerable.

The proposed incorporators began an action in the Court of First Instance of the city of Manila to compel
the chief of the division of archives to receive and register said articles of incorporation and to do any
and all acts necessary for the complete incorporation of the persons named in the articles. The court
below found in favor of the defendant and refused to order the registration of the articles mentioned,
maintaining and holding that the defendant, under the Corporation Law, had authority to determine both
the sufficiency of the form of the articles and the legality of the object of the proposed corporation. This
appeal is taken from that judgment.

The first question that arises is whether or not the chief of the division of archives has authority, under
the Corporation Law, on being presented with articles of incorporation for registration, to decide not only
as to the sufficiency of the form of the articles, but also as to the lawfulness of the purposes of the
proposed corporation.

It is strongly urged on the part of the appellants that the duties of the defendant are purely ministerial and
that he has no authority to pass upon the lawfulness of the object for which the incorporators propose to
organize. No authorities are cited to support this proposition and we are of the opinion that it is not sound.

Section 6 of the Corporation Law reads in part as follows:

"Five or more persons, not exceeding fifteen, a majority of whom are residents of the Philippine Islands,
may form a private corporation for any lawful purpose by filing with the division of archives, patents,
copyrights, and trademarks of the Executive Bureau articles of incorporation duly executed and
acknowledged before a notary public, . . ."

Simply because the duties of an official happen to be ministerial, it does not necessarily follow that he
may not, in the administration of his office, determine questions of law. We are of the opinion that it is the
duty of the division of archives, when articles of incorporation are presented for registration, to determine
whether the objects of the corporation as expressed in the articles are lawful. We do not believe that,
simply because articles of incorporation presented for registration are perfect in form, the division of
archives must accept and register them and issue the corresponding certificate of incorporation no
matter what the purpose of the corporation may be as expressed in the articles. We do not believe it was
intended that the division of archives should issue a certificate of incorporation to, and thereby put the
seal of approval of the Government upon, a corporation which was organized for base or immoral
purposes. That such corporation might later, if it sought to carry out such purposes, be dissolved, or its
| Page 1 of 3
officials imprisoned or itself heavily fined furnishes no reason why it should have been created in the first
instance. It seems to us to be not only the right but the duty of the division of archives to determine the
lawfulness of the objects and purposes of the corporation before it issues a certificate of incorporation.

It having been determined that the division of archives, through its officials, has authority to determine
not only the sufficiency as to form of the articles of incorporation offered for registration, but also the
lawfulness of the purposes of the corporation as stated in those articles, the next inquiry leads us to the
determination of the question whether or not the chief of the division of archives, who is the
representative thereof and clothed by it with authority to deal with articles of incorporation offered for
registration, is subject to mandamus in the performance of his duties.

We are of the opinion that he may be mandamused if he act in violation of law or if he refuses, unduly, to
comply with the law. While we have held that defendant has power to pass upon the lawfulness of the
purposes of the proposed corporation and that he may, in the fulfillment of his duties, determine the
question of law whether or not those purposes are lawful and embraced within that class concerning
which the law permits corporations to be formed, this does not necessarily mean, as we have already
intimated, that his duties are not ministerial. On the contrary, there is no incompatibility in holding, as we
do hold, that his duties are ministerial and that he has no authority to exercise discretion in receiving and
registering articles of incorporation. He may exercise judgment ---- that is, the judicial function ---- in the
determination of the question of law referred to, but he may not use discretion. The question whether or
not the objects of a proposed corporation are lawful is one that can be decided one way only. If he err in
the determination of that question and refuse to file articles which should be filed under the law, that
decision is subject to review and correction and, upon proper showing, he will be ordered to file the
articles. This is the same kind of determination which a court makes when it decides a case upon the
merits. When a case is presented to a court upon the merits, the court can decide only one way and be
right. As a matter of law, there is only one course to pursue. In a case where the court or other official
has discretion in the resolution of a question, then, within certain limitations, he may decide the question
either way and still be right. Discretion, it may be said generally, is a faculty conferred upon a court or
other official by which he may decide a question either way and still be right. The power conferred upon
the division of archives with respect to the registration of articles of incorporation is not of that character.
It is of the same character as the determination of a lawsuit by a court upon the merits. It can be decided
only one way correctly.

If, therefore, the defendant erred in determining the question presented when the articles were offered
for registration, then that error will be corrected by this court in this action and he will be compelled to
register the articles as offered. If, however, he did not commit an error, but decided that question
correctly, then, of course, his action will be affirmed to the extent that we will deny the relief prayed for.

The next question leads us to the determination of whether or not the purposes of the corporation as
stated in the articles of incorporation are lawful within the meaning of the Corporation Law.

The purpose of the incorporation as stated in the articles is: "That the object of the corporation is (a) to
organize and regulate the management, disposition, administration and control which the barrio of Pulo
or San Miguel or its inhabitants or residents have over the common property of said residents or
inhabitants or property belonging to the whole barrio as such; and (b) to use the natural products of the
said property for institutions, foundations, and charitable works of common utility and advantage to the
barrio or its inhabitants."

The municipality of Pasig as recognized by law contains within its limits several barrios or small
settlements, like Pulo or San Miguel, which have no local government of their own but are governed by
the municipality of Pasig through its municipal president and council. The president and members of the
| Page 2 of 3
municipal council are elected by a general vote of the municipality, the qualified electors of all the barrios
having the right to participate.

The municipality of Pasig is a municipal corporation organized by law. It has the control of all property of
the municipality. The various barrios of the municipality have no right to own or hold property, they not
being recognized as legal entities by any law. The residents of the barrios participate in the advantages
which accrue to the municipality from public property and receive all of the benefits incident to residence
in a municipality organized by law. If there is any public property situated in the barrio of Pulo or San
Miguel not belonging to the general government or the province, it belongs to the municipality of Pasig
and the sole authority to manage and administer the same resides in that municipality. Until the present
laws upon the subject are changed no other entity can be the owner of such property or control or
administer it.

The object of the proposed corporation, as appears from the articles offered for registration, is to make of
the barrio of Pulo or San Miguel a corporation which will become the owner of and have the right to
control and administer any property belonging to the municipality of Pasig found within the limits of that
barrio. This clearly cannot be permitted. Otherwise municipalities as now established by law could be
derived of the property which they now own and administer. Each barrio of the municipality would
become, under the scheme proposed, a separate corporation, would take over the ownership,
administration, and control of that portion of the municipal territory within its limits. This would disrupt, in
a sense, the municipalities of the Islands by dividing them into a series of smaller municipalities entirely
independent of the original municipality.

What the law does not permit cannot be obtained by indirection. The object of the proposed corporation
is clearly repugnant to the provisions of the Municipal Code and the governments of municipalities as
they have been organized thereunder. (Act No. 82, Philippine Commission.)

The judgment appealed from is affirmed, with costs against appellants.

Arellano, C.J., Torres, Johnson, Carson and Araullo, JJ., concur.

| Page 3 of 3