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SMITH BELL v NATIVIDAD

Facts: Smith Bell.is a corporation organized and existing under the


laws of the Philippine but a majority of its stockholders are British
subjects. When SimithBell applied for a certificate of Philippine
registry of the vessel owned by it, the Collector refused to issue the
certificate, giving as his reason that all the stockholders of Smith
Bell were not citizens either of the United States or of the Philippine
Islands.

BACHE&CO v RUIZ
Facts: Respondent Commissioner of Internal Revenue, wrote a
letter to respondent Judge Ruiz requesting the issuance of a search
warrant against petitioner for violation of NIRC. Petitioner, on the
other hand, filed a petition to quash the search warrant.
Respondent Judge however, dismissed the said petition of the
petitioner.

Issue: Whether the Government can deny the registry of a vessel


to corporations having alien stockholders

Ruling: The SC ruled that although an officer of a corporation


cannot refuse to produce the books and papers of such corporation,
it does not mean however that a corporation is not entitled to
immunity against unreasonable searches and seizures. (NOTE: The
Search Warrant is invalid for lack of personal examination by the
issuing Judge.)

Ruling: Yes the Government can deny the registry of a vessel to


corporations having alien stockholders since it is within the purview
of the police power. . However, the SCacknowledge thata
corporation having alien stockholders, is still entitled to the
protection afforded by the due-process of law and equal protection
of the laws clause of the constitution.

BATAAN SHIPYARD v PCGG


STONEHILL v DIOKNO
Facts:Upon application of the officers of the government, several
judges issued search warrants against petitioners and the
corporations of which they were officers for violation of Central
Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and
the Revised Penal Code. Alleging that the aforementioned search
warrants are null and void, said petitioner filed with the SC a writ of
preliminary injunction restraining Respondents-Prosecutors from
using the effects seized.

Facts:In this case the petitioner contends that its right against selfincrimination had been violated by the Order issued by the
respondent PCGG requiring it to produce corporate records under
pain of contempt if it failed to do so.
Ruling: The SC ruled that while an individual may lawfully refuse to
answer incriminating questions, it does not follow that a
corporation being a juridical person may refuse to show its hand
when charged with an abuse of privileges granted to it by the state.

Ruling:The SC held that petitioners have no cause of action to


assail the legality of the search warrants, for the simple reason that
said corporations have their respective personalities, separate and
distinct from the personality of the petitioners and the objection to
an unlawful search and seizure is purely personal and cannot be
availed of by third parties.

NATIONAL COAL CO. V. CIR


Facts: The National Coal Co.(NCC) was created by a special law
and was enacted by virtue of Act 2705 in order to develop a coal
industry.
It was engaged in coal mining on reserved lands
belonging to the government.
The National Coal Co.(NCC) filed a case against the CIR for the
recovery of sum of money it paid on protest as specific tax on

24,089 tons of coals claiming exemption to tax pursuant to Sec. 14


and 15 of Act 2719.

DAVAO CITY WATER DISTRICT VS. CIVIL SERVICE


COMMISSION

Issue: Whether or not NCC is a private corporation?

FACTS: Petitioners are among the more than five hundred (500)
water districts existing throughout the country formed pursuant to
the provisions of Presidential Decree No. 198, as amended by
Presidential Decrees Nos. 768 and 1479, otherwise known as the
"Provincial Water Utilities Act of 1973."

Held: Plaintiff is a private corporation. The mere fact that the


government is a majority stockholder of the corporation does not
make the corporation. Act 2705 as amended by Act 2822 makes it
subject to all the provision of the corporation law.

Presidential Decree No. 198 was issued by the then


President Ferdinand E. Marcos by virtue of his legislative power
under Proclamation No. 1081. It authorized the different local
legislative bodies to form and create their respective water districts
through a resolution they will pass subject to the guidelines, rules
and regulations therein laid down. The decree further created and
formed the "Local Water Utilities Administration" (LWUA), a national
agency attached to the National Economic and Development
Authority (NEDA), and granted with regulatory power necessary to
optimize public service from water utilities operations.

As a private corporation, it has no greater rights, powers


or privileges than any other corporation which may be organized
for the same purpose under the corporation law and certainly it was
not the intention of the legislature to give preference or right or
privilege over other legitimate private corporation in the mining of
coal.
NCC is required to pay taxes pursuant to Section 1496 of
the Administrative Code. Moreover, Act 2719 is applicable only to
lessee or owner of coal bearing lands which NCC is not.

ISSUE: WHETHER OR NOT THE LOCAL WATER DISTRICTS FORMED


AND CREATED PURSUANT TO THE PROVISIONS OF P.D. 198, AS
AMENDED,
ARE
GOVERNMENT-OWNED
OR
CONTROLLED
CORPORATIONS WITH ORIGINAL CHARTER FALLING UNDER THE
CIVIL SERVICE LAW AND/OR COVERED BY THE VISITORIAL POWER
OF THE COMMISSION ON AUDIT?

PHILIPPINE SOCIETY v COA


Facts: Petitioner was incorporated as a juridical entity over 100
years ago by virtue of Act No. 1285. The petitioner at the time it
was created, was composed of animal aficionados and animal
propagandists. At the time of the enactment of Act No. 1285, the
original Corporation Law Act No. 1459, was not yet in existence. Act
No. 1285 antedated both Corporation Law and the Constitution of
SEC. When COA sought to conduct an audit survey. The petitioner
protested on the ground that it was a private entity hence, not
under the jurisdiction of COA.

RULING: After a fair consideration of the parties' arguments


coupled with a careful study of the applicable laws as well as the
constitutional provisions involved, We rule against the petitioners
and reiterate Our ruling in Tanjay case declaring water districts
government-owned or controlled corporations with original charter.

Issue: Whether petitioner qualifies as a government agency that


may be subject to audit by COA.
Ruliing: No. The fact that a certain juridical entity is impressed
with public interest does not ipso facto make the entity a public
corporation. The true criterion to determine whether a corporation
is private or public is found in the totality of the relation of the
corporation to the State.

Ascertained from a consideration of the whole statute, PD


198 is a special law applicable only to the different water districts
created pursuant thereto. In all its essential terms, it is obvious that
it pertains to a special purpose which is intended to meet a
particular set of conditions and cirmcumstances. The fact that said
decree generally applies to all water districts throughout the
country does not change the fact that PD 198 is a special law.
Accordingly, this Court's resolution in Metro Iloilo case declaring PD
198 as a general legislation is hereby abandoned.

through three trustees all of Chinese nationality. The


donation was duly accepted by Yu Juan, of Chinese
nationality, founder and deaconess of the Temple, acting in
representation and in behalf of the latter and its trustees.
The Register of Deeds refused to record such donation.
ISSUE:
Whether or not the act of the Register of Deeds in
refusing to register the donation of a parcel of land executed
in favor of a religious organization whose founder, trustees
and administrator are Chinese citizens is proper.

By "government-owned or controlled corporation with


original charter," We mean government owned or controlled
corporation created by a special law and not under the Corporation
Code of the Philippines.

HELD: The act of the Register of Deeds is proper.


The Constitution makes no exception in favor of religious
associations. Neither is there any such saving found in
sections 1 and 2 of Article XIII, restricting the acquisition of
public agricultural lands and other natural resources to
"corporations or associations at least sixty per centum of
the capital of which is owned by such citizens" (of the
Philippines).

From the foregoing pronouncement, it is clear that what has


been excluded from the coverage of the CSC are those corporations
created pursuant to the Corporation Code. Significantly, petitioners
are not created under the said code, but on the contrary, they were
created pursuant to a special law and are governed primarily by its
provision.

The fact that the appellant religious organization has no


capital stock does not suffice to escape the Constitutional
inhibition, since it is admitted that its members are of
foreign nationality. The purpose of the sixty per centum
requirement is obviously to ensure that corporations or
associations allowed to acquire agricultural land or to exploit
natural resources shall be controlled by Filipinos; and the
spirit of the Constitution demands that in the absence of
capital stock, the controlling membership should be
composed of Filipino citizens.

The provisions of PD 198, as amended, are similar to those


which are actually contained in other corporate charters. The
conclusion is inescapable that the said decree is in truth and in fact
the charter of the different water districts for it clearly defines the
latter's primary purpose and its basic organizational set-up. In other
words, PD 198, as amended, is the very law which gives a water
district juridical personality. While it is true that a resolution of a
local sanggunian is still necessary for the final creation of a district,
this Court is of the opinion that said resolution cannot be
considered as its charter, the same being intended only to
implement the provisions of said decree.

PEOPLE V. QUASHA
Facts: William H. Quasha is a lawyer representing Pacific Airways
Corporation, a corporation organized for the purpose of engaging in
business as a common carrier. Quasha was charged with the crime
of falsification of a public and commercial document for having
been entrusted with the preparation and registration of the article
of incorporation which he caused to appear in said article of
incorporation that one Arsenio Baylon, a Filipino citizen, had

REGISTER OF DEEDS vs. UNG SIU SI TEMPLE


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

subscribed to and was the owner of 60.005 per cent of the


subscribed capital stock of the corporation when in reality such was
not the case, the truth being that the owner of the portion of the
capital stock subscribed to by Baylon and the money paid thereon
were American citizen whose name did not appear in the article of
incorporation, and that the purpose for making this false statement
was to circumvent the constitutional mandate that no corporation
shall be authorized to operate as a public utility in the Philippines
unless 60 per cent of its capital stock is owned by Filipinos. Baylon
was merely their trustee. The lower court found him guilty, hence
this appeal.

common carrier by water, and the Public Service Law if it is a


common carrier by land or other kind of public service.
. The majority of the court, however, are also of the opinion
that, even supposing that the act imputed to the defendant
constituted falsification at the time it was perpetrated, still with the
approval of the Party Amendment to the Constitution in March,
1947, which placed Americans on the same footing as Filipino
citizens with respect to the right to operate public utilities in the
Philippines, thus doing away with the prohibition in section 8,
Article XIV of the Constitution in so far as American citizens are
concerned, the said act has ceased to be an offense within the
meaning of the law, so that defendant can no longer be held
criminally liable therefor.

Issue: Whether or not the accused can be charged with having


wrongfully intended to circumvent that fundamental law by not
revealing in the articles of incorporation that Baylon was a mere
trustee of his American co-incorporation and that for that reason
the subscribed capital stock of the corporation was wholly
American?

FILIPINAS COMPAIA DE SEGUROS vs. CHRISTERN,


HUENEFELD & CO. INC.

Held: The court reversed the decision of the lower court.

FACTS: On Oct. 1, 1941, the respondent corporation, Christern


Huenefeld, & Co., Inc., after payment of corresponding premium,
obtained from the petitioner, Filipinas Cia. de Seguros, fire policy in
the sum of P1000,000, covering merchandise contained in a
building located at Roman Street, Binondo Manila.
During the
Japanese military occupation, the building and insured merchandise
were burned. In due time the respondent submitted to the
petitioner its claim under the policy. The salvage goods were sold at
public auction and, after deducting their value, the total loss
suffered by the respondent was fixed at P92,650. The petitioner
refused to pay the claim on the ground that the policy in favor of
the respondent had ceased to be in force on the date the United
States declared war against Germany, the respondent Corporation
(though organized under and by virtue of the laws of the
Philippines) being controlled by the German subjects and the
petitioner being a company under American jurisdiction when said
policy was issued on Oct. 1, 1941.
In pursuance of the order of the Director of Bureau of
Financing, Philippine Executive Commission, petitioner paid
respondent the sum of P92,650.
The present action was filed in the CFI of Manila for the
purpose of recovering from the respondent the sum of P92,650.
PETITIONERS CONTENTION, that the insured merchandise
were burned up after the policy issued in 1941 in favor of the
respondent corporation has ceased to be effective because of the

The court stated that such revelation was not essential, and
the Corporation Law does not require it. Defendant was, therefore,
under no obligation to make it. In the absence of such obligation
and of the allege wrongful intent, defendant cannot be legally
convicted of the crime with which he is charged.
For a corporation to be entitled to operate a public utility it
is not necessary that it be organized with 60 per cent of its capital
owned by Filipinos from the start. A corporation formed with capital
that is entirely alien may subsequently change the nationality of its
capital through transfer of shares to Filipino citizens. conversely, a
corporation originally formed with Filipino capital may subsequently
change the national status of said capital through transfer of shares
to foreigners.
The moment for determining whether a corporation is
entitled to operate as a public utility is when it applies for a
franchise, certificate, or any other form of authorization for that
purpose. And that can be done after the corporation has already
come into being and not while it is still being formed. And at that
moment, the corporation must show that it has complied not only
with the requirement of the Constitution as to the nationality of its
capital, but also with the requirements of the Civil Aviation Law if it
is a common carrier by air, the Revised Administrative Code if it is a

outbreak of the war between the United States and Germany on


Dec. 10, 1941, and that the payment made by the petitioner to the
respondent corporation during the Japanese military occupation
was under pressure.
CFI of Manila dismissed the action without pronouncement
as to costs.
CA affirmed the judgment of the lower court with costs. It
overruled petitioner's contention that the respondent corporation
became an enemy when the United States declared war against
Germany, relying on English and American cases which held that a
corporation is a citizen of the country or state by and under the
laws of which it was created or organized. It rejected the theory
that nationality of private corporation is determine by the character
or citizenship of its controlling stockholders.

Bureau of Financing, in ordering the petitioner to pay the claim of


the respondent, merely obeyed the instruction of the Japanese
Military Administration, as may be seen from the following: "In view
of the findings and conclusion of this office contained in its decision
on Administrative Case dated February 9, 1943 copy of which was
sent to your office and the concurrence therein of the Financial
Department of the Japanese Military Administration, and following
the instruction of said authority, you are hereby ordered to pay the
claim of Messrs. Christern, Huenefeld & Co., Inc. The payment of
said claim, however, should be made by means of crossed check."
It results that the petitioner is entitled to recover what paid
to the respondent under the circumstances on this case. However,
the petitioner will be entitled to recover only the equivalent, in
actual Philippines currency of P92,650 paid on April 19, 1943, in
accordance with the rate fixed in the Ballantyne scale.]

ISSUE: W/N the fire policy became null and void upon the
declaration of war between US and Germany (Dec. 10, 1941).

ROMAN CATHOLIC ADM. OF DAVAO, INC. VS LAND REG. COM.


G.R. 8451

HELD: SC reversed CA's decision and respondent corporation is


ordered to pay to the petitioner hte sum of P77,208.33, Phil.
currency, LESS the amount of the premium, Phil. currency, that
should be returned by the petitioner for the unexpired term of the
policy, beginning Dec. 11, 1941.
The Philippine Insurance Law (Act No. 2427, as amended,) in
Sec. 8, provides that "anyone except a public enemy may be
insured." It stands to reason that an insurance policy ceases to be
allowable as soon as an insured becomes a public enemy.
The respondent having become an enemy corporation on
Dec. 10, 1941, the insurance policy issued in its favor on Oct. 1,
1941, by the petitioner (a Philippine corporation) had ceased to be
valid and enforcible, and since the insured goods were burned after
Dec. 10, 1941, and during the war, the respondent was not entitled
to any indemnity under said policy from the petitioner. HOWEVER,
elementary rules of justice (in the absence of specific provision in
the Insurance Law) require that the premium paid by the
respondent for the period covered by its policy from Dec. 11, 1941,
should be returned by the petitioner.
In the case of an ordinary fire policy, which grants insurance
only from year, or for some other specified term it is plain that
when the parties become alien enemies, the contractual tie is
broken and the contractual rights of the parties, so far as not
vested. lost.

Facts: Meteo L. Rodis executed a deed of sale of a parcel of land


in favor of Roma Catholic Administrator of Davao, Inc. a corporation
sole organized in accordance with Philippine laws, with Msgr. Clovis
Thibault a Canadian national as actual incumbent. The land
Registration Commissioner and the Registration of Deeds of Davao
deny the registration in the absence of proof that at least 60% of its
capital is owned by Filipino citizens in view of Sec. 1 and 5 of Art.
XIII of the Constitution and Sec. 159 of the Corporation Law. The
petitioner contends that a corporation sole irrespective of the
citizenship of its incumbent, is not prohibited or disqualified to
acquired and hold real properties. The Corporation Law and the
Canon Law are explicit in their provisions that a corporation sole or
ordinary is not the owner of the properties but merely the
administrator thereof. The respondents averred that a corporation
actually exercising all rights of ownership over the properties.
Issue: Whether or not the petitioner is qualified to acquire
agricultural lands in the Phlippines?
Held: The Roman Catholic Apostolic Church has no nationality and
that the framers of the Constitution did not have in mind the
religious corporation sole when they provided that 60% of the
capital thereof be owned by Filipino citizens. Thus, if this
constitutional provision were not intended for corporation sole, it is

[Factually, there can be no doubt that the Director of the

obvious that this could not be regulated or restricted by said


provision. In determining whether the constitutional provision
requiring 60% Filipino capital is applicable in Corporation sole, the
nationality of the constituents of the diocese and not the nationality
of the actual incumbent of the parish must be taken into
consideration. Even if the question of nationality is considered, the
constitutional requirement is fully met and satisfied, considering
that the corporation sole in question is composed of an
overwhelming majority of Filipinos.

On September 13, 1977, the Iglesia Ni Cristo, a corporation sole,


duly existing under Philippine laws, filed with the Court of First
Instance of Bulacan an application for the registration of the two
lots. It alleged that it and its predecessors-in-interest had
possessed the land for more than thirty years. It invoked section
48(b) of the Public Land Law, which provides:

Both the Corporation Law and the Canon Law are explicit in their
provisions that a corporation sole or ordinary is not the owner of
the properties that he may acquire but merely the administrator
thereof and holds the same in trust for the church to which the
corporation is an organized and constituents part. Being mere
administrator the constitutional provision of 60% Filipino ownership
is not applicable.

xxx xxx xxx

Chapter VIII.Judicial confirmation of imperfect or


incomplete titles.

SEC. 48. The following-described citizens of the


Philippines, occupying lands of the public domain or
claiming to own any such lands or an interest therein,
but whose titles have not been perfected or
completed, may apply to the Court of First Instance
of the province where the land is located for
confirmation of their claims and the issuance of a
certificate of title therefore, under the Land Register
Act, to wit:

The Register of Deeds of the City of Davao is ordered to register the


deed of sale in favor of the petitioner.
REPUBLIC VS VILLANUEVA

xxx xxx xxx

Facts: This case involves the prohibition in section 11, Article XIV
of the Constitution that "no private corporation or association may
hold alienable lands of the public domain except by lease not to
exceed one thousand hectares in area".

(b) Those who by themselves or through their


predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and
occupation of agricultural lands of the public domain,
under a bona fide claim of acquisition of ownership,
for at least thirty years immediately preceding the
filing of the application for confirmation of title
except when prevented by war or force majeure.
These shall be conclusively presumed to have
performed all the conditions essential to a
Government grant and shall be entitled to a
certificate of title under the provisions of this
chapter." (As amended by Republic Act No. 1942,
approved on June 22, 1957.)

Lots Nos. 568 and 569, located at Barrio Dampol, Plaridel, Bulacan,
with an area of 313 square meters and an assessed value of P1,350
were acquired by the Iglesia Ni Cristo on January 9, 1953 from
Andres Perez in exchange for a lot with an area of 247 square
meters owned by the said church (Exh. D).
The said lots were already possessed by Perez in 1933. They are
not included in any military reservation. They are inside an area
which was certified as alienable or disposable by the Bureau of
Forestry in 1927. The lots are planted to santol and mango trees
and banana plants. A chapel exists on the said land. The land had
been declared for realty tax purposes. Realty taxes had been paid
therefor (Exh. N).

The Republic of the Philippines, through the Direct/r of Lands,


opposed the application on the grounds that applicant, as a private
corporation, is disqualified to hold alienable lands of the public
domain, that the land applied for is public land not susceptible of

private appropriation and that the applicant and its predecessorsin-interest have not been in the open, continuous, exclusive and
notorious possession of the land since June 12, 1945.

course. The club is operated mainly with funds derived from


membership fees and dues.

Issue: Whether or not Iglesia Ni Cristo, a corporation sole can


acquire private land?

In 1951. as a result of a capital surplus, arising from the revaluation of its real properties, the value or price of which
increased, the Club declared stock dividends; but no actual cash
dividends were distributed to the stockholders.

Held: After hearing, the trial court ordered the registration of the
two lots, as described in Plan Ap-04-001344 (Exh. E), in the name
of the Iglesia Ni Cristo, a corporation sole, represented by Executive
Minister Erao G. Manalo, with office at the corner of Central and
Don Mariano Marcos Avenues, Quezon City, From that decision, the
Republic of the Philippines appealed to this Court under Republic
Act No. 5440. The appeal should be sustained.

In 1952, a BIR agent discovered that the Club has never


paid percentage tax on the gross receipts of its bar and restaurant,
although it secured B-4, B-9(a) and B-7 licenses. In a letter dated
December 22, 1852, the Collector of Internal Revenue assessed
against and demanded from the Club.
Issue: Whether or not the Club is a stock-corporation? If so, can it
be subject to tax?

As correctly contended by the Solicitor General, the Iglesia Ni


Cristo, as a corporation sole or a juridical person, is disqualified to
acquire or hold alienable lands of the public domain, like the two
lots in question, because of the constitutional prohibition already
mentioned and because the said church is not entitled to avail itself
of the benefits of section 48(b) which applies only to Filipino
citizens or natural persons. A corporation sole (an "unhappy freak
of English law") has no nationality (Roman Catholic Apostolic Adm.
of Davao, Inc. vs. Land Registration Commission, 102 Phil. 596. See
Register of Deeds vs. Ung Siu Si Temple, 97 Phil. 58 and sec. 49 of
the Public Land Law).

Held: For a stock corporation to exist, two requisites must be


complied with, to wit: (1) a capital stock divided into shares and (2)
an authority to distribute to the holders of such shares, dividends or
allotments of the surplus profits on the basis of the shares held
(sec. 3, Act No. 1459). In the case at bar, nowhere in its articles of
incorporation or by-laws could be found an authority for the
distribution of its dividends or surplus profits. Strictly speaking, it
cannot, therefore, be considered a stock corporation, within the
contemplation of the corporation law.
The bar and restaurant are necessary adjuncts of the Club to
foster its purposes and the profits derived therefrom are
necessarily incidental to the primary object of developing and
cultivating sports for the healthful recreation and entertainment of
the stockholders and members.

COLLECTOR OF INTERNAL REVENUE VS. CLUB FILIPINO INC.


DE CEBU
Facts: As found by the Court of Tax Appeals, the "Club Filipino, Inc.
de Cebu," (Club, for short), is a civic corporation organized under
the laws of the Philippines with an original authorized capital stock
of P22,000.00, which was subsequently increased to P200,000.00.

Having arrived at the conclusion that respondent Club is not


engaged in the business as an operator of a bar and restaurant,
and therefore, not liable for fixed and percentage taxes, it follows
that it is not liable for any penalty, much less of a compromise
penalty.

The Club owns and operates a club house, a bowling alley, a


golf course (on a lot leased from the government), and a barrestaurant where it sells wines and liquors, soft drinks, meals and
short orders to its members and their guests. The bar-restaurant
was a necessary incident to the operation of the club and its golf-

DULAY ENTERPRISES, INC. vs. COURT OF APPEALS


FACTS:
Dulay Enterprises, Inc., a domestic corporation with
the following as members of its Board of Directors: Manuel R. Dulay

designated as president, treasurer and general manager; Atty.


Virgilio E. Dulay designated as vice-president; Linda E. Dulay; Celia
Dulay-Mendoza and Atty. Plaridel C. Jose designated as secretary,
owned a property known as Dulay Apartment located at Seventh
Street (now Buendia Extension) and F.B. Harrison Street, Pasay City.
The corporation through its president, Manuel Dulay, obtained
various loans for the construction of its hotel project, Dulay
Continental Hotel (now Frederick Hotel). It even had to borrow
money from Virgilio Dulay to be able to continue the hotel project.
As a result of said loan, Virgilio Dulay occupied one of the unit
apartments of the subject property since 1973 while at the same
time managing the Dulay Apartment as his shareholdings in the
corporation was subsequently increased by his father. Manuel
Dulay by virtue of Board Resolution 18 of the corporation sold the
subject property to spouses Maria Theresa and Castrense Veloso.
Subsequently, Manuel Dulay and the spouses Veloso executed a
Memorandum to the Deed of Absolute Sale, giving Manuel Dulay
within 2 years to repurchase the subject property which was,
however, not annotated. Maria Veloso, without the knowledge of
Manuel Dulay, mortgaged the subject property to Manuel A. Torres.
Upon the failure of Maria Veloso to pay Torres, the subject property
was sold to Torres as the highest bidder in an extrajudicial
foreclosure sale as evidenced by the Certificate of Sheriff's Sale.
Maria Veloso executed a Deed of Absolute Assignment of the Right
to Redeem in favor of Manuel Dulay assigning her right to
repurchase the subject property from Torres as a result of the
extrajudicial sale. As neither Maria Veloso nor her assignee Manuel
Dulay was able to redeem the subject property within the one year
statutory period for redemption, Torres filed an Affidavit of
Consolidation of Ownership with the Registry of Deeds of Pasay
City. Torres filed a petition for the issuance of a writ of possession
against spouses Veloso and Manuel Dulay in LRC. However, when
Virgilio Dulay appeared in court to intervene in said case alleging
that Manuel Dulay was never authorized by the corporation to sell
or mortgage the subject property, the trial court ordered Torres to
implead the corporation as an indispensable party but the latter
moved for the dismissal of his petition which was granted. Torres
and Edgardo Pabalan, real estate administrator of Torres, filed an
action against the corporation, Virgilio Dulay and Nepomuceno
Redovan, a tenant of Dulay Apartment for the recovery of
possession, sum of money and damages with preliminary

injunction. The corporation filed an action against spouses Veloso


and Torres for the cancellation of the Certificate of Sheriff's Sale.
Pabalan and Torres filed an action against spouses Florentino and
Elvira Manalastas, a tenant of Dulay Apartment, with the
corporation as intervenor for ejectment Metropolitan Trial Court of
Pasay City which rendered a decision in favor of Pabalan, et al.,
ordering the spouses Manalastas and all persons claiming
possession under them to vacate the premises; and to pay the
rents until they shall have vacated the premises with interest at the
legal rate; and to pay attorney's fees as other expenses of litigation
and for them to pay the costs of the suit. Thereafter, the
corporation and Virgilio Dulay filed an action against the presiding
judge of the Metropolitan Trial Court of Pasay City, Pabalan and
Torres for the annulment of said decision with the Regional Trial
Court of Pasay. Thereafter, the 3 cases were jointly tried and the
trial court rendered a decision in favor of Pabalan and Torres. The
corporation, et al. filed the petition for review on certiorari. During
the pendency of the petition, Torres died and named Torres-Pabalan
Realty & Development Corporation as his heir in his holographic
will.
ISSUE:
Whether the sale of the subject property between
spouses Veloso and Manuel Dulay has no binding effect on the
corporation as Board Resolution 18 which authorized the sale of the
subject property was resolved without the approval of all the
members of the board of directors and said Board Resolution was
prepared by a person not designated by the corporation to be its
secretary.
HELD:
Section 101 of the Corporation Code of the
Philippines provides that "When board meeting is unnecessary or
improperly held. Unless the by-laws provide otherwise, any action
by the directors of a close corporation without a meeting shall
nevertheless be deemed valid if: (1) Before or after such action is
taken, written consent thereto is signed by all the directors; or (2)
All the stockholders have actual or implied knowledge of the action
and make no prompt objection thereto in writing; or (3) The
directors are accustomed to take informal action with the express
or implied acquiesce of all the stockholders; or (4) All the directors
have express or implied knowledge of the action in question and
none of them makes prompt objection thereto in writing. If a

directors' meeting is held without proper call or notice, an action


taken therein within the corporate powers is deemed ratified by a
director who failed to attend, unless he promptly files his written
objection with the secretary of the corporation after having
knowledge thereof." Herein, the corporation is classified as a close
corporation and consequently a board resolution authorizing the
sale or mortgage of the subject property is not necessary to bind
the corporation for the action of its president. At any rate, a
corporate action taken at a board meeting without proper call or
notice in a close corporation is deemed ratified by the absent
director unless the latter promptly files his written objection with
the secretary of the corporation after having knowledge of the
meeting which, in this case, Virgilio Dulay failed to do. The
corporation's claim that the sale of the subject property by its
president, Manuel Dulay, to spouses Veloso is null and void as the
alleged Board Resolution 18 was passed without the knowledge and
consent of the other members of the board of directors cannot be
sustained. Virgilio E. Dulay's protestations of complete innocence to
the effect that he never participated nor was even aware of any
meeting or resolution authorizing the mortgage or sale of the
subject premises is difficult to believe. On the contrary, he is very
much privy to the transactions involved. To begin with, he is an
incorporator and one of the board of directors designated at the
time of the organization of Manuel R. Dulay Enterprises, Inc. In
ordinary parlance, the said entity is loosely referred to as a "family
corporation." The nomenclature, if imprecise, however, fairly
reflects the cohesiveness of a group and the parochial instincts of
the individual members of such an aggrupation of which Manuel R.
Dulay Enterprises, Inc. is typical: four-fifths of its incorporators
being close relatives namely, 3 children and their father whose
name identifies their corporation. Besides, the fact that Virgilio
Dulay on 24 June 1975 executed an affidavit that he was a
signatory witness to the execution of the post-dated Deed of
Absolute Sale of the subject property in favor of Torres indicates
that he was aware of the transaction executed between his father
and Torres and had, therefore, adequate knowledge about the sale
of the subject property to Torres. Consequently, the corporation is
liable for the act of Manuel Dulay and the sale of the subject
property to Torres by Manuel Dulay is valid and binding.

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 unauthorized and fraudulent disbursements and
disposition of assets made by him, and that he be required 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 liquidation and distribution of the
assets. Over the strong objection of the defendants, the trial court
presided by respondent Judge Jose Teodoro, granted the petition for
the appointment of a receiver and designated Mr. Alfredo Yulo as
such receiver with a bond of P50,000. 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
with preliminary injunction to revoke and set aside the order.
ISSUE/S:
1. WHETHER OR NOT the appointment of a receiver made
by the respondent judge has no basis?
2. WHETHER OR NOT the suit for the dissolution of a
corporation can be brought and maintained only by the
State through its legal counsel, and that 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. However, 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 within the corporation,
must not and should not be left without redress and remedy.
This was what probably prompted this Court to state in the
case of Hall, et al. vs. Judge Piccio,* G.R. No. L-2598 (47 Off.
Gaz. No. 12 Supp., p. 200) that even the existence of a de
jure corporation may be terminated in a private suit for its
dissolution by the stockholders without the intervention of
the State. It was therein further held that although there
might be some room for argument on the right of minority
stockholders to ask for dissolution,-that question does not
affect the court's jurisdiction over the case, and that the
remedy by the party dissatisfied was to appeal from the
decision of the trial court. We 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 Government through its legal officer in a quo
warranto case, at their instance and request, there might be
exceptional cases wherein the intervention of the State, for
one reason or another, cannot be obtained, as when the
State is not interested because the complaint is strictly a
matter between the stockholders and does not involve, in
the opinion of the legal officer of the Government, any of the
acts or omissions warranting quo warranto proceedings, in
which minority stockholders are entitled to have such
dissolution. When such action or private suit is brought by
them, the trial court had jurisdiction and may or may not
grant the prayer, depending upon the facts and
circumstances attending it. The trial court's decision is of

course subject to review by the appellate tribunal. Having


such jurisdiction, the appointment of a receiver pendente
lite is left to the sound discretion of the trial court. As was
said in the case of Angeles vs. Santos (64 Phil., 697), the
action having been properly brought and the trial court
having entertained the same, it was within the power of said
court upon proper showing to appoint a receiver pendente
lite for the corporation; that although the appointment of a
receiver upon application of the minority stockholders is a
power to be exercised with great caution, nevertheless, it
should be exercised necessary in order not to entirely ignore
and disregard the rights of said minority stockholders,
especially when said minority stockholders are unable to
obtain redress and protection of their rights within the
corporation itself.
In conclusion, we hold that the trial court through
respondent Judge Teodoro had jurisdiction and properly
entertained the original case; that he also had jurisdiction to
appoint a receiver pendente lite, and considering the
allegations made in connection with the petition for the
appointment of a receiver, he neither exceeded his
jurisdiction nor abused his discretion in appointing a
receiver. The petition for certiorari is hereby denied, with
costs. The writ of preliminary injunction heretofore issued is
hereby ordered dissolved.

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