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

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

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

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

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. 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. 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 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.

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 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. 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).

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.

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 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.

Issue: Whether or not the accused can be charged with having wrongfully intended to circumvent that fundamental law by not revealing in the articles of incorporation that Baylon was a mere trustee of his American co-incorporation and that for that reason the subscribed capital stock of the corporation was wholly American? Held: The court reversed the decision of the lower court. The 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 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.

FILIPINAS COMPAIA DE SEGUROS vs. CHRISTERN, HUENEFELD & CO. INC. 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 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. ISSUE: W/N the fire policy became null and void upon the declaration of war between US and Germany (Dec. 10, 1941). 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. [Factually, there can be no doubt that the Director of the 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.] Roman Catholic Adm. Of Davao, Inc. vs Land Reg. Com. G.R. 8451 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 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. 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. 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 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". 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). 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: Chapter VIII.Judicial confirmation of imperfect or incomplete titles. xxx xxx xxx 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: xxx xxx xxx (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.) 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 predecessors-in-interest have not been in the open, continuous, exclusive and notorious possession of the land since June 12, 1945. Issue: Whether or not Iglesia Ni Cristo, a corporation sole can acquire private land? 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. 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).

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. The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased from the government), and a bar-restaurant 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-course. The club is operated mainly with funds derived from membership fees and dues. In 1951. as a result of a capital surplus, arising from the re-valuation 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. 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? 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. 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.

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 vicepresident; 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. 2.

WHETHER OR NOT the appointment of a receiver made by the respondent judge has no basis? WHETHER OR NOT the suit for the dissolution of a corporation can be brought and maintained only by the State through its legal counsel, and that 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.

Cagayan Fishing Development Co. vs. Sandiko Facts: Manuel Tabora is the registered owner of four parcels of land. He executed three mortgages to secure three different loans. The first and second mortgages over the parcels of land were in favor of Philippine National Bank. A third mortgage was then also executed in favor of Severina Buzon. He then subsequently sold the parcels of land to plaintiff company, which was then still in the process of incorporation. This sale was subject to the mortgages and to the condition that the title to the land shall not be transferred in the name of the company unless Taboras obligations be fully and completely satisfied. A year after it was incorporated, the company sold the parcels of land to defendant-appellee Teodoro Sandiko. Three documents were executed: a deed of sale over the parcels of land in favor of the defendant, a promissory note drawn by defendant in favor of plaintiff, and a deed of mortgage over the parcels of land to secure the payment of the promissory note. Defendant failed to pay the sum of the promissory note and so plaintiff then brought this sought for the sum plus interest in the Court of First Instance of Manila, who ruled in favor of the defendant. Issue: Is the transaction between Tabora and the company transferring the parcels of land in favor of the company valid? The Court held in the negative. The transfer was made by Tabora in favor of the company was made before the company was incorporated. It was not yet in legal existence then, as such, it possessed no juridical capacity to enter into contracts. The transaction in reality was between Tabora as owner of the parcels of land and the same Manuel Tabora and others as mere promoters of the corporation. These promoters could not have acted as agents for a projected corporation since that which had no legal existence could have no agent.

Ruling:

Under the peculiar facts of the case the Court did not extend the doctrine of ratification since it would result in the commission of fraud to the unwary. In this case, almost all of the capital stock of the company is owned by Tabora. The defendant always regarded Tabora as the owner of the parcels of land. The promissory note was ade payable to the plaintiff so that it may not be attached by its creditors, who then had obtained writs of attachment to the four parcels of land. Since the plaintiff company did not acquire the parcels of land, it follows that it did not possess any right to dispose the same in favor of defendant Sandiko.

RIZAL LIGHT & ICE CO., INC. vs. MORONG FACTS:Morong Electric, having been granted a municipal franchise on May 6, 1962 by respondent municipality to install, operate and maintain an electric heat, light and power service in said municipality approved by the Provincial Board of Rizal on August 31, 1962 filed with the Commission an application for a certificate of public convenience and necessity for said service. Petitioner moved to dismiss the application of Morong Electric mainly on the ground that it is a holder of a certificate of public convenience to operate an electric light, heat and power service in the same municipality of Morong, Rizal, and that applicant Morong Electric had no legal personality when it filed its application on September 10, 1962, because its certificate of incorporation was issued by the Securities and Exchange Commission only on October 17, 1962. The motion to dismiss was denied by the Commission on the premise that applicant Morong Electric was a de facto corporation. Consequently, the case was heard on the merits and both parties presented their respective evidence. On the basis of the evidence adduced, the Commission found that there was an absence of electric service in the municipality of Morong and that applicant Morong Electric, a Filipino-owned corporation duly organized and existing under the laws of the Philippines, has the financial capacity to maintain said service. These circumstances, considered together, the Commission approved the application of Morong Electric and ordered the issuance in its favor of the corresponding certificate of public convenience and necessity. ISSUE: Whether or not the issuance of certificate of public convenience and necessity in favor of Morong Electric is valid. HELD: The issuance is valid. Petitioner's contention that Morong Electric did not yet have a legal personality on May 6, 1962 when a municipal franchise was granted to it is correct. The juridical personality and legal existence of Morong Electric began only on October 17, 1962 when its certificate of incorporation was issued by the SEC. Before that date, or pending the issuance of said certificate of incorporation, the incorporators cannot be considered as de facto corporation. But the fact that Morong Electric had no corporate existence on the day the franchise was granted in its name does not render the franchise invalid, because later Morong Electric obtained its certificate of incorporation and then accepted the franchise in accordance with the terms and conditions thereof. The incorporation of Morong Electric on October 17, 1962 and its acceptance of the franchise as shown by its action in prosecuting the application filed with the Commission for the approval of said franchise, not only perfected a contract between the respondent municipality and Morong Electric but also cured the deficiency pointed out by the petitioner in the application of Morong Electric. Thus, the Commission did not err in the issuance of certificate of public convenience and necessity in favor of Morong Electric.

CARAM VS CA FACTS: During the organization of Filipinas Orient Airways, defendants Barretto and Garcia requested private respondent Alberto Arellano to undertake a project study and the pre-organizational services that will be used for presentation to prospective investors, one of those investors were petitiners herein, Fermin Caram and Rosa Caram. The airline was eventually organized on the basis of the project study with petitioners as major stockholders and,

together with Barretto and Garcia, as principal officers. However, Filipinas Orient Airways was unable to pay the private respondent for the services rendered, hence, the filing of this case. ISSUE: Whether or not petitioners can be held personally liable for the expenses incurred in connection with the organization of Filipinas Orient Airways RULING: The Supreme Court held that petitioners Caram are not personally liable for the expenses incurred in the pre-organization of the corporation. Petitioners were not involved in the initial stages of the organization of the airline, which were being directed by Barretto as the main promoter. It was he who was putting all the pieces together, so to speak. The petitioners were merely among the financiers whose interest was to be invited and who were in fact persuaded, on the strength of the project study, to invest in the proposed airline. Significantly, there was no showing that the Filipinas Orient Airways was a fictitious corporation and did not have a separate juridical personality, to justify making the petitioners, as principal stockholders thereof, responsible for its obligations. As a bona fide corporation, the Filipinas Orient Airways should alone be liable for its corporate acts as duly authorized by its officers and directors.

Trillana vs. Quezon College, Inc. (Subscription Contracts: Sections 60 and 72 of the Corporation Code) FACTS: Damasa Crisostomo sent the following letter to the board of Trustees of the Quezon College: Gentlemen: Please enter my subscription to dalawang daan (200) shares of your capital stock with a par value of P100 each. Enclosed you will find (Babayaran kong lahat pagkatapos na ako ay makapaghuli ng isda) pesos as my initial payment and the balance payable in accordance with law and the rules and regulations of the Quezon College. x x x Damasa Crisostomo died on October 26, 1948. As no payment appears to have been made on the subscription mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the CFI of Bulacan in her estate proceeding, for the collection of P20,000, representing the value of the subscription to the capital stock of the Quezon College, Inc. This claim was opposed by the administrator of the estate, and the court after hearing, issued an order dismissing the claim of Quezon College, Inc. HELD: It appears that the application sent by Crisostomo to the College was written on a general form indicating that an applicant will enclose an amount as initial payment and will pay the balance in accordance with law and the rules or regulations of the College. On the other hand, in the letter actually sent by Damasa Crisostomo, the latter (who requested that her subscription for 200 shares be entered) not only did not enclose any initial payment but stated that babayaran kong lahat pagkatapos na ako ay makapanghuli ng isda. There is nothing in the record to show that the Quezon College, Inc. accepted the term of payment suggested by Crisostomo, or that if there was any acceptance the same came to her knowledge during her lifetime. The relation between Crisostomo and the College had only thus reached the preliminary stage whereby the latter offered its stock for subscription on terms stated in the form letter, and Damasa applied for subscription fixing her own plan of payment,-- a relation, in the absence as in the present case of acceptance by the College of the counter offer of Crisostomo, that had not ripened into an enforceable contract. Indeed, the need for express acceptance on the part of the College becomes the more imperative, in view of the proposal of Crisostomo to pay the value of the subscription after she had harvested fish, a condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the obligation void under the Civil Code.

Bayla vs. Silang Traffic Co., Inc. Facts: Petitioners Bayla et. al paid the respondent corporation for shares of stock they agreed to take under certain specified terms and conditions. The agreement provides that the shares shall be paid in installment; failure to pay the same shall mean forfeiture of payment and shares shall revert to the seller. Petitioner defaulted in the payment and so the BOD of respondent corporation issued a resolution regarding forfeiture of subject shares/subscription. Subsequently, petitioners filed an action to recover the amount they paid. The lower court absolved the corporation and declared them the owner of the shares of stock in question. CA reversed the said decision declaring that petitioners subscription is not cancelled/forfeited in favor of the corporation. Both parties filed an appeal. Issue: Whether or not the agreement is a contract of subscription or of sale. Held: SC held that the agreement between the parties is a contract of sale because of the ff. reasons: 1.agreement is entitled Agreement for Installment Sale of Shares; 2.contract was entered into before the incorporation and organization of the corporation. The contract did not expressly provide that failure of the purchaser to pay any installment would give rise to forfeiture and cancellation without necessity of demand from the seller. Further, Had it been the intention of the parties to provide for automatic forfeiture/cancellation, the provision regarding interest on deferred payments should not have been inserted. Since the contract in question is one of sale, rescission can be done by agreement of the parties. Respondent Corporation was ordered to refund the petitioners of the amount they paid. Note: Distinction between contract of sale and subscription. Contract of sale/purchase-is an independent agreement between the individual and the corporation to buy shares of stock from it at a stipulated price. Contract of subscription-is the mutual agreement of the subscribers to take and pay for the stock of a corporation.

Velasco(plaintiff) v. Poizat (defendant)

Facts: The plaintiff, as assignee in insolvency of "The Philippine Chemical Product Company" (Ltd.) is seeking to recover of the defendant, Jean M. Poizat, the sum of P1,500, upon a subscription made by him to the corporate stock of said company. The defendant subscribed for 20 shares of the stock of the company, an paid in upon his subscription the sum of P500, the par value of 5 shares . The action was brought to recover the amount subscribed upon the remaining shares. Defendant was a stockholder in the company from the inception of the enterprise, and for sometime acted as its treasurer and manager.Whileserving in this capacity he called in and collected all subscriptions to the capital stock of the company, except the aforesaid 15 shares subscribed by himself and another 15 shares owned by Jose R. Infante. On July 13, 1914, the company in a proposition was to effect that Juan [Jean] M. Poizat, who was absent, should be required to pay the amount of his subscription upon the 15 shares for which he was still indebted to the company. The resolution further provided that, in case he should refuse to make such payment, the management of the corporation should be authorized to undertake judicial proceedings against him. Poizat questioned the resolution claiming that his decision not to pay was based on poor opinion which he entertain of the business and the faint hope of ever recovering any money invested. He also claimed that, he cannot be compelled to pay because the board failed to make a call.At the hearing of the Court of First Instance, judgment was rendered in favor of the defendant, and the complaint was dismissed. From this action the plaintiff has appealed.

Issue: Whether or not Poizat is liable upon his subscription?

Held: The Court held him to be liable. A stock subscription is a contract between the corporation on one side, and the subscriber on the other, and courts will enforce it for or against either. It is a rule, accepted by the Supreme Court of the United States, that a subscription for shares of stock does not require an express promise to pay the amount subscribed, as the law implies a promise to pay on the part of the subscriber. Section 36 of the Corporation Law clearly recognizes that a stock subscription is subsisting liability from the time the subscription is made, since it requires the subscriber to pay interest quarterly from that date unless he is relieved from such liability by the by-laws of the corporation. The subscriber is as much bound to pay the amount of the share subscribed by him as he would be to pay any other debt, and the right of the company to demand payment is no less incontestable.The provisions of the Corporation Law (Act No. 1459) given recognition of two remedies for the enforcement of stock subscriptions. The first and most special remedy given by the statute consists in permitting the corporation to put up the unpaid stock for sale and dispose of it for the account of the delinquent subscriber. The other remedy is by action in court. When the corporation becomes insolvent, with proceedings instituted by creditors to wind up and distribute its assets, no call or assessment is necessary before the institution of suits to collect unpaid balances on subscription. It evidently cannot be permitted that a subscriber should escape from his lawful obligation by reason of the failure of the officers of the corporation to perform their duty in making a call; and when the original model of making the call becomes impracticable, the obligation must be treated as due upon demand. When insolvency supervenes all unpaid subscriptions become at once due and enforceable.The defendant is liable for P1,500, the amount of his subscription upon the unpaid shares. Under section 36 of the Corporation Law he is also liable for interest at the lawful rate from the date of his subscription, unless relieved from this liability by the by-laws of the company.

PNB vs. Bitulok Sawmill, Inc. (Subscription Contracts: Release from Subscription Obligation) 23 SCRA 1366 June 29, 1968 Fernando, J. FACTS: President Roxas organized the Philippine Lumber Distributing Agency for the purpose of insuring the steady supply of lumber to enable the war sufferers to rehabilitate their devastated homes. Roxas convinced the lumber producers to form a lumber cooperative and to pool their resources together. The President promised and agreed to finance the agency by making the government invest P9.00 for every peso the members would invest. Relying on the assurance, Bitulok and several others subscribed to the stocks of Philippine Distributing Agency. The legislature was not able to appropriate the counterpart fund to be put up by the government, hence, President Roxas instructed PNB to grant loan to the Philippine Distributing Agency. The loan was not paid as a consequence, PNB filed a suit on their subscriptions to the Philippine Distributing Agency. ISSUE: May PNB collect the balance on the subscription in spite of the conditions attached thereto which were not fulfilled? HELD: The Court held that it is a well-settled principle that with all the vast powers lodged in the President, he is still devoid of the prerogative of suspending the operation of any statute or any of its terms. The power of suspending laws is lodged with the Legislature, which has indicated that the obligation for the payment of subscription by the defendants shall be governed by the Corporation Law. The President could not suspend the effectivity of the Corporation Law; therefore, the defendants remain liable to the balance of their subscription. This case gives the essence of a subscription contract. It is indeed a species of the Law on Contracts, but the principles in Corporate Law prevail. One of the principles in Corporate law is that, when one enters into a subscription agreement, one cannot deny the obligation to pay, even when the corporation becomes insolvent. When one enters into a subscription agreement, the principles of Corporate Law become part and parcel of the contract. The cases therefore hold that any contradiction to modify the condition of the obligation to pay is essentially void. It does not avoid the subscription agreement but avoids the condition. The obligation to pay then becomes a purely simple obligation. The lumber producers are therefore liable for the balance of their respective subscriptions.

Decision reversed and cases remanded to lower court for judgment.