Government of the Phils v.

El Hogar Filipino
G.R. No. L-26649

July 13, 1927

Street, J.

petitioners Government of the Philippine Islandss

respondents El Hogar Filipino (EHL)

*A/N: Guys super haba nung case so iibahin ko yung format ng digest. Gagawa ako ng sets of
facts, issue and ratio for each cause of action kasi thats how it is discussed in the case, and
super favorite daw itong kaso na to ni Sir. Para madali ring sundan. Sorry in advance for the
length of this digest.

General facts:
This is a QUO WARRANTO PROCEEDING instituted by the government against EHF to deprive
it of its franchise and effect a final dissolution of the corporation.
COMPANY PROFILE:
El Hogar Filipino is a building and loan association organized in 1911. It was organized and is
doing business under the laws of the Phils. It is the first corporation to be organized under the
Corporation Law (Act 1459 of the Phil Commission). It was incorporated on Dec. 28, 1910 with an
initial capital stock of P150k with P10,620 had been paid in.
Initially the law imposed a P3M limit as to the capitalization of corporations but it was
subsequently amended to P10M. As a result the corporation amended its by-laws to increase its
capitalization. By Dec. 1925, the association had 5,826 shareholders with a total paid-up value of
P8.7M
The purpose of the corporation (from the dissent of J. Malcolm):
1. for the accumulation of savings of shareholders
2. the return of these savings to them
3. encouragement of industry, frugality, and home building among its shareholders
4. the loan of its funds to its shareholders upon an adequate security and pledge of capital
stocks
5. borrowing of money upon the credit of the corporation
6. issuance of bonds or other documents evidencing the existence of such obligations

Central issue
WON the corporation should be deprived of its franchise and be dissolved because of several
violations of the law? NO, the violations incurred are too trivial and does not fall qualify
as a misdemeanor worthy of the cancellation of the corporate franchise.

Summary of the causes of action and the ruling of the court:

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

WON it illegally held acquired properties in excess of 5 years? NO.

WON the holding and ownership a business lot is in excess of its reasonable requirements? NO.
WON it engaged in activities foreign to its purposes for which it was created and which is not
necessary to its legitimate ends? YES but only as to the management of properties NOT
MORTGAGED to the corporation.
WON Art. 10 in its by-laws is a patent nullity? NO.
WON its board of directors has become a permanent and self-perpetuating body for failing to
elect its board in accordance to the manner set forth by law? NO.
WON the distribution of 5% of the net profits to the board is a valid measure? YES
WON royalty of the founder is unconscionable and excessive? NO.
WON Art. 70 of its by-laws restricts the rights and privileges of its members to serve as board
members? NO.
WON the issuance of special shares is an abuse of its corporate franchise? NO.
WON the rate of depreciation (10-14%) is too excessive? NO
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11.
12.
13.
14.
15.
16.
17.

WON
WON
WON
WON
WON
WON
WON

the maintenance of the reserve fund is too excessive? NO

the fixed annual dividend of 10% is unlawful? NO.
EHF has an obligation to monitor the use of the loans? NO.
extending large amount of loans to wealthy persons and large companies is not valid? NO.
it is a misdemeanor to have reserve funds upon the dissolution of the corporation? NO.
juridical persons can become shareholders and avail of loans from the corporation? YES.
the practice of selling the acquired property at a credit is unlawful? NO.

FIRST CAUSE OF ACTION: the illegal holding of EHF of title to property in

excess of 5 years
FACTS:
In 1920 a mortgage was made in favor of EHF of a parcel of land in San Clemente, Tarlac. It
was made as security for a loan of P24,000 to the owners of the property who are also
shareholders of EHF. Upon their default, EHF foreclosed the mortgaged and bought the property
for P23,744.18. The deed of sale was executed and delivered to EHF on Dec. 22, 1920 and was
forwarded to the Register of Deeds on Dec. 28, 1920. However the Register of Deeds did not act
upon the same despite many letters of the respondent corporation. It was only on May 7,
1921 did the company receive the certificate of title of the land.
The company made several efforts to dispose of the land:
1.
March 10, 1921 and July 27 Board Resolutions authorizing Vicente Bengzon and Jose
Laguardia as agents to find a purchaser for the land. However both of them failed to find
a buyer so the corporation advertised its public sale.
2.
March 10, 1926 an offer was made by Alcantara for P4,000 to which the board agreed to
accept the offer on March 25. However Alcantara failed to pay the entire purchase price
despite several extensions of time. As a result the contract to sell was rescinded.
3.
On July 30, 1926 the land was finally sold to Doa Alberto for P6,000.

issue
WON the franchise of EHF should be cancelled for violating the period imposed on corporations
on holding land titles? NO.

ratio
Sec. 75 of Act of Congress of July 1902 mandates that corporations making loans and
acquiring property as consequence thereof must dispose of the real estate so obtained within
five years after receiving the title. This is the provision being alleged as violated by EHF.
When do you reckon the five year period?
The court gave credence to EHFs argument that the five year period commenced when
the Register of Deeds issued its certificate of title on May 7, 1921. It was only on that
date the corporation had unequivocal and unquestionable right to pass a complete title. It was
also held in previous cases that an innocent purchaser of value under the Torrens system could
not acquire such status unless the vendor was able to place in his hands an owners duplicate of
certificate of title.
How about the effect of the first supposed sale to Alcantara?
The period of the acceptance of offer (March 25, 1926) to the perfection of the sale to
Alberto (July 30, 1926) should not be included in the period of five years. This and the fact
that the price of the sale (P6,000 v. P24,000 loan) was significantly lower than the cost of its
acquisition made the court equitably apply the law in favor of EHF.
Should the franchise of EHF be forfeited because of this violation?
No, the corporation did not offend the law in such a manner as to deprive it of its franchise.
The case of GP v. Phil Sugar Estates states that if there was a violation of the law but not of a
grave character as to warrant the surrender of its franchise, the court is allowed discretion to
impose the proper penalty. The facts of this case appears that EHF tried to sell the property
many months prior to this action. Imposing such penalty will be too severe and disproportionate
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to the offense. The purpose of the law is to prevent the revival of the entail (mayorazgo) or the
hampering of alienation of land for a long period of time.
Attorney-General (AG) argued that the court has no such discretion and dissolving the
corporation is mandatory upon ANY violation of the Corporation Law.
As basis for the same, he cited Sec. 190 on penalties which states that if the
violation being proved, be dissolved by quo warranto proceedings instituted by AG or provincial
fiscal. However the court held that the intention of the law was only to indicate the remedy
against the corporation which is a quo warranto proceeding. Adopting the argument of AG is too
dangerous as many corporations commit trivial violations of the rules (i.e. stock book must be
kept in alphabetical order).

SECOND CAUSE OF ACTION: EHF is holding and owning a business lot which is
in excess of its reasonable requirements (violating Sec. 13 subsection 5 Corpo
Law)

FACTS:
EHF purchased a 1,413 sq. m of land at the corner of Juan Luna St and Muelle de la Industria
in Manila on Aug. 28, 1913. There was an old building erected therein so the company had to
demolish it (as it was more than 50 years old and outdated for its purposes). In 1920 the
corporation built a new building three stories high but later on it was increased to four (except
one corner with 5 floors). The company spent P690k on the improvements and their assessed
value is at P786, 478.
The problem is that EHF only used 324 sq. m of office spaces and leased out about
3,175 sq. m to other persons and entities. The argument of AG is that the acquisition of the
lot, construction of the building, and leasing out were ultra vires acts of the corporation as these
were in excess of its reasonable business requirements.

issue

WON the acquisition of the lot, construction of the building, and leasing out of office spaces
exceeded the reasonable requirements of EHF therefore violating Sec. 13 sub. 5? NO.

ratio

Every corporation has the power to purchase, hold and lease such real property in its lawful
business transactions which it may reasonably and necessarily require. Owning of a business lot
upon which to construct its office building are reasonable necessary for its operations. Having
lawfully acquired the property, EHF is entitled to the full and beneficial ownership thereof.
How about leasing out office spaces?
The court discussed several cases to prove that leasing out office spaces does not exceed the
reasonable needs of a corporation (A/N:these are relevant cases, dami cinite ng court eh):
1.
Rector v. Hartford Deposit Co. In planning and constructing a building, the
corporations consideration is not limited to the precise number of rooms it may require,
but includes the future probable growth and volume of its business. Such rooms may
rented out for the mean time, and such lease must be done in good faith.
2.
Association v. Driver Renting of the unused portions of the building is a mere incident
in the conduct of its business.
3.
Wingert v. First Natl Bank Leasing out office spaces can be done to offset the great
cost of the lot and improvements therein
4.
Brown v. Scheleir Banking associations are given discretion to act as a prudent person
in making an investment in real estate. As long as the property is acquired for a
legitimate person, it is free to deal with the property as a prudent owner

THIRD CAUSE OF ACTION: engaging in activities foreign to its purposes for

which it was created and which is not necessary to its legitimate ends
FACTS:
There are three acts being complained of under this cause of action:

1.
2.

3.

Administration of offices in the El Hogar building not used by the corporation but leased
out to the public (facts under second cause of action) VALID
EHF administers and manages properties belonging to delinquent shareholders of the
association as payment for the interest, premium, and dues. The corporation charges a
commission of 2.5% on the sums collected on these properties which it applies to the
obligations of its delinquent shareholders. VALID
The corporation also managed real estates belonging to its shareholders but NOT
MORTGAGED TO IT (In 1925 there were 14 properties). The services being rendered by
EHF were renting out, payment of taxes, insurance, necessary repairs, and collection of
rent. As consideration for its services it charges commission ranging from 2.5%-5%
commission on the sums collected. INVALID

issue

WON such practices are authorized by law? NO. 3 is NOT AUTHORIZED BY LAW.

ratio

1. See discussion on second cause of action

2. AG argued that the proper remedy for delinquent shareholders is an action for collection of
the whole loan under Section 185 (Case did not provide the details). However the court
held that under the same section, the association may treat the entire indebtedness as
due giving discretion to the board of directors as to the remedy it wants to pursue to
collect the same.
3. General rule is that corporations possess powers as expressly granted to them.
Since there is no express provision in the law authorizing corporations to manage and
administer properties of shareholders, such is not authorized by law. (A/N: Naisip ko lang
nab aka itanong ni sir if may express provision ngayon allowing a corp to do this kasi 1927
pa yung kaso. Hindi ko alam haha!)
The administration of such properties in such manner is more befitting to a
business of real estate or trust company and not to a building and loan association.
The court made a reservation that the corporation exceeded the powers conferred to it by
law but only as regards the properties which are not mortgaged to the association.
Requiring the real property owners to subscribe to one or more shares is of no moment.
What is the effect of this ultra vires act?
The court still did not rule that this merits a revocation of EHFs franchise. It merely
enjoined the corporation from further activities of this sort.

FOURTH CAUSE OF ACTION: a patent nullity in its by-laws

FACTS:
In Nov. 1923, the Acting Insular Treasurer made a communication to EHF notifying it of a void
provision in its by-laws namely Art.10 which gives the board of directors to cancel shares and
return to the owner thereof the balance resulting to the liquidation of his shares. This may be
done by a vote of absolute majority of the board and for reasons involving their conduct or for
any other motive that their continuation as shareholders is undesirable.
EHF then resolved to eliminate this provision in the annual meeting of its shareholders but no
such meeting was conducted because it was not attended by a sufficient number to constitute a
quorum. Such power had not been exercised by the board.

issue

WON Art. 10 is a valid provision in its by-laws? NO.

ratio

It is a patent nullity because it conflicts with Sec. 187 of the Corpo Law which states that the
board shall not have power to force the surrender and withdrawal of an unmatured stock except
in liquidation of the corporation or forfeiture of the stock due to delinquency.
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So is this a valid ground to revoke EHFs franchise? NO.

The existence of such a provision is NOT a misdemeanor which necessitates the revocation of
the corps franchise.

FIFTH CAUSE OF ACTION: failure to fill the board in the manner provided for by
Sec. 31 of the Corpo Law

FACTS:
For the years 1911 and 1912, the board was elected in the manner provided for by law.
However due to the growth of the corporation and the expansion of the number of its
shareholders, it had difficulties in getting the required quorum (Art. 61 of its by-laws: quorum is
50% + 1 of the shares) of shares during annual meetings. It made several efforts to increase
attendance for the Feb 1923 meeting but only 3,899 out of 106,491 shares attended the
meeting.
It had been the practice of the board to fill the vacancies therein by choosing suitable persons
from its stockholders. This practice is sanctioned by Art. 71 of its by-laws which states that the
directors shall elect from among the shareholders members to fill the vacancies in the board
UNTIL THE ELECTION at the general meeting. Those chosen are experienced and successful
businessmen, members of prominent families (who are related by blood or by marriage), and a
member of a prominent American lawfirm in Manila.

issue

WON this practice to fill vacancies is contrary to law and constitutes a misdemeanor which
justifies the dissolution of the corporation? NO.

ratio

UNDER THE LAW:

Sec. 31 states that during election of board members owners of at least a majority of the
stockholdings entitled to vote must be present either personally or by proxy.
The court discussed the principle of HOLDOVER which allows an officer to hold his position
upon the expiration of his term or its vacancy until his successor is duly qualified. This is not
applicable if such is prohibited by law or by the charter of the corporation. Since the manner of
election of the board is expressly stated in its by-laws (Art. 66) stating that the term of the board
is for one year until their successors have been elected and taken possession of their offices, the
practice is valid.
The court cannon fault the corporation for the failure of its stockholders to reach a quorum for
purposes of electing members of the board. Such absence may be an indication of their
satisfaction as to how the corporation is being handled.
The argument of AG that the board had become self-perpetuating body composed of wealthy
men and not wage earners and those of moderate means is UNTENABLE.

SIXTH CAUSE OF ACTION: salaries of the directors of EHF

FACTS:
Sec. 92 of its by-laws distributes 5% of the net profit of the corporation to its board of
directors in proportion to their attendance at meetings of the board. This liberal policy had
extraordinary results of 7-8 our of 9 directors attending every meeting.

issue

WON this is a valid measure? YES.

ratio

The Corpo Law did not prescribe any compensation to the board but this power is left to the
discretion of the corporation as may be determined in its by-laws. Since this liberal measure is
contained therein in Sec. 92, such is a valid measure. This is a matter properly considered by its
shareholders in the framing of its by-laws.
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What is there was a mistake?

The proper remedy is to change the by-laws. The court is not the appropriate venue to do the
same. The existence of a liberal measure (even if it may be excessive given the expansion of the
corporations profits) is not adequate to dissolve the corporation by depriving it of its franchise.

SEVENTH CAUSE OF ACTION: royalty of the founder is unconscionable,

excessive and out of all proportion to the services rendered

FACTS:
The founder (promoter and organizer) of EHF was Mr. Antonio Melian. During the early stages
of the corporation, the board made a contract with Melian stating that he is to be the
manager of the association to render services thereto paying for his own account the expenses in
organizing the corporation and that he will loan P6,000 without interest (to meet office expenses)
until such time that the association has sufficient funds to pay for the loan. He also undertook
the obligation that by the end of 1 year, the amount of the corporations capital is P400,000.
As compensation for all these services, the board agreed to give him 5% of the net profits
earned by the corporation each year during the period fixed for the duration of the
association by its articles of incorporation. This is to be transferred to his heirs upon his death,
and that the condition precedent to the acquisition of part of profits is the fulfillment of the
obligations undertaken by him.
As consequence of this contract, a provision in its by-laws giving 5% of the net profits to
Melian during the life of the corporation was inserted.

issue

WON the founders royalty is excessive as to warrant the imposition of the dissolution of the
corporation? NO.

ratio

A corporation has a power to enter into contracts of services rendered an to be rendered by a

promoter in connection with organizing and maintaining the corporation. The petitioner does not
even assail this act of the corporation as ultra vires, but assuming arguendo that it is, the cause
of action suffers an infirmity as to the failure of the petitioner to implead Mr. Melian. An action to
annul the contract cannot be maintained without joining both contracting parties. Also the proper
party to bring the case is the corporation or the shareholders.
The court upheld the sanctity of the contract obligation.

EIGHT CAUSE OF ACTION: Art. 70 of its by-laws restricts the rights and
privileges of its members to serve as board members

FACTS:
The provision in question are Art. 70 and 76 which requires that persons elected to the board
must be shareholders of shares with P5,000 paid up value. This shall be held as security which
may be put up in behalf of any director by some other holder of shares. Directors waive their
right as shareholders to receive loans from the association.
The argument of the petitioner is that these requirements limits the rights and privileges of
qualified stockholders but lacking in financial capability to participate in the board of directors.

issue

WON these provisions in its by-laws are valid? YES.

ratio

Sec 21 of the Corpo Law expressly gives the power to the corporation to provide in its by-laws
the qualifications of directors. The requirement of giving a security for the proper discharge of
their functions is a prudent measure and is in conformity with good practice. The rationale for the
prohibition of the directors from obtaining a loan is to prevent the possibility of looting of the
corporation by unscrupulous directors.
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NINTH CAUSE OF ACTION: EHF abused its franchise by issuing special shares

FACTS:
The company issued special shares wherein a shareholder upon subscribing either pays 80%
of the par value in cash (and the other 20% to be paid from the dividends/profits he earns each
year) or by paying monthly dues of P10 until the total amount paid is P160 per share.
Since 1915 it has also been the practice of EHF to accumulate to each special share 1/10 of
the dividend declared and to pay the remainder in cash. When the amount paid in upon any
special share plus the accumulate dividends accruing to it amount to par value of P200, the
share matures and ceases to participate further in the earning. The amount of the value of the
share (P200) is returned to the shareholder and the share is cancelled.

issue

WON the issuance of such share is unlawful because such kind of share is not mentioned in the
Corporation Law? NO.

ratio

The mechanism of the special shares is the same as that of advance payment shares. Sec.
178 of Corpo Law allows for the prepayment of dues or interest in advance (before its maturity)
subject to the condition that the corporation shall not allow interest on such payment to exceed
6% per annum and it must not be for a period longer than one year. And assuming arguendo
that the law does not expressly authorize such shares, the association has implied authority to
issue them. [A/N:Which is weird kasi I thought they are only given powers expressly provided for
by law.]
It is a principle of corporation law that shares must be sold at par. Under the first option of
obtaining a special share (payment of 80%), the shareholder still pays the 20% albeit indirectly
(as the company deducts the 20% from the profits).
The court had previously upheld the validity of these shares on two cases (EHF v. Refferty and
Severino v. EHF). It did not anymore elaborate on such matter but validated its previous rulings
that such shares did not affect the character of EHF as building and loan association nor does
such scheme makes the loans usurious.

TENTH CAUSE OF ACTION: the rate of depreciation is too excessive

FACTS:
The company made 1,373 loans to its shareholders secured by mortgages on real property.
There were several foreclosure sales of 54 of the mortgaged properties. The amount of the
purchase price is the amount of the indebtedness of a stockholder minus the withdrawal value of
the shares pledged as collateral.
In its inventory, this amount is recorded and is depreciated at the rate of 10-14%.

issue

WON the rate of depreciation is too excessive? NO.

ratio

The power to adopt by-laws includes making the rules for administration of the
corporate affairs, management of its business and the care, control and disposition of
its property.
The board possesses a discretion as to the amount of depreciation allowed every year. There
is no law prohibiting a corporation to write off a reasonable amount of depreciation on its assets
to determine the real profits.
What if the amount of depreciation is too large?
7

The remedy is not upon the courts but upon the legislation to define the extent of the
allowable depreciation. The court could not impair the discretion given to the board on such
matters they have legitimate power of action.

ELEVENTH AND TWELFTH CAUSES OF ACTION: excessive reserve funds and

unlawful policy of straight annual dividend of 10%

FACTS:
Art. 92 of the by-laws states that 5% of the net profits earned each year shall be carried to a
general reserve fund. Art. 93 authorized the board to carry funds therein whenever advisable to
do so provided that the annual dividends carried to special reserve exceeds 8%.
It is the policy of EHF to place in the special reserve any balance in the profits left after the
payment of the dividends and other charges and losses. In 1926, the amount is 5% of the paidin value of shares.
The petitioner assails the validity of the maintenance of this general reserve. According to
him this practice is inconsistent with Sec. 188 of the Corpo Law [the case did not state the
provision] and the fixed dividends of 10% is contrary to the intention of the statute [again the
case did not state the law].

issue

WON the maintenance of the reserve funds and the fixed annual dividends were valid? YES.

ratio

The right to maintain a reserve even if not expressly granted is implied. It is a

prudent measure to guard against possible losses when the earnings fall beyond the average. A
prudent manager guards against contingencies and fluctuations. No prudent person would retain
funds barely sufficient to pay for its present liabilities. Discretion is given to the directors of the
board to determine the allocation for such contingencies. (Greeff v. Equitable Life Assurance
Society).
The fund is also an insurance of stockholders against losses. It can also be used for various
contingencies such as considerable litigation and expenses brought about by human errors and
omissions.

THIRTEENTH CAUSE OF ACTION: failure of EHF to monitor the purpose of the

loans

FACTS:
On Dec 1925, there were 544 outstanding loans to EHF but it made no attempt to monitor
and control the borrowers as to the use of their loans. According to the petitioner the purpose of
the loans must be limited to building of homes. However it appears that from the voluntary
statements of the borrowers as to what purpose they will be using the funds, a large amount
(P5,763,700) was borrowed without disclosing its purpose.

issue

WON the failure of EHF to monitor the use of the loans (for building and housing purposes only)
illegally departed from its character therefore deserves the penalty of dissolution? NO.

ratio

There is no provision of law declaring that loans may be made solely for the purpose of
building homes. Sec. 178 of the Corpo Law states that building of homes is ONLY ONE of the
several ends which a building and loan association may promote. It is not an abuse of their
powers or departure from their main purposes but is a natural and expansion along healthy and
legitimate lines.
Furthermore, there is no duty or obligation for the association to inquire into what purpose the
loan is obtained or require the borrower to disclose its intended use.
8

FOURTEENTH CAUSE OF ACTION: for extending large amount of loans to

wealthy persons and large companies

FACTS:
For several years, EHF made loans amounting to 120k to 390k in favor or Roxas Estates and
1.1M to 2.3M to Pacific Warehouse Company. This significantly reduced the available funds for
the shareholders of the corporation as it had to postpone payment of claims resulting from
withdrawal applications. (I guess withdrawal of the shareholdings?)

issue

WON extending huge loans is a violation of its franchise which must be punished by dissolution
of the corporation? NO.

ratio

The law does not state a limit as to the size of the loans to be made by the association. It is a
matter confided to the discretion of the board of directors. The loans in question only compose
10 out of the 544 outstanding loans to the corporation. Furthermore, there was no allegation that
such loans were not backed up by sufficient security.

FIFTEENTH CAUSE OF ACTION: misdemeanor to maintain its reserve funds

FACTS:
Art. 95 of its by-laws states that funds obtained by the liquidation of the association shall be
applied in the first lace to the repayment of shares and the balance (if any) shall be distributed in
accordance with the system established for the distribution of annual profits.
The petitioner argues that upon the expiration of the franchise of the corporation, the reserve
funds will be given to the founder, his heirs, the directors and holders of ordinary and special
shares.

issue

[A/N: there was no actual issue, ginawa lang nilang pandagdag tong argument na to]

ratio

This argument of the petitioner is directed on what may happen in the future upon the
expiration of the franchise. The court ruled that there was nothing wrong with this provision. The
funds left if any upon the liquidation of the corporation is subject to the discretion of the board. It
is not a matter for judicial interference.

SIXTEENTH CAUSE OF ACTION: allowing corporations and partnerships to

become shareholders to obtain loans

FACTS:
On Dec. 31, 1925, out of the 5,826 shareholders of EHF, 30 are juridical entities (16 corp
+ 14 pships). Loans were also extended to 9 corps and 5 partnerships.

issue

WON juridical persons can become shareholders of the corporation? YES.

ratio

Sec. 173 of the Corpo Law states that any person may become a stockholder in building
and loan associations. The term person is used in its general sense which includes BOTH
NATURAL AND ARTIFICIAL PERSONS. This is different from the meaning of persons as used in Sec.
2 of the same law which mandates that incorporators be NATURAL PERSONS only.
9

The petitioner argues that these juridical persons availed of the shareholdings for the sole
purpose of obtaining a loan. The court did not consider the motive of the shareholder in making a
subscription to the stock. What matters is that they are competent to make contracts.

SEVENTEENTH CAUSE OF ACTION: faulty bookkeeping

FACTS:
EHF sold some of the real estate it foreclosed on CREDIT. How? By transferring the title of the
property to the buyer on the condition that the same will be mortgaged to the corporation as
security for payment of the purchase price.

issue

WON such practice is illegal? NO.

ratio

Recall that the law requires that real properties acquired by the corporation must be disposed
within 5 years upon the transfer of title. However the law does not prescribe that the
consideration for the property be in CASH or that the purchaser be a shareholder in the
corporation. After all such sale is still a contract wherein the parties can impose terms and
conditions.
Dissent of J. Malcolm
[A/N: friends hindi ko na kaya sorry huhu yung relevant na lang]
The violations allegedly committed by the corporation constitute GRAVE ABUSES. He
described EHF as an octopus whose tentacles have reached out to embrace and stifle
public interest ( yep relevant haha!)
For these abuses, the court is justified in decreeing a dissolution of the corporation.
The law as amended makes it the imperative duty of the court to dissolve a corporation for
any violation it has committed. However the legislature is without power to diminish the
jurisdiction of the court and to direct a judgment in the resolution of a dispute.
EHF is an important possessor of property rights which if disturbed will result in a
catastrophe. It is an institution which should be encouraged in the community
The proper remedy is to confine EHF to its legitimate functions and to eliminate its
illegitimate purposes. It must be given a reasonable time to fulfill the conditions lain down
in this decision.

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