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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.

REGISTER OF DEEDS vs UNG SIU SI TEMPLE


GR. No. L-6776
May 21,1955
FACTS:
A Filipino citizen executed a deed of donation in favor of the Ung Siu Si Temple, an unregistered religious
organization that operated through three trustees all of Chinese nationality. The Register of Deeds refused
to record the deed of donation executed in due form arguing that the Consitution provides that acquisition
of land is limited to Filipino citizens, or to corporations or associations at least 60% of which is owned by
such citizens.
ISSUE:
Whether a deed of donation of a parcel of land executed in favor of a religious organization whose founder,
trustees and administrator are Chinese citizens should be registered or not.
RULING:
Sec. 5, Art. 13 of the Constitution provides that save in cases of hereditary succession, no private
agricultural land shall be transferred or assigned except to individuals, corporations, or associations
qualified to hold lands of the public domain in the Philippines. The Constitution does not make any
exception in favor of religious associations.
The fact that appellant has no capital stock does not exempt it from the Constitutional inhibition, since its
member are of foreign nationality. The purpose of the 60% requirement is to ensure that corporations or
associations allowed to acquire agricultural lands or to exploit natural resources shall be controlled by
Filipinos; and the spirit of the Constitution demands that in the absence of capital stock, controlling
membership should be composed of Filipino citizens.
As to the complaint that the disqualification under Art. 13 of the Constitution violated the freedom of
religion, the Court was not convinced that land tenure is indispensable to the free exercise and enjoyment
of religious profession or worship.

People vs Quasha

FACTS:

William H. Quasha

a member of the Philippine bar, committed a crime of


falsification of a public and commercial document for causing it to

appear that Arsenio Baylon, a Filipino citizen, had subscribed to and


was the owner of 60.005 % of the subscribed capital stock of Pacific
Airways Corp. (Pacific) when in reality the money paid belongs to an
American citizen whose name did not appear in the article of
incorporation,
to circumvent the constitutional mandate that no corp.
shall be authorize to operate as a public utility in the Philippines unless
60% of its capital stock is owned by Filipinos.
Found guilty after trial and sentenced to a term of
imprisonment and a fine
Quasha appealed to this Court
Primary purpose: to carry on the business of a common carrier by air, land or water
Baylon did not have the controlling vote because of the difference in voting power
between the preferred shares and the common shares
ART. 171. Falsification by public officer, employee, or notary or ecclesiastic minister.
The penalty of prision mayor and a fine not to exceed 5,000 pesos shall be imposed
upon any public officer, employee, or notary who, taking advantage of his official
position, shall falsify a document by committing any of the following acts:
4. Making untruthful statements in a narration of facts.
ART. 172. Falsification by private individuals and use of falsified documents. The
penalty of prision correccional in its medium and maximum period and a fine of not more

than 5,000 pesos shall be imposed upon:


1. Any private individual who shall commit any of the falsifications enumerated in the next
preceding

article in any public or official document or letter of exchange or any other kind of
commercial
document.
ISSUE: W/N Quasha should be criminally liable
HELD: NO. Acquitted.

falsification consists in not disclosing in the articles of incorporation that Baylon was
a mere trustee ( or dummy as the prosecution chooses to call him) of his American coincorporators, thus giving the impression that Baylon was the owner of the shares
subscribed to by him

For the mere formation of the corporation such revelation was not essential, and the
Corporation Law does not require it

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.

that can be done after the corporation has already come into being and not
while it is still being formed

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 DE COMPANIA DE SEGUROS


vs. CHRISTERN, HUENFELD & CO

July 2, 2014 Leave a comment

G.R. No. L-2294 May 25, 1951, EN BANC (PARAS, C.J.)

FACTS:

Christern, Huenefeld and Company, a German company, obtained a fire insurance policy
from Filipinas Compaia for the merchandise contained in a building located in Binondo,
Manila in the sum of P100,000. Filipinas Compaia is an American controlled company. The
building and the insured merchandise were burned during the Japanese occupation.
Christern filed its claim amounting to P92,650.00 but Filipinas Compaia refused to pay
alleging that Christern is a corporation whose majority stockholders are Germans and that
during the Japanese occupation, America declared war against Germany hence the
insurance policy ceased to be effective because the insured has become an enemy.
Filipinas Compaia was eventually ordered to pay Christern as ordered by the Japanese
government.

ISSUE:

Whether or not Christern, Huenefeld and Co is entitled to receive the proceeds from the
insurance claim.

HELD:

NO. There is no question that majority of the stockholders of Christern were German
subjects. This being so, Christern became an enemy corporation upon the outbreak of the
war between the United States and Germany. The Philippine Insurance Law (Act No. 2427,
as amended,) in Section 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 December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner had ceased to be

valid and enforceable, and since the insured goods were burned after December 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 December 11, 1941, should be returned by the petitioner

ROMAN CATHOLIC ADMINISTRATOR vs LRC


FACTS:

October 4, 1954: Mateo L. Rodis, a Filipino citizen and resident of the


City of Davao, executed a deed of sale of a parcel of land in favor of
the Roman Catholic Apostolic Administrator of Davao Inc.(Roman), a
corporation sole organized and existing in accordance with Philippine
Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual
incumbent.

The Register of Deeds of Davao for registration, having in mind a


previous resolution of the CFI in Carmelite Nuns of Davao were made to
prepare an affidavit to the effect that 60% of the members of their
corp. were Filipino citizens when they sought to register in favor of
their congregation of deed of donation of a parcel of land, required it to
submit a similar affidavit declaring the same.

June 28, 1954: Roman in the letter expressed willingness to submit an


affidavit but not in the same tenor as the Carmelite Nuns because it
had five incorporators while as a corporation sole it has only one and it
was ownership through donation and this was purchased

As the Register of the Land Registration Commissioner (LRC) : Deeds has some
doubts as to the registerability, the matter was referred to the Land Registration
Commissioner en consulta for resolution (section 4 of Republic Act No. 1151)

LRC:

In view of the provisions of Section 1 and 5 of Article XIII of the Philippine


Constitution, the vendee was not qualified to acquire private lands in the Philippines in
the absence of proof that at least 60 per centum of the capital, property, or assets of the
Roman Catholic Apostolic Administrator of Davao, Inc., was actually owned or
controlled by Filipino citizens, there being no question that the present incumbent of the
corporation sole was a Canadian citizen

ordered the Registered Deeds of Davao to deny registration of the deed of sale
in the absence of proof of compliance with such condition

action for mandamus was instituted by Roman alleging the land is held in true for the
benefit of the Catholic population of a place

ISSUE: W/N Roman is qualified to acquire private agricultural lands in the Philippines pursuant

to the provisions of Article XIII of the Constitution

HELD: YES. Register of Deeds of the City of Davao is ordered to register the deed of sale

A corporation sole consists of one person only, and his successors (who will always
be one at a time), in some particular station, who are incorporated by law in order to give
them some legal capacities and advantages, particularly that of perpetuity, which in their
natural persons they could not have had.

In this sense, the king is a sole corporation; so is a bishop, or dens, distinct


from their several chapters

corporation sole
1.
composed of only one persons, usually the head or bishop of the diocese, a unit which
is not subject to expansion for the purpose of determining any percentage whatsoever
2.
only the administrator and not the owner of the temporalities located in the territory
comprised by said corporation sole and such temporalities are administered for and on
behalf of the faithful residing in the diocese or territory of the corporation sole
3.
has no nationality and the citizenship of the incumbent and ordinary has nothing to do
with the operation, management or administration of the corporation sole, nor effects
the citizenship of the faithful connected with their respective dioceses or corporation
sole.

Constitution demands that in the absence of capital stock, the


controlling membership should be composed of Filipino citizens.
(Register of Deeds of Rizal vs. Ung Sui Si Temple)

undeniable proof that the members of the Roman Catholic Apostolic


faith within the territory of Davao are predominantly Filipino citizens

presented evidence to establish that the clergy and lay


members of this religion fully covers the percentage of Filipino citizens
required by the Constitution

fact that the law thus expressly authorizes the corporations sole
to receive bequests or gifts of real properties (which were the main
source that the friars had to acquire their big haciendas during the
Spanish regime), is a clear indication that the requisite that bequests
or gifts of real estate be for charitable, benevolent, or educational
purposes, was, in the opinion of the legislators, considered sufficient
and adequate protection against the revitalization of religious
landholdings.

as in respect to the property which they hold for the corporation, they stand in position
of TRUSTEES and the courts may exercise the same supervision as in other cases of
trust
Republic vs Villanueva

In 1978, Iglesia ni Cristo (INC) purchased a parcel of land from one Carmen Racimo in
Ilocos Norte. In 1979, INC sought to register said land under its name pursuant to
Section 48 (b) of the Public Land Law. The Director of Lands opposed the application as
it averred that the said parcel of land is part of the alienable public land; that INC cannot
register said land because it is not a Filipino citizen. INC argues that it is a private land
because Racimo, its predecessor-in-interest has been in possession thereof for more
than 30 years; that the Constitutional prohibition does not apply to INC, a corporation
sole (solely incorporated by one man, Erao Manalo, a Filipino citizen), hence it can
acquire said property.
ISSUE: Whether or not INC can register said parcel of land under its name.
HELD: No.
1.

The disputed land has never lost its public character. Racimo, though occupying
said land for more than 30 years, never applied for confirmation of incomplete or
imperfect title over said land. Under the law, all lands that were not acquired from the
Government either by purchase or by grant, belong to the public domain. As exception to
the rule would be any land that should have been in the possession of an occupant and
of his predecessors-in-interest since time immemorial, for such possession would justify
the presumption that the land had never been part of the public domain or that it had
been a private property even before the Spanish conquest.

2.

Section 48 (b) of the Public Land Law allows the registration of alienable public
lands but only by Filipino citizens. INC is not a Filipino citizen. There is no basis on the
contention that as a corporation sole, INC is not prohibited from holding said land. The
benefit only applies to Filipino citizens not to a corporation sole which has citizenship.
NOTE: 60% rule: Corporations and Partnerships of which at least 60% of their capital
belong to Filipinos may acquire real property.

CIR VS. CLUB FILIPINO (5 SCRA 321; 1962)


FACTS: Club Filipino owns and operates a club house, a sports complex, and a bar
restaurant, which is incident to the operation of the club and its gold course. The club is
operated mainly with funds derived from membership fees and dues. The BIR seeks to tax the
said restaurant as a business.
HELD: The Club was organized to develop and cultivate sports of all class and denomination
for the healthful recreation and entertainment of its stockholders and members. There was in
fact, no cash dividend distribution to its stockholders and whatever was derived on retail from
its bar and restaurants used were to defray its overhead expenses and to improve its golf
course.

For a stock corporation to exist, 2 requisites must be complied with:


(1) a capital stock divided into shares
(2) an authority to distribute to the holders of such shares, dividends or allotments
of the surplus profits on the basis of shares held.
In the case at bar, nowhere in the AOI or by-laws of Club Filipino could be found an
authority for the distribution of its dividends or surplus profits.

Manuel Dulay Enterprises, Inc. v. CA, Torres [Aug 27, 1993]


11:43 PM Dulay v. CA No comments
Facts:

Manuel R. Dulay Enterprises, Inc, a domestic corporation obtained various loans for the
construction of its hotel project, Dulay Continental Hotel (now Frederick Hotel).

Manuel Dulay by virtue of Board Resolution No 18 sold the subject property to spouses Maria
Theresa and Castrense Veloso.

Maria Veloso (buyer), without the knowledge of Manuel Dulay, mortgaged the subject property to
private respondent Manuel A. Torres. #fluffypeaches Upon the failure of Maria Veloso to pay Torres,
the property was sold to Torres in an extrajudicial foreclosure sale.

Torres filed an action against the corporation, Virgilio Dulay and against the tenants of the
apartment.

RTC ordered the corporation and the tenants to vacate the building.

Petitioners: RTC had acted with GAD when it applied the doctrine of piercing the veil of
corporate entity considering that the sale has no binding effect on corporation as Board
Resolution No. 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.
Issue:

WON the sale to Veloso is valid notwithstanding that it was resolved without the approval of all
the members of the board of directors. (YES)
Ruling

Section 101 of the Corporation Code of the Philippines provides:


Sec. 101. 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 acquiese 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 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.

Dulay Inc. is classified as a close corporation and consequently a board resolution authorizing
the sale or mortgage isnot necessary to bind the corporation for the action of its president.
#fluffypeaches At any rate, corporate actiontaken 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 his case, Virgilio Dulay failed to do.

Although a corporation is an entity which has a personality distinct and separate from its
individual stockholders or members, the veil of corporate fiction may be pierced when it is
used to defeat public convenience justify wrong, protect fraud or defend crime.

Case Digest on FINANCING


V TEODORO 93 PHIL 404
(1953)
Case Digest on FINANCING V TEODORO
93 PHIL 404 (1953)
The minority stockholders of the Financing Corporation are suing
the corporation and its president and general manager for gross

mismanagement and fraudulent conduct of corporate affairs and are


asking for the dissolution of the corporation.
SC Held: The general rule is that minority stockholders of a
corporation cannot sue and demand its dissolution but such action
should be brought by the Government through its legal officer in a
quo warranto.
However, there are instances when minority stockmembers who
are unable to obtain redress and protection of their rights within the
corporation may petition for dissolution without intervention of the
State. When such action is brought by the minority stockholders,
the trial court has jurisdiction, and may appoint a receiver as part of
its power.
The grounds of the prayer for receivership are:
1)

imminent danger of insolvency

2)

fraud and mismanagement

5.
Failure to organize and commence business; cessation of
business for 5 years
22. Effects of non-use of corporate charter and continuous
inoperation of a corporation. If a corporation does not formally
organize and commence the transaction of its business within 2
years from the date of its incorporation, its corporate powers cease
and the corporation shall be deemed dissolved. However, if a
corporation has commenced the transaction of its business but
subsequently becomes continuously inoperative for a period of at
least 5 years the same shall be a ground for the suspension or
revocation of its corporate franchise or certificate of incorporation.

This provision shall not apply if the failure to organize, commence


the transaction of its business or the construction of its works, or to
continuously operate is due to causes beyond the control of the
corporation as may be determined by the SEC.
A corporation is formally organized by the:
1.

adoption of its by-laws;

2.

election of its directors and

3.

election of its officers

Failure to do any of these steps within 2 years will cause the


dissolution of the corporation.
Failure to adopt by-laws will result in the suspension or revocation of
the by-laws.
Failure to elect directors is a ground for dissolution, but if the
incorporating directors whose names appear in the AOI continue to
act as such and begin transacting corporate business, then
stockholders are deemed to have acquiesced to their acts as
directors as if they had been duly elected, but only for the purpose
of determining whether the corporation failed to organize.
Transacting business implies a continuity of acts or dealings in the
accomplishment of the purpose for which the corporation was
formed. However, even a single act would be sufficient if it is
intended to be the beginning of a series of acts in pursuance of the
corporate business.
Code of Commerce. Art. 3. The legal presumption of habitually
engaging in commerce shall exist from the moment the person who

intends to engage therein announces through circulars,


newspapers, handbills, posters exhibited to the public, or in any
other manner whatsoever, an establishment which has for its object
some commercial operation.
Any advertisement in the media would thus be sufficient to raise the
rebuttable presumption that the corporation has commenced
business; thus one can present evidence to show that the business
in face never commenced.
SEC may suspend or revoke the certificate of incorporation of a
corporation which had been formally organized and had
commenced its business within the 2-year period but discontinues
its operations for at least 5 continuous years, unless it can prove
that the cessation of its business was due to causes beyond its
control. In this case, there is no automatic dissolution and a
proceeding before the SEC is necessary. The corporation must be
given due process: notice and the opportunity to be heard.
Campos: now asks the ? of what happens if the corporation is able
to prove that the discontinuation of the corporations business was
due to causes beyond its control? Is the corporation revived, or will
there be no dissolution until it is given the change to prove that its
failure is beyond its control.
6.

Involuntary dissolution

a.

Revocation of Certificate of Registration by SEC

121. Involuntary dissolution. A corporation may be dissolved by


the SEC upon filing of a verified complaint and after proper notice
and hearing on grounds provided by existing laws, rules and
regulations.

PD 902-A, 6. In order to effectively exercise such jurisdiction, the


Commission shall possess the ff. powers: x x x x
e.
To suspend, or revoke, after proper ntocie and hearing, the
franchise or certificate of registration of corporations, partnerships
or associations, upon any of the grounds provided by law, including
the ff:
1.

Fraud in procuring its certificate of registration;

2.
Serious misrepresentation as to what the corporation can do
or is doing to the great prejudice of our damage to the general
public;
3.
Refusal to comply or defiance of any lawful order of the
Commission restraining commission of acts which would amount to
a grave violation of its franchise;
4.

Continuous inoperation for a period of at least 5 years;

5.

Failure to file by-laws within the required period;

6.
Failure to file required reports in appropriate forms as
determined by the Commission within the prescribed period.
Required reports are the annual report of its operations and a
financial statement of its assets and liabilities.
The reference to any of the grounds provided by law, including the
ff., implies that aside from the enumerated grounds, there are other
grounds for suspending or revoking the certificate. Some of these
are:

1.
Violation of the corporation of any provision of the Corpo
Code (144)
2.
In case of deadlocks in close corporations and the SEC
deems it proper to order the dissolution of the corporation as the
only practical solution to the dispute.
3.
grounds for a quo warranto proceeding to dissolve the
corporation which may be initiated by the Sol Gen or the fiscal on
grounds which may also be used as a basis for SEC revocation of
registration.
ROC Rule 66 2. Like actions against corporations. A like action
may be brought against a corporation:
a)
when it has offended against a provision of an Act for its
creation or renewal;
b)
use;

when it has forfeited its privileges and franchises by non-

c)
when it has committed or omitted an act which amounts to a
surrender of its corporate rights, privileges, or franchises;
d)
when it as misused a right, privilege, or franchise conferred
upon it by law, or when it has exercised a right, privilege, or
franchise in contravention of law.
4.
25 % minimum requirement for subscription and/or payment
has not been complied with after incorporation, contrary to its AOI.
This amounts to a fraud in procuring the corporations registration.
Where the offense of the corporation is not serious enough to cause
great prejudice to the public, such a severe penalty as revocation,

or even should be suspension, should be avoided as it would affect


the goodwill of the corporation. The SEC can instead enjoin the
corporation from further committing the act or acts complained of,
and has the power to issue prohibitory or mandatory injunctions in
all cases under its jurisdiction.
b. Quo warranto proceeding
PD 902-A grants exclusive jurisdiction to the SEC over any
controversy between the corporation and the State in so far as it
concerns its individual franchise or right to exist as such entity.
Consider as repealed by PD902-A the ROC provision re: quo
warranto proceedings should be filed before the RTC.