Smith, Bell & Company (Ltd.

), pet
vs.
Joaquin Natividad, Collector of Customs of the port of
Cebu, resp.
This is a petition for a writ of mandamus filed by the petitioner to compel
Natividad to issue a certificate of Philippine registry in favor of the former for
its motor vessel Bato.
Facts:
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the
laws of the Philippine Islands. A majority of its stockholders are British
subjects. It is the owner of a motor vessel known as the Bato built for it in the
Philippine Islands in 1916, of more than fifteen tons gross The Bato was
brought to Cebu in the present year for the purpose of transporting plaintiff's
merchandise between ports in the Islands. Application was made at Cebu,
the home port of the vessel, to the Collector of Customs for a certificate of
Philippine registry. The Collector refused to issue the certificate, giving as his
reason that all the stockholders of Smith, Bell & Co., Ltd., were not citizens
either of the United States or of the Philippine Islands. The instant action is
the result.
Counsel argues that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal
protection of the laws because it, in effect, prohibits the corporation from
owning vessels, and because classification of corporations based on the
citizenship of one or more of their stockholders is capricious, and that Act No.
2761 deprives the corporation of its property without due process of law
because by the passage of the law company was automatically deprived of
every beneficial attribute of ownership in the Bato and left with the naked
title to a boat it could not use .
Issue:
Whether the Government of the Philippine Islands, through its Legislature,
can deny the registry of vessel in its coastwise trade to corporations having
alien stockholders
Ruling:
Yes. Act No. 2761 provides:
Investigation into character of vessel. No application for a certificate of
Philippine register shall be approved until the collector of customs is satisfied
from an inspection of the vessel that it is engaged or destined to be engaged
in legitimate trade and that it is of domestic ownership as such ownership is
defined in section eleven hundred and seventy-two of this Code.
Certificate of Philippine register. Upon registration of a vessel of domestic
ownership, and of more than fifteen tons gross, a certificate of Philippine
register shall be issued for it. If the vessel is of domestic ownership and of

fifteen tons gross or less, the taking of the certificate of Philippine register
shall be optional with the owner.
While Smith, Bell & Co. Ltd., a corporation having alien stockholders, is
entitled to the protection afforded by the due-process of law and equal
protection of the laws clause of the Philippine Bill of Rights, nevertheless, Act
No. 2761 of the Philippine Legislature, in denying to corporations such as
Smith, Bell &. Co. Ltd., the right to register vessels in the Philippines
coastwise trade, does not belong to that vicious species of class legislation
which must always be condemned, but does fall within authorized
exceptions, notably, within the purview of the police power, and so does not
offend against the constitutional provision.

Harry Stonehill,Robert Brooks, John Brooks and Karl Beck,

petitioner
vs.
Hon. Jose Diokno as Sec of Justice, Prosecutors and
Judges, respondents

This is a petition for certiorari, prohibition, mandamus and injunction to

restrain the respondent-Prosecutors, their agents and/or representatives
from using the effects seized by the police officers from the petitioners
offices and residences by virtue of search warrants.
Facts:
Upon application of the Respondent-Prosecutors and Respondent-Judges, a
total of 42 search warrants were issued on different dates against petitioners
and/or the corporations of which they were officers, directing any peace
officer to search the petitioners and/or the premises of their offices,
warehouses and/or residences and to seize and take possession of records to
all business transactions.
Petitioners questioned the validity of the search warrants and alleged that
they are null and void, mainly, because they do not describe with
particularity the books and things to be seized.
Respondents alleged that the said search warrants are valid and issued in
accordance with law, that the defects, if any, were cured by petitioners
consent
Issue:
Whether the petitioners can assail the legality of the search warrants and of
the seizures made in pursuance thereof
Ruling:
No. The petitioners herein and the corporations of which they are officers
have personalities separate and distinct from each other.
It is well settled that the legality of a seizure can be contested only by the
party whose rights have been impaired thereby, and that the objection to an

unlawful search and seizure is purely personal and cannot be availed of by

third parties. Consequently, petitioners herein may not validly object to the
use in evidence against them of the documents, papers and things seized
from the offices and premises of the corporations adverted to above, since
the right to object to the admission of said papers in evidence belongs
exclusively to the corporations, to whom the seized effects belong, and may
not be invoked by the corporate officers in proceedings against them in their
individual capacity.
Moreover, the Government's action in gaining possession of papers
belonging to the corporation did not relate to nor did it affect the personal
defendants. If these papers were unlawfully seized and thereby the
constitutional rights of or any one were invaded, they were the rights of the
corporation and not the rights of the other defendants.

Bache & Co. Inc. et al vs BIR Commissioner Vivencio Ruiz et al

On 24 Feb 1970, Commissioner Vera of Internal Revenue, wrote a letter addressed to J Ruiz
requesting the issuance of a search warrant against petitioners for violation of Sec 46(a) of the
NIRC, in relation to all other pertinent provisions thereof, particularly Sects 53, 72, 73, 208 and
209, and authorizing Revenue Examiner de Leon make and file the application for search
warrant which was attached to the letter. The next day, de Leon and his witnesses went to CFI
Rizal to obtain the search warrant. At that time J Ruiz was hearing a certain case; so, by means of
a note, he instructed his Deputy Clerk of Court to take the depositions of De Leon and Logronio.
After the session had adjourned, J Ruiz was informed that the depositions had already been
taken. The stenographer read to him her stenographic notes; and thereafter, J Ruiz asked
respondent Logronio to take the oath and warned him that if his deposition was found to be false
and without legal basis, he could be charged for perjury. J Ruiz signed de Leons application for
search warrant and Logronios deposition. The search was subsequently conducted.
ISSUE: Whether or not there had been a valid search warrant.
HELD: The SC ruled in favor of Bache on three grounds.
1. J Ruiz failed to personally examine the complainant and his witness.
Personal examination by the judge of the complainant and his witnesses is necessary to enable
him to determine the existence or non-existence of a probable cause.
2. The search warrant was issued for more than one specific offense.

The search warrant in question was issued for at least four distinct offenses under the Tax Code.
As ruled in Stonehill Such is the seriousness of the irregularities committed in connection with
the disputed search warrants, that this Court deemed it fit to amend Section 3 of Rule 122 of the
former Rules of Court that a search warrant shall not issue but upon probable cause in
connection with one specific offense. Not satisfied with this qualification, the Court added
thereto a paragraph, directing that no search warrant shall issue for more than one specific
offense.
3. The search warrant does not particularly describe the things to be seized.
The documents, papers and effects sought to be seized are described in the Search Warrant
Unregistered and private books of accounts (ledgers, journals, columnars, receipts and
disbursements books, customers ledgers); receipts for payments received; certificates of stocks
and securities; contracts, promissory notes and deeds of sale; telex and coded messages; business
communications, accounting and business records; checks and check stubs; records of bank
deposits and withdrawals; and records of foreign remittances, covering the years 1966 to 1970.
The description does not meet the requirement in Art III, Sec. 1, of the Constitution, and of Sec.
3, Rule 126 of the Revised Rules of Court, that the warrant should particularly describe the
things to be seized.
A search warrant may be said to particularly describe the things to be seized when the description
therein is as specific as the circumstances will ordinarily allow or when the description expresses
a conclusion of fact not of law by which the warrant officer may be guided in making the search
and seizure or when the things described are limited to those which bear direct relation to the
offense for which the warrant is being issued.

Bataan Shipyard & Engineering Co., Inc. vs Presidential Commission on

Good Government

150 SCRA 181 Business Organization Corporation Law A Corporation Cannot Invoke
the Right Against Self-Incrimination
When President Corazon Aquino took power, the Presidential Commission on Good
Government (PCGG) was formed in order to recover ill gotten wealth allegedly acquired by
former President Marcos and his cronies. Aquino then issued two executive orders in 1986
and pursuant thereto, a sequestration and a takeover order were issued against Bataan
Shipyard & engineering Co., Inc. (BASECO). BASECO was alleged to be in actuality owned

and controlled by the Marcoses through the Romualdez family, and in turn, through dummy
stockholders.
The sequestration order issued in 1986 required, among others, that BASECO produce
corporate records from 1973 to 1986 under pain of contempt of the PCGG if it fails to do so.
BASECO assails this order as it avers, among others, that it is against BASECOs right
against self incrimination and unreasonable searches and seizures.
ISSUE: Whether or not BASECO is correct.
HELD: No. First of all, PCGG has the right to require the production of such documents
pursuant to the power granted to it. Second, and more importantly, right against selfincrimination has no application to juridical persons. There is a reserve right in the
legislature to investigate the contracts of a corporation and find out whether it has exceeded
its powers. It would be a strange anomaly to hold that a state, having chartered a
corporation like BASECO to make use of certain franchises, could not, in the exercise of
sovereignty, inquire how these franchises had been employed, and whether they had been
abused, and demand the production of the corporate books and papers for that purpose.
Neither is the right against unreasonable searches and seizures applicable here. There
were no searches made and no seizure pursuant to any search was ever made. BASECO
was merely ordered to produce the corporate records.

PHILIPPINE SOCIETY FOR THE PREVENTION OF CRUELTY TO ANIMALS vs.

COA.
G.R. No. 169752 September 25, 2007
Facts:
The petitioner was incorporated as a juridical entity over one hundred years ago by
virtue of Act No. 1285, enacted on January 19, 1905, by the Philippine Commission.
The petitioner, at the time it was created, was composed of animal aficionados and
animal propagandists. The objects of the petitioner, as stated in Section 2 of its
charter, shall be to enforce laws relating to cruelty inflicted upon animals or the
protection of animals in the Philippine Islands, and generally, to do and perform all
things which may tend in any way to alleviate the suffering of animals and promote
their welfare.
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 the
Corporation Law and the constitution of the Securities and Exchange Commission.
Important to note is that the nature of the petitioner as a corporate entity is
distinguished from the sociedad anonimas under the Spanish Code of Commerce.

For the purpose of enhancing its powers in promoting animal welfare and
enforcing laws for the protection of animals, the petitioner was initially imbued
under its charter with the power to apprehend violators of animal welfare laws. In
addition, the petitioner was to share one-half (1/2) of the fines imposed and
collected through its efforts for violations of the laws related thereto. As originally
worded, Sections 4 and 5 of Act No. 1285 provide:
Subsequently, however, the power to make arrests as well as the privilege to
retain a portion of the fines collected for violation of animal-related laws were
recalled by virtue of Commonwealth Act (C.A.) No. 148, which reads, in its entirety,
thus:
Immediately thereafter, then President Manuel L. Quezon issued Executive Order
(E.O.) No. 63 dated November 12, 1936, portions of which provide:
Whereas, during the first regular session of the National Assembly, Commonwealth
Act Numbered One Hundred Forty Eight was enacted depriving the agents of the
Society for the Prevention of Cruelty to Animals of their power to arrest persons who
have violated the laws prohibiting cruelty to animals thereby correcting a serious
defect in one of the laws existing in our statute books.
Whereas, the cruel treatment of animals is an offense against the State,
penalized under our statutes, which the Government is duty bound to enforce;

By this when the COA was to perform an audit on them they refuse to do so, by the
reason that they are a private entity and not under the said commission. On the
other hand the COA decided that they are a government entity.
Issue: is the said petitioner a private entity?
Ruling:
First, the Court agrees with the petitioner that the charter test cannot be
applied. Essentially, the charter test as it stands today provides:
[T]he test to determine whether a corporation is government owned or controlled,
or private in nature is simple. Is it created by its own charter for the exercise of a
public function, or by incorporation under the general corporation law? Those with
special charters are government corporations subject to its provisions, and its
employees are under the jurisdiction of the Civil Service Commission, and are
compulsory members of the Government Service Insurance System.
The petitioner is correct in stating that the charter test is predicated, at best, on the
legal regime established by the 1935 Constitution, Section 7, Article XIII, which
states:
Sec. 7. The National Assembly shall not, except by general law, provide for
the formation, organization, or regulation of private corporations, unless such

corporations are owned or controlled by the Government or any subdivision or

instrumentality thereof.
During the formulation of the 1935 Constitution, the Committee on Franchises
recommended the foregoing proscription to prevent the pressure of special interests
upon the lawmaking body in the creation of corporations or in the regulation of the
same. To permit the lawmaking body by special law to provide for the organization,
formation, or regulation of private corporations would be in effect to offer to it the
temptation in many cases to favor certain groups, to the prejudice of others or to
the prejudice of the interests of the country.
And since the underpinnings of the charter test had been introduced by the 1935
Constitution and not earlier, it follows that the test cannot apply to the petitioner,
which was incorporated by virtue of Act No. 1285, enacted on January 19, 1905.
Settled is the rule that laws in general have no retroactive effect, unless the
contrary is provided. All statutes are to be construed as having only a prospective
operation, unless the purpose and intention of the legislature to give them a
retrospective effect is expressly declared or is necessarily implied from the
language used. In case of doubt, the doubt must be resolved against the
retrospective effect.
There are a few exceptions. Statutes can be given retroactive effect in the
following cases: (1) when the law itself so expressly provides; (2) in case of remedial
statutes; (3) in case of curative statutes; (4) in case of laws interpreting others; and
(5) in case of laws creating new rights. None of the exceptions is present in the
instant case.
As a curative statute, and based on the doctrines so far discussed, C.A. No.
148 has to be given retroactive effect, thereby freeing all doubt as to which class of
corporations the petitioner belongs, that is, it is a quasi-public corporation, a kind of
private domestic corporation, which the Court will further elaborate on under the
fourth point.
The general principle of prospectivity of the law likewise applies to Act No. 1459,
otherwise known as the Corporation Law, which had been enacted by virtue of the
plenary powers of the Philippine Commission on March 1, 1906, a little over a year
after January 19, 1905, the time the petitioner emerged as a juridical entity. Even
the Corporation Law respects the rights and powers of juridical entities organized
beforehand
Second, a reading of petitioners charter shows that it is not subject to control
or supervision by any agency of the State, unlike government-owned and -controlled
corporations. No government representative sits on the board of trustees of the
petitioner. Like all private corporations, the successors of its members are
determined voluntarily and solely by the petitioner in accordance with its by-laws,
and may exercise those powers generally accorded to private corporations, such as
the powers to hold property, to sue and be sued, to use a common seal, and so
forth. It may adopt by-laws for its internal operations: the petitioner shall be
managed or operated by its officers in accordance with its by-laws in force. The
pertinent provisions of the charter provide:

Section 1. Anna L. Ide, Kate S. Wright, John L. Chamberlain, William F. Tucker, Mary
S. Fergusson, Amasa S. Crossfield, Spencer Cosby, Sealy B. Rossiter, Richard P.
Strong, Jose Robles Lahesa, Josefina R. de Luzuriaga, and such other persons as may
be associated with them in conformity with this act, and their successors, are
hereby constituted and created a body politic and corporate at law, under the name
and style of The Philippines Society for the Prevention of Cruelty to Animals.
As incorporated by this Act, said society shall have the power to add to its
organization such and as many members as it desires, to provide for and choose
such officers as it may deem advisable, and in such manner as it may wish, and
to remove members as it shall provide.
It shall have the right to sue and be sued, to use a common seal, to receive
legacies and donations, to conduct social enterprises for the purpose of
obtaining funds, to levy dues upon its members and provide for their collection to
hold real and personal estate such as may be necessary for the accomplishment of
the purposes of the society, and to adopt such by-laws for its government as may
not be inconsistent with law or this charter.
xxxx
Sec. 3. The said society shall be operated under the direction of its officers, in
accordance with its by-laws in force, and this charter.
xxxx
Sec. 6. The principal office of the society shall be kept in the city of Manila, and the
society shall have full power to locate and establish branch offices of the society
wherever it may deem advisable in the Philippine Islands, such branch offices to be
under the supervision and control of the principal office.
Third. The employees of the petitioner are registered and covered by the
Social Security System at the latters initiative, and not through the Government
Service Insurance System, which should be the case if the employees are
considered government employees. This is another indication of petitioners nature
as a private entity. Section 1 of Republic Act No. 1161, as amended by Republic Act
No. 8282, otherwise known as the Social Security Act of 1997, defines the employer:
Employer Any person, natural or juridical, domestic or foreign, who carries on in
the Philippines any trade, business, industry, undertaking or activity of any kind and
uses the services of another person who is under his orders as regards the
employment, except the Government and any of its political subdivisions, branches
or instrumentalities, including corporations owned or controlled by the Government:
Provided, That a self-employed person shall be both employee and employer at the
same time. (Emphasis supplied)

Fourth. The respondents contend that the petitioner is a body politic

because its primary purpose is to secure the protection and welfare of animals
which, in turn, redounds to the public good.
This argument, is, at best, specious. The fact that a certain juridical entity is
impressed with public interest does not, by that circumstance alone, make the
entity a public corporation, inasmuch as a corporation may be private although its
charter contains provisions of a public character, incorporated solely for the public
good. This class of corporations may be considered quasi-public corporations,
which are private corporations that render public service, supply public wants, or
pursue other eleemosynary objectives. While purposely organized for the gain or
benefit of its members, they are required by law to discharge functions for the
public benefit. Examples of these corporations are utility, railroad, warehouse,
telegraph, telephone, water supply corporations and transportation companies. It
must be stressed that a quasi-public corporation is a species of private corporations,
but the qualifying factor is the type of service the former renders to the public: if it
performs a public service, then it becomes a quasi-public corporation.
Authorities are of the view that the purpose alone of the corporation cannot be
taken as a safe guide, for the fact is that almost all corporations are nowadays
created to promote the interest, good, or convenience of the public. A bank, for
example, is a private corporation; yet, it is created for a public benefit. Private
schools and universities are likewise private corporations; and yet, they are
rendering public service. Private hospitals and wards are charged with heavy social
responsibilities. More so with all common carriers. On the other hand, there may
exist a public corporation even if it is endowed with gifts or donations from private
individuals.
The true criterion, therefore, to determine whether a corporation is public or
private is found in the totality of the relation of the corporation to the State. If the
corporation is created by the State as the latters own agency or instrumentality to
help it in carrying out its governmental functions, then that corporation is
considered public; otherwise, it is private. Applying the above test, provinces,
chartered cities, and barangays can best exemplify public corporations. They are
created by the State as its own device and agency for the accomplishment of parts
of its own public works.
It is clear that the amendments introduced by C.A. No. 148 revoked the
powers of the petitioner to arrest offenders of animal welfare laws and the power to
serve processes in connection therewith.
Fifth. The respondents argue that since the charter of the petitioner requires
the latter to render periodic reports to the Civil Governor, whose functions have
been inherited by the President, the petitioner is, therefore, a government
instrumentality.
This contention is inconclusive. By virtue of the fiction that all corporations
owe their very existence and powers to the State, the reportorial requirement is
applicable to all corporations of whatever nature, whether they are public, quasi-

public, or private corporationsas creatures of the State, there is a reserved right in

the legislature to investigate the activities of a corporation to determine whether it
acted within its powers. In other words, the reportorial requirement is the principal
means by which the State may see to it that its creature acted according to the
powers and functions conferred upon it. These principles were extensively
discussed in Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on
Good Government. Here, the Court, in holding that the subject corporation could
not invoke the right against self-incrimination whenever the State demanded the
production of its corporate books and papers, extensively discussed the purpose of
reportorial requirements, viz:
x x x The corporation is a creature of the state. It is presumed to be incorporated for
the benefit of the public. It received certain special privileges and franchises, and
holds them subject to the laws of the state and the limitations of its charter. Its
powers are limited by law. It can make no contract not authorized by its charter. Its
rights to act as a corporation are only preserved to it so long as it obeys the laws of
its creation. There is a reserve[d] right in the legislature to investigate its contracts
and find out whether it has exceeded its powers. It would be a strange anomaly to
hold that a state, having chartered a corporation to make use of certain franchises,
could not, in the exercise of sovereignty, inquire how these franchises had been
employed, and whether they had been abused, and demand the production of the
corporate books and papers for that purpose. The defense amounts to this, that an
officer of the corporation which is charged with a criminal violation of the statute
may plead the criminality of such corporation as a refusal to produce its books. To
state this proposition is to answer it. While an individual may lawfully refuse to
answer incriminating questions unless protected by an immunity statute, it does not
follow that a corporation vested with special privileges and franchises may refuse to
show its hand when charged with an abuse of such privileges. (Wilson v. United
States, 55 Law Ed., 771, 780.)
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 V. Quasha (1953) G.R. No. L-6055

June 12, 1953

Lessons Applicable: Public Utilities (Corporate Law)
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 Compania de Seguros v. Christern Huenefeld

A corporation borrows its citizenship from the citizenship of majority of

its stockholders, regardless of the country under whose laws it was organized
and created.
FACTS:
Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de Seguros to
cover merchandise contained in a building. During the Japanese military occupation, this same
merchandise and the building were burned, so Huenefeld filed a claim under the policy.
Filipinas Compania refused to pay, alleging that the policy had ceased to be in force when the US
declared war against Germany. Filipinas Compania contended that Huenefeld, although organized and
created under Philippine laws, is a German subject, and hence, a public enemy, since majority of its
stockholders are Germans. On the other hand, Filipinas Compania is under American jurisdiction.
However, the Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas
Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of that sum paid.

ISSUES:
W/N Christern Huenefeld is a German subject because majority of its stockholders are

under German jurisdiction, despite the fact that it was organized and created under
Philippine laws
If so, W/N the fire insurance policy is enforceable against an enemy state

o
HELD:

The Court of Appeals ruled that a private 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 a private corporation is
determined by the character or citizenship of its controlling stockholders.
But the Supreme Court held that Christern Huenefeld is an enemy corporation since majority of its
stockholders are German subjects. The two American cases relied up by the Court of Appeals have lost
their force in view of a newer case where the control test was adopted.
The Philippine Insurance Law 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 the insured becomes a public enemy.
Since Christern Huenefeld became a public enemy on Dec. 10, 1941, then the policy has ceased to be
enforcible and therefore Huenefeld is not entitled to indemnity. However, elementary rules of justice
require that the premium paid from Dec. 11, 1941 should be returned.
Thus, Filipinas Compania is allowed to recover the sum paid but only its equivalent in actual Philippine
currency, minus the premium that Huenefeld paid after Dec. 11.

Corporate Law Case Digest: Roman Catholic Apostolic Administrator Of Davao V.

LRC (1957)
G.R. No. L-8451
December 20, 1957
Lesson Applicable: Exploitation of Natural Resources (Corporate Law)

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 OF THE PHILIPPINES, represented by the Director of Lands, petitionerappellant, vs. JUDGE CANDIDO P. VILLANUEVA, of the Court of First Instance of Bulacan,
Malolos Branch VII, and IGLESIA NI CRISTO, as a corporation sole, represented by
ERAO G. MANALO, as Executive Minister, respondents-appellees.
G.R. No. L-55289. June 29, 1982

FACTS:
In 1933, Iglesia ni Cristo, private respondent, a corporation sole duly existing under
Philippine laws, acquired two lots with a total area of 313 square meters from Andres Perez,

who had possessed the property since 1933 and had declared the same for tax purposes. On
September 13, 1977, private respondent filed an application for registration of the two lots
pursuant to Section 48(b) of the Public Land Law alleging that it and its predecessor-in-interest
had possessed the land for more than 30 years. The Republic of the Philippines opposed the
application on the ground that the Iglesia Ni Cristo, as a corporation sole, is disqualified under
the Constitution to hold alienable lands of the public domain and that the land applied for is a
public land. After hearing, the trial court ordered the registration of the two lots in the name of
private respondent. Hence, this appeal by the Republic.

ISSUE:
Whether or not Iglesia ni Cristo may acquire or hold lands of public domain.

HELD:
The Supreme Court held that the Constitution prohibits a corporation sole or a juridical
person like the Iglesia Ni Cristo from acquiring or holding lands of the public domain; that said
church is not entitled to avail of the benefits of Section 48(b) of the Public Land Law which
applies only to Filipino citizens or natural persons; and that the subject lots are not private lands
because possession by the applicant and his predecessors-in-interest has not been since time
immemorial and because land registration proceeding under Section 48(b) of the Public Land
Law presupposes that the land is public.
The provision in 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; Art. XIV, Sec. II of the Constitution is not the decisive consideration for the denial of the
registration in favor of appellee. It is the view that the Bill of Rights provision on religious
freedom which bans the enactment of any law prohibiting its free exercise, the "enjoyment of
religious profession and worship without discrimination or preference. (being) forever . . .

allowed." Here the Iglesia Ni Cristo, as a corporation sole, seeks the registration. The area
involved in the two parcels of land in question is 313 square meters. As admitted in the opinion
of the Court, a chapel is therein located. It is that basic consideration that leads to the
conclusion that the balancing process, which finds application in constitutional law adjudication,
equally requires that when two provisions in the Constitution maybe relevant to a certain factual
situation, it calls for the affirmance of the decision of respondent Judge allowing the registration.
G.R. No. L-12719

May 31, 1962

THE
COLLECTOR
OF
vs.
THE CLUB FILIPINO, INC. DE CEBU, respondent.

INTERNAL

REVENUE, petitioner,

FACTS:
This is a petition to review the decision of the Court of Tax Appeals, reversing the decision of the Collector of Internal
Revenue, assessing against and demanding from the "Club Filipino, Inc. de Cebu", the sum of P12,068.84 as fixed
and percentage taxes, surcharge and compromise penalty, allegedly due from it as a keeper of bar and restaurant.
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, among others, to it "proporcionar, operar, y mantener un campo de golf,
tenis, gimnesio (gymnasiums), juego de bolos (bowling alleys), mesas de billar y pool, y toda clase de juegos no
prohibidos por leyes generales y ordenanzas generales; y desarollar y cultivar deportes de toda clase y
denominacion cualquiera para el recreo y entrenamiento saludable de sus miembros y accionistas" (sec. 2, Escritura
de Incorporacion del Club Filipino, Inc. Exh. A). Neither in the articles or by-laws is there a provision relative to
dividends and their distribution, although it is covenanted that upon its dissolution, the Club's remaining assets, after
paying debts, shall be donated to a charitable Philippine Institution in Cebu (Art. 27, Estatutos del Club, Exh. A-a.).
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. Whatever profits it had, were used to defray its overhead
expenses and to improve its golf-course. 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.

The Club wrote the Collector, requesting for the cancellation of the assessment. The request having been denied, the
Club filed the instant petition for review.
ISSUES
1.

2.
3.

Whether the respondent Club is liable for the payment of the sum of 12,068.84, as fixed and percentage
taxes and surcharges prescribed in sections 182, 183 and 191 of the Tax Code, under which the
assessment was made, in connection with the operation of its bar and restaurant, during the periods
mentioned above
Whether it is liable for the payment of the sum of P500.00 as compromise penalty.
WON, Club Filipino is a stock corporation

RULING

1.

No. Section 182, of the Tax Code states, "Unless otherwise provided, every person engaging in a business on which
the percentage tax is imposed shall pay in full a fixed annual tax of ten pesos for each calendar year or fraction
thereof in which such person shall engage in said business." Section 183 provides in general that "the percentage
taxes on business shall be payable at the end of each calendar quarter in the amount lawfully due on the business
transacted during each quarter; etc." And section 191, same Tax Code, provides "Percentage tax . . . Keepers of
restaurants, refreshment parlors and other eating places shall pay a tax three per centum, and keepers of bar and
cafes where wines or liquors are served five per centum of their gross receipts . . .".
It has been held that the liability for fixed and percentage taxes, as provided by these sections, does
not ipso facto attach by mere reason of the operation of a bar and restaurant. For the liability to attach, the
operator thereof must be engaged in the business as a barkeeper and restaurateur. The plain and ordinary
meaning of business is restricted to activities or affairs where profit is the purpose or livelihood is the motive,
and the term business when used without qualification, should be construed in its plain and ordinary meaning,
restricted to activities for profit or livelihood (The Coll. of Int. Rev. v. Manila Lodge No. 761 of the BPOE [Manila Elks
Club] & Court of Tax Appeals, G.R. No. L-11176, June 29, 1959

Having found as a fact that 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; that upon its dissolution, its remaining
assets, after paying debts, shall be donated to a charitable Philippine Institution in Cebu; that it is operated mainly
with funds derived from membership fees and dues; that the Club's bar and restaurant catered only to its members
and their guests; that there was in fact no cash dividend distribution to its stockholders and that whatever was derived
on retail from its bar and restaurant was used to defray its overall overhead expenses and to improve its golf-course
(cost-plus-expenses-basis), it stands to reason that the Club is not engaged in the business of an operator of
bar and restaurant (same authorities, cited above). It is conceded that the Club derived profit from the operation of
its bar and restaurant, but such fact does not necessarily convert it into a profit-making enterprise. . That a Club
makes some profit, does not make it a profit-making Club. As has been remarked a club should always strive,
whenever possible, to have surplus (Jesus Sacred Heart College v. Collector of Int. Rev., G.R. No. L-6807, May 24,
1954; Collector of Int. Rev. v. Sinco Educational Corp., G.R. No. L-9276, Oct. 23, 1956).1wph1.t
2. No. 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.
3. The facts that the capital stock of the respondent Club is divided into shares, does not detract from the
finding of the trial court that it is not engaged in the business of operator of bar and restaurant. What is
determinative of whether or not the Club is engaged in such business is its object or purpose, as stated in its
articles and by-laws. It is a familiar rule that the actual purpose is not controlled by the corporate form or by
the commercial aspect of the business prosecuted, but may be shown by extrinsic evidence, including the
by-laws and the method of operation. From the extrinsic evidence adduced, the Tax Court concluded that the Club
is not engaged in the business as a barkeeper and restaurateur.
Moreover, 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 bylaws 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.

Manuel R. Dulay Enterprises vs. CA Case Digest

Manuel R. Dulay Enterprises vs. Court of Appeals
[GR 91889, 27 August 1993]

Facts: Manuel R.Dulay Enterprises, Inc., a domestic corporation with the following as members of
its Board of Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer
and general manager; Atty. Virgilio E. Dulay with 10 shares and designated as vice-president; Linda
E. Dulay with 10 shares; Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10
shares and designated as secretary, owned a property covered by TCT 17880 4 and known as
Dulay Apartment consisting of 16 apartment units on a 689 square meter lot, more or less, 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.

On 23 December 1976, Manuel Dulay by virtue of Board Resolution 18 of the corporation sold the
subject property to spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as
evidenced by the Deed of Absolute Sale. Thereafter, TCT 17880 was cancelled and TCT 23225 was
issued to Maria Theresa Veloso. Subsequently, Manuel Dulay and the spouses Veloso executed a
Memorandum to the Deed of Absolute Sale of 23 December 1976 dated 9 December 1977 giving
Manuel Dulay within 2 years or until 9 December 1979 to repurchase the subject property for
P200,000.00 which was, however, not annotated either in TCT 17880 or TCT 23225. On 24
December 1976, Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject
property to Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry 68139 in
TCT 23225. Upon the failure of Maria Veloso to pay Torres, the subject property was sold on 5 April
1978 to Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the
Certificate of Sheriff's Sale issued on 20 April 1978.

On 20 July 1978, 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 13 with the Registry of Deeds of Pasay City and TCT 24799 was
subsequently issued to Torres on 23 April 1979. On 1 October 1979, Torres filed a petition for the
issuance of a writ of possession against spouses Veloso and Manuel Dulay in LRC Case 1742-P.
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 in an Order dated 8 April 1980. On 20 June 1980, 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 Unit No. 8-A for the recovery
of possession, sum of money and damages with preliminary injunction in Civil Case 8198-P with the
then Court of First Instance of Rizal.

On 21 July 1980, the corporation filed an action against spouses Veloso and Torres for the
cancellation of the Certificate of Sheriff's Sale and TCT 24799 in Civil Case 8278-P with the then

Court of First Instance of Rizal. On 29 January 1981, Pabalan and Torres filed an action against
spouses Florentino and Elvira Manalastas, a tenant of Dulay Apartment Unit No. 7-B, with the
corporation as intervenor for ejectment in Civil Case 38-81 with the Metropolitan Trial Court of Pasay
City which rendered a decision on 25 April 1985, 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 in the sum of P500.00 a month from May 1979 until they shall have vacated the premises with
interest at the legal rate; and to pay attorney's fees in the sum of P2,000.00 and P1,000.00 as other
expenses of litigation and for them to pay the costs of the suit.

Thereafter or on 17 May 1985, 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 in Civil Case 2880-P. Thereafter, the 3 cases were
jointly tried and the trial court rendered a decision in favor of Pabalan and Torres. Not satisfied with
said decision, the corporation, et al. appealed to the Court of Appeals which rendered a decision on
23 October 1989, affirming the trial court decision. On 8 November 1989, the corporation, et al. filed
a Motion for Reconsideration which was denied on 26 January 1990. The corporation, et al. filed the
petition for review on certiorari. During the pendency of the petition, Torres died on 3 April 1991 as
shown in his death certificate and named Torres-Pabalan Realty & Development Corporation as his
heir in his holographic will dated 31 October 1986.

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.