THE COLLECTOR OF INTERNAL REVENUE, petitioner,  (1) A capital stock divided into shares

vs. (2) An authority to distribute to the holders of such shares,

THE CLUB FILIPINO, INC. DE CEBU, respondent. dividends or allotments of the surplus profits on the basis of
shares held.
FACTS: The Club owns and operates a club house, a In the case at bar, nowhere in the AOI or by-laws of Club
bowling alley, a golf course (on a lot leased from the Filipino could be found an authority for the distribution of its
government), and a bar-restaurant where it sells wines and dividends or surplus profits. Strictly speaking, it cannot,
liquors, soft drinks, meals and short orders to its members therefore, be considered a stock corporation, within the
and their guests. The bar-restaurant was a necessary contemplation of the corporation law.
incident to the operation of the club and its golf-course. The The fact that the capital stock of the respondent Club is
club is operated mainly with funds derived from membership divided into shares, does not detract from the finding of the
fees and dues. Whatever profits it had, were used to defray trial court that it is not engaged in the business of operator
its overhead expenses and to improve its golf-course. In of bar and restaurant. What is determinative of whether or
1951. as a result of a capital surplus, arising from the re- not the Club is engaged in such business is its object or
valuation of its real properties, the value or price of which purpose, as stated in its articles and by-laws. It is a familiar
increased, the Club declared stock dividends; but no actual rule that the actual purpose is not controlled by the
cash dividends were distributed to the stockholders. In corporate form or by the commercial aspect of the business
1952, a BIR agent discovered that the Club has never paid prosecuted, but may be shown by extrinsic evidence,
percentage tax on the gross receipts of its bar and including the by-laws and the method of operation.
restaurant. CIR assessed against and demanded from the It is conceded that the Club derived profit from the operation
Club taxes allegedly due. of its bar and restaurant, but such fact does not necessarily
convert it into a profit-making enterprise. The bar and
ISSUE: WON Club Filipino is liable for the taxes (WON it is restaurant are necessary adjuncts of the Club to foster its
a stock corporation) purposes and the profits derived therefrom are necessarily
incidental to the primary object of developing and cultivating
HELD: No (it is non-stock) sports for the healthful recreation and entertainment of the
The Club was organized to develop and cultivate sports of stockholders and members. That a Club makes some profit,
all class and denomination for the healthful recreation and does not make it a profit-making Club. As has been
entertainment of its stockholders and members.  There was remarked a club should always strive, whenever possible, to
in fact, no cash dividend distribution to its stockholders and have surplus
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:
REPUBLIC VS CITY OF PARANAQUE On February 19, 2003, then Parañaque City Treasurer
Liberato M. Carabeo (Carabeo) issued Warrants of Levy on
Facts: PRA's reclaimed properties (Central Business Park and
The Public Estates Authority (PEA) is a government Barangay San Dionisio) located in Parañaque City based on
corporation created by virtue of Presidential Decree (P.D.) the assessment for delinquent real property... taxes made
No. 1084 (Creating the Public Estates Authority, Defining its by then Parañaque City Assessor Soledad Medina Cue for
Powers and Functions, Providing Funds Therefor and For tax years 2001 and 2002.
Other Purposes) which took... effect on February 4, 1977 to On January 8, 2010, the RTC rendered its decision
provide a coordinated, economical and efficient reclamation dismissing PRA's petition. In ruling that PRA was not
of lands, and the administration and operation of lands exempt from payment of real property taxes, the RTC
belonging to, managed and/or operated by, the government reasoned out that it was a GOCC under Section 3 of P.D.
with the object of maximizing their utilization and hastening No. 1084. It was organized as a stock corporation because
their... development consistent with public interest. it had an... authorized capital stock divided into no par value
On February 14, 1979, by virtue of Executive Order (E.O.) shares. In fact, PRA admitted its corporate personality and
No. 525 issued by then President Ferdinand Marcos, PEA that said properties were registered in its name as shown by
was designated as the agency primarily responsible for the certificates of title. Therefore, as a GOCC, local tax
integrating, directing and coordinating all reclamation exemption is withdrawn by virtue of Section 193... of
projects for and on behalf of the National Republic Act (R.A.) No. 7160 [Local Government Code
(LGC)] which was the prevailing law in 2001 and 2002 with
Government. respect to real property taxation. The RTC also ruled that
On October 26, 2004, then President Gloria Macapagal- the tax exemption claimed by PRA under E.O. No. 654 had
Arroyo issued E.O. No. 380 transforming PEA into PRA, already been expressly repealed by R.A. No.
which shall perform all the powers and functions of the PEA 7160 and that PRA failed to comply with the procedural
relating to reclamation activities. requirements in Section 206 thereof.
By virtue of its mandate, PRA reclaimed several portions of PRA asserts that it is not a GOCC under Section 2(13) of
the foreshore and offshore areas of Manila Bay, including the Introductory Provisions of the Administrative Code.
those located in Parañaque City, and was issued Original Neither is it a GOCC under Section 16, Article XII of the
Certificates of Title (OCT Nos. 180, 202, 206, 207, 289, 1987 Constitution because it is not required to meet the test
557, and 559) and Transfer Certificates of of economic viability. Instead, PRA is a... government
Title (TCT Nos. 104628, 7312, 7309, 7311, 9685, and 9686) instrumentality vested with corporate powers and
over the reclaimed lands. performing an essential public service pursuant to Section
2(10) of the Introductory Provisions of the Administrative
Code. Although it has a capital stock divided into shares, it
is not authorized to distribute... dividends and allotment of It explains that reclaimed lands are part of the public
surplus and profits to its stockholders. Therefore, it may not domain, owned by the State, thus, exempt from the
be classified as a stock corporation because it lacks the payment of real estate taxes. Reclaimed lands retain their
second requisite of a stock corporation which is the inherent potential as areas for public use or public service.
distribution of dividends and allotment of surplus and profits While the subject reclaimed lands are still in its... hands,
to the... stockholders. these lands remain public lands and form part of the public
domain. Hence, the assessment of real property taxes
It insists that it may not be classified as a non-stock made on said lands, as well as the levy thereon, and the
corporation because it has no members and it is not public sale thereof on April 7, 2003, including the issuance
organized for charitable, religious, educational, professional, of the certificates of sale in favor of... the respondent
cultural, recreational, fraternal, literary, scientific, social, civil Parañaque City, are invalid and of no force and effect.
service, or similar purposes, like... trade, industry,
agriculture and like chambers as provided in Section 88 of Issues:
the Corporation Code.
Whether the Trial Court erred when it failed to consider that
Moreover, PRA points out that it was not created to reclaimed lands are part of the public domain.
compete in the market place as there was no competing
reclamation company operated by the private sector. Also, THE TRIAL COURT GRAVELY ERRED IN FAILING TO
while PRA is vested with corporate powers under P.D. No. CONSIDER THAT RECLAIMED LANDS ARE PART OF
1084, such circumstance does not make it a corporation THE PUBLIC DOMAIN AND, HENCE, EXEMPT FROM
but... merely an incorporated instrumentality and that the REAL PROPERTY TAX.
mere fact that an incorporated instrumentality of the Ruling:
National Government holds title to real property does not
make said instrumentality a GOCC. Section 48, Chapter 12, The Court finds merit in the petition.
Book I of the Administrative Code of 1987 recognizes a... In the case at bench, PRA is not a GOCC because it is
scenario where a piece of land owned by the Republic is neither a stock nor a non-stock corporation. It cannot be
titled in the name of a department, agency or considered as a stock corporation because although it has a
instrumentality. capital stock divided into no par value shares as provided in
Thus, PRA insists that, as an incorporated instrumentality of Section 7... of P.D.
the National Government, it is exempt from payment of real No. 1084, it is not authorized to distribute dividends, surplus
property tax except when the beneficial use of the real allotments or profits to stockholders. There is no provision
property is granted to a taxable person. PRA claims that whatsoever in P.D. No. 1084 or in any of the subsequent
based on Section 133(o) of the LGC, local... governments executive issuances pertaining to PRA, particularly, E.O.
cannot tax the national government which delegate to local No. 525,... E.O.
governments the power to tax.
No. 654... and EO No. 798... that authorizes PRA to "shall not be alienated," unless they are classified as
distribute dividends, surplus allotments or profits to its "agricultural lands" of the public domain. The mere
stockholders. reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or
PRA cannot be considered a non-stock corporation either disposable lands of the public domain. There must be... a
because it does not have members. A non-stock law or presidential proclamation officially classifying these
corporation must have members. reclaimed lands as alienable or disposable and open to
Moreover, it was not organized for any of the purposes disposition or concession. Moreover, these reclaimed lands
mentioned in Section 88 of the Corporation Code. cannot be classified as alienable or disposable if the law
Specifically, it... was created to manage all government has reserved them for some public or... quasi-public use.
reclamation projects. As the Court has repeatedly ruled, properties of public
Likewise, it is worthy to mention Section 14, Chapter 4, Title dominion are not subject to execution or foreclosure sale.
I, Book III of the Administrative Code of 1987, thus: Thus, the assessment, levy and foreclosure made on the
SEC 14. Power to Reserve Lands of the Public and Private subject reclaimed lands by respondent, as well as the
Dominion of the Government.- issuances of certificates of... title in favor of respondent, are
without basis.
(1) The President shall have the power to reserve for
settlement or public use, and for specific public purposes, Principles:
any of the lands of the public domain, the use of which is Two requisites must concur before one may be classified as
not otherwise directed by law. The reserved land shall a stock corporation, namely: (1) that it has capital stock
thereafter remain subject to the specific public... purpose divided into shares; and (2) that it is authorized to distribute
indicated until otherwise provided by law or proclamation. dividends and allotments of surplus and profits to its
Reclaimed lands such as the subject lands in issue are stockholders. If only one... requisite is present, it cannot be
reserved lands for public use. They are properties of public properly classified as a stock corporation. As for non-stock
dominion. The ownership of such lands remains with the corporations, they must have members and must not
State unless they are withdrawn by law or presidential distribute any part of their income to said members.
proclamation from public use.
Under Section 2, Article XII of the 1987 Constitution, the
foreshore and submerged areas of Manila Bay are part of
the "lands of the public domain, waters x x x and other
natural resources" and consequently "owned by the State."
As such, foreshore and submerged areas
MIAA VS. CITY OF PARANAQUE MIAA cannot claim that the Airport Lands and Buildings are
exempt from real estate tax.
FACTS:
MIAA’s contention: Airport Lands and Buildings are owned
MIAA received Final Notices of Real Estate Tax by the Republic. The government cannot tax itself. The
Delinquency from the City of Parañaque for the taxable reason for tax exemption of public property is that its
years 1992 to 2001. MIAA’s real estate tax delinquency was taxation would not inure to any public advantage, since in
estimated at P624 million. such a case the tax debtor is also the tax creditor.

The City of Parañaque, through its City Treasurer, issued ISSUE:

notices of levy and warrants of levy on the Airport Lands
and Buildings. The Mayor of the City of Parañaque Whether Airport Lands and Buildings of MIAA are exempt
threatened to sell at public auction the Airport Lands and from real estate tax under existing laws?
Buildings should MIAA fail to pay the real estate tax
delinquency.
RULING:  

MIAA filed with the Court of Appeals an original petition for

prohibition and injunction, with prayer for preliminary Yes. Ergo, the real estate tax assessments issued by the
injunction or temporary restraining order. The petition City of Parañaque, and all proceedings taken pursuant to
sought to restrain the City of Parañaque from imposing real such assessments, are void.
estate tax on, levying against, and auctioning for public sale
the Airport Lands and Buildings. 1. MIAA is Not a Government-Owned or Controlled
Corporation
Paranaque’s Contention: Section 193 of the Local
Government Code expressly withdrew the tax exemption MIAA is not a government-owned or controlled corporation
privileges of “government-owned and-controlled but an instrumentality of the National Government and thus
corporations” upon the effectivity of the Local Government exempt from local taxation.
Code. Respondents also argue that a basic rule of statutory
construction is that the express mention of one person,
thing, or act excludes all others. An international airport is MIAA is not a stock corporation because it has no capital
not among the exceptions mentioned in Section 193 of the stock divided into shares. MIAA has no stockholders or
Local Government Code. Thus, respondents assert that voting shares.
MIAA is also not a non-stock corporation because it has no
members. A non-stock corporation must have members.

MIAA is a government instrumentality vested with corporate

powers to perform efficiently its governmental functions.
MIAA is like any other government instrumentality, the only
difference is that MIAA is vested with corporate powers.

When the law vests in a government instrumentality

corporate powers, the instrumentality does not become a
corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains a
government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent domain,
police authority and the levying of fees and charges. At the
same time, MIAA exercises “all the powers of a corporation
under the Corporation Law, insofar as these powers are not
inconsistent with the provisions of this Executive Order.”
CIR VS ST. LUKE’S MEDICAL CENTER
Consequently, the CIR moved for reconsideration but the
FACTS: CTA Division denied which the CIR prompted to file a
The respondent St. Luke’s Medical Center, Inc. (SLMC) petition for review before the CTA En Banc which eventually
received a tax payment assessment from the Large denied and affirmed the first decision of the CTA Division.
Taxpayers Service-Documents Processing and Quality
Assurance Division of the Bureau of Internal Revenue Audit Moreover, the CIR filed an instant petition contending that
Result/Assessment Notice on December 14, 2007. Based the CTA erred in exempting SLMC from payment of income
on the assessment the respondent SLMC has a deficiency tax, where the CIR petition is partly granted. SLMC ordered
income tax under Section 27 (B) of the 1997 National to pay the deficiency income tax in 1998 based on the 10%
Internal Revenue Code (NIRC), as amended for the taxable preferential income tax. The CIR argues that under the
year 2005 in the amount of P78, 617,434.54 and for taxable doctrine of Stare Decisis SLMC is subject to 10% income
year 2006 in the amount of P57, 119,867.33. tax under Section 27 (B) of the 1997 NIRC, and liable to pay
the compromise penalty. SLMC argues that the income
In response to the received assessment from NIRC on derives from operating a hospital is not income from
January 14, 2008, SLMC filed with the petitioner activities conducted for profit. And the case should be
Commission on Internal Revenue (CIR) an administrative dismissed since payment to BIR for the basic taxes due for
protest assailing the assessments. The SLMC alleged that taxable years 1998, 2000-2002 and 2004-2007 has been
they are exempted from paying the income tax since SLMC made.
is a non-stock, non-profit, charitable and social welfare
organization under Section 30 (E) and (G) of the 1997 NIRC
as amended. ISSUES:

However, on April 25, 2008, SLMC received the petitioner 1. Whether or not SLMC is liable for income tax under
CIR’s Final Decision on the Disputed Assessment dated Section 27 (B) of the 1997 NIRC.
April 9, 2008 increasing the deficiency income from P78,
617, 434.54 to P82,419,522.21 for taxable year 2005 and
from P57,119,867.33 to P60, 259,885.94 for taxable year HELD:
2006.
1. Yes. Based on Section 27 (B) of the NIRC imposes 10%
The aggrieved SLMC elevated the matter to Court of Tax preferential tax rate on the income of (1) proprietary non-
Appeal (CTA) finding the decision that SLMC is not liable for profit educational institutions and (2) proprietary non-profit
the deficiency income tax under Section 27 (B) of the 1997 hospitals. The only qualifications for hospitals are they must
NIRC, as amended and exempt from paying the income be proprietary and non-profit. Proprietary means private,
under Section 30 (E) and (G) of the same code. following the definition of a proprietary educational
institution, as any other private school maintained and
administered by private individuals or groups with
government permit. While non-profit means no net income
or asset accrues to or benefits any member or specific
person with all the net income or asset devoted to the
institution’s purposes and all its activities conducted not for
profit.
 for the third quarter of 1997... and... of DST on policies of
REPUBLIC v. SUNLIFE ASSURANCE COMPANY OF insurance from August 21 to December 18, 1997.
CANADA, GR NO. 158085, 2005-10-14
the CTA found in favor of Sun Life.
Facts:
Seeking reconsideration of the decision of the CTA, the CIR
Sun Life is a mutual life insurance company organized and argued that Sun Life ought to have registered, foremost,
existing under the laws of Canada. It is registered and with the Cooperative Development Authority before it could
authorized by the Securities and Exchange Commission enjoy the exemptions from premium tax and DST extended
and the Insurance Commission to engage in business in the to purely cooperative companies or associations
Philippines as a mutual life insurance... company with
principal office at Paseo de Roxas, Legaspi Village, Makati For its failure to register, it could not avail of the exemptions
City. prayed for.

Sun Life filed with the [Commissioner of Internal Revenue] "Notwithstanding these arguments, the CTA denied the
(CIR) its insurance premium tax return for the third quarter CIR's motion for reconsideration.
of 1997 and paid the premium tax in the amount Ruling of the Court of Appeals
"On October 20, 1997, S In upholding the CTA, the CA reasoned that respondent
On December 29, 1997, the [Court of Tax Appeals] (CTA) was a purely cooperative corporation duly licensed to
rendered its decision in Insular Life Assurance Co. Ltd. v. engage in mutual life insurance business in the Philippines.
[CIR], which held that mutual life insurance companies are Thus, respondent was deemed exempt from premium and
purely cooperative companies and are exempt from the documentary stamp taxes, because its affairs are
payment of premium tax and DST. managed... and conducted by its members with money
Hence, on August 20, 1999, Sun Life filed with... the CIR an collected from among themselves, solely for their own
administrative claim for tax credit of its alleged erroneously protection, and not for profit.
paid premium tax and DST for the aforestated tax periods. Hence, this Petition.
"For failure of the CIR to act upon the administrative claim Issues:
for tax credit and with the 2-year period to file a claim for tax
credit or refund dwindling away and about to expire, Sun Whether Respondent Is a Cooperative
Life filed with the CTA a petition for review Whether CDA Registration Is Necessary
In its petition, it prayed... for the issuance of a tax credit Ruling:
certificate... representing... erroneously paid premium tax
Having satisfactorily proven to the Court of Tax Appeals, to taxes on policies of insurance or annuities it grants, under
the Court of Appeals and to this Court that it is a bona fide Section 199.
cooperative, respondent is entitled to exemption from the
payment of taxes on life insurance premiums and
documentary stamps. Not being... governed by the
Cooperative Code of the Philippines, it is not required to be
registered with the Cooperative Development Authority in
order to avail itself of the tax exemptions. Significantly,
neither the Tax Code nor the Insurance Code mandates this
administrative... registration.
The Petition has no merit.
The Tax Code defines a cooperative as an association
"conducted by the members thereof with the money
collected from among themselves and solely for their own
protection and not for profit."[8] Without a doubt, respondent
is a cooperative engaged in a... mutual life insurance
business.
First, it is managed by its members. Both the CA and the
CTA found that the management and affairs of respondent
were conducted by its member-policyholders.[9]
Second, it is operated with money collected from its
members. Since respondent is composed entirely of
members who are also its policyholders, all premiums
collected obviously come only from them.
Third, it is licensed for the mutual protection of its members,
not for the profit of anyone.
Under the Tax Code although respondent is a cooperative,
registration with the Cooperative Development Authority
(CDA)[45] is not necessary in order for it to be exempt from
the payment of both percentage taxes on insurance
premiums, under Section 121; and... documentary stamp
Tan versus Sycip SEC Hearing Officer Malthie G. Militar declared the April 6,
G.R. No. 153468; August 17, 2006 1998 meeting null and void for lack of quorum. She held
that the basis for determining the quorum in a meeting of
For stock corporations, the quorum referred to in Section 52 members should be their number as specified in the articles
of the Corporation Code is based on the number of of incorporation, not simply the number of living members.
outstanding voting stocks. For nonstock corporations, only
those who are actual, living members with voting rights
shall be counted in determining the existence of a quorum Issue:
during members meetings. Dead members shall not be
counted. Whether or not in NON-STOCK corporations, dead
members should still be counted in determination of quorum
Facts:  for purpose of conducting the Annual Members Meeting.

Petitioner Grace Christian High School (GCHS) is a Ruling:

nonstock, non-profit educational corporation with fifteen (15)
regular members, who also constitute the board of trustees.  The Right to Vote in Nonstock Corporations
During the annual members meeting held on April 6, 1998,
there were only eleven (11) living member-trustees, as four
(4) had already died. Out of the eleven, seven (7) attended In nonstock corporations, the voting rights attach to
the meeting through their respective proxies. The meeting membership. Members vote as persons, in accordance with
was convened and chaired by Atty. Sabino Padilla Jr. over the law and the bylaws of the corporation. Each member
the objection of Atty. Antonio C. Pacis, who argued that shall be entitled to one vote unless so limited, broadened, or
there was no quorum. In the meeting, Petitioners Ernesto denied in the articles of incorporation or bylaws. We hold
Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were that when the principle for determining the quorum for stock
voted to replace the four deceased member-trustees. corporations is applied by analogy to nonstock corporations,
only those who are actual members with voting rights
should be counted.
When the controversy reached the Securities and Exchange
Commission (SEC), petitioners maintained that the
deceased member-trustees should not be counted in the Under Section 52 of the Corporation Code, the majority of
computation of the quorum because, upon their death, the members representing the actual number of voting
members automatically lost all their rights (including the rights, not the number or numerical constant that may
right to vote) and interests in the corporation. originally be specified in the articles of incorporation,
constitutes the quorum.
Section 25 of the Code specifically provides that a majority of the member. Section 91 of the Corporation Code further
of the directors or trustees, as fixed in the articles of provides that termination extinguishes all the rights of a
incorporation, shall constitute a quorum for the transaction member of the corporation, unless otherwise provided in the
of corporate business (unless the articles of incorporation or articles of incorporation or the bylaws.
the bylaws provide for a greater majority). If the intention of
the lawmakers was to base the quorum in the meetings of
stockholders or members on their absolute number as fixed Applying Section 91 to the present case, we hold that dead
in the articles of incorporation, it would have expressly members who are dropped from the membership roster in
specified so. Otherwise, the only logical conclusion is that the manner and for the cause provided for in the By-Laws of
the legislature did not have that intention. GCHS are not to be counted in determining the requisite
vote in corporate matters or the requisite quorum for the
annual members meeting. With 11 remaining members, the
Effect of the Death of a Member or Shareholder quorum in the present case should be 6. Therefore, there
being a quorum, the annual members meeting, conducted
with six members present, was valid.
In stock corporations, shareholders may generally transfer
their shares. Thus, on the death of a shareholder, the
executor or administrator duly appointed by the Court is
vested with the legal title to the stock and entitled to vote it.
Until a settlement and division of the estate is effected, the
stocks of the decedent are held by the administrator or
executor.

On the other hand, membership in and all rights arising from

a nonstock corporation are personal and non-transferable,
unless the articles of incorporation or the bylaws of the
corporation provide otherwise. In other words, the
determination of whether or not dead members are entitled
to exercise their voting rights (through their executor or
administrator), depends on those articles of incorporation or
bylaws.

Under the By-Laws of GCHS, membership in the

corporation shall, among others, be terminated by the death
 During the hearings on the application for creation of a
management committee, [the Batong group] filed an Urgent
Motion to Suspend the Proceedings of the Case in view of
REV. LUIS AO-AS v. CA, GR NO. 128464, 2006-06-20 an amicable settlement agreed upon by the parties entitled
"A FORMULA FOR CONCORD".  However,...
Facts:
notwithstanding the FORMULA FOR CONCORD, the SEC-
[The members of the Batong group] are the duly elected SICD denied [the Batong group's] motion to suspend
board of directors of the LCP proceedings.
[the Ao-As group] have served in various capacities as the SEC-SICD Hearing Officer after the presentation of the
directors or officers of the LCP. parties respective evidence, issued an Order creating a
management committee.
[the Ao-As group] filed SEC-SICD Case No. 3857 for
accounting and damages with prayer for preliminary [the Batong group] filed with the SEC En Banc a Petition for
injunction and appointment of a management committee... Certiorari with prayer for a temporary restraining order
asserting the following causes of action: alleging that the SEC-SIDC acted with grave abuse of
discretion in creating the management committee.
"First, the alleged non-liquidation and/or non-accounting of
a part of the proceeds of the La Trinidad land    transaction [the Ao-As group] filed a motion for issuance of a writ of
in the amount of P64,000.00 by petitioner Thomas Batong; preliminary injunction seeking to enjoin [the Batong group]
not only from continuing to act as LCP board of directors but
Second, the alleged non-liquidation and/or unaccounting of also from calling a national convention to elect new set of
cash advances in the aggregate amount of P323,750.00 by officers and... members of the Board as provided in the LCP
petitioner Thomas Batong; Constitution and By-Laws.
Third, the alleged dissipation and/or unaccounting of the the SEC-SIDC ordered the issuance of a writ of preliminary
LCP general fund in the amount of 4.8 million; injunction
Fourth, the non-registration of the Leyte land purchased [the Batong group] allege that the SEC-SIDC management
with LCP funds by petitioner Victorio Saquilayan; committee used the Order... to carry out ultra vires acts,
Fifth, severance of church-partnership relationship with more specifically: (i) to take control of and closing down
Lutheran Church-Missouri Synod (LCMS); and church buildings; (ii) to evict LCP clergymen from their
church parsonages; (iii)... to ordain and appoint new
Sixth, the transfer of LCP corporate books from the Sta. clergymen to replace incumbent members of the church
Mesa office to the Caloocan office." hierarchy.
However, even before the creation of the management [the Batong Group] filed a Second Supplement to its petition
committee, the LCP national convention had already been for certiorari in the SEC En Banc alleging the supervening
called in a Board meeting events and seeking the review of an Order of the Hearing
Officer... which enlisted the aid of the Secretary of the
During the 17th LCP National Convention, the delegates Department... of Interior and Local Government and the
representing the majority of the members which comprised PNP Director General to enforce the writ of preliminary
the three districts (North Luzon, South Luzon and injunction.
Mindanao) issued a "Manifesto" to initiate by themselves
the election for a new set of church... leaders because the Pending the resolution of the above-mentioned petitions,
incumbent directors were enjoined to act as a board. the management committee took control of several church
properties, replaced clergymen from their parsonages and
Similarly, prior to the issuance of the writ of preliminary froze all bank accounts in the name of LCP.
injunction and the appointment of the management
committee, the SLD (South Luzon District) of LCP already [The Batong group] then filed a Petition for Mandamus and
held its district conference... which elected, among other of Damages with Prayer for Preliminary Mandatory
its officers, the SLD Lay Injunction... seeking to unfreeze the bank accounts and
recover the seized buildings.
Representative pursuant to the LCP Constitution and By
Laws. All of the aforementioned petitioners (sic) were denied by
the SEC En Banc.
The district conference for NLD was likewise held before the
issuance of the writ of preliminary injunction The Batong group then filed a Petition for Review with the
Court of Appeals seeking to annul the Decision of the
In said convention, the local congregations and clergymen Securities and Exchange Commission En Banc.  In said
executed a manifesto expressing their own opposition to the Petition, the Batong group alleged that the Ao-As group
appointment of a... management committee. persisted in carrying out ultra vires and... illegal acts... the
[The Batong group] then filed with the SEC En Banc a Court of Appeals ruled in favor of the Batong group
Supplemental Petition dated November 13, 1992 alleging Issues:
the supervening events in the case which took place after
the filing of the original petition The creation of a management
Subsequent to the 17th LCP national convention of October  committee is not warranted by
1992, a special convention was called by the SEC
Management Committee... to elect a different set of officers  the facts of the case.
for LCP. Ruling:
Refusal to allow stockholders (or members of a non-stock bad faith was shared by all persons to whom... he attributes
corporation) to examine books of the company is not a the same.
ground for appointing a receiver (or creating a management
committee) since there are other adequate remedies, such
as a writ of mandamus.[24]  Misconduct of corporate
directors or other officers is not a ground for the
appointment of a receiver where there are one or more
adequate legal action against the officers, where they are
solvent, or other remedies.[25]
The appointment of a receiver for a going corporation is a
last resort remedy, and should not be employed when
another remedy is available.  Relief by receivership is an
extraordinary remedy and is never exercised if there is an
adequate remedy at law or if the harm can be... prevented
by an injunction or a restraining order.  Bad judgment by
directors, or even unauthorized use and misapplication of
the company's funds, will not justify the appointment of a
receiver for the corporation if appropriate relief can
otherwise be had
The fact that the President of the LCP needs the
concurrence of only two other directors to authorize the
release of surplus funds plainly contradicts the conclusion of
conspiracy among the presently 11-man board.  Neither
does the fact that the Board of Directors of the
LCP prepares the annual budget and the annual auditing of
properties of the LCP justify the conclusion that the alleged
acts of respondent Batong was done in concert with the
other directors.  There should have been evidence that such
dissipation took place with the... knowledge and express or
implied consent of most or the entire board.  Good faith is
always presumed.[27]  As it is the obligation of one who
alleges bad faith to prove it, so should he prove that such
 pending controversy over the Golf Share, the Caram family
and the RTC included the Golf Share as part of Caram’s
estate. The RTC approved a project of partition of Caram’s
estate and the Golf Share was adjudicated to the wife, who
paid the corresponding estate tax due, including that on the
golf Share

It was only through a letter that the heirs of Caram learned

of the sale of the Golf Share following their inquiry with
VALLEY GOLF & COUNTRY CLUB, INC., Petitioner, vs. Valley Golf about the Golf Share. After a series of
ROSA O. VDA. DE CARAM,Respondent.G.R. No. 158805 correspondence, the Caram heirs were subsequently
| April 16, 2009 informed in a letter that they were entitled to the refund
FACTS: Petitioner is a duly constituted non-stock, non-profit ofP11,066.52 out of the proceeds of the sale of the Golf
corporation which operates a golf course. The members Share, which amount had been in the custody of the
and their guests are entitled to play golf on the said course petitioner.
and avail of the facilities and privilege. The shareholders are Caram’s wife filed an action for reconveyance of the Golf
likewise assessed monthly membership dues. Share with damages before the SEC against Valley Golf.
Cong. Fermin Z. Caram, Jr., respondent’s husband, The SEC Hearing Officer rendered a decision in favor of the
subscribed and paid in full 1 Golf Share of the petitioner and wife, ordering Valley Golf to convey ownership of the Golf
was subsequently issued with a stock certificate which Share, or in the alternative. to issue one fully paid share of
indicated a par value of P9,000.00. It was alleged by the stock of Valley Golf of the same class as the Golf Share to
petitioner that Caram stopped paying his monthly dues and the wife. Damages totaling P90,000.00 were also awarded
that it has sent 5 letters to Caram concerning his delinquent to the wife.
account. The Golf Share was subsequently sold at public The SEC hearing officer ruled that under Section 67,
auction for P25,000.00 after the BOD had authorized the paragraph 2 of the Corporation Code, a share stock could
sale and the Notice of Auction Sale was published in the only be deemed delinquent and sold in an extrajudicial sale
Philippine Daily Inquirer at public auction only upon the failure of the stockholder to
Caram thereafter died and hiis wife initiated intestate pay the unpaid subscription or balance for the share.
proceedings before the RTC of IloIlo. Unaware of the However, the section could not have applied in Caram’s
case since he had fully paid for the Golf Share and he had
been assessed not for the share itself but for his delinquent
club dues
Title XI on Non-
Proceeding from the foregoing premises, the SEC hearing
officer concluded that the auction sale had no basis in law
Stock
and was thus a nullity. The SEC en banc and the Court of
Appeals affirmed the hearing officer’s decision, and so the Corporations of the
Corporation Code
petitioner appealed before SC.

ISSUE:

WON a non-stock corporation seize and dispose of the

membership share of a fully-paid member on account of its
dealing with the
unpaid debts to the corporation when it is authorized to do
sounder the corporate by-laws but not by the Articles of termination of
Incorporation?
membership in a
RULING: non-stock
The Supreme corporation such as
Court ruled that Valley Golf.
there is a specific
provision under
Section 91 of the incorporation or the
Corporation Code by-laws. Termination
provides: of
SEC. 91. membership shall
Termination of have the effect of
membership.— extinguishing all
Membership shall be rights of a
terminated in the member in the
manner corporation or in its
and for the causes property, unless
provided in the otherwise provided in
articles of
the articles of Delinquency in
incorporation or monthly club dues
the by-laws. was merely an
(Emphasis supplied) ordinary debt
A share can only be enforceable by
deemed delinquent judicial action in a
and sold at public civil case. A provision
auction only upon the creating a lien upon
failure of the shares of stock for
stockholder to pay unpaid debts,
the unpaid liabilities, or
subscription. assessments of
stockholders to the before a member’s
corporation, share may be seized
should be embodied and sold.
in the Articles of The procedure for
Incorporation, and stock corporation’s
not merely in the by- recourse on unpaid
laws. Moreover, subscription is not
the by-laws of applicable
petitioner should in member’s shares
have provided in a non-stock
formal notice and corporation.
RULING:
hearing procedure
The Supreme Court ruled that there is a specific provision SC proceeded to declare the sale as invalid. SC found that
under Title XI on Non-Stock Corporations of the Corporation Valley Golf acted in bad faith when it sent the final notice to
Code dealing with the termination of membership in a non- Caram under the pretense they believed him to be still alive,
stock corporation such as Valley Golf. when infact they had very well known that he had already
died. The Court stated
Section 91 of the Corporation Code provides:
Whatever the reason Caram was unable to respond to the
SEC. 91. Termination of membership.—Membership shall earlier notices, the fact remains that at the time of the final
be terminated in the manner and for the causes provided in notice, Valley Golf knew that Caram, having died and gone,
the articles of incorporation or the by-laws. Termination of would not be able to settle the obligation himself, yet they
membership shall have the effect of extinguishing all rights persisted in sending him notice to provide a color of
of a member in the corporation or in its property, unless regularity to the resulting sale.
otherwise provided in the articles of incorporation orthe by-
laws. (Emphasis supplied) That reason alone, evocative as it is of the absence of
substantial justice in the sale of the Golf Share, is sufficient
A share can only be deemed delinquent and sold at public to nullify the sale and sustain the rulings of the SEC and the
auction only upon the failure of the stockholder to pay the Court of Appeals.
unpaid subscription. Delinquency in monthly club dues was
merely an ordinary debt enforceable by judicial action in a Moreover, the utter and appalling bad faith exhibited by
civil case. A provision creating a lien upon shares of stock Valley Golf in sending out the final notice to Caram on the
for unpaid debts, liabilities, or assessments of stockholders deliberate pretense that he was still alive could bring into
to the corporation,should be embodied in the Articles of operation Articles 19, 20 and 21 under the Chapter on
Incorporation, and not merely in the by-laws. Moreover, the Human Relations of the Civil Code. Theseprovisions
by-laws of petitioner should have provided formal notice and enunciate a general obligation under law for every person to
hearing procedure before a member’s share may be seized act fairly and in good faith towards one another. Non-stock
and sold. corporations and its officers are not exempt from that
obligation.
The procedure for Stock Corporation’s recourse on unpaid
subscription is not applicable in member’s shares in a non-
stock corporation.
CALATAGAN GOLF CLUB, INC vs. SIXTO CLEMENTE,
JR.,
(585 SCRA 300 (2009)
FACTS
Clemente applied to purchase one share of stock of
Calatagan, indicating in his application for
membership his mailing address at “Phimco Industries, Inc.
– P.O. Box 240, MCC,” complete that had already been closed. On 5
residential address, office and residence telephone January 1993, a notice of auction sale was posted on the
numbers, as well as the company (Phimco) with Club’s bulletin board, as well as on the club’s
which he was connected, Calatagan issued to him premises. The auction sale took place as scheduled on 15
Certificate of Stock No. A-01295 on 2 May January 1993, and Clemente’s share sold
1990 after paying P120,000.00 for the share. Calatagan for P64,000 was purchased by a Nestor A. Virata. At the
charges monthly dues on its members and its time of the sale, Clemente’s accrued monthly
provision on monthly dues is incorporated in Calatagan’s dues amounted to P5,200.00. notice of foreclosure of
Articles of Incorporation and By-Laws. It is Clemente’s share was published in the 26 May
also reproduced at the back of each certificate of stock. 1993 issue of the Business World.
When Clemente became a member the monthly charge Clemente learned of the sale of his share only in November
stood at P400.00. He of 1997. He filed a claim with the
paid P3,000.00 for his monthly dues on 21 March 1991 and Securities and Exchange Commission (SEC) seeking the
another P5,400.00 on 9 December 1991. restoration of his shareholding in Calatagan
Then he ceased paying the dues. At that point, his balance with damages. The SEC dismissed the complaint. Citing
amounted to P400.00. Ten (10) months Section 69 of the Corporation Code which
later, sent a demand letter on September 21, 1992 and on provides that the sale of shares at an auction sale can only
October 22, 1992. It was followed by a be questioned within six (6) months from
second letter dated . Both letters were sent to Clemente’s the date of sale, the SEC concluded that Clemente’s claim,
mailing address as indicated in his filed four (4) years after the sale, had
membership application but were sent back to sender with already prescribed. The SEC further held that Calatagan
the postal note that the address had been had complied with all the requirements for a
closed. valid sale of the subject share, Clemente having failed to
Calatagan declared Clemente delinquent for having failed to inform Calatagan that the address he had
pay his monthly dues for more than earlier supplied was no longer his address. Clemente, the
sixty (60) days, specifically P5,600.00 as of 31 October SEC ruled, had acted in bad faith in
1992. On 7 December 1992, Calatagan sent a assuming as he claimed that his non-payment of monthly
third and final letter to Clemente, this time signed by its dues would merely render his share
Corporate Secretary, Atty. Benjamin Tanedo, “inactive.”
Jr. Again, this letter was sent to Clemente’s mailing address Clemente filed a petition for review with the Court of
Appeals. The Court of Appeals reversed the case at bar.
decision of the SEC. The Court of Appeals rejected the Calatagan argues in the alternative that Clemente’s suit is
SEC’s finding that the action had prescribed, barred by Article 1146 of the Civil
hence, this petition under Rule 45. Code which establishes four (4) years as the prescriptive
ISSUE: period for actions based upon injury to the
1. Did the action of Clemente had prescribed pursuant to rights of the plaintiff on the hypothesis that the suit is purely
section 69 of the Corporation Code? for damages. As a second alternative still,
Calatagan posits that Clemente’s action is governed by
2. Did the requisite notices under both the law and the by- Article 1149 of the Civil Code which sets five
laws had been rendered to (5) years as the period of prescription for all other actions
Clemente? whose prescriptive periods are not fixed in
RULING: the Civil Code or in any other law. Neither article is
On the first issue-No, there are fundamental differences that applicable but Article 1140 of the Civil Code which
defy equivalence or even analogy provides that an action to recover movables shall prescribe
between the sale of delinquent stock under Section 68 and in eight (8) years.
the sale that occurred in this case. At the On the second issue- No, Under Section 91 of the
root of the sale of delinquent stock is the non-payment of Corporation Code, membership in a nonstock corporation
the subscription price for the share of stock “shall be terminated in the manner and for the causes
itself. The stockholder or subscriber has yet to fully pay for provided in the articles of
the value of the share or shares subscribed. incorporation or the by-laws. Ultimately, the petition must
In this case, Clemente had already fully paid for the share in fail because Calatagan had failed to duly
Calatagan and no longer had any observe both the spirit and letter of its own by-laws. The by-
outstanding obligation to deprive him of full title to his share. law provisions was clearly conceived to
Perhaps the analogy could have been afford due notice to the delinquent member of the
made if Clemente had not yet fully paid for his share and impending sale, and not just to provide an intricate
the non-stock corporation, pursuant to an façade that would facilitate Calatagan’s sale of the share.
article or by-law provision designed to address that But then, the bad faith on Calatagan’s part is
situation, decided to sell such share as a palpable. As found by the Court of Appeals, Calatagan very
consequence. But that is not the case here, and there is no well knew that Clemente’s postal box
purpose for us to apply Section 69 to the to which it sent its previous letters had already been closed,
yet it persisted in sending that final letter not even aware of the closure of the postal box, the
to the same postal box. maintenance of which was not his responsibility but
It is noteworthy that Clemente in his membership his employer Phimco’s.
application had provided his residential The utter bad faith exhibited by Calatagan brings into
address along with his residence and office telephone operation Articles 19, 20 and 21 of the
numbers. Nothing in Section 32 of Calatagan’s Civil Code, under the Chapter on Human Relations. These
By-Laws requires that the final notice prior to the sale be provisions, which the Court of Appeals did
made solely through the member’s mailing apply, enunciate a general obligation under law for every
address. Clemente cites our aphorism-like pronouncement person to act fairly and in good faith towards
in Rizal Commercial Banking Corporation v.
Court of Appeals, that “[a] simple telephone call and an one another. A non-stock corporation like Calatagan is not
ounce of good faith x x x could have prevented exempt from that obligation in its treatment
this present controversy.” That memorable observation is of its members. The obligation of a corporation to treat
quite apt in this case. every person honestly and in good faith extends
Calatagan’s bad faith and failure to observe its own By- even to its shareholders or members, even if the latter find
Laws had resulted not merely in the loss themselves contractually bound to perform
of Clemente’s privilege to play golf at its golf course and certain obligations to the corporation. A certificate of stock
avail of its amenities, but also in significant cannot be a charter of dehumanization.
pecuniary damage to him. For that loss, the only blame that
could be thrown Clemente’s way was his
failure to notify Calatagan of the closure of the P.O. Box.
That lapse, if we uphold Calatagan would cost
Clemente a lot. But, in the first place, does he deserve
answerability for failing to notify the club of the
closure of the postal box? Indeed, knowing as he did that San Juan Structural and Steel Fabricators, Inc. vs Court
Calatagan was in possession of his home of Appeals
address as well as residence and office telephone numbers, 296 SCRA 631 [GR No. 129459 September 29, 1998]
he had every reason to assume that the
Facts: Plaintiff-appellant San Juan structural and steel
club would not be at a loss should it need to contact him. In fabricators Inc.’s amended complaint alleged that on
addition, according to Clemente, he was February 14, 1989, plaintiff-appellant entered into an
agreement with defendant-appellee Motorich Sales deeds of Quezon City issued a new title in the name of
Corporation for the transfer to it of a parcel of land identified Motorich Sales Corporation, represented by defendant-
as lot 30, Block 1 of the Acropolis Greens Subdivision appellee Nenita Lee Gruenbeg and Reynaldo L. Gruenbeg,
located in the district of Murphy, Quezon City, Metro Manila under TCT no. 3751; that as a result of defendants-
containing an area of 414 sqm, covered by TCT no. appellees Nenita and Motorich’s bad faith in refusing to
362909; that as stipulated in the agreement of February 14, execute a formal transfer of rights/deed of assignment,
1i989, plaintiff-appellant paid the down payment in the sum plaintiff-appellant suffered moral and nominal damages
of P100,000, the balance to be paid on or before March 2, which may be assessed against defendant-appellees in the
19889; that on March 1, 1989,Mr. Andres T. Co, president sum of P500,000; that as a result of an unjustified and
of Plaintiff-appellant corporation, wrote a letter to defendant- unwarranted failure to execute the required transfer or
appellee Motorich Sales Corporation requesting a formal deed of sale in favor of plaintiff-appellant, defendant-
computation for the balance to be paid; that said letter was appellees should be assessed exemplary damages in the
coursed through the defendant-appellee’s broker. Linda sum of P100,000; that by reason of the said bad faith in
Aduca who wrote the computation of the balance; that on refusing to execute a transfer in favor of plaintiff-appellant
March 2, 1989, plaintiff-appellant was ready with the the latter lost opportunity to construct a residential building
amount corresponding to the balance, covered by in the sum of P100,000 and that as a consequence of such
Metrobank cashier’s check no. 004223 payable to bad faith, it has been constrained to obtain the services of
defendant-appellee Motorich Sales Corporation; that counsel at an agreed fee of P100,000 plus appearance fee
plaintiff-appellant and defendant-appellee were supposed to of for every appearance in court hearings.
meet in the plaintiff-appellant’s office but defendant-
appellee’s treasurer, Nenita Lee Gruenbeg did not appear; Issues: Whether or not the corporation’s treasurer act can
that defendant-appelle despite repeated demands and in bind the corporation.
utter disregard of its commitments had refused to execute
the transfer of rights/deed of assignment which is necessary Whether or not the doctrine of piercing the veil of corporate
to transfer the certificate of title; that defendant ACL entity is applicable.
development corporation is impleaded as a necessary party
since TCT no. 362909 is still in the name of said defendant; Held: No. Such contract cannot bind Motorich, because it
while defendant VNM Realty and Development Corporation never authorized or ratified such sale.
is likewise impleaded as a necessary party in view of the
fact that it is the transferor of the right in favor of defendant- A corporation is a juridical person separate and distinct from
appellee Motorich Sales Corporation; that on April 6, 1989 its stockholders or members. Accordingly, the property of
defendant ACL Development Corporation and Motorich the corporation is not the property of the corporation is not
Sales Corporation entered into a deed of absolute sale the property of its stockholders or members and may not be
whereby the former transferred to the latter the subject sold by the stockholders or members without express
property; that by reason of said transfer; the registry of authorization from the corporation’s board of directors.
Section 23 of BP 68 provides the Board of Directors or question of piercing the veil of corporate fiction is
Trustees – Unless otherwise provided in this code, the essentially, then a matter of proof. In the present case,
corporate powers of all corporations formed under this code however, the court finds no reason to pierce the corporate
shall be exercised, all business conducted, and all property veil of respondent Motorich. Petitioner utterly failed to
of such corporations controlled and held by the board of establish the said corporation was formed, or that it is
directors or trustees to be elected from among the operated for the purpose of shielding any alleged fraudulent
stockholders of stocks, or where there is no stock, from or illegal activities of its officers or stockholders; or that the
among the members of the corporations, who shall hold said veil was used to conceal fraud, illegality or inequity at
office for 1 year and until their successors are elected and the expense of third persons like petitioner.
qualified.

As a general rule, the acts of corporate officers within the

scope of their authority are binding on the corporation. But
when these officers exceed their authority, their actions,
cannot bind the corporation, unless it has ratified such acts
as is estopped from disclaiming them.

Because Motorich had never given a written authorization to

respondent Gruenbeg to sell its parcel of land, we hold that
the February 14, 1989 agreement entered into by the latter
with petitioner is void under Article 1874 of the Civil Code.
Being inexistent and void from the beginning, said contract
cannot be ratified.

The statutorily granted privilege of a corporate veil may be

used only for legitimate purposes. On equitable
consideration,the veil can be disregarded when it is utilized
as a shield to commit fraud, illegality or inequity, defeat
public convenience; confuse legitimate issues; or serve as a
mere alter ego or business conduit of a person or an Dulay v. CA 
instrumentality, agency or adjunct of another corporation. Facts:
·         Manuel R. Dulay Enterprises, Inc, a domestic corporation
We stress that the corporate fiction should be set aside obtained various loans for the construction of its hotel
when it becomes a shield against liability for fraud, or an project, Dulay Continental Hotel (now Frederick Hotel).  
illegal act on inequity committed on third person. The
·         Manuel Dulay by virtue of Board Resolution No 18  sold 1. Before or after such action is taken, written consent
the subject property to spouses Maria Theresa and thereto is signed by all the directors, or
Castrense Veloso. 2. All the stockholders have actual or implied knowledge of
·         Maria Veloso (buyer), without the knowledge of Manuel the action and make no prompt objection thereto in writing;
Dulay, mortgaged the subject property to private respondent or
Manuel A. Torres. #fluffypeaches Upon the failure of Maria 3. The directors are accustomed to take informal action with
Veloso to pay Torres, the property was sold to Torres in an the express or implied acquiese of all the stockholders, or
extrajudicial foreclosure sale. 4. All the directors have express or implied knowledge of
·         Torres filed an action against the corporation, Virgilio the action in question and none of them makes prompt
Dulay and against the tenants of the apartment.  objection thereto in writing.
·         RTC ordered the corporation and the tenants to vacate If a directors' meeting is held without call or notice, an
the building.  action taken therein within the corporate powers is deemed
·         Petitioners: RTC had acted with GAD when it applied ratified by a director who failed to attend, unless he
the doctrine of piercing the veil of promptly files his written objection with the secretary of the
corporate entity considering that the sale has no binding corporation after having knowledge thereof.
effect on corporation as Board Resolution No. 18 which ·         Dulay Inc. is classified as a close corporation and
authorized the sale of the subject property was resolved consequently a board resolution authorizing the sale or
without the approval of all the members of the board of mortgage is not necessary to bind the corporation for the
directors and said Board Resolution was prepared by a action of its president. #fluffypeaches At any
person not designated by the corporation to be its secretary. rate, corporate actiontaken at a board meeting without
Issue: proper call or notice in a close corporation is deemed
·         WON the sale to Veloso is valid notwithstanding that it ratified by the absent director unless the latter promptly
was resolved without the approval of all the members of the files his written objection with the secretary of the
board of directors. (YES) corporation after having knowledge of the meeting which,
Ruling in his case, Virgilio Dulay failed to do.
·         Section 101 of the Corporation Code of the Philippines
provides: ·         Although a corporation is an entity which has a
Sec. 101. When board meeting is unnecessary or personality distinct and separate from its individual
improperly held. Unless the by-laws provide otherwise, any stockholders or members,  the veil of corporate fiction
action by the directors of a close corporation without a may be pierced when it is used to defeat public
meeting shall nevertheless be deemed valid if:
convenience justify wrong, protect fraud or defend
crime.

TOPIC: Nationality of a corporation

Roman Catholic Apostolic Administrator of Davao, Inc.
v. The Land Registration Commission and the Register
of Deeds of Davao City, G.R. No. L-8451, December While it is true and We have to concede that in the
20,1957 profession of their faith, the Roman Pontiff is the supreme
Facts: head; that in the religious matters, in the exercise of their
On October 4, 1954, Mateo L. Rodis, a Filipino citizen and belief, the Catholic congregation of the faithful throughout
resident of the City of Davao, executed a deed of sale of a the world seeks the guidance and direction of their Spiritual
parcel of land located in the same city covered by Transfer Father in the Vatican, yet it cannot be said that there is a
Certificate No. 2263, in favor of the Roman Catholic merger of personalities resultant therein. Neither can it be
Apostolic Administrator of Davao Inc.,(RCADI) is said that the political and civil rights of the faithful, inherent
corporation sole organized and existing in accordance with or acquired under the laws of their country, are affected by
Philippine Laws, with Msgr. Clovis Thibault, a Canadian that relationship with the Pope. The fact that the Roman
citizen, as actual incumbent. Registry of Deeds Davao (RD) Catholic Church in almost every country springs from that
required RCADI to submit affidavit declaring that 60% of its society that saw its beginning in Europe and the fact that
members were Filipino Citizens. As the RD entertained the clergy of this faith derive their authorities and receive
some doubts as to the registerability of the deed of sale, the orders from the Holy See do not give or bestow the
matter was referred to the Land Registration citizenship of the Pope upon these branches. Citizenship is
Commissioner (LRC) en consulta for resolution. LRC hold a political right which cannot be acquired by a sort of
that pursuant to provisions of sections 1 and 5 of Article XII “radiation”. We have to realize that although there is a
of the Philippine Constitution, RCADI is not qualified to fraternity among all the catholic countries and the dioceses
acquire land in the Philippines in the absence of proof that therein all over the globe, the universality that the word
at leat 60% of the capital, properties or assets of the RCADI “catholic” implies, merely characterize their faith, a
is actually owned or controlled by Filipino citizens. LRC also uniformity in the practice and the interpretation of their
denied the registration of the Deed of Sale in the absence of dogma and in the exercise of their belief, but certainly they
proof of compliance with such requisite. RCADI’s Motion for are separate and independent from one another in
Reconsideration was denied. Aggrieved, the latter filed a jurisdiction, governed by different laws under which they are
petition for mandamus. incorporated, and entirely independent on the others in the
Issue:   management and ownership of their temporalities. To allow
Whether or not the Universal Roman Catholic Apostolic theory that the Roman Catholic Churches all over the world
Church in the Philippines, or better still, the corporation sole follow the citizenship of their Supreme Head, the Pontifical
named the Roman Catholic Apostolic Administrator of Father, would lead to the absurdity of finding the citizens of
Davao, Inc., is qualified to acquire private agricultural lands a country who embrace the Catholic faith and become
in the Philippines pursuant to the provisions of Article XIII of members of that religious society, likewise citizens of the
the Constitution. Vatican or of Italy. And this is more so if We consider that
Ruling: the Pope himself may be an Italian or national of any other
RCADI is qualified. country of the world. The same thing be said with regard to
the nationality or citizenship of the corporation sole created
under the laws of the Philippines, which is not altered by the of corporation. If this were so, as the facts and
change of citizenship of the incumbent bishops or head of circumstances already indicated tend to prove it to be so,
said corporation sole. then the inescapable conclusion would be that this
We must therefore, declare that although a branch of the requirement of at least 60 per cent of Filipino capital was
Universal Roman Catholic Apostolic Church, every Roman never intended to apply to corporations sole, and the
Catholic Church in different countries, if it exercises its existence or not a vested right becomes unquestionably
mission and is lawfully incorporated in accordance with the immaterial.
laws of the country where it is located, is considered an
entity or person with all the rights and privileges granted to
such artificial being under the laws of that country, separate
and distinct from the personality of the Roman Pontiff or the
Holy See, without prejudice to its religious relations with the
latter which are governed by the Canon Law or their rules
and regulations.
It has been shown before that: (1) the corporation sole,
unlike the ordinary corporations which are formed by no
less than 5 incorporators, is 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) the corporation sole is only
the administrator and not the owner of the temporalities
located in the territory comprised by said corporation sole;
(3) such temporalities are administered for and on behalf of
the faithful residing in the diocese or territory of the
corporation sole; and (4) the latter, as such, has no
nationality and the citizenship of the incumbent 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.
In view of these peculiarities of the corporation sole, it would
seem obvious that when the specific provision of the
Constitution invoked by respondent Commissioner (section
1, Art. XIII), was under consideration, the framers of the REPUBLIC VS. IAC
same did not have in mind or overlooked this particular form
 petition is dismissed for lack of merit and the appealed
FACTS: decision and Resolution of the Intermediate Appellate Court
  is hereby AFFIRMED
“On February 2, 1979, the ROMAN CATHOLIC BISHOP of
Lucena, represented by Msgr.Jose T. Sanchez, filed an
application for confirmation of title to four (4) parcels of
land. Three of said parcels, denominated as Lots 1, 2 and 3,
respectively, of plan PSU-65686 are situated in Barrio
Masin, Municipality of Candelaria, Quezon Province. The
fourth parcels under plan PSU-112592 is located in Barrio
Bucal (Taguan), same municipality and province. As basis
for the application, the applicant claimed title to the various
properties through either purchase or donation dating as far
back as 1928.The court ordered the registration of the four
parcels together with the improvements
thereon „in the name of the ROMAN CATHOLIC BISHOP
OF LUCENA, INC., a religious corporation sole duly
registered and existing under the laws of the
Republic of the Philippines.”
 
ISSUES:
 Whether or not the Roman Catholic Bishop of Lucena, as
a corporation sole is qualified to apply for confirmation of its
title to the four (4) parcels of land subject of this case.
RULING:
 There is no doubt that a corporation sole by the nature of
its incorporation is vested with the right to purchase and
hold real estate and personal property. It need not therefore
be treated as an ordinary private corporation because
whether or not it is so treated as such, the Constitutional
provision involved will, nevertheless, be not applicable. The
lands subjects of this petition were already private property
at the time the application for confirmation of title was filed
Iglesia Evangelica Metodista En Las Islas Filipinas vs.
in 1979. There is therefore no cogent reason to disturb
Bishop Lazaro
the findings of the appellate court. WHEREFORE, the
G.R. No. 184088; July 6, 2010 A corporation may change its character as a corporation
sole into a corporation aggregate by mere amendment of its
FACTS; articles of incorporation without first going through the
process of dissolution.
IEMELIF is a corporation sole. It was registered and by-laws
were created which empowered the election of officers to True, the Corporation Code provides no specific mechanism
manage the affairs of the organization. Although, the for amending the articles of incorporation of a corporation
petitioner remained a corporation sole on paper, it had sole. However, Section 109 of the Corporation Code
always acted like a corporation aggregate. The Consistory, allows the application to religious corporations of the
IEMELIF’s BOD, together with the general general provisions governing non-stock corporations.
membership change the organizational structure from
corporation sole to corporation aggregate, which was For non-stock corporations, the power to amend its
approved by SEC. However, the corporate papers remained articles of incorporation lies in its members. The code
unaltered as a corporation sole. requires two-thirds of their votes for the approval of such an
amendment. So how will this requirement apply to a
About 28 years later, the issue reemerge. The SEC corporation sole that has technically but one member (the
answered, this time, is that the conversion was not properly head of the religious organization) who holds in his hands
carried out and documented and that it needed to amend its its broad corporate powers over the properties, rights,
AOI for that purpose. Acting on the advice, the Consistory and interests of his religious organization? Although a
resolved to convert but petitioner Rev. Nestor Pineda in non-stock corporation has a personality that is distinct from
IEMELIF’s name did not support the conversion. Petitioners those of its members who established it, its articles of
claim that a complete shift from IEMELIF’s status as a incorporation cannot be amended solely through the action
corporation sole to a corporation aggregate required, not of its board of trustees. The amendment needs the
just an amendment of the IEMELIF’s articles of concurrence of at least two-thirds of its membership.
incorporation, but a complete dissolution of the existing
corporation sole followed by a re-incorporation. If such approval mechanism is made to operate in a
corporation sole, its one member in whom all the powers of
ISSUE: the corporation technically belongs, needs to get the
WON a corporation sole may be converted into a concurrence of two-thirds of its membership. The one
corporation aggregate by mere amendment of its articles of member, here the General Superintendent, is but a trustee,
incorporation. according to Section 110 of the Corporation Code, of its
membership.
There is no point to dissolving the corporation sole of one
HELD: member to enable the corporation aggregate to emerge
from it. Whether it is a non- stock corporation or a
corporation sole, the corporate being remains distinct from
its members, whatever be their number.

The increase in the number of its corporate membership

does not change the complexion of its corporate
responsibility to third parties. The one member, with the
concurrence of two-thirds of the membership of the
organization for whom he acts as trustee, can self-will
the amendment. He can, with membership
concurrence, increase the technical number of the
members of the corporation from “sole” or one to the
greater number authorized by its amended articles.