Corporation Cases

G.R. No. L-8451 December 20, 1957

THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC., petitioner, vs.THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF DAVAO CITY, respondents.

FELIX, J.:

This is a petition for mandamus filed by the Roman Catholic Apostolic Administrator of Davao seeking the reversal of a resolution by the Land Registration Commissioner in L.R.C. Consulta No. 14. The facts of the case are as follows:

On 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 located in the same city covered by Transfer Certificate No. 2263, in favor of the Roman Catholic Apostolic Administrator of Davao Inc., s corporation sole organized and existing in accordance with Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent. When the deed of sale was presented to Register of Deeds of Davao for registration, the latter.

having in mind a previous resolution of the Fourth Branch of the Court of First Instance of Manila wherein the Carmelite Nuns of Davao were made to prepare an affidavit to the effect that 60 per cent of the members of their corporation were Filipino citizens when they sought to register in favor of their congregation of deed of donation of a parcel of land—

required said corporation sole to submit a similar affidavit declaring that 60 per cent of the members thereof were Filipino citizens.

The vendee in the letter dated June 28, 1954, expressed willingness to submit an affidavit, both not in the same tenor as that made the Progress of the Carmelite Nuns because the two cases were not similar, for whereas the

congregation of the Carmelite Nuns had five incorporators, the corporation sole has only one; that according to their articles of incorporation, the organization of the Carmelite Nuns became the owner of properties donated to it, whereas the case at bar, the totality of the Catholic population of Davao would become the owner of the property bought to be registered.

As the Register of Deeds entertained some doubts as to the registerability if the document, the matter was referred to the Land Registration Commissioner en consulta for resolution in accordance with section 4 of Republic Act No. 1151. Proper hearing on the matter was conducted by the Commissioner and after the petitioner corporation had filed its memorandum, a resolution was rendered on September 21, 1954, holding that 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. It was also the opinion of the Land Registration Commissioner that section 159 of the corporation Law relied upon by the vendee was rendered operative by the aforementioned provisions of the Constitution with respect to real estate, unless the precise condition set therein — that at least 60 per cent of its capital is owned by Filipino citizens — be present, and, therefore, ordered the Registered Deeds of Davao to deny registration of the deed of sale in the absence of proof of compliance with such condition.

After the motion to reconsider said resolution was denied, an action for mandamus was instituted with this Court by said corporation sole, alleging that under the Corporation Law as well as the settled jurisprudence on the matter, the deed of sale executed by Mateo L. Rodis in favor of petitioner is actually a deed of sale in

favor of the Catholic Church which is qualified to acquire private agricultural lands for the establishment and maintenance of places of worship, and prayed that judgment be rendered reserving and setting aside the resolution of the Land Registration Commissioner in question. In its resolution of November 15, 1954, this Court gave due course to this petition providing that the procedure prescribed for appeals from the Public Service Commission of the Securities and Exchange Commissions (Rule 43), be followed.

Section 5 of Article XIII of the Philippine Constitution reads as follows:

SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.

Section 1 of the same Article also provides the following:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, water, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to cititzens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT, grant, lease, or concession AT THE TIME OF THE INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER CONSTITUTION. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or leases for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of

water power, in which cases other than the development and limit of the grant.

In virtue of the foregoing mandates of the Constitution, who are considered "qualified" to acquire and hold agricultural lands in the Philippines? What is the effect of these constitutional prohibition of the right of a religious corporation recognized by our Corporation Law and registered as a corporation sole, to possess, acquire and register real estates in its name when the Head, Manager, Administrator or actual incumbent is an alien?

Petitioner consistently maintained that a corporation sole, irrespective of the citizenship of its incumbent, is not prohibited or disqualified to acquire and hold real properties. The Corporation Law and the Canon Law are explicit in their provisions that a corporation sole or "ordinary" is not the owner of the of the properties that he may acquire but merely the administrator thereof. The Canon Law also specified that church temporalities are owned by the Catholic Church as a "moral person" or by the diocess as minor "moral persons" with the ordinary or bishop as administrator.

And elaborating on the composition of the Catholic Church in the Philippines, petitioner explained that as a religious society or organization, it is made up of 2 elements or divisions — the clergy or religious members and the faithful or lay members. The 1948 figures of the Bureau of Census showed that there were 277,551 Catholics in Davao and aliens residing therein numbered 3,465. Ever granting that all these foreigners are Catholics, petitioner contends that Filipino citizens form more than 80 per cent of the entire Catholics population of that area. As to its clergy and religious composition, counsel for petitioner presented the Catholic Directory of the Philippines for 1954 (Annex A) which revealed that as of that year, Filipino clergy and women novices comprise already 60.5 per cent of the group. It was, therefore, allowed that the

CORPORATION LAW CASES 1

constitutional requirement was fully met and satisfied.

Respondents, on the other hand, averred that although it might be true that petitioner is not the owner of the land purchased, yet he has control over the same, with full power to administer, take possession of, alienate, transfer, encumber, sell or dispose of any or all lands and their improvements registered in the name of the corporation sole and can collect, receive, demand or sue for all money or values of any kind that may be kind that may become due or owing to said corporation, and vested with authority to enter into agreements with any persons, concerns or entities in connection with said real properties, or in other words, actually exercising all rights of ownership over the properties. It was their stand that the theory that properties registered in the name of the corporation sole are held in true for the benefit of the Catholic population of a place, as of Davao in the case at bar should be sustained because a conglomeration of persons cannot just be pointed out as the cestui que trust or recipient of the benefits from the property allegedly administered in their behalf. Neither can it be said that the mass of people referred to as such beneficiary exercise ant right of ownership over the same. This set-up, respondents argued, falls short of a trust. The respondents instead tried to prove that in reality, the beneficiary of ecclesiastical properties are not members or faithful of the church but someone else, by quoting a portion a portion of the ought of fidelity subscribed by a bishop upon his elevation to the episcopacy wherein he promises to render to the Pontificial Father or his successors an account of his pastoral office and of all things appertaining to the state of this church.

Respondents likewise advanced the opinion that in construing the constitutional provision calling for 60 per cent of Filipino citizenship, the criterion of the properties or assets thereof.

In solving the problem thus submitted to our consideration, We can say the following: A

corporation sole is a special form of corporation usually associated with the clergy. Conceived and introduced into the common law by sheer necessity, this legal creation which was referred to as "that unhappy freak of English law" was designed to facilitate the exercise of the functions of ownership carried on by the clerics for and on behalf of the church which was regarded as the property owner (See I Couvier's Law Dictionary, p. 682-683).

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 (Reid vs. Barry, 93 Fla. 849, 112 So. 846).

The provisions of our Corporation law on religious corporations are illuminating and sustain the stand of petitioner. Section 154 thereof provides:

SEC. 154. — For the administration of the temporalities of any religious denomination, society or church and the management of the estates and the properties thereof, it shall be lawful for the bishop, chief priest, or presiding either of any such religious denomination, society or church to become a corporation sole, unless inconsistent wit the rules, regulations or discipline of his religious denomination, society or church or forbidden by competent authority thereof.

See also the pertinent provisions of the succeeding sections of the same Corporation Law copied hereunder:

SEC. 155. In order to become a corporation sole the bishop, chief priest, or presiding elder of any religious denomination, society or church must file with the Securities and Exchange Commissioner articles of incorporation setting forth the following facts:

xxx xxx xxx.

(3) That as such bishop, chief priest, or presiding elder he is charged with the administration of the temporalities and the management of the estates and properties of his religious denomination, society, or church within its territorial jurisdiction, describing it;

xxx xxx xxx.

(As amended by Commonwealth Act No. 287).

SEC. 157. From and after the filing with the Securities and Exchange Commissioner of the said articles of incorporation, which verified by affidavit or affirmation as aforesaid and accompanied by the copy of the commission, certificate of election, or letters of appointment of the bishop, chief priest, or presiding elder, duly certified as prescribed in the section immediately preceding such the bishop, chief priest, or presiding elder, as the case may be, shall become a corporation sole and all temporalities, estates, and properties the religious denomination, society, or church therefore administered or managed by him as such bishop, chief priest, or presiding elder, shall be held in trust by him as a corporation sole, for the use, purpose, behalf, and sole benefit of his religious denomination, society, or church, including hospitals, schools, colleges, orphan, asylums, parsonages, and cemeteries thereof. For the filing of such articles of incorporation, the Securities and Exchange Commissioner shall collect twenty-five pesos. (As amended by Commonwealth Act. No. 287); and.

SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or by the diocese, synod, or district organization of any religious denomination or church shall, on its incorporation, pass to the corporation and shall be held in trust for the use, purpose behalf, and benefit of the religious society, or order so incorporated or of the church of which the

diocese, or district organization is an organized and constituent part.

The Cannon Law contains similar provisions regarding the duties of the corporation sole or ordinary as administrator of the church properties, as follows:

Al Ordinario local pertenence vigilar diligentemente sobre la administracion de todos los bienes eclesiasticos que se hallan en su territorio y no estuvieren sustraidos de su jurisdiccion, salvs las prescriciones legitimas que le concedan mas aamplios derechos.

Teniendo en cuenta los derechos y las legitimas costumbres y circunstancias, procuraran los Ordinarios regular todo lo concerniente a la administracion de los bienes eclesciasticos, dando las oportunas instucciones particularles dentro del narco del derecho comun. (Title XXVIII, Codigo de Derecho Canonico, Lib. III, Canon 1519).1

That leaves no room for doubt that the bishops or archbishops, as the case may be, as corporation's sole are merely administrators of the church properties that come to their possession, in which they hold in trust for the church. It can also be said that while it is true that church properties could be administered by a natural persons, problems regarding succession to said properties can not be avoided to rise upon his death. Through this legal fiction, however, church properties acquired by the incumbent of a corporation sole pass, by operation of law, upon his death not his personal heirs but to his successor in office. It could be seen, therefore, that a corporation sole is created not only to administer the temporalities of the church or religious society where he belongs but also to hold and transmit the same to his successor in said office. If the ownership or title to the properties do not pass to the administrators, who are the owners of church properties?.

Bouscaren and Elis, S.J., authorities on cannon law, on their treatise comment:


In matters regarding property belonging to the Universal Church and to the Apostolic See, the Supreme Pontiff exercises his office of supreme administrator through the Roman Curia; in matters regarding other church property, through the administrators of the individual moral persons in the Church according to that norms, laid down in the Code of Cannon Law. This does not mean, however, that the Roman Pontiff is the owner of all the church property; but merely that he is the supreme guardian (Bouscaren and Ellis, Cannon Law, A Text and Commentary, p. 764).

and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia Canonica, ruled in the case of Trinidad vs. Roman Catholic Archbishop of Manila, 63 Phil. 881, that:

The second question to be decided is in whom the ownership of the properties constituting the endowment of the ecclesiastical or collative chaplaincies is vested.

Canonists entertain different opinions as to the persons in whom the ownership of the ecclesiastical properties is vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more probable that ownership, strictly speaking, does not reside in the latter, and, consequently, ecclesiastical properties are owned by the churches, institutions and canonically established private corporations to which said properties have been donated.

Considering that nowhere can We find any provision conferring ownership of church properties on the Pope although he appears to be the supreme administrator or guardian of his flock, nor on the corporation sole or heads of dioceses as they are admittedly mere administrators of said properties, ownership of these temporalities logically fall and develop upon the church, diocese or congregation acquiring the same. Although this

question of ownership of ecclesiastical properties has off and on been mentioned in several decisions of the Court yet in no instance was the subject of citizenship of this religious society been passed upon.

We are not unaware of the opinion expressed by the late Justice Perfecto in his dissent in the case of Agustines vs. Court of First Instance of Bulacan, 80 Phil. 565, to the effect that "the Roman Catholic Archbishop of Manila is only a branch of a universal church by the Pope, with permanent residence in Rome, Italy". There is no question that the Roman Catholic Church existing in the Philippines is a tributary and part of the international religious organization, for the word "Roman" clearly expresses its unity with and recognizes the authority of the Pope in Rome. However, lest We become hasty in drawing conclusions, We have to analyze and take note of the nature of the government established in the Vatican City, of which it was said:

GOVERNMENT. In the Roman Catholic Church supreme authority and jurisdiction over clergy and laity alike as held by the pope who (since the Middle Ages) is elected by the cardinals assembled in conclave, and holds office until his death or legitimate abdication. . . While the pope is obviously independent of the laws made, and the officials appointed, by himself or his predecessors, he usually exercises his administrative authority according to the code of canon law and through the congregations, tribunals and offices of the Curia Romana. In their respective territories (called generally dioceses) and over their respective subjects, the patriarchs, metropolitans or archbishops and bishops exercise a jurisdiction which is called ordinary (as attached by law to an office given to a person. . . (Collier's Encyclopedia, Vol. 17, p. 93).

While it is true and We have to concede that in the profession of their faith, the Roman Pontiff is the supreme head; that in the religious matters, in the exercise of their belief, the Catholic congregation of the faithful throughout

the world seeks the guidance and direction of their Spiritual Father in the Vatican, yet it cannot be said that there is a merger of personalities resultant therein. Neither can it be said that the political and civil rights of the faithful, inherent or acquired under the laws of their country, are affected by that relationship with the Pope. The fact that the Roman Catholic Church in almost every country springs from that society that saw its beginning in Europe and the fact that the clergy of this faith derive their authorities and receive orders from the Holy See do not give or bestow the citizenship of the Pope upon these branches. Citizenship is a political right which cannot be acquired by a sort of "radiation". We have to realize that although there is a fraternity among all the catholic countries and the dioceses therein all over the globe, the universality that the word "catholic" implies, merely characterize their faith, a uniformity in the practice and the interpretation of their dogma and in the exercise of their belief, but certainly they are separate and independent from one another in jurisdiction, governed by different laws under which they are incorporated, and entirely independent on the others in the management and ownership of their temporalities. To allow theory that the Roman Catholic Churches all over the world follow the citizenship of their Supreme Head, the Pontifical Father, would lead to the absurdity of finding the citizens of a country who embrace the Catholic faith and become members of that religious society, likewise citizens of the Vatican or of Italy. And this is more so if We consider that the Pope himself may be an Italian or national of any other 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 change of citizenship of the incumbent bishops or head of said corporation sole.

We must therefore, declare that although a branch of the Universal Roman Catholic Apostolic Church, every Roman Catholic Church in different countries, if it exercises its

mission and is lawfully incorporated in accordance with the 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.

We certainly are conscious of the fact that whatever conclusion We may draw on this matter will have a far reaching influence, nor can We overlook the pages of history that arouse indignation and criticisms against church landholdings. This nurtured feeling that snowbailed into a strong nationalistic sentiment manifested itself when the provisions on natural to be embodied in the Philippine Constitution were framed, but all that has been said on this regard referred more particularly to landholdings of religious corporations known as "Friar Estates" which have already bee acquired by our government, and not to properties held by corporations sole which, We repeat, are properties held in trust for the benefit of the faithful residing within its territorial jurisdiction. Though that same feeling probably precipitated and influenced to a large extent the doctrine laid down in the celebrated Krivenco decision, We have to take this matter in the light of legal provisions and jurisprudence actually obtaining, irrespective of sentiments.

The question now left for our determination is whether the Universal Roman Catholic Apostolic Church in the Philippines, or better still, the corporation sole named the Roman Catholic Apostolic Administrator of Davao, Inc., is qualified to acquire private agricultural lands in the Philippines pursuant to the provisions of Article XIII of the Constitution.

We see from sections 1 and 5 of said Article quoted before, that only persons or corporations qualified to acquire hold lands of the public domain in the Philippines may acquire or be assigned and hold private agricultural lands.


Consequently, the decisive factor in the present controversy hinges on the proposition or whether or not the petitioner in this case can acquire agricultural lands of the public domain.

From the data secured from the Securities and Exchange Commission, We find that the Roman Catholic Bishop of Zamboanga was incorporated (as a corporation sole) in September, 1912, principally to administer its temporalities and manage its properties. Probably due to the ravages of the last war, its articles of incorporation were reconstructed in the Securities and Exchange Commission on April 8, 1948. At first, this corporation sole administered all the temporalities of the church existing or located in the island of Mindanao. Later on, however, new dioceses were formed and new corporations sole were created to correspond with the territorial jurisdiction of the new dioceses, one of them being petitioner herein, the Roman Catholic Apostolic Administrator of Davao, Inc., which was registered with the Securities and Exchange Commission on September 12, 1950, and succeeded in the administrative for all the "temporalities" of the Roman Catholic Church existing in Davao.

According to our Corporation Law, Public Act No. 1549, approved April 1, 1906, a corporation sole.

is organized and composed of a single individual, the head of any religious society or church, for the ADMINISTRATION of the temporalities of such society or church. By "temporalities" is meant estate and properties not used exclusively for religious worship. The successor in office of such religious head or chief priest incorporated as a corporation sole shall become the corporation sole on ascension to office, and shall be permitted to transact business as such on filing with the Securities and Exchange Commission a copy of his commission, certificate of election or letter of appointment duly certified by any notary public or clerk of court of record (Guevara's The Philippine Corporation Law, p. 223).

The Corporation Law also contains the following provisions:

SECTION 159. Any corporation sole may purchase and hold real estate and personal; property for its church, charitable, benevolent, or educational purposes, and may receive bequests or gifts of such purposes. Such corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from the Court of First Instance of the province in which the property is situated; but before making the order proof must be made to the satisfaction of the Court that notice of the application for leave to mortgage or sell has been given by publication or otherwise in such manner and for such time as said Court or the Judge thereof may have directed, and that it is to the interest of the corporation that leave to mortgage or sell must be made by petition, duly verified by the bishop, chief priest, or presiding elder acting as corporation sole, and may be opposed by any member of the religious denomination, society or church represented by the corporation sole: Provided, however, That in cases where the rules, regulations, and discipline of the religious denomination, society or church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling and mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the intervention of the Courts shall not be necessary.

It can, therefore, be noticed that the power of a corporation sole to purchase real property, like the power exercised in the case at bar, it is not restricted although the power to sell or mortgage sometimes is, depending upon the rules, regulations, and discipline of the church concerned represented by said corporation sole. If corporations sole can purchase and sell real estate for its church, charitable, benevolent, or educational purposes, can they register said real properties? As provided by law, lands held in trust for specific purposes me be subject of registration (section 69, Act 496), and the capacity of a corporation sole, like petitioner

herein, to register lands belonging to it is acknowledged, and title thereto may be issued in its name (Bishop of Nueva Segovia vs. Insular Government, 26 Phil. 300-1913). Indeed it is absurd that while the corporations sole that might be in need of acquiring lands for the erection of temples where the faithful can pray, or schools and cemeteries which they are expressly authorized by law to acquire in connection with the propagation of the Roman Catholic Apostolic faith or in furtherance of their freedom of religion they could not register said properties in their name. As professor Javier J. Nepomuceno very well says "Man in his search for the immortal and imponderable, has, even before the dawn of recorded history, erected temples to the Unknown God, and there is no doubt that he will continue to do so for all time to come, as long as he continues 'imploring the aid of Divine Providence'" (Nepomuceno's Corporation Sole, VI Ateneo Law Journal, No. 1, p. 41, September, 1956). Under the circumstances of this case, We might safely state that even before the establishment of the Philippine Commonwealth and of the Republic of the Philippines every corporation sole then organized and registered had by express provision of law the necessary power and qualification to purchase in its name private lands located in the territory in which it exercised its functions or ministry and for which it was created, independently of the nationality of its incumbent unique and single member and head, the bishop of the dioceses. It can be also maintained without fear of being gainsaid that the Roman Catholic Apostolic Church in the Philippines has no nationality and that the framers of the Constitution, as will be hereunder explained, did not have in mind the religious corporations sole when they provided that 60 per centum of the capital thereof be owned by Filipino citizens.

There could be no controversy as to the fact that a duly registered corporation sole is an artificial being having the right of succession and the power, attributes, and properties expressly authorized by law or incident to its existence

(section 1, Corporation Law). In outlining the general powers of a corporation. Public Act. No. 1459 provides among others:

SEC. 13. Every corporation has the power:

(5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and otherwise deal with such real and personal property as the purpose for which the corporation was formed may permit, and the transaction of the lawful business of the corporation may reasonably and necessarily require, unless otherwise prescribed in this Act: . . .

In implementation of the same and specially made applicable to a form of corporation recognized by the same law, Section 159 aforequoted expressly allowed the corporation sole to purchase and hold real as well as personal properties necessary for the promotion of the objects for which said corporation sole is created. Respondent Land Registration Commissioner, however, maintained that since the Philippine Constitution is a later enactment than public Act No. 1459, the provisions of Section 159 in amplification of Section 13 thereof, as regard real properties, should be considered repealed by the former.

There is a reason to believe that when the specific provision of the Constitution invoked by respondent Commissioner was under consideration, the framers of the same did not have in mind or overlooked this particular form of corporation. It is undeniable that the naturalization and conservation of our national resources was one of the dominating objectives of the Convention and in drafting the present Article XII of the Constitution, the delegates were goaded by the desire (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the country of foreign control through peaceful economic penetration; and (3) to prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence (See The Framing of the


Philippine Constitution by Professor Jose M. Aruego, a Delegate to the Constitutional Convention, Vol. II. P. 592-604). In the same book Delegate Aruego, explaining the reason behind the first consideration, wrote:

At the time of the framing of Philippine Constitution, Filipino capital had been to be rather shy. Filipinos hesitated s a general rule to invest a considerable sum of their capital for the development, exploitation and utilization of the natural resources of the country. They had not as yet been so used to corporate as the peoples of the west. This general apathy, the delegates knew, would mean the retardation of the development of the natural resources, unless foreign capital would be encouraged to come and help in that development. They knew that the naturalization of the natural resources would certainly not encourage theINVESTMENT OF FOREIGN CAPITAL into them. But there was a general feeling in the Convention that it was better to have such a development retarded or even postpone together until such time when the Filipinos would be ready and willing to undertake it rather than permit the natural resources to be placed under the ownership or control of foreigners in order that they might be immediately be developed, with the Filipinos of the future serving not as owners but utmost as tenants or workers under foreign masters. By all means, the delegates believed, the natural resources should be conserved for Filipino posterity.

It could be distilled from the foregoing that the farmers of the Constitution intended said provisions as barrier for foreigners or corporations financed by such foreigners to acquire, exploit and develop our natural resources, saving these undeveloped wealth for our people to clear and enrich when they are already prepared and capable of doing so. But that is not the case of corporations sole in the Philippines, for, We repeat, they are mere administrators of the "temporalities" or properties titled in their name and for the benefit of the members of their respective religion composed of an overwhelming majority

of Filipinos. No mention nor allusion whatsoever is made in the Constitution as to the prohibition against or the liability of the Roman Catholic Church in the Philippines to acquire and hold agricultural lands. Although there were some discussions on landholdings, they were mostly confined in the inclusion of the provision allowing the Government to break big landed estates to put an end to absentee landlordism.

But let us suppose, for the sake of argument, that the above referred to inhibitory clause of Section 1 of Article XIII of the constitution does have bearing on the petitioner's case; even so the clause requiring that at least 60 per centum of the capital of the corporation be owned by Filipinos is subordinated to the petitioner's aforesaid right already existing at the time of the inauguration of the Commonwealth and the Republic of the Philippines. In the language of Mr. Justice Jose P. Laurel (a delegate to the Constitutional Convention), in his concurring opinion of the case of Gold Creek mining Corporation, petitioner vs. Eulogio Rodriguez, Secretary of Agriculture and Commerce, and Quirico Abadilla, Director of the Bureau of Mines, respondent, 66 Phil. 259:

The saving clause in the section involved of the Constitution was originally embodied in the report submitted by the Committee on Naturalization and Preservation of Land and Other Natural Resources to the Constitutional Convention on September 17, 1954. It was later inserted in the first draft of the Constitution as section 13 of Article XIII thereof, and finally incorporated as we find it now. Slight have been the changes undergone by the proviso from the time when it comes out of the committee until it was finally adopted. When first submitted and as inserted to the first draft of the Constitution it reads: 'subject to any right, grant, lease, or concession existing in respect thereto on the date of the adoption of the Constitution'. As finally adopted, the proviso reads: 'subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government

established under this Constitution'. This recognition is not mere graciousness but springs form the just character of the government established. The framers of the Constitution were not obscured by the rhetoric of democracy or swayed to hostility by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean destruction or annihilation of acquired property rights. Withal, they erected a government neither episodic nor stationary but well-nigh conservative in the protection of property rights. This notwithstanding nationalistic and socialistic traits discoverable upon even a sudden dip into a variety of the provisions embodied in the instrument.

The writer of this decision wishes to state at this juncture that during the deliberation of this case he submitted to the consideration of the Court the question that may be termed the "vested right saving clause" contained in Section 1, Article XII of the Constitution, but some of the members of this Court either did not agree with the theory of the writer, or were not ready to take a definite stand on the particular point I am now to discuss deferring our ruling on such debatable question for a better occasion, inasmuch as the determination thereof is not absolutely necessary for the solution of the problem involved in this case. In his desire to face the issues squarely, the writer will endeavor, at least as a disgression, to explain and develop his theory, not as a lucubration of the Court, but of his own, for he deems it better and convenient to go over the cycle of reasons that are linked to one another and that step by step lead Us to conclude as We do in the dispositive part of this decision.

It will be noticed that Section 1 of Article XIII of the Constitution provides, among other things, that "all agricultural lands of the public domain and their disposition shall be limited to citizens of the Philippines or to corporations at least 60 per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF THE INAUGURATION OF THE GOVERNMENT

ESTABLISHED UNDER THIS CONSTITUTION."

As recounted by Mr. Justice Laurel in the aforementioned case of Gold Creek Mining Corporation vs. Rodriguez et al., 66 Phil. 259, "this recognition (in the clause already quoted), is not mere graciousness but springs from the just character of the government established. The farmers of the Constitution were not obscured by the rhetoric of democracy or swayed to hostility by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean destruction or annihilation of ACQUIRED PROPERTY RIGHTS".

But respondents' counsel may argue that the preexisting right of acquisition of public or private lands by a corporation which does not fulfill this 60 per cent requisite, refers to purchases of the Constitution and not to later transactions. This argument would imply that even assuming that petitioner had at the time of the enactment of the Constitution the right to purchase real property or right could not be exercised after the effectivity of our Constitution, because said power or right of corporations sole, like the herein petitioner, conferred in virtue of the aforequoted provisions of the Corporation Law, could no longer be exercised in view of the requisite therein prescribed that at least 60 per centum of the capital of the corporation had to be Filipino. 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 same did not have in mind or overlooked this particular form of corporation. If this were so, as the facts and circumstances already indicated tend to prove it to be so, then the inescapable conclusion would be that this requirement of at least 60 per cent of Filipino capital was never intended to apply to corporations sole, and the existence or not a vested right becomes unquestionably immaterial.

But let us assumed that the questioned proviso is material. yet We might say that a reading of said Section 1 will show that it does not refer to any actual acquisition of land up to the right, qualification or power to acquire and hold private real property. The population of the Philippines, Catholic to a high percentage, is ever increasing. In the practice of religion of their faithful the corporation sole may be in need of more temples where to pray, more schools where the children of the congregation could be taught in the principles of their religion, more hospitals where their sick could be treated, more hallow or consecrated grounds or cemeteries where Catholics could be buried, many more than those actually existing at the time of the enactment of our Constitution. This being the case, could it be logically maintained that because the corporation sole which, by express provision of law, has the power to hold and acquire real estate and personal property of its churches, charitable benevolent, or educational purposes (section 159, Corporation Law) it has to stop its growth and restrain its necessities just because the corporation sole is a non-stock corporation composed of only one person who in his unity does not admit of any

percentage, especially when that person is not the owner but merely an administrator of the temporalities of the corporation sole? The writer leaves the answer to whoever may read and consider this portion of the decision.

Anyway, as stated before, this question is not a decisive factor in disposing the case, for even if We were to disregard such saving clause of the Constitution, which reads: subject to any existing right, grant, etc., at the same time of the inauguration of the Government established under this Constitution, yet We would have, under the evidence on record, sufficient grounds to uphold petitioner's contention on this matter.

In this case of the Register of Deeds of Rizal vs. Ung Sui Si Temple, 2 G.R. No. L-6776, promulgated May 21, 1955, wherein this question was considered from a different angle, this Court through Mr. Justice J.B.L. Reyes, said:

The fact that the appellant religious organization has no capital stock does not suffice to escape the Constitutional inhibition, since it is admitted that its members are of foreign nationality. The purpose of the sixty per centum requirement is obviously to ensure that corporation or associations allowed to acquire agricultural land or to exploit natural resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in the absence of capital stock, the controlling membership should be composed of Filipino citizens.

In that case respondent-appellant Ung Siu Si Temple was not a corporation sole but a corporation aggregate, i.e., an unregistered organization operating through 3 trustees, all of Chinese nationality, and that is why this Court laid down the doctrine just quoted. With regard to petitioner, which likewise is a non-stock corporation, the case is different, because it is a registered corporation sole, evidently of no nationality and registered mainly to administer the temporalities and manage the properties belonging to the faithful of said church residing in Davao. But even if we were to go over the

record to inquire into the composing membership to determine whether the citizenship requirement is satisfied or not, we would find undeniable proof that the members of the Roman Catholic Apostolic faith within the territory of Davao are predominantly Filipino citizens. As indicated before, petitioner has presented evidence to establish that the clergy and lay members of this religion fully covers the percentage of Filipino citizens required by the Constitution. These facts are not controverted by respondents and our conclusion in this point is sensibly obvious.

Dissenting Opinion—Discussed. — After having developed our theory in the case and arrived at the findings and conclusions already expressed in this decision. We now deem it proper to analyze and delve into the basic foundation on which the dissenting opinion stands up. Being aware of the transcendental and far-reaching effects that Our ruling on the matter might have, this case was thoroughly considered from all points of view, the Court sparing no effort to solve the delicate problems involved herein.

At the deliberations had to attain this end, two ways were open to a prompt dispatch of the case: (1) the reversal of the doctrine We laid down in the celebrated Krivenko case by excluding urban lots and properties from the group of the term "private agricultural lands" use in this section 5, Article XIII of the Constitution; and (2) by driving Our reasons to a point that might indirectly cause the appointment of Filipino bishops or Ordinary to head the corporations sole created to administer the temporalities of the Roman Catholic Church in the Philippines. With regard to the first way, a great majority of the members of this Court were not yet prepared nor agreeable to follow that course, for reasons that are obvious. As to the second way, it seems to be misleading because the nationality of the head of a diocese constituted as a corporation sole has no material bearing on the functions of the latter, which are limited to the administration of the temporalities

of the Roman Catholic Apostolic Church in the Philippines.

Upon going over the grounds on which the dissenting opinion is based, it may be noticed that its author lingered on the outskirts of the issues, thus throwing the main points in controversy out of focus. Of course We fully agree, as stated by Professor Aruego, that the framers of our Constitution had at heart to insure the conservation of the natural resources of Our motherland of Filipino posterity; to serve them as an instrument of national defense, helping prevent the extension into the country of foreign control through peaceful economic penetration; and to prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence. But all these precautions adopted by the Delegates to Our Constitutional Assembly could have not been intended for or directed against cases like the one at bar. The emphasis and wonderings on the statement that once the capacity of a corporation sole to acquire private agricultural lands is admitted there will be no limit to the areas that it may hold and that this will pave the way for the "revival or revitalization of religious landholdings that proved so troublesome in our past", cannot even furnish the "penumbra" of a threat to the future of the Filipino people. In the first place, the right of Filipino citizens, including those of foreign extraction, and Philippine corporations, to acquire private lands is not subject to any restriction or limit as to quantity or area, and We certainly do not see any wrong in that. The right of Filipino citizens and corporations to acquire public agricultural lands is already limited by law. In the second place, corporations sole cannot be considered as aliens because they have no nationality at all. Corporations sole are, under the law, mere administrators of the temporalities of the Roman Catholic Church in the Philippines. In the third place, every corporation, be it aggregate or sole, is only entitled to purchase, convey, sell, lease, let, mortgage, encumber and


otherwise deal with real properties when it is pursuant to or in consonance with the purposes for which the corporation was formed, and when the transactions of the lawful business of the corporation reasonably and necessarily require such dealing — section 13-(5) of the Corporation Law, Public Act No. 1459 — and considering these provisions in conjunction with Section 159 of the same law which provides that a corporation sole may only "purchase and hold real estate and personal properties for its church, charitable, benevolent or educational purposes", the above mentioned fear of revitalization of religious landholdings in the Philippines is absolutely dispelled. The 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.

Finally, and as previously stated, We have reason to believe that when the Delegates to the Constitutional Convention drafted and approved Article XIII of the Constitution they do not have in mind the corporation sole. We come to this finding because the Constitutional Assembly, composed as it was by a great number of eminent lawyers and jurists, was like any other legislative body empowered to enact either the Constitution of the country or any public statute, presumed to know the conditions existing as to particular subject matter when it enacted a statute (Board of Commerce of Orange Country vs. Bain, 92 S.E. 176; N. C. 377).

Immemorial customs are presumed to have been always in the mind of the Legislature in enacting legislation. (In re Kruger's Estate, 121 A. 109; 277 P. 326).

The Legislative is presumed to have a knowledge of the state of the law on the subjects upon which it legislates. (Clover Valley Land and Stock Co. vs. Lamb et al., 187, p. 723,726.)

The Court in construing a statute, will assume that the legislature acted with full knowledge of the prior legislation on the subject and its construction by the courts. (Johns vs. Town of Sheridan, 89 N. E. 899, 44 Ind. App. 620.).

The Legislature is presumed to have been familiar with the subject with which it was dealing . . . . (Landers vs. Commonwealth, 101 S. E. 778, 781.).

The Legislature is presumed to know principles of statutory construction. (People vs. Lowell, 230 N. W. 202, 250 Mich. 349, followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.).

It is not to be presumed that a provision was inserted in a constitution or statute without reason, or that a result was intended inconsistent with the judgment of men of common sense guided by reason" (Mitchell vs. Lawden, 123 N.E. 566, 288 Ill. 326.) See City of Decatur vs. German, 142 N. E. 252, 310 Ill. 591, and may other authorities that can be cited in support hereof.

Consequently, the Constitutional Assembly must have known:

1. That a corporation sole is organized by and composed of a single individual, the head of any religious society or church operating within the zone, area or jurisdiction covered by said corporation sole (Article 155, Public Act No. 1459);

2. That a corporation sole is a non-stock corporation;

3. That the Ordinary ( the corporation sole proper) does not own the temporalities which he merely administers;

4. That under the law the nationality of said Ordinary or of any administrator has absolutely no bearing on the nationality of the person desiring to acquire real property in the Philippines by purchase or other lawful means other than by hereditary succession, who according to the Constitution must be a Filipino (sections 1 and 5, Article XIII).

5. That section 159 of the Corporation Law expressly authorized the corporation sole to purchase and holdreal estate for its church, charitable, benevolent or educational purposes, and to receive bequests or giftsfor such purposes;

6. That in approving our Magna Carta the Delegates to the Constitutional Convention, almost all of whom were Roman Catholics, could not have intended to curtail the propagation of the Roman Catholic faith or the expansion of the activities of their church, knowing pretty well that with the growth of our population more places of worship, more schools where our youth could be taught and trained; more hallow grounds where to bury our dead would be needed in the course of time.

Long before the enactment of our Constitution the law authorized the corporations sole even to receive bequests or gifts of real estates and this Court could not, without any clear and specific provision of the Constitution, declare that any real property donated, let as say this year, could no longer be registered in the name of the corporation sole to which it was conveyed. That would be an absurdity that should not receive our sanction on the pretext that corporations sole which have no nationality and are non-stock corporations composed of only one person in the capacity of administrator, have to establish first that at least sixty per centum of their capital belong to Filipino citizens. The new Civil Code even provides:

ART. 10. — In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail.

Moreover, under the laws of the Philippines, the administrator of the properties of a Filipino can acquire, in the name of the latter, private lands without any limitation whatsoever, and that is so because the properties thus acquired are not for and would not belong to the administrator but to the Filipino whom he represents. But the dissenting Justice inquires: If the Ordinary is only the administrator, for whom does he administer? And who can alter or overrule his acts? We will forthwith proceed to answer these questions. The corporations sole by reason of their peculiar constitution and form of operation have no designed owner of its temporalities, although by the terms of the law it can be safely implied that the Ordinary holds them in trust for the benefit of the Roman Catholic faithful to their respective locality or diocese. Borrowing the very words of the law, We may say that the temporalities of every corporation sole are held in trust for the use, purpose, behalf and benefit of the religious society, or order so incorporated or of the church to which the diocese, synod, or district organization is an organized and constituent part (section 163 of the Corporation Law).

In connection with the powers of the Ordinary over the temporalities of the corporation sole, let us see now what is the meaning and scope of the word "control". According to the Merriam-Webster's New International Dictionary, 2nd ed., p. 580, on of the acceptations of the word "control" is:

4. To exercise restraining or directing influence over; to dominate; regulate; hence, to hold from action; to curb; subject; also, Obs. — to overpower.

SYN: restrain, rule, govern, guide, direct; check, subdue.

It is true that under section 159 of the Corporation Law, the intervention of the courts is not necessary, tomortgage or sell real property held by the corporation sole where the rules, regulations and discipline of the religious denomination, society or church concerned


presented by such corporation sole regulates the methods of acquiring, holding, selling and mortgaging real estate, and that the Roman Catholic faithful residing in the jurisdiction of the corporation sole has no say either in the manner of acquiring or of selling real property. It may be also admitted that the faithful of the diocese cannot govern or overrule the acts of the Ordinary, but all this does not mean that the latter can administer the temporalities of the corporation sole without check or restraint. We must not forget that when a corporation sole is incorporated under Philippine laws, the head and only member thereof subjects himself to the jurisdiction of the Philippine courts of justice and these tribunals can thus entertain grievances arising out of or with respect to the temporalities of the church which came into the possession of the corporation sole as administrator. It may be alleged that the courts cannot intervene as to the matters of doctrine or teachings of the Roman Catholic Church. That is correct, but the courts may step in, at the instance of the faithful for whom the temporalities are being held in trust, to check undue exercise by the corporation sole of its power as administrator to insure that they are used for the purpose or purposes for which the corporation sole was created.

American authorities have these to say:

It has been held that the courts have jurisdiction over an action brought by persons claiming to be members of a church, who allege a wrongful and fraudulent diversion of the church property to uses foreign to the purposes of the church, since no ecclesiastical question is involved and equity will protect from wrongful diversion of the property (Hendryx vs. Peoples United Church, 42 Wash. 336, 4 L.R.A. — n.s. — 1154).

The courts of the State have no general jurisdiction and control over the officers of such corporations in respect to the performance of their official duties; but 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 (Ramsey vs. Hicks, 174 Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. — n.s. — 665; Hendryx vs. Peoples United Church, supra.).

Courts of the state do not interfere with the administration of church rules or discipline unless civil rights become involved and which must be protected (Morris St., Baptist Church vs. Dart, 67 S.C. 338, 45 S.E. 753, and others). (All cited in Vol. II, Cooley's Constitutional Limitations, p. 960-964.).

If the Constitutional Assembly was aware of all the facts above enumerated and of the provisions of law relative to existing conditions as to management and operation of corporations sole in the Philippines, and if, on the other hand, almost all of the Delegates thereto embraced the Roman Catholic faith, can it be imagined even for an instant that when Article XIII of the Constitution was approved the framers thereof intended to prevent or curtail from then on the acquisition sole, either by purchase or donation, of real properties that they might need for the propagation of the faith and for there religious and Christian activities such as the moral education of the youth, the care, attention and treatment of the sick and the burial of the dead of the Roman Catholic faithful residing in the jurisdiction of the respective corporations sole? The mere indulgence in said thought would impress upon Us a feeling of apprehension and absurdity. And that is precisely the leit motiv that permeates the whole fabric of the dissenting opinion.

It seems from the foregoing that the main problem We are confronted with in this appeal, hinges around the necessity of a proper and adequate interpretation of sections 1 and 5 of Article XIII of the Constitution. Let Us then be guided by the principles of statutory construction laid down by the authorities on the matter:

The most important single factor in determining the intention of the people from whom the

constitution emanated is the language in which it is expressed. The words employed are to be taken in their natural sense, except that legal or technical terms are to be given their technical meaning. The imperfections of language as a vehicle for conveying meanings result in ambiguities that must be resolved by result to extraneous aids for discovering the intent of the framers. Among the more important of these are a consideration of the history of the times when the provision was adopted and of the purposes aimed at in its adoption. The debates of constitutional convention, contemporaneous construction, and practical construction by the legislative and executive departments, especially if long continued, may be resorted to resolve, but not to create, ambiguities. . . . Consideration of the consequences flowing from alternative constructions of doubtful provisions constitutes an important interpretative device. . . . The purposes of many of the broadly phrased constitutional limitations were the promotion of policies that do not lend themselves to definite and specific formulation. The courts have had to define those policies and have often drawn on natural law and natural rights theories in doing so. The interpretation of constitutions tends to respond to changing conceptions of political and social values. The extent to which these extraneous aids affect the judicial construction of constitutions cannot be formulated in precise rules, but their influence cannot be ignored in describing the essentials of the process (Rottschaeffer on Constitutional Law, 1939 ed., p. 18-19).

There are times that when even the literal expression of legislation may be inconsistent with the general objectives of policy behind it, and on the basis of equity or spirit of the statute the courts rationalize a restricted meaning of the latter. A restricted interpretation is usually applied where the effect of literal interpretation will make for injustice and absurdity or, in the words of one court, the language must be so unreasonable 'as to shock general common

sense'. (Vol. 3, Sutherland on Statutory Construction, 3rd ed., 150.).

A constitution is not intended to be a limitation on the development of a country nor an obstruction to its progress and foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs. Bank of New York and Trust Co., 294 N. Y. S.648; 56 N.E. 2d. 745, 293 N.Y. 749).

Although the meaning or principles of a constitution remain fixed and unchanged from the time of its adoption, a constitution must be construed as if intended to stand for a great length of time, and it is progressive and not static. Accordingly, it should not receive too narrow or literal an interpretation but rather the meaning given it should be applied in such manner as to meet new or changed conditions as they arise (U.S. vs. Lassic, 313 U.S. 299, 85 L. Ed., 1368).

Effect should be given to the purpose indicated by a fair interpretation of the language used and that construction which effectuates, rather than that which destroys a plain intent or purpose of a constitutional provision, is not only favored but will be adopted (State ex rel. Randolph Country vs. Walden, 206 S.W. 2d 979).

It is quite generally held that in arriving at the intent and purpose the construction should be broad or liberal or equitable, as the better method of ascertaining that intent, rather than technical (Great Southern Life Ins. Co. vs. City of Austin, 243 S.W. 778).

All these authorities uphold our conviction that the framers of the Constitution had not in mind the corporations sole, nor intended to apply them the provisions of section 1 and 5 of said Article XIII when they passed and approved the same. And if it were so as We think it is, herein petitioner, the Roman Catholic Apostolic Administrator of Davao, Inc., could not be deprived of the right to acquire by purchase or donation real properties for charitable, benevolent and educational purposes, nor of the right to register the same in its name with the


Register of Deeds of Davao, an indispensable requisite prescribed by the Land Registration Act for lands covered by the Torrens system.

We leave as the last theme for discussion the much debated question above referred to as "the vested right saving clause" contained in section 1, Article XIII of the Constitution. The dissenting Justice hurls upon the personal opinion expressed on the matter by the writer of the decision the most pointed darts of his severe criticism. We think, however, that this strong dissent should have been spared, because as clearly indicated before, some members of this Court either did not agree with the theory of the writer or were not ready to take a definite stand on that particular point, so that there being no majority opinion thereon there was no need of any dissension therefrom. But as the criticism has been made the writer deems it necessary to say a few words of explanation.

The writer fully agrees with the dissenting Justice that ordinarily "a capacity to acquire (property) in futuro, is not in itself a vested or existing property right that the Constitution protects from impairment. For a property right to be vested (or acquired) there must be a transition from the potential or contingent to the actual, and the proprietary interest must have attached to a thing; it must have become 'fixed and established'" (Balboa vs. Farrales, 51 Phil. 498). But the case at bar has to be considered as an exception to the rule because among the rights granted by section 159 of the Corporation Law was the right to receive bequests or gifts of real properties for charitable, benevolent and educational purposes. And this right to receive such bequests or gifts (which implies donations in futuro), is not a mere potentiality that could be impaired without any specific provision in the Constitution to that effect, especially when the impairment would disturbingly affect the propagation of the religious faith of the immense majority of the Filipino people and the curtailment of the activities of their Church. That is why the writer gave us a basis of his contention what Professor Aruego said in his

book "The Framing of the Philippine Constitution" and the enlightening opinion of Mr. Justice Jose P. Laurel, another Delegate to the Constitutional Convention, in his concurring opinion in the case of Goldcreek Mining Co. vs. Eulogio Rodriguez et al., 66 Phil. 259. Anyway the majority of the Court did not deem necessary to pass upon said "vested right saving clause" for the final determination of this case.

JUDGMENT

Wherefore, the resolution of the respondent Land Registration Commission of September 21, 1954, holding that in view of the provisions of sections 1 and 5 of Article XIII of the Philippine Constitution the vendee (petitioner) is not qualified to acquire lands in the Philippines in the absence of proof that at least 60 per centum of the capital, properties or assets of the Roman Catholic Apostolic Administrator of Davao, Inc. is actually owned or controlled by Filipino citizens, and denying the registration of the deed of sale in the absence of proof of compliance with such requisite, is hereby reversed. Consequently, the respondent Register of Deeds of the City of Davao is ordered to register the deed of sale executed by Mateo L. Rodis in favor of the Roman Catholic Apostolic Administrator of Davao, Inc., which is the subject of the present litigation. No pronouncement is made as to costs. It is so ordered.

G.R. No. L-55289 June 29, 1982

REPUBLIC OF THE PHILIPPINES, represented by the Director of Lands, petitioner-appellant, 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 ERAÑO G. MANALO, as Executive Minister,respondents-appellees.

AQUINO, J.:

Like L-49623, Manila Electric Company vs. Judge Castro-Bartolome, this case involves the prohibition in section 11, Article XIV of the Constitution that "no private corporation or association may hold alienable lands of the public domain except by lease not to exceed one thousand hectares in area".

Lots Nos. 568 and 569, located at Barrio Dampol, Plaridel, Bulacan, with an area of 313 square meters and an assessed value of P1,350 were acquired by the Iglesia Ni Cristo on January 9, 1953 from Andres Perez in exchange for a lot with an area of 247 square meters owned by the said church (Exh. D).

The said lots were already possessed by Perez in 1933. They are not included in any military reservation. They are inside an area which was certified as alienable or disposable by the Bureau of Forestry in 1927. The lots are planted to santol and mango trees and banana plants. A chapel exists on the said land. The land had been declared for realty tax purposes. Realty taxes had been paid therefor (Exh. N).

On September 13, 1977, the Iglesia Ni Cristo, a corporation sole, duly existing under Philippine laws, filed with the Court of First Instance of Bulacan an application for the registration of the two lots. It alleged that it and its predecessors-in-interest had possessed the land for more than thirty years. It invoked section 48(b) of the Public Land Law, which provides:

Chapter VIII.—Judicial confirmation of imperfect or incomplete titles.

xxx xxx xxx

SEC. 48. The following-described citizens of the Philippines, occupying lands of the public domain or claiming to own any such lands or an interest therein, but whose titles have not been perfected or completed, may apply to the Court of First Instance of the province where the land is located for confirmation of their claims and the issuance of a certificate of title therefore, under the Land Register Act, to wit:

xxx xxx xxx

(b) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive, and notorious possession and occupation of agricultural lands of the public domain, under a bona fide claim of acquisition of ownership, for at least thirty years immediately preceding the filing of the application for confirmation of title except when prevented by war or force majeure. These shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter." (As amended by Republic Act No. 1942, approved on June 22, 1957.)

The Republic of the Philippines, through the Direct/r of Lands, opposed the application on the grounds that applicant, as a private corporation, is disqualified to hold alienable lands of the public domain, that the land applied for is public land not susceptible of private appropriation and that the applicant and its predecessors-in-interest have not been in the open, continuous, exclusive and notorious possession of the land since June 12, 1945.

After hearing, the trial court ordered the registration of the two lots, as described in Plan Ap-04-001344 (Exh. E), in the name of the Iglesia Ni Cristo, a corporation sole, represented by Executive Minister Eraño G. Manalo, with office at the corner of Central and Don Mariano Marcos Avenues, Quezon City, From that decision, the Republic of the Philippines appealed to this Court under Republic Act No. 5440. The appeal should be sustained.

As correctly contended by the Solicitor General, the Iglesia Ni Cristo, as a corporation sole or a juridical person, is disqualified to acquire or hold alienable lands of the public domain, like the two lots in question, because of the constitutional prohibition already mentioned and because the said church is not entitled to avail itself of the benefits of section 48(b) which applies only to Filipino citizens or


natural persons. A corporation sole (an "unhappy freak of English law") has no nationality (Roman Catholic Apostolic Adm. of Davao, Inc. vs. Land Registration Commission, 102 Phil. 596. See Register of Deeds vs. Ung Siu Si Temple, 97 Phil. 58 and sec. 49 of the Public Land Law).

The contention in the comments of the Iglesia Ni Cristo (its lawyer did not file any brief) that the two lots are private lands, following the rule laid down in Susi vs. Razon and Director of Lands, 48 Phil. 424, is not correct. What was considered private land in the Susi case was a parcel of land possessed by a Filipino citizen since time immemorial, as in Cariño vs. Insular Government, 212 U.S. 449, 53 L. ed. 594, 41 Phil. 935 and 7 Phil. 132. The lots sought to be registered in this case do not fall within that category. They are still public lands. A land registration proceeding under section 48(b) "presupposes that the land is public" (Mindanao vs. Director of Lands, L-19535, July 10, 1967, 20 SCRA 641, 644).

As held in Oh Cho vs. Director of Lands, 75 Phil. 890, "all lands that were not acquired from the Government, either by purchase or by grant, belong to the public domain. An exception to the rule would be any land that should have been in the possession of an occupant and of his predecessors-in-interest since time immemorial, for such possession would justify the presumption that the land had never been part of the public domain or that it had been a private property even before the Spanish conquest. "

In Uy Un vs. Perez, 71 Phil. 508, it was noted that the right of an occupant of public agricultural land to obtain a confirmation of his title under section 48(b) of the Public Land Law is a "derecho dominical incoativo"and that before the issuance of the certificate of title the occupant is not in the juridical sense the true owner of the land since it still pertains to the State.

The lower court's judgment is reversed and set aside. The application for registration of the

Iglesia Ni Cristo is dismissed with costs against said applicant.

SO ORDERED.

G.R. No. L-12719 May 31, 1962

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

Office of the Solicitor General for petitioner.V. Jaime and L. E. Petilla for respondent.

PAREDES, J.:

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. In a letter dated December 22, 1852, the Collector of Internal Revenue assessed against and demanded from the Club, the following sums: —

As percentage tax on its gross receipts during the tax years 1946 to 1951 P9,599.07

Surcharge therein 2,399.77

As fixed tax for the years 1946 to 1952 70.00

Compromise penalty 500.00

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.

The dominant issues involved in this case are twofold:

1. 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; and

2. Whether it is liable for the payment of the sum of P500.00 as compromise penalty.

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 factoattach 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 profitor 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, giving full definitions of the word "business"; Coll. of Int. Rev. v. Sweeney, et al. [International Club of Iloilo, Inc.], G.R. No. L-12178, Aug. 21, 1959, the facts of which are similar to the ones at bar; Manila Polo Club v. B. L. Meer, etc., No. L-10854, Jan. 27, 1960).


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. The bar and restaurant are necessary adjuncts of the Club to foster its purposes and the profits derived therefrom are necessarily incidental to the primary object of developing and cultivating sports for the healthful recreation and entertainment of the stockholders and members. 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).1äwphï1.ñët

It is claimed that unlike the two cases just cited (supra), which are non-stock, the appellee Club is a stock corporation. This is unmeritorious. 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 by-laws could be found an authority for the distribution of its dividends or surplus profits. Strictly speaking, it cannot, therefore, be considered a stock corporation, within the contemplation of the corporation law.

A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-profit, nonstock organizations, unless the intent to the contrary is manifest and patent" (Collector v. BPOE Elks Club, et al., supra), which is not the case in the present appeal.

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.

WHEREFORE, the decision appealed from is affirmed without costs.

G.R. No. 91889 August 27, 1993

MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, petitioners, vs.THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR., MARIA

THERESA V. VELOSO AND CASTRENSE C. VELOSO, respondents.

Virgilio E. Dulay for petitioners.

Torres, Tobias, Azura & Jocson for private respondents.

NOCON, J.:

This is a petition for review on certiorari to annul and set aside the decision 1 of the Court of Appeals affirming the decision 2 of the Regional Trial Court of Pasay, Branch 114 Civil Cases Nos. 8198-P, and 2880-P, the dispositive portion of which reads, as follows:

Wherefore, in view of all the foregoing considerations, in this Court hereby renders judgment, as follows:

In Civil Case No. 2880-P, the petition filed by Manuel R. Dulay Enterprises, Inc. and Virgilio E. Dulay for annulment or declaration of nullity of the decision of the Metropolitan Trial Court, Branch 46, Pasay City, in its Civil Case No. 38-81 entitled "Edgardo D. Pabalan, et al., vs. Spouses Florentino Manalastas, et al.," is dismissed for lack of merits;

In Civil Case No. 8278-P, the complaint filed by Manuel R. Dulay Enterprises, Inc. for cancellation of title of Manuel A. Torres, Jr. (TCT No. 24799 of the Register of Deeds of Pasay City) and reconveyance, is dismissed for lack or merit, and,

In Civil Case No. 8198-P, defendants Manuel R. Dulay Enterprises, Inc. and Virgilio E. Dulay are ordered to surrender and deliver possession of the parcel of land, together with all the improvements thereon, described in Transfer Certificate of Title No. 24799 of the Register of Deeds of Pasay City, in favor of therein plaintiffs Manuel A. Torres, Jr. as owner and Edgardo D. Pabalan as real estate administrator of said Manuel A. Torres, Jr.; to account for and return to said plaintiffs the rentals from dwelling unit No. 8-A of the apartment building

(Dulay Apartment) from June 1980 up to the present, to indemnify plaintiffs, jointly and severally, expenses of litigation in the amount of P4,000.00 and attorney's fees in the sum of P6,000.00, for all the three (3) cases. Co-defendant Nepomuceno Redovan is ordered to pay the current and subsequent rentals on the premises leased by him to plaintiffs.

The counterclaim of defendants Virgilio E. Dulay and Manuel R. Dulay Enterprises, Inc. and N. Redovan, dismissed for lack of merit. With costs against the three (3) aforenamed defendants. 3

The facts as found by the trial court are as follows:

Petitioner 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 No. 17880 4 and known as Dulay Apartment consisting of sixteen (16) apartment units on a six hundred eighty-nine (689) square meters lot, more or less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City.

Petitioner 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 petitioner Virgilio Dulay to be able to continue the hotel project. As a result of said loan, petitioner Virgilio Dulay occupied one of the unit apartments of the subject property since property since 1973 while at the same time managing the Dulay Apartment at his shareholdings in the corporation was subsequently increased by his father. 5


On December 23, 1976, Manuel Dulay by virtue of Board Resolution No 18 6 of petitioner corporation sold the subject property to private respondents spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of Absolute Sale. 7 Thereafter, TCT No. 17880 was cancelled and TCT No. 23225 was issued to private respondent Maria Theresa Veloso. 8 Subsequently, Manuel Dulay and private respondents spouses Veloso executed a Memorandum to the Deed of Absolute Sale of December 23, 1976 9 dated December 9, 1977 giving Manuel Dulay within (2) years or until December 9, 1979 to repurchase the subject property for P200,000.00 which was, however, not annotated either in TCT No. 17880 or TCT No. 23225.

On December 24, 1976, private respondent Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject property to private respondent Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry No. 68139 in TCT No. 23225. 10

Upon the failure of private respondent Maria Veloso to pay private respondent Torres, the subject property was sold on April 5, 1978 to private respondent Torres as the highest bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of Sheriff's Sale 11 issued on April 20, 1978.

On July 20, 1978, private respondent Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem 12 in favor of Manuel Dulay assigning her right to repurchase the subject property from private respondent Torres as a result of the extra sale held on April 25, 1978.

As neither private respondent Maria Veloso nor her assignee Manuel Dulay was able to redeem the subject property within the one year statutory period for redemption, private respondent Torres filed an Affidavit of Consolidation of Ownership 13 with the Registry of Deeds of Pasay City and TCT No.

24799 14 was subsequently issued to private respondent Manuel Torres on April 23, 1979.

On October 1, 1979, private respondent Torres filed a petition for the issuance of a writ of possession against private respondents spouses Veloso and Manuel Dulay in LRC Case No. 1742-P. However, when petitioner Virgilio Dulay was never authorized by the petitioner corporation to sell or mortgage the subject property, the trial court ordered private respondent Torres to implead petitioner corporation as an indispensable party but the latter moved for the dismissal of his petition which was granted in an Order dated April 8, 1980.

On June 20, 1980, private respondent Torres and Edgardo Pabalan, real estate administrator of Torres, filed an action against petitioner 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, No. 8198-P with the then Court of First Instance of Rizal.

On July 21, 1980, petitioner corporation filed an action against private respondents spouses Veloso and Torres for the cancellation of the Certificate of Sheriff's Sale and TCT No. 24799 in Civil Case No. 8278-P with the then Court of First Instance of Rizal.

On January 29, 1981, private respondents Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas, a tenant of Dulay Apartment Unit No. 7-B, with petitioner corporation as intervenor for ejectment in Civil Case No. 38-81 with the Metropolitan Trial Court of Pasay City which rendered a decision on April 25, 1985, dispositive portion of which reads, as follows:

Wherefore, judgment is hereby rendered in favor of the plaintiff (herein private respondents) and against the defendants:

1. Ordering the defendants and all persons claiming possession under them to vacate the premises.

2. Ordering the defendants to pay the rents in the sum of P500.000 a month from May, 1979 until they shall have vacated the premises with interest at the legal rate;

3. Ordering the defendants 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. 15

Thereafter or on May 17, 1985, petitioner corporation and Virgilio Dulay filed an action against the presiding judge of the Metropolitan Trial Court of Pasay City, private respondents Pabalan and Torres for the annulment of said decision with the Regional Trial Court of Pasay in Civil Case No. 2880-P.

Thereafter, the three (3) cases were jointly tried and the trial court rendered a decision in favor of private respondents.

Not satisfied with said decision, petitioners appealed to the Court of Appeals which rendered a decision on October 23, 1989, the dispositive portion of which reads, as follows:

PREMISES CONSIDERED, the decision being appealed should be as it is hereby AFFIRMED in full.16

On November 8, 1989, petitioners filed a Motion for Reconsideration which was denied on January 26, 1990.

Hence, this petition.

During the pendency of this petition, private respondent Torres died on April 3, 1991 as shown in his death certificate 17 and named Torres-Pabalan Realty & Development Corporation as his heir in his holographic will 18 dated October 31, 1986.

Petitioners contend that the respondent court had acted with grave abuse of discretion when it applied the doctrine of piercing the veil of

corporate entity in the instant case considering that the sale of the subject property between private respondents spouses Veloso and Manuel Dulay has no binding effect on petitioner corporation as Board Resolution No. 18 which authorized the sale of the subject property was resolved without the approval of all the members of the board of directors and said Board Resolution was prepared by a person not designated by the corporation to be its secretary.

We do not agree.

Section 101 of the Corporation Code of the Philippines provides:

Sec. 101. When board meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a meeting shall nevertheless be deemed valid if:

1. Before or after such action is taken, written consent thereto is signed by all the directors, or

2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or

3. The directors are accustomed to take informal action with the express or implied acquiese of all the stockholders, or

4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing.

If a directors' meeting is held without call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof.

In the instant case, petitioner 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, 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 his case, petitioner Virgilio Dulay failed to do.

It is relevant to note that although a corporation is an entity which has a personality distinct and separate from its individual stockholders or members, 19 the veil of corporate fiction may be pierced when it is used to defeat public convenience justify wrong, protect fraud or defend crime. 20 The privilege of being treated as an entity distinct and separate from its stockholder or members is therefore confined to its legitimate uses and is subject to certain limitations to prevent the commission of fraud or other illegal or unfair act. When the corporation is used merely as an alter ego or business conduit of a person, the law will regard the corporation as the act of that person. 21 The Supreme Court had repeatedly disregarded the separate personality of the corporation where the corporate entity was used to annul a valid contract executed by one of its members.

Petitioners' claim that the sale of the subject property by its president, Manuel Dulay, to private respondents spouses Veloso is null and void as the alleged Board Resolution No. 18 was passed without the knowledge and consent of the other members of the board of directors cannot be sustained. As correctly pointed out by the respondent Court of Appeals:

Appellant 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 (see par. 8, affidavit of Virgilio E. Dulay, dated May 31, 1984, p. 14, Exh. "21") is difficult to believe. On the contrary, he is very much privy to the transactions involved. To begin with, he is a incorporator and one of the board of directors designated at the time of the organization of Manuel R. Dulay Enterprise, 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, three (3) children and their father whose name identifies their corporation (Articles of Incorporation of Manuel R. Dulay Enterprises, Inc. Exh. "31-A"). 22

Besides, the fact that petitioner Virgilio Dulay on June 24, 1975 executed an affidavit 23 that he was a signatory witness to the execution of the post-dated Deed of Absolute Sale of the subject property in favor of private respondent Torres indicates that he was aware of the transaction executed between his father and private respondents and had, therefore, adequate knowledge about the sale of the subject property to private respondents.

Consequently, petitioner corporation is liable for the act of Manuel Dulay and the sale of the subject property to private respondents by Manuel Dulay is valid and binding. As stated by the trial court:

. . . the sale between Manuel R. Dulay Enterprises, Inc. and the spouses Maria Theresa V. Veloso and Castrense C. Veloso, was a corporate act of the former and not a personal transaction of Manuel R. Dulay. This is so because Manuel R. Dulay was not only president and treasurer but also the general manager of the corporation. The corporation was a closed family corporation and the only non-relative in the board of directors was Atty. Plaridel C. Jose who appeared on paper as the secretary. There is no denying the fact, however, that Maria Socorro R. Dulay at times acted as secretary. . . ., the Court can not lose sight of the fact that the Manuel R. Dulay Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single family. It cannot be concealed that Manuel R. Dulay as president, treasurer and

general manager almost had absolute control over the business and affairs of the corporation. 24

Moreover, the appellate courts will not disturb the findings of the trial judge unless he has plainly overlooked certain facts of substance and value that, if considered, might affect the result of the case, 25 which is not present in the instant case.

Petitioners' contention that private respondent Torres never acquired ownership over the subject property since the latter was never in actual possession of the subject property nor was the property ever delivered to him is also without merit.

Paragraph 1, Article 1498 of the New Civil Code provides:

When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary do not appear or cannot clearly be inferred.

Under the aforementioned article, the mere execution of the deed of sale in a public document is equivalent to the delivery of the property. Likewise, this Court had held that:

It is settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale. As such, he is entitled to the possession of the said property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title. The buyer can in fact demand possession of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No. 3133 as amended. No such bond is required after the redemption period if the property is not redeemed. Possession of the land then becomes an absolute right of the purchaser as confirmed owner. 26

Therefore, prior physical delivery or possession is not legally required since the execution of the Deed of Sale in deemed equivalent to delivery.

Finally, we hold that the respondent appellate court did not err in denying petitioner's motion for reconsideration despite the fact that private respondents failed to submit their comment to said motion as required by the respondent appellate court from resolving petitioners' motion for reconsideration without the comment of the private respondent which was required merely to aid the court in the disposition of the motion. The courts are as much interested as the parties in the early disposition of cases before them. To require otherwise would unnecessarily clog the courts' dockets.

WHEREFORE, the petition is DENIED and the decision appealed from is hereby AFFIRMED.

SO ORDERED.

G.R. No. L-4900 August 31, 1953

FINANCING CORPORATION OF THE PHILIPPINES and J. AMADO ARANETA, petitioners, vs.HON. JOSE TEODORO, Judge of the Court of First Instance of Negros Occidental, Branch II, and ENCARNACION LIZARES VDA. DE PANLILIO, respondents.

Vicente Hilado for petitioners.Antonio Barredo for respondents.

MONTEMAYOR, J.:

In civil case No. 1924 of the Court of First Instance of Negros Occidental, Asuncion Lopez Vda. de Lizares, Encarnacion Lizares Vda. de Panlilio and Efigenia Vda. de Paredes, in their own behalf and in behalf of the other minority stockholders of the Financing Corporation of the Philippines, filed a complaint against the said corporation and J. Amado Araneta, its president and general manager, claiming among other things alleged gross mismanagement and


fraudulent conduct of the corporate affairs of the defendant corporation by J. Amado Araneta, and asking that the corporation be dissolved; that J. Amado Araneta be declared personally accountable for the amounts of the unauthorized and fraudulent disbursements and disposition of assets made by him, and that he be required to account for said assets, and that pending trial and disposition of the case on its merits a receiver be appointed to take possession of the books, records and assets of the defendant corporation preparatory to its dissolution and liquidation and distribution of the assets. Over the strong objection of the defendants, the trial court presided by respondent Judge Jose Teodoro, granted the petition for the appointment of a receiver and designated Mr. Alfredo Yulo as such receiver with a bond of P50,000. Failing to secure a reconsideration of the order appointing a receiver, the defendants in said case, Financing Corporation of the Philippines and J. Amado Araneta, as petitioners, have filed the present petition for certiorari with preliminary injunction to revoke and set aside the order. Acting upon that part of the petition asking for a writ of preliminary injunction, a majority of the court granted the same upon the filing of a bond by the petitioners in the sum of P50,000.

The main contention of the petitioners in opposing the appointment of a receiver in this case is that said appointment is merely an auxiliary remedy; that the principal remedy sought by the respondents in the action in Negros Occidental was the dissolution of the Financing Corporation of the Philippines; that according to the law a suit for the dissolution of a corporation can be brought and maintained only by the State through its legal counsel, and that respondents, much less the minority stockholders of said corporation, have no right or personality to maintain the action for dissolution, and that inasmuch as said action cannot be maintained legally by the respondents, then the auxiliary remedy for the appointment of a receiver has no basis.

True it is that the general rule is that the minority stockholders of a corporation cannot sue and demand its dissolution. However, there are cases that hold that even minority stockholders may ask for dissolution, this, under the theory that such minority members, if unable to obtain redress and protection of their rights within the corporation, must not and should not be left without redress and remedy. This was what probably prompted this Court to state in the case of Hall, et al. vs. Judge Piccio,* G.R. No. L-2598 (47 Off. Gaz. No. 12 Supp., p. 200) that even the existence of a de jure corporation may be terminated in a private suit for its dissolution by the stockholders without the intervention of the State. It was therein further held that although there might be some room for argument on the right of minority stockholders to ask for dissolution,-that question does not affect the court's jurisdiction over the case, and that the remedy by the party dissatisfied was to appeal from the decision of the trial court. We repeat that although as a rule, minority stockholders of a corporation may not ask for its dissolution in a private suit, and that such action should be brought by the Government through its legal officer in a quo warranto case, at their instance and request, there might be exceptional cases wherein the intervention of the State, for one reason or another, cannot be obtained, as when the State is not interested because the complaint is strictly a matter between the stockholders and does not involve, in the opinion of the legal officer of the Government, any of the acts or omissions warranting quo warranto proceedings, in which minority stockholders are entitled to have such dissolution. When such action or private suit is brought by them, the trial court had jurisdiction and may or may not grant the prayer, depending upon the facts and circumstances attending it. The trial court's decision is of course subject to review by the appellate tribunal. Having such jurisdiction, the appointment of a receiver pendente lite is left to the sound discretion of the trial court. As was said in the case of Angeles vs. Santos (64 Phil., 697), the

action having been properly brought and the trial court having entertained the same, it was within the power of said court upon proper showing to appoint a receiverpendente lite for the corporation; that although the appointment of a receiver upon application of the minority stockholders is a power to be exercised with great caution, nevertheless, it should be exercised necessary in order not to entirely ignore and disregard the rights of said minority stockholders, especially when said minority stockholders are unable to obtain redress and protection of their rights within the corporation itself.

In that civil case No. 1924 of Negros Occidental court, allegations of mismanagement and misconduct by its President and Manager were made, specially in connection with the petition for the appointment of a receiver. in order to have an idea of the seriousness of said allegations, we reproduce a pertinent portion of the order of respondent Judge Teodoro dated June 23, 1951, subject of these certiorari proceedings:

Considering plaintiffs' complaint and verified motion for appointment of a receiver together, as they have been treated jointly in the opposition of the defendants, the grounds of the prayer for receivership may be briefly stated to be: (1) imminent danger of insolvency; (2) fraud and mismanagement, such as, particularly, (a) wrongful and unauthorized diversion from corporate purposes and use for personal benefit of defendant Araneta, for the benefit of the corporations under his control and of which he is majority stockholder and/or for the benefit of his relatives, personal friends and the political organization to which he is affiliated of approximately over one and a half million pesos of the funds of the defendant corporation in the form of uncollected allowances and loans, either without or with uncollected interest, and either unsecured or insufficiently secured, and sometimes with a securities appearing in favor of defendant Araneta as if the funds advanced or loaned were his own; (b) unauthorized and profitless pledging of securities owned by

defendant corporation to secure obligations amounting to P588,645.34 of another corporation controlled by defendant Araneta; (c) unauthorized and profitless using of the name of the defendant corporation in the shipping of sugar belonging to other corporations controlled by defendant Araneta to the benefit of said corporations in the amount of at least P104,343.36; (d) refusal by defendant Araneta to endorse to the defendant corporation shares of stock and other securities belonging to it but which are still in his name; (e) negligent failure to endorse other shares of stock belonging to defendant corporation but still in the names of the respective vendors; and (f) illegal and unauthorized transfer and deposit in the United States of America of 6,426,281 shares of the Atok-Big Wedge Mining Company; (3) violations of the corporation law and the by-laws of the corporation such as (a) refusal to allow minority stockholders to examine the books and records of the corporation; (b) failure to call and hold stockholders' and directors' meetings; (c) virtual disregard and ignoring of the board of directors by defendant Araneta who has been and is conducting the affairs of the corporation under his absolute control and for his personal benefit and for the benefit of the corporations controlled by him, to the prejudice and in disregard of the rights of the plaintiffs and other minority stockholders; and (d) irregularity in the keeping and (e) errors and omissions in the books and failure of the same to reflect the real and actual transactions of the defendant corporations; (4) failure to achieve the fundamental purpose of the corporation; (5) if administration, possession and control of the affairs, books, etc. of defendant corporation are left in the hands of the defendant Araneta and the present corporate officials, under his power and influence, the remaining assets of the corporation are in danger of being further dissipated, wasted or lost and of becoming ultimately unavailable for distribution among its stockholders; and (6) the best means to protect and preserve the assets of defendant corporation is the appointment of a receiver.


In conclusion, we hold that the trial court through respondent Judge Teodoro had jurisdiction and properly entertained the original case; that he also had jurisdiction to appoint a receiver pendente lite, and considering the allegations made in connection with the petition for the appointment of a receiver, he neither exceeded his jurisdiction nor abused his discretion in appointing a receiver. The petition for certiorari is hereby denied, with costs. The writ of preliminary injunction heretofore issued is hereby ordered dissolved.


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