Сase digest for corporation law

Facts: The National Coal Co.(NCC) was created by a special law and was enacted by virtue of Act 2705 in order to develop a coal industry. It was engaged in coal mining on reserved lands belonging to the government. The National Coal Co.(NCC) filed a case against the CIR for the recovery of sum of money it paid on protest as specific tax on 24,089 tons of coals claiming exemption to tax pursuant to Sec. 14 and 15 of Act 2719. Issue: Whether or not NCC is a private corporation?

Held: Plaintiff is a private corporation. The mere fact that the government is a majority stockholder of the corporation does not make the corporation. Act 2705 as amended by Act 2822 makes it subject to all the provision of the corporation law. As a private corporation, it has no greater rights, powers or privileges than any other corporation which may be organized for the same purpose under the corporation law and certainly it was not the intention of the legislature to give preference or right or privilege over other legitimate private corporation in the mining of coal. NCC is required to pay taxes pursuant to Section 1496 of the Administrative Code. Moreover, Act 2719 is applicable only to lessee or owner of coal bearing lands which NCC is not.

PHILIPPINE SOCIETY v COAFacts: Petitioner was incorporated as a juridical entity over 100 years ago by virtue of Act No. 1285. The petitioner at the time it was created, was composed of animal aficionados and animal propagandists. At the time of the enactment of Act No. 1285, the original Corporation Law Act No. 1459, was not yet in existence. Act No. 1285 antedated both Corporation Law and the Constitution of SEC. When COA sought to conduct an audit survey.

The petitioner protested on the ground that it was a private entity hence, not under the jurisdiction of COA. Issue: Whether petitioner qualifies as a government agency that may be subject to audit by COA. Ruliing: No. The fact that a certain juridical entity is impressed with public interest does not ipso facto make the entity a public corporation. The true criterion to determine whether a corporation is private or public is found in the totality of the relation of the corporation to the State.

DAVAO CITY WATER DISTRICT VS. CIVIL SERVICE COMMISSIONFACTS: Petitioners are among the more than five hundred (500) water districts existing throughout the country formed pursuant to the provisions of Presidential Decree No. 198, as amended by Presidential Decrees Nos. 768 and 1479, otherwise known as the “Provincial Water Utilities Act of 1973.”

Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of his legislative power under Proclamation No. 1081. It authorized the different local legislative bodies to form and create their respective water districts through a resolution they will pass subject to the guidelines, rules and regulations therein laid down. The decree further created and formed the “Local Water Utilities Administration” (LWUA), a national agency attached to the National Economic and Development Authority (NEDA), and granted with regulatory power necessary to optimize public service from water utilities operations.


After a fair consideration of the parties’ arguments coupled with a careful study of the applicable laws as well as the constitutional provisions involved, We rule against the petitioners and reiterate Our ruling in Tanjay case declaring water districts government-owned or controlled corporations with original charter. Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to the different water districts created pursuant thereto. In all its essential terms, it is obvious that it pertains to a special purpose which is

intended to meet a particular set of conditions and cirmcumstances. The fact that said decree generally applies to all water districts throughout the country does not change the fact that PD 198 is a special law. Accordingly, this Court’s resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby abandoned. By “government-owned or controlledcorporation with original charter,”

We mean government owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines. From the foregoing pronouncement, it is clear that what has been excluded from the coverage of the CSC are those corporations created pursuant to the Corporation Code. Significantly, petitioners are not created under the said code, but on the contrary, they were created pursuant to a special law and are governed primarily by its provision. The provisions of PD 198, as amended, are similar to those which are actually contained in other corporate charters.

The conclusion is inescapable that the said decree is in truth and in fact the charter of the different water districts for it clearly defines the latter’s primary purpose and its basic organizational set-up. In other words, PD 198, as amended, is the very law which gives a water district juridical personality. While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district, this Court is of the opinion that said resolution cannot be considered as its charter, the same being intended only to implement the provisions of said decree.

REGISTER OF DEEDS vs. UNG SIU SI TEMPLEFACTS: Jesus Dy, a Filipino citizen, donated a parcel of residential land in Caloocan in favor of the unregistered religious organization “Ung Siu Si Temple”, operating through three trustees all of Chinese nationality. The donation was duly accepted by Yu Juan, of Chinese nationality, founder and deaconess of the Temple, acting in representation and in behalf of the latter and its trustees. The Register of Deeds refused to record such donation. ISSUE:

Whether or not the act of the Register of Deeds in refusing to register the donation of a parcel of land executed in favor of a religious organization whose founder, trustees and administrator are Chinese citizens is proper.


The act of the Register of Deeds is proper. The Constitution makes no exception in favor of religious associations. Neither is there any such saving found in sections 1 and 2 of Article XIII, restricting the acquisition of public agricultural lands and other natural resources to “corporations or associations at least sixty per centum of the capital of which is owned by such citizens” (of the Philippines).

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 corporations 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.

People v. QuashaFacts: William H. Quasha is a lawyer representing Pacific Airways Corporation, a corporation organized for the purpose of engaging in business as a common carrier.

Quasha was charged with the crime of falsification of a public and commercial document for having been entrusted with the preparation and registration of the article of incorporation which he caused to appear in said article of incorporation that one Arsenio Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005 per cent of the subscribed capital stock of the corporation when in reality such was not the case, the truth being that the owner of the portion of the capital stock subscribed to by Baylon and the money paid thereon were American citizen whose name did not appear in the article of incorporation, and that the purpose for making this false statement was to circumvent the constitutional mandate that no corporation shall be authorized to operate as a public utility in the Philippines unless 60 per cent of its capital stock is owned by Filipinos.

Baylon was merely their trustee. The lower court found him guilty, hence this appeal.

Issue: Whether or not the accused can be charged with having wrongfully intended to circumvent that fundamental law by not revealing in the articles of incorporation that Baylon was a mere trustee of his American co-incorporation and that for that reason the subscribed capital stock of the corporation was wholly American? Held: The court reversed the decision of the lower court.

The court stated that such revelation was not essential, and the Corporation Law does not require it. Defendant was, therefore, under no obligation to make it. In the absence of such obligation and of the allege wrongful intent, defendant cannot be legally convicted of the crime with which he is charged. For a corporation to be entitled to operate a public utility it is not necessary that it be organized with 60 per cent of its capital owned by Filipinos from the start.

A corporation formed with capital that is entirely alien may subsequently change the nationality of its capital through transfer of shares to Filipino citizens. conversely, a corporation originally formed with Filipino capital may subsequently change the national status of said capital through transfer of shares to foreigners.

The moment for determining whether a corporation is entitled to operate as a public utility is when it applies for a franchise, certificate, or any other form of authorization for that purpose. And that can be done after the corporation has already come into being and not while it is still being formed. And at that moment, the corporation must show that it has complied not only with the requirement of the Constitution as to the nationality of its capital, but also with the requirements of the Civil Aviation Law if it is a common carrier by air, the Revised Administrative Code if it is a common carrier by water, and the Public Service Law if it is a common carrier by land or other kind of public service.

The majority of the court, however, are also of the opinion that, even supposing that the act imputed to the defendant constituted falsification at the time it was perpetrated, still with the approval of the Party Amendment to the Constitution in March, 1947, which placed Americans on the same footing as Filipino citizens with respect to the right to operate public utilities in the Philippines, thus doing away with the prohibition in section 8, Article XIV of the Constitution in so far as American citizens are concerned, the said act has ceased to be an offense within the meaning of the law, so that defendant can no longer be held criminally liable therefor.

FILIPINAS COMPAÑIA DE SEGUROS vs. CHRISTERN, HUENEFELD & CO. INC. FACTS: On Oct. 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., after payment of corresponding premium, obtained from the petitioner, Filipinas Cia. de Seguros, fire policy in the sum of P1000,000, covering merchandise contained in a building located at Roman Street, Binondo Manila. During the Japanese military occupation, the

building and insured merchandise were burned. In due time the respondent submitted to the petitioner its claim under the policy. The salvage goods were sold at public auction and, after deducting their value, the total loss suffered by the respondent was fixed at P92,650. The petitioner refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared war against Germany, the respondent Corporation (though organized under and by virtue of the laws of the Philippines) being controlled by the German subjects and the petitioner being a company under American jurisdiction when said policy was issued on Oct. 1, 1941. In pursuance of the order of the Director of Bureau of Financing, Philippine Executive Commission, petitioner paid respondent the sum of P92,650.

The present action was filed in the CFI of Manila for the purpose of recovering from the respondent the sum of P92,650. PETITIONERS CONTENTION, that the insured merchandise were burned up after the policy issued in 1941 in favor of the respondent corporation has ceased to be effective because of the outbreak of the war between the United States and Germany on Dec. 10, 1941, and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure.

CFI of Manila dismissed the action without pronouncement as to costs. CA affirmed the judgment of the lower court with costs. It overruled petitioner’s contention that the respondent corporation became an enemy when the United States declared war against Germany, relying on English and American cases which held that a corporation is a citizen of the country or state by and under the laws of which it was created or organized. It rejected the theory that nationality of private corporation is determine by the character or citizenship of its controlling stockholders.

ISSUE: W/N the fire policy became null and void upon the declaration of war between US and Germany (Dec. 10, 1941). HELD: SC reversed CA’s decision and respondent corporation is ordered to pay to the petitioner hte sum of P77,208.33, Phil. currency, LESS the amount of the premium, Phil. currency, that should be returned by the petitioner for the unexpired term of the policy, beginning Dec. 11, 1941.

The Philippine Insurance Law (Act No. 2427, as amended,) in Sec. 8, provides that “anyone except a public enemy may be insured.” It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.

The respondent having become an enemy corporation on Dec. 10, 1941, the insurance policy issued in its favor on Oct. 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforcible, and since the insured goods were burned after Dec. 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. HOWEVER, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from Dec. 11, 1941, should be returned by the petitioner.

In the case of an ordinary fire policy, which grants insurance only from year, or for some other specified term it is plain that when the parties become alien enemies, the contractual tie is broken and the contractual rights of the parties, so far as not vested. lost.

[Factually, there can be no doubt that the Director of the Bureau of Financing, in ordering the petitioner to pay the claim of the respondent, merely obeyed the instruction of the Japanese Military Administration, as may be seen from the following: “In view of the findings and conclusion of this office contained in its decision on Administrative Case dated February9, 1943 copy of which was sent to your office and the concurrence therein of the Financial Department of the Japanese Military Administration, and following the instruction of said authority, you are hereby ordered to pay the claim of Messrs.

Christern, Huenefeld & Co., Inc. The payment of said claim, however, should be made by means of crossed check.” It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on this case. However, the petitioner will be entitled to recover only the equivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accordance with the rate fixed in the Ballantyne scale.]

Roman Catholic Adm. Of Davao, Inc. vs Land Reg. Com. G.R. 8451 Facts: Meteo L. Rodis executed a deed of sale of a parcel of land in favor of Roma Catholic Administrator of Davao, Inc. a corporation sole organized in accordance with Philippine laws, with Msgr. Clovis Thibault a Canadian national as actual incumbent. The land Registration Commissioner and the Registration of Deeds of Davao deny the registration in the absence of proof that at least 60% of its capital is owned by Filipino citizens in view of Sec. 1 and 5 of Art. XIII of the Constitution and Sec. 159 of the Corporation Law.

The petitioner contends that a corporation sole irrespective of the citizenship of its incumbent, is not prohibited or disqualified to acquired 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 properties but merely the administrator thereof. The respondents averred that a corporation actually exercising all rights of ownership over the properties.