Tayag vs.

Benguet Consolidated

Facts

Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others, two stock certificates
covering 33,002 shares of appellant, the certificates being in the possession of the County Trust Company of New
York, which as noted, is the domiciliary administrator of the estate of the deceased.2 Then came this portion of the
appellant's brief: "On August 12, 1960, Prospero Sanidad instituted ancillary administration proceedings in the
Court of First Instance of Manila; Lazaro A. Marquez was appointed ancillary administrator, and on January 22,
1963, he was substituted by the appellee Renato D. Tayag. A dispute arose between the domiciary administrator in
New York and the ancillary administrator in the Philippines as to which of them was entitled to the possession of
the stock certificates in question. On January 27, 1964, the Court of First Instance of Manila ordered the
domiciliary administrator, County Trust Company, to "produce and deposit" them with the ancillary administrator
or with the Clerk of Court. The domiciliary administrator did not comply with the order, and on February 11, 1964,
the ancillary administrator petitioned the court to "issue an order declaring the certificate or certificates of stocks
covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared
[or] considered as lost."3

It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far as it is
concerned as to "who is entitled to the possession of the stock certificates in question; appellant opposed the
petition of the ancillary administrator because the said stock certificates are in existence, they are today in the
possession of the domiciliary administrator, the County Trust Company, in New York, U.S.A...."4

It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or considered as
lost. Moreover, it would allege that there was a failure to observe certain requirements of its by-laws before new
stock certificates could be issued.

Issue:

Whether or not the contention of appellant Benguet consolidated is correct?

Ruling

A corporation as known to Philippine jurisprudence is a creature without any existence until it has received the
imprimatur of the state according to law. It is logically inconceivable therefore that it will have rights and privileges
of a higher priority than that of its creator. More than that, it cannot legitimately refuse to yield obedience to acts
of its state organs, certainly not excluding the judiciary, whenever called upon to do so.

Ang Pue and Co. vs Secretary of Commerce and Industry

Facts

Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue & Company for a term of five
years from May 1, 1953, extendible by their mutual consent. The purpose of the partnership was "to maintain the
business of general merchandising, buying and selling at wholesale and retail, particularly of lumber, hardware and
other construction materials for commerce, either native or foreign." The corresponding articles of partnership
(Exhibit B) were registered in the Office of the Securities & Exchange Commission on June 16, 1953.
Republic Act No. 1180 was enacted to regulate the retail business. It provided, among other things, that, after its
enactment, a partnership not wholly formed by Filipinos could continue to engage in the retail business until the
expiration of its term.

Prior to the expiration of the five-year term of the partnership Ang Pue & Company, but after the enactment of the
Republic Act 1180, the partners already mentioned amended the original articles of part ownership (Exhibit B) so
as to extend the term of life of the partnership to another five years. When the amended articles were presented
for registration in the Office of the Securities & Exchange Commission on April 16, 1958, registration was refused
upon the ground that the extension was in violation of the aforesaid Act.

Issue

Whether or not the refusal of SEC on the registration of partnership correct.

Ruling

. To organize a corporation or a partnership that could claim a juridical personality of its own and transact business
as such, is not a matter of absolute right but a privilege which may be enjoyed only under such terms as the State
may deem necessary to impose. That the State, through Congress, and in the manner provided by law, had the
right to enact Republic Act No. 1180 and to provide therein that only Filipinos and concerns wholly owned by
Filipinos may engage in the retail business can not be seriously disputed. That this provision was clearly intended
to apply to partnership already existing at the time of the enactment of the law is clearly showing by its provision
giving them the right to continue engaging in their retail business until the expiration of their term or life.

PSE vs CA

Facts

Puerto Azul Land, Inc. (PALI) is a corporation engaged in the real estate business. PALI was
granted permission by the Securities and Exchange Commission (SEC) to sell its shares to the
public in order for PALI to develop its properties.

PALI then asked the Philippine Stock Exchange (PSE) to list PALI’s stocks/shares to facilitate
exchange. The PSE Board of Governors denied PALI’s application on the ground that there were
multiple claims on the assets of PALI. Apparently, the Marcoses, Rebecco Panlilio (trustee of the
Marcoses), and some other corporations were claiming assets if not ownership over PALI.

PALI then wrote a letter to the SEC asking the latter to review PSE’s decision. The SEC reversed
PSE’s decisions and ordered the latter to cause the listing of PALI shares in the Exchange.

Issue

Whether or not the reversion of SEC on the PSE’s decision tenable.

Ruling

A corporation is but an association of individuals, allowed to transact under an assumed corporate name, and with
a distinct legal personality. In organizing itself as a collective body, it waives no constitutional immunities and
perquisites appropriate to such body.i[11] As to its corporate and management decisions, therefore, the state will
generally not interfere with the same. Questions of policy and of management are left to the honest decision of
the officers and directors of a corporation, and the courts are without authority to substitute their judgment for
the judgment of the board of directors. The board is the business manager of the corporation, and so long as it
acts in good faith, its orders are not reviewable by the courts.ii[12]

Thus, notwithstanding the regulatory power of the SEC over the PSE, and the resultant authority to reverse the
PSEs decision in matters of application for listing in the market, the SEC may exercise such power only if the PSEs
judgment is attended by bad faith.

Also, as the primary market for securities, the PSE has established its name and goodwill, and it has the right to
protect such goodwill by maintaining a reasonable standard of propriety in the entities who choose to transact
through its facilities. It was reasonable for PSE, therefore, to exercise its judgment in the manner it deems
appropriate for its business identity, as long as no rights are trampled upon, and public welfare is safeguarded.

Remo vs IAC

Facts

The Board of Directors of Akron, which includes petitioner Remo, authorized the
purchase of 13 trucks to be used in the business through a resolution. The president then of
the corporation purchased from private respondent the trucks evinced by a deed of
absolute sale, with terms of payment as follows—downpayment, balance payable within
60 days from date of execution of agreement. It was also agreed upon that until said
balance, the downpayment shall constitute as rentals for the trucks. And if there would be
failure of payment, the balance shall constitute as chattel mortgage lien. This is further
secured by a promissory note—that the balance would be paid from a loan to be
obtained from a bank. After several days, private respondent made several demands
but the corporation failed to pay. This prompted the private respondent to file a
complaint. Meanwhile, petitioner sold his shares to Coprada and the name of the corporation
was modified.

Issue

Whether or not remo must still be held liable to the private respondent.

Ruling

The environmental facts of this case show that there is no cogent basis to pierce the corporate veil of Akron and
hold petitioner personally liable for its obligation to private respondent. While it is true that in December, 1977
petitioner was still a member of the board of directors of Akron and that he participated in the adoption of a
resolution authorizing the purchase of 13 trucks for the use in the brokerage business of Akron to be paid out of a
loan to be secured from a lending institution, it does not appear that said resolution was intended to defraud
anyone and more particularly private respondent. It was Coprada, President and Chairman of Akron, who
negotiated with said respondent for the purchase of 13 cargo trucks on January 25, 1978. It was Coprada who
signed a promissory note to guarantee the payment of the unpaid balance of the purchase price out of the
proceeds of a loan he supposedly sought from the DBP. The word "WE' in the said promissory note must refer to
the corporation which Coprada represented in the execution of the note and not its stockholders or directors.
Petitioner did not sign the said promissory note so he cannot be personally bound thereby.
Thus, if there was any fraud or misrepresentation that was foisted on private respondent in that there was a
forthcoming loan from the DBP when it fact there was none, it is Coprada who should account for the same and
not petitioner.

San Juan Structural Fabricators vs CA

Facts

In 1989, San Juan Structural and Steel Fabricators, Inc. (San Juan) alleged that it entered into a
contract of sale with Motorich Sales Corporation (Motorich) through the latter’s treasurer,
Nenita Gruenberg. The subject of the sale was a parcel of land owned by Motorich. San Juan
advanced P100k to Nenita as earnest money.

On the day agreed upon on which Nenita was supposed to deliver the title of the land to
Motorich, Nenita did not show up. Nenita and Motorich did not heed the subsequent demand
of San Juan to comply with the contract hence San Juan sued Motorich. Motorich, in its
defense, argued that it is not bound by the acts of its treasurer, Nenita, since her act in
contracting with San Juan was not authorized by the corporate board.

San Juan raised the issue that Nenita was actually the wife of the President of Motorich; that
Nenita and her husband owns 98% of the corporation’s capital stocks; that as such, it is a close
corporation and that makes Nenita and the President as principal stockholders who do not
need any authorization from the corporate board; that in this case, the corporate veil may be
properly pierced.

Issue

May a corporate treasurer, by herself and without any authorization from the board of directors, validly sell a
parcel of land owned by the corporation? May the veil of corporate fiction be pierced on the mere ground that
almost all of the shares of stock of the corporation are owned by said treasurer and her husband?

Ruling

A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the
property of the corporation is not the property of its stockholders or members and may not be sold by the
stockholders or members without express authorization from the corporations board of directors.[10] Section 23
of BP 68, otherwise known as the Corporation Code of the Philippines, provides:

SEC. 23. The Board of Directors or Trustees. -- Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or trustees to be elected
from among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are elected and qualified.

Indubitably, a corporation may act only through its board of directors, or, when authorized either by its bylaws or
by its board resolution, through its officers or agents in the normal course of business. The general principles of
agency govern the relation between the corporation and its officers or agents, subject to the articles of
incorporation, bylaws, or relevant provisions of law.[11] Thus, this Court has held that a corporate officer or agent
may represent and bind the corporation in transactions with third persons to the extent that the authority to do so
has been conferred upon him, and this includes powers which have been intentionally conferred, and also such
powers as, in the usual course of the particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining to the particular officer or agent,
and such apparent powers as the corporation has caused persons dealing with the officer or agent to believe that
it has conferred.[12]

Furthermore, the Court has also recognized the rule that persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at their peril, if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19).[13] Unless duly authorized,
a treasurer, whose powers are limited, cannot bind the corporation in a sale of its assets.[14]

In the case at bar, Respondent Motorich categorically denies that it ever authorized Nenita Gruenberg, its
treasurer, to sell the subject parcel of land.[15] Consequently, petitioner had the burden of proving that Nenita
Gruenberg was in fact authorized to represent and bind Motorich in the transaction. Petitioner failed to discharge
this burden. Its offer of evidence before the trial court contained no proof of such authority.[16] It has not shown
any provision of said respondents articles of incorporation, bylaws or board resolution to prove that Nenita
Gruenberg possessed such power.

NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC., vs . PHILIPPINE VETERANS BANK

Facts

The particular enactment in question is Presidential Decree No. 1717, which ordered the
rehabilitation of the Agrix Group of Companies to be administered mainly by the National
Development Company. The law outlined the procedure for filling claims against the Agrix
Companies and created a claims committee to process these claims. Especially relevant to this
case, and noted at the outset, is section 4(1) thereof providing that “all mortgages and other
liens presently attaching to any of the assets of the dissolved corporations are hereby
extinguished.” Earlier, the Agrix Marketing Inc. had executed in favor of private respondent
Philippine Veterans Bank a real estate mortgage dated July 7, 1978 over three parcels of land
situated in Los Baños, Laguna. During the existence of the mortgage, Agrix went bankrupt. It
was the expressed purpose of salvaging this and the other Agrix companies that the
aforementioned decree was issued by President Marcos. A claim for the payment of its loan
credit was filed by PNB against herein petitioner, however the latter alleged and invoked that
the same was extinguished by PD 1717.

Issue

Whether or not the enactment of pd1717 not contrary to the constitutional provision on the
creation of a corporation

Ruling

New Agrix, Inc. was created by special decree notwithstanding the provision of Article XIV, Section 4 of the 1973
Constitution, then in force, that:
SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation, organization, or
regulation of private corporations, unless such corporations are owned or controlled by the Government or any
subdivision or instrumentality thereof. 4
The new corporation is neither owned nor controlled by the government. The National Development Corporation
was merely required to extend a loan of not more than P10,000,000.00 to New Agrix, Inc. Pending payment
thereof, NDC would undertake the management of the corporation, but with the obligation of making periodic
reports to the Agrix board of directors. After payment of the loan, the said board can then appoint its own
management. The stocks of the new corporation are to be issued to the old investors and stockholders of AGRIX
upon proof of their claims against the abolished corporation. They shall then be the owners of the new
corporation. New Agrix, Inc. is entirely private and so should have been organized under the Corporation Law in
accordance with the above-cited constitutional provision.

SMITH, BELL & COMPANY vs JOAQUIN NATIVIDAD

Facts

Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the Philippine Islands. A majority
of its stockholders are British subjects. It is the owner of a motor vessel known as the Bato built for it in the
Philippine Islands in 1916, of more than fifteen tons gross The Bato was brought to Cebu in the present year for
the purpose of transporting plaintiff's merchandise between ports in the Islands. Application was made at Cebu,
the home port of the vessel, to the Collector of Customs for a certificate of Philippine registry. The Collector
refused to issue the certificate, giving as his reason that all the stockholders of Smith, Bell & Co., Ltd., were not
citizens either of the United States or of the Philippine Islands. The instant action is the result.

Issue

Whether or not the refusal of the collector of customs constitute a violation of the equal
protection clause

Whether or not smith, bell is entitled to due process

Ruling

a. The first paragraph of the Philippine Bill of Rights of the Philippine Bill, repeated again in the first
paragraph of the Philippine Bill of Rights as set forth in the Jones Law, provides "That no law shall be
enacted in said Islands which shall deprive any person of life, liberty, or property without due process of
law, or deny to any person therein the equal protection of the laws." Counsel says that Act No. 2761
denies to Smith, Bell & Co., Ltd., the equal protection of the laws because it, in effect, prohibits the
corporation from owning vessels, and because classification of corporations based on the citizenship of
one or more of their stockholders is capricious, and that Act No. 2761 deprives the corporation of its
properly without due process of law because by the passage of the law company was automatically
deprived of every beneficial attribute of ownership in the Bato and left with the naked title to a boat it
could not use .

The guaranties extended by the Congress of the United States to the Philippine Islands have been used in
the same sense as like provisions found in the United States Constitution. While the "due process of law
and equal protection of the laws" clause of the Philippine Bill of Rights is couched in slightly different
words than the corresponding clause of the Fourteenth Amendment to the United States Constitution,
the first should be interpreted and given the same force and effect as the latter. (Kepner vs. U.S. [1904],
195 U. S., 100; Sierra vs. Mortiga [1907], 204 U. S.,.470; U. S. vs. Bull [1910], 15 Phil., 7.) The meaning of
 the Fourteenth Amendment has been announced in classic decisions of the United States Supreme Court.
Even at the expense of restating what is so well known, these basic principles must again be set down in
order to serve as the basis of this decision.

The guaranties of the Fourteenth Amendment and so of the first paragraph of the Philippine Bill of Rights,
are universal in their application to all person within the territorial jurisdiction, without regard to any
differences of race, color, or nationality. The word "person" includes aliens. .) Private corporations,
likewise, are "persons" within the scope of the guaranties in so far as their property is concerned.
Classification with the end in view of providing diversity of treatment may be made among corporations,
but must be based upon some reasonable ground and not be a mere arbitrary selection.

. STONEHILL vs Dioknp

Facts

Respondents issued, on different dates, 42 search warrants against petitioners personally, and/or
corporations for which they are officers directing peace officers to search the persons of
petitioners and premises of their offices, warehouses and/or residences to search for personal
properties “books of accounts, financial records, vouchers, correspondence, receipts, ledgers,
journals, portfolios, credit journals, typewriters, and other documents showing all business
transactions including disbursement receipts, balance sheets and profit and loss statements and
Bobbins(cigarettes)” as the subject of the offense for violations of Central Bank Act, Tariff and
Customs Laws, Internal Revenue Code, and Revised Penal Code.

Upon effecting the search in the offices of the aforementioned corporations and on the respective
residences of the petitioners, there seized documents, papers, money and other records.
Petitioners then were subjected to deportation proceedings and were constrained to question the
legality of the searches and seizures as well as the admissibility of those seized as evidence
against them.

Issue

Whether the search warrants in question, and the searches and seizures made under the authority thereof, are
valid

Ruling

particularly describing the place to be searched, and the persons or things to be seized.

Two points must be stressed in connection with this constitutional mandate, namely: (1) that no warrant shall
issue but upon probable cause, to be determined by the judge in the manner set forth in said provision; and (2)
that the warrant shall particularly describe the things to be seized.

None of these requirements has been complied with in the contested warrants. Indeed, the same were issued
upon applications stating that the natural and juridical person therein named had committed a "violation of
Central Ban Laws, Tariff and Customs Laws, Internal Revenue (Code) and Revised Penal Code." In other words, no
specific offense had been alleged in said applications. The averments thereof with respect to the offense
committed were abstract. As a consequence, it was impossible for the judges who issued the warrants to have
found the existence of probable cause, for the same presupposes the introduction of competent proof that the
party against whom it is sought has performed particular acts, or committed specific omissions, violating a given
provision of our criminal laws. As a matter of fact, the applications involved in this case do not allege any specific
acts performed by herein petitioners. It would be the legal heresy, of the highest order, to convict anybody of a
"violation of Central Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and Revised Penal Code," — as
alleged in the aforementioned applications — without reference to any determinate provision of said laws or

To uphold the validity of the warrants in question would be to wipe out completely one of the most fundamental
rights guaranteed in our Constitution, for it would place the sanctity of the domicile and the privacy of
communication and correspondence at the mercy of the whims caprice or passion of peace officers. This is
precisely the evil sought to be remedied by the constitutional provision above quoted — to outlaw the so-called
general warrants. It is not difficult to imagine what would happen, in times of keen political strife, when the party
in power feels that the minority is likely to wrest it, even though by legal means.

Such is the seriousness of the irregularities committed in connection with the disputed search warrants, that this
Court deemed it fit to amend Section 3 of Rule 122 of the former Rules of Court 14 by providing in its counterpart,
under the Revised Rules of Court 15 that "a search warrant shall not issue but upon probable cause in connection
with one specific offense." Not satisfied with this qualification, the Court added thereto a paragraph, directing that
"no search warrant shall issue for more than one specific offense."

The grave violation of the Constitution made in the application for the contested search warrants was
compounded by the description therein made of the effects to be searched for and seized, to wit:

Books of accounts, financial records, vouchers, journals, correspondence, receipts, ledgers, portfolios,
credit journals, typewriters, and other documents and/or papers showing all business transactions
including disbursement receipts, balance sheets and related profit and loss statements.

Thus, the warrants authorized the search for and seizure of records pertaining to all business transactions of
petitioners herein, regardless of whether the transactions were legal or illegal. The warrants sanctioned the
seizure of all records of the petitioners and the aforementioned corporations, whatever their nature, thus openly
contravening the explicit command of our Bill of Rights — that the things to be seized be particularly described —
as well as tending to defeat its major objective: the elimination of general warrants.

Bache and Co. vs ruiz

Facts

Misael P. Vera, Commissioner of Internal Revenue, wrote a letter addressed to respondent Judge Vivencio M. Ruiz
requesting the issuance of a search warrant against petitioners for violation of Section 46(a) of the National Internal
Revenue Code, in relation to all other pertinent provisions thereof, particularly Sections 53, 72, 73, 208 and 209, and
authorizing Revenue Examiner Rodolfo de Leon, one of herein respondents, to make and file the application for
search warrant which was attached to the letter.

Respondent De Leon and his witness, respondent Arturo Logronio, went to the Court of First Instance of Rizal. They
brought with them the following papers: respondent Vera’s aforesaid letter-request; an application for search
warrant already filled up but still unsigned by respondent De Leon; an affidavit of respondent Logronio subscribed
before respondent De Leon; a deposition in printed form of respondent Logronio already accomplished and signed
by him but not yet subscribed; and a search warrant already accomplished but still unsigned by respondent Judge.

At that time respondent Judge was hearing a certain case; so, by means of a note, he instructed his Deputy Clerk of
Court to take the depositions of respondents De Leon and Logronio. After the session had adjourned, respondent
Judge was informed that the depositions had already been taken. The stenographer, upon request of respondent
Judge, read to him her stenographic notes; and thereafter, respondent Judge asked respondent Logronio to take the
oath and warned him that if his deposition was found to be false and without legal basis, he could be charged for
perjury. Respondent Judge signed respondent de Leon’s application for search warrant and respondent Logronio’s
deposition, Search Warrant No. 2-M-70 was then sign by respondent Judge and accordingly issued.

Three days later, or on February 28, 1970, which was a Saturday, the BIR agents served the search warrant
petitioners at the offices of petitioner corporation on Ayala Avenue, Makati, Rizal. Petitioners’ lawyers protested the
search on the ground that no formal complaint or transcript of testimony was attached to the warrant. The agents
nevertheless proceeded with their search which yielded six boxes of documents.

Issue

Whether or not the act of the judge in the issuance of search warrant valid.

Ruling

Respondent Judge failed to personally examine the complainant and his witness.

The pertinent provisions of the Constitution of the Philippines and of the Revised Rules of Court
are:jgc:chanrobles.com.ph

"(3) The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches
and seizures shall not be violated, and no warrants shall issue but upon probable cause, to be determined by the
judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched, and the persons or things to be seized." (Art. III, Sec. 1,
Constitution.)

"SEC. 3. Requisites for issuing search warrant. — A search warrant shall not issue but upon probable cause in
connection with one specific offense to be determined by the judge or justice of the peace after examination under
oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized.

"No search warrant shall issue for more than one specific offense.

"SEC. 4. Examination of the applicant. — The judge or justice of the peace must, before issuing the warrant,
personally examine on oath or affirmation the complainant and any witnesses he may produce and take their
depositions in writing, and attach them to the record, in addition to any affidavits presented to him." (Rule 126,
Revised Rules of Court.)

The examination of the complainant and the witnesses he may produce, required by Art. III, Sec. 1, par. 3, of the
Constitution, and by Secs. 3 and 4, Rule 126 of the Revised Rules of Court, should be conducted by the judge
himself and not by others.