G.R. No. L-23145. November 29, 1968.

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary

administrator-appellee, v. BENGUET CONSOLIDATED, INC., Oppositor-Appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.

Ross, Salcedo, Del Rosario, Bito & Misa for Oppositor-Appellant.

DOCTRINES:
1. A corporation is an artificial being created by operation of law. It cannot legitimately refuse
to yield obedience to acts of its state organs, certainly not excluding the judiciary, whenever
called upon to do so. A corporation is not in fact and in reality a person, but the law treats it
as though it were a person by process of fiction, or by regarding it as an artificial person
distinct and separate from its individual stockholders.
2. Administration, whether principal or ancillary, certainly extends to the assets of a decedent
found within the state or country where it was granted. An administrator appointed in one
state or country has no power over property in another state or country.

FACTS: Idonah Slade Perkins died in New York City and left two stock certificates covering
33,002 shares of appellant, the certificates being in the possession of the County Trust Company
of New York, as the domiciliary administrator of the estate of the deceased.

Renato D. Tayag is the ancillary administrator in the Philippines. A dispute arose between the
domiciliary 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.

The RTC 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 thus 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.

ISSUE: Whether the stock certificates should be considered or declared lost

RULING: Yes. Since there is a refusal, persistently adhered to by the domiciliary administrator in
New York, to deliver the shares of stocks of Benguet Consolidated, Inc owned by Perkins to the
ancillary administrator in the Philippines, there was nothing unreasonable or arbitrary in
considering them as lost and requiring Benguet Consolidated, Inc to issue new certificates in lieu
thereof. Thereby, the task incumbent under the law on the ancillary administrator could be
discharged and his responsibility fulfilled. Any other view would result in the compliance to a valid
judicial order being made to depend on the uncontrolled discretion of a party or entity.
1. REMEDIAL LAW; SPECIAL PROCEEDINGS; SETTLEMENT OF ESTATE; WHEN ANCILLARY
ADMINISTRATION IS PROPER. — The ancillary administration is proper, whenever a person dies,
leaving in a country other than that of his last domicile, property to be administered in the nature
of assets of the deceased liable for his individual debts or to be distributed among his heirs
(Johannes v. Harvey, 43 Phil. 175). Ancillary administration is necessary or the reason for such
administration is because a grant of administration does not ex proprio vigore have any effect
beyond the limits of the country in which it is granted. Hence, an administrator appointed in a
foreign state has no authority in the Philippines.

2. ID.; ID.; ID.; SCOPE OF POWER AND AUTHORITY OF AN ANCILLARY ADMINISTRATOR. — No

one could dispute the power of an ancillary administrator to gain control and possession of all
assets of the decedent within the jurisdiction of the Philippines. Such a power is inherent
in his duty to settle her estate and satisfy the claims of local creditors (Rule 84, Sec. 3, Rules of
Court. Cf Pavia v. De la Rosa, 8 Phil. 70; Liwanag v. Reyes, L-19159, Sept. 29, 1964; Ignacio v.
Elchico, L-18937, May 16, 1967; etc.). It is a general rule universally recognized that
administration, whether principal or ancillary, certainly extends to the assets of a
decedent found within the state or country where it was granted, the corollary being "that
an administrator appointed in one state or country has no power over property in another state or
country" (Leon and Ghezzi v. Manufacturers Life Ins. Co., 90 Phil. 459).

3. ID.; ID.; ID.; ID.; CASE AT BAR. — Since, in the case at bar, there is a refusal, persistently
adhered to by the domiciliary administrator in New York, to deliver the shares of stocks
of appellant corporation owned by the decedent to the ancillary administrator in the
Philippines, there was nothing unreasonable or arbitrary in considering them as lost and
requiring the appellant to issue new certificates in lieu thereof. Thereby, the task
incumbent under the law on the ancillary administrator could be discharged and his responsibility
fulfilled. Any other view would result in the compliance to a valid judicial order being made to
depend on the uncontrolled discretion of a party or entity.

4. CORPORATION LAW; CORPORATIONS; CONCEPT AND NATURE. — A corporation is an artificial

being created by operation of law (Sec. 2, Act No. 1459). A corporation as known to Philippine
jurisprudence is a creature without any existence until it has received the imprimatur of the state
acting 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. A corporation is not in fact and in reality a person, but the law
treats it as though it were a person by process of fiction, or by regarding it as an artificial person
distinct and separate from its individual stockholders (1 Fletcher, Cyclopedia Corporations, pp. 19-
20)

DECISION

FERNANDO, J.:

Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County Trust
Company of New York, United States of America, of the estate of the deceased Idonah Slade
Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary administrator
in the Philippines the stock certificates owned by her in a Philippine corporation, Benguet
Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court, then
presided by the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order of this
tenor: "After considering the motion of the ancillary administrator, dated February 11, 1964, as
well as the opposition filed by the Benguet Consolidated, Inc., the Court hereby (1) considers as
lost for all purposes in connection with the administration and liquidation of the
Philippine estate of Idonah Slade Perkins the stock certificates covering the 33,002
shares of stock standing in her name in the books of the Benguet Consolidated, Inc., (2)
orders said certificates cancelled, and (3) directs said corporation to issue new
certificates in lieu thereof, the same to be delivered by said corporation to either the
incumbent ancillary administrator or to the Probate Division of this Court." 1

From such an order, an appeal was taken to this Court not by the domiciliary administrator, the
County Trust Company of New York, but by the Philippine corporation, the Benguet Consolidated,
Inc. The appeal cannot possibly prosper. The order challenged represents a response and
expresses a policy, to paraphrase Frankfurter, arising out of a specific problem, addressed to the
attainment of specific ends by the use of specific remedies, with full and ample support from legal
doctrines of weight and significance.

The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc.,
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 domiciliary 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. Hence, its appeal.

As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order
constitutes an emphatic affirmation of judicial authority sought to be emasculated by the willful
conduct of the domiciliary administrator in refusing to accord obedience to a court decree. How,
then, can this order be stigmatized as illegal?

As is true of many problems confronting the judiciary, such a response was called for by the
realities of the situation. What cannot be ignored is that conduct bordering on willful defiance, if it
had not actually reached it, cannot without undue loss of judicial prestige, be condoned or
tolerated. For the law is not so lacking in flexibility and resourcefulness as to preclude such a
solution, the more so as deeper reflection would make clear its being buttressed by indisputable
principles and supported by the strongest policy considerations.

It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary
no less than that of the country. Through this challenged order, there is thus dispelled the
atmosphere of contingent frustration brought about by the persistence of the domiciliary
administrator to hold on to the stock certificates after it had, as admitted, voluntarily submitted
itself to the jurisdiction of the lower court by entering its appearance through counsel on June 27,
1963, and filing a petition for relief from a previous order of March 15, 1963. Thus did the lower
court, in the order now on appeal, impart vitality and effectiveness to what was decreed. For
without it, what it had been decided would be set at naught and nullified. Unless such a blatant
disregard by the domiciliary administrator, with residence abroad, of what was previously
ordained by a court order could be thus remedied, it would have entailed, insofar as this matter
was concerned, not a partial but a well-nigh complete paralysis of judicial authority.

1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee
ancillary administrator to gain control and possession of all assets of the decedent
within the jurisdiction of the Philippines. Nor could it. Such a power is inherent in his
duty to settle her estate and satisfy the claims of local creditors. 5 As Justice Tuason
speaking for this Court made clear, it is a "general rule universally recognized" that
administration, whether principal or ancillary, certainly "extends to the assets of a
decedent found within the state or country where it was granted," the corollary being
"that an administrator appointed in one state or country has no power over property in
another state or country." 6

It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case,
set forth by Justice Malcolm. Thus: "It is often necessary to have more than one
administration of an estate. When a person dies intestate owning property in the
country of his domicile as well as in a foreign country, administration is had in both
countries. That which is granted in the jurisdiction of decedent’s last domicile is termed
the principal administration, while any other administration is termed the ancillary
administration. The reason for the latter is because a grant of administration does not
ex proprio vigore have any effect beyond the limits of the country in which it is granted.
Hence, an administrator appointed in a foreign state has no authority in the
[Philippines]. The ancillary administration is proper, whenever a person dies, leaving in
a country other than that of his last domicile, property to be administered in the nature
of assets of the deceased liable for his individual debts or to be distributed among his
heirs." 7

It would follow then that the authority of the probate court to require that ancillary administrator’s
right to "the stock certificates covering the 33,002 shares .. standing in her name in the books of
[appellant] Benguet Consolidated, Inc.." be respected is equally beyond question. For appellant
is a Philippine corporation owing full allegiance and subject to the unrestricted
jurisdiction of local courts. Its shares of stock cannot therefore be considered in any
wise as immune from lawful court orders.

Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue 8 finds application. "In
the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being
domiciled [here]." To the force of the above undeniable proposition, not even appellant is
insensible. It does not dispute it. Nor could it successfully do so even if it were so minded.

2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the
legality of the challenged order, how does appellant Benguet Consolidated, Inc. propose to carry
the extremely heavy burden of persuasion of precisely demonstrating the contrary? It would
assign as the basic error allegedly committed by the lower court its "considering as lost the stock
certificates covering 33,002 shares of Benguet belonging to the deceased Idonah Slade
Perkins, . . ." 9 More specifically, appellant would stress that the "lower court could not
`consider as lost’ the stock certificates in question when, as a matter of fact, his Honor
the trial Judge knew, and does know, and it is admitted by the appellee, that the said
stock certificates are in existence and are today in the possession of the domiciliary
administrator in New York." 10

There may be an element of fiction in the above view of the lower court. That certainly does not
suffice to call for the reversal of the appealed order. Since there is a refusal, persistently
adhered to by the domiciliary administrator in New York, to deliver the shares of stocks
of appellant corporation owned by the decedent to the ancillary administrator in the
Philippines, there was nothing unreasonable or arbitrary in considering them as lost
and requiring the appellant to issue new certificates in lieu thereof. Thereby, the task
incumbent under the law on the ancillary administrator could be discharged and his
responsibility fulfilled.
Any other view would result in the compliance to a valid judicial order being made to depend on
the uncontrolled discretion of the party or entity, in this case domiciled abroad, which thus far has
shown the utmost persistence in refusing to yield obedience. Certainly, appellant would not be
heard to contend in all seriousness that a judicial decree could be treated as a mere scrap of
paper, the court issuing it being powerless to remedy its flagrant disregard.

It may be admitted of course that such alleged loss as found by the lower court did not
correspond exactly with the facts. To be more blunt, the quality of truth may be lacking in such a
conclusion arrived at. It is to be remembered however, again to borrow from Frankfurter, "that
fictions which the law may rely upon in the pursuit of legitimate ends have played an important
part in its development." 11

Speaking of the common law in its earlier period, Cardozo could state that fictions "were devices
to advance the ends of justice, [even if] clumsy and at times offensive." 12 Some of them have
persisted even to the present, that eminent jurist, noting "the quasi contract, the adopted child,
the constructive trust, all of flourishing vitality, to attest the empire of `as if’ today." 13 He
likewise noted "a class of fictions of another order, the fiction which is a working tool of thought,
but which at times hides itself from view till reflection and analysis have brought it to the light."
14

What cannot be disputed, therefore, is the at times indispensable role that fictions as such played
in the law. There should be then on the part of the appellant a further refinement in the catholicity
of its condemnation of such judicial technique. If ever an occasion did call for the employment of a
legal fiction to put an end to the anomalous situation of a valid judicial order being disregarded
with apparent impunity, this is it. What is thus most obvious is that this particular alleged error
does not carry persuasion.

3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking
one of the provisions of its by-laws which would set forth the procedure to be followed in case of a
lost, stolen or destroyed stock certificate; it would stress that in the event of a contest or the
pendency of an action regarding ownership of such certificate or certificates of stock allegedly
lost, stolen or destroyed, the issuance of a new certificate or certificates would await the "final
decision by [a] court regarding the ownership [thereof]." 15

Such reliance is misplaced. In the first place, there is no such occasion to apply such a by-law. It
is admitted that the foreign domiciliary administrator did not appeal from the order now in
question. Moreover, there is likewise the express admission of appellant that as far as it is
concerned, "it is immaterial . . . who is entitled to the possession of the stock certificates . . ."
Even if such were not the case, it would be a legal absurdity to impart to such a provision
conclusiveness and finality. Assuming that a contrariety exists between the above by-law
and the command of a court decree, the latter is to be followed.

It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which,
however, the judiciary must yield deference, when appropriately invoked and deemed applicable.
It would be most highly unorthodox, however, if a corporate by-law would be accorded such a
high estate in the jural order that a court must not only take note of it but yield to its alleged
controlling force.

The fear of appellant of a contingent liability with which it could be saddled unless the appealed
order be set aside for its inconsistency with one of its by-laws does not impress us. Its obedience
to a lawful court order certainly constitutes a valid defense, assuming that such apprehension of a
possible court action against it could possibly materialize. Thus far, nothing in the circumstances
as they have developed gives substance to such a fear. Gossamer possibilities of a future
prejudice to appellant do not suffice to nullify the lawful exercise of judicial authority.

4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with
implications at war with the basic postulates of corporate theory.

We start with the undeniable premise that, "a corporation is an artificial being created by
operation of law . . ." 16 It owes its life to the state, its birth being purely dependent on
its will. As Berle so aptly stated: "Classically, a corporation was conceived as an artificial person,
owing its existence through creation by a sovereign power. 17 As a matter of fact, the statutory
language employed owes much to Chief Justice Marshall, who in the Dartmouth College decision,
defined a corporation precisely as "an artificial being invisible, intangible, and existing only
in contemplation of law." 18

The well-known authority Fletcher could summarize the matter thus: "A corporation is not in
fact and in reality a person, but the law treats it as though it were a person by process
of fiction, or by regarding it as an artificial person distinct and separate from its
individual stockholders.. It owes its existence to law. It is an artificial person created by
law for certain specific purposes, the extent of whose existence, powers and liberties is
fixed by its charter." 19 Dean Pound’s terse summary, a juristic person, resulting from an
association of human beings granted legal personality by the state, puts the matter neatly. 20

There is thus a rejection of Gierke’s genosssenchaft theory, the basic theme of which to quote
from Friedmann, "is the reality of the group as a social and legal entity, independent of state
recognition and concession." 21 A corporation as known to Philippine jurisprudence is a creature
without any existence until it has received the imprimatur of the state acting 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.

As a matter of fact, a corporation once it comes into being, following American law still of
persuasive authority in our jurisdiction, comes more often within the ken of the judiciary than the
other two coordinate branches. It institutes the appropriate Court Action to enforce its rights.
Correlatively, it is not immune from judicial control in those instances, where a duty under the law
as ascertained in an appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to disregard is to confer upon it
not autonomy which may be conceded but license which cannot be tolerated. It is to argue that it
may, when so minded, overrule the state, the source of its very existence; it is to contend that
what any of its governmental organs may lawfully require could be ignored at will. So extravagant
a claim cannot possibly merit approval.

5. One last point. In Viloria v. Administrator of Veterans Affairs, 22 it was shown that in a
guardianship proceeding then pending in a lower court, the United States Veterans Administration
filed a motion for the refund of a certain sum of money paid to the minor under guardianship,
alleging that the lower court had previously granted its petition to consider the deceased father as
not entitled to guerilla benefits according to a determination arrived at by its main office in the
United States. The motion was denied. In seeking a reconsideration of such order, the
Administrator relied on an American federal statute making his decisions "final and conclusive on
all questions of law or fact" precluding any other American official to examine the matter anew,
"except a judge or judges of the United States court." 23 Reconsideration was denied, and the
Administrator appealed.

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the
opinion that the appeal should be rejected. The provisions of the U.S. Code, invoked by the
appellant, make the decisions of U.S. Veteran Administrator final and conclusive when made on
claims properly submitted to him for resolution; but they are not applicable to the present case,
where the Administrator is not acting as a judge but as a litigant. There is a great difference
between actions against the Administrator (which must be filed strictly in accordance with the
conditions that are imposed by the Veterans’ Act, including the exclusive review by United States
courts), and those actions where the Veterans’ Administrator seeks a remedy from our courts and
submits to their jurisdiction by filing actions therein. Our attention has not been called to any law
or treaty that would make the findings of the Veterans’ Administrator, in actions where he is a
party, conclusive on our courts. That, in effect, would deprive our tribunals of judicial discretion
and render them mere subordinate instrumentalities of the Veterans’ Administrator." cralaw virtua1aw library

It is bad enough as the Viloria decision made patent for our judiciary to accept as final and
conclusive, determinations made by foreign governmental agencies. It is infinitely worse if
through the absence of any coercive power by our courts over juridical persons within our
jurisdiction, the force and effectivity of their orders could be made to depend on the whim or
caprice of alien entities. It is difficult to imagine of a situation more offensive to the dignity of the
bench or the honor of the country.

Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet
Consolidated seems to be firmly committed as shown by its failure to accept the validity of the
order complained of; it seeks its reversal. Certainly we must at all pains see to it that it does not
succeed. The deplorable consequences attendant on appellant prevailing attest to the necessity of
a negative response from us. That is what appellant will get.

That is all then that this case presents. It is obvious why the appeal cannot succeed. It is
always easy to conjure extreme and even oppressive possibilities. That is not decisive. It
does not settle the issue. What carries weight and conviction is the result arrived at, the
just solution obtained, grounded in the soundest of legal doctrines and distinguished by
its correspondence with what a sense of realism requires. For through the appealed order,
the imperative requirement of justice according to law is satisfied and national dignity and honor
maintained.

WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First
Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appellant Benguet
Consolidated, Inc.

Makalintal, Zaldivar, and Capistrano, JJ., concur.

Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Ruiz Castro, JJ., concur in the result.