Roman Catholic Apostolic Administrator vs.

LRC fact that the clergy derive their authorities from the Vatican does not mean
that the Pope bestows his own citizenship to each priest. To allow the theory
FACTS: that all of the Churches around the world would follow the citizenship of the
Rodis executed a deed of sale over a parcel of land in favor of the Pope would lead to the absurdity that each member of the Catholic Church
Roman Catholic Apostolic Administrator of Davao, a corporation sole, with would be a citizen of the Vatican or of Italy. As such, it cannot be said that
Msgr. Thibault, a Canadian Citizen, as the actual incumbent. When the the citizenship of the corporation sole, as created under Philippine laws, is
Roman Catholic Administrator presented the deed of sale for registration at altered by the citizenship of whoever is the incumbent head.
the Register of Deeds of Davao, the latter required that the corporation sole The Corporation Law recognized that corporation soles as those
prepare an affidavit declaring that 60% of the members were Filipino which are organized and composed of a single individual for the
citizens. administration of the properties not used exclusively for religious worship of
In spite of assurance by the corporation sole that the totality of the the church. The successor in office will become the corporation on ascension
Catholic population of Davao would become the owner of the property, the to office. Furthermore, the Corporation Law also recognized that the
Register of Deeds still had some doubts as to the registerability of the corporation sole can purchase real property, although there are restrictions
document, and referred the matter to the Land Registration Commissioner. as to the power to sell or mortgage depending on the rules, regulations and
The Land Registration Commissioner found that the corporation sole discipline of the church concerned. As such, the Court finds it absurd that the
was not qualified to acquire private lands in the Philippines because of the corporation sole can purchase properties but would not be able to register
requirement that 60% of the corporation was actually owned or controlled properties in its name.
by Filipino citizens; as the present incumbent of the corporation was a While the Constitution prohibits foreigners from taking, acquiring,
Canadian citizen, the LRC found that the corporation sole was not compliant. exploiting or developing the natural resources of the country, the Court finds
Consequently the corporation sole instituted an action for mandamus that the provisions relating to these are not applicable to corporation soles
with the Supreme Court alleging that the sale in favor is in favor of the because they are merely administrators of the properties titled in their name.
Catholic Church, which is qualified to acquire private agricultural lands for Furthermore, the administration of these properties is for the benefit of the
the establishment and maintenance of places of worship, and prayed that members of the congregation, which is overwhelmingly comprised of
the registration be recognized. Filipinos.
As the acquisition of the properties is for the benefit of the
ISSUE: congregation, the Roman Catholic Apostolic Administrator of Davao cannot
Whether or not the Roman Catholic Apostolic Administrator of Davao be deprived of the right to acquire by purchase or donation real properties
Inc. is entitled to acquire private properties for charitable, benevolent and educational purposes, nor of the right to
register these properties in its name in the Register of Deeds of Davao.
RULING:
Yes. In a corporation sole, the bishops or archbishops who sit as the UNITED CHURCH OF CHRIST IN THE PHILIPPINES, INC.
incumbent are merely administrators of the church properties, and they only vs  BRADFORDUNITED CHURCH OF CHRIST, INC.,
hold these in trust for the church. Consequently, upon the death of the (G.R. No. 171905. June 20, 2012)
incumbent of the corporation sole, the church properties acquired will pass
on to his successor in office. FACTS:
The Court also finds that here is no provision of law that confers
ownership of the church properties on to the Pope, or even to the Bradford United Church of Christ, Inc. (BUCCI) built a fence that said
corporation sole or heads of the corporation sole who are mere to encroached the right of way allocated by United Church of Christ in the
administrators of said properties; rather, ownership of these properties fall Philippines (UCCP) to the Cebu Conference Inc. (CCI). UCCP favored CCI and
and develop upon the congregation. the series of events then followed led to the breakup of BUCCI from UCCP.
While the Catholic congregation does follow the guidance of the BUCCI then disaffiliated itself from UCCP and filed its Amended Articles of
Pope, there cannot be said to be a merger of personalities between the Pope Incorporation and By-Laws which provided for and effected its disaffiliation
and the Catholic Church, and it cannot be said that the political and civil from UCCP, which approved by the SEC. UCCP filed a complaint for rejection
rights of the Catholics are affected by their relationship with the Pope; the of decision, alleging that separate incorporation and registration of BUCCI is
not allowed under the UCCP Constitution and By-laws. SEC dismissed UCCP's Republic of the Philippines vs. Intermmediate Appellate Court
petition and defended the right of BUCCI to disassociate itself from UCCP in G.R. No. 75042, November 29, 1988
recognition of its constitutional freedom to associate and disassociate. CA
affirmed the decision of SEC, thus UCCP maintains that it has the sole power FACTS:
to decide whether BUCCI could disaffiliate from it as this involves a purely On February 2, 1979, the ROMAN CATHOLIC BISHOP of Lucena, represented
ecclesiastical affair. by Msgr. Jose T. Sanchez, filed an application for confirmation of title to four
(4) parcels of land. Three of said parcels, are situated in Barrio Masin,
ISSUE: Municipality of Candelaria, Quezon Province. The fourth parcel is located in
Barrio Bucal (Taguan), same municipality and province. As basis for the
Whether or not the determination of the validity of disaffiliation of application, the applicant claimed title to the various properties through
respondents is purely an ecclesiastical affair. either purchase or donation dating as far back as 1928.
At the initial hearing held on November 13, 1979, only the Provincial Fiscal in
HELD: representation of the Solicitor General appeared to interpose personal
objection to the application. Hence, an Order of General Default against the
No. The issue is not a purely ecclesiastical affair. An ecclesiastical whole world was issued by the Court a quo except for the Director of Lands
affair is one that concerns doctrine, creed or form of worship of the church, and the Director of the Bureau of Forest Development.
or the adoption and enforcement within a religious association of needful The preliminaries dispensed with, the applicant then introduced its proofs in
laws and regulations for the government of the membership, and the power support of the petition.
of excluding from such associations those deemed unworthy of membership. Evaluating the applicant's submitted proofs, the court a quo concluded, on
Based on this definition, an ecclesiastical affair involves the relationship the basis of acquisitive prescription at the very least, that the former had
between the church and its members and relate to matters of faith, religious adequately shown title to the parcels of land being claimed.
doctrines, worship, and governance of the congregation. Accordingly, the court ordered the registration of the four parcels together
with the improvements thereon "in the name of the ROMAN CATHOLIC
UCCP and BUCCI, being corporate entities and grantees of primary BISHOP OF LUCENA, INC., a religious corporation sole duly registered and
franchises, are subject to the jurisdiction of the SEC. Section 3 of Presidential existing under the laws of the Republic of the Philippines."
Decree No. 902-A provides that SEC shall have absolute jurisdiction,
supervision and control over all corporations. Even with their religious Against this decision, the Solicitor General filed a Motion for reconsideration
nature, SEC may exercise jurisdiction over them in matters that are legal and on the following grounds:
corporate. BUCCI, as a juridical entity separate and distinct from UCCP,
possesses the freedom to determine its steps. BUCCI’s decision concerns its 1. Article XIV, Section 11 of the New Constitution(1973) disqualifies a
legal right as a religious corporation to disaffiliate from another religious private corporation from acquiring alienable lands for the public domain.
corporation via legitimate means- a secular matter well within the civil court’s
purview. 2. In the case at bar the application was filed after the effectivity on
the New Constitution on January 17, 1973.

which was denied by the lower court for lack of merit.

Still insisting of the alleged unconstitutionality of the registration (a point

which, incidentally, the appellant never raised in the lower court prior to its
Motion for Reconsideration), the Republic elevated this appeal. (Rollo, pp.
25-28)

On May 13, 1986, the first Civil Cases Division of the Intermediate Appellate
Court rendered its Decision affirming the decision of the trial court.
With the motion for reconsideration before the Intermediate Appellate Court and that it is to the interest of the corporation that leave to mortgage or sell
being denied, petitioner elevated the case to the Supreme Court. should be granted. The application for leave to mortgage or sell must be
made by petition, duly verified by the chief archbishop, bishop, priest,
ISSUE: minister, rabbi or presiding elder acting as corporation sole, and may be
Whether or Not the Roman Catholic Bishop of Lucena, as a corporation sole, opposed by any member of the religious denomination, sect or church
is qualified to apply for confirmation of its title to the four (4) parcels of land represented by the corporation sole: Provided, That in cases where the rules,
subject of this case. regulations and discipline of the religious denomination, sect or church
religious society or order concerned represented by such corporation sole
RULING: regulate the method of acquiring, holding, selling and mortgaging real estate
It must be emphasized that the Court is not here saying that a corporation and personal property, such rules, regulations and discipline shall control and
sole should be treated like an ordinary private corporation. the intervention of the courts shall not be necessary.

In Roman Catholic Apostolic Administration of Davao, Inc. vs. Land There is no doubt that a corporation sole by the nature of its Incorporation is
Registration Commission, et al. (L-8451, December 20,1957,102 Phil. 596). vested with the right to purchase and hold real estate and personal property.
We articulated: It need not therefore be treated as an ordinary private corporation because
whether or not it be so treated as such, the Constitutional provision involved
In solving the problem thus submitted to our consideration, We can say the will, nevertheless, be not applicable.
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 1 Bouvier'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, particulary
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 deans distinct
from their several chapters (Reid vs. Barry, 93 fla. 849, 112 So. 846).

Pertinent to this case is the provision of Sec. 113 Batas Pambansa Blg. 68
which reads as follows:

Sec. 113. Acquisition and alienation of property. — 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 for 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 where the property is situated; but before the order
is issued, 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 may have directed,
G.R. No. 184088 July 6, 2010 IGLESIA EVANGELICA METODISTA EN corporation aggregate required, not just an amendment of the IEMELIF’s
LAS ISLAS FILIPINAS (IEMELIF) (Corporation Sole), INC., REV. articles of incorporation, but a complete dissolution of the existing
NESTOR PINEDA, et al., Petitioners, vs. BISHOP NATHANAEL corporation sole followed by a re-incorporation. Unimpressed, the RTC
LAZARO, et al., Respondents. dismissed the action. It held that, while the Corporation Code on Religious
Corporations (Chapter II, Title XIII) has no provision governing the
ISSUE: The present dispute resolves the issue of whether or not a amendment of the articles of incorporation of a corporation sole, its Section
corporation may change its character as a corporation sole into a corporation 109 provides that religious corporations shall be governed additionally "by
aggregate by mere amendment of its articles of incorporation without first the provisions on non-stock corporations insofar as they may be applicable."
going through the process of dissolution. The RTC thus held that Section 16 of the Code that governed amendments
of the articles of incorporation of non-stock corporations applied to
FACTS: In 1909, Bishop Nicolas Zamora established the petitioner Iglesia corporations sole as well. What IEMELIF needed to authorize the amendment
Evangelica Metodista En Las Islas Filipinas, Inc. (IEMELIF) as a corporation was merely the vote or written assent of at least two-thirds of the IEMELIF
sole. Thirty-nine years later, the IEMELIF enacted and registered a by-laws membership. CA rendered a decision, affirming that of the RTC. Motion for
that established a Supreme Consistory of Elders (the Consistory), made up of reconsideration was likewise denied.Hence, the present petition for review
church ministers. The by-laws empowered the Consistory to elect officers before this Court.
who would manage the affairs of the organization. For all intents and
purposes, the Consistory served as the IEMELIF’s board of directors. RULING: Religious corporations are governed by Sections 109 through 116
Although the IEMELIF remained a corporation sole on paper, it had always of the Corporation Code. In a 2009 case involving IEMELIF, the Court
acted like a corporation aggregate. The Consistory exercised IEMELIF’s distinguished a corporation sole from a corporation aggregate. Citing Section
decision-making powers without ever being challenged. Subsequently, during 110 of the Corporation Code, the Court said that a corporation sole is "one
its 1973 General Conference, the general membership voted to put things formed by the chief archbishop, bishop, priest, minister, rabbi or other
right by changing IEMELIF’s organizational structure from a corporation sole presiding elder of a religious denomination, sect, or church, for the purpose
to a corporation aggregate. On May 7, 1973 the Securities and Exchange of administering or managing, as trustee, the affairs, properties and
Commission (SEC) approved the vote. However, the corporate papers of the temporalities of such religious denomination, sect or church." A corporation
IEMELIF remained unaltered as a corporation sole. About 28 years later, did aggregate formed for the same purpose, on the other hand, consists of two
the issue reemerge. In answer to a query from the IEMELIF, the SEC replied or more persons. RTC correctly held that Section 109 of the Corporation
although the SEC Commissioner did not in 1948 object to the conversion of Code allows the application to religious corporations of the general provisions
the IEMELIF into a corporation aggregate, that conversion was not properly governing non-stock corporations. For non-stock corporations, the power to
carried out and documented. The SEC said that the IEMELIF needed to amend its articles of incorporation lies in its members. The code requires
amend its articles of incorporation for that purpose. Acting on this advice, two-thirds of their votes for the approval of such an amendment. However, if
the Consistory resolved to convert the IEMELIF to a corporation aggregate. such approval mechanism is made to operate in a corporation sole, its one
Respondent Bishop Nathanael Lazaro, its General Superintendent, instructed member in whom all the powers of the corporation technically belongs,
all their congregations to take up the matter with their respective members needs to get the concurrence of two-thirds of its membership. The one
for resolution. Subsequently, the general membership approved the member, here the General Superintendent, is but a trustee, according to
conversion, prompting the IEMELIF to file amended articles of incorporation Section 110 of the Corporation Code, of its membership.1avvphi 1 There is
with the SEC. Bishop Lazaro filed an affidavit-certification in support of the no point to dissolving the corporation sole of one member to enable the
conversion. Petitioners Reverend Nestor Pineda, et al., which belonged to a corporation aggregate to emerge from it. The one member, with the
faction that did not support the conversion, filed a civil case for concurrence of two-thirds of the membership of the organization for whom
"Enforcement of Property Rights of Corporation Sole, Declaration of Nullity of he acts as trustee, can self-will the amendment. He can, with membership
Amended Articles of Incorporation from Corporation Sole to Corporation concurrence, increase the technical number of the members of the
Aggregate with Application for Preliminary Injunction and/or Temporary corporation from "sole" or one to the greater number authorized by its
Restraining Order" in IEMELIF’s name against respondent members of its amended articles. Here, the evidence shows that the IEMELIF’s General
Consistory before the Regional Trial Court (RTC) of Manila. Petitioners claim Superintendent, respondent Bishop Lazaro, who embodied the corporation
that a complete shift from IEMELIF’s status as a corporation sole to a sole, had obtained, not only the approval of the Consistory that drew up
corporate policies, but also that of the required two-thirds vote of its 1980, RUBY filed on December 13, 1983 a petition for suspension of
membership.1avvphi 1 The amendment of the articles of incorporation, as payments with the SEC which was granted.
correctly put by the CA, requires merely that a) the amendment is not - On August 10, 1984, the SEC Hearing Panel created the management
contrary to any provision or requirement under the Corporation Code, and committee (MANCOM) for RUBY, composed of representatives from Ruby’s
that b) it is for a legitimate purpose. Section 17 of the Corporation Code creditors. One of the many task of MANCOM is study, review and evaluate
provides that amendment shall be disapproved if, among others, the the proposed rehabilitation plan for RUBY.
prescribed form of the articles of incorporation or amendment to it is not - Subsequently, two (2) rehabilitation plans were submitted to the SEC the
observed, or if the purpose or purposes of the corporation are patently BENHAR/RUBY Rehabilitation Plan of the majority stockholders led by Yu Kim
unconstitutional, illegal, immoral, or contrary to government rules and Giang, and the Alternative Plan of the minority stockholders represented by
regulations, or if the required percentage of ownership is not complied with. Miguel Lim (Lim). But the implementation of both majority plans has been
These impediments do not appear in the case of IEMELIF. Besides, as the CA enjoined by the SEC and CA. Later, the SC issued a final injunction on the
noted, the IEMELIF worked out the amendment of its articles of implementation.
incorporation upon the initiative and advice of the SEC. The SEC’s prior - Sept 18, 1991: Notwithstanding the injunction order, SEC issued an Order
action on the IEMELIF issue should be accorded great weight. approving the Revised BENHAR/RUBY Plan and creating a new management
committee to oversee its implementation. It also dissolves the MANCOM.
- The Revised BENHAR/RUBY Plan had proposed the calling for subscription
Majority Stockholders of Ruby vs Lim of unissued shares through a Board Resolution from the P11.814 million of
Short Summary: This lengthy case involves the validity of the infusion of theP23.7 million ACS “in order to allow the long overdue program of the
additional capital effected by the board of directors, the questionable REHAB Program.”
issuance of shares of stock by the majority stockholders and the extension of - Oct 2, 1991: To implement the Revised plan, RUBY’s board of directors
RUBY’s corporate term. As described by the SC, the present action has been held a special meeting and took up the capital infusion of P11.814 Million
instituted for the purpose of protecting the true and legitimate interests of representing the unissued and unsubscribed portion of the present ACS of
Ruby against the Majority Stockholders. P23.7 Million.
- The Board resolved that: The corporation be authorized to issue out of the
RUBY has been experiencing severe liquidity problem. The majority unissued portion of the authorized capital stocks of the corporation in the
stockholders wanted to infuse more capital into the corporation through form of common stocks 11.8134.00 [Million] to be subscribed and paid in full
issuance of additional shares. Hence, the Revised BENHAR/RUBY by the present stockholders in proportion to their present stockholding in the
Rehabilitation Plan of the majority stockholders proposed to call for corporation on staggered basis…and that should any of the stockholders fail
subscription of unissued shares for P11.814M. This led to the special meeting to exercise their rights to buy the number of shares they are qualified to buy
of RUBY’s board meeting whose resolution authorized the issuance of the by making the first installment payment of 25% on or before October 13,
unissued portion of the authorized capital stocks of the corporation in the 1991, then the other stockholders may buy the same and that only when
form of common stocks. However, the minority stockholders contended, none of the present stockholders are interested in the shares may there be a
among others, that they were not given notice as required and reasonable resort to selling them by public auction.
time to exercise their pre-emptive rights. Hence, the minority stockholders - The minority directors claimed they were not notified of said board
wanted to nullify the acts of the majority stockholders in implementing the meeting.
capital infusion. Pre-emptive right refers to the right of a stockholder of a - Sept 1, 1996: Lim receive a Notice of Stockholders’ Meeting scheduled on
stock corporation to subscribe to all issues or disposition of shares of any September 3, 1996. The matters that will be taken up in said meeting
class, in proportion to their respective shareholdings. SC ruled in favor of the include the extension of RUBY’s corporate term for another twenty-five (25)
minority stockholders. years and election of Directors.
- Sept 3, 1996: Lim together with other minority stockholders, appeared in
Facts: order to put on record their objections on the validity of holding thereof and
- Ruby Industrial Corporation (RUBY) is a domestic corporation engaged in the matters to be taken therein. Specifically, they questioned the percentage
glass manufacturing. Reeling from severe liquidity problems beginning in of stockholders present in the meeting which the majority claimed stood at
74.75%(from 59.829%) of the outstanding capital stock of RUBY. Lim
argued that the majority stockholders claimed to have increased their shares was no General Information Sheet reports made to the SEC on the alleged
to 74.75% by subscribing to the unissued shares of the authorized capital capital infusion, as per certification by the SEC.
stock (ACS). Lim pointed out that such move of the majority was in
implementation of the BENHAR/RUBY Plan which calls for capital infusion of CA Decision (which is cited by SC in its decision):
P11.814 Million representing the unissued and unsubscribed portion of the - SEC erred in not finding that the October 2, 1991 meeting held by RUBY’s
present ACS of P23.7 Million. board of directors was illegal because the MANCOM was neither involved nor
- Jan 20, 1998: the SC affirmed CA decision setting aside the SEC orders consulted in the resolution approving the issuance of additional shares of
approving the Revised BENHAR/RUBY Plan because it not only recognized RUBY. The CA further noted that the October 2, 1991 board meeting was
the void deeds of assignments entered into with some of RUBY’s creditors in conducted on the basis of the September 18, 1991 order of the SEC Hearing
violation of the CA’s decision in CA-G.R. SP No. 18310, but also maintained a Panel approving the Revised BENHAR/RUBY Plan, which plan was set by CA
financing scheme which will just make the rehabilitation plan more costly and and SC.
create a worse situation for RUBY. - The CA pointed out that records confirmed the proposed infusion of
- Mar 17, 2000, Lim filed a Motion informing the SEC of acts being performed additional capital for RUBY’s rehabilitation, approved during said meeting, as
by BENHAR and RUBY. Allegedly, the implementation of the new percentage implementing the Revised BENHAR/RUBY Plan. Necessarily then, such capital
stockholdings of the majority stockholders and the calling of stockholders’ infusion is covered by the final injunction against the implementation of the
meeting and the subsequent resolution approving the extension of corporate revised plan.
life of RUBY for another twenty-five (25) years, were all done in violation of - The CA likewise faulted the SEC in relying on the presumption of regularity
the decisions of the CA and this Court, and without compliance with the legal on the matter of the extension of RUBY’s corporate term through the filing of
requirements under the Corporation Code. There being no valid extension of amended articles of incorporation. SEC should have invalidated the resolution
corporate term, RUBY’s corporate life had legally ceased. Consequently, Lim extending the corporate term of RUBY for another twenty-five (25) years.
moved that the SEC: (1) declare as null and void the infusion of additional With the expiration of the RUBY’s corporate term, the CA ruled that it was
capital made by the majority stockholders and restore the capital structure of error for the SEC in not commencing liquidation proceedings.
RUBY to its original structure prior to the time injunction was issued; and (2)
declare as null and void the resolution of the majority stockholders extending Issue: WON the additional capital infusion is valid? [No because the
the corporate life of RUBY for another twenty-five (25) years. issuance of additional shares was done in breach of trust by the controlling
- Sept 18, 2002, the SEC overruled the objections raised by the minority stockholders. Here, the majority sought to impose their will and, through
stockholders regarding the questionable issuance of shares of stock by the fraudulent means, attempt to siphon off Ruby’s valuable assets to the great
majority stockholders and extension of RUBY’s corporate term because the prejudice of Ruby itself, as well as the minority stockholders and the
filing of the amendment of articles of incorporation by RUBY in 1996 unsecured creditors.]
complied with all the legal requisites and hence the the presumption of
regularity in the act of a government entity stands. It pointed out that Lim Ratio: A stock corporation is expressly granted the power to issue or sell
raised the issue only in the year 2000. Moreover, the SEC found that stocks. The power to issue shares of stock in a corporation is lodged in the
notwithstanding his allegations of fraud, Lim never proved the illegality of board of directors and no stockholders’ meeting is required to consider it
the additional infusion of the capitalization by RUBY so as to warrant a because additional issuances of shares of stock do not need approval of the
finding that there was indeed an unlawful act. stockholders. What is only required is the board resolution approving the
- Before the CA, Lim demonstrated the following evidence to rebut the additional issuance of shares. The corporation shall also file the necessary
presumption of regularity: application with the SEC to exempt these from the registration requirements
(1) it was the board of directors and not the stockholders which conducted under the Revised Securities Act (now the Securities Regulation Code).
the meeting without the approval of the MANCOM; (2) there was no written
waivers of the minority stockholders’ pre-emptive rights and thus it was But CA found, which the Court affirmed, that: the foregoing payment
irregular to merely notify them of the board of directors’ meeting and ask schedules as embodied in the said Revised plan which gives Benhar undue
them to exercise their option; (3) there was an existing permanent injunction advantage over the other creditors goes against the very essence of
against any additional capital infusion on the BENHAR/RUBY Plan, while the rehabilitation, which requires that no creditor should be preferred over the
CA and this Court both rejected the Revised BENHAR/RUBY Plan; (4) there other. One of the salient features of the Revised Benhar/Ruby Plan is to Call
on unissued shares forP11.814 M and if minority will take up their pre- of trust and their primary purpose is to perpetuate or shift control of the
emptive rights and dilute minority shareholdings. corporation, or to “freeze out” the minority interest. In this case, the
following relevant observations should have signaled greater circumspection
With the nullification of the Revised BENHAR/RUBY Plan by both CA and SC on the part of the SEC -- upon the third and last remand to it pursuant to our
on Jan 20, 1998, the legitimate concerns of the minority stockholders and January 20, 1998 decision -- to demand transparency and accountability
MANCOM who objected to the capital infusion which resulted in the dilution from the majority stockholders, in view of the illegal assignments and
of their shareholdings, the expiration of RUBY’s corporate term and the objectionable features of the Revised BENHAR/RUBY Plan, as found by the
pending incidents on the void deeds of assignment of credit – all these CA and as affirmed by this Court:
should have been duly considered and acted upon by the SEC when the case
was remanded to it for further proceedings. With the final rejection of the There can be no gainsaying the well-established rule in corporate practice
courts of the Revised BENHAR/RUBY Plan, it was grave error for the SEC not and procedure that the will of the majority shall govern in all matters within
to act decisively on the motions filed by the minority stockholders who have the limits of the act of incorporation and lawfully enacted by-laws not
maintained that the issuance of additional shares did not help improve the proscribed by law. It is, however, equally true that other stockholders are
situation of RUBY except to stifle the opposition coming from the MANCOM afforded the right to intervene especially during critical periods in the life of a
and minority stockholders by diluting the latter’s shareholdings. Worse, the corporation like reorganization, or in this case, suspension of payments,
SEC ignored the evidence adduced by the minority stockholders indicating more so, when the majority seek to impose their will and through fraudulent
that the correct amount of subscription of additional shares was not paid by means, attempt to siphon off Ruby’s valuable assets to the great prejudice of
the majority stockholders and that SEC official records still reflect the 60%- Ruby itself, as well as the minority stockholders and the unsecured creditors.
40% percentage of ownership of RUBY.
Certainly, the minority stockholders and the unsecured creditors are given
The SEC remained indifferent to the reliefs sought by the minority some measure of protection by the law from the abuses and impositions of
stockholders, saying that the issue of the validity of the additional capital the majority, more so in this case, considering the give-away signs of private
infusion was belatedly raised. Even assuming the October 2, 1991 board respondents’ perfidy strewn all over the factual landscape. Indeed, equity
meeting indeed took place, the SEC did nothing to ascertain whether indeed, cannot deprive the minority of a remedy against the abuses of the majority,
as the minority claimed: (1) the minority stockholders were not given notice and the present action has been instituted precisely for the purpose of
as required and reasonable time to exercise their pre-emptive rights; and (2) protecting the true and legitimate interests of Ruby against the Majority
the capital infusion was not for the purpose of rehabilitation but a mere ploy Stockholders. On this score, the Supreme Court, has ruled that:
to divest the minority stockholders of their 40.172% shareholding and
reduce it to a mere 25.25%. “Generally speaking, the voice of the majority of the stockholders is the law
of the corporation, but there are exceptions to this rule. There must
Pre-emptive right under Sec. 39 of the Corporation Code refers to the right necessarily be a limit upon the power of the majority. Without such a limit
of a stockholder of a stock corporation to subscribe to all issues or the will of the majority will be absolute and irresistible and might easily
disposition of shares of any class, in proportion to their respective degenerate into absolute tyranny. x x x”[67] (Additional emphasis supplied.)
shareholdings. The right may be restricted or denied under the articles of
incorporation, and subject to certain exceptions and limitations. The Lamentably, the SEC refused to heed the plea of the minority stockholders
stockholder must be given a reasonable time within which to exercise their and MANCOM for the SEC to order RUBY to commence liquidation
preemptive rights. Upon the expiration of said period, any stockholder who proceedings, which is allowed under Sec. 4-9 of the Rules on Corporate
has not exercised such right will be deemed to have waived it. Recovery. Under the circumstances, liquidation was the only hope of the
minority stockholders for effecting an orderly and equitable settlement of
The validity of issuance of additional shares may be questioned if done in RUBY’s obligations, and compelling the majority stockholders to account for
breach of trust by the controlling stockholders. Thus, even if the pre-emptive all funds, properties and documents in their possession, and make full
right does not exist, either because the issue comes within the exceptions in disclosure on the nullified credit assignments.
Section 39 or because it is denied or limited in the articles of incorporation,
an issue of shares may still be objectionable if the directors acted in breach
In fine, no error was committed by the CA when it set aside the September The SEC thus scheduled a conference to determine which of the two STBs is
18, 2002 Order of the SEC and declared the nullity of the acts of majority valid.
stockholders in implementing capital infusion through issuance of additional On February 12, 2003, the hearing officer ruled:
shares in October 1991 and the board resolution approving the extension of WHEREFORE, premises considered and finding the 1979 stock and transfer
RUBY’s corporate term for another 25 years. book authentic and duly executed, the Commission hereby recall the
certification issued on 6 August 2002 and cancel the stock and transfer book
registered on October 2002. Accordingly, the stock... and transfer book
registered on 25 September 1979 shall remain valid.
PROVIDENT INTERNATIONAL RESOURCES CORPORATION v. Issues:
JOAQUIN T. VENUS, GR No. 167041, 2008-06-17 The Asistio group appealed to the SEC Board of Commissioners. They
claimed that the issue of which of the two STBs is valid is intra-corporate in
Facts: nature; hence, the RTC, not the SEC, has jurisdiction.
Petitioner Provident International Resources Corporation (PIRC) is a The SEC, in its assailed order, denied the appeal. The SEC ratiocinated that
corporation duly organized under Philippine law. It was registered with the the determination of which of the two STBs is valid calls for regulatory, not
SEC on September 20, 1979. judicial power and is therefore within its exclusive jurisdiction.
the Marcelo group, were its incorporators, original stockholders, and The Asistio group elevated the case to the Court of Appeals, which ruled in
directors. their favor.
Another group, known as the Asistio group,... claimed that the Marcelo group The Court of Appeals held that the issue of which of the two STBs is valid is
acquired shares in PIRC as mere trustees for the Asistio group. intra-corporate and thus subject to the jurisdiction of the RTC. The appellate
The Marcelo group... allegedly executed a waiver of pre-emptive right, blank court reversed the SEC ruling
deeds of assignment, and blank deeds of transfer; endorsed in blank their WHETHER OR NOT THE SEC HAS THE JURISDICTION TO RECALL AND
respective stock certificates over all of the outstanding capital stock CANCEL A STOCK AND TRANSFER BOOK WHICH IT ISSUED IN 2002
registered in their names; and completed the blank deeds in 2002 to effect... BECAUSE OF ITS MISTAKEN ASSUMPTION THAT NO STOCK AND TRANSFER
transfers to the Asistio group. BOOK HAD BEEN PREVIOUSLY ISSUED IN 1979
On August 6, 2002, the Company Registration and Monitoring Department Ruling:
(CRMD) of the SEC issued a certification[5] stating that verification made on it can be said that the SEC's regulatory authority over private corporations
the available records of PIRC showed failure to register its stock and transfer encompasses a wide margin of areas, touching nearly all of a corporation's
book (STB). concerns.[12] This authority more vividly springs from the fact that a
On August 7, 2002, the Asistio group registered PIRC's STB. Upon learning of corporation owes... its existence to the concession of its corporate franchise
this, PIRC's assistant corporate secretary, Celedonio Escaño, Jr., requested from the state.[13] Under its regulatory responsibilities, the SEC may pass
the SEC for a certification of the registration in 1979 of PIRC's STB. Escaño upon applications for, or may suspend or revoke (after due notice and
presented the 1979-registered STB bearing the hearing), certificates of registration of... corporations, partnerships and
SEC stamp and the signature of the officer in charge of book registration. associations (excluding cooperatives, homeowners' association, and labor
Meanwhile, on October 17, 2002, the Asistio group filed in the Regional Trial unions); compel legal and regulatory compliances; conduct inspections; and
Court (RTC) of Muntinlupa City, a complaint[7] docketed as Civil Case No. impose fines or other penalties for violations of the Revised Securities Act, as
02-238 against the Marcelo group. The Asistio group prayed that the Marcelo well as... implementing rules and directives of the SEC, such as may be
group be enjoined from acting... as directors of PIRC, from physically holding warranted.
office at PIRC's office, and from taking custody of PIRC's corporate records. Considering that the SEC, after due notice and hearing, has the regulatory
Then, on October 30, 2002, the CRMD of the SEC issued a letter[8] recalling power to revoke the corporate franchise -- from which a corporation owes its
the certification it had issued on August 6, 2002 and canceling the 2002- legal existence -- the SEC must likewise have the lesser power of merely
registered STB. recalling and canceling a STB that was erroneously... registered.
However, one Kennedy B. Sarmiento requested the SEC not to cancel the we find that the SEC has the primary competence and means to determine
2002-registered STB. and verify whether the subject 1979 STB presented by the incumbent
assistant corporate secretary was indeed authentic, and duly registered by by virtue of a Timber License Agreement (TLA) No. 118, issued by the
the SEC as... early as September 1979. Department of Environment and Natural Resources (DENR), which is to
As the administrative agency responsible for the registration and monitoring expire in 2007. On February 8, 1989, the DENR issued a Moratorium Order
of STBs, it is the body cognizant of the STB registration procedures, and in (MO) suspending all logging operations in the island of Samar effective
possession of the pertinent files, records and specimen signatures of February 1989 to May 30, 1989 which prompted SJTC to cease operations
authorized officers relating... to the registration of STBs. effective February 8, 1989 and caused it to lose all its income.
The evaluation of whether a STB was authorized by the SEC primarily
requires an examination of the STB itself and the SEC files. This function Then, on August 7, 1990, SJTC and CSDC filed with the Securities
necessarily belongs to the SEC as part of its regulatory jurisdiction. Contrary and Exchange Commission (SEC) a petition for the appointment of a
to the allegations of... respondents, the issues involved in this case can be rehabilitation receiver and for suspension of payments. After due hearing,
resolved without going into the intra-corporate controversies brought up by the SEC Hearing Panel granted such with the condition that SJTC would
respondents. “resuscitate its operations and properly service its liabilities in accordance
As the regulatory body, it is the SEC's duty to ensure that there is only one with the duly approved schedule to be submitted by the Rehabilitation
set of STB for each corporation. Receiver within a one (1) year period. Petitioners, on February 26, 1992,
The determination of whether or not the 1979-registered STB is valid and of submitted their Motion to Approve Revised Rehabilitation Plan and Urgent
whether to cancel and revoke the August 6, 2002 certification and the Motion to Extend Waiting Period for Commencement of Rehabilitation. The
registration of the 2002 STB on the ground that there already is an existing SEC Hearing Panel extended the waiting period up to August 15, 1992 but
STB is impliedly and necessarily within the regulatory jurisdiction of the SEC. held in abeyance its approval of the revised rehabilitation plan. Also,
Under the circumstances of the instant case, we find no error in the exercise subsequent motions filed by petitioners extended the waiting period several
of jurisdiction by the SEC. All that the SEC was tasked to do, and which it times. Meanwhile, prior to the expiration of the waiting period to commence
actually did, was to evaluate the 1979 STB presented to it. rehabilitation, petitioners filed their Motion for Settlement of Claims Against
WHEREFORE, premises considered and finding the 1979 stock and transfer Petitioner San Jose and subsequently, their Motion to Dispose of Personal
book authentic and duly executed, the Commission hereby recall the Properties which were both granted by SEC. On May 6, 2002, however, The
certification issued on 6 August 2002 and cancel the stock and transfer book SEC En Banc motupropio issued its decision terminating the rehabilitation
registered on October 2002. Accordingly, the stock and transfer... book proceedings and dismissing the petition for rehabilitation since SJTC could no
registered on 25 September 1979 shall remain valid. longer be rehabilitated because the logging moratorium/ban, which was
We find the above ruling proper and within the SEC's jurisdiction to make. crucial for its rehabilitation, had not been lifted. Such was affirmed by the
CA. The petitioners filed a motion for reconsideration but it was denied by
CA. Hence, this petition for review with the SC. Significantly, except for the
Social Security System (SSS), none of the creditors filed an opposition to or
P. Corporate Dissolution comment on the petition. During the pendency of the petition before the SC,
2. Rehabilitation (Financial Rehabilitation and Insolvency Act of DENR issued an Order allowing SJTC to resume operations and extending
2010, R.A. No. 10142) the term of its TLA up to 2021. Then, petitioners filed their Supplemental
Petition. The SC gave due course to such and directed the parties to submit
1. San Jose Timber Corporation v. SEC their respective memoranda within thirty (30) days from notice. SJTC and
G.R. No. 162196 CSDC filed their memorandum arguing, among others, that the SEC acted
February 27, 2012 illegally and beyond its statutory mandate when it ordered the termination of
the rehabilitation proceedings. The CA, in turn, acted contrary to law when it
Facts: upheld the SEC’s decision. Thereafter, the SEC and the SSS filed their
Petitioner Casilayan Softwood Development Corporation (CSDC) is a respective memoranda. Then, petitioners
corporation duly organized and existing under and by virtue of the laws of SJTC and CSDC filed their Reply Memorandum.
the Republic of the Philippines and is the controlling stockholder and creditor
of petitioner San Jose Timber Corporation (SJTC). SJTC is primarily engaged Issue: Whether the CA erred in affirming the dissolution of SJTC when the
in the operation of a logging concession with a base camp in Western Samar vast majority of the creditors had agreed to await its rehabilitation?
 likely to exist by the time the debtor submits his revised or substitute
Ruling: rehabilitation plan for the final approval of the court."
No. The CA did not err in affirming the dissolution of SJTC when the
vast majority of the creditors had agreed to await its rehabilitation. Both the SEC and the CA had reasonable basis in deciding to terminate the
rehabilitation proceedings of SJTC because of the lack of certainty that the
At the time of the promulgation of the CA decision, there was no logging ban would, in fact, be lifted. It is clear from the records that the
certainty that the moratorium on logging activities in Samar would be lifted proposed rehabilitation plan of the petitioners would depend entirely on the
or a law on selective logging was forthcoming. There being no assurance, lifting of the logging ban either by the lifting of the moratorium on logging
the CA was correct in sustaining the decision of the SEC to terminate the activities in Samar issued by the DENR, or by the enactment of a law on
rehabilitation proceedings to protect the interest of all concerned, particularly selective logging. Such lifting of the logging ban is indispensable to the
the investors and the creditors. To have resolved otherwise would have been rehabilitation of SJTC. If it would not be lifted, the company would have no
prejudicial to these entities as they would be made to wait indefinitely for source of income or revenues and no investor or creditor would come in to
something the likelihood of which was quite remote. lend a hand in its resuscitation.
 
 Under the Rules of Procedure on Corporate Rehabilitation,  
rehabilitation is defined as the restoration of the debtor to a position of On August 15, 2005, however, an event supervened. With the lifting of the
successful operation and solvency, if it is shown that its continuance of logging moratorium in Samar, an indispensable element for the possible
operation is economically feasible and its creditors can recover by way of the rehabilitation of SJTC has been made a reality. Considering the extension
present value of payments projected in the plan, more if the corporation granted by the DENR, the TLA of SJTC will expire on 2021, or nine (9) years
continues as a going concern than if it is immediately liquidated. from now. It appears from the proposed Adjusted Rehabilitation Plan,that
  SJTC would only need a period of 24 months from the lifting of the logging
An indispensable requirement in the rehabilitation of a distressed corporation moratorium within which to liquidate all of its liabilities, except those of its
is the rehabilitation plan. Section 5 of the Interim Rules of Procedure on affiliates.
Corporate Rehabilitation provides the requisites thereof:   
 SEC. 5. Rehabilitation Plan. -- The rehabilitation plan shall include (a) The Court is of the considered view that SJTC should be given a second
the desired business targets or goals and the duration and coverage of chance to recover and pay off its creditors.  The only practical way of doing it
the rehabilitation; (b) the terms and conditions of is to resume the rehabilitation of SJTC which estimated its first year
such rehabilitation which shall include the manner of its implementation, production upon resumption of operations at 29,000 cubic
giving due regard to the interests of secured creditors; (c) the material meters. Thereafter, production is projected to rise to 60,000 cubic meters
financial commitments to support the rehabilitation plan; (d) the means per year. If the estimated selling price per cubic meter as of  December 31,
for the execution of the rehabilitation plan, which may include conversion of 1991 was P3,500.00 and between P5,000.00 and P6,000.00 in 2004, there is
the debts or any portion thereof to equity, restructuring of the debts, no doubt that the price has again risen.
dacionenpago, or sale of assets or of the controlling interest; (e) a liquidation  
analysis that estimates the proportion of the claims that the creditors and The Court is not unaware of the issuance of Executive Order (E.O.) No. 23
shareholders would receive if the debtor's properties were liquidated; and (f) on February 1, 2011. E.O. No. 23 declares a Moratorium on the Cutting and
such other relevant information to enable a reasonable investor to make an Harvesting of Timber in the Natural and Residual Forests and Creates the
informed decision on the feasibility of the rehabilitation plan. Anti-Illegal Logging Task Force that will enforce the moratorium. It aims
  mainly at the promotion of intergeneration responsibility to protect the
A successful rehabilitation usually depends on two factors: (1) a positive environment. As pronounced in the DENR website, however, it does not
change in the business fortunes of the debtor, and (2) the willingness of the impose a total log ban  in the country. What is being protected by the
creditors and shareholders to arrive at a compromise agreement on executive order is simply the natural   forests and residual forests. Section 2
repayment burdens, extent of dilution, etc. The debtor must demonstrate by thereof provides for a moratorium on the cutting and harvesting of timber in
convincing and compelling evidence that these circumstances exist or are the natural and residual forests of the entire country. Timber companies,
such as petitioner SJTC, may still be allowed to cut trees subject to the were merely interlocutory in nature. Thus, PAL filed before the RTC a motion
provisions thereof. for leave to file a second motion for reconsideration which the RTC denied.
  Again, PAL filed a motion for reconsideration which sought reconsideration of
Thus, SJTCs rehabilitation appears highly feasible and the proceedings the denial of the prayed leave to file a second motion for reconsideration
thereon should be revived. It should, therefore, be given an opportunity to which was again denied. On the thesis that there was no other plain, speedy
be heard by the SEC to determine if it could maintain its corporate and adequate remedy available to it, PAL went to this Court via  a petition for
existence. For said reason, the case should be remanded to the SEC so that review on certiorari  under Rule 45 of the Rules of Court.
it could factor in the aforecited figures and claims of SJTC and assess
whether or not SJTC could still recover. It appears from the figures that SJTC Issue: Whether the proceedings before the trial court should have been
can generate sufficient income to pay all its obligations to all its creditors suspended after the court was informed that a rehabilitation receiver was
except, as the petitioners pledged, its corporate affiliates who allegedly appointed over the petitioner by the Securities and Exchange Commission
represent more than 66% of the liabilities. under Section 6(c) of Presidential Decree No. 902-A?

Ruling:
PAL v. Sps. Sadic and Aisha Kurangking, et al. Yes. The proceedings before the trial court should have been suspended
G.R. No. 146698 after the court was informed that a rehabilitation receiver was appointed
September 24, 2002 over the petitioner by the Securities and Exchange Commission under
Section 6(c) of Presidential Decree No. 902-A.
Facts:
In April 1997, respondents, all Muslim Filipinos, returned to Manila from their While a petition for review on certiorari under Rule 45 would ordinarily be
pilgrimage to the Holy City of Mecca, Saudi Arabia, on board a Philippines inappropriate to assail an interlocutory order, in the interest, however, of
Airlines (PAL) flight. Respondents claimed that they were unable to retrieve arresting the perpetuation of an apparent error committed below that could
their checked-in luggages. Thus, respondents filed a complaint with the only serve to unnecessarily burden the parties, the Court has resolved to
Regional Trial Court (RTC) of Marawi City against PAL for breach of contract ignore the technical flaw and, also, to treat the petition, there being no other
resulting in damages due to negligence in the custody of the missing plain, speedy and adequate remedy, as a special civil action for certiorari.
luggages.
The Supreme Court, in A.M. No. 00-8-10-SC, adopted the Interim Rules of
PAL filed it answer invoking, among others, the limitations under the Warsaw Procedure on Corporate Rehabilitation and directed to be transferred from
Convention. Before the case could be heard on pre-trial, PAL filed a petition the SEC to Regional Trial Courts,all petitions for rehabilitation filed by
for the approval of a rehabilitation plan and the appointment of a corporations, partnerships, and associations under P.D. 902-A in accordance
rehabilitation receiver before the SEC, due to serious business losses brought with the amendatory provisions of Republic Act No. 8799. The rules require
by the Asian economic crisis and the massive strike of its employees, which trial courts to issue, among other things, a stay order in the enforcement of
the SEC granted. Moreover, the SEC constituted a three-man panel to all claims, whether for money or otherwise, and whether such enforcement
oversee PAL’s rehabilitation. Then, the SEC created a management is by court action or otherwise, against the corporation under rehabilitation,
committee in accordance with Sec. 6 (d) of P.D. 902, declaring the its guarantors and sureties not solidarily liable with it.
suspension of all actions for money claims against PAL pending before any
court, tribunal, board or body. So PAL moved for the suspension of the The stay order is effective from the date of its issuance until the dismissal of
proceedings before the Marawi City RTC which the trial court denied on the the petition or the termination of the rehabilitation proceedings.
ground that the claim of respondents was only yet to be established. PAL’s
motion for reconsideration was also denied. The interim rules must likewise be read and applied along with Section 6 (c)
PAL went to the Court of Appeals via a petition for certiorari which the latter of P.D. 902-A, as so amended, directing that upon the appointment of a
denied. PAL’s motion for reconsideration was likewise denied by the CA but it management committee, rehabilitation receiver, board or body pursuant to
added that a second motion for reconsideration before the trial the decree, all actions for claims against the distressed corporation pending
court could still be feasible inasmuch as the assailed orders of the trial court before any court, tribunal, board or body shall be suspended accordingly.
 extrajudicial foreclosure of its mortgage on October 26, 1984 because a
A claim is said to be a right to payment, whether or not it is reduced to management committee was not appointed by the SEC until March 18, 1985.
judgment, liquidated or unliquidated, fixed or contingent, matured or No matter how practical and noble a reason would be, in order to depart
unmatured, disputed or undisputed, legal or equitable, and secured or from the words of the law stated in clear and unambiguous manner, would
unsecured. In Finasia Investments and Finance Corporation, this Court has be to encroach upon legislative prerogative to define the wisdom of the law.
defined the word claim, contemplated in Section 6(c) of P.D. 902-A, as Such is plainly judicial legislation.
referring to debts or demands of a pecuniary nature and the assertion of a
right to have money paid as well.

Verily, the claim of private respondents against petitioner PAL is a money

claim for the missing luggages, a financial demand that the law requires to
be suspended pending the rehabilitation proceedings. 

Rizal Commercial Banking Corporation vs. Intermediate Appellate

Court and BF Homes
G.R. No. 74851 (December 9, 1999)
Facts:
Petitioner RCBC is a mortgagor-creditor of the party respondent BF Homes.
BF Homes, being a distressed firm, filed before the Securities and Exchange
Commission a Petition for Rehabilitation and for Declaration of Suspension of
Payments. Consequently, RCBC requested the sheriff of Rizal to levy on
execution the properties of party respondent, and consequently obtained
favorable judgment. RCBC being the highest bidder during the public auction
is now seeking for the transfer certificate of titles from the Register of Deeds
issued in its name. It is worthy to note that it was on October 26, 1984 that
RCBC obtained favor over the execution of the respondent’s properties, and
it was only on March 18, 1985 that a Management Committee was organized
by the SEC for BF Homes.
Issue:
Whether or not the Court may depart from the words of the law which
clearly provides that a creditor may levy execution on a firm’s properties
when such execution precedes SEC’s organization of a Management
Committee to act as its receiver.
Held:
PD 209-A states that suspension of claims against a corporation under
rehabilitation is counted or figured up only upon the appointment of a
management committee or a rehabilitation receiver. The holding that
suspension of actions for claims against a corporation under rehabilitation
takes effect as soon as the application or a petition for rehabilitation is filed
with the SEC — may, to some, be more logical and wise but unfortunately,
such is incongruent with the clear language of the law. Suspension of actions
for claims commences only from the time a management committee or
receiver is appointed by the SEC. Petitioner RCBC rightfully moved for the