Tayag vs benguet consolidated

26 SCRA 242 Business Organization Corporation Law Domicile of a Corporation By

Laws Must Yield To a Court Order Corporation is an Artificial Being
In March 1960, Idonah Perkins died in New York. She left behind properties here and
abroad. One property she left behind were two stock certificates covering 33,002 shares of
stocks of the Benguet Consolidated, Inc (BCI). Said stock certificates were in the
possession of the Country Trust Company of New York (CTC-NY). CTC-NY was the
domiciliary administrator of the estate of Perkins (obviously in the USA). Meanwhile, in
1963, Renato Tayag was appointed as the ancillary administrator (of the properties of
Perkins she left behind in the Philippines).
A dispute arose between CTC-NY and Tayag as to who between them is entitled to possess
the stock certificates. A case ensued and eventually, the trial court ordered CTC-NY to turn
over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a
petition to have said stock certificates be declared lost and to compel BCI to issue new
stock certificates in replacement thereof. The trial court granted Tayags petition.
BCI assailed said order as it averred that it cannot possibly issue new stock certificates
because the two stock certificates declared lost are not actually lost; that the trial court as
well Tayag acknowledged that the stock certificates exists and that they are with CTC-NY;
that according to BCIs by laws, it can only issue new stock certificates, in lieu of lost,
stolen, or destroyed certificates of stocks, only after court of law has issued a final and
executory order as to who really owns a certificate of stock.
ISSUE: Whether or not the arguments of Benguet Consolidated, Inc. are correct.
HELD: No. Benguet Consolidated is a corporation who owes its existence to Philippine
laws. It has been given rights and privileges under the law. Corollary, it also has obligations
under the law and one of those is to follow valid legal court orders. It is not immune from
judicial control because it is domiciled here in the Philippines. BCI 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. Further, to allow BCIs opposition is to render the court order against CTC-NY a
mere scrap of paper. It will leave Tayag without any remedy simply because CTC-NY, a
foreign entity refuses to comply with a valid court order. The final recourse then is for our
local courts to create a legal fiction such that the stock certificates in issue be declared lost
even though in reality they exist in the hands of CTC-NY. This is valid. As held time and
again, fictions which the law may rely upon in the pursuit of legitimate ends have played an
important part in its development.
Further still, the argument invoked by BCI that it can only issue new stock certificates in
accordance with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the

order of the court it simply refused to turn over the stock certificates hence ownership can
be said to have been settled in favor of estate of Perkins here. Also, assuming that there
really is a conflict between BCIs bylaws and the court order, what should prevail is the
lawful court order. It would be highly irregular if court orders would yield to the bylaws of a
corporation. Again, a corporation is not immune from judicial orders.

GOOD EARTH EMPORIUM VS CA (194

SCRA 544)
Good Earth Emporium Inc. vs Court of Appeals
194 SCRA 544 [GR No. 82797 February 27, 1991]
Facts: A lease contract, dated October 16, 1981, was entered into
by and between Roces-Reyes Realty Inc. as lessor, and Good Earth
Emporium Inc. (GEE) as lessee for a term of three years beginning
November 1, 1981 and ending October 31, 1984 at a monthly rental
of Php65,000. The building which was the subject of the contract of
lease is a five story building located at the corner of Rizal Avenue
and Bustos Street in Sta. Cruz, Manila. From March 1983 up to the
complaint was filed, the lessee had defaulted in the payment of
rentals, as a consequence of which, private respondent Roces-Reyes
Realty Inc. filed on October 14, 1984 an ejectment case against
herein petitioners, Good Earth Emporium Inc. and Lim Ka Ring. After
the latter had tendered their responsive pleading, the lower court on
motion of Roces rendered judgement on the pleadings dated April
17, 1984 to which petitioners were ordered to vacate the premises
and surrender the same to the plaintiffs. On May 16, 1984, Roces
filed a motion for execution which was opposed by petitioners on
May 28, 1984 simultaneous with the latters filing of a notice of
appeal. However, on August 15, 1984, GEE thru counsel filed a
motion to withdraw said appeal citing as reason that they are
satisfied with the decision of the lower court.
Issue: Whether or not the payment made by GEE to the Roces
brothers constitute payment to private respondent corporation
which would result to the extinguishment of the obligation.
Held: No. Under article 1240 of the civil code of the Philippines
Payment shall be made to the person in whose favor the obligation
has been constituted, on his successor in interest or any person
authorized to receive it.
In the case at bar, the supposed payments were not made to RocesReyes Realty Inc. or to its successors in interest nor is there positive
evidence that payment was made to a person authorized to receive
it. No such proof was submitted but merely inferred by the RTC from
Marcos Roces having signed the lease contract as President which
was witnessed by Jesus Marcos Roces. The later, however, was no
longer President or even an officer of the Roces-Realty Inc at the
time he received the money and signed the sale with pacto de retro.

He, in fact denied being in possession of authority to receive

payment for the respondent corporation nor does the receipt show
that he signed in the same capacity as he did in the lease contract
at a time when he was President for respondent corporation.
A corporation has a personality distinct and separate from its
individual stockholders or members. Being an officer or stockholder
of a corporation does not make ones property also of the
corporation, and vice-versa, for they are separate entities. Share
owners are in no legal sense the owners corporate property which is
owned by the corporation as a distinct legal person. As a
consequence of the separate juridical personality of a corporation,
the corporate debt or credit is not the debt or credit of the
stockholder, nor is the stockholders debt or credit that of the
corporation.

BOYER
ROXAS VS.
COURT OF
APPEALS211
SCRA 470
(1992)FACTS
OF THE CASE
When Eugenia V.
Roxas died, her
heirs formed a

corporation under
the name and style
of Heirs of
EugeniaV. Roxas,
Inc. using her
estate as the
capital of the
corporation, the
private respondent
herein. It

wasprimarily
engaged in
agriculture
business, however
it amended its
purpose to enable
it to engage
in resortand
restaurant
business.

etitioners are
stoc!holders of the
corporation
and two of the
heirs of Eugenia.
"ytolerance, they
were allowed to
occupy some of
the properties of
the corporation as

their
residence.Howeve
r, the board of
directors of the
corporation passed
a resolution
evicting the
petitioners from
theproperty of the
corporation

because the same

will be needed for
expansion.#t the R$
%, private
respondent
presented its
evidence averring
that the sub&ect
premises are
owned by

thecorporation.
etitioners failed to
present their
evidence due to
alleged negligence
of their counsel. R$
%handed a
decision in favor of
private
respondent.etition

ers appealed to the

%ourt of #ppeals
but the latter
denied the petition
and a'rmed the
ruling of the R$%.
Hence, they
appealed to the
(upreme %ourt. In
their appeal,

petitioners argues
that the %# madea
mista!e in upholding
the decision of the
R$%, and that their
occupancy of the
sub&ect premises
should
berespected
because they own

an ali)uot part of
the corporation as
stoc!holders, and
that the veil
of corporate *ction
must be pierced by
virtue thereof.
ISSUE
+. Whether
petitioners

contention were
correct as regards
the piercing of the
corporate veil.-.
Whether
petitioners were
correct in their
contention that
they should be
respected as

regards
theiroccupancy
since they own an
ali)uot part of the
corporation.
RULING
+.etitioners
contention to
pierce the veil of
corporate *ction is

untenable. #s aptly
held by the
court/..$he
separate
personality of a
corporation may
0123 be
disregarded when
the corporation is

used as acloak or
cover for fraud or
illegality, or to
work injustice, or
when necessary to
achieve equity or
whennecessary
for the protection
of creditors.

4-. #s regards
petitioners
contention that
they should be
respected on their
occupancy by
virtue of anali)uot
part they own on
the corporation as
stoc!holders, it also

fails to hold water.

$he court held that/
properties owned
by a corporation
are owned by it
as an
entity separate and
distinct from its
members.While
shares of stocks are

personal property,
they do not
represent property
of the corporation.
A share of stock
only typies an
aliquot part of the
corporations
property, or
the right to share

in its proceeds to
that etent when
distributed
according to law
and equity, but its
holder is not the
owner of any part
of thecapital of the
corporation. !or is
he entitled to the

possession of any
denite portion of
its property
or assets. "he
holder is not a
co#owner or
a tenant in
common of
the corporate
property.$