Consolidated, Inc.
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.
FACTS:
Sept 19, 1960: 5 stockholders of the F. Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the corporation, dissolution and distribution
among themselves in proportion to their shareholdings, as liquidating dividends,
corporate assets, including real properties
Register of Deeds of Manila denied the registration of the certificate of
liquidation:
1.
2.
3.
4.
The judgment of the Court approving the dissolution and directing the disposition
of the assets of the corporation need be presented
Stockholders appealed
contend that the certificate of liquidation is not a conveyance or transfer
but merely a distribution of the assets of the corporation which has ceased to exist
for having been dissolved
ISSUE: W/N certificate merely involves a distribution of the corporation's assets (or
should be considered a transfer or conveyance)
property, or the right to share in its proceeds to that extent when distributed
according to law and equity but its holder is NOT the owner of any part of the capital
of the corporation nor entitled to possession
The stockholder is not a co-owner or tenant in common of the
corporate property
ADVERTISEMENTS
175 SCRA 668 Business Organization Corporation Law When De Facto Partnership
Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim
convinced Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border
Machinery and Heavy Equipment Company (BORMAHECO) to contribute funds and to buy
two aircrafts which would form part a corporation which will be the expansion of Southern
Air Lines. Maglana et al then contributed and delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the
knowledge of Maglana et al, made an agreement with Pioneer Insurance for the latter to
insure the two aircrafts which were brought in installment from Japan Domestic Airlines
(JDA) using said aircrafts as security. So when Lim defaulted from paying JDA, the two
aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.
HELD: No. There was no de facto partnership. Ordinarily, when co-investors agreed to do
business through a corporation but failed to incorporate, a de facto partnership would have
been formed, and as such, all must share in the losses and/or gains of the venture in
proportion to their contribution. But in this case, it was shown that Lim did not have the
intent to form a corporation with Maglana et al. This can be inferred from acts of unilaterally
taking out a surety from Pioneer Insurance and not using the funds he got from Maglana et
al. The record shows that Lim was acting on his own and not in behalf of his other would-be
incorporators in transacting the sale of the airplanes and spare parts.
ADVERTISEMENTS