SEPARATE JURIDICAL PERSONALITY complaint for illegal dismissal against MMDC, Benjamin A.
Santos (MMDC’s President), and Rodillano A. Velasquez (the
G.R. No. 101699 March 13, 1996
BENJAMIN A. SANTOS, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. LABOR ARBITER FRUCTUOSO T.
AURELLANO and MELVIN D. MILLENA, respondents.
 Millena was hired to be the project accountant for MMDC's
mining operations. (Gatbo operations)
 On 12 August 1986, he sent to the MMDC corporate
treasurer a memorandum calling the latter's attention to
the failure of the company to comply with the withholding
tax requirements of the BIR on account of delayed
payments of accrued salaries to the company's laborers and
employees.
 Subsequently, he was informed via letter that his services
were no longer needed by the company, stating mainly .,
the rainy season, deteriorating peace and order situation
and little paperwork as reasons.
o (It is therefore the board's decision that it would be
useless for us to continue operations, especially if
we will always be in the "hole," so to speak. Our
first funds receipts will be used to pay all our debts.
Until we resume full-scale operations, we will not
need a project accountant as there will be very little
paper work at the site, which can be easily handled
at Makati.)
 When Millen’s claim for reimbursement for the "advances"
he had made for the company, as well as his accrued
salaries/claims, was not heeded; he filed with the NLRC a
executive vice-president).
 Millena alleged, among other things, that his dismissal was
merely an offshoot of his letter of 12 August 1986 to Abaño
about the company's inability to pay its workers and to
remit withholding taxes to the BIR.
 LA, finding no valid cause for the termination of Millena’s
employment, held the three liable to Millena. NLRC
affirmed.
 In holding Santos personally liable for MIllena's claim, the
NLRC cited Article 289 14 of the Labor Code and the ruling
in A.C. Ransom Labor Union-CCLU vs. NLRC 15 to the effect
that "(t)he responsible officer of an employer corporation
(could) be held personally, not to say even criminally, liable
for non-payment of backwages," and that of Gudez vs. NLRC
16 which amplified that "where the employer corporation
(was) no longer existing and unable to satisfy the judgment
in favor of the employee, the officer should be liable for
acting on behalf of the corporation.
 Santos, on the other hand, mainly argues that public
respondents have gravely abused their discretion "in finding
petitioner solidarily liable with MMDC even (in) the absence
of bad faith and malice on his part."
ISSUE: WON Santos should be held solidarily liable to MIllena.
HELD: NO.
 A corporation is a juridical entity with legal personality
separate and distinct from those acting for and in its behalf
 and, in general, from the people comprising it. The rule is
that obligations incurred by the corporation, acting through
its directors, officers and employees, are its sole liabilities.
 It is not even shown that Santos has had a direct hand in the
dismissal of Millena enough to attribute to Santos a
patently unlawful act while acting for the corporation. It is
undisputed that the termination of petitioner's employment
has, instead, been due, collectively, to the need for a
further mitigation of losses, the onset of the rainy season,
the insurgency problem in Sorsogon and the lack of funds to
further support the mining operation in Gatbo.
 NOTE: Under the Minimum Wage Law, the responsible
officer of an employer corporation could be held personally
liable for nonpayment of backwages for "(i)f the policy of
the law were otherwise, the corporation employer (would)
have devious ways for evading payment of back wages." In
the absence of a clear identification of the officer directly
responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer.
 NOTE: Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of
a corporation is not of itself sufficient ground for
disregarding the separate corporate personality. (SUNIO
DOCTRINE)
 NOTE: Being a mere fiction of law, peculiar situations or
valid grounds can exist to warrant, albeit done sparingly,
the disregard of the Corporation’s independent being and
the lifting of the corporate veil. As a rule, this situation
might arise when a corporation is used:
1. to evade a just and due obligation or to justify a wrong,
2. to shield or perpetrate fraud,
3. to carry out similar other unjustifable aims or intentions, or
4. as a subterfuge to commit injustice.
NOTE: Instances when, without necessarily piercing the veil of
corporate fiction, personal civil liability can also be said to lawfully
attach to a corporate director, trustee or officer; to wit: When —
(1) He assents (a) to a patently unlawful act of the corporation,
or (b) for bad faith or gross negligence in directing its affairs, or (c)
for conflict of interest, resulting in damages to the corporation, its
stockholders or other persons;
(2) He consents to the issuance of watered stocks or who,
having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto;
(3) He agrees to hold himself personally and solidarily liable
with the corporation; or
(4) He is made, by a specific provision of law, to personally
answer for his corporate action. (The case of petitioner is way off
these exceptional instances.)
 NOTE: Santos, likewise, posited that he should not have
been adjudged personally liable, the NLRC not having validly
acquired jurisdiction over his person whether by personal
service of summons or by substituted service under Rule 19
of the Rules of Court.
o Petitioner's contention is unacceptable. The fact
that a counsel for Santos had active participation in
the proceedings, should disprove the supposed
 want of service of legal process. Although as a rule,
modes of service of summons are strictly followed
in order that the court may acquire jurisdiction over
the person of a defendant, such procedural modes,
however, are liberally construed in quasi-judicial
proceedings, substantial compliance with the same
being considered adequate.Moreover, jurisdiction
over the person of the defendant in civil cases is
acquired not only by service of summons but also
by voluntary appearance in court and submission to
its authority.
G.R. No. L-18216 October 30, 1962
STOCKHOLDERS OF F. GUANZON AND SONS, INC., petitioners-
appellants, vs. REGISTER OF DEEDS OF MANILA, respondent-
appellee.
The five stockholders of the F. Guanzon and Sons, Inc. executed a
certificate of liquidation of the assets of the corporation reciting,
among other things, that by virtue of a resolution of the
stockholders dissolving the corporation, they have distributed
among themselves in proportion to their shareholdings, as
liquidating dividends, the assets of said corporation, including real
properties located in Manila.
The certificate of liquidation, when presented to the Register of
Deeds of Manila, was denied registration on seven grounds, of
which the following were disputed by the stockholders:
3. The number of parcels not certified to in the
acknowledgment;
5. P430.50 Reg. fees need be paid;
6. P940.45 documentary stamps need be attached to the
document;
7. The judgment of the Court approving the dissolution and
directing the disposition of the assets of the corporation need be
presented (Rules of Court, Rule 104, Sec. 3).
Deciding the consulta elevated by the stockholders, the
Commissioner of Land Registration overruled ground No. 7 and
sustained requirements Nos. 3, 5 and 6.
The stockholders interposed the present appeal.
As correctly stated by the Commissioner of Land Registration, the
propriety or impropriety of the three grounds on which the denial
of the registration of the certificate of liquidation was predicated
hinges on whether or not that certificate merely involves a
distribution of the corporation's assets or should be considered a
transfer or conveyance.
Appellants 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.
This is apparent in the minutes for dissolution attached to the
document. Not being a conveyance the certificate need not contain
a statement of the number of parcel of land involved in the
distribution in the acknowledgment appearing therein. Hence the
amount of documentary stamps to be affixed thereon should only
be P0.30 and not P940.45, as required by the register of deeds.
Neither is it correct to require appellants to pay the amount of
P430.50 as registration fee.
The Commissioner of Land Registration, however, entertained a
different opinion. He concurred in the view expressed by the
register of deed to the effect that the certificate of liquidation in
question, though it involves a distribution of the corporation's
assets, in the last analysis represents a transfer of said assets from
the corporation to the stockholders. Hence, in substance it is a
transfer or conveyance.
We agree with the opinion of these two officials. A corporation is a
juridical person distinct from the members composing it. Properties
registered in the name of the corporation are owned by it as an
entity separate and distinct from its members. While shares of stock
constitute personal property they do not represent property of the
corporation. The corporation has property of its own which consists
chiefly of real estate. A share of stock only typifies an aliquot part of
the corporation's 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 is he entitled to the possession of any definite portion of its
property or assets. The stockholder is not a co-owner or tenant in
common of the corporate property.
On the basis of the foregoing authorities, it is clear that the act of
liquidation made by the stockholders of the F. Guanzon and Sons,
Inc. of the latter's assets is not considered a partition of community
property, but rather a transfer or conveyance of the title of its
assets to the individual stockholders. Indeed, since the purpose of
the liquidation, as well as the distribution of the assets of the
corporation, is to transfer their title from the corporation to the
stockholders in proportion to their shareholdings, — and this is in
effect the purpose which they seek to obtain from the Register of
Deeds of Manila, — that transfer cannot be effected without the
corresponding deed of conveyance from the corporation to the
stockholders. It is, therefore, fair and logical to consider the
certificate of liquidation as one in the nature of a transfer or
conveyance.
G.R. No. L-42780 January 17, 1936
MANILA GAS CORPORATION, plaintiff-appellant, vs. THE
COLLECTOR OF INTERNAL REVENUE, defendant-appellee.
Manila Gas is a corporation organized under the laws of the
Philippine Islands. It operates a gas plant in Manila. Associated with
it are the Islands Gas and Electric Company domiciled in New York,
US, and the General Finance Company domiciled in Zurich,
Switzerland. Neither of these two corporations is resident in the
Philippines.
Manila Gas then brought an action against the CIR for the recovery
of P56,757.37, which the former was required by the latter to
deduct and withhold from the various sums paid it to the aforesaid
foreign corporations as dividends and interest on bonds and other
indebtedness and which the plaintiff paid under protest. (NOTE:
for the years 1930, 1931, and 1932 // TC dismissed the complaint)
The corporation mainly contends that the dividends paid by it to its
stockholders, Islands Gas and General Finance, were not subject to
tax because to impose a tax thereon would be to do so on the
Manila Gas, in violation of the terms of its franchise and would,
moreover, be oppressive and inequitable.
ISSUE: WON the dividends paid by Manila Gas in the case at bar
were subject to income tax.
HELD: YES.
A corporation has a personality distinct from that of its
stockholders, enabling the taxing power to reach the latter when
they receive dividends from the corporation. It must be considered
as settled in this jurisdiction that dividends of a domestic
corporation, which are paid and delivered in cash to foreign
corporations as stockholders, are subject to the payment in the
income tax, the exemption clause in the charter of the corporation
notwithstanding.
NOTE: The taxing power of a state does not extend beyond its
territorial limits, but within such it may tax persons, property,
income, or business. If an interest in property is taxed, the situs of
either the property or interest must be found within the state. If an
income is taxed, the recipient thereof must have a domicile within
the state or the property or business out of which the income issues
must be situated within the state so that the income may be said to
have a situs therein. Personal property may be separated from its
owner, and he may be taxed on its account at the place where the
property is although it is not the place of his own domicile and even
though he is not a citizen or resident of the state which imposes the
tax. But debts owing by corporations are obligations of the debtors,
and only possess value in the hands of the creditors.
Manila Gas operates its business entirely within the Philippines. Its
earnings, therefore come from local sources. The place of payment
even if conceded to be outside of the country cannot alter the fact
that the income was derived from the Philippines.
The Collector of Internal Revenue was justified in withholding
income taxes on interest on bonds and other indebtedness paid to
non-resident corporations because this income was received from
sources within the Philippine Islands as authorized by the Income
Tax Law.
NOTE: FRANCHISE ALLEGEDLY VIOLATED: Manila Gas shall annually
pay Manila and the municipalities in Rizal in which gas is sold, 2.5%
of the gross receipts within said city and municipalities during the
preceding year. Said payment shall be in lieu of all taxes, except
taxes on the real estate, buildings, plant, machinery, and other
personal property belonging to Manila Gas.
G.R. No. 58168 December 19, 1989
CONCEPCION MAGSAYSAY-LABRADOR, et. Al., petitioners, vs. THE
COURT OF APPEALS and ADELAIDA RODRIGUEZ-MAGSAYSAY,
Special Administratrix of the Estate of the late Genaro F.
Magsaysay, respondents.
On 9 February 1979, Adelaida Rodriguez-Magsaysay, widow and
special administratix of the estate of the late Senator Genaro
Magsaysay, brought an action against Artemio Panganiban, Subic
Land Corporation, FILMANBANK and the RD of Zambales, for the
annulment of the Deed of Assignment executed by the late Senator
in favor of SUBIC (as a result of which TCT 3258 was cancelled and
TCT 22431 issued in the name of SUBIC), for the annulment of the
Deed of Mortgage executed by SUBIC in favor of FILMANBANK
(dated 28 April 1977 in the amount of P 2,700,000.00), and
cancellation of TCT 22431 by the Register of Deeds, and for the
latter to issue a new title in her favor.
The sisters of the late senator subsequently filed a motion for
intervention on the ground that their brother conveyed to them 1/2
of his shareholdings in SUBIC or a total of 416,566.6 shares and as
assignees of around 41 % of the total outstanding shares of such
stocks of SUBIC, they have a substantial and legal interest in the
subject matter of litigation and that they have a legal interest in the
success of the suit with respect to SUBIC.
The trial court denied the motion for intervention, and ruled that
petitioners have no legal interest whatsoever in the matter in
litigation and their being alleged assignees or transferees of certain
shares in SUBIC cannot legally entitle them to intervene because
SUBIC has a personality separate and distinct from its stockholders.
CA affirmed. The appellate court further stated that whatever
claims the Magsaysay sisters have against the late Senator or
against SUBIC for that matter can be ventilated in a separate
proceeding.
Issue: Whether the Magsaysay sister, allegedly stockholders of
SUBIC, are considered as interested parties in a case where
corporate properties are in dispute.
HELD: NO.
Pursuant to Section 2, Rule 12, ROC, the Magsaysay sisters have no
legal interest in the subject matter in litigation so as to entitle them
to intervene in the proceedings. To be permitted to intervene in a
pending action, the party must have a legal interest in the matter in
litigation, or in the success of either of the parties or an interest
against both, or he must be so situated as to be adversely affected
by a distribution or other disposition of the property in the custody
of the court or an officer thereof .
The interest of the Magsaysay sisters is purely inchoate, or in sheer
expectancy of a right in the management of the corporation and to
share in the profits thereof and in the properties and assets thereof
on dissolution, after payment of the corporate debts and
obligations. While a share of stock represents a proportionate or
aliquot interest in the property of the corporation, it does not vest
the owner thereof with any legal right or title to any of the
property, his interest in the corporate property being equitable or
beneficial in nature. Shareholders are in no legal sense the owners
of corporate property, which is owned by the corporation as a
distinct legal person.
 NOTE: The interest which entitles a person to intervene in a
suit between other parties must be in the matter in
litigation and of such direct and immediate character that
the intervenor will either gain or lose by the direct legal
operation and effect of the judgment.
 NOTE: The petitioners, likewise, cannot claim the right to
intervene on the strength of the transfer of shares allegedly
executed by the late Senator. The corporation did not keep
books and records. Perforce, no transfer was ever recorded,
much less effected as to prejudice third parties. The transfer
must be registered in the books of the corporation to affect
third persons. The law on corporations is explicit. "No
transfer, however, shall be valid, except as between the
 parties, until the transfer is recorded in the books of the
corporation showing the names of the parties to the
transaction, the date of the transfer, the number of the
certificate or certificates and the number of shares
transferred."
G.R. No. 82797 February 27, 1991
GOOD EARTH EMPORIUM INC., and LIM KA PING, petitioners, vs.
HONORABLE COURT OF APPEALS and ROCES-REYES REALTY INC.,
respondents.
A Lease Contract was entered into between ROCES-REYES REALTY,
as lessor, and GOOD EARTH EMPORIUM (GEE), as lessee, for a term
of three years beginning November 1, 1981 and ending October 31,
1984 at a monthly rental of P65,000.00.
The lessee had defaulted in the payment of rentals, thus ROCES filed
an ejectment case (Unlawful Detainer) against GEE. The MTC
eventually ruled in favor of ROCES. A writ of execution was issued
by the MTC. The RTC, however, reversed the MTC decision. It
declared the judgment debt as having been fully paid. It found that
the amount of P1 million evidenced by a receipt (Exhibit "I") and
another P1 million evidenced by a pacto de retro sale instrument
were in full satisfaction of the judgment obligation. CA reinstated
the MTC decision.
ISSUE: WON there was full satisfaction of the judgment debt in
favor of ROCES which would justify the quashing of the Writ of
Execution.
HELD: NO. (GEE FAILED TO PROVE PAYMENT)
 There is no indication in the subject receipt that it was in
payment of the judgment obligation. Likewise, there is no
indication in the pacto de retro sale which was drawn in
favor of Jesus Marcos Roces and Marcos V. Roces, and not
ROCES Corporation, that the obligation embodied therein
had something to do with GEE’s judgment obligation with
ROCES.
 The supposed payments were not made to ROCES or to its
successor-in-interest, nor is there any evidence that the
payment was made to a person authorized to receive it.
o RTC merely inferred the same from Marcos Roces
having signed the Lease Contract as President. The
latter, however, was no longer President or even an
officer of ROCES at the time he received the money
and signed the sale with pacto de retro.
o Marcos Roces, in fact, denied being in possession of
authority to receive payment for ROCES 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 ROCES.
o On the other hand, Jesus Marcos Roces testified
that the amount of P1 million evidenced by the
subject receipt is the payment for a loan extended
by him and Marcos Roces in favor of Lim Ka Ping.
The receipt itself shows that they acknowledged
payment of the loan in their names and in no other
capacity.
 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 one's property
 also of the corporation, and vice-versa, for they are
separate entities. Shareowners are in no legal sense the
owners of corporate property (or credits) 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 stockholder's debt or
credit that of the corporation.
 The fact that at the time payment was made to the two
Roces brothers, GEE was also indebted to respondent
corporation for a larger amount, is not supportive of the
RTC's conclusions that the payment was in favor of the
latter, especially in the case at bar where the amount was
not receipted for by ROCES Corporation and there is
absolutely no indication in the receipt presented from
which it can be reasonably inferred, that said payment was
in satisfaction of the judgment debt. Likewise, no such
inference can be made from the execution of the pacto de
retro sale which was not made in favor of ROCES
Corporation but in favor of the two Roces brothers in their
individual capacities.
 NOTE: Article 1240, NCC: Payment shall be made to the
person in whose favor the obligation has been constituted,
or his successor in interest, or any person authorized to
receive it.
 NOTE: The totality of the amount covered by the evidence
presented in the sum of P2 million, far exceeds petitioners'
judgment obligation to ROCES by P440,000.00, which
militates against the claim of petitioner that the aforesaid
amount (P2M) was in full payment of the judgment
obligation. Their explanation that the excess is interest and
advance rentals for an extension of the lease contract is
belied by the absence of any interest awarded in the case
and of any agreement as to the extension of the lease.
 NOTE: When the existence of a debt is fully established by
the evidence, the burden of proving that it has been
extinguished by payment devolves upon the debtor who
offers such a defense.
DE FACTO: RATIONALE BEHIND THE DOCTRINE
G.R. No. L-30188 October 2, 1928
FELIPE TAYKO, EDUARDO BUENO, BAUTISTA TAYKO, BERNARDO
SOLDE and VICENTE ELUM, petitioners, vs. NICOLAS CAPISTRANO,
ALFREDO B. CACNIO, and JUAN GADIANI, respondents.
This is a petition for prohibition to enjoin Judge Nicolas Capistrano
from taking cognizance of certain election casese where the
petitioners herein are parties. The petitioners allege that Judge
Capistrano was appointed judge of the CFI Negros Oriental. He was
to hold office until he should reach the age of 65 years. Now that he
has reached that age, he is disqualified from acting as a judge of the
CFI under the provisions of section 148 of the Administrative Code.
The petitioners further allege that in view of the many election
protests and criminal cases for violation of the election law filed in
the Negros Oriental CFI arising from the last election of June 5,
1928, Judge Sixto de la Costa was duly designated as auxiliary judge
of Negros Oriental. There was an understanding between Judge
Capistrano and Judge de la Costa that the latter would take
cognizance of all election protests and criminal actions arising from
the last general election, while the former would hear the ordinary
cases pending. Nonetheless, Judge Capistrano still tried election
protests and criminal actions in said court.
Further, Judge Capistrano, in spite of the fact that he was holding
and now pretending to hold the office of CFI judge, took great
interest and active part in the filing of criminal charges against the
petitioners herein to the extent of appointing deputy fiscals when
the provincial fiscal refused to file criminal charges against them for
violation of the election law for lack of sufficient evidence to sustain
the same.
Lastly, petitioners allege that Capistrano is neither a judge de jure
nor de facto, but that, notwithstanding this fact, he continues to
hold the office of judge and pretends to be duly qualified to hold
such office.
ISSUE: WON Capistrano could still continue public office.
HELD: YES.
In view of Section 148 of the Admin Code, it is evident that Judge
Capistrano is no longer a judge de jure. Nonetheless, he is still a
judge de facto.
A de facto judge is one who exercises the duties of a judicial office
under color of an appointment or election thereto. He differs, on
the one hand, from a mere usurper who undertakes to act officially
without any color of right, and on the other hand, from a judge de
jure who is in all respects legally appointed and qualified and whose
term of office has not expired.
There is a general rule that an incumbent of an office will hold over
after the conclusion of his term until the election and qualification
of a successor. When a judge in good faith remains in office after his
title has ended, he is a de facto officer.
Judge Capistrano’s term of office may have expired, but his
successor has not been appointed, and as good faith is presumed,
he must be regarded as holding over in good faith. The contention
of the petitioners that the auxiliary judge present in the district
must be considered the regular judge is erroneous.
 NOTE: A judge de facto assumes the exercise of a part of the
prerogative of sovereignty, and the legality of that
assumption is open to the attack of the sovereign power
alone. Accordingly, it is a well established principle that the
official acts of a de facto judge are just as valid for all
purposes as those of a de jure judge, so far as the public or
third persons who are interested therein are concerned.
The principle is one founded in policy and convenience, for
the right of no one claiming a title or interest under or
through the proceedings of an officer having an apparent
authority to act would be safe, if it were necessary in
every case to examine the legality of the title of such
officer up to its original source, and the title or interest of
such person were held to be invalidated by some
accidental defect or flaw in the appointment, election or
qualification of such officer, or in the rights of those from
whom his appointment or election emanated; nor could
the supremacy of the laws be maintained, or their
execution enforced, if the acts of the judge having a
colorable, but not a legal title, were to be deemed invalid.”
  NOTE: The acts of a justice de facto cannot be called in
question in any suit to which he is not a party. The official
acts of a de facto justice cannot b attacked collaterally. The
title of a de facto officer cannot be indirectly questioned in
a proceeding to obtain a writ of prohibition to prevent him
from doing an official act, nor in a suit to enjoin the
collection of a judgment rendered by him. Having at least
colorable right to the office, his title can be determined only
in a quo warranto proceeding or information in the nature
of a quo warranto at suit of the sovereign.
 NOTE: (1st allegation)A writ of prohibition to a judge of an
interior court will only lie in cases where he acts without or
in excess of his jurisdiction. A mere "understanding" as to
the distribution of cases for trial did not deprive the
respondent judge of the jurisdiction conferred upon him by
law.
 NOTE: (2nd allegation) The determination of the question as
to whether the fiscal has failed to discharge his duty in the
prosecution of a crime necessarily lie within the sound
discretion of the presiding judge, and there is no allegation
in the petition that such discretion was abused in the
present instance. In appointing an acting fiscal, the
respondent judge was well within his jurisdiction.
DE FACTO: REQUISITES
G.R. No. L-2598 June 29, 1950
C. ARNOLD HALL and BRADLEY P. HALL, petitioners, vs. EDMUNDO
S. PICCIO, Judge of the Court of First Instance of Leyte, FRED
BROWN, respondents.
On 28 May 1947, C. Arnold Hall and Bradley P. Hall, and Fred Brown,
Emma Brown, Hipolita D. Chapman and Ceferino S. Abella, signed
and acknowledged in Leyte, the article of incorporation of the Far
Eastern Lumber and Commercial Co., Inc., organized to engage in a
general lumber business to carry on as general contractors,
operators and managers, etc. Attached to the article was an
affidavit of the treasurer stating that 23,428 shares of stock had
been subscribed and fully paid with certain properties transferred
to the corporation described in a list appended thereto.
Immediately after the execution of said articles of incorporation,
the corporation proceeded to do business with the adoption of by-
laws and the election of its officers.
On 2 December 1947, the said articles of incorporation were filed in
the office of the Securities and Exchange Commissioner, for the
issuance of the corresponding certificate of incorporation. On 22
March 1948, pending action on the articles of incorporation by the
aforesaid governmental office, the respondents filed an action to
cause the dissolution of the Far Eastern Lumber, alleging among
other things that the corporation was an unregistered partnership;
that they wished to have it dissolved because of bitter dissension
among the members, mismanagement and fraud by the managers
and heavy financial losses.
Judge Edmund Piccio eventually ordered the dissolution of the
company; and appointed Pedro A. Capuciong as the receiver of the
properties thereof. Hall and Hall offered to file a counter-bond for
the discharge of the receiver, but Judge Piccio refused to accept the
offer and to discharge the receiver.
Hall and Hall now allege mainly that the court had no jurisdiction to
decree the dissolution of the company, because it being a de facto
corporation, dissolution thereof may only be ordered in a quo
warranto proceeding instituted in accordance with the Corporation
Law (Sec. 20).
ISSUE: WON the respondents may file an action to cause the
dissolution of the Far Eastern Lumber, without State intervention.
HELD: YES
The SEC has not issued the corresponding certificate of
incorporation. The personality of a corporation begins to exist only
from the moment such certificate is issued — not before. Not
having obtained the certificate of incorporation, Far Eastern Lumber
— even its stockholders — may not probably claim "in good faith"
to be a corporation. Under the Corporation Law, it is to be noted
that it is the issuance of a certificate of incorporation by the
Director of the Bureau of Commerce and Industry which calls a
corporation into being. The immunity if collateral attack is granted
to corporations "claiming in good faith to be a corporation under
this act." Such a claim is compatible with the existence of errors and
irregularities; but not with a total or substantial disregard of the
law. Unless there has been an evident attempt to comply with the
law the claim to be a corporation "under this act" could not be
made "in good faith."
This is not a suit in which the corporation is a party. This is a
litigation between stockholders of the alleged corporation, for the
purpose of obtaining its dissolution. Even the existence of a de jure
corporation may be terminated in a private suit for its dissolution
between stockholders, without the intervention of the state.
BENGUET CONSOLIDATED vs. PINEDA
Benguet Consolidated Mining Company was organized in 1903
under the Spanish Code of Commerce of 1886 as a sociedad
anonima. It was agreed by the incorporators that Benguet Mining
was to exist for 50 years.
In 1906, Act 1459 (Corporation Law) was enacted which superseded
the Code of Commerce of 1886. Act 1459 essentially introduced the
American concept of a corporation. The purpose of the law, among
others, is to eradicate the Spanish Code and make sociedades
anonimas obsolete.
In 1953, the board of directors of Benguet Mining submitted to the
Securities and Exchange Commission an application for them to be
allowed to extend the life span of Benguet Mining. Then
Commissioner Mariano Pineda denied the application as it ruled
that the extension requested is contrary to Section 18 of the
Corporation Law of 1906 which provides that the life of a
corporation shall not be extended by amendment beyond the time
fixed in their original articles.
Benguet Mining contends that they have a vested right under the
Code of Commerce of 1886 because they were organized under said
law; that under said law, Benguet Mining is allowed to extend its life
by simply amending its articles of incorporation; that the prohibition
in Section 18 of the Corporation Code of 1906 does not apply to
sociedades anonimas already existing prior to the Law’s enactment;
that even assuming that the prohibition applies to Benguet Mining,
it should be allowed to be reorganized as a corporation under the
said Corporation Law.

ISSUE: Whether or not Benguet Mining is correct.

HELD: No. Benguet Mining has no vested right to extend its life. It is
a well settled rule that no person has a vested interest in any rule of
law entitling him to insist that it shall remain unchanged for his
benefit. Had Benguet Mining agreed to extend its life prior to the
passage of the Corporation Code of 1906 such right would have
vested. But when the law was passed in 1906, Benguet Mining was
already deprived of such right.

To allow Benguet Mining to extend its life will be inimical to the

purpose of the law which sought to render obsolete sociedades
anonimas. If this is allowed, Benguet Mining will unfairly do
something which new corporations organized under the new
Corporation Law can’t do – that is, exist beyond 50 years. Plus, it
would have reaped the benefits of being a sociedad anonima and
later on of being a corporation. Further, under the Corporation
Code of 1906, existing sociedades anonimas during the enactment
of the law must choose whether to continue as such or be organized
as a corporation under the new law. Once a sociedad anonima
chooses one of these, it is already proscribed from choosing the
other. Evidently, Benguet Mining chose to exist as a sociedad
anonima hence it can no longer elect to become a corporation when
its life is near its end.