Professional Documents
Culture Documents
L-23145
administrator-appellee.
FERNANDO, J.:
Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County Trust
Company of New York, United States of America, of the estate of the deceased Idonah Slade
Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary administrator in
the Philippines the stock certificates owned by her in a Philippine corporation, Benguet
Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court, then presided by
the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order of this tenor: "After
considering the motion of the ancillary administrator, dated February 11, 1964, as well as the
opposition filed by the Benguet Consolidated, Inc., the Court hereby (1) considers as lost for all
purposes in connection with the administration and liquidation of the Philippine estate of Idonah
Slade Perkins the stock certificates covering the 33,002 shares of stock standing in her name in the
books of the Benguet Consolidated, Inc., (2) orders said certificates cancelled, and (3) directs said
corporation to issue new certificates in lieu thereof, the same to be delivered by said corporation to
either the incumbent ancillary administrator or to the Probate Division of this Court." 1
From such an order, an appeal was taken to this Court not by the domiciliary administrator, the
County Trust Company of New York, but by the Philippine corporation, the Benguet Consolidated,
Inc. The appeal cannot possibly prosper. The challenged order represents a response and
expresses a policy, to paraphrase Frankfurter, arising out of a specific problem, addressed to the
attainment of specific ends by the use of specific remedies, with full and ample support from legal
doctrines of weight and significance.
The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc., Idonah
Slade Perkins, who died on March 27, 1960 in New York City, left among others, two stock
certificates covering 33,002 shares of appellant, the certificates being in the possession of the
County Trust Company of New York, which as noted, is the domiciliary administrator of the estate of
the deceased.2 Then came this portion of the appellant's brief: "On August 12, 1960, Prospero
Sanidad instituted ancillary administration proceedings in the Court of First Instance of Manila;
Lazaro A. Marquez was appointed ancillary administrator, and on January 22, 1963, he was
substituted by the appellee Renato D. Tayag. A dispute arose between the domiciary administrator in
New York and the ancillary administrator in the Philippines as to which of them was entitled to the
possession of the stock certificates in question. On January 27, 1964, the Court of First Instance of
Manila ordered the domiciliary administrator, County Trust Company, to "produce and deposit" them
with the ancillary administrator or with the Clerk of Court. The domiciliary administrator did not
comply with the order, and on February 11, 1964, the ancillary administrator petitioned the court to
"issue an order declaring the certificate or certificates of stocks covering the 33,002 shares issued in
the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or] considered as
lost."3
It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial" as far
as it is concerned as to "who is entitled to the possession of the stock certificates in question;
appellant opposed the petition of the ancillary administrator because the said stock certificates are in
apparent impunity, this is it. What is thus most obvious is4that this particular alleged error does not
carry persuasion.
3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking
one of the provisions of its by-laws which would set forth the procedure to be followed in case of a
lost, stolen or destroyed stock certificate; it would stress that in the event of a contest or the
pendency of an action regarding ownership of such certificate or certificates of stock allegedly lost,
stolen or destroyed, the issuance of a new certificate or certificates would await the "final decision by
[a] court regarding the ownership [thereof]." 15
Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law. It is
admitted that the foreign domiciliary administrator did not appeal from the order now in question.
Moreover, there is likewise the express admission of appellant that as far as it is concerned, "it is
immaterial ... who is entitled to the possession of the stock certificates ..." Even if such were not the
case, it would be a legal absurdity to impart to such a provision conclusiveness and finality.
Assuming that a contrariety exists between the above by-law and the command of a court decree,
the latter is to be followed.
It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which,
however, the judiciary must yield deference, when appropriately invoked and deemed applicable. It
would be most highly unorthodox, however, if a corporate by-law would be accorded such a high
estate in the jural order that a court must not only take note of it but yield to its alleged controlling
force.
The fear of appellant of a contingent liability with which it could be saddled unless the appealed
order be set aside for its inconsistency with one of its by-laws does not impress us. Its obedience to
a lawful court order certainly constitutes a valid defense, assuming that such apprehension of a
possible court action against it could possibly materialize. Thus far, nothing in the circumstances as
they have developed gives substance to such a fear. Gossamer possibilities of a future prejudice to
appellant do not suffice to nullify the lawful exercise of judicial authority.
4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with
implications at war with the basic postulates of corporate theory.
We start with the undeniable premise that, "a corporation is an artificial being created by operation of
law...."16 It owes its life to the state, its birth being purely dependent on its will. As Berle so aptly
stated: "Classically, a corporation was conceived as an artificial person, owing its existence through
creation by a sovereign power."17As a matter of fact, the statutory language employed owes much to
Chief Justice Marshall, who in the Dartmouth College decision defined a corporation precisely as "an
artificial being, invisible, intangible, and existing only in contemplation of law." 18
The well-known authority Fletcher could summarize the matter thus: "A corporation is not in fact and
in reality a person, but the law treats it as though it were a person by process of fiction, or by
regarding it as an artificial person distinct and separate from its individual stockholders.... It owes its
existence to law. It is an artificial person created by law for certain specific purposes, the extent of
whose existence, powers and liberties is fixed by its charter." 19 Dean Pound's terse summary, a
juristic person, resulting from an association of human beings granted legal personality by the state,
puts the matter neatly.20
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote from
Friedmann, "is the reality of the group as a social and legal entity, independent of state recognition
and concession."21 A corporation as known to Philippine jurisprudence is a creature without any
existence until it has received the imprimatur of the state according to law. It is logically
That is all then that this case presents. It is obvious why6the appeal cannot succeed. It is always
easy to conjure extreme and even oppressive possibilities. That is not decisive. It does not settle the
issue. What carries weight and conviction is the result arrived at, the just solution obtained,
grounded in the soundest of legal doctrines and distinguished by its correspondence with what a
sense of realism requires. For through the appealed order, the imperative requirement of justice
according to law is satisfied and national dignity and honor maintained.
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of First
Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appelant Benguet
Consolidated, Inc.
After the election, it was resolved that after the meeting, the
11new board of directors shall convene for
the election of officers.
xxx. [7]
Consequently, on 10 April 1987, private respondents instituted a complaint with the SEC (SEC
Case No. 3161) praying in the main, that the election of petitioners to the Board of Directors be
annulled.
Private respondents alleged that the petitioners-nominees were not legitimate stockholders of
Tormil because the assignment of shares to them violated the minority stockholders right of preemption as provided in the corporations articles and by-laws.
Upon motion of petitioners, SEC Cases Nos. 3153 and 3161 were consolidated for joint hearing
and adjudication.
On 6 March 1991, the Panel of Hearing Officers of the SEC rendered a decision in favor of
private respondents. The dispositive portion thereof states, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering and directing the respondents, particularly respondent Manuel A. Torres, Jr., to turn over
and deliver to TORMIL through its Corporate Secretary, Ma. Cristina T. Carlos: (a) the originals of the
Deeds of Assignment dated July 13 and 24, 1984 together with the owners duplicates of Transfer
Certificates of Title Nos. 374079 of the Registry of Deeds for Makati, and 41527, 41528 and 41529
of the Registry of Deeds for Pasay City and/or to cause the formal registration and transfer of title in
and over such real properties in favor of TORMIL with the proper government agency; (b) all
corporate books of account, records and papers as may be necessary for the conduct of a
comprehensive audit examination, and to allow the examination and inspection of such accounting
books, papers and records by any or all of the corporate directors, officers and stockholders and/or
their duly authorized representatives or auditors;
2. Declaring as permanent and final the writ of preliminary injunction issued by the Hearing Panel on
February 13, 1989;
3. Declaring as null and void the election and appointment of respondents to the Board of Directors
and executive positions of TORMIL held on March 25, 1987, and all their acts and resolutions made
for and in behalf of TORMIL by authority of and pursuant to such invalid appointment & election held
on March 25, 1987;
4. Ordering the respondents jointly and severally, to pay the complainants the sum of ONE
HUNDRED THOUSAND PESOS (P100,000.00) and by way of attorneys fees. [8]
Petitioners promptly appealed to the SEC en banc (docketed as SEC-AC No. 339). Thereafter,
on 3 April 1991, during the pendency of said appeal, petitioner Manuel A. Torres, Jr. died. However,
notice thereof was brought to the attention of the SEC not by petitioners counsel but by private
respondents in a Manifestation dated 24 April 1991.[9]
On 8 June 1993, petitioners filed a Motion to Suspend Proceedings on grounds that no
administrator or legal representative of the late Judge Torres estate has yet been appointed by the
Regional Trial Court of Makati where Sp. Proc. No. M-1768 (In Matter of the Issuance of the Last Will
(3)
13
21
Dissatisfied with this ruling, the PSE filed with the Court
23 of Appeals on May 17, 1996 a Petition
for Review (with application for Writ of Preliminary Injunction and Temporary Restraining Order),
assailing the above mentioned orders of the SEC, submitting the following as errors of the SEC:
I. SEC COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN ISSUING
THE ASSAILED ORDERS WITHOUT POWER, JURISDICTION, OR AUTHORITY; SEC
HAS NO POWER TO ORDER THE LISTING AND SALE OF SHARES OF PALI WHOSE
ASSETS ARE SEQUESTERED AND TO REVIEW AND SUBSTITUTE DECISIONS OF PSE
ON LISTING APPLICATIONS;
II. SEC COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION IN FINDING
THAT PSE ACTED IN AN ARBITRARY AND ABUSIVE MANNER IN DISAPPROVING PALIS
LISTING APPLICATION;
III. THE ASSAILED ORDERS OF SEC ARE ILLEGAL AND VOID FOR ALLOWING FURTHER
DISPOSITION OF PROPERTIES IN CUSTODIA LEGIS AND WHICH FORM PART OF
NAVAL/MILITARY RESERVATION; AND
IV. THE FULL DISCLOSURE OF THE SEC WAS NOT PROPERLY PROMULGATED AND ITS
IMPLEMENTATION AND APPLICATION IN THIS CASE VIOLATES THE DUE PROCESS
CLAUSE OF THE CONSTITUTION.
On June 4, 1996, PALI filed its Comment to the Petition for Review and subsequently, a
Comment and Motion to Dismiss. On June 10, 1996, PSE filed its Reply to Comment and Opposition
to Motion to Dismiss.
On June 27, 1996, the Court of Appeals promulgated its Resolution dismissing the PSEs
Petition for Review. Hence, this Petition by the PSE.
The appellate court had ruled that the SEC had both jurisdiction and authority to look into the
decision of the petitioner PSE, pursuant to Section 3 [3] of the Revised Securities Act in relation to
Section 6(j) and 6(m)[4] of P.D. No. 902-A, and Section 38(b)[5] of the Revised Securities Act, and for
the purpose of ensuring fair administration of the exchange. Both as a corporation and as a stock
exchange, the petitioner is subject to public respondents jurisdiction, regulation and
control. Accepting the argument that the public respondent has the authority merely to supervise or
regulate, would amount to serious consequences, considering that the petitioner is a stock exchange
whose business is impressed with public interest. Abuse is not remote if the public respondent is left
without any system of control. If the securities act vested the public respondent with jurisdiction and
control over all corporations; the power to authorize the establishment of stock exchanges; the right
to supervise and regulate the same; and the power to alter and supplement rules of the exchange in
the listing or delisting of securities, then the law certainly granted to the public respondent the
plenary authority over the petitioner; and the power of review necessarily comes within its authority.
All in all, the court held that PALI complied with all the requirements for public listing, affirming
the SECs ruling to the effect that:
x x x the Philippine Stock Exchange has acted in an arbitrary and abusive manner in disapproving
the application of PALI for listing of its shares in the face of the following considerations:
1. PALI has clearly and admittedly complied with the Listing Rules and full disclosure requirements of
the Exchange;
30
31
33
COA may charge GOCCs actual audit cost but GOCCs must
42 pay the same directly to COA and not
to COA auditors. Petitioner has not alleged that COA charges LWDs auditing fees in excess of COAs
actual audit cost. Neither has petitioner alleged that the auditing fees are paid by LWDs directly to
individual COA auditors. Thus, petitioners contention must fail.
WHEREFORE, the Resolution of the Commission on Audit dated 3 January 2000 and the
Decision dated 30 January 2001 denying petitioners Motion for Reconsideration are
AFFIRMED. The second sentence of Section 20 of Presidential Decree No. 198 is declared VOID for
being inconsistent with Sections 2 (1) and 3, Article IX-D of the Constitution. No costs.
SO ORDERED.
December 2, 1924
43
NATIONAL
COAL
vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellant.
Attorney-General
Villa-Real
Perfecto J. Salas Rodriguez for appellee.
for
COMPANY, plaintiff-appellee,
appellant.
JOHNSON, J.:
This action was brought in the Court of First Instance of the City of Manila on the 17th day of July,
1923, for the purpose of recovering the sum of P12,044.68, alleged to have been paid under protest
by the plaintiff company to the defendant, as specific tax on 24,089.3 tons of coal. Said company is a
corporation created by Act No. 2705 of the Philippine Legislature for the purpose of developing the
coal industry in the Philippine Islands and is actually engaged in coal mining on reserved lands
belonging to the Government. It claimed exemption from taxes under the provision of sections 14
and 15 of Act No. 2719, and prayed for a judgment ordering the defendant to refund to the plaintiff
said sum of P12,044.68, with legal interest from the date of the presentation of the complaint, and
costs against the defendant.
The defendant answered denying generally and specifically all the material allegations of the
complaint, except the legal existence and personality of the plaintiff. As a special defense, the
defendant alleged (a) that the sum of P12,044.68 was paid by the plaintiff without protests, and (b)
that said sum was due and owing from the plaintiff to the Government of the Philippine Islands under
the provisions of section 1496 of the Administrative Code and prayed that the complaint be
dismissed, with costs against the plaintiff.
Upon the issue thus presented, the case was brought on for trial. After a consideration of the
evidence adduced by both parties, the Honorable Pedro Conception, judge, held that the words
"lands owned by any person, etc.," in section 15 of Act No. 2719 should be understood to mean
"lands held in lease or usufruct," in harmony with the other provision of said Act; that the coal lands
possessed by the plaintiff, belonging to the Government, fell within the provisions of section 15 of Act
No. 2719; and that a tax of P0.04 per ton of 1,016 kilos on each ton of coal extracted therefrom, as
provided in said section, was the only tax which should be collected from the plaintiff; and sentenced
the defendant to refund to the plaintiff the sum of P11,081.11 which is the difference between the
amount collected under section 1496 of the Administrative Code and the amount which should have
been collected under the provisions of said section 15 of Act No. 2719. From that sentence the
defendant appealed, and now makes the following assignments of error:
I. The court below erred in holding that section 15 of Act No. 2719 does not refer to coal lands owned
by persons and corporations.
II. The court below erred in holding that the plaintiff was not subject to the tax prescribed in section
1496 of the Administrative Code.
The question confronting us in this appeal is whether the plaintiff is subject to the taxes under
section 15 of Act No. 2719, or to the specific taxes under section 1496 of the Administrative Code.
The plaintiff corporation was created on the 10th day of March, 1917, by Act No. 2705, for the
purpose of developing the coal industry in the Philippine Island, in harmony with the general plan of
47
MARILAO
WATER
CONSUMERS
ASSOCIATION,
INC., petitioners,
vs.
INTERMEDIATE APPELLATE
COURT, MUNICIPALITY OF MARILAO,
BULACAN,
SANGGUNIANG BAYAN, MARILAO, BULACAN, and MARILAO WATER DISTRICT, respondents.
Magtanggol C. Gunigundo for petitioner.
Prospero A. Crescini for Marilao Water District.
NARVASA, J.:p
Involved in this appeal is the determination of which triburial has jurisdiction over the dissolution of a
water district organized and operating as a quasi-public corporation under the provisions of
Presidential Decree No. 198, as amended; 1 the Regional Trial Court, or the Securities & Exchange
Commission.
PD 198 authorizes the formation, lays down the powers and functions, and governs the operation of
water districts throughout the country; it is "the source of authorization and power to form and
maintain a (water) district." Once formed, it says, a district is subject to its provisions and is not
under the jurisdiction of any political subdivision. 2
Under PD 198, water districts may be created by the different local legislative bodies by the passage
of a resolution to this effect, subject to the terms of the decree. The primary function of these water
districts is to sell water to residents within their territory, under such schedules of rates and charges
as may be determined by their boards. 3 They shall manage, administer, operate and maintain all
watersheds within their territorial boundaries, safeguard and protect the use of the waters therein,
supervise and control structures within their service areas, and prohibit any person from selling or
otherwise disposing of water for public purposes within their service areas where district facilities are
available to provide such service. 4
The decree specifies the terms under which water districts may be formed and operate. It
prescribes, particularly
a) the name by which a water district shad be known, which shall be contained in the enabling
resolution, and shall include the name of the city, municipality, or province, or region thereof, served
by said system, followed by the words, 'Water District;' 5
b) the number and qualifications of the members of the boards of directors, with the date of
expiration of term of office for each; 6 the manner of their selection and initial appointment by the
head of the local political subdivision; 7 their terms of office (which shall be in staggered periods of
two, four and six years); 8 the manner of filling up vacancies in the board; 9 the compensation and
liabilities of members of the board. 10 The resolution shall contain a "statement that the district may
only be dissolved on the grounds and under the conditions set forth in Section 44" of the law, but
nothing in the resolution of formation, the decree adds, "shall state or infer that the local legislative
body has the power to dissolve, alter or affect the district beyond that specifically provided for in this
Act." 11
53
1) another public entity has acquired the assets of the district and has assumed all obligations and
liabilities attached thereto; and
2) all bondholders and other creditors have been notified and consent to said transfer and
dissolution;
b) the commencement by the water district in a court of competent jurisdiction of a proceeding to
obtain a declaration that "said transfer and dissolution are in the best interest of the public;
2) after compliance with the foregoing requisites, the adoption by the board of directors of the water
district of a resolution dissolving the water district and its submission to the Sangguniang Bayan
concerned for approval;
3) submission of the resolution of the Sangguniang Bayan dissolving the water district to the head of
the local government concerned for approval, and ultimately to the LWUA for final approval and filing.
The Consumer Association's action therefore is, in fine, in the nature of a mandamus suit, seeking to
compel the board of directors of the Marilao Water District, and its alleged co-conspirators, the
Sangguniang Bayan and the Mayor of Marilao to go through the process above described for the
dissolution of the water district. In this sense, and indeed, taking account of the nature of the
proceedings for dissolution just described, it seems plain that the case does not fall within the limited
jurisdiction of the SEC., but within the general jurisdiction of Regional Trial Courts.
WHEREFORE, the Decision of the Intermediate Appellate Court of September 10, 1985 affirming
that of the Regional Trial Court of June 8, 1984 is REVERSED and SET ASIDE, and the case is
remanded to the Regional Trial Court for further proceedings and adjudication in accordance with
law. No costs.
SO ORDERED.
54
SAPPARI K. SAWADJAAN, petitioner, vs. THE HONORABLE COURT OF APPEALS, THE CIVIL
SERVICE COMMISSION and AL-AMANAH INVESTMENT BANK OF THE
PHILIPPINES, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court of the Decision [1] of the Court
of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and No. 95-2754 of the Civil Service
Commission (CSC) dated 11 August 1994 and 11 April 1995, respectively, which in turn affirmed
Resolution No. 2309 of the Board of Directors of the Al-Amanah Islamic Investment Bank of the
Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty of Dishonesty in the
Performance of Official Duties and/or Conduct Prejudicial to the Best Interest of the Service and
dismissing him from the service, and its Resolution [2] of 15 December 1999 dismissing petitioners
Motion for Reconsideration.
The records show that petitioner Sappari K. Sawadjaan was among the first employees of the
Philippine Amanah Bank (PAB) when it was created by virtue of Presidential Decree No. 264 on 02
August 1973. He rose through the ranks, working his way up from his initial designation as security
guard, to settling clerk, bookkeeper, credit investigator, project analyst, appraiser/ inspector, and
eventually, loans analyst.[3]
In February 1988, while still designated as appraiser/investigator, Sawadjaan was assigned to
inspect the properties offered as collaterals by Compressed Air Machineries and Equipment
Corporation (CAMEC) for a credit line of Five Million Pesos (P5,000,000.00). The properties
consisted of two parcels of land covered by Transfer Certificates of Title (TCTs) No. N-130671 and
No. C-52576. On the basis of his Inspection and Appraisal Report, [4] the PAB granted the loan
application. When the loan matured on 17 May 1989, CAMEC requested an extension of 180 days,
but was granted only 120 days to repay the loan.[5]
In the meantime, Sawadjaan was promoted to Loans Analyst I on 01 July 1989. [6]
In January 1990, Congress passed Republic Act 6848 creating the AIIBP and repealing P.D. No.
264 (which created the PAB). All assets, liabilities and capital accounts of the PAB were transferred
to the AIIBP,[7] and the existing personnel of the PAB were to continue to discharge their functions
unless discharged.[8] In the ensuing reorganization, Sawadjaan was among the personnel retained
by the AIIBP.
When CAMEC failed to pay despite the given extension, the bank, now referred to as the AIIBP,
discovered that TCT No. N-130671 was spurious, the property described therein non-existent, and
that the property covered by TCT No. C-52576 had a prior existing mortgage in favor of one Divina
Pablico.
On 08 June 1993, the Board of Directors of the AIIBP created an Investigating Committee to
look into the CAMEC transaction, which had cost the bank Six Million Pesos (P6,000,000.00) in
losses.[9] The subsequent events, as found and decided upon by the Court of Appeals, [10] are as
follows:
The foregoing provision in the 1973 Constitution reproduced Section 8, Article XIV of the 1935
Constitution, viz:
Section 8. No franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens of the Philippines or to
corporations or other entities organized under the laws of the Philippines sixty per
centum of the capital of which is owned by citizens of the Philippines, nor shall such
franchise, certificate, or authorization be exclusive in character or for a longer period than
fifty years. No franchise or right shall be granted to any individual, firm, or corporation,
except under the condition that it shall be subject to amendment, alteration, or repeal by the
Congress when the public interest so requires. (Emphasis supplied)
Father Joaquin G. Bernas, S.J., a leading member of the 1986 Constitutional Commission, reminds
us that the Filipinization provision in the 1987 Constitution is one of the products of the spirit of
nationalism which gripped the 1935 Constitutional Convention. 25 The 1987 Constitution provides for
the Filipinization of public utilities by requiring that any form of authorization for the operation of
public utilities should be granted only to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty per centum of whose capital is owned by
such citizens. The provision is [an express] recognition of the sensitive and vital position of
public utilities both in the national economy and for national security. 26 The evident purpose of
the citizenship requirement is to prevent aliens from assuming control of public utilities, which may
be inimical to the national interest.27 This specific provision explicitly reserves to Filipino citizens
control of public utilities, pursuant to an overriding economic goal of the 1987 Constitution: to
conserve and develop our patrimony28 and ensure a self-reliant and independent national
economy effectively controlled by Filipinos.29
Any citizen or juridical entity desiring to operate a public utility must therefore meet the minimum
nationality requirement prescribed in Section 11, Article XII of the Constitution. Hence, for a
corporation to be granted authority to operate a public utility, at least 60 percent of its capital must be
owned by Filipino citizens.
72
MR. NOLLEDO. In teaching law, we are always faced with this question: Where do we base
the equity requirement, is it on the authorized capital stock, on the subscribed capital stock,
or on the paid-up capital stock of a corporation? Will the Committee please enlighten me on
this?
MR. VILLEGAS. We have just had a long discussion with the members of the team from the
UP Law Center who provided us a draft. The phrase that is contained here which we
adopted from the UP draft is 60 percent of voting stock.
MR. NOLLEDO. That must be based on the subscribed capital stock, because unless
declared delinquent, unpaid capital stock shall be entitled to vote.
MR. VILLEGAS. That is right.
MR. NOLLEDO. Thank you.
With respect to an investment by one corporation in another corporation, say, a corporation
with 60-40 percent equity invests in another corporation which is permitted by the
Corporation Code, does the Committee adopt the grandfather rule?
MR. VILLEGAS. Yes, that is the understanding of the Committee.
MR. NOLLEDO. Therefore, we need additional Filipino capital?
MR. VILLEGAS. Yes.48
xxxx
MR. AZCUNA. May I be clarified as to that portion that was accepted by the Committee.
MR. VILLEGAS. The portion accepted by the Committee is the deletion of the phrase voting
stock or controlling interest.
MR. AZCUNA. Hence, without the Davide amendment, the committee report would read:
corporations or associations at least sixty percent of whose CAPITAL is owned by such
citizens.
MR. VILLEGAS. Yes.
MR. AZCUNA. So if the Davide amendment is lost, we are stuck with 60 percent of the
capital to be owned by citizens.
MR. VILLEGAS. That is right.
MR. AZCUNA. But the control can be with the foreigners even if they are the minority.
Let us say 40 percent of the capital is owned by them, but it is the voting capital,
whereas, the Filipinos own the nonvoting shares. So we can have a situation where
the corporation is controlled by foreigners despite being the minority because they
have the voting capital. That is the anomaly that would result here.
MR. BENGZON. No, the reason we eliminated the word stock as stated in the 1973 and
1935 Constitutions is that according to Commissioner Rodrigo, there are associations
that do not have stocks. That is why we say CAPITAL.
MR. AZCUNA. We should not eliminate the phrase controlling interest.
MR. BENGZON. In the case of stock corporations, it is assumed. 49 (Emphasis supplied)
Mere legal title is insufficient to meet the 60 percent Filipino-owned capital required in the
Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60
percent of the voting rights, is required. The legal and beneficial ownership of 60 percent of the
In Manila Prince Hotel, even the Dissenting Opinion of then Associate Justice Reynato S. Puno, later
Chief Justice, agreed that constitutional provisions are presumed to be self-executing. Justice Puno
stated:
Courts as a rule consider the provisions of the Constitution as self-executing, rather than as
requiring future legislation for their enforcement. The reason is not difficult to discern. For if
they are not treated as self-executing, the mandate of the fundamental law ratified by
the sovereign people can be easily ignored and nullified by Congress. Suffused with
wisdom of the ages is the unyielding rule that legislative actions may give breath to
constitutional rights but congressional inaction should not suffocate them.
Thus, we have treated as self-executing the provisions in the Bill of Rights on arrests,
searches and seizures, the rights of a person under custodial investigation, the rights of an
accused, and the privilege against self-incrimination. It is recognized that legislation is
unnecessary to enable courts to effectuate constitutional provisions guaranteeing the
fundamental rights of life, liberty and the protection of property. The same treatment is
accorded to constitutional provisions forbidding the taking or damaging of property for public
use without just compensation. (Emphasis supplied)
Thus, in numerous cases,67 this Court, even in the absence of implementing legislation, applied
directly the provisions of the 1935, 1973 and 1987 Constitutions limiting land ownership to Filipinos.
In Soriano v. Ong Hoo,68 this Court ruled:
x x x As the Constitution is silent as to the effects or consequences of a sale by a citizen of
his land to an alien, and as both the citizen and the alien have violated the law, none of them
should have a recourse against the other, and it should only be the State that should be
allowed to intervene and determine what is to be done with the property subject of the
violation. We have said that what the State should do or could do in such matters is a matter