Manila Sanitarium vs.

Gabuco (7 SCRA 14 [1963])

FACTS: On December 19, 1956, respondent Fausto Gabuco (pharmacist) instituted with the respondent Court of
Industrial Relations, a complaint for Unfair Labor Practice against the petitioner, alleging

1. That the complainant being an employee of the respondents, together with some of his co-employees
proposed to respondents, through a petition in writing dated August 2, 1956 the return of the privileges
they usually enjoyed, i.e., (1) rental subsidies, (2) child allowance, (3) educational grant, and (4)
transportation allowance;

2. That on August 14, 1956, the complainant in company with his other co-employees in respondent
hospital convoked a meeting and organized a union in which he was elected President; and

3. That upon respondents' learning complainant's organization of union, they dismissed Fausto Gabuco on
September 30, 1956, in order to discourage union membership.

Herein petitioners defense (in their answer to the complaint): specifically denying the charges and averred that
Fausto Gabuco was removed because (1) his job was longer necessary and (2) he was given the equity separation
allowance; and that CIR did not have jurisdiction over the case, since the Manila Sanitarium and Hospital
was not established for profit or gain, and that aside from being operated for charitable purposes it is
also in the nature of an educational institution, for it educates and trains nurses.

Decision of the Court of Industrial Relations: holds that respondents are guilty of unfair labor practices within the
meaning of Section 4 (a), 1 and 4 of the Industrial Peace Act by discriminately discharging Fausto Gabuco on
September 30, 1956 for union activities. Hence, respondents are hereby ordered to reinstate fully and immediately
Fausto Gabuco with back wages from October 1, 1956 until reinstated without prejudice to seniority or other rights
privileges he enjoyed before his separation.

MR denied because the Memorandum in support of the MR was filed 1 day late.
Hence this Writ of Certiorari, claiming, that the CIR acted without or in excess of its jurisdiction and/or with grave
abuse of discretion, and committed substantial errors of law in:

1. Taking cognizance of the case subject of this petition and finding petitioner Manila Sanitarium &
Hospital, to be an institution operated for profit or gain;

2. Finding the herein petitioners guilty of unfair labor practices;

3. Ordering the herein petitioners to reinstate immediately Respondent Fausto Gabuco with back wages
from October 1, 1956 until fully reinstated; and

4. In not giving due course to petitioners' Motion for Reconsideration.

ISSUES: (1) Whether or not Manila Sanitarium and Hospital is an institution operated for profit or gain (2)
Whether or not the Court of Industrial Relations has jurisdiction over the case.
HELD: It appears that the petitioner Manila Sanitarium and Hospital is a purely charitable and
educational institution, not established or operated for profit or gain, the same is not governed by the
said Act, and the respondent Court has acted without jurisdiction and committed grave abuse of
discretion and substantial error of law when it took cognizance of the case, subject of the petition..

The evidence of record, mainly documentary, definitely proves that the Manila Sanitarium and Hospital is a non-
profit, non-industrial establishment. The Articles of Incorporation of the Philippine Union Mission Corporation of the
Seventh Day Adventists, a religious corporation, (Exhs. A-B), to which the hospital is a subsidiary, provides the
following

THIRD: That the general and principal purpose and object for which this corporation is formed is to teach
the people of all nations the commandments of God and the everlasting Gospel of Jesus Christ, and the
subsidiary purposes and objects for which this corporation is formed are: to issue notes, to grant annuities,
to acquire, possess, and hold title to real, personal and mixed estates, including public or private lands for
agricultural development and other purposes, water rights, mining rights, and forest rights, either in trust
 or otherwise, by gift, bequest, device, or purchase, and to have the power to sell and convey the same by
such instrument or conveyance as may be suitable; to establish and operate sanitariums, hospitals, clinics,
publishing houses, and book and periodical agencies; ....

As such religious corporation, the Seventh Day Adventists expressly declared that it is not for personal profit or gain
to any individual, but that all its property and effects must be used and expended in carrying into effect the aims
and objects of its existence.
The Operating Policy of the Seventh Day Adventists, (Article II), states that the object of the Hospital is "to advance
through medical missionary work, the cause and Kingdom of Jesus Christ .. it being understood that no dividends or
profits shall ever be declared to any constituency, boards or to any of its working force"
W.J. Hackett, Minister and President of the Philippine Union Mission Corporation of the Seventh Day Adventists,
Potenciano Romulo, Secretary of the same religious denomination and Dr. Rey Jutry, Chief Medical Staff and Member
of the Board of Management of the Manila Sanitarium and Hospital, testified in unison that the hospital was not
operated for private gain or profit. Their testimony has not been contradicted by respondent Fausto Gabuco.

With respect to its management, the respondent Court commented that this medical institution is operated in the
fashion of an ordinary private hospital, imposing medical and hospital fees. This must be conceded; for it is one way
of obtaining maximum efficiency in its service. The mere charging of medical and hospital fees for those
who can afford to pay, did not make the institution established for profit or gain. It had to meet
expenses for operation and maintenance, in order to carry its lofty purposes to serve suffering
humanity.
The petitioner hospital is not only established and run for religious purposes but it is also educational in the sense
that it trains and educates nurses and charitable and benevolent because it offers free medical assistance to
indigents. The fact that in the hospital, there is no separate place distinctly marked with the words "Free Ward,"
does not necessarily prove that the hospital was not giving free medical assistance for not admitting charity
patients therein.
It has not been shown that the petitioner-hospital, a non-stock corporation, ever declared dividends to
its members or that its property, effects or profit was used for personal or individual gain, and not for
the purpose or carrying out the objectives of the hospital itself.

Because of the conclusions reached, consideration of the other issues involved herein is deemed
unnecessary.

The decision sought to be reviewed is reversed, without pronouncement as to costs, reserving to the
respondent herein, Fausto Gabuco, the right to file the appropriate action, in the proper Court.

Collector of Internal Revenue vs. Club Filipino (5 SCRA 321 [1962])

Facts: As found by the Court of Tax Appeals, the "Club Filipino, Inc. de Cebu," (Club, for short), is a civic
corporation organized under the laws of the Philippines with an original authorized capital stock of P22,000.00,
which was subsequently increased to P200,000.00.
The Club owns and operates a club house, a bowling alley, a golf course (on a lot leased from the government), and
a bar-restaurant where it sells wines and liquors, soft drinks, meals and short orders to its members and their
guests. The bar-restaurant was a necessary incident to the operation of the club and its golf-course. The club is
operated mainly with funds derived from membership fees and dues.

In 1951. as a result of a capital surplus, arising from the re-valuation of its real properties, the value or price of
which increased, the Club declared stock dividends; but no actual cash dividends were distributed to the
stockholders.

In 1952, a BIR agent discovered that the Club has never paid percentage tax on the gross receipts of its bar and
restaurant, although it secured B-4, B-9(a) and B-7 licenses. In a letter dated December 22, 1852, the Collector of
Internal Revenue assessed against and demanded from the Club.

Issue: Whether or not the Club is a stock-corporation? If so, can it be subject to tax?

Held: For a stock corporation to exist, two requisites must be complied with, to wit: (1) a capital stock divided into
shares and (2) an authority to distribute to the holders of such shares, dividends or allotments of the surplus profits
on the basis of the shares held (sec. 3, Act No. 1459). In the case at bar, nowhere in its articles of incorporation or
by-laws could be found an authority for the distribution of its dividends or surplus profits. Strictly speaking, it
cannot, therefore, be considered a stock corporation, within the contemplation of the corporation law.

The bar and restaurant are necessary adjuncts of the Club to foster its purposes and the profits derived therefrom
are necessarily incidental to the primary object of developing and cultivating sports for the healthful recreation
and entertainment of the stockholders and members.
Having arrived at the conclusion that respondent Club is not engaged in the business as an operator of a bar and
restaurant, and therefore, not liable for fixed and percentage taxes, it follows that it is not liable for any penalty,
much less of a compromise penalty.

People vs. Menil (G.R. Nos. 115054-66, Sep.12, 1999)

FACTS: VICENTE Menil, Jr. and his wife, Adrian B. Menil, were the proprietors of a business operating under the
name ABM Appliance and Upholstery with offices at the Denso Building, Capitol Road, Surigao City. On July 15,
1989, they, through ushers and sales executives began soliciting investments from the general public in Surigao
City and its neighboring towns. They assured would be investors that their money would be multiplied ten-fold after
fifteen (15) calendar days.
Initially, the operation started with a few investors who invested small amounts. Gradually. the amounts invested
and the number of depositors increased. Sometime during the first week of August 1989 accused-appellant and his
wife, apparently to clothe their operations with legitimacy caused the incorporation of their business, under the
name ABM Development Center Inc. with the SEC. The ABM Development Center, Inc. was a non-stock corporation
with twelve (12) incorporators and trustees, including Vicente Menil, Jr. and his wife Adriana B. Menil. Adriana B.
Menil was likewise appointed as the treasurer of the non-stock corporation. The corporation had a total
capitalization of P12,000.00 and its purposes as stated in its Articles of Incorporation, are as follows:chanrob1es
virtua1 1aw 1ibrar
"1. To assist in the total development of community members morally, physically, educationally and
economically and socially towards their present and future progress;
2. To operate coordinate and/or organize community development centers;
3. To make or coordinate in the making of studies and researches;
4. To solicit, receive, channel and/or distribute donations, economic aids, grants, investments
in money or in kind; x x x

After sometime, daily investments amounting to millions of pesos were pouring into the offices of ABM Development
Center, Inc. and payments of the returns became delayed. On September 19, 1989 the ABM Development Center,
Inc. stopped releasing payments. The sales investors went to the offices of ABM Development Center Inc. to inquire
about the release of payments but there was no one around to address their complaints. The whereabouts of
accused-appellant and his wife was also unknown.

Consequently a case for large scale swindling was filed by the City Prosecutor of Surigao City against the accused-
appellant and his wife.

Trial court rendered a joint decision finding accused-appellant guilty of one count of large scale swindling and
thirteen (13) counts of estafa.

Spouses Contention: That there was no profit forthcoming can likewise be deduced from the fact that accused-
appellant was not engaged nor authorized to engage in any lucrative business to finance its operation. On this point
accused-appellant points out that under the Articles of Incorporation of ABM Development Center, Inc., he was
authorized to make or coordinate in the making of studies and researches" and "to solicit, receive, channel and/or
distribute donations, economic aids, grants investments in money or in kind. Likewise, he presented a Mayors
Permit that he claimed authorized him to engage in the investment business.

ISSUE: WON the investment transactions were legally bound by the Articles of Incorporation, authorized spouses
Menil to solicit money from general public.

RULING: NO. There is no merit in these contentions of Accused-Appellant. As proven by the prosecution the
incorporation of the ABM Development Center, Inc. on August 21, 1989 was undertaken by accused-appellant only
to give a semblance of legitimacy to its illegal operations. Accused-appellant started receiving investments from the
public as early as July 15, 1989 and yet it was only after he was warned by a representative of the Department of
Trade and Industry that his operation was illegal that he went about with the business of incorporating his
moneymaking scheme. Moreover, as borne out by the Articles of Incorporation, the ABM Development Center,
Inc. was incorporated as a non-stock corporation. As a non-stock corporation, ABM Development
Center, Inc. may only be formed or organized for charitable, religious, educational professional,
cultural, fraternal, literary, scientific, social, civic, or other similar purposes. It may not engage in
undertakings such as the investment business where profit is the main or underlying purpose. Although the non-
stock corporation may obtain profits as an incident to its operation such profits are not to be distributed among its
members but must be used for the furtherance of its purposes. 36 In the same vein, the Mayors Permit issued to
accused-appellant shows that he was only permitted to "act as dealer of appliances and upholstery." The permit did
not give accused-appellant authority to engage in the investment business.

Finally the fact that accused-appellant could not present any specific business plan or cite any donations or
bequests which he received to finance his money-making scheme clearly shows that the investment scheme which
he foisted on the unsuspecting public was fraudulent. It must be noted that according to the Articles of
Incorporation of ABM Development Center, Inc., its paid-up capital was only P11,000.00 and yet it was able to
transact business in terms of millions of pesos. It must likewise be stressed that accused-appellant refused to
answer when asked about the specifics of his business and about how he would be able to fulfill his obligation of
paying the promised exorbitant rates of return.

Republic vs. COCOFED (372 SCRA 462 [2001])

FACTS:
On the explicit premise that 'vast resources of the government have been amassed by former President
Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and abroad,' the Presidential
Commission on Good Government (PCGG) was created by Executive Order No. 1 to assist the President in the
recovery of the ill-gotten wealth thus accumulated whether located in the Philippines or abroad. Several executive
orders were then issued describing the properties to be recovered.Among the properties sequestered by the
Commission were shares of stock in the United Coconut Planters Bank (UCPB) registered in the names of the alleged
"one million coconut farmers," the so-called Coconut Industry Investment Fund companies (CIIF companies) and
Private Respondent Eduardo Cojuangco Jr.

Six years later, on February 13, 2001, the Board of Directors of UCPB received from the ACCRA Law Office a
letter written on behalf of the COCOFED and the alleged nameless one million coconut farmers, demanding the
holding of a stockholders' meeting for the purpose of, among others, electing the board of directors. In response,
the board approved a Resolution calling for a stockholders' meeting on March 6, 2001 at three o'clock in the
afternoon. However, the same was meted by a Class Action Omnibus Motion seeking to enjoin PCGG from voting the
UCPB shares of stock registered in the respective names of the more than one million coconut farmers; and to
enjoin the PCGG from voting the SMC shares registered in the names of the 14 CIF holding companies including
those registered in the name of the PCGG.

ISSUE: Whether or not PCGG may vote the sequestered UCPB shares while the main case for their reversion to the
State is pending in the Sandiganbayan.

RULING: YES.

The SC holds that the government should be allowed to continue voting those shares inasmuch as they
were purchased with coconut levy funds since those are prima facie public in character or, at the very least, are
"clearly affected with public interest."
The general rule is that the registered owner of the shares of a corporation exercises the right and the
privilege of voting. This principle applies even to shares that are sequestered by the government, over which the
PCGG as a mere conservator cannot, as a general rule, exercise acts of dominion. On the other hand, it is
authorized to vote these sequestered shares registered in the names of private persons and acquired with allegedly
ill-gotten wealth, if it is able to satisfy the two-tiered test. Unfortunately, this test is not applicable under the
circumstances of this case.
Hence, the Court granted PCGG the right to vote the sequestered shares because they appeared to be assets
belonging to the government itself.

Tan vs. Sycip (499 SCRA 216 [2006])

Facts: Petitioner Grace Christian High School is a non-stock, non-profit educational corporation with 15 regular
members, who also constitute the board of trustees. During the annual members meeting held on April 8, 1998,
there were only 11 living member-trustees, as 4 had already died. Out of the 11, 7 attended the meeting through
their respective proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr. over the objection of Atty.
Antonio C. Pacis, who argued that there was no quorum. SEC Hearing Officer Malthie G. Militar declared the April 8,
1996 meeting null and void for lack of quorum. She held that the basis for determining the quorum in a meeting of
 members should be their number as specified in the articles of incorporation, not simply the number of living
members. She explained that the qualifying phrase entitled to vote in Section 24 of the Corporation Code, which
provided the basis for determining a quorum for the election of directors or trustees, should be read together with
Section 89. The SEC en banc denied the appeal of petitioners and affirmed the decision of the hearing officer in
toto. It found to be untenable their contention that the word members as used in Section 52 of the Corporation
Code, referred only to the living members of a non-stock corporation. On appeal, the SC dismissed the appeal of
petitioners, because the verification and Certification of Non-Forum Shopping had been signed only by Atty. Sabino
Padilla Jr. No Special Power of Attorney had been attached to show his authority to sign for the rest of the
petitioners. Hence the instant Petition for review on Certiorari.

Issue: Whether or not in Non-Stock Corporations, dead members should still be counted in determination of
quorum for purpose of conducting the annual membersmeeting.

Held: Under Section 52 of the Corporation Code, the majority of the members representing the actual number of
voting rights, not the number or numerical constant that may originally be specified in the articles of incorporation,
constitutes the quorum. Membership in and all rights arising from a non-stock corporation are personal and non-
transferable, unless the articles of incorporation or the bylaws of the corporation provide otherwise. In other words,
the determination of whether or not dead members are entitled to exercise their voting rights (through their
executor or administrator), depends on those articles of incorporation or bylaws. Under the bylaws of GCHS,
membership in the corporation shall, among others, be terminated by the death of the member. Section 91 of the
Corporation Code further provides that termination extinguishes all the rights of a member of the corporation,
unless otherwise provided in the articles of incorporation or the bylaws. Applying Section 91 to the present case, we
hold that dead members who are dropped from the membership roster in the manner and for the cause provided
for in the bylaws of GCHS are not to be counted in determining the requisite vote in corporate matters or the
requisite quorum for the annual members meeting. With 11 remaining members, the quorum in the present case
should be 6. Therefore, there being a quorum, the annual members meeting, conducted with six members present,
was valid.

Gala vs. Ellice Agro-Industrial Corp. (418 SCRA 431 [2003])

Doctrine: The legal right of a taxpayer to reduce the amount of what otherwise, could be his taxes or altogether to
avoid them, by means which the law permits, could be doubted
Facts: The spouses Manuel and Alicia Gala and their children Guia Domingo, Ofelia Gala, Raul Gala and Rita Benson,
and their encargados (rough translation; representatives) VirgilioGaleon and Julian Jader, formed and organized Ellice
Agro Industrial Corporation (Ellice). As payment for their subscriptions the Spouses Gala transferred several parcles
of land to Ellice. Subsequently, the children and the encargados formed and organized another corporation, Margo
Management and Development Corporation (Margo). The father, Manuel Gala, sold his shares in Ellice to Margo.
Subsequently, Alicia transferred her shares to Margo.

In 1990, a special stockholders meeting of Margo was held where a new board of directors was elected. Raul Gala
was elected as chairman, president, and general manager. During the meeting, the board approved the
commencement of proceeding to annul the dispositions of Margoss property made by Alicia Gala. Similarity, a
special stockholders meeting was held in Ellice. A new board was elected and Raul Gala also became chairman,
president and GM of Ellice, Raul Gala along with the respondents filed a case against the petitiones in the SEC for
accounting and restitution for alleged mismanagement of funds of Ellice.

In turn the petitioners filed in the SEC a petition for the nullification of the election of directors of officers of both
Margo and Ellice. Essentially, petitioners sought to disregard the separate juridical personalities of two corporations,
namely, Ellice Agro-Industrial Corporation and Margo Management and Development Corporation, for the purpose of
treating all property purportedly owned by said corporations as properly solely owned by the Gala Spouses. Among
their arguments were: (1) said corporations were organized for purpose of exempting the property the property of
the Gala Spouses from the coverage of land reform laws, and (2) the two corporations were meant to be used as
mere tools for the avoidance of estate taxes.

Issue: Whether the separate juridical personalities of Ellice and Margo could be disregard on the grounds that they
were meant to be tools to avoid land reform laws and estate taxes.

Held: NO, a perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the allegedly illegal
purposes that petitioners are complaining of. And even assuming that the petitioners allegations were true, the
legality of the purposes for which the two corporations were formed should be first threshed out in an administrative
case before the Securities and Exchange Commission. (Doctrine of Primary Jurisdiction).

Moreover, on the contention that Ellice and Margo were meant to be tools for the avoidance of estate taxes, the
court said that the legal right of a taxpayer to reduce the amount of what otherwise could be his taxes or
altogether avoid them, by means which the law permits, cannot be doubted. (citing: Liddel& Co., Inc c. CIR)

Note: Simplified, this case is about a feud between family members who organized two corporation. Petitioners are
Alicia Gala (mother), Guia Domingo (sister), and Rita Benson (Sister), Respondents are Raul Gala (brother), Ellice Inc.,
and Margo Inc. (the family corporations).

Manuel R. Dulay Ent. vs. CA (225 SCRA 678 [1993])

Facts: Manuel R.Dulay Enterprises, Inc., a domestic corporation with the following as members of its Board of
Directors: Manuel R. Dulay with 19,960 shares and designated as president, treasurer and general manager; Atty.
Virgilio E. Dulay with 10 shares and designated as vice-president; Linda E. Dulay with 10 shares; Celia Dulay-
Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares and designated as secretary, owned a property
covered by TCT 17880 4 and known as Dulay Apartment consisting of 16 apartment units on a 689 square meter
lot, more or less, located at Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City. The
corporation through its president, Manuel Dulay, obtained various loans for the construction of its hotel project,
Dulay Continental Hotel (now Frederick Hotel). It even had to borrow money from Virgilio Dulay to be able to
continue the hotel project. As a result of said loan, Virgilio Dulay occupied one of the unit apartments of the subject
property since 1973 while at the same time managing the Dulay Apartment as his shareholdings in the corporation
was subsequently increased by his father.

On 23 December 1976, Manuel Dulay by virtue of Board Resolution 18 of the corporation sold the subject property
to spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as evidenced by the Deed of
Absolute Sale. Thereafter, TCT 17880 was cancelled and TCT 23225 was issued to Maria Theresa Veloso.
Subsequently, Manuel Dulay and the spouses Veloso executed a Memorandum to the Deed of Absolute Sale of 23
December 1976 dated 9 December 1977 giving Manuel Dulay within 2 years or until 9 December 1979 to
repurchase the subject property for P200,000.00 which was, however, not annotated either in TCT 17880 or TCT
23225. On 24 December 1976, Maria Veloso, without the knowledge of Manuel Dulay, mortgaged the subject
property to Manuel A. Torres for a loan of P250,000.00 which was duly annotated as Entry 68139 in TCT 23225.
Upon the failure of Maria Veloso to pay Torres, the subject property was sold on 5 April 1978 to Torres as the highest
bidder in an extrajudicial foreclosure sale as evidenced by the Certificate of Sheriff's Sale issued on 20 April 1978.

On 20 July 1978, Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem in favor of Manuel
Dulay assigning her right to repurchase the subject property from Torres as a result of the extrajudicial sale. As
neither Maria Veloso nor her assignee Manuel Dulay was able to redeem the subject property within the one year
statutory period for redemption, Torres filed an Affidavit of Consolidation of Ownership 13 with the Registry of Deeds
of Pasay City and TCT 24799 was subsequently issued to Torres on 23 April 1979. On 1 October 1979, Torres filed a
petition for the issuance of a writ of possession against spouses Veloso and Manuel Dulay in LRC Case 1742-P.
However, when Virgilio Dulay appeared in court to intervene in said case alleging that Manuel Dulay was never
authorized by the corporation to sell or mortgage the subject property, the trial court ordered Torres to implead the
corporation as an indispensable party but the latter moved for the dismissal of his petition which was granted in an
Order dated 8 April 1980. On 20 June 1980, Torres and Edgardo Pabalan, real estate administrator of Torres, filed an
action against the corporation, Virgilio Dulay and Nepomuceno Redovan, a tenant of Dulay Apartment Unit No. 8-A
for the recovery of possession, sum of money and damages with preliminary injunction in Civil Case 8198-P with the
then Court of First Instance of Rizal.

On 21 July 1980, the corporation filed an action against spouses Veloso and Torres for the cancellation of the
Certificate of Sheriff's Sale and TCT 24799 in Civil Case 8278-P with the then Court of First Instance of Rizal. On 29
January 1981, Pabalan and Torres filed an action against spouses Florentino and Elvira Manalastas, a tenant of Dulay
Apartment Unit No. 7-B, with the corporation as intervenor for ejectment in Civil Case 38-81 with the Metropolitan
Trial Court of Pasay City which rendered a decision on 25 April 1985, in favor of Pabalan, et al., ordering the spouses
Manalastas and all persons claiming possession under them to vacate the premises; and to pay the rents in the sum
of P500.00 a month from May 1979 until they shall have vacated the premises with interest at the legal rate; and to
pay attorney's fees in the sum of P2,000.00 and P1,000.00 as other expenses of litigation and for them to pay the
costs of the suit.

Thereafter or on 17 May 1985, the corporation and Virgilio Dulay filed an action against the presiding judge of the
Metropolitan Trial Court of Pasay City, Pabalan and Torres for the annulment of said decision with the Regional Trial
Court of Pasay in Civil Case 2880-P. Thereafter, the 3 cases were jointly tried and the trial court rendered a decision
in favor of Pabalan and Torres. Not satisfied with said decision, the corporation, et al. appealed to the Court of
Appeals which rendered a decision on 23 October 1989, affirming the trial court decision. On 8 November 1989, the
corporation, et al. filed a Motion for Reconsideration which was denied on 26 January 1990. The corporation, et al.
filed the petition for review on certiorari. During the pendency of the petition, Torres died on 3 April 1991 as shown
in his death certificate and named Torres-Pabalan Realty & Development Corporation as his heir in his holographic
will dated 31 October 1986.

Issue: Whether the sale of the subject property between spouses Veloso and Manuel Dulay has no binding effect on
the corporation as Board Resolution 18 which authorized the sale of the subject property was resolved without the
approval of all the members of the board of directors and said Board Resolution was prepared by a person not
designated by the corporation to be its secretary.

Held: Section 101 of the Corporation Code of the Philippines provides that "When board meeting is unnecessary or
improperly held. Unless the by-laws provide otherwise, any action by the directors of a close corporation without a
meeting shall nevertheless be deemed valid if: (1) Before or after such action is taken, written consent thereto is
signed by all the directors; or (2) All the stockholders have actual or implied knowledge of the action and make no
prompt objection thereto in writing; or (3) The directors are accustomed to take informal action with the express or
implied acquiesce of all the stockholders; or (4) All the directors have express or implied knowledge of the action in
question and none of them makes prompt objection thereto in writing. If a directors' meeting is held without proper
call or notice, an action taken therein within the corporate powers is deemed ratified by a director who failed to
attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge
thereof." Herein, the corporation is classified as a close corporation and consequently a board resolution authorizing
the sale or mortgage of the subject property is not necessary to bind the corporation for the action of its president.
At any rate, a corporate action taken at a board meeting without proper call or notice in a close corporation is
deemed ratified by the absent director unless the latter promptly files his written objection with the secretary of the
corporation after having knowledge of the meeting which, in this case, Virgilio Dulay failed to do. The corporation's
claim that the sale of the subject property by its president, Manuel Dulay, to spouses Veloso is null and void as the
alleged Board Resolution 18 was passed without the knowledge and consent of the other members of the board of
directors cannot be sustained. Virgilio E. Dulay's protestations of complete innocence to the effect that he never
participated nor was even aware of any meeting or resolution authorizing the mortgage or sale of the subject
premises is difficult to believe. On the contrary, he is very much privy to the transactions involved. To begin with, he
is an incorporator and one of the board of directors designated at the time of the organization of Manuel R. Dulay
Enterprises, Inc. In ordinary parlance, the said entity is loosely referred to as a "family corporation." The
nomenclature, if imprecise, however, fairly reflects the cohesiveness of a group and the parochial instincts of the
individual members of such an aggrupation of which Manuel R. Dulay Enterprises, Inc. is typical: four-fifths of its
incorporators being close relatives namely, 3 children and their father whose name identifies their corporation.
Besides, the fact that Virgilio Dulay on 24 June 1975 executed an affidavit that he was a signatory witness to the
execution of the post-dated Deed of Absolute Sale of the subject property in favor of Torres indicates that he was
aware of the transaction executed between his father and Torres and had, therefore, adequate knowledge about the
sale of the subject property to Torres. Consequently, the corporation is liable for the act of Manuel Dulay and the
sale of the subject property to Torres by Manuel Dulay is valid and binding.

San Juan Structural vs. CA (296 SCRA 631 [1998])

FACTS: In 1989, San Juan Structural and Steel Fabricators, Inc. (San Juan) alleged that it entered into a contract of
sale with Motorich Sales Corporation (Motorich) through the latters treasurer, Nenita Gruenberg. The subject of the
sale was a parcel of land owned by Motorich. San Juan advanced P100k to Nenita as earnest money.

On the day agreed upon on which Nenita was supposed to deliver the title of the land to Motorich, Nenita did not
show up. Nenita and Motorich did not heed the subsequent demand of San Juan to comply with the contract hence
San Juan sued Motorich. Motorich, in its defense, argued that it is not bound by the acts of its treasurer, Nenita,
since her act in contracting with San Juan was not authorized by the corporate board.
San Juan raised the issue that Nenita was actually the wife of the President of Motorich; that Nenita and her
husband owns 98% of the corporations capital stocks; that as such, it is a close corporation and that makes Nenita
and the President as principal stockholders who do not need any authorization from the corporate board; that in this
case, the corporate veil may be properly pierced.

ISSUE: Whether or not San Juan is correct.

HELD: No. Motorich is right in invoking that it is not bound by the acts of Nenita because her act in entering into a
contract with San Juan was not authorized by the board of directors of Motorich. Nenita is however ordered to return
the P100k.

There is no merit in the contention that the corporate veil should be pierced even though it is true that Nenita and
her husband own 98% of the capital stocks of Motorich. The corporate veil can only be pierced if the corporate
fiction is merely used by the incorporators to shield themselves against liability for fraud, illegality or inequity
committed on third persons. It is incumbent upon San Juan to prove that Nenita or her husband is merely using
Motorich to defraud San Juan. In this case however, San Juan utterly failed to establish that Motorich was formed, or
that it is operated, for the purpose of shielding any alleged fraudulent or illegal activities of its officers or
stockholders; or that the said veil was used to conceal fraud, illegality or inequity at the expense of third persons
like San Juan.

Torres vs. CA (278 SCRA 793 [1997])

FACTS: Judge Manuel Torres, Jr. owns about 81% of the capital stocks of Tormil Realty & Development Corporation
(TRDC). TRDC is a small family owned corporation and other stockholders thereof include Judge Torres nieces and
nephews. However, even though Judge Torres owns the majority of TRDC and was also the president thereof, he is
only entitled to one vote among the 9-seat Board of Directors, hence, his vote can be easily overridden by minority
stockholders. So in 1987, before the regular election of TRDC officers, Judge Torres assigned one share (qualifying
share) each to 5 outsiders for the purpose of qualifying them to be elected as directors in the board and thereby
strengthen Judge Torres power over other family members.

However, the said assignment of shares were not recorded by the corporate secretary, Ma. Christina Carlos (niece)
in the stock and transfer book of TRDC. When the validity of said assignments were questioned, Judge Torres
ratiocinated that it is impractical for him to order Carlos to make the entries because Carlos is one of his opposition.
So what Judge Torres did was to make the entries himself because he was keeping the stock and transfer book. He
further ratiocinated that he can do what a mere secretary can do because in the first place, he is the president.

Since the other family members were against the inclusion of the five outsiders, they refused to take part in the
election. Judge Torres and his five assignees then decided to conduct the election among themselves considering
that the 6 of them constitute a quorum.

ISSUE: Whether or not the inclusion of the five outsiders are valid. Whether or not the subsequent election is valid.

HELD: No. The assignment of the shares of stocks did not comply with procedural requirements. It did not comply
with the by laws of TRDC nor did it comply with Section 74 of the Corporation Code. Section 74 provides that the
stock and transfer book should be kept at the principal office of the corporation. Here, it was Judge Torres who was
keeping it and was bringing it with him. Further, his excuse of not ordering the secretary to make the entries is
flimsy. The proper procedure is to order the secretary to make the entry of said assignment in the book, and if she
refuses, Judge Torres can come to court and compel her to make the entry. There are judicial remedies for this.
Needless to say, the subsequent election is invalid because the assignment of shares is invalid by reason of
procedural infirmity. The Supreme Court also emphasized: all corporations, big or small, must abide by the
provisions of the Corporation Code. Being a simple family corporation is not an exemption. Such corporations
cannot have rules and practices other than those established by law.

Sergio F. Naguiat vs. NLRC (269 SCRA 564 [1997])

FACTS: Sergio Naguiat was the president of Clark Field Taxi, Inc. (CFTI) which supplied taxi services to Clark Air
Base. At the same time, Naguiat was a director of the Sergio F. Naguiat Enterprises, Inc. (SFNEI), their family owned
corporation along with CFTI.

In 1991, CFTI had to close due to great financial losses and lost business opportunity resulting from the phase-out
of Clark Air Base brought about by the Mt. Pinatubo eruption and the expiration of the RP-US military bases
agreement.

CFTI then came up with an agreement with the drivers that the latter be entitled to a separation pay in the amount
of P500.00 per every year of service. Most of the drivers accepted this but some drivers did not. The drivers who
refused to accept the separation pay offered by CFTI instead sued the latter before the labor arbiter.
The labor arbiter ruled in favor of the taxi drivers. The National Labor Relations Commission affirmed the labor
arbiter. It was established that when CFTI closed, it was in profitable standing and was not incurring losses. It ruled
that the drivers are entitled to $120.00 per every year of service subject to exchange rates prevailing that time.

The NLRC likewise ruled that SFNEI as well as CFTIs president and vice president Sergio Naguiat and Antolin
Naguiat should be held jointly and severally liable to pay the drivers. The NLRC ruled that SFNEI actively managed
CFTI and its business affairs hence it acted as the employer of the drivers.

ISSUE: Whether or not the ruling of the NLRC is correct.

HELD: It is only partially correct.

1. It is correct when it ruled that the Sergio Naguiat is jointly and severally liable to pay the drivers the award
of separation pay in the amount so determined. As president of CFTI, Sergio Naguiat is considered an
employer of the dismissed employees who is therefore liable for the obligations of the corporation to its
dismissed employees. Moreover, CFTI, being a close family corporation, is liable for corporate torts and
stockholders thereof shall be personally liable for corporate torts unless the corporation has obtained
reasonably adequate liability insurance (par. 5, Section 100, Close Corporations, Corporation Code).
Antolin Naguiat is absolved because there was insufficient evidence as against him.

2. SFNEI is not liable jointly or severally with CFTI. SFNEI has nothing to do with CFTI. There is no sufficient
evidence to prove that it actively managed CFTI especially so when even the drivers testified that their
employer is CFTI and that their payroll comes from CFTI. Further, SFNEI was into trading business while
CFTI was into taxi services.

Long vs. Basa (366 SCRA 113 [2001])

Facts: In 1973, a religious group known as "The Church In Quezon City (Church Assembly Hall), Incorporated"
(CHURCH), located at 140 Talayan St., Talayan Village, Quezon City, was organized as "an entity of the brotherhood
in Christ.'' It was registered in the same year with the Securities and Exchange Commission (SEC) as a non-stock,
non-profit religious corporation for the administration of its temporalities or the management of its properties. The
Articles of Incorporation and By-laws of the CHURCH decree that its affairs and operation shall be managed by a
Board of Directors consisting of 6 members, 3 who shall be members of the CHURCH. Zealous in upholding and
guarding their Christian faith, and to ensure unity and uninterrupted exercise of their religious belief, the members
of the CHURCH vested upon the Board of Directors the absolute power "(to preserve and protect the(ir) faith" and to
admit and expel a member of the CHURCH. Admission for membership in the CHURCH is so exacting.

Only "persons zealous of the Gospel, faithful in Church work and of sound knowledge of the Truth, as the Board of
Directors shall admit to membership, shall be members of the (CHURCH)." The procedure for the expulsion of an
erring or dissident member is prescribed in Article VII (paragraph 4) of the CHURCH By-laws, which provides that "If
it is brought to the notice of the Board of Directors that any member has failed to observe any regulations and By-
laws of the Institution (CHURCH) or the conduct of any member has been dishonorable or improper or otherwise
injurious to the character and interest of the Institution, the Board of Directors may by resolution without assigning
any reason therefor expel such member from such Institution and he shall then forfeit his interest, rights and
privileges in the Institution."

As early as 1988, the Board of Directors observed that certain members of the CHURCH, including Alfredo Long,
Joseph Lim, Liu Yek See, and Felix Almeria, exhibited "conduct which was dishonorable, improper and injurious to
the character and interest of the (CHURCH)" by "introducing (to the members) doctrines and teachings which were
not based on the Holy Bible" and the Principles of Faith embraced by the CHURCH. Confronted with this situation,
Lydia Basa, Anthony Sayheeliam and Yao Chek, as members of the Board of Directors, and some responsible
members of the CHURCH, advised Long, et al. "to correct their ways" and warned them that if they persist in their
highly improper conduct, they will be dropped from the membership of the CHURCH; during Sunday worship
gatherings, "in small group meetings and even one-on-one personal talk with them." Long et al. ignored these
repeated admonitions. Alarmed that Long, et al.'s conduct will continue to undermine the integrity of the Principles
of Faith of the CHURCH, the Board of Directors, during its 30 August 1993 regular meeting held for the purpose of
reviewing and updating the membership list of the CHURCH, removed from the said list certain names of members,
including the names of Joseph Lim, Liu Yek See, Alfredo Long and Felix Almeria.

They were removed for espousing doctrines inimical or injurious to the Principles of Faith of the CHURCH. The Board
also updated the list by removing the names of those who have migrated to other countries, those deceased and
those whom the CHURCH had lost contact with. All the then 6 members of the Board, namely, Directors Lim Che
Boon, Tan Hon Koc, Anthony Sayheeliam, Leandro Basa, Yao Chec and Lydia L. Basa "were duly informed" of that
meeting. However, Directors Lim Che Boon and Tan Hon Koc did not appear. Thus, the resolution was signed only by
Directors Anthony Sayheeliam, Leandro Basa, Yao Chec and Lydia L. Basa who composed the majority of the Board.
The updated membership list approved by the Board on 30 August 1993, together with the minutes of the meeting,
were duly filed with the SEC on 13 September 1993. On 29 September 1993, Lim Che Boon, Tan Hon Koc, Joseph
Lim, Liu Yek See and others questioned their expulsion by filing with the SEC Securities Investigation and Clearing
Department a petition (SEC Case 09 93-4581, and later a supplemental petition) against Directors Yao Chek,
Leandro Basa, Lydia Basa and Anthony Sayheeliam.

It sought mainly the annulment of the 30 August 1993 membership list and the reinstatement of the original list on
the ground that the expulsion was made without prior notice and hearing; and prayed for the issuance of a
temporally restraining order (TRO) and a writ of preliminary injunction principally to enjoin the Board of Directors
from holding any election of a new set of directors among the members named in the 30 August 1993 list of
corporate membership. After conducting a hearing on the application for a writ of preliminary injunction, SEC
Hearing Officer Manuel Perea denied the same in an order dated 22 February 1994. Lim Che Boon, et al. elevated
Perea's order to the SEC en banc via a petition for certiorari (SEC EB Case 389). The SEC, in an en banc decision
dated 11 July 1994, affirmed the Perea ruling and "dismissed for lack of merit" the petition. Lim Che Boon et al. did
not appeal from the decision of the SEC en banc.

Subsequently, the SEC, through a hearing panel, conducted further proceedings to hear and decide the permissive
counterclaim and third-party complaint incorporated in Basa, et al.'s supplemental answer, including their prayer for
injunctive relief to prevent Long, Lim Che Boon, et al. from interfering and usurping the functions of the Board of
Directors. Long, et al. subsequently filed motions to dismiss/strike out the counterclaim and third-party complaint.
The hearing panel in its omnibus order dated 2 October 1995 denied the motions, and declined to act on Basa, et
al.'s third-party complaint's prayer for injunctive relief since there is a case pending before another Hearing Officer
in SEC Case 4994 for the declaration of nullity of the general membership meeting held on 12 February 1995. Upon
denial of the separate motions for reconsideration of both parties, Basa, et al. filed with the SEC en banc a petition
for review on certiorari (SEC EB Case 484), which interposed the issue as to the validity of the questioned expulsion
already resolved by the SEC en banc in its decision dated 11 July 1994 in SEC EB Case 389 which had attained
finality.

On 31 July 1996, the SEC en banc, issued an order in SEC EB Case 484, setting aside the expulsion of certain
members of the CHURCH approved by its Board of Directors on 30 August 1993 for being void and ordering the
reinstatement of Long, et al. as members of the CHURCH. Promptly, Sayheeliam and Basa filed a petition for review
with the Court of Appeals (CA-GR SP 41551). Yao Check, for his part, filed a motion for reconsideration of the same
order. Upon denial of his motion he also filed with the Court of Appeals a petition for review (CA-GR SP 43389),
which was consolidated with CA-GR SP 41551). On 29 May 1998, the Court of Appeals promulgated its decision
granting Basa, et al.'s consolidated petitions and reversing the 31 July 1996 order of the SEC en banc in SEC EB
Case 484. Long, et al. filed a motion for reconsideration but was denied by the appellate court in a resolution dated
18 August 1998. Long, Lim Che Boon, et al. filed the petitions for review, which were subsequently consolidated.

Issue: Whether the expulsion of Joseph Lim, Liu Yek See, Alfredo Long and Felix Almeria from the membership of
the CHURCH by its Board of Directors through a resolution issued on August 30, 1993 is in accordance with law.

Held: The By-laws of the CHURCH, which the members have expressly adhered to, does not require the Board of
Directors to give prior notice to the erring or dissident members in cases of expulsion. In the By-law provision, the
only requirements before a member can be expelled or removed from the membership of the CHURCH are: (a) the
Board of Directors has been notified that a member has failed to observe any regulations and By-laws of the
CHURCH, or the conduct of any member has been dishonorable or improper or otherwise injurious to the character
and interest of the CHURCH, and (b) a resolution is passed by the Board expelling the member concerned, without
assigning any reason therefor. Thus, a member who commits any of the causes for expulsion enumerated in
paragraph 4 of Article VII may be expelled by the Board of Directors, through a resolution, without giving that erring
member any notice prior to his expulsion. The resolution need not even state the reason for such action. The
CHURCH By-law provision on expulsion, as phrased, may sound unusual and objectionable as there is no
requirement of prior notice to be given to an erring member before he can be expelled; but that is how peculiar the
nature of a religious corporation is vis-a-vis an ordinary corporation organized for profit. It must be stressed that the
basis of the relationship between a religious corporation and its members is the latter's absolute adherence to a
common religious or spiritual belief . Once this basis ceases, membership in the religious corporation must also
cease. Thus, generally, there is no room for dissension in a religious corporation. And where any member of a
religious corporation is expelled from the membership for espousing doctrines and teachings contrary to that of his
church, the established doctrine in this jurisdiction is that such action from the church authorities is conclusive upon
the civil courts. Obviously recognizing the peculiarity of a religious corporation, the Corporation Code leaves the
matter of ecclesiastical discipline to the religious group concerned. Section 91 of the Corporation Code, which has
been made explicitly applicable to religious corporations by the second paragraph of Section 109 of the same Code,
provides for the termination of membership. It provides that "Membership shall be terminated in the manner and
for the causes provided in the articles of incorporation or the by-laws. Termination of membership shall have the
effect of extinguishing all rights of a member in the corporation or in its property, unless otherwise provided in the
articles of incorporation or the by-laws." In fact, Long, et al. really have no reason to bewail the lack of prior notice
in the By-laws. They have waived such notice by adhering to those By-laws. They became members of the CHURCH
voluntarily. They entered into its covenant and subscribed to its rules. By doing so, they are bound by their consent.
Even assuming that Long, et al.'s expulsion falls within the Constitutional provisions on "prior notice" or "due
process," still the Court can not conclude that Basa, et al. committed a constitutional infraction. Long, et al. were
given more than sufficient notice of their impending expulsion, as shown by the records.

Yamane vs. BA Lepanto Condominium Corp. (474 SCRA 258 [2005])

FACTS: In 1998, BA Lepanto Condominium Corporation (Lepanto) received a tax assessment in the amount of P1.6
million from Luz Yamane, the City Treasurer of Makati, for business taxes. Lepanto protested the assessment as it
averred that Lepanto, as a corporation, is not organized for profit; that it merely exists for the maintenance of the
condominium. Yamane denied the protest. Lepanto then appealed the denial to the RTC of Makati. RTC Makati
affirmed the decision of Yamane. Lepanto then filed a petition for review under Rule 42 with the Court of Appeals.
The Court of Appeals reversed the RTC.

Yamane now filed a petition for review under Rule 45 with the Supreme Court. Yamane avers that a.) Lepanto is
liable for local taxation because its act of maintaining the condominium is an activity for profit because the end
result of such activity is the betterment of the market value of the condominium which makes it easier to sell it;
that Lepanto is earning profit from fees collected from condominium unit owners; and that b.) Lepantos petition for
review of the decision of the RTC to the CA is erroneous because when the RTC decided on the appeal brought to it
by Lepanto, the RTC was exercising its original jurisdiction and not its appellate jurisdiction; that as such, what
Lepanto should have done is to file an ordinary appeal under Rule 41.
ISSUE: Whether or not a RTC deciding an appeal from the decision of a city treasurer on tax protests is exercising
original jurisdiction. Whether or not a condominium corporation organized solely for the maintenance of a
condominium is liable for local taxation.

HELD:

1. Yes. Although the LGC (Section 195) provides that the remedy of the taxpayer whose protest is denied by
the local treasurer is to appeal with the court of competent jurisdiction or in this case the RTC (considering the
amount of tax liability is P1.6 million), such appeal when decided by the RTC is still in the exercise of its original
jurisdiction and not its appellate jurisdiction. This is because appellate jurisdiction is defined as the authority of a
court higher in rank to re-examine the final order or judgment of a lower court which tried the case now
elevated for judicial review. Here, the City Treasurer is not a lower court.

The Supreme Court however clarifies that this ruling is only applicable to similar cases before the passage of
Republic Act 9282 (effective April 2004). Under RA 9282, the Court of Tax Appeals (CTA), not CA, exercises exclusive
appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax
cases whether originally decided or resolved by them in the exercise of their original or appellate
jurisdiction.

2. No. Lepanto was not organized for profit. The fees it was collecting from the condominium unit owners
redound to the owners themselves because the fees collected are being used for the maintenance of the condo.
Further, it appears that the assessment issued by Yamane did not state the legal basis for the tax being imposed on
Lepanto it merely states that Makati is authorized to collect business taxes under the Local Government Code
(LGC) but no other reference specific reference to specific laws were cited.

Twin Towers Condominium Corporation

Facts:
Twin Towers Condominium Corp. (P) is a non-stock corporation organized for the sole purpose of holding title to and
managing the common areas of Twin Towers Condominium. ALS Management & Development Corp. (R) is a
registered owner of Unit 4-A wherein its pres. Litonjua occupies therein. P collects from all its members quarterly
assessments and dues as authorized by its Master Deed and its By-Laws. R failed to pay assessments and dues
starting 1986 up to the 1st quarter of 1988. P claimed against both ALS and Litonjua P118,923.20 as unpaid
assessments and dues. R claims that it is the corp. & not Litonuja who is liable and claims damages against Ps act
of preventing usage of facilities. The SEC Hearing Officer ordered P to pay Litonjua moral and exemplary damages
for maliciously including Litonjuas name in the list of delinquent unit owners and for impleading him as R but
ordered the latter to pay the assessments and dues to P. The SEC en banc nullified the award of damages and
attorneys fees to Litonjua on the ground that the SEC had no jurisdiction over Litonjua.

The SEC en banc held that there is no intracorporate relationship between P and Litonjua who is not the registered
owner of the Unit & not a member of P and P cant raise corp. veil doctrine. Specifically, Rule 26.3 of Ps house rules
expressly authorize denial of the use of condominium facilities to delinquent members. P justifies such by invoking
Section 36, paragraph 11 of the Corporation Code which grants every corporation the power "to exercise such
powers as may be essential or necessary to carry out its purpose or purposes as stated in its Articles of
Incorporation." P claims that there is here implied the power to enact such measures as may be necessary to carry
out the provisions of the Articles of Incorporation, By-Laws and Master Deed to deal with delinquent members. R
assail the validity of House Rule 26.3 alleging that it is ultra vires so it claims it can validly deduct the value of the
services withheld from the assessments and dues since it was barred from using the Condominium facilities for
which the assessments and dues were being collected.

Issue:
Whether P House Rule 26.3 is Ultra Vires.

Ruling:
No. The Master Deed empowers P to enforce the provisions of the Master Deed in accordance with Ps By-Laws and
expressly authorizes P to exercise all powers granted to the management body by the Condominium Act, Articles of
Incorp. & By-Laws, the Master Deed, and the Corporation Code under the Sec. 9 (a) (1) & (3) of the Condomium Act.
Ps By-Laws expressly authorize Ps Board of Directors to promulgate rules and regulations on the use and
enjoyment of the common areas. P would be unable to carry out its main purpose of maintaining the Condominium
common areas and facilities if members refuse to pay their dues and yet continue to use these areas and facilities.
To impose a temporary ban on the use of the common areas and facilities until the assessments and dues in arrears
are paid is a reasonable measure that P may undertake to compel the prompt payment of assessments and dues.