Corpo Cases

Today is Sunday, November 16, 2014
Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23145
November 29, 1968
TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary administratorappellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.
Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.
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 existence, they are today in the
possession of the domiciliary administrator, the County Trust Company, in New York, U.S.A...."4
It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or considered as lost.
Moreover, it would allege that there was a failure to observe certain requirements of its by-laws before new stock
certificates could be issued. Hence, its appeal.
As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order constitutes an
emphatic affirmation of judicial authority sought to be emasculated by the wilful conduct of the domiciliary
administrator in refusing to accord obedience to a court decree. How, then, can this order be stigmatized as illegal?
As is true of many problems confronting the judiciary, such a response was called for by the realities of the situation.
What cannot be ignored is that conduct bordering on wilful defiance, if it had not actually reached it, cannot without
undue loss of judicial prestige, be condoned or tolerated. For the law is not so lacking in flexibility and
resourcefulness as to preclude such a solution, the more so as deeper reflection would make clear its being
buttressed by indisputable principles and supported by the strongest policy considerations.
It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary no less than that of
the country. Through this challenged order, there is thus dispelled the atmosphere of contingent frustration brought
about by the persistence of the domiciliary administrator to hold on to the stock certificates after it had, as admitted,
voluntarily submitted itself to the jurisdiction of the lower court by entering its appearance through counsel on June
27, 1963, and filing a petition for relief from a previous order of March 15, 1963.
Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to what was decreed. For
without it, what it had been decided would be set at naught and nullified. Unless such a blatant disregard by the
domiciliary administrator, with residence abroad, of what was previously ordained by a court order could be thus
remedied, it would have entailed, insofar as this matter was concerned, not a partial but a well-nigh complete
paralysis of judicial authority.
1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary administrator to gain
control and possession of all assets of the decedent within the jurisdiction of the Philippines. Nor could it. Such a
power is inherent in his duty to settle her estate and satisfy the claims of local creditors.5 As Justice Tuason
speaking for this Court made clear, it is a "general rule universally recognized" that administration, whether principal
or ancillary, certainly "extends to the assets of a decedent found within the state or country where it was granted,"
the corollary being "that an administrator appointed in one state or country has no power over property in another
state or country."6
It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case, set forth by Justice
Malcolm. Thus: "It is often necessary to have more than one administration of an estate. When a person dies
intestate owning property in the country of his domicile as well as in a foreign country, administration is had in both
countries. That which is granted in the jurisdiction of decedent's last domicile is termed the principal administration,
while any other administration is termed the ancillary administration. The reason for the latter is because a grant of
administration does not ex proprio vigore have any effect beyond the limits of the country in which it is granted.
Hence, an administrator appointed in a foreign state has no authority in the [Philippines]. The ancillary
administration is proper, whenever a person dies, leaving in a country other than that of his last domicile, property to
be administered in the nature of assets of the deceased liable for his individual debts or to be distributed among his
heirs."7
It would follow then that the authority of the probate court to require that ancillary administrator's right to "the stock
certificates covering the 33,002 shares ... standing in her name in the books of [appellant] Benguet Consolidated,
Inc...." be respected is equally beyond question. For appellant is a Philippine corporation owing full allegiance and
subject to the unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be considered in any wise
as immune from lawful court orders.
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8 finds application. "In the instant case,
the actual situs of the shares of stock is in the Philippines, the corporation being domiciled [here]." To the force of
the above undeniable proposition, not even appellant is insensible. It does not dispute it. Nor could it successfully do
so even if it were so minded.
2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the legality of the
challenged order, how does appellant, Benguet Consolidated, Inc. propose to carry the extremely heavy burden of
persuasion of precisely demonstrating the contrary? It would assign as the basic error allegedly committed by the
lower court its "considering as lost the stock certificates covering 33,002 shares of Benguet belonging to the
deceased Idonah Slade Perkins, ..."9 More specifically, appellant would stress that the "lower court could not
"consider as lost" the stock certificates in question when, as a matter of fact, his Honor the trial Judge knew, and
does know, and it is admitted by the appellee, that the said stock certificates are in existence and are today in the
possession of the domiciliary administrator in New York."10

There may be an element of fiction in the above view of the lower court. That certainly does not suffice to call for the
reversal of the appealed order. Since there is a refusal, persistently adhered to by the domiciliary administrator in
New York, to deliver the shares of stocks of appellant corporation owned by the decedent to the ancillary
administrator in the Philippines, there was nothing unreasonable or arbitrary in considering them as lost and
requiring the appellant to issue new certificates in lieu thereof. Thereby, the task incumbent under the law on the
ancillary administrator could be discharged and his responsibility fulfilled.
Any other view would result in the compliance to a valid judicial order being made to depend on the uncontrolled
discretion of the party or entity, in this case domiciled abroad, which thus far has shown the utmost persistence in
refusing to yield obedience. Certainly, appellant would not be heard to contend in all seriousness that a judicial
decree could be treated as a mere scrap of paper, the court issuing it being powerless to remedy its flagrant
disregard.
It may be admitted of course that such alleged loss as found by the lower court did not correspond exactly with the
facts. To be more blunt, the quality of truth may be lacking in such a conclusion arrived at. It is to be remembered
however, again to borrow from Frankfurter, "that fictions which the law may rely upon in the pursuit of legitimate
ends have played an important part in its development."11
Speaking of the common law in its earlier period, Cardozo could state fictions "were devices to advance the ends of
justice, [even if] clumsy and at times offensive."12 Some of them have persisted even to the present, that eminent
jurist, noting "the quasi contract, the adopted child, the constructive trust, all of flourishing vitality, to attest the
empire of "as if" today."13 He likewise noted "a class of fictions of another order, the fiction which is a working tool of
thought, but which at times hides itself from view till reflection and analysis have brought it to the light."14
What cannot be disputed, therefore, is the at times indispensable role that fictions as such played in the law. There
should be then on the part of the appellant a further refinement in the catholicity of its condemnation of such judicial
technique. If ever an occasion did call for the employment of a legal fiction to put an end to the anomalous situation
of a valid judicial order being disregarded with apparent impunity, this is it. What is thus most obvious is that 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."17 As
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 inconceivable therefore that it will have rights and privileges of
a higher priority than that of its creator. More than that, it cannot legitimately refuse to yield obedience to acts of its
state organs, certainly not excluding the judiciary, whenever called upon to do so.
As a matter of fact, a corporation once it comes into being, following American law still of persuasive authority in our
jurisdiction, comes more often within the ken of the judiciary than the other two coordinate branches. It institutes the
appropriate court action to enforce its right. Correlatively, it is not immune from judicial control in those instances,
where a duty under the law as ascertained in an appropriate legal proceeding is cast upon it.
To assert that it can choose which court order to follow and which to disregard is to confer upon it not autonomy
which may be conceded but license which cannot be tolerated. It is to argue that it may, when so minded, overrule
the state, the source of its very existence; it is to contend that what any of its governmental organs may lawfully
require could be ignored at will. So extravagant a claim cannot possibly merit approval.
5. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was shown that in a guardianship proceedings
then pending in a lower court, the United States Veterans Administration filed a motion for the refund of a certain
sum of money paid to the minor under guardianship, alleging that the lower court had previously granted its petition
to consider the deceased father as not entitled to guerilla benefits according to a determination arrived at by its main
office in the United States. The motion was denied. In seeking a reconsideration of such order, the Administrator
relied on an American federal statute making his decisions "final and conclusive on all questions of law or fact"
precluding any other American official to examine the matter anew, "except a judge or judges of the United States
court."23 Reconsideration was denied, and the Administrator appealed.
In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the opinion that the appeal
should be rejected. The provisions of the U.S. Code, invoked by the appellant, make the decisions of the U.S.
Veterans' Administrator final and conclusive when made on claims property submitted to him for resolution; but they
are not applicable to the present case, where the Administrator is not acting as a judge but as a litigant. There is a
great difference between actions against the Administrator (which must be filed strictly in accordance with the
conditions that are imposed by the Veterans' Act, including the exclusive review by United States courts), and those
actions where the Veterans' Administrator seeks a remedy from our courts and submits to their jurisdiction by filing
actions therein. Our attention has not been called to any law or treaty that would make the findings of the Veterans'
Administrator, in actions where he is a party, conclusive on our courts. That, in effect, would deprive our tribunals of
judicial discretion and render them mere subordinate instrumentalities of the Veterans' Administrator."
It is bad enough as the Viloria decision made patent for our judiciary to accept as final and conclusive,
determinations made by foreign governmental agencies. It is infinitely worse if through the absence of any coercive
power by our courts over juridical persons within our jurisdiction, the force and effectivity of their orders could be
made to depend on the whim or caprice of alien entities. It is difficult to imagine of a situation more offensive to the
dignity of the bench or the honor of the country.
Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet Consolidated seems
to be firmly committed as shown by its failure to accept the validity of the order complained of; it seeks its reversal.
Certainly we must at all pains see to it that it does not succeed. The deplorable consequences attendant on
appellant prevailing attest to the necessity of negative response from us. That is what appellant will get.
That is all then that this case presents. It is obvious why the 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.
Makalintal, Zaldivar and Capistrano, JJ., concur.
Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro, JJ., concur in the result.
Footnotes
1 Statement of the Case and Issues Involved, Brief for the Oppositor-Appellant, p. 2.
2 Ibid, p. 3.
3 Ibid, pp. 3 to 4.
4 Ibid, p. 4.
5 Rule 84, Sec. 3, Rules of Court. Cf. Pavia v. De la Rosa, 8 Phil. 70 (1907); Suiliong and Co. v. Chio Taysan,
12 Phil. 13 (1908); Malahacan v. Ignacio, 19 Phil. 434 (1911); McMicking v. Sy Conbieng, 21 Phil. 211 (1912);
In re Estate of De Dios, 24 Phil. 573 (1913); Santos v. Manarang, 27 Phil. 209 (1914); Jaucian v. Querol, 38
Phil. 707 (1918); Buenaventura v. Ramos, 43 Phil. 704 (1922); Roxas v. Pecson, 82 Phil. 407 (1948); De
Borja v. De Boria, 83 Phil. 405 (1949); Barraca v. Zayco, 88 Phil. 774 (1951); Pabilonia v. Santiago, 93 Phil.
516 (1953); Sison v. Teodoro, 98 Phil. 680 (1956); Ozaeta v. Palanca, 101 Phil. 976 (1957); Natividad Castelvi
de Raquiza v. Castelvi, et al, L-17630, Oct. 31, 1963; Habana v. Imbo, L-15598 & L-15726, March 31, 1964;
Gliceria Liwanag v. Hon. Luis Reyes, L-19159, Sept. 29, 1964; Ignacio v. Elchico, L-18937, May 16, 1967.
6 Leon and Ghezzi v. Manufacturers Life, Inc. Co., 990 Phil. 459 (1951).
7 Johannes v. Harvey, 43 Phil. 175, 177-178 (1922).
8 70 Phil. 325 (1940). Cf. Perkins v. Dizon, 69 Phil. 186 (1939).
9 Brief for Oppositor-Appellant, p. 5. The Assignment of Error reads: "The lower court erred in entering its
order of May 18, 1964, (1) considering as lost the stock certificates covering 33,002 shares of Benguet
belonging to the deceased Idonah Slade Perkins, (2) ordering the said certificates cancelled, and (3) ordering
appellant to issue new certificates in lieu thereof and to deliver them to the ancillary administrator of the
estate of the deceased Idonah Slade Perkins or to the probate division of the lower court."
10 Ibid, pp. 5 to 6.
11 Nashville C. St. Louis Ry v. Browning, 310 US 362 (1940).
12 Cardozo, The Paradoxes of Legal Science, 34 (1928).
13 Ibid, p. 34.
14 Ibid, p. 34. The late Professor Gray in his The Nature and Sources of the Law, distinguished, following
Ihering, historic fictions from dogmatic fictions, the former being devices to allow the addition of new law to old
without changing the form of the old law and the latter being intended to arrange recognized and established
doctrines under the most convenient forms. pp. 30, 36 (1909) Speaking of historic fictions, Gray added: "Such
fictions have had their field of operation largely in the domain of procedure, and have consisted in pretending
that a person or thing was other than which he or it was in truth (or that an event had occurred which had not
in fact occurred) for the purpose of thereby giving an action at law to or against a person who did not really
come within the class to or against which the old section was confined." Ibid, pp. 30-31. See also Pound, The
Philosophy of Law, pp. 179, 180, 274 (1922).
15 This is what the particular by-law provides: Section 10. Lost, Stolen or Destroyed Certificates. Any
registered stockholder claiming a certificate or certificates of stock to be lost, stolen or destroyed shall file an
affidavit in triplicate with the Secretary of the Company, or with one of its Transfer Agents, setting forth, if
possible, the circumstances as to how, when and where said certificate or certificates was or were lost, stolen
or destroyed, the number of shares represented by the certificate or by each of the certificates, the serial
number or numbers of the certificate or certificates, and the name of this Company. The registered
stockholder shall also submit such other information and evidence which he may deem necessary.
xxx
xxx
xxx
If a contest is presented to the Company, or if an action is pending in court regarding the ownership of said
certificate or certificates of stock which have been claimed to have been lost, stolen or destroyed, the
issuance of the new certificate or certificates in lieu of that or those claimed to have been lost, stolen or
destroyed, shall be suspended until final decision by the court regarding the ownership of said certificate or
certificates. Brief for Oppositor-Appelant, pp. 8-10.
16 Sec. 2, Act No. 1459 (1906).
17 Berle, The Theory of Enterprise Entity, 47 Co. Law Rev. 343 (1907).
18 Dartmouth College v. Woodward, 4 Wheat, 518 (1819). Cook would trace such a concept to Lord Coke.
See 1 Cook on Corporations, p. 2 (1923).

19 Fletcher, Cyclopedia Corporations, pp. 19-20 (1931). Chancellor Kent and Chief Justice Baldwin of
Connecticut were likewise cited to the same effect. At pp. 12-13.

20 4 Pound on Jurisprudence, pp. 207-209 (1959).
21 Friedmann, Legal Theory, pp. 164-168 (1947). See also Holdsworth, English Corporation Law, 31 Yale Law
Journal, 382 (1922).

22 101 Phil. 762 (1957).
23 38 USCA, Sec. 808.
The Lawphil Project - Arellano Law Foundation
1. Tayag vs. Benguet consolidated INC 26 SCRA 242

Facts: Idonah Slade Perkins died in New York on March 1960, the domestic administrator in
New York refused to give the Stock Certificates owned by Perkins in the Benguet
Consolidated Inc. to the Ancillary administrator here in the Philippines for the purpose of
satisfying the legitimate claims of local creditors. The Court of First Instance of Manila
decided that the Stock Certificates was considered lose because of the refusal of the
domestic administrator in New York to give such certificates to the ancilliary administrator
here in the Philippines and ordered Benguet Consolidated Inc to issue New Stock
Certificates to the Ancilliary administrator. Benguet refuses to obey the order of the CFI of
Manila on the ground that it is in violation of the Corporation By Laws.
Issue: Whether or not the Benguet Consolidated Inc is covered by the orders of the COURT.
Held: The Supreme Court Held that a corporation is an artificial being created by operation
of law, it owes its life to the state, its birth being purely dependent on its will. It is logically
inconceivable therefore that it will have rights and privileges of a higher priority than that of
its creator. More than that, it cannot legitimately REFUSE to yield obedience to acts of its
state organs, certainly not excluding the JUDICIARY, whenever called. It is not immune to
judicial control in those instances, where a duty under the law as ascertained in an
appropriate legal proceeding is cast upon it.

SUPREME COURT
Manila
EN BANC
G.R. No. L-17295
July 30, 1962
ANG PUE & COMPANY, ET AL., plaintiffs-appellants,

vs.
SECRETARY OF COMMERCE AND INDUSTRY, defendant-appellee.
Felicisimo E. Escaran for plaintiffs-appellants.
Office of the Solicitor General for defendant-appellee.
DIZON, J.:
Action for declaratory relief filed in the Court of First Instance of Iloilo by Ang Pue & Company, Ang Pue and Tan
Siong against the Secretary of Commerce and Industry to secure judgment "declaring that plaintiffs could extend for
five years the term of the partnership pursuant to the provisions of plaintiffs' Amendment to the Article of Copartnership."
The answer filed by the defendant alleged, in substance, that the extension for another five years of the term of the
plaintiffs' partnership would be in violation of the provisions of Republic Act No. 1180.
It appears that on May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue
& Company for a term of five years from May 1, 1953, extendible by their mutual consent. The purpose of the
partnership was "to maintain the business of general merchandising, buying and selling at wholesale and retail,
particularly of lumber, hardware and other construction materials for commerce, either native or foreign." The
corresponding articles of partnership (Exhibit B) were registered in the Office of the Securities & Exchange
Commission on June 16, 1953.
On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It provided, among other
things, that, after its enactment, a partnership not wholly formed by Filipinos could continue to engage in the retail
business until the expiration of its term.
On April 15, 1958 prior to the expiration of the five-year term of the partnership Ang Pue & Company, but after the
enactment of the Republic Act 1180, the partners already mentioned amended the original articles of part ownership
(Exhibit B) so as to extend the term of life of the partnership to another five years. When the amended articles were
presented for registration in the Office of the Securities & Exchange Commission on April 16, 1958, registration was
refused upon the ground that the extension was in violation of the aforesaid Act.
From the decision of the lower court dismissing the action, with costs, the plaintiffs interposed this appeal.
The question before us is too clear to require an extended discussion. To organize a corporation or a partnership
that could claim a juridical personality of its own and transact business as such, is not a matter of absolute right but
a privilege which may be enjoyed only under such terms as the State may deem necessary to impose. That the
State, through Congress, and in the manner provided by law, had the right to enact Republic Act No. 1180 and to
provide therein that only Filipinos and concerns wholly owned by Filipinos may engage in the retail business can not
be seriously disputed. That this provision was clearly intended to apply to partnership already existing at the time of
the enactment of the law is clearly showing by its provision giving them the right to continue engaging in their retail
business until the expiration of their term or life.
To argue that because the original articles of partnership provided that the partners could extend the term of the
partnership, the provisions of Republic Act 1180 cannot be adversely affect appellants herein, is to erroneously
assume that the aforesaid provision constitute a property right of which the partners can not be deprived without due
process or without their consent. The agreement contain therein must be deemed subject to the law existing at the
time when the partners came to agree regarding the extension. In the present case, as already stated, when the
partners amended the articles of partnership, the provisions of Republic Act 1180 were already in force, and there
can be not the slightest doubt that the right claimed by appellants to extend the original term of their partnership to
another five years would be in violation of the clear intent and purpose of the law aforesaid.
WHEREFORE, the judgment appealed from is affirmed, with costs.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Regala and Makalintal, JJ., concur.
Bautista Angelo and Reyes, J.B.L., JJ., took no part.
CASE #9-G.R. No. L-17295; July 30, 1962

ANG PUE & COMPANY, ET AL., plaintiffs-appellants, vs. SECRETARY OF COMMERCE
AND INDUSTRY, defendant-appellee.
FACTS:
On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the
partnership Ang Pue & Company for a term of five years extendible by their mutual
consent. The purpose of the partnership was "to maintain the business of general
merchandising, buying and selling at wholesale and retail, particularly of lumber, hardware and
other construction materials for commerce, either native or foreign." The corresponding articles
of partnership were registered in the Office of the Securities & Exchange Commission on
June 16, 1953. On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail
business. It provided, among other things, that, after its enactment, a partnership not wholly
formed by Filipinos could continue to engage in the retail business until the expiration
of its term.
On April 15, 1958 prior to the expiration of the five-year term of the partnership Ang Pue &
Company, but after the enactment of the Republic Act 1180, the partners already mentioned
amended the original articles of part ownership so as to extend the term of life of the
partnership to another five years. When the amended articles were presented for registration in
the Office of the Securities & Exchange Commission on April 16, 1958, registration was
refused upon the ground that the extension was in violation of the aforesaid Act.
ISSUE:
WON plaintiffs could extend for five years the term of the partnership pursuant to
the provisions of plaintiffs' Amendment to the Article of Co-partnership.
HELD: NO.
To organize a corporation or a partnership that could claim a juridical

personality of its own and transact business as such, is not a matter of absolute right but a
privilege which may be enjoyed only under such terms as the State may deem necessary to
impose. That the State, through Congress, and in the manner provided by law, had the right to
enact Republic Act No. 1180 and to provide therein that only Filipinos and concerns wholly
owned by Filipinos may engage in the retail business can not be seriously disputed. That
this provision was clearly intended to apply to partnership already existing at the time of
the enactment of the law is clearly showing by its provision giving them the right to
continue engaging in their retail business until the expiration of their term or life.
To argue that because the original articles of partnership provided that the partners could
extend the term of the partnership, the provisions of Republic Act 1180 cannot be adversely
affect appellants herein, is to erroneously assume that the aforesaid provision constitute
a property right of which the partners can not be deprived without due process or without
their consent. The agreement contain therein must be deemed subject to the law existing at
the time when the partners came to agree regarding the extension. In the present case, as
already stated, when the partners amended the articles of partnership, the provisions of
Republic Act 1180 were already in force, and there can be not the slightest doubt that the
right claimed by appellants to extend the original term of their partnership to another five years
would be in violation of the clear intent and purpose of the law aforesaid.
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Philippine Supreme Court Jurisprudence > Year 1990 > December 1990 Decisions > [G.R. Nos. 84132-33 :
December 10, 1990.] 192 SCRA 257 NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC., Petitioners, vs.
PHILIPPINE VETERANS BANK, THE EX-OFFICIO SHERIFF and GODOFREDO QUILING, in his capacity as Deputy
Sheriff of Calamba, Laguna, Respondents.:
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[G.R. Nos. 84132-33 : December 10, 1990.]
192 SCRA 257
NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC., Petitioners, vs.
PHILIPPINE VETERANS BANK, THE EX-OFFICIO SHERIFF and GODOFREDO
QUILING, in his capacity as Deputy Sheriff of Calamba, Laguna, Respondents.
DECISION
CRUZ, J.:
This case involves the constitutionality of a presidential decree which, like all other
issuances of President Marcos during his regime, was at that time regarded as
sacrosanct. It is only now, in a freer atmosphere, that his acts are being tested by the
touchstone of the fundamental law that even then was supposed to limit presidential
action.
: rd
The particular enactment in question is Pres. Decree No. 1717, which ordered the
rehabilitation of the Agrix Group of Companies to be administered mainly by the
National Development Company. The law outlined the procedure for filing claims against
the Agrix companies and created a Claims Committee to process these claims. Especially
relevant to this case, and noted at the outset, is Sec. 4(1) thereof providing that "all
mortgages and other liens presently attaching to any of the assets of the dissolved
corporations are hereby extinguished."
Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in favor of private respondent
Philippine Veterans Bank a real estate mortgage dated July 7, 1978, over three (3)
parcels of land situated in Los Baos, Laguna. During the existence of the mortgage,
AGRIX went bankrupt. It was for the expressed purpose of salvaging this and the other
Agrix companies that the aforementioned decree was issued by President Marcos.
DebtKollect Company, Inc.
Pursuant thereto, the private respondent filed a claim with the AGRIX Claims Committee
for the payment of its loan credit. In the meantime, the New Agrix, Inc. and the
National Development Company, petitioners herein, invoking Sec. 4 (1) of the decree,
filed a petition with the Regional Trial Court of Calamba, Laguna, for the cancellation of
the mortgage lien in favor of the private respondent. For its part, the private respondent
took steps to extrajudicially foreclose the mortgage, prompting the petitioners to file a
second case with the same court to stop the foreclosure. The two cases were
consolidated.
After the submission by the parties of their respective pleadings, the trial court rendered
the impugned decision. Judge Francisco Ma. Guerrero annulled not only the challenged
provision, viz., Sec. 4 (1), but the entire Pres. Decree No. 1717 on the grounds that: (1)
the presidential exercise of legislative power was a violation of the principle of
separation of powers; (2) the law impaired the obligation of contracts; and (3) the
decree violated the equal protection clause. The motion for reconsideration of this
decision having been denied, the present petition was filed.
: rd
ChanRobles Intellectual Property

Division
The petition was originally assigned to the Third Division of this Court but because of the
constitutional questions involved it was transferred to the Court en banc. On August 30,
1988, the Court granted the petitioner's prayer for a temporary restraining order and
instructed the respondents to cease and desist from conducting a public auction sale of
the lands in question. After the Solicitor General and the private respondent had filed
their comments and the petitioners their reply, the Court gave due course to the
petition and ordered the parties to file simultaneous memoranda. Upon compliance by
the parties, the case was deemed submitted.
The petitioners contend that the private respondent is now estopped from contesting the
validity of the decree. In support of this contention, it cites the recent case of Mendoza
v. Agrix Marketing, Inc., 1 where the constitutionality of Pres. Decree No. 1717 was also
raised but not resolved. The Court, after noting that the petitioners had already filed
their claims with the AGRIX Claims Committee created by the decree, had simply
dismissed the petition on the ground of estoppel.
The petitioners stress that in the case at bar the private respondent also invoked the
provisions of Pres. Decree No. 1717 by filing a claim with the AGRIX Claims Committee.
Failing to get results, it sought to foreclose the real estate mortgage executed by AGRIX
in its favor, which had been extinguished by the decree. It was only when the
petitioners challenged the foreclosure on the basis of Sec. 4 (1) of the decree, that the
private respondent attacked the validity of the provision. At that stage, however,
consistent with Mendoza, the private respondent was already estopped from questioning
the constitutionality of the decree.
The Court does not agree that the principle of estoppel is applicable.
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It is not denied that the private respondent did file a claim with the AGRIX Claims
Committee pursuant to this decree. It must be noted, however, that this was done in
1980, when President Marcos was the absolute ruler of this country and his decrees
were the absolute law. Any judicial challenge to them would have been futile, not to say
foolhardy. The private respondent, no less than the rest of the nation, was aware of that
reality and knew it had no choice under the circumstances but to conform.
: nad
It is true that there were a few venturesome souls who dared to question the dictator's
decisions before the courts of justice then. The record will show, however, that not a
single act or issuance of President Marcos was ever declared unconstitutional, not even
by the highest court, as long as he was in power. To rule now that the private
respondent is estopped for having abided with the decree instead of boldly assailing it is
to close our eyes to a cynical fact of life during that repressive time.
This case must be distinguished from Mendoza, where the petitioners, after filing their
claims with the AGRIX Claims Committee, received in settlement thereof shares of stock
valued at P40,000.00 without protest or reservation. The herein private respondent has
not been paid a single centavo on its claim, which was kept pending for more than
seven years for alleged lack of supporting papers. Significantly, the validity of that claim
was not questioned by the petitioner when it sought to restrain the extrajudicial
foreclosure of the mortgage by the private respondent. The petitioner limited itself to
the argument that the private respondent was estopped from questioning the decree
because of its earlier compliance with its provisions.
Independently of these observations, there is the consideration that an affront to the
Constitution cannot be allowed to continue existing simply because of procedural
inhibitions that exalt form over substance.
December-1990 Jurisprudence
[G.R. No. 32945 : December 3, 1990.] MARIANO T.
NASSER, Petitioner, vs. THE COURT OF APPEALS, HON.
MALCOLM SARMIENTO, in his capacity as Presiding
Judge, Court of First Instance of Pampanga, Branch I,
AURORA RIVERA CANLAS, PATERNO R. CANLAS, and
TOMAS CENTILLAS, Respondents. [G.R. No. 32946.
December 3, 1990.] MARIANO T. NASSER, Petitioner,
vs. THE COURT OF APPEALS, PATERNO R. CANLAS,
AURORA RIVERA-CANLAS, TOMAS CENTILLAS and THE
CHIEF OF POLICE OF SAN ISIDRO, DAVAO ORIENTAL,
Respondents.
[G.R. No. 39430 : December 3, 1990.] FRANCISCO
MANLAPAZ, DELFIN SANGCAP, DOMINGO SANGCAP,
PEDRO CUNANAN, FAUSTO DE LA PENA and HONORATA
DE LA PENA, Petitioners, vs. HON. COURT OF APPEALS,
HON. JUDGE LORENZO R. MOSQUEDA, HON. JUDGE
VIRGILIO CANIVEL, TEODORO RIVERA, PABLO RIVERA,
RENATO
RIVERA
and
BONIFACIO
RIVERA,
Respondents.
[G.R. No. 55466 : December 3, 1990.] MANILA
SURETY & FIDELITY CO., INC., Petitioner, vs. COURT OF
APPEALS and WILLIAM H. QUASHA, Respondents.
[G.R. No. 78778 : December 3, 1990.] 191 SCRA 814
LEONIDA
CORONADO,
FELIX
BUENO,
MELANIA
RETIZOS, BERNARDINO BUENASEDA and JOVITA
MONTEFALCON, Petitioners, vs. THE COURT OF
APPEALS and JUANA BUENO ALBOVIAS, Respondents.
ANDRES E. DITAN, Petitioner, vs. PHILIPPINE
OVERSEAS
EMPLOYMENT
ADMINISTRATION
ADMINISTRATOR,
NATIONAL
LABOR
RELATIONS
COMMISSION,
ASIAWORLD
RECRUITMENT,
INC.,
AND/OR INTRACO SALES CORPORATION, Respondents.
BALTAZAR, PEDRO, URSULA, and DOMINGO, all
surnamed
PANTIG,
Petitioners,
vs.
VENANCIO
BALTAZAR, Respondent.
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs.
ROMEO ORTIZ y BALLARES, Accused-Appellant.
[G.R. No. 84884 : December 3, 1990.] EULALIO M.
RUIZ and ILUMINADA RUIZ, Petitioners, vs. HON.
DOROTEO N. CANEBA, THE CITY SHERIFF OF MANILA
AND/OR HIS DEPUTIES, ZENAIDA SANGALANG and
ADOLFO CRUZ, Respondents.
[G.R. No. 87264 : December 3, 1990.] MARIANO
DINGLASAN and FELICIDAD DINGLASAN, Petitioners,
vs. THE HON. MARIA ALICIA M. AUSTRIA, Presiding
Judge of Branch 159, Regional Trial Court, Pasig, Metro
Manila,
National
Capital
Judicial
Region,
The
GOVERNMENT SERVICE INSURANCE SYSTEM, and
CONCEPCION T. TINIO, Respondents.
[G.R. No. 89545 : December 3, 1990.] SPOUSES
ROLANDO DOLORFINO and MONINA FULE, Petitioners,
vs. THE HON. COURT OF APPEALS, SEVERO ALCOS and
EFIGENIA DE LUNA-ALCOS, Respondents.
[UDK No. 9864 : December 3, 1990.] RUFINA VDA.
DE TANGUB, Petitioner, vs. COURT OF APPEALS,
PRESIDING JUDGE of the [CAR] RTC, Branch 4, Iligan
City, and SPOUSES DOMINGO and EUGENIA MARTIL,
Respondents.
SANTIAGO ESCARTE, JR., ERNESTO VILLANUEVA,
FELIXBERTO VILLANUEVA, and LOURDES VILLANUEVA,
Petitioners, vs. OFFICE OF THE PRESIDENT OF THE
PHILIPPINES and TEODORO MEDINA, Respondents.
The Court is especially disturbed by Section 4(1) of the decree, quoted above,
extinguishing all mortgages and other liens attaching to the assets of AGRIX. It also
notes, with equal concern, the restriction in Subsection (ii) thereof that all "unsecured
obligations shall not bear interest" and in Subsection (iii) that "all accrued interests,
penalties or charges as of date hereof pertaining to the obligations, whether secured or
unsecured, shall not be recognized."
These provisions must be read with the Bill of Rights, where it is clearly provided in
Section 1 that "no person shall be deprived of life, liberty or property without due
course of law nor shall any person be denied the equal protection of the law" and in
Section 10 that "no law impairing the obligation of contracts shall be passed."
In defending the decree, the petitioners argue that property rights, like all rights, are
subject to regulation under the police power for the promotion of the common welfare.
The contention is that this inherent power of the state may be exercised at any time for
this purpose so long as the taking of the property right, even if based on contract, is
done with due process of law.
This argument is an over-simplification of the problem before us. The police power is not
a panacea for all constitutional maladies. Neither does its mere invocation conjure an
instant and automatic justification for every act of the government depriving a person of
his life, liberty or property.
A legislative act based on the police power requires the concurrence of a lawful subject
and a lawful method. In more familiar words, a) the interests of the public generally, as
distinguished from those of a particular class, should justify the interference of the
state; and b) the means employed are reasonably necessary for the accomplishment of
the purpose and not unduly oppressive upon individuals. 2
Applying these criteria to the case at bar, the Court finds first of all that the interests of
the public are not sufficiently involved to warrant the interference of the government
with the private contracts of AGRIX. The decree speaks vaguely of the "public,
particularly the small investors," who would be prejudiced if the corporation were not to
be assisted. However, the record does not state how many there are of such investors,
and who they are, and why they are being preferred to the private respondent and other
creditors of AGRIX with vested property rights.
:-cralaw
The public interest supposedly involved is not identified or explained. It has not been
shown that by the creation of the New Agrix, Inc. and the extinction of the property
rights of the creditors of AGRIX, the interests of the public as a whole, as distinguished
from those of a particular class, would be promoted or protected. The indispensable link
to the welfare of the greater number has not been established. On the contrary, it would
appear that the decree was issued only to favor a special group of investors who, for
reasons not given, have been preferred to the legitimate creditors of AGRIX.
Assuming there is a valid public interest involved, the Court still finds that the means
employed to rehabilitate AGRIX fall far short of the requirement that they shall not be
unduly oppressive. The oppressiveness is patent on the face of the decree. The right to
property in all mortgages, liens, interests, penalties and charges owing to the creditors
of AGRIX is arbitrarily destroyed. No consideration is paid for the extinction of the
mortgage rights. The accrued interests and other charges are simply rejected by the
decree. The right to property is dissolved by legislative fiat without regard to the private
interest violated and, worse, in favor of another private interest.
A mortgage lien is a property right derived from contract and so comes under the
protection of the Bill of Rights. So do interests on loans, as well as penalties and
charges, which are also vested rights once they accrue. Private property cannot simply
be taken by law from one person and given to another without compensation and any
known public purpose. This is plain arbitrariness and is not permitted under the
Constitution.
And not only is there arbitrary taking, there is discrimination as well. In extinguishing
the mortgage and other liens, the decree lumps the secured creditors with the
unsecured creditors and places them on the same level in the prosecution of their
respective claims. In this respect, all of them are considered unsecured creditors. The
only concession given to the secured creditors is that their loans are allowed to earn
interest from the date of the decree, but that still does not justify the cancellation of the
interests earned before that date. Such interests, whether due to the secured or the
unsecured creditors, are all extinguished by the decree. Even assuming such
cancellation to be valid, we still cannot see why all kinds of creditors, regardless of
security, are treated alike.
Under the equal protection clause, all persons or things similarly situated must be
treated alike, both in the privileges conferred and the obligations imposed. Conversely,

ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE
COURT and FELIPA E. PABLO, Respondents.
all persons or things differently situated should be treated differently. In the case at bar,
persons differently situated are similarly treated, in disregard of the principle that there
should be equality only among equals.
- nad
192 SCRA 21 CONSOLACION VILLANUEVA, Petitioner,

vs. THE INTERMEDIATE APPELLATE COURT, JESUS
BERNAS and REMEDIOS Q. BERNAS, Respondents.
THE PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee,
vs. MARIO TANDOY y LIM, Defendant-Appellant.
PEOPLE'S
FINANCING
CORP.
and
ENRIQUE
V.
ARCENAS, Petitioners, vs. COURT OF APPEALS
(Sixteenth Division), GAUDIOSO MANLIGUEZ and
PURIFICACION MANLIGUEZ, Respondents.
NATIONAL IRRIGATION ADMINISTRATION, Petitioner,
vs. HONORABLE TEODORO P. REGINO, PRESIDING
JUDGE, REGIONAL TRIAL COURT, BRANCH 84, QUEZON
CITY and CONSTRUCTION SERVICES OF AUSTRALIAPHILIPPINES INC., Respondents.
LUZ
FARMS,
Petitioner,
vs.
THE
HONORABLE
SECRETARY OF THE DEPARTMENT OF AGRARIAN
REFORM, Respondent.
DOLORES A. PAREDES, Petitioner, vs. CIVIL SERVICE
COMMISSION AND REMEDIOS A. AMOR, Respondents.
DOLORES A. PAREDES, Petitioner, vs. CIVIL SERVICE
COMMISSION, MERIT SYSTEMS PROTECTION BOARD
AND REMEDIOS A. AMOR, Respondents.
Cordillera Regional Assembly Member ALEXANDER P.
ORDILLO, (Banaue), Ifugao Provincial Board Member
CORAZON MONTINIG, (Mayoyao), Former Vice-Mayor
MARTIN UDAN (Banaue), Municipal Councilors MARTIN
GANO, (Lagawe), and TEODORO HEWE, (Hingyon),
Barangay Councilman PEDRO W. DULAG (Lamut);
Aguinaldo residents SANDY B. CHANGIWAN, and
DONATO TIMAGO; Lamut resident REY ANTONIO;
Kiangan residents ORLANDO PUGUON, and REYNAND
DULDULAO; Lagawe residents TOMAS KIMAYONG,
GREGORIO DANGO, GEORGE B. BAYWONG, and
VICENTE LUNAG; Hingyon residents PABLO M.
DULNUAN and CONSTANCIO GANO; Mayoyao residents
PEDRO M. BAOANG, LEONARDO IGADNA, and MAXIMO
IGADNA; and Banaue residents PUMA-A CULHI,
LATAYON BUTTIG, MIGUEL PUMELBAN, ANDRES
ORDILLO, FEDERICO MARIANO, SANDY BINOMNGA,
GABRIEL
LIMMANG,
ROMEO
TONGALI,
RUBEN
BAHATAN, MHOMDY GABRIEL, and NADRES GHAMANG,
Petitioners, vs. THE COMMISSION ON ELECTIONS; The
Honorable FRANKLIN M. DRILON, Secretary of Justice;
Hon. CATALINO MACARAIG, Executive Secretary; The
Cabinet Officer for Regional Development; Hon.
GUILLERMO CARAGUE, Secretary of Budget and
Management; and Hon. ROSALINA S. CAJUCOM, OIC,
National Treasurer, Respondents.
EUFRACIO
D.
ROJAS,
Plaintiff-Appellant,
vs.
CONSTANCIO B. MAGLANA, Defendant-Appellee.
[G.R. No. 36827 : December 10, 1990.] THE
DIRECTOR
OF
FOREST
ADMINISTRATION,
THE
DIRECTOR OF LANDS and THE REPUBLIC OF THE
PHILIPPINES, Petitioners, vs. HON. RAMON C.
FERNANDEZ, HERMOGENES CONCEPCION, JR., and
EMILIO A. GANCAYCO, ET AL., Respondents. [G.R. No.
56622 : December 10, 1990.] THE DIRECTOR OF LANDS
and THE DIRECTOR OF FOREST DEVELOPMENT,
Petitioners, vs. COURT OF APPEALS (Ninth Division),
GREGORIO A. LEGASPI and VALENTINA CERVANIA,
Respondents. [G.R. No. 70076 : December 10, 1990.]
REYNALDA ESPEJO, BENITA GARLITOS and ENRIQUETA
OXCIANO, Petitioners, vs. INTERMEDIATE APPELLATE
COURT, HON. ANTONIO M. BELEN, as Judge of the
Regional Trial Court of Lingayen, Pangasinan Branch
XXXVIII and ASTERIO SAURA, Respondents.
PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, vs.
MELVIN GIRON y SANTOS, Accused-Appellant.

RUBEN DELFIN, BENITO DOLOSA, CORNELIO AGUILAR,
ANASTACIO GORDOLA, CESAR PANALIGAN, LUIS
VIESCA, VICENTE GUADAMOR, JUAN CAGATIN, SIMEON
CHICA, REYNALDO CINCO, WILFREDO IPAS, SIMEON
One may also well wonder why AGRIX was singled out for government help, among
other corporations where the stockholders or investors were also swindled. It is not
clear why other companies entitled to similar concern were not similarly treated. And
surely, the stockholders of the private respondent, whose mortgage lien had been
cancelled and legitimate claims to accrued interests rejected, were no less deserving of
protection, which they did not get. The decree operated, to use the words of a
celebrated case, 3 "with an evil eye and an uneven hand."
On top of all this, New Agrix, Inc. was created by special decree notwithstanding the
provision of Article XIV, Section 4 of the 1973 Constitution, then in force, that:
SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the
formation, organization, or regulation of private corporations, unless such corporations
are owned or controlled by the Government or any subdivision or instrumentality
thereof. 4
The new corporation is neither owned nor controlled by the government. The National
Development Corporation was merely required to extend a loan of not more than
P10,000,000.00 to New Agrix, Inc. Pending payment thereof, NDC would undertake the
management of the corporation, but with the obligation of making periodic reports to
the Agrix board of directors. After payment of the loan, the said board can then appoint
its own management. The stocks of the new corporation are to be issued to the old
investors and stockholders of AGRIX upon proof of their claims against the abolished
corporation. They shall then be the owners of the new corporation. New Agrix, Inc. is
entirely private and so should have been organized under the Corporation Law in
accordance with the above-cited constitutional provision.
The Court also feels that the decree impairs the obligation of the contract between
AGRIX and the private respondent without justification. While it is true that the police
power is superior to the impairment clause, the principle will apply only where the
contract is so related to the public welfare that it will be considered congenitally
susceptible to change by the legislature in the interest of the greater number. 5 Most
present-day contracts are of that nature. But as already observed, the contracts of loan
and mortgage executed by AGRIX are purely private transactions and have not been
shown to be affected with public interest. There was therefore no warrant to amend
their provisions and deprive the private respondent of its vested property rights.
It is worth noting that only recently in the case of the Development Bank of the
Philippines v. NLRC, 6 we sustained the preference in payment of a mortgage creditor as
against the argument that the claims of laborers should take precedence over all other
claims, including those of the government. In arriving at this ruling, the Court
recognized the mortgage lien as a property right protected by the due process and
contract clauses notwithstanding the argument that the amendment in Section 110 of
the Labor Code was a proper exercise of the police power.
: nad
The Court reaffirms and applies that ruling in the case at bar.
Our finding, in sum, is that Pres. Decree No. 1717 is an invalid exercise of the police
power, not being in conformity with the traditional requirements of a lawful subject and
a lawful method. The extinction of the mortgage and other liens and of the interest and
other charges pertaining to the legitimate creditors of AGRIX constitutes taking without
due process of law, and this is compounded by the reduction of the secured creditors to
the category of unsecured creditors in violation of the equal protection clause. Moreover,
the new corporation, being neither owned nor controlled by the Government, should
have been created only by general and not special law. And insofar as the decree also
interferes with purely private agreements without any demonstrated connection with the
public interest, there is likewise an impairment of the obligation of the contract.
With the above pronouncements, we feel there is no more need to rule on the authority
of President Marcos to promulgate Pres. Decree No. 1717 under Amendment No. 6 of
the 1973 Constitution. Even if he had such authority, the decree must fall just the same
because of its violation of the Bill of Rights.
WHEREFORE, the petition is DISMISSED. Pres. Decree No. 1717 is declared
UNCONSTITUTIONAL. The temporary restraining order dated August 30, 1988, is
LIFTED. Costs against the petitioners.
- nad
SO ORDERED.
Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco
Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ., concur.
Padilla,
Bidin,
Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95 SCRA 392

(1980), a portion of the second paragraph of section 4 of Batas Pambansa Blg.
52 was declared null and void for being unconstitutional.
Feliciano, J., is on leave.
Endnotes
1. G.R. No. 62259, April 19, 1989.
NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC.,

Petitioners, vs. PHILIPPINE VETERANS BANK, THE EX-OFFICIO SHERIFF and
GODOFREDO QUILING, in his capacity as Deputy Sheriff of Calamba, Laguna,
Respondents.
1990 Cruz
FACTS:
PD 1717 ordered the rehabilitation of the Agrix Group of Companies to be
administered mainly by the National Development Company.
Agrix companies had a Claims Committee to process claims.
Sec. 4(1) thereof providing that "all mortgages and other liens presently attaching to
any of the assets of the dissolved corporations are hereby extinguished."
Agrix Marketing (AGRIX) executed in favor of Phil. Veterans Bank REM on July 7,
1978 over 3 parcels of land in LB, Laguna.
AGRIX went bankrupt then Pres. Marcos issued PD 1717 to salvage the company
PVB filed claim with the Claims Comittee
In the meantime, the New Agrix, Inc. and the National Development Company,
petitioners herein, invoking Sec. 4 (1) of the decree, filed a petition with the
Regional Trial Court of Calamba, Laguna, for the cancellation of the mortgage lien
in favor of the private respondent. For its part, the private respondent took steps to
extrajudicially foreclose the mortgage, prompting the petitioners to file a second case
with the same court to stop the foreclosure. The two cases were consolidated.
Judge Francisco Ma. Guerrero annulled not only the challenged provision,
viz., Sec. 4 (1), but the entire Pres. Decree No. 1717 on the grounds that: (1)
the presidential exercise of legislative power was a violation of the principle of
separation of powers; (2) the law impaired the obligation of contracts; and (3) the
decree violated the equal protection clause. The motion for reconsideration of this
decision having been denied, the present petition was filed.
NDC and AGRIX says: PVB estopped since they filed claims in Claims Committee
(cited another case Mendoza vs Agrix)
ISSUE/HELD: 1) WON PD 1717 is constitutional NO, not valid exercise of police power 2)
WON New Agrix, Inc was validly constituted NO new corporation, being neither owned nor
controlled by the Government, should have been created only by general and not special
law.
RATIO:
The Court is especially disturbed by Section 4(1) of the decree extinguishing all mortgages
and other liens attaching to the assets of AGRIX. It also notes, with equal concern, the
restriction in Subsection (ii) thereof that all "unsecured obligations shall not bear interest"
and in Subsection (iii) that "all accrued interests, penalties or charges as of date hereof
pertaining to the obligations, whether secured or unsecured, shall not be recognized."
On constitutionality of PD (Bill of Rights)
"no person shall be deprived of life, liberty or property without due course of law nor shall
any person be denied the equal protection of the law"
Sec 10 "no law impairing the obligation of contracts shall be passed."
Defense: Property rights subject to regulation under Police Power for the promotion of
common welfare
Court says: The police power is not a panacea for all constitutional maladies. Neither does
its mere invocation conjure an instant and automatic justification for every act of the
government depriving a person of his life, liberty or property.
A legislative act based on the police power requires the concurrence of a lawful subject and
a lawful method. In more familiar words, a) the interests of the public generally, as
distinguished from those of a particular class, should justify the interference of the state;
and b) the means employed are reasonably necessary for the accomplishment of the
purpose and not unduly oppressive upon individuals.
Public interest not identited and link to welfare of greater number not established. Decree
was issued to favour only special group of investors. Assuming there is valid public interest,
method is oppressive since there was no consideration pain on the extinction of mortgage
rights.
There was arbitrary taking of property (Mortgage lien property right)
The decree operated, to use the words of a celebrated case, 3 "with an evil eye and an
uneven hand." - AGRIX was singled out for government help, among other
corporations where the stockholders or investors were also swindled.
Decree impairs the obligation of the contract between AGRIX and the private respondent
without justification.
On creation of New Agrix
New Agrix, Inc. was created by special decree notwithstanding the provision of Article XIV,
Section 4 of the 1973 Constitution, then in force, that:
SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or instrumentality thereof.
The new corporation is neither owned nor controlled by the government. The National
Development Corporation was merely required to extend a loan of not more than
P10,000,000.00 to New Agrix, Inc. Pending payment thereof, NDC would undertake the
management of the corporation, but with the obligation of making periodic reports to the
Agrix board of directors. After payment of the loan, the said board can then appoint its own
management. The stocks of the new corporation are to be issued to the old investors and
stockholders of AGRIX upon proof of their claims against the abolished corporation. They
shall then be the owners of the new corporation. New Agrix, Inc. is entirely private and
so should have been organized under the Corporation Law in accordance with the
above-cited constitutional provision.
On estoppel
Philippine Veterans Bank not estopped. Filed with Claims Comittee during Marcos time when
Pres Marcos was absolute ruler and nobody questions him. Futile. No PD issued by Marcos
that time was declared unconstitutional
Mendoza case was not the same, since Mendoza received settlement of stocks P40,000.
Here PVB did not receive single centavo.
Today is Monday, November 17, 2014

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 75875 December 15, 1989
WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM and CHARLES CHAMSAY, petitioners,
vs.
SANITARY WARES MANUFACTURING CORPORATOIN, ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO,
JR., ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, BALDWIN YOUNG and AVELINO V.
CRUZ, respondents.
G.R. No. 75951 December 15, 1989
SANITARY WARES MANUFACTURING CORPORATION, ERNESTO R. LAGDAMEO, ENRIQUE B. LAGDAMEO,
GEORGE FL .EE RAUL A. BONCAN, BALDWIN YOUNG and AVELINO V. CRUX, petitioners,
vs.
THE COURT OF APPEALS, WOLFGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM, CHARLES
CHAMSAY and LUCIANO SALAZAR, respondents.
G.R. Nos. 75975-76 December 15, 1989
LUCIANO E. SALAZAR, petitioner,
vs.
SANITARY WARES MANUFACTURING CORPORATION, ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO,
JR., ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, BALDWIN YOUNG, AVELINO V. CRUZ
and the COURT OF APPEALS, respondents.
Belo, Abiera & Associates for petitioners in 75875.
Sycip, Salazar, Hernandez & Gatmaitan for Luciano E. Salazar.
GUTIERREZ, JR., J.:

These consolidated petitions seek the review of the amended decision of the Court of Appeals in CA-G.R. SP Nos.
05604 and 05617 which set aside the earlier decision dated June 5, 1986, of the then Intermediate Appellate Court
and directed that in all subsequent elections for directors of Sanitary Wares Manufacturing Corporation (Saniwares),
American Standard Inc. (ASI) cannot nominate more than three (3) directors; that the Filipino stockholders shall not
interfere in ASI's choice of its three (3) nominees; that, on the other hand, the Filipino stockholders can nominate
only six (6) candidates and in the event they cannot agree on the six (6) nominees, they shall vote only among
themselves to determine who the six (6) nominees will be, with cumulative voting to be allowed but without
interference from ASI.
The antecedent facts can be summarized as follows:
In 1961, Saniwares, a domestic corporation was incorporated for the primary purpose of manufacturing and
marketing sanitary wares. One of the incorporators, Mr. Baldwin Young went abroad to look for foreign partners,
European or American who could help in its expansion plans. On August 15, 1962, ASI, a foreign corporation
domiciled in Delaware, United States entered into an Agreement with Saniwares and some Filipino investors
whereby ASI and the Filipino investors agreed to participate in the ownership of an enterprise which would engage
primarily in the business of manufacturing in the Philippines and selling here and abroad vitreous china and sanitary
wares. The parties agreed that the business operations in the Philippines shall be carried on by an incorporated
enterprise and that the name of the corporation shall initially be "Sanitary Wares Manufacturing Corporation."
The Agreement has the following provisions relevant to the issues in these cases on the nomination and election of
the directors of the corporation:
3. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation shall be substantially in the form annexed hereto as
Exhibit A and, insofar as permitted under Philippine law, shall specifically provide for
(1) Cumulative voting for directors:
xxx xxx xxx
5. Management
(a) The management of the Corporation shall be vested in a Board of Directors, which shall consist of
nine individuals. As long as American-Standard shall own at least 30% of the outstanding stock of the
Corporation, three of the nine directors shall be designated by American-Standard, and the other six
shall be designated by the other stockholders of the Corporation. (pp. 51 & 53, Rollo of 75875)
At the request of ASI, the agreement contained provisions designed to protect it as a minority group, including the
grant of veto powers over a number of corporate acts and the right to designate certain officers, such as a member
of the Executive Committee whose vote was required for important corporate transactions.
Later, the 30% capital stock of ASI was increased to 40%. The corporation was also registered with the Board of
Investments for availment of incentives with the condition that at least 60% of the capital stock of the corporation
shall be owned by Philippine nationals.
The joint enterprise thus entered into by the Filipino investors and the American corporation prospered.
Unfortunately, with the business successes, there came a deterioration of the initially harmonious relations between
the two groups. According to the Filipino group, a basic disagreement was due to their desire to expand the export
operations of the company to which ASI objected as it apparently had other subsidiaries of joint joint venture groups
in the countries where Philippine exports were contemplated. On March 8, 1983, the annual stockholders' meeting
was held. The meeting was presided by Baldwin Young. The minutes were taken by the Secretary, Avelino Cruz.
After disposing of the preliminary items in the agenda, the stockholders then proceeded to the election of the
members of the board of directors. The ASI group nominated three persons namely; Wolfgang Aurbach, John Griffin
and David P. Whittingham. The Philippine investors nominated six, namely; Ernesto Lagdameo, Sr., Raul A. Boncan,
Ernesto R. Lagdameo, Jr., George F. Lee, and Baldwin Young. Mr. Eduardo R, Ceniza then nominated Mr. Luciano
E. Salazar, who in turn nominated Mr. Charles Chamsay. The chairman, Baldwin Young ruled the last two
nominations out of order on the basis of section 5 (a) of the Agreement, the consistent practice of the parties during
the past annual stockholders' meetings to nominate only nine persons as nominees for the nine-member board of
directors, and the legal advice of Saniwares' legal counsel. The following events then, transpired:
... There were protests against the action of the Chairman and heated arguments ensued. An appeal
was made by the ASI representative to the body of stockholders present that a vote be taken on the
ruling of the Chairman. The Chairman, Baldwin Young, declared the appeal out of order and no vote on
the ruling was taken. The Chairman then instructed the Corporate Secretary to cast all the votes
present and represented by proxy equally for the 6 nominees of the Philippine Investors and the 3
nominees of ASI, thus effectively excluding the 2 additional persons nominated, namely, Luciano E.
Salazar and Charles Chamsay. The ASI representative, Mr. Jaqua protested the decision of the
Chairman and announced that all votes accruing to ASI shares, a total of 1,329,695 (p. 27, Rollo, ACG.R. SP No. 05617) were being cumulatively voted for the three ASI nominees and Charles Chamsay,
and instructed the Secretary to so vote. Luciano E. Salazar and other proxy holders announced that all
the votes owned by and or represented by them 467,197 shares (p. 27, Rollo, AC-G.R. SP No. 05617)
were being voted cumulatively in favor of Luciano E. Salazar. The Chairman, Baldwin Young,
nevertheless instructed the Secretary to cast all votes equally in favor of the three ASI nominees,
namely, Wolfgang Aurbach, John Griffin and David Whittingham and the six originally nominated by
Rogelio Vinluan, namely, Ernesto Lagdameo, Sr., Raul Boncan, Ernesto Lagdameo, Jr., Enrique
Lagdameo, George F. Lee, and Baldwin Young. The Secretary then certified for the election of the
following Wolfgang Aurbach, John Griffin, David Whittingham Ernesto Lagdameo, Sr., Ernesto
Lagdameo, Jr., Enrique Lagdameo, George F. Lee, Raul A. Boncan, Baldwin Young. The
representative of ASI then moved to recess the meeting which was duly seconded. There was also a
motion to adjourn (p. 28, Rollo, AC-G.R. SP No. 05617). This motion to adjourn was accepted by the
Chairman, Baldwin Young, who announced that the motion was carried and declared the meeting
adjourned. Protests against the adjournment were registered and having been ignored, Mr. Jaqua the
ASI representative, stated that the meeting was not adjourned but only recessed and that the meeting
would be reconvened in the next room. The Chairman then threatened to have the stockholders who
did not agree to the decision of the Chairman on the casting of votes bodily thrown out. The ASI Group,
Luciano E. Salazar and other stockholders, allegedly representing 53 or 54% of the shares of
Saniwares, decided to continue the meeting at the elevator lobby of the American Standard Building.
The continued meeting was presided by Luciano E. Salazar, while Andres Gatmaitan acted as
Secretary. On the basis of the cumulative votes cast earlier in the meeting, the ASI Group nominated
its four nominees; Wolfgang Aurbach, John Griffin, David Whittingham and Charles Chamsay. Luciano
E. Salazar voted for himself, thus the said five directors were certified as elected directors by the Acting
Secretary, Andres Gatmaitan, with the explanation that there was a tie among the other six (6)
nominees for the four (4) remaining positions of directors and that the body decided not to break the tie.
(pp. 37-39, Rollo of 75975-76)
These incidents triggered off the filing of separate petitions by the parties with the Securities and Exchange
Commission (SEC). The first petition filed was for preliminary injunction by Saniwares, Emesto V. Lagdameo,
Baldwin Young, Raul A. Bonean Ernesto R. Lagdameo, Jr., Enrique Lagdameo and George F. Lee against Luciano
Salazar and Charles Chamsay. The case was denominated as SEC Case No. 2417. The second petition was for
quo warranto and application for receivership by Wolfgang Aurbach, John Griffin, David Whittingham, Luciano E.
Salazar and Charles Chamsay against the group of Young and Lagdameo (petitioners in SEC Case No. 2417) and
Avelino F. Cruz. The case was docketed as SEC Case No. 2718. Both sets of parties except for Avelino Cruz
claimed to be the legitimate directors of the corporation.
The two petitions were consolidated and tried jointly by a hearing officer who rendered a decision upholding the
election of the Lagdameo Group and dismissing the quo warranto petition of Salazar and Chamsay. The ASI Group
and Salazar appealed the decision to the SEC en banc which affirmed the hearing officer's decision.
The SEC decision led to the filing of two separate appeals with the Intermediate Appellate Court by Wolfgang
Aurbach, John Griffin, David Whittingham and Charles Chamsay (docketed as AC-G.R. SP No. 05604) and by
Luciano E. Salazar (docketed as AC-G.R. SP No. 05617). The petitions were consolidated and the appellate court in
its decision ordered the remand of the case to the Securities and Exchange Commission with the directive that a
new stockholders' meeting of Saniwares be ordered convoked as soon as possible, under the supervision of the
Commission.
Upon a motion for reconsideration filed by the appellees Lagdameo Group) the appellate court (Court of Appeals)
rendered the questioned amended decision. Petitioners Wolfgang Aurbach, John Griffin, David P. Whittingham and
Charles Chamsay in G.R. No. 75875 assign the following errors:
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE ALLEGED ELECTION OF PRIVATE
RESPONDENTS AS MEMBERS OF THE BOARD OF DIRECTORS OF SANIWARES WHEN IN FACT
THERE WAS NO ELECTION AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS FROM EXERCISING THEIR FULL
VOTING RIGHTS REPRESENTED BY THE NUMBER OF SHARES IN SANIWARES, THUS
DEPRIVING PETITIONERS AND THE CORPORATION THEY REPRESENT OF THEIR PROPERTY
RIGHTS WITHOUT DUE PROCESS OF LAW.
III. THE COURT OF APPEALS IMPOSES CONDITIONS AND READS PROVISIONS INTO THE
AGREEMENT OF THE PARTIES WHICH WERE NOT THERE, WHICH ACTION IT CANNOT
LEGALLY DO. (p. 17, Rollo-75875)
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the amended decision on the following grounds:
11.1. ThatAmendedDecisionwouldsanctiontheCA'sdisregard of binding contractual agreements entered
into by stockholders and the replacement of the conditions of such agreements with terms never
contemplated by the stockholders but merely dictated by the CA .
11.2. The Amended decision would likewise sanction the deprivation of the property rights of
stockholders without due process of law in order that a favored group of stockholders may be illegally
benefitted and guaranteed a continuing monopoly of the control of a corporation. (pp. 14-15, Rollo75975-76)
On the other hand, the petitioners in G.R. No. 75951 contend that:
I
THE AMENDED DECISION OF THE RESPONDENT COURT, WHILE RECOGNIZING THAT THE
STOCKHOLDERS OF SANIWARES ARE DIVIDED INTO TWO BLOCKS, FAILS TO FULLY
ENFORCE THE BASIC INTENT OF THE AGREEMENT AND THE LAW.
II
THE AMENDED DECISION DOES NOT CATEGORICALLY RULE THAT PRIVATE PETITIONERS
HEREIN WERE THE DULY ELECTED DIRECTORS DURING THE 8 MARCH 1983 ANNUAL
STOCKHOLDERS MEETING OF SANTWARES. (P. 24, Rollo-75951)
The issues raised in the petitions are interrelated, hence, they are discussed jointly.
The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its annual
stockholders' meeting held on March 8, 1983. To answer this question the following factors should be determined:
(1) the nature of the business established by the parties whether it was a joint venture or a corporation and (2)
whether or not the ASI Group may vote their additional 10% equity during elections of Saniwares' board of directors.
The rule is that whether the parties to a particular contract have thereby established among themselves a joint
venture or some other relation depends upon their actual intention which is determined in accordance with the rules
governing the interpretation and construction of contracts. (Terminal Shares, Inc. v. Chicago, B. and Q.R. Co. (DC
MO) 65 F Supp 678; Universal Sales Corp. v. California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of the parties should
be viewed strictly on the "Agreement" dated August 15,1962 wherein it is clearly stated that the parties' intention
was to form a corporation and not a joint venture.
They specifically mention number 16 under Miscellaneous Provisions which states:
xxx xxx xxx
c) nothing herein contained shall be construed to constitute any of the parties hereto partners or joint
venturers in respect of any transaction hereunder. (At P. 66, Rollo-GR No. 75875)
They object to the admission of other evidence which tends to show that the parties' agreement was to establish a
joint venture presented by the Lagdameo and Young Group on the ground that it contravenes the parol evidence
rule under section 7, Rule 130 of the Revised Rules of Court. According to them, the Lagdameo and Young Group
never pleaded in their pleading that the "Agreement" failed to express the true intent of the parties.
The parol evidence Rule under Rule 130 provides:
Evidence of written agreements-When the terms of an agreement have been reduced to writing, it is to
be considered as containing all such terms, and therefore, there can be, between the parties and their
successors in interest, no evidence of the terms of the agreement other than the contents of the writing,
except in the following cases:
(a) Where a mistake or imperfection of the writing, or its failure to express the true intent and
agreement of the parties or the validity of the agreement is put in issue by the pleadings.
(b) When there is an intrinsic ambiguity in the writing.
Contrary to ASI Group's stand, the Lagdameo and Young Group pleaded in their Reply and Answer to Counterclaim
in SEC Case No. 2417 that the Agreement failed to express the true intent of the parties, to wit:
xxx xxx xxx
4. While certain provisions of the Agreement would make it appear that the parties thereto disclaim
being partners or joint venturers such disclaimer is directed at third parties and is not inconsistent with,
and does not preclude, the existence of two distinct groups of stockholders in Saniwares one of which
(the Philippine Investors) shall constitute the majority, and the other ASI shall constitute the minority
stockholder. In any event, the evident intention of the Philippine Investors and ASI in entering into the
Agreement is to enter into ajoint venture enterprise, and if some words in the Agreement appear to be
contrary to the evident intention of the parties, the latter shall prevail over the former (Art. 1370, New
Civil Code). The various stipulations of a contract shall be interpreted together attributing to the
doubtful ones that sense which may result from all of them taken jointly (Art. 1374, New Civil Code).
Moreover, in order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered. (Art. 1371, New Civil Code). (Part I, Original Records,
SEC Case No. 2417)
It has been ruled:
In an action at law, where there is evidence tending to prove that the parties joined their efforts in
furtherance of an enterprise for their joint profit, the question whether they intended by their agreement
to create a joint adventure, or to assume some other relation is a question of fact for the jury. (Binder v.
Kessler v 200 App. Div. 40,192 N Y S 653; Pyroa v. Brownfield (Tex. Civ. A.) 238 SW 725; Hoge v.
George, 27 Wyo, 423, 200 P 96 33 C.J. p. 871)
In the instant cases, our examination of important provisions of the Agreement as well as the testimonial evidence
presented by the Lagdameo and Young Group shows that the parties agreed to establish a joint venture and not a
corporation. The history of the organization of Saniwares and the unusual arrangements which govern its policy
making body are all consistent with a joint venture and not with an ordinary corporation. As stated by the SEC:
According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement with ASI in
behalf of the Philippine nationals. He testified that ASI agreed to accept the role of minority vis-a-vis the
Philippine National group of investors, on the condition that the Agreement should contain provisions to
protect ASI as the minority.
An examination of the Agreement shows that certain provisions were included to protect the interests of
ASI as the minority. For example, the vote of 7 out of 9 directors is required in certain enumerated
corporate acts [Sec. 3 (b) (ii) (a) of the Agreement]. ASI is contractually entitled to designate a member
of the Executive Committee and the vote of this member is required for certain transactions [Sec. 3 (b)
(i)].
The Agreement also requires a 75% super-majority vote for the amendment of the articles and by-laws
of Saniwares [Sec. 3 (a) (iv) and (b) (iii)]. ASI is also given the right to designate the president and plant
manager [Sec. 5 (6)]. The Agreement further provides that the sales policy of Saniwares shall be that
which is normally followed by ASI [Sec. 13 (a)] and that Saniwares should not export "Standard"
products otherwise than through ASI's Export Marketing Services [Sec. 13 (6)]. Under the Agreement,
ASI agreed to provide technology and know-how to Saniwares and the latter paid royalties for the
same. (At p. 2).
xxx xxx xxx
It is pertinent to note that the provisions of the Agreement requiring a 7 out of 9 votes of the board of
directors for certain actions, in effect gave ASI (which designates 3 directors under the Agreement) an
effective veto power. Furthermore, the grant to ASI of the right to designate certain officers of the
corporation; the super-majority voting requirements for amendments of the articles and by-laws; and
most significantly to the issues of tms case, the provision that ASI shall designate 3 out of the 9
directors and the other stockholders shall designate the other 6, clearly indicate that there are two
distinct groups in Saniwares, namely ASI, which owns 40% of the capital stock and the Philippine
National stockholders who own the balance of 60%, and that 2) ASI is given certain protections as the
minority stockholder.
Premises considered, we believe that under the Agreement there are two groups of stockholders who
established a corporation with provisions for a special contractual relationship between the parties, i.e.,
ASI and the other stockholders. (pp. 4-5)
Section 5 (a) of the agreement uses the word "designated" and not "nominated" or "elected" in the selection of the
nine directors on a six to three ratio. Each group is assured of a fixed number of directors in the board.
Moreover, ASI in its communications referred to the enterprise as joint venture. Baldwin Young also testified that
Section 16(c) of the Agreement that "Nothing herein contained shall be construed to constitute any of the parties
hereto partners or joint venturers in respect of any transaction hereunder" was merely to obviate the possibility of
the enterprise being treated as partnership for tax purposes and liabilities to third parties.
Quite often, Filipino entrepreneurs in their desire to develop the industrial and manufacturing capacities of a local
firm are constrained to seek the technology and marketing assistance of huge multinational corporations of the
developed world. Arrangements are formalized where a foreign group becomes a minority owner of a firm in
exchange for its manufacturing expertise, use of its brand names, and other such assistance. However, there is
always a danger from such arrangements. The foreign group may, from the start, intend to establish its own sole or
monopolistic operations and merely uses the joint venture arrangement to gain a foothold or test the Philippine
waters, so to speak. Or the covetousness may come later. As the Philippine firm enlarges its operations and
becomes profitable, the foreign group undermines the local majority ownership and actively tries to completely or
predominantly take over the entire company. This undermining of joint ventures is not consistent with fair dealing to
say the least. To the extent that such subversive actions can be lawfully prevented, the courts should extend
protection especially in industries where constitutional and legal requirements reserve controlling ownership to
Filipino citizens.
The Lagdameo Group stated in their appellees' brief in the Court of Appeal
In fact, the Philippine Corporation Code itself recognizes the right of stockholders to enter into
agreements regarding the exercise of their voting rights.
Sec. 100. Agreements by stockholders.xxx xxx xxx
2. An agreement between two or more stockholders, if in writing and signed by the parties thereto, may
provide that in exercising any voting rights, the shares held by them shall be voted as therein provided,
or as they may agree, or as determined in accordance with a procedure agreed upon by them.
Appellants contend that the above provision is included in the Corporation Code's chapter on close
corporations and Saniwares cannot be a close corporation because it has 95 stockholders. Firstly,
although Saniwares had 95 stockholders at the time of the disputed stockholders meeting, these 95
stockholders are not separate from each other but are divisible into groups representing a single
Identifiable interest. For example, ASI, its nominees and lawyers count for 13 of the 95 stockholders.
The YoungYutivo family count for another 13 stockholders, the Chamsay family for 8 stockholders, the
Santos family for 9 stockholders, the Dy family for 7 stockholders, etc. If the members of one family
and/or business or interest group are considered as one (which, it is respectfully submitted, they should
be for purposes of determining how closely held Saniwares is there were as of 8 March 1983,
practically only 17 stockholders of Saniwares. (Please refer to discussion in pp. 5 to 6 of appellees'
Rejoinder Memorandum dated 11 December 1984 and Annex "A" thereof).
Secondly, even assuming that Saniwares is technically not a close corporation because it has more
than 20 stockholders, the undeniable fact is that it is a close-held corporation. Surely, appellants cannot
honestly claim that Saniwares is a public issue or a widely held corporation.
In the United States, many courts have taken a realistic approach to joint venture corporations and
have not rigidly applied principles of corporation law designed primarily for public issue corporations.
These courts have indicated that express arrangements between corporate joint ventures should be
construed with less emphasis on the ordinary rules of law usually applied to corporate entities and with
more consideration given to the nature of the agreement between the joint venturers (Please see
Wabash Ry v. American Refrigerator Transit Co., 7 F 2d 335; Chicago, M & St. P. Ry v. Des Moines
Union Ry; 254 Ass'n. 247 US. 490'; Seaboard Airline Ry v. Atlantic Coast Line Ry; 240 N.C. 495,.82
S.E. 2d 771; Deboy v. Harris, 207 Md., 212,113 A 2d 903; Hathway v. Porter Royalty Pool, Inc., 296
Mich. 90, 90, 295 N.W. 571; Beardsley v. Beardsley, 138 U.S. 262; "The Legal Status of Joint Venture
Corporations", 11 Vand Law Rev. p. 680,1958). These American cases dealt with legal questions as to
the extent to which the requirements arising from the corporate form of joint venture corporations
should control, and the courts ruled that substantial justice lay with those litigants who relied on the
joint venture agreement rather than the litigants who relied on the orthodox principles of corporation
law.
As correctly held by the SEC Hearing Officer:
It is said that participants in a joint venture, in organizing the joint venture deviate from the traditional
pattern of corporation management. A noted authority has pointed out that just as in close corporations,
shareholders' agreements in joint venture corporations often contain provisions which do one or more
of the following: (1) require greater than majority vote for shareholder and director action; (2) give
certain shareholders or groups of shareholders power to select a specified number of directors; (3) give
to the shareholders control over the selection and retention of employees; and (4) set up a procedure
for the settlement of disputes by arbitration (See I O' Neal, Close Corporations, 1971 ed., Section
1.06a, pp. 15-16) (Decision of SEC Hearing Officer, P. 16)
Thirdly paragraph 2 of Sec. 100 of the Corporation Code does not necessarily imply that agreements
regarding the exercise of voting rights are allowed only in close corporations. As Campos and LopezCampos explain:
Paragraph 2 refers to pooling and voting agreements in particular. Does this provision necessarily imply
that these agreements can be valid only in close corporations as defined by the Code? Suppose that a
corporation has twenty five stockholders, and therefore cannot qualify as a close corporation under
section 96, can some of them enter into an agreement to vote as a unit in the election of directors? It is
submitted that there is no reason for denying stockholders of corporations other than close ones the
right to enter into not voting or pooling agreements to protect their interests, as long as they do not
intend to commit any wrong, or fraud on the other stockholders not parties to the agreement. Of course,
voting or pooling agreements are perhaps more useful and more often resorted to in close
corporations. But they may also be found necessary even in widely held corporations. Moreover, since
the Code limits the legal meaning of close corporations to those which comply with the requisites laid
down by section 96, it is entirely possible that a corporation which is in fact a close corporation will not
come within the definition. In such case, its stockholders should not be precluded from entering into
contracts like voting agreements if these are otherwise valid. (Campos & Lopez-Campos, op cit, p. 405)
In short, even assuming that sec. 5(a) of the Agreement relating to the designation or nomination of
directors restricts the right of the Agreement's signatories to vote for directors, such contractual
provision, as correctly held by the SEC, is valid and binding upon the signatories thereto, which include
appellants. (Rollo No. 75951, pp. 90-94)
In regard to the question as to whether or not the ASI group may vote their additional equity during elections of
Saniwares' board of directors, the Court of Appeals correctly stated:
As in other joint venture companies, the extent of ASI's participation in the management of the
corporation is spelled out in the Agreement. Section 5(a) hereof says that three of the nine directors
shall be designated by ASI and the remaining six by the other stockholders, i.e., the Filipino
stockholders. This allocation of board seats is obviously in consonance with the minority position of
ASI.
Having entered into a well-defined contractual relationship, it is imperative that the parties should honor
and adhere to their respective rights and obligations thereunder. Appellants seem to contend that any
allocation of board seats, even in joint venture corporations, are null and void to the extent that such
may interfere with the stockholder's rights to cumulative voting as provided in Section 24 of the
Corporation Code. This Court should not be prepared to hold that any agreement which curtails in any
way cumulative voting should be struck down, even if such agreement has been freely entered into by
experienced businessmen and do not prejudice those who are not parties thereto. It may well be that it
would be more cogent to hold, as the Securities and Exchange Commission has held in the decision
appealed from, that cumulative voting rights may be voluntarily waived by stockholders who enter into
special relationships with each other to pursue and implement specific purposes, as in joint venture
relationships between foreign and local stockholders, so long as such agreements do not adversely
affect third parties.
In any event, it is believed that we are not here called upon to make a general rule on this question.
Rather, all that needs to be done is to give life and effect to the particular contractual rights and
obligations which the parties have assumed for themselves.
On the one hand, the clearly established minority position of ASI and the contractual allocation of board
seats Cannot be disregarded. On the other hand, the rights of the stockholders to cumulative voting
should also be protected.
In our decision sought to be reconsidered, we opted to uphold the second over the first. Upon further
reflection, we feel that the proper and just solution to give due consideration to both factors suggests
itself quite clearly. This Court should recognize and uphold the division of the stockholders into two
groups, and at the same time uphold the right of the stockholders within each group to cumulative
voting in the process of determining who the group's nominees would be. In practical terms, as
suggested by appellant Luciano E. Salazar himself, this means that if the Filipino stockholders cannot
agree who their six nominees will be, a vote would have to be taken among the Filipino stockholders
only. During this voting, each Filipino stockholder can cumulate his votes. ASI, however, should not be
allowed to interfere in the voting within the Filipino group. Otherwise, ASI would be able to designate
more than the three directors it is allowed to designate under the Agreement, and may even be able to
get a majority of the board seats, a result which is clearly contrary to the contractual intent of the
parties.
Such a ruling will give effect to both the allocation of the board seats and the stockholder's right to
cumulative voting. Moreover, this ruling will also give due consideration to the issue raised by the
appellees on possible violation or circumvention of the Anti-Dummy Law (Com. Act No. 108, as
amended) and the nationalization requirements of the Constitution and the laws if ASI is allowed to
nominate more than three directors. (Rollo-75875, pp. 38-39)
The ASI Group and petitioner Salazar, now reiterate their theory that the ASI Group has the right to vote their
additional equity pursuant to Section 24 of the Corporation Code which gives the stockholders of a corporation the
right to cumulate their votes in electing directors. Petitioner Salazar adds that this right if granted to the ASI Group
would not necessarily mean a violation of the Anti-Dummy Act (Commonwealth Act 108, as amended). He cites
section 2-a thereof which provides:
And provided finally that the election of aliens as members of the board of directors or governing body
of corporations or associations engaging in partially nationalized activities shall be allowed in proportion
to their allowable participation or share in the capital of such entities. (amendments introduced by
Presidential Decree 715, section 1, promulgated May 28, 1975)
The ASI Group's argument is correct within the context of Section 24 of the Corporation Code. The point of query,
however, is whether or not that provision is applicable to a joint venture with clearly defined agreements:
The legal concept of ajoint venture is of common law origin. It has no precise legal definition but it has
been generally understood to mean an organization formed for some temporary purpose. (Gates v.
Megargel, 266 Fed. 811 [1920]) It is in fact hardly distinguishable from the partnership, since their
elements are similar community of interest in the business, sharing of profits and losses, and a mutual
right of control. Blackner v. Mc Dermott, 176 F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P. 2d., 1043
[1939]; Buckley v. Chadwick, 45 Cal. 2d. 183, 288 P. 2d. 12 289 P. 2d. 242 [1955]). The main distinction
cited by most opinions in common law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is formed for the execution of a single
transaction, and is thus of a temporary nature. (Tufts v. Mann 116 Cal. App. 170, 2 P. 2d. 500 [1931];
Harmon v. Martin, 395 111. 595, 71 NE 2d. 74 [1947]; Gates v. Megargel 266 Fed. 811 [1920]). This
observation is not entirely accurate in this jurisdiction, since under the Civil Code, a partnership may be
particular or universal, and a particular partnership may have for its object a specific undertaking. (Art.
1783, Civil Code). It would seem therefore that under Philippine law, a joint venture is a form of
partnership and should thus be governed by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has held that although a corporation
cannot enter into a partnership contract, it may however engage in a joint venture with others. (At p. 12,
Tuazon v. Bolanos, 95 Phil. 906 [1954]) (Campos and Lopez-Campos Comments, Notes and Selected
Cases, Corporation Code 1981)
Moreover, the usual rules as regards the construction and operations of contracts generally apply to a contract of
joint venture. (O' Hara v. Harman 14 App. Dev. (167) 43 NYS 556).
Bearing these principles in mind, the correct view would be that the resolution of the question of whether or not the
ASI Group may vote their additional equity lies in the agreement of the parties.
Necessarily, the appellate court was correct in upholding the agreement of the parties as regards the allocation of
director seats under Section 5 (a) of the "Agreement," and the right of each group of stockholders to cumulative
voting in the process of determining who the group's nominees would be under Section 3 (a) (1) of the "Agreement."
As pointed out by SEC, Section 5 (a) of the Agreement relates to the manner of nominating the members of the
board of directors while Section 3 (a) (1) relates to the manner of voting for these nominees.
This is the proper interpretation of the Agreement of the parties as regards the election of members of the board of
directors.
To allow the ASI Group to vote their additional equity to help elect even a Filipino director who would be beholden to
them would obliterate their minority status as agreed upon by the parties. As aptly stated by the appellate court:
... ASI, however, should not be allowed to interfere in the voting within the Filipino group. Otherwise,
ASI would be able to designate more than the three directors it is allowed to designate under the
Agreement, and may even be able to get a majority of the board seats, a result which is clearly contrary
to the contractual intent of the parties.
Such a ruling will give effect to both the allocation of the board seats and the stockholder's right to
cumulative voting. Moreover, this ruling will also give due consideration to the issue raised by the
appellees on possible violation or circumvention of the Anti-Dummy Law (Com. Act No. 108, as
amended) and the nationalization requirements of the Constitution and the laws if ASI is allowed to
nominate more than three directors. (At p. 39, Rollo, 75875)
Equally important as the consideration of the contractual intent of the parties is the consideration as regards the
possible domination by the foreign investors of the enterprise in violation of the nationalization requirements
enshrined in the Constitution and circumvention of the Anti-Dummy Act. In this regard, petitioner Salazar's position
is that the Anti-Dummy Act allows the ASI group to elect board directors in proportion to their share in the capital of
the entity. It is to be noted, however, that the same law also limits the election of aliens as members of the board of
directors in proportion to their allowance participation of said entity. In the instant case, the foreign Group ASI was
limited to designate three directors. This is the allowable participation of the ASI Group. Hence, in future dealings,
this limitation of six to three board seats should always be maintained as long as the joint venture agreement exists
considering that in limiting 3 board seats in the 9-man board of directors there are provisions already agreed upon
and embodied in the parties' Agreement to protect the interests arising from the minority status of the foreign
investors.
With these findings, we the decisions of the SEC Hearing Officer and SEC which were impliedly affirmed by the
appellate court declaring Messrs. Wolfgang Aurbach, John Griffin, David P Whittingham, Emesto V. Lagdameo,
Baldwin young, Raul A. Boncan, Emesto V. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee as the duly
elected directors of Saniwares at the March 8,1983 annual stockholders' meeting.
On the other hand, the Lagdameo and Young Group (petitioners in G.R. No. 75951) object to a cumulative voting
during the election of the board of directors of the enterprise as ruled by the appellate court and submits that the six
(6) directors allotted the Filipino stockholders should be selected by consensus pursuant to section 5 (a) of the
Agreement which uses the word "designate" meaning "nominate, delegate or appoint."
They also stress the possibility that the ASI Group might take control of the enterprise if the Filipino stockholders are
allowed to select their nominees separately and not as a common slot determined by the majority of their group.
Section 5 (a) of the Agreement which uses the word designates in the allocation of board directors should not be
interpreted in isolation. This should be construed in relation to section 3 (a) (1) of the Agreement. As we stated
earlier, section 3(a) (1) relates to the manner of voting for these nominees which is cumulative voting while section
5(a) relates to the manner of nominating the members of the board of directors. The petitioners in G.R. No. 75951
agreed to this procedure, hence, they cannot now impugn its legality.
The insinuation that the ASI Group may be able to control the enterprise under the cumulative voting procedure
cannot, however, be ignored. The validity of the cumulative voting procedure is dependent on the directors thus
elected being genuine members of the Filipino group, not voters whose interest is to increase the ASI share in the
management of Saniwares. The joint venture character of the enterprise must always be taken into account, so long
as the company exists under its original agreement. Cumulative voting may not be used as a device to enable ASI
to achieve stealthily or indirectly what they cannot accomplish openly. There are substantial safeguards in the
Agreement which are intended to preserve the majority status of the Filipino investors as well as to maintain the
minority status of the foreign investors group as earlier discussed. They should be maintained.
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are DISMISSED and the petition in G.R.
No. 75951 is partly GRANTED. The amended decision of the Court of Appeals is MODIFIED in that Messrs.
Wolfgang Aurbach John Griffin, David Whittingham Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto
R. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee are declared as the duly elected directors of Saniwares at
the March 8,1983 annual stockholders' meeting. In all other respects, the questioned decision is AFFIRMED. Costs
against the petitioners in G.R. Nos. 75975-76 and G.R. No. 75875.
SO ORDERED.
Fernan, C.J., (Chairman), Bidin and Cortes, JJ., concur.
Feliciano, J., took no part.
Aurbach vs. Sanitary Wares

(Partnership; Joint Venture; Foreign and Domestic Corp)
F: This consolidated petition assailed the decision of the CA directing a certain MANNER OF ELECTION OF
OFFICERS IN THE BOARD OF DIRECTORS
*There are two groups in this case, the Lagdameo group composed of Filipino investors and the
American Standard Inc. (ASI) composed of foreign investors.
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual intention of the
parties should be viewed strictly on the "Agreement" dated August 15,1962 wherein it is clearly stated
that the parties' intention was to form a corporation and not a joint venture.
I: The main issue hinges on who were the duly elected directors of Saniwares for the year 1983 during its
annual stockholders' meeting held on March 8, 1983. To answer this question the following factors
should be determined:
*(1) the nature of the business established by the parties whether it was a joint venture or a corporation
and
H:
While certain provisions of the Agreement would make it appear that the parties thereto
disclaim being partners or joint venturers such disclaimer is directed at third parties and is not
inconsistent with, and does not preclude, the existence of two distinct groups of stockholders in
Saniwares one of which (the Philippine Investors) shall constitute the majority, and the other ASI
shall constitute the minority stockholder. In any event, the evident intention of the Philippine
Investors and ASI in entering into the Agreement is to enter into a joint venture enterprise
An examination of the Agreement shows that certain provisions were inccuded to protect the
interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in
certain enumerated corporate acts. ASI is contractually entitled to designate a member of the
Executive Committee and the vote of this member is required for certain transactions
The Agreement also requires a 75% super-majority vote for the amendment of the articles and
by-laws of Saniwares. ASI is also given the right to designate the president and plant manager
.The Agreement further provides that the sales policy of Saniwares shall be that which is
normally followed by ASI and that Saniwares should not export "Standard" products otherwise
than through ASI's Export Marketing Services. Under the Agreement, ASI agreed to provide
technology and know-how to Saniwares and the latter paid royalties for the same.
The legal concept of a joint venture is of common law origin. It has no precise legal definition
but it has been generally understood to mean an organization formed for some temporary
purpose. It is in fact hardly distinguishable from the partnership, since their elements are similar
community of interest in the business, sharing of profits and losses, and a mutual right of
control.
The main distinction cited by most opinions in common law jurisdictions is that the partnership
contemplates a general business with some degree of continuity, while the joint venture is formed
for the execution of a single transaction, and is thus of a temporary nature.

SUPREME COURT
Manila
EN BANC
G.R. No. L-4935
May 28, 1954
J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA ARANETA, INC., plaintiffappellee,
vs.
QUIRINO BOLAOS, defendant-appellant.
Araneta and Araneta for appellee.
Jose A. Buendia for appellant.
REYES, J.:
This is an action originally brought in the Court of First Instance of Rizal, Quezon City Branch, to recover possesion
of registered land situated in barrio Tatalon, Quezon City.
Plaintiff's complaint was amended three times with respect to the extent and description of the land sought to be
recovered. The original complaint described the land as a portion of a lot registered in plaintiff's name under
Transfer Certificate of Title No. 37686 of the land record of Rizal Province and as containing an area of 13 hectares
more or less. But the complaint was amended by reducing the area of 6 hectares, more or less, after the defendant
had indicated the plaintiff's surveyors the portion of land claimed and occupied by him. The second amendment
became necessary and was allowed following the testimony of plaintiff's surveyors that a portion of the area was
embraced in another certificate of title, which was plaintiff's Transfer Certificate of Title No. 37677. And still later, in
the course of trial, after defendant's surveyor and witness, Quirino Feria, had testified that the area occupied and
claimed by defendant was about 13 hectares, as shown in his Exhibit 1, plaintiff again, with the leave of court,
amended its complaint to make its allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself thru "open, continuous, exclusive and public and
notorious possession (of land in dispute) under claim of ownership, adverse to the entire world by defendant and his
predecessor in interest" from "time in-memorial". The answer further alleges that registration of the land in dispute
was obtained by plaintiff or its predecessors in interest thru "fraud or error and without knowledge (of) or interest
either personal or thru publication to defendant and/or predecessors in interest." The answer therefore prays that
the complaint be dismissed with costs and plaintiff required to reconvey the land to defendant or pay its value.
After trial, the lower court rendered judgment for plaintiff, declaring defendant to be without any right to the land in
question and ordering him to restore possession thereof to plaintiff and to pay the latter a monthly rent of P132.62
from January, 1940, until he vacates the land, and also to pay the costs.
Appealing directly to this court because of the value of the property involved, defendant makes the following
assignment or errors:
I. The trial court erred in not dismissing the case on the ground that the case was not brought by the real
property in interest.
II. The trial court erred in admitting the third amended complaint.
III. The trial court erred in denying defendant's motion to strike.
IV. The trial court erred in including in its decision land not involved in the litigation.
V. The trial court erred in holding that the land in dispute is covered by transfer certificates of Title Nos. 37686
and 37677.
Vl. The trial court erred in not finding that the defendant is the true and lawful owner of the land.
VII. The trial court erred in finding that the defendant is liable to pay the plaintiff the amount of P132.62
monthly from January, 1940, until he vacates the premises.
VIII. The trial court erred in not ordering the plaintiff to reconvey the land in litigation to the defendant.
As to the first assigned error, there is nothing to the contention that the present action is not brought by the real
party in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of Court require is that an action be brought in
the name of, but not necessarily by, the real party in interest. (Section 2, Rule 2.) In fact the practice is for an
attorney-at-law to bring the action, that is to file the complaint, in the name of the plaintiff. That practice appears to
have been followed in this case, since the complaint is signed by the law firm of Araneta and Araneta, "counsel for
plaintiff" and commences with the statement "comes now plaintiff, through its undersigned counsel." It is true that
the complaint also states that the plaintiff is "represented herein by its Managing Partner Gregorio Araneta, Inc.",
another corporation, but there is nothing against one corporation being represented by another person, natural or
juridical, in a suit in court. The contention that Gregorio Araneta, Inc. can not act as managing partner for plaintiff on
the theory that it is illegal for two corporations to enter into a partnership is without merit, for the true rule is that
"though a corporation has no power to enter into a partnership, it may nevertheless enter into a joint venture with
another where the nature of that venture is in line with the business authorized by its charter." (Wyoming-Indiana Oil
Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of Corp., 1082.) There is nothing in the record to
indicate that the venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in
line with the corporate business of either of them.
Errors II, III, and IV, referring to the admission of the third amended complaint, may be answered by mere reference
to section 4 of Rule 17, Rules of Court, which sanctions such amendment. It reads:
Sec. 4. Amendment to conform to evidence. When issues not raised by the pleadings are tried by express
or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the
pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence
and to raise these issues may be made upon motion of any party at my time, even of the trial of these issues.
If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the
court may allow the pleadings to be amended and shall be so freely when the presentation of the merits of the
action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such
evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a
continuance to enable the objecting party to meet such evidence.
Under this provision amendment is not even necessary for the purpose of rendering judgment on issues proved
though not alleged. Thus, commenting on the provision, Chief Justice Moran says in this Rules of Court:
Under this section, American courts have, under the New Federal Rules of Civil Procedure, ruled that where
the facts shown entitled plaintiff to relief other than that asked for, no amendment to the complaint is
necessary, especially where defendant has himself raised the point on which recovery is based, and that the
appellate court treat the pleadings as amended to conform to the evidence, although the pleadings were not
actually amended. (I Moran, Rules of Court, 1952 ed., 389-390.)
Our conclusion therefore is that specification of error II, III, and IV are without merit..
Let us now pass on the errors V and VI. Admitting, though his attorney, at the early stage of the trial, that the land in
dispute "is that described or represented in Exhibit A and in Exhibit B enclosed in red pencil with the name Quirino
Bolaos," defendant later changed his lawyer and also his theory and tried to prove that the land in dispute was not
covered by plaintiff's certificate of title. The evidence, however, is against defendant, for it clearly establishes that
plaintiff is the registered owner of lot No. 4-B-3-C, situate in barrio Tatalon, Quezon City, with an area of 5,297,429.3
square meters, more or less, covered by transfer certificate of title No. 37686 of the land records of Rizal province,
and of lot No. 4-B-4, situated in the same barrio, having an area of 74,789 square meters, more or less, covered by
transfer certificate of title No. 37677 of the land records of the same province, both lots having been originally
registered on July 8, 1914 under original certificate of title No. 735. The identity of the lots was established by the
testimony of Antonio Manahan and Magno Faustino, witnesses for plaintiff, and the identity of the portion thereof
claimed by defendant was established by the testimony of his own witness, Quirico Feria. The combined testimony
of these three witnesses clearly shows that the portion claimed by defendant is made up of a part of lot 4-B-3-C and
major on portion of lot 4-B-4, and is well within the area covered by the two transfer certificates of title already
mentioned. This fact also appears admitted in defendant's answer to the third amended complaint.
As the land in dispute is covered by plaintiff's Torrens certificate of title and was registered in 1914, the decree of
registration can no longer be impugned on the ground of fraud, error or lack of notice to defendant, as more than
one year has already elapsed from the issuance and entry of the decree. Neither court the decree be collaterally
attacked by any person claiming title to, or interest in, the land prior to the registration proceedings. (Sorogon vs.
Makalintal,1 45 Off. Gaz., 3819.) Nor could title to that land in derogation of that of plaintiff, the registered owner, be
acquired by prescription or adverse possession. (Section 46, Act No. 496.) Adverse, notorious and continuous
possession under claim of ownership for the period fixed by law is ineffective against a Torrens title. (Valiente vs.
Judge of CFI of Tarlac,2 etc., 45 Off. Gaz., Supp. 9, p. 43.) And it is likewise settled that the right to secure
possession under a decree of registration does not prescribed. (Francisco vs. Cruz, 43 Off. Gaz., 5105, 5109-5110.)
A recent decision of this Court on this point is that rendered in the case of Jose Alcantara et al., vs. Mariano et al.,
92 Phil., 796. This disposes of the alleged errors V and VI.
As to error VII, it is claimed that `there was no evidence to sustain the finding that defendant should be sentenced to
pay plaintiff P132.62 monthly from January, 1940, until he vacates the premises.' But it appears from the record that
that reasonable compensation for the use and occupation of the premises, as stipulated at the hearing was P10 a
month for each hectare and that the area occupied by defendant was 13.2619 hectares. The total rent to be paid for
the area occupied should therefore be P132.62 a month. It is appears from the testimony of J. A. Araneta and
witness Emigdio Tanjuatco that as early as 1939 an action of ejectment had already been filed against defendant.
And it cannot be supposed that defendant has been paying rents, for he has been asserting all along that the
premises in question 'have always been since time immemorial in open, continuous, exclusive and public and
notorious possession and under claim of ownership adverse to the entire world by defendant and his predecessors
in interest.' This assignment of error is thus clearly without merit.
Error No. VIII is but a consequence of the other errors alleged and needs for further consideration.
During the pendency of this case in this Court appellant, thru other counsel, has filed a motion to dismiss alleging
that there is pending before the Court of First Instance of Rizal another action between the same parties and for the
same cause and seeking to sustain that allegation with a copy of the complaint filed in said action. But an
examination of that complaint reveals that appellant's allegation is not correct, for the pretended identity of parties
and cause of action in the two suits does not appear. That other case is one for recovery of ownership, while the
present one is for recovery of possession. And while appellant claims that he is also involved in that order action
because it is a class suit, the complaint does not show that such is really the case. On the contrary, it appears that
the action seeks relief for each individual plaintiff and not relief for and on behalf of others. The motion for dismissal
is clearly without merit.
Wherefore, the judgment appealed from is affirmed, with costs against the plaintiff.
Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.
Footnotes
180 Phil., 259.
2 80 Phil., 415.
TUASON VS. BOLANOS

GR. No. L-4935. May 28, 1954
95 Phil. 106
CASE DIGEST
Facts:
Plaintiffs complaint against defendant was to recover possession of a registered land. In
the complaint, the plaintiff is represented by its Managing Partner, Gregorio Araneta, Inc.,
another corporation. Defendant, in his answer, sets up prescription and title in himself thru
"open, continuous, exclusive and public and notorious possession under claim of ownership,
adverse to the entire world by defendant and his predecessors in interest" from "time
immemorial". After trial, the lower court rendered judgment for plaintiff, declaring defendant to
be without any right to the land in question and ordering him to restore possession thereof to
plaintiff and to pay the latter a monthly rent. Defendant appealed directly to the Supreme Court
and contended, among others, that Gregorio Araneta, Inc. can not act as managing partner for
plaintiff on the theory that it is illegal for two corporations to enter into a partnership
Issue:
Whether or not a corporation may enter into a joint venture with another corporation.
Ruling:
It is true that the complaint states that the plaintiff is "represented herein by its Managing
Partner Gregorio Araneta, Inc.", another corporation, but there is nothing against one
corporation being represented by another person, natural or juridical, in a suit in court. The
contention that Gregorio Araneta, Inc. cannot act as managing partner for plaintiff on the theory
that it is illegal for two corporations to enter into a partnership is without merit, for the true rule is
that "though a corporation has no power to enter into a partnership, it may nevertheless enter
into a joint venture with another where the nature of that venture is in line with the business
authorized by its charter." (Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2.
Fletcher Cyc. of Corp., 1082.). There is nothing in the record to indicate that the venture in
which plaintiff is represented by Gregorio Araneta, Inc. as "its managing partner" is not in line
with the corporate business of either of them.

SUPREME COURT
Manila
EN BANC
G.R. No. L-19891
July 31, 1964
Franchise
The right to operate a messenger and
express delivery service, by virtue of a
legislative enactment, is admittedly a
secondary franchise
J.R.S. BUSINESS CORPORATION, J.R. DA SILVA and A.J. BELTRAN, petitioners,

vs.
IMPERIAL INSURANCE, INC., MACARIO M. OFILADA, Sheriff of Manila and
HON. AGUSTIN MONTESA, Judge of the Court of First Instance of Manila, respondents.
Felipe N. Aurea for petitioners.
Taada, Teehankee and Carreon for respondent Imperial Insurance, Inc.
PAREDES, J.:
Petitioner J. R. Da Silva, is the President of the J.R.S. Business Corporation, an establishment duly franchised by
the Congress of the Philippines, to conduct a messenger and delivery express service. On July 12, 1961, the
respondent Imperial Insurance, Inc., presented with the CFI of Manila a complaint (Civ. Case No. 47520), for sum of
money against the petitioner corporation. After the defendants therein have submitted their Answer, the parties
entered into a Compromise Agreement, assisted by their respective counsels, the pertinent portions of which recite:
1) WHEREAS, the DEFENDANTS admit and confess their joint and solidary indebtedness to the PLAINTIFF
in the full sum of PESOS SIXTY ONE THOUSAND ONE HUNDRED SEVENTY-TWO & 32/100 (P61,172.32),
Philippine Currency, itemized as follows:
a) Principal
P50,000.00
b) Interest at 12% per annum
5,706.14
c) Liquidated damages at 7% per annum
3,330.58
d) Costs of suit
e) Attorney's fees
135.60
2,000.00
2) WHEREAS, the DEFENDANTS bind themselves, jointly and severally, and hereby promise to pay their
aforementioned obligation to the PLAINTIFF at its business address at 301-305 Banquero St., (Ground
Floor), Regina Building, Escolta, Manila, within sixty (60) days from March 16, 1962 or on or before May 14,
1962;
3) WHEREAS, in the event the DEFENDANTS FAIL to pay in full the total amount of PESOS SIXTY ONE
THOUSAND ONE HUNDRED SEVENTY TWO & 32/100 (P61,172.32), Philippine Currency, for any reason
whatsoever, on May 14, 1962, the PLAINTIFF shall be entitled, as a matter of right, to move for the execution
of the decision to be rendered in the above-entitled case by this Honorable Court based on this
COMPROMISE AGREEMENT.
On March 17, 1962, the lower court rendered judgment embodying the contents of the said compromise agreement,
the dispositive portion of which reads
WHEREFORE, the Court hereby approves the above-quoted compromise agreement and renders judgment
in accordance therewith, enjoining the parties to comply faithfully and strictly with the terms and conditions
thereof, without special pronouncement as to costs.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by
this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered
by this stipulation of facts.
1wph1.t
On May 15, 1962, one day after the date fixed in the compromise agreement, within which the judgment debt would
be paid, but was not, respondent Imperial Insurance Inc., filed a "Motion for the Insurance of a Writ of Execution".
On May 23, 1962, a Writ of Execution was issued by respondent Sheriff of Manila and on May 26, 1962, Notices of
Sale were sent out for the auction of the personal properties of the petitioner J.R.S. Business Corporation. On June
2, 1962, a Notice of Sale of the "whole capital stocks of the defendants JRS Business Corporation, the business
name, right of operation, the whole assets, furnitures and equipments, the total liabilities, and Net Worth, books of
accounts, etc., etc." of the petitioner corporation was, handed down. On June 9, the petitioner, thru counsel,
presented an "Urgent Petition for Postponement of Auction Sale and for Release of Levy on the Business Name and
Right to Operate of Defendant JRS Business Corporation", stating that petitioners were busy negotiating for a loan
with which to pay the judgment debt; that the judgment was for money only and, therefore, plaintiff (respondent
Insurance Company) was not authorized to take over and appropriate for its own use, the business name of the
defendants; that the right to operate under the franchise, was not transferable and could not be considered a
personal or immovable, property, subject to levy and sale. On June 10, 1962, a Supplemental Motion for Release of
Execution, was filed by counsel of petitioner JRS Business Corporation, claiming that the capital stocks thereof,
could not be levied upon and sold under execution. Under date of June 20, 1962, petitioner's counsel presented a
pleading captioned "Very Urgent Motion for Postponement of Public Auction Sale and for Ruling on Motion for
Release of Levy on the Business Name, Right to Operate and Capital Stocks of JRS Business Corporation". The
auction sale was set for June 21, 1962. In said motion, petitioners alleged that the loan they had applied for, was to
be secured within the next ten (10) days, and they would be able to discharge the judgment debt. Respondents
opposed the said motion and on June 21, 1962, the lower court denied the motion for postponement of the auction
sale.
In the sale which was conducted in the premises of the JRS Business Corporation at 1341 Perez St., Paco, Manila,
all the properties of said corporation contained in the Notices of Sale dated May 26, 1962, and June 2, 1962 (the
latter notice being for the whole capital stocks of the defendant, JRS Business Corporation, the business name, right
of operation, the whole assets, furnitures and equipments, the total liabilities and Net Worth, books of accounts, etc.,
etc.), were bought by respondent Imperial Insurance, Inc., for P10,000.00, which was the highest bid offered.
Immediately after the sale, respondent Insurance Company took possession of the proper ties and started running
the affairs and operating the business of the JRS Business Corporation. Hence, the present appeal.
It would seem that the matters which need determination are (1) whether the respondent Judge acted without or in
excess of his jurisdiction or with grave abuse of discretion in promulgating the Order of June 21, 1962, denying the
motion for postponement of the scheduled sale at public auction, of the properties of petitioner; and (2) whether the
business name or trade name, franchise (right to operate) and capital stocks of the petitioner are properties or
property rights which could be the subject of levy, execution and sale.
The respondent Court's act of postponing the scheduled sale was within the discretion of respondent Judge, the
exercise of which, one way or the other, did not constitute grave abuse of discretion and/or excess of jurisdiction.
There was a decision rendered and the corresponding writ of execution was issued. Respondent Judge had
jurisdiction over the matter and erroneous conclusions of law or fact, if any, committed in the exercise of such
jurisdiction are merely errors of judgment, not correctible by certiorari (Villa Rey Transit v. Bello, et al., L-18957, April
23, 1963, and cases cited therein.)
The corporation law, on forced sale of franchises, provides
Any franchise granted to a corporation to collect tolls or to occupy, enjoy, or use public property or any portion
of the public domain or any right of way over public property or the public domain, and any rights and
privileges acquired under such franchise may be levied upon and sold under execution, together with the
property necessary for the enjoyment, the exercise of the powers, and the receipt of the proceeds of such
franchise or right of way, in the same manner and with like effect as any other property to satisfy any
judgment against the corporation: Provided, That the sale of the franchise or right of way and the property
necessary for the enjoyment, the exercise of the powers, and the receipt of the proceeds of said franchise or
right of way is especially decreed and ordered in the judgment: And provided, further, That the sale shall not
become effective until confirmed by the court after due notice. (Sec. 56, Corporation Law.)
In the case of Gulf Refining Co. v. Cleveland Trust Co., 108 So., 158, it was held
The first question then for decision is the meaning of the word "franchise" in the statute.
"A franchise is a special privilege conferred by governmental authority, and which does not belong to
citizens of the country generally as a matter of common right. ... Its meaning depends more or less
upon the connection in which the word is employed and the property and corporation to which it is
applied. It may have different significations.
"For practical purposes, franchises, so far as relating to corporations, are divisible into (1) corporate or
general franchises; and (2) special or secondary franchises. The former is the franchise to exist as a
corporation, while the latter are certain rights and privileges conferred upon existing corporations, such
as the right to use the streets of a municipality to lay pipes or tracks, erect poles or string wires." 2
Fletcher's Cyclopedia Corp. See. 1148; 14 C.J. p. 160; Adams v. Yazon & M. V. R. Co., 24 So. 200,
317, 28 So. 956, 77 Miss. 253, 60 L.R.A. 33 et seq.
The primary franchise of a corporation that is, the right to exist as such, is vested "in the individuals who
compose the corporation and not in the corporation itself" (14 C.J. pp. 160, 161; Adams v. Railroad, supra; 2
Fletcher's Cyclopedia Corp. Secs. 1153, 1158; 3 Thompson on Corporations 2d Ed.] Secs. 2863, 2864), and
cannot be conveyed in the absence of a legislative authority so to do (14A CJ. 543, 577; 1 Fletcher's Cyc.
Corp. Sec. 1224; Memphis & L.R.R. Co. v. Berry 5 S. Ct. 299, 112 U.S. 609, 28 L.E.d. 837; Vicksburg
Waterworks Co. v. Vicksburg, 26 S. Ct. 660, 202 U.S. 453, 50 L.E.d. 1102, 6 Ann. Cas. 253; Arthur v.
Commercial & Railroad Bank, 9 Smedes & M. 394, 48 Am. Dec. 719), but the specify or secondary franchises
of a corporation are vested in the corporation and may ordinarily be conveyed or mortgaged under a general
power granted to a corporation to dispose of its property (Adams v. Railroad, supra; 14A C.J. 542, 557; 3
Thompson on Corp. [2nd Ed.] Sec. 2909), except such special or secondary franchises as are charged with a
public use (2 Fletcher's Cyc. Corp. see. 1225; 14A C.J. 544; 3 Thompson on Corp. [2d Ed.] sec. 2908; Arthur
v. Commercial & R.R. Bank, supra; McAllister v. Plant, 54 Miss. 106).
The right to operate a messenger and express delivery service, by virtue of a legislative enactment, is admittedly a
secondary franchise (R.A. No. 3260, entitled "An Act granting the JRS Business Corporation a franchise to conduct
a messenger and express service)" and, as such, under our corporation law, is subject to levy and sale on execution
together and including all the property necessary for the enjoyment thereof. The law, however, indicates the
procedure under which the same (secondary franchise and the properties necessary for its enjoyment) may be sold
under execution. Said franchise can be sold under execution, when such sale is especially decreed and ordered in
the judgment and it becomes effective only when the sale is confirmed by the Court after due notice (Sec. 56, Corp.
Law). The compromise agreement and the judgment based thereon, do not contain any special decree or order
making the franchise answerable for the judgment debt. The same thing may be stated with respect to petitioner's
trade name or business name and its capital stock. Incidentally, the trade name or business name corresponds to
the initials of the President of the petitioner corporation and there can be no serious dispute regarding the fact that a
trade name or business name and capital stock are necessarily included in the enjoyment of the franchise. Like that
of a franchise, the law mandates, that property necessary for the enjoyment of said franchise, can only be sold to
satisfy a judgment debt if the decision especially so provides. As We have stated heretofore, no such directive
appears in the decision. Moreover, a trade name or business name cannot be sold separately from the franchise,
and the capital stock of the petitioner corporation or any other corporation, for the matter, represents the interest and
is the property of stockholders in the corporation, who can only be deprived thereof in the manner provided by law
(Therbee v. Baker, 35 N.E. Eq. [8 Stew.] 501, 505; In re Wells' Estate, 144 N.W. 174, 177, Wis. 294, cited in 6 Words
and Phrases, 109).
It, therefore, results that the inclusion of the franchise, the trade name and/or business name and the capital stock of
the petitioner corporation, in the sale of the properties of the JRS Business Corporation, has no justification. The
sale of the properties of petitioner corporation is set aside, in so far as it authorizes the levy and sale of its franchise,
trade name and capital stocks. Without pronouncement as to costs.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Regala and Makalintal, JJ., concur.
J.R.S. Business Corporation vs. Imperial Insurance Inc

Facts:
Petitioner is JR Da Silva, president of JRS Business Corporation, an establishment duly franchised by the Congress
of the Philippines, to conduct a messenger and delivery express service. The respondent, Imperial Insurance Inc.,
presented with the CFI of Manila a complaint for the sum of money against the petitioner corporation. After the
submission of the answer of the defendants, a compromise agreement was entered into by the parties with the
following provisions:
1.
2.
3.
The Defendants (JRS Business Corporation) admit and confess their joint and solidary indebtedness to the
Plaintiff in the sum of P61, 172. 32)
The Defendants bind themselves, jointly and severally, and hereby promise to pay the obligation to plaintiff
at their business address located at Escolta Manila within sixty (60) days from March 16, 1962 or on or
before May 14, 1962.
In the event the defendants fail to pay in full the total amount mentioned above, for ANY reason
whatsoever, Plaintiff shall be entitled, as a matter of right, to move for the execution of the decision
rendered in the above-entitled case by the honorable court based on the Compromise Agreement.
On March 17, the court approved the compromise agreement and rendered judgment enjoining the parties to comply
faithfully and strictly with the terms and conditions thereof, without special pronouncements as to the cost.
On May 15, 1962, the debt was not paid which prompted Imperial Insurance Inc to file a Motion for the Insurance of
a Writ of Execution. On May 23, 1962, a Writ of Execution was issued by the Sheriff of Manila and on May 26, a
Notice of Sale was sent out for the auction of the personal properties of JRS Business Corporation.
On June 2, a Notice of Sale of the whole capital stocks of the defendants JRS Business Corporation, the business
name, right of operation, the whole assets, furniture and equipment, the total liabilities, and Net Worth, books of
accounts, etc of the petitioner corporation was handed down. JRS filed an Urgent Petition for Postponement of
Auction Sale and Release of Levy in the Business Name and Right to Operate. In addition, the counsel of petitioner
filed a Supplemental Motion for Release of Execution claiming that capital stocks cannot be levied upon and sold
under execution. Another Very Urgent Motion for Postponement of Auction Sale was filed. The auction sale was set
for June 21, 1962; however, respondents opposed and the lower court denied the motion for postponement.
In the sale, all the properties of the corporation were bought by the respondent Imperial Insurance Inc for ten
thousand pesos which was the highest bid. Immediately after the sale, respondent Insurance company took
possession of the properties and started running the affairs and operating the business of JRS Business Corporation.
Issues:
(a) W/N the respondent judge acted without or in excess of his jurisdiction or with grave abuse of discretion?
(b) W/N the business name or trade name, franchise (right to operate) and capital stocks of the petitioner are
properties or property rights which could be subject of levy, execution and sale?
Ruling:
On the first issue:
The respondent courts act of postponing the scheduled sale was within the discretion of the respondent judge, the
exercise of which, one way or the other, did not constitute grave abuse of discretion and/or excess of jurisdiction.
Respondent judge had jurisdiction over the matter and erroneous conclusions of law or fact, if any, committed in the
exercise of such jurisdiction are merely errors of judgment, not correctible by certiorari.
The corporation law, on forced sale of franchises, provides:
Any franchise granted to a corporation to collect tolls or to occupy, enjoy, or use
public property or any portion of the public domain or any right of way over
public property or the public domain, and any rights and privileges acquired
under such franchise may be levied upon and sold under execution, together
with the property necessary for the enjoyment, the exercise of the powers, and
the receipt of the proceeds of such franchise or right of way, in the same manner
and with like effect as any other property to satisfy any judgment against the
corporation: Provided, That the sale of the franchise or right of way and the
property necessary for the enjoyment, the exercise of the powers, and the receipt
of the proceeds of said franchise or right of way is especially decreed and
ordered in the judgment: And provided, further, That the sale shall not become
effective until confirmed by the court after due notice. (Sec. 56, Corporation
Law.)
In order to reach a conclusion, the word franchise must be understood. It is defined as:
"A franchise is a special privilege conferred by governmental authority, and
which does not belong to citizens of the country generally as a matter of
common right. ... Its meaning depends more or less upon the connection in
which the word is employed and the property and corporation to which it is
applied. It may have different significations.
"For practical purposes, franchises, so far as relating to corporations, are
divisible into (1) corporate or general franchises; and (2) special or secondary
franchises. The former is the franchise to exist as a corporation, while the latter
are certain rights and privileges conferred upon existing corporations, such as
the right to use the streets of a municipality to lay pipes or tracks, erect poles or
string wires." 2 Fletcher's Cyclopedia Corp. See. 1148; 14 C.J. p. 160; Adams v.
Yazon & M. V. R. Co., 24 So. 200, 317, 28 So. 956, 77 Miss. 253, 60 L.R.A. 33
et seq.
The right to operate a messenger and express delivery service, by virtue of a legislative enactment, is admittedly a
secondary franchise (R.A. No. 3260, entitled "An Act granting the JRS Business Corporation a franchise to conduct
a messenger and express service)" and, as such, under our corporation law, is subject to levy and sale on execution
together and including all the property necessary for the enjoyment thereof. The law, however, indicates the
procedure under which the same may be sold under execution. Said franchise can be sold under execution, when
such sale is especially decreed and ordered in the judgment and it becomes effective only when the sale is confirmed
by the Court after due notice (Sec. 56, Corp. Law). The compromise agreement and the judgment based thereon, do
not contain any special decree or order making the franchise answerable for the judgment debt. The same thing may
be stated with respect to petitioner's trade name or business name and its capital stock. Incidentally, the trade name
or business name corresponds to the initials of the President of the petitioner corporation and there can be no serious
dispute regarding the fact that a trade name or business name and capital stock are necessarily included in the
enjoyment of the franchise. Like that of a franchise, the law mandates, that property necessary for the enjoyment of
said franchise, can only be sold to satisfy a judgment debt if the decision especially so provides. As we have stated
heretofore, no such directive appears in the decision. Moreover, a trade name or business name cannot be sold
separately from the franchise, and the capital stock of the petitioner corporation or any other corporation, for the
matter, represents the interest and is the property of stockholders in the corporation, who can only be deprived
thereof in the manner provided by law (Therbee v. Baker, 35 N.E. Eq. [8 Stew.] 501, 505; In re Wells' Estate, 144
N.W. 174, 177, Wis. 294, cited in 6 Words and Phrases, 109).
It, therefore, results that the inclusion of the franchise, the trade name and/or business name and the capital stock of
the petitioner corporation, in the sale of the properties of the JRS Business Corporation, has no justification. The sale
of the properties of Petitioner Corporation is set aside, in so far as it authorizes the levy and sale of its franchise,
trade name and capital stocks without pronouncement as to costs.

SUPREME COURT
Manila
EN BANC
G.R. No. 15574
September 17, 1919
SMITH, BELL & COMPANY (LTD.), petitioner,

vs.
JOAQUIN NATIVIDAD, Collector of Customs of the port of Cebu, respondent.
Ross and Lawrence for petitioner.
Attorney-General Paredes for respondent.
MALCOLM, J.:
A writ of mandamus is prayed for by Smith, Bell & Co. (Ltd.), against Joaquin Natividad, Collector of Customs of the
port of Cebu, Philippine Islands, to compel him to issue a certificate of Philippine registry to the petitioner for its
motor vessel Bato. The Attorney-General, acting as counsel for respondent, demurs to the petition on the general
ground that it does not state facts sufficient to constitute a cause of action. While the facts are thus admitted, and
while, moreover, the pertinent provisions of law are clear and understandable, and interpretative American
jurisprudence is found in abundance, yet the issue submitted is not lightly to be resolved. The question, flatly
presented, is, whether Act. No. 2761 of the Philippine Legislature is valid or, more directly stated, whether the
Government of the Philippine Islands, through its Legislature, can deny the registry of vessels in its coastwise trade
to corporations having alien stockholders.
FACTS.
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the Philippine Islands. A majority
of its stockholders are British subjects. It is the owner of a motor vessel known as the Bato built for it in the
Philippine Islands in 1916, of more than fifteen tons gross The Bato was brought to Cebu in the present year for the
purpose of transporting plaintiff's merchandise between ports in the Islands. Application was made at Cebu, the
home port of the vessel, to the Collector of Customs for a certificate of Philippine registry. The Collector refused to
issue the certificate, giving as his reason that all the stockholders of Smith, Bell & Co., Ltd., were not citizens either
of the United States or of the Philippine Islands. The instant action is the result.
LAW.
The Act of Congress of April 29, 1908, repealing the Shipping Act of April 30, 1906 but reenacting a portion of
section 3 of this Law, and still in force, provides in its section 1:
That until Congress shall have authorized the registry as vessels of the United States of vessels owned in the
Philippine Islands, the Government of the Philippine Islands is hereby authorized to adopt, from time to time,
and enforce regulations governing the transportation of merchandise and passengers between ports or
places in the Philippine Archipelago. (35 Stat. at L., 70; Section 3912, U. S. Comp Stat. [1916]; 7 Pub. Laws,
364.)
The Act of Congress of August 29, 1916, commonly known as the Jones Law, still in force, provides in section 3,
(first paragraph, first sentence), 6, 7, 8, 10, and 31, as follows.
SEC. 3. That no law shall be enacted in said Islands which shall deprive any person of life, liberty, or property
without due process of law, or deny to any person therein the equal protection of the laws. . . .
SEC. 6. That the laws now in force in the Philippines shall continue in force and effect, except as altered,
amended, or modified herein, until altered, amended, or repealed by the legislative authority herein provided
or by Act of Congress of the United States.
SEC. 7. That the legislative authority herein provided shall have power, when not inconsistent with this Act, by
due enactment to amend, alter modify, or repeal any law, civil or criminal, continued in force by this Act as it
may from time to time see fit
This power shall specifically extend with the limitation herein provided as to the tariff to all laws relating to
revenue provided as to the tariff to all laws relating to revenue and taxation in effect in the Philippines.
SEC. 8. That general legislative power, except as otherwise herein provided, is hereby granted to the
Philippine Legislature, authorized by this Act.
SEC. 10. That while this Act provides that the Philippine government shall have the authority to enact a tariff
law the trade relations between the islands and the United States shall continue to be governed exclusively
by laws of the Congress of the United States: Provided, That tariff acts or acts amendatory to the tariff of the
Philippine Islands shall not become law until they shall receive the approval of the President of the United
States, nor shall any act of the Philippine Legislature affecting immigration or the currency or coinage laws of
the Philippines become a law until it has been approved by the President of the United States: Provided
further, That the President shall approve or disapprove any act mentioned in the foregoing proviso within six
months from and after its enactment and submission for his approval, and if not disapproved within such time
it shall become a law the same as if it had been specifically approved.
SEC. 31. That all laws or parts of laws applicable to the Philippines not in conflict with any of the provisions of
this Act are hereby continued in force and effect." (39 Stat at L., 546.)
On February 23, 1918, the Philippine Legislature enacted Act No. 2761. The first section of this law amended
section 1172 of the Administrative Code to read as follows:
SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic ownership, and of
more than fifteen tons gross, a certificate of Philippine register shall be issued for it. If the vessel is of
domestic ownership and of fifteen tons gross or less, the taking of the certificate of Philippine register shall be
optional with the owner.
"Domestic ownership," as used in this section, means ownership vested in some one or more of the following
classes of persons: (a) Citizens or native inhabitants of the Philippine Islands; (b) citizens of the United States
residing in the Philippine Islands; (c) any corporation or company composed wholly of citizens of the
Philippine Islands or of the United States or of both, created under the laws of the United States, or of any
State thereof, or of thereof, or the managing agent or master of the vessel resides in the Philippine Islands
Any vessel of more than fifteen gross tons which on February eighth, nineteen hundred and eighteen, had a
certificate of Philippine register under existing law, shall likewise be deemed a vessel of domestic ownership
so long as there shall not be any change in the ownership thereof nor any transfer of stock of the companies
or corporations owning such vessel to person not included under the last preceding paragraph.
Sections 2 and 3 of Act No. 2761 amended sections 1176 and 1202 of the Administrative Code to read as follows:
SEC. 1176. Investigation into character of vessel. No application for a certificate of Philippine register shall
be approved until the collector of customs is satisfied from an inspection of the vessel that it is engaged or
destined to be engaged in legitimate trade and that it is of domestic ownership as such ownership is defined
in section eleven hundred and seventy-two of this Code.
The collector of customs may at any time inspect a vessel or examine its owner, master, crew, or passengers
in order to ascertain whether the vessel is engaged in legitimate trade and is entitled to have or retain the
certificate of Philippine register.
SEC. 1202. Limiting number of foreign officers and engineers on board vessels. No Philippine vessel
operating in the coastwise trade or on the high seas shall be permitted to have on board more than one
master or one mate and one engineer who are not citizens of the United States or of the Philippine Islands,
even if they hold licenses under section one thousand one hundred and ninety-nine hereof. No other person
who is not a citizen of the United States or of the Philippine Islands shall be an officer or a member of the
crew of such vessel. Any such vessel which fails to comply with the terms of this section shall be required to
pay an additional tonnage tax of fifty centavos per net ton per month during the continuance of said failure.
ISSUES.
Predicated on these facts and provisions of law, the issues as above stated recur, namely, whether Act No 2761 of
the Philippine Legislature is valid in whole or in part whether the Government of the Philippine Islands, through its
Legislature, can deny the registry of vessel in its coastwise trade to corporations having alien stockholders .
OPINION.
1. Considered from a positive standpoint, there can exist no measure of doubt as to the power of the Philippine
Legislature to enact Act No. 2761. The Act of Congress of April 29, 1908, with its specific delegation of authority to
the Government of the Philippine Islands to regulate the transportation of merchandise and passengers between
ports or places therein, the liberal construction given to the provisions of the Philippine Bill, the Act of Congress of
July 1, 1902, by the courts, and the grant by the Act of Congress of August 29, 1916, of general legislative power to
the Philippine Legislature, are certainly superabundant authority for such a law. While the Act of the local legislature
may in a way be inconsistent with the Act of Congress regulating the coasting trade of the Continental United
States, yet the general rule that only such laws of the United States have force in the Philippines as are expressly
extended thereto, and the abnegation of power by Congress in favor of the Philippine Islands would leave no
starting point for convincing argument. As a matter of fact, counsel for petitioner does not assail legislative action
from this direction (See U. S. vs. Bull [1910], 15 Phil., 7; Sinnot vs. Davenport [1859] 22 How., 227.)
2. It is from the negative, prohibitory standpoint that counsel argues against the constitutionality of Act No. 2761.
The first paragraph of the Philippine Bill of Rights of the Philippine Bill, repeated again in the first paragraph of the
Philippine Bill of Rights as set forth in the Jones Law, provides "That no law shall be enacted in said Islands which
shall deprive any person of life, liberty, or property without due process of law, or deny to any person therein the
equal protection of the laws." Counsel says that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection
of the laws because it, in effect, prohibits the corporation from owning vessels, and because classification of
corporations based on the citizenship of one or more of their stockholders is capricious, and that Act No. 2761
deprives the corporation of its properly without due process of law because by the passage of the law company was
automatically deprived of every beneficial attribute of ownership in the Bato and left with the naked title to a boat it
could not use .
The guaranties extended by the Congress of the United States to the Philippine Islands have been used in the same
sense as like provisions found in the United States Constitution. While the "due process of law and equal protection
of the laws" clause of the Philippine Bill of Rights is couched in slightly different words than the corresponding
clause of the Fourteenth Amendment to the United States Constitution, the first should be interpreted and given the
same force and effect as the latter. (Kepner vs. U.S. [1904], 195 U. S., 100; Sierra vs. Mortiga [1907], 204 U.
S.,.470; U. S. vs. Bull [1910], 15 Phil., 7.) The meaning of the Fourteenth Amendment has been announced in
classic decisions of the United States Supreme Court. Even at the expense of restating what is so well known, these
basic principles must again be set down in order to serve as the basis of this decision.
The guaranties of the Fourteenth Amendment and so of the first paragraph of the Philippine Bill of Rights, are
universal in their application to all person within the territorial jurisdiction, without regard to any differences of race,
color, or nationality. The word "person" includes aliens. (Yick Wo vs. Hopkins [1886], 118 U. S., 356; Truax vs. Raich
[1915], 239 U. S., 33.) Private corporations, likewise, are "persons" within the scope of the guaranties in so far as
their property is concerned. (Santa Clara County vs. Southern Pac. R. R. Co. [1886], 118.U. S., 394; Pembina
Mining Co. vs. Pennsylvania [1888],.125 U. S., 181 Covington & L. Turnpike Road Co. vs. Sandford [1896], 164 U.
S., 578.) Classification with the end in view of providing diversity of treatment may be made among corporations, but
must be based upon some reasonable ground and not be a mere arbitrary selection (Gulf, Colorado & Santa Fe
Railway Co. vs. Ellis [1897],.165 U. S., 150.) Examples of laws held unconstitutional because of unlawful
discrimination against aliens could be cited. Generally, these decisions relate to statutes which had attempted
arbitrarily to forbid aliens to engage in ordinary kinds of business to earn their living. (State vs. Montgomery [1900],
94 Maine, 192, peddling but see. Commonwealth vs. Hana [1907], 195 Mass., 262; Templar vs. Board of
Examiners of Barbers [1902], 131 Mich., 254, barbers; Yick Wo vs. Hopkins [1886], 118 U. S.,.356, discrimination
against Chinese; Truax vs. Raich [1915], 239 U. S., 33; In re Parrott [1880], 1 Fed , 481; Fraser vs. McConway &
Torley Co. [1897], 82 Fed , 257; Juniata Limestone Co. vs. Fagley [1898], 187 Penn., 193, all relating to the
employment of aliens by private corporations.)
A literal application of general principles to the facts before us would, of course, cause the inevitable deduction that
Act No. 2761 is unconstitutional by reason of its denial to a corporation, some of whole members are foreigners, of
the equal protection of the laws. Like all beneficient propositions, deeper research discloses provisos. Examples of a
denial of rights to aliens notwithstanding the provisions of the Fourteenth Amendment could be cited. (Tragesser vs.
Gray [1890], 73 Md., 250, licenses to sell spirituous liquors denied to persons not citizens of the United States;
Commonwealth vs. Hana [1907], 195 Mass , 262, excluding aliens from the right to peddle; Patsone vs.
Commonwealth of Pennsylvania [1914], 232 U. S. , 138, prohibiting the killing of any wild bird or animal by any
unnaturalized foreign-born resident; Ex parte Gilleti [1915], 70 Fla., 442, discriminating in favor of citizens with
reference to the taking for private use of the common property in fish and oysters found in the public waters of the
State; Heim vs. McCall [1915], 239 U. S.,.175, and Crane vs. New York [1915], 239 U. S., 195, limiting employment
on public works by, or for, the State or a municipality to citizens of the United States.)
One of the exceptions to the general rule, most persistent and far reaching in influence is, that neither the
Fourteenth Amendment to the United States Constitution, broad and comprehensive as it is, nor any other
amendment, "was designed to interfere with the power of the State, sometimes termed its `police power,' to
prescribe regulations to promote the health, peace, morals, education, and good order of the people, and legislate
so as to increase the industries of the State, develop its resources and add to its wealth and prosperity. From the
very necessities of society, legislation of a special character, having these objects in view, must often be had in
certain districts." (Barbier vs. Connolly [1884], 113 U.S., 27; New Orleans Gas Co. vs. Lousiana Light Co. [1885],
115 U.S., 650.) This is the same police power which the United States Supreme Court say "extends to so dealing
with the conditions which exist in the state as to bring out of them the greatest welfare in of its people." (Bacon vs.
Walker [1907], 204 U.S., 311.) For quite similar reasons, none of the provision of the Philippine Organic Law could
could have had the effect of denying to the Government of the Philippine Islands, acting through its Legislature, the
right to exercise that most essential, insistent, and illimitable of powers, the sovereign police power, in the promotion
of the general welfare and the public interest. (U. S. vs. Toribio [1910], 15 Phil., 85; Churchill and Tait vs. Rafferty
[1915], 32 Phil., 580; Rubi vs. Provincial Board of Mindoro [1919], 39 Phil., 660.) Another notable exception permits
of the regulation or distribution of the public domain or the common property or resources of the people of the State,
so that use may be limited to its citizens. (Ex parte Gilleti [1915], 70 Fla., 442; McCready vs. Virginia [1876], 94 U.
S., 391; Patsone vs. Commonwealth of Pennsylvania [1914], 232U. S., 138.) Still another exception permits of the
limitation of employment in the construction of public works by, or for, the State or a municipality to citizens of the
United States or of the State. (Atkin vs. Kansas [1903],191 U. S., 207; Heim vs. McCall [1915], 239 U.S., 175; Crane
vs. New York [1915], 239 U. S., 195.) Even as to classification, it is admitted that a State may classify with reference
to the evil to be prevented; the question is a practical one, dependent upon experience. (Patsone vs.
Commonwealth of Pennsylvania [1914], 232 U. S., 138.)
To justify that portion of Act no. 2761 which permits corporations or companies to obtain a certificate of Philippine
registry only on condition that they be composed wholly of citizens of the Philippine Islands or of the United States
or both, as not infringing Philippine Organic Law, it must be done under some one of the exceptions here mentioned
This must be done, moreover, having particularly in mind what is so often of controlling effect in this jurisdiction
our local experience and our peculiar local conditions.
To recall a few facts in geography, within the confines of Philippine jurisdictional limits are found more than three
thousand islands. Literally, and absolutely, steamship lines are, for an Insular territory thus situated, the arteries of
commerce. If one be severed, the life-blood of the nation is lost. If on the other hand these arteries are protected,
then the security of the country and the promotion of the general welfare is sustained. Time and again, with such
conditions confronting it, has the executive branch of the Government of the Philippine Islands, always later with the
sanction of the judicial branch, taken a firm stand with reference to the presence of undesirable foreigners. The
Government has thus assumed to act for the all-sufficient and primitive reason of the benefit and protection of its
own citizens and of the self-preservation and integrity of its dominion. (In re Patterson [1902], 1 Phil., 93; Forbes vs.
Chuoco, Tiaco and Crossfield [1910], 16 Phil., 534;.228 U.S., 549; In re McCulloch Dick [1918], 38 Phil., 41.) Boats
owned by foreigners, particularly by such solid and reputable firms as the instant claimant, might indeed traverse the
waters of the Philippines for ages without doing any particular harm. Again, some evilminded foreigner might very
easily take advantage of such lavish hospitality to chart Philippine waters, to obtain valuable information for
unfriendly foreign powers, to stir up insurrection, or to prejudice Filipino or American commerce. Moreover, under
the Spanish portion of Philippine law, the waters within the domestic jurisdiction are deemed part of the national
domain, open to public use. (Book II, Tit. IV, Ch. I, Civil Code; Spanish Law of Waters of August 3, 1866, arts 1, 2,
3.) Common carriers which in the Philippines as in the United States and other countries are, as Lord Hale said,
"affected with a public interest," can only be permitted to use these public waters as a privilege and under such
conditions as to the representatives of the people may seem wise. (See De Villata vs. Stanley [1915], 32 Phil., 541.)
In Patsone vs. Commonwealth of Pennsylvania ([1913], 232 U.S., 138), a case herein before mentioned, Justice
Holmes delivering the opinion of the United States Supreme Court said:
This statute makes it unlawful for any unnaturalized foreign-born resident to kill any wild bird or animal except
in defense of person or property, and `to that end' makes it unlawful for such foreign-born person to own or be
possessed of a shotgun or rifle; with a penalty of $25 and a forfeiture of the gun or guns. The plaintiff in error
was found guilty and was sentenced to pay the abovementioned fine. The judgment was affirmed on
successive appeals. (231 Pa., 46; 79 Atl., 928.) He brings the case to this court on the ground that the statute
is contrary to the 14th Amendment and also is in contravention of the treaty between the United States and
Italy, to which latter country the plaintiff in error belongs .
Under the 14th Amendment the objection is twofold; unjustifiably depriving the alien of property, and
discrimination against such aliens as a class. But the former really depends upon the latter, since it hardly can
be disputed that if the lawful object, the protection of wild life (Geer vs. Connecticut, 161 U.S., 519; 40 L. ed.,
793; 16 Sup. Ct. Rep., 600), warrants the discrimination, the, means adopted for making it effective also might
be adopted. . . .
The discrimination undoubtedly presents a more difficult question. But we start with reference to the evil to be
prevented, and that if the class discriminated against is or reasonably might be considered to define those
from whom the evil mainly is to be feared, it properly may be picked out. A lack of abstract symmetry does not
matter. The question is a practical one, dependent upon experience. . . .
The question therefore narrows itself to whether this court can say that the legislature of Pennsylvania was
not warranted in assuming as its premise for the law that resident unnaturalized aliens were the peculiar
source of the evil that it desired to prevent. (Barrett vs. Indiana,. 229 U.S., 26, 29; 57 L. ed., 1050, 1052; 33
Sup. Ct. Rep., 692.)
Obviously the question, so stated, is one of local experience, on which this court ought to be very slow to
declare that the state legislature was wrong in its facts (Adams vs. Milwaukee, 228 U.S., 572, 583; 57 L. ed.,
971,.977; 33 Sup. Ct. Rep., 610.) If we might trust popular speech in some states it was right; but it is enough
that this court has no such knowledge of local conditions as to be able to say that it was manifestly wrong. . . .
Judgment affirmed.
We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation having alien stockholders, is entitled to
the protection afforded by the due-process of law and equal protection of the laws clause of the Philippine Bill of
Rights, nevertheless, Act No. 2761 of the Philippine Legislature, in denying to corporations such as Smith, Bell &.
Co. Ltd., the right to register vessels in the Philippines coastwise trade, does not belong to that vicious species of
class legislation which must always be condemned, but does fall within authorized exceptions, notably, within the
purview of the police power, and so does not offend against the constitutional provision.
This opinion might well be brought to a close at this point. It occurs to us, however, that the legislative history of the
United States and the Philippine Islands, and, probably, the legislative history of other countries, if we were to take
the time to search it out, might disclose similar attempts at restriction on the right to enter the coastwise trade, and
might thus furnish valuable aid by which to ascertain and, if possible, effectuate legislative intention.
3. The power to regulate commerce, expressly delegated to the Congress by the Constitution, includes the
power to nationalize ships built and owned in the United States by registries and enrollments, and the
recording of the muniments of title of American vessels. The Congress "may encourage or it may entirely
prohibit such commerce, and it may regulate in any way it may see fit between these two extremes." (U.S. vs.
Craig [1886], 28 Fed., 795; Gibbons vs. Ogden [1824], 9 Wheat., 1; The Passenger Cases [1849], 7 How.,
283.)
Acting within the purview of such power, the first Congress of the United States had not been long convened before
it enacted on September 1, 1789, "An Act for Registering and Clearing Vessels, Regulating the Coasting Trade, and
for other purposes." Section 1 of this law provided that for any ship or vessel to obtain the benefits of American
registry, it must belong wholly to a citizen or citizens of the United States "and no other." (1 Stat. at L., 55.) That Act
was shortly after repealed, but the same idea was carried into the Acts of Congress of December 31, 1792 and
February 18, 1793. (1 Stat. at L., 287, 305.).Section 4 of the Act of 1792 provided that in order to obtain the registry
of any vessel, an oath shall be taken and subscribed by the owner, or by one of the owners thereof, before the
officer authorized to make such registry, declaring, "that there is no subject or citizen of any foreign prince or state,
directly or indirectly, by way of trust, confidence, or otherwise, interested in such vessel, or in the profits or issues
thereof." Section 32 of the Act of 1793 even went so far as to say "that if any licensed ship or vessel shall be
transferred to any person who is not at the time of such transfer a citizen of and resident within the United States, ...
every such vessel with her tackle, apparel, and furniture, and the cargo found on board her, shall be forefeited." In
case of alienation to a foreigner, Chief Justice Marshall said that all the privileges of an American bottom were ipso
facto forfeited. (U.S. vs. Willings and Francis [1807], 4 Cranch, 48.) Even as late as 1873, the Attorney-General of
the United States was of the opinion that under the provisions of the Act of December 31, 1792, no vessel in which a
foreigner is directly or indirectly interested can lawfully be registered as a vessel of the United. States. (14 Op. Atty.Gen. [U.S.], 340.)
These laws continued in force without contest, although possibly the Act of March 3, 1825, may have affected them,
until amended by the Act of May 28, 1896 (29 Stat. at L., 188) which extended the privileges of registry from vessels
wholly owned by a citizen or citizens of the United States to corporations created under the laws of any of the states
thereof. The law, as amended, made possible the deduction that a vessel belonging to a domestic corporation was
entitled to registry or enrollment even though some stock of the company be owned by aliens. The right of
ownership of stock in a corporation was thereafter distinct from the right to hold the property by the corporation
(Humphreys vs. McKissock [1890], 140 U.S., 304; Queen vs. Arnaud [1846], 9 Q. B., 806; 29 Op. Atty.-Gen.
[U.S.],188.)
On American occupation of the Philippines, the new government found a substantive law in operation in the Islands
with a civil law history which it wisely continued in force Article fifteen of the Spanish Code of Commerce permitted
any foreigner to engage in Philippine trade if he had legal capacity to do so under the laws of his nation. When the
Philippine Commission came to enact the Customs Administrative Act (No. 355) in 1902, it returned to the old
American policy of limiting the protection and flag of the United States to vessels owned by citizens of the United
States or by native inhabitants of the Philippine Islands (Sec. 117.) Two years later, the same body reverted to the
existing Congressional law by permitting certification to be issued to a citizen of the United States or to a corporation
or company created under the laws of the United States or of any state thereof or of the Philippine Islands (Act No.
1235, sec. 3.) The two administration codes repeated the same provisions with the necessary amplification of
inclusion of citizens or native inhabitants of the Philippine Islands (Adm. Code of 1916, sec. 1345; Adm. Code of
1917, sec. 1172). And now Act No. 2761 has returned to the restrictive idea of the original Customs Administrative
Act which in turn was merely a reflection of the statutory language of the first American Congress.
Provisions such as those in Act No. 2761, which deny to foreigners the right to a certificate of Philippine registry, are
thus found not to be as radical as a first reading would make them appear.
Without any subterfuge, the apparent purpose of the Philippine Legislature is seen to be to enact an anti-alien
shipping act. The ultimate purpose of the Legislature is to encourage Philippine ship-building. This, without doubt,
has, likewise, been the intention of the United States Congress in passing navigation or tariff laws on different
occasions. The object of such a law, the United States Supreme Court once said, was to encourage American trade,
navigation, and ship-building by giving American ship-owners exclusive privileges. (Old Dominion Steamship Co. vs.
Virginia [1905], 198 U.S., 299; Kent's Commentaries, Vol. 3, p. 139.)
In the concurring opinion of Justice Johnson in Gibbons vs. Ogden ([1824], 9 Wheat., 1) is found the following:
Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts licensing gaming
houses, retailers of spirituous liquors, etc. The act, in this instance, is distinctly of that character, and forms
part of an extensive system, the object of which is to encourage American shipping, and place them on an
equal footing with the shipping of other nations. Almost every commercial nation reserves to its own subjects
a monopoly of its coasting trade; and a countervailing privilege in favor of American shipping is contemplated,
in the whole legislation of the United States on this subject. It is not to give the vessel an American character,
that the license is granted; that effect has been correctly attributed to the act of her enrollment. But it is to
confer on her American privileges, as contradistinguished from foreign; and to preserve the. Government from
fraud by foreigners, in surreptitiously intruding themselves into the American commercial marine, as well as
frauds upon the revenue in the trade coastwise, that this whole system is projected.
The United States Congress in assuming its grave responsibility of legislating wisely for a new country did so
imbued with a spirit of Americanism. Domestic navigation and trade, it decreed, could only be carried on by citizens
of the United States. If the representatives of the American people acted in this patriotic manner to advance the
national policy, and if their action was accepted without protest in the courts, who can say that they did not enact
such beneficial laws under the all-pervading police power, with the prime motive of safeguarding the country and of
promoting its prosperity? Quite similarly, the Philippine Legislature made up entirely of Filipinos, representing the
mandate of the Filipino people and the guardian of their rights, acting under practically autonomous powers, and
imbued with a strong sense of Philippinism, has desired for these Islands safety from foreign interlopers, the use of
the common property exclusively by its citizens and the citizens of the United States, and protection for the common
good of the people. Who can say, therefore, especially can a court, that with all the facts and circumstances
affecting the Filipino people before it, the Philippine Legislature has erred in the enactment of Act No. 2761?
Surely, the members of the judiciary are not expected to live apart from active life, in monastic seclusion amidst
dusty tomes and ancient records, but, as keen spectators of passing events and alive to the dictates of the general
the national welfare, can incline the scales of their decisions in favor of that solution which will most effectively
promote the public policy. All the presumption is in favor of the constitutionally of the law and without good and
strong reasons, courts should not attempt to nullify the action of the Legislature. "In construing a statute enacted by
the Philippine Commission (Legislature), we deem it our duty not to give it a construction which would be repugnant
to an Act of Congress, if the language of the statute is fairly susceptible of another construction not in conflict with
the higher law." (In re Guaria [1913], 24. Phil., 36; U.S. vs. Ten Yu [1912], 24 Phil., 1.) That is the true construction
which will best carry legislative intention into effect.
With full consciousness of the importance of the question, we nevertheless are clearly of the opinion that the
limitation of domestic ownership for purposes of obtaining a certificate of Philippine registry in the coastwise trade to
citizens of the Philippine Islands, and to citizens of the United States, does not violate the provisions of paragraph 1
of section 3 of the Act of Congress of August 29, 1916 No treaty right relied upon Act No. 2761 of the Philippine
Legislature is held valid and constitutional .
The petition for a writ of mandamus is denied, with costs against the petitioner. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Street, Avancea and Moir, JJ., concur.
Smith, Bell & Company (Ltd.), pet

vs.
Joaquin Natividad, Collector of Customs of the port of Cebu, resp.
This is a petition for a writ of mandamus filed by the petitioner to compel Natividad to issue a
certificate of Philippine registry in favor of the former for its motor vessel Bato.
Facts:
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the Philippine Islands.
A majority of its stockholders are British subjects. It is the owner of a motor vessel known as the Bato
built for it in the Philippine Islands in 1916, of more than fifteen tons gross The Bato was brought to
Cebu in the present year for the purpose of transporting plaintiff's merchandise between ports in the
Islands. Application was made at Cebu, the home port of the vessel, to the Collector of Customs for a
certificate of Philippine registry. The Collector refused to issue the certificate, giving as his reason that
all the stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United States or of the
Philippine Islands. The instant action is the result.
Counsel argues that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the laws
because it, in effect, prohibits the corporation from owning vessels, and because classification of
corporations based on the citizenship of one or more of their stockholders is capricious, and that Act
No. 2761 deprives the corporation of its property without due process of law because by the passage
of the law company was automatically deprived of every beneficial attribute of ownership in the Bato
and left with the naked title to a boat it could not use .
Issue:
Whether the Government of the Philippine Islands, through its Legislature, can deny the registry of
vessel in its coastwise trade to corporations having alien stockholders
Ruling:
Yes. Act No. 2761 provides:
Investigation into character of vessel. No application for a certificate of Philippine register shall be
approved until the collector of customs is satisfied from an inspection of the vessel that it is engaged or
destined to be engaged in legitimate trade and that it is of domestic ownership as such ownership is
defined in section eleven hundred and seventy-two of this Code.
Certificate of Philippine register. Upon registration of a vessel of domestic ownership, and of more
than fifteen tons gross, a certificate of Philippine register shall be issued for it. If the vessel is of
domestic ownership and of fifteen tons gross or less, the taking of the certificate of Philippine register
shall be optional with the owner.
While Smith, Bell & Co. Ltd., a corporation having alien stockholders, is entitled to the protection
afforded by the due-process of law and equal protection of the laws clause of the Philippine Bill of
Rights, nevertheless, Act No. 2761 of the Philippine Legislature, in denying to corporations such as
Smith, Bell &. Co. Ltd., the right to register vessels in the Philippines coastwise trade, does not belong
to that vicious species of class legislation which must always be condemned, but does fall within
authorized exceptions, notably, within the purview of the police power, and so does not offend against
the constitutional provision.

SUPREME COURT
Manila
EN BANC
G.R. No. L-19550
June 19, 1967
HARRY S. STONEHILL, ROBERT P. BROOKS, JOHN J. BROOKS and KARL BECK, petitioners,
vs.
HON. JOSE W. DIOKNO, in his capacity as SECRETARY OF JUSTICE; JOSE LUKBAN, in his capacity as
Acting Director, National Bureau of Investigation; SPECIAL PROSECUTORS PEDRO D. CENZON, EFREN I.
PLANA and MANUEL VILLAREAL, JR. and ASST. FISCAL MANASES G. REYES; JUDGE AMADO ROAN,
Municipal Court of Manila; JUDGE ROMAN CANSINO, Municipal Court of Manila; JUDGE HERMOGENES
CALUAG, Court of First Instance of Rizal-Quezon City Branch, and JUDGE DAMIAN JIMENEZ, Municipal
Court of Quezon City, respondents.
Paredes, Poblador, Cruz and Nazareno and Meer, Meer and Meer and Juan T. David for petitioners.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Pacifico P. de Castro, Assistant Solicitor
General Frine C. Zaballero, Solicitor Camilo D. Quiason and Solicitor C. Padua for respondents.
CONCEPCION, C.J.:
Upon application of the officers of the government named on the margin1 hereinafter referred to as RespondentsProsecutors several judges2 hereinafter referred to as Respondents-Judges issued, on different dates,3 a
total of 42 search warrants against petitioners herein4 and/or the corporations of which they were officers,5 directed
to the any peace officer, to search the persons above-named and/or the premises of their offices, warehouses
and/or residences, and to seize and take possession of the following personal property to wit:
Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals, portfolios, credit
journals, typewriters, and other documents and/or papers showing all business transactions including
disbursements receipts, balance sheets and profit and loss statements and Bobbins (cigarette wrappers).
as "the subject of the offense; stolen or embezzled and proceeds or fruits of the offense," or "used or intended to be
used as the means of committing the offense," which is described in the applications adverted to above as "violation
of Central Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and the Revised Penal Code."
Alleging that the aforementioned search warrants are null and void, as contravening the Constitution and the Rules
of Court because, inter alia: (1) they do not describe with particularity the documents, books and things to be
seized; (2) cash money, not mentioned in the warrants, were actually seized; (3) the warrants were issued to fish
evidence against the aforementioned petitioners in deportation cases filed against them; (4) the searches and
seizures were made in an illegal manner; and (5) the documents, papers and cash money seized were not delivered
to the courts that issued the warrants, to be disposed of in accordance with law on March 20, 1962, said
petitioners filed with the Supreme Court this original action for certiorari, prohibition, mandamus and injunction, and
prayed that, pending final disposition of the present case, a writ of preliminary injunction be issued restraining
Respondents-Prosecutors, their agents and /or representatives from using the effects seized as aforementioned or
any copies thereof, in the deportation cases already adverted to, and that, in due course, thereafter, decision be
rendered quashing the contested search warrants and declaring the same null and void, and commanding the
respondents, their agents or representatives to return to petitioners herein, in accordance with Section 3, Rule 67, of
the Rules of Court, the documents, papers, things and cash moneys seized or confiscated under the search
warrants in question.
In their answer, respondents-prosecutors alleged, 6 (1) that the contested search warrants are valid and have been
issued in accordance with law; (2) that the defects of said warrants, if any, were cured by petitioners' consent; and
(3) that, in any event, the effects seized are admissible in evidence against herein petitioners, regardless of the
alleged illegality of the aforementioned searches and seizures.
On March 22, 1962, this Court issued the writ of preliminary injunction prayed for in the petition. However, by
resolution dated June 29, 1962, the writ was partially lifted or dissolved, insofar as the papers, documents and
things seized from the offices of the corporations above mentioned are concerned; but, the injunction was
maintained as regards the papers, documents and things found and seized in the residences of petitioners herein.7
Thus, the documents, papers, and things seized under the alleged authority of the warrants in question may be split
into two (2) major groups, namely: (a) those found and seized in the offices of the aforementioned corporations, and
(b) those found and seized in the residences of petitioners herein.
As regards the first group, we hold that petitioners herein have no cause of action to assail the legality of the
contested warrants and of the seizures made in pursuance thereof, for the simple reason that said corporations
have their respective personalities, separate and distinct from the personality of herein petitioners, regardless of the
amount of shares of stock or of the interest of each of them in said corporations, and whatever the offices they hold
therein may be.8 Indeed, it is well settled that the legality of a seizure can be contested only by the party whose
rights have been impaired thereby,9 and that the objection to an unlawful search and seizure is purely personal and
cannot be availed of by third parties. 10 Consequently, petitioners herein may not validly object to the use in
evidence against them of the documents, papers and things seized from the offices and premises of the
corporations adverted to above, since the right to object to the admission of said papers in evidence belongs
exclusively to the corporations, to whom the seized effects belong, and may not be invoked by the corporate officers
in proceedings against them in their individual capacity. 11 Indeed, it has been held:
. . . that the Government's action in gaining possession of papers belonging to the corporation did not relate to
nor did it affect the personal defendants. If these papers were unlawfully seized and thereby the constitutional
rights of or any one were invaded, they were the rights of the corporation and not the rights of the other
defendants. Next, it is clear that a question of the lawfulness of a seizure can be raised only by one whose
rights have been invaded. Certainly, such a seizure, if unlawful, could not affect the constitutional rights of
defendants whose property had not been seized or the privacy of whose homes had not been disturbed; nor
could they claim for themselves the benefits of the Fourth Amendment, when its violation, if any, was with
reference to the rights of another. Remus vs. United States (C.C.A.)291 F. 501, 511. It follows, therefore, that
the question of the admissibility of the evidence based on an alleged unlawful search and seizure does not
extend to the personal defendants but embraces only the corporation whose property was taken. . . . (A
Guckenheimer & Bros. Co. vs. United States, [1925] 3 F. 2d. 786, 789, Emphasis supplied.)
With respect to the documents, papers and things seized in the residences of petitioners herein, the aforementioned
resolution of June 29, 1962, lifted the writ of preliminary injunction previously issued by this Court, 12 thereby, in
effect, restraining herein Respondents-Prosecutors from using them in evidence against petitioners herein.
In connection with said documents, papers and things, two (2) important questions need be settled, namely: (1)
whether the search warrants in question, and the searches and seizures made under the authority thereof, are valid
or not, and (2) if the answer to the preceding question is in the negative, whether said documents, papers and things
may be used in evidence against petitioners herein.
1wph1.t
Petitioners maintain that the aforementioned search warrants are in the nature of general warrants and that
accordingly, the seizures effected upon the authority there of are null and void. In this connection, the Constitution 13
provides:
The right of the people to be secure in their persons, houses, papers, and effects against unreasonable
searches and seizures shall not be violated, and no warrants shall issue but upon probable cause, to be
determined by the judge after examination under oath or affirmation of the complainant and the witnesses he
may produce, and particularly describing the place to be searched, and the persons or things to be seized.
Two points must be stressed in connection with this constitutional mandate, namely: (1) that no warrant shall issue
but upon probable cause, to be determined by the judge in the manner set forth in said provision; and (2) that the
warrant shall particularly describe the things to be seized.
None of these requirements has been complied with in the contested warrants. Indeed, the same were issued upon
applications stating that the natural and juridical person therein named had committed a "violation of Central Ban
Laws, Tariff and Customs Laws, Internal Revenue (Code) and Revised Penal Code." In other words, no specific
offense had been alleged in said applications. The averments thereof with respect to the offense committed were
abstract. As a consequence, it was impossible for the judges who issued the warrants to have found the existence
of probable cause, for the same presupposes the introduction of competent proof that the party against whom it is
sought has performed particular acts, or committed specific omissions, violating a given provision of our criminal
laws. As a matter of fact, the applications involved in this case do not allege any specific acts performed by herein
petitioners. It would be the legal heresy, of the highest order, to convict anybody of a "violation of Central Bank
Laws, Tariff and Customs Laws, Internal Revenue (Code) and Revised Penal Code," as alleged in the
aforementioned applications without reference to any determinate provision of said laws or
To uphold the validity of the warrants in question would be to wipe out completely one of the most fundamental
rights guaranteed in our Constitution, for it would place the sanctity of the domicile and the privacy of communication
and correspondence at the mercy of the whims caprice or passion of peace officers. This is precisely the evil sought
to be remedied by the constitutional provision above quoted to outlaw the so-called general warrants. It is not
difficult to imagine what would happen, in times of keen political strife, when the party in power feels that the
minority is likely to wrest it, even though by legal means.
Such is the seriousness of the irregularities committed in connection with the disputed search warrants, that this
Court deemed it fit to amend Section 3 of Rule 122 of the former Rules of Court 14 by providing in its counterpart,
under the Revised Rules of Court 15 that "a search warrant shall not issue but upon probable cause in connection
with one specific offense." Not satisfied with this qualification, the Court added thereto a paragraph, directing that
"no search warrant shall issue for more than one specific offense."
The grave violation of the Constitution made in the application for the contested search warrants was compounded
by the description therein made of the effects to be searched for and seized, to wit:
Books of accounts, financial records, vouchers, journals, correspondence, receipts, ledgers, portfolios, credit
journals, typewriters, and other documents and/or papers showing all business transactions including
disbursement receipts, balance sheets and related profit and loss statements.
Thus, the warrants authorized the search for and seizure of records pertaining to all business transactions of
petitioners herein, regardless of whether the transactions were legal or illegal. The warrants sanctioned the seizure
of all records of the petitioners and the aforementioned corporations, whatever their nature, thus openly
contravening the explicit command of our Bill of Rights that the things to be seized be particularly described as
well as tending to defeat its major objective: the elimination of general warrants.
Relying upon Moncado vs. People's Court (80 Phil. 1), Respondents-Prosecutors maintain that, even if the searches
and seizures under consideration were unconstitutional, the documents, papers and things thus seized are
admissible in evidence against petitioners herein. Upon mature deliberation, however, we are unanimously of the
opinion that the position taken in the Moncado case must be abandoned. Said position was in line with the American
common law rule, that the criminal should not be allowed to go free merely "because the constable has blundered,"
16 upon the theory that the constitutional prohibition against unreasonable searches and seizures is protected by
means other than the exclusion of evidence unlawfully obtained, 17 such as the common-law action for damages
against the searching officer, against the party who procured the issuance of the search warrant and against those
assisting in the execution of an illegal search, their criminal punishment, resistance, without liability to an unlawful
seizure, and such other legal remedies as may be provided by other laws.
However, most common law jurisdictions have already given up this approach and eventually adopted the
exclusionary rule, realizing that this is the only practical means of enforcing the constitutional injunction against
unreasonable searches and seizures. In the language of Judge Learned Hand:
As we understand it, the reason for the exclusion of evidence competent as such, which has been unlawfully
acquired, is that exclusion is the only practical way of enforcing the constitutional privilege. In earlier times the
action of trespass against the offending official may have been protection enough; but that is true no longer.
Only in case the prosecution which itself controls the seizing officials, knows that it cannot profit by their
wrong will that wrong be repressed.18
In fact, over thirty (30) years before, the Federal Supreme Court had already declared:
If letters and private documents can thus be seized and held and used in evidence against a citizen accused
of an offense, the protection of the 4th Amendment, declaring his rights to be secure against such searches
and seizures, is of no value, and, so far as those thus placed are concerned, might as well be stricken from
the Constitution. The efforts of the courts and their officials to bring the guilty to punishment, praiseworthy as
they are, are not to be aided by the sacrifice of those great principles established by years of endeavor and
suffering which have resulted in their embodiment in the fundamental law of the land.19
This view was, not only reiterated, but, also, broadened in subsequent decisions on the same Federal Court. 20
After reviewing previous decisions thereon, said Court held, in Mapp vs. Ohio (supra.):
. . . Today we once again examine the Wolf's constitutional documentation of the right of privacy free from
unreasonable state intrusion, and after its dozen years on our books, are led by it to close the only courtroom
door remaining open to evidence secured by official lawlessness in flagrant abuse of that basic right, reserved
to all persons as a specific guarantee against that very same unlawful conduct. We hold that all evidence
obtained by searches and seizures in violation of the Constitution is, by that same authority, inadmissible in a
State.
Since the Fourth Amendment's right of privacy has been declared enforceable against the States through the
Due Process Clause of the Fourteenth, it is enforceable against them by the same sanction of exclusion as it
used against the Federal Government. Were it otherwise, then just as without the Weeks rule the assurance
against unreasonable federal searches and seizures would be "a form of words," valueless and underserving
of mention in a perpetual charter of inestimable human liberties, so too, without that rule the freedom from
state invasions of privacy would be so ephemeral and so neatly severed from its conceptual nexus with the
freedom from all brutish means of coercing evidence as not to permit this Court's high regard as a freedom
"implicit in the concept of ordered liberty." At the time that the Court held in Wolf that the amendment was
applicable to the States through the Due Process Clause, the cases of this Court as we have seen, had
steadfastly held that as to federal officers the Fourth Amendment included the exclusion of the evidence
seized in violation of its provisions. Even Wolf "stoutly adhered" to that proposition. The right to when
conceded operatively enforceable against the States, was not susceptible of destruction by avulsion of the
sanction upon which its protection and enjoyment had always been deemed dependent under the Boyd,
Weeks and Silverthorne Cases. Therefore, in extending the substantive protections of due process to all
constitutionally unreasonable searches state or federal it was logically and constitutionally necessarily
that the exclusion doctrine an essential part of the right to privacy be also insisted upon as an essential
ingredient of the right newly recognized by the Wolf Case. In short, the admission of the new constitutional
Right by Wolf could not tolerate denial of its most important constitutional privilege, namely, the exclusion of
the evidence which an accused had been forced to give by reason of the unlawful seizure. To hold otherwise
is to grant the right but in reality to withhold its privilege and enjoyment. Only last year the Court itself
recognized that the purpose of the exclusionary rule to "is to deter to compel respect for the constitutional
guaranty in the only effectively available way by removing the incentive to disregard it" . . . .
The ignoble shortcut to conviction left open to the State tends to destroy the entire system of constitutional
restraints on which the liberties of the people rest. Having once recognized that the right to privacy embodied
in the Fourth Amendment is enforceable against the States, and that the right to be secure against rude
invasions of privacy by state officers is, therefore constitutional in origin, we can no longer permit that right to
remain an empty promise. Because it is enforceable in the same manner and to like effect as other basic
rights secured by its Due Process Clause, we can no longer permit it to be revocable at the whim of any
police officer who, in the name of law enforcement itself, chooses to suspend its enjoyment. Our decision,
founded on reason and truth, gives to the individual no more than that which the Constitution guarantees him
to the police officer no less than that to which honest law enforcement is entitled, and, to the courts, that
judicial integrity so necessary in the true administration of justice. (emphasis ours.)
Indeed, the non-exclusionary rule is contrary, not only to the letter, but also, to the spirit of the constitutional
injunction against unreasonable searches and seizures. To be sure, if the applicant for a search warrant has
competent evidence to establish probable cause of the commission of a given crime by the party against whom the
warrant is intended, then there is no reason why the applicant should not comply with the requirements of the
fundamental law. Upon the other hand, if he has no such competent evidence, then it is not possible for the Judge to
find that there is probable cause, and, hence, no justification for the issuance of the warrant. The only possible
explanation (not justification) for its issuance is the necessity of fishing evidence of the commission of a crime. But,
then, this fishing expedition is indicative of the absence of evidence to establish a probable cause.
Moreover, the theory that the criminal prosecution of those who secure an illegal search warrant and/or make
unreasonable searches or seizures would suffice to protect the constitutional guarantee under consideration,
overlooks the fact that violations thereof are, in general, committed By agents of the party in power, for, certainly,
those belonging to the minority could not possibly abuse a power they do not have. Regardless of the handicap
under which the minority usually but, understandably finds itself in prosecuting agents of the majority, one
must not lose sight of the fact that the psychological and moral effect of the possibility 21 of securing their conviction,
is watered down by the pardoning power of the party for whose benefit the illegality had been committed.
In their Motion for Reconsideration and Amendment of the Resolution of this Court dated June 29, 1962, petitioners
allege that Rooms Nos. 81 and 91 of Carmen Apartments, House No. 2008, Dewey Boulevard, House No. 1436,
Colorado Street, and Room No. 304 of the Army-Navy Club, should be included among the premises considered in
said Resolution as residences of herein petitioners, Harry S. Stonehill, Robert P. Brook, John J. Brooks and Karl
Beck, respectively, and that, furthermore, the records, papers and other effects seized in the offices of the
corporations above referred to include personal belongings of said petitioners and other effects under their exclusive
possession and control, for the exclusion of which they have a standing under the latest rulings of the federal courts
of federal courts of the United States. 22
We note, however, that petitioners' theory, regarding their alleged possession of and control over the
aforementioned records, papers and effects, and the alleged "personal" nature thereof, has Been Advanced, not in
their petition or amended petition herein, but in the Motion for Reconsideration and Amendment of the Resolution of
June 29, 1962. In other words, said theory would appear to be readjustment of that followed in said petitions, to suit
the approach intimated in the Resolution sought to be reconsidered and amended. Then, too, some of the affidavits
or copies of alleged affidavits attached to said motion for reconsideration, or submitted in support thereof, contain
either inconsistent allegations, or allegations inconsistent with the theory now advanced by petitioners herein.
Upon the other hand, we are not satisfied that the allegations of said petitions said motion for reconsideration, and
the contents of the aforementioned affidavits and other papers submitted in support of said motion, have sufficiently
established the facts or conditions contemplated in the cases relied upon by the petitioners; to warrant application of
the views therein expressed, should we agree thereto. At any rate, we do not deem it necessary to express our
opinion thereon, it being best to leave the matter open for determination in appropriate cases in the future.
We hold, therefore, that the doctrine adopted in the Moncado case must be, as it is hereby, abandoned; that the
warrants for the search of three (3) residences of herein petitioners, as specified in the Resolution of June 29, 1962,
are null and void; that the searches and seizures therein made are illegal; that the writ of preliminary injunction
heretofore issued, in connection with the documents, papers and other effects thus seized in said residences of
herein petitioners is hereby made permanent; that the writs prayed for are granted, insofar as the documents,
papers and other effects so seized in the aforementioned residences are concerned; that the aforementioned motion
for Reconsideration and Amendment should be, as it is hereby, denied; and that the petition herein is dismissed and
the writs prayed for denied, as regards the documents, papers and other effects seized in the twenty-nine (29)
places, offices and other premises enumerated in the same Resolution, without special pronouncement as to costs.
It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.
CASTRO, J., concurring and dissenting:
From my analysis of the opinion written by Chief Justice Roberto Concepcion and from the import of the
deliberations of the Court on this case, I gather the following distinct conclusions:
1. All the search warrants served by the National Bureau of Investigation in this case are general warrants
and are therefore proscribed by, and in violation of, paragraph 3 of section 1 of Article III (Bill of Rights) of the
Constitution;
2. All the searches and seizures conducted under the authority of the said search warrants were
consequently illegal;
3. The non-exclusionary rule enunciated in Moncado vs. People, 80 Phil. 1, should be, and is declared,
abandoned;
4. The search warrants served at the three residences of the petitioners are expressly declared null and void
the searches and seizures therein made are expressly declared illegal; and the writ of preliminary injunction
heretofore issued against the use of the documents, papers and effect seized in the said residences is made
permanent; and
5. Reasoning that the petitioners have not in their pleadings satisfactorily demonstrated that they have legal
standing to move for the suppression of the documents, papers and effects seized in the places other than
the three residences adverted to above, the opinion written by the Chief Justice refrains from expressly
declaring as null and void the such warrants served at such other places and as illegal the searches and
seizures made therein, and leaves "the matter open for determination in appropriate cases in the future."
It is precisely the position taken by the Chief Justice summarized in the immediately preceding paragraph
(numbered 5) with which I am not in accord.
I do not share his reluctance or unwillingness to expressly declare, at this time, the nullity of the search warrants
served at places other than the three residences, and the illegibility of the searches and seizures conducted under
the authority thereof. In my view even the exacerbating passions and prejudices inordinately generated by the
environmental political and moral developments of this case should not deter this Court from forthrightly laying down
the law not only for this case but as well for future cases and future generations. All the search warrants, without
exception, in this case are admittedly general, blanket and roving warrants and are therefore admittedly and
indisputably outlawed by the Constitution; and the searches and seizures made were therefore unlawful. That the
petitioners, let us assume in gratia argumente, have no legal standing to ask for the suppression of the papers,
things and effects seized from places other than their residences, to my mind, cannot in any manner affect, alter or
otherwise modify the intrinsic nullity of the search warrants and the intrinsic illegality of the searches and seizures
made thereunder. Whether or not the petitioners possess legal standing the said warrants are void and remain void,
and the searches and seizures were illegal and remain illegal. No inference can be drawn from the words of the
Constitution that "legal standing" or the lack of it is a determinant of the nullity or validity of a search warrant or of
the lawfulness or illegality of a search or seizure.
On the question of legal standing, I am of the conviction that, upon the pleadings submitted to this Court the
petitioners have the requisite legal standing to move for the suppression and return of the documents, papers and
effects that were seized from places other than their family residences.
Our constitutional provision on searches and seizures was derived almost verbatim from the Fourth Amendment to
the United States Constitution. In the many years of judicial construction and interpretation of the said constitutional
provision, our courts have invariably regarded as doctrinal the pronouncement made on the Fourth Amendment by
federal courts, especially the Federal Supreme Court and the Federal Circuit Courts of Appeals.
The U.S. doctrines and pertinent cases on standing to move for the suppression or return of documents, papers and
effects which are the fruits of an unlawful search and seizure, may be summarized as follows; (a) ownership of
documents, papers and effects gives "standing;" (b) ownership and/or control or possession actual or
constructive of premises searched gives "standing"; and (c) the "aggrieved person" doctrine where the search
warrant and the sworn application for search warrant are "primarily" directed solely and exclusively against the
"aggrieved person," gives "standing."
An examination of the search warrants in this case will readily show that, excepting three, all were directed against
the petitioners personally. In some of them, the petitioners were named personally, followed by the designation, "the
President and/or General Manager" of the particular corporation. The three warrants excepted named three
corporate defendants. But the "office/house/warehouse/premises" mentioned in the said three warrants were also
the same "office/house/warehouse/premises" declared to be owned by or under the control of the petitioners in all
the other search warrants directed against the petitioners and/or "the President and/or General Manager" of the
particular corporation. (see pages 5-24 of Petitioners' Reply of April 2, 1962). The searches and seizures were to be
made, and were actually made, in the "office/house/warehouse/premises" owned by or under the control of the
petitioners.
Ownership of matters seized gives "standing."
Ownership of the properties seized alone entitles the petitioners to bring a motion to return and suppress, and gives
them standing as persons aggrieved by an unlawful search and seizure regardless of their location at the time of
seizure. Jones vs. United States, 362 U.S. 257, 261 (1960) (narcotics stored in the apartment of a friend of the
defendant); Henzel vs. United States, 296 F. 2d. 650, 652-53 (5th Cir. 1961), (personal and corporate papers of
corporation of which the defendant was president), United States vs. Jeffers, 342 U.S. 48 (1951) (narcotics seized in
an apartment not belonging to the defendant); Pielow vs. United States, 8 F. 2d 492, 493 (9th Cir. 1925) (books
seized from the defendant's sister but belonging to the defendant); Cf. Villano vs. United States, 310 F. 2d 680, 683
(10th Cir. 1962) (papers seized in desk neither owned by nor in exclusive possession of the defendant).
In a very recent case (decided by the U.S. Supreme Court on December 12, 1966), it was held that under the
constitutional provision against unlawful searches and seizures, a person places himself or his property within a
constitutionally protected area, be it his home or his office, his hotel room or his automobile:
Where the argument falls is in its misapprehension of the fundamental nature and scope of Fourth
Amendment protection. What the Fourth Amendment protects is the security a man relies upon when he
places himself or his property within a constitutionally protected area, be it his home or his office, his hotel
room or his automobile. There he is protected from unwarranted governmental intrusion. And when he puts
some thing in his filing cabinet, in his desk drawer, or in his pocket, he has the right to know it will be secure
from an unreasonable search or an unreasonable seizure. So it was that the Fourth Amendment could not
tolerate the warrantless search of the hotel room in Jeffers, the purloining of the petitioner's private papers in
Gouled, or the surreptitious electronic surveilance in Silverman. Countless other cases which have come to
this Court over the years have involved a myriad of differing factual contexts in which the protections of the
Fourth Amendment have been appropriately invoked. No doubt, the future will bring countless others. By
nothing we say here do we either foresee or foreclose factual situations to which the Fourth Amendment may
be applicable. (Hoffa vs. U.S., 87 S. Ct. 408 (December 12, 1966). See also U.S. vs. Jeffers, 342 U.S. 48, 72
S. Ct. 93 (November 13, 1951). (Emphasis supplied).
Control of premises searched gives "standing."
Independent of ownership or other personal interest in the records and documents seized, the petitioners have
standing to move for return and suppression by virtue of their proprietary or leasehold interest in many of the
premises searched. These proprietary and leasehold interests have been sufficiently set forth in their motion for
reconsideration and need not be recounted here, except to emphasize that the petitioners paid rent, directly or
indirectly, for practically all the premises searched (Room 91, 84 Carmen Apts; Room 304, Army & Navy Club;
Premises 2008, Dewey Boulevard; 1436 Colorado Street); maintained personal offices within the corporate offices
(IBMC, USTC); had made improvements or furnished such offices; or had paid for the filing cabinets in which the
papers were stored (Room 204, Army & Navy Club); and individually, or through their respective spouses, owned
the controlling stock of the corporations involved. The petitioners' proprietary interest in most, if not all, of the
premises searched therefore independently gives them standing to move for the return and suppression of the
books, papers and affects seized therefrom.
In Jones vs. United States, supra, the U.S. Supreme Court delineated the nature and extent of the interest in the
searched premises necessary to maintain a motion to suppress. After reviewing what it considered to be the unduly
technical standard of the then prevailing circuit court decisions, the Supreme Court said (362 U.S. 266):
We do not lightly depart from this course of decisions by the lower courts. We are persuaded, however, that it
is unnecessarily and ill-advised to import into the law surrounding the constitutional right to be free from
unreasonable searches and seizures subtle distinctions, developed and refined by the common law in
evolving the body of private property law which, more than almost any other branch of law, has been shaped
by distinctions whose validity is largely historical. Even in the area from which they derive, due consideration
has led to the discarding of those distinctions in the homeland of the common law. See Occupiers' Liability
Act, 1957, 5 and 6 Eliz. 2, c. 31, carrying out Law Reform Committee, Third Report, Cmd. 9305. Distinctions
such as those between "lessee", "licensee," "invitee," "guest," often only of gossamer strength, ought not be
determinative in fashioning procedures ultimately referable to constitutional safeguards. See also Chapman
vs. United States, 354 U.S. 610, 616-17 (1961).
It has never been held that a person with requisite interest in the premises searched must own the property seized
in order to have standing in a motion to return and suppress. In Alioto vs. United States, 216 F. Supp. 48 (1963), a
Bookkeeper for several corporations from whose apartment the corporate records were seized successfully moved
for their return. In United States vs. Antonelli, Fireworks Co., 53 F. Supp. 870, 873 (W D. N. Y. 1943), the
corporation's president successfully moved for the return and suppression is to him of both personal and corporate
documents seized from his home during the course of an illegal search:
The lawful possession by Antonelli of documents and property, "either his own or the corporation's was
entitled to protection against unreasonable search and seizure. Under the circumstances in the case at bar,
the search and seizure were unreasonable and unlawful. The motion for the return of seized article and the
suppression of the evidence so obtained should be granted. (Emphasis supplied).
Time was when only a person who had property in interest in either the place searched or the articles seize had the
necessary standing to invoke the protection of the exclusionary rule. But in MacDonald vs. Unite States, 335 U.S.
461 (1948), Justice Robert Jackson joined by Justice Felix Frankfurter, advanced the view that "even a guest may
expect the shelter of the rooftree he is under against criminal intrusion." This view finally became the official view of
the U.S. Supreme Court and was articulated in United States vs. Jeffers, 432 U.S 48 (1951). Nine years later, in
1960, in Jones vs. Unite States, 362 U.S. 257, 267, the U.S. Supreme Court went a step further. Jones was a mere
guest in the apartment unlawfully searched but the Court nonetheless declared that the exclusionary rule protected
him as well. The concept of "person aggrieved by an unlawful search and seizure" was enlarged to include "anyone
legitimately on premise where the search occurs."
Shortly after the U.S. Supreme Court's Jones decision the U.S. Court of Appeals for the Fifth Circuit held that the
defendant organizer, sole stockholder and president of a corporation had standing in a mail fraud prosecution
against him to demand the return and suppression of corporate property. Henzel vs. United States, 296 F 2d 650,
652 (5th Cir. 1961), supra. The court conclude that the defendant had standing on two independent grounds: First
he had a sufficient interest in the property seized, and second he had an adequate interest in the premises
searched (just like in the case at bar). A postal inspector had unlawfully searched the corporation' premises and had
seized most of the corporation's book and records. Looking to Jones, the court observed:
Jones clearly tells us, therefore, what is not required qualify one as a "person aggrieved by an unlawful
search and seizure." It tells us that appellant should not have been precluded from objecting to the Postal
Inspector's search and seizure of the corporation's books and records merely because the appellant did not
show ownership or possession of the books and records or a substantial possessory interest in the invade
premises . . . (Henzel vs. United States, 296 F. 2d at 651). .
Henzel was soon followed by Villano vs. United States, 310 F. 2d 680, 683, (10th Cir. 1962). In Villano, police
officers seized two notebooks from a desk in the defendant's place of employment; the defendant did not claim
ownership of either; he asserted that several employees (including himself) used the notebooks. The Court held that
the employee had a protected interest and that there also was an invasion of privacy. Both Henzel and Villano
considered also the fact that the search and seizure were "directed at" the moving defendant. Henzel vs. United
States, 296 F. 2d at 682; Villano vs. United States, 310 F. 2d at 683.
In a case in which an attorney closed his law office, placed his files in storage and went to Puerto Rico, the Court of
Appeals for the Eighth Circuit recognized his standing to move to quash as unreasonable search and seizure under
the Fourth Amendment of the U.S. Constitution a grand jury subpoena duces tecum directed to the custodian of his
files. The Government contended that the petitioner had no standing because the books and papers were physically
in the possession of the custodian, and because the subpoena was directed against the custodian. The court
rejected the contention, holding that
Schwimmer legally had such possession, control and unrelinquished personal rights in the books and papers
as not to enable the question of unreasonable search and seizure to be escaped through the mere procedural
device of compelling a third-party naked possessor to produce and deliver them. Schwimmer vs. United
States, 232 F. 2d 855, 861 (8th Cir. 1956).
Aggrieved person doctrine where the search warrant s primarily directed against said person gives "standing."
The latest United States decision squarely in point is United States vs. Birrell, 242 F. Supp. 191 (1965, U.S.D.C.
S.D.N.Y.). The defendant had stored with an attorney certain files and papers, which attorney, by the name of Dunn,
was not, at the time of the seizing of the records, Birrell's attorney. * Dunn, in turn, had stored most of the records at
his home in the country and on a farm which, according to Dunn's affidavit, was under his (Dunn's) "control and
management." The papers turned out to be private, personal and business papers together with corporate books
and records of certain unnamed corporations in which Birrell did not even claim ownership. (All of these type records
were seized in the case at bar). Nevertheless, the search in Birrell was held invalid by the court which held that even
though Birrell did not own the premises where the records were stored, he had "standing" to move for the return of
all the papers and properties seized. The court, relying on Jones vs. U.S., supra; U.S. vs. Antonelli Fireworks Co.,
53 F. Supp. 870, Aff'd 155 F. 2d 631: Henzel vs. U.S., supra; and Schwimmer vs. U.S., supra, pointed out that
It is overwhelmingly established that the searches here in question were directed solely and exclusively
against Birrell. The only person suggested in the papers as having violated the law was Birrell. The first
search warrant described the records as having been used "in committing a violation of Title 18, United States
Code, Section 1341, by the use of the mails by one Lowell M. Birrell, . . ." The second search warrant was
captioned: "United States of America vs. Lowell M. Birrell. (p. 198)
Possession (actual or constructive), no less than ownership, gives standing to move to suppress. Such was
the rule even before Jones. (p. 199)
If, as thus indicated Birrell had at least constructive possession of the records stored with Dunn, it matters not
whether he had any interest in the premises searched. See also Jeffers v. United States, 88 U.S. Appl. D.C.
58, 187 F. 2d 498 (1950), affirmed 432 U.S. 48, 72 S. Ct. 93, 96 L. Ed. 459 (1951).
The ruling in the Birrell case was reaffirmed on motion for reargument; the United States did not appeal from this
decision. The factual situation in Birrell is strikingly similar to the case of the present petitioners; as in Birrell, many
personal and corporate papers were seized from premises not petitioners' family residences; as in Birrell, the
searches were "PRIMARILY DIRECTED SOLETY AND EXCLUSIVELY" against the petitioners. Still both types of
documents were suppressed in Birrell because of the illegal search. In the case at bar, the petitioners connection
with the premises raided is much closer than in Birrell.
Thus, the petitioners have full standing to move for the quashing of all the warrants regardless whether these were
directed against residences in the narrow sense of the word, as long as the documents were personal papers of the
petitioners or (to the extent that they were corporate papers) were held by them in a personal capacity or under their
personal control.
Prescinding a from the foregoing, this Court, at all events, should order the return to the petitioners all personal and
private papers and effects seized, no matter where these were seized, whether from their residences or corporate
offices or any other place or places. The uncontradicted sworn statements of the petitioners in their, various
pleadings submitted to this Court indisputably show that amongst the things seized from the corporate offices and
other places were personal and private papers and effects belonging to the petitioners.
If there should be any categorization of the documents, papers and things which where the objects of the unlawful
searches and seizures, I submit that the grouping should be: (a) personal or private papers of the petitioners were
they were unlawfully seized, be it their family residences offices, warehouses and/or premises owned and/or
possessed (actually or constructively) by them as shown in all the search and in the sworn applications filed in
securing the void search warrants and (b) purely corporate papers belonging to corporations. Under such
categorization or grouping, the determination of which unlawfully seized papers, documents and things are
personal/private of the petitioners or purely corporate papers will have to be left to the lower courts which issued the
void search warrants in ultimately effecting the suppression and/or return of the said documents.
And as unequivocally indicated by the authorities above cited, the petitioners likewise have clear legal standing to
move for the suppression of purely corporate papers as "President and/or General Manager" of the corporations
involved as specifically mentioned in the void search warrants.
Finally, I must articulate my persuasion that although the cases cited in my disquisition were criminal prosecutions,
the great clauses of the constitutional proscription on illegal searches and seizures do not withhold the mantle of
their protection from cases not criminal in origin or nature.
Footnotes
1Hon. Jose W. Diokno, in his capacity as Secretary of Justice, Jose Lukban, in his capacity as Acting Director,
National Bureau of Investigation, Special Prosecutors Pedro D. Cenzon, Efren I. Plana and Manuel Villareal,
Jr. and Assistant Fiscal Maneses G. Reyes, City of Manila.
2Hon. Amado Roan, Judge of the Municipal (now City) Court of Manila, Hon. Roman Cansino, Judge of the
Municipal (now City) Court of Manila, Hon. Hermogenes Caluag, Judge of the Court of First Instance of Rizal,
Quezon City Branch, Hon. Eulogio Mencias, Judge of the Court of First Instance of Rizal, Pasig Branch, and
Hon. Damian Jimenez, Judge of the Municipal (now City) Court of Quezon City.
3Covering the period from March 3 to March 9, 1962.
4Harry S. Stonehill, Robert P. Brooks, John J. Brooks and Karl Beck.
5U.S. Tobacco Corporation, Atlas Cement Corporation, Atlas Development Corporation, Far East Publishing
Corporation (Evening News), Investment Inc., Industrial Business Management Corporation, General
Agricultural Corporation, American Asiatic Oil Corporation, Investment Management Corporation, Holiday
Hills, Inc., Republic Glass Corporation, Industrial and Business Management Corporation, United Housing
Corporation, The Philippine Tobacco-Flue-Curing and Redrying Corporation, Republic Real Estate
Corporation and Merconsel Corporation.
6Inter alia.
7"Without prejudice to explaining the reasons for this order in the decision to be rendered in the case, the writ
of preliminary injunction issued by us in this case against the use of the papers, documents and things from
the following premises: (1) The office of the U.S. Tobacco Corp. at the Ledesma Bldg., Arzobispo St., Manila;
(2) 932 Gonzales, Ermita, Manila; (3) office at Atlanta St. bounded by Chicago, 15th & 14th Sts., Port Area,
Manila; (4) 527 Rosario St., Mla.; (5) Atlas Cement Corp. and/or Atlas Development Corp., Magsaysay Bldg.,
San Luis, Ermita, Mla.; (6) 205 13th St., Port Area, Mla.; (7) No. 224 San Vicente St., Mla.; (8) Warehouse
No. 2 at Chicago & 23rd Sts., Mla.; (9) Warehouse at 23rd St., between Muelle de San Francisco & Boston,
Port Area, Mla.; (10) Investment Inc., 24th St. & Boston; (11) IBMC, Magsaysay Bldg., San Luis, Mla.; (12)
General Agricultural Corp., Magsaysay Bldg., San Luis, Manila; (13) American Asiatic Oil Corp., Magsaysay
Bldg., San Luis, Manila; (14) Room 91, Carmen Apts.; Dewey Blvd., Manila; (15) Warehouse Railroad St.
between 17 & 12 Sts., Port Area, Manila; (16) Rm. 304, Army & Navy Club, Manila, South Blvd.; (17)
Warehouse Annex Bldg., 18th St., Port Area, Manila; (18) Rm. 81 Carmen Apts.; Dewey Blvd., Manila; (19)
Holiday Hills, Inc., Trinity Bldg., San Luis, Manila; (20) No. 2008 Dewey Blvd.; (21) Premises of 24th St. &
Boston, Port Area, Manila; (22) Republic Glass Corp., Trinity Bldg., San Luis, Manila; (23) IBMC, 2nd Floor,
Trinity Bldg., San Luis, Manila; (24) IBMC, 2nd Flr., Gochangco Blg., 610 San Luis, Manila; (25) United
Housing Corp., Trinity Bldg., San Luis, Manila; (26) Republic Real Estate Corp., Trinity Bldg., San Luis,
Manila; (27) 1437 Colorado St., Malate, Manila; (28) Phil. Tobacco Flue-Curing, Magsaysay Bldg., San Luis,
Manila and (29) 14 Baldwin St., Sta. Cruz, Manila, in the hearing of Deportation Cases Nos. R-953 and 955
against petitioners, before the Deportation Board, is hereby lifted. The preliminary injunction shall continue as
to the papers, documents and things found in the other premises namely: in those of the residences of
petitioners, as follows: (1) 13 Narra Road, Forbes Park, Makati, Rizal; (2) 15 Narra Road, Forbes Park,
Makati, Rizal; and (3) 8 Urdaneta Avenue, Urdaneta Village, Makati, Rizal."
8Newingham, et al. vs. United States, 4 F. 2d. 490.
9Lesis vs. U.S., 6 F. 2d. 22.
10In re Dooley (1931) 48 F 2d. 121; Rouda vs. U.S., 10 F. 60 2d 916; Lusco vs. U.S. 287 F. 69; Ganci vs.
U.S., 287 F. Moris vs. U.S., 26 F. 2d 444.

11U.S. vs. Gass 17 F. 2d. 997; People vs. Rubio, 57 Phil. 384, 394.
12On March 22, 1962.
13Section 1, paragraph 3, of Article III thereof.
14Reading: . . . A search warrant shall not issue but upon probable cause to be determined by the judge or
justice of the peace after examination under oath or affirmation of the complainant and the witnesses he may
produce, and particularly describing the place to be searched, and the persons or things to be seized.
15. . . A search warrant shall not issue but upon probable cause in connection with one specific offense to be
determined by the judge or justice of the peace after examination under oath or affirmation of the complainant
and the witnesses he may produce, and particularly describing the place to be searched and persons or
things to be seized.
No search warrant shall issue for more than one specific offense. (Sec. 3, Rule 126.)
16 People vs. Defore, 140 NE 585.
17Wolf vs. Colorado, 93 L. ed. 1782.
18Pugliese (1945) 133 F. 2d. 497.
19Weeks vs. United States (1914) 232 U.S. 383, 58 L. ed. 652, 34 S. Ct. 341; emphasis supplied.
20Gouled vs. United States (1921) 255 US 298, 65 L. ed, 647, 41 S. Ct. 261; Olmstead vs. United States
(1928) 277 US 438, 72 L. ed. 944, 48 S. Ct. 564, Wolf vs. Colorado, 338 US 25, 93 L. ed. 1782, 69 S. Ct.
1359; Elkins vs. United States, 364 US 206, 4 L. ed. 2d. 1669, 80 S. Ct. 1437 (1960); Mapp vs. Ohio (1961),
367 US 643, 6 L. ed. 2d. 1081, 81 S. Ct. 1684.
21Even if remote.
22Particularly, Jones vs. U.S. 362 U.S. 257; Alioto vs. U.S., 216 Fed. Supp. 49: U.S. vs. Jeffries, 72 S. Ct. 93:
Villano vs, U.S., 300 Fed. 2d 680; and Henzel vs. U.S., 296 Fed. 2d 650.
CASTRO, J., CONCURRING AND DISSENTING:
*Attorney-client relationship played no part in the decision of the case.
Stonehill v. Diokno 20 SCRA 283 (1967) Concepcion, CJ

Facts: 1. Respondent (porsecution) made possible the issuance of 42 search warrants against
the petitioner and the corporation to search persons and premises of several personal
properties due to an alleged violation of Central Bank Laws, Tariff and Custom Laws,
Internal Revenue Code and the Revised Penal Code of the Philippines. As a results, search
and seizures were conducted in the both the residence of the petitioner and in the
corporation's premises.
2.The petitioner contended that the search warrants are null and void as their issuance
violated the Constitution and the Rules of Court for being general warrants. Thus,he filed a
petition with the Supreme Court for certiorari, prohibition, mandamus and injunction to
prevent the seized effects from being introduced as evidence in the deportation cases against
the petitioner. The court issued the writ only for those effects found in the petitioner's
residence.
Issue: Whether or not the petitioner can validly assail the legality of the search and seizure
in both premises
RULING: No, he can only assail the search conducted in the residences but not those done
in the corporation's premises. The petitioner has no cause of action in the second situation
since a corporation has a personality separate and distinct from the personality of its officers
or herein petitioner regardless of the amount of shares of stock or interest of each in the said
corporation, and whatever office they hold therein. Only the party whose rights has been
impaired can validly object the legality of a seizure--a purely personal right which cannot be
exercised by a third party. The right to object belongs to the corporation ( for the 1st group
of documents, papers, and things seized from the offices and the premises).

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Today is Sunday, November 16, 2014

Republic of the Philippines

November 29, 1968

possession of the domiciliary administrator in New York."10

See 1 Cook on Corporations, p. 2 (1923).

Connecticut were likewise cited to the same effect. At pp. 12-13.

Journal, 382 (1922).

The Lawphil Project - Arellano Law Foundation

1. Tayag vs. Benguet consolidated INC 26 SCRA 242

Today is Sunday, November 16, 2014

Republic of the Philippines

July 30, 1962

ANG PUE & COMPANY, ET AL., plaintiffs-appellants,

CASE #9-G.R. No. L-17295; July 30, 1962

To organize a corporation or a partnership that could claim a juridical

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DebtKollect Company, Inc.

ChanRobles Intellectual Property

[G.R. No. 71929 : December 4, 1990.] 192 SCRA 9

192 SCRA 21 CONSOLACION VILLANUEVA, Petitioner,

[G.R. No. 50661 : December 10, 1990.] 192 SCRA 151

Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95 SCRA 392

NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC.,

Today is Monday, November 17, 2014

Republic of the Philippines

GUTIERREZ, JR., J.:

Aurbach vs. Sanitary Wares

Today is Monday, November 17, 2014

Republic of the Philippines

May 28, 1954

TUASON VS. BOLANOS

Today is Sunday, November 16, 2014

Republic of the Philippines

July 31, 1964

J.R.S. BUSINESS CORPORATION, J.R. DA SILVA and A.J. BELTRAN, petitioners,

b) Interest at 12% per annum

c) Liquidated damages at 7% per annum

by this stipulation of facts.

J.R.S. Business Corporation vs. Imperial Insurance Inc

Today is Monday, November 17, 2014

Republic of the Philippines

September 17, 1919

SMITH, BELL & COMPANY (LTD.), petitioner,

Smith, Bell & Company (Ltd.), pet

Today is Monday, November 17, 2014

Republic of the Philippines

June 19, 1967

U.S., 287 F. Moris vs. U.S., 26 F. 2d 444.

The Lawphil Project - Arellano Law Foundation

Stonehill v. Diokno 20 SCRA 283 (1967) Concepcion, CJ

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