Trillana vs Quezon College, G. R. No. L-5003, June 27, ¥When Damasa died, QC, Inc.

ied, QC, Inc. presented a claim in her testate

1953 proceeding for collection of sum, representing the value of
subscription to capital stock
Facts: Damasa Crisostomo subscribed 200 shares of capital ¥Damasa, in her letter: 1. did not enclose initial payment, 2.
stock with a par value of P100 each through a letter sent to the stated “babayaran kong lahat pagkatapos manghuli ng isda”
Board of Trustees of the Quezon College, enclosed with the
letter are a sum of money as her initial payment and her Held:
assurance of full payment after she harvested fish. On October ¥In view of proposal of Damasa to pay value of subscription
26, 1948, Damasa Crisostomo passed away. As no payment after he has harvested fish is a condition obviously dependent
appears to have been made on the subscription mentioned in upon her sole will and therefore void
the foregoing letter, the Quezon College, Inc. presented a ¥Art. 1182. When the fulfillment of the condition depends upon
claim before the CFI of Bulacan in her testate proceeding, for the sole will of the debtor, the conditional obligation shall be
the collection of the sum of P20,000, representing the value of void.
the subscription to the capital stock of the Quezon College, Inc.
which was then opposed by the administrator of the estate.
Bayla V. Silang Traffic Co. (1942) G.R. Nos. L-48195 and
Issue: Whether or not the condition entered into by both 48196
parties are valid.
Lessons Applicable: Purchase Agreement (Corporation Law)
Held: No, Under article 1115 of the old Civil Code which
provides as follows: "If the fulfillment of the condition should FACTS:
depend upon the exclusive will of the debtor, the conditional •Petitioners purchased the following:
obligation shall be void.”
Sofronio T.
8 shares P360
Bayla.......
Trillana vs. Quezon College, Inc V e n a n c i o
93 Phil. 383 8 shares 375
Toledo........
Art. 1182, Potestative Condition
J o s e f a
15 shares 675
Issue/Scope: Naval..............
¥Example of Potestative/Facultative which depend solely in the
will of debtor • purchase price to be paid 5% upon the execution of the
contract and the remainder in installments of 5%, payable
Facts: within the 1st month of each and every quarter
startingJuly 1, 1935, w/ interest on deferred payments at
¥Deceased Damasa Crisostomo sent a letter to defendant
regarding to her subscription to shares of capital stock in QC, 6%/annum until paid
Inc. • They also agreed to forfeit in favor of seller in case of default
w/o court proceedings
• BOD resolution Aug 1, 1937: rescinding the agreement
• Petitoners filed an action in the CFI against Silang Traffic Co.
Inc to recover certain sum of money w/c they had paid
severally to the corp. on account of shares of stock they
indiv. agreed to take and pay for under certain conditions
Defenses:
1.That the resolution is not applicable to the petitioners
Sofronio T. Bayla, Josefa Naval, and Paz Toledo because
on the date thereof "their subscribed shares of stock had
already automatically reverted to the defendant, and the
installments paid by them had already been forfeited"
2.that said resolution of August 1, 1937, was revoked and
cancelled by a subsequent resolution
• RTC: absolved defendant. BOD resolution cancelled
• Petitioners appealed
ISSUES:
1. W/N the subsequent BOD resolution is valid
2. W/N under the contract between the parties the failure
of the purchaser to pay any of the quarterly
installments on the purchase price automatically
gave rise to the forfeiture of the amounts already
paid and the reversion of the shares to the
corporation
HELD: NO. CA reversed. Silang Traffic to pay petitioners
NO
• noted agreement is entitled "Agreement for
Installment Sale of Shares in the Silang Traffic
Company, Inc.,"; that while the purchaser is
designated as "subscriber," the corporation is
described as “seller.
• Whether a particular contract is a subscription or a
sale of stock is a matter of construction and
depends upon its terms and the intention of the
parties
• subscription - mutual agreement of the subscribers to
take and pay for the stock of a corporation
• purchase - independent agreement bet. the
individual and the corp. to buy shares of stock
from it at stipulated price
• rules governing subscriptions and sales of shares
are different
• Corporation Law regarding calls for unpaid
subscription and assessment of stock
(sections 37-50) do not apply to a
purchase of stock
• corporation has no legal capacity to release
an original subscriber to its capital stock
from the obligation to pay for his shares,
is inapplicable to a contract of purchase
of shares.
• The contract in question being one of purchase and
not subscription as we have heretofore pointed
out, we see no legal impediment to its
rescission by agreement of the parties
• We may add that there is no intimation in this case
that the corporation was insolvent, or that the
right of any creditor of the same was in any way
prejudiced by the rescission.
• The attempted revocation of said rescission by the
resolution of August 22, 1937, was invalid, it not
having been agreed to by the petitioners.
• NO
• The provision regarding interest on deferred
payments would not have been inserted if it had
been the intention of the parties to provide for
automatic forfeiture and cancelation of the
contract
• contract did not expressly provide that the failure of
the purchaser to pay any installment would give
rise to forfeiture and cancelation without the
necessity of any demand from the seller
• Art. 1100 of the Civil Code: persons obliged to
deliver or do something are not in default until
the moment the creditor demands of them
judicially or extrajudicially the fulfillment of their
 obligation, unless: (1) the obligation or the law
expressly provides that demand shall not be
necessary in order that default may arise (2) by
reason of the nature and circumstances of the
obligation it shall appear that the designation of
the time at which that thing was to be delivered
or the service rendered was the principal
inducement to the creation of the obligation.
RURAL BANK OF SALINAS, INC. and MANUEL SALUD ET.
AL., vs. CA, SEC and MELANIA GUERRERO ET. AL. G.R.
No. 96674. June 26, 1992
FACTS: Clemente Guerrero, President of the Rural Bank of
Salinas, Inc., executed a Special Power of Attorney in favor of
his wife, Melania, giving and granting the latter full power of
authority to sell or otherwise dispose of and/or mortgage 473
shares of stock of the Bank registered in his name. before the
death of Clemente, Melania, pursuant to the said SPA,
executed Deed of Assignments for the shares of stock in favor
of private respondents. After the death of Clemente, Melania
proceeded in presenting the said Deeds and for registration
with a request for the transfer in the Bank’s stock and transfer
book of the 473 shares of stock so assigned, the cancelation of
stock certificates in the name of Clemente and the issuance of
new stock certificates in the name of the new owners thereof.
The Bank however denied the request. Melania then filed with
SEC an action for Mandamus against Rural Bank of Salinas,
its President and Secretary. The latter bank contended in its
answer that the shares of Guerrero became the property of his
estate and thus must be first settled and liquidated before
distribution.
ISSUES:
1. Whether SEC has jurisdiction over the matter.
2. Whether petitioner may restrict the registration of shares of
stock or its transfer.
RULING:
1. YES. Sec. 5 (b) of PD 902-A grants to the SEC the original
and exclusive jurisdiction to hear and decide cases involving
intracorporate controversies. An intracorporate controversy has
been defined as one which arises between a stockholder and
the corporation. There is no distinction, qualification, not any
exception whatsoever. The case at bar involves shares of
stock, their registration, cancellation and issuances thereof by
petitioner.
2. NO. Sec. 63 of the Corporation Code provides that the
shares of stock issued are personal property and may be
transferred by delivery of the certificate or certificates indorsed
by the owner or his attorney-in-fact or other person legally
authorized to make the transfer. A corporation either by its
Board, its by-laws, or the act of its officers, cannot create
restrictions in stock transfer. The Restrictions in the transfer of
stock must have their source in legislative enactment, as the
corporation itself cannot create such impediment. By-laws are
intended merely for the protection of the corporation, and
prescribe regulation, not restriction; they are always subject to
the charter of the corporation. The corporation, in the absence
of such power, cannot ordinarily inquire into or pass upon the
legality of the transactions by which its stock passes from one
person to another, nor can it question the consideration upon
which a sale is based. The right to transfer shares is inherent
from the stockholders ownership of the same, thus whenever a
corporation refuses to transfer and register stocks, mandamus
will lie to compel the officers of the corporation to transfer said
stocks to the books of the corporation.
Red Line Transportation Co. vs. Rural Transit Co.
GR No. 41570 | Sept. 6, 1934
Facts: This is a petition for review of an order of the Public
Service Commission granting to the Rural Transit Company,
Ltd., a certificate of public convenience to operate a
transportation service between Ilagan in the Province of
Isabela and Tuguegarao in the Province of Cagayan, and
additional trips in its existing express service between Manila
Tuguegarao.
On June 4, 1932, Rural Transit filed an application for
certification of a new service between Tuguegarao and Ilagan
with the Public Company Service Commission (PSC), since the
present service is not sufficient. Rural Transit further stated
that it is a holder of a certificate of public convenience to
operate a passenger bus service between Manila and
Tuguegarao. Red Line opposed said application, arguing that
they already hold a certificate of public convenience for
Tuguegarao and Ilagan, and is rendering adequate service.
They also argued that granting Rural Transit’s application
would constitute a ruinous competition over said route On Dec.
21, 1932, Public Service Commission approved Rural Transit’s
application, with the condition that "all the other terms and
conditions of the various certificates of public convenience of
the herein applicant and herein incorporated are made a part
hereof."
A motion for rehearing and reconsideration was filed by Red
Line since Rural Transit has a pending application before the
Court of First Instance for voluntary dissolution of the
corporation. A motion for postponement was filed by Rural
Transit as verified by M. Olsen who swears "that he was the
secretary of the Rural Transit Company, Ltd. During the
hearing before the Public Service Commission, the petition for
dissolution and the CFI’s decision decreeing the dissolution of
Rural Transit were admitted without objection. At the trial of this
case before the Public Service Commission an issue was
raised as to who was the real party in interest making the
application, whether the Rural Transit Company, Ltd., as
appeared on the face of the application, or the Bachrach Motor
Company, Inc., using name of the Rural Transit Company, Ltd.,
as a trade name
However, PSC granted Rural Transit’s application for certificate
of public convenience and ordered that a certificate be issued
on its name. PSC relied on a Resolution in case No. 23217,
authorizing Bachrach Motor to continue using Rural Transit’s
name as its tradename in all its applications and petitions to be
filed before the PSC. Said resolution was given a retroactive
effect as of the date of filing of the application or April 30, 1930
Issue: Can the Public Service Commission authorize a
corporation to assume the name of another corporation as a
trade name?
Ruling: NO. The Rural Transit Company, Ltd., and the
Bachrach Motor Co., Inc., are Philippine corporations and the
very law of their creation and continued existence requires
each to adopt and certify a distinctive name. The incorporators
"constitute a body politic and corporate under the name stated
in the certificate." A corporation has the power "of succession
by its corporate name." It is essential to its existence and
cannot change its name except in the manner provided by the
statute. By that name alone is it authorized to transact
business.
The law gives a corporation no express or implied authority to
assume another name that is unappropriated: still less that of
another corporation, which is expressly set apart for it and
protected by the law. If any corporation could assume at
pleasure as an unregistered trade name the name of another
corporation, this practice would result in confusion and open
the door to frauds and evasions and difficulties of
administration and supervision.
In this case, the order of the commission authorizing the
Bachrach Motor Co., Incorporated, to assume the name of the
Rural Transit Co., Ltd. likewise incorporated, as its trade name
being void. Accepting the order of December 21, 1932, at its
face as granting a certificate of public convenience to the
applicant Rural Transit Co., Ltd., the said order last mentioned
is set aside and vacated on the ground that the Rural Transit
Company, Ltd., is not the real party in interest and its
application was fictitious
Philippine First Insurance Company, Inc. v. Ma. Carmen
Hartigan, CGH and O. Engkee
FACTS: Plaintiff was originally organized as an insurance
corporation under the name of ‘The Yek Tong Lin Fire and
Marine Insurance Co., Ltd.,’ in 1953. But on 26 May 1961, its
Articles of Incorporation were amended changing the name of
the corporation to ‘Philippine First Insurance, Co., Inc.’.
The case arose when plaintiff, acting in the name of Yek Tong,
signed as co-maker together with defendants, a promissory
note in favor of China Banking Corporation. Subsequently, as
form of security, defendants signed an indemnity agreement in
favor of plaintiff in case damages or loses arises thereof.
Defendant Hartigan failed to pay, hence, the complaint for
collection of sum of money with interest and other fees.
Defendants deny the allegations, claiming, among others that
there is no privity of contract between them and plaintiff since
the plaintiff did not conduct its business under the name of Yek
Tong Insurance, hence not entitled to the indemnification
agreement which is named in favor of Yek Tong.
Decision of the CFI: The Court of First Instance of Manila
dismissed the action against plaintiff PFIC, based on the
following grounds, among others:
1. The change of name of the Yek Tong Lin Fire & Marine
Insurance Co. to PFIC is of dubious validity,
because such change in effect dissolved the
original corporation by a process of dissolution not
authorized by the Corporation Law;
2. Assuming the change is valid, Yek Tong is considered
dissolved, hence, at the time the indemnity
agreement was signed, it has no capacity to enter
into such agreement anymore;
3. Assuming further that the chance is valid, Yek Tong is
deemed as continuing as a body corporate for three
(3) years for the purpose of prosecuting and
defending suits, hence, Yek Tong should be the
proper party in interest.
Its Motion for Reconsideration having been denied, the plaintiff
filed this present case.
ISSUE: Whether or not a Philippine Corporation may change
its name and still retain its original personality and
individuality?
RULING: YES.
RATIO: Under section 18 of the Corporation Code, the law
authorizes corporations to amend their charter, its procedure
and restrictions for such amendments. There is restriction on
the term of their existence and the increase or decrease of the
capital stock but there is no prohibition against the change of
name.
The general rule as to corporations is that each corporation
shall have a name by which it is to sue and be sued and do all
legal acts. The name of a corporation in this respect
designates the corporation in the same manner as the name of
an individual designates the person.” Since an individual has
the right to change his name under certain conditions, there is
no compelling reason why a corporation may not enjoy the
same right.
Further, the Court held that a change of corporate name is not
against public policy. As such, what is held to be contrary to
public policy is the use by one corporation of the name of
another corporation as its trade name.
Likewise, it was ruled that change of name does not result in a
corporation’s dissolution. In settled jurisprudence, the Court
held that an authorized change in the name of a corporation
has no more effect upon its identity as a corporation than a
change of name of a natural person has upon his identity. It
does not affect the rights of the corporation or lessen or add to
its obligations. After a corporation has effected a change in its
name it should sue and be sued in its new name.
From the foregoing, the Court believes that the lower court
erred in holding that plaintiff is not the right party in interest to
sue defendants-appellees. As correctly pointed out by
appellant, the approval by the stockholders of the amendment
of its articles of incorporation changing the name “The Yek
Tong Lin Fire & Marine Insurance Co., Ltd.” to “Philippine First
Insurance Co., Inc.” on March 8, 1961, did not automatically
change the name of said corporation on that date. Hence, the
lower court likewise erred in dismissing appellant’s complaint.
WHEREFORE, judgment of the lower court is reversed, and
this case is remanded to the trial court for further proceedings
consistent herewith with costs against appellees.
Universal Mills Corporation vs. Universal Textile Mills 78
SCRA 62 (1977)


FACTS: This is an appeal from the order of the Securities and
Exchange Commission granting a petition by the respondent to
have the petitioner’s corporate name be changed as it is
“confusingly and deceptively similar” to that of the former. 
 assailed the order of the SEC as it averred that their


On January 8, 1954, respondent Universal Textile Mills was
issued a certificate of Corporation as a textile manufacturing
firm. On the other hand, petitioner, which deals in the
production of hosieries and apparels, acquired its current name
by amending its articles of incorporation, changing its name
from Universal Hosiery mills Corporation to Universal Mills
corporation. 
 it was UTMI’s warehouse that was destroyed. Although the


ISSUE: Whether or not petioner’s trade name is confusingly
similar with that of respondent’s. 
 SEC did not act in abuse of its discretion when it order UMC to


HELD: Yes. The corporate names in question are not identical,
but they are indisputably so similar that even under the test of
reasonable care and observation as the public generally are
capable of using and may be expected to exercise” invoked by
appellant. We are apprehensive confusion will usually arise,
considering that x x x appellant included among its primary
purposes the manufacturing, dyeing, finishing and selling of
fabrics of all kinds” which respondent had been engaged for
more than a decade ahead of petitioner.
FACTS: In 1953, Universal Textile Mills, Inc. (UTMI) was
organized. In 1954, Universal Hosiery Mills Corporation
(UHMC) was also organized. Both are actually distinct
corporations but they engage in the same business (fabrics). In
1963, UHMC petitioned to change its name to Universal Mills
Corporation (UMC). The Securities and Exchange Commission
(SEC) granted the petition.
Subsequently, a warehouse owned by UMC was gutted by fire.
News about the fire spread and investors of UTMI thought that
it was UTMI’s warehouse that was destroyed. UTMI had to
make clarifications that it was UMC’s warehouse that got
burned. Eventually, UTMI petitioned that UMC should be
enjoined from using its name because of the confusion it
brought. The SEC granted UTMI’s petition. UMC however
tradename is not deceptive; that UTMI’s tradename is qualified
by the word “Textile”, hence, there can be no confusion.
ISSUE: Whether or not the decision of the SEC is correct.
HELD: Yes. There is definitely confusion as it was evident from
the facts where the investors of UTMI mistakenly believed that
corporate names are not really identical, they are indisputably
so similar that it can cause, as it already did, confusion. The
drop its name because there was a factual evidence presented
as to the confusion. Further, when UMC filed its petition for
change of corporate name, it made an undertaking that it shall
change its name in the event that there is another person, firm
or entity who has obtained a prior right to the use of such name
or one similar to it. That promise is still binding upon the
corporation and its responsible officers.
CLAVECILLA Radio System v. Hon. Agustin Antillon
Facts: New Cagayan Grocery (NECAGRO) filed a complaint
for damages against Clavecilla Radio system.
They alleged that Clavecilla omitted the word “NOT” in the
letter addressed to NECAGRO for transmittal at Clavecilla
Cagayan de Oro Branch. NECAGRO alleged that the omission
of the word “not” between the word WASHED and AVAILABLE
altered the contents of the same causing them to suffer from
damages. Clavecilla filed a motion to dismiss on the ground of
failure to state a cause of action and improper venue. City
Judge of CDO denied the MTD. Clavecilla filed a petition for
prohibition with preliminary Injunction with the CFI praying that
the City Judge be enjoined from further proceeding with the
case because of improper venue. CFI dismissed the case and
held that Clavecilla may be sued either in Manila (principal
office) or in CDO (branch office). Clavecilla appealed to the SC
contending that the suit against it should be filed in Manila
where it holds its principal office.
Issue: WON the present case against Clavecilla should be
filed in Manila where it holds its principal office.
Held: YES. It is clear that the case from damages is based
upon a written contract. Under par. (b)(3) Sec. 1 Rule 4 of
the New Rules of Court, when an action is not upon a written
contract then the case should be filed in the municipality where
the defendant or any of the defendant resides or maybe served
upon with summons. In corpo. Law, the residence of the
corporation is the place where the principal office is
established. Since Clavecilla’s
principal office is in Manila, then the suit against it may
properly be file in the City of Manila. As stated in Evangelista v.
Santos, the laying of the venue of an action is not left to
plaintiff’s caprice because the matter is regulated by the Rules
of Court.
Alhambra Cigar & Cigarette vs. SEC
FACTS: On January 15, 1912, Alhambra Cigar & Cigarette
Manufacturing Company, Inc. was incorporated. Its lifespan
was for 50 years so on January 15, 1962, it expired.
Thereafter, its Board authorized its liquidation. Under the
prevailing law, Alhambra has 3 years to liquidate.
In 1963, while Alhambra was liquidating, Republic Act 3531
was enacted. It amended Section 18 of the Corporation Law; it
empowered domestic private corporations to extend their
corporate life beyond the period fixed by the articles of
incorporation for a term not to exceed fifty years in any one
instance. Previous to Republic Act 3531, the maximum non-
extendible term of such corporations was fifty years.
Alhambra now amended its articles of incorporation to extend
its lifespan for another 50 years. The Securities and Exchange
Commission (SEC) denied the amended articles of
incorporation.
ISSUE: Whether or not a corporation under liquidation may still
amend its articles of incorporation to extend its lifespan.
HELD: No. Alhambra cannot avail of the new law because it
has already expired at the time of its passage. When a
corporation is liquidating pursuant to the statutory period of
three years to liquidate, it is only allowed to continue for the
purpose of final closure of its business and no other purposes.
In fact, within that period, the corporation is enjoined from
“continuing the business for which it was established”. Hence,
Alhambra’s board cannot validly amend its articles of
incorporation to extend its lifespan.
 1906 such right would have vested. But when the law was
Benguet Consolidated vs. Pineda passed in 1906, Benguet Mining was already deprived of such
right.
FACTS: Benguet Consolidated Mining Company was To allow Benguet Mining to extend its life will be inimical to the
organized in 1903 under the Spanish Code of Commerce of purpose of the law which sought to render obsolete sociedades
1886 as a sociedad anonima. It was agreed by the anonimas. If this is allowed, Benguet Mining will unfairly do
incorporators that Benguet Mining was to exist for 50 years. something which new corporations organized under the new
Corporation Law can’t do – that is, exist beyond 50 years. Plus,
In 1906, Act 1459 (Corporation Law) was enacted which
it would have reaped the benefits of being a sociedad
superseded the Code of Commerce of 1886. Act 1459
anonima and later on of being a corporation. Further, under the
essentially introduced the American concept of a corporation.
Corporation Code of 1906, existing sociedades anonimas
The purpose of the law, among others, is to eradicate the
during the enactment of the law must choose whether to
Spanish Code and make sociedades anonimas obsolete.
continue as such or be organized as a corporation under the
In 1953, the board of directors of Benguet Mining submitted to new law. Once a sociedad anonima chooses one of these, it is
the Securities and Exchange Commission an application for already proscribed from choosing the other. Evidently, Benguet
them to be allowed to extend the life span of Benguet Mining. Mining chose to exist as a sociedad anonima hence it can no
Then Commissioner Mariano Pineda denied the application as longer elect to become a corporation when its life is near its
it ruled that the extension requested is contrary to Section 18 end.
of the Corporation Law of 1906 which provides that the life of a
corporation shall not be extended by amendment beyond the
time fixed in their original articles.
Asuncion vs. De Yriate
Benguet Mining contends that they have a vested right under
the Code of Commerce of 1886 because they were organized
FACTS: The proposed incorporators began an action in the
under said law; that under said law, Benguet Mining is allowed
CFI to compel the chief of the division of archives to receive
to extend its life by simply amending its articles of
and register said articles of incorporation and to do any and all
incorporation; that the prohibition in Section 18 of the
acts necessary for the complete incorporation of the persons
Corporation Code of 1906 does not apply to sociedades
named in the articles. The court below found in favor of the
anonimas already existing prior to the Law’s enactment; that
defendant and refused to order the registration of the articles
even assuming that the prohibition applies to Benguet Mining,
mentioned, maintaining and holding that the defendant, under
it should be allowed to be reorganized as a corporation under
the Corporation Law, had authority to determine both the
the said Corporation Law.
sufficiency of the form of the articles and the legality of the
ISSUE: Whether or not Benguet Mining is correct. object of the proposed corporation. This appeal is taken from
that judgment

HELD: No. Benguet Mining has no vested right to extend its
The chief of the division of archives, the respondent, refused to
life. It is a well settled rule that no person has a vested interest
file the articles of incorporation, upon the ground that the object
in any rule of law entitling him to insist that it shall remain
of the corporation, as stated in the articles, was not lawful and
unchanged for his benefit. Had Benguet Mining agreed to
that, in pursuance of section 6 of Act No. 1459, they were not
extend its life prior to the passage of the Corporation Code of
registerable.
 the proposed corporation within the purview of the law
Hence, this action to obtain a writ of mandamus. authorizing corporations for given purposes.

ISSUE: Whether or not the chief of the division of archives has
authority, under the Corporation Law, on being presented with
articles of incorporation for registration, to decide not only as to
the sufficiency of the form of the articles, but also as to the
lawfulness of the purposes of the proposed corporation.
HELD: YES. CORPORATION LAW; POWERS AND DUTIES
OF CHIEF OF DIVISION OF ARCHIVES, EXECUTIVE
BUREAU. —The chief of the division of archives, for and on
behalf of the division, has authority under the Corporation Law
(Act No. 1459) to determine the sufficiency of the form of
articles of incorporation offered for registration with the
division.
 the objects of a proposed corporation are lawful is one that can
Section 6 of the Corporation Law reads in part as follows:
 be decided one way only. If he err in the determination of that
“Five or more persons, not exceeding fifteen, a majority of
whom are residents of the Philippine Islands, may form a
private corporation for any lawful purpose by filing with the
division of archives, patents, copyrights, and trademarks of the
Executive Bureau articles of incorporation duly executed and
acknowledged before a notary public, . . .”
 a court or other official by which he may decide a question
Simply because the duties of an official happen to be
ministerial, it does not necessarily follow that he may not,
in the administration of his office, determine questions of
law. We are of the opinion that it is the duty of the division of
archives, when articles of incorporation are presented for
registration, to determine whether the objects of the
corporation as expressed in the articles are lawful. We do not
believe that, simply because articles of incorporation presented
for registration are perfect in form, the division of archives must
accept and register them and issue the corresponding
certificate of incorporation no matter what the purpose of the
corporation may be as expressed in the articles. The chief of
the division of archives, on behalf of the division, has also the
power and duty to determine from the articles of incorporation
presented for registration the lawfulness of the purposes of the
proposed corporation and whether or not those purposes bring
MANDAMUS TO COMPEL HIM TO PERFORM DUTIES. —
The duties of the chief of the division of archives, so far as
relates to the registration of articles of incorporation, are purely
ministerial and not discretional; and mandamus will lie to
compel him to perform his duties under the Corporation Law if,
in violation of law, he refuse to perform them

On the contrary, there is no incompatibility in holding, as we do
hold, that his duties are ministerial and that he has no authority
to exercise discretion in receiving and registering articles of
incorporation. He may exercise judgment — that is, the judicial
function — in the determination of the question of law referred
to, but he may not use discretion. The question whether or not
question and refuse to file articles which should be filed under
the law, that decision is subject to review and correction and,
upon proper showing, he will be ordered to file the articles.

Discretion, it may be said generally, is a faculty conferred upon
either way and still be right. The power conferred upon the
division of archives with respect to the registration of articles of
incorporation is not of that character. It is of the same character
as the determination of a lawsuit by a court upon the merits. It
can be decided only one way correctly.
Loyola Grand Villas vs. CA
FACTS: In 1983, the Loyola Grand Villas Association, Inc.
(LGVAI) was incorporated by the homeowners of the Loyola
Grand Villas (LGV), a subdivision. The Securities and
Exchange Commission (SEC) issued a certificate of
incorporation under its official seal to LGVAI in the same year.
LGVAI was likewise recognized by the Home Insurance and
Guaranty Corporation (HIGC), a government-owned-and- 

controlled corporation whose mandate is to oversee The LGVHAI officers then tried to registered its By-Laws in
associations like LGVAI. 1988, but they failed to do so. They then discovered that there
were two other homeowners' organizations within the
Later, LGVAI later found out that there are two homeowners
subdivision - the Loyola Grand Villas Homeowners (North)
associations within LGV, namely: Loyola Grand Villas
Association, Inc. [North Association] and herein Petitioner
Homeowners (South) Association, Inc. (LGVAI-South) and
Loyola Grand Villas Homeowners (South) Association, Inc.
Loyola Grand Villas Homeowners (North) Association, Inc.
["South Association]. Upon inquiry by the LGVHAI to HIGC, it
(LGVAI-North). The two associations asserted that they have to
was discovered that LGVHAI was dissolved for its failure to
be formed because LGVAI is inactive. When LGVAI inquired
submit its by-laws within the period required by the Corporation
about its status with HIGC, HIGC advised that LGVAI was
Code and for its non-user of corporate charter because HIGC
already terminated; that it was automatically dissolved when it
had not received any report on the association's activities.
failed to submit it By-Laws after it was issued a certificate of
These paved the way for the formation of the North and South
incorporation by the SEC.
Associations.

ISSUE: Whether or not a corporation’s failure to submit its by- 

laws results to its automatic dissolution. LGVHAI then lodged a complaint with HIGC Hearing Officer
Danilo Javier, and questioned the revocation of its registration.
HELD: No. A private corporation like LGVAI commences to
Hearing Officer Javier ruled in favor of LGVHAI, revoking the
have corporate existence and juridical personality from the
registration of the North and South Associations. Petitioner
date the Securities and Exchange Commission (SEC) issues a
South Association appealed the ruling, contending that
certificate of incorporation under its official seal. The
LGVHAI's failure to file its by-laws within the period prescribed
submission of its by-laws is a condition subsequent but
by Section 46 of the Corporation Code effectively automatically
although it is merely such, it is a MUST that it be submitted by
dissolved the corporation. The Appeals Board of the HIGC and
the corporation. Failure to submit however does not warrant
the Court of Appeals both rejected the contention of the
automatic dissolution because such a consequence was never
Petitioner affirmed the decision of Hearing Officer Javier.

the intention of the law. The failure is merely a ground for


dissolution which may be raised in a quo warranto proceeding.
Issue: W/N LGVHAI's failure to file its by-laws within the period
It is also worthwhile to note that failure to submit can’t result to
prescribed by Section 46 of the Corporation Code had the
automatic dissolution because there are some instances when
effect of automatically dissolving the said corporation.

a corporation does not require a by-laws.


Ruling: No. The pertinent provision of the Corporation Code
FACTS: Loyola Grand Villas Homeowners Association, Inc. that is the focal point of controversy in this case states:

(LGVHAI) was organized on 8 February 1983 as the
homeoenwers' association for Loyola Grand Villas. It was also Sec. 46. Adoption of by-laws. - Every corporation formed under
registered as the sole homeowners' association in the said this Code, must within one (1) month after receipt of official
village with the Home Financing Corporation (which eventually notice of the issuance of its certificate of incorporation by the
became Home Insurance Guarantee Corporation ["HIGC"]). Securities and Exchange Commission, adopt a code of by-laws
However, the association was not able file its corporate by- for its government not inconsistent with this Code.
laws.

Ordinarily, the word "must" connotes an imposition of duty
which must be enforced. However, the word "must" in a
statute, like "shall," is not always imperative. It may be
consistent with an ecercise of discretion. If the language of a
statute, considered as a whole with due regard to its nature
and object, reveals that the legislature intended to use the
words "shall" and "must" to be directory, they should be given
that meaning.
 PMI. Galvan got a favorable judgment from the Labor Arbiter;


The legislative deliberations of the Corporation Code reveals
that it was not the intention of Congress to automatically
dissolve a corporation for failure to file the By-Laws on time.
 Apparently, the by-laws require that an employment contract


Moreover, By-Laws may be necessary to govern the
corporation, but By-Laws are still subordinate to the Articles of
Incorporation and the Corporation Code. In fact, there are
cases where By-Laws are unnecessary to the corporate
existence and to the valid exercise of corporate powers.
 HELD: No. PMI Colleges never even presented a copy of the


The Corporation Code does not expressly provide for the
effects of non-filing of By-Laws. However, these have been
rectified by Section 6 of PD 902-A which provides that SEC
shall possess the power to suspend or revoke, after proper
notice and hearing, the franchise or certificate of registration of
corporations upon failure to file By-Laws within the required
period.
 prove that Galvan knew of said provision in the by-laws when


This shows that there must be notice and hearing before a
corporation is dissolved for failure to file its By-Laws. Even
assuming that the existence of a ground, the penalty is not
necessarily revocation, but may only be suspension.



By-Laws are indispensable to corporations, since they are
required by law for an orderly management of corporations.
However, failure to file them within the period prescribed does
not equate to the automatic dissolution of a corporation.
PMI Colleges vs. NLRC
FACTS: In 1991, PMI Colleges hired the services of Alejandro
Galvan for the latter to teach in said institution. However, for
unknown reasons, PMI defaulted from paying the
remunerations due to Galvan. Galvan made demands but were
ignored by PMI. Eventually, Galvan filed a labor case against
this was affirmed by the National Labor Relations Commission.
On appeal, PMI reiterated, among others, that the employment
of Galvan is void because it did not comply with its by-laws.
must be signed by the Chairman of the Board of PMI. PMI
asserts that Galvan’s employment contract was not signed by
the Chairman of the Board.
ISSUE: Whether or not Galvan’s employment contract is void.
by-laws to prove the existence of such provision. But even if it
did, the employment contract cannot be rendered invalid just
because it does not bear the signature of the Chairman of the
Board of PMI. By-Laws operate merely as internal rules among
the stockholders, they cannot affect or prejudice third
persons who deal with the corporation, unless they have
knowledge of the same. In this case, PMI was not able to
he was employed by PMI.
Pena vs. CA
FACTS: In 1962, the Pampanga Bus Company (PAMBUSCO)
took out a loan from the Development Bank of the Philippines
(DBP). PAMBUSCO used the parcels of land it owns to secure
the loan. In October 1974, due to PAMBUSCO’s nonpayment,
DBP foreclosed the parcels of land. Rosita Peña was the
highest bidder. Meanwhile, in November 1974, the Board of
Directors of PAMBUSCO had a meeting. The meeting was
attended by only 3 out of the 5 Directors. In the said meeting,
the Board, through a resolution, authorized one of the detriment which would positively result to him or her from the
directors, Atty. Joaquin Briones, to assign the properties of contract in which he or she had no intervention.
PAMBUSCO. Pursuant to the resolution, Briones assigned
Further, the sale of the properties of PAMBUSCO did not
PAMBUSCO’s assets to Marcelino Enriquez. Enriquez,
comply with the procedure laid down by the Corporation Law.
knowing that the properties were previously mortgaged and
Under the law, the sale or disposition of an and/or substantially
foreclosed, exercised PAMBUSCO’s right to redeem. So in
all properties of the corporation requires, in addition to a proper
August 1975, he redeemed the said properties and thereafter
board resolution, the affirmative votes of the stockholders
he sold them to Rising Yap.
holding at least two-thirds (2/3) of the voting power in the
Yap then registered the properties under his name. He then corporation in a meeting duly called for that purpose. No doubt,
demanded Peña to vacate the properties. Peña refused to do the questioned resolution was not confirmed at a subsequent
hence Yap filed a complaint. In her defense, Peña averred that stockholders meeting duly called for the purpose by the
Yap acquired no legal title over the property because the board affirmative votes of the stockholders holding at least two-thirds
resolution issued by PAMBUSCO in November 1974 is void; (2/3) of the voting power in the corporation.
that it is void because the resolution was issued without a
Further still, the Supreme Court discovers a few other
quorum; that there was no quorum because under the by-laws
anomalies with PAMBUSCO. One is that PAMBUSCO has
of PAMBUSCO, a quorum constitutes the presence of 4 out of
been inactive since 1949 as per the records provided by the
5 directors yet the meeting was only attended by three
Securities and Exchange Commission. Its general information
directors. As such, the authority granted to Briones to assign
sheet with the SEC has not been updated regularly even. And
the properties is void; that the subsequent assignment by
the three directors present were not even listed as current
Briones to Enriquez is void; that Enriquez acquired no title
directors of PAMBUSCO.
hence, likewise, Yap acquired no title. Yap insists that Peña
has no legal standing to question the board resolution because
she is not a stockholder.
ISSUE: Whether or not the board resolution is valid.
HELD: No, it is void. The by-laws are the laws of the
corporation. PAMBUSCO’s by-laws provides that a quorum
consists of at least four directors. Hence, the meeting attended
by only three directors did not comply with the required
quorum. As such, the three directors were not able to come up
with a valid resolution which could bind the corporation. Anent
the issue of Peña being a third person, she can question the
board resolution. The resolution here is liken to a contract.
Under the law, a person who is not a party obliged principally
or subsidiarily in a contract may exercise an action for nullity of
the contract if he or she is prejudiced in his or her rights with
respect to one of the contracting parties, and can show the