Renato Tayag vs Benguet Consolidated, Inc.

on December 13, 2012

26 SCRA 242 Business Organization Corporation Law Domicile of a Corporation By Laws Must Yield To a Court Order Corporation is an Artificial Being
In March 1960, Idonah Perkins died in New York. She left behind properties here and abroad. One property she left behind were two stock certificates covering 33,002 shares of stocks of the Benguet Consolidated, Inc (BCI). Said stock certificates were in the possession of the Country Trust Company of New York (CTC-NY). CTC-NY was the domiciliary administrator of the estate of Perkins (obviously in the USA). Meanwhile, in 1963, Renato Tayag was appointed as the ancillary administrator (of the properties of Perkins she left behind in the Philippines). A dispute arose between CTC-NY and Tayag as to who between them is entitled to possess the stock certificates. A case ensued and eventually, the trial court ordered CTC-NY to turn over the stock certificates to Tayag. CTC-NY refused. Tayag then filed with the court a petition to have said stock certificates be declared lost and to compel BCI to issue new stock certificates in replacement thereof. The trial court granted Tayags petition. BCI assailed said order as it averred that it cannot possibly issue new stock certificates because the two stock certificates declared lost are not actually lost; that the trial court as well Tayag acknowledged that the stock certificates exists and that they are with CTC-NY; that according to BCIs by laws, it can only issue new stock certificates, in lieu of lost, stolen, or destroyed certificates of stocks, only after court of law has issued a final and executory order as to who really owns a certificate of stock. ISSUE: Whether or not the arguments of Benguet Consolidated, Inc. are correct. HELD: No. Benguet Consolidated is a corporation who owes its existence to Philippine laws. It has been given rights and privileges under the law. Corollary, it also has obligations under the law and one of those is to follow valid legal court orders. It is not immune from judicial control because it is domiciled here in the Philippines. BCI 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. Further, to allow BCIs opposition is to render the court order against CTC -NY a mere scrap of paper. It will leave Tayag without any remedy simply because CTC-NY, a foreign entity refuses to comply with a valid court order. The final recourse then is for our local courts to create a legal fiction such that the stock certificates in issue be declared lost even though in reality they exist in the

hands of CTC-NY. This is valid. As held time and again, fictions which the law may rely upon in the pursuit of legitimate ends have played an important part in its development. Further still, the argument invoked by BCI that it can only issue new stock certificates in accordance with its bylaws is misplaced. It is worth noting that CTC-NY did not appeal the order of the court it simply refused to turn over the stock certificates hence ownership can be said to have been settled in favor of estate of Perkins here. Also, assuming that there really is a conflict between BCIs bylaws and the court order, what should prevail is the lawful court order. It would be highly irregular if court orders would yield to the bylaws of a corporation. Again, a corporation is not immune from judicial orders.

Bataan Shipyard & Engineering Co., Inc. vs Presidential Commission on Good Government on November 19, 2012

150 SCRA 181 Business Organization Corporation Law A Corporation Cannot Invoke the Right Against Self-Incrimination
When President Corazon Aquino took power, the Presidential Commission on Good Government (PCGG) was formed in order to recover ill gotten wealth allegedly acquired by former President Marcos and his cronies. Aquino then issued two executive orders in 1986 and pursuant thereto, a sequestration and a takeover order were issued against Bataan Shipyard & engineering Co., Inc. (BASECO). BASECO was alleged to be in actuality owned and controlled by the Marcoses through the Romualdez family, and in turn, through dummy stockholders. The sequestration order issued in 1986 required, among others, that BASECO produce corporate records from 1973 to 1986 under pain of contempt of the PCGG if it fails to do so. BASECO assails this order as it avers, among others, that it is against BASECOs right against self incrimination and unreasonable searches and seizures. ISSUE: Whether or not BASECO is correct. HELD: No. First of all, PCGG has the right to require the production of such documents pursuant to the power granted to it. Second, and more importantly, right against self-incrimination has no application to juridical persons. There is a reserve right in the legislature to investigate the contracts of a corporation and find out whether it has exceeded its powers. It would be a strange anomaly to hold that a state, having chartered a corporation like BASECO to make use of certain franchises, could not, in the exercise of sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the production of the corporate books and papers for that purpose. Neither is the right against unreasonable searches and seizures applicable here. There were no searches made and no seizure pursuant to any search was ever made. BASECO was merely ordered to produce the corporate records.

G.R. No. L-27155 May 18, 1978PHILIPPINE NATIONAL BANK, petitioner,vs. THE COURT OF APPEALS, RITA GUECO TAPNIO, CECILIO GUECO andTHE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., respondents. ANTONIO, J.: Facts: plaintiff, Philam gen as surety, issued a bond in favor of Tapnio, to secure thelatters obligation to PNB 2371.79 plus 12% interest. Philamgen paid the said amount toPNB and seek indemnity from Tapnio. Tapnio refused to pay alleging that he was notliable to the bank because due to the negligence of the latter the contract of lease w/Tuazon was rescind which amounts to 2800.Tapnio mortgage his standing crops and sugar quota to PNB. Tapnio agreed to leased thesugar quota, in excess of his need to Tuazon which was approved by the branch and vice president of the PNB in the amount of P2.80 per picul. However, the banks board of directors disapproved the lease, stating that the amount should be P3.00 per picul, itsmarket value. Tuazon ask for reconsideration to the board which was not acted by the board, so the lease was not consummated resulting to the loss of P2,800, which couldhave been earned by Tapnio.The Trial court and CA ruled that the bank was liable to Tapnio. Thus this petitionIssue : WON PNB is liable to tapnioHeld:Yes pnb is liable to Tapnio. PNB argue that it has a right both under its own Charter and under the Corporation Law, to approve or disapprove the said lease of sugar quotaand in the exercise of that authority.The SC said that time is of the essence in the approval of the lease of sugar quotaallotments, since the same must be utilized during the milling season. There was no proof that there was any other person at that time willing to lease the sugar quota allotment of private respondents for a price higher than P2.80 per picul. Also, Considering that all theaccounts of Rita Gueco Tapnio with the Bank were secured by chattel mortgage onstanding crops, assignment of leasehold rights and interests on her properties, and surety bonds and that she had apparently "the means to pay her obligation to the Bank, there was NO REASONABLE BASIS for the Board of Directors of petitioner to have rejected thelease agreement.While petitioner had the ultimate authority of approving or disapproving the proposedlease since the quota was mortgaged to the Bank, the latter certainly cannot escape itsresponsibility of observing, for the protection of the interest of private respondents.

Republic of the Philippines SUPREME COURT Manila EN BANC DECISION March 30, 1914 G.R. No. L-8527 WEST COAST LIFE INSURANCE CO., plaintiff, vs. GEO N. HURD, Judge of Court of First Instance, defendant. Southworth, Hargis & Springer for plaintiff. Haussermann, Cohn & Fisher for defendant. MORELAND, J.: This is an action for the issuance of a writ of prohibition against the defendant commanding the defendant to desist or refrain from further proceedings in a criminal action pending in that court. The petitioner is a foreign life-insurance corporation, duly organized under and by virtue of the laws of the State of California, doing business regularly and legally in the Philippine Islands pursuant to its laws. On the 16th of December, 1912, the assistant prosecuting attorney of the city of Manila filed an information in a criminal action in the Court of First Instance of that city against the plaintiff, said corporation, and also against John Northcott and Manuel C. Grey, charging said corporation and said individuals with the crime of libel. On the 17th day of December the defendant in his official capacity as judge of the court of First Instance signed and issued a process directed to the plaintiff and the other accused in said criminal action, which said process reads as follows: UNITED STATES OF AMERICA, PHILIPPINE ISLANDS. In the Court of First Instance of the Judicial District of Manila. No. 9661 Libel THE UNITED STATES versus WEST COAST LIFE INSURANCE CO., JOHN NORTHCOTT, AND MANUEL C. GREY.

To West Coast Life Insurance Co., John Northcott, and Manuel C. Grey, Manila. SUMMONS. You are hereby summoned to appear before the Court of First Instance of the city of Manila P.I., on the 18th day of December, 1912, at the hour of 8 a.m., to answer the charge made against you upon the information of F. H. Nesmith, assistant prosecuting attorney of the city of Manila, for libel, as set forth in the said information filed in this copurt on December 16, 1912, a copy of which is hereto attached and herewith served upon you. Dated at the city of Manila, P. I., this 17th day of December, 1912. (Sgd.) GEO N. HURD, Judge, Court of First Instance. The information upon which said process was issued is as follows: The undersigned accuses the West Coast Life Insurance Company, John Northcott, and Manuel C. Grey of the crime of libel, committed as follows: That on or about the 14th day of September, 1912, and continuously thereafter up to and including the date of this complaint, in the city of Manila, P. I., the said defendant West Coast Life Insurance Company was and has been a foreign corporation duly organized in the State of California, United States of America, and registered and doing business in the Philippine Islands; that the said defendant John Nortcott then and there was and has been the general agent and manager for the Philippine Islands of the said defendant corporation West Coast Life Insurance Company, and the said defendant Manuel C. Grey was and has been an agent and employee of the said defendant corporation West Coast Life Insurance Company, acting in the capacity of treasurer of the branch of the said defendant corporation in the Philippine Islands; that on or about the said 14th day of September, 1912, and for some time thereafter, to wit, during the months of September and October, 1912, in the city of Manila, P.I., the said defendants West Coast Life Insurance Company, John Northcott, and Manuel C. Grey, conspiring and confederating together, did then and there willfully, unlawfully, and maliciously, and to the damage of the Insular Life Insurance Company, a domestic corporation duly organized, registered, and doing business in the Philippine Islands, and with intent o cause such damage and to expose the said Insular Life Insurance Company to public hatred, contempt, and ridicule, compose and print, and cause to be printed a large number of circulars, and, in numerous printings in the form of said circulars, did publish and distribute, and cause to be published and distributed, among other persons, to policy holders and prospective policy holders of the said Insular Life Insurance Company, among other things, a malicious defamation and libel in the Spanish language, of the words and tenor following: First. For some time past various rumors are current to the effect that the Insular Life Insurance Company is not in as good a condition as it should be at the present time, and that really it is in bad shape. Nevertheless, the investigations made by the representative of the Bulletin have failed fully to confirm these rumors. It is known that the Insular Auditor has examined the books of the company and has found that its capital has diminished, and that by direction of said official the company has decided to double the amount of its capital, and also to pay its reserve fund. All this is true.

That the said circulars, and the matters therein contained hereinbefore set forth in this information, tend to impeach and have impeached the honesty, virtue, and reputation of the said Insular Life Insurance Company by exposing it to public hatred, contempt, and ridicule; that by the matters printed in said circulars, and hereinbefore set forth in this information, the said defendants West Coast Life Insurance Company, John Northcott, and Manuel C. Grey meant and intended to state and represent to those to whom the said defendants delivered said circulars as aforesaid, that the said Insular Life Insurance Company was then and there in a dangerous financial condition and on the point of going into insolvency, to the detriment of the policy holders of the said Insular Life Insurance Company, and of those with whom the said Insular Life Insurance Company have and have had business transactions, and each and all of said persons to whom the said defendants delivered said circulars, and all persons as well who read said circulars understood the said matters in said circulars to have said libelous sense and meaning. Contrary to law. On the 20th day of December, 1912, the plaintiff, together with the other persons named as accused in said process through their attorneys, served upon the prosecuting attorney and filed with the clerk of the court a motion to quash said summons and the service thereof, on the ground that the court had no jurisdiction over the said company, there being no authority in the court for the issuance of the process, Exhibit B, the order under which it was issued being void. The court denied the motion and directed plaintiff to appear before it on the 28th day of December, 1912, and to plead to the information, to which order the plaintiff then and there duly excepted. It is alleged in the complaint that unless restrained by this Court the respondent will proceed to carry out said void order and compel your petitioner to appear before his court and plead and submit to criminal prosecution without having acquired any jurisdiction whatever over your petitioner. The prayer of the complaint is, your petitioner prays judgment for the issuance of a writ of prohibition against the respondent, commanding the respondent absolutely to desist or refrain from further proceedings against your petitioner in the said criminal action. The basis of the action is that the Court of First Instance has no power or authority, under the laws of the Philippine Islands, to proceed against a corporation, as such, criminally, to bring it into court for the purpose of making it amenable to the criminal laws. It is contended that the court had no jurisdiction to issue the process in evidence against the plaintiff corporation; that the issuance and service thereof upon the plaintiff corporation were outside of the authority and jurisdiction of the court, were authorized by no law, conferred no jurisdiction over said corporation, and that they were absolutely void and without force or effect. The plaintiff, further attacking said process, alleges that the process is a mixture of civil and criminal process, that it is not properly signed, that it does not direct or require an arrest; that it is an order to appear and answer on a date certain without restraint of the person, and that it is not in the form required by law.

Section 5 of General Orders, No. 58, defines an information as accusation in writing charging a period with a public offense. Section 6 provide that a complaint or information is sufficient it if shows the name of the defendant, or if his name cannot be discovered, that he is described under a fictitious name with a statement that his true name is unknown to the informant or official signing the same. His true name may be inserted at any stage of the proceedings instituted against him, whenever ascertained. These provisions, as well as those which relate to arraignment and counsel, and to demurrers and pleas, indicate clearly that the maker of the Code of Criminal Procedure had no intention or expectation that corporations would be included among those who would fall within the provisions thereof. The only process known to the Code of Criminal Procedure, or which any court is by that order authorized to issue, is an order of arrest. The Code of Criminal Procedure provides that if the magistrate be satisfied from the investigation that the crime complained of has been committed, and there is reasonable ground to believe that the party charged has committed it, he must issue an order for his arrest. If the offense be bailable, and the defendant offer a sufficient security, he shall be admitted to bail; otherwise he shall be committed to prison. There is no authority for the issuance of any other process than an order of arrest. As a necessary consequence, the process issued in the case before us is without express authorization of statute. The question remains as to whether or not he court may, of itself and on its own motion, create not only a process but a procedure by which the process may be made effective. We do not believe that the authority of the courts of the Philippine Islands extends so far. While having the inherent powers which usually go with courts of general jurisdiction, we are of the opinion that, under the circumstances of their creation, they have only such authority in criminal matters as is expressly conferred upon them by statute or which it is necessary to imply from such authority in order to carry out fully and adequately the express authority conferred. We do not feel that Courts of First Instance have authority to create new procedure and new processes in criminal law. The exercise of such power verges too closely on legislation. Even though it be admitted, a question we do not now decide, that there are various penal laws in the Philippine Islands which corporation as such may violate, still we do not believe that the courts are authorized to go to the extent of creating special procedure and special processes for the purpose of carrying out those penal statutes, when the legislature itself has neglected to do so. To bring a corporation into court criminally requires many additions to the present criminal procedure. While it may be said to be the duty of courts to see to it that criminals are punished, it is no less their duty to follow prescribed forms of procedure and to go out upon unauthorized ways or act in an unauthorized manner. There are many cases cited by counsel for the defendant which show that corporations have been proceeded against criminally by indictment and otherwise and have been punished as malefactors by the courts. Of this, of course, there can be no doubt; but it is clear that, in

those cases, the statute, by express words or by necessary intendment, included corporations within the persons who could offend against the criminal laws; and the legislature, at the same time established a procedure applicable to corporations. No case has been cited to us where a corporation has been proceeded against under a criminal statute where the court did not exercise its common law powers or where there was not in force a special procedure applicable to corporations. The courts of the Philippine Islands are creatures of statute and, as we have said, have only those powers conferred upon them by statute and those which are required to exercise that authority fully and adequately. The courts here have no common law jurisdiction or powers. If they have any powers not conferred by statute, expressly or impliedly, they would naturally come from Spanish and not from common law sources. It is undoubted that, under the Spanish criminal law and procedure, a corporation could not have been proceeded against criminally, as such, if such an entity as a corporation in fact existed under the Spanish law, and as such it could not have committed a crime in which a willful purpose or a malicious intent was required. Criminal actions would have been restricted or limited, under that system, to the officials of such corporations and never would have been directed against the corporation itself. This was the rule with relation to associations or combinations of persons approaching, more or less, the corporation as it is now understood, and it would undoubtedly have been the rue with corporations. From this source, then, the courts derive no authority to bring corporations before them in criminal actions, nor to issue processes for that purpose. The case was submitted to this Court on an agreed statement of facts with a stipulation for a decision upon the merits. We are of the opinion that the plaintiff is entitled, under that stipulation, to the remedy prayed for. It is adjudged that the Court of First Instance of the city of Manila be and it is hereby enjoined and prohibited from proceeding further in the criminal cause which is before us in this proceeding, entitledUnited States vs. West Coast Life Insurance Company, a corporation, John Northcott and Manuel C. Grey, so far as said proceedings relate to the said West Coast Life Insurance Company, a corporation, the plaintiff in the case.

G.R. No. L-35262

March 15, 1930

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs. TAN BOON KONG, defendant-appellee. Attorney-General Jaranilla for appellant. Alejandro de Aboitiz Pinaga for appellee. OSTRAND, J.: This is an appeal from an order of the Judge of the Twenty-third Judicial District sustaining to demurrer to an information charging the defendant Tan Boon Kong with the violation of section 1458 of Act No. 2711 as amended. The information reads as follows: That on and during the four quarters of the year 1924, in the municipality of Iloilo, Province of Iloilo, Philippine Islands, the said accused, as corporation organized under the laws of the Philippine Islands and engaged in the purchase and the sale of sugar, "bayon," coprax, and other native products and as such object to the payment of internal-revenue taxes upon its sales, did then and there voluntarily, illegally, and criminally declare in 1924 for the purpose of taxation only the sum of P2,352,761.94, when in truth and in fact, and the accused well knew that the total gross sales of said corporation during that year amounted to P2543,303.44, thereby failing to declare for the purpose of taxation the amount of P190,541.50, and voluntarily and illegally not paying the Government as internal-revenue percentage taxes the sum of P2,960.12, corresponding to 1 per cent of said undeclared sales. The question to be decided is whether the information sets forth facts rendering the defendant, as manager of the corporation liable criminally under section 2723 of Act No. 2711 for violation of section 1458 of the same act for the benefit of said corporation. Section 1458 and 2723 read as follows: SEC. 1458. Payment of percentage taxes Quarterly reports of earnings. The percentage taxes on business shall be payable at the end of each calendar quarter in the amount lawfully due on the business transacted during each quarter; and it shall be on the duty of every person conducting a business subject to such tax, within the same period as is allowed for the payment of the quarterly installments of the fixed taxes without penalty, to make a true and complete return of the amount of the receipts or earnings of his business during the preceeding quarter and pay the tax due thereon. . . . (Act No. 2711.) SEC. 2723. Failure to make true return of receipts and sales. Any person who, being required by law to make a return of the amount of his receipts, sales, or business, shall fail or neglect to make such return within the time required, shall be punished by a fine not exceeding two thousand pesos or by imprisonment for a term not exceeding one year, or both. And any such person who shall make a false or fraudulent return shall be punished by a fine not exceeding ten thousand pesos or by imprisonment for a term not exceeding two years, or both. (Act No. 2711.) Apparently, the court below based the appealed ruling on the ground that the offense charged must be regarded as committed by the corporation and not by its officials or agents. This view is in direct

conflict with the great weight of authority. a corporation can act only through its officers and agent s, and where the business itself involves a violation of the law, the correct rule is that all who participate in it are liable (Grall and Ostrand's Case, 103 Va., 855, and authorities there cited.) In case of State vs. Burnam (17 Wash., 199), the court went so far as to hold that the manager of a diary corporation was criminally liable for the violation of a statute by the corporation through he was not present when the offense was committed. In the present case the information or complaint alleges that he defendant was the manager of a corporation which was engaged in business as a merchant, and as such manager, he made a false return, for purposes of taxation, of the total amount of sale made by said false return constitutes a violation of law, the defendant, as the author of the illegal act, must necessarily answer for its consequences, provided that the allegation are proven. The ruling of the court below sustaining the demurrer to the complaint is therefore reversed, and the case will be returned to said court for further proceedings not inconsistent with our view as hereinafter stated. Without costs. So ordered.

G.R. No. L-30896 April 28, 1983 JOSE O. SIA, petitioner, vs. THE PEOPLE OF THE PHILIPPINES, respondent.

DE CASTRO, J.: Petition for review of the decision of the Court of Appeals affirming the decision of the Court of First Instance of Manila convicting the appellant of estafa, under an information which reads: That in, about or during the period comprised' between July 24, 1963 and December 31, 1963, both dates inclusive, in the City of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously defraud the Continental Bank, a banking institution duly organized and doing business in the City of Manila, in the following manner, to wit: the said accused, in his capacity as president and general manager of the Metal Manufacturing of the Philippines, Inc. (MEMAP) and on behalf of said company, obtained delivery of 150 M/T Cold Rolled Steel Sheets valued at P 71,023.60 under a trust receipt agreement under L/C No. 63/109, which cold rolled steel sheets were consigned to the Continental Bank, under the express obligation on the part of said accused of holding the said steel sheets in trust and selling them and turning over the proceeds of the sale to the Continental Bank; but the said accused, once in possession of the said goods, far from complying with his aforesaid obligation and despite demands made upon him to do so, with intent to defraud, failed and refused to return the said cold rolled sheets or account for the proceeds thereof, if sold, which the said accused willfully, unlawfully and feloniously misappropriated, misapplied and converted to his own personal use and benefit, to the damage and prejudice of the said Continental Bank in the total amount of P146,818.68, that is the balance including the interest after deducting the sum of P28,736.47 deposited by the said accused with the bank as marginal deposit and forfeited by the said from the value of the said goods, in the said sum of P71,023.60. (Original Records, p. 1). In reviewing the evidence, the Court of Appeals came up with the following findings of facts which the Solicitor General alleges should be conclusive upon this Court: There is no debate on certain antecedents: Accused Jose 0. Sia sometime prior to 24 May, 1963, was General Manager of the Metal Manufacturing Company of the Philippines, Inc. engaged in the manufacture of steel office equipment; on 31 May, 1963, because his company was in need of raw materials to be imported from abroad, he applied for a letter of credit to import steel sheets from Mitsui Bussan Kaisha, Ltd. of Tokyo, Japan, the application being directed to the Continental Bank, herein complainant, Exhibit B and his application having been approved, the letter of credit was opened on 5 June, 1963 in the amount of $18,300, Exhibit D; and the goods arrived sometime in July, 1963 according to accused himself, tsn. II:7; now from here on there is some debate on the evidence; according to Complainant Bank, there was permitted delivery of the steel sheets only upon execution of a trust receipt, Exhibit A; while according to the accused, the goods were delivered to him sometime before he executed that trust receipt in fact they had already been converted into steel office equipment by the time he signed said trust receipt, tsn.

II:8; but there is no question - and this is not debated - that the bill of exchange issued for the purpose of collecting the unpaid account thereon having fallen due (see Exh. B) neither accused nor his company having made payment thereon notwithstanding demands, Exh. C and C-1, dated 17 and 27 December, 1963, and the accounts having reached the sum in pesos of P46,818.68 after deducting his deposit valued at P28,736.47; that was the reason why upon complaint by Continental Bank, the Fiscal filed the information after preliminary investigation as has been said on 22 October, 1964. (Rollo [CA], pp. 103- 104). The first issue raised, which in effect combines the first three errors assigned, is whether petitioner Jose O. Sia, having only acted for and in behalf of the Metal Manufacturing Company of the Philippines (Metal Company, for short) as President thereof in dealing with the complainant, the Continental Bank, (Bank for short) he may be liable for the crime charged. In discussing this question, petitioner proceeds, in the meantime, on the assumption that the acts imputed to him would constitute the crime of estafa, which he also disputes, but seeks to avoid liability on his theory that the Bank knew all along that petitioner was dealing with him only as an officer of the Metal Company which was the true and actual applicant for the letter of credit (Exhibit B) and which, accordingly, assumed sole obligation under the trust receipt (Exhibit A). In disputing the theory of petitioner, the Solicitor General relies on the general principle that when a corporation commits an act which would constitute a punishable offense under the law, it is the responsible officers thereof, acting for the corporation, who would be punished for the crime, The Court of Appeals has subscribed to this view when it quoted approvingly from the decision of the trial court the following: A corporation is an artificial person, an abstract being. If the defense theory is followed unscrupulously legions would form corporations to commit swindle right and left where nobody could be convicted, for it would be futile and ridiculous to convict an abstract being that can not be pinched and confined in jail like a natural, living person, hence the result of the defense theory would be hopeless chose in business and finance. It is completely untenable. (Rollo [CA], p. 108.) The above-quoted observation of the trial court would seem to be merely restating a general principle that for crimes committed by a corporation, the responsible officers thereof would personally bear the criminal liability. (People vs. Tan Boon Kong, 54 Phil. 607. See also Tolentino, Commercial Laws of the Philippines, p. 625, citing cases.) The case cited by the Court of Appeals in support of its stand-Tan Boon Kong case, supra-may however not be squarely applicable to the instant case in that the corporation was directly required by law to do an act in a given manner, and the same law makes the person who fails to perform the act in the prescribed manner expressly liable criminally. The performance of the act is an obligation directly imposed by the law on the corporation. Since it is a responsible officer or officers of the corporation who actually perform the act for the corporation, they must of necessity be the ones to assume the criminal liability; otherwise this liability as created by the law would be illusory, and the deterrent effect of the law, negated. In the present case, a distinction is to be found with the Tan Boon Kong case in that the act alleged to be a crime is not in the performance of an act directly ordained by law to be performed by the corporation. The act is imposed by agreement of parties, as a practice observed in the usual pursuit of a business or a commercial transaction. The offense may arise, if at all, from the peculiar terms and condition agreed upon by the parties to the transaction, not by direct provision of the law. The intention of the parties, therefore, is a factor determinant of whether a crime was committed or

whether a civil obligation alone intended by the parties. With this explanation, the distinction adverted to between the Tan Boon Kong case and the case at bar should come out clear and meaningful. In the absence of an express provision of law making the petitioner liable for the criminal offense committed by the corporation of which he is a president as in fact there is no such provisions in the Revised Penal Code under which petitioner is being prosecuted, the existence of a criminal liability on his part may not be said to be beyond any doubt. In all criminal prosecutions, the existence of criminal liability for which the accused is made answerable must be clear and certain. The maxim that all doubts must be resolved in favor of the accused is always of compelling force in the prosecution of offenses. This Court has thus far not ruled on the criminal liability of an officer of a corporation signing in behalf of said corporation a trust receipt of the same nature as that involved herein. In the case of Samo vs. People, L-17603-04, May 31, 1962, the accused was not clearly shown to be acting other than in his own behalf, not in behalf of a corporation. The next question is whether the violation of a trust receipt constitutes estafa under Art. 315 (1-[2]) of the Revised Penal Code, as also raised by the petitioner. We now entertain grave doubts, in the light of the promulgation of P.D. 115 providing for the regulation of trust receipts transaction, which is a very comprehensive piece of legislation, and includes an express provision that if the violation or offense is committed by a corporation, partnership, association or other juridical entities the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other officials or persons therein responsible for the offense, without prejudice to civil liabilities arising from the criminal offense. The question that suggests itself is, therefore, whether the provisions of the Revised Penal Code, Article 315, par. 1 (b) are not adequate to justify the punishment of the act made punishable by P.D. 115, that the necessity was felt for the promulgation of the decree. To answer this question, it is imperative to make an indepth analysis of the conditions usually embodied in a trust receipt to best their legal sufficiency to constitute the basis for holding the violation of said conditions as estafa under Article 315 of the Revised Penal Code which P.D. 115 now seeks to punish expressly. As executed, the trust receipt in question reads: I/WE HEREBY AGREE TO HOLD SAID GOODS IN TRUST FOR THE SAID BANK as its property with liberty to sell the same for its account but without authority to make any other disposition whatsoever of the said goods or any part thereof (or the proceeds thereof) either way of conditional sale, pledge or otherwise; In case of sale I/we further agree to hand the proceeds as soon as received to the BANK to apply against the relative acceptance (as described above) and for the payment of any other indebtedness of mine/ours to CONTINENTAL BANK. (Original Records, p. 108) One view is to consider the transaction as merely that of a security of a loan, and that the trust element is but and inherent feature of the security aspect of the arrangement where the goods are placed in the possession of the "entrustee," to use the term used in P.D. 115, violation of the element of trust not being intended to be in the same concept as how it is understood in the criminal sense. The other view is that the bank as the owner and "entrustor" delivers the goods to the "entrustee, " with the authority to sell the goods, but with the obligation to give the proceeds to the "entrustor" or return the goods themselves if not sold, a trust being thus created in the full sense as contemplated by Art. 315, par. 1 (b). We consider the view that the trust receipt arrangement gives rise only to civil liability as the more feasible, before the promulgation of P.D. 115. The transaction being contractual, the intent of the parties should govern. Since the trust receipt has, by its nature, to be executed upon the arrival of

the goods imported, and acquires legal standing as such receipt only upon acceptance by the "entrustee," the trust receipt transaction itself, the antecedent acts consisting of the application of the L/C, the approval of the L/C and the making of the marginal deposit and the effective importation of the goods, all through the efforts of the importer who has to find his supplier, arrange for the payment and shipment of the imported goods-all these circumstances would negate any intent of subjecting the importer to criminal prosecution, which could possibly give rise to a case of imprisonment for non-payment of a debt. The parties, therefore, are deemed to have consciously entered into a purely commercial transaction that could give rise only to civil liability, never to subject the "entrustee" to criminal prosecution. Unlike, for instance, when several pieces of jewelry are received by a person from the owner for sale on commission, and the former misappropriates for his personal use and benefit, either the jewelries or the proceeds of the sale, instead of returning them to the owner as is his obligation, the bank is not in the same concept as the jewelry owner with full power of disposition of the goods, which the bank does not have, for the bank has previously extended a loan which the L/C represents to the importer, and by that loan, the importer should be the real owner of the goods. If under the trust receipt the bank is made to appear as the owner, it was but an artificial expedient, more of a legal fiction than fact, for if it were really so, it could dispose of the goods in any manner it wants, which it cannot do, just to give consistency with the purpose of the trust receipt of giving a stronger security for the loan obtained by the importer. To consider the bank as the true owner from the inception of the transaction would be to disregard the loan feature thereof, a feature totally absent in the case of the transaction between the jewel-owner and his agent. Consequently, if only from the fact that the trust receipt transaction is susceptible to two reasonable interpretation, one as giving rise only to civil liability for the violation of the condition thereof, and the other, as generating also criminal liability, the former should be adopted as more favorable to the supposed offender. (Duran vs. CA, L-39758, May 7, 1976, 71 SCRA 68; People vs. Parayno, L24804, July 5, 1968, 24 SCRA 3; People vs. Abendan, L-1481, January 28,1949,82 Phil. 711; People vs. Bautista, L-1502, May 24, 1948, 81 Phil. 78; People vs. Abana, L-39, February 1, 1946, 76 Phil. 1.) There is, moreover, one circumstance appearing on record, the significance of which should be properly evaluated. As stated in petitioner's brief (page 2), not denied by the People, "before the Continental Bank approved the application for a letter of credit (Exhibit 'D'), subsequently covered by the trust receipt, the Continental Bank examined the financial capabilities of the applicant, Metal Manufacturing Company of the Philippines because that was the bank's standard procedure (Testimony of Mr. Ernesto Garlit, Asst. Manager of the Foreign Department, Continental Bank, t.s.n., August 30, 1965). The Continental Bank did not examine the financial capabilities of herein petitioner, Jose O. Sia, in connection with the same letter of credit. (Ibid). " From this fact, it would appear as positively established that the intention of the parties in entering into the "trust receipt" agreement is merely to afford a stronger security for the loan evidenced by the letter of credit, may be not as an ordinary pledge as observed in P.N.B. vs. Viuda e Hijos de Angel Jose, et al., 63 Phil. 814, citing In re Dunlap C (206 Fed. 726) but neither as a transaction falling under Article 315-1 (b) of the Revised Penal Code giving rise to criminal liability, as previously explained and demonstrated. It is worthy of note that the civil liability imposed by the trust receipt is exclusively on the Metal Company. Speaking of such liability alone, as one arising from the contract, as distinguished from the civil liability arising out of a crime, the petitioner was never intended to be equally liable as the corporation. Without being made so liable personally as the corporation is, there would then be no basis for holding him criminally liable, for any violation of the trust receipt. This is made clearly so upon consideration of the fact that in the violation of the trust agreement and in the absence of positive evidence to the contrary, only the corporation benefited, not the petitioner personally, yet, the allegation of the information is to effect that the misappropriation or conversion was for the

personal use and benefit of the petitioner, with respect to which there is variance between the allegation and the evidence. It is also worthy of note that while the trust receipt speaks of authority to sell, the fact is undisputed that the imported goods were to be manufactured into finished products first before they could be sold, as the Bank had full knowledge of. This fact is, however, not embodied in the trust agreement, thus impressing on the trust receipt vagueness and ambiguity which should not be the basis for criminal prosecution, in the event of a violation of the terms of the trust receipt. Again, P.D. 115 has express provision relative to the "manufacture or process of the good with the purpose of ultimate sale," as a distinct condition from that of "to sell the goods or procure their sale" (Section 4, (1). Note that what is embodied in the receipt in question is the sale of imported goods, the manufacture thereof not having been mentioned. The requirement in criminal prosecution, that there must be strict harmony, not variance, between the allegation and the evidence, may therefore, not be said to have been satisfied in the instance case. FOR ALL THE FOREGOING, We reverse the decision of the Court of Appeals and hereby acquit the petitioner, with costs de oficio. SO ORDERED.

[G.R. No. 128690. January 21, 1999]

ABS-CBN BROADCASTING CORPORATION, petitioners, vs. HONORABLE COURT OF APPEALS, REPUBLIC BROADCASTING CORP., VIVA PRODUCTIONS, INC., and VICENTE DEL ROSARIO, respondents. DECISION
DAVIDE, JR., C.J.:

In this petition for review on certiorari, petitioners ABS-CBN Broadcasting Corp. (hereinafter ABS-CBN) seeks to reverse and set aside the decision[1] of 31 October 1996 and the resolution[2] of 10 March 1997 of the Court of Appeals in CA-G.R. CV No. 44125. The former affirmed with modification the decision[3] of 28 April 1993 of the Regional Trial Court (RTC) of Quezon City, Branch 80, in Civil Case No. Q-12309. The latter denied the motion to reconsider the decision of 31 October 1996. The antecedents, as found by the RTC and adopted by the Court of Appeals, are as follows:

In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement (Exh. A) whereby Viva gave ABS-CBN an exclusive right to exhibit some Viva films. Sometime in December 1991, in accordance with paragraph 2.4 [sic] of said agreement stating that1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) Viva films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN from the actual offer in writing. Viva, through defendant Del Rosario, offered ABS-CBN, through its vice-president Charo Santos-Concio, a list of three (3) film packages (36 title) from which ABSCBN may exercise its right of first refusal under the afore-said agreement (Exhs. 1 par. 2, 2, 2-A and 2-B Viva). ABS-CBN, however through Mrs. Concio, can tick off only ten (10) titles (from the list) we can purchase (Exh. 3 Viva) and therefore did not accept said list (TSN, June 8, 1992, pp. 9-10). The titles ticked off by Mrs. Concio are not the subject of the case at bar except the film Maging Sino Ka Man. For further enlightenment, this rejection letter dated January 06, 1992 (Exh 3 Viva) is hereby quoted:

6 January 1992 Dear Vic, This is not a very formal business letter I am writing to you as I would like to express my difficulty in recommending the purchase of the three film packages you are offering ABS-CBN. From among the three packages I can only tick off 10 titles we can purchase. Please see attached. I hope you will understand my position. Most of the action pictures in the list do not have big action stars in the cast. They are not for primetime. In line with this I wish to mention that I have not scheduled for telecast several action pictures in our very first contract because of the cheap production value of these movies as well as the lack of big action stars. As a film producer, I am sure you understand what I am trying to say as Viva produces only big action pictures. In fact, I would like to request two (2) additional runs for these movies as I can only schedule them in out non-primetime slots. We have to cover the amount that was paid for these movies because as you very well know that non-primetime advertising rates are very low. These are the unaired titles in the first contract.
1. Kontra Persa [sic] 2. Raider Platoon 3. Underground guerillas 4. Tiger Command 5. Boy de Sabog 6. lady Commando 7. Batang Matadero 8. Rebelyon

I hope you will consider this request of mine. The other dramatic films have been offered to us before and have been rejected because of the ruling of MTRCB to have them aired at 9:00 p.m. due to their very adult themes. As for the 10 titles I have choosen [sic] from the 3 packages please consider including all the other Viva movies produced last year, I have quite an attractive offer to make. Thanking you and with my warmest regards. (Signed) Charo Santos-Concio

On February 27, 1992, defendant Del Rosario approached ABS-CBNs Ms. Concio, with a list consisting of 52 original movie titles (i.e., not yet aired on television) including the 14 titles subject of the present case, as well as 104 re-runs (previously aired on television) from which ABS-CBN may choose another 52 titles, as a total of 156 titles, proposing to sell to ABS-CBN airing rights over this package of 52 originals and 52 re-runs for P60,000,000.00 of which P30,000,000.00 will be in cash andP30,000,000.00 worth of television spots (Exh. 4 to 4-C Viva; 9 Viva). On April 2, 1992, defendant Del Rosario and ABS-CBNs general manager, Eugenio Lopez III, met at the Tamarind Grill Restaurant in Quezon City to discuss the package proposal of VIVA. What transpired in that lunch meeting is the subject of conflicting versions. Mr. Lopez testified that he and Mr. Del Rosario allegedly agreed that ABSCBN was granted exclusive film rights to fourteen (14) films for a total consideration of P36 million; that he allegedly put this agreement as to the price and number of films in a napkin and signed it and gave it to Mr. Del Rosario (Exh. D; TSN, pp. 24 26, 77-78, June 8, 1992). On the other hand. Del Rosario denied having made any agreement with Lopez regarding the 14 Viva films; denied the existence of a napkin in which Lopez wrote something; and insisted that what he and Lopez discussed at the lunch meeting was Vivas film package offer of 104 films (52 originals and 52 reruns) for a total price of P60 million. Mr. Lopez promising [sic]to make a counter proposal which came in the form of a proposal contract Annex C of the complaint (Exh. 1 Viva; Exh C ABS-CBN). On April 06, 1992, Del Rosario and Mr. Graciano Gozon of RBS Senior vicepresident for Finance discussed the terms and conditions of Vivas offer to sell the 104 films, after the rejection of the same package by ABS-CBN. On April 07, 1992, defendant Del Rosario received through his secretary , a handwritten note from Ms. Concio, (Exh. 5 Viva), which reads: Heres the draft of the contract. I hope you find everything in order, to which was attached a draft exhibition agreement (Exh. C ABS-CBN; Exh. 9 Viva p. 3) a counterproposal covering 53 films, 52 of which came from the list sent by defendant Del Rosario and one film was added by Ms. Concio, for a consideration of P35 million. Exhibit C provides that ABS-CBN is granted film rights to 53 films and contains a right of first refusal to 1992 Viva Films. The said counter proposal was however rejected by Vivas Board of Directors [in the] evening of the same day, April 7, 1992, as Viva would not sell anything less than the package of 104 films for P60 million pesos (Exh. 9 Viva), and such rejection was relayed to Ms. Concio. On April 29, 1992, after the rejection of ABS-CBN and following several negotiations and meetings defendant Del Rosario and Vivas President Teresita Cruz, in consideration of P60 million, signed a letter of agreement dated April 24, 1992,

granting RBS the exclusive right to air 104 Viva-produced and/or acquired films (Exh. 7-A - RBS; Exh. 4 RBS) including the fourteen (14) films subject of the present case.[4]
On 27 May 1992, ABS-CBN filed before the RTC a complaint for specific performance with a prayer for a writ of preliminary injunction and/or temporary restraining order against private respondents Republic Broadcasting Corporation[5] (hereafter RBS), Viva Production (hereafter VIVA), and Vicente del Rosario. The complaint was docketed as Civil Case No. Q92-12309. On 28 May 1992, the RTC issued a temporary restraining order[6] enjoining private respondents from proceeding with the airing, broadcasting, and televising of the fourteen VIVA films subject of the controversy, starting with the film Maging Sino Ka Man, which was scheduled to be shown on private respondent RBS channel 7 at seven oclock in the evening of said date. On 17 June 1992, after appropriate proceedings, the RTC issued an order[7] directing the issuance of a writ of preliminary injunction upon ABS-CBNs posting of a P35 million bond. ABS-CBN moved for the reduction of the bond,[8] while private respondents moved for reconsideration of the order and offered to put up a counterbond.[9] In the meantime, private respondents filed separate answer with counterclaim.[10] RBS also set up a cross-claim against VIVA. On 3 August 1992, the RTC issued an order[11] dissolving the writ of preliminary injunction upon the posting by RBS of a P30 million counterbond to answer for whatever damages ABSCBN might suffer by virtue of such dissolution. However, it reduced petitioners injunction bond to P15 million as a condition precedent for the reinstatement of the writ of preliminary injunction should private respondents be unable to post a counterbond. At the pre-trial[12] on 6 August 1992, the parties upon suggestion of the court, agreed to explore the possibility of an amicable settlement. In the meantime, RBS prayed for and was granted reasonable time within which to put up a P30 million counterbond in the event that no settlement would be reached. As the parties failed to enter into an amicable settlement, RBS posted on 1 October 1992 a counterbond, which the RTC approved in its Order of 15 October 1992.[13] On 19 October 1992, ABS-CBN filed a motion for reconsideration[14] of the 3 August and 15 October 1992 Orders, which RBS opposed.[15] On 29 October, the RTC conducted a pre-trial.[16] Pending resolution of its motion for reconsideration, ABS-CBN filed with the Court of Appeals a petition[17] challenging the RTCs Order of 3 August and 15 October 1992 and praying for the issuance of a writ of preliminary injunction to enjoin the RTC from enforcing said orders. The case was docketed as CA-G.R. SP No. 29300. On 3 November 1992, the Court of Appeals issued a temporary restraining order[18] to enjoin the airing, broadcasting, and televising of any or all of the films involved in the controversy.

On 18 December 1992, the Court of Appeals promulgated a decision[19] dismissing the petition in CA-G.R. SP No. 29300 for being premature. ABS-CBN challenged the dismissal in a petition for review filed with this Court on 19 January 1993, which was docketed s G.R. No. 108363. In the meantime the RTC received the evidence for the parties in Civil Case No. Q-9212309. Thereafter, on 28 April 1993, it rendered a decision[20] in favor of RBS and VIVA and against ABS-CBN disposing as follows:

WHEREFORE, under cool reflection and prescinding from the foregoing, judgment is rendered in favor of defendants and against the plaintiff.
(1) The complaint is hereby dismissed; (2) Plaintiff ABS-CBN is ordered to pay defendant RBS the following: a) P107,727.00 the amount of premium paid by RBS to the surety which issued defendants RBSs bond to lift the injunction; b) P191,843.00 for the amount of print advertisement for Maging Sino Ka Man in various newspapers; c) Attorneys fees in the amount of P1 million; d) P5 million as and by way of moral damages; e) P5 million as and by way of exemplary damages; (3) For the defendant VIVA, plaintiff ABS-CBN is ordered to pay P212,000.00 by way of reasonable attorneys fees. (4) The cross-claim of defendant RBS against defendant VIVA is dismissed. (5) Plaintiff to pay the costs.

According to the RTC, there was no meeting of minds on the price and terms of the offer. The alleged agreement between Lopez III and Del Rosario was subject to the approval of the VIVA Board of Directors, and said agreement was disapproved during the meeting of the Board on 7 April 1992. Hence, there was no basis for ABS-CBNs demand that VIVA signed the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal under the 1990 Film Exhibition Agreement had previously been exercised per Ms. Concios letter to Del Rosario ticking off ten titles acceptable to them, which would have made the 1992 agreement an entirely new contract. On 21 June 1993, this Court denied[21] ABS-CBNs petition for review in G.R. No. 108363, as no reversible error was committed by the Court of Appeals in its challenged decision and the case had become moot and academic in view of the dismissal of the main action by the court a quo in its decision of 28 April 1993. Aggrieved by the RTCs decision, ABS-CBN appealed to the Court of Appeals claiming that there was a perfected contract between ABS-CBN and VIVA granting ABS-CBN the exclusive right to exhibit the subject films. Private respondents VIVA and Del Rosario also appealed seeking moral and exemplary damages and additional attorneys fees.

In its decision of 31 October 1996, the Court of Appeals agreed with the RTC that the contract between ABS-CBN and VIVA had not been perfected, absent the approval by the VIVA Board of Directors of whatever Del Rosario, its agent, might have agreed with Lopez III. The appellate court did not even believe ABS-CBNs evidence that Lopez III actually wrote down such an agreement on a napkin, as the same was never produced in court. It likewise rejected ABS-CBNs insistence on its right of first refusal and ratiocinated as follows:

As regards the matter of right of first refusal, it may be true that a Film Exhibition Agreement was entered into between Appellant ABS-CBN and appellant VIVA under Exhibit A in 1990 and that parag. 1.4 thereof provides: 1.4 ABS-CBN shall have the right of first refusal to the next twenty-four (24) VIVA films for TV telecast under such terms as may be agreed upon by the parties hereto, provided, however, that such right shall be exercised by ABS-CBN within a period of fifteen (15) days from the actual offer in writing (Records, p. 14). [H]owever, it is very clear that said right of first refusal in favor of ABS-CBN shall still be subjected to such terms as may be agreed upon by the parties thereto, and that the said right shall be exercised by ABS-CBN within fifteen (15) days from the actual offer in writing. Said parag. 1.4 of the agreement Exhibit A on the right of first refusal did not fix the price of the film right to the twenty-four (24) films, nor did it specify the terms thereof. The same are still left to be agreed upon by the parties. In the instant case, ABS-CBNs letter of rejection Exhibit 3 (Records, p. 89) stated that it can only tick off ten (10) films, and the draft contract Exhibit C accepted only fourteen (14) films, while parag. 1.4 of Exhibit A speaks of the next twen ty-four (24) films. The offer of VIVA was sometime in December 1991, (Exhibits 2, 2-A, 2-B; Records, pp. 86-88; Decision, p. 11, Records, p. 1150), when the first list of VIVA films was sent by Mr. Del Rosario to ABS-CBN. The Vice President of ABS-CBN, Mrs. Charo Santos-Concio, sent a letter dated January 6, 1992 (Exhibit 3, Records, p. 89) where ABS-CBN exercised its right of refusal by rejecting the offer of VIVA. As aptly observed by the trial court, with the said letter of Mrs. Concio of January 6, 1992, ABS-CBN had lost its right of first refusal. And even if We reckon the fifteen (15) day period from February 27, 1992 (Exhibit 4 to 4-C) when another list was sent to ABS-CBN after the letter of Mrs. Concio, still the fifteen (15) day period within which ABS-CBN shall exercise its right of first refusal has already expired.[22]
Accordingly, respondent court sustained the award factual damages consisting in the cost of print advertisements and the premium payments for the counterbond, there being adequate proof

of the pecuniary loss which RBS has suffered as a result of the filing of the complaint by ABSCBN. As to the award of moral damages, the Court of Appeals found reasonable basis therefor, holding that RBSs reputation was debased by the filing of the complaint in Civil Case No. Q 92-12309 and by the non-showing of the film Maging Sino Ka Man. Respondent court also held that exemplary damages were correctly imposed by way of example or correction for the public good in view of the filing of the complaint despite petitioners knowledge that the contract with VIVA had not been perfected. It also upheld the award of attorneys fees, reasoning that with ABS-CBNs act of instituting Civil Case No. Q-92-12309, RBS was unnecessarily forced to litigate. The appellate court, however, reduced the awards of moral damages to P 2 million, exemplary damages to P2 million, and attorneys fees to P500,000.00. On the other hand, respondent Court of Appeals denied VIVA and Del Rosarios appeal because it was RBS and not VIVA which was actually prejudiced when the complaint was filed by ABS-CBN. Its motion for reconsideration having been denied, ABS-CBN filed the petition in this case, contending that the Court of Appeals gravely erred in
I

RULING THAT THERE WAS NO PERFECTED CONTRACT BETWEEN PETITIONER AND PRIVATE RESPONDENT VIVA NOTWITHSTANDING PREPONFERANCE OF EVIDENCE ADDUCED BY PETITIONER TO THE CONTRARY.
II

IN AWARDING ACTUAL AND COMPENSATORY DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS.

III

IN AWARDING MORAL AND EXEMPLARY DAMAGES IN FAVOR OF PRIVATE RESPONDENT RBS.

IV

IN AWARDING ATORNEYS FEES OF RBS.

ABS-CBN claims that it had yet to fully exercise its right of first refusal over twenty-four titles under the 1990 Film Exhibition Agreement, as it had chosen only ten titles from the first list. It insists that we give credence to Lopezs testimony that he and Del Rosario met at the Tamarind Grill Restaurant, discussed the terms and conditions of the second list (the 1992 Film Exhibition Agreement) and upon agreement thereon, wrote the same on a paper napkin. It also asserts that the contract has already been effective, as the elements thereof, namely, consent, object, and consideration were established. It then concludes that the Court of Appeals pronouncements were not supported by law and jurisprudence, as per our decision of 1 December 1995 in Limketkai Sons Milling, Inc. v. Court of Appeals,[23] which cited Toyota Shaw, Inc. v. Court of Appeals;[24] Ang Yu Asuncion v. Court of Appeals,[25] and Villonco Realty Company v. Bormaheco, Inc.[26] Anent the actual damages awarded to RBS, ABS-CBN disavows liability therefor. RBS spent for the premium on the counterbond of its own volition in order to negate the injunction issued by the trial court after the parties had ventilated their respective positions during the

hearings for the purpose. The filing of the counterbond was an option available to RBS, but it can hardly be argued that ABS-CBN compelled RBS to incur such expense. Besides, RBS had another available option, i.e., move for the dissolution of the injunction; or if it was determined to put up a counterbond, it could have presented a cash bond. Furthermore under Article 2203 of the Civil Code, the party suffering loss injury is also required to exercise the diligence of a good father of a family to minimize the damages resulting from the act or omission. As regards the cost of print advertisements, RBS had not convincingly established that this was a loss attributable to the non-showing of Maging Sino Ka Man; on the contrary, it was brought out during trial that with or without the case or injunction, RBS would have spent such an amount to generate interest in the film. ABS-CBN further contends that there was no other clear basis for the awards of moral and exemplary damages. The controversy involving ABS-CBN and RBS did not in any way originate from business transaction between them. The claims for such damages did not arise from any contractual dealings or from specific acts committed by ABS-CBN against RBS that may be characterized as wanton, fraudulent, or reckless; they arose by virtue only of the filing of the complaint. An award of moral and exemplary damages is not warranted where the record is bereft of any proof that a party acted maliciously or in bad faith in filing an action.[27] In any case, free resort to courts for redress of wrongs is a matter of public policy. The law recognizes the right of every one to sue for that which he honestly believes to be his right without fear of standing trial for damages where by lack of sufficient evidence, legal technicalities, or a different interpretation of the laws on the matter, the case would lose ground.[28] One who, makes use of his own legal right does no injury.[29] If damage results from filing of the complaint, it is damnum absque injuria.[30] Besides, moral damages are generally not awarded in favor of a juridical person, unless it enjoys a good reputation that was debased by the offending party resulting in social humiliation.[31] As regards the award of attorneys fees, ABS-CBN maintains that the same had no factual, legal, or equitable justification. In sustaining the trial courts award, the Court of Appeals acted in clear disregard of the doctrine laid down in Buan v. Camaganacan[32] that the text of the decision should state the reason why attorneys fees are being awarded; otherwise, the award should be disallowed. Besides, no bad faith has been imputed on, much less proved as having been committed by, ABS-CBN. It has been held that where no sufficient showing of bad faith would be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause, attorneys fees shall not be recovered as cost.[33] On the other hand, RBS asserts that there was no perfected contract between ABS-CBN and VIVA absent meeting of minds between them regarding the object and consideration of the alleged contract. It affirms that ABS-CBNs claim of a right of first refusal was correctly rejected by the trial court. RBS insists the premium it had paid for the counterbond constituted a pecuniary loss upon which it may recover. It was obliged to put up the counterbond due to the injunction procured by ABS-CBN. Since the trial court found that ABS-CBN had no cause of action or valid claim against RBS and, therefore not entitled to the writ of injunction, RBS could recover from ABS-CBN the premium paid on the counterbond. Contrary to the claim of ABSCBN, the cash bond would prove to be more expensive, as the loss would be equivalent to the cost of money RBS would forego in case the P30 million came from its funds or was borrowed from banks.

RBS likewise asserts that it was entitled to the cost of advertisements for the cancelled showing of the film Maging Sino Ka Man because the print advertisements were out to announce the showing on a particular day and hour on Channel 7, i.e., in its entirety at one time, not as series to be shown on a periodic basis. Hence, the print advertisements were good and relevant for the particular date of showing, and since the film could not be shown on that particular date and hour because of the injunction, the expenses for the advertisements had gone to waste. As regards moral and exemplary damages, RBS asserts that ABS-CBN filed the case and secured injunctions purely for the purpose of harassing and prejudicing RBS. Pursuant then to Articles 19 and 21 of the Civil Code, ABS-CBN must be held liable for such damages. Citing Tolentino,[34] damages may be awarded in cases of abuse of rights even if the done is not illicit, and there is abuse of rights where a plaintiff institutes an action purely for the purpose of harassing or prejudicing the defendant. In support of its stand that a juridical entity can recover moral and exemplary damages, private respondent RBS cited People v. Manero,[35] where it was stated that such entity may recover moral and exemplary damages if it has a good reputation that is debased resulting in social humiliation. It then ratiocinates; thus:

There can be no doubt that RBS reputation has been debased by ABS-CBNs acts in this case. When RBS was not able to fulfill its commitment to the viewing public to show the film Maging Sino Ka Man on the scheduled dates and times (and on two occasions that RBS advertised), it suffered serious embarrassment and social humiliation. When the showing was cancelled, irate viewers called up RBS offices and subjected RBS to verbal abuse (Announce kayo ng announce, hindi ninyo naman ilalabas, nanloloko yata kayo) (Exh. 3-RBS, par.3). This alone was not something RBS brought upon itself. It was exactly what ABS-CBN had planted to happen. The amount of moral and exemplary damages cannot be said to be excessive. Two reasons justify the amount of the award. The first is that the humiliation suffered by RBS, is national in extent. RBS operations as a broadcasting company is [sic] nationwide. Its clientele, like that of ABS-CBN, consists of those who own and watch television. It is not an exaggeration to state, and it is a matter of judicial notice that almost every other person in the country watches television. The humiliation suffered by RBS is multiplied by the number of televiewers who had anticipated the showing of the film, Maging Sino Ka Man on May 28 and November 3, 1992 but did not see it owing to the cancellation. Added to this are the advertisers who had placed commercial spots for the telecast and to whom RBS had a commitment in consideration of the placement to show the film in the dates and times specified.

The second is that it is a competitor that caused RBS suffer the humiliation. The humiliation and injury are far greater in degree when caused by an entity whose ultimate business objective is to lure customers (viewers in this case) away from the competition.[36]
For their part, VIVA and Vicente del Rosario contend that the findings of fact of the trial court and the Court of Appeals do not support ABS-CBNs claim that there was a perfected contract. Such factual findings can no longer be disturbed in this petition for review under Rule 45, as only questions of law can be raised, not questions of fact. On the issue of damages and attorneys fees, they adopted the arguments of RBS. The key issues for our consideration are (1) whether there was a perfected contract between VIVA and ABS-CBN, and (2) whether RBS is entitled to damages and attorneys fees. It may be noted that that award of attorneys fees of P212,000 in favor of VIVA is not assigned as another error.
I

The first issue should be resolved against ABS-CBN. A contract is a meeting of minds between two persons whereby one binds himself to give something or render some service to another[37] for a consideration. There is no contract unless the following requisites concur: (1) consent of the contracting parties; (2) object certain which is the subject of the contract; and (3) cause of the obligation, which is established.[38] A contract undergoes three stages:
(a) preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties; (b) perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract; and (c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.[39]

Contracts that are consensual in nature are perfected upon mere meeting of the minds. Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms of payment a contract is produced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counteroffer and is a rejection of the original offer. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls the offer.[40] When Mr. Del Rosario of Viva met Mr. Lopez of ABS-CBN at the Tamarind Grill on 2 April 1992 to discuss the package of films, said package of 104 VIVA films was VIVAs offer to ABS-CBN to enter into a new Film Exhibition Agreement. But ABS-CBN, sent through Ms. Concio, counter-proposal in the form a draft contract proposing exhibition of 53 films for a consideration of P35 million. This counter-proposal could be nothing less than the counter-offer of Mr. Lopez during his conference with Del Rosario at Tamarind Grill Restaurant. Clearly,

there was no acceptance of VIVAs offer, for it was met by a counter-offer which substantially varied the terms of the offer. ABS-CBNs reliance in Limketkai Sons Milling, Inc. v. Court of Appeals[41] and Villonco Realty Company v. Bormaheco, Inc.,[42] is misplaced. In these cases, it was held that an acceptance may contain a request for certain changes in the terms of the offer and yet be a binding acceptance as long as it is clear that the meaning of the acceptance is positively and unequivocally to accept the offer, whether such request is granted or not. This ruling was, however, reversed in the resolution of 29 March 1996,[43]which ruled that the acceptance of an offer must be unqualified and absolute, i.e., it must be identical in all respects with that of the offer so as to produce consent or meetings of the minds. On the other hand, in Villonco, cited in Limketkai, the alleged changes in the revised counter-offer were not material but merely clarificatory of what had previously been agreed upon. It cited the statement in Stuart v. Franklin Life Insurance Co.[44] that a vendors change in a phrase of the offer to purchase, which change does not essentially change the terms of the offer, does not amount to a rejection of the offer and the tender of a counter-offer.[45] However, when any of the elements of the contract is modified upon acceptance, such alteration amounts to a counter-offer. In the case at bar, ABS-CBN made no unqualified acceptance of VIVAs offer hence, they underwent period of bargaining. ABS-CBN then formalized its counter-proposals or counteroffer in a draft contract. VIVA through its Board of Directors, rejected such counter-offer. Even if it be conceded arguendo that Del Rosario had accepted the counter-offer, the acceptance did not bind VIVA, as there was no proof whatsoever that Del Rosario had the specific authority to do so. Under the Corporation Code,[46] unless otherwise provided by said Code, corporate powers, such as the power to enter into contracts, are exercised by the Board of Directors. However, the Board may delegate such powers to either an executive committee or officials or contracted managers. The delegation, except for the executive committee, must be for specific purposes.[47] Delegation to officers makes the latter agents of the corporation; accordingly, the general rules of agency as to the binding effects of their acts would apply.[48] For such officers to be deemed fully clothed by the corporation to exercise a power of the Board, the latter must specially authorize them to do so. that Del Rosario did not have the authority to accept ABSCBNs counter-offer was best evidenced by his submission of the draft contract to VIVAs Board of Directors for the latters approval. In any event, there was between Del Rosario and Lopez III no meeting of minds. The following findings of the trial court are instructive:

A number of considerations militate against ABS-CBNs claim that a contract was perfected at that lunch meeting on April 02, 1992 at the Tamarind Grill. FIRST, Mr. Lopez claimed that what was agreed upon at the Tamarind Grill referred to the price and the number of films, which he wrote on a napkin. However, Exhibit C contains numerous provisions which were not discussed at the Tamarind Grill, if Lopez testimony was to be believed nor could they have been physically written on a napkin. There was even doubt as to whether it was a paper napkin or cloth napkin. In

short what were written in Exhibit C were not discussed, and therefore could not have been agreed upon, by the parties. How then could this court compel the parties to sign Exhibit C when the provisions thereof were not previously agreed upon? SECOND, Mr. Lopez claimed that what was agreed upon as the subject matter of the contract was 14 films. The complaint in fact prays for delivery of 14 films. But Exhibit C mentions 53 films as its subject matter. Which is which? If Exhibit C reflected the true intent of the parties, then ABS-CBNs claim for 14 films in its complaint is false or if what it alleged in the complaint is true, then Exhibit C did not reflect what was agreed upon by the parties. This underscores the fact that there was no meeting of the minds as to the subject matter of the contract, so as to preclude perfection thereof. For settled is the rule that there can be no contract where there is no object certain which is its subject matter (Art. 1318, NCC). THIRD, Mr. Lopez [sic] answer to question 29 of his affidavit testimony (Exh. D) States: We were able to reach an agreement. VIVA gave us the exclusive license to show these fourteen (14) films, and we agreed to pay Viva the amount of P16,050,000.00 as well as grant Viva commercial slots worth P19,950,000.00. We had already earmarked this P16,050,000.00. which gives a total consideration of P36 million (P19,951,000.00 plus P16,050,000.00 equals P36,000,000.00). On cross-examination Mr. Lopez testified:
Q What was written in this napkin? A The total price, the breakdown the known Viva movies, the 7 blockbuster movies and the other 7 Viva movies because the price was broken down accordingly. The none [sic] Viva and the seven other Viva movies and the sharing between the cash portion and the concerned spot portion in the total amount of P35 million pesos.

Now, which is which? P36 million or P35 million? This weakens ABS-CBNs claim. FOURTH. Mrs. Concio, testifying for ABS-CBN stated that she transmitted Exhibit C to Mr. Del Rosario with a handwritten note, describing said Exhibit C as a draft. (Exh. 5 Viva; tsn pp. 23-24, June 08, 1992). The said draft has a well defined meaning.

Since Exhibit C is only a draft, or a tentative, provisional or preparatory writing prepared for discussion, the terms and conditions thereof could not have been previously agreed upon by ABS-CBN and Viva. Exhibit C could not therefore legally bind Viva, not having agreed thereto. In fact, Ms. Concio admitted that the terms and conditions embodied in Exhibit C were prepared by ABS-CBNs lawyers and there was no discussion on said terms and conditions. As the parties had not yet discussed the proposed terms and conditions in Exhibit C, and there was no evidence whatsoever that Viva agreed to the terms and conditions thereof, said document cannot be a binding contract. The fact that Viva refused to sign Exhibit C reveals only two [sic] well that it did not agree on its terms and conditions, and this court has no authority to compel Viva to agree thereto. FIFTH. Mr. Lopez understand [sic] that what he and Mr. Del Rosario agreed upon at the Tamarind Grill was only provisional, in the sense that it was subject to approval by the Board of Directors of Viva. He testified:
Q Now, Mr. Witness, and after that Tamarinf meeting the second meeting wherein you claimed that you have the meeting of the minds between you and Mr. Vic del Rosario, what happened? A Vic Del Rosario was supposed to call us up and tell us specifically the result of the discussion with the Board of Directors. Q And you are referring to the so-called agreement which you wrote in [sic] a piece of paper? A Yes, sir. Q So, he was going to forward that to the board of Directors for approval? A Yes, sir (Tsn, pp. 42-43, June 8, 1992) Q Did Mr. Del Rosario tell you that he will submit it to his Board for approval? A Yes, sir. (Tsn, p. 69, June 8, 1992).

The above testimony of Mr. Lopez shows beyond doubt that he knew Mr. Del Rosario had no authority to bind Viva to a contract with ABS-CBN until and unless its Board of Directors approved it. The complaint, in fact, alleges that Mr. Del Rosario is the Executive Producer of defendant Viva which is a corporation. (par. 2, complaint). As a mere agent of Viva, Del Rosario could not bind Viva unless what he did is ratified by its Directors. (Vicente vs.Geraldez, 52 SCRA 210; Arnold vs. Willets and Paterson, 44 Phil. 634). As a mere agent, recognized as such by plaintiff, Del Rosario could not be held liable jointly and severally with Viva and his inclusion as party defendant has no legal basis. (Salonga vs. Warner Barnes [sic],COLTA, 88 Phil. 125; Salmon vs. Tan, 36 Phil. 556).

The testimony of Mr. Lopez and the allegations in the complaint are clear admissions that what was supposed to have been agreed upon at the Tamarind Grill between Mr. Lopez and Del Rosario was not a binding agreement. It is as it should be because corporate power to enter into a contract is lodged in the Board of Directors. (Sec. 23, Corporation Code). Without such board approval by the Viva board, whatever agreement Lopez and Del Rosario arrived at could not ripen into a valid binding upon Viva (Yao Ka Sin Trading vs. Court of Appeals, 209 SCRA 763). The evidence adduced shows that the Board of Directors of Viva rejected Exhibit C and insisted that the film package for 104 films be maintained (Exh. 7-1 Cica).[49]
The contention that ABS-CBN had yet to fully exercise its right of first refusal over twentyfour films under the 1990 Film Exhibition Agreement and that the meeting between Lopez and Del Rosario was a continuation of said previous contract is untenable. As observed by the trial court, ABS-CBNs right of first refusal had already been exercised when Ms. Concio wrote to Viva ticking off ten films. Thus:

[T]he subsequent negotiation with ABS-CBN two (2) months after this letter was sent, was for an entirely different package. Ms. Concio herself admitted on crossexamination to having used or exercised the right of first refusal. She stated that the list was not acceptable and was indeed not accepted by ABS-CBN, (Tsn, June 8, 1992, pp. 8-10). Even Mr. Lopez himself admitted that the right of first refusal may have been already exercised by Ms. Concio (as she had). (TSN, June 8, 1992, pp. 71-75). Del Rosario himself knew and understand [sic] that ABS-CBN has lost its right of first refusal when his list of 36 titles were rejected (Tsn, June 9, 1992, pp. 10-11).[50]
II

However, we find for ABS-CBN on the issue of damages. We shall first take up actual damages. Chapter 2, Title XVIII, Book IV of the Civil Code is the specific law on actual or compensatory damages. Except as provided by law or by stipulation, one is entitled to compensation for actual damages only for such pecuniary loss suffered by him as he has duly proved.[51] The indemnification shall comprehend not only the value of the loss suffered, but also that of the profits that the obligee failed to obtain.[52] In contracts and quasi-contracts the damages which may be awarded are dependent on whether the obligor acted with good faith or otherwise. In case of good faith, the damages recoverable are those which are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time of the constitution of the obligation. If the obligor acted with fraud, bad faith, malice, or wanton attitude, he shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.[53] In crimes and quasi-delicts, the defendants shall be liable for all damages which are the natural and probable consequences of the act or omission complained of, whether or not such damages have been foreseen or could have reasonably been foreseen by the defendant.[54]

Actual damages may likewise be recovered for loss or impairment of earning capacity in cases of temporary or permanent personal injury, or for injury to the plaintiffs business standing or commercial credit.[55] The claim of RBS for actual damages did not arise from contract, quasi-contract, delict, or quasi-delict. It arose from the fact of filing of the complaint despite ABS-CBNs alleged knowledge of lack of cause of action. Thus paragraph 12 of RBSs Answer with Counterclaim and Cross-claim under the heading COUNTERCLAIM specifically alleges:
12. ABS-CBN filed the complaint knowing fully well that it has no cause of action against RBS. As a result thereof, RBS suffered actual damages in the amount of P6,621,195.32.[56]

Needless to state the award of actual damages cannot be comprehended under the above law on actual damages. RBS could only probably take refuge under Articles 19, 20, and 21 of the Civil Code, which read as follows:

ART. 19. Every person must, in the exercise of hid rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. ART. 20. Every person who, contrary to law, wilfully or negligently causes damage to another shall indemnify the latter for the same. ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage.
It may further be observed that in cases where a writ of preliminary injunction is issued, the damages which the defendant may suffer by reason of the writ are recoverable from the injunctive bond.[57] In this case, ABS-CBN had not yet filed the required bond; as a matter of fact, it asked for reduction of the bond and even went to the Court of Appeals to challenge the order on the matter. Clearly then, it was not necessary for RBS to file a counterbond. Hence, ABS-CBN cannot be held responsible for the premium RBS paid for the counterbond. Neither could ABS-CBN be liable for the print advertisements for Maging Sino Ka Man for lack of sufficient legal basis. The RTC issued a temporary restraining order and later, a writ of preliminary injunction on the basis of its determination that there existed sufficient ground for the issuance thereof. Notably, the RTC did not dissolve the injunction on the ground of lack of legal and factual basis, but because of the plea of RBS that it be allowed to put up a counterbond. As regards attorneys fees, the law is clear that in the absence of stipulation, attorneys fees may be recovered as actual or compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code.[58] The general rule is that attorneys fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate.[59] They are not to be awarded every time a party wins a suit. The power of the court t award attorneys fees under Article 2208 demands factual, legal, and equitable justification.[60] Even when a claimant is compelled to litigate with third persons or to incur expenses to protect his rights, still attorneys

fees may not be awarded where no sufficient showing of bad faith could be reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his cause.[61] As to moral damages the law is Section 1, Chapter 3, Title XVIII, Book IV of the Civil Code. Article 2217 thereof defines what are included in moral damages, while Article 2219 enumerates the cases where they may be recovered. Article 2220 provides that moral damages may be recovered in breaches of contract where the defendant acted fraudulently or in bad faith. RBSs claim for moral damages could possibly fall only under item (10) of Article 2219, thereof which reads:

(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.
Moral damages are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer.[62] The award is not meant to enrich the complainant at the expense of the defendant, but to enable the injured party to obtain means, diversion, or amusements that will serve to obviate the moral suffering he has undergone. It is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and should be proportionate to the suffering inflicted.[63] Trial courts must then guard against the award of exorbitant damages; they should exercise balanced restrained and measured objectivity to avoid suspicion that it was due to passion, prejudice, or corruption or the part of the trial court.[64] The award of moral damages cannot be granted in favor of a corporation because, being an artificial person and having existence only in legal contemplation, it has no feelings, no emotions, no senses. It cannot, therefore, experience physical suffering and mental anguish, which can be experienced only by one having a nervous system.[65] The statement in People v. Manero[66] and Mambulao Lumber Co. v. PNB[67] that a corporation may recover moral damages if it has a good reputation that is debased, resulting in social humiliation is an obiter dictum. On this score alone the award for damages must be set aside, since RBS is a corporation. The basic law on exemplary damages is Section 5 Chapter 3, Title XVIII, Book IV of the Civil Code. These are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages.[68] They are recoverable in criminal cases as part of the civil liability when the crime was committed with one or more aggravating circumstances;[69] in quasi-delicts, if the defendant acted with gross negligence;[70] and in contracts and quasi-contracts, if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.[71] It may be reiterated that the claim of RBS against ABS-CBN is not based on contract, quasicontract, delict, or quasi-delict. Hence, the claims for moral and exemplary damages can only be based on Articles 19, 20, and 21 of the Civil Code. The elements of abuse of right under Article 19 are the following: (1) the existence of a legal right or duty, (2) which is exercised in bad faith, and (3) for the sole intent of prejudicing or injuring another. Article 20 speaks of the general sanction for all provisions of law which do not especially provide for their own sanction; while Article 21 deals with acts contra bonus mores, and has the following elements: (1) there is an act which is legal, (2) but which is contrary to morals, good custom, public order, or public policy, and (3) and it is done with intent to injure.[72]

Verily then, malice or bad faith is at the core of Articles 19, 20, and 21. Malice or bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.[73] Such must be substantiated by evidence.[74] There is no adequate proof that ABS-CBN was inspired by malice or bad faith. It was honestly convinced of the merits of its cause after it had undergone serious negotiations culminating in its formal submission of a draft contract. Settled is the rule that the adverse result of an action does not per se make the action wrongful and subject the actor to damages, for the law could not have meant impose a penalty on the right to litigate. If damages result from a persons exercise of a right, it is damnum absque injuria.[75] WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of Appeals in CA-G.R. CV No. 44125 is hereby REVERSED except as to unappealed award of attorneys fees in favor of VIVA Productions, Inc. No pronouncement as to costs. SO ORDERED.

epublic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 124062 REYNALDO vs. COURT OF APPEALS, HON. GEORGE MACLI-ING, in his capacity as Presiding Judge, Regional Trial Court, Quezon City, Branch 100, REYNALDO S. GUEVARA and HONEYCOMB BUILDERS, INC., respondents. T. January 21, 1999 COMETA and STATE INVESTMENT TRUST, INC., petitioners,

DECISION

MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals, dated, July 28, 1995, affirming the trial courts order denying petitioners Motion to Dismiss Civil Case No. Q -93-15691 for alleged failure of private respondents to state in their complaint a cause of action against petitioners and the appellate courts resolution, dated March 1, 1996, denying reconsideration of the same. Petitioner State Investment Trust, Inc. (SITI), formerly State Investment House, Inc. (SIHI), is an investment house engaged in quasi-banking activities. Petitioner Reynaldo Cometa is its president. Private correspondent Honeycomb Builders, Inc. (HBI), on the other hand, is a corporation engaged in the business of developing, constructing, and selling townhouses and condominium units, private respondent Reynaldo Guevara is president of HBI and chairman of the board of directors of Guevent Industrial Development Corp., (GIDC). Sometime in 1979, petitioner SITI extended loans in various amounts to GIDC which the latter failed to pay on the dates they became due. For this reason, a rehabilitation plan was agreed upon for GIDC under which it mortgaged several parcels of land to petitioner SITI. Among those mortgaged was a Mandaluyong lot covered by TCT No. 462855 (20510). However, GIDC again defaulted. Hence, petitioner SITI foreclosed the mortgages and, in the foreclosure sale, acquired the properties as highest bidder.
2

Alleging irregularities in the foreclosure of the mortgages and the sale of properties to petitioner SITI, GIDC filed a case entitled Guevent Industrial Development Corp., et. al., plaintiffs v. State Investment House Inc. et. al., defendants, in the Regional Trial Court of Pasig. The case was eventually settled through a compromise agreement which became the basis of the trial courts Judgment. A dispute later arose concerning the interpretation of the compromise agreement, as respondent HBI offered to purchase from GIDC the lot covered by TCT No. 462855 (20510) and the latter agreed but petitioner SITI (the mortgagee) refused to give its consent to the sale and release its lien on the property. 3 For this reason, GIDC asked the trial court for a clarification of its decision.
4

Subsequently, the trial court directed petitioner SITI to accept the offer of respondent HBI to purchase the property covered by TCT No. 462855 (20510). Petitioner SITI appealed the order to the Court of

Appeals which affirmed the same. On appeal to this Court, the decision of the Court of Appeals was affirmed.
5

Meanwhile, respondent HBI applied to the Housing and Land Use Regulatory Board for a permit to develop the property in question. Its application was granted, on account of which respondent HBI built a condominium on the property called RSG Condominium Gueventville II. When respondent HBI applied for a license to sell the condominium units it was required by the HLURB to submit an Affidavit of Undertaking which in effect stated that the mortgagee (SITI) of the said property to be developed agrees to release the mortgage on the said property as soon as the full purchase price of the same is paid by the buyer. Respondent HBI submitted the required affidavit purportedly executed by petitioner Cometa as president of SITI (mortgagee). Petitioner Cometa denied, however, that he ever executed the affidavit. He asked the National Bureau of Investigation for assistance to determine the authenticity of the signature on the affidavit. The NBI found Cometas signature on the Affidavit of Undertaking to be forgery on the basis of which a complaint for falsification of public document was filed against HBI president Guevara. 6 However, the Rizal Provincial Prosecutors Office found no probable cause against private respondent Guevara and accordingly dismissed the complaint in its resolution of September 25, 1989.
7

Petitioners appealed the matter to then Secretary of Justice Franklin Drilon who reversed the Provincial Prosecutors Office and ordered it to file an information against private respondent Guevara for falsification of public document. 8 Private respondent Guevara moved for a reconsideration of the aforesaid resolution, but his motion was denied.
9

An information for Falsification of Public Document was thus filed against private respondent Guevara in the Regional Trial Court of Makati where it was docketed as Criminal Case No. 90-3018. 10 After the prosecution presented its evidence. Guevara filed a demurrer to evidence which the trial court, presided over by Judge Fernando V. Gorospe, Jr., granted.
11

Following the dismissal of the criminal case against him, private respondents Reynaldo S. Guevara and HBI filed a complaint for malicious prosecution against petitioners Cometa and SITI in the Regional Trial Court of Quezon City.
12

Petitioners SITI and Cometa filed their respective answers. After the pre-trial of the case, they filed a joint motion to dismiss with alternative motion to drop respondent HBI as a party plaintiff, upon the following grounds: 13 1. The complaint states no cause of action. 2. Secretary Drilon, Undersecretary Bello and the prosecutor, not impleaded herein, are the real parties in-interest-defendants, which again makes the complaint lack a cause of action. At the least, the above public officials are indispensable parties, and their non-inclusion renders this court with jurisdiction over the case. 3. The action seeks to impose a penalty on the right to litigate and for that reason is unconstitutional and against settled public policy.

On May 30, 1994, the trial court, through Judge George Macli-ing, denied petitioners joint motion for the following reasons: Acting on the MOTION TO DISMISS With Alternative Motion to Drop Honeycomb Builders, Inc. as Party Plaintiff filed by Defendants Reynaldo T. Cometa and State Investment House, Inc. (SIHI) thru counsel, together with the OPPOSITION filed by Plaintiffs thru counsel, after a thorough perusal of the contents

embodied in said pleadings, the Court in the exercise of its sound judicial discretion finds that there are sufficient allegations of cause of action in the Complaint, and in the interest of justice, the Plaintiff thru
counsel should be given an opportunity to introduce proof in support of his allegations, which could at best be attained thru a full blown hearing on the merits of the case. The defense of lack of cause of

action, and that defendants are not the real parties in interest, in the considered opinion of this Court, are matters of defense, which will be considered, after the contending parties thru counsel shall have
rested their cases, and the case submitted for Decision. As regards the Alternative Motion to Drop Honeycomb Builders, Inc. as Party Plaintiff, the Complaint shows that Reynaldo Guevara, is the President, Chairman of the Board and Majority Stockholder of HBI, the same will likewise be taken into consideration when proofs will be introduced for or against this particular matter. At this point in time, let Honeycomb Builders, Inc. remain as party plaintiff. Petitioners, in separate motions, asked for a reconsideration but their motions were denied on August 12, 1994.
15

They then filed a petition for certiorari and prohibition. The Court of Appeals immediately issued a

temporary restraining order on September 22, 1994 and, on October 28, 1994, upon petitioners posting of a P1,000.00 bond, issued a writ of preliminary injunction enjoining the trial court from conducting further proceedings in the case. On July 28, 1995, the Court of Appeals rendered its decision the appellate court denied their motion in a resolution,
17 16

denying

the petition for certiorari and prohibition of petitioners. Petitioners filed a motion for reconsideration but dated March 1, 1996. Hence, this petition. The principal question for decision is whether the complaint filed by private respondents against petitioners in the Regional Trial Court states a cause of action. First, petitioners maintain it does not as the allegations in the complaint are insufficient and indispensable parties were not impleaded in the case. Secondly, they contend that private respondent HBI should have been dropped as a party plaintiff upon petitioners motion therefor. Both contentions are without merit. First. A complaint for malicious prosecution sates a cause of action if it alleges 1. that the defendant was himself the prosecutor or that at least he instigated the prosecution; 2. that the prosecution finally terminated in the plaintiffs acquittal; 3. that in bringing the action the prosecutor acted without probable cause; and 4. that the prosecutor was actuated by malice, i.e., by improper and sinister motives.
18

Thus, the question is; whether the facts pleaded and the substantive law entitle plaintiff to a judgment.
19

Otherwise stated, can a judgment be rendered upon the facts alleged and deemed admitted,
20

in accordance with the prayer in the complaint? be examined. Paragraph 12 to 13

21

To resolve this, the allegations of the complaint must

of the complaint allege that SITI and Cometa (petitioners herein) filed a complaint

against respondent Guevara which led to the filing by the provincial prosecutor of an information for falsification of public documents against him (Guevara) in the RTC. It is thus alleged that petitioners instigated the prosecution of private respondents. Paragraph 17
23 22

of the complaint alleges that the trial court granted respondent Guevaras demurrer to
24

the evidence and ordered the dismissal of the criminal case against him as shown in the order of the trial court acquitting respondent Guevara, a copy of which is made part of the complaint. acquittal is thus alleged. With regard to the requirement of malice, paragraphs 7 to 12 and paragraph 18 25 of the complaint allege: 1) that a compromise agreement was entered into between GIDC and SITI in connection with contracts of loan; 2) that in the course of implementing the agreement, HBI offered to purchase from GIDC one of the mortgaged properties. 3) that GIDC accepted the offer but despite tender of the purchase price, SITI refused to approve the sale and the release of its mortgage lien on the property; 4) that a dispute arose between the parties regarding the interpretation and implementation of the compromise agreement; 5) that GIDC filed a Motion for Clarification and to Suspend Sales in the Regional Trial Court (which had approved the Compromise Agreement), while SITI filed a Motion for Execution praying for consolidation in its favor of the titles over GIDCs remaining properties; 6) that the trial court granted GIDCs motion and ordered SITI to accept HBIs offer to purchase one of the mortgaged properties; 7) that SITI appealed the order to the Court of Appeals and, when it lost, appealed the matter to the Supreme Court which sustained both the appellate court and the lower court; 8) that while SITIs appeal was still pending, SITI and its president, Cometa, filed a criminal case, against Guevara; and 9) that petitioners filed the aforesaid case with the sole intent of harassing and pressuring (Guevara, in his capacity as chairman of GIDC, to give in to their illicit and malicious desire to appropriate the remaining unsold properties of GIDC. The second requisite, namely, that the criminal case terminated in the plaintiffs (private respondent Guevara)

The foregoing statements sufficiently allege malice. These allegations are averments of malice in accordance with Rule 6, 5 of the Rules of Civil Procedure which provides: Sec. 5. Fraud, mistake, condition of mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity. Malice, intent, knowledge or other

condition of the mind of a person may be averred generally (emphasis added).

Contrary to petitioners contention, they are not mere conclusions. As regards the requirement of lack of probable cause, paragraph 18 mentioned earlier and that a reading of the order
27 26

of the complaint alleges that the

criminal case filed had absolutely no basis in the fact and in law in light of the factual allegations of the trial court in the criminal case, a copy of which is annexed to the complaint and made an integral part thereof, will show that the prosecution failed to establish even a prima facie case against Guevara. Clearly, the complaint alleges that there was no probable cause for respondent Guevaras prosecution. As held in Far East Marble (Phils.), Inc. v. Court of Appeals,
28

a complaint is sufficient if it contains

sufficient notice of the cause of action even though the allegations may be vague or indefinite, for, in such case, the recourse of the defendant is to file a motion for a bill of particulars. Pleadings should be liberally construed so that litigants can have ample opportunity to prove their claims and thus prevent a denial of justice due to legal technicalities. It is nonetheless pointed out that the complaint itself alleges that a preliminary investigation was conducted, that the Secretary of Justice ordered the filing of the information, and that the trial court issued a warrant of arrest against private respondent Guevara. Such allegations in the complaint, petitioners claim, negate the existence of probable cause. Petitioners cite the case of Martinez v. UFC
29

in

which this Court sustained the dismissal of a complaint for malicious prosecution for failure to state a cause of action on the basis of similar allegations in the complaint and the findings of the criminal court in acquitting the plaintiff, which this Court ruled belied the allegations of malice and want of probable cause in the complaint. The mere allegation in a complaint for malicious prosecution that an information was filed after preliminary investigation and that a warrant of arrest was there after issued does not by itself negate allegations in the same complaint that the prosecution was malicious. All criminal prosecutions are by direction and control of the public prosecutor.
30

To sustain petitioners stand that an allegation in a

complaint for malicious prosecution that the information in the criminal case was filed after appropriate preliminary investigation negates a contrary allegation that the filing of the case was malicious would result in the dismissal of every action for malicious prosecution. What was decisive in Martinez was the finding in the criminal case that complainant had acted in good faith in bringing the charge against accused. For the fact in that case was that accused was acquitted because, although it was true he had disposed of properties, he did not do so prior to or simultaneously with the fraud. There was deceit, but it was not the efficient cause of the defraudation. On this bas is, this Court found that in bringing the case the complainant in that case acted in good faith. Said this Court:
31

The findings of fact made by the Court in its decision of acquittal bear materially on the question of malice and want of probable cause. The evidence, said the court, showed that when the plaintiff executed the chattel mortgage on the stock inventory in his store on November 29, 1960 he was the owner the thereof, and therefore made no false representation when he executed said mortgage to secure the loan of P58,381.13 he obtained from the defendant; but that some weeks or months after November 29, 1960, with intent to defraud the complainant United Finance Corporation, the accused succeeded in disposing of the whole or a part of said store and stock merchandise in favor of a third part, to the complainants prejudice. . . The basis of the acquittal according to the court, was that deceit, to constitute estafa, should be the efficient cause of the defraudation and as such should either be prior to or simultaneous with the act of fraud, citing People vs. Fortune, 73 Phil. 407. The foregoing facts, alleged in the complaint for malicious prosecution either directly or by reference to its annexes, show that in filing the criminal charge the defendant was not actuated by malice, nor was there want of probable cause. It had been the victim or deceit committed by the plaintiff, and whether or not such deceit constituted estafa was a legal question properly submitted first to the City Fiscal and then to the court after the necessary preliminary investigation was conducted. The very fact that the plaintiffs acquittal was based on reasonable doubt as to his guilt demonstrates that the defendant was justified in submitting its grievances to the said authorities for ruling and possible redress. In contrast, the decision of the criminal court in the present case indicates that there was not even prima

facie evidence to prove the alleged guilt of the accused. Consequently, a trial was in fact unnecessary
and the criminal court dismissed the case against private respondent Guevara on the basis of a demurrer to evidence. A court, dealing with a motion to dismiss an action for malicious prosecution, has only to determine whether the allegation of the complaint, assuming to be true, entitle the plaintiff to a judgment. The trial court is not to inquire into the truth of the allegations. Indeed, it cannot do so without depriving the plaintiff an opportunity to be heard on his allegations.
32

The case of Martinez is exceptional. This is not the first time we are clarifying its scope. In Ventura v.

Bernabe, 33we stated:

It is true that in that case of Martinez, this Court sustained the order of dismissal of the complaint for malicious prosecution partly because a preliminary investigation had been conducted by the fiscal who had found probable cause for the filing of an estafa case against Martinez, but the main consideration for such action of this Court was the fact that from the recitals in the judgment acquitting the plainliff, it appeared that although the court found that said plaintiff had been guilty of deceit, the issue resolved by the court was that in law such deceit did not constitute estafa, a matter which had been passed upon by the fiscal in a different way, naturally, without any fault on the part of the defendant. In other words, in Martinez case, the findings of the criminal court in the decision of acquittal negated the imputation of malice on the part of the defendant in charging plaintiff with estafa before the fiscal. xxx xxx xxx

For the rest, it might just as well be clarified here, lest some statements in Martinez and Buenaventura relative to the materiality of the fiscals having filed an information on the question of malice of the accuser may be misunderstood, that such participation of the fiscal is not decisive and that malice may still be shown, the holding of a preliminary investigation and the finding of probable cause by the fiscal notwithstanding. The same may be said of cases where preliminary investigations are conducted by judges. The determination of the issue of malice must always be made to rest on all the attendant circumstances, including the possibility of the fiscal or judge being somehow misled by the accusers evidence. No doubt the very purpose of preliminary investigations is to avoid baseless and malicious prosecutions, still, whether or not in a particular case such an objective has been dully pursued is a matter proof . . . . It is hardly necessary to say that to allow the present action to proceed is not to impose a penalty on the right to litigate. For trial is still to be conducted and liability is not automatic. It is only to acknowledge the truism that Just as it is bad to encourage the indiscriminate filing of actions for damages by accused persons after they have been acquitted, whether correctly or incorrectly, a blanket clearance of all who may be minded to charge others with offenses, fancied or otherwise, without any chance of the aggrieved parties in the appropriate cases of false accusation to obtain relief, is in Our Opinion short of being good law.
34

of

Second. Petitioners contend that the Secretary and the Undersecretary of the Department of Justice and the Assistant Provincial Prosecutor should have been included in the case for malicious prosecution because it was they who found probable cause against private respondents and under the law the prosecution of criminal actions is vested in the public prosecutor. According to petitioners, they did not conduct the preliminary investigation or order the filing of an information and their participation was limited to initiating the investigation in the NBI and testifying. the ruling in Lagman v. Intermediate Appellate Court
36 35

In support of their contention, they cite

which expounded on the ruling in Buenaventura

v. Sto. Domingo:

37

The mere act of submitting a case to the authorities for prosecution does not make one liable for malicious prosecution for generally, it is the Government or representative of the State that takes charge of the prosecution of the offense. There must be proof that the prosecution was prompted by a sinister design to vex and humiliate a person for if the rule were otherwise, every acquitted person can turn against the complainant in a civil action for damages. There is no merit in this contention. The issue in those cases was not whether the complaint stated a cause of action against defendants who were complainants in the criminal cases which led to the filing of civil cases for damages but whether they were liable to the plaintiffs. The Court merely ruled in those cases that the complainant in the criminal case is not necessarily liable simply because he initiated the criminal case which eventually was dismissed. It is noteworthy that, in the case at bar, private respondents do not allege that petitioners initiated the filing of the criminal case against them but that

because of the evidence they (petitioners) presented, the Department of Justice could have been induced to order the filing of a criminal case in court.
38

Third. It is contended that HBI is not a real-party-interest, whatever interest it may have being purely speculative.39 On this point, we think the Court of Appeals correctly ruled: Sec. 11 of Rule 3 of the Rules of Court provides:
40

Misjoinder and non-joinder of parties. Misjoinder of parties is not a ground for dismissal of an action.
Parties may be dropped or added by order of the court or on motion of any party or on its own initiative at any stage of the action and on such terms as are just. xxx xxx xxx Given (1) the foregoing rule, (2), the fact that Guevara, in his capacity as president of HBI, filed HBIs application to sell at the HLURB and it was in the same capacity and in connection with the application that he was criminally charged, and (3) the allegations in the complaint including that stating that by the filing of the criminal case against Guevara, the application of HBI with the HLURB for a regular license to sell the condominium units . . . had been delayed, resulting in the corresponding delay in the sale thereof on account of which plaintiffs incurred over runs in development, marketing and financial costs and charges, resulting in actual damages, the deferral by public respondent of petitioners motion to drop HBI as party plaintiff cannot be said to have been attended with grave abuse of discretion. It bears emphasis that the phraseology of Section 11 of Rule 3 is that parties may be dropped . . . at any stage

of the action.
It is true that a criminal case can only be filed against the officers of a corporation and not against the corporation itself.
41

It does not follow from this, however, that the corporation cannot be a real-party-in-

interest for the purpose of bringing a civil action for malicious prosecution. Lastly, the statement of the judge in the assailed order of May 30, 1994 that [t]he defense of lack of cause of action and that the defendants are not the real parties in interest . . . . are matters of defens e was correctly held by the appellate court as mere dictum, said judge having earlier stated in the same order that there are sufficient allegations of causes of action in the Complaint. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. SO ORDERED.

Corporate Law Case Digest: Roman Catholic Apostolic Administrator Of Davao V. LRC (1957)
G.R. No. L-8451 December 20, 1957 Lesson Applicable: Exploitation of Natural Resources (Corporate Law)

FACTS:

October 4, 1954: Mateo L. Rodis, a Filipino citizen and resident of the City of Davao, executed adeed of sale of a parcel of land in favor of the Roman Catholic Apostolic Administrator of Davao Inc.(Roman), a corporation sole organized and existing in accordance with Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent. The Register of Deeds of Davao for registration, having in mind a previous resolution of the CFI in Carmelite Nuns of Davao were made to prepare an affidavit to the effect that 60% of the members of their corp. were Filipino citizens when they sought to register in favor of their congregation of deed of donation of a parcel of land, required it to submit a similar affidavitdeclaring the same. June 28, 1954: Roman in the letter expressed willingness to submit an affidavit but not in the same tenor as the Carmelite Nuns because it had five incorporators while as a corporation sole it has only one and it was ownership through donation and this was purchased As the Register of the Land Registration Commissioner (LRC) : Deeds has some doubts as to the registerability, the matter was referred to the Land Registration Commissioner en consulta for resolution (section 4 of Republic Act No. 1151) LRC: In view of the provisions of Section 1 and 5 of Article XIII of the Philippine Constitution, the vendee was not qualified to acquire private lands in the Philippines in the absence of proof that at least 60 per centum of the capital, property, or assets of the Roman Catholic Apostolic Administrator of Davao, Inc., was actually owned or controlled by Filipino citizens, there being no question that the present incumbent of the corporation sole was a Canadian citizen

ordered the Registered Deeds of Davao to deny registration of the deed of sale in the absence of proof of compliance with such condition

action for mandamus was instituted by Roman alleging the land is held in true for the benefit of the Catholic population of a place ISSUE: W/N Roman is qualified to acquire private agricultural lands in the Philippines pursuant to the provisions of Article XIII of the Constitution

HELD: YES. Register of Deeds of the City of Davao is ordered to register the deed of sale

A corporation sole consists of one person only, and his successors (who will always be one at a time), in some particular station, who are incorporated by law in order to give them some legal capacities and advantages, particularly that of perpetuity, which in their natural persons they could not have had. In this sense, the king is a sole corporation; so is a bishop, or dens, distinct from their several chapters corporation sole 1. composed of only one persons, usually the head or bishop of the diocese, a unit which is not subject to expansion for the purpose of determining any percentage whatsoever 2. only the administrator and not the owner of the temporalities located in the territory comprised by said corporation sole and such temporalities are administered for and on behalf of the faithful residing in the diocese or territory of the corporation sole 3. has no nationality and the citizenship of the incumbent and ordinary has nothing to do with the operation, management or administration of the corporation sole, nor effects the citizenship of the faithful connected with their respective dioceses or corporation sole.

Constitution demands that in the absence of capital stock, the controlling membership should be composed of Filipino citizens. (Register of Deeds of Rizal vs. Ung Sui Si Temple) undeniable proof that the members of the Roman Catholic Apostolic faith within the territory of Davao are predominantly Filipino citizens presented evidence to establish that the clergy and lay members of this religion fully covers the percentage of Filipino citizens required by the Constitution fact that the law thus expressly authorizes the corporations sole to receive bequests or gifts of real properties (which were the main source that the friars had to acquire their big haciendas during the Spanish regime), is a clear indication that the requisite that bequests or gifts of real estate be for charitable, benevolent, or educational purposes, was, in the opinion of the legislators, considered sufficient and adequate protection against the revitalization of religious landholdings. as in respect to the property which they hold for the corporation, they stand in position of TRUSTEES and the courts may exercise the same supervision as in other cases of trust

G.R. No. L-8451

December 20, 1957

THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC., petitioner, vs. THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF DAVAO CITY, respondents.

Teodoro Padilla, for petitioner. Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista and Troadio T. Quianzon, Jr., for respondents.

FELIX, J.: This is a petition for mandamus filed by the Roman Catholic Apostolic Administrator of Davao seeking the reversal of a resolution by the Land Registration Commissioner in L.R.C. Consulta No. 14. The facts of the case are as follows: On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City of Davao, executed a deed of sale of a parcel of land located in the same city covered by Transfer Certificate No. 2263, in favor of the Roman Catholic Apostolic Administrator of Davao Inc., s corporation sole organized and existing in accordance with Philippine Laws, with Msgr. Clovis Thibault, a Canadian citizen, as actual incumbent. When the deed of sale was presented to Register of Deeds of Davao for registration, the latter. having in mind a previous resolution of the Fourth Branch of the Court of First Instance of Manila wherein the Carmelite Nuns of Davao were made to prepare an affidavit to the effect that 60 per cent of the members of their corporation were Filipino citizens when they sought to register in favor of their congregation of deed of donation of a parcel of land required said corporation sole to submit a similar affidavit declaring that 60 per cent of the members thereof were Filipino citizens. The vendee in the letter dated June 28, 1954, expressed willingness to submit an affidavit, both not in the same tenor as that made the Progress of the Carmelite Nuns because the two cases were not similar, for whereas the congregation of the Carmelite Nuns had five incorporators, the corporation sole has only one; that according to their articles of incorporation, the organization of the Carmelite Nuns became the owner of properties donated to it, whereas the case at bar, the totality of the Catholic population of Davao would become the owner of the property bought to be registered. As the Register of Deeds entertained some doubts as to the registerability if the document, the matter was referred to the Land Registration Commissioner en consulta for resolution in accordance with section 4 of Republic Act No. 1151. Proper hearing on the matter was conducted by the Commissioner and after the petitioner corporation had filed its memorandum, a resolution was rendered on September 21, 1954, holding that in view of the provisions of Section 1 and 5 of Article XIII of the Philippine Constitution, the vendee was not qualified to acquire private lands in the Philippines in the absence of proof that at least 60 per centum of the capital, property, or assets of the Roman Catholic Apostolic Administrator of Davao, Inc., was actually owned or controlled by Filipino citizens, there being no question that the present incumbent of the corporation sole was a Canadian citizen. It was also the opinion of the Land Registration Commissioner that section 159 of the corporation Law relied upon by the vendee was rendered operative by the aforementioned provisions of the Constitution with respect to real estate, unless the precise condition set therein that at least 60 per cent of its capital is owned by Filipino citizens be present, and, therefore, ordered the Registered Deeds of Davao to deny registration of the deed of sale in the absence of proof of compliance with such condition. After the motion to reconsider said resolution was denied, an action for mandamus was instituted with this Court by said corporation sole, alleging that under the Corporation Law as well as the

settled jurisprudence on the matter, the deed of sale executed by Mateo L. Rodis in favor of petitioner is actually a deed of sale in favor of the Catholic Church which is qualified to acquire private agricultural lands for the establishment and maintenance of places of worship, and prayed that judgment be rendered reserving and setting aside the resolution of the Land Registration Commissioner in question. In its resolution of November 15, 1954, this Court gave due course to this petition providing that the procedure prescribed for appeals from the Public Service Commission of the Securities and Exchange Commissions (Rule 43), be followed. Section 5 of Article XIII of the Philippine Constitution reads as follows: SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. Section 1 of the same Article also provides the following: SECTION 1. All agricultural, timber, and mineral lands of the public domain, water, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to cititzens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT, grant, lease, or concession AT THE TIME OF THE INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER CONSTITUTION. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or leases for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which cases other than the development and limit of the grant. In virtue of the foregoing mandates of the Constitution, who are considered "qualified" to acquire and hold agricultural lands in the Philippines? What is the effect of these constitutional prohibition of the right of a religious corporation recognized by our Corporation Law and registered as a corporation sole, to possess, acquire and register real estates in its name when the Head, Manager, Administrator or actual incumbent is an alien? Petitioner consistently maintained that a corporation sole, irrespective of the citizenship of its incumbent, is not prohibited or disqualified to acquire and hold real properties. The Corporation Law and the Canon Law are explicit in their provisions that a corporation sole or "ordinary" is not the owner of the of the properties that he may acquire but merely the administrator thereof. The Canon Law also specified that church temporalities are owned by the Catholic Church as a "moral person" or by the diocess as minor "moral persons" with the ordinary or bishop as administrator. And elaborating on the composition of the Catholic Church in the Philippines, petitioner explained that as a religious society or organization, it is made up of 2 elements or divisions the clergy or religious members and the faithful or lay members. The 1948 figures of the Bureau of Census showed that there were 277,551 Catholics in Davao and aliens residing therein numbered 3,465. Ever granting that all these foreigners are Catholics, petitioner contends that Filipino citizens form more than 80 per cent of the entire Catholics population of that area. As to its clergy and religious composition, counsel for petitioner presented the Catholic Directory of the Philippines for 1954 (Annex A) which revealed that as of that year, Filipino clergy and women novices comprise already 60.5 per cent of the group. It was, therefore, allowed that the constitutional requirement was fully met and satisfied.

Respondents, on the other hand, averred that although it might be true that petitioner is not the owner of the land purchased, yet he has control over the same, with full power to administer, take possession of, alienate, transfer, encumber, sell or dispose of any or all lands and their improvements registered in the name of the corporation sole and can collect, receive, demand or sue for all money or values of any kind that may be kind that may become due or owing to said corporation, and vested with authority to enter into agreements with any persons, concerns or entities in connection with said real properties, or in other words, actually exercising all rights of ownership over the properties. It was their stand that the theory that properties registered in the name of the corporation sole are held in true for the benefit of the Catholic population of a place, as of Davao in the case at bar should be sustained because a conglomeration of persons cannot just be pointed out as the cestui que trust or recipient of the benefits from the property allegedly administered in their behalf. Neither can it be said that the mass of people referred to as such beneficiary exercise ant right of ownership over the same. This set-up, respondents argued, falls short of a trust. The respondents instead tried to prove that in reality, the beneficiary of ecclesiastical properties are not members or faithful of the church but someone else, by quoting a portion a portion of the ought of fidelity subscribed by a bishop upon his elevation to the episcopacy wherein he promises to render to the Pontificial Father or his successors an account of his pastoral office and of all things appertaining to the state of this church. Respondents likewise advanced the opinion that in construing the constitutional provision calling for 60 per cent of Filipino citizenship, the criterion of the properties or assets thereof. In solving the problem thus submitted to our consideration, We can say the following: A corporation sole is a special form of corporation usually associated with the clergy. Conceived and introduced into the common law by sheer necessity, this legal creation which was referred to as "that unhappy freak of English law" was designed to facilitate the exercise of the functions of ownership carried on by the clerics for and on behalf of the church which was regarded as the property owner (See I Couvier's Law Dictionary, p. 682-683). A corporation sole consists of one person only, and his successors (who will always be one at a time), in some particular station, who are incorporated by law in order to give them some legal capacities and advantages, particularly that of perpetuity, which in their natural persons they could not have had. In this sense, the king is a sole corporation; so is a bishop, or dens, distinct from their several chapters (Reid vs. Barry, 93 Fla. 849, 112 So. 846). The provisions of our Corporation law on religious corporations are illuminating and sustain the stand of petitioner. Section 154 thereof provides: SEC. 154. For the administration of the temporalities of any religious denomination, society or church and the management of the estates and the properties thereof, it shall be lawful for the bishop, chief priest, or presiding either of any such religious denomination, society or church to become a corporation sole, unless inconsistent wit the rules, regulations or discipline of his religious denomination, society or church or forbidden by competent authority thereof. See also the pertinent provisions of the succeeding sections of the same Corporation Law copied hereunder: SEC. 155. In order to become a corporation sole the bishop, chief priest, or presiding elder of any religious denomination, society or church must file with the Securities and Exchange Commissioner articles of incorporation setting forth the following facts:

xxx xxx xxx. (3) That as such bishop, chief priest, or presiding elder he is charged with the administration of the temporalities and the management of the estates and properties of his religious denomination, society, or church within its territorial jurisdiction, describing it; xxx xxx xxx. (As amended by Commonwealth Act No. 287). SEC. 157. From and after the filing with the Securities and Exchange Commissioner of the said articles of incorporation, which verified by affidavit or affirmation as aforesaid and accompanied by the copy of the commission, certificate of election, or letters of appointment of the bishop, chief priest, or presiding elder, duly certified as prescribed in the section immediately preceding such the bishop, chief priest, or presiding elder, as the case may be, shall become a corporation sole and all temporalities, estates, and properties the religious denomination, society, or church therefore administered or managed by him as such bishop, chief priest, or presiding elder, shall be held in trust by him as a corporation sole, for the use, purpose, behalf, and sole benefit of his religious denomination, society, or church, including hospitals, schools, colleges, orphan, asylums, parsonages, and cemeteries thereof. For the filing of such articles of incorporation, the Securities and Exchange Commissioner shall collect twenty-five pesos. (As amended by Commonwealth Act. No. 287); and. SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or by the diocese, synod, or district organization of any religious denomination or church shall, on its incorporation, pass to the corporation and shall be held in trust for the use, purpose behalf, and benefit of the religious society, or order so incorporated or of the church of which the diocese, or district organization is an organized and constituent part. The Cannon Law contains similar provisions regarding the duties of the corporation sole or ordinary as administrator of the church properties, as follows: Al Ordinario local pertenence vigilar diligentemente sobre la administracion de todos los bienes eclesiasticos que se hallan en su territorio y no estuvieren sustraidos de su jurisdiccion, salvs las prescriciones legitimas que le concedan mas aamplios derechos. Teniendo en cuenta los derechos y las legitimas costumbres y circunstancias, procuraran los Ordinarios regular todo lo concerniente a la administracion de los bienes eclesciasticos, dando las oportunas instucciones particularles dentro del narco del derecho comun. (Title XXVIII, Codigo de Derecho Canonico, Lib. III, Canon 1519).1 That leaves no room for doubt that the bishops or archbishops, as the case may be, as corporation's sole are merely administrators of the church properties that come to their possession, in which they hold in trust for the church. It can also be said that while it is true that church properties could be administered by a natural persons, problems regarding succession to said properties can not be avoided to rise upon his death. Through this legal fiction, however, church properties acquired by the incumbent of a corporation sole pass, by operation of law, upon his death not his personal heirs but to his successor in office. It could be seen, therefore, that a corporation sole is created not only to administer the temporalities of the church or religious society where he belongs but also to hold and transmit the same to his successor in said office. If the ownership or title to the properties do not pass to the administrators, who are the owners of church properties?.

Bouscaren and Elis, S.J., authorities on cannon law, on their treatise comment: In matters regarding property belonging to the Universal Church and to the Apostolic See, the Supreme Pontiff exercises his office of supreme administrator through the Roman Curia; in matters regarding other church property, through the administrators of the individual moral persons in the Church according to that norms, laid down in the Code of Cannon Law. This does not mean, however, that the Roman Pontiff is the owner of all the church property; but merely that he is the supreme guardian (Bouscaren and Ellis, Cannon Law, A Text and Commentary, p. 764). and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia Canonica, ruled in the case of Trinidad vs. Roman Catholic Archbishop of Manila, 63 Phil. 881, that: The second question to be decided is in whom the ownership of the properties constituting the endowment of the ecclesiastical or collative chaplaincies is vested. Canonists entertain different opinions as to the persons in whom the ownership of the ecclesiastical properties is vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more probable that ownership, strictly speaking, does not reside in the latter, and, consequently, ecclesiastical properties are owned by the churches, institutions and canonically established private corporations to which said properties have been donated. Considering that nowhere can We find any provision conferring ownership of church properties on the Pope although he appears to be the supreme administrator or guardian of his flock, nor on the corporation sole or heads of dioceses as they are admittedly mere administrators of said properties, ownership of these temporalities logically fall and develop upon the church, diocese or congregation acquiring the same. Although this question of ownership of ecclesiastical properties has off and on been mentioned in several decisions of the Court yet in no instance was the subject of citizenship of this religious society been passed upon. We are not unaware of the opinion expressed by the late Justice Perfecto in his dissent in the case of Agustines vs. Court of First Instance of Bulacan, 80 Phil. 565, to the effect that "the Roman Catholic Archbishop of Manila is only a branch of a universal church by the Pope, with permanent residence in Rome, Italy". There is no question that the Roman Catholic Church existing in the Philippines is a tributary and part of the international religious organization, for the word "Roman" clearly expresses its unity with and recognizes the authority of the Pope in Rome. However, lest We become hasty in drawing conclusions, We have to analyze and take note of the nature of the government established in the Vatican City, of which it was said: GOVERNMENT. In the Roman Catholic Church supreme authority and jurisdiction over clergy and laity alike as held by the pope who (since the Middle Ages) is elected by the cardinals assembled in conclave, and holds office until his death or legitimate abdication. . . While the pope is obviously independent of the laws made, and the officials appointed, by himself or his predecessors, he usually exercises his administrative authority according to the code of canon law and through the congregations, tribunals and offices of the Curia Romana. In their respective territories (called generally dioceses) and over their respective subjects, the patriarchs, metropolitans or archbishops and bishops exercise a jurisdiction which is called ordinary (as attached by law to an office given to a person. . . (Collier's Encyclopedia, Vol. 17, p. 93).

While it is true and We have to concede that in the profession of their faith, the Roman Pontiff is the supreme head; that in the religious matters, in the exercise of their belief, the Catholic congregation of the faithful throughout the world seeks the guidance and direction of their Spiritual Father in the Vatican, yet it cannot be said that there is a merger of personalities resultant therein. Neither can it be said that the political and civil rights of the faithful, inherent or acquired under the laws of their country, are affected by that relationship with the Pope. The fact that the Roman Catholic Church in almost every country springs from that society that saw its beginning in Europe and the fact that the clergy of this faith derive their authorities and receive orders from the Holy See do not give or bestow the citizenship of the Pope upon these branches. Citizenship is a political right which cannot be acquired by a sort of "radiation". We have to realize that although there is a fraternity among all the catholic countries and the dioceses therein all over the globe, the universality that the word "catholic" implies, merely characterize their faith, a uniformity in the practice and the interpretation of their dogma and in the exercise of their belief, but certainly they are separate and independent from one another in jurisdiction, governed by different laws under which they are incorporated, and entirely independent on the others in the management and ownership of their temporalities. To allow theory that the Roman Catholic Churches all over the world follow the citizenship of their Supreme Head, the Pontifical Father, would lead to the absurdity of finding the citizens of a country who embrace the Catholic faith and become members of that religious society, likewise citizens of the Vatican or of Italy. And this is more so if We consider that the Pope himself may be an Italian or national of any other country of the world. The same thing be said with regard to the nationality or citizenship of the corporation sole created under the laws of the Philippines, which is not altered by the change of citizenship of the incumbent bishops or head of said corporation sole. We must therefore, declare that although a branch of the Universal Roman Catholic Apostolic Church, every Roman Catholic Church in different countries, if it exercises its mission and is lawfully incorporated in accordance with the laws of the country where it is located, is considered an entity or person with all the rights and privileges granted to such artificial being under the laws of that country, separate and distinct from the personality of the Roman Pontiff or the Holy See, without prejudice to its religious relations with the latter which are governed by the Canon Law or their rules and regulations. We certainly are conscious of the fact that whatever conclusion We may draw on this matter will have a far reaching influence, nor can We overlook the pages of history that arouse indignation and criticisms against church landholdings. This nurtured feeling that snowbailed into a strong nationalistic sentiment manifested itself when the provisions on natural to be embodied in the Philippine Constitution were framed, but all that has been said on this regard referred more particularly to landholdings of religious corporations known as "Friar Estates" which have already bee acquired by our government, and not to properties held by corporations sole which, We repeat, are properties held in trust for the benefit of the faithful residing within its territorial jurisdiction. Though that same feeling probably precipitated and influenced to a large extent the doctrine laid down in the celebrated Krivenco decision, We have to take this matter in the light of legal provisions and jurisprudence actually obtaining, irrespective of sentiments. The question now left for our determination is whether the Universal Roman Catholic Apostolic Church in the Philippines, or better still, the corporation sole named the Roman Catholic Apostolic Administrator of Davao, Inc., is qualified to acquire private agricultural lands in the Philippines pursuant to the provisions of Article XIII of the Constitution. We see from sections 1 and 5 of said Article quoted before, that only persons or corporations qualified to acquire hold lands of the public domain in the Philippines may acquire or be assigned and hold private agricultural lands. Consequently, the decisive factor in the present controversy hinges on the proposition or whether or not the petitioner in this case can acquire agricultural lands of the public domain.

From the data secured from the Securities and Exchange Commission, We find that the Roman Catholic Bishop of Zamboanga was incorporated (as a corporation sole) in September, 1912, principally to administer its temporalities and manage its properties. Probably due to the ravages of the last war, its articles of incorporation werereconstructed in the Securities and Exchange Commission on April 8, 1948. At first, this corporation sole administered all the temporalities of the church existing or located in the island of Mindanao. Later on, however, new dioceses were formed and new corporations sole were created to correspond with the territorial jurisdiction of the new dioceses, one of them being petitioner herein, the Roman Catholic Apostolic Administrator of Davao, Inc., which was registered with the Securities and Exchange Commission on September 12, 1950, and succeeded in the administrative for all the "temporalities" of the Roman Catholic Church existing in Davao. According to our Corporation Law, Public Act No. 1549, approved April 1, 1906, a corporation sole. is organized and composed of a single individual, the head of any religious society or church, for the ADMINISTRATION of the temporalities of such society or church. By "temporalities" is meant estate and properties not used exclusively for religious worship. The successor in office of such religious head or chief priest incorporated as a corporation sole shall become the corporation sole on ascension to office, and shall be permitted to transact business as such on filing with the Securities and Exchange Commission a copy of his commission, certificate of election or letter of appointment duly certified by any notary public or clerk of court of record (Guevara's The Philippine Corporation Law, p. 223). The Corporation Law also contains the following provisions: SECTION 159. Any corporation sole may purchase and hold real estate and personal; property for its church, charitable, benevolent, or educational purposes, and may receive bequests or gifts of such purposes. Such corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from the Court of First Instance of the province in which the property is situated; but before making the order proof must be made to the satisfaction of the Court that notice of the application for leave to mortgage or sell has been given by publication or otherwise in such manner and for such time as said Court or the Judge thereof may have directed, and that it is to the interest of the corporation that leave to mortgage or sell must be made by petition, duly verified by the bishop, chief priest, or presiding elder acting as corporation sole, and may be opposed by any member of the religious denomination, society or church represented by the corporation sole: Provided, however, That in cases where the rules, regulations, and discipline of the religious denomination, society or church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling and mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the intervention of the Courts shall not be necessary. It can, therefore, be noticed that the power of a corporation sole to purchase real property, like the power exercised in the case at bar, it is not restricted although the power to sell or mortgage sometimes is, depending upon the rules, regulations, and discipline of the church concerned represented by said corporation sole. If corporations sole can purchase and sell real estate for its church, charitable, benevolent, or educational purposes, can they register said real properties? As provided by law, lands held in trust for specific purposes me be subject of registration (section 69, Act 496), and the capacity of a corporation sole, like petitioner herein, to register lands belonging to it is acknowledged, and title thereto may be issued in its name (Bishop of Nueva Segovia vs. Insular Government, 26 Phil. 300-1913). Indeed it is absurd that while the corporations sole that might be in need of acquiring lands for the erection of temples where the faithful can pray,

or schools and cemeteries which they are expressly authorized by law to acquire in connection with the propagation of the Roman Catholic Apostolic faith or in furtherance of their freedom of religion they could not register said properties in their name. As professor Javier J. Nepomuceno very well says "Man in his search for the immortal and imponderable, has, even before the dawn of recorded history, erected temples to the Unknown God, and there is no doubt that he will continue to do so for all time to come, as long as he continues 'imploring the aid of Divine Providence'" (Nepomuceno's Corporation Sole, VI Ateneo Law Journal, No. 1, p. 41, September, 1956). Under the circumstances of this case, We might safely state that even before the establishment of the Philippine Commonwealth and of the Republic of the Philippines every corporation sole then organized and registered had by express provision of law the necessary power and qualification to purchase in its name private lands located in the territory in which it exercised its functions or ministry and for which it was created, independently of the nationality of its incumbent unique and single member and head, the bishop of the dioceses. It can be also maintained without fear of being gainsaid that the Roman Catholic Apostolic Church in the Philippines has no nationality and that the framers of the Constitution, as will be hereunder explained, did not have in mind the religious corporations sole when they provided that 60 per centum of the capital thereof be owned by Filipino citizens. There could be no controversy as to the fact that a duly registered corporation sole is an artificial being having the right of succession and the power, attributes, and properties expressly authorized by law or incident to its existence (section 1, Corporation Law). In outlining the general powers of a corporation. Public Act. No. 1459 provides among others: SEC. 13. Every corporation has the power: (5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and otherwise deal with such real and personal property as the purpose for which the corporation was formed may permit, and the transaction of the lawful business of the corporation may reasonably and necessarily require, unless otherwise prescribed in this Act: . . . In implementation of the same and specially made applicable to a form of corporation recognized by the same law, Section 159 aforequoted expressly allowed the corporation sole to purchase and hold real as well as personal properties necessary for the promotion of the objects for which said corporation sole is created. Respondent Land Registration Commissioner, however, maintained that since the Philippine Constitution is a later enactment than public Act No. 1459, the provisions of Section 159 in amplification of Section 13 thereof, as regard real properties, should be considered repealed by the former. There is a reason to believe that when the specific provision of the Constitution invoked by respondent Commissioner was under consideration, the framers of the same did not have in mind or overlooked this particular form of corporation. It is undeniable that the naturalization and conservation of our national resources was one of the dominating objectives of the Convention and in drafting the present Article XII of the Constitution, the delegates were goaded by the desire (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the country of foreign control through peaceful economic penetration; and (3) to prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence (See The Framing of the Philippine Constitution by Professor Jose M. Aruego, a Delegate to the Constitutional Convention, Vol. II. P. 592-604). In the same book Delegate Aruego, explaining the reason behind the first consideration, wrote: At the time of the framing of Philippine Constitution, Filipino capital had been to be rather shy. Filipinos hesitated s a general rule to invest a considerable sum of their capital for the

development, exploitation and utilization of the natural resources of the country. They had not as yet been so used to corporate as the peoples of the west. This general apathy, the delegates knew, would mean the retardation of the development of the natural resources, unless foreign capital would be encouraged to come and help in that development. They knew that the naturalization of the natural resources would certainly not encourage theINVESTMENT OF FOREIGN CAPITAL into them. But there was a general feeling in the Convention that it was better to have such a development retarded or even postpone together until such time when the Filipinos would be ready and willing to undertake it rather than permit the natural resources to be placed under the ownership or control of foreigners in order that they might be immediately be developed, with the Filipinos of the future serving not as owners but utmost as tenants or workers under foreign masters. By all means, the delegates believed, the natural resources should be conserved for Filipino posterity. It could be distilled from the foregoing that the farmers of the Constitution intended said provisions as barrier for foreigners or corporations financed by such foreigners to acquire, exploit and develop our natural resources, saving these undeveloped wealth for our people to clear and enrich when they are already prepared and capable of doing so. But that is not the case of corporations sole in the Philippines, for, We repeat, they are mere administrators of the "temporalities" or properties titled in their name and for the benefit of the members of their respective religion composed of an overwhelming majority of Filipinos. No mention nor allusion whatsoever is made in the Constitution as to the prohibition against or the liability of the Roman Catholic Church in the Philippines to acquire and hold agricultural lands. Although there were some discussions on landholdings, they were mostly confined in the inclusion of the provision allowing the Government to break big landed estates to put an end to absentee landlordism. But let us suppose, for the sake of argument, that the above referred to inhibitory clause of Section 1 of Article XIII of the constitution does have bearing on the petitioner's case; even so the clause requiring that at least 60 per centum of the capital of the corporation be owned by Filipinos is subordinated to the petitioner's aforesaid right already existing at the time of the inauguration of the Commonwealth and the Republic of the Philippines. In the language of Mr. Justice Jose P. Laurel (a delegate to the Constitutional Convention), in his concurring opinion of the case of Gold Creek mining Corporation, petitioner vs. Eulogio Rodriguez, Secretary of Agriculture and Commerce, and Quirico Abadilla, Director of the Bureau of Mines, respondent, 66 Phil. 259: The saving clause in the section involved of the Constitution was originally embodied in the report submitted by the Committee on Naturalization and Preservation of Land and Other Natural Resources to the Constitutional Convention on September 17, 1954. It was later inserted in the first draft of the Constitution as section 13 of Article XIII thereof, and finally incorporated as we find it now. Slight have been the changes undergone by the proviso from the time when it comes out of the committee until it was finally adopted. When first submitted and as inserted to the first draft of the Constitution it reads: 'subject to any right, grant, lease, or concession existing in respect thereto on the date of the adoption of the Constitution'. As finally adopted, the proviso reads: 'subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution'. This recognition is not mere graciousness but springs form the just character of the government established. The framers of the Constitution were not obscured by the rhetoric of democracy or swayed to hostility by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean destruction or annihilation of acquired property rights. Withal, they erected a government neither episodic nor stationary but well-nigh conservative in the protection of property rights. This notwithstanding nationalistic and socialistic traits discoverable upon even a sudden dip into a variety of the provisions embodied in the instrument.

The writer of this decision wishes to state at this juncture that during the deliberation of this case he submitted to the consideration of the Court the question that may be termed the "vested right saving clause" contained in Section 1, Article XII of the Constitution, but some of the members of this Court either did not agree with the theory of the writer, or were not ready to take a definite stand on the particular point I am now to discuss deferring our ruling on such debatable question for a better occasion, inasmuch as the determination thereof is not absolutely necessary for the solution of the problem involved in this case. In his desire to face the issues squarely, the writer will endeavor, at least as a disgression, to explain and develop his theory, not as a lucubration of the Court, but of his own, for he deems it better and convenient to go over the cycle of reasons that are linked to one another and that step by step lead Us to conclude as We do in the dispositive part of this decision. It will be noticed that Section 1 of Article XIII of the Constitution provides, among other things, that "all agricultural lands of the public domain and their disposition shall be limited to citizens of the Philippines or to corporations at least 60 per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF THE INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER THIS CONSTITUTION." As recounted by Mr. Justice Laurel in the aforementioned case of Gold Creek Mining Corporation vs. Rodriguez et al., 66 Phil. 259, "this recognition (in the clause already quoted), is not mere graciousness but springs from the just character of the government established. The farmers of the Constitution were not obscured by the rhetoric of democracy or swayed to hostility by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean destruction or annihilation of ACQUIRED PROPERTY RIGHTS". But respondents' counsel may argue that the preexisting right of acquisition of public or private lands by a corporation which does not fulfill this 60 per cent requisite, refers to purchases of the Constitution and not to later transactions. This argument would imply that even assuming that petitioner had at the time of the enactment of the Constitution the right to purchase real property or right could not be exercised after the effectivity of our Constitution, because said power or right of corporations sole, like the herein petitioner, conferred in virtue of the aforequoted provisions of the Corporation Law, could no longer be exercised in view of the requisite therein prescribed that at least 60 per centum of the capital of the corporation had to be Filipino. It has been shown before that: (1) the corporation sole, unlike the ordinary corporations which are formed by no less than 5 incorporators, is composed of only one persons, usually the head or bishop of the diocese, a unit which is not subject to expansion for the purpose of determining any percentage whatsoever; (2) the corporation sole is only the administrator and not the owner of the temporalities located in the territory comprised by said corporation sole; (3) such temporalities are administered for and on behalf of the faithful residing in the diocese or territory of the corporation sole; and (4) the latter, as such, has no nationality and the citizenship of the incumbent Ordinary has nothing to do with the operation, management or administration of the corporation sole, nor effects the citizenship of the faithful connected with their respective dioceses or corporation sole. In view of these peculiarities of the corporation sole, it would seem obvious that when the specific provision of the Constitution invoked by respondent Commissioner (section 1, Art. XIII), was under consideration, the framers of the same did not have in mind or overlooked this particular form of corporation. If this were so, as the facts and circumstances already indicated tend to prove it to be so, then the inescapable conclusion would be that this requirement of at least 60 per cent of Filipino capital was never intended to apply to corporations sole, and the existence or not a vested right becomes unquestionably immaterial. But let us assumed that the questioned proviso is material. yet We might say that a reading of said Section 1 will show that it does not refer to any actual acquisition of land up to the right, qualification

or power to acquire and hold private real property. The population of the Philippines, Catholic to a high percentage, is ever increasing. In the practice of religion of their faithful the corporation sole may be in need of more temples where to pray, more schools where the children of the congregation could be taught in the principles of their religion, more hospitals where their sick could be treated, more hallow or consecrated grounds or cemeteries where Catholics could be buried, many more than those actually existing at the time of the enactment of our Constitution. This being the case, could it be logically maintained that because the corporation sole which, by express provision of law, has the power to hold and acquire real estate and personal property of its churches, charitable benevolent, or educational purposes (section 159, Corporation Law) it has to stop its growth and restrain its necessities just because the corporation sole is a non-stock corporation composed of only one person who in his unity does not admit of any percentage, especially when that person is not the owner but merely an administrator of the temporalities of the corporation sole? The writer leaves the answer to whoever may read and consider this portion of the decision. Anyway, as stated before, this question is not a decisive factor in disposing the case, for even if We were to disregard such saving clause of the Constitution, which reads: subject to any existing right, grant, etc., at the same time of the inauguration of the Government established under this Constitution, yet We would have, under the evidence on record, sufficient grounds to uphold petitioner's contention on this matter. In this case of the Register of Deeds of Rizal vs. Ung Sui Si Temple, 2 G.R. No. L-6776, promulgated May 21, 1955, wherein this question was considered from a different angle, this Court through Mr. Justice J.B.L. Reyes, said: The fact that the appellant religious organization has no capital stock does not suffice to escape the Constitutional inhibition, since it is admitted that its members are of foreign nationality. The purpose of the sixty per centum requirement is obviously to ensure that corporation or associations allowed to acquire agricultural land or to exploit natural resources shall be controlled by Filipinos; and the spirit of the Constitution demands that in the absence of capital stock, the controlling membership should be composed of Filipino citizens. In that case respondent-appellant Ung Siu Si Temple was not a corporation sole but a corporation aggregate, i.e., an unregistered organization operating through 3 trustees, all of Chinese nationality, and that is why this Court laid down the doctrine just quoted. With regard to petitioner, which likewise is a non-stock corporation, the case is different, because it is a registered corporation sole, evidently of no nationality and registered mainly to administer the temporalities and manage the properties belonging to the faithful of said church residing in Davao. But even if we were to go over the record to inquire into the composing membership to determine whether the citizenship requirement is satisfied or not, we would find undeniable proof that the members of the Roman Catholic Apostolic faith within the territory of Davao are predominantly Filipino citizens. As indicated before, petitioner has presented evidence to establish that the clergy and lay members of this religion fully covers the percentage of Filipino citizens required by the Constitution. These facts are not controverted by respondents and our conclusion in this point is sensibly obvious. Dissenting OpinionDiscussed. After having developed our theory in the case and arrived at the findings and conclusions already expressed in this decision. We now deem it proper to analyze and delve into the basic foundation on which the dissenting opinion stands up. Being aware of the transcendental and far-reaching effects that Our ruling on the matter might have, this case was thoroughly considered from all points of view, the Court sparing no effort to solve the delicate problems involved herein.

At the deliberations had to attain this end, two ways were open to a prompt dispatch of the case: (1) the reversal of the doctrine We laid down in the celebrated Krivenko case by excluding urban lots and properties from the group of the term "private agricultural lands" use in this section 5, Article XIII of the Constitution; and (2) by driving Our reasons to a point that might indirectly cause the appointment of Filipino bishops or Ordinary to head the corporations sole created to administer the temporalities of the Roman Catholic Church in the Philippines. With regard to the first way, a great majority of the members of this Court were not yet prepared nor agreeable to follow that course, for reasons that are obvious. As to the second way, it seems to be misleading because the nationality of the head of a diocese constituted as a corporation sole has no material bearing on the functions of the latter, which are limited to the administration of the temporalities of the Roman Catholic Apostolic Church in the Philippines. Upon going over the grounds on which the dissenting opinion is based, it may be noticed that its author lingered on the outskirts of the issues, thus throwing the main points in controversy out of focus. Of course We fully agree, as stated by Professor Aruego, that the framers of our Constitution had at heart to insure the conservation of the natural resources of Our motherland of Filipino posterity; to serve them as an instrument of national defense, helping prevent the extension into the country of foreign control through peaceful economic penetration; and to prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence. But all these precautions adopted by the Delegates to Our Constitutional Assembly could have not been intended for or directed against cases like the one at bar. The emphasis and wonderings on the statement that once the capacity of a corporation sole to acquire private agricultural lands is admitted there will be no limit to the areas that it may hold and that this will pave the way for the "revival or revitalization of religious landholdings that proved so troublesome in our past", cannot even furnish the "penumbra" of a threat to the future of the Filipino people. In the first place, the right of Filipino citizens, including those of foreign extraction, and Philippine corporations, to acquire private lands is not subject to any restriction or limit as to quantity or area, and We certainly do not see any wrong in that. The right of Filipino citizens and corporations to acquire public agricultural lands is already limited by law. In the second place, corporations sole cannot be considered as aliens because they have no nationality at all. Corporations sole are, under the law, mere administrators of the temporalities of the Roman Catholic Church in the Philippines. In the third place, every corporation, be it aggregate or sole, is only entitled to purchase, convey, sell, lease, let, mortgage, encumber and otherwise deal with real properties when it is pursuant to or in consonance with the purposes for which the corporation was formed, and when the transactions of the lawful business of the corporation reasonably and necessarily require such dealing section 13-(5) of the Corporation Law, Public Act No. 1459 and considering these provisions in conjunction with Section 159 of the same law which provides that a corporation sole may only "purchase and hold real estate and personal properties for its church, charitable, benevolent or educational purposes", the above mentioned fear of revitalization of religious landholdings in the Philippines is absolutely dispelled. The fact that the law thus expressly authorizes the corporations sole to receive bequests or gifts of real properties (which were the main source that the friars had to acquire their big haciendas during the Spanish regime), is a clear indication that the requisite that bequests or gifts of real estate be for charitable, benevolent, or educational purposes, was, in the opinion of the legislators, considered sufficient and adequate protection against the revitalization of religious landholdings. Finally, and as previously stated, We have reason to believe that when the Delegates to the Constitutional Convention drafted and approved Article XIII of the Constitution they do not have in mind the corporation sole. We come to this finding because the Constitutional Assembly, composed as it was by a great number of eminent lawyers and jurists, was like any other legislative body empowered to enact either the Constitution of the country or any public statute, presumed to know the conditions existing as to particular subject matter when it enacted a statute (Board of Commerce of Orange Country vs. Bain, 92 S.E. 176; N. C. 377).

Immemorial customs are presumed to have been always in the mind of the Legislature in enacting legislation. (In re Kruger's Estate, 121 A. 109; 277 P. 326). The Legislative is presumed to have a knowledge of the state of the law on the subjects upon which it legislates. (Clover Valley Land and Stock Co. vs. Lamb et al., 187, p. 723,726.) The Court in construing a statute, will assume that the legislature acted with full knowledge of the prior legislation on the subject and its construction by the courts. (Johns vs. Town of Sheridan, 89 N. E. 899, 44 Ind. App. 620.). The Legislature is presumed to have been familiar with the subject with which it was dealing . . . . (Landers vs. Commonwealth, 101 S. E. 778, 781.). The Legislature is presumed to know principles of statutory construction. (People vs. Lowell, 230 N. W. 202, 250 Mich. 349, followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.). It is not to be presumed that a provision was inserted in a constitution or statute without reason, or that a result was intended inconsistent with the judgment of men of common sense guided by reason" (Mitchell vs. Lawden, 123 N.E. 566, 288 Ill. 326.) See City of Decatur vs. German, 142 N. E. 252, 310 Ill. 591, and may other authorities that can be cited in support hereof. Consequently, the Constitutional Assembly must have known: 1. That a corporation sole is organized by and composed of a single individual, the head of any religious society or church operating within the zone, area or jurisdiction covered by said corporation sole (Article 155, Public Act No. 1459); 2. That a corporation sole is a non-stock corporation; 3. That the Ordinary ( the corporation sole proper) does not own the temporalities which he merely administers; 4. That under the law the nationality of said Ordinary or of any administrator has absolutely no bearing on the nationality of the person desiring to acquire real property in the Philippines by purchase or other lawful means other than by hereditary succession, who according to the Constitution must be a Filipino (sections 1 and 5, Article XIII). 5. That section 159 of the Corporation Law expressly authorized the corporation sole to purchase and holdreal estate for its church, charitable, benevolent or educational purposes, and to receive bequests or giftsfor such purposes; 6. That in approving our Magna Carta the Delegates to the Constitutional Convention, almost all of whom were Roman Catholics, could not have intended to curtail the propagation of the Roman Catholic faith or the expansion of the activities of their church, knowing pretty well that with the growth of our population more places of worship, more schools where our youth could be taught and trained; more hallow grounds where to bury our dead would be needed in the course of time. Long before the enactment of our Constitution the law authorized the corporations sole even to receive bequests or gifts of real estates and this Court could not, without any clear and specific

provision of the Constitution, declare that any real property donated, let as say this year, could no longer be registered in the name of the corporation sole to which it was conveyed. That would be an absurdity that should not receive our sanction on the pretext that corporations sole which have no nationality and are non-stock corporations composed of only one person in the capacity of administrator, have to establish first that at least sixty per centum of their capital belong to Filipino citizens. The new Civil Code even provides: ART. 10. In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail. Moreover, under the laws of the Philippines, the administrator of the properties of a Filipino can acquire, in the name of the latter, private lands without any limitation whatsoever, and that is so because the properties thus acquired are not for and would not belong to the administrator but to the Filipino whom he represents. But the dissenting Justice inquires: If the Ordinary is only the administrator, for whom does he administer? And who can alter or overrule his acts? We will forthwith proceed to answer these questions. The corporations sole by reason of their peculiar constitution and form of operation have no designed owner of its temporalities, although by the terms of the law it can be safely implied that the Ordinary holds them in trust for the benefit of the Roman Catholic faithful to their respective locality or diocese. Borrowing the very words of the law, We may say that the temporalities of every corporation sole are held in trust for the use, purpose, behalf and benefit of the religious society, or order so incorporated or of the church to which the diocese, synod, or district organization is an organized and constituent part (section 163 of the Corporation Law). In connection with the powers of the Ordinary over the temporalities of the corporation sole, let us see now what is the meaning and scope of the word "control". According to the Merriam-Webster's New International Dictionary, 2nd ed., p. 580, on of the acceptations of the word "control" is: 4. To exercise restraining or directing influence over; to dominate; regulate; hence, to hold from action; to curb; subject; also, Obs. to overpower. SYN: restrain, rule, govern, guide, direct; check, subdue. It is true that under section 159 of the Corporation Law, the intervention of the courts is not necessary, tomortgage or sell real property held by the corporation sole where the rules, regulations and discipline of the religious denomination, society or church concerned presented by such corporation sole regulates the methods of acquiring, holding, selling and mortgaging real estate, and that the Roman Catholic faithful residing in the jurisdiction of the corporation sole has no say either in the manner of acquiring or of selling real property. It may be also admitted that the faithful of the diocese cannot govern or overrule the acts of the Ordinary, but all this does not mean that the latter can administer the temporalities of the corporation sole without check or restraint. We must not forget that when a corporation sole is incorporated under Philippine laws, the head and only member thereof subjects himself to the jurisdiction of the Philippine courts of justice and these tribunals can thus entertain grievances arising out of or with respect to the temporalities of the church which came into the possession of the corporation sole as administrator. It may be alleged that the courts cannot intervene as to the matters of doctrine or teachings of the Roman Catholic Church. That is correct, but the courts may step in, at the instance of the faithful for whom the temporalities are being held in trust, to check undue exercise by the corporation sole of its power as administrator to insure that they are used for the purpose or purposes for which the corporation sole was created. American authorities have these to say:

It has been held that the courts have jurisdiction over an action brought by persons claiming to be members of a church, who allege a wrongful and fraudulent diversion of the church property to uses foreign to the purposes of the church, since no ecclesiastical question is involved and equity will protect from wrongful diversion of the property (Hendryx vs. Peoples United Church, 42 Wash. 336, 4 L.R.A. n.s. 1154). The courts of the State have no general jurisdiction and control over the officers of such corporations in respect to the performance of their official duties; but as in respect to the property which they hold for the corporation, they stand in position of TRUSTEES and the courts may exercise the same supervision as in other cases of trust (Ramsey vs. Hicks, 174 Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. n.s. 665; Hendryx vs. Peoples United Church, supra.). Courts of the state do not interfere with the administration of church rules or discipline unless civil rights become involved and which must be protected (Morris St., Baptist Church vs. Dart, 67 S.C. 338, 45 S.E. 753, and others). (All cited in Vol. II, Cooley's Constitutional Limitations, p. 960-964.). If the Constitutional Assembly was aware of all the facts above enumerated and of the provisions of law relative to existing conditions as to management and operation of corporations sole in the Philippines, and if, on the other hand, almost all of the Delegates thereto embraced the Roman Catholic faith, can it be imagined even for an instant that when Article XIII of the Constitution was approved the framers thereof intended to prevent or curtail from then on the acquisition sole, either by purchase or donation, of real properties that they might need for the propagation of the faith and for there religious and Christian activities such as the moral education of the youth, the care, attention and treatment of the sick and the burial of the dead of the Roman Catholic faithful residing in the jurisdiction of the respective corporations sole? The mere indulgence in said thought would impress upon Us a feeling of apprehension and absurdity. And that is precisely the leit motiv that permeates the whole fabric of the dissenting opinion. It seems from the foregoing that the main problem We are confronted with in this appeal, hinges around the necessity of a proper and adequate interpretation of sections 1 and 5 of Article XIII of the Constitution. Let Us then be guided by the principles of statutory construction laid down by the authorities on the matter: The most important single factor in determining the intention of the people from whom the constitution emanated is the language in which it is expressed. The words employed are to be taken in their natural sense, except that legal or technical terms are to be given their technical meaning. The imperfections of language as a vehicle for conveying meanings result in ambiguities that must be resolved by result to extraneous aids for discovering the intent of the framers. Among the more important of these are a consideration of the history of the times when the provision was adopted and of the purposes aimed at in its adoption. The debates of constitutional convention, contemporaneous construction, and practical construction by the legislative and executive departments, especially if long continued, may be resorted to resolve, but not to create, ambiguities. . . . Consideration of the consequences flowing from alternative constructions of doubtful provisions constitutes an important interpretative device. . . . The purposes of many of the broadly phrased constitutional limitations were the promotion of policies that do not lend themselves to definite and specific formulation. The courts have had to define those policies and have often drawn on natural law and natural rights theories in doing so. The interpretation of constitutions tends to respond to changing conceptions of political and social values. The extent to which these extraneous aids affect the judicial construction of constitutions cannot be formulated in

precise rules, but their influence cannot be ignored in describing the essentials of the process (Rottschaeffer on Constitutional Law, 1939 ed., p. 18-19). There are times that when even the literal expression of legislation may be inconsistent with the general objectives of policy behind it, and on the basis of equity or spirit of the statute the courts rationalize a restricted meaning of the latter. A restricted interpretation is usually applied where the effect of literal interpretation will make for injustice and absurdity or, in the words of one court, the language must be so unreasonable 'as to shock general common sense'. (Vol. 3, Sutherland on Statutory Construction, 3rd ed., 150.). A constitution is not intended to be a limitation on the development of a country nor an obstruction to its progress and foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs. Bank of New York and Trust Co., 294 N. Y. S.648; 56 N.E. 2d. 745, 293 N.Y. 749). Although the meaning or principles of a constitution remain fixed and unchanged from the time of its adoption, a constitution must be construed as if intended to stand for a great length of time, and it is progressive and not static. Accordingly, it should not receive too narrow or literal an interpretation but rather the meaning given it should be applied in such manner as to meet new or changed conditions as they arise (U.S. vs. Lassic, 313 U.S. 299, 85 L. Ed., 1368). Effect should be given to the purpose indicated by a fair interpretation of the language used and that construction which effectuates, rather than that which destroys a plain intent or purpose of a constitutional provision, is not only favored but will be adopted (State ex rel. Randolph Country vs. Walden, 206 S.W. 2d 979). It is quite generally held that in arriving at the intent and purpose the construction should be broad or liberal or equitable, as the better method of ascertaining that intent, rather than technical (Great Southern Life Ins. Co. vs. City of Austin, 243 S.W. 778). All these authorities uphold our conviction that the framers of the Constitution had not in mind the corporations sole, nor intended to apply them the provisions of section 1 and 5 of said Article XIII when they passed and approved the same. And if it were so as We think it is, herein petitioner, the Roman Catholic Apostolic Administrator of Davao, Inc., could not be deprived of the right to acquire by purchase or donation real properties for charitable, benevolent and educational purposes, nor of the right to register the same in its name with the Register of Deeds of Davao, an indispensable requisite prescribed by the Land Registration Act for lands covered by the Torrens system. We leave as the last theme for discussion the much debated question above referred to as "the vested right saving clause" contained in section 1, Article XIII of the Constitution. The dissenting Justice hurls upon the personal opinion expressed on the matter by the writer of the decision the most pointed darts of his severe criticism. We think, however, that this strong dissent should have been spared, because as clearly indicated before, some members of this Court either did not agree with the theory of the writer or were not ready to take a definite stand on that particular point, so that there being no majority opinion thereon there was no need of any dissension therefrom. But as the criticism has been made the writer deems it necessary to say a few words of explanation. The writer fully agrees with the dissenting Justice that ordinarily "a capacity to acquire (property) in futuro, is not in itself a vested or existing property right that the Constitution protects from impairment. For a property right to be vested (or acquired) there must be a transition from the potential or contingent to the actual, and the proprietary interest must have attached to a thing; it must have become 'fixed and established'" (Balboa vs. Farrales, 51 Phil. 498). But the case at bar

has to be considered as an exception to the rule because among the rights granted by section 159 of the Corporation Law was the right to receive bequests or gifts of real properties for charitable, benevolent and educational purposes. And this right to receive such bequests or gifts (which implies donations in futuro), is not a mere potentiality that could be impaired without any specific provision in the Constitution to that effect, especially when the impairment would disturbingly affect the propagation of the religious faith of the immense majority of the Filipino people and the curtailment of the activities of their Church. That is why the writer gave us a basis of his contention what Professor Aruego said in his book "The Framing of the Philippine Constitution" and the enlightening opinion of Mr. Justice Jose P. Laurel, another Delegate to the Constitutional Convention, in his concurring opinion in the case of Goldcreek Mining Co. vs. Eulogio Rodriguez et al., 66 Phil. 259. Anyway the majority of the Court did not deem necessary to pass upon said "vested right saving clause" for the final determination of this case. JUDGMENT Wherefore, the resolution of the respondent Land Registration Commission of September 21, 1954, holding that in view of the provisions of sections 1 and 5 of Article XIII of the Philippine Constitution the vendee (petitioner) is not qualified to acquire lands in the Philippines in the absence of proof that at least 60 per centum of the capital, properties or assets of the Roman Catholic Apostolic Administrator of Davao, Inc. is actually owned or controlled by Filipino citizens, and denying the registration of the deed of sale in the absence of proof of compliance with such requisite, is hereby reversed. Consequently, the respondent Register of Deeds of the City of Davao is ordered to register the deed of sale executed by Mateo L. Rodis in favor of the Roman Catholic Apostolic Administrator of Davao, Inc., which is the subject of the present litigation. No pronouncement is made as to costs. It is so ordered. Bautista Angelo and Endencia, JJ., concur. Paras, C.J., and Bengzon, J., concur in the result. LABRADOR, J., concurring: The case at bar squarely present this important legal question: Has the bishop or ordinary of the Roman Catholic Church who is not a Filipino citizen, as corporation sole, the right to register land, belonging to the Church over which he presides, in view of the Krivenko decision? Mr. Justice Felix sustains the affirmative view while Mr. Justice J. B. L. Reyes, the negative. As the undersigned understands it, the reason given for this last view is that the constitutional provision prohibiting land ownership by foreigners also extends to control because this lies within the scope and purpose of the prohibition. To our way of thinking, the question at issue depends for its resolution upon another, namely, who is the owner of the land or property of the Church sought to be registered? Under the Canon Law the parish and the diocese have the right to acquire and own property. SEC. 1. La Iglesia catolica y la Sede Apostolica, libre e independientemente de la potestad civil, tiene derecho innato de adquirir, retener y administrar bienes temporales para el logro de sus propios fines. SEC. 2. Tambien las iglesias particulares y demas personas morales erigidas por la autoridad eclesiastica en persona juridica, tienen derecho, a tenor de los sagrados canones, de adquirir, retener y administrar bienes temporales. (Canon 1495) (Codigo de Derecho Canonico por Miguelez-Alonzo-Cabreros, 4a ed., p. 562.).

The Canon Law further states that Church property belongs to the non-collegiate moral person called the parish, or to the diocese. In canon law the ownership of ecclesiastical goods belongs to each separate juridical person in the Church (C. 1499). The property of St. John's Church does not belong to the Pope, the bishop, the pastor, or even to the people of the parish. It belongs to the non-collegiate moral person called the parish, which has been lawfully erected. It is not like a stock company. The civil law does not recognize this canonical principle; it insists on an act of civil incorporation or some other legal device. (Ready Answers in Canon Law by Rev. P.J. Lydon, DD., 3rd ed., 1948, p. 576.). Parish. 3. A portion or subdivision of a diocese committed to the spiritual jurisdiction or care of a priest or minister, called rector or pastor. In the Protestant Episcopal Church, it is a territorial division usually following civil bounds, as those of a town. In the Roman Catholic Church, it is usually territorial, but whenever, as in some parts of the United States there are different rites and languages, the boundaries and jurisdiction are determined by right or language; as, a Ruthenian or Polish parish. "5. The inhabitants or members of a parish, collectively. Diocese. 3. Eccl. The circuit or extent of a bishop's jurisdiction; the district in which a bishop has authority. (Webster's New International Dictionary). We are aware of the fact that some writers believe that ownership of ecclesiastical properties resides in the Roman Catholic Pontiff as Head of the Universal Church, but the better opinion seems to be that they do belong to the parishes and diocese as above indicated. Canonists entertain different opinions as to the person in whom the ownership of the ecclesiastical properties is vested, with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many doctors cited by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more probable that ownership, strictly speaking, does not reside in the latter and, consequently, ecclesiastical properties are owned by the churches, institutions and canonically established private corporations to which said properties have been donated. (3 Campos y Pulido, Legislacion y Jurisprudencia Canonica, P. 420, cited in Trinidad vs. Roman Catholic Archbishop of Manila, 63 Phil., 881, 888-889.). The property in question, therefore, appears to belong to the parish or the diocese of Davao. But the Roman Catholics of Davao are not organized as a juridical person, either under the Canon law or under the Civil Law. Neither is there any provision in either for their organization as a juridical person. Registration of the property in the name of the Roman Catholics of Davao is, therefore, impossible. As under the Civil Law, however, the organization of parishes and dioceses as juridical persons is not expressly provided for, the corporation law has set up the fiction known as the "corporation sole." It tolerates the corporation sole wherever and as long as the state law does not permit the legal incorporation of the parish or diocese. The bishop officially is the legal owner. (Ready Answers in Canon Law, supra, p. 577.) . and authorizes it to purchase and hold real estate for the Church.

SEC. 159. Any corporation sole may purchase and hold real estate and personal property for its church, charitable, benevolent, or educational purposes, and may receive bequests or gifts for such purposes. Such corporation may mortgage or sell real property held by it upon obtaining an order for that purpose from the Court of First Instance of the province in which the property is situated; but before making the order proof must be made to the satisfaction of the court that notice of the application for leave to mortgage or sell has been given by publication or otherwise in such manner and for such time as said court or the judge thereof may have directed, and that it is to the interest of the corporation that leave to mortgage or sell should be granted. The application for leave to mortgage or sell must be made by petition, duly verified by the bishop, chief priest, or presiding elder, acting as corporation sole, and may be opposed by any member of the religious denomination, society, or church represented by the corporation sole: Provided, however, That in cases when the rules, regulations and discipline of the religious denomination, society or church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling, and mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the intervention of the courts shall not be necessary. (The Corporation Law.) And in accordance with the above section, temporalities of the Church or of parish or a diocese are allowed to be registered in the name of the corporation sole for purposes of administration and in trust for the real owners. The mere fact that the Corporation Law authorizes the corporation sole to acquire and hold real estate or other property does not make the latter the real owner thereof, as his tenure of Church property is merely for the purposes of administration. As stated above, the bishop is only the legal (technical) owner or trustee, the parish or diocese being the beneficial owner, or cestui que trust. Having arrived at the conclusion that the property in question belongs actually either to the parish or to the dioceses of Davao, the next question that possess for solution is, In case of said property, whose nationality must be considered for the purpose of determining the applicability of the constitutional provision limiting ownership of land to Filipinos, that of the bishop or chief priest who registers as corporation sole, or that of the constituents of the parish or diocese who are the beneficial owners of the land? We believe that of a latter must be considered, and not that of the priest clothed with the corporate fiction and denominated as the corporation sole. The corporation sole is a mere contrivance to enable a church to acquire, own and manage properties belonging to the church. It is only a means to an end. The constitutional provision could not have been meant to apply to the means through which and by which property may be owned or acquired, but to the ultimate owner of the property. Hence, the citizenship of the priest forming the corporation sole should be no impediment if the parish or diocese which owns the property is qualified to own and possess the property. We can take judicial notice of the fact that a great majority of the constituents of the parish or diocese of Davao are Roman Catholics. The affidavit demanded is therefore, a mere formality. The dissenting opinion sustains the proposition that control, not actual ownership, is the factor that determines whether the constitutional prohibition against alien ownership of lands should or should not apply. We may assume the correctness of the proposition that the Holy See exercises control cannot be real and actual but merely theoretical. In any case, the constitutional prohibition is limited by its terms to ownership and ownership alone. And should the corporation sole abuse its powers and authority in relation to the administration or disposal of the property contrary to the wishes of the constituents of the parish or the diocese, the act may always be questioned as ultra vires. We agree, therefore, with the reversal of the order.

Montemayor and Reyes, A., JJ., concur. REYES, J.B.L., dissenting: I regret not being able to assent to the opinion of Mr. Justice Felix. The decision of the Supreme Court in this case will be of far reaching results, for once the capacity of corporations sole to acquire public and private agricultural lands is admitted, there will be no limit to the areas they may hold until the Legislature implements section 3 of Article XIII of the Constitution, empowering it to set a limit to the size of private agricultural land that may be held; and even then it can only be done without prejudice to rights acquired prior to the enactment of such law. In other words, even if a limitative law is adopted, it will not affect the landholdings acquired before the law become effective, no matter how vast the estate should be. The Constitutional restrictions to the acquisition of agricultural land are well known: SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply fisheries, or industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit of the grant. (Article XII, Constitution of the Phil.). SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. (Art. XII, Constitution of the Phil.). In requiring corporations or associations to have sixty per cent (60%) of their capital owned by Filipino citizens, the constitution manifestly disregarded the corporate fiction, i.e., the juridical personality of such corporations or associations. It went behind the corporate entity and looked at the natural persons that composed it, and demanded that a clear majority in interest (60%) should be Filipino. To me this was done to ensure that the control of its properties (not merely the beneficial ownership thereof) remained in Filipino hands. (Aruego, Framing of the Constitution, Vol. 2. pp. 604, 606.) . The nationalization of the natural resources of the country was intended (1) to insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the country of foreign control through peaceful economic penetration; and (3) to prevent making the Philippines a source of international conflicts with the consequent danger to its internal security and independence. . . . The convention permitted aliens to acquire an interest in the natural resources of the country and in private agricultural lands as component elements of corporations or associations. The maximum limit of interest that they could hold in a corporation or association would be only

forty per centum of the capital. Accordingly the control of the corporation or association would remain in Filipino hands. In its report the committee on nationalization and preservation of lands and other natural resources recommended that the maximum limit of interest that aliens could hold in a corporation or association should be only twenty-five per centum of the capital. The purpose of the committee was to enable Filipino-controlled corporations or associations, if necessary, to interest aliens to join their technical or managerial staff by giving them a part interest in the same. The sub-committee of seven embodied this recommendation in the first draft of the Constitution; but in the revised article on General Provisions, it raised the amount to forty per centum. (emphasis supplied.) It was in recognition of this basic rule that we held in Register of Deeds vs. Ung Siu Si Temple, 51 Off. Gaz. p. 2866, that if the association had no capital, its controlling membership must be composed of Filipinos. Becauseownership divorced from control is not true ownership. From these premises it can be deduced that the preliminary question to be decide by the court is the following: what and who exercises the power of control in the corporation sole known as "The Roman Catholic Apostolic Administrator of Davao, Inc."?. Under section 155 of the Corporation Law, the bishop, or other religious head, as corporation sole, is "charged with the administration of the temporalities of his church." It becomes then pertinent to inquire: if he is only an administrator, for whom does he administer? And who can alter or overrule his acts? If his acts as administrator can not be overridden, or altered, except by himself, then obviously the control of the corporation and its temporalities is in the bishop himself, and he must be a Filipino citizen. If, on the other hand, the final say as to management, exploitation, encumbrance or disposition of the temporalities resides in another individual or body of individuals, then the control resides there. To possess constitutional capacity to acquire agricultural land or other natural resources, that body making the final decision for the corporation must have at least 60 per cent Filipino membership. By this test, the body of members professing the Catholic faith in the diocese of Davao does not constitute the controlling membership. For under the rules of the Roman Catholic Church the faithful can not control the acts of the Ordinary; they cannot override his decision, just as they do not elect or remove him. Only his hierarchical superiors can do that; the control is from above, not from below. Hence, the fact that 90 per cent (or even 100 per cent) of the faithful in the diocese should be composed of Filipino citizens is totally devoid of significance from the standpoint of the constitutional restrictions in question (see Codex, Canons 1518 and 1530, paragraph 1, No. 3). Moreover, I do not think that the body of Catholic faithful in the Davao diocese can be taken, for the purpose here under consideration, as the Church represented by the Ordinary of Davao. That body does not constitute an entity or unit separate and apart from the rest of the faithful throughout the world that compose the Roman Catholic Church that has always claimed ecumenical (universal) character. There is nom Catholic Church of Davao district and independent of the Catholic Church of Manila, Lipa or Rome. All those professing Catholic faith are members of only one single church or religious group. Thus the Iglesia Filipina Independiente is not part of the Catholic Church, precisely because of its independence. If, the, the Catholic Church of Davao is part and parcel of the universal Catholic Church, it can not be considered separate and apart from it in this case. And if considered with it, obviously the condition

of 60 per cent Filipino membership is not satisfied when all the Catholic faithful in the world are taken into account. The unity and singleness of the various diocese of the church appears expressly recognized in section 163 of the Corporation Law, which provides that the corporation (sole) shall hold the temporalities, not for the diocese; but for the benefit "of the church of which the diocese is an organized or constituent part." SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or by the diocese synod, or district organization of any religious denomination or church shall, on its incorporation, pass to the corporation and shall be held in trust for the use purpose, behalf, and benefit of the religious society or order so incorporated or of the church of which the diocese, synod, or district organization is an organized and constituent part. So that, even from the standpoint of beneficial ownership, the dioceses of Davao can not be viewed as a group legally isolated from the Catholic Church as a whole. Nor does court control over the acts of the corporation sole constitute a guarantee of Filipino control that would satisfy the purposes of the constitution, for the reason that under section 159 (last proviso) of the Corporation law, the court intervention is dispensed with where the rules and discipline of the church already regulate the acquisition and disposition of real estate and personal property. Provided however, that in cases where the rules, regulations and discipline of the religious denomination, society, or church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling, and mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the intervention of the courts shall not be necessary. (emphasis supplied.) It is argued that a distinction must be drawn between the lands to be devoted to purely religious purposes and the lands held in ordinary ownership. But where in the Constitution is such a distinction drawn? Under it, capacity to acquire agricultural land for the erection of a church is capacity to acquire agricultural lands for any lawful purpose, whether it be for convents or schools or seminaries or haciendas for their support or land to be held solely for enjoyment of the revenue. Once the capacity to acquire is granted, the way is paved for the revitalization of religious landholdings that proved so troublesome in our past. I cannot conceive that the Constitution intended to revive them. It is also argued that, before the Constitution was adopted, the corporations sole had, by express statute, the right to acquire agricultural land; and that the Constitution was not intended to destroy such "acquired property rights." If followed, the argument destroys the constitutional restrictions. All aliens had a capacity to acquire agricultural land before the Constitution came into effect, because no prohibition existed previously. Must their right to acquire and hold agricultural land be conceded in spite of the Constitution?. That the law should have expressly conferred capacity to acquire land upon corporations sole was not due any special predilection for them; it was exclusively due to the principle that corporation, as artificial entities, have no inherent rights, but only those granted by the sovereign. Unless conferred, the corporate right would not exist.

Furthermore, a capacity to acquire in futuro, is not in itself a vested existing property right that the Constitution protects from impairment. For a property right to be vested (or acquired) there must be a transition from thepotential, or contingent, to the actual, and the proprietary interest must have attached to a thing, it must have become "fixed or established "(Balboa vs. Farrales, 51 Phil. 498). If mere potentialities cannot be impaired, then the law would become unchangeable, for every variation in it will reduce some one's legal ability to do or not to do. Already in Benguet Consolidated vs. Pineda, 3 52 Off. Gaz. 1961, we have ruled that no one has a vested right in statutory privileges or exemptions. And in the concurring opinion in Gold Creek Mining Corp. vs. Rodriguez, 66 Phil. 259 (cited by Justice Felix), Mr. Justice Laurel squarely declared that "contingency or expectation is neither property right." (cas. cit., p. 269.) Finally, the point is also made that the Ordinary, as religious corporation sole, has no citizenship, and is not an alien. The answer is that under the Constitution of the Republic, it is not enough that the acquirer of agricultural land be not an alien; he must be a Filipino or controlled by Filipinos. Wherefore, I am constrained to conclude: (1) That the capacity of religious corporations sole to acquire agricultural land depends upon 60 per cent Filipino membership of the group or body exercising control of the corporation;
lawphi1.net

(2) That if control of any such corporation should be vested in a single person, then such person must be a Filipino citizen;
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(3) That in the absence of evidence on these points, the order appealed from, denying registration of the conveyance, should be affirmed. Concepcion, J., concur.

G.R. No. L-6055

June 12, 1953

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. WILLIAM H. QUASHA, defendant-appellant. Jose P. Laurel for appellant and William H. Quasha in his own behalf. Office of the Solicitor General Juan R. Liwag and Assistant Solicitor General Francisco Carreon for appellee. REYES, J.: William H. Quasha, a member of the Philippine bar, was charged in the Court of First Instance of Manila with the crime of falsification of a public and commercial document in that, having been entrusted with the preparation and registration of the article of incorporation of the Pacific Airways Corporation, a domestic corporation organized for the purpose of engaging in business as a common carrier, he caused it to appear in said article of incorporation that one Arsenio Baylon, a Filipino citizen, had subscribed to and was the owner of 60.005 per cent of the subscribed capital stock of the corporation when in reality, as the accused well knew, such was not the case, the truth being that the owner of the portion of the capital stock subscribed to by Baylon and the money paid thereon were American citizen whose name did not appear in the article of incorporation, and that the purpose for making this false statement was to circumvent the constitutional mandate that no corporation shall be authorize to operate as a public utility in the Philippines unless 60 per cent of its capital stock is owned by Filipinos. Found guilty after trial and sentenced to a term of imprisonment and a fine, the accused has appealed to this Court. The essential facts are not in dispute. On November 4,1946, the Pacific Airways Corporation registered its articles of incorporation with the Securities and Exchanged Commission. The article were prepared and the registration was effected by the accused, who was in fact the organizer of the corporation. The article stated that the primary purpose of the corporation was to carry on the business of a common carrier by air, land or water; that its capital stock was P1,000,000, represented by 9,000 preferred and 100,000 common shares, each preferred share being of the par value of p100 and entitled to 1/3 vote and each common share, of the par value of P1 and entitled to one vote; that the amount capital stock actually subscribed was P200,000, and the names of the subscribers were Arsenio Baylon, Eruin E. Shannahan, Albert W. Onstott, James O'Bannon, Denzel J. Cavin, and William H. Quasha, the first being a Filipino and the other five all Americans; that Baylon's subscription was for 1,145 preferred shares, of the total value of P114,500, and for 6,500 common shares, of the total par value of P6,500, while the aggregate subscriptions of the American subscribers were for 200 preferred shares, of the total par value of P20,000, and 59,000 common shares, of the total par value of P59,000; and that Baylon and the American subscribers had already paid 25 per cent of their respective subscriptions. Ostensibly the owner of, or subscriber to, 60.005 per cent of the subscribed capital stock of the corporation, Baylon nevertheless did not have the controlling vote because of the difference in voting power between the preferred shares and the common shares. Still, with the capital structure as it was, the article of incorporation were accepted for registration and a certificate of incorporation was issued by the Securities and Exchange Commission. There is no question that Baylon actually subscribed to 60.005 per cent of the subscribed capital stock of the corporation. But it is admitted that the money paid on his subscription did not belong to him but to the Americans subscribers to the corporate stock. In explanation, the accused testified,

without contradiction, that in the process of organization Baylon was made a trustee for the American incorporators, and that the reason for making Baylon such trustee was as follows: Q. According to this article of incorporation Arsenio Baylon subscribed to 1,135 preferred shares with a total value of P1,135. Do you know how that came to be? A. Yes. The people who were desirous of forming the corporation, whose names are listed on page 7 of this certified copy came to my house, Messrs. Shannahan, Onstott, O'Bannon, Caven, Perry and Anastasakas one evening. There was considerable difficulty to get them all together at one time because they were pilots. They had difficulty in deciding what their respective share holdings would be. Onstott had invested a certain amount of money in airplane surplus property and they had obtained a considerable amount of money on those planes and as I recall they were desirous of getting a corporation formed right away. And they wanted to have their respective shares holdings resolved at a latter date. They stated that they could get together that they feel that they had no time to settle their respective share holdings. We discussed the matter and finally it was decided that the best way to handle the things was not to put the shares in the name of anyone of the interested parties and to have someone act as trustee for their respective shares holdings. So we looked around for a trustee. And he said "There are a lot of people whom I trust." He said, "Is there someone around whom we could get right away?" I said, "There is Arsenio. He was my boy during the liberation and he cared for me when i was sick and i said i consider him my friend." I said. They all knew Arsenio. He is a very kind man and that was what was done. That is how it came about. Defendant is accused under article 172 paragraph 1, in connection with article 171, paragraph 4, of the Revised Penal Code, which read: ART. 171. Falsification by public officer, employee, or notary or ecclesiastic minister. The penalty ofprision mayor and a fine not to exceed 5,000 pesos shall be imposed upon any public officer, employee, or notary who, taking advantage of his official position, shall falsify a document by committing any of the following acts: xxx xxx xxx

4. Making untruthful statements in a narration of facts. ART. 172. Falsification by private individuals and use of falsified documents. The penalty of prision correccional in its medium and maximum period and a fine of not more than 5,000 pesos shall be imposed upon: xxx xxx xxx

1. Any private individual who shall commit any of the falsifications enumerated in the next preceding article in any public or official document or letter of exchange or any other kind of commercial document. Commenting on the above provision, Justice Albert, in his well-known work on the Revised Penal Code ( new edition, pp. 407-408), observes, on the authority of U.S. vs. Reyes, (1 Phil., 341), that the perversion of truth in the narration of facts must be made with the wrongful intent of injuring a third person; and on the authority of U.S. vs. Lopez (15 Phil., 515), the same author further maintains that even if such wrongful intent is proven, still the untruthful statement will not constitute

the crime of falsification if there is no legal obligation on the part of the narrator to disclose the truth. Wrongful intent to injure a third person and obligation on the part of the narrator to disclose the truth are thus essential to a conviction for a crime of falsification under the above article of the Revised Penal Code. Now, as we see it, the falsification imputed in the accused in the present case consists in not disclosing in the articles of incorporation that Baylon was a mere trustee ( or dummy as the prosecution chooses to call him) of his American co-incorporators, thus giving the impression that Baylon was the owner of the shares subscribed to by him which, as above stated, amount to 60.005 per cent of the sub-scribed capital stock. This, in the opinion of the trial court, is a malicious perversion of the truth made with the wrongful intent circumventing section 8, Article XIV of the Constitution, which provides that " no franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporation or other entities organized under the law of the Philippines, sixty per centum of the capital of which is owned by citizens of the Philippines . . . ." Plausible though it may appear at first glance, this opinion loses validity once it is noted that it is predicated on the erroneous assumption that the constitutional provision just quoted was meant to prohibit the mere formation of a public utility corporation without 60 per cent of its capital being owned by the Filipinos, a mistaken belief which has induced the lower court to that the accused was under obligation to disclose the whole truth about the nationality of the subscribed capital stock of the corporation by revealing that Baylon was a mere trustee or dummy of his American co-incorporators, and that in not making such disclosure defendant's intention was to circumvent the Constitution to the detriment of the public interests. Contrary to the lower court's assumption, the Constitution does not prohibit the mere formation of a public utility corporation without the required formation of Filipino capital. What it does prohibit is the granting of a franchise or other form of authorization for the operation of a public utility to a corporation already in existence but without the requisite proportion of Filipino capital. This is obvious from the context, for the constitutional provision in question qualifies the terms " franchise", "certificate", or "any other form of authorization" with the phrase "for the operation of a public utility," thereby making it clear that the franchise meant is not the "primary franchise" that invest a body of men with corporate existence but the "secondary franchise" or the privilege to operate as a public utility after the corporation has already come into being. If the Constitution does not prohibit the mere formation of a public utility corporation with the alien capital, then how can the accused be charged with having wrongfully intended to circumvent that fundamental law by not revealing in the articles of incorporation that Baylon was a mere trustee of his American co-incorporation and that for that reason the subscribed capital stock of the corporation was wholly American? For the mere formation of the corporation such revelation was not essential, and the Corporation Law does not require it. Defendant was, therefore, under no obligation to make it. In the absence of such obligation and of the allege wrongful intent, defendant cannot be legally convicted of the crime with which he is charged. It is urged, however, that the formation of the corporation with 60 per cent of its subscribed capital stock appearing in the name of Baylon was an indispensable preparatory step to the subversion of the constitutional prohibition and the laws implementing the policy expressed therein. This view is not correct. For a corporation to be entitled to operate a public utility it is not necessary that it be organized with 60 per cent of its capital owned by Filipinos from the start. A corporation formed with capital that is entirely alien may subsequently change the nationality of its capital through transfer of shares to Filipino citizens. conversely, a corporation originally formed with Filipino capital may subsequently change the national status of said capital through transfer of shares to foreigners. What need is there then for a corporation that intends to operate a public utility to have, at the time of its formation, 60 per cent of its capital owned by Filipinos alone? That condition may anytime be attained thru the necessary transfer of stocks. The moment for determining whether a corporation is entitled to operate as a public utility is when it applies for a franchise, certificate, or any other form of

authorization for that purpose. And that can be done after the corporation has already come into being and not while it is still being formed. And at that moment, the corporation must show that it has complied not only with the requirement of the Constitution as to the nationality of its capital, but also with the requirements of the Civil Aviation Law if it is a common carrier by air, the Revised Administrative Code if it is a common carrier by water, and the Public Service Law if it is a common carrier by land or other kind of public service. Equally untenable is the suggestion that defendant should at least be held guilty of an "impossible crime" under article 59 of the Revised Penal Code. It not being possible to suppose that defendant had intended to commit a crime for the simple reason that the alleged constitutional prohibition which he is charged for having tried to circumvent does not exist, conviction under that article is out of the question. The foregoing consideration can not but lead to the conclusion that the defendant can not be held guilty of the crime charged. The majority of the court, however, are also of the opinion that, even supposing that the act imputed to the defendant constituted falsification at the time it was perpetrated, still with the approval of the Party Amendment to the Constitution in March, 1947, which placed Americans on the same footing as Filipino citizens with respect to the right to operate public utilities in the Philippines, thus doing away with the prohibition in section 8, Article XIV of the Constitution in so far as American citizens are concerned, the said act has ceased to be an offense within the meaning of the law, so that defendant can no longer be held criminally liable therefor. In view of the foregoing, the judgment appealed from is reversed and the defendant William H. Quasha acquitted, with costs de oficio.

G.R. No. 114222 April 6, 1995 FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, petitioners, vs. HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of Transportation and Communications, and EDSA LRT CORPORATION, LTD., respondents.

QUIASON, J.: This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing and enforcing the "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" dated April 22, 1992, and the "Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement To Build, Lease and Transfer a Light Rail Transit System for EDSA" dated May 6, 1993. Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine Senate and are suing in their capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of the Department of Transportation and Communications (DOTC), while private respondent EDSA LRT Corporation, Ltd. is a private corporation organized under the laws of Hongkong. I In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan Manila, which shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT III), was intended to provide a mass transit system along EDSA and alleviate the congestion and growing transportation problem in the metropolis. On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu Levin to DOTC Secretary Oscar Orbos, proposing to construct the EDSA LRT III on a BuildOperate-Transfer (BOT) basis. On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with DOTC. On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by President Corazon C. Aquino. Referred to as the Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990. Republic Act No. 6957 provides for two schemes for the financing, construction and operation of government projects through private initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT). In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on January 22, 1991 and March 14, 1991, issued Department Orders Nos. 91-494 and 91496, respectively creating the Prequalification Bids and Awards Committee (PBAC) and the Technical Committee.

After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing and implementation of the project The notice, advertising the prequalification of bidders, was published in three newspapers of general circulation once a week for three consecutive weeks starting February 21, 1991. The deadline set for submission of prequalification documents was March 21, 1991, later extended to April 1, 1991. Five groups responded to the invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel International of Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT Consortium, composed of ten foreign and domestic corporations: namely, Kaiser Engineers International, Inc., ACER Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the Czech and Slovak Federal Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L. Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F. F. Cruz & co., Inc. On the last day for submission of prequalification documents, the prequalification criteria proposed by the Technical Committee were adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal aspects 10 percent; (b) Management/Organizational capability 30 percent; and (c) Financial capability 30 percent; and (d) Technical capability 30 percent (Rollo, p. 122). On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementation Rules and Regulations thereof, approved the same. After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991 declaring that of the five applicants, only the EDSA LRT Consortium "met the requirements of garnering at least 21 points per criteria [sic], except for Legal Aspects, and obtaining an over-all passing mark of at least 82 points" (Rollo, p. 146). The Legal Aspects referred to provided that the BOT/BT contractor-applicant meet the requirements specified in the Constitution and other pertinent laws (Rollo, p. 114). Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by Secretary Pete Nicomedes Prado. The latter sent to President Aquino two letters dated May 31, 1991 and June 14, 1991, respectively recommending the award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and requesting for authority to negotiate with the said firm for the contract pursuant to paragraph 14(b) of the Implementing Rules and Regulations of the BOT Law (Rollo, pp. 298-302). In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the DOTC to proceed with the negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid proposal to DOTC. Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT Corporation, Ltd., in substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" under the terms of the BOT Law (Rollo, pp. 147-177). Secretary Prado, thereafter, requested presidential approval of the contract. In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary Orbos, informed Secretary Prado that the President could not grant the requested approval for the following reasons: (1) that DOTC failed to conduct actual public bidding in compliance with Section 5 of the BOT Law; (2) that the law authorized public bidding as the only mode to award BOT projects, and the prequalification proceedings was not the public bidding

contemplated under the law; (3) that Item 14 of the Implementing Rules and Regulations of the BOT Law which authorized negotiated award of contract in addition to public bidding was of doubtful legality; and (4) that congressional approval of the list of priority projects under the BOT or BT Scheme provided in the law had not yet been granted at the time the contract was awarded (Rollo, pp. 178-179). In view of the comments of Executive Secretary Drilon, the DOTC and private respondents renegotiated the agreement. On April 22, 1992, the parties entered into a "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" (Rollo, pp. 47-78) inasmuch as "the parties [are] cognizant of the fact the DOTC has full authority to sign the Agreement without need of approval by the President pursuant to the provisions of Executive Order No. 380 and that certain events [had] supervened since November 7, 1991 which necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6, 1992, DOTC, represented by Secretary Jesus Garcia vice Secretary Prado, and private respondent entered into a "Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" so as to "clarify their respective rights and responsibilities" and to submit [the] Supplemental Agreement to the President, of the Philippines for his approval" (Rollo, pp. 79-80). Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and approval. In a Memorandum to Secretary Garcia on May 6, 1993, approved the said Agreements, (Rollo, p. 194). According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics and will have a maximum carrying capacity of 450,000 passengers a day, or 150 million a year to be achieved-through 54 such vehicles operating simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-section of EDSA for a distance of 17.8 kilometers from F.B. Harrison, Pasay City to North Avenue, Quezon City. The system will have its own power facility (Revised and Restated Agreement, Sec. 2.3 (ii); Rollo p. 55). It will also have thirteen (13) passenger stations and one depot in 16-hectare government property at North Avenue (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system (Revised and Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days or approximately three years from the implementation date of the contract inclusive of mobilization, site works, initial and final testing of the system (Supplemental Agreement, Sec. 5; Rollo, p. 83). Upon full or partial completion and viability thereof, private respondent shall deliver the use and possession of the completed portion to DOTC which shall operate the same (Supplemental Agreement, Sec. 5; Revised and Restated Agreement, Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private respondent rentals on a monthly basis through an Irrevocable Letter of Credit. The rentals shall be determined by an independent and internationally accredited inspection firm to be appointed by the parties (Supplemental Agreement, Sec. 6; Rollo, pp. 85-86) As agreed upon, private respondent's capital shall be recovered from the rentals to be paid by the DOTC which, in turn, shall come from the earnings of the EDSA LRT III (Revised and Restated Agreement, Sec. 1, p. 5; Rollo, p. 54). After 25 years and DOTC shall have completed payment of the rentals, ownership of the project shall be transferred to the latter for a consideration of only U.S. $1.00 (Revised and Restated Agreement, Sec. 11.1; Rollo, p. 67). On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes" was signed into law by the President. The law was published in two newspapers of general circulation on May 12, 1994, and

took effect 15 days thereafter or on May 28, 1994. The law expressly recognizes BLT scheme and allows direct negotiation of BLT contracts. II In their petition, petitioners argued that: (1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL AGREEMENT OF MAY 6, 1993, INSOFAR AS IT GRANTS EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION, THE OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY, VIOLATES THE CONSTITUTION AND, HENCE, IS UNCONSTITUTIONAL; (2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS ILLEGAL; (3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957 AND, HENCE, IS UNLAWFUL; (4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT CORPORATION, LTD. VIOLATES THE REQUIREMENTS PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS OF THE BOT LAW AND, HENCE, IS ILLEGAL; (5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO BEAR PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL AND INEFFECTIVE; AND (6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT (Rollo, pp. 15-16). Secretary Garcia and private respondent filed their comments separately and claimed that: (1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition; (2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts; (3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law; (4) The nationality requirement for public utilities mandated by the Constitution does not apply to private respondent; (5) The Agreements executed by and between respondents have been approved by President Ramos and are not disadvantageous to the government; (6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the BOT Law; and

(7) Granting that the BOT Law requires public bidding, this has been amended by R.A No. 7718 passed by the Legislature On May 12, 1994, which provides for direct negotiation as a mode of award of infrastructure projects. III Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners, however, countered that the action was filed by them in their capacity as Senators and as taxpayers. The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the national government or government-owned or controlled corporations allegedly in contravention of the law (Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and to disallow the same when only municipal contracts are involved (Bugnay Construction and Development Corporation v. Laron, 176 SCRA. 240 [1989]). For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal standing of petitioners as taxpayers to institute the present action. IV In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the Supplemental Agreement of May 6, 1993 are unconstitutional and invalid for the following reasons: (1) the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the Constitution to Filipino citizens and domestic corporations, not foreign corporations like private respondent; (2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT Scheme under the law; (3) the contract to construct the EDSA LRT III was awarded to private respondent not through public bidding which is the only mode of awarding infrastructure projects under the BOT law; and (4) the agreements are grossly disadvantageous to the government. 1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was awarded by public respondent, is admittedly a foreign corporation "duly incorporated and existing under the laws of Hongkong" (Rollo, pp. 50, 79). There is also no dispute that once the EDSA LRT III is constructed, private respondent, as lessor, will turn it over to DOTC, as lessee, for the latter to operate the system and pay rentals for said use. The question posed by petitioners is: Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility? (Rollo, p. 17). The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not by themselves

constitute a public utility. What constitutes a public utility is not their ownership but their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]). The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public. Section 11 of Article XII of the Constitution provides: No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive character or for a longer period than fifty years . . . (Emphasis supplied). In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment used to serve the public. Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will in everything not prohibited by law or the concurrence with the rights of another (Tolentino, II Commentaries and Jurisprudence on the Civil Code of the Philippines 45 [1992]). The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve the public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the transportation of passengers from one point to another point, their loading and unloading at designated places and the movement of the trains at pre-scheduled times (cf. Arizona Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R. 1149 [1919] ;United States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]). The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person in control thereof who may not necessarily be the owner thereof. This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the public can be very well appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their aircraft and vessels instead of owning them themselves. While private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is not enfranchised to operate a public utility (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of this incapacity, private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the LRT system by way of lease for 25 years, during which period DOTC shall operate the same as a common carrier and private respondent shall provide technical maintenance and repair services to DOTC (Revised and Restated Agreement, Secs. 3.2, 5.1 and 5.2; Rollo, pp. 57-58, 61-62). Technical maintenance consists of providing (1) repair and maintenance facilities for the depot and rail lines, services for routine

clearing and security; and (2) producing and distributing maintenance manuals and drawings for the entire system (Revised and Restated Agreement, Annex F). Private respondent shall also train DOTC personnel for familiarization with the operation, use, maintenance and repair of the rolling stock, power plant, substations, electrical, signaling, communications and all other equipment as supplied in the agreement (Revised and Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training consists of theoretical and live training of DOTC operational personnel which includes actual driving of light rail vehicles under simulated operating conditions, control of operations, dealing with emergencies, collection, counting and securing cash from the fare collection system (Revised and Restated Agreement, Annex E, Secs. 2-3). Personnel of DOTC will work under the direction and control of private respondent only during training (Revised and Restated Agreement, Annex E, Sec. 3.1). The training objectives, however, shall be such that upon completion of the EDSA LRT III and upon opening of normal revenue operation, DOTC shall have in their employ personnel capable of undertaking training of all new and replacement personnel (Revised and Restated Agreement, Annex E Sec. 5.1). In other words, by the end of the three-year construction period and upon commencement of normal revenue operation, DOTC shall be able to operate the EDSA LRT III on its own and train all new personnel by itself. Fees for private respondent' s services shall be included in the rent, which likewise includes the project cost, cost of replacement of plant equipment and spare parts, investment and financing cost, plus a reasonable rate of return thereon (Revised and Restated Agreement, Sec. 1; Rollo, p. 54). Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier. For this purpose, DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries or death which may be claimed in the operation or implementation of the system, except losses, damages, injury or death due to defects in the EDSA LRT III on account of the defective condition of equipment or facilities or the defective maintenance of such equipment facilities (Revised and Restated Agreement, Secs. 12.1 and 12.2; Rollo, p. 68). In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with the public and the public will have no right to demand any services from it. It is well to point out that the role of private respondent as lessor during the lease period must be distinguished from the role of the Philippine Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v. Guingona, 232 SCRA 110 (1994). Therein, the Contract of Lease between PGMC and the Philippine Charity Sweepstakes Office (PCSO) was actually a collaboration or joint venture agreement prescribed under the charter of the PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build, at its own expense, all the facilities necessary to operate and maintain a nationwide on-line lottery system from whom PCSO was to lease the facilities and operate the same. Upon due examination of the contract, the Court found that PGMC's participation was not confined to the construction and setting up of the on-line lottery system. It spilled over to the actual operation thereof, becoming indispensable to the pursuit, conduct, administration and control of the highly technical and sophisticated lottery system. In effect, the PCSO leased out its franchise to PGMC which actually operated and managed the same. Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence and W.R. Co. v. United States, 46 F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v. Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners of tank, refrigerator, wine, poultry and beer cars who supply cars under contract to railroad companies considered as public utilities (Crystal Car Line v. State Tax Commission, 174 p. 2d 984, 987 [1946]).

Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one operating a public utility. The moment for determining the requisite Filipino nationality is when the entity applies for a franchise, certificate or any other form of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]). 2. Petitioners further assert that the BLT scheme under the Agreements in question is not recognized in the BOT Law and its Implementing Rules and Regulations. Section 2 of the BOT Law defines the BOT and BT schemes as follows: (a) Build-operate-and-transfer scheme A contractual arrangement whereby the contractor undertakes the construction including financing, of a given infrastructure facility, and the operation and maintenance thereof. The contractor operates the facility over a fixed term during which it is allowed to charge facility users appropriate tolls, fees, rentals and charges sufficient to enable the contractor to recover its operating and maintenance expenses and its investment in the project plus a reasonable rate of return thereon. The contractor transfers the facility to the government agency or local government unit concerned at the end of the fixed term which shall not exceed fifty (50) years. For the construction stage, the contractor may obtain financing from foreign and/or domestic sources and/or engage the services of a foreign and/or Filipino constructor [sic]: Provided, That the ownership structure of the contractor of an infrastructure facility whose operation requires a public utility franchise must be in accordance with the Constitution: Provided, however, That in the case of corporate investors in the build-operate-and-transfer corporation, the citizenship of each stockholder in the corporate investors shall be the basis for the computation of Filipino equity in the said corporation: Provided, further, That, in the case of foreign constructors [sic], Filipino labor shall be employed or hired in the different phases of the construction where Filipino skills are available: Provided, furthermore, that the financing of a foreign or foreign-controlled contractor from Philippine government financing institutions shall not exceed twenty percent (20%) of the total cost of the infrastructure facility or project: Provided, finally, That financing from foreign sources shall not require a guarantee by the Government or by government-owned or controlled corporations. The build-operate-and-transfer scheme shall include a supply-and-operate situation which is a contractual agreement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the Government so requires, operates the facility providing in the process technology transfer and training to Filipino nationals. (b) Build-and-transfer scheme "A contractual arrangement whereby the contractor undertakes the construction including financing, of a given infrastructure facility, and its turnover after completion to the government agency or local government unit concerned which shall pay the contractor its total investment expended on the project, plus a reasonable rate of return thereon. This arrangement may be employed in the construction of any infrastructure project including critical facilities which for security or strategic reasons, must be operated directly by the government (Emphasis supplied). The BOT scheme is expressly defined as one where the contractor undertakes the construction and financing in infrastructure facility, and operates and maintains the same. The contractor operates the facility for a fixed period during which it may recover its expenses and investment in the project plus a reasonable rate of return thereon. After the expiration of the agreed term, the contractor transfers the ownership and operation of the project to the government.

In the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion, the ownership and operation thereof are turned over to the government. The government, in turn, shall pay the contractor its total investment on the project in addition to a reasonable rate of return. If payment is to be effected through amortization payments by the government infrastructure agency or local government unit concerned, this shall be made in accordance with a scheme proposed in the bid and incorporated in the contract (R.A. No. 6957, Sec. 6). Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply with the citizenship requirement of the Constitution on the operation of a public utility. No such a requirement is imposed in the BT scheme. There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the payment by the government of the project cost. The law must not be read in such a way as to rule out or unduly restrict any variation within the context of the two schemes. Indeed, no statute can be enacted to anticipate and provide all the fine points and details for the multifarious and complex situations that may be encountered in enforcing the law (Director of Forestry v. Munoz, 23 SCRA 1183 [1968]; People v. Exconde, 101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil. 119 [1914]). The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law. As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter by allowing it to amortize payments out of the income from the operation of the LRT System. In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis according to a schedule of rates through and under the terms of a confirmed Irrevocable Revolving Letter of Credit (Supplemental Agreement, Sec. 6; Rollo, p. 85). At the end of 25 years and when full payment shall have been made to and received by private respondent, it shall transfer to DOTC, free from any lien or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00 (Revised and Restated Agreement, Sec. 11.1; Supplemental Agreement, Sec; 7; Rollo, pp. 67, .87). A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for a certain price and for a period which may be definite or indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643). There is no transfer of ownership at the end of the lease period. But if the parties stipulate that title to the leased premises shall be transferred to the lessee at the end of the lease period upon the payment of an agreed sum, the lease becomes a lease-purchase agreement. Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine pesos. The EDSA LRT III Project is a high priority project certified by Congress and the National Economic and Development Authority as falling under the Investment Priorities Plan of Government (Rollo, pp. 310-311). It is, therefore, outside the application of the Uniform Currency Act (R.A. No. 529), which reads as follows: Sec. 1. Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted in the Philippines which provisions purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null, void, and of no effect, and no such provision shall be contained in, or made with

respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a) . . .; (b) transactions affecting high-priority economic projects for agricultural, industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds; . . . . 3. The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation and before congressional approval on January 22 and 23, 1992 of the List of National Projects to be undertaken by the private sector pursuant to the BOT Law (Rollo, pp. 309-312) does not suffice to invalidate the award. Subsequent congressional approval of the list including "rail-based projects packaged with commercial development opportunities" (Rollo, p. 310) under which the EDSA LRT III projects falls, amounts to a ratification of the prior award of the EDSA LRT III contract under the BOT Law. Petitioners insist that the prequalifications process which led to the negotiated award of the contract appears to have been rigged from the very beginning to do away with the usual open international public bidding where qualified internationally known applicants could fairly participate. The records show that only one applicant passed the prequalification process. Since only one was left, to conduct a public bidding in accordance with Section 5 of the BOT Law for that lone participant will be an absurb and pointless exercise (cf. Deloso v. Sandiganbayan, 217 SCRA 49, 61 [1993]). Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in relation to Presidential Decree No. 1594 allows the negotiated award of government infrastructure projects. Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts," allows the negotiated award of government projects in exceptional cases. Sections 4 of the said law reads as follows: Bidding. Construction projects shall generally be undertaken by contract after competitive public bidding. Projects may be undertaken by administration or force account or by negotiated contract only in exceptional cases where time is of the essence, or where there is lack of qualified bidders or contractors, or where there is conclusive evidence that greater economy and efficiency would be achieved through this arrangement, and in accordance with provision of laws and acts on the matter, subject to the approval of the Minister of Public Works and Transportation and Communications, the Minister of Public Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million, and the President of the Philippines, upon recommendation of the Minister, if the project cost is P1 Million or more (Emphasis supplied). xxx xxx xxx Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may he made by negotiation. Presidential Decree No. 1594 is the general law on government infrastructure contracts while the BOT Law governs particular arrangements or schemes aimed at encouraging private sector participation in government infrastructure projects. The two laws are not inconsistent with each other but are inpari materia and should be read together accordingly. In the instant case, if the prequalification process was actually tainted by foul play, one wonders why none of the competing firms ever brought the matter before the PBAC, or intervened in this case

before us (cf. Malayan Integrated Industries Corp. v. Court of Appeals, 213 SCRA 640 [1992]; Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]). The challenged agreements have been approved by President Ramos himself. Although then Executive Secretary Drilon may have disapproved the "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws that prohibits parties to a contract from renegotiating and modifying in good faith the terms and conditions thereof so as to meet legal, statutory and constitutional requirements. Under the circumstances, to require the parties to go back to step one of the prequalification process would just be an idle ceremony. Useless bureaucratic "red tape" should be eschewed because it discourages private sector participation, the "main engine" for national growth and development (R.A. No. 6957, Sec. 1), and renders the BOT Law nugatory. Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as: (e) Build-lease-and-transfer A contractual arrangement whereby a project proponent is authorized to finance and construct an infrastructure or development facility and upon its completion turns it over to the government agency or local government unit concerned on a lease arrangement for a fixed period after which ownership of the facility is automatically transferred to the government unit concerned. Section 5-A of the law, which expressly allows direct negotiation of contracts, provides: Direct Negotiation of Contracts. Direct negotiation shall be resorted to when there is only one complying bidder left as defined hereunder. (a) If, after advertisement, only one contractor applies for prequalification and it meets the prequalification requirements, after which it is required to submit a bid proposal which is subsequently found by the agency/local government unit (LGU) to be complying. (b) If, after advertisement, more than one contractor applied for prequalification but only one meets the prequalification requirements, after which it submits bid/proposal which is found by the agency/local government unit (LGU) to be complying. (c) If, after prequalification of more than one contractor only one submits a bid which is found by the agency/LGU to be complying. (d) If, after prequalification, more than one contractor submit bids but only one is found by the agency/LGU to be complying. Provided, That, any of the disqualified prospective bidder [sic] may appeal the decision of the implementing agency, agency/LGUs prequalification bids and awards committee within fifteen (15) working days to the head of the agency, in case of national projects or to the Department of the Interior and Local Government, in case of local projects from the date the disqualification was made known to the disqualified bidder: Provided, furthermore, That the implementing agency/LGUs concerned should act on the appeal within forty-five (45) working days from receipt thereof. Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been rendered moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government infrastructure agencies, government-owned and controlled corporations and local government units to enter into contract with any duly prequalified proponent for the

financing, construction, operation and maintenance of any financially viable infrastructure or development facility through a BOT, BT, BLT, BOO (Build-own-and-operate), CAO (Contract-addoperate), DOT (Develop-operate-and-transfer), ROT (Rehabilitate-operate-and-transfer), and ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]). From the law itself, once and applicant has prequalified, it can enter into any of the schemes enumerated in Section 2 thereof, including a BLT arrangement, enumerated and defined therein (Sec. 3). Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of minimum government regulations and procedures and specific government undertakings in support of the private sector" (Sec. 1). A curative statute makes valid that which before enactment of the statute was invalid. Thus, whatever doubts and alleged procedural lapses private respondent and DOTC may have engendered and committed in entering into the questioned contracts, these have now been cured by R.A. No. 7718 (cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos V. Duata, 14 SCRA 1041 [1965]; Adong V. Cheong Seng Gee, 43 Phil. 43 [1922]. 4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the government because the rental rates are excessive and private respondent's development rights over the 13 stations and the depot will rob DOTC of the best terms during the most productive years of the project. It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a period of 25 years, exclusive rights over the depot and the air space above the stations for development into commercial premises for lease, sublease, transfer, or advertising (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in consideration of these development rights, private respondent shall pay DOTC in Philippine currency guaranteed revenues generated therefrom in the amounts set forth in the Supplemental Agreement (Sec. 11;Rollo, p. 93). In the event that DOTC shall be unable to collect the guaranteed revenues, DOTC shall be allowed to deduct any shortfalls from the monthly rent due private respondent for the construction of the EDSA LRT III (Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles, interests and income over all contracts on the commercial spaces shall revert to DOTC upon expiration of the 25-year period. (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper administrative agencies and officials who have acquired expertise, specialized skills and knowledge in the performance of their functions should be accorded respect absent any showing of grave abuse of discretion (Felipe Ysmael, Jr. & Co. v. Deputy Executive Secretary, 190 SCRA 673 [1990]; Board of Medical Education v. Alfonso, 176 SCRA 304 [1989]). Government officials are presumed to perform their functions with regularity and strong evidence is necessary to rebut this presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the parties to each other. The matter of valuation is an esoteric field which is better left to the experts and which this Court is not eager to undertake. That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the profits if it engages in the business itself, is not worthy of being raised as an issue. In all cases where a party enters into a contract with the government, he does so, not out of charity and not to lose money, but to gain pecuniarily.

5. Definitely, the agreements in question have been entered into by DOTC in the exercise of its governmental function. DOTC is the primary policy, planning, programming, regulating and administrative entity of the Executive branch of government in the promotion, development and regulation of dependable and coordinated networks of transportation and communications systems as well as in the fast, safe, efficient and reliable postal, transportation and communications services (Administrative Code of 1987, Book IV, Title XV, Sec. 2). It is the Executive department, DOTC in particular that has the power, authority and technical expertise determine whether or not a specific transportation or communication project is necessary, viable and beneficial to the people. The discretion to award a contract is vested in the government agencies entrusted with that function (Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]). WHEREFORE, the petition is DISMISSED.

G.R. No. L-2294

May 25, 1951

FILIPINAS COMPAIA DE SEGUROS, petitioner, vs. CHRISTERN, HUENEFELD and CO., INC., respondent. Ramirez and Ortigas for petitioner. Ewald Huenefeld for respondent. PARAS, C.J.: On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., after payment of corresponding premium, obtained from the petitioner ,Filipinas Cia. de Seguros, fire policy No. 29333 in the sum of P1000,000, covering merchandise contained in a building located at No. 711 Roman Street, Binondo Manila. On February 27, 1942, or during the Japanese military occupation, the building and insured merchandise were burned. In due time the respondent submitted to the petitioner its claim under the policy. The salvage goods were sold at public auction and, after deducting their value, the total loss suffered by the respondent was fixed at P92,650. The petitioner refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the United States declared war against Germany, the respondent Corporation (though organized under and by virtue of the laws of the Philippines) being controlled by the German subjects and the petitioner being a company under American jurisdiction when said policy was issued on October 1, 1941. The petitioner, however, in pursuance of the order of the Director of Bureau of Financing, Philippine Executive Commission, dated April 9, 1943, paid to the respondent the sum of P92,650 on April 19, 1943. The present action was filed on August 6, 1946, in the Court of First Instance of Manila for the purpose of recovering from the respondent the sum of P92,650 above mentioned. The theory of the petitioner is that the insured merchandise were burned up after the policy issued in 1941 in favor of the respondent corporation has ceased to be effective because of the outbreak of the war between the United States and Germany on December 10, 1941, and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure. After trial, the Court of First Instance of Manila dismissed the action without pronouncement as to costs. Upon appeal to the Court of Appeals, the judgment of the Court of First Instance of Manila was affirmed, with costs. The case is now before us on appeal by certiorari from the decision of the Court of Appeals. The Court of Appeals overruled the contention of the petitioner that the respondent corporation became an enemy when the United States declared war against Germany, relying on English and American cases which held that a corporation is a citizen of the country or state by and under the laws of which it was created or organized. It rejected the theory that nationality of private corporation is determine by the character or citizenship of its controlling stockholders. There is no question that majority of the stockholders of the respondent corporation were German subjects. This being so, we have to rule that said respondent became an enemy corporation upon the outbreak of the war between the United States and Germany. The English and American cases relied upon by the Court of Appeals have lost their force in view of the latest decision of the Supreme Court of the United States in Clark vs. Uebersee Finanz Korporation, decided on December 8, 1947, 92 Law. Ed. Advance Opinions, No. 4, pp. 148-153, in which the controls test has been adopted. In "Enemy Corporation" by Martin Domke, a paper presented to the Second International Conference of the Legal Profession held at the Hague (Netherlands) in August. 1948 the following enlightening passages appear:

Since World War I, the determination of enemy nationality of corporations has been discussion in many countries, belligerent and neutral. A corporation was subject to enemy legislation when it was controlled by enemies, namely managed under the influence of individuals or corporations, themselves considered as enemies. It was the English courts which first the Daimler case applied this new concept of "piercing the corporate veil," which was adopted by the peace of Treaties of 1919 and the Mixed Arbitral established after the First World War. The United States of America did not adopt the control test during the First World War. Courts refused to recognized the concept whereby American-registered corporations could be considered as enemies and thus subject to domestic legislation and administrative measures regarding enemy property. World War II revived the problem again. It was known that German and other enemy interests were cloaked by domestic corporation structure. It was not only by legal ownership of shares that a material influence could be exercised on the management of the corporation but also by long term loans and other factual situations. For that reason, legislation on enemy property enacted in various countries during World War II adopted by statutory provisions to the control test and determined, to various degrees, the incidents of control. Court decisions were rendered on the basis of such newly enacted statutory provisions in determining enemy character of domestic corporation. The United States did not, in the amendments of the Trading with the Enemy Act during the last war, include as did other legislations the applications of the control test and again, as in World War I, courts refused to apply this concept whereby the enemy character of an American or neutral-registered corporation is determined by the enemy nationality of the controlling stockholders. Measures of blocking foreign funds, the so called freezing regulations, and other administrative practice in the treatment of foreign-owned property in the United States allowed to large degree the determination of enemy interest in domestic corporations and thus the application of the control test. Court decisions sanctioned such administrative practice enacted under the First War Powers Act of 1941, and more recently, on December 8, 1947, the Supreme Court of the United States definitely approved of the control theory. In Clark vs. Uebersee Finanz Korporation, A. G., dealing with a Swiss corporation allegedly controlled by German interest, the Court: "The property of all foreign interest was placed within the reach of the vesting power (of the Alien Property Custodian) not to appropriate friendly or neutral assets but to reach enemy interest which masqueraded under those innocent fronts. . . . The power of seizure and vesting was extended to all property of any foreign country or national so that no innocent appearing device could become a Trojan horse." It becomes unnecessary, therefore, to dwell at length on the authorities cited in support of the appealed decision. However, we may add that, in Haw Pia vs. China Banking Corporation,* 45 Off Gaz., (Supp. 9) 299, we already held that China Banking Corporation came within the meaning of the word "enemy" as used in the Trading with the Enemy Acts of civilized countries not only because it was incorporated under the laws of an enemy country but because it was controlled by enemies. The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy.

Effect of war, generally. All intercourse between citizens of belligerent powers which is inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes all negotiations, commerce, or trading with the enemy; all acts which will increase, or tend to increase, its income or resources; all acts of voluntary submission to it; or receiving its protection; also all acts concerning the transmission of money or goods; and all contracts relating thereto are thereby nullified. It further prohibits insurance upon trade with or by the enemy, upon the life or lives of aliens engaged in service with the enemy; this for the reason that the subjects of one country cannot be permitted to lend their assistance to protect by insurance the commerce or property of belligerent, alien subjects, or to do anything detrimental too their country's interest. The purpose of war is to cripple the power and exhaust the resources of the enemy, and it is inconsistent that one country should destroy its enemy's property and repay in insurance the value of what has been so destroyed, or that it should in such manner increase the resources of the enemy, or render it aid, and the commencement of war determines, for like reasons, all trading intercourse with the enemy, which prior thereto may have been lawful. All individuals therefore, who compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are public enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.) In the case of an ordinary fire policy, which grants insurance only from year, or for some other specified term it is plain that when the parties become alien enemies, the contractual tie is broken and the contractual rights of the parties, so far as not vested. lost. (Vance, the Law on Insurance, Sec. 44, p. 112.) The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforcible, and since the insured goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner. The Court of Appeals, in deciding the case, stated that the main issue hinges on the question of whether the policy in question became null and void upon the declaration of war between the United States and Germany on December 10, 1941, and its judgment in favor of the respondent corporation was predicated on its conclusion that the policy did not cease to be in force. The Court of Appeals necessarily assumed that, even if the payment by the petitioner to the respondent was involuntary, its action is not tenable in view of the ruling on the validity of the policy. As a matter of fact, the Court of Appeals held that "any intimidation resorted to by the appellee was not unjust but the exercise of its lawful right to claim for and received the payment of the insurance policy," and that the ruling of the Bureau of Financing to the effect that "the appellee was entitled to payment from the appellant was, well founded." Factually, there can be no doubt that the Director of the Bureau of Financing, in ordering the petitioner to pay the claim of the respondent, merely obeyed the instruction of the Japanese Military Administration, as may be seen from the following: "In view of the findings and conclusion of this office contained in its decision on Administrative Case dated February 9, 1943 copy of which was sent to your office and the concurrence therein of the Financial Department of the Japanese Military Administration, and following the instruction of said authority, you are hereby ordered to pay the claim of Messrs. Christern, Huenefeld & Co., Inc. The payment of said claim, however, should be made by means of crossed check." (Emphasis supplied.) It results that the petitioner is entitled to recover what paid to the respondent under the circumstances on this case. However, the petitioner will be entitled to recover only the equivalent, in actual Philippines currency of P92,650 paid on April 19, 1943, in accordance with the rate fixed in the Ballantyne scale.

Wherefore, the appealed decision is hereby reversed and the respondent corporation is ordered to pay to the petitioner the sum of P77,208.33, Philippine currency, less the amount of the premium, in Philippine currency, that should be returned by the petitioner for the unexpired term of the policy in question, beginning December 11, 1941. Without costs. So ordered.

G.R. No. L-14441

December 17, 1966

PEDRO R. PALTING, petitioner, vs. SAN JOSE PETROLEUM INCORPORATED, respondent. BARRERA, J.: This is a petition for review of the order of August 29, 1958, later supplemented and amplified by another dated September 9, 1958, of the Securities and Exchange Commission denying the opposition to, and instead, granting the registration, and licensing the sale in the Philippines, of 5,000,000 shares of the capital stock of the respondent-appellee San Jose Petroleum, Inc. (hereafter referred to as SAN JOSE PETROLEUM), a corporation organized and existing in the Republic of Panama. On September 7, 1956, SAN JOSE PETROLEUM filed with the Philippine Securities and Exchange Commission a sworn registration statement, for the registration and licensing for sale in the Philippines Voting Trust Certificates representing 2,000,000 shares of its capital stock of a par value of $0.35 a share, at P1.00 per share. It was alleged that the entire proceeds of the sale of said securities will be devoted or used exclusively to finance the operations of San Jose Oil Company, Inc. (a domestic mining corporation hereafter to be referred to as SAN JOSE OIL) which has 14 petroleum exploration concessions covering an area of a little less than 1,000,000 hectares, located in the provinces of Pangasinan, Tarlac, Nueva Ecija, La Union, Iloilo, Cotabato, Davao and Agusan. It was the express condition of the sale that every purchaser of the securities shall not receive a stock certificate, but a registered or bearer-voting-trust certificate from the voting trustees named therein James L. Buckley and Austin G.E. Taylor, the first residing in Connecticut, U.S.A., and the second in New York City. While this application for registration was pending consideration by the Securities and Exchange Commission, SAN JOSE PETROLEUM filed an amended Statement on June 20, 1958, for registration of the sale in the Philippines of its shares of capital stock, which was increased from 2,000,000 to 5,000,000, at a reduced offering price of from P1.00 to P0.70 per share. At this time the par value of the shares has also been reduced from $.35 to $.01 per share.1 Pedro R. Palting and others, allegedly prospective investors in the shares of SAN JOSE PETROLEUM, filed with the Securities and Exchange Commission an opposition to registration and licensing of the securities on the grounds that (1) the tie-up between the issuer, SAN JOSE PETROLEUM, a Panamanian corporation and SAN JOSE OIL, a domestic corporation, violates the Constitution of the Philippines, the Corporation Law and the Petroleum Act of 1949; (2) the issuer has not been licensed to transact business in the Philippines; (3) the sale of the shares of the issuer is fraudulent, and works or tends to work a fraud upon Philippine purchasers; and (4) the issuer as an enterprise, as well as its business, is based upon unsound business principles. Answering the foregoing opposition of Palting, et al., the registrant SAN JOSE PETROLEUM claimed that it was a "business enterprise" enjoying parity rights under the Ordinance appended to the Constitution, which parity right, with respect to mineral resources in the Philippines, may be exercised, pursuant to the Laurel-Langley Agreement, only through the medium of a corporation organized under the laws of the Philippines. Thus, registrant which is allegedly qualified to exercise rights under the Parity Amendment, had to do so through the medium of a domestic corporation, which is the SAN JOSE OIL. It refused the contention that the Corporation Law was being violated, by alleging that Section 13 thereof applies only to foreign corporations doing business in the Philippines, and registrant was not doing business here. The mere fact that it was a holding company of SAN JOSE OIL and that registrant undertook the financing of and giving technical assistance to said corporation did not constitute transaction of business in the Philippines. Registrant also denied that the offering for sale in the Philippines of its shares of capital stock was fraudulent or would work or tend to work fraud on

the investors. On August 29, 1958, and on September 9, 1958 the Securities and Exchange Commissioner issued the orders object of the present appeal. The issues raised by the parties in this appeal are as follows: 1. Whether or not petitioner Pedro R. Palting, as a "prospective investor" in respondent's securities, has personality to file the present petition for review of the order of the Securities and Exchange Commission; 2. Whether or not the issue raised herein is already moot and academic; 3. Whether or not the "tie-up" between the respondent SAN JOSE PETROLEUM, a foreign corporation, and SAN JOSE OIL COMPANY, INC., a domestic mining corporation, is violative of the Constitution, the Laurel-Langley Agreement, the Petroleum Act of 1949, and the Corporation Law; and 4. Whether or not the sale of respondent's securities is fraudulent, or would work or tend to work fraud to purchasers of such securities in the Philippines. 1. In answer to the notice and order of the Securities and Exchange Commissioner, published in 2 newspapers of general circulation in the Philippines, for "any person who is opposed" to the petition for registration and licensing of respondent's securities, to file his opposition in 7 days, herein petitioner so filed an opposition. And, the Commissioner, having denied his opposition and instead, directed the registration of the securities to be offered for sale, oppositor Palting instituted the present proceeding for review of said order. Respondent raises the question of the personality of petitioner to bring this appeal, contending that as a mere "prospective investor", he is not an "Aggrieved" or "interested" person who may properly maintain the suit. Citing a 1931 ruling of Utah State Supreme Court2 it is claimed that the phrase "party aggrieved" used in the Securities Act3 and the Rules of Court4 as having the right to appeal should refer only to issuers, dealers and salesmen of securities. It is true that in the cited case, it was ruled that the phrase "person aggrieved" is that party "aggrieved by the judgment or decree where it operates on his rights of property or bears directly upon his interest", that the word "aggrieved" refers to "a substantial grievance, a denial of some personal property right or the imposition upon a party of a burden or obligation." But a careful reading of the case would show that the appeal therein was dismissed because the court held that an order of registration was not final and therefore not appealable. The foregoing pronouncement relied upon by herein respondent was made in construing the provision regarding an order of revocation which the court held was the one appealable. And since the law provides that in revoking the registration of any security, only the issuer and every registered dealer of the security are notified, excluding any person or group of persons having no such interest in the securities, said court concluded that the phrase "interested person" refers only to issuers, dealers or salesmen of securities. We cannot consider the foregoing ruling by the Utah State Court as controlling on the issue in this case. Our Securities Act in Section 7(c) thereof, requires the publication and notice of the registration statement. Pursuant thereto, the Securities and Exchange Commissioner caused the publication of an order in part reading as follows: . . . Any person who is opposed with this petition must file his written opposition with this Commission within said period (2 weeks). . . .

In other words, as construed by the administrative office entrusted with the enforcement of the Securities Act, any person (who may not be "aggrieved" or "interested" within the legal acceptation of the word) is allowed or permitted to file an opposition to the registration of securities for sale in the Philippines. And this is in consonance with the generally accepted principle that Blue Sky Laws are enacted to protect investors and prospective purchasers and to prevent fraud and preclude the sale of securities which are in fact worthless or worth substantially less than the asking price. It is for this purpose that herein petitioner duly filed his opposition giving grounds therefor. Respondent SAN JOSE PETROLEUM was required to reply to the opposition. Subsequently both the petition and the opposition were set for hearing during which the petitioner was allowed to actively participate and did so by cross-examining the respondent's witnesses and filing his memorandum in support of his opposition. He therefore to all intents and purposes became a party to the proceedings. And under the New Rules of Court,5 such a party can appeal from a final order, ruling or decision of the Securities and Exchange Commission. This new Rule eliminating the word "aggrieved" appearing in the old Rule, being procedural in nature,6 and in view of the express provision of Rule 144 that the new rules made effective on January 1, 1964 shall govern not only cases brought after they took effect but all further proceedings in cases then pending, except to the extent that in the opinion of the Court their application would not be feasible or would work injustice, in which event the former procedure shall apply, we hold that the present appeal is properly within the appellate jurisdiction of this Court. The order allowing the registration and sale of respondent's securities is clearly a final order that is appealable. The mere fact that such authority may be later suspended or revoked, depending on future developments, does not give it the character of an interlocutory or provisional ruling. And the fact that seven days after the publication of the order, the securities are deemed registered (Sec. 7, Com. Act 83, as amended), points to the finality of the order. Rights and obligations necessarily arise therefrom if not reviewed on appeal. Our position on this procedural matter that the order is appealable and the appeal taken here is proper is strengthened by the intervention of the Solicitor General, under Section 23 of Rule 3 of the Rules of Court, as the constitutional issues herein presented affect the validity of Section 13 of the Corporation Law, which, according to the respondent, conflicts with the Parity Ordinance and the Laurel-Langley Agreement recognizing, it is claimed, its right to exploit our petroleum resources notwithstanding said provisions of the Corporation Law. 2. Respondent likewise contends that since the order of Registration/Licensing dated September 9, 1958 took effect 30 days from September 3, 1958, and since no stay order has been issued by the Supreme Court, respondent's shares became registered and licensed under the law as of October 3, 1958. Consequently, it is asserted, the present appeal has become academic. Frankly we are unable to follow respondent's argumentation. First it claims that the order of August 29 and that of September 9, 1958 are not final orders and therefor are not appealable. Then when these orders, according to its theory became final and were implemented, it argues that the orders can no longer be appealed as the question of registration and licensing became moot and academic. But the fact is that because of the authority to sell, the securities are, in all probabilities, still being traded in the open market. Consequently the issue is much alive as to whether respondent's securities should continue to be the subject of sale. The purpose of the inquiry on this matter is not fully served just because the securities had passed out of the hands of the issuer and its dealers. Obviously, so long as the securities are outstanding and are placed in the channels of trade and commerce, members of the investing public are entitled to have the question of the worth or legality of the securities resolved one way or another.

But more fundamental than this consideration, we agree with the late Senator Claro M. Recto, who appeared asamicus curiae in this case, that while apparently the immediate issue in this appeal is the right of respondent SAN JOSE PETROLEUM to dispose of and sell its securities to the Filipino public, the real and ultimate controversy here would actually call for the construction of the constitutional provisions governing the disposition, utilization, exploitation and development of our natural resources. And certainly this is neither moot nor academic. 3. We now come to the meat of the controversy the "tie-up" between SAN JOSE OIL on the one hand, and the respondent SAN JOSE PETROLEUM and its associates, on the other. The relationship of these corporations involved or affected in this case is admitted and established through the papers and documents which are parts of the records: SAN JOSE OIL, is a domestic mining corporation, 90% of the outstanding capital stock of which is owned by respondent SAN JOSE PETROLEUM, a foreign (Panamanian) corporation, the majority interest of which is owned by OIL INVESTMENTS, Inc., another foreign (Panamanian) company. This latter corporation in turn is wholly (100%) owned by PANTEPEC OIL COMPANY, C.A., and PANCOASTAL PETROLEUM COMPANY, C.A., both organized and existing under the laws of Venezuela. As of September 30, 1956, there were 9,976 stockholders of PANCOASTAL PETROLEUM found in 49 American states and U.S. territories, holding 3,476,988 shares of stock; whereas, as of November 30, 1956, PANTEPEC OIL COMPANY was said to have 3,077,916 shares held by 12,373 stockholders scattered in 49 American state. In the two lists of stockholders, there is no indication of the citizenship of these stockholders,7 or of the total number of authorized stocks of each corporation, for the purpose of determining the corresponding percentage of these listed stockholders in relation to the respective capital stock of said corporation. Petitioner, as well as the amicus curiae and the Solicitor General8 contend that the relationship between herein respondent SAN JOSE PETROLEUM and its subsidiary, SAN JOSE OIL, violates the Petroleum Law of 1949, the Philippine Constitution, and Section 13 of the Corporation Law, which inhibits a mining corporation from acquiring an interest in another mining corporation. It is respondent's theory, on the other hand, that far from violating the Constitution; such relationship between the two corporations is in accordance with the Laurel-Langley Agreement which implemented the Ordinance Appended to the Constitution, and that Section 13 of the Corporation Law is not applicable because respondent is not licensed to do business, as it is not doing business, in the Philippines. Article XIII, Section 1 of the Philippine Constitution provides: SEC. 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease or concession at the time of the inauguration of this Government established under this Constitution. . . . (Emphasis supplied) In the 1946 Ordinance Appended to the Constitution, this right (to utilize and exploit our natural resources) was extended to citizens of the United States, thus: Notwithstanding the provisions of section one, Article Thirteen, and section eight, Article Fourteen, of the foregoing Constitution, during the effectivity of the Executive Agreement entered into by the President of the Philippines with the President of the United States on the fourth of July, nineteen hundred and forty-six, pursuant to the provisions of Commonwealth Act Numbered Seven hundred and thirty-three, but in no case to extend beyond the third of

July, nineteen hundred and seventy-four, the disposition, exploitation, development, and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines, and the operation of public utilities shall, if open to any person, be open to citizens of the United States, and to all forms of business enterprises owned or controlled, directly or indirectly, by citizens of the United States in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines (Emphasis supplied.) In the 1954 Revised Trade Agreement concluded between the United States and the Philippines, also known as the Laurel-Langley Agreement, embodied in Republic Act 1355, the following provisions appear: ARTICLE VI 1. The disposition, exploitation, development and utilization of all agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces and sources of potential energy, and other natural resources of either Party, and the operation of public utilities, shall, if open to any person, be open to citizens of the other Party and to all forms of business enterprise owned or controlled, directly or indirectly, by citizens of such other Party in the same manner as to and under the same conditions imposed upon citizens or corporations or associations owned or controlled by citizens of the Party granting the right. 2. The rights provided for in Paragraph 1 may be exercised, . . . in the case of citizens of the United States, with respect to natural resources in the public domain in the Philippines, only through the medium of a corporation organized under the laws of the Philippines and at least 60% of the capital stock of which is owned or controlled by citizens of the United States. . . . 3. The United States of America reserves the rights of the several States of the United States to limit the extent to which citizens or corporations or associations owned or controlled by citizens of the Philippines may engage in the activities specified in this Article. The Republic of the Philippines reserves the power to deny any of the rights specified in this Article to citizens of the United States who are citizens of States, or to corporations or associations at least 60% of whose capital stock or capital is owned or controlled by citizens of States, which deny like rights to citizens of the Philippines, or to corporations or associations which are owned or controlled by citizens of the Philippines. . . . (Emphasis supplied.) Re-stated, the privilege to utilize, exploit, and develop the natural resources of this country was granted, by Article XIII of the Constitution, to Filipino citizens or to corporations or associations 60% of the capital of which is owned by such citizens. With the Parity Amendment to the Constitution, the same right was extended to citizens of the United States and business enterprises owned or controlled directly or indirectly, by citizens of the United States. There could be no serious doubt as to the meaning of the word "citizens" used in the aforementioned provisions of the Constitution. The right was granted to 2 types of persons: natural persons (Filipino or American citizens) and juridical persons (corporations 60% of which capital is owned by Filipinos and business enterprises owned or controlled directly or indirectly, by citizens of the United States). In American law, "citizen" has been defined as "one who, under the constitution and laws of the United States, has a right to vote for representatives in congress and other public officers, and who is qualified to fill offices in the gift of the people. (1 Bouvier's Law Dictionary, p. 490.) A citizen is

One of the sovereign people. A constituent member of the sovereignty, synonymous with the people." (Scott v. Sandford, 19 Ho. [U.S.] 404, 15 L. Ed. 691.) A member of the civil state entitled to all its privileges. (Cooley, Const. Lim. 77. See U.S. v. Cruikshank 92 U.S. 542, 23 L. Ed. 588; Minor v. Happersett 21 Wall. [U.S.] 162, 22 L. Ed. 627.) These concepts clarified, is herein respondent SAN JOSE PETROLEUM an American business enterprise entitled to parity rights in the Philippines? The answer must be in the negative, for the following reasons: Firstly It is not owned or controlled directly by citizens of the United States, because it is owned and controlled by a corporation, the OIL INVESTMENTS, another foreign (Panamanian) corporation. Secondly Neither can it be said that it is indirectly owned and controlled by American citizens through the OIL INVESTMENTS, for this latter corporation is in turn owned and controlled, not by citizens of the United States, but still by two foreign (Venezuelan) corporations, the PANTEPEC OIL COMPANY and PANCOASTAL PETROLEUM. Thirdly Although it is claimed that these two last corporations are owned and controlled respectively by 12,373 and 9,979 stockholders residing in the different American states, there is no showing in the certification furnished by respondent that the stockholders of PANCOASTAL or those of them holding the controlling stock, are citizens of the United States. Fourthly Granting that these individual stockholders are American citizens, it is yet necessary to establish that the different states of which they are citizens, allow Filipino citizens or corporations or associations owned or controlled by Filipino citizens, to engage in the exploitation, etc. of the natural resources of these states (see paragraph 3, Article VI of the Laurel-Langley Agreement, supra). Respondent has presented no proof to this effect. Fifthly But even if the requirements mentioned in the two immediately preceding paragraphs are satisfied, nevertheless to hold that the set-up disclosed in this case, with a long chain of intervening foreign corporations, comes within the purview of the Parity Amendment regarding business enterprises indirectly owned or controlled by citizens of the United States, is to unduly stretch and strain the language and intent of the law. For, to what extent must the word "indirectly" be carried? Must we trace the ownership or control of these various corporationsad infinitum for the purpose of determining whether the American ownership-control-requirement is satisfied? Add to this the admitted fact that the shares of stock of the PANTEPEC and PANCOASTAL which are allegedly owned or controlled directly by citizens of the United States, are traded in the stock exchange in New York, and you have a situation where it becomes a practical impossibility to determine at any given time, the citizenship of the controlling stock required by the law. In the circumstances, we have to hold that the respondent SAN JOSE PETROLEUM, as presently constituted, is not a business enterprise that is authorized to exercise the parity privileges under the Parity Ordinance, the LaurelLangley Agreement and the Petroleum Law. Its tie-up with SAN JOSE OIL is, consequently, illegal. What, then, would be the Status of SAN JOSE OIL, about 90% of whose stock is owned by SAN JOSE PETROLEUM? This is a query which we need not resolve in this case as SAN JOSE OIL is not a party and it is not necessary to do so to dispose of the present controversy. But it is a matter that probably the Solicitor General would want to look into. There is another issue which has been discussed extensively by the parties. This is whether or not an American mining corporation may lawfully "be in anywise interested in any other corporation

(domestic or foreign) organized for the purpose of engaging in agriculture or in mining," in the Philippines or whether an American citizen owning stock in more than one corporation organized for the purpose of engaging in agriculture or in mining, may own more than 15% of the capital stock then outstanding and entitled to vote, of each of such corporations, in view of the express prohibition contained in Section 13 of the Philippine Corporation Law. The petitioner in this case contends that the provisions of the Corporation Law must be applied to American citizens and business enterprise otherwise entitled to exercise the parity privileges, because both the Laurel-Langley Agreement (Art. VI, par. 1) and the Petroleum Act of 1948 (Art. 31), specifically provide that the enjoyment by them of the same rights and obligations granted under the provisions of both laws shall be "in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines." The petitioner further contends that, as the enjoyment of the privilege of exploiting mineral resources in the Philippines by Filipino citizens or corporations owned or controlled by citizens of the Philippines (which corporation must necessarily be organized under the Corporation Law), is made subject to the limitations provided in Section 13 of the Corporation Law, so necessarily the exercise of the parity rights by citizens of the United States or business enterprise owned or controlled, directly or indirectly, by citizens of the United States, must equally be subject to the same limitations contained in the aforesaid Section 13 of the Corporation Law. In view of the conclusions we have already arrived at, we deem it not indispensable for us to pass upon this legal question, especially taking into account the statement of the respondent (SAN JOSE PETROLEUM) that it is essentially a holding company, and as found by the Securities and Exchange Commissioner, its principal activity is limited to the financing and giving technical assistance to SAN JOSE OIL. 4. Respondent SAN JOSE PETROLEUM, whose shares of stock were allowed registration for sale in the Philippines, was incorporated under the laws of Panama in April, 1956 with an authorized capital stock of $500,000.00, American currency, divided into 50,000,000 shares at par value of $0.01 per share. By virtue of a 3-party Agreement of June 14, 1956, respondent was supposed to have received from OIL INVESTMENTS 8,000,000 shares of the capital stock of SAN JOSE OIL (at par value of $0.01 per share), plus a note for $250,000.00 due in 6 months, for which respondent issued in favor of OIL INVESTMENTS 16,000,000 shares of its capital stock, at $0.01 per share or with a value of $160,000.00, plus a note for $230,297.97 maturing in 2 years at 6% per annum interest,9 and the assumption of payment of the unpaid price of 7,500,000 (of the 8,000,000 shares of SAN JOSE OIL). On June 27, 1956, the capitalization of SAN JOSE PETROLEUM was increased from $500,000.00 to $17,500,000.00 by increasing the par value of the same 50,000,000 shares, from $0.01 to $0.35. Without any additional consideration, the 16,000,000 shares of $0.01 previously issued to OIL INVESTMENTS with a total value of $160,000.00 were changed with 16,000,000 shares of the recapitalized stock at $0.35 per share, or valued at $5,600,000.00. And, to make it appear that cash was received for these re-issued 16,000,000 shares, the board of directors of respondent corporation placed a valuation of $5,900,000.00 on the 8,000,000 shares of SAN JOSE OIL (still having par value of $0.10 per share) which were received from OIL INVESTMENTS as partconsideration for the 16,000,000 shares at $0.01 per share. In the Balance Sheet of respondent, dated July 12, 1956, from the $5,900,000.00, supposedly the value of the 8,000,000 shares of SAN JOSE OIL, the sum of $5,100,000.00 was deducted, corresponding to the alleged difference between the "value" of the said shares and the subscription price thereof which is $800,000.00 (at $0.10 per share). From this $800,000.00, the subscription price of the SAN JOSE OIL shares, the amount of $319,702.03 was deducted, as allegedly unpaid subscription price, thereby giving a difference of $480,297.97, which was placed as the amount allegedly paid in on the subscription price of the 8,000,000 SAN JOSE OIL shares. Then, by adding

thereto the note receivable from OIL INVESTMENTS, for $250,000.00 (part-consideration for the 16,000,000 SAN JOSE PETROLEUM shares), and the sum of $6,516.21, as deferred expenses, SAN JOSE PETROLEUM appeared to have assets in the sum of $736,814.18. These figures are highly questionable. Take the item $5,900,000.00 the valuation placed on the 8,000,000 shares of SAN JOSE OIL. There appears no basis for such valuation other than belief by the board of directors of respondent that "should San Jose Oil Company be granted the bulk of the concessions applied for upon reasonable terms, that it would have a reasonable value of approximately $10,000,000." 10 Then, of this amount, the subscription price of $800,000.00 was deducted and called it "difference between the (above) valuation and the subscription price for the 8,000,000 shares." Of this $800,000.00 subscription price, they deducted the sum of $480,297.97 and the difference was placed as the unpaid portion of the subscription price. In other words, it was made to appear that they paid in $480,297.97 for the 8,000,000 shares of SAN JOSE OIL. This amount ($480,297.97) was supposedly that $250,000.00 paid by OIL INVESMENTS for 7,500,000 shares of SAN JOSE OIL, embodied in the June 14 Agreement, and a sum of $230,297.97 the amount expended or advanced by OIL INVESTMENTS to SAN JOSE OIL. And yet, there is still an item among respondent's liabilities, for $230,297.97 appearing as note payable to Oil Investments, maturing in two (2) years at six percent (6%) per annum. 11 As far as it appears from the records, for the 16,000,000 shares at $0.35 per share issued to OIL INVESTMENTS, respondent SAN JOSE PETROLEUM received from OIL INVESTMENTS only the note for $250,000.00 plus the 8,000,000 shares of SAN JOSE OIL, with par value of $0.10 per share or a total of $1,050,000.00 the only assets of the corporation. In other words, respondent actually lost $4,550,000.00, which was received by OIL INVESTMENTS. But this is not all. Some of the provisions of the Articles of Incorporation of respondent SAN JOSE PETROLEUM are noteworthy; viz: (1) the directors of the Company need not be shareholders; (2) that in the meetings of the board of directors, any director may be represented and may vote through a proxy who also need not be a director or stockholder; and (3) that no contract or transaction between the corporation and any other association or partnership will be affected, except in case of fraud, by the fact that any of the directors or officers of the corporation is interested in, or is a director or officer of, such other association or partnership, and that no such contract or transaction of the corporation with any other person or persons, firm, association or partnership shall be affected by the fact that any director or officer of the corporation is a party to or has an interest in, such contract or transaction, or has in anyway connected with such other person or persons, firm, association or partnership; and finally, that all and any of the persons who may become director or officer of the corporation shall be relieved from all responsibility for which they may otherwise be liable by reason of any contract entered into with the corporation, whether it be for his benefit or for the benefit of any other person, firm, association or partnership in which he may be interested. These provisions are in direct opposition to our corporation law and corporate practices in this country. These provisions alone would outlaw any corporation locally organized or doing business in this jurisdiction. Consider the unique and unusual provision that no contract or transaction between the company and any other association or corporation shall be affected except in case of fraud, by the fact that any of the directors or officers of the company may be interested in or are directors or officers of such other association or corporation; and that none of such contracts or transactions of this company with any person or persons, firms, associations or corporations shall be affected by the

fact that any director or officer of this company is a party to or has an interest in such contract or transaction or has any connection with such person or persons, firms associations or corporations; and that any and all persons who may become directors or officers of this company are hereby relieved of all responsibility which they would otherwise incur by reason of any contract entered into which this company either for their own benefit, or for the benefit of any person, firm, association or corporation in which they may be interested. The impact of these provisions upon the traditional judiciary relationship between the directors and the stockholders of a corporation is too obvious to escape notice by those who are called upon to protect the interest of investors. The directors and officers of the company can do anything, short of actual fraud, with the affairs of the corporation even to benefit themselves directly or other persons or entities in which they are interested, and with immunity because of the advance condonation or relief from responsibility by reason of such acts. This and the other provision which authorizes the election of non-stockholders as directors, completely disassociate the stockholders from the government and management of the business in which they have invested. To cap it all on April 17, 1957, admittedly to assure continuity of the management and stability of SAN JOSE PETROLEUM, OIL INVESTMENTS, as holder of the only subscribed stock of the former corporation and acting "on behalf of all future holders of voting trust certificates," entered into a voting trust agreement12 with James L. Buckley and Austin E. Taylor, whereby said Trustees were given authority to vote the shares represented by the outstanding trust certificates (including those that may henceforth be issued) in the following manner: (a) At all elections of directors, the Trustees will designate a suitable proxy or proxies to vote for the election of directors designated by the Trustees in their own discretion, having in mind the best interests of the holders of the voting trust certificates, it being understood that any and all of the Trustees shall be eligible for election as directors; (b) On any proposition for removal of a director, the Trustees shall designate a suitable proxy or proxies to vote for or against such proposition as the Trustees in their own discretion may determine, having in mind the best interest of the holders of the voting trust certificates; (c) With respect to all other matters arising at any meeting of stockholders, the Trustees will instruct such proxy or proxies attending such meetings to vote the shares of stock held by the Trustees in accordance with the written instructions of each holder of voting trust certificates. (Emphasis supplied.) It was also therein provided that the said Agreement shall be binding upon the parties thereto, their successors, and upon all holders of voting trust certificates. And these are the voting trust certificates that are offered to investors as authorized by Security and Exchange Commissioner. It can not be doubted that the sale of respondent's securities would, to say the least, work or tend to work fraud to Philippine investors. FOR ALL THE FOREGOING CONSIDERATIONS, the motion of respondent to dismiss this appeal, is denied and the orders of the Securities and Exchange Commissioner, allowing the registration of Respondent's securities and licensing their sale in the Philippines are hereby set aside. The case is remanded to the Securities and Exchange Commission for appropriate action in consonance with this decision. With costs. Let a copy of this decision be furnished the Solicitor General for whatever action he may deem advisable to take in the premises. So ordered.