BAYLA VS SILANG TRAFFIC

The case is about recovery by petitioners of a certain sum of money which they
had paid severally to respondent corporation on account of shares of stock they
individually agreed to take and pay for a certain specified terms and conditions.
Respondent, Silang Traffic Co., Inc., entered into an agreement for the sale on
installment of its shares of stock with various individuals, including the petitioners
Sofrio Bayla. After the latter had paid several installments for the purchase price
of said shares of stock, the petitioners defaulted in the payment of the
subsequent installments. Thus, the board of directors passed a resolution
authorizing for the refund of the amounts paid and the reversion of the shares of
stock to the corporation. Despite the said board resolution, the amounts paid by
petitioners were not returned to them since the board resolution was revoked and
cancelled by a subsequent resolution. Thus, petitioners instituted an action in the
Court of First Instance of Cavite to recover the sums of money paid. The
respondent contends that the resolution does not apply to petitioners as at the
time the resolution was passed, the shares had already automatically been
reverted back to the corporation, and that the resolution was no longer effective
as it was cancelled by a subsequent resolution passed by the Board. The Court of
First Instance declared that the shares of stock had already been forfeited and
absolved the respondent from the complaint.
ISSUE:
WON THE CONTRACT IS A SUBSCRIPTION CONTRACT OR CONTRACT OF SALE
HELD:
The parties litigant, the trial court, and the Court of Appeals have interpreted or
considered the said agreement as a contract of subscription to the capital stock of
the respondent corporation. It should be noted, however, that said agreement is
entitled "Agreement for Installment Sale of Shares in the Silang Traffic Company,
Inc.,"; that while the purchaser is designated as "subscriber," the corporation is
described as "seller"; that the agreement was entered into on March 30, 1935,
long after the incorporation and organization of the corporation, which took place
in 1927; and that the price of the stock was payable in quarterly installments
spread over a period of five years. It also appears that in civil case No. 3125 of the
Court of First Instance of Cavite mentioned in the resolution of August 1, 1937, the
right of the corporation to sell the shares of stock to the person named in said
resolution (including herein petitioners) was impugned by the plaintiffs in said
case, who claimed a preferred right to buy said shares.
Whether a particular contract is a subscription or a sale of stock is a matter of
construction and depends upon its terms and the intention of the parties (4
Fletcher, Cyclopedia of Corporation [permanent edition], 29, cited in Salmon,
Dexter & Co. vs. Unson (47 Phil. 649, 652). In the Unson case just cited, this Court
held that a subscription to stock in an existing corporation is, as
between the subscriber and the corporation, simply a contract of
purchase and sale.
*****It seems clear from the terms of the contracts in question that they
are contracts of sale and not of subscription. The lower courts erred in
overlooking the distinction between subscription and purchase "A
subscription, properly speaking, is the mutual agreement of the
subscribers to take and pay for the stock of a corporation, while a
purchase is an independent agreement between the individual and the
corporation to buy shares of stock from it at stipulated price." (18 C. J.
S., 760.) In some particulars the rules governing subscriptions and sales

of shares are different. For instance, the provisions of our Corporation

Law regarding calls for unpaid subscription and assessment of stock
(sections 37-50) do not apply to a purchase of stock. Likewise the rule
that corporation has no legal capacity to release an original subscriber
to its capital stock from the obligation to pay for his shares, is
inapplicable to a contract of purchase of shares.

VELASCO VS POIZAT
FACTS:
the plaintiff, as assignee in insolvency of "The Philippine Chemical Product
Company" (Ltd.) is seeking to recover of the defendant, Jean M. Poizat, the sum of
P1,500, upon a subscription made by him to the corporate stock of said company.
It appears that the corporation in question was originally organized by several
residents of the city of Manila, where the company had its principal place of
business, with a capital of P50,000, divided into 500 shares. The defendant
subscribed for 20 shares of the stock of the company, an paid in upon his
subscription the sum of P500, the par value of 5 shares . The action was brought
to recover the amount subscribed upon the remaining shares.
It appears that the defendant was a stock holder in the company from the
inception of the enterprise, and for sometime acted as its treasurer and manager.
While serving in this capacity he called in and collected all subscriptions to the
capital stock of the company, except the aforesaid 15 shares subscribed by
himself and another 15 shares owned by Jose R. Infante.
Upon July 13, 1914, a meeting of the board of directors of the company was held
at which a majority of the stock was presented. Up[on this occasion two
resolutions, important to be here noted, were adopted. The first was a proposal
that the directors, or shareholders, of the company should make good by new
subscriptions, in proportion to their respective holdings, 15 shares which had been
surrendered by Infante.
The other proposition was o the effect that Juan [Jean] M. Poizat, who was absent,
should be required to pay the amount of his subscription upon the 15 shares for
which he was still indebted to the company. The resolution further provided that,
in case he should refuse to make such payment, the management of the
corporation should be authorized to undertake judicial proceedings against him.
When notification of this resolution reached Poizat through the mail it evoked from
him a manifestation of surprise and pain, which found expression in a letter
written by him in reply, dated July 27, 1914, and addressed to Velasco, as
treasurer and administrator.
ISSUE:
WON Poizat is liable to the unpaid subscription.
HELD:
We think that Poizat is liable upon this subscription. A stock subscription is a
contract between the corporation on one side, and the subscriber on the other,
and courts will enforce it for or against either. It is a rule, accepted by the
Supreme Court of the United States, that a subscription for shares of stock does
not require an express promise to pay the amount subscribed, as the law implies
a promise to pay on the part of the subscriber. (7 Ruling Case Law, sec. 191.)
Section 36 of the Corporation Law clearly recognizes that a stock subscription is

subsisting liability from the time the subscription is made, since it requires the
subscriber to pay interest quarterly from that date unless he is relieved from such
liability by the by-laws of the corporation. The subscriber is as much bound to pay
the amount of the share subscribed by him as he would be to pay any other debt,
and the right of the company to demand payment is no less incontestable.
The provisions of the Corporation Law (Act No. 1459) given recognition of two
remedies for the enforcement of stock subscriptions. The first and most special
remedy given by the statute consists in permitting the corporation to put up the
unpaid stock for sale and dispose of it for the account of the delinquent
subscriber. In this case the provisions of section 38 to 48, inclusive , of the
Corporation Law are applicable and must be followed. The other remedy is by
action in court, concerning which we find in section 49 the following provision:
Nothing in this Act shall prevent the directors from collecting, by action in any
court of proper jurisdiction, the amount due on any unpaid subscription, together
with accrued interest and costs and expenses incurred.
It is generally accepted doctrine that the statutory right to sell the subscriber's
stock is merely a remedy in addition to that which proceeds by action in court;
and it has been held that the ordinary legal remedy by action exists even though
no express mention thereof is made in the statute. (Instone vs. Frankfort Bridge
Co., 2 Bibb [Ky.], 576; 5 Am. Dec., 638.)
No attempt is made in the Corporation Law to define the precise conditions under
which an action may be maintained upon a stock subscription, as such conditions
should be determined with reference to the rules governing contract liability in
general; and where it appears as in this case that a matured stock subscription is
unpaid, none of the provisions contained in section 38 to 48, inclusive, of Act No.
1459 can be permitted to obstruct or impede the action to recover thereon. By
virtue of the first subsection of section 36 of the Insolvency Law (Act No. 1956)
the assignee of the insolvent corporation succeeds to all the corporate rights of
action vested in the corporation prior to its insolvency; and the assignee therefore
has the same freedom with respect to suing upon the stock subscription as the
directors themselves would have had under section 49 above cited.
It evidently cannot be permitted that a subscriber should escape from his lawful
obligation by reason of the failure of the officers of the corporation to perform
their duty in making a call; and when the original model of making the call
becomes impracticable, the obligation must be treated as due upon demand. If
the corporation must be treated still an active entity, and this action should be
dismissed for irregularity in the making of the call, other steps could be taken by
the board to cure the defect and another action could be brought; but where the
company is being wound up, no such procedure would be practicable. The better
doctrine is that when insolvency supervenes all unpaid subscriptions become at
once due and enforceable.
PNB VS BITULOK SAWMILL
FACTS:
the Philippine National Bank, as creditor, and therefore the real party in interest,
was allowed by the lower court to substitute the receiver of the Philippine Lumber
Distributing Agency in these respective actions for the recovery from defendant
lumber producers the balance of their stock subscriptions. The amount sought to
be collected from defendants-appellees Bitulok Sawmill, Inc., Dingalan Lumber
Co., Inc., and Sierra Madre Lumber Co., Inc., is P5,000.00, defendants-appellees
having made a partial payment of P15,000.00 of their total subscription worth
P20,000.00; from defendant-appellee Nasipit Lumber Co., Inc., the sum of

P10,000.00, defendant-appellee having made a partial payment of P10,000.00 of

its total subscription worth P20,000.00; from defendant-appellee Woodworks, Inc.,
the sum of P10,886.00, defendant-appellee having made a partial payment of
P9,114.00 of its total subscription worth P20,000.00; from defendant-appellee
Gonzalo Puyat the sum of P10,000.00, defendant-appellee having made a partial
payment of P10,000.00 of his total subscription worth P20,000.00; from
defendant-appellee Tomas Morato the sum of P10,000.00, defendant-appellee
having made a partial payment of P10,000.00 of his total subscription worth
P20,000.00; from defendant-appellee Findlay Millar Lumber Co., Inc., the sum of
P10,000.00, defendant-appellee having made a partial payment of P10,000.00 of
its total subscription worth P20,000.00; from defendant-appellee Insular Lumber
Co., Inc., the sum of P5,000.00, defendant-appellee having made a partial
payment of P15,000.00 of its total subscription worth P20,000.00; from defendantappellee Anakan Lumber Co., Inc., the sum of P15,000.00, defendant-appellee
having made a partial payment of P5,000.00 of its total subscription worth
P20,000.00; and from defendant-appellee Cantilan Lumber Co., Inc., the sum of
P7,500.00, defendant-appellee having made a partial payment of P2,500.00 of its
total subscription worth P10,000.00, plus interest at the legal rate from the filing
of the suits and the costs of the suits in all the nine (9) cases.
The Philippine Lumber Distributing Agency, Inc., according to the lower court,
"was organized sometime in the early part of 1947 upon the initiative and
insistence of the late President Manuel Roxas of the Republic of the Philippines
who for the purpose, had called several conferences between him and the
subscribers and organizers of the Philippine Lumber Distributing Agency, Inc." 5
The purpose was praiseworthy, to insure a steady supply of lumber, which could
be sold at reasonable prices to enable the war sufferers to rehabilitate their
devastated homes. The decision continues: "He convinced the lumber producers
to form a lumber cooperative and to pool their sources together in order to wrest,
particularly, the retail trade from aliens who were acting as middlemen in the
distribution of lumber. At the beginning, the lumber producers were reluctant to
organize the cooperative agency as they believed that it would not be easy to
eliminate from the retail trade the alien middlemen who had been in this business
from time immemorial, but because the late President Roxas made it clear that
such a cooperative agency would not be successful without a substantial working
capital which the lumber producers could not entirely shoulder, and as an
inducement he promised and agreed to finance the agency by making the
Government invest P9.00 by way of counterpart for every peso that the members
would invest therein,...." 6
This was the assurance relied upon according to the decision, which stated that
the amount thus contributed by such lumber producers was not enough for the
operation of its business especially having in mind the primary purpose of putting
an end to alien domination in the retail trade of lumber products. Nor was there
any appropriation by the legislature of the counterpart fund to be put up by the
Government, namely, P9.00 for every peso invested by defendant lumber
producers. Accordingly, "the late President Roxas instructed the Hon. Emilio
Abello, then Executive Secretary and Chairman of the Board of Directors of the
Philippine National Bank, for the latter to grant said agency an overdraft in the
original sum of P250,000.00 which was later increased to P350,000.00, which was
approved by said Board of Directors of the Philippine National Bank on July 28,
1947, payable on or before April 30, 1958, with interest at the rate of 6% per
annum, and secured by the chattel mortgages on the stock of lumber of said
agency." 7 The Philippine Government did not invest the P9.00 for every peso
coming from defendant lumber producers. The loan extended to the Philippine
Lumber Distributing Agency by the Philippine National Bank was not paid. Hence,
these suits.
ISSUE:

HELD:
this Court held: "It is established doctrine that subscriptions to the capital of a
corporation constitute a fund to which creditors have a right to look for
satisfaction of their claims and that the assignee in insolvency can maintain an
action upon any unpaid stock subscription in order to realize assets for the
payment of its debt.... A corporation has no power to release an original
subscriber to its capital stock from the obligation of paying for his shares, without
a valuable consideration for such release; and as against creditors a reduction of
the capital stock can take place only in the manner and under the conditions
prescribed by the statute or the charter or the articles of incorporation. Moreover,
strict compliance with the statutory regulations is necessary...." The Poizat
doctrine found acceptance in later cases. 11 One of the latest cases, Lingayen
Gulf Electric Power v. Baltazar, 12 Speaks to this effect: "In the case of Velasco v.
Poizat, 13 the corporation involved was insolvent, in which case all unpaid stock
subscriptions become payable on demand and are immediately recoverable in an
action instituted by the assignee."
It would be unwarranted to ascribe to the late President Roxas the view that the
payment of the stock subscriptions, as thus required by law, could be condoned in
the event that the counterpart fund to be invested by the Government would not
be available. Even if such were the case, however, and such a promise were in
fact made, to further the laudable purpose to which the proposed corporation
would be devoted and the possibility that the lumber producers would lose money
in the process, still the plain and specific wording of the applicable legal provision
as interpreted by this Court must be controlling. It is a well-settled principle that
with all the vast powers lodged in the Executive, he is still devoid of the
prerogative of suspending the operation of any statute or any of its terms.
GOVERNMENT OF PH VS MANILA RAILROAD
FACTS:
This is a petition in the Supreme Court of the extraordinary legal writ of
mandamus presented by the Government of the Philippine Islands, praying that
the writ be issued to compel the Manila Railroad Company and Jose Paez, as its
manager, to provide and equip the telegraph poles of said company between the
municipality of Paniqui, Province of Tarlac, and the Municipality of San Fernando,
Province of La Union, with crosspieces for six telegraph wires belonging to the
Government, which, it is alleged, are necessary for public service between said
municipalities.
It is admitted that the present poles and crosspieces between said municipalities
are sufficient to carry four telegraph wires and that they do now carry four
telegraph wires, by virtue of an agreement between the respondents and the
Bureau of the Posts of the Philippine Government. It is admitted that the poles and
not sufficient to carry six telegraph wires.
The petitioner relies upon the provisions of section 84 of act No. 1459. Act No.
1459 is the General Corporation Law and was adopted by the United States
Philippine Commission on March 1, 1906. (Vol. 5, Pub. Laws, pp. 224-268.) Section
84 of the said Act provides:
The railroad corporation shall establish along the whole length of the road a
telegraph line for the use of the railroad. The posts of this line may be used for
Government wires and shall be of sufficient length and strength and equipped
with sufficient crosspiece to carry the number of wires which the Government may
consider necessary for the public service. The establishment, protection, and

maintenance of the wires and stations necessary for the public service shall be at
the cost of the Government. (Vol. 5, P. L., p. 247.)
The plaintiff contends that under said section 84 the defendant company is
required to erect and maintain posts for its telegraph wires, of sufficient length
and strength, and equipped with sufficient crosspieces to carry the number of
wires which the Government may consider necessary for the public service, and
that six wires are now necessary for the public service.
ISSUE:
whether the dependant company is required to provide and equip its telegraph
poles with crosspieces to carry six telegraph wires of the Government, or whether
it is only required to furnish poles with crosspieces sufficient to carry four wires
only.
HELD:
Act No. 1510 is the charter of Manila Railroad Company and constitute a contract
between it and the Governmemnt, it would seem that the company is governd by
its contract and not by the provisions of any general law upon questions covered
by said contract. From a reading of the said charter or contract it would be seen
that there is no indication that the Government intended to impose upon said
company any other conditions as obligations not expressly found in said charter
or contract. If that is true, then certainly the Government cannot impose upon
said company any conditions or obligations found in any general law, which does
not expressly modify said contract.
Section 84 of the Corporation Law (Act No. 1459) was intended to apply to all
railways in the Philippine Islands which did not have a special charter contract. Act
No. 1510 applies only to the Manila Railroad Company, one of the respondents,
and being a special charter of said company, its adoption had the effect of
superseding the provisions of the general Corporation Law which are applicable to
railraods in general. The special charter (Act No. 1510) had the effect of
superseding the general Corporation Law upon all matters covered by said special
charter. Said Act, inasmuch as it contained a special provision relating to the
erection of telegraph and telephone poles, and the number of wires which the
Government might place thereon, superseded the general law upon that question.
Act No. 1510 is a special charter of the respondent company. It constitutes a
contract between the respondent company and the state; and the state and the
grantee of a charter are equally bound by its provisions. For the state to impose
an obligation or a duty upon the respondent company, which is not expressly
provided for in the charter (Act No. 1510), would amount to a violation of said
contract between the state and the respondent company. The provisions of Act
No. 1459 relating to the number of wires which the Government may place upon
the poles of the company are different and more enerous than the provisions of
the charter upon the same question. Therefore, to allow the plaintiff to require of
the respondent company a compliance with said section 84 of Act No. 1459, would
be to require of the respondent company and the performance of an obligation
which is not imposed upon it by its charter. The charter of a corporation is a
contract between three parties: (a) it is a contract between the state and the
corporation to which the charter is granted; (b) it is a contact between the
stockholders and the state and (c) it is also a contract between the corporation
and its stockholders. (Cook on Corporations, vol. 2, sec. 494 and cases cited.)
The question is not whether Act No. 1510 repealed Act No. 1459; but whether,
after the adoption of Act No. 1510, the respondents are obliged to comply with the
special provision above mentioned, contained in Act No. 1459. We must answer

that question in the native. Both laws are still in force, unless otherwise repealed.
Act No. 1510 is applicable to respondents upon the question before us, while Act
No. 1459 is not applicable.
RURAL BANK VS CA
FACTS:
On June 10, 1979, Clemente G. Guerrero, President of the Rural Bank of Salinas,
Inc., executed a Special Power of Attorney in favor of his wife, private respondent
Melania Guerrero, giving and granting the latter full power and authority to sell or
otherwise dispose of and/or mortgage 473 shares of stock of the Bank registered
in his name (represented by the Bank's stock certificates nos. 26, 49 and 65), to
execute the proper documents therefor, and to receive and sign receipts for the
dispositions.
On February 27, 1980, and pursuant to said Special Power of Attorney, private
respondent Melania Guerrero, as Attorney-in-Fact, executed a Deed of Assignment
for 472 shares out of the 473 shares, in favor of private respondents Luz Andico
(457 shares), Wilhelmina Rosales (10 shares) and Francisco Guerrero, Jr. (5
shares).
Almost four months later, or two (2) days before the death of Clemente Guerrero
on June 24, 1980, private respondent Melania Guerrero, pursuant to the same
Special Power of Attorney, executed a Deed of Assignment for the remaining one
(1) share of stock in favor of private respondent Francisco Guerrero, Sr.
Subsequently, private respondent Melania Guerrero presented to petitioner Rural
Bank of Salinas the two (2) Deeds of Assignment for registration with a request for
the transfer in the Bank's stock and transfer book of the 473 shares of stock so
assigned, the cancellation of stock certificates in the name of Clemente G.
Guerrero, and the issuance of new stock certificates covering the transferred
shares of stocks in the name of the new owners thereof. However, petitioner Bank
denied the request of respondent Melania Guerrero.
On December 5, 1980, private respondent Melania Guerrero filed with the
Securities and Exchange Commission" (SEC) an action for mandamus against
petitioners Rural Bank of Salinas, its President and Corporate Secretary. The case
was docketed as SEC Case No. 1979.
Petitioners filed their Answer with counterclaim on December 19, 1980 alleging
the upon the death of Clemente G. Guerrero, his 473 shares of stock became the
property of his estate, and his property and that of his widow should first be
settled and liquidated in accordance with law before any distribution can be
effected so that petitioners may not be a party to any scheme to evade payment
of estate or inheritance tax and in order to avoid liability to any third persons or
creditors of the late Clemente G. Guerrero.
On January 29, 1981, a motion for intervention was filed by Maripol Guerrero, a
legally adopted daughter of the late Clemente G. Guerrero and private respondent
Melania Guerrero, who stated therein that on November 26, 1980 (almost two
weeks before the filing of the petition for Mandamus) a Petition for the
administration of the estate of the late Clemente G. Guerrero had been filed with
the Regional Trial Court, Pasig, Branch XI, docketed as Special Proceedings No.
9400. Maripol Guerrero further claimed that the Deeds of Assignment for the
subject shares of stock are fictitious and antedated; that said conveyances are
donations since the considerations therefor are below the book value of the
shares, the assignees/private respondents being close relatives of private
respondent Melania Guerrero; and that the transfer of the shares in question to

assignees/private respondents, other than private respondent Melania Guerrero,

would deprive her (Maripol Guerrero) of her rightful share in the inheritance. The
SEC hearing officer denied the Motion for Intervention for lack of merit. On appeal,
the SEC En Banc affirmed the decision of the hearing officer.
Intervenor Guerrero filed a complaint before the then Court of First Instance of
Rizal, Quezon City Branch, against private respondents for the annulment of the
Deeds of Assignment, docketed as Civil Case No. Q-32050. Petitioners, on the
other hand, filed a Motion to Dismiss and/or to Suspend Hearing of SEC Case No.
1979 until after the question of whether the subject Deeds of Assignment are
fictitious, void or simulated is resolved in Civil Case No. Q-32050. The SEC Hearing
Officer denied said motion.
On December 10, 1984, the SEC Hearing Officer rendered a Decision granting the
writ of Mandamus prayed for by the private respondents and directing petitioners
to cancel stock certificates nos. 26, 49 and 65 of the Bank, all in the name of
Clemente G. Guerrero, and to issue new certificates in the names of private
respondents, except Melania Guerrero.
ISSUE:
whether or not the respondent court erred in sustaining the Securities and
Exchange Commission when it compelled by Mandamus the Rural Bank of Salinas
to register in its stock and transfer book the transfer of 473 shares of stock to
private respondents.
HELD:
Respondent SEC correctly ruled in favor of the registering of the shares of stock in
question in private respondent's names. Such ruling finds support under Section
63 of the Corporation Code, to wit:
Sec. 63. . . . Shares of stock so issued are personal property and may be
transferred by delivery of the certificate or certificates indorsed by the owner or
his attorney-in-fact or other person legally authorized to make the transfer. No
transfer, however, shall be valid, except as between the parties, until the transfer
is recorded in the books of the corporation
In the case of Fleisher vs. Botica Nolasco, 47 Phil. 583, the Court interpreted Sec.
63 in his wise:
Said Section (Sec. 35 of Act 1459 [now Sec. 63 of the Corporation Code])
contemplates no restriction as to whom the stocks may be transferred. It does not
suggest that any discrimination may be created by the corporation in favor of, or
against a certain purchaser. The owner of shares, as owner of personal property,
is at liberty, under said section to dispose them in favor of whomever he pleases,
without limitation in this respect, than the general provisions of law. . . .
The only limitation imposed by Section 63 of the Corporation Code is when the
corporation holds any unpaid claim against the shares intended to be transferred,
which is absent here.
A corporation, either by its board, its by-laws, or the act of its officers, cannot
create restrictions in stock transfers, because:
. . . Restrictions in the traffic of stock must have their source in legislative
enactment, as the corporation itself cannot create such impediment. By-laws are
intended merely for the protection of the corporation, and prescribe regulation,
not restriction; they are always subject to the charter of the corporation. The

corporation, in the absence of such power, cannot ordinarily inquire into or pass
upon the legality of the transactions by which its stock passes from one person to
another, nor can it question the consideration upon which a sale is based. . . .
(Tomson on Corporation Sec. 4137, cited in Fleisher vs. Nolasco, Supra).
The right of a transferee/assignee to have stocks transferred to his name is an
inherent right flowing from his ownership of the stocks. Thus:
Whenever a corporation refuses to transfer and register stock in cases like the
present, mandamus will lie to compel the officers of the corporation to transfer
said stock in the books of the corporation" (26, Cyc. 347, Hyer vs. Bryan, 19 Phil.
138; Fleisher vs. Botica Nolasco, 47 Phil. 583, 594).
The corporation's obligation to register is ministerial.
In transferring stock, the secretary of a corporation acts in purely ministerial
capacity, and does not try to decide the question of ownership. (Fletcher, Sec.
5528, page 434).
The duty of the corporation to transfer is a ministerial one and if it refuses to
make such transaction without good cause, it may be compelled to do so by
mandamus. (See. 5518, 12 Fletcher 394)
For the petitioner Rural Bank of Salinas to refuse registration of the transferred
shares in its stock and transfer book, which duty is ministerial on its part, is to
render nugatory and ineffectual the spirit and intent of Section 63 of the
Corporation Code. Thus, respondent Court of Appeals did not err in upholding the
Decision of respondent SEC affirming the Decision of its Hearing Officer directing
the registration of the 473 shares in the stock and transfer book in the names of
private respondents.
Red Line Transport vs. Rural Transit
Red Line Transportation Co. vs. Rural Transit Co.
GR No. 41570 | Sept. 6, 1934
Facts:

This is a petition for review of an order of the Public Service Commission

granting to the Rural Transit Company, Ltd., a certificate of public convenience to
operate a transportation service between Ilagan in the Province of Isabela and
Tuguegarao in the Province of Cagayan, and additional trips in its existing express
service between Manila Tuguegarao.

On June 4, 1932, Rural Transit filed an application for certification of a new

service between Tuguegarao and Ilagan with the Public Company Service
Commission (PSC), since the present service is not sufficient

Rural Transit further stated that it is a holder of a certificate of public

convenience to operate a passenger bus service between Manila and Tuguegarao

Red Line opposed said application, arguing that they already hold a
certificate of public convenience for Tuguegarao and Ilagan, and is rendering
adequate service. They also argued that granting Rural Transits application would
constitute a ruinous competition over said route

On Dec. 21, 1932, Public Service Commission approved Rural Transits

application, with the condition that "all the other terms and conditions of the
various certificates of public convenience of the herein applicant and herein
incorporated are made a part hereof."

A motion for rehearing and reconsideration was filed by Red Line since
Rural Transit has a pending application before the Court of First Instance for
voluntary dissolution of the corporation


A motion for postponement was filed by Rural Transit as verified by M. Olsen
who swears "that he was the secretary of the Rural Transit Company, Ltd

During the hearing before the Public Service Commission, the petition for
dissolution and the CFIs decision decreeing the dissolution of Rural Transit were
admitted without objection

At the trial of this case before the Public Service Commission an issue was
raised as to who was the real party in interest making the application, whether
the Rural Transit Company, Ltd., as appeared on the face of the application, or the
Bachrach Motor Company, Inc., using name of the Rural Transit Company, Ltd., as
a trade name

However, PSC granted Rural Transits application for certificate of public

convenience and ordered that a certificate be issued on its name

PSC relied on a Resolution in case No. 23217, authorizing Bachrach Motor to

continue using Rural Transits name as its tradename in all its applications and
petitions to be filed before the PSC. Said resolution was given a retroactive effect
as of the date of filing of the application or April 30, 1930
Issue:
Can the Public Service Commission authorize a corporation to assume the name
of another corporation as a trade name?
Ruling:
NO

The Rural Transit Company, Ltd., and the Bachrach Motor Co., Inc., are
Philippine corporations and the very law of their creation and continued existence
requires each to adopt and certify a distinctive name

The incorporators "constitute a body politic and corporate under the name
stated in the certificate."

A corporation has the power "of succession by its corporate name." It is

essential to its existence and cannot change its name except in the manner
provided by the statute. By that name alone is it authorized to transact business.

The law gives a corporation no express or implied authority to assume

another name that is unappropriated: still less that of another corporation, which
is expressly set apart for it and protected by the law. If any corporation could
assume at pleasure as an unregistered trade name the name of another
corporation, this practice would result in confusion and open the door to frauds
and evasions and difficulties of administration and supervision.
In this case, the order of the commission authorizing the Bachrach Motor Co.,
Incorporated, to assume the name of the Rural Transit Co., Ltd. likewise
incorporated, as its trade name being void. Accepting the order of December 21,
1932, at its face as granting a certificate of public convenience to the applicant
Rural Transit Co., Ltd., the said order last mentioned is set aside and vacated on
the ground that the Rural Transit Company, Ltd., is not the real party in interest
and its application was fictitious
PHILIPPINE INSURANCE VS HARTIGAN
FACTS:
According to the complaint, plaintiff was originally organized as an insurance
corporation under the name of 'The Yek Tong Lin Fire and Marine Insurance Co.,
Ltd.' The articles of incorporation originally presented before the Security and
Exchange Commissioner and acknowledged before Notary Public Mr. E. D. Ignacio
on June 1, 1953 state that the name of the corporation was 'The Yek Tong Lin Fire
and Marine Insurance Co., Ltd.' On May 26, 1961 the articles of incorporation were
amended pursuant to a certificate of the Board of Directors dated March 8, 1961
changing the name of the corporation to 'Philippine First Insurance Co., Inc.'.

The complaint alleges that the plaintiff Philippine First Insurance Co., Inc., doing
business under the name of 'The Yek Tong Lin Fire and Marine Insurance Co., Lt.'
signed as co-maker together with defendant Maria Carmen Hartigan, CGH, a
promissory note for P5,000.00 in favor of the China Banking Corporation payable
within 30 days after the date of the promissory note with the usual banking
interest; that the plaintiff agreed to act as such co-maker of the promissory note
upon the application of the defendant Maria Carmen Hartigan, CGH, who together
with Antonio F. Chua and Chang Ka Fu, signed an indemnity agreement in favor of
the plaintiff, undertaking jointly and severally, to pay the plaintiff damages, losses
or expenses of whatever kind or nature, including attorney's fees and legal costs,
which the plaintiff may sustain as a result of the execution by the plaintiff and comaker of Maria Carmen Hartigan, CGH, of the promissory note above-referred to;
that as a result of the execution of the promissory note by the plaintiff and Maria
Carmen Hartigan, CGH, the China Banking Corporation delivered to the defendant
Maria Carmen Hartigan, CGH, the sum of P5,000.00 which said defendant failed to
pay in full, such that on August 31, 1961 the same was. renewed and as of
November 27, 1961 there was due on account of the promissory note the sum of
P4,559.50 including interest. The complaint ends with a prayer for judgment
against the defendants, jointly and severally, for the sum of P4,559.50 with
interest at the rate of 12% per annum from November 23, 1961 plus P911.90 by
way of attorney's fees and costs.
Although O. Engkee was made as party defendant in the caption of the complaint,
his name is not mentioned in the body of said complaint. However, his name
Appears in the Annex A attached to the complaint which is the counter indemnity
agreement supposed to have been signed according to the complaint by Maria
Carmen Hartigan, CGH, Antonio F. Chua and Chang Ka Fu.
In their answer the defendants deny the allegation that the plaintiff formerly
conducted business under the name and style of 'The Yek Tong Lin Fire and Marine
Insurance Co., Ltd.' They admit the execution of the indemnity agreement but
they claim that they signed said agreement in favor of the Yek Tong Lin Fire and
Marine Insurance Co., Ltd.' and not in favor of the plaintiff. They likewise admit
that they failed to pay the promissory note when it fell due but they allege that
since their obligation with the China Banking Corporation based on the promissory
note still subsists, the surety who co-signed the promissory note is not entitled to
collect the value thereof from the defendants otherwise they will be liable for
double amount of their obligation, there being no allegation that the surety has
paid the obligation to the creditor.
By way of special defense, defendants claim that there is no privity of contract
between the plaintiff and the defendants and consequently, the plaintiff has no
cause of action against them, considering that the complaint does not allege that
the plaintiff and the 'Yek Tong Lin Fire and Marine Insurance Co., Ltd.' are one and
the same or that the plaintiff has acquired the rights of the latter. The parties after
the admission of Exhibit A which is the amended articles of incorporation and
Exhibit 1 which is a demand letter dated August 16, 1962 signed by the manager
of the loans and discount department of the China Banking Corporation showing
that the promissory note up to said date in the sum of P4,500.00 was still unpaid,
submitted the case for decision based on the pleadings.
Under date of 6 October 1962, the Court of First Instance of Manila rendered the
decision appealed. It dismissed the action with costs against the plaintiff
Philippine First Insurance Co
ISSUE:

WON a Philippine corporation change its name and still retain its original
personality and individuality as such
HELD:
The answer is not difficult to find. True, under Section 6 of the Corporation Law,
the first thing required to be stated in the Articles of Incorporation of any corn
corporation is its name, but it is only one among many matters equally if not more
important, that must be stated therein. Thus, it is also required, for example, to
state the number and names of and residences of the incorporators and the
residence or location of the principal office of the corporation, its term of
existence, the amount of its capital stock and the number of shares into which it is
divided, etc., etc.
On the other hand, Section 18(CHECK THE ARTICLE) explicitly permits
the articles of incorporation to be amended
according to this Court in Red Line Transportation Co. v. Rural Transit Co., Ltd., 60
Phil, 549, 555, change of name of a corporation is against public policy. We must
clarify that such is not the import of Our said decision. What this Court held in that
case is simply that:
We know of no law that empowers the Public Service Commission or any court in
this jurisdiction to authorize one corporation to assume the name of another
corporation as a trade name. Both the Rural Transit Company, Ltd., and the
Bachrach Motor Co., Inc., are Philippine corporations and the very law of their
creation and continued existence requires each to adopt and certify a distinctive
name. The incorporators 'constitute a body politic and corporate under the name
stated in the certificate.' (Section 11, Act No. 1459, as amended.) A corporation
has the power 'of succession by its corporate name.' (Section 13, ibid.) The name
of a corporation is therefore essential to its existence. It cannot change its name
except in the manner provided by the statute. By that name alone is it authorized
to transact business. The law gives a corporation no express or implied authority
to assume another name that is unappropriated; still less that of another
corporation, which is expressly set apart for it and protected by the law. If any
corporation could assume at pleasure as an unregistered trade name the name of
another corporation, this practice would result in confusion and open the door to
frauds and evasions and difficulties of administration and supervision. The policy
of the law as expressed our corporation statute and the Code of Commerce is
clearly against such a practice. (Cf. Scarsdale Pub. Co. Colonial Press vs. Carter,
116 New York Supplement, 731; Svenska Nat. F. i. C. vs. Swedish Nat. Assn., 205
Illinois [Appellate Courts], 428, 434.)
In other words, what We have held to be contrary to public policy is the use by
one corporation of the name of another corporation as its trade name. We are
certain no one will disagree that such an act can only "result in confusion and
open the door to frauds and evasions and difficulties of administration and
supervision." Surely, the Red Line case was not one of change of name.
Neither can We share the posture of His Honor that the change of name of a
corporation results in its dissolution. There is unanimity of authorities to the
contrary.
An authorized change in the name of a corporation has no more effect upon its
identity as a corporation than a change of name of a natural person has upon his
identity. It does not affect the rights of the corporation or lessen or add to its
obligations. After a corporation has effected a change in its name it should sue
and be sued in its new name .... (13 Am. Jur. 276-277, citing cases.)

A mere change in the name of a corporation, either by the legislature or by the

corporators or stockholders under legislative authority, does not, generally
speaking, affect the identity of the corporation, nor in any way affect the rights,
privileges, or obligations previously acquired or incurred by it. Indeed, it has been
said that a change of name by a corporation has no more effect upon the identity
of the corporation than a change of name by a natural person has upon the
identity of such person. The corporation, upon such change in its name, is in no
sense a new corporation, nor the successor of the original one, but remains and
continues to be the original corporation. It is the same corporation with a different
name, and its character is in no respect changed.
Having arrived at the above conclusion, We have agree with appellant's pose that
the lower court also erred in holding that it is not the right party in interest to sue
defendants-appellees. 4 As correctly pointed out by appellant, the approval by the
stockholders of the amendment of its articles of incorporation changing the name
"The Yek Tong Lin Fire & Marine Insurance Co., Ltd." to "Philippine First Insurance
Co., Inc." on March 8, 1961, did not automatically change the name of said
corporation on that date. To be effective, Section 18 of the Corporation Law,
earlier quoted, requires that "a copy of the articles of incorporation as amended,
duly certified to be correct by the president and the secretary of the corporation
and a majority of the board of directors or trustees, shall be filed with the
Securities & Exchange Commissioner", and it is only from the time of such filing,
that "the corporation shall have the same powers and it and the members and
stockholders thereof shall thereafter be subject to the same liabilities as if such
amendment had been embraced in the original articles of incorporation." It goes
without saying then that appellant rightly acted in its old name when on May 15,
1961, it entered into the indemnity agreement, Annex A, with the defendantappellees; for only after the filing of the amended articles of incorporation with
the Securities & Exchange Commission on May 26, 1961, did appellant legally
acquire its new name; and it was perfectly right for it to file the present case In
that new name on December 6, 1961. Such is, but the logical effect of the change
of name of the corporation upon its actions.
Actions brought by a corporation after it has changed its name should be brought
under the new name although for the enforcement of rights existing at the time
the change was made.
UNIVERSAL MILLS VS UNIVERSAL TEXTILE
FACTS:
In 1953, Universal Textile Mills, Inc. (UTMI) was organized. In 1954, Universal
Hosiery Mills Corporation (UHMC) was also organized. Both are actually distinct
corporations but they engage in the same business (fabrics). In 1963, UHMC
petitioned to change its name to Universal Mills Corporation (UMC). The Securities
and Exchange Commission (SEC) granted the petition.
Subsequently, a warehouse owned by UMC was gutted by fire. News about the fire
spread and investors of UTMI thought that it was UTMIs warehouse that was
destroyed. UTMI had to make clarifications that it was UMCs warehouse that got
burned. Eventually, UTMI petitioned that UMC should be enjoined from using its
name because of the confusion it brought. The SEC granted UTMIs petition. UMC
however assailed the order of the SEC as it averred that their tradename is not
deceptive; that UTMIs tradename is qualified by the word Textile, hence, there
can be no confusion.
ISSUE: Whether or not the decision of the SEC is correct.

HELD: Yes. There is definitely confusion as it was evident from the facts where
the investors of UTMI mistakenly believed that it was UTMIs warehouse that was
destroyed. Although the corporate names are not really identical, they are
indisputably so similar that it can cause, as it already did, confusion. The SEC did
not act in abuse of its discretion when it order UMC to drop its name because
there was a factual evidence presented as to the confusion. Further, when UMC
filed its petition for change of corporate name, it made an undertaking that it shall
change its name in the event that there is another person, firm or entity who has
obtained a prior right to the use of such name or one similar to it. That promise is
still binding upon the corporation and its responsible officers.
UY SULIONG VS DIRECTOR OF COMMERCE
FACTS:
The purpose of this action is to obtain the writ of Mandamus to require
the respondent to
File and register ,upon the payment of the lawful fee, articles of
incorporation, and to issue
to the petitioners as theincorporators of a certain corporation to be
known as "Siuliong y Compaia, Inc.," a certificate under theseal of the
office of said respondent, certifying that the articles of incorporation
have been duly filed andregistered in his office in accordance with the
law. That prior to the presentation of the petition, petitionersassociated
together as partners, which partnership was known as "mercantil
regular colectiva, under thename of "Siuliong y Cia.;" Petitioners have
been members of said partnership of "Siuliong y Cia.," desiredto dissolve
the partnership and to form a corporation composed of the same
persons as incorporators, tobe known as "Siulong y Compaia,
Incorporada;" That the purpose of said corporation, "Siuliong y Cia.,Inc.,"
is to acquire the business of the partnership theretofore known as
Siuliong & Co., and to continuesaid business with some of its objects or
purposes; An examination of the articles of incorporation of thesaid
"Siuliong y Compaia, Incorporada" (Exhibit A) shows that it is to be
organized for the purchase andsale, importation and exportation, of the
products of the country as well as of foreign countries; Todiscount
promissory notes, bills of exchange, and other negotiable instruments;
The purchase and sale of bills of exchange, bonds, stocks, or joint
account of mercantile and industrial associations and of all classesof
mercantile documents; commissions, consignments;"xxx.. The
respondent contends (a) that theproposed articles of incorporation
presented for file and registry permitted the petitioners to engage in
abusiness which had for its end more than one purpose; (b) that it
permitted the petitioners to engage inthe banking business, and (c) to
deal in real estate, in violation of the Act of Congress of July 1, 1902.
Thepetitioners, insisted that said proposed articles of incorporation do
not permit it to enter into the bankingbusiness nor to engage in the
purchase and sale of real estate in violation of said Act of
Congress,expressly renounced in open court their right to engage in
such business under their articles of incorporation, even though said
articles might be interpreted in a way to authorize them to so to do.
ISSUE:
Whether or not a corporation organized for commercial purposes in the Philippine
Islands can beorganized for more than one purpose?
HELD:

YES.
Considering the purposes and objects of the proposed articles of incorporation
which areenumerated, we are of the opinion that it contains nothing which
violates in the slightest degree any of theprovisions of the laws of the Philippine
Islands, and the petitioners are, therefore, entitled to have sucharticles of
incorporation filed and registered as prayed for by them and to have issued to
thema certificate under the seal of the office of the respondent, setting forth that
such articles of incorporationhave been duly filed in his office. (Sec. 11, Act No.
1459.) Therefore, the petition prayed for is hereby granted, and without any
finding as to costs, it is so ordered.
CLAVECILLA VS ANTILLION
FACTS:
It appears that on June 22, 1963, the New Cagayan Grocery filed a complaint
against the Clavecilla Radio System, alleging, in effect, that on March 12, 1963,
the following message, addressed to the former, was filed at the latters Bacolod
Branch Office for transmittal thru its branch office at Cagayan de Oro
The Cagayan de Oro branch office having received the said message omitted, in
delivering the same to the New Cagayan Grocery, the word "NOT" between the
words "WASHED" and "AVAILABLE," thus changing entirely the contents and
purport of the same and causing the said addressee to suffer damages. After
service of summons, the Clavecilla Radio System filed a motion to dismiss the
complaint on the grounds that it states no cause of action and that the venue is
improperly laid. The New Cagayan Grocery interposed an opposition to which the
Clavecilla Radio System filed its rejoinder. Thereafter, the City Judge, on
September 18, 1963, denied the motion to dismiss for lack of merit and set the
case for hearing.
Hence, the Clavecilla Radio System filed a petition for prohibition with preliminary
injunction with the Court of First Instance praying that the City Judge, Honorable
Agustin Antillon, be enjoined from further proceeding with the case on the ground
of improper venue. The respondents filed a motion to dismiss the petition but this
was opposed by the petitioner. Later, the motion was submitted for resolution on
the pleadings.
In dismissing the case, the lower court held that the Clavecilla Radio System may
be sued either in Manila where it has its principal office or in Cagayan de Oro City
where it may be served, as in fact it was served, with summons through the
Manager of its branch office in said city. In other words, the court upheld the
authority of the city court to take cognizance of the case.
ISSUE:
HELD:
Settled is the principle in corporation law that the residence of a corporation is the
place where its principal office is established. Since it is not disputed that the
Clavecilla Radio system has its principal office in Manila, it follows that the suit
against it may properly be filed in the City of Manila.
The appellees maintain, however, that with the filing of the action in Cagayan de
Oro City, venue was properly laid on the principle that the appellant may also be
served with summons in that city where it maintains a branch office. This Court
has already held in the case of Cohen v. Benguet Commercial Co., Ltd., 34 Phil.
526, that the term "may be served with summons" does not apply when the
defendant resides in the Philippines for, in such case, he may be sued only in the

municipality of his residence, regardless of the place where he may be found and
served with summons. As any other corporation, the Clavecilla Radio System
maintains a residence which is Manila in this case, and a person can have only
one residence at a time (See Alcantara v. Secretary of the Interior, 61 Phil. 459;
Evangelista v. Santos, 86 Phil. 387). The fact that it maintains branch offices in
some parts of the country does not mean that it can be sued in any of these
places. To allow an action to be instituted in any place where a corporate entity
has its branch offices would create confusion and work untold inconvenience to
the corporation.
It is important to remember, as was stated by this Court in Evangelista v. Santos,
Et Al., supra, that the laying of the venue of an action is not left to plaintiffs
caprice because the matter is regulated by the Rules of Court. Applying the
provision of the Rules of Court, the venue in this case was improperly laid.
The order appealed from is therefore reversed
ALHAMBRA VS SEC
FACTS:
On January 15, 1912, Alhambra Cigar & Cigarette Manufacturing Company, Inc.
was incorporated. Its lifespan was for 50 years so on January 15, 1962, it expired.
Thereafter, its Board authorized its liquidation. Under the prevailing law, Alhambra
has 3 years to liquidate.
In 1963, while Alhambra was liquidating, Republic Act 3531 was enacted. It
amended Section 18 of the Corporation Law; it empowered domestic private
corporations to extend their corporate life beyond the period fixed by the articles
of incorporation for a term not to exceed fifty years in any one instance. Previous
to Republic Act 3531, the maximum non-extendible term of such corporations was
fifty years.
Alhambra now amended its articles of incorporation to extend its lifespan for
another 50 years. The Securities and Exchange Commission (SEC) denied the
amended articles of incorporation.
ISSUE:
Whether or not a corporation under liquidation may still amend its articles of
incorporation to extend its lifespan.
HELD:
No. Alhambra cannot avail of the new law because it has already expired at the
time of its passage. When a corporation is liquidating pursuant to the statutory
period of three years to liquidate, it is only allowed to continue for the purpose of
final closure of its business and no other purposes. In fact, within that period, the
corporation is enjoined from continuing the business for which it was
established. Hence, Alhambras board cannot validly amend its articles of
incorporation to extend its lifespan.
BENGUET CONSOLIDATED VS MARINA
FACTS:
Benguet Consolidated Mining Company was organized in 1903 under the Spanish
Code of Commerce of 1886 as a sociedad anonima. It was agreed by the
incorporators that Benguet Mining was to exist for 50 years.

In 1906, Act 1459 (Corporation Law) was enacted which superseded the Code of
Commerce of 1886. Act 1459 essentially introduced the American concept of a
corporation. The purpose of the law, among others, is to eradicate the Spanish
Code and make sociedades anonimas obsolete.
In 1953, the board of directors of Benguet Mining submitted to the Securities and
Exchange Commission an application for them to be allowed to extend the life
span of Benguet Mining. Then Commissioner Mariano Pineda denied the
application as it ruled that the extension requested is contrary to Section 18 of
the Corporation Law of 1906 which provides that the life of a corporation shall not
be extended by amendment beyond the time fixed in their original articles.
Benguet Mining contends that they have a vested right under the Code of
Commerce of 1886 because they were organized under said law; that under said
law, Benguet Mining is allowed to extend its life by simply amending its articles of
incorporation; that the prohibition in Section 18 of the Corporation Code of 1906
does not apply to sociedades anonimas already existing prior to the Laws
enactment; that even assuming that the prohibition applies to Benguet Mining, it
should be allowed to be reorganized as a corporation under the said Corporation
Law.
ISSUE:
Whether or not Benguet Mining is correct.
HELD:
No. Benguet Mining has no vested right to extend its life. It is a well settled rule
that no person has a vested interest in any rule of law entitling him to insist that it
shall remain unchanged for his benefit. Had Benguet Mining agreed to extend its
life prior to the passage of the Corporation Code of 1906 such right would have
vested. But when the law was passed in 1906, Benguet Mining was already
deprived of such right.
To allow Benguet Mining to extend its life will be inimical to the purpose of the law
which sought to render obsolete sociedades anonimas. If this is allowed, Benguet
Mining will unfairly do something which new corporations organized under the
new Corporation Law cant do that is, exist beyond 50 years. Plus, it would have
reaped the benefits of being a sociedad anonima and later on of being a
corporation. Further, under the Corporation Code of 1906, existing sociedades
anonimas during the enactment of the law must choose whether to continue as
such or be organized as a corporation under the new law. Once a sociedad
anonima chooses one of these, it is already proscribed from choosing the other.
Evidently, Benguet Mining chose to exist as a sociedad anonima hence it can no
longer elect to become a corporation when its life is near its end.
ASUNCION VS YRRIATE
FACTS:
The proposed incorporators began an action in the CFI to compel the chief of the
division of archives to receive and register said articles of incorporation and to do
any and all acts necessary for the complete incorporation of the persons named in
the articles. The court below found in favor of the defendant and refused to order
the registration of the articles mentioned, maintaining and holding that the
defendant, under the Corporation Law, had authority to determine both the
sufficiency of the form of the articles and the legality of the object of the proposed
corporation. This appeal is taken from that judgment

The chief of the division of archives, the respondent, refused to file the articles of
incorporation, upon the ground that the object of the corporation, as stated in the
articles, was not lawful and that, in pursuance of section 6 of Act No. 1459, they
were not registerable.
Hence, this action to obtain a writ of mandamus.
ISSUE:
Whether or not the chief of the division of archives has authority, under the
Corporation Law, on being presented with articles of incorporation for registration,
to decide not only as to the sufficiency of the form of the articles, but also as to
the lawfulness of the purposes of the proposed corporation.
HELD:
YES.
CORPORATION LAW; POWERS AND DUTIES OF CHIEF OF DIVISION OF ARCHIVES,
EXECUTIVE BUREAU. The chief of the division of archives, for and on behalf of
the division, has authority under the Corporation Law (Act No. 1459) to determine
the sufficiency of the form of articles of incorporation offered for registration with
the division.
Section 6 of the Corporation Law reads in part as follows:
Five or more persons, not exceeding fifteen, a majority of whom are residents of
the Philippine Islands, may form a private corporation for any lawful purpose by
filing with the division of archives, patents, copyrights, and trademarks of the
Executive Bureau articles of incorporation duly executed and acknowledged
before a notary public, . . .
Simply because the duties of an official happen to be ministerial, it does not
necessarily follow that he may not, in the administration of his office, determine
questions of law. We are of the opinion that it is the duty of the division of
archives, when articles of incorporation are presented for registration, to
determine whether the objects of the corporation as expressed in the articles are
lawful. We do not believe that, simply because articles of incorporation presented
for registration are perfect in form, the division of archives must accept and
register them and issue the corresponding certificate of incorporation no matter
what the purpose of the corporation may be as expressed in the articles. The chief
of the division of archives, on behalf of the division, has also the power and duty
to determine from the articles of incorporation presented for registration the
lawfulness of the purposes of the proposed corporation and whether or not those
purposes bring the proposed corporation within the purview of the law authorizing
corporations for given purposes.
MANDAMUS TO COMPEL HIM TO PERFORM DUTIES. The duties of the chief of
the division of archives, so far as relates to the registration of articles of
incorporation, are purely ministerial and not discretional; and mandamus will lie to
compel him to perform his duties under the Corporation Law if, in violation of law,
he refuse to perform them
On the contrary, there is no incompatibility in holding, as we do hold, that his
duties are ministerial and that he has no authority to exercise discretion in
receiving and registering articles of incorporation. He may exercise judgment
that is, the judicial function in the determination of the question of law referred
to, but he may not use discretion. The question whether or not the objects of a
proposed corporation are lawful is one that can be decided one way only. If he err
in the determination of that question and refuse to file articles which should be
filed under the law, that decision is subject to review and correction and, upon
proper showing, he will be ordered to file the articles.
Discretion, it may be said generally, is a faculty conferred upon a court or other
official by which he may decide a question either way and still be right. The power
conferred upon the division of archives with respect to the registration of articles
of incorporation is not of that character. It is of the same character as the

determination of a lawsuit by a court upon the merits. It can be decided only one
way correctly.