G.R. No. L-23145 – 135 Phil. 237 – 26 SCRA 242 – Mercantile Law – 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 Tayag’s 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 exist and that they are with CTC-NY; that according to BCI’s 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 BCI’s 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 BCI’s 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.
