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Government-v.-El-Hogar, G.R. No. L-26649, July 13, 1927
Government-v.-El-Hogar, G.R. No. L-26649, July 13, 1927
Millado
1577-17
Summary:
Facts:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
some prospect buyers, but failed. On March 25, 1926, it even accepted the
offer of one Alcantara to purchase the same for only Php4,000.00 but it was
rescinded on April 30, 1926 when the latter failed to tender the initial
payment after the lapse of extension of time. Finally, said property was sold
to Doña Felipa Alberto for Php6,000.00 on July 30, 1926. From said facts,
the Attorney-General stressed that from December 22, 1920, when said
corporation acquired the title to said property until July 30, 1926, when it
was finally sold, the interval is thus more than five years.
Issue:
Ruling:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
In this case, as penned by Justice Street, that even if it appears that the
law cited by the plaintiff was violated by defendant corporation, and in
exercising the Court’s discretion, it cannot grant the dissolution of said
corporation as “it would be excessively severe and fraught with
consequences altogether disproportionate to the offense committed.”
That “under these circumstances the destruction of the corporation
would bring irreparable loss upon the thousands of innocent
shareholders of the corporation without any corresponding benefit to
the public.”
In ruling this issue, the Supreme Court pointed several facts and
incidents that tend to mitigate the offense. These among others are:
a) According to the Court, the purpose of the law restricting the rights
of the corporation with regard the tenure of land is to prevent the
revival of entail (mayorazgo) or other similar institution that
hampered its alienation over a long period of time, but here, it
favored El Hogar Filipino because said corporation has acted in
good faith when it disposed the San Clemente property even if it
appears that they have done it after the expiration of the period
fixed by law, and explained sufficiently their failure to dispose it
sooner;
c) The period between March 25, 1926, and April 30, 1926, should
not be counted as part of the five-year period. This was the
period when defendant corporation was under obligation to sell the
property to Alcantara, prior to the rescission of the contract by
reason of Alcantara's failure to pay. That were it not for the
latter’s failure to pay, the property could have been already sold;
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Facts:
Issue:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Ruling:
In People v. Pullman’s Palace -Car Co., supra, it was held that, “the
corporation should not necessarily be restricted to a building containing
the precise number of rooms its then business might require, and no more,
but that the future probable growth and volume of its business might be
considered and anticipated, and a larger building, and one containing more
rooms than the present volume of business required be erected, and the
rooms not needed might be rented by the corporation, — provided, of
course, such course should be taken in good faith, and not as a mere
evasion of the public law and the policy of the state relative to the
ownership of real estate by corporations.” (emphasis supplied)
Here, applying the same similar cases, the Supreme Court ruled that
the said lot was lawfully acquired by El Hogar Filipino and it is entitled to
full beneficial use of the said lot. They do not agree with the contention of
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
the plaintiff because there is nothing in law and principle that denies the
owner the right to enjoy its own property. In crafting the corporation law,
the legislature would not have intended to deprive a corporation of this right
similar to any property owners.
Facts:
Issue:
Ruling:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Facts:
Issue:
Ruling:
Here, said article is in direct conflict of the above-cited law. Thus, the
invalid article of the by-laws is a nullity that cannot be enforced by the
corporation’s board of directors and that it must be stricken out from its by-
laws. However, the Court ruled that it does not justify the dissolution of the
corporation because as stated by the Court: “There is no provision of law
making it a misdemeanor to incorporate an invalid provision in the by-
laws of a corporation.”
Facts:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
In 1911 and 1912, El Hogar Filipino duly elected their directors at the
annual general meeting and there was a quorum then. However, in 1921,
when a new directorate was elected, meetings have failed for lack of
quorum. Due to lack of quorum, and without any elections, it has been the
directorates’ practice to fill vacancies in the directorate by choosing suitable
persons from among the stockholders. According to plaintiff, it is in
contravention with its by-laws particularly Article 71 which reads: “The
directors shall elect from among the shareholders-members to fill the
vacancies that may occur in the board of directors until the election at the
general meeting.”
Issue:
Ruling:
In Quitman Oil Company vs. Peacock, 14 Ga. App., 550; Jenkins vs.
Baxter, 160 Pa. State, 199; New York B. & E. Ry. Co. vs. Motil, 81 Conn.,
466; Hatch vs. Lucky Bill Mining Company, 71 Pac., 865; Youree vs.
Home Town Matual Ins. Company, 180 Missouri, 153; Cassell vs.
Lexington, H. and P. Turnpike Road Co., 10 Ky. L. R., 486, it was held
that, “Unless the law or the charter of a corporation expressly provides that
an office shall become vacant at the expiration of the term of office for
which the officer was elected, the general rule is to allow the officer to
holdover until his successor is duly qualified. Mere failure of a corporation
to elect officers does not terminate the terms of existing officers nor dissolve
the corporation.”
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Facts:
Issue:
Ruling:
Section 21, Act No. 1459 provides: “The power to fixed the
compensation they shall receive, if any, is left to the corporation, to be
determined in its by-laws.”
Here, Supreme Court ruled that “the Corporation Law does not
undertake to prescribe the rate of compensation for the directors of
corporations.” Pursuant to the provision of the Act above-stated, and based
upon Article 92 of its by-laws, said compensation of the directors is valid.
The question of whether it is just and proper is a matter that should be
resolved by the shareholders of the corporation upon the framing of its by-
laws, and not by statutes or the Court.
Facts:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Issue:
Ruling:
No, this royalty is not unconscionable and excessive and likewise not
contrary to and incompatible with the spirits and purpose of building and
loan associations.
In El Hogar Filipino v. Rafferty (37 Phil., 995), it was held that, “our
traditional respect for the sanctity of the contract obligation should prevail
over the radical and innovating tendencies which find acceptance with
some and which, if given full rein, would go far to sink legitimate
enterprise in the Islands into the pit of populism and bolshevism.”
(emphasis supplied)
Here, the Court cannot pass upon a judgment for a mere fact that the
compensation paid to a person is excessive or not based on the contract of
the parties. If the allegation that the said contract is ultra vires, which is not
argued in this cause of action, its continuance might be enjoined or
prohibited.
Facts:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Issue:
Ruling:
Facts:
The plaintiff alleged that the defendant abused its franchise in issuing
“special shares”, in which he contends that it is illegal and inconsistent with
the plan and purpose of building and loan associations. It is likewise alleged
that they are held by well-to-wage-earners for accumulating their modest
savings for the building of homes.
Issue:
Ruling:
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Facts:
Issue:
Ruling:
Section 13(7) of Act No. 1459 provides the power of the corporation
to make by-laws for the administration of the corporate affairs of the
association and for the management of its business, as well as the care,
control and disposition of its property.
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Facts:
Issue:
Ruling:
Page 13 of 18
Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Here, the Court ruled that there is no reason to doubt the defendant to
maintain these reserves. While it is true that it is not expressly provided
under the Corporation Law, however, it is to be implied. Thus, as stated by
the Supreme Court: “It is a fact of common observation that all commercial
enterprises encounter periods when earnings fall below the average, and the
prudent manager makes provision for such contingencies. To regard all
surplus as profit is to neglect one of the primary canons of good business
practice. Building and loan associations, though among the most solid of
financial institutions, are nevertheless subject to vicissitudes. Fluctuations
in the dividend rate are highly detrimental to any fiscal institutions, while
uniformity in the payments of dividends, continued over long periods,
supplies the surest foundations of public confidence.” (Justice Street)
Facts:
El Hogar Filipino, with their knowledge, had made loans which are
intended by the borrowers for other purpose other than the building of
homes. However, said defendant did not make any attempt to control the
use of the borrowed funds so long as the collateral for the said loans are
sufficient. Thus, the plaintiff alleged that defendant illegally departed from
its character as a building and loan association and thus amenable to its
dissolution.
Issue:
Ruling:
Page 14 of 18
Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Here, it was ruled that no statutes expressly declared that loans may
be made solely for the purpose of building homes. On the contrary, as
expressly provided by Section 171 of the Corporation Law, building of
homes is only one among several purposes that a loan may be granted by the
said corporation.
Facts:
Issue:
Ruling:
Facts:
Page 15 of 18
Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Issue:
Ruling:
Here, the said cause of action by the plaintiff is not directed to any
misdemeanor allegedly committed by the corporation. Said provision of the
by-laws is left to the discretion of the board of directors or legislature, and it
is not a matter of judicial interference.
Facts:
Issue:
Ruling:
Page 16 of 18
Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
Under Section 173 of the Corporation Law, that "any person" may
become a stockholder in building and loan associations.
Here, the word “person” is used in a general sense which means that it
includes both natural and juridical persons. Hence, said juridical entities is
qualified to become shareholders.
Facts:
Issue:
Ruling:
Under the Corporation Law, loans are for stockholders only and on
the security of real properties and shares in the corporation, or of shares
alone.
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Case Digest – Government v. El Hogar Filipino, G.R. No. L-26649, July 13, 1927
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