A husband left his legitimate wife and children to live with his mistress. He thereafter put up a “religious ministry” and registered the same as a Corporation Sole—with him as the titular head and his mistress as the corporate secretary. He transferred all conjugal properties in his name to the Corporation Sole. Thereafter he died intestate. Under the Corporation Code, the church property in the name of a corporation sole does not pass to his personal heirs but rather passes on to his successor. What can his legitimate wife and children do in order to recover the properties?
Assuming this matter can be resolved amicably, it may be possible that the wife, the children and the mistress could enter into a voluntary arrangement wherein the successor to the Corporation Sole would reconvey or return the subject properties to the personal heirs. This can be done directly without prejudice to the continued operation of the Corporation Sole or after its voluntary dissolution. The Corporation Sole, being a juridical person, has the power to dispose of its own property. The first paragraph of Article 428 of the Civil Code provides that “[t]he owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.” While it may be true that the provisions on the Corporation Code on Corporation Sole only speak of sale and mortgage, this does not mean that a Corporation Sole cannot transfer property in other ways, such as through, say, donation. The doctrine of necessary implication should be applied here. Under Section 113 of the Corporation Code, authority from the Regional Trial Court is required before a Corporation Sole can mortgage or sell real property but such authority is not necessary where the religious denomination, sect or church, religious society or order concerned represented by the Corporation Sole has rules which regulation the acquisition, mortgage and selling of real estate and personal property, in which case such rules shall control. But what if there is no successor yet who can enter into an agreement with the heirs? In the meantime that there is no successor, the corporation then would be in a state of suspended animation. Section 114 of the Corporation Code provides that “the successors in office of any chief archbishop, bishop, priest, minister, rabbi or presiding elder in a corporation sole shall become the corporation sole on their accession to office; and shall be permitted to transact business as such on the filing with the Securities and Exchange Commission of a copy of their commission, certificate of election, or letters of appointment, duly certified by any notary public.”
If the problem cannot be resolved amicably, then the heirs can do the following—
1. File a civil action for annulment of documents, recovery of ownership and possession, and damages against the Corporation Sole and all those who have participated in its organization—including the mistress on the ground that the transfer of the conjugal properties to the Corporation Sole was illegal as it was without the knowledge and consent of the wife—who was co-owner. It also prejudiced his compulsory heirs.
The second paragraph of Article 48 of the Civil Code provides that, “the owner has also a right of action against the holder and possessor of the thing in order to recover it.” The husband did not have authority to dispose of the community property without the knowledge and written consent of his wife. The wife never consented to the execution of a Deed of Sale or Transfer of the property to the Corporation Sole. The Deed of Sale or Transfer can be declared void because he did not have any authority to bind the conjugal partnership. Article 96 of the Family Code provides that “[t]he administration and enjoyment of the community property shall belong to both spouses jointly. x x x If one of the parties want to dispose or encumber the community property, he or she should do so with proper permission from the other. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the spouse may assume sole powers of administration. These powers to do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.”
The lack of marital consent anent the disposition of conjugal property makes the contract voidable. The disposition of a conjugal property requires the consent of both the husband and wife. The absence of the consent of one renders the entire transaction null and void, including the portion of the conjugal property pertaining to the husband who contracted the sale.
It is also possible that the husband violated Article 750 of the Civil Code pertaining to the limitations on donations when he transferred conjugal property to the Corporation Sole. Article 750 of the Civil Code provides that “[t]he donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced on petition of any person affected.”
2. File an action for the involuntary dissolution of the Corporation Sole on the ground of fraud. Section 121 of the Corporation Code provides that “[a] corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on grounds provided by existing laws, rules and regulations.” It is clear that the Corporation Sole was established contrary to ethical principles. The mere fact that the husband left his family and established a Corporation Sole with his mistress is enough to show that his “ministry” was founded on immorality. It is also plausible that the Corporation Sole was merely used as an instrumentality for the purpose of obtaining tax immunity [considering its being generally a non-stock non-profit entity], asset protection, estate planning and for perpetuating fraud. It is prohibited for corporate officers to use corporate property for their own personal benefit, or treating corporate assets as though it were their own. This is referred to as "arm's-length dealing." However, it is possible that this legal doctrine of "arm's-length dealing" was abused. It may be proven that the corporation sole’s "ministry" was made in such a way as to include just about every conceivable activity that a religious person would ever engage in, including investments and profitable business ventures. It can be demonstrated that the subject properties were not actually utilized for the benefit of the church but were rather used for the personal benefit of the Corporation Sole and his mistress.
Philippine Copyright © 2010 by Oscar A. Corpuz, Jr.
All Rights Reserved.
Assuming this matter can be resolved amicably, it may be possible that the wife, the children and the mistress could enter into a voluntary arrangement wherein the successor to the Corporation Sole would reconvey or return the subject properties to the personal heirs. This can be done directly without prejudice to the continued operation of the Corporation Sole or after its voluntary dissolution. The Corporation Sole, being a juridical person, has the power to dispose of its own property. The first paragraph of Article 428 of the Civil Code provides that “[t]he owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.” While it may be true that the provisions on the Corporation Code on Corporation Sole only speak of sale and mortgage, this does not mean that a Corporation Sole cannot transfer property in other ways, such as through, say, donation. The doctrine of necessary implication should be applied here. Under Section 113 of the Corporation Code, authority from the Regional Trial Court is required before a Corporation Sole can mortgage or sell real property but such authority is not necessary where the religious denomination, sect or church, religious society or order concerned represented by the Corporation Sole has rules which regulation the acquisition, mortgage and selling of real estate and personal property, in which case such rules shall control. But what if there is no successor yet who can enter into an agreement with the heirs? In the meantime that there is no successor, the corporation then would be in a state of suspended animation. Section 114 of the Corporation Code provides that “the successors in office of any chief archbishop, bishop, priest, minister, rabbi or presiding elder in a corporation sole shall become the corporation sole on their accession to office; and shall be permitted to transact business as such on the filing with the Securities and Exchange Commission of a copy of their commission, certificate of election, or letters of appointment, duly certified by any notary public.”
If the problem cannot be resolved amicably, then the heirs can do the following—
1. File a civil action for annulment of documents, recovery of ownership and possession, and damages against the Corporation Sole and all those who have participated in its organization—including the mistress on the ground that the transfer of the conjugal properties to the Corporation Sole was illegal as it was without the knowledge and consent of the wife—who was co-owner. It also prejudiced his compulsory heirs.
The second paragraph of Article 48 of the Civil Code provides that, “the owner has also a right of action against the holder and possessor of the thing in order to recover it.” The husband did not have authority to dispose of the community property without the knowledge and written consent of his wife. The wife never consented to the execution of a Deed of Sale or Transfer of the property to the Corporation Sole. The Deed of Sale or Transfer can be declared void because he did not have any authority to bind the conjugal partnership. Article 96 of the Family Code provides that “[t]he administration and enjoyment of the community property shall belong to both spouses jointly. x x x If one of the parties want to dispose or encumber the community property, he or she should do so with proper permission from the other. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the common properties, the spouse may assume sole powers of administration. These powers to do not include the powers of disposition or encumbrance which must have the authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void.”
The lack of marital consent anent the disposition of conjugal property makes the contract voidable. The disposition of a conjugal property requires the consent of both the husband and wife. The absence of the consent of one renders the entire transaction null and void, including the portion of the conjugal property pertaining to the husband who contracted the sale.
It is also possible that the husband violated Article 750 of the Civil Code pertaining to the limitations on donations when he transferred conjugal property to the Corporation Sole. Article 750 of the Civil Code provides that “[t]he donation may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced on petition of any person affected.”
2. File an action for the involuntary dissolution of the Corporation Sole on the ground of fraud. Section 121 of the Corporation Code provides that “[a] corporation may be dissolved by the Securities and Exchange Commission upon filing of a verified complaint and after proper notice and hearing on grounds provided by existing laws, rules and regulations.” It is clear that the Corporation Sole was established contrary to ethical principles. The mere fact that the husband left his family and established a Corporation Sole with his mistress is enough to show that his “ministry” was founded on immorality. It is also plausible that the Corporation Sole was merely used as an instrumentality for the purpose of obtaining tax immunity [considering its being generally a non-stock non-profit entity], asset protection, estate planning and for perpetuating fraud. It is prohibited for corporate officers to use corporate property for their own personal benefit, or treating corporate assets as though it were their own. This is referred to as "arm's-length dealing." However, it is possible that this legal doctrine of "arm's-length dealing" was abused. It may be proven that the corporation sole’s "ministry" was made in such a way as to include just about every conceivable activity that a religious person would ever engage in, including investments and profitable business ventures. It can be demonstrated that the subject properties were not actually utilized for the benefit of the church but were rather used for the personal benefit of the Corporation Sole and his mistress.
Philippine Copyright © 2010 by Oscar A. Corpuz, Jr.
All Rights Reserved.
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