TESTATE ESTATE OF IDONAH SLADE PERKINS, DECEASED. RENATO D. TAYAG, ANCILLARY ADMINISTRATOR-APPELLEE, VS. BENGUET CONSOLIDATED, INC., OPPOSITOR-APPELLANT.

Tayag versus Benguet Consolidated

The Case

This is the case of Tayag versus Benguet Consolidated, decided by the Supreme Court in November 1968. The ancillary administrator of the Philippine estate of Idonah Slade Perkins asked the probate court to deal with stock certificates that the New York domiciliary administrator stubbornly refused to surrender. The Philippine corporation that issued the shares, Benguet Consolidated, opposed the order and appealed. The case matters because it tells us what a probate court may do when a foreign administrator defies its lawful orders, and because it fixes the situs of shares of stock in a Philippine corporation for purposes of ancillary administration.

Procedural History

Idonah Slade Perkins died in New York City in March 1960. In August 1960, ancillary administration proceedings were begun in the Court of First Instance of Manila. Lazaro Marquez was appointed ancillary administrator, and in January 1963 he was replaced by Renato Tayag. A dispute arose between the New York domiciliary administrator, the County Trust Company, and the Philippine ancillary administrator over who was entitled to possess the stock certificates. In January 1964, the Court of First Instance of Manila ordered the County Trust Company to produce and deposit the certificates with the ancillary administrator or with the Clerk of Court. The County Trust Company did not comply. In February 1964, the ancillary administrator asked the court to declare the certificates lost. In May 1964, the probate court, through Judge Arsenio Santos, issued the order now in question. The appeal to the Supreme Court was taken not by the domiciliary administrator but by Benguet Consolidated, the Philippine corporation.

Facts

Idonah Slade Perkins died in New York City on March 27, 1960. Among the assets she left were two stock certificates covering 33,002 shares in Benguet Consolidated, a Philippine corporation. Those certificates were in the possession of the County Trust Company of New York, the domiciliary administrator of her estate.

Ancillary administration was opened in the Philippines so that the estate could be settled here and the claims of local creditors satisfied. The domiciliary administrator, however, refused to surrender the certificates to the ancillary administrator. It had earlier entered its appearance through counsel and even filed a petition for relief from a prior order, yet it did not obey the order to produce the certificates.

Faced with this refusal, the probate court issued an order in May 1964. It considered the stock certificates as lost for all purposes in connection with the administration and liquidation of the Philippine estate, ordered the certificates cancelled, and directed Benguet Consolidated to issue new certificates in lieu thereof, to be delivered to the ancillary administrator or to the Probate Division of the Court. Benguet Consolidated appealed, arguing that the certificates were not in fact lost, since they were in existence in New York, and that its by-laws on lost, stolen or destroyed certificates had not been observed.

Issues

• Whether or not the probate court could validly consider the stock certificates as lost and order them cancelled and replaced, given that they were in existence and held by the domiciliary administrator abroad.
• Whether or not the ancillary administrator is entitled to gain control and possession of the decedent's assets found in the Philippines, including shares in a Philippine corporation.
• Whether or not the corporation's by-law on lost, stolen or destroyed certificates may prevail over a lawful court order.
• Whether or not a Philippine corporation may choose which court orders to obey and which to disregard.

Applicable Provisions

The decision cites Section 3 of Rule 84 of the Rules of Court on the duties of an administrator, which bears on the ancillary administrator's power to take control of the decedent's assets in the Philippines:

When a person dies intestate, or if he dies testate, in respect to the portion of his estate not disposed of by will, the administrator shall have charge of the estate of the deceased, shall pay the debts and expenses of administration, and shall distribute the residue among the persons entitled thereto.

The decision also quotes the by-law of Benguet Consolidated invoked by the appellant, Section 10 on lost, stolen or destroyed certificates, which the Court held cannot prevail over a court decree:

Any registered stockholder claiming a certificate or certificates of stock to be lost, stolen or destroyed shall file an affidavit in triplicate with the Secretary of the Company or with one of its Transfer Agents, setting forth, if possible, the circumstances as to how, when and where said certificate or certificates was or were lost, stolen or destroyed, the number of shares represented by the certificate or by each of the certificates, the serial number or

Ruling

On the first issue, the Court held that the appeal lacked merit. There may be an element of fiction in treating the certificates as lost, but that did not call for reversal. Since the domiciliary administrator persistently refused to deliver the shares to the ancillary administrator, there was nothing unreasonable or arbitrary in considering them as lost and requiring the corporation to issue new certificates. Otherwise, compliance with a valid judicial order would depend on the uncontrolled discretion of a party domiciled abroad. The Court invoked the role of legal fictions as devices to advance the ends of justice.

On the second issue, the Court held that the ancillary administrator's power to gain control and possession of all assets of the decedent within the Philippines is inherent in his duty to settle the estate and satisfy local creditors. Administration extends to assets found within the state or country where it was granted, and an administrator appointed elsewhere has no power over property in another jurisdiction. Since Benguet Consolidated is a Philippine corporation subject to the unrestricted jurisdiction of local courts, its shares cannot be considered immune from lawful court orders. The Court applied its earlier holding that the actual situs of the shares is in the Philippines, the corporation being domiciled here.

On the third issue, the Court held that reliance on the by-law was misplaced. There was no occasion to apply it, since the domiciliary administrator did not appeal and the corporation itself admitted that it was immaterial to it who was entitled to possession. Even if there were a conflict, a court decree must be followed over a corporate by-law. It would be most unorthodox to accord a by-law such a high estate that a court must yield to its alleged controlling force.

On the fourth issue, the Court held that a corporation is an artificial being created by operation of law. It owes its existence to the state and cannot claim rights of higher priority than its creator, nor refuse obedience to the acts of its state organs, including the judiciary. To allow it to choose which court order to follow would confer a license that cannot be tolerated.

Doctrine

First, ancillary administration extends to the assets of a decedent found within the country where it was granted, and an administrator appointed abroad has no power over property in another jurisdiction. Second, the actual situs of shares of stock is in the place where the corporation is domiciled; hence shares in a Philippine corporation are subject to the jurisdiction of Philippine courts. Third, a probate court may, when a foreign domiciliary administrator persistently refuses to obey its lawful order, treat the stock certificates as lost and direct the corporation to issue new certificates in lieu thereof. Fourth, a corporation is an artificial being created by operation of law and cannot refuse obedience to lawful court orders; a corporate by-law must yield to a court decree.

Disposition

The Supreme Court affirmed the order of the Court of First Instance of Manila dated May 18, 1964, with costs against Benguet Consolidated.

Remember This

The single line to memorize: a Philippine corporation is a creature of Philippine law, so its shares have their situs here and it cannot set its by-laws above a lawful court order. Examiners use this case on ancillary administration, the situs of shares of stock, and the subordination of corporate by-laws to judicial decrees.