Corporation Law; Contracts; Sales; Where a corporate body never gave its consent, thru a

Islamic Directorate of the Phils. vs. Court of Appeals, 272 SCRA 454 , May 14, 1997
legitimate governing board, to a deed of absolute sale, the subject sale is void and produces
Case Title : ISLAMIC DIRECTORATE OF THE PHILIPPINES, MANUEL F. PEREA and no effect whatsoever.-
SECURITIES & EXCHANGE COMMISSION, petitioners, vs. COURT OF APPEALS and
Premises considered, all acts carried out by the Carpizo Board, particularly the sale of the
IGLESIA NI CRISTO, respondents.Case Nature : PETITION for review of a decision of the
Tandang Sora property, allegedly in the name of the IDP, have to be struck down for having
Court of Appeals.
been done without the consent of the IDP thru a legitimate Board of Trustees. Article 1318 of
Islamic Directorate of the Philippines vs. Court of Appeals the New Civil Code lays down the essential requisites of contracts: “There is no contract
unless the following requisites concur: (1) Consent of the contracting parties; (2) Object
[GR 117897, 14 May 1997] certain which is the subject matter of the contract; (3) Cause of the obligation which is
Facts: In an earlier case, SEC had declared two contending groups as neither being established.” All these elements must be present to constitute a valid contract. For, where
legitimate Board of Trustees of the Islamic Directorate of the Philippines (IDP), with SEC even one is absent, the contract is void. As succinctly put by Tolentino, consent is essential
setting down the procedure for the proper election of the Board. Without complying with SEC for the existence of a contract, and where it is wanting, the contract is non-existent. In this
directives, the Carpizo group represented themselves as the IDP Board and passed a case, the IDP, owner of the subject parcels of land, never gave its consent, thru a legitimate
resolution authorizing the sale of two (2) parcels of land in Quezon City to the Iglesia ni Cristo Board of Trustees, to the disputed Deed of Absolute Sale executed in favor of INC. This is,
(INC). therefore, a case not only of vitiated consent, but one where consent on the part of one of the
supposed contracting parties is totally wanting. Ineluctably, the subject sale is void and
Issue: Is the sale valid or at least voidable? produces no effect whatsoever.
Held: The sale is void. SEC declaration that the Carpizo group is not a duly elected nor Corporation Law; Contracts; Sales; For the sale of the only property of a corporation to be
constituted IDP Board would mean that the Board was "bereft of any authority whatsoever to valid, the majority vote of the legitimate board, concurred in by the vote of at least 2/3 of the
bind IDP in any kind of transaction including the sale or disposition of the IDP property." bona fide m embers of the corporation, should be obtained.-
Consequently, "all acts carried out by the Carpizo Board, particularly the sale of the Tandang
Sora property, allegedly in the name of the IDP, have to be struck down for having been done The Tandang Sora property, it appears from the records, constitutes the only property of the
without the consent of the IDP thru a legitimate Board of Trustees." The contract is void under IDP. Hence, its sale to a third-party is a sale or disposition of all the corporate property and
Art. 1318 of Civil Code because of the lack of "consent." assets of I DP falling squarely within the contemplation of the foregoing section. For the sale
to be valid, the m a jorit y vot e of the legitimate Board of Trustees, concurred in by the vote of
Corporation Law; Jurisdiction; Securities and Exchange Commission; The SEC has the at least 2/3 of the bona fide members of the corporation should have been obtained. These
unquestionable authority to pass upon the issue as to who among the different contending twin requirements were not met as the Carpizo Group which voted to sell the Tandang Sora
groups is the legitimate governing board of a corporate body.- property was a fake Board of Trustees , and those whose names and s ignatures were affixed
There can be no question as to the authority of the SEC to pass upon the issue as to who by the Carpizo Group together with the sham Board Resolution authorizing the negotiation for
among the different contending groups is the legitimate Board of Trustees of the IDP since the sale were, from all indications, not bona fide members of the IDP as they were ma de to
this is a matter properly falling within the original and exclusive jurisdiction of the SEC by appear to be. Apparently, there are only fifteen (15) official members of the petitioner
virtue of Sections 3 and 5(c) of Presidential Decree No. 902-A: “Section 3. The Commission corporation including the eight (8) members of the Board of Trustees.
shall have absolute jurisdiction, supervision and control over all corporations, partnerships or Corporation Law; Contracts; Sales; Securities and Exchange Commission; Remand of
associations , who are the grantees of primary franchises and/or a license or permit issued by Cases; No end of substantial justice will be served if the Supreme Court reverses the SEC’s
the government to operate in the Philippines x x x x x x.” x x x x x x x x x Section 5. In addition conclusion and remand the case to the regular courts for further litigation over an issue which
to the regulatory and adjudicative functions of the Securities and Exchange Commission over is already determinable based on what is in the records.-
corpora ti ons , partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive jurisdiction to The resolution of the question as to whether or not the SEC had jurisdiction to declare the
hear and decide cases involving: x x x x x x x x x c) Controversies in the selection or subject sale null and void is rendered moot and academic by the inherent nullity of the highly
appointment of directors, trustees, officers, or managers of such corporations, partnerships or dubious sale due to lack of consent of the IDP, owner of the subject property. No end of
associations. x x x.” substantial justice will be served if we reverse the SEC’s conclusion on the matter, and
remand the case to the regular courts for further litigation over an issue which is already
determinable based on what we have in the records.