Held
No, the purchase by Pio, Inc. of the parcel of land is not an ultra vires act, under Section 35(g) of the Revised Corporation Code of the Philippines.
Explanation
A corporation incorporated under the Revised Corporation Code has the power to purchase and deal with real property as long as such transactions are reasonably and necessarily required by the lawful business of the corporation, subject to constitutional and legal limitations. The purchase of land by a corporation is not ultra vires if it is directly related to the corporation's purpose and business.
The Constitution restricts the acquisition of private lands to qualified individuals or corporations. Specifically, private corporations may only hold alienable lands of the public domain by lease, and only citizens or corporations with at least 60% Filipino ownership may acquire private agricultural lands. This is to ensure Filipino control over land ownership.
In the case of Pio, Inc., a stock corporation organized under Philippine laws with 60% of its capital stock owned by the Filipino Foundation, the corporation qualifies as a Filipino-controlled corporation. Its primary purpose is to sell low-cost housing units to marginalized sectors, which is a lawful business aligned with the State's policy to promote affordable housing for underprivileged citizens.
The purchase of land in Payatas, Quezon City, for the socialized housing project is reasonably necessary and directly furthers the corporation's business purpose. Therefore, the act is within its corporate powers and not ultra vires.
The case of Rizal v. Temple clarifies that corporations with at least 60% Filipino ownership may acquire land, and the case interpreting ultra vires acts confirms that acts reasonably necessary and directly related to the corporation's purpose are within its powers.
Application to the facts
Pio, Inc. is a stock corporation duly organized under Philippine law with 60% of its capital stock owned by the Filipino Foundation, which satisfies the constitutional requirement for Filipino control over corporations acquiring land. The corporation's primary purpose is to sell low-cost housing units to marginalized sectors, which is a lawful business purpose consistent with the State's policy on urban land reform and housing.
The purchase of the parcel of land in Payatas, Quezon City, is directly related to Pio, Inc.'s business of selling low-cost housing units. Acquiring land is reasonably necessary for implementing the socialized housing project, making the purchase an act within the corporation's powers under Section 35(g) of the Revised Corporation Code.
Since the corporation is Filipino-controlled and the land acquisition is for a lawful business purpose aligned with its articles of incorporation and the State's housing policy, the purchase is not ultra vires. It complies with constitutional restrictions on land ownership and is a valid corporate act.
- a constitutional provision is among the sources and controls over any conflicting statute
"Every corporation incorporated under this Code has the power and capacity: ... (g) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;"
"Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain."
"Lands of the public domain are classified into agricultural, forest or timber, mineral lands and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such alienable lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one thousand hectares in area. Citizens of the Philippines may lease not more than f…
"The State shall, by law, and for the common good, undertake, in cooperation with the private sector, a continuing program of urban land reform and housing which will make available at affordable cost, decent housing and basic services to under-privileged and homeless citizens in urban centers and resettlement areas. It shall also promote adequate employment opportunities to such citizens. In the implementation of such program the State shall respect the rights of small property owners."
Laws retrieved
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"It appearing from the record of the Consulta that UNG SIU SI TEMPLE is a religious organization whose deaconess, founder, trustees and administrator are all Chinese citizens, this Court is of the opinion and so hold that in view of the provisions of the sections 1 and 5 of Article XIII of the Constitution of the Philippines limiting the acquisition of land in the Philippines to its citizens, or to corporations or associations at least sixty per centum of the capital stock of which is owned by such citizens adopted after the enactment of said Act No. 271, and the decision of the Supreme Court in the case of Krive…
"II Petitioner argues that the execution of the mortgage contract was ultra vires. As an educational institution, it may not secure the loans of third persons.73 Securing loans of third persons is not among the purposes for which petitioner was established.74 Petitioner is correct. ... Corporations are artificial entities granted legal personalities upon their creation by their incorporators in accordance with law. Unlike natural persons, they have no inherent powers. Third persons dealing with corporations cannot assume that corporations have powers. It is up to those persons dealing with corporations to determi…
In G.R. No. 194964-65, the Supreme Court explained that corporations have only such powers as are expressly granted by law and their articles of incorporation, and acts outside those powers are ultra vires unless they are necessary and incidental to carry out the corporation's purposes or the exercise of powers conferred by law.
The Court further stated that a corporation may purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution (G.R. No. 194964-65).
The test is whether the act in question is in direct and immediate furtherance of the corporation's business, fairly incident to the express powers and reasonably necessary to their exercise. If so, the corporation has the power to do it; otherwise, not (G.R. No. 194964-65).
In Rizal v. Temple, the Court held that the Constitution limits the acquisition of land in the Philippines to its citizens, or to corporations or associations at least sixty percent of the capital stock of which is owned by such citizens.
The Court explained that the sixty percent requirement is to ensure that corporations or associations allowed to acquire agricultural land or to exploit natural resources are controlled by Filipinos (Rizal v. Temple, G.R. No. L-6776).
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