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St. Charbel’s Foundation (Foundation) is a non-stock corporation organized in accordance with Philippine laws, comprising of five voting members and…

2026 Bar Exam · Commercial & Taxation Law · Question 4 · Essay

The question

St. Charbel’s Foundation (Foundation) is a non-stock corporation organized in accordance with Philippine laws, comprising of five voting members and trustees. Two of them are Filipino priests, one is a Filipino lawyer residing in the United States, and the remaining two are Nigerian missionaries residing in the Philippines. The Filipino priests are the president and corporate secretary of the Foundation. The Foundation agreed to establish an incorporated partnership with Hayes and Ryan, who are American citizens. Pursuant to said agreement, the Foundation, Hayes, and Ryan established a stock corporation under Philippine laws named Pio, Inc. The primary purpose of Pio, Inc. is to sell low-cost housing units to the marginalized sectors of society. The Foundation owns and controls 60% of the outstanding capital stock of Pio, Inc., while the remaining 40% is registered in the names of Hayes and Ryan. Pio, Inc. bought a parcel of land in Payatas, Quezon City, where the socialized housing project shall be implemented. Is the purchase by Pio, Inc. of the parcel of land an ultra vires act? Explain.

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
This is general legal information, not legal advice.