Asuncion vs. De Yriarte

The Chief of the Division of Archives has the ministerial duty to determine not only the sufficiency of form of articles of incorporation but also the lawfulness of the corporation's purpose before issuing a certificate of incorporation; this determination involves judgment but not discretion, and may be corrected by mandamus if erroneous.

The case arose from an attempt by residents of the barrio of Pulo or San Miguel in the municipality of Pasig to incorporate themselves as a legal entity that would own and administer the common property within their barrio. At the time, barrios were not recognized as legal entities under Philippine law and had no separate corporate existence from the municipality. The municipality of Pasig, as a municipal corporation organized under the Municipal Code, held title to and administered all public property within its territorial limits, including property situated in the various barrios.

• Original Filing: Action for mandamus filed with the Court of First Instance of Manila to compel the Chief of the Division of Archives to receive and register articles of incorporation
• Lower Court Decision: The CFI found in favor of the defendant (respondent), refusing to order registration and holding that the Chief of the Division of Archives had authority to determine both the sufficiency of form and the legality of the object of the proposed corporation
• Appeal: Appeal taken directly to the Supreme Court from the judgment of the CFI
• SC Action: Appeal resolved on the merits, affirming the lower court's judgment

Norberto Asuncion and other residents of the barrio of Pulo or San Miguel, located within the municipality of Pasig, sought to organize a private corporation under the Corporation Law, Act No. 1459. They prepared and submitted articles of incorporation to the Division of Archives of the Executive Bureau, stating that the object of the corporation was (a) to organize and regulate the management, disposition, administration and control which the barrio of Pulo or San Miguel or its inhabitants or residents have over the common property of said residents or inhabitants or property belonging to the whole barrio as such, and (b) to use the natural products of said property for institutions, foundations, and charitable works of common utility and advantage to the barrio or its inhabitants.

Manuel de Yriarte, as Chief of the Division of Archives, refused to file the articles of incorporation. He based his refusal on the ground that the object of the corporation as stated in the articles was not lawful and that, pursuant to Section 6 of Act No. 1459, the articles were not registerable. The proposed incorporators thereafter initiated an action in the Court of First Instance of Manila to compel the Chief of the Division of Archives to receive and register the articles of incorporation and to perform all acts necessary for their complete incorporation.

The Court of First Instance found in favor of the defendant, refusing to order the registration of the articles. The lower court held that the defendant, under the Corporation Law, had authority to determine both the sufficiency of the form of the articles and the legality of the object of the proposed corporation. The plaintiffs appealed from this judgment.

At the time of the dispute, the municipality of Pasig was a municipal corporation organized by law, containing within its limits several barrios or small settlements like Pulo or San Miguel, which had no local government of their own but were governed by the municipality of Pasig through its municipal president and council. The president and members of the municipal council were elected by a general vote of the municipality, with qualified electors from all barrios having the right to participate. The municipality of Pasig had control of all property of the municipality, while the various barrios had no right to own or hold property, not being recognized as legal entities by any law. Residents of the barrios participated in the advantages accruing to the municipality from public property and received all benefits incident to residence in a municipality organized by law. Any public property situated in the barrio of Pulo or San Miguel not belonging to the general government or the province belonged to the municipality of Pasig, and the sole authority to manage and administer the same resided in that municipality.

• The duties of the Chief of the Division of Archives are purely ministerial, and he has no authority to pass upon the lawfulness of the object for which incorporators propose to organize
• The Division of Archives must accept and register articles of incorporation that are perfect in form, regardless of the purpose of the corporation as expressed in the articles
• The proper remedy for unlawful corporate purposes is dissolution after incorporation, not refusal of registration
• The proposed corporation's purpose of managing common property for the benefit of barrio residents is lawful and not contrary to law

• Under Section 6 of Act No. 1459 (the Corporation Law), the Division of Archives has authority to determine whether the objects of a proposed corporation are lawful before registering the articles
• The object of the proposed corporation is unlawful because it seeks to make the barrio of Pulo or San Miguel a corporation that would become owner of and have the right to control and administer property belonging to the municipality of Pasig
• The proposed incorporation is repugnant to the provisions of the Municipal Code (Act No. 82) and the governments of municipalities as organized thereunder
• Barrios are not recognized as legal entities by any law and have no right to own or hold property

• Procedural Issues: Whether the Chief of the Division of Archives may be compelled by mandamus to register articles of incorporation when he refuses to do so on the ground that the corporate purpose is unlawful.
• Substantive Issues:
  • Whether the Chief of the Division of Archives has authority under the Corporation Law to determine not only the sufficiency of the form of articles of incorporation but also the lawfulness of the purpose of the proposed corporation.
  • Whether the purposes of the proposed corporation as stated in the articles of incorporation are lawful within the meaning of the Corporation Law.

• Procedural: The SC held that the Chief of the Division of Archives may be mandamused if he acts in violation of law or refuses unduly to comply with the law. While the Chief has power to pass upon the lawfulness of the purposes of a proposed corporation and may exercise judgment in determining questions of law, his duties remain ministerial. The SC distinguished between judgment and discretion: judgment involves determining a question of law that can be decided only one way correctly, while discretion allows an official to decide a question either way and still be right. The determination of whether corporate objects are lawful is like a court deciding a case on the merits — there is only one correct answer. If the Chief errs in this determination and refuses to file articles that should be filed under the law, the error will be corrected by the SC through mandamus.

• Substantive: The SC ruled that the Chief of the Division of Archives has the authority and duty to determine the lawfulness of the objects and purposes of a corporation before issuing a certificate of incorporation. The SC reasoned that it could not have been intended that the Division of Archives should issue a certificate of incorporation to a corporation organized for base or immoral purposes, putting the seal of approval of the Government upon it. The fact that such a corporation might later be dissolved or its officials punished furnished no reason why it should have been created in the first instance. On the second substantive issue, the SC held that the purposes of the proposed corporation were unlawful. The object of the corporation was to make the barrio of Pulo or San Miguel a corporation that would become owner of and have the right to control and administer property belonging to the municipality of Pasig found within the barrio's limits. This clearly could not be permitted, as it would deprive municipalities of property they owned and administered, disrupt municipalities by dividing them into smaller independent municipalities, and was repugnant to the Municipal Code. The SC emphasized that what the law does not permit cannot be obtained by indirection.

• Ministerial Duty with Judgment — A public officer's duty may be ministerial even if it involves the exercise of judgment in determining questions of law. The distinction lies between judgment (determining a question that can be decided only one way correctly) and discretion (the faculty to decide a question either way and still be right). The Chief of the Division of Archives exercises judgment, not discretion, in determining whether corporate purposes are lawful.

• Authority to Determine Lawfulness of Corporate Purpose — The Division of Archives has both the right and the duty to determine the lawfulness of the objects and purposes of a corporation before issuing a certificate of incorporation. Registration cannot be compelled merely because articles are perfect in form if the corporate purpose is unlawful.

• Mandamus to Correct Erroneous Legal Determination — While the Chief of the Division of Archives may exercise judgment in determining questions of law, if he errs in that determination and refuses to file articles that should be filed under the law, the decision is subject to review and correction by mandamus.

• Prohibition Against Indirect Achievement of Unlawful Objects — What the law does not permit cannot be obtained by indirection. A corporation cannot be used to accomplish a purpose prohibited by law, such as depriving municipalities of property they own and administer.

• Barrios as Non-Entities — Barrios are not recognized as legal entities by law and have no right to own or hold property. Public property within a barrio belongs to the municipality, and the sole authority to manage and administer it resides in the municipality.

• Section 6, Act No. 1459 (Corporation Law) — Provides that five or more persons, not exceeding fifteen, a majority of whom are residents of the Philippine Islands, may form a private corporation for any lawful purpose by filing with the Division of Archives articles of incorporation duly executed and acknowledged before a notary public. The SC interpreted this provision as requiring the Division of Archives to determine the lawfulness of the corporate purpose before registration.

• Act No. 82 (Municipal Code) — The SC cited this law in holding that the proposed corporation's object was repugnant to the provisions of the Municipal Code and the governments of municipalities as organized thereunder. The Municipal Code establishes municipalities as the legal entities with authority to own, control, and administer public property within their territorial limits.

None.