Iglesia Evangelica Metodista En Las Islas Filipinas (IEMELIF) vs. Bishop Nathanael Lazaro

A corporation sole may be converted into a corporation aggregate by mere amendment of its articles of incorporation without prior dissolution, applying by analogy the provisions on non-stock corporations regarding amendments, provided the amendment is approved by the corporation sole acting as trustee with the concurrence of at least two-thirds of the religious organization's membership.

The case stems from a long-standing organizational dispute within the Iglesia Evangelica Metodista En Las Islas Filipinas (IEMELIF), a religious organization established in 1909. Although incorporated as a corporation sole, IEMELIF had functioned practically as a corporation aggregate since 1948 through its Supreme Consistory of Elders. In 1973, the membership voted to formalize this structure, but the corporate papers were never amended. When the issue resurfaced in 2001, the SEC advised that proper amendment of articles was necessary, leading to a factional dispute between those supporting the conversion and those opposing it.

• In 1909, Bishop Nicolas Zamora established IEMELIF as a corporation sole under the Corporation Code, with the Bishop acting as "General Superintendent."
• In 1948, IEMELIF enacted and registered by-laws establishing a Supreme Consistory of Elders composed of church ministers serving four-year terms, effectively acting as a board of directors with power to elect key officers.
• Despite remaining a corporation sole on paper, IEMELIF functioned as a corporation aggregate in practice, with the Consistory exercising decision-making powers without challenge.
• In 1973, the general membership voted to formally convert IEMELIF from a corporation sole to a corporation aggregate, which the SEC approved on May 7, 1973, though the corporate papers were never actually amended to reflect this change.
• In 2001, the SEC responded to an IEMELIF query stating that the 1973 conversion was not properly documented and required formal amendment of the articles of incorporation.
• Acting on this advice, the Consistory, led by respondent Bishop Nathanael Lazaro as General Superintendent, resolved to convert to a corporation aggregate and obtained approval from the general membership.
• Petitioners, comprising a faction opposed to the conversion including Reverend Nestor Pineda and other Tondo congregation members, filed suit in IEMELIF's name to nullify the amended articles, arguing that conversion required dissolution and re-incorporation rather than mere amendment.
• Bishop Lazaro filed an affidavit-certification supporting the conversion, claiming he acted with approval of the Consistory and the required two-thirds vote of the membership.

• Petitioners argued that the Corporation Code contains no provision allowing a corporation sole to convert into a corporation aggregate by mere amendment of articles of incorporation.
• They contended that a complete shift from a corporation sole to a corporation aggregate requires the dissolution of the existing corporation sole followed by the creation of a new corporation through re-incorporation.
• They maintained that the nature of a corporation sole (with only one member holding all corporate powers) is fundamentally incompatible with a corporation aggregate (with multiple members), necessitating termination of the former entity before the latter can exist.

• Respondents argued that Section 109 of the Corporation Code permits religious corporations to be governed by provisions applicable to non-stock corporations, including Section 16 governing amendments of articles of incorporation.
• They contended that the amendment merely requires the vote or written assent of at least two-thirds of the membership, which was obtained in this case.
• They maintained that dissolution is unnecessary because the corporate entity remains distinct from its members regardless of whether it has one or multiple members, and the conversion does not affect the corporation's responsibilities to third parties.

• Procedural: N/A
• Substantive Issues:
  • Whether a corporation sole may be converted into a corporation aggregate by mere amendment of its articles of incorporation without undergoing dissolution.
  • Whether the concurrence of two-thirds of the religious organization's membership is required for such amendment.

• Procedural: N/A
• Substantive:
  • The Court held that a corporation sole may indeed be converted into a corporation aggregate by mere amendment of its articles of incorporation without prior dissolution.
  • Section 109 of the Corporation Code provides that religious corporations shall be governed additionally by provisions on non-stock corporations insofar as applicable. Since the Code lacks specific provisions for amending a corporation sole's articles, Section 16 (governing non-stock corporations) applies suppletorily.
  • Section 16 requires the vote or written assent of at least two-thirds of the members for non-stock corporations. Applied to a corporation sole, this means the one member (the General Superintendent) who holds all corporate powers must obtain the concurrence of two-thirds of the membership of the religious organization for whom he acts as trustee under Section 110.
  • The Court rejected the dissolution argument, explaining that whether a non-stock corporation or a corporation sole, the corporate being remains distinct from its members. Increasing the number of corporate members from "sole" to multiple does not change the corporation's responsibility to third parties.
  • The Court found that Bishop Lazaro, embodying the corporation sole, obtained the approval of the Consistory and the required two-thirds vote of the membership, satisfying statutory requirements.
  • The Court accorded great weight to the SEC's interpretation and application of the Corporation Code, noting the agency's specialized expertise in corporate law.

• Suppletory Application of Non-Stock Corporation Provisions to Religious Corporations — Section 109 of the Corporation Code allows religious corporations to be governed by provisions applicable to non-stock corporations where the Code lacks specific rules. The Court applied this to utilize Section 16 (amendment procedures) for corporations sole.
• Corporation Sole as Trustee — Under Section 110, a corporation sole is formed by a presiding elder to administer affairs, properties, and temporalities of a religious denomination as trustee. This trustee relationship requires the sole member to obtain membership concurrence for fundamental changes like conversion to aggregate status.
• Distinct Corporate Personality Independent of Member Count — The corporate entity remains distinct from its members regardless of whether it is a corporation sole (one member) or aggregate (multiple members). Changes in membership structure do not affect the corporation's continuity or obligations to third parties.
• Great Weight to Administrative Interpretation — Courts accord respect and recognition to the interpretation and application of statutes by administrative agencies exercising specialized functions, such as the SEC's interpretation of the Corporation Code.

• "There is no point to dissolving the corporation sole of one member to enable the corporation aggregate to emerge from it. Whether it is a non-stock corporation or a corporation sole, the corporate being remains distinct from its members, whatever be their number."
• "The increase in the number of its corporate membership does not change the complexion of its corporate responsibility to third parties."
• "The one member, with the concurrence of two-thirds of the membership of the organization for whom he acts as trustee, can self-will the amendment."
• "Considering its experience and specialized capabilities in the area of corporation law, the SEC's prior action on the IEMELIF issue should be accorded great weight."

• Iglesia Evangelica Metodista en las Islas Filipinas, Inc. v. Juane, G.R. No. 172447, September 18, 2009 — Cited to distinguish between a corporation sole (one member) and a corporation aggregate (two or more persons), and to define the nature of a corporation sole under Section 110 of the Corporation Code.
• The Roman Catholic Apostolic Administration of Davao, Inc. v. The Land Registration Commission and the Register of Deeds of Davao City, 102 Phil. 596 (1957) — Cited in the concurring opinion to explain that a corporation sole consists of one person only and his successors in a particular station, incorporated by law to be given legal capacities and perpetuity.

• Section 109 of the Corporation Code — Provides that religious corporations shall be governed by the general provisions on non-stock corporations insofar as applicable; served as the statutory basis for applying amendment procedures to corporations sole.
• Section 110 of the Corporation Code — Defines a corporation sole as one formed by a chief archbishop, bishop, priest, minister, rabbi, or presiding elder to administer affairs, properties, and temporalities of a religious denomination as trustee.
• Section 16 of the Corporation Code — Governs amendment of articles of incorporation for non-stock corporations, requiring the vote or written assent of at least two-thirds of the members; applied suppletorily to corporations sole via Section 109.
• Section 17 of the Corporation Code — Enumerates grounds for rejection or disapproval of articles of incorporation or amendments; cited to confirm that the IEMELIF amendment met statutory requirements and was not contrary to law.
• Section 36 of the Corporation Code — Lists general powers of corporations, including the power to amend articles of incorporation; cited in the concurring opinion to support the corporation sole's inherent power to amend.
• Section 113 of the Corporation Code — Governs acquisition and alienation of property by corporations sole; cited in the concurring opinion to contrast with Section 40 (governing corporations aggregate).

• Justice Antonio T. Carpio — Concurred in the result but maintained that the amendment could be effected by the corporation sole without the concurrence of two-thirds of the members of the religious denomination. He argued that: (1) Section 16 requires approval by the board of trustees and members of the corporation; (2) a corporation sole has only one member (the presiding elder) who is also the sole trustee; (3) therefore, the vote of the single member suffices, and the members of the religious denomination (distinct from corporate members) need not concur; (4) once converted, the corporation aggregate ceases to be governed by corporation sole rules (e.g., Section 113 on property sales) and becomes subject to general non-stock corporation provisions (e.g., Section 40).