Case Digest (G.R. No. L-17295)
Facts:
The case of Ang Pue & Company, et al. vs. Secretary of Commerce and Industry (G.R. No. L-17295) was decided on July 30, 1962, by the Supreme Court of the Philippines. The plaintiffs, Ang Pue and Tan Siong, both Chinese citizens, organized a partnership named Ang Pue & Company on May 1, 1953, for a term of five years, with the possibility of extension by mutual consent. The partnership was established for the purpose of engaging in general merchandising, specifically in the wholesale and retail trade of lumber, hardware, and other construction materials. The articles of partnership were duly registered with the Securities and Exchange Commission on June 16, 1953.
However, on June 19, 1954, Republic Act No. 1180 was enacted, which regulated the retail business in the Philippines. This law stipulated that partnerships not wholly composed of Filipino citizens could continue their retail operations only until the expiration of their original term. On April 15, 1958, p...
Case Digest (G.R. No. L-17295)
Facts:
Partnership Formation: On May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the partnership Ang Pue & Company for a term of five years, extendible by mutual consent. The partnership's purpose was to engage in general merchandising, including the wholesale and retail sale of lumber, hardware, and other construction materials. The articles of partnership were registered with the Securities and Exchange Commission (SEC) on June 16, 1953.
Enactment of Republic Act No. 1180: On June 19, 1954, Republic Act No. 1180 (the Retail Trade Nationalization Law) was enacted. This law regulated the retail business, stipulating that only Filipinos and entities wholly owned by Filipinos could engage in retail trade. However, it allowed existing non-Filipino partnerships to continue operating until the expiration of their original term.
Amendment to the Articles of Partnership: On April 15, 1958, prior to the expiration of the five-year term of the partnership, Ang Pue and Tan Siong amended the articles of partnership to extend the term for another five years. When the amended articles were presented for registration with the SEC on April 16, 1958, registration was denied on the grounds that the extension violated Republic Act No. 1180.
Legal Action: The plaintiffs (Ang Pue & Company, Ang Pue, and Tan Siong) filed an action for declaratory relief in the Court of First Instance of Iloilo, seeking a judgment declaring their right to extend the partnership term. The lower court dismissed the action, prompting the plaintiffs to appeal.
Issue:
- Whether the extension of the partnership term by Ang Pue & Company, a partnership not wholly owned by Filipinos, violates Republic Act No. 1180.
- Whether the original provision in the articles of partnership allowing for an extension constitutes a property right that cannot be impaired by the law.
Ruling:
The Supreme Court affirmed the decision of the lower court, holding that the extension of the partnership term violated Republic Act No. 1180. The Court ruled that the right to extend the partnership term was not an absolute property right and was subject to existing laws. Since Republic Act No. 1180 was already in force when the partners sought to extend the term, the extension was deemed invalid.
Ratio:
Regulation of Business as a Privilege: The Court emphasized that the formation of a corporation or partnership is not an absolute right but a privilege granted by the State, subject to terms and conditions imposed by law.
Application of Republic Act No. 1180: The law clearly intended to restrict retail trade to Filipinos and entities wholly owned by Filipinos. While existing non-Filipino partnerships were allowed to continue operating until the expiration of their original term, any extension of that term would violate the law.
No Property Right in Extension Clause: The provision in the original articles of partnership allowing for an extension did not create a vested property right. Such agreements are subject to the laws in force at the time of the extension. Since Republic Act No. 1180 was already in effect when the partners sought to extend the term, the extension was invalid.
Clear Intent of the Law: The Court found that the intent of Republic Act No. 1180 was clear and unambiguous. Allowing the extension would contravene the law's purpose of nationalizing the retail trade sector.