G.R. No. L-23145 - Tayag vs. Benguet Consolidated, Inc.

Case Summary (G.R. No. L-23145)

Petitioner / Respondent

Petitioner (appellant before the Supreme Court): Benguet Consolidated, Inc., a Philippine corporation that held the corporate books evidencing the shares. Respondent (appellee): Renato D. Tayag, ancillary administrator of the Philippine estate of Idonah Slade Perkins.

Key Dates

Death of decedent: March 27, 1960 (New York City). Ancillary administration instituted: August 12, 1960. Substitution of ancillary administrator: January 22, 1963. Lower court order to produce certificates: January 27, 1964. Ancillary administrator’s petition to consider certificates lost: February 11, 1964. Lower court order declaring certificates lost and directing issuance of new certificates: May 18, 1964. Supreme Court decision affirming lower court order: November 29, 1968.

Applicable Law and Authorities

Constitutional framework applicable at the time: the 1935 Philippine Constitution (operative in 1968). Rules and precedents expressly relied upon in the decision: Rule 84, Section 3 of the Rules of Court (scope of ancillary administration); numerous Philippine precedents cited (e.g., Johannes v. Harvey; Leon and Ghezzi v. Manuf. Life Ins. Co.; Wells Fargo Bank and Union v. Collector of Internal Revenue; Viloria v. Administrator of Veterans Affairs); and accepted principles on corporate personality (Act No. 1459, and authorities such as Dartmouth College, Fletcher, Berle, Pound as cited by the Court).

Procedural Posture and Relief Sought

The ancillary administrator sought possession of stock certificates representing 33,002 shares of Benguet Consolidated standing in the name of the decedent, to satisfy local creditors and carry out estate administration. The domiciliary administrator in New York refused to surrender the certificates despite the Philippine probate court’s order. The Manila trial court, confronted with persistent noncompliance, ordered the existing certificates cancelled, declared them “lost for all purposes in connection with the administration and liquidation of the Philippine estate,” and directed Benguet Consolidated to issue new certificates to the ancillary administrator or the probate division. Benguet Consolidated appealed to the Supreme Court claiming (a) the certificates were not in fact lost, (b) its by‑laws prescribe a different procedure for replacement of lost certificates (including suspension of issuance pending final judicial determination of ownership), and (c) the trial court erred in ordering issuance of new certificates.

Issue Framed by the Court

Whether the trial court erred in (1) treating the extant stock certificates as lost for purposes of administering the Philippine estate, (2) ordering cancellation of those certificates, and (3) directing Benguet Consolidated to issue new certificates to the ancillary administrator, despite the certificates’ physical possession by the domiciliary administrator in New York and the corporation’s by‑law provisions concerning lost certificates.

Holding

The Supreme Court affirmed the trial court’s order. The Court held that the ancillary administrator had authority over assets of the decedent located in the Philippines; that the shares’ situs was in the Philippines because the corporation was domiciled here; that the trial court acted within its power in “considering as lost” the certificates and ordering issuance of new certificates to effectuate the court’s decree; and that the corporation’s by‑law could not be given precedence over a lawful court order. Costs were imposed on the oppositor‑appellant (Benguet Consolidated, Inc.).

Reasoning — Ancillary Administrator’s Authority and Situs of Shares

The Court reiterated the established rule that administration extends to the decedent’s assets found within the jurisdiction granting administration, and that an ancillary administration is proper for assets within a foreign state when those assets must be administered to satisfy local debts or for distribution. Citing Rule 84, Section 3 and relevant precedents, the Court emphasized that an administrator appointed in one jurisdiction has no power over property in another, but that the probate court in the Philippines legitimately exercises authority over assets within its territory. Because Benguet Consolidated is a Philippine corporation, the Court concluded the actual situs of the shares was in the Philippines and therefore subject to local judicial control and to the ancillary administrator’s right to possession for estate administration.

Reasoning — “Considered as Lost” and Use of Legal Fiction

Faced with the domiciliary administrator’s persistent refusal to obey court orders and surrender the certificates, the trial court declared the certificates “lost” and ordered new certificates issued. The Supreme Court upheld this as a permissible judicial measure to preserve the efficacy of its decree. The Court recognized that the characterization of the certificates as “lost” may not perfectly align with physical fact, but it deemed the use of such a legal fiction appropriate and necessary to defeat a tactic that would otherwise render the court’s authority impotent. The Court invoked the legitimate role of legal fictions in advancing justice and achieving practical, enforceable results when a party’s willful noncompliance frustrates administration.

Reasoning — Corporate By‑law and Priority of Court Decrees

Benguet Consolidated’s reliance on its by‑law procedure for replacement of lost, stolen, or destroyed certificates (including suspension of issuance where a contest regarding ownership exists) was rejected. The Court reasoned that the corporation’s by‑law cannot be allowed to control or nullify a valid judicial order; if a conflict exists between corporate internal provisions and a court’s lawful command, the court’s decree must prevail. The corporation itself had admitted that it was immaterial to it who was entitled to possession of the certificates; moreover, the risk of contingent liability raised by the corporation did not justify nullifying the court’s exercise of jurisdiction or fostering continued noncompliance by an overseas domiciliary administrator.

Reasoning — Corporate Nature and Obligat

Case Syllabus (G.R. No. L-23145)

Case Background and Facts

Decedent Idonah Slade Perkins died in New York City on March 27, 1960, and owned among other property two stock certificates covering 33,002 shares of Benguet Consolidated, Inc.
The stock certificates were in the possession of the County Trust Company of New York, which served as domiciliary (principal) administrator of the decedent’s estate.
Ancillary administration proceedings in the Philippines were instituted on August 12, 1960; Prospero Sanidad initially instituted them and Lazaro A. Marquez was appointed ancillary administrator.
On January 22, 1963, Renato D. Tayag was substituted as ancillary administrator.
A dispute arose between the domiciliary administrator in New York and the ancillary administrator in the Philippines over entitlement to possession of the stock certificates.
On January 27, 1964, the Court of First Instance of Manila ordered the County Trust Company to “produce and deposit” the certificates with the ancillary administrator or the Clerk of Court; the domiciliary administrator did not comply.
On February 11, 1964, the ancillary administrator petitioned the court to have the certificates “declared [or] considered as lost.”
On May 18, 1964, the lower court (presided by Hon. Arsenio Santos) ordered: (1) the stock certificates covering the 33,002 shares to be considered lost for all purposes in connection with administration and liquidation of the Philippine estate; (2) the certificates cancelled; and (3) Benguet Consolidated, Inc. to issue new certificates in lieu thereof and deliver them to either the incumbent ancillary administrator or the Probate Division of the Court.

Procedural History

The order of May 18, 1964, was appealed to the Supreme Court by the Philippine corporation Benguet Consolidated, Inc. (the oppositor-appellant); the domiciliary administrator did not file the appeal.
Benguet Consolidated, in its brief, admitted that the stock certificates were in existence and in the possession of the County Trust Company in New York, and stated that “it is immaterial” to the corporation who is entitled to possession of the certificates.
The appeal raised, among others, the assignment of error that the lower court erred in (1) considering the certificates lost, (2) ordering their cancellation, and (3) ordering issuance of new certificates and delivery to the ancillary administrator or probate division.
The Supreme Court rendered decision affirming the lower court order (135 Phil. 237; G.R. No. L-23145) on November 29, 1968, with costs against oppositor-appellant Benguet Consolidated, Inc.

Issues Presented

Whether the lower court lawfully could “consider as lost” stock certificates that were in fact in existence and in the possession of the domiciliary administrator abroad.
Whether Benguet Consolidated’s by-law provision governing lost, stolen or destroyed certificates (Section 10) barred issuance of new certificates pending final judicial determination of ownership.
Whether the ancillary administrator had the power to gain control and possession of assets of the decedent located within the Philippines for administration and satisfaction of local creditors’ claims.
Whether a Philippine corporation subject to the jurisdiction of local courts could refuse to obey a lawful court decree directing issuance and delivery of replacement stock certificates.

Holding (Supreme Court)

The appealed order of the Court of First Instance dated May 18, 1964, was affirmed.
Costs were awarded against oppositor-appellant Benguet Consolidated, Inc.
The Supreme Court found the appeal devoid of merit and upheld the lower court’s remedial disposition.

Rationale and Reasoning — Judicial Authority and Enforcement

The lower court’s order was a lawful and necessary response to the domiciliary administrator’s persistent refusal to obey a Philippine court decree; such refusal threatened to emasculate judicial authority and produce paralysis of effective administration within the Philippines.
The domiciliary administrator had voluntarily submitted itself to the jurisdiction of the lower court by entering appearance through counsel (June 27, 1963) and by filing a petition for relief from a prior order; despite this, it refused compliance, justifying the remedial step taken by the Philippine court.
The Court emphasized that conduct bordering on willful defiance of court decrees cannot be condoned without loss of judicial prestige; the remedy chosen was aimed at restoring the effectiveness of the decree and ensuring administration of the Philippine estate.

Rationale and Reasoning — Ancillary Administration Authority

The ancillary administrator’s power to gain control and possession of a decedent’s assets located within the Philippines is inherent in the duty to settle the estate and satisfy claims of local creditors; this power “extends to the assets of a decedent found within the state or country where it was granted,” as a “general rule universally recognized.”
The corollary that an administrator appointed in