Iglesia Evangelica Metodista en las Islas Filipinas (IEMELIF) vs. Lazaro (624 SCRA 224 [2010]) CASE DIGEST

 Iglesia Evangelica Metodista en las Islas Filipinas (IEMELIF) vs. Lazaro (624 SCRA 224 [2010])

(CorpLaw Case Digest by: Arlou June D. Gomez)

The dispute resolves the issue of whether or not a corporation may change its character as a corporation sole into a corporation aggregate by mere amendment of its articles of incorporation without first going through the process of dissolution.

FACTS:

In 1909, Bishop Nicolas Zamora established the petitioner Iglesia Evangelica Metodista En Las Islas Filipinas, Inc. (IEMELIF) as a corporation sole with Bishop Zamora acting as its "General Superintendent." 

Thirty-nine years later in 1948, the IEMELIF enacted and registered a by-laws that established a Supreme Consistory of Elders (the Consistory), made up of church ministers, who were to serve for four years and served as the IEMELIF’s board of directors.

Apparently, although the IEMELIF remained a corporation sole on paper (with all corporate powers theoretically lodged in the hands of one member, the General Superintendent), it had always acted like a corporation aggregate. 

On May 7, 1973 the SEC approved the vote of general membership [changing IEMELIF’s organizational structure from a corporation sole to a corporation aggregate]. For some reasons, however, the corporate papers of the IEMELIF remained unaltered as a corporation sole.

Only in 2001, about 28 years later, did the issue reemerge. x x x

The SEC said that the IEMELIF needed to amend its articles of incorporation for that purpose.

Acting on this advice, the Consistory resolved to convert the IEMELIF to a corporation aggregate. x x x

Subsequently, the general membership approved the conversion, prompting the IEMELIF to file amended articles of incorporation with the SEC. 

Petitioners Reverend Nestor Pineda, et al., which belonged to a faction that did not support the conversion, filed a civil case x x x.

Petitioners claim that a complete shift from IEMELIF’s status as a corporation sole to a corporation aggregate required, not just an amendment of the IEMELIF’s articles of incorporation, but a complete dissolution of the existing corporation sole followed by a re-incorporation.

RTC dismissed the action 

On appeal, the CA affirmed that of the RTC. Motion for reconsideration was likewise denied.

ISSUE:

whether or not the CA erred in affirming the RTC ruling that a corporation sole may be converted into a corporation aggregate by mere amendment of its articles of incorporation.

HELD:

No. 

Religious corporations are governed by Sections 109 through 116 of the Corporation Code. 

A corporation sole is "one formed by the chief archbishop, bishop, priest, minister, rabbi or other presiding elder of a religious denomination, sect, or church, for the purpose of administering or managing, as trustee, the affairs, properties and temporalities of such religious denomination, sect or church." A corporation aggregate formed for the same purpose, on the other hand, consists of two or more persons. [Section 110 of the Corporation Code]. 

True, the Corporation Code provides no specific mechanism for amending the articles of incorporation of a corporation sole. But, as the RTC correctly held, Section 109 of the Corporation Code allows the application to religious corporations of the general provisions governing non-stock corporations.

For non-stock corporations, the power to amend its articles of incorporation lies in its members. The code requires two-thirds of their votes for the approval of such an amendment. So how will this requirement apply to a corporation sole that has technically but one member (the head of the religious organization) who holds in his hands its broad corporate powers over the properties, rights, and interests of his religious organization?

Although a non-stock corporation has a personality that is distinct from those of its members who established it, its articles of incorporation cannot be amended solely through the action of its board of trustees. The amendment needs the concurrence of at least two-thirds of its membership. If such approval mechanism is made to operate in a corporation sole, its one member in whom all the powers of the corporation technically belongs, needs to get the concurrence of two-thirds of its membership. The one member, here the General Superintendent, is but a trustee, according to Section 110 of the Corporation Code, of its membership.

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. He can, with membership concurrence, increase the technical number of the members of the corporation from "sole" or one to the greater number authorized by its amended articles.

Here, the evidence shows that the IEMELIF’s General Superintendent, respondent Bishop Lazaro, who embodied the corporation sole, had obtained, not only the approval of the Consistory that drew up corporate policies, but also that of the required two-thirds vote of its membership.

The Court DENIED the petition and AFFIRMED the CA Resolution