G.R. No.

118043 July 23, 1998

LINCOLN PHILIPPINE LIFE INSURANCE COMPANY vs. COURT OF APPEALS
FACTS:
Petitioner is a domestic corporation engaged in a life insurance business. It issued 50,000
shares of stock as stock dividends with par value of P100 or a total of P5,000,000 and paid
documentary stamp taxes on each certificate on the basis of its par value. The CIR stated that
Lincoln the book value of the shares amounting to P19,307,500.00 should be used as basis for
determining the amount of the documentary stamp tax. Thus, it issued a deficiency documentary
stamp tax assessment in the amount of P78,991.25 in excess of the par value of the stock
dividends. On the appeal, CTA held that the amount of the documentary stamp tax should be
based on the par value stated on each certificate of stock. CA reversed the CTA's decision.
Hence, this petition.
ISSUE:
WON the par value of the certificates of stocks should be the basis for determining the
amount to be paid as documentary stamp tax.
HELD:
Yes. The par value of the certificates of stock should be the basis for determining the
amount to be paid as documentary stamp tax. The NIRC Sec. 224 provides that on every original
issue, whether on organization, reorganization or for any lawful purpose, of certificates of stock
by any association, company or corporation, there shall be collected a documentary stamp tax of
one peso and ten centavos on each two hundred pesos, or fractional part thereof, of the par value
of such certificates.
Stock dividends are shares of stock and not certificates of stock which merely represent
them. Thus, there is no basis for considering stock dividends as a distinct class from ordinary
shares of stock since under this provision only certificates of stock are required to be
distinguished into either one with par value or one without par rather than the classes of shares
themselves.

G.R. No. 93695 February 4, 1992

RAMON C. LEE and ANTONIO DM. LACDAO vs THE HON. COURT OF APPEALS
FACTS:
A third party complaint was filed against Alfa Integrated Textile Mills, Ramon Lee,
President of Alfa, and Antonio Lacdao, VP of Alfa. The petitioners filed a motion to dismiss the
third party complaint which was denied. On the answer to the third party complaint, petitioners
alleged that the summons for Alfa was erroneously served upon them considering that the
management of Alfa had been transferred to the DBP due to the voting trust agreement executed
between Alfa and DBP. On the other hand, DBP claimed that it was not authorized to receive
summons on behalf of Alfa since DBP had not taken over the company which has a separate and
distinct corporate personality and existence. Thus, the trial court issued an order advising the
private respondents to take the appropriate steps to serve the summons to Alfa and grants the
Manifestation and Motion for the Declaration of Proper Service of Summons filed by the
respondents.
The petitioners filed a motion for reconsideration. On comment, the private respondents
argued that the voting trust agreement did not divest the petitioners of their positions as president
and executive vice-president of Alfa so that service of summons upon Alfa through the
petitioners as corporate officers was proper.
The trial court upheld the validity of the service of summons on Alfa. On 2 nd MR,
petitioners reiterate their stand that by virtue of the voting trust agreement they ceased to be
officers and directors of Alfa, hence, they could no longer receive summons or any court
processes for or on behalf of Alfa. The trial court ruled in favor of the petitioners. CA reversed its
decision. Hence, this petition.
ISSUE:
WON the creation of voting trust agreement divests the petitioners of their positions as
president and executive vice-president of Alfa.
HELD:
Yes. A voting trust agreement results in the separation of the voting rights of a
stockholder from his other rights such as the right to receive dividends, the right to inspect the
books of the corporation, the right to sell certain interests in the assets of the corporation and
other rights to which a stockholder may be entitled until the liquidation of the corporation.
However, in order to distinguish a voting trust agreement from proxies and other voting pools
and agreements, it must pass three criteria or tests, namely: (1) that the voting rights of the stock
are separated from the other attributes of ownership; (2) that the voting rights granted are
intended to be irrevocable for a definite period of time; and (3) that the principal purpose of the
grant of voting rights is to acquire voting control of the corporation.
Both under the old and the new Corporation Codes there is no dispute as to the most
immediate effect of a voting trust agreement on the status of a stockholder who is a party to its
execution from legal titleholder or owner of the shares subject of the voting trust agreement,
he becomes the equitable or beneficial owner.
Under the old Corporation Code, the eligibility of a director, strictly speaking, cannot be
adversely affected by the simple act of such director being a party to a voting trust agreement
inasmuch as he remains owner (although beneficial or equitable only) of the shares subject of the

voting trust agreement pursuant to which a transfer of the stockholder's shares in favor of the
trustee is required (section 36 of the old Corporation Code). No disqualification arises by virtue
of the phrase "in his own right" provided under the old Corporation Code.
With the omission of the phrase "in his own right" the election of trustees and other
persons who in fact are not beneficial owners of the shares registered in their names on the books
of the corporation becomes formally legalized. Hence, this is a clear indication that in order to be
eligible as a director, what is material is the legal title to, not beneficial ownership of, the stock
as appearing on the books of the corporation.
The facts of this case show that the petitioners, by virtue of the voting trust agreement
executed disposed of all their shares through assignment and delivery in favor of the DBP, as
trustee. Consequently, the petitioners ceased to own at least one share standing in their names on
the books of Alfa as required under Section 23 of the new Corporation Code. They also ceased to
have anything to do with the management of the enterprise. The petitioners ceased to be
directors. Hence, the transfer of the petitioners' shares to the DBP created vacancies in their
respective positions as directors of Alfa.