G.R. No. L-12719, May 31, 1962 – THE COLLECTOR OF INTERNAL REVENUE v. THE CLUB FILIPINO, INC. DE CEBU.

Fact: Respondent is a civic corporation organized under the laws of the Philippines with an original authorized capital stock of P22,000.00, which was subsequently increased to P200,000.00, civic corporation organized under the laws of the Philippines with an original authorized capital stock of P22,000.00, which was subsequently increased to P200,000.00. Neither in the articles or by-laws is there a provision relative to dividends and their distribution, although it is covenanted that upon its dissolution, the Club’s remaining assets, after paying debts, shall be donated to a charitable Philippine Institution in Cebu. The Respondent owns and operates a club house, a bowling alley, a golf course (on a lot leased from the government), and a bar-restaurant where it sells wines and liquors, soft drinks, meals and short orders to its members and their guests. The bar-restaurant was a necessary incident to the operation of the club and its golf-course. The club is operated mainly with funds derived from membership fees and dues. Whatever profits it had, were used to defray its overhead expenses and to improve its golf-course. the Collector of Internal Revenue assessed against and demanded from the Respondent. The Respondent wrote the Collector, requesting for the cancellation of the assessment. The request having been denied, the Club filed the instant petition for review.

Issue: Whether the respondent is a Stock Corporation

Held: No, to be a stock Corporation two requisites must be complied with, to wit: (1) a capital stock divided into shares and (2) an authority to distribute to the holders of such shares, dividends or allotments of the surplus profits on the basis of the shares held. In this case, nowhere in its articles of incorporation or by-laws could be found an authority for the distribution of its dividends or surplus profits. Strictly speaking, it cannot, therefore, be considered a stock corporation, within the contemplation of the corporation law.