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[G.R. No. 119020. October 19, 2000.] INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs. HON.

COURT OF APPEALS, HENRI KAHN, PHILIPPINES FOOTBALL FEDERATION, respondents. DECISION KAPUNAN, J :
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On June 30 1989, petitioner International Express Travel and Tour Services, Inc., through its managing director, wrote a letter to the Philippine Football Federation (Federation), through its president private respondent Henri Kahn, wherein the former offered its services as a travel agency to the latter. 1 The offer was accepted.
AaCEDS

Petitioner secured the airline tickets for the trips of the athletes and officials of the Federation to the South East Asian Games in Kuala Lumpur as well as various other trips to the People's Republic of China and Brisbane. The total cost of the tickets amounted to P449,654.83. For the tickets received, the Federation made two partial payments, both in September of 1989, in the total amount of P176,467.50. 2 On 4 October 1989, petitioner wrote the Federation, through the private respondent a demand letter requesting for the amount of P265,894.33. 3 On 30

October 1989, the Federation, through the Project Gintong Alay, paid the amount of P31,603.00. 4 On 27 December 1989, Henri Kahn issued a personal check in the amount of P50,000 as partial payment for the outstanding balance of the Federation. 5 Thereafter, no further payments were made despite repeated demands. This prompted petitioner to file a civil case before the Regional Trial Court of Manila. Petitioner sued Henri Kahn in his personal capacity and as President of the Federation and impleaded the Federation as an alternative defendant. Petitioner sought to hold Henri Kahn liable for the unpaid balance for the tickets purchased by the Federation on the ground that Henri Kahn allegedly guaranteed the said obligation. 6 Henri Kahn filed his answer with counterclaim. While not denying the allegation that the Federation owed the amount P207,524.20, representing the unpaid balance for the plane tickets, he averred that the petitioner has no cause of action against him either in his personal capacity or in his official capacity as president of the Federation. He maintained that he did not guarantee payment but merely acted as an agent of the Federation which has a separate and distinct juridical personality. 7 On the other hand, the Federation failed to file its answer, hence, was declared in default by the trial court.
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In due course, the trial court rendered judgment and ruled in favor of the petitioner and declared Henri Kahn

personally liable for the unpaid obligation of the Federation. In arriving at the said ruling, the trial court rationalized:
Defendant Henri Kahn would have been correct in his contentions had it been duly established that defendant Federation is a corporation. The trouble, however, is that neither the plaintiff nor the defendant Henri Kahn has adduced any evidence proving the corporate existence of the defendant Federation. In paragraph 2 of its complaint, plaintiff asserted that "defendant Philippine Football Federation is a sports association . . . ." This has not been denied by defendant Henri Kahn in his Answer. Being the President of defendant Federation, its corporate existence is within the personal knowledge of defendant Henri Kahn. He could have easily denied specifically the assertion of the plaintiff that it is a mere sports association if it were a domestic corporation. But he did not. xxx xxx xxx A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify, a contract. The contract entered into by its officers or agents on behalf of such association is not binding on, or enforceable against it. The officers or agents are themselves personally liable. xxx xxx xxx
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With the costs against defendant Henri Kahn.The dispositive portion of the trial court's decision reads: WHEREFORE.000.20.00 for attorney's fees. Kahn. the judgment appealed from is hereby REVERSED and SET ASIDE and another one is rendered dismissing the complaint against defendant Henri S. the respondent court rendered a decision reversing the trial court. 1990. plus the interest thereon at the legal rate computed from July 5. SEHDIC The complaint of the plaintiff against the Philippine Football Federation and the counterclaims of the defendant Henri Kahn are hereby dismissed.524. until the principal obligation is fully liquidated. he should not be held liable for the same as said entity has a separate and distinct personality from its officers. the decretal portion of said decision reads: WHEREFORE. 11 In finding for Henri Kahn. On 21 December 1994. It rationalized that since petitioner failed to prove that Henri Kahn guaranteed the obligation of the Federation. . premises considered. 10 Only Henri Kahn elevated the above decision to the Court of Appeals. the Court of Appeals recognized the juridical existence of the Federation. judgment is rendered ordering defendant Henri Kahn to pay the plaintiff the principal sum of P207. the date the complaint was filed. and another sum of P15.

Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be held liable for the unpaid obligation. let alone the fact that the judgment dismissing the complaint against it. The same was denied by the appellate court in its resolution of 8 February 1995. it should be remembered that the trial court dismissed the complaint against the Philippine Football Federation. the Philippine Football Federation is not a party to this appeal and consequently. HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD DEALT WITH THE PHILIPPINE FOOTBALL FEDERATION (PFF) AS A . and the plaintiff did not appeal from this decision.THE. no judgment may be pronounced by this Court against the PFF without violating the due process clause. 12 Petitioner now seeks recourse to this Court and alleges that the respondent court committed the following assigned errors: 13 A. Hence. The alternative prayer is therefore similarly DENIED. had already become final by virtue of the plaintiff's failure to appeal therefrom. where it stated that: As to the alternative prayer for the Modification of the Decision by expressly declaring in the dispositive portion thereof the Philippine Football Federation (PFF) as liable for the unpaid obligation.

The resolution of the case at bar hinges on the determination of the existence of the Philippine Football Federation as a juridical person. HAVING NEGOTIATED WITH PETITIONER AND CONTRACTED THE OBLIGATION IN BEHALF OF THE PFF. the appellate court recognized the existence of the . THE HONORABLE COURT OF APPEALS ERRED IN NOT EXPRESSLY DECLARING IN ITS DECISION THAT THE PFF IS SOLELY LIABLE FOR THE OBLIGATION. B.ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT PERSONALLY LIABLE. MADE A PARTIAL PAYMENT AN ASSURED PETITIONER OF FULLY SETTLING THE OBLIGATION. C.CORPORATE ENTITY AND IN NOT HOLDING THAT PRIVATE RESPONDENT HENRI KAHN WAS THE ONE.THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE RESPONDENT HENRI KAHN PERSONALLY LIABLE FOR THE OBLIGATION OF THE UNINCORPORATED PFF. In the assailed decision. WHO REPRESENTED THE PFF AS HAVING CORPORATE PERSONALITY.

This may be gleaned from the powers and functions granted to these associations.To adopt a constitution and by-laws for their internal organization and government. 3135 and P.Functions.A. 3.D. powers and duties of Associations. and other means for their purposes. powers and duties: 1. lease or otherwise encumber property both real and personal. No. xxx xxx xxx . otherwise known as the Revised Charter of the Philippine Amateur Athletic Federation.A.To affiliate with international or regional sports' Associations after due consultation with the executive committee.To raise funds by donations benefits. In support of this. both R. sell. — The National Sports' Association shall have the following functions. 2. 14.To purchase. 604 recognized the juridical existence of national sports associations. 604 as the laws from which said Federation derives its existence. for the accomplishment of their purpose. 3135 provides: SEC. Section 14 of R. the CA cited Republic Act 3135.Federation. and Presidential Decree No. As correctly observed by the appellate court. 4.

however. Section 8 of P. and other means for their purpose subject to the approval of the Department. and Duties of National Sports Association.Purchase. 2. school. grants similar functions to these sports associations: SEC.Raise funds by donations. — The National sports associations shall have the following functions. 604.D. lease. and duties: 1. both real and personal. Powers. school. organization or entity are Filipino citizens.13.To perform such other acts as may be necessary for the proper accomplishment of their purposes and not inconsistent with this Act.Adopt a Constitution and By-Laws for their internal organization and government which shall be submitted to the Department and any amendment hereto shall take effect upon approval by the Department: Provided. sell. That no team.Functions. club. club. powers. 8. benefits. or otherwise encumber property. 3. organization or entity shall be admitted as a voting member of an association unless 60 per cent of the athletes composing said team. for the accomplishment of .

and international competitions. However. The power to purchase.Perform such other functions as may be provided by law. The above powers and functions granted to national sports associations clearly indicate that these entities may acquire a juridical personality. the State must give its consent either in the form of a special law or a general enabling act. xxx xxx xxx 13.Affiliate with international or regional sports associations after due consultation with the Department. for the promotion of their sport. while we agree with the appellate court that national sports associations may be accorded corporate status. Nowhere can it be found in . 5. 4. interport.their purpose. It is a basic postulate that before a corporation may acquire juridical personality. such does not automatically take place by the mere passage of these laws. lease and encumber property are acts which may only be done by persons. sell. We cannot agree with the view of the appellate court and the private respondent that the Philippine Football Federation came into existence upon the passage of these laws.Conduct local. with juridical capacity. other than the Olympic and Asian Games. whether natural or artificial.

A. 3135 or P. — A National Association shall be organized for each individual sports in the Philippines in the manner hereinafter provided to constitute the Philippine Amateur Athletic Federation. 3135 provides: SEC. among others. The Executive Committee shall give the recognition applied for if it is satisfied that said association will promote the purposes of this Act and particularly section three thereof.D. organization and recognition. These laws merely recognized the existence of national sports associations and provided the manner by which these entities may acquire juridical personality. Section 11 of R. 604 any provision creating the Philippine Football Federation. the reasons for such rejection shall be clearly stated in a written communication to the applicant. 11. Should the application be rejected.A. No application shall be held pending for more than three months after the filing thereof without any action having been taken thereon by the executive committee. a copy of the constitution and by-laws and a list of the members of the proposed association. Applications for recognition as a National Sports' Association shall be filed with the executive committee together with. Failure to specify the reasons for the rejection shall not affect the application which shall be considered as unacted upon: .National Sports' Association. and a filing fee of ten pesos.R.

That the Department may withdraw accreditation or recognition for violation of . The said executive committee shall be dissolved upon the organization of the executive committee herein provided: Provided. 7. That the functioning executive committee is charged with the responsibility of seeing to it that the National Sports' Associations are formed and organized within six months from and after the passage of this Act. further. The Department shall give the recognition applied for if it is satisfied that the national sports association to be organized will promote the objectives of this Decree and has substantially complied with the rules and regulations of the Department: Provided. applications for recognition shall be passed upon by the duly elected members of the present executive committee of the Philippine Amateur Athletic Federation. Section 7 of P. That until the executive committee herein provided shall have been formed. National Sports Associations: — Application for accreditation or recognition as a national sports association for each individual sport in the Philippines shall be filed with the Department together with. similarly provides: SEC.D. a copy of the Constitution and By-Laws and a list of the members of the proposed association.Provided however. 604. among others.

however. we rule that the Philippine Football Federation is not a national sports association within the purview of the aforementioned laws and does not have corporate existence of its own. the Philippine. In attempting to prove the juridical existence of the Federation. Unfortunately.D. Clearly the above cited provisions require that before an entity may be considered as a national sports association. such entity must be recognized by the accrediting organization. caCTHI Thus being said. it follows that private respondent Henry Kahn should be held liable for the unpaid obligations of the unincorporated Philippine Football Federation. Amateur Athletic Federation under R. 604. The Department shall supervise the national sports association: Provided. the same does not prove that said Federation has indeed been recognized and accredited by either the Philippine Amateur Athletic Federation or the Department of Youth and Sports Development. Henri Kahn failed to substantiate. That the latter shall have exclusive technical control over the development and promotion of the particular sport for which they are organized. It is a settled principle in corporation law that any person . Henri Kahn attached to his motion for reconsideration before the trial court a copy of the constitution and by-laws of the Philippine Football Federation. 3135. and the Department of Youth and Sports Development under P. Accordingly.this Decree and such rules and regulations formulated by it.A. This fact of recognition.

16 In the case at bar. the petitioner cannot deny the corporate existence of the Federation because it had contracted and dealt with the Federation in such a manner as to recognize and in effect admit its existence. . WHEREFORE. 15 The doctrine of corporation by estoppel is mistakenly applied by the respondent court to the petitioner.acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. The decision of the Regional Trial Court of Manila. in Civil Case No. Branch 35. Henri Kahn is presumed to have known about the corporate existence or non-existence of the Federation. 90-53595 is hereby REINSTATED. the petitioner is not trying to escape liability from the contract but rather is the one claiming from the contract. We cannot subscribe to the position taken by the appellate court that even assuming that the Federation was defectively incorporated. the decision appealed from is REVERSED and SET ASIDE. 14 As president of the Federation. The application of the doctrine applies to a third party only when he tries to escape liabilities on a contract from which he has benefited on the irrelevant ground of defective incorporation. SO ORDERED.

Roberto A. were jointly liable to pay respondent. but the appellate court affirmed the decision of the trial court that petitioner Lim is a partner and may thus be held liable as such. respondent. the present petition. Inc. Chua and Yao claimed that they were engaged in business venture with petitioner Lim Tong Lim. Yao and petitioner Lim in their capacities as general partners because it turned out that Ocean Quest Fishing Corporation is a non-existent corporation. vs. as general partners. Hence. which the sheriff enforced by attaching the fishing nets.R. The trial court issued a Writ of Preliminary Attachment. November 3. however. Petitioner .[G. PHILIPPINE FISHING GEAR INDUSTRIES.. who. 136448. was not a signatory to the contract. Benjamin S. Respondent filed a collection against Chua. Benito & Associates for private respondent. SYNOPSIS Antonio Chua and Peter Yao entered into a contract in behalf of Ocean Quest Fishing Corporation for the purchase of fishing nets from respondent Philippine Fishing Gear Industries. 1999. INC. petitioner. Yao and Lim. Abad for petitioner. The buyers failed to pay the fishing nets. The trial court rendered its decision ruling that respondent was entitled to the Writ of Attachment and that Chua. No. Lim appealed to the Court of Appeals.] LIM TONG LIM.

35 million. AGREEMENT THAT ANY LOSS OR PROFIT FROM THE SALE AND OPERATION OF THE BOATS WOULD BE DIVIDED EQUALLY AMONG THEM SHOWS THAT THE PARTIES HAD INDEED FORMED A PARTNERSHIP. they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats. cIaCTS The Supreme Court denied the petition. and to divide equally among them the excess or loss. The Court also ruled that under the principle of estoppel. it is clear that Chua. In their Compromise Agreement. The Court ruled that having reaped the benefits of the contract entered into by Chua and Yao. PARTNERSHIP. with whom he had an existing relationship.CIVIL LAW. petitioner Lim is deemed a part of said association and is covered by the doctrine of corporation by estoppel. which they started by buying boats worth P3. ergo. financed by a loan secured from Jesus Lim who was petitioner's brother. he cannot be held liable. These boats. fell under the term "common fund" under Article 1767. those acting on behalf of a corporation and those benefited by it. SYLLABUS 1. — From the factual findings of both lower courts. Yao and Lim had decided to engage in a fishing business. knowing it to be without valid existence.claimed that since his name did not appear on any of the contracts and since he never directly transacted with the respondent corporation. the purchase and the repair of which were financed with borrowed money. are held liable as general partners. The contribution to such fund need .

ID. Moreover. it could be an intangible like credit or industry. Given the preceding facts. a partnership engaged in the fishing business. COMPROMISE AGREEMENT OF THE PARTIES NOT THE SOLE BASIS OF PARTNERSHIP. Both lower courts have done . Chua and Yao. He also claims that the settlement was entered into only to end the dispute among them. among petitioner. 2. — Petitioner argues that the appellate court's sole basis for assuming the existence of a partnership was the Compromise Agreement. That the parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership. it is clear that there was. His arguments are baseless. which constituted the main assets of the partnership. it is clear that the partnership extended not only to the purchase of the boat. and they agreed that the proceeds from the sales and operations thereof would be divided among them. without which the business could not have proceeded.. but also to that of the nets and the floats. both essential to fishing. were obviously acquired in furtherance of their business. A proper adjudication of claimants' rights mandates that courts must review and thoroughly appraise all relevant facts.not be cash or fixed assets. It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment. but not to adjudicate their preexisting rights and obligations.ID. The fishing nets and the floats. They purchased the boats.. The Agreement was but an embodiment of the relationship extant among the parties prior to its execution.

. logic and fairness. 3. ID. After all. PETITIONER WAS A PARTNER. as found by the lower courts.so and have found.ID. correctly. Verily. Jesus Lim. petitioner entered into a business agreement with Chua and Yao. as well as the division among the three of the balance remaining after the payment of their loans. was not his own property but an asset of the partnership. We stress that it is unreasonable — indeed. the two lower courts' factual findings mentioned above nullified petitioner's argument that the existence of a partnership was based only on the Compromise Agreement.. HAVING . it is absurd — for petitioner to sell his property to pay a debt he did not incur. in which debts were undertaken in order to finance the acquisition and the upgrading of the vessels which would be used in their fishing business. if the relationship among the three of them was merely that of lessor-lessee.MERCANTILE LAW. he is the brother of the creditor. NOT A LESSOR. instead of partners. 4. It is not uncommon to register the properties acquired from a loan in the name of the person the lender trusts. The sale of the boats. In implying that the lower courts have decided on the basis of one piece of document alone. petitioner fails to appreciate that the CA and the RTC delved into the history of the document and explored all the possible consequential combinations in harmony with law. — Verily. PRIVATE CORPORATIONS. proves beyond cavil that F/B Lourdes. who in this case is the petitioner himself. a preexisting partnership among the parties. though registered in his name.

— There is no dispute that the respondent. this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. Petitioner contests such liability. under the law on estoppel. He in fact questions the attachment of the nets. having reaped the benefits of the contract entered into by persons with . Technically. those acting on behalf of a corporation and those benefited by it. Philippine Fishing Gear Industries. the boat which has earlier been proven to be an asset of the partnership. The only question here is whether petitioner should be held jointly liable with Chua and Yao.REAPED THE BENEFITS OF THE CONTRACT ENTERED INTO BY PERSONS WITH WHOM HE PREVIOUSLY HAD AN EXISTING RELATIONSHIP. It is difficult to disagree with the RTC and the CA that Lim. are held liable as general partners. However. it is true that petitioner did not directly act on behalf of the corporation. because the Writ has effectively stopped his use of the fishing vessel. PETITIONER IS DEEMED TO BE PART OF SAID ASSOCIATION AND IS COVERED BY THE DOCTRINE OF CORPORATION BY ESTOPPEL. is entitled to be paid for the nets it sold. petitioner benefited from the use of the nets found inside F/B Lourdes. Although it was never legally formed for unknown reasons. Chua and Yao decided to form a corporation. he cannot be held liable. ergo. Unquestionably. Clearly. knowing it to be without valid existence. Since his name does not appear on any of the contracts and since he never directly transacted with the respondent corporation. insisting that only those who dealt in the name of the ostensible corporation should be held liable.

by specific agreement. should be. We agree with the Court of Appeals that this issue is now moot and academic. As previously discussed. he is deemed an agent of such persons consenting to such representation and in the same manner.. J. MOOT AND ACADEMIC. ownership of the nets remained with Respondent Philippine Fishing Gear. ATTACHMENT. PROVISIONAL REMEDIES. as . — When a person by his act or deed represents himself.REMEDIAL LAW.CIVIL LAW. and were bought and used in the fishing venture they agreed upon. PARTNERSHIP. F/B Lourdes was an asset of the partnership and that it was placed in the name of petitioner.whom he previously had an existing relationship. only to assure payment of the debt he and his partners owed. Hence. with respect to persons who rely upon the representation. The nets and the floats were specifically manufactured and tailor-made according to their own design. if he were a partner. he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. VITUG. EXTENT OF LIABILITY OF PARTNERS IN A GENERAL PARTNERSHIP. Yao and Lim. — Petitioner claims that the Writ of Attachment was improperly issued against the nets. 5. the issuance of the Writ to assure the payment of the price stipulated in the invoices is proper. until full payment thereof. The association formed by Chua. ISSUE OF VALIDITY THEREOF. Besides. concurring: 1. as a partner in an existing partnership or with one or more persons not actual partners.

and (3) where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership — consistently with the rules on the nature of civil liability in delicts and quasi-delicts.ID. by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners.. (2) where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it. The liability of general partners (in a general partnership as so opposed to a limited partnership) is laid down in Article 1816 which posits that all partners shall be liable pro rata beyond the partnership assets for all the contracts which may have been entered into in its name. ID. 2. and by a person authorized to act for the partnership.it has been deemed.. — This rule is to be construed along with other provisions of the Civil Code which postulate that the partners can be held solidarily liable with the partnership specifically in these instances. loss or injury is caused to any person.. a de facto partnership with all the consequent obligations for the purpose of enforcing the rights of third persons. ID. or any penalty is incurred. — (1) where. under its signature. the partnership is liable therefor to the same extent as the partner so acting or omitting to act. . INSTANCES WHEN THE PARTNERS CAN BE HELD SOLIDARILY LIABLE WITH THE PARTNERSHIP. not being a partner in the partnership.

" Their contribution may be in the form of credit or industry. [there being] no reversible error in the appealed decision. 1998 Decision of the Court of Appeals in CA-GR CV 41477. The liability for a contract entered into on behalf of an unincorporated association or ostensible corporation may lie in a person who may not have directly transacted on its behalf. Being partners. the same is hereby affirmed. Lim Tong Lim assails the November 26.DECISION PANGANIBAN. not necessarily cash or fixed assets. they are all liable for debts incurred by or on behalf of the partnership. which was affirmed by the CA. J : p A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to divide the profits or losses that may arise therefrom. even if it is shown that they have not contributed any capital of their own to a "common fund. reads . cda The Case In the Petition for Review on Certiorari before us." 2 The decretal portion of the Quezon City Regional Trial Court (RTC) ruling. but reaped benefits from that contract. 1 which disposed as follows: "WHEREFORE.

12% interest per annum counted from date of plaintiff's invoices and computed on their respective amounts as follows: i.00 dated February 19. .00 on Invoice No. 1990. 1990.80 dated February 9.Accrued interest of P12. iii. 1990.That plaintiff is entitled to the writ of preliminary attachment issued by this Court on September 20. 1990.00 representing the unpaid price of the floats not covered by said Agreement.02 on Invoice No.221. ii. cdphil 2.000. a.045.00 on Invoice No. b.868.Accrued interest of P73.00 representing [the] unpaid purchase price of the fishing nets covered by the Agreement plus P68.That defendants are jointly liable to plaintiff for the following amounts.as follows: "WHEREFORE.920. 14413 for P146. 14407 for P385.P532. 14426 for P68.904.000.00 dated February 13.Accrued interest of P27. subject to the modifications as hereinafter made by reason of the special and unique facts and circumstances and the proceedings that transpired during the trial of this case. the Court rules: 1.377.

The proceeds of the sale paid for by plaintiff was deposited in court.000.00 per appearance in court.P65.00 as and for attorney's fees.00 for which the plaintiff was the sole and winning bidder. d.00 and P68.000. it was ordered sold at public auction for not less than P900.00 representing P5. cdasia e.045.000.00 replaced the attached property as a guaranty for any judgment that plaintiff may be able to secure in this case with the ownership and possession of the nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder in the public auction sale.045. and. to avoid further deterioration of the nets during the pendency of this case. the amount of P900. plus P8.Cost of suit.P50. respectively.000.500.00 representing P500.000.00. In effect. or for the total amount of P600.00 monthly rental for storage charges on the nets counted from September 20. upon agreement of the parties.00. this Court noted that these items were attached to guarantee any judgment that may be rendered in favor of the plaintiff but.000. 1990 (date of attachment) to September 12.c. "With respect to the joint liability of defendants for the principal obligation or for the unpaid price of nets and floats in the amount of P532. It has also been noted that . 1991 (date of auction sale).

however.000. it would appear therefore that whatever judgment the plaintiff may be entitled to in this case will have to be satisfied from the amount of P900. the defendants are hereby relieved from any and all liabilities arising from the monetary judgment obligation enumerated above and for plaintiff to retain possession and ownership of the nets and floats and for the reimbursement of the P900. For this reason.00 aside from the fact that they are not the owners of the nets and floats. it would be inequitable.00 cash bidded and paid for by plaintiff to serve as its bond in favor of defendants.00 deposited by it with the Clerk of Court.216.ownership of the nets [was] retained by the plaintiff until full payment [was] made as stipulated in the invoices.000. that the total judgment obligation as computed above would amount to only P840. in effect. unfair and unjust to award the excess to the defendants who are not entitled to damages and who did not put up a single centavo to raise the amount of P900. Considering.00 as this amount replaced the attached nets and floats.000. "From the foregoing. hence.92. It [was] for this reason also that this Court earlier ordered the attachment bond filed by plaintiff to guaranty damages to defendants to be cancelled and for the P900.000. the plaintiff attached its own properties. .

however. which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which was then docked at the Fisheries Port. (herein respondent). Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary attachment. private respondent filed a collection suit against Chua. the lower court issued a Writ of Preliminary Attachment. hence. He also turned over to respondent some of the nets which were in his . The total price of the nets amounted to P532.045." Antonio Chua and Peter Yao entered into a Contract dated February 7.000 were also sold to the Corporation.SO ORDERED. They claimed that they were engaged in a business venture with Petitioner Lim Tong Lim. 4 The buyers. for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries. who however was not a signatory to the agreement. Inc. on the allegation that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the Securities and Exchange Commission. 5 On September 20. 1990." 3 cdasia The Facts On behalf of "Ocean Quest Fishing Corporation. LLpr Instead of answering the Complaint. Metro Manila. Four hundred pieces of floats worth P68. The suit was brought against the three in their capacities as general partners. failed to pay for the fishing nets and the floats. 1990. Navotas. Chua filed a Manifestation admitting his liability and requesting a reasonable time within which to pay.

because of his failure to appear in subsequent hearings. Lim Tong Lim.000.750. ordered the sale of the fishing nets at a public auction.000.possession. 10 The Compromise Agreement provided: cdll "a)That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in the amount of P5. after which he was deemed to have waived his right to cross-examine witnesses and to present evidence on his behalf. 1992. as general partners. 1492-MN which Chua and Yao had brought against Lim in the RTC of Malabon. (c) a declaration of ownership of fishing boats. on the other hand. were jointly liable to pay respondent. 8 The trial court ruled that a partnership among Lim. (b) a reformation of contracts. and upon motion of private respondent. This . 6 The trial court maintained the Writ. Philippine Fishing Gear Industries won the bidding and deposited with the said court the sales proceeds of P900.00 including the fishing net. ruling that Philippine Fishing Gear Industries was entitled to the Writ of Attachment and that Chua. the trial court rendered its Decision. for (a) a declaration of nullity of commercial documents. Yao and Lim. (d) an injunction and (e) damages. Chua and Yao existed based (1) on the testimonies of the witnesses presented and (2) on a Compromise Agreement executed by the three 9 in Civil Case No. 7 On November 18. filed an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of Attachment. Branch 72. Peter Yao filed an Answer.

the CA held that petitioner was a partner of Chua and Yao in a fishing business and may thus be held liable as such for the fishing nets and floats purchased by and for the use of the partnership.000. 1/3 Antonio Chua. as already stated.000.P5. 1/3 Peter Yao.000.750. 12 Lim appealed to the Court of Appeals (CA) which. "c)If the proceeds of the sale the vessels will be less than P5.250. The appellate court ruled: "The evidence establishes that all the . "b)If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5.000. 1/3 Peter Yao. affirmed the RTC.750.00 whatever the deficiency shall be shouldered and paid to JL Holding Corporation by 1/3 Lim Tong Lim.750. Ruling of the Court of Appeals In affirming the trial court.00 shall be applied as full payment for P3.00 in favor of JL Holdings Corporation and/or Lim Tong Lim. but that joint liability could be presumed from the equal distribution of the profit and loss.00 whatever will be the excess will be divided into 3: 1/3 Lim Tong Lim. 1/3 Antonio Chua." 11 The trial court noted that the Compromise Agreement was silent as to the nature of their obligations.

that is for commercial fishing . two or more persons bind themselves to contribute money. property or industry to a common fund with the intention of dividing the profits among themselves (Article 1767. 14 The Issues In his Petition and Memorandum. THE COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING . Obviously. By a contract of partnership. "IISINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM PHILIPPINE FISHING. . the ultimate undertaking of the defendants was to divide the profits among themselves which is what a partnership essentially is . . THAT A PARTNERSHIP AGREEMENT EXISTED AMONG THEM.defendants including herein appellant Lim Tong Lim undertook a partnership for a specific undertaking. petitioner brought this recourse before this Court. . BASED ON A COMPROMISE AGREEMENT THAT CHUA. New Civil Code). . . . Lim asks this Court to reverse the assailed Decision on the following grounds: "ITHE COURT OF APPEALS ERRED IN HOLDING. YAO AND PETITIONER LIM ENTERED INTO IN A SEPARATE CASE." 13 cdtai Hence.

and that he has not even met the representatives of the respondent company. Chua and Yao could be deemed to have entered into a partnership. not a partner. he disclaims any direct participation in the purchase of the nets. He asserts that the CA based its finding on the Compromise Agreement alone.LIABILITY TO PETITIONER LIM AS WELL. of Chua and Yao. Lim." In determining whether petitioner may be held liable for the fishing nets and floats purchased from respondent. First and Second Issues: Existence of a Partnership
and Petitioner's Liability In arguing that he should not be held liable for the equipment purchased from respondent. for the . the Court must resolve this key issue: whether by their acts. alleging that the negotiations were conducted by Chua and Yao only. Furthermore. "IIITHE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF PETITIONER LIM'S GOODS. petitioner controverts the CA finding that a partnership existed between him. cdasia This Court's Ruling The Petition is devoid of merit. Peter Yao and Antonio Chua. Petitioner further argues that he was a lessor.

"Contract of Lease" dated February 1. (2)That after convening for a few times. showed that he had merely leased to the two the main asset of the purported partnership — the fishing boat F/B Lourdes. property. 1990. Yao and him.35 million. with the intention of dividing the profits among themselves. and Yao verbally agreed to acquire two fishing boats. (3)That they borrowed P3.500 plus 25 percent of the gross catch of the boat. pursuant to Article 1767 of the Civil Code which provides: "ARTICLE 1767. brother of Petitioner Lim Tong . the FB Lourdes and the FB Nelson for the sum of P3. We are not persuaded by the arguments of petitioner. while Antonio Chua was already Yao's partner. two or more persons bind themselves to contribute money. The facts as found by the two lower courts clearly showed that there existed a partnership among Chua. with a monthly rental of P37.25 million from Jesus Lim.By the contract of partnership. or industry to a common fund." llcd Specifically. The lease was for six months. both lower courts ruled that a partnership among the three existed based on the following factual findings: 15 (1)That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to join him. Lim Chua.

dry docking and other expenses for the boats would be shouldered by Chua and Yao. 1492MN was filed in the Malabon RTC. (5)That Lim. and (e) . to finance the venture. Chua's FB Lady Anne Mel and Yao's FB Tracy to Lim Tong Lim. repairing. Chua and Yao agreed that the refurbishing. Civil Case No. (4) injunction. because of which. (8)That subsequently. which executed a Deed of Sale over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as security for the loan extended by Jesus Lim. (b) reformation of contracts. in behalf of "Ocean Quest Fishing Corporation. (4)That they bought the boats from CMF Fishing Corporation.Lim." Jesus Lim again extended a loan to the partnership in the amount of P1 million secured by a check. (6)That because of the "unavailability of funds. Yao and Chua entrusted the ownership papers of two other boats. cdtai (7)That in pursuance of the business agreement. re-equipping." their purported business name. Branch 72 by Antonio Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of commercial documents. (c) declaration of ownership of fishing boats. Peter Yao and Antonio Chua bought nets from Respondent Philippine Fishing Gear.

fell under the term "common fund" under Article 1767. it is clear that the partnership extended not only to the purchase of the boat.damages. financed by a loan secured from Jesus Lim who was petitioner's brother. That the parties agreed that any loss or profit from the sale and operation of the boats would be divided equally among them also shows that they had indeed formed a partnership. Yao and Lim had decided to engage in a fishing business. it could be an intangible like credit or industry. without which the business could .35 million. The fishing nets and the floats. The contribution to such fund need not be cash or fixed assets. which they started by buying boats worth P3. but also to that of the nets and the floats. It would have been inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition of the aforesaid equipment. the purchase and the repair of which were financed with borrowed money. Moreover. (9)That the case was amicably settled through a Compromise Agreement executed between the parties-litigants the terms of which are already enumerated above. they subsequently revealed their intention to pay the loan with the proceeds of the sale of the boats. In their Compromise Agreement. were obviously acquired in furtherance of their business. and to divide equally among them the excess or loss. From the factual findings of both lower courts. These boats. it is clear that Chua. both essential to fishing.

the foregoing factual findings of the RTC and the CA are binding on this Court.not have proceeded. a petition for review like the present case should involve only questions of law. absent any cogent proof that the present action is embraced by one of the exceptions to the rule. it is clear that there was. Chua and Yao. Thus. 16 In assailing the factual findings of the two lower courts. cdtai Given the preceding facts. Both lower courts have done so and have found. His arguments are baseless. among petitioner. petitioner effectively goes beyond the bounds of a petition for review under Rule 45. He also claims that the settlement was entered into only to end the dispute among them. which constituted the main assets of the partnership. but not to adjudicate their preexisting rights and obligations. The Agreement was but an embodiment of the relationship extant among the parties prior to its execution. and they agreed that the proceeds from the sales and operations thereof would be divided among them. a partnership engaged in the fishing business. . They purchased the boats. We stress that under Rule 45. Compromise Agreement
Not the Sole Basis of Partnership Petitioner argues that the appellate court's sole basis for assuming the existence of a partnership was the Compromise Agreement. A proper adjudication of claimants' rights mandates that courts must review and thoroughly appraise all relevant facts.

LLphil Petitioner Was a Partner. Verily. In effect. not a partner in the fishing venture. His argument allegedly finds support in the Contract of Lease and the registration papers showing that he was the owner of the boats. His allegation defies logic. petitioner entered into a business agreement with Chua and Yao. as found by the lower courts.
Not a Lessor We are not convinced by petitioner's argument that he was merely the lessor of the boats to Chua and Yao. Verily. petitioner fails to appreciate that the CA and the RTC delved into the history of the document and explored all the possible consequential combinations in harmony with law. he would like this Court to believe that he consented to the sale of his own boats to pay a debt of Chua and Yao.correctly. In implying that the lower courts have decided on the basis of one piece of document alone. logic and fairness. the two lower courts' factual findings mentioned above nullified petitioner's argument that the existence of a partnership was based only on the Compromise Agreement. his consent to the sale proved that there was a preexisting partnership among all three. The sale of the boats. as well as . Indeed. a preexisting partnership among the parties. with the excess of the proceeds to be divided among the three of them. including F/B Lourdes where the nets were found. in which debts were undertaken in order to finance the acquisition and the upgrading of the vessels which would be used in their fishing business. No lessor would do what petitioner did.

if the relationship among the three of them was merely that of lessor-lessee. who in this case is the petitioner himself. liabilities and damages incurred or arising as a result thereof: Provided however. though registered in his name. it shall not be allowed to use as a . he is the brother of the creditor.Corporation by estoppel. liability can be imputed only to Chua and Yao. was not his own property but an asset of the partnership. Jesus Lim. Corporation by Estoppel Petitioner argues that under the doctrine of corporation by estoppel.the division among the three of the balance remaining after the payment of their loans. It is not uncommon to register the properties acquired from a loan in the name of the person the lender trusts. instead of partners. 21. it is absurd — for petitioner to sell his property to pay a debt he did not incur. Again. prLL We stress that it is unreasonable — indeed. proves beyond cavil that F/B Lourdes. — All persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts. Section 21 of the Corporation Code of the Philippines provides: "Sec. After all. That when any such ostensible corporation is sued on any transaction entered by it as a corporation or on any tort committed by it as such. we disagree. and not to him.

those who act or purport to act as its representatives or agents do so without authority and at their own risk. And as it is an elementary principle of law that a person who acts as an agent without authority or without a principal is himself regarded as the principal. cannot resist performance thereof on the ground that there was in fact no corporation. even if the ostensible corporate entity is proven to be legally nonexistent. a person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent. In the first instance." LibLex Thus. thus.defense its lack of corporate personality. it cannot create agents or confer authority on another to act in its behalf. possessed of all the right and subject to all the liabilities of a principal. will be estopped ." 17 The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. an unincorporated association. "One who assumes an obligation to an ostensible corporation as such. "The reason behind this doctrine is obvious — an unincorporated association has no personality and would be incompetent to act and appropriate for itself the power and attributes of a corporation as provided by law. which represented itself to be a corporation. a party may be estopped from denying its corporate existence.

he cannot be held liable. cdrep There is no dispute that the respondent. He in fact questions the attachment of the nets. Philippine Fishing Gear Industries. In such case. is entitled to be paid for the nets it sold. a third party who. Unquestionably. insisting that only those who dealt in the name of the ostensible corporation should be held liable. despite knowledge of its legal defects. because the Writ has . It cannot allege lack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advantages and benefits. the boat which has earlier been proven to be an asset of the partnership. all those who benefited from the transaction made by the ostensible corporation. nonetheless treated it as a corporation and received benefits from it. may be held liable for contracts they impliedly assented to or took advantage of. Petitioner contests such liability. may be barred from denying its corporate existence in a suit brought against the alleged corporation. ergo. petitioner benefited from the use of the nets found inside F/B Lourdes. The only question here is whether petitioner should be held jointly 18 liable with Chua and Yao. knowing an association to be unincorporated. Since his name does not appear on any of the contracts and since he never directly transacted with the respondent corporation. On the other hand.from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation.

having reaped the benefits of the contract entered into by persons with whom he previously had an existing relationship. are not to be won by a rapier's thrust. are held liable as general partners. It is. Technically. However. knowing it to be without valid existence. Clearly. Villamor: 19 prLL "A litigation is not a game of technicalities in which one. those acting on behalf of a corporation and those benefited by it. more deeply schooled and skilled in the subtle art of movement and position. Technicality. when it deserts its proper office as an aid to justice and . Chua and Yao decided to form a corporation. Lawsuits. Although it was never legally formed for unknown reasons. entraps and destroys the other. We reiterate the ruling of the Court in Alonso v. rather. he is deemed to be part of said association and is covered by the scope of the doctrine of corporation by estoppel. it is true that petitioner did not directly act on behalf of the corporation. It is difficult to disagree with the RTC and the CA that Lim. a contest in which each contending party fully and fairly lays before the court the facts in issue and then.effectively stopped his use of the fishing vessel. unlike duels. brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of procedure. under the law on estoppel. this fact alone does not preclude the liabilities of the three as contracting parties in representation of it. asks that justice be done upon the merits.

The nets and the floats were specifically manufactured and tailor-made according to their own design. until full payment thereof. the Petition is DENIED and the assailed Decision AFFIRMED. by specific agreement. WHEREFORE. ownership of the nets remained with Respondent Philippine Fishing Gear. Hence. petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree with the Court of Appeals that this issue is now moot and academic.becomes its great hindrance and chief enemy. the issuance of the Writ to assure the payment of the price stipulated in the invoices is proper. . F/B Lourdes was an asset of the partnership and that it was placed in the name of petitioner. Costs against petitioner. Cdpr SO ORDERED. Besides. and were bought and used in the fishing venture they agreed upon. only to assure payment of the debt he and his partners owed. deserves scant consideration from courts." Third Issue: Validity of Attachment Finally. As previously discussed. There should be no vested rights in technicalities.

58.COMMERCIAL LAW. and (2) the nature of the question that is the subject of their controversy. JURISDICTION. The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. This jurisdiction is determined by a concurrence of two elements: (1) the status or relationship of the parties. petitioner.[G. Rivera for petitioner. partnership or association of which they are stockholders.R. SYLLABUS 1.] REYNALDO M. DE LOS SANTOS. Yabut Law Office for respondents. Willie B. and between such corporation. members or associates. members. Br. Angeles City. or associates. — The grant of jurisdiction to the SEC must be viewed in the light of its nature and function under the law. ELIEZER R. partnership or association . partnership or association and the State in so far as it concerns their individual franchises. SECURITIES AND EXCHANGE COMMISSION. DETERMINATION THEREOF. 1997. LOZANO. Presiding Judge. June 19. and ANTONIO ANDA. RTC. vs. between any or all of them and the corporation. HON. 125221. respectively. No. The first element requires that the controversy must arise out of intracorporate or partnership relations between and among stockholders. respondents.

but these associations are two separate entities. . ID. The dispute between petitioner and private respondent is not within the KAMAJDA nor the SAMAJODA. — The doctrine of corporation by estoppel advanced by private respondent cannot override jurisdictional requirements. DISPUTE BETWEEN MEMBERS OF TWO SEPARATE AND DISTINCT CORPORATIONS WHO HAVE NO INTRACORPORATE RELATION. — The KAMAJDA and SAMAJODA to which petitioner and private respondent belong are duly registered with the SEC.ID. After all. enlarged or diminished by. It cannot be acquired through or waived. Jurisdiction is fixed by law and is not subject to the agreement of the parties. the principal function of the SEC is the supervision and control of corporations. partnerships and associations with the end in view that investments in these entities may be encouraged and protected. Petitioner and private respondent have no intracorporate relation much less do they have an intracorporate dispute.. DaScAI 2.. 3.or deal with the internal affairs of the corporation. DOES NOT FALL WITHIN THE JURISDICTION OF SECURITIES AND EXCHANGE COMMISSION. The SEC therefore has no jurisdiction over the complaint. ID.. CASE AT BAR.. It is between members of separate and distinct associations.ID.. ID. ID. any act or omission of the parties. neither can it be conferred by the acquiescence of the court. DOCTRINE OF CORPORATION BY ESTOPPEL CANNOT OVERRIDE JURISDICTIONAL REQUIREMENTS. partnership or association.. and their activities pursued for the promotion of economic development.

Pampanga..4. 1995. Mabalacat and Magalang. THERE IS NO CORPORATION BY ESTOPPEL. Angeles City which ordered the Municipal Circuit Trial Court. Branch 58. Lozano filed Civil Case No. ID. The facts are undisputed. (KAMAJDA) while respondent . 1214 for damages against respondent Antonio Anda before the Municipal Circuit Trial Court (MCTC). Pampanga to dismiss Civil Case No. — Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness. WHERE THERE IS NO THIRD PERSON INVOLVED AND THE CONFLICT ARISES ONLY AMONG THOSE ASSUMING THE FORM OF A CORPORATION. there is no corporation by estoppel. It applies when persons assume to form a corporation and exercise corporate functions and enter into business relations with third persons. Petitioner alleged that he was the president of the Kapatirang Mabalacat-Angeles Jeepney Drivers' Association. J : p This petition for certiorari seeks to annul and set aside the decision of the Regional Trial Court. Inc. EATcHD DECISION PUNO. Where there is no third person involved and the conflict arises only among those assuming the form of a corporation. who therefore know that it has not been registered. ID.ID. Mabalacat and Magalang.. 1214 for lack of jurisdiction. petitioner Reynaldo M. On December 19..

Branch 58. petitioner won. Pampanga. . petitioner and private respondent also agreed to elect one set of officers who shall be given the sole authority to collect the daily dues from the members of the consolidated association. upon the request of the Sangguniang Bayan of Mabalacat. claiming that jurisdiction was lodged with the Securities and Exchange Commission (SEC). 1995 and both petitioner and private respondent ran for president. hence. 1996. (SAMAJODA). Inc. 1996. private respondent protested and. Petitioner was thus constrained to file the complaint to restrain private respondent from collecting the dues and to order him to pay damages in the amount of P25. The MCTC denied the motion on February 9.000. 3 Private respondent filed a petition for certiorari before the Regional Trial Court.00 and attorney's fees of P500. alleging fraud. 1 Private respondent moved to dismiss the complaint for lack of jurisdiction. refused to recognize the results of the election. Inc. in August 1995.Anda was the president of the Samahang AngelesMabalacat Jeepney Operators' and Drivers' Association. (UMAJODA). 4 The trial court found the dispute to be intracorporate.00. Angeles City. petitioner and private respondent agreed to consolidate their respective associations and form the Unified Mabalacat-Angeles Jeepney Operators' and Drivers' Association. elections were held on October 29. private respondent also refused to abide by their agreement and continued collecting the dues from the members of his association despite several demands to desist. 2 It denied reconsideration on March 8.

subject to the jurisdiction of the SEC. 6 Hence this petition. 902-A. its officers or partners. business associates. and ordered the MCTC to dismiss Civil Case No. Petitioner claims that: "THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND SERIOUS ERROR OF LAW IN CONCLUDING THAT THE SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION OVER A CASE OF DAMAGES BETWEEN HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS WHO INTENDED TO CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT NOT YET [SIC] APPROVED AND REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION. 5 It denied reconsideration on May 31. [T]he Securities and Exchange Commission [has] original and exclusive jurisdiction to hear and decide cases involving: (a)Devices or schemes employed by or any acts of the board of directors. 1996. . 1214 accordingly." 7 The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in Section 5 of Presidential Decree No. amounting to fraud and misrepresentation which may be detrimental to the interest of the public . ... Section 5 reads as follows: "Section 5.

partnership or association possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation. partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity. cdtai (b)Controversies arising out of intracorporate or partnership relations. and between such corporation. partnership or association of which they are stockholders. officers or managers of such corporations. members of associations or organizations registered with the Commission. between and among stockholders. between any or all of them and the corporation. members or associates. or associates. partnership or association has no sufficient assets to cover its liabilities. members.and/or of the stockholders. (d)Petitions of corporations. partners. respectively. but is under the management of a Rehabilitation Receiver or Management Committee created pursuant to this Decree. partnerships or associations." . trustees. (c)Controversies in the election or appointment of directors. partnerships or associations to be declared in the state of suspension of payments in cases where the corporation.

The grant of jurisdiction to the SEC must be viewed in the light of its nature and function under the law. 8 This jurisdiction is determined by a concurrence of two elements: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy. 9 The first element requires that the controversy must arise out of intracorporate or partnership relations between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State in so far as it concerns their individual franchises. 10 The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation, partnership or association or deal with the internal affairs of the corporation, partnership or association. 11 After all, the principal function of the SEC is the supervision and control of corporations, partnerships and associations with the end in view that investments in these entities may be encouraged and protected, and their activities pursued for the promotion of economic development. 12 There is no intracorporate nor partnership relation between petitioner and private respondent. The controversy between them arose out of their plan to consolidate their respective jeepney drivers' and operators' associations into a single common

association. This unified association was, however, still a proposal. It had not been approved by the SEC, neither had its officers and members submitted their articles of consolidation in accordance with Sections 78 and 79 of the Corporation Code. Consolidation becomes effective not upon mere agreement of the members but only upon issuance of the certificate of consolidation by the SEC. 13 When the SEC, upon processing and examining the articles of consolidation, is satisfied that the consolidation of the corporations is not inconsistent with the provisions of the Corporation Code and existing laws, it issues a certificate of consolidation which makes the reorganization official. 14 The new consolidated corporation comes into existence and the constituent corporations dissolve and cease to exist. 15 The KAMAJDA and SAMAJODA to which petitioner and private respondent belong are duly registered with the SEC, but these associations are two separate entities. The dispute between petitioner and private respondent is not within the KAMAJDA nor the SAMAJODA. It is between members of separate and distinct associations. Petitioner and private respondent have no intracorporate relation much less do they have an intracorporate dispute. The SEC therefore has no jurisdiction over the complaint. The doctrine of corporation by estoppel 16 advanced by private respondent cannot override jurisdictional requirements. Jurisdiction is fixed by law and is not

subject to the agreement of the parties. 17 It cannot be acquired through or waived, enlarged or diminished by, any act or omission of the parties, neither can it be conferred by the acquiescence of the court. 18 Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness. 19 It applies when persons assume to form a corporation and exercise corporate functions and enter into business relations with third persons. Where there is no third person involved and the conflict arises only among those assuming the form of a corporation, who therefore know that it has not been registered there is no corporation by estoppel. 20 IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996 and the order dated May 31, 1996 of the Regional Trial Court, Branch 58, Angeles City are set aside. The Municipal Circuit Trial Court of Mabalacat and Magalang, Pampanga is ordered to proceed with dispatch in resolving Civil Case No. 1214. No costs. SO ORDERED.

SYLLABUS 1. Tarriela & Tan Law Offices for respondents. Froilan Siobal for Western Pangasinan Lyceum. No. PROHIBITED. March 5. Antonio M. Chato.. INC. LYCEUM OF LALLO. CORPORATE NAMES. LYCEUM OF TUAO. petitioner. — The Articles of Incorporation of a . INC. COURT OF APPEALS.. LYCEUM OF SOUTHERN PHILIPPINES. respondents. INC.. Nuyles and Purungan. and WESTERN PANGASINAN LYCEUM. LYCEUM OF APARRI. CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM".CORPORATION LAW.R. 101897. CENTRAL LYCEUM OF CATANDUANES. LYCEUM OF CAMALANIUGAN. LYCEUM OF CABAGAN. Torres & Evangelista Law Offices and Ambrosio Padilla for petitioner. 1993.[G. LYCEUM OF EASTERN MINDANAO. INC. REGISTRATION OF PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING CORPORATION. Quisumbing. Chato. vs. BUHI LYCEUM.. INC. INC..] LYCEUM OF THE PHILIPPINES.

Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate names are concerned: "Section 18. Corporate name. the Commission shall issue an amended certificate of incorporation under the amended name. True enough. the evasion of legal obligations and duties. set out the name of the corporation. the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum. When a change in the corporate name is approved. confusing or contrary to existing laws. or deceptively or confusingly similar" to that of the petitioner institution. We do not consider that the corporate names of private respondent institutions are "identical with." is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned. among other things.corporation must." Thus. or that . we do not believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines." The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws. and the reduction of difficulties of administration and supervision over corporations. — No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive.

. Its application has." NOT ATTENDED WITH EXCLUSIVITY. In Philippine Nut Industry. by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that word.. ID.. is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least . v. Inc. although originally a generic.. the doctrine of secondary meaning was elaborated in the following terms: " .ID. been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. The doctrine of secondary meaning originated in the field of trademark law. because geographically or otherwise descriptive. DOCTRINE OF SECONDARY MEANING. Standard Brands. has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. USE OF WORD "LYCEUM." The question which arises.the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines. a word or phrase originally incapable of exclusive appropriation with reference to an article on the market. the word or phrase has come to mean that the article was his product. therefore. 2. . might nevertheless have been used so long and so exclusively by one producer with reference to his article that. — It is claimed. Inc. however. however. in that trade and to that branch of the purchasing public.

56). there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that. Toribio Teodoro. a word or phrase originally incapable of exclusive appropriation with reference to an article in the market. The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning. In other words. This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. Consequently. . 74 Phil. the same tend to prove only that the appellant had been using the disputed word for a long period of time. . in that trade and to that group of the purchasing public. . . the allegations of the appellant in its first .that portion of the general public which has to do with schools). the word or phrase has come to mean that the article was his produce (Ana Ang vs. More so. If there was any of this kind. this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time. . .

MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S NAME. There may well be other schools using Lyceum or Liceo in their names.. they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name. The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. but not registered with the SEC because they have not adopted the corporate form of organization. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents.two assigned errors must necessarily fail. ." We agree with the Court of Appeals.ID.. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. 3. ID. — petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names.

— 26 March 1972 Lyceum of Aparri — 28 March 1972 Lyceum of Tuao. On 24 February 1984. and has used that name ever since. J : p Petitioner is an educational institution duly registered with the Securities and Exchange Commission ("SEC"). When it first registered with the SEC on 21 September 1950. Inc. Inc. Inc. it used the corporate name Lyceum of the Philippines. to delete the word "Lyceum" from their corporate names and permanently to enjoin them from using "Lyceum" as part of their respective names.DECISION FELICIANO. the dates of their original SEC registration being set out below opposite their respective names: Western Pangasinan Lyceum — 27 October 1950 Lyceum of Cabagan — 31 October 1962 Lyceum of Lallo. which are also educational institutions. prLL Some of the private respondents actively participated in the proceedings before the SEC. petitioner instituted proceedings before the SEC to compel the private respondents. These are the following. — 28 March 1972 .

The Lyceum of Malacanay. Inc. 2..The Lyceum of Araullo The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of Marbel. Associate . Lyceum of Eastern Mindanao. In an Order dated 20 April 1977.Lyceum of Camalaniugan — 28 March 1972 The following private respondents were declared in default for failure to file an answer despite service of summons: Buhi Lyceum. Central Lyceum of Catanduanes.The Lyceum of Marbel. Petitioner had sometime before commenced in the SEC a proceeding (SEC-Case No. for failure to serve summons upon these two (2) entities. and 3. The case against the Liceum of Araullo was dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo. and Lyceum of Southern Philippines Petitioner's original complaint before the SEC had included three (3) other entities: 1. Inc." The background of the case at bar needs some recounting. to require it to change its corporate name and to adopt another name not "similar [to] or identical" with that of petitioner. 1241) against the Lyceum of Baguio.

in point of time. L-46595. 1 and ordered the latter to change its name to another name "not similar or identical [with]" the names of previously registered entities. petitioner then wrote all the educational institutions it could find using the word "Lyceum" as part of their corporate name. and advised them to discontinue such use of "Lyceum. "Lyceum. Inc. No.e. petitioner instituted before the SEC SECCase No. assailed the Order of the SEC before the Supreme Court in a case docketed as G. L-46595." When. it became clear that this recourse had failed. The SEC also noted that petitioner had registered as a corporation ahead of the Lyceum of Baguio. with the passage of time. Entry of judgment in that case was made on 21 October 1977.R. cdrep The Lyceum of Baguio. In a Minute Resolution dated 14 September 1977. the Court denied the Petition for Review for lack of merit. 2579 to enforce what petitioner claims as its proprietary right to the word "Lyceum.Commissioner Julio Sulit held that the corporate name of petitioner and that of the Lyceum of Baguio. were substantially identical because of the presence of a "dominant" word. i. No. Inc." the name of the geographical location of the campus being the only word which distinguished one from the other corporate name. Inc.R.. 2 Armed with the Resolution of this Court in G." The SEC hearing officer rendered a decision sustaining petitioner's claim to an exclusive right to use the word .

Before this Court. Unlike its hearing officer. especially in view of the fact that the campuses of petitioner and those of the private respondents were physically quite remote from each other." The hearing officer relied upon the SEC ruling in the Lyceum of Baguio. case (SEC-Case No. Inc. 3 Petitioner then went on appeal to the Court of Appeals. L-46595 did not constitute . No. 4 Petitioner filed a motion for reconsideration. petitioner asserts that the Court of Appeals committed the following errors: 1. the Court of Appeals affirmed the questioned Orders of the SEC En Banc. 1241) and held that the word "Lyceum" was capable of appropriation and that petitioner had acquired an enforceable exclusive right to the use of that word. On appeal. however. In its Decision dated 28 June 1991.R.The Court of Appeals erred in holding that the Resolution of the Supreme Court in G. by private respondents to the SEC En Banc. the decision of the hearing officer was reversed and set aside. without success. the SEC En Banc held that the attaching of geographical names to the word "Lyceum" served sufficiently to distinguish the schools from one another. however."Lyceum. The SEC En Banc did not consider the word "Lyceum" to have become so identified with petitioner as to render use thereof by other institutions as productive of confusion about the identity of the schools concerned in the mind of the general public.

R. if only because the SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute Resolution of the Court in G. was incorporated earlier than petitioner. The Articles of Incorporation of a corporation must. L46595 does not.The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum.R. constitute res adjudicata in respect of the case at bar. 2. We begin by noting that the Resolution of the Court in G.The Court of Appeals erred in holding that Lyceum as a generic word cannot be appropriated by the petitioner to the exclusion of others.The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary meaning in favor of petitioner. 4. L-46595 was not a reasoned adoption of the Sulit ruling. 3. though not necessarily seriatim. Inc. 6 Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate . No. among other things. No. set out the name of the corporation. Neither is stare decisis pertinent. since there is no identity of parties.stare decisis as to apply to this case and in not holding that said Resolution bound subsequent determinations on the right to exclusive use of the word Lyceum. 5 We will consider all the foregoing ascribed errors. of course.

" Thus. True enough." (Emphasis supplied) The policy underlying the prohibition in Section 18 against the registration of a corporate name which is "identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing laws. the corporate names of private respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by the appending of geographic names to the word "Lyceum.Corporate name.names are concerned: "SECTION 18. When a change in the corporate name is approved." is the avoidance of fraud upon the public which would have occasion to deal with the entity concerned. confusing or contrary to existing laws. we do not . — No corporate name may be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive. the evasion of legal obligations and duties. or deceptively or confusingly similar" to that of the petitioner institution. the Commission shall issue an amended certificate of incorporation under the amended name. and the reduction of difficulties of administration and supervision over corporations. 7 We do not consider that the corporate names of private respondent institutions are "identical with.

believe that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines." "Liceo de Albay. Roman Catholic schools frequently use the term. the word is also found in Spanish (liceo) and in French (lycee).g." 8 In time. Masbate)." "Liceo de Baleno" (in Baleno. Pericles and Lycurgus frequented by the youth for exercise and by the philosopher Aristotle and his followers for teaching. "Liceo de Manila. "Lyceum. however. "Liceo de Masbate. the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus. As the Court of Appeals noted in its Decision." In the name of the petitioner. or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines.. e. the word "Lyceum" generally refers to a school or an institution of learning." or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this is a question of fact which we need not resolve) that the use of the word "Lyceum" may not ." 9 "Lyceum" is in fact as generic in character as the word "university." in other places. "Lyceum" appears to be a substitute for "university. While the Latin word "lyceum" has been incorporated into the English language. LLphil Etymologically. Thus today. the word "Lyceum" became associated with schools and other institutions providing public lectures and concerts and public discussions.

It is claimed. The doctrine of secondary meaning originated in the field of trademark law. because geographically or otherwise descriptive. by petitioner that the word "Lyceum" has acquired a secondary meaning in relation to petitioner with the result that that word. it is not unnatural to use this word to designate an entity which is organized and operating as an educational institution. in that trade and to that branch of the ." but it is clear that a not inconsiderable number of educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate names.. a word or phrase originally incapable of exclusive appropriation with reference to an article on the market. been extended to corporate names sine the right to use a corporate name to the exclusion of others is based upon the same principle which underlies the right to use a particular trademark or tradename. 11 the doctrine of secondary meaning was elaborated in the following terms: " . has become appropriable by petitioner to the exclusion of other institutions like private respondents herein. however. however. might nevertheless have been used so long and so exclusively by one producer with reference to his article that. although originally a generic. Inc. . Standard Brands. v. 10 In Philippine Nut Industry. Inc. . Since "Lyceum" or "Liceo" denotes a school or institution of learning.yet be as widespread as the use of "university. Its application has.

because geographical or otherwise descriptive might nevertheless have been used so long and so exclusively by one producer with reference to this article that.purchasing public. This circumstance has been referred to as the distinctiveness into which the name or phrase has evolved through the substantial and exclusive use of the same for a considerable period of time. The Court of Appeals recognized this issue and answered it in the negative: "Under the doctrine of secondary meaning. in that trade and to that group of the purchasing public. the word or phrase has come to mean that the article was his produce (Ana Ang vs. a word or phrase originally incapable of exclusive appropriation with reference to an article in the market." 12 The question which arises. 74 Phil. therefore. Toribio Teodoro. 56). Consequently. the same doctrine or principle cannot be made to apply where the evidence did not prove that the business (of the plaintiff) has continued for so long a time that it has . is whether or not the use by petitioner of "Lyceum" in its corporate name has been for such length of time and with such exclusivity as to have become associated or identified with the petitioner institution in the mind of the general public (or at least that portion of the general public which has to do with schools). the word or phrase has come to mean that the article was his product.

No evidence was ever presented in the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. Nevertheless. 92 Phil. Wellington Department Store. llcd With the foregoing as a yardstick. and confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng vs. If there was any of this kind. Masbate). The appellant also failed to prove that the word 'Lyceum' has become so identified with its educational institution that . its (appellant) exclusive use of the word (Lyceum) was never established or proven as in fact the evidence tend to convey that the cross-claimant was already using the word 'Lyceum' seventeen (17) years prior to the date the appellant started using the same word in its corporate name. the same tend to prove only that the appellant had been using the disputed word for a long period of time. educational institutions of the Roman Catholic Church had been using the same or similar word like 'Liceo de Manila. 'Liceo de Masbate.' 'Liceo de Albay' long before appellant started using the word 'Lyceum'. [we] believe the appellant failed to satisfy the aforementioned requisites. 448).become of consequence and acquired a good will of considerable value such that its articles and produce have acquired a well-known reputation.' 'Liceo de Baleno' (in Baleno. Furthermore. Inc..

Consequently." It follows that if any institution had acquired an exclusive right to the word . The number alone of the private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning. the allegations of the appellant in its first two assigned errors must necessarily fail. Inc. there was no evidence presented to prove that confusion will surely arise if the same word were to be used by other educational institutions. used the term "Lyceum" seventeen (17) years before the petitioner registered its own corporate name with the SEC and began using the word "Lyceum.. i. the Western Pangasinan Lyceum.e. More so." 13 (Emphasis partly in the original and partly supplied) We agree with the Court of Appeals.confusion will surely arise in the minds of the public if the same word were to be used by other educational institutions. while the appellant may have proved that it had been using the word 'Lyceum' for a long period of time.. It may be noted also that at least one of the private respondents. this fact alone did not amount to mean that the said word had acquired secondary meaning in its favor because the appellant failed to prove that it had been using the same word all by itself to the exclusion of others. In other words.

Inc. Inc." that institution would have been the Western Pangasinan Lyceum. appears to us to be quite secondary in importance. rather than the petitioner institution. Inc. but not registered with the SEC because they have not adopted the corporate form of organization. 62. registered with the SEC soon after petitioner had filed its own registration on 21 September 1950. . There may well be other schools using Lyceum or Liceo in their names. cdphil In this connection. which records had been destroyed during World War II. must be deemed to have lost its rights under its original 1933 registration. failed to reconstruct its records before the SEC in accordance with the provisions of R. Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little later with other private respondent institutions which registered with the SEC using "Lyceum" as part of their corporation names. No. It might be noted that the Western Pangasinan Lyceum. Whether or not Western Pangasinan Lyceum.A. petitioner argues that because the Western Pangasinan Lyceum."Lyceum. Western Pangasinan Lyceum should be deemed to have lost all rights it may have acquired by virtue of its past registration. we refer to this earlier registration simply to underscore the fact that petitioner's use of the word "Lyceum" was neither the first use of that term in the Philippines nor an exclusive use thereof. Inc.

LexLib SO ORDERED. and the Decision of the Court of Appeals dated 28 June 1991 is hereby AFFIRMED.We conclude and so hold that petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their corporate names. WHEREFORE. To determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with another entity's corporate name. . No pronouncement as to costs. One must evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with the names of private respondents. the Petition for Review is DENIED for lack of merit. it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. the petitioner having failed to show any reversible error on the part of the public respondent Court of Appeals. they are not reasonably regarded as "identical" or "confusingly or deceptively similar" with each other.

vs.[G. The Court of Appeals. however. Roxas Delos Reyes Laurel and Rosario for private respondent. October 3. No.] INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES. upheld the jurisdiction of the SEC and ruled that the corporate names of petitioner ." Hence. such that the public may be confused or deceived into believing that they are one and the same corporation. 2002.R. SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES. Augusto Gatmaytan for petitioner. petitioner corporation brought the matter before the Court of Appeals on ground of lack of jurisdiction. petitioner. respondents. The SEC ruled in favor of respondent corporation and ordered petitioner corporation to delete from its corporate name the word "Refractories. SYNOPSIS Respondent Refractories Corporation of the Philippines filed a petition before the respondent Securities and Exchange Commission (SEC) asking the latter to compel petitioner Industrial Refractories Corporation of the Philippines to change its corporate name on the ground that it was confusingly similar with that of petitioner's. 122174. COURT OF APPEALS.

In denying the petition.corporation and respondent corporation were confusingly or deceptively similar. 902-A. The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of P. By express mandate. It has the duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved." "Corporation" and "Philippines". one of which is the provision on the use of corporate name. the confusion is probable or likely to occur. and. as found by the SEC. confusion might arise. Hence.e. SYLLABUS . Hence. the Supreme Court held that the present case falls within the ambit of the SEC's regulatory powers. both cater to the same clientele. It also exercises regulatory and administrative powers to implement and enforce the Corporation Code. i. the steel industry. and that respondent corporation had established its prior right to use the word "Refractories" as its corporate name. and it has authority to deregister at all times and under all circumstances corporate names which in its estimation are likely to generate confusion. but more so for the protection of the public. supervision and control over all corporations. both have similar product packaging. The Court further held that the two corporate names were patently similar that even with reasonable care and observation. as amended.D. it has absolute jurisdiction. The Court found that both corporate names contain the identical words "Refractories. this petition.

ID. the instant petition should be denied as the SEC En Banc's decision had already attained finality and the SEC's findings of fact. The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of P. we agree with the appellate court's finding that petitioner failed to rebut respondent RCP's allegations of material dates of receipt and filing. if reckoned from the dates provided by respondent RCP.D. SEC HAS AUTHORITY TO DEREGISTER AT ALL TIMES AND UNDER ALL CIRCUMSTANCES CORPORATE NAMES WHICH IN ITS ESTIMATION ARE LIKELY TO GENERATE CONFUSION. SECURITIES AND EXCHANGE COMMISSION. 2. the certifications were executed by the SEC officials based on their official records which enjoy the presumption of regularity. these are prima facie evidence of the facts stated therein.. — If reckoned from the dates supplied by petitioner. 902-A. On this score. By express mandate. it has absolute jurisdiction. as amended.. In addition. then the petition was timely filed. FINDINGS OF FACT THEREOF. supervision and control over all corporations. On this ground alone. then it was filed way beyond the reglementary period. And based on such dates. WHEN SUPPORTED BY SUBSTANTIAL EVIDENCE.1. is final.COMMERCIAL LAW. On the other hand. ID. It also exercises regulatory and administrative powers to implement and enforce the . when supported by substantial evidence. JURISDICTION. there is no question that the petition was filed with the Court of Appeals beyond the fifteen (15) day period. — Petitioner's argument on the SEC's jurisdiction over the case is utterly myopic. As such. IS FINAL.

. confusing or contrary to existing laws. and it has authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to generate confusion. the evasion of legal obligations and duties. Clearly therefore. the Commission shall issue an amended certificate of incorporation under the amended name. 18. HISAET 3. confusing or contrary to existing laws. REQUIREMENTS. one of which is Section 18. Section 18 of the Corporation Code expressly prohibits the use of a corporate name which is "identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive." It is the SEC's duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public. which provides: "SEC.ID. PRIVATE CORPORATION. the present case falls within the ambit of the SEC's regulatory powers. Corporate name. USE OF CORPORATE NAME. — Likewise untenable is petitioner's argument that there is no confusing or deceptive similarity between petitioner and respondent RCP's corporate names.Corporation Code. — No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive.. When a change in the corporate name is approved." The policy behind the foregoing prohibition is to avoid fraud upon the public that will have occasion to deal with the entity concerned.

to fall within the prohibition of the law. and (2) the proposed name is either: (a) identical. CASE AT BAR. ID.ID.. vs. 4. Pursuant thereto.and the reduction of difficulties of administration and supervision over corporation.. ID. ID. or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law. the Revised Guidelines in the Approval of Corporate and Partnership Names specifically requires that: (1) a corporate name shall not be identical. respondent RCP was incorporated on October 13. 1976 and since then has been using the corporate name "Refractories Corp. and (2) if the proposed name is similar to the name of a registered firm. REQUISITES. it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption.. ID. — As regards the first requisite.. two requisites must be proven. In this case. ID. — As held in Philips Export B." Meanwhile. or (c) patently deceptive. RULE. V. ID. petitioner was incorporated on August 23. to wit: (1) that the complainant corporation acquired a prior right over the use of such corporate name. the proposed name must contain at least one distinctive word different from the name of the company already registered. 1979 originally .. of the Philippines. 5... PROHIBITION. confusing or contrary to existing law.ID. misleading or confusingly similar to one already registered by another corporation with the Commission.. Court of Appeals. PRIORITY OF ADOPTION.

" "Corporation" and "Philippines. respondent RCP has acquired the right to use the word "Refractories" as part of its corporate name.. ID.. Petitioner's corporate name is "Industrial Refractories Corp. ID..ID. 1985.. in determining the existence of confusing similarity in corporate names. TEST." Obviously. confusion might arise. or nine (9) years after respondent RCP started using its name. both names contain the identical words "Refractories.. of the Philippines" when it amended its Articles of Incorporation on August 23." The only word that distinguishes petitioner from respondent RCP is the word "Industrial" which merely identifies a corporation's general field of activities or operations." It only started using the name "Industrial Refractories Corp.under the name "Synclaire Manufacturing Corporation. Thus." while respondent's is "Refractories Corp.. especially since they also have similar product packaging. the test is whether the similarity is such as to mislead a person using ordinary care and discrimination and the Court must look to the record as well as the names themselves. of the Phils. EXISTENCE OF CONFUSING SIMILARITY IN CORPORATE NAMES.. We need not linger on these two corporate names to conclude that they are patently similar that even with reasonable care and observation. ID. of the Phils. CASE AT BAR. the steel industry. — Anent the second requisite. ID. the SEC found that there were instances when different steel companies were actually confused between the two. i.e. being the prior registrant. It must be noted that both cater to the same clientele. 6. Such findings are accorded not only great respect but . In fact.

ID. 8.. and are binding upon this Court. REASON. — We find the award of P50.even finality. And even without such proof of actual confusion between the two corporate names.00 as attorney's fees to be fair and reasonable. In this . and its continuous use by respondent RCP for a considerable period has made the term so closely identified with it..S. Moreover. Article 2208 of the Civil Code allows the award of such fees when its claimant is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. PETITIONER'S APPROPRIATION OF RESPONDENTS' CORPORATE NAME NOT JUSTIFIED UNDER THE GENERIC WORD RULE.. ID. A contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name..CIVIL LAW. unless it is shown that it had arbitrarily disregarded or misapprehended evidence before it to such an extent as to compel a contrary conclusion had such evidence been properly appreciated. Haligi at Suhay ng Katotohanan. — While the word "refractories" is a generic term.000. ID.. ID. WHEN ALLOWED. ID. Iglesia ng Dios kay Cristo Jesus. 7.K. vs. it suffices that confusion is probable or likely to occur. as held in the case of Ang Kaanib sa Iglesia ng Dios kay Kristo Hesus. DAMAGES. H. Inc. to the detriment of the public. petitioner's appropriation of respondent's corporate name cannot find justification under the generic word rule. its usage is not widespread and is limited merely to the industry/trade in which it is used. sa Bansang Pilipinas. AWARD OF ATTORNEY'S FEES.

On June 22. its byproducts and derivatives. 1976 for the purpose of engaging in the business of manufacturing.R. EHCcIT DECISION AUSTRIA-MARTINEZ. it refused to do so. . Petitioner IRCP on the other hand. producing. of the Philippines. 1979 originally under the name "Synclaire Manufacturing Corporation. despite its undertaking to change its corporate name in case another firm has acquired a prior right to use such name. denying due course and dismissing the petition filed by Industrial Refractories Corp." It is engaged in the business of manufacturing all kinds of ceramics and other products. exporting and otherwise dealing in any and all refractory bricks. 35056. 1977. it registered its corporate and business name with the Bureau of Domestic Trade.case. was incorporated on August 23. AacCIT Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13. thus compelling respondent to undergo litigation and incur expenses to protect its corporate name. 1985 to change its corporate name to "Industrial Refractories Corp. of the Philippines (IRCP). J : p Filed before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals in CA-G. SP No." It amended its Articles of Incorporation on August 23. selling.

judgment is hereby rendered in favor of the petitioner and against the respondent declaring the latter's corporate name 'Industrial Refractories Corporation of the Philippines' as deceptively and confusingly similar to that of petitioner's corporate name 'Refractories Corporation of the Philippines.00 as attorney's fees. respondent RCP filed on April 14. 1993 with the following dispositive portion: "WHEREFORE.000. 2 The SEC decided in favor of respondent RCP and rendered judgment on July 23. respondent is hereby ordered to pay the petitioner the sum of P50.' Accordingly. Both companies are the only local suppliers of monolithic gunning mix. respondent is hereby directed to amend its Articles of Incorporation by deleting the name 'Refractories Corporation of the Philippines' in its corporate name within thirty (30) days from finality of this Decision. 1988 with the Securities and Exchange Commission (SEC) a petition to compel petitioner to change its corporate name on the ground that its corporate name is confusingly similar with that of petitioner's such that the public may be confused or deceived into believing that they are one and the same corporation. 1 Discovering that petitioner was using such corporate name." 3 .except paints and zincs. Likewise.

" 5 Petitioner IRCP elevated the decision of the SEC En Banc through a petition for review on certiorari to the Court of Appeals which then rendered the herein assailed decision. 191. and that respondent RCP has established its prior right to use the word "Refractories" as its corporate name. It must be noted that at the time the SEC En Banc rendered its decision on May 10. 1994. Petitioner contends that the petition before the Court of Appeals was timely filed. herein petition which we must deny. arguing that it does not have any jurisdiction over the case. 1993. 7 Hence. 4 In its Decision dated July 23. As provided therein. and that respondent RCP has no right to the exclusive use of its corporate name as it is composed of generic or common words. raising questions of . the governing rule on appeals from quasi-judicial agencies like the SEC was Supreme Court Circular No. The appellate court upheld the jurisdiction of the SEC over the case and ruled that the corporate names of petitioner IRCP and respondent RCP are confusingly or deceptively similar. the SEC En Banc modified the appealed decision in that petitioner was ordered to delete or drop from its corporate name only the word "Refractories. 6 The appellate court also found that the petition was filed beyond the reglementary period.Petitioner appealed to the SEC En Banc. the remedy should have been a petition for review filed before the Court of Appeals within fifteen (15) days from notice.

1994. 1994Receipt of SEC's Order dated August 3. 1994 June 20. 1994Filing of Motion for extension of time September 6. the petition was filed twenty-one (21) days beyond the reglementary period provided in Supreme Court Circular No. 11 Thus. 1994 on August 15. 1994Receipt of SEC's Decision dated May 10.fact. of law. asserts that the foregoing dates are incorrect as the certifications issued by the SEC show that petitioner received the SEC's Decision dated May 10. filed the motion for reconsideration via registered mail on June 25. 12 If reckoned from the dates supplied by petitioner. however. 1994. then . 1994 denying petitioner's motion for reconsideration September 2. there is a discrepancy between the dates provided by petitioner and respondent. 8 A motion for reconsideration suspends the running of the period. 1-91. 1994. Petitioner alleges the following dates of receipt and filing: 10 June 10. and received the Order dated August 3. 1994Filing of Motion for Reconsideration September 1. or mixed questions of fact and law. 9 In the case at bench. 1994Filing of Petition Respondent RCP. 1994 on June 9.

17 Nevertheless. (2) respondent RCP is not entitled to use the generic name "refractories". the instant petition should be denied as the SEC En Banc's decision had already attained finality and the SEC's findings of fact. supervision and . On the other hand. (3) there is no confusing similarity between their corporate names.the petition was timely filed. are as follows: (1) jurisdiction is vested with the regular courts as the present case is not one of the instances provided in P. TacADE Petitioner's arguments. we agree with the appellate court's finding that petitioner failed to rebut respondent RCP's allegations of material dates of receipt and filing. 18 Petitioner's argument on the SEC's jurisdiction over the case is utterly myopic. 902-A. we shall delve into the other issues posed by petitioner. when supported by substantial evidence. is final. and (4) there is no basis for the award of attorney's fees. On this score. 902-A. then it was filed way beyond the reglementary period.D. the certifications were executed by the SEC officials based on their official records 14 which enjoy the presumption of regularity. 15 As such. it has absolute jurisdiction. On this ground alone. if reckoned from the dates provided by respondent RCP. substantially. these are prima facie evidence of the facts stated therein. to set the matters at rest.D. 19 By express mandate. 16 And based on such dates. as amended. there is no question that the petition was filed with the Court of Appeals beyond the fifteen (15) day period. The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in Section 5 of P. 13 In addition.

18." It is the SEC's duty to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public. 21 one of which is Section 18. When a change in the corporate name is approved. 20 It also exercises regulatory and administrative powers to implement and enforce the Corporation Code. 23 Likewise untenable is petitioner's argument that there is no confusing or deceptive similarity between petitioner and respondent RCP's corporate names.control over all corporations. — No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive. Corporate name. and it has authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to generate confusion. 22 Clearly therefore. the present case falls within the ambit of the SEC's regulatory powers. confusing or contrary to existing laws. the Commission shall issue an amended certificate of incorporation under the amended name. which provides: "SEC. Section 18 of the Corporation Code expressly prohibits the use of a corporate name which is "identical or deceptively or confusingly similar to that of any existing corporation or .

and the reduction of difficulties of administration and supervision over corporation.V. 28 to fall within the prohibition of the law. misleading or confusingly similar to one already registered by another corporation with the Commission. Court of Appeals. or (c) patently deceptive. the proposed name must contain at least one distinctive word different from the name of the company already registered. vs." The policy behind the foregoing prohibition is to avoid fraud upon the public that will have occasion to deal with the entity concerned. confusing or contrary to existing laws. or (b) deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law. 27 As held in Philips Export B. to wit: (1)that the complainant corporation acquired a prior right over the use of such corporate name. and (2)the proposed name is either: (a) identical. 26 and (2) if the proposed name is similar to the name of a registered firm.to any other name already protected by law or is patently deceptive. two requisites must be proven. 24 Pursuant thereto. confusing or . the Revised Guidelines in the Approval of Corporate and Partnership Names 25 specifically requires that: (1) a corporate name shall not be identical. the evasion of legal obligations and duties.

of the Phils." It only started using the name "Industrial Refractories Corp. Thus. or nine (9) years after respondent RCP started using its name. it has been held that the right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by priority of adoption. 1976 and since then has been using the corporate name "Refractories Corp. the test is whether the similarity is such as to mislead a person using ordinary care and discrimination and the Court must look to the record as well as the names themselves. in determining the existence of confusing similarity in corporate names. respondent RCP was incorporated on October 13. of the Philippines" when it amended its Articles of Incorporation on August 23. respondent RCP has acquired the right to use the word "Refractories" as part of its corporate name. of the Philippines." Obviously. 30 Petitioner's corporate name is "Industrial Refractories Corp. As regards the first requisite." while respondent's is "Refractories Corp. Anent the second requisite. being the prior registrant. of the Phils." The only word that distinguishes petitioner from respondent RCP is the word "Industrial" which merely identifies a corporation's general field of activities or operations. 1979 originally under the name "Synclaire Manufacturing Corporation.contrary to existing law. both names contain the identical words "Refractories.. We need not linger on these two . 29 In this case. petitioner was incorporated on August 23." "Corporation" and "Philippines." Meanwhile. 1985.

e. In fact. and its continuous . its usage is not widespread and is limited merely to the industry/trade in which it is used. the steel industry. unless it is shown that it had arbitrarily disregarded or misapprehended evidence before it to such an extent as to compel a contrary conclusion had such evidence been properly appreciated. confusion might arise. bonding mortars. it suffices that confusion is probable or likely to occur. They are supplied mainly in the form of brick of standard sizes and of special shapes. 33 And even without such proof of actual confusion between the two corporate names. especially since they also have similar product packaging.. i.corporate names to conclude that they are patently similar that even with reasonable care and observation. Refractories also include refractory cements. and are binding upon this Court." 35 While the word "refractories" is a generic term. chrome or ground ganister and special clay. 31 It must be noted that both cater to the same clientele. ramming mixtures. the SEC found that there were instances when different steel companies were actually confused between the two. 34 Refractory materials are described as follows: "Refractories are structural materials used at high temperatures to [sic] industrial furnaces. and other bulk materials such as dead-burned grain magneside. castables. 32 Such findings are accorded not only great respect but even finality. plastic firebrick.

as held in the case of Ang Kaanib sa Iglesia ng Dios kay Kristo Hesus. . Inc. 38 Finally. thus compelling respondent to undergo litigation and incur expenses to protect its corporate name. Article 2208 of the Civil Code allows the award of such fees when its claimant is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. 36 Moreover.S.K. sa Bansang Pilipinas.use by respondent RCP for a considerable period has made the term so closely identified with it.000. petitioner's appropriation of respondent's corporate name cannot find justification under the generic word rule. 39 it refused to do so. to the detriment of the public. vs. Costs against petitioner. Iglesia ng Dios kay Cristo Jesus. In this case. 37 A contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name. SO ORDERED. the instant petition for review on certiorari is hereby DENIED for lack of merit. despite its undertaking to change its corporate name in case another firm has acquired a prior right to use such name. WHEREFORE. Haligi at Suhay ng Katotohanan. we find the award of P50. H.00 as attorney's fees to be fair and reasonable.

— An entity whose certificate of incorporation had not been obtained may be terminated in a private suit for its dissolution between stockholders. Claro M. Recto for petitioners. vs.CORPORATION "DE FACTO". The question as to the right of minority stockholders to sue for dissolution does not affect the court's jurisdiction. subject to review on appeal by the aggrieved party at the proper time. Judge of the Court of First Instance of Leyte.R. .ID.] C. DISSOLUTION BY SUIT OF STOCKHOLDERS. June 29. EMMA BROWN. petitioners. respondent. ARNOLD HALL and BRADLEY P. SYLLABUS 1. HIPOLITA CAPUCIONG. PICCIO. Inc. L-2598. Diokno for respondents. 2. without the intervention of the state. RIGHTS OF. Ramon Diokno and Jose W. JURISDICTION OF COURT. EDMUNDO S. FRED BROWN. HALL. 1950... in his capacity as receiver of the Far Eastern Lumber and Commercial Co.[G. — Persons acting as corporation may not claim rights of "de facto" corporation if they have not obtained certificate of incorporation. No.. and is a matter for decision by the judge.

Hall. . (4) On March 22. the corporation proceeded to do business with the adoption of by-laws and the election of its officers. 1947. the petitioners C. Chapman and Ceferino S. 1947. the said articles of incorporation were filed in the office of the Securities and Exchange Commissioner. Abella. Arnold Hall and Bradley P. 1948. J : p This is a petition to set aside all the proceedings had in civil case No.. (3) On December 2.DECISION BENGZON.. Attached to the articles was an affidavit of the treasurer stating that 23. and the respondents Fred Brown. Facts: (1) On May 28. Hipolita D. operators and managers. organized to engage in a general lumber business to carry on as general contractors. Inc. etc. the articles of incorporation of the Far Eastern Lumber and Commercial Co. signed and acknowledged in Leyte. 381 of the Court of First Instance of Leyte and to enjoin the respondent judge from further acting upon the same. Emma Brown.428 shares of stock had been subscribed and fully paid with certain properties transferred to the corporation described in a list appended thereto. (2) Immediately after the execution of said articles of incorporation. for the issuance of the corresponding certificate of incorporation. pending action .

Piccio ordered the dissolution of the company. (5) The defendants in the suit. Hipolita D. Whereupon the present special civil action was instituted in this court. (6) After hearing the parties. Abella filed before the Court of First Instance of Leyte the civil case numbered 381. was an unregistered partnership. C. entitled "Fred Brown et al.". upon the filing of a P20. Chapman and Ceferino S. the Hon. It is based upon two main propositions. vs. mismanagement and fraud by the managers and heavy financial losses. appointed the respondent Pedro A. Emma Brown. the respondents Fred Brown.on the articles of incorporation by the aforesaid governmental office. (a) The court had no jurisdiction in civil case No.000 bond. filed a motion to dismiss. Hall et al. Hall. and at the request of plaintiffs. dissolution thereof may only be ordered in a quo warranto proceeding instituted in accordance with section 19 of . that they wished to have it dissolved because of bitter dissension among the members. but the respondent judge refused to accept the offer and to discharge the receiver. contesting the court's jurisdiction and the sufficiency of the cause of action. Edmundo S. (7) The defendants therein (petitioners herein) offered to file a counter-bond for the discharge of the receiver. 381 to decree the dissolution of the company. because it being a de facto corporation. Arnold C. Arnold Hall and Bradley P. namely. alleging among other things that the Far Eastern Lumber and Commercial Co. to wit: . Capuciong as receiver of the properties thereof.

Corporation Law). The first proposition above stated is premised on the theory that. And as nobody was led to believe anything to his prejudice and damage. and therefore the court had no jurisdiction to take cognizance of said civil case number 381. All the parties are informed that the Securities and Exchange Commission has not. The complaining associates have not represented to the others that they were incorporated any more than the latter had made similar representations to them.. Discussion: The second proposition may at once be dismissed. section 19 of the Corporation Law applies. . the principle of estoppel does not apply. or ought to know. "*** The due incorporation of any corporations claiming in good faith to be a corporation under this . All of them know. that the personality of a corporation begins to exist only from the moment such certificate is issued . 11. so far. . (b) Inasmuch as respondents Fred Brown and Emma Brown had signed the articles of incorporation. inasmuch as the Far Eastern Lumber and Commercial Co. they are estopped from claiming that it is not a corporation but only a partnership. Obviously this is not an instance requiring the enforcement of contracts with the corporation through the rule of estoppel.the Corporation Law. Section 19 reads in part as follows: .not before (sec. issued the corresponding certificate of incorporation. is a de facto corporation. .

Drew.' " (Fisher on the Philippine Law of Stock Corporations.' Such a claim is compatible with the existence of errors and irregularities.Act and its right to exercise corporate powers shall not be inquired into collaterally in any private suit to which the corporation may be a party. 59 Fla. but such inquiry may be had at the suit of the Insular Government on information of the Attorney-General. 11) that it is the issuance of a certificate of incorporation by the Director of the Bureau of Commerce and Industry which calls a corporation into being.) . Second. 52 So. 362. There are at least two reasons why this section does not govern the situation. but not with a total or substantial disregard of the law.. for the . Not having obtained the certificate of incorporation. This is a litigation between stockholders of the alleged corporation. this is not a suit in which the corporation is a party.. . 295. "Under our statute it is to be noted (Corporation Law. p. Unless there has been an evident attempt to comply with the law the claim to be a corporation 'under this act' could not be made 'in good faith. The immunity of collateral attack is granted to corporations 'claiming in good faith to be a corporation under this act. 75. See also Humphreys vs. sec." . the Far Eastern Lumber and Commercial Co.even its stockholders may not probably claim "in good faith" to be a corporation. .

There might be room for argument on the right of minority stockholders to sue for dissolution. namely: the petitioners have their remedy by appealing the order of dissolution at the proper time. . without the intervention of the state. which in this instance we do not believe has been clearly abused. concur. Petition dismissed.. . therefore. As to the amount of the bond to be demanded of the receiver. But it must be admitted that receivership is proper in proceedings for dissolution of a company or corporation. be dismissed. the court having decreed the dissolution.purpose of obtaining its dissolution. with costs. subject to review on appeal. and Reyes. Tuason. Even the existence of a de jure corporation may be terminated in a private suit for its dissolution between stockholders. The preliminary injunction heretofore issued will be dissolved. . . .1 but that question does not affect the court's jurisdiction. and is a matter for decision by the judge. JJ. Pablo. and it was no error to reject the counter-bond. much depends upon the discretion of the trial court. There is a secondary issue in connection with the appointment of a receiver. Montemayor. Which brings us to one principal reason why this petition may not prosper. Judgment: The petition will. Ozaeta.

No. GULAY. vs. LAYON. TY and JETHRO CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH [OF] NORTHEASTERN MINDANAO MISSION. NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST. ISRAEL C. 150416. Agusan del . INC. the decision of the Regional Trial Court (RTC) of Bayugan. 41966 affirming. LORETO PAEL and JOEL BACUBAS. SERRANO. CV No. INC. MURILLON. and/or represented by JOSUE A. DECISION CORONA. FLORANTE P. DIONICES O. with modification. LUCENARA. 2006. J : p This petition for review on certiorari assails the Court of Appeals (CA) decision 1 and resolution 2 in CA-G. GEORGE G.R..[G. NINAL. SOMOSOT. * respondents. TIPGOS. and/or represented by MANASSEH C. petitioners. ARRANGUEZ.] SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES. FRANCISCO M. JESSIE T.. BRIGIDO P.R. WENDELL M. July 21. LORESTO C. ORBISO.

Municipality of Esperanza. claim and demand both at law and as well in possession as in expectancy of in and to all the place of land and portion situated in the Barrio of Bayugan.069 sq. [h]usband and wife. 3 Part of the deed of donation read: KNOW ALL MEN BY THESE PRESENTS: That we Felix Cosio[. interest. to wit: 1. 63. This case involves a 1.] 49 years of age[. both are citizen[s] of the Philippines. 4468 in Bayugan. Province of Agusan. Agusan (SPUMSDA Bayugan). all the rights. the spouses Cosio donated the land to the South Philippine Union Mission of Seventh Day Adventist Church of Bayugan Esperanza.] and Felisa Cuysona[. title. 1959. Philippines. lot covered by Transfer Certificate of Title (TCT) No. Felisa Cuysona. Branch 7 in Civil Case No. and resident[s] with post office address in the Barrio of Bayugan. On April 21. Esperanza. Philippines. do hereby grant. m. Agusan del Sur originally owned by Felix Cosio and his wife. Province of Agusan. Municipality of Esperanza.a parcel of land for Church Site purposes only. more particularly and bounded as follows.Sur. Agusan. convey and forever quit claim by way of Donation or gift unto the South Philippine [Union] Mission of Seventh Day Adventist Church of Bayugan.] 40 years of age. .

Title No. aHDTAI 5. Esperanza]. the donation could not have been made particularly to them. 3. it had no juridical personality. an elder of the Seventh Day Adventist Church. V-36704. . Homestead Application No. however. 4 The donation was allegedly accepted by one Liberato Rayos. East by Bricio Gerona. P-285.2. on behalf of the donee. the same parcel of land was sold by the spouses Cosio to the Seventh Day Adventist Church of Northeastern Mindanao Mission (SDA-NEMM). 822-Pls-225.situated [in Barrio Bayugan. not having been incorporated yet. petitioners asserted ownership over the property.Area: 30 meters wide and 30 meters length or 900 square meters. .Lot No. Twenty-one years later. This was opposed by respondents who argued that at the time of the donation. SPUM-SDA Bayugan could not legally be a donee because. South by Serapio Abijaron and West by Feliz Cosio .Bounded Areas North by National High Way. 4. . 1980. 4468 was thereafter issued in the name of SDA-NEMM. 5 TCT No. on February 28. 6 Claiming to be the alleged donee's successors-in-interest. . Neither were petitioners members of the local church then. hence.

1992 upholding the sale in favor of respondents. Thus. ownership of a property may be transferred by tradition as a consequence of a sale. Likewise. 63 (a suit for cancellation of title. declaratory relief and reconveyance with prayer for preliminary injunction and damages). petitioners filed a case. Agusan del Sur. 1987. The controversy between petitioners and respondents involves two supposed transfers of the lot previously owned by the spouses Cosio: (1) a donation to petitioners' alleged predecessors-in-interest in 1959 and (2) a sale to respondents in 1980. This is not correct because an appeal generally opens the entire case for review. this petition. After trial. On appeal. The issue in this petition is simple: should SDA-NEMM's ownership of the lot covered by TCT No. 8 Petitioners' motion for reconsideration was likewise denied. 4468 be upheld? 9 We answer in the affirmative. docketed as Civil Case No.On September 28. the CA affirmed the RTC decision but deleted the award of moral damages and attorney's fees. in the RTC of Bayugan. quieting of ownership and possession. Petitioners contend that the appellate court should not have ruled on the validity of the donation since it was not among the issues raised on appeal. the trial court rendered a decision 7 on November 20. . Donation is undeniably one of the modes of acquiring ownership of real property.

We agree with the appellate court that the alleged donation to petitioners was void. Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another person who accepts it. The donation could not have been made in favor of an entity yet inexistent at the time it was made. Nor could it have been accepted as there was yet no one to accept it. The deed of donation was not in favor of any informal group of SDA members but a supposed SPUM-SDA Bayugan (the local church) which, at the time, had neither juridical personality nor capacity to accept such gift. Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation. But there are stringent requirements before one can qualify as a de facto corporation:
(a)the existence of a valid law under which it may be incorporated; (b)an attempt in good faith to incorporate; and (c)assumption of corporate powers.
10

While there existed the old Corporation Law (Act 1459), 11 a law under which SPUM-SDA Bayugan could have been organized, there is no proof that there was an attempt to incorporate at that time. The filing of articles of incorporation and the issuance of

the certificate of incorporation are essential for the existence of a de facto corporation. 12 We have held that an organization not registered with the Securities and Exchange Commission (SEC) cannot be considered a corporation in any concept, not even as a corporation de facto. 13 Petitioners themselves admitted that at the time of the donation, they were not registered with the SEC, nor did they even attempt to organize 14 to comply with legal requirements. Corporate existence begins only from the moment a certificate of incorporation is issued. No such certificate was ever issued to petitioners or their supposed predecessor-in-interest at the time of the donation. Petitioners obviously could not have claimed succession to an entity that never came to exist. Neither could the principle of separate juridical personality apply since there was never any corporation 15 to speak of. And, as already stated, some of the representatives of petitioner Seventh Day Adventist Conference Church of Southern Philippines, Inc. were not even members of the local church then, thus, they could not even claim that the donation was particularly for them. 16
"The de facto doctrine thus effects a compromise between two conflicting public interest[s] — the one opposed to an unauthorized assumption of corporate privileges; the other in favor of doing justice to the parties and of establishing a general assurance of security in business dealing with corporations." 17

Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not to favor the defective or nonexistent corporation. 18

In view of the foregoing, petitioners' arguments anchored on their supposed de facto status hold no water. We are convinced that there was no donation to petitioners or their supposed predecessor-in-interest.

TCDHIc

On the other hand, there is sufficient basis to affirm the title of SDA-NEMM. The factual findings of the trial court in this regard were not convincingly disputed. This Court is not a trier of facts. Only questions of law are the proper subject of a petition for review on certiorari. 19 Sustaining the validity of respondents' title as well as their right of ownership over the property, the trial court stated:
[W]hen Felix Cosio was shown the Absolute Deed of Sale during the hearing . . . he acknowledged that the same was his . . . but that it was not his intention to sell the controverted property because he had previously donated the same lot to the South Philippine Union Mission of SDA Church of Bayugan-Esperanza. Cosio avouched that had it been his intendment to sell, he would not have disposed of it for a mere P2,000.00 in two installments but for P50,000.00 or P60,000.00. According to him, the P2,000.00 was not a consideration of the sale but only a form of help extended.

. Would then this inadequacy of the consideration render the contract invalid? Article 1355 of the Civil Code provides: Except in cases specified by law.A thorough analysis and perusal. except that the consideration of P2. xxx xxx xxx Well-entrenched is the rule that a Certificate of Title is generally a conclusive evidence of [ownership] of the land. of the Deed of Absolute Sale disclosed that it has the essential requisites of contracts pursuant to .00 is somewhat insufficient for a [1. . The title shall be received as evidence in all the Courts and shall be .069-square meter] land. There is that strong and solid presumption that titles were legally issued and that they are valid. . Article 1318 of the Civil Code. It is irrevocable and indefeasible and the duty of the Court is to see to it that the title is maintained and respected unless challenged in a direct proceeding. unless there has been fraud. lesion or inadequacy of cause shall not invalidate a contract.000. mistake or undue influence. mistake or undue influence] was adduced by [petitioners]. No evidence [of fraud. . . nonetheless.

. transfers the ownership from the vendor to the vendee who may thereafter exercise the rights of an owner over the same 21 Here. the petition is hereby DENIED. On this. 4468 was thereafter issued and it remains in the name of SDANEMM. 22 TCT No. transfer of ownership from the spouses Cosio to SDA-NEMM was made upon constructive delivery of the property on February 28. 1980 when the sale was made through a public instrument.] 20 According to Art. Costs against petitioners. 1477 of the Civil Code. [This action was instituted almost seven years after the certificate of title in respondents' name was issued in 1980. the noted author Arturo Tolentino had this to say: The execution of [a] public instrument . .conclusive as to all matters contained therein. SO ORDERED. WHEREFORE. . the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.