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-Wensha Spa is in the bss of sauna bath
and massage services
-Loreta Yung as a previous employer of Manmen was
offered by Xu a job in Wensha, to which she became an
-She recounted that on 2004 she was asked to resign
bec. Feng Shui master told Xu that her aura did not
match that of Xu
-Loreta went to NLRC & filed for illegal dismissal
-Wensha & Xu denied illegally terminating Loreta's
employment, they received various complaints against
her from employees so they advised her to take a
leave. Later on they terminated her employment for
loss of trust & confidence
-LA & NLRC ruled in favor of Wensha
-Loreta MR but denied so went to CA P. for Certiorari
-Ca reversed ruling of NLRC - GAD & Wensha Spa
Center, Inc. and Xu Zhi Jie are ORDERED to, jointly and
severally, pay Loreta T. Yung her full backwages, other
privileges, and benefits, or their monetary equivalent
- the cause of Loretas dismissal is questionable. Loss of
trust and confidence to be a valid ground for dismissal
must have basis and must be founded on clearly
established facts HOWEVER the Court finds merit in the
argument of petitioner Xu that the CA erred in ruling
that he is solidarily liable with Wensha.
-Elementary is the rule that a corporation is invested
by law with a personality separate and distinct from
those of the persons composing it and from that of any
other legal entity to which it may be related. Mere
ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a
corporation is not of itself sufficient ground for
disregarding the separate corporate personality
-corporate directors and officers may be held solidarily
liable with the corporation for the termination of
employment only if done with malice or in bad faith,
NO BF on the part of Xu
-In the subject decision, the CA concluded that
petitioner Xu and Wensha are jointly and severally
liable to Loreta. We have read the decision in its
entirety but simply failed to come across any finding of
bad faith or malice on the part of Xu. There is,
therefore, no justification for such a ruling. To sustain
such a finding, there should be an evidence on record
that an officer or director acted maliciously or in bad
faith in terminating the services of an employee.
Moreover, the finding or indication that the dismissal
was effected with malice or bad faith should be stated
in the decision itself.


G.R. No. 152542 : July 8, 2004
G.R. No. 155472 : July 8, 2004
Corporation, a domestic private corporation, is the
registered owner of a farm, fishpond and sugar cane
plantation known as Haciendas San Antonio II,
Marapara, Pinanoag and Tinampa-an, all situated in
Cadiz City. It also owns one unit of motor vehicle and
two units of tractors. The same allowed Ramon H.
Monfort, its Executive Vice President, to breed and
maintain fighting cocks in his personal capacity at
Hacienda San Antonio. In 1997, the group of Antonio
Monfort III, through force and intimidation, allegedly
took possession of the 4 Haciendas, the produce
thereon and the motor vehicle and tractors, as well as
the fighting cocks of Ramon H. Monfort.
In G.R. No. 155472: The Corporation, represented by its
President, Ma. Antonia M. Salvatierra, and Ramon H.
Monfort, in his personal capacity, filed against the
group of Antonio Monfort III, a complaint for delivery of
motor vehicle, tractors and 378 fighting cocks, with
prayer for injunction and damages. Motion to dismiss
on the ground of Ma. Antonia M. Salvatierra's lack of
capacity to sue on behalf of the Corporation was
In G.R. No. 152542: Ma. Antonia M. Salvatierra filed on
behalf of the Corporation a complaint for forcible entry,
preliminary mandatory injunction with temporary
restraining order and damages against the group of
Antonio Monfort III.
The group of Antonio Monfort III alleged that they are
possessing and controlling the Haciendas and
harvesting the produce therein on behalf of the
corporation and not for themselves. They likewise
raised the affirmative defense of lack of legal capacity
of Ma. Antonia M. Salvatierra to sue on behalf of the
Complaint was eventually dismissed.
Basis of claim of Salvatierra\s lack of capacity to sue:
The group of Antonio Monfort III claims that the March
31, 1997 Board Resolution authorizing Ma. Antonia M.
Salvatierra and/or Ramon H. Monfort to represent the
Corporation is void because the purported Members of
the Board who passed the same were not validly
elected officers of the Corporation.
Issue/ Held: WON Ma. Antonia M. Salvatierra has the
legal capacity to sue on behalf of the Corporation. -NO.
Ma. Antonia M. Salvatierra failed to prove that four of
those who authorized her to represent the Corporation
were the lawfully elected Members of the Board of the
Corporation. As such, they cannot confer valid
authority for her to sue on behalf of the corporation.
A corporation has no power except those expressly
conferred on it by the Corporation Code and those that
are implied or incidental to its existence. In turn, a

corporation exercises said powers through its board of

directors and/or its duly authorized officers and agents.
Thus, it has been observed that the power of a
corporation to sue and be sued in any court is lodged
with the board of directors that exercises its corporate
powers. In turn, physical acts of the corporation, like
the signing of documents, can be performed only by
natural persons duly authorized for the purpose by
corporate by-laws or by a specific act of the board of
Corporation failed to comply with Section 26 of the
Corporation Code, requiring submission to the SEC
within thirty (30) days after the election the names,
nationalities and residences of the elected directors,
trustees and officers of the Corporation.
In the case at bar, the fact that four of the six
Members of the Board listed in the 1996 General
Information Sheet are already dead at the time the
March 31, 1997 Board Resolution was issued, does not
automatically make the four signatories (i.e., Paul M.
Monfort, Yvete M. Benedicto, Jaqueline M. Yusay and
Ester S. Monfort) to the said Board Resolution (whose
name do not appear in the 1996 General Information
Sheet) as among the incumbent Members of the Board.
This is because it was not established that they were
duly elected to replace the said deceased Board
To correct the alleged error in the General Information
Sheet, the retained accountant of the Corporation
informed the SEC in its November 11, 1998 letter that
the non-inclusion of the lawfully elected directors in the
1996 General Information Sheet was attributable to its
oversight and not the fault of the Corporation. This
belated attempt, however, did not erase the doubt as
to whether an election was indeed held.
What further militates against the purported
election of those who signed the March 31, 1997 Board
Resolution was the belated submission of the alleged
Minutes of the October 16, 1996 meeting where the
questioned officers were elected. The issue of legal
capacity of Ma. Antonia M. Salvatierra was raised
before the lower court by the group of Antonio Monfort
III as early as 1997, but the Minutes of said October 16,
1996 meeting was presented by the Corporation only
in its September 29, 1999 Comment before the Court
of Appeals. Moreover, the Corporation failed to prove
that the same October 16, 1996 Minutes was
submitted to the SEC.

Facts: Petitioners Arnold Hall, Bradley Hall and Private

Respondents Fred Brown, Emma Brown, Hipolita
acknowledged the articles of incorporation of the Far
Eastern Lumber and Commercial Co., Inc. organized to
engage in a general lumber business to carry on as
general contractors, operators and managers. Attached
to the articles was an affidavit of the treasurer stating
that 23, 428 shares of stock had been subscribed and
fully paid with certain properties transferred to the

What is the effect of non-filing of the articles of

incorporation within the required period?

First, not having obtained the certificate of

incorporation, the Far Eastern Lumber and Commercial
Co. even its stockholders may not probably claim
in good faith to be a corporation.

Failure to submit the by-laws within 30 days from

incorporation does not automatically dissolve the
corporation. It is merely a ground for suspension or
revocation of its charter after proper notice and
hearing. The corporation is, at the very least, a de
facto corporation whose existence may not be
collaterally attacked. (Sawadjaan v. CA, G.R. No.
142284, June 8, 2005)


Immediately after the execution of the articles of

incorporation, the corporation proceeded to do
business with the adoption of by-laws and the election
of its officers.
Then, the articles of incorporation were filed in SEC for
the issuance of the corresponding certificate of
Pending action on the articles of incorporation, Fred
Brown, Emma Brown, Hipolita Chapman and Ceferino
Abella filed a civil case against the Halls alleging
among other things that Far Eastern Lumber and
Commercial Co, was an unregistered partnership and
that they wished to have it dissolved because of bitter
dissension among the members, mismanagement and
fraud by the managers and heavy financial losses.
The Halls filed a Motion to Dismiss contesting the
courts jurisdiction and the sufficiency of the cause of
action but Judge Piccio ordered the dissolution of the
company and appointed a receiver.
(1) Whether or not the court had jurisdiction to decree
the dissolution of the company because it being a de
facto corporation, dissolution may only be ordered in a
quo warranto proceeding in accordance with Section
(2) Inasmuch as the Browns had signed the articles of
incorporation, whether or not they are estopped from
claiming that it is not a corporation but only a
(1) YES. The court had jurisdiction but Section 19 does
not apply.

The immunity of collateral attack is granted to

corporations claiming in good faith to be corporation
under this act. Such a claim is compatible with the
existence of errors and irregularities but not with a
total or substantial disregard of the law. 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.
Second, this is not a suit in which the corporation is a
party. This is a litigation between stockholders of the
alleged corporation for the purpose of obtaining its

dissolution. Even the existence of a de jure corporation

may be terminated in a private suit for its dissolution
between stockholders, without the intervention of the
(2) NO. The Browns are not estopped. Because the SEC
has not yet issued the corresponding certificate of
incorporation, all of them know or ought to know that
the personality of a corporation begins to exist only
from the moment such certificate is issued and 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.
And as nobody was led to believe anything to his
prejudice and damage, the principle of estoppel does
not apply. This is not an instance requiring the
enforcement of contracts with the corporation through
the rule of estoppel.
G.R. No. 125221 June 19, 1997
FACTS: In August 1995, upon the request of the
petitioner Reynaldo M. Lozano and private respondent
Antonio Anda agreed to consolidate their respective
associations and form the Unified Mabalacat-Angeles
Jeepney Operators' and Drivers Association, Inc.
Elections were held on October 29, 1995 and both
petitioner and private respondent ran for president.
When petitioner won, private respondent protested and
alleging fraud, refused to recognize the results of the
election. 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. Petitioner was thus constrained to
file the complaint before Municipal Circuit Trial Court,
Mabalacat and Magalang, Pampanga to restrain private
respondent from collecting the dues and to order him
to pay damages. Private respondent moved to dismiss
the complaint for lack of jurisdiction, claiming that
jurisdiction was lodged with the SEC. The MCTC denied
the motion. It likewise denied the motion for
reconsideration. Private respondent filed a petition for
certiorari before the RTC, Branch 58, Angeles City. The
trial court found the dispute to be intracorporate,
hence, subject to the jurisdiction of the SEC, and
ordered the MCTC to dismiss the Civil Case accordingly.
It denied reconsideration, hence this petition. Private
respondent raised the defense of corporation by
estoppel thus within SEC jurisdiction.
ISSUE: Whether or not there exists an intracorporate or
partnership relation between petitioner and private
RULING: The grant of jurisdiction to the SEC must be
viewed in the light of its nature and function under the
law. 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. 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 is 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. 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
reorganization official.
The new consolidated
corporation comes into existence and the constituent
corporations dissolve and cease to exist.
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
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 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.
Corporation by estoppel is founded on principles of
equity and is designed to prevent injustice and
unfairness. It applies when persons assume to form a
corporation and exercise corporate functions and enter
into business relations with third person. 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.

Mariano Alber v University Publishing Co., Inc.

Bengzon, J.P. J. | 1965
No less than three times have the parties here
appealed to this Court.
In 1949, Albert sued University Publishing Co.
(UPC). He alleged that UPC was organized and existing
under PH laws and that thru its president Jose Aruego
(Aruego), they entered into a contract where UPC
would pay him 30 thousand pesos for the exclusive
right to publish his revised Commentaries on the RPC
and for his share in previous sales of the books 1 st
edition; that UPC undertook to pay in 8 instalments of
3.5k and failure to pay one instalment would render
the rest due

Albert said UPC failed to pay the 2 nd instalment

but the latter countered that it was the former who
violated their contract by his failure to deliver the

On Agency:

Later, Albert died and Justo Albert (his

administrator) substituted him. The CFI then favoured
Justo and ordered UPC to pay him 23 thousand. The
cases went to SC which reduced it to 15 thousand
The CFI then ordered for the execution against
UPC but at some point, Justo petitioned for a writ of
execution against Aruego (its president) because he
and the sheriff discovered that UPC wasnt registered
in the SEC. UPC countered by saying that Aruego was
not a party to the case so the petition should be
SC notes that UPC doesnt want Aruego to be a
party to the case because if hes not a party, a
separate action will have to be filed by Justo which will
result in him dealing with the statute of limitations.
The CFI denied the petition so Justo appealed.

W/N Aruego considered a party in the case. Yes.

Non-registration of UPC:

on account of the non-registration it cannot be
considered a corporation, not even a
corporation de facto;
UPC then has no personality separate from
Aruego, thus cannot be sued independently;

Corporation-by-estoppel not invoked by UPC:


Even if invoked, its not applicable;

Aruego represented a non-existent entity and
induced not only Justo but also the court to
believe such representation; (he signed the
contract as president and stated the UPC was
One who has induced another to act upon his
wilful misrepresentation that a corporation was
duly organized and existing under the law,
cannot thereafter set up against his victim the
principle of corporation by estoppel (Salvatiera
vs. Garlitos, 56 O.G. 3069);

A person acting or purporting to act on behalf

of a corporation which has no valid
existence assumes
obligations and becomes personally liable for
contracts entered into or for other acts
performed as such agent;

On due process question (since Aruego wasnt

named in the case):

Aruego was given his day in court;

Parties to a suit are "persons who have a right
to control the proceedings, to make defense, to
adduce and cross-examine witnesses, and to
appeal from a decision; in reality, it was Aruego
who exercised these rights;
By due process of law we mean a law which
hears before it condemns; which proceeds
upon inquiry, and renders judgment only after
Summary: The evidence is patently clear that Jose
M. Aruego, acting as representative of a nonexistent principal, was the real party to the
contract sued upon; that he was the one who
reaped the benefits resulting from it, so much so
that partial payments of the consideration were
made by him; that he violated its terms, thereby
precipitating the suit in question; and that in the
litigation he was the real defendant.
supplementary proceedings for the purpose of
carrying the judgment into effect against University
Publishing Co., Inc. and/or Jose M. Aruego (because
others might be liable to him for reimbursement or


It was established that Lim Tong Lim requested Peter
Yao to engage in commercial fishing with him and one
Antonio Chua. The three agreed to purchase two
fishing boats but since they do not have the money
they borrowed from one Jesus Lim (brother of Lim Tong
Lim). They again borrowed money and they agreed to
purchase fishing nets and other fishing equipments.
Now, Yao and Chua represented themselves as acting
in behalf of Ocean Quest Fishing Corporation (OQFC)
they contracted with Philippine Fishing Gear Industries
(PFGI) for the purchase of fishing nets amounting to
more than P500k.

Aruego is the real defendant:


UPC who came to the court, but as said, it does

not have independent personaility; it is just a
In reality, it was Aruego, in reality, the one who
answered and litigated, through his own law
firm as counsel;

They were however unable to pay PFGI and so they

were sued in their own names because apparently
OQFC is a non-existent corporation. Chua admitted
liability and asked for some time to pay. Yao waived his
rights. Lim Tong Lim however argued that hes not
liable because he was not aware that Chua and Yao

represented themselves as a corporation; that the two

acted without his knowledge and consent.

ISSUE: Whether or not Lim Tong Lim is liable.

HELD: Yes. From the factual findings of both lower

courts, it is clear that Chua, Yao and Lim had decided
to engage in a fishing business, which they started by
buying boats worth P3.35 million, financed by a loan
secured from Jesus Lim. In their Compromise
Agreement, they subsequently revealed their intention
to pay the loan with the proceeds of the sale of the
boats, and to divide equally among them the excess or
loss. These boats, the purchase and the repair of which
were financed with borrowed money, fell under the
term common fund under Article 1767. The
contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry.
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.

Lim Tong Lim cannot argue that the principle of

corporation by estoppels can only be imputed to Yao
and Chua. Unquestionably, Lim Tong Lim benefited
from the use of the nets found in his boats, the boat
which has earlier been proven to be an asset of the
partnership. Lim, Chua and Yao decided to form a
corporation. Although it was never legally formed for
unknown reasons, this fact alone does not preclude the
liabilities of the three as contracting parties in
representation of it. Clearly, under the law on estoppel,
those acting on behalf of a corporation and those
benefited by it, knowing it to be without valid
existence, are held liable as general partners.