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MANUELA T. VDA. DE SALVATIERRA vs.

LORENZO C. GARLITOS

6.

June 8, 1955, the lower Court rendered judgment


granting plaintiff's prayer, and required defendants to
render a complete accounting of the harvest within
15 days from receipt of the decision and to deliver
30 % of the net income realized from the last
harvest with legal interest from the date defendants
received payment for said crop.

that upon defendants' failure to abide by the said


requirement, the gross income would be fixed at
P4,200 or a net income of P3,200 after deducting the
expenses for production, 30 % of which or P960 was
held to be due the plaintiff pursuant to the
aforementioned contract of lease, which was
declared rescinded.

G.R. No. L-11442. May 23, 1958


Petition for certiorari filed by Salvatierra seeking to
nullify the order of the CFI of Leyte relieving Segundino
Refuerzo of liability for the contract entered into
between the former and the Philippine Fibers Producers
Co., Inc., of which Refuerzo is the president.
1. Salvatierra is the owner of a parcel of land located at
Maghobas, Poblacion, Burauen, Teyte.
2. March 7, 1954, Salvatierra entered into a contract of
lease with the PFPCI

7. No appeal have been perfected


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Corporation duly organized and existing under the


laws of the Philippines domiciled at Burauen, Leyte.
Represented by Mr. Refuerzo, the President.

8. Court, upon motion, issued a writ of execution


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Contract: the lifetime of the lease would be for a period


of 10 years; that the land would be planted to kenaf, ramie
or other crops suitable to the soil; that the lessor would be
entitled to 30 % of the net income accruing from the
harvest of any, crop without being responsible for the cost
of production thereof; and that after every harvest, the
lessee was bound to declare at the earliest possible time
the income derived therefrom and to deliver the
corresponding share due the lessor.

3. Obligations imposed were not complied with


4. On April 5, 1955, Salvatierra filed with the CFI of
Leyte a complaint against the PFPCI and Refuerzofor accounting, rescission and damages.
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5.

She claims that defendants planted kenaf on 3 hectares of


the leased property which crop was, at the time of the
commencement of the action, already harvested,
processed and sold by defendants; defendants refused to
render an accounting of the income derived therefrom and
to deliver the lessor's share; that the estimated gross
income was P4,500, and the deductible expenses
amounted to P1,000; that as defendants' refusal to
undertake such task was in violation of the terms of the
covenant entered into between the plaintiff and defendant
corporation, a rescission was but proper.

Defendants failed to file their answer - Court


declared them in default

Provincial Sheriff of Leyte caused the attachment


of 3 parcels of land registered in the name of
Refuerzo. No property of the PFPCI was found
available for attachment.

9. Refuerzo filed a motion claiming that the decision


rendered was null and void with respect to him,
there being no allegation in the complaint pointing
to his personal liability and thus prayed that an order
be issued limiting such liability to defendant
corporation.
10. Plaintiff opposed but the Court a quo granted the
same and ordered the Provincial Sheriff to release all
properties belonging to the movant that might have
already been attached
11. Petition for relief from said order was denied,
Salvatierra instituted the instant action
ISSUE: Whether or not Refuerzo can be held
personally liable
RULING: YES.
Refuerzo: interposed the defense that the complaint
filed with the lower court contained no allegation which
would hold him liable personally, for while it was stated
therein that he was a signatory to the lease contract, he
did so in his capacity as president of the corporation.

And this allegation was found by the Court a quo to be


supported by the records.
Plaintiff on the other hand tried to refute this averment
by contending that her failure to specify defendant's
personal liability was due to the fact that all the time she
was under the impression that the PFPCI, represented by
Refuerzo was a duly registered corporation as appearing
in the contract, but a subsequent inquiry from the
Securities and Exchange Commission yielded otherwise.
While as a general rule a person who has contracted or
dealt with an association in such a way as to recognize
its existence as a corporate body is estopped from
denying the same in an action arising out of such
transaction or dealing, yet this doctrine may not be held
to be applicable where fraud takes a part in the said
transaction. In the instant case, on plaintiff's charge that
she was unaware of the fact that the PFPCI, had no
juridical personality, defendant Refuerzo gave no
confirmation or denial and the circumstances
surrounding the execution of the contract lead to the
inescapable conclusion that plaintiff Salvatierra was
really made to believe that such corporation was duly
organized in accordance with law.

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,
possessed of all the rights and subject to all the
liabilities of a principal, a person acting or
purporting to act on behalf of a corporation which
has no valid existence assumes such privileges and
obligations and comes personally liable for contracts
entered into or for other acts performed as such,

Considering that defendant Refuerzo, as president of the


unregistered corporation PFPCI was the moving spirit
behind the consummation of the lease agreement by
acting as its representative, his liability cannot be limited
or restricted that imposed upon corporate shareholders.
In acting on behalf of a corporation which he knew to be
unregistered, he assumed the risk of reaping the
consequential damages or resultant rights, if any, arising
out of such transaction.

There can be no question that a corporation with


registered has a juridical personality separate and
distinct from its component members or stockholders
and officers such that a corporation cannot be held liable
for the personal indebtedness of a stockholder even if he
should be its president (Walter A. Smith Co. vs. Ford,
SC-G.R. No. 42420) and conversely, a stockholder or
member cannot be held personally liable for any
financial obligation be, the corporation in excess of his
unpaid subscription.
But this rule is understood to refer merely to
registered corporations and cannot be made
applicable to the liability of members of an
unincorporated association.
The reason behind this doctrine is obvious-since an
organization which before the law is non-existent has no
personality and would be incompetent to act and
appropriate for itself the powers and attribute of a
corporation as provided by law;
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it cannot create agents or confer authority on


another to act in its behalf; thus, those who act or
purport to act as its representatives or agents do so
without authority and at their own risk.

REYNALDO LOZANO vs. HON. DE LOS SANTOS,


G.R. No. 125221. June 19, 1997

6. MCTC denied the motion and the subsequent MR


This is a petition for certiorari seeks to annul and set
aside the decision of the RTC Angeles City which
ordered the MCTC, Mabalacat and Magalang, Pampanga
to dismiss Civil Case No. 1214 for lack of jurisdiction.
1. On December 19, 1995, petitioner Lozano filed a
complaint for damages against respondent Antonio
Anda before MCTC Mabalacat and Magalang,
Pampanga.
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Petitioner alleged that he was the president of the


Kapatirang Mabalacat-Angeles Jeepney Drivers'
Association, Inc. (KAMAJDA) while respondent
Anda was the president of the Samahang AngelesMabalacat Jeepney Operators' and Drivers'
Association, Inc. (SAMAJODA)

2. August 1995, upon the request of the Sangguniang


Bayan of Mabalacat, Pampanga, petitioner and
private respondent
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agreed to consolidate their respective associations


and form the Unified Mabalacat-Angeles Jeepney
Operators'
and
Drivers' Association,
Inc.
(UMAJODA)
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

3. Elections were held on October 29, 1995 and both


petitioner and private respondent ran for president
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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.

4. Petitioner filed a complaint to restrain private


respondent from collecting the dues and to order him
to pay damages in the amount of P25,000.00 and
attorney's fees of P500.00.
5. Private respondent moved to dismiss the complaint
for lack of jurisdiction, claiming that jurisdiction
was lodged with SEC

7. Private
respondent
filed
a
petition
for certiorari before the RTC Angeles City.
8. The trial court found the dispute to be intracorporate,
hence, subject to the jurisdiction of the SEC, and
ordered the MCTC to dismiss the case
ISSUE: Whether the MCTC or the SEC has
jurisdiction over the controversy
RULING:
Jurisdiction of the SEC : Section 5 of PD 902-A
Section 5. x x x [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, business associates, its officers or partners,
amounting to fraud and misrepresentation which may be
detrimental to the interest of the public and/or of the
stockholders, partners, members of associations or
organizations registered with the Commission.
(b) Controversies arising 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 insofar as
it concerns their individual franchise or right to exist as such
entity.
(c) Controversies in the election or appointment of directors,
trustees, officers or managers of such corporations,
partnerships or associations.
(d) Petitions of corporations, partnerships or associations to be
declared in the state of suspension of payments in cases where
the corporation, partnership or association possesses sufficient
property to cover all its debts but foresees the impossibility of
meeting them when they respect very fall due or in cases
where the corporation, partnership or association has no
sufficient assets to cover its liabilities, but is under the
management of a Rehabilitation Receiver or Management
Committee created pursuant to this Decree.

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;


(2) the nature of the question that is the subject
of their controversy.
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.
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. 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.
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.

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. 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 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 advanced
by private respondent cannot override jurisdictional
requirements. Jurisdiction is fixed by law and is not
subject to the agreement of the parties. 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 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.