You are on page 1of 13

1. Tayag v. Benguet Consolidated Mining Co.

G.R. No. L-23145, 29 November 1968

Idonah Slade Perkins, who died on March 27, 1960 left two stock certificates owned by
her in a Philippine Corporation, Benguet Consolidated, Inc., to satisfy the legitimate claims of
local creditors. The certificates are in the possession of the County Trust Company of New York,
which as noted, is the domiciliary administrator of the estate of the deceased.

Lazaro A. Marquez was appointed ancillary administrator, and was later substituted by
the appellee Renato D. Tayag. A dispute arose between the domiciliary administrator County
Trust Company of New York and the ancillary administrator in the Philippines as to which of
them was entitled to the possession of the stock certificates in question. In January 1964, the
Court of First Instance of Manila ordered the domiciliary administrator, to `produce and deposit
them with the ancillary administrator or with the Clerk of Court. The domiciliary administrator did
not comply with the order, and on February 11, 1964, the ancillary administrator petitioned the
court to "issue an order declaring the certificate or certificates of stocks covering the 33,002
shares issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc. be declared
or considered as lost.

After considering the motion of the ancillary administrator, the Court hereby (1) considers
as lost for all purposes in connection with the administration and liquidation of the Philippine
estate of Idonah Slade Perkins the stock certificates covering the 33,002 shares of stock
standing in her name in the books of the Benguet Consolidated,Inc., (2) orders said certificates
cancelled, and (3) directs said corporation to issue new certificates in lieuthereof, the same to
be delivered by said corporation to either the incumbent ancillary administrator or to the Probate
Division of this Court."

From such an order, an appeal was taken to this Court not by the domiciliary
administrator, the County Trust Company of New York, but by the Philippine corporation, the
Benguet Consolidated, Inc.

Issue: Can the corporation be compelled to comply with the order?

Held: Yes.A corporation is a creature without any existence until it has received the imprimatur
of the state acting according to the law. It is inconceivable that it will have rights and privileges
of a higher priority than that of its creator. Thus, it cannot refuse to yield obedience to acts of its
state organs, including the judiciary, whenever called upon to do so.
It is also within the authority of the probate court to require that ancillary administrators
right to the stock certificates covering the 33,002 shares standing in the deceaseds name in the
books of Benguet Consolidated, Inc., being a Philippine corporation owing allegiance and
subject to the unrestricted jurisdiction of local courts.
Further, respondent cannot insist that the related provision of its by-laws in case of a
lost, stolen or destroyed stock certificate be followed. Such provision stresses that in the event
of a contest or pendency of an action regarding ownership of such certificate or certificates of
stock allegedly lost, stolen or destroyed, the issuance of a new certificate would await the final
decision of a court regarding the ownership thereof. In the first place, there is no such occasion
to apply such a by-law. It is admitted that the foreign domiciliary administrator did not appeal
from the order now in question. Moreover, there is likewise the express admission of appellant
that as far as it is concerned, it is immaterial who is entitled to the possession of the stock
certificates. Even if such were not the case, it would be a legal absurdity to impart to such a
provision conclusiveness and finality. Assuming that a contrariety exists between the above by-
law and the command of a court decree, the latter is to be followed.

(As a general rule, administration, whether principal or ancillary, extends to the assets of
a decedent found within the state or country where it was granted, the corollary being that an
administrator appointed in one state or country has no power over property in another state.

It is often necessary to have more than one administration of an estate. When a person dies
intestate owning property in the country of his domicile as well as in a foreign country,
administration is had in both countries. That which is granted in the jurisdiction of decedents
last domicile is termed the principal administration, while any other administration is termed the
ancillary administration. The reason for the latter is because a grant of administration does not
ex proprio vigore have any effect beyond the limits of the country in which it is granted. Hence,
the administrator appointed in a foreign state has no authority in the Philippines. The ancillary
administration is proper, whenever a person dies, leaving in a country other than that of his last
domicile, properly to be administered in the nature of assets of the deceased liable for his
individual debts or to be distributed among his heirs.

Rebecca Boyer - Roxas and Guillermo Roxas vs. Hon. CA and Heirs of Eugenia Roxas,
GR. No. 100866, July 14, 1992

The questioned properties belonged to Eugenia V. Roxas. After her death, the heirs of
Eugenia V. Roxas, among them the petitioners herein, decided to form a corporation Heirs of
Eugenia V. Roxas, Incorporated (private respondent herein) with the inherited properties as
capital of the corporation. The corporation was incorporated on December 4, 1962 with the
primary purpose of engaging in agriculture to develop the inherited properties. The Articles of
Incorporation of the respondent corporation were amended in 1971 to allow it to engage in the
resort business. Accordingly, the corporation put up a resort known as Hidden Valley Springs
Resort where the questioned properties are located.
In two separate complaints for recovery of possession filed with the Regional Trial Court
of Laguna against petitioners, respondent corporation prayed for the ejectment of the petitioners
from buildings inside property allegedly owned by the respondent. In the case of petitioner
Rebecca Boyer-Roxas, the respondent corporation alleged that Rebecca is in possession of two
(2) houses, one of which is still under construction, built at the expense of the respondent
corporation; and that her occupancy on the two (2) houses was only upon the tolerance of the
respondent corporation. In the case of petitioner Guillermo Roxas, the respondent corporation
alleged that Guillermo occupies a house which was built at the expense of the former during the
time when Guillermo's father, Eriberto Roxas, was still living and was the general manager of
the respondent corporation; that the house was originally intended as a recreation hall but was
converted for the residential use of Guillermo; and that Guillermo's possession over the house
and lot was only upon the tolerance of the respondent corporation.

The RTC ruled in favor of the respondent corporation. The CA also affirmed the

Issue/s: WoN Respondent Court is justified when it refused to pierce the

veil of corporate fiction over private respondent and maintain the petitioners in their possession
and/or occupancy of the subject premises considering that petitioners are owners of aliquot part
of the properties of private respondent.
WoN respondent Court misapplied the law when it ordered petitioner Rebecca Boyer-
Roxas to remove the unfinished building, when the trial court opined that she spent her own
funds for the construction thereof.

Held: YES
The respondent is a bona fide corporation. It has a juridical personality of its own
separate from the members composing it. The petitioners' stay within the questioned properties
was merely by tolerance of the respondent corporation in deference to the wishes of Eufrocino
Roxas, who during his lifetime, controlled and managed the corporation. Eufrocino Roxas'
actions could not have bound the corporation forever. The petitioners have not cited any
provision of the corporation by-laws or any resolution or act of the Board of Directors which
authorized Eufrocino Roxas to allow them to stay within the company premises forever. The
court ruled that in the absence of any existing contract between the petitioners and the
respondent corporation, the corporation may elect to eject the petitioners at any time it wishes
for the benefit and interest of the respondent corporation. The petitioners' suggestion that the
veil of the corporate fiction should be pierced is untenable. The separate personality of the
corporation may be disregarded only when the corporation is used "as a cloak or cover for fraud
or illegality, or to work injustice, or where necessary to achieve equity or when necessary for the
protection of the creditors."
The construction of the unfinished building started when Eriberto Roxas, husband of
Rebecca Boyer-Roxas, was still alive and was the general manager of the respondent
corporation. The couple used their own funds to finance the construction of the building. The
Board of Directors of the corporation, however, did not object to the construction. They allowed
the construction to continue despite the fact that it was within the property of the corporation.
Under these circumstances, we agree with the petitioners that the provision of Article 453 (as if
both had acted in good faith) of the Civil Code should have been applied by the lower courts.


Sept-Oct 1980: PBMI, through Ching, Senior VP of Philippine Blooming Mills, Inc. (PBMI), applied
with the Rizal Commercial Banking Corporation (RCBC) for the issuance of commercial letters
of credit to finance its importation of assorted goods
RCBC approved the application, and irrevocable letters of credit were issued in favor of Ching.
The goods were purchased and delivered in trust to PBMI.
Ching signed 13 trust receipts as surety, acknowledging delivery of the goods
Under the receipts, Ching agreed to hold the goods in trust for RCBC, with authority to sell but
not by way of conditional sale, pledge or otherwise
In case such goods were sold, to turn over the proceeds thereof as soon as received, to apply
against the relative acceptances and payment of other indebtedness to respondent bank.
In case the goods remained unsold within the specified period, the goods were to be returned to
RCBC without any need of demand.
goods, manufactured products or proceeds thereof, whether in the form of money or bills,
receivables, or accounts separate and capable of identification - RCBCs property
When the trust receipts matured, Ching failed to return the goods to RCBC, or to return their
value amounting toP6,940,280.66 despite demands.
RCBC filed a criminal complaint for estafa against petitioner in the Office of the City Prosecutor of
December 8, 1995: no probable cause to charge petitioner with violating P.D. No. 115, as
petitioners liability was only civil, not criminal, having signed the trust receipts as surety
RCBC appealed the resolution to the Department of Justice (DOJ) via petition for review
On July 13, 1999: reversed the assailed resolution of the City Prosecutor
execution of said receipts is enough to indict the Ching as the official responsible for violation of
P.D. No. 115
April 22, 2004: CA dismissed the petition for lack of merit and on procedural grounds
Ching filed a petition for certiorari, prohibition and mandamus with the CA

ISSUE: W/N Ching should be held criminally liable.

HELD: YES. DENIED for lack of merit

There is no dispute that it was the Ching executed the 13 trust receipts. The law points to him
as the official responsible for the offense. Since a corporation CANNOT be proceeded against
criminally because it CANNOT commit crime in which personal violence or malicious intent is
required, criminal action is limited to the corporate agents guilty of an act amounting to a crime
and never against the corporation itself
execution by Ching of receipts is enough to indict him as the official responsible for violation
of PD 115
RCBC is estopped to still contend that PD 115 covers only goods which are ultimately
destined for sale and not goods, like those imported by PBM, for use in manufacture.
Moreover, PD 115 explicitly allows the prosecution of corporate officers without prejudice to
the civil liabilities arising from the criminal offense thus, the civil liability imposed on respondent
in RCBC vs. Court of Appeals case is clearly separate and distinct from his criminal liability
under PD 115
Chings being a Senior Vice-President of the Philippine Blooming Mills does not exculpate
him from any liability
The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under
paragraph 1(b), Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It
may be committed by a corporation or other juridical entity or by natural persons. However, the
penalty for the crime is imprisonment for the periods provided in said Article 315.
law specifically makes the officers, employees or other officers or persons responsible for
the offense, without prejudice to the civil liabilities of such corporation and/or board of directors,
officers, or other officials or employees responsible for the offense
rationale: officers or employees are vested with the authority and responsibility to devise
means necessary to ensure compliance with the law and, if they fail to do so, are held criminally
accountable; thus, they have a responsible share in the violations of the law
If the crime is committed by a corporation or other juridical entity, the directors, officers,
employees or other officers thereof responsible for the offense shall be charged and penalized
for the crime, precisely because of the nature of the crime and the penalty therefor. A
corporation cannot be arrested and imprisoned; hence, cannot be penalized for a crime
punishable by imprisonment. However, a corporation may be charged and prosecuted for a
crime if the imposable penalty is fine. Even if the statute prescribes both fine and imprisonment
as penalty, a corporation may be prosecuted and, if found guilty, may be fined
When a criminal statute designates an act of a corporation or a crime and prescribes
punishment therefor, it creates a criminal offense which, otherwise, would not exist and such
can be committed only by the corporation. But when a penal statute does not expressly apply to
corporations, it does not create an offense for which a corporation may be punished. On the
other hand, if the State, by statute, defines a crime that may be committed by a corporation but
prescribes the penalty therefor to be suffered by the officers, directors, or employees of such
corporation or other persons responsible for the offense, only such individuals will suffer such
penalty. Corporate officers or employees, through whose act, default or omission the corporation
commits a crime, are themselves individually guilty of the crime. The principle applies whether
or not the crime requires the consciousness of wrongdoing. It applies to those corporate agents
who themselves commit the crime and to those, who, by virtue of their managerial positions or
other similar relation to the corporation, could be deemed responsible for its commission, if by
virtue of their relationship to the corporation, they had the power to prevent the act. Benefit is
not an operative fact.



On March 30, 1954, the Recreation and Amusement Association of the Philippines, Inc.,
allegedly a non-stock corporation organized and existing under the laws of the Philippines,
whose 35 members are licensed owner and operators in the City of Manila, of Five-Ball-Flipper-
Action-Pinball machines (also known as slot machines), filed a complaint in the Court of First
Instance of said City praying that a preliminary injunction be issued to restrain the City Mayor
and the City Treasurer from enforcing Ordinance No. 3628 passed by the Municipal Board of
Manila on March 19, 1954, and approved by the City Mayor on the following day, which reads
as follows:




Be it ordained by the Municipal Board of the City of Manila, that:

SECTION 1. Sections seven hundred seventy-three and seven hundred seventy-four of

Ordinance Numbered One thousand six hundred, known as "The Revised Ordinances of
the City of Manila, as lastly amended by Ordinance Numbered Three thousand three
hundred forty-seven, are hereby amended to read as follows:

SEC. 773. Licenses. No person, entity or corporation shall install or cause to be

installed for the use of the public for compensation any mechanical contrivance or
automatic apparatus which functions through the introduction of money not otherwise
prohibited by law of weights and measure and not a gambling device, for purposes of
amusement or of confronting the weight of persons or things, or printing letters or
numbers, or displaying features inside the apparatus or reproducing recorded music
including other kinds of machines or apparatus without having first obtained a license
therefor from the City Treasurer. Such license must be posted on the apparatus
concerned, Provided, that the operation or maintenance of pinball machines, not
otherwise failing under the category of gambling device, shall not be allowed within a
radius of two hundred (200) meters from any church, hospital, institution of learning
public market, plaza, and government buildings.

SEC. 774. Fees. There shall be paid for every license granted for the installation and
use of an apparatus provided in this chapter, an annual fee of P300 which is payable in
advance: Provided, that person-coin operated weighing or scale machines shall pay only
an annual fee of P12, payable in advance.

SEC. 2. This Ordinance shall take effect on its approval.

Enacted, March 19, 1954.
Approved, March 20, 1954.

It is further prayed in the complaint that the City Mayor and the Treasurer be compelled to issue
permits and licenses to the members of the said corporation upon compliance with the
provisions of the ordinance (No. 3347) enforced before the enactment of Ordinance No. 3628;
that after hearing, said ordinance he declared null and void, the writ of preliminary injunction be
made permanent, and that plaintiff be granted such other relief to which it may be entitled under
the law.

Acting upon this complaint, the lower court required plaintiff to file, as it did file, a bond in the
amount of P2,000 for the issuance of a writ of preliminary injunction to restrain the defendant
City Officials from enforcing the ordinance in question, and said writ was actually issued on April
1, 1954. Thereupon, Assistant City Fiscal filed on April 14, 1954, a motion to lift the writ of
preliminary injunction issued as well as a motion to dismiss on the ground that plaintiff has no
legal capacity to sue and that the complaint states no cause of action. Defendants argue that
the complaint does not state that plaintiff is the owner of any pinball machine to be affected by
the ordinance in question; on the contrary, it appears from the complaint that the real parties in
interest are the individual members of said organization whose names are not given. Such
being the case, plaintiff association cannot be in any way adversely affected by the enforcement
of the questioned ordinance, from which it follows that the complaint does not state a cause of

A supplement to the Motion to Dismiss and the Motion to lift the Preliminary Injunction was
subsequently filed on April 21, 1954, wherein defendants' counsel endeavors to substantiate its
previous contention by alleging, among others, that the ordinance subject of litigation is a valid
legislation and within the power of the Municipal Board to enact; that the power of the Board to
regulate slot machines is embodied in the Revised Charter of the City of Manila (section 18-(1)
of Republic Act No. 409); that the regulation of the operation and maintenance of this kind of
machine which they alleged to be inimical to the general welfare of the population especially the
school children, is a lawful exercise of the police power of the State (section 18-kk), Republic
Act No. 409); and that as it a discretionary function of the Mayor to deny or issue permits and
licenses, he cannot be compelled by mandamus to issue the same.

Upon defendants' motion, the hearing of the motion to dismiss was re-set for April 24, 1954, and
on that date the Court granted defendants' counsel a period of 5 days from April 26, 1954, to file
an answer to plaintiff's opposition to the motions to dismiss and to lift the preliminary injunction,
and another 5 days to plaintiff's counsel to reply, if necessary.

On May 7, 1954, plaintiff was served with a "Resolucion" dated April 30, 1954, issued by the trial
Judge, wherein the Court dismissed the complaint and dissolved the injunction issued thereby
on the ground that the City Mayor has discretionary power to issue or refuse the issuance of a
license or permit, declaring at the same time that Ordinance No. 3628 is valid and within the
power of the Municipal Board to enact. The motion for reconsideration filed by plaintiff having
been denied, the case was brought to us on appeal and in this instance plaintiff ascribes to the
lower Court the commission of the following errors:
1. In motu proprio resolving upon the constitutionality or Ordinance No. 3628 at said stage of the
proceeding (before defendants' answer and hearing on the merits), and consequently, in
dissolving the writ of preliminary injunction;

2. In finding the Mayor of Manila vested with discretionary powers to grant or refuse to issue
municipal licenses and permits, and that the same cannot be controlled by mandamus; and

3. In finding Ordinance No. 3628 valid and constitutional assuming that it had the power to do so
at such stage of the proceeding.

There is no dispute that the Municipal Board of the City of Manila passed Ordinance No. 3628
limiting the operation and maintenance of a certain kind of slot machine to areas not within the
radius of 200 hundred meters from any church, hospital, institution of learning, public market,
plaza and government buildings and that it increased the annual fee from P55 to P300 payable
in advance. It is likewise clear that at the expiration of the period allowed the parties within
which to file certain pleadings in connection with defendants' motion to dismiss, the Court
issued a "Resolucion" dated April 30, 1954, the dispositive part of which, translated into English,
reads as follows:

In view of the foregoing consideration the Court is of the opinion and consequently
declares Ordinance No. 3628 of the City of Manila valid and that the writ of preliminary
injunction issued by this Court shall be dissolved with costs against plaintiff.

It is to be stated in this connection that defendants did not file in time their answer to plaintiff's
opposition to their two motions, but on May 4, 1954, and that is undoubtedly the reason why the
Court prepared its Resolution before the lapse of plaintiff's period to reply if necessary" (which
was conditioned on defendants' pleading which the latter failed to submit in time), though it was
released thereafter, or on May 7, 1956. It is true that the trial Judge, instead of ruling on the
motion to dismiss on either of the two grounds stated therein, namely, lack of legal capacity to
sue and failure to state a cause of action, elected to ignore the same and dismissed the
complaint upon its own findings. However, it is to be remembered that it was only the motion to
dismiss that was set for hearing and that section 3, Rule 8 of the Rules of Court provides for the
manner in which such kind of motion may be resolved:

SEC. 3. Order. After hearing the Court may deny or grant the motion or allow
amendment of pleading, or may defer the hearing and determination of the motion until
the trial if the ground alleged therein does not appear to be indubitable.

By arriving at a conclusion upholding the constitutionality of the ordinance and stating the
reasons in support of such declaration, the lower court though in effect it passed upon the
merits of the case, also assumed the lack of sufficient cause of action on the part of the plaintiff.
Moreover, the question relative to the constitutionality of a statute or ordinance is one of law
which does not need to be supported by evidence.

In the complaint filed with the lower court, plaintiff alleged that it was a non-stock corporation
duly organized and existing in accordance with the laws of the Philippines. Subsequent inquires
from the Securities and Exchange Commission and the Bureau of Commerce disclosed that the
Recreation and Amusement Association of the Philippines, Inc., is not registered and does not
appear in the files of said Offices. Most probably, owners and operators of such pin-ball
machines met, put up their set of officers and thus an association was formed, after which they
merely folded their arms and exerted no further effort to effectuate the necessary registration
that would bestow juridicial personality upon it. The right to be and to act as a corporation is not
a natural or civil right any person; such right as well as the right to enjoy the immunities and
privileges resulting from incorporation constitute a franchise and a corporation, therefore cannot
be created except by or under a special authority from the state (Vol. II, Tolentino's
Commentaries and Jurisprudence on the Commercial Law of the Philippines, p. 734). When
there is no legal organization of a corporation, the association of a group of men for business or
other endeavors does not absorb the personality of the group and merge it into the personality
of another separate and independent entity which is not given corporate life by the mere
formation of the group. Such conglomeration of persons is incompetent to act as a corporation,
cannot create agents, or exercise by itself authority in its behalf. (See Fay vs. Noble, 7 Cushing
(Mass.) 188.)

Section 1-(c), Rule 8 of the Rules of Court provides for the grounds upon which an action may
be dismissed upon motion of defendant and one of them is "that the plaintiff has no legal
capacity to sue." The City Fiscal rightly capitalized on this basis because as far as the Court
was concerned, appellant herein, being an association not organized as a juridicial entity, did
not possess the personality to conduct or maintain an action. The term "lack of legal capacity to
sue" means either that the plaintiff does not have the necessary qualifications to appear in the
case . . . or when he does not have the character or representation which he claims, as, when
he is not a duly appointed executor or administrator of the estate he purports to represent, or
that the plaintiff is not a corporation duly registered in accordance with law. (I Moran's
Comments on the Rules of Court, p. 168, 1952 ed.)

It may be argued that under the law plaintiff could be considered as a civil association, but in
this case plaintiff-appellant does not claim to be a civil association but a corporation and as such
it has no capacity to sue.

If from the records of the case We shall find, as We do: (1) that plaintiff has no legal capacity to
sue; (2) that the complaint states no cause of action; and (3) that a proper and adequate
interpretation of section 18, paragraph (1) and (kk) of Republic Act No. 409, would lead Us to
conclude that Ordinance No. 3628 of the City of Manila is valid, would We be justified in
annuling or setting aside the order of the Court dismissing this case, just because it was issued
before the filing of defendants' answer and before hearing on the merits but after defendants
had submitted their motion to dismiss and argued maintaining the constitutionality of said
ordinance? On the strenght of the foregoing considerations, the answer is obviously in the

Wherefore, the order appealed from is hereby affirmed, with costs against appellant. It is so




This case involves two supposed transfers of the lot previously owned by the spouses
Cosio. The first transfer was a donation to petitioners alleged predecessors-in-interest in 1959
while the second transfer was through a contract of sale to respondents in 1980. A TCT was
later issued in the name of respondents. Claiming to be the alleged donees successors-in-
interest, petitioners filed a case for cancellation of title, quieting of ownership and possession,
declaratory relief and reconveyance with prayer for preliminary injunction and damages against
respondents. Respondents, on the other hand, argued that at the time of the donation,
petitioners predecessors-in-interest has no juridical personality to accept the donation because
it was not yet incorporated. Moreover, petitioners were not members of the local church then.
The RTC upheld the sale in favor of respondents, which was affirmed by the Court of
Appeals, on the ground that all the essential requisites of a contract were present and it also
applied the indefeasibility of title.

ISSUE: Whether or not the donation was void.

Yes, the donation was void because the local church had neither juridical personality nor
capacity to accept such gift since it was inexistent at the time it was made.
The Court denied petitioners contention that there exists a de facto corporation. While
there existed the old Corporation Law (Act 1459), a law under which the local church could have
been organized, petitioners admitted that they did not even attempt to incorporate at that time
nor the organization was registered at the Securities and Exchange Commission. Hence,
petitioners obviously could not have claimed succession to an entity that never came to exist.
And since some of the representatives of petitioner Seventh Day Adventist Conference Church
of Southern Philippines, Inc. were not even members of the local church then, it necessarily
follows that they could not even claim that the donation was particularly for them.

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 power.
While there existed the old Corporation Law (Act 1459), 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. 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. Petitioners themselves admitted
that at the time of the donation, they were not registered with the SEC, nor did they even
attempt to organize 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 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.

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

Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not
to favor the defective or non-existent corporation.[
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

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.

A thorough analysis and perusal, nonetheless, of the Deed of Absolute Sale

disclosed that it has the essential requisites of contracts pursuant to xxx Article
1318 of the Civil Code, except that the consideration of P2,000.00 is somewhat
insufficient for a [1,069-square meter] land. Would then this inadequacy of the
consideration render the contract invalid?

Article 1355 of the Civil Code provides:

Except in cases specified by law, lesion or inadequacy of cause
shall not invalidate a contract, unless there has been fraud,
mistake or undue influence.

No evidence [of fraud, mistake or undue influence] was adduced by [petitioners].

Well-entrenched is the rule that a Certificate of Title is generally a conclusive
evidence of [ownership] of the land. There is that strong and solid presumption that
titles were legally issued and that they are valid. 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. The title shall be received as evidence in all the
Courts and shall be conclusive as to all matters contained therein.

[This action was instituted almost seven years after the certificate of title in
respondents name was issued in 1980.]

According to Art. 1477 of the Civil Code, the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof. On this, the noted
author Arturo Tolentino had this to say:

The execution of [a] public instrument xxx transfers the ownership from
the vendor to the vendee who may thereafter exercise the rights of an owner
over the same.

Here, 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. TCT No. 4468 was thereafter issued and it remains in the name of SDA-


Petitioner Sawadjaan was an appraiser/investigator in the Philippine Amanah Bank (PAB) when
on the basis of his report, a credit line was granted to Compressed Air Machineries and
Equipment Corporation (CAMEC) by virtue of the two parcels of land it offered as collaterals.
Meanwhile, Congress passed a law which created Al-Amanah Investment Bank of the
Philippines (AIIBP) and repealed the law creating PAB, transferring all its assets, liabilities and
capital accounts to AIIBP. Later, AIIBP discovered that the collaterals were spurious, thus
conducted an investigation and found petitioner Sawadjaan at fault. Petitioner appealed before
the SC which ruled against him. Petitioner moved for a new trial claiming he recently discovered
that AIIBP had not yet adopted its corporate by-laws and since it failed to file within 60 days
from the passage of its law, it had forfeited its franchise or charter and thus has no legal
standing to initiate an administrative case. The motion was denied.
Whether or not the failure of AIIBP to file its by-laws within the period prescribed results to a
nullity of all actions and proceedings it has initiated.
Ruling: NO.
The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts business,
has shareholders, corporate officers, a board of directors, assets, and personnel. It is, in fact,
here represented by the Office of the Government Corporate Counsel, the principal law office of
government-owned corporations, one of which is respondent bank. At the very least, by its
failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation whose
right to exercise corporate powers may not be inquired into collaterally in any private suit to
which such corporations may be a party.
Moreover, a corporation which has failed to file its by-laws within the prescribed period does
not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the
Certificate of Registration of Corporations, details the procedures and remedies that may be
availed of before an order of revocation can be issued. There is no showing that such a
procedure has been initiated in this case.
Pioneer Insurance & Surety Corporation vs Court of Appeals

175 SCRA 668 Business Organization Corporation Law When De Facto Partnership Does Not Exist
Jacob Lim was the owner of Southern Air Lines, a single proprietorship. In 1965, Lim convinced
Constancio Maglana, Modesto Cervantes, Francisco Cervantes, and Border Machinery and Heavy
Equipment Company (BORMAHECO) to contribute funds and to buy two aircrafts which would form
part a corporation which will be the expansion of Southern Air Lines. Maglana et al then contributed and
delivered money to Lim.
But instead of using the money given to him to pay in full the aircrafts, Lim, without the knowledge of
Maglana et al, made an agreement with Pioneer Insurance for the latter to insure the two aircrafts which
were brought in installment from Japan Domestic Airlines (JDA) using said aircrafts as security. So when
Lim defaulted from paying JDA, the two aircrafts were foreclosed by Pioneer Insurance.
It was established that no corporation was formally formed between Lim and Maglana et al.
ISSUE: Whether or not Maglana et al must share in the loss as general partners.
HELD: No. There was no de facto partnership. Ordinarily, when co-investors agreed to do business
through a corporation but failed to incorporate, a de facto partnership would have been formed, and as
such, all must share in the losses and/or gains of the venture in proportion to their contribution. But in this
case, it was shown that Lim did not have the intent to form a corporation with Maglana et al. This can be
inferred from acts of unilaterally taking out a surety from Pioneer Insurance and not using the funds he
got from Maglana et al. The record shows that Lim was acting on his own and not in behalf of his other
would-be incorporators in transacting the sale of the airplanes and spare parts.

We first state the principles.
While it has been held that as between themselves the rights of the stockholders in a
defectively incorporated association should be governed by the supposed charter and the laws of
the state relating thereto and not by the rules governing partners (Cannon v. Brush Electric Co.,
54 A. 121, 96 Md. 446, 94 Am. S.R. 584), it is ordinarily held that persons who attempt, but fail,
to form a corporation and who carry on business under the corporate name occupy the position of
partners inter se (Lynch v. Perryman, 119 P. 229, 29 Okl. 615, Ann. Cas. 1913A 1065). Thus,
where persons associate themselves together under articles to purchase property to carry on a
business, and their organization is so defective as to come short of creating a corporation within
the statute, they become in legal effect partners inter se, and their rights as members of the
company to the property acquired by the company will be recognized (Smith v. Schoodoc Pond
Packing Co., 84 A. 268,109 Me. 555; Whipple v. Parker, 29 Mich. 369). So, where certain
persons associated themselves as a corporation for the development of land for irrigation
purposes, and each conveyed land to the corporation, and two of them contracted to pay a third
the difference in the proportionate value of the land conveyed by him, and no stock was ever
issued in the corporation, it was treated as a trustee for the associates in an action between them
for an accounting, and its capital stock was treated as partnership assets, sold, and the proceeds
distributed among them in proportion to the value of the property contributed by each (Shorb v.
Beaudry, 56 Cal. 446). However, such a relation does not necessarily exist, for ordinarily persons
cannot be made to assume the relation of partners, as between themselves, when their purpose is
that no partnership shall exist (London Assur. Corp. v. Drennen, Minn., 6 S.Ct. 442, 116 U.S.
461, 472, 29 L.Ed. 688), and it should be implied only when necessary to do justice between the
parties; thus, one who takes no part except to subscribe for stock in a proposed corporation
which is never legally formed does not become a partner with other subscribers who engage in
business under the name of the pretended corporation, so as to be liable as such in an action for
settlement of the alleged partnership and contribution (Ward v. Brigham, 127 Mass. 24). A
partnership relation between certain stockholders and other stockholders, who were also directors,
will not be implied in the absence of an agreement, so as to make the former liable to contribute
for payment of debts illegally contracted by the latter (Heald v. Owen, 44 N.W. 210, 79 Iowa 23)

In the instant case, it is to be noted that the petitioner was declared non-suited for his failure to
appear during the pretrial despite notification. In his answer, the petitioner denied having received any
amount from respondents Bormaheco, the Cervanteses and Maglana. The trial court and the appellate
court, however, found through Exhibit 58, that the petitioner received the amount of P151,000.00
representing the participation of Bormaheco and Atty. Constancio B. Maglana in the ownership of the
subject airplanes and spare parts. The record shows that defendant Maglana gave P75,000.00 to petitioner
Jacob Lim thru the Cervanteses.

It is therefore clear that the petitioner never had the intention to form a corporation with the
respondents despite his representations to them. This gives credence to the cross-claims of the
respondents to the effect that they were induced and lured by the petitioner to make contributions to
a proposed corporation which was never formed because the petitioner reneged on their agreement.
Maglana alleged in his cross-claim:

Applying therefore the principles of law earlier cited to the facts of the case, necessarily, no de
facto partnership was created among the parties which would entitle the petitioner to a
reimbursement of the supposed losses of the proposed corporation. The record shows that the
petitioner was acting on his own and not in behalf of his other would-be incorporators in transacting the
sale of the airplanes and spare parts.