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Paz v. New International Environmental Universality, Inc., G . R. No .

203993,April20,2015

DOCTRINE/S:

Section 21 of the Corporation Code explicitly provides that one who assumes an
obligation to an ostensible corporation, as such, cannot resist performance thereof
on the ground that there was in fact no corporation. (Doctrine of Estoppel)

FACTS:

Priscillo Paz, entered into a MOA with Captain Allan J. Clarke, president of
International Environmental University , for the use of the aircraft hangar
space at the said airport exclusively for company aircraft/helicopter for a
period of four years, unless pre-terminated with 6-months notice.

By letters to MR ALLAN J. CLARK, International Environmental


Universality Inc. , Paz threatened to cancel the contract since the company
was using it to park trucks and equipments instead of aircraft. More letters
were sent demanding compliance with the MOA, to no avail.

Paz then caused disconnection of electric and telephone lines of


respondents premises; and ordered security guards to prevent respondents
employees from entering the premises - without giving respondent the 6-
month notice as required under the MOA

Respondent then filed an action for breach of contract against Paz,


alleging that his acts violated the terms of the MOA

In his answer, Paz alleged that the company had no cause of action since
he dealt with Mr. Allan J. Clark in his personal capacity; there was no need to
wait for the expiration of the contract since the company was performing high
risk works in the leased premises and the six-month notice was given thru his
letters given to Mr. Allan J. Clarke.

RTC rendered judgment in favour of the corporation

CA dismissed Priscillos appeal, ruling that, while there was no corporate


entity at the time of the
execution of the MOA on March 1, 2000 when Capt. Clarke signed as
President of International Environmental University, petitioner is
nonetheless estopped from denying that he had contracted with respondent
as a corporation, having recognized the latter as the Second Party in the
MOA that will use the hangar space exclusively for company aircraft/
helicopter.

Paz elevated his case to the SC, contending that case should be
dismissed for failure to implead Allan J. Clarke, and lack of legal capacity of
the corporation.
ISSUE/S:
(1) WON Capt. Clarke should have been impleaded in the case as an
indispensable party? (2) WON there was breach of contract on the part of
petitioner?
HELD:
(1) NO. Capt. Clarke was not an indispensable party because he was merely
an agent of respondent company. While Capt. Clarkes name and signature
appeared on the MOA, his participation was, nonetheless, limited to being a
representative of respondent. As a mere representative, Capt. Clarke
acquired no rights whatsoever, nor did he incur any liabilities, arising from the
contract between petitioner and respondent. Therefore, he was not an
indispensable party to the case at bar.
CA had correctly pointed out that, from the very language itself of the MOA
entered into by petitioner whereby he obligated himself to allow the use of the
hangar space "for company aircraft/helicopter," petitioner cannot deny that he
contracted with respondent. Petitioner further acknowledged this fact in his
final demand letter where he reiterated and strongly demanded the
respondent to immediately vacate the hangar space his "company is
occupying/utilizing
Section 21 of the Corporation Code explicitly provides that one who assumes
an obligation to an ostensible corporation, as such, cannot resist
performance thereof on the ground that there was in fact no corporation.
Clearly, petitioner is bound by his obligation under the MOA not only on
estoppel but by express provision of law. Courts have no power to relieve
parties from obligations they voluntarily assumed, simply because their
contracts turn out to be disastrous deals or unwise investments.

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(2) YES. Petitioner is liable for breach of contract for effectively evicting respondent
from the leased premises even before the expiration of the term of the lease.1 If it
were true that respondent was violating the terms and conditions of the lease,
"[petitioner] should have gone to court to make the [former] refrain from its 'illegal'
activities or seek rescission of the [MOA], rather than taking the law into his own
hands."