MANUELA VDA.

DE SALVATIERRA VS LORENZO GARLITOS

DOCTRINE: Bordado Doctrine – When Not Applicable

FACTS:
In 1954, Manuela Vda. De Salvatierra entered into a lease contract with Philippine Fibers Producers
Co., Inc. (PFPC). PFPC was represented by its president Segundino Refuerzo. It was agreed that Manuela shall
lease her land to PFPC in exchange of rental payments plus shares from the sales of crops.

However, PFPC failed to comply with its obligations and so in 1955, Manuela sued PFPC and she won.
An order was issued by Judge Lorenzo Garlitos of CFI Leyte ordering the execution of the judgment against
Refuerzo‘s property (there being no property under PFPC). Refuerzo moved for reconsideration on the
ground that he should not be held personally liable because he merely signed the lease contract in his official
capacity as president of PFPC. Garlitos granted Refuerzo‘s motion.

Manuela assailed the decision of the judge on the ground that she sued PFPC without impleading
Refuerzo because she initially believed that PFPC was a legitimate corporation. However, during trial, she
found out that PFPC was not actually registered with the SEC (Tanga kasi) hence Refuerzo should be
personally liable.

ISSUE: W/N Manuela is correct.

HELD/RATIONALE: Yes.
It is true that as a general rule, the corporation has a personality separate and distinct from its incorporators
and as such the incorporators cannot be held personally liable for the obligations of the corporation.

However, this doctrine is not applicable to unincorporated associations. The reason behind this doctrine is
obvious: Since an organization which before the law is nonexistent has no personality and would be
incompetent to act and appropriate for itself the powers and attributes of a corporation as provided by law;

It cannot create agents or confer authority on another to act on its behalf, thus, those who act or purport to
act as its representatives or agents do so without authority and at their own risk.

In this case, Refuerzo was the moving spirit behind PFPC. As such, his liability cannot be limited or restricted
that imposed upon [would-be] 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.