Republic of the Philippines Sometime in 1988, the officers of the LGVHAI tried to register its by-

SUPREME COURT
Manila
SECOND DIVISION
 
G.R. No. 117188 August 7, 1997
LOYOLA GRAND VILLAS HOMEOWNERS (SOUTH)
ASSOCIATION, INC., petitioner,
vs.
HON. COURT OF APPEALS, HOME INSURANCE AND
GUARANTY CORPORATION, EMDEN ENCARNACION and
HORATIO AYCARDO, respondents.
ROMERO, J.:
laws. They failed to do so. 2 To the officers' consternation, they
discovered that there were two other organizations within the
subdivision — the North Association and the South Association.
According to private respondents, a non-resident and Soliven himself,
respectively headed these associations. They also discovered that
these associations had five (5) registered homeowners each who
were also the incorporators, directors and officers thereof. None of the
members of the LGVHAI was listed as member of the North
Association while three (3) members of LGVHAI were listed as
members of the South Association.3 The North Association was
registered with the HIGC on February 13, 1989 under Certificate of
Registration No. 04-1160 covering Phases West II, East III, West III
and East IV. It submitted its by-laws on December 20, 1988.

May the failure of a corporation to file its by-laws within one month
from the date of its incorporation, as mandated by Section 46 of the
Corporation Code, result in its automatic dissolution?
This is the issue raised in this petition for review on certiorari of the
Decision1 of the Court of Appeals affirming the decision of the Home
Insurance and Guaranty Corporation (HIGC). This quasi-judicial body
recognized Loyola Grand Villas Homeowners Association (LGVHA) as
the sole homeowners' association in Loyola Grand Villas, a duly
registered subdivision in Quezon City and Marikina City that was
owned and developed by Solid Homes, Inc. It revoked the certificates
of registration issued to Loyola Grand Villas homeowners (North)
Association Incorporated (the North Association for brevity) and
Loyola Grand Villas Homeowners (South) Association Incorporated
(the South Association).
LGVHAI was organized on February 8, 1983 as the association of
homeowners and residents of the Loyola Grand Villas. It was
registered with the Home Financing Corporation, the predecessor of
herein respondent HIGC, as the sole homeowners' organization in the
said subdivision under Certificate of Registration No. 04-197. It was
organized by the developer of the subdivision and its first president
was Victorio V. Soliven, himself the owner of the developer. For
unknown reasons, however, LGVHAI did not file its corporate by-laws.
In July, 1989, when Soliven inquired about the status of LGVHAI, Atty.
Joaquin A. Bautista, the head of the legal department of the HIGC,
informed him that LGVHAI had been automatically dissolved for two
reasons. First, it did not submit its by-laws within the period required
by the Corporation Code and, second, there was non-user of
corporate charter because HIGC had not received any report on the
association's activities. Apparently, this information resulted in the
registration of the South Association with the HIGC on July 27, 1989
covering Phases West I, East I and East II. It filed its by-laws on July
26, 1989.
These developments prompted the officers of the LGVHAI to lodge a
complaint with the HIGC. They questioned the revocation of LGVHAI's
certificate of registration without due notice and hearing and
concomitantly prayed for the cancellation of the certificates of
registration of the North and South Associations by reason of the
earlier issuance of a certificate of registration in favor of LGVHAI.
On January 26, 1993, after due notice and hearing, private
respondents obtained a favorable ruling from HIGC Hearing Officer
Danilo C. Javier who disposed of HIGC Case No. RRM-5-89 as
follows:
WHEREFORE, judgment is hereby rendered recognizing the Loyola
Grand Villas Homeowners Association, Inc., under Certificate of
1
Registration No. 04-197 as the duly registered and existing
homeowners association for Loyola Grand Villas homeowners, and
declaring the Certificates of Registration of Loyola Grand Villas
Homeowners (North) Association, Inc. and Loyola Grand Villas
Homeowners (South) Association, Inc. as hereby revoked or
cancelled; that the receivership be terminated and the Receiver is
hereby ordered to render an accounting and turn-over to Loyola
Grand Villas Homeowners Association, Inc., all assets and records of
the Association now under his custody and possession.
The South Association appealed to the Appeals Board of the HIGC. In
its Resolution of September 8, 1993, the Board 4 dismissed the appeal
for lack of merit.
Rebuffed, the South Association in turn appealed to the Court of
Appeals, raising two issues. First, whether or not LGVHAI's failure to
file its by-laws within the period prescribed by Section 46 of the
Corporation Code resulted in the automatic dissolution of
LGVHAI. Second, whether or not two homeowners' associations may
be authorized by the HIGC in one "sprawling subdivision." However, in
the Decision of August 23, 1994 being assailed here, the Court of
Appeals affirmed the Resolution of the HIGC Appeals Board.
In resolving the first issue, the Court of Appeals held that under the
Corporation Code, a private corporation commences to have
corporate existence and juridical personality from the date the
Securities and Exchange Commission (SEC) issues a certificate of
incorporation under its official seal. The requirement for the filing of
by-laws under Section 46 of the Corporation Code within one month
from official notice of the issuance of the certificate of incorporation
presupposes that it is already incorporated, although it may file its by-
laws with its articles of incorporation. Elucidating on the effect of a
delayed filing of by-laws, the Court of Appeals said:
We also find nothing in the provisions cited by the petitioner, i.e.,
Section 46 and 22, Corporation Code, or in any other provision of the
Code and other laws which provide or at least imply that failure to file
the by-laws results in an automatic dissolution of the corporation.
While Section 46, in prescribing that by-laws must be adopted within
the period prescribed therein, may be interpreted as a mandatory
provision, particularly because of the use of the word "must," its
meaning cannot be stretched to support the argument that automatic
dissolution results from non-compliance.
We realize that Section 46 or other provisions of the Corporation
Code are silent on the result of the failure to adopt and file the by-laws
within the required period. Thus, Section 46 and other related
provisions of the Corporation Code are to be construed with Section 6
(1) of P.D. 902-A. This section empowers the SEC to suspend or
revoke certificates of registration on the grounds listed therein. Among
the grounds stated is the failure to file by-laws (see also II Campos:
The Corporation Code, 1990 ed., pp. 124-125). Such suspension or
revocation, the same section provides, should be made upon proper
notice and hearing. Although P.D. 902-A refers to the SEC, the same
principles and procedures apply to the public respondent HIGC as it
exercises its power to revoke or suspend the certificates of
registration or homeowners association. (Section 2 [a], E.O. 535,
series 1979, transferred the powers and authorities of the SEC over
homeowners associations to the HIGC.)
We also do not agree with the petitioner's interpretation that Section
46, Corporation Code prevails over Section 6, P.D. 902-A and that the
latter is invalid because it contravenes the former. There is no basis
for such interpretation considering that these two provisions are not
inconsistent with each other. They are, in fact, complementary to each
other so that one cannot be considered as invalidating the other.
The Court of Appeals added that, as there was no showing that the
registration of LGVHAI had been validly revoked, it continued to be
the duly registered homeowners' association in the Loyola Grand
Villas. More importantly, the South Association did not dispute the fact
that LGVHAI had been organized and that, thereafter, it transacted
business within the period prescribed by law.
On the second issue, the Court of Appeals reiterated its previous
ruling 5 that the HIGC has the authority to order the holding of a
referendum to determine which of two contending associations should
represent the entire community, village or subdivision.
2
Undaunted, the South Association filed the instant petition for review
on certiorari. It elevates as sole issue for resolution the first issue it
had raised before the Court of Appeals, i.e., whether or not the
LGVHAI's failure to file its by-laws within the period prescribed by
Section 46 of the Corporation Code had the effect of automatically
dissolving the said corporation.
Petitioner contends that, since Section 46 uses the word "must" with
respect to the filing of by-laws, noncompliance therewith would result
in "self-extinction" either due to non-occurrence of a suspensive
condition or the occurrence of a resolutory condition "under the
hypothesis that (by) the issuance of the certificate of registration alone
the corporate personality is deemed already formed." It asserts that
the Corporation Code provides for a "gradation of violations of
requirements." Hence, Section 22 mandates that the corporation must
be formally organized and should commence transaction within two
years from date of incorporation. Otherwise, the corporation would be
deemed dissolved. On the other hand, if the corporation commences
operations but becomes continuously inoperative for five years, then it
may be suspended or its corporate franchise revoked.
Petitioner concedes that Section 46 and the other provisions of the
Corporation Code do not provide for sanctions for non-filing of the by-
laws. However, it insists that no sanction need be provided "because
the mandatory nature of the provision is so clear that there can be no
doubt about its being an essential attribute of corporate birth." To
petitioner, its submission is buttressed by the facts that the period for
compliance is "spelled out distinctly;" that the certification of the
SEC/HIGC must show that the by-laws are not inconsistent with the
Code, and that a copy of the by-laws "has to be attached to the
articles of incorporation." Moreover, no sanction is provided for
because "in the first place, no corporate identity has been completed."
Petitioner asserts that "non-provision for remedy or sanction is itself
the tacit proclamation that non-compliance is fatal and no corporate
existence had yet evolved," and therefore, there was "no need to
proclaim its demise." 6 In a bid to convince the Court of its arguments,
petitioner stresses that:
. . . the word MUST is used in Sec. 46 in its universal literal meaning
and corollary human implication — its compulsion is integrated in its
very essence — MUST is always enforceable by the inevitable
consequence — that is, "OR ELSE". The use of the word MUST in
Sec. 46 is no exception — it means file the by-laws within one month
after notice of issuance of certificate of registration OR ELSE. The OR
ELSE, though not specified, is inextricably a part of MUST . Do this or
if you do not you are "Kaput". The importance of the by-laws to
corporate existence compels such meaning for as decreed the by-
laws is "the government" of the corporation. Indeed, how can the
corporation do any lawful act as such without by-laws. Surely, no law
is indeed to create chaos. 7
Petitioner asserts that P.D. No. 902-A cannot exceed the scope and
power of the Corporation Code which itself does not provide sanctions
for non-filing of by-laws. For the petitioner, it is "not proper to assess
the true meaning of Sec. 46 . . . on an unauthorized provision on such
matter contained in the said decree."
In their comment on the petition, private respondents counter that the
requirement of adoption of by-laws is not mandatory. They point to
P.D. No. 902-A as having resolved the issue of whether said
requirement is mandatory or merely directory. Citing Chung Ka Bio
v. Intermediate Appellate Court, 8 private respondents contend that
Section 6(I) of that decree provides that non-filing of by-laws is only a
ground for suspension or revocation of the certificate of registration of
corporations and, therefore, it may not result in automatic dissolution
of the corporation. Moreover, the adoption and filing of by-laws is a
condition subsequent which does not affect the corporate personality
of a corporation like the LGVHAI. This is so because Section 9 of the
Corporation Code provides that the corporate existence and juridical
personality of a corporation begins from the date the SEC issues a
certificate of incorporation under its official seal. Consequently, even if
the by-laws have not yet been filed, a corporation may be considered
a de facto corporation. To emphasize the fact the LGVHAI was
registered as the sole homeowners' association in the Loyola Grand
Villas, private respondents point out that membership in the LGVHAI
was an "unconditional restriction in the deeds of sale signed by lot
buyers."
In its reply to private respondents' comment on the petition, petitioner
reiterates its argument that the word " must" in Section 46 of the
3
Corporation Code is mandatory. It adds that, before the ruling
in Chung Ka Bio v. Intermediate Appellate Court could be applied to
this case, this Court must first resolve the issue of whether or not the
provisions of P.D. No. 902-A prescribing the rules and regulations to
implement the Corporation Code can "rise above and change" the
substantive provisions of the Code.
The pertinent provision of the Corporation Code that is the focal point
of controversy in this case states:
Sec. 46. Adoption of by-laws. — Every corporation formed under this
Code, must within one (1) month after receipt of official notice of the
issuance of its certificate of incorporation by the Securities and
Exchange Commission, adopt a code of by-laws for its government
not inconsistent with this Code. For the adoption of by-laws by the
corporation, the affirmative vote of the stockholders representing at
least a majority of the outstanding capital stock, or of at least a
majority of the members, in the case of non-stock corporations, shall
be necessary. The by-laws shall be signed by the stockholders or
members voting for them and shall be kept in the principal office of the
corporation, subject to the stockholders or members voting for them
and shall be kept in the principal office of the corporation, subject to
inspection of the stockholders or members during office hours; and a
copy thereof, shall be filed with the Securities and Exchange
Commission which shall be attached to the original articles of
incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws
may be adopted and filed prior to incorporation; in such case, such
by-laws shall be approved and signed by all the incorporators and
submitted to the Securities and Exchange Commission, together with
the articles of incorporation.
In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-
laws are not inconsistent with this Code.
The Securities and Exchange Commission shall not accept for filing
the by-laws or any amendment thereto of any bank, banking
institution, building and loan association, trust company, insurance
company, public utility, educational institution or other special
corporations governed by special laws, unless accompanied by a
certificate of the appropriate government agency to the effect that
such by-laws or amendments are in accordance with law.
As correctly postulated by the petitioner, interpretation of this
provision of law begins with the determination of the meaning and
import of the word "must" in this section Ordinarily, the word "must"
connotes an imperative act or operates to impose a duty which may
be enforced. 9 It is synonymous with "ought" which connotes
compulsion or mandatoriness. 10 However, the word "must" in a
statute, like "shall," is not always imperative. It may be consistent with
an exercise of discretion. In this jurisdiction, the tendency has been to
interpret "shall" as the context or a reasonable construction of the
statute in which it is used demands or requires. 11 This is equally true
as regards the word "must." Thus, if the languages of a statute
considered as a whole and with due regard to its nature and object
reveals that the legislature intended to use the words "shall" and
"must" to be directory, they should be given that meaning.12
In this respect, the following portions of the deliberations of the
Batasang Pambansa No. 68 are illuminating:
MR. FUENTEBELLA. Thank you, Mr. Speaker.
On page 34, referring to the adoption of by-laws, are we made
to understand here, Mr. Speaker, that by-laws must
immediately be filed within one month after the issuance? In
other words, would this be mandatory or directory in
character?
MR. MENDOZA. This is mandatory.
MR. FUENTEBELLA. It being mandatory, Mr. Speaker, what
would be the effect of the failure of the corporation to file these
by-laws within one month?
MR. MENDOZA. There is a provision in the latter part of the
Code which identifies and describes the consequences of
4
 violations of any provision of this Code. One such
consequences is the dissolution of the corporation for its
inability, or perhaps, incurring certain penalties.
MR. FUENTEBELLA. But it will not automatically amount to a
dissolution of the corporation by merely failing to file the by-
laws within one month. Supposing the corporation was late,
say, five days, what would be the mandatory penalty?
MR. MENDOZA. I do not think it will necessarily result in the
automatic or ipso facto dissolution of the corporation. Perhaps,
as in the case, as you suggested, in the case of El Hogar
Filipino where a quo warranto action is brought, one takes into
account the gravity of the violation committed. If the by-laws
were late — the filing of the by-laws were late by, perhaps, a
day or two, I would suppose that might be a tolerable delay,
but if they are delayed over a period of months — as is
happening now — because of the absence of a clear
requirement that by-laws must be completed within a specified
period of time, the corporation must suffer certain
consequences. 13
This exchange of views demonstrates clearly that automatic corporate
dissolution for failure to file the by-laws on time was never the
intention of the legislature. Moreover, even without resorting to the
records of deliberations of the Batasang Pambansa, the law itself
provides the answer to the issue propounded by petitioner.
Taken as a whole and under the principle that the best interpreter of a
statute is the statute itself (optima statuli interpretatix est ipsum
statutum), 14 Section 46 aforequoted reveals the legislative intent to
attach a directory, and not mandatory, meaning for the word "must" in
the first sentence thereof. Note should be taken of the second
paragraph of the law which allows the filing of the by-laws
even prior to incorporation. This provision in the same section of the
Code rules out mandatory compliance with the requirement of filing
the by-laws "within one (1) month after receipt of official notice of the
issuance of its certificate of incorporation by the Securities and
Exchange Commission." It necessarily follows that failure to file the
by-laws within that period does not imply the "demise" of the
corporation. By-laws may be necessary for the "government" of the
corporation but these are subordinate to the articles of incorporation
as well as to the Corporation Code and related statutes.15 There are in
fact cases where by-laws are unnecessary to corporate existence or
to the valid exercise of corporate powers, thus:
In the absence of charter or statutory provisions to the contrary, by-
laws are not necessary either to the existence of a corporation or to
the valid exercise of the powers conferred upon it, certainly in all
cases where the charter sufficiently provides for the government of
the body; and even where the governing statute in express terms
confers upon the corporation the power to adopt by-laws, the failure to
exercise the power will be ascribed to mere nonaction which will not
render void any acts of the corporation which would otherwise be
valid.  16 (Emphasis supplied.)
As Fletcher aptly puts it:
It has been said that the by-laws of a corporation are the rule
of its life, and that until by-laws have been adopted the
corporation may not be able to act for the purposes of its
creation, and that the first and most important duty of the
members is to adopt them. This would seem to follow as a
matter of principle from the office and functions of by-laws.
Viewed in this light, the adoption of by-laws is a matter of
practical, if not one of legal, necessity. Moreover, the peculiar
circumstances attending the formation of a corporation may
impose the obligation to adopt certain by-laws, as in the case
of a close corporation organized for specific purposes. And the
statute or general laws from which the corporation derives its
corporate existence may expressly require it to make and
adopt by-laws and specify to some extent what they shall
contain and the manner of their adoption. The mere fact,
however, of the existence of power in the corporation to adopt
by-laws does not ordinarily and of necessity make the exercise
of such power essential to its corporate life, or to the validity of
any of its acts.  17
Although the Corporation Code requires the filing of by-laws, it does
not expressly provide for the consequences of the non-filing of the
5
same within the period provided for in Section 46. However, such
omission has been rectified by Presidential Decree No. 902-A, the
pertinent provisions on the jurisdiction of the SEC of which state:
Sec. 6. In order to effectively exercise such jurisdiction, the
Commission shall possess the following powers:
xxx xxx xxx
(1) To suspend, or revoke, after proper notice and hearing, the
franchise or certificate of registration of
corporations, partnerships or associations, upon any of the
grounds provided by law, including the following:
xxx xxx xxx
5. Failure to file by-laws within the required period;
xxx xxx xxx
In the exercise of the foregoing authority and jurisdiction of the
Commission or by a Commissioner or by such other bodies,
boards, committees and/or any officer as may be created or
designated by the Commission for the purpose. The decision,
ruling or order of any such Commissioner, bodies, boards,
committees and/or officer may be appealed to the Commission
sitting en banc within thirty (30) days after receipt by the
appellant of notice of such decision, ruling or order. The
Commission shall promulgate rules of procedures to govern
the proceedings, hearings and appeals of cases falling with its
jurisdiction.
The aggrieved party may appeal the order, decision or ruling
of the Commission sitting en banc to the Supreme Court by
petition for review in accordance with the pertinent provisions
of the Rules of Court.
Even under the foregoing express grant of power and authority, there
can be no automatic corporate dissolution simply because the
incorporators failed to abide by the required filing of by-laws embodied
in Section 46 of the Corporation Code. There is no outright "demise"
of corporate existence. Proper notice and hearing are cardinal
components of due process in any democratic institution, agency or
society. In other words, the incorporators must be given the chance to
explain their neglect or omission and remedy the same.
That the failure to file by-laws is not provided for by the Corporation
Code but in another law is of no moment. P.D. No. 902-A, which took
effect immediately after its promulgation on March 11, 1976, is very
much apposite to the Code. Accordingly, the provisions abovequoted
supply the law governing the situation in the case at bar, inasmuch as
the Corporation Code and P.D. No. 902-A are statutes in pari
materia. Interpretare et concordare legibus est optimus interpretandi.
Every statute must be so construed and harmonized with other
statutes as to form a uniform system of jurisprudence. 18
As the "rules and regulations or private laws enacted by the
corporation to regulate, govern and control its own actions, affairs and
concerns and its stockholders or members and directors and officers
with relation thereto and among themselves in their relation to
it," 19 by-laws are indispensable to corporations in this jurisdiction.
These may not be essential to corporate birth but certainly, these are
required by law for an orderly governance and management of
corporations. Nonetheless, failure to file them within the period
required by law by no means tolls the automatic dissolution of a
corporation.
In this regard, private respondents are correct in relying on the
pronouncements of this Court in Chung Ka Bio v. Intermediate
Appellate Court, 20 as follows:
. . . . Moreover, failure to file the by-laws does not
automatically operate to dissolve a corporation but is now
considered only a ground for such dissolution.
Section 19 of the Corporation Law, part of which is now
Section 22 of the Corporation Code, provided that the powers
of the corporation would cease if it did not formally organize
and commence the transaction of its business or the
6
continuation of its works within two years from date of its
incorporation. Section 20, which has been reproduced with
some modifications in Section 46 of the Corporation Code,
expressly declared that "every corporation formed under this
Act, must within one month after the filing of the articles of
incorporation with the Securities and Exchange Commission,
adopt a code of by-laws." Whether this provision should be
given mandatory or only directory effect remained a
controversial question until it became academic with the
adoption of PD 902-A. Under this decree, it is now clear that
the failure to file by-laws within the required period is only a
ground for suspension or revocation of the certificate of
registration of corporations.
Non-filing of the by-laws will not result in automatic dissolution
of the corporation. Under Section 6(I) of PD 902-A, the SEC is
empowered to "suspend or revoke, after proper notice and
hearing, the franchise or certificate of registration of a
corporation" on the ground inter alia of "failure to file by-laws
within the required period." It is clear from this provision that
there must first of all be a hearing to determine the existence
of the ground, and secondly, assuming such finding, the
penalty is not necessarily revocation but may be only
suspension of the charter. In fact, under the rules and
regulations of the SEC, failure to file the by-laws on time may
be penalized merely with the imposition of an administrative
fine without affecting the corporate existence of the erring firm.
Corporation Code, must be adopted "within one month after
receipt of official notice of the issuance of its certificate of
incorporation." 21
That the corporation involved herein is under the supervision of the
HIGC does not alter the result of this case. The HIGC has taken over
the specialized functions of the former Home Financing Corporation
by virtue of Executive Order No. 90 dated December 17, 1989. 22 With
respect to homeowners associations, the HIGC shall "exercise all the
powers, authorities and responsibilities that are vested on the
Securities and Exchange Commission . . . , the provision of Act 1459,
as amended by P.D. 902-A, to the contrary notwithstanding." 23
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED and the questioned Decision of the Court of Appeals
AFFIRMED. This Decision is immediately executory. Costs against
petitioner.
SO ORDERED.
Regalado, Puno and Mendoza, JJ., concur.
Torres, Jr., J., is on leave.

It should be stressed in this connection that substantial

compliance with conditions subsequent will suffice to perfect
corporate personality. Organization and commencement of
transaction of corporate business are but conditions
subsequent and not prerequisites for acquisition of corporate
personality. The adoption and filing of by-laws is also a
condition subsequent. Under Section 19 of the Corporation
Code, a Corporation commences its corporate existence and
juridical personality and is deemed incorporated from the date
the Securities and Exchange Commission issues certificate of
incorporation under its official seal. This may be done even
before the filing of the by-laws, which under Section 46 of the
7
 EN BANC
G.R. No. 141735               June 8, 2005
SAPPARI K. SAWADJAAN, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE CIVIL SERVICE
COMMISSION and AL-AMANAH INVESTMENT BANK OF THE
PHILIPPINES, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court of
the Decision1 of the Court of Appeals of 30 March 1999 affirming
Resolutions No. 94-4483 and No. 95-2754 of the Civil Service
Commission (CSC) dated 11 August 1994 and 11 April 1995,
respectively, which in turn affirmed Resolution No. 2309 of the Board
of Directors of the Al-Amanah Islamic Investment Bank of the
Philippines (AIIBP) dated 13 December 1993, finding petitioner guilty
of Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and dismissing him from
the service, and its Resolution2 of 15 December 1999 dismissing
petitioner’s Motion for Reconsideration.
The records show that petitioner Sappari K. Sawadjaan was among
the first employees of the Philippine Amanah Bank (PAB) when it was
created by virtue of Presidential Decree No. 264 on 02 August 1973.
He rose through the ranks, working his way up from his initial
designation as security guard, to settling clerk, bookkeeper, credit
investigator, project analyst, appraiser/ inspector, and eventually,
loans analyst.3
In February 1988, while still designated as appraiser/investigator,
Sawadjaan was assigned to inspect the properties offered as
collaterals by Compressed Air Machineries and Equipment
Corporation (CAMEC) for a credit line of Five Million Pesos
(P5,000,000.00). The properties consisted of two parcels of land
covered by Transfer Certificates of Title (TCTs) No. N-130671 and
No. C-52576. On the basis of his Inspection and Appraisal
Report,4 the PAB granted the loan application. When the loan matured
on 17 May 1989, CAMEC requested an extension of 180 days, but
was granted only 120 days to repay the loan.5
In the meantime, Sawadjaan was promoted to Loans Analyst I on 01
July 1989.6
In January 1990, Congress passed Republic Act 6848 creating the
AIIBP and repealing P.D. No. 264 (which created the PAB). All assets,
liabilities and capital accounts of the PAB were transferred to the
AIIBP,7 and the existing personnel of the PAB were to continue to
discharge their functions unless discharged.8 In the ensuing
reorganization, Sawadjaan was among the personnel retained by the
AIIBP.
When CAMEC failed to pay despite the given extension, the bank,
now referred to as the AIIBP, discovered that TCT No. N-130671 was
spurious, the property described therein non-existent, and that the
property covered by TCT No. C-52576 had a prior existing mortgage
in favor of one Divina Pablico.
On 08 June 1993, the Board of Directors of the AIIBP created an
Investigating Committee to look into the CAMEC transaction, which
had cost the bank Six Million Pesos (P6,000,000.00) in losses.9 The
subsequent events, as found and decided upon by the Court of
Appeals,10 are as follows:
On 18 June 1993, petitioner received a memorandum from Islamic
Bank [AIIBP] Chairman Roberto F. De Ocampo charging him with
Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and preventively
suspending him.
In his memorandum dated 8 September 1993, petitioner informed the
Investigating Committee that he could not submit himself to the
jurisdiction of the Committee because of its alleged partiality. For his
failure to appear before the hearing set on 17 September 1993, after
the hearing of 13 September 1993 was postponed due to the
Manifestation of even date filed by petitioner, the Investigating
8
Committee declared petitioner in default and the prosecution was
allowed to present its evidence ex parte.
On 08 December 1993, the Investigating Committee rendered a
decision, the pertinent portions of which reads as follows:
In view of respondent SAWADJAAN’S abject failure to perform his
duties and assigned tasks as appraiser/inspector, which resulted to
the prejudice and substantial damage to the Bank, respondent should
be held liable therefore. At this juncture, however, the Investigating
Committee is of the considered opinion that he could not be held
liable for the administrative offense of dishonesty considering the fact
that no evidence was adduced to show that he profited or benefited
from being remiss in the performance of his duties. The record is
bereft of any evidence which would show that he received any amount
in consideration for his non-performance of his official duties.
This notwithstanding, respondent cannot escape liability. As adverted
to earlier, his failure to perform his official duties resulted to the
prejudice and substantial damage to the Islamic Bank for which he
should be held liable for the administrative offense of CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.
Premises considered, the Investigating Committee recommends that
respondent SAPPARI SAWADJAAN be meted the penalty of SIX (6)
MONTHS and ONE (1) DAY SUSPENSION from office in accordance
with the Civil Service Commission’s Memorandum Circular No. 30,
Series of 1989.
On 13 December 1993, the Board of Directors of the Islamic Bank
[AIIBP] adopted Resolution No. 2309 finding petitioner guilty of
Dishonesty in the Performance of Official Duties and/or Conduct
Prejudicial to the Best Interest of the Service and imposing the penalty
of Dismissal from the Service.
On reconsideration, the Board of Directors of the Islamic Bank [AIIBP]
adopted the Resolution No. 2332 on 20 February 1994 reducing the
penalty imposed on petitioner from dismissal to suspension for a
period of six (6) months and one (1) day.
On 29 March 1994, petitioner filed a notice of appeal to the Merit
System Protection Board (MSPB).
On 11 August 1994, the CSC adopted Resolution No. 94-4483
dismissing the appeal for lack of merit and affirming Resolution No.
2309 dated 13 December 1993 of the Board of Directors of Islamic
Bank.
On 11 April 1995, the CSC adopted Resolution No. 95-2574 denying
petitioner’s Motion for Reconsideration.
On 16 June 1995, the instant petition was filed with the Honorable
Supreme Court on the following assignment of errors:
I. Public respondent Al-Amanah Islamic Investment Bank of
the Philippines has committed a grave abuse of discretion
amounting to excess or lack of jurisdiction when it initiated and
conducted administrative investigation without a validly
promulgated rules of procedure in the adjudication of
administrative cases at the Islamic Bank.
II. Public respondent Civil Service Commission has committed
a grave abuse of discretion amounting to lack of jurisdiction
when it prematurely and falsely assumed jurisdiction of the
case not appealed to it, but to the Merit System Protection
Board.
III. Both the Islamic Bank and the Civil Service Commission
erred in finding petitioner Sawadjaan of having deliberately
reporting false information and therefore guilty of Dishonesty
and Conduct Prejudicial to the Best Interest of the Service and
penalized with dismissal from the service.
On 04 July 1995, the Honorable Supreme Court En Banc referred this
petition to this Honorable Court pursuant to Revised Administrative
Circular No. 1-95, which took effect on 01 June 1995.
We do not find merit [in] the petition.
9
Anent the first assignment of error, a reading of the records would
reveal that petitioner raises for the first time the alleged failure of the
Islamic Bank [AIIBP] to promulgate rules of procedure governing the
adjudication and disposition of administrative cases involving its
personnel. It is a rule that issues not properly brought and ventilated
below may not be raised for the first time on appeal, save in
exceptional circumstances (Casolita, Sr. v. Court of Appeals, 275
SCRA 257) none of which, however, obtain in this case.
Granting arguendo that the issue is of such exceptional character that
the Court may take cognizance of the same, still, it must fail. Section
26 of Republic Act No. 6848 (1990) provides:
Section 26. Powers of the Board. The Board of Directors shall have
the broadest powers to manage the Islamic Bank, x x x The Board
shall adopt policy guidelines necessary to carry out effectively the
provisions of this Charter as well as internal rules and
regulations necessary for the conduct of its Islamic banking business
and all matters related to personnel organization, office functions and
salary administration. (Italics ours)
On the other hand, Item No. 2 of Executive Order No. 26 (1992)
entitled "Prescribing Procedure and Sanctions to Ensure Speedy
Disposition of Administrative Cases" directs, "all administrative
agencies" to "adopt and include in their respective Rules of
Procedure" provisions designed to abbreviate administrative
proceedings.
The above two (2) provisions relied upon by petitioner does not
require the Islamic Bank [AIIBP] to promulgate rules of procedure
before administrative discipline may be imposed upon its employees.
The internal rules of procedures ordained to be adopted by the Board
refers to that necessary for the conduct of its Islamic banking
business and all matters related to "personnel organization, office
functions and salary administration." On the contrary, Section 26 of
RA 6848 gives the Board of Directors of the Islamic Bank the
"broadest powers to manage the Islamic Bank." This grant of broad
powers would be an idle ceremony if it would be powerless to
discipline its employees.
The second assignment of error must likewise fail. The issue is raised
for the first time via this petition for certiorari. Petitioner submitted
himself to the jurisdiction of the CSC. Although he could have raised
the alleged lack of jurisdiction in his Motion for Reconsideration of
Resolution No. 94-4483 of the CSC, he did not do so. By filing the
Motion for Reconsideration, he is estopped from denying the CSC’s
jurisdiction over him, as it is settled rule that a party who asks for an
affirmative relief cannot later on impugn the action of the tribunal as
without jurisdiction after an adverse result was meted to him. Although
jurisdiction over the subject matter of a case may be objected to at
any stage of the proceedings even on appeal, this particular rule,
however, means that jurisdictional issues in a case can be raised only
during the proceedings in said case and during the appeal of said
case (Aragon v. Court of Appeals, 270 SCRA 603). The case at bar is
a petition [for] certiorari and not an appeal.
But even on the merits the argument must falter. Item No. 1 of CSC
Resolution No. 93-2387 dated 29 June 1993, provides:
Decisions in administrative cases involving officials and employees of
the civil service appealable to the Commission pursuant to Section 47
of Book V of the Code (i.e., Administrative Code of 1987) including
personnel actions such as contested appointments shall now be
appealed directly to the Commission and not to the MSPB.
In Rubenecia v. Civil Service Commission, 244 SCRA 640, 651, it
was categorically held:
. . . The functions of the MSPB relating to the determination of
administrative disciplinary cases were, in other words, re-allocated to
the Commission itself.
Be that as it may, "(i)t is hornbook doctrine that in order `(t)o ascertain
whether a court (in this case, administrative agency) has jurisdiction
or not, the provisions of the law should be inquired into.’ Furthermore,
`the jurisdiction of the court must appear clearly from the statute law
or it will not be held to exist.’"(Azarcon v. Sandiganbayan, 268 SCRA
747, 757) From the provision of law abovecited, the Civil Service
Commission clearly has jurisdiction over the Administrative Case
against petitioner.
10
Anent the third assignment of error, we likewise do not find merit in
petitioner’s proposition that he should not be liable, as in the first
place, he was not qualified to perform the functions of
appraiser/investigator because he lacked the necessary training and
expertise, and therefore, should not have been found dishonest by the
Board of Directors of Islamic Bank [AIIBP] and the CSC. Petitioner
himself admits that the position of appraiser/inspector is "one of the
most serious [and] sensitive job in the banking operations." He should
have been aware that accepting such a designation, he is obliged to
perform the task at hand by the exercise of more than ordinary
prudence. As appraiser/investigator, he is expected, among others, to
check the authenticity of the documents presented by the borrower by
comparing them with the originals on file with the proper government
office. He should have made it sure that the technical descriptions in
the location plan on file with the Bureau of Lands of Marikina, jibe with
that indicated in the TCT of the collateral offered by CAMEC, and that
the mortgage in favor of the Islamic Bank was duly annotated at the
back of the copy of the TCT kept by the Register of Deeds of
Marikina. This, petitioner failed to do, for which he must be held liable.
That he did not profit from his false report is of no moment. Neither
the fact that it was not deliberate or willful, detracts from the nature of
the act as dishonest. What is apparent is he stated something to be a
fact, when he really was not sure that it was so.
Wherefore, above premises considered, the instant Petition is
DISMISSED, and the assailed Resolutions of the Civil Service
Commission are hereby AFFIRMED.
On 24 March 1999, Sawadjaan’s counsel notified the court a quo of
his change of address,11 but apparently neglected to notify his client of
this fact. Thus, on 23 July 1999, Sawadjaan, by himself, filed a Motion
for New Trial12 in the Court of Appeals based on the following
grounds: fraud, accident, mistake or excusable negligence and newly
discovered evidence. He claimed that he had recently discovered that
at the time his employment was terminated, the AIIBP had not yet
adopted its corporate by-laws. He attached a Certification13 by the
Securities and Exchange Commission (SEC) that it was only on 27
May 1992 that the AIIBP submitted its draft by-laws to the SEC, and
that its registration was being held in abeyance pending certain
corrections being made thereon. Sawadjaan argued that since the
AIIBP failed to file its by-laws within 60 days from the passage of Rep.
Act No. 6848, as required by Sec. 51 of the said law, the bank and its
stockholders had "already forfeited its franchise or charter, including
its license to exist and operate as a corporation,"14 and thus no longer
have "the legal standing and personality to initiate an administrative
case."
Sawadjaan’s counsel subsequently adopted his motion, but requested
that it be treated as a motion for reconsideration.15 This motion was
denied by the court a quo in its Resolution of 15 December 1999.16
Still disheartened, Sawadjaan filed the present petition
for certiorari under Rule 65 of the Rules of Court challenging the
above Decision and Resolution of the Court of Appeals on the ground
that the court a quo erred: i) in ignoring the facts and evidences that
the alleged Islamic Bank has no valid by-laws; ii) in ignoring the facts
and evidences that the Islamic Bank lost its juridical personality as a
corporation on 16 April 1990; iii) in ignoring the facts and evidences
that the alleged Islamic Bank and its alleged Board of Directors have
no jurisdiction to act in the manner they did in the absence of a valid
by-laws; iv) in not correcting the acts of the Civil Service Commission
who erroneously rendered the assailed Resolutions No. 94-4483 and
No. 95-2754 as a result of fraud, falsification and/or
misrepresentations committed by Farouk A. Carpizo and his group,
including Roberto F. de Ocampo; v) in affirming an unconscionably
harsh and/or excessive penalty; and vi) in failing to consider newly
discovered evidence and reverse its decision accordingly.
Subsequently, petitioner Sawadjaan filed an "Ex-parte Urgent Motion
for Additional Extension of Time to File a Reply (to the Comments of
Respondent Al-Amanah Investment Bank of the Philippines),17 Reply
(to Respondent’s Consolidated Comment,)18 and Reply (to the Alleged
Comments of Respondent Al-Amanah Islamic Bank of the
Philippines)."19 On 13 October 2000, he informed this Court that he
had terminated his lawyer’s services, and, by himself, prepared and
filed the following: 1) Motion for New Trial;20 2) Motion to Declare
Respondents in Default and/or Having Waived their Rights to
Interpose Objection to Petitioner’s Motion for New Trial;21 3) Ex-
Parte Urgent Motions to Punish Attorneys Amado D. Valdez, Elpidio
J. Vega, Alda G. Reyes, Dominador R. Isidoro, Jr., and Odilon A. Diaz
11
for Being in Contempt of Court & to Inhibit them from Appearing in this
Case Until they Can Present Valid Evidence of Legal Authority;22 4)
Opposition/Reply (to Respondent AIIBP’s Alleged Comment);23 5) Ex-
Parte Urgent Motion to Punish Atty. Reynaldo A. Pineda for Contempt
of Court and the Issuance of a Commitment Order/Warrant for His
Arrest;24 6) Reply/Opposition (To the Formal Notice of Withdrawal of
Undersigned Counsel as Legal Counsel for the Respondent Islamic
Bank with Opposition to Petitioner’s Motion to Punish Undersigned
Counsel for Contempt of Court for the Issuance of a Warrant of
Arrest);25 7) Memorandum for Petitioner;26 8) Opposition to SolGen’s
Motion for Clarification with Motion for Default and/or Waiver of
Respondents to File their Memorandum;27 9) Motion for Contempt of
Court and Inhibition/Disqualification with Opposition to OGCC’s
Motion for Extension of Time to File Memorandum;28 10) Motion for
Enforcement (In Defense of the Rule of Law);29 11) Motion and
Opposition (Motion to Punish OGCC’s Attorneys Amado D. Valdez,
Efren B. Gonzales, Alda G. Reyes, Odilon A. Diaz and Dominador R.
Isidoro, Jr., for Contempt of Court and the Issuance of a Warrant for
their Arrest; and Opposition to their Alleged "Manifestation and
Motion" Dated February 5, 2002);30 12) Motion for Reconsideration of
Item (a) of Resolution dated 5 February 2002 with Supplemental
Motion for Contempt of Court;31 13) Motion for Reconsideration of
Portion of Resolution Dated 12 March 2002;32 14) Ex-Parte Urgent
Motion for Extension of Time to File Reply Memorandum (To: CSC
and AIIBP’s Memorandum);33 15) Reply Memorandum (To: CSC’s
Memorandum) With Ex-Parte Urgent Motion for Additional Extension
of time to File Reply Memorandum (To: AIIBP’s Memorandum);34 and
16) Reply Memorandum (To: OGCC’s Memorandum for Respondent
AIIBP).35
Petitioner’s efforts are unavailing, and we deny his petition for its
procedural and substantive flaws.
The general rule is that the remedy to obtain reversal or modification
of the judgment on the merits is appeal. This is true even if the error,
or one of the errors, ascribed to the court rendering the judgment is its
lack of jurisdiction over the subject matter, or the exercise of power in
excess thereof, or grave abuse of discretion in the findings of fact or
of law set out in the decision.36
The records show that petitioner’s counsel received the Resolution of
the Court of Appeals denying his motion for reconsideration on 27
December 1999. The fifteen day reglamentary period to appeal under
Rule 45 of the Rules of Court therefore lapsed on 11 January 2000.
On 23 February 2000, over a month after receipt of the resolution
denying his motion for reconsideration, the petitioner filed his petition
for certiorari under Rule 65.
It is settled that a special civil action for certiorari will not lie as a
substitute for the lost remedy of appeal,37 and though there are
instances38 where the extraordinary remedy of certiorari may be
resorted to despite the availability of an appeal,39 we find no special
reasons for making out an exception in this case.
Even if we were to overlook this fact in the broader interests of justice
and treat this as a special civil action for certiorari under Rule 65,40 the
petition would nevertheless be dismissed for failure of the petitioner to
show grave abuse of discretion. Petitioner’s recurrent argument,
tenuous at its very best, is premised on the fact that since respondent
AIIBP failed to file its by-laws within the designated 60 days from the
effectivity of Rep. Act No. 6848, all proceedings initiated by AIIBP and
all actions resulting therefrom are a patent nullity. Or, in his words, the
AIIBP and its officers and Board of Directors,
. . . [H]ave no legal authority nor jurisdiction to manage much less
operate the Islamic Bank, file administrative charges and investigate
petitioner in the manner they did and allegedly passed Board
Resolution No. 2309 on December 13, 1993 which is null and
void for lack of an (sic)  authorized and valid by-laws. The CIVIL
SERVICE COMMISSION was therefore affirming, erroneously, a null
and void "Resolution No. 2309 dated December 13, 1993 of the Board
of Directors of Al-Amanah Islamic Investment Bank of the Philippines"
in CSC Resolution No. 94-4483 dated August 11, 1994. A motion for
reconsideration thereof was denied by the CSC in its Resolution No.
95-2754 dated April 11, 1995. Both acts/resolutions of the CSC are
erroneous, resulting from fraud, falsifications and misrepresentations
of the alleged Chairman and CEO Roberto F. de Ocampo and the
alleged Director Farouk A. Carpizo and his group at the alleged
Islamic Bank.41
12
Nowhere in petitioner’s voluminous pleadings is there a showing that
the court a quo committed grave abuse of discretion amounting to
lack or excess of jurisdiction reversible by a petition
for certiorari. Petitioner already raised the question of AIIBP’s
corporate existence and lack of jurisdiction in his Motion for New
Trial/Motion for Reconsideration of 27 May 1997 and was denied by
the Court of Appeals. Despite the volume of pleadings he has
submitted thus far, he has added nothing substantial to his
arguments.
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."42 At the very least, by its failure to submit its by-
laws on time, the AIIBP may be considered a de
facto corporation43 whose right to exercise corporate powers may not
be inquired into collaterally in any private suit to which such
corporations may be a party.44
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,45 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.
In any case, petitioner’s argument is irrelevant because this case is
not a corporate controversy, but a labor dispute; and it is an
employer’s basic right to freely select or discharge its employees, if
only as a measure of self-protection against acts inimical to its
interest.46 Regardless of whether AIIBP is a corporation, a partnership,
a sole proprietorship, or a sari-sari store, it is an undisputed fact that
AIIBP is the petitioner’s employer. AIIBP chose to retain his services
during its reorganization, controlled the means and methods by which
his work was to be performed, paid his wages, and, eventually,
terminated his services.47
And though he has had ample opportunity to do so, the petitioner has
not alleged that he is anything other than an employee of AIIBP. He
has neither claimed, nor shown, that he is a stockholder or an officer
of the corporation. Having accepted employment from AIIBP, and
rendered his services to the said bank, received his salary, and
accepted the promotion given him, it is now too late in the day for
petitioner to question its existence and its power to terminate his
services. 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.481avvphi1
Even if we were to consider the facts behind petitioner Sawadjaan’s
dismissal from service, we would be hard pressed to find error in the
decision of the AIIBP.
As appraiser/investigator, the petitioner was expected to conduct an
ocular inspection of the properties offered by CAMEC as collaterals
and check the copies of the certificates of title against those on file
with the Registry of Deeds. Not only did he fail to conduct these
routine checks, but he also deliberately misrepresented in his
appraisal report that after reviewing the documents and conducting a
site inspection, he found the CAMEC loan application to be in order.
Despite the number of pleadings he has filed, he has failed to offer an
alternative explanation for his actions.
When he was informed of the charges against him and directed to
appear and present his side on the matter, the petitioner sent instead
a memorandum questioning the fairness and impartiality of the
members of the investigating committee and refusing to recognize
their jurisdiction over him. Nevertheless, the investigating committee
rescheduled the hearing to give the petitioner another chance, but he
still refused to appear before it.
Thereafter, witnesses were presented, and a decision was rendered
finding him guilty of dishonesty and dismissing him from service. He
sought a reconsideration of this decision and the same committee
whose impartiality he questioned reduced their recommended penalty
to suspension for six months and one day. The board of directors,
however, opted to dismiss him from service.
13
On appeal to the CSC, the Commission found that Sawadjaan’s personal hostility, and it must be so patent and gross as to amount to
failure to perform his official duties greatly prejudiced the AIIBP, for an evasion of positive duty or to a virtual refusal to perform the duty
which he should be held accountable. It held that: enjoined or to act at all in contemplation of law.50 The records show
that the respondents did none of these; they acted in accordance with
. . . (I)t is crystal clear that respondent SAPPARI SAWADJAAN was the law.
remiss in the performance of his duties as appraiser/inspector. Had
respondent performed his duties as appraiser/inspector, he could WHEREFORE, the petition is DISMISSED. The Decision of the Court
have easily noticed that the property located at Balintawak, Caloocan of Appeals of 30 March 1999 affirming Resolutions No. 94-4483 and
City covered by TCT No. C-52576 and which is one of the properties No. 95-2754 of the Civil Service Commission, and its Resolution of 15
offered as collateral by CAMEC is encumbered to Divina Pablico. Had December 1999 are hereby affirmed. Costs against the petitioner.
respondent reflected such fact in his appraisal/inspection report on
said property the ISLAMIC BANK would not have approved CAMEC’s SO ORDERED.
loan of P500,000.00 in 1987 and CAMEC’s P5 Million loan in 1988,
respondent knowing fully well the Bank’s policy of not accepting Davide, Jr., C.J., Panganiban, Quisumbing, Ynares-Santiago,
encumbered properties as collateral. Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-
Morales, Callejo, Sr., Azcuna, Tinga, and Garcia, JJ., concur.
Respondent SAWADJAAN’s reprehensible act is further aggravated Puno, J., on official leave.
when he failed to check and verify from the Registry of Deeds of
Marikina the authenticity of the property located at Mayamot, Antipolo,
Rizal covered by TCT No. N-130671 and which is one of the
properties offered as collateral by CAMEC for its P5 Million loan in
1988. If he only visited and verified with the Register of Deeds of
Marikina the authenticity of TCT No. N-130671 he could have easily
discovered that TCT No. N-130671 is fake and the property described
therein non-existent.

...

This notwithstanding, respondent cannot escape liability. As adverted

to earlier, his failure to perform his official duties resulted to the
prejudice and substantial damage to the ISLAMIC BANK for which he
should be held liable for the administrative offense of CONDUCT
PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE.49

From the foregoing, we find that the CSC and the court a
quo committed no grave abuse of discretion when they sustained
Sawadjaan’s dismissal from service. Grave abuse of discretion
implies such capricious and whimsical exercise of judgment as
equivalent to lack of jurisdiction, or, in other words, where the power is
exercised in an arbitrary or despotic manner by reason of passion or
14
 SECOND DIVISION Adventist Church of Bayugan, Esperanza, Agusan, all the rights, title,
G.R. No. 150416             July 21, 2006 interest, claim and demand both at law and as well in possession as
SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF in expectancy of in and to all the place of land and portion situated in
SOUTHERN PHILIPPINES, INC., and/or represented by the Barrio of Bayugan, Municipality of Esperanza, Province of
MANASSEH C. ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO Agusan, Philippines, more particularly and bounded as follows, to wit:
M. LUCENARA, DIONICES O. TIPGOS, LORESTO C. MURILLON,
ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE T. ORBISO, 1. a parcel of land for Church Site purposes only.
LORETO PAEL and JOEL BACUBAS, petitioners,
vs. 2. situated [in Barrio Bayugan, Esperanza].
NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY
ADVENTIST, INC., and/or represented by JOSUE A. LAYON, 3. Area: 30 meters wide and 30 meters length or 900 square meters.
WENDELL M. SERRANO, FLORANTE P. TY and JETHRO
CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH [OF] 4. Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No.
NORTHEASTERN MINDANAO MISSION,* Respondents. P-285.
DECISION
5. Bounded Areas
CORONA, J.:
North by National High Way; East by Bricio Gerona; South by Serapio
This petition for review on certiorari assails the Court of Appeals (CA)
Abijaron and West by Feliz Cosio xxx. 4
decision1 and resolution2 in CA-G.R. CV No. 41966 affirming, with
modification, the decision of the Regional Trial Court (RTC) of
Bayugan, Agusan del Sur, Branch 7 in Civil Case No. 63. The donation was allegedly accepted by one Liberato Rayos, an elder
of the Seventh Day Adventist Church, on behalf of the donee.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate
of Title (TCT) No. 4468 in Bayugan, Agusan del Sur originally owned Twenty-one years later, however, on February 28, 1980, the same
by Felix Cosio and his wife, Felisa Cuysona. parcel of land was sold by the spouses Cosio to the Seventh Day
Adventist Church of Northeastern Mindanao Mission (SDA-
NEMM).5 TCT No. 4468 was thereafter issued in the name of SDA-
On April 21, 1959, the spouses Cosio donated the land to the South
NEMM.6
Philippine Union Mission of Seventh Day Adventist Church of
Bayugan Esperanza, Agusan (SPUM-SDA Bayugan).3 Part of the
deed of donation read: Claiming to be the alleged donee’s successors-in-interest, petitioners
asserted ownership over the property. This was opposed by
respondents who argued that at the time of the donation, SPUM-SDA
KNOW ALL MEN BY THESE PRESENTS:
Bayugan could not legally be a donee
That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,]
because, not having been incorporated yet, it had no juridical
40 years of age, [h]usband and wife, both are citizen[s] of the
personality. Neither were petitioners members of the local church
Philippines, and resident[s] with post office address in the Barrio of
then, hence, the donation could not have been made particularly to
Bayugan, Municipality of Esperanza, Province of Agusan, Philippines,
them.
do hereby grant, convey and forever quit claim by way of Donation or
gift unto the South Philippine [Union] Mission of Seventh Day
15
On September 28, 1987, petitioners filed a case, docketed as Civil
Case No. 63 (a suit for cancellation of title, quieting of ownership and
possession, declaratory relief and reconveyance with prayer for
preliminary injunction and damages), in the RTC of Bayugan, Agusan
del Sur. After trial, the trial court rendered a decision7 on November
20, 1992 upholding the sale in favor of respondents.
On appeal, the CA affirmed the RTC decision but deleted the award of
moral damages and attorney’s fees.8 Petitioners’ motion for
reconsideration was likewise denied. Thus, this petition.
The issue in this petition is simple: should SDA-NEMM’s ownership of
the lot covered by TCT No. 4468 be upheld?9 We answer in the
affirmative.
The controversy between petitioners and respondents involves two
supposed transfers of the lot previously owned by the spouses Cosio:
(1) a donation to petitioners’ alleged predecessors-in-interest in 1959
and (2) a sale to respondents in 1980.
Donation is undeniably one of the modes of acquiring ownership of
real property. Likewise, ownership of a property may be transferred by
tradition as a consequence of a sale.
Petitioners contend that the appellate court should not have ruled on
the validity of the donation since it was not among the issues raised
on appeal. This is not correct because an appeal generally opens the
entire case for review.
We agree with the appellate court that the alleged donation to
petitioners was void.
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 powers.10
While there existed the old Corporation Law (Act 1459),11 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.12 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.13 Petitioners themselves admitted that at the time of the
donation, they were not registered with the SEC, nor did they even
attempt to organize14 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
corporation15 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
16
local church then, thus, they could not even claim that the donation
was particularly for them.16
"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 corporations."17
Generally, the doctrine exists to protect the public dealing with
supposed corporate entities, not to favor the defective or non-existent
corporation.18
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 predecessor-in-
interest.
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 xxx he acknowledged that the same was his xxx 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].
xxx
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. xxx 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.]20
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 same21
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.22 TCT No.
17
4468 was thereafter issued and it remains in the name of SDA-
NEMM.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED.

Puno, Chairperson, Sandoval-Gutierrez, Azcuna, Garcia, J.J., concur.

18
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-2598             June 29, 1950
C. ARNOLD HALL and BRADLEY P. HALL, petitioners,
vs.
EDMUNDO S. PICCIO, Judge of the Court of First Instance of
Leyte, FRED BROWN, EMMA BROWN, HIPOLITA CAPUCIONG, in
his capacity as receiver of the Far Eastern Lumber and
Commercial Co., Inc., respondents.
Claro M. Recto for petitioners.
Ramon Diokno and Jose W. Diokno for respondents.
BENGZON, J.:
This is petition to set aside all the proceedings had in civil case No.
381 of the Court of First Instance of Leyte and to enjoin the
respondent judge from further acting upon the same.
Facts: (1) on May 28, 1947, the petitioners C. Arnold Hall and Bradley
P. Hall, and the respondents Fred Brown, Emma Brown, Hipolita D.
Chapman and Ceferino S. Abella, signed and acknowledged in Leyte,
the article 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, etc. Attached to
the article 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 corporation described in a list appended thereto.
(2) Immediately after the execution of said articles of incorporation,
the corporation proceeded to do business with the adoption of by-laws
and the election of its officers.
(3) On December 2, 1947, the said articles of incorporation were filed
in the office of the Securities and Exchange Commissioner, for the
issuance of the corresponding certificate of incorporation.
(4) On March 22, 1948, pending action on the articles of incorporation
by the aforesaid governmental office, the respondents Fred Brown,
Emma Brown, Hipolita D. Chapman and Ceferino S. Abella filed
before the Court of First Instance of Leyte the civil case numbered
381, entitled "Fred Brown et al. vs. Arnold C. Hall et al.", alleging
among other things that the Far Eastern Lumber and Commercial Co.
was an unregistered partnership; that they wished to have it dissolved
because of bitter dissension among the members, mismanagement
and fraud by the managers and heavy financial losses.
(5) The defendants in the suit, namely, C. Arnold Hall and Bradley P.
Hall, filed a motion to dismiss, contesting the court's jurisdiction and
the sufficiently of the cause of action.
(6) After hearing the parties, the Hon. Edmund S. Piccio ordered the
dissolution of the company; and at the request of plaintiffs, appointed
of the properties thereof, upon the filing of a P20,000 bond.
(7) The defendants therein (petitioners herein) offered to file a
counter-bond for the discharge of the receiver, but the respondent
judge refused to accept the offer and to discharge the receiver.
Whereupon, the present special civil action was instituted in this court.
It is based upon two main propositions, to wit:
(a) The court had no jurisdiction in civil case No. 381 to decree the
dissolution of the company, because it being a de facto corporation,
dissolution thereof may only be ordered in a quo warranto proceeding
instituted in accordance with section 19 of the Corporation Law.
(b) Inasmuch as respondents Fred Brown and Emma Brown had
signed the article of incorporation but only a partnership.
Discussion: The second proposition may at once be dismissed. All the
parties are informed that the Securities and Exchange Commission
has not, so far, issued the corresponding certificate of incorporation.
All of them know, or sought to know, that the personality of a
corporation begins to exist only from the moment such certificate is
issued — not before (sec. 11, Corporation Law). The complaining
associates have not represented to the others that they were
19
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.
Obviously this is not an instance requiring the enforcement of
contracts with the corporation through the rule of estoppel.
The first proposition above stated is premised on the theory that,
inasmuch as the Far Eastern Lumber and Commercial Co., is a de
facto corporation, section 19 of the Corporation Law applies, and
therefore the court had not jurisdiction to take cognizance of said civil
case number 381. Section 19 reads as follows:
. . . The due incorporation of any corporations claiming in good
faith to be a corporation under this Act and its right to exercise
corporate powers shall not be inquired into collaterally in any
private suit to which the corporation may be a party, but such
inquiry may be had at the suit of the Insular Government on
information of the Attorney-General.
There are least two reasons why this section does not govern the
situation. 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.
jure corporation may be terminated in a private suit for its dissolution
between stockholders, without the intervention of the state.
There might be room for argument on the right of minority
stockholders to sue for dissolution;1 but that question does not affect
the court's jurisdiction, and is a matter for decision by the judge,
subject to review on appeal. Whkch brings us to one principal reason
why this petition may not prosper, namely: the petitioners have their
remedy by appealing the order of dissolution at the proper time.
There is a secondary issue in connection with the appointment of a
receiver. But it must be admitted that receivership is proper in
proceedings for dissolution of a company or corporation, and it was no
error to reject the counter-bond, the court having declared the
dissolution. As to the amount of the bond to be demanded of the
receiver, much depends upon the discretion of the trial court, which in
this instance we do not believe has been clearly abused.
Judgment: The petition will, therefore, be dismissed, with costs. The
preliminary injunction heretofore issued will be dissolved.
Ozaeta, Pablo, Tuason, Montemayor, and Reyes, JJ., concur.

Under our statue it is to be noted (Corporation Law, sec. 11)

that it is the issuance of a certificate of incorporation by the
Director of the Bureau of Commerce and Industry which calls a
corporation into being. The immunity if collateral attack is
granted to corporations "claiming in good faith to be a
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."
(Fisher on the Philippine Law of Stock Corporations, p.
75. See also Humphreys vs. Drew, 59 Fla., 295; 52 So., 362.)

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
20

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 101897. March 5, 1993.
LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF
APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN,
LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC.,
LYCEUM OF TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF
CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM
OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN
LYCEUM, INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla
for petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law
Offices for respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION
OF PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY
SIMILAR TO THAT OF ANY EXISTING CORPORATION,
PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY
PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO
THE WORD "LYCEUM". — The Articles of Incorporation of a
corporation must, among other things, set out the name of the
corporation. Section 18 of the Corporation Code establishes a
restrictive rule insofar as corporate names are concerned: "Section
18. Corporate name. — No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical
or deceptively or confusingly similar to that of any existing corporation
or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. When a change in
the corporate name is approved, the Commission shall issue an
amended certificate of incorporation under the amended name." The
policy underlying the prohibition in Section 18 against the registration
of a corporate name which is "identical or deceptively or confusingly
similar" to that of any existing corporation or which is "patently
deceptive" or "patently confusing" or "contrary to existing laws," is the
avoidance of fraud upon the public which would have occasion to deal
with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over
corporations. We do not consider that the corporate names of private
respondent institutions are "identical with, or deceptively or
confusingly similar" to that of the petitioner institution. True enough,
the corporate names of private respondent entities all carry the word
"Lyceum" but confusion and deception are effectively precluded by
the appending of geographic names to the word "Lyceum." Thus, we
do not believe that the "Lyceum of Aparri" can be mistaken by the
general public for the Lyceum of the Philippines, or that the "Lyceum
of Camalaniugan" would be confused with the Lyceum of the
Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD
"LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. — It is claimed,
however, by petitioner that the word "Lyceum" has acquired a
secondary meaning in relation to petitioner with the result that word,
although originally a generic, has become appropriable by petitioner
to the exclusion of other institutions like private respondents herein.
The doctrine of secondary meaning originated in the field of trademark
law. Its application has, however, been extended to corporate names
sine the right to use a corporate name to the exclusion of others is
based upon the same principle which underlies the right to use a
particular trademark or tradename. In Philippine Nut Industry, Inc. v.
Standard Brands, Inc., the doctrine of secondary meaning was
elaborated in the following terms: " . . . a word or phrase originally
incapable of exclusive appropriation with reference to an article on the
market, because geographically or otherwise descriptive, might
nevertheless have been used so long and so exclusively by one
producer with reference to his article that, in that trade and to that
branch of the purchasing public, the word or phrase has come to
mean that the article was his product." The question which arises,
therefore, is whether or not the use by petitioner of "Lyceum" in its
corporate name has been for such length of time and with such
exclusivity as to have become associated or identified with the
petitioner institution in the mind of the general public (or at least that
portion of the general public which has to do with schools). The Court
of Appeals recognized this issue and answered it in the negative:
21
"Under the doctrine of secondary meaning, a word or phrase originally
incapable of exclusive appropriation with reference to an article in the
market, because geographical or otherwise descriptive might
nevertheless have been used so long and so exclusively by one
producer with reference to this article that, in that trade and to that
group of the purchasing public, the word or phrase has come to mean
that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil.
56). This circumstance has been referred to as the distinctiveness into
which the name or phrase has evolved through the substantial and
exclusive use of the same for a considerable period of time. . . . No
evidence was ever presented in the hearing before the Commission
which sufficiently proved that the word 'Lyceum' has indeed acquired
secondary meaning in favor of the appellant. If there was any of this
kind, the same tend to prove only that the appellant had been using
the disputed word for a long period of time. . . . In other words, while
the appellant may have proved that it had been using the word
'Lyceum' for a long period of time, this fact alone did not amount to
mean that the said word had acquired secondary meaning in its favor
because the appellant failed to prove that it had been using the same
word all by itself to the exclusion of others. More so, there was no
evidence presented to prove that confusion will surely arise if the
same word were to be used by other educational institutions.
Consequently, the allegations of the appellant in its first two assigned
errors must necessarily fail." We agree with the Court of Appeals. The
number alone of the private respondents in the case at bar suggests
strongly that petitioner's use of the word "Lyceum" has not been
attended with the exclusivity essential for applicability of the doctrine
of secondary meaning. Petitioner's use of the word "Lyceum" was not
exclusive but was in truth shared with the Western Pangasinan
Lyceum and a little later with other private respondent institutions
which registered with the SEC using "Lyceum" as part of their
corporation names. There may well be other schools using Lyceum or
Liceo in their names, but not registered with the SEC because they
have not adopted the corporate form of organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO
DETERMINE WHETHER THEY ARE CONFUSINGLY OR
DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S
NAME. — petitioner institution is not entitled to a legally enforceable
exclusive right to use the word "Lyceum" in its corporate name and
that other institutions may use "Lyceum" as part of their corporate
names. To determine whether a given corporate name is "identical" or
"confusingly or deceptively similar" with another entity's corporate
name, it is not enough to ascertain the presence of "Lyceum" or
"Liceo" in both names. One must evaluate corporate names in their
entirety and when the name of petitioner is juxtaposed with the names
of private respondents, they are not reasonably regarded as
"identical" or "confusingly or deceptively similar" with each other.
DECISION
FELICIANO, J p:
Petitioner is an educational institution duly registered with the
Securities and Exchange Commission ("SEC"). When it first registered
with the SEC on 21 September 1950, it used the corporate name
Lyceum of the Philippines, Inc. and has used that name ever since.
On 24 February 1984, petitioner instituted proceedings before the
SEC to compel the private respondents, which are also educational
institutions, to delete the word "Lyceum" from their corporate names
and permanently to enjoin them from using "Lyceum" as part of their
respective names.
Some of the private respondents actively participated in the
proceedings before the SEC. These are the following, the dates of
their original SEC registration being set out below opposite their
respective names:
Western Pangasinan Lyceum — 27 October 1950
Lyceum of Cabagan — 31 October 1962
Lyceum of Lallo, Inc. — 26 March 1972
Lyceum of Aparri — 28 March 1972
Lyceum of Tuao, Inc. — 28 March 1972
22
Lyceum of Camalaniugan — 28 March 1972
The following private respondents were declared in default for failure
to file an answer despite service of summons:
Buhi Lyceum;
Central Lyceum of Catanduanes;
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines
Petitioner's original complaint before the SEC had included three (3)
other entities:
1. The Lyceum of Malacanay;
2. The Lyceum of Marbel; and
3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum
of Malacanay and the Lyceum of Marbel, for failure to serve summons
upon these two (2) entities. The case against the Liceum of Araullo
was dismissed when that school motu proprio change its corporate
name to "Pamantasan ng Araullo."
The background of the case at bar needs some recounting. Petitioner
had sometime before commenced in the SEC a proceeding (SEC-
Case No. 1241) against the Lyceum of Baguio, Inc. to require it to
change its corporate name and to adopt another name not "similar [to]
or identical" with that of petitioner. In an Order dated 20 April 1977,
Associate Commissioner Julio Sulit held that the corporate name of
petitioner and that of the Lyceum of Baguio, Inc. were substantially
identical because of the presence of a "dominant" word, i.e.,
"Lyceum," the name of the geographical location of the campus being
the only word which distinguished one from the other corporate name.
The SEC also noted that petitioner had registered as a corporation
ahead of the Lyceum of Baguio, Inc. in point of time, 1 and ordered
the latter to change its name to another name "not similar or identical
[with]" the names of previously registered entities.
The Lyceum of Baguio, Inc. assailed the Order of the SEC before the
Supreme Court in a case docketed as G.R. No. L-46595. In a Minute
Resolution dated 14 September 1977, the Court denied the Petition
for Review for lack of merit. Entry of judgment in that case was made
on 21 October 1977. 2
Armed with the Resolution of this Court in G.R. No. L-46595,
petitioner then wrote all the educational institutions it could find using
the word "Lyceum" as part of their corporate name, and advised them
to discontinue such use of "Lyceum." When, with the passage of time,
it became clear that this recourse had failed, petitioner instituted
before the SEC SEC-Case No. 2579 to enforce what petitioner claims
as its proprietary right to the word "Lyceum." The SEC hearing officer
rendered a decision sustaining petitioner's claim to an exclusive right
to use the word "Lyceum." The hearing officer relied upon the SEC
ruling in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and
held that the word "Lyceum" was capable of appropriation and that
petitioner had acquired an enforceable exclusive right to the use of
that word.
On appeal, however, by private respondents to the SEC En Banc, the
decision of the hearing officer was reversed and set aside. The SEC
En Banc did not consider the word "Lyceum" to have become so
identified with petitioner as to render use thereof by other institutions
as productive of confusion about the identity of the schools concerned
in the mind of the general public. Unlike its hearing officer, the SEC
En Banc held that the attaching of geographical names to the word
"Lyceum" served sufficiently to distinguish the schools from one
another, especially in view of the fact that the campuses of petitioner
and those of the private respondents were physically quite remote
from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its Decision
dated 28 June 1991, however, the Court of Appeals affirmed the
questioned Orders of the SEC En Banc. 4 Petitioner filed a motion for
reconsideration, without success.
23
Before this Court, petitioner asserts that the Court of Appeals
committed the following errors:
1. The Court of Appeals erred in holding that the Resolution of the
Supreme Court in G.R. No. L-46595 did not constitute stare decisis as
to apply to this case and in not holding that said Resolution bound
subsequent determinations on the right to exclusive use of the word
Lyceum.
2. The Court of Appeals erred in holding that respondent Western
Pangasinan Lyceum, Inc. was incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has
not acquired a secondary meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic
word cannot be appropriated by the petitioner to the exclusion of
others. 5
We will consider all the foregoing ascribed errors, though not
necessarily seriatim. We begin by noting that the Resolution of the
Court in G.R. No. L-46595 does not, of course, constitute res
adjudicata in respect of the case at bar, since there is no identity of
parties. Neither is stare decisis pertinent, if only because the SEC En
Banc itself has re-examined Associate Commissioner Sulit's ruling in
the Lyceum of Baguio case. The Minute Resolution of the Court in
G.R. No. L-46595 was not a reasoned adoption of the Sulit ruling.
The Articles of Incorporation of a corporation must, among other
things, set out the name of the corporation. 6 Section 18 of the
Corporation Code establishes a restrictive rule insofar as corporate
names are concerned:
"SECTION 18. Corporate name. — No corporate name may be
allowed by the Securities an Exchange Commission if the proposed
name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or
is patently deceptive, confusing or contrary to existing laws. When a
change in the corporate name is approved, the Commission shall
issue an amended certificate of incorporation under the amended
name." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the
registration of a corporate name which is "identical or deceptively or
confusingly similar" to that of any existing corporation or which is
"patently deceptive" or "patently confusing" or "contrary to existing
laws," is the avoidance of fraud upon the public which would have
occasion to deal with the entity concerned, the evasion of legal
obligations and duties, and the reduction of difficulties of
administration and supervision over corporations. 7
We do not consider that the corporate names of private respondent
institutions are "identical with, or deceptively or confusingly similar" to
that of the petitioner institution. True enough, the corporate names of
private respondent entities all carry the word "Lyceum" but confusion
and deception are effectively precluded by the appending of
geographic names to the word "Lyceum." Thus, we do not believe that
the "Lyceum of Aparri" can be mistaken by the general public for the
Lyceum of the Philippines, or that the "Lyceum of Camalaniugan"
would be confused with the Lyceum of the Philippines.
Etymologically, the word "Lyceum" is the Latin word for the Greek
lykeion which in turn referred to a locality on the river Ilissius in
ancient Athens "comprising an enclosure dedicated to Apollo and
adorned with fountains and buildings erected by Pisistratus, Pericles
and Lycurgus frequented by the youth for exercise and by the
philosopher Aristotle and his followers for teaching." 8 In time, the
word "Lyceum" became associated with schools and other institutions
providing public lectures and concerts and public discussions. Thus
today, the word "Lyceum" generally refers to a school or an institution
of learning. While the Latin word "lyceum" has been incorporated into
the English language, the word is also found in Spanish (liceo) and in
French (lycee). As the Court of Appeals noted in its Decision, Roman
Catholic schools frequently use the term; e.g., "Liceo de Manila,"
"Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo
de Albay." 9 "Lyceum" is in fact as generic in character as the word
"university." In the name of the petitioner, "Lyceum" appears to be a
substitute for "university;" in other places, however, "Lyceum," or
"Liceo" or "Lycee" frequently denotes a secondary school or a college.
24
It may be (though this is a question of fact which we need not resolve)
that the use of the word "Lyceum" may not yet be as widespread as
the use of "university," but it is clear that a not inconsiderable number
of educational institutions have adopted "Lyceum" or "Liceo" as part of
their corporate names. Since "Lyceum" or "Liceo" denotes a school or
institution of learning, it is not unnatural to use this word to designate
an entity which is organized and operating as an educational
institution.
It is claimed, however, by petitioner that the word "Lyceum" has
acquired a secondary meaning in relation to petitioner with the result
that that word, although originally a generic, has become appropriable
by petitioner to the exclusion of other institutions like private
respondents herein.
The doctrine of secondary meaning originated in the field of trademark
law. Its application has, however, been extended to corporate names
sine the right to use a corporate name to the exclusion of others is
based upon the same principle which underlies the right to use a
particular trademark or tradename. 10 In Philippine Nut Industry, Inc.
v. Standard Brands, Inc., 11 the doctrine of secondary meaning was
elaborated in the following terms:
" . . . a word or phrase originally incapable of exclusive appropriation
with reference to an article on the market, because geographically or
otherwise descriptive, might nevertheless have been used so long
and so exclusively by one producer with reference to his article that, in
that trade and to that branch of the purchasing public, the word or
phrase has come to mean that the article was his product." 12
The question which arises, therefore, is whether or not the use by
petitioner of "Lyceum" in its corporate name has been for such length
of time and with such exclusivity as to have become associated or
identified with the petitioner institution in the mind of the general public
(or at least that portion of the general public which has to do with
schools). The Court of Appeals recognized this issue and answered it
in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally
incapable of exclusive appropriation with reference to an article in the
market, because geographical or otherwise descriptive might
nevertheless have been used so long and so exclusively by one
producer with reference to this article that, in that trade and to that
group of the purchasing public, the word or phrase has come to mean
that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil.
56). This circumstance has been referred to as the distinctiveness into
which the name or phrase has evolved through the substantial and
exclusive use of the same for a considerable period of time.
Consequently, the same doctrine or principle cannot be made to apply
where the evidence did not prove that the business (of the plaintiff)
has continued for so long a time that it has become of consequence
and acquired a good will of considerable value such that its articles
and produce have acquired a well-known reputation, and confusion
will result by the use of the disputed name (by the defendant) (Ang Si
Heng vs. Wellington Department Store, Inc., 92 Phil. 448).
With the foregoing as a yardstick, [we] believe the appellant failed to
satisfy the aforementioned requisites. No evidence was ever
presented in the hearing before the Commission which sufficiently
proved that the word 'Lyceum' has indeed acquired secondary
meaning in favor of the appellant. If there was any of this kind, the
same tend to prove only that the appellant had been using the
disputed word for a long period of time. Nevertheless, its (appellant)
exclusive use of the word (Lyceum) was never established or proven
as in fact the evidence tend to convey that the cross-claimant was
already using the word 'Lyceum' seventeen (17) years prior to the
date the appellant started using the same word in its corporate name.
Furthermore, educational institutions of the Roman Catholic Church
had been using the same or similar word like 'Liceo de Manila,' 'Liceo
de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,' 'Liceo de Albay'
long before appellant started using the word 'Lyceum'. The appellant
also failed to prove that the word 'Lyceum' has become so identified
with its educational institution that confusion will surely arise in the
minds of the public if the same word were to be used by other
educational institutions.
In other words, while the appellant may have proved that it had been
using the word 'Lyceum' for a long period of time, this fact alone did
not amount to mean that the said word had acquired secondary
meaning in its favor because the appellant failed to prove that it had
25
been using the same word all by itself to the exclusion of others. More We conclude and so hold that petitioner institution is not entitled to a
so, there was no evidence presented to prove that confusion will legally enforceable exclusive right to use the word "Lyceum" in its
surely arise if the same word were to be used by other educational corporate name and that other institutions may use "Lyceum" as part
institutions. Consequently, the allegations of the appellant in its first of their corporate names. To determine whether a given corporate
two assigned errors must necessarily fail." 13 (Underscoring partly in name is "identical" or "confusingly or deceptively similar" with another
the original and partly supplied) entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names. One must evaluate corporate
We agree with the Court of Appeals. The number alone of the private names in their entirety and when the name of petitioner is juxtaposed
respondents in the case at bar suggests strongly that petitioner's use with the names of private respondents, they are not reasonably
of the word "Lyceum" has not been attended with the exclusivity regarded as "identical" or "confusingly or deceptively similar" with
essential for applicability of the doctrine of secondary meaning. It may each other.
be noted also that at least one of the private respondents, i.e., the
Western Pangasinan Lyceum, Inc., used the term "Lyceum" WHEREFORE, the petitioner having failed to show any reversible
seventeen (17) years before the petitioner registered its own error on the part of the public respondent Court of Appeals, the
corporate name with the SEC and began using the word "Lyceum." It Petition for Review is DENIED for lack of merit, and the Decision of
follows that if any institution had acquired an exclusive right to the the Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No
word "Lyceum," that institution would have been the Western pronouncement as to costs.
Pangasinan Lyceum, Inc. rather than the petitioner institution.
SO ORDERED.
In this connection, petitioner argues that because the Western
Pangasinan Lyceum, Inc. failed to reconstruct its records before the Bidin, Davide, Jr., Romero and Melo, JJ ., concur.
SEC in accordance with the provisions of R.A. No. 62, which records
had been destroyed during World War II, Western Pangasinan Gutierrez, Jr., J ., on terminal leave.
Lyceum should be deemed to have lost all rights it may have acquired
by virtue of its past registration. It might be noted that the Western
Pangasinan Lyceum, Inc. registered with the SEC soon after
petitioner had filed its own registration on 21 September 1950.
Whether or not Western Pangasinan Lyceum, Inc. must be deemed to
have lost its rights under its original 1933 registration, appears to us to
be quite secondary in importance; we refer to this earlier registration
simply to underscore the fact that petitioner's use of the word
"Lyceum" was neither the first use of that term in the Philippines nor
an exclusive use thereof. Petitioner's use of the word "Lyceum" was
not exclusive but was in truth shared with the Western Pangasinan
Lyceum and a little later with other private respondent institutions
which registered with the SEC using "Lyceum" as part of their
corporation names. There may well be other schools using Lyceum or
Liceo in their names, but not registered with the SEC because they
have not adopted the corporate form of organization.

26
G.R. No. 137592            December 12, 2001
ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS,
H.S.K. SA BANSANG PILIPINAS, INC., petitioner,
vs.
IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG
KATOTOHANAN, respondent.
YNARES-SANTIAGO, J.:
This is a petition for review assailing the Decision dated October 7,
19971 and the Resolution dated February 16, 19992 of the Court of
Appeals in CA-G.R. SP No. 40933, which affirmed the Decision of the
Securities and Exchange and Commission (SEC) in SEC-AC No.
539.3
Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng
Katotohanan (Church of God in Christ Jesus, the Pillar and Ground of
Truth),4 is a non-stock religious society or corporation registered in
1936. Sometime in 1976, one Eliseo Soriano and several other
members of respondent corporation disassociated themselves from
the latter and succeeded in registering on March 30, 1977 a new non-
stock religious society or corporation, named Iglesia ng Dios Kay
Kristo Hesus, Haligi at Saligan ng Katotohanan.
On July 16, 1979, respondent corporation filed with the SEC a petition
to compel the Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng
Katotohanan to change its corporate name, which petition was
docketed as SEC Case No. 1774. On May 4, 1988, the SEC rendered
judgment in favor of respondent, ordering the Iglesia ng Dios Kay
Kristo Hesus, Haligi at Saligan ng Katotohanan to change its
corporate name to another name that is not similar or identical to any
name already used by a corporation, partnership or association
registered with the Commission.5 No appeal was taken from said
decision.
It appears that during the pendency of SEC Case No. 1774, Soriano,
et al., caused the registration on April 25, 1980 of petitioner
corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus,
H.S.K, sa Bansang Pilipinas. The acronym "H.S.K." stands for Haligi
at Saligan ng Katotohanan.6
On March 2, 1994, respondent corporation filed before the SEC a
petition, docketed as SEC Case No. 03-94-4704, praying that
petitioner be compelled to change its corporate name and be barred
from using the same or similar name on the ground that the same
causes confusion among their members as well as the public.
Petitioner filed a motion to dismiss on the ground of lack of cause of
action. The motion to dismiss was denied. Thereafter, for failure to file
an answer, petitioner was declared in default and respondent was
allowed to present its evidence ex parte.
On November 20, 1995, the SEC rendered a decision ordering
petitioner to change its corporate name. The dispositive portion
thereof reads:
PREMISES CONSIDERED, judgment is hereby rendered in
favor of the petitioner (respondent herein).
Respondent Mga Kaanib sa Iglesia ng Dios Kay Kristo Jesus
(sic), H.S.K. sa Bansang Pilipinas (petitioner herein) is hereby
MANDATED to change its corporate name to another not
deceptively similar or identical to the same already used by the
Petitioner, any corporation, association, and/or partnership
presently registered with the Commission.
Let a copy of this Decision be furnished the Records Division
and the Corporate and Legal Department [CLD] of this
Commission for their records, reference and/or for whatever
requisite action, if any, to be undertaken at their end.
SO ORDERED.7
Petitioner appealed to the SEC En Banc, where its appeal was
docketed as SEC-AC No. 539. In a decision dated March 4, 1996, the
SEC En Banc affirmed the above decision, upon a finding that
petitioner's corporate name was identical or confusingly or deceptively
similar to that of respondent's corporate name.8
27
Petitioner filed a petition for review with the Court of Appeals. On
October 7, 1997, the Court of Appeals rendered the assailed decision
affirming the decision of the SEC En Banc. Petitioner's motion for
reconsideration was denied by the Court of Appeals on February 16,
1992.
Hence, the instant petition for review, raising the following assignment
of errors:
I The contention is without merit. As a general rule, the negligence of
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING
THAT PETITIONER HAS NOT BEEN DEPRIVED OF ITS RIGHT TO
PROCEDURAL DUE PROCESS, THE HONORABLE COURT OF
APPEALS DISREGARDED THE JURISPRUDENCE APPLICABLE
TO THE CASE AT BAR AND INSTEAD RELIED ON TOTALLY
INAPPLICABLE JURISPRUDENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN ITS
INTERPRETATION OF THE CIVIL CODE PROVISIONS ON
EXTINCTIVE PRESCRIPTION, THEREBY RESULTING IN ITS
FAILURE TO FIND THAT THE RESPONDENT'S RIGHT OF ACTION
TO INSTITUTE THE SEC CASE HAS SINCE PRESCRIBED PRIOR
TO ITS INSTITUTION.
III
THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER
AND PROPERLY APPLY THE EXCEPTIONS ESTABLISHED BY
JURISPRUDENCE IN THE APPLICATION OF SECTION 18 OF THE
CORPORATION CODE TO THE INSTANT CASE.
IV
THE HONORABLE COURT OF APPEALS FAILED TO PROPERLY
APPRECIATE THE SCOPE OF THE CONSTITUTIONAL
GUARANTEE ON RELIGIOUS FREEDOM, THEREBY FAILING TO
APPLY THE SAME TO PROTECT PETITIONER'S RIGHTS.9
Invoking the case of Legarda v. Court of Appeals,10 petitioner insists
that the decision of the Court of Appeals and the SEC should be set
aside because the negligence of its former counsel of record, Atty.
Joaquin Garaygay, in failing to file an answer after its motion to
dismiss was denied by the SEC, deprived them of their day in court.
counsel binds the client. This is based on the rule that any act
performed by a lawyer within the scope of his general or implied
authority is regarded as an act of his client.11 An exception to the
foregoing is where the reckless or gross negligence of the counsel
deprives the client of due process of law. 12 Said exception, however,
does not obtain in the present case.
In Legarda v. Court of Appeals, the effort of the counsel in defending
his client's cause consisted in filing a motion for extension of time to
file answer before the trial court. When his client was declared in
default, the counsel did nothing and allowed the judgment by default
to become final and executory. Upon the insistence of his client, the
counsel filed a petition to annul the judgment with the Court of
Appeals, which denied the petition, and again the counsel allowed the
denial to become final and executory. This Court found the counsel
grossly negligent and consequently declared as null and void the
decision adverse to his client.
The factual antecedents of the case at bar are different. Atty.
Garaygay filed before the SEC a motion to dismiss on the ground of
lack of cause of action. When his client was declared in default for
failure to file an answer, Atty. Garaygay moved for reconsideration
and lifting of the order of default.13 After judgment by default was
rendered against petitioner corporation, Atty. Garaygay filed a motion
for extension of time to appeal/motion for reconsideration, and
thereafter a motion to set aside the decision.14
Evidently, Atty. Garaygay was only guilty of simple negligence.
Although he failed to file an answer that led to the rendition of a
28
judgment by default against petitioner, his efforts were palpably real,
albeit bereft of zeal.15
Likewise, the issue of prescription, which petitioner raised for the first
time on appeal to the Court of Appeals, is untenable. Its failure to
raise prescription before the SEC can only be construed as a waiver
of that defense.16 At any rate, the SEC has the authority to de-register
at all times and under all circumstances corporate names which in its
estimation are likely to spawn confusion. It is the duty of the SEC to
prevent confusion in the use of corporate names not only for the
protection of the corporations involved but more so for the protection
of the public.17
Section 18 of the Corporation Code provides:
Corporate Name. — No corporate name may be allowed by
the Securities and Exchange Commission if the proposed
name is identical or deceptively or confusingly similar to that of
any existing corporation or to any other name already
protected by law or is patently deceptive, confusing or is
contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended
certificate of incorporation under the amended name.
Corollary thereto, the pertinent portion of the SEC Guidelines on
Corporate Names states:
(d) If the proposed name contains a word similar to a word
already used as part of the firm name or style of a registered
company, the proposed name must contain two other words
different from the name of the company already registered;
Parties organizing a corporation must choose a name at their peril;
and the use of a name similar to one adopted by another corporation,
whether a business or a nonprofit organization, if misleading or likely
to injure in the exercise of its corporate functions, regardless of intent,
may be prevented by the corporation having a prior right, by a suit for
injunction against the new corporation to prevent the use of the
name.18
Petitioner claims that it complied with the aforecited SEC guideline by
adding not only two but eight words to their registered name, to wit:
"Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which, petitioner
argues, effectively distinguished it from respondent corporation.
The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas,
Inc." in petitioner's name are, as correctly observed by the SEC,
merely descriptive of and also referring to the members, or kaanib, of
respondent who are likewise residing in the Philippines. These words
can hardly serve as an effective differentiating medium necessary to
avoid confusion or difficulty in distinguishing petitioner from
respondent. This is especially so, since both petitioner and
respondent corporations are using the same acronym — H.S.K.;19 not
to mention the fact that both are espousing religious beliefs and
operating in the same place. Parenthetically, it is well to mention that
the acronym H.S.K. used by petitioner stands for "Haligi at Saligan ng
Katotohanan."20
Then, too, the records reveal that in holding out their corporate name
to the public, petitioner highlights the dominant words "IGLESIA NG
DIOS KAY KRISTO HESUS, HALIGI AT SALIGAN NG
KATOTOHANAN," which is strikingly similar to respondent's corporate
name, thus making it even more evident that the additional words
"Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.", are merely
descriptive of and pertaining to the members of respondent
corporation.21
Significantly, the only difference between the corporate names of
petitioner and respondent are the words SALIGAN and SUHAY.
These words are synonymous — both mean ground, foundation or
support. Hence, this case is on all fours with Universal Mills
Corporation v. Universal Textile Mills, Inc.,22 where the Court ruled
that the corporate names Universal Mills Corporation and Universal
Textile Mills, Inc., are undisputably so similar that even under the test
of "reasonable care and observation" confusion may arise.
Furthermore, the wholesale appropriation by petitioner of respondent's
corporate name cannot find justification under the generic word rule.
We agree with the Court of Appeals' conclusion that a contrary ruling
29
would encourage other corporations to adopt verbatim and register an
existing and protected corporate name, to the detriment of the public.

The fact that there are other non-stock religious societies or

corporations using the names Church of the Living God, Inc., Church
of God Jesus Christ the Son of God the Head, Church of God in
Christ & By the Holy Spirit, and other similar names, is of no
consequence. It does not authorize the use by petitioner of the
essential and distinguishing feature of respondent's registered and
protected corporate name.23

We need not belabor the fourth issue raised by petitioner. Certainly,

ordering petitioner to change its corporate name is not a violation of
its constitutionally guaranteed right to religious freedom. In so doing,
the SEC merely compelled petitioner to abide by one of the SEC
guidelines in the approval of partnership and corporate names,
namely its undertaking to manifest its willingness to change its
corporate name in the event another person, firm, or entity has
acquired a prior right to the use of the said firm name or one
deceptively or confusingly similar to it.

WHEREFORE, in view of all the foregoing, the instant petition for

review is DENIED. The appealed decision of the Court of Appeals is
AFFIRMED in toto.

SO ORDERED.

Davide, Jr., C .J ., Kapunan and Pardo, JJ ., concur.

Puno, J ., on official leave.

30
 SECOND DIVISION
G.R. No. 122174             October 3, 2002
INDUSTRIAL REFRACTORIES CORPORATION OF THE
PHILIPPINES, petitioner,
vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE
COMMISSION and REFRACTORIES CORPORATION OF THE
PHILIPPINES, respondents.
AUSTRIA-MARTINEZ, J.:
Filed before us is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the Decision of the Court of Appeals in
CA-G.R. SP No. 35056, denying due course and dismissing the
petition filed by Industrial Refractories Corp. of the Philippines (IRCP).
Respondent Refractories Corporation of the Philippines (RCP) is a
corporation duly organized on October 13, 1976 for the purpose of
engaging in the business of manufacturing, producing, selling,
exporting and otherwise dealing in any and all refractory bricks, its by-
products and derivatives. On June 22, 1977, it registered its corporate
and business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23,
1979 originally under the name "Synclaire Manufacturing
Corporation". It amended its Articles of Incorporation on August 23,
1985 to change its corporate name to "Industrial Refractories Corp. of
the Philippines". It is engaged in the business of manufacturing all
kinds of ceramics and other products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning
mix.1
Discovering that petitioner was using such corporate name,
respondent RCP filed on April 14, 1988 with the Securities and
Exchange Commission (SEC) a petition to compel petitioner to
change its corporate name on the ground that its corporate name is
confusingly similar with that of petitioner’s such that the public may be
confused or deceived into believing that they are one and the same
corporation.2
The SEC decided in favor of respondent RCP and rendered judgment
on July 23, 1993 with the following dispositive portion:
"WHEREFORE, judgment is hereby rendered in favor of the petitioner
and against the respondent declaring the latter’s corporate name
‘Industrial Refractories Corporation of the Philippines’ as deceptively
and confusingly similar to that of petitioner’s corporate name
‘Refractories Corporation of the Philippines’. Accordingly, respondent
is hereby directed to amend its Articles of Incorporation by deleting
the name ‘Refractories Corporation of the Philippines’ in its corporate
name within thirty (30) days from finality of this Decision. Likewise,
respondent is hereby ordered to pay the petitioner the sum of
P50,000.00 as attorney’s fees."3
Petitioner appealed to the SEC En Banc, arguing that it does not have
any jurisdiction over the case, and that respondent RCP has no right
to the exclusive use of its corporate name as it is composed of
generic or common words.4
In its Decision dated July 23, 1993, the SEC En Banc modified the
appealed decision in that petitioner was ordered to delete or drop from
its corporate name only the word "Refractories".5
Petitioner IRCP elevated the decision of the SEC En Banc through a
petition for review on certiorari to the Court of Appeals which then
rendered the herein assailed decision. The appellate court upheld the
jurisdiction of the SEC over the case and ruled that the corporate
names of petitioner IRCP and respondent RCP are confusingly or
deceptively similar, and that respondent RCP has established its prior
right to use the word "Refractories" as its corporate name.6 The
appellate court also found that the petition was filed beyond the
reglementary period.7
Hence, herein petition which we must deny.
31
Petitioner contends that the petition before the Court of Appeals was
timely filed. It must be noted that at the time the SEC En Banc
rendered its decision on May 10, 1994, the governing rule on appeals
from quasi-judicial agencies like the SEC was Supreme Court
Circular No. 1-91. As provided therein, the remedy should have been
a petition for review filed before the Court of Appeals within fifteen
(15) days from notice, raising questions of fact, of law, or mixed
questions of fact and law.8 A motion for reconsideration suspends the
running of the period.9
In the case at bench, there is a discrepancy between the dates
provided by petitioner and respondent. Petitioner alleges the following
dates of receipt and filing:10
June 10, 1994 Receipt of SEC’s Decision dated May 10, 1994
June 20, 1994 Filing of Motion for Reconsideration
September 1, 1994 Receipt of SEC’s Order dated August 3,
1994 denying petitioner’s motion for reconsideration
September 2, 1994 Filing of Motion for extension of time
September 6, 1994 Filing of Petition
Respondent RCP, however, asserts that the foregoing dates are
incorrect as the certifications issued by the SEC show that petitioner
received the SEC’s Decision dated May 10, 1994 on June 9, 1994,
filed the motion for reconsideration via registered mail on June 25,
1994, and received the Order dated August 3, 1994 on August 15,
1994.11 Thus, the petition was filed twenty-one (21) days beyond the
reglementary period provided in Supreme Court Circular No. 1-91.12
If reckoned from the dates supplied by petitioner, then the petition was
timely filed. On the other hand, if reckoned from the dates provided by
respondent RCP, then it was filed way beyond the reglementary
period. On this score, we agree with the appellate court’s finding that
petitioner failed to rebut respondent RCP’s allegations of material
dates of receipt and filing.13 In addition, the certifications were
executed by the SEC officials based on their official records14 which
enjoy the presumption of regularity.15 As such, these are prima facie
evidence of the facts stated therein.16 And based on such dates, there
is no question that the petition was filed with the Court of Appeals
beyond the fifteen (15) day period. On this ground alone, the instant
petition should be denied as the SEC En Banc’s decision had already
attained finality and the SEC’s findings of fact, when supported by
substantial evidence, is final.17
Nevertheless, to set the matters at rest, we shall delve into the other
issues posed by petitioner.
Petitioner’s arguments, substantially, are as follows: (1) jurisdiction is
vested with the regular courts as the present case is not one of the
instances provided in P.D. 902-A; (2) respondent RCP is not entitled
to use the generic name "refractories"; (3) there is no confusing
similarity between their corporate names; and (4) there is no basis for
the award of attorney’s fees.18
Petitioner’s argument on the SEC’s jurisdiction over the case is utterly
myopic. The jurisdiction of the SEC is not merely confined to the
adjudicative functions provided in Section 5 of P.D. 902-A, as
amended.19 By express mandate, it has absolute jurisdiction,
supervision and control over all corporations.20 It also exercises
regulatory and administrative powers to implement and enforce the
Corporation Code,21 one of which is Section 18, which provides:
"SEC. 18. Corporate name. -- No corporate name may be allowed by
the Securities and Exchange Commission if the proposed name is
identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing laws. When a
change in the corporate name is approved, the Commission shall
issue an amended certificate of incorporation under the amended
name."
It is the SEC’s duty to prevent confusion in the use of corporate
names not only for the protection of the corporations involved but
more so for the protection of the public, and it has authority to de-
register at all times and under all circumstances corporate names
32
which in its estimation are likely to generate confusion.22 Clearly
therefore, the present case falls within the ambit of the SEC’s
regulatory powers.23
Likewise untenable is petitioner’s argument that there is no confusing
or deceptive similarity between petitioner and respondent RCP’s
corporate names. Section 18 of the Corporation Code expressly
prohibits the use of a corporate name which is "identical or
deceptively or confusingly similar to that of any existing corporation or
to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws". The policy behind the
foregoing prohibition is to avoid fraud upon the public that will have
occasion to deal with the entity concerned, the evasion of legal
obligations and duties, and the reduction of difficulties of
administration and supervision over corporation.24
Pursuant thereto, the Revised Guidelines in the Approval of Corporate
and Partnership Names25 specifically requires that: (1) a corporate
name shall not be identical, misleading or confusingly similar to one
already registered by another corporation with the Commission;26 and
(2) if the proposed name is similar to the name of a registered firm,
the proposed name must contain at least one distinctive word different
from the name of the company already registered.27
As held in Philips Export B.V. vs. Court of Appeals,28 to fall within
the prohibition of the law, two requisites must be proven, to wit:
(1) that the complainant corporation acquired a prior right over the use
of such corporate name;
and
(2) the proposed name is either: (a) identical, or (b) deceptively or
confusingly similar to that of any existing corporation or to any other
name already protected by law; or (c) patently deceptive, confusing or
contrary to existing law.
As regards the first requisite, it has been held that the right to the
exclusive use of a corporate name with freedom from infringement by
similarity is determined by priority of adoption.29 In this case,
respondent RCP was incorporated on October 13, 1976 and since
then has been using the corporate name "Refractories Corp. of the
Philippines". Meanwhile, petitioner was incorporated on August 23,
1979 originally under the name "Synclaire Manufacturing
Corporation". It only started using the name "Industrial Refractories
Corp. of the Philippines" when it amended its Articles of Incorporation
on August 23, 1985, or nine (9) years after respondent RCP started
using its name. Thus, being the prior registrant, respondent RCP has
acquired the right to use the word "Refractories" as part of its
corporate name.
Anent the second requisite, in determining the existence of confusing
similarity in corporate names, the test is whether the similarity is such
as to mislead a person using ordinary care and discrimination and the
Court must look to the record as well as the names
themselves.30 Petitioner’s corporate name is "Industrial Refractories
Corp. of the Phils.", while respondent’s is "Refractories Corp. of the
Phils." Obviously, both names contain the identical words
"Refractories", "Corporation" and "Philippines". The only word that
distinguishes petitioner from respondent RCP is the word "Industrial"
which merely identifies a corporation’s general field of activities or
operations. We need not linger on these two corporate names to
conclude that they are patently similar that even with reasonable care
and observation, confusion might arise.31 It must be noted that both
cater to the same clientele, i.e.¸ the steel industry. In fact, the SEC
found that there were instances when different steel companies were
actually confused between the two, especially since they also have
similar product packaging.32 Such findings are accorded not only great
respect but even finality, and are binding upon this Court, unless it is
shown that it had arbitrarily disregarded or misapprehended evidence
before it to such an extent as to compel a contrary conclusion had
such evidence been properly appreciated. 33 And even without such
proof of actual confusion between the two corporate names, it suffices
that confusion is probable or likely to occur.34
Refractory materials are described as follows:
"Refractories are structural materials used at high temperatures to
[sic] industrial furnaces. They are supplied mainly in the form of brick
33
of standard sizes and of special shapes. Refractories also include
refractory cements, bonding mortars, plastic firebrick, castables,
ramming mixtures, and other bulk materials such as dead-burned
grain magneside, chrome or ground ganister and special clay."35

While the word "refractories" is a generic term, its usage is not

widespread and is limited merely to the industry/trade in which it is
used, and its continuous use by respondent RCP for a considerable
period has made the term so closely identified with it. 36 Moreover, as
held in the case of Ang Kaanib sa Iglesia ng Dios kay Kristo
Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay
Cristo Jesus, Haligi at Suhay ng Katotohanan, petitioner’s
appropriation of respondent's corporate name cannot find justification
under the generic word rule. 37 A contrary ruling would encourage
other corporations to adopt verbatim and register an existing and
protected corporate name, to the detriment of the public.38

Finally, we find the award of P50,000.00 as attorney's fees to be fair

and reasonable. Article 2208 of the Civil Code allows the award of
such fees when its claimant is compelled to litigate with third persons
or to incur expenses to protect its just and valid claim. In this case,
despite its undertaking to change its corporate name in case another
firm has acquired a prior right to use such name,39 it refused to do so,
thus compelling respondent to undergo litigation and incur expenses
to protect its corporate name.

WHEREFORE, the instant petition for review on certiorari is hereby

DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.

Bellosillo, Acting C.J., (Chairman), Quisumbing, and Callejo, Sr., JJ.,

concur.

Mendoza, J., on official leave.

34