ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC. vs.

SECURITIES & EXCHANGE COMMISSION

G.R. No. L23606 July 29, 1968

FACTS:

1. Petitioner Alhambra was duly incorporated under Philippine laws on January 15,
1912.
2. By its corporate articles it was to exist for fifty years from incorporation.
3. Its term of existence expired on January 15, 1962.
4. On that date, it ceased transacting business, entered into a state of liquidation.
5. Thereafter, a new corporation. — Alhambra Industries, Inc. — was formed to carry
on the business of Alhambra.
6. On June 20, 1963 — within Alhambra's three year statutory period for liquidation
Republic Act 3531 was enacted into law.
7. It amended Section 18 of the Corporation Law; It empowered domestic private
corporations to extend their corporate life beyond the period fixed by the articles of
incorporation for a term not to exceed fifty years in any one instance.  Previous to RA
3531, the maximum non extendible term of such corporations was fifty years.
8. On July 15, 1963, at a special meeting, Alhambra's board of directors resolved to
amend its articles of incorporation to extend its corporate life for an additional fifty
years, or a total of 100 years from its incorporation.
9. On August 26, 1963, Alhambra's stockholders, representing more than two thirds of
its subscribed capital stock, voted to approve the foregoing resolution.
10. On October 28, 1963, Alhambra's articles of incorporation as so amended were filed
with respondent SEC.
11. On November 18, 1963, SEC, however, returned said amended articles of
incorporation.

ISSUE:
            May a corporation extend its life by amendment of its articles of incorporation
effected during the three year statutory period for liquidation when its original term of
existence had already expired?

RULING:
            The liquidation of the corporation's affairs set forth in Section 77 became necessary
precisely because its life had ended. For this reason alone, the corporate existence and
juridical personality of that corporation to do business may no longer be extended.
            Upon its dissolution, a corporation became legally dead for all purposes. Statutory
authorizations had to be provided for its continuance after dissolution "for limited and
specified purposes incident to complete liquidation of its affairs". Thus, the moment a
corporation's right to exist as an "artificial person" ceases, its corporate powers are terminated
"just as the powers of a natural person to take part in mundane affairs cease to exist upon his
death". There is nothing left but to conduct, as it were, the settlement of the estate of a
deceased juridical person.

            Section 77 - the privilege given to prolong corporate life under the amendment must
be exercised before the expiry of the term fixed in the articles of incorporation.
Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus vs Iglesia ng Dios kay
Cristo Jesus, Haligi at Suhay ng Katotohanan Case Digest

Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, HSK sa Bansang
Pilipinas Inc. vs. Iglesia ng Dios kay Cristo Jesus, Haligi at Suhay ng
Katotohanan
[GR 137592, 12 December 2001]

Facts: The Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (IDCJ-
HSK; Church of God in Christ Jesus, the Pillar and Ground of Truth), is a non-stock
religious society or corporation registered in 1936. Sometime in 1976, one Eliseo
Soriano and several other members of said corporation disassociated themselves
from the latter and succeeded in registering on 30 March 1977 a new non-stock
religious society or corporation, named Iglesia ng Dios Kay Kristo Hesus, Haligi at
Saligan ng Katotohanan (IDKJ-HSK). On 16 July 1979, IDCJ-HSK filed with the SEC
a petition to compel IDKJ-HSK to change its corporate name (SEC Case 1774). On 4
May 1988, the SEC rendered judgment in favor of IDCJ-HSK, ordering IDKJ-HSK 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. No appeal was taken from said decision. 

During the pendency of SEC Case 1774, Soriano, et al., caused the registration on
25 April 1980 of Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa
Bansang Pilipinas (AK[IDKH-HSK]BP). The acronym "H.S.K." stands for Haligi at
Saligan ng Katotohanan. On 2 March 1994, IDCJ-HSK filed before the SEC a
petition (SEC Case 03-94-4704), praying that AK[IDKH-HSK]BP 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. KIDKH-HSK-BP 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,
AK[IDKH-HSK]BP was declared in default and IDCJ-HSK was allowed to present its
evidence ex parte. On 20 November 1995, the SEC rendered a decision ordering
AK[IDKH-HSK]BP to change its corporate name. AK[IDKH-HSK]BP appealed to the
SEC En Banc (SEC-AC 539). In a decision dated 4 March 1996, the SEC En Banc
affirmed the above decision, upon a finding that AK[IDKH-HSK]BP's corporate name
was identical or confusingly or deceptively similar to that of IDCJ-HSK's corporate
name. AK[IDKH-HSK]BP filed a petition for review with the Court of Appeals. On 7
October 1997, the Court of Appeals rendered the decision affirming the decision of
the SEC En Banc. AK[IDKH-HSK]BP's motion for reconsideration was denied by the
Court of Appeals on 16 February 1992. AK[IDKH-HSK]BP filed the petition for
review. 

Issue:

1. Whether the corporate names of AK[IDKH-HSK]BP and IDCH-HSK are

confusingly similar. 
2. Whether the generic word rule would apply to support AK[IDKH-HSK]BP’s
cause. 
Held:

1. 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.
Section 18 of the Corporation Code provides that "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 that "(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. Herein, the additional words "Ang Mga Kaanib " and "Sa Bansang
Pilipinas, Inc." in AK[IDKH-HSK]BP's name are merely descriptive of and also
referring to the members, or kaanib, of IDCH-HSK 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 AK[IDKH-HSK]BP from
IDCH-HSK. This is especially so, since both AK[IDKH-HSK]BP and IDCH-HSK are
using the same acronym — H.S.K.; 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 AK[IDKH-HSK]BP stands for "Haligi at Saligan ng
Katotohanan." Then, too, the records reveal that in holding out their corporate name
to the public, AK[IDKH-HSK]BP highlights the dominant words "IGLESIA NG DIOS
KAY KRISTO HESUS, HALIGI AT SALIGAN NG KATOTOHANAN," which is
strikingly similar to IDCH-HSK'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 IDCH-HSK. Significantly, the
only difference between the corporate names of AK[IDKH-HSK]BP and IDCH-HSK
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. 

3. The wholesale appropriation by AK[IDKH-HSK]BP of IDCH-HSK's corporate

name cannot find justification under the generic word rule. A contrary ruling
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 AK[IDKH-
HSK]BP of the essential and distinguishing feature of IDCH-HSK's registered
and protected corporate name. 

PHILIPS EXPORT VS. COURT OF APPEALS- Corporate

Trade Name

A corporation’s right to use its corporate and trade name is a property right, a right in rem,
which it may assert and protect against the whole world.

FACTS:

Philips Export B.V. (PEBV) filed with the SEC for the cancellation of the word “Philips” the
corporate name of Standard Philips Corporation in view of its prior registration with the
Bureau of Patents and the SEC. However, Standard Philips refused to amend its Articles of
Incorporation so PEBV filed with the SEC a petition for the issuance of a Writ of Preliminary
Injunction, however this was denied ruling that it can only be done when the corporate names
are identical and they have at least 2 words different. This was affirmed by the SEC en banc
and the Court of Appeals thus the case at bar.

ISSUE:

Whether or not Standard Philips can be enjoined from using Philips in its corporate name

RULING: YES

A corporation’s right to use its corporate and trade name is a property right, a right in rem,
which it may assert and protect against the whole world. According to Sec. 18 of the
Corporation Code, no corporate name may be allowed if the proposed name is identical or
deceptively 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 law.

For the prohibition to apply, 2 requisites must be present:

(1) the complainant corporation must have acquired a prior right over the use of such
corporate name and
(2) the proposed name is either identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or patently deceptive,
confusing or contrary to existing law.

With regard to the 1st requisite, PEBV adopted the name “Philips” part of its name 26 years
before Standard Philips. As regards the 2nd, the test for the existence of confusing similarity
is whether the similarity is such as to mislead a person using ordinary care and
discrimination. Standard Philips only contains one word, “Standard”, different from that of
PEBV. The 2 companies’ products are also the same, or cover the same line of products.
Although PEBV primarily deals with electrical products, it has also shipped to its subsidiaries
machines and parts which fall under the classification of “chains, rollers, belts, bearings and
cutting saw”, the goods which Standard Philips also produce. Also, among Standard Philips’
primary purposes are to buy, sell trade x x x electrical wiring devices, electrical component,
electrical supplies. Given these, there is nothing to prevent Standard Philips from dealing in
the same line of business of electrical devices. The use of “Philips” by Standard Philips tends
to show its intention to ride on the popularity and established goodwill of PEBV

SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES

v. NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST, GR NO.
150416, 2006-07-21

Facts:

That we Felix Cosio

Felisa Cuysona... do hereby grant, convey and forever quit claim by way of Donation or gift
unto the South Philippine [Union] Mission of Seventh Day Adventist Church of Bayugan,
Esperanza, Agusan, all the rights, title, interest, claim and demand both at law and as well
in... possession as in expectancy of in and to all the place of land and portion situated in the
Barrio of Bayugan, Municipality of Esperanza, Province of Agusan, Philippines

The donation was allegedly accepted by one Liberato Rayos, an elder of the Seventh Day
Adventist Church, on behalf of the donee.

Twenty-one years later, however, on February 28, 1980, the same parcel of land was sold by
the spouses Cosio to the Seventh Day Adventist Church of Northeastern Mindanao Mission
(SDA-NEMM).

petitioners asserted ownership over the property. This was opposed by respondents who
argued that at the time of the donation, SPUM-SDA Bayugan could not legally be a donee
because, not having been incorporated yet, it... had no juridical personality.

Neither were petitioners members of the local church then, hence, the donation could not
have been made particularly to them.

tr

After trial, the trial court rendered a decision[7] 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.

Issues:

should SDA-NEMM's ownership of the lot covered by TCT No. 4468 be upheld?[9] We
answer in the affirmative.

Ruling:

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.

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.

Petitioners themselves admitted that at the time of the donation, they were not registered with
the SEC, nor did they even attempt to... organize[14] 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.

were not even members of the local church then, thus, they could not even claim that the
donation was particularly for them.

Principles:

"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.

ASIA BANKING CORPORATION vs. STANDARD PRODUCTS, CO., INC

G.R. No. 22106 September 11, 1924

FACTS: Standard Products, Co., Inc., was indebted to Asia Banking Corporation for the
amount

of P37,757.22. To secure its indebtedness, it executed a promissory note in favor of plaintiff-

appellee. Upon demand for the balance due, the respondent-appellant failed to pay. Hence an

action was brought by plaintiff-appellee to recover the sum of P24,736.47. The court
rendered

judgment in favor of the plaintiff-appellee for the sum demanded in the complaint, with
interest

on the sum of P24,147.34 from November 1, 1923, at the rate of 10 per cent per annum, and

the costs. Hence this appeal by the respondent-appellant. At the trial of the case the plaintiff

failed to prove affirmatively the corporate existence of the parties and the appellant insists
that

under these circumstances the court erred in finding that the parties were corporations with

juridical personality and assigns same as reversible error.

ISSUE: Whether or not respondent is estopped from denying the corporate existence of the

plaintiff.

RULING: The general rule is that in the absence of fraud a person who has contracted or

otherwise dealt with an association in such a way as to recognize and in effect admit its legal

existence as a corporate body is thereby estopped to deny its corporate existence in any action

leading out of or involving such contract or dealing, unless its existence is attacked for cause

which have arisen since making the contract or other dealing relied on as an estoppel and this

applies to foreign as well as to domestic corporations. The defendant having recognized the
corporate existence of the plaintiff by making a promissory note in its favor and making
partial

payments on the same is therefore estopped to deny said plaintiff's corporate existence. It is,
of

course, also estopped from denying its own corporate existence. Under these circumstances it

was unnecessary for the plaintiff to present other evidence of the corporate existence of either

of the parties. It may be noted that there is no evidence showing circumstances taking the
case

out of the rules stated.

G.R. No. L-19118             January 30, 1965

MARIANO A. ALBERT, plaintiff-appellant, 
vs.
UNIVERSITY PUBLISHING CO., INC., defendant-appellee.
Uy & Artiaga and Antonio M. Molina for plaintiff-appellant.
Aruego, Mamaril & Associates for defendant-appellees.

(BENGZON, J.P., J.)
Facts:
The University Publishing Co. Inc. through its President Jose Aruego entered into a
contract with Mariano Albert whereby the corporation agreed to pay a certain sum in
installments for the exclusive right to publish his revised commentaries in the RPC and for his share
in the previous sale of the book’s first edit edition. The corporation failed to pay the second
installment thereby making the whole amount due and demandable (i.e. there was an acceleration
clause). Albert then sued the corporation.
The lower court rendered judgment in favor of Albert and a writ of execution was issued
against the corporation. Albert however, petitioned for a writ of execution against Aruego, as the
real defendant, stating that there is no such entity as University Publishing Co. Inc. Albert
annexed to his petition a certification from the SEC saying that their records contain no such
registered corporation.
The corporation countered by saying that Aruego is not a party to this case and that,
therefore, Albert’s petition should be denied. The corporation countered by saying that Aruego is
not a party to this case, and that therefore, Albert’s petition should be denied. The corporation,
actually did not want Aruego to be declared a party to the present case is because there would be
no need to institute a separate action against Aruego to be declared a party to the present case
is because there would then be a need to institute a separate action against Aruego; and if this is
done, Aruego can set up the defense of prescription under the Statute of Limitations.

Held:

1.) The corporation cannot invoke the doctrine of estoppel. The fact of non-registration of the
corporation has not been disputed because the corporation only raised the point that it and not
Aruego is the party defendant thereby assuming that the corporation is an existing
corporation with an independent juridical personality. HOWEVER, precisely on account of non-
registration, it cannot be considered a corporation not even a corporation de facto. It has
therefore no personality separate from Aruego; it cannot be sued independently. The estoppel
doctrine has not been invoked and even if it had been, it is not applicable to the case at bar: (a)
Aruego had represented a non-existing entity and induced not only Albert but also the court to
believe in such representation (b) He signed the contract as president of the corporation
stating that this was a corporation duly organized and existing under the laws of the Philippines.
One who induced another to act upon his willful misrepresentation that a corporation was duly
organized and existing under the law, cannot thereafter set up against his victim the principle of
corporation by estoppel.

2.) Aruego is the real defendant as he had control over the proceedings. Had Aruego been named as
party defendant instead of or together with the corporation, there would be no room for debate
as to his personal liability. Since he was not so named, matters of due process have arisen. Parties
to a suit are persons who have a right to control the proceedings, to make defense, to adduce and
crossexamine witnesses and to appeal from a decision. In the case at bar, Aruego, was and in reality,
the one who answered and litigated through his own firm as counsel. He was in fact, if not on
name, the defendant. Clearly then Aruego had his day in court as the real defendant and due
process of law has been substantially observed.

3.) Aruego is the real party in interest because he reaped the benefits from the contract.

BISAYA LAND TRANSPORTATION COMPANY, INC vs. MIGUEL CUENCO

G.R. No. L-18173 April 22, 1968

FACTS: In 1959 the Solicitor General, in representation of the Republic, filed a petition for
quo
warranto against the Bisaya Land Transportation Co., Inc., seeking its forcible dissolution.
The
petition was docketed as special civil case No. 39766, CFI of Manila. Impleaded with the
corporation as respondents were its officers, among them is Miguel Cuenco. Respondent filed
his individual answer to the petition, admitting the allegations therein insofar as the offending
acts of the corporation and of the other individual respondents were concerned but
disclaiming
any participation in such acts by him. He joined in the prayer for dissolution as well as for the
appointment of a receiver, and at the same time filed a cross-claim "in his own behalf as
bonafide stockholder and as director for the benefit of cross-respondent Corporation." On
August 31, 1959 Miguel, as cross-claimant, filed a notice of lis pendens with the Register of
Deeds for the City of Cebu, covering real properties of the corporation. The corporation went
to
the CFI of Cebu and in the original land registration records of said properties filed a petition
for
the cancellation of the notice of lis pendens, making Miguel the party-respondent. After
hearing,
the court in its decision held the annotation of lis pendens to be irregular and unwarranted and
so ordered its cancellation. Hence, this appeal.

ISSUE: Whether or not the petition for quo warranto filed by the Solicitor General for the
dissolution of the appellee corporation affects the latter's title or right of possession to the real
properties subject of the lis pendens.

RULING: The Republic and respondent cross-claimant Miguel Cuenco lays no any claim of
right or title to the lands covered by the notice. They admit ownership thereof by the
corporation.
Indeed the cross-claim is for the latter's benefit and against the other individual cross-
respondents, who likewise do not claim any right or title to the said properties. As far as the
cross-claim is concerned it merely prays that the cross-respondents be ordered to reimburse
the
corporation certain sums of money allegedly realized by them as a result of their fraudulent
transactions. The title to or right to possess the properties subject of the lis pendens is
nowhere
in issue. The fact that in case the petitioning corporation is dissolved its assets will be
liquidated
and distributed among the stockholders, after paying off the creditors, and that part of those
assets as of the present consists of the properties now in question, does not convert this
proceeding into a real action involving the title to these properties so as to justify the notation
of lis pendens. The rights of the stockholders to the assets will arise only after dissolution of
the
corporation, and even then they cannot individually lay claim to any particular property or
any
part thereof as their own except as a result of the liquidation. They have therefore no title or
possessory right to protect by the notice.

ARNOLD HALL vs. EDMUNDO PICCIO

G.R. No. L-2598 / June 29, 1950

FACTS:

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 articles 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 articles 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.

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. On December 2,
1947, the said articles of incorporation were filed in the office of the Securities and Exchange
Commission  for the issuance of the corresponding certificate of incorporation.

On March 22, 1948, pending action on the articles of incorporation by the SEC,  respondents
Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella filed a suit against
petitioners before the Court of First Instance of Leyte 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.

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 sufficiency of the cause of action.
After hearing the parties, the Hon. Edmundo S. Piccio ordered the dissolution of the
company; and at the request of plaintiffs, appointed the respondent Pedro A. Capuciong as
receiver of the properties thereof, upon the filing of a P20,000 bond.

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.

Hence, this petition.

ISSUE:

Whether or not the trial court has jurisdiction over the case?

HELD:

No. 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.

Under our statute it is to be noted 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 of collateral attack is granted to corporations ‘claiming in good faith to be a
corporation under this act.’

Further, 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 jure corporation may be terminated in a private suit for its dissolution
between stockholders, without the intervention of the state.

WHEREFORE, the petition is dismissed

G.R. No. 125221 June 19, 1997

REYNALDO M. LOZANO, petitioner, 
vs.
HON. ELIEZER R. DE LOS SANTOS, Presiding Judge, RTC, Br. 58, Angeles City;
and ANTONIO ANDA,respondents.

FACTS: On December 19, 1995, petitioner Reynaldo M. Lozano filed Civil Case No. 1214
for damages against respondent Antonio Anda before the Municipal Circuit Trial Court
(MCTC), Mabalacat and Magalang, Pampanga. Petitioner alleged that he was the president of
the Kapatirang Mabalacat-Angeles Jeepney Drivers’ Association, Inc. (KAMAJDA) while
respondent Anda was the president of the Samahang Angeles-Mabalacat Jeepney Operators’
and Drivers’ Association, Inc. (SAMAJODA); in August 1995, upon the request of the
Sangguniang Bayan of Mabalacat, Pampanga, petitioner and private respondent agreed to
consolidate their respective associations and form the Unified Mabalacat-Angeles Jeepney
Operators’ and Drivers Association, Inc. (UMAJODA); petitioner and private respondent also
agreed to elect one set of officers who shall be given the sole authority to collect the daily
dues from the members of the consolidated association; elections were held on October 29,
1995 and both petitioner and private respondent ran for president; petitioner won; private
respondent protested and, alleging fraud, refused to recognize the results of the election;
private respondent also refused to abide by their agreement and continued collecting the dues
from the members of his association despite several demands to desist.

ISSUE: WON the issue is an intra-corporate dispute, properly falling under the jurisdiction of
the SEC(now RTC)

HELD: NOT intra-corporate. Petitioner and private respondent have no intracorporate

relation much less do they have an intracorporate dispute. The SEC therefore has no
jurisdiction over the complaint.

The first element requires that the controversy must arise out of intracorporate or partnership
relations between and among stockholders, members, or associates; between any or all of
them and the corporation, partnership or association of which they are stockholders, members
or associates, respectively; and between such corporation, partnership or association and the
State in so far as it concerns their individual franchises. The second element requires that the
dispute among the parties be intrinsically connected with the regulation of the corporation,
partnership or association or deal with the internal affairs of the corporation, partnership or
association.

There is no intracorporate nor partnership relation between petitioner and private respondent.
The controversy between them arose out of their plan to consolidate their respective jeepney
drivers’ and operators’ associations into a single common association. This unified
association was, however, still a proposal. It had not been approved by the SEC, neither had
its officers and members submitted their articles of consolidation is accordance with Sections
78 and 79 of the Corporation Code. Consolidation becomes effective not upon mere
agreement of the members but only upon issuance of the certificate of consolidation by the
SEC. 

NOTE:

The doctrine of corporation by estoppel advanced by private respondent cannot override

jurisdictional requirements. Jurisdiction is fixed by law and is not subject to the agreement of
the parties. It cannot be acquired through or waived, enlarged or diminished by, any act or
omission of the parties, neither can it be conferred by the acquiescence of the court.

Corporation by estoppel is founded on principles of equity and is designed to prevent

injustice and unfairness. It applies when persons assume to form a corporation and exercise
corporate functions and enter into business relations with third person. Where there is no
third person involved and the conflict arises only among those assuming the form of a
corporation, who therefore know that it has not been registered, there is no corporation by
estoppel.

103 Phil 757, GR No L-11442, May 23, 1958

Facts: Manuela T. Vda. de Salvatierra is the owner of a parcel of land located at Maghobas, Poblacion, Burauen,
Teyte. On March 7, 1954, Salvatierra entered into a contract of lease with the Philippine Fibers Producers Co.,
Inc., allegedly a corporation "duly organized and existing under the laws of the Philippines, with business address
in Burauen, Leyte, and represented by Mr. Segundino Q. Refuerzo, the President". The contract provided that the
lifetime of the lease would 10 years, that the land will be planted with kenaf, ramie or other crops suitable to the
soil; that the lessor would be entitled to 30% of the net income from the harvest of any, crop without being
responsible for the cost of production thereof; and that after every harvest, the lessee was bound to declare at
the earliest possible time the income derived and to deliver the corresponding share due the lessor.
However, the obligations imposed were not complied with by the alleged corporation. Salvatierra filed
for accounting, rescission and damages. She claimed that the defendant corporation planted the land with kenaf
but it refused to render an accounting of the income it derived and to deliver the lessor's share (estimated gross
income was P4,500 and the deductible expenses amounted to P1,000).
The court granted plaintiff's prayer and required defendants to render a complete accounting of the
harvest of the land and to deliver 30% of the net income realized from the last harvest. If the defendant’s fail to
abide by this rule, the gross income would be fixed at P4,200 or a net income of P3,200 after deducting the
expenses for production, 30% of which or P960 was due the plaintiff pursuant to the contract of lease, which
was declared rescinded.
The court then issued a issued a writ of execution causing the attachment of 3 parcels of land
registered in the name of Segundino Refuerzo as there was no available property of the Philippine Fibers
Producers Co., Inc., for attachment. Refuerzo claimed that the decision was null and void with respect to him,
there being no allegation in the complaint pointing to his personal liability and that the liability be limited to the
defendant corporation. The court then ordered the release of all properties belonging to Refuerzo.

Issue: Whether or not Refuerzo should be held liable to Salvatierra?

Ruling: Refuerzo is liable to Salvatierra!

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

Refuerzo’s defense is premised on the fact that the complaint contained no allegation which holds him personally
liable, for while he was a signatory to the contract, he did so in his capacity as president of the corporation.
Salvatierra, on the other hand, contends that her failure to specify Refuerzo’s personal liability was because she
was under the impression that the Philippine Fibers Producers Co., Inc., represented by Refuerzo was a duly
registered corporation as appearing in the contract, but a subsequent inquiry from the Securities and Exchange
Commission yielded otherwise.

While as a general rule a person who has contracted or dealt with an association in such a way as to recognize
its existence as a corporate body is estopped from denying the same in an action arising out of such transaction
or dealing, yet this doctrine may not be held to be applicable where fraud takes a part in the said transaction. In
the instant case, on plaintiff's charge that she was unaware of the fact that the Philippine Fibers Producers Co.,
Inc., had no juridical personality, defendant Refuerzo gave no confirmation or denial and the circumstances
surrounding the execution of the contract lead to the inescapable conclusion that plaintiff Manuela T. Vda. de
Salvatierra was really made to believe that such corporation was duly organized in accordance with law.

A registered corporation has a juridical personality separate and distinct from its component members such that
a corporation cannot be held liable for the personal indebtedness of a stockholder even if he should be its
president and conversely, a stockholder or member cannot be held personally liable for any financial obligation of
the corporation in excess of his unpaid subscription. But this rule is understood to refer merely to
registered corporations and cannot be made applicable to the liability of members of an
unincorporated association. The reason behind this doctrine is obvious - since an organization which before
the law is non-existent has no personality and would be incompetent to act and appropriate for itself the powers
and attribute of a corporation as provided by law; it cannot create agents or confer authority on another to act in
its behalf; thus, those who act or purport to act as its representatives or agents do so without authority and at
their own risk. And as it is an elementary principle of law that a person who acts as an agent without authority or
without a principal is himself regarded as the principal, possessed of all the rights and subject to all the liabilities
of a principal, a person acting or purporting to act on behalf of a corporation which has no valid existence
assumes such privileges and obligations and comes personally liable for contracts entered into or for other acts
performed as such, agent.