1

G.R. No. 119002               October 19, 2000 Defendant Henri Kahn would have been correct in his contentions had it been duly established that defendant
Federation is a corporation. The trouble, however, is that neither the plaintiff nor the defendant Henri Kahn
has adduced any evidence proving the corporate existence of the defendant Federation. In paragraph 2 of its
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner,
complaint, plaintiff asserted that "Defendant Philippine Football Federation is a sports association xxx." This
vs.
has not been denied by defendant Henri Kahn in his Answer. Being the President of defendant Federation, its
HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION, respondents.
corporate existence is within the personal knowledge of defendant Henri Kahn. He could have easily denied
specifically the assertion of the plaintiff that it is a mere sports association, if it were a domestic corporation.
DECISION But he did not.

KAPUNAN, J.: xxx

On June 30 1989, petitioner International Express Travel and Tour Services, Inc., through its managing A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify, a
director, wrote a letter to the Philippine Football Federation (Federation), through its president private contract. The contract entered into by its officers or agents on behalf of such association is not binding on, or
respondent Henri Kahn, wherein the former offered its services as a travel agency to the latter. 1 The offer was enforceable against it. The officers or agents are themselves personally liable.
accepted.
x x x9
Petitioner secured the airline tickets for the trips of the athletes and officials of the Federation to the South
East Asian Games in Kuala Lumpur as well as various other trips to the People's Republic of China and
The dispositive portion of the trial court's decision reads:
Brisbane. The total cost of the tickets amounted to P449,654.83. For the tickets received, the Federation made
two partial payments, both in September of 1989, in the total amount of P176,467.50.2
WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay the plaintiff the principal sum of
P207,524.20, plus the interest thereon at the legal rate computed from July 5, 1990, the date the complaint
On 4 October 1989, petitioner wrote the Federation, through the private respondent a demand letter
was filed, until the principal obligation is fully liquidated; and another sum of P15,000.00 for attorney's fees.
requesting for the amount of P265,894.33.3 On 30 October 1989, the Federation, through the Project Gintong
Alay, paid the amount of P31,603.00.4
The complaint of the plaintiff against the Philippine Football Federation and the counterclaims of the
defendant Henri Kahn are hereby dismissed.
On 27 December 1989, Henri Kahn issued a personal check in the amount of P50,000 as partial payment for
the outstanding balance of the Federation.5 Thereafter, no further payments were made despite repeated
demands. With the costs against defendant Henri Kahn.10

This prompted petitioner to file a civil case before the Regional Trial Court of Manila. Petitioner sued Henri Only Henri Kahn elevated the above decision to the Court of Appeals. On 21 December 1994, the respondent
Kahn in his personal capacity and as President of the Federation and impleaded the Federation as an court rendered a decision reversing the trial court, the decretal portion of said decision reads:
alternative defendant. Petitioner sought to hold Henri Kahn liable for the unpaid balance for the tickets
purchased by the Federation on the ground that Henri Kahn allegedly guaranteed the said obligation.6
WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and SET ASIDE and
another one is rendered dismissing the complaint against defendant Henri S. Kahn.11
Henri Kahn filed his answer with counterclaim. While not denying the allegation that the Federation owed the
amount P207,524.20, representing the unpaid balance for the plane tickets, he averred that the petitioner has
In finding for Henri Kahn, the Court of Appeals recognized the juridical existence of the Federation. It
no cause of action against him either in his personal capacity or in his official capacity as president of the
rationalized that since petitioner failed to prove that Henri Kahn guaranteed the obligation of the Federation,
Federation. He maintained that he did not guarantee payment but merely acted as an agent of the Federation
he should not be held liable for the same as said entity has a separate and distinct personality from its officers.
which has a separate and distinct juridical personality.7

Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be held
On the other hand, the Federation failed to file its answer, hence, was declared in default by the trial court. 8
liable for the unpaid obligation. The same was denied by the appellate court in its resolution of 8 February
1995, where it stated that:
In due course, the trial court rendered judgment and ruled in favor of the petitioner and declared Henri Kahn
personally liable for the unpaid obligation of the Federation. In arriving at the said ruling, the trial court
As to the alternative prayer for the Modification of the Decision by expressly declaring in the dispositive
rationalized:
portion thereof the Philippine Football Federation (PFF) as liable for the unpaid obligation, it should be
remembered that the trial court dismissed the complaint against the Philippine Football Federation, and the
plaintiff did not appeal from this decision. Hence, the Philippine Football Federation is not a party to this
2

appeal and consequently, no judgment may be pronounced by this Court against the PFF without violating the 13. To perform such other acts as may be necessary for the proper accomplishment of their
due process clause, let alone the fact that the judgment dismissing the complaint against it, had already purposes and not inconsistent with this Act.
become final by virtue of the plaintiff's failure to appeal therefrom. The alternative prayer is therefore
similarly DENIED.12
Section 8 of P.D. 604, grants similar functions to these sports associations:

Petitioner now seeks recourse to this Court and alleges that the respondent court committed the following
SEC. 8. Functions, Powers, and Duties of National Sports Association. - The National sports associations shall
assigned errors:13
have the following functions, powers, and duties:

A. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD DEALT WITH
1. Adopt a Constitution and By-Laws for their internal organization and government which shall be
THE PHILIPPINE FOOTBALL FEDERATION (PFF) AS A CORPORATE ENTITY AND IN NOT HOLDING
submitted to the Department and any amendment thereto shall take effect upon approval by the
THAT PRIVATE RESPONDENT HENRI KAHN WAS THE ONE WHO REPRESENTED THE PFF AS HAVING A
Department: Provided, however, That no team, school, club, organization, or entity shall be
CORPORATE PERSONALITY.
admitted as a voting member of an association unless 60 per cent of the athletes composing said
team, school, club, organization, or entity are Filipino citizens;
B. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE RESPONDENT HENRI
KAHN PERSONALLY LIABLE FOR THE OBLIGATION OF THE UNINCORPORATED PFF, HAVING
2. Raise funds by donations, benefits, and other means for their purpose subject to the approval of
NEGOTIATED WITH PETITIONER AND CONTRACTED THE OBLIGATION IN BEHALF OF THE PFF, MADE
the Department;
A PARTIAL PAYMENT AND ASSURED PETITIONER OF FULLY SETTLING THE OBLIGATION.

3. Purchase, sell, lease, or otherwise encumber property, both real and personal, for the
C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT PERSONALLY LIABLE, THE
accomplishment of their purpose;
HONORABLE COURT OF APPEALS ERRED IN NOT EXPRESSLY DECLARING IN ITS DECISION THAT THE
PFF IS SOLELY LIABLE FOR THE OBLIGATION.
4. Conduct local, interport, and international competitions, other than the Olympic and Asian
Games, for the promotion of their sport;
The resolution of the case at bar hinges on the determination of the existence of the Philippine Football
Federation as a juridical person. In the assailed decision, the appellate court recognized the existence of the
Federation. In support of this, the CA cited Republic Act 3135, otherwise known as the Revised Charter of the 5. Affiliate with international or regional sports associations after due consultation with the
Philippine Amateur Athletic Federation, and Presidential Decree No. 604 as the laws from which said Department;
Federation derives its existence.
xxx
As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604 recognized the juridical
existence of national sports associations. This may be gleaned from the powers and functions granted to these 13. Perform such other functions as may be provided by law.
associations. Section 14 of R.A. 3135 provides:

SEC. 14. Functions, powers and duties of Associations. - The National Sports' Association shall have the
following functions, powers and duties:
1. To adopt a constitution and by-laws for their internal organization and government;
The above powers and functions granted to national sports associations clearly indicate that these entities
may acquire a juridical personality. The power to purchase, sell, lease and encumber property are acts which
may only be done by persons, whether natural or artificial, with juridical capacity. However, while we agree
with the appellate court that national sports associations may be accorded corporate status, such does not
automatically take place by the mere passage of these laws.

2. To raise funds by donations, benefits, and other means for their purposes.
3. To purchase, sell, lease or otherwise encumber property both real and personal, for the
accomplishment of their purpose;
4. To affiliate with international or regional sports' Associations after due consultation with the
executive committee;
xxx
It is a basic postulate that before a corporation may acquire juridical personality, the State must give its
consent either in the form of a special law or a general enabling act. We cannot agree with the view of the
appellate court and the private respondent that the Philippine Football Federation came into existence upon
the passage of these laws. Nowhere can it be found in R.A. 3135 or P.D. 604 any provision creating the
Philippine Football Federation. These laws merely recognized the existence of national sports associations and
provided the manner by which these entities may acquire juridical personality. Section 11 of R.A. 3135
provides:
SEC. 11. National Sports' Association; organization and recognition. - A National Association shall be organized
for each individual sports in the Philippines in the manner hereinafter provided to constitute the Philippine
3

Amateur Athletic Federation. Applications for recognition as a National Sports' Association shall be filed with existence of the Federation because it had contracted and dealt with the Federation in such a manner as to
the executive committee together with, among others, a copy of the constitution and by-laws and a list of the recognize and in effect admit its existence. 15 The doctrine of corporation by estoppel is mistakenly applied by
members of the proposed association, and a filing fee of ten pesos. the respondent court to the petitioner. The application of the doctrine applies to a third party only when he
tries to escape liability on a contract from which he has benefited on the irrelevant ground of defective
incorporation.16 In the case at bar, the petitioner is not trying to escape liability from the contract but rather is
The Executive Committee shall give the recognition applied for if it is satisfied that said association will
the one claiming from the contract.
promote the purposes of this Act and particularly section three thereof. No application shall be held pending
for more than three months after the filing thereof without any action having been taken thereon by the
executive committee. Should the application be rejected, the reasons for such rejection shall be clearly stated WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The decision of the Regional Trial Court
in a written communication to the applicant. Failure to specify the reasons for the rejection shall not affect the of Manila, Branch 35, in Civil Case No. 90-53595 is hereby REINSTATED.
application which shall be considered as unacted upon: Provided, however, That until the executive
committee herein provided shall have been formed, applications for recognition shall be passed upon by the
SO ORDERED.
duly elected members of the present executive committee of the Philippine Amateur Athletic Federation. The
said executive committee shall be dissolved upon the organization of the executive committee herein
provided: Provided, further, That the functioning executive committee is charged with the responsibility of G.R. No. 136448 November 3, 1999
seeing to it that the National Sports' Associations are formed and organized within six months from and after
the passage of this Act. LIM TONG LIM, petitioner,
vs.
Section 7 of P.D. 604, similarly provides: PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

SEC. 7. National Sports Associations. - Application for accreditation or recognition as a national sports
association for each individual sport in the Philippines shall be filed with the Department together with, PANGANIBAN, J.:
among others, a copy of the Constitution and By-Laws and a list of the members of the proposed association.
A partnership may be deemed to exist among parties who agree to borrow money to pursue a business and to
The Department shall give the recognition applied for if it is satisfied that the national sports association to be divide the profits or losses that may arise therefrom, even if it is shown that they have not contributed any
organized will promote the objectives of this Decree and has substantially complied with the rules and capital of their own to a "common fund." Their contribution may be in the form of credit or industry, not
regulations of the Department: Provided, That the Department may withdraw accreditation or recognition for necessarily cash or fixed assets. Being partner, they are all liable for debts incurred by or on behalf of the
violation of this Decree and such rules and regulations formulated by it. partnership. The liability for a contract entered into on behalf of an unincorporated association or ostensible
corporation may lie in a person who may not have directly transacted on its behalf, but reaped benefits from
that contract.
The Department shall supervise the national sports association: Provided, That the latter shall have exclusive
technical control over the development and promotion of the particular sport for which they are organized.
The Case
Clearly the above cited provisions require that before an entity may be considered as a national sports
association, such entity must be recognized by the accrediting organization, the Philippine Amateur Athletic In the Petition for Review on Certiorari before us, Lim Tong Lim assails the November 26, 1998 Decision of the
Federation under R.A. 3135, and the Department of Youth and Sports Development under P.D. 604. This fact Court of Appeals in CA-GR CV
of recognition, however, Henri Kahn failed to substantiate. In attempting to prove the juridical existence of the 41477, 1 which disposed as follows:
Federation, Henri Kahn attached to his motion for reconsideration before the trial court a copy of the
constitution and by-laws of the Philippine Football Federation. Unfortunately, the same does not prove that WHEREFORE, [there being] no reversible error in the appealed decision, the same is
said Federation has indeed been recognized and accredited by either the Philippine Amateur Athletic hereby affirmed. 2
Federation or the Department of Youth and Sports Development. Accordingly, we rule that the Philippine
Football Federation is not a national sports association within the purview of the aforementioned laws and
does not have corporate existence of its own. The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed by the CA, reads
as follows:

Thus being said, it follows that private respondent Henry Kahn should be held liable for the unpaid obligations
of the unincorporated Philippine Football Federation. It is a settled principal in corporation law that any WHEREFORE, the Court rules:
person acting or purporting to act on behalf of a corporation which has no valid existence assumes such
privileges and becomes personally liable for contract entered into or for other acts performed as such 1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on
agent.14 As president of the Federation, Henri Kahn is presumed to have known about the corporate existence September 20, 1990;
or non-existence of the Federation. We cannot subscribe to the position taken by the appellate court that
even assuming that the Federation was defectively incorporated, the petitioner cannot deny the corporate
4
2. That defendants are jointly liable to plaintiff for the following amounts, subject to the
modifications as hereinafter made by reason of the special and unique facts and
circumstances and the proceedings that transpired during the trial of this case;
a. P532,045.00 representing [the] unpaid purchase price of the
fishing nets covered by the Agreement plus P68,000.00
representing the unpaid price of the floats not covered by said
Agreement;
b. 12% interest per annum counted from date of plaintiff's
invoices and computed on their respective amounts as follows:
i. Accrued interest of P73,221.00 on Invoice
No. 14407 for P385,377.80 dated February
9, 1990;
ii. Accrued interest for P27,904.02 on
Invoice No. 14413 for P146,868.00 dated
February 13, 1990;
iii. Accrued interest of P12,920.00 on
Invoice No. 14426 for P68,000.00 dated
February 19, 1990;
c. P50,000.00 as and for attorney's fees, plus P8,500.00
representing P500.00 per appearance in court;
d. P65,000.00 representing P5,000.00 monthly rental for storage
charges on the nets counted from September 20, 1990 (date of
attachment) to September 12, 1991 (date of auction sale);
e. Cost of suit.
With respect to the joint liability of defendants for the principal obligation or
for the unpaid price of nets and floats in the amount of P532,045.00 and
P68,000.00, respectively, or for the total amount P600,045.00, this Court
noted that these items were attached to guarantee any judgment that may
be rendered in favor of the plaintiff but, upon agreement of the parties, and,
to avoid further deterioration of the nets during the pendency of this case, it
was ordered sold at public auction for not less than P900,000.00 for which
the plaintiff was the sole and winning bidder. The proceeds of the sale paid
for by plaintiff was deposited in court. In effect, the amount of P900,000.00
replaced the attached property as a guaranty for any judgment that plaintiff
may be able to secure in this case with the ownership and possession of the
nets and floats awarded and delivered by the sheriff to plaintiff as the
highest bidder in the public auction sale. It has also been noted that
ownership of the nets [was] retained by the plaintiff until full payment [was]
made as stipulated in the invoices; hence, in effect, the plaintiff attached its
own properties. It [was] for this reason also that this Court earlier ordered
the attachment bond filed by plaintiff to guaranty damages to defendants to
be cancelled and for the P900,000.00 cash bidded and paid for by plaintiff to
serve as its bond in favor of defendants.
From the foregoing, it would appear therefore that whatever judgment the
plaintiff may be entitled to in this case will have to be satisfied from the
amount of P900,000.00 as this amount replaced the attached nets and floats.
Considering, however, that the total judgment obligation as computed above
would amount to only P840,216.92, it would be inequitable, unfair and
unjust to award the excess to the defendants who are not entitled to
damages and who did not put up a single centavo to raise the amount of
P900,000.00 aside from the fact that they are not the owners of the nets and
floats. For this reason, the defendants are hereby relieved from any and all
liabilities arising from the monetary judgment obligation enumerated above
and for plaintiff to retain possession and ownership of the nets and floats
and for the reimbursement of the P900,000.00 deposited by it with the Clerk
of Court.
SO ORDERED. 3
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract dated
February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear Industries,
Inc. (herein respondent). They claimed that they were engaged in a business venture with Petitioner Lim Tong
Lim, who however was not a signatory to the agreement. The total price of the nets amounted to P532,045.
Four hundred pieces of floats worth P68,000 were also sold to the Corporation. 4
The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondents filed a
collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary
attachment. The suit was brought against the three in their capacities as general partners, on the allegation
that "Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a Certification from the
Securities and Exchange Commission. 5 On September 20, 1990, the lower court issued a Writ of Preliminary
Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes which was then
docked at the Fisheries Port, Navotas, Metro Manila.
Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a
reasonable time within which to pay. He also turned over to respondent some of the nets which were in his
possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to cross-examine
witnesses and to present evidence on his behalf, because of his failure to appear in subsequent hearings. Lim
Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and moved for the lifting of
the Writ of Attachment. 6 The trial court maintained the Writ, and upon motion of private respondent,
ordered the sale of the fishing nets at a public auction. Philippine Fishing Gear Industries won the bidding and
deposited with the said court the sales proceeds of P900,000. 7
On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries was
entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable to pay
respondent. 8
5
The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of the
witnesses presented and (2) on a Compromise Agreement executed by the three 9 in Civil Case No. 1492-MN
which Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a declaration of nullity
of commercial documents; (b) a reformation of contracts; (c) a declaration of ownership of fishing boats; (d)
an injunction and (e) damages. 10 The Compromise Agreement provided:
a) That the parties plaintiffs & Lim Tong Lim agree to have the
four (4) vessels sold in the amount of P5,750,000.00 including the
fishing net. This P5,750,000.00 shall be applied as full payment for
P3,250,000.00 in favor of JL Holdings Corporation and/or Lim
Tong Lim;
b) If the four (4) vessel[s] and the fishing net will be sold at a
higher price than P5,750,000.00 whatever will be the excess will
be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter
Yao;
c) If the proceeds of the sale the vessels will be less than
P5,750,000.00 whatever the deficiency shall be shouldered and
paid to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio
Chua; 1/3 Peter Yao. 11
The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but that
joint liability could be presumed from the equal distribution of the profit and loss. 21
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing business and
may thus be held liable as a such for the fishing nets and floats purchased by and for the use of the
partnership. The appellate court ruled:
The evidence establishes that all the defendants including herein appellant Lim Tong
Lim undertook a partnership for a specific undertaking, that is for commercial fishing . . .
. Oviously, the ultimate undertaking of the defendants was to divide the profits among
themselves which is what a partnership essentially is . . . . By a contract of partnership,
two or more persons bind themselves to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves (Article 1767,
New Civil Code). 13
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the following
grounds:
I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE AGREEMENT
THAT CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A SEPARATE CASE, THAT A
PARTNERSHIP AGREEMENT EXISTED AMONG THEM.
II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN
QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM PHILIPPINE
FISHING, THE COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING LIABILITY TO
PETITIONER LIM AS WELL.
III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF
PETITIONER LIM'S GOODS.
In determining whether petitioner may be held liable for the fishing nets and floats from respondent, the
Court must resolve this key issue: whether by their acts, Lim, Chua and Yao could be deemed to have entered
into a partnership.
This Court's Ruling
The Petition is devoid of merit.
First and Second Issues:
Existence of a Partnership
and Petitioner's Liability
In arguing that he should not be held liable for the equipment purchased from respondent, petitioner
controverts the CA finding that a partnership existed between him, Peter Yao and Antonio Chua. He asserts
that the CA based its finding on the Compromise Agreement alone. Furthermore, he disclaims any direct
participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and Yao only,
and that he has not even met the representatives of the respondent company. Petitioner further argues that
he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease " dated February 1, 1990, showed
that he had merely leased to the two the main asset of the purported partnership — the fishing boat  F/B
Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25 percent of the gross catch of
the boat.
We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts clearly
showed that there existed a partnership among Chua, Yao and him, pursuant to Article 1767 of the Civil Code
which provides:
Art. 1767 — By the contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of
dividing the profits among themselves.
Specifically, both lower courts ruled that a partnership among the three existed based on the following factual
findings: 15
6
(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial
fishing to join him, while Antonio Chua was already Yao's partner;
(2) That after convening for a few times, Lim, Chua, and Yao verbally agreed to acquire
two fishing boats, the FB Lourdes and the FB Nelson for the sum of P3.35 million;
(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim,
to finance the venture.
(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of
Sale over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as
security for the loan extended by Jesus Lim;
(5) That Lim, Chua and Yao agreed that the refurbishing, re-equipping, repairing, dry
docking and other expenses for the boats would be shouldered by Chua and Yao;
(6) That because of the "unavailability of funds," Jesus Lim again extended a loan to the
partnership in the amount of P1 million secured by a check, because of which, Yao and
Chua entrusted the ownership papers of two other boats, Chua's FB Lady Anne
Mel and Yao's FB Tracy to Lim Tong Lim.
(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought
nets from Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing
Corporation," their purported business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72
by Antonio Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of
commercial documents; (b) reformation of contracts; (c) declaration of ownership of
fishing boats; (4) injunction; and (e) damages.
(9) That the case was amicably settled through a Compromise Agreement executed
between the parties-litigants the terms of which are already enumerated above.
From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in a
fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured from
Jesus Lim who was petitioner's brother. In their Compromise Agreement, they subsequently revealed their
intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among them the
excess or loss. These boats, the purchase and the repair of which were financed with borrowed money, fell
under the term "common fund" under Article 1767. The contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry. That the parties agreed that any loss or profit from the
sale and operation of the boats would be divided equally among them also shows that they had indeed
formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of the
nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously acquired in
furtherance of their business. It would have been inconceivable for Lim to involve himself so much in buying
the boat but not in the acquisition of the aforesaid equipment, without which the business could not have
proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership engaged in
the fishing business. They purchased the boats, which constituted the main assets of the partnership, and they
agreed that the proceeds from the sales and operations thereof would be divided among them.
We stress that under Rule 45, a petition for review like the present case should involve only questions of law.
Thus, the foregoing factual findings of the RTC and the CA are binding on this Court, absent any cogent proof
that the present action is embraced by one of the exceptions to the rule. 16 In assailing the factual findings of
the two lower courts, petitioner effectively goes beyond the bounds of a petition for review under Rule 45.
Compromise Agreement
Not the Sole Basis of Partnership
Petitioner argues that the appellate court's sole basis for assuming the existence of a partnership was the
Compromise Agreement. He also claims that the settlement was entered into only to end the dispute among
them, but not to adjudicate their preexisting rights and obligations. His arguments are baseless. The
Agreement was but an embodiment of the relationship extant among the parties prior to its execution.
A proper adjudication of claimants' rights mandates that courts must review and thoroughly appraise all
relevant facts. Both lower courts have done so and have found, correctly, a preexisting partnership among the
parties. In implying that the lower courts have decided on the basis of one piece of document alone, petitioner
fails to appreciate that the CA and the RTC delved into the history of the document and explored all the
possible consequential combinations in harmony with law, logic and fairness. Verily, the two lower courts'
factual findings mentioned above nullified petitioner's argument that the existence of a partnership was based
only on the Compromise Agreement.
Petitioner Was a Partner,
Not a Lessor
We are not convinced by petitioner's argument that he was merely the lessor of the boats to Chua and Yao,
not a partner in the fishing venture. His argument allegedly finds support in the Contract of Lease and the
registration papers showing that he was the owner of the boats, including F/B Lourdes where the nets were
found.
His allegation defies logic. In effect, he would like this Court to believe that he consented to the sale of his own
boats to pay a debt of Chua and Yao, with the excess of the proceeds to be divided among the three of them.
No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a preexisting
partnership among all three.
Verily, as found by the lower courts, petitioner entered into a business agreement with Chua and Yao, in
which debts were undertaken in order to finance the acquisition and the upgrading of the vessels which would
be used in their fishing business. The sale of the boats, as well as the division among the three of the balance
remaining after the payment of their loans, proves beyond cavil that F/B Lourdes, though registered in his
7
name, was not his own property but an asset of the partnership. It is not uncommon to register the properties
acquired from a loan in the name of the person the lender trusts, who in this case is the petitioner himself.
After all, he is the brother of the creditor, Jesus Lim.
We stress that it is unreasonable — indeed, it is absurd — for petitioner to sell his property to pay a debt he
did not incur, if the relationship among the three of them was merely that of lessor-lessee, instead of
partners.
Corporation by Estoppel
Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed only to Chua and
Yao, and not to him. Again, we disagree.
Sec. 21 of the Corporation Code of the Philippines provides:
Sec. 21. Corporation by estoppel. — All persons who assume to act as a corporation
knowing it to be without authority to do so shall be liable as general partners for all
debts, liabilities and damages incurred or arising as a result thereof: Provided
however, That when any such ostensible corporation is sued on any transaction entered
by it as a corporation or on any tort committed by it as such, it shall not be allowed to
use as a defense its lack of corporate personality.
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.
Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped from
denying its corporate existence. "The reason behind this doctrine is obvious — an unincorporated association
has no personality and would be incompetent to act and appropriate for itself the power and attributes 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 right 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 becomes personally liable for contracts entered into or
for other acts performed as such agent. 17
The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the first
instance, an unincorporated association, which represented itself to be a corporation, will be estopped from
denying its corporate capacity in a suit against it by a third person who relied in good faith on such
representation. It cannot allege lack of personality to be sued to evade its responsibility for a contract it
entered into and by virtue of which it received advantages and benefits.
On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it as
a corporation and received benefits from it, may be barred from denying its corporate existence in a suit
brought against the alleged corporation. In such case, all those who benefited from the transaction made by
the ostensible corporation, despite knowledge of its legal defects, may be held liable for contracts they
impliedly assented to or took advantage of.
There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the nets it
sold. The only question here is whether petitioner should be held jointly 18 liable with Chua and Yao. Petitioner
contests such liability, insisting that only those who dealt in the name of the ostensible corporation should be
held liable. Since his name does not appear on any of the contracts and since he never directly transacted with
the respondent corporation, ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which has
earlier been proven to be an asset of the partnership. He in fact questions the attachment of the nets, because
the Writ has effectively stopped his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation.
Although it was never legally formed for unknown reasons, this fact alone does not preclude the liabilities of
the three as contracting parties in representation of it. Clearly, under the law on estoppel, those acting on
behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held liable as
general partners.
Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having reaped
the benefits of the contract entered into by persons with whom he previously had an existing relationship, he
is deemed to be part of said association and is covered by the scope of the doctrine of corporation by
estoppel. We reiterate the ruling of the Court in Alonso v. Villamor: 19
A litigation is not a game of technicalities in which one, more deeply schooled and
skilled in the subtle art of movement and position, entraps and destroys the other. It is,
rather, a contest in which each contending party fully and fairly lays before the court the
facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections
of form and technicalities of procedure, asks that justice be done upon the merits.
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance and chief
enemy, deserves scant consideration from courts. There should be no vested rights in
technicalities.
Third Issue:
Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree with
the Court of Appeals that this issue is now moot and academic. As previously discussed,  F/B Lourdes was an
asset of the partnership and that it was placed in the name of petitioner, only to assure payment of the debt
he and his partners owed. The nets and the floats were specifically manufactured and tailor-made according
to their own design, and were bought and used in the fishing venture they agreed upon. Hence, the issuance
of the Writ to assure the payment of the price stipulated in the invoices is proper. Besides, by specific
agreement, ownership of the nets remained with Respondent Philippine Fishing Gear, until full payment
thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
G.R. No. 125221 June 19, 1997
8

REYNALDO M. LOZANO, petitioner, Sec. 5. . . . [T]he Securities and Exchange Commission [has] original and exclusive
vs. jurisdiction to hear and decide cases involving:
HON. ELIEZER R. DE LOS SANTOS, Presiding Judge, RTC, Br. 58, Angeles City; and ANTONIO
ANDA, respondents.
(a) Devices or schemes employed by or any acts of the board of directors, business
associates, its officers or partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or of the stockholders, partners,
PUNO, J.: members of associations or organizations registered with the Commission.

This petition for certiorari seeks to annul and set aside the decision of the Regional Trial Court, Branch 58, (b) Controversies arising out of intracorporate or partnership relations, between and
Angeles City which ordered the Municipal Circuit Trial Court, Mabalacat and Magalang, Pampanga to dismiss among stockholders, members or associates; between any or all of them and the
Civil Case No. 1214 for lack of jurisdiction. corporation, partnership or association of which they are stockholders, members, or
associates, respectively; and between such corporation, partnership or association and
the state insofar as it concerns their individual franchise or right to exist as such entity.
The facts are undisputed. 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 (c) Controversies in the election or appointment of directors, trustees, officers or
Jeepney Drivers' Association, Inc. (KAMAJDA) while respondent Anda was the president of the Samahang managers of such corporations, partnerships or associations.
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
(d) Petitions of corporations, partnerships or associations to be declared in the state of
consolidate their respective associations and form the Unified Mabalacat-Angeles Jeepney Operators' and
suspension of payments in cases where the corporation, partnership or association
Drivers Association, Inc. (UMAJODA); petitioner and private respondent also agreed to elect one set of officers
possesses sufficient property to cover all its debts but foresees the impossibility of
who shall be given the sole authority to collect the daily dues from the members of the consolidated
meeting them when they respectively fall due or in cases where the corporation,
association; elections were held on October 29, 1995 and both petitioner and private respondent ran for
partnership or association has no sufficient assets to over its liabilities, but is under the
president; petitioner won; private respondent protested and, alleging fraud, refused to recognize the results
management of a Rehabilitation Receiver or Management Committee created pursuant
of the election; private respondent also refused to abide by their agreement and continued collecting the dues
to this Decree.
from the members of his association despite several demands to desist. Petitioner was thus constrained to file
the complaint to restrain private respondent from collecting the dues and to order him to pay damages in the
amount of P25,000.00 and attorney's fees of P500.00. 1 The grant of jurisdiction to the SEC must be viewed in the light of its nature and function under the
law. 8 This jurisdiction is determined by a concurrence of two elements: (1) the status or
relationship of the parties; and (2) the nature of the question that is the subject of their
Private respondent moved to dismiss the complaint for lack of jurisdiction, claiming that jurisdiction was
controversy. 9
lodged with the Securities and Exchange Commission (SEC). The MCTC denied the motion on February 9,
1996. 2 It denied reconsideration on March 8, 1996. 3
The first element requires that the controversy must arise out of intracorporate or partnership relations
4 between and among stockholders, members, or associates; between any or all of them and the corporation,
Private respondent filed a petition for certiorari before the Regional Trial Court, Branch 58, Angeles City.   The
partnership or association of which they are stockholders, members or associates, respectively; and between
trial court found the dispute to be intracorporate, hence, subject to the jurisdiction of the SEC, and ordered
such corporation, partnership or association and the State in so far as it concerns their individual
the MCTC to dismiss Civil Case No. 1214 accordingly. 5 It denied reconsideration on May 31, 1996. 6
franchises. 10 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
Hence this petition. Petitioner claims that: corporation, partnership or association. 11 After all, the principal function of the SEC is the supervision and
control of corporations, partnership and associations with the end in view that investments in these entities
may be encouraged and protected, and their entities may be encouraged and protected, and their activities
THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO
pursued for the promotion of economic development. 12
LACK OR EXCESS OF JURISDICTION AND SERIOUS ERROR OF LAW IN CONCLUDING THAT
THE SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION OVER A CASE OF
DAMAGES BETWEEN HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS WHO INTENDED There is no intracorporate nor partnership relation between petitioner and private respondent. The
TO CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT NOT YET [SIC] APPROVED AND controversy between them arose out of their plan to consolidate their respective jeepney drivers' and
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION. 7 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
The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in Section 5 of Presidential
effective not upon mere agreement of the members but only upon issuance of the certificate of consolidation
Decree No. 902-A. Section 5 reads as follows:
by the SEC. 13 When the SEC, upon processing and examining the articles of consolidation, is satisfied that the
consolidation of the corporations is not inconsistent with the provisions of the Corporation Code and existing
9
laws, it issues a certificate of consolidation which makes the reorganization official.  14 The new consolidated
corporation comes into existence and the constituent corporations dissolve and cease to exist. 15
The KAMAJDA and SAMAJODA to which petitioner and private respondent belong are duly registered with the
SEC, but these associations are two separate entities. The dispute between petitioner and private respondent
is not within the KAMAJDA nor the SAMAJODA. It is between members of separate and distinct associations.
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 doctrine of corporation by estoppel 16 advanced by private respondent cannot override jurisdictional
requirements. Jurisdiction is fixed by law and is not subject to the agreement of the parties. 17 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. 18
Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and
unfairness. 19 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. 20
IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996 and the order dated May 31,
1996 of the Regional Trial Court, Branch 58, Angeles City are set aside. The Municipal Circuit Trial Court of
Mabalacat and Magalang, Pampanga is ordered to proceed with dispatch in resolving Civil Case No. 1214. No
costs.
SO ORDERED.
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: "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
10
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
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
11
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.
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. 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).
12
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 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." 13 (Underscoring partly in the original and partly supplied)
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. It may be noted also that at least one of the private
respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17) years before
the petitioner registered its own corporate name with the SEC and began using the word "Lyceum." It follows
that if any institution had acquired an exclusive right to the word "Lyceum," that institution would have been
the Western Pangasinan Lyceum, Inc. rather than the petitioner institution.
In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to reconstruct
its records before the SEC in accordance with the provisions of R.A. No. 62, which records had been destroyed
during World War II, Western Pangasinan 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.
We conclude and so hold that 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.
WHEREFORE, the petitioner having failed to show any reversible error on the part of the public respondent
Court of Appeals, the Petition for Review is DENIED for lack of merit, and the Decision of the Court of Appeals
dated 28 June 1991 is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
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
13
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.
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 records 14 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 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 Names 25 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:
14

(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.
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.

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. G.R. No. L-2598             June 29, 1950
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
C. ARNOLD HALL and BRADLEY P. HALL, petitioners,
Philippines" when it amended its Articles of Incorporation on August 23, 1985, or nine (9) years after
vs.
respondent RCP started using its name. Thus, being the prior registrant, respondent RCP has acquired the right
EDMUNDO S. PICCIO, Judge of the Court of First Instance of Leyte, FRED BROWN, EMMA BROWN, HIPOLITA
to use the word "Refractories" as part of its corporate name.
CAPUCIONG, in his capacity as receiver of the Far Eastern Lumber and Commercial Co., Inc., respondents.

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
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.

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 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
(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.

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
(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.
15

(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:
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 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
(a) The court had no jurisdiction in civil case No. 381 to decree the dissolution of the company, because it
receivership is proper in proceedings for dissolution of a company or corporation, and it was no error to reject
being a de facto corporation, dissolution thereof may only be ordered in a quo warranto proceeding instituted
the counter-bond, the court having declared the dissolution. As to the amount of the bond to be demanded of
in accordance with section 19 of the Corporation Law.
the receiver, much depends upon the discretion of the trial court, which in this instance we do not believe has
been clearly abused.
(b) Inasmuch as respondents Fred Brown and Emma Brown had signed the article of incorporation but only a
partnership.
Judgment: The petition will, therefore, be dismissed, with costs. The preliminary injunction heretofore issued
will be dissolved.
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
G.R. No. 150416             July 21, 2006
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 incorporated any more than the latter had made similar representations to them. SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES, INC., and/or represented by
And as nobody was led to believe anything to his prejudice and damage, the principle of estoppel does not MANASSEH C. ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO M. LUCENARA, DIONICES O. TIPGOS, LORESTO
apply. Obviously this is not an instance requiring the enforcement of contracts with the corporation through C. MURILLON, ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE T. ORBISO, LORETO PAEL and JOEL
the rule of estoppel. BACUBAS, petitioners,
vs.
NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST, INC., and/or represented by JOSUE A.
The first proposition above stated is premised on the theory that, inasmuch as the Far Eastern Lumber and
LAYON, WENDELL M. SERRANO, FLORANTE P. TY and JETHRO CALAHAT and/or SEVENTH DAY ADVENTIST
Commercial Co., is a de facto corporation, section 19 of the Corporation Law applies, and therefore the court
CHURCH [OF] NORTHEASTERN MINDANAO MISSION,* Respondents.
had not jurisdiction to take cognizance of said civil case number 381. Section 19 reads as follows:

DECISION
. . . 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 CORONA, J.:
Government on information of the Attorney-General.
This petition for review on certiorari assails the Court of Appeals (CA) decision 1 and resolution2 in CA-G.R. CV
There are least two reasons why this section does not govern the situation. Not having obtained the certificate No. 41966 affirming, with modification, the decision of the Regional Trial Court (RTC) of Bayugan, Agusan del
of incorporation, the Far Eastern Lumber and Commercial Co. — even its stockholders — may not probably Sur, Branch 7 in Civil Case No. 63.
claim "in good faith" to be a corporation.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title (TCT) No. 4468 in Bayugan, Agusan
Under our statue it is to be noted (Corporation Law, sec. 11) that it is the issuance of a certificate of del Sur originally owned by Felix Cosio and his wife, Felisa Cuysona.
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
On April 21, 1959, the spouses Cosio donated the land to the South Philippine Union Mission of Seventh Day
a corporation under this act." Such a claim is compatible with the existence of errors and
Adventist Church of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan). 3 Part of the deed of donation read:
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 KNOW ALL MEN BY THESE PRESENTS:
also Humphreys vs. Drew, 59 Fla., 295; 52 So., 362.)
16

That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,] 40 years of age, [h]usband and wife, both are The controversy between petitioners and respondents involves two supposed transfers of the lot previously
citizen[s] of the Philippines, and resident[s] with post office address in the Barrio of Bayugan, Municipality of owned by the spouses Cosio: (1) a donation to petitioners’ alleged predecessors-in-interest in 1959 and (2) a
Esperanza, Province of Agusan, Philippines, do hereby grant, convey and forever quit claim by way of Donation sale to respondents in 1980.
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
Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership of a
of in and to all the place of land and portion situated in the Barrio of Bayugan, Municipality of Esperanza,
property may be transferred by tradition as a consequence of a sale.
Province of Agusan, Philippines, more particularly and bounded as follows, to wit:

Petitioners contend that the appellate court should not have ruled on the validity of the donation since it was
1. a parcel of land for Church Site purposes only.
not among the issues raised on appeal. This is not correct because an appeal generally opens the entire case
for review.
2. situated [in Barrio Bayugan, Esperanza].
We agree with the appellate court that the alleged donation to petitioners was void.
3. Area: 30 meters wide and 30 meters length or 900 square meters.
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another
4. Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No. P-285. 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.
5. Bounded Areas
The deed of donation was not in favor of any informal group of SDA members but a supposed SPUM-SDA
4 Bayugan (the local church) which, at the time, had neither juridical personality nor capacity to accept such gift.
North by National High Way; East by Bricio Gerona; South by Serapio Abijaron and West by Feliz Cosio xxx. 

Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation.
The donation was allegedly accepted by one Liberato Rayos, an elder of the Seventh Day Adventist Church, on
behalf of the donee.
But there are stringent requirements before one can qualify as a de facto corporation:
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). 5 TCT No. 4468 was (a) the existence of a valid law under which it may be incorporated;
thereafter issued in the name of SDA-NEMM.6
(b) an attempt in good faith to incorporate; and
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 Bayugan could not
(c) assumption of corporate powers.10
legally be a donee

While there existed the old Corporation Law (Act 1459), 11 a law under which SPUM-SDA Bayugan could have
because, not having been incorporated yet, it had no juridical personality. Neither were petitioners members
been organized, there is no proof that there was an attempt to incorporate at that time.
of the local church then, hence, the donation could not have been made particularly to them.

The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the
On September 28, 1987, petitioners filed a case, docketed as Civil Case No. 63 (a suit for cancellation of title,
existence of a de facto corporation.12 We have held that an organization not registered with the Securities and
quieting of ownership and possession, declaratory relief and reconveyance with prayer for preliminary
Exchange Commission (SEC) cannot be considered a corporation in any concept, not even as a corporation de
injunction and damages), in the RTC of Bayugan, Agusan del Sur. After trial, the trial court rendered a
facto.13 Petitioners themselves admitted that at the time of the donation, they were not registered with the
decision7 on November 20, 1992 upholding the sale in favor of respondents.
SEC, nor did they even attempt to organize14 to comply with legal requirements.

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.
Corporate existence begins only from the moment a certificate of incorporation is issued. No such certificate
was ever issued to petitioners or their supposed predecessor-in-interest at the time of the donation.
Petitioners obviously could not have claimed succession to an entity that never came to exist. Neither could
the principle of separate juridical personality apply since there was never any corporation 15 to speak of. And,
as already stated, some of the representatives of petitioner Seventh Day Adventist Conference Church of
Southern Philippines, Inc. were not even members of the local church then, thus, they could not even claim
that the donation was particularly for them.16
17

"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.
According to Art. 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof. On this, the noted author Arturo Tolentino had this to say:
The execution of [a] public instrument xxx transfers the ownership from the vendor to the vendee who may
thereafter exercise the rights of an owner over the same 21
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. 4468 was
thereafter issued and it remains in the name of SDA-NEMM.

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