CAGAYAN FISHING DEVELOPMENT CO., Inc., v.
TEODORO Nor do those engaged in bringing it into being have any
SANDIKO
[G.R. No. 43350. December 23, 1937.]
Facts:
Manuel Tabora is the registered owner of four parcels of
land in Linao, Aparri.
These parcels of land were subjected to several mortgages
in favor of PNB and Buzon.
Then Tabora sold to Cagayan Shipping the 4 parcels of
land. Cagayan was then still under process of
incorporation.
The sale stated that the outstanding mortgage loan on the
properties would have to be fully paid by the corporation.
Then, the corporation was incorporated. The board adopted
a resolution which authorized its president to sell the 4
parcels of land to Teodoro Sandiko. Teodoro Sandiko then
obligated himself to shoulder the three mortgages But
Sandiko failed to pay the promissory note. So the
corporation filed a recovery suit
ONLINE:
1.Whether Cagayan Fishing Dev’t. has juridical capacity to
enter into the contract. NO
2. Can promoters of a corporation act as agents of a
corporation? NO
RULING:
The transfer made by Effected May 31, 1930
Tabora to the
Cagayan Fishing
Development Co., Inc
Actual incorporation Oct 22, 1930
In other words, the transfer was made almost five
months before the incorporation of the company.
Unquestionably, a duly organized corporation has the
power to purchase and hold such real property as the
purposes for which such corporation was formed may
permit and for this purpose may enter into such contracts
as may be necessary.
But before a corporation may be said to be lawfully
organized, many things have to be done. Among other
things, the law requires the filing of articles of
incorporation.
Although there is a presumption that all the requirements
of law have been complied with, IN THIS CASE, the plaintiff
was not yet incorporated when it entered into the contract
of sale.
The contract itself referred to the plaintiff as "una
sociedad en vias de incorporacion." [A COMPANY IN
THE PROCESS OF INCORPORATION]
It was not even a de facto corporation at the time.
Not being in legal existence then, it did not possess
juridical capacity to enter into the contract.
"Corporations are creatures of the law, and can only
come into existence in the manner prescribed by law.
If conditions precedent are prescribed in the statute, or
certain acts are required to be done, they are terms of the
offer, and must be complied with substantially before legal
corporate existence can be acquired.
A corporation, until organized, has no being, franchises or
faculties.
power to bind it by contract, unless so authorized by the
charter.
Parties to the contract:
Manuel Tabora (as owner of the 4 parcels of land)
Non-existent corpo (Cagayan)
Manuel Tabora, his wife and others, as mere promoters
of a corporation.
For reasons that are self-evident, these promoters could
not have acted as agents for a projected corporation
since that which had no legal existence could have
no agent.
A corporation, until organized, has no life and
therefore no faculties.
It is, as it were, a child (in ventre sa mere) [IN ITS
MOTHER’S WOMB].
This is not saying that under no circumstances may the
acts of promoters of a corporation be ratified by the
corporation if and when subsequently organized.
There are, of course, exceptions (Fletcher Cyc. of
Corps., permanent edition, 1931, vol. I, secs. 207 et
seq.) , but under the peculiar facts and circumstances of
the present case we decline to extend the doctrine of
ratification which would result in the commission of
injustice or fraud to the candid and unwary.
1. Manuel Tabora was the registered owner of the
four parcels of land, which he succeeded in
mortgaging to the Philippine National Bank so that
he might have the necessary funds with which to
convert and develop them into fishery.
2. He appeared to have met with financial reverses.
3. He formed a corporation composed of himself, his
wife, and a few others.
4. From the articles of incorporation, it appears that
out of the P48,700, amount of capital stock
subscribed, P45,000 was subscribed by Manuel
Tabora himself and P500 by his wife, Rufina Q. de
Tabora; and
5. out of the P43,300, amount paid on subscriptions,
P42,100 is made to appear as paid by Tabora and
P200 by his wife.
6. Both Tabora and his wife were directors and the
latter was treasurer as well.
7. To this day, the lands remain inscribed in Tabora’s
name.
8. The defendant always regarded Tabora as the
owner of the lands.
9. He dealt with Tabora directly. Jose Ventura,
president of the plaintiff corporation, intervened
only to sign the contract, Exhibit B, in behalf of
the plaintiff.
10. Even the Philippine National Bank, mortgagee of
the four parcels of land, always treated Tabora as
the owner of the same.
11. The promissory note, Exhibit C, was made payable
to the plaintiff company so that it may not be
attached by Tabora’s creditors, two of whom had
obtained writs of attachment against the four
parcels of land.
If the plaintiff corporation could not and did not
acquire the four parcels of land here involved, it
follows that it did not possess any resultant right
to dispose of them by sale to the defendant,
Teodoro Sandiko.
NOTE:
Here, the promoters were made liable. It
would seem that in this case, ratification is the
key element in upholding the validity and
enforceability of promoter’s contracts.
 Without ratification by a corporation after its due
incorporation, a contract entered into in behalf of
a corporation yet to be organized or still in the
process of incorporation is void against the
corporation.

ADD:
The transfer by Manuel Tabora to the Cagayan
Fishing Development Company, Inc. was null
because at the time it was effected the
corporation was non-existent

Promoters contracts—refers to contracts entered into

when the parties know fully well that the corporation does
not yet even exist.

It is valid; so, the event of the birth of the corporation, all

the contracts are deemed transferred.

PROMOTER’S CONTRACT – WHEN CORPORATION

BOUND; WHEN NOT

General rule: All these contracts are not necessarily

binding [upon] the corporation,

Exception: when the corporation receives the benefit of

the contract at the time of its constitution.

So kung ti-nransfer talaga yung money du’n that’s deemed

ratified, di na kailangan mag-execute si corporation ng any
documents kase it’s deemed ratified.

BASIS FOR PROMOTER’S LIABILTY

Now look at your provisions on agency: The agent who

acts as such is not personally liable to the party with whom
he contracts, unless he expressly binds himself or exceeds
the limits of his authority without giving such party
sufficient notice of his powers. (1725) [Article 1897, Civil
Code]

If the agent contracts in the name of the principal,

exceeding the scope of his authority, and the principal does
not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of
the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the
principal’s ratification. (n) [Article 1898, Civil Code]

Dito tatama ang liability (dito), kase, alam naman ni

counter-party na si promoter wala siyang [principal],

“If the party with whom the agent contracts aware

the limits of the power granted by the principal.”

Alam naman niya na wala talagang principal, so it’s

actually void.

“In this case however, the agent is liable if he undertook to

secure the principal’s ratification.”

So nakalagay din sa pre-incorporation agreement that the

corporation will ratify this document. So that is the basis of
the liability of the promoter, kase alam pala: that the
counterparty was aware na wala talaga siya’ng authority
kase wala pa namang principal. So please take note of
your provisions on agency.

SO ANSWER TO THE TSN QUESTION:

Not all promoter’s contract are unenforceable – the

exception is when the corporation receives the benefit of
the contract at the time of its constitution.