ZAMBRANO v. PHILIPPINE CARPET MANU. CORP.

ROMMEL M. ZAMBRANO, ROMEO O. CALIPAY, JESUS L. CHIN, et al., petitioners vs. PHILIPPINE
CARPET MANUFACTURING CORPORATION/ PACIFIC CARPET MANUFACTURING CORPORATION,
DAVIDE. T. LIM, and EVELYN LIM FORBES, respondents.

G.R. No. 224099

June 21, 2017

FACTS:

On January 3, 2011,petitioners, who were employees of private respondent Philippine Carpet Manufacturing
Corporation, were notified of the termination of their employment effective February 3, 2011 on the ground of
cessation of operation due to serious business losses. They were of the belief that their dismissal was without
just cause and in violation of due process because the closure of Phil Carpet was a mere pretense to transfer
its operations to its wholly owned and controlled corporation, Pacific Carpet Manufacturing Corporation
(PacificCarpet). They asserted that their dismissal constituted unfair labor practice as it involved the mass
dismissal of all union officers and members of the Philippine Carpet Manufacturing Employees Association
(PHILCEA).

In its defense, Phil Carpet countered that it permanently closed and totally ceased its operations because there
had been a steady decline in the demand for its products due to global recession, stiffer competition, and the
effects of a changing market. Thus, in order to stem the bleeding, the company implemented several cost-
cutting measures, including voluntary redundancy and early retirement programs. Phil Carpet likewise faithfully
complied with the requisites for closure or cessation of business under the Labor Code. The petitioners and the
Department of Labor and Employment were served written notices one (1) month before the intended closure
of the company. The petitioners’ •were also paid their separation pay and they voluntarily executed their
respective Release and Quitclaim before the DOLE officials.

In the September 29, 2014 Decision, the Labor Arbiter dismissed the complaints for illegal dismissal and unfair
labor practice. The NLRC affirmed the findings of the LA, which was subsequently affirmed by the CA.

ISSUES:

1. Whether or not the petitioners were dismissed from employment for a lawful cause.

2. Whether or not the petitioners’ termination from employment constitutes unfair labor practice.
3. Whether or not the quitclaims signed by petitioners are valid and binding.

HELD:

1. Yes. The petitioners were terminated from employment for an authorized cause. In this case, the LA's
findings that Phil Carpet suffered from serious business losses which resulted in its closure were affirmed in
toto by the NLRC, and subsequently by the CA. It is a rule that absent any showing that the findings of fact of
the labor tribunals and the appellate court are not supported by evidence on record or the judgment is based on
a misapprehension of facts, the Court shall not examine anew the evidence submitted by the parties.

Further, even if the petitioners refuse to consider these losses as serious enough to warrant Phil Carpet's total
and permanent closure, it was a business judgment on the part of the company's owners and stockholders to
cease operations, a judgment which the Court has no business interfering with. The only limitation provided by
law is that the closure must be "bonafide in character and not impelled by a motive to defeat or circumvent the
tenurial rights of employees. Thus, when an employer complies with the foregoing conditions, the Court cannot
prohibit closure "just because the business is not suffering from any loss or because of the desire to provide
the workers continued employment."

2. No. The dismissal of the petitioners did not amount to unfair labor practice. Unfair labor practice refers to
acts that violate the workers' right to organize. There should be no dispute that all the prohibited acts
constituting unfair labor practice in essence relate to the workers' right to self-organization. Thus, an employer
may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the
right of his employees to self-organize.

The general principle is that one who makes an allegation has the burden of proving it. The petitioners
miserably failed to discharge the duty imposed upon them. They did not identify the acts of Phil Carpet, which,
they claimed, constituted unfair labor practice. They did not even point out the specific provisions, which Phil
Carpet violated.

3. Yes. The quitclaims were valid and binding upon the petitioners. Where the person making the waiver has
done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as being a valid and binding undertaking.

In this case, the petitioners question the validity of the quitclaims they signed on the ground that Phil Carpet's
closure was a mere pretense. As the closure of Phil Carpet, however, was supported by substantial evidence,
the petitioners' reason for seeking the invalidation of the quitclaims must necessarily fail. Further, as aptly
observed by the CA, the contents of the quitclaims, which were in Filipino, were clear and simple, such that it
was unlikely that the petitioners did not understand what they were signing. Finally, the amount they received
was reasonable as the same complied with the requirements of the Labor Code.

Wherefore, the SC affirmed the decision of the CA in toto.

TAYAG vs. BENGUET CONSOLIDATED, INC. (Conflict of

Laws)
G.R. No. L-23145 November 29, 1968

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary administrator-
appellee,

vs.

BENGUET CONSOLIDATED, INC., oppositor-appellant.

FACTS:

Idonah Slade Perkins, died in New York City, left among others, two stock certificates covering 33,002 shares
of Benguet Consolidated Inc., the certificates being in the possession of the County Trust Company of New
York, which as noted, is the domiciliary administrator of the estate of the deceased.

On August 12, 1960, Prospero Sanidad instituted ancillary administration proceedings in the Court of First
Instance of Manila; Lazaro A. Marquez was appointed ancillary administrator, and on January 22, 1963, he was
substituted by the appellee Renato D. Tayag.

A dispute arose between the domiciary administrator in New York and the ancillary administrator in the
Philippines as to which of them was entitled to the possession of the stock certificates in question.

On January 27, 1964, the Court of First Instance of Manila ordered the domiciliary administrator, County Trust
Company, to "produce and deposit" them with the ancillary administrator or with the Clerk of Court.

The domiciliary administrator did not comply with the order.

And on February 11, 1964, the ancillary administrator petitioned the court to "issue an order declaring the
certificate or certificates of stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by
Benguet Consolidated, Inc., be declared [or] considered as lost."

After considering the motion of the ancillary administrator, dated February 11, 1964, as well as the opposition
filed by the Benguet Consolidated, Inc., the Court hereby:

(1) considers as lost for all purposes in connection with the administration and liquidation of the Philippine
estate of Idonah Slade Perkins the stock certificates covering the 33,002 shares of stock standing in her name
in the books of the Benguet Consolidated, Inc.,

(2) orders said certificates cancelled, and

(3) directs said corporation to issue new certificates in lieu thereof, the same to be delivered by said corporation
to either the incumbent ancillary administrator or to the Probate Division of this Court."

From such an order, an appeal was taken to this Court not by the domiciliary administrator, the County Trust
Company of New York, but by the Philippine corporation, the Benguet Consolidated, Inc. Invoking one of the
provisions of its by-laws which would set forth the procedure to be followed in case of a lost, stolen or
destroyed stock certificate; it would stress that in the event of a contest or the pendency of an action regarding
ownership of such certificate or certificates of stock allegedly lost, stolen or destroyed, the issuance of a new
certificate or certificates would await the "final decision by [a] court regarding the ownership [thereof]."

ISSUE:

Whether the order of the court is proper.

RULING:

YES.

Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary administrator to gain
control and possession of all assets of the decedent within the jurisdiction of the Philippines. Nor could it. Such
a power is inherent in his duty to settle her estate and satisfy the claims of local creditors.

As Justice Tuason speaking for this Court made clear, it is a "general rule universally recognized" that
administration, whether principal or ancillary, certainly "extends to the assets of a decedent found within the
state or country where it was granted," the corollary being "that an administrator appointed in one state or
country has no power over property in another state or country."

The case of Wells Fargo Bank and Union v. Collector of Internal Revenue finds application. "In the instant
case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled [here]." To the
force of the above undeniable proposition, not even appellant is insensible. It does not dispute it. Nor could it
successfully do so even if it were so minded.
The contention of Appellant Benguet Consolidated, Inc. is misplaced. In the first place, there is no such
occasion to apply such by-law. It is admitted that the foreign domiciliary administrator did not appeal from the
order now in question. Moreover, there is likewise the express admission of appellant that as far as it is
concerned, "it is immaterial ... who is entitled to the possession of the stock certificates ..." Even if such were
not the case, it would be a legal absurdity to impart to such a provision conclusiveness and finality. Assuming
that a contrariety exists between the above by-law and the command of a court decree, the latter is to be
followed.

Feliciano vs. COA

ON SEPTEMBER 17, 2020 BY CHESKAMHEYIN UNCATEGORIZED

G.R. NO. 147402 – January 14, 2004

DOCTRINE:

Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or

regulation of private corporations. Government-owned or controlled corporations may be created or

established by special charters in the interest of the common good and subject to the test of

economic viability.

FACTS:

COA audited the accounts of LMWD. Subsequently, LMWD received a letter from COA dated 19 July

1999 requesting payment of auditing fees. As General Manager of LMWD, petitioner sent a reply dated

12 October 1999 informing COAs Regional Director that the water district could not pay the auditing

fees. Petitioner cited as basis for his action Sections 6 and 20 of Presidential Decree 198 (“PD 198”) 2, as
well as Section 18 of Republic Act No. 6758 (“RA 6758”). The Regional Director referred petitioners

reply to the COA Chairman on 18 October 1999.

On 19 October 1999, petitioner wrote COA through the Regional Director asking for refund of all

auditing fees LMWD previously paid to COA.

On 16 March 2000, petitioner received COA Chairman Celso D. Gangans Resolution dated 3 January

2000 denying his requests. Petitioner filed a motion for reconsideration on 31 March 2000, which COA

denied on 30 January 2001.

Hence, petitioner filed this instant petition.

ISSUE:

1. Whether a Local Water District (“LWD”) created under PD 198, as amended, is a government-owned

or controlled corporation subject to the audit jurisdiction of COA;

2. Whether Section 20 of PD 198, as amended, prohibits COAs certified public accountants from auditing

local water districts;

3. Whether Section 18 of RA 6758 prohibits the COA from charging government-owned and controlled

corporations auditing fees.

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RULING:
1. Yes. The Constitution and existing laws mandate COA to audit all government agencies,
including government-owned and controlled corporations (“GOCCs”) with original charters. An
LWD is a GOCC with an original charter. The COAs audit jurisdiction extends not only to
government “agencies or instrumentalities,” but also to “government-owned and controlled
corporations with original charters” as well as “other government-owned or controlled
corporations” without original charters. LWDs exist by virtue of PD 198, which constitutes their
special charter. Since under the Constitution only government-owned or controlled corporations
may have special charters, LWDs can validly exist only if they are government-owned or
controlled. To claim that LWDs are private corporations with a special charter is to admit that
their existence is constitutionally infirm.

2. NO, PD 198 cannot prevail over the Constitution. No amount of clever legislation can exclude GOCCs

like LWDs from COAs audit jurisdiction. Section 3, Article IX-C of the Constitution outlaws any scheme

or devise to escape COAs audit jurisdiction, thus:

“Sec. 3. No law shall be passed exempting any entity of the Government or its subsidiary in any guise
whatever, or any investment of public funds, from the jurisdiction of the Commission on Audit. “

The framers of the Constitution added Section 3, Article IX-D of the Constitution precisely to annul

provisions of Presidential Decrees, like that of Section 20 of PD 198, that exempt GOCCs from COA

audit.

3. No. Section 18 of RA 6758 prohibits COA personnel from receiving any kind of compensation from

any government entity except “compensation paid directly by COA out of its appropriations and

contributions.” Thus, RA 6758 itself recognizes an exception to the statutory ban on COA personnel

receiving compensation from GOCCs. COA may charge GOCCs “actual audit cost” but GOCCs must pay

the same directly to COA and not to COA auditors. Petitioner has not alleged that COA charges LWDs

auditing fees in excess of COAs “actual audit cost.” Neither has petitioner alleged that the auditing fees

are paid by LWDs directly to individual COA auditors.

GSIS Family Bank Employees Union vs. Villanueva
Facts: Royal Savings Bank filed an application with the Central Bank of the Philippines for the appointment of a
conservator. The application was denied, prohibited it from doing business, and placed it under receivership. Royal
Savings Bank filed several complaints against the Central Bank for grave abuse of discretion. To amicably settle the
cases, then Central Bank Governor Jose B. Fernandez, Jr. offered to reopen and rehabilitate Royal Savings Bank if it
would drop all its complaints against the Central Bank and transfer all its shares of stock to Commercial Bank of
Manila, a wholly-owned subsidiary of GSIS. Royal Savings Bank and Commercial Bank of Manila entered into a
Memorandum of Agreement to rehabilitate and infuse capital into Royal Savings Bank. Royal Savings Bank was
renamed Comsavings Bank.

GSIS transferred its holdings from Commercial Bank of Manila to Boston Bank. Comsavings Bank was not included
in the transfer. Due to Boston Bank’s acquisition of Commercial Bank of Manila, GSIS took over the control and
management of Comsavings Bank.

Comsavings Bank and GSIS executed a Memorandum of Agreement where the latter committed to infuse an
additional capital of P2.5 billion into Comsavings Bank. After the infusion of funds, GSIS effectively owned 99.55% of
Comsavings Bank’s outstanding shares of stock. Comsavings Bank changed its name to GSIS Family Bank.

President Benigno S. Aquino III issued Executive Order No. 7, which placed an indefinite moratorium on increases in
salaries and benefits of employees in GOCCs and government financial institutions. President Aquino also signed
into law RA No. 10149, or the GOCC Governance Act of 2011. The law created the Governance Commission for
GOCCs.

The Governance Commission clarified that GSIS Family Bank was classified as a government financial institution.
Moreover, as a government financial institution, GSIS Family Bank was unauthorized to enter into a collective
bargaining agreement with its employees “based on the principle that the compensation and position classification
system is provided for by law and not subject to private bargaining.” Also further clarified that the right to strike of
GSIS Family Bank’s employees was not guaranteed by the Constitution, as they were government officers and
employees.

GSIS Union sent GSIS Family Bank a demand letter for the payment of Christmas bonus to its members, as
stipulated in their CBA. GSIS Union accused GSIS Family Bank of evading its contractual obligation to its employees
by invoking the Governance Commission’s opinion that it was no longer authorized to grant incentives and other
benefits to its employees, unless authorized by the President of the Philippines. GSIS Union alleged that Republic Act
No. 10149 does not apply to GSIS Family Bank, as it was a private bank created and established under the
Corporation Code.

Issue: Whether or not GSIS Family Bank is a private bank, outside the coverage of the RA.

Held: No. A GOCC is: (1) established by original charter or through the general corporation law; (2) vested with
functions relating to public need whether governmental or proprietary in nature; and (3) directly owned by the
government or by its instrumentality, or where the government owns a majority of the outstanding capital stock.
Possessing all 3 attributes is necessary to be classified as a GOCC. There is no doubt that GSIS Family Bank is a
GOCC since 99.55% of its outstanding capital stock is owned and controlled by GSIS.

SEVENTH DAY ADVENTIST CHURCH v. NORTHEASTERN MINDANAO MISSION, GR NO.

150416, 2006-07-21
Facts:

That we Felix Cosio

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

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

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

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

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

tr

After trial, the trial court rendered a decision[7] on November 20, 1992 upholding the sale in
favor of respondents.

On appeal, the CA affirmed the RTC decision but deleted the award of moral damages and
attorney's fees.

Issues:

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

Ruling:

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor
of another person who accepts it. The donation could not have been made in favor of an entity
yet inexistent at the time it was made. Nor could it have been accepted... as there was yet no
one to accept it.

The deed of donation was not in favor of any informal group of SDA members but a supposed
SPUM-SDA Bayugan (the local church) which, at the time, had neither juridical personality nor
capacity to accept such gift.

Declaring themselves a de facto corporation, petitioners allege that they should benefit from the
donation.

But there are stringent requirements before one can qualify as a de facto corporation:
(a) the existence of a valid law under which it may be incorporated;

(b) an attempt in good faith to incorporate; and

(c) assumption of corporate powers.

there is no proof that there was an attempt to incorporate at that time.

The filing of articles of incorporation and the issuance of the certificate of incorporation are
essential for the existence of a de facto corporation.

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

Corporate existence begins only from the moment a certificate of incorporation is issued. No
such certificate was ever issued to petitioners or their supposed predecessor-in-interest at the
time of the donation. Petitioners obviously could not have claimed succession to an... entity that
never came to exist.

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

Principles:

"The de facto doctrine thus effects a compromise between two conflicting public interest[s]-the
one opposed to an unauthorized assumption of corporate privileges; the other in favor of doing
justice to the parties and of establishing a general assurance... of security in business dealing
with corporations."[17]

Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not
to favor the defective or non-existent corporation.

LIM TONG LIM v. PHILIPPINE FISHING GEAR INDUSTRIES, GR No. 136448, 1999-11-03

Facts:

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.

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.

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.

Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.

Issues:

In determining whether petitioner may be held liable for the fishing nets and floats purchased
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.

Ruling:

Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.

The Petition is devoid of merit.

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.

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 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.

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.
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

MISSIONARY SISTERS OF OUR LADY OF FATIMA v. AMANDO V. ALZONA, GR No. 224307,

2018-08-06

Facts:

The Missionary Sisters of Our Lady of Fatima (petitioner), otherwise known as the Peach Sisters
of Laguna, is a religious and charitable group

Its primary mission is to take care of the abandoned and neglected elderly persons.

The petitioner came into being as a corporation by virtue of a Certificate issued by the Securities
and Exchange Commission (SEC) on August 31, 2001

Mother Ma. Concepcion R. Realon (Mother Concepcion) is the petitioner's Superior General

The respondents, on the other hand, are the legal heirs of the late Purificacion Y. Alzona
(Purificacion).

Purificacion, a spinster, is the registered owner of parcels of land... and a co-owner of another
property... all of which are located in Calamba City, Laguna.

Purificacion, impelled by her unmaterialized desire to be nun, decided to devote the rest of her
life in helping others. In the same year, she then became a benefactor of the petitioner by giving
support to the community and its works.

during a doctor's appointment, Purificacion then accompanied by Mother Concepcion,

discovered that she has been suffering from lung cancer

Considering the restrictions in her movement, Purificacion requested Mother Concepcion to take
care of her in her house, to which the latter agreed

Purificacion called Mother Concepcion and handed her a handwritten letter dated October 1999.

Therein, Purificacion stated that she is donating her house and lot at F. Mercado Street and
Riceland at Banlic, both at Calamba, Laguna, to the petitioner through Mother Concepcion.

Sometime in August 2001, at the request of Purificacion, Mother Concepcion went to see Atty.
Nonato Arcillas (Atty. Arcillas) in Los Baños, Laguna. During their meeting, Atty. Arcillas asked
Mother Concepcion whether their group is registered with the SEC, to which the latter replied in
the negative.

Acting on the advice given by Atty. Arcillas, Mother Concepcion went to SEC and filed the
corresponding registration application on August 28, 2001.

Purificacion executed a Deed of Donation Inter Vivos (Deed) in favor of the petitioner,
conveying her properties... and her undivided share in the property

Subsequently, the Deed, together with the owner's duplicate copies... and the exemption letter
from the BIR was presented for registration. The Register of Deeds, however, denied the
registration on account of the Affidavit of Adverse Claim dated September 26, 2001 filed by the
brother of Purificacion, respondent Amando Y. Alzona (Amando).[13]

Purificacion died without any issue, and survived only by her brother of full blood, Amando, who
nonetheless died during the pendency of this case and is now represented and substituted by his
legal heirs, joined as herein respondents.

Amando filed a Complaint before the RTC, seeking to annul the Deed executed between
Purificacion and the petitioner, on the ground that at the time the donation was made, the latter
was not registered with the SEC and therefore has no juridical personality and cannot legally
accept the donation

RTC rendered its Decision[16] finding no merit in the complaint

On the capacity of the donee, the RTC held that at the time of the execution of the Deed, the
petitioner was a de facto corporation and as such has the personality to be a beneficiary and has
the power to acquire and possess property.

Further then, the petitioner's incapacity cannot be questioned or assailed in the instant case as it
constitutes a collateral attack which is prohibited by the Corporation Code of the Philippines.

In this regard, the RTC found that the recognition by the petitioner of Mother Concepcion's
authority is sufficient to vest the latter of the capacity to accept the donation... the CA, citing the
case of Seventh Day Adventist Conference Church of Southern Phils., Inc. v. Northeastern
Mindanao Mission of Seventh Day Adventist, Inc.,[24] held that the petitioner cannot be
considered as a de facto corporation considering that at the time of the donation, there was no
bona fide attempt on its part to incorporate.

Ultimately, bereft of juridical personality, the CA ruled that the petitioner cannot enter into a
contract of Donation with Purificacion.[26]... petitioner contends that it is a de facto corporation
and therefore possessed of the requisite personality to enter into a contract of donation.

Assuming further that it cannot be considered as a de facto corporation, the petitioner submits
that the acceptance by Mother Concepcion while the religious organization is still in the process
of incorporation is valid as it then takes the form of a pre-incorporation contract governed by
the rules on agency.
the petitioner argues that the intestate estate of Purificacion is estopped from questioning its
legal personality considering the record is replete of evidence to prove that Purificacion at the
time of the donation is fully aware of its status and yet was still resolved into giving her property.

In response, the respondents submit that juridical personality to enter into a contract of donation
is vested only upon the issuance of a Certificate of Incorporation from SEC.

Further, the respondents posit that the petitioner cannot even be considered as a de facto
corporation considering that for more than 20 years, there was never any attempt on its part to
incorporate,

Issues:

whether or not the Deed executed by Purificacion in favor of the petitioner is valid and binding

Ruling:

The Court finds that for the purpose of accepting the donation, the petitioner is deemed vested
with personality to accept, and Mother Concepcion is clothed with authority to act on the latter's
behalf.

At the outset, it must be stated that as correctly pointed out by the CA, the RTC erred in holding
that the petitioner is a de facto corporation.

Jurisprudence settled that "[t]he filing of articles of incorporation and the issuance of the
certificate of incorporation are essential for the existence of a de facto corporation."[38] In fine,
it is the act of registration with SEC through the issuance of a certificate of incorporation that
marks the beginning of an entity's corporate existence.

Petitioner filed its Articles of Incorporation and by-laws on August 28, 2001. However, the SEC
issued the corresponding Certificate of Incorporation only on August 31, 2001, two (2) days after
Purificacion executed a Deed of Donation on August 29, 2001. Clearly, at the time the donation
was made, the Petitioner cannot be considered a corporation de facto.

Rather, a review of the attendant circumstances reveals that it calls for the application of the
doctrine of corporation by estoppel as provided for under Section 21 of the Corporation Code

The doctrine of corporation by estoppel is founded on principles of equity and is designed to

prevent injustice and unfairness. It applies when a non-existent corporation enters into contracts
or dealings with third persons.[41] In which case, the person who has contracted or otherwise
dealt with the non-existent corporation is estopped to deny the latter's legal existence in any
action leading out of or involving such contract or dealing.

In this controversy, Purificacion dealt with the petitioner as if it were a corporation. This is
evident from the fact that Purificacion executed two (2) documents conveying her properties in
favor of the petitioner... the latter having been executed the day after the petitioner filed its
application for registration with the SEC

The doctrine of corporation by estoppel rests on the idea that if the Court were to disregard the
existence of an entity which entered into a transaction with a third party, unjust enrichment
would result as some form of benefit have already accrued on the part of one of the parties.
Thus, in that instance, the Court affords upon the unorganized entity corporate fiction and
juridical personality for the sole purpose of upholding the contract or transaction.

In this case, while the underlying contract which is sought to be enforced is that of a donation,
and thus rooted on liberality, it cannot be said that Purificacion, as the donor failed to acquire
any benefit therefrom so as to prevent the application of the doctrine of corporation by
estoppel.

the subject deed partakes of the nature of a remuneratory or compensatory donation, having
been made "for the purpose of rewarding the donee for past services, which services do not
amount to a demandable debt."... past services constitutes consideration, which in tum can be
regarded as "benefit" on the part of the donor, consequently, there exists no obstacle to the
application of the doctrine of corporation by estoppel;

Precisely, the existence of the petitioner as a corporate entity is upheld in this case for the
purpose of validating the Deed to ensure that the primary objective for which the donation was
intended is achieved, that is, to convey the property for the purpose of aiding the petitioner in
the pursuit of its charitable objectives.

Further, apart from the foregoing, the subsequent act by Purificacion of re-conveying the
property in favor of the petitioner is a ratification by conduct of the otherwise defective
donation.

In this controversy, while the initial conveyance is defective, the genuine intent of Purificacion to
donate the subject properties in favor of the petitioner is indubitable. Also, while the petitioner
is yet to be incorporated, it cannot be said that the initial conveyance was tainted with fraud or
misrepresentation. Contrarily, Purificacion acted with full knowledge of circumstances of the
Petitioner

This is evident from Purificacion's act of referring Mother Concepcion to Atty. Arcillas, who, in
turn, advised the petitioner to apply for registration.

Further, with the execution of two (2) documents of conveyance in favor of the petitioner, it is
clear that what Purificacion intended was for the sisters comprising the petitioner to have
ownership of her properties to aid them in the pursuit of their charitable activities, as a token of
appreciation for the services they rendered to her during her illness.

The Deed sought to be enforced having been validly entered into by Purificacion, the
respondents' predecessor-in-interest, binds the respondents who succeed the latter as heirs.[56]
Simply, as they claim interest in their capacity as Purificacion's heirs, the respondents are
considered as "privies" to the subject Deed; or are "those between whom an action is binding
although they are not literally parties to the said action."