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Corporation
Law Week 2
G.R. No. 119002 October 19, 2000 This prompted petitioner to file a civil case before the Regional
Trial Court of Manila. Petitioner sued Henri Kahn in his
personal capacity and as President of the Federation and
INTERNATIONAL EXPRESS TRAVEL & TOUR impleaded the Federation as an alternative defendant.
SERVICES, INC., petitioner, Petitioner sought to hold Henri Kahn liable for the unpaid
vs. balance for the tickets purchased by the Federation on the
HON. COURT OF APPEALS, HENRI KAHN, ground that Henri Kahn allegedly guaranteed the said
obligation.6
PHILIPPINE FOOTBALL
FEDERATION, respondents.
Henri Kahn filed his answer with counterclaim. While not
denying the allegation that the Federation owed the amount
KAPUNAN, J.: P207,524.20, representing the unpaid balance for the plane
tickets, he averred that the petitioner has no cause of action
Facts: against him either in his personal capacity or in his official
capacity as president of the Federation. He maintained that he
On June 30 1989, petitioner International Express Travel and did not guarantee payment but merely acted as an agent of the
Tour Services, Inc., through its managing director, wrote a Federation which has a separate and distinct juridical
letter to the Philippine Football Federation (Federation), personality. On the other hand, the Federation failed to file its
through its president private respondent Henri Kahn, wherein answer, hence, was declared in default by the trial court.
the former offered its services as a travel agency to the
latter.1 The offer was accepted. Trial Court: in favor of petitioner, Henri Kahn, personally liable
for the unpaid obligation of the Federation, failed to adduce
Petitioner secured the airline tickets for the trips of the athletes evidence proving the corporate existence
and officials of the Federation to the South East Asian Games
in Kuala Lumpur as well as various other trips to the People's CA: reversed Trial Court decision, petitioner failed to prove that
Republic of China and Brisbane. The total cost of the tickets Henri Kahn guaranteed the obligation of the Federation as said
amounted to P449,654.83. For the tickets received, the entity has a separate and distinct personality from its officers.
Federation made two partial payments, both in September of
1989, in the total amount of P176,467.50.2
Petitioner filed a motion for reconsideration and as an
alternative prayer pleaded that the Federation be held liable for
On 4 October 1989, petitioner wrote the Federation, through the unpaid obligation.
the private respondent a demand letter requesting for the
amount of P265,894.33.3 On 30 October 1989, the Federation,
Appellate court: denied the motion, “it should be remembered
through the Project Gintong Alay, paid the amount of
that the trial court dismissed the complaint against the
P31,603.00.4
Philippine Football Federation, and the plaintiff did not appeal
from this decision. Hence, the Philippine Football Federation is
On 27 December 1989, Henri Kahn issued a personal check in not a party to this appeal and consequently, no judgment may
the amount of P50,000 as partial payment for the outstanding be pronounced by this Court against the PFF without violating
balance of the Federation.5 Thereafter, no further payments the due process clause, let alone the fact that the judgment
were made despite repeated demands.
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dismissing the complaint against it, had already become final non-existence of the Federation. We cannot subscribe to the
by virtue of the plaintiff's failure to appeal therefrom.” position taken by the appellate court that even assuming that
the Federation was defectively incorporated, the petitioner
Issue: cannot deny the corporate existence of the Federation
because it had contracted and dealt with the Federation in
WON CA erred in holding that petitioner dealt with PFF as a such a manner as to recognize and in effect admit its
corporate entity and in holding that private respondent Henri existence.15 The doctrine of corporation by estoppel is
Kahn not liable (WON there is a corporation by estoppel) mistakenly applied by 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
Held:
has benefited on the irrelevant ground of defective
incorporation.16 In the case at bar, the petitioner is not trying to
Nowhere can it be found in R.A. 3135 or P.D. 604 any escape liability from the contract but rather is the one claiming
provision creating the Philippine Football Federation. These from the contract.
laws merely recognized the existence of national sports
associations and provided the manner by which these entities
may acquire juridical personality. The powers and functions G.R. No. 136448 November 3, 1999
granted to national sports associations clearly indicate that
these entities may acquire a juridical personality. The power to LIM TONG LIM, petitioner,
purchase, sell, lease and encumber property are acts which vs.
may only be done by persons, whether natural or artificial, with
PHILIPPINE FISHING GEAR INDUSTRIES,
juridical capacity. However, while we agree with the appellate
court that national sports associations may be accorded INC., respondent.
corporate status, such does not automatically take place by the
mere passage of these laws. It is a basic postulate that before PANGANIBAN, J.:
a corporation may acquire juridical personality, the State must
give its consent either in the form of a special law or a general
Facts:
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 On behalf of "Ocean Quest Fishing Corporation," Antonio Chua
laws. 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).
Clearly the provisions require that before an entity may be
They claimed that they were engaged in a business venture
considered as a national sports association, such entity must
with Petitioner Lim Tong Lim, who however was not a signatory
be recognized by the accrediting organization, the Philippine
to the agreement. The total price of the nets amounted to
Amateur Athletic Federation under R.A. 3135, and the
P532,045. Four hundred pieces of floats worth P68,000 were
Department of Youth and Sports Development under P.D. 604.
also sold to the Corporation. 4
This fact of recognition, however, Henri Kahn failed to
substantiate. In attempting to prove the juridical existence of
the Federation, Henri Kahn attached to his motion for The buyers, however, failed to pay for the fishing nets and the
reconsideration before the trial court a copy of the constitution floats; hence, private respondents filed a collection suit against
and by-laws of the Philippine Football Federation. Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ
Unfortunately, the same does not prove that said Federation of preliminary attachment. The suit was brought against the
has indeed been recognized and accredited by either the three in their capacities as general partners, on the allegation
Philippine Amateur Athletic Federation or the Department of that "Ocean Quest Fishing Corporation" was a nonexistent
Youth and Sports Development. Accordingly, we rule that the corporation as shown by a Certification from the Securities and
Philippine Football Federation is not a national sports Exchange Commission. 5 On September 20, 1990, the lower
association within the purview of the aforementioned laws and court issued a Writ of Preliminary Attachment, which the sheriff
does not have corporate existence of its own. enforced by attaching the fishing nets on board F/B Lourdes
which was then docked at the Fisheries Port, Navotas, Metro
Manila.
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 Chua filed a Manifestation admitting his liability and requesting
principal in corporation law that any person acting or purporting a reasonable time within which to pay. He also turned over to
to act on behalf of a corporation which has no valid existence respondent some of the nets which were in his possession.
assumes such privileges and becomes personally liable for Peter Yao filed an Answer, after which he was deemed to have
contract entered into or for other acts performed as such waived his right to cross-examine witnesses and to present
agent.14 As president of the Federation, Henri Kahn is evidence on his behalf, because of his failure to appear in
presumed to have known about the corporate existence or subsequent hearings. Lim Tong Lim, on the other hand, filed an
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Answer with Counterclaim and Crossclaim and moved for the nets and the floats. The fishing nets and the floats,
lifting of the Writ of Attachment. both essential to fishing, were obviously acquired in
furtherance of their business. It would have been
The trial court maintained the Writ, and upon motion of private inconceivable for Lim to involve himself so much in
respondent, ordered the sale of the fishing nets at a public buying the boat but not in the acquisition of the
auction. Philippine Fishing Gear Industries won the bidding and aforesaid equipment, without which the business
deposited with the said court the sales proceeds of P900,000. could not have proceeded.

Trial Court: ruled that Philippine Fishing Gear Industries was

Given the preceding facts, it is clear that there was,
entitled to the Writ of Attachment and that Chua, Yao and Lim,
among petitioner, Chua and Yao, a partnership
as general partners, were jointly liable to pay respondent. A
engaged in the fishing business. They purchased the
partnership among Lim, Chua and Yao existed. The trial court
boats, which constituted the main assets of the
noted that the Compromise Agreement was silent as to the
partnership, and they agreed that the proceeds from
nature of their obligations, but that joint liability could be
the sales and operations thereof would be divided
presumed from the equal distribution of the profit and loss.
among them.
CA: held that petitioner was a partner of Chua and Yao in a
fishing business and may thus be held liable as such for the 2. No. There is no dispute that the respondent,
fishing nets and floats purchased by and for the use of the Philippine Fishing Gear Industries, is entitled to be
partnership. “The ultimate undertaking of the defendants was paid for the nets it sold. The only question here is
to divide the profits among themselves which is what a whether petitioner should be held jointly 18 liable with
partnership essentially is.” Chua and Yao. Petitioner contests such liability,
insisting that only those who dealt in the name of the
Issue: ostensible corporation should be held liable. Since his
name does not appear on any of the contracts and
Whether by their acts, Lim, Chua and Yao could be deemed to
since he never directly transacted with the respondent
have entered into a partnership
corporation, ergo, he cannot be held liable.
Whether or not under the doctrine of corporation by estoppel,
liability can only be imputed only to Chua and Yao and not to Unquestionably, petitioner benefited from the use of
Lim. the nets found inside F/B Lourdes, the boat which has
earlier been proven to be an asset of the partnership.
Held: He in fact questions the attachment of the nets,
because the Writ has effectively stopped his use of
1. Yes. The Court is not persuaded by the arguments of the fishing vessel.
petitioner. The facts as found by the two lower courts
clearly showed that there existed a partnership It is difficult to disagree with the RTC and the CA that
among Chua, Yao and him, pursuant to Article 1767 of Lim, Chua and Yao decided to form a corporation.
the Civil Code. Although it was never legally formed for unknown
reasons, this fact alone does not preclude the
From the factual findings of both lower courts, it is liabilities of the three as contracting parties in
clear that Chua, Yao and Lim had decided to engage representation of it. Clearly, under the law on
in a fishing business, which they started by buying estoppel, those acting on behalf of a corporation and
boats worth P3.35 million, financed by a loan secured those benefited by it, knowing it to be without valid
from Jesus Lim who was petitioner's brother. In their existence, are held liable as general partners.
Compromise Agreement, they subsequently revealed
their intention to pay the loan with the proceeds of the Technically, it is true that petitioner did not directly act
sale of the boats, and to divide equally among them on behalf of the corporation. However, having reaped
the excess or loss. These boats, the purchase and the benefits of the contract entered into by persons
the repair of which were financed with borrowed with whom he previously had an existing relationship,
money, fell under the term "common fund" under he is deemed to be part of said association and is
Article 1767. The contribution to such fund need not covered by the scope of the doctrine of corporation by
be cash or fixed assets; it could be an intangible like estoppel.
credit or industry. That the parties agreed that any
loss or profit from the sale and operation of the boats G.R. No. 125221 June 19, 1997
would be divided equally among them also shows that
they had indeed formed a partnership.
REYNALDO M. LOZANO, petitioner,
Moreover, it is clear that the partnership extended not vs.
only to the purchase of the boat, but also to that of the HON. ELIEZER R. DE LOS SANTOS, Presiding
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Judge, RTC, Br. 58, Angeles City; and ANTONIO had its officers and members submitted their articles of
consolidation is accordance with Sections 78 and 79 of the
ANDA, respondents.
Corporation Code. Consolidation becomes effective not upon
mere agreement of the members but only upon issuance of the
PUNO, J.: certificate of consolidation by the SEC. 13 When the SEC, upon
processing and examining the articles of consolidation, is
Facts: satisfied that the consolidation of the corporations is not
inconsistent with the provisions of the Corporation Code and
On December 19, 1995, petitioner Reynaldo M. Lozano filed existing laws, it issues a certificate of consolidation which
Civil Case No. 1214 for damages against respondent Antonio makes the reorganization official. 14 The new consolidated
Anda before the Municipal Circuit Trial Court (MCTC), corporation comes into existence and the constituent
Mabalacat and Magalang, Pampanga. Petitioner alleged that corporations dissolve and cease to exist.
he was the president of the Kapatirang Mabalacat-Angeles
Jeepney Drivers' Association, Inc. (KAMAJDA) while The grant of jurisdiction to the SEC must be viewed in the light
respondent Anda was the president of the Samahang Angeles- of its nature and function under the law. 8 This jurisdiction is
Mabalacat Jeepney Operators' and Drivers' Association, Inc. determined by a concurrence of two elements: (1) the status or
(SAMAJODA); in August 1995, upon the request of the relationship of the parties; and (2) the nature of the question
Sangguniang Bayan of Mabalacat, Pampanga, petitioner and that is the subject of their controversy.
private respondent agreed to consolidate their respective
The first element requires that the controversy must arise out
associations and form the Unified Mabalacat-Angeles Jeepney
of intracorporate or partnership relations between and among
Operators' and Drivers Association, Inc. (UMAJODA);
stockholders, members, or associates; between any or all of
petitioner and private respondent also agreed to elect one set
them and the corporation, partnership or association of which
of officers who shall be given the sole authority to collect the
they are stockholders, members or associates, respectively;
daily dues from the members of the consolidated association;
and between such corporation, partnership or association and
elections were held on October 29, 1995 and both petitioner
the State in so far as it concerns their individual
and private respondent ran for president; petitioner won;
franchises. 10 The second element requires that the dispute
private respondent protested and, alleging fraud, refused to
among the parties be intrinsically connected with the regulation
recognize the results of the election; private respondent also
of the corporation, partnership or association or deal with the
refused to abide by their agreement and continued collecting
internal affairs of the corporation, partnership or
the dues from the members of his association despite several
association. 11 After all, the principal function of the SEC is the
demands to desist. Petitioner was thus constrained to file the
supervision and control of corporations, partnership and
complaint to restrain private respondent from collecting the
associations with the end in view that investments in these
dues and to order him to pay damages in the amount of
entities may be encouraged and protected, and their entities
P25,000.00 and attorney's fees of P500.00. 1
may be encouraged and protected, and their activities pursued
for the promotion of economic development.
Private respondent moved to dismiss the complaint for lack of
jurisdiction, claiming that jurisdiction was lodged with the
The KAMAJDA and SAMAJODA to which petitioner and private
Securities and Exchange Commission (SEC).
respondent belong are duly registered with the SEC, but these
associations are two separate entities. The dispute between
MCTC: The MCTC denied the motion to dismiss on February petitioner and private respondent is not within the KAMAJDA
9, 1996. 2 It denied reconsideration on March 8, 1996. nor the SAMAJODA. It is between members of separate and
distinct associations. Petitioner and private respondent have
RTC: certiorari; found the dispute to be intracorporate, hence,
no intracorporate relation much less do they have an
subject to the jurisdiction of the SEC, and ordered the MCTC to
intracorporate dispute. The SEC therefore has no jurisdiction
dismiss Civil Case No. 1214 accordingly.
over the complaint.
Issue:
The doctrine of corporation by estoppel 16 advanced by private
WON the SEC has jurisdiction over associations not yet respondent cannot override jurisdictional requirements.
approved and registered with the SEC Jurisdiction is fixed by law and is not subject to the agreement
of the parties. 17 It cannot be acquired through or waived,
Held: enlarged or diminished by, any act or omission of the parties,
neither can it be conferred by the acquiescence of the court. 18
There is no intracorporate nor partnership relation between
petitioner and private respondent. The controversy between
Corporation by estoppel is founded on principles of equity and
them arose out of their plan to consolidate their respective
is designed to prevent injustice and unfairness. 19 It applies
jeepney drivers' and operators' associations into a single
when persons assume to form a corporation and exercise
common association. This unified association was, however,
corporate functions and enter into business relations with third
still a proposal. It had not been approved by the SEC, neither
person. Where there is no third person involved and the
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conflict arises only among those assuming the form of a adopt another name not "similar [to] or identical" with that of
corporation, who therefore know that it has not been petitioner. In an Order dated 20 April 1977, Associate
registered, there is no corporation by estoppel. Commissioner Julio Sulit held that the corporate name of
petitioner and that of the Lyceum of Baguio, Inc. were
G.R. No. 101897. March 5, 1993. 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
LYCEUM OF THE PHILIPPINES, INC., petitioner, the other corporate name. The SEC also noted that petitioner
vs. COURT OF APPEALS, LYCEUM OF APARRI, had registered as a corporation ahead of the Lyceum of
LYCEUM OF CABAGAN, 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
CAMALANIUGAN, INC., LYCEUM OF LALLO,
names of previously registered entities.
INC., LYCEUM OF TUAO, INC., BUHI LYCEUM,
CENTRAL LYCEUM OF CATANDUANES, Armed with the Resolution of this Court in G.R. No. L-46595,
LYCEUM OF SOUTHERN PHILIPPINES, LYCEUM petitioner then wrote all the educational institutions it could find
using the word "Lyceum" as part of their corporate name, and
OF EASTERN MINDANAO, INC. and WESTERN
advised them to discontinue such use of "Lyceum." When, with
PANGASINAN LYCEUM, INC., respondents. the passage of time, it became clear that this recourse had
failed, petitioner instituted before the SEC SEC-Case No. 2579
FELICIANO, J: to enforce what petitioner claims as its proprietary right to the
word "Lyceum." The SEC hearing officer rendered a decision
Facts: sustaining petitioner's claim to an exclusive right to use the
word "Lyceum." The hearing officer relied upon the SEC ruling
Petitioner is an educational institution duly registered with the in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and
Securities and Exchange Commission ("SEC"). When it first held that the word "Lyceum" was capable of appropriation and
registered with the SEC on 21 September 1950, it used the that petitioner had acquired an enforceable exclusive right to
corporate name Lyceum of the Philippines, Inc. and has used the use of that word.
that name ever since.
SEC En Banc: (private respondents) appeal; reversed the
decision of hearing officer, did not consider the word "Lyceum"
On 24 February 1984, petitioner instituted proceedings before
to have become so identified with petitioner as to render use
the SEC to compel the private respondents, which are also
thereof by other institutions as productive of confusion about
educational institutions, to delete the word "Lyceum" from their
the identity, held that the attaching of geographical names to
corporate names and permanently to enjoin them from using
the word "Lyceum" served sufficiently to distinguish the schools
"Lyceum" as part of their respective names. Some of the
from one another.
private respondents actively participated in the proceedings
before the SEC. These are the following, the dates of their
Court of Appeals: (petitioner) appeal; affirmed SEC En Banc;
original SEC registration being set out below opposite their
reconsideration, same same.
respective names:
Issue:
Western Pangasinan Lyceum — 27 October 1950
Lyceum of Cabagan — 31 October 1962 Whether or not the use by petitioner of "Lyceum" in its
Lyceum of Lallo, Inc. — 26 March 1972 corporate name has been for such length of time and with such
Lyceum of Aparri — 28 March 1972 exclusivity as to have become associated or identified with the
Lyceum of Tuao, Inc. — 28 March 1972
petitioner institution in the mind of the general public
Lyceum of Camalaniugan — 28 March 1972
Held:

The following private respondents were declared in default for

The doctrine of secondary meaning originated in the field of
failure to file an answer despite service of summons:
trademark law. Its application has, however, been extended to
corporate names sine the right to use a corporate name to the
Buhi Lyceum; exclusion of others is based upon the same principle which
Central Lyceum of Catanduanes;
underlies the right to use a particular trademark or tradename.
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines 10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11
the doctrine of secondary meaning was elaborated in the
following terms:
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 " . . . a word or phrase originally incapable of exclusive
Baguio, Inc. to require it to change its corporate name and to appropriation with reference to an article on the market,
because geographically or otherwise descriptive, might
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nevertheless have been used so long and so exclusively by EXCHANGE COMMISSION and REFRACTORIES
one producer with reference to his article that, in that trade and CORPORATION OF THE
to that branch of the purchasing public, the word or phrase has
come to mean that the article was his product."
PHILIPPINES, respondents.

With the foregoing as a yardstick, [we] believe the appellant AUSTRIA-MARTINEZ, J.:
failed to satisfy the aforementioned requisites. No evidence
was ever presented in the hearing before the Commission Respondent Refractories Corporation of the Philippines (RCP)
which sufficiently proved that the word 'Lyceum' has indeed is a corporation duly organized on October 13, 1976 for the
acquired secondary meaning in favor of the appellant. If there purpose of engaging in the business of manufacturing,
was any of this kind, the same tend to prove only that the producing, selling, exporting and otherwise dealing in any and
appellant had been using the disputed word for a long period of all refractory bricks, its by-products and derivatives. On June
time. Nevertheless, its (appellant) exclusive use of the word 22, 1977, it registered its corporate and business name with
(Lyceum) was never established or proven as in fact the the Bureau of Domestic Trade.
evidence tend to convey that the cross-claimant was already
using the word 'Lyceum' seventeen (17) years prior to the date Petitioner IRCP on the other hand, was incorporated on August
the appellant started using the same word in its corporate 23, 1979 originally under the name "Synclaire Manufacturing
name. Furthermore, educational institutions of the Roman Corporation". It amended its Articles of Incorporation on August
Catholic Church had been using the same or similar word like 23, 1985 to change its corporate name to "Industrial
'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), Refractories Corp. of the Philippines". It is engaged in the
'Liceo de Masbate,' 'Liceo de Albay' long before appellant business of manufacturing all kinds of ceramics and other
started using the word 'Lyceum'. The appellant also failed to products, except paints and zincs.
prove that the word 'Lyceum' has become so identified with its
educational institution that confusion will surely arise in the
Both companies are the only local suppliers of monolithic
minds of the public if the same word were to be used by other
gunning mix.1
educational institutions.

Discovering that petitioner was using such corporate name,

In other words, while the appellant may have proved that it had
respondent RCP filed on April 14, 1988 with the Securities and
been using the word 'Lyceum' for a long period of time, this fact
Exchange Commission (SEC) a petition to compel petitioner to
alone did not amount to mean that the said word had acquired
change its corporate name on the ground that its corporate
secondary meaning in its favor because the appellant failed to
name is confusingly similar with that of petitioner’s such that
prove that it had been using the same word all by itself to the
the public may be confused or deceived into believing that they
exclusion of others. More so, there was no evidence presented
are one and the same corporation.
to prove that confusion will surely arise if the same word were
to be used by other educational institutions. Consequently, the
SEC: decided in favor of RCP, IRCP, deceptively and
allegations of the appellant in its first two assigned errors must
confusingly similar to that of respondent’s corporate name
necessarily fail."

SEC En Banc: (Petitioner) appeal; petitioner was ordered to

The number alone of the private respondents in the case at bar
delete or drop from its corporate name only the word
suggests strongly that petitioner's use of the word "Lyceum"
"Refractories".5
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 CA: (Petitioner) certiorari; the corporate names of petitioner
Western Pangasinan Lyceum, Inc., used the term "Lyceum" IRCP and respondent RCP are confusingly or deceptively
seventeen (17) years before the petitioner registered its own similar, and that respondent RCP has established its prior right
corporate name with the SEC and began using the word to use the word "Refractories" as its corporate name.
"Lyceum." It follows that if any institution had acquired an
exclusive right to the word "Lyceum," that institution would Issue:
have been the Western Pangasinan Lyceum, Inc. rather than
the petitioner institution. WON the corporate names of both parties are not confusingly
similar
G.R. No. 122174 October 3, 2002
Held:
INDUSTRIAL REFRACTORIES CORPORATION
No. Section 18 of the Corporation Code expressly prohibits
OF THE PHILIPPINES, petitioner,
the use of a corporate name which is "identical or deceptively
vs. or confusingly similar to that of any existing corporation or to
COURT OF APPEALS, SECURITIES AND any other name already protected by law or is patently
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7

deceptive, confusing or contrary to existing laws". The policy actual confusion between the two corporate names, it suffices
behind the foregoing prohibition is to avoid fraud upon the that confusion is probable or likely to occur.
public that will have occasion to deal with the entity concerned,
the evasion of legal obligations and duties, and the reduction of G.R. No. L-2598 June 29, 1950
difficulties of administration and supervision over corporation.24

C. ARNOLD HALL and BRADLEY P.

As held in Philips Export B.V. vs. Court of Appeals,28 to fall
HALL, petitioners,
within the prohibition of the law, two requisites must be proven,
vs.
to wit:
EDMUNDO S. PICCIO, Judge of the Court of
First Instance of Leyte, FRED BROWN, EMMA
(1) that the complainant corporation acquired a prior right over
BROWN, HIPOLITA CAPUCIONG, in his capacity
the use of such corporate name;
as receiver of the Far Eastern Lumber and
Commercial Co., Inc.,respondents.
and

(2) the proposed name is either: (a) identical, or (b) deceptively

BENGZON, J.:
or confusingly similar to that of any existing corporation or to
any other name already protected by law; or (c) patently Facts:
deceptive, confusing or contrary to existing law.
On May 28, 1947, the petitioners C. Arnold Hall and Bradley P.
Hall, and the respondents Fred Brown, Emma Brown, Hipolita
As regards the first requisite, it has been held that the right to
D. Chapman and Ceferino S. Abella, signed and acknowledged
the exclusive use of a corporate name with freedom from
in Leyte, the article of incorporation of the Far Eastern Lumber
infringement by similarity is determined by priority of
and Commercial Co., Inc., organized to engage in a general
adoption.29 In this case, respondent RCP was incorporated on
lumber business to carry on as general contractors, operators
October 13, 1976 and since then has been using the corporate
and managers, etc. Attached to the article was an affidavit of
name "Refractories Corp. of the Philippines". Meanwhile,
the treasurer stating that 23,428 shares of stock had been
petitioner was incorporated on August 23, 1979 originally under
subscribed and fully paid with certain properties transferred to
the name "Synclaire Manufacturing Corporation". It only started
the corporation described in a list appended thereto.
using the name "Industrial Refractories Corp. of the
Philippines" when it amended its Articles of Incorporation on
August 23, 1985, or nine (9) years after respondent RCP Immediately after the execution of said articles of
started using its name. Thus, being the prior registrant, incorporation, the corporation proceeded to do business with
respondent RCP has acquired the right to use the word the adoption of by-laws and the election of its officers. On
"Refractories" as part of its corporate name. 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.
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 On March 22, 1948, pending action on the articles of
and discrimination and the Court must look to the record as incorporation by the aforesaid governmental office, the
well as the names themselves.30 Petitioner’s corporate name is respondents Fred Brown, Emma Brown, Hipolita D. Chapman
"Industrial Refractories Corp. of the Phils.", while respondent’s and Ceferino S. Abella filed before the Court of First Instance
is "Refractories Corp. of the Phils." Obviously, both names of Leyte the civil case numbered 381, entitled "Fred Brown et
contain the identical words "Refractories", "Corporation" and al. vs. Arnold C. Hall et al.", alleging among other things that
"Philippines". The only word that distinguishes petitioner from the Far Eastern Lumber and Commercial Co. was an
respondent RCP is the word "Industrial" which merely identifies unregistered partnership; that they wished to have it dissolved
a corporation’s general field of activities or operations. We because of bitter dissension among the members,
need not linger on these two corporate names to conclude that mismanagement and fraud by the managers and heavy
they are patently similar that even with reasonable care and financial losses.
observation, confusion might arise.31 It must be noted that both
cater to the same clientele, i.e.¸ the steel industry. In fact, the The defendants in the suit, namely, C. Arnold Hall and Bradley
SEC found that there were instances when different steel P. Hall, filed a motion to dismiss, contesting the court's
companies were actually confused between the two, especially jurisdiction and the sufficiently of the cause of action.
since they also have similar product packaging.32 Such findings
are accorded not only great respect but even finality, and are After hearing the parties, the Hon. Edmund S. Piccio ordered
binding upon this Court, unless it is shown that it had arbitrarily the dissolution of the company; and at the request of plaintiffs,
disregarded or misapprehended evidence before it to such an appointed of the properties thereof, upon the filing of a
extent as to compel a contrary conclusion had such evidence P20,000 bond.
been properly appreciated. 33 And even without such proof of
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The defendants therein (petitioners herein) offered to file a SERRANO, FLORANTE P. TY and JETHRO
counter-bond for the discharge of the receiver, but the CALAHAT and/or SEVENTH DAY ADVENTIST
respondent judge refused to accept the offer and to discharge CHURCH [OF] NORTHEASTERN MINDANAO
the receiver. MISSION,* Respondents.
Issue:
CORONA, J.:
WON the court had no jurisdiction to decree the dissolution of Facts:
the company, it being a de facto corporation in accordance with
sec. 19 of the Corp. Code
SPUM-SDA: petitioner
SDA-NEMM: respondent
Held:

No. There are least two reasons why this section does not This case involves a 1,069 sq. m. lot covered by Transfer
govern the situation. Not having obtained the certificate of Certificate of Title (TCT) No. 4468 in Bayugan, Agusan del Sur
incorporation, the Far Eastern Lumber and Commercial Co. — originally owned by Felix Cosio and his wife, Felisa Cuysona.
even its stockholders — may not probably claim "in good faith"
to be a corporation. On April 21, 1959, the spouses Cosio donated the land to the
South Philippine Union Mission of Seventh Day Adventist
Under our statue it is to be noted (Corporation Law, Church of Bayugan Esperanza, Agusan (SPUM-SDA
sec. 11) that it is the issuance of a certificate of Bayugan). The donation was allegedly accepted by one
incorporation by the Director of the Bureau of Liberato Rayos, an elder of the Seventh Day Adventist Church,
Commerce and Industry which calls a corporation into on behalf of the donee.
being. The immunity if collateral attack is granted to
corporations "claiming in good faith to be a Twenty-one years later, however, on February 28, 1980, the
corporation under this act." Such a claim is same parcel of land was sold by the spouses Cosio to the
compatible with the existence of errors and Seventh Day Adventist Church of Northeastern Mindanao
irregularities; but not with a total or substantial Mission (SDA-NEMM).5 TCT No. 4468 was thereafter issued in
disregard of the law. Unless there has been an the name of SDA-NEMM.6
evident attempt to comply with the law the claim to be
a corporation "under this act" could not be made "in Claiming to be the alleged donee’s successors-in-interest,
good faith." (Fisher on the Philippine Law of Stock petitioners asserted ownership over the property. This was
Corporations, p. 75. See also Humphreys vs. Drew, opposed by respondents who argued that at the time of the
59 Fla., 295; 52 So., 362.) donation, SPUM-SDA Bayugan could not legally be a donee
because, not having been incorporated yet, it had no juridical
Second, this is not a suit in which the corporation is a party. personality. Neither were petitioners members of the local
This is a litigation between stockholders of the alleged church then, hence, the donation could not have been made
corporation, for the purpose of obtaining its dissolution. Even particularly to them.
the existence of a de jure corporation may be terminated in a
private suit for its dissolution between stockholders, without the On September 28, 1987, petitioners filed a case, docketed as
intervention of the state. Civil Case No. 63 (a suit for cancellation of title, quieting of
ownership and possession, declaratory relief and
G.R. No. 150416 July 21, 2006 reconveyance with prayer for preliminary injunction and
damages), in the RTC of Bayugan, Agusan del Sur.
SEVENTH DAY ADVENTIST CONFERENCE
CHURCH OF SOUTHERN PHILIPPINES, INC., Trial Court: favor of respondents
and/or represented by MANASSEH C.
ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO CA: affirmed decision of RTC; Motion for recon: denied
M. LUCENARA, DIONICES O. TIPGOS,
LORESTO C. MURILLON, ISRAEL C. NINAL, Issue:
GEORGE G. SOMOSOT, JESSIE T. ORBISO,
LORETO PAEL and JOEL WON respondents (SDA-NEMM) own the land
BACUBAS, petitioners,
vs. Held:
NORTHEASTERN MINDANAO MISSION OF
SEVENTH DAY ADVENTIST, INC., and/or Yes. The controversy between petitioners and respondents
represented by JOSUE A. LAYON, WENDELL M. involves two supposed transfers of the lot previously owned by
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the spouses Cosio: (1) a donation to petitioners’ alleged unauthorized assumption of corporate privileges; the other in
predecessors-in-interest in 1959 and (2) a sale to respondents favor of doing justice to the parties and of establishing a
in 1980. Donation is undeniably one of the modes of acquiring general assurance of security in business dealing with
corporations." Generally, the doctrine exists to protect the
ownership of real property. Likewise, ownership of a property
public dealing with supposed corporate entities, not to favor the
may be transferred by tradition as a consequence of a sale. defective or non-existent corporation.

We agree with the appellate court that the alleged donation to

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

The deed of donation was not in favor of any informal group of

SDA members but a supposed SPUM-SDA Bayugan (the local
church) which, at the time, had neither juridical personality nor
capacity to accept such gift. Declaring themselves a de
facto corporation, petitioners allege that they should benefit
from the donation.

But there are stringent requirements before one can qualify as

a de facto corporation:
(a) the existence of a valid law under which it may be
incorporated;
(b) an attempt in good faith to incorporate; and
(c) assumption of corporate powers.10

While there existed the old Corporation Law (Act 1459),11 a law
under which SPUM-SDA Bayugan could have been organized,
there is no proof that there was an attempt to incorporate at
that time.

The filing of articles of incorporation and the issuance of the

certificate of incorporation are essential for the existence of
a de facto corporation.12 We have held that an organization not
registered with the Securities and Exchange Commission
(SEC) cannot be considered a corporation in any concept, not
even as a corporation de facto.13 Petitioners themselves
admitted that at the time of the donation, they were not
registered with the SEC, nor did they even attempt to
organize14 to comply with legal requirements.

Corporate existence begins only from the moment a certificate

of incorporation is issued. No such certificate was ever issued
to petitioners or their supposed predecessor-in-interest at the
time of the donation. Petitioners obviously could not have
claimed succession to an entity that never came to exist.
Neither could the principle of separate juridical personality
apply since there was never any corporation15 to speak of. And,
as already stated, some of the representatives of petitioner
Seventh Day Adventist Conference Church of Southern
Philippines, Inc. were not even members of the local church
then, thus, they could not even claim that the donation was
particularly for them.

"The de facto doctrine thus effects a compromise between two

conflicting public interest[s]—the one opposed to an