Corporation Through The Rule of Estoppel

Hall v Piccio (CFI Judge) Held
GR No. L-2598 | Jun 29, 1950 | Bengzon, J.

Principle of estoppel does not apply
Facts
The SEC has not issued the certification of incorporation. The personality of a corporation
May 26, 1947: Petitioners C. Arnold Hall and Bradley P. Hall, and respondents Fred Brown, begins to exist only from the moment such certificate is issued. Since none of the parties have
Emma Brown, Hipolita D, Chapman and Ceferino S. Abella, signed and acknowledged in Leyte, represented to others that they were incorporated and nobody was led to believe anything to
the articles of incorporation of the Far Eastern Lumber and Commercial Co., Inc. his prejudice and damage, estoppel doesn’t apply.
- Organized to engage in a general lumber business, to carry on as general contractors, - This is not an instance requiring the enforcement of contracts with the
operators and managers, etc. corporation through the rule of estoppel.
- Attached to the articles was an affidavit of the treasurer stating that 23,428 shares
of stock had been subscribed and fully paid with certain properties transferred to the Section 19 does not govern because (1) Far Eastern Lumber and Commercial Co cannot claim
corporation described in a list appended thereto. good faith and (2) this is not a suit in which the corporation is a party.
After the execution of the articles of incorporation, the corporation proceeded to do business 1. The Far Eastern Lumber and Commercial Co. may not claim "in good faith" to be a
with the adoption of by-laws and election of its officers. corporation because it hasn’t obtained its certificate of incorporation.
- Under Section 11 of the Corporation Law, it is the issuance of a certificate of
Dec 2, 1947: Articles were filed in the office of the Securities and Exchange Commissioner, for incorporation by the Director of the Bureau of Commerce and Industry which calls a
the issuance of the certificate of incorporation. corporation into being. Therefore, the immunity to collateral attack is granted to
corporations 'claiming in good faith to be a corporation under this act.'
March 22, 1948: Pending action on the articles of incorporation by the SEC, the respondents - The claim of good faith is compatible with the existence of errors and irregularities;
filed a civil case before CFI Leyte, alleging: but not with a total or substantial disregard of the law. Unless there has been an
- Far Eastern Lumber and Commercial Co. was an unregistered partnership evident attempt to comply with the law the claim to be a corporation 'under this Act'
- they wished to have it dissolved because of bitter dissension among the members, could not be made 'in good faith.' (Fisher on The Philippine Law of Stock
mismanagement and fraud by the managers and heavy financial losses. Corporations)
Petitioners (defendants in the civil case) filed a MTD, contesting the CFI’s jurisdiction and the 2. The instant suit is not one in which the corporation is a party, but a litigation between
sufficiency of the cause of action. 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
CFI Judge Piccio: Ordered the dissolution of the company; appointed respondent Pedro A. its dissolution between stockholders, without the intervention of the state.
Capuciong as receiver of the properties upon filing of a 20,000 peso bond
The Court posits that there might be room for argument on the right of minority stockholders
Petitioners offered to file a counter-bond for the discharge of the receiver. to sue for dissolution; but this does not affect the court's jurisdiction, and is a matter for
- CFI Judge Piccio: Refused to accept the offer decision by the judge, subject to review on appeal.
Present special civil action instituted: Petitioners have the remedy of appealing the order of dissolution at the proper time
- CFI had no jurisdiction to decree the dissolution of the company, because it being a - But instead they instituted this special civil action against respondent CFI Judge
de facto corporation, dissolution thereof may only be ordered in a quo warranto
proceeding (in accordance with Section 191 of the Corporation Law) Receivership is proper in proceedings for dissolution of a company or corporation
- Respondents Fred Brown and Emma Brown are estopped from claiming that it is not - There was no error in rejecting the counter-bond, the court having decreed the
a corporation but only a partnership because they had signed the articles of dissolution.
incorporation.
Issue: WN the CFI has jurisdiction  YES
1Section 19: * * * The due incorporation of any corporation claiming in good faith to be a corporation private suit to which the corporation may be a party, but such inquiry may be had at the suit of the
under this Act and its right to exercise corporate powers shall not be inquired into collaterally in any Insular Government on information of the Attorney-General.

Corporation Through The Rule of Estoppel

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Corporation Through The Rule of Estoppel

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Hall v Piccio (CFI Judge) Held

GR No. L-2598 | Jun 29, 1950 | Bengzon, J.

Issue: WN the CFI has jurisdiction  YES

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