Corpo Case 2nd Set

JOSEF, LEYAH ( CORPO 2ND SET) 1 | P a g e
International Express Travel & Tour Services, Inc. v. CA, Kahn & Philippine Football
Federation [343 SCRA 674 (Oct.19, 2000)]
Creation of Separate Corporate Personality
Liability of Person Acting for Unincorporated Entity
Doctrine of Estoppel
Facts: IETTSI wrote a letter to the Federation through its president, Kahn, offering its services
as a travel agency. This was accepted by the Federation. IETTSI secured airline tickets for the
trips of the athletes & officials of the Federation to the South East Asian Games in Kula
Lumpur as well as other trips to China & Brisbane. A demand letter was sent to the
Federation re: payment of the tickets. After 3 partial payments, Kahn issued a personal
check as partial payment for the Federations balance. No further payments were made,
causing IETTSI to file a civil case before the RTC against Kahn in his personal capacity on the
ground that he allegedly guaranteed the said obligation & as President of the Federation,
impleading the Federation as an alternative defendant.
Kahn filed a counterclaim against IETTSI averring that it had no cause of action against him
either in his personal nor official capacity as he did not guarantee the payment but merely
acted as an agent of the Federation w/c has a separate & distinct juridical personality. The
Federation, in failing to file its answer, was declared in default.
The RTC found Kahn personally liable since a voluntary unincorporated association, like the
Federation, doesnt have the power to enter nor ratify a contract. The contract thus entered
into by its officers or agents on its behalf is not binding on the association nor enforceable
against it but against the officers or agents in their personal capacity. On appeal to the CA,
decision was reversed saying that IETTSI failed to prove that Kahn guaranteed the obligation,
hence this petition.
Issues: (1) WON the Federation has a separate juridical personality.
(2) WON Kahn can be held personally liable for the unpaid obligations of the Federation
Held: CA decision reversed & set aside. RTC decision reinstated.
RA 3135 & PD 604 recognized the juridical existence of national sports associations. The
power to purchase, sell, lease & encumber property are acts w/c may only be done by
persons, whether natural or artificial, with juridical capacity and these have been granted to
national sports associations, clearly indicating their juridical personality. However, such does
not automatically take place by mere passage of the laws.
Before a corp may acquire juridical personality, the State must give its consent either in the
form of a special law or a general enabling act. Nowhere can it be found in RA 3135 & PD
604 any provision creating the Philippine Football Federation. These laws merely recognized
the existence of national sports associations & provided the manner by which they may
acquire juridical personality.
The statutory provisions require that before an entity may be considered as a national sports
association, such must be recognized by the accrediting organization, the Philippine Amateur
Athletic Federation under RA 3135 & the Department of Youth & Sports Development under
PD 604. In attempting to prove juridical existence of the Federation, Kahn attached a copy of
the constitution & by-laws of the Federation this doesnt prove the said Federation has been
recognized & accredited.
Any person acting or purporting to act on behalf of a corp w/c has no valid existence assumes
such privileges & obligations & becomes personally liable for contracts entered into or for
such other acts performed as such agent. Hence, Kahn should be liable for the unpaid
obligations of the unincorporated Federation. He is presumed to have known of the corp
existence or non-existence of the Federation.
Doctrine of Corporation by Estoppel applies to third persons only when he tries to escape
liability on a contract from w/c he has benefited on the irrelevant ground of defective
corporation. Here, IETTSI is not trying to escape liability from the contract but rather is the 1
claiming from it.
[G.R. No. 136448. November 3, 1999]
LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.
D E C I S I O N
PANGANIBAN, J.:
A partnership may be deemed to exist among parties who agree to borrow money to pursue
a business and to divide the profits or losses that may arise therefrom, even if it is shown
that they have not contributed any capital of their own to a "common fund." Their
contribution may be in the form of credit or industry, not necessarily cash or fixed assets.
Being partners, they are all liable for debts incurred by or on behalf of the partnership. The
liability for a contract entered into on behalf of an unincorporated association or ostensible
corporation may lie in a person who may not have directly transacted on its behalf, but
reaped benefits from that contract.
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim assails the November 26,
1998 Decision of the Court of Appeals in CA-GR CV 41477,[1] which disposed as follows:
WHEREFORE, *there being+ no reversible error in the appealed decision, the same is hereby
affirmed.*2+

The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed
by the CA, reads as follows:
WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on
September 20, 1990;
2. That defendants are jointly liable to plaintiff for the following amounts, subject to the
modifications as hereinafter made by reason of the special and unique facts and
circumstances and the proceedings that transpired during the trial of this case;
a. P532,045.00 representing [the] unpaid purchase price of the fishing nets covered by the
Agreement plus P68,000.00 representing the unpaid price of the floats not covered by said
Agreement;

b. 12% interest per annum counted from date of plaintiffs invoices and computed on their
respective amounts as follows:
i. Accrued interest of P73,221.00 on Invoice No. 14407 for P385,377.80 dated February 9,
1990;
ii. Accrued interest of P27,904.02 on Invoice No. 14413 for P146,868.00 dated February 13,
1990;
iii. Accrued interest of P12,920.00 on Invoice No. 14426 for P68,000.00 dated February 19,
1990;
c. P50,000.00 as and for attorneys fees, plus P8,500.00 representing P500.00 per
appearance in court;
d. P65,000.00 representing P5,000.00 monthly rental for storage charges on the nets
counted from September 20, 1990 (date of attachment) to September 12, 1991 (date of
auction sale);
e. Cost of suit.
With respect to the joint liability of defendants for the principal obligation or for the unpaid
price of nets and floats in the amount of P532,045.00 and P68,000.00, respectively, or for the
total amount of P600,045.00, this Court noted that these items were attached to guarantee
any judgment that may be rendered in favor of the plaintiff but, upon agreement of the
parties, and, to avoid further deterioration of the nets during the pendency of this case, it
was ordered sold at public auction for not less than P900,000.00 for which the plaintiff was
the sole and winning bidder. The proceeds of the sale paid for by plaintiff was deposited in
court. In effect, the amount of P900,000.00 replaced the attached property as a guaranty for
any judgment that plaintiff may be able to secure in this case with the ownership and
possession of the nets and floats awarded and delivered by the sheriff to plaintiff as the
highest bidder in the public auction sale. It has also been noted that ownership of the nets
[was] retained by the plaintiff until full payment [was] made as stipulated in the invoices;
hence, in effect, the plaintiff attached its own properties. It [was] for this reason also that
this Court earlier ordered the attachment bond filed by plaintiff to guaranty damages to
defendants to be cancelled and for the P900,000.00 cash bidded and paid for by plaintiff to
serve as its bond in favor of defendants.
From the foregoing, it would appear therefore that whatever judgment the plaintiff may be
entitled to in this case will have to be satisfied from the amount of P900,000.00 as this
amount replaced the attached nets and floats. Considering, however, that the total
judgment obligation as computed above would amount to only P840,216.92, it would be
inequitable, unfair and unjust to award the excess to the defendants who are not entitled to
damages and who did not put up a single centavo to raise the amount of P900,000.00 aside
from the fact that they are not the owners of the nets and floats. For this reason, the
defendants are hereby relieved from any and all liabilities arising from the monetary
judgment obligation enumerated above and for plaintiff to retain possession and ownership
of the nets and floats and for the reimbursement of the P900,000.00 deposited by it with the
Clerk of Court.
SO ORDERED. *3+
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a
Contract dated February 7, 1990, for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein respondent). They claimed that they were
engaged in a business venture with Petitioner Lim Tong Lim, who however was not a
signatory to the agreement. The total price of the nets amounted to P532,045. Four
hundred pieces of floats worth P68,000 were also sold to the Corporation.[4]
The buyers, however, failed to pay for the fishing nets and the floats; hence, private
respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer
for a writ of preliminary attachment. The suit was brought against the three in their
capacities as general partners, on the allegation that Ocean Quest Fishing Corporation was
a nonexistent corporation as shown by a Certification from the Securities and Exchange
Commission.[5] On September 20, 1990, the lower court issued a Writ of Preliminary
Attachment, which the sheriff enforced by attaching the fishing nets on board F/B Lourdes
which was then docked at the Fisheries Port, Navotas, Metro Manila.
Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and
requesting a reasonable time within which to pay. He also turned over to respondent some
of the nets which were in his possession. Peter Yao filed an Answer, after which he was
deemed to have waived his right to cross-examine witnesses and to present evidence on his
behalf, because of his failure to appear in subsequent hearings. Lim Tong Lim, on the other
hand, filed an Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ

of Attachment.[6] The trial court maintained the Writ, and upon motion of private
respondent, ordered the sale of the fishing nets at a public auction. Philippine Fishing Gear
Industries won the bidding and deposited with the said court the sales proceeds of
P900,000.[7]
On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing
Gear Industries was entitled to the Writ of Attachment and that Chua, Yao and Lim, as
general partners, were jointly liable to pay respondent.[8]
The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the
testimonies of the witnesses presented and (2) on a Compromise Agreement executed by the
three[9] in Civil Case No. 1492-MN which Chua and Yao had brought against Lim in the RTC of
Malabon, Branch 72, for (a) a declaration of nullity of commercial documents; (b) a
reformation of contracts; (c) a declaration of ownership of fishing boats; (d) an injunction and
(e) damages.[10] The Compromise Agreement provided:
a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in
the amount of P5,750,000.00 including the fishing net. This P5,750,000.00 shall be applied as
full payment for P3,250,000.00 in favor of JL Holdings Corporation and/or Lim Tong Lim;
b) If the four (4) vessel*s+ and the fishing net will be sold at a higher price than
P5,750,000.00 whatever will be the excess will be divided into 3: 1/3 Lim Tong Lim; 1/3
Antonio Chua; 1/3 Peter Yao;
c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the
deficiency shall be shouldered and paid to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3
Antonio Chua; 1/3 Peter Yao.*11+
The trial court noted that the Compromise Agreement was silent as to the nature of their
obligations, but that joint liability could be presumed from the equal distribution of the profit
and loss.[12]
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a
fishing business and may thus be held liable as a such for the fishing nets and floats
purchased by and for the use of the partnership. The appellate court ruled:

The evidence establishes that all the defendants including herein appellant Lim Tong Lim
undertook a partnership for a specific undertaking, that is for commercial fishing x x x.
Obviously, the ultimate undertaking of the defendants was to divide the profits among
themselves which is what a partnership essentially is x x x. By a contract of partnership, two
or more persons bind themselves to contribute money, property or industry to a common
fund with the intention of dividing the profits among themselves (Article 1767, New Civil
Code).*13+
Hence, petitioner brought this recourse before this Court.[14]
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the
following grounds:
I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE AGREEMENT
THAT CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A SEPARATE CASE, THAT A
PARTNERSHIP AGREEMENT EXISTED AMONG THEM.
II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN
QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM PHILIPPINE FISHING, THE
COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING LIABILITY TO PETITIONER LIM AS WELL.
III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF
PETITIONER LIMS GOODS.
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.
This Courts Ruling
The Petition is devoid of merit.
First and Second Issues: Existence of a Partnership and Petitioner's Liability
In arguing that he should not be held liable for the equipment purchased from respondent,
petitioner controverts the CA finding that a partnership existed between him, Peter Yao and
Antonio Chua. He asserts that the CA based its finding on the Compromise Agreement alone.
Furthermore, he disclaims any direct participation in the purchase of the nets, alleging that
the negotiations were conducted by Chua and Yao only, and that he has not even met the
representatives of the respondent company. Petitioner further argues that he was a lessor,
not a partner, of Chua and Yao, for the "Contract of Lease" dated February 1, 1990, showed
that he had merely leased to the two the main asset of the purported partnership -- the
fishing boat F/B Lourdes. The lease was for six months, with a monthly rental of P37,500 plus
25 percent of the gross catch of the boat.
We are not persuaded by the arguments of petitioner. The facts as found by the two lower
courts clearly showed that there existed a partnership among Chua, Yao and him, pursuant
to Article 1767 of the Civil Code which provides:


Article 1767 - By the contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the
profits among themselves.
Specifically, both lower courts ruled that a partnership among the three existed based on the
following factual findings:[15]
(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial
fishing to join him, while Antonio Chua was already Yaos partner;
(2) That after convening for a few times, Lim Chua, and Yao verbally agreed to acquire two
fishing boats, the FB Lourdes and the FB Nelson for the sum of P3.35 million;
(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to
finance the venture.
(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of Sale
over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as security for the
loan extended by Jesus Lim;
(5) That Lim, Chua and Yao agreed that the refurbishing , re-equipping, repairing, dry docking
and other expenses for the boats would be shouldered by Chua and Yao;
(6) That because of the unavailability of funds, Jesus Lim again extended a loan to the
partnership in the amount of P1 million secured by a check, because of which, Yao and Chua
entrusted the ownership papers of two other boats, Chuas FB Lady Anne Mel and Yaos FB
Tracy to Lim Tong Lim.
(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets
from Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing Corporation,"
their purported business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72 by
Antonio Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of commercial
documents; (b) reformation of contracts; (c) declaration of ownership of fishing boats; (4)
injunction; and (e) damages.
(9) That the case was amicably settled through a Compromise Agreement executed between
the parties-litigants the terms of which are already enumerated above.
From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided
to engage in a fishing business, which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim who was petitioners brother. In their
Compromise Agreement, they subsequently revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally among them the excess or loss.
These boats, the purchase and the repair of which were financed with borrowed money, fell
under the term common fund under Article 1767. The contribution to such fund need not
be cash or fixed assets; it could be an intangible like credit or industry. That the parties
agreed that any loss or profit from the sale and operation of the boats would be divided
equally among them also shows that they had indeed formed a partnership.

Moreover, it is clear that the partnership extended not only to the purchase of the boat, but
also to that of the nets and the floats. The fishing nets and the floats, both essential to
fishing, were obviously acquired in furtherance of their business. It would have been
inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition
of the aforesaid equipment, without which the business could not have proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a
partnership engaged in the fishing business. They purchased the boats, which constituted
the main assets of the partnership, and they agreed that the proceeds from the sales and
operations thereof would be divided among them.
We stress that under Rule 45, a petition for review like the present case should involve only
questions of law. Thus, the foregoing factual findings of the RTC and the CA are binding on
this Court, absent any cogent proof that the present action is embraced by one of the
exceptions to the rule.[16] In assailing the factual findings of the two lower courts, petitioner
effectively goes beyond the bounds of a petition for review under Rule 45.
Compromise Agreement Not the Sole Basis of Partnership
Petitioner argues that the appellate courts sole basis for assuming the existence of a
partnership was the Compromise Agreement. He also claims that the settlement was
entered into only to end the dispute among them, but not to adjudicate their preexisting
rights and obligations. His arguments are baseless. The Agreement was but an embodiment
of the relationship extant among the parties prior to its execution.
A proper adjudication of claimants rights mandates that courts must review and thoroughly
appraise all relevant facts. Both lower courts have done so and have found, correctly, a
preexisting partnership among the parties. In implying that the lower courts have decided on
the basis of one piece of document alone, petitioner fails to appreciate that the CA and the
RTC delved into the history of the document and explored all the possible consequential
combinations in harmony with law, logic and fairness. Verily, the two lower courts factual
findings mentioned above nullified petitioners argument that the existence of a partnership
was based only on the Compromise Agreement.
Petitioner Was a Partner, Not a Lessor
We are not convinced by petitioners argument that he was merely the lessor of the boats to
Chua and Yao, not a partner in the fishing venture. His argument allegedly finds support in
the Contract of Lease and the registration papers showing that he was the owner of the
boats, including F/B Lourdes where the nets were found.

His allegation defies logic. In effect, he would like this Court to believe that he consented to
the sale of his own boats to pay a debt of Chua and Yao, with the excess of the proceeds to
be divided among the three of them. No lessor would do what petitioner did. Indeed, his
consent to the sale proved that there was a preexisting partnership among all three.
Verily, as found by the lower courts, petitioner entered into a business agreement with Chua
and Yao, in which debts were undertaken in order to finance the acquisition and the
upgrading of the vessels which would be used in their fishing business. The sale of the boats,
as well as the division among the three of the balance remaining after the payment of their
loans, proves beyond cavil that F/B Lourdes, though registered in his name, was not his own
property but an asset of the partnership. It is not uncommon to register the properties
acquired from a loan in the name of the person the lender trusts, who in this case is the
petitioner himself. After all, he is the brother of the creditor, Jesus Lim.
We stress that it is unreasonable indeed, it is absurd -- for petitioner to sell his property to
pay a debt he did not incur, if the relationship among the three of them was merely that of
lessor-lessee, instead of partners.
Corporation by Estoppel
Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed
only to Chua and Yao, and not to him. Again, we disagree.
Section 21 of the Corporation Code of the Philippines provides:
Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation knowing
it to be without authority to do so shall be liable as general partners for all debts, liabilities
and damages incurred or arising as a result thereof: Provided however, That when any such
ostensible corporation is sued on any transaction entered by it as a corporation or on any
tort committed by it as such, it shall not be allowed to use as a defense its lack of corporate
personality.
One who assumes an obligation to an ostensible corporation as such, cannot resist
performance thereof on the ground that there was in fact no corporation.
Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may
be estopped from denying its corporate existence. The reason behind this doctrine is
obvious - an unincorporated association has no personality and would be incompetent to act
and appropriate for itself the power and attributes of a corporation as provided by law; it
cannot create agents or confer authority on another to act in its behalf; thus, those who act
or purport to act as its representatives or agents do so without authority and at their own
risk. And as it is an elementary principle of law that a person who acts as an agent without
authority or without a principal is himself regarded as the principal, possessed of all the right
and subject to all the liabilities of a principal, a person acting or purporting to act on behalf of
a corporation which has no valid existence assumes such privileges and obligations and
becomes personally liable for contracts entered into or for other acts performed as such
agent.*17+
The doctrine of corporation by estoppel may apply to the alleged corporation and to a third
party. In the first instance, an unincorporated association, which represented itself to be a
corporation, will be estopped from denying its corporate capacity in a suit against it by a
third person who relied in good faith on such representation. It cannot allege lack of
personality to be sued to evade its responsibility for a contract it entered into and by virtue
of which it received advantages and benefits.
On the other hand, a third party who, knowing an association to be unincorporated,
nonetheless treated it as a corporation and received benefits from it, may be barred from
denying its corporate existence in a suit brought against the alleged corporation. In such
case, all those who benefited from the transaction made by the ostensible corporation,
despite knowledge of its legal defects, may be held liable for contracts they impliedly
assented to or took advantage of.
There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be
paid for the nets it sold. The only question here is whether petitioner should be held
jointly[18] liable with Chua and Yao. Petitioner contests such liability, insisting that only
those who dealt in the name of the ostensible corporation should be held liable. Since his
name does not appear on any of the contracts and since he never directly transacted with
the respondent corporation, ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the
boat which has earlier been proven to be an asset of the partnership. He in fact questions
the attachment of the nets, because the Writ has effectively stopped his use of the fishing
vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a
corporation. Although it was never legally formed for unknown reasons, this fact alone does
not preclude the liabilities of the three as contracting parties in representation of it. Clearly,
under the law on estoppel, those acting on behalf of a corporation and those benefited by it,
knowing it to be without valid existence, are held liable as general partners.
Technically, it is true that petitioner did not directly act on behalf of the corporation.
However, having reaped the benefits of the contract entered into by persons with whom he
previously had an existing relationship, he is deemed to be part of said association and is
covered by the scope of the doctrine of corporation by estoppel. We reiterate the ruling of
the Court in Alonso v. Villamor:[19]
A litigation is not a game of technicalities in which one, more deeply schooled and skilled in
the subtle art of movement and position , entraps and destroys the other. It is, rather, a
contest in which each contending party fully and fairly lays before the court the facts in issue
and then, brushing aside as wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels,
are not to be won by a rapiers thrust. Technicality, when it deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy, deserves scant consideration
from courts. There should be no vested rights in technicalities.

Third Issue: Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets.
We agree with the Court of Appeals that this issue is now moot and academic. As previously
discussed, F/B Lourdes was an asset of the partnership and that it was placed in the name of
petitioner, only to assure payment of the debt he and his partners owed. The nets and the
floats were specifically manufactured and tailor-made according to their own design, and
were bought and used in the fishing venture they agreed upon. Hence, the issuance of the
Writ to assure the payment of the price stipulated in the invoices is proper. Besides, by
specific agreement, ownership of the nets remained with Respondent Philippine Fishing
Gear, until full payment thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.
LIM TONG LIM vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC.
G.R. No. 136448 November 3, 1999
PANGANIBAN, J
Facts:
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao
entered into a Contract for the purchase of fishing nets and floats from respondent
Philippine Fishing Gear Industries, Inc. They claimed that they were engaged in a business
venture with Petitioner Lim Tong Lim, who however was not a signatory to the agreement.
The buyers, however, failed to pay for the fishing nets and the floats; hence,
private respondents filed a collection suit against Chua, Yao and Petitioner Lim Tong Lim with
a prayer for a writ of preliminary attachment. The suit was brought against the three in their
capacities as general partners, on the allegation that "Ocean Quest Fishing Corporation" was
a nonexistent corporation as shown by a Certification from the Securities and Exchange
Commission.
The trial court maintained the Writ, and upon motion of private respondent,
ordered the sale of the fishing nets at a public auction. Philippine Fishing Gear Industries won
the bidding and deposited with the said court the sales proceeds of P900,000.
7

Thereafter, the trial court ruled 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. It also 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 in a civil case which provides that the proceeds of the sale of four (4)
vessels including the fishing net shall be applied as full payment in favor of JL Holdings
Corporation and/or Lim Tong Lim; and to divide equally among them the excess or loss.
The CA affirmed the decision of the RTC ruling that petitioner was a partner of
Chua and Yao in a fishing business and may thus be held liable as a such for the fishing nets
and floats purchased by and for the use of the partnership.
Hence, petitioner brought this recourse before this Court.

Issue: Whether by their acts, Lim, Chua and Yao could be deemed to have entered into a
partnership.

Held: YES. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim
had decided to engage in a fishing business, which they started by buying boats worth P3.35
million, financed by a loan secured from Jesus Lim who was petitioner's brother. In their
Compromise Agreement, they subsequently revealed their intention to pay the loan with the
proceeds of the sale of the boats, and to divide equally among them the excess or loss. These
boats, the purchase and the repair of which were financed with borrowed money, fell under
the term "common fund" under Article 1767. The contribution to such fund need not be cash
or fixed assets; it could be an intangible like credit or industry. That the parties agreed that
any loss or profit from the sale and operation of the boats would be divided equally among
them also shows that they had indeed formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the
boat, but also to that of the nets and the floats. The fishing nets and the floats, both essential
to fishing, were obviously acquired in furtherance of their business. It would have been
inconceivable for Lim to involve himself so much in buying the boat but not in the acquisition
of the aforesaid equipment, without which the business could not have proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and
Yao, a partnership engaged in the fishing business. They purchased the boats, which
constituted the main assets of the partnership, and they agreed that the proceeds from the
sales and operations thereof would be divided among them.

[G.R. No. 125221. June 19, 1997]
REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R. DE LOS SANTOS, Presiding Judge,
RTC, Br. 58, Angeles City; and ANTONIO ANDA, respondents.
D E C I S I O N
This petition for certiorari seeks to annul and set aside the decision of the Regional Trial
Court, Branch 58, Angeles City which ordered the Municipal Circuit Trial Court, Mabalacat
and Magalang, Pampanga to dismiss Civil Case No. 1214 for lack of jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo M. Lozano filed
Civil Case No. 1214 for damages against respondent Antonio Anda before the Municipal
Circuit Trial Court (MCTC), Mabalacat and Magalang, Pampanga. Petitioner alleged that he
was the president of the Kapatirang Mabalacat-Angeles Jeepney Drivers' Association, Inc.
(KAMAJDA) while respondent Anda was the president of the Samahang Angeles-Mabalacat
Jeepney Operators' and Drivers' Association, Inc. (SAMAJODA); in August 1995, upon the
request of the Sangguniang Bayan of Mabalacat, Pampanga, petitioner and private
respondent agreed to consolidate their respective associations and form the Unified
Mabalacat-Angeles Jeepney Operators' and Drivers' Association, Inc. (UMAJODA); petitioner
and private respondent also agreed to elect one set of officers who shall be given the sole
authority to collect the daily dues from the members of the consolidated association;
elections were held on October 29, 1995 and both petitioner and private respondent ran for

president; petitioner won; private respondent protested and, alleging fraud, refused to
recognize the results of the election; private respondent also refused to abide by their
agreement and continued collecting the dues from the members of his association despite
several demands to desist. Petitioner was thus constrained to file the complaint to restrain
private respondent from collecting the dues and to order him to pay damages in the amount
of P25,000.00 and attorney's fees of P500.00.
[1]

Private respondent moved to dismiss the complaint for lack of jurisdiction, claiming
that jurisdiction was lodged with the Securities and Exchange Commission (SEC). The MCTC
denied the motion on February 9, 1996.
[2]
It denied reconsideration on March 8, 1996.
[3]

Private respondent filed a petition for certiorari before the Regional Trial Court, Branch
58, Angeles City.
[4]
The trial court found the dispute to be intracorporate, hence, subject to
the jurisdiction of the SEC, and ordered the MCTC to dismiss Civil Case No. 1214
accordingly.
[5]
It denied reconsideration on May 31, 1996.
[6]

Hence this petition. Petitioner claims that:
"THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION AND SERIOUS ERROR OF LAW IN CONCLUDING THAT THE
SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION OVER A CASE OF DAMAGES
BETWEEN HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS WHO INTENDED TO
CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT NOT YET [SIC] APPROVED AND REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION."
[7]

The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in Section
5 of Presidential Decree No. 902-A. Section 5 reads as follows:
"Section 5. x x x [T]he Securities and Exchange Commission [has] original and exclusive
jurisdiction to hear and decide cases involving:
(a) Devices or schemes employed by or any acts of the board of directors, business
associates, its officers or partners, amounting to fraud and misrepresentation which may be
detrimental to the interest of the public and/or of the stockholders, partners, members of
associations or organizations registered with the Commission.
(b) Controversies arising out of intracorporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members, or associates,
respectively; and between such corporation, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as such entity.
(c) Controversies in the election or appointment of directors, trustees, officers or managers
of such corporations, partnerships or associations.
(d) Petitions of corporations, partnerships or associations to be declared in the state of
suspension of payments in cases where the corporation, partnership or association possesses
sufficient property to cover all its debts but foresees the impossibility of meeting them when
they respect very fall due or in cases where the corporation, partnership or association has
no sufficient assets to cover its liabilities, but is under the management of a Rehabilitation
Receiver or Management Committee created pursuant to this Decree."
The grant of jurisdiction to the SEC must be viewed in the light of its nature and function
under the law.
[8]
This jurisdiction is determined by a concurrence of two elements: (1) the
status or relationship of the parties; and (2) the nature of the question that is the subject of
their controversy.
[9]

The first element requires that the controversy must arise out of intracorporate or
partnership relations between and among stockholders, members, or associates; between
any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation,
partnership or association and the State in so far as it concerns their individual
franchises.
[10]
The second element requires that the dispute among the parties be intrinsically
connected with the regulation of the corporation, partnership or association or deal with the
internal affairs of the corporation, partnership or association.
[11]
After all, the principal
function of the SEC is the supervision and control of corporations, partnerships and
associations with the end in view that investments in these entities may be encouraged and
protected, and their activities pursued for the promotion of economic development.
[12]

There is no intracorporate nor partnership relation between petitioner and private
respondent. The controversy between them arose out of their plan to consolidate their
respective jeepney drivers' and operators' associations into a single common
association. This unified association was, however, still a proposal. It had not been approved
by the SEC, neither had its officers and members submitted their articles of consolidation in
accordance with Sections 78 and 79 of the Corporation Code. Consolidation becomes
effective not upon mere agreement of the members but only upon issuance of the certificate
of consolidation by the SEC.
[13]
When the SEC, upon processing and examining the articles of
consolidation, is satisfied that the consolidation of the corporations is not inconsistent with
the provisions of the Corporation Code and existing laws, it issues a certificate of
consolidation which makes the reorganization official.
[14]
The new consolidated corporation
comes into existence and the constituent corporations dissolve and cease to exist.
[15]

The KAMAJDA and SAMAJODA to which petitioner and private respondent belong are
duly registered with the SEC, but these associations are two separate entities. The dispute
between petitioner and private respondent is not within the KAMAJDA nor the
SAMAJODA. It is between members of separate and distinct associations. Petitioner and
private respondent have no intracorporate relation much less do they have an intracorporate
dispute. The SEC therefore has no jurisdiction over the complaint.
The doctrine of corporation by estoppel
[16]
advanced by private respondent cannot
override jurisdictional requirements. Jurisdiction is fixed by law and is not subject to the
agreement of the parties.
[17]
It cannot be acquired through or waived, enlarged or diminished

by, any act or omission of the parties, neither can it be conferred by the acquiescence of the
court.
[18]

Corporation by estoppel is founded on principles of equity and is designed to prevent
injustice and unfairness.
[19]
It applies when persons assume to form a corporation and
exercise corporate functions and enter into business relations with third persons. Where
there is no third person involved and the conflict arises only among those assuming the form
of a corporation, who therefore know that it has not been registered, there is no corporation
by estoppel.
[20]

IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996 and
the order dated May 31, 1996 of the Regional Trial Court, Branch 58, Angeles City are set
aside. The Municipal Circuit Trial Court of Mabalacat and Magalang, Pampanga is ordered to
proceed with dispatch in resolving Civil Case No. 1214. No costs.
SO ORDERED.
Lozano vs. De Los Santos

Petitioner Lozano filed for damages against Adda before the MCTC in Pampanga. Lozano is
the president of KAMAJDA while Anda was the president of SAMAJODA. With the request of
the Sangguniang Bayan of Mabalacat, Lozano and Anda agreed to CONSOLIDATE their
respective associations and from a unified jeepney operators association UMAJODA.

They agreed to elect one set of officers who shall be given the SOLE authority to collect the
daily dues from the members of the consolidated assoc.

Lozano won as president and Anda protested alleging fraud and refused to recognize the
results of the election. He also continued to collect the dues from the members of his assoc
despite demands to resist.

Anda claims that the jurisdiction was lodged with SEC. MCTC denied the motion.

RTC: Intracorporate SEC.

ISSUE: Jurisdiction

Held: MCTC
There is no intracorporate nor partnership relation between the petitioner and priv resp.
Dispute arose of just a plan to consolidate into a single common assoc and is still a
PROPOSAL.
Not approved by SEC and had not submitted its articles nor its officers and members.

CONSOLIDATION becomes effective not upon mere agreement but only UPON ISSUANCE OF
THE CERTIFICATE OF CONSOLIDATION OF SEC.

Consolidation must not be against the provisions of the Corpo Code.

The dispute is not among the members of the KAMAJDA or SAMAJODA but between
members of separate and distinct associations.

Sec. 5 of the PD 902-A sets forth the jurisdiction of SEC. The jurisdiction is determined by a
concurrence of two elements:

1) status or relationship of the parties- relationship must arise our of intracorporate
of partnership releations between and amoing stockholders, members or assoc etc.
2) nature of the question that is the subject of their controversy requires that the
dispute be INTRINSICALLY CONNECTED WITH THE REGULATION OF THE CORPO,
PARTN, ASSOC. and deal with the internal affairs of the corpo.

Corporation by estoppel is founded on principles of equity and is designed to prevent
injustice and unfairness. It applies when persons assume to form a corporation and exercises
corporate functions and enter into business relations with third persons. Where there is no
third person involved and the conflict arises only among those assuming the form of a
corporation, who therefore know that it has not been registered, there is no corporation
by estoppel.

Lyceum of the Philippines vs. Court of Appeals
[GR 101897, 5 March 1993]Third Division, Feliciano (J): 4 concur, 1 on terminal leave
Facts: Lyceum of the Philippines Inc. had sometime before commenced in the SEC a
proceeding (SEC-CaseNo. 1241) against the Lyceum of Baguio, Inc. to require it to change its
corporate name and to adopt another name not "similar [to] or identical" with that of
petitioner. In an Order dated 20 April 1977, AssociateCommissioner Julio Sulit held that the
corporate name of petitioner and that of the Lyceum of Baguio, Inc.were substantially
identical because of the presence of a "dominant" word, i.e., "Lyceum," the name of
thegeographical location of the campus being the only word which distinguished one from
the other corporatename. The SEC also noted that Lyceum of the Philippines Inc. had
registered as a corporation ahead of theLyceum of Baguio, Inc. in point of time, and ordered
the latter to change its name to another name "notsimilar or identical [with]" the names of
previously registered entities. The Lyceum of Baguio, Inc. assailedthe Order of the SEC before
the Supreme Court (GR L-46595). In a Minute Resolution dated 14 September 1977, the
Court denied the Petition for Review for lack of merit. Entry of judgment in that case was
made on21 October 1977.Armed with the Resolution of the Supreme Court, the Lyceum of
the Philippines then wrote all theeducational institutions it could find using the word
"Lyceum" as part of their corporate name, and advisedthem to discontinue such use of
"Lyceum." When, with the passage of time, it became clear that this recoursehad failed, and
on 24 February 1984, Lyceum of the Philippines instituted before the SEC SEC-Case 2579
toenforce what Lyceum of the Philippines claims as its proprietary right to the word
"Lyceum." The SEChearing officer rendered a decision sustaining petitioner's claim to an
exclusive right to use the word"Lyceum." The hearing officer relied upon the SEC ruling in the

Lyceum of Baguio, Inc. case (SEC-Case1241) and held that the word "Lyceum" was capable of
appropriation and that petitioner had acquired anenforceable exclusive right to the use of
that word. On appeal, however, by Lyceum Of Aparri, Lyceum Of Cabagan, Lyceum Of
Camalaniugan, Inc., Lyceum Of Lallo, Inc., Lyceum Of Tuao, Inc., Buhi Lyceum,Central Lyceum
Of Catanduanes, Lyceum Of Southern Philippines, Lyceum Of Eastern Mindanao, Inc.
andWestern Pangasinan Lyceum, Inc.,, which are also educational institutions, to the SEC En
Banc, the decisionof the hearing officer was reversed and set aside. The SEC En Banc did not
consider the word "Lyceum" tohave become so identified with Lyceum of the Philippines as
to render use thereof by other institutions asproductive of confusion about the identity of
the schools concerned in the mind of the general public. Unlikeits hearing officer, the SEC En
Banc held that the attaching of geographical names to the word "Lyceum"served sufficiently
to distinguish the schools from one another, especially in view of the fact that thecampuses
of Lyceum of the Philippines and those of the other Lyceums were physically quite remote
fromeach other. Lyceum of the Philippines then went on appeal to the Court of Appeals. In
its Decision dated 28June 1991, however, the Court of Appeals affirmed the questioned
Orders of the SEC En Banc. Lyceum of thePhilippines filed a motion for reconsideration,
without success. Lyceum of the Philippines filed the petitionfor review.
Issue [1]:
Whether the names of the contending Lyceum schools are confusingly similar.
Held [1]:
The Articles of Incorporation of a corporation must, among other things, set out the name of
thecorporation. Section 18 of the Corporation Code establishes a restrictive rule insofar as
corporate names areconcerned. It provides that "No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or toany other name already protected
by law or is patently deceptive, confusing or contrary to existing laws.When a change in the
corporate name is approved, the Commission shall issue an amended certificate
of incorporation under the amended name." The policy underlying the prohibition in Section
18 against theregistration of a corporate name which is "identical or deceptively or
confusingly similar" to that of anyexisting corporation or which is "patently deceptive" or
"patently confusing" or "contrary to existing laws," isthe avoidance of fraud upon the public
which would have occasion to deal with the entity concerned, theevasion of legal obligations
and duties, and the reduction of difficulties of administration and supervision
over corporations. Herein, the Court does not consider that the corporate names of the
academic institutions are"identical with, or deceptively or confusingly similar" to that of
Lyceum of the Philippines Inc.. True enough,the corporate names of the other schools
(defendant institutions) entities all carry the word "Lyceum" but confusion and deception are
effectively precluded by the appending of geographic names to the word"Lyceum." Thus, the
"Lyceum of Aparri" cannot be mistaken by the general public for the Lyceum of
thePhilippines, or that the "Lyceum of Camalaniugan" would be confused with the Lyceum of
the Philippines.Further, etymologically, the word "Lyceum" is the Latin word for the Greek
lykeion which in turn referred toa locality on the river Ilissius in ancient Athens "comprising
an enclosure dedicated to Apollo and adornedwith fountains and buildings erected by
Pisistratus, Pericles and Lycurgus frequented by the youth for exerciseand by the philosopher
Aristotle and his followers for teaching." In time, the word "Lyceum" becameassociated with
schools and other institutions providing public lectures and concerts and public
discussions.Thus today, the word "Lyceum" generally refers to a school or an institution of
learning. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it is not
unnatural to use this word to designate an entitywhich is organized and operating as an
educational institution. To determine whether a given corporate nameis "identical" or
"confusingly or deceptively similar" with another entity's corporate name, it is not enough
toascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate
names in their entirety and when the name of Lyceum of the Philippines is juxtaposed with
the names of private respondents,they are not reasonably regarded as "identical" or
"confusingly or deceptively similar" with each other.
Issue [2]:
Whether the use by the Lyceum of the Philippines of "Lyceum" in its corporate name has
been for such length of time and with such exclusivity as to have become associated or
identified with the petitioner institution in the mind of the general public (or at least that
portion of the general public which has to do withschools).
Held [2]:
The number alone of the private respondents in the present case suggests strongly that the
Lyceumof the Philippines' use of the word "Lyceum" has not been attended with the
exclusivity essential for applicability of the doctrine of secondary meaning. It may be noted
also that at least one of the privaterespondents, i.e., the Western Pangasinan Lyceum, Inc.,
used the term "Lyceum" 17 years before Lyceum of the Philippines registered its own
corporate name with the SEC and began using the word "Lyceum." Itfollows that if any
institution had acquired an exclusive right to the word "Lyceum," that institution wouldhave
been the Western Pangasinan Lyceum, Inc. rather than Lyceum of the Philippines. Hence,
Lyceum of thePhilippines is not entitled to a legally enforceable exclusive right to use the
word "Lyceum" in its corporatename and that other institutions may use "Lyceum" as part of
their corporate names
[G.R. No. 122174. October 3, 2002]
INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF
THE PHILIPPINES, respondents.
D E C I S I O N
AUSTRIA-MARTINEZ, J.:

Filed before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision of the Court of Appeals in CA-G.R. SP No. 35056, denying due course
and dismissing the petition filed by Industrial Refractories Corp. of the Philippines (IRCP).
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized
on October 13, 1976 for the purpose of engaging in the business of manufacturing,
producing, selling, exporting and otherwise dealing in any and all refractory bricks, its by-
products and derivatives. On June 22, 1977, it registered its corporate and business name
with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the
name Synclaire Manufacturing Corporation. It amended its Articles of Incorporation on
August 23, 1985 to change its corporate name to Industrial Refractories Corp. of the
Philippines. It is engaged in the business of manufacturing all kinds of ceramics and other
products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix.
[1]

Discovering that petitioner was using such corporate name, respondent RCP filed on April 14,
1988 with the Securities and Exchange Commission (SEC) a petition to compel petitioner to
change its corporate name on the ground that its corporate name is confusingly similar with
that of petitioners such that the public may be confused or deceived into believing that they
are one and the same corporation.
[2]

The SEC decided in favor of respondent RCP and rendered judgment on July 23, 1993 with
the following dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the
respondent declaring the latters corporate name Industrial Refractories Corporation of the
Philippines as deceptively and confusingly similar to that of petitioners corporate name
Refractories Corporation of the Philippines. Accordingly, respondent is hereby directed to
amend its Articles of Incorporation by deleting the name Refractories Corporation of the
Philippines in its corporate name within thirty (30) days from finality of this
Decision. Likewise, respondent is hereby ordered to pay the petitioner the sum of
P50,000.00 as attorneys fees.
[3]

Petitioner appealed to the SEC En Banc, arguing that it does not have any jurisdiction over
the case, and that respondent RCP has no right to the exclusive use of its corporate name as
it is composed of generic or common words.
[4]

In its Decision dated July 23, 1993, the SEC En Banc modified the appealed decision in that
petitioner was ordered to delete or drop from its corporate name only the word
Refractories.
[5]

Petitioner IRCP elevated the decision of the SEC En Banc through a petition for review on
certiorari to the Court of Appeals which then rendered the herein assailed decision. The
appellate court upheld the jurisdiction of the SEC over the case and ruled that the corporate
names of petitioner IRCP and respondent RCP are confusingly or deceptively similar, and that
respondent RCP has established its prior right to use the word Refractories as its corporate
name.
[6]
The appellate court also found that the petition was filed beyond the reglementary
period.
[7]

Hence, herein petition which we must deny.
Petitioner contends that the petition before the Court of Appeals was timely filed. It must be
noted that at the time the SEC En Banc rendered its decision on May 10, 1994, the governing
rule on appeals from quasi-judicial agencies like the SEC was Supreme Court Circular No. 1-
91. As provided therein, the remedy should have been a petition for review filed before the
Court of Appeals within fifteen (15) days from notice, raising questions of fact, of law, or
mixed questions of fact and law.
[8]
A motion for reconsideration suspends the running of the
period.
[9]

In the case at bench, there is a discrepancy between the dates provided by petitioner and
respondent. Petitioner alleges the following dates of receipt and filing:
[10]

June 10, 1994 Receipt of SECs Decision dated May 10, 1994
June 20, 1994 Filing of Motion for Reconsideration
September 1, 1994 Receipt of SECs Order dated August 3, 1994 denying petitioners
motion for reconsideration
September 2, 1994 Filing of Motion for extension of time
September 6, 1994 Filing of Petition
Respondent RCP, however, asserts that the foregoing dates are incorrect as the certifications
issued by the SEC show that petitioner received the SECs Decision dated May 10, 1994 on
June 9, 1994, filed the motion for reconsideration via registered mail on June 25, 1994, and
received the Order dated August 3, 1994 on August 15, 1994.
[11]
Thus, the petition was filed
twenty-one (21) days beyond the reglementary period provided in Supreme Court Circular
No. 1-91.
[12]

If reckoned from the dates supplied by petitioner, then the petition was timely filed. On the
other hand, if reckoned from the dates provided by respondent RCP, then it was filed way
beyond the reglementary period. On this score, we agree with the appellate courts finding
that petitioner failed to rebut respondent RCPs allegations of material dates of receipt and
filing.
[13]
In addition, the certifications were executed by the SEC officials based on their
official records
[14]
which enjoy the presumption of regularity.
[15]
As such, these are prima
facie evidence of the facts stated therein.
[16]
And based on such dates, there is no question
that the petition was filed with the Court of Appeals beyond the fifteen (15) day period. On
this ground alone, the instant petition should be denied as the SEC En Bancs decision had
already attained finality and the SECs findings of fact, when supported by substantial
evidence, is final.
[17]


Nevertheless, to set the matters at rest, we shall delve into the other issues posed by
petitioner.
Petitioners arguments, substantially, are as follows: (1) jurisdiction is vested with the regular
courts as the present case is not one of the instances provided in P.D. 902-A; (2) respondent
RCP is not entitled to use the generic name refractories; (3) there is no confusing similarity
between their corporate names; and (4) there is no basis for the award of attorneys fees.
[18]

Petitioners argument on the SECs jurisdiction over the case is utterly myopic. The
jurisdiction of the SEC is not merely confined to the adjudicative functions provided in
Section 5 of P.D. 902-A, as amended.
[19]
By express mandate, it has absolute jurisdiction,
supervision and control over all corporations.
[20]
It also exercises regulatory and
administrative powers to implement and enforce the Corporation Code,
[21]
one of which
is Section 18, which provides:
SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical or deceptively or confusingly similar
to that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate of incorporation under
the amended name.
It is the SECs duty to prevent confusion in the use of corporate names not only for the
protection of the corporations involved but more so for the protection of the public, and it
has authority to de-register at all times and under all circumstances corporate names which
in its estimation are likely to generate confusion.
[22]
Clearly therefore, the present case falls
within the ambit of the SECs regulatory powers.
[23]

Likewise untenable is petitioners argument that there is no confusing or deceptive similarity
between petitioner and respondent RCPs corporate names. Section 18 of the Corporation
Code expressly prohibits the use of a corporate name which is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already protected
by law or is patently deceptive, confusing or contrary to existing laws. The policy behind the
foregoing prohibition is to avoid fraud upon the public that will have occasion to deal with
the entity concerned, the evasion of legal obligations and duties, and the reduction of
difficulties of administration and supervision over corporation.
[24]

Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership
Names
[25]
specifically requires that: (1) a corporate name shall not be identical, misleading or
confusingly similar to one already registered by another corporation with the
Commission;
[26]
and (2) if the proposed name is similar to the name of a registered firm, the
proposed name must contain at least one distinctive word different from the name of the
company already registered.
[27]

As held in Philips Export B.V. vs. Court of Appeals,
[28]
to fall within the prohibition of the law,
two requisites must be proven, to wit:
(1) that the complainant corporation acquired a prior right over the use of such
corporate name;
and
(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar
to that of any existing corporation or to any other name already protected by law; or (c)
patently deceptive, confusing or contrary to existing law.
As regards the first requisite, it has been held that the right to the exclusive use of a
corporate name with freedom from infringement by similarity is determined by priority of
adoption.
[29]
In this case, respondent RCP was incorporated on October 13, 1976 and since
then has been using the corporate name Refractories Corp. of the Philippines. Meanwhile,
petitioner was incorporated on August 23, 1979 originally under the name Synclaire
Manufacturing Corporation. It only started using the name Industrial Refractories Corp. of
the Philippines when it amended its Articles of Incorporation on August 23, 1985, or nine (9)
years after respondent RCP started using its name. Thus, being the prior registrant,
respondent RCP has acquired the right to use the word Refractories as part of its corporate
name.
Anent the second requisite, in determining the existence of confusing similarity in corporate
names, the test is whether the similarity is such as to mislead a person using ordinary care
and discrimination and the Court must look to the record as well as the names
themselves.
[30]
Petitioners corporate name is Industrial Refractories Corp. of the Phils.,
while respondents is Refractories Corp. of the Phils. Obviously, both names contain the
identical words Refractories, Corporation and Philippines. The only word that
distinguishes petitioner from respondent RCP is the word Industrial which merely identifies
a corporations general field of activities or operations. We need not linger on these two
corporate names to conclude that they are patently similar that even with reasonable care
and observation, confusion might arise.
[31]
It must be noted that both cater to the same
clientele, i.e. the steel industry. In fact, the SEC found that there were instances when
different steel companies were actually confused between the two, especially since they also
have similar product packaging.
[32]
Such findings are accorded not only great respect but
even finality, and are binding upon this Court, unless it is shown that it had arbitrarily
disregarded or misapprehended evidence before it to such an extent as to compel a contrary
conclusion had such evidence been properly appreciated.
[33]
And even without such proof of
actual confusion between the two corporate names, it suffices that confusion is probable or
likely to occur.
[34]

Refractory materials are described as follows:
Refractories are structural materials used at high temperatures to [sic] industrial furnaces.
They are supplied mainly in the form of brick of standard sizes and of special shapes.
Refractories also include refractory cements, bonding mortars, plastic firebrick, castables,
ramming mixtures, and other bulk materials such as dead-burned grain magneside, chrome
or ground ganister and special clay.
[35]


While the word refractories is a generic term, its usage is not widespread and is limited
merely to the industry/trade in which it is used, and its continuous use by respondent RCP for
a considerable period has made the term so closely identified with it.
[36]
Moreover, as held in
the case of Ang Kaanib sa Iglesia ng Dios kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc.
vs. Iglesia ng Dios kay Cristo Jesus, Haligi at Suhay ng Katotohanan,petitioners
appropriation of respondent's corporate name cannot find justification under the generic
word rule.
[37]
A contrary ruling would encourage other corporations to adopt verbatim and
register an existing and protected corporate name, to the detriment of the public.
[38]

Finally, we find the award of P50,000.00 as attorney's fees to be fair and reasonable. Article
2208 of the Civil Code allows the award of such fees when its claimant is compelled to litigate
with third persons or to incur expenses to protect its just and valid claim. In this case,
despite its undertaking to change its corporate name in case another firm has acquired a
prior right to use such name,
[39]
it refused to do so, thus compelling respondent to undergo
litigation and incur expenses to protect its corporate name.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit.
INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs. COURT
OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION
OF THE PHILIPPINES,respondents.

[G.R. No. 122174. October 3, 2002]

Facts:
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized
on October 13, 1976 for the purpose of engaging in the business of manufacturing,
producing, selling, exporting and otherwise dealing in any and all refractory bricks, its by-
products and derivatives. On June 22, 1977, it registered its corporate and business name
with the Bureau of Domestic Trade.

Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the
name Synclaire Manufacturing Corporation. It amended its Articles of Incorporation on
August 23, 1985 to change its corporate name to Industrial Refractories Corp. of the
Philippines. It is engaged in the business of manufacturing all kinds of ceramics and other
products, except paints and zincs.

Both companies are the only local suppliers of monolithic gunning mix.

Discovering that petitioner was using such corporate name, respondent RCP filed on April 14,
1988 with the Securities and Exchange Commission (SEC) a petition to compel petitioner to
change its corporate name on the ground that its corporate name is confusingly similar with
that of petitioners such that the public may be confused or deceived into believing that they
are one and the same corporation

Issue: Was there confusion in the corporate names?

Does The SEC have the power to decide over the issue?

Ruling:

SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities
and Exchange Commission if the proposed name is identical or deceptively or confusingly
similar to that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing laws. When a change in the corporate
name is approved, the Commission shall issue an amended certificate of incorporation under
the amended name.

It is the SECs duty to prevent confusion in the use of corporate names not only for the
protection of the corporations involved but more so for the protection of the public, and it
has authority to de-register at all times and under all circumstances corporate names which
in its estimation are likely to generate confusion. Clearly therefore, the present case falls
within the ambit of the SECs regulatory powers.

Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership
Names specifically requires that: (1) a corporate name shall not be identical, misleading or
confusingly similar to one already registered by another corporation with the Commission;
and (2) if the proposed name is similar to the name of a registered firm, the proposed name
must contain at least one distinctive word different from the name of the company already
registered.

As held in Philips Export B.V. vs. Court of Appeals, to fall within the prohibition of the law,
two requisites must be proven, to wit:

(1) that the complainant corporation acquired a prior right over the use of such
corporate name;

and

(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar
to that of any existing corporation or to any other name already protected by law; or (c)
patently deceptive, confusing or contrary to existing law.

As regards the first requisite, it has been held that the right to the exclusive use of a
corporate name with freedom from infringement by similarity is determined by priority of
adoption. In this case, respondent RCP was incorporated on October 13, 1976 and since then
has been using the corporate name Refractories Corp. of the Philippines. Meanwhile,
petitioner was incorporated on August 23, 1979 originally under the name Synclaire
Manufacturing Corporation. It only started using the name Industrial Refractories Corp. of
the Philippines when it amended its Articles of Incorporation on August 23, 1985, or nine (9)
years after respondent RCP started using its name. Thus, being the prior registrant,
respondent RCP has acquired the right to use the word Refractories as part of its corporate

name.

Anent the second requisite, in determining the existence of confusing similarity in corporate
names, the test is whether the similarity is such as to mislead a person using ordinary care
and discrimination and the Court must look to the record as well as the names themselves.
Petitioners corporate name is Industrial Refractories Corp. of the Phils., while
respondents is Refractories Corp. of the Phils. Obviously, both names contain the identical
words Refractories, Corporation and Philippines. The only word that distinguishes
petitioner from respondent RCP is the word Industrial which merely identifies a
corporations general field of activities or operations. We need not linger on these two
corporate names to conclude that they are patently similar that even with reasonable care
and observation, confusion might arise. It must be noted that both cater to the same
clientele, i.e. the steel industry. In fact, the SEC found that there were instances when
different steel companies were actually confused between the two, especially since they also
have similar product packaging. Such findings are accorded not only great respect but even
finality, and are binding upon this Court, unless it is shown that it had arbitrarily disregarded
or misapprehended evidence before it to such an extent as to compel a contrary conclusion
had such evidence been properly appreciated.And even without such proof of actual
confusion between the two corporate names, it suffices that confusion is probable or likely
to occur.

Refractory materials are described as follows:

Refractories are structural materials used at high temperatures to *sic+ industrial furnaces.
They are supplied mainly in the form of brick of standard sizes and of special shapes.
Refractories also include refractory cements, bonding mortars, plastic firebrick, castables,
ramming mixtures, and other bulk materials such as dead-burned grain magneside, chrome
or ground ganister and special clay.

While the word refractories is a generic term, its usage is not widespread and is limited
merely to the industry/trade in which it is used, and its continuous use by respondent RCP for
a considerable period has made the term so closely identified with it.
Hall vs Piccio

Facts: In May 1947, the Halls with resp Brown, Chapman and Abella sighed and acknowledge
in Leyte, the articles of incoraporation of the Far Estern Lumber and Commercial Co
organized to engaged in a general lumber business general contractors, operators and
managers.

Attached in the articles are affidavit by the treasurer the number of shares of stocks and
what has been subscribed and fully paid.

After, adoption of by-laws and election of officers. In Dec 1947, filed in SEC for the cert of
incorporation.

In March 1942, resp filed for the dissolution of the FELC because it was an unregistered
partnership and that there is a bitter dissension among members.

Judge Piccio ordered for the dissolution of the company and appointed Capuciong, at the
request of the pet, as receiver of the properties.

Pet claims that it bec it is a de facto corpo, the dissolution may only be ordered in a quo
warranto proceeding. Browns and the resp are estopped from claiming that it is not a
corporation but only a partnership.

ISSUE: WON corporation or partnership

Held: Partnership.

Not having obtained the cert of incorporation, FELC may not claim corporation in good faith.
Immunity of collateral attack is granted to corporations claiming in good faith to be a
corporation under this act.

The complaining assoc have not represented to the others that they were incorporated any
more than the latter had made similar rep to them. And as nobody was led to believe
anything to his prejudice and damage, the principle of estoppel does not apply.

This suit is not one in which the corporation is a party. This is a litigation between the
stockholders of the alleged corporation. Even the existence of a de jure corp may be
terminated in a private suit for dissolution bet SH WITHOUT the intervention of the State.

Pau: In the present Code, the appointment of a receiver would suspend all proceedings and
would make SEC have the jurisdiction over the case.

G.R. No. L-2598 June 29, 1950
C. ARNOLD HALL and BRADLEY P. HALL, petitioners,
vs.
EDMUNDO S. PICCIO, Judge of the Court of First Instance of Leyte, FRED BROWN, EMMA
BROWN, HIPOLITA CAPUCIONG, in his capacity as receiver of the Far Eastern Lumber and
Commercial Co., Inc.,respondents.
Claro M. Recto for petitioners.
Ramon Diokno and Jose W. Diokno for respondents.
BENGZON, J.:
This is petition to set aside all the proceedings had in civil case No. 381 of the Court of First
Instance of Leyte and to enjoin the respondent judge from further acting upon the same.
Facts: (1) on May 28, 1947, the petitioners C. Arnold Hall and Bradley P. Hall, and the
respondents Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella, signed

and acknowledged in Leyte, the article of incorporation of the Far Eastern Lumber and
Commercial Co., Inc., organized to engage in a general lumber business to carry on as general
contractors, operators and managers, etc. Attached to the article was an affidavit of the
treasurer stating that 23,428 shares of stock had been subscribed and fully paid with certain
properties transferred to the corporation described in a list appended thereto.
(2) Immediately after the execution of said articles of incorporation, the corporation
proceeded to do business with the adoption of by-laws and the election of its officers.
(3) On December 2, 1947, the said articles of incorporation were filed in the office of the
Securities and Exchange Commissioner, for the issuance of the corresponding certificate of
incorporation.
(4) On March 22, 1948, pending action on the articles of incorporation by the aforesaid
governmental office, the respondents Fred Brown, Emma Brown, Hipolita D. Chapman and
Ceferino S. Abella filed before the Court of First Instance of Leyte the civil case numbered
381, entitled "Fred Brown et al. vs. Arnold C. Hall et al.", alleging among other things that the
Far Eastern Lumber and Commercial Co. was an unregistered partnership; that they wished
to have it dissolved because of bitter dissension among the members, mismanagement and
fraud by the managers and heavy financial losses.
(5) The defendants in the suit, namely, C. Arnold Hall and Bradley P. Hall, filed a motion to
dismiss, contesting the court's jurisdiction and the sufficiently of the cause of action.
(6) After hearing the parties, the Hon. Edmund S. Piccio ordered the dissolution of the
company; and at the request of plaintiffs, appointed of the properties thereof, upon the filing
of a P20,000 bond.
(7) The defendants therein (petitioners herein) offered to file a counter-bond for the
discharge of the receiver, but the respondent judge refused to accept the offer and to
discharge the receiver. Whereupon, the present special civil action was instituted in this
court. It is based upon two main propositions, to wit:
(a) The court had no jurisdiction in civil case No. 381 to decree the dissolution of the
company, because it being ade facto corporation, dissolution thereof may only be ordered in
a quo warranto proceeding instituted in accordance with section 19 of the Corporation Law.
(b) Inasmuch as respondents Fred Brown and Emma Brown had signed the article of
incorporation but only a partnership.
Discussion: The second proposition may at once be dismissed. All the parties are informed
that the Securities and Exchange Commission has not, so far, issued the corresponding
certificate of incorporation. All of them know, or sought to know, that the personality of a
corporation begins to exist only from the moment such certificate is issued not before
(sec. 11, Corporation Law). The complaining associates have not represented to the others
that they were incorporated any more than the latter had made similar representations to
them. And as nobody was led to believe anything to his prejudice and damage, the principle
of estoppel does not apply. Obviously this is not an instance requiring the enforcement of
contracts with the corporation through the rule of estoppel.
The first proposition above stated is premised on the theory that, inasmuch as the Far
Eastern Lumber and Commercial Co., is a de facto corporation, section 19 of the Corporation
Law applies, and therefore the court had not jurisdiction to take cognizance of said civil case
number 381. Section 19 reads as follows:
. . . The due incorporation of any corporations claiming in good faith to be a corporation
under this Act and its right to exercise corporate powers shall not be inquired into collaterally
in any private suit to which the corporation may be a party, but such inquiry may be had at
the suit of the Insular Government on information of the Attorney-General.
There are least two reasons why this section does not govern the situation. Not having
obtained the certificate of incorporation, the Far Eastern Lumber and Commercial Co.
even its stockholders may not probably claim "in good faith" to be a corporation.
Under our statue it is to be noted (Corporation Law, sec. 11) that it is the issuance of a
certificate of incorporation by the Director of the Bureau of Commerce and Industry which
calls a corporation into being. The immunity if collateral attack is granted to corporations
"claiming in good faith to be a corporation under this act." Such a claim is compatible with
the existence of errors and irregularities; but not with a total or substantial disregard of the
law. Unless there has been an evident attempt to comply with the law the claim to be a
corporation "under this act" could not be made "in good faith." (Fisher on the Philippine Law
of Stock Corporations, p. 75. See also Humphreys vs. Drew, 59 Fla., 295; 52 So., 362.)
Second, this is not a suit in which the corporation is a party. This is a litigation between
stockholders of the alleged corporation, for the purpose of obtaining its dissolution. Even the
existence of a de jure corporation may be terminated in a private suit for its dissolution
between stockholders, without the intervention of the state.
There might be room for argument on the right of minority stockholders to sue for
dissolution;
1
but that question does not affect the court's jurisdiction, and is a matter for
decision by the judge, subject to review on appeal. Whkch brings us to one principal reason
why this petition may not prosper, namely: the petitioners have their remedy by appealing
the order of dissolution at the proper time.
There is a secondary issue in connection with the appointment of a receiver. But it must be
admitted that receivership is proper in proceedings for dissolution of a company or
corporation, and it was no error to reject the counter-bond, the court having declared the
dissolution. As to the amount of the bond to be demanded of the receiver, much depends
upon the discretion of the trial court, which in this instance we do not believe has been
clearly abused.
Judgment: The petition will, therefore, be dismissed, with costs. The preliminary injunction
heretofore issued will be dissolved.

SEVENTH DAY ADVENTIST G.R. No. 150416
CONFERENCE CHURCH OFSOUTHERN PHILIPPINES, INC.,
and/or represented by MANASSEHC. ARRANGUEZ, BRIGIDO P.
GULAY, FRANCISCO M. LUCENARA,DIONICES O. TIPGOS, LORESTO
C. MURILLON, ISRAEL C. NINAL,GEORGE G. SOMOSOT, JESSIET. ORBISO, LORETO PAEL and
JOEL BACUB Petitioners, Present:
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.
NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST, INC., and/or
represented by JOSUE A. LAYON,WENDELL M. SERRANO, FLORANTE P. TY and JETHRO
CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH [OF] NORTHEASTERN MINDANAO
MISSION,
*

Respondents. Promulgated
July 21, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
D E C I S I O N
CORONA, J.:
This petition for review on certiorari assails the Court of Appeals (CA) decision
[1]
and
resolution
[2]
in CA-G.R. CV No. 41966 affirming, with modification, the decision of the
Regional Trial Court (RTC) of Bayugan, Agusan del Sur, Branch 7 in Civil Case No. 63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title (TCT) No.
4468 in Bayugan, Agusan del Sur originally owned by Felix Cosio and his wife, Felisa Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the South Philippine Union Mission
of Seventh Day Adventist Church of Bayugan Esperanza, Agusan(SPUM-SDA Bayugan).
[3]
Part
of the deed of donation read:
KNOW ALL MEN BY THESE PRESENTS
That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,] 40 years of age,
[h]usband and wife, both are citizen[s] of the Philippines, and resident[s] with post office
address in the Barrio of Bayugan, Municipality of Esperanza, Province of Agusan, Philippines,
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 ofBayugan, 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, more particularly and bounded as
follows, to wit:
1. a parcel of land for Church Site purposes only.
2. situated [in Barrio Bayugan, Esperanza].
3. Area: 30 meters wide and 30 meters length or 900 square meters.
4. Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No. P-285.
5. Bounded Areas
North by National High Way; East by Bricio Gerona; South by Serapio Abijaron and West
by Feliz Cosio xxx.
[4]

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).
[5]
TCT No. 4468 was thereafter issued in the name of SDA-NEMM.
[6]

Claiming to be the alleged donees successors-in-interest, petitioners asserted
ownership over the property. This was opposed by respondents who argued that at the time
of the donation, SPUM-SDA Bayugan could not 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.
On September 28, 1987, petitioners filed a case, docketed as Civil Case No. 63 (a suit for
cancellation of title, quieting of ownership and possession, declaratory relief
and reconveyance with prayer for preliminary injunction and damages), in the RTC
of Bayugan, Agusan del Sur. 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
attorneys fees.
[8]
Petitioners motion for reconsideration was likewise denied. Thus, this
petition
The issue in this petition is simple: should SDA-NEMMs ownership of the lot covered by TCT
No. 4468 be upheld?
[9]
We answer in the affirmative.
The controversy between petitioners and respondents involves two supposed transfers of
the lot previously owned by the spouses Cosio: (1) a donation to petitioners alleged
predecessors-in-interest in 1959 and (2) a sale to respondents in 1980.

Donation is undeniably one of the modes of acquiring ownership of real property. Likewise,
ownership of a property may be transferred by tradition as a consequence of a sale.
Petitioners contend that the appellate court should not have ruled on the validity of the
donation since it was not among the issues raised on appeal. This is not correct because an
appeal generally opens the entire case for review.
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 corporationde 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 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. Neither could the principle of separate juridical personality
apply since there was never any corporation
[15]
to speak of. And, as already stated, some of
the representatives of petitioner Seventh Day Adventist Conference Church of Southern
Philippines, Inc. were not even members of the local church then, thus, they could not even
claim that the donation was particularly for them.
[16]

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

Generally, the doctrine exists to protect the public dealing with supposed corporate entities,
not to favor the defective or non-existent corporation.
[18]

In view of the foregoing, petitioners arguments anchored on their supposed de facto status
hold no water. We are convinced that there was no donation to petitioners or their supposed
predecessor-in-interest.
On the other hand, there is sufficient basis to affirm the title of SDA-NEMM. The factual
findings of the trial court in this regard were not convincingly disputed. This Court is not
a trier of facts. Only questions of law are the proper subject of a petition for review on
certiorari.
[19]

Sustaining the validity of respondents title as well as their right of ownership over the
property, the trial court stated:
[W]hen Felix Cosio was shown the Absolute Deed of Sale during the hearing xxx he
acknowledged that the same was his xxx but that it was not his intention to sell
the controverted property because he had previously donated the same lot to the South
Philippine Union Mission of SDA Church of Bayugan-Esperanza. Cosio avouched that had it
been his intendment to sell, he would not have disposed of it for a mereP2,000.00 in two
installments but for P50,000.00 or P60,000.00. According to him, the P2,000.00 was not a
consideration of the sale but only a form of help extended.
A thorough analysis and perusal, nonetheless, of the Deed of Absolute Sale disclosed
that it has the essential requisites of contracts pursuant to xxx Article 1318 of the Civil

Code, except that the consideration of P2,000.00 is somewhat insufficient for a [1,069-square
meter] land. Would then this inadequacy of the consideration render the contract invalid?
Article 1355 of the Civil Code provides:
Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract,
unless there has been fraud, mistake or undue influence.
No evidence [of fraud, mistake or undue influence] was adduced by [petitioners]
Well-entrenched is the rule that a Certificate of Title is generally a conclusive
evidence of [ownership] of the land. There is that strong and solid presumption that titles
were legally issued and that they are valid. It is irrevocable and indefeasible and the duty of
the Court is to see to it that the title is maintained and respected unless challenged in a
direct proceeding. xxx The title shall be received as evidence in all the Courts and shall be
conclusive as to all matters contained therein.
[This action was instituted almost seven years after the certificate of title in
respondents name was issued in 1980.+
[20]

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

Here, transfer of ownership from the spouses Cosio to SDA-NEMM was made upon
constructive delivery of the property on February 28, 1980 when the sale was made through
a public instrument.
[22]
TCT No. 4468 was thereafter issued and it remains in the name of
SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.

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