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Corporation
Law Week 2
G.R. No. 119002 October 19, 2000
INTERNATIONAL EXPRESS TRAVEL & TOUR
SERVICES, INC., petitioner,
vs.
HON. COURT OF APPEALS, HENRI KAHN,
PHILIPPINE FOOTBALL
FEDERATION, respondents.
KAPUNAN, J.:
Facts:
On June 30 1989, petitioner International Express Travel and
Tour Services, Inc., through its managing director, wrote a
letter to the Philippine Football Federation (Federation),
through its president private respondent Henri Kahn, wherein
the former offered its services as a travel agency to the
latter.1 The offer was accepted.
Petitioner secured the airline tickets for the trips of the athletes
and officials of the Federation to the South East Asian Games
in Kuala Lumpur as well as various other trips to the People's
Republic of China and Brisbane. The total cost of the tickets
amounted to P449,654.83. For the tickets received, the
Federation made two partial payments, both in September of
1989, in the total amount of P176,467.50.2
On 4 October 1989, petitioner wrote the Federation, through
the private respondent a demand letter requesting for the
amount of P265,894.33.3 On 30 October 1989, the Federation,
through the Project Gintong Alay, paid the amount of
P31,603.00.4
On 27 December 1989, Henri Kahn issued a personal check in
the amount of P50,000 as partial payment for the outstanding
balance of the Federation.5 Thereafter, no further payments
were made despite repeated demands.
This prompted petitioner to file a civil case before the Regional
Trial Court of Manila. Petitioner sued Henri Kahn in his
personal capacity and as President of the Federation and
impleaded the Federation as an alternative defendant.
Petitioner sought to hold Henri Kahn liable for the unpaid
balance for the tickets purchased by the Federation on the
ground that Henri Kahn allegedly guaranteed the said
obligation.6
Henri Kahn filed his answer with counterclaim. While not
denying the allegation that the Federation owed the amount
P207,524.20, representing the unpaid balance for the plane
tickets, he averred that the petitioner has no cause of action
against him either in his personal capacity or in his official
capacity as president of the Federation. He maintained that he
did not guarantee payment but merely acted as an agent of the
Federation which has a separate and distinct juridical
personality. On the other hand, the Federation failed to file its
answer, hence, was declared in default by the trial court.
Trial Court: in favor of petitioner, Henri Kahn, personally liable
for the unpaid obligation of the Federation, failed to adduce
evidence proving the corporate existence
CA: reversed Trial Court decision, petitioner failed to prove that
Henri Kahn guaranteed the obligation of the Federation as said
entity has a separate and distinct personality from its officers.
Petitioner filed a motion for reconsideration and as an
alternative prayer pleaded that the Federation be held liable for
the unpaid obligation.
Appellate court: denied the motion, “it should be remembered
that the trial court dismissed the complaint against the
Philippine Football Federation, and the plaintiff did not appeal
from this decision. Hence, the Philippine Football Federation is
not a party to this appeal and consequently, no judgment may
be pronounced by this Court against the PFF without violating
the due process clause, let alone the fact that the judgment
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dismissing the complaint against it, had already become final
by virtue of the plaintiff's failure to appeal therefrom.”
Issue:
WON CA erred in holding that petitioner dealt with PFF as a
corporate entity and in holding that private respondent Henri
Kahn not liable (WON there is a corporation by estoppel)
Held:
Nowhere can it be found in R.A. 3135 or P.D. 604 any
provision creating the Philippine Football Federation. These
laws merely recognized the existence of national sports
associations and provided the manner by which these entities
may acquire juridical personality. The powers and functions
granted to national sports associations clearly indicate that
these entities may acquire a juridical personality. The power to
purchase, sell, lease and encumber property are acts which
may only be done by persons, whether natural or artificial, with
juridical capacity. However, while we agree with the appellate
court that national sports associations may be accorded
corporate status, such does not automatically take place by the
mere passage of these laws. It is a basic postulate that before
a corporation may acquire juridical personality, the State must
give its consent either in the form of a special law or a general
enabling act. We cannot agree with the view of the appellate
court and the private respondent that the Philippine Football
Federation came into existence upon the passage of these
laws.
Clearly the provisions require that before an entity may be
considered as a national sports association, such entity must
be recognized by the accrediting organization, the Philippine
Amateur Athletic Federation under R.A. 3135, and the
Department of Youth and Sports Development under P.D. 604.
This fact of recognition, however, Henri Kahn failed to
substantiate. In attempting to prove the juridical existence of
the Federation, Henri Kahn attached to his motion for
reconsideration before the trial court a copy of the constitution
and by-laws of the Philippine Football Federation.
Unfortunately, the same does not prove that said Federation
has indeed been recognized and accredited by either the
Philippine Amateur Athletic Federation or the Department of
Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports
association within the purview of the aforementioned laws and
does not have corporate existence of its own.
Thus being said, it follows that private respondent Henry Kahn
should be held liable for the unpaid obligations of the
unincorporated Philippine Football Federation. It is a settled
principal in corporation law that any person acting or purporting
to act on behalf of a corporation which has no valid existence
assumes such privileges and becomes personally liable for
contract entered into or for other acts performed as such
agent.14 As president of the Federation, Henri Kahn is
presumed to have known about the corporate existence or
non-existence of the Federation. We cannot subscribe to the
position taken by the appellate court that even assuming that
the Federation was defectively incorporated, the petitioner
cannot deny the corporate existence of the Federation
because it had contracted and dealt with the Federation in
such a manner as to recognize and in effect admit its
existence.15 The doctrine of corporation by estoppel is
mistakenly applied by the respondent court to the petitioner.
The application of the doctrine applies to a third party only
when he tries to escape liability on a contract from which he
has benefited on the irrelevant ground of defective
incorporation.16 In the case at bar, the petitioner is not trying to
escape liability from the contract but rather is the one claiming
from the contract.
G.R. No. 136448 November 3, 1999
LIM TONG LIM, petitioner,
vs.
PHILIPPINE FISHING GEAR INDUSTRIES,
INC., respondent.
PANGANIBAN, J.:
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 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. 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.
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
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Answer with Counterclaim and Crossclaim and moved for the
lifting of the Writ of Attachment.
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.
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. A
partnership among Lim, Chua and Yao existed. 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.
CA: held that petitioner was a partner of Chua and Yao in a
fishing business and may thus be held liable as such for the
fishing nets and floats purchased by and for the use of the
partnership. “The ultimate undertaking of the defendants was
to divide the profits among themselves which is what a
partnership essentially is.”
Issue:
Whether by their acts, Lim, Chua and Yao could be deemed to
have entered into a partnership
Whether or not under the doctrine of corporation by estoppel,
liability can only be imputed only to Chua and Yao and not to
Lim.
Held:
1. Yes. The Court is 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.
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.
2. No. 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.
G.R. No. 125221 June 19, 1997
REYNALDO M. LOZANO, petitioner,
vs.
HON. ELIEZER R. DE LOS SANTOS, Presiding
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Judge, RTC, Br. 58, Angeles City; and ANTONIO
ANDA, respondents.
PUNO, J.:
Facts:
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).
MCTC: The MCTC denied the motion to dismiss on February
9, 1996. 2 It denied reconsideration on March 8, 1996.
RTC: certiorari; 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.
Issue:
WON the SEC has jurisdiction over associations not yet
approved and registered with the SEC
Held:
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 is 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.
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.
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, partnership and
associations with the end in view that investments in these
entities may be encouraged and protected, and their entities
may be encouraged and protected, and their activities pursued
for the promotion of economic development.
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
person. Where there is no third person involved and the
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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.
G.R. No. 101897. March 5, 1993.
LYCEUM OF THE PHILIPPINES, INC., petitioner,
vs. COURT OF APPEALS, 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. and WESTERN
PANGASINAN LYCEUM, INC., respondents.
FELICIANO, J:
Facts:
Petitioner is an educational institution duly registered with the
Securities and Exchange Commission ("SEC"). When it first
registered with the SEC on 21 September 1950, it used the
corporate name Lyceum of the Philippines, Inc. and has used
that name ever since.
On 24 February 1984, petitioner instituted proceedings before
the SEC to compel the private respondents, which are also
educational institutions, to delete the word "Lyceum" from their
corporate names and permanently to enjoin them from using
"Lyceum" as part of their respective names. Some of the
private respondents actively participated in the proceedings
before the SEC. These are the following, the dates of their
original SEC registration being set out below opposite their
respective names:
Western Pangasinan Lyceum — 27 October 1950
Lyceum of Cabagan — 31 October 1962
Lyceum of Lallo, Inc. — 26 March 1972
Lyceum of Aparri — 28 March 1972
Lyceum of Tuao, Inc. — 28 March 1972
Lyceum of Camalaniugan — 28 March 1972
The following private respondents were declared in default for
failure to file an answer despite service of summons:
Buhi Lyceum;
Central Lyceum of Catanduanes;
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines
The background of the case at bar needs some recounting.
Petitioner had sometime before commenced in the SEC a
proceeding (SEC-Case No. 1241) against the Lyceum of
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, Associate
Commissioner 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 the geographical location of
the campus being the only word which distinguished one from
the other corporate name. The SEC also noted that petitioner
had registered as a corporation ahead of the Lyceum of
Baguio, Inc. in point of time, 1 and ordered the latter to change
its name to another name "not similar or identical [with]" the
names of previously registered entities.
Armed with the Resolution of this Court in G.R. No. L-46595,
petitioner then wrote all the educational institutions it could find
using the word "Lyceum" as part of their corporate name, and
advised them to discontinue such use of "Lyceum." When, with
the passage of time, it became clear that this recourse had
failed, petitioner instituted before the SEC SEC-Case No. 2579
to enforce what petitioner claims as its proprietary right to the
word "Lyceum." The SEC hearing 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-Case No. 1241) and
held that the word "Lyceum" was capable of appropriation and
that petitioner had acquired an enforceable exclusive right to
the use of that word.
SEC En Banc: (private respondents) appeal; reversed the
decision of hearing officer, did not consider the word "Lyceum"
to have become so identified with petitioner as to render use
thereof by other institutions as productive of confusion about
the identity, held that the attaching of geographical names to
the word "Lyceum" served sufficiently to distinguish the schools
from one another.
Court of Appeals: (petitioner) appeal; affirmed SEC En Banc;
reconsideration, same same.
Issue:
Whether or not the use by petitioner 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
Held:
The doctrine of secondary meaning originated in the field of
trademark law. Its application has, however, been extended to
corporate names sine the right to use a corporate name to the
exclusion of others is based upon the same principle which
underlies the right to use a particular trademark or tradename.
10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11
the doctrine of secondary meaning was elaborated in the
following terms:
" . . . a word or phrase originally incapable of exclusive
appropriation with reference to an article on the market,
because geographically or otherwise descriptive, might
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nevertheless have been used so long and so exclusively by
one producer with reference to his article that, in that trade and
to that branch of the purchasing public, the word or phrase has
come to mean that the article was his product."
With the foregoing as a yardstick, [we] believe the appellant
failed to satisfy the aforementioned requisites. No evidence
was ever presented in the hearing before the Commission
which sufficiently proved that the word 'Lyceum' has indeed
acquired secondary meaning in favor of the appellant. If there
was any of this kind, the same tend to prove only that the
appellant had been using the disputed word for a long period of
time. Nevertheless, its (appellant) exclusive use of the word
(Lyceum) was never established or proven as in fact the
evidence tend to convey that the cross-claimant was already
using the word 'Lyceum' seventeen (17) years prior to the date
the appellant started using the same word in its corporate
name. Furthermore, educational institutions of the Roman
Catholic Church had been using the same or similar word like
'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate),
'Liceo de Masbate,' 'Liceo de Albay' long before appellant
started using the word 'Lyceum'. The appellant also failed to
prove that the word 'Lyceum' has become so identified with its
educational institution that confusion will surely arise in the
minds of the public if the same word were to be used by other
educational institutions.
In other words, while the appellant may have proved that it had
been using the word 'Lyceum' for a long period of time, this fact
alone did not amount to mean that the said word had acquired
secondary meaning in its favor because the appellant failed to
prove that it had been using the same word all by itself to the
exclusion of others. More so, there was no evidence presented
to prove that confusion will surely arise if the same word were
to be used by other educational institutions. Consequently, the
allegations of the appellant in its first two assigned errors must
necessarily fail."
The number alone of the private respondents in the case at bar
suggests strongly that petitioner's 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 private respondents, i.e., the
Western Pangasinan Lyceum, Inc., used the term "Lyceum"
seventeen (17) years before the petitioner registered its own
corporate name with the SEC and began using the word
"Lyceum." It follows that if any institution had acquired an
exclusive right to the word "Lyceum," that institution would
have been the Western Pangasinan Lyceum, Inc. rather than
the petitioner institution.
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.
AUSTRIA-MARTINEZ, J.:
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 petitioner’s such that
the public may be confused or deceived into believing that they
are one and the same corporation.
SEC: decided in favor of RCP, IRCP, deceptively and
confusingly similar to that of respondent’s corporate name
SEC En Banc: (Petitioner) appeal; petitioner was ordered to
delete or drop from its corporate name only the word
"Refractories".5
CA: (Petitioner) certiorari; 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.
Issue:
WON the corporate names of both parties are not confusingly
similar
Held:
No. 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
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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
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 Petitioner’s corporate name is
"Industrial Refractories Corp. of the Phils.", while respondent’s
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 corporation’s 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.
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.
BENGZON, J.:
Facts:
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.
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. 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.
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.
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.
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.
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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.
Issue:
WON the court had no jurisdiction to decree the dissolution of
the company, it being a de facto corporation in accordance with
sec. 19 of the Corp. Code
Held:
No. 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.
G.R. No. 150416 July 21, 2006
SEVENTH DAY ADVENTIST CONFERENCE
CHURCH OF SOUTHERN PHILIPPINES, INC.,
and/or represented by MANASSEH C.
ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO
M. LUCENARA, DIONICES O. TIPGOS,
LORESTO C. MURILLON, ISRAEL C. NINAL,
GEORGE G. SOMOSOT, JESSIE T. ORBISO,
LORETO PAEL and JOEL
BACUBAS, petitioners,
vs.
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.
CORONA, J.:
Facts:
SPUM-SDA: petitioner
SDA-NEMM: respondent
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). 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 donee’s 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.
Trial Court: favor of respondents
CA: affirmed decision of RTC; Motion for recon: denied
Issue:
WON respondents (SDA-NEMM) own the land
Held:
Yes. The controversy between petitioners and respondents
involves two supposed transfers of the lot previously owned by
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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.
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." Generally, the doctrine exists to protect the
public dealing with supposed corporate entities, not to favor the
defective or non-existent corporation.

We agree with the appellate court that the alleged donation to

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

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

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

But there are stringent requirements before one can qualify as

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

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

The filing of articles of incorporation and the issuance of the

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

Corporate existence begins only from the moment a certificate

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

"The de facto doctrine thus effects a compromise between two

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