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Gamboa vs Teves

In 1928, the Philippine Long Distance Telephone Company (PLDT) was granted a franchise to
engage in the business of telecommunications. Telecommunications is a nationalized area of
activity where a corporation engaged therein must have 60% of its capital be owned by Filipinos
as provided for by Section 11, Article XII (National Economy and Patrimony) of the 1987
Constitution, to wit:
Section 11. No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines, at least sixty per centum of
whose capital is owned by such citizens; xxx
In 1999, First Pacific, a foreign corporation, acquired 37% of PLDT common shares. Wilson
Gamboa opposed said acquisition because at that time, 44.47% of PLDT common shares already
belong to various other foreign corporations. Hence, if First Pacific’s share is added, foreign
shares will amount to 81.47% or more than the 40% threshold prescribed by the Constitution.
Margarito Teves, as Secretary of Finance, and the other respondents argued that this is okay
because in totality, most of the capital stocks of PLDT is Filipino owned. It was explained that all
PLDT subscribers, pursuant to a law passed by Marcos, are considered shareholders (they hold
serial preferred shares). Broken down, preferred shares consist of 77.85% while common shares
consist of 22.15%.
Gamboa argued that the term “capital” should only pertain to the common shares because that
is the share which is entitled to vote and thus have effective control over the corporation.
ISSUE: What does the term “capital” pertain to? Does the term “capital” in Section 11, Article XII
of the Constitution refer to common shares or to the total outstanding capital stock (combined
total of common and non-voting preferred shares)?
HELD: Gamboa is correct. Capital only pertains to common shares. It will be absurd for capital to
pertain as inclusive of non-voting shares. This is because a corporation consisting of 1,000,000
capital stocks, 100 of which are common shares which are foreign owned and the rest (999,900
shares) are preferred shares which are non-voting shares and are Filipino owned, would seem
compliant to the constitutional requirement – here 99.999% is Filipino owned. But if scrutinized,
the controlling stock – the voting stock – or that miniscule .001% is foreign owned. That is absurd.
In this case, it is true that at least 77.85% of the capital is owned by Filipinos (the PLDT
subscribers). But these subscribers, who hold non-voting preferred shares, have no control over
the corporation. Hence, capital should only pertain to common shares.
Thus, to be compliant with the constitution, 60% of the common shares of PLDT should be Filipino
owned. That is not so in this case as it appears that 81.47% of the common shares are already
foreign owned (split between First Pacific (37%) and a Japanese corporation).
When may preferred shares be considered part of the capital share?
If the preferred shares are allowed to vote like common shares.
Ronaldo San Miguel had been a checker/ customs representative of Zera Brokerage Corp.
Sometime onJanuary !!"# he and other employees $ere informed that Zeta $ould cease
operations# and that all affectedemployees# including him# $ould be separated. Zeta informed
him through a letter# of his termination effectiveMarch % # !!". &e allegedly accepted his
separation pay sub'ect to the standing offer to be hired to his former position by petitioner. (n
)pril *# !!"# he $as summarily terminated.&ence# San Miguel filed a complaint for unfair
labor practice# illegal dismissal# nonpayment of salariesand moral damages against Zeta. +or
its part# Zeta contended that the dismissal is for a 'ust cause# cessation of business operations.
,hether the dismissal due to alleged closure of business operations is valid
-o. he cessation of business operations by Zeta $as not a bona fide closure to be regarded
as a validground for the termination of employment of San Miguel. he change of name is not a
change of the corporate being. he amendments in the articles of incorporation of Zeta to
change the corporate name to Zuellig +reightand Cargo Systems did not produce its
dissolution as a corporation. hus# Zuellig is bound to respect andhonor Zeta s
obligation especially $ith the employees security of tenure



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


Respondent Refractories Corporation of the Philippines (RCP) is a

corporation duly organized on October 13, 1976. On June 22, 1977, it
registered its corporate and business name with the Bureau of Domestic

Petitioner IRCP 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".

Both companies are the only local suppliers of monolithic gunning mix.
Respondent RCP then filed a petition with the Securities and Exchange
Commission to compel petitioner IRCP to change its corporate name.

The SEC rendered judgment in favor of respondent RCP.

Petitioner appealed to the SEC En Banc. The SEC En Banc modified the
appealed decision and the petitioner was ordered to delete or drop from its
corporate name only the word "Refractories".

Petitioner IRCP filed a petition for review on certiorari to the Court of

Appeals and 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

Petitioner then filed a petition for review on certiorari


Are corporate names Refractories Corporation of the Philippines (RCP) and

"Industrial Refractories Corp. of the Philippines" confusingly and
deceptively similar?


Yes, the petitioner and respondent RCP’s corporate names are confusingly
and deceptively similar.
Further, 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 said 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.

The Supreme Court denied the petition for review on certiorari due for lack
of merit.
Red Line Transportation Co. vs. Rural Transit Co.
GR No. 41570 | Sept. 6, 1934

 This is a petition for review of an order of the Public Service Commission granting to the Rural Transit Company, Ltd., a certificate
of public convenience to operate a transportation service between Ilagan in the Province of Isabela and Tuguegarao in the
Province of Cagayan, and additional trips in its existing express service between Manila Tuguegarao.
 On June 4, 1932, Rural Transit filed an application for certification of a new service between Tuguegarao and Ilagan with the
Public Company Service Commission (PSC), since the present service is not sufficient
 Rural Transit further stated that it is a holder of a certificate of public convenience to operate a passenger bus service between
Manila and Tuguegarao
 Red Line opposed said application, arguing that they already hold a certificate of public convenience for Tuguegarao and Ilagan,
and is rendering adequate service. They also argued that granting Rural Transit’s application would constitute a ruinous
competition over said route
 On Dec. 21, 1932, Public Service Commission approved Rural Transit’s application, with the condition that "all the other terms
and conditions of the various certificates of public convenience of the herein applicant and herein incorporated are made a part
 A motion for rehearing and reconsideration was filed by Red Line since Rural Transit has a pending application before the Court
of First Instance for voluntary dissolution of the corporation
 A motion for postponement was filed by Rural Transit as verified by M. Olsen who swears "that he was the secretary of the Rural
Transit Company, Ltd
 During the hearing before the Public Service Commission, the petition for dissolution and the CFI’s decision decreeing the
dissolution of Rural Transit were admitted without objection
 At the trial of this case before the Public Service Commission an issue was raised as to who was the real party in interest making
the application, whether the Rural Transit Company, Ltd., as appeared on the face of the application, or the Bachrach Motor
Company, Inc., using name of the Rural Transit Company, Ltd., as a trade name
 However, PSC granted Rural Transit’s application for certificate of public convenience and ordered that a certificate be issued on
its name
 PSC relied on a Resolution in case No. 23217, authorizing Bachrach Motor to continue using Rural Transit’s name as its tradename
in all its applications and petitions to be filed before the PSC. Said resolution was given a retroactive effect as of the date of filing
of the application or April 30, 1930

Issue: Can the Public Service Commission authorize a corporation to assume the name of another corporation as a trade name?

Ruling: NO
 The Rural Transit Company, Ltd., and the Bachrach Motor Co., Inc., are Philippine corporations and the very law of their creation
and continued existence requires each to adopt and certify a distinctive name
 The incorporators "constitute a body politic and corporate under the name stated in the certificate."
 A corporation has the power "of succession by its corporate name." It is essential to its existence and cannot change its name
except in the manner provided by the statute. By that name alone is it authorized to transact business.
 The law gives a corporation no express or implied authority to assume another name that is unappropriated: still less that of
another corporation, which is expressly set apart for it and protected by the law. If any corporation could assume at pleasure as
an unregistered trade name the name of another corporation, this practice would result in confusion and open the door to frauds
and evasions and difficulties of administration and supervision.
In this case, the order of the commission authorizing the Bachrach Motor Co., Incorporated, to assume the name of the Rural
Transit Co., Ltd. likewise incorporated, as its trade name being void. Accepting the order of December 21, 1932, at its face as
granting a certificate of public convenience to the applicant Rural Transit Co., Ltd., the said order last mentioned is set aside and
vacated on the ground that the Rural Transit Company, Ltd., is not the real party in interest and its application was fictitious

In 1953, Universal Textile Mills, Inc. (UTMI) was organized. In 1954, Universal Hosiery Mills
Corporation (UHMC) was also organized. Both are actually distinct corporations but they
engage in the same business (fabrics). In 1963, UHMC petitioned to change its name to
Universal Mills Corporation (UMC). The Securities and Exchange Commission (SEC) granted
the petition.
Subsequently, a warehouse owned by UMC was gutted by fire. News about the fire spread
and investors of UTMI thought that it was UTMI’s warehouse that was destroyed. UTMI had
to make clarifications that it was UMC’s warehouse that got burned. Eventually, UTMI
petitioned that UMC should be enjoined from using its name because of the confusion it
brought. The SEC granted UTMI’s petition. UMC however assailed the order of the SEC as it
averred that their tradename is not deceptive; that UTMI’s tradename is qualified by the word
“Textile”, hence, there can be no confusion.
ISSUE: Whether or not the decision of the SEC is correct.
HELD: Yes. There is definitely confusion as it was evident from the facts where the investors
of UTMI mistakenly believed that it was UTMI’s warehouse that was destroyed. Although the
corporate names are not really identical, they are indisputably so similar that it can cause, as
it already did, confusion. The SEC did not act in abuse of its discretion when it order UMC to
drop its name because there was a factual evidence presented as to the confusion. Further,
when UMC filed its petition for change of corporate name, it made an undertaking that it shall
change its name in the event that there is another person, firm or entity who has obtained a
prior right to the use of such name or one similar to it. That promise is still binding upon the
corporation and its responsible officers.

 Lyceum of the Philippines, Inc. is an educational institution duly registered with
Securities and Exchange Commission since 1950. (Sept)
 In 1984, it instituted proceedings before SEC to compel several education
institutions to delete the word “Lyceum” from their corporate names and to
permanently enjoin them from using the said word.
 Their action is based on a SEC Resolution wherein SEC ordered the Lyceum of
Baguio to change its corporate name as it is identical to the Lyceum of the
Philippines which was able to register first.
 SEC En Banc ruled that the attaching of the geographical names after the word
“Lyceum” sufficiently distinguishes one from the other.
 However, the CA ruled otherwise.

Issue No.1: WON the corporate names of the parties are identical with or deceptively
similar to that of the petitioner. NO

Held: The corporate names of the parties carry the word “Lyceum” but confusion and
deception are precluded by the appending of geographic names. Lyceum generally refers
to a school or an institution of learning and it is natural to use this word to designate an
entity which is organized and operating as an educational institution.

Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the general public
for the Lyceum of the Philippines, or that the "Lyceum of Camalaniugan" would be
confused with the Lyceum of the Philippines.
Issue No. 2: WON the use by the Lyceum of the Philippines of the word 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. (Doctrine of Secondary meaning). NO

Held: Doctrine of Secondary meaning is a word of phrase originally incapable of exclusive

appropriation, might nevertheless have been used so long and so exclusively by one
producer with reference to his article that, in trade and to that branch of the purchasing
public, the word or phrase has come to mean that the article was his product.

Lyceum of the Philippines has not gained exclusive use of “Lyceum” by long passage of
time. The number alone of the private respondents suggests strongly that the use of
Lyceum has not been attended with the exclusivity essential for the applicability of the
doctrine. It may be noted that one of the respondents – Western Pangasinan Lyceum
used such term 17 years before the petitioner registered with the SEC. Moreover, there
may be other schools using the name but not registered with the SEC because they have
not adopted the corporate form of organization.

Doctrine of secondary meaning can be extended to corporation name but must comply
with the requirement that it has been used so long and so exclusively by one and that the
said name has come to mean that it is referred to as that corporation.

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

Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn
referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure
dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus,
Pericles and Lycurgus frequented by the youth for exercise and by the philosopher
Aristotle and his followers for teaching."

Lyceum" is in fact as generic in character as the word "university." In the name of the
petitioner, "Lyceum" appears to be a substitute for "university;" in other places, however,
"Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college.