FIRST DIVISION

[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.
DECISION
KAPUNAN, J.:
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.[7]
On the other hand, the Federation failed to file its answer, hence, was declared in default
by the trial court.[8]
In due course, the trial court rendered judgment and ruled in favor of the petitioner and
declared Henri Kahn personally liable for the unpaid obligation of the Federation. In arriving at

the said ruling, the trial court rationalized:

Defendant Henri Kahn would have been correct in his contentions had it been duly
established that defendant Federation is a corporation. The trouble, however, is that neither
the plaintiff nor the defendant Henri Kahn has adduced any evidence proving the corporate
existence of the defendant Federation. In paragraph 2 of its complaint, plaintiff asserted that
"Defendant Philippine Football Federation is a sports association xxx." This has not been
denied by defendant Henri Kahn in his Answer. Being the President of defendant Federation,
its corporate existence is within the personal knowledge of defendant Henri Kahn. He could
have easily denied specifically the assertion of the plaintiff that it is a mere sports association,
if it were a domestic corporation. But he did not.
xxx
A voluntary unincorporated association, like defendant Federation has no power to enter into,
or to ratify, a contract. The contract entered into by its officers or agents on behalf of such
association is not binding on, or enforceable against it. The officers or agents are themselves
personally liable.
x x x[9]
The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay the plaintiff the
principal sum of P207,524.20, plus the interest thereon at the legal rate computed from July 5,
1990, the date the complaint was filed, until the principal obligation is fully liquidated; and
another sum of P15,000.00 for attorney's fees.
The complaint of the plaintiff against the Philippine Football Federation and the counterclaims
of the defendant Henri Kahn are hereby dismissed.
With the costs against defendant Henri Kahn.[10]
Only Henri Kahn elevated the above decision to the Court of Appeals. On 21 December
1994, the respondent court rendered a decision reversing the trial court, the decretal portion
of said decision reads:
WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and
SET ASIDE and another one is rendered dismissing the complaint against defendant Henri S.
Kahn.[11]
In finding for Henri Kahn, the Court of Appeals recognized the juridical existence of the
Federation. It rationalized that since petitioner failed to prove that Henri Kahn guaranteed the
obligation of the Federation, he should not be held liable for the same 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. The same was denied by the appellate
court in its resolution of 8 February 1995, where it stated that:

As to the alternative prayer for the Modification of the Decision by expressly declaring in the
dispositive portion thereof the Philippine Football Federation (PFF) as liable for the unpaid
obligation, 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 dismissing the complaint against it, had already become
final by virtue of the plaintiff's failure to appeal therefrom. The alternative prayer is therefore
similarly DENIED.[12]
Petitioner now seeks recourse to this Court and alleges that the respondent court
committed the following assigned errors:[13]
A. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER HAD DEALT WITH THE PHILIPPINE FOOTBALL FEDERATION
(PFF) AS A CORPORATE ENTITY AND IN NOT HOLDING THAT PRIVATE
RESPONDENT HENRI KAHN WAS THE ONE WHO REPRESENTED THE
PFF AS HAVING A CORPORATE PERSONALITY.
B. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE
RESPONDENT HENRI KAHN PERSONALLY LIABLE FOR THE OBLIGATION
OF THE UNINCORPORATED PFF, HAVING NEGOTIATED WITH
PETITIONER AND CONTRACTED THE OBLIGATION IN BEHALF OF THE
PFF, MADE A PARTIAL PAYMENT AND ASSURED PETITIONER OF FULLY
SETTLING THE OBLIGATION.
C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT
PERSONALLY LIABLE, THE HONORABLE COURT OF APPEALS ERRED IN
NOT EXPRESSLY DECLARING IN ITS DECISION THAT THE PFF IS SOLELY
LIABLE FOR THE OBLIGATION.
The resolution of the case at bar hinges on the determination of the existence of the
Philippine Football Federation as a juridical person. In the assailed decision, the appellate
court recognized the existence of the Federation. In support of this, the CA cited Republic Act
3135, otherwise known as the Revised Charter of the Philippine Amateur Athletic Federation,
and Presidential Decree No. 604 as the laws from which said Federation derives its
existence.
As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604
recognized the juridical existence of national sports associations. This may be gleaned from
the powers and functions granted to these associations. Section 14 of R.A. 3135 provides:
SEC. 14. Functions, powers and duties of Associations. - The National Sports' Association
shall have the following functions, powers and duties:
1. To adopt a constitution and by-laws for their internal organization and government;
2. To raise funds by donations, benefits, and other means for their purposes.
3. To purchase, sell, lease or otherwise encumber property both real and personal, for the

accomplishment of their purpose;

4. To affiliate with international or regional sports' Associations after due consultation with the
executive committee;
xxx
13. To perform such other acts as may be necessary for the proper accomplishment of their
purposes and not inconsistent with this Act.
Section 8 of P.D. 604, grants similar functions to these sports associations:
SEC. 8. Functions, Powers, and Duties of National Sports Association. - The National sports
associations shall have the following functions, powers, and duties:
1. Adopt a Constitution and By-Laws for their internal organization and government which
shall be submitted to the Department and any amendment thereto shall take effect upon
approval by the Department: Provided, however, That no team, school, club, organization, or
entity shall be admitted as a voting member of an association unless 60 per cent of the
athletes composing said team, school, club, organization, or entity are Filipino citizens;
2. Raise funds by donations, benefits, and other means for their purpose subject to the
approval of the Department;
3. Purchase, sell, lease, or otherwise encumber property, both real and personal, for the
accomplishment of their purpose;
4. Conduct local, interport, and international competitions, other than the Olympic and Asian
Games, for the promotion of their sport;
5. Affiliate with international or regional sports associations after due consultation with the
Department;
xxx
13. Perform such other functions as may be provided by law.
The above 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. 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. Section 11 of
R.A. 3135 provides:
SEC. 11. National Sports' Association; organization and recognition. - A National Association
shall be organized for each individual sports in the Philippines in the manner hereinafter
provided to constitute the Philippine Amateur Athletic Federation. Applications for recognition
as a National Sports' Association shall be filed with the executive committee together with,
among others, a copy of the constitution and by-laws and a list of the members of the
proposed association, and a filing fee of ten pesos.
The Executive Committee shall give the recognition applied for if it is satisfied that said
association will promote the purposes of this Act and particularly section three thereof. No
application shall be held pending for more than three months after the filing thereof without
any action having been taken thereon by the executive committee. Should the application be
rejected, the reasons for such rejection shall be clearly stated in a written communication to
the applicant. Failure to specify the reasons for the rejection shall not affect the application
which shall be considered as unacted upon: Provided, however, That until the executive
committee herein provided shall have been formed, applications for recognition shall be
passed upon by the duly elected members of the present executive committee of the
Philippine Amateur Athletic Federation. The said executive committee shall be dissolved upon
the organization of the executive committee herein provided: Provided, further, That the
functioning executive committee is charged with the responsibility of seeing to it that the
National Sports' Associations are formed and organized within six months from and after the
passage of this Act.
Section 7 of P.D. 604, similarly provides:
SEC. 7. National Sports Associations. - Application for accreditation or recognition as a
national sports association for each individual sport in the Philippines shall be filed with the
Department together with, among others, a copy of the Constitution and By-Laws and a list of
the members of the proposed association.
The Department shall give the recognition applied for if it is satisfied that the national sports
association to be organized will promote the objectives of this Decree and has substantially
complied with the rules and regulations of the Department: Provided, That the Department
may withdraw accreditation or recognition for violation of this Decree and such rules and
regulations formulated by it.
The Department shall supervise the national sports association: Provided, That the latter shall
have exclusive technical control over the development and promotion of the particular sport
for which they are organized.
Clearly the above cited 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 nonexistence 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.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The
decision of the Regional Trial Court of Manila, Branch 35, in Civil Case No. 90-53595 is
hereby REINSTATED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

THIRD DIVISION
[G.R. No. 136448. November 3, 1999]

LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC.,
respondent.
DECISION
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.
Melo, (Chairman), Purisima, and Gonzaga-Reyes, JJ., concur.
Vitug, J., Pls. see concurring opinion.

SECOND DIVISION
[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.
DECISION
PUNO, J.:
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.
Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

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.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED NAME
WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING
CORPORATION, PROHIBITED; CONFUSION AND DECEPTION EFFECTIVELY
PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM".
The Articles of Incorporation of a corporation must, among other things, set out the name
of the corporation. Section 18 of the Corporation Code establishes a restrictive rule insofar as
corporate names are concerned: "Section 18. Corporate name. 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 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." The policy underlying the prohibition in
Section 18 against the registration of a corporate name which is "identical or deceptively or
confusingly similar" to that of any existing corporation or which is "patently deceptive" or
"patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public
which would 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
corporations. We do not consider that the corporate names of private respondent institutions
are "identical with, or deceptively or confusingly similar" to that of the petitioner institution.
True enough, the corporate names of private respondent entities all carry the word "Lyceum"
but confusion and deception are effectively precluded by the appending of geographic names
to the word "Lyceum." 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.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM," NOT
ATTENDED WITH EXCLUSIVITY. It is claimed, however, by petitioner that the word
"Lyceum" has acquired a secondary meaning in relation to petitioner with the result that word,

although originally a generic, has become appropriable by petitioner to the exclusion of other
institutions like private respondents herein. 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. In Philippine
Nut Industry, Inc. v. Standard Brands, Inc., 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 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." The question which arises,
therefore, is 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 (or at least that portion of the
general public which has to do with schools). The Court of Appeals recognized this issue and
answered it in the negative: "Under the doctrine of secondary meaning, a word or phrase
originally incapable of exclusive appropriation with reference to an article in the market,
because geographical or otherwise descriptive might nevertheless have been used so long
and so exclusively by one producer with reference to this article that, in that trade and to that
group of the purchasing public, the word or phrase has come to mean that the article was his
produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as
the distinctiveness into which the name or phrase has evolved through the substantial and
exclusive use of the same for a considerable period of time. . . . 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. . . . 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." We agree with the Court of
Appeals. 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. Petitioner's use of the word "Lyceum"
was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a little
later with other private respondent institutions which registered with the SEC using "Lyceum"
as part of their corporation names. There may well be other schools using Lyceum or Liceo in
their names, but not registered with the SEC because they have not adopted the corporate
form of organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER THEY
ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S
NAME. petitioner institution is not entitled to a legally enforceable exclusive right to use the
word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of
their corporate names. To determine whether a given corporate name is "identical" or
"confusingly or deceptively similar" with another entity's corporate name, it is not enough to
ascertain the presence of "Lyceum" or "Liceo" in both names. One must evaluate corporate

names in their entirety and when the name of petitioner is juxtaposed with the names of
private respondents, they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
DECISION
FELICIANO, J p:
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
Petitioner's original complaint before the SEC had included three (3) other entities:
1. The Lyceum of Malacanay;

2. The Lyceum of Marbel; and

3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the
Lyceum of Marbel, for failure to serve summons upon these two (2) entities. The case against
the Liceum of Araullo was dismissed when that school motu proprio change its corporate
name to "Pamantasan ng Araullo."
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.
The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court in a
case docketed as G.R. No. 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 on 21 October 1977. 2
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.
On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing
officer was reversed and set aside. The SEC En Banc 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 of the schools concerned in the mind of the general
public. Unlike its 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 the campuses of petitioner and those of the private
respondents were physically quite remote from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June 1991,
however, the Court of Appeals affirmed the questioned Orders of the SEC En Banc. 4
Petitioner filed a motion for reconsideration, without success.

Before this Court, petitioner asserts that the Court of Appeals committed the following errors:
1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in G.R. No.
L-46595 did not constitute stare decisis as to apply to this case and in not holding that said
Resolution bound subsequent determinations on the right to exclusive use of the word
Lyceum.
2. The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum, Inc.
was incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary
meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be
appropriated by the petitioner to the exclusion of others. 5
We will consider all the foregoing ascribed errors, though not necessarily seriatim. We begin
by noting that the Resolution of the Court in G.R. No. L-46595 does not, of course, constitute
res adjudicata in respect of the case at bar, since there is no identity of parties. Neither is
stare decisis pertinent, if only because the SEC En Banc itself has re-examined Associate
Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute Resolution of the Court
in G.R. No. L-46595 was not a reasoned adoption of the Sulit ruling.
The Articles of Incorporation of a corporation must, among other things, set out the name of
the corporation. 6 Section 18 of the Corporation Code establishes a restrictive rule insofar as
corporate names are concerned:
"SECTION 18. Corporate name. 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 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." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the registration of a corporate
name which is "identical or deceptively or confusingly similar" to that of any existing
corporation or which is "patently deceptive" or "patently confusing" or "contrary to existing
laws," is the avoidance of fraud upon the public which would 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 corporations. 7
We do not consider that the corporate names of private respondent institutions are "identical
with, or deceptively or confusingly similar" to that of the petitioner institution. True enough, the
corporate names of private respondent entities all carry the word "Lyceum" but confusion and
deception are effectively precluded by the appending of geographic names to the word
"Lyceum." 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.

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." 8 In time, the word "Lyceum" became associated 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. While the Latin
word "lyceum" has been incorporated into the English language, the word is also found in
Spanish (liceo) and in French (lycee). As the Court of Appeals noted in its Decision, Roman
Catholic schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in
Baleno, Masbate), "Liceo de Masbate," "Liceo de Albay." 9 "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. It may be (though this is a question of fact which we
need not resolve) that the use of the word "Lyceum" may not yet be as widespread as the use
of "university," but it is clear that a not inconsiderable number of educational institutions have
adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo"
denotes a school or institution of learning, it is not unnatural to use this word to designate an
entity which is organized and operating as an educational institution.
It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary
meaning in relation to petitioner with the result that that word, although originally a generic,
has become appropriable by petitioner to the exclusion of other institutions like private
respondents herein.
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 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." 12
The question which arises, therefore, is 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 (or at
least that portion of the general public which has to do with schools). The Court of Appeals
recognized this issue and answered it in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive
appropriation with reference to an article in the market, because geographical or otherwise
descriptive might nevertheless have been used so long and so exclusively by one producer
with reference to this article that, in that trade and to that group of the purchasing public, the
word or phrase has come to mean that the article was his produce (Ana Ang vs. Toribio
Teodoro, 74 Phil. 56). This circumstance has been referred to as the distinctiveness into

which the name or phrase has evolved through the substantial and exclusive use of the same
for a considerable period of time. Consequently, the same doctrine or principle cannot be
made to apply where the evidence did not prove that the business (of the plaintiff) has
continued for so long a time that it has become of consequence and acquired a good will of
considerable value such that its articles and produce have acquired a well-known reputation,
and confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng vs.
Wellington Department Store, Inc., 92 Phil. 448).
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." 13 (Underscoring partly in the original and partly supplied)
We agree with the Court of Appeals. 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.
In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc.
failed to reconstruct its records before the SEC in accordance with the provisions of R.A. No.
62, which records had been destroyed during World War II, Western Pangasinan Lyceum
should be deemed to have lost all rights it may have acquired by virtue of its past registration.
It might be noted that the Western Pangasinan Lyceum, Inc. registered with the SEC soon
after petitioner had filed its own registration on 21 September 1950. Whether or not Western
Pangasinan Lyceum, Inc. must be deemed to have lost its rights under its original 1933
registration, appears to us to be quite secondary in importance; we refer to this earlier
registration simply to underscore the fact that petitioner's use of the word "Lyceum" was

neither the first use of that term in the Philippines nor an exclusive use thereof. Petitioner's
use of the word "Lyceum" was not exclusive but was in truth shared with the Western
Pangasinan Lyceum and a little later with other private respondent institutions which
registered with the SEC using "Lyceum" as part of their corporation names. There may well
be other schools using Lyceum or Liceo in their names, but not registered with the SEC
because they have not adopted the corporate form of organization.
We conclude and so hold that petitioner institution is not entitled to a legally enforceable
exclusive right to use the word "Lyceum" in its corporate name and that other institutions may
use "Lyceum" as part of their corporate names. To determine whether a given corporate name
is "identical" or "confusingly or deceptively similar" with another entity's corporate name, it is
not enough to ascertain the presence of "Lyceum" or "Liceo" in both names. One must
evaluate corporate names in their entirety and when the name of petitioner is juxtaposed with
the names of private respondents, they are not reasonably regarded as "identical" or
"confusingly or deceptively similar" with each other.
WHEREFORE, the petitioner having failed to show any reversible error on the part of the
public respondent Court of Appeals, the Petition for Review is DENIED for lack of merit, and
the Decision of the Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No
pronouncement as to costs.
SO ORDERED.

SECOND DIVISION
[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.
DECISION
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 byproducts 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.
Costs against petitioner.
SO ORDERED.
Bellosillo, Acting C.J., (Chairman), Quisumbing, and Callejo, Sr.

Republic of the PhilippinesSUPREME COURTManila

EN BANC
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 a de 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.
Ozaeta, Pablo, Tuason, Montemayor, and Reyes, JJ., concur.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION
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.
DECISION
CORONA, J.:
This petition for review on certiorari assails the Court of Appeals (CA) decision 1 and
resolution2 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 of Bayugan, 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 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 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 mere P2,000.00 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].
xxx
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 SDANEMM.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.