[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 non-existence of the Federation. We cannot subscribe to the
position taken by the appellate court that even assuming that the Federation
was defectively incorporated, the petitioner cannot deny the corporate
existence of the Federation because it had contracted and dealt with the
Federation in such a manner as to recognize and in effect admit its existence.
[15]
The doctrine of corporation by estoppel is mistakenly applied by the
respondent court to the petitioner. The application of the doctrine applies to a
third party only when he tries to escape liability on a contract from which he
has benefited on the irrelevant ground of defective incorporation.[16] In the case
at bar, the petitioner is not trying to escape liability from the contract but rather
is the one claiming from the contract.
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.

343 SCRA 674 Business Organization Corporation Law Corporation by Estoppel

When Applied
In 1989, International Express Travel & Tour Services, Inc. (IETTI), offered to the Philippine
Football Federation (PFF) its travel services for the South East Asian Games. PFF, through
Henri Kahn, its president, agreed. IETTI then delivered the plane tickets to PFF, PFF in turn
made a down payment. However, PFF was not able to complete the full payment in
subsequent installments despite repeated demands from IETTI. IETTI then sued PFF and
Kahn was impleaded as a co-defendant.
Kahn averred that he should not be impleaded because he merely acted as an agent of
PFF which he averred is a corporation with separate and distinct personality from him. The
trial court ruled against Kahn and held him personally liable for the said obligation (PFF was
declared in default for failing to file an answer). The trial court ruled that Kahn failed to prove
that PFF is a corporation. The Court of Appeals however reversed the decision of the trial
court. The Court of Appeals took judicial notice of the existence of PFF as a national sports
association; that as such, PFF is empowered to enter into contracts through its agents; that
PFF is therefore liable for the contract entered into by its agent Kahn. The CA further ruled
that IETTI is in estoppel; that it cannot now deny the corporate existence of PFF because it
had contracted and dealt with PFF in such a manner as to recognize and in effect admit its
existence.
ISSUE: Whether or not the Court of Appeals is correct.
HELD: No. PFF, upon its creation, is not automatically considered a national sports
association. It must first be recognized and accredited by the Philippine Amateur Athletic
Federation and the Department of Youth and Sports Development. This fact was never
substantiated by Kahn. As such, PFF is considered as an unincorporated sports
association. And under the law, 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. Kahn is therefore
personally liable for the contract entered into by PFF with IETTI.
There is also no merit on the finding of the CA that IETTI is in estoppel. The application of
the doctrine of corporation by estoppel 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. In the case at bar, IETTI is not trying to escape liability from the contract but
rather is the one claiming from the contract.

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 Lourdeswhere 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 itreceived
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.

Business Organization Partnership, Agency, Trust Corporation by Estoppel

It was established that Lim Tong Lim requested Peter Yao to engage in commercial fishing
with him and one Antonio Chua. The three agreed to purchase two fishing boats but since
they do not have the money they borrowed from one Jesus Lim (brother of Lim Tong Lim).
They again borrowed money and they agreed to purchase fishing nets and other fishing
equipments. Now, Yao and Chua represented themselves as acting in behalf of Ocean
Quest Fishing Corporation (OQFC) they contracted with Philippine Fishing Gear Industries
(PFGI) for the purchase of fishing nets amounting to more than P500k.
They were however unable to pay PFGI and so they were sued in their own names because
apparently OQFC is a non-existent corporation. Chua admitted liability and asked for some
time to pay. Yao waived his rights. Lim Tong Lim however argued that hes not liable
because he was not aware that Chua and Yao represented themselves as a corporation;
that the two acted without his knowledge and consent.
ISSUE: Whether or not Lim Tong Lim is liable.
HELD: Yes. From the factual findings of both lower courts, it is clear that Chua, Yao and Lim
had decided to engage in a fishing business, which they started by buying boats worth
P3.35 million, financed by a loan secured from Jesus Lim. 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.
Lim Tong Lim cannot argue that the principle of corporation by estoppels can only be
imputed to Yao and Chua. Unquestionably, Lim Tong Lim benefited from the use of the nets
found in his boats, the boat which has earlier been proven to be an asset of the partnership.
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.

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. It [2]

denied reconsideration on March 8, 1996. [3]

Private respondent filed a petition for certiorari before the Regional Trial
Court, Branch 58, Angeles City. The trial court found the dispute to be
[4]

intracorporate, hence, subject to the jurisdiction of the SEC, and ordered the
MCTC to dismiss Civil Case No. 1214 accordingly. It denied reconsideration
[5]

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. This jurisdiction is determined by a concurrence
[8]

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.
The second element requires that the dispute among the parties be
[10]

intrinsically connected with the regulation of the corporation, partnership or

association or deal with the internal affairs of the corporation, partnership or
association. After all, the principal function of the SEC is the supervision and
[11]

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. When the SEC, upon processing and examining
[13]

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. The new consolidated corporation comes into
[14]

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 advanced by private respondent
[16]

cannot override jurisdictional requirements. Jurisdiction is fixed by law and is

not subject to the agreement of the parties. It cannot be acquired through or
[17]

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. It applies when persons assume to form
[19]

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.

274 SCRA 452 Business Organization Corporation Law Jurisdiction of the SEC
Reynaldo Lozano was the president of KAMAJDA (Kapatirang Mabalacat-Angeles Jeepney
Drivers Association, Inc.). Antonio Anda was the president of SAMAJODA (Samahang
Angeles-Mabalacat Jeepney Operators and Drivers Association, Inc.). In 1995, the two
agreed to consolidate the two corporations, thus, UMAJODA (Unified Mabalacat-Angeles
Jeepney Operators and Drivers Association, Inc.). In the same year, elections for the
officers of UMAJODA were held. Lozano and Anda both ran for president. Lozano won but
Anda alleged fraud and the elections and thereafter he refused to participate with
UMAJODA. Anda continued to collect fees from members of SAMAJODA and refused to
recognize Lozano as president of UMAJODA. Lozano then filed a complaint for damages
against Anda with the MCTC of Mabalacat (and Magalang), Pampanga. Anda moved for the
dismissal of the case for lack of jurisdiction. The MCTC judge denied Andas motion. On
certiorari, Judge Eliezer De Los Santos of RTC Angeles City reversed and ordered the
dismissal of the case on the ground that what is involved is an intra-corporate dispute which
should be under the jurisdiction of the Securities and Exchange Commission (SEC).
ISSUE: Whether or not the RTC Judge is correct.
HELD: No. The regular courts have jurisdiction over the case. The case between Lozano
and Anda is not an intra-corporate dispute. UMAJODA is not yet incorporated. It is yet to
submit its articles of incorporation to the SEC. It is not even a dispute between KAMAJDA or
SAMAJODA. The controversy between Lozano and Anda does not arise from intra-
corporate relations but rather from a mere conflict from their plan to merge the two
associations.
NOTE: Regular courts can now hear intra-corporate disputes (expanded jurisdiction).

Republic of the Philippines

SUPREME COURT
Manila

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.

Bidin, Davide, Jr., Romero and Melo, JJ ., concur.

Gutierrez, Jr., J ., on terminal leave.

LYCEUM OF THE
PHILIPPINES. vs. CA-
Doctrine of Secondary
Meaning
Property, Ownership And Its Modifications

inShare

LYCEUM OF THE
PHILIPPINES vs. CA-
Doctrine of Secondary
Meaning
Doctrine of secondary meaning can be extended to corporation name but must comply with the
requirement that it has been used so long and so exclusively by one and that the said name has
come to mean that it is referred to as that corporation.

FACTS:
Petitioner is an educational institution duly registered with the SEC since Sept 1950. Before the
case at bar, Petitioner commenced a proceeding against Lyceum of Baguio with the SEC to
require it to change its corporate name and adopt a new one not similar or identical to the
Petitioner. SEC granted noting that there was substantial because of the dominant word
Lyceum. CA and SC affirmed. Petitioner filed similar complaint against other schools and
obtain a favorable decision from the hearing officer. On appeal, SEC En banc reversed the
decision and held that the word Lyceum have not become so identified with the petitioner and
that the use thereof will cause confusion to the general public.

ISSUE:
1. Whether or not the corporate names of the private respondents are identical with or
deceptively similar to that of the petitioner.

2. Whether or not the use by the 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 (Doctrine of Secondary meaning).

RULING: NO to both.
True enough, the corporate names of the parties carry the word Lyceum but confusion and
deception are precluded by the appending of geographic names. Lyceum generally refers to a
school or an institution of learning and it is natural to use this word to designate an entity which
is organized and operating as an educational institution.

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

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

Lyceum of the Philippines has not gained exclusive use of Lyceum by long passage of time.
The number alone of the private respondents suggests strongly that the use of Lyceum has not
been attended with the exclusivity essential for the applicability of the doctrine. It may be noted
that one of the respondents Western Pangasinan Lyceum used such term 17 years before the
petitioner registered with the SEC. Moreover, there may be other schools using the name but not
registered with the SEC because they have not adopted the corporate form of organization.
 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 by-products and derivatives. On
June 22, 1977, it registered its corporate and business name with the Bureau
of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979
originally under the name Synclaire Manufacturing Corporation. It amended its
Articles of Incorporation on August 23, 1985 to change its corporate name to
Industrial Refractories Corp. of the Philippines. It is engaged in the business
of manufacturing all kinds of ceramics and other products, except paints and
zincs.
Both companies are the only local suppliers of monolithic gunning mix. [1]
 Discovering that petitioner was using such corporate name, respondent
RCP filed on April 14, 1988 with the Securities and Exchange Commission
(SEC) a petition to compel petitioner to change its corporate name on the
ground that its corporate name is confusingly similar with that of petitioners
such that the public may be confused or deceived into believing that they are
one and the same corporation. [2]

The SEC decided in favor of respondent RCP and rendered judgment on

July 23, 1993 with the following dispositive portion:

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

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

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

Petitioner IRCP elevated the decision of the SEC En Banc through a

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

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. A motion for reconsideration
[8]

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. Thus, the petition was filed
[11]

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. In [13]

addition, the certifications were executed by the SEC officials based on their
official records which enjoy the presumption of regularity. As such, these
[14] [15]

are prima facieevidence of the facts stated therein. And based on such
[16]

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. By express [19]

mandate, it has absolute jurisdiction, supervision and control over all

corporations. It also exercises regulatory and administrative powers to
[20]

implement and enforce the Corporation Code, one of which is Section 18,
[21]

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. Clearly therefore, the present case falls within the ambit
[22]

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 specifically requires that: (1) a corporate name shall not
[25]

be identical, misleading or confusingly similar to one already registered by

another corporation with the Commission; and (2) if the proposed name is
[26]

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, to fall within the [28]

prohibition of the law, two requisites must be proven, to wit:

(1) that the complainant corporation acquired a prior right over the use of such
corporate name;
and
(2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to
that of any existing corporation or to any other name already protected by law; or (c)
patently deceptive, confusing or contrary to existing law.

As regards the first requisite, it has been held that the right to the
exclusive use of a corporate name with freedom from infringement by
similarity is determined by priority of adoption. In this case, respondent
[29]

RCP was incorporated on October 13, 1976 and since then has been using
the corporate name Refractories Corp. of the Philippines. Meanwhile,
petitioner was incorporated on August 23, 1979 originally under the name
Synclaire Manufacturing Corporation. It only started using the name Industrial
Refractories Corp. of the Philippines when it amended its Articles of
Incorporation on August 23, 1985, or nine (9) years after respondent RCP
started using its name. Thus, being the prior registrant, respondent RCP has
acquired the right to use the word Refractories as part of its corporate name.
Anent the second requisite, in determining the existence of confusing
similarity in corporate names, the test is whether the similarity is such as to
mislead a person using ordinary care and discrimination and the Court must
look to the record as well as the names themselves. Petitioners corporate
[30]

name is Industrial Refractories Corp. of the Phils., while respondents is

Refractories Corp. of the Phils. Obviously, both names contain the identical
words Refractories, Corporation and Philippines. The only word that
distinguishes petitioner from respondent RCP is the word Industrial which
merely identifies a corporations general field of activities or operations. We
need not linger on these two corporate names to conclude that they are
patently similar that even with reasonable care and observation, confusion
might arise. It must be noted that both cater to the same clientele, i.e. the
[31]

steel industry. In fact, the SEC found that there were instances when different
steel companies were actually confused between the two, especially since
they also have similar product packaging. Such findings are accorded not
[32]

only great respect but even finality, and are binding upon this Court, unless it
is shown that it had arbitrarily disregarded or misapprehended evidence
before it to such an extent as to compel a contrary conclusion had such
evidence been properly appreciated. And even without such proof of actual
[33]

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. Moreover, as held in the case of Ang Kaanib sa
[36]

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. A contrary ruling would
[37]

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, it refused to do so, thus compelling respondent
[39]

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.,
JJ., concur.
Mendoza, J., on official leave.
 INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES vs. COURT OF
APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES
CORPORATION OF THE PHILIPPINES

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

Facts:

Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized

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

Petitioner IRCP was incorporated on August 23, 1979 originally under the name "Synclaire
Manufacturing Corporation". It amended its Articles of Incorporation on August 23, 1985 to
change its corporate name to "Industrial Refractories Corp. of the Philippines".

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

Respondent RCP then filed a petition with the Securities and Exchange Commission to compel
petitioner IRCP to change its corporate name.

The SEC rendered judgment in favor of respondent RCP.

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

Petitioner IRCP filed a petition for review on certiorari to the Court of Appeals and the appellate
court upheld the jurisdiction of the SEC over the case and ruled that the corporate names of
petitioner IRCP and respondent RCP are confusingly or deceptively similar, and that respondent
RCP has established its prior right to use the word "Refractories" as its corporate name.

Petitioner then filed a petition for review on certiorari

Issue:

Are corporate names Refractories Corporation of the Philippines (RCP) and "Industrial
Refractories Corp. of the Philippines" confusingly and deceptively similar?

Ruling:

Yes, the petitioner and respondent RCPs corporate names are confusingly and deceptively
similar.
Further, Section 18 of the Corporation Code expressly prohibits the use of a corporate name
which is "identical or deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law or is patently deceptive, confusing or contrary to
existing laws". The policy behind said prohibition is to avoid fraud upon the public that will have
occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the
reduction of difficulties of administration and supervision over corporation.

The Supreme Court denied the petition for review on certiorari due for lack of merit.

Republic of the Philippines

SUPREME COURT
Manila

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.

Footnotes

1
Cf. Thompson on Corporations, 3rd. ed., secs. 6455-6457. But the suit might be viewed as
one of the rescission of contract, the agreement between incorporators being contractual in
nature. Fisher op. cit., p. 14.

Hall vs. Piccio Case Digest

Hall vs. Piccio

[GR L-2598, 29 June 1950]
Facts: On 28 May 1947, C. Arnold Hall and Bradley P. Hall, and Fred Brown, Emma Brown, Hipolita
D. Chapman and Ceferino S. Abella, signed and acknowledged in Leyte, the article of incorporation
of the Far Eastern Lumber and Commercial Co., Inc., organized to engage in a general lumber
business to carry on as general contractors, operators and managers, etc. Attached to the article
was an affidavit of the treasurer stating that 23,428 shares of stock had been subscribed and fully
paid with certain properties transferred to the corporation described in a list appended thereto.
Immediately after the execution of said articles of incorporation, the corporation proceeded to do
business with the adoption of by-laws and the election of its officers.

On 2 December 1947, the said articles of incorporation were filed in the office of the Securities and
Exchange Commissioner, for the issuance of the corresponding certificate of incorporation. On 22
March 1948, pending action on the articles of incorporation by the aforesaid governmental office,
Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella filed before the Court of
First Instance of Leyte the civil case, 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. C. Arnold Hall and Bradley P. Hall, filed a motion to dismiss, contesting the court's
jurisdiction and the sufficiently of the cause of action.

After hearing the parties, the Hon. Edmund S. Piccio ordered the dissolution of the company; and at
the request of Brown, et. al., appointed Pedro A. Capuciong as the receiver of the properties thereof,
upon the filing of a P20,000 bond. Hall and Hall offered to file a counter-bond for the discharge of the
receiver, but Judge Piccio refused to accept the offer and to discharge the receiver. Whereupon, Hall
and Hall instituted the present special civil action with the Supreme Court.

Issue: Whether Brown, et. al. may file an action to cause the dissolution of the Far Eastern Lumber
and Commercial Co., without State intervention.

Held: The Securities and Exchange Commission has not issued the corresponding certificate of
incorporation. The personality of a corporation begins to exist only from the moment such certificate
is issued not before. 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 the statue it is to be noted 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."

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.
 SECOND DIVISION

SEVENTH DAY ADVENTIST G.R. No. 150416

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, Present:/

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,

- v e r s u s - CORONA,

AZCUNA and

GARCIA, JJ.

NORTHEASTERN MINDANAO

MISSION OF SEVENTH DAY

ADVENTIST, INC., and/or

represented by JOSUE A. LAYON,

WENDELL M. SERRANO, FLORANTE

P. TY and JETHRO CALAHAT

and/or SEVENTH DAY ADVENTIST

CHURCH [OF] NORTHEASTERN

MINDANAO MISSION,*

Respondents. Promulgated:

July 21, 2006

x------------------------------------------x

DECISION

CORONA, J.:

This petition for review on certiorari assails the Court of Appeals

(CA) decision[1] and resolution[2] in CA-G.R. CV No. 41966 affirming,
with modification, the decision of the Regional Trial Court (RTC)
of Bayugan, Agusan del Sur, Branch 7 in Civil Case No. 63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate
of Title (TCT) No. 4468 in Bayugan, Agusan del Sur originally owned
by Felix Cosio and his wife, Felisa Cuysona.

On April 21, 1959, the spouses Cosio donated the land to the
South Philippine Union Mission of Seventh Day Adventist Church
of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan).[3] Part of the
deed of donation read:

KNOW ALL MEN BY THESE PRESENTS:

That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,]

40 years of age, [h]usband and wife, both are citizen[s] of the
Philippines, and resident[s] with post office address in the Barrio
of Bayugan, Municipality of Esperanza, Province of Agusan,
Philippines, do hereby grant, convey and forever quit claim by
way of Donation or gift unto the South Philippine [Union] Mission
of Seventh Day Adventist Church 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 organize[14] to comply with legal requirements.

Corporate existence begins only from the moment a certificate

of incorporation is issued. No such certificate was ever issued to
petitioners or their supposed predecessor-in-interest at the time of
the donation. Petitioners obviously could not have claimed
succession to an entity that never came to exist. Neither could the
principle of separate juridical personality apply since there was
never any corporation[15]to speak of. And, as already stated, some of
the representatives of petitioner Seventh Day Adventist Conference
Church of Southern Philippines, Inc. were not even members of the
local church then, thus, they could not even claim that the
donation was particularly for them.[16]

The de facto doctrine thus effects a compromise between two

conflicting public interest[s]the one opposed to an unauthorized
assumption of corporate privileges; the other in favor of doing
justice to the parties and of establishing a general assurance of
security in business dealing with corporations.[17]

Generally, the doctrine exists to protect the public dealing

with supposed corporate entities, not to favor the defective or non-
existent corporation.[18]

In view of the foregoing, petitioners arguments anchored on

their supposed de facto status hold no water. We are convinced that
there was no donation to petitioners or their supposed predecessor-
in-interest.

On the other hand, there is sufficient basis to affirm the title of

SDA-NEMM. The factual findings of the trial court in this regard
were not convincingly disputed. This Court is not a trier of facts.
Only questions of law are the proper subject of a petition for review
on certiorari.[19]

Sustaining the validity of respondents title as well as their

right of ownership over the property, the trial court stated:
[W]hen Felix Cosio was shown the Absolute Deed of Sale during
the hearing xxx he acknowledged that the same was his xxx but
that it was not his intention to sell the controverted property
because he had previously donated the same lot to the South
Philippine Union Mission of SDA Church of Bayugan-
Esperanza. Cosio avouched that had it been his intendment to
sell, he would not have disposed of it for a 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 SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED.