CASE DIGEST

TUASON VS. BOLANOS

GR. No. L-4935. May 28, 1954
95 Phil. 106

FACTS: Plaintiffs complaint against defendant was to recover possession of a

registered land. In the complaint, the plaintiff is represented by its Managing
Partner, Gregorio Araneta, Inc., another corporation. Defendant, in his
answer, sets up prescription and title in himself thru "open, continuous,
exclusive and public and notorious possession under claim of ownership,
adverse to the entire world by defendant and his predecessors in interest"
from "time immemorial". After trial, the lower court rendered judgment for
plaintiff, declaring defendant to be without any right to the land in question
and ordering him to restore possession thereof to plaintiff and to pay the latter
a monthly rent. Defendant appealed directly to the Supreme Court and
contended, among others, that Gregorio Araneta, Inc. can not act as managing
partner for plaintiff on the theory that it is illegal for two corporations to enter
into a partnership

ISSUE: Whether or not a corporation may enter into a joint venture with
another corporation.

RULING: It is true that the complaint states that the plaintiff is "represented
herein by its Managing Partner Gregorio Araneta, Inc.", another corporation,
but there is nothing against one corporation being represented by another
person, natural or juridical, in a suit in court. The contention that Gregorio
Araneta, Inc. cannot act as managing partner for plaintiff on the theory that it
is illegal for two corporations to enter into a partnership is without merit, for
the true rule is that "though a corporation has no power to enter into a
partnership, it may nevertheless enter into a joint venture with another where the
nature of that venture is in line with the business authorized by its charter."
(Wyoming-Indiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2. Fletcher
Cyc. of Corp., 1082.). There is nothing in the record to indicate that the
venture in which plaintiff is represented by Gregorio Araneta, Inc. as "its
managing partner" is not in line with the corporate business of either of them.
 NATIONAL COAL CO. V. CIR

FACTS: The National Coal Co.(NCC) was created by a special law and was
enacted by virtue of Act 2705 in order to develop a coal industry. It was
engaged in coal mining on reserved lands belonging to the government. The
National Coal Co.(NCC) filed a case against the CIR for the recovery of sum of
money it paid on protest as specific tax on 24,089 tons of coals claiming
exemption to tax pursuant to Sec. 14 and 15 of Act 2719.

ISSUE: Whether or not NCC is a private corporation?

HELD: Plaintiff is a private corporation. The mere fact that the government is
a majority stockholder of the corporation does not make the corporation. Act
2705 as amended by Act 2822 makes it subject to all the provision of the
corporation law. As a private corporation, it has no greater rights, powers or
privileges than any other corporation which may be organized for the same
purpose under the corporation law and certainly it was not the intention of the
legislature to give preference or right or privilege over other legitimate
private corporation in the mining of coal. NCC is required to pay taxes
pursuant to Section 1496 of the Administrative Code. Moreover, Act 2719 is
applicable only to lessee or owner of coal bearing lands which NCC is not.
 MARILAO WATER CONSUMERS ASSOCIATION, INC., petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MUNICIPALITY OF MARILAO,
BULACAN, SANGGUNIANG BAYAN, MARILAO, BULACAN, and
MARILAO WATER DISTRICT, respondents.
G.R. No. 72807 September 9, 1991

FACTS: PD 198 authorizes the formation, lays down the powers and functions,
and governs the operation of water districts throughout the country; it is "the
source of authorization and power to form and maintain a (water) district."
Once formed, it says, a district is subject to its provisions and is not under the
jurisdiction of any political subdivision. The juridical entities thus created and
organized under PD 198 are considered quasi-public corporations,
performing public services and supplying public wants. They are authorized
not only to "exercise all the powers which are expressly granted" by said
decree, and those "which are necessarily implied from or incidental to" said
powers, but also "the power of eminent domain, the exercise.(of which) shall
however be subject to review by the Administration" (LWUA). In addition to
the powers granted in, and subject to such restrictions imposed under, the
Act, they may also exercise the powers, rights and privileges given to private
corporations under existing laws. The decree also established a government
corporation attached to the Office of the President, known as the Local Water
Utilities Administration (LWUA). It was pursuant to the foregoing rules and
norms that the Marilao Water District was formed by Resolution of the
Sangguniang Bayan of the Municipality of Marilao dated September 18, 1982,
which resolution was thereafter forwarded to the LWUA and "duly filed" by it
on October 4, 1982 after ascertaining that it conformed to the requirements of
the law. The claim was thereafter made that the creation of the Marilao Water
District in the manner aforestated was defective and illegal. The claim was
made by a non-stock, non-profit corporation known as the Marilao Water
Consumers Association, Inc., in a petition dated December 12, 1983 filed with
the Regional Trial Court at Malolos, Bulacan. Impleaded as respondents were
the Marilao Water District, as well as the Municipality of Marilao, Bulacan; its
Sangguniang Bayan; and Mayor Nicanor V. GUILLERMO. The petition prayed
for the dissolution of the water district.

ISSUE: WHETHER OR NOT THE MARILAO WATER DISTRICT IS WITHIN THE

CONTEXT OF THE CORPORATION LAW?

HELD: NO. The juridical entities known as water districts created by PD 198,
although considered as quasi-public corporations and authorized to exercise
the powers, rights and privileges given to private corporations under existing
laws are entirely distinct from corporations organized under the Corporation
Code, PD 902-A, as amended. The Corporation Code has nothing whatever to
do with their formation and organization, all the terms and conditions for their
organization and operation being particularly spelled out in PD 198. The
resolutions creating them, their charters, in other words, are filed not with the
Securities and Exchange Commission but with the LWUA. It is these
resolutions qua charters, and not articles of incorporation drawn up under the
Corporation Code, which set forth the name of the water districts, the number
of their directors, the manner of their selection and replacement, their
powers, etc. . The SEC which is charged with enforcement of the Corporation
Code as regards corporations, partnerships and associations formed or
operating under its provisions, has no power of supervision or control over
the activities of water districts. More particularly, the SEC has no power of
oversight over such activities of water districts as selling water, fuling the
rates and charges therefor. That function of supervision or control over
water districts is entrusted to the Local Water Utilities
Administration. Consequently, as regards the activities of water districts
just mentioned, the SEC obviously can have no claim to any expertise.
National Development Company and New Agrix vs. Philippine Veterans
Bank
(192 SCRA 257)

Facts: Agrix Marketing executed in favor of respondent a real estate

mortgage over three parcels of land. Agrix later on went bankrupt. In order to
rehabilitate the company, then President Marcos issued Presidential Decree
1717 which mandated, among others, the extinguishing of all the mortgages
and liens attaching to the property of Agrix, and creating a Claims Committee
to process claims against the company to be administered mainly by NDC.
Respondent thereon filed a claim against the company before the Committee.
Petitioners however filed a petition with the RTC of Calamba, Laguna invoking
the provision of the law which cancels all mortgage liens against it.
Respondent took measures to extrajudicially foreclose which the petitioners
opposed by filing another case in the same court. These cases were
consolidated. The RTC held in favor of the respondent on the ground of
unconstitutionality of the decree; mainly violation of the separation of powers,
impairment of obligation of contracts, and violation of the equal protection
clause. Hence this petition.

Issue:

Is the respondent estopped from questioning the constitutionality of the

law since they first abided by it by filing a claim with the Committee?
Is PD 1717 unconstitutional?

Ruling: On the issue of estoppel, the Court held that it could not apply in the
present case since when the respondent filed his claim, President Marcos was
the supreme ruler of the country and they could not question his acts even
before the courts because of his absolute power over all government
institutions when he was the President.

The creation of New Agrix as mandated by the decree was also ruled as
unconstitutional since it violated the prohibition that the Batasang Pambansa
(Congress) shall not provide for the formation, organization, or regulation of
private corporations unless such corporations are owned or controlled by the
government.

PD 1717 was held as unconstitutional on the other grounds that it was an

invalid exercise of police power, It had no lawful subject and no lawful
method. It violated due process by extinguishing all mortgages and liens and
interests which are property rights unjustly taken. It also violated the equal
protection clause by lumping together all secured and unsecured creditors. It
also impaired the obligation of contracts, even though it only involved purely
private interests.
 NDC VS PHILIPPINE VETERANS BANK (192 SCRA 257)
National Development Corporation vs Philippine Veterans Bank
192 SCRA 257 [GR No. 84132-33 December 10, 1990]

FACTS: The particular enactment in question is Presidential Decree No. 1717,

which ordered the rehabilitation of the Agrix Group of Companies to be
administered mainly by the National Development Company. The law
outlined the procedure for filling claims against the Agrix Companies and
created a claims committee to process these claims. Especially relevant to this
case, and noted at the outset, is section 4(1) thereof providing that all
mortgages and other liens presently attaching to any of the assets of the
dissolved corporations are hereby extinguished. Earlier, the Agrix
Marketing Inc. had executed in favor of private respondent Philippine
Veterans Bank a real estate mortgage dated July 7, 1978 over three parcels of
land situated in Los Baos, Laguna. During the existence of the mortgage,
Agrix went bankrupt. It was the expressed purpose of salvaging this and the
other Agrix companies that the aforementioned decree was issued by
President Marcos. A claim for the payment of its loan credit was filed by PNB
against herein petitioner, however the latter alleged and invoked that the
same was extinguished by PD 1717.

ISSUE: Whether or not Philippine Veterans Bank as creditor of Agrix is still

entitled for payment without prejudice to PD 1717.

HELD: Yes. A mortgage lien is a property right derived from contract and so
comes under the protection of Bill of rights so do interests on loans, as well s
penalties and charges, which are also vested rights once they accrue. Private
property cannot simply be taken by law from one person and given to another
without just compensation and any known public purpose. This is plain
arbitrariness and is not permitted under the constitution.
The court also feels that the decree impairs the obligation of the contract
between Agrix and the private respondent without justification. While it is true
that the police power is superior to the impairment clause, the principle will
apply only where the contract is so related to the public welfare that it will be
considered congenitally susceptible to change by the legislature in the
interest of greater number.
Our finding in sum, is that PD 1717 is an invalid exercise of the police power,
not being in conformity with the traditional requirements of a lawful subject
and a lawful method. The extinction of the mortgage and other liens and of the
interest and other charges pertaining to the legitimate creditors of Agrix
constitutes taking without due process of law, and this is compounded by the
reduction of the secured creditors to the category of unsecured creditors in
violation of the equal protection clause. Moreover, the new corporation being
neither owned nor controlled by the government, should have been created
only by general and not special law. And in so far as the decree also interferes
with purely private agreements without any demonstrated connection with the
public interest, there is likewise an impairment of the obligation of the
contract.
 SAPPARI K. SAWADJAAN V. CA (G.R. NO. 141735)

FACTS: Petitioner Sawadjaan was an appraiser/investigator in the Philippine

Amanah Bank (PAB) when on the basis of his report, a credit line was granted
to Compressed Air Machineries and Equipment Corporation (CAMEC) by
virtue of the two parcels of land it offered as collaterals. Meanwhile, Congress
passed a law which created Al-Amanah Investment Bank of the Philippines
(AIIBP) and repealed the law creating PAB, transferring all its assets, liabilities
and capital accounts to AIIBP. Later, AIIBP discovered that the collaterals were
spurious, thus conducted an investigation and found petitioner Sawadjaan at
fault. Petitioner appealed before the SC which ruled against him. Petitioner
moved for a new trial claiming he recently discovered that AIIBP had not yet
adopted its corporate by-laws and since it failed to file within 60 days from the
passage of its law, it had forfeited its franchise or charter and thus has no legal
standing to initiate an administrative case. The motion was denied.

ISSUE: Whether or not the failure of AIIBP to file its by-laws within the period
prescribed results to a nullity of all actions and proceedings it has initiated.

RULING: NO. The AIIBP was created by Rep. Act No. 6848. It has a main office
where it conducts business, has shareholders, corporate officers, a board of
directors, assets, and personnel. It is, in fact, here represented by the Office
of the Government Corporate Counsel, the principal law office of
government-owned corporations, one of which is respondent bank. At the
very least, by its failure to submit its by-laws on time, the AIIBP may be
considered a de facto corporation whose right to exercise corporate powers
may not be inquired into collaterally in any private suit to which such
corporations may be a party.
Moreover, a corporation which has failed to file its by-laws within the
prescribed period does not ipso facto lose its powers as such. The SEC Rules
on Suspension/Revocation of the Certificate of Registration of Corporations,
details the procedures and remedies that may be availed of before an order
of revocation can be issued. There is no showing that such a procedure has
been initiated in this case.
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC.,
petitioner, vs. HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE
FOOTBALL FEDERATION, respondents.,

G.R. No. 119002

FACTS: On June 30 1989, petitioner, 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. 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 China and Brisbane. The total cost of the tickets
amounted to P449,654.83. The Federation made two partial payments, both in
September of 1989, in the total amount of P176,467.50.
On 4 October 1989, petitioner wrote the Federation, through the private
respondent a demand letter requesting for the amount of P265,894.33. On 30
October 1989, the Federation, through the Project Gintong Alay, paid the
amount of P31,603.00.
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. No
further payments were made despite repeated demands.
Petitioner to filed a civil case before RTC- 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.
Henri Kahn 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 because he did not guarantee payment but merely acted as an
agent of the Federation which has a separate and distinct juridical personality.
The Federation failed to file its answer, hence, was declared in default by the
trial court.
The trial court ruled in favor of the petitioner and declared Henri
Kahn personally liable for the unpaid obligation of the Federation. CA
reversed the trial court. Hence this Petition.

ISSUE: WON the doctrine of corporation by estoppel applies in this case?

RULING: CA cited RA 3135 (Revised Charter of the Philippine Amateur
Athletic Federation), and PD 604 as the laws from which said Federation
derives its existence. Both R.A. 3135 and P.D. No. 604 recognized the juridical
existence of national sports associations. These laws granted to national
sports associations certain powers and functions which clearly indicate that
these entities may acquire a juridical personality. Among these powers is the
power to purchase, sell, lease and encumber property which are acts that
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 CA 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.
The said laws 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 MR
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. 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.
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 principle 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. As president of the Federation, Henri
Kahn is presumed to have known about the corporate existence or non-
existence of the Federation.
We do not agree with the position taken by the CA 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. 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. 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.
FILIPINAS COMPANIA DE SEGUROS vs. CHRISTERN HUENEFELD and
CO., INC. 89 Phil 54

FACTS: On October 1, 1941, the respondent corporation, Christern

Huenefeld and Co., Inc., after payment of corresponding premium, obtained
from the petitioner, Filipinas Cia de Seguros fire policy covering merchandise
contained in a building located at Binondo, Manila. On February 27, 1942 or
during the Japanese military occupation, the building and insured
merchandise were burned. In due time, the respondent submitted to the
petitioner its claim under the policy. The petitioner refused to pay the claim
on the ground that the policy in favor of the respondent that ceased to be a
force on the date the United States declared war against Germany, the
respondent corporation (through organized under and by virtue of the laws of
Philippines) being controlled by German subjects and the petitioner being a
company under American jurisdiction when said policy was issued on
October 1, 1941. The theory of the petitioner is that the insured merchandise
was burned after the policy issued in 1941 had ceased to be effective because
the outbreak of the war between United States and Germany on December 10,
1941, and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under pressure.

ISSUE: Whether or not the respondent corporation is a corporation of public

enemy.

RULING: Since the majority of stockholders of the respondent corporation

were German subjects, the respondent became an enemy of the state upon
the outbreak of the war between US and Germany. The English and American
cases relied upon by the Court of Appeals lost in force upon the latest
decision of the Supreme Court of US in which the control test has adopted.
Since World War I, the determination of enemy nationality of corporations has
been discussed in many countries, belligerent and neutral. A corporation was
subject to enemy legislation when it was controlled by enemies, namely
managed under the influence of individuals or corporations themselves
considered as enemies
The Philippine Insurance Law (Act No 2427, as amended), in Section 8,
provides that anyone except a public enemy may be insured. It stands to
reason that an insurance policy ceases to be allowable as soon as an insured
becomes a public enemy.
The respondent having an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner had
ceased to be valid and enforceable, and since the insured good were burned
during the war, the respondent was not entitled to any indemnity under said
policy from the petitioner. However, elementary rule of justice (in the
absence of specific provisions in the Insurance Law) require that the premium
paid by the respondent for the period covered by its policy from December
11, 1941, should be returned by the petitioner.