CORPORATION LAW CASES

1. LBC Express, Inc. vs. Court of Appeals, G.R. No. 108670, 236 SCRA 602 , September 21, 1994

LBC EXPRESS, INC., petitioner,

vs.
THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF LABASON, INC., respondents.
Emmanuel D. Agustin for petitioner.
Bernardo P. Concha for private respondents.

PUNO, J.:
In this Petition for Review on Certiorari, petitioner LBC questions the decision

1 of respondent Court of Appeals affirming the judgment of the Regional Trial Court of Dipolog City,
Branch 8, awarding moral and exemplary damages, reimbursement of P32,000.00, and costs of suit; but
deleting the amount of attorney's fees.
Private respondent Adolfo Carloto, incumbent President-Manager of private respondent Rural Bank of
Labason, alleged that on November 12, 1984, he was in Cebu City transacting business with the Central
Bank Regional Office. He was instructed to proceed to Manila on or before November 21, 1984 to
follow-up the Rural Bank's plan of payment of rediscounting obligations with Central Bank's main office
in Manila.
2
He then purchased a round trip plane ticket to Manila. He also phoned his sister Elsie Carloto-Concha to
send him ONE THOUSAND PESOS (P1,000.00) for his pocket money in going to Manila and some
rediscounting papers thru petitioner's LBC Office at Dipolog City.
3
On November 16, 1984, Mrs. Concha thru her clerk, Adelina Antigo consigned thru LBC Dipolog Branch
the pertinent documents and the sum of ONE THOUSAND PESOS (P1,000.00) to respondent Carloto at
No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City. This was evidenced by LBC Air Cargo, Inc.,
Cashpack Delivery Receipt No. 34805.

On November 17, 1984, the documents arrived without the cashpack. Respondent Carloto made
personal follow-ups on that same day, and also on November 19 and 20, 1984 at LBC's office in Cebu but
petitioner failed to deliver to him the cashpack.

Consequently, respondent Carloto said he was compelled to go to Dipolog City on November 24, 1984 to
claim the money at LBC's office. His effort was once more in vain. On November 27, 1984, he went back
to Cebu City at LBC's office. He was, however, advised that the money has been returned to LBC's office
in Dipolog City upon shipper's request. Again, he demanded for the ONE THOUSAND PESOS (P1,000.00)
and refund of FORTY-NINE PESOS (P49.00) LBC revenue charges. He received the money only on
December 15, 1984 less the revenue charges.

Respondent Carloto claimed that because of the delay in the transmittal of the cashpack, he failed to
submit the rediscounting documents to Central Bank on time. As a consequence, his rural bank was
made to pay the Central Bank THIRTY-TWO THOUSAND PESOS (P32,000.00) as penalty interest. 4 He
allegedly suffered embarrassment and humiliation.
Petitioner LBC, on the other hand, alleged that the cashpack was forwarded via PAL to LBC Cebu City
branch on November 22, 1984. 5 On the same day, it was delivered at respondent Carloto's residence at
No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City. However, he was not around to receive it.
The delivery man served instead a claim notice to insure he would personally receive the money. This
was annotated on Cashpack Delivery Receipt No. 342805. Notwithstanding the said notice, respondent
Carloto did not claim the cashpack at LBC Cebu. On November 23, 1984, it was returned to the shipper,
Elsie Carloto-Concha at Dipolog City.

Claiming that petitioner LBC wantonly and recklessly disregarded its obligation, respondent Carloto
instituted an action for Damages Arising from Non-performance of Obligation docketed as Civil Case No.
3679 before the Regional Trial Court of Dipolog City on January 4, 1985. On June 25, 1988, an amended
complaint was filed where respondent rural bank joined as one of the plaintiffs and prayed for the
reimbursement of THIRTY-TWO THOUSAND PESOS (P32,000.00).

After hearing, the trial court rendered its decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Ordering the defendant LBC Air Cargo, Inc. to pay unto plaintiff Adolfo M. Carloto and Rural Bank of
Labason, Inc., moral damages in the amount of P10,000.00; exemplary damages in the amount of
P5,000.00; attorney's fees in the amount of P3,000.00 and litigation expenses of P1,000.00;
2. Sentencing defendant LBC Air Cargo, Inc., to reimburse plaintiff Rural Bank of Labason, Inc. the sum of
P32,000.00 which the latter paid as penalty interest to the Central Bank of the Philippines as penalty
interest for failure to rediscount its due bills on time arising from the defendant's failure to deliver the
cashpack, with legal interest computed from the date of filing of this case; and
3. Ordering defendant to pay the costs of these proceedings.
SO ORDERED.

6
On appeal, respondent court modified the judgment by deleting the award of attorney's fees.
Petitioner's Motion for Reconsideration was denied in a Resolution dated January 11, 1993.
Hence, this petition raising the following questions, to wit:
1. Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be awarded
moral damages.
2. Whether or not the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) was made with grave
abuse of discretion.
3. Whether or not the respondent Court of Appeals gravely abused its discretion in affirming the trial
court's decision ordering petitioner LBC to pay moral and exemplary damages despite performance of its
obligation.
We find merit in the petition.

The respondent court erred in awarding moral damages to the Rural Bank of Labason, Inc., an artificial
person.

Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
7
A corporation, being an artificial person and having existence only in legal contemplation, has no
feelings, no emotions, no senses; therefore, it cannot experience physical suffering and mental anguish.
8
Mental suffering can be experienced only by one having a nervous system and it flows from real ills,
sorrows, and griefs of life
9 all of which cannot be suffered by respondent bank as an artificial person.

We can neither sustain the award of moral damages in favor of the private respondents. The right to
recover moral damages is based on equity. Moral damages are recoverable only if the case falls under
Article 2219 of the Civil Code in relation to Article 21.
10
Part of conventional wisdom is that he who comes to court to demand equity, must come with clean
hands.

In the case at bench, respondent Carloto is not without fault. He was fully aware that his rural bank's
obligation would mature on November 21, 1984 and his bank has set aside cash for these bills payable.
11
He was all set to go to Manila to settle this obligation. He has received the documents necessary for the
approval of their rediscounting application with the Central Bank. He has also received the plane ticket
to go to Manila. Nevertheless, he did not immediately proceed to Manila but instead tarried for days
allegedly claiming his ONE THOUSAND PESOS (P1,000.00) pocket money. Due to his delayed trip, he
failed to submit the rediscounting papers to the Central Bank on time and his bank was penalized
THIRTY-TWO THOUSAND PESOS (P32,000.00) for failure to pay its obligation on its due date. The undue
importance given by respondent Carloto to his ONE THOUSAND PESOS (P1,000.00) pocket money is
inexplicable for it was not indispensable for him to follow up his bank's rediscounting application with
Central Bank. According to said respondent, he needed the money to "invite people for a snack or
dinner."
12 The attitude of said respondent speaks ill of his ways of business dealings and cannot be
countenanced by this Court. Verily, it will be revolting to our sense of ethics to use it as basis for
awarding damages in favor of private respondent Carloto and the Rural Bank of Labason, Inc.
We also hold that respondents failed to show that petitioner LBC's late delivery of the cashpack was
motivated by personal malice or bad faith, whether intentional or thru gross negligence. In fact, it was
proved during the trial that the cashpack was consigned on November 16, 1984, a Friday. It was sent to
Cebu on November 19, 1984, the next business day. Considering this circumstance, petitioner cannot be
charged with gross neglect of duty. Bad faith under the law cannot be presumed; it must be established
by clearer and convincing evidence.
13 Again, the unbroken jurisprudence is that in breach of contract cases where the defendant is not
shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and
probable consequences of the branch of the obligation which the parties had foreseen or could
reasonable have foreseen. The damages, however, will not include liability for moral damages.
14
Prescinding from these premises, the award of exemplary damages made by the respondent court
would have no legal leg to support itself. Under Article 2232 of the Civil Code, in a contractual or quasi-
contractual relationship, exemplary damages may be awarded only if the defendant had acted in "a
wanton, fraudulent, reckless, oppressive, or malevolent manner." The established facts of not so
warrant the characterization of the action of petitioner LBC.

IN VIEW WHEREOF, the Decision of the respondent court dated September 30, 1992 is REVERSED and
SET ASIDE; and the Complaint in Civil Case No. 3679 is ordered DISMISSED. No costs.
 2. Filipinas Broadcasting vs. Ago Medical Center GRN 141994, January 17, 2005

Carpio, J.:

FACTS:

Rima & Alegre were host of FBNI radio program Expose. Respondent Ago was the owner of
the Medical & Educational center, subject of the radio program Expose. AMEC claimed that the
broadcasts were defamatory and owner Ago and school AMEC claimed for damages. The complaint
further alleged that AMEC is a reputable learning institution. With the supposed expose, FBNI, Rima and
Alegre transmitted malicious imputations and as such, destroyed plaintiffs reputation. FBNI was
included as defendant for allegedly failing to exercise due diligence in the selection and supervision of its
employees. The trial court found Rimas statements to be within the bounds of freedom of speech and
ruled that the broadcast was libelous. It ordered the defendants Alegre and FBNI to pay AMEC 300k for
moral damages.

ISSUE: Whether or not AMEC is entitled to moral damages.

RULING:

A juridical person is generally not entitled to moral damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish
or moral shock. Nevertheless, AMECs claim, or moral damages fall under item 7 of Art 2219 of the
NCC.

This provision expressly authorizes the recovery of moral damages in cases of libel, slander or any other
form of defamation. Art 2219 (7) does not qualify whether the plaintiff is a natural or juridical person.
Therefore, a juridical person such as a corporation can validly complain for libel or any other form of
defamation and claim for moral damages. Moreover, where the broadcast is libelous per se, the law
implied damages. In such a case, evidence of an honest mistake or the want of character or reputation
of the party libeled goes only in mitigation of damages. In this case, the broadcasts are libelous per se.
thus, AMEC is entitled to moral damages. However, we find the award P500,000 moral damages
unreasonable. The record shows that even though the broadcasts were libelous, per se, AMEC has not
suffered any substantial or material damage to its reputation. Therefore, we reduce the award of moral
damages to P150k.

v JOIN TORT FEASORS are all the persons who command, instigate, promote, encourage, advice
countenance, cooperate in, aid or abet the commission of a tort, as who approve of it after it is
done, for its benefit.

3. CIR (Collector) vs. THE CLUB FILIPINO, INC. DE CEBU

GR No. L-12719 | May 31, 1962 | Paredes, J.

FACTS:
The Club Filipino, is a civic corporation organized underthe laws of the Philippines with an original
authorized capitalstock of P22,000, which was subsequently increased to P200,000to operate and
maintain a golf course, tennis, gymnasiums,bowling alleys, billiard tables and pools, and all sortsof
games not prohibited by general laws and general ordinances,and develop and nurture sports of any
kindand any denomination for recreation and healthy training of itsmembers and shareholders" (sec. 2,
Escritura de Incorporacion(Deed of Incorporation) del Club Filipino, Inc.). There is noprovision either in
the articles or in the by-laws relative todividends and their distribution, although it is covenanted
thatupon its dissolution, the Club's remaining assets, after payingdebts, shall be donated to a charitable
Phil. Institution in Cebu(Art. 27, Estatutos del (Statutes of the) Club).The Club owns and operates a club
house, a bowling alley, a golf course (on a lot leased from the government), and a bar-restaurant where
it sells wines and liquors, soft drinks,meals and short orders to its members and their guests. The
bar-restaurant was a necessary incident to the operation of the club and its golf-course. The club is
operated mainly with funds derived from membership fees and dues. Whatever profits it had, were
used to defray its overhead expenses and to improve its golf-course. In 1951, as a result of a capital
surplus, arising from the re-valuation of its real properties, the value or price of which increased, the
Club declared stock dividends; but no actual cash dividends were distributed to the stockholders. In
1952, a BIR agent discovered that the Club has never paid percentage tax on the gross receipts of its bar
and restaurant, although it secured licenses. In a letter, the Collector assessed against and demanded
from the Club P12,068.841 as fixed and percentage taxes, surcharge and compromise penalty. Also, the
Collector denied the Clubs request to cancel the assessment.

On appeal, the CTA reversed the Collector and ruled that the Club is not liable for the assessed tax
liabilities of P12,068.84allegedly due from it as a keeper of bar and restaurant as it is anon-stock
corporation. Hence, the Collector filed the instant petition for review.

ISSUE:
WON the Club is a stock corporation

HELD:
NO. It is a non-stock corporation. The facts that the capital stock of the Club is divided into
shares, does not detract from the finding of the trial court that it is not engaged in the business of
operator of bar and restaurant.
What is determinative of whether or not the Club is engaged in such business is its object or purpose,
as stated in its articles and by-laws. The actual purpose is not controlled by the corporate form or by the
commercial aspect of the business prosecuted, but maybe shown by extrinsic evidence, including the by-
laws and the method of operation. From the extrinsic evidence adduced, the CTA concluded that the
Club is not engaged in the business as a barkeeper and restaurateur. For a stock corporation to exist,
two requisites must be complied with:

1. a capital stock divided into shares and

2. an authority to distribute to the holders of such shares, dividends or allotments of the surplus
profits on the basis of the shares held (sec. 3, Act No. 1459).

Nowhere in its articles of incorporation or by-laws could be found an authority for the distribution of its
dividends or surplus profits. Strictly speaking, it cannot, therefore, be considered a stock corporation,
within the contemplation of the corpo law.

ISSUE:
WON the Club is liable for the payment of P12,068.84, as fixed and percentage taxes and surcharges
prescribed in sec.1822, 1833 and 1914 of the Tax Code, in connection with the operation of its bar and
restaurant; and for P500 as compromise penalty.

HELD:

NO. A tax is a burden, and, as such, it should not be deemed imposed upon fraternal, civic, non-profit,
nonstick organizations, unless the intent to the contrary is manifest and patent" (Collector v. BPOE Elks
Club, et al.), which is not the case here. Having found as a fact that the Club was organized to develop
and cultivate sports of all class and denomination, for the healthful recreation and entertainment of its
stockholders and members; that upon its dissolution, its remaining assets, after paying debts, shall be
donated to a charitable Phil. Institution in Cebu; that it is operated mainly with funds derived from
membership fees and dues; that the Club's bar and restaurant catered only to its members and their
guests; that there was in fact no cash dividend distribution to its stockholders and that whatever was
derived on retail from its bar and restaurant was used to defray its overall overhead expenses and to
improve its golf-course (cost-plus-expenses-basis), it stands to reason that the Club is not engaged in the
business of an operator of bar and restaurant.

Ratio:
The liability for fixed and percentage taxes, as provided by these sections, does not
ipso facto attach by mere reason of the operation of a bar and restaurant. For the liability to attach, the
operator thereof must be engaged in the business as a barkeeper and restaurateur.
The plain and ordinary meaning of business is restricted to activities or affairs where profit is the
purpose or livelihood is the motive, and the term business when used without qualification, should be
construed in its plain and ordinary meaning, restricted to activities for profit or livelihood
(CIR v. Manila Lodge & CTA, 1959; CIR v. Sweeney, etal., 1959,; Manila Polo Club v. B. L. Meer, 1960).The
Club derived profit from the operation of its bar and restaurant, but such fact does not necessarily
convert it into a profit-making enterprise. The bar and restaurant are necessary adjuncts of the Club to
foster its purposes and the profits derived therefrom are necessarily incidental to the primary object
of developing and cultivating sports for the healthful recreation and entertainment of the stockholders
and members. That a Club makes some profit, does not make it a profit-making Club. As has been
remarked a club should always strive, whenever possible, to have surplus (Jesus Sacred Heart College v.
CIR, 1954; CIR v. Sinco Educational Corp., 1956).

Footnotes:
Sec. 182, of the Tax Code states, "Unless otherwise provided, every personengaging in a business on which the percentage tax is
imposed shall pay in full afixed annual tax of ten pesos for each calendar year or fraction thereof in whichsuch person shall engage in
said business."
3
Sec. 183 provides in general that "the percentage taxes on business shall bepayable at the end of each calendar quarter in the
amount lawfully due on thebusiness transacted during each quarter; etc."
4
Sec. 191, same Tax Code, provides "Percentage tax . . . Keepers of restaurants,refreshment parlors and other eating places shall pay a
tax three per centum, andkeepers of bar and cafes where wines or liquors are served five per centum of their gross receipts . . ."
 4. PNOC Energy Development Corporation vs NLRC, 201 SCRA 487 (1991)

FACTS:

Private respondent Danilo Mercado was employed by petitioner Phil. National Oil Company-Energy
Development Corp. (PNOC-EDC).

Mercado held various positions ranging from clerk, general clerk to shipping clerk during his
employment at its Cebu office until his transfer to its establishment at Oriental Negros.

Mercado was dismissed due to alleged serious acts of dishonesty and violation of rules and regulations.

Mercado purchased 1,400 pieces of nipa shingles from Mrs. Leonardo Nodado for the total purchase
price of Pl,680.00. Against company policy, regulations and specific orders, Danilo Mercado withdrew
the nipa shingles from the supplier but paid the amount of P1,000.00 only. Mercado appropriated the
balance of P680.00 for his personal use;

In the same transaction, the supplier agreed to give the company a discount of P70.00 which Mercado did not report to the
company;

Mercado was instructed to contract the services of Fred R. Melon for the fabrication of rubber stamps,
for the total amount of P28.66. Mercado paid the amount of P20.00 to Fred R. Melon and appropriated
for his personal use the balance of P8.66.

Mercado was absent from work without leave, without proper turn-over of his work, causing disruption
and delay of work activities;

Mercado went on vacation leave without prior leave, against company policy, rules and regulations.

Mercado filed for illegal dismissal, retirement benefits, separation pay, unpaid wages, etc. against
PNOC-EDC before the NLRC.

PNOC-EDC praying for the dismissal of the case on the ground that the Labor Arbiter and/or the NLRC
had no jurisdiction.

The Labor Arbiter ruled in favor of private respondent Mercado.

Petition for certiorari to set aside the Resolution of NLRC which affirmed the decision of Labor Arbiter
Vito J. Minoria.

ISSUE:

1. Whether or not matters of employment affecting the PNOC-EDC, a government-owned and

controlled corporation, are within the jurisdiction of the Labor Arbiter and the NLRC.
2. Whether or not the Labor Arbiter and the NLRC are justified in ordering the reinstatement of
private respondent
RULING:

1. Yes.

PNOC-EDC having been incorporated under the General Corporation Law was held to be a GOCC whose
employees are subject to the provisions of the Labor Code.

2. The Labor Arbiter ruled in favor of private respondent Mercado. The dispositive onion of said
decision reads as follows:

WHEREFORE, in view of the foregoing, respondents are hereby ordered:

1) To reinstate complainant to his former position with full back wages from the date of his
dismissal up to the time of his actual reinstatement without loss of seniority rights and other
privileges;
2) To pay complainant the amount of P10,000.00 representing his personal share of his savings
account with the respondents;
3) To pay complainants the amount of P30,000.00 moral damages; P20,000.00 exemplary
damages and P5,000.00 attorney's fees;
4) To pay complainant the amount of P792.50 as his proportionate 13th month pay for 1985.
Respondents are hereby further ordered to deposit the aforementioned amounts with this
Office within ten days from receipt of a copy of this decision for further disposition.

SO ORDERED. (Labor Arbiter's Decision, Rollo, p. 56) The appeal to the NLRC was dismissed for
lack of merit on July 3, 1987 and the assailed decision was affirmed.

5. National Coal Company vs Collector of Internal Revenue

46 Phil 583 [GR No. L-22619 December 2, 1924]

Facts:

The plaintiff corporation was created on the 10th day of March 1917, by Act No. 2705, for the purpose
of developing the coal industry in the Philippine Islands, in harmony with the general plan of the
government to encourage the development of natural resources of the country, and to provide facilities
therefore. By the said act, the company was granted the general powers of a corporation and such other
powers as may be necessary to enable it to prosecute the business of developing coal deposits in the
Philippine Islands of mining, extracting, transporting, and selling the coal contained in said deposits. By
the same law, the government of the Philippine Islands is made the majority stockholder, evidently in
order to ensure proper government supervision and control and thus to place the government in a
position to render all possible encouragement, assistance, and help in the prosecution and furtherance
of the companys business. On May 14, 1917, two months after the passage of Act no. 2705, creating the
national coal company, the Philippine legislature passed Act 2719, to provide for the leasing and
development of coal lands in the Philippine islands. On October 18, 1917, upon petition of the national
coal company, the governor-general, by proclamation no. 39, withdrew from settlement, entry, sale or
other deposition, all coal-bearing public lands within the province of Zamboanga, Department of
Mindanao and Sulu, and the island of Polillo, Province of Tayabas. Almost immediately after the issuance
of said proclamation the national coal company took possession of the coal lands within the said
 reservation with an area of about 400 hectares, without any further formality, contract of lease. Of the
30,000 shares of stock issued by the company, the government of the Philippine islands is the owner of
29,809 shares, that is, of 99 1/3 per centum of the whole capital stock.

Issue: Whether or not plaintiff is a private corporation.

Held: Yes. The plaintiff is a private corporation. The mere fact that the government happens to the
majority stockholder does not make it a public corporation. Act 2705, as amended by Act 2822, makes it
subject to all the provisions of the corporation law, in so far as they are not inconsistent with said act.
No provisions of Act 2705 are found to be inconsistent with the provisions of the corporation law. As a
private corporation, it has no greater rights, powers or privileges than any other corporation which
might be organized for the same purpose under the corporation law, and certainly it was not the
intention of the legislature to give it a preference or right or privilege over other legitimate private
corporations in the mining of coal. While it is true that said proclamation no. 39 withdrew from
settlement entry, sale or other disposition of coal-bearing public lands within the province of
Zamboanga, and the islands of Polillo, it made no provision for the occupation and operation by the
plaintiff, to the exclusion of other persons or corporations who might under proper permission, enter
upon to operate the coal mines.

6. Red Line Transportation Co. vs. Rural Transit Co.

GR No. 41570 | Sept. 6, 1934

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

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

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

7. Universal Mills Corporation vs. Universal Textile Mills 78 SCRA 62 (1977)

FACTS:

This is an appeal from the order of the Securities and Exchange Commission granting a petition
by the respondent to have the petitioners corporate name be changed as it is confusingly and
deceptively similar to that of the former.

On January 8, 1954, respondent Universal Textile Mills was issued a certificate of Corporation as
a textile manufacturing firm. On the other hand, petitioner, which deals in the production of
hosieries and apparels, acquired its current name by amending its articles of incorporation,
changing its name from Universal Hosiery mills Corporation to Universal Mills corporation.

ISSUE:

Whether or not petitioners trade name is confusingly similar with that of respondents.
 HELD:

Yes. The corporate names in question are not identical, but they are indisputably so similar that
even under the test of reasonable care and observation as the public generally are capable of
using and may be expected to exercise invoked by appellant. We are apprehensive confusion
will usually arise, considering that x x x appellant included among its primary purposes the
manufacturing, dyeing, finishing and selling of fabrics of all kinds which respondent had been
engaged for more than a decade ahead of petitioner.

8. Lyceum of the Philippines vs. CA

G.R. No. 101897 March 5, 1993

Facts:

Petitioner is an educational institution duly registered with the Securities and Exchange Commission
(SEC). When it first registered with the SEC on 21 September 1950, it used the corporate name Lyceum
of the Philippines, Inc. and has used that name ever since.

On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private
respondents, which are also educational institutions, to delete the word Lyceum from their corporate
names and permanently to enjoin them from using Lyceum as part of their respective names.

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 SEC decided that the word Lyceum is was capable of appropriation and that petitioner had acquired
an enforceable exclusive right to the use of that word. on appeal to the SEC en banc the word Lyceum
did not 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.
Such decision was affirmed by the CA.

Held:
The SC ruled:

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.

Anent to the issue of acquisition of secondary meaning the Supreme Court has this to say:
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.

9. PHILIPS EXPORT VS. COURT OF APPEALS- Corporate Trade Name

A corporations right to use its corporate and trade name is a property right, a right in rem, which it may
assert and protect against the whole world.

FACTS:

Philips Export B.V. (PEBV) filed with the SEC for the cancellation of the word Philips the corporate
name of Standard Philips Corporation in view of its prior registration with the Bureau of Patents and the
SEC. However, Standard Philips refused to amend its Articles of Incorporation so PEBV filed with the SEC
a petition for the issuance of a Writ of Preliminary Injunction, however this was denied ruling that it can
only be done when the corporate names are identical and they have at least 2 words different. This was
affirmed by the SEC en banc and the Court of Appeals thus the case at bar.

ISSUE:

Whether or not Standard Philips can be enjoined from using Philips in its corporate name

RULING: YES

A corporations right to use its corporate and trade name is a property right, a right in rem, which it may
assert and protect against the whole world. According to Sec. 18 of the Corporation Code, no corporate
name may be allowed if the proposed name is identical or deceptively 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 law.

For the prohibition to apply, 2 requisites must be present:

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

With regard to the 1st requisite, PEBV adopted the name Philips part of its name 26 years before
Standard Philips. As regards the 2nd, the test for the existence of confusing similarity is whether the
similarity is such as to mislead a person using ordinary care and discrimination. Standard Philips only
contains one word, Standard, different from that of PEBV. The 2 companies products are also the
same, or cover the same line of products. Although PEBV primarily deals with electrical products, it has
also shipped to its subsidiaries machines and parts which fall under the classification of chains, rollers,
belts, bearings and cutting saw, the goods which Standard Philips also produce. Also, among Standard
Philips primary purposes are to buy, sell trade x x x electrical wiring devices, electrical component,
electrical supplies. Given these, there is nothing to prevent Standard Philips from dealing in the same
line of business of electrical devices. The use of Philips by Standard Philips tends to show its intention
to ride on the popularity and established goodwill of PEBV.

10. CLAVECILLA Radio System v. Hon. Agustin Antillon

Facts:

1. New Cagayan Grocery (NECAGRO) filed a complaint for damages against Clavecilla Radio system.
They alleged that Clavecilla omitted the word NOT in the letter addressed to NECAGRO for
transmittal at Clavecilla Cagayan de Oro Branch.
2. NECAGRO alleged that the omission of the word not between the word WASHED and
AVAILABLE altered the contents of the same causing them to suffer from damages.
3. Clavecilla filed a motion to dismiss on the ground of failure to state a cause of action and
improper venue.
4. City Judge of CDO denied the MTD. Clavecilla filed a petition for prohibition with preliminary
Injunction with the CFI praying that the City Judge be enjoined from further proceeding with the
case because of improper venue.
5. CFI dismissed the case and held that Clavecilla may be sued either in Manila (principal office) or
in CDO (branch office).
6. Clavecilla appealed to the SC contending that the suit against it should be filed in Manila where
it holds its principal office.

Issue: WON the present case against Clavecilla should be filed in Manila where it holds its principal
office.

Held: YES

It is clear that the case from damages is based upon a written contract. Under par. (b)(3) Sec. 1 Rule 4 of
the New Rules of Court, when an action is not upon a written contract then the case should be filed in
the municipality where the defendant or any of the defendant resides or maybe served upon with
summons. In Corpo. Law, the residence of the corporation is the place where the principal office is
established. Since Clavecillas principal office is in Manila, then the suit against it may properly be file in
the City of Manila. As stated in Evangelista v. Santos, the laying of the venue of an action is not left to
plaintiffs caprice because the matter is regulated by the Rules of Court.