Alhambra v.
SEC FACTS:
On January 15, 1912, Alhambra Cigar &
Cigarette Manufacturing Company, Inc. was
incorporated. Its lifespan was for 50 years so on
January 15, 1962, it expired. Thereafter, its
Board authorized its liquidation. Under the
prevailing law, Alhambra has 3 years to
liquidate.
In 1963, while Alhambra was liquidating,
Republic Act 3531 was enacted. It amended
Section 18 of the Corporation Law; it
empowered domestic private corporations to
extend their corporate life beyond the period
fixed by the articles of incorporation for a term
not to exceed fifty years in any one instance.
Previous to Republic Act 3531, the maximum
non-extendible term of such corporations was
fifty years.
Alhambra now amended its articles of
incorporation to extend its lifespan for another
50 years. The Securities and Exchange
Commission (SEC) denied the amended articles
of incorporation.
ISSUE: Whether or not a corporation under
liquidation may still amend its articles of
incorporation to extend its lifespan.
HELD: No. Alhambra cannot avail of the new
law because it has already expired at the time
of its passage. When a corporation is liquidating
pursuant to the statutory period of three years
to liquidate, it is only allowed to continue for
the purpose of final closure of its business and
no other purposes. In fact, within that period,
the corporation is enjoined from “continuing
the business for which it was established”.
Hence, Alhambra’s board cannot validly amend
its articles of incorporation to extend its
lifespan.
Phil Export v. CA
A corporation’s 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.
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 corporation’s 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.
Gala v. Ellice
FACTS:On March 28, 1979, the Ellice Agro-
Industrial Corporation was formed and
organized. The total subscribed capital stock of
the corporation was P3.5 Million with 35,000
shares. Additional shares were acquired and
subscribed from said corporation.
Subsequently, on September 16, 1982, the
Margo Management and Development
Corporation (Margo) was incorporated. The
total subscribed capital stock of Margo was
20,000 shares at P200, 000.00. Several
transfers of shares of Ellice to Margo were
made by the stockholders and some payments
of subscription were made by transferring
parcels of land by the Gala Spouses. In essence,
petitioners want this Court to disregard the
separate juridical personalities of Ellice and
Margo for the purpose of treating all property
purportedly owned by said corporations as
property solely owned by the Gala spouses.
The petitioners’ contention in support of this
theory is that the purposes for which Ellice and
Margo were organized should be declared as
illegal and contrary to public policy. They claim
that the respondents never pursued exemption
from land reform coverage in good faith and
instead merely used the corporations as tools to
circumvent land reform laws and to avoid
estate taxes. Specifically, they point out that
respondents have not shown that the transfers
of the land in favor of Ellice were executed in
compliance with the requirements of Section 13
of R.A. 3844. Furthermore, they alleged that
respondent corporations were run without any
of the conventional corporate formalities.
ISSUE:
Whether or not the purpose of the creation of
the two corporations is illegal and against public
policy.
RULING:
NO. Impugning the legality of the purposes for
which Ellice and Margo were organized, amount
to collateral attacks which are prohibited in this
jurisdiction. The best proof of the purpose of a
corporation is its articles of incorporation and
by-laws. The articles of incorporation must
state the primary and secondary purposes of
the corporation, while the by-laws outline the
administrative organization of the corporation,
which, in turn, is supposed to insure or facilitate
the accomplishment of said purpose. A perusal
of the Articles of Incorporation of Ellice and
Margo shows no sign of the allegedly illegal
purposes that petitioners are complaining of. If
a corporation’s purpose, as stated in the
Articles of Incorporation, is lawful, then the SEC
has no authority to inquire whether the
corporation has purposes other than those
stated, and mandamus will lie to compel it to
issue the certificate of incorporation.
With regard to their claim that Ellice and Margo
were meant to be used as mere tools for the
avoidance of estate taxes, suffice it say that the
legal right of a taxpayer to reduce the amount
of what otherwise could be his taxes or
altogether avoid them, by means which the law
permits, cannot be doubted. Thus, even if Ellice
and Margo were organized for the purpose of
exempting the properties of the Gala spouses
from the coverage of land reform legislation
and avoiding estate taxes, the court cannot
disregard their separate juridical personalities.
Young Auto Supply v. CA
Facts: On 28 October 1987, Young Auto Supply
Co. Inc. (YASCO) represented by Nemesio
Garcia, its president, Nelson Garcia and Vicente
Sy, sold all of their shares of stock in
Consolidated Marketing & Development
Corporation (CMDC) to George C. Roxas. The
purchase price was P8,000,000.00 payable as
follows: a down payment of P4,000,000.00 and
the balance of P4,000,000.00 in four postdated
checks of P1,000,000.00 each. Immediately
after the execution of the agreement, Roxas
took full control of the four markets of CMDC.
However, the vendors held on to the stock
certificates of CMDC as security pending full
payment of the balance of the purchase price.
The first check of P4,000,000.00, representing
the down payment, was honored by the drawee
bank but the four other checks representing the
balance of P4,000,000.00 were dishonored. In
the meantime, Roxas sold one of the markets to
a third party. Out of the proceeds of the sale,
YASCO received P600,000.00, leaving a balance
of P3,400,000.00. Subsequently, Nelson Garcia
and Vicente Sy assigned all their rights and title
to the proceeds of the sale of the CMDC shares
to Nemesio Garcia. On 10 June 1988, YASCO
and Garcia filed a complaint against Roxas in
the Regional Trial Court, Branch 11, Cebu City,
praying that Roxas be ordered to pay them the
sum of P3,400,000.00 or that full control of the
three markets be turned over to YASCO and
Garcia. The complaint also prayed for the
forfeiture of the partial payment of
P4,600,000.00 and the payment of attorney's
fees and costs. Failing to submit his answer, and
on 19 August 1988, the trial court declared
Roxas in default. The order of default was,
however, lifted upon motion of Roxas. On 22
August 1988, Roxas filed a motion to dismiss.
After a hearing, wherein testimonial and
documentary evidence were presented by both
parties, the trial court in an Order dated 8
February 1991 denied Roxas' motion to dismiss.
After receiving said order, Roxas filed another
motion for extension of time to submit his
answer. He also filed a motion for
reconsideration, which the trial court denied in
its Order dated 10 April 1991 for being pro-
forma. Roxas was again declared in default, on
the ground that his motion for reconsideration
did not toll the running of the period to file his
answer. On 3 May 1991, Roxas filed an
unverified Motion to Lift the Order of Default
which was not accompanied with the required
affidavit of merit. But without waiting for the
resolution of the motion, he filed a petition for
certiorari with the Court of Appeals. The Court
of Appeals dismissal of the complaint on the
ground of improper venue. A subsequent
motion for reconsideration by YASCO was to no
avail. YASCO and Garcia filed the petition.
Issue: Whether the venue for the case against
YASCO and Garcia in Cebu City was improperly
laid.
Held: A corporation has no residence in the
same sense in which this term is applied to a
natural person. But for practical purposes, a
corporation is in a metaphysical sense a
resident of the place where its principal office is
located as stated in the articles of
incorporation. The Corporation Code precisely
requires each corporation to specify in its
articles of incorporation the "place where the
principal office of the corporation is to be
located which must be within the Philippines."
The purpose of this requirement is to fix the
residence of a corporation in a definite place,
instead of allowing it to be ambulatory. Actions
cannot be filed against a corporation in any
place where the corporation maintains its
branch offices. The Court ruled that to allow an
action to be instituted in any place where the
corporation has branch offices, would create
confusion and work untold inconvenience to
said entity. By the same token, a corporation
cannot be allowed to file personal actions in a
place other than its principal place of business
unless such a place is also the residence of a co-
plaintiff or a defendant. With the finding that
the residence of YASCO for purposes of venue is
in Cebu City, where its principal place of
business is located, it becomes unnecessary to
decide whether Garcia is also a resident of Cebu
City and whether Roxas was in estoppel from
questioning the choice of Cebu City as the
venue. The decision of the Court of Appeals was
set aside
Lyceum of the Phil v. CA
FACTS: Lyceum of the Philippines is an
educational institution duly registered with the
Securities and Exchange Commission. 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
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 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 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.
ISSUE:
Whether or not the word Lyceum has not
acquired a secondary meaning.
RULING:
NO. The Articles of Incorporation of a
corporation must, among other things, set out
the name of the corporation. 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. "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. The appellant failed to satisfy
the 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.
Lozano v. De los Santos
FACTS: 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 Anda’s
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.
Lim v. Fishing Gear
FACTS: 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 he’s 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.
Republic Planters Bank v. CA
FACTS: Shozo Yamaguchi and Fermin Canlas
were President/Chief Operating Officer and
Treasurer respectively, of Worldwide Garment
Manufacturing, Inc. By virtue of Board
Resolution No.1 dated August 1, 1979,
defendant Shozo Yamaguchi and private
respondent Fermin Canlas were authorized to
apply for credit facilities with the petitioner
Republic Planters Bank in the forms of export
advances and letters of credit/trust receipts
accommodations.Petitioner bank issued nine
promissory notes. In some promissory notes,
the name Worldwide Garment Manufacturing,
Inc. was apparently rubber stamped above the
signatures of defendant and private
respondent. On December 20, 1982, Worldwide
Garment Manufacturing, Inc. noted to change
its corporate name to Pinch Manufacturing
Corporation. Subsequently, petitioner bank filed
a complaint for the recovery of sums of money
covered among others, by the nine promissory
notes with interest thereon, plus attorney's fees
and penalty charges. The complainant was
originally brought against Worldwide Garment
Manufacturing, Inc. inter alia, but it was later
amended to drop Worldwide Manufacturing,
Inc. as defendant and substitute Pinch
Manufacturing Corporation it its place.
Defendants Pinch Manufacturing Corporation
and Shozo Yamaguchi did not file an Amended
Answer and failed to appear at the scheduled
pre-trial conference despite due notice. Only
private respondent Fermin Canlas filed an
Amended Answer wherein he denied having
issued the promissory notes in question since
according to him, he was not an officer of Pinch
Manufacturing Corporation, but instead of
Worldwide Garment Manufacturing, Inc., and
that when he issued said promissory notes in
behalf of Worldwide Garment Manufacturing,
Inc., the same were in blank, the typewritten
entries not appearing therein prior to the time
he affixed his signature.
ISSUE:
Whether or not the amendment in a
corporation's Articles of Incorporation effecting
a change of corporate name extinguished the
personality of the original corporation.
RULING:
NO.The corporation, upon such change in its
name, is in no sense a new corporation, nor the
successor of the original corporation. It is the
same corporation with a different name, and its
character is in no respect changed. A change in
the corporate name does not make a new
corporation, and whether effected by special
act or under a general law, has no affect on the
identity of the corporation, or on its property,
rights, or liabilities. The corporation continues,
as before, responsible in its new name for all
debts or other liabilities which it had previously
contracted or incurred. As a general rule,
officers or directors under the old corporate
name bear no personal liability for acts done or
contracts entered into by officers of the
corporation, if duly authorized. Inasmuch as
such officers acted in their capacity as agent of
the old corporation and the change of name
meant only the continuation of the old juridical
entity, the corporation bearing the same name
is still bound by the acts of its agents if
authorized by the Board.
Albert v. University Publishing
FACTS:In the original case, the court had
awarded P P15,000.00 in favor of the petitioner
for damages arising out of a breach of contract.
Such breach of contract arose when the
publishing company failed to pay the petitioner
the agreed amount for latter to have the
exclusive right to publish his revised
Commentaries on the Revised Penal Code and
for his share in previous sales of the book's first
edition. The order became final and executory.
A writ of execution was issued against the
company, however the petitioner petitioned for
a writ of execution against Jose M. Aruego, as
the real defendant stating, plaintiff's counsel
and the Sheriff of Manila discovered that there
is no such entity as University Publishing Co.,
Inc. and no such entity is registered with the
SEC.
ISSUE:
Whether or not the judgment may be executed
against Jose M. Aruego, supposed President of
University Publishing Co., Inc., as the real
defendant.
RULING:
NO. The Court ruled that the doctrine of
corporation by estoppel was not applicable.
Although the rule is that 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, in this
case, Aruego was not named as a defendant.
Since he was not named, he could not be served
and be made liable for the claim because to do
so would violate his right to due process. He
was not given the chance to defend himself and
be heard during trial. Wherefore, the order was
reversed and set aside and was remanded
lower court to hold supplementary proceedings
for the purpose of carrying the judgment into
effect against University Publishing Co., Inc.
and/or Jose M. Aruego.
LAUREANO INVESTMENT & DEVELOPMENT
CORPORATION v. CA
FACTS:The Spouses Reynaldo Laureano and
Florence Laureano are majority stockholders of
petitioner Corporation who entered into a
series of loan and credit transactions with
Philippine National Cooperative Bank. To secure
payment of the loans, they executed Deeds of
Real Estate Mortgage dated December 11,
1962, January 9, 1963, July 2, 1963 and
September 5, 1964, for the following amounts:
P100,000.00, P20,000.00, P70,000.00 and
P13,424.04, respectively. Spouses Laureano
failed to pay their indebtedness, thus PNCB
applied for extrajudicial foreclosure of the real
estate mortgages. The bank was the purchaser
of the properties in question in the foreclosure
sale and titles thereof were consolidated in
PNCB's name on February 20, 1984. PNCB did
not secure a writ of possession nor did it file
ejectment proceedings against the Laureano
spouses, because there were then pending
cases involving the titles of ownership of
subject two lots, which are situated at Bel-Air
Subdivision, Makati, Metro Manila. Private
respondent Bormaheco, Inc. became the
successor of the obligations and liabilities of
PNCB over subject lots by virtue of a Deed of
Sale/Assignment. Transfer Certificate of Title
Nos. 157724 and 157725 over the lots in
question were issued on October 12, 1988 in
the name of Bormaheco. Five (5) days after
securing titles over the said properties,
Petitioner Corporation filed on January 18, 1989
its Motion for Intervention and to Admit
Attached Complaint in Intervention in said.
Respondent Bormaheco filed its Motion to
Strike out the Complaint in Intervention and all
related pleadings filed by LIDECO Corporation.
The motion was granted stating that Intervenor
LIDECO Corporation and LAUREANO
INVESTMENT AND DEVELOPMENT
CORPORATION are two (2) separate and distinct
entities, therefore, no way whatsoever that
LIDECO Corporation's interests will be adversely
affected by the outcome of the instant case.
Thus, intervenor LIDECO lacks personality to
intervene in the instant
ISSUES: Whether or not Respondent
Bormaheco, Inc. is estopped from contesting
the legal personality to sue of "Lideco
Corporation".
RULING:
NO. Bad faith implies a conscious and
intentional design to do a wrongful act for a
dishonest purpose or moral obliquity; bad faith
contemplates a state of mind affirmatively
operating with furtive design or ill will. Other
than its bare allegations that private
respondent acted in bad faith, petitioner failed
to show that the former acted consciously and
deliberately to achieve a dishonest purpose or
moral obliquity, or was motivated by ill will.
Rather, as discussed above, no false
representation was contrived nor concealment
made by private respondent. Neither did it
deliberately convey facts other than, or
inconsistent with, what it now asserts and upon
which petitioner had relied or acted upon due
to the representations of private respondent.