012918
FORMATION AND ORGANIZATION UNDER THE CORP
CODE
B. Steps in Formation
1. Articles of Incorporation
Xx
b. Purpose Clause
Corporation Code of the PH
Sec. 14. Contents of the articles of incorporation. -
All corporations organized under this code shall file
with the Securities and Exchange Commission
articles of incorporation in any of the official
languages duly signed and acknowledged by all of
the incorporators, containing substantially the
following matters, except as otherwise prescribed
by this Code or by special law:
xxx
2. The specific purpose or purposes for which
the corporation is being incorporated. Where a
corporation has more than one stated purpose, the
articles of incorporation shall state which the
primary purpose is and which is/are the secondary
purpose or purposes: Provided, That a non-stock
corporation may not include a purpose which would
change or contradict its nature as such;
Sec. 17. Grounds when articles of incorporation or
amendment may be rejected or disapproved. - The
Securities and Exchange Commission may reject the
articles of incorporation or disapprove any
amendment thereto if the same is not in compliance
with the requirements of this Code: Provided, That
the Commission shall give the incorporators a
reasonable time within which to correct or modify
the objectionable portions of the articles or
amendment. The following are grounds for such
rejection or disapproval:
xxx
2. That the purpose or purposes of the
corporation are patently unconstitutional, illegal,
immoral, or contrary to government rules and
regulations;
Sec. 88. Purposes. - Non-stock corporations may be
formed or organized for charitable, religious,
educational, professional, cultural, fraternal,
literary, scientific, social, civic service, or similar
purposes, like trade, industry, agricultural and like
chambers, or any combination thereof, subject to
the special provisions of this Title governing
particular classes of non-stock corporations. (n)
c. Principal Office
Corporation Code of the PH
Sec. 14. Contents of the articles of incorporation. –
xxx
3. The place where the principal office of the
corporation is to be located, which must be within
the Philippines;
SEC MC No. 3 s. 2006
In line with the full disclosure requirement of
existing laws, all corporations and partnerships
applying for registration with the SEC should state in
their Articles of Incorporation or Articles of
Partnership the (1) specific address of their principal
office which shall include, if feasible, the street
number, street name, barangay, city or
municipality; and (2) specific residence address of
each incorporator, stockholder, director, trustee or
partner.
Metro Manila shall no longer be allowed as
address of the principal office.
Additionally, all corporations are required to
state in the General Information sheet the specific
address of each stockholder, officer, director or
trustee.
SEC MC No. 6 s. 2014
Sec. 1. Existing corporations and partnerships whose
articles of incorporation or articles of partnership
indicate only a general address as their principal
office address, such that it refers only to a city, town
or municipality, or Metro Manila, are directed to file
an amended articles of incorporation or amended
articles of partnership in order to specify their
complete address, such that, if feasible, it has a
street number, street name, barangay, city or
municipality, and if applicable, the name of the
building, the number of the building, and name or
number of the room or unit.
SEC MC No. 16 s. 2014
In the event that a corporation whose principal
office address as indicated in its articles is already
specific and complete or fully compliant with the
aforementioned circulars, has moved or moves to
another location within the same city or
municipality, the corporation is not required to file
an amended articles of incorporation. However, it
must declare its new or current specific address in
its GIS within 15 days from transfer to its new
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location or effectivity of this circular. Metro Manila
shall not be considered a city or municipality for this
purpose.
CLAVECILLIA RADIO SYSTEM vs. HON. AGUSTIN
ANTILLON
Facts: It appears that on June 22, 1963, the New
Cagayan Grocery filed a complaint against the Clavecilla
Radio System alleging, in effect, that on March 12,
1963, the following message, addressed to the former,
was filed at the latter's Bacolod Branch Office for
transmittal thru its branch office at Cagayan de Oro:
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
REURTEL WASHED NOT AVAILABLE REFINED TWENTY
FIFTY IF AGREEABLE SHALL SHIP LATER REPLY POHANG
The Cagayan de Oro branch office having received the
said message omitted, in delivering the same to the
New Cagayan Grocery, the word "NOT" between the
words "WASHED" and "AVAILABLE," thus changing
entirely the contents and purport of the same and
causing the said addressee to suffer damages. After
service of summons, the Clavecilla Radio System filed a
motion to dismiss the complaint on the grounds that it
states no cause of action and that the venue is
improperly laid. The New Cagayan Grocery interposed
an opposition to which the Clavecilla Radio System filed
its rejoinder. Thereafter, the City Judge, on September
18, 1963, denied the motion to dismiss for lack of merit
and set the case for hearing.
Hence, the Clavecilla Radio System filed a petition for
prohibition with preliminary injunction with the Court
of First Instance praying that the City Judge, Honorable
Agustin Antillon, be enjoined from further proceeding
with the case on the ground of improper venue. The
respondents filed a motion to dismiss the petition but
this was opposed by the petitioner. Later, the motion
was submitted for resolution on the pleadings.
In dismissing the case, the lower court held that the
Clavecilla Radio System may be sued either in Manila
where it has its principal office or in Cagayan de Oro
City where it may be served, as in fact it was served,
with summons through the Manager of its branch office
in said city. In other words, the court upheld the
authority of the city court to take cognizance of the
case.
In appealing, the Clavecilla Radio System contends that
the suit against it should be filed in Manila where it
holds its principal office.
Held: It is clear that the case for damages filed with the
city court is based upon tort and not upon a written
contract. Section 1 of Rule 4 of the New Rules of Court,
governing venue of actions in inferior courts, provides
in its paragraph (b) (3) that when "the action is not
upon a written contract, then in the municipality where
the defendant or any of the defendants resides or may
be served with summons." (Emphasis supplied)
Settled is the principle in corporation law that the
residence of a corporation is the place where its
principal office is established. Since it is not disputed
that the Clavecilla Radio System has its principal office
in Manila, it follows that the suit against it may properly
be filed in the City of Manila.
The appellee maintain, however, that with the filing of
the action in Cagayan de Oro City, venue was properly
laid on the principle that the appellant may also be
served with summons in that city where it maintains a
branch office. This Court has already held in the case of
Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 526;
that the term "may be served with summons" does not
apply when the defendant resides in the Philippines for,
in such case, he may be sued only in the municipality of
his residence, regardless of the place where he may be
found and served with summons. As any other
corporation, the Clavecilla Radio System maintains a
residence which is Manila in this case, and a person can
have only one residence at a time (See Alcantara vs.
Secretary of the Interior, 61 Phil. 459; Evangelists vs.
Santos, 86 Phil. 387). The fact that it maintains branch
offices in some parts of the country does not mean that
it can be sued in any of these places. To allow an action
to be instituted in any place where a corporate entity
has its branch offices would create confusion and work
untold inconvenience to the corporation.
It is important to remember, as was stated by this Court
in Evangelista vs. Santos, et al., supra, that the laying of
the venue of an action is not left to plaintiff's caprice
because the matter is regulated by the Rules of Court.
Applying the provision of the Rules of Court, the venue
in this case was improperly laid.
The order appealed from is therefore reversed, but
without prejudice to the filing of the action in Which the
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venue shall be laid properly. With costs against the
respondents-appellees.
HYATT ELEVATORS AND ESCALATORS CORPORATION v
GOLDSTAR ELEVATORS, PHILS.
FACTS:
1. Both parties are engaged in the same business of
selling installing and maintaining/servicing elevators
and escalators. On February 23, 1999, HYATT filed a
complaint for unfair trade practices and damages
unther Articles 19, 20 and 21 of the Civil Code of the
Philippines against LG industrial Systems Co. Ltd
(LGISC) and LG International Corporation (LGIC),
alleging that in 1988, HYATT was appointed by
LGISC and LGIC as the exclusive distributor of LG
elevators in the Philippines under a “Distributorship
Agreement.” In the latter part of 1996, LGISC made
a proposal to change the Distributorship
Agreement to that of the joint venture, however
HYATT allege that the representatives of LGISC and
LGIC conducted the meeting in bad faith in order to
put pressures upon them and eventually terminated
the Exclusive Distributorship Agreement.
2. LGISC and LGIC filed a Motion to Dismiss on the
following grounds: (1) lack of jurisdiction over the
persons of defendants, summons not having been
served on its resident agent; (2) improper venue;
and (3) failure to state a cause of action.
3. HYATT then filed a motion for leave of court to
amend the complaint when it learned that LGISC
was to be substituted to LG Otis because of the
latter succeeding the former. THe motion also
averred that Goldstar was being utilized by LG OTIS
and LGIC in perpetrating their unlawful and
unjustified acts against HYATT. Goldstar was
additionally impleaded as a party-defendant.
4. Goldstar filed a Motion to Dismiss the amended
complaint, raising the following grounds: (1) the
venue was improperly laid, as neither HYATT nor
defendants reside in Mandaluyong City, where the
original case was filed, and (2) failure to state a
cause of action agains (respondent), since the
amended complaint fails to allege with certainty
what specific ultimate acts GOLDSTAR performed in
violation of HYATT’s rights.
5. Trial court dismiss the motion. Goldstar filed a MR
but the same was dismissed. CA reversed RTC and
declared that the venue was clearly improper,
because none of the litigants “resided” in
Mandaluyong City, where the case was filed.
ISSUE:
1. WoN the venue (Mandaluyong) was improper— YES.
RULING: Petition DENIED.
RATIO:
1. Sec 2 Rule 4 of the 1997 Revised Rules of Court
states tgat “Venue of personal actions – all other
actions may be commenced and tried where the
plaintiff resides, or where the defendant or any of
the principal defendant resides, or in the case of a
non-resident defendant where he may be found, at
the election of the plaintiff.”
2. But since both parties to this case are corporations,
there is a need to clarify the meaning of
“residence.” The law recognize two types of
persons: (1) Natural and (2) juridical. Corporations
fall under juridical. A corporation, however, has no
residence in the same sense in which this term is
applied to a natural person.
3. In the case Young Auto Supply Company v Court of
Appelas, the court ruled that “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.”
But even before this ruling, it has been already
established that the residence of a corporation is
the place where its principal office is established.
4. The court held that in the purpose of venue,
“residence” is the same with “domicile.”
Correspondingly the Civil Code provides: “Art 51.
When the law creating or recognizing them, or any
other provision does not fix the domicile of juridical
persons, the same shall be understood to be the
place where their legal representation is established
or where they exercise their principal functions.”
AND Under Section 14(3) of the Corporation Code,
the place where the principal office of the
corporation is to be located is one of the required
contents of the articles of incorporation, which shall
be filed with the Securities and Exchange
Commission (SEC).
5. In the present case, there is no question as to the
residence of respondent. What needs to be
examined is that of petitioner. Admittedly, the
latter’s principal place of business is Makati, as
indicated in its Articles of Incorporation. Since the
principal place of business of a corporation
determines its residence or domicile, then the place
indicated in petitioner’s articles of incorporation
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becomes controlling in determining the venue for
this case.
6. HYATT argues that the Rules of Court did not
provide that when the plaintiff is a corporation, the
complaint should be filed in the location of its
principal office as indicated in its articles of
incorporation. This is however settled by
jurisprudence.
7. The choice of venue should not be left to the
plaintiff’s whim or caprice. He may be impelled by
some ulterior motivation in choosing to file a case in
a particular court even if not allowed by the rules
on venue.
d. Term
Corporation Code of the PH
Sec. 11. Corporate term. - A corporation shall exist
for a period not exceeding fifty (50) years from the
date of incorporation unless sooner dissolved or
unless said period is extended. The corporate term
as originally stated in the articles of incorporation
may be extended for periods not exceeding fifty (50)
years in any single instance by an amendment of the
articles of incorporation, in accordance with this
Code; Provided, That no extension can be made
earlier than five (5) years prior to the original or
subsequent expiry date(s) unless there are justifiable
reasons for an earlier extension as may be
determined by the Securities and Exchange
Commission.
e. Incorporators
CC PH
Sec. 5. Corporators and incorporators, stockholders
and members. - Corporators are those who
compose a corporation, whether as stockholders or
as members. Incorporators are those stockholders
or members mentioned in the articles of
incorporation as originally forming and composing
the corporation and who are signatories thereof.
Corporators in a stock corporation are called
stockholders or shareholders. Corporators in a non-
stock corporation are called members.
Sec. 10. Number and qualifications of
incorporators. - Any number of natural persons not
less than five (5) but not more than fifteen (15), all
of legal age and a majority of whom are residents of
the Philippines, may form a private corporation for
any lawful purpose or purposes. Each of the
incorporators of s stock corporation must own or be
a subscriber to at least one (1) share of the capital
stock of the corporation.
Sec. 14. Contents of the articles of incorporation. -
xxx
5. The names, nationalities and residences of
the incorporators;
f. Directors
CC PH
Sec. 14. Contents of the articles of incorporation. -
Xxx
6. The number of directors or trustees, which
shall not be less than five (5) nor more than fifteen
(15);
7. The names, nationalities and residences of
persons who shall act as directors or trustees until
the first regular directors or trustees are duly
elected and qualified in accordance with this Code;
g. Capital Stock
CC PH
Sec. 12. Minimum capital stock required of stock
corporations. - Stock corporations incorporated
under this Code shall not be required to have any
minimum authorized capital stock except as
otherwise specifically provided for by special law,
and subject to the provisions of the following
section.
Sec. 13. Amount of capital stock to be subscribed
and paid for the purposes of incorporation. - At
least twenty-five percent (25%) of the authorized
capital stock as stated in the articles of
incorporation must be subscribed at the time of
incorporation, and at least twenty-five (25%) per
cent of the total subscription must be paid upon
subscription, the balance to be payable on a date or
dates fixed in the contract of subscription without
need of call, or in the absence of a fixed date or
dates, upon call for payment by the board of
directors: Provided, however, That in no case shall
the paid-up capital be less than five Thousand
(P5,000.00) pesos.
Sec. 14. Contents of the articles of incorporation. -
Xxx
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8. If it be a stock corporation, the amount of its
authorized capital stock in lawful money of the
Philippines, the number of shares into which it is
divided, and in case the share are par value shares,
the par value of each, the names, nationalities and
residences of the original subscribers, and the
amount subscribed and paid by each on his
subscription, and if some or all of the shares are
without par value, such fact must be stated;
Sec. 15. xxx Sec. 15. Forms of Articles of
Incorporation
EIGHTH: That at least twenty five (25%) per cent of
the authorized capital stock above stated has been
subscribed as follows:
Name of Subscriber Nationality No of Shares
Amount
Subscribed Subscribed
NINTH: That the above-named subscribers have
paid at least twenty-five (25%) percent of the total
subscription as follows:
Name of Subscriber Amount Subscribed Total Paid-
In
(Modify Nos. 8 and 9 if shares are with no par value.
In case the corporation is non-stock, Nos. 7, 8 and 9
of the above articles may be modified accordingly,
and it is sufficient if the articles state the amount of
capital or money contributed or donated by
specified persons, stating the names, nationalities
and residences of the contributors or donors and the
respective amount given by each.)
TENTH: That has been elected by the subscribers as
Treasurer of the Corporation to act as such until his
successor is duly elected and qualified in accordance
with the by-laws, and that as such Treasurer, he has
been authorized to receive for and in the name and
for the benefit of the corporation, all subscription
(or fees) or contributions or donations paid or given
by the subscribers or members.
Sec. 137. Outstanding capital stock defined. - The
term "outstanding capital stock", as used in this
Code, means the total shares of stock issued under
binding subscription agreements to subscribers or
stockholders, whether or not fully or partially paid,
except treasury shares. (n)
Sec. 14. Contents of the articles of incorporation. -
Xxx
9. If it be a non-stock corporation, the amount
of its capital, the names, nationalities and
residences of the contributors and the amount
contributed by each; and
h. Classes of shares of stock
CC PH
Sec. 6. Classification of shares. - The shares of stock
of stock corporations may be divided into classes or
series of shares, or both, any of which classes or
series of shares may have such rights, privileges or
restrictions as may be stated in the articles of
incorporation: Provided, That no share may be
deprived of voting rights except those classified and
issued as "preferred" or "redeemable" shares, unless
otherwise provided in this Code: Provided, further,
That there shall always be a class or series of shares
which have complete voting rights. Any or all of the
shares or series of shares may have a par value or
have no par value as may be provided for in the
articles of incorporation: Provided, however, That
banks, trust companies, insurance companies, public
utilities, and building and loan associations shall not
be permitted to issue no-par value shares of stock.
Preferred shares of stock issued by any corporation
may be given preference in the distribution of the
assets of the corporation in case of liquidation and
in the distribution of dividends, or such other
preferences as may be stated in the articles of
incorporation which are not violative of the
provisions of this Code: Provided, That preferred
shares of stock may be issued only with a stated par
value. The board of directors, where authorized in
the articles of incorporation, may fix the terms and
conditions of preferred shares of stock or any series
thereof: Provided, That such terms and conditions
shall be effective upon the filing of a certificate
thereof with the Securities and Exchange
Commission.
Shares of capital stock issued without par value
shall be deemed fully paid and non-assessable and
the holder of such shares shall not be liable to the
corporation or to its creditors in respect thereto:
Provided; That shares without par value may not be
issued for a consideration less than the value of five
(P5.00) pesos per share: Provided, further, That the
entire consideration received by the corporation for
5
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its no-par value shares shall be treated as capital
and shall not be available for distribution as
dividends.
A corporation may, furthermore, classify its shares
for the purpose of insuring compliance with
constitutional or legal requirements.
Except as otherwise provided in the articles of
incorporation and stated in the certificate of stock,
each share shall be equal in all respects to every
other share.
Where the articles of incorporation provide for non-
voting shares in the cases allowed by this Code, the
holders of such shares shall nevertheless be entitled
to vote on the following matters:
1. Amendment of the articles of incorporation;
2. Adoption and amendment of by-laws;
3. Sale, lease, exchange, mortgage, pledge or
other disposition of all or substantially all of the
corporate property;
4. Incurring, creating or increasing bonded
indebtedness;
5. Increase or decrease of capital stock;
6. Merger or consolidation of the corporation
with another corporation or other corporations;
7. Investment of corporate funds in another
corporation or business in accordance with this
Code; and
8. Dissolution of the corporation.
Except as provided in the immediately preceding
paragraph, the vote necessary to approve a
particular corporate act as provided in this Code
shall be deemed to refer only to stocks with voting
rights.
Sec. 7. Founders' shares. - Founders' shares
classified as such in the articles of incorporation
may be given certain rights and privileges not
enjoyed by the owners of other stocks, provided that
where the exclusive right to vote and be voted for in
the election of directors is granted, it must be for a
limited period not to exceed five (5) years subject to
the approval of the Securities and Exchange
Commission. The five-year period shall commence
from the date of the aforesaid approval by the
Securities and Exchange Commission.
Sec. 8. Redeemable shares. - Redeemable shares
may be issued by the corporation when expressly so
provided in the articles of incorporation. They may
be purchased or taken up by the corporation upon
the expiration of a fixed period, regardless of the
existence of unrestricted retained earnings in the
books of the corporation, and upon such other
terms and conditions as may be stated in the
articles of incorporation, which terms and
conditions must also be stated in the certificate of
stock representing said shares.
i. Other matters
CC PH
Sec. 15. Forms of Articles of Incorporation
xxx
ELEVENTH: (Corporations which will engage in any
business or activity reserved for Filipino citizens shall
provide the following):
"No transfer of stock or interest which shall reduce
the ownership of Filipino citizens to less than the
required percentage of the capital stock as provided
by existing laws shall be allowed or permitted to
recorded in the proper books of the corporation and
this restriction shall be indicated in all stock
certificates issued by the corporation."
IN WITNESS WHEREOF, we have hereunto signed
these Articles of Incorporation, thisday of., 19in the
City/Municipality of., Province of, Republic of the
Philippines.
Sec. 14. Contents of the articles of incorporation. -
Xxx
10. Such other matters as are not inconsistent
with law and which the incorporators may deem
necessary and convenient.
The Securities and Exchange Commission shall not
accept the articles of incorporation of any stock
corporation unless accompanied by a sworn
statement of the Treasurer elected by the
subscribers showing that at least twenty-five (25%)
6
012918
percent of the authorized capital stock of the
corporation has been subscribed, and at least
twenty-five (25%) of the total subscription has been
fully paid to him in actual cash and/or in property
the fair valuation of which is equal to at least
twenty-five (25%) percent of the said subscription,
such paid-up capital being not less than five
thousand (P5,000.00) pesos.
2. Articles of close corporations
CC PH
Sec. 97. Articles of incorporation. - The articles of
incorporation of a close corporation may provide:
1. For a classification of shares or rights and the
qualifications for owning or holding the same and
restrictions on their transfers as may be stated therein,
subject to the provisions of the following section;
2. For a classification of directors into one or more
classes, each of whom may be voted for and elected
solely by a particular class of stock; and
3. For a greater quorum or voting requirements in
meetings of stockholders or directors than those
provided in this Code.
The articles of incorporation of a close corporation may
provide that the business of the corporation shall be
managed by the stockholders of the corporation rather
than by a board of directors. So long as this provision
continues in effect:
1. No meeting of stockholders need be called to
elect directors;
2. Unless the context clearly requires otherwise, the
stockholders of the corporation shall be deemed to be
directors for the purpose of applying the provisions of
this Code; and
3. The stockholders of the corporation shall be
subject to all liabilities of directors.
The articles of incorporation may likewise provide that
all officers or employees or that specified officers or
employees shall be elected or appointed by the
stockholders, instead of by the board of directors.
4. Articles of Special Corporations
Sec. 106. Incorporation. - Educational corporations shall
be governed by special laws and by the general
provisions of this Code. (n)
Sec. 107. Pre-requisites to incorporation. - Except upon
favorable recommendation of the Ministry of Education
and Culture, the Securities and Exchange Commission
shall not accept or approve the articles of incorporation
and by-laws of any educational institution. (168a)
Sec. 108. Board of trustees. - Trustees of educational
institutions organized as non-stock corporations shall
not be less than five (5) nor more than fifteen (15):
Provided, however, That the number of trustees shall be
in multiples of five (5).
Unless otherwise provided in the articles of
incorporation on the by-laws, the board of trustees of
incorporated schools, colleges, or other institutions of
learning shall, as soon as organized, so classify
themselves that the term of office of one-fifth (1/5) of
their number shall expire every year. Trustees thereafter
elected to fill vacancies, occurring before the expiration
of a particular term, shall hold office only for the
unexpired period. Trustees elected thereafter to fill
vacancies caused by expiration of term shall hold office
for five (5) years. A majority of the trustees shall
constitute a quorum for the transaction of business. The
powers and authority of trustees shall be defined in the
by-laws.
For institutions organized as stock corporations, the
number and term of directors shall be governed by the
provisions on stock corporations. (169a)
Sec. 109. Classes of religious corporations. - Religious
corporations may be incorporated by one or more
persons. Such corporations may be classified into
corporations sole and religious societies.
Religious corporations shall be governed by this Chapter
and by the general provisions on non-stock corporations
insofar as they may be applicable. (n)
5. Form of Articles (see sec. 15)
6. Accompanying documents
a. Treasurer’s Affidavit (see sec. 15, last part)
b. Recommendation of Government Agency
CC PH
Sec. 17. Grounds when articles of incorporation
or amendment may be rejected or
disapproved. –
xxx
No articles of incorporation or amendment to
articles of incorporation of banks, banking and
quasi-banking institutions, building and loan
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012918
associations, trust companies and other
financial intermediaries, insurance companies,
public utilities, educational institutions, and
other corporations governed by special laws
shall be accepted or approved by the
Commission unless accompanied by a favorable
recommendation of the appropriate
government agency to the effect that such
articles or amendment is in accordance with
law.
c. SEC Rules on Documentary Requirements for
Registration of Corporations and Partnerships (23
June 2013)
7. Filing of Articles and payment fees
8. Examination by SEC
CC PH
Sec. 17. Grounds when articles of incorporation or
amendment may be rejected or disapproved. - The
Securities and Exchange Commission may reject the
articles of incorporation or disapprove any amendment
thereto if the same is not in compliance with the
requirements of this Code: Provided, That the
Commission shall give the incorporators a reasonable
time within which to correct or modify the objectionable
portions of the articles or amendment. The following are
grounds for such rejection or disapproval:
1. That the articles of incorporation or any
amendment thereto is not substantially in accordance
with the form prescribed herein;
2. That the purpose or purposes of the corporation
are patently unconstitutional, illegal, immoral, or
contrary to government rules and regulations;
3. That the Treasurer's Affidavit concerning the
amount of capital stock subscribed and/or paid if false;
4. That the percentage of ownership of the capital
stock to be owned by citizens of the Philippines has not
been complied with as required by existing laws or the
Constitution.
No articles of incorporation or amendment to articles of
incorporation of banks, banking and quasi-banking
institutions, building and loan associations, trust
companies and other financial intermediaries, insurance
companies, public utilities, educational institutions, and
other corporations governed by special laws shall be
accepted or approved by the Commission unless
accompanied by a favorable recommendation of the
appropriate government agency to the effect that such
articles or amendment is in accordance with law.
9. Certificate of Registration; beginning of corporate
existence
CC PH
Sec. 19. Commencement of corporate existence. - A
private corporation formed or organized under this Code
commences to have corporate existence and juridical
personality and is deemed incorporated from the date
the Securities and Exchange Commission issues a
certificate of incorporation under its official seal; and
thereupon the incorporators, stockholders/members
and their successors shall constitute a body politic and
corporate under the name stated in the articles of
incorporation for the period of time mentioned therein,
unless said period is extended or the corporation is
sooner dissolved in accordance with law.
C. DE FACTO CORPORATIONS
CC PH
Sec. 20. De facto corporations. - The due incorporation
of any corporation claiming in good faith to be a
corporation under this Code, and its right to exercise
corporate powers, shall not be inquired into collaterally
in any private suit to which such corporation may be a
party. Such inquiry may be made by the Solicitor General
in a quo warranto proceeding.
THE MUNICIPALITY OF MALABANG vs. PANGANDAPUN
BENITO
FACTS: Municipality of Balabagan was once part of the
Municipality of Malabang before it was created into a
separate municipality thru an executive order. The
Municipality Malabang filed a suit against the
Municipality of Balabagan for having been created
under an invalid EO 386 and to restrain the respondent
municipal officials from performing the functions of
their respective offices.
Petitioner relied on the ruling of the Pelaez case that
Sec. 68 of the Administrative Code is unconstitutional
(a) because it constitutes an undue delegation of
legislative power and (b) because it offends against
Section 10 (1) of Article VII of the Constitution, which
limits the President's power over local governments to
mere supervision.
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Section 68 of the Revised Administrative Code,
approved on March 10, 1917, must be deemed
repealed by the subsequent adoption of the
Constitution, in 1935, which is utterly incompatible and
inconsistent with said statutory enactment.
The Respondents on the other hand argue that the
Mun. of Balabagan is at least a de facto corporation for
having been organized under color of a statute before
this was declared unconstitutional, its officers having
been either elected or appointed, and the municipality
itself having discharged its corporate functions for the
past five years preceding the institution of this action. It
is contended that as a de facto corporation, its
existence cannot be collaterally attacked, although it
may be inquired into directly in an action for quo
warranto at the instance of the State and not of an
individual like the petitioner Balindong.
The method of challenging the existence of a municipal
corporation is reserved to the State in a proceeding for
quo warranto or other direct proceeding. But the rule
disallowing collateral attacks applies only where the
municipal corporation is at least a de facto corporation.
For where it is neither a corporation de jure nor de
facto, but a nullity, the rule is that its existence may be
questioned collaterally or directly in any action or
proceeding by anyone whose rights or interests are
affected thereby, including the citizens of the territory
incorporated unless they are estopped by their conduct
from doing so.
ISSUE: W/O the municipality of Balabagan is a de facto
corporation.
RULING: No, because there is no other valid statute to
give color of authority to its creation when EO 386 was
subsequently declared as unconstitutional.
The color of authority requisite to the organization of a
de facto municipal corporation may be:
1. A valid law enacted by the legislature.
2. An unconstitutional law, valid on its face, which has
either (a) been upheld for a time by the courts or (b)
not yet been declared void; provided that a warrant for
its creation can be found in some other valid law or in
the recognition of its potential existence by the general
laws or constitution of the state.
In the case at bar, there is no other law that could give
color of authority to the validity of the existence of the
municpality of Balabagan when EO 386 was later on
invalidated. Hence, such municipality is not a de factor
corporation.
BERGERON V. HOBBS
96 WIS. 641
FACTS
1. Bayfield Agricultural Association (which was
organized by the defendants) employed several
persons to perform labor in improving their grounds
and in erecting fences and buildings. It assigned to
plaintiff time checks for such operation.
2. Plaintiff brought an action to recover the amount
for said time checks, alleging that defendants were
a co-partnership.
3. Defendants did not rebut the unpaid debt to
plaintiff, but denied co-partnership and alleged that
they were liable as a corporation
4. Upon trial, it appeared that Bayfield County
Agricultural Association’s articles of organization
and a certificate showing the election of officers
had been recorded in the office of the register of
deeds of Bayfield, but were not on file there. They
had been deposited and recorded, but failed to
remain.
5. Circuit Court ordered defendants to pay the amount
of the time checks.
ISSUE with HOLDING
1. W/N the recording of the articles of incorporation
and the certificate of election of officers was
sufficient compliance with the law to form a
corporation – No.
 The filing of the proper papers in the proper
office is made a condition precedent to the
vesting of the corporate powers, according
to statute. Mere recording and, later,
removal of the papers, from the office
(which happened here) fails to serve the full
purpose which the legislature intended to
accomplish.
 The term “filing” and the verb “to file,” as
related to this subject, include the idea that
the paper is to remain in its proper order on
file in the office (delivered and received by
the proper officer).
 Since there are valuable rights and
exemption from personal liability to be
secured, strict observance is required. The
defendants failed in this respect, and were
not vested with corporate powers.
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2. If not, W/N the defendants are liable as co-partners
– Yes.
 Defendants cannot assume to be a de facto
corporation, and seek immunity from
individual liability.
 Until the AoI is filed in the office of the
register of deeds of the country, there is no
color of legal right to act as a corporation.
o Bayfield is not under a color of right
since the AoI must 1st be filed as
condition precedent. With this, they
are neither de jure nor de facto.
 It is not necessary to prove a co-partnership
by evidence. The co-partnership of the
defendants was established by implication
of law.
DISPOSITIVE PORTION
Circuit court judgment affirmed.
DISSENT (MARSHALL, J.)
Bayfield was a corporation de facto; thus, the
defendants are not personally liable.
 Beach and Thomp. agree that a pretended
corporation is personally liable for not being a
corporation in fact.
 Judge Thompson, however, states that if a
corporation never came into being (and failing
to comply with all conditions precedent) it is
personally liable as a de facto corporation.
However, he further says that if the corporation
does exist, it escapes personal liability. Such
theory lacks harmony. If such were the case
(and applied in other states) nothing would
qualify as a de jure corporation.
 It is therefore held that Defendant is a de facto
corporation. The elements of such clearly
appear on record:
a. There’s a law under which it might have
existed
b. By mistake, it was recorded and returned
instead of leaving it at the register of deeds
as the law required
c. It exercised corporate powers
Such elements prima facie established good
faith.
Plaintiff cannot deny such in their relations, supposing
that the corporation was a corporate body till long after
his contract relations with the Defendant association
ceased.
HARRILL V. DAVIS ET AL.
Doctrine: Parties who actively engage in business for
profit under the name and pretense of a corporation
which they know neither exists nor has any color of
existence may not escape individual liability because
strangers are led by their pretense to con- tract with
their pretended entity as a corporation.
Color of legal organization as a corporation, such as a
charter or the filing of articles of incorporation under
some law, and user of the supposed corporate franchise
in good faith, are indispensable to the existence of a de
facto corporation which will exempt from individual
liability those who actively conduct it.
Neither the execution of articles which are not filed, nor
statements nor beliefs of the promoters that they are a
corporation, nor the treatment of themselves by
themselves and by those who deal with them as a
corporation, nor all these together, will exempt those
who actively conduct the business under the assumed
name of such a nonexistent corporation from individual
liability for the debts they incur.
Facts: The four defendants(Walter B. Mann, Frank
Davis, Robert S. Davis, and James G. Knight) agreed in
April or June, 1902, to take specified shares in a $10,000
enterprise for the purpose of building a cotton gin and
carrying on the business of buying, ginning, and selling
cotton, and to organize a corporation for this purpose.
They transacted a business with the plaintiff consisting
of the purchase of lumber, materials, and labor for their
buildings and of dealing in cotton with it which
amounted to several tens of thousands of dollars, and
they remained indebted to it over $5,000, of which
$4,700.
On September 3, 1902, three of the defendants met and
signed articles of incorporation as the "Coweta Cotton
& Milling Company" and a declaration of the purpose of
the incorporation, which the statutes required to be
verified by the signers and to be filed with the clerk of
the Court of Appeals and with the clerk of the judicial
district in which the contemplated corporation was to
do business. This declaration was verified by Mann on
November 10, 1902, and by Frank M. Davis on
December 10, 1902, and it was filed with the clerk of
the Court of Appeals on December 22, 1902, and was
never filed elsewhere. Frank M. Davis, as general
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manager of the investment company, treated the
milling company as a corporation all the time during
which this indebtedness was contracted, and never
charged any of it to himself or his associates.
The Western Investment Company brought this action
for a balance due It upon an account for lumber and
materials sold, cotton handled, and services rendered
to Walter B. Mann, Frank Davis, Robert S. Davis, and
James G. Knight, as partners doing business under the
firm name the "Coweta Cotton & Milling Company. The
defendants denied the partnership and their liability,
and averred that the indebtedness in question was that
of the milling company and that that company was a
corporation.
Issue/s: Was there ‘colorable’ compliance enough to
give the supposed corporation at least the status of a
‘de facto’ corporation?
Held: There was none.
The defendants cannot escape individual liability on the
ground that the Coweta Cotton & Milling Company was
a corporation de facto when that portion of the
plaintiff's claim was incurred, because it then had no
color of incorporation, and they knew it and yet,
actively used its name to incur the obligation.
The general rule is that parties who associate
themselves together and actively engage in business for
profit under any name are liable as partners for the
debts they incur under that name. It is an exception to
this rule that such associates may escape individual
liability for such debts by a compliance with
incorporation laws or by a real attempt to comply with
them which gives the color of a legal corporation, and
by the user of the franchise of such a corporation in the
honest belief that it is duly incorporated. When the fact
appears, as it does in the case at bar, by indisputable
evidence that parties associated and knowingly incurred
liabilities under a given name, the legal presumption is
that they are governed by the general rule, and the
burden is upon them to prove that they fall under some
exception to it.
For the exception to apply, under the general law of
Arkansas in force in the Indian Territory, the filing of
articles of incorporation with the clerk of the Court of
Appeals was a sine qua non of any color of a legal
corporation. Without that there was not, and there
could not be, an apparent corporation or the color of a
corporation, Agreements to form one, statements that
there was one, signed articles of association to make
one, acts as one, created no color of incorporation,
because there could be no incorporation or color of it
under the law until the articles were filed.
The defendants never became a corporation de facto
prior to December 22, 1902, that they never became a
corporation de jure, that the indebtedness here in
question was not incurred under any promise or
assurance of the defendants as promoters that it should
become the obligation of a corporation to be formed,
that a large part of it was incurred in the conduct of a
general commercial business, and not to prepare for the
commencement of such a business or for the
organization of a corporation.
HALL v PICCIO
86 Phil 603, GR No L-2598, June 29, 1950
Facts: On May 28, 1947, petitioners C. Arnold Hall and
Bradley P. Hall, and 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, . 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. The said
articles of incorporation was filed in the office of SEC.
Pending action of the articles of incorporation by SEC,
the respondents filed a civil case against the petitioners
alleging that Far Eastern Lumber and Commercial Co
was an unregistered partnership and that they wished it
dissolved because of bitter dissension among the
members, mismanagement and fraud by the managers
and heavy financial losses. The court (thru Judge Piccio)
ordered the dissolution of the company. Halls offered to
file a counter bond for the discharge of the receiver but
the judge refused to accept the offer and discharge the
receiver.
Issue: W/N the court had jurisdiction 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.
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Held: Yes, the court has jurisdiction to take cognizance
of the case!
Section 20 of the Corporation Law does not apply in this
situation
First, 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." )
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.
D. CORPORATIONS BY ESTOPPEL
CC PH
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.
On who assumes an obligation to an ostensible
corporation as such, cannot resist performance thereof
on the ground that there was in fact no corporation.
EMPIRE MANUFACTURING COMPANY OF GRAND
RAPIDS V STUART
(SEE CAMPOS P. 108-109)
THE LOWELL-WOODWARD HARDWARE COMPANY V.
G. R WOODS, ET. AL. PARTNERS AS THE SUPERIOR
LEASING COMPANY
FACTS: Lowell-Woodward Hardware Company
(Plaintiff), describing itself as a Colorado corporation,
brought an action against several persons alleged to
constitute a partnership, upon a promissory note.
Judgment was rendered for the plaintiff.
On appeal, one of the defendants, Ed. Semke, denied
the plaintiff’s corporate existence, or him being a
member of the partnership described.
A witness for the plaintiff testified that it was a
corporation. He said that the plaintiff was running a
hardware store and that he inferred it was a
corporation from its name and its mode of doing
business and that a bank president had told him it was a
corporation.
Apparently, the defendant in this case issued a
promissory note in favor of the payee indicated as “The
Lowell-Woodward Hardware Company.”
ISSUE: Whether the defendant can deny the existence
of the corporation in order to escape his liability from
the promissory note.
HELD: No. One who enters into a contract with a party
described therein as a corporation is precluded, in an
action brought thereon by such party under the same
designation, from denying its corporate existence.
In accordance with modern views of good practice and
to promote substantial justice, the court ruled that one
who has signed a promissory note running to a payee
described by a name appropriate to a corporation,
although not employing that term, cannot, in an action
brought against him thereon by such payee, in which it
alleges itself to be a corporation, be heard to question
the plaintiff's corporate existence, unless upon a
showing that his obligation to make payment would be
thereby affected.
The payee was styled in the note, "The Lowell-
Woodward Hardware Company," a title which prima
facie imports a corporation.
There is some difference of opinion as to whether one
contracting with an organization styling itself a
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"company," there being nothing further in the language
used to indicate its character, the term "corporation"
not being employed, can be heard to deny its corporate
capacity when sued by it upon the contract.
The defendant, having given his promise to pay the sum
indicated to the payee named, should not be permitted
to escape or delay performance by raising an issue as to
the character of the organization to which he is
indebted, unless his substantial rights might be thereby
affected, which would only be under exceptional
conditions.
It is thoroughly settled that in such a situation the
defendant cannot attack the regularity of the plaintiff's
organization, or take any advantage of the fact that it
has no legal standing as a corporation. No good reason
is apparent why, having explicitly promised to make
payment to the concern by which he is sued, he should
be permitted to question its de facto, any more than its
de jure, character--to inject into the case an issue
having no bearing on his obligation to make payment.
Defendants were engaged in business as a firm in
Colorado under “Super Leasing Company” which was
signed to the note sued on and that the appellant was a
member of the company. He also testified that he had
been a member until 1912 but had withdrawn from it.
Decision in favor of plaintiff was supported by evidence.
Judgment is affirmed.
ASIA BANKING CORP v. STANDARD PRODUCTS
September 11, 1924, G.R. No. 22106
CASE LAW/ DOCTRINE: Absent any fraud, any person
who recognized and in effect admitted its legal
existence as a corporate body is estopped to deny its
corporate existence, unless its existence is attacked
since making the contract or dealings.
FACTS:
1. On Nov. 28, 1921, Standard Products, Inc. (note the
inclusion of “Inc. as an indication of a corporation)
issued a promissory note amounting to P24, 736.47
to Asia Banking Corporation.
2. Asian Banking filed a case to recover the said
amount plus 10% interest.
3. The lower court, on Nov. 1, 1923 ruled in favor of
Asia Banking Corp.
(No mention where appeal was brought,
presumably to SC)
4. But, Standard Products, Inc. (appellant) contended
that Asia Banking Corp (plaintiff) failed to prove
affirmatively the corporate existence of the parties.
Appellant also assigned this as a reversible error.
ISSUE: Whether or not the failure of Asia Banking Corp
to prove corporate existence of both parties is fatal to
its suit to recover?
HELD: No. The defendant having recognized the
corporate existence of the plaintiff by making a
promissory note in its favor and making partial
payments on the same is therefore estopped to deny
said plaintiff's corporate existence.
There is no merit whatever in the appellant's
contention. The general rule is that in the absence of
fraud a person who has contracted or otherwise dealt
with an association in such a way as to recognize and in
effect admit its legal existence as a corporate body is
thereby estopped to deny its corporate existence in any
action leading out of or involving such contract or
dealing, unless its existence is attacked for cause which
have arisen since making the contract or other dealing
relied on as an estoppel and this applies to foreign as
well as to domestic corporations.
The defendant having recognized the corporate
existence of the plaintiff by making a promissory note in
its favor and making partial payments on the same is
therefore estopped to deny said plaintiff's corporate
existence. It is, of course, also estopped from denying
its own corporate existence. Under these circumstances
it was unnecessary for the plaintiff to present other
evidence of the corporate existence of either of the
parties. It may be noted that there is no evidence
showing circumstances taking the case out of the rules
stated.
SALVATIERRA v GARLITOS
103 Phil 757, GR No L-11442, May 23, 1958
Facts: Manuela T. Vda. de Salvatierra is the owner of a
parcel of land located at Maghobas, Poblacion,
Burauen, Teyte. On March 7, 1954, Salvatierra entered
into a contract of lease with the Philippine Fibers
Producers Co., Inc., allegedly a corporation "duly
organized and existing under the laws of the Philippines,
with business address in Burauen, Leyte, and
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represented by Mr. Segundino Q. Refuerzo, the
President". The contract provided that the lifetime of
the lease would 10 years, that the land will be planted
with kenaf, ramie or other crops suitable to the soil;
that the lessor would be entitled to 30% of the net
income from the harvest of any, crop without being
responsible for the cost of production thereof; and that
after every harvest, the lessee was bound to declare at
the earliest possible time the income derived and to
deliver the corresponding share due the lessor.
However, the obligations imposed were not
complied with by the alleged corporation. Salvatierra
filed for accounting, rescission and damages. She
claimed that the defendant corporation planted the
land with kenaf but it refused to render an accounting
of the income it derived and to deliver the lessor's share
(estimated gross income was P4,500 and the deductible
expenses amounted to P1,000).
The court granted plaintiff's prayer and
required defendants to render a complete accounting of
the harvest of the land and to deliver 30% of the net
income realized from the last harvest. If the defendant’s
fail to abide by this rule, the gross income would be
fixed at P4,200 or a net income of P3,200 after
deducting the expenses for production, 30% of which or
P960 was due the plaintiff pursuant to the contract of
lease, which was declared rescinded.
The court then issued a issued a writ of
execution causing the attachment of 3 parcels of land
registered in the name of Segundino Refuerzo as there
was no available property of the Philippine Fibers
Producers Co., Inc., for attachment. Refuerzo claimed
that the decision was null and void with respect to him,
there being no allegation in the complaint pointing to
his personal liability and that the liability be limited to
the defendant corporation. The court then ordered the
release of all properties belonging to Refuerzo.
Issue: Whether or not Refuerzo should be held liable to
Salvatierra?
Ruling: Refuerzo is liable to Salvatierra!
Refuerzo, as president of the unregistered corporation
Philippine Fibers Producers Co., Inc., was the moving
spirit behind the consummation of the lease agreement
by acting as its representative. His liability cannot be
limited or restricted that imposed upon corporate
shareholders. In acting on behalf of a corporation which
he knew to be unregistered, he assumed the risk of
reaping the consequential damages or resultant rights,
if any, arising out of such transaction.
Refuerzo’s defense is premised on the fact that the
complaint contained no allegation which holds him
personally liable, for while he was a signatory to the
contract, he did so in his capacity as president of the
corporation. Salvatierra, on the other hand, contends
that her failure to specify Refuerzo’s personal liability
was because she was under the impression that the
Philippine Fibers Producers Co., Inc., represented by
Refuerzo was a duly registered corporation as appearing
in the contract, but a subsequent inquiry from the
Securities and Exchange Commission yielded otherwise.
While as a general rule a person who has contracted or
dealt with an association in such a way as to recognize
its existence as a corporate body is estopped from
denying the same in an action arising out of such
transaction or dealing, yet this doctrine may not be held
to be applicable where fraud takes a part in the said
transaction. In the instant case, on plaintiff's charge that
she was unaware of the fact that the Philippine Fibers
Producers Co., Inc., had no juridical personality,
defendant Refuerzo gave no confirmation or denial and
the circumstances surrounding the execution of the
contract lead to the inescapable conclusion that plaintiff
Manuela T. Vda. de Salvatierra was really made to
believe that such corporation was duly organized in
accordance with law.
A registered corporation has a juridical personality
separate and distinct from its component members
such that a corporation cannot be held liable for the
personal indebtedness of a stockholder even if he
should be its president and conversely, a stockholder or
member cannot be held personally liable for any
financial obligation of the corporation in excess of his
unpaid subscription. But this rule is understood to refer
merely to registered corporations and cannot be made
applicable to the liability of members of an
unincorporated association. The reason behind this
doctrine is obvious - since an organization which before
the law is non-existent has no personality and would be
incompetent to act and appropriate for itself the
powers and attribute 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
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an agent without authority or without a principal is
himself regarded as the principal, possessed of all the
rights 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 comes personally liable
for contracts entered into or for other acts performed
as such, agent.
ALBERT VS UNIVERSITY PUBLISHING
G.R. NO. L-19118 | JANUARY 30, 1965
Facts: In Albert vs. University Publishing Co., Inc., L-
9300, April 18, 1958, we found plaintiff entitled to
damages (for breach of contract) but reduced the
amount from P23, 000.00 to P15, 000.00.
Then in Albert vs. University Publishing Co., Inc., L-
15275, October 24, 1960, we held that the judgment for
P15,000.00 which had become final and executory,
should be executed to its full amount, since in fixing it,
payment already made had been considered.
15 years ago, Mariano Albert entered into a contract
with University Publishing Co., Inc. through Jose M.
Aruego, its President, whereby University would pay
plaintiff for the exclusive right to publish his revised
Commentaries on the Revised Penal Code. The contract
stipulated that failure to pay one installment would
render the rest of the payments due. When University
failed to pay the second installment, Albert sued for
collection and won.
However, upon execution, it was found that the records
of this Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either as a
corporation or partnership. Albert petitioned for a writ
of execution against Jose M. Aruego as the real
defendant. University opposed, on the ground that
Aruego was not a party to the case.
Issue: WON the non-registration of University
Publishing Co., Inc. in the SEC is an existing corporation
with an independent juridical personality.
Held: No. On account of the non-registration it cannot
be considered a corporation, not even a corporation de
facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no
personality separate from Jose M. Aruego; it cannot be
sued independently.
In the case at bar, Aruego represented a non-existent
entity and induced not only Albert but the court to
believe in such representation. He signed the contract
as “President” of “University Publishing Co., Inc.,”
stating that this was “a corporation duly organized and
existing under the laws of the Philippines”.
“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.”
Aruego, acting as representative of such non-existent
principal, was the real party to the contract sued upon,
and thus assumed such privileges and obligations and
became personally liable for the contract entered into
or for other acts performed as such agent.
The Supreme Court likewise held that the doctrine of
corporation by estoppel cannot be set up against Albert
since it was Aruego who had induced him to act upon
his (Aruego’s) willful representation that University had
been duly organized and was existing under the law.
Dispositive: The order appealed from is hereby set
aside.
CHIANG KAI SHEK SCHOOL VS. CA
G.R. NO. L-58028; APRIL 18, 1989
FACTS:
Fausta F. Oh reported for work at the Chiang Kai
Shek School in Sorsogon on the first week of July, 1968.
She was told she had no assignment for the next
semester. Oh was shocked for she had been teaching in
the school since1932 for a continuous period of almost
33 years. And now, for no apparent or given reason, this
abrupt dismissal. She demanded separation pay, social
security benefits, salary differentials, maternity benefits
and moral and exemplary damages.
The original defendant was the Chiang Kai Shek
School but when it filed a motion to dismiss on the
ground that it could not be sued, the complaint was
amended. Certain officials of the school were also
impleaded to make them solidarily liable with the
school. Court of First Instance of Sorsogon dismissed
the complaint. On appeal, its decision was set aside by
the respondent court, which held the school suable and
liable while absolving the other defendants.
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ISSUE:
WON a school that has not been incorporated
may be sued by reason alone of its long continued
existence and recognition by the government.

HELD:
YES. Having been recognized by the
government, it was under obligation to incorporate
under the Corporation Law within 90 days from such
recognition. It appears that it had not done so at the
time the complaint was filed notwithstanding that it
had been in existence even earlier than 1932. The
petitioner cannot now invoke its own non-compliance
with the law to immunize it from the private
respondent's complaint.
There should also be no question that having
contracted with the private respondent every year for
thirty two years and thus represented itself as
possessed of juridical personality to do so, the
petitioner is now estopped from denying such
personality to defeat her claim against it. According to
Article 1431 of the Civil Code, "through estoppel an
admission or representation is rendered conclusive
upon the person making it and cannot be denied or
disproved as against the person relying on it."

16