FIRST DIVISION tickets purchased by the Federation on the ground that Henri Kahn allegedly

guaranteed the said obligation.6

G.R. No. 119002 October 19, 2000
Henri Kahn filed his answer with counterclaim. While not denying the
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, allegation that the Federation owed the amount P207,524.20, representing
INC., petitioner, the unpaid balance for the plane tickets, he averred that the petitioner has no
vs. cause of action against him either in his personal capacity or in his official
HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL capacity as president of the Federation. He maintained that he did not
FEDERATION, respondents. guarantee payment but merely acted as an agent of the Federation which
has a separate and distinct juridical personality.7
DECISION
On the other hand, the Federation failed to file its answer, hence, was
declared in default by the trial court.8
KAPUNAN, J.:

In due course, the trial court rendered judgment and ruled in favor of the
On June 30 1989, petitioner International Express Travel and Tour Services,
Inc., through its managing director, wrote a letter to the Philippine Football petitioner and declared Henri Kahn personally liable for the unpaid obligation
of the Federation. In arriving at the said ruling, the trial court rationalized:
Federation (Federation), through its president private respondent Henri
Kahn, wherein the former offered its services as a travel agency to the
latter.1 The offer was accepted. Defendant Henri Kahn would have been correct in his contentions had it
been duly established that defendant Federation is a corporation. The
Petitioner secured the airline tickets for the trips of the athletes and officials trouble, however, is that neither the plaintiff nor the defendant Henri Kahn
has adduced any evidence proving the corporate existence of the defendant
of the Federation to the South East Asian Games in Kuala Lumpur as well as
various other trips to the People's Republic of China and Brisbane. The total Federation. In paragraph 2 of its complaint, plaintiff asserted that "Defendant
cost of the tickets amounted to P449,654.83. For the tickets received, the Philippine Football Federation is a sports association xxx." This has not been
denied by defendant Henri Kahn in his Answer. Being the President of
Federation made two partial payments, both in September of 1989, in the
total amount of P176,467.50. 2 defendant Federation, its corporate existence is within the personal
knowledge of defendant Henri Kahn. He could have easily denied specifically
the assertion of the plaintiff that it is a mere sports association, if it were a
On 4 October 1989, petitioner wrote the Federation, through the private domestic corporation. But he did not.
3
respondent a demand letter requesting for the amount of P265,894.33. On
30 October 1989, the Federation, through the Project Gintong Alay, paid the
amount of P31,603.00.4 xxx

On 27 December 1989, Henri Kahn issued a personal check in the amount
of P50,000 as partial payment for the outstanding balance of the
Federation.5 Thereafter, no further payments were made despite repeated
demands.
This prompted petitioner to file a civil case before the Regional Trial Court of
Manila. Petitioner sued Henri Kahn in his personal capacity and as President
of the Federation and impleaded the Federation as an alternative defendant.
Petitioner sought to hold Henri Kahn liable for the unpaid balance for the
A voluntary unincorporated association, like defendant Federation has no
power to enter into, or to ratify, a contract. The contract entered into by its
officers or agents on behalf of such association is not binding on, or
enforceable against it. The officers or agents are themselves personally
liable.
x x x9
The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay
the plaintiff the principal sum of P207,524.20, plus the interest thereon at the
legal rate computed from July 5, 1990, the date the complaint was filed, until
the principal obligation is fully liquidated; and another sum of P15,000.00 for
attorney's fees.
The complaint of the plaintiff against the Philippine Football Federation and
the counterclaims of the defendant Henri Kahn are hereby dismissed.
With the costs against defendant Henri Kahn.10
Only Henri Kahn elevated the above decision to the Court of Appeals. On 21
December 1994, the respondent court rendered a decision reversing the trial
court, the decretal portion of said decision reads:
WHEREFORE, premises considered, the judgment appealed from is hereby
REVERSED and SET ASIDE and another one is rendered dismissing the
complaint against defendant Henri S. Kahn.11
In finding for Henri Kahn, the Court of Appeals recognized the juridical
existence of the Federation. It rationalized that since petitioner failed to prove
that Henri Kahn guaranteed the obligation of the Federation, he should not
be held liable for the same as said entity has a separate and distinct
personality from its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer
pleaded that the Federation be held liable for the unpaid obligation. The
same was denied by the appellate court in its resolution of 8 February 1995,
where it stated that:
As to the alternative prayer for the Modification of the Decision by expressly
declaring in the dispositive portion thereof the Philippine Football Federation
(PFF) as liable for the unpaid obligation, it should be remembered that the
trial court dismissed the complaint against the Philippine Football Federation,
and the plaintiff did not appeal from this decision. Hence, the Philippine
Football Federation is not a party to this appeal and consequently, no
judgment may be pronounced by this Court against the PFF without violating
the due process clause, let alone the fact that the judgment dismissing the
complaint against it, had already become final by virtue of the plaintiff's
failure to appeal therefrom. The alternative prayer is therefore similarly
DENIED.12
Petitioner now seeks recourse to this Court and alleges that the respondent
court committed the following assigned errors:13
A. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
THAT PETITIONER HAD DEALT WITH THE PHILIPPINE
FOOTBALL FEDERATION (PFF) AS A CORPORATE ENTITY AND
IN NOT HOLDING THAT PRIVATE RESPONDENT HENRI KAHN
WAS THE ONE WHO REPRESENTED THE PFF AS HAVING A
CORPORATE PERSONALITY.
B. THE HONORABLE COURT OF APPEALS ERRED IN NOT
HOLDING PRIVATE RESPONDENT HENRI KAHN PERSONALLY
LIABLE FOR THE OBLIGATION OF THE UNINCORPORATED
PFF, HAVING NEGOTIATED WITH PETITIONER AND
CONTRACTED THE OBLIGATION IN BEHALF OF THE PFF,
MADE A PARTIAL PAYMENT AND ASSURED PETITIONER OF
FULLY SETTLING THE OBLIGATION.
C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN
IS NOT PERSONALLY LIABLE, THE HONORABLE COURT OF
APPEALS ERRED IN NOT EXPRESSLY DECLARING IN ITS
DECISION THAT THE PFF IS SOLELY LIABLE FOR THE
OBLIGATION.
The resolution of the case at bar hinges on the determination of the
existence of the Philippine Football Federation as a juridical person. In the
assailed decision, the appellate court recognized the existence of the
Federation. In support of this, the CA cited Republic Act 3135, otherwise
known as the Revised Charter of the Philippine Amateur Athletic Federation,
and Presidential Decree No. 604 as the laws from which said Federation
derives its existence.
As correctly observed by the appellate court, both R.A. 3135 and P.D. No.
604 recognized the juridical existence of national sports associations. This
may be gleaned from the powers and functions granted to these
associations. Section 14 of R.A. 3135 provides:
SEC. 14. Functions, powers and duties of Associations. - The National
Sports' Association shall have the following functions, powers and duties:
1. To adopt a constitution and by-laws for their internal organization
and government;
 2. To raise funds by donations, benefits, and other means for their
purposes.
3. To purchase, sell, lease or otherwise encumber property both real
and personal, for the accomplishment of their purpose;
4. To affiliate with international or regional sports' Associations after
due consultation with the executive committee;
xxx
13. To perform such other acts as may be necessary for the proper
accomplishment of their purposes and not inconsistent with this Act.
Section 8 of P.D. 604, grants similar functions to these sports associations:
SEC. 8. Functions, Powers, and Duties of National Sports Association. - The
National sports associations shall have the following functions, powers, and
duties:
1. Adopt a Constitution and By-Laws for their internal organization
and government which shall be submitted to the Department and
any amendment thereto shall take effect upon approval by the
Department: Provided, however, That no team, school, club,
organization, or entity shall be admitted as a voting member of an
association unless 60 per cent of the athletes composing said team,
school, club, organization, or entity are Filipino citizens;
2. Raise funds by donations, benefits, and other means for their
purpose subject to the approval of the Department;
3. Purchase, sell, lease, or otherwise encumber property, both real
and personal, for the accomplishment of their purpose;
4. Conduct local, interport, and international competitions, other than
the Olympic and Asian Games, for the promotion of their sport;
5. Affiliate with international or regional sports associations after due
consultation with the Department;
xxx
13. Perform such other functions as may be provided by law.
The above powers and functions granted to national sports associations
clearly indicate that these entities may acquire a juridical personality. The
power to purchase, sell, lease and encumber property are acts which may
only be done by persons, whether natural or artificial, with juridical capacity.
However, while we agree with the appellate court that national sports
associations may be accorded corporate status, such does not automatically
take place by the mere passage of these laws.
It is a basic postulate that before a corporation may acquire juridical
personality, the State must give its consent either in the form of a special law
or a general enabling act. We cannot agree with the view of the appellate
court and the private respondent that the Philippine Football Federation
came into existence upon the passage of these laws. Nowhere can it be
found in R.A. 3135 or P.D. 604 any provision creating the Philippine Football
Federation. These laws merely recognized the existence of national sports
associations and provided the manner by which these entities may acquire
juridical personality. Section 11 of R.A. 3135 provides:
SEC. 11. National Sports' Association; organization and recognition. - A
National Association shall be organized for each individual sports in the
Philippines in the manner hereinafter provided to constitute the Philippine
Amateur Athletic Federation. Applications for recognition as a National
Sports' Association shall be filed with the executive committee together with,
among others, a copy of the constitution and by-laws and a list of the
members of the proposed association, and a filing fee of ten pesos.
The Executive Committee shall give the recognition applied for if it is
satisfied that said association will promote the purposes of this Act and
particularly section three thereof. No application shall be held pending for
more than three months after the filing thereof without any action having
been taken thereon by the executive committee. Should the application be
rejected, the reasons for such rejection shall be clearly stated in a written
communication to the applicant. Failure to specify the reasons for the
rejection shall not affect the application which shall be considered as
unacted upon: Provided, however, That until the executive committee herein
provided shall have been formed, applications for recognition shall be
passed upon by the duly elected members of the present executive
committee of the Philippine Amateur Athletic Federation. The said executive
committee shall be dissolved upon the organization of the executive
committee herein provided: Provided, further, That the functioning executive
committee is charged with the responsibility of seeing to it that the National
Sports' Associations are formed and organized within six months from and
after the passage of this Act.
Section 7 of P.D. 604, similarly provides:
SEC. 7. National Sports Associations. - Application for accreditation or
recognition as a national sports association for each individual sport in the
Philippines shall be filed with the Department together with, among others, a
copy of the Constitution and By-Laws and a list of the members of the
proposed association.
The Department shall give the recognition applied for if it is satisfied that the
national sports association to be organized will promote the objectives of this
Decree and has substantially complied with the rules and regulations of the
Department: Provided, That the Department may withdraw accreditation or
recognition for violation of this Decree and such rules and regulations
formulated by it.
The Department shall supervise the national sports association: Provided,
That the latter shall have exclusive technical control over the development
and promotion of the particular sport for which they are organized.
Clearly the above cited provisions require that before an entity may be
considered as a national sports association, such entity must be recognized
by the accrediting organization, the Philippine Amateur Athletic Federation
under R.A. 3135, and the Department of Youth and Sports Development
under P.D. 604. This fact of recognition, however, Henri Kahn failed to
substantiate. In attempting to prove the juridical existence of the Federation,
Henri Kahn attached to his motion for reconsideration before the trial court a
copy of the constitution and by-laws of the Philippine Football Federation.
Unfortunately, the same does not prove that said Federation has indeed
been recognized and accredited by either the Philippine Amateur Athletic
Federation or the Department of Youth and Sports Development.
Accordingly, we rule that the Philippine Football Federation is not a national
sports association within the purview of the aforementioned laws and does
not have corporate existence of its own.
Thus being said, it follows that private respondent Henry Kahn should be
held liable for the unpaid obligations of the unincorporated Philippine
Football Federation. It is a settled principal in corporation law that any person
acting or purporting to act on behalf of a corporation which has no valid
existence assumes such privileges and becomes personally liable for
contract entered into or for other acts performed as such agent.14 As
president of the Federation, Henri Kahn is presumed to have known about
the corporate existence or non-existence of the Federation. We cannot
subscribe to the position taken by the appellate court that even assuming
that the Federation was defectively incorporated, the petitioner cannot deny
the corporate existence of the Federation because it had contracted and
dealt with the Federation in such a manner as to recognize and in effect
admit its existence.15 The doctrine of corporation by estoppel is mistakenly
applied by the respondent court to the petitioner. The application of the
doctrine applies to a third party only when he tries to escape liability on a
contract from which he has benefited on the irrelevant ground of defective
incorporation.16 In the case at bar, the petitioner is not trying to escape
liability from the contract but rather is the one claiming from the contract.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE.
The decision of the Regional Trial Court of Manila, Branch 35, in Civil Case
No. 90-53595 is hereby REINSTATED.
SO ORDERED.
THIRD DIVISION
G.R. No. 136448 November 3, 1999
LIM TONG LIM, petitioner,
vs.
PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.
PANGANIBAN, J.:
A partnership may be deemed to exist among parties who agree to borrow
money to pursue a business and to divide the profits or losses that may arise
therefrom, even if it is shown that they have not contributed any capital of
their own to a "common fund." Their contribution may be in the form of credit
or industry, not necessarily cash or fixed assets. Being partner, they are all
liable for debts incurred by or on behalf of the partnership. The liability for a
contract entered into on behalf of an unincorporated association or
ostensible corporation may lie in a person who may not have directly
transacted on its behalf, but reaped benefits from that contract.
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim assails the
November 26, 1998 Decision of the Court of Appeals in CA-GR CV
41477, 1 which disposed as follows:
WHEREFORE, [there being] no reversible error in the
appealed decision, the same is hereby affirmed. 2
The decretal portion of the Quezon City Regional Trial Court (RTC) ruling,
which was affirmed by the CA, reads as follows:
WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary
attachment issued by this Court on September 20, 1990;
2. That defendants are jointly liable to plaintiff for the
following amounts, subject to the modifications as
hereinafter made by reason of the special and unique facts
and circumstances and the proceedings that transpired
during the trial of this case;
a. P532,045.00 representing [the] unpaid
purchase price of the fishing nets covered
by the Agreement plus P68,000.00
representing the unpaid price of the floats
not covered by said Agreement;
b. 12% interest per annum counted from
date of plaintiff's invoices and computed on
their respective amounts as follows:
i. Accrued interest of
P73,221.00 on Invoice No.
14407 for P385,377.80
dated February 9, 1990;
ii. Accrued interest for
P27,904.02 on Invoice No.
14413 for P146,868.00
dated February 13, 1990;
iii. Accrued interest of
P12,920.00 on Invoice No.
14426 for P68,000.00 dated
February 19, 1990;
c. P50,000.00 as and for attorney's fees,
plus P8,500.00 representing P500.00 per
appearance in court;
d. P65,000.00 representing P5,000.00
monthly rental for storage charges on the
nets counted from September 20, 1990
(date of attachment) to September 12, 1991
(date of auction sale);
e. Cost of suit.
With respect to the joint liability of defendants for the
principal obligation or for the unpaid price of nets
and floats in the amount of P532,045.00 and
P68,000.00, respectively, or for the total amount
P600,045.00, this Court noted that these items were
attached to guarantee any judgment that may be
rendered in favor of the plaintiff but, upon agreement
of the parties, and, to avoid further deterioration of
the nets during the pendency of this case, it was
ordered sold at public auction for not less than
P900,000.00 for which the plaintiff was the sole and
winning bidder. The proceeds of the sale paid for by
plaintiff was deposited in court. In effect, the amount
of P900,000.00 replaced the attached property as a
guaranty for any judgment that plaintiff may be able
to secure in this case with the ownership and
possession of the nets and floats awarded and
delivered by the sheriff to plaintiff as the highest
bidder in the public auction sale. It has also been
noted that ownership of the nets [was] retained by
the plaintiff until full payment [was] made as
stipulated in the invoices; hence, in effect, the
plaintiff attached its own properties. It [was] for this
reason also that this Court earlier ordered the
attachment bond filed by plaintiff to guaranty
damages to defendants to be cancelled and for the
 P900,000.00 cash bidded and paid for by plaintiff to
serve as its bond in favor of defendants.
From the foregoing, it would appear therefore that
whatever judgment the plaintiff may be entitled to in
this case will have to be satisfied from the amount of
P900,000.00 as this amount replaced the attached
nets and floats. Considering, however, that the total
judgment obligation as computed above would
amount to only P840,216.92, it would be inequitable,
unfair and unjust to award the excess to the
defendants who are not entitled to damages and
who did not put up a single centavo to raise the
amount of P900,000.00 aside from the fact that they
are not the owners of the nets and floats. For this
reason, the defendants are hereby relieved from any
and all liabilities arising from the monetary judgment
obligation enumerated above and for plaintiff to
retain possession and ownership of the nets and
floats and for the reimbursement of the P900,000.00
deposited by it with the Clerk of Court.
SO ORDERED. 3
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter
Yao entered into a Contract dated February 7, 1990, for the purchase of
fishing nets of various sizes from the Philippine Fishing Gear Industries, Inc.
(herein respondent). They claimed that they were engaged in a business
venture with Petitioner Lim Tong Lim, who however was not a signatory to
the agreement. The total price of the nets amounted to P532,045. Four
hundred pieces of floats worth P68,000 were also sold to the Corporation. 4
The buyers, however, failed to pay for the fishing nets and the floats; hence,
private respondents filed a collection suit against Chua, Yao and Petitioner
Lim Tong Lim with a prayer for a writ of preliminary attachment. The suit was
brought against the three in their capacities as general partners, on the
allegation that "Ocean Quest Fishing Corporation" was a nonexistent
corporation as shown by a Certification from the Securities and Exchange
Commission. 5 On September 20, 1990, the lower court issued a Writ of
Preliminary Attachment, which the sheriff enforced by attaching the fishing
nets on board F/B Lourdes which was then docked at the Fisheries Port,
Navotas, Metro Manila.
Instead of answering the Complaint, Chua filed a Manifestation admitting his
liability and requesting a reasonable time within which to pay. He also turned
over to respondent some of the nets which were in his possession. Peter
Yao filed an Answer, after which he was deemed to have waived his right to
cross-examine witnesses and to present evidence on his behalf, because of
his failure to appear in subsequent hearings. Lim Tong Lim, on the other
hand, filed an Answer with Counterclaim and Crossclaim and moved for the
lifting of the Writ of Attachment. 6 The trial court maintained the Writ, and
upon motion of private respondent, ordered the sale of the fishing nets at a
public auction. Philippine Fishing Gear Industries won the bidding and
deposited with the said court the sales proceeds of P900,000. 7
On November 18, 1992, the trial court rendered its Decision, ruling that
Philippine Fishing Gear Industries was entitled to the Writ of Attachment and
that Chua, Yao and Lim, as general partners, were jointly liable to pay
respondent. 8
The trial court ruled that a partnership among Lim, Chua and Yao existed
based (1) on the testimonies of the witnesses presented and (2) on a
Compromise Agreement executed by the three 9 in Civil Case No. 1492-MN
which Chua and Yao had brought against Lim in the RTC of Malabon,
Branch 72, for (a) a declaration of nullity of commercial documents; (b) a
reformation of contracts; (c) a declaration of ownership of fishing boats; (d)
an injunction and (e) damages. 10 The Compromise Agreement provided:
a) That the parties plaintiffs & Lim Tong Lim
agree to have the four (4) vessels sold in
the amount of P5,750,000.00 including the
fishing net. This P5,750,000.00 shall be
applied as full payment for P3,250,000.00 in
favor of JL Holdings Corporation and/or Lim
Tong Lim;
b) If the four (4) vessel[s] and the fishing net
will be sold at a higher price than
P5,750,000.00 whatever will be the excess
will be divided into 3: 1/3 Lim Tong Lim; 1/3
Antonio Chua; 1/3 Peter Yao;
 c) If the proceeds of the sale the vessels will
be less than P5,750,000.00 whatever the
deficiency shall be shouldered and paid to
JL Holding Corporation by 1/3 Lim Tong
Lim; 1/3 Antonio Chua; 1/3 Peter Yao. 11
The trial court noted that the Compromise Agreement was silent as to the
nature of their obligations, but that joint liability could be presumed from the
equal distribution of the profit and loss. 21
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed
the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua
and Yao in a fishing business and may thus be held liable as a such for the
fishing nets and floats purchased by and for the use of the partnership. The
appellate court ruled:
The evidence establishes that all the defendants including
herein appellant Lim Tong Lim undertook a partnership for a
specific undertaking, that is for commercial fishing . . . .
Oviously, the ultimate undertaking of the defendants was to
divide the profits among themselves which is what a
partnership essentially is . . . . By a contract of partnership,
two or more persons bind themselves to contribute money,
property or industry to a common fund with the intention of
dividing the profits among themselves (Article 1767, New
Civil Code). 13
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the assailed
Decision on the following grounds:
I THE COURT OF APPEALS ERRED IN HOLDING, BASED
ON A COMPROMISE AGREEMENT THAT CHUA, YAO
AND PETITIONER LIM ENTERED INTO IN A SEPARATE
CASE, THAT A PARTNERSHIP AGREEMENT EXISTED
AMONG THEM.
II SINCE IT WAS ONLY CHUA WHO REPRESENTED
THAT HE WAS ACTING FOR OCEAN QUEST FISHING
CORPORATION WHEN HE BOUGHT THE NETS FROM
PHILIPPINE FISHING, THE COURT OF APPEALS WAS
UNJUSTIFIED IN IMPUTING LIABILITY TO PETITIONER
LIM AS WELL.
III THE TRIAL COURT IMPROPERLY ORDERED THE
SEIZURE AND ATTACHMENT OF PETITIONER LIM'S
GOODS.
In determining whether petitioner may be held liable for the fishing nets and
floats from respondent, the Court must resolve this key issue: whether by
their acts, Lim, Chua and Yao could be deemed to have entered into a
partnership.
This Court's Ruling
The Petition is devoid of merit.
First and Second Issues:
Existence of a Partnership
and Petitioner's Liability
In arguing that he should not be held liable for the equipment purchased
from respondent, petitioner controverts the CA finding that a partnership
existed between him, Peter Yao and Antonio Chua. He asserts that the CA
based its finding on the Compromise Agreement alone. Furthermore, he
disclaims any direct participation in the purchase of the nets, alleging that the
negotiations were conducted by Chua and Yao only, and that he has not
even met the representatives of the respondent company. Petitioner further
argues that he was a lessor, not a partner, of Chua and Yao, for the
"Contract of Lease " dated February 1, 1990, showed that he had merely
leased to the two the main asset of the purported partnership — the fishing
boat F/B Lourdes. The lease was for six months, with a monthly rental of
P37,500 plus 25 percent of the gross catch of the boat.
We are not persuaded by the arguments of petitioner. The facts as found by
the two lower courts clearly showed that there existed a partnership among
Chua, Yao and him, pursuant to Article 1767 of the Civil Code which
provides:
Art. 1767 — By the contract of partnership, two or more
persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the
profits among themselves.
Fishing Gear, in behalf of "Ocean Quest Fishing
Corporation," their purported business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in
the Malabon RTC, Branch 72 by Antonio Chua and Peter
Yao against Lim Tong Lim for (a) declaration of nullity of
commercial documents; (b) reformation of contracts; (c)
declaration of ownership of fishing boats; (4) injunction; and
(e) damages.

Specifically, both lower courts ruled that a partnership among the three (9) That the case was amicably settled through a
existed based on the following factual findings: 15 Compromise Agreement executed between the parties-
litigants the terms of which are already enumerated above.
(1) That Petitioner Lim Tong Lim requested Peter Yao who
was engaged in commercial fishing to join him, while Antonio From the factual findings of both lower courts, it is clear that Chua, Yao and
Chua was already Yao's partner; 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
(2) That after convening for a few times, Lim, Chua, and Yao who was petitioner's brother. In their Compromise Agreement, they
verbally agreed to acquire two fishing boats, the FB subsequently revealed their intention to pay the loan with the proceeds of the
Lourdes and the FB Nelson for the sum of P3.35 million; 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
(3) That they borrowed P3.25 million from Jesus Lim, brother 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
of Petitioner Lim Tong Lim, to finance the venture.
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
(4) That they bought the boats from CMF Fishing among them also shows that they had indeed formed a partnership.
Corporation, which executed a Deed of Sale over these two
(2) boats in favor of Petitioner Lim Tong Lim only to serve as
Moreover, it is clear that the partnership extended not only to the purchase of
security for the loan extended by Jesus Lim;
the boat, but also to that of the nets and the floats. The fishing nets and the
floats, both essential to fishing, were obviously acquired in furtherance of
(5) That Lim, Chua and Yao agreed that the refurbishing, re- their business. It would have been inconceivable for Lim to involve himself so
equipping, repairing, dry docking and other expenses for the much in buying the boat but not in the acquisition of the aforesaid equipment,
boats would be shouldered by Chua and Yao; without which the business could not have proceeded.

(6) That because of the "unavailability of funds," Jesus Lim
again extended a loan to the partnership in the amount of P1
million secured by a check, because of which, Yao and
Chua entrusted the ownership papers of two other boats,
Chua's FB Lady Anne Mel and Yao's FB Tracy to Lim Tong
Lim.
(7) That in pursuance of the business agreement, Peter Yao
and Antonio Chua bought nets from Respondent Philippine
Given the preceding facts, it is clear that there was, among petitioner, Chua
and Yao, a partnership engaged in the fishing business. They purchased the
boats, which constituted the main assets of the partnership, and they agreed
that the proceeds from the sales and operations thereof would be divided
among them.
We stress that under Rule 45, a petition for review like the present case
should involve only questions of law. Thus, the foregoing factual findings of
the RTC and the CA are binding on this Court, absent any cogent proof that
the present action is embraced by one of the exceptions to the rule. 16 In
assailing the factual findings of the two lower courts, petitioner effectively
goes beyond the bounds of a petition for review under Rule 45.
Compromise Agreement
Not the Sole Basis of Partnership
Petitioner argues that the appellate court's sole basis for assuming the
existence of a partnership was the Compromise Agreement. He also claims
that the settlement was entered into only to end the dispute among them, but
not to adjudicate their preexisting rights and obligations. His arguments are
baseless. The Agreement was but an embodiment of the relationship extant
among the parties prior to its execution.
A proper adjudication of claimants' rights mandates that courts must review
and thoroughly appraise all relevant facts. Both lower courts have done so
and have found, correctly, a preexisting partnership among the parties. In
implying that the lower courts have decided on the basis of one piece of
document alone, petitioner fails to appreciate that the CA and the RTC
delved into the history of the document and explored all the possible
consequential combinations in harmony with law, logic and fairness. Verily,
the two lower courts' factual findings mentioned above nullified petitioner's
argument that the existence of a partnership was based only on the
Compromise Agreement.
Petitioner Was a Partner,
Not a Lessor
We are not convinced by petitioner's argument that he was merely the lessor
of the boats to Chua and Yao, not a partner in the fishing venture. His
argument allegedly finds support in the Contract of Lease and the
registration papers showing that he was the owner of the boats,
including F/B Lourdes where the nets were found.
His allegation defies logic. In effect, he would like this Court to believe that
he consented to the sale of his own boats to pay a debt of Chua and Yao,
with the excess of the proceeds to be divided among the three of them. No
lessor would do what petitioner did. Indeed, his consent to the sale proved
that there was a preexisting partnership among all three.
Verily, as found by the lower courts, petitioner entered into a business
agreement with Chua and Yao, in which debts were undertaken in order to
finance the acquisition and the upgrading of the vessels which would be
used in their fishing business. The sale of the boats, as well as the division
among the three of the balance remaining after the payment of their loans,
proves beyond cavil that F/B Lourdes, though registered in his name, was
not his own property but an asset of the partnership. It is not uncommon to
register the properties acquired from a loan in the name of the person the
lender trusts, who in this case is the petitioner himself. After all, he is the
brother of the creditor, Jesus Lim.
We stress that it is unreasonable — indeed, it is absurd — for petitioner to
sell his property to pay a debt he did not incur, if the relationship among the
three of them was merely that of lessor-lessee, instead of partners.
Corporation by Estoppel
Petitioner argues that under the doctrine of corporation by estoppel, liability
can be imputed only to Chua and Yao, and not to him. Again, we disagree.
Sec. 21 of the Corporation Code of the Philippines provides:
Sec. 21. Corporation by estoppel. — All persons who
assume to act as a corporation knowing it to be without
authority to do so shall be liable as general partners for all
debts, liabilities and damages incurred or arising as a result
thereof: Provided however, That when any such ostensible
corporation is sued on any transaction entered by it as a
corporation or on any tort committed by it as such, it shall
not be allowed to use as a defense its lack of corporate
personality.
One who assumes an obligation to an ostensible corporation
as such, cannot resist performance thereof on the ground
that there was in fact no corporation.
Thus, even if the ostensible corporate entity is proven to be legally
nonexistent, a party may be estopped from denying its corporate existence.
"The reason behind this doctrine is obvious — an unincorporated association
has no personality and would be incompetent to act and appropriate for itself
the power and attributes of a corporation as provided by law; it cannot create
agents or confer authority on another to act in its behalf; thus, those who act
or purport to act as its representatives or agents do so without authority and
at their own risk. And as it is an elementary principle of law that a person
who acts as an agent without authority or without a principal is himself
regarded as the principal, possessed of all the right and subject to all the
liabilities of a principal, a person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such privileges and
obligations and becomes personally liable for contracts entered into or for
other acts performed as such agent. 17
The doctrine of corporation by estoppel may apply to the alleged corporation
and to a third party. In the first instance, an unincorporated association,
which represented itself to be a corporation, will be estopped from denying
its corporate capacity in a suit against it by a third person who relied in good
faith on such representation. It cannot allege lack of personality to be sued to
evade its responsibility for a contract it entered into and by virtue of which it
received advantages and benefits.
On the other hand, a third party who, knowing an association to be
unincorporated, nonetheless treated it as a corporation and received benefits
from it, may be barred from denying its corporate existence in a suit brought
against the alleged corporation. In such case, all those who benefited from
the transaction made by the ostensible corporation, despite knowledge of its
legal defects, may be held liable for contracts they impliedly assented to or
took advantage of.
There is no dispute that the respondent, Philippine Fishing Gear Industries,
is entitled to be paid for the nets it sold. The only question here is whether
petitioner should be held jointly 18 liable with Chua and Yao. Petitioner
contests such liability, insisting that only those who dealt in the name of the
ostensible corporation should be held liable. Since his name does not appear
on any of the contracts and since he never directly transacted with the
respondent corporation, ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found
inside F/B Lourdes, the boat which has earlier been proven to be an asset of
the partnership. He in fact questions the attachment of the nets, because the
Writ has effectively stopped his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao
decided to form a corporation. Although it was never legally formed for
unknown reasons, this fact alone does not preclude the liabilities of the three
as contracting parties in representation of it. Clearly, under the law on
estoppel, those acting on behalf of a corporation and those benefited by it,
knowing it to be without valid existence, are held liable as general partners.
Technically, it is true that petitioner did not directly act on behalf of the
corporation. However, having reaped the benefits of the contract entered into
by persons with whom he previously had an existing relationship, he is
deemed to be part of said association and is covered by the scope of the
doctrine of corporation by estoppel. We reiterate the ruling of the Court
in Alonso v. Villamor: 19
A litigation is not a game of technicalities in which one, more
deeply schooled and skilled in the subtle art of movement
and position, entraps and destroys the other. It is, rather, a
contest in which each contending party fully and fairly lays
before the court the facts in issue and then, brushing aside
as wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that justice be done upon
the merits. Lawsuits, unlike duels, are not to be won by a
rapier's thrust. Technicality, when it deserts its proper office
as an aid to justice and becomes its great hindrance and
chief enemy, deserves scant consideration from courts.
There should be no vested rights in technicalities.
Third Issue:
Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly issued
against the nets. We agree with the Court of Appeals that this issue is now
moot and academic. As previously discussed, F/B Lourdes was an asset of
the partnership and that it was placed in the name of petitioner, only to
assure payment of the debt he and his partners owed. The nets and the
floats were specifically manufactured and tailor-made according to their own
design, and were bought and used in the fishing venture they agreed upon.
Hence, the issuance of the Writ to assure the payment of the price stipulated
in the invoices is proper. Besides, by specific agreement, ownership of the
nets remained with Respondent Philippine Fishing Gear, until full payment
thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision
AFFIRMED. Costs against petitioner.
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.
Vitug, J., pls. see concurring opinion.
Separate Opinions
VITUG, J., concurring opinion;
I share the views expressed in the ponencia of an esteemed colleague, Mr.
Justice Artemio V. Panganiban, particularly the finding that Antonio Chua,
Peter Yao and petitioner Lim Tong Lim have incurred the liabilities of general
partners. I merely would wish to elucidate a bit, albeit briefly, the liability of
partners in a general partnership.
When a person by his act or deed represents himself as a partner in an
existing partnership or with one or more persons not actual partners, he is
deemed an agent of such persons consenting to such representation and in
the same manner, if he were a partner, with respect to persons who rely
upon the representation. 1 The association formed by Chua, Yao and Lim,
should be, as it has been deemed, a de facto partnership with all the
consequent obligations for the purpose of enforcing the rights of third
persons. The liability of general partners (in a general partnership as so
opposed to a limited partnership) is laid down in Article 1816 2 which posits
that all partners shall be liable pro rata beyond the partnership assets for all
the contracts which may have been entered into in its name, under its
signature, and by a person authorized to act for the partnership. This rule is
to be construed along with other provisions of the Civil Code which postulate
that the partners can be held solidarily liable with the partnership specifically
in these instances — (1) where, by any wrongful act or omission of any
partner acting in the ordinary course of the business of the partnership or
with the authority of his co-partners, loss or injury is caused to any person,
not being a partner in the partnership, or any penalty is incurred, the
partnership is liable therefor to the same extent as the partner so acting or
omitting to act; (2) where one partner acting within the scope of his apparent
authority receives money or property of a third person and misapplies it; and
(3) where the partnership in the course of its business receives money or
property of a third person and the money or property so received is
misapplied by any partner while it is in the custody of the partnership 3 —
consistently with the rules on the nature of civil liability in delicts and quasi-
delicts.
SECOND DIVISION
G.R. No. 125221 June 19, 1997
REYNALDO M. LOZANO, petitioner,
vs.
HON. ELIEZER R. DE LOS SANTOS, Presiding Judge, RTC, Br. 58,
Angeles City; and ANTONIO ANDA, respondents.
PUNO, J.:
This petition for certiorari seeks to annul and set aside the decision of the
Regional Trial Court, Branch 58, Angeles City which ordered the Municipal
Circuit Trial Court, Mabalacat and Magalang, Pampanga to dismiss Civil
Case No. 1214 for lack of jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo M.
Lozano filed Civil Case No. 1214 for damages against respondent Antonio
Anda before the Municipal Circuit Trial Court (MCTC), Mabalacat and
Magalang, Pampanga. Petitioner alleged that he was the president of the
Kapatirang Mabalacat-Angeles Jeepney Drivers' Association, Inc.
(KAMAJDA) while respondent Anda was the president of the Samahang
Angeles-Mabalacat Jeepney Operators' and Drivers' Association, Inc.
(SAMAJODA); in August 1995, upon the request of the Sangguniang Bayan
of Mabalacat, Pampanga, petitioner and private respondent agreed to
consolidate their respective associations and form the Unified Mabalacat-
Angeles Jeepney Operators' and Drivers Association, Inc. (UMAJODA);
petitioner and private respondent also agreed to elect one set of officers who
shall be given the sole authority to collect the daily dues from the members
of the consolidated association; elections were held on October 29, 1995
and both petitioner and private respondent ran for president; petitioner won;
private respondent protested and, alleging fraud, refused to recognize the
results of the election; private respondent also refused to abide by their
agreement and continued collecting the dues from the members of his
association despite several demands to desist. Petitioner was thus
constrained to file the complaint to restrain private respondent from collecting
the dues and to order him to pay damages in the amount of P25,000.00 and
attorney's fees of P500.00. 1
Private respondent moved to dismiss the complaint for lack of jurisdiction,
claiming that jurisdiction was lodged with the Securities and Exchange
Commission (SEC). The MCTC denied the motion on February 9, 1996. 2 It
denied reconsideration on March 8, 1996. 3
Private respondent filed a petition for certiorari before the Regional Trial
Court, Branch 58, Angeles City. 4 The trial court found the dispute to be
intracorporate, hence, subject to the jurisdiction of the SEC, and ordered the
MCTC to dismiss Civil Case No. 1214 accordingly. 5 It denied
reconsideration on May 31, 1996. 6
Hence this petition. Petitioner claims that:
THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND SERIOUS ERROR OF LAW IN
CONCLUDING THAT THE SECURITIES AND EXCHANGE
COMMISSION HAS JURISDICTION OVER A CASE OF
DAMAGES BETWEEN HEADS/PRESIDENTS OF TWO (2)
ASSOCIATIONS WHO INTENDED TO
CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT NOT
YET [SIC] APPROVED AND REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION.7
The jurisdiction of the Securities and Exchange Commission (SEC) is set
forth in Section 5 of Presidential Decree No. 902-A. Section 5 reads as
follows:
Sec. 5. . . . [T]he Securities and Exchange Commission [has] partnership or association of which they are stockholders, members or
original and exclusive jurisdiction to hear and decide cases
involving:
(a) Devices or schemes employed by or any acts of the
board of directors, business associates, its officers or
partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or of the supervision and control of corporations, partnership and associations with
stockholders, partners, members of associations or
organizations registered with the Commission.
(b) Controversies arising out of intracorporate or partnership
relations, between and among stockholders, members or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members, or associates, respectively; and between such
corporation, partnership or association and the state insofar
as it concerns their individual franchise or right to exist as
such entity.
(c) Controversies in the election or appointment of directors,
trustees, officers or managers of such corporations,
partnerships or associations.
(d) Petitions of corporations, partnerships or associations to
be declared in the state of suspension of payments in cases
where the corporation, partnership or association possesses
sufficient property to cover all its debts but foresees the
impossibility of meeting them when they respectively fall due
or in cases where the corporation, partnership or association
has no sufficient assets to over its liabilities, but is under the
management of a Rehabilitation Receiver or Management
Committee created pursuant to this Decree.
The grant of jurisdiction to the SEC must be viewed in the light of its
nature and function under the law. 8 This jurisdiction is determined
by a concurrence of two elements: (1) the status or relationship of
the parties; and (2) the nature of the question that is the subject of
their controversy. 9
The first element requires that the controversy must arise out of
intracorporate or partnership relations between and among stockholders,
members, or associates; between any or all of them and the corporation,
associates, respectively; and between such corporation, partnership or
association and the State in so far as it concerns their individual
franchises. 10 The second element requires that the dispute among the
parties be intrinsically connected with the regulation of the corporation,
partnership or association or deal with the internal affairs of the corporation,
partnership or association. 11 After all, the principal function of the SEC is the
the end in view that investments in these entities may be encouraged and
protected, and their entities may be encouraged and protected, and their
activities pursued for the promotion of economic development. 12
There is no intracorporate nor partnership relation between petitioner and
private respondent. The controversy between them arose out of their plan to
consolidate their respective jeepney drivers' and operators' associations into
a single common association. This unified association was, however, still a
proposal. It had not been approved by the SEC, neither had its officers and
members submitted their articles of consolidation is accordance with
Sections 78 and 79 of the Corporation Code. Consolidation becomes
effective not upon mere agreement of the members but only upon issuance
of the certificate of consolidation by the SEC. 13 When the SEC, upon
processing and examining the articles of consolidation, is satisfied that the
consolidation of the corporations is not inconsistent with the provisions of the
Corporation Code and existing laws, it issues a certificate of consolidation
which makes the reorganization official. 14 The new consolidated corporation
comes into existence and the constituent corporations dissolve and cease to
exist. 15
The KAMAJDA and SAMAJODA to which petitioner and private respondent
belong are duly registered with the SEC, but these associations are two
separate entities. The dispute between petitioner and private respondent is
not within the KAMAJDA nor the SAMAJODA. It is between members of
separate and distinct associations. Petitioner and private respondent have
no intracorporate relation much less do they have an intracorporate dispute.
The SEC therefore has no jurisdiction over the complaint.
The doctrine of corporation by estoppel 16 advanced by private respondent
cannot override jurisdictional requirements. Jurisdiction is fixed by law and is
not subject to the agreement of the parties. 17 It cannot be acquired through
or waived, enlarged or diminished by, any act or omission of the parties,
neither can it be conferred by the acquiescence of the court. 18
Corporation by estoppel is founded on principles of equity and is designed to
prevent injustice and unfairness. 19 It applies when persons assume to form
a corporation and exercise corporate functions and enter into business
relations with third person. Where there is no third person involved and the
conflict arises only among those assuming the form of a corporation, who
therefore know that it has not been registered, there is no corporation by
estoppel. 20
IN VIEW WHEREOF, the petition is granted and the decision dated April 18,
1996 and the order dated May 31, 1996 of the Regional Trial Court, Branch
58, Angeles City are set aside. The Municipal Circuit Trial Court of
Mabalacat and Magalang, Pampanga is ordered to proceed with dispatch in
resolving Civil Case No. 1214. No costs.
SO ORDERED.
THIRD DIVISION
G.R. No. 101897. March 5, 1993.
LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF
APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF
CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO,
INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM
OF SOUTHERN PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC.
and WESTERN PANGASINAN LYCEUM, INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for
petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices
for respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF
PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR
TO THAT OF ANY EXISTING CORPORATION, PROHIBITED;
CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE
APPENDING OF GEOGRAPHIC NAMES TO THE WORD "LYCEUM". —
The Articles of Incorporation of a corporation must, among other things, set
out the name of the corporation. Section 18 of the Corporation Code
establishes a restrictive rule insofar as corporate names are concerned:
"Section 18. Corporate name. — No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing corporation or to any
other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. When a change in the corporate name is approved,
the Commission shall issue an amended certificate of incorporation under
the amended name." The policy underlying the prohibition in Section 18
against the registration of a corporate name which is "identical or deceptively
or confusingly similar" to that of any existing corporation or which is "patently
deceptive" or "patently confusing" or "contrary to existing laws," is the
avoidance of fraud upon the public which would have occasion to deal with
the entity concerned, the evasion of legal obligations and duties, and the
reduction of difficulties of administration and supervision over corporations.
We do not consider that the corporate names of private respondent
institutions are "identical with, or deceptively or confusingly similar" to that of
the petitioner institution. True enough, the corporate names of private
respondent entities all carry the word "Lyceum" but confusion and deception
are effectively precluded by the appending of geographic names to the word
"Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be
mistaken by the general public for the Lyceum of the Philippines, or that the
"Lyceum of Camalaniugan" would be confused with the Lyceum of the
Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD
"LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. — It is claimed,
however, by petitioner that the word "Lyceum" has acquired a secondary
meaning in relation to petitioner with the result that word, although originally
a generic, has become appropriable by petitioner to the exclusion of other
institutions like private respondents herein. The doctrine of secondary
meaning originated in the field of trademark law. Its application has,
however, been extended to corporate names sine the right to use a
corporate name to the exclusion of others is based upon the same principle
which underlies the right to use a particular trademark or tradename. In
Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of
secondary meaning was elaborated in the following terms: " . . . a word or
phrase originally incapable of exclusive appropriation with reference to an
article on the market, because geographically or otherwise descriptive, might
nevertheless have been used so long and so exclusively by one producer
with reference to his article that, in that trade and to that branch of the
purchasing public, the word or phrase has come to mean that the article was
his product." The question which arises, therefore, is whether or not the use
by petitioner of "Lyceum" in its corporate name has been for such length of
time and with such exclusivity as to have become associated or identified
with the petitioner institution in the mind of the general public (or at least that
portion of the general public which has to do with schools). The Court of
Appeals recognized this issue and answered it in the negative: "Under the
doctrine of secondary meaning, a word or phrase originally incapable of
exclusive appropriation with reference to an article in the market, because
geographical or otherwise descriptive might nevertheless have been used so
long and so exclusively by one producer with reference to this article that, in
that trade and to that group of the purchasing public, the word or phrase has
come to mean that the article was his produce (Ana Ang vs. Toribio Teodoro,
74 Phil. 56). This circumstance has been referred to as the distinctiveness
into which the name or phrase has evolved through the substantial and
exclusive use of the same for a considerable period of time. . . . No evidence
was ever presented in the hearing before the Commission which sufficiently
proved that the word 'Lyceum' has indeed acquired secondary meaning in
favor of the appellant. If there was any of this kind, the same tend to prove
only that the appellant had been using the disputed word for a long period of
time. . . . In other words, while the appellant may have proved that it had
been using the word 'Lyceum' for a long period of time, this fact alone did not
amount to mean that the said word had acquired secondary meaning in its
favor because the appellant failed to prove that it had been using the same
word all by itself to the exclusion of others. More so, there was no evidence
presented to prove that confusion will surely arise if the same word were to
be used by other educational institutions. Consequently, the allegations of
the appellant in its first two assigned errors must necessarily fail." We agree
with the Court of Appeals. The number alone of the private respondents in
the case at bar suggests strongly that petitioner's use of the word "Lyceum"
has not been attended with the exclusivity essential for applicability of the
doctrine of secondary meaning. Petitioner's use of the word "Lyceum" was
not exclusive but was in truth shared with the Western Pangasinan Lyceum
and a little later with other private respondent institutions which registered
with the SEC using "Lyceum" as part of their corporation names. There may
well be other schools using Lyceum or Liceo in their names, but not
registered with the SEC because they have not adopted the corporate form
of organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE
WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO
ANOTHER CORPORATE ENTITY'S NAME. — petitioner institution is not
entitled to a legally enforceable exclusive right to use the word "Lyceum" in
its corporate name and that other institutions may use "Lyceum" as part of
their corporate names. To determine whether a given corporate name is
"identical" or "confusingly or deceptively similar" with another entity's
corporate name, it is not enough to ascertain the presence of "Lyceum" or
"Liceo" in both names. One must evaluate corporate names in their entirety
and when the name of petitioner is juxtaposed with the names of private
respondents, they are not reasonably regarded as "identical" or "confusingly
or deceptively similar" with each other.
DECISION
FELICIANO, J p:
Petitioner is an educational institution duly registered with the Securities and
Exchange Commission ("SEC"). When it first registered with the SEC on 21
September 1950, it used the corporate name Lyceum of the Philippines, Inc.
and has used that name ever since.
On 24 February 1984, petitioner instituted proceedings before the SEC to
compel the private respondents, which are also educational institutions, to
delete the word "Lyceum" from their corporate names and permanently to
enjoin them from using "Lyceum" as part of their respective names.
Some of the private respondents actively participated in the proceedings
before the SEC. These are the following, the dates of their original SEC
registration being set out below opposite their respective names:
Western Pangasinan Lyceum — 27 October 1950
Lyceum of Cabagan — 31 October 1962
Lyceum of Lallo, Inc. — 26 March 1972
Lyceum of Aparri — 28 March 1972
Lyceum of Tuao, Inc. — 28 March 1972
Lyceum of Camalaniugan — 28 March 1972
The complaint was later withdrawn insofar as concerned the Lyceum of
Malacanay and the Lyceum of Marbel, for failure to serve summons upon
these two (2) entities. The case against the Liceum of Araullo was dismissed
when that school motu proprio change its corporate name to "Pamantasan
ng Araullo."
The background of the case at bar needs some recounting. Petitioner had
sometime before commenced in the SEC a proceeding (SEC-Case No.
1241) against the Lyceum of Baguio, Inc. to require it to change its corporate
name and to adopt another name not "similar [to] or identical" with that of
petitioner. In an Order dated 20 April 1977, Associate Commissioner Julio
Sulit held that the corporate name of petitioner and that of the Lyceum of
Baguio, Inc. were substantially identical because of the presence of a
"dominant" word, i.e., "Lyceum," the name of the geographical location of the
campus being the only word which distinguished one from the other
corporate name. The SEC also noted that petitioner had registered as a
corporation ahead of the Lyceum of Baguio, Inc. in point of time, 1 and
ordered the latter to change its name to another name "not similar or
identical [with]" the names of previously registered entities.

The following private respondents were declared in default for failure to file The Lyceum of Baguio, Inc. assailed the Order of the SEC before the
an answer despite service of summons: Supreme Court in a case docketed as G.R. No. L-46595. In a Minute
Resolution dated 14 September 1977, the Court denied the Petition for
Review for lack of merit. Entry of judgment in that case was made on 21
Buhi Lyceum;
October 1977. 2
Central Lyceum of Catanduanes;
Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then
wrote all the educational institutions it could find using the word "Lyceum" as
Lyceum of Eastern Mindanao, Inc.; and part of their corporate name, and advised them to discontinue such use of
"Lyceum." When, with the passage of time, it became clear that this recourse
Lyceum of Southern Philippines had failed, petitioner instituted before the SEC SEC-Case No. 2579 to
enforce what petitioner claims as its proprietary right to the word "Lyceum."
Petitioner's original complaint before the SEC had included three (3) other The SEC hearing officer rendered a decision sustaining petitioner's claim to
entities: an exclusive right to use the word "Lyceum." The hearing officer relied upon
the SEC ruling in the Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and
1. The Lyceum of Malacanay; held that the word "Lyceum" was capable of appropriation and that petitioner
had acquired an enforceable exclusive right to the use of that word.
2. The Lyceum of Marbel; and
On appeal, however, by private respondents to the SEC En Banc, the
decision of the hearing officer was reversed and set aside. The SEC En
3. The Lyceum of Araullo Banc did not consider the word "Lyceum" to have become so identified with
petitioner as to render use thereof by other institutions as productive of
confusion about the identity of the schools concerned in the mind of the
general public. Unlike its hearing officer, the SEC En Banc held that the
attaching of geographical names to the word "Lyceum" served sufficiently to
distinguish the schools from one another, especially in view of the fact that
the campuses of petitioner and those of the private respondents were
physically quite remote from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its Decision dated
28 June 1991, however, the Court of Appeals affirmed the questioned
Orders of the SEC En Banc. 4 Petitioner filed a motion for reconsideration,
without success.
Before this Court, petitioner asserts that the Court of Appeals committed the
following errors:
1. The Court of Appeals erred in holding that the Resolution of the Supreme
Court in G.R. No. L-46595 did not constitute stare decisis as to apply to this
case and in not holding that said Resolution bound subsequent
determinations on the right to exclusive use of the word Lyceum.
2. The Court of Appeals erred in holding that respondent Western
Pangasinan Lyceum, Inc. was incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has not
acquired a secondary meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic word
cannot be appropriated by the petitioner to the exclusion of others. 5
We will consider all the foregoing ascribed errors, though not necessarily
seriatim. We begin by noting that the Resolution of the Court in G.R. No. L-
46595 does not, of course, constitute res adjudicata in respect of the case at
bar, since there is no identity of parties. Neither is stare decisis pertinent, if
only because the SEC En Banc itself has re-examined Associate
Commissioner Sulit's ruling in the Lyceum of Baguio case. The Minute
Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption of
the Sulit ruling.
The Articles of Incorporation of a corporation must, among other things, set
out the name of the corporation. 6 Section 18 of the Corporation Code
establishes a restrictive rule insofar as corporate names are concerned:
"SECTION 18. Corporate name. — No corporate name may be allowed by
the Securities an Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing corporation or to any
other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. When a change in the corporate name is approved,
the Commission shall issue an amended certificate of incorporation under
the amended name." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the registration of
a corporate name which is "identical or deceptively or confusingly similar" to
that of any existing corporation or which is "patently deceptive" or "patently
confusing" or "contrary to existing laws," is the avoidance of fraud upon the
public which would have occasion to deal with the entity concerned, the
evasion of legal obligations and duties, and the reduction of difficulties of
administration and supervision over corporations. 7
We do not consider that the corporate names of private respondent
institutions are "identical with, or deceptively or confusingly similar" to that of
the petitioner institution. True enough, the corporate names of private
respondent entities all carry the word "Lyceum" but confusion and deception
are effectively precluded by the appending of geographic names to the word
"Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be
mistaken by the general public for the Lyceum of the Philippines, or that the
"Lyceum of Camalaniugan" would be confused with the Lyceum of the
Philippines.
Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion
which in turn referred to a locality on the river Ilissius in ancient Athens
"comprising an enclosure dedicated to Apollo and adorned with fountains
and buildings erected by Pisistratus, Pericles and Lycurgus frequented by
the youth for exercise and by the philosopher Aristotle and his followers for
teaching." 8 In time, the word "Lyceum" became associated with schools and
other institutions providing public lectures and concerts and public
discussions. Thus today, the word "Lyceum" generally refers to a school or
an institution of learning. While the Latin word "lyceum" has been
incorporated into the English language, the word is also found in Spanish
(liceo) and in French (lycee). As the Court of Appeals noted in its Decision,
Roman Catholic schools frequently use the term; e.g., "Liceo de Manila,"
"Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo de
Albay." 9 "Lyceum" is in fact as generic in character as the word "university."
In the name of the petitioner, "Lyceum" appears to be a substitute for
"university;" in other places, however, "Lyceum," or "Liceo" or "Lycee"
frequently denotes a secondary school or a college. It may be (though this is
a question of fact which we need not resolve) that the use of the word
"Lyceum" may not yet be as widespread as the use of "university," but it is
clear that a not inconsiderable number of educational institutions have
adopted "Lyceum" or "Liceo" as part of their corporate names. Since
"Lyceum" or "Liceo" denotes a school or institution of learning, it is not
unnatural to use this word to designate an entity which is organized and
operating as an educational institution.
It is claimed, however, by petitioner that the word "Lyceum" has acquired a
secondary meaning in relation to petitioner with the result that that word,
although originally a generic, has become appropriable by petitioner to the
exclusion of other institutions like private respondents herein.
The doctrine of secondary meaning originated in the field of trademark law.
Its application has, however, been extended to corporate names sine the
right to use a corporate name to the exclusion of others is based upon the
same principle which underlies the right to use a particular trademark or
tradename. 10 In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11
the doctrine of secondary meaning was elaborated in the following terms:
" . . . a word or phrase originally incapable of exclusive appropriation with
reference to an article on the market, because geographically or otherwise
descriptive, might nevertheless have been used so long and so exclusively
by one producer with reference to his article that, in that trade and to that
branch of the purchasing public, the word or phrase has come to mean that
the article was his product." 12
The question which arises, therefore, is whether or not the use by petitioner
of "Lyceum" in its corporate name has been for such length of time and with
such exclusivity as to have become associated or identified with the
petitioner institution in the mind of the general public (or at least that portion
of the general public which has to do with schools). The Court of Appeals
recognized this issue and answered it in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally
incapable of exclusive appropriation with reference to an article in the
market, because geographical or otherwise descriptive might nevertheless
have been used so long and so exclusively by one producer with reference
to this article that, in that trade and to that group of the purchasing public, the
word or phrase has come to mean that the article was his produce (Ana Ang
vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been referred to as
the distinctiveness into which the name or phrase has evolved through the
substantial and exclusive use of the same for a considerable period of time.
Consequently, the same doctrine or principle cannot be made to apply where
the evidence did not prove that the business (of the plaintiff) has continued
for so long a time that it has become of consequence and acquired a good
will of considerable value such that its articles and produce have acquired a
well-known reputation, and confusion will result by the use of the disputed
name (by the defendant) (Ang Si Heng vs. Wellington Department Store,
Inc., 92 Phil. 448).
With the foregoing as a yardstick, [we] believe the appellant failed to satisfy
the aforementioned requisites. No evidence was ever presented in the
hearing before the Commission which sufficiently proved that the word
'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If
there was any of this kind, the same tend to prove only that the appellant had
been using the disputed word for a long period of time. Nevertheless, its
(appellant) exclusive use of the word (Lyceum) was never established or
proven as in fact the evidence tend to convey that the cross-claimant was
already using the word 'Lyceum' seventeen (17) years prior to the date the
appellant started using the same word in its corporate name. Furthermore,
educational institutions of the Roman Catholic Church had been using the
same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno,
Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant started
using the word 'Lyceum'. The appellant also failed to prove that the word
'Lyceum' has become so identified with its educational institution that
confusion will surely arise in the minds of the public if the same word were to
be used by other educational institutions.
In other words, while the appellant may have proved that it had been using
the word 'Lyceum' for a long period of time, this fact alone did not amount to
mean that the said word had acquired secondary meaning in its favor
because the appellant failed to prove that it had been using the same word
all by itself to the exclusion of others. More so, there was no evidence
presented to prove that confusion will surely arise if the same word were to
be used by other educational institutions. Consequently, the allegations of
the appellant in its first two assigned errors must necessarily fail." 13
(Underscoring partly in the original and partly supplied)
We agree with the Court of Appeals. The number alone of the private
respondents in the case at bar suggests strongly that petitioner's use of the
word "Lyceum" has not been attended with the exclusivity essential for
applicability of the doctrine of secondary meaning. It may be noted also that
at least one of the private respondents, i.e., the Western Pangasinan
Lyceum, Inc., used the term "Lyceum" seventeen (17) years before the
petitioner registered its own corporate name with the SEC and began using
the word "Lyceum." It follows that if any institution had acquired an exclusive
right to the word "Lyceum," that institution would have been the Western
Pangasinan Lyceum, Inc. rather than the petitioner institution.
In this connection, petitioner argues that because the Western Pangasinan
Lyceum, Inc. failed to reconstruct its records before the SEC in accordance
with the provisions of R.A. No. 62, which records had been destroyed during
World War II, Western Pangasinan Lyceum should be deemed to have lost
all rights it may have acquired by virtue of its past registration. It might be
noted that the Western Pangasinan Lyceum, Inc. registered with the SEC
soon after petitioner had filed its own registration on 21 September 1950.
Whether or not Western Pangasinan Lyceum, Inc. must be deemed to have
lost its rights under its original 1933 registration, appears to us to be quite
secondary in importance; we refer to this earlier registration simply to
underscore the fact that petitioner's use of the word "Lyceum" was neither
the first use of that term in the Philippines nor an exclusive use thereof.
Petitioner's use of the word "Lyceum" was not exclusive but was in truth
shared with the Western Pangasinan Lyceum and a little later with other
private respondent institutions which registered with the SEC using "Lyceum"
as part of their corporation names. There may well be other schools using
Lyceum or Liceo in their names, but not registered with the SEC because
they have not adopted the corporate form of organization.
We conclude and so hold that petitioner institution is not entitled to a legally
enforceable exclusive right to use the word "Lyceum" in its corporate name
and that other institutions may use "Lyceum" as part of their corporate
names. To determine whether a given corporate name is "identical" or
"confusingly or deceptively similar" with another entity's corporate name, it is
not enough to ascertain the presence of "Lyceum" or "Liceo" in both names.
One must evaluate corporate names in their entirety and when the name of
petitioner is juxtaposed with the names of private respondents, they are not
reasonably regarded as "identical" or "confusingly or deceptively similar" with
each other.
WHEREFORE, the petitioner having failed to show any reversible error on
the part of the public respondent Court of Appeals, the Petition for Review is
DENIED for lack of merit, and the Decision of the Court of Appeals dated 28
June 1991 is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
SECOND DIVISION
G.R. No. 122174 October 3, 2002
INDUSTRIAL REFRACTORIES CORPORATION OF THE
PHILIPPINES, petitioner,
vs.
COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and
REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents.
AUSTRIA-MARTINEZ, J.:
Filed before us is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the Decision of the Court of Appeals in CA-G.R. SP
No. 35056, denying due course and dismissing the petition filed by Industrial
Refractories Corp. of the Philippines (IRCP).
Respondent Refractories Corporation of the Philippines (RCP) is a
corporation duly organized on October 13, 1976 for the purpose of engaging
in the business of manufacturing, producing, selling, exporting and otherwise
dealing in any and all refractory bricks, its by-products and derivatives. On
June 22, 1977, it registered its corporate and business name with the Bureau
of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979
originally under the name "Synclaire Manufacturing Corporation". It amended
its Articles of Incorporation on August 23, 1985 to change its corporate name
to "Industrial Refractories Corp. of the Philippines". It is engaged in the
business of manufacturing all kinds of ceramics and other products, except
paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix.1
Discovering that petitioner was using such corporate name, respondent RCP
filed on April 14, 1988 with the Securities and Exchange Commission (SEC)
a petition to compel petitioner to change its corporate name on the ground
that its corporate name is confusingly similar with that of petitioner’s such
that the public may be confused or deceived into believing that they are one
and the same corporation.2
The SEC decided in favor of respondent RCP and rendered judgment on
July 23, 1993 with the following dispositive portion:
"WHEREFORE, judgment is hereby rendered in favor of the petitioner and
against the respondent declaring the latter’s corporate name ‘Industrial
Refractories Corporation of the Philippines’ as deceptively and confusingly
similar to that of petitioner’s corporate name ‘Refractories Corporation of the
Philippines’. Accordingly, respondent is hereby directed to amend its Articles
of Incorporation by deleting the name ‘Refractories Corporation of the
Philippines’ in its corporate name within thirty (30) days from finality of this
Decision. Likewise, respondent is hereby ordered to pay the petitioner the
sum of P50,000.00 as attorney’s fees."3
Petitioner appealed to the SEC En Banc, arguing that it does not have any
jurisdiction over the case, and that respondent RCP has no right to the
exclusive use of its corporate name as it is composed of generic or common
words.4
In its Decision dated July 23, 1993, the SEC En Banc modified the appealed
decision in that petitioner was ordered to delete or drop from its corporate
name only the word "Refractories".5
Petitioner IRCP elevated the decision of the SEC En Banc through a petition
for review on certiorari to the Court of Appeals which then rendered the
herein assailed decision. The appellate court upheld the jurisdiction of the
SEC over the case and ruled that the corporate names of petitioner IRCP
and respondent RCP are confusingly or deceptively similar, and that
respondent RCP has established its prior right to use the word "Refractories"
as its corporate name.6 The appellate court also found that the petition was
filed beyond the reglementary period.7
Hence, herein petition which we must deny.
Petitioner contends that the petition before the Court of Appeals was timely
filed. It must be noted that at the time the SEC En Banc rendered its decision substantial evidence, is final.17
on May 10, 1994, the governing rule on appeals from quasi-judicial agencies
like the SEC was Supreme Court Circular No. 1-91. As provided therein,
the remedy should have been a petition for review filed before the Court of
Appeals within fifteen (15) days from notice, raising questions of fact, of law,
8
or mixed questions of fact and law. A motion for reconsideration suspends
the running of the period.9
In the case at bench, there is a discrepancy between the dates provided by
petitioner and respondent. Petitioner alleges the following dates of receipt
10
and filing:
June 10, 1994 Receipt of SEC’s Decision dated May 10, 1994
June 20, 1994 Filing of Motion for Reconsideration
September 1, 1994 Receipt of SEC’s Order dated August 3, 1994
denying petitioner’s motion for reconsideration
September 2, 1994 Filing of Motion for extension of time
September 6, 1994 Filing of Petition
Respondent RCP, however, asserts that the foregoing dates are incorrect as
the certifications issued by the SEC show that petitioner received the SEC’s
Decision dated May 10, 1994 on June 9, 1994, filed the motion for
reconsideration via registered mail on June 25, 1994, and received the Order
dated August 3, 1994 on August 15, 1994.11 Thus, the petition was filed
twenty-one (21) days beyond the reglementary period provided in Supreme
Court Circular No. 1-91.12
If reckoned from the dates supplied by petitioner, then the petition was timely
filed. On the other hand, if reckoned from the dates provided by respondent
RCP, then it was filed way beyond the reglementary period. On this score,
we agree with the appellate court’s finding that petitioner failed to rebut
respondent RCP’s allegations of material dates of receipt and filing.13 In
addition, the certifications were executed by the SEC officials based on their
official records14 which enjoy the presumption of regularity.15 As such, these
are prima facie evidence of the facts stated therein.16 And based on such
dates, there is no question that the petition was filed with the Court of
Appeals beyond the fifteen (15) day period. On this ground alone, the instant
petition should be denied as the SEC En Banc’s decision had already
attained finality and the SEC’s findings of fact, when supported by
Nevertheless, to set the matters at rest, we shall delve into the other issues
posed by petitioner.
Petitioner’s arguments, substantially, are as follows: (1) jurisdiction is vested
with the regular courts as the present case is not one of the instances
provided in P.D. 902-A; (2) respondent RCP is not entitled to use the generic
name "refractories"; (3) there is no confusing similarity between their
corporate names; and (4) there is no basis for the award of attorney’s fees.18
Petitioner’s argument on the SEC’s jurisdiction over the case is utterly
myopic. The jurisdiction of the SEC is not merely confined to the adjudicative
functions provided in Section 5 of P.D. 902-A, as amended.19 By express
mandate, it has absolute jurisdiction, supervision and control over all
corporations.20 It also exercises regulatory and administrative powers to
implement and enforce the Corporation Code,21 one of which is Section 18,
which provides:
"SEC. 18. Corporate name. -- No corporate name may be allowed by the
Securities and Exchange Commission if the proposed name is identical or
deceptively or confusingly similar to that of any existing corporation or to any
other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. When a change in the corporate name is approved,
the Commission shall issue an amended certificate of incorporation under
the amended name."
It is the SEC’s duty to prevent confusion in the use of corporate names not
only for the protection of the corporations involved but more so for the
protection of the public, and it has authority to de-register at all times and
under all circumstances corporate names which in its estimation are likely to
generate confusion.22 Clearly therefore, the present case falls within the
ambit of the SEC’s regulatory powers.23
Likewise untenable is petitioner’s argument that there is no confusing or
deceptive similarity between petitioner and respondent RCP’s corporate
names. Section 18 of the Corporation Code expressly prohibits the use of
a corporate name which is "identical or deceptively or confusingly similar to
that of any existing corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to existing laws". The
policy behind the foregoing prohibition is to avoid fraud upon the public that
will have occasion to deal with the entity concerned, the evasion of legal
obligations and duties, and the reduction of difficulties of administration and
supervision over corporation.24
Pursuant thereto, the Revised Guidelines in the Approval of Corporate and
Partnership Names25 specifically requires that: (1) a corporate name shall
not be identical, misleading or confusingly similar to one already registered
by another corporation with the Commission;26 and (2) if the proposed name
is similar to the name of a registered firm, the proposed name must contain
at least one distinctive word different from the name of the company already
registered.27
As held in Philips Export B.V. vs. Court of Appeals,28 to fall within the
prohibition of the law, two requisites must be proven, to wit:
(1) that the complainant corporation acquired a prior right over the use of
such corporate name;
and
(2) the proposed name is either: (a) identical, or (b) deceptively or
confusingly similar to that of any existing corporation or to any other name
already protected by law; or (c) patently deceptive, confusing or contrary to
existing law.
As regards the first requisite, it has been held that the right to the exclusive
use of a corporate name with freedom from infringement by similarity is
determined by priority of adoption.29 In this case, respondent RCP was
incorporated on October 13, 1976 and since then has been using the
corporate name "Refractories Corp. of the Philippines". Meanwhile, petitioner
was incorporated on August 23, 1979 originally under the name "Synclaire
Manufacturing Corporation". It only started using the name "Industrial
Refractories Corp. of the Philippines" when it amended its Articles of
Incorporation on August 23, 1985, or nine (9) years after respondent RCP
started using its name. Thus, being the prior registrant, respondent RCP has
acquired the right to use the word "Refractories" as part of its corporate
name.
Anent the second requisite, in determining the existence of confusing
similarity in corporate names, the test is whether the similarity is such as to
mislead a person using ordinary care and discrimination and the Court must
look to the record as well as the names themselves.30 Petitioner’s corporate
name is "Industrial Refractories Corp. of the Phils.", while respondent’s is
"Refractories Corp. of the Phils." Obviously, both names contain the identical
words "Refractories", "Corporation" and "Philippines". The only word that
distinguishes petitioner from respondent RCP is the word "Industrial" which
merely identifies a corporation’s general field of activities or operations. We
need not linger on these two corporate names to conclude that they are
patently similar that even with reasonable care and observation, confusion
might arise.31 It must be noted that both cater to the same clientele, i.e.¸ the
steel industry. In fact, the SEC found that there were instances when
different steel companies were actually confused between the two, especially
since they also have similar product packaging.32 Such findings are accorded
not only great respect but even finality, and are binding upon this Court,
unless it is shown that it had arbitrarily disregarded or misapprehended
evidence before it to such an extent as to compel a contrary conclusion had
such evidence been properly appreciated. 33 And even without such proof of
actual confusion between the two corporate names, it suffices that confusion
is probable or likely to occur.34
Refractory materials are described as follows:
"Refractories are structural materials used at high temperatures to [sic]
industrial furnaces. They are supplied mainly in the form of brick of standard
sizes and of special shapes. Refractories also include refractory cements,
bonding mortars, plastic firebrick, castables, ramming mixtures, and other
bulk materials such as dead-burned grain magneside, chrome or ground
ganister and special clay."35
While the word "refractories" is a generic term, its usage is not widespread
and is limited merely to the industry/trade in which it is used, and its
continuous use by respondent RCP for a considerable period has made the
term so closely identified with it. 36 Moreover, as held in the case of Ang
Kaanib sa Iglesia ng Dios kay Kristo Hesus, H.S.K. sa Bansang
Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo Jesus, Haligi at Suhay ng
Katotohanan,petitioner’s appropriation of respondent's corporate name
cannot find justification under the generic word rule. 37 A contrary ruling
would encourage other corporations to adopt verbatim and register an
existing and protected corporate name, to the detriment of the public.38
Finally, we find the award of P50,000.00 as attorney's fees to be fair and
reasonable. Article 2208 of the Civil Code allows the award of such fees
when its claimant is compelled to litigate with third persons or to incur
expenses to protect its just and valid claim. In this case, despite its
undertaking to change its corporate name in case another firm has acquired
a prior right to use such name,39 it refused to do so, thus compelling
respondent to undergo litigation and incur expenses to protect its corporate
name.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED
for lack of merit.
Costs against petitioner.
SO ORDERED.
EN BANC
G.R. No. L-2598 June 29, 1950
C. ARNOLD HALL and BRADLEY P. HALL, petitioners,
vs.
EDMUNDO S. PICCIO, Judge of the Court of First Instance of Leyte,
FRED BROWN, EMMA BROWN, HIPOLITA CAPUCIONG, in his capacity
as receiver of the Far Eastern Lumber and Commercial Co.,
Inc.,respondents.
Claro M. Recto for petitioners.
Ramon Diokno and Jose W. Diokno for respondents.
BENGZON, J.:
This is petition to set aside all the proceedings had in civil case No. 381 of
the Court of First Instance of Leyte and to enjoin the respondent judge from
further acting upon the same.
Facts: (1) on May 28, 1947, the petitioners C. Arnold Hall and Bradley P.
Hall, and the respondents Fred Brown, Emma Brown, Hipolita D. Chapman
and Ceferino S. Abella, signed and acknowledged in Leyte, the article of
incorporation of the Far Eastern Lumber and Commercial Co., Inc.,
organized to engage in a general lumber business to carry on as general
contractors, operators and managers, etc. Attached to the article was an
affidavit of the treasurer stating that 23,428 shares of stock had been
subscribed and fully paid with certain properties transferred to the
corporation described in a list appended thereto.
(2) Immediately after the execution of said articles of incorporation, the
corporation proceeded to do business with the adoption of by-laws and the
election of its officers.
(3) On December 2, 1947, the said articles of incorporation were filed in the
office of the Securities and Exchange Commissioner, for the issuance of the
corresponding certificate of incorporation.
(4) On March 22, 1948, pending action on the articles of incorporation by the
aforesaid governmental office, the respondents Fred Brown, Emma Brown,
Hipolita D. Chapman and Ceferino S. Abella filed before the Court of First
Instance of Leyte the civil case numbered 381, entitled "Fred Brown et al. vs.
Arnold C. Hall et al.", alleging among other things that the Far Eastern
Lumber and Commercial Co. was an unregistered partnership; that they
wished to have it dissolved because of bitter dissension among the
members, mismanagement and fraud by the managers and heavy financial
losses.
(5) The defendants in the suit, namely, C. Arnold Hall and Bradley P. Hall,
filed a motion to dismiss, contesting the court's jurisdiction and the
sufficiently of the cause of action.
(6) After hearing the parties, the Hon. Edmund S. Piccio ordered the
dissolution of the company; and at the request of plaintiffs, appointed of the
properties thereof, upon the filing of a P20,000 bond.
(7) The defendants therein (petitioners herein) offered to file a counter-bond
for the discharge of the receiver, but the respondent judge refused to accept
the offer and to discharge the receiver. Whereupon, the present special civil
action was instituted in this court. It is based upon two main propositions, to
wit:
(a) The court had no jurisdiction in civil case No. 381 to decree the
dissolution of the company, because it being a de facto corporation,
dissolution thereof may only be ordered in a quo warranto proceeding
instituted in accordance with section 19 of the Corporation Law.
(b) Inasmuch as respondents Fred Brown and Emma Brown had signed the
article of incorporation but only a partnership.
Discussion: The second proposition may at once be dismissed. All the
parties are informed that the Securities and Exchange Commission has not,
so far, issued the corresponding certificate of incorporation. All of them
know, or sought to know, that the personality of a corporation begins to exist
only from the moment such certificate is issued — not before (sec. 11,
Corporation Law). The complaining associates have not represented to the
others that they were incorporated any more than the latter had made similar
representations to them. And as nobody was led to believe anything to his
prejudice and damage, the principle of estoppel does not apply. Obviously
this is not an instance requiring the enforcement of contracts with the
corporation through the rule of estoppel.
The first proposition above stated is premised on the theory that, inasmuch
as the Far Eastern Lumber and Commercial Co., is a de facto corporation,
section 19 of the Corporation Law applies, and therefore the court had not
jurisdiction to take cognizance of said civil case number 381. Section 19
reads as follows:
. . . The due incorporation of any corporations claiming in good faith
to be a corporation under this Act and its right to exercise corporate
powers shall not be inquired into collaterally in any private suit to
which the corporation may be a party, but such inquiry may be had
at the suit of the Insular Government on information of the Attorney-
General.
There are least two reasons why this section does not govern the situation.
Not having obtained the certificate of incorporation, the Far Eastern Lumber
and Commercial Co. — even its stockholders — may not probably claim "in
good faith" to be a corporation.
Under our statue it is to be noted (Corporation Law, sec. 11) that it is
the issuance of a certificate of incorporation by the Director of the
Bureau of Commerce and Industry which calls a corporation into
being. The immunity if collateral attack is granted to corporations
"claiming in good faith to be a corporation under this act." Such a
claim is compatible with the existence of errors and irregularities; but
not with a total or substantial disregard of the law. Unless there has
been an evident attempt to comply with the law the claim to be a
corporation "under this act" could not be made "in good faith."
(Fisher on the Philippine Law of Stock Corporations, p. 75. See
also Humphreys vs. Drew, 59 Fla., 295; 52 So., 362.)
Second, this is not a suit in which the corporation is a party. This is a
litigation between stockholders of the alleged corporation, for the purpose of
obtaining its dissolution. Even the existence of a de jure corporation may be
terminated in a private suit for its dissolution between stockholders, without
the intervention of the state.
There might be room for argument on the right of minority stockholders to
sue for dissolution;1 but that question does not affect the court's jurisdiction,
and is a matter for decision by the judge, subject to review on appeal. Whkch
brings us to one principal reason why this petition may not prosper, namely:
the petitioners have their remedy by appealing the order of dissolution at the
proper time.
There is a secondary issue in connection with the appointment of a receiver.
But it must be admitted that receivership is proper in proceedings for
dissolution of a company or corporation, and it was no error to reject the
counter-bond, the court having declared the dissolution. As to the amount of
the bond to be demanded of the receiver, much depends upon the discretion
of the trial court, which in this instance we do not believe has been clearly
abused.
Judgment: The petition will, therefore, be dismissed, with costs. The
preliminary injunction heretofore issued will be dissolved.
SECOND DIVISION
G.R. No. 150416 July 21, 2006
SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN
PHILIPPINES, INC., and/or represented by MANASSEH C. ARRANGUEZ,
BRIGIDO P. GULAY, FRANCISCO M. LUCENARA, DIONICES O.
TIPGOS, LORESTO C. MURILLON, ISRAEL C. NINAL, GEORGE G.
SOMOSOT, JESSIE T. ORBISO, LORETO PAEL and JOEL
BACUBAS, petitioners,
vs.
NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST,
INC., and/or represented by JOSUE A. LAYON, WENDELL M.
SERRANO, FLORANTE P. TY and JETHRO CALAHAT and/or SEVENTH
DAY ADVENTIST CHURCH [OF] NORTHEASTERN MINDANAO
MISSION,* Respondents.
DECISION
CORONA, J.:
This petition for review on certiorari assails the Court of Appeals (CA)
decision1 and resolution2 in CA-G.R. CV No. 41966 affirming, with
modification, the decision of the Regional Trial Court (RTC) of Bayugan,
Agusan del Sur, Branch 7 in Civil Case No. 63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title
(TCT) No. 4468 in Bayugan, Agusan del Sur originally owned by Felix Cosio
and his wife, Felisa Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the South
Philippine Union Mission of Seventh Day Adventist Church of Bayugan
Esperanza, Agusan (SPUM-SDA Bayugan).3 Part of the deed of donation
read:
KNOW ALL MEN BY THESE PRESENTS:
That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,] 40 years of
age, [h]usband and wife, both are citizen[s] of the Philippines, and resident[s]
with post office address in the Barrio of Bayugan, Municipality of Esperanza,
Province of Agusan, Philippines, do hereby grant, convey and forever quit
claim by way of Donation or gift unto the South Philippine [Union] Mission of
Seventh Day Adventist Church of Bayugan, Esperanza, Agusan, all the
rights, title, interest, claim and demand both at law and as well in possession
as in expectancy of in and to all the place of land and portion situated in the
Barrio of Bayugan, Municipality of Esperanza, Province of Agusan,
Philippines, more particularly and bounded as follows, to wit:
1. a parcel of land for Church Site purposes only.
2. situated [in Barrio Bayugan, Esperanza].
3. Area: 30 meters wide and 30 meters length or 900 square meters.
4. Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No. P-
285.
5. Bounded Areas
North by National High Way; East by Bricio Gerona; South by Serapio
Abijaron and West by Feliz Cosio xxx. 4
The donation was allegedly accepted by one Liberato Rayos, an elder of the
Seventh Day Adventist Church, on behalf of the donee.
Twenty-one years later, however, on February 28, 1980, the same parcel of
land was sold by the spouses Cosio to the Seventh Day Adventist Church of
Northeastern Mindanao Mission (SDA-NEMM).5 TCT No. 4468 was
thereafter issued in the name of SDA-NEMM.6
Claiming to be the alleged donee’s successors-in-interest, petitioners
asserted ownership over the property. This was opposed by respondents
who argued that at the time of the donation, SPUM-SDA Bayugan could not
legally be a donee
because, not having been incorporated yet, it had no juridical personality.
Neither were petitioners members of the local church then, hence, the
donation could not have been made particularly to them.
On September 28, 1987, petitioners filed a case, docketed as Civil Case No. But there are stringent requirements before one can qualify as a de
63 (a suit for cancellation of title, quieting of ownership and possession,
declaratory relief and reconveyance with prayer for preliminary injunction and
damages), in the RTC of Bayugan, Agusan del Sur. After trial, the trial court (a) the existence of a valid law under which it may be incorporated;
rendered a decision7 on November 20, 1992 upholding the sale in favor of
respondents.
On appeal, the CA affirmed the RTC decision but deleted the award of moral
damages and attorney’s fees.8Petitioners’ motion for reconsideration was
likewise denied. Thus, this petition.
The issue in this petition is simple: should SDA-NEMM’s ownership of the lot
covered by TCT No. 4468 be upheld?9We answer in the affirmative.
The controversy between petitioners and respondents involves two
supposed transfers of the lot previously owned by the spouses Cosio: (1) a
donation to petitioners’ alleged predecessors-in-interest in 1959 and (2) a
sale to respondents in 1980.
Donation is undeniably one of the modes of acquiring ownership of real
property. Likewise, ownership of a property may be transferred by tradition
as a consequence of a sale.
Petitioners contend that the appellate court should not have ruled on the
validity of the donation since it was not among the issues raised on appeal.
This is not correct because an appeal generally opens the entire case for
review.
We agree with the appellate court that the alleged donation to petitioners
was void.
Donation is an act of liberality whereby a person disposes gratuitously of a
thing or right in favor of another personwho accepts it. The donation could
not have been made in favor of an entity yet inexistent at the time it was
made. Nor could it have been accepted as there was yet no one to accept it.
The deed of donation was not in favor of any informal group of SDA
members but a supposed SPUM-SDA Bayugan (the local church) which, at
the time, had neither juridical personality nor capacity to accept such gift.
Declaring themselves a de facto corporation, petitioners allege that they
should benefit from the donation.
facto corporation:
(b) an attempt in good faith to incorporate; and
(c) assumption of corporate powers.10
While there existed the old Corporation Law (Act 1459),11 a law under which
SPUM-SDA Bayugan could have been organized, there is no proof that there
was an attempt to incorporate at that time.
The filing of articles of incorporation and the issuance of the certificate of
incorporation are essential for the existence of a de facto corporation.12 We
have held that an organization not registered with the Securities and
Exchange Commission (SEC) cannot be considered a corporation in any
concept, not even as a corporation de facto.13 Petitioners themselves
admitted that at the time of the donation, they were not registered with the
SEC, nor did they even attempt to organize14 to comply with legal
requirements.
Corporate existence begins only from the moment a certificate of
incorporation is issued. No such certificate was ever issued to petitioners or
their supposed predecessor-in-interest at the time of the donation.
Petitioners obviously could not have claimed succession to an entity that
never came to exist. Neither could the principle of separate juridical
personality apply since there was never any corporation15 to speak of. And,
as already stated, some of the representatives of petitioner Seventh Day
Adventist Conference Church of Southern Philippines, Inc. were not even
members of the local church then, thus, they could not even claim that the
donation was particularly for them.16
"The de facto doctrine thus effects a compromise between two conflicting
public interest[s]—the one opposed to an unauthorized assumption of
corporate privileges; the other in favor of doing justice to the parties and of
establishing a general assurance of security in business dealing with
corporations."17
Generally, the doctrine exists to protect the public dealing with supposed
corporate entities, not to favor the defective or non-existent corporation.18
In view of the foregoing, petitioners’ arguments anchored on their
supposed de facto status hold no water. We are convinced that there was no
donation to petitioners or their supposed predecessor-in-interest.
On the other hand, there is sufficient basis to affirm the title of SDA-NEMM.
The factual findings of the trial court in this regard were not convincingly
disputed. This Court is not a trier of facts. Only questions of law are the
proper subject of a petition for review on certiorari.19
Sustaining the validity of respondents’ title as well as their right of ownership
over the property, the trial court stated:
[W]hen Felix Cosio was shown the Absolute Deed of Sale during the hearing
xxx he acknowledged that the same was his xxx but that it was not his
intention to sell the controverted property because he had previously
donated the same lot to the South Philippine Union Mission of SDA Church
of Bayugan-Esperanza. Cosio avouched that had it been his intendment to
sell, he would not have disposed of it for a mere P2,000.00 in two
installments but for P50,000.00 or P60,000.00. According to him,
the P2,000.00 was not a consideration of the sale but only a form of help
extended.
A thorough analysis and perusal, nonetheless, of the Deed of Absolute
Sale disclosed that it has the essential requisites of contracts pursuant
to xxx Article 1318 of the Civil Code, except that the consideration
of P2,000.00 is somewhat insufficient for a [1,069-square meter] land. Would
then this inadequacy of the consideration render the contract invalid?
Article 1355 of the Civil Code provides:
Except in cases specified by law, lesion or inadequacy of cause shall not
invalidate a contract, unless there has been fraud, mistake or undue
influence.
No evidence [of fraud, mistake or undue influence] was adduced by
[petitioners].
xxx
Well-entrenched is the rule that a Certificate of Title is generally a
conclusive evidence of [ownership] of the land. There is that strong and
solid presumption that titles were legally issued and that they are valid. It is
irrevocable and indefeasible and the duty of the Court is to see to it that the
title is maintained and respected unless challenged in a direct proceeding.
xxx The title shall be received as evidence in all the Courts and shall be
conclusive as to all matters contained therein.
[This action was instituted almost seven years after the certificate of title in
respondents’ name was issued in 1980.]20
According to Art. 1477 of the Civil Code, the ownership of the thing sold shall
be transferred to the vendee upon the actual or constructive delivery thereof.
On this, the noted author Arturo Tolentino had this to say:
The execution of [a] public instrument xxx transfers the ownership from the
vendor to the vendee who may thereafter exercise the rights of an owner
over the same21
Here, transfer of ownership from the spouses Cosio to SDA-NEMM was
made upon constructive delivery of the property on February 28, 1980 when
the sale was made through a public instrument.22 TCT No. 4468 was
thereafter issued and it remains in the name of SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.