same time save on inheritance taxes.
The "Deed of
CORPORATE CONTRACT LAW – PLACE OF BUSINESS CASES
- DIGEST
(1) Delpher Trades Corp. VS IAC
[DELPHER TRADES CORPORATION, and DELPHIN
PACHECO, vs.INTERMEDIATE APPELLATE COURT and
HYDRO PIPES PHILIPPINES, INC., G.R. No. L-69259
January 26, 1988]
Facts:
Delfin Pacheco and sister Pelagia were the owners of a
parcel of land in Polo (now Valenzuela). On April 3, 1974,
they leased to Construction Components International Inc.
the property and providing for a right of first refusal should
it decide to buy the said property. Construction
Components International, Inc. assigned its rights and
obligations under the contract of lease in favor of Hydro
Pipes Philippines, Inc. with the signed conformity and
consent of Delfin and Pelagia. In 1976, a deed of exchange
was executed between lessors Delfin and Pelagia Pacheco
and defendant Delpher Trades Corporation whereby the
Pachecos conveyed to the latter the leased property
together with another parcel of land also located in Malinta
Estate, Valenzuela for 2,500 shares of stock of defendant
corporation with a total value of P1.5M. On the ground that
it was not given the first option to buy the leased property
pursuant to the proviso in the lease agreement, respondent
Hydro Pipes Philippines, Inc., filed an amended complaint
for reconveyance of the lot. Trivia lang: Delpher Trades
Corp is owned by the Pacheco Family, managed by the sons
and daughters of Delfin and Pelagia. Their primary defense
is that there is no transfer of ownership because the
Pachecos remained in control of the original co-owners. The
transfer of ownership, if anything, was merely in form but
not in substance.
Issue: WON the Deed of Exchange of the properties
executed by the Pachecos and the Delpher Trades
Corporation on the other was meant to be a contract of sale
which, in effect, prejudiced the Hydro Phil's right of
first refusal over the leased property included in the
"deed of exchange"? NO
Held:
By their ownership of the 2,500 no par shares of stock, the
Pachecos have control of the corporation. Their equity
capital is 55% as against 45% of the other stockholders, who
also belong to the same family group. In effect, the Delpher
Trades Corporation is a business conduit of the Pachecos.
What they really did was to invest their properties and
change the nature of their ownership from unincorporated
to incorporated form by organizing Delpher Trades
Corporation to take control of their properties and at the
Exchange" of property between the Pachecos and Delpher
Trades Corporation cannot be considered a contract of sale.
There was no transfer of actual ownership interests by the
Pachecos to a third party. The Pacheco family merely
changed their ownership from one form to another. The
ownership remained in the same hands. Hence, the private
respondent has no basis for its claim of a light of first refusal
under the lease contract.
(2) Cagayan Fishing Development Co. VS Sandiko
CAGAYAN FISHING DEVELOPMENT CO., INC., plaintiff-
appellant, vs. TEODORO SANDIKO, defendant-appellee.
G.R. No. L-43350 December 23, 1937]
FACTS:
Manuel Tabora is the registered owner of four parcels of
land and he wanted to build a Fishery. He loaned from PNB
P8,000 and to guarantee the payment of the loan, he
mortgaged the said parcels of land. Three subsequent
mortgages were executed in favor of the same bank and to
Severina Buzon, whom Tabora is indebted to.
Tabora sold the four parcels of land to the plaintiff
company, said to be under process of incorporation, in
consideration of one peso (P1) subject to the mortgages in
favor of PNB and Severina Buzon and, to the condition that
the certificate of title to said lands shall not be transferred
to the name of the plaintiff company until the latter has
fully and completely paid Tabora’s indebtedness to PNB.
The articles of incorporation were filed and the company
sold the parcels of land to Sandiko on the reciprocal
obligation that Sandiko will shoulder the three mortgages.
A deed of sale executed before a notary public by the terms
of which the plaintiff sold, ceded and transferred to the
defendant all its rights, titles and interest in and to the four
parcels of land.
He executed a promissory note that he shall be 25,300 after
a year with interest and on the promissory notes, the
parcels were mortgage as security.
A promissory note for P25,300 was drawn by the defendant
in favor of the plaintiff, payable after one year from the date
thereof. Further, a deed of mortgage executed before a
notary public in accordance with which the four parcels of
land were given as security for the payment of the said
promissory note. All these three instruments were dated
February 15, 1932.
Sandiko failed to pay, thus the action for payment. The
lower court held that deed of sale was invalid.
The corporation filed a motion for reconsideration.
ISSUE:
1.Whether Cagayan Fishing Dev’t. has juridical capacity to
enter into the contract.
2. Can promoters of a corporation act as agents of a
corporation?
RULING:
1.
The transfer made by Tabora to the Cagayan Fishing
Development Co., Inc., plaintiff herein, was effected on May
31, 1930 and the actual incorporation of said company was
effected later on October 22, 1930. In other words, the
transfer was made almost five months before the
incorporation of the company.
A duly organized corporation has the power to purchase
and hold such real property as the purposes for which such
corporation was formed may permit and for this purpose
may enter into such contracts as may be necessary. But
before a corporation may be said to be lawfully organized,
many things have to be done. Among other things, the law
requires the filing of articles of incorporation. Although
there is a presumption that all the requirements of law have
been complied with, in the case before us it can not be
denied that the plaintiff was not yet incorporated when it
entered into the contract of sale.
The contract itself referred to the plaintiff as “una sociedad
en vias de incorporacion.” It was not even a de facto
corporation at the time. Not being in legal existence then,
it did not possess juridical capacity to enter into the
contract.
“Corporations are creatures of the law, and can only come
into existence in the manner prescribed by law. As has
already been stated, general laws authorizing the formation
of corporations are general offers to any persons who may
bring themselves within their provisions; and if conditions
precedent are prescribed in the statute, or certain acts are
required to be done, they are terms of the offer, and must
be complied with substantially before legal corporate
existence can be acquired.”
“That a corporation should have a full and complete
organization and existence as an entity before it can enter
into any kind of a contract or transact any business, would
seem to be self evident. . . . A corporation, until organized,
has no being, franchises or faculties. Nor do those engaged
in bringing it into being have any power to bind it by
contract, unless so authorized by the charter. Until
organized as authorized by the charter there is not a
corporation, nor does it possess franchises or faculties for it
or others to exercise, until it acquires a complete
existence.”
2.
The contract here was entered into not only between
Manuel Tabora and a non-existent corporation but
between Manuel Tabora as owner of four parcels of land on
the one hand and the same Manuel Tabora, his wife and
others, as mere promoters of a corporation on the other
hand. For reasons that are self-evident, these promoters
could not have acted as agents for a projected corporation
since that which had no legal existence could have no agent.
A corporation, until organized, has no life and therefore no
faculties. It is, as it were, a child in ventre sa mere. This is
not saying that under no circumstances may the acts of
promoters of a corporation be ratified by the corporation if
and when subsequently organized. There are, of course,
exceptions , but under the peculiar facts and circumstances
of the present case we decline to extend the doctrine of
ratification which would result in the commission of
injustice or fraud to the candid and unwary.
The transfer by Manuel Tabora to the Cagayan Fishing
Development Company, Inc. was null because at the time it
was effected the corporation was non-existent, we deem it
unnecessary to discuss this point.
(3) Hall VS Piccio
[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. G.R. No. L-2598 June 29, 1950]
Facts: On 28 May 1947, C. Arnold Hall and Bradley P. Hall,
and 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. 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.
On 2 December 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. On 22 March 1948, pending
action on the articles of incorporation by the aforesaid
governmental office, Fred Brown, Emma Brown, Hipolita D.
Chapman and Ceferino S. Abella filed before the Court of
First Instance of Leyte the civil case, 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. 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.
After hearing the parties, the Hon. Edmund S. Piccio
ordered the dissolution of the company; and at the request
of Brown, et. al., appointed Pedro A. Capuciong as the
receiver of the properties thereof, upon the filing of a
P20,000 bond. Hall and Hall offered to file a counter-bond
for the discharge of the receiver, but Judge Piccio refused
to accept the offer and to discharge the receiver.
Whereupon, Hall and Hall instituted the present special civil
action with the Supreme Court.
Issue: Whether Brown, et. al. may file an action to cause the
dissolution of the Far Eastern Lumber and Commercial Co.,
without State intervention.
Held: The Securities and Exchange Commission has not
issued the corresponding certificate of incorporation. The
personality of a corporation begins to exist only from the
moment such certificate is issued — not before. 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 the statue it is to be noted 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."
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.
(4) Lozano VS Delos Santos
[REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R.
DE LOS SANTOS, Presiding Judge, RTC, Br. 58, Angeles
City; and ANTONIO ANDA, respondents. G.R. No. 125221
June 19, 1997]
FACTS:
Reynaldo Lozano was the president of KAMAJDA
(Kapatirang Mabalacat-Angeles Jeepney Drivers’
Association, Inc.). Antonio Anda was the president of
SAMAJODA (Samahang Angeles-Mabalacat Jeepney
Operators’ and Drivers’ Association, Inc.). In 1995, the two
agreed to consolidate the two corporations, thus,
UMAJODA (Unified Mabalacat-Angeles Jeepney Operators’
and Drivers Association, Inc.). In the same year, elections
for the officers of UMAJODA were held. Lozano and Anda
both ran for president. Lozano won but Anda alleged fraud
and the elections and thereafter he refused to participate
with UMAJODA. Anda continued to collect fees from
members of SAMAJODA and refused to recognize Lozano as
president of UMAJODA. Lozano then filed a complaint for
damages against Anda with the MCTC of Mabalacat (and
Magalang), Pampanga. Anda moved for the dismissal of the
case for lack of jurisdiction. The MCTC judge denied Anda’s
motion. On certiorari, Judge Eliezer De Los Santos of RTC
Angeles City reversed and ordered the dismissal of the case
on the ground that what is involved is an intra-corporate
dispute which should be under the jurisdiction of the
Securities and Exchange Commission (SEC).
ISSUE: Whether or not the RTC Judge is correct.
HELD: No. The regular courts have jurisdiction over the
case. The case between Lozano and Anda is not an intra-
corporate dispute. UMAJODA is not yet incorporated. It is
yet to submit its articles of incorporation to the SEC. It is not
even a dispute between KAMAJDA or SAMAJODA. The
controversy between Lozano and Anda does not arise from
intra-corporate relations but rather from a mere conflict
from their plan to merge the two associations.
NOTE: Regular courts can now hear intra-corporate
disputes (expanded jurisdiction).
(5) Seventh Day Adventist Conference Church of
Southern Phils., Inc. et. al. VS Northeasthern Mindanao
Mission of Seventh Day Adventists, Inc.
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. G.R. No. 150416
July 21, 2006
FACTS:
Spouses Felix Cosio and Felisa Cuysona donate a parcel of
land to South Philippine [Union] Mission of Seventh Day
Adventist Church, and was received by Liberato Rayos, an
elder of the Seventh Day Adventist Church, on behalf of the
donee.
However, twenty years later, the spouses sold the same
land to the Seventh Day Adventist Church of Northeastern
Mindanao Mission.
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.
ISSUE:
Should the Seventh Day Adventist Church of Northeastern
Mindanao Mission's ownership of the lot be upheld?
HELD:
We answer in the affirmative.
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.
Donation is an act of liberality whereby a person disposes
gratuitously of a thing or right in favor of another person
who 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.
(With questions regarding de facto corporation and law of
sales.) Petition Denied.
(6) Lim Tong Lim VS Philippine Fishing Gear Industries,
Inc.
[LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR
INDUSTRIES, INC., respondent. G.R. No. 136448
November 3, 1999]
FACTS OF THE CASE
This case is petition for review on Certiorari. On behalf of
"Ocean Quest Fishing Corporation," Antonio Chua and
Peter Yao entered into a Contract dated 7 February 1990,
for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (PFGI). They claimed
that they were engaged in a business venture with Lim Tong
Lim, who however was not a signatory to the agreement.
The total price of the nets amounted to P532,045. 400
pieces of floats worth P68, 000 were also sold to the
Corporation.
The buyers, however, failed to pay for the fishing nets and
the floats; hence, PFGI filed a collection suit against Chua,
Yao and 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.
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
PFGI 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 Cross claim and moved
for the lifting of the Writ of Attachment. The trial court
maintained the Writ, and upon motion of PFGI, ordered the
sale of the fishing nets at a public auction. PFGI won the
bidding and deposited with the said court the sales
proceeds of P900, 000.
On 18 November 1992, the trial court rendered its Decision,
ruling in favor of PFGI and that Chua, Yao and Lim, as
general partners, were jointly liable to pay PFGI. Lim
appealed to the Court of Appeals (CA) which, affirmed the
RTC. Hence, Lim filed the Petition for Review on Certiorari
arguing that under the doctrine of corporation by estoppel,
liability can be imputed only to Chua and Yao, and not to
him.
ISSUE
Whether Lim should be held jointly liable with Chua and Yao
under the Doctrine of Corporation by estoppel.
RULING
Yes. The Supreme Court held that although technically, it is
true that petitioner did not directly act on behalf of the
corporation. Still, a person who has reaped the benefits of
a contract entered into by persons with whom he
previously had an existing relationship is deemed to be part
of said association and is covered by the scope of the
doctrine of corporation by estoppel.
(7) Macasaet et. al. VS Francisco R. Co
[ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS
ALBANO, LILY REYES, JANET BAY, JESUS R. GALANG, AND
RANDY HAGOS, Petitioners, vs. FRANCISCO R. CO, JR.,
Respondent. G.R. No. 156759 June 5, 2013]
FACTS:
Francisco Co, Jr. was a retired police officer assigned at the
Western Police District in Manila. Abante Tonite is a daily
tabloid of general circulation which Publisher was Allen A.
Macasaet; Managing Director was Nicolas V. Quijano;
Circulation Manager was Isaias Albano; Editors were Janet
Bay, Jesus R. Galang and Randy Hagos; and
Columnist/Reporter is Lily Reyes.
On July 3, 2000, Co sued petitioners before Branch 51 of the
RTC, Manila claiming damages because of an allegedly
libelous article published in Abante Tonite on June 6, 2000.
In the morning of September 18, 2000, RTC Sheriff Raul
Medina proceeded to the business address of Abante
Tonite at Monica Publishing Corporation, 301-305 3rd
Floor, BF Condominium Building, Solana Street corner A.
Soriano Street, Intramuros, Manila, to effect the personal
service of the summons on the petitioners but they were
then out of the office. He returned in the afternoon but
petitioners were still out of the office as was informed by
Lu-Ann Quijano and Rene Esleta. He decided to resort to
substituted service of the summons and in his sheriff’s
return had explained the reasons.
On October 3, 2000, petitioners moved for the dismissal of
the complaint, alleging lack of jurisdiction over their
persons because of the invalid and ineffectual substituted
service of summons in accordance with Section 6 and
Section 7, Rule 14 of the Rules of Court. They further moved
to drop Abante Tonite as a defendant by virtue of its being
neither a natural nor a juridical person that could be
impleaded as a party in a civil action. However, the RTC
denied the motion and directed them to file their answers
to the complaint within the remaining period. Substituted
service of summonses was validly applied considering that
summonses cannot be served within a reasonable time to
the persons of all the defendants. Quijano, Secretary of the
President and the wife of the defendant, and Esleta,
Editorial Assistant of the defendant, were considered
competent persons with sufficient discretion to realize the
importance of the legal papers served upon them and to
relay it to petitioners (Sec. 7, Rule 14, 1997 Rules of Civil
Procedure).
On June 29, 2001, the RTC denied petitioners’ motion for
reconsideration because substituted service of summons by
sheriff considers the nature of the work of the defendants
that they are always on field. Regarding the impleading of
Abante Tonite as defendant, the RTC held, Abante Tonite
possesses attributes of a juridical person thus the doctrine
of corporation by estoppel may appropriately apply.
Petitioners brought a petition for certiorari, prohibition,
mandamus in the CA which dismissed it, upholding the trial
court’s finding.
ISSUE:
Whether summons was not duly served to acquire
jurisdiction over respondents?
RULING:
The SC approved the decision of RTC of Manila City and the
CA that substituted service of summons complied with the
rules. We are strict in insisting on personal service on the
defendant but we do not cling to such strictness when
circumstances already justify substituted service instead. It
is the spirit of the procedural rules, not their letter, that
governs.
The plaintiff in a civil action voluntarily submits himself to
the jurisdiction of the court by the act of filing the initiatory
pleading. As to the defendant, the court acquires
jurisdiction over his person either by the proper service of
the summons, or by a voluntary appearance in the action.
DOCTRINE LEARNED: That summons received by their
substitutes is sufficient compliance to inform the parties
unless substantially show the otherwise.
That substituted service of summons can be resorted to
with sufficient reasons as when efforts to effect personal
service occurred to be futile or impossible within
reasonable time.
A retired police officer sued Abante Tonite, its publisher
Macasaet and other officers. Sherifftried to serve the
summons but all the officers/defendants were out. Sheriff
resorted to substitutedservice.The officers of Abante Tonite
moved for the dismissal of the case on the ground of lack
ofjurisdiction over their persons. They insisted that the
summons should have been served personallyon each of
them. Also, Abante Tonite according to the officers is not
incorporated so it should bedropped as a party to the
suit.May Abante Tonite be sued even if it is not
incorporated?YES. The non-incorporation of AbanteTonite
was of no consequence for, otherwise, anyonewho suffers
damage from the publication of the articles in the pages of
its tabloids would be leftwithout recourse.Corporation by
estoppel results when a corporation represented itself to
 the reading publicas such despite its not being
incorporated. It is founded on principles of equity and is
designed toprevent injustice and unfairness.
(8) Paz VS New International Environment University, Inc
[PRISCILO B. PAZ,*Petitioner, v. NEW INTERNATIONAL
ENVIRONMENTAL UNIVERSALITY, INC., Respondent. G.R.
No. 203993, April 20, 2015]
No digest found
ARTICLES OF INCORPORATION – CORPORATE
NAME_CASES:
(1) Red Line Transportation VS Rural Transit
[RED LINE TRANSPORTATION CO., petitioner-appellant, vs.
RURAL TRANSIT CO., LTD., respondent-appellee. G.R. No.
41570 September 6, 1934]
Facts:
· This is a petition for review of an order of the Public
Service Commission granting to the Rural Transit Company,
Ltd., a certificate of public convenience to operate a
transportation service between Ilagan in the Province of
Isabela and Tuguegarao in the Province of Cagayan, and
additional trips in its existing express service between
Manila Tuguegarao.
On June 4, 1932, Rural Transit filed an application for
certification of a new service between Tuguegarao and
Ilagan with the Public Company Service Commission (PSC),
since the present service is not sufficient
· Rural Transit further stated that it is a holder of a
certificate of public convenience to operate a passenger bus
service between Manila and Tuguegarao
· Red Line opposed said application, arguing that they
already hold a certificate of public convenience for
Tuguegarao and Ilagan, and is rendering adequate service.
They also argued that granting Rural Transit’s application
would constitute a ruinous competition over said route
· On Dec. 21, 1932, Public Service Commission approved
Rural Transit’s application, with the condition that "all the
other terms and conditions of the various certificates of
public convenience of the herein applicant and herein
incorporated are made a part hereof."
· A motion for rehearing and reconsideration was filed by
Red Line since Rural Transit has a pending application
before the Court of First Instance for voluntary dissolution
of the corporation
· A motion for postponement was filed by Rural Transit as
verified by M. Olsen who swears "that he was the secretary
of the Rural Transit Company, Ltd
· During the hearing before the Public Service Commission,
the petition for dissolution and the CFI’s decision decreeing
the dissolution of Rural Transit were admitted without
objection
· At the trial of this case before the Public Service
Commission an issue was raised as to who was the real
party in interest making the application, whether the Rural
Transit Company, Ltd., as appeared on the face of the
application, or the Bachrach Motor Company, Inc., using
name of the Rural Transit Company, Ltd., as a trade name
· However, PSC granted Rural Transit’s application for
certificate of public convenience and ordered that a
certificate be issued on its name
· PSC relied on a Resolution in case No. 23217, authorizing
Bachrach Motor to continue using Rural Transit’s name as
its tradename in all its applications and petitions to be filed
before the PSC. Said resolution was given a retroactive
effect as of the date of filing of the application or April 30,
1930
Issue: Can the Public Service Commission authorize a
corporation to assume the name of another corporation as
a trade name?
Ruling: NO
· The Rural Transit Company, Ltd., and the Bachrach Motor
Co., Inc., are Philippine corporations and the very law of
their creation and continued existence requires each to
adopt and certify a distinctive name
· The incorporators "constitute a body politic and
corporate under the name stated in the certificate."
· A corporation has the power "of succession by its
corporate name." It is essential to its existence and cannot
change its name except in the manner provided by the
statute. By that name alone is it authorized to transact
business.
· The law gives a corporation no express or implied
authority to assume another name that is unappropriated:
still less that of another corporation, which is expressly set
apart for it and protected by the law. If any corporation
could assume at pleasure as an unregistered trade name
the name of another corporation, this practice would result
in confusion and open the door to frauds and evasions and
difficulties of administration and supervision.
In this case, the order of the commission authorizing the
Bachrach Motor Co., Incorporated, to assume the name of
the Rural Transit Co., Ltd. likewise incorporated, as its trade
name being void. Accepting the order of December 21,
1932, at its face as granting a certificate of public
convenience to the applicant Rural Transit Co., Ltd., the said
order last mentioned is set aside and vacated on the ground
that the Rural Transit Company, Ltd., is not the real party in
interest and its application was fictitious
(2) Pison – Arceo Agricultural and Dev. Corp. VS NLRC
 [PISON-ARCEO AGRICULTURAL and DEVELOPMENT
CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and NATIONAL FEDERATION OF
SUGAR WORKERS-FOOD and GENERAL TRADE (NFSW-
FGT)/JESUS PASCO, MARTIN BONARES, EVANGELINE
PASCO, TERESITA NAVA, FELIXBERTO NAVA, JOHNNY
GARRIDO, EDUARDO NUÑEZ and DELMA NUÑEZ,
respondents. G.R. No. 117890 September 18, 1997]
FACTS: In 1988, a labor case for illegal dismissal was filed
against Jose Edmundo Pison and Hacienda Lanutan. The
labor arbiter issued a favorable for the dismissed workers.
Pison appealed and the National Labor Relations
Commission (NLRC) affirmed the labor arbiter. However, in
the NLRC ruling, it ordered Pison-Arceo Agricultural and
Development Corporation (PADC) as solidarily liable
together with Pison and the Hacienda, PADC being the
owner of the Hacienda and in which Pison is a majority
stockholder. PADC assails the order of the NLRC on due
process grounds as it averred that it was not issued
summons hence it was not able to defend itself in court and
therefore the judgment against it is void.
ISSUE: Whether or not the contention of PADC is correct.
HELD: No. The Supreme Court emphasized that in labor
cases and other administrative cases, the Rule of Civil
Procedure are not strictly applied especially so in the
interest of laborers. So long as there is a substantial
compliance, a party can be placed under the jurisdiction of
the labor court. In the case at bar, there is substantial
compliance when summons was served to Jose Edmundo
Pison who was also the administrator of the Hacienda.
PADC is therefore adequately represented by Pison in the
proceedings in the labor tribunal. If at all, the non-inclusion
of the corporate name of PADC in the case before the
executive labor arbiter was a mere procedural error which
did not at all affect the jurisdiction of the labor tribunals.
(3) Philips Export B.V.VS CA
[PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC.
and PHILIPS INDUSTRIAL DEVELOPMENT, INC.,
petitioners, vs. COURT OF APPEALS, SECURITIES &
EXCHANGE COMMISSION and STANDARD PHILIPS
CORPORATION, respondents. G.R. No. 96161 February 21,
1992]
A corporation’s right to use its corporate and trade name is
a property right, a right in rem, which it may assert and
protect against the whole world.
F ACTS:
Philips Export B.V. (PEBV) filed with the SEC for the
cancellation of the word “Philips” the corporate name of
Standard Philips Corporation in view of its prior registration
with the Bureau of Patents and the SEC. However, Standard
Philips refused to amend its Articles of Incorporation so
PEBV filed with the SEC a petition for the issuance of a Writ
of Preliminary Injunction, however this was denied ruling
that it can only be done when the corporate names are
identical and they have at least 2 words different. This was
affirmed by the SEC en banc and the Court of Appeals thus
the case at bar.
ISSUE:
Whether or not Standard Philips can be enjoined from using
Philips in its corporate name
RULING: YES
A corporation’s right to use its corporate and trade name is
a property right, a right in rem, which it may assert and
protect against the whole world. According to Sec. 18 of the
Corporation Code, no corporate name may be allowed if the
proposed name is identical or deceptively confusingly
similar to that of any existing corporation or to any other
name already protected by law or is patently deceptive,
confusing or contrary to existing law.
For the prohibition to apply, 2 requisites must be present:
(1) the complainant corporation must have acquired a prior
right over the use of such corporate name and
(2) the proposed name is either identical or deceptively or
confusingly similar to that of any existing corporation or to
any other name already protected by law or patently
deceptive, confusing or contrary to existing law.
With regard to the 1st requisite, PEBV adopted the name
“Philips” part of its name 26 years before Standard Philips.
As regards the 2nd, the test for the existence of confusing
similarity is whether the similarity is such as to mislead a
person using ordinary care and discrimination. Standard
Philips only contains one word, “Standard”, different from
that of PEBV. The 2 companies’ products are also the same,
or cover the same line of products. Although PEBV primarily
deals with electrical products, it has also shipped to its
subsidiaries machines and parts which fall under the
classification of “chains, rollers, belts, bearings and cutting
saw”, the goods which Standard Philips also produce. Also,
among Standard Philips’ primary purposes are to buy, sell
trade x x x electrical wiring devices, electrical component,
electrical supplies. Given these, there is nothing to prevent
Standard Philips from dealing in the same line of business
of electrical devices. The use of “Philips” by Standard Philips
tends to show its intention to ride on the popularity and
established goodwill of PEBV.
(4) Lyceum of the Philippines VS CA
[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. G.R.
No. 101897. March 5, 1993.]
FACTS:
1. Petitioner had sometime commenced before in the SEC a
complaint against Lyceum of Baguio, to require it to change
its corporate name and to adopt another name not similar
or identical with that of petitioner. SEC decided in favor of
petitioner. Lyceum of Baguio filed petition for certiorari but
was denied for
lack of merit.
2. Armed with the resolution of the Court, petitioner
instituted before the SEC to compel private respondents,
which are also educational institutions, to delete word
“Lyceum” from their corporate names and permanently to
enjoin them from using such as part of their respective
names.
3. Hearing officer sustained the claim of petitioner and held
that the word “Lyceum” was capable of appropriation and
that petitioner had acquired an enforceable right to the use
of that word.
4. In an appeal, the decision was reversed by the SEC En
Banc. They held that the word “Lyceum” to have become
identified with petitioner as to render use thereof of other
institutions as productive of consfusion about the identity
of the schools concerned in the mind of the general public.
5. Petitioner went to appeal with the CA but the latter just
affirmed the decision of the SEC En Banc.
HELD:
Under the corporation code, no corporate name may be
allowed by the SEC 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. The policy behind this provision is to avoid fraud upon
the public, which would have the 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.
The corporate names of private respondents are not
identical or deceptively or confusingly similar to that of
petitioner’s. Confusion and deception has been precluded
by the appending of geographic names to the word
“Lyceum”. Furthermore, the word “Lyceum” has become
associated in time with schools and other institutions
providing public lectures, concerts, and public discussions.
Thus, it generally refers to a school or an institution of
learning.
Petitioner claims that the word has acquired a secondary
meaning in relation to petitioner with the result that the
word, although originally generic, has become appropriable
by petitioner to the exclusion of other institutions.
The doctrine of secondary meaning is a principle used in
trademark law but has been extended to corporate names
since 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. Under
this doctrine, 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 for so long and so
exclusively by one producer with reference to this article
that, in that trade and to that group of purchasing public,
the word or phrase has come to mean that the article was
his produce. The doctrine cannot be made to apply where
the evidence didn't prove that the business has continued
for so long a time that it has become of consequence and
acquired 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.
Petitioner didn't present evidence, which provided that the
word “Lyceum” acquired secondary meaning. The
petitioner failed to adduce evidence that it had exclusive
use of the word. Even if petitioner used the word for a long
period of time, it hadn’t acquired any 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.
ARTICLES OF INCORPORATION – PURPOSE
CLAUSE_CASES:
(1) Asuncion VS De Yriarte
[NORBERTO ASUNCION, ET AL., petitioners-appellants, vs.
MANUEL DE YRIARTE respondent-appellee. MORELAND,
J.: G.R. No. 9321 September 24, 1914]
FACTS: The proposed incorporators began an action in the
CFI to compel the chief of the division of archives to receive
and register said articles of incorporation and to do any and
all acts necessary for the complete incorporation of the
persons named in the articles. The court below found in
favor of the defendant and refused to order the registration
of the articles mentioned, maintaining and holding that the
defendant, under the Corporation Law, had authority to
determine both the sufficiency of the form of the articles
and the legality of the object of the proposed corporation.
This appeal is taken from that judgment
The chief of the division of archives, the respondent,
refused to file the articles of incorporation, upon the
ground that the object of the corporation, as stated in the
articles, was not lawful and that, in pursuance of section 6
of Act No. 1459, they were not registerable.
Hence, this action to obtain a writ of mandamus.
ISSUE: Whether or not the chief of the division of archives
has authority, under the Corporation Law, on being
presented with articles of incorporation for registration, to
decide not only as to the sufficiency of the form of the
articles, but also as to the lawfulness of the purposes of the
proposed corporation.
HELD: YES. CORPORATION LAW; POWERS AND DUTIES OF
CHIEF OF DIVISION OF ARCHIVES, EXECUTIVE BUREAU. —
The chief of the division of archives, for and on behalf of the
division, has authority under the Corporation Law (Act No.
1459) to determine the sufficiency of the form of articles of
incorporation offered for registration with the division.
Section 6 of the Corporation Law reads in part as follows:
“Five or more persons, not exceeding fifteen, a majority of
whom are residents of the Philippine Islands, may form a
private corporation for any lawful purpose by filing with the
division of archives, patents, copyrights, and trademarks of
the Executive Bureau articles of incorporation duly executed
and acknowledged before a notary public, . . .”
Simply because the duties of an official happen to be
ministerial, it does not necessarily follow that he may not,
in the administration of his office, determine questions of
law. We are of the opinion that it is the duty of the division
of archives, when articles of incorporation are presented
for registration, to determine whether the objects of the
corporation as expressed in the articles are lawful. We do
not believe that, simply because articles of incorporation
presented for registration are perfect in form, the division
of archives must accept and register them and issue the
corresponding certificate of incorporation no matter what
the purpose of the corporation may be as expressed in the
articles. The chief of the division of archives, on behalf of
the division, has also the power and duty to determine from
the articles of incorporation presented for registration the
lawfulness of the purposes of the proposed corporation and
whether or not those purposes bring the proposed
corporation within the purview of the law authorizing
corporations for given purposes.
MANDAMUS TO COMPEL HIM TO PERFORM DUTIES. — The
duties of the chief of the division of archives, so far as
relates to the registration of articles of incorporation, are
purely ministerial and not discretional; and mandamus will
lie to compel him to perform his duties under the
Corporation Law if, in violation of law, he refuse to perform
them
On the contrary, there is no incompatibility in holding, as
we do hold, that his duties are ministerial and that he has
no authority to exercise discretion in receiving and
registering articles of incorporation. He may exercise
judgment — that is, the judicial function — in the
determination of the question of law referred to, but he
may not use discretion. The question whether or not the
objects of a proposed corporation are lawful is one that can
be decided one way only. If he err in the determination of
that question and refuse to file articles which should be
filed under the law, that decision is subject to review and
correction and, upon proper showing, he will be ordered to
file the articles.
Discretion, it may be said generally, is a faculty conferred
upon a court or other official by which he may decide a
question either way and still be right. The power conferred
upon the division of archives with respect to the
registration of articles of incorporation is not of that
character. It is of the same character as the determination
of a lawsuit by a court upon the merits. It can be decided
only one way correctly.
(2) Gala, et. al. VS Ellice Agro-Industrial Corp., et. al
[ALICIA E. GALA, GUIA G. DOMINGO and RITA G.
BENSON, petitioners, vs. ELLICE AGRO-INDUSTRIAL
CORPORATION, MARGO MANAGEMENT AND
DEVELOPMENT CORPORATION, RAUL E. GALA,
VITALIANO N. AGUIRRE II, ADNAN V. ALONTO, ELIAS N.
CRESENCIO, MOISES S. MANIEGO, RODOLFO B. REYNO,
RENATO S. GONZALES, VICENTE C. NOLAN, NESTOR N.
BATICULON,respondents. G.R. No. 156819 December 11,
2003]
Corp Law Topic: Purpose Clauses
On March 28, 1979, the spouses Manuel and Alicia Gala,
their children Guia Domingo, Ofelia Gala, Raul Gala, and
Rita Benson, and their encargados Virgilio Galeon and Julian
Jader formed and organized the Ellice Agro-Industrial
Corporation.
As payment for their subscriptions, the Gala spouses
transferred several parcels of land located in the provinces
of Quezon and Laguna to Ellice.
Issue:
Petitioners want this Court to disregard the separate
juridical personalities of Ellice and Margo for the purpose of
treating all property purportedly owned by said
corporations as property solely owned by the Gala spouses.
Whether or not the purposes for which Ellice and Margo
were organized should be declared as illegal and contrary
to public policy?
They claim that the respondents never pursued exemption
from land reform coverage in good faith and instead merely
used the corporations as tools to circumvent land reform
laws and to avoid estate taxes.
Specifically, they point out that respondents have not
shown that the transfers of the land in favor of Ellice were
executed in compliance with the requirements of Section
13 of R.A. 3844
Held:
The Court holds that petitioners’ contentions impugning
the legality of the purposes for which Ellice and Margo were
organized, amount to collateral attacks which are
prohibited in this jurisdiction.
The best proof of the purpose of a corporation is its articles
of incorporation and by-laws. The articles of incorporation
must state the primary and secondary purposes of the
corporation, while the by-laws outline the administrative
organization of the corporation, which, in turn, is supposed
to insure or facilitate the accomplishment of said purpose.
In the case at bar, a perusal of the Articles of Incorporation
of Ellice and Margo shows no sign of the allegedly illegal
purposes that petitioners are complaining of.
If a corporation’s purpose, as stated in the Articles of
Incorporation, is lawful, then the SEC has no authority to
inquire whether the corporation has purposes other than
those stated, and mandamus will lie to compel it to issue
the certificate of incorporation.
Assuming there was even a grain of truth to the petitioners’
claims regarding the legality of what are alleged to be the
corporations’ true purposes, we are still precluded from
granting them relief. We cannot address here their
concerns regarding circumvention of land reform laws, for
the doctrine of primary jurisdiction precludes a court from
arrogating unto itself the authority to resolve a controversy
the jurisdiction over which is initially lodged with an
administrative body of special competence.
With regard to their claim that Ellice and Margo were meant
to be used as mere tools for the avoidance of estate taxes,
suffice it say that the legal right of a taxpayer to reduce the
amount of what otherwise could be his taxes or altogether
avoid them, by means which the law permits, cannot be
doubted.
Thus, even if Ellice and Margo were organized for the
purpose of exempting the properties of the Gala spouses
from the coverage of land reform legislation and avoiding
estate taxes, we cannot disregard their separate juridical
personalities.
ARTICLES OF INCORPORATION – PRINCIPAL PLACE OF
BUSINESS_CASES:
(1) Hyatt Elevators and Escalators, Corp. VS Goldstar
Elevators, Phils. Inc.
[HYATT ELEVATORS AND ESCALATORS CORPORATION,
Petitioner, vs. GOLDSTAR ELEVATORS, PHILS., INC.,*
Respondent. G.R. No. 161026 October 24, 2005]
Corp Law Topic: Principal Place of Business
Well established in our jurisprudence is the rule that the
residence of a corporation is the place where its principal
office is located, as stated in its Articles of Incorporation.
Petitioner [herein Respondent] Goldstar Elevator
Philippines, Inc. (GOLDSTAR for brevity) is a domestic
corporation primarily engaged in the business of marketing,
distributing, selling, importing, installing, and maintaining
elevators and escalators, with address at 6th Floor, Jacinta
II Building, 64 EDSA, Guadalupe, Makati City.
On the other hand, private respondent [herein petitioner]
Hyatt Elevators and Escalators Company (HYATT for brevity)
is a domestic corporation similarly engaged in the business
of selling, installing and maintaining/servicing elevators,
escalators and parking equipment, with address at the 6th
Floor, Dao I Condominium, Salcedo St., Legaspi Village,
Makati, as stated in its Articles of Incorporation.
On February 23, 1999, HYATT filed a Complaint for unfair
trade practices and damages under Articles 19, 20 and 21 of
the Civil Code of the Philippines against LG Industrial
Systems Co. Ltd. (LGISC) and LG International Corporation
(LGIC).
Alleging among others, that: in 1988, it was appointed by
LGIC and LGISC as the exclusive distributor of LG elevators
and escalators in the Philippines under a ‘Distributorship
Agreement’; x x x LGISC, in the latter part of 1996, made a
proposal to change the exclusive distributorship agency to
that of a joint venture partnership; while it looked forward
to a healthy and fruitful negotiation for a joint venture,
however, the various meetings it had with LGISC and LGIC,
through the latter’s representatives, were conducted in
utmost bad faith and with malevolent intentions; in the
middle of the negotiations, in order to put pressures upon
it, LGISC and LGIC terminated the Exclusive Distributorship
Agreement; x x x [A]s a consequence, [HYATT] suffered
P120,000,000.00 as actual damages.
On March 17, 1999, LGISC and LGIC filed a Motion to
Dismiss raising the following grounds: (1) lack of jurisdiction
over the persons of defendants, summons not having been
served on its resident agent; (2) improper venue;and (3)
failure to state a cause of action.
The [trial] court denied the said motion in an Order dated
January 7, 2000.
On December 4, 2000, HYATT filed a motion for leave of
court to amend the complaint, alleging that subsequent to
the filing of the complaint, it learned that LGISC transferred
all its organization, assets and goodwill, as a consequence
of a joint venture agreement with Otis Elevator Company of
the USA, to LG Otis Elevator Company (LG OTIS, for brevity).
Thus, LGISC was to be substituted or changed to LG OTIS, its
successor-in-interest.
Likewise, the motion averred that x x x GOLDSTAR was
being utilized by LG OTIS and LGIC in perpetrating their
unlawful and unjustified acts against HYATT. Consequently,
in order to afford complete relief, GOLDSTAR was to be
additionally impleaded as a party-defendant.
Hence, in the Amended Complaint, HYATT impleaded x x x
GOLDSTAR as a party-defendant, and all references to LGISC
were correspondingly replaced with LG OTIS.
On January 8, 2001, the [trial] court admitted the Amended
Complaint.
On April 12, 2002, x x x GOLDSTAR filed a Motion to Dismiss
the amended complaint, raising the following grounds: (1)
the venue was improperly laid, as neither HYATT nor
defendants reside in Mandaluyong City, where the original
case was filed xxx
In the Order dated May 27, 2002, which is the main subject
of the present petition, the [trial] court denied the motion
to dismiss: the court resolves to rule that the complaint
sufficiently states a cause of action and that the venue is
properly laid.
The appellate court held that the venue was clearly
improper, because none of the litigants "resided" in
Mandaluyong City, where the case was filed.
According to the appellate court, since Makati was the
principal place of business of both respondent and
petitioner, as stated in the latter’s Articles of
Incorporation, that place was controlling for purposes of
determining the proper venue. The fact that petitioner
had abandoned its principal office in Makati years prior to
the filing of the original case did not affect the venue
where personal actions could be commenced and tried.
Issue: Whether or not the venue was improper.
Held: Yes, petition denied.
Section 2 of Rule 4 of the 1997 Revised Rules of Court:
"Sec. 2. Venue of personal actions. – All other actions may
be commenced and tried where the plaintiff or any of the
principal plaintiff resides, or where the defendant or any of
the principal defendant resides, or in the case of a non-
resident defendant where he may be found, at the election
of the plaintiff."
Since both parties to this case are corporations, there is a
need to clarify the meaning of "residence." The law
recognizes two types of persons: (1) natural and (2)
juridical. Corporations come under the latter in accordance
with Article 44(3) of the Civil Code.
Residence is the permanent home -- the place to which,
whenever absent for business or pleasure, one intends to
return. Residence is vital when dealing with venue.
A corporation, however, has no residence in the same sense
in which this term is applied to a natural person. This is
precisely the reason why the Court in Young Auto Supply
Company v. Court of Appeals ruled that "for practical
purposes, a corporation is in a metaphysical sense a
resident of the place where its principal office is located as
stated in the articles of incorporation."
The residence of a corporation is the place where its
principal office is established.
It now becomes apparent that the residence or domicile of
a juridical person is fixed by "the law creating or
recognizing" it. Under Section 14(3) of the Corporation
Code, the place where the principal office of the
corporation is to be located is one of the required contents
of the articles of incorporation, which shall be filed with the
Securities and Exchange Commission (SEC).
In the present case, there is no question as to the residence
of respondent. What needs to be examined is that of
petitioner. the latter’s principal place of business is Makati,
as indicated in its Articles of Incorporation. Since the
principal place of business of a corporation determines its
residence or domicile, then the place indicated in
petitioner’s articles of incorporation becomes controlling
in determining the venue for this case.
Jurisprudence has, however, settled that the place where
the principal office of a corporation is located, as stated in
the articles, indeed establishes its residence. This ruling is
important in determining the venue of an action by or
against a corporation.
(2) Sy VS Tyson Enterprises, Inc.
[JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION,
petitioners, vs. TYSON ENTERPRISES, INC., JUDGE
GREGORIO G. PINEDA of the Court of First Instance of
Rizal, Pasig Branch XXI and COURT OF APPEALS,
respondents. G.R. No. L-56763 December 15, 1982]
In 1979, Tyson Enterprises, Inc. filed a collection suit against
Universal Parts Supply Corporation and its president John
Sy. The suit was filed in Pasig, Rizal. John Sy filed a motion
to file for a bill of particulars which was denied.
Subsequently, Sy filed a motion to dismiss on the ground of
improper venue. Sy alleged that Tyson Enterprises should
have filed the case either in Bacolod City (business address
of Universal Parts) or in Manila (business address of Tyson
Enterprises). Sy alleged that it is improper for Tyson
Enterprises to file the case in Pasig even if it is the residence
of Tyson’s president and general manager, Dominador Ti.
The trial court as well as the Court of Appeals denied Sy’s
motion on the ground that he waived the defense of
improper venue when he filed his motion to file for a bill of
particulars; that the prior motion placed Sy under the
jurisdiction of the trial court.
ISSUE: Whether or not a plaintiff-corporation may file a civil
case not in its business address nor the business
address/residence of the defendant but in the place of
residence of its incorporators/officers.
HELD: No. A corporation has a separate and distinct
personality from its incorporators. Its place of business is its
residence and not the residence of its president or any
other officer. Hence, venue is improperly laid in this case.
The trial court of Pasig has no jurisdiction.
Anent the issue that there was a waiver, as a rule, the
defense of improper venue is waived if it is not alleged in a
motion to dismiss. In the case at bar, Sy was able to file his
motion to dismiss in a timely manner. It is of no moment
that there was a prior motion for a bill of particulars that
was filed. There is nothing in the rule that states that no
other motion should have been filed prior to filing a motion
to dismiss before a motion to dismiss grounded on
improper venue may be allowed.
(3) Young Auto Supply Co. VS CA
[YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA,
petitioners, vs. THE HONORABLE COURT OF APPEALS
(THIRTEENTH DIVISION) AND GEORGE CHIONG ROXAS,
respondents. G.R. No. 104175 June 25, 1993]
Facts: On 28 October 1987, Young Auto Supply Co. Inc.
(YASCO) represented by Nemesio Garcia, its president,
Nelson Garcia and Vicente Sy, sold all of their shares of
stock in Consolidated Marketing & Development
Corporation (CMDC) to George C. Roxas. The purchase price
was P8,000,000.00 payable as follows: a down payment of
P4,000,000.00 and the balance of P4,000,000.00 in four
postdated checks of P1,000,000.00 each. Immediately after
the execution of the agreement, Roxas took full control of
the four markets of CMDC. However, the vendors held on
to the stock certificates of CMDC as security pending full
payment of the balance of the purchase price. The first
check of P4,000,000.00, representing the down payment,
was honored by the drawee bank but the four other checks
representing the balance of P4,000,000.00 were
dishonored. In the meantime, Roxas sold one of the
markets to a third party. Out of the proceeds of the sale,
YASCO received P600,000.00, leaving a balance of
P3,400,000.00.
Subsequently, Nelson Garcia and Vicente Sy assigned all
their rights and title to the proceeds of the sale of the CMDC
shares to Nemesio Garcia. On 10 June 1988, YASCO and
Garcia filed a complaint against Roxas in the Regional Trial
Court, Branch 11, Cebu City, praying that Roxas be ordered
to pay them the sum of P3,400,000.00 or that full control of
the three markets be turned over to YASCO and Garcia. The
complaint also prayed for the forfeiture of the partial
payment of P4,600,000.00 and the payment of attorney's
fees and costs. Failing to submit his answer, and on 19
August 1988, the trial court declared Roxas in default. The
order of default was, however, lifted upon motion of Roxas.
On 22 August 1988, Roxas filed a motion to dismiss. After a
hearing, wherein testimonial and documentary evidence
were presented by both parties, the trial court in an Order
dated 8 February 1991 denied Roxas' motion to dismiss.
After receiving said order, Roxas filed another motion for
extension of time to submit his answer. He also filed a
motion for reconsideration, which the trial court denied in
its Order dated 10 April 1991 for being pro-forma. Roxas
was again declared in default, on the ground that his motion
for reconsideration did not toll the running of the period to
file his answer. On 3 May 1991, Roxas filed an unverified
Motion to Lift the Order of Default which was not
accompanied with the required affidavit of merit. But
without waiting for the resolution of the motion, he filed a
petition for certiorari with the Court of Appeals. The Court
of Appeals dismissal of the complaint on the ground of
improper venue. A subsequent motion for reconsideration
by YASCO was to no avail. YASCO and Garcia filed the
petition.

Issue: Whether the venue for the case against YASCO and
Garcia in Cebu City was improperly laid.

Held: A corporation has no residence in the same sense in

which this term is applied to a natural person. But for
practical purposes, a corporation is in a metaphysical sense
a resident of the place where its principal office is located
as stated in the articles of incorporation. The Corporation
Code precisely requires each corporation to specify in its
articles of incorporation the "place where the principal
office of the corporation is to be located which must be
within the Philippines." The purpose of this requirement is
to fix the residence of a corporation in a definite place,
instead of allowing it to be ambulatory. Actions cannot be
filed against a corporation in any place where the
corporation maintains its branch offices. The Court ruled
that to allow an action to be instituted in any place where
the corporation has branch offices, would create confusion
and work untold inconvenience to said entity. By the same
token, a corporation cannot be allowed to file personal
actions in a place other than its principal place of business
unless such a place is also the residence of a co-plaintiff or
a defendant. With the finding that the residence of YASCO
for purposes of venue is in Cebu City, where its principal
place of business is located, it becomes unnecessary to
decide whether Garcia is also a resident of Cebu City and
whether Roxas was in estoppel from questioning the choice
of Cebu City as the venue. The decision of the Court of
Appeals was set aside.