MENDIOLA V CA
Had he known that no joint venture existed, he
FACTS:Private respondent Pacific Forest Resources,
Phils., Inc. (Pacfor) is a corporation organized and
existing under the laws of California, USA.
Pacfor entered into a "Side Agreement on
Representative Office known as Pacific Forest Resources
(Phils.), Inc." with petitioner Arsenio T. Mendiola (ATM),
"assuming thatPacfor-Phils. is already approved by the
SEC on the said date." The Side Agreement outlines the
business relationship of the parties with regard to the
Philippine operations of Pacfor. Private respondent will
establish a Pacfor representative office in the Philippines,
to be known as PacforPhils, and petitioner ATM will be
its President. Petitioner's base salary and the overhead
expenditures of the company shall be borne by the
representative office and funded by Pacfor/ATM, since
PacforPhils. is equally owned on a 50-50 equity by ATM
and Pacfor-usa.
The Side Agreement was amended through a "Revised
Operating and Profit Sharing Agreement for the
Representative Office Known as Pacific Forest Resources
(Philippines)," where the salary of petitioner was
increased. Both agreements show that the operational
expenses will be borne by the representative office and
funded by all parties "as equal partners," while the
profits and commissions will be shared among them.
Petitioner wrote to the Vice President for Asia of Pacfor,
seeking confirmation of his 50% equity of PacforPhils.
Private respondent Pacfor, through William Gleason, its
President, replied that petitioner is not a part-owner of
PacforPhils. because the latter is merely Pacfor-USA's
representative office and not an entity separate and
distinct from Pacfor-USA. "It's simply a 'theoretical
company' with the purpose of dividing the income 50-
50." Petitioner presumably knew of this arrangement
from the start, having been the one to propose to private
respondent Pacfor the setting up of a representative
office, and "not a branch office" in the Philippines to save
on taxes.
Petitioner claimed that he was all along made to believe
that he was in a joint venture with them. He alleged he
would have been better off remaining as an independent
agent or representative of Pacfor-USA as ATM Marketing
Corp.
would not have allowed Pacfor to take the profitable
business of his own company, ATM Marketing Corp.
ISSUE: WON there is a partnership between the parties
HELD:Petitioner is an employee of private respondent
Pacfor and that no partnership or co-ownership exists
between the parties.
In a partnership, the members become co-owners of
what is contributed to the firm capital and of all property
that may be acquired thereby and through the efforts of
the members. The property or stock of the partnership
forms a community of goods, a common fund, in which
each party has a proprietary interest. In fact, the New
Civil Code regards a partner as a co-owner of specific
partnership property. Each partner possesses a joint
interest in the whole of partnership property. If the
relation does not have this feature, it is not one of
partnership. This essential element, the community of
interest, or co-ownership of, or joint interest in
partnership property is absent in the relations between
petitioner and private respondent Pacfor. Petitioner is
not a part-owner of PacforPhils. William Gleason, private
respondent Pacfor's President established this fact when
he said that PacforPhils. is simply a "theoretical
company" for the purpose of dividing the income 50-50.
He stressed that petitioner knew of this arrangement
from the very start, having been the one to propose to
private respondent Pacfor the setting up of a
representative office, and "not a branch office" in the
Philippines to save on taxes. Thus, the parties in this case,
merely shared profits. This alone does not make a
partnership.
Besides, a corporation cannot become a member of a
partnership in the absence of express authorization by
statute or charter. This doctrine is based on the following
considerations: (1) that the mutual agency between the
partners, whereby the corporation would be bound by
the acts of persons who are not its duly appointed and
authorized agents and officers, would be inconsistent
with the policy of the law that the corporation shall
manage its own affairs separately and exclusively; and,
(2) that such an arrangement would improperly allow
corporate property to become subject to risks not
contemplated by the stockholders when they originally
invested in the corporation. No such authorization has
been proved in the case at bar.
JM TUASON V BOLANOS
FACTS: Plaintiff's complaint was amended three times
with respect to the extent and description of the land
sought to be recovered. The original complaint described
the land as a portion of a lot registered in plaintiff's name
as containing an area of 13 hectares more or less. But the
complaint was amended by reducing the area of 6
hectares, more or less, after the defendant had indicated
the plaintiff's surveyors the portion of land claimed and
occupied by him. The second amendment became
necessary and was allowed following the testimony of
plaintiff's surveyors that a portion of the area was
embraced in another certificate of title. And still later, in
the course of trial, after defendant's surveyor and
witness, Quirino Feria, had testified that the area
occupied and claimed by defendant was about 13
hectares, plaintiff again, with the leave of court,
amended its complaint to make its allegations conform
to the evidence.
Defendant, in his answer, sets up prescription and title in
himself thru "open, continuous, exclusive and public and
notorious possession under claim of ownership, adverse
to the entire world by defendant and his predecessor in
interest" from "time in-memorial". The answer further
alleges that registration of the land in dispute was
obtained by plaintiff or its predecessors in interest thru
"fraud or error and without knowledge (of) or interest
either personal or thru publication to defendant and/or
predecessors in interest."
ISSUE: WON The trial court erred in not dismissing the
case on the ground that the case was not brought by the
real property in interest; WON a corporation may enter
into a joint venture with another corporation
HELD: There is nothing to the contention that the present
action is not brought by the real party in interest, that is,
by J. M. Tuason and Co., Inc. What the Rules of Court
require is that an action be brought in the name of, but
not necessarily by, the real party in interest. (Section 2,
Rule 2.) In fact the practice is for an attorney-at-law to
bring the action, that is to file the complaint, in the name
of the plaintiff. That practice appears to have been
followed in this case, since the complaint is signed by the
law firm of Araneta and Araneta, "counsel for plaintiff"
and commences with the statement "comes now
plaintiff, through its undersigned counsel."It is true that
the complaint also states that the plaintiff is
"represented herein by its Managing Partner Gregorio
Araneta, Inc.", another corporation, but there is nothing
against one corporation being represented by another
person, natural or juridical, in a suit in court. The
contention that Gregorio Araneta, Inc. cannot act as
managing partner for plaintiff on the theory that it is
illegal for two corporations to enter into a partnership is
without merit, for the true rule is that "though a
corporation has no power to enter into a partnership, it
may nevertheless enter into a joint venture with another
where the nature of that venture is in line with the
business authorized by its charter." There is nothing in
the record to indicate that the venture in which plaintiff
is represented by Gregorio Araneta, Inc. as "its managing
partner" is not in line with the corporate business of
either of them.
AURBACH V SANITARY WARES CORPORATION
FACTS: Saniwares, a domestic corporation was
incorporated for the primary purpose of manufacturing
and marketing sanitary wares. ASI, a foreign corporation
domiciled in Delaware, United States entered into an
Agreement with Saniwares and some Filipino investors
whereby ASI and the Filipino investors agreed to
participate in the ownership of an enterprise which
would engage primarily in the business of manufacturing
in the Philippines and selling here and abroad vitreous
china and sanitary wares. The parties agreed that the
business operations in the Philippines shall be carried on
by an incorporated enterprise and that the name of the
corporation shall initially be "Sanitary Wares
Manufacturing Corporation."
3. Articles of Incorporation
 (a) The Articles of Incorporation of the
Corporation shall be substantially in the form
annexed hereto as Exhibit A and, insofar as
permitted under Philippine law, shall specifically
provide for
(1) Cumulative voting for directors:
xxx xxx xxx
5. Management
(a) The management of the Corporation
shall be vested in a Board of Directors, which
shall consist of nine individuals. As long as
American-Standard shall own at least 30% of the
outstanding stock of the Corporation, three of
the nine directors shall be designated by
American-Standard, and the other six shall be
designated by the other stockholders of the
Corporation.
At the request of ASI, the agreement contained
provisions designed to protect it as a minority group,
including the grant of veto powers over a number of
corporate acts and the right to designate certain officers.
Later, the 30% capital stock of ASI was increased to 40%.
The corporation was also registered with the Board of
Investments for availment of incentives with the
condition that at least 60% of the capital stock of the
corporation shall be owned by Philippine nationals.
The joint enterprise thus entered into by the Filipino
investors and the American corporation prospered.
Unfortunately, with the business successes, there came
a deterioration of the initially harmonious relations
between the two groups. According to the Filipino group,
a basic disagreement was due to their desire to expand
the export operations of the company to which ASI
objected as it apparently had other subsidiaries of joint
venture groups in the countries where Philippine exports
were contemplated. The annual stockholders' meeting
was held. The stockholders proceeded to the election of
the members of the board of directors. The ASI group
nominated three persons namely; Wolfgang Aurbach,
John Griffin and David P. Whittingham. The Philippine
investors nominated six, namely; Ernesto Lagdameo, Sr.,
Raul A. Boncan, Ernesto R. Lagdameo, Jr., George F. Lee,
and Baldwin Young. Mr. Eduardo R, Ceniza then
nominated Mr. Luciano E. Salazar, who in turn
nominated Mr. Charles Chamsay. The chairman, Baldwin
Young ruled the last two nominations out of order on the
basis of section 5 (a) of the Agreement, the consistent
practice of the parties during the past annual
stockholders' meetings to nominate only nine persons as
nominees for the nine-member board of directors, and
the legal advice of Saniwares' legal counsel.
Heated arguments ensued. Votes were cast for the
different nominees including Salazar and Chamsay.
Chairman nevertheless instructed the Secretary to cast
all votes equally in favor of the first 9. Meeting was
adjourned. Chairman threatened to have protesters
bodily thrown out. ASI Group, Salazar, and other
stockholders allegedly representing 53-54% of the shares
of Saniwares decided to continue the meeting at the
elevator lobby.
ASI nominated Aurbach, Griffin, Whittingham, and
Chamsay. Salazar voted for himself. These 5were
certified as elected directors by the Acting Secretary
Andres Gatmaitan.
These incidents triggered off the filing of separate
petitions by the parties with the SEC. The first petition
filed was for preliminary injunction by Saniwares, Emesto
V. Lagdameo, Baldwin Young, Raul A. Bonean Ernesto R.
Lagdameo, Jr., Enrique Lagdameo and George F. Lee
against Luciano Salazar and Charles Chamsay. The
second petition was for quo warranto and application for
receivership by Wolfgang Aurbach, John Griffin, David
Whittingham, Luciano E. Salazar and Charles Chamsay
against the group of Young and Lagdameo and Avelino F.
Cruz. Both sets of parties except for Avelino Cruz claimed
to be the legitimate directors of the corporation.
The two petitions were consolidated and tried jointly by
a hearing officer who rendered a decision upholding the
election of the Lagdameo Group and dismissing the quo
warranto petition of Salazar and Chamsay. The ASI Group
and Salazar appealed the decision to the SEC en banc
which affirmed the hearing officer's decision.
The SEC decision led to the filing of two separate appeals
with the IAC by Wolfgang Aurbach, John Griffin, David
Whittingham and Charles Chamsayand by Luciano E.
Salazar. The petitions were consolidated and the
appellate court in its decision ordered the remand of the
case to the Securities and Exchange Commission with the
directive that a new stockholders' meeting of Saniwares
be ordered convoked as soon as possible, under the
supervision of the Commission.
ISSUE: Who were the duly elected directors of Saniwares
for the year 1983 during its annual stockholders'
meeting? To answer such question, such issues must be
resolved as well: (1) the nature of the business
established by the parties whether it was a joint venture
or a corporation and (2) whether or not the ASI Group
may vote their additional 10% equity during elections of
Saniwares' board of directors
HELD: The rule is that whether the parties to a particular
contract have thereby established among themselves a
joint venture or some other relation depends upon their
actual intention which is determined in accordance with
the rules governing the interpretation and construction
of contracts.
In the instant cases, our examination of important
provisions of the Agreement as well as the testimonial
evidence presented by the Lagdameo and Young Group
shows that the parties agreed to establish a joint venture
and not a corporation. The history of the organization of
Saniwares and the unusual arrangements which govern
its policy making body are all consistent with a joint
venture and not with an ordinary corporation.
Moreover, ASI in its communications referred to the
enterprise as joint venture. Baldwin Young also testified
that Section 16(c) of the Agreement that "Nothing herein
contained shall be construed to constitute any of the
parties hereto partners or joint venturers in respect of
any transaction hereunder" was merely to obviate the
possibility of the enterprise being treated as partnership
for tax purposes and liabilities to third parties.
LBC EXPRESS V CA
FACTS: Private respondent Adolfo Carloto, incumbent
President-Manager of private respondent Rural Bank of
Labason, alleged that he was in Cebu City transacting
business with the Central Bank Regional Office. He was
instructed to proceed to Manila to follow-up the Rural
Bank's plan of payment of rediscounting obligations with
Central Bank's main office in Manila. He then purchased
a round trip plane ticket to Manila. He also phoned his
sister Elsie Carloto-Concha to send him ONE THOUSAND
PESOS (P1,000.00) for his pocket money in going to
Manila and some rediscounting papers thru petitioner's
LBC Office at Dipolog City.
Mrs. Concha thru her clerk, Adelina Antigo consigned
thru LBC Dipolog Branch the pertinent documents and
the sum of ONE THOUSAND PESOS to respondent
Carloto.
The documents arrived without the cashpack.
Respondent Carloto made personal follow-ups on that
same day, and also on November 19 and 20, 1984 at
LBC's office in Cebu but petitioner failed to deliver to him
the cashpack.
Consequently, respondent Carloto said he was
compelled to go to DipologCityto claim the money at
LBC's office. His effort was once more in vain. He went
back to Cebu City at LBC's office. He was, however,
advised that the money has been returned to LBC's office
in Dipolog City upon shipper's request. Again, he
demanded for the P1,000.00 and refund of P49.00 LBC
revenue charges. He received the money almost a month
later, less the revenue charges.
Respondent Carloto claimed that because of the delay in
the transmittal of the cashpack, he failed to submit the
rediscounting documents to Central Bank on time. As a
consequence, his rural bank was made to pay the Central
Bank P32,000.00 as penalty interest. He allegedly
suffered embarrassment and humiliation.
ISUUE: Whether or not respondent Rural Bank of
Labason Inc., being an artificial person should be
awarded moral damages
HELD: No. Moral damages are granted in recompense for
physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, and similar injury. A
corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no
emotions, no senses; therefore, it cannot experience
physical suffering and mental anguish. Mental suffering
can be experienced only by one having a nervous system
and it flows from real ills, sorrows, and griefs of life — all
of which cannot be suffered by respondent bank as an
artificial person.
We can neither sustain the award of moral damages in
favor of the private respondents. The right to recover
moral damages is based on equity. Moral damages are
recoverable only if the case falls under Article 2219 of the
Civil Code in relation to Article 21. Part of conventional
wisdom is that he who comes to court to demand equity,
must come with clean hands.
FILIPINAS BROADCASTING V AGO MEDICAL CENTER
Facts: "Exposé" is a radio documentary program hosted
by Carmelo Rima ("Rima") and Jun Alegre ("Alegre").
Exposé is aired every morning over DZRC-AM which is
owned by Filipinas Broadcasting Network, Inc. ("FBNI").
On December 1989, Rima and Alegre exposed various
alleged complaints from students, teachers and parents
against Ago Medical and Educational Center-Bicol
Christian College of Medicine ("AMEC") and its
administrators. Claiming that the broadcasts were
defamatory, AMEC and Angelita Ago ("Ago"), as Dean of
AMEC’s College of Medicine, filed a complaint for
damages against FBNI, Rima and Alegre.
Some allegedly libelously broadcasts:
“If you have children taking medical course at AMEC-
BCCM, advise them to pass all subjects because if they
fail in any subject they will repeat their year level, taking
up all subjects including those they have passed already.”
“Earlier AMEC students in Physical Therapy had
complained that the course is not recognized by DECS.”
“Students are required to take and pay for the subject
even if the subject does not have an instructor - such
greed for money on the part of AMEC’s administration.”
“AMEC is a dumping ground, garbage, not merely of
moral and physical misfits.”
“It is likely that the students would be influenced by evil.
When they become members of society outside of
campus will be liabilities rather than assets.”
The trial court found FBNI and Alegre liable for libel
except Rima and heldthat the broadcasts are libelous per
se. The trial court absolved Rima, it ruled that Rima’s only
participation was when he agreed with Alegre’s exposé
and it found Rima’s statement within the "bounds of
freedom of speech, expression, and of the press." The CA
affirmed the trial court’s judgment with modification and
made Rima solidarily liable with FBNI and Alegre.
ISSUE: WON AMEC, a juridical person, is entitled to moral
damages
HELD: A juridical person is generally not entitled to moral
damages because, unlike a natural person, it cannot
experience physical suffering or such sentiments as
wounded feelings, serious anxiety, mental anguish or
moral shock.
Nevertheless, AMEC’s claim for moral damages falls
under item 7 of Article 2219 of the Civil Code. This
provision expressly authorizes the recovery of moral
damages in cases of libel, slander or any other form of
defamation. Article 2219(7) does not qualify whether the
plaintiff is a natural or juridical person. Therefore, a
juridical person such as a corporation can validly
complain for libel or any other form of defamation and
claim for moral damages.
Moreover, where the broadcast is libelous per se, the law
implies damages. In such a case, evidence of an honest
mistake or the want of character or reputation of the
party libeled goes only in mitigation of damages. Neither
in such a case is the plaintiff required to introduce
evidence of actual damages as a condition precedent to
the recovery of some damages. In this case, the
broadcasts are libelous per se. Thus, AMEC is entitled to
moral damages.
COLLECTOR V CLUB FILIPINO DE CEBU
FACTS: The "Club Filipino, Inc. de Cebu," (Club, for short),
is a civic corporation organized under the laws of the
Philippines with an original authorized capital stock of
P22,000.00, which was subsequently increased to
P200,000.00.
The Club owns and operates a club house, a bowling
alley, a golf course (on a lot leased from the
government), and a bar-restaurant where it sells wines
and liquors, soft drinks, meals and short orders to its
members and their guests. The bar-restaurant was a
necessary incident to the operation of the club and its
golf-course. The club is operated mainly with funds
derived from membership fees and dues. Whatever
profits it had, were used to defray its overhead expenses
and to improve its golf-course. As a result of a capital
surplus, arising from the re-valuation of its real
properties, the value or price of which increased, the
Club declared stock dividends; but no actual cash
dividends were distributed to the stockholders. A BIR
agent discovered that the Club has never paid
percentage tax on the gross receipts of its bar and
restaurant. The Collector of Internal Revenue assessed
against and demanded from the Club sums of money
allegedly due.
ISSUE: WON Club is a stock corporation
HELD: No. Having found as a fact that the Club was
organized to develop and cultivate sports of all class and
denomination, for the healthful recreation and
entertainment of its stockholders and members; that
upon its dissolution, its remaining assets, after paying
debts, shall be donated to a charitable Philippine
Institution in Cebu; that it is operated mainly with funds
derived from membership fees and dues; that the Club's
bar and restaurant catered only to its members and their
guests; that there was in fact no cash dividend
distribution to its stockholders and that whatever was
derived on retail from its bar and restaurant was used to
defray its overall overhead expenses and to improve its
golf-course (cost-plus-expenses-basis), it stands to
reason that the Club is not engaged in the business of an
operator of bar and restaurant.
It is conceded that the Club derived profit from the
operation of its bar and restaurant, but such fact does
not necessarily convert it into a profit-making enterprise.
The bar and restaurant are necessary adjuncts of the
Club to foster its purposes and the profits derived
therefrom are necessarily incidental to the primary
object of developing and cultivating sports for the
healthful recreation and entertainment of the
stockholders and members. That a Club makes some
profit, does not make it a profit-making Club. As has been
remarked a club should always strive, whenever
possible, to have surplus.
The facts that the capital stock of the respondent Club is
divided into shares, does not detract from the finding of
the trial court that it is not engaged in the business of
operator of bar and restaurant. What is determinative of
whether or not the Club is engaged in such business is its
object or purpose, as stated in its articles and by-laws. It
is a familiar rule that the actual purpose is not controlled
by the corporate form or by the commercial aspect of the
business prosecuted, but may be shown by extrinsic
evidence, including the by-laws and the method of
operation. From the extrinsic evidence adduced, the Tax
Court concluded that the Club is not engaged in the
business as a barkeeper and restaurateur.
Moreover, for a stock corporation to exist, two requisites
must be complied with, to wit: (1) a capital stock divided
into shares and (2) an authority to distribute to the
holders of such shares, dividends or allotments of the
surplus profits on the basis of the shares held (sec. 3, Act
No. 1459). In the case at bar, nowhere in its articles of
incorporation or by-laws could be found an authority for
the distribution of its dividends or surplus profits. Strictly
speaking, it cannot, therefore, be considered a stock
corporation, within the contemplation of the
corporation law.
PNOC-ENERGY DEV’T CORP V NLRC
FACTS: Private respondent Danilo Mercado was first
employed by herein petitioner PNOC-EDC on August 13,
1979. On June 30, 1985, private respondent Mercado
was dismissed because Mercado has allegedly
misappropriated the funds of petitioner.
Mercado filed a complaint for illegal dismissal,
retirement benefits, separation pay, unpaid wages, etc.
against PNOC-EDC, and the latter filed its Position
Paper/Motion to Dismisspraying for the dismissal of the
case on the ground that the Labor Arbiter and/or the
NLRC had no jurisdiction over the case. The Labor Arbiter
ruled in favor of private respondent Mercado.
ISSUE: WON matters of employment affecting the PNOC-
EDC, a government-owned and controlled corporation,
are within the jurisdiction of the Labor Arbiter and the
NLRC.
HELD: This issue has already been laid to rest in the case
of PNOC-EDC vs. Leogardo, involving the same petitioner
and the same issue, where this Court ruled that the
doctrine that employees of government-owned and/or
con controlled corporations, whether created by special
law or formed as subsidiaries under the General
Corporation law are governed by the Civil Service Law
and not by the Labor Code, has been supplanted by the
present Constitution. "Thus, under the present state of
the law, the test in determining whether a government-
owned or controlled corporation is subject to the Civil
Service Law are the manner of its creation, such that
government corporations created by special charter are
subject to its provisions while those incorporated under
the General Corporation Law are not within its
coverage."
Specifically, the PNOC-EDC having been incorporated
under the General Corporation Law was held to be a
government owned or controlled corporation whose
employees are subject to the provisions of the Labor
Code.
The fact that the case arose at the time when the 1973
Constitution was still in effect, does not deprive the NLRC
of jurisdiction on the premise that it is the 1987
Constitution that governs because it is the Constitution
in place at the time of the decision.
In the case at bar, the decision of the NLRC was
promulgated on July 3, 1987. Accordingly, this case falls
squarely under the rulings of the aforementioned cases.
TUNA PROCESSING V PHIL. KINGFORD
FACTS: Kanemitsu Yamaoka (hereinafter referred to as
the "licensor"), and five (5) Philippine tuna processors,
entered into a Memorandum of Agreement (MOA).
Due to a series of events not mentioned in the petition,
the licensees, including respondent Kingford, withdrew
from petitioner TPI and correspondingly reneged on their
obligations. Petitioner submitted the dispute for
arbitration before the International Centre for Dispute
Resolution in California, USA and won the case against
respondent.
Petitioner TPI now seeks to nullify the order of the trial
court dismissing its Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award.
ISSUE: Can a foreign corporation not licensed to do
business in the Philippines, but which collects royalties
from entities in the Philippines, sue here to enforce a
foreign arbitral award?
HELD: Sec. 133. Doing business without a license. - No
foreign corporation transacting business in the
Philippines without a license, or its successors or assigns,
shall be permitted to maintain or intervene in any action,
suit or proceeding in any court or administrative agency
of the Philippines; but such corporation may be sued or
proceeded against before Philippine courts or
administrative tribunals on any valid cause of action
recognized under Philippine laws.
There is no doubt, therefore, in the mind of this Court
that TPI has been doing business in the Philippines, but
sans a license to do so issued by the concerned
government agency of the Republic of the Philippines,
when it collected royalties from the five (5) Philippine
tuna processors. This being the real situation, TPI cannot
be permitted to maintain or intervene in any action, suit
or proceedings in any court or administrative agency of
the Philippines." A priori, the "Petition, etc." extant of the
plaintiff TPI should be dismissed for it does not have the
legal personality to sue in the Philippines.
Now, does a foreign corporation not licensed to do
business in the Philippines have legal capacity to sue
under the provisions of the Alternative Dispute
Resolution Act of 2004? We answer in the affirmative.
Sec. 45 of the Alternative Dispute Resolution Act of 2004
provides that the opposing party in an application for
recognition and enforcement of the arbitral award may
raise only those grounds that were enumerated under
Article V of the New York Convention.
Clearly, not one of these exclusive grounds touched on
the capacity to sue of the party seeking the recognition
and enforcement of the award.
Indeed, it is in the best interest of justice that in the
enforecement of a foreign arbitral award, we deny
availment by the losing party of the rule that bars foreign
corporations not licensed to do business in the
Philippines from maintaining a suit in our courts. When a
party enters into a contract containing a foreign
arbitration clause and, as in this case, in fact submits
itself to arbitration, it becomes bound by the contract, by
the arbitration and by the result of arbitration, conceding
thereby the capacity of the other party to enter into the
contract, participate in the arbitration and cause the
implementation of the result.
Arbitration, as an alternative mode of settlement, is
gaining adherents in legal and judicial circles here and
abroad. If its tested mechanism can simply be ignored by
an aggrieved party, one who, it must be stressed,
voluntarily and actively participated in the arbitration
proceedings from the very beginning, it will destroy the
very essence of mutuality inherent in consensual
contracts.
Clearly, on the matter of capacity to sue, a foreign
arbitral award should be respected not because it is
favored over domestic laws and procedures, but because
Republic Act No. 9285 has certainly erased any conflict of
law question.
All considered, petitioner TPI, although a foreign
corporation not licensed to do business in the
Philippines, is not, for that reason alone, precluded from
filing the Petition for Confirmation, Recognition, and
Enforcement of Foreign Arbitral Award before a
Philippine court.
LITONJUA V ETERNIT CORPORATION
FACTS: The Eternit Corporation (EC) is a corporation duly
organized and registered under Philippine laws. Since
1950, it had been engaged in the manufacture of roofing
materials and pipe products. Ninety (90%) percent of the
shares of stocks of EC were owned by Eteroutremer S.A.
Corporation (ESAC), a corporation organized and
registered under the laws of Belgium. In 1986, the
management of ESAC grew concerned about the political
situation in the Philippines and wanted to stop its
operations in the country. The Committee for Asia of
ESAC instructed Michael Adams, a member of EC’s Board
of Directors, to dispose of the eight parcels of land.
Adams engaged the services of realtor/broker Lauro G.
Marquez so that the properties could be offered for sale
to prospective buyers. Marquez thereafter offered the
parcels of land and the improvements thereon to
Eduardo B. Litonjua, Jr. of the Litonjua& Company, Inc.
Eduardo Litonjua, Jr. responded to the offer. Marquez
showed the property to Eduardo Litonjua, Jr., and his
brother Antonio K. Litonjua. The Litonjua siblings offered
to buy the property for P20,000,000.00 cash. Marquez
furnished Eduardo Litonjua, Jr. with a copy of the telex
sent by Delsaux. Litonjua, Jr. accepted the
counterproposal of Delsaux. Marquez confirmed that the
Litonjua siblings had accepted the counter-proposal of
Delsaux. Meanwhile, with the assumption of Corazon C.
Aquino as President of the Republic of the Philippines,
the political situation in the Philippines had improved.
Marquez received a telephone call from Glanville,
advising that the sale would no longer proceed. Glanville
followed it up with a letter confirming that he had been
instructed by his principal to inform Marquez that "the
decision has been taken at a Board Meeting not to sell
the properties on which Eternit Corporation is
situated."The trial court declared that since the authority
of the agents/realtors was not in writing, the sale is void
and not merely unenforceable. CA affirmed in toto.
ISSUE: WON the sale made by a stockholder is valid
HELD: No. The property of a corporation, however, is not
the property of the stockholders or members, and as
such, may not be sold without express authority from the
board of directors. Physical acts, like the offering of the
properties of the corporation for sale, or the acceptance
of a counter-offer of prospective buyers of such
properties and the execution of the deed of sale covering
such property, can be performed by the corporation only
by officers or agents duly authorized for the purpose by
corporate by-laws or by specific acts of the board of
directors. Absent such valid delegation/authorization,
the rule is that the declarations of an individual director
relating to the affairs of the corporation, but not in the
course of, or connected with, the performance of
authorized duties of such director, are not binding on the
corporation.
While a corporation may appoint agents to negotiate for
the sale of its real properties, the final say will have to be
with the board of directors through its officers and
agents as authorized by a board resolution or by its by-
laws. An unauthorized act of an officer of the corporation
is not binding on it unless the latter ratifies the same
expressly or impliedly by its board of directors. Any sale
of real property of a corporation by a person purporting
to be an agent thereof but without written authority
from the corporation is null and void. The declarations of
the agent alone are generally insufficient to establish the
fact or extent of his/her authority.
PH NAT’L CONTSTRUCTION CORP. V PABION
FACTS: Private respondents Ernesto Pabion and Louella
Ramiro, claiming to be stockholders of the PNCC, filed
with the SEC a verified petition, therein alleging that
since 1982 or for a period of twelve (12) years, there has
been no stockholders' meeting of the PNCC to elect the
corporation's board of directors, thus enabling the
incumbent directors to hold on to their position beyond
their 1-year term, in violation of PNCC's By-Laws and the
Corporation Code. Pabion and Ramiro, therefore, prayed
the SEC to issue an order "ordering the officers of PNCC
or, in the alternative, authorizing petitioners, to call and
hold a meeting of the stockholders . . . for the purpose of
electing new directors . . . ."
PNCC filed its answer. Therein, PNCC claimed that it is a
government-owned corporation whose "organizational
and functional management, administration, and
supervision" are governed by Administrative Order (AO)
No. 59, issued by then President Corazon Aquino on
February 16, 1988. PNCC asserts that its board of
directors does not hold office by virtue of a stockholder's
election but by appointment of the President of the
Philippines. PNCC expressed the fear that if granted, the
prayer in the verified petition would amount to a
contravention of AO No. 59 and an interference with the
President's power of control and appointment over
government-owned and/or controlled corporations
(GOCCs).
ISSUES: 1.) May SEC determine WON PNCC is a GOCC?;
2.) Does SEC Have Jurisdiction over GOCCs?; 3.) What is
the Status of PNCC?
HELD: 1.) YES. It is certainly absurd to say that SEC is
without jurisdiction to determine if PNCC is a GOCC
simply because the latter claims to be one. The President
does not "determine" whether a corporation is a GOCC
or not. It is the law that does. PNCC's status as a GOCC
can be ruled upon by SEC — as well as by other
competent authorities for that matter — based on law,
specifically the Revised Administrative Code of 1987.
(13) Government-owned or controlled
corporation — refers to any agency organized as
a stock or non-stock corporation, vested with
functions relating to public needs whether
governmental or proprietary in nature, and
owned by the Government directly or through its
instrumentalities either wholly, or, where
applicable as in the case of stock corporations, to
the extent of at least fifty-one (51) per cent of its
capital stock: Provided, That government owned
or controlled corporations may be further
categorized by the Department of Budget, the
Civil Service Commission, and the Commission
on Audit for purposes of the exercise and
discharge of their respective powers, functions
and responsibilities with respect to such
corporations.
2.) YES. GOCCs may either be (1) with original charter or
created by special law; or (2) incorporated under general
law, via either the Old Corporation Code or the New
Corporation Code.
We concede that SEC has no jurisdiction over
corporations of the first type — GOCCs with original
charter or created by special law — primarily because
they are governed by their charters. But even this
concession is not absolute, since the Corporation Code
may apply suppletorily, either by operation of law or
through express provisions in the charter.
On the other hand, we have no doubt that over GOCCs
established or organized under the Corporation Code,
SEC can exercise jurisdiction. These GOCCs are regarded
as private corporations despite common
misconceptions. That the government may own the
controlling shares in the corporation does not diminish
the fact that the latter owes its existence to the
Corporation Code. More pointedly, Section 143 of the
Corporation Code gives SEC the authority and power to
implement its provisions, specifically for the purpose of
regulating the entities created pursuant to such
provisions. These entities include corporations in which
the controlling shares are owned by the government or
its agencies.
3.) PNCC is an Acquired Asset Corporation. We agree
with the respondents that PNCC falls under the
exception carved out from Section 2 (a and b) of AO 59:
(a) Government-owned and/or controlled
corporation, hereinafter referred to as GOCC or
government corporation, is a corporation which
is created by special law or organized under the
Corporation Code in which the Government,
directly or indirectly, has ownership of the
majority of the capital or has voting control;
Provided that an acquired asset corporation as
defined in the next paragraph shall not be
considered as GOCC or government corporation.
(b) Acquired asset corporation is a
corporation (1) which is under private
ownership, the voting or outstanding shares of
which (i) were conveyed to the government or to
a government agency, instrumentality or
corporation in satisfaction of debts whether by
foreclosure or otherwise, or (ii) were duly
acquired by the government through final
judgment in a sequestration proceeding; or (2)
which is a subsidiary of a government
corporation organized exclusively to own and
manage, or lease, or operate specific physical
assets acquired by a government financial
institution in satisfaction of debts incurred
therewith, and which in any case by law or by
enunciated policy is required to be disposed of
to private ownership within a specified period of
time.
which removes an acquired asset corporation from the
category of a GOCC. In the context of the entire
administrative order and in relation to presidential
issuances, these provisions clearly indicate that PNCC is
indeed an acquired asset corporation. This is because
PNCC is a corporation that is, to quote said AO, "under
private ownership, the voting or outstanding shares of
which (i) were conveyed to the government" financial
institutions "in satisfaction of debts . . .."
PNCC is a corporation created in accordance with the
general corporation statute. It is essentially a private
corporation, notwithstanding the government's interest
therein through the debt-to-equity conversion imposed
by PD 1295. Being a private corporation, PNCC is subject
to SEC regulation and jurisdiction.
REPUBLIC V PARANAQUE
FACTS: The Public Estates Authority (PEA) is a
government corporation created by virtue of P.D. No.
1084 to provide a coordinated, economical and efficient
reclamation of lands, and the administration and
operation of lands belonging to, managed and/or
operated by, the government with the object of
maximizing their utilization and hastening their
development consistent with public interest.
By virtue of E.O. No. 525 issued by then President
Ferdinand Marcos, PEA was designated as the agency
primarily responsible for integrating, directing and
coordinating all reclamation projects for and on behalf of
the National Government.
On October 26, 2004, then President Gloria Macapagal-
Arroyo issued E.O. No. 380 transforming PEA into PRA,
which shall perform all the powers and functions of the
PEA relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions
of the foreshore and offshore areas of Manila Bay,
including those located in Parañaque City. Then
Parañaque City Treasurer Carabeo issued Warrants of
Levy on PRA’s reclaimed properties located in Parañaque
City based on the assessment for delinquent real
property taxes made by then Parañaque City Assessor
Soledad Medina Cue for tax years 2001 and 2002.
PRA asserts that it is not a GOCC under Section 2(13) of
the Introductory Provisions of the Administrative Code.
Neither is it a GOCC under Section 16, Article XII of the
1987 Constitution because it is not required to meet the
test of economic viability. Instead, PRA is a government
instrumentality vested with corporate powers and
performing an essential public service pursuant to
Section 2(10) of the Introductory Provisions of the
Administrative Code. Although it has a capital stock
divided into shares, it is not authorized to distribute
dividends and allotment of surplus and profits to its
stockholders. Therefore, it may not be classified as a
stock corporation because it lacks the second requisite of
a stock corporation which is the distribution of dividends
and allotment of surplus and profits to the stockholders.
It insists that it may not be classified as a non-stock
corporation because it has no members and it is not
organized for charitable, religious, educational,
professional, cultural, recreational, fraternal, literary,
scientific, social, civil service, or similar purposes, like
trade, industry, agriculture and like chambers as
provided in Section 88 of the Corporation Code.
On the other hand, the City of Parañaque (respondent)
argues that PRA since its creation consistently
represented itself to be a GOCC. PRA’s very own charter
(P.D. No. 1084) declared it to be a GOCC and that it has
entered into several thousands of contracts where it
represented itself to be a GOCC. In fact, PRA admitted in
its original and amended petitions and pre-trial brief filed
with the RTC of Parañaque City that it was a GOCC.
Respondent further argues that PRA is a stock
corporation with an authorized capital stock divided into
3 million no par value shares, out of which 2 million
shares have been subscribed and fully paid up. Section
193 of the LGC of 1991 has withdrawn tax exemption
privileges granted to or presently enjoyed by all persons,
whether natural or juridical, including GOCCs.
ISSUE: WON PRA is a GOCC, thus not exempt from real
property taxes
HELD: NO. Section 3 of the Corporation Code defines a
stock corporation as one whose "capital stock is
dividedinto shares and x xx authorized to distribute to
the holders of such shares dividends x xx." Section 87
thereofdefines a non-stock corporation as "one where
no part of its income is distributable as dividends to its
members,trustees or officers." Further, Section 88
provides that non-stock corporations are "organized for
charitable, religious,educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil
service, or similar purposes,like trade, industry,
agriculture and like chambers."
Two requisites must concur before one may be classified
as a stock corporation, namely: (1) that it has capital
stockdivided into shares; and (2) that it is authorized to
distribute dividends and allotments of surplus and profits
to itsstockholders. If only one requisite is present, it
cannot be properly classified as a stock corporation. As
for non-stockcorporations, they must have members and
must not distribute any part of their income to said
members.
In the case at bench, PRA is not a GOCC because it is
neither a stock nor a non-stock corporation. It cannot
beconsidered as a stock corporation because although it
has a capital stock divided into no par value shares
asprovided in Section 74 of P.D. No. 1084, it is not
authorized to distribute dividends, surplus allotments or
profits tostockholders. There is no provision whatsoever
in P.D. No. 1084 or in any of the subsequent executive
issuancespertaining to PRA, particularly, E.O. No. 525,5
E.O. No. 6546 and EO No. 7987 that authorizes PRA to
distributedividends, surplus allotments or profits to its
stockholders.
PRA cannot be considered a non-stock corporation either
because it does not have members. A non-
stockcorporation must have members. Moreover, it was
not organized for any of the purposes mentioned in
Section 88 ofthe Corporation Code. Specifically, it was
created to manage all government reclamation projects.
PRA is a government instrumentality vested with
corporate powers and performing an essential public
service pursuant to Section 2(10) of the Introductory
Provisions of the Administrative Code. Being an
incorporated government instrumentality, it is exempt
from payment of real property tax.
MANILA INT’L AIRPORT AUTHORITY V CA
FACTS: MIAA operates the NAIA Complex in Parañaque
City. As operator of the international airport, MIAA
administers the land, improvements and equipment
within the NAIA Complex. The MIAA Charter transferred
to MIAA approximately 600 hectares of land, including
the runways and buildingsthen under the Bureau of Air
Transportation. The MIAA Charter further provides that
no portion of the land transferred to MIAA shall be
disposed of through sale or any other mode unless
specifically approved by the President of the Philippines.
The OGCC opined that the Local Government Code of
1991 withdrew the exemption from real estate tax
granted to MIAA under Section 21 of the MIAA Charter.
Thus, MIAA negotiated with respondent City of
Parañaque to pay the real estate tax imposed by the City.
MIAA then paid some of the real estate tax already due.
the City of Parañaque, through its City Treasurer, issued
notices of levy and warrants of levy on the Airport Lands
and Buildings. The Mayor of the City of Parañaque
threatened to sell at public auction the Airport Lands and
Buildings should MIAA fail to pay the real estate tax
delinquency. The OGCC pointed out that Section 206 of
the Local Government Code requires persons exempt
from real estate tax to show proof of exemption. The
OGCC opined that Section 21 of the MIAA Charter is the
proof that MIAA is exempt from real estate tax.
the City of Parañaque posted notices of auction sale at
the Barangay Halls of ; in a public market; and in the main
lobby of the Parañaque City Hall. It also published the
notices in the issues of the Philippine Daily Inquirer, a
newspaper of general circulation in the Philippines. The
notices announced the public auction sale of the Airport
Lands and Buildings to the highest bidder.
MIAA admits that the MIAA Charter has placed the title
to the Airport Lands and Buildings in the name of MIAA.
However, MIAA points out that it cannot claim
ownership over these properties since the real owner of
the Airport Lands and Buildings is the Republic of the
Philippines. The MIAA Charter mandates MIAA to devote
the Airport Lands and Buildings for the benefit of the
general public. Since the Airport Lands and Buildings are
devoted to public use and public service, the ownership
of these properties remains with the State. The Airport
Lands and Buildings are thus inalienable and are not
subject to real estate tax by local governments.
Respondents invoke Section 193 of the Local
Government Code, which expressly withdrew the tax
exemption privileges of "government-owned and-
controlled corporations" upon the effectivity of the Local
Government Code. Respondents also argue that a basic
rule of statutory construction is that the express mention
of one person, thing, or act excludes all others. An
international airport is not among the exceptions
mentioned in Section 193 of the Local Government Code.
Thus, respondents assert that MIAA cannot claim that
the Airport Lands and Buildings are exempt from real
estate tax.
ISSUE: Whether the Airport Lands and Buildings of MIAA
are exempt from real estate tax under existing laws. If so
exempt, then the real estate tax assessments issued by
the City of Parañaque, and all proceedings taken
pursuant to such assessments, are void
HELD: YES. MIAA's Airport Lands and Buildings are
exempt from real estate tax imposed by local
governments.
Section 3 of the Corporation Code10 defines a stock
corporation as one whose "capital stock is divided into
shares and x xx authorized to distribute to the holders of
such shares dividends x xx." MIAA has capital but it is not
divided into shares of stock. MIAA has no stockholders or
voting shares. Hence, MIAA is not a stock corporation.
MIAA is also not a non-stock corporation because it has
no members. Section 87 of the Corporation Code defines
a non-stock corporation as "one where no part of its
income is distributable as dividends to its members,
trustees or officers." A non-stock corporation must have
members. Even if we assume that the Government is
considered as the sole member of MIAA, this will not
make MIAA a non-stock corporation. Non-stock
corporations cannot distribute any part of their income
to their members. Section 11 of the MIAA Charter
mandates MIAA to remit 20% of its annual gross
operating income to the National Treasury.11 This
prevents MIAA from qualifying as a non-stock
corporation.
Section 88 of the Corporation Code provides that non-
stock corporations are "organized for charitable,
religious, educational, professional, cultural,
recreational, fraternal, literary, scientific, social, civil
service, or similar purposes, like trade, industry,
agriculture and like chambers." MIAA is not organized for
any of these purposes. MIAA, a public utility, is organized
to operate an international and domestic airport for
public use.
Since MIAA is neither a stock nor a non-stock
corporation, MIAA does not qualify as a government-
owned or controlled corporation. What then is the legal
status of MIAA within the National Government?
MIAA is a government instrumentality vested with
corporate powers to perform efficiently its
governmental functions. MIAA is like any other
government instrumentality, the only difference is that
MIAA is vested with corporate powers. Section 2(10) of
the Introductory Provisions of the Administrative Code
defines a government "instrumentality" as follows:
SEC. 2. General Terms Defined. –– x xxx
(10) Instrumentality refers to any agency of the National
Government, not integrated within the department
framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational
autonomy, usually through a charter. x xx (Emphasis
supplied)
When the law vests in a government instrumentality
corporate powers, the instrumentality does not become
a corporation. Unless the government instrumentality is
organized as a stock or non-stock corporation, it remains
a government instrumentality exercising not only
governmental but also corporate powers. Thus, MIAA
exercises the governmental powers of eminent domain,
police authority and the levying of fees and charges. At
the same time, MIAA exercises "all the powers of a
corporation under the Corporation Law, insofar as these
powers are not inconsistent with the provisions of this
Executive Order."
NATIONAL COAL CORP V CIR
NCC was createdfor the purpose of developing the coal
industry in the Philippine Island, in harmony with the
general plan of the Government to encourage the
development of the natural resources of the country,
and to provide facilities therefor. By said Act, the
company was granted the general powers of a
corporation "and such other powers as may be necessary
to enable it to prosecute the business of developing coal
deposits in the Philippine Island and of mining,
extracting, transporting and selling the coal contained in
said deposits." (Sec. 2, Act No. 2705.) By the same law
(Act No. 2705) the Government of the Philippine Islands
is made the majority stockholder, evidently in order to
insure proper government supervision and control, and
thus to place the Government in a position to render all
possible encouragement, assistance and help in the
prosecution and furtherance of the company's business.
Two months after the passage of Act No. 2705, creating
the National Coal Company, the Philippine Legislature
passed Act No. 2719 "to provide for the leasing and
development of coal lands in the Philippine Islands."
Upon petition of the National Coal Company, the
Governor-General, by Proclamation No. 39, withdrew
"from settlement, entry, sale or other disposition, all
coal-bearing public lands within the Province of
Zamboanga, Department of Mindanao and Sulu, and the
Island of Polillo, Province of Tayabas." Almost
immediately after the issuance of said proclamation the
National Coal Company took possession of the coal lands
within the said reservation, with an area of about 400
hectares, without any further formality, contract or
lease. Of the 30,000 shares of stock issued by the
company, the Government of the Philippine Islands is the
owner of 29,809 shares, that is, of 99 1/3 per centum of
the whole capital stock.
ISSUE: Whether NCC is a public corporation
HELD: The plaintiff is a private corporation. The mere fact
that the Government happens to the majority
stockholder does not make it a public corporation. Act
No. 2705, as amended by Act No. 2822, makes it subject
to all of the provisions of the Corporation Law, in so far
as they are not inconsistent with said Act (No. 2705). No
provisions of Act No. 2705 are found to be inconsistent
with the provisions of the Corporation Law. As a private
corporation, it has no greater rights, powers or privileges
than any other corporation which might be organized for
the same purpose under the Corporation Law, and
certainly it was not the intention of the Legislature to
give it a preference or right or privilege over other
legitimate private corporations in the mining of coal.
While it is true that said proclamation No. 39 withdrew
"from settlement, entry, sale, or other disposition of
coal-bearing public lands within the Province of
Zamboanga . . . and the Island of Polillo," it made no
provision for the occupation and operation by the
plaintiff, to the exclusion of other persons or
corporations who might, under proper permission, enter
upon the operate coal mines.
RED LINE TRANSPORT V RURAL TRANSIT
FACTS: the Rural Transit Company, Ltd., a Philippine
corporation, filed with the Public Company Service
Commission an application in which it is stated in
substance that it is the holder of a certificate or public
convenience to operate a passenger bus service between
Manila and Tuguegarao; that it is the only operator of
direct service between said points and the present
authorized schedule of only one trip daily is not
sufficient; that it will be also to the public convenience to
grant the applicant a certificate for a new service
between Tuguegarao and Ilagan.
the appellant, Red Line Transportation Company, filed an
opposition to the said application alleging in substance
that as to the service between Tuguegarao and Ilagan,
the oppositor already holds a certificate of public
convenience and is rendering adequate and satisfactory
service; that the granting of the application of the Rural
Transit Company, Ltd., would not serve public
convenience but would constitute a ruinous competition
for the oppositor over said route.
ISSUE: 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
HELD: We know of no law that empowers the Public
Service Commission or any court in this jurisdiction to
authorize one corporation to assume the name of
another corporation as a trade name. Both 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." The name of a
corporation is therefore essential to its existence. It
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. The policy of the law
expressed in our corporation statute and the Code of
Commerce is clearly against such a practice.
The order of the commission of November 26, 1932,
authorizing the Bachrach Motor Co., Incorporated, to
assume the name of the Rural Transit Co., Ltd. likewise in
corporated, as its trade name being void, and 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.
UNIVERSAL MILLS V. UNIVERSAL TEXTILE MILLS
FACTS: "The Universal Textile Mills, Inc. was organ on
December 29, 1953, as a textile manufacturing firm for
which it was issued a certificate of registration on
January 8, 1954. The Universal Mills Corporation, on the
other hand, was registered in this Commission on
October 27, 1954, under its original name, Universal
Hosiery Mills Corporation, having as its primary purpose
the "manufacture and production of hosieries and
wearing apparel of all kinds." On May 24, 1963, it filed an
amendment to its articles of incorporation changing its
name to Universal Mills Corporation, its present name,
for which this Commission issued the certificate of
approval on June 10, 1963.
The immediate cause of this present complaint,
however, was the occurrence of a fire which gutted
respondent's spinning mills in Pasig, Rizal. Petitioner
alleged that as a result of this fire and because of the
similarity of respondent's name to that of herein
complainant, the news items appearing in the various
metropolitan newspapers carrying reports on the fire
created uncertainty and confusion among its bankers,
friends, stockholders and customers prompting
petitioner to make announcements, clarifying the real
Identity of the corporation whose property was burned.
On the other hand, respondent's position is that the
names of the two corporations are not similar and even
if there be some similarity, it is not confusing or
deceptive; that the only reason that respondent changed
its name was because it expanded its business to include
the manufacture of fabrics of all kinds; and that the word
'textile' in petitioner's name is dominant and prominent
enough to distinguish the two. It further argues that
petitioner failed to present evidence of confusion or
deception in the ordinary course of business; that the
only supposed confusion proved by complainant arose
out of an extraordinary occurrence — a disastrous fire.
ISSUE: WON petitioner’s trade name is confusingly
similar with that of respondent’s.
HELD: The corporate names in question are not Identical,
but they are indisputably so similar that even under the
test of "reasonable care and observation as the public
generally are capable of using and may be expected to
exercise" invoked by appellant, We are apprehensive
confusion will usually arise, considering that under the
second amendment of its articles of incorporation on
August 14, 1964, appellant included among its primary
purposes the "manufacturing, dyeing, finishing and
selling of fabrics of all kinds" in which respondent had
been engaged for more than a decade ahead of
petitioner. Factually, the Commission found existence of
such confusion, and there is evidence to support its
conclusion. Since respondent is not claiming damages in
this proceeding, it is, of course, immaterial whether or
not appellant has acted in good faith, but We cannot
perceive why of all names, it had to choose a name
already being used by another firm engaged in practically
the same business for more than a decade enjoying well
earned patronage and goodwill, when there are so many
other appropriate names it could possibly adopt without
arousing any suspicion as to its motive and, more
importantly, any degree of confusion in the mind of the
public which could mislead even its own customers,
existing or prospective. Premises considered, there is no
warrant for our interference.
LYCEUM V CA
FACTS: Petitioner is an educational institution duly
registered with the 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.
ISSUE: WON the respondent should remove the word
“Lyceum” from their corporate names
HELD: 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.
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."
"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.
"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).
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."
PHILIPS EXPORT V CA
FACTS: Petitioner Philips Export B.V. (PEBV), a foreign
corporation organized under the laws of the
Netherlands, although not engaged in business here, is
the registered owner of the trademarks PHILIPS and
PHILIPS SHIELD EMBLEM, respectively issued by the
Philippine Patents Office. Petitioners Philips Electrical
Lamps, Inc. (Philips Electrical, for brevity) and Philips
Industrial Developments, Inc. (Philips Industrial, for
short), authorized users of the trademarks PHILIPS and
PHILIPS SHIELD EMBLEM, were incorporated on 29
August 1956 and 25 May 1956, respectively. All
petitioner corporations belong to the PHILIPS Group of
Companies.
Respondent Standard Philips Corporation (Standard
Philips), on the other hand, was issued a Certificate of
Registration by respondent Commission on 19 May 1982.
Petitioners filed a letter complaint with the SEC asking
for the cancellation of the word "PHILIPS" from Private
Respondent's corporate name in view of the prior
registration with the Bureau of Patents of the trademark
"PHILIPS" and the logo "PHILIPS SHIELD EMBLEM" in the
name of Petitioner, PEBV, and the previous registration
of Petitioners Philips Electrical and Philips Industrial with
the SEC.
As a result of Private Respondent's refusal to amend its
Articles of Incorporation, Petitioners filed with the SEC,
alleging, among others, that Private Respondent's use of
the word PHILIPS amounts to an infringement and clear
violation of Petitioners' exclusive right to use the same
considering that both parties engage in the same
business.
In its Answer, Private Respondent countered that
Petitioner PEBV has no legal capacity to sue; that its use
of its corporate name is not at all similar to Petitioners'
trademark PHILIPS when considered in its entirety; and
that its products consisting of chain rollers, belts,
bearings and cutting saw are grossly different from
Petitioners' electrical products.
ISSUE: WON Standard Philips should be directed to
delete the word "PHILIPS" from their corporate name
HELD: YES. As early as Western Equipment and Supply
Co. v. Reyes, the Court declared that 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
world in the same manner as it may protect its tangible
property, real or personal, against trespass or
conversion. It is regarded, to a certain extent, as a
property right and one which cannot be impaired or
defeated by subsequent appropriation by another
corporation in the same field.
A name is peculiarly important as necessary to the very
existence of a corporation. Its name is one of its
attributes, an element of its existence, and essential to
its identity. The general rule as to corporations is that
each corporation must have a name by which it is to sue
and be sued and do all legal acts. The name of a
corporation in this respect designates the corporation in
the same manner as the name of an individual designates
the person and the right to use its corporate name is as
much a part of the corporate franchise as any other
privilege granted.
A corporation acquires its name by choice and need not
select a name identical with or similar to one already
appropriated by a senior corporation while an
individual's name is thrust upon him. A corporation can
no more use a corporate name in violation of the rights
of others than an individual can use his name legally
acquired so as to mislead the public and injure another.
Sec 18 of the Corporation Code cannot be any clearer. To
come within its scope, two requisites must be proven,
namely:
(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.
The right to the exclusive use of a corporate name with
freedom from infringement by similarity is determined
by priority of adoption. In this regard, there is no doubt
with respect to Petitioners' prior adoption of' the name
''PHILIPS" as part of its corporate name. Petitioners
Philips Electrical and Philips Industrial were incorporated
on 29 August 1956 and 25 May 1956, respectively, while
Respondent Standard Philips was issued a Certificate of
Registration on 12 April 1982, 26 years later. Petitioner
PEBV has also used the trademark "PHILIPS" on electrical
lamps of all types and their accessories since 30
September 1922.
The second requisite no less exists in this case. 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. In so doing, the Court must look to the
record as well as the names themselves. While the
corporate names of Petitioners and Private Respondent
are not identical, a reading of Petitioner's corporate
names, to wit: PHILIPS EXPORT B.V., PHILIPS ELECTRICAL
LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT,
INC., inevitably leads one to conclude that "PHILIPS" is,
indeed, the dominant word in that all the companies
affiliated or associated with the principal corporation,
PEBV, are known in the Philippines and abroad as the
PHILIPS Group of Companies.
Respondents maintain, however, that Petitioners did not
present an iota of proof of actual confusion or deception
of the public much less a single purchaser of their
product who has been deceived or confused or showed
any likelihood of confusion. It is settled, however, that
proof of actual confusion need not be shown. It suffices
that confusion is probably or likely to occur.
CLAVECILLA RADIO SYSTEMS V ANTILLON
FACTS: New Cagayan Grocery filed a complaint against
the Clavecilla Radio System alleging, in effect, that on
March 12, 1963, the following message, addressed to the
former, was filed at the latter's Bacolod Branch Office for
transmittal thru its branch office at Cagayan de Oro:
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
REURTEL WASHED NOT AVAILABLE REFINED TWENTY
FIFTY IF AGREEABLE SHALL SHIP LATER REPLY POHANG
The Cagayan de Oro branch office having received the
said message omitted, in delivering the same to the New
Cagayan Grocery, the word "NOT" between the words
"WASHED" and "AVAILABLE," thus changing entirely the
contents and purport of the same and causing the said
addressee to suffer damages.
After service of summons, the Clavecilla Radio System
filed a motion to dismiss the complaint on the grounds
that it states no cause of action and that the venue is
improperly laid.
ISSUE: WON the case filed in CDO will prosper
HELD: It is clear that the case for damages filed with the
city court is based upon tort and not upon a written
contract. Section 1 of Rule 4 of the New Rules of Court,
governing venue of actions in inferior courts, provides in
its paragraph (b) (3) that when "the action is not upon a
written contract, then in the municipality where the
defendant or any of the defendants resides or may be
served with summons."
Settled is the principle in corporation law that the
residence of a corporation is the place where its principal
office is established. Since it is not disputed that the
Clavecilla Radio System has its principal office in Manila,
it follows that the suit against it may properly be filed in
the City of Manila.
The appellee maintain, however, that with the filing of
the action in Cagayan de Oro City, venue was properly
laid on the principle that the appellant may also be
served with summons in that city where it maintains a
branch office. This Court has already held in the case of
Cohen vs. Benguet Commercial Co. that the term "may
be served with summons" does not apply when the
defendant resides in the Philippines for, in such case, he
may be sued only in the municipality of his residence,
regardless of the place where he may be found and
served with summons. As any other corporation, the
Clavecilla Radio System maintains a residence which is
Manila in this case, and a person can have only one
residence at a time. The fact that it maintains branch
offices in some parts of the country does not mean that
it can be sued in any of these places. To allow an action
to be instituted in any place where a corporate entity has
its branch offices would create confusion and work
untold inconvenience to the corporation.
HEIRS OF GAMBOA V TEVES
FACTS: Movants Philippine Stock Exchange’s (PSE)
President, Manuel V. Pangilinan, Napoleon L. Nazareno,
and the Securities and Exchange Commission (SEC)
contend that the term “capital” in Section 11, Article XII
of the Constitution has long been settled and defined to
refer to the total outstanding shares of stock, whether
voting or non-voting. In fact, movants claim that the SEC,
which is the administrative agency tasked to enforce the
60-40 ownership requirement in favor of Filipino citizens
in the Constitution and various statutes, has consistently
adopted this particular definition in its numerous
opinions. Movants point out that with the 28 June 2011
Decision, the Court in effect introduced a “new”
definition or “midstream redefinition” of the term
“capital” in Section 11, Article XII of the Constitution.
ISSUE: Whether the term “capital” includes both voting
and non-voting shares.
\HELD: The Constitution expressly declares as State
policy the development of an economy "effectively
controlled" by Filipinos. Consistent with such State
policy, the Constitution explicitly reserves the ownership
and operation of public utilities to Philippine nationals,
who are defined in the Foreign Investments Act of 1991
as Filipino citizens, or corporations or associations at
least 60 percent of whose capital with voting rights
belongs to Filipinos. The FIA’s implementing rules explain
that "[f]or stocks to be deemed owned and held by
Philippine citizens or Philippine nationals, mere legal title
is not enough to meet the required Filipino equity. Full
beneficial ownership of the stocks, coupled with
appropriate voting rights is essential." In effect, the FIA
clarifies, reiterates and confirms the interpretation that
the term "capital" in Section 11, Article XII of the 1987
Constitution refers to shares with voting rights, as well as
with full beneficial ownership. This is precisely because
the right to vote in the election of directors, coupled with
full beneficial ownership of stocks, translates to effective
control of a corporation.
Any other construction of the term "capital" in Section
11, Article XII of the Constitution contravenes the letter
and intent of the Constitution. Any other meaning of the
term "capital" openly invites alien domination of
economic activities reserved exclusively to Philippine
nationals. Therefore, respondents’ interpretation will
ultimately result in handing over effective control of our
national economy to foreigners in patent violation of the
Constitution, making Filipinos second-class citizens in
their own country.
NARRA MINING V REDMONT MINING
ISSUE: whether petitioner’s nationality is Filipino or
foreign
HELD: Concluding from the above-stated facts, it is quite
safe to say that petitioners McArthur, Tesoro and Narra
are not Filipino since MBMI, a 100% Canadian
corporation, owns 60% or more of their equity interests.
Such conclusion is derived from grandfathering
petitioners’ corporate owners, namely: MMI, SMMI and
PLMDC. Going further and adding to the picture, MBMI’s
Summary of Significant Accounting Policies statement– –
regarding the "joint venture" agreements that it entered
into with the "Olympic" and "Alpha" groups––involves
SMMI, Tesoro, PLMDC and Narra. Noticeably, the
ownership of the "layered" corporations boils down to
MBMI, Olympic or corporations under the "Alpha" group
wherein MBMI has joint venture agreements with,
practically exercising majority control over the
corporations mentioned. In effect, whether looking at
the capital structure or the underlying relationships
between and among the corporations, petitioners are
NOT Filipino nationals and must be considered foreign
since 60% or more of their capital stocks or equity
interests are owned by MBMI.
[P]etitioners McArthur, Tesoro and Narra are not Filipino
since MBMI, a 100% Canadian corporation, owns 60% or
more of their equity interests. Such conclusion is derived
from grandfathering petitioners’ corporate owners. xxx
Noticeably, the ownership of the “layered” corporations
boils down to xxx group wherein MBMI has joint venture
agreements with, practically exercising majority control
over the corporations mentioned. In effect, whether
looking at the capital structure or the underlying
relationships between and among the corporations,
petitioners are NOT Filipino nationals and must be
considered foreign since 60% or more of their capital
stocks or equity interests are owned by MBMI.

CAGAYAN FISHING V SANDIKO
FACTS: On May 31, 1930, Tabora executed a public
document entitled "Escritura de Transpaso de Propiedad
Inmueble" (Exhibit A) by virtue of which the four parcels
of land owned by him was sold to the plaintiff company,
said to under process of incorporation, in consideration
of one peso (P1) subject to the mortgages in favor of the
Philippine National Bank 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 the Philippine National Bank.
The plaintiff company filed its article incorporation with
the Bureau of Commerce and Industry on October 22,
1930 (Exhibit 2). A year later, on October 28, 1931, the
board of directors of said company adopted a resolution
(Exhibit G) authorizing its president, Jose Ventura, to sell
the four parcels of lands in question to Teodoro Sandiko
for P42,000. Exhibits B, C and D were thereafter made
and executed.
ISSUE: WON the subsequent sale of the properties to
Sandiko is valid
HELD: The transfer made by Tabora to the Cagayan
fishing Development Co., Inc., plaintiff herein, was
affected on May 31, 1930 (Exhibit A) and the actual
incorporation of said company was affected later on
October 22, 1930 (Exhibit 2). In other words, the transfer
was made almost five months before the incorporation
of the company. Unquestionably, 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 (sec. 13, pars. 5
and 9, and sec. 14, Act No. 1459). 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 (secs. 6 et
seq., Act. No. 1459). Although there is a presumption
that all the requirements of law have been complied with
(sec. 334, par. 31 Code of Civil Procedure), in the case
before us it can not be denied that the plaintiff was not
yet incorporated when it entered into a contract of sale,
Exhibit A. 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 law 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. (14 C. J., sec. 111, p. 118.)
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
there is not a corporation nor does it possess franchise
or faculties for it or others to exercise, until it acquires a
complete existence. (Gent vs. Manufacturers and
Merchant's Mutual Insurance Company, 107 Ill., 652,
658.)
However, having arrived at the conclusion that the
transfer by Manuel Tabora to the Cagayan Fishing
Development Company, Inc. was null because at the time
it was affected the corporation was non-existent, we
deem it unnecessary to discuss this point.lawphil.net
HALL V PICCIO
FACTS: The petitioner Amer Macaorao Balindong is the
mayor of Malabang, Lanao del Sur, while the respondent
Pangandapun Bonito is the mayor, and the rest of the
respondents are the councilors, of the municipality of
Balabagan of the same province. Balabagan was formerly
a part of the municipality of Malabang, having been
created on March 15, 1960, by Executive Order 386 of
the then President Carlos P. Garcia, out of barrios and
sitios 1 of the latter municipality.
The petitioners brought this action for prohibition to
nullify Executive Order 386 and to restrain the
respondent municipal officials from performing the
functions of their respective office relying on the ruling
of this Court in Pelaez v. Auditor General 2 and
Municipality of San Joaquin v. Siva. 3
In Pelaez this Court, through Mr. Justice (now Chief
Justice) Concepcion, ruled: (1) that section 23 of Republic
Act 2370 [Barrio Charter Act, approved January 1, 1960],
by vesting the power to create barrios in the provincial
board, is a "statutory denial of the presidential authority
to create a new barrio [and] implies a negation of the
bigger power to create municipalities," and (2) that
section 68 of the Administrative Code, insofar as it gives
the President the power to create municipalities, is
unconstitutional (a) because it constitutes an undue
delegation of legislative power and (b) because it offends
against section 10 (1) of article VII of the Constitution,
which limits the President's power over local
governments to mere supervision. As this Court summed
up its discussion: "In short, even if it did not entail an
undue delegation of legislative powers, as it certainly
does, said section 68, as part of the Revised
Administrative Code, approved on March 10, 1917, must
be deemed repealed by the subsequent adoption of the
Constitution, in 1935, which is utterly incompatible and
inconsistent with said statutory enactment."
On the other hand, the respondents, while admitting
the facts alleged in the petition, nevertheless argue that
the rule announced in Pelaez can have no application in
this case because unlike the municipalities involved in
Pelaez, the municipality of Balabagan is at least a de facto
corporation, having been organized under color of a
statute before this was declared unconstitutional, its
officers having been either elected or appointed, and the
municipality itself having discharged its corporate
functions for the past five years preceding the institution
of this action. It is contended that as a de facto
corporation, its existence cannot be collaterally
attacked, although it may be inquired into directly in an
action for quo warranto at the instance of the State and
not of an individual like the petitioner Balindong.
It is indeed true that, generally, an inquiry into the legal
existence of a municipality is reserved to the State in a
proceeding for quo warranto or other direct proceeding,
and that only in a few exceptions may a private person
exercise this function of government. 4 But the rule
disallowing collateral attacks applies only where the
municipal corporation is at least a de facto corporations.
5 For where it is neither a corporation de jure nor de
facto, but a nullity, the rule is that its existence may be,
questioned collaterally or directly in any action or
proceeding by any one whose rights or interests ate
affected thereby, including the citizens of the territory
incorporated unless they are estopped by their conduct
from doing so.
ISSUE: whether the municipality of Balabagan is a de
facto corporation
HELD: In the cases where a de facto municipal
corporation was recognized as such despite the fact that
the statute creating it was later invalidated, the decisions
could fairly be made to rest on the consideration that
there was some other valid law giving corporate vitality
to the organization. Hence, in the case at bar, the mere
fact that Balabagan was organized at a time when the
statute had not been invalidated cannot conceivably
make it a de facto corporation, as, independently of the
Administrative Code provision in question, there is no
other valid statute to give color of authority to its
creation. Indeed, in Municipality of San Joaquin v. Siva,
11 this Court granted a similar petition for prohibition
and nullified an executive order creating the municipality
of Lawigan in Iloilo on the basis of the Pelaez ruling,
despite the fact that the municipality was created in
1961, before section 68 of the Administrative Code,
under which the President had acted, was invalidated.
'Of course the issue of de facto municipal corporation did
not arise in that case.
In Norton v. Shelby Count, 12 Mr. Justice Field said: "An
unconstitutional act is not a law; it confers no rights; it
imposes no duties; it affords no protection; it creates no
office; it is, in legal contemplation, as inoperative as
though it had never been passed." Accordingly, he held
that bonds issued by a board of commissioners created
under an invalid statute were unenforceable.
Executive Order 386 "created no office." This is not to
say, however, that the acts done by the municipality of
Balabagan in the exercise of its corporate powers are a
nullity because the executive order "is, in legal
contemplation, as inoperative as though it had never
been passed." For the existence of Executive, Order 386
is "an operative fact which cannot justly be ignored."
LOZANO V DELOS SANTOS
FACTS: 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); 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 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.
Private respondent moved to dismiss the complaint for
lack of jurisdiction, claiming that jurisdiction was lodged
with the SEC. The MCTC denied the motion and denied
reconsideration.
Private respondent filed a petition for certiorari. The trial
court found the dispute to be intracorporate, hence,
subject to the jurisdiction of the SEC, and ordered the
MCTC to dismiss accordingly. 5 It denied reconsideration.
ISSUE: WON there is a corporation by estoppel placing
the case within the ambit of SEC jurisdiction being intra-
corporate in nature
HELD: 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
ALBERT V UNIVERSITY PUBLISHING
FACTS: Albert sued University Publishing Co., Inc. Plaintiff
alleged inter alia that defendant was a corporation duly
organized and existing under the laws of the Philippines;
that defendant, through Aruego, its President, entered
into a contract with plaintifif; that defendant had
thereby agreed to pay plaintiff P30,000.00 for the
exclusive right to publish his revised Commentaries on
the Revised Penal Code and for his share in previous sales
of the book's first edition; that defendant had
undertaken to pay in eight quarterly installments of
P3,750; that per contract failure to pay one installment
would render the rest due; and that defendant had failed
to pay the second installment.
Defendant admitted plaintiff's allegation of defendant's
corporate existence; admitted the execution and terms
of the contract; but alleged that it was plaintiff who
breached their contract by failing to deliver his
manuscript. Furthermore, defendant counterclaimed for
damages.
The Supreme Court reduced the amount of damages to
P15,000.00, to be executed in full. Thereafter, the court
a quo ordered issuance of an execution writ against
University Publishing Co., Inc. Plaintiff, however,
petitioned for a writ of execution against Aruego, as the
real defendant, stating, "plaintiff's counsel and the
Sheriff of Manila discovered that there is no such entity
as University Publishing Co., Inc." Plaintiff annexed to his
petition a certification from the SEC, attesting: "The
records of this Commission do not show the registration
of UNIVERSITY PUBLISHING CO., INC., either as a
corporation or partnership." "University Publishing Co.,
Inc." countered by filing, through counsel (Aruego's own
law firm), a "manifestation" stating that "Aruego is not a
party to this case," and that, therefore, plaintiff's petition
should be denied.
ISSUE: WON the writ of execution may be effected upon
Aruego as the supposed president of the university, the
real party defendant
HELD: The fact of non-registration of University
Publishing Co., Inc. in the Securities and Exchange
Commission has not been disputed. Defendant would
only raise the point that "University Publishing Co., Inc.,"
and not Jose M. Aruego, is the party defendant; thereby
assuming that "University Publishing Co., Inc." is an
existing corporation with an independent juridical
personality. Precisely, however, on account of the non-
registration it cannot be considered a corporation, not
even a corporation de facto (Hall vs. Piccio, 86 Phil. 603).
It has therefore no personality separate from Jose M.
Aruego; it cannot be sued independently.
The corporation-by-estoppel doctrine has not been
invoked. At any rate, the same is inapplicable here.
Aruego represented a non-existent entity and induced
not only the plaintiff but even the court to believe in such
representation. He signed the contract as "President" of
"University Publishing Co., Inc.," stating that this was "a
corporation duly organized and existing under the laws
of the Philippines," and obviously misled plaintiff
(Mariano A. Albert) into believing the same. One who has
induced another to act upon his wilful misrepresentation
that a corporation was duly organized and existing under
the law, cannot thereafter set up against his victim the
principle of corporation by estoppel (Salvatiera vs.
Garlitos, 56 O.G. 3069).
"University Publishing Co., Inc." purported to come to
court, answering the complaint and litigating upon the
merits. But as stated, "University Publishing Co., Inc." has
no independent personality; it is just a name. Jose M.
Aruego was, in reality, the one who answered and
litigated, through his own law firm as counsel. He was in
fact, if not, in name, the defendant.
Even with regard to corporations duly organized and
existing under the law, we have in many a case pierced
the veil of corporate fiction to administer the ends of
justice. * And in Salvatiera vs. Garlitos, supra, p. 3073, we
ruled: "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." Had Jose M. Aruego been named as party
defendant instead of, or together with, "University
Publishing Co., Inc.," there would be no room for debate
as to his personal liability. Since he was not so named,
the matters of "day in court" and "due process" have
arisen.
SALVATIERRA V GARLITOS
FACTS: Manuela T. Vda. de Salvatierra appeared to be
the owner of a parcel of land located at Maghobas,
Poblacion, Burauen, Teyte. Said landholder entered into
a contract of lease with the Philippine Fibers Producers
Co., Inc., (PFPC) allegedly a corporation "duly organized
and existing under the laws of the Philippines, domiciled
at Burauen, Leyte, Philippines, and with business address
therein, represented in this instance by Mr. Segundino Q.
Refuerzo, the President". It was provided in said contract
that the lifetime of the lease would be for a period of 10
years; that the land would be planted to kenaf, ramie or
other crops suitable to the soil; that the lessor would be
entitled to 30 per cent of the net income accruing from
the harvest of any, crop without being responsible for
the cost of production thereof; and that after every
harvest, the lessee was bound to declare at the earliest
possible time the income derived therefrom and to
deliver the corresponding share due the lessor.
Apparently, the aforementioned obligations imposed on
the alleged corporation were not complied with because
Salvatierra filed with the Court of First Instance of Leyte
a complaint against PFPC and Refuerzo, for accounting,
rescission and damages.
As defendants apparently failed to file their answer to
the complaint, of which they were allegedly notified, the
Court declared them in default and proceeded to receive
plaintiff's evidence.
Refuerzo filed a motion claiming that the decision
rendered in said Civil Case No. 1912 was null and void
with respect to him, there being no allegation in the
complaint pointing to his personal liability and thus
prayed that an order be issued limiting such liability to
defendant corporation.
ISSUE: Whether Refuerzo can be made personally liable
HELD: YES. While as a general rule a person who has
contracted or dealt with an association in such a way as
to recognize its existence as a corporate body is
estopped from denying the same in an action arising out
of such transaction or dealing, yet this doctrine may not
be held to be applicable where fraud takes a part in the
said transaction. In the instant case, on plaintiff's charge
that she was unaware of the fact that the Philippine
Fibers Producers Co., Inc., had no juridical personality,
Refuerzo gave no confirmation or denial and the
circumstances surrounding the execution of the contract
lead to the inescapable conclusion that Salvatierra was
really made to believe that such corporation was duly
organized in accordance with law.
There can be no question that a corporation with
registered has a juridical personality separate and
distinct from its component members or stockholders
and officers such that a corporation cannot be held liable
for the personal indebtedness of a stockholder even if he
should be its president and conversely, a stockholder or
member cannot be held personally liable for any financial
obligation be, the corporation in excess of his unpaid
subscription. But this rule is understood to refer merely
to registered corporations and cannot be made
applicable to the liability of members of an
unincorporated association. The reason behind this
doctrine is obvious-since an organization which before
the law is non-existent has no personality and would be
incompetent to act and appropriate for itself the powers
and attribute of a corporation as provided by law; it
cannot create agents or confer authority on another to
act in its behalf; thus, those who act or purport to act as
its representatives or agents do so without authority and
at their own risk. And as it is an elementary principle of
law that a person who acts as an agent without authority
or without a principal is himself regarded as the principal,
possessed of all the rights and subject to all the liabilities
of a principal, a person acting or purporting to act on
behalf of a corporation which has no valid existence
assumes such privileges and obligations and comes
personally liable for contracts entered into or for other
acts performed as such, agent (Fay vs. Noble, 7 Cushing
[Mass.] 188. Cited in II Tolentino's Commercial Laws of
the Philippines, Fifth Ed., P. 689-690). Considering that
defendant Refuerzo, as president of the unregistered
corporation Philippine Fibers Producers Co., Inc., was the
moving spirit behind the consummation of the lease
agreement by acting as its representative, his liability
cannot be limited or restricted that imposed upon
corporate shareholders. In acting on behalf of a
corporation which he knew to be unregistered, he
assumed the risk of reaping the consequential damages
or resultant rights, if any, arising out of such transaction.
CHIANG KAI SHEK V CA
FACTS: An unpleasant surprise awaited Fausta F. Oh
when she reported for work at the Chiang Kai Shek
School in Sorsogon on the first week of July, 1968. She
was told she had no assignment for the next semester.
Oh was shocked. She had been teaching in the school
since 1932 for a continuous period of almost 33 years.
And now, out of the blue, and for no apparent or given
reason, this abrupt dismissal.
Oh sued. She demanded separation pay, social security
benefits, salary differentials, maternity benefits and
moral and exemplary damages. 1 The original defendant
was the Chiang Kai Shek School but when it filed a motion
to dismiss on the ground that it could not be sued, the
complaint was amended. 2 Certain officials of the school
were also impleaded to make them solidarily liable with
the school.
The Court of First Instance of Sorsogon dismissed the
complaint. 3 On appeal, its decision was set aside by the
respondent court, which held the school suable and
liable while absolving the other defendants. 4 The
motion for reconsideration having been denied, 5 the
school then came to this Court in this petition for review
on certiorari.
ISSUE: 1. Whether or not a school that has not been
incorporated may be sued by reason alone of its long
continued existence and recognition by the government,
2. Whether or not a complaint filed against persons
associated under a common name will justify a judgment
against the association itself and not its individual
members.
HELD: We hold against the petitioner on the first
question. It is true that Rule 3, Section 1, of the Rules of
Court clearly provides that "only natural or juridical
persons may be parties in a civil action." It is also not
denied that the school has not been incorporated.
However, this omission should not prejudice the private
respondent in the assertion of her claims against the
school.
As a school, the petitioner was governed by Act No. 2706
as amended by C.A. No. 180, which provided as follows:
Unless exempted for special reasons by the
Secretary of Public Instruction, any private
school or college recognized by the government
shall be incorporated under the provisions of Act
No. 1459 known as the Corporation Law, within
90 days after the date of recognition, and shall
file with the Secretary of Public Instruction a
copy of its incorporation papers and by-laws.
Having been recognized by the government, it was under
obligation to incorporate under the Corporation Law
within 90 days from such recognition. It appears that it
had not done so at the time the complaint was filed
notwithstanding that it had been in existence even
earlier than 1932. The petitioner cannot now invoke its
own non-compliance with the law to immunize it from
the private respondent's complaint.
There should also be no question that having contracted
with the private respondent every year for thirty two
years and thus represented itself as possessed of juridical
personality to do so, the petitioner is now estopped from
denying such personality to defeat her claim against it.
According to Article 1431 of the Civil Code, "through
estoppel an admission or representation is rendered
conclusive upon the person making it and cannot be
denied or disproved as against the person relying on it."
As the school itself may be sued in its own name, there is
no need to apply Rule 3, Section 15, under which the
persons joined in an association without any juridical
personality may be sued with such association. Besides,
it has been shown that the individual members of the
board of trustees are not liable, having been appointed
only after the private respondent's dismissal. 6
ASIA BANKING V STANDARD PRODUCTS
This action is brought to recover the sum of
P24,736.47, the balance due on the following
promissory note:
P37,757.22
MANILA, P. I., Nov. 28, 1921.
MANILA, P. I., Nov. 28, 1921.
On demand, after date we promise to pay to
the Asia Banking Corporation, or order, the
sum of thirty-seven thousand seven hundred
fifty-seven and 22/100 pesos at their office in
Manila, for value received, together with
interest at the rate of ten per cent per annum.
No. ________ Due __________
THE STANDARD PRODUCTS CO., INC.
By (Sgd.) GEORGE H. SEAVER
By President
ISSUE: WON the parties herein are corporations with
juridical personality
HELD: There is no merit whatever in the appellant's
contention. The general rule is that in the absence of
fraud a person who has contracted or otherwise dealt
with an association in such a way as to recognize and in
effect admit its legal existence as a corporate body is
thereby estopped to deny its corporate existence in any
action leading out of or involving such contract or
dealing, unless its existence is attacked for cause which
have arisen since making the contract or other dealing
relied on as an estoppel and this applies to foreign as well
as to domestic corporations.
The defendant having recognized the corporate
existence of the plaintiff by making a promissory note in
its favor and making partial payments on the same is
therefore estopped to deny said plaintiff's corporate
existence. It is, of course, also estopped from denying its
own corporate existence. Under these circumstances it
was unnecessary for the plaintiff to present other
evidence of the corporate existence of either of the
parties. It may be noted that there is no evidence
showing circumstances taking the case out of the rules
stated.
INTERNATIONAL EXPRESS TRAVEL V CA
FACTS: Petitioner International Express Travel and Tour
Services, Inc., through its managing director, wrote a
letter to the Philippine Football Federation (Federation),
through its president private respondent Henri Kahn,
wherein the former offered its services as a travel agency
to the latter. The offer was accepted
Petitioner secured the airline tickets for the trips of the
athletes and officials 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 cost of the tickets amounted to P449,654.83. For
the tickets received, the Federation made two partial
payments.
petitioner wrote the Federation, through the private
respondent a demand letter requesting for the amount
of P265,894.33. 3 On 30 October 1989, the Federation,
through the Project Gintong Alay, paid the amount of
P31,603.00. 4
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.chanrob1es virtua1 1aw 1ibrary
Petitioner sued Henri Kahn in his personal capacity and
as President of the Federation and impleaded the
Federation as an alternative defendant and sought to
hold Henri Kahn liable for the unpaid balance for the
tickets purchased by the Federation on the ground that
Henri Kahn allegedly guaranteed the said obligation.
Henri Kahn filed his answer with counterclaim. While not
denying the allegation that the Federation owed the
unpaid balance for the plane tickets, he averred that the
petitioner has no cause of action against him either in his
personal capacity or in his official capacity as president
of the Federation. He maintained that he; did not
guarantee payment but merely acted as an agent of the
Federation which has a separate and distinct juridical
personality.
ISSUE: WON Philippine Football Federation is a juridical
person
HELD: 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.
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.chanrob1es
virtua1 1aw 1ibrary
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 liabilities 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.
GROTJAHN V ISNANI
FACTS: petitioner is a multinational company organized
and existing under the laws of the Federal Republic of
Germany. Petitioner filed an application with the SEC for
the establishment of a regional or area headquarters in
the Philippines, pursuant to Presidential Decree No. 218.
The application was approved by the BOI. Consequently,
the SEC issued a Certificate of Registration and License to
petitioner.
Respondent Romana was a sales representative of
petitioner from 1983 to mid-1992. On March 12, 1992,
she secured a loan of twenty-five thousand pesos
(P25,000.00) from petitioner. On March 26 and June 10,
1992, she made additional cash advances in the sum of
ten thousand pesos (P10,000.00). Of the total amount,
twelve thousand one hundred seventy pesos and thirty-
seven centavos (P12,170.37) remained unpaid. Despite
demand, private respondent Romana failed to settle her
obligation with petitioner.
petitioner filed another Complaint for collection of sum
of money against private respondents spouses Romana
and Teofilo Lanchinebre.
nationals like private respondent Romana Lanchinebre.
From this uninterrupted performance by petitioner of
acts pursuant to its primary purposes and functions as a
regional/area headquarters for its home office, it is clear
that petitioner is doing business in the country.
Moreover, private respondents are estopped from
assailing the personality of petitioner.

“it is not disputed that the Certificate of Registration and

License issued to the (petitioner) by the Securities and
Exchange Commission was merely "for the
establishment of a regional or area headquarters in the
Philippines, pursuant to Presidential Decree No. 218 and
its implementing rules and regulations." It does not
include a license to do business in the Philippines. There
is no allegation in the complaint moreover that
(petitioner) is suing under an isolated transaction. It must
be considered that under Section 4, Rule 8 of the Revised
Rules of Court, facts showing the capacity of a party to
sue or be sued or the authority of a party to sue or be
sued in a representative capacity or the legal existence
of an organized association of persons that is made a
party must be averred. There is no averment in the
complaint regarding (petitioner's) capacity to sue or be
sued.”

ISSUE: WON petitioner has the capacity to sue

HELD: YES. trial court erred in holding that petitioner

does not have capacity to sue in the Philippines. It is clear
that petitioner is a foreign corporation doing business in
the Philippines.

There is no general rule or governing principle as to what

constitutes "doing" or "engaging in" or "transacting"
business in the Philippines. Each case must be judged in
the light of its peculiar circumstances. 6 In the case at
bench, petitioner does not engage in commercial
dealings or activities in the country because it is
precluded from doing so by P.D. No. 218, under which it
was established. 7 Nonetheless, it has been
continuously, since 1983, acting as a supervision,
communications and coordination center for its home
office's affiliates in Singapore, and in the process has
named its local agent and has employed Philippine