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of the state.
SECTION 20
Sec. 20. De facto corporations. The due incorporation of any corporation
claiming in good faith to be a corporation under this Code, and its right to
exercise corporate powers, shall not be inquired into collaterally in any private
suit to which such corporation may be a party. Such inquiry may be made by
the Solicitor General in a quo warranto proceeding.
HALL v PICCIO
86 Phil 603, GR No L-2598, June 29, 1950
Facts: On May 28, 1947, petitioners C. Arnold Hall and Bradley P. Hall, and
respondents Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S.
Abella, signed and acknowledged in Leyte, the article of incorporation of the Far
Eastern Lumber and Commercial Co., Inc., organized to engage in a general
lumber business to carry on as general contractors, operators and managers, .
Attached to the article was an affidavit of the treasurer stating that 23,428
shares of stock had been subscribed and fully paid with certain properties
transferred to the corporation. The said articles of incorporation was filed in the
office of SEC. Pending action of the articles of incorporation by SEC, the
respondents filed a civil case against the petitioners alleging that Far Eastern
Lumber and Commercial Co was an unregistered partnership and that they
wished it dissolved because of bitter dissension among the members,
mismanagement and fraud by the managers and heavy financial losses. The
court (thru Judge Piccio) ordered the dissolution of the company. Halls offered
to file a counter bond for the discharge of the receiver but the judge refused to
accept the offer and discharge the receiver.
Issue: W/N the court had jurisdiction to decree the dissolution of the company,
because it being a de facto corporation, dissolution thereof may only be
ordered in a quo warranto proceeding instituted in accordance with section 19
of the Corporation Law.
Held: Yes, the court has jurisdiction to take cognizance of the case!
Section 20 of the Corporation Law does not apply in this situation
First, not having obtained the certificate of incorporation, the Far Eastern
Lumber and Commercial Co. even its stockholders may not probably claim
"in good faith" to be a corporation. (Under our statue it is to be noted
(Corporation Law, sec. 11) that it is the issuance of a certificate of incorporation
by the Director of the Bureau of Commerce and Industry which calls a
corporation into being. The immunity if collateral attack is granted to
corporations "claiming in good faith to be a corporation under this act." Such a
claim is compatible with the existence of errors and irregularities; but not with a
total or substantial disregard of the law. Unless there has been an evident
attempt to comply with the law the claim to be a corporation "under this act"
could not be made "in good faith." )
Second, this is not a suit in which the corporation is a party. This is a litigation
between stockholders of the alleged corporation, for the purpose of obtaining
its dissolution. Even the existence of a de jure corporation may be terminated in
W/N Islamic Bank and its alleged Board of Directors have no jurisdiction to act
in the manner they did in the absence of a valid by-laws;
RULING: AIIBP has a juridical personality to act as corporation!
The AIIBP was created by Rep. Act No. 6848. It has a main office where it
conducts business, has shareholders, corporate officers, a board of directors,
assets, and personnel. It is, in fact, here represented by the Office of the
Government Corporate Counsel, "the principal law office of government-owned
corporations, one of which is respondent bank." At the very least, by its failure
to submit its by-laws on time, the AIIBP may be considered a de facto
corporation whose right to exercise corporate powers may not be inquired into
collaterally in any private suit to which such corporations may be a party.
Moreover, a corporation which has failed to file its by-laws within the prescribed
period does not ipso facto lose its powers as such. The SEC Rules on
Suspension/Revocation of the Certificate of Registration of Corporations, details
the procedures and remedies that may be availed of before an order of
revocation can be issued. There is no showing that such a procedure has been
initiated in this case.
In any case, petitioners argument is irrelevant because this case is not a
corporate controversy, but a labor dispute; and it is an employers basic right to
freely select or discharge its employees, if only as a measure of self-protection
against acts inimical to its interest. Regardless of whether AIIBP is a
corporation, a partnership, a sole proprietorship, or a sari-sari store, it is an
undisputed fact that AIIBP is the petitioners employer. AIIBP chose to retain his
services during its reorganization, controlled the means and methods by which
his work was to be performed, paid his wages, and, eventually, terminated his
services.
SECTION 21
Sec. 21. Corporation by Estoppel. All persons who assume to act as a
corporation knowing it to be without authority to do so shall be liable as general
partners for all debts, liabilities and damages incurred or arising as a result
thereof: Provided, however, that when any such ostensible corporation is sued
on any transaction entered by it as a corporation or on any tort committed by it
as such, it shall not be allowed to use as a defense its lack of corporate
personality.
One who assumes an obligation to an ostensible corporation as such, cannot
resist performance thereof on the ground that there was in fact no corporation.
SALVATIERRA v GARLITOS
103 Phil 757, GR No L-11442, May 23, 1958
Facts: Manuela T. Vda. de Salvatierra is the owner of a parcel of land located at
Maghobas, Poblacion, Burauen, Teyte. On March 7, 1954, Salvatierra entered
into a contract of lease with the Philippine Fibers Producers Co., Inc., allegedly a
corporation "duly organized and existing under the laws of the Philippines, with
business address in Burauen, Leyte, and represented by Mr. Segundino Q.
Refuerzo, the President". The contract provided that the lifetime of the lease
would 10 years, that the land will be planted with kenaf, ramie or other crops
suitable to the soil; that the lessor would be entitled to 30% of the net income
from the harvest of any, crop without being responsible for the cost of
production thereof; and that after every harvest, the lessee was bound to
declare at the earliest possible time the income derived and to deliver the
corresponding share due the lessor.
However, the obligations imposed were not complied with by the
alleged corporation. Salvatierra filed for accounting, rescission and damages.
She claimed that the defendant corporation planted the land with kenaf but it
refused to render an accounting of the income it derived and to deliver the
lessor's share (estimated gross income was P4,500 and the deductible
expenses amounted to P1,000).
The court granted plaintiff's prayer and required defendants to render a
complete accounting of the harvest of the land and to deliver 30% of the net
income realized from the last harvest. If the defendants fail to abide by this
rule, the gross income would be fixed at P4,200 or a net income of P3,200 after
deducting the expenses for production, 30% of which or P960 was due the
plaintiff pursuant to the contract of lease, which was declared rescinded.
The court then issued a issued a writ of execution causing the
attachment of 3 parcels of land registered in the name of Segundino Refuerzo
as there was no available property of the Philippine Fibers Producers Co., Inc.,
for attachment. Refuerzo claimed that the decision was null and void with
respect to him, there being no allegation in the complaint pointing to his
personal liability and that the liability be limited to the defendant corporation.
The court then ordered the release of all properties belonging to Refuerzo.
made to believe that such corporation was duly organized in accordance with
law.
A registered corporation has a juridical personality separate and distinct from
its component members such that a corporation cannot be held liable for the
personal indebtedness of a stockholder even if he should be its president and
conversely, a stockholder or member cannot be held personally liable for any
financial obligation of the corporation in excess of his unpaid subscription. But
this rule is understood to refer merely to registered corporations and
cannot be made applicable to the liability of members of an
unincorporated association. The reason behind this doctrine is obvious since an organization which before the law is non-existent has no personality
and would be incompetent to act and appropriate for itself the powers and
attribute of a corporation as provided by law; it cannot create agents or confer
authority on another to act in its behalf; thus, those who act or purport to act as
its representatives or agents do so without authority and at their own risk. And
as it is an elementary principle of law that a person who acts as 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.
SECTION 23
The petitioner filed a Motion for Reconsideration arguing that that there
was no showing that the persons acting on its behalf were not authorized to do
so and that its petition was filed within the additional 15-day period granted by
the CA. Attached to the Motion was a Secretary's Certificate showing that
petitioner's Board of Directors approved a Resolution on February 11, 2000
appointing Estela Lombos and Anita Pascual, incumbent directors of the
corporation, as its duly authorized representatives who may sign all papers,
execute all documents, and do such other acts as may be necessary to
prosecute the petition for review that it would file with the CA
The CA again denied petitioners motion for reconsideration stressing
that any person who claims authority to sign, in behalf of another, the
Certificate of Non-Forum Shopping, as required by the rules, must show
sufficient proof thereof. Bare allegations are not proof, and the representation
of one who acts in behalf of another cannot, by itself, serve as proof of his
authority to act as agent or of the extent of his authority as agent.
Issue: Whether or not the persons who executed the verification and
certification of non-forum shopping attached to PSIs manifestation/petition for
review filed with the CA were authorized to do so.
Ruling: Lombos and Pascual were authorized to execute the verification and
certification of non-forum shopping. Case is remanded to the appellate court to
give due course to the appeal.
When the petition for certiorari was filed with the CA, there was no
proof attached thereto that Lombos and Pascual were authorized to sign the
verification and non-forum shopping certification. Subsequent to the CA's
dismissal of the petition, however, petitioner filed a motion for reconsideration
to which it attached a certificate issued by its board secretary stating that on
February 11, 2000 or prior to the filing of the petition, Lombos and Pascual had
been authorized by petitioner's board of directors to file the petition before the
CA. It has been ruled that the subsequent submission of proof of authority to
act on behalf of a petitioner corporation justifies the relaxation of the Rules for
the purpose of allowing its petition to be given due course.
And while the requirement of the certificate of non-forum shopping is
mandatory, nonetheless the requirements must not be interpreted too literally
and thus defeat the objective of preventing the undesirable practice of forum
shopping.
The requirement that the petitioner should sign the certificate of nonforum shopping applies even to corporations, considering that the mandatory
directives of the Rules of Court make no distinction between natural and
juridical persons.
Except for the powers which are expressly conferred on it by the Corporation
Code and those that are implied by or are incidental to its existence, a
corporation has no powers. It exercises its powers through its board of directors
and/or its duly authorized officers and agents. Thus, its power to sue and be
sued in any court is lodged with the board of directors that exercises its
corporate powers. Physical acts, like the signing of documents, can be
performed only by natural persons duly authorized for the purpose by corporate
by-laws or by a specific act of the board of directors.