INTERNATIONAL TRAVEL EXPRESS & TOURS INC. VS.

CA, 343 SCRA 674

FIRST DIVISION
[G.R. No. 119002. October 19, 2000]
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs. HON. COURT OF
APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION, respondents.
DECISION
KAPUNAN, J.:
On June 30 1989, 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.i 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, both in September of 1989, in the total amount of P176,467.50. ii
On 4 October 1989, petitioner wrote the Federation, through the private respondent a demand letter
requesting for the amount of P265,894.33.iii On 30 October 1989, the Federation, through the Project
Gintong Alay, paid the amount of P31,603.00.iv
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.v Thereafter, no further payments were made despite
repeated demands.
This prompted petitioner to file a civil case before the Regional Trial Court of Manila. Petitioner sued Henri
Kahn in his personal capacity and as President of the Federation and impleaded the Federation as an
alternative defendant. Petitioner sought to hold Henri Kahn liable for the unpaid balance for the tickets
purchased by the Federation on the ground that Henri Kahn allegedly guaranteed the said obligation. vi
Henri Kahn filed his answer with counterclaim. While not denying the allegation that the Federation owed
the amount P207,524.20, representing 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.vii
On the other hand, the Federation failed to file its answer, hence, was declared in default by the trial
court.viii
In due course, the trial court rendered judgment and ruled in favor of the petitioner and declared Henri
Kahn personally liable for the unpaid obligation of the Federation. In arriving at the said ruling, the trial
court rationalized:
Defendant Henri Kahn would have been correct in his contentions had it been duly established that
defendant Federation is a corporation. The trouble, however, is that neither the plaintiff nor the defendant
Henri Kahn has adduced any evidence proving the corporate existence of the defendant Federation. In
paragraph 2 of its complaint, plaintiff asserted that "Defendant Philippine Football Federation is a sports
association xxx." This has not been denied by defendant Henri Kahn in his Answer. Being the President of
defendant Federation, its corporate existence is within the personal knowledge of defendant Henri Kahn.
He could have easily denied specifically the assertion of the plaintiff that it is a mere sports association, if
it were a domestic corporation. But he did not.
xxx

A voluntary unincorporated association, like defendant Federation has no power to enter into, or to ratify,
a contract. The contract entered into by its officers or agents on behalf of such association is not binding
on, or enforceable against it. The officers or agents are themselves personally liable.
x x xix
The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay the plaintiff the principal sum
of P207,524.20, plus the interest thereon at the legal rate computed from July 5, 1990, the date the
complaint was filed, until the principal obligation is fully liquidated; and another sum of P15,000.00 for
attorney's fees.
The complaint of the plaintiff against the Philippine Football Federation and the counterclaims of the
defendant Henri Kahn are hereby dismissed.
With the costs against defendant Henri Kahn.x
Only Henri Kahn elevated the above decision to the Court of Appeals. On 21 December 1994, the
respondent court rendered a decision reversing the trial court, the decretal portion of said decision reads:
WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED and SET ASIDE
and another one is rendered dismissing the complaint against defendant Henri S. Kahn. xi
In finding for Henri Kahn, the Court of Appeals recognized the juridical existence of the Federation. It
rationalized that since petitioner failed to prove that Henri Kahn guaranteed the obligation of the
Federation, he should not be held liable for the same as said entity has a separate and distinct personality
from its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be
held liable for the unpaid obligation. The same was denied by the appellate court in its resolution of 8
February 1995, where it stated that:
As to the alternative prayer for the Modification of the Decision by expressly declaring in the dispositive
portion thereof the Philippine Football Federation (PFF) as liable for the unpaid obligation, it should be
remembered that the trial court dismissed the complaint against the Philippine Football Federation, and
the plaintiff did not appeal from this decision. Hence, the Philippine Football Federation is not a party to
this appeal and consequently, no judgment may be pronounced by this Court against the PFF without
violating the due process clause, let alone the fact that the judgment dismissing the complaint against it,
had already become final by virtue of the plaintiff's failure to appeal therefrom. The alternative prayer is
therefore similarly DENIED.xii
Petitioner now seeks recourse to this Court and alleges that the respondent court committed the following
assigned errors:xiii
A.THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD DEALT
WITH THE PHILIPPINE FOOTBALL FEDERATION (PFF) AS A CORPORATE ENTITY AND IN NOT
HOLDING THAT PRIVATE RESPONDENT HENRI KAHN WAS THE ONE WHO REPRESENTED THE
PFF AS HAVING A CORPORATE PERSONALITY.
B.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE RESPONDENT
HENRI KAHN PERSONALLY LIABLE FOR THE OBLIGATION OF THE UNINCORPORATED PFF,
HAVING NEGOTIATED WITH PETITIONER AND CONTRACTED THE OBLIGATION IN BEHALF OF
THE PFF, MADE A PARTIAL PAYMENT AND ASSURED PETITIONER OF FULLY SETTLING THE
OBLIGATION.
C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT PERSONALLY LIABLE, THE
HONORABLE COURT OF APPEALS ERRED IN NOT EXPRESSLY DECLARING IN ITS DECISION
THAT THE PFF IS SOLELY LIABLE FOR THE OBLIGATION.
The resolution of the case at bar hinges on the determination of the existence of the Philippine Football
Federation as a juridical person. In the assailed decision, the appellate court recognized the existence of
the Federation. In support of this, the CA cited Republic Act 3135, otherwise known as the Revised

Charter of the Philippine Amateur Athletic Federation, and Presidential Decree No. 604 as the laws from
which said Federation derives its existence.
As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604 recognized the juridical
existence of national sports associations. This may be gleaned from the powers and functions granted to
these associations. Section 14 of R.A. 3135 provides:
SEC. 14. Functions, powers and duties of Associations. - The National Sports' Association shall have the
following functions, powers and duties:
1.
To adopt a constitution and by-laws for their internal organization and government;
2.
To raise funds by donations, benefits, and other means for their purposes.
3.
To purchase, sell, lease or otherwise encumber property both real and personal, for the
accomplishment of their purpose;
4.
To affiliate with international or regional sports' Associations after due consultation with the
executive committee;
xxx
13. To perform such other acts as may be necessary for the proper accomplishment of their purposes and
not inconsistent with this Act.
Section 8 of P.D. 604, grants similar functions to these sports associations:
SEC. 8. Functions, Powers, and Duties of National Sports Association. - The National sports associations
shall have the following functions, powers, and duties:
1. Adopt a Constitution and By-Laws for their internal organization and government which shall be
submitted to the Department and any amendment thereto shall take effect upon approval by the
Department: Provided, however, That no team, school, club, organization, or entity shall be admitted as a
voting member of an association unless 60 per cent of the athletes composing said team, school, club,
organization, or entity are Filipino citizens;
2. Raise funds by donations, benefits, and other means for their purpose subject to the approval of the
Department;
3. Purchase, sell, lease, or otherwise encumber property, both real and personal, for the accomplishment
of their purpose;
4. Conduct local, interport, and international competitions, other than the Olympic and Asian Games, for
the promotion of their sport;
5. Affiliate with international or regional sports associations after due consultation with the Department;
xxx
13. Perform such other functions as may be provided by law.
The above powers and functions granted to national sports associations clearly indicate that these entities
may acquire a juridical personality. The power to purchase, sell, lease and encumber property are acts
which may only be done by persons, whether natural or artificial, with juridical capacity. However, while
we agree with the appellate court that national sports associations may be accorded corporate status,
such does not automatically take place by the mere passage of these laws.
It is a basic postulate that before a corporation may acquire juridical personality, the State must give its
consent either in the form of a special law or a general enabling act. We cannot agree with the view of the
appellate court and the private respondent that the Philippine Football Federation came into existence
upon the passage of these laws. Nowhere can it be found in R.A. 3135 or P.D. 604 any provision creating
the Philippine Football Federation. These laws merely recognized the existence of national sports
associations and provided the manner by which these entities may acquire juridical personality. Section
11 of R.A. 3135 provides:
SEC. 11. National Sports' Association; organization and recognition. - A National Association shall be
organized for each individual sports in the Philippines in the manner hereinafter provided to constitute the
Philippine Amateur Athletic Federation. Applications for recognition as a National Sports' Association shall

be filed with the executive committee together with, among others, a copy of the constitution and by-laws
and a list of the members of the proposed association, and a filing fee of ten pesos.
The Executive Committee shall give the recognition applied for if it is satisfied that said association will
promote the purposes of this Act and particularly section three thereof. No application shall be held
pending for more than three months after the filing thereof without any action having been taken thereon
by the executive committee. Should the application be rejected, the reasons for such rejection shall be
clearly stated in a written communication to the applicant. Failure to specify the reasons for the rejection
shall not affect the application which shall be considered as unacted upon: Provided, however, That until
the executive committee herein provided shall have been formed, applications for recognition shall be
passed upon by the duly elected members of the present executive committee of the Philippine Amateur
Athletic Federation. The said executive committee shall be dissolved upon the organization of the
executive committee herein provided: Provided, further, That the functioning executive committee is
charged with the responsibility of seeing to it that the National Sports' Associations are formed and
organized within six months from and after the passage of this Act.
Section 7 of P.D. 604, similarly provides:
SEC. 7. National Sports Associations. - Application for accreditation or recognition as a national sports
association for each individual sport in the Philippines shall be filed with the Department together with,
among others, a copy of the Constitution and By-Laws and a list of the members of the proposed
association.
The Department shall give the recognition applied for if it is satisfied that the national sports association to
be organized will promote the objectives of this Decree and has substantially complied with the rules and
regulations of the Department: Provided, That the Department may withdraw accreditation or recognition
for violation of this Decree and such rules and regulations formulated by it.
The Department shall supervise the national sports association: Provided, That the latter shall have
exclusive technical control over the development and promotion of the particular sport for which they are
organized.
Clearly the above cited provisions require that before an entity may be considered as a national sports
association, such entity must be recognized by the accrediting organization, the Philippine Amateur
Athletic Federation under R.A. 3135, and the Department of Youth and Sports Development under P.D.
604. This fact of recognition, however, Henri Kahn failed to substantiate. In attempting to prove the
juridical existence of the Federation, Henri Kahn attached to his motion for reconsideration before the trial
court a copy of the constitution and by-laws of the Philippine Football Federation. Unfortunately, the same
does not prove that said Federation has indeed been recognized and accredited by either the Philippine
Amateur Athletic Federation or the Department of Youth and Sports Development. Accordingly, we rule
that the Philippine Football Federation is not a national sports association within the purview of the
aforementioned laws and does not have corporate existence of its own.
Thus being said, it follows that private respondent Henry Kahn should be held liable for the unpaid
obligations of the unincorporated Philippine Football Federation. It is a settled principal in corporation law
that any person acting or purporting to act on behalf of a corporation which has no valid existence
assumes such privileges and becomes personally liable for contract entered into or for other acts
performed as such agent.xiv 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. xv The doctrine of
corporation by estoppel is mistakenly applied by the respondent court to the petitioner. The application of
the doctrine applies to a third party only when he tries to escape liability on a contract from which he has
benefited on the irrelevant ground of defective incorporation. xvi In the case at bar, the petitioner is not
trying to escape liability from the contract but rather is the one claiming from the contract.

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE. The decision of the Regional
Trial Court of Manila, Branch 35, in Civil Case No. 90-53595 is hereby REINSTATED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur
2. LIM TONG LIM VS. PHIL. FISHING GEAR INDUSTRIES, INC., 317 SCRA728
THIRD DIVISION
[G.R. No. 136448. November 3, 1999]
LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.
DECISION
PANGANIBAN, J.:
A partnership may be deemed to exist among parties who agree to borrow money to pursue a business
and to divide the profits or losses that may arise therefrom, even if it is shown that they have not
contributed any capital of their own to a "common fund." Their contribution may be in the form of credit or
industry, not necessarily cash or fixed assets. Being partners, they are all liable for debts incurred by or
on behalf of the partnership. The liability for a contract entered into on behalf of an unincorporated
association or ostensible corporation may lie in a person who may not have directly transacted on its
behalf, but reaped benefits from that contract.
The Case

In the Petition for Review on Certiorari before us, Lim Tong Lim assails the November 26, 1998 Decision
of the Court of Appeals in CA-GR CV 41477,xvii which disposed as follows:
WHEREFORE, [there being] no reversible error in the appealed decision, the same is hereby affirmed. xviii
The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which was affirmed by the CA,
reads as follows:
WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary attachment issued by this Court on September 20,
1990;
2. That defendants are jointly liable to plaintiff for the following amounts, subject to the modifications as
hereinafter made by reason of the special and unique facts and circumstances and the proceedings that
transpired during the trial of this case;
a. P532,045.00 representing [the] unpaid purchase price of the fishing nets covered by the Agreement
plus P68,000.00 representing the unpaid price of the floats not covered by said Agreement;
b. 12% interest per annum counted from date of plaintiffs invoices and computed on their respective
amounts as follows:
i. Accrued interest of P73,221.00 on Invoice No. 14407 for P385,377.80 dated February 9, 1990;
ii. Accrued interest of P27,904.02 on Invoice No. 14413 for P146,868.00 dated February 13, 1990;
iii. Accrued interest of P12,920.00 on Invoice No. 14426 for P68,000.00 dated February 19, 1990;
c. P50,000.00 as and for attorneys fees, plus P8,500.00 representing P500.00 per appearance in court;
d. P65,000.00 representing P5,000.00 monthly rental for storage charges on the nets counted from
September 20, 1990 (date of attachment) to September 12, 1991 (date of auction sale);
e. Cost of suit.
With respect to the joint liability of defendants for the principal obligation or for the unpaid price of nets
and floats in the amount of P532,045.00 and P68,000.00, respectively, or for the total amount of
P600,045.00, this Court noted that these items were attached to guarantee any judgment that may be
rendered in favor of the plaintiff but, upon agreement of the parties, and, to avoid further deterioration of
the nets during the pendency of this case, it was ordered sold at public auction for not less than
P900,000.00 for which the plaintiff was the sole and winning bidder. The proceeds of the sale paid for by
plaintiff was deposited in court. In effect, the amount of P900,000.00 replaced the attached property as a

guaranty for any judgment that plaintiff may be able to secure in this case with the ownership and
possession of the nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder in
the public auction sale. It has also been noted that ownership of the nets [was] retained by the plaintiff
until full payment [was] made as stipulated in the invoices; hence, in effect, the plaintiff attached its own
properties. It [was] for this reason also that this Court earlier ordered the attachment bond filed by plaintiff
to guaranty damages to defendants to be cancelled and for the P900,000.00 cash bidded and paid for by
plaintiff to serve as its bond in favor of defendants.
From the foregoing, it would appear therefore that whatever judgment the plaintiff may be entitled to in
this case will have to be satisfied from the amount of P900,000.00 as this amount replaced the attached
nets and floats. Considering, however, that the total judgment obligation as computed above would
amount to only P840,216.92, it would be inequitable, unfair and unjust to award the excess to the
defendants who are not entitled to damages and who did not put up a single centavo to raise the amount
of P900,000.00 aside from the fact that they are not the owners of the nets and floats. For this reason, the
defendants are hereby relieved from any and all liabilities arising from the monetary judgment obligation
enumerated above and for plaintiff to retain possession and ownership of the nets and floats and for the
reimbursement of the P900,000.00 deposited by it with the Clerk of Court.
SO ORDERED. xix
The Facts

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao entered into a Contract
dated February 7, 1990, for the purchase of fishing nets of various sizes from the Philippine Fishing Gear
Industries, Inc. (herein respondent). They claimed that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The total price of the nets
amounted to P532,045. Four hundred pieces of floats worth P68,000 were also sold to the Corporation.xx
The buyers, however, failed to pay for the fishing nets and the floats; hence, private respondent filed a
collection suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer for a writ of preliminary
attachment. The suit was brought against the three in their capacities as general partners, on the
allegation that Ocean Quest Fishing Corporation was a nonexistent corporation as shown by a
Certification from the Securities and Exchange Commission. xxi On September 20, 1990, the lower court
issued a Writ of Preliminary Attachment, which the sheriff enforced by attaching the fishing nets on board
F/B Lourdes which was then docked at the Fisheries Port, Navotas, Metro Manila.
Instead of answering the Complaint, Chua filed a Manifestation admitting his liability and requesting a
reasonable time within which to pay. He also turned over to respondent some of the nets which were in
his possession. Peter Yao filed an Answer, after which he was deemed to have waived his right to crossexamine witnesses and to present evidence on his behalf, because of his failure to appear in subsequent
hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and Crossclaim and moved
for the lifting of the Writ of Attachment.xxii The trial court maintained the Writ, and upon motion of private
respondent, ordered the sale of the fishing nets at a public auction. Philippine Fishing Gear Industries
won the bidding and deposited with the said court the sales proceeds of P900,000.xxiii
On November 18, 1992, the trial court rendered its Decision, ruling that Philippine Fishing Gear Industries
was entitled to the Writ of Attachment and that Chua, Yao and Lim, as general partners, were jointly liable
to pay respondent.xxiv
The trial court ruled that a partnership among Lim, Chua and Yao existed based (1) on the testimonies of
the witnesses presented and (2) on a Compromise Agreement executed by the three xxv in Civil Case No.
1492-MN which Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a
declaration of nullity of commercial documents; (b) a reformation of contracts; (c) a declaration of
ownership of fishing boats; (d) an injunction and (e) damages. xxvi The Compromise Agreement provided:
a)That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in the amount of
P5,750,000.00 including the fishing net. This P5,750,000.00 shall be applied as full payment for
P3,250,000.00 in favor of JL Holdings Corporation and/or Lim Tong Lim;

b)
If the four (4) vessel[s] and the fishing net will be sold at a higher price than P5,750,000.00
whatever will be the excess will be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter Yao;
c)
If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the deficiency
shall be shouldered and paid to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3 Peter
Yao.xxvii
The trial court noted that the Compromise Agreement was silent as to the nature of their obligations, but
that joint liability could be presumed from the equal distribution of the profit and loss. xxviii
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua and Yao in a fishing business
and may thus be held liable as a such for the fishing nets and floats purchased by and for the use of the
partnership. The appellate court ruled:
The evidence establishes that all the defendants including herein appellant Lim Tong Lim undertook a
partnership for a specific undertaking, that is for commercial fishing x x x. Obviously, the ultimate
undertaking of the defendants was to divide the profits among themselves which is what a partnership
essentially is x x x. By a contract of partnership, two or more persons bind themselves to contribute
money, property or industry to a common fund with the intention of dividing the profits among themselves
(Article 1767, New Civil Code).xxix
Hence, petitioner brought this recourse before this Court. xxx
The Issues

In his Petition and Memorandum, Lim asks this Court to reverse the assailed Decision on the following
grounds:
ITHE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE AGREEMENT THAT
CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A SEPARATE CASE, THAT A PARTNERSHIP
AGREEMENT EXISTED AMONG THEM.
II
SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING FOR OCEAN
QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM PHILIPPINE FISHING, THE
COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING LIABILITY TO PETITIONER LIM AS WELL.
III
THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE AND ATTACHMENT OF
PETITIONER LIMS GOODS.
In determining whether petitioner may be held liable for the fishing nets and floats purchased from
respondent, the Court must resolve this key issue: whether by their acts, Lim, Chua and Yao could be
deemed to have entered into a partnership.
This Courts Ruling

The Petition is devoid of merit.

First and Second Issues: Existence of a Partnership and Petitioner's Liability

In arguing that he should not be held liable for the equipment purchased from respondent, petitioner
controverts the CA finding that a partnership existed between him, Peter Yao and Antonio Chua. He
asserts that the CA based its finding on the Compromise Agreement alone. Furthermore, he disclaims any
direct participation in the purchase of the nets, alleging that the negotiations were conducted by Chua and
Yao only, and that he has not even met the representatives of the respondent company. Petitioner further
argues that he was a lessor, not a partner, of Chua and Yao, for the "Contract of Lease" dated February 1,
1990, showed that he had merely leased to the two the main asset of the purported partnership -- the
fishing boat F/B Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25 percent
of the gross catch of the boat.
We are not persuaded by the arguments of petitioner. The facts as found by the two lower courts clearly
showed that there existed a partnership among Chua, Yao and him, pursuant to Article 1767 of the Civil
Code which provides:

Article 1767 - By the contract of partnership, two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.
Specifically, both lower courts ruled that a partnership among the three existed based on the following
factual findings:xxxi
(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in commercial fishing to join him,
while Antonio Chua was already Yaos partner;
(2) That after convening for a few times, Lim Chua, and Yao verbally agreed to acquire two fishing boats,
the FB Lourdes and the FB Nelson for the sum of P3.35 million;
(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong Lim, to finance the
venture.
(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed of Sale over these
two (2) boats in favor of Petitioner Lim Tong Lim only to serve as security for the loan extended by Jesus
Lim;
(5) That Lim, Chua and Yao agreed that the refurbishing , re-equipping, repairing, dry docking and other
expenses for the boats would be shouldered by Chua and Yao;
(6) That because of the unavailability of funds, Jesus Lim again extended a loan to the partnership in the
amount of P1 million secured by a check, because of which, Yao and Chua entrusted the ownership
papers of two other boats, Chuas FB Lady Anne Mel and Yaos FB Tracy to Lim Tong Lim.
(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought nets from
Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing Corporation," their purported
business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch 72 by Antonio
Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of commercial documents; (b)
reformation of contracts; (c) declaration of ownership of fishing boats; (4) injunction; and (e) damages.
(9) That the case was amicably settled through a Compromise Agreement executed between the partieslitigants the terms of which are already enumerated above.
From the factual findings of both lower courts, it is clear that Chua, Yao and Lim had decided to engage in
a fishing business, which they started by buying boats worth P3.35 million, financed by a loan secured
from Jesus Lim who was petitioners brother. In their Compromise Agreement, they subsequently revealed
their intention to pay the loan with the proceeds of the sale of the boats, and to divide equally among
them the excess or loss. These boats, the purchase and the repair of which were financed with borrowed
money, fell under the term common fund under Article 1767. The contribution to such fund need not be
cash or fixed assets; it could be an intangible like credit or industry. That the parties agreed that any loss
or profit from the sale and operation of the boats would be divided equally among them also shows that
they had indeed formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the boat, but also to that of
the nets and the floats. The fishing nets and the floats, both essential to fishing, were obviously acquired
in furtherance of their business. It would have been inconceivable for Lim to involve himself so much in
buying the boat but not in the acquisition of the aforesaid equipment, without which the business could not
have proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and Yao, a partnership
engaged in the fishing business. They purchased the boats, which constituted the main assets of the
partnership, and they agreed that the proceeds from the sales and operations thereof would be divided
among them.
We stress that under Rule 45, a petition for review like the present case should involve only questions of
law. Thus, the foregoing factual findings of the RTC and the CA are binding on this Court, absent any
cogent proof that the present action is embraced by one of the exceptions to the rule. xxxii In assailing the
factual findings of the two lower courts, petitioner effectively goes beyond the bounds of a petition for
review under Rule 45.

Compromise Agreement Not the Sole Basis of Partnership

Petitioner argues that the appellate courts sole basis for assuming the existence of a partnership was the
Compromise Agreement. He also claims that the settlement was entered into only to end the dispute
among them, but not to adjudicate their preexisting rights and obligations. His arguments are baseless.
The Agreement was but an embodiment of the relationship extant among the parties prior to its execution.
A proper adjudication of claimants rights mandates that courts must review and thoroughly appraise all
relevant facts. Both lower courts have done so and have found, correctly, a preexisting partnership among
the parties. In implying that the lower courts have decided on the basis of one piece of document alone,
petitioner fails to appreciate that the CA and the RTC delved into the history of the document and
explored all the possible consequential combinations in harmony with law, logic and fairness. Verily, the
two lower courts factual findings mentioned above nullified petitioners argument that the existence of a
partnership was based only on the Compromise Agreement.
Petitioner Was a Partner, Not a Lessor

We are not convinced by petitioners argument that he was merely the lessor of the boats to Chua and
Yao, not a partner in the fishing venture. His argument allegedly finds support in the Contract of Lease
and the registration papers showing that he was the owner of the boats, including F/B Lourdes where the
nets were found.
His allegation defies logic. In effect, he would like this Court to believe that he consented to the sale of his
own boats to pay a debt of Chua and Yao, with the excess of the proceeds to be divided among the three
of them. No lessor would do what petitioner did. Indeed, his consent to the sale proved that there was a
preexisting partnership among all three.
Verily, as found by the lower courts, petitioner entered into a business agreement with Chua and Yao, in
which debts were undertaken in order to finance the acquisition and the upgrading of the vessels which
would be used in their fishing business. The sale of the boats, as well as the division among the three of
the balance remaining after the payment of their loans, proves beyond cavil that F/B Lourdes, though
registered in his name, was not his own property but an asset of the partnership. It is not uncommon to
register the properties acquired from a loan in the name of the person the lender trusts, who in this case
is the petitioner himself. After all, he is the brother of the creditor, Jesus Lim.
We stress that it is unreasonable indeed, it is absurd -- for petitioner to sell his property to pay a debt he
did not incur, if the relationship among the three of them was merely that of lessor-lessee, instead of
partners.
Corporation by Estoppel

Petitioner argues that under the doctrine of corporation by estoppel, liability can be imputed only to Chua
and Yao, and not to him. Again, we disagree.
Section 21 of the Corporation Code of the Philippines provides:
Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation knowing it to be
without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred
or arising as a result thereof: Provided however, That when any such ostensible corporation is sued on
any transaction entered by it as a corporation or on any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate personality.
One who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof
on the ground that there was in fact no corporation.
Thus, even if the ostensible corporate entity is proven to be legally nonexistent, a party may be estopped
from denying its corporate existence. The reason behind this doctrine is obvious - an unincorporated
association has no personality and would be incompetent to act and appropriate for itself the power and
attributes of a corporation as provided by law; it cannot create agents or confer authority on another to act
in its behalf; thus, those who act or purport to act as its representatives or agents do so without authority
and at their own risk. And as it is an elementary principle of law that a person who acts as an agent
without authority or without a principal is himself regarded as the principal, possessed of all the right and

subject to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation
which has no valid existence assumes such privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such agent. xxxiii
The doctrine of corporation by estoppel may apply to the alleged corporation and to a third party. In the
first instance, an unincorporated association, which represented itself to be a corporation, will be
estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith
on such representation. It cannot allege lack of personality to be sued to evade its responsibility for a
contract it entered into and by virtue of which it received advantages and benefits.
On the other hand, a third party who, knowing an association to be unincorporated, nonetheless treated it
as a corporation and received benefits from it, may be barred from denying its corporate existence in a
suit brought against the alleged corporation. In such case, all those who benefited from the transaction
made by the ostensible corporation, despite knowledge of its legal defects, may be held liable for
contracts they impliedly assented to or took advantage of.
There is no dispute that the respondent, Philippine Fishing Gear Industries, is entitled to be paid for the
nets it sold. The only question here is whether petitioner should be held jointly xxxiv liable with Chua and
Yao. Petitioner contests such liability, insisting that only those who dealt in the name of the ostensible
corporation should be held liable. Since his name does not appear on any of the contracts and since he
never directly transacted with the respondent corporation, ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found inside F/B Lourdes, the boat which
has earlier been proven to be an asset of the partnership. He in fact questions the attachment of the nets,
because the Writ has effectively stopped his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided to form a corporation.
Although it was never legally formed for unknown reasons, this fact alone does not preclude the liabilities
of the three as contracting parties in representation of it. Clearly, under the law on estoppel, those acting
on behalf of a corporation and those benefited by it, knowing it to be without valid existence, are held
liable as general partners.
Technically, it is true that petitioner did not directly act on behalf of the corporation. However, having
reaped the benefits of the contract entered into by persons with whom he previously had an existing
relationship, he is deemed to be part of said association and is covered by the scope of the doctrine of
corporation by estoppel. We reiterate the ruling of the Court in Alonso v. Villamor: xxxv
A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art
of movement and position , entraps and destroys the other. It is, rather, a contest in which each
contending party fully and fairly lays before the court the facts in issue and then, brushing aside as wholly
trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice be done
upon the merits. Lawsuits, unlike duels, are not to be won by a rapiers thrust. Technicality, when it deserts
its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant
consideration from courts. There should be no vested rights in technicalities.
Third Issue: Validity of Attachment

Finally, petitioner claims that the Writ of Attachment was improperly issued against the nets. We agree
with the Court of Appeals that this issue is now moot and academic. As previously discussed, F/B Lourdes
was an asset of the partnership and that it was placed in the name of petitioner, only to assure payment of
the debt he and his partners owed. The nets and the floats were specifically manufactured and tailormade according to their own design, and were bought and used in the fishing venture they agreed upon.
Hence, the issuance of the Writ to assure the payment of the price stipulated in the invoices is proper.
Besides, by specific agreement, ownership of the nets remained with Respondent Philippine Fishing
Gear, until full payment thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
SO ORDERED.

3. LOZANO VS. DE LOS SANTOS, 273 SCRA 452

SECOND DIVISION
[G.R. No. 125221. June 19, 1997]
REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R. DE LOS SANTOS, Presiding Judge, RTC,
Br. 58, Angeles City; and ANTONIO ANDA, respondents.
DECISION
PUNO, J.:
This petition for certiorari seeks to annul and set aside the decision of the Regional Trial Court, Branch
58, Angeles City which ordered the Municipal Circuit Trial Court, Mabalacat and Magalang, Pampanga to
dismiss Civil Case No. 1214 for lack of jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo M. Lozano filed Civil Case No.
1214 for damages against respondent Antonio Anda before the Municipal Circuit Trial Court (MCTC),
Mabalacat and Magalang, Pampanga. Petitioner alleged that he was the president of the Kapatirang
Mabalacat-Angeles Jeepney Drivers' Association, Inc. (KAMAJDA) while respondent Anda was the
president of the Samahang Angeles-Mabalacat Jeepney Operators' and Drivers' Association, Inc.
(SAMAJODA); in August 1995, upon the request of the Sangguniang Bayan of Mabalacat, Pampanga,
petitioner and private respondent agreed to consolidate their respective associations and form the Unified
Mabalacat-Angeles Jeepney Operators' and Drivers' Association, Inc. (UMAJODA); petitioner and private
respondent also agreed to elect one set of officers who shall be given the sole authority to collect the daily
dues from the members of the consolidated association; elections were held on October 29, 1995 and
both petitioner and private respondent ran for president; petitioner won; private respondent protested and,
alleging fraud, refused to recognize the results of the election; private respondent also refused to abide by
their agreement and continued collecting the dues from the members of his association despite several
demands to desist. Petitioner was thus constrained to file the complaint to restrain private respondent
from collecting the dues and to order him to pay damages in the amount of P25,000.00 and attorney's
fees of P500.00.xxxvi
Private respondent moved to dismiss the complaint for lack of jurisdiction, claiming that jurisdiction was
lodged with the Securities and Exchange Commission (SEC). The MCTC denied the motion on February
9, 1996.xxxvii It denied reconsideration on March 8, 1996.xxxviii
Private respondent filed a petition for certiorari before the Regional Trial Court, Branch 58, Angeles
City.xxxix The trial court found the dispute to be intracorporate, hence, subject to the jurisdiction of the SEC,
and ordered the MCTC to dismiss Civil Case No. 1214 accordingly.xl It denied reconsideration on May 31,
1996.xli
Hence this petition. Petitioner claims that:
"THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION AND SERIOUS ERROR OF LAW IN CONCLUDING THAT THE
SECURITIES AND EXCHANGE COMMISSION HAS JURISDICTION OVER A CASE OF DAMAGES
BETWEEN HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS WHO INTENDED TO
CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT NOT YET [SIC] APPROVED AND REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION."xlii
The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in Section 5 of Presidential
Decree No. 902-A. Section 5 reads as follows:
"Section 5. x x x [T]he Securities and Exchange Commission [has] original and exclusive jurisdiction to
hear and decide cases involving:
(a) Devices or schemes employed by or any acts of the board of directors, business associates, its
officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of
the public and/or of the stockholders, partners, members of associations or organizations registered with
the Commission.

(b) Controversies arising out of intracorporate or partnership relations, between and among stockholders,
members or associates; between any or all of them and the corporation, partnership or association of
which they are stockholders, members, or associates, respectively; and between such corporation,
partnership or association and the state insofar as it concerns their individual franchise or right to exist as
such entity.
(c) Controversies in the election or appointment of directors, trustees, officers or managers of such
corporations, partnerships or associations.
(d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of
payments in cases where the corporation, partnership or association possesses sufficient property to
cover all its debts but foresees the impossibility of meeting them when they respect very fall due or in
cases where the corporation, partnership or association has no sufficient assets to cover its liabilities, but
is under the management of a Rehabilitation Receiver or Management Committee created pursuant to
this Decree."
The grant of jurisdiction to the SEC must be viewed in the light of its nature and function under the law. xliii
This jurisdiction is determined by a concurrence of two elements: (1) the status or relationship of the
parties; and (2) the nature of the question that is the subject of their controversy.xliv
The first element requires that the controversy must arise out of intracorporate or partnership relations
between and among stockholders, members, or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members or associates,
respectively; and between such corporation, partnership or association and the State in so far as it
concerns their individual franchises.xlv The second element requires that the dispute among the parties be
intrinsically connected with the regulation of the corporation, partnership or association or deal with the
internal affairs of the corporation, partnership or association. xlvi After all, the principal function of the SEC
is the supervision and control of corporations, partnerships and associations with the end in view that
investments in these entities may be encouraged and protected, and their activities pursued for the
promotion of economic development.xlvii
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 in 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.xlviii 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.xlix The new consolidated corporation comes into existence and the constituent
corporations dissolve and cease to exist.l
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 estoppelli advanced by private respondent cannot override jurisdictional
requirements. Jurisdiction is fixed by law and is not subject to the agreement of the parties. lii 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.liii
Corporation by estoppel is founded on principles of equity and is designed to prevent injustice and
unfairness.liv It applies when persons assume to form a corporation and exercise corporate functions and
enter into business relations with third persons. 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. lv
IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996 and the order dated
May 31, 1996 of the Regional Trial Court, Branch 58, Angeles City are set aside. The Municipal Circuit
Trial Court of Mabalacat and Magalang, Pampanga is ordered to proceed with dispatch in resolving Civil
Case No. 1214. No costs.
SO ORDERED.

4. LYCEUM OF THE PHILIPPINES, INC. VS CA, G.R. No. 101897. March 5, 1993
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 101897. March 5, 1993.
LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS, LYCEUM OF APARRI,
LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF
TUAO, INC., BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN
PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM,
INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED NAME WHICH IS
IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY EXISTING CORPORATION, PROHIBITED;
CONFUSION AND DECEPTION EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC
NAMES TO THE WORD "LYCEUM". The Articles of Incorporation of a corporation must, among other
things, set out the name of the corporation. Section 18 of the Corporation Code establishes a restrictive
rule insofar as corporate names are concerned: "Section 18. Corporate name. No corporate name may
be allowed by the Securities an Exchange Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing laws. When a change in the corporate name is
approved, the Commission shall issue an amended certificate of incorporation under the amended name."
The policy underlying the prohibition in Section 18 against the registration of a corporate name which is
"identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently
deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public
which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over corporations. We do not consider
that the corporate names of private respondent institutions are "identical with, or deceptively or
confusingly similar" to that of the petitioner institution. True enough, the corporate names of private
respondent entities all carry the word "Lyceum" but confusion and deception are effectively precluded by
the appending of geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of
Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the "Lyceum of
Camalaniugan" would be confused with the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM," NOT ATTENDED
WITH EXCLUSIVITY. It is claimed, however, by petitioner that the word "Lyceum" has acquired a

secondary meaning in relation to petitioner with the result that word, although originally a generic, has
become appropriable by petitioner to the exclusion of other institutions like private respondents herein.
The doctrine of secondary meaning originated in the field of trademark law. Its application has, however,
been extended to corporate names sine the right to use a corporate name to the exclusion of others is
based upon the same principle which underlies the right to use a particular trademark or tradename. In
Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning was elaborated
in the following terms: " . . . a word or phrase originally incapable of exclusive appropriation with reference
to an article on the market, because geographically or otherwise descriptive, might nevertheless have
been used so long and so exclusively by one producer with reference to his article that, in that trade and
to that branch of the purchasing public, the word or phrase has come to mean that the article was his
product." The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its
corporate name has been for such length of time and with such exclusivity as to have become associated
or identified with the petitioner institution in the mind of the general public (or at least that portion of the
general public which has to do with schools). The Court of Appeals recognized this issue and answered it
in the negative: "Under the doctrine of secondary meaning, a word or phrase originally incapable of
exclusive appropriation with reference to an article in the market, because geographical or otherwise
descriptive might nevertheless have been used so long and so exclusively by one producer with reference
to this article that, in that trade and to that group of the purchasing public, the word or phrase has come to
mean that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has
been referred to as the distinctiveness into which the name or phrase has evolved through the substantial
and exclusive use of the same for a considerable period of time. . . . No evidence was ever presented in
the hearing before the Commission which sufficiently proved that the word 'Lyceum' has indeed acquired
secondary meaning in favor of the appellant. If there was any of this kind, the same tend to prove only
that the appellant had been using the disputed word for a long period of time. . . . In other words, while the
appellant may have proved that it had been using the word 'Lyceum' for a long period of time, this fact
alone did not amount to mean that the said word had acquired secondary meaning in its favor because
the appellant failed to prove that it had been using the same word all by itself to the exclusion of others.
More so, there was no evidence presented to prove that confusion will surely arise if the same word were
to be used by other educational institutions. Consequently, the allegations of the appellant in its first two
assigned errors must necessarily fail." We agree with the Court of Appeals. The number alone of the
private respondents in the case at bar suggests strongly that petitioner's use of the word "Lyceum" has
not been attended with the exclusivity essential for applicability of the doctrine of secondary meaning.
Petitioner's use of the word "Lyceum" was not exclusive but was in truth shared with the Western
Pangasinan Lyceum and a little later with other private respondent institutions which registered with the
SEC using "Lyceum" as part of their corporation names. There may well be other schools using Lyceum
or Liceo in their names, but not registered with the SEC because they have not adopted the corporate
form of organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE WHETHER THEY ARE
CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER CORPORATE ENTITY'S NAME.
petitioner institution is not entitled to a legally enforceable exclusive right to use the word "Lyceum" in its
corporate name and that other institutions may use "Lyceum" as part of their corporate names. To
determine whether a given corporate name is "identical" or "confusingly or deceptively similar" with
another entity's corporate name, it is not enough to ascertain the presence of "Lyceum" or "Liceo" in both
names. One must evaluate corporate names in their entirety and when the name of petitioner is
juxtaposed with the names of private respondents, they are not reasonably regarded as "identical" or
"confusingly or deceptively similar" with each other.
DECISION
FELICIANO, J p:

Petitioner is an educational institution duly registered with the Securities and Exchange Commission
("SEC"). When it first registered with the SEC on 21 September 1950, it used the corporate name Lyceum
of the Philippines, Inc. and has used that name ever since.
On 24 February 1984, petitioner instituted proceedings before the SEC to compel the private
respondents, which are also educational institutions, to delete the word "Lyceum" from their corporate
names and permanently to enjoin them from using "Lyceum" as part of their respective names.
Some of the private respondents actively participated in the proceedings before the SEC. These are the
following, the dates of their original SEC registration being set out below opposite their respective names:
Western Pangasinan Lyceum 27 October 1950
Lyceum of Cabagan 31 October 1962
Lyceum of Lallo, Inc. 26 March 1972
Lyceum of Aparri 28 March 1972
Lyceum of Tuao, Inc. 28 March 1972
Lyceum of Camalaniugan 28 March 1972
The following private respondents were declared in default for failure to file an answer despite service of
summons:
Buhi Lyceum;
Central Lyceum of Catanduanes;
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines
Petitioner's original complaint before the SEC had included three (3) other entities:
1. The Lyceum of Malacanay;
2. The Lyceum of Marbel; and
3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay and the Lyceum of
Marbel, for failure to serve summons upon these two (2) entities. The case against the Liceum of Araullo
was dismissed when that school motu proprio change its corporate name to "Pamantasan ng Araullo."
The background of the case at bar needs some recounting. Petitioner had sometime before commenced
in the SEC a proceeding (SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require it to change
its corporate name and to adopt another name not "similar [to] or identical" with that of petitioner. In an
Order dated 20 April 1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner
and that of the Lyceum of Baguio, Inc. were substantially identical because of the presence of a
"dominant" word, i.e., "Lyceum," the name of the geographical location of the campus being the only word
which distinguished one from the other corporate name. The SEC also noted that petitioner had
registered as a corporation ahead of the Lyceum of Baguio, Inc. in point of time, 1 and ordered the latter
to change its name to another name "not similar or identical [with]" the names of previously registered
entities.
The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court in a case docketed
as G.R. No. L-46595. In a Minute Resolution dated 14 September 1977, the Court denied the Petition for
Review for lack of merit. Entry of judgment in that case was made on 21 October 1977. 2
Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then wrote all the educational
institutions it could find using the word "Lyceum" as part of their corporate name, and advised them to
discontinue such use of "Lyceum." When, with the passage of time, it became clear that this recourse had
failed, petitioner instituted before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its
proprietary right to the word "Lyceum." The SEC hearing officer rendered a decision sustaining petitioner's
claim to an exclusive right to use the word "Lyceum." The hearing officer relied upon the SEC ruling in the
Lyceum of Baguio, Inc. case (SEC-Case No. 1241) and held that the word "Lyceum" was capable of
appropriation and that petitioner had acquired an enforceable exclusive right to the use of that word.

On appeal, however, by private respondents to the SEC En Banc, the decision of the hearing officer was
reversed and set aside. The SEC En Banc did not consider the word "Lyceum" to have become so
identified with petitioner as to render use thereof by other institutions as productive of confusion about the
identity of the schools concerned in the mind of the general public. Unlike its hearing officer, the SEC En
Banc held that the attaching of geographical names to the word "Lyceum" served sufficiently to distinguish
the schools from one another, especially in view of the fact that the campuses of petitioner and those of
the private respondents were physically quite remote from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June 1991, however, the
Court of Appeals affirmed the questioned Orders of the SEC En Banc. 4 Petitioner filed a motion for
reconsideration, without success.
Before this Court, petitioner asserts that the Court of Appeals committed the following errors:
1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in G.R. No. L-46595
did not constitute stare decisis as to apply to this case and in not holding that said Resolution bound
subsequent determinations on the right to exclusive use of the word Lyceum.
2. The Court of Appeals erred in holding that respondent Western Pangasinan Lyceum, Inc. was
incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has not acquired a secondary meaning in
favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be appropriated by the
petitioner to the exclusion of others. 5
We will consider all the foregoing ascribed errors, though not necessarily seriatim. We begin by noting
that the Resolution of the Court in G.R. No. L-46595 does not, of course, constitute res adjudicata in
respect of the case at bar, since there is no identity of parties. Neither is stare decisis pertinent, if only
because the SEC En Banc itself has re-examined Associate Commissioner Sulit's ruling in the Lyceum of
Baguio case. The Minute Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption of the
Sulit ruling.
The Articles of Incorporation of a corporation must, among other things, set out the name of the
corporation. 6 Section 18 of the Corporation Code establishes a restrictive rule insofar as corporate
names are concerned:
"SECTION 18. Corporate name. No corporate name may be allowed by the Securities an Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently deceptive, confusing or contrary
to existing laws. When a change in the corporate name is approved, the Commission shall issue an
amended certificate of incorporation under the amended name." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the registration of a corporate name which is
"identical or deceptively or confusingly similar" to that of any existing corporation or which is "patently
deceptive" or "patently confusing" or "contrary to existing laws," is the avoidance of fraud upon the public
which would have occasion to deal with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over corporations. 7
We do not consider that the corporate names of private respondent institutions are "identical with, or
deceptively or confusingly similar" to that of the petitioner institution. True enough, the corporate names of
private respondent entities all carry the word "Lyceum" but confusion and deception are effectively
precluded by the appending of geographic names to the word "Lyceum." Thus, we do not believe that the
"Lyceum of Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that the
"Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines.
Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn referred to a
locality on the river Ilissius in ancient Athens "comprising an enclosure dedicated to Apollo and adorned
with fountains and buildings erected by Pisistratus, Pericles and Lycurgus frequented by the youth for
exercise and by the philosopher Aristotle and his followers for teaching." 8 In time, the word "Lyceum"

became associated with schools and other institutions providing public lectures and concerts and public
discussions. Thus today, the word "Lyceum" generally refers to a school or an institution of learning. While
the Latin word "lyceum" has been incorporated into the English language, the word is also found in
Spanish (liceo) and in French (lycee). As the Court of Appeals noted in its Decision, Roman Catholic
schools frequently use the term; e.g., "Liceo de Manila," "Liceo de Baleno" (in Baleno, Masbate), "Liceo
de Masbate," "Liceo de Albay." 9 "Lyceum" is in fact as generic in character as the word "university." In
the name of the petitioner, "Lyceum" appears to be a substitute for "university;" in other places, however,
"Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary school or a college. It may be (though this
is a question of fact which we need not resolve) that the use of the word "Lyceum" may not yet be as
widespread as the use of "university," but it is clear that a not inconsiderable number of educational
institutions have adopted "Lyceum" or "Liceo" as part of their corporate names. Since "Lyceum" or "Liceo"
denotes a school or institution of learning, it is not unnatural to use this word to designate an entity which
is organized and operating as an educational institution.
It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary meaning in relation
to petitioner with the result that that word, although originally a generic, has become appropriable by
petitioner to the exclusion of other institutions like private respondents herein.
The doctrine of secondary meaning originated in the field of trademark law. Its application has, however,
been extended to corporate names sine the right to use a corporate name to the exclusion of others is
based upon the same principle which underlies the right to use a particular trademark or tradename. 10 In
Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11 the doctrine of secondary meaning was
elaborated in the following terms:
" . . . a word or phrase originally incapable of exclusive appropriation with reference to an article on the
market, because geographically or otherwise descriptive, might nevertheless have been used so long and
so exclusively by one producer with reference to his article that, in that trade and to that branch of the
purchasing public, the word or phrase has come to mean that the article was his product." 12
The question which arises, therefore, is whether or not the use by petitioner of "Lyceum" in its corporate
name has been for such length of time and with such exclusivity as to have become associated or
identified with the petitioner institution in the mind of the general public (or at least that portion of the
general public which has to do with schools). The Court of Appeals recognized this issue and answered it
in the negative:
"Under the doctrine of secondary meaning, a word or phrase originally incapable of exclusive
appropriation with reference to an article in the market, because geographical or otherwise descriptive
might nevertheless have been used so long and so exclusively by one producer with reference to this
article that, in that trade and to that group of the purchasing public, the word or phrase has come to mean
that the article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been
referred to as the distinctiveness into which the name or phrase has evolved through the substantial and
exclusive use of the same for a considerable period of time. Consequently, the same doctrine or principle
cannot be made to apply where the evidence did not prove that the business (of the plaintiff) has
continued for so long a time that it has become of consequence and acquired a good will of considerable
value such that its articles and produce have acquired a well-known reputation, and confusion will result
by the use of the disputed name (by the defendant) (Ang Si Heng vs. Wellington Department Store, Inc.,
92 Phil. 448).
With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the aforementioned
requisites. No evidence was ever presented in the hearing before the Commission which sufficiently
proved that the word 'Lyceum' has indeed acquired secondary meaning in favor of the appellant. If there
was any of this kind, the same tend to prove only that the appellant had been using the disputed word for
a long period of time. Nevertheless, its (appellant) exclusive use of the word (Lyceum) was never
established or proven as in fact the evidence tend to convey that the cross-claimant was already using
the word 'Lyceum' seventeen (17) years prior to the date the appellant started using the same word in its

corporate name. Furthermore, educational institutions of the Roman Catholic Church had been using the
same or similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,'
'Liceo de Albay' long before appellant started using the word 'Lyceum'. The appellant also failed to prove
that the word 'Lyceum' has become so identified with its educational institution that confusion will surely
arise in the minds of the public if the same word were to be used by other educational institutions.
In other words, while the appellant may have proved that it had been using the word 'Lyceum' for a long
period of time, this fact alone did not amount to mean that the said word had acquired secondary meaning
in its favor because the appellant failed to prove that it had been using the same word all by itself to the
exclusion of others. More so, there was no evidence presented to prove that confusion will surely arise if
the same word were to be used by other educational institutions. Consequently, the allegations of the
appellant in its first two assigned errors must necessarily fail." 13 (Underscoring partly in the original and
partly supplied)
We agree with the Court of Appeals. The number alone of the private respondents in the case at bar
suggests strongly that petitioner's use of the word "Lyceum" has not been attended with the exclusivity
essential for applicability of the doctrine of secondary meaning. It may be noted also that at least one of
the private respondents, i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen
(17) years before the petitioner registered its own corporate name with the SEC and began using the
word "Lyceum." It follows that if any institution had acquired an exclusive right to the word "Lyceum," that
institution would have been the Western Pangasinan Lyceum, Inc. rather than the petitioner institution.
In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to
reconstruct its records before the SEC in accordance with the provisions of R.A. No. 62, which records
had been destroyed during World War II, Western Pangasinan Lyceum should be deemed to have lost all
rights it may have acquired by virtue of its past registration. It might be noted that the Western
Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had filed its own registration on 21
September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed to have lost its
rights under its original 1933 registration, appears to us to be quite secondary in importance; we refer to
this earlier registration simply to underscore the fact that petitioner's use of the word "Lyceum" was
neither the first use of that term in the Philippines nor an exclusive use thereof. Petitioner's use of the
word "Lyceum" was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a
little later with other private respondent institutions which registered with the SEC using "Lyceum" as part
of their corporation names. There may well be other schools using Lyceum or Liceo in their names, but
not registered with the SEC because they have not adopted the corporate form of organization.
We conclude and so hold that petitioner institution is not entitled to a legally enforceable exclusive right to
use the word "Lyceum" in its corporate name and that other institutions may use "Lyceum" as part of their
corporate names. To determine whether a given corporate name is "identical" or "confusingly or
deceptively similar" with another entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names. One must evaluate corporate names in their entirety and when the
name of petitioner is juxtaposed with the names of private respondents, they are not reasonably regarded
as "identical" or "confusingly or deceptively similar" with each other.
WHEREFORE, the petitioner having failed to show any reversible error on the part of the public
respondent Court of Appeals, the Petition for Review is DENIED for lack of merit, and the Decision of the
Court of Appeals dated 28 June 1991 is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
5. INDUSTRIAL REFRATORIES CORP. VS, CA, G.R. No. 122174. October 3, 2002
SECOND DIVISION
[G.R. No. 122174. October 3, 2002]
INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner, vs. COURT OF
APPEALS, SECURITIES AND EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF
THE PHILIPPINES, respondents.

DECISION
AUSTRIA-MARTINEZ, J.:
Filed before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
Decision of the Court of Appeals in CA-G.R. SP No. 35056, denying due course and dismissing the
petition filed by Industrial Refractories Corp. of the Philippines (IRCP).
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October
13, 1976 for the purpose of engaging in the business of manufacturing, producing, selling, exporting and
otherwise dealing in any and all refractory bricks, its by-products and derivatives. On June 22, 1977, it
registered its corporate and business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally under the name
Synclaire Manufacturing Corporation. It amended its Articles of Incorporation on August 23, 1985 to
change its corporate name to Industrial Refractories Corp. of the Philippines. It is engaged in the business
of manufacturing all kinds of ceramics and other products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix. 1
Discovering that petitioner was using such corporate name, respondent RCP filed on April 14, 1988 with
the Securities and Exchange Commission (SEC) a petition to compel petitioner to change its corporate
name on the ground that its corporate name is confusingly similar with that of petitioners such that the
public may be confused or deceived into believing that they are one and the same corporation. 2
The SEC decided in favor of respondent RCP and rendered judgment on July 23, 1993 with the following
dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the respondent
declaring the latters corporate name Industrial Refractories Corporation of the Philippines as deceptively
and confusingly similar to that of petitioners corporate name Refractories Corporation of the Philippines.
Accordingly, respondent is hereby directed to amend its Articles of Incorporation by deleting the name
Refractories Corporation of the Philippines in its corporate name within thirty (30) days from finality of this
Decision. Likewise, respondent is hereby ordered to pay the petitioner the sum of P50,000.00 as
attorneys fees.3
Petitioner appealed to the SEC En Banc, arguing that it does not have any jurisdiction over the case, and
that respondent RCP has no right to the exclusive use of its corporate name as it is composed of generic
or common words.4
In its Decision dated July 23, 1993, the SEC En Banc modified the appealed decision in that petitioner
was ordered to delete or drop from its corporate name only the word Refractories. 5
Petitioner IRCP elevated the decision of the SEC En Banc through a petition for review on certiorari to the
Court of Appeals which then rendered the herein assailed decision. The appellate court upheld the
jurisdiction of the SEC over the case and ruled that the corporate names of petitioner IRCP and
respondent RCP are confusingly or deceptively similar, and that respondent RCP has established its prior

1
2
3
4
5

right to use the word Refractories as its corporate name. 6 The appellate court also found that the petition
was filed beyond the reglementary period.7
Hence, herein petition which we must deny.
Petitioner contends that the petition before the Court of Appeals was timely filed. It must be noted that at
the time the SEC En Banc rendered its decision on May 10, 1994, the governing rule on appeals from
quasi-judicial agencies like the SEC was Supreme Court Circular No. 1-91. As provided therein, the
remedy should have been a petition for review filed before the Court of Appeals within fifteen (15) days
from notice, raising questions of fact, of law, or mixed questions of fact and law.8 A motion for
reconsideration suspends the running of the period.9
In the case at bench, there is a discrepancy between the dates provided by petitioner and respondent.
Petitioner alleges the following dates of receipt and filing: 10
June 10, 1994 Receipt of SECs Decision dated May 10, 1994
June 20, 1994 Filing of Motion for Reconsideration
September 1, 1994
Receipt of SECs Order dated August 3, 1994 denying petitioners motion for
reconsideration
September 2, 1994
Filing of Motion for extension of time
September 6, 1994
Filing of Petition
Respondent RCP, however, asserts that the foregoing dates are incorrect as the certifications issued by
the SEC show that petitioner received the SECs Decision dated May 10, 1994 on June 9, 1994, filed the
motion for reconsideration via registered mail on June 25, 1994, and received the Order dated August 3,
1994 on August 15, 1994.11 Thus, the petition was filed twenty-one (21) days beyond the reglementary
period provided in Supreme Court Circular No. 1-91.12
If reckoned from the dates supplied by petitioner, then the petition was timely filed. On the other hand, if
reckoned from the dates provided by respondent RCP, then it was filed way beyond the reglementary
period. On this score, we agree with the appellate courts finding that petitioner failed to rebut respondent
RCPs allegations of material dates of receipt and filing. 13 In addition, the certifications were executed by
the SEC officials based on their official records14 which enjoy the presumption of regularity.15 As such,
these are prima facie evidence of the facts stated therein. 16 And based on such dates, there is no
question that the petition was filed with the Court of Appeals beyond the fifteen (15) day period. On this

6
7
8
9
10
11
12
13
14
15
16

ground alone, the instant petition should be denied as the SEC En Bancs decision had already attained
finality and the SECs findings of fact, when supported by substantial evidence, is final. 17
Nevertheless, to set the matters at rest, we shall delve into the other issues posed by petitioner.
Petitioners arguments, substantially, are as follows: (1) jurisdiction is vested with the regular courts as the
present case is not one of the instances provided in P.D. 902-A; (2) respondent RCP is not entitled to use
the generic name refractories; (3) there is no confusing similarity between their corporate names; and (4)
there is no basis for the award of attorneys fees.18
Petitioners argument on the SECs jurisdiction over the case is utterly myopic. The jurisdiction of the SEC
is not merely confined to the adjudicative functions provided in Section 5 of P.D. 902-A, as amended. 19 By
express mandate, it has absolute jurisdiction, supervision and control over all corporations. 20 It also
exercises regulatory and administrative powers to implement and enforce the Corporation Code, 21 one of
which is Section 18, which provides:
SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law or is patently deceptive, confusing or contrary
to existing laws. When a change in the corporate name is approved, the Commission shall issue an
amended certificate of incorporation under the amended name.
It is the SECs duty to prevent confusion in the use of corporate names not only for the protection of the
corporations involved but more so for the protection of the public, and it has authority to de-register at all
times and under all circumstances corporate names which in its estimation are likely to generate
confusion.22 Clearly therefore, the present case falls within the ambit of the SECs regulatory powers. 23
Likewise untenable is petitioners argument that there is no confusing or deceptive similarity between
petitioner and respondent RCPs corporate names. Section 18 of the Corporation Code expressly
prohibits the use of a corporate name which is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. The policy behind the foregoing prohibition is to avoid fraud upon the public that
will have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the
reduction of difficulties of administration and supervision over corporation. 24
Pursuant thereto, the Revised Guidelines in the Approval of Corporate and Partnership Names 25
specifically requires that: (1) a corporate name shall not be identical, misleading or confusingly similar to
one already registered by another corporation with the Commission; 26 and (2) if the proposed name is

17
18
19
20
21
22
23
24
25
26

similar to the name of a registered firm, the proposed name must contain at least one distinctive word
different from the name of the company already registered. 27
As held in Philips Export B.V. vs. Court of Appeals,28 to fall within the prohibition of the law, two
requisites must be proven, to wit:
(1)that the complainant corporation acquired a prior right over the use of such corporate name;
and
(2)
the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law; or (c) patently deceptive, confusing or
contrary to existing law.
As regards the first requisite, it has been held that the right to the exclusive use of a corporate name with
freedom from infringement by similarity is determined by priority of adoption.29 In this case, respondent
RCP was incorporated on October 13, 1976 and since then has been using the corporate name
Refractories Corp. of the Philippines. Meanwhile, petitioner was incorporated on August 23, 1979
originally under the name Synclaire Manufacturing Corporation. It only started using the name Industrial
Refractories Corp. of the Philippines when it amended its Articles of Incorporation on August 23, 1985, or
nine (9) years after respondent RCP started using its name. Thus, being the prior registrant, respondent
RCP has acquired the right to use the word Refractories as part of its corporate name.
Anent the second requisite, in determining the existence of confusing similarity in corporate names, the
test is whether the similarity is such as to mislead a person using ordinary care and discrimination and the
Court must look to the record as well as the names themselves. 30 Petitioners corporate name is Industrial
Refractories Corp. of the Phils., while respondents is Refractories Corp. of the Phils. Obviously, both
names contain the identical words Refractories, Corporation and Philippines. The only word that
distinguishes petitioner from respondent RCP is the word Industrial which merely identifies a corporations
general field of activities or operations. We need not linger on these two corporate names to conclude that
they are patently similar that even with reasonable care and observation, confusion might arise. 31 It must
be noted that both cater to the same clientele, i.e. the steel industry. In fact, the SEC found that there
were instances when different steel companies were actually confused between the two, especially since
they also have similar product packaging.32 Such findings are accorded not only great respect but even
finality, and are binding upon this Court, unless it is shown that it had arbitrarily disregarded or
misapprehended evidence before it to such an extent as to compel a contrary conclusion had such
evidence been properly appreciated. 33 And even without such proof of actual confusion between the two
corporate names, it suffices that confusion is probable or likely to occur.34
Refractory materials are described as follows:
Refractories are structural materials used at high temperatures to [sic] industrial furnaces. They are
supplied mainly in the form of brick of standard sizes and of special shapes. Refractories also include

27
28
29
30
31
32
33
34

refractory cements, bonding mortars, plastic firebrick, castables, ramming mixtures, and other bulk
materials such as dead-burned grain magneside, chrome or ground ganister and special clay.35
While the word refractories is a generic term, its usage is not widespread and is limited merely to the
industry/trade in which it is used, and its continuous use by respondent RCP for a considerable period
has made the term so closely identified with it. 36 Moreover, as held in the case of Ang Kaanib sa Iglesia
ng Dios kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo Jesus,
Haligi at Suhay ng Katotohanan, petitioners appropriation of respondent's corporate name cannot find
justification under the generic word rule. 37 A contrary ruling would encourage other corporations to adopt
verbatim and register an existing and protected corporate name, to the detriment of the public. 38
Finally, we find the award of P50,000.00 as attorney's fees to be fair and reasonable. Article 2208 of the
Civil Code allows the award of such fees when its claimant is compelled to litigate with third persons or to
incur expenses to protect its just and valid claim. In this case, despite its undertaking to change its
corporate name in case another firm has acquired a prior right to use such name, 39 it refused to do so,
thus compelling respondent to undergo litigation and incur expenses to protect its corporate name.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
6. HALL VS. PICCIO, G.R. No. L-2598. June 29, 1950
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-2598
June 29, 1950
C. ARNOLD HALL and BRADLEY P. HALL, petitioners,
vs.
EDMUNDO S. PICCIO, Judge of the Court of First Instance of Leyte, FRED BROWN, EMMA
BROWN, HIPOLITA CAPUCIONG, in his capacity as receiver of the Far Eastern Lumber and
Commercial Co., Inc., respondents.
Claro M. Recto for petitioners.
Ramon Diokno and Jose W. Diokno for respondents.
BENGZON, J.:
This is petition to set aside all the proceedings had in civil case No. 381 of the Court of First Instance of
Leyte and to enjoin the respondent judge from further acting upon the same.
Facts: (1) on May 28, 1947, the petitioners C. Arnold Hall and Bradley P. Hall, and the respondents Fred
Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella, signed and acknowledged in Leyte,
the article of incorporation of the Far Eastern Lumber and Commercial Co., Inc., organized to engage in a
general lumber business to carry on as general contractors, operators and managers, etc. Attached to the

35
36
37
38
39

article was an affidavit of the treasurer stating that 23,428 shares of stock had been subscribed and fully
paid with certain properties transferred to the corporation described in a list appended thereto.
(2) Immediately after the execution of said articles of incorporation, the corporation proceeded to do
business with the adoption of by-laws and the election of its officers.
(3) On December 2, 1947, the said articles of incorporation were filed in the office of the Securities and
Exchange Commissioner, for the issuance of the corresponding certificate of incorporation.
(4) On March 22, 1948, pending action on the articles of incorporation by the aforesaid governmental
office, the respondents Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella filed
before the Court of First Instance of Leyte the civil case numbered 381, entitled "Fred Brown et al. vs.
Arnold C. Hall et al.", alleging among other things that the Far Eastern Lumber and Commercial Co. was
an unregistered partnership; that they wished to have it dissolved because of bitter dissension among the
members, mismanagement and fraud by the managers and heavy financial losses.
(5) The defendants in the suit, namely, C. Arnold Hall and Bradley P. Hall, filed a motion to dismiss,
contesting the court's jurisdiction and the sufficiently of the cause of action.
(6) After hearing the parties, the Hon. Edmund S. Piccio ordered the dissolution of the company; and at
the request of plaintiffs, appointed of the properties thereof, upon the filing of a P20,000 bond.
(7) The defendants therein (petitioners herein) offered to file a counter-bond for the discharge of the
receiver, but the respondent judge refused to accept the offer and to discharge the receiver. Whereupon,
the present special civil action was instituted in this court. It is based upon two main propositions, to wit:
(a) The court had no jurisdiction in civil case No. 381 to decree the dissolution of the company, because it
being a de facto corporation, dissolution thereof may only be ordered in a quo warranto proceeding
instituted in accordance with section 19 of the Corporation Law.
(b) Inasmuch as respondents Fred Brown and Emma Brown had signed the article of incorporation but
only a partnership.
Discussion: The second proposition may at once be dismissed. All the parties are informed that the
Securities and Exchange Commission has not, so far, issued the corresponding certificate of
incorporation. All of them know, or sought to know, that the personality of a corporation begins to exist
only from the moment such certificate is issued not before (sec. 11, Corporation Law). The complaining
associates have not represented to the others that they were incorporated any more than the latter had
made similar representations to them. And as nobody was led to believe anything to his prejudice and
damage, the principle of estoppel does not apply. Obviously this is not an instance requiring the
enforcement of contracts with the corporation through the rule of estoppel.
The first proposition above stated is premised on the theory that, inasmuch as the Far Eastern Lumber
and Commercial Co., is a de facto corporation, section 19 of the Corporation Law applies, and therefore
the court had not jurisdiction to take cognizance of said civil case number 381. Section 19 reads as
follows:
. . . The due incorporation of any corporations claiming in good faith to be a corporation under this Act and
its right to exercise corporate powers shall not be inquired into collaterally in any private suit to which the
corporation may be a party, but such inquiry may be had at the suit of the Insular Government on
information of the Attorney-General.
There are least two reasons why this section does not govern the situation. Not having obtained the
certificate of incorporation, the Far Eastern Lumber and Commercial Co. even its stockholders may
not probably claim "in good faith" to be a corporation.
Under our statue it is to be noted (Corporation Law, sec. 11) that it is the issuance of a certificate of
incorporation by the Director of the Bureau of Commerce and Industry which calls a corporation into
being. The immunity if collateral attack is granted to corporations "claiming in good faith to be a
corporation under this act." Such a claim is compatible with the existence of errors and irregularities; but
not with a total or substantial disregard of the law. Unless there has been an evident attempt to comply

with the law the claim to be a corporation "under this act" could not be made "in good faith." (Fisher on the
Philippine Law of Stock Corporations, p. 75. See also Humphreys vs. Drew, 59 Fla., 295; 52 So., 362.)
Second, this is not a suit in which the corporation is a party. This is a litigation between stockholders of
the alleged corporation, for the purpose of obtaining its dissolution. Even the existence of a de jure
corporation may be terminated in a private suit for its dissolution between stockholders, without the
intervention of the state.
There might be room for argument on the right of minority stockholders to sue for dissolution; 1 but that
question does not affect the court's jurisdiction, and is a matter for decision by the judge, subject to review
on appeal. Whkch brings us to one principal reason why this petition may not prosper, namely: the
petitioners have their remedy by appealing the order of dissolution at the proper time.
There is a secondary issue in connection with the appointment of a receiver. But it must be admitted that
receivership is proper in proceedings for dissolution of a company or corporation, and it was no error to
reject the counter-bond, the court having declared the dissolution. As to the amount of the bond to be
demanded of the receiver, much depends upon the discretion of the trial court, which in this instance we
do not believe has been clearly abused.
Judgment: The petition will, therefore, be dismissed, with costs. The preliminary injunction heretofore
issued will be dissolved.
Ozaeta, Pablo, Tuason, Montemayor, and Reyes, JJ., concur.
Footnotes
1
Cf. Thompson on Corporations, 3rd. ed., secs. 6455-6457. But the suit might be viewed as one of the
rescission of contract, the agreement between incorporators being contractual in nature. Fisher op. cit., p.
14.
7. SEVENTH DAY ADVENTIST VS. NORTHEASTERN MINDANAO, G.R. No. 150416. July 21, 2006

SECOND DIVISION
SEVENTH DAY ADVENTIST
G.R. No. 150416
CONFERENCE CHURCH OF
SOUTHERN PHILIPPINES, INC.,
and/or represented by MANASSEH
C. ARRANGUEZ, BRIGIDO P.
GULAY, FRANCISCO M. LUCENARA,
DIONICES O. TIPGOS, LORESTO
C. MURILLON, ISRAEL C. NINAL,
GEORGE G. SOMOSOT, JESSIE
T. ORBISO, LORETO PAEL and
JOEL BACUBAS,
Petitioners,
PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
-versusAZCUNA and
GARCIA, JJ.

Present:

CORONA,

NORTHEASTERN MINDANAO
MISSION OF SEVENTH DAY
ADVENTIST, INC., and/or
represented by JOSUE A. LAYON,
WENDELL M. SERRANO, FLORANTE
P. TY and JETHRO CALAHAT
and/or SEVENTH DAY ADVENTIST
CHURCH [OF] NORTHEASTERN
MINDANAO MISSION,*
Respondents.

Promulgated:

July 21, 2006

x------------------------------------------x
DECISION
CORONA, J.:

This petition for review on certiorari assails the Court of Appeals (CA) decision 40 and resolution41
in CA-G.R. CV No. 41966 affirming, with modification, the decision of the Regional Trial Court (RTC) of
Bayugan, Agusan del Sur, Branch 7 in Civil Case No. 63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title (TCT) No. 4468 in Bayugan,
Agusan del Sur originally owned by Felix Cosio and his wife, Felisa Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the South Philippine Union Mission of Seventh
Day Adventist Church of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan). 42 Part of the deed of
donation read:

KNOW ALL MEN BY THESE PRESENTS:

That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,] 40 years of age, [h]usband and wife, both
are citizen[s] of the Philippines, and resident[s] with post office address in the Barrio of Bayugan,
Municipality of Esperanza, Province of Agusan, Philippines, do hereby grant, convey and forever quit
claim by way of Donation or gift unto the South Philippine [Union] Mission of Seventh Day Adventist
Church of Bayugan, Esperanza, Agusan, all the rights, title, interest, claim and demand both at law and as
well in possession as in expectancy of in and to all the place of land and portion situated in the Barrio of

*
40
41
42

Bayugan, Municipality of Esperanza, Province of Agusan, Philippines, more particularly and bounded as
follows, to wit:
a parcel of land for Church Site purposes only.
situated [in Barrio Bayugan, Esperanza].
Area: 30 meters wide and 30 meters length or 900 square meters.
Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No. P-285.
Bounded Areas
North by National High Way; East by Bricio Gerona; South by Serapio Abijaron and West by Feliz Cosio
xxx. 43

The donation was allegedly accepted by one Liberato Rayos, an elder of the Seventh Day Adventist
Church, on behalf of the donee.
Twenty-one years later, however, on February 28, 1980, the same parcel of land was sold by the spouses
Cosio to the Seventh Day Adventist Church of Northeastern Mindanao Mission (SDA-NEMM). 44 TCT No.
4468 was thereafter issued in the name of SDA-NEMM. 45
Claiming to be the alleged donees successors-in-interest, petitioners asserted ownership over the
property. This was opposed by respondents who argued that at the time of the donation, SPUM-SDA
Bayugan could not legally be a donee
because, not having been incorporated yet, it had no juridical personality. Neither were petitioners
members of the local church then, hence, the donation could not have been made particularly to them.
On September 28, 1987, petitioners filed a case, docketed as Civil Case No. 63 (a suit for
cancellation of title, quieting of ownership and possession, declaratory relief and reconveyance with
prayer for preliminary injunction and damages), in the RTC of Bayugan, Agusan del Sur. After trial, the
trial court rendered a decision46 on November 20, 1992 upholding the sale in favor of respondents.
On appeal, the CA affirmed the RTC decision but deleted the award of moral damages and attorneys
fees.47 Petitioners motion for reconsideration was likewise denied. Thus, this petition.
The issue in this petition is simple: should SDA-NEMMs ownership of the lot covered by TCT No. 4468 be
upheld?48 We answer in the affirmative.

43
44
45
46
47
48

The controversy between petitioners and respondents involves two supposed transfers of the lot
previously owned by the spouses Cosio: (1) a donation to petitioners alleged predecessors-in-interest in
1959 and (2) a sale to respondents in 1980.
Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership of a
property may be transferred by tradition as a consequence of a sale.
Petitioners contend that the appellate court should not have ruled on the validity of the donation since it
was not among the issues raised on appeal. This is not correct because an appeal generally opens the
entire case for review.
We agree with the appellate court that the alleged donation to petitioners was void.
Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor
of another person who accepts it. The donation could not have been made in favor of an entity yet
inexistent at the time it was made. Nor could it have been accepted as there was yet no one to accept it.
The deed of donation was not in favor of any informal group of SDA members but a supposed SPUMSDA Bayugan (the local church) which, at the time, had neither juridical personality nor capacity to accept
such gift.
Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation.
But there are stringent requirements before one can qualify as a de facto corporation:

the existence of a valid law under which it may be incorporated;

an attempt in good faith to incorporate; and
assumption of corporate powers.49
While there existed the old Corporation Law (Act 1459), 50 a law under which SPUM-SDA Bayugan could
have been organized, there is no proof that there was an attempt to incorporate at that time.
The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for
the existence of a de facto corporation.51 We have held that an organization not registered with the
Securities and Exchange Commission (SEC) cannot be considered a corporation in any concept, not
even as a corporation de facto.52 Petitioners themselves admitted that at the time of the donation, they
were not registered with the SEC, nor did they even attempt to organize 53 to comply with legal
requirements.

49
50
51
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Corporate existence begins only from the moment a certificate of incorporation is issued. No such
certificate was ever issued to petitioners or their supposed predecessor-in-interest at the time of the
donation. Petitioners obviously could not have claimed succession to an entity that never came to exist.
Neither could the principle of separate juridical personality apply since there was never any corporation 54
to speak of. And, as already stated, some of the representatives of petitioner Seventh Day Adventist
Conference Church of Southern Philippines, Inc. were not even members of the local church then, thus,
they could not even claim that the donation was particularly for them. 55
The de facto doctrine thus effects a compromise between two conflicting public interest[s]the one
opposed to an unauthorized assumption of corporate privileges; the other in favor of doing justice to the
parties and of establishing a general assurance of security in business dealing with corporations. 56
Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not to favor
the defective or non-existent corporation.57
In view of the foregoing, petitioners arguments anchored on their supposed de facto status hold no water.
We are convinced that there was no donation to petitioners or their supposed predecessor-in-interest.
On the other hand, there is sufficient basis to affirm the title of SDA-NEMM. The factual findings of the trial
court in this regard were not convincingly disputed. This Court is not a trier of facts. Only questions of law
are the proper subject of a petition for review on certiorari. 58
Sustaining the validity of respondents title as well as their right of ownership over the property, the trial
court stated:
[W]hen Felix Cosio was shown the Absolute Deed of Sale during the hearing xxx he acknowledged that
the same was his xxx but that it was not his intention to sell the controverted property because he had
previously donated the same lot to the South Philippine Union Mission of SDA Church of BayuganEsperanza. Cosio avouched that had it been his intendment to sell, he would not have disposed of it for a
mere P2,000.00 in two installments but for P50,000.00 or P60,000.00. According to him, the P2,000.00
was not a consideration of the sale but only a form of help extended.
A thorough analysis and perusal, nonetheless, of the Deed of Absolute Sale disclosed that
it has the essential requisites of contracts pursuant to xxx Article 1318 of the Civil Code, except
that the consideration of P2,000.00 is somewhat insufficient for a [1,069-square meter] land. Would then
this inadequacy of the consideration render the contract invalid?
Article 1355 of the Civil Code provides:
Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless
there has been fraud, mistake or undue influence.

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No evidence [of fraud, mistake or undue influence] was adduced by [petitioners].

xxx
Well-entrenched is the rule that a Certificate of Title is generally a conclusive evidence of
[ownership] of the land. There is that strong and solid presumption that titles were legally issued and
that they are valid. It is irrevocable and indefeasible and the duty of the Court is to see to it that the title is
maintained and respected unless challenged in a direct proceeding. xxx The title shall be received as
evidence in all the Courts and shall be conclusive as to all matters contained therein.
[This action was instituted almost seven years after the certificate of title in respondents name
was issued in 1980.]59
According to Art. 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof. On this, the noted author Arturo Tolentino had this to say:
The execution of [a] public instrument xxx transfers the ownership from the vendor to the vendee who
may thereafter exercise the rights of an owner over the same 60
Here, transfer of ownership from the spouses Cosio to SDA-NEMM was made upon constructive delivery
of the property on February 28, 1980 when the sale was made through a public instrument. 61 TCT No.
4468 was thereafter issued and it remains in the name of SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.

59
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