FIRST DIVISION

[G.R. No. 119020. October 19, 2000.]

INTERNATIONAL EXPRESS TRAVEL & TOUR SERVIC
ES, INC., petitioner, vs. HON. COURT OF APPEALS,
HENRI
KAHN,
PHILIPPINES
FOOTBALL
FEDERATION, respondents.
DECISION
KAPUNAN, J p:
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. 1 The offer was accepted. AaCEDS
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. 2
On 4 October 1989, petitioner wrote the Federation, through the private
respondent a demand letter requesting for the amount of
P265,894.33. 3 On 30 October 1989, the Federation, through the Project
Gintong Alay, paid the amount of P31,603.00. 4
On 27 December 1989, Henri Kahn issued a personal check in the
amount of P50,000 as partial payment for the outstanding balance of the
Federation. 5Thereafter, 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. 6
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. 7
On the other hand, the Federation failed to file its answer, hence, was
declared in default by the trial court. 8
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 . .
. ." 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 xxx 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.
xxx xxx xxx 9
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. SEHDIC

The complaint of the plaintiff against the Philippine

Football Federation and the counterclaims of the
defendant Henri Kahn are hereby dismissed.
With the costs against defendant Henri Kahn. 10
Only Henri Kahn elevated the above decision to the Court of Appeals. On
21 December 1994, the respondent court rendered a decision reversing
the trial court, the decretal portion of said decision reads:
WHEREFORE, premises considered, the judgment
appealed from is hereby REVERSED and SET ASIDE and
another one is rendered dismissing the complaint
against defendant Henri S. Kahn. 11
In finding for Henri Kahn, the Court of Appeals recognized the juridical
existence of the Federation. It rationalized that since petitioner failed to
prove that Henri Kahn guaranteed the obligation of the Federation, he
should not be held liable for the same as said entity has a separate and
distinct personality from its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer
pleaded that the Federation be held liable for the unpaid obligation. The
same was denied by the appellate court in its resolution of 8 February
1995, where it stated that:
As to the alternative prayer for the Modification of the
Decision by expressly declaring in the dispositive
portion thereof the Philippine Football Federation
(PFF) as liable for the unpaid obligation, it should be
remembered that the trial court dismissed the
complaint against the Philippine Football Federation,
and the plaintiff did not appeal from this decision.
Hence, the Philippine Football Federation is not a party
to this appeal and consequently, no judgment may be
pronounced by this Court against the PFF without
violating the due process clause, let alone the fact that
the judgment dismissing the complaint against it, had
already become final by virtue of the plaintiff's failure
to appeal therefrom. The alternative prayer is therefore
similarly DENIED. 12
Petitioner now seeks recourse to this Court and alleges that the
respondent court committed the following assigned errors: 13
A. THE, HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PETITIONER HAD DEALT
WITH
THE
PHILIPPINE
FOOTBALL
FEDERATION (PFF) AS A CORPORATE ENTITY

AND IN NOT HOLDING THAT PRIVATE

RESPONDENT HENRI KAHN WAS THE ONE,
WHO REPRESENTED THE PFF AS HAVING
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 AN
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 xxx 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 hereto 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 xxx 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. caCTHI
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 principle in corporation law
that any person acting or purporting to act on behalf of a corporation
which has no valid existence assumes such privileges and becomes
personally liable for contract entered into or for other acts performed as
such agent. 14 As president of the Federation, Henri Kahn is presumed
to have known about the corporate existence or non-existence of the
Federation. We cannot subscribe to the position taken by the appellate
court that even assuming that the Federation was defectively
incorporated, the petitioner cannot deny the corporate existence of the
Federation because it had contracted and dealt with the Federation in
such a manner as to recognize and in effect admit its existence. 15 The
doctrine of corporation by estoppel is mistakenly applied by the
respondent court to the petitioner. The application of the doctrine
applies to a third party only when he tries to escape liabilities on a
contract from which he has benefited on the irrelevant ground of
defective incorporation. 16 In the case at bar, the petitioner is not trying
to escape liability from the contract but rather is the one claiming from
the contract.
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., Puno, Pardo and Santiago, JJ., concur.
||| (International Express Travel & Tour Services, Inc. v. Court of Appeals,
G.R. No. 119020, October 19, 2000)

THIRD DIVISION
[G.R. No. 136448. November 3, 1999.]
LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING
GEAR INDUSTRIES, INC., respondent.
Roberto A. Abad for petitioner.
Benjamin S. Benito & Associates for private respondent.
SYNOPSIS
Antonio Chua and Peter Yao entered into a contract in behalf of Ocean
Quest Fishing Corporation for the purchase of fishing nets from
respondent Philippine Fishing Gear Industries, Inc. Chua and Yao
claimed that they were engaged in business venture with petitioner Lim
Tong Lim, who, however, was not a signatory to the contract. The buyers
failed to pay the fishing nets. Respondent filed a collection against Chua,
Yao and petitioner Lim in their capacities as general partners because it
turned out that Ocean Quest Fishing Corporation is a non-existent
corporation. The trial court issued a Writ of Preliminary Attachment,
which the sheriff enforced by attaching the fishing nets. The trial court
rendered its decision ruling that respondent was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as general partners, were jointly
liable to pay respondent. Lim appealed to the Court of Appeals, but the
appellate court affirmed the decision of the trial court that petitioner
Lim is a partner and may thus be held liable as such. Hence, the present
petition. Petitioner claimed that since his name did not appear on any of
the contracts and since he never directly transacted with the respondent
corporation, ergo, he cannot be held liable. cIaCTS
The Supreme Court denied the petition. The Court ruled that having
reaped the benefits of the contract entered into by Chua and Yao, with
whom he had an existing relationship, petitioner Lim is deemed a part of
said association and is covered by the doctrine of corporation by
estoppel. The Court also ruled that under the principle of 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.
SYLLABUS
1. CIVIL LAW; PARTNERSHIP; AGREEMENT THAT ANY LOSS OR PROFIT
FROM THE SALE AND OPERATION OF THE BOATS WOULD BE DIVIDED
EQUALLY AMONG THEM SHOWS THAT THE PARTIES HAD INDEED
FORMED A PARTNERSHIP. 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 petitioner's
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.
2. ID.; ID.; COMPROMISE AGREEMENT OF THE PARTIES NOT THE SOLE
BASIS OF PARTNERSHIP. Petitioner argues that the appellate court's
sole basis for assuming the existence of a partnership was the
Compromise Agreement. He also claims that the settlement was entered
into only to end the dispute among them, but not to adjudicate their
preexisting rights and obligations. His arguments are baseless. The
Agreement was but an embodiment of the relationship extant among the
parties prior to its execution. A proper adjudication of claimants' rights
mandates that courts must review and thoroughly appraise all relevant
facts. Both lower courts have done so and have found, correctly, a
preexisting partnership among the parties. In implying that the lower
courts have decided on the basis of one piece of document alone,
petitioner fails to appreciate that the CA and the RTC delved into the
history of the document and explored all the possible consequential
combinations in harmony with law, logic and fairness. Verily, the two
lower courts' factual findings mentioned above nullified petitioner's
argument that the existence of a partnership was based only on the
Compromise Agreement.
3. ID.; ID.; PETITIONER WAS A PARTNER, NOT A LESSOR. 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.
4. MERCANTILE LAW; PRIVATE CORPORATIONS; HAVING REAPED THE
BENEFITS OF THE CONTRACT ENTERED INTO BY PERSONS WITH
WHOM HE PREVIOUSLY HAD AN EXISTING RELATIONSHIP,
PETITIONER IS DEEMED TO BE PART OF SAID ASSOCIATION AND IS
COVERED BY THE DOCTRINE OF CORPORATION BY ESTOPPEL.
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 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.
5. REMEDIAL LAW; PROVISIONAL REMEDIES; ATTACHMENT; ISSUE OF
VALIDITY THEREOF, MOOT AND ACADEMIC. Petitioner claims that
the Writ of Attachment was improperly issued against the nets. We

agree with the Court of Appeals that this issue is now moot and
academic. As previously discussed,F/B Lourdes was an asset of the
partnership and that it was placed in the name of petitioner, only to
assure payment of the debt he and his partners owed. The nets and the
floats were specifically manufactured and tailor-made according to their
own design, and were bought and used in the fishing venture they
agreed upon. Hence, the issuance of the Writ to assure the payment of
the price stipulated in the invoices is proper. Besides, by specific
agreement, ownership of the nets remained with Respondent Philippine
Fishing Gear, until full payment thereof.
VITUG, J., concurring:
1. CIVIL LAW; PARTNERSHIP; EXTENT OF LIABILITY OF PARTNERS IN
A GENERAL PARTNERSHIP. When a person by his act or deed
represents himself. as a partner in an existing partnership or with one or
more persons not actual partners, he is deemed an agent of such persons
consenting to such representation and in the same manner, if he were a
partner, with respect to persons who rely upon the representation. The
association formed by Chua, Yao and Lim, should be, as it has been
deemed, a de facto partnership with all the consequent obligations for
the purpose of enforcing the rights of third persons. The liability of
general partners (in a general partnership as so opposed to a limited
partnership) is laid down in Article 1816 which posits that all partners
shall be liable pro rata beyond the partnership assets for all the
contracts which may have been entered into in its name, under its
signature, and by a person authorized to act for the partnership.
2. ID.; ID.; ID.; INSTANCES WHEN THE PARTNERS CAN BE HELD
SOLIDARILY LIABLE WITH THE PARTNERSHIP. This rule is to be
construed along with other provisions of the Civil Code which postulate
that the partners can be held solidarily liable with the partnership
specifically in these instances. (1) where, by any wrongful act or
omission of any partner acting in the ordinary course of the business of
the partnership or with the authority of his co-partners, loss or injury is
caused to any person, not being a partner in the partnership, or any
penalty is incurred, the partnership is liable therefor to the same extent
as the partner so acting or omitting to act; (2) where one partner acting
within the scope of his apparent authority receives money or property of
a third person and misapplies it; and (3) where the partnership in the
course of its business receives money or property of a third person and
the money or property so received is misapplied by any partner while it
is in the custody of the partnership consistently with the rules on the
nature of civil liability in delicts and quasi-delicts.

DECISION
PANGANIBAN, J p:
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. cda
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim assails
the November 26, 1998 Decision of the Court of Appeals in CA-GR CV
41477, 1 which disposed as follows:
"WHEREFORE, [there being] no reversible error in the
appealed decision, the same is hereby affirmed." 2
The decretal portion of the Quezon City Regional Trial Court (RTC)
ruling, which was affirmed by the CA, reads as follows:
"WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary
attachment issued by this Court on September 20,
1990; cdphil
2. That defendants are jointly liable to plaintiff for the
following amounts, subject to the modifications as
hereinafter made by reason of the special and unique
facts and circumstances and the proceedings that
transpired during the trial of this case;
a. P532,045.00 representing [the] unpaid purchase
price of the fishing nets covered by the Agreement plus
P68,000.00 representing the unpaid price of the floats
not covered by said Agreement;
b. 12% interest per annum counted from date of
plaintiff's invoices and computed on their respective
amounts as follows:
i. Accrued interest of P73,221.00 on Invoice No. 14407
for P385,377.80 dated February 9, 1990;
ii. Accrued interest 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 attorney's fees, plus P8,500.00
representing P500.00 per appearance in court;
d. P65,000.00 representing P5,000.00 monthly rental
for storage charges on the nets counted from
September 20, 1990 (date of attachment) to September
12, 1991 (date of auction sale); cdasia
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." 3 cdasia
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter
Yao entered into a Contract dated February 7, 1990, for the purchase of
fishing nets of various sizes from the Philippine Fishing Gear Industries,
Inc. (herein respondent). They claimed that they were engaged in a
business venture with Petitioner Lim Tong Lim, who however was not a
signatory to the agreement. The total price of the nets amounted to
P532,045. Four hundred pieces of floats worth P68,000 were also sold to
the Corporation. 4
The buyers, however, failed to pay for the fishing nets and the floats;
hence, private 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. 5 On September 20,
1990, the lower court issued a Writ of Preliminary Attachment, which
the sheriff enforced by attaching the fishing nets on board F/B
Lourdeswhich was then docked at the Fisheries Port, Navotas, Metro
Manila. LLpr
Instead of answering the Complaint, Chua filed a Manifestation admitting
his liability and requesting a reasonable time within which to pay. He
also turned over to respondent some of the nets which were in his
possession. Peter Yao filed an Answer, after which he was deemed to
have waived his right to cross-examine witnesses and to present
evidence on his behalf, because of his failure to appear in subsequent
hearings. Lim Tong Lim, on the other hand, filed an Answer with
Counterclaim and Crossclaim and moved for the lifting of the Writ of

Attachment. 6 The trial court maintained the Writ, and upon motion of
private respondent, ordered the sale of the fishing nets at a public
auction. Philippine Fishing Gear Industries won the bidding and
deposited with the said court the sales proceeds of P900,000. 7
On November 18, 1992, the trial court rendered its Decision, ruling that
Philippine Fishing Gear Industries was entitled to the Writ of
Attachment and that Chua, Yao and Lim, as general partners, were jointly
liable to pay respondent. 8
The trial court ruled that a partnership among Lim, Chua and Yao existed
based (1) on the testimonies of the witnesses presented and (2) on a
Compromise Agreement executed by the three 9 in Civil Case No. 1492MN which Chua and Yao had brought against Lim in the RTC of Malabon,
Branch 72, for (a) a declaration of nullity of commercial documents; (b)
a reformation of contracts; (c) a declaration of ownership of fishing
boats; (d) an injunction and (e) damages. 10 The Compromise
Agreement provided: cdll
"a) That the parties plaintiffs & Lim Tong Lim agree to
have the four (4) vessels sold in the amount of
P5,750,000.00 including the fishing net. This
P5,750,000.00 shall be applied as full payment
for P3,250,000.00 in favor of JL Holdings
Corporation and/or Lim Tong Lim;
"b) If the four (4) vessel[s] and the fishing net will be
sold at a higher price than P5,750,000.00
whatever will be the excess will be divided into
3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3
Peter Yao;
"c) If the proceeds of the sale the vessels will be less
than P5,750,000.00 whatever the deficiency
shall be shouldered and paid to JL Holding
Corporation by 1/3 Lim Tong Lim; 1/3 Antonio
Chua; 1/3 Peter Yao." 11
The trial court noted that the Compromise Agreement was silent as to
the nature of their obligations, but that joint liability could be presumed
from the equal distribution of the profit and loss. 12
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 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 . . . . Obviously, the ultimate
undertaking of the defendants was to divide the profits
among themselves which is what a partnership
essentially is . . . . By a contract of partnership, two or
more persons bind themselves to contribute money,
property or industry to a common fund with the
intention of dividing the profits among themselves
(Article 1767, New Civil Code)." 13 cdtai
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the
assailed Decision on the following grounds:
"I THE COURT OF APPEALS ERRED IN HOLDING,
BASED ON A COMPROMISE AGREEMENT THAT
CHUA, YAO AND PETITIONER LIM ENTERED
INTO IN A SEPARATE CASE, THAT A
PARTNERSHIP AGREEMENT EXISTED AMONG
THEM.
"II SINCE IT WAS ONLY CHUA WHO REPRESENTED
THAT HE WAS ACTING FOR OCEAN QUEST
FISHING CORPORATION WHEN HE BOUGHT
THE NETS FROM PHILIPPINE FISHING, THE
COURT OF APPEALS WAS UNJUSTIFIED IN
IMPUTING LIABILITY TO PETITIONER LIM AS
WELL.
"III THE TRIAL COURT IMPROPERLY ORDERED THE
SEIZURE AND ATTACHMENT OF PETITIONER
LIM'S GOODS."
In determining whether petitioner may be held liable for the fishing nets
and floats 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. cdasia
This Court's Ruling
The Petition is devoid of merit.
First and Second Issues:

Existence of a Partnership
and Petitioner's Liability
In arguing that he should not be held liable for the equipment purchased
from respondent, petitioner controverts the CA finding that a
partnership existed between him, Peter Yao and Antonio Chua. He
asserts that the CA based its finding on the Compromise Agreement
alone. Furthermore, he disclaims any direct participation in the purchase
of the nets, alleging that the negotiations were conducted by Chua and
Yao only, and that he has not even met the representatives of the
respondent company. Petitioner further argues that he was a lessor, not
a partner, of Chua and Yao, for the "Contract of Lease" dated February 1,
1990, showed that he had merely leased to the two the main asset of the
purported partnership the fishing boat F/B Lourdes. The lease was for
six months, with a monthly rental of P37,500 plus 25 percent of the
gross catch of the boat.
We are not persuaded by the arguments of petitioner. The facts as found
by the two lower courts clearly showed that there existed a partnership
among Chua, Yao and him, pursuant to Article 1767 of the Civil Code
which provides:
"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." llcd
Specifically, both lower courts ruled that a partnership among the three
existed based on the following factual findings: 15
(1) That Petitioner Lim Tong Lim requested Peter Yao
who was engaged in commercial fishing to join him,
while Antonio Chua was already Yao's 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, Chua's FB Lady Anne Mel and
Yao's FB Tracy to Lim Tong Lim. cdtai
(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 petitioner's 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. cdtai
Given the preceding facts, it is clear that there was, among petitioner,
Chua and Yao, a partnership engaged in the fishing business. They
purchased the boats, which constituted the main assets of the
partnership, and they agreed that the proceeds from the sales and
operations thereof would be divided among them.
We stress that under Rule 45, a petition for review like the present case
should involve only questions of law. Thus, the foregoing factual findings
of the RTC and the CA are binding on this Court, absent any cogent proof
that the present action is embraced by one of the exceptions to the
rule. 16 In assailing the factual findings of the two lower courts,
petitioner effectively goes beyond the bounds of a petition for review
under Rule 45.
Compromise Agreement
Not the Sole Basis of Partnership
Petitioner argues that the appellate court's sole basis for assuming the
existence of a partnership was the Compromise Agreement. He also
claims that the settlement was entered into only to end the dispute
among them, but not to adjudicate their preexisting rights and
obligations. His arguments are baseless.The Agreement was but an
embodiment of the relationship extant among the parties prior to its
execution.
A proper adjudication of claimants' rights mandates that courts must
review and thoroughly appraise all relevant facts. Both lower courts
have done so and have found, correctly, a preexisting partnership among
the parties. In implying that the lower courts have decided on the basis
of one piece of document alone, petitioner fails to appreciate that the CA
and the RTC delved into the history of the document and explored all the
possible consequential combinations in harmony with law, logic and
fairness. Verily, the two lower courts' factual findings mentioned above
nullified petitioner's argument that the existence of a partnership was
based only on the Compromise Agreement. LLphil
Petitioner Was a Partner,
Not a Lessor
We are not convinced by petitioner's argument that he was merely the
lessor of the boats to Chua and Yao, not a partner in the fishing venture.
His argument allegedly finds support in the Contract of Lease and the
registration papers showing that he was the owner of the boats,
including F/B Lourdes where the nets were found.

His allegation defies logic. In effect, he would like this Court to believe
that he consented to the sale of his own boats to pay a debt of Chua and
Yao, with the excess of the proceeds to be divided among the three of
them. No lessor would do what petitioner did. Indeed, his consent to the
sale proved that there was a preexisting partnership among all three.
Verily, as found by the lower courts, petitioner entered into a business
agreement with Chua and Yao, in which debts were undertaken in order
to finance the acquisition and the upgrading of the vessels which would
be used in their fishing business. The sale of the boats, as well as the
division among the three of the balance remaining after the payment of
their loans, proves beyond cavil that F/B Lourdes, though registered in
his name, was not his own property but an asset of the partnership. It is
not uncommon to register the properties acquired from a loan in the
name of the person the lender trusts, who in this case is the petitioner
himself. After all, he is the brother of the creditor, Jesus Lim. prLL
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." LibLex
Thus, even if the ostensible corporate entity is proven to be legally
nonexistent, a party may be estopped from denying its corporate
existence. "The reason behind this doctrine is obvious an
unincorporated association has no personality and would be

incompetent to act and appropriate for itself the power and attributes of
a corporation as provided by law; it cannot create agents or confer
authority on another to act in its behalf; thus, those who act or purport
to act as its representatives or agents do so without authority and at
their own risk. And as it is an elementary principle of law that a person
who acts as an agent without authority or without a principal is himself
regarded as the principal, possessed of all the right and subject to all the
liabilities of a principal, a person acting or purporting to act on behalf of
a corporation which has no valid existence assumes such privileges and
obligations and becomes personally liable for contracts entered into or
for other acts performed as such agent." 17
The doctrine of corporation by estoppel may apply to the alleged
corporation and to a third party. In the first instance, an unincorporated
association, which represented itself to be a corporation, will be
estopped from denying its corporate capacity in a suit against it by a
third person who relied in good faith on such representation. It cannot
allege lack of personality to be sued to evade its responsibility for a
contract it entered into and by virtue of which it received advantages
and benefits.
On the other hand, a third party who, knowing an association to be
unincorporated, nonetheless treated it as a corporation and received
benefits from it, may be barred from denying its corporate existence in a
suit brought against the alleged corporation. In such case, all those who
benefited from the transaction made by the ostensible corporation,
despite knowledge of its legal defects, may be held liable for contracts
they impliedly assented to or took advantage of. cdrep
There is no dispute that the respondent, Philippine Fishing Gear
Industries, is entitled to be paid for the nets it sold. The only question
here is whether petitioner should be held jointly 18 liable with Chua and
Yao. Petitioner contests such liability, insisting that only those who dealt
in the name of the ostensible corporation should be held liable. Since his
name does not appear on any of the contracts and since he never directly
transacted with the respondent corporation, ergo, he cannot be held
liable.
Unquestionably, petitioner benefited from the use of the nets found
inside F/B Lourdes, the boat which has earlier been proven to be an asset
of the partnership. He in fact questions the attachment of the nets,
because the Writ has effectively stopped his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao
decided to form a corporation. Although it was never legally formed for

unknown reasons, this fact alone does not preclude the liabilities of the
three as contracting parties in representation of it. Clearly, under the law
on estoppel, those acting on behalf of a corporation and those benefited
by it, knowing it to be without valid existence, are held liable as general
partners.
Technically, it is true that petitioner did not directly act on behalf of the
corporation. However, having reaped the benefits of the contract entered
into by persons with whom he previously had an existing relationship, he is
deemed to be part of said association and is covered by the scope of the
doctrine of corporation by estoppel. We reiterate the ruling of the Court
in Alonso v. Villamor: 19 prLL
"A litigation is not a game of technicalities in which one,
more deeply schooled and skilled in the subtle art of
movement and position, entraps and destroys the
other. It is, rather, a contest in which each contending
party fully and fairly lays before the court the facts in
issue and then, brushing aside as wholly trivial and
indecisive all imperfections of form and technicalities
of procedure, asks that justice be done upon the merits.
Lawsuits, unlike duels, are not to be won by a rapier's
thrust. Technicality, when it deserts its proper office as
an aid to justice and becomes its great hindrance and
chief enemy, deserves scant consideration from courts.
There should be no vested rights in technicalities."
Third Issue:
Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly
issued against the nets. We agree with the Court of Appeals that this
issue is now moot and academic. As previously discussed, F/B
Lourdes was an asset of the partnership and that it was placed in the
name of petitioner, only to assure payment of the debt he and his
partners owed. The nets and the floats were specifically manufactured
and tailor-made according to their own design, and were bought and
used in the fishing venture they agreed upon. Hence, the issuance of the
Writ to assure the payment of the price stipulated in the invoices is
proper. Besides, by specific agreement, ownership of the nets remained
with Respondent Philippine Fishing Gear, until full payment thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision
AFFIRMED. Costs against petitioner. Cdpr
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ.,concur.

Vitug, J., pls. see concurring opinion.

Separate Opinions
VITUG, J., concurring:
I share the views expressed in the ponencia of an esteemed colleague,
Mr. Justice Artemio V. Panganiban, particularly the finding that Antonio
Chua, Peter Yao and petitioner Lim Tong Lim have incurred the liabilities
of general partners. I merely would wish to elucidate a bit, albeit briefly,
the liability of partners in a general partnership.
When a person by his act or deed represents himself as a partner in an
existing partnership or with one or more persons not actual partners, he
is deemed an agent of such persons consenting to such representation
and in the same manner, if he were a partner, with respect to persons
who rely upon the representation. 1 The association formed by Chua,
Yao and Lim, should be, as it has been deemed, a de facto partnership
with all the consequent obligations for the purpose of enforcing the
rights of third persons. The liability of general partners (in a general
partnership as so opposed to a limited partnership) is laid down in
Article 1816 2 which posits that all partners shall be liable pro
rata beyond the partnership assets for all the contracts which may have
been entered into in its name, under its signature, and by a person
authorized to act for the partnership. This rule is to be construed along
with other provisions of the Civil Code which postulate that the partners
can be held solidarily liable with the partnership specifically in these
instances (1) where, by any wrongful act or omission of any partner
acting in the ordinary course of the business of the partnership or with
the authority of his co-partners, loss or injury is caused to any person,
not being a partner in the partnership, or any penalty is incurred, the
partnership is liable therefor to the same extent as the partner so acting
or omitting to act; (2) where one partner acting within the scope of his
apparent authority receives money or property of a third person and
misapplies it; and (3) where the partnership in the course of its business
receives money or property of a third person and the money or property
so received is misapplied by any partner while it is in the custody of the
partnership 3 consistently with the rules on the nature of civil
liability in delicts and quasi-delicts. LLpr
Footnotes
1.Penned by J. Portia Alino-Hormachuelos; with the concurrence of JJ.
Buenaventura J. Guerrero, Division chairman, and Presbitero J.
Velasco Jr., member.
2.CA Decision, p. 12; rollo, p. 36.

3.RTC Decision penned by Judge Maximiano C. Asuncion, pp. 1112; rollo, pp. 48-49.
4.CA Decision, pp. 1-2; rollo, pp. 25-26.
5.Ibid., p. 2; rollo, p. 26.
6.RTC Decision, p. 2; rollo, p. 39.
7.Petition, p. 4; rollo, p. 11.
8.Ibid.
9.RTC Decision, pp. 6-7; rollo, pp. 43-44.
10.Respondent's Memorandum, pp. 5, 8; rollo, pp. 107, 109.
11.CA Decision, pp. 9-10; rollo, pp. 33-34.
12.RTC Decision, p. 10; rollo, p. 47.
13.Ibid.
14.This case was deemed submitted for resolution on August 10, 1999,
when this Court received petitioner's Memorandum signed by
Atty. Roberto A. Abad. Respondent's Memorandum signed by
Atty. Benjamin S. Benito was filed earlier on July 27, 1999.
15.Nos. 1-7 are from CA Decision, p. 9 (rollo, p. 33); No. 8 is from RTC
Decision, p. 5 (rollo, p. 42); and No. 9 is from CA Decision, pp. 910 (rollo, pp. 33-34).
16.See Fuentes v. Court of Appeals, 268 SCRA 703, February 26, 1997.
17.Salvatierra v. Garlitos, 103 SCRA 757, May 23, 1958, per Felix, J.;
citing Fay v. Noble, 7 Cushing [Mass.] 188.
18."The liability is joint if it is not specifically stated that it is
solidary," Maramba v. Lozano, 126 Phil 833, June 29, 1967, per
Makalintal, J. See also Article 1207 of the Civil Code, which
provides: "The concurrence of two or more creditors or of two
or more debtors in one [and] the same obligation does not
imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire
compliance with the prestation. There is a solidary liability
only when the obligation expressly so states, or when the law
or the nature of the obligation requires solidarity."
19.16 Phil. 315, July 26, 1910, per Moreland, J.
VITUG, J.:
1.Article 1825. When a person, by words spoken or written or by
conduct, represents himself, or consents to another
representing him to anyone, as a partner in an existing
partnership or with one or more persons not actual partners,
he is liable to any such persons to whom such representation
has been made, who has, on the faith of such representation,
given credit to the actual or apparent partnership, and if he has

made such representation or consented to its being made in a

public manner he is liable to such person, whether the
representation has or has not been made or communicated to
such person so giving credit by or with the knowledge of the
apparent partner making the representation or consenting to
its being made:
(1) When a partnership liability results, he is liable as though he were
an actual member of the partnership;
(2) When no partnership liability results, he is liable pro rata with the
other persons, if any, so consenting to the contract or
representation as to incur liability, otherwise separately.
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the
same manner as though he were a partner in fact, with respect
to persons who rely upon the representation. When all the
members of the existing partnership consent to the
representation, a partnership act or obligation results; but in
all other cases it is the joint act or obligation of the person
acting and the persons consenting to the representation.
2.All partners, including industrial ones, shall be liable pro rata with all
their property and after all the partnership assets have been
exhausted, for the contracts which may be entered into in the
name and for the account of the partnership, under its
signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate
obligation to perform a partnership contract.
3.Article 1824 in relation to Article 1822 and Article 1823, New Civil
Code.
||| (Lim Tong Lim v. Philippine Fishing Gear Industries, Inc., G.R. No.
136448, November 03, 1999)

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.
Willie B. Rivera for petitioner.
Yabut Law Office for respondents.
SYLLABUS
1. COMMERCIAL LAW; SECURITIES AND EXCHANGE COMMISSION;
JURISDICTION; DETERMINATION THEREOF. The grant of jurisdiction
to the SEC must be viewed in the light of its nature and function under
the law. 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. 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. 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. 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. DaScAI
2. ID.; ID.; ID.; DISPUTE BETWEEN MEMBERS OF TWO SEPARATE AND
DISTINCT CORPORATIONS WHO HAVE NO INTRACORPORATE
RELATION, DOES NOT FALL WITHIN THE JURISDICTION OF
SECURITIES AND EXCHANGE COMMISSION; CASE AT BAR. 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.

3. ID.; ID.; ID.; DOCTRINE OF CORPORATION BY ESTOPPEL CANNOT

OVERRIDE JURISDICTIONAL REQUIREMENTS. The doctrine of
corporation by estoppel advanced by private respondent cannot
override jurisdictional requirements. Jurisdiction is fixed by law and is
not subject to the agreement of the parties. 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.
4. ID.; ID.; ID.; WHERE THERE IS NO THIRD PERSON INVOLVED AND
THE CONFLICT ARISES ONLY AMONG THOSE ASSUMING THE FORM OF
A CORPORATION, THERE IS NO CORPORATION BY ESTOPPEL.
Corporation by estoppel is founded on principles of equity and is
designed to prevent injustice and unfairness. 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. EATcHD
DECISION
PUNO, J p:
This petition for certiorari seeks to annul and set aside the decision of
the Regional Trial Court, Branch 58, Angeles City which ordered the
Municipal Circuit Trial Court, Mabalacat and Magalang, Pampanga to
dismiss Civil Case No. 1214 for lack of jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo
M. Lozano filed Civil Case No. 1214 for damages against respondent
Antonio Anda before the Municipal Circuit Trial Court (MCTC),
Mabalacat and Magalang, Pampanga. Petitioner alleged that he was the
president of the Kapatirang Mabalacat-Angeles Jeepney Drivers'
Association, Inc. (KAMAJDA) while respondent Anda was the president
of the Samahang Angeles-Mabalacat Jeepney Operators' and Drivers'
Association, Inc. (SAMAJODA); in August 1995, upon the request of the
Sangguniang Bayan of Mabalacat, Pampanga, petitioner and private
respondent agreed to consolidate their respective associations and form
the Unified Mabalacat-Angeles Jeepney Operators' and Drivers'
Association, Inc. (UMAJODA); petitioner and private respondent also
agreed to elect one set of officers who shall be given the sole authority to
collect the daily dues from the members of the consolidated association;
elections were held on October 29, 1995 and both petitioner and private
respondent ran for president; petitioner won; private respondent
protested and, alleging fraud, refused to recognize the results of the
election; private respondent also refused to abide by their agreement

and continued collecting the dues from the members of his association
despite several demands to desist. Petitioner was thus constrained to file
the complaint to restrain private respondent from collecting the dues
and to order him to pay damages in the amount of P25,000.00 and
attorney's fees of P500.00. 1
Private respondent moved to dismiss the complaint for lack of
jurisdiction, claiming that jurisdiction was lodged with the Securities and
Exchange Commission (SEC). The MCTC denied the motion on February
9, 1996. 2 It denied reconsideration on March 8, 1996. 3
Private respondent filed a petition for certiorari before the Regional
Trial Court, Branch 58, Angeles City. 4 The trial court found the dispute
to be intracorporate, hence, subject to the jurisdiction of the SEC, and
ordered the MCTC to dismiss Civil Case No. 1214 accordingly. 5 It denied
reconsideration on May 31, 1996. 6
Hence this petition. Petitioner claims that:
"THE RESPONDENT JUDGE ACTED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION AND SERIOUS ERROR OF
LAW IN CONCLUDING THAT THE SECURITIES AND
EXCHANGE COMMISSION HAS JURISDICTION OVER A
CASE OF DAMAGES BETWEEN HEADS/PRESIDENTS
OF TWO (2) ASSOCIATIONS WHO INTENDED TO
CONSOLIDATE/MERGE THEIR ASSOCIATIONS BUT
NOT YET [SIC] APPROVED AND REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION." 7
The jurisdiction of the Securities and Exchange Commission (SEC) is set
forth in Section 5 of Presidential Decree No. 902-A.. Section 5 reads as
follows:
"Section 5. . . . [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. cdtai
(b) Controversies arising out of intracorporate or
partnership
relations,
between
and
among
stockholders, members or associates; between any or

all of them and the corporation, partnership or

association of which they are stockholders, members,
or associates, respectively; and between such
corporation, partnership or association and the state
insofar as it concerns their individual franchise or right
to exist as such entity.
(c) Controversies in the election or appointment of
directors, trustees, officers or managers of such
corporations, partnerships or associations.
(d) Petitions of corporations, partnerships or
associations to be declared in the state of suspension of
payments in cases where the corporation, partnership
or association possesses sufficient property to cover all
its debts but foresees the impossibility of meeting them
when they respectively fall due or in cases where the
corporation, partnership or association has no
sufficient assets to 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. 8 This jurisdiction is determined by a
concurrence of two elements: (1) the status or relationship of the
parties; and (2) the nature of the question that is the subject of their
controversy. 9
The first element requires that the controversy must arise out of
intracorporate or partnership relations between and among
stockholders, members, or associates; between any or all of them and
the corporation, 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. 10 The second element requires
that the dispute among the parties be intrinsically connected with the
regulation of the corporation, partnership or association or deal with the
internal affairs of the corporation, partnership or association. 11 After
all, the principal function of the SEC is the 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. 12
There is no intracorporate nor partnership relation between petitioner
and private respondent. The controversy between them arose out of

their plan to consolidate their respective jeepney drivers' and operators'

associations into a single common association. This unified association
was, however, still a proposal. It had not been approved by the SEC,
neither had its officers and members submitted their articles of
consolidation 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. 13 When the SEC, upon processing and examining the articles of
consolidation, is satisfied that the consolidation of the corporations is
not inconsistent with the provisions of the Corporation Code and
existing laws, it issues a certificate of consolidation which makes the
reorganization official. 14 The new consolidated corporation comes into
existence and the constituent corporations dissolve and cease to
exist. 15
The KAMAJDA and SAMAJODA to which petitioner and private
respondent belong are duly registered with the SEC, but these
associations are two separate entities. The dispute between petitioner
and private respondent is not within the KAMAJDA nor the SAMAJODA.
It is between members of separate and distinct associations. Petitioner
and private respondent have no intracorporate relation much less do
they have an intracorporate dispute. The SEC therefore has no
jurisdiction over the complaint.
The doctrine of corporation by estoppel 16 advanced by private
respondent cannot override jurisdictional requirements. Jurisdiction is
fixed by law and is not subject to the agreement of the parties. 17 It
cannot be acquired through or waived, enlarged or diminished by, any
act or omission of the parties, neither can it be conferred by the
acquiescence of the court. 18
Corporation by estoppel is founded on principles of equity and is
designed to prevent injustice and unfairness. 19 It applies when persons
assume to form a corporation and exercise corporate functions and
enter into business relations with third 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. 20
IN VIEW WHEREOF, the petition is granted and the decision dated April
18, 1996 and the order dated May 31, 1996 of the Regional Trial Court,
Branch 58, Angeles City are set aside. The Municipal Circuit Trial Court
of Mabalacat and Magalang, Pampanga is ordered to proceed with
dispatch in resolving Civil Case No. 1214. No costs.

SO ORDERED.
Regalado, Romero, Mendoza and Torres, Jr., JJ ., concur.
||| (Lozano v. De los Santos, G.R. No. 125221, June 19, 1997)

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 producerwith 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
timeand 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. prLL
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. cdrep
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. L46595 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 isidentical 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. LLphil
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 andwith 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 wellknown 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). llcd
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 (Emphasis 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. cdphil
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. LexLib
SO ORDERED.
Bidin, Davide, Jr., Romero and Melo, JJ ., concur.
Gutierrez, Jr., J ., on terminal leave.
||| (Lyceum of the Phil., Inc. v. Court of Appeals, G.R. No. 101897, March 05,
1993)

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.
Augusto Gatmaytan for petitioner.
Roxas Delos Reyes Laurel and Rosario for private respondent.
SYNOPSIS
Respondent Refractories Corporation of the Philippines filed a petition
before the respondent Securities and Exchange Commission (SEC)
asking the latter to compel petitioner Industrial Refractories
Corporation of the Philippines to change its corporate name on the
ground that it was confusingly similar with that of petitioner's, such that
the public may be confused or deceived into believing that they are one
and the same corporation. The SEC ruled in favor of respondent
corporation and ordered petitioner corporation to delete from its
corporate name the word "Refractories." Hence, petitioner corporation
brought the matter before the Court of Appeals on ground of lack of
jurisdiction. The Court of Appeals, however, upheld the jurisdiction of
the SEC and ruled that the corporate names of petitioner corporation
and respondent corporation were confusingly or deceptively similar,
and that respondent corporation had established its prior right to use
the word "Refractories" as its corporate name. Hence, this petition.
In denying the petition, the Supreme Court held that the present case
falls within the ambit of the SEC's regulatory powers. The jurisdiction of
the SEC is not merely confined to the adjudicative functions provided in
Section 5 of P.D. 902-A, as amended. By express mandate, it has absolute
jurisdiction, supervision and control over all corporations. It also
exercises regulatory and administrative powers to implement and
enforce the Corporation Code, one of which is the provision on the use of
corporate name. It has the 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.
The Court further held that the two corporate names were patently
similar that even with reasonable care and observation, confusion might
arise. The Court found that both corporate names contain the identical
words "Refractories," "Corporation" and "Philippines"; both cater to the

same clientele, i.e. the steel industry; and, both have similar product
packaging, as found by the SEC. Hence, the confusion is probable or
likely to occur.
SYLLABUS
1. COMMERCIAL LAW; SECURITIES AND EXCHANGE COMMISSION;
FINDINGS OF FACT THEREOF, WHEN SUPPORTED BY SUBSTANTIAL
EVIDENCE, IS FINAL. If reckoned from the dates supplied by
petitioner, then the petition was timely filed. On the other hand, if
reckoned from the dates provided by respondent RCP, then it was filed
way beyond the reglementary period. On this score, we agree with the
appellate court's finding that petitioner failed to rebut respondent RCP's
allegations of material dates of receipt and filing. In addition, the
certifications were executed by the SEC officials based on their official
records which enjoy the presumption of regularity. As such, these
are prima facie evidence of the facts stated therein. And based on such
dates, there is no question that the petition was filed with the Court of
Appeals beyond the fifteen (15) day period. On this ground alone, the
instant petition should be denied as the SEC En Banc's decision had
already attained finality and the SEC's findings of fact, when supported
by substantial evidence, is final.
2. ID.; ID.; JURISDICTION; SEC HAS AUTHORITY TO DE-REGISTER AT
ALL TIMES AND UNDER ALL CIRCUMSTANCES CORPORATE NAMES
WHICH IN ITS ESTIMATION ARE LIKELY TO GENERATE CONFUSION.
Petitioner's argument on the SEC's jurisdiction over the case is utterly
myopic. The jurisdiction of the SEC is not merely confined to the
adjudicative functions provided in Section 5 of P.D. 902-A, as amended.
By express mandate, it has absolute jurisdiction, supervision and control
over all corporations. It also exercises regulatory and administrative
powers to implement and enforce the Corporation Code, one of which
is Section 18, which provides: "SEC. 18. Corporate name. No corporate
name may be allowed by the Securities and Exchange Commission if the
proposed name is identical or deceptively or confusingly similar to that
of any existing corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to existing laws.
When a change in the corporate name is approved, the Commission shall
issue an amended certificate of incorporation under the amended name."
It is the SEC's duty to prevent confusion in the use of corporate names
not only for the protection of the corporations involved but more so for
the protection of the public, and it has authority to de-register at all
times and under all circumstances corporate names which in its
estimation are likely to generate confusion. Clearly therefore, the

present case falls within the ambit of the SEC's regulatory

powers. HISAET
3. ID.; PRIVATE CORPORATION; USE OF CORPORATE NAME;
REQUIREMENTS. Likewise untenable is petitioner's argument that
there is no confusing or deceptive similarity between petitioner and
respondent RCP's corporate names. Section 18 of the Corporation
Code expressly prohibits the use of a corporate name which is "identical
or deceptively or confusingly similar to that of any existing corporation or
to any other name already protected by law or is patently deceptive,
confusing or contrary to existing laws." The policy behind the foregoing
prohibition is to avoid fraud upon the public that will have occasion to
deal with the entity concerned, the evasion of legal obligations and
duties, and the reduction of difficulties of administration and
supervision over corporation. Pursuant thereto, the Revised Guidelines
in the Approval of Corporate and Partnership Names 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; and (2) if the proposed name is similar to the
name of a registered firm, the proposed name must contain at least one
distinctive word different from the name of the company already
registered.
4. ID.; ID.; ID.; PROHIBITION; REQUISITES. As held in Philips Export B.
V. vs. Court of Appeals, 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.
5. ID.; ID.; ID.; ID.; ID.; PRIORITY OF ADOPTION; RULE; CASE AT BAR.
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. 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.
6. ID.; ID.; ID.; ID.; ID.; EXISTENCE OF CONFUSING SIMILARITY IN
CORPORATE NAMES; TEST; CASE AT BAR. 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. Petitioner's corporate
name is "Industrial Refractories Corp. of the Phils.," while respondent's
is "Refractories Corp. of the Phils." Obviously, both names contain the
identical words "Refractories," "Corporation" and "Philippines." The only
word that distinguishes petitioner from respondent RCP is the word
"Industrial" which merely identifies a corporation's general field of
activities or operations. We need not linger on these two corporate
names to conclude that they are patently similar that even with
reasonable care and observation, confusion might arise. 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. 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. And even without such proof of
actual confusion between the two corporate names, it suffices that
confusion is probable or likely to occur.
7. ID.; ID.; ID.; ID.; ID.; PETITIONER'S APPROPRIATION OF
RESPONDENTS' CORPORATE NAME NOT JUSTIFIED UNDER THE
GENERIC WORD RULE; REASON. 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. Moreover, as held in the case of Ang Kaanib sa Iglesia ng Dios kay
Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo
Jesus, Haligi at Suhay ng Katotohanan, petitioner's appropriation of
respondent's corporate name cannot find justification under the generic
word rule. A contrary ruling would encourage other corporations to
adopt verbatim and register an existing and protected corporate name,
to the detriment of the public.

8. CIVIL LAW; DAMAGES; AWARD OF ATTORNEY'S FEES; WHEN

ALLOWED. 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, it refused to do so, thus
compelling respondent to undergo litigation and incur expenses to
protect its corporate name. EHCcIT
DECISION
AUSTRIA-MARTINEZ, J p:
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). AacCIT
Respondent Refractories Corporation of the Philippines (RCP) is a
corporation duly organized on October 13, 1976 for the purpose of
engaging in the business of manufacturing, producing, selling, exporting
and otherwise dealing in any and all refractory bricks, its by-products
and derivatives. On June 22, 1977, it registered its corporate and
business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979
originally under the name "Synclaire Manufacturing Corporation." It
amended its Articles of Incorporation on August 23, 1985 to change its
corporate name to "Industrial Refractories Corp. of the Philippines." It is
engaged in the business of manufacturing all kinds of ceramics and other
products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix. 1
Discovering that petitioner was using such corporate name, respondent
RCP filed on April 14, 1988 with the Securities and Exchange
Commission (SEC) a petition to compel petitioner to change its
corporate name on the ground that its corporate name is confusingly
similar with that of petitioner's such that the public may be confused or
deceived into believing that they are one and the same corporation. 2
The SEC decided in favor of respondent RCP and rendered judgment on
July 23, 1993 with the following dispositive portion:
"WHEREFORE, judgment is hereby rendered in favor of
the petitioner and against the respondent declaring the
latter's corporate name 'Industrial Refractories
Corporation of the Philippines' as deceptively and
confusingly similar to that of petitioner's corporate

name 'Refractories Corporation of the Philippines.'

Accordingly, respondent is hereby directed to amend
its Articles of Incorporation by deleting the name
'Refractories Corporation of the Philippines' in its
corporate name within thirty (30) days from finality of
this Decision. Likewise, respondent is hereby ordered
to pay the petitioner the sum of P50,000.00 as
attorney's fees." 3
Petitioner appealed to the SEC En Banc, arguing that it does not have any
jurisdiction over the case, and that respondent RCP has no right to the
exclusive use of its corporate name as it is composed of generic or
common words. 4
In its Decision dated July 23, 1993, the SEC En Banc modified the
appealed decision in that petitioner was ordered to delete or drop from
its corporate name only the word "Refractories." 5
Petitioner IRCP elevated the decision of the SEC En Banc through a
petition for review on certiorari to the Court of Appeals which then
rendered the herein assailed decision. The appellate court upheld the
jurisdiction of the SEC over the case and ruled that the corporate names
of petitioner IRCP and respondent RCP are confusingly or deceptively
similar, and that respondent RCP has established its prior right to use
the word "Refractories" as its corporate name. 6 The appellate court also
found that the petition was filed beyond the reglementary period. 7
Hence, herein petition which we must deny.
Petitioner contends that the petition before the Court of Appeals was
timely filed. It must be noted that at the time the SEC En Banc rendered
its decision on May 10, 1994, the governing rule on appeals from quasijudicial 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 SEC's Decision dated May 10,
1994
June 20, 1994 Filing of Motion for Reconsideration
September 1, 1994 Receipt of SEC's Order dated August
3, 1994
denying petitioner's motion for reconsideration

September 2, 1994 Filing of Motion for extension of

time
September 6, 1994 Filing of Petition
Respondent RCP, however, asserts that the foregoing dates are incorrect
as the certifications issued by the SEC show that petitioner received the
SEC's Decision dated May 10, 1994 on June 9, 1994, filed the motion for
reconsideration via registered mail on June 25, 1994, and received the
Order dated August 3, 1994 on August 15, 1994. 11 Thus, the petition
was filed twenty-one (21) days beyond the reglementary period
provided in Supreme Court Circular No. 1-91.12
If reckoned from the dates supplied by petitioner, then the petition was
timely filed. On the other hand, if reckoned from the dates provided by
respondent RCP, then it was filed way beyond the reglementary period.
On this score, we agree with the appellate court's finding that petitioner
failed to rebut respondent RCP's allegations of material dates of receipt
and filing. 13 In addition, the certifications were executed by the SEC
officials based on their official records 14 which enjoy the presumption
of regularity. 15 As such, these are prima facie evidence of the facts
stated therein. 16 And based on such dates, there is no question that the
petition was filed with the Court of Appeals beyond the fifteen (15) day
period. On this ground alone, the instant petition should be denied as the
SEC En Banc's decision had already attained finality and the SEC's
findings of fact, when supported by substantial evidence, is final. 17
Nevertheless, to set the matters at rest, we shall delve into the other
issues posed by petitioner. TacADE
Petitioner's arguments, substantially, are as follows: (1) jurisdiction is
vested with the regular courts as the present case is not one of the
instances provided in P.D. 902-A; (2) respondent RCP is not entitled to
use the generic name "refractories"; (3) there is no confusing similarity
between their corporate names; and (4) there is no basis for the award
of attorney's fees. 18
Petitioner's argument on the SEC's jurisdiction over the case is utterly
myopic. The jurisdiction of the SEC is not merely confined to the
adjudicative functions provided in Section 5 of P.D. 902-A, as
amended. 19 By express mandate, it has absolute jurisdiction,
supervision and control over all corporations. 20 It also exercises
regulatory and administrative powers to implement and enforce
the Corporation Code, 21 one of which is Section 18, which provides:
"SEC. 18. Corporate name. No corporate name may
be allowed by the Securities and Exchange Commission
if the proposed name is identical or deceptively or

confusingly similar to that of any existing corporation

or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing
laws. When a change in the corporate name is
approved, the Commission shall issue an amended
certificate of incorporation under the amended name."
It is the SEC's duty to prevent confusion in the use of corporate names
not only for the protection of the corporations involved but more so for
the protection of the public, and it has authority to de-register at all
times and under all circumstances corporate names which in its
estimation are likely to generate confusion. 22 Clearly therefore, the
present case falls within the ambit of the SEC's regulatory powers. 23
Likewise untenable is petitioner's argument that there is no confusing or
deceptive similarity between petitioner and respondent RCP's corporate
names.Section 18 of the Corporation Code expressly prohibits the use of a
corporate name which is "identical or deceptively or confusingly similar to
that of any existing corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to existing laws." The
policy behind the foregoing prohibition is to avoid fraud upon the public
that will have occasion to deal with the entity concerned, the evasion of
legal obligations and duties, and the reduction of difficulties of
administration and supervision over corporation. 24
Pursuant thereto, the Revised Guidelines in the Approval of Corporate
and Partnership 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 similar to the name of a registered firm, the
proposed name must contain at least one distinctive word different from
the name of the company already registered.27
As held in Philips Export B.V. vs. Court of Appeals, 28 to fall within the
prohibition of the law, two requisites must be proven, to wit:
(1) that the complainant corporation acquired a prior
right over the use of such corporate name;
and
(2) the proposed name is either: (a) identical, or (b)
deceptively or confusingly similar to that of any
existing corporation or to any other name
already protected by law; or (c) patently
deceptive, confusing or contrary to existing law.
As regards the first requisite, it has been held that the right to the
exclusive use of a corporate name with freedom from infringement by

similarity is determined by priority of adoption. 29 In this case,

respondent RCP was incorporated on October 13, 1976 and since then
has been using the corporate name "Refractories Corp. of the
Philippines." Meanwhile, petitioner was incorporated on August 23,
1979 originally under the name "Synclaire Manufacturing Corporation."
It only started using the name "Industrial Refractories Corp. of the
Philippines" when it amended its Articles of Incorporation on August 23,
1985, or nine (9) years after respondent RCP started using its name.
Thus, being the prior registrant, respondent RCP has acquired the right
to use the word "Refractories" as part of its corporate name.
Anent the second requisite, in determining the existence of confusing
similarity in corporate names, the test is whether the similarity is such
as to mislead a person using ordinary care and discrimination and the
Court must look to the record as well as the names
themselves. 30 Petitioner's corporate name is "Industrial Refractories
Corp. of the Phils.," while respondent's is "Refractories Corp. of the
Phils." Obviously, both names contain the identical words "Refractories,"
"Corporation" and "Philippines." The only word that distinguishes
petitioner from respondent RCP is the word "Industrial" which merely
identifies a corporation's general field of activities or operations. We
need not linger on these two corporate names to conclude that they are
patently similar that even with reasonable care and observation,
confusion might arise. 31 It must be noted that both cater to the same
clientele, i.e., the steel industry. In fact, the SEC found that there were
instances when different steel companies were actually confused
between the two, especially since they also have similar product
packaging. 32 Such findings are accorded not only great respect but even
finality, and are binding upon this Court, unless it is shown that it had
arbitrarily disregarded or misapprehended evidence before it to such an
extent as to compel a contrary conclusion had such evidence been
properly appreciated. 33 And even without such proof of actual
confusion between the two corporate names, it suffices that confusion is
probable or likely to occur. 34
Refractory materials are described as follows:
"Refractories are structural materials used at high
temperatures to [sic] industrial furnaces. They are
supplied mainly in the form of brick of standard sizes
and of special shapes. Refractories also include
refractory cements, bonding mortars, plastic firebrick,
castables, ramming mixtures, and other bulk materials

such as dead-burned grain magneside, chrome or

ground ganister and special clay." 35
While the word "refractories" is a generic term, its usage is not
widespread and is limited merely to the industry/trade in which it is
used, and its continuous use by respondent RCP for a considerable
period has made the term so closely identified with it. 36 Moreover,
as held in the case of Ang Kaanib sa Iglesia ng Dios kay Kristo Hesus,
H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay Cristo Jesus,
Haligi at Suhay ng Katotohanan, petitioner's appropriation of
respondent's corporate name cannot find justification under the
generic word rule. 37 A contrary ruling would encourage other
corporations to adopt verbatim and register an existing and
protected corporate name, to the detriment of the public. 38
Finally, we find the award of P50,000.00 as attorney's fees to be fair and
reasonable. Article 2208 of the Civil Code allows the award of such fees
when its claimant is compelled to litigate with third persons or to incur
expenses to protect its just and valid claim. In this case, despite its
undertaking to change its corporate name in case another firm has
acquired a prior right to use such name, 39 it refused to do so, thus
compelling respondent to undergo litigation and incur expenses to
protect its corporate name.
WHEREFORE, the instant petition for review on certiorari is hereby
DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
Bellosillo, Quisumbing and Callejo, Sr., JJ., concur.
Mendoza, J., is on official leave.
||| (Industrial Refractories Corp. of the Phil. v. Court of Appeals, G.R. No.
122174, October 03, 2002)

SECOND DIVISION
[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., respondent.
Claro M. Recto for petitioners.
Ramon Diokno and Jose W. Diokno for respondents.
SYLLABUS
1. CORPORATION "DE FACTO"; DISSOLUTION BY SUIT OF
STOCKHOLDERS; JURISDICTION OF COURT. An entity whose
certificate of incorporation had not been obtained may be
terminated in a private suit for its dissolution between stockholders,
without the intervention of the state. The question as to the right of
minority stockholders to sue for dissolution does not affect the
court's jurisdiction, and is a matter for decision by the judge, subject
to review on appeal by the aggrieved party at the proper time.
2. ID.; RIGHTS OF. Persons acting as corporation may not
claim rights of "de facto" corporation if they have not obtained
certificate of incorporation.
DECISION
BENGZON, J p:
This is a 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 articles 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 articles 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 sufficiency of the cause of
action. (6) After hearing the parties, the Hon. Edmundo S. Piccio
ordered the dissolution of the company; and at the request of
plaintiffs, appointed the respondent Pedro A. Capuciong as receiver
of the properties thereof, upon the filing of a P20,000 bond. (7) The
defendants therein (petitioners herein) offered to file a counterbond 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 articles of incorporation, they are estopped from
claiming that it is not a corporation 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 ought 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 no jurisdiction to take cognizance of said
civil case number 381. Section 19 reads in part 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 at 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 statute 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 of 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. Which 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
decreed 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.
Petition dismissed.
||| (Hall v. Piccio, G.R. No. L-2598, June 29, 1950)

SECOND DIVISION
[G.R. No. 150416. July 21, 2006.]
SEVENTH DAY ADVENTIST CONFERENCE CHURCH
OF SOUTHERN PHILIPPINES, INC., and/or
represented by MANASSEH C. ARRANGUEZ,
BRIGIDO P. GULAY, FRANCISCO M. LUCENARA,
DIONICES O. TIPGOS, LORESTO C. MURILLON,
ISRAEL C. NINAL, GEORGE G. SOMOSOT, JESSIE T.
ORBISO,
LORETO
PAEL
and
JOEL
BACUBAS, petitioners, vs.
NORTHEASTERN
MINDANAO MISSION OF SEVENTH DAY ADVENTIST,
INC., and/or represented by JOSUE A. LAYON,
WENDELL M. SERRANO, FLORANTE P. TY and
JETHRO
CALAHAT
and/or
SEVENTH
DAY
ADVENTIST
CHURCH
[OF]
NORTHEASTERN
MINDANAO MISSION, * respondents.
DECISION
CORONA, J p:
This petition for review on certiorari assails the Court of Appeals (CA)
decision 1 and resolution 2 in CA-G.R. CV No. 41966 affirming, with
modification, the decision of the Regional Trial Court (RTC) of Bayugan,
Agusan del Sur, Branch 7 in Civil Case No. 63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of
Title (TCT) No. 4468 in Bayugan, Agusan del Sur originally owned by
Felix Cosio and his wife, Felisa Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the South
Philippine Union Mission of Seventh Day Adventist Church of Bayugan
Esperanza, Agusan (SPUM-SDA Bayugan). 3 Part of the deed of donation
read:
KNOW ALL MEN BY THESE PRESENTS:
That we Felix Cosio[,] 49 years of age[,] and Felisa
Cuysona[,] 40 years of age, [h]usband and wife, both
are citizen[s] of the Philippines, and resident[s] with
post office address in the Barrio of Bayugan,
Municipality of Esperanza, Province of Agusan,
Philippines, do hereby grant, convey and forever quit
claim by way of Donation or gift unto the South
Philippine [Union] Mission of Seventh Day Adventist
Church of Bayugan, Esperanza, Agusan, all the rights,
title, interest, claim and demand both at law and as well
in possession as in expectancy of in and to all the place

of land and portion situated in the Barrio of Bayugan,

Municipality of Esperanza, Province of Agusan,
Philippines, more particularly and bounded as follows,
to wit:
1. a parcel of land for Church Site purposes
only.
2. situated [in Barrio Bayugan, Esperanza].
3. Area: 30 meters wide and 30 meters length
or 900 square meters.
4. Lot No. 822-Pls-225. Homestead Application
No. V-36704, Title No. P-285. aHDTAI
5. Bounded Areas
North by National High Way; East by Bricio Gerona;
South by Serapio Abijaron and West by Feliz Cosio . . .
.4
The donation was allegedly accepted by one Liberato Rayos, an elder
of the Seventh Day Adventist Church, on behalf of the donee.
Twenty-one years later, however, on February 28, 1980, the same parcel
of land was sold by the spouses Cosio to the Seventh Day Adventist
Church of Northeastern Mindanao Mission (SDA-NEMM). 5 TCT No.
4468 was thereafter issued in the name of SDA-NEMM. 6
Claiming to be the alleged donee's successors-in-interest, petitioners
asserted ownership over the property. This was opposed by
respondents who argued that at the time of the donation, SPUM-SDA
Bayugan could not legally be a donee because, not having been
incorporated yet, it had no juridical personality. Neither were
petitioners members of the local church then, hence, the donation could
not have been made particularly to them.
On September 28, 1987, petitioners filed a case, docketed as Civil Case
No. 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 decision 7 on November 20,
1992 upholding the sale in favor of respondents.
On appeal, the CA affirmed the RTC decision but deleted the award of
moral damages and attorney's fees. 8 Petitioners' motion for
reconsideration was likewise denied. Thus, this petition.
The issue in this petition is simple: should SDA-NEMM's ownership of
the lot covered by TCT No. 4468 be upheld? 9 We answer in the
affirmative.

The controversy between petitioners and respondents involves two

supposed transfers of the lot previously owned by the spouses Cosio: (1)
a donation to petitioners' alleged predecessors-in-interest in 1959 and
(2) a sale to respondents in 1980.
Donation is undeniably one of the modes of acquiring ownership of real
property. Likewise, ownership of a property may be transferred by
tradition as a consequence of a sale.
Petitioners contend that the appellate court should not have ruled on the
validity of the donation since it was not among the issues raised on
appeal. This is not correct because an appeal generally opens the entire
case for review.
We agree with the appellate court that the alleged donation to
petitioners was void.
Donation is an act of liberality whereby a person disposes gratuitously of
a thing or right in favor of another person who accepts it. The donation
could not have been made in favor of an entity yet inexistent at the time
it was made. Nor could it have been accepted as there was yet no one to
accept it.
The deed of donation was not in favor of any informal group of SDA
members but a supposed SPUM-SDA Bayugan (the local church) which,
at the time, had neither juridical personality nor capacity to accept such
gift.
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:
(a) the existence of a valid law under which it may be
incorporated;
(b) an attempt in good faith to incorporate; and
(c) assumption of corporate powers. 10
While there existed the old Corporation Law (Act 1459), 11 a law under
which SPUM-SDA Bayugan could have been organized, there is no proof
that there was an attempt to incorporate at that time.
The filing of articles of incorporation and the issuance of the certificate
of incorporation are essential for the existence of a de
facto corporation. 12 We have held that an organization not registered
with the Securities and Exchange Commission (SEC) cannot be
considered a corporation in any concept, not even as a corporation de
facto. 13 Petitioners themselves admitted that at the time of the
donation, they were not registered with the SEC, nor did they even
attempt to organize 14 to comply with legal requirements.

Corporate existence begins only from the moment a certificate of

incorporation is issued. No such certificate was ever issued to
petitioners or their supposed predecessor-in-interest at the time of the
donation. Petitioners obviously could not have claimed succession to an
entity that never came to exist. Neither could the principle of separate
juridical personality apply since there was never any corporation 15 to
speak of. And, as already stated, some of the representatives of
petitioner Seventh Day Adventist Conference Church of Southern
Philippines, Inc. were not even members of the local church then, thus,
they could not even claim that the donation was particularly for
them. 16
"The de facto doctrine thus effects a compromise
between two conflicting public interest[s] the one
opposed to an unauthorized assumption of corporate
privileges; the other in favor of doing justice to the
parties and of establishing a general assurance of
security in business dealing with corporations." 17
Generally, the doctrine exists to protect the public
dealing with supposed corporate entities, not to favor
the defective or non-existent corporation. 18
In view of the foregoing, petitioners' arguments anchored on their
supposed de facto status hold no water. We are convinced that there was
no donation to petitioners or their supposed predecessor-ininterest. TCDHIc
On the other hand, there is sufficient basis to affirm the title of SDANEMM. The factual findings of the trial court in this regard were not
convincingly disputed. This Court is not a trier of facts. Only questions of
law are the proper subject of a petition for review on certiorari. 19
Sustaining the validity of respondents' title as well as their right of
ownership over the property, the trial court stated:
[W]hen Felix Cosio was shown the Absolute Deed of
Sale during the hearing . . . he acknowledged that the
same was his . . . but that it was not his intention to sell
the controverted property because he had previously
donated the same lot to the South Philippine Union
Mission of SDA Church of Bayugan-Esperanza. Cosio
avouched that had it been his intendment to sell, he
would not have disposed of it for a mere P2,000.00 in
two installments but for P50,000.00 or P60,000.00.
According to him, the P2,000.00 was not a

consideration of the sale but only a form of help

extended.
A thorough analysis and perusal, nonetheless, of
the Deed of Absolute Sale disclosed that it has the
essential requisites of contracts pursuant to . . .
Article 1318 of the Civil Code, except that the
consideration of P2,000.00 is somewhat insufficient for
a [1,069-square meter] land. Would then this
inadequacy of the consideration render the contract
invalid?
Article 1355 of the Civil Code provides:
Except in cases specified by law, lesion or
inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake
or undue influence.
No evidence [of fraud, mistake or undue influence]
was adduced by [petitioners].
xxx xxx 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. . . .
The title shall be received as evidence in all the Courts
and shall be conclusive as to all matters contained
therein.
[This action was instituted almost seven years after the
certificate of title in respondents' name was issued in
1980.] 20
According to Art. 1477 of the Civil Code, the ownership of the thing sold
shall be transferred to the vendee upon the actual or constructive
delivery thereof. On this, the noted author Arturo Tolentino had this to
say:
The execution of [a] public instrument . . . transfers the
ownership from the vendor to the vendee who may
thereafter exercise the rights of an owner over the
same 21

Here, transfer of ownership from the spouses Cosio to SDA-NEMM was

made upon constructive delivery of the property on February 28, 1980
when the sale was made through a public instrument. 22 TCT No. 4468
was thereafter issued and it remains in the name of SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.
Costs against petitioners.
SO ORDERED.
Puno, Sandoval-Gutierrez, Azcuna and Garcia, JJ., concur.
Footnotes
*The Seventh Day Adventist Church of Northeastern Mindanao Mission
(SDA-NEMM) is the ecclesiastical body and the Northern
Mindanao Mission of Seventh Day Adventist, Inc. is the
corporation managing SDA-NEMM's properties.
1.Penned by Associate Justice Andres B. Reyes, Jr. and concurred in by
Associate Justices B.A. Adefuin-de la Cruz (retired) and
Rebecca de Guia-Salvador of the Sixteenth Division of the Court
of Appeals; rollo, pp. 19-28.
2.Id., p. 30.
3.Id., p. 105.
4.Id., p. 105.
5.Id., p. 107.
6.Id., p. 108.
7.Penned by Judge Zenaida P. Placer of RTC Bayugan, Agusan del Sur,
Branch VII; rollo, pp. 205-220.
ACCORDINGLY, viewed from the above perceptions, the evidence
having [preponderance] in favor of [SDA-NEMM], judgment is
hereby rendered dismissing the above[-mentioned] petition
and ordering [petitioners]:
1) to return to [SDA-NEMM] the litigated property, Lot No. 822 PLS225 covered by [TCT] No. 4468;
2) to pay moral damages in the amount of P30,000.00;
3) to pay attorney's fees in the amount of P30,000.0;
4) to pay expenses of litigation in the sum of P66,860.00; and
5) to pay the costs.
SO ORDERED.
8.The Court had gone over the arguments propounded by each side
and finds itself in agreement with [SDA-NEMM] that because
[SPUM-SDA Bayugan] was not incorporated at the time of the
donation in 1959, the said [SPUM-SDA Bayugan] could not be
the recipient of a donation. [Petitioners] had in fact admitted
[that] the donee was not registered with the Securities and

Exchange Commission. But neither can we uphold [SDANEMM's] position that because [SPUM-SDA Bayugan] could not
have been the donee, [South Philippine Union Mission] was
necessarily the donee. We had carefully gone over the Deed of
Donation and [found] that the donee was "South Philippine
Union Mission of Seventh Day Adventist Church of Bayugan
Esperanza, Agusan."
To the mind of this Court, the intended donee was the local church of
Bayugan-Esperanza, Agusan and not SPUM. [Had] the donors
intended to donate the property to SPUM, they would not have
specified the local church (i.e., the SDA Church of Bayugan,
Esperanza, Agusan) as the donee. In fine, the Court finds that
the Deed of Donation did not validly transfer the property to
either [SPUM-SDA Bayugan] or to SPUM. (Rollo, pp. 24-25).
9.Petition, rollo, p.12.
10.Villanueva, PHILIPPINE CORPORATE LAW (1998), Rex Book Store,
Manila, pp. 111-112. Agbayani added a fourth requisite to
consider a corporation as de facto in status: good faith in
claiming to be and in doing business as a corporation. This
finds basis on Sec. 20, Corporation Code. "A group of persons
may be in good faith in their attempt to incorporate, but
subsequently they may discover that they have not
substantially complied with the law. After such discovery, they
could no longer claim in good faith to be a corporation, and
therefore, ought not to be accorded the privilege of de
facto existence."
(Agbayani,
COMMENTARIES
AND
JURISPRUDENCE ON THE COMMERCIAL LAWS OF THE
PHILIPPINES [1996], AFA Publications, Inc., Quezon City, p.
181).
11.This was the law applicable at the time of the alleged donation. It
became effective on April 1, 1906. The Corporation Code (BP
68), which took effect on May 1, 1980, is the general statute
under which private corporations are organized today.
12.See Hall v. Piccio, 86 Phil. 603 (1950).
13.Agbayani, supra note 10, at 181 citing Albert v. University Publishing
Co., Inc., 121 Phil. 87 (1965).
14."[T]he term 'organization' means simply the process of forming and
arranging into suitable disposition the parties who are to act
together in, and defining the objects of, the compound body,
and that this process, even when complete in all its parts, does
not confer a franchise either valid or defective, but, on the

contrary, it is only the act of the individuals, and something

else must be done to secure the corporate franchise."
Organization refers to the "systematization and orderly
arrangement of the internal and managerial affairs and organs"
of the corporation. (Benguet Consolidated Mining Co. v. Pineda,
98 Phil. 711, 720 [1956]). Citations omitted.
15.A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its
existence (CORPORATION CODE, Sec. 2. See also CIVIL CODE,
Art. 46). This is the legal basis of the main doctrine that a
corporation, being a juridical person, has a personality
separate and distinct from its members.
16.Considering that we are treating properties of a supposed religious
organization, it would not be amiss to be guided by the
following:
The confradias and capellanias of the Roman Catholic Church are also
recognized as juridical persons if they were legally organized
under the laws of the Spanish regime and have by-laws
approved by the government existing at the time of their
foundation; but if they were not so organized, they cannot
be considered as juridical persons and cannot register
properties in their own names. (Villanueva, supra note 10, at
180 citing Capellania de Tambobong v. Cruz, 9 Phil. 145
[1907]; Government of the Philippines v. Avila, 38 Phil. 383
[1918]). (emphasis ours)
17.Agbayani, supra note 10, at 180-181. See also Villanueva, supra note
10, at 110-111.
18."It has been stated that 'so long as it exists, a de facto corporation is
a reality and has a substantial, legal existence, and an
independent status, recognized by law, as distinct from that of
its members. It is, as the term implies, a corporation, and
enjoys at least for most purposes, the status of a corporation de
jure until the state questions its existence.' This statement,
however, has been criticized. Each case must be considered
according to the specific point at issue. . . . [T]he recognition
of de facto existence, which consists mainly of the 'denial of
collateral attack,' is a device used by the courts to recognize
certain corporate attributes in a defective organization where
that seems advisable." (Agbayani, supra note 10, at 179-180,
citations omitted).

19.RULES OF COURT, Rule 45, Sec. 1.

20.Rollo, pp. 216-220.
21.Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL
CODE OF THE PHILIPPINES VOL. V (1992), Central
Professional Books, Inc., Quezon City, p. 53. See also CIVIL
CODE, Art. 1498.
22.Rollo, p. 107.
||| (Seventh Day Adventist Conference Church of Southern Phil. Inc. v.
Northeastern Mindanao Mission of Seventh Day Adventist, Inc., G.R. No.
150416, July 21, 2006)