corporation law cases.docx

8/9/2019 corporation law cases.docx

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1. LBC Express, Inc. vs. Court of Appeals, G.R. No. 108670, !6 "CRA 60 , "epte#$er 1, 1%%&

G.R. No. 108670 "epte#$er 1, 1%%&

LBC E'(RE"", INC., petitioner,vs.

)*E C+R) +- A((EAL", A+L-+ /. CARL+)+, an RRAL BAN +- LABA"+N, INC., respondents.

Emmanuel D. Agustin for petitioner.

Bernardo P. Concha for private respondents.

(N+, J.:In this Petition for Review on Certiorari, petitioner LBC questions the decision 1 of respondent Court of Appeals affirming

judgment of the Regional rial Court of !ipolog Cit", Branch #, awarding moral and e$emplar" damages, reim%ursement of

P&',(((.((, and costs of suit) %ut deleting the amount of attorne"*s fees.

Private respondent Adolfo Carloto, incum%ent President+anager of private respondent Rural Ban- of La%ason, alleged that

ovem%er /', /0#1, he was in Ce%u Cit" transacting %usiness with the Central Ban- Regional 2ffice. 3e was instructed to

proceed to anila on or %efore ovem%er '/, /0#1 to follow+up the Rural Ban-*s plan of pa"ment of rediscounting o%ligatio

with Central Ban-*s main office in anila. 3e then purchased a round trip plane tic-et to anila. 3e also phoned his sister

4lsie Carloto+Concha to send him 24 3256A! P4626 7P/,(((.((8 for his poc-et mone" in going to anila and som

rediscounting papers thru petitioner*s LBC 2ffice at !ipolog Cit". !

2n ovem%er /9, /0#1, rs. Concha thru her cler-, Adelina Antigo consigned thru LBC !ipolog Branch the pertinent

documents and the sum of 24 3256A! P4626 7P/,(((.((8 to respondent Carloto at o. ' :re"hound 6u%division,

;inasangan, Pardo, Ce%u Cit". his was evidenced %" LBC Air Cargo, Inc., Cashpac- !eliver" Receipt o. &1#(


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&. @hether or not the respondent Court of Appeals gravel" a%used its discretion in affirming the trial court*s decision orderin

petitioner LBC to pa" moral and e$emplar" damages despite performance of its o%ligation.

@e find merit in the petition.

he respondent court erred in awarding moral damages to the Rural Ban- of La%ason, Inc., an artificial person.

oral damages are granted in recompense for ph"sical suffering, mental anguish, fright, serious an$iet", %esmirchedreputation, wounded feelings, moral shoc-, social humiliation, and similar injur". 7 A corporation, %eing an artificial person

and having e$istence onl" in legal contemplation, has no feelings, no emotions, no senses) therefore, it cannot e$perience

ph"sical suffering and mental anguish. 8 ental suffering can %e e$perienced onl" %" one having a nervous s"stem and it flo

from real ills, sorrows, and griefs of life % all of which cannot %e suffered %" respondent %an- as an artificial person.

@e can neither sustain the award of moral damages in favor of the private respondents. he right to recover moral damages i

%ased on equit". oral damages are recovera%le onl" if the case falls under Article ''/0 of the Civil Code in relation to Arti'/. 10 Part of conventional wisdom is that he who comes to court to demand equit", must come with clean hands.

In the case at %ench, respondent Carloto is not without fault. 3e was full" aware that his rural %an-*s o%ligation would matur

on ovem%er '/, /0#1 and his %an- has set aside cash for these %ills pa"a%le. 11 3e was all set to go to anila to settle this

o%ligation. 3e has received the documents necessar" for the approval of their rediscounting application with the Central Ban

3e has also received the plane tic-et to go to anila. evertheless, he did not immediatel" proceed to anila %ut instead

tarried for da"s allegedl" claiming his 24 3256A! P4626 7P/,(((.((8 poc-et mone". !ue to his dela"ed trip, he fail

to su%mit the rediscounting papers to the Central Ban- on time and his %an- was penaliDed 3IR?+@2 3256A!

P4626 7P&',(((.((8 for failure to pa" its o%ligation on its due date. he undue importance given %" respondent Carloto to h

24 3256A! P4626 7P/,(((.((8 poc-et mone" is ine$plica%le for it was not indispensa%le for him to follow up his

%an-*s rediscounting application with Central Ban-. According to said respondent, he needed the mone" to Einvite people for

snac- or dinner.E 1 he attitude of said respondent spea-s ill of his wa"s of %usiness dealings and cannot %e countenanced %

this Court. Feril", it will %e revolting to our sense of ethics to use it as %asis for awarding damages in favor of privaterespondent Carloto and the Rural Ban- of La%ason, Inc.

@e also hold that respondents failed to show that petitioner LBC*s late deliver" of the cashpac- was motivated %" personal

malice or %ad faith, whether intentional or thru gross negligence. In fact, it was proved during the trial that the cashpac- was

consigned on ovem%er /9, /0#1, a >rida". It was sent to Ce%u on ovem%er /0, /0#1, the ne$t %usiness da". Considering t

circumstance, petitioner cannot %e charged with gross neglect of dut". Bad faith under the law can not %e presumed) it must %

esta%lished %" clearer and convincing evidence. 1! Again, the un%ro-en jurisprudence is that in %reach of contract cases whe

the defendant is not shown to have acted fraudulentl" or in %ad faith, lia%ilit" for damages is limited to the natural and pro%a

consequences of the %ranch of the o%ligation which the parties had foreseen or could reasona%le have foreseen. he damages

however, will not include lia%ilit" for moral damages. 1&

Prescinding from these premises, the award of e$emplar" damages made %" the respondent court would have no legal leg to

support itself. 5nder Article ''&' of the Civil Code, in a contractual or quasi+contractual relationship, e$emplar" damages m

%e awarded onl" if the defendant had acted in Ea wanton, fraudulent, rec-less, oppressive, or malevolent manner.E heesta%lished facts of not so warrant the characteriDation of the action of petitioner LBC.

I FI4@ @34R42>, the !ecision of the respondent court dated 6eptem%er &(, /00' is R4F4R64! and 64 A6I!4) and

the Complaint in Civil Case o. &9=0 is ordered !I6I664!. o costs.

62 2R!4R4!.

Narvasa, C.J., Padilla, Regalado and Mendoa, JJ., concur.

3-ootnotes

/ 3errera, anuel, ., Ponente) orres, usto, and :utierreD, Angelina, ., concurring.

' Rollo, Court of Appeals !ecision, p. =#.

& !"id .

1 !"id ., p. =0.


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CIR vs CAP26 R54!A

Repu%lic of the Philippines

"(RE/E C+R)

anila

4 BAC

G.R. No. L41!20 2cto%er '0, /0=/

)*E C+LLEC)+R +- IN)ERNAL RE5ENE, petitioner ,

vs.

AN)+NI+ CA/(+" REA, respondent .

Assistant #olicitor $eneral Jose P. Ale%andro and #pecial Attorne& Jose $. Aurin, '(.#.$.) for petitioner.

Ramire and (rtigas for respondent.

E C I " I + N

*ERNAND(, J.+

he %asic issue posed %" petitioner Collector of Internal Revenue in this appeal from a decision of the Court of a$ Appeals

to whether or not the requisites of statehood, or at least so much thereof as ma" %e necessar" for the acquisition of an

international personalit", must %e satisfied for a Gforeign countr"H to fall within the e$emption of 6ection /'' of the ationa

Internal Revenue Code 1 is now ripe for adjudication7negotiation8. he Court of a$ Appeals answered the question in the

negative, and thus reversed the action ta-en %" petitioner Collector, who would hold respondent Antonio Campos Rueda, as

administrator of the estate of the late 4strella 6oriano Fda. de Cerdeira, lia%le for the sum of P/9/,#=1.0< as deficienc"7lac-

estate and inheritance ta$es for the transfer of intangi%le personal properties in the Philippines, the deceased, a 6panish natio

having %een a resident of angier, orocco from /0&/ up to the time of her death in /0


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respective amounts of P///,e%ruar" #, /0


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It does not admit of dou%t that if a foreign countr" is to %e identified with a state, it is required in line with PoundOs formulat

that it %e a politicall" organiDed sovereign communit" independent of outside control %ound %" penalties of nationhood, lega

supreme within its territor", acting through a government functioning under a regime of law. % It is thus a sovereign person w

the people composing it viewed as an organiDed corporate societ" under a government with the legal competence to e$act

o%edience to its commands. 10 It has %een referred to as a %od"+politic organiDed %" common consent for mutual defense and

mutual safet" and to promote the general welfare. 11 Correctl" has it %een descri%ed %" 4smein as Gthe juridical personificatio

of the nation.H 1 his is to view it in the light of its historical development. he stress is on its %eing a nation, its people

occup"ing a definite territor", politicall" organiDed, e$ercising %" means of its government its sovereign will over the

individuals within it and maintaining its separate international personalit". Las-i could spea- of it then as a territorial societ"

divided into government and su%jects, claiming within its allotted area a supremac" over all other institutions. 1! cIver

similarl" would point to the power entrusted to its government to maintain within its territor" the conditions of a legal order

and to enter into international relations. 1& @ith the latter requisite satisfied, international law do not e$act independence as a

condition of statehood. 6o 3"de did opine. 12

4ven on the assumption then that angier is %ereft of international personalit", petitioner has not successfull" made out a cas

It %ears repeating that four da"s after the filing of this petition on anuar" 9, /0


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4 BAC

!ecem%er ', /0'1

:.R. o. ''9/0

NA)I+NAL C+AL C+/(AN, plaintiff+appellee,

vs.

)*E C+LLEC)+R +- IN)ERNAL RE5ENE, defendant+appellant.

Attorne&3$eneral 1illa3Real for appellant. Perfecto J. #alas Rodrigue for appellee.

+*N"+N, J.:

his action was %rought in the Court of >irst Instance of the Cit" of anila on the /=th da" of ul", /0'&, for the purpose of

recovering the sum of P/',(11.9#, alleged to have %een paid under protest %" the plaintiff compan" to the defendant, as

specific ta$ on '1,(#0.& tons of coal. 6aid compan" is a corporation created %" Act o. '=(< of the Philippine Legislature fo

the purpose of developing the coal industr" in the Philippine Islands and is actuall" engaged in coal mining on reserved land

%elonging to the :overnment. It claimed e$emption from ta$es under the provision of sections /1 and /< of Act o. '=/0, a

pra"ed for a judgment ordering the defendant to refund to the plaintiff said sum of P/',(11.9#, with legal interest from the d

of the presentation of the complaint, and costs against the defendant.

he defendant answered den"ing generall" and specificall" all the material allegations of the complaint, e$cept the legal

e$istence and personalit" of the plaintiff. As a special defense, the defendant alleged 7a8 that the sum of P/',(11.9# was paid

%" the plaintiff without protests, and 7%8 that said sum was due and owing from the plaintiff to the :overnment of the

Philippine Islands under the provisions of section /109 of the Administrative Code and pra"ed that the complaint %e dismiss

with costs against the plaintiff.

5pon the issue thus presented, the case was %rought on for trial. After a consideration of the evidence adduced %" %oth partiethe 3onora%le Pedro Conception, judge, held that the words Elands o4ned %" an" person, etc.,E in section /< of Act o.

'=/0 should %e understood to mean Elands held in lease or usufruct,E in harmon" with the other provision of said Act) that th

coal lands possessed %" the plaintiff, %elonging to the :overnment, fell within the provisions of section /< of Act o. '=/0)

and that a ta$ of P(.(1 per ton of /,(/9 -ilos on each ton of coal e$tracted therefrom, as provided in said section, was the onl

ta$ which should %e collected from the plaintiff) and sentenced the defendant to refund to the plaintiff the sum of P//,(#/.//

which is the difference %etween the amount collected under section /109 of the Administrative Code and the amount which

should have %een collected under the provisions of said section /< of Act o. '=/0. >rom that sentence the defendant appeal

and now ma-es the following assignments of error

I. he court %elow erred in holding that section /< of Act o. '=/0 does not refer to coal lands owned %" persons and

corporations.

II. he court %elow erred in holding that the plaintiff was not su%ject to the ta$ prescri%ed in section /109 of the Administrat

Code.

he question confronting us in this appeal is whether the plaintiff is su%ject to the ta$es under section /< of Act o. '=/0, or

the specific ta$es under section /109 of the Administrative Code.

he plaintiff corporation was created on the /(th da" of arch, /0/=, %" Act o. '=(


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of a corporation Eand such other powers as ma" %e necessar" to ena%le it to prosecute the %usiness of developing coal deposi

in the Philippine Island and of mining, e$tracting, transporting and selling the coal contained in said deposits.E 76ec. ', Act

'=(


8/32

said Act provides ECoal+%earing lands of the pu%lic domain in the Philippine Island shall not %e disposed of in an" manner

e$cept as provided in this Act,E there%" giving a clear indication that no Ecoal+%earing lands of the pu%lic domainE had %een

disposed of %" virtue of said proclamation.

either is there an" provision in Act o. '=(< creating the ational Coal Compan", nor in the amendments thereof found in

Act o. '#'', which authoriDes the ational Coal Compan" to enter upon an" of the reserved coal lands without first having

o%tained permission from the 6ecretar" of Agriculture and atural Resources.

he following propositions are full" sustained %" the facts and the law

7/8 he ational Coal Compan" is an ordinar" private corporation organiDed under Act o. '=(irst. All Ecoal+%earing lands of the pu%lic domain in the Philippine Islands shall not %e disposed of in an" manner e$cept as

provided in this Act.E 6econd. Provisions for leasing %" the 6ecretar" of Agriculture and atural Resources of Eunreserved,

unappropriated coal+%earing pu%lic lands,E and the o%ligation to the :overnment which shall %e imposed %" said 6ecretar"

upon the lessee.

hird. he internal revenue dut" and ta$ which must %e paid upon coal+%earing lands owned %" an" person, firm, association

corporation.

o repeat, it will %e noted, first, that Act o. '=/0 provides an internal revenue dut" and ta$ upon unreserved, unappropriate

coal+%earing pu%lic lands which ma" %e leased %" the 6ecretar" of Agriculture and atural Resources) and, second, that said

Act 7o. '=/08 provides an internal revenue dut" and ta$ imposed upon an" person, firm, association or corporation, who m

%e the owner of Ecoal+%earing lands.E A reading of said Act clearl" shows that the ta$ imposed there%" is imposed upon two

classes of persons onl" lessees and owners.

http://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act926-the-public-land-act.htmlhttp://philippinelaw.info/statutes/act926-the-public-land-act.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act926-the-public-land-act.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.htmlhttp://philippinelaw.info/statutes/act2719.html


9/32

he lower court had some trou%le in determining what was the correct interpretation of section /< of said Act, %" reason of

what he %elieved to %e some difference in the interpretation of the language used in 6panish and 4nglish. @hile there is som

ground for confusion in the use of the language in 6panish and 4nglish, we are persuaded, considering all the provisions of s

Act, that said section /< has reference onl" to persons, firms, associations or corporations which had alread", prior to the

e$istence of said Act, %ecome the owners of coal lands. 6ection /< cannot certaint" refer to Eholders or lessees of coal lands*

for the reason that practicall" all of the other provisions of said Act has reference to lessees or holders. If section /< means th

the persons, firms, associations, or corporation mentioned therein are holders or lessees of coal lands onl", it is difficult to

understand wh" the internal revenue dut" and ta$ in said section was made different from the o%ligations mentioned in sectio

& of said Act, imposed upon lessees or holders.

>rom all of the foregoing, it seems to %e made plain that the plaintiff is neither a lessee nor an owner of coal+%earing lands, a

is, therefore, not su%ject to an" other provisions of Act o. '=/0. But, is the plaintiff su%ject to the provisions of section /10

of the Administrative CodeS

6ection /109 of the Administrative Code provides that Eon all coal and co-e there shall %e collected, per metric ton, fift"

centavos.E 6aid section 7/1098 is a part of article, 9 which provides for specific ta$es. 6aid article provides for a specific

internal revenue ta$ upon all things manufactured or produced in the Philippine Islands for domestic sale or consumption, an

upon things imported from the 5nited 6tates or foreign countries. It having %een demonstrated that the plaintiff has produced

coal in the Philippine Islands and is not a lessee or owner of the land from which the coal was produced, we are clearl" of th

opinion, and so hold, that it is su%ject to pa" the internal revenue ta$ under the provisions of section /109 of the Administrat

Code, and is not su%ject to the pa"ment of the internal revenue ta$ under section /< of Act o. '=/0, nor to an" other

provisions of said Act.

herefore, the judgment appealed from is here%" revo-ed, and the defendant is here%" relieved from all responsi%ilit" under

the complaint. And, without an" finding as to costs, it is so ordered.

#treet, Malcolm, Avance5a, 1illamor, (strand and Romualde, JJ., concur.

G.R. No. 415"#, Re$ %ine &ran'portation Co. v. Rural &ran'it Co., 6# Phil. 549


"(RE/E C+R)

anila

4 BAC

6eptem%er 9, /0&1

:.R. o. 1/


10/32

Ilagan in the Province of Isa%ela and uguegarao in the Province of Caga"an, and additional trips in its e$isting e$press serv

%etween anila uguegarao.

2n une 1, /0&', the Rural ransit Compan", Ltd., a Philippine corporation, filed with the Pu%lic Compan" 6ervice

Commission an application in which it is stated in su%stance that it is the holder of a certificate or pu%lic convenience to

operate a passenger %us service %etween anila and uguegarao) that it is the onl" operator of direct service %etween said

points and the present authoriDed schedule of onl" one trip dail" is not sufficient) that it will %e also to the pu%lic convenienc

to grant the applicant a certificate for a new service %etween uguegarao and Ilagan.

2n ul" '', /0&', the appellant, Red Line ransportation Compan", filed an opposition to the said application alleging insu%stance that as to the service %etween uguegarao and Ilagan, the oppositor alread" holds a certificate of pu%lic convenien

and is rendering adequate and satisfactor" service) that the granting of the application of the Rural ransit Compan", Ltd.,

would not serve pu%lic convenience %ut would constitute a ruinous competition for the oppositor over said route.

After testimon" was ta-en, the commission, on !ecem%er '/, /0&', approved the application of the Rural ransit Compan",

Ltd., and ordered that the certificate of pu%lic convenience applied for %e Eissued to the applicant Rural ransit Compan",

Ltd.,E with the condition, among others, that Eall the other terms and conditions of the various certificates of pu%lic

convenience of the herein applicant and herein incorporated are made a part hereof.E

2n anuar" /1, /0&&, the oppositor Red Line ransportation Compan" filed a motion for rehearing and reconsideration in

which it called the commission*s attention to the fact that there was pending in the Court of >irst Instance of anila case .

1'&1&, an application for the voluntar" dissolution of the corporation, Rural ransit Compan", Ltd. 6aid motion for

reconsideration was set down for hearing on arch '1, /0&&. 2n arch '&, /0&&, the Rural ransit Compan", Ltd., the

applicant, filed a motion for postponement. his motion was verified %" . 2lsen who swears Ethat he was the secretar" of t

Rural ransit Compan", Ltd., in the a%ove entitled case.E 5pon the hearing of the motion for reconsideration, the commissio

admitted without o%jection the following documents filed in said case o. 1'&1& in the Court of >irst Instance of anila for

the dissolution of the Rural ransit Compan", Ltd. the petition for dissolution dated ul" 9, /0&', the decision of the said Co

of >irst Instance of anila, dated >e%ruar" '#, /0&&, decreeing the dissolution of the Rural ransit Compan", Ltd.

At the trial of this case %efore the Pu%lic 6ervice Commission an issue was raised as to who was the real part" in interest

ma-ing the application, whether the Rural ransit Compan", Ltd., as appeared on the face of the application, or the Bachrachotor Compan", Inc., using name of the Rural ransit Compan", Ltd., as a trade name. he evidence given %" the applicant*

secretar", 2lsen, is certainl" ver" du%ious and confusing, as ma" %e seen from the following

T. @ill "ou please answer the question whether it is the Bachrach otor Compan" operating under the trade name of

the Rural ransit Compan", Limited, or whether it is the Rural ransit Compan", Limited in its own name this application w

filedS

A. he Bachrach otor Compan" is the principal stoc-holder.

T. Please answer the question.

46P4L4A. 2%jecion porque la pregunta "a ha sido contestada.

54Q. Puede contestar.

A. I do not -now what the legal construction or relationship e$isting %etween the two.

5!:4. I do not -now what is in "our mind %" not telling the real applicant in this caseS

A. It is the Rural ransit Compan", Ltd.

5!:4. As an entit" %" itself and not %" the Bachrach otor Compan"S


11/32

A. I do not -now. I have not given that phase of the matter much thought, as in previous occassion had not necessitate

5!:4. In filing this application, "ou filed it for the operator on that lineS Is it notU

A. ?es, sir.

5!:4. @ho is that operatorS

A. he Rural ransit Compan", Ltd.

5!:4. B" itself, or as a commercial name of the Bachrach otor Compan"S

A. I cannot sa".

46P4L4A. he Rural ransit Compan", Ltd., is a corporation dul" esta%lished in accordance with the laws of the Philippin

Islands.

5!:4. According to the records of this commission the Bachrach otor Compan" is the owner of the certificates and the

Rural ransit Compan", Ltd., is operating without an" certificate.

5!:4. If "ou filed this application for the Rural ransit Compan", Ltd., and afterwards it is found out that the Rural rans

Compan", Ltd., is not an operator, ever"thing will %e turned down.

5!:4. " question was, when "ou filed this application "ou evidentl" made it for the operatorS

A. ?es, sir.

5!:4. @ho was that operator "ou had in mindS

A. According to the status of the ownership of the certificates of the former Rural ransit Compan", the operator was

operator authoriDed in case o. '&'/= to whom all of the assets of the former Rural ransit Compan" were sold.

5!:4. Bachrach otor Compan"S

A. All actions have %een prosecuted in the name of the Rural ransit Compan", Ltd.

5!:4. ?ou mean the Bachrach otor Compan", Inc., doing %usiness under the name of the Rural ransit Compan", Ltd.S

A. ?es, sir.

L2C;@22!. I move that this case %e dismissed, "our 3onor, on the ground that this application was made in the name of

one part" %ut the real owner is another part".

46P4L4A. @e o%ject to that petition.

5!:4. I will have that in mind when I decide the case. If I agree with "ou ever"thing would %e finished.

he Bachrach otor Compan", Inc., entered no appearance and ostensi%l" too- no part in the hearing of the application of th

Rural ransit Compan", Ltd. It ma" %e a matter of some surprise that the commission did not on its own motion order the

amendment of the application %" su%stituting the Bachrach otor Compan", Inc., as the applicant. 3owever, the hearing

proceeded on the application as filed and the decision of !ecem%er ', /0&', was rendered in favor of the Rural ransit

Compan", Ltd., and the certificate ordered to %e issued in its name, in the face of the evidence that the said corporation was n


12/32


13/32

reasona%le care and o%servation as the pu%lic generall" are capa%le of using and ma" %e e$pected to e$erciseH invo-ed %"

appellant. @e are apprehensive confusion will usuall" arise, considering that $ $ $ appellant included among its primar"

purposes the manufacturing, d"eing, finishing and selling of fa%rics of all -indsH which respondent had %een engaged for mo

than a decade ahead of petitioner.


"(RE/E C+R)

anila

3IR! !IFI6I2

G.R. No. 1018%7. /arc9 2, 1%%!.

L?C45 2> 34 P3ILIPPI46, IC., petitioner, vs. C25R 2> APP4AL6, L?C45 2> APARRI, L?C45 2>

CABA:A, L?C45 2> CAALAI5:A, IC., L?C45 2> LALL2, IC., L?C45 2> 5A2, IC., B53I

L?C45, C4RAL L?C45 2> CAA!5A46, L?C45 2> 62534R P3ILIPPI46, L?C45 2>

4A64R I!AA2, IC. and @464R PA:A6IA L?C45, IC., respondents.

Tuisum%ing, orres V 4vangelista Law 2ffices and Am%rosio Padilla for petitioner.

Antonio . u"les and Purungan, Chato, Chato, arriela V an Law 2ffices for respondents.

>roilan 6io%al for @estern Pangasinan L"ceum.

6?LLAB56

/. C2RP2RAI2 LA@) C2RP2RA4 A46) R4:I6RAI2 2> PR2P264! A4 @3IC3 I6 I!4ICAL 2R

C2>56I:L? 6IILAR 2 3A 2> A? 4WI6I: C2RP2RAI2, PR23IBI4!) C2>56I2 A!!4C4PI2 4>>4CIF4L? PR4CL5!4! B? 34 APP4!I: 2> :42:RAP3IC A46 2 34 @2R!

EL?C45E. he Articles of Incorporation of a corporation must, among other things, set out the name of the corporation

6ection /# of the Corporation Code esta%lishes a restrictive rule insofar as corporate names are concerned E6ection /#.

Corporate name. o corporate name ma" %e allowed %" the 6ecurities an 4$change Commission if the proposed name is

identical or deceptivel" or confusingl" similar to that of an" e$isting corporation or to an" other name alread" protected %" l

or is patentl" deceptive, confusing or contrar" to e$isting laws. @hen a change in the corporate name is approved, the

Commission shall issue an amended certificate of incorporation under the amended name.E he polic" underl"ing the prohi%ition in 6ection /# against the registration of a corporate name which is Eidentical or deceptivel" or confusingl" simila

to that of an" e$isting corporation or which is Epatentl" deceptiveE or Epatentl" confusingE or Econtrar" to e$isting laws,E is t

avoidance of fraud upon the pu%lic which would have occasion to deal with the entit" concerned, the evasion of legal

o%ligations and duties, and the reduction of difficulties of administration and supervision over corporations. @e do not consithat the corporate names of private respondent institutions are Eidentical with, or deceptivel" or confusingl" similarE to that o

the petitioner institution. rue enough, the corporate names of private respondent entities all carr" the word EL"ceumE %ut

confusion and deception are effectivel" precluded %" the appending of geographic names to the word EL"ceum.E hus, we d

not %elieve that the EL"ceum of AparriE can %e mista-en %" the general pu%lic for the L"ceum of the Philippines, or that the

EL"ceum of CamalaniuganE would %e confused with the L"ceum of the Philippines.

'. I!.) I!.) !2CRI4 2> 64C2!AR? 4AI:) 564 2> @2R! EL?C45,E 2 A4!4! @I3

4WCL56IFI?. It is claimed, however, %" petitioner that the word EL"ceumE has acquired a secondar" meaning in relati

to petitioner with the result that word, although originall" a generic, has %ecome appropria%le %" petitioner to the e$clusion o

other institutions li-e private respondents herein. he doctrine of secondar" meaning originated in the field of trademar- law

Its application has, however, %een e$tended to corporate names sine the right to use a corporate name to the e$clusion of oth

is %ased upon the same principle which underlies the right to use a particular trademar- or tradename. In Philippine ut

Industr", Inc. v. 6tandard Brands, Inc., the doctrine of secondar" meaning was ela%orated in the following terms E . . . a wor

or phrase originall" incapa%le of e$clusive appropriation with reference to an article on the mar-et, %ecause geographicall" o


14/32

otherwise descriptive, might nevertheless have %een used so long and so e$clusivel" %" one producer with reference to his

article that, in that trade and to that %ranch of the purchasing pu%lic, the word or phrase has come to mean that the article wa

his product.E he question which arises, therefore, is whether or not the use %" petitioner of EL"ceumE in its corporate name

has %een for such length of time and with such e$clusivit" as to have %ecome associated or identified with the petitioner

institution in the mind of the general pu%lic 7or at least that portion of the general pu%lic which has to do with schools8. heCourt of Appeals recogniDed this issue and answered it in the negative E5nder the doctrine of secondar" meaning, a word or

phrase originall" incapa%le of e$clusive appropriation with reference to an article in the mar-et, %ecause geographical or

otherwise descriptive might nevertheless have %een used so long and so e$clusivel" %" one producer with reference to this

article that, in that trade and to that group of the purchasing pu%lic, the word or phrase has come to mean that the article was

produce 7Ana Ang vs. ori%io eodoro, =1 Phil. 56I:L?

2R !4C4PIF4L? 6IILAR 2 A234R C2RP2RA4 4I?*6 A4. petitioner institution is not entitled to

legall" enforcea%le e$clusive right to use the word EL"ceumE in its corporate name and that other institutions ma" use

EL"ceumE as part of their corporate names. o determine whether a given corporate name is EidenticalE or Econfusingl" or

deceptivel" similarE with another entit"*s corporate name, it is not enough to ascertain the presence of EL"ceumE or ELiceoE i

%oth names. 2ne must evaluate corporate names in their entiret" and when the name of petitioner is ju$taposed with the nam

of private respondents, the" are not reasona%l" regarded as EidenticalE or Econfusingl" or deceptivel" similarE with each othe

! 4 C I 6 I 2

>4LICIA2, p

Petitioner is an educational institution dul" registered with the 6ecurities and 4$change Commission 7E64CE8. @hen it first

registered with the 64C on '/ 6eptem%er /0


15/32

L"ceum of Camalaniugan '# arch /0='

he following private respondents were declared in default for failure to file an answer despite service of summons

Buhi L"ceum)

Central L"ceum of Catanduanes)

L"ceum of 4astern indanao, Inc.) and

L"ceum of 6outhern Philippines

Petitioner*s original complaint %efore the 64C had included three 7&8 other entities

/. he L"ceum of alacana")

'. he L"ceum of ar%el) and

&. he L"ceum of Araullo

he complaint was later withdrawn insofar as concerned the L"ceum of alacana" and the L"ceum of ar%el, for failure to

serve summons upon these two 7'8 entities. he case against the Liceum of Araullo was dismissed when that school motu proprio change its corporate name to EPamantasan ng Araullo.E

he %ac-ground of the case at %ar needs some recounting. Petitioner had sometime %efore commenced in the 64C a proceed

764C+Case o. /'1/8 against the L"ceum of Baguio, Inc. to require it to change its corporate name and to adopt another nam

not Esimilar toM or identicalE with that of petitioner. In an 2rder dated '( April /0==, Associate Commissioner ulio 6ulit he

that the corporate name of petitioner and that of the L"ceum of Baguio, Inc. were su%stantiall" identical %ecause of the

presence of a EdominantE word, i.e., EL"ceum,E the name of the geographical location of the campus %eing the onl" word wh

distinguished one from the other corporate name. he 64C also noted that petitioner had registered as a corporation ahead ofthe L"ceum of Baguio, Inc. in point of time, / and ordered the latter to change its name to another name Enot similar or

identical withME the names of previousl" registered entities.

he L"ceum of Baguio, Inc. assailed the 2rder of the 64C %efore the 6upreme Court in a case doc-eted as :.R. o. L+19


16/32

/. he Court of Appeals erred in holding that the Resolution of the 6upreme Court in :.R. o. L+19


17/32

he doctrine of secondar" meaning originated in the field of trademar- law. Its application has, however, %een e$tended to

corporate names sine the right to use a corporate name to the e$clusion of others is %ased upon the same principle which

underlies the right to use a particular trademar- or tradename. /( In Philippine ut Industr", Inc. v. 6tandard Brands, Inc., //

the doctrine of secondar" meaning was ela%orated in the following terms

E . . . a word or phrase originall" incapa%le of e$clusive appropriation with reference to an article on the mar-et, %ecause

geographicall" or otherwise descriptive, might nevertheless have %een used so long and so e$clusivel" %" one producer with

reference to his article that, in that trade and to that %ranch of the purchasing pu%lic, the word or phrase has come to mean th

the article was his product.E /'

he question which arises, therefore, is whether or not the use %" petitioner of EL"ceumE in its corporate name has %een forsuch length of time and with such e$clusivit" as to have %ecome associated or identified with the petitioner institution in the

mind of the general pu%lic 7or at least that portion of the general pu%lic which has to do with schools8. he Court of Appeals

recogniDed this issue and answered it in the negative

E5nder the doctrine of secondar" meaning, a word or phrase originall" incapa%le of e$clusive appropriation with reference t

an article in the mar-et, %ecause geographical or otherwise descriptive might nevertheless have %een used so long and so

e$clusivel" %" one producer with reference to this article that, in that trade and to that group of the purchasing pu%lic, the wo

or phrase has come to mean that the article was his produce 7Ana Ang vs. ori%io eodoro, =1 Phil.


18/32

and a little later with other private respondent institutions which registered with the 64C using EL"ceumE as part of their

corporation names. here ma" well %e other schools using L"ceum or Liceo in their names, %ut not registered with the 64C

%ecause the" have not adopted the corporate form of organiDation.

@e conclude and so hold that petitioner institution is not entitled to a legall" enforcea%le e$clusive right to use the word

EL"ceumE in its corporate name and that other institutions ma" use EL"ceumE as part of their corporate names. o determine

whether a given corporate name is EidenticalE or Econfusingl" or deceptivel" similarE with another entit"*s corporate name, it

not enough to ascertain the presence of EL"ceumE or ELiceoE in %oth names. 2ne must evaluate corporate names in their

entiret" and when the name of petitioner is ju$taposed with the names of private respondents, the" are not reasona%l" regard

as EidenticalE or Econfusingl" or deceptivel" similarE with each other.

@34R4>2R4, the petitioner having failed to show an" reversi%le error on the part of the pu%lic respondent Court of Appea

the Petition for Review is !4I4! for lac- of merit, and the !ecision of the Court of Appeals dated '# une /00/ is here%"

A>>IR4!. o pronouncement as to costs.

62 2R!4R4!.

Bidin, !avide, r., Romero and elo, ., concur.

:utierreD, r., ., on terminal leave.

>ootnotes

/. Rollo, pp. irst Insurance Co., Inc. v. 3artigan, &1 6CRA '


19/32

PhilippineLaw.info X urisprudence X /090 X arch XPhilippineLaw.info X urisprudence X 6CRA X Fol. '= X

/&. :.R. o. L+'#//&, unicipalit" of ala%ang, Lanao del 6ur and Balindong v. Benito et al., '= 6CRA


20/32

An earl" article in the ?ale Law ournal offers the following anal"sis

It appears that the true %asis for den"ing to the corporation a de facto status la" in the a%sence of an" legislative act to give

vitalit" to its creation. An e$amination of the cases holding, some of them unreservedl", that a de facto office or municipalcorporation can e$ist under color of an unconstitutional statute will reveal that in no instance did the invalid act give life to th

corporation, %ut that either in other valid acts or in the constitution itself the office or the corporation was potentiall" created

he principle that color of title under an unconstitutional statute can e$ist onl" where there is some other valid law under wh

the organiDation ma" %e effected, or at least an authorit" in potentia %" the state constitution, has its counterpart in the negat

propositions that there can %e no color of authorit" in an unconstitutional statute that plainl" so appears on its face or that

attempts to authoriDe the ousting of a de %ure or de facto municipal corporation upon the same territor") in the one case the fa

would impl" the imputation of %ad faith, in the other the new organiDation must %e regarded as a mere usurper..As a result of this anal"sis of the cases the following principles ma" %e deduced which seem to reconcile the apparentl"

conflicting decisions

I. he color of authorit" requisite to the organiDation of a de facto municipal corporation ma" %e

/. A valid law enacted %" the legislature.

'. An unconstitutional law, valid on its face, which has either 7a8 %een upheld for a time %" the courts or 7%8

"et %een declared void) provided that a warrant for its creation can %e found in some other valid law or in the

recognition of its potential e$istence %" the general laws or constitution of the state.II. here can %e no de facto municipal corporation unless either directl" or potentiall", such a de

%ure corporation is authoriDed %" some legislative fiat.

III. here can %e no color of authorit" in an unconstitutional statute alone, the invalidit" of which is apparenon its face.

IF. here can %e no de facto corporation created to ta-e the place of an e$isting de %ure corporation, as such

organiDation would clearl" %e a usurper./(MM

In the cases where a de facto municipal corporation was recogniDed as such despite the fact that the statute creating it was lat

invalidated, the decisions could fairl" %e made to rest on the consideration that there was some other valid law giving corpor

vitalit" to the organiDation. 3ence, in the case at %ar, the mere fact that Bala%agan was organiDed at a time when the statute h

not %een invalidated cannot conceiva%l" ma-e it a de facto corporation, as, independentl" of the Administrative Code provis

in question, there is no other valid statute to give color of authorit" to its creation. Indeed, in Municipalit& of #an Joauin v.

#iva, //MM this Court granted a similar petition for prohi%ition and nullified an e$ecutive order creating the municipalit" of

Lawigan in Iloilo on the %asis of the Pelae ruling, despite the fact that the municipalit" was created in /09/, %efore section

of the Administrative Code, under which the President had acted, was invalidated. *2f course the issue of de facto municipal

corporation did not arise in that case.

In Norton v. #hel"& Count , /'MM r. ustice >ield said EAn unconstitutional act is not a law) it confers no rights) it imposes nduties) it affords no protection) it creates no office) it is, in legal contemplation, as inoperative as though it had never %een

passed.E Accordingl", he held that %onds issued %" a %oard of commissioners created under an invalid statute were

unenforcea%le.

4$ecutive 2rder Ecreated no office.E his is not to sa", however, that the acts done %" the municipalit" of Bala%agan in t

e$ercise of its corporate powers are a nullit" %ecause the e$ecutive order Eis, in legal contemplation, as inoperative as though

had never %een passed.E >or the e$istence of 4$ecutive, 2rder is Ean operative fact which cannot justl" %e ignored.E As

Chief ustice 3ughes e$plained in Chicot Count& Drainage District v. Ba7ter #tate Ban/ /&MM

he courts %elow have proceeded on the theor" that the Act of Congress, having %een found to %e unconstitutional, was not a

law) that it was inoperative, conferring no rights and imposing no duties, and hence affording no %asis for the challenged

decree. orton v. 6hel%" Count", //# 5.6. 1'


21/32

ACC2R!I:L?, the petition is granted, 4$ecutive 2rder is declared void, and the respondents are here%" permanentl"

restrained from performing the duties and functions of their respective offices. o pronouncement as to costs.

Re&es, J.B.-., Dion, Ma/alintal, 0aldivar, #anche and Capistrano, JJ., concur.2eehan/ee and Barredo, JJ., too/ no part.

"eparate +p:n:ons

-ERNAN+, J., concurring

I concur full" with the well+written opinion of ustice Castro. It %rea-s new ground) it stri-es out new paths. It is precisel"

%ecause of its impact on the power of judicial review of e$ecutive acts that I deem a few additional words would not %e amis

/. Insofar as the effect of a declaration of unconstitionalit" is concerned, the latter and more realistic trend reflected in ChicoCount" !rainage !istrict v. Ba$ter 6tate Ban- /MM had previousl" elicited our approval. hus E*Rutter vs. 4ste%an 70& Phil. 9

ma" %e construed to mean that at the time of the decision the oratorium law could no longer %e validl" applied %ecause of

prevailing circumstances. At an" rate, although the general rule is that an unconstitutional statute *confers no right, create

no office, affords no protection and justifies no acts performed under it.* ... there are several instances wherein courts, out of

equit", have rela$ed its operation ... or qualified its effects *since the actual e$istence of a statute prior to such declaration is a

operative fact, and ma" have consequences which cannot justl" %e ignored* ... and a realistic approach is eroding the general

doctrine ....*E'MM Also E@e have ta-en note, of the fact that, on une &(, /09/, 6ection '< of ReorganiDation Plan o. '(+A h

%een declared unconstitutional %" this Court in the case of Corominas, et al. v. he La%or 6tandards Commission, et al., .... I

appears, however, that the Plaintiff had filed his claim %efore Regional 2ffice o. 1 of the !epartment of La%or on ul" '9,

/09(, or a%out one "ear %efore said 6ection '< had %een declared unconstitutional. he circumstance that 6ection '< ofReorganiDation Plan o. '(+A had %een declared unconstitutional should not %e counted against the defendant in the present

case. In the case of anila otor Co., Inc. v. >lores, ..., this Court upheld the right of a part" under the oratorium Law whhad accrued in his favor %efore said law was declared unconstitutional %" this Court in the case of Rutter v. 4ste%an, 0& Phil

9#.E&MM

'. othing can %e clearer therefore in the light of the two a%ove cases than that a previous declaration of invalidit" of

legislative acts would not %e %ereft of legal results. @ould that view hold true of nullification of e$ecutive actsS here might

have %een dou%ts as to the correct answer %efore. here is none now.

A judicial decision annulling a presidential e$ercise of authorit"1MM is not without its effect either. hat much is evident from

the holding now reached. he act stric-en down, whether proceeding from the legislature or the 4$ecutive, could in the

language of the Chicot Count" case, %e considered, prior to the declaration of invalidit", as Ean operative fact and ma" have

consequences which cannot justl" %e ignored.E

hus the frontiers of the law have %een e$tended, a doctrine which to some ma" come into pla" when a statute is voided is n

considered equall" applica%le to a Presidential act that has met a similar fate. 6uch a result should not occasion surprise. hato %e e$pected.

here would %e an unjustified deviation from the doctrine of separation of powers if a consequence attached to the annulmen

of a statue is considered as not operative where an e$ecutive order is involved. he doctrine of co+equal or coordinate

departments would %e meaningless if a discrimination of the a%ove sort were considered permissi%le. he cogniDance ta-en o

the prior e$istence of an enactment su%sequentl" declared unconstitutional applies as well as to a Presidential act thereafter

successfull" assailed. here was a time when it too did e$ist and, as such, a fact to %e rec-oned with, though an infirm sourc

of a legal right, if, as su%sequentl" held, considered violative of a constitutional command.

&. Precisionists ma" cavil at the a%ove view) the" ma" assert, and with some degree of plausi%ilit", that the holding in the

PelaeD case goes no further than to locate a statutor" infirmit" in the Presidential act there challenged, creating municipal

corporations under what the then 4$ecutive considered a grant of authorit" found in the Revised Administrative Code.


22/32

with the end sought to %e attained %" the Act of Congress, thus nullif"ing the principle of separation of powers and the s"stem

of chec-s and %alances, and, consequentl", undermining the ver" foundation of our Repu%lican s"stem.E 9MM

>rom which, it would follow, in the language of the opinion E6ection 9# of the Revised Administrative Code does not meet

these well+settled requirements for a valid delegation of the power to fi$ the details in the enforcement of a law. It does not

enunciate an" polic" to %e carried out or implemented %" the President. either does it give a standard sufficientl" precise toavoid the evil effects a%ove referred to.E =MM

It is thus clear that while it might not %e strictl" accurate to advance the view that there was a finding of unconstitutionalit" o

challenged statutor" norm, there could %e no o%jection to the view that the holding was one of unconstitutional application.

or is this all. If there %e admission of the force of the assertion that the PelaeD opinion went no further than to locate in the

challenged 4$ecutive orders creating municipal corporations an act in e$cess of statutor" authorit", then our decision in thiscase is all the more noteworth" for the more hospita%le scope accorded the Chicot doctrine. >or as originall" formulated, it

would merel" recogniDe that during its e$istence, prior to its %eing declared violative of the constitute, the statute must %e

deemed an operative fact. oda" we decide that such a doctrine e$tends to a Presidential act held void not onl" on the ground

of unconstitutional infirmit" %ut also %ecause in e$cess of the statutor" power conferred. hat to me is the more significant

aspect of this decision. o repeat, to that point of view I "ield full concurrence.

I do so %ecause it appears to me a logical corollar" to the principle of separation of powers. 2nce we accept the %asic doctrin

that each department as a coordinate agenc" of government is entitled to the respect of the other two, it would seem to follow

that at the ver" least, there is a presumption of the validit" of the act performed %" it, unless su%sequentl" declared void in

accordance with legall" accepted principles. he rule of law cannot %e satisfied with an"thing less.

6ince under our Constitution, judicial review e$ists precisel" to test the validit" of e$ecutive or legislative acts in anappropriate legal proceeding, there is alwa"s the possi%ilit" of their %eing declared inoperative and void. Realism compels th

acceptance of the thought that there could %e a time+lag %etween the initiation of such Presidential or congressional e$ercise

power and the final declaration of nullit". In the meanwhile, it would %e productive of confusion, perhaps at times even of

chaos, if the parties affected were left free to speculate as to its fate %eing one of doom, thus leaving them free to diso%e" it i

the meanwhile. 6ince, however, the orderl" processes of government not to mention common sense, requires that the

presumption of validit" %e accorded an act of Congress or an order of the President, it would %e less than fair, and it ma" %e

productive of injustice, if no notice of its e$istence as a fact %e paid to it, even if thereafter, it is stric-en down as contrar", in

the case of Presidential act, either to the Constitution or a controlling statute.

he far+reaching import in the a%ove sense of the decision we now render calls, to m" mind, for an articulation of further

reflection on its varied implications. @e have here an illustration to paraphrase !ean Pound, of the law %eing sta%le and "et f

from standing still. hat is as it ought to %e) that is how law grows. It is in that sense that the judicial process is impressed w

creativit", admittedl" within limits rather narrowl" confined. hat in itself is to hold fast to the appropriate role of the judicia

far from insignificant as our decision discloses. 3ence, this separate concurring opinion, which, I trust, will ma-e manifest wm" agreement with what ustice Castro had so a%l" e$pressed in the opinion of the Court is wholehearted and entire.

Concepcion, C.J., concurs.

-ootnotes/MM he %arrios and sitios are Barorao, Baguiangan ;alilangan, Bala%agan, Itil, Banago, Budas, Iga%a", agolalong, !agoan

atimus, Bonga%on and Lusain.'MM 91 2.:. 1=#/ 7/09


23/32

retrospective effect to app v. 2hio, &9= 5.6. 91& 7/09/8 7e$clusionar" rule8, with that in ohnson v. ew erse", 5.6. =

7/0998 holding that the rule concerning counsel as announced in :ideon v. @ainwright, &=' 5.6. &&< 7/09&8 was to %e appli

retrospectivel".

>4RA!2, ., concurring/MM &(# 56 &=/ 7/01(8.'MM anila otor Co., Inc. v. >lores, 00 Phil. =, =&0 7/0ernandeD v. Cuerva V Co., '/ 6CRA /(0

4astern Lum%er and Commercial Co., Inc., organiDed to engage in a general lum%er %usiness to carr" on as general contracto

operators and managers, etc. Attached to the article was an affidavit of the treasurer stating that '&,1'# shares of stoc- had %

su%scri%ed and full" paid with certain properties transferred to the corporation descri%ed in a list appended thereto.

7'8 Immediatel" after the e$ecution of said articles of incorporation, the corporation proceeded to do %usiness with the adopt

of %"+laws and the election of its officers.

7&8 2n !ecem%er ', /01=, the said articles of incorporation were filed in the office of the 6ecurities and 4$change

Commissioner, for the issuance of the corresponding certificate of incorporation.

718 2n arch '', /01#, pending action on the articles of incorporation %" the aforesaid governmental office, the respondents

>red Brown, 4mma Brown, 3ipolita !. Chapman and Ceferino 6. A%ella filed %efore the Court of >irst Instance of Le"te the

civil case num%ered /, entitled E>red Brown et al. vs. Arnold C. 3all et al.E, alleging among other things that the >ar 4aste

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urisprudence/index.htmlhttp://philippinelaw.info/jurisprudence/philippine-reports-volumes.htmlhttp://philippinelaw.info/jurisprudence/philippine-reports-volume-86.html


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Lum%er and Commercial Co. was an unregistered partnership) that the" wished to have it dissolved %ecause of %itter dissens

among the mem%ers, mismanagement and fraud %" the managers and heav" financial losses.

7


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principal reason wh" this petition ma" not prosper, namel" the petitioners have their remed" %" appealing the order of

dissolution at the proper time.

here is a secondar" issue in connection with the appointment of a receiver. But it must %e admitted that receivership is prop

in proceedings for dissolution of a compan" or corporation, and it was no error to reject the counter+%ond, the court having

declared the dissolution. As to the amount of the %ond to %e demanded of the receiver, much depends upon the discretion of t

trial court, which in this instance we do not %elieve has %een clearl" a%used.

Judgment he petition will, therefore, %e dismissed, with costs. he preliminar" injunction heretofore issued will %e dissolv

(aeta, Pa"lo, 2uason, Montema&or, and Re&es, JJ., concur.

-ootnotes

/MM Cf. hompson on Corporations, &rd. ed., secs. 91


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of officers who shall %e given the sole authorit" to collect the dail" dues from the mem%ers of the consolidated association)

elections were held on 2cto%er '0, /00< and %oth petitioner and private respondent ran for president) petitioner won) private

respondent protested and, alleging fraud, refused to recogniDe the results of the election) private respondent also refused to

a%ide %" their agreement and continued collecting the dues from the mem%ers 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 ord

him to pa" damages in the amount of P'


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he first element requires that the controvers" must arise out of intracorporate or partnership relations %etween and among

stoc-holders, mem%ers, or associates) %etween an" or all of them and the corporation, partnership or association of which th

are stoc-holders, mem%ers or associates, respectivel") and %etween such corporation, partnership or association and the 6tate

so far as it concerns their individual franchises. 10 he second element requires that the dispute among the parties %e

intrinsicall" connected with the regulation of the corporation, partnership or association or deal with the internal affairs of th

corporation, partnership or association. 11 After all, the principal function of the 64C is the supervision and control of

corporations, partnership and associations with the end in view that investments in these entities ma" %e encouraged and

protected, and their entities ma" %e encouraged and protected, and their activities pursued for the promotion of economic

development. 1

here is no intracorporate nor partnership relation %etween petitioner and private respondent. he controvers" %etween them

arose out of their plan to consolidate their respective jeepne" driversO and operatorsO associations into a single common

association. his unified association was, however, still a proposal. It had not %een approved %" the 64C, neither had its

officers and mem%ers su%mitted their articles of consolidation is accordance with 6ections =# and =0 of the Corporation Cod

Consolidation %ecomes effective not upon mere agreement of the mem%ers %ut onl" upon issuance of the certificate of

consolidation %" the 64C. 1! @hen the 64C, upon processing and e$amining the articles of consolidation, is satisfied that the

consolidation of the corporations is not inconsistent with the provisions of the Corporation Code and e$isting laws, it issues

certificate of consolidation which ma-es the reorganiDation official. 1& he new consolidated corporation comes into e$istenc

and the constituent corporations dissolve and cease to e$ist. 12

he ;AA!A and 6AA2!A to which petitioner and private respondent %elong are dul" registered with the 64C, %ut

these associations are two separate entities. he dispute %etween petitioner and private respondent is not within the ;AA!

nor the 6AA2!A. It is %etween mem%ers of separate and distinct associations. Petitioner and private respondent have no

intracorporate relation much less do the" have an intracorporate dispute. he 64C therefore has no jurisdiction over the

complaint.

he doctrine of corporation %" estoppel 16 advanced %" private respondent cannot override jurisdictional requirements.

urisdiction is fi$ed %" law and is not su%ject to the agreement of the parties. 17 It cannot %e acquired through or waived,

enlarged or diminished %", an" act or omission of the parties, neither can it %e conferred %" the acquiescence of the court. 18

Corporation %" estoppel is founded on principles of equit" and is designed to prevent injustice and unfairness.1%

It applies wh persons assume to form a corporation and e$ercise corporate functions and enter into %usiness relations with third person.

@here there is no third person involved and the conflict arises onl" among those assuming the form of a corporation, who

therefore -now that it has not %een registered, there is no corporation %" estoppel. 0

IN 5IE *ERE+-, the petition is granted and the decision dated April /#, /009 and the order dated a" &/, /009 of th

Regional rial Court, Branch


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& Anne$ G4H to the Petition, Rollo, p. &=.

1 Civil Case o. #'&=.

< Anne$ GAH to the Petition, Rollo, pp. /#+'/.

9 Anne$ GBH to the Petition, Rollo, pp. ''+'1.

= Petition, p. 9, Rollo, p. #.

# 5nion :lass V Container Corporation v. 6ecurities and 4$change Commission, /'9 6CRA &', /0#&M.

0 acapalan v. ;atal%as+oscardon, ''= 6CRA 10,


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2cto%er '1, /09(

:.R. o. L+/irst

Instance of anila, finding that defendant had %reached the contract, ordered it to pa" plaintiff P'&,(((.(( 7Civil case o.

0'9=8. 2n appeal, this Court reduced the damages to P/


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G.R. No. L411&& a" '&, /0irst

Instance of Le"te in Civil Case o. /0/', dated arch '/, /0


31/32

o appeal therefrom having %een perfected within the reglementar" period, the Court, upon motion of plaintiff, issued a writ

e$ecution, in virtue of which the Provincial 6heriff of Le"te caused the attachment of & parcels of land registered in the nam

of 6egundino RefuerDo. o propert" of the Philippine >i%ers Producers Co., Inc., was found availa%le for attachment. 2n

anuar" &/, /0i%ers Producers Co., Inc., interposed the defense that the complaint filed with the lower court containe

no allegation which would hold him lia%le personall", for while it was stated therein that he was a signator" to the lease

contract, he did so in his capacit" as president of the corporation. And this allegation was found %" the Court a quo to %e

supported %" the records. Plaintiff on the other hand tried to refute this averment %" contending that her failure to specif"

defendantOs personal lia%ilit" was due to the fact that all the time she was under the impression that the Philippine >i%ers

Producers Co., Inc., represented %" RefuerDo was a dul" registered corporation as appearing in the contract, %ut a su%sequen

inquir" from the 6ecurities and 4$change Commission "ielded otherwise. @hile as a general rule a person who has contracte

or dealt with an association in such a wa" as to recogniDe its e$istence as a corporate %od" is estopped from den"ing the sam

in an action arising out of such transaction or dealing, 7Asia Ban-ing Corporation vs. 6tandard Products Co., 19 Phil., //1)

Compania Agricola de 5ltramar vs. Re"es, 1 Phil., /) 2hta !evelopment Co.) vs. 6teamship Pompe", 10 Phil., //=8, "et this

doctrine ma" not %e held to %e applica%le where fraud ta-es a part in the said transaction. In the instant case, on plaintiffOs

charge that she was unaware of the fact that the Philippine >i%ers Producers Co., Inc., had no juridical personalit", defendant

RefuerDo gave no confirmation or denial and the circumstances surrounding the e$ecution of the contract lead to the

inescapa%le conclusion that plaintiff anuela . Fda. de 6alvatierra was reall" made to %elieve that such corporation was du

organiDed in accordance with law.


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here can %e no question that a corporation with registered has a juridical personalit" separate and distinct from its compone

mem%ers or stoc-holders and officers such that a corporation cannot %e held lia%le for the personal inde%tedness of a

stoc-holder even if he should %e its president 7@alter A. 6mith Co. vs. >ord, 6C+:.R. o. 1'1'(8 and conversel", a stoc-hol

or mem%er cannot %e held personall" lia%le for an" financial o%ligation %e, the corporation in e$cess of his unpaid su%scripti

But this rule is understood to refer merel" to registered corporations and cannot %e made applica%le to the lia%ilit" of mem%e

of an unincorporated association. he reason %ehind this doctrine is o%vious+since an organiDation which %efore the law is no

e$istent has no personalit" and would %e incompetent to act and appropriate for itself the powers and attri%ute of a corporatio

as provided %" law) it cannot create agents or confer authorit" on another to act in its %ehalf) thus, those who act or purport t

act as its representatives or agents do so without authorit" and at their own ris-. And as it is an elementar" principle of law th

a person who acts as an agent without authorit" or without a principal is himself regarded as the principal, possessed of all th

rights and su%ject to all the lia%ilities of a principal, a person acting or purporting to act on %ehalf of a corporation which has

valid e$istence assumes such privileges and o%ligations and comes personall" lia%le for contracts entered into or for other ac

performed as such, agent 7>a" vs. o%le, = Cushing ass.M /##. Cited in II olentinoOs Commercial Laws of the Philippine

>ifth 4d., P. 9#0+90(8. Considering that defendant RefuerDo, as president of the unregistered corporation Philippine >i%ers

Producers Co., Inc., was the moving spirit %ehind the consummation of the lease agreement %" acting as its representative, h

lia%ilit" cannot %e limited or restricted that imposed upon corporate shareholders. In acting on %ehalf of a corporation which

-new to %e unregistered, he assumed the ris- of reaping the consequential damages or resultant rights, if an", arising out of

such transaction.

@herefore, the order of the lower Court of arch '/, /0

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