Lozano vs.

De Los Santos
FACTS:
 Lozano alleged that he was the president of KAMAJDA while Anda is the president of
SAMAJODA.
 Upon the request of Sangguniang Bayan, Lozano and Anda agreed to consolidate their
respective associations and form UMAJODA; they also agreed to elect one set of officers
who shall be given the sole authority to collect daily dues from the members.
 Elections were held and they both ran for president but Lozano won. Anda protested and
refused to recognize the result of the election. Anda also refused to abide by their
agreement and continued collecting the dues from member of SAMAJODA despite
demand to desist.
 Lozano filed a civil complaint to restrain Anda from collecting the dues and pay
damages.
 Anda moved to dismiss the complaint for lack of jurisdiction arguing that jurisdiction
was with the SEC.
 MCTC denied the motion and consideration.
 Upon certiorari before the RTC: it found that the dispute was intracorporate hence subject
to the jurisdiction of SEC and ordered MCTC to dismiss the civil case. Hence this
petition.
 SC:
o Lozano: Judge Delos Santos acted with gadalej and serious error of law in
concluding that SEC has jurisdiction over the case of damages between head of 2
associations who intended to consolidate or merge but not yet approved and
registered with SEC.
ISSUE: WON SEC has jurisdiction over the case.
RULING:
NO
The grant of jurisdiction to the SEC must be viewed in the light of its nature and function
under the law. The jurisdiction is determined by a concurrence of 2 elements:
1. Status or relationship of the parties
2. Nature of the question that is the subject of their controversy.
The 1st element requires that the controversy must arise out of intracorporate or partnership
relations between and among stockholder, members or associates or between any of them or all
and the corporation, partnership or associations of which they are stockholders, members, or
associates, respectively.
The 2nd 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.
The principal function of SEC is the supervision and control of corporations, partnership and
associations with the en vie that investments in these entities may be encouraged and protected,
and their entities may be encouraged and protected, and their activities pursued for promotion of
economic development.
In this case, there is no intracorporate no partnership relation between Lozano and Anda. The
controversy between them arouse out of their plan to consolidate their associations into one
single associations. This unified association was still a proposal and had not be approved by the
SEC nor had its officers and members submitted their articles of consolidations. Consolidation
becomes effective not upon mere agreement of the members but only upon the issuance of the
certification of consolidation by SEC. The dispute between Lozano and Anda is not within the
KAMAJDA nor the SAMAJODA. It is between members of separate and distinct associations.
Lozano and Anda have no intracorporate relation much less they do have an intracorporate
dispute. The SEC therefore has no jurisdiction over the complaint.
The doctrine of corporation by estoppel advance by Anda cannot override jurisdictional
requirements. Jurisdiction is fixed by law and is not subject to the agreements of parties. It
cannot be acquired through or waived, enlarged or diminished by, any act or omission of parties,
neither can it be conferred by the acquiescence of the court.
Corporation by estoppel is found 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 3rd person. Where there is no 3rd person involved
and the conflict arises only among those assuming the form of corporation, who therefore know
that it has not been registered, there is no corporation by estoppel.
International Express Travel and Tours vs. CA, Henri Kahn, Philippine Football
Federation
FACTS:
 International Express wrote a letter to Philippine Football Federation through its
president Henri Kahn, wherein International Express offered its services as a travel
agency to the PFF. The offer was accepted
 International Express secured the airline tickets for the trips of the athletes and officials
of the Federation to the SEA Games in Kuala Lumpur as well as other trips. For the
tickets received, PFF made 2 partial payments.
 International Express wrote the PFF a demand letter requesting for payment which was
partially paid for by the Federation through the Gintong Alay Project.
 Henri Kahn issued a personal check as a partial payment for the outstanding balance of
the PFF. Thereafter, no further payments were made despite repeated demands, which
prompted International Express to file a civil case against Kahn and PFF.
 International Express sought to hold Kahn liable for the unpaid balance for the tickets
purchased by the Federation on the ground that Kahn allegedly guaranteed the said
obligation.
 Kahn filed his answer with counterclaim averring that International Express has not cause
of action against him in his personal capacity or in his capacity as a president. He
maintained that he did not guarantee payment but merely acted as an agent of the
Federation.
 RTC: rendered judgement in favor of Itnernational Express and made Henri Kahn
personally liable for the unpaid Federation stating that: Kahn did not adduced any
evidence proving the corporate existence of PFF
 CAL reversed the ruling of the trial court recognizing the existence of the PFF and since
International Express failed to prove that Kahn guaranteed the obligation, he should not
be held liable for the PFF has a separate and distinct personality from its officers.
 Hence this petition.
 SC:
ISSUE: WON PFF is a juridical person.
RULING:
NO.
RA 3135 and PD 604 recognize the existence of national sports associations. The powers and
functions granted to national sports associations clearly indicate that these entities may acquire
juridical personality. However, such does not automatically take place by the mere passage of
laws.
Before a corporation may acquire juridical personality, the State must give its consent either in
the form of a special law or general enabling act. Nowhere in the laws any provisions creating
PFF. These laws merely recognized the existence of national sports associations. Clearly, the
provision require that before an entity may be considered as national sports association, such
entity must be recognized by Philippine Amateur Athletic Federation and Department of Youth
and Sport Development.
In this case, Kahn failed to substantiate the fact of recognitions. Attaching in his motion for
reconsideration a copy of constitution and by-laws of PFF does not prove that said PFF has
indeed been recognized and accredited by either accrediting organization. Accordingly, PFF is
not a national sports assocation within the purview of the law and does not have corporate
existence.
Thus it follows that Kahn should be liable for the unpaid obligations of the unincorporated PF. It
is 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 privileged and becomes personally liable
for contract entered into or for other acts performed as such agent. In this case, as president of
the PFF, Kahn presumed to have known about the corporate existence or non-existence of PFF.
Kahn cannot deny the corporate existence of the PFF because it had contracted and dealt with
PFF in such a manner as to recognize and in effect admit its existence.
The doctrine of corporation by estoppel is mistakenly applied by the CA to International
Express. The application of the doctrine applies to a third part only when he tries to escape
liability on a contract from which he has benefited on the irrelevant ground of defective
incorporation. In this case, International Express is not trying to escape liability but rather is the
one claiming from the contract.
SAPPARI SAWADJAAN vs. CA, CSC, Al-Amanah Investment Bank
FACTS:
 Sawadjaan was among the first employees of PAB when it was created. While still
designated as appraiser, Sawadjaan was assigned to inspect the properties offered as
collateral by CAMEC for a credit line. The properties consist of two parcels of land. On
the basis of Sawadjaan’s inspection and appraisal, the PAB granted the loan.
 In the meantime, Sawadjaan was promoted to Loan analyst and a half a year later,
Congress passed an act creating AlIBP and repealing the law which created PAB. All
assets, liabilities and capital account of PAB was trasnferred to AlIBP and the existing
personnel of the PAB were to continue to discharge their functions unless discharged.
Sawadjaan was among the retained personnel by AlIPB.
 When CAMEC failed to pay despite the given extension, AlIBP discovered that the 2
properties offered as collateral was spurious and the other non-existent.
 AlIBP created an investigating committee to look into CAMEC transaction. Sawadjaan
received a memorandum from AlIBP chairman charging him with dishonesty in
performance of official duties prejudicial to the best interest of service and preventively
suspending him.
 Sawadjaan informed the committee that he could not submit himself to he jurisdiction of
the committee because of its partiality.
 The Investigating declared him in default and rendered a decision against Sawadjaan and
suspending him from offiece.
 The Board of Director adopted a resolution finding Sawadjaan guilty o Dishonesty I nteh
performance of office duties.
 Sawadjaan filed a notice of appeal to MSPB
 CSC adopted a resolution dismissing the appeal for lack of merit and affirmed the
resolution of BoD.
 SC: dismissed the petition for lack of merit.
 Hence Sawadjaan filed a motion for new trial in the CA based on the ground of fraud,
accident, mistake, or excusable negligence, and newly discovered evidence. Which was
denied by the CA hence Sawadjaan filed a petition for certiorari under rule 65.
o He alleges that the CA errred in ignoring the facts and evidence that the AlIBP
has not valid bylaw-laws and ignoring the fact that AlIBP lost its juridical
personality as a corporation.
ISSUE: WON the proceedings initiated by AlIBP is null and void for failure to passed its by-
laws within the prescribed period by the law.
RULING:
NO
The AlIBP was created by RA 6848 and has a main office where it conducts business,
has shareholders, corporate officers and board of directors, assets, and personnel. At the very
least, but its failure to submit its by-laws on time, the AlIBP may be considered as de facto
corporation whose right to exercise corprate power may not be inquired into collaterally in any
private suit ti which such corporations may be a party.
A corporation which failed to file its by-laws within the prescribed period does not ipso
facto lose its powers as such.
In this case however, such is irrelevant because it is not a corporate controversy but a
labor dispute because it is undisputed fact that AlIBP was employer of Sawadjaan. He never
claimed to be or shown that he is a stockholder or officer of the corporation.
Having accepted employment from AlIBP, and rendered his services to the bank, it is too
late for Sawadjaan to question the existence and its power to terminate his services. 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.
Lim Tong Lim vs. Philippine Fishing Gears
FACTS:
 On behalf of Ocean Quest Fishing, Chua and Yao entered into a contract for a purchase
of fishing nets from PFG. They claimed that they were engaged in a business venture
with Lim who was not a signatory to the agreement.
 Chua and Yao however failed to pay for the nets and floats. Hence, PFG filed a collection
suit against Yao, Chua, and Lim, in their capacities as general partners, with preliminary
attachment alleging that Ocean Quest is nonexistent corporation.
 RTC issued a writ of preliminary attachment which the sheriff enforced by attaching the
nets on board of FB Lourdes.
 Chua filed a manifestation admitting his liability and requesting a reasonable time to pay.
He also turned over to PFG some nets which were in his possession. Yao filed an answer
after which he was deemed to have waived his right to cross-examine and present
evidence because of his failure to appear in hearings. Lim filed an answer with
counterclaim and crossclaim and moved for the lifter of the attachment.
 The RTC maintained the writ and ordered the sale of the nets in a public bidding. The
RTC rendered a decision ruling that PFG was entitled to the Writ and Chua, Yao and
Lim, were jointly liable to the pay. It ruled that partnership among Lim, Chua, and Yao
existed based on testimonies and a compromise agreement.
 Lim appealed to the CA which affirmed the RTC
 Hence this petition:
 SC:
o Lim argued that he should not be held liable for the equipment purchased from
respondent disclaims any direct participation in the purchase of the nets and he
was only a lessor nad not a partner of Yao and Chua.
o Lim argues that under the doctrine of corporation by estoppel, liability can
beimputed only to Chua and Yao and not him.
ISSUE: WON by Lim, Chua and Yao’s act could be deemed to have entered into partnership.
RULING:
YES
The facts found by the lower courts clearly showed that there existed a partnership among
Chua, Yao and Lim, pursuant to art. 1767 of the Civil code which provides that by contract of
partnership, 2 or more persons bind themselves to contribute money, property, or industry to a
common fund, with intention of dividing the profits among themselves.
It is clear that Chua, Yao, and Lim had decided to engage in a fishing business which
they started by buying a boat financed by a loan secured from Lim’s brother. In their
compromise agreement they revealed their intention to pay the loan with the proceeds of the sale
of the boats and divide equally among them the excess or loss.
On his argument under doctrine of corporation by estoppel: Thus even if the ostensible corporate
entity is proven to be leggal non-existent, a party may be estopped from denying the corporate
existence.
The reason fro this doctrine are:
1. An unincorporated assocation has no personality and would be incompetent to act and
appropriate for itself the power and attributes of a corporation as provided by law;
2. It cannot create agents or confer authority on another to act in its behalf; thus those who
act or purport to act as its representative or agents do so without authority and at their
own risk.
A person who acts as an agent without authority or without principal is himself regarded as
the principal, possessed of all theright and subject to all liabilities of a principal. A person
acting purporting to act on behalf of a corporation which has no valid existence assumes such
privileges and obligation and becomes personally liable for contracts entered into or for the
other acts performed as such agent.
The doctrime of corporation by estoppel may apply to the alleged corporation and to a third
party. In the firs 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.
On the other hand. A third party knowing an association to be unincorporated but nonetheless
treated it as a corporation and received benefits from it may be barred from denying its
corporate existence in a suit brought agaisnt the alleged corporation. In such case, all thos
who benefited from the transaction may by the ostensible corporattion, may be held liable for
contracts they assented to.