Republic of the Philippines On August 26, 1963, Alhambra's
SUPREME COURT stockholders, representing more than two-
Manila
EN BANC
G.R. No. L-23606           July 29, 1968
ALHAMBRA CIGAR & CIGARETTE
MANUFACTURING COMPANY,
INC., petitioner,
vs.
SECURITIES & EXCHANGE
COMMISSION, respondent.
Gamboa and Gamboa for petitioner.
Office of the Solicitor General for respondent.
SANCHEZ, J.:
To the question — May a corporation extend
its life by amendment of its articles of
incorporation effected during the three-year
statutory period for liquidation when its
original term of existence had already
expired? — the answer of the Securities and
Exchange Commissioner was in the negative.
Offshoot is this appeal.
That problem emerged out of the following
controlling facts:
Petitioner Alhambra Cigar and Cigarette
Manufacturing Company, Inc. (hereinafter
referred to simply as Alhambra) was duly
incorporated under Philippine laws on January
15, 1912. By its corporate articles it was to
exist for fifty (50) years from incorporation. Its
term of existence expired on January 15,
1962. On that date, it ceased transacting
business, entered into a state of liquidation.
Thereafter, a new corporation. — Alhambra
Industries, Inc. — was formed to carry on the
business of Alhambra.
On May 1, 1962, Alhambra's stockholders, by
resolution named Angel S. Gamboa trustee to
take charge of its liquidation.
On June 20, 1963 — within Alhambra's three-
year statutory period for liquidation - Republic
Act 3531 was enacted into law. It amended
Section 18 of the Corporation Law; it
empowered domestic private corporations to
extend their corporate life beyond the period
fixed by the articles of incorporation for a term
not to exceed fifty years in any one instance.
Previous to Republic Act 3531, the maximum
non-extendible term of such corporations was
fifty years.
On July 15, 1963, at a special meeting,
Alhambra's board of directors resolved to
amend paragraph "Fourth" of its articles of
incorporation to extend its corporate life for an
additional fifty years, or a total of 100 years
from its incorporation.
thirds of its subscribed capital stock, voted to
approve the foregoing resolution. The "Fourth"
paragraph of Alhambra's articles of
incorporation was thus altered to read:
FOURTH. That the term for which said
corporation is to exist is fifty (50) years
from and after the date of
incorporation, and for an additional
period of fifty (50) years thereafter.
On October 28, 1963, Alhambra's articles of
incorporation as so amended certified correct
by its president and secretary and a majority
of its board of directors, were filed with
respondent Securities and Exchange
Commission (SEC).
On November 18, 1963, SEC, however,
returned said amended articles of
incorporation to Alhambra's counsel with the
ruling that Republic Act 3531 "which took
effect only on June 20, 1963, cannot be
availed of by the said corporation, for the
reason that its term of existence had already
expired when the said law took effect in short,
said law has no retroactive effect."
On December 3, 1963, Alhambra's counsel
sought reconsideration of SEC's ruling
aforesaid, refiled the amended articles of
incorporation.
On September 8, 1964, SEC, after a
conference hearing, issued an order denying
the reconsideration sought.
Alhambra now invokes the jurisdiction of this
Court to overturn the conclusion below. 1
1. Alhambra relies on Republic Act 3531,
which amended Section 18 of the Corporation
Law. Well it is to take note of the old and the
new statutes as they are framed. Section 18,
prior to and after its modification by Republic
Act 3531, covers the subject of amendment of
the articles of incorporation of private
corporations. A provision thereof which
remains unaltered is that a corporation may
amend its articles of incorporation "by a
majority vote of its board of directors or
trustees and ... by the vote or written assent of
the stockholders representing at least two-
thirds of the subscribed capital stock ... "
But prior to amendment by Republic Act 3531,
an explicit prohibition existed in Section 18,
thus:
... Provided, however, That the life of
said corporation shall not be extended
by said amendment beyond the time
fixed in the original articles: ...
This was displaced by Republic Act 3531
which enfranchises all private corporations to
extend their corporate existence. Thus
incorporated into the structure of Section 18
are the following:
... Provided, however, That should the
amendment consist in extending the
corporate life, the extension shall not
exceed fifty years in any one instance:
Provided, further, That the original
articles, and amended articles
together shall contain all provisions
required by law to be set out in the
articles of incorporation: ...
As we look in retrospect at the facts, we find
these: From July 15 to October 28, 1963,
when Alhambra made its attempt to extend its
corporate existence, its original term of fifty
years had already expired (January 15, 1962);
it was in the midst of the three-year grace
period statutorily fixed in Section 77 of the
Corporation Law, thus: .
SEC. 77. Every corporation whose
charter expires by its own limitation or
is annulled by forfeiture or otherwise,
or whose corporate existence for other
purposes is terminated in any other
manner, shall nevertheless be
continued as a body corporate for
three years after the time when it
would have been so dissolved, for the
purpose of prosecuting and defending
suits by or against it and of enabling it
gradually to settle and close its affairs,
to dispose of and convey its property
and to divide its capital stock, but not
for the purpose of continuing the
business for which it was established.2
Plain from the language of the provision is its
meaning: continuance of a "dissolved"
corporation as a body corporate for three
years has for its purpose the final closure of
its affairs, and no other; the corporation is
specifically enjoined from "continuing the
business for which it was established". The
liquidation of the corporation's affairs set forth
in Section 77 became necessary precisely
because its life had ended. For this reason
alone, the corporate existence and juridical
personality of that corporation to do business
may no longer be extended.
Worth bearing in mind, at this juncture, is the
basic development of corporation law.
The common law rule, at the beginning, was
rigid and inflexible in that upon its dissolution,
a corporation became legally dead for all
purposes. Statutory authorizations had to be
provided for its continuance after dissolution
"for limited and specified purposes incident to
complete liquidation of its affairs".3 Thus, the
moment a corporation's right to exist as an
"artificial person" ceases, its corporate powers
are terminated "just as the powers of a natural
person to take part in mundane affairs cease
to exist upon his death".4 There is nothing left
but to conduct, as it were, the settlement of
the estate of a deceased juridical person.
2. Republic Act 3531, amending Section 18 of
the Corporation Law, is silent, it is true, as to
when such act of extension may be made. But
even with a superficial knowledge of corporate
principles, it does not take much effort to
reach a correct conclusion. For, implicit in
Section 77 heretofore quoted is that the
privilege given to prolong corporate life under
the amendment must be exercised before the
expiry of the term fixed in the articles of
incorporation.
Silence of the law on the matter is not hard to
understand. Specificity is not really necessary.
The authority to prolong corporate life was
inserted by Republic Act 3531 into a section of
the law that deals with the power of a
corporation to amend its articles of
incorporation. (For, the manner of
prolongation is through an amendment of the
articles.) And it should be clearly evident that
under Section 77 no corporation in a state of
liquidation can act in any way, much
less amend its articles, "for the purpose of
continuing the business for which it was
established".
All these dilute Alhambra's position that it
could revivify its corporate life simply because
when it attempted to do so, Alhambra was still
in the process of liquidation. It is surely
impermissible for us to stretch the law — that
merely empowers a corporation to act in
liquidation — to inject therein the power to
extend its corporate existence.
3. Not that we are alone in this view. Fletcher
has written: "Since the privilege of extension
is purely statutory, all of the statutory
conditions precedent must be complied with in
order that the extension may be effectuated.
And, generally these conditions must be
complied with, and the steps necessary to
effect the extension must be taken, during the
life of the corporation, and before the
expiration of the term of existence as original
fixed by its charter or the general law, since,
as a rule, the corporation is ipso facto
dissolved as soon as that time expires. So
where the extension is by amendment of the
articles of incorporation, the amendment must
be adopted before that time. And, similarly,
the filing and recording of a certificate of
extension after that time cannot relate back to
the date of the passage of a resolution by the
stockholders in favor of the extension so as to
save the life of the corporation. The contrary is
true, however, and the doctrine of relation will
apply, where the delay is due to the neglect of
the officer with whom the certificate is required
to be filed, or to a wrongful refusal on his part
to receive it. And statutes in some states
specifically provide that a renewal may be had
within a specified time before or after the time
fixed for the termination of the corporate
existence".5
The logic of this position is well expressed in a
foursquare case decided by the Court of
Appeals of Kentucky.6 There, pronouncement
was made as follows:
... But section 561 (section 2147)
provides that, when any corporation
expires by the terms of its articles of
incorporation, it may be thereafter
continued to act for the purpose of
closing up its business, but for no
other purpose. The corporate life of
the Home Building Association expired
on May 3, 1905. After that date, by the
mandate of the statute, it could
continue to act for the purpose of
closing up its business, but for no
other purpose. The proposed
amendment was not made until
January 16, 1908, or nearly three
years after the corporation expired by
the terms of the articles of
incorporation. When the corporate life
of the corporation was ended, there
was nothing to extend. Here it was
proposed nearly three years after the
corporate life of the association had
expired to revivify the dead body, and
to make that relate back some two
years and eight months. In other
words, the association for two years
and eight months had only existed for
the purpose of winding up its
business, and, after this length of time,
it was proposed to revivify it and make
it a live corporation for the two years
and eight months daring which it had
not been such.
The law gives a certain length of time
for the filing of records in this court,
and provides that the time may be
extended by the court, but under this
provision it has uniformly been held
that when the time was expired, there
is nothing to extend, and that the
appeal must be dismissed... So, when
the articles of a corporation have
expired, it is too late to adopt an
amendment extending the life of a
corporation; for, the corporation
having expired, this is in effect to
create a new corporation ..."7
True it is, that the Alabama Supreme Court
has stated in one case.8 that a corporation
empowered by statute to renew its corporate
existence may do so even after the expiration
of its corporate life, provided renewal is taken
advantage of within the extended statutory
period for purposes of liquidation. That ruling,
however, is inherently weak as persuasive
authority for the situation at bar for at least two
reasons: First. That case was a suit for
mandamus to compel a former corporate
officer to turn over books and records that
came into his possession and control by virtue
of his office. It was there held that such officer
was obliged to surrender his books and
records even if the corporation had already
expired. The holding on the continued
existence of the corporation was a mere
dictum. Second. Alabama's law is different.
Corporations in that state were authorized not
only to extend but also to renew their
corporate existence.That very case defined
the word "renew" as follows; "To make new
again; to restore to freshness; to make new
spiritually; to regenerate; to begin again; to
recommence; to resume; to restore to
existence, to revive; to re-establish; to
recreate; to replace; to grant or obtain an
extension of Webster's New International
Dict.; 34 Cyc. 1330; Carter v. Brooklyn Life
Ins. Co., 110 N.Y. 15, 21, 22, 17 N.E. 396; 54
C.J. 379. Sec".9
On this point, we again draw from Fletcher:
"There is a broad distinction between the
extension of a charter and the grant of a new
one. To renew a charter is to revive a charter
which has expired, or, in other words, "to give
a new existence to one which has been
forfeited, or which has lost its vitality by lapse
of time". To "extend" a charter is "to increase
the time for the existence of one which would
otherwise reach its limit at an earlier
period".10 Nowhere in our statute — Section
18, Corporation Law, as amended by
Republic Act 3531 — do we find the word
"renew" in reference to the authority given to
corporations to protract their lives. Our law
limits itself to extension of corporate
existence. And, as so understood, extension
may be made only before the term provided in
the corporate charter expires.
Alhambra draws attention to another
case11 which declares that until the end of the
extended period for liquidation, a dissolved
corporation "does not become an
extinguished entity". But this statement was
obviously lifted out of context. That case
dissected the question whether or not suits
can be commenced by or against a
corporation within its liquidation period. Which
was answered in the affirmative. For, the
corporation still exists for the settlement of its
affairs.
People, ex rel. vs. Green,12 also invoked by
Alhambra, is as unavailing. There, although
the corporation amended its articles to extend
its existence at a time when it had no legal
authority yet, it adopted the amended articles
later on when it had the power to extend
its life and during its original term when it
could amend its articles.
The foregoing notwithstanding, Alhambra falls
back on the contention that its case is
arguably within the purview of the law. It says
that before cessation of its corporate life, it
could not have extended the same, for the
simple reason that Republic Act 3531 had not
then become law. It must be remembered that
Republic Act 3531 took effect on June 20,
1963, while the original term of Alhambra's
existence expired before that date — on
January 15, 1962. The mischief that flows
from this theory is at once apparent. It would
certainly open the gates for all defunct
corporations — whose charters have expired
even long before Republic Act 3531 came into
being — to resuscitate their corporate
existence.
4. Alhambra brings into argument Republic
Act 1932, which amends Section 196 of the
Insurance Act, now reading as follows:  1äwphï1.ñët
SEC. 196. Any provision of law to the
contrary notwithstanding, every
domestic life insurance corporation,
formed for a limited period under the
provisions of its articles of
incorporation, may extend its
corporate existence for a period not
exceeding fifty years in any one
instance by amendment to its articles
of incorporation on or before the
expiration of the term so fixed in said
articles ...
To be observed is that the foregoing statute
— unlike Republic Act 3531 — expressly
authorizes domestic insurance corporations to
extend their corporate existence "on or before
the expiration of the term" fixed in their articles
of incorporation. Republic Act 1932 was
approved on June 22, 1957, long before the
passage of Republic Act 3531 in 1963.
Congress, Alhambra points out, must have
been aware of Republic Act 1932 when it
passed Republic Act 3531. Since the phrase
"on or before", etc., was omitted in Republic
Act 3531, which contains no similar limitation,
it follows, according to Alhambra, that it is not
necessary to extend corporate existence on or
before the expiration of its original term.
That Republic Act 3531 stands mute as to
when extention of corporate existence may be
made, assumes no relevance. We have
already said, in the face of a familiar precept,
that a defunct corporation is bereft of any
legal faculty not otherwise expressly
sanctioned by law.
Illuminating here is the explanatory note of
H.B. 1774, later Republic Act 3531 — now in
dispute. Its first paragraph states that
"Republic Act No. 1932 allows the automatic
extension of the corporate existence of
domestic life insurance corporations upon
amendment of their articles of incorporation
on or before the expiration of the terms fixed
by said articles". The succeeding lines are
decisive: "This is a good law, a sane and
sound one. There appears to be no valid
reason why it should not be made to apply to
other private corporations.13
The situation here presented is not one where
the law under consideration is ambiguous,
where courts have to put in harness extrinsic
aids such as a look at another statute to
disentangle doubts. It is an elementary rule in
legal hermeneutics that where the terms of the
law are clear, no statutory construction may
be permitted. Upon the basic conceptual
scheme under which corporations operate,
and with Section 77 of the Corporation Law
particularly in mind, we find no vagueness in
Section 18, as amended by Republic Act
3531. As we view it, by directing attention to
Republic Act 1932, Alhambra would seek to
create obscurity in the law; and, with that, ask
of us a ruling that such obscurity be
explained. This, we dare say, cannot be done.
The pari materia rule of statutory construction,
in fact, commands that statutes must be
harmonized with each other. 14 So
harmonizing, the conclusion is clear that
Section 18 of the Corporation Law, as
amended by Republic Act 3531 in reference
to extensions of corporate existence, is to be
read in the same light as Republic Act 1932.
Which means that domestic corporations in
general, as with domestic insurance
companies, can extend corporate existence
only on or before the expiration of the term
fixed in their charters.
5. Alhambra pleads for munificence in
interpretation, one which brushes
technicalities aside. Bases for this posture are
that Republic Act 3531 is a remedial statute,
and that extension of corporate life is
beneficial to the economy.
Alhambra's stance does not induce assent.
Expansive construction is possible only
when there is something to expand. At the
time of the passage of Republic Act 3531,
Alhambra's corporate life had already expired.
It had overstepped the limits of its limited
existence. No life there is to prolong.
Besides, a new corporation — Alhambra
Industries, Inc., with but slight change in
stockholdings15 — has already been
established. Its purpose is to carry on, and it
actually does carry on,16 the business of the
dissolved entity. The beneficial-effects
argument is off the mark.
The way the whole case shapes up then, the
only possible drawbacks of Alhambra might
be that, instead of the new corporation
(Alhambra Industries, Inc.) being written off,
the old one (Alhambra Cigar & Cigarette
Manufacturing Company, Inc.) has to be
wound up; and that the old corporate name
cannot be retained fully in its exact
form.17 What is important though is that the
word Alhambra, the name that counts [it has
goodwill], remains.
FOR THE REASONS GIVEN, the ruling of the
Securities and Exchange Commission of
November 18, 1963, and its order of
September 8, 1964, both here under review,
are hereby affirmed.
Costs against petitioner Alhambra Cigar &
Cigarette Manufacturing Company, Inc. So
ordered.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 96161 February 21, 1992
PHILIPS EXPORT B.V., PHILIPS
ELECTRICAL LAMPS, INC. and PHILIPS
INDUSTRIAL DEVELOPMENT,
INC., petitioners,
vs.
COURT OF APPEALS, SECURITIES &
EXCHANGE COMMISSION and STANDARD
PHILIPS CORPORATION, respondents.
Emeterio V. Soliven & Associates for
petitioners.
Narciso A. Manantan for private respondent.
MELENCIO-HERRERA, J.:
Petitioners challenge the Decision of the Court
of Appeals, dated 31 July 1990, in CA-GR Sp.
No. 20067, upholding the Order of the
Securities and Exchange Commission, dated
2 January 1990, in SEC-AC No. 202,
dismissing petitioners' prayer for the
cancellation or removal of the word "PHILIPS"
from private respondent's corporate name.
Petitioner Philips Export B.V. (PEBV),
a foreign corporation organized under the
laws of the Netherlands, although not
engaged in business here, is the registered
owner of the trademarks PHILIPS
and PHILIPS SHIELD EMBLEM under
Certificates of Registration Nos. R-1641 and
R-1674, respectively issued by the Philippine
Patents Office (presently known as the
Bureau of Patents, Trademarks and
Technology Transfer). Petitioners Philips
Electrical Lamps, Inc. (Philips Electrical, for
brevity) and Philips Industrial Developments,
Inc. (Philips Industrial, for short), authorized
users of the trademarks PHILIPS and
PHILIPS SHIELD EMBLEM, were
incorporated on 29 August 1956 and 25 May
1956, respectively. All petitioner corporations
belong to the PHILIPS Group of Companies.
Respondent Standard Philips Corporation
(Standard Philips), on the other hand, was
issued a Certificate of Registration by
respondent Commission on 19 May 1982.
On 24 September 1984, Petitioners filed a
letter complaint with the Securities &
Exchange Commission (SEC) asking for the
cancellation of the word "PHILIPS" from
Private Respondent's corporate name in view
of the prior registration with the Bureau of
Patents of the trademark "PHILIPS" and the
logo "PHILIPS SHIELD EMBLEM" in the
name of Petitioner, PEBV, and the previous
registration of Petitioners Philips Electrical and
Philips Industrial with the SEC.
As a result of Private Respondent's refusal to
amend its Articles of Incorporation, Petitioners
filed with the SEC, on 6 February 1985, a
Petition (SEC Case No. 2743) praying for the
issuance of a Writ of Preliminary Injunction,
alleging, among others, that Private
Respondent's use of the word PHILIPS
amounts to an infringement and clear violation
of Petitioners' exclusive right to use the same
considering that both parties engage in the
same business.
In its Answer, dated 7 March 1985, Private
Respondent countered that Petitioner PEBV
has no legal capacity to sue; that its use of its
corporate name is not at all similar to
Petitioners' trademark PHILIPS when
considered in its entirety; and that its products
consisting of chain rollers, belts, bearings and
cutting saw are grossly different from
Petitioners' electrical products.
After conducting hearings with respect to the
prayer for Injunction; the SEC Hearing Officer,
on 27 September 1985, ruled against the
issuance of such Writ.
On 30 January 1987, the same Hearing
Officer dismissed the Petition for lack of merit.
In so ruling, the latter declared that inasmuch
as the SEC found no sufficient ground for the
granting of injunctive relief on the basis of the
testimonial and documentary evidence
presented, it cannot order the removal or
cancellation of the word "PHILIPS" from
Private Respondent's corporate name on the
basis of the same evidence adopted in
toto during trial on the merits. Besides,
Section 18 of the Corporation Code (infra) is
applicable only when the corporate names in
question are identical. Here, there is no
confusing similarity between Petitioners' and
Private Respondent's corporate names as
those of the Petitioners contain at least two
words different from that of the Respondent.
Petitioners' Motion for Reconsideration was
likewise denied on 17 June 1987.
On appeal, the SEC en banc affirmed the
dismissal declaring that the corporate names
of Petitioners and Private Respondent hardly
breed confusion inasmuch as each contains
at least two different words and, therefore,
rules out any possibility of confusing one for
the other.
On 30 January 1990, Petitioners sought an
extension of time to file a Petition for Review
on Certiorari before this Court, which Petition
was later referred to the Court of Appeals in a
Resolution dated 12 February 1990.
In deciding to dismiss the petition on 31 July
1990, the Court of
Appeals  swept aside Petitioners' claim that
1
following the ruling in Converse Rubber
Corporation v. Universal Converse Rubber
Products, Inc., et al, (G. R. No. L-27906,
January 8, 1987, 147 SCRA 154), the word
PHILIPS cannot be used as part of Private
Respondent's corporate name as the same
constitutes a dominant part of Petitioners'
corporate names. In so holding, the Appellate
Court observed that the Converse case is not
four-square with the present case inasmuch
as the contending parties in Converse are
engaged in a similar business, that is, the
manufacture of rubber shoes. Upholding the
SEC, the Appellate Court concluded that
"private respondents' products consisting of
chain rollers, belts, bearings and cutting saw
are unrelated and non-competing with
petitioners' products i.e. electrical lamps such
that consumers would not in any probability
mistake one as the source or origin of the
product of the other."
The Appellate Court denied Petitioners'
Motion for Reconsideration on 20 November
1990, hence, this Petition which was given
due course on 22 April 1991, after which the
parties were required to submit their
memoranda, the latest of which was received
on 2 July 1991. In December 1991, the SEC
was also required to elevate its records for the
perusal of this Court, the same not having
been apparently before respondent Court of
Appeals.
We find basis for petitioners' plea.
As early as Western Equipment and Supply
Co. v. Reyes, 51 Phil. 115 (1927), the Court
declared that a corporation's right to use its
corporate and trade name is a property right,
a right in rem, which it may assert and protect
against the world in the same manner as it
may protect its tangible property, real or
personal, against trespass or conversion. It is
regarded, to a certain extent, as a property
right and one which cannot be impaired or
defeated by subsequent appropriation by
another corporation in the same field (Red
Line Transportation Co. vs. Rural Transit Co.,
September 8, 1934, 20 Phil 549).
A name is peculiarly important as necessary
to the very existence of a corporation
(American Steel Foundries vs. Robertson, 269
US 372, 70 L ed 317, 46 S Ct 160; Lauman
vs. Lebanon Valley R. Co., 30 Pa 42; First
National Bank vs. Huntington Distilling Co. 40
W Va 530, 23 SE 792). Its name is one of its
attributes, an element of its existence, and
essential to its identity (6 Fletcher [Perm Ed],
pp. 3-4). The general rule as to corporations is
that each corporation must have a name by
which it is to sue and be sued and do all legal
acts. The name of a corporation in this respect
designates the corporation in the same
manner as the name of an individual
designates the person (Cincinnati Cooperage
Co. vs. Bate. 96 Ky 356, 26 SW 538; Newport
Mechanics Mfg. Co. vs. Starbird. 10 NH 123);
and the right to use its corporate name is as
much a part of the corporate franchise as any
other privilege granted (Federal Secur. Co. vs.
Federal Secur. Corp., 129 Or 375, 276 P
1100, 66 ALR 934; Paulino vs. Portuguese
Beneficial Association, 18 RI 165, 26 A 36).
A corporation acquires its name by choice and
need not select a name identical with or
similar to one already appropriated by a
senior corporation while an individual's name
is thrust upon him (See Standard Oil Co. of
New Mexico, Inc. v. Standard Oil Co. of
California, 56 F 2d 973, 977). A corporation
can no more use a corporate name in
violation of the rights of others than an
individual can use his name legally acquired
so as to mislead the public and injure another
(Armington vs. Palmer, 21 RI 109. 42 A 308).
Our own Corporation Code, in its Section 18,
expressly provides that:
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 law. Where a change
in a corporate name is
approved, the commission
shall issue an amended
certificate of incorporation
under the amended name.
(Emphasis supplied)
The statutory prohibition cannot be any
clearer. To come within its scope, two
requisites must be proven, namely:
(1) that the complainant corporation acquired
a prior right over the use of such corporate
name; and
(2) the proposed name is either:
(
a
)
i
d
e
n
t
i
c
a
l
;
o
r
 ( test is whether the similarity is such as to
b mislead a person, using ordinary care and
) discrimination. In so doing, the Court must
look to the record as well as the names
d themselves (Ohio Nat. Life Ins. Co. v. Ohio
e Life Ins. Co., 210 NE 2d 298). While the
c corporate names of Petitioners and Private
e Respondent are not identical, a reading of
p Petitioner's corporate names, to wit: PHILIPS
t EXPORT B.V., PHILIPS ELECTRICAL
i LAMPS, INC. and PHILIPS INDUSTRIAL
v DEVELOPMENT, INC., inevitably leads one to
e conclude that "PHILIPS" is, indeed, the
l dominant word in that all the companies
y affiliated or associated with the principal
corporation, PEBV, are known in the
o Philippines and abroad as the PHILIPS Group
r of Companies.

c Respondents maintain, however, that

o Petitioners did not present an iota of proof of
n actual confusion or deception of the public
f much less a single purchaser of their product
u who has been deceived or confused or
s showed any likelihood of confusion. It is
i settled, however, that proof of actual
n confusion need not be shown. It suffices that
g confusion is probably or likely to occur (6
l Fletcher [Perm Ed], pp. 107-108, enumerating
y a long line of cases).

s It may be that Private Respondent's products

i also consist of chain rollers, belts, bearing and
m the like, while petitioners deal principally with
i electrical products. It is significant to note,
l however, that even the Director of Patents
a had denied Private Respondent's application
r for registration of the trademarks "Standard
Philips & Device" for chain, rollers, belts,
to that of any existing corporation or to bearings and cutting saw. That office held that
any other name already protected by PEBV, "had shipped to its subsidiaries in the
law; or Philippines equipment, machines and their
parts which fall under international class
where "chains, rollers, belts, bearings and
(c) patently deceptive, confusing or contrary to
cutting saw," the goods in connection with
existing law.
which Respondent is seeking to register
'STANDARD PHILIPS' . . . also belong" ( Inter
The right to the exclusive use of a corporate Partes Case No. 2010, June 17, 1988,
name with freedom from infringement by SEC Rollo).
similarity is determined by priority of adoption
(1 Thompson, p. 80 citing Munn v. Americana
Furthermore, the records show that among
Co., 82 N. Eq. 63, 88 Atl. 30; San Francisco
Private Respondent's primary purposes in its
Oyster House v. Mihich, 75 Wash. 274, 134
Articles of Incorporation (Annex D, Petition p.
Pac. 921). In this regard, there is no doubt
37, Rollo) are the following:
with respect to Petitioners' prior adoption of'
the name ''PHILIPS" as part of its corporate
name. Petitioners Philips Electrical and Philips To buy, sell, barter, trade,
Industrial were incorporated on 29 August manufacture, import, export,
1956 and 25 May 1956, respectively, while or otherwise acquire, dispose
Respondent Standard Philips was issued a of, and deal in and deal with
Certificate of Registration on 12 April 1982, any kind of goods, wares, and
twenty-six (26) years later (Rollo, p. 16). merchandise such as but not
Petitioner PEBV has also used the trademark limited to plastics, carbon
"PHILIPS" on electrical lamps of all types and products, office stationery and
their accessories since 30 September 1922, supplies, hardware
as evidenced by Certificate of Registration No. parts, electrical wiring
1651. devices, electrical component
parts, and/or complement
of industrial, agricultural or
The second requisite no less exists in this
commercial machineries,
case. In determining the existence of
constructive
confusing similarity in corporate names, the
 supplies, electrical
supplies and other
merchandise which are or may
become articles of commerce
except food, drugs and
cosmetics and to carry on
such business as
manufacturer, distributor,
dealer, indentor, factor,
manufacturer's representative
capacity for domestic or
foreign companies. (emphasis
ours)
For its part, Philips Electrical also includes,
among its primary purposes, the following:
To develop manufacture and
deal in electrical products,
including electronic,
mechanical and other similar
products . . . (p. 30, Record of
SEC Case No. 2743)
Given Private Respondent's aforesaid
underlined primary purpose, nothing could
prevent it from dealing in the same line of
business of electrical devices, products or
supplies which fall under its primary purposes.
Besides, there is showing that Private
Respondent not only manufactured and sold
ballasts for fluorescent lamps with their
corporate name printed thereon but also
advertised the same as, among others,
Standard Philips (TSN, before the SEC, pp.
14, 17, 25, 26, 37-42, June 14, 1985; pp. 16-
19, July 25, 1985). As aptly pointed out by
Petitioners, [p]rivate respondent's choice of
"PHILIPS" as part of its corporate name
[STANDARD PHILIPS CORPORATION] . . .
tends to show said respondent's intention to
ride on the popularity and established goodwill
of said petitioner's business throughout the
world" (Rollo, p. 137). The subsequent
appropriator of the name or one confusingly
similar thereto usually seeks an unfair
advantage, a free ride of another's goodwill
(American Gold Star Mothers, Inc. v. National
Gold Star Mothers, Inc., et al, 89 App DC 269,
191 F 2d 488).
In allowing Private Respondent the continued
use of its corporate name, the SEC maintains
that the corporate names of Petitioners
PHILIPS ELECTRICAL LAMPS. INC. and
PHILIPS INDUSTRIAL DEVELOPMENT, INC.
contain at least two words different from that
of the corporate name of respondent
STANDARD PHILIPS CORPORATION, which
words will readily identify Private Respondent
from Petitioners and vice-versa.
True, under the Guidelines in the Approval of
Corporate and Partnership Names formulated
by the SEC, the proposed name "should not
be similar to one already used by another
corporation or partnership. If the proposed
name contains a word already used as part of
the firm name or style of a registered
company; the proposed name must contain
two other words different from the company
already registered" (Emphasis ours). It is then
pointed out that Petitioners Philips Electrical
and Philips Industrial have two words different
from that of Private Respondent's name.
What is lost sight of, however, is that PHILIPS
is a trademark or trade name which was
registered as far back as 1922. Petitioners,
therefore, have the exclusive right to its use
which must be free from any infringement by
similarity. A corporation has an exclusive right
to the use of its name, which may be
protected by injunction upon a principle similar
to that upon which persons are protected in
the use of trademarks and tradenames (18
C.J.S. 574). Such principle proceeds upon the
theory that it is a fraud on the corporation
which has acquired a right to that name and
perhaps carried on its business thereunder,
that another should attempt to use the same
name, or the same name with a slight
variation in such a way as to induce persons
to deal with it in the belief that they are
dealing with the corporation which has given a
reputation to the name (6 Fletcher [Perm Ed],
pp. 39-40, citing Borden Ice Cream Co. v.
Borden's Condensed Milk Co., 210 F 510).
Notably, too, Private Respondent's name
actually contains only a single word, that is,
"STANDARD", different from that of
Petitioners inasmuch as the inclusion of the
term "Corporation" or "Corp." merely serves
the Purpose of distinguishing the corporation
from partnerships and other business
organizations.
The fact that there are other companies
engaged in other lines of business using the
word "PHILIPS" as part of their corporate
names is no defense and does not warrant
the use by Private Respondent of such word
which constitutes an essential feature of
Petitioners' corporate name previously
adopted and registered and-having acquired
the status of a well-known mark in the
Philippines and internationally as well (Bureau
of Patents Decision No. 88-35 [TM], June 17,
1988, SEC Records).
In support of its application for the registration
of its Articles of Incorporation with the SEC,
Private Respondent had submitted an
undertaking "manifesting its willingness to
change its corporate name in the event
another person, firm or entity has acquired a
prior right to the use of the said firm name or
one deceptively or confusingly similar to it."
Private respondent must now be held to its
undertaking.
As a general rule, parties
organizing a corporation must
choose a name at their peril;
and the use of a name similar
to one adopted by another
corporation, whether a
business or a nonbusiness or
non-profit organization if
misleading and likely to injure
 it in the exercise in its
corporate functions,
regardless of intent, may be
prevented by the corporation
having the prior right, by a suit
for injunction against the new
corporation to prevent the use
of the name (American Gold
Star Mothers, Inc. v. National
Gold Star Mothers, Inc., 89
App DC 269, 191 F 2d 488, 27
ALR 2d 948).

WHEREFORE, the Decision of the Court of

Appeals dated 31 July 1990, and its
Resolution dated 20 November 1990, are SET
ASIDE and a new one entered ENJOINING
private respondent from using "PHILIPS" as a
feature of its corporate name, and
ORDERING the Securities and Exchange
Commission to amend private respondent's
Articles of Incorporation by deleting the word
PHILIPS from the corporate name of private
respondent.

No costs.

SO ORDERED.

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.:
This petition for review on certiorari assails the
Court of Appeals (CA) decision1 and
resolution2 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.
5. Bounded Areas
North by National High Way; East by Bricio
Gerona; South by Serapio Abijaron and West
by Feliz Cosio xxx. 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 decision7 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
organize14 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
corporation15 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-in-interest.
On the other hand, there is sufficient basis to
affirm the title of SDA-NEMM. The factual
findings of the trial court in this regard were
not convincingly disputed. This Court is not a
trier of facts. Only questions of law are the
proper subject of a petition for review on
certiorari.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 xxx he
acknowledged that the same was his xxx but
that it was not his intention to sell the
controverted property because he had
previously donated the same lot to the South
Philippine Union Mission of SDA Church of
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 xxx
Article 1318 of the Civil Code, except that
the consideration of P2,000.00 is somewhat
insufficient for a [1,069-square meter] land.
Would then this inadequacy of the
consideration render the contract invalid?

Article 1355 of the Civil Code provides:

Except in cases specified by law, lesion or

inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake
or undue influence.

No evidence [of fraud, mistake or undue

influence] was adduced by [petitioners].

xxx

Well-entrenched is the rule that a Certificate

of Title is generally a conclusive evidence
of [ownership] of the land. There is that
strong and solid presumption that titles were
legally issued and that they are valid. It is
irrevocable and indefeasible and the duty of
the Court is to see to it that the title is
maintained and respected unless challenged
in a direct proceeding. xxx The title shall be
received as evidence in all the Courts and
shall be conclusive as to all matters contained
therein.

[This action was instituted almost seven years

after the certificate of title in respondents’
name was issued in 1980.]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 xxx

transfers the ownership from the vendor to the
vendee who may thereafter exercise the rights
of an owner over the same21

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.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19118             January 30, 1965
MARIANO A. ALBERT, plaintiff-appellant,
vs.
UNIVERSITY PUBLISHING CO.,
INC., defendant-appellee.
Uy & Artiaga and Antonio M. Molina for
plaintiff-appellant.
Aruego, Mamaril & Associates for defendant-
appellees.
BENGZON, J.P., J.:
No less than three times have the parties here
appealed to this Court.
In Albert vs. University Publishing Co., Inc., L-
9300, April 18, 1958, we found plaintiff entitled
to damages (for breach of contract) but
reduced the amount from P23,000.00 to
P15,000.00.
Then in Albert vs. University Publishing Co.,
Inc., L-15275, October 24, 1960, we held that
the judgment for P15,000.00 which had
become final and executory, should be
executed to its full amount, since in fixing it,
payment already made had been considered.
Now we are asked whether the judgment may
be executed against Jose M. Aruego,
supposed President of University Publishing
Co., Inc., as the real defendant.
Fifteen years ago, on September 24, 1949,
Mariano A. Albert sued University Publishing
Co., Inc. Plaintiff alleged inter alia that
defendant was a corporation duly organized
and existing under the laws of the Philippines;
that on July 19, 1948, defendant, through
Jose M. Aruego, its President, entered into a
contract with plaintifif; that defendant had
thereby agreed to pay plaintiff P30,000.00 for
the exclusive right to publish his revised
Commentaries on the Revised Penal Code
and for his share in previous sales of the
book's first edition; that defendant had
undertaken to pay in eight quarterly
installments of P3,750.00 starting July 15,
1948; that per contract failure to pay one
installment would render the rest due; and
that defendant had failed to pay the second
installment.
Defendant admitted plaintiff's allegation of
defendant's corporate existence; admitted the
execution and terms of the contract dated July
19, 1948; but alleged that it was plaintiff who
breached their contract by failing to deliver his
manuscript. Furthermore, defendant
counterclaimed for damages. 1äwphï1.ñët
Plaintiff died before trial and Justo R. Albert,
his estate's administrator, was substituted for
him.
The Court of First Instance of Manila, after
trial, rendered decision on April 26, 1954,
stating in the dispositive portion —
IN VIEW OF ALL THE FOREGOING,
the Court renders judgment in favor of
the plaintiff and against the defendant
the University Publishing Co., Inc.,
ordering the defendant to pay the
administrator Justo R. Albert, the sum
of P23,000.00 with legal [rate] of
interest from the date of the filing of
this complaint until the whole amount
shall have been fully paid. The
defendant shall also pay the costs.
The counterclaim of the defendant is
hereby dismissed for lack of evidence.
As aforesaid, we reduced the amount of
damages to P15,000.00, to be executed in
full. Thereafter, on July 22, 1961, the court a
quo ordered issuance of an execution writ
against University Publishing Co., Inc.
Plaintiff, however, on August 10, 1961,
petitioned for a writ of execution against Jose
M. Aruego, as the real defendant, stating,
"plaintiff's counsel and the Sheriff of Manila
discovered that there is no such entity as
University Publishing Co., Inc." Plaintiff
annexed to his petition a certification from the
securities and Exchange Commission dated
July 31, 1961, attesting: "The records of this
Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either
as a corporation or partnership." "University
Publishing Co., Inc." countered by filing,
through counsel (Jose M. Aruego's own law
firm), a "manifestation" stating that "Jose M.
Aruego is not a party to this case," and that,
therefore, plaintiff's petition should be denied.
Parenthetically, it is not hard to decipher why
"University Publishing Co., Inc.," through
counsel, would not want Jose M. Aruego to be
considered a party to the present case: should
a separate action be now instituted against
Jose M. Aruego, the plaintiff will have to
reckon with the statute of limitations.
The court a quo denied the petition by order of
September 9, 1961, and from this, plaintiff has
appealed.
The fact of non-registration of University
Publishing Co., Inc. in the Securities and
Exchange Commission has not been
disputed. Defendant would only raise the point
that "University Publishing Co., Inc.," and not
Jose M. Aruego, is the party defendant;
thereby assuming that "University Publishing
Co., Inc." is an existing corporation with an
independent juridical personality. Precisely,
however, on account of the non-registration it
cannot be considered a corporation, not even
a corporation de facto (Hall vs. Piccio, 86 Phil.
603). It has therefore no personality separate
from Jose M. Aruego; it cannot be sued
independently.
The corporation-by-estoppel doctrine has not
been invoked. At any rate, the same is
inapplicable here. Aruego represented a non-
existent entity and induced not only the
plaintiff but even the court to believe in such
representation. He signed the contract as
"President" of "University Publishing Co.,
Inc.," stating that this was "a corporation duly
organized and existing under the laws of the
Philippines," and obviously misled plaintiff
(Mariano A. Albert) into believing the same.
One who has induced another to act upon his
wilful misrepresentation that a corporation was
duly organized and existing under the law,
cannot thereafter set up against his victim the
principle of corporation by estoppel
(Salvatiera vs. Garlitos, 56 O.G. 3069).
"University Publishing Co., Inc." purported to
come to court, answering the complaint and
litigating upon the merits. But as stated,
"University Publishing Co., Inc." has no
independent personality; it is just a name.
Jose M. Aruego was, in reality, the one who
answered and litigated, through his own law
firm as counsel. He was in fact, if not, in
name, the defendant.
Even with regard to corporations duly
organized and existing under the law, we
have in many a case pierced the veil of
corporate fiction to administer the ends of
justice. * And in Salvatiera vs. Garlitos, supra,
p. 3073, we ruled: "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." Had
Jose M. Aruego been named as party
defendant instead of, or together with,
"University Publishing Co., Inc.," there would
be no room for debate as to his personal
liability. Since he was not so named, the
matters of "day in court" and "due process"
have arisen.
In this connection, it must be realized that
parties to a suit are "persons who have a right
to control the proceedings, to make defense,
to adduce and cross-examine witnesses, and
to appeal from a decision" (67 C.J.S. 887) —
and Aruego was, in reality, the person who
had and exercised these rights. Clearly, then,
Aruego had his day in court as the real
defendant; and due process of law has been
substantially observed.
By "due process of law" we mean " "a law
which hears before it condemns; which
proceeds upon inquiry, and renders judgment
only after trial. ... ." (4 Wheaton, U.S. 518,
581.)"; or, as this Court has said, " "Due
process of law" contemplates notice and
opportunity to be heard before judgment is
rendered, affecting one's person or property"
(Lopez vs. Director of Lands, 47 Phil. 23, 32)."
(Sicat vs. Reyes, L-11023, Dec. 14, 1956.)
And it may not be amiss to mention here also
that the "due process" clause of the
Constitution is designed to secure justice as a
living reality; not to sacrifice it by paying
undue homage to formality.
For substance must prevail over form. It may
now be trite, but none the less apt, to quote
what long ago we said in Alonso vs. Villamor,
16 Phil. 315, 321-322:
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 side 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.
The evidence is patently clear that Jose M.
Aruego, acting as representative of a non-
existent principal, was the real party to the
contract sued upon; that he was the one who
reaped the benefits resulting from it, so much
so that partial payments of the consideration
were made by him; that he violated its terms,
thereby precipitating the suit in question; and
that in the litigation he was the real defendant.
Perforce, in line with the ends of justice,
responsibility under the judgment falls on him.
We need hardly state that should there be
persons who under the law are liable to
Aruego for reimbursement or contribution with
respect to the payment he makes under the
judgment in question, he may, of course,
proceed against them through proper
remedial measures.
PREMISES CONSIDERED, the order
appealed from is hereby set aside and the
case remanded ordering the lower court to
hold supplementary proceedings for the
purpose of carrying the judgment into effect
against University Publishing Co., Inc. and/or
Jose M. Aruego. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 22106           September 11, 1924
ASIA BANKING CORPORATION, plaintiff-
appellee,
vs.
STANDARD PRODUCTS, CO.,
INC., defendant-appellant.
Charles C. De Selms for appellant.
Gibbs & McDonough and Roman Ozaeta for
appellee.
OSTRAND, J.:
This action is brought to recover the sum of
P24,736.47, the balance due on the following
promissory note:
P37,757.22
MANILA, P. I.,     Nov. 28, 1921.
MANILA, P. I., Nov. 28, 1921.
On demand, after date we promise to
pay to the Asia Banking Corporation,
or order, the sum of thirty-seven
thousand seven hundred fifty-seven
and 22/100 pesos at their office in
Manila, for value received, together
with interest at the rate of ten per cent
per annum.
No. ________ Due __________
THE STANDARD PRODUCTS CO., INC.
        By     (Sgd.) GEORGE H. SEAVER
                By     President
The court below rendered judgment in favor of
the plaintiff for the sum demanded in the
complaint, with interest on the sum of
P24,147.34 from November 1, 1923, at the
rate of 10 per cent per annum, and the costs.
From this judgment the defendant appeals to
this court.
At the trial of the case the plaintiff failed to
prove affirmatively the corporate existence of
the parties and the appellant insists that under
these circumstances the court erred in finding
that the parties were corporations with juridical
personality and assigns same as reversible
error.
There is no merit whatever in the appellant's
contention. The general rule is that in the
absence of fraud a person who has
contracted or otherwise dealt with an
association in such a way as to recognize and
in effect admit its legal existence as a
corporate body is thereby estopped to deny its
corporate existence in any action leading out
of or involving such contract or dealing, unless
its existence is attacked for cause which have
arisen since making the contract or other
dealing relied on as an estoppel and this
applies to foreign as well as to domestic
corporations. (14 C. J., 227; Chinese
Chamber of Commerce vs. Pua Te Ching, 14
Phil., 222.)
The defendant having recognized the
corporate existence of the plaintiff by making
a promissory note in its favor and making
partial payments on the same is therefore
estopped to deny said plaintiff's corporate
existence. It is, of course, also estopped from
denying its own corporate existence. Under
these circumstances it was unnecessary for
the plaintiff to present other evidence of the
corporate existence of either of the parties. It
may be noted that there is no evidence
showing circumstances taking the case out of
the rules stated.
The judgment appealed from is affirmed, with
the costs against the appellant. So ordered.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18173             April 22, 1968
BISAYA LAND TRANSPORTATION
COMPANY, INC., petitioner-appellee,
vs.
MIGUEL CUENCO, respondent-appellant.
Pedro L. Albino, Nicolas Jumapao, Leoncio P.
Abarquez and Norberto J. Quisumbing for
petitioner-appellee.
Efrain C. Pelaez and Miguel Cuenco for
respondent-appellant.
MAKALINTAL, J.:
In 1959 the Solicitor General, in
representation of the Republic, filed a petition
for quo warranto against the Bisaya Land
Transportation. Co., Inc., seeking its forcible
dissolution on the ground that it had
committed and was continuing to commit acts
amounting to a forfeiture of its franchise, rights
and privileges. The petition was docketed as
special civil case No. 39766, Court of First
Instance of Manila. Impleaded with the
corporation as respondents were its officers,
namely, Miguel Cuenco, Manuel Cuenco,
Lourdes Cuenco, Jose P. Velez, Federico A.
Reyes and Jesus P. Velez. Alleged in nine
separate causes of action were numerous
violations of law and of the articles of
incorporation, transactions and activities
beyond the corporate powers, fraudulent
machinations and channeling of funds and
properties for extra-corporate purposes, and
acts of mismanagement on the part of the co-
respondents above-mentioned. The petitioner
prayed that during the pendency of the case a
receiver be appointed for the assets of the
corporation.
Miguel Cuenco filed his individual answer to
the petition, admitting the allegations therein
insofar as the offending acts of the
corporation and of the other individual
respondents were concerned but disclaiming
any participation in such acts by him. He
joined in the prayer for dissolution as well as
for the appointment of a receiver, and at the
same time filed a cross-claim "in his own
behalf as bonafide stockholder and as director
. . . for the benefit of cross-respondent
corporation." In the eighteen causes of action
constituting the cross-claim Miguel Cuenco
attributed to the individual cross-respondents,
as members of the board of directors of the
corporation, the commission of acts which
"offend the law of its creation as well as
several applicable statutes, rules and
regulations adopted by the Republic of the
Philippines." On the cross-claim he prayed
that said individual cross-respondents be
ordered to return and/or reimburse to the
Corporation different sums of money
aggregating several million pesos, such return
and/or reimbursement being, according to
him, "a condition precedent to the receipt of
said cross-respondents of any share in the
liquidating dividends of the cross-respondent
corporation once its dissolution is decreed by
the court."
On August 31, 1959 Miguel Cuenco, as cross-
claimant, filed a notice of lis pendens with the
Register of Deeds for the City of Cebu,
covering real properties of the Bisaya Land
Transportation Co., Inc., with transfer
certificates of title Nos. 4293 and 3425. On
November 17, 1959 the corporation went to
the Court of First Instance of Cebu and in the
original land registration records of said
properties filed a petition for the cancellation
of the notice of lis pendens, making Miguel
Cuenco the party-respondent. The latter
presented his written opposition, and after
hearing, the court (Hon. Jose S. Rodriguez
presiding), in its decision rendered September
29, 1960, held the annotation of lis
pendens to be irregular and unwarranted and
so ordered its cancellation. It is from that
decision that the present appeal has been
taken.
The subject of lis pendens is dealth with
expressly in Rule 14 (formerly Rule 7),
Section 24 of the Rules of Court, and
indirectly in Section 79 of the Land
Registration Act. They provide:
Sec. 24. Notice of lis pendens. — In
an action affecting the title or the right
of possession of real property, the
plaintiff, at the time of filing the
complaint, and the defendant, at the
time of filing his answer, when
affirmative relief is claimed in such
answer, or at any time afterwards,
may record in the office of the registrar
of deeds of the province in which the
property is situated a notice of the
pendency of the action, containing the
names of the parties and the object of
the action or defense, and a
 description of the property in that
province affected thereby. From the
time only of filing such notice for
record shall a purchaser, or
incumbrancer of the property affected
thereby, be deemed to have
constructive notice of the pendency of
the action, and only of its pendency
against parties designated by their
real names.
The notice of lis pendens hereinabove
mentioned may be cancelled only
upon order of the court, after proper
showing that the notice is for the
purpose of molesting the adverse
party, or that it is not necessary to
protect the rights of the party who
caused it to be recorded.
Sec. 79. — No action to recover
possession of real estate, or to quiet
title thereto or to remove clouds upon
the title thereof, or for the partition or
other proceeding of any kind in court
affecting the title to real estate or the
use and occupation thereof or the
buildings thereon, and no judgment or
decree, and no proceeding to vacate
or reverse any judgment or decree,
shall have any effect upon registered
land as against persons other than
parties thereto, unless a memorandum
stating the institution of such action or
proceeding and the court wherein the
same is pending and the date of the
institution thereof, containing also a
reference to the number of the
certificate of title of the land affected,
and the volume and page of the
registration book where it is entered,
shall be filed and registered. This
section shall not apply to attachments,
levies or execution, or to proceedings
for the probate of wills or for
administration of estates of deceased
persons in the Court of First
Instance; provided, however, That in
the case of notice of the pendency of
the action has been duly registered it
shall be sufficient to register the
judgment or decree in such action
within sixty days after the rendition
thereof.
Section 24 of Rule 14 authorizes a notice
of lis pendens to be filed by the plaintiff, as
well as by the defendant when affirmative
relief is claimed in his answer. In either case
the action must affect the title or the right of
possession of real property. The same
requirement is prescribed in Section 79 of the
Land Registration Act.
The crux of the question here is whether or
not the petition for quo warranto filed by the
Solicitor General for the dissolution of the
appellee corporation affects the latter's title or
right of possession to the real properties
subject of the lis pendens. In none of the nine
causes of action included in the Solicitor
General's petition below is there any
allegation which puts in issue such title or right
of possession. The only issue raised is the
propriety of the dissolution of the corporation
upon the grounds set forth in the petition. To
be sure, dissolution of a corporate entity
would result in the liquidation of its assets and
the termination of its title to and right to
possess its properties, but this does not mean
that they are affected by the action in the
sense which would justify the notation of lis
pendens.
A notice of lis pendens is intended for third
persons, such as purchasers or
incumbrancers of the property in litigation, to
the end that the transactions entered into by
them subsequent to the notation may be
subject to whatever judgment may be
rendered. The very purpose of this procedural
remedy circumscribes its availability to real
actions, that is, actions where the title to or
possession of real property is directly affected.
Thus, for instance, a purchaser of property
involved in an action may lose the same to the
winning party therein by virtue of the notice
of lis pendens made prior to the purchase.
This result could not conceivably arise in the
present case. Neither the Republic nor
respondent cross-claimant Miguel Cuenco
lays any claim of right or title to the lands
covered by the notice: they admit ownership
thereof by the corporation; indeed the cross-
claim is for the latter's benefit and against the
other individual cross-respondents, who
likewise do not claim any right or title to the
said properties. As far as the cross-claim is
concerned it merely prays that the cross-
respondents be ordered to reimburse the
corporation certain sums of money allegedly
realized by them as a result of their fraudulent
transactions. The title to or right to posseses
the properties subject of the lis pendens is
nowhere in issue.
The fact that in case the petitioning
corporation is dissolved its assets will be
liquidated and distributed among the
stockholders, after paying off the creditors,
and that part of those assets as of the present
consists of the properties now in question,
does not convert this proceeding into a real
action involving the title to these properties so
as to justify the notation of lis pendens. The
rights of the stockholders to the assets will
arise only after dissolution of the corporation,
and even then they cannot individually lay
claim to any particular property or any part
thereof as their own except as a result of the
liquidation. They have therefore no title or
possessory right to protect by the notice.
Appellant cites the case of Register of Deeds
vs. Magdalena Estate, Inc., G.R. No. L-9102,
May 22, 1959. The citation is not in point. The
main issue there involved the power and
jurisdiction of the Court of First Instance of
Manila, Branch IV, to order the registered
owner of real property to surrender his copy of
the certificate of title so that a notice of lis
pendens may be annotated thereon,
considering that at the time the power and
jurisdiction of said court with respect to
"consultas" from Registers of Deeds had been
transferred by Republic Act No. 1151 to the
Land Registration Commissioner. The
decision dealth but briefly on the question of
whether or not the notation of lis pendens was
proper. This Court held that it was, on the
ground that "the complaint . . . involves a real
action and not a personal one," since the
plaintiffs claimed that they were entitled to 25
per cent of all the assets of the defendant
corporation, including the properties covered
by the notice of lis pendens. There is no
similar claim or pretension in the present
case. The appellee corporation is admittedly
the owner of the properties, and until it is
dissolved and liquidated no question as to the
title to or possession thereof will arise vis-a-vis
the stockholders as such.
1äwphï1.ñët
WHEREFORE, the decision appealed from is
affirmed, with costs.1äwphï1.ñët
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-2598             June 29, 1950
C. ARNOLD HALL and BRADLEY P.
HALL, petitioners,
vs.
EDMUNDO S. PICCIO, Judge of the Court
of First Instance of Leyte, FRED BROWN,
EMMA BROWN, HIPOLITA CAPUCIONG, in
his capacity as receiver of the Far Eastern
Lumber and Commercial Co.,
Inc., respondents.
Claro M. Recto for petitioners.
Ramon Diokno and Jose W. Diokno for
respondents.
BENGZON, J.:
This is petition to set aside all the proceedings
had in civil case No. 381 of the Court of First
Instance of Leyte and to enjoin the
respondent judge from further acting upon the
same.
Facts: (1) on May 28, 1947, the petitioners C.
Arnold Hall and Bradley P. Hall, and the
respondents Fred Brown, Emma Brown,
Hipolita D. Chapman and Ceferino S. Abella,
signed and acknowledged in Leyte, the article
of incorporation of the Far Eastern Lumber
and Commercial Co., Inc., organized to
engage in a general lumber business to carry
on as general contractors, operators and
managers, etc. Attached to the article was an
affidavit of the treasurer stating that 23,428
shares of stock had been subscribed and fully
paid with certain properties transferred to the
corporation described in a list appended
thereto.
(2) Immediately after the execution of said
articles of incorporation, the corporation
proceeded to do business with the adoption of
by-laws and the election of its officers.
(3) On December 2, 1947, the said articles of
incorporation were filed in the office of the
Securities and Exchange Commissioner, for
the issuance of the corresponding certificate
of incorporation.
(4) On March 22, 1948, pending action on the
articles of incorporation by the aforesaid
governmental office, the respondents Fred
Brown, Emma Brown, Hipolita D. Chapman
and Ceferino S. Abella filed before the Court
of First Instance of Leyte the civil case
numbered 381, entitled "Fred Brown et al. vs.
Arnold C. Hall et al.", alleging among other
things that the Far Eastern Lumber and
Commercial Co. was an unregistered
partnership; that they wished to have it
dissolved because of bitter dissension among
the members, mismanagement and fraud by
the managers and heavy financial losses.
(5) The defendants in the suit, namely, C.
Arnold Hall and Bradley P. Hall, filed a motion
to dismiss, contesting the court's jurisdiction
and the sufficiently of the cause of action.
(6) After hearing the parties, the Hon. Edmund
S. Piccio ordered the dissolution of the
company; and at the request of plaintiffs,
appointed of the properties thereof, upon the
filing of a P20,000 bond.
(7) The defendants therein (petitioners herein)
offered to file a counter-bond for the discharge
of the receiver, but the respondent judge
refused to accept the offer and to discharge
the receiver. Whereupon, the present special
civil action was instituted in this court. It is
based upon two main propositions, to wit:
(a) The court had no jurisdiction in civil case
No. 381 to decree the dissolution of the
company, because it being a de
facto corporation, dissolution thereof may only
be ordered in a quo warranto proceeding
instituted in accordance with section 19 of the
Corporation Law.
(b) Inasmuch as respondents Fred Brown and
Emma Brown had signed the article of
incorporation but only a partnership.
Discussion: The second proposition may at
once be dismissed. All the parties are
informed that the Securities and Exchange
Commission has not, so far, issued the
corresponding certificate of incorporation. All
of them know, or sought to know, that the
personality of a corporation begins to exist
only from the moment such certificate is
issued — not before (sec. 11, Corporation
Law). The complaining associates have not
represented to the others that they were
incorporated any more than the latter had
made similar representations to them. And as
nobody was led to believe anything to his
prejudice and damage, the principle of
estoppel does not apply. Obviously this is not
an instance requiring the enforcement of
contracts with the corporation through the rule
of estoppel.
There might be room for argument on the right
of minority stockholders to sue for
dissolution;1 but that question does not affect
the court's jurisdiction, and is a matter for
decision by the judge, subject to review on
appeal. Whkch brings us to one principal
reason why this petition may not prosper,
namely: the petitioners have their remedy by
appealing the order of dissolution at the
proper time.

The first proposition above stated is premised There is a secondary issue in connection with
on the theory that, inasmuch as the Far the appointment of a receiver. But it must be
Eastern Lumber and Commercial Co., is a de admitted that receivership is proper in
facto corporation, section 19 of the proceedings for dissolution of a company or
Corporation Law applies, and therefore the corporation, and it was no error to reject the
court had not jurisdiction to take cognizance counter-bond, the court having declared the
of said civil case number 381. Section 19 dissolution. As to the amount of the bond to
reads as follows: be demanded of the receiver, much depends
upon the discretion of the trial court, which in
. . . The due incorporation of any this instance we do not believe has been
corporations claiming in good faith to clearly abused.
be a corporation under this Act and its
right to exercise corporate powers
shall not be inquired into collaterally in
any private suit to which the
corporation may be a party, but such
inquiry may be had at the suit of the
Insular Government on information of
the Attorney-General.

There are least two reasons why this section

does not govern the situation. Not having
obtained the certificate of incorporation, the
Far Eastern Lumber and Commercial Co. —
even its stockholders — may not probably
claim "in good faith" to be a corporation.

Under our statue it is to be noted

(Corporation Law, sec. 11) that it is
the issuance of a certificate of
incorporation by the Director of the
Bureau of Commerce and Industry
which calls a corporation into being.
The immunity if collateral attack is
granted to corporations "claiming in
good faith to be a corporation under
this act." Such a claim is compatible
with the existence of errors and
irregularities; but not with a total or
substantial disregard of the law.
Unless there has been an evident
attempt to comply with the law the
claim to be a corporation "under this
act" could not be made "in good faith."
(Fisher on the Philippine Law of Stock
Corporations, p. 75. See
also Humphreys vs. Drew, 59 Fla.,
295; 52 So., 362.)

Second, this is not a suit in which the

corporation is a party. This is a litigation
between stockholders of the alleged
corporation, for the purpose of obtaining its
dissolution. Even the existence of a de
jure corporation may be terminated in a
private suit for its dissolution between
stockholders, without the intervention of the
state.

Republic of the Philippines
SUPREME COURT
Manila
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.
PUNO, J.:
This petition for certiorari seeks to annul and
set aside the decision of the Regional Trial
Court, Branch 58, Angeles City which ordered
the Municipal Circuit Trial Court, Mabalacat
and Magalang, Pampanga to dismiss Civil
Case No. 1214 for lack of jurisdiction.
The facts are undisputed. On December 19,
1995, petitioner Reynaldo M. Lozano filed
Civil Case No. 1214 for damages against
respondent Antonio Anda before the
Municipal Circuit Trial Court (MCTC),
Mabalacat and Magalang, Pampanga.
Petitioner alleged that he was the president of
the Kapatirang Mabalacat-Angeles Jeepney
Drivers' Association, Inc. (KAMAJDA) while
respondent Anda was the president of the
Samahang Angeles-Mabalacat Jeepney
Operators' and Drivers' Association, Inc.
(SAMAJODA); in August 1995, upon the
request of the Sangguniang Bayan of
Mabalacat, Pampanga, petitioner and private
respondent agreed to consolidate their
respective associations and form the Unified
Mabalacat-Angeles Jeepney Operators' and
Drivers Association, Inc. (UMAJODA);
petitioner and private respondent also agreed
to elect one set of officers who shall be given
the sole authority to collect the daily dues from
the members of the consolidated association;
elections were held on October 29, 1995 and
both petitioner and private respondent ran for
president; petitioner won; private respondent
protested and, alleging fraud, refused to
recognize the results of the election; private
respondent also refused to abide by their
agreement and continued collecting the dues
from the members of his association despite
several demands to desist. Petitioner was
thus constrained to file the complaint to
restrain private respondent from collecting the
dues and to order him to pay damages in the
amount of P25,000.00 and attorney's fees of
P500.00.  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.   It2
denied reconsideration on March 8, 1996.  3
Private respondent filed a petition
for certiorari before the Regional Trial Court,
Branch 58, Angeles City.   The trial court
4
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.   It denied reconsideration
5
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:
Sec. 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.
(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 over 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.   This jurisdiction is determined by
8
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.   The
10
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
11
of the SEC is the supervision and control of
corporations, partnership and associations
with the end in view that investments in these
entities may be encouraged and protected,
and their 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 is 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.   When the SEC,
13
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.   The new consolidated
14
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   advanced by private respondent
16
cannot override jurisdictional requirements.
Jurisdiction is fixed by law and is not subject
to the agreement of the parties.   It cannot be
17
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.   It applies when
19
persons assume to form a corporation and
exercise corporate functions and enter into
business relations with third person. 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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11442             May 23, 1958
MANUELA T. VDA. DE
SALVATIERRA, petitioner,
vs.
HON. LORENZO C. GARLITOS, in his
capacity as Judge of the Court of First
Instance of Leyte, Branch II, and
SEGUNDINO REFUERZO, respondents.
Jimenez, Tantuico, Jr. and Tolete for
petitioner.
Francisco Astilla for respondent Segundino
Refuerzo.
FELIX, J.:
This is a petition for certiorari filed by Manuela
T. Vda. de Salvatierra seeking to nullify the
order of the Court of First Instance of Leyte in
Civil Case No. 1912, dated March 21, 1956,
relieving Segundino Refuerzo of liability for
the contract entered into between the former
and the Philippine Fibers Producers Co., Inc.,
of which Refuerzo is the president. The facts
of the case are as follows:
Manuela T. Vda. de Salvatierra appeared to
be the owner of a parcel of land located at
Maghobas, Poblacion, Burauen, Teyte. On
March 7, 1954, said landholder entered into a
contract of lease with the Philippine Fibers
Producers Co., Inc., allegedly a corporation
"duly organized and existing under the laws of
the Philippines, domiciled at Burauen, Leyte,
Philippines, and with business address
therein, represented in this instance by Mr.
Segundino Q. Refuerzo, the President". It was
provided in said contract, among other things,
that the lifetime of the lease would be for a
period of 10 years; that the land would be
planted to kenaf, ramie or other crops suitable
to the soil; that the lessor would be entitled to
30 per cent of the net income accruing from
the harvest of any, crop without being
responsible for the cost of production thereof;
and that after every harvest, the lessee was
bound to declare at the earliest possible time
the income derived therefrom and to deliver
the corresponding share due the lessor.
Apparently, the aforementioned obligations
imposed on the alleged corporation were not
complied with because on April 5, 1955,
Alanuela T. Vda, de Salvatierra filed with the
Court of First Instance of Leyte a complaint
against the Philippine Fibers Producers Co.,
Inc., and Segundino Q. Refuerzo, for
accounting, rescission and damages (Civil
Case No. 1912). She averred that sometime
in April, 1954, defendants planted kenaf on 3
hectares of the leased property which crop
was, at the time of the commencement of the
action, already harvested, processed and sold
by defendants; that notwithstanding that fact,
defendants refused to render an accounting of
the income derived therefrom and to deliver
the lessor's share; that the estimated gross
income was P4,500, and the deductible
expenses amounted to P1,000; that as
defendants' refusal to undertake such task
was in violation of the terms of the covenant
entered into between the plaintiff and
defendant corporation, a rescission was but
proper.
As defendants apparently failed to file their
answer to the complaint, of which they were
allegedly notified, the Court declared them in
default and proceeded to receive plaintiff's
evidence. On June 8, 1955, the lower Court
rendered judgment granting plaintiff's prayer,
and required defendants to render a complete
accounting of the harvest of the land subject
of the proceeding within 15 days from receipt
of the decision and to deliver 30 per cent of
the net income realized from the last harvest
to plaintiff, with legal interest from the date
defendants received payment for said crop. It
was further provide that upon defendants'
failure to abide by the said requirement, the
gross income would be fixed at P4,200 or a
net income of P3,200 after deducting the
expenses for production, 30 per cent of which
or P960 was held to be due the plaintiff
pursuant to the aforementioned contract of
lease, which was declared rescinded.
No appeal therefrom having been perfected
within the reglementary period, the Court,
upon motion of plaintiff, issued a writ of
execution, in virtue of which the Provincial
Sheriff of Leyte caused the attachment of 3
parcels of land registered in the name of
Segundino Refuerzo. No property of the
Philippine Fibers Producers Co., Inc., was
found available for attachment. On January
31, 1956, defendant Segundino Refuerzo filed
a motion claiming that the decision rendered
in said Civil Case No. 1912 was null and void
with respect to him, there being no allegation
in the complaint pointing to his personal
liability and thus prayed that an order be
issued limiting such liability to defendant
corporation. Over plaintiff's opposition, the
Court a quo granted the same and ordered
the Provincial Sheriff of Leyte to release all
properties belonging to the movant that might
have already been attached, after finding that
the evidence on record made no mention or
referred to any fact which might hold movant
personally liable therein. As plaintiff's petition
for relief from said order was denied, Manuela
T. Vda. de Salvatierra instituted the instant
action asserting that the trial Judge in issuing
the order complained of, acted with grave
abuse of discretion and prayed that same be
declared a nullity.
From the foregoing narration of facts, it is
clear that the order sought to be nullified was
issued by tile respondent Judge upon motion
of defendant Refuerzo, obviously pursuant to
Rule 38 of the Rules of Court. Section 3 of
said Rule, however, in providing for the period
within which such a motion may be filed,
prescribes that:
SEC. 3. WHEN PETITION FILED;
CONTENTS AND VERIFICATION. —
A petition provided for in either of the
preceding sections of this rule must be
verified, filed within sixty days after
the petitioner learns of the judgment,
order, or other proceeding to be set
aside, and not more than six months
after such judgment or order was
entered, or such proceeding was
taken; and must be must be
accompanied with affidavit showing
the fraud, accident, mistake, or
excusable negligence relied upon, and
the facts constituting the petitioner is
good and substantial cause of action
or defense, as the case may be, which
he may prove if his petition be
granted". (Rule 38)
The aforequoted provision treats of 2 periods,
i.e., 60 days after petitioner learns of the
judgment, and not more than 6 months after
the judgment or order was rendered, both of
which must be satisfied. As the decision in the
case at bar was under date of June 8, 1955,
whereas the motion filed by respondent
Refuerzo was dated January 31, 1956, or
after the lapse of 7 months and 23 days, the
filing of the aforementioned motion was clearly
made beyond the prescriptive period provided
for by the rules. The remedy allowed by Rule
38 to a party adversely affected by a decision
or order is certainly an alert of grace or
benevolence intended to afford said litigant a
penultimate opportunity to protect his interest.
Considering the nature of such relief and the
purpose behind it, the periods fixed by said
rule are non-extendible and never interrupted;
nor could it be subjected to any condition or
contingency because it is of itself devised to
meet a condition or contingency (Palomares
vs. Jimenez,* G.R. No. L-4513, January 31,
1952). On this score alone, therefore, the
petition for a writ of certiorari filed herein may
be granted. However, taking note of the
question presented by the motion for relief
involved herein, We deem it wise to delve in
and pass upon the merit of the same.
Refuerzo, in praying for his exoneration from
any liability resulting from the non-fulfillment of
the obligation imposed on defendant
Philippine Fibers Producers Co., Inc.,
interposed the defense that the complaint filed
with the lower court contained no allegation
which would hold him liable personally, for
while it was stated therein that he was a
signatory to the lease contract, he did so in his
capacity as president of the corporation. And
this allegation was found by the Court a quo
to be supported by the records. Plaintiff on the
other hand tried to refute this averment by
contending that her failure to specify
defendant's personal liability was due to the
fact that all the time she was under the
impression that the Philippine Fibers
Producers Co., Inc., represented by Refuerzo
was a duly registered corporation as
appearing in the contract, but a subsequent
inquiry from the Securities and Exchange
Commission yielded otherwise. While as a
general rule a person who has contracted or
dealt with an association in such a way as to
recognize its existence as a corporate body is
estopped from denying the same in an action
arising out of such transaction or dealing,
(Asia Banking Corporation vs. Standard
Products Co., 46 Phil., 114; Compania
Agricola de Ultramar vs. Reyes, 4 Phil., 1;
Ohta Development Co.; vs. Steamship
Pompey, 49 Phil., 117), yet this doctrine may
not be held to be applicable where fraud takes
a part in the said transaction. In the instant
case, on plaintiff's charge that she was
unaware of the fact that the Philippine Fibers
Producers Co., Inc., had no juridical
personality, defendant Refuerzo gave no
confirmation or denial and the circumstances
surrounding the execution of the contract lead
to the inescapable conclusion that plaintiff
Manuela T. Vda. de Salvatierra was really
made to believe that such corporation was
duly organized in accordance with law.
There can be no question that a corporation
with registered has a juridical personality
separate and distinct from its component
members or stockholders and officers such
that a corporation cannot be held liable for the
personal indebtedness of a stockholder even
if he should be its president (Walter A. Smith
Co. vs. Ford, SC-G.R. No. 42420) and
conversely, a stockholder or member cannot
be held personally liable for any financial
obligation be, the corporation in excess of his
unpaid subscription. But this rule is
understood to refer merely to registered
corporations and cannot be made applicable
to the liability of members of an
unincorporated association. The reason
behind this doctrine is obvious-since an
organization which before the law is non-
existent has no personality and would be
incompetent to act and appropriate for itself
the powers and attribute of a corporation as
provided by law; it cannot create agents or
confer authority on another to act in its behalf;
thus, those who act or purport to act as its
representatives or agents do so without
authority and at their own risk. And as it is an
elementary principle of law that a person who
acts as an agent without authority or without a
principal is himself regarded as the principal,
possessed of all the rights and subject to all
the liabilities of a principal, a person acting or
purporting to act on behalf of a corporation
which has no valid existence assumes such
privileges and obligations and comes
personally liable for contracts entered into or
for other acts performed as such, agent (Fay
vs. Noble, 7 Cushing [Mass.] 188. Cited in II
Tolentino's Commercial Laws of the
Philippines, Fifth Ed., P. 689-690).
Considering that defendant Refuerzo, as
president of the unregistered corporation
Philippine Fibers Producers Co., Inc., was the
moving spirit behind the consummation of the
lease agreement by acting as its
representative, his liability cannot be limited or
restricted that imposed upon corporate
shareholders. In acting on behalf of a
corporation which he knew to be unregistered,
he assumed the risk of reaping the
consequential damages or resultant rights, if
any, arising out of such transaction.

Wherefore, the order of the lower Court of

March 21, 1956, amending its previous
decision on this matter and ordering the
Provincial Sheriff of Leyte to release any and
all properties of movant therein which might
have been attached in the execution of such
judgment, is hereby set aside and nullified as
if it had never been issued. With costs against
respondent Segundino Refuerzo. It is so
ordered.

G.R. No. 137592            December 12, 2001
ANG MGA KAANIB SA IGLESIA NG DIOS
KAY KRISTO HESUS, H.S.K. SA BANSANG
PILIPINAS, INC., petitioner,
vs.
IGLESIA NG DIOS KAY CRISTO JESUS,
HALIGI AT SUHAY NG
KATOTOHANAN, respondent.
YNARES-SANTIAGO, J.:
This is a petition for review assailing the
Decision dated October 7, 19971 and the
Resolution dated February 16, 19992 of the
Court of Appeals in CA-G.R. SP No. 40933,
which affirmed the Decision of the Securities
and Exchange and Commission (SEC) in
SEC-AC No. 539.3
Respondent Iglesia ng Dios Kay Cristo Jesus,
Haligi at Suhay ng Katotohanan (Church of
God in Christ Jesus, the Pillar and Ground of
Truth),4 is a non-stock religious society or
corporation registered in 1936. Sometime in
1976, one Eliseo Soriano and several other
members of respondent corporation
disassociated themselves from the latter and
succeeded in registering on March 30, 1977 a
new non-stock religious society or corporation,
named Iglesia ng Dios Kay Kristo Hesus,
Haligi at Saligan ng Katotohanan.
On July 16, 1979, respondent corporation filed
with the SEC a petition to compel the Iglesia
ng Dios Kay Kristo Hesus, Haligi at Saligan
ng Katotohanan to change its corporate name,
which petition was docketed as SEC Case No.
1774. On May 4, 1988, the SEC rendered
judgment in favor of respondent, ordering
the Iglesia ng Dios Kay Kristo Hesus, Haligi at
Saligan ng Katotohanan to change its
corporate name to another name that is not
similar or identical to any name already used
by a corporation, partnership or association
registered with the Commission. 5 No appeal
was taken from said decision.
It appears that during the pendency of SEC
Case No. 1774, Soriano, et al., caused the
registration on April 25, 1980 of petitioner
corporation, Ang Mga Kaanib sa Iglesia ng
Dios Kay Kristo Hesus, H.S.K, sa Bansang
Pilipinas. The acronym "H.S.K." stands
for Haligi at Saligan ng Katotohanan.6
On March 2, 1994, respondent corporation
filed before the SEC a petition, docketed as
SEC Case No. 03-94-4704, praying that
petitioner be compelled to change its
corporate name and be barred from using the
same or similar name on the ground that the
same causes confusion among their members
as well as the public.
Petitioner filed a motion to dismiss on the
ground of lack of cause of action. The motion
to dismiss was denied. Thereafter, for failure
to file an answer, petitioner was declared in
default and respondent was allowed to
present its evidence ex parte.
On November 20, 1995, the SEC rendered a
decision ordering petitioner to change its
corporate name. The dispositive portion
thereof reads:
PREMISES CONSIDERED, judgment
is hereby rendered in favor of the
petitioner (respondent herein).
Respondent Mga Kaanib sa Iglesia ng
Dios Kay Kristo Jesus (sic), H.S.K. sa
Bansang Pilipinas (petitioner herein) is
hereby MANDATED to change its
corporate name to another not
deceptively similar or identical to the
same already used by the Petitioner,
any corporation, association, and/or
partnership presently registered with
the Commission.
Let a copy of this Decision be
furnished the Records Division and
the Corporate and Legal Department
[CLD] of this Commission for their
records, reference and/or for whatever
requisite action, if any, to be
undertaken at their end.
SO ORDERED.7
Petitioner appealed to the SEC En Banc,
where its appeal was docketed as SEC-AC
No. 539. In a decision dated March 4, 1996,
the SEC En Banc affirmed the above decision,
upon a finding that petitioner's corporate
name was identical or confusingly or
deceptively similar to that of respondent's
corporate name.8
Petitioner filed a petition for review with the
Court of Appeals. On October 7, 1997, the
Court of Appeals rendered the assailed
decision affirming the decision of the SEC En
Banc. Petitioner's motion for reconsideration
was denied by the Court of Appeals on
February 16, 1992.
Hence, the instant petition for review, raising
the following assignment of errors:
I the insistence of his client, the counsel filed a
THE HONORABLE COURT OF APPEALS
ERRED IN CONCLUDING THAT
PETITIONER HAS NOT BEEN DEPRIVED
OF ITS RIGHT TO PROCEDURAL DUE
PROCESS, THE HONORABLE COURT OF
APPEALS DISREGARDED THE
JURISPRUDENCE APPLICABLE TO THE
CASE AT BAR AND INSTEAD RELIED ON
TOTALLY INAPPLICABLE
JURISPRUDENCE.
II
THE HONORABLE COURT OF APPEALS
ERRED IN ITS INTERPRETATION OF THE
CIVIL CODE PROVISIONS ON EXTINCTIVE
PRESCRIPTION, THEREBY RESULTING IN
ITS FAILURE TO FIND THAT THE
RESPONDENT'S RIGHT OF ACTION TO
INSTITUTE THE SEC CASE HAS SINCE
PRESCRIBED PRIOR TO ITS INSTITUTION.
III
THE HONORABLE COURT OF APPEALS
FAILED TO CONSIDER AND PROPERLY
APPLY THE EXCEPTIONS ESTABLISHED
BY JURISPRUDENCE IN THE APPLICATION
OF SECTION 18 OF THE CORPORATION
CODE TO THE INSTANT CASE.
IV
THE HONORABLE COURT OF APPEALS
FAILED TO PROPERLY APPRECIATE THE
SCOPE OF THE CONSTITUTIONAL
GUARANTEE ON RELIGIOUS FREEDOM,
THEREBY FAILING TO APPLY THE SAME
TO PROTECT PETITIONER'S RIGHTS.9
Invoking the case of Legarda v. Court of
Appeals,10 petitioner insists that the decision of
the Court of Appeals and the SEC should be
set aside because the negligence of its former
counsel of record, Atty. Joaquin Garaygay, in
failing to file an answer after its motion to
dismiss was denied by the SEC, deprived
them of their day in court.
The contention is without merit. As a general
rule, the negligence of counsel binds the
client. This is based on the rule that any act
performed by a lawyer within the scope of his
general or implied authority is regarded as an
act of his client.11 An exception to the
foregoing is where the reckless or gross
negligence of the counsel deprives the client
of due process of law. 12 Said exception,
however, does not obtain in the present case.
In Legarda v. Court of Appeals, the effort of
the counsel in defending his client's cause
consisted in filing a motion for extension of
time to file answer before the trial court. When
his client was declared in default, the counsel
did nothing and allowed the judgment by
default to become final and executory. Upon
petition to annul the judgment with the Court
of Appeals, which denied the petition, and
again the counsel allowed the denial to
become final and executory. This Court found
the counsel grossly negligent and
consequently declared as null and void the
decision adverse to his client.
The factual antecedents of the case at bar are
different. Atty. Garaygay filed before the SEC
a motion to dismiss on the ground of lack of
cause of action. When his client was declared
in default for failure to file an answer, Atty.
Garaygay moved for reconsideration and
lifting of the order of default.13 After judgment
by default was rendered against petitioner
corporation, Atty. Garaygay filed a motion for
extension of time to appeal/motion for
reconsideration, and thereafter a motion to set
aside the decision.14
Evidently, Atty. Garaygay was only guilty of
simple negligence. Although he failed to file
an answer that led to the rendition of a
judgment by default against petitioner, his
efforts were palpably real, albeit bereft of
zeal.15
Likewise, the issue of prescription, which
petitioner raised for the first time on appeal to
the Court of Appeals, is untenable. Its failure
to raise prescription before the SEC can only
be construed as a waiver of that defense.16 At
any rate, the SEC has the authority to de-
register at all times and under all
circumstances corporate names which in its
estimation are likely to spawn confusion. It is
the duty of the SEC 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.17
Section 18 of the Corporation Code provides:
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 is 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.
Corollary thereto, the pertinent portion of the
SEC Guidelines on Corporate Names states:
(d) If the proposed name contains a
word similar to a word already used as
part of the firm name or style of a
registered company, the proposed
name must contain two other words
different from the name of the
company already registered;
Parties organizing a corporation must choose
a name at their peril; and the use of a name
similar to one adopted by another corporation,
whether a business or a nonprofit
organization, if misleading or likely to injure in
the exercise of its corporate functions,
regardless of intent, may be prevented by the
corporation having a prior right, by a suit for
injunction against the new corporation to
prevent the use of the name.18
Petitioner claims that it complied with the
aforecited SEC guideline by adding not only
two but eight words to their registered name,
to wit: "Ang Mga Kaanib" and "Sa Bansang
Pilipinas, Inc.," which, petitioner argues,
effectively distinguished it from respondent
corporation.
The additional words "Ang Mga Kaanib" and
"Sa Bansang Pilipinas, Inc." in petitioner's
name are, as correctly observed by the SEC,
merely descriptive of and also referring to the
members, or kaanib, of respondent who are
likewise residing in the Philippines. These
words can hardly serve as an effective
differentiating medium necessary to avoid
confusion or difficulty in distinguishing
petitioner from respondent. This is especially
so, since both petitioner and respondent
corporations are using the same acronym —
H.S.K.;19 not to mention the fact that both are
espousing religious beliefs and operating in
the same place. Parenthetically, it is well to
mention that the acronym H.S.K. used by
petitioner stands for "Haligi at Saligan ng
Katotohanan."20
Then, too, the records reveal that in holding
out their corporate name to the public,
petitioner highlights the dominant words
"IGLESIA NG DIOS KAY KRISTO HESUS,
HALIGI AT SALIGAN NG KATOTOHANAN,"
which is strikingly similar to respondent's
corporate name, thus making it even more
evident that the additional words "Ang Mga
Kaanib" and "Sa Bansang Pilipinas, Inc.", are
merely descriptive of and pertaining to the
members of respondent corporation.21
Significantly, the only difference between the
corporate names of petitioner and respondent
are the words SALIGAN and SUHAY. These
words are synonymous — both mean ground,
foundation or support. Hence, this case is on
all fours with Universal Mills Corporation v.
Universal Textile Mills, Inc.,22 where the Court
ruled that the corporate names Universal Mills
Corporation and Universal Textile Mills, Inc.,
are undisputably so similar that even under
the test of "reasonable care and observation"
confusion may arise.
Furthermore, the wholesale appropriation by
petitioner of respondent's corporate name
cannot find justification under the generic
word rule. We agree with the Court of
Appeals' conclusion that a contrary ruling
would encourage other corporations to adopt
verbatim and register an existing and
protected corporate name, to the detriment of
the public.
The fact that there are other non-stock
religious societies or corporations using the
names Church of the Living God, Inc., Church
of God Jesus Christ the Son of God the Head,
Church of God in Christ & By the Holy Spirit,
and other similar names, is of no
consequence. It does not authorize the use by
petitioner of the essential and distinguishing
feature of respondent's registered and
protected corporate name.23
We need not belabor the fourth issue raised
by petitioner. Certainly, ordering petitioner to
change its corporate name is not a violation of
its constitutionally guaranteed right to religious
freedom. In so doing, the SEC merely
compelled petitioner to abide by one of the
SEC guidelines in the approval of partnership
and corporate names, namely its undertaking
to manifest its willingness to change its
corporate name in the event another person,
firm, or entity has acquired a prior right to the
use of the said firm name or one deceptively
or confusingly similar to it.
WHEREFORE, in view of all the foregoing, the
instant petition for review is DENIED. The
appealed decision of the Court of Appeals is
AFFIRMED in toto.
SO ORDERED.