INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner, vs.

HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL

FEDERATION, respondents.
DECISION
KAPUNAN, J.:
On June 30 1989, petitioner International Express Travel and Tour Services, Inc.,
through its managing director, wrote a letter to the Philippine Football Federation
(Federation), through its president private respondent Henri Kahn, wherein the former
offered its services as a travel agency to the latter. [if !supportFootnotes][1][endif] The offer was
accepted.
Petitioner secured the airline tickets for the trips of the athletes and officials of the
Federation to the South East Asian Games in Kuala Lumpur as well as various other
trips to the People's Republic of China and Brisbane. The total cost of the tickets
amounted to P449,654.83. For the tickets received, the Federation made two partial
payments, both in September of 1989, in the total amount of P176,467.50.[if !supportFootnotes]
[2][endif]

On 4 October 1989, petitioner wrote the Federation, through the private respondent a
demand letter requesting for the amount of P265,894.33. [if !supportFootnotes][3][endif] On 30
October 1989, the Federation, through the Project Gintong Alay, paid the amount of
P31,603.00.[if !supportFootnotes][4][endif]
On 27 December 1989, Henri Kahn issued a personal check in the amount of P50,000
as partial payment for the outstanding balance of the Federation. [if !supportFootnotes][5][endif]
Thereafter, no further payments were made despite repeated demands.
This prompted petitioner to file a civil case before the Regional Trial Court of Manila.
Petitioner sued Henri Kahn in his personal capacity and as President of the Federation
and impleaded the Federation as an alternative defendant. Petitioner sought to hold
Henri Kahn liable for the unpaid balance for the tickets purchased by the Federation
on the ground that Henri Kahn allegedly guaranteed the said obligation. [if !supportFootnotes][6]
[endif]

Henri Kahn filed his answer with counterclaim. While not denying the allegation that
the Federation owed the amount P207,524.20, representing the unpaid balance for
the plane tickets, he averred that the petitioner has no cause of action against him
either in his personal capacity or in his official capacity as president of the Federation.
He maintained that he did not guarantee payment but merely acted as an agent of the
Federation which has a separate and distinct juridical personality.[if !supportFootnotes][7][endif]
On the other hand, the Federation failed to file its answer, hence, was declared in
default by the trial court.[if !supportFootnotes][8][endif]
In due course, the trial court rendered judgment and ruled in favor of the petitioner and
declared Henri Kahn personally liable for the unpaid obligation of the Federation. In
arriving at the said ruling, the trial court rationalized:
Defendant Henri Kahn would have been correct in his contentions had it been duly
established that defendant Federation is a corporation. The trouble, however, is that
neither the plaintiff nor the defendant Henri Kahn has adduced any evidence proving
the corporate existence of the defendant Federation. In paragraph 2 of its complaint,
plaintiff asserted that "Defendant Philippine Football Federation is a sports association
xxx." This has not been denied by defendant Henri Kahn in his Answer. Being the

President of defendant Federation, its corporate existence is within the personal

knowledge of defendant Henri Kahn. He could have easily denied specifically the
assertion of the plaintiff that it is a mere sports association, if it were a domestic
corporation. But he did not.
xxx
A voluntary unincorporated association, like defendant Federation has no power to
enter into, or to ratify, a contract. The contract entered into by its officers or agents on
behalf of such association is not binding on, or enforceable against it. The officers or
agents are themselves personally liable.
x x x[if !supportFootnotes][9][endif]
The dispositive portion of the trial court's decision reads:
WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay the
plaintiff the principal sum of P207,524.20, plus the interest thereon at the legal rate
computed from July 5, 1990, the date the complaint was filed, until the principal
obligation is fully liquidated; and another sum of P15,000.00 for attorney's fees.
The complaint of the plaintiff against the Philippine Football Federation and the
counterclaims of the defendant Henri Kahn are hereby dismissed.
With the costs against defendant Henri Kahn.[if !supportFootnotes][10][endif]
Only Henri Kahn elevated the above decision to the Court of Appeals. On 21
December 1994, the respondent court rendered a decision reversing the trial court,
the decretal portion of said decision reads:
WHEREFORE, premises considered, the judgment appealed from is hereby
REVERSED and SET ASIDE and another one is rendered dismissing the complaint
against defendant Henri S. Kahn.[if !supportFootnotes][11][endif]
In finding for Henri Kahn, the Court of Appeals recognized the juridical existence of the
Federation. It rationalized that since petitioner failed to prove that Henri Kahn
guaranteed the obligation of the Federation, he should not be held liable for the same
as said entity has a separate and distinct personality from its officers.
Petitioner filed a motion for reconsideration and as an alternative prayer pleaded that
the Federation be held liable for the unpaid obligation. The same was denied by the
appellate court in its resolution of 8 February 1995, where it stated that:
As to the alternative prayer for the Modification of the Decision by expressly declaring
in the dispositive portion thereof the Philippine Football Federation (PFF) as liable for
the unpaid obligation, it should be remembered that the trial court dismissed the
complaint against the Philippine Football Federation, and the plaintiff did not appeal
from this decision. Hence, the Philippine Football Federation is not a party to this
appeal and consequently, no judgment may be pronounced by this Court against the
PFF without violating the due process clause, let alone the fact that the judgment
dismissing the complaint against it, had already become final by virtue of the plaintiff's
failure to appeal therefrom. The alternative prayer is therefore similarly DENIED. [if !
supportFootnotes][12][endif]

Petitioner now seeks recourse to this Court and alleges that the respondent court
committed the following assigned errors:[if !supportFootnotes][13][endif]
A. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER HAD DEALT WITH THE PHILIPPINE FOOTBALL FEDERATION (PFF)
AS A CORPORATE ENTITY AND IN NOT HOLDING THAT PRIVATE RESPONDENT

HENRI KAHN WAS THE ONE WHO REPRESENTED THE PFF AS HAVING A
CORPORATE PERSONALITY.
B. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE
RESPONDENT HENRI KAHN PERSONALLY LIABLE FOR THE OBLIGATION OF
THE UNINCORPORATED PFF, HAVING NEGOTIATED WITH PETITIONER AND
CONTRACTED THE OBLIGATION IN BEHALF OF THE PFF, MADE A PARTIAL
PAYMENT AND ASSURED PETITIONER OF FULLY SETTLING THE OBLIGATION.
C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT
PERSONALLY LIABLE, THE HONORABLE COURT OF APPEALS ERRED IN NOT
EXPRESSLY DECLARING IN ITS DECISION THAT THE PFF IS SOLELY LIABLE
FOR THE OBLIGATION.
The resolution of the case at bar hinges on the determination of the existence of the
Philippine Football Federation as a juridical person. In the assailed decision, the
appellate court recognized the existence of the Federation. In support of this, the CA
cited Republic Act 3135, otherwise known as the Revised Charter of the Philippine
Amateur Athletic Federation, and Presidential Decree No. 604 as the laws from which
said Federation derives its existence.
As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604
recognized the juridical existence of national sports associations. This may be gleaned
from the powers and functions granted to these associations. Section 14 of R.A. 3135
provides:
SEC. 14. Functions, powers and duties of Associations. - The National Sports'
Association shall have the following functions, powers and duties:
1. To adopt a constitution and by-laws for their internal organization and government;
2. To raise funds by donations, benefits, and other means for their purposes.
3. To purchase, sell, lease or otherwise encumber property both real and personal, for
the accomplishment of their purpose;
4. To affiliate with international or regional sports' Associations after due consultation
with the executive committee;
xxx
13. To perform such other acts as may be necessary for the proper accomplishment of
their purposes and not inconsistent with this Act.
Section 8 of P.D. 604, grants similar functions to these sports associations:
SEC. 8. Functions, Powers, and Duties of National Sports Association. - The National
sports associations shall have the following functions, powers, and duties:
1. Adopt a Constitution and By-Laws for their internal organization and government
which shall be submitted to the Department and any amendment thereto shall take
effect upon approval by the Department: Provided, however, That no team, school,
club, organization, or entity shall be admitted as a voting member of an association
unless 60 per cent of the athletes composing said team, school, club, organization, or
entity are Filipino citizens;
2. Raise funds by donations, benefits, and other means for their purpose subject to the
approval of the Department;
3. Purchase, sell, lease, or otherwise encumber property, both real and personal, for
the accomplishment of their purpose;
4. Conduct local, interport, and international competitions, other than the Olympic and

Asian Games, for the promotion of their sport;

5. Affiliate with international or regional sports associations after due consultation with
the Department;
xxx
13. Perform such other functions as may be provided by law.
The above powers and functions granted to national sports associations clearly
indicate that these entities may acquire a juridical personality. The power to purchase,
sell, lease and encumber property are acts which may only be done by persons,
whether natural or artificial, with juridical capacity. However, while we agree with the
appellate court that national sports associations may be accorded corporate status,
such does not automatically take place by the mere passage of these laws.
It is a basic postulate that before a corporation may acquire juridical personality, the
State must give its consent either in the form of a special law or a general enabling
act. We cannot agree with the view of the appellate court and the private respondent
that the Philippine Football Federation came into existence upon the passage of these
laws. Nowhere can it be found in R.A. 3135 or P.D. 604 any provision creating the
Philippine Football Federation. These laws merely recognized the existence of
national sports associations and provided the manner by which these entities may
acquire juridical personality. Section 11 of R.A. 3135 provides:
SEC. 11. National Sports' Association; organization and recognition. - A National
Association shall be organized for each individual sports in the Philippines in the
manner hereinafter provided to constitute the Philippine Amateur Athletic Federation.
Applications for recognition as a National Sports' Association shall be filed with the
executive committee together with, among others, a copy of the constitution and bylaws and a list of the members of the proposed association, and a filing fee of ten
pesos.
The Executive Committee shall give the recognition applied for if it is satisfied that said
association will promote the purposes of this Act and particularly section three thereof.
No application shall be held pending for more than three months after the filing thereof
without any action having been taken thereon by the executive committee. Should the
application be rejected, the reasons for such rejection shall be clearly stated in a
written communication to the applicant. Failure to specify the reasons for the rejection
shall not affect the application which shall be considered as unacted upon: Provided,
however, That until the executive committee herein provided shall have been formed,
applications for recognition shall be passed upon by the duly elected members of the
present executive committee of the Philippine Amateur Athletic Federation. The said
executive committee shall be dissolved upon the organization of the executive
committee herein provided: Provided, further, That the functioning executive
committee is charged with the responsibility of seeing to it that the National Sports'
Associations are formed and organized within six months from and after the passage
of this Act.
Section 7 of P.D. 604, similarly provides:
SEC. 7. National Sports Associations. - Application for accreditation or recognition as
a national sports association for each individual sport in the Philippines shall be filed
with the Department together with, among others, a copy of the Constitution and ByLaws and a list of the members of the proposed association.

The Department shall give the recognition applied for if it is satisfied that the national
sports association to be organized will promote the objectives of this Decree and has
substantially complied with the rules and regulations of the Department: Provided,
That the Department may withdraw accreditation or recognition for violation of this
Decree and such rules and regulations formulated by it.
The Department shall supervise the national sports association: Provided, That the
latter shall have exclusive technical control over the development and promotion of the
particular sport for which they are organized.
Clearly the above cited provisions require that before an entity may be considered as
a national sports association, such entity must be recognized by the accrediting
organization, the Philippine Amateur Athletic Federation under R.A. 3135, and the
Department of Youth and Sports Development under P.D. 604. This fact of recognition,
however, Henri Kahn failed to substantiate. In attempting to prove the juridical
existence of the Federation, Henri Kahn attached to his motion for reconsideration
before the trial court a copy of the constitution and by-laws of the Philippine Football
Federation. Unfortunately, the same does not prove that said Federation has indeed
been recognized and accredited by either the Philippine Amateur Athletic Federation
or the Department of Youth and Sports Development. Accordingly, we rule that the
Philippine Football Federation is not a national sports association within the purview of
the aforementioned laws and does not have corporate existence of its own.
Thus being said, it follows that private respondent Henry Kahn should be held liable
for the unpaid obligations of the unincorporated Philippine Football Federation. It is a
settled principal in corporation law that any person acting or purporting to act on behalf
of a corporation which has no valid existence assumes such privileges and becomes
personally liable for contract entered into or for other acts performed as such agent. [if !
supportFootnotes][14][endif]
As president of the Federation, Henri Kahn is presumed to have
known about the corporate existence or non-existence of the Federation. We cannot
subscribe to the position taken by the appellate court that even assuming that the
Federation was defectively incorporated, the petitioner cannot deny the corporate
existence of the Federation because it had contracted and dealt with the Federation in
such a manner as to recognize and in effect admit its existence. [if !supportFootnotes][15][endif] The
doctrine of corporation by estoppel is mistakenly applied by the respondent court to
the petitioner. The application of the doctrine applies to a third party only when he tries
to escape liability on a contract from which he has benefited on the irrelevant ground
of defective incorporation.[if !supportFootnotes][16][endif] In the case at bar, the petitioner is not
trying to escape liability from the contract but rather is the one claiming from the
contract.
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE.
The decision of the Regional Trial Court of Manila, Branch 35, in Civil Case No. 9053595 is hereby REINSTATED.
SO ORDERED.
LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR INDUSTRIES, INC.,
respondent.
DECISION
PANGANIBAN, J.:

A partnership may be deemed to exist among parties who agree to borrow

money to pursue a business and to divide the profits or losses that may arise
therefrom, even if it is shown that they have not contributed any capital of their own to
a "common fund." Their contribution may be in the form of credit or industry, not
necessarily cash or fixed assets. Being partners, they are all liable for debts incurred
by or on behalf of the partnership. The liability for a contract entered into on behalf of
an unincorporated association or ostensible corporation may lie in a person who may
not have directly transacted on its behalf, but reaped benefits from that contract.
The Case

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

the sale paid for by plaintiff was deposited in court. In effect, the amount of
P900,000.00 replaced the attached property as a guaranty for any judgment that
plaintiff may be able to secure in this case with the ownership and possession of the
nets and floats awarded and delivered by the sheriff to plaintiff as the highest bidder in
the public auction sale. It has also been noted that ownership of the nets [was]
retained by the plaintiff until full payment [was] made as stipulated in the invoices;
hence, in effect, the plaintiff attached its own properties. It [was] for this reason also
that this Court earlier ordered the attachment bond filed by plaintiff to guaranty
damages to defendants to be cancelled and for the P900,000.00 cash bidded and paid
for by plaintiff to serve as its bond in favor of defendants.
From the foregoing, it would appear therefore that whatever judgment the plaintiff may
be entitled to in this case will have to be satisfied from the amount of P900,000.00 as
this amount replaced the attached nets and floats. Considering, however, that the total
judgment obligation as computed above would amount to only P840,216.92, it would
be inequitable, unfair and unjust to award the excess to the defendants who are not
entitled to damages and who did not put up a single centavo to raise the amount of
P900,000.00 aside from the fact that they are not the owners of the nets and floats.
For this reason, the defendants are hereby relieved from any and all liabilities arising
from the monetary judgment obligation enumerated above and for plaintiff to retain
possession and ownership of the nets and floats and for the reimbursement of the
P900,000.00 deposited by it with the Clerk of Court.
SO ORDERED. [if !supportFootnotes][3][endif]
The Facts

On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao
entered into a Contract dated February 7, 1990, for the purchase of fishing nets of
various sizes from the Philippine Fishing Gear Industries, Inc. (herein respondent).
They claimed that they were engaged in a business venture with Petitioner Lim Tong
Lim, who however was not a signatory to the agreement. The total price of the nets
amounted to P532,045. Four hundred pieces of floats worth P68,000 were also sold to
the Corporation.[if !supportFootnotes][4][endif]
The buyers, however, failed to pay for the fishing nets and the floats; hence,
private respondent filed a collection suit against Chua, Yao and Petitioner Lim Tong
Lim with a prayer for a writ of preliminary attachment. The suit was brought against the
three in their capacities as general partners, on the allegation that Ocean Quest
Fishing Corporation was a nonexistent corporation as shown by a Certification from
the Securities and Exchange Commission. [if !supportFootnotes][5][endif] On September 20, 1990,
the lower court issued a Writ of Preliminary Attachment, which the sheriff enforced by
attaching the fishing nets on board F/B Lourdes which was then docked at the
Fisheries Port, Navotas, Metro Manila.
Instead of answering the Complaint, Chua filed a Manifestation admitting his
liability and requesting a reasonable time within which to pay. He also turned over to
respondent some of the nets which were in his possession. Peter Yao filed an Answer,
after which he was deemed to have waived his right to cross-examine witnesses and
to present evidence on his behalf, because of his failure to appear in subsequent
hearings. Lim Tong Lim, on the other hand, filed an Answer with Counterclaim and
Crossclaim and moved for the lifting of the Writ of Attachment. [if !supportFootnotes][6][endif] The

trial court maintained the Writ, and upon motion of private respondent, ordered the
sale of the fishing nets at a public auction. Philippine Fishing Gear Industries won the
bidding and deposited with the said court the sales proceeds of P900,000.[if !supportFootnotes]
[7][endif]

On November 18, 1992, the trial court rendered its Decision, ruling that
Philippine Fishing Gear Industries was entitled to the Writ of Attachment and that
Chua, Yao and Lim, as general partners, were jointly liable to pay respondent. [if !
supportFootnotes][8][endif]

The trial court ruled that a partnership among Lim, Chua and Yao existed
based (1) on the testimonies of the witnesses presented and (2) on a Compromise
Agreement executed by the three [if !supportFootnotes][9][endif] in Civil Case No. 1492-MN which
Chua and Yao had brought against Lim in the RTC of Malabon, Branch 72, for (a) a
declaration of nullity of commercial documents; (b) a reformation of contracts; (c) a
declaration of ownership of fishing boats; (d) an injunction and (e) damages. [if !
supportFootnotes][10][endif]
The Compromise Agreement provided:
a) That the parties plaintiffs & Lim Tong Lim agree to have the four (4) vessels sold in
the amount of P5,750,000.00 including the fishing net. This P5,750,000.00 shall be
applied as full payment for P3,250,000.00 in favor of JL Holdings Corporation and/or
Lim Tong Lim;
b) If the four (4) vessel[s] and the fishing net will be sold at a higher price than
P5,750,000.00 whatever will be the excess will be divided into 3: 1/3 Lim Tong Lim;
1/3 Antonio Chua; 1/3 Peter Yao;
c) If the proceeds of the sale the vessels will be less than P5,750,000.00 whatever the
deficiency shall be shouldered and paid to JL Holding Corporation by 1/3 Lim Tong
Lim; 1/3 Antonio Chua; 1/3 Peter Yao.[if !supportFootnotes][11][endif]
The trial court noted that the Compromise Agreement was silent as to the
nature of their obligations, but that joint liability could be presumed from the equal
distribution of the profit and loss.[if !supportFootnotes][12][endif]
Lim appealed to the Court of Appeals (CA) which, as already stated, affirmed
the RTC.
Ruling of the Court of Appeals
In affirming the trial court, the CA held that petitioner was a partner of Chua
and Yao in a fishing business and may thus be held liable as a such for the fishing
nets and floats purchased by and for the use of the partnership. The appellate court
ruled:
The evidence establishes that all the defendants including herein appellant Lim Tong
Lim undertook a partnership for a specific undertaking, that is for commercial fishing x
x x. Obviously, the ultimate undertaking of the defendants was to divide the profits
among themselves which is what a partnership essentially is x x x. By a contract of
partnership, two or more persons bind themselves to contribute money, property or
industry to a common fund with the intention of dividing the profits among themselves
(Article 1767, New Civil Code).[if !supportFootnotes][13][endif]
Hence, petitioner brought this recourse before this Court.[if !supportFootnotes][14][endif]
The Issues

In his Petition and Memorandum, Lim asks this Court to reverse the assailed
Decision on the following grounds:

I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE

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

The Petition is devoid of merit.

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

In arguing that he should not be held liable for the equipment purchased from
respondent, petitioner controverts the CA finding that a partnership existed between
him, Peter Yao and Antonio Chua. He asserts that the CA based its finding on the
Compromise Agreement alone. Furthermore, he disclaims any direct participation in
the purchase of the nets, alleging that the negotiations were conducted by Chua and
Yao only, and that he has not even met the representatives of the respondent
company. Petitioner further argues that he was a lessor, not a partner, of Chua and
Yao, for the "Contract of Lease" dated February 1, 1990, showed that he had merely
leased to the two the main asset of the purported partnership -- the fishing boat F/B
Lourdes. The lease was for six months, with a monthly rental of P37,500 plus 25
percent of the gross catch of the boat.
We are not persuaded by the arguments of petitioner. The facts as found by
the two lower courts clearly showed that there existed a partnership among Chua, Yao
and him, pursuant to Article 1767 of the Civil Code which provides:
Article 1767 - By the contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing
the profits among themselves.
Specifically, both lower courts ruled that a partnership among the three existed
based on the following factual findings:[if !supportFootnotes][15][endif]
(1) That Petitioner Lim Tong Lim requested Peter Yao who was engaged in
commercial fishing to join him, while Antonio Chua was already Yaos partner;
(2) That after convening for a few times, Lim Chua, and Yao verbally agreed to acquire
two fishing boats, the FB Lourdes and the FB Nelson for the sum of P3.35 million;
(3) That they borrowed P3.25 million from Jesus Lim, brother of Petitioner Lim Tong
Lim, to finance the venture.
(4) That they bought the boats from CMF Fishing Corporation, which executed a Deed
of Sale over these two (2) boats in favor of Petitioner Lim Tong Lim only to serve as
security for the loan extended by Jesus Lim;
(5) That Lim, Chua and Yao agreed that the refurbishing , re-equipping, repairing, dry
docking and other expenses for the boats would be shouldered by Chua and Yao;
(6) That because of the unavailability of funds, Jesus Lim again extended a loan to the

partnership in the amount of P1 million secured by a check, because of which, Yao

and Chua entrusted the ownership papers of two other boats, Chuas FB Lady Anne
Mel and Yaos FB Tracy to Lim Tong Lim.
(7) That in pursuance of the business agreement, Peter Yao and Antonio Chua bought
nets from Respondent Philippine Fishing Gear, in behalf of "Ocean Quest Fishing
Corporation," their purported business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in the Malabon RTC, Branch
72 by Antonio Chua and Peter Yao against Lim Tong Lim for (a) declaration of nullity of
commercial documents; (b) reformation of contracts; (c) declaration of ownership of
fishing boats; (4) injunction; and (e) damages.
(9) That the case was amicably settled through a Compromise Agreement executed
between the parties-litigants the terms of which are already enumerated above.
From the factual findings of both lower courts, it is clear that Chua, Yao and
Lim had decided to engage in a fishing business, which they started by buying boats
worth P3.35 million, financed by a loan secured from Jesus Lim who was petitioners
brother. In their Compromise Agreement, they subsequently revealed their intention to
pay the loan with the proceeds of the sale of the boats, and to divide equally among
them the excess or loss. These boats, the purchase and the repair of which were
financed with borrowed money, fell under the term common fund under Article 1767.
The contribution to such fund need not be cash or fixed assets; it could be an
intangible like credit or industry. That the parties agreed that any loss or profit from the
sale and operation of the boats would be divided equally among them also shows that
they had indeed formed a partnership.
Moreover, it is clear that the partnership extended not only to the purchase of
the boat, but also to that of the nets and the floats. The fishing nets and the floats,
both essential to fishing, were obviously acquired in furtherance of their business. It
would have been inconceivable for Lim to involve himself so much in buying the boat
but not in the acquisition of the aforesaid equipment, without which the business could
not have proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua
and Yao, a partnership engaged in the fishing business. They purchased the boats,
which constituted the main assets of the partnership, and they agreed that the
proceeds from the sales and operations thereof would be divided among them.
We stress that under Rule 45, a petition for review like the present case
should involve only questions of law. Thus, the foregoing factual findings of the RTC
and the CA are binding on this Court, absent any cogent proof that the present action
is embraced by one of the exceptions to the rule. [if !supportFootnotes][16][endif] In assailing the
factual findings of the two lower courts, petitioner effectively goes beyond the bounds
of a petition for review under Rule 45.
Compromise Agreement Not the Sole Basis of Partnership

Petitioner argues that the appellate courts sole basis for assuming the
existence of a partnership was the Compromise Agreement. He also claims that the
settlement was entered into only to end the dispute among them, but not to adjudicate
their preexisting rights and obligations. His arguments are baseless. The Agreement
was but an embodiment of the relationship extant among the parties prior to its
execution.

A proper adjudication of claimants rights mandates that courts must review

and thoroughly appraise all relevant facts. Both lower courts have done so and have
found, correctly, a preexisting partnership among the parties. In implying that the lower
courts have decided on the basis of one piece of document alone, petitioner fails to
appreciate that the CA and the RTC delved into the history of the document and
explored all the possible consequential combinations in harmony with law, logic and
fairness. Verily, the two lower courts factual findings mentioned above nullified
petitioners argument that the existence of a partnership was based only on the
Compromise Agreement.
Petitioner Was a Partner, Not a Lessor

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

Petitioner argues that under the doctrine of corporation by estoppel, liability

can be imputed only to Chua and Yao, and not to him. Again, we disagree.
Section 21 of the Corporation Code of the Philippines provides:
Sec. 21. Corporation by estoppel. - All persons who assume to act as a corporation
knowing it to be without authority to do so shall be liable as general partners for all
debts, liabilities and damages incurred or arising as a result thereof: Provided
however, That when any such ostensible corporation is sued on any transaction
entered by it as a corporation or on any tort committed by it as such, it shall not be
allowed to use as a defense its lack of corporate personality.
One who assumes an obligation to an ostensible corporation as such, cannot resist
performance thereof on the ground that there was in fact no corporation.
Thus, even if the ostensible corporate entity is proven to be legally
nonexistent, a party may be estopped from denying its corporate existence. The
reason behind this doctrine is obvious - an unincorporated association has no

personality and would be incompetent to act and appropriate for itself the power and
attributes of a corporation as provided by law; it cannot create agents or confer
authority on another to act in its behalf; thus, those who act or purport to act as its
representatives or agents do so without authority and at their own risk. And as it is an
elementary principle of law that a person who acts as an agent without authority or
without a principal is himself regarded as the principal, possessed of all the right and
subject to all the liabilities of a principal, a person acting or purporting to act on behalf
of a corporation which has no valid existence assumes such privileges and obligations
and becomes personally liable for contracts entered into or for other acts performed as
such agent.[if !supportFootnotes][17][endif]
The doctrine of corporation by estoppel may apply to the alleged corporation
and to a third party. In the first instance, an unincorporated association, which
represented itself to be a corporation, will be estopped from denying its corporate
capacity in a suit against it by a third person who relied in good faith on such
representation. It cannot allege lack of personality to be sued to evade its
responsibility for a contract it entered into and by virtue of which it received
advantages and benefits.
On the other hand, a third party who, knowing an association to be
unincorporated, nonetheless treated it as a corporation and received benefits from it,
may be barred from denying its corporate existence in a suit brought against the
alleged corporation. In such case, all those who benefited from the transaction made
by the ostensible corporation, despite knowledge of its legal defects, may be held
liable for contracts they impliedly assented to or took advantage of.
There is no dispute that the respondent, Philippine Fishing Gear Industries, is
entitled to be paid for the nets it sold. The only question here is whether petitioner
should be held jointly[if !supportFootnotes][18][endif] liable with Chua and Yao. Petitioner contests
such liability, insisting that only those who dealt in the name of the ostensible
corporation should be held liable. Since his name does not appear on any of the
contracts and since he never directly transacted with the respondent corporation,
ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found inside F/B
Lourdes, the boat which has earlier been proven to be an asset of the partnership. He
in fact questions the attachment of the nets, because the Writ has effectively stopped
his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao
decided to form a corporation. Although it was never legally formed for unknown
reasons, this fact alone does not preclude the liabilities of the three as contracting
parties in representation of it. Clearly, under the law on estoppel, those acting on
behalf of a corporation and those benefited by it, knowing it to be without valid
existence, are held liable as general partners.
Technically, it is true that petitioner did not directly act on behalf of the
corporation. However, having reaped the benefits of the contract entered into by
persons with whom he previously had an existing relationship, he is deemed to be
part of said association and is covered by the scope of the doctrine of corporation by
estoppel. We reiterate the ruling of the Court in Alonso v. Villamor:[if !supportFootnotes][19][endif]
A litigation is not a game of technicalities in which one, more deeply schooled and

skilled in the subtle art of movement and position , entraps and destroys the other. It
is, rather, a contest in which each contending party fully and fairly lays before the court
the facts in issue and then, brushing aside as wholly trivial and indecisive all
imperfections of form and technicalities of procedure, asks that justice be done upon
the merits. Lawsuits, unlike duels, are not to be won by a rapiers thrust. Technicality,
when it deserts its proper office as an aid to justice and becomes its great hindrance
and chief enemy, deserves scant consideration from courts. There should be no
vested rights in technicalities.
Third Issue: Validity of Attachment

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

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.[if !supportFootnotes][1][endif]
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.[if !supportFootnotes][2][endif] It denied
reconsideration on March 8, 1996.[if !supportFootnotes][3][endif]
Private respondent filed a petition for certiorari before the Regional Trial Court, Branch
58, Angeles City.[if !supportFootnotes][4][endif] The trial court found the dispute to be
intracorporate, hence, subject to the jurisdiction of the SEC, and ordered the MCTC to
dismiss Civil Case No. 1214 accordingly.[if !supportFootnotes][5][endif] It denied reconsideration on
May 31, 1996.[if !supportFootnotes][6][endif]
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." [if !
supportFootnotes][7][endif]

REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R. DE LOS SANTOS,

Presiding Judge, RTC, Br. 58, Angeles City; and ANTONIO ANDA, respondents.
DECISION
PUNO, J.:
This petition for certiorari seeks to annul and set aside the decision of the Regional
Trial Court, Branch 58, Angeles City which ordered the Municipal Circuit Trial Court,
Mabalacat and Magalang, Pampanga to dismiss Civil Case No. 1214 for lack of
jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo M. Lozano filed
Civil Case No. 1214 for damages against respondent Antonio Anda before the
Municipal Circuit Trial Court (MCTC), Mabalacat and Magalang, Pampanga. Petitioner
alleged that he was the president of the Kapatirang Mabalacat-Angeles Jeepney
Drivers' Association, Inc. (KAMAJDA) while respondent Anda was the president of the
Samahang Angeles-Mabalacat Jeepney Operators' and Drivers' Association, Inc.
(SAMAJODA); in August 1995, upon the request of the Sangguniang Bayan of
Mabalacat, Pampanga, petitioner and private respondent agreed to consolidate their
respective associations and form the Unified Mabalacat-Angeles Jeepney Operators'
and Drivers' Association, Inc. (UMAJODA); petitioner and private respondent also
agreed to elect one set of officers who shall be given the sole authority to collect the
daily dues from the members of the consolidated association; elections were held on
October 29, 1995 and both petitioner and private respondent ran for president;
petitioner won; private respondent protested and, alleging fraud, refused to recognize
the results of the election; private respondent also refused to abide by their agreement
and continued collecting the dues from the members of his association despite several

The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in
Section 5 of Presidential Decree No. 902-A. Section 5 reads as follows:
"Section 5. x x x [T]he Securities and Exchange Commission [has] original and
exclusive jurisdiction to hear and decide cases involving:
(a) Devices or schemes employed by or any acts of the board of directors, business
associates, its officers or partners, amounting to fraud and misrepresentation which
may be detrimental to the interest of the public and/or of the stockholders, partners,
members of associations or organizations registered with the Commission.
(b) Controversies arising out of intracorporate or partnership relations, between and
among stockholders, members or associates; between any or all of them and the
corporation, partnership or association of which they are stockholders, members, or
associates, respectively; and between such corporation, partnership or association
and the state insofar as it concerns their individual franchise or right to exist as such
entity.
(c) Controversies in the election or appointment of directors, trustees, officers or
managers of such corporations, partnerships or associations.
(d) Petitions of corporations, partnerships or associations to be declared in the state of
suspension of payments in cases where the corporation, partnership or association
possesses sufficient property to cover all its debts but foresees the impossibility of
meeting them when they respect very fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its liabilities, but is under
the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree."
The grant of jurisdiction to the SEC must be viewed in the light of its nature and
function under the law.[if !supportFootnotes][8][endif] This jurisdiction is determined by a

concurrence of two elements: (1) the status or relationship of the parties; and (2) the
nature of the question that is the subject of their controversy.[if !supportFootnotes][9][endif]
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.[if !supportFootnotes][10][endif] The second element requires that the dispute
among the parties be intrinsically connected with the regulation of the corporation,
partnership or association or deal with the internal affairs of the corporation,
partnership or association.[if !supportFootnotes][11][endif] After all, the principal function of the SEC
is the supervision and control of corporations, partnerships and associations with the
end in view that investments in these entities may be encouraged and protected, and
their activities pursued for the promotion of economic development.[if !supportFootnotes][12][endif]
There is no intracorporate nor partnership relation between petitioner and private
respondent. The controversy between them arose out of their plan to consolidate their
respective jeepney drivers' and operators' associations into a single common
association. This unified association was, however, still a proposal. It had not been
approved by the SEC, neither had its officers and members submitted their articles of
consolidation in accordance with Sections 78 and 79 of the Corporation Code.
Consolidation becomes effective not upon mere agreement of the members but only
upon issuance of the certificate of consolidation by the SEC. [if !supportFootnotes][13][endif] When
the SEC, upon processing and examining the articles of consolidation, is satisfied that
the consolidation of the corporations is not inconsistent with the provisions of the
Corporation Code and existing laws, it issues a certificate of consolidation which
makes the reorganization official.[if !supportFootnotes][14][endif] The new consolidated corporation
comes into existence and the constituent corporations dissolve and cease to exist. [if !
supportFootnotes][15][endif]

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[if !supportFootnotes][16][endif] advanced by private
respondent cannot override jurisdictional requirements. Jurisdiction is fixed by law and
is not subject to the agreement of the parties.[if !supportFootnotes][17][endif] It cannot be acquired
through or waived, enlarged or diminished by, any act or omission of the parties,
neither can it be conferred by the acquiescence of the court.[if !supportFootnotes][18][endif]
Corporation by estoppel is founded on principles of equity and is designed to prevent
injustice and unfairness.[if !supportFootnotes][19][endif] It applies when persons assume to form a
corporation and exercise corporate functions and enter into business relations with
third persons. Where there is no third person involved and the conflict arises only
among those assuming the form of a corporation, who therefore know that it has not
been registered, there is no corporation by estoppel.[if !supportFootnotes][20][endif]
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.
LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS,
LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN,
INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM,
CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN PHILIPPINES,
LYCEUM OF EASTERN MINDANAO, INC. and WESTERN PANGASINAN LYCEUM,
INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for
respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS
1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF PROPOSED
NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF ANY
EXISTING CORPORATION, PROHIBITED; CONFUSION AND DECEPTION
EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO
THE WORD "LYCEUM". The Articles of Incorporation of a corporation must, among
other things, set out the name of the corporation. Section 18 of the Corporation Code
establishes a restrictive rule insofar as corporate names are concerned: "Section 18.
Corporate name. No corporate name may be allowed by the Securities an
Exchange Commission if the proposed name is identical or deceptively or confusingly
similar to that of any existing corporation or to any other name already protected by
law or is patently deceptive, confusing or contrary to existing laws. When a change in
the corporate name is approved, the Commission shall issue an amended certificate
of incorporation under the amended name." The policy underlying the prohibition in
Section 18 against the registration of a corporate name which is "identical or
deceptively or confusingly similar" to that of any existing corporation or which is
"patently deceptive" or "patently confusing" or "contrary to existing laws," is the
avoidance of fraud upon the public which would have occasion to deal with the entity
concerned, the evasion of legal obligations and duties, and the reduction of difficulties
of administration and supervision over corporations. We do not consider that the
corporate names of private respondent institutions are "identical with, or deceptively or
confusingly similar" to that of the petitioner institution. True enough, the corporate
names of private respondent entities all carry the word "Lyceum" but confusion and
deception are effectively precluded by the appending of geographic names to the word
"Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can be mistaken by the
general public for the Lyceum of the Philippines, or that the "Lyceum of
Camalaniugan" would be confused with the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM,"
NOT ATTENDED WITH EXCLUSIVITY. It is claimed, however, by petitioner that the

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

THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER

CORPORATE ENTITY'S NAME. petitioner institution is not entitled to a legally
enforceable exclusive right to use the word "Lyceum" in its corporate name and that
other institutions may use "Lyceum" as part of their corporate names. To determine
whether a given corporate name is "identical" or "confusingly or deceptively similar"
with another entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names. One must evaluate corporate names in their
entirety and when the name of petitioner is juxtaposed with the names of private
respondents, they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
DECISION
FELICIANO, J p:
Petitioner is an educational institution duly registered with the Securities and
Exchange Commission ("SEC"). When it first registered with the SEC on 21
September 1950, it used the corporate name Lyceum of the Philippines, Inc. and has
used that name ever since.
On 24 February 1984, petitioner instituted proceedings before the SEC to compel the
private respondents, which are also educational institutions, to delete the word
"Lyceum" from their corporate names and permanently to enjoin them from using
"Lyceum" as part of their respective names.
Some of the private respondents actively participated in the proceedings before the
SEC. These are the following, the dates of their original SEC registration being set out
below opposite their respective names:
Western Pangasinan Lyceum 27 October 1950
Lyceum of Cabagan 31 October 1962
Lyceum of Lallo, Inc. 26 March 1972
Lyceum of Aparri 28 March 1972
Lyceum of Tuao, Inc. 28 March 1972
Lyceum of Camalaniugan 28 March 1972
The following private respondents were declared in default for failure to file an answer
despite service of summons:
Buhi Lyceum;
Central Lyceum of Catanduanes;
Lyceum of Eastern Mindanao, Inc.; and
Lyceum of Southern Philippines
Petitioner's original complaint before the SEC had included three (3) other entities:
1. The Lyceum of Malacanay;
2. The Lyceum of Marbel; and
3. The Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the Lyceum of Malacanay
and the Lyceum of Marbel, for failure to serve summons upon these two (2) entities.
The case against the Liceum of Araullo was dismissed when that school motu proprio
change its corporate name to "Pamantasan ng Araullo."
The background of the case at bar needs some recounting. Petitioner had sometime
before commenced in the SEC a proceeding (SEC-Case No. 1241) against the
Lyceum of Baguio, Inc. to require it to change its corporate name and to adopt another

name not "similar [to] or identical" with that of petitioner. In an Order dated 20 April
1977, Associate Commissioner Julio Sulit held that the corporate name of petitioner
and that of the Lyceum of Baguio, Inc. were substantially identical because of the
presence of a "dominant" word, i.e., "Lyceum," the name of the geographical location
of the campus being the only word which distinguished one from the other corporate
name. The SEC also noted that petitioner had registered as a corporation ahead of
the Lyceum of Baguio, Inc. in point of time, 1 and ordered the latter to change its name
to another name "not similar or identical [with]" the names of previously registered
entities.
The Lyceum of Baguio, Inc. assailed the Order of the SEC before the Supreme Court
in a case docketed as G.R. No. L-46595. In a Minute Resolution dated 14 September
1977, the Court denied the Petition for Review for lack of merit. Entry of judgment in
that case was made on 21 October 1977. 2
Armed with the Resolution of this Court in G.R. No. L-46595, petitioner then wrote all
the educational institutions it could find using the word "Lyceum" as part of their
corporate name, and advised them to discontinue such use of "Lyceum." When, with
the passage of time, it became clear that this recourse had failed, petitioner instituted
before the SEC SEC-Case No. 2579 to enforce what petitioner claims as its
proprietary right to the word "Lyceum." The SEC hearing officer rendered a decision
sustaining petitioner's claim to an exclusive right to use the word "Lyceum." The
hearing officer relied upon the SEC ruling in the Lyceum of Baguio, Inc. case (SECCase No. 1241) and held that the word "Lyceum" was capable of appropriation and
that petitioner had acquired an enforceable exclusive right to the use of that word.
On appeal, however, by private respondents to the SEC En Banc, the decision of the
hearing officer was reversed and set aside. The SEC En Banc did not consider the
word "Lyceum" to have become so identified with petitioner as to render use thereof
by other institutions as productive of confusion about the identity of the schools
concerned in the mind of the general public. Unlike its hearing officer, the SEC En
Banc held that the attaching of geographical names to the word "Lyceum" served
sufficiently to distinguish the schools from one another, especially in view of the fact
that the campuses of petitioner and those of the private respondents were physically
quite remote from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28 June
1991, however, the Court of Appeals affirmed the questioned Orders of the SEC En
Banc. 4 Petitioner filed a motion for reconsideration, without success.
Before this Court, petitioner asserts that the Court of Appeals committed the following
errors:
1. The Court of Appeals erred in holding that the Resolution of the Supreme Court in
G.R. No. L-46595 did not constitute stare decisis as to apply to this case and in not
holding that said Resolution bound subsequent determinations on the right to
exclusive use of the word Lyceum.
2. The Court of Appeals erred in holding that respondent Western Pangasinan
Lyceum, Inc. was incorporated earlier than petitioner.
3. The Court of Appeals erred in holding that the word Lyceum has not acquired a
secondary meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a generic word cannot be

appropriated by the petitioner to the exclusion of others. 5

We will consider all the foregoing ascribed errors, though not necessarily seriatim. We
begin by noting that the Resolution of the Court in G.R. No. L-46595 does not, of
course, constitute res adjudicata in respect of the case at bar, since there is no identity
of parties. Neither is stare decisis pertinent, if only because the SEC En Banc itself
has re-examined Associate Commissioner Sulit's ruling in the Lyceum of Baguio case.
The Minute Resolution of the Court in G.R. No. L-46595 was not a reasoned adoption
of the Sulit ruling.
The Articles of Incorporation of a corporation must, among other things, set out the
name of the corporation. 6 Section 18 of the Corporation Code establishes a
restrictive rule insofar as corporate names are concerned:
"SECTION 18. Corporate name. No corporate name may be allowed by the
Securities an Exchange Commission if the proposed name is identical or deceptively
or confusingly similar to that of any existing corporation or to any other name already
protected by law or is patently deceptive, confusing or contrary to existing laws. When
a change in the corporate name is approved, the Commission shall issue an amended
certificate of incorporation under the amended name." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the registration of a
corporate name which is "identical or deceptively or confusingly similar" to that of any
existing corporation or which is "patently deceptive" or "patently confusing" or
"contrary to existing laws," is the avoidance of fraud upon the public which would have
occasion to deal with the entity concerned, the evasion of legal obligations and duties,
and the reduction of difficulties of administration and supervision over corporations. 7
We do not consider that the corporate names of private respondent institutions are
"identical with, or deceptively or confusingly similar" to that of the petitioner institution.
True enough, the corporate names of private respondent entities all carry the word
"Lyceum" but confusion and deception are effectively precluded by the appending of
geographic names to the word "Lyceum." Thus, we do not believe that the "Lyceum of
Aparri" can be mistaken by the general public for the Lyceum of the Philippines, or that
the "Lyceum of Camalaniugan" would be confused with the Lyceum of the Philippines.
Etymologically, the word "Lyceum" is the Latin word for the Greek lykeion which in turn
referred to a locality on the river Ilissius in ancient Athens "comprising an enclosure
dedicated to Apollo and adorned with fountains and buildings erected by Pisistratus,
Pericles and Lycurgus frequented by the youth for exercise and by the philosopher
Aristotle and his followers for teaching." 8 In time, the word "Lyceum" became
associated with schools and other institutions providing public lectures and concerts
and public discussions. Thus today, the word "Lyceum" generally refers to a school or
an institution of learning. While the Latin word "lyceum" has been incorporated into the
English language, the word is also found in Spanish (liceo) and in French (lycee). As
the Court of Appeals noted in its Decision, Roman Catholic schools frequently use the
term; e.g., "Liceo de Manila," "Liceo de Baleno" (in Baleno, Masbate), "Liceo de
Masbate," "Liceo de Albay." 9 "Lyceum" is in fact as generic in character as the word
"university." In the name of the petitioner, "Lyceum" appears to be a substitute for
"university;" in other places, however, "Lyceum," or "Liceo" or "Lycee" frequently
denotes a secondary school or a college. It may be (though this is a question of fact
which we need not resolve) that the use of the word "Lyceum" may not yet be as

widespread as the use of "university," but it is clear that a not inconsiderable number
of educational institutions have adopted "Lyceum" or "Liceo" as part of their corporate
names. Since "Lyceum" or "Liceo" denotes a school or institution of learning, it is not
unnatural to use this word to designate an entity which is organized and operating as
an educational institution.
It is claimed, however, by petitioner that the word "Lyceum" has acquired a secondary
meaning in relation to petitioner with the result that that word, although originally a
generic, has become appropriable by petitioner to the exclusion of other institutions
like private respondents herein.
The doctrine of secondary meaning originated in the field of trademark law. Its
application has, however, been extended to corporate names sine the right to use a
corporate name to the exclusion of others is based upon the same principle which
underlies the right to use a particular trademark or tradename. 10 In Philippine Nut
Industry, Inc. v. Standard Brands, Inc., 11 the doctrine of secondary meaning was
elaborated in the following terms:
" . . . a word or phrase originally incapable of exclusive appropriation with reference to
an article on the market, because geographically or otherwise descriptive, might
nevertheless have been used so long and so exclusively by one producer with
reference to his article that, in that trade and to that branch of the purchasing public,
the word or phrase has come to mean that the article was his product." 12
The question which arises, therefore, is whether or not the use by petitioner of
"Lyceum" in its corporate name has been for such length of time and with such
exclusivity as to have become associated or identified with the petitioner institution in
the mind of the general public (or at least that portion of the general public which has
to do with schools). The Court of Appeals recognized this issue and answered it in the
negative:
"Under the doctrine of secondary meaning, a word or phrase originally incapable of
exclusive appropriation with reference to an article in the market, because
geographical or otherwise descriptive might nevertheless have been used so long and
so exclusively by one producer with reference to this article that, in that trade and to
that group of the purchasing public, the word or phrase has come to mean that the
article was his produce (Ana Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance
has been referred to as the distinctiveness into which the name or phrase has evolved
through the substantial and exclusive use of the same for a considerable period of
time. Consequently, the same doctrine or principle cannot be made to apply where the
evidence did not prove that the business (of the plaintiff) has continued for so long a
time that it has become of consequence and acquired a good will of considerable
value such that its articles and produce have acquired a well-known reputation, and
confusion will result by the use of the disputed name (by the defendant) (Ang Si Heng
vs. Wellington Department Store, Inc., 92 Phil. 448).
With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the
aforementioned requisites. No evidence was ever presented in the hearing before the
Commission which sufficiently proved that the word 'Lyceum' has indeed acquired
secondary meaning in favor of the appellant. If there was any of this kind, the same
tend to prove only that the appellant had been using the disputed word for a long
period of time. Nevertheless, its (appellant) exclusive use of the word (Lyceum) was

never established or proven as in fact the evidence tend to convey that the crossclaimant was already using the word 'Lyceum' seventeen (17) years prior to the date
the appellant started using the same word in its corporate name. Furthermore,
educational institutions of the Roman Catholic Church had been using the same or
similar word like 'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de
Masbate,' 'Liceo de Albay' long before appellant started using the word 'Lyceum'. The
appellant also failed to prove that the word 'Lyceum' has become so identified with its
educational institution that confusion will surely arise in the minds of the public if the
same word were to be used by other educational institutions.
In other words, while the appellant may have proved that it had been using the word
'Lyceum' for a long period of time, this fact alone did not amount to mean that the said
word had acquired secondary meaning in its favor because the appellant failed to
prove that it had been using the same word all by itself to the exclusion of others.
More so, there was no evidence presented to prove that confusion will surely arise if
the same word were to be used by other educational institutions. Consequently, the
allegations of the appellant in its first two assigned errors must necessarily fail." 13
(Underscoring partly in the original and partly supplied)
We agree with the Court of Appeals. The number alone of the private respondents in
the case at bar suggests strongly that petitioner's use of the word "Lyceum" has not
been attended with the exclusivity essential for applicability of the doctrine of
secondary meaning. It may be noted also that at least one of the private respondents,
i.e., the Western Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17)
years before the petitioner registered its own corporate name with the SEC and began
using the word "Lyceum." It follows that if any institution had acquired an exclusive
right to the word "Lyceum," that institution would have been the Western Pangasinan
Lyceum, Inc. rather than the petitioner institution.
In this connection, petitioner argues that because the Western Pangasinan Lyceum,
Inc. failed to reconstruct its records before the SEC in accordance with the provisions
of R.A. No. 62, which records had been destroyed during World War II, Western
Pangasinan Lyceum should be deemed to have lost all rights it may have acquired by
virtue of its past registration. It might be noted that the Western Pangasinan Lyceum,
Inc. registered with the SEC soon after petitioner had filed its own registration on 21
September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed
to have lost its rights under its original 1933 registration, appears to us to be quite
secondary in importance; we refer to this earlier registration simply to underscore the
fact that petitioner's use of the word "Lyceum" was neither the first use of that term in
the Philippines nor an exclusive use thereof. Petitioner's use of the word "Lyceum"
was not exclusive but was in truth shared with the Western Pangasinan Lyceum and a
little later with other private respondent institutions which registered with the SEC
using "Lyceum" as part of their corporation names. There may well be other schools
using Lyceum or Liceo in their names, but not registered with the SEC because they
have not adopted the corporate form of organization.
We conclude and so hold that petitioner institution is not entitled to a legally
enforceable exclusive right to use the word "Lyceum" in its corporate name and that
other institutions may use "Lyceum" as part of their corporate names. To determine
whether a given corporate name is "identical" or "confusingly or deceptively similar"

with another entity's corporate name, it is not enough to ascertain the presence of
"Lyceum" or "Liceo" in both names. One must evaluate corporate names in their
entirety and when the name of petitioner is juxtaposed with the names of private
respondents, they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
WHEREFORE, the petitioner having failed to show any reversible error on the part of
the public respondent Court of Appeals, the Petition for Review is DENIED for lack of
merit, and the Decision of the Court of Appeals dated 28 June 1991 is hereby
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES, petitioner,
vs. COURT OF APPEALS, SECURITIES AND EXCHANGE COMMISSION and
REFRACTORIES CORPORATION OF THE PHILIPPINES, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Filed before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision of the Court of Appeals in CA-G.R. SP No. 35056, denying due
course and dismissing the petition filed by Industrial Refractories Corp. of the
Philippines (IRCP).
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly
organized on October 13, 1976 for the purpose of engaging in the business of
manufacturing, producing, selling, exporting and otherwise dealing in any and all
refractory bricks, its by-products and derivatives. On June 22, 1977, it registered its
corporate and business name with the Bureau of Domestic Trade.
Petitioner IRCP on the other hand, was incorporated on August 23, 1979 originally
under the name Synclaire Manufacturing Corporation. It amended its Articles of
Incorporation on August 23, 1985 to change its corporate name to Industrial
Refractories Corp. of the Philippines. It is engaged in the business of manufacturing all
kinds of ceramics and other products, except paints and zincs.
Both companies are the only local suppliers of monolithic gunning mix. [if !supportFootnotes][1]
[endif]

Discovering that petitioner was using such corporate name, respondent RCP filed on
April 14, 1988 with the Securities and Exchange Commission (SEC) a petition to
compel petitioner to change its corporate name on the ground that its corporate name
is confusingly similar with that of petitioners such that the public may be confused or
deceived into believing that they are one and the same corporation.[if !supportFootnotes][2][endif]
The SEC decided in favor of respondent RCP and rendered judgment on July 23,
1993 with the following dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the petitioner and against the
respondent declaring the latters corporate name Industrial Refractories Corporation of
the Philippines as deceptively and confusingly similar to that of petitioners corporate
name Refractories Corporation of the Philippines. Accordingly, respondent is hereby
directed to amend its Articles of Incorporation by deleting the name Refractories
Corporation of the Philippines in its corporate name within thirty (30) days from finality
of this Decision. Likewise, respondent is hereby ordered to pay the petitioner the sum

of P50,000.00 as attorneys fees.[if !supportFootnotes][3][endif]

Petitioner appealed to the SEC En Banc, arguing that it does not have any jurisdiction
over the case, and that respondent RCP has no right to the exclusive use of its
corporate name as it is composed of generic or common words.[if !supportFootnotes][4][endif]
In its Decision dated July 23, 1993, the SEC En Banc modified the appealed decision
in that petitioner was ordered to delete or drop from its corporate name only the word
Refractories.[if !supportFootnotes][5][endif]
Petitioner IRCP elevated the decision of the SEC En Banc through a petition for
review on certiorari to the Court of Appeals which then rendered the herein assailed
decision. The appellate court upheld the jurisdiction of the SEC over the case and
ruled that the corporate names of petitioner IRCP and respondent RCP are
confusingly or deceptively similar, and that respondent RCP has established its prior
right to use the word Refractories as its corporate name.[if !supportFootnotes][6][endif] The
appellate court also found that the petition was filed beyond the reglementary period. [if !
supportFootnotes][7][endif]

Hence, herein petition which we must deny.

Petitioner contends that the petition before the Court of Appeals was timely filed. It
must be noted that at the time the SEC En Banc rendered its decision on May 10,
1994, the governing rule on appeals from quasi-judicial agencies like the SEC was
Supreme Court Circular No. 1-91. As provided therein, the remedy should have
been a petition for review filed before the Court of Appeals within fifteen (15) days
from notice, raising questions of fact, of law, or mixed questions of fact and law. [if !
supportFootnotes][8][endif]
A motion for reconsideration suspends the running of the period. [if !
supportFootnotes][9][endif]

In the case at bench, there is a discrepancy between the dates provided by petitioner
and respondent. Petitioner alleges the following dates of receipt and filing: [if !supportFootnotes]
[10][endif]

June 10, 1994 Receipt of SECs Decision dated May 10, 1994
June 20, 1994 Filing of Motion for Reconsideration
September 1, 1994 Receipt of SECs Order dated August 3, 1994 denying petitioners
motion for reconsideration
September 2, 1994 Filing of Motion for extension of time
September 6, 1994 Filing of Petition
Respondent RCP, however, asserts that the foregoing dates are incorrect as the
certifications issued by the SEC show that petitioner received the SECs Decision
dated May 10, 1994 on June 9, 1994, filed the motion for reconsideration via
registered mail on June 25, 1994, and received the Order dated August 3, 1994 on
August 15, 1994.[if !supportFootnotes][11][endif] Thus, the petition was filed twenty-one (21) days
beyond the reglementary period provided in Supreme Court Circular No. 1-91. [if !
supportFootnotes][12][endif]

If reckoned from the dates supplied by petitioner, then the petition was timely filed. On
the other hand, if reckoned from the dates provided by respondent RCP, then it was
filed way beyond the reglementary period. On this score, we agree with the appellate
courts finding that petitioner failed to rebut respondent RCPs allegations of material
dates of receipt and filing.[if !supportFootnotes][13][endif] In addition, the certifications were
executed by the SEC officials based on their official records [if !supportFootnotes][14][endif] which

enjoy the presumption of regularity.[if !supportFootnotes][15][endif] As such, these are prima facie
evidence of the facts stated therein.[if !supportFootnotes][16][endif] And based on such dates, there
is no question that the petition was filed with the Court of Appeals beyond the fifteen
(15) day period. On this ground alone, the instant petition should be denied as the
SEC En Bancs decision had already attained finality and the SECs findings of fact,
when supported by substantial evidence, is final.[if !supportFootnotes][17][endif]
Nevertheless, to set the matters at rest, we shall delve into the other issues posed by
petitioner.
Petitioners arguments, substantially, are as follows: (1) jurisdiction is vested with the
regular courts as the present case is not one of the instances provided in P.D. 902-A;
(2) respondent RCP is not entitled to use the generic name refractories; (3) there is no
confusing similarity between their corporate names; and (4) there is no basis for the
award of attorneys fees.[if !supportFootnotes][18][endif]
Petitioners argument on the SECs jurisdiction over the case is utterly myopic. The
jurisdiction of the SEC is not merely confined to the adjudicative functions provided in
Section 5 of P.D. 902-A, as amended.[if !supportFootnotes][19][endif] By express mandate, it has
absolute jurisdiction, supervision and control over all corporations.[if !supportFootnotes][20][endif] It
also exercises regulatory and administrative powers to implement and enforce the
Corporation Code,[if !supportFootnotes][21][endif] one of which is Section 18, which provides:
SEC. 18. Corporate name. -- No corporate name may be allowed by the Securities
and Exchange Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name already
protected by law or is patently deceptive, confusing or contrary to existing laws. When
a change in the corporate name is approved, the Commission shall issue an amended
certificate of incorporation under the amended name.
It is the SECs duty to prevent confusion in the use of corporate names not only for the
protection of the corporations involved but more so for the protection of the public, and
it has authority to de-register at all times and under all circumstances corporate names
which in its estimation are likely to generate confusion. [if !supportFootnotes][22][endif] Clearly
therefore, the present case falls within the ambit of the SECs regulatory powers. [if !
supportFootnotes][23][endif]

Likewise untenable is petitioners argument that there is no confusing or deceptive

similarity between petitioner and respondent RCPs corporate names. Section 18 of
the Corporation Code expressly prohibits the use of a corporate name which is
identical or deceptively or confusingly similar to that of any existing corporation or to
any other name already protected by law or is patently deceptive, confusing or
contrary to existing laws. The policy behind the foregoing prohibition is to avoid fraud
upon the public that will have occasion to deal with the entity concerned, the evasion
of legal obligations and duties, and the reduction of difficulties of administration and
supervision over corporation.[if !supportFootnotes][24][endif]
Pursuant thereto, the Revised Guidelines in the Approval of Corporate and
Partnership Names[if !supportFootnotes][25][endif] specifically requires that: (1) a corporate name
shall not be identical, misleading or confusingly similar to one already registered by
another corporation with the Commission;[if !supportFootnotes][26][endif] and (2) if the proposed
name is similar to the name of a registered firm, the proposed name must contain at
least one distinctive word different from the name of the company already registered. [if !

supportFootnotes][27][endif]

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

Refractory materials are described as follows:

Refractories are structural materials used at high temperatures to [sic] industrial
furnaces. They are supplied mainly in the form of brick of standard sizes and of
special shapes. Refractories also include refractory cements, bonding mortars, plastic
firebrick, castables, ramming mixtures, and other bulk materials such as dead-burned
grain magneside, chrome or ground ganister and special clay.[if !supportFootnotes][35][endif]
While the word refractories is a generic term, its usage is not widespread and is

limited merely to the industry/trade in which it is used, and its continuous use by
respondent RCP for a considerable period has made the term so closely identified
with it. [if !supportFootnotes][36][endif] Moreover, as held in the case of Ang Kaanib sa Iglesia ng
Dios kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. vs. Iglesia ng Dios kay
Cristo Jesus, Haligi at Suhay ng Katotohanan, petitioners appropriation of
respondent's corporate name cannot find justification under the generic word rule. [if !
supportFootnotes][37][endif]
A contrary ruling would encourage other corporations to adopt
verbatim and register an existing and protected corporate name, to the detriment of
[if !supportFootnotes][38][endif]
the public.
Finally, we find the award of P50,000.00 as attorney's fees to be fair and reasonable.
Article 2208 of the Civil Code allows the award of such fees when its claimant is
compelled to litigate with third persons or to incur expenses to protect its just and valid
claim. In this case, despite its undertaking to change its corporate name in case
another firm has acquired a prior right to use such name, [if !supportFootnotes][39][endif] it refused
to do so, thus compelling respondent to undergo litigation and incur expenses to
protect its corporate name.
WHEREFORE, the instant petition for review on certiorari is hereby DENIED
for lack of merit.
Costs against petitioner.
SO ORDERED.
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.
The first proposition above stated is premised on the theory that, inasmuch as the Far
Eastern Lumber and Commercial Co., is a de facto corporation, section 19 of the
Corporation Law applies, and therefore the court had not jurisdiction to take
cognizance of said civil case number 381. Section 19 reads as follows:
. . . The due incorporation of any corporations claiming in good faith to be a
corporation under this Act and its right to exercise corporate powers shall not be
inquired into collaterally in any private suit to which the corporation may be a party, but
such inquiry may be had at the suit of the Insular Government on information of the
Attorney-General.
There are least two reasons why this section does not govern the situation. Not having
obtained the certificate of incorporation, the Far Eastern Lumber and Commercial Co.
even its stockholders may not probably claim "in good faith" to be a corporation.
Under our statue it is to be noted (Corporation Law, sec. 11) that it is the issuance of a
certificate of incorporation by the Director of the Bureau of Commerce and Industry
which calls a corporation into being. The immunity if collateral attack is granted to

corporations "claiming in good faith to be a corporation under this act." Such a claim is
compatible with the existence of errors and irregularities; but not with a total or
substantial disregard of the law. Unless there has been an evident attempt to comply
with the law the claim to be a corporation "under this act" could not be made "in good
faith." (Fisher on the Philippine Law of Stock Corporations, p. 75. See also Humphreys
vs. Drew, 59 Fla., 295; 52 So., 362.)
Second, this is not a suit in which the corporation is a party. This is a litigation between
stockholders of the alleged corporation, for the purpose of obtaining its dissolution.
Even the existence of a de jure corporation may be terminated in a private suit for its
dissolution between stockholders, without the intervention of the state.
There might be room for argument on the right of minority stockholders to sue for
dissolution;1 but that question does not affect the court's jurisdiction, and is a matter
for decision by the judge, subject to review on appeal. Whkch brings us to one
principal reason why this petition may not prosper, namely: the petitioners have their
remedy by appealing the order of dissolution at the proper time.
There is a secondary issue in connection with the appointment of a receiver. But it
must be admitted that receivership is proper in proceedings for dissolution of a
company or corporation, and it was no error to reject the counter-bond, the court
having declared the dissolution. As to the amount of the bond to be demanded of the
receiver, much depends upon the discretion of the trial court, which in this instance we
do not believe has been clearly abused.
SEVENTH DAY ADVENTIST VS. NORTHEASTERN MINDANAO
CORONA, J.:

This petition for review on certiorari assails the Court of Appeals (CA) decision[1] and
resolution[2] in CA-G.R. CV No. 41966 affirming, with modification, the decision of the
Regional Trial Court (RTC) of Bayugan, Agusan del Sur, Branch 7 in Civil Case No.
63.
This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title (TCT) No.
4468 in Bayugan, Agusan del Sur originally owned by Felix Cosio and his wife, Felisa
Cuysona.
On April 21, 1959, the spouses Cosio donated the land to the South Philippine Union
Mission of Seventh Day Adventist Church of Bayugan Esperanza, Agusan (SPUMSDA 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 donees successors-in-interest, petitioners asserted
ownership over the property. This was opposed by respondents who argued that at the
time of the donation, SPUM-SDA Bayugan could not legally be a donee
because, not having been incorporated yet, it had no juridical personality. Neither were
petitioners members of the local church then, hence, the donation could not have
been made particularly to them.
On September 28, 1987, petitioners filed a case, docketed as Civil Case No. 63 (a suit
for cancellation of title, quieting of ownership and possession, declaratory relief and
reconveyance with prayer for preliminary injunction and damages), in the RTC of
Bayugan, Agusan del Sur. After trial, the trial court rendered a decision[7] on
November 20, 1992 upholding the sale in favor of respondents.
On appeal, the CA affirmed the RTC decision but deleted the award of moral damages
and attorneys fees.[8] Petitioners motion for reconsideration was likewise denied.
Thus, this petition.
The issue in this petition is simple: should SDA-NEMMs ownership of the lot covered
by TCT No. 4468 be upheld?[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.

predecessor-in-interest at the time of the donation. Petitioners obviously could not

have claimed succession to an entity that never came to exist. Neither could the
principle of separate juridical personality apply since there was never any
corporation[15] to speak of. And, as already stated, some of the representatives of
petitioner Seventh Day Adventist Conference Church of Southern Philippines, Inc.
were not even members of the local church then, thus, they could not even claim that
the donation was particularly for them.[16]

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.

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]

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.

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]

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 SPUMSDA Bayugan could have been organized, there is no proof that there was an attempt
to incorporate at that time.
The filing of articles of incorporation and the issuance of the certificate of incorporation
are essential for the existence of a de facto corporation.[12] We have held that an
organization not registered with the Securities and Exchange Commission (SEC)
cannot be considered a corporation in any concept, not even as a corporation de
facto.[13] Petitioners themselves admitted that at the time of the donation, they were
not registered with the SEC, nor did they even attempt to organize[14] to comply with
legal requirements.
Corporate existence begins only from the moment a certificate of incorporation is
issued. No such certificate was ever issued to petitioners or their supposed

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 [1,069square 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.

transferred to the vendee upon the actual or constructive delivery thereof. On this, the
noted author Arturo Tolentino had this to say:

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

The execution of [a] public instrument xxx transfers the ownership from the vendor to
the vendee who may thereafter exercise the rights of an owner over the same[21]
Here, transfer of ownership from the spouses Cosio to SDA-NEMM was made upon
constructive delivery of the property on February 28, 1980 when the sale was made
through a public instrument.[22] TCT No. 4468 was thereafter issued and it remains in
the name of SDA-NEMM.
WHEREFORE, the petition is hereby DENIED.