G.R. No.

L-23606

July 29, 1968

ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY,

INC., petitioner,
vs.
SECURITIES & EXCHANGE COMMISSION, respondent.
Gamboa and Gamboa for petitioner.
Office of the Solicitor General for respondent.
SANCHEZ, J.:
To the question May a corporation extend its life by amendment of its articles
of incorporation effected during the three-year statutory period for liquidation
when its original term of existence had already expired? the answer of the
Securities and Exchange Commissioner was in the negative. Offshoot is this
appeal.
That problem emerged out of the following controlling facts:
Petitioner Alhambra Cigar and Cigarette Manufacturing Company, Inc.
(hereinafter referred to simply asAlhambra) was duly incorporated under
Philippine laws on January 15, 1912. By its corporate articles it was to exist for
fifty (50) years from incorporation. Its term of existence expired on January 15,
1962. On that date, it ceased transacting business, entered into a state of
liquidation.
Thereafter, a new corporation. Alhambra Industries, Inc. was formed to
carry on the business of Alhambra.
On May 1, 1962, Alhambra's stockholders, by resolution named Angel S.
Gamboa trustee to take charge of its liquidation.
On June 20, 1963 within Alhambra's three-year statutory period for liquidation
- Republic Act 3531 was enacted into law. It amended Section 18 of the
Corporation Law; it empowered domestic private corporations to extend their
corporate life beyond the period fixed by the articles of incorporation for a term
not to exceed fifty years in any one instance. Previous to Republic Act 3531, the
maximum non-extendible term of such corporations was fifty years.

On July 15, 1963, at a special meeting, Alhambra's board of directors resolved to

amend paragraph "Fourth" of its articles of incorporation to extend its corporate
life for an additional fifty years, or a total of 100 years from its incorporation.
On August 26, 1963, Alhambra's stockholders, representing more than two-thirds
of its subscribed capital stock, voted to approve the foregoing resolution. The
"Fourth" paragraph of Alhambra's articles of incorporation was thus altered to
read:
FOURTH. That the term for which said corporation is to exist is fifty (50)
years from and after the date of incorporation, and for an additional period
of fifty (50) years thereafter.
On October 28, 1963, Alhambra's articles of incorporation as so amended
certified correct by its president and secretary and a majority of its board of
directors, were filed with respondent Securities and Exchange Commission
(SEC).
On November 18, 1963, SEC, however, returned said amended articles of
incorporation to Alhambra's counsel with the ruling that Republic Act 3531 "which
took effect only on June 20, 1963, cannot be availed of by the said corporation,
for the reason that its term of existence had already expired when the said law
took effect in short, said law has no retroactive effect."
On December 3, 1963, Alhambra's counsel sought reconsideration of SEC's
ruling aforesaid, refiled the amended articles of incorporation.
On September 8, 1964, SEC, after a conference hearing, issued an order
denying the reconsideration sought.
Alhambra now invokes the jurisdiction of this Court to overturn the conclusion
below.1
1. Alhambra relies on Republic Act 3531, which amended Section 18 of the
Corporation Law. Well it is to take note of the old and the new statutes as they
are framed. Section 18, prior to and after its modification by Republic Act 3531,
covers the subject of amendment of the articles of incorporation of private
corporations. A provision thereof which remains unaltered is that a corporation
may amend its articles of incorporation "by a majority vote of its board of

directors or trustees and ... by the vote or written assent of the stockholders
representing at least two-thirds of the subscribed capital stock ... "
But prior to amendment by Republic Act 3531, an explicit prohibition existed in
Section 18, thus:
... Provided, however, That the life of said corporation shall not be
extended by said amendment beyond the time fixed in the original
articles: ...
This was displaced by Republic Act 3531 which enfranchises all private
corporations to extend their corporate existence. Thus incorporated into the
structure of Section 18 are the following:
... Provided, however, That should the amendment consist in extending the
corporate life, the extension shall not exceed fifty years in any one
instance: Provided, further, That the original articles, and amended articles
together shall contain all provisions required by law to be set out in the
articles of incorporation: ...
As we look in retrospect at the facts, we find these: From July 15 to October 28,
1963, when Alhambra made its attempt to extend its corporate existence, its
original term of fifty years had already expired (January 15, 1962); it was in the
midst of the three-year grace period statutorily fixed in Section 77 of the
Corporation Law, thus: .
SEC. 77. Every corporation whose charter expires by its own limitation or
is annulled by forfeiture or otherwise, or whose corporate existence for
other purposes is terminated in any other manner, shall nevertheless be
continued as a body corporate for three years after the time when it would
have been so dissolved, for the purpose of prosecuting and defending
suits by or against it and of enabling it gradually to settle and close its
affairs, to dispose of and convey its property and to divide its capital stock,
but not for the purpose of continuing the business for which it was
established.2
Plain from the language of the provision is its meaning: continuance of a
"dissolved" corporation as a body corporate for three years has for its purpose
the final closure of its affairs, and no other; the corporation is specifically enjoined

from "continuing the business for which it was established". The liquidation of the
corporation's affairs set forth in Section 77 became necessary precisely because
its life had ended. For this reason alone, the corporate existence and juridical
personality of that corporation to do business may no longer be extended.
Worth bearing in mind, at this juncture, is the basic development of corporation
law.
The common law rule, at the beginning, was rigid and inflexible in that upon its
dissolution, a corporation became legally dead for all purposes. Statutory
authorizations had to be provided for its continuance after dissolution "for limited
and specified purposes incident to complete liquidation of its affairs".3 Thus, the
moment a corporation's right to exist as an "artificial person" ceases, its
corporate powers are terminated "just as the powers of a natural person to take
part in mundane affairs cease to exist upon his death".4 There is nothing left but
to conduct, as it were, the settlement of the estate of a deceased juridical person.
2. Republic Act 3531, amending Section 18 of the Corporation Law, is silent, it is
true, as to when such act of extension may be made. But even with a superficial
knowledge of corporate principles, it does not take much effort to reach a correct
conclusion. For, implicit in Section 77 heretofore quoted is that the privilege given
toprolong corporate life under the amendment must be exercised before the
expiry of the term fixed in the articles of incorporation.
Silence of the law on the matter is not hard to understand. Specificity is not really
necessary. The authority to prolong corporate life was inserted by Republic Act
3531 into a section of the law that deals with the power of a corporation
to amend its articles of incorporation. (For, the manner of prolongation is through
an amendment of the articles.) And it should be clearly evident that under Section
77 no corporation in a state of liquidation can act in any way, much less amend
its articles, "for the purpose of continuing the business for which it was
established".
All these dilute Alhambra's position that it could revivify its corporate life simply
because when it attempted to do so, Alhambra was still in the process of
liquidation. It is surely impermissible for us to stretch the law that merely
empowers a corporation to act in liquidation to inject therein the power to
extend its corporate existence.

3. Not that we are alone in this view. Fletcher has written: "Since the privilege of
extension is purely statutory, all of the statutory conditions precedent must be
complied with in order that the extension may be effectuated. And, generally
these conditions must be complied with, and the steps necessary to effect the
extension must be taken,during the life of the corporation, and before the
expiration of the term of existence as original fixed by its charter or the general
law, since, as a rule, the corporation is ipso facto dissolved as soon as that time
expires. So where the extension is by amendment of the articles of
incorporation, the amendment must be adopted before that time. And, similarly,
the filing and recording of a certificate of extension after that time cannot relate
back to the date of the passage of a resolution by the stockholders in favor of the
extension so as to save the life of the corporation. The contrary is true, however,
and the doctrine of relation will apply, where the delay is due to the neglect of the
officer with whom the certificate is required to be filed, or to a wrongful refusal on
his part to receive it. And statutes in some states specifically provide that a
renewal may be had within a specified time before or after the time fixed for the
termination of the corporate existence".5
The logic of this position is well expressed in a foursquare case decided by the
Court of Appeals of Kentucky.6There, pronouncement was made as follows:
... But section 561 (section 2147) provides that, when any corporation
expires by the terms of its articles of incorporation, it may be thereafter
continued to act for the purpose of closing up its business, but for no other
purpose. The corporate life of the Home Building Association expired on
May 3, 1905. After that date, by the mandate of the statute, it could
continue to act for the purpose of closing up its business, but for no other
purpose. The proposed amendment was not made until January 16, 1908,
or nearly three years after the corporation expired by the terms of the
articles of incorporation. When the corporate life of the corporation was
ended, there was nothing to extend. Here it was proposed nearly three
years after the corporate life of the association had expired to revivify the
dead body, and to make that relate back some two years and eight
months. In other words, the association for two years and eight months
had only existed for the purpose of winding up its business, and, after this
length of time, it was proposed to revivify it and make it a live corporation
for the two years and eight months daring which it had not been such.

The law gives a certain length of time for the filing of records in this court,
and provides that the time may be extended by the court, but under this
provision it has uniformly been held that when the time was expired, there
is nothing to extend, and that the appeal must be dismissed... So, when
the articles of a corporation have expired, it is too late to adopt an
amendment extending the life of a corporation; for, the corporation having
expired, this is in effect to create a new corporation ..."7
True it is, that the Alabama Supreme Court has stated in one case.8 that a
corporation empowered by statute torenew its corporate existence may do so
even after the expiration of its corporate life, provided renewal is taken
advantage of within the extended statutory period for purposes of liquidation.
That ruling, however, is inherently weak as persuasive authority for the situation
at bar for at least two reasons: First. That case was a suit for mandamus to
compel a former corporate officer to turn over books and records that came into
his possession and control by virtue of his office. It was there held that such
officer was obliged to surrender his books and records even if the corporation
had already expired. The holding on the continued existence of the corporation
was a mere dictum. Second. Alabama's law is different. Corporations in that state
were authorized not only to extend but also to renew their corporate
existence.That very case defined the word "renew" as follows; "To make new
again; to restore to freshness; to make new spiritually; to regenerate; to begin
again; to recommence; to resume; to restore to existence, to revive; to reestablish; to recreate; to replace; to grant or obtain an extension of Webster's
New International Dict.; 34 Cyc. 1330; Carter v. Brooklyn Life Ins. Co., 110 N.Y.
15, 21, 22, 17 N.E. 396; 54 C.J. 379. Sec".9
On this point, we again draw from Fletcher: "There is a broad distinction between
the extension of a charter and the grant of a new one. To renew a charter is to
revive a charter which has expired, or, in other words, "to give a new existence to
one which has been forfeited, or which has lost its vitality by lapse of time". To
"extend" a charter is "to increase the time for the existence of one which would
otherwise reach its limit at an earlier period".10Nowhere in our statute Section
18, Corporation Law, as amended by Republic Act 3531 do we find the word
"renew" in reference to the authority given to corporations to protract their lives.
Our law limits itself to extensionof corporate existence. And, as so understood,
extension may be made only before the term provided in the corporate charter
expires.

Alhambra draws attention to another case11 which declares that until the end of
the extended period for liquidation, a dissolved corporation "does not become an
extinguished entity". But this statement was obviously lifted out of context. That
case dissected the question whether or not suits can be commenced by or
against a corporation within its liquidation period. Which was answered in the
affirmative. For, the corporation still exists for the settlement of its affairs.
People, ex rel. vs. Green,12 also invoked by Alhambra, is as unavailing. There,
although the corporation amended its articles to extend its existence at a time
when it had no legal authority yet, it adopted the amended articles later on when
it had the power to extend its life and during its original term when it could amend
its articles.
The foregoing notwithstanding, Alhambra falls back on the contention that its
case is arguably within the purview of the law. It says that before cessation of its
corporate life, it could not have extended the same, for the simple reason that
Republic Act 3531 had not then become law. It must be remembered that
Republic Act 3531 took effect on June 20, 1963, while the original term of
Alhambra's existence expired before that date on January 15, 1962. The
mischief that flows from this theory is at once apparent. It would certainly open
the gates for all defunct corporations whose charters have expired even long
before Republic Act 3531 came into being to resuscitate their corporate
existence.
4. Alhambra brings into argument Republic Act 1932, which amends Section 196
of the Insurance Act, now reading as follows: 1wph1.t
SEC. 196. Any provision of law to the contrary notwithstanding, every
domestic life insurance corporation, formed for a limited period under the
provisions of its articles of incorporation, may extend its corporate
existence for a period not exceeding fifty years in any one instance by
amendment to its articles of incorporation on or before the expiration of the
term so fixed in said articles ...
To be observed is that the foregoing statute unlike Republic Act 3531
expressly authorizes domestic insurance corporations to extend their corporate
existence "on or before the expiration of the term" fixed in their articles of
incorporation. Republic Act 1932 was approved on June 22, 1957, long before

the passage of Republic Act 3531 in 1963. Congress, Alhambra points out, must
have been aware of Republic Act 1932 when it passed Republic Act 3531. Since
the phrase "on or before", etc., was omitted in Republic Act 3531, which contains
no similar limitation, it follows, according to Alhambra, that it is not necessary to
extend corporate existence on or before the expiration of its original term.
That Republic Act 3531 stands mute as to when extention of corporate existence
may be made, assumes no relevance. We have already said, in the face of a
familiar precept, that a defunct corporation is bereft of any legal faculty not
otherwise expressly sanctioned by law.
Illuminating here is the explanatory note of H.B. 1774, later Republic Act 3531
now in dispute. Its first paragraph states that "Republic Act No. 1932 allows the
automatic extension of the corporate existence of domestic life insurance
corporations upon amendment of their articles of incorporation on or before the
expiration of the terms fixed by said articles". The succeeding lines are decisive:
"This is a good law, a sane and sound one.There appears to be no valid reason
why it should not be made to apply to other private corporations.13
The situation here presented is not one where the law under consideration is
ambiguous, where courts have to put in harness extrinsic aids such as a look at
another statute to disentangle doubts. It is an elementary rule in legal
hermeneutics that where the terms of the law are clear, no statutory construction
may be permitted. Upon the basic conceptual scheme under which corporations
operate, and with Section 77 of the Corporation Law particularly in mind, we find
no vagueness in Section 18, as amended by Republic Act 3531. As we view it, by
directing attention to Republic Act 1932, Alhambra would seek to create obscurity
in the law; and, with that, ask of us a ruling that such obscurity be explained.
This, we dare say, cannot be done.
The pari materia rule of statutory construction, in fact, commands that statutes
must be harmonized with each other.14 So harmonizing, the conclusion is clear
that Section 18 of the Corporation Law, as amended by Republic Act 3531 in
reference to extensions of corporate existence, is to be read in the same light as
Republic Act 1932. Which means that domestic corporations in general, as with
domestic insurance companies, can extend corporate existence only on or before
the expiration of the term fixed in their charters.

5. Alhambra pleads for munificence in interpretation, one which brushes

technicalities aside. Bases for this posture are that Republic Act 3531 is a
remedial statute, and that extension of corporate life is beneficial to the economy.
Alhambra's stance does not induce assent. Expansive construction is
possible only when there is something to expand. At the time of the passage of
Republic Act 3531, Alhambra's corporate life had already expired. It had
overstepped the limits of its limited existence. No life there is to prolong.
Besides, a new corporation Alhambra Industries, Inc., with but slight change in
stockholdings15 has already been established. Its purpose is to carry on, and it
actually does carry on,16 the business of the dissolved entity. The beneficialeffects argument is off the mark.
The way the whole case shapes up then, the only possible drawbacks of
Alhambra might be that, instead of the new corporation (Alhambra Industries,
Inc.) being written off, the old one (Alhambra Cigar & Cigarette Manufacturing
Company, Inc.) has to be wound up; and that the old corporate name cannot be
retained fully in its exact form.17 What is important though is that the
word Alhambra, the name that counts [it has goodwill], remains.
FOR THE REASONS GIVEN, the ruling of the Securities and Exchange
Commission of November 18, 1963, and its order of September 8, 1964, both
here under review, are hereby affirmed.
Costs against petitioner Alhambra Cigar & Cigarette Manufacturing Company,
Inc. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Angeles
and Fernando, JJ., concur.

G.R. No. 96161 February 21, 1992

PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS
INDUSTRIAL DEVELOPMENT, INC.,petitioners,
vs.

COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and

STANDARD PHILIPS CORPORATION,respondents.
Emeterio V. Soliven & Associates for petitioners.
Narciso A. Manantan for private respondent.

MELENCIO-HERRERA, J.:
Petitioners challenge the Decision of the Court of Appeals, dated 31 July 1990, in
CA-GR Sp. No. 20067, upholding the Order of the Securities and Exchange
Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing petitioners'
prayer for the cancellation or removal of the word "PHILIPS" from private
respondent's corporate name.
Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under the
laws of the Netherlands, although not engaged in business here, is the registered
owner of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM under
Certificates of Registration Nos. R-1641 and R-1674, respectively issued by the
Philippine Patents Office (presently known as the Bureau of Patents, Trademarks
and Technology Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips
Electrical, for brevity) and Philips Industrial Developments, Inc. (Philips Industrial,
for short), authorized users of the trademarks PHILIPS and PHILIPS SHIELD
EMBLEM, were incorporated on 29 August 1956 and 25 May 1956, respectively.
All petitioner corporations belong to the PHILIPS Group of Companies.
Respondent Standard Philips Corporation (Standard Philips), on the other hand,
was issued a Certificate of Registration by respondent Commission on 19 May
1982.
On 24 September 1984, Petitioners filed a letter complaint with the Securities &
Exchange Commission (SEC) asking for the cancellation of the word "PHILIPS"
from Private Respondent's corporate name in view of the prior registration with
the Bureau of Patents of the trademark "PHILIPS" and the logo "PHILIPS
SHIELD EMBLEM" in the name of Petitioner, PEBV, and the previous registration
of Petitioners Philips Electrical and Philips Industrial with the SEC.

As a result of Private Respondent's refusal to amend its Articles of Incorporation,

Petitioners filed with the SEC, on 6 February 1985, a Petition (SEC Case No.
2743) praying for the issuance of a Writ of Preliminary Injunction, alleging,
among others, that Private Respondent's use of the word PHILIPS amounts to an
infringement and clear violation of Petitioners' exclusive right to use the same
considering that both parties engage in the same business.
In its Answer, dated 7 March 1985, Private Respondent countered that Petitioner
PEBV has no legal capacity to sue; that its use of its corporate name is not at all
similar to Petitioners' trademark PHILIPS when considered in its entirety; and that
its products consisting of chain rollers, belts, bearings and cutting saw are
grossly different from Petitioners' electrical products.
After conducting hearings with respect to the prayer for Injunction; the SEC
Hearing Officer, on 27 September 1985, ruled against the issuance of such Writ.
On 30 January 1987, the same Hearing Officer dismissed the Petition for lack of
merit. In so ruling, the latter declared that inasmuch as the SEC found no
sufficient ground for the granting of injunctive relief on the basis of the testimonial
and documentary evidence presented, it cannot order the removal or cancellation
of the word "PHILIPS" from Private Respondent's corporate name on the basis of
the same evidence adopted in toto during trial on the merits. Besides, Section 18
of the Corporation Code (infra) is applicable only when the corporate names in
question are identical. Here, there is no confusing similarity between Petitioners'
and Private Respondent's corporate names as those of the Petitioners contain at
least two words different from that of the Respondent. Petitioners' Motion for
Reconsideration was likewise denied on 17 June 1987.
On appeal, the SEC en banc affirmed the dismissal declaring that the corporate
names of Petitioners and Private Respondent hardly breed confusion inasmuch
as each contains at least two different words and, therefore, rules out any
possibility of confusing one for the other.
On 30 January 1990, Petitioners sought an extension of time to file a Petition for
Review on Certiorari before this Court, which Petition was later referred to the
Court of Appeals in a Resolution dated 12 February 1990.
In deciding to dismiss the petition on 31 July 1990, the Court of
Appeals 1 swept aside Petitioners' claim that following the ruling in Converse

Rubber Corporation v. Universal Converse Rubber Products, Inc., et al, (G. R.

No. L-27906, January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be
used as part of Private Respondent's corporate name as the same constitutes a
dominant part of Petitioners' corporate names. In so holding, the Appellate Court
observed that the Converse case is not four-square with the present case
inasmuch as the contending parties in Converse are engaged in a similar
business, that is, the manufacture of rubber shoes. Upholding the SEC, the
Appellate Court concluded that "private respondents' products consisting of chain
rollers, belts, bearings and cutting saw are unrelated and non-competing with
petitioners' products i.e. electrical lamps such that consumers would not in any
probability mistake one as the source or origin of the product of the other."
The Appellate Court denied Petitioners' Motion for Reconsideration on 20
November 1990, hence, this Petition which was given due course on 22 April
1991, after which the parties were required to submit their memoranda, the latest
of which was received on 2 July 1991. In December 1991, the SEC was also
required to elevate its records for the perusal of this Court, the same not having
been apparently before respondent Court of Appeals.
We find basis for petitioners' plea.
As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927),
the Court declared that a corporation's right to use its corporate and trade name
is a property right, a right in rem, which it may assert and protect against the
world in the same manner as it may protect its tangible property, real or personal,
against trespass or conversion. It is regarded, to a certain extent, as a property
right and one which cannot be impaired or defeated by subsequent appropriation
by another corporation in the same field (Red Line Transportation Co. vs. Rural
Transit Co., September 8, 1934, 20 Phil 549).
A name is peculiarly important as necessary to the very existence of a
corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317,
46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank
vs. Huntington Distilling Co. 40 W Va 530, 23 SE 792). Its name is one of its
attributes, an element of its existence, and essential to its identity (6 Fletcher
[Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation
must have a name by which it is to sue and be sued and do all legal acts. The
name of a corporation in this respect designates the corporation in the same

manner as the name of an individual designates the person (Cincinnati

Cooperage Co. vs. Bate. 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co.
vs. Starbird. 10 NH 123); and the right to use its corporate name is as much a
part of the corporate franchise as any other privilege granted (Federal Secur. Co.
vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs.
Portuguese Beneficial Association, 18 RI 165, 26 A 36).
A corporation acquires its name by choice and need not select a name identical
with or similar to one already appropriated by a senior corporation while an
individual's name is thrust upon him (See Standard Oil Co. of New Mexico, Inc. v.
Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use
a corporate name in violation of the rights of others than an individual can use his
name legally acquired so as to mislead the public and injure another (Armington
vs. Palmer, 21 RI 109. 42 A 308).
Our own Corporation Code, in its Section 18, expressly provides that:
No corporate name may be allowed by the Securities and Exchange
Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other
name already protected by law or is patently deceptive, confusing or
contrary to existing law.Where a change in a corporate name is
approved, the commission shall issue an amended certificate of
incorporation under the amended name. (Emphasis supplied)
The statutory prohibition cannot be any clearer. To come within its scope, two
requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of such
corporate name; and
(2) the proposed name is either:
(a) 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.

The right to the exclusive use of a corporate name with freedom from
infringement by similarity is determined by priority of adoption (1 Thompson, p.
80 citing Munn v. Americana Co., 82 N. Eq. 63, 88 Atl. 30; San Francisco Oyster
House v. Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there is no doubt
with respect to Petitioners' prior adoption of' the name ''PHILIPS" as part of its
corporate name. Petitioners Philips Electrical and Philips Industrial were
incorporated on 29 August 1956 and 25 May 1956, respectively, while
Respondent Standard Philips was issued a Certificate of Registration on 12 April
1982, twenty-six (26) years later (Rollo, p. 16). Petitioner PEBV has also used
the trademark "PHILIPS" on electrical lamps of all types and their accessories
since 30 September 1922, as evidenced by Certificate of Registration No. 1651.
The second requisite no less exists in this case. 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. In so doing, the
Court must look to the record as well as the names themselves (Ohio Nat. Life
Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of
Petitioners and Private Respondent are not identical, a reading of Petitioner's
corporate names, to wit: PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS,
INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to
conclude that "PHILIPS" is, indeed, the dominant word in that all the companies
affiliated or associated with the principal corporation, PEBV, are known in the
Philippines and abroad as the PHILIPS Group of Companies.
Respondents maintain, however, that Petitioners did not present an iota of proof
of actual confusion or deception of the public much less a single purchaser of
their product who has been deceived or confused or showed any likelihood of
confusion. It is settled, however, that proof of actual confusion need not be
shown. It suffices that confusion is probably or likely to occur (6 Fletcher [Perm
Ed], pp. 107-108, enumerating a long line of cases).
It may be that Private Respondent's products also consist of chain rollers, belts,
bearing and the like, while petitioners deal principally with electrical products. It is
significant to note, however, that even the Director of Patents had denied Private
Respondent's application for registration of the trademarks "Standard Philips &
Device" for chain, rollers, belts, bearings and cutting saw. That office held that

PEBV, "had shipped to its subsidiaries in the Philippines equipment, machines

and their parts which fall under international class where "chains, rollers, belts,
bearings and cutting saw," the goods in connection with which Respondent is
seeking to register 'STANDARD PHILIPS' . . . also belong" ( Inter Partes Case
No. 2010, June 17, 1988, SEC Rollo).
Furthermore, the records show that among Private Respondent's primary
purposes in its Articles of Incorporation (Annex D, Petition p. 37, Rollo) are the
following:
To buy, sell, barter, trade, manufacture, import, export, or otherwise
acquire, dispose of, and deal in and deal with any kind of goods,
wares, and merchandise such as but not limited to plastics, carbon
products, office stationery and supplies, hardware parts, electrical
wiring devices, electrical component parts, and/or complement
of industrial, agricultural or commercial machineries, constructive
supplies, electrical supplies and other merchandise which are or
may become articles of commerce except food, drugs and cosmetics
and to carry on such business as manufacturer, distributor, dealer,
indentor, factor, manufacturer's representative capacity for domestic
or foreign companies. (emphasis ours)
For its part, Philips Electrical also includes, among its primary purposes, the
following:
To develop manufacture and deal in electrical products, including
electronic, mechanical and other similar products . . . (p. 30, Record
of SEC Case No. 2743)
Given Private Respondent's aforesaid underlined primary purpose, nothing could
prevent it from dealing in the same line of business of electrical devices, products
or supplies which fall under its primary purposes. Besides, there is showing that
Private Respondent not only manufactured and sold ballasts for fluorescent
lamps with their corporate name printed thereon but also advertised the same as,
among others, Standard Philips (TSN, before the SEC, pp. 14, 17, 25, 26, 37-42,
June 14, 1985; pp. 16-19, July 25, 1985). As aptly pointed out by Petitioners,
[p]rivate respondent's choice of "PHILIPS" as part of its corporate name
[STANDARD PHILIPS CORPORATION] . . . tends to show said respondent's

intention to ride on the popularity and established goodwill of said petitioner's

business throughout the world" (Rollo, p. 137). The subsequent appropriator of
the name or one confusingly similar thereto usually seeks an unfair advantage, a
free ride of another's goodwill (American Gold Star Mothers, Inc. v. National Gold
Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488).
In allowing Private Respondent the continued use of its corporate name, the SEC
maintains that the corporate names of Petitioners PHILIPS ELECTRICAL
LAMPS. INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at least
two words different from that of the corporate name of respondent STANDARD
PHILIPS CORPORATION, which words will readily identify Private Respondent
from Petitioners and vice-versa.
True, under the Guidelines in the Approval of Corporate and Partnership Names
formulated by the SEC, the proposed name "should not be similar to one already
used by another corporation or partnership. If the proposed name contains a
word already used as part of the firm name or style of a registered company; the
proposed name must contain two other words different from the company
already registered" (Emphasis ours). It is then pointed out that Petitioners Philips
Electrical and Philips Industrial have two words different from that of Private
Respondent's name.
What is lost sight of, however, is that PHILIPS is a trademark or trade name
which was registered as far back as 1922. Petitioners, therefore, have the
exclusive right to its use which must be free from any infringement by similarity. A
corporation has an exclusive right to the use of its name, which may be protected
by injunction upon a principle similar to that upon which persons are protected in
the use of trademarks and tradenames (18 C.J.S. 574). Such principle proceeds
upon the theory that it is a fraud on the corporation which has acquired a right to
that name and perhaps carried on its business thereunder, that another should
attempt to use the same name, or the same name with a slight variation in such a
way as to induce persons to deal with it in the belief that they are dealing with the
corporation which has given a reputation to the name (6 Fletcher [Perm Ed], pp.
39-40, citingBorden Ice Cream Co. v. Borden's Condensed Milk Co., 210 F 510).
Notably, too, Private Respondent's name actually contains only a single word,
that is, "STANDARD", different from that of Petitioners inasmuch as the inclusion
of the term "Corporation" or "Corp." merely serves the Purpose of distinguishing
the corporation from partnerships and other business organizations.

The fact that there are other companies engaged in other lines of business using
the word "PHILIPS" as part of their corporate names is no defense and does not
warrant the use by Private Respondent of such word which constitutes an
essential feature of Petitioners' corporate name previously adopted and
registered and-having acquired the status of a well-known mark in the Philippines
and internationally as well (Bureau of Patents Decision No. 88-35 [TM], June 17,
1988, SEC Records).
In support of its application for the registration of its Articles of Incorporation with
the SEC, Private Respondent had submitted an undertaking "manifesting its
willingness to change its corporate name in the event another person, firm or
entity has acquired a prior right to the use of the said firm name or one
deceptively or confusingly similar to it." Private respondent must now be held to
its undertaking.
As a general rule, parties organizing a corporation must choose a
name at their peril; and the use of a name similar to one adopted by
another corporation, whether a business or a nonbusiness or nonprofit organization if misleading and likely to injure it in the exercise
in its corporate functions, regardless of intent, may be prevented by
the corporation having the prior right, by a suit for injunction against
the new corporation to prevent the use of the name (American Gold
Star Mothers, Inc. v. National Gold Star Mothers, Inc., 89 App DC
269, 191 F 2d 488, 27 ALR 2d 948).
WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990, and its
Resolution dated 20 November 1990, are SET ASIDE and a new one entered
ENJOINING private respondent from using "PHILIPS" as a feature of its
corporate name, and ORDERING the Securities and Exchange Commission to
amend private respondent's Articles of Incorporation by deleting the word
PHILIPS from the corporate name of private respondent.
No costs.
SO ORDERED.

G.R. No. 114776

February 2, 2000

MENANDRO B. LAUREANO, petitioner,

vs.
COURT OF APPEALS AND SINGAPORE AIRLINES LIMITED, respondents.
QUISUMBING, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
reverse the Decision of the Court of Appeals, dated October 29, 1993, in C.A.
G.R. No. CV 34476, as well as its Resolution dated February 28, 1994, which
denied the motion for reconsideration.
The facts of the case as summarized by the respondent appellate court are as
follows:
Sometime in 1978, plaintiff [Menandro B. Laureano, herein petitioner], then
Director of Flight Operations and Chief Pilot of Air Manila, applied for
employment with defendant company [herein private respondent] through
its Area Manager in Manila.
On September 30, 1978, after the usual personal interview, defendant
wrote to plaintiff, offering a contract of employment as an expatriate B-707
captain for an original period of two (2) years commencing on January 21,
1978. Plaintiff accepted the offer and commenced working on January 20,
1979. After passing the six-month probation period, plaintiffs appointment
was confirmed effective July 21, 1979. (Annex "B", p. 30, Rollo).
On July 21, 1979, defendant offered plaintiff an extension of his two-year
contract to five (5) years effective January 21, 1979 to January 20, 1984
subject to the terms and conditions set forth in the contract of employment,
which the latter accepted (Annex "C" p. 31, Rec.).
During his service as B-707 captain, plaintiff on August 24, 1980, while in
command of a flight, committed a noise violation offense at the Zurich
Airport, for which plaintiff apologized.(Exh. "3", p. 307, Rec.).
Sometime in 1980, plaintiff featured in a tail scraping incident wherein the
tail of the aircraft scraped or touched the runway during landing. He was
suspended for a few days until he was investigated by board headed by
Capt. Choy. He was reprimanded.

On September 25, 1981, plaintiff was invited to take a course of A-300

conversion training at Aeroformacion, Toulouse, France at dependant's
expense. Having successfully completed and passed the training course,
plaintiff was cleared on April 7, 1981, for solo duty as captain of the Airbus
A-300 and subsequently appointed as captain of the A-300 fleet
commanding an Airbus A-300 in flights over Southeast Asia. (Annexes "D",
"E" and "F", pp. 34-38, Rec.).
Sometime in 1982, defendant, hit by a recession, initiated cost-cutting
measures. Seventeen (17) expatriate captains in the Airbus fleet were
found in excess of the defendant's requirement (t.s.n., July 6, 1988. p. 11).
Consequently, defendant informed its expatriate pilots including plaintiff of
the situation and advised them to take advance leaves. (Exh. "15", p. 466,
Rec.)
Realizing that the recession would not be for a short time, defendant
decided to terminate its excess personnel (t.s.n., July 6, 1988, p. 17). It did
not, however, immediately terminate it's A-300 pilots. It reviewed their
qualifications for possible promotion to the B-747 fleet. Among the 17
excess Airbus pilots reviewed, twelve were found qualified. Unfortunately,
plaintiff was not one of the twelve.
On October 5, 1982, defendant informed plaintiff of his termination
effective November 1, 1982 and that he will be paid three (3) months
salary in lieu of three months notice (Annex "I", pp. 41-42, Rec.). Because
he could not uproot his family on such short notice, plaintiff requested a
three-month notice to afford him time to exhaust all possible avenues for
reconsideration and retention. Defendant gave only two (2) months notice
and one (1) month salary. (t.s.n., Nov. 12, 1987. p. 25).
Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal dismissal
before the Labor Arbiter. Defendant moved to dismiss on jurisdiction
grounds. Before said motion was resolved, the complaint was withdrawn.
Thereafter, plaintiff filed the instant case for damages due to illegal
termination of contract of services before the court a quo (Complaint, pp.
1-10, Rec.).

Again, defendant on February 11, 1987 filed a motion to dismiss

alleging inter alia: (1) that the court has no jurisdiction over the subject
matter of the case, and (2) that Philippine courts have no jurisdiction over
the instant case. Defendant contends that the complaint is for illegal
dismissal together with a money claim arising out of and in the course of
plaintiffs employment "thus it is the Labor Arbiter and the NLRC who have
the jurisdiction pursuant to Article 217 of the Labor Code" and that, since
plaintiff was employed in Singapore, all other aspects of his employment
contract and/or documents executed in Singapore. Thus, defendant
postulates that Singapore laws should apply and courts thereat shall have
jurisdiction. (pp. 50-69, Rec.).
In traversing defendant's arguments, plaintiff claimed that: (1) where the
items demanded in a complaint are the natural consequences flowing from
a breach of an obligation and not labor benefits, the case is intrinsically a
civil dispute; (2) the case involves a question that is beyond the field of
specialization of labor arbiters; and (3) if the complaint is grounded not on
the employee's dismissal per se but on the manner of said dismissal and
the consequence thereof, the case falls under the jurisdiction of the civil
courts. (pp. 70-73, Rec.)
On March 23, 1987, the court a quo denied defendant's motion to dismiss
(pp. 82-84, Ibid). The motion for reconsideration was likewise denied. (p.
95 ibid.)
On September 16, 1987, defendant filed its answer reiterating the grounds
relied upon in its motion to dismiss and further arguing that plaintiff is
barred by laches, waiver, and estoppel from instituting the complaint and
that he has no cause of action . (pp. 102-115)1
On April 10, 1991, the trial court handed down its decision in favor of plaintiff. The
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Menandro
Laureano and against defendant Singapore Airlines Limited, ordering
defendant to pay plaintiff the amounts of

SIN$396,104.00, or its equivalent in Philippine currency at the current rate

of exchange at the time of payment, as and for unearned compensation
with legal interest from the filing of the complaint until fully paid;
SIN$154,742.00, or its equivalent in Philippine currency at the current rate
of exchange at the time of payment; and the further amounts of
P67,500.00 as consequential damages with legal interest from the filing of
the complaint until fully paid;
P1,000,000.00 as and for moral damages; P1,000,000.00 as and for
exemplary damages; and P100,000.00 as and for attorney's fees.
Costs against defendant.
SO ORDERED.2
Singapore Airlines timely appealed before the respondent court and raised the
issues of jurisdiction, validity of termination, estoppel, and damages.
On October 29, 1993, the appellate court set aside the decision of the trial court,
thus,
. . . In the instant case, the action for damages due to illegal termination
was filed by plaintiff-appellee only on January 8, 1987 or more than four (4)
years after the effectivity date of his dismissal on November 1, 1982.
Clearly, plaintiff-appellee's action has already prescribed.
WHEREFORE, the appealed decision is hereby REVERSED and SET
ASIDE. The complaint is hereby dismissed.
SO ORDERED.3
Petitioner's and Singapore Airlines' respective motions for reconsideration were
denied.
Now, before the Court, petitioner poses the following queries:
1. IS THE PRESENT ACTION ONE BASED ON CONTRACT WHICH
PRESCRIBES IN TEN YEARS UNDER ARTICLE 1144 OF THE NEW CIVIL
CODE OR ONE FOR DAMAGES ARISING FROM AN INJURY TO THE RIGHTS

OF THE PLAINTIFF WHICH PRESCRIBES IN FOUR YEARS UNDER ARTICLE

1146 OF THE NEW CIVIL CODE?
2. CAN AN EMPLOYEE WITH A FIXED PERIOD OF EMPLOYMENT BE
RETRENCHED BY HIS EMPLOYER?
3. CAN THERE BE VALID RETRENCHMENT IF AN EMPLOYER MERELY
FAILS TO REALIZE THE EXPECTED PROFITS EVEN IF IT WERE NOT, IN
FACT, INCURRING LOSSES?
At the outset, we find it necessary to state our concurrence on the assumption of
jurisdiction by the Regional Trial Court of Manila, Branch 9. The trial court rightly
ruled on the application of Philippine law, thus:
Neither can the Court determine whether the termination of the plaintiff is
legal under the Singapore Laws because of the defendant's failure to show
which specific laws of Singapore Laws apply to this case. As substantially
discussed in the preceding paragraphs, the Philippine Courts do not take
judicial notice of the laws of Singapore. The defendant that claims the
applicability of the Singapore Laws to this case has the burden of proof.
The defendant has failed to do so. Therefore, the Philippine law should be
applied.4
Respondent Court of Appeals acquired jurisdiction when defendant filed its
appeal before said court.5 On this matter, respondent court was correct when it
barred defendant-appellant below from raising further the issue of jurisdiction.6
Petitioner now raises the issue of whether his action is one based on Article 1144
or on Article 1146 of the Civil Code. According to him, his termination of
employment effective November 1, 1982, was based on an employment contract
which is under Article 1144, so his action should prescribe in 10 years as
provided for in said article. Thus he claims the ruling of the appellate court based
on Article 1146 where prescription is only four (4) years, is an error. The appellate
court concluded that the action for illegal dismissal originally filed before the
Labor Arbiter on June 29, 1983, but which was withdrawn, then filed again in
1987 before the Regional Trial Court, had already prescribed.
In our view, neither Article 11447 nor Article 11468 of the Civil Code is here
pertinent. What is applicable is Article 291 of the Labor Code, viz:

Art. 291. Money claims. All money claims arising from employeeemployer relations accruing during the effectivity of this Code shall be filed
within three (3) years from the time the cause of action accrued; otherwise
they shall be forever barred.
xxx

xxx

xxx

What rules on prescription should apply in cases like this one has long been
decided by this Court. In illegal dismissal, it is settled, that the ten-year
prescriptive period fixed in Article 1144 of the Civil Code may not be invoked by
petitioners, for the Civil Code is a law of general application, while the
prescriptive period fixed in Article 292 of the Labor Code [now Article 291] is a
SPECIAL LAW applicable to claims arising from employee-employer relations. 9
More recently in De Guzman vs. Court of Appeals,10 where the money claim was
based on a written contract, the Collective Bargaining Agreement, the Court held:
. . . The language of Art. 291 of the Labor Code does not limit its
application only to "money claims specifically recoverable under said
Code" but covers all money claims arising from an employee-employer
relations" (Citing Cadalin v. POEA Administrator, 238 SCRA 721, 764
[1994]; and Uy v. National Labor Relations Commission, 261 SCRA 505,
515 [1996]). . . .
It should be noted further that Article 291 of the Labor Code is a special
law applicable to money claims arising from employer-employee relations;
thus, it necessarily prevails over Article 1144 of the Civil Code, a general
law. Basic is the rule in statutory construction that "where two statutes are
of equal theoretical application to a particular case, the one designed
therefore should prevail." (Citing Leveriza v. Intermediate Appellate Court,
157 SCRA 282, 294.) Generalia specialibus non derogant.11
In the light of Article 291, aforecited, we agree with the appellate court's
conclusion that petitioner's action fordamages due to illegal termination filed
again on January 8, 1987 or more than four (4) years after the effective date of
his dismissal on November 1, 1982 has already prescribed.
In the instant case, the action for damages due to illegal termination was
filed by plaintiff-appelle only on January 8, 1987 or more than four (4)

years after the effectivity date of his dismissal on November 1, 1982.

Clearly, plaintiff-appellee's action has already prescribed.
We base our conclusion not on Article 1144 of the Civil Code but on which sets
the prescription period at three (3) years and which governs under this
jurisdiction.
Petitioner claims that the running of the prescriptive period was tolled when he
filed his complaint for illegal dismissal before the Labor Arbiter of the National
Labor Relations Commission. However, this claim deserves scant consideration;
it has no legal leg to stand on. In Olympia International, Inc., vs., Court of
Appeals, we held that "although the commencement of a civil action stops the
running of the statute of prescription or limitations, its dismissal or voluntary
abandonment by the plaintiff leaves in exactly the same position as though no
action had been commenced at all."12
Now, as to whether petitioner's separation from the company due to
retrenchment was valid, the appellate court found that the employment contract
of petitioner allowed for pre-termination of employment. We agree with the Court
of Appeals when it said,
It is a settled rule that contracts have the force of law between the parties.
From the moment the same is perfected, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all
consequences which, according to their nature, may be in keeping with
good faith, usage and law. Thus, when plaintiff-appellee accepted the offer
of employment, he was bound by the terms and conditions set forth in the
contract, among others, the right of mutual termination by giving three
months written notice or by payment of three months salary. Such
provision is clear and readily understandable, hence, there is no room for
interpretation.
xxx

xxx

xxx

Further, plaintiff-appellee's contention that he is not bound by the

provisions of the Agreement, as he is not a signatory thereto, deserves no
merit. It must be noted that when plaintiff-appellee's employment was
confirmed, he applied for membership with the Singapore Airlines Limited
(Pilots) Association, the signatory to the aforementioned Agreement. As

such, plaintiff-appellee is estopped from questioning the legality of the said

agreement or any proviso contained therein.13
Moreover, the records of the present case clearly show that respondent court's
decision is amply supported by evidence and it did not err in its findings,
including the reason for the retrenchment:
When defendant-appellant was faced with the world-wide recession of the
airline industry resulting in a slow down in the company's growth
particularly in the regional operation (Asian Area) where the Airbus 300
operates. It had no choice but to adopt cost cutting measures, such as
cutting down services, number of frequencies of flights, and reduction of
the number of flying points for the A-300 fleet (t.s.n., July 6, 1988, pp. 1718). As a result, defendant-appellant had to lay off A-300 pilots, including
plaintiff-appellee, which it found to be in excess of what is reasonably
needed.14
All these considered, we find sufficient factual and legal basis to conclude that
petitioner's termination from employment was for an authorized cause, for which
he was given ample notice and opportunity to be heard, by respondent company.
No error nor grave abuse of discretion, therefore, could be attributed to
respondent appellate court.1wphi1.nt
ACCORDINGLY, the instant petition is DISMISSED. The decision of the Court of
Appeals in C.A. CV No. 34476 is AFFIRMED.
SO ORDERED.

G.R. No. 174077

November 21, 2012

ELLICE AGRO-INDUSTRIAL CORPORATION, represented by its Chairman

of the Board of Directors and President, RAUL E. GALA, Petitioner,
vs.
RODEL T. YOUNG, DELFIN CHAN, JIM WEE, and GUIA G.
DOMINGO, *** Respondents.
DECISION

MENDOZA, J.:
Assailed in this Petition for Review on Certiorari under Rule 45 of the Rules of
Court are the July 1, 2003 Decision1 and the August 8, 2006 Resolution2 of the
Court of Appeals (CA), in CA-G.R. SP No. 64421, dismissing the petition and
upholding the November 11, 1999 Decision of the Regional Trial Court of Lucena
City, Branch 60 (RTC), in Civil Case No. 96-177, entitled "Rodel T. Young, Delfin
Chan and Jim Wee v. Ellice Agro Industrial Corporation, represented by Guia G.
Domingo."
The Facts
On July 24, 1995, Rodel T. Young, Delfin Chan and Jim Wee (respondents) and
Ellice Agro-Industrial Corporation (EAIC), represented by its alleged corporate
secretary and attorney-in-fact, Guia G. Domingo (Domingo), entered into a
Contract to Sell, under certain terms and conditions, wherein EAIC agreed to sell
to the respondents a 30,000 square-meter portion of a parcel of land located in
Lutucan, Sariaya, Quezon and registered under EAICs name and covered by
Transfer Certificate of Title (TCT) No. T-157038 in consideration of One Million
and Fifty Thousand (P1,050,000.00) Pesos.
Pursuant to the Contract to Sell,3 respondents paid EAIC, through Domingo, the
aggregate amount of Five Hundred Forty Five Thousand (P545,000.00) Pesos as
partial payment for the acquisition of the subject property. Despite such payment,
EAIC failed to deliver to respondents the owners duplicate certificate of title of
the subject property and the corresponding deed of sale as required under the
Contract to Sell.
On November 8, 1996, prompted by the failure of EAIC to comply with its
obligation, respondents had their Affidavit of Adverse Claim annotated in TCT No.
T-157038.4
On November 14, 1996, respondents filed a Complaint5 for specific performance,
docketed as Civil Case No. 96-177, against EAIC and Domingo before the RTC.
Consequently, on November 18, 1996, respondents caused the annotation of a
Notice of Lis Pendens involving Civil Case No. 96-177 in TCT No. T-157038.6

The initial attempt to serve the summons and a copy of the complaint and its
annexes on EAIC, through Domingo, on Rizal Street, Sariaya, Quezon, was
unsuccessful as EAIC could not be located in the said address.
Another attempt was made to serve the alias summons on EAIC at 996 Maligaya
Street, Singalong, Manila, the residence of Domingo. The second attempt to
serve the alias summons to Domingo was, this time, successful.
On March 21, 1997, EAIC, represented by Domingo, filed its Answer with
Counterclaim.7
Meanwhile, respondent Jim Wee (Wee) sent Raul E. Gala (Gala), EAICs
Chairman and President, a letter,8 dated July 9, 1997, seeking a conference with
the latter relating to the execution of an absolute deed of sale pursuant to the
Contract to Sell entered into between EAIC and respondents.
In response, the Robles Ricafrente Aguirre Sanvicente & Cacho Law Firm,
introducing itself to be the counsel of EAIC, sent Wee a letter,9 dated July 18,
1997, informing him of Domingos lack of authority to represent EAIC.
On the scheduled pre-trial conference on January 27, 1998, neither Domingo nor
her counsel appeared. As a result of EAICs failure to appear in the pre-trial
conference, respondents were allowed to present their evidence ex parte,
pursuant to Section 5, Rule 1810 of the Rules of Court.
Following the presentation of evidence ex parte, the RTC rendered its November
11, 1999 Decision ordering EAIC to deliver the owners duplicate copy of TCT
No. T-157038 and to execute a final deed of sale in favor of respondents.
No motion for reconsideration or notice of appeal was filed by EAIC, hence, the
said RTC decision became final and executory on December 8, 1999.11
On July 10, 2000 (roughly seven months after the finality of the RTC Decision),
EAIC, represented by Gala, filed its Petition for Relief from Judgment12 under
Rule 38 of the Rules of Court of the November 11, 1999 RTC Decision before the
same court. The petition for relief from judgment was premised on the alleged
fraud committed by Domingo in concealing the existence of both the Contract to
Sell and Civil Case No. 96-177 from EAIC.

In its July 12, 2000 Order,13 the RTC denied the petition for relief from judgment
for being clearly filed out of time under Section 3, Rule 38 of the Rules of Court.14
On April 24, 2001, EAIC, represented by Gala, initiated the Petition for Annulment
of Judgment15 under Rule 47 of the Rules of Court of the November 11, 1999
RTC Decision before the CA. The petition was grounded on the RTCs lack of
jurisdiction over EAIC and the extrinsic fraud committed by Domingo. EAIC
discarded any knowledge of the said sale and the suit filed by respondents
against it. According to EAIC, it could not be bound by the assailed RTC Decision
pursuant to Section 13, Rule 1416 of the 1964 Rules of Court which was, the
applicable rule then. Domingo was not its President, Manager, Secretary,
Cashier, Agent or Director, as evidenced by the General Information Sheets17
(GIS) it filed with the Securities and Exchange Commission (SEC), at the time
the summons was served upon her and she did not possess the requisite
authorization to represent EAIC in the subject transaction. Furthermore, her
misrepresentation that she was EAICs corporate secretary who was properly
authorized to sell and receive payment for the subject property, defrauded EAIC
of the potential gains it should have realized from the proceeds of the sale.
In their Answer with Counterclaim18 filed before the CA, respondents countered
that considering EAICs petition for relief from judgment under Rule 38 grounded
on extrinsic fraud, had already been rejected with finality, EAIC could not be
permitted to invoke the same ground in a petition for annulment of judgment
under Rule 47. Further, EAIC could not feign ignorance of Civil Case No. 96-177
because of the November 8, 1996 Adverse Claim and the November 18, 1996
Notice of Lis Pendens annotated at the back of TCT No. T-157038. Respondents
insisted that the mentioned annotations in TCT No. T-157038 should be deemed
constructive notices to the world of the pending litigation referred to therein and,
therefore, bound EAIC to Civil Case No. 96-177. Moreover, with the exchange of
letters, dated July 9, 199719 and July 18, 1997,20 between Wee and EAIC,
through Gala, EAIC was informed of the pending civil case against it.
In its Reply21 filed before the CA, EAIC explained that the RTC did not touch
upon the issue of fraud in the petition for relief from judgment as it was dismissed
for being filed out of time. In addition, EAIC claimed that the exchange of letters
between Wee and EAIC never stated anything whatsoever of any pending suit
between them.

In its July 1, 2003 Decision, the CA dismissed the petition for annulment of
judgment. In its decision, the CA ratiocinated:
x x x x.
The corporation, at the inception of Civil Case No. 96-177 on November 14,
1996, already had constructive notice of the three (3) businessmens herein
respondents adverse claim to a 30,000
square-meter portion of the land covered by TCT No. T-157038 because this
claim was duly registered and annotated on the said title even before this date.
Moreover, four (4) days after the inception of the civil case, room was provided
for on the same title for the annotation of a notice of lis pendens.
These constructive notices ought to have spurred the corporation into action by
filing an answer in Civil Case No. 96-177 through proper or legitimate
representations, for instance. But the corporation chose to keep quiet, thus,
making the trial court and everyone else concerned with said civil case believe
that Guia G. Domingo is its proper or legitimate representative. It even appears
that she was, after all, a proper or legitimate representative of the corporation
because in the decision, dated November 3, 1998, rendered in SEC Cases Nos.
3747 and 4027, the corporations board headed by Raul E. Gala since August 24,
1990 was held to be illegitimate.
Even without the constructive notices, the businessmen herein respondents,
through a letter signed by one of them, apprised the corporation, through Raul E.
Gala, of their contract to sell. This was in July, 1997. The letter was duly
acknowledged and the parties thereafter even tried to settle among themselves
the consideration and conveyance of the 30,000 square-meter portion.
When this failed, there was no reason why the corporation could not have
proceeded with the pre-trial in Civil Case No. 96-177. It did not.
The corporations reticence in view of the constructive notices and its then
incumbent boards personal knowledge of the case had, in effect, amounted to a
waiver of its right to actively participate in the proper disposition of Civil Case No.
96-177, to move for a new trial therein and to appeal from the decision rendered
therein. Certainly, these remedies no longer are available, but only the
corporation should be faulted for this.

Be that as it may, the corporation had availed of the remedy of relief from the
judgment in Civil Case No. 96-177. The fact that it was not able to prove that it
was entitled thereto does not mean that it can now avail of the instant remedy.
It would serve no useful purpose then to delve into the issues of jurisdiction and
fraud raised in the petition as the petition itself is unavailing under the
circumstances.
x x x x.
EAICs motion for reconsideration was denied by the CA in its Resolution, dated
August 8, 2006.
Hence, this petition for review.
The Issues
Not in conformity with the ruling of the CA, EAIC seeks relief from this Court
raising the following errors:
THE COURT OF APPEALS ERRED IN RULING THAT THERE WAS
VALID SERVICE OF SUMMONS UPON PETITIONER CORPORATION.
THE COURT OF APPEALS ERRED IN RULING THAT GUIA G.
DOMINGO WAS A DIRECTOR OF PETITIONER CORPORATION AT THE
TIME SUMMONS WAS SERVED UPON HER AND IN DENYING
PETITIONERS MOTION FOR RECONSIDERATION.
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER CAN
NO LONGER AVAIL OF THE PRESENT PETITION HAVING EARLIER
FILED A PETITION FOR RELIEF FROM JUDGMENT.22
The main issue for the Courts consideration is whether the RTC validly acquired
jurisdiction over the person of EAIC, defendant in Civil Case No. 96-177.
In their Memorandum,23 respondents argue that at the time the summons was
served upon Domingo, she was acting for and in behalf of EAIC. They further
point out that, at any rate, EAICs filing of its Answer with Counterclaim and the
petition for relief from judgment before the trial court constitutes voluntary

appearance thereby submitting itself to the jurisdiction of the RTC. Respondents

stress that the extrinsic fraud claimed by EAIC is not a valid ground for a petition
for annulment of judgment because the latter had already availed of the said
ground in a petition from relief from judgment in contravention to Section 2, Rule
47.24
In her Memorandum,25 Domingo argues that EAIC, in filing its Answer with
Counterclaim and Petition for Relief from Judgment, had invoked the jurisdiction
of the same trial court that it now denies. Further, she claims that she acted in
utmost good faith in receiving the summons and filing the Answer in Civil Case
No. 96-177 for EAIC since she truly believed that she was authorized to do so.
On the other hand, EAIC, in its Memorandum,26 contends that there was no valid
service of summons because Domingo, at the time summons was served, was
not its president, manager, secretary, cashier, agent, or director. The GIS filed
with the SEC consistently showed that she never held any position with EAIC
which could have authorized her to receive summons in behalf of EAIC. The CA
erred in considering the Adverse Claim and Notice of Lis Pendens annotated in
TCT No. T-157038 as constructive notice to EAIC of the pendency of Civil Case
No. 96-177 and, therefore, clothed the RTC with jurisdiction over the person of
EAIC. Those annotations in the TCT merely serve to apprise third persons of the
controversy or pending litigation relating to the subject property but do not place
a party under the jurisdiction of the court. Moreover, respondents duty to
prosecute their case diligently includes ensuring that the proper parties are
impleaded and properly served with summonses.
The Courts Ruling
The Court finds merit in the petition.
It is a settled rule that jurisdiction over the defendant is acquired either upon a
valid service of summons or the defendants voluntary appearance in court.
When the defendant does not voluntarily submit to the courts jurisdiction or when
there is no valid service of summons, any judgment of the court which has no
jurisdiction over the person of the defendant is null and void.27 The purpose of
summons is not only to acquire jurisdiction over the person of the defendant, but
also to give notice to the defendant that an action has been commenced against
it and to afford it an opportunity to be heard on the claim made against it. The

requirements of the rule on summons must be strictly followed, otherwise, the

trial court will not acquire jurisdiction over the defendant.28
Section 13, Rule 14 of the 1964 Rules of Civil Procedure, the applicable rule on
service of summons upon a private domestic corporation then, provides:
Sec. 13. Service upon private domestic corporation or partnership. If the
defendant is a corporation organized under the laws of the Philippines or a
partnership duly registered, service may be made on the president, manager,
secretary, cashier, agent, or any of its directors. [Underscoring supplied]
Based on the above-quoted provision, for service of summons upon a private
domestic corporation, to be effective and valid, should be made on the persons
enumerated in the rule. Conversely, service of summons on anyone other than
the president, manager, secretary, cashier, agent, or director, is not valid. The
purpose is to render it reasonably certain that the corporation will receive prompt
and proper notice in an action against it or to insure that the summons be served
on a representative so integrated with the corporation that such person will know
what to do with the legal papers served on him.29
In the present case, the 1996 GIS30 of EAIC, the pertinent document showing
EAICs composition at the time the summons was served upon it, through
Domingo, will readily reveal that she was not its president, manager, secretary,
cashier, agent or director. Due to this fact, the Court is of the view that her honest
belief that she was the authorized corporate secretary was clearly mistaken
because she was evidently not the corporate secretary she claimed to be. In view
of Domingos lack of authority to properly represent EAIC, the Court is
constrained to rule that there was no valid service of summons binding on it.
Granting arguendo that EAIC had actual knowledge of the existence of Civil
Case No. 96-177 lodged against it, the RTC still failed to validly acquire
jurisdiction over EAIC. In Cesar v. Ricafort-Bautista,31 it was held that "x x x
jurisdiction of the court over the person of the defendant or respondent cannot be
acquired notwithstanding his knowledge of the pendency of a case against him
unless he was validly served with summons. Such is the important role a valid
service of summons plays in court actions."
The Court cannot likewise subscribe to respondents argument that by filing its
answer with counterclaim, through Domingo, with the RTC, EAIC is deemed to

have voluntarily submitted itself to the jurisdiction of the RTC. In Salenga v. Court
of Appeals,32 the Court stated:
A corporation can only exercise its powers and transact its business through its
board of directors and through its officers and agents when authorized by a
board resolution or its bylaws. The power of a corporation to sue and be sued is
exercised by the board of directors. The physical acts of the corporation, like the
signing of documents, can be performed only by natural persons duly authorized
for the purpose by corporate bylaws or by a specific act of the board.
In this case, at the time she filed the Answer with Counterclaim, Domingo was
clearly not an officer of EAIC, much less duly authorized by any board resolution
or secretarys certificate from EAIC to file the said Answer with Counterclaim in
behalf of EAIC. Undoubtedly, Domingo lacked the necessary authority to bind
EAIC to Civil Case No. 96-177 before the RTC despite the filing of an Answer
with Counterclaim. EAIC cannot be bound or deemed to have voluntarily
appeared before the RTC by the act of an unauthorized stranger.
Incidentally, Domingo alleged in her Answer with Counterclaim that "Alicia E.
Gala is the real owner and possessor of all the real properties registered in the
business name and style Ellice-Agro Industrial Corporation x x x."33 In the same
pleading, Domingo claimed that she was authorized by Alicia E. Gala, the
purported beneficial owner of the subject property, to represent her in Civil Case
No. 96-177 by virtue of a General Power of Attorney. In advancing the said
allegations, among others, Domingo evidently acted in representation of Alicia E.
Gala, not EAIC. Hence, her conduct in the filing of the Answer with Counterclaim
cannot and should not be binding to EAIC.
In view of the fact that EAIC was not validly served with summons and did not
voluntarily appear in Civil Case No. 96-177, the RTC did not validly acquire
jurisdiction over the person of EAIC. Consequently, the proceedings had before
the RTC and ultimately its November 11, 1999 Decision were null and
void.1wphi1
Pursuant to Section 7, Rule 4734 of the Rules of Court, a judgment of annulment
shall set aside the questioned judgment or final order or resolution and render
the same null and void.

WHEREFORE, the petition is GRANTED. The July 1, 2003 Decision and August
8, 2006 Resolution of the Court of Appeals, in CA-G.R. SP No. 64421, are
hereby REVERSED. The November 11, 1999 Decision of the Regional Trial
Court of Lucena City, Branch 60, in Civil Case No. 96-177, is hereby declared
VACATED and SET ASIDE.
The records of the case is hereby ordered remanded to the Regional Trial Court
of Lucena City, Branch 60, for the proper service of summons to the petitioner
and other parties, if any, and for other appropriate proceedings.
SO ORDERED.

G.R. No. 104175 June 25, 1993

YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (THIRTEENTH DIVISION) AND
GEORGE CHIONG ROXAS,respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Antonio Nuyles for private respondent.

QUIASON, J.:
Petitioners seek to set aside the decision of respondent Court of Appeals in CAG.R. SP No. 25237, which reversed the Order dated February 8, 1991 issued by
the Regional Trial Court, Branch 11, Cebu City in Civil Case No. CEB 6967. The
order of the trial court denied the motion to dismiss filed by respondent George
C. Roxas of the complaint for collection filed by petitioners.
It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc.
(YASCO) represented by Nemesio Garcia, its president, Nelson Garcia and
Vicente Sy, sold all of their shares of stock in Consolidated Marketing &
Development Corporation (CMDC) to Roxas. The purchase price was

P8,000,000.00 payable as follows: a downpayment of P4,000,000.00 and the

balance of P4,000,000.00 in four post dated checks of P1,000,000.00 each.
Immediately after the execution of the agreement, Roxas took full control of the
four markets of CMDC. However, the vendors held on to the stock certificates of
CMDC as security pending full payment of the balance of the purchase price.
The first check of P4,000,000.00, representing the down-payment, was honored
by the drawee bank but the four other checks representing the balance of
P4,000,000.00 were dishonored. In the meantime, Roxas sold one of the markets
to a third party. Out of the proceeds of the sale, YASCO received P600,000.00,
leaving a balance of P3,400,000.00 (Rollo, p. 176).
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to
the proceeds of the sale of the CMDC shares to Nemesio Garcia.
On June 10, 1988, petitioners filed a complaint against Roxas in the Regional
Trial Court, Branch 11, Cebu City, praying that Roxas be ordered to pay
petitioners the sum of P3,400,00.00 or that full control of the three markets be
turned over to YASCO and Garcia. The complaint also prayed for the forfeiture of
the partial payment of P4,600,000.00 and the payment of attorney's fees and
costs (Rollo, p. 290).
Roxas filed two motions for extension of time to submit his answer. But despite
said motion, he failed to do so causing petitioners to file a motion to have him
declared in default. Roxas then filed, through a new counsel, a third motion for
extension of time to submit a responsive pleading.
On August 19, 1988, the trial court declared Roxas in default. The order of
default was, however, lifted upon motion of Roxas.
On August 22, 1988, Roxas filed a motion to dismiss on the grounds that:
1. The complaint did not state a cause of action due to non-joinder of
indispensable parties;
2. The claim or demand set forth in the complaint had been waived,
abandoned or otherwise extinguished; and

3. The venue was improperly laid (Rollo, p. 299).

After a hearing, wherein testimonial and documentary evidence were presented
by both parties, the trial court in an Order dated February 8, 1991 denied Roxas'
motion to dismiss. After receiving said order, Roxas filed another motion for
extension of time to submit his answer. He also filed a motion for reconsideration,
which the trial court denied in its Order dated April 10, 1991 for being proforma (Rollo, p. 17). Roxas was again declared in default, on the ground that his
motion for reconsideration did not toll the running of the period to file his answer.
On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default
which was not accompanied with the required affidavit or merit. But without
waiting for the resolution of the motion, he filed a petition for certiorari with the
Court of Appeals.
The Court of Appeals sustained the findings of the trial court with regard to the
first two grounds raised in the motion to dismiss but ordered the dismissal of the
complaint on the ground of improper venue (Rollo, p. 49).
A subsequent motion for reconsideration by petitioner was to no avail.
Petitioners now come before us, alleging that the Court of Appeals
erred in:
1. holding the venue should be in Pasay City, and not in Cebu City
(where both petitioners/plaintiffs are residents;
2. not finding that Roxas is estopped from questioning the choice of
venue (Rollo, p. 19).
The petition is meritorious.
In holding that the venue was improperly laid in Cebu City, the Court of Appeals
relied on the address of YASCO, as appearing in the Deed of Sale dated October
28, 1987, which is "No. 1708 Dominga Street, Pasay City." This was the same
address written in YASCO's letters and several commercial documents in the
possession of Roxas (Decision, p. 12; Rollo, p. 48).

In the case of Garcia, the Court of Appeals said that he gave Pasay City as his
address in three letters which he sent to Roxas' brothers and sisters (Decision, p.
12; Rollo, p. 47). The appellate court held that Roxas was led by petitioners to
believe that their residence is in Pasay City and that he had relied upon those
representations (Decision, p. 12, Rollo, p. 47).
The Court of Appeals erred in holding that the venue was improperly laid in Cebu
City.
In the Regional Trial Courts, all personal actions are commenced and tried in the
province or city where the defendant or any of the defendants resides or may be
found, or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff [Sec. 2(b) Rule 4, Revised Rules of Court].
There are two plaintiffs in the case at bench: a natural person and a domestic
corporation. Both plaintiffs aver in their complaint that they are residents of Cebu
City, thus:
1.1. Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic
corporation duly organized and existing under Philippine laws with
principal place of business at M. J. Cuenco Avenue, Cebu City. It
also has a branch office at 1708 Dominga Street, Pasay City, Metro
Manila.
Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and
with business address at Young Auto Supply Co., Inc., M. J. Cuenco
Avenue, Cebu City. . . . (Complaint, p. 1; Rollo, p. 81).
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
THIRD That the place where the principal office of the corporation is
to be established or located is at Cebu City, Philippines (as amended
on December 20, 1980 and further amended on December 20,
1984) (Rollo, p. 273).
A corporation has no residence in the same sense in which this term is applied to
a natural person. But for practical purposes, a corporation is in a metaphysical
sense a resident of the place where its principal office is located as stated in the
articles of incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 256

[1916] Clavecilla Radio System v. Antillon, 19 SCRA 379 [1967]). The

Corporation Code precisely requires each corporation to specify in its articles of
incorporation the "place where the principal office of the corporation is to be
located which must be within the Philippines" (Sec. 14 [3]). The purpose of this
requirement is to fix the residence of a corporation in a definite place, instead of
allowing it to be ambulatory.
In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court
explained why actions cannot be filed against a corporation in any place where
the corporation maintains its branch offices. The Court ruled that to allow an
action to be instituted in any place where the corporation has branch offices,
would create confusion and work untold inconvenience to said entity. By the
same token, a corporation cannot be allowed to file personal actions in a place
other than its principal place of business unless such a place is also the
residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the
venue on the ground that its principal place of business was in Cebu City, Roxas
could argue that YASCO was in estoppel because it misled Roxas to believe that
Pasay City was its principal place of business. But this is not the case before us.
With the finding that the residence of YASCO for purposes of venue is in Cebu
City, where its principal place of business is located, it becomes unnecessary to
decide whether Garcia is also a resident of Cebu City and whether Roxas was in
estoppel from questioning the choice of Cebu City as the venue.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals
appealed from is SET ASIDE and the Order dated February 8, 1991 of the
Regional Trial Court is REINSTATED.
SO ORDERED.

G.R. No. 93073 December 21, 1992

REPUBLIC PLANTERS BANK, petitioner,
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.

CAMPOS, JR., J.:

This is an appeal by way of a Petition for Review on Certiorari from the
decision * of the Court of Appeals in CA G.R. CV No. 07302, entitled "Republic
Planters Bank.Plaintiff-Appellee vs. Pinch Manufacturing Corporation, et al.,
Defendants, and Fermin Canlas, Defendant-Appellant", which affirmed the
decision ** in Civil Case No. 82-5448 except that it completely absolved Fermin
Canlas from liability under the promissory notes and reduced the award for
damages and attorney's fees. The RTC decision, rendered on June 20, 1985, is
quoted hereunder:
WHEREFORE, premises considered, judgment is hereby rendered
in favor of the plaintiff Republic Planters Bank, ordering defendant
Pinch Manufacturing Corporation (formerly Worldwide Garment
Manufacturing, Inc.) and defendants Shozo Yamaguchi and Fermin
Canlas to pay, jointly and severally, the plaintiff bank the following
sums with interest thereon at 16% per annum from the dates
indicated, to wit:
Under the promissory note (Exhibit "A"), the sum of P300,000.00
with interest from January 29, 1981 until fully paid; under promissory
note (Exhibit "B"), the sum of P40,000.00 with interest from
November 27, 1980; under the promissory note (Exhibit "C"), the
sum of P166,466.00 which interest from January 29, 1981; under the
promissory note (Exhibit "E"), the sum of P86,130.31 with interest
from January 29, 1981; under the promissory note (Exhibit "G"), the
sum of P12,703.70 with interest from November 27, 1980; under the
promissory note (Exhibit "H"), the sum of P281,875.91 with interest
from January 29, 1981; and under the promissory note (Exhibit "I"),
the sum of P200,000.00 with interest from January 29, 1981.
Under the promissory note (Exhibit "D") defendants Pinch
Manufacturing Corporation (formerly named Worldwide Garment
Manufacturing, Inc.), and Shozo Yamaguchi are ordered to pay
jointly and severally, the plaintiff bank the sum of P367,000.00 with
interest of 16% per annum from January 29, 1980 until fully paid

Under the promissory note (Exhibit "F") defendant corporation Pinch

(formerly Worldwide) is ordered to pay the plaintiff bank the sum of
P140,000.00 with interest at 16% per annum from November 27,
1980 until fully paid.
Defendant Pinch (formely Worldwide) is hereby ordered to pay the
plaintiff the sum of P231,120.81 with interest at 12% per annum from
July 1, 1981, until fully paid and the sum of P331,870.97 with
interest from March 28, 1981, until fully paid.
All the defendants are also ordered to pay, jointly and severally, the
plaintiff the sum of P100,000.00 as and for reasonable attorney's fee
and the further sum equivalent to 3% per annum of the respective
principal sums from the dates above stated as penalty charge until
fully paid, plus one percent (1%) of the principal sums as service
charge.
With costs against the defendants.
SO ORDERED. 1
From the above decision only defendant Fermin Canlas appealed to the then
Intermediate Court (now the Court Appeals). His contention was that inasmuch
as he signed the promissory notes in his capacity as officer of the defunct
Worldwide Garment Manufacturing, Inc, he should not be held personally liable
for such authorized corporate acts that he performed. It is now the contention of
the petitioner Republic Planters Bank that having unconditionally signed the nine
(9) promissory notes with Shozo Yamaguchi, jointly and severally, defendant
Fermin Canlas is solidarity liable with Shozo Yamaguchi on each of the nine
notes.
We find merit in this appeal.
From the records, these facts are established: Defendant Shozo Yamaguchi and
private respondent Fermin Canlas were President/Chief Operating Officer and
Treasurer respectively, of Worldwide Garment Manufacturing, Inc.. By virtue of
Board Resolution No.1 dated August 1, 1979, defendant Shozo Yamaguchi and
private respondent Fermin Canlas were authorized to apply for credit facilities
with the petitioner Republic Planters Bank in the forms of export advances and

letters of credit/trust receipts accommodations. Petitioner bank issued nine

promissory notes, marked as Exhibits A to I inclusive, each of which were
uniformly worded in the following manner:
___________, after date, for value received, I/we, jointly and
severaIly promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of
___________ PESOS(....) Philippine Currency...
On the right bottom margin of the promissory notes appeared the signatures of
Shozo Yamaguchi and Fermin Canlas above their printed names with the phrase
"and (in) his personal capacity" typewritten below. At the bottom of the
promissory notes appeared: "Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6
of WORLDWIDE GARMENT MFG. CORP.
These entries were separated from the text of the notes with a bold line which
ran horizontally across the pages.
In the promissory notes marked as Exhibits C, D and F, the name Worldwide
Garment Manufacturing, Inc. was apparently rubber stamped above the
signatures of defendant and private respondent.
On December 20, 1982, Worldwide Garment Manufacturing, Inc. noted to
change its corporate name to Pinch Manufacturing Corporation.
On February 5, 1982, petitioner bank filed a complaint for the recovery of sums of
money covered among others, by the nine promissory notes with interest
thereon, plus attorney's fees and penalty charges. The complainant was
originally brought against Worldwide Garment Manufacturing, Inc. inter alia, but it
was later amended to drop Worldwide Manufacturing, Inc. as defendant and
substitute Pinch Manufacturing Corporation it its place. Defendants Pinch
Manufacturing Corporation and Shozo Yamaguchi did not file an Amended
Answer and failed to appear at the scheduled pre-trial conference despite due
notice. Only private respondent Fermin Canlas filed an Amended Answer wherein

he, denied having issued the promissory notes in question since according to
him, he was not an officer of Pinch Manufacturing Corporation, but instead of
Worldwide Garment Manufacturing, Inc., and that when he issued said
promissory notes in behalf of Worldwide Garment Manufacturing, Inc., the same
were in blank, the typewritten entries not appearing therein prior to the time he
affixed his signature.
In the mind of this Court, the only issue material to the resolution of this appeal is
whether private respondent Fermin Canlas is solidarily liable with the other
defendants, namely Pinch Manufacturing Corporation and Shozo Yamaguchi, on
the nine promissory notes.
We hold that private respondent Fermin Canlas is solidarily liable on each of the
promissory notes bearing his signature for the following reasons:
The promissory motes are negotiable instruments and must be governed by the
Negotiable Instruments Law. 2
Under the Negotiable lnstruments Law, persons who write their names on the
face of promissory notes are makers and are liable as such. 3 By signing the
notes, the maker promises to pay to the order of the payee or any
holder4 according to the tenor thereof. 5 Based on the above provisions of law,
there is no denying that private respondent Fermin Canlas is one of the comakers of the promissory notes. As such, he cannot escape liability arising
therefrom.
Where an instrument containing the words "I promise to pay" is signed by two or
more persons, they are deemed to be jointly and severally liable thereon. 6 An
instrument which begins" with "I" ,We" , or "Either of us" promise to, pay, when
signed by two or more persons, makes them solidarily liable. 7 The fact that the
singular pronoun is used indicates that the promise is individual as to each other;
meaning that each of the co-signers is deemed to have made an independent
singular promise to pay the notes in full.
In the case at bar, the solidary liability of private respondent Fermin Canlas is
made clearer and certain, without reason for ambiguity, by the presence of the
phrase "joint and several" as describing the unconditional promise to pay to the
order of Republic Planters Bank. A joint and several note is one in which the
makers bind themselves both jointly and individually to the payee so that all may

be sued together for its enforcement, or the creditor may select one or more as
the object of the suit. 8 A joint and several obligation in common law corresponds
to a civil law solidary obligation; that is, one of several debtors bound in such
wise that each is liable for the entire amount, and not merely for his proportionate
share. 9 By making a joint and several promise to pay to the order of Republic
Planters Bank, private respondent Fermin Canlas assumed the solidary liability of
a debtor and the payee may choose to enforce the notes against him alone or
jointly with Yamaguchi and Pinch Manufacturing Corporation as solidary debtors.
As to whether the interpolation of the phrase "and (in) his personal capacity"
below the signatures of the makers in the notes will affect the liability of the
makers, We do not find it necessary to resolve and decide, because it is
immaterial and will not affect to the liability of private respondent Fermin Canlas
as a joint and several debtor of the notes. With or without the presence of said
phrase, private respondent Fermin Canlas is primarily liable as a co-maker of
each of the notes and his liability is that of a solidary debtor.
Finally, the respondent Court made a grave error in holding that an amendment
in a corporation's Articles of Incorporation effecting a change of corporate name,
in this case from Worldwide Garment manufacturing Inc to Pinch Manufacturing
Corporation extinguished the personality of the original corporation.
The corporation, upon such change in its name, is in no sense a new
corporation, nor the successor of the original corporation. It is the same
corporation with a different name, and its character is in no respect changed.10
A change in the corporate name does not make a new corporation, and whether
effected by special act or under a general law, has no affect on the identity of the
corporation, or on its property, rights, or liabilities. 11
The corporation continues, as before, responsible in its new name for all debts or
other liabilities which it had previously contracted or incurred. 12
As a general rule, officers or directors under the old corporate name bear no
personal liability for acts done or contracts entered into by officers of the
corporation, if duly authorized. Inasmuch as such officers acted in their capacity
as agent of the old corporation and the change of name meant only the
continuation of the old juridical entity, the corporation bearing the same name is
still bound by the acts of its agents if authorized by the Board. Under the

Negotiable Instruments Law, the liability of a person signing as an agent is

specifically provided for as follows:
Sec. 20. Liability of a person signing as agent and so forth. Where
the instrument contains or a person adds to his signature words
indicating that he signs for or on behalf of a principal , or in a
representative capacity, he is not liable on the instrument if he was
duly authorized; but the mere addition of words describing him as an
agent, or as filling a representative character, without disclosing his
principal, does not exempt him from personal liability.
Where the agent signs his name but nowhere in the instrument has he disclosed
the fact that he is acting in a representative capacity or the name of the third
party for whom he might have acted as agent, the agent is personally liable to
take holder of the instrument and cannot be permitted to prove that he was
merely acting as agent of another and parol or extrinsic evidence is not
admissible to avoid the agent's personal liability. 13
On the private respondent's contention that the promissory notes were delivered
to him in blank for his signature, we rule otherwise. A careful examination of the
notes in question shows that they are the stereotype printed form of promissory
notes generally used by commercial banking institutions to be signed by their
clients in obtaining loans. Such printed notes are incomplete because there are
blank spaces to be filled up on material particulars such as payee's name,
amount of the loan, rate of interest, date of issue and the maturity date. The
terms and conditions of the loan are printed on the note for the borrower-debtor 's
perusal. An incomplete instrument which has been delivered to the borrower for
his signature is governed by Section 14 of the Negotiable Instruments Law which
provides, in so far as relevant to this case, thus:
Sec. 14. Blanks: when may be filled. Where the instrument is
wanting in any material particular, the person in possesion thereof
has a prima facie authority to complete it by filling up the blanks
therein. ... In order, however, that any such instrument when
completed may be enforced against any person who became a party
thereto prior to its completion, it must be filled up strictly in
accordance with the authority given and within a reasonable time...

Proof that the notes were signed in blank was only the self-serving testimony of
private respondent Fermin Canlas, as determined by the trial court, so that the
trial court ''doubts the defendant (Canlas) signed in blank the promissory notes".
We chose to believe the bank's testimony that the notes were filled up before
they were given to private respondent Fermin Canlas and defendant Shozo
Yamaguchi for their signatures as joint and several promissors. For signing the
notes above their typewritten names, they bound themselves as unconditional
makers. We take judicial notice of the customary procedure of commercial banks
of requiring their clientele to sign promissory notes prepared by the banks in
printed form with blank spaces already filled up as per agreed terms of the loan,
leaving the borrowers-debtors to do nothing but read the terms and conditions
therein printed and to sign as makers or co-makers. When the notes were given
to private respondent Fermin Canlas for his signature, the notes were complete
in the sense that the spaces for the material particular had been filled up by the
bank as per agreement. The notes were not incomplete instruments; neither
were they given to private respondent Fermin Canlas in blank as he claims.
Thus, Section 14 of the NegotiabIe Instruments Law is not applicable.
The ruling in case of Reformina vs. Tomol relied upon by the appellate court in
reducing the interest rate on the promissory notes from 16% to 12% per annum
does not squarely apply to the instant petition. In the abovecited case, the rate of
12% was applied to forebearances of money, goods or credit and court
judgemets thereon, only in the absence of any stipulation between the parties.
In the case at bar however , it was found by the trial court that the rate of interest
is 9% per annum, which interest rate the plaintiff may at any time without notice,
raise within the limits allowed law. And so, as of February 16, 1984 , the plaintiff
had fixed the interest at 16% per annum.
This Court has held that the rates under the Usury Law, as amended by
Presidential Decree No. 116, are applicable only to interests by way of
compensation for the use or forebearance of money. Article 2209 of the Civil
Code, on the other hand, governs interests by way of damages. 15 This fine
distinction was not taken into consideration by the appellate court, which instead
made a general statement that the interest rate be at 12% per annum.
Inasmuch as this Court had declared that increases in interest rates are not
subject to any ceiling prescribed by the Usury Law, the appellate court erred in

limiting the interest rates at 12% per annum. Central Bank Circular No. 905,
Series of 1982 removed the Usury Law ceiling on interest rates. 16
In the 1ight of the foregoing analysis and under the plain language of the statute
and jurisprudence on the matter, the decision of the respondent: Court of Appeals
absolving private respondent Fermin Canlas is REVERSED and SET ASIDE.
Judgement is hereby rendered declaring private respondent Fermin Canlas
jointly and severally liable on all the nine promissory notes with the following
sums and at 16% interest per annum from the dates indicated, to wit:
Under the promissory note marked as exhibit A, the sum of P300,000.00 with
interest from January 29, 1981 until fully paid; under promissory note marked as
Exhibit B, the sum of P40,000.00 with interest from November 27, 1980: under
the promissory note denominated as Exhibit C, the amount of P166,466.00 with
interest from January 29, 1981; under the promissory note denominated as
Exhibit D, the amount of P367,000.00 with interest from January 29, 1981 until
fully paid; under the promissory note marked as Exhibit E, the amount of
P86,130.31 with interest from January 29, 1981; under the promissory note
marked as Exhibit F, the sum of P140,000.00 with interest from November 27,
1980 until fully paid; under the promissory note marked as Exhibit G, the amount
of P12,703.70 with interest from November 27, 1980; the promissory note
marked as Exhibit H, the sum of P281,875.91 with interest from January 29,
1981; and the promissory note marked as Exhibit I, the sum of P200,000.00 with
interest on January 29, 1981.
The liabilities of defendants Pinch Manufacturing Corporation (formerly
Worldwide Garment Manufacturing, Inc.) and Shozo Yamaguchi, for not having
appealed from the decision of the trial court, shall be adjudged in accordance
with the judgment rendered by the Court a quo.
With respect to attorney's fees, and penalty and service charges, the private
respondent Fermin Canlas is hereby held jointly and solidarity liable with
defendants for the amounts found, by the Court a quo. With costs against private
respondent.
SO ORDERED.

G.R. No. 101897. March 5, 1993.

LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS,
LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF CAMALANIUGAN,
INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC., BUHI LYCEUM,
CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN
PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN
PANGASINAN LYCEUM, INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio Padilla for
petitioner.
Antonio M. Nuyles and Purungan, Chato, Chato, Tarriela & Tan Law Offices for
respondents.
Froilan Siobal for Western Pangasinan Lyceum.
SYLLABUS

1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF

PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO
THAT OF ANY EXISTING CORPORATION, PROHIBITED; CONFUSION AND
DECEPTION EFFECTIVELY PRECLUDED BY THE APPENDING OF
GEOGRAPHIC NAMES TO THE WORD "LYCEUM". The Articles of
Incorporation of a corporation must, among other things, set out the name of the
corporation. Section 18 of the Corporation Code establishes a restrictive rule
insofar as corporate names are concerned: "Section 18. Corporate name. No
corporate name may be allowed by the Securities an Exchange Commission if
the proposed name is identical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law or is patently
deceptive, confusing or contrary to existing laws. When a change in the
corporate name is approved, the Commission shall issue an amended certificate
of incorporation under the amended name." The policy underlying the prohibition
in Section 18 against the registration of a corporate name which is "identical or
deceptively or confusingly similar" to that of any existing corporation or which is
"patently deceptive" or "patently confusing" or "contrary to existing laws," is the
avoidance of fraud upon the public which would have occasion to deal with the
entity concerned, the evasion of legal obligations and duties, and the reduction of
difficulties of administration and supervision over corporations. We do not
consider that the corporate names of private respondent institutions are "identical
with, or deceptively or confusingly similar" to that of the petitioner institution. True
enough, the corporate names of private respondent entities all carry the word
"Lyceum" but confusion and deception are effectively precluded by the
appending of geographic names to the word "Lyceum." Thus, we do not believe
that the "Lyceum of Aparri" can be mistaken by the general public for the Lyceum
of the Philippines, or that the "Lyceum of Camalaniugan" would be confused with
the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD
"LYCEUM," NOT ATTENDED WITH EXCLUSIVITY. It is claimed, however, by
petitioner that the word "Lyceum" has acquired a secondary meaning in relation
to petitioner with the result that word, although originally a generic, has become
appropriable by petitioner to the exclusion of other institutions like private
respondents herein. The doctrine of secondary meaning originated in the field of
trademark law. Its application has, however, been extended to corporate names
sine the right to use a corporate name to the exclusion of others is based upon
the same principle which underlies the right to use a particular trademark or

tradename. In Philippine Nut Industry, Inc. v. Standard Brands, Inc., the doctrine
of secondary meaning was elaborated in the following terms: " . . . a word or
phrase originally incapable of exclusive appropriation with reference to an article
on the market, because geographically or otherwise descriptive, might
nevertheless have been used so long and so exclusively by one 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 (SEC-Case No. 1241) and held that the word
"Lyceum" was capable of appropriation and that petitioner had acquired an
enforceable exclusive right to the use of that word.
On appeal, however, by private respondents to the SEC En Banc, the decision of
the hearing officer was reversed and set aside. The SEC En Banc did not
consider the word "Lyceum" to have become so identified with petitioner as to
render use thereof by other institutions as productive of confusion about the
identity of the schools concerned in the mind of the general public. Unlike its
hearing officer, the SEC En Banc held that the attaching of geographical names
to the word "Lyceum" served sufficiently to distinguish the schools from one
another, especially in view of the fact that the campuses of petitioner and those
of the private respondents were physically quite remote from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its Decision dated 28
June 1991, however, the Court of Appeals affirmed the questioned Orders of the
SEC En Banc. 4 Petitioner filed a motion for reconsideration, without success.

Before this Court, petitioner asserts that the Court of Appeals committed the
following errors:
1. The Court of Appeals erred in holding that the Resolution of the Supreme
Court in G.R. No. 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. L46595 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 cross-claimant was already using the word
'Lyceum' seventeen (17) years prior to the date the appellant started using the
same word in its corporate name. Furthermore, educational institutions of the
Roman Catholic Church had been using the same or similar word like 'Liceo de
Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,' 'Liceo de
Albay' long before appellant started using the word 'Lyceum'. The appellant also
failed to prove that the word 'Lyceum' has become so identified with its
educational institution that confusion will surely arise in the minds of the public if
the same word were to be used by other educational institutions.
In other words, while the appellant may have proved that it had been using the
word 'Lyceum' for a long period of time, this fact alone did not amount to mean
that the said word had acquired secondary meaning in its favor because the
appellant failed to prove that it had been using the same word all by itself to the
exclusion of others. More so, there was no evidence presented to prove that
confusion will surely arise if the same word were to be used by other educational
institutions. Consequently, the allegations of the appellant in its first two assigned
errors must necessarily fail." 13 (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.

G.R. No. 125221 June 19, 1997

REYNALDO M. LOZANO, petitioner,
vs.
HON. ELIEZER R. DE LOS SANTOS, Presiding Judge, RTC, Br. 58, Angeles
City; and ANTONIO ANDA,respondents.

PUNO, J.:
This petition for certiorari seeks to annul and set aside the decision of the
Regional Trial Court, Branch 58, Angeles City which ordered the Municipal Circuit
Trial Court, Mabalacat and Magalang, Pampanga to dismiss Civil Case No. 1214
for lack of jurisdiction.
The facts are undisputed. On December 19, 1995, petitioner Reynaldo M.
Lozano filed Civil Case No. 1214 for damages against respondent Antonio Anda
before the Municipal Circuit Trial Court (MCTC), Mabalacat and Magalang,
Pampanga. Petitioner alleged that he was the president of the Kapatirang
Mabalacat-Angeles Jeepney Drivers' Association, Inc. (KAMAJDA) while
respondent Anda was the president of the Samahang Angeles-Mabalacat
Jeepney Operators' and Drivers' Association, Inc. (SAMAJODA); in August 1995,
upon the request of the Sangguniang Bayan of Mabalacat, Pampanga, petitioner
and private respondent agreed to consolidate their respective associations and
form the Unified Mabalacat-Angeles Jeepney Operators' and Drivers Association,
Inc. (UMAJODA); petitioner and private respondent also agreed to elect one set
of officers who shall be given the sole authority to collect the daily dues from the
members of the consolidated association; elections were held on October 29,
1995 and both petitioner and private respondent ran for president; petitioner won;
private respondent protested and, alleging fraud, refused to recognize the results
of the election; private respondent also refused to abide by their agreement and
continued collecting the dues from the members of his association despite
several demands to desist. Petitioner was thus constrained to file the complaint
to restrain private respondent from collecting the dues and to order him to pay
damages in the amount of P25,000.00 and attorney's fees of P500.00.1

Private respondent moved to dismiss the complaint for lack of jurisdiction,

claiming that jurisdiction was lodged with the Securities and Exchange
Commission (SEC). The MCTC denied the motion on February 9, 1996. 2 It
denied reconsideration on March 8, 1996. 3
Private respondent filed a petition for certiorari before the Regional Trial Court,
Branch 58, Angeles City. 4 The trial court found the dispute to be intracorporate,
hence, subject to the jurisdiction of the SEC, and ordered the MCTC to dismiss
Civil Case No. 1214 accordingly. 5 It denied reconsideration on May 31, 1996. 6
Hence this petition. Petitioner claims that:
THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION AND SERIOUS ERROR OF LAW IN CONCLUDING
THAT THE SECURITIES AND EXCHANGE COMMISSION HAS
JURISDICTION OVER A CASE OF DAMAGES BETWEEN
HEADS/PRESIDENTS OF TWO (2) ASSOCIATIONS WHO
INTENDED TO CONSOLIDATE/MERGE THEIR ASSOCIATIONS
BUT NOT YET [SIC] APPROVED AND REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION. 7
The jurisdiction of the Securities and Exchange Commission (SEC) is set forth in
Section 5 of Presidential Decree No. 902-A. Section 5 reads as follows:
Sec. 5. . . . [T]he Securities and Exchange Commission [has] original
and exclusive jurisdiction to hear and decide cases involving:
(a) Devices or schemes employed by or any acts of the board of
directors, business associates, its officers or partners, amounting to
fraud and misrepresentation which may be detrimental to the interest
of the public and/or of the stockholders, partners, members of
associations or organizations registered with the Commission.
(b) Controversies arising out of intracorporate or partnership
relations, between and among stockholders, members or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members,
or associates, respectively; and between such corporation,

partnership or association and the state insofar as it concerns their

individual franchise or right to exist as such entity.
(c) Controversies in the election or appointment of directors,
trustees, officers or managers of such corporations, partnerships or
associations.
(d) Petitions of corporations, partnerships or associations to be
declared in the state of suspension of payments in cases where the
corporation, partnership or association possesses sufficient property
to cover all its debts but foresees the impossibility of meeting them
when they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to over its
liabilities, but is under the management of a Rehabilitation Receiver
or Management Committee created pursuant to this Decree.
The grant of jurisdiction to the SEC must be viewed in the light of its nature
and function under the law. 8This jurisdiction is determined by a
concurrence of two elements: (1) the status or relationship of the parties;
and (2) the nature of the question that is the subject of their controversy. 9
The first element requires that the controversy must arise out of intracorporate or
partnership relations between and among stockholders, members, or associates;
between any or all of them and the corporation, partnership or association of
which they are stockholders, members or associates, respectively; and between
such corporation, partnership or association and the State in so far as it concerns
their individual franchises. 10 The second element requires that the dispute
among the parties be intrinsically connected with the regulation of the
corporation, partnership or association or deal with the internal affairs of the
corporation, partnership or association. 11 After all, the principal function of the
SEC is the supervision and control of corporations, partnership and associations
with the end in view that investments in these entities may be encouraged and
protected, and their entities may be encouraged and protected, and their
activities pursued for the promotion of economic development. 12
There is no intracorporate nor partnership relation between petitioner and private
respondent. The controversy between them arose out of their plan to consolidate
their respective jeepney drivers' and operators' associations into a single

common association. This unified association was, however, still a proposal. It

had not been approved by the SEC, neither had its officers and members
submitted their articles of consolidation is accordance with Sections 78 and 79 of
the Corporation Code. Consolidation becomes effective not upon mere
agreement of the members but only upon issuance of the certificate of
consolidation by the SEC. 13 When the SEC, upon processing and examining the
articles of consolidation, is satisfied that the consolidation of the corporations is
not inconsistent with the provisions of the Corporation Code and existing laws, it
issues a certificate of consolidation which makes the reorganization
official. 14 The new consolidated corporation comes into existence and the
constituent corporations dissolve and cease to exist. 15
The KAMAJDA and SAMAJODA to which petitioner and private respondent
belong are duly registered with the SEC, but these associations are two separate
entities. The dispute between petitioner and private respondent is not within the
KAMAJDA nor the SAMAJODA. It is between members of separate and distinct
associations. Petitioner and private respondent have no intracorporate relation
much less do they have an intracorporate dispute. The SEC therefore has no
jurisdiction over the complaint.
The doctrine of corporation by estoppel 16 advanced by private respondent
cannot override jurisdictional requirements. Jurisdiction is fixed by law and is not
subject to the agreement of the parties. 17 It cannot be acquired through or
waived, enlarged or diminished by, any act or omission of the parties, neither can
it be conferred by the acquiescence of the court.18
Corporation by estoppel is founded on principles of equity and is designed to
prevent injustice and unfairness. 19It applies when persons assume to form a
corporation and exercise corporate functions and enter into business relations
with third person. Where there is no third person involved and the conflict arises
only among those assuming the form of a corporation, who therefore know that it
has not been registered, there is no corporation by estoppel. 20
IN VIEW WHEREOF, the petition is granted and the decision dated April 18, 1996
and the order dated May 31, 1996 of the Regional Trial Court, Branch 58,
Angeles City are set aside. The Municipal Circuit Trial Court of Mabalacat and
Magalang, Pampanga is ordered to proceed with dispatch in resolving Civil Case
No. 1214. No costs.

SO ORDERED.

G.R. No. 136448 November 3, 1999

LIM TONG LIM, petitioner,
vs.
PHILIPPINE FISHING GEAR INDUSTRIES, INC., respondent.

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 partner, 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, 1 which disposed as follows:
WHEREFORE, [there being] no reversible error in the appealed
decision, the same is hereby affirmed. 2
The decretal portion of the Quezon City Regional Trial Court (RTC) ruling, which
was affirmed by the CA, reads as follows:
WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary attachment issued
by this Court on September 20, 1990;

2. That defendants are jointly liable to plaintiff for the following

amounts, subject to the modifications as hereinafter made by reason
of the special and unique facts and circumstances and the
proceedings that transpired during the trial of this case;
a. P532,045.00 representing [the] unpaid purchase
price of the fishing nets covered by the Agreement plus
P68,000.00 representing the unpaid price of the floats
not covered by said Agreement;
b. 12% interest per annum counted from date of
plaintiff's invoices and computed on their respective
amounts as follows:
i. Accrued interest of P73,221.00 on Invoice
No. 14407 for P385,377.80 dated February
9, 1990;
ii. Accrued interest for P27,904.02 on
Invoice No. 14413 for P146,868.00 dated
February 13, 1990;
iii. Accrued interest of P12,920.00 on
Invoice No. 14426 for P68,000.00 dated
February 19, 1990;
c. P50,000.00 as and for attorney's fees, plus P8,500.00
representing P500.00 per appearance in court;
d. P65,000.00 representing P5,000.00 monthly rental for
storage charges on the nets counted from September
20, 1990 (date of attachment) to September 12, 1991
(date of auction sale);
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 P600,045.00, this Court noted that these

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

SO ORDERED. 3
The Facts
On behalf of "Ocean Quest Fishing Corporation," Antonio Chua and Peter Yao
entered into a Contract dated February 7, 1990, for the purchase of fishing nets
of various sizes from the Philippine Fishing Gear Industries, Inc. (herein
respondent). They claimed that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a signatory to the agreement. The
total price of the nets amounted to P532,045. Four hundred pieces of floats worth
P68,000 were also sold to the Corporation. 4
The buyers, however, failed to pay for the fishing nets and the floats; hence,
private respondents filed a collection suit against Chua, Yao and Petitioner Lim
Tong Lim with a prayer for a writ of preliminary attachment. The suit was brought
against the three in their capacities as general partners, on the allegation that
"Ocean Quest Fishing Corporation" was a nonexistent corporation as shown by a
Certification from the Securities and Exchange Commission. 5 On September 20,
1990, the lower court issued a Writ of Preliminary Attachment, which the sheriff
enforced by attaching the fishing nets on board F/B 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 crossexamine witnesses and to present evidence on his behalf, because of his failure
to appear in subsequent hearings. Lim Tong Lim, on the other hand, filed an
Answer with Counterclaim and Crossclaim and moved for the lifting of the Writ of
Attachment.6 The trial court maintained the Writ, and upon motion of private
respondent, ordered the sale of the fishing nets at a public auction. Philippine
Fishing Gear Industries won the bidding and deposited with the said court the
sales proceeds of P900,000. 7
On November 18, 1992, the trial court rendered its Decision, ruling that Philippine
Fishing Gear Industries was entitled to the Writ of Attachment and that Chua, Yao
and Lim, as general partners, were jointly liable to pay respondent. 8

The trial court ruled that a partnership among Lim, Chua and Yao existed based
(1) on the testimonies of the witnesses presented and (2) on a Compromise
Agreement executed by the three 9 in Civil Case No. 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.10 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. 11
The trial court noted that the Compromise Agreement was silent as to the nature
of their obligations, but that joint liability could be presumed from the equal
distribution of the profit and loss. 21
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 . . . . Oviously, the ultimate
undertaking of the defendants was to divide the profits among
themselves which is what a partnership essentially is . . . . By a
contract of partnership, two or more persons bind themselves to
contribute money, property or industry to a common fund with the
intention of dividing the profits among themselves (Article 1767, New
Civil Code). 13
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse the assailed
Decision on the following grounds:
I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A
COMPROMISE AGREEMENT THAT CHUA, YAO AND
PETITIONER LIM ENTERED INTO IN A SEPARATE CASE, THAT A
PARTNERSHIP AGREEMENT EXISTED AMONG THEM.
II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE
WAS ACTING FOR OCEAN QUEST FISHING CORPORATION
WHEN HE BOUGHT THE NETS FROM PHILIPPINE FISHING, THE
COURT OF APPEALS WAS UNJUSTIFIED IN IMPUTING
LIABILITY TO PETITIONER LIM AS WELL.
III THE TRIAL COURT IMPROPERLY ORDERED THE SEIZURE
AND ATTACHMENT OF PETITIONER LIM'S GOODS.
In determining whether petitioner may be held liable for the fishing nets and floats
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 Court's Ruling
The Petition is devoid of merit.

First and Second Issues:

Existence of a Partnership
and Petitioner's Liability
In arguing that he should not be held liable for the equipment purchased from
respondent, petitioner controverts the CA finding that a partnership existed
between him, Peter Yao and Antonio Chua. He asserts that the CA based its
finding on the Compromise Agreement alone. Furthermore, he disclaims any
direct participation in the purchase of the nets, alleging that the negotiations were
conducted by Chua and Yao only, and that he has not even met the
representatives of the respondent company. Petitioner further argues that he was
a lessor, not a partner, of Chua and Yao, for the "Contract of Lease " dated
February 1, 1990, showed that he had merely leased to the two the main asset of
the purported partnership the fishing boat F/B Lourdes. The lease was for six
months, with a monthly rental of P37,500 plus 25 percent of the gross catch of
the boat.
We are not persuaded by the arguments of petitioner. The facts as found by the
two lower courts clearly showed that there existed a partnership among Chua,
Yao and him, pursuant to Article 1767 of the Civil Code which provides:
Art. 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: 15
(1) That Petitioner Lim Tong Lim requested Peter Yao who was
engaged in commercial fishing to join him, while Antonio Chua was
already Yao's partner;
(2) That after convening for a few times, Lim, Chua, and Yao verbally
agreed to acquire two fishing boats, the FB Lourdes and the FB
Nelson for the sum of P3.35 million;

(3) That they borrowed P3.25 million from Jesus Lim, brother of
Petitioner Lim Tong Lim, to finance the venture.
(4) That they bought the boats from CMF Fishing Corporation, which
executed a Deed of Sale over these two (2) boats in favor of
Petitioner Lim Tong Lim only to serve as security for the loan
extended by Jesus Lim;
(5) That Lim, Chua and Yao agreed that the refurbishing, reequipping, repairing, dry docking and other expenses for the boats
would be shouldered by Chua and Yao;
(6) That because of the "unavailability of funds," Jesus Lim again
extended a loan to the partnership in the amount of P1 million
secured by a check, because of which, Yao and Chua entrusted the
ownership papers of two other boats, Chua's FB Lady Anne
Mel and Yao's FB Tracy to Lim Tong Lim.
(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
petitioner's brother. In their Compromise Agreement, they subsequently revealed
their intention to pay the loan with the proceeds of the sale of the boats, and to
divide equally among them the excess or loss. These boats, the purchase and

the repair of which were financed with borrowed money, fell under the term
"common fund" under Article 1767. The contribution to such fund need not be
cash or fixed assets; it could be an intangible like credit or industry. That the
parties agreed that any loss or profit from the sale and operation of the boats
would be divided equally among them also shows that they had indeed formed a
partnership.
Moreover, it is clear that the partnership extended not only to the purchase of the
boat, but also to that of the nets and the floats. The fishing nets and the floats,
both essential to fishing, were obviously acquired in furtherance of their business.
It would have been inconceivable for Lim to involve himself so much in buying
the boat but not in the acquisition of the aforesaid equipment, without which the
business could not have proceeded.
Given the preceding facts, it is clear that there was, among petitioner, Chua and
Yao, a partnership engaged in the fishing business. They purchased the boats,
which constituted the main assets of the partnership, and they agreed that the
proceeds from the sales and operations thereof would be divided among them.
We stress that under Rule 45, a petition for review like the present case should
involve only questions of law. Thus, the foregoing factual findings of the RTC and
the CA are binding on this Court, absent any cogent proof that the present action
is embraced by one of the exceptions to the rule. 16 In assailing the factual
findings of the two lower courts, petitioner effectively goes beyond the bounds of
a petition for review under Rule 45.
Compromise Agreement
Not the Sole Basis of Partnership
Petitioner argues that the appellate court's sole basis for assuming the existence
of a partnership was the Compromise Agreement. He also claims that the
settlement was entered into only to end the dispute among them, but not to
adjudicate their preexisting rights and obligations. His arguments are baseless.
The Agreement was but an embodiment of the relationship extant among the
parties prior to its execution.
A proper adjudication of claimants' rights mandates that courts must review and
thoroughly appraise all relevant facts. Both lower courts have done so and have

found, correctly, a preexisting partnership among the parties. In implying that the
lower courts have decided on the basis of one piece of document alone,
petitioner fails to appreciate that the CA and the RTC delved into the history of
the document and explored all the possible consequential combinations in
harmony with law, logic and fairness. Verily, the two lower courts' factual findings
mentioned above nullified petitioner's argument that the existence of a
partnership was based only on the Compromise Agreement.
Petitioner Was a Partner,
Not a Lessor
We are not convinced by petitioner's argument that he was merely the lessor of
the boats to Chua and Yao, not a partner in the fishing venture. His argument
allegedly finds support in the Contract of Lease and the registration papers
showing that he was the owner of the boats, including F/B Lourdes where the
nets were found.
His allegation defies logic. In effect, he would like this Court to believe that he
consented to the sale of his own boats to pay a debt of Chua and Yao, with the
excess of the proceeds to be divided among the three of them. No lessor would
do what petitioner did. Indeed, his consent to the sale proved that there was a
preexisting partnership among all three.
Verily, as found by the lower courts, petitioner entered into a business agreement
with Chua and Yao, in which debts were undertaken in order to finance the
acquisition and the upgrading of the vessels which would be used in their fishing
business. The sale of the boats, as well as the division among the three of the
balance remaining after the payment of their loans, proves beyond cavil that F/B
Lourdes, though registered in his name, was not his own property but an asset of
the partnership. It is not uncommon to register the properties acquired from a
loan in the name of the person the lender trusts, who in this case is the petitioner
himself. After all, he is the brother of the creditor, Jesus Lim.
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.
Sec. 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. 17
The doctrine of corporation by estoppel may apply to the alleged corporation and
to a third party. In the first instance, an unincorporated association, which
represented itself to be a corporation, will be estopped from denying its corporate
capacity in a suit against it by a third person who relied in good faith on such
representation. It cannot allege lack of personality to be sued to evade its
responsibility for a contract it entered into and by virtue of which it received
advantages and benefits.

On the other hand, a third party who, knowing an association to be

unincorporated, nonetheless treated it as a corporation and received benefits
from it, may be barred from denying its corporate existence in a suit brought
against the alleged corporation. In such case, all those who benefited from the
transaction made by the ostensible corporation, despite knowledge of its legal
defects, may be held liable for contracts they impliedly assented to or took
advantage of.
There is no dispute that the respondent, Philippine Fishing Gear Industries, is
entitled to be paid for the nets it sold. The only question here is whether
petitioner should be held jointly 18 liable with Chua and Yao. Petitioner contests
such liability, insisting that only those who dealt in the name of the ostensible
corporation should be held liable. Since his name does not appear on any of the
contracts and since he never directly transacted with the respondent corporation,
ergo, he cannot be held liable.
Unquestionably, petitioner benefited from the use of the nets found inside F/B
Lourdes, the boat which has earlier been proven to be an asset of the
partnership. He in fact questions the attachment of the nets, because the Writ
has effectively stopped his use of the fishing vessel.
It is difficult to disagree with the RTC and the CA that Lim, Chua and Yao decided
to form a corporation. Although it was never legally formed for unknown reasons,
this fact alone does not preclude the liabilities of the three as contracting parties
in representation of it. Clearly, under the law on estoppel, those acting on behalf
of a corporation and those benefited by it, knowing it to be without valid
existence, are held liable as general partners.
Technically, it is true that petitioner did not directly act on behalf of the
corporation. However, having reaped the benefits of the contract entered into by
persons with whom he previously had an existing relationship, he is deemed to
be part of said association and is covered by the scope of the doctrine of
corporation by estoppel. We reiterate the ruling of the Court in Alonso
v. Villamor: 19
A litigation is not a game of technicalities in which one, more deeply
schooled and skilled in the subtle art of movement and position,
entraps and destroys the other. It is, rather, a contest in which each

contending party fully and fairly lays before the court the facts in
issue and then, brushing aside as wholly trivial and indecisive all
imperfections of form and technicalities of procedure, asks that
justice be done upon the merits. Lawsuits, unlike duels, are not to be
won by a rapier's thrust. Technicality, when it deserts its proper office
as an aid to justice and becomes its great hindrance and chief
enemy, deserves scant consideration from courts. There should be
no vested rights in technicalities.
Third Issue:
Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was improperly issued
against the nets. We agree with the Court of Appeals that this issue is now moot
and academic. As previously discussed, F/B Lourdes was an asset of the
partnership and that it was placed in the name of petitioner, only to assure
payment of the debt he and his partners owed. The nets and the floats were
specifically manufactured and tailor-made according to their own design, and
were bought and used in the fishing venture they agreed upon. Hence, the
issuance of the Writ to assure the payment of the price stipulated in the invoices
is proper. Besides, by specific agreement, ownership of the nets remained with
Respondent Philippine Fishing Gear, until full payment thereof.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
Costs against petitioner.
SO ORDERED.

G.R. No. L-19118

January 30, 1965

MARIANO A. ALBERT, plaintiff-appellant,

vs.
UNIVERSITY PUBLISHING CO., INC., defendant-appellee.
Uy & Artiaga and Antonio M. Molina for plaintiff-appellant.
Aruego, Mamaril & Associates for defendant-appellees.

BENGZON, J.P., J.:

No less than three times have the parties here appealed to this Court.
In Albert vs. University Publishing Co., Inc., L-9300, April 18, 1958, we found
plaintiff entitled to damages (for breach of contract) but reduced the amount from
P23,000.00 to P15,000.00.
Then in Albert vs. University Publishing Co., Inc., L-15275, October 24, 1960, we
held that the judgment for P15,000.00 which had become final and executory,
should be executed to its full amount, since in fixing it, payment already made
had been considered.
Now we are asked whether the judgment may be executed against Jose M.
Aruego, supposed President of University Publishing Co., Inc., as the real
defendant.
Fifteen years ago, on September 24, 1949, Mariano A. Albert sued University
Publishing Co., Inc. Plaintiff allegedinter alia that defendant was a corporation
duly organized and existing under the laws of the Philippines; that on July 19,
1948, defendant, through Jose M. Aruego, its President, entered into a contract
with plaintifif; that defendant had thereby agreed to pay plaintiff P30,000.00 for
the exclusive right to publish his revised Commentaries on the Revised Penal
Code and for his share in previous sales of the book's first edition; that defendant
had undertaken to pay in eight quarterly installments of P3,750.00 starting July
15, 1948; that per contract failure to pay one installment would render the rest
due; and that defendant had failed to pay the second installment.
Defendant admitted plaintiff's allegation of defendant's corporate existence;
admitted the execution and terms of the contract dated July 19, 1948; but alleged
that it was plaintiff who breached their contract by failing to deliver his
manuscript. Furthermore, defendant counterclaimed for damages.1wph1.t
Plaintiff died before trial and Justo R. Albert, his estate's administrator, was
substituted for him.
The Court of First Instance of Manila, after trial, rendered decision on April 26,
1954, stating in the dispositive portion

IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor

of the plaintiff and against the defendant the University Publishing Co.,
Inc., ordering the defendant to pay the administrator Justo R. Albert, the
sum of P23,000.00 with legal [rate] of interest from the date of the filing of
this complaint until the whole amount shall have been fully paid. The
defendant shall also pay the costs. The counterclaim of the defendant is
hereby dismissed for lack of evidence.
As aforesaid, we reduced the amount of damages to P15,000.00, to be executed
in full. Thereafter, on July 22, 1961, the court a quo ordered issuance of an
execution writ against University Publishing Co., Inc. Plaintiff, however, on
August 10, 1961, petitioned for a writ of execution against Jose M. Aruego, as
the real defendant, stating, "plaintiff's counsel and the Sheriff of Manila
discovered that there is no such entity as University Publishing Co., Inc." Plaintiff
annexed to his petition a certification from the securities and Exchange
Commission dated July 31, 1961, attesting: "The records of this Commission do
not show the registration of UNIVERSITY PUBLISHING CO., INC., either as a
corporation or partnership." "University Publishing Co., Inc." countered by filing,
through counsel (Jose M. Aruego's own law firm), a "manifestation" stating that
"Jose M. Aruego is not a party to this case," and that, therefore, plaintiff's petition
should be denied.
Parenthetically, it is not hard to decipher why "University Publishing Co., Inc.,"
through counsel, would not want Jose M. Aruego to be considered a party to the
present case: should a separate action be now instituted against Jose M. Aruego,
the plaintiff will have to reckon with the statute of limitations.
The court a quo denied the petition by order of September 9, 1961, and from this,
plaintiff has appealed.
The fact of non-registration of University Publishing Co., Inc. in the Securities and
Exchange Commission has not been disputed. Defendant would only raise the
point that "University Publishing Co., Inc.," and not Jose M. Aruego, is the party
defendant; thereby assuming that "University Publishing Co., Inc." is an existing
corporation with an independent juridical personality. Precisely, however, on
account of the non-registration it cannot be considered a corporation, not even a
corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no personality
separate from Jose M. Aruego; it cannot be sued independently.

The corporation-by-estoppel doctrine has not been invoked. At any rate, the
same is inapplicable here. Aruego represented a non-existent entity and induced
not only the plaintiff but even the court to believe in such representation. He
signed the contract as "President" of "University Publishing Co., Inc.," stating that
this was "a corporation duly organized and existing under the laws of the
Philippines," and obviously misled plaintiff (Mariano A. Albert) into believing the
same. One who has induced another to act upon his wilful misrepresentation that
a corporation was duly organized and existing under the law, cannot thereafter
set up against his victim the principle of corporation by estoppel (Salvatiera vs.
Garlitos, 56 O.G. 3069).
"University Publishing Co., Inc." purported to come to court, answering the
complaint and litigating upon the merits. But as stated, "University Publishing
Co., Inc." has no independent personality; it is just a name. Jose M. Aruego was,
in reality, the one who answered and litigated, through his own law firm as
counsel. He was in fact, if not, in name, the defendant.
Even with regard to corporations duly organized and existing under the law, we
have in many a case pierced the veil of corporate fiction to administer the ends of
justice. * And in Salvatiera vs. Garlitos, supra, p. 3073, we ruled: "A person acting
or purporting to act on behalf of a corporation which has no valid
existence assumes such privileges and obligations and becomes personally
liable for contracts entered into or for other acts performed as such agent." Had
Jose M. Aruego been named as party defendant instead of, or together with,
"University Publishing Co., Inc.," there would be no room for debate as to his
personal liability. Since he was not so named, the matters of "day in court" and
"due process" have arisen.
In this connection, it must be realized that parties to a suit are "persons who have
a right to control the proceedings, to make defense, to adduce and crossexamine witnesses, and to appeal from a decision" (67 C.J.S. 887) and
Aruego was, in reality, the person who had and exercised these rights. Clearly,
then, Aruego had his day in court as the real defendant; and due process of law
has been substantially observed.
By "due process of law" we mean " "a law which hears before it condemns; which
proceeds upon inquiry, and renders judgment only after trial. ... ." (4 Wheaton,
U.S. 518, 581.)"; or, as this Court has said, " "Due process of law" contemplates

notice and opportunity to be heard before judgment is rendered, affecting one's

person or property" (Lopez vs. Director of Lands, 47 Phil. 23, 32)." (Sicat vs.
Reyes, L-11023, Dec. 14, 1956.) And it may not be amiss to mention here also
that the "due process" clause of the Constitution is designed to secure justice as
a living reality; not to sacrifice it by paying undue homage to formality.
For substance must prevail over form. It may now be trite, but none the less apt,
to quote what long ago we said in Alonso vs. Villamor, 16 Phil. 315, 321-322:
A litigation is not a game of technicalities in which one, more deeply
schooled and skilled in the subtle art of movement and position, entraps
and destroys the other. It is, rather, a contest in which each contending
party fully and fairly lays before the court the facts in issue and then,
brushing side as wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that Justice be done upon the merits.
Lawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality,
when it deserts its proper office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from courts.
There should be no vested rights in technicalities.
The evidence is patently clear that Jose M. Aruego, acting as representative of a
non-existent principal, was the real party to the contract sued upon; that he was
the one who reaped the benefits resulting from it, so much so that partial
payments of the consideration were made by him; that he violated its terms,
thereby precipitating the suit in question; and that in the litigation he was the real
defendant. Perforce, in line with the ends of justice, responsibility under the
judgment falls on him.
We need hardly state that should there be persons who under the law are liable
to Aruego for reimbursement or contribution with respect to the payment he
makes under the judgment in question, he may, of course, proceed against them
through proper remedial measures.
PREMISES CONSIDERED, the order appealed from is hereby set aside and the
case remanded ordering the lower court to hold supplementary proceedings for
the purpose of carrying the judgment into effect against University Publishing
Co., Inc. and/or Jose M. Aruego. So ordered.

Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala,

Makalintal and Zaldivar, JJ., concur.
Bautista Angelo, J., took no part.