G.R. No.

L-43350

The plaintiff company was not even a de facto corporation at the time. Not being in legal
existence then, it did not possess juridical capacity to enter into the contract.

CAGAYAN FISHING DEVELOPMENT CO., INC., vs. TEODORO SANDIKO

DE FACTO CORPORATIONS
FACTS: Manuel Tabora, the registered owner of four parcels of land, executed in favour of
the Philippine National Bank a first mortgage on the four parcels of land to guarantee the
payment of a loan in the sum of P8,000. A second mortgage on the same lands were
executed to guarantee the payment of another loan amounting to P7,000. A third mortgage
was then executed on the same lands but this time in favour of Severina Buzon to whom
Tabora was indebted in the sum of P2,900.
Tabora sold to the Cagayan Fishing Development Co., Inc. under the process of
incorporation, in consideration of one peso (P1) the four parcels of land subject to the
mortgages in favor of the Philippine National Bank and Severina Buzon and, to the condition
that the certificate of title to said lands shall not be transferred to the name of the plaintiff
company until the latter has fully and completely paid Tabora's indebtedness to the
Philippine National Bank.
A year after the plaintiff company filed its articles of incorporation with the Bureau of
Commerce and Industry, the board of directors adopted a resolution authorizing its
president to sell the four parcels of lands to Teodoro Sandiko for P42,000 wherein Sandiko
shall receive the rights, titles, and interest in and to the four parcels of land and in turn shall
obligate himself to shoulder the three mortgages referred to.

Corporations are creatures of the law, and can only come into existence in the
manner prescribed by law. As has already been stated, general law authorizing the
formation of corporations are general offers to any persons who may bring
themselves within their provisions; and if conditions precedent are prescribed in
the statute, or certain acts are required to be done, they are terms of the offer, and
must be complied with substantially before legal corporate existence can be
acquired. (14 C. J., sec. 111, p. 118.)
That a corporation should have a full and complete organization and existence as
an entity before it can enter into any kind of a contract or transact any business,
would seem to be self evident. . . . A corporation, until organized, has no being,
franchises or faculties. Nor do those engaged in bringing it into being have any
power to bind it by contract, unless so authorized by the charter there is not a
corporation nor does it possess franchise or faculties for it or others to exercise,
until it acquires a complete existence. (Gent vs. Manufacturers and Merchant's
Mutual Insurance Company, 107 Ill., 652, 658.)
The contract here was entered into not between Manuel Tabora and a non-existent
corporation but between the Manuel Tabora as owner of the four parcels of lands on the one
hand and the same Manuel Tabora, his wife and others, as mere promoters of a
corporations on the other hand.

The defendant having failed to pay the sum stated in the promissory note, plaintiff company
brought an action in the Court of First Instance of Manila praying that judgment be rendered
against the defendant for the sum of P25,300.

A corporation, until organized, has no life and therefore no faculties. It is, as it were, a
child in ventre sa mere. This is not saying that under no circumstances may the acts of
promoters of a corporation be ratified by the corporation if and when subsequently
organized.

The CFI rendered judgment absolving defendant. The trial court held that deed of sale was
invalid because of vice in consent and repugnancy to law because at the time the land was
transferred, the plaintiff corporation have not yet been duly organized.

Moreover, the defendant always regarded Tabora as the owner of the lands and dealt with
Tabora directly. Jose Ventura, president of the plaintiff corporation, intervened only to sign
the contract in behalf of the plaintiff.

ISSUE: WON Cagayan Fishing Development Co., Inc. acquired the four parcels of land.

Tabora approached the defendant Sandiko and succeeded in the making him purchase the
four parcels of land and assume the payment of indebtedness to the Philippine National
Bank.

HELD: No, Cagayan Fishing Development Co., Inc. did not acquire the four parcels of land
from Tabora since the actual transfer of the land was effected five months before the
incorporation of Cagayan fishing Development Co., Inc and unquestionably, the plaintiff was
not yet incorporated when it entered into a contract of sale.

If the plaintiff corporation could not and did not acquire the four parcels of land here
involved, it follows that it did not possess any resultant right to dispose of them by sale to
the defendant, Teodoro Sandiko.