C. ARNOLD HALL and BRADLEY P. HALL v. Edmundo S. Piccio b. The principle of estoppel does not apply.

b. The principle of estoppel does not apply. Nobody was led to believe
Formation of Corporation| June 29, 1950 | Bengzon
Nature of Case:
Digest maker: Angge
SUMMARY: Petitioners and private respondents are incorporators of Far Eastern Lumber
Co. Inc. Pending the issuance of the certification from SEC, the respondents Fred and Emma
Brown filed an action for dissolution with the CFI. CFI granted this. Petitioners however
allege that the court had no jurisdiction to rule on the case and that the Browns are
estopped from claiming that Far Eastern is a corporation because they are also among its
incorporators. The Court dismissed this petition and held that the CFI had jurisdiction to
rule on the dissolution case because Sec. 19 does not apply. Because it does not have its
certificate of incorporation, the company cannot claim in good faith to be a corporation. The
Browns are also not estopped from claiming that Far Eastern is not a corporation because
there was no person that was led to believe anything to his prejudice or damage.
DOCTRINE: An entity whose certificate of incorporation had not been obtained may be
terminated in a private suit for its dissolution between stockholders, without 'the
intervention of the state. The question as to the right of minority stockholders to sue for
dissolution does not affect the court's jurisdiction, and is a matter for decision by the judge,
subject to review on appeal by the aggrieved party at the proper time.
anything to his prejudice and damage. This is not an instance requiring the
enforcement of contracts with the corporation through the rule of estoppel.
2. WON the court had no jurisdiction to decree the dissolution of the company,
(WON it was a de facto corporation whose dissolution may only be ordered in a quo
warranto proceeding pursuant to Sec. 191 of Corp Law)
a. The section does not govern this situation because:
i. Not having obtained the certificate of incorporation, the Far
Eastern Lumber and Commercial Co.—even its stockholders—
may not probably claim "in good faith" to be a corporation.
ii. this is not a suit in which the corporation is a party. This is a
litigation between stockholders of the alleged corporation, for the
purpose of obtaining its dissolution. Even the existence of a de
jure corporation may be terminated in a private suit for its
dissolution between stockholders, without the intervention of the
state.
c. The principal reason why this petition may not prosper is the availability of another
remedy – appealing the order of dissolution.
d. The secondary issue on the appointment of receiver is proper in proceedings for
dissolution of a company or corporation, and it was no error to reject the counter-
bond, the court having decreed the dissolution.

FACTS: RULING: The petition will, therefore, be dismissed, with costs. The preliminary injunction
 Pets. Arnold Hall and Bradley Hall, and Resps. Fred Brown, Emma Brown, Hipolita heretofore issued will be dissolved.
Chapman and Ceferino Abella, signed the article of incorporation of Far Eastern
Lumber and Commercial Co., Inc.
 Attached to the AOI was an affidavit of the treasurer stating that 23,348 shares of
stock had been subscribed and fully paid with certain properties transferred to the
corporation. The corporation then proceeded to do business with the adoption of by-
laws and election of its officers.
 Months later, the AOI were filed in the SEC. However, pending action, Resps. filed a
case with the CFI alleging that Far Eastern was an unregistered partnership and that
they wished to have it dissolved because of dissension among the members,
mismanagement and fraud by the managers and heavy financial losses.
 CFI Judge Piccio ordered the dissolution of the company and appointed respondent
Capuciong as receiver of its properties upon filing of a bond.
 Petitioners offered to file a counter-bond but Piccio refused to accept and discharge
the receiver.

ISSUE/S & RATIO:

1. WON Fred and Emma Brown are estopped from claiming that Far Eastern is not a
corporation but only a partnership - NO
a. All the parties are informed that the SEC has not issued the certificate of
incorporation. They know/ought to know that the personality of a
corporation begins to exist only from the moment such certificate is issued,
not before. (Sec. 11, Corp. Law)

1 The due incorporation of any corporations claiming in good faith to be a corporation under this Act and
its right to exercise corporate powers shall not be inquired into collaterally in any private suit to which
the corporation may be a party, but such inquiry may be had at the suit of the Insular Government on
information of the Attorney-General."