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ARTICLES OF INCORPORATION

G.R. No. L-30646 January 30, 1929

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE MANILA RAILROAD COMPANY and JOSE PAEZ as Manager of said Company, respondents.

Facts:
This is a petition of the extraordinary legal writ of mandamus presented by the Government, praying that the writ be issued
to compel the Manila Railroad Company and Jose Paez, as its manager, to provide and equip the telegraph poles of
said company between the municipality of Paniqui and San Fernando, with crosspieces for six telegraph wires
belonging to the Government, which is allegedly necessary for public service between said municipalities.

It is admitted that the present poles and crosspieces between said municipalities are sufficient to carry four telegraph wires,
which it now carries by virtue of an agreement between the respondents and the Bureau of the Posts of the Philippine
Government and also admitted that the poles is not sufficient to carry six telegraph wires.

The petitioner relies upon the provisions of section 84 of act No. 1459, the General Corporation Law and was adopted by
the United States Philippine Commission on March 1, 1906. (Vol. 5, Pub. Laws, pp. 224-268.) Section 84 of the said Act
provides:

The railroad corporation shall establish along the whole length of the road a telegraph line for the use of the railroad.
The posts of this line may be used for Government wires and shall be of sufficient length and strength and equipped
with sufficient crosspiece to carry the number of wires which the Government may consider necessary for the public
service. The establishment, protection, and maintenance of the wires and stations necessary for the public service
shall be at the cost of the Government. (Vol. 5, P. L., p. 247.)

The plaintiff contends that under said section 84, the defendant company is required to erect and maintain posts for its
telegraph wires, with crosspieces to carry the number of wires which the Government may consider necessary for the public
service, and that six wires are now necessary for the public service.

The respondents answered that section 84 of Act No. 1459 has been repealed by section 1, paragraph 8 of Act No.
1510, which is the charter of the Manila Railroad Company. It was adopted by the United States Philippine Commission on
July 7, 1906. Section 1, paragraph 8, of said Act No. 1510 provides:

8. The grantee (the Manila Railroad Company) shall have the right to construct and operate telegraph, telephone,
and electrical transmission lines over said railways for the use of the railways and their business, and also, with the
approval of the Secretary of War, for public service and commercial purposes but these latter privileges shall be
subject to the following provisions:

In the construction of telegraph or telephone lines along the right of way the grantee (the Manila Railroad Company)
shall erect and maintain poles with sufficient space thereon to permit the Philippine Government, at the expense of
said Government, to place, operate, and maintain four wires for telegraph, telephone, and electrical transmission
for any Government purposes between the termini of the lines of railways main or branch; and the Philippine
Government reserves to itself the right to construct, maintain, and operate telegraph, telephone, or electrical
transmission lines over the right of way of said railways for commercial military, or government purposes, without
unreasonably interfering with the construction, maintenance, and operation by the grantee of its railways, telegraph,
telephone, and electrical transmission lines.

Issue:

Whether the defendant company is required to provide and equip its telegraph poles with crosspieces to carry six telegraph
wires of the Government, as provided for in Section 84 of Act No. 1459 (The General Corporation Law Act) or, is it only
required to furnish poles with crosspieces sufficient to carry four wires only as provided for by Section 1 pagraph 8 of Act
1510 (The Charter of manila Railroad Company)?

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Held:

No. Defendant is only required to provide what is required by its charter (furnish poles with crosspieces sufficient to carry
four wires, which it now carries). Act No. 1459 is a general law applicable to corporations generally, while Act No. 1510 is
the charter of the Manila Railroad Company and constitute a contract between it and the Government. The charter of a
corporation is a contract between three parties: (a) it is a contract between the state and the corporation to which the charter
is granted; (b) it is a contact between the stockholders and the state and (c) it is also a contract between the corporation
and its stockholders. (Cook on Corporations, vol. 2, sec. 494 and cases cited.)

Section 84 of the Corporation Law (Act No. 1459) was intended to apply to all railways in the Philippine Islands which did
not have a special charter contract. The special charter (Act No. 1510) had the effect of superseding the general Corporation
Law upon all matters covered by said special charter. Said Act, inasmuch as it contained a special provision relating to the
erection of telegraph and telephone poles, and the number of wires which the Government might place thereon, superseded
the general law upon that question.

Act No. 1510 is a special charter of the respondent company. It constitutes a contract between the respondent
company and the state; and the state and the grantee of a charter are equally bound by its provisions. For the state
to impose an obligation or a duty upon the respondent company, which is not expressly provided for in the charter
(Act No. 1510), would amount to a violation of said contract between the state and the respondent company.

The question is not whether Act No. 1510 repealed Act No. 1459; but whether, after the adoption of Act No. 1510, the
respondents are obliged to comply with the special provision above mentioned, contained in Act No. 1459. We must answer
that question in the negative. Both laws are still in force, unless otherwise repealed. Act No. 1510 is applicable to
respondents upon the question, while Act No. 1459 is not applicable.

Petition was denied.

Lanuza vs. CA
GR No. 131394 | March 28, 2005

Facts:
 Petitioners seek to nullify the Court of Appeals’ Decision in CA–G.R. SP No. 414731 promulgated on 18 August 1997, affirming the
SEC Order dated 20 June 1996, and the Resolution2 of the Court of Appeals dated 31 October 1997 which denied petitioners’ motion
for reconsideration.
 In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven hundred (700) founders’ shares and
seventy-six (76) common shares as its initial capital stock subscription reflected in the articles of incorporation
 Onrubia et. al, who were in control of PMMSI registered the company’s stock and transfer book for the first time in 1978, recording
thirty-three (33) common shares as the only issued and outstanding shares of PMMSI.
 In 1979, a special stockholders’ meeting was called and held on the basis of what was considered as a quorum of twenty-seven (27)
common shares, representing more than two-thirds (2/3) of the common shares issued and outstanding.
 In 1982, Juan Acayan, one of the heirs of the incorporators filed a petition for the registration of their property rights was filed
before the SEC over 120 founders’ shares and 12 common shares owned by their father
 SEC Hearing Officer: heirs of Acayan were entitled to the claimed shares and called for a special stockholders’ meeting to elect a
new set of officers.
 SEC en banc: affirmed the decision
 As a result, the shares of Acayan were recorded in the stock and transfer book.
 On May 6, 1992, a special stockholders’ meeting was held to elect a new set of directors
 Onrubia et al filed a petition with SEC questioning the validity of said meeting alleging that the quorum for the said meeting should
not be based on the 165 issued and outstanding shares as per the stock and transfer book, but on the initial subscribed capital stock
of seven hundred seventy-six (776) shares, as reflected in the 1952 Articles of Incorporation
 Petition was dismissed

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 SC en banc: shares of the deceased incorporators should be duly represented by their respective administrators or heirs concerned.
Called for a stockholders meeting on the basis of the stockholdings reflected in the articles of incorporation for the purpose of electing
a new set of officers for the corporation
 Lanuza, Acayan et al, who are PMMSI stockholders, filed a petition for review with the CA, raising the following issues:
1. whether the basis the outstanding capital stock and accordingly also for determining the quorum at stockholders’ meetings it should
be the 1978 stock and transfer book or if it should be the 1952 articles of incorporation
(They contended that the basis is the stock and transfer book, not articles of incorporation in computing the quorum)
2. whether the Espejo decision (decision of SEC en banc ordering the recording of the shares of Jose Acayan in the stock and transfer
book) is applicable to the benefit of Onrubia et al
 CA decision:
1. For purposes of transacting business, the quorum should be based on the outstanding capital stock as found in the articles of
incorporation
2. To require a separate judicial declaration to recognize the shares of the original incorporators would entail unnecessary delay and
expense. Besides. the incorporators have already proved their stockholdings through the provisions of the articles of incorporation.
 Appeal was made by Lanuza et al before the SC
 Lanuza et al’ contention:
a. 1992 stockholders’ meeting was valid and legal
b. Reliance on the 1952 articles of incorporation for determining the quorum negates the existence and validity of the
stock and transfer book Onrubia et al prepared
c. Onrubia et al must show and prove entitlement to the founders and common shares in a separate and independent
action/proceeding in order to avail of the benefits secured by the heirs of Acayan
 Onrubia et al’s contention, based on the Memorandum: petition should be dismissed on the ground of res judicata
 Another appeal was made
 Lanuza et al’s contention: instant petition is separate and distinct from G.R. No. 131315, there being no identity of parties, and
more importantly, the parties in the two petitions have their own distinct rights and interests in relation to the subject matter in
litigation
 Onrubia et al’s manifestation and motion: moved for the dismissal of the case

Issue: What should be the basis of quorum for a stockholders’ meeting—the outstanding capital stock as indicated in the articles of
incorporation or that contained in the company’s stock and transfer book?

Ruling:
 Articles of Incorporation
- Defines the charter of the corporation and the contractual relationships between the State and the corporation, the stockholders and
the State, and between the corporation and its stockholders.
- Contents are binding, not only on the corporation, but also on its shareholders.
 Stock and transfer book
- Book which records the names and addresses of all stockholders arranged alphabetically, the installments paid and unpaid on all stock
for which subscription has been made, and the date of payment thereof; a statement of every alienation, sale or transfer of stock
made, the date thereof and by and to whom made; and such other entries as may be prescribed by law
- necessary as a measure of precaution, expediency and convenience since it provides the only certain and accurate method of
establishing the various corporate acts and transactions and of showing the ownership of stock and like matters
- Not public record, and thus is not exclusive evidence of the matters and things which ordinarily are or should be written therein
 In this case, the articles of incorporation indicate that at the time of incorporation, the incorporators were bona fide stockholders
of 700 founders’ shares and 76 common shares. Hence, at that time, the corporation had 776 issued and outstanding shares.
 According to Sec. 52 of the Corp Code, “a quorum shall consist of the stockholders representing a majority of the outstanding capital
stock.” As such, quorum is based on the totality of the shares which have been subscribed and issued, whether it be founders’ shares
or common shares
 To base the computation of quorum solely on the obviously deficient, if not inaccurate stock and transfer book, and completely
disregarding the issued and outstanding shares as indicated in the articles of incorporation would work injustice to the owners and/or
successors in interest of the said shares.
 The stock and transfer book of PMMSI cannot be used as the sole basis for determining the quorum as it does not reflect the totality
of shares which have been subscribed, more so when the articles of incorporation show a significantly larger amount of shares issued
and outstanding as compared to that listed in the stock and transfer book.
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 One who is actually a stockholder cannot be denied his right to vote by the corporation merely because the corporate officers failed
to keep its records accurately. A corporation’s records are not the only evidence of the ownership of stock in a corporation.
 It is no less than the articles of incorporation that declare the incorporators to have in their name the founders and several common
shares. Thus, to disregard the contents of the articles of incorporation would be to pretend that the basic document which legally
triggered the creation of the corporation does not exist and accordingly to allow great injustice to be caused to the incorporators and
their heirs

WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs against petitioners

Red Line Transportation Co. vs. Rural Transit Co.

GR No. 41570 | Sept. 6, 1934

Facts:
 This is a petition for review of an order of the Public Service Commission granting to the Rural Transit Company, Ltd., a certificate
of public convenience to operate a transportation service between Ilagan in the Province of Isabela and Tuguegarao in the Province
of Cagayan, and additional trips in its existing express service between Manila Tuguegarao.
 On June 4, 1932, Rural Transit filed an application for certification of a new service between Tuguegarao and Ilagan with the Public
Company Service Commission (PSC), since the present service is not sufficient
 Rural Transit further stated that it is a holder of a certificate of public convenience to operate a passenger bus service between
Manila and Tuguegarao
 Red Line opposed said application, arguing that they already hold a certificate of public convenience for Tuguegarao and Ilagan, and
is rendering adequate service. They also argued that granting Rural Transit’s application would constitute a ruinous competition over
said route
 On Dec. 21, 1932, Public Service Commission approved Rural Transit’s application, with the condition that "all the other terms and
conditions of the various certificates of public convenience of the herein applicant and herein incorporated are made a part hereof."
 A motion for rehearing and reconsideration was filed by Red Line since Rural Transit has a pending application before the Court of
First Instance for voluntary dissolution of the corporation
 A motion for postponement was filed by Rural Transit as verified by M. Olsen who swears "that he was the secretary of the Rural
Transit Company, Ltd
 During the hearing before the Public Service Commission, the petition for dissolution and the CFI’s decision decreeing the dissolution
of Rural Transit were admitted without objection
 At the trial of this case before the Public Service Commission an issue was raised as to who was the real party in interest making the
application, whether the Rural Transit Company, Ltd., as appeared on the face of the application, or the Bachrach Motor Company,
Inc., using name of the Rural Transit Company, Ltd., as a trade name
 However, PSC granted Rural Transit’s application for certificate of public convenience and ordered that a certificate be issued on its
name
 PSC relied on a Resolution in case No. 23217, authorizing Bachrach Motor to continue using Rural Transit’s name as its tradename
in all its applications and petitions to be filed before the PSC. Said resolution was given a retroactive effect as of the date of filing of
the application or April 30, 1930

Issue: Can the Public Service Commission authorize a corporation to assume the name of another corporation as a trade name?

Ruling: NO
 The Rural Transit Company, Ltd., and the Bachrach Motor Co., Inc., are Philippine corporations and the very law of their creation
and continued existence requires each to adopt and certify a distinctive name
 The incorporators "constitute a body politic and corporate under the name stated in the certificate."
 A corporation has the power "of succession by its corporate name." It is essential to its existence and cannot change its name except
in the manner provided by the statute. By that name alone is it authorized to transact business.
 The law gives a corporation no express or implied authority to assume another name that is unappropriated: still less that of another
corporation, which is expressly set apart for it and protected by the law. If any corporation could assume at pleasure as an unregistered
trade name the name of another corporation, this practice would result in confusion and open the door to frauds and evasions and
difficulties of administration and supervision.
In this case, the order of the commission authorizing the Bachrach Motor Co., Incorporated, to assume the name of the Rural Transit
Co., Ltd. likewise incorporated, as its trade name being void. Accepting the order of December 21, 1932, at its face as granting a
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certificate of public convenience to the applicant Rural Transit Co., Ltd., the said order last mentioned is set aside and vacated on the
ground that the Rural Transit Company, Ltd., is not the real party in interest and its application was fictitious

INDUSTRIAL REFRACTORIES CORPORATION OF THE PHILIPPINES vs. COURT OF APPEALS, SECURITIES AND
EXCHANGE COMMISSION and REFRACTORIES CORPORATION OF THE PHILIPPINES

G.R. No. 122174, October 3, 2002

Facts:
Respondent Refractories Corporation of the Philippines (RCP) is a corporation duly organized on October 13, 1976. On
June 22, 1977, it registered its corporate and business name with the Bureau of Domestic Trade.

Petitioner IRCP was incorporated on August 23, 1979 originally under the name "Synclaire Manufacturing Corporation". It
amended its Articles of Incorporation on August 23, 1985 to change its corporate name to "Industrial Refractories Corp. of
the Philippines".

Both companies are the only local suppliers of monolithic gunning mix.

Respondent RCP then filed a petition with the Securities and Exchange Commission to compel petitioner IRCP to change
its corporate name.

The SEC rendered judgment in favor of respondent RCP.

Petitioner appealed to the SEC En Banc. The SEC En Banc modified the appealed decision and the petitioner was
ordered to delete or drop from its corporate name only the word "Refractories".

Petitioner IRCP filed a petition for review on certiorari to the Court of Appeals and the appellate court upheld the
jurisdiction of the SEC over the case and ruled that the corporate names of petitioner IRCP and respondent RCP are
confusingly or deceptively similar, and that respondent RCP has established its prior right to use the word "Refractories"
as its corporate name.

Petitioner then filed a petition for review on certiorari

Issue:
Are corporate names Refractories Corporation of the Philippines (RCP) and "Industrial Refractories Corp. of the
Philippines" confusingly and deceptively similar?
Ruling:
Yes, the petitioner and respondent RCP’s corporate names are confusingly and deceptively similar.
Further, Section 18 of the Corporation Code expressly prohibits the use of a corporate name which is "identical or
deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is
patently deceptive, confusing or contrary to existing laws". The policy behind said prohibition is to avoid fraud upon the
public that will have occasion to deal with the entity concerned, the evasion of legal obligations and duties, and the
reduction of difficulties of administration and supervision over corporation.

The Supreme Court denied the petition for review on certiorari due for lack of merit.

Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus v. Iglesia ng Dios Kay Dristo Jesus, 372 SCRA 171 (2001).

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FACTS: Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (Church of God in Christ Jesus,
the Pillar and Ground of Truth), is a non-stock religious society or corporation registered in 1936. Sometime in 1976, one
Eliseo Soriano and several other members of respondent corporation disassociated themselves from the latter and
succeeded in registering on March 30, 1977 a new non-stock religious society or corporation, named Iglesia ng Dios Kay
Kristo Hesus, Haligi at Saligan ng Katotohanan. Respondent corporation filed with the SEC a petition to compel the Iglesia
ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan to change its corporate name to another name that is not
similar or identical to any name already used by a corporation, partnership or association registered with the Commission.
Petitioner is compelled to change its corporate name and be barred from using the same or similar name on the ground
that the same causes confusion among their members as well as the public. SEC rendered a decision ordering petitioner
to change its corporate name. The Court of Appeals rendered the assailed decision affirming the decision of the SEC En
Banc.

ISSUE: Whether the court of appeals failed to properly appreciate the scope of the constitutional guarantee on religious
freedom

RULING: The additional words "Ang Mga Kaanib " and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly
observed by the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise
residing in the Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid
confusion or difficulty in distinguishing petitioner from respondent. This is especially so, since both petitioner and
respondent corporations are using the same acronym — H.S.K.; not to mention the fact that both are espousing religious
beliefs and operating in the same place. The fact that there are other non-stock religious societies or corporations using
the names Church of the Living God, Inc., Church of God Jesus Christ the Son of God the Head, Church of God in Christ
& By the Holy Spirit, and other similar names, is of no consequence. It does not authorize the use by petitioner of the
essential and distinguishing feature of respondent's registered and protected corporate name. Ordering petitioner to
change its corporate name is not a violation of its constitutionally guaranteed right to religious freedom. In so doing, the
SEC merely compelled petitioner to abide by one of the SEC guidelines in the approval of partnership and corporate
names, namely its undertaking to manifest its willingness to change its corporate name in the event another person, firm,
or entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it. The
instant petition for review is DENIED. The appealed decision of the Court of Appeals is AFFIRMED in toto.

PHILIPS EXPORT VS. COURT OF APPEALS- Corporate Trade Name

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 whole world.

FACTS:
Philips Export B.V. (PEBV) filed with the SEC for the cancellation of the word “Philips” the corporate name of Standard
Philips Corporation in view of its prior registration with the Bureau of Patents and the SEC. However, Standard Philips
refused to amend its Articles of Incorporation so PEBV filed with the SEC a petition for the issuance of a Writ of
Preliminary Injunction, however this was denied ruling that it can only be done when the corporate names are identical
and they have at least 2 words different. This was affirmed by the SEC en banc and the Court of Appeals thus the case at
bar.

ISSUE:
Whether or not Standard Philips can be enjoined from using Philips in its corporate name

RULING: YES
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 whole world. According to Sec. 18 of the Corporation Code, no corporate name may be allowed if the
proposed name is identical or deceptively 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.
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For the prohibition to apply, 2 requisites must be present:

(1) the complainant corporation must have acquired a prior right over the use of such corporate name and
(2) the proposed name is either identical or deceptively or confusingly similar to that of any existing corporation or to any
other name already protected by law or patently deceptive, confusing or contrary to existing law.

With regard to the 1st requisite, PEBV adopted the name “Philips” part of its name 26 years before Standard Philips. As
regards the 2nd, the test for the existence of confusing similarity is whether the similarity is such as to mislead a person
using ordinary care and discrimination. Standard Philips only contains one word, “Standard”, different from that of PEBV.
The 2 companies’ products are also the same, or cover the same line of products. Although PEBV primarily deals with
electrical products, it has also shipped to its subsidiaries machines and parts which fall under the classification of “chains,
rollers, belts, bearings and cutting saw”, the goods which Standard Philips also produce. Also, among Standard Philips’
primary purposes are to buy, sell trade x x x electrical wiring devices, electrical component, electrical supplies. Given
these, there is nothing to prevent Standard Philips from dealing in the same line of business of electrical devices. The use
of “Philips” by Standard Philips tends to show its intention to ride on the popularity and established goodwill of PEBV.

Laureano Investment & Development Corporation vs Court of Appeals

272 SCRA 253 – Business Organization – Corporation Law – Right To Sue Under A Corporate Name
In 1988, Bormaheco, Inc. (Bormaheco) filed an ex-parte petition with the Registry of Deeds of Makati for the issuance of a
writ of possession over various lots that it bought from a bank. Subsequently, a motion for intervention was filed by LIDECO
Corporation (Lideco) for certain adverse claims. Bormaheco opposed the motion on the ground that Lideco has no
personality to sue because it is not a juridical entity. Apparently, Lideco is not a corporation registered with the Securities
and Exchange Commission. Bormaheco’s opposition was granted. Lideco assailed the decision on the ground that LIDECO
is an acronym for Laureano Investment & Development Corporation which is a duly organized corporation.
ISSUE: Whether or not Laureano Investment & Development Corporation can sue Bormaheco, Inc. as “LIDECO”
Corporation.
HELD: No. A corporation cannot sue under a name other than that registered with the SEC. The contention that Laureano
Investment & Development Corporation merely used the abbreviation is not tenable. “Lideco Corporation” had no personality
to intervene since it had not been duly registered as a corporation. If Laureano Investment & Development Corporation truly
wished to intervene, it should have, it should have used its corporate name as the law requires and not another name which
it had not registered.

Pison-Arceo Agricultural and Development Corporation vs National Labor Relations Commission

279 SCRA 312 – Business Organization – Corporation Law – Suit Under a Corporate Name
In 1988, a labor case for illegal dismissal was filed against Jose Edmundo Pison and Hacienda Lanutan. The labor arbiter
issued a favorable for the dismissed workers. Pison appealed and the National Labor Relations Commission (NLRC)
affirmed the labor arbiter. However, in the NLRC ruling, it ordered Pison-Arceo Agricultural and Development Corporation
(PADC) as solidarily liable together with Pison and the Hacienda, PADC being the owner of the Hacienda and in which
Pison is a majority stockholder. PADC assails the order of the NLRC on due process grounds as it averred that it was not
issued summons hence it was not able to defend itself in court and therefore the judgment against it is void.
ISSUE: Whether or not the contention of PADC is correct.
HELD: No. The Supreme Court emphasized that in labor cases and other administrative cases, the Rule of Civil Procedure
are not strictly applied especially so in the interest of laborers. So long as there is a substantial compliance, a party can be
placed under the jurisdiction of the labor court. In the case at bar, there is substantial compliance when summons was
served to Jose Edmundo Pison who was also the administrator of the Hacienda. PADC is therefore adequately represented
by Pison in the proceedings in the labor tribunal. If at all, the non-inclusion of the corporate name of PADC in the case
before the executive labor arbiter was a mere procedural error which did not at all affect the jurisdiction of the labor tribunals.

G.R. No. L-26370 July 31, 1970

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PHILIPPINE FIRST INSURANCE COMPANY, INC., plaintiff-appellant,

vs.
MARIA CARMEN HARTIGAN, CGH, and O. ENGKEE, defendants-appellees.
FACTS
Appeal from the decision dated 6 October 1962 of the Court of First Instance of Manila — dismissing the action
in its Civil Case No. 48925 — brought by the herein plaintiff-appellant Philippine First Insurance Co., Inc. to the
Court of Appeals which could, upon finding that the said appeal raises purely questions of law, declared itself
without jurisdiction to entertain the same and, in its resolution dated 15 July 1966, certified the records thereof
to this Court for proper determination.
FACTS:
-PLAINTIFF was originally organized as an insurance corporation under the name of 'The Yek Tong Lin Fire
and Marine Insurance Co., Ltd.' The articles of incorporation originally presented before the Security and
Exchange Commissioner and acknowledged before Notary Public Mr. E. D. Ignacio on June 1, 1953 state that
the name of the corporation was 'The Yek Tong Lin Fire and Marine Insurance Co., Ltd.'
-On May 26, 1961 the articles of incorporation were amended pursuant to a certificate of the Board of
Directors dated March 8, 1961 changing the name of the corporation to 'Philippine First Insurance Co.,
Inc.'.
-The complaint alleges that the plaintiff Philippine First Insurance Co., Inc., doing business under the name of
'The Yek Tong Lin Fire and Marine Insurance Co., Lt.'
signed as co-maker together with defendant Maria Carmen Hartigan, CGH, a promissory note for P5,000.00 in
favor of the China Banking Corporation payable within 30 days after the date of the promissory note with the
usual banking interest;
that the plaintiff agreed to act as such co-maker of the promissory note upon the application of the defendant
Maria Carmen Hartigan, CGH, who together with Antonio F. Chua and Chang Ka Fu, signed an indemnity
agreement in favor of the plaintiff, undertaking jointly and severally, to pay the plaintiff damages, losses or
expenses of whatever kind or nature, including attorney's fees and legal costs, which the plaintiff may sustain
as a result of the execution by the plaintiff and co-maker of Maria Carmen Hartigan, CGH, of the promissory
note above-referred to; that as a result of the execution of the promissory note by the plaintiff and Maria
Carmen Hartigan, CGH, the China Banking Corporation delivered to the defendant Maria Carmen Hartigan,
CGH, the sum of P5,000.00 which said defendant failed to pay in full, such that on August 31, 1961 the same
was. renewed and as of November 27, 1961 there was due on account of the promissory note the sum of
P4,559.50 including interest. The complaint ends with a prayer for judgment against the defendants, jointly and
severally, for the sum of P4,559.50 with interest at the rate of 12% per annum from November 23, 1961 plus
P911.90 by way of attorney's fees and costs.
Although O. Engkee was made as party defendant in the caption of the complaint, his name is
not mentioned in the body of said complaint. However, his name Appears in the Annex A
attached to the complaint which is the counter indemnity agreement supposed to have been
signed according to the complaint by Maria Carmen Hartigan, CGH, Antonio F. Chua and
Chang Ka Fu.
In their answer the defendants deny the allegation that the plaintiff formerly conducted business
under the name and style of 'The Yek Tong Lin Fire and Marine Insurance Co., Ltd.' They admit
the execution of the indemnity agreement but they claim that they signed said agreement in
favor of the Yek Tong Lin Fire and Marine Insurance Co., Ltd.' and not in favor of the plaintiff.
They likewise admit that they failed to pay the promissory note when it fell due but they allege
that since their obligation with the China Banking Corporation based on the promissory note still
subsists, the surety who co-signed the promissory note is not entitled to collect the value thereof
from the defendants otherwise they will be liable for double amount of their obligation, there
being no allegation that the surety has paid the obligation to the creditor.
By way of special defense, defendants claim that there is no privity of contract between the
plaintiff and the defendants and consequently, the plaintiff has no cause of action against them,
considering that the complaint does not allege that the plaintiff and the 'Yek Tong Lin Fire and
Marine Insurance Co., Ltd.' are one and the same or that the plaintiff has acquired the rights of

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the latter. The parties after the admission of Exhibit A which is the amended articles of
incorporation and Exhibit 1 which is a demand letter dated August 16, 1962 signed by the
manager of the loans and discount department of the China Banking Corporation showing that
the promissory note up to said date in the sum of P4,500.00 was still unpaid, submitted the case
for decision based on the pleadings.
Under date of 6 October 1962, the Court of First Instance of Manila rendered the decision appealed. It
dismissed the action with costs against the plaintiff Philippine First Insurance Co., Inc., reasoning as follows:
... With these undisputed facts in mind, the parties correctly concluded that the issues for
resolution by this Court are as follows:
(a) Whether or not the plaintiff is the real party in interest that may validly sue on the indemnity
agreement signed by the defendants and the Yek Tong Lin Fire & Marine Insurance Co., Ltd.
(Annex A to plaintiff's complaint ); and
(b) Whether or not a suit for indemnity or reimbursement may under said indemnity agreement
prosper without plaintiff having yet paid the amount due under said promissory note.
In the first place, the change of name of the Yek Tong Lin Fire & Marine Insurance Co., Ltd. to
the Philippines First Insurance Co., Inc. is of dubious validity. Such change of name in effect
dissolved the original corporation by a process of dissolution not authorized by our corporation
law (see Secs. 62 and 67, inclusive, of our Corporation Law). Moreover, said change of name,
amounting to a dissolution of the Yek Tong Lin Fire & Marine Insurance Co., Ltd., does not
appear to have been effected with the written note or assent of stockholders representing at
least two-thirds of the subscribed capital stock of the corporation, a voting proportion required
not only for the dissolution of a corporation but also for any amendment of its articles of
incorporation (Secs. 18 and 62, Corporation Law). Furthermore, such change of corporate name
appears to be against public policy and may be effected only by express authority of law (Red
Line Transportation Co. v. Rural Transit Co., Ltd., 60 Phil. 549, 555; Cincinnati Cooperage Co.,
Ltd. vs. Vate, 26 SW 538, 539; Pilsen Brewing Co. vs. Wallace, 125 NE 714), but there is
nothing in our corporation law authorizing the change of corporate name in this jurisdiction.
In the second place, assuming that the change of name of the Yek Tong Lin Fire & Marine
Insurance Co. Ltd., to Philippines pine First Insurance Co., Inc., as accomplished on March 8,
1961, is valid, that would mean that the original corporation, the Yek Tong Lin Fire & Marine
Insurance Co., Ltd., became dissolved and of no further existence since March 8, 1961, so that
on May 15, 1961, the date the indemnity agreement, Annex A, was executed, said original
corporation bad no more power to enter into any agreement with the defendants, and the
agreement entered into by it was ineffective for lack of capacity of said dissolved corporation to
enter into said agreement. At any rate, even if we hold that said change of name is valid, the
fact remains that there is no evidence showing that the new entity, the Philippine First Insurance
Co., Inc. has with the consent of the original parties, assumed the obligations or was assigned
the rights of action in the original corporation, the Yek Tong Lin Fire & Marine Insurance Co.,
Ltd. In other words, there is no evidence of conventional subrogation of the Plaintiffs in the
rights of the Yek Tong Lin Fire & Marine Insurance Co., Ltd. under said indemnity agreement
(Arts. 1300, 1301, New Civil Code). without such subrogation assignment of rights, the herein
plaintiff has no cause of action against the defendants, and is, therefore, not the right party in
interest as plaintiff.
Last, but not least, assuming that the said change of name was legal and operated to dissolve
the original corporation, the dissolved corporation, must pursuant to Sec. 77 of our corporation
law, be deemed as continuing as a body corporate for three (3) years from March 8, 1961 for
the purpose of prosecuting and defending suits. It is, therefore, the Yek Tong Lin Fire & Marine
Insurance Co., Ltd. that is the proper party to sue the defendants under said indemnity
agreement up to March 8, 1964.
Having arrived at the foregoing conclusions, this Court need not squarely pass upon issue (b)
formulated above.
WHEREFORE, plaintiff's action is hereby dismissed, with costs against the plaintiff.

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In due time, the Philippine First Insurance Company, Inc. moved for reconsideration of the decision aforesaid,
but said motion was denied on December 3, 1962 in an order worded thus:
The motion for reconsideration, dated November 8, 1962, raises no new issue that we failed to
consider in rendering our decision of October 6, 1962. However, it gives us an opportunity to
amplify our decision as regards the question of change of name of a corporation in this
jurisdiction.
We find nothing in our Corporation Law authorizing a change of name of a corporation
organized pursuant to its provisions. Sec. 18 of the Corporation Law authorizes, in our opinion,
amendment to the Articles of Incorporation of a corporation only as to matters other than its
corporate name. Once a corporation is organized in this jurisdiction by the execution and
registration of its Articles of Incorporation, it shall continue to exist under its corporate name for
the lifetime of its corporate existence fixed in its Articles of Incorporation, unless sooner legally
dissolved (Sec. 11, Corp. Law). Significantly, change of name is not one of the methods of
dissolution of corporations expressly authorized by our Corporation Law. Also significant is the
fact that the power to change its corporate name is not one of the general powers conferred on
corporations in this jurisdiction (Sec. 13, Corp. Law). The enumeration of corporate powers
made in our Corporation Law implies the exclusion of all others (Thomas v. West Jersey R. Co.,
101 U.S. 71, 25 L. ed. 950). It is obvious, in this connection, that change of name is not one of
the powers necessary to the exercise of the powers conferred on corporations by said Sec. 13
(see Sec. 14, Corp. Law).
To rule that Sec. 18 of our Corporation Law authorizes the change of name of a corporation by
amendment of its Articles of Incorporation is to indulge in judicial legislation. We have examined
the cases cited in Volume 13 of American Jurisprudence in support of the proposition that the
general power to alter or amend the charter of a corporation necessarily includes the power to
alter the name of a corporation, and find no justification for said conclusion arrived at by the
editors of American Jurisprudence. On the contrary, the annotations in favor of plaintiff's view
appear to have been based on decisions in cases where the statute itself expressly authorizes
change of corporate name by amendment of its Articles of Incorporation. The correct rule in
harmony with the provisions of our Corporation Law is well expressed in an English case as
follows:
After a company has been completely register without defect or omission, so as
to be incorporated by the name set forth in the deed of settlement, such
incorporated company has not the power to change its name ... Although the
King by his prerogative might incorporate by a new name, and the newly named
corporation might retain former rights, and sometimes its former name also, ... it
never appears to be such an act as the corporation could do by itself, but
required the same power as created the corporation. (Reg. v. Registrar of Joint
Stock Cos 10 Q.B. 839, 59 E.C.L. 839).
The contrary view appears to represent the minority doctrine, judging from the annotations on
decided cases on the matter.
The movant invokes as persuasive precedent the action of the Securities Commissioner in
tacitly approving the Amended, Articles of Incorporation on May 26, 1961. We regret that we
cannot in good conscience lend approval to this action of the Securities and Exchange
Commissioner. We find no justification, legal, moral, or practical, for adhering to the view taken
by the Securities and Exchange Commissioner that the name of a corporation in the Philippines
may be changed by mere amendment of its Articles of Incorporation as to its corporate name. A
change of corporate name would serve no useful purpose, but on the contrary would most
probably cause confusion. Only a dubious purpose could inspire a change of a corporate. name
which, unlike a natural person's name, was chosen by the incorporators themselves; and our
Courts should not lend their assistance to the accomplishment of dubious purposes.
WHEREFORE, we hereby deny plaintiff's motion for reconsideration, dated November 8, 1962,
for lack of merit.

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In this appeal appellant contends that —

I
THE TRIAL COURT ERRED IN HOLDING THAT IN THIS JURISDICTION, THERE IS
NOTHING IN OUR CORPORATION LAW AUTHORIZING THE CHANGE OF CORPORATE
NAME;
II
THE TRIAL COURT ERRED IN DECLARING THAT A CHANGE OF CORPORATE NAME
APPEARS TO BE AGAINST PUBLIC POLICY;
III
THE TRIAL COURT ERRED IN HOLDING THAT A CHANGE OF CORPORATE NAME HAS
THE LEGAL EFFECT OF DISSOLVING THE ORIGINAL CORPORATION:
IV
THE TRIAL COURT ERRED IN HOLDING THAT THE CHANGE OF NAME OF THE YEK
TONG LIN FIRE & MARINE INSURANCE CO., LTD. IS OF DUBIOUS VALIDITY;
V
THE TRIAL COURT ERRED IN HOLDING THAT THE APPELLANT HEREIN IS NOT THE
RIGHT PARTY INTEREST TO SUE DEFENDANTS-APPELLEES;
IV
THE TRIAL COURT FINALLY ERRED IN DISMISSING THE COMPLAINT.
Appellant's Position is correct; all the above assignments of error are well taken. The whole case, however,
revolves around only one question. May a Philippine corporation change its name and still retain its original
personality and individuality as such?
The answer is not difficult to find. True, under Section 6 of the Corporation Law, the first thing required to be
stated in the Articles of Incorporation of any corporation is its name, but it is only one among many matters
equally if not more important, that must be stated therein. Thus, it is also required, for example, to state the
number and names of and residences of the incorporators and the residence or location of the principal office
of the corporation, its term of existence, the amount of its capital stock and the number of shares into which it
is divided, etc., etc.
On the other hand, Section 18 explicitly permits the articles of incorporation to be amended thus:
Sec. 18. — Any corporation may for legitimate corporate purpose or purposes, amend its
articles of incorporation by a majority vote of its board of directors or trustees and the vote or
written assent of two-thirds of its members, if it be a nonstock corporation or, if it be a stock
corporation, by the vote or written assent of the stockholders representing at least two-thirds of
the subscribed capital stock of the corporation Provided, however, That if such amendment to
the articles of incorporation should consist in extending the corporate existence or in any
change in the rights of holders of shares of any class, or would authorize shares with
preferences in any respect superior to those of outstanding shares of any class, or would restrict
the rights of any stockholder, then any stockholder who did not vote for such corporate action
may, within forty days after the date upon which such action was authorized, object thereto in
writing and demand Payment for his shares. If, after such a demand by a stockholder, the
corporation and the stockholder cannot agree upon the value of his share or shares at the time
such corporate action was authorized, such values all be ascertained by three disinterested
persons, one of whom shall be named by the stockholder, another by the corporation, and the
third by the two thus chosen. The findings of the appraisers shall be final, and if their award is
not paid by the corporation within thirty days after it is made, it may be recovered in an action by
the stockholder against the corporation. Upon payment by the corporation to the stockholder of
the agreed or awarded price of his share or shares, the stockholder shall forthwith transfer and
assign the share or shares held by him as directed by the corporation: Provided, however, That
their own shares of stock purchased or otherwise acquired by banks, trust companies, and
insurance companies, should be disposed of within six months after acquiring title thereto.
Unless and until such amendment to the articles of incorporation shall have been abandoned or
the action rescinded, the stockholder making such demand in writing shall cease to be a

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stockholder and shall have no rights with respect to such shares, except the right to receive
payment therefor as aforesaid.
A stockholder shall not be entitled to payment for his shares under the provisions of this section
unless the value of the corporate assets which would remain after such payment would be at
least equal to the aggregate amount of its debts and liabilities and the aggregate par value
and/or issued value of the remaining subscribed capital stock.
A copy of the articles of incorporation as amended, duly certified to be correct by the president
and the secretary of the corporation and a majority of the board of directors or trustees, shall be
filed with the Securities and Exchange Commissioner, who shall attach the same to the original
articles of incorporation, on file in his office. From the time of filing such copy of the amended
articles of incorporation, the corporation shall have the same powers and it and the members
and stockholders thereof shall thereafter be subject to the same liabilities as if such amendment
had been embraced in the original articles of incorporation: Provided, however, That should the
amendment consist in extending the corporate life, the extension shall not exceed 50 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: And
provided, further, That nothing in this section shall be construed to authorize any corporation to
increase or diminish its capital stock or so as to effect any rights or actions which accrued to
others between the time of filing the original articles of incorporation and the filing of the
amended articles.
The Securities and, Exchange Commissioner shall be entitled to collect and receive the sum of ten pesos for
filing said copy of the amended articles of incorporation. Provided, however, That when the amendment
consists in extending the term of corporate existence, the Securities and Exchange Commissioner shall be
entitled to collect and receive for the filing of its amended articles of incorporation the same fees collectible
under existing law for the filing of articles of incorporation. The Securities & Exchange Commissioner shall not
hereafter file any amendment to the articles of incorporation of any bank, banking institution, or building and
loan association unless accompanied by a certificate of the Monetary Board (of the Central Bank) to the effect
that such amendment is in accordance with law. (As further amended by Act No. 3610, Sec. 2 and Sec. 9. R.A.
No. 337 and R.A. No. 3531.)
It can be gleaned at once that this section does not only authorize corporations to amend their charter; it also
lays down the procedure for such amendment; and, what is more relevant to the present discussion, it contains
provisos restricting the power to amend when it comes to the term of their existence and the increase or
decrease of the capital stock. There is no prohibition therein against the change of name. The inference is
clear that such a change is allowed, for if the legislature had intended to enjoin corporations from changing
names, it would have expressly stated so in this section or in any other provision of the law.
No doubt, "(the) name (of a corporation) is peculiarly important as necessary to the very existence of a
corporation. The general rule as to corporations is that each corporation shall 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."1 Since an individual has the right to change
his name under certain conditions, there is no compelling reason why a corporation may not enjoy the same
right. There is nothing sacrosanct in a name when it comes to artificial beings. The sentimental considerations
which individuals attach to their names are not present in corporations and partnerships. Of course, as in the
case of an individual, such change may not be made exclusively. by the corporation's own act. It has to follow
the procedure prescribed by law for the purpose; and this is what is important and indispensably prescribed —
strict adherence to such procedure.
Local well known corporation law commentators are unanimous in the view that a corporation may change its
name by merely amending its charter in the manner prescribed by law.2 American authorities which have
persuasive force here in this regard because our corporation law is of American origin, the same being a sort
of codification of American corporate law,3 are of the same opinion.
A general power to alter or amend the charter of a corporation necessarily includes the power to
alter the name of the corporation. Ft. Pitt Bldg., etc., Assoc. v. Model Plan Bldg., etc.,

12
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Assoc., 159 Pa. St. 308, 28 Atl. 215; In re Fidelity Mut. Aid Assoc., 12 W.N.C. (Pa.) 271;
Excelsior Oil Co., 3 Pa. Co. Ct. 184; Wetherill Steel Casting Co., 5 Pa. Co. Ct. 337.
xxx xxx xxx
Under the General Laws of Rhode Island, c 176, sec. 7, relating to an increase of the capital
stock of a corporation, it is provided that 'such agreement may be amended in any other
particular, excepting as provided in the following section', which relates to a decrease of the
capital stock This section has been held to authorize a change in the name of a
corporation. Armington v. Palmer, 21 R.I. 109, 42 Atl. 308, 43, L.R.A. 95, 79 Am. St. Rep. 786.
(Vol. 19, American and English Annotated Cases, p. 1239.)
Fletcher, a standard authority on American an corporation law also says:
Statutes are to be found in the various jurisdictions dealing with the matter of change in
corporate names. Such statutes have been subjected to judicial construction and have, in the
main, been upheld as constitutional. In direct terms or by necessary implication, they authorize
corporations new names and prescribe the mode of procedure for that purpose. The same steps
must be taken under some statutes to effect a change in a corporate name, as when any other
amendment of the corporate charter is sought .... When the general law thus deals with the
subject, a corporation can change its name only in the manner provided. (6 Fletcher, Cyclopedia
of the Law of Private Corporations, 1968 Revised Volume, pp. 212-213.) (Emphasis supplied)
The learned trial judge held that the above-quoted proposition are not supported by the weight of authority
because they are based on decisions in cases where the statutes expressly authorize change of corporate
name by amendment of the articles of incorporation. We have carefully examined these authorities and We are
satisfied of their relevance. Even Lord Denman who has been quoted by His Honor from In Reg. v. Registrar of
Joint Stock Cos. 10, Q.B., 59 E.C.L. maintains merely that the change of its name never appears to be such an
act as the corporation could do for itself, but required ;the same Power as created a corporation." What seems
to have been overlooked, therefore, is that the procedure prescribes by Section 18 of our Corporation Law for
the amendment of corporate charters is practically identical with that for the incorporation itself of a
corporation.
In the appealed order of dismissal, the trial court, made the observation that, according to this Court in Red
Line Transportation Co. v. Rural Transit Co., Ltd., 60 Phil, 549, 555, change of name of a corporation is against
public policy. We must clarify that such is not the import of Our said decision. What this Court held in that case
is simply that:
We know of no law that empowers the Public Service Commission or any court in this
jurisdiction to authorize one corporation to assume the name of another corporation as a trade
name. Both the Rural Transit Company, Ltd., and the Bachrach Motor Co., Inc., are Philippine
corporations and the very law of their creation and continued existence requires each to adopt
and certify a distinctive name. The incorporators 'constitute a body politic and corporate under
the name stated in the certificate.' (Section 11, Act No. 1459, as amended.) A corporation has
the power 'of succession by its corporate name.'(Section 13, ibid.) The name of a corporation is
therefore essential to its existence. It cannot change its name except in the manner provided by
the statute. By that name alone is it authorized to transact business. The law gives a corporation
no express or implied authority to assume another name that is unappropriated; still less that of
another corporation, which is expressly set apart for it and protected by the law. If any
corporation could assume at pleasure as an unregistered trade name the name of another
corporation, this practice would result in confusion and open the door to frauds and evasions
and difficulties of administration and supervision. The policy of the law as expressed our
corporation statute and the Code of Commerce is clearly against such a practice. (Cf. Scarsdale
Pub. Co. — Colonial Press vs. Carter, 116 New York Supplement, 731; Svenska Nat. F. i. C. vs.
Swedish Nat. Assn., 205 Illinois [Appellate Courts], 428, 434.)
In other words, what We have held to be contrary to public policy is the use by one corporation of the name of
another corporation as its trade name. We are certain no one will disagree that such an act can only "result in
confusion and open the door to frauds and evasions and difficulties of administration and supervision." Surely,
the Red Line case was not one of change of name.

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Neither can We share the posture of His Honor that the change of name of a corporation results in its
dissolution. There is unanimity of authorities to the contrary.
An authorized change in the name of a corporation has no more effect upon its identity as a corporation than a
change of name of a natural person has upon his identity. It does not affect the rights of the corporation or
lessen or add to its obligations. After a corporation has effected a change in its name it should sue and be
sued in its new name .... (13 Am. Jur. 276-277, citing cases.)
A mere change in the name of a corporation, either by the legislature or by the corporators or stockholders
under legislative authority, does not, generally speaking, affect the identity of the corporation, nor in any way
affect the rights, privileges, or obligations previously acquired or incurred by it. Indeed, it has been said that a
change of name by a corporation has no more effect upon the identity of the corporation than a change of
name by a natural person has upon the identity of such person. The corporation, upon such change in its
name, is in no sense a new corporation, nor the successor of the original one, but remains and continues to be
the original corporation. It is the same corporation with a different name, and its character is in no respect
changed. ... (6 Fletcher, Cyclopedia of the Law of Private Corporations, 224-225, citing cases.)
The change in the name of a corporation has no more effect upon its identity as a corporation than a change of
name of a natural person has upon his identity. It does not affect the rights of the corporation, or lessen or add
to its obligations.
The fact that the corporation by its old name makes a format transfer of its property to the corporation by its
new name does not of itself show that the change in name has affected a change in the identity of the
corporation. Palfrey v. Association for Relief, etc., 110 La. 452, 34 So. 600. The fact that a corporation
organized as a state bank afterwards becomes a national bank by complying with the provisions of the
National Banking Act, and changes its name accordingly, has no effect on its right to sue upon obligations or
liabilities incurred to it by its former name. Michigan Ins. Bank v. Eldred 143 U.S. 293, 12 S. Ct. 450, 36 U.S.
(L. ed.) 162.
A deed of land to a church by a particular name has been held not to be affected by the fact that the church
afterwards took a different name. Cahill v. Bigger, 8 B. Mon (ky) 211.
A change in the name of a corporation is not a divestiture of title or such a change as requires a regular
transfer of title to property, whether real or personal, from the corporation under one name to the same
corporation under another name. McCloskey v. Doherty, 97 Ky. 300, 30 S. W. 649. (19 American and English
Annotated Cases 1242-1243.)
As was very aptly said in Pacific Bank v. De Ro 37 Cal. 538, "The changing of the name of a corporation is no
more the creation of a corporation than the changing of the name of a natural person is the begetting of a
natural person. The act, in both cases, would seem to be what the language which we use to designate it
imports — a change of name, and not a change of being.
Having arrived at the above conclusion, We have agree with appellant's pose that the lower court also erred in
holding that it is not the right party in interest to sue defendants-appellees.4 As correctly pointed out by
appellant, the approval by the stockholders of the amendment of its articles of incorporation changing the
name "The Yek Tong Lin Fire & Marine Insurance Co., Ltd." to "Philippine First Insurance Co., Inc." on March
8, 1961, did not automatically change the name of said corporation on that date. To be effective, Section 18 of
the Corporation Law, earlier quoted, requires that "a copy of the articles of incorporation as amended, duly
certified to be correct by the president and the secretary of the corporation and a majority of the board of
directors or trustees, shall be filed with the Securities & Exchange Commissioner", and it is only from the time
of such filing, that "the corporation shall have the same powers and it and the members and stockholders
thereof shall thereafter be subject to the same liabilities as if such amendment had been embraced in the
original articles of incorporation." It goes without saying then that appellant rightly acted in its old name when
on May 15, 1961, it entered into the indemnity agreement, Annex A, with the defendant-appellees; for only
after the filing of the amended articles of incorporation with the Securities & Exchange Commission on May 26,
1961, did appellant legally acquire its new name; and it was perfectly right for it to file the present case In that
new name on December 6, 1961. Such is, but the logical effect of the change of name of the corporation upon
its actions.
Actions brought by a corporation after it has changed its name should be brought under the new name
although for the enforcement of rights existing at the time the change was made. Lomb v. Pioneer Sav., etc.,

14
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Co., 106 Ala. 591, 17 So. 670: Newlan v. Lombard University, 62 III. 195; Thomas v. Visitor of Frederick
County School, 7 Gill & J (Md.) 388; Delaware, etc., R. Co. v. Trick, 23 N. J. L. 321; Northumberland Country
Bank v. Eyer, 60 Pa. St. 436; Wilson v. Chesapeake etc., R. Co., 21 Gratt (Va.) 654.
The change in the name of the corporation does not affect its right to bring an action on a note given to the
corporation under its former name. Cumberland College v. Ish, 22. Cal. 641; Northwestern College v.
Schwagler, 37 Ia. 577. (19 American and English Annotated Cases 1243.)
In consequence, We hold that the lower court erred in dismissing appellant's complaint. We take this
opportunity, however, to express the Court's feeling that it is apparent that appellee's position is more technical
than otherwise. Nowhere in the record is it seriously pretended that the indebtedness sued upon has already
been paid. If appellees entertained any fear that they might again be made liable to Yek Tong Lin Fire &
Marine Insurance Co. Ltd., or to someone else in its behalf, a cursory examination of the records of the
Securities & Exchange Commission would have sufficed to clear up the fact that Yek Tong Lin had just
changed its name but it had not ceased to be their creditor. Everyone should realize that when the time of the
courts is utilized for cases which do not involve substantial questions and the claim of one of the parties,
therein is based on pure technicality that can at most delay only the ultimate outcome necessarily adverse to
such party because it has no real cause on the merits, grave injustice is committed to numberless litigants
whose meritorious cases cannot be given all the needed time by the courts. We address this appeal once more
to all members of the bar, in particular, since it is their bounden duty to the profession and to our country and
people at large to help ease as fast as possible the clogged dockets of the courts. Let us not wait until the
people resort to other means to secure speedy, just and inexpensive determination of their cases.
WHEREFORE, judgment of the lower court is reversed, and this case is remanded to the trial court for further
proceedings consistent herewith With costs against appellees.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Villamor, JJ.,
concur.

Phil. First Insurance v. Maria Carmen Hartigan, CGH, et al. GR No. 26370 July 31, 1970 

The Timeline 1953 The Yek Tong Lin Fire and Marine Insurance Co was incorporated.

May 26, 1961 BoD issued a Certificate changing its name to PFIC

Indemnity agreement between Yek Tong Lin and defendants was executed

Tried to collect from the defendants on the indemnity agreement November 1961

May 15, 1961 Amended its AI, changed its name to Philippine First Insurance Co March 8, 1961 

Defendants argue that they are not liable to PFIC because of the following:

 They signed the indemnity agreement in favor of Yek Tong Lin, not PFIC.
 There is no privity of contract between the PFIC and defendants and hence, PFIC has no cause of action against
them.
 They cannot be liable on the indemnity agreement as the PN still subsists.

What’s in a name? 

Change of name dissolved the original corporation by process of dissolution not authorized under the Corporation Law.
While the Corporation Law authorizes the amendment of the AI, it does not include the corporate name as one of those
which may be amended. Once a corporation is organized, it shall continue to exist under its corporate name for the
lifetime of its corporate existence fixed in its AI, unless sooner dissolved. The power to change its corporate name is not
one of the general powers conferred on corporations. CFI of Manila  Change of name is dubious Even if valid, the

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original corporation had no more power to enter into any agreement when it signed the indemnity agreement. There is no
evidence showing that PFIC was subrogated to the rights of the original corporation. Change of name is against public
policy and may be effected only by express authority of law.  Although the King by his prerogative might incorporate by a
new name, and the newly named corporation might retain former rights, and sometimes its former name also x x x it never
appears to be such an act as the corporation could do by itself, but required the same power as created the corporation.
(Reg v. Registrar of Joint Stockss Cos 10 Q.B. 839)  A change of corporate name would serve no useful purpose, but on
the contrary would most probably cause confusion. Only a dubious purpose could inspire a change of corporate name
which, unlike a natural person’s name, was chosen by the incorporators themselves; and our courts should not lend their
assistance to the accomplishment of dubious purposes.  May a Philippine corporation change its name and still retain its
original personality and individuality as such?

Issue  The Supreme Court

A rose by any other name would smell as sweet.  The answer is not difficult to find. While the first thing the Corporation
Law requires to be stated is the corporate name, it is only but one among many matters equally if not more important to
be stated therein. SC  The Corporation law explicitly permits the Articles of Incorporation to be amended. There is no
prohibition against the change of name. If legislature had intended to enjoin corporations from changing names, it would
have expressly stated so.  Indeed, the name of a corporation is peculiarly important as necessary to the very existence
of a corporation. It is the name by which it is to sue and be sued and do all legal acts. The name of a corporation
designates the corporation in the same manner that the name of an individual designates the person. Since an individual
has the right to change his name under certain conditions, there is no compelling reason why a corporation may not enjoy
the same right.  What was held contrary to public policy was the use by one corporation of the name of another
corporation as its trade name. Change of name is not against public policy  An authorized change in the name of a
corporation has no more effect upon its identity as a corporation than a change of name of a natural person has upon his
identity. It does not affect the rights of the corporation or lessen or add to its obligations. The corporation, upon such a
change in its name, is in no sense a new corporation, nor the successor of the original one, but remains and continues to
be the original corporation. Change of name does not result in its dissolution  The mere certification of the BoD changing
the name of the corporation on March 8, 1961 did not automatically change the name of the corporation. It had to follow
the procedure required under the law. PFIC rightly acted in its old name when, on May 15, 1961, it entered into the
indemnity agreement. PFIC validly entered into the agreement 

G.R. No. 93073 December 21, 1992

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

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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 (formerly 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 severally 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.

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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:
2
The promissory notes are negotiable instruments and must be governed by the Negotiable Instruments Law.
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 holder 4 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 co-makers 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
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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 possession
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 Negotiable 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 judgments 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 light 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. Judgment
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.
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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.
Narvasa, C.J., (Chairman), Feliciano, Regalado and Nocon, JJ., concur.
G.R. No. 93073 December 21, 1992
REPUBLIC PLANTERS BANK, petitioner,
vs.
COURT OF APPEALS and FERMIN CANLAS, respondents.
Digest
In 1979, World Garment Manufacturing, through its board authorized Shozo Yamaguchi (president) and Fermin Canlas
(treasurer) to obtain credit facilities from Republic Planters Bank (RPB). For this, 9 promissory notes were executed. Each
promissory note was uniformly written in the following manner:

___________, after date, for value received, I/we, jointly and severally promise to pay to the ORDER of the REPUBLIC
PLANTERS BANK, at its office in Manila, Philippines, the sum of ___________ PESOS(….) Philippine Currency…
Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.
Sgd. Shozo Yamaguchi
Sgd. Fermin Canlas

The note became due and no payment was made. RPB eventually sued Yamaguchi and Canlas. Canlas, in his defense,
averred that he should not be held personally liable for such authorized corporate acts that he performed inasmuch as he
signed the promissory notes in his capacity as officer of the defunct Worldwide Garment Manufacturing.
ISSUE: Whether or not Canlas should be held liable for the promissory notes.
HELD: Yes. 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. 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.
Canlas is solidarily liable on each of the promissory notes bearing his signature for the following reasons:
The promissory notes are negotiable instruments and must be governed by the Negotiable Instruments Law.
Under the Negotiable lnstruments Law, persons who write their names on the face of promissory notes are makers and are
liable as such. By signing the notes, the maker promises to pay to the order of the payee or any holder according to the
tenor thereof.

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Gala vs. Ellice Agro-Industrial Corp. (418 SCRA 431 [2003])

Corp Law Topic: Purpose Clauses

On March 28, 1979, the spouses Manuel and Alicia Gala, their children Guia Domingo, Ofelia Gala, Raul Gala, and Rita
Benson, and their encargados Virgilio Galeon and Julian Jader formed and organized the Ellice Agro-Industrial
Corporation.

As payment for their subscriptions, the Gala spouses transferred several parcels of land located in the provinces of
Quezon and Laguna to Ellice.

Issue:

Petitioners want this Court to disregard the separate juridical personalities of Ellice and Margo for the purpose of treating
all property purportedly owned by said corporations as property solely owned by the Gala spouses.

Whether or not the purposes for which Ellice and Margo were organized should be declared as illegal and
contrary to public policy?

They claim that the respondents never pursued exemption from land reform coverage in good faith and instead merely
used the corporations as tools to circumvent land reform laws and to avoid estate taxes.

Specifically, they point out that respondents have not shown that the transfers of the land in favor of Ellice were executed
in compliance with the requirements of Section 13 of R.A. 3844.

Held:

The Court holds that petitioners’ contentions impugning the legality of the purposes for which Ellice and Margo were
organized, amount to collateral attacks which are prohibited in this jurisdiction.

The best proof of the purpose of a corporation is its articles of incorporation and by-laws. The articles of incorporation
must state the primary and secondary purposes of the corporation, while the by-laws outline the administrative
organization of the corporation, which, in turn, is supposed to insure or facilitate the accomplishment of said purpose.

In the case at bar, a perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the allegedly illegal
purposes that petitioners are complaining of.

If a corporation’s purpose, as stated in the Articles of Incorporation, is lawful, then the SEC has no authority to
inquire whether the corporation has purposes other than those stated, and mandamus will lie to compel it to
issue the certificate of incorporation.

Assuming there was even a grain of truth to the petitioners’ claims regarding the legality of what are alleged to be the
corporations’ true purposes, we are still precluded from granting them relief. We cannot address here their concerns
regarding circumvention of land reform laws, for the doctrine of primary jurisdiction precludes a court from arrogating unto
itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of
special competence.
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With regard to their claim that Ellice and Margo were meant to be used as mere tools for the avoidance of estate taxes,
suffice it say that the legal right of a taxpayer to reduce the amount of what otherwise could be his taxes or altogether
avoid them, by means which the law permits, cannot be doubted.

Thus, even if Ellice and Margo were organized for the purpose of exempting the properties of the Gala spouses from the
coverage of land reform legislation and avoiding estate taxes, we cannot disregard their separate juridical personalities.

Alhambra Cigar & Cigarette Manufacturing Company, Inc. vs Securities and Exchange Commission
24 SCRA 269 – Business Organization – Corporation Law – Corporate Lifespan
On January 15, 1912, Alhambra Cigar & Cigarette Manufacturing Company, Inc. was incorporated. Its lifespan was for 50
years so on January 15, 1962, it expired. Thereafter, its Board authorized its liquidation. Under the prevailing law, Alhambra
has 3 years to liquidate.
In 1963, while Alhambra was liquidating, Republic Act 3531 was enacted. 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.
Alhambra now amended its articles of incorporation to extend its lifespan for another 50 years. The Securities and Exchange
Commission (SEC) denied the amended articles of incorporation.
ISSUE: Whether or not a corporation under liquidation may still amend its articles of incorporation to extend its lifespan.
HELD: No. Alhambra cannot avail of the new law because it has already expired at the time of its passage. When a
corporation is liquidating pursuant to the statutory period of three years to liquidate, it is only allowed to continue for the
purpose of final closure of its business and no other purposes. In fact, within that period, the corporation is enjoined from
“continuing the business for which it was established”. Hence, Alhambra’s board cannot validly amend its articles of
incorporation to extend its lifespan.

HYATT ELEVATORS AND ESCALATORS CORPORATION vs. GOLDSTAR ELEVATORS, PHILS., INC.
G.R. No. 161026; October 24, 2005
Ponente: Panganiban, J.,

FACTS:

Petitioner and Respondent are both engaged in the business of importing, installing and maintaining
elevators and escalators. Hyatt filed an unfair competition case against LG and Goldstar alleging that it
was appointed as the sole distributor of LG elevators and escalators.

Goldstar moved to dismiss the case alleging that venue was improperly laid as neither the Hyatt, LG or
Goldstar itself resided in Mandaluyong city where the case was originally filed. The RTC denied the motion.
The CA dismissed the case and held that Makati was the principal place of business of both respondent
and petitioner, as stated in the latter’s Articles of Incorporation, that place was controlling for purposes of
determining the proper venue.

ISSUE:

Whether or not the “residence” of the corporation is the same one as stated in the AOI.
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HELD:

Yes. Although the Rules of Court do not provide that when the plaintiff is a corporation, the complaint
should be filed in the location of its principal office as indicated in its articles of incorporation,
jurisprudence has, however, settled that the place where the principal office of a corporation is located, as
stated in the articles, indeed establishes its residence. This ruling is important in determining the venue of
an action by or against a corporation, as in the present case.

G.R. No. L-22238 February 18, 1967

CLAVECILLIA RADIO SYSTEM, petitioner-appellant,

vs.
HON. AGUSTIN ANTILLON, as City Judge of the Municipal Court of Cagayan de Oro City
and NEW CAGAYAN GROCERY, respondents-appellees.

B. C. Padua for petitioner and appellant.

Pablo S. Reyes for respondents and appellees.

REGALA, J.:

This is an appeal from an order of the Court of First Instance of Misamis Oriental dismissing the petition of the Clavecilla
Radio System to prohibit the City Judge of Cagayan de Oro from taking cognizance of Civil Case No. 1048 for damages.

It appears that on June 22, 1963, the New Cagayan Grocery filed a complaint against the Clavecilla Radio System
alleging, in effect, that on March 12, 1963, the following message, addressed to the former, was filed at the latter's
Bacolod Branch Office for transmittal thru its branch office at Cagayan de Oro:

NECAGRO CAGAYAN DE ORO (CLAVECILLA)

REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE SHALL SHIP LATER REPLY
POHANG

The Cagayan de Oro branch office having received the said message omitted, in delivering the same to the New
Cagayan Grocery, the word "NOT" between the words "WASHED" and "AVAILABLE," thus changing entirely the
contents and purport of the same and causing the said addressee to suffer damages. After service of summons,
the Clavecilla Radio System filed a motion to dismiss the complaint on the grounds that it states no cause of
action and that the venue is improperly laid. The New Cagayan Grocery interposed an opposition to which the
Clavecilla Radio System filed its rejoinder. Thereafter, the City Judge, on September 18, 1963, denied the motion
to dismiss for lack of merit and set the case for hearing.1äwphï1.ñët

Hence, the Clavecilla Radio System filed a petition for prohibition with preliminary injunction with the Court of First
Instance praying that the City Judge, Honorable Agustin Antillon, be enjoined from further proceeding with the case on the
ground of improper venue. The respondents filed a motion to dismiss the petition but this was opposed by the petitioner.
Later, the motion was submitted for resolution on the pleadings.

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In dismissing the case, the lower court held that the Clavecilla Radio System may be sued either in Manila where it has its
principal office or in Cagayan de Oro City where it may be served, as in fact it was served, with summons through the
Manager of its branch office in said city. In other words, the court upheld the authority of the city court to take cognizance
of the case.1äwphï1.ñët

In appealing, the Clavecilla Radio System contends that the suit against it should be filed in Manila where it holds its
principal office.

It is clear that the case for damages filed with the city court is based upon tort and not upon a written contract. Section 1
of Rule 4 of the New Rules of Court, governing venue of actions in inferior courts, provides in its paragraph (b) (3) that
when "the action is not upon a written contract, then in the municipality where the defendant or any of the defendants
resides or may be served with summons." (Emphasis supplied)

Settled is the principle in corporation law that the residence of a corporation is the place where its principal office is
established. Since it is not disputed that the Clavecilla Radio System has its principal office in Manila, it follows that the
suit against it may properly be filed in the City of Manila.

The appellee maintain, however, that with the filing of the action in Cagayan de Oro City, venue was properly laid on the
principle that the appellant may also be served with summons in that city where it maintains a branch office. This Court
has already held in the case of Cohen vs. Benguet Commercial Co., Ltd., 34 Phil. 526; that the term "may be served with
summons" does not apply when the defendant resides in the Philippines for, in such case, he may be sued only in the
municipality of his residence, regardless of the place where he may be found and served with summons. As any other
corporation, the Clavecilla Radio System maintains a residence which is Manila in this case, and a person can have only
one residence at a time (See Alcantara vs. Secretary of the Interior, 61 Phil. 459; Evangelists vs. Santos, 86 Phil. 387).
The fact that it maintains branch offices in some parts of the country does not mean that it can be sued in any of these
places. To allow an action to be instituted in any place where a corporate entity has its branch offices would create
confusion and work untold inconvenience to the corporation.

It is important to remember, as was stated by this Court in Evangelista vs. Santos, et al., supra, that the laying of the
venue of an action is not left to plaintiff's caprice because the matter is regulated by the Rules of Court. Applying the
provision of the Rules of Court, the venue in this case was improperly laid.

The order appealed from is therefore reversed, but without prejudice to the filing of the action in Which the venue shall be
laid properly. With costs against the respondents-appellees.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur.

G.R. No. L-56763 December 15, 1982

JOHN SY and UNIVERSAL PARTS SUPPLY CORPORATION, petitioners,

vs.
TYSON ENTERPRISES, INC., JUDGE GREGORIO G. PINEDA of the Court of First Instance of Rizal, Pasig

AQUINO, J:

This is a case about the venue of a collection suit. On August 29, 1979, Tyson Enterprises, Inc. filed against John Sy and
Universal Parts Supply Corporation in the Court of First Instance of Rizal, Pasig Branch XXI, a complaint for the collection
of P288,534.58 plus interest, attorney's fees and litigation expenses (Civil Case No. 34302).

It is alleged in the complaint that John Sy, doing business under the trade name, Universal Parts Supply, is a resident of
Fuentebella Subdivision, Bacolod City and that his co-defendant, Universal Parts Supply Corporation, allegedly controlled
by Sy, is doing business in Bacolod City.

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Curiously enough, there is no allegation in the complaint as to the office or place of business of plaintiff Tyson Enterprises,
Inc., a firm actually doing business at 1024 Magdalena, now G. Masangkay Street, Binondo, Manila (p. 59, Rollo).

What is alleged is the postal address or residence of Dominador Ti, the president and general manager of plaintiff firm,
which is at 26 Xavier Street, Greenhills Subdivision, San Juan, Rizal. The evident purpose of alleging that address and
not mentioning the place of business of plaintiff firm was to justify the filing of the suit in Pasig, Rizal instead of in Manila.

Defendant Sy and Universal Parts Supply Corporation first filed a motion for extension of time to file their answer and later
a motion for a bill of particulars. The latter motion was denied. Then, they filed a motion to dismiss on the ground of
improper venue.

They invoked the provision of section 2(b), Rule 4 of the Rules of Court that personal actions "may be commenced and
tried where the defendant or any of the defendants resides or may be found, or where the plaintiffs or any of the plaintiffs
resides, at the election of the plaintiff."

To strengthen that ground, they also cited the stipulation in the sales invoice that "the parties expressly submit to the
jurisdiction of the Courts of the City of Manila for any legal action arising out of" the transaction which stipulation is quoted
in paragraph 4 of plaintiff's complaint.

The plaintiff opposed the motion to dismiss on the ground that the defendants had waived the objection based on
improper venue because they had previously filed a motion for a bill of particulars which was not granted. The trial court
denied the motion to dismiss on the ground that by filing a motion for a bill of particulars the defendants waived their
objection to the venue. That denial order was assailed in a petition for certiorari and prohibition in the Court of Appeals
which issued on July 29, 1980 a restraining order, enjoining respondent judge from acting on the case. He disregarded
the restraining order (p. 133, Rollo).

The Appellate Court in its decision of October 6, 1980 dismissed the petition. It ruled that the parties did not intend Manila
as the exclusive venue of the actions arising under their transactions and that since the action was filed in Pasig, which is
near Manila, no useful purpose would be served by dismissing the same and ordering that it be filed in Manila (Sy vs.
Pineda, CA-G.R. No. SP-10775). That decision was appealed to this Court.

There is no question that the venue was improperly laid in this case. The place of business of plaintiff Tyson Enterprises,
Inc., which for purposes of venue is considered as its residence (18 C.J.S 583; Clavecilla Radio system vs. Antillon, L-
22238, February 18, 1967, 19 SCRA 379), because a corporation has a personality separate and distinct from that of its
officers and stockholders.

Consequently, the collection suit should have been filed in Manila, the residence of plaintiff corporation and the place
designated in its sales invoice, or it could have been filed also in Bacolod City, the residence of defendant Sy.

We hold that the trial court and the Court of Appeals erred in ruling that the defendants, now the petitioners, waived their
objection to the improper venue. As the trial court proceeded in defiance of the Rules of Court in not dismissing the case,
prohibition lies to restrain it from acting in the case (Enriquez vs. Macadaeg, 84 Phil. 674).

Section 4, Rule 4 of the Rules of Court provides that, "when improper venue is not objected to in a motion to dismiss it is
deemed waived" and it can no longer be pleaded as an affirmative defense in the answer (Sec. 5, Rule 16).

In this case, the petitioners, before filing their answer, filed a motion to dismiss based on improper venue. That motion
was seasonably filed (Republic vs. Court of First Instance of Manila, L-30839, November 28, 1975, 68 SCRA 231, 239).
The fact that they filed a motion for a bill of particulars before they filed their motion to dismiss did not constitute a waiver
of their objection to the venue.

It should be noted that the provision of Section 377 of the Code of Civil Procedure that "the failure of a defendant to object
to the venue of the action at the time of entering his appearance in the action shall be deemed a waiver on his part of all
objection to the place or tribunal in which the action is brought" is not found in the Rules of Court.

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And the provision of section 4, Rule 5 of the 1940 Rules of Court that "when improper venue is not objected to prior to the
trial, it is deemed waived" is not reproduced in the present Rules of Court.

To repeat, what section 4 of Rule 4 of the present Rules of court provides is that the objection to improper venue should
be raised in a motion to dismiss seasonably filed and, if not so raised, then the said objection is waived. Section 4 does
not provide that the objection based on improper venue should be interposed by means of a special appearance or before
any pleading is filed.

The rules on venue, like the other procedural rules, are designed to insure a just and orderly administration of justice or
the impartial and evenhanded determination of every action and proceeding. Obviously, this objective will not be attained
if the plaintiff is given unrestricted freedom to choose the court where he may file his complaint or petition.

The choice of venue should not be left to the plaintiff's whim or caprice. He may be impelled by some ulterior motivation in
choosing to file a case in a particular court even if not allowed by the rules on venue.

As perspicaciously observed by Justice Moreland, the purpose of procedure is not to restrict the court's jurisdiction over
the subject matter but to give it effective facility "in righteous action", "to facilitate and promote the administration of
justice" or to insure "just judgments" by means of a fair hearing. If that objective is not achieved, then "the administration
of justice becomes incomplete and unsatisfactory and lays itself open to grave criticism." (Manila Railroad Co. vs. Attorney
General, 20 Phil. 523, 530.)

The case of Marquez Lim Cay vs. Del Rosario, 55 Phil. 962, does not sustain the trial court's order of denial because in
that case the defendants, before filing a motion to dismiss on the ground of improper venue, interposed a demurrer on the
ground that the complaint does not state a cause of action. Then, they filed a motion for the dissolution of an attachment,
posted a bond for its dissolution and later filed a motion for the assessment of the damages caused by the attachment. All
those acts constituted a submission to the trial court's jurisdiction and a waiver of the objection based on improper venue
under section 377 of the Code of Civil Procedure.

The instant case is similar to Evangelista vs. Santos, 86 Phil. 387, where the plaintiffs sued the defendant in the Court of
First Instance of Rizal on the assumption that he was a resident of Pasay City because he had a house there. Upon
receipt of the summons, the defendant filed a motion to dismiss based on improper venue. He alleged under oath that he
was a resident of Iloilo City.

This Court sustained the dismissal of the complaint on the ground of improper venue, because the defendant was really a
resident of Iloilo City. His Pasay City residence was used by his children who were studying in Manila. Same holding
in Casilan vs. Tomassi, 90 Phil. 765; Corre vs. Corre, 100 Phil. 321; Calo vs. Bislig Industries, Inc., L-19703, January 30,
1967, 19 SCRA 173; Adamos vs. J. M. Tuason, Co., Inc.,. L-21957, October 14, 1968, 25 SCRA 529.

Where one Cesar Ramirez, a resident of Quezon City, sued in the Court of First Instance of Manila Manuel F. Portillo, a
resident of Caloocan City, for the recovery of a sum of money, the trial court erred in not granting Portillo's motion to
dismiss the complaint on the ground of improper venue This Court issued the writ of prohibition to restrain the trial court
from proceeding in the case (Portillo vs. Judge Reyes and Ramirez, 113 Phil. 288).

WHEREFORE, the decision of the Court of Appeals and the order of respondent judge denying the motion to dismiss are
reversed and set aside. The writ of prohibition is granted. Civil Case No. 34302 should be considered dismissed without
prejudice to refiling - it in the Court of First Instance of Manila or Bacolod City at the election of plaintiff which should be
allowed to withdraw the documentary evidence submitted in that case. All the proceedings in said case, including the
decision, are also set aside. Costs against Tyson Enterprises, Inc.

SOORDERED.

Makasiar (Chairman), Concepcion, Jr., Guerrero and Abad Santos, JJ., concur.

NORBERTO ASUNCION, ET AL. vs. MANUEL DE YRIARTE

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Posted on July 25, 2013 by winnieclaire

Standard
[G.R. No. 9321. September 24, 1914.]

FACTS: The proposed incorporators began an action in the CFI to compel the chief of the division of archives to receive
and register said articles of incorporation and to do any and all acts necessary for the complete incorporation of the
persons named in the articles. The court below found in favor of the defendant and refused to order the registration of the
articles mentioned, maintaining and holding that the defendant, under the Corporation Law, had authority to determine
both the sufficiency of the form of the articles and the legality of the object of the proposed corporation. This appeal is
taken from that judgment
The chief of the division of archives, the respondent, refused to file the articles of incorporation, upon the ground that the
object of the corporation, as stated in the articles, was not lawful and that, in pursuance of section 6 of Act No. 1459, they
were not registerable.
Hence, this action to obtain a writ of mandamus.

ISSUE: Whether or not the chief of the division of archives has authority, under the Corporation Law, on being presented
with articles of incorporation for registration, to decide not only as to the sufficiency of the form of the articles, but also as
to the lawfulness of the purposes of the proposed corporation.

HELD: YES.
CORPORATION LAW; POWERS AND DUTIES OF CHIEF OF DIVISION OF ARCHIVES, EXECUTIVE BUREAU. — The
chief of the division of archives, for and on behalf of the division, has authority under the Corporation Law (Act No. 1459)
to determine the sufficiency of the form of articles of incorporation offered for registration with the division.
Section 6 of the Corporation Law reads in part as follows:
“Five or more persons, not exceeding fifteen, a majority of whom are residents of the Philippine Islands, may form a
private corporation for any lawful purpose by filing with the division of archives, patents, copyrights, and trademarks of the
Executive Bureau articles of incorporation duly executed and acknowledged before a notary public, . . .”
Simply because the duties of an official happen to be ministerial, it does not necessarily follow that he may not,
in the administration of his office, determine questions of law. We are of the opinion that it is the duty of the division
of archives, when articles of incorporation are presented for registration, to determine whether the objects of the
corporation as expressed in the articles are lawful. We do not believe that, simply because articles of incorporation
presented for registration are perfect in form, the division of archives must accept and register them and issue the
corresponding certificate of incorporation no matter what the purpose of the corporation may be as expressed in the
articles. The chief of the division of archives, on behalf of the division, has also the power and duty to determine from the
articles of incorporation presented for registration the lawfulness of the purposes of the proposed corporation and whether
or not those purposes bring the proposed corporation within the purview of the law authorizing corporations for given
purposes.
MANDAMUS TO COMPEL HIM TO PERFORM DUTIES. — The duties of the chief of the division of archives, so far as
relates to the registration of articles of incorporation, are purely ministerial and not discretional; and mandamus will lie to
compel him to perform his duties under the Corporation Law if, in violation of law, he refuse to perform them
On the contrary, there is no incompatibility in holding, as we do hold, that his duties are ministerial and that he has no
authority to exercise discretion in receiving and registering articles of incorporation. He may exercise judgment — that is,
the judicial function — in the determination of the question of law referred to, but he may not use discretion. The question
whether or not the objects of a proposed corporation are lawful is one that can be decided one way only. If he err in the
determination of that question and refuse to file articles which should be filed under the law, that decision is subject to
review and correction and, upon proper showing, he will be ordered to file the articles.
Discretion, it may be said generally, is a faculty conferred upon a court or other official by which he may decide a
question either way and still be right. The power conferred upon the division of archives with respect to the
registration of articles of incorporation is not of that character. It is of the same character as the determination of
a lawsuit by a court upon the merits. It can be decided only one way correctly.

[G.R. No. 148830. April 13, 2005]

NATIONAL HOUSING AUTHORITY, petitioner, vs. COURT OF APPEALS, BULACAN GARDEN CORPORATION and
MANILA SEEDLING BANK FOUNDATION, INC., respondents.
DECISION
CARPIO, J.:

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The Case
This is a petition for review[1] seeking to set aside the Decision[2] dated 30 March 2001 of the Court of Appeals (appellate
court) in CA-G.R. CV No. 48382, as well as its Resolution dated 25 June 2001 denying the motion for reconsideration. The
appellate court reversed the Decision[3] of Branch 87 of the Regional Trial Court of Quezon City (trial court) dated 8 March
1994 in Civil Case No. Q-53464. The trial court dismissed the complaint for injunction filed by Bulacan Garden Corporation
(BGC) against the National Housing Authority (NHA). BGC wanted to enjoin the NHA from demolishing BGCs facilities on
a lot leased from Manila Seedling Bank Foundation, Inc. (MSBF). MSBF allegedly has usufructuary rights over the lot leased
to BGC.
Antecedent Facts

Sometime in 1968, Proclamation No. 481 was issued by then President Marcos, setting aside a 120-hectare portion of
land in Quezon City owned by the NHA[4] as reserved property for the site of the National Government Center (NGC).
Sometime in 1977, he issued Proclamation No. 1670, which removed a seven-hectare portion from the coverage of the
NGC and gave MSBF usufructuary rights over it this segregated portion, as follows:

Pursuant to the powers vested in me by the Constitution and the laws of the Philippines, I, FERDINAND E. MARCOS, President of
the Republic of the Philippines, do hereby exclude from the operation of Proclamation No. 481, dated October 24, 1968, which
established the National Government Center Site, certain parcels of land embraced therein and reserving the same for the Manila
Seedling Bank Foundation, Inc., for use in its operation and projects, subject to private rights if any there be, and to future survey,
under the administration of the Foundation.
This parcel of land, which shall embrace 7 hectares, shall be determined by the future survey based on the technical
descriptions found in Proclamation No. 481, and most particularly on the original survey of the area, dated July 1910 to June 1911,
and on the subdivision survey dated April 19-25, 1968. (Emphasis added)

MSBF occupied the area but over the years it’s occupancy exceeded the seven-hectare area subject to its usufructuary
rights that by 1987, MSBF has occupied approximately 16 hectares already.

Sometime in 1987,MSBF leased a portion of the area it occupied to BGC and other stallholders. (BGC leased the portion
facing EDSA, which occupies 4,590 square meters of the 16-hectare area)

On the later part of 1987, President Corazon Aquino issued Memorandum Order No. 127, revoking the reserved status of
the more or less remaining 50 hectares of the 120 hectares of the NHA property and authorized NHA to to sell it to the
public.

Sometime in 1988, acting on the power granted under MO 127, the NHA gave BGC ten days to vacate its occupied area
and any structure left behind after the expiration of the ten-day period will be demolished by NHA.

BGC then filed a complaint for injunction on April 1988 before the trial court and later amended its complaint to include
MSBF as its co-plaintiff.
The Trial Courts Ruling

(The trial court agreed with BGC and MSBF that Proclamation No. 1670 gave MSBF the right to conduct the survey,
which would establish the seven-hectare area covered by MSBFs usufructuary rights. However, the trial court held that
MSBF failed to act seasonably on this right to conduct the survey. The trial court ruled that the previous surveys conducted
by MSBF covered 16 hectares, and were thus inappropriate to determine the seven-hectare area. The trial court concluded
that to allow MSBF to determine the seven-hectare area now would be grossly unfair to the grantor of the usufruct).
On March 1994, the trial court dismissed BGCs complaint for injunction.
The NHA demolished BGCs facilities soon thereafter.

The Appellate Courts Ruling

Not content with the trial courts ruling, BGC appealed the trial courts Decision to the appellate court. Initially, the
appellate court agreed with the trial court that Proclamation No. 1670 granted MSBF the right to determine the location of
the seven-hectare area covered by its usufructuary rights. However, the appellate court ruled that MSBF did in fact assert
this right by conducting two surveys and erecting its main structures in the area of its choice.
On 30 March 2001, the appellate court reversed the trial courts ruling. Thus:
WHEREFORE, premises considered, the Decision dated March 8, 1994 of the Regional Trial Court of Quezon City, Branch 87, is
hereby REVERSED and SET ASIDE. The National Housing Authority is enjoined from demolishing the structures, facilities and
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improvements of the plaintiff-appellant Bulacan Garden Corporation at its leased premises located in Quezon City which premises
were covered by Proclamation No. 1670, during the existence of the contract of lease it (Bulacan Garden) had entered with the
plaintiff-appellant Manila Seedling Bank Foundation, Inc.
No costs.
SO ORDERED.[6]
The NHA filed a motion for reconsideration, which was denied by the appellate court on 25 June 2001.
Hence, this petition.
The Issues
The following issues are considered by this Court for resolution:
WHETHER THE PETITION IS NOW MOOT BECAUSE OF THE DEMOLITION OF THE STRUCTURES OF BGC;
and
WHETHER THE PREMISES LEASED BY BGC FROM MSBF IS WITHIN THE SEVEN-HECTARE AREA THAT
PROCLAMATION NO. 1670 GRANTED TO MSBF BY WAY OF USUFRUCT.
The Ruling of the Court
We remand this petition to the trial court for a joint survey to determine finally the metes and bounds of the seven-
hectare area subject to MSBFs usufructuary rights.
Whether the Petition is Moot because of the
Demolition of BGCs Facilities
BGC claims that the issue is now moot due to NHAs demolition of BGCs facilities after the trial court dismissed BGCs
complaint for injunction. BGC argues that there is nothing more to enjoin and that there are no longer any rights left for
adjudication.
We disagree.
BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not. The
issue for resolution has a direct effect on MSBFs usufructuary rights. There is yet the central question of the exact location
of the seven-hectare area granted by Proclamation No. 1670 to MSBF. This issue is squarely raised in this petition. There
is a need to settle this issue to forestall future disputes and to put this 20-year litigation to rest.
On the Location of the Seven-Hectare Area Granted by
Proclamation No. 1670 to MSBF as Usufructuary
Rule 45 of the 1997 Rules of Civil Procedure limits the jurisdiction of this Court to the review of errors of law. [7] Absent
any of the established grounds for exception,[8] this Court will not disturb findings of fact of lower courts. Though the matter
raised in this petition is factual, it deserves resolution because the findings of the trial court and the appellate court conflict
on several points.
The entire area bounded by Agham Road to the east, EDSA to the west, Quezon Avenue to the south and by a creek
to the north measures approximately 16 hectares. Proclamation No. 1670 gave MSBF a usufruct over only a seven-hectare
area. The BGCs leased portion is located along EDSA.
A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient
subject to the legal provisions on usufruct.[9] A usufructuary may lease the object held in usufruct. [10] Thus, the NHA may
not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by
MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as the usufruct
exists.[11]However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-hectare area covered
by MSBFs usufructuary rights.
MSBFs survey shows that BGCs stall is within the seven-hectare area. On the other hand, NHAs survey shows
otherwise. The entire controversy revolves on the question of whose land survey should prevail.
MSBFs survey plots the location of the seven-hectare portion by starting its measurement from Quezon Avenue going
northward along EDSA up until the creek, which serves as the northern boundary of the land in question. Mr. Ben Malto
(Malto), surveyor for MSBF, based his survey method on the fact that MSBFs main facilities are located within this area.
On the other hand, NHAs survey determines the seven-hectare portion by starting its measurement from Quezon
Avenue going towards Agham Road. Mr. Rogelio Inobaya (Inobaya), surveyor for NHA, based his survey method on the
fact that he saw MSBFs gate fronting Agham Road.
BGC presented the testimony of Mr. Lucito M. Bertol (Bertol), General Manager of MSBF. Bertol presented a
map,[12]which detailed the area presently occupied by MSBF. The map had a yellow-shaded portion, which was supposed
to indicate the seven-hectare area. It was clear from both the map and Bertols testimony that MSBF knew that it had
occupied an area in excess of the seven-hectare area granted by Proclamation No. 1670.[13] Upon cross-examination, Bertol
admitted that he personally did not know the exact boundaries of the seven-hectare area.[14] Bertol also admitted that MSBF
prepared the map without consulting NHA, the owner of the property.[15]
BGC also presented the testimony of Malto, a registered forester and the Assistant Vice-President of Planning,
Research and Marketing of MSBF. Malto testified that he conducted the land survey, which was used to construct the map
presented by Bertol.[16] Bertol clarified that he authorized two surveys, one in 1984 when he first joined MSBF, and the other
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in 1986.[17] In both instances, Mr. Malto testified that he was asked to survey a total of 16 hectares, not just seven hectares.
Malto testified that he conducted the second survey in 1986 on the instruction of MSBFs general manager. According to
Malto, it was only in the second survey that he was told to determine the seven-hectare portion. Malto further clarified that
he based the technical descriptions of both surveys on a previously existing survey of the property. [18]
The NHA presented the testimony of Inobaya, a geodetic engineer employed by the NHA. Inobaya testified that as part
of the NHAs Survey Division, his duties included conducting surveys of properties administered by the NHA. [19] Inobaya
conducted his survey in May 1988 to determine whether BGC was occupying an area outside the seven-hectare area MSBF
held in usufruct.[20] Inobaya surveyed the area occupied by MSBF following the same technical descriptions used by Malto.
Inobaya also came to the same conclusion that the area occupied by MSBF, as indicated by the boundaries in the technical
descriptions, covered a total of 16 hectares. He further testified that the seven-hectare portion in the map presented by
BGC,[21] which was constructed by Malto, does not tally with the boundaries BGC and MSBF indicated in their complaint.
Article 565 of the Civil Code states:
ART. 565. The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct; in default of
such title, or in case it is deficient, the provisions contained in the two following Chapters shall be observed.
In the present case, Proclamation No. 1670 is the title constituting the usufruct. Proclamation No. 1670 categorically states
that the seven-hectare area shall be determined by future survey under the administration of the Foundation subject to
private rights if there be any. The appellate court and the trial court agree that MSBF has the latitude to determine the
location of its seven-hectare usufruct portion within the 16-hectare area. The appellate court and the trial court disagree,
however, whether MSBF seasonably exercised this right.
It is clear that MSBF conducted at least two surveys. Although both surveys covered a total of 16 hectares, the second
survey specifically indicated a seven-hectare area shaded in yellow. MSBF made the first survey in 1984 and the second in
1986, way before the present controversy started. MSBF conducted the two surveys before the lease to BGC. The trial court
ruled that MSBF did not act seasonably in exercising its right to conduct the survey. Confronted with evidence that MSBF
did in fact conduct two surveys, the trial court dismissed the two surveys as self-serving. This is clearly an error on the part
of the trial court. Proclamation No. 1670 authorized MSBF to determine the location of the seven-hectare area. This
authority, coupled with the fact that Proclamation No. 1670 did not state the location of the seven-hectare area, leaves no
room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct.
More evidence supports MSBFs stand on the location of the seven-hectare area. The main structures of MSBF are
found in the area indicated by MSBFs survey. These structures are the main office, the three green houses, the warehouse
and the composting area. On the other hand, the NHAs delineation of the seven-hectare area would cover only the four
hardening bays and the display area. It is easy to distinguish between these two groups of structures. The first group covers
buildings and facilities that MSBF needs for its operations. MSBF built these structures before the present controversy
started. The second group covers facilities less essential to MSBFs existence. This distinction is decisive as to which survey
should prevail. It is clear that the MSBF intended to use the yellow-shaded area primarily because it erected its main
structures there.
Inobaya testified that his main consideration in using Agham Road as the starting point for his survey was the presence
of a gate there. The location of the gate is not a sufficient basis to determine the starting point. MSBFs right as a usufructuary
as granted by Proclamation No. 1670 should rest on something more substantial than where MSBF chose to place a gate.
To prefer the NHAs survey to MSBFs survey will strip MSBF of most of its main facilities. Only the main building of
MSBF will remain with MSBF since the main building is near the corner of EDSA and Quezon Avenue. The rest of MSBFs
main facilities will be outside the seven-hectare area.
On the other hand, this Court cannot countenance MSBFs act of exceeding the seven-hectare portion granted to it by
Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the
owners interests. One such duty is found in Article 601 of the Civil Code which states:
ART. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have knowledge, that
may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for damages, as if they had been caused
through his own fault.
A usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the
title constituting it or the law otherwise provides.[22] This controversy would not have arisen had MSBF respected the limit
of the beneficial use given to it. MSBFs encroachment of its benefactors property gave birth to the confusion that attended
this case. To put this matter entirely to rest, it is not enough to remind the NHA to respect MSBFs choice of the location of
its seven-hectare area. MSBF, for its part, must vacate the area that is not part of its usufruct. MSBFs rights begin and end
within the seven-hectare portion of its usufruct. This Court agrees with the trial court that MSBF has abused the privilege
given it under Proclamation No. 1670. The direct corollary of enforcing MSBFs rights within the seven-hectare area is the
negation of any of MSBFs acts beyond it.
The seven-hectare portion of MSBF is no longer easily determinable considering the varied structures erected within
and surrounding the area. Both parties advance different reasons why their own surveys should be preferred. At this point,
the determination of the seven-hectare portion cannot be made to rely on a choice between the NHAs and MSBFs survey.
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There is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all doubts on the exact location
of the seven-hectare area and thus avoid future controversies. This new survey should consider existing structures of MSBF.
It should as much as possible include all of the facilities of MSBF within the seven-hectare portion without sacrificing
contiguity.
A final point. Article 605 of the Civil Code states:
ART. 605. Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. If it has been
constituted, and before the expiration of such period the town is abandoned, or the corporation or association is dissolved, the usufruct
shall be extinguished by reason thereof. (Emphasis added)
The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant
only as a lifetime grant. Unlike a natural person, a corporation or associations lifetime may be extended indefinitely. The
usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or
association covers public land. Proclamation No. 1670 was issued 19 September 1977, or 28 years ago. Hence, under
Article 605, the usufruct in favor of MSBF has 22 years left.
MO 127 released approximately 50 hectares of the NHA property as reserved site for the National Government Center.
However, MO 127 does not affect MSBFs seven-hectare area since under Proclamation No. 1670, MSBFs seven-hectare
area was already exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968, which established the
National Government Center Site.
WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in
CA-G.R. CV No. 48382 are SET ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City,
which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine
the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670.
The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of
Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval
within sixty days from the date ordering the joint survey.
SO ORDERED.

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