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FIRST DIVISION [G.R. No. 119020. October 19, 2000.]
INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC.,
petitioner, vs. HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINES
FOOTBALL FEDERATION, respondents.
D E C I S I O N KAPUNAN, J p: On June 30 1989, petitioner
International Express Travel and Tour Services, Inc., through its
managing director, wrote a letter to the Philippine Football
Federation (Federation), through its president private respondent
Henri Kahn, wherein the former offered its services as a travel
agency to the latter. 1 The offer was accepted. AaCEDS Petitioner
secured the airline tickets for the trips of the athletes and
officials of the Federation to the South East Asian Games in Kuala
Lumpur as well as various other trips to the People's Republic of
China and Brisbane. The total cost of the tickets amounted to
P449,654.83. For the tickets received, the Federation made two
partial payments, both in September of 1989, in the total amount of
P176,467.50. 2 On 4 October 1989, petitioner wrote the Federation,
through the private respondent a demand letter requesting for the
amount of P265,894.33. 3 On 30 October 1989, the Federation,
through the Project Gintong Alay, paid the amount of P31,603.00. 4
On 27 December 1989, Henri Kahn issued a personal check in the
amount of P50,000 as partial payment for the outstanding balance of
the Federation. 5Thereafter, no further payments were made despite
repeated demands. This prompted petitioner to file a civil case
before the Regional Trial Court of Manila. Petitioner sued Henri
Kahn in his personal capacity and as President of the Federation
and impleaded the Federation as an alternative defendant.
Petitioner sought to hold Henri Kahn liable for the unpaid balance
for the tickets purchased by the Federation on the ground that
Henri Kahn allegedly guaranteed the said obligation. 6 Henri Kahn
filed his answer with counterclaim. While not denying the
allegation that the Federation owed the amount P207,524.20,
representing the unpaid balance for the plane tickets, he averred
that the petitioner has no cause of action against him either in
his personal capacity or in his official capacity as president of
the Federation. He maintained that he did not guarantee payment but
merely acted as an
agent of the Federation which has a separate and distinct
juridical personality. 7 On the other hand, the Federation failed
to file its answer, hence, was declared in default by the trial
court. 8 In due course, the trial court rendered judgment and ruled
in favor of the petitioner and declared Henri Kahn personally
liable for the unpaid obligation of the Federation. In arriving at
the said ruling, the trial court rationalized:
Defendant Henri Kahn would have been correct in his contentions
had it been duly established that defendant Federation is a
corporation. The trouble, however, is that neither the plaintiff
nor the defendant Henri Kahn has adduced any evidence proving the
corporate existence of the defendant Federation. In paragraph 2 of
its complaint, plaintiff asserted that "defendant Philippine
Football Federation is a sports association . . . ." This has not
been denied by defendant Henri Kahn in his Answer. Being the
President of defendant Federation, its corporate existence is
within the personal knowledge of defendant Henri Kahn. He could
have easily denied specifically the assertion of the plaintiff that
it is a mere sports association if it were a domestic corporation.
But he did not.
xxx xxx xxx A voluntary unincorporated association, like
defendant Federation has no power to enter into, or to ratify, a
contract. The contract entered into by its officers or agents on
behalf of such association is not binding on, or enforceable
against it. The officers or agents are themselves personally
liable.
xxx xxx xxx 9 The dispositive portion of the trial court's
decision reads:
WHEREFORE, judgment is rendered ordering defendant Henri Kahn to
pay the plaintiff the principal sum of P207,524.20, plus the
interest thereon at the legal rate computed from July 5, 1990, the
date the complaint was filed, until the principal obligation is
fully liquidated; and another sum of P15,000.00 for attorney's
fees. SEHDIC
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The complaint of the plaintiff against the Philippine Football
Federation and the counterclaims of the defendant Henri Kahn are
hereby dismissed. With the costs against defendant Henri Kahn.
10
Only Henri Kahn elevated the above decision to the Court of
Appeals. On 21 December 1994, the respondent court rendered a
decision reversing the trial court, the decretal portion of said
decision reads:
WHEREFORE, premises considered, the judgment appealed from is
hereby REVERSED and SET ASIDE and another one is rendered
dismissing the complaint against defendant Henri S. Kahn. 11
In finding for Henri Kahn, the Court of Appeals recognized the
juridical existence of the Federation. It rationalized that since
petitioner failed to prove that Henri Kahn guaranteed the
obligation of the Federation, he should not be held liable for the
same as said entity has a separate and distinct personality from
its officers. Petitioner filed a motion for reconsideration and as
an alternative prayer pleaded that the Federation be held liable
for the unpaid obligation. The same was denied by the appellate
court in its resolution of 8 February 1995, where it stated
that:
As to the alternative prayer for the Modification of the
Decision by expressly declaring in the dispositive portion thereof
the Philippine Football Federation (PFF) as liable for the unpaid
obligation, it should be remembered that the trial court dismissed
the complaint against the Philippine Football Federation, and the
plaintiff did not appeal from this decision. Hence, the Philippine
Football Federation is not a party to this appeal and consequently,
no judgment may be pronounced by this Court against the PFF without
violating the due process clause, let alone the fact that the
judgment dismissing the complaint against it, had already become
final by virtue of the plaintiff's failure to appeal therefrom. The
alternative prayer is therefore similarly DENIED. 12
Petitioner now seeks recourse to this Court and alleges that the
respondent court committed the following assigned errors: 13
A. THE, HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER HAD DEALT WITH THE PHILIPPINE FOOTBALL FEDERATION (PFF)
AS A CORPORATE ENTITY
AND IN NOT HOLDING THAT PRIVATE RESPONDENT HENRI KAHN WAS THE
ONE, WHO REPRESENTED THE PFF AS HAVING CORPORATE PERSONALITY.
B. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE
RESPONDENT HENRI KAHN PERSONALLY LIABLE FOR THE OBLIGATION OF THE
UNINCORPORATED PFF, HAVING NEGOTIATED WITH PETITIONER AND
CONTRACTED THE OBLIGATION IN BEHALF OF THE PFF, MADE A PARTIAL
PAYMENT AN ASSURED PETITIONER OF FULLY SETTLING THE OBLIGATION.
C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT
PERSONALLY LIABLE, THE HONORABLE COURT OF APPEALS ERRED IN NOT
EXPRESSLY DECLARING IN ITS DECISION THAT THE PFF IS SOLELY LIABLE
FOR THE OBLIGATION.
The resolution of the case at bar hinges on the determination of
the existence of the Philippine Football Federation as a juridical
person. In the assailed decision, the appellate court recognized
the existence of the Federation. In support of this, the CA cited
Republic Act 3135, otherwise known as the Revised Charter of the
Philippine Amateur Athletic Federation, and Presidential Decree No.
604 as the laws from which said Federation derives its existence.
As correctly observed by the appellate court, both R.A. 3135 and
P.D. No. 604 recognized the juridical existence of national sports
associations. This may be gleaned from the powers and functions
granted to these associations. Section 14 of R.A. 3135
provides:
SEC. 14. Functions, powers and duties of Associations. The
National Sports' Association shall have the following functions,
powers and duties:
1. To adopt a constitution and by-laws for their internal
organization and government. 2. To raise funds by donations
benefits, and other means for their purposes. 3. To purchase, sell,
lease or otherwise encumber property both real and personal, for
the accomplishment of their purpose;
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4. To affiliate with international or regional sports'
Associations after due consultation with the executive
committee;
xxx xxx xxx 13. To perform such other acts as may be necessary
for the proper accomplishment of their purposes and not
inconsistent with this Act.
Section 8 of P.D. 604, grants similar functions to these sports
associations:
SEC. 8. Functions, Powers, and Duties of National Sports
Association. The National sports associations shall have the
following functions, powers, and duties:
1. Adopt a Constitution and By-Laws for their internal
organization and government which shall be submitted to the
Department and any amendment hereto shall take effect upon approval
by the Department: Provided, however, That no team, school, club,
organization or entity shall be admitted as a voting member of an
association unless 60 per cent of the athletes composing said team,
school, club, organization or entity are Filipino citizens. 2.
Raise funds by donations, benefits, and other means for their
purpose subject to the approval of the Department; 3. Purchase,
sell, lease, or otherwise encumber property, both real and
personal, for the accomplishment of their purpose; 4. Conduct
local, interport, and international competitions, other than the
Olympic and Asian Games, for the promotion of their sport; 5.
Affiliate with international or regional sports associations after
due consultation with the Department;
xxx xxx xxx 13. Perform such other functions as may be provided
by law.
The above powers and functions granted to national sports
associations clearly indicate that these entities may acquire a
juridical personality.
The power to purchase, sell, lease and encumber property are
acts which may only be done by persons, whether natural or
artificial, with juridical capacity. However, while we agree with
the appellate court that national sports associations may be
accorded corporate status, such does not automatically take place
by the mere passage of these laws. It is a basic postulate that
before a corporation may acquire juridical personality, the State
must give its consent either in the form of a special law or a
general enabling act. We cannot agree with the view of the
appellate court and the private respondent that the Philippine
Football Federation came into existence upon the passage of these
laws. Nowhere can it be found in R.A. 3135 or P.D. 604 any
provision creating the Philippine Football Federation. These laws
merely recognized the existence of national sports associations and
provided the manner by which these entities may acquire juridical
personality.Section 11 of R.A. 3135 provides:
SEC. 11. National Sports' Association; organization and
recognition. A National Association shall be organized for each
individual sports in the Philippines in the manner hereinafter
provided to constitute the Philippine Amateur Athletic Federation.
Applications for recognition as a National Sports' Association
shall be filed with the executive committee together with, among
others, a copy of the constitution and by-laws and a list of the
members of the proposed association, and a filing fee of ten pesos.
The Executive Committee shall give the recognition applied for if
it is satisfied that said association will promote the purposes of
this Act and particularly section three thereof. No application
shall be held pending for more than three months after the filing
thereof without any action having been taken thereon by the
executive committee. Should the application be rejected, the
reasons for such rejection shall be clearly stated in a written
communication to the applicant. Failure to specify the reasons for
the rejection shall not affect the application which shall be
considered as unacted upon: Provided however, That until the
executive committee herein provided shall have been formed,
applications for recognition shall be passed upon by the duly
elected members of the present
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executive committee of the Philippine Amateur Athletic
Federation. The said executive committee shall be dissolved upon
the organization of the executive committee herein provided:
Provided, further, That the functioning executive committee is
charged with the responsibility of seeing to it that the National
Sports' Associations are formed and organized within six months
from and after the passage of this Act.
Section 7 of P.D. 604, similarly provides: SEC. 7. National
Sports Associations: Application for accreditation or recognition
as a national sports association for each individual sport in the
Philippines shall be filed with the Department together with, among
others, a copy of the Constitution and By-Laws and a list of the
members of the proposed association. The Department shall give the
recognition applied for if it is satisfied that the national sports
association to be organized will promote the objectives of this
Decree and has substantially complied with the rules and
regulations of the Department: Provided, That the Department may
withdraw accreditation or recognition for violation of this Decree
and such rules and regulations formulated by it. The Department
shall supervise the national sports association: Provided, That the
latter shall have exclusive technical control over the development
and promotion of the particular sport for which they are
organized.
Clearly the above cited provisions require that before an entity
may be considered as a national sports association, such entity
must be recognized by the accrediting organization, the Philippine,
Amateur Athletic Federation under R.A. 3135, and the Department of
Youth and Sports Development under P.D. 604. This fact of
recognition, however, Henri Kahn failed to substantiate. In
attempting to prove the juridical existence of the Federation,
Henri Kahn attached to his motion for reconsideration before the
trial court a copy of the constitution and by-laws of the
Philippine Football Federation. Unfortunately, the same does not
prove that said Federation has indeed been recognized and
accredited by either the Philippine Amateur Athletic Federation or
the Department of Youth and Sports Development. Accordingly, we
rule that the Philippine Football
Federation is not a national sports association within the
purview of the aforementioned laws and does not have corporate
existence of its own. caCTHI Thus being said, it follows that
private respondent Henry Kahn should be held liable for the unpaid
obligations of the unincorporated Philippine Football Federation.
It is a settled principle in corporation law that any person acting
or purporting to act on behalf of a corporation which has no valid
existence assumes such privileges and becomes personally liable for
contract entered into or for other acts performed as such agent. 14
As president of the Federation, Henri Kahn is presumed to have
known about the corporate existence or non-existence of the
Federation. We cannot subscribe to the position taken by the
appellate court that even assuming that the Federation was
defectively incorporated, the petitioner cannot deny the corporate
existence of the Federation because it had contracted and dealt
with the Federation in such a manner as to recognize and in effect
admit its existence. 15 The doctrine of corporation by estoppel is
mistakenly applied by the respondent court to the petitioner. The
application of the doctrine applies to a third party only when he
tries to escape liabilities on a contract from which he has
benefited on the irrelevant ground of defective incorporation. 16
In the case at bar, the petitioner is not trying to escape
liability from the contract but rather is the one claiming from the
contract. WHEREFORE, the decision appealed from is REVERSED and SET
ASIDE. The decision of the Regional Trial Court of Manila, Branch
35, in Civil Case No. 90-53595 is hereby REINSTATED. SO ORDERED.
Davide, Jr., C.J., Puno, Pardo and Santiago, JJ., concur. |||
(International Express Travel & Tour Services, Inc. v. Court of
Appeals, G.R. No. 119020, October 19, 2000)
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THIRD DIVISION [G.R. No. 136448. November 3, 1999.]
LIM TONG LIM, petitioner, vs. PHILIPPINE FISHING GEAR
INDUSTRIES, INC., respondent.
Roberto A. Abad for petitioner. Benjamin S. Benito &
Associates for private respondent.
SYNOPSIS Antonio Chua and Peter Yao entered into a contract in
behalf of Ocean Quest Fishing Corporation for the purchase of
fishing nets from respondent Philippine Fishing Gear Industries,
Inc. Chua and Yao claimed that they were engaged in business
venture with petitioner Lim Tong Lim, who, however, was not a
signatory to the contract. The buyers failed to pay the fishing
nets. Respondent filed a collection against Chua, Yao and
petitioner Lim in their capacities as general partners because it
turned out that Ocean Quest Fishing Corporation is a non-existent
corporation. The trial court issued a Writ of Preliminary
Attachment, which the sheriff enforced by attaching the fishing
nets. The trial court rendered its decision ruling that respondent
was entitled to the Writ of Attachment and that Chua, Yao and Lim,
as general partners, were jointly liable to pay respondent. Lim
appealed to the Court of Appeals, but the appellate court affirmed
the decision of the trial court that petitioner Lim is a partner
and may thus be held liable as such. Hence, the present petition.
Petitioner claimed that since his name did not appear on any of the
contracts and since he never directly transacted with the
respondent corporation, ergo, he cannot be held liable. cIaCTS The
Supreme Court denied the petition. The Court ruled that having
reaped the benefits of the contract entered into by Chua and Yao,
with whom he had an existing relationship, petitioner Lim is deemed
a part of said association and is covered by the doctrine of
corporation by estoppel. The Court also ruled that under the
principle of estoppel, those acting on behalf of a corporation and
those benefited by it, knowing it to be without valid existence,
are held liable as general partners.
SYLLABUS 1. CIVIL LAW; PARTNERSHIP; AGREEMENT THAT ANY LOSS OR
PROFIT FROM THE SALE AND OPERATION OF THE BOATS WOULD BE DIVIDED
EQUALLY AMONG THEM SHOWS THAT THE PARTIES HAD INDEED FORMED A
PARTNERSHIP. From the factual findings of both lower courts, it is
clear that Chua, Yao and Lim had decided to engage in a fishing
business, which they started by buying boats worth P3.35 million,
financed by a loan secured from Jesus Lim who was petitioner's
brother. In their Compromise Agreement, they subsequently
revealed
their intention to pay the loan with the proceeds of the sale of
the boats, and to divide equally among them the excess or loss.
These boats, the purchase and the repair of which were financed
with borrowed money, fell under the term "common fund" under
Article 1767. The contribution to such fund need not be cash or
fixed assets; it could be an intangible like credit or industry.
That the parties agreed that any loss or profit from the sale and
operation of the boats would be divided equally among them also
shows that they had indeed formed a partnership. Moreover, it is
clear that the partnership extended not only to the purchase of the
boat, but also to that of the nets and the floats. The fishing nets
and the floats, both essential to fishing, were obviously acquired
in furtherance of their business. It would have been inconceivable
for Lim to involve himself so much in buying the boat but not in
the acquisition of the aforesaid equipment, without which the
business could not have proceeded. Given the preceding facts, it is
clear that there was, among petitioner, Chua and Yao, a partnership
engaged in the fishing business. They purchased the boats, which
constituted the main assets of the partnership, and they agreed
that the proceeds from the sales and operations thereof would be
divided among them. 2. ID.; ID.; COMPROMISE AGREEMENT OF THE
PARTIES NOT THE SOLE BASIS OF PARTNERSHIP. Petitioner argues that
the appellate court's sole basis for assuming the existence of a
partnership was the Compromise Agreement. He also claims that the
settlement was entered into only to end the dispute among them, but
not to adjudicate their preexisting rights and obligations. His
arguments are baseless. The Agreement was but an embodiment of the
relationship extant among the parties prior to its execution. A
proper adjudication of claimants' rights mandates that courts must
review and thoroughly appraise all relevant facts. Both lower
courts have done so and have found, correctly, a preexisting
partnership among the parties. In implying that the lower courts
have decided on the basis of one piece of document alone,
petitioner fails to appreciate that the CA and the RTC delved into
the history of the document and explored all the possible
consequential combinations in harmony with law, logic and fairness.
Verily, the two lower courts' factual findings mentioned above
nullified petitioner's argument that the existence of a partnership
was based only on the Compromise Agreement. 3. ID.; ID.; PETITIONER
WAS A PARTNER, NOT A LESSOR. Verily, as found by the lower courts,
petitioner entered into a business agreement with Chua and Yao, in
which debts were undertaken in order to finance the acquisition and
the upgrading of the vessels which would be used in
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their fishing business. The sale of the boats, as well as the
division among the three of the balance remaining after the payment
of their loans, proves beyond cavil that F/B Lourdes, though
registered in his name, was not his own property but an asset of
the partnership. It is not uncommon to register the properties
acquired from a loan in the name of the person the lender trusts,
who in this case is the petitioner himself. After all, he is the
brother of the creditor, Jesus Lim. We stress that it is
unreasonable indeed, it is absurd for petitioner to sell his
property to pay a debt he did not incur, if the relationship among
the three of them was merely that of lessor-lessee, instead of
partners. 4. MERCANTILE LAW; PRIVATE CORPORATIONS; HAVING REAPED
THE BENEFITS OF THE CONTRACT ENTERED INTO BY PERSONS WITH WHOM HE
PREVIOUSLY HAD AN EXISTING RELATIONSHIP, PETITIONER IS DEEMED TO BE
PART OF SAID ASSOCIATION AND IS COVERED BY THE DOCTRINE OF
CORPORATION BY ESTOPPEL. There is no dispute that the respondent,
Philippine Fishing Gear Industries, is entitled to be paid for the
nets it sold. The only question here is whether petitioner should
be held jointly liable with Chua and Yao. Petitioner contests such
liability, insisting that only those who dealt in the name of the
ostensible corporation should be held liable. Since his name does
not appear on any of the contracts and since he never directly
transacted with the respondent corporation, ergo, he cannot be held
liable. Unquestionably, petitioner benefited from the use of the
nets found inside F/B Lourdes, the boat which has earlier been
proven to be an asset of the partnership. He in fact questions the
attachment of the nets, because the Writ has effectively stopped
his use of the fishing vessel. It is difficult to disagree with the
RTC and the CA that Lim, Chua and Yao decided to form a
corporation. Although it was never legally formed for unknown
reasons, this fact alone does not preclude the liabilities of the
three as contracting parties in representation of it. Clearly,
under the law on estoppel, those acting on behalf of a corporation
and those benefited by it, knowing it to be without valid
existence, are held liable as general partners. Technically, it is
true that petitioner did not directly act on behalf of the
corporation. However, having reaped the benefits of the contract
entered into by persons with whom he previously had an existing
relationship, he is deemed to be part of said association and is
covered by the scope of the doctrine of corporation by estoppel. 5.
REMEDIAL LAW; PROVISIONAL REMEDIES; ATTACHMENT; ISSUE OF VALIDITY
THEREOF, MOOT AND ACADEMIC. Petitioner claims that the Writ of
Attachment was improperly issued against the nets. We
agree with the Court of Appeals that this issue is now moot and
academic. As previously discussed,F/B Lourdes was an asset of the
partnership and that it was placed in the name of petitioner, only
to assure payment of the debt he and his partners owed. The nets
and the floats were specifically manufactured and tailor-made
according to their own design, and were bought and used in the
fishing venture they agreed upon. Hence, the issuance of the Writ
to assure the payment of the price stipulated in the invoices is
proper. Besides, by specific agreement, ownership of the nets
remained with Respondent Philippine Fishing Gear, until full
payment thereof. VITUG, J., concurring: 1. CIVIL LAW; PARTNERSHIP;
EXTENT OF LIABILITY OF PARTNERS IN A GENERAL PARTNERSHIP. When a
person by his act or deed represents himself. as a partner in an
existing partnership or with one or more persons not actual
partners, he is deemed an agent of such persons consenting to such
representation and in the same manner, if he were a partner, with
respect to persons who rely upon the representation. The
association formed by Chua, Yao and Lim, should be, as it has been
deemed, a de facto partnership with all the consequent obligations
for the purpose of enforcing the rights of third persons. The
liability of general partners (in a general partnership as so
opposed to a limited partnership) is laid down in Article 1816
which posits that all partners shall be liable pro rata beyond the
partnership assets for all the contracts which may have been
entered into in its name, under its signature, and by a person
authorized to act for the partnership. 2. ID.; ID.; ID.; INSTANCES
WHEN THE PARTNERS CAN BE HELD SOLIDARILY LIABLE WITH THE
PARTNERSHIP. This rule is to be construed along with other
provisions of the Civil Code which postulate that the partners can
be held solidarily liable with the partnership specifically in
these instances. (1) where, by any wrongful act or omission of any
partner acting in the ordinary course of the business of the
partnership or with the authority of his co-partners, loss or
injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is liable
therefor to the same extent as the partner so acting or omitting to
act; (2) where one partner acting within the scope of his apparent
authority receives money or property of a third person and
misapplies it; and (3) where the partnership in the course of its
business receives money or property of a third person and the money
or property so received is misapplied by any partner while it is in
the custody of the partnership consistently with the rules on the
nature of civil liability in delicts and quasi-delicts.
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D E C I S I O N
PANGANIBAN, J p: A partnership may be deemed to exist among
parties who agree to borrow money to pursue a business and to
divide the profits or losses that may arise therefrom, even if it
is shown that they have not contributed any capital of their own to
a "common fund." Their contribution may be in the form of credit or
industry, not necessarily cash or fixed assets. Being partners,
they are all liable for debts incurred by or on behalf of the
partnership. The liability for a contract entered into on behalf of
an unincorporated association or ostensible corporation may lie in
a person who may not have directly transacted on its behalf, but
reaped benefits from that contract. cda
The Case In the Petition for Review on Certiorari before us, Lim
Tong Lim assails the November 26, 1998 Decision of the Court of
Appeals in CA-GR CV 41477, 1 which disposed as follows:
"WHEREFORE, [there being] no reversible error in the appealed
decision, the same is hereby affirmed." 2
The decretal portion of the Quezon City Regional Trial Court
(RTC) ruling, which was affirmed by the CA, reads as follows:
"WHEREFORE, the Court rules: 1. That plaintiff is entitled to
the writ of preliminary attachment issued by this Court on
September 20, 1990; cdphil 2. That defendants are jointly liable to
plaintiff for the following amounts, subject to the modifications
as hereinafter made by reason of the special and unique facts and
circumstances and the proceedings that transpired during the trial
of this case; a. P532,045.00 representing [the] unpaid purchase
price of the fishing nets covered by the Agreement plus P68,000.00
representing the unpaid price of the floats not covered by said
Agreement; b. 12% interest per annum counted from date of
plaintiff's invoices and computed on their respective amounts as
follows: i. Accrued interest of P73,221.00 on Invoice No. 14407 for
P385,377.80 dated February 9, 1990; ii. Accrued interest of
P27,904.02 on Invoice No. 14413 for P146,868.00 dated February 13,
1990;
iii. Accrued interest of P12,920.00 on Invoice No. 14426 for
P68,000.00 dated February 19, 1990; c. P50,000.00 as and for
attorney's fees, plus P8,500.00 representing P500.00 per appearance
in court; d. P65,000.00 representing P5,000.00 monthly rental for
storage charges on the nets counted from September 20, 1990 (date
of attachment) to September 12, 1991 (date of auction sale); cdasia
e. Cost of suit. "With respect to the joint liability of defendants
for the principal obligation or for the unpaid price of nets and
floats in the amount of P532,045.00 and P68,000.00, respectively,
or for the total amount of P600,045.00, this Court noted that these
items were attached to guarantee any judgment that may be rendered
in favor of the plaintiff but, upon agreement of the parties, and,
to avoid further deterioration of the nets during the pendency of
this case, it was ordered sold at public auction for not less than
P900,000.00 for which the plaintiff was the sole and winning
bidder. The proceeds of the sale paid for by plaintiff was
deposited in court. In effect, the amount of P900,000.00 replaced
the attached property as a guaranty for any judgment that plaintiff
may be able to secure in this case with the ownership and
possession of the nets and floats awarded and delivered by the
sheriff to plaintiff as the highest bidder in the public auction
sale. It has also been noted that ownership of the nets [was]
retained by the plaintiff until full payment [was] made as
stipulated in the invoices; hence, in effect, the plaintiff
attached its own properties. It [was] for this reason also that
this Court earlier ordered the attachment bond filed by plaintiff
to guaranty damages to defendants to be cancelled and for the
P900,000.00 cash bidded and paid for by plaintiff to serve as its
bond in favor of defendants. "From the foregoing, it would appear
therefore that whatever judgment the plaintiff may be entitled to
in this case will have to be satisfied from the amount of
P900,000.00 as this amount replaced the attached nets and floats.
Considering, however, that the total
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judgment obligation as computed above would amount to only
P840,216.92, it would be inequitable, unfair and unjust to award
the excess to the defendants who are not entitled to damages and
who did not put up a single centavo to raise the amount of
P900,000.00 aside from the fact that they are not the owners of the
nets and floats. For this reason, the defendants are hereby
relieved from any and all liabilities arising from the monetary
judgment obligation enumerated above and for plaintiff to retain
possession and ownership of the nets and floats and for the
reimbursement of the P900,000.00 deposited by it with the Clerk of
Court. SO ORDERED." 3 cdasia
The Facts On behalf of "Ocean Quest Fishing Corporation,"
Antonio Chua and Peter Yao entered into a Contract dated February
7, 1990, for the purchase of fishing nets of various sizes from the
Philippine Fishing Gear Industries, Inc. (herein respondent). They
claimed that they were engaged in a business venture with
Petitioner Lim Tong Lim, who however was not a signatory to the
agreement. The total price of the nets amounted to P532,045. Four
hundred pieces of floats worth P68,000 were also sold to the
Corporation. 4 The buyers, however, failed to pay for the fishing
nets and the floats; hence, private respondent filed a collection
suit against Chua, Yao and Petitioner Lim Tong Lim with a prayer
for a writ of preliminary attachment. The suit was brought against
the three in their capacities as general partners, on the
allegation that "Ocean Quest Fishing Corporation" was a nonexistent
corporation as shown by a Certification from the Securities and
Exchange Commission. 5 On September 20, 1990, the lower court
issued a Writ of Preliminary Attachment, which the sheriff enforced
by attaching the fishing nets on board F/B Lourdeswhich was then
docked at the Fisheries Port, Navotas, Metro Manila. LLpr Instead
of answering the Complaint, Chua filed a Manifestation admitting
his liability and requesting a reasonable time within which to pay.
He also turned over to respondent some of the nets which were in
his possession. Peter Yao filed an Answer, after which he was
deemed to have waived his right to cross-examine witnesses and to
present evidence on his behalf, because of his failure to appear in
subsequent hearings. Lim Tong Lim, on the other hand, filed an
Answer with Counterclaim and Crossclaim and moved for the lifting
of the Writ of
Attachment. 6 The trial court maintained the Writ, and upon
motion of private respondent, ordered the sale of the fishing nets
at a public auction. Philippine Fishing Gear Industries won the
bidding and deposited with the said court the sales proceeds of
P900,000. 7 On November 18, 1992, the trial court rendered its
Decision, ruling that Philippine Fishing Gear Industries was
entitled to the Writ of Attachment and that Chua, Yao and Lim, as
general partners, were jointly liable to pay respondent. 8 The
trial court ruled that a partnership among Lim, Chua and Yao
existed based (1) on the testimonies of the witnesses presented and
(2) on a Compromise Agreement executed by the three 9 in Civil Case
No. 1492-MN which Chua and Yao had brought against Lim in the RTC
of Malabon, Branch 72, for (a) a declaration of nullity of
commercial documents; (b) a reformation of contracts; (c) a
declaration of ownership of fishing boats; (d) an injunction and
(e) damages. 10 The Compromise Agreement provided: cdll
"a) That the parties plaintiffs & Lim Tong Lim agree to have
the four (4) vessels sold in the amount of P5,750,000.00 including
the fishing net. This P5,750,000.00 shall be applied as full
payment for P3,250,000.00 in favor of JL Holdings Corporation
and/or Lim Tong Lim;
"b) If the four (4) vessel[s] and the fishing net will be sold
at a higher price than P5,750,000.00 whatever will be the excess
will be divided into 3: 1/3 Lim Tong Lim; 1/3 Antonio Chua; 1/3
Peter Yao;
"c) If the proceeds of the sale the vessels will be less than
P5,750,000.00 whatever the deficiency shall be shouldered and paid
to JL Holding Corporation by 1/3 Lim Tong Lim; 1/3 Antonio Chua;
1/3 Peter Yao." 11
The trial court noted that the Compromise Agreement was silent
as to the nature of their obligations, but that joint liability
could be presumed from the equal distribution of the profit and
loss. 12 Lim appealed to the Court of Appeals (CA) which, as
already stated, affirmed the RTC.
Ruling of the Court of Appeals In affirming the trial court, the
CA held that petitioner was a partner of Chua and Yao in a fishing
business and may thus be held liable as such
-
for the fishing nets and floats purchased by and for the use of
the partnership. The appellate court ruled:
"The evidence establishes that all the defendants including
herein appellant Lim Tong Lim undertook a partnership for a
specific undertaking, that is for commercial fishing . . . .
Obviously, the ultimate undertaking of the defendants was to divide
the profits among themselves which is what a partnership
essentially is . . . . By a contract of partnership, two or more
persons bind themselves to contribute money, property or industry
to a common fund with the intention of dividing the profits among
themselves (Article 1767, New Civil Code)." 13 cdtai
Hence, petitioner brought this recourse before this Court. 14
The Issues
In his Petition and Memorandum, Lim asks this Court to reverse
the assailed Decision on the following grounds:
"I THE COURT OF APPEALS ERRED IN HOLDING, BASED ON A COMPROMISE
AGREEMENT THAT CHUA, YAO AND PETITIONER LIM ENTERED INTO IN A
SEPARATE CASE, THAT A PARTNERSHIP AGREEMENT EXISTED AMONG THEM.
"II SINCE IT WAS ONLY CHUA WHO REPRESENTED THAT HE WAS ACTING
FOR OCEAN QUEST FISHING CORPORATION WHEN HE BOUGHT THE NETS FROM
PHILIPPINE FISHING, THE COURT OF APPEALS WAS UNJUSTIFIED IN
IMPUTING LIABILITY TO PETITIONER LIM AS WELL.
"III THE TRIAL COURT IMPROPERLY ORDERED THE
SEIZURE AND ATTACHMENT OF PETITIONER LIM'S GOODS."
In determining whether petitioner may be held liable for the
fishing nets and floats purchased from respondent, the Court must
resolve this key issue: whether by their acts, Lim, Chua and Yao
could be deemed to have entered into a partnership. cdasia
This Court's Ruling The Petition is devoid of merit.
First and Second Issues:
Existence of a Partnership and Petitioner's Liability
In arguing that he should not be held liable for the equipment
purchased from respondent, petitioner controverts the CA finding
that a partnership existed between him, Peter Yao and Antonio Chua.
He asserts that the CA based its finding on the Compromise
Agreement alone. Furthermore, he disclaims any direct participation
in the purchase of the nets, alleging that the negotiations were
conducted by Chua and Yao only, and that he has not even met the
representatives of the respondent company. Petitioner further
argues that he was a lessor, not a partner, of Chua and Yao, for
the "Contract of Lease" dated February 1, 1990, showed that he had
merely leased to the two the main asset of the purported
partnership the fishing boat F/B Lourdes. The lease was for six
months, with a monthly rental of P37,500 plus 25 percent of the
gross catch of the boat. We are not persuaded by the arguments of
petitioner. The facts as found by the two lower courts clearly
showed that there existed a partnership among Chua, Yao and him,
pursuant to Article 1767 of the Civil Code which provides:
"ARTICLE 1767. By the contract of partnership, two or more
persons bind themselves to contribute money, property, or industry
to a common fund, with the intention of dividing the profits among
themselves." llcd
Specifically, both lower courts ruled that a partnership among
the three existed based on the following factual findings: 15
(1) That Petitioner Lim Tong Lim requested Peter Yao who was
engaged in commercial fishing to join him, while Antonio Chua was
already Yao's partner; (2) That after convening for a few times,
Lim Chua, and Yao verbally agreed to acquire two fishing boats, the
FB Lourdes and the FB Nelson for the sum of P3.35 million; (3) That
they borrowed P3.25 million from Jesus Lim, brother of Petitioner
Lim Tong Lim, to finance the venture. (4) That they bought the
boats from CMF Fishing Corporation, which executed a Deed of Sale
over these two (2) boats in favor of Petitioner Lim Tong Lim only
to serve as security for the loan extended by Jesus Lim; (5) That
Lim, Chua and Yao agreed that the refurbishing, re-equipping,
repairing, dry docking and
-
other expenses for the boats would be shouldered by Chua and
Yao; (6) That because of the "unavailability of funds," Jesus Lim
again extended a loan to the partnership in the amount of P1
million secured by a check, because of which, Yao and Chua
entrusted the ownership papers of two other boats, Chua's FB Lady
Anne Mel and Yao's FB Tracy to Lim Tong Lim. cdtai (7) That in
pursuance of the business agreement, Peter Yao and Antonio Chua
bought nets from Respondent Philippine Fishing Gear, in behalf of
"Ocean Quest Fishing Corporation," their purported business name.
(8) That subsequently, Civil Case No. 1492-MN was filed in the
Malabon RTC, Branch 72 by Antonio Chua and Peter Yao against Lim
Tong Lim for (a) declaration of nullity of commercial documents;
(b) reformation of contracts; (c) declaration of ownership of
fishing boats; (4) injunction; and (e) damages. (9) That the case
was amicably settled through a Compromise Agreement executed
between the parties-litigants the terms of which are already
enumerated above.
From the factual findings of both lower courts, it is clear that
Chua, Yao and Lim had decided to engage in a fishing business,
which they started by buying boats worth P3.35 million, financed by
a loan secured from Jesus Lim who was petitioner's brother. In
their Compromise Agreement, they subsequently revealed their
intention to pay the loan with the proceeds of the sale of the
boats, and to divide equally among them the excess or loss. These
boats, the purchase and the repair of which were financed with
borrowed money, fell under the term "common fund" under Article
1767. The contribution to such fund need not be cash or fixed
assets; it could be an intangible like credit or industry. That the
parties agreed that any loss or profit from the sale and operation
of the boats would be divided equally among them also shows that
they had indeed formed a partnership. Moreover, it is clear that
the partnership extended not only to the purchase of the boat, but
also to that of the nets and the floats. The fishing nets and the
floats, both essential to fishing, were obviously acquired in
furtherance of their business. It would have been inconceivable for
Lim to involve himself so much in buying the boat but
not in the acquisition of the aforesaid equipment, without which
the business could not have proceeded. cdtai Given the preceding
facts, it is clear that there was, among petitioner, Chua and Yao,
a partnership engaged in the fishing business. They purchased the
boats, which constituted the main assets of the partnership, and
they agreed that the proceeds from the sales and operations thereof
would be divided among them. We stress that under Rule 45, a
petition for review like the present case should involve only
questions of law. Thus, the foregoing factual findings of the RTC
and the CA are binding on this Court, absent any cogent proof that
the present action is embraced by one of the exceptions to the
rule. 16 In assailing the factual findings of the two lower courts,
petitioner effectively goes beyond the bounds of a petition for
review under Rule 45.
Compromise Agreement Not the Sole Basis of Partnership
Petitioner argues that the appellate court's sole basis for
assuming the existence of a partnership was the Compromise
Agreement. He also claims that the settlement was entered into only
to end the dispute among them, but not to adjudicate their
preexisting rights and obligations. His arguments are baseless.The
Agreement was but an embodiment of the relationship extant among
the parties prior to its execution. A proper adjudication of
claimants' rights mandates that courts must review and thoroughly
appraise all relevant facts. Both lower courts have done so and
have found, correctly, a preexisting partnership among the parties.
In implying that the lower courts have decided on the basis of one
piece of document alone, petitioner fails to appreciate that the CA
and the RTC delved into the history of the document and explored
all the possible consequential combinations in harmony with law,
logic and fairness. Verily, the two lower courts' factual findings
mentioned above nullified petitioner's argument that the existence
of a partnership was based only on the Compromise Agreement.
LLphil
Petitioner Was a Partner, Not a Lessor
We are not convinced by petitioner's argument that he was merely
the lessor of the boats to Chua and Yao, not a partner in the
fishing venture. His argument allegedly finds support in the
Contract of Lease and the registration papers showing that he was
the owner of the boats, including F/B Lourdes where the nets were
found.
-
His allegation defies logic. In effect, he would like this Court
to believe that he consented to the sale of his own boats to pay a
debt of Chua and Yao, with the excess of the proceeds to be divided
among the three of them. No lessor would do what petitioner did.
Indeed, his consent to the sale proved that there was a preexisting
partnership among all three. Verily, as found by the lower courts,
petitioner entered into a business agreement with Chua and Yao, in
which debts were undertaken in order to finance the acquisition and
the upgrading of the vessels which would be used in their fishing
business. The sale of the boats, as well as the division among the
three of the balance remaining after the payment of their loans,
proves beyond cavil that F/B Lourdes, though registered in his
name, was not his own property but an asset of the partnership. It
is not uncommon to register the properties acquired from a loan in
the name of the person the lender trusts, who in this case is the
petitioner himself. After all, he is the brother of the creditor,
Jesus Lim. prLL We stress that it is unreasonable indeed, it is
absurd for petitioner to sell his property to pay a debt he did not
incur, if the relationship among the three of them was merely that
of lessor-lessee, instead of partners.
Corporation by Estoppel Petitioner argues that under the
doctrine of corporation by estoppel, liability can be imputed only
to Chua and Yao, and not to him. Again, we disagree. Section 21 of
the Corporation Code of the Philippines provides:
"Sec. 21. Corporation by estoppel. All persons who assume to act
as a corporation knowing it to be without authority to do so shall
be liable as general partners for all debts, liabilities and
damages incurred or arising as a result thereof: Provided however,
That when any such ostensible corporation is sued on any
transaction entered by it as a corporation or on any tort committed
by it as such, it shall not be allowed to use as a defense its lack
of corporate personality. "One who assumes an obligation to an
ostensible corporation as such, cannot resist performance thereof
on the ground that there was in fact no corporation." LibLex
Thus, even if the ostensible corporate entity is proven to be
legally nonexistent, a party may be estopped from denying its
corporate existence. "The reason behind this doctrine is obvious an
unincorporated association has no personality and would be
incompetent to act and appropriate for itself the power and
attributes of a corporation as provided by law; it cannot create
agents or confer authority on another to act in its behalf; thus,
those who act or purport to act as its representatives or agents do
so without authority and at their own risk. And as it is an
elementary principle of law that a person who acts as an agent
without authority or without a principal is himself regarded as the
principal, possessed of all the right and subject to all the
liabilities of a principal, a person acting or purporting to act on
behalf of a corporation which has no valid existence assumes such
privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such agent."
17 The doctrine of corporation by estoppel may apply to the alleged
corporation and to a third party. In the first instance, an
unincorporated association, which represented itself to be a
corporation, will be estopped from denying its corporate capacity
in a suit against it by a third person who relied in good faith on
such representation. It cannot allege lack of personality to be
sued to evade its responsibility for a contract it entered into and
by virtue of which it received advantages and benefits. On the
other hand, a third party who, knowing an association to be
unincorporated, nonetheless treated it as a corporation and
received benefits from it, may be barred from denying its corporate
existence in a suit brought against the alleged corporation. In
such case, all those who benefited from the transaction made by the
ostensible corporation, despite knowledge of its legal defects, may
be held liable for contracts they impliedly assented to or took
advantage of. cdrep There is no dispute that the respondent,
Philippine Fishing Gear Industries, is entitled to be paid for the
nets it sold. The only question here is whether petitioner should
be held jointly 18 liable with Chua and Yao. Petitioner contests
such liability, insisting that only those who dealt in the name of
the ostensible corporation should be held liable. Since his name
does not appear on any of the contracts and since he never directly
transacted with the respondent corporation, ergo, he cannot be held
liable. Unquestionably, petitioner benefited from the use of the
nets found inside F/B Lourdes, the boat which has earlier been
proven to be an asset of the partnership. He in fact questions the
attachment of the nets, because the Writ has effectively stopped
his use of the fishing vessel. It is difficult to disagree with the
RTC and the CA that Lim, Chua and Yao decided to form a
corporation. Although it was never legally formed for
-
unknown reasons, this fact alone does not preclude the
liabilities of the three as contracting parties in representation
of it. Clearly, under the law on estoppel, those acting on behalf
of a corporation and those benefited by it, knowing it to be
without valid existence, are held liable as general partners.
Technically, it is true that petitioner did not directly act on
behalf of the corporation. However, having reaped the benefits of
the contract entered into by persons with whom he previously had an
existing relationship, he is deemed to be part of said association
and is covered by the scope of the doctrine of corporation by
estoppel. We reiterate the ruling of the Court in Alonso v.
Villamor: 19 prLL
"A litigation is not a game of technicalities in which one, more
deeply schooled and skilled in the subtle art of movement and
position, entraps and destroys the other. It is, rather, a contest
in which each contending party fully and fairly lays before the
court the facts in issue and then, brushing aside as wholly trivial
and indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits,
unlike duels, are not to be won by a rapier's thrust. Technicality,
when it deserts its proper office as an aid to justice and becomes
its great hindrance and chief enemy, deserves scant consideration
from courts. There should be no vested rights in
technicalities."
Third Issue: Validity of Attachment
Finally, petitioner claims that the Writ of Attachment was
improperly issued against the nets. We agree with the Court of
Appeals that this issue is now moot and academic. As previously
discussed, F/B Lourdes was an asset of the partnership and that it
was placed in the name of petitioner, only to assure payment of the
debt he and his partners owed. The nets and the floats were
specifically manufactured and tailor-made according to their own
design, and were bought and used in the fishing venture they agreed
upon. Hence, the issuance of the Writ to assure the payment of the
price stipulated in the invoices is proper. Besides, by specific
agreement, ownership of the nets remained with Respondent
Philippine Fishing Gear, until full payment thereof. WHEREFORE, the
Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner. Cdpr SO ORDERED. Melo, Purisima and
Gonzaga-Reyes, JJ.,concur.
Vitug, J., pls. see concurring opinion. Separate Opinions
VITUG, J., concurring: I share the views expressed in the
ponencia of an esteemed colleague, Mr. Justice Artemio V.
Panganiban, particularly the finding that Antonio Chua, Peter Yao
and petitioner Lim Tong Lim have incurred the liabilities of
general partners. I merely would wish to elucidate a bit, albeit
briefly, the liability of partners in a general partnership. When a
person by his act or deed represents himself as a partner in an
existing partnership or with one or more persons not actual
partners, he is deemed an agent of such persons consenting to such
representation and in the same manner, if he were a partner, with
respect to persons who rely upon the representation. 1 The
association formed by Chua, Yao and Lim, should be, as it has been
deemed, a de facto partnership with all the consequent obligations
for the purpose of enforcing the rights of third persons. The
liability of general partners (in a general partnership as so
opposed to a limited partnership) is laid down in Article 1816 2
which posits that all partners shall be liable pro rata beyond the
partnership assets for all the contracts which may have been
entered into in its name, under its signature, and by a person
authorized to act for the partnership. This rule is to be construed
along with other provisions of the Civil Code which postulate that
the partners can be held solidarily liable with the partnership
specifically in these instances (1) where, by any wrongful act or
omission of any partner acting in the ordinary course of the
business of the partnership or with the authority of his
co-partners, loss or injury is caused to any person, not being a
partner in the partnership, or any penalty is incurred, the
partnership is liable therefor to the same extent as the partner so
acting or omitting to act; (2) where one partner acting within the
scope of his apparent authority receives money or property of a
third person and misapplies it; and (3) where the partnership in
the course of its business receives money or property of a third
person and the money or property so received is misapplied by any
partner while it is in the custody of the partnership 3
consistently with the rules on the nature of civil liability in
delicts and quasi-delicts. LLpr Footnotes
1.Penned by J. Portia Alino-Hormachuelos; with the concurrence
of JJ. Buenaventura J. Guerrero, Division chairman, and Presbitero
J. Velasco Jr., member.
2.CA Decision, p. 12; rollo, p. 36.
-
3.RTC Decision penned by Judge Maximiano C. Asuncion, pp. 11-12;
rollo, pp. 48-49.
4.CA Decision, pp. 1-2; rollo, pp. 25-26. 5.Ibid., p. 2; rollo,
p. 26. 6.RTC Decision, p. 2; rollo, p. 39. 7.Petition, p. 4; rollo,
p. 11. 8.Ibid. 9.RTC Decision, pp. 6-7; rollo, pp. 43-44.
10.Respondent's Memorandum, pp. 5, 8; rollo, pp. 107, 109. 11.CA
Decision, pp. 9-10; rollo, pp. 33-34. 12.RTC Decision, p. 10;
rollo, p. 47. 13.Ibid. 14.This case was deemed submitted for
resolution on August 10, 1999,
when this Court received petitioner's Memorandum signed by Atty.
Roberto A. Abad. Respondent's Memorandum signed by Atty. Benjamin
S. Benito was filed earlier on July 27, 1999.
15.Nos. 1-7 are from CA Decision, p. 9 (rollo, p. 33); No. 8 is
from RTC Decision, p. 5 (rollo, p. 42); and No. 9 is from CA
Decision, pp. 9-10 (rollo, pp. 33-34).
16.See Fuentes v. Court of Appeals, 268 SCRA 703, February 26,
1997. 17.Salvatierra v. Garlitos, 103 SCRA 757, May 23, 1958, per
Felix, J.;
citing Fay v. Noble, 7 Cushing [Mass.] 188. 18."The liability is
joint if it is not specifically stated that it is
solidary," Maramba v. Lozano, 126 Phil 833, June 29, 1967, per
Makalintal, J. See also Article 1207 of the Civil Code, which
provides: "The concurrence of two or more creditors or of two or
more debtors in one [and] the same obligation does not imply that
each one of the former has a right to demand, or that each one of
the latter is bound to render, entire compliance with the
prestation. There is a solidary liability only when the obligation
expressly so states, or when the law or the nature of the
obligation requires solidarity."
19.16 Phil. 315, July 26, 1910, per Moreland, J. VITUG, J.:
1.Article 1825. When a person, by words spoken or written or by
conduct, represents himself, or consents to another representing
him to anyone, as a partner in an existing partnership or with one
or more persons not actual partners, he is liable to any such
persons to whom such representation has been made, who has, on the
faith of such representation, given credit to the actual or
apparent partnership, and if he has
made such representation or consented to its being made in a
public manner he is liable to such person, whether the
representation has or has not been made or communicated to such
person so giving credit by or with the knowledge of the apparent
partner making the representation or consenting to its being
made:
(1) When a partnership liability results, he is liable as though
he were an actual member of the partnership;
(2) When no partnership liability results, he is liable pro rata
with the other persons, if any, so consenting to the contract or
representation as to incur liability, otherwise separately.
When a person has been thus represented to be a partner in an
existing partnership, or with one or more persons not actual
partners, he is an agent of the persons consenting to such
representation to bind them to the same extent and in the same
manner as though he were a partner in fact, with respect to persons
who rely upon the representation. When all the members of the
existing partnership consent to the representation, a partnership
act or obligation results; but in all other cases it is the joint
act or obligation of the person acting and the persons consenting
to the representation.
2.All partners, including industrial ones, shall be liable pro
rata with all
their property and after all the partnership assets have been
exhausted, for the contracts which may be entered into in the name
and for the account of the partnership, under its signature and by
a person authorized to act for the partnership. However, any
partner may enter into a separate obligation to perform a
partnership contract.
3.Article 1824 in relation to Article 1822 and Article 1823, New
Civil Code.
||| (Lim Tong Lim v. Philippine Fishing Gear Industries, Inc.,
G.R. No. 136448, November 03, 1999)
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SECOND DIVISION [G.R. No. 125221. June 19, 1997.]
REYNALDO M. LOZANO, petitioner, vs. HON. ELIEZER R. DE LOS
SANTOS, Presiding Judge, RTC, Br. 58, Angeles City; and ANTONIO
ANDA,respondents.
Willie B. Rivera for petitioner. Yabut Law Office for
respondents.
SYLLABUS 1. COMMERCIAL LAW; SECURITIES AND EXCHANGE COMMISSION;
JURISDICTION; DETERMINATION THEREOF. The grant of jurisdiction to
the SEC must be viewed in the light of its nature and function
under the law. This jurisdiction is determined by a concurrence of
two elements: (1) the status or relationship of the parties; and
(2) the nature of the question that is the subject of their
controversy. The first element requires that the controversy must
arise out of intracorporate or partnership relations between and
among stockholders, members, or associates; between any or all of
them and the corporation, partnership or association of which they
are stockholders, members or associates, respectively; and between
such corporation, partnership or association and the State in so
far as it concerns their individual franchises. The second element
requires that the dispute among the parties be intrinsically
connected with the regulation of the corporation, partnership or
association or deal with the internal affairs of the corporation,
partnership or association. After all, the principal function of
the SEC is the supervision and control of corporations,
partnerships and associations with the end in view that investments
in these entities may be encouraged and protected, and their
activities pursued for the promotion of economic development.
DaScAI 2. ID.; ID.; ID.; DISPUTE BETWEEN MEMBERS OF TWO SEPARATE
AND DISTINCT CORPORATIONS WHO HAVE NO INTRACORPORATE RELATION, DOES
NOT FALL WITHIN THE JURISDICTION OF SECURITIES AND EXCHANGE
COMMISSION; CASE AT BAR. The KAMAJDA and SAMAJODA to which
petitioner and private respondent belong are duly registered with
the SEC, but these associations are two separate entities. The
dispute between petitioner and private respondent is not within the
KAMAJDA nor the SAMAJODA. It is between members of separate and
distinct associations. Petitioner and private respondent have no
intracorporate relation much less do they have an intracorporate
dispute. The SEC therefore has no jurisdiction over the
complaint.
3. ID.; ID.; ID.; DOCTRINE OF CORPORATION BY ESTOPPEL CANNOT
OVERRIDE JURISDICTIONAL REQUIREMENTS. The doctrine of corporation
by estoppel advanced by private respondent cannot override
jurisdictional requirements. Jurisdiction is fixed by law and is
not subject to the agreement of the parties. It cannot be acquired
through or waived, enlarged or diminished by, any act or omission
of the parties, neither can it be conferred by the acquiescence of
the court. 4. ID.; ID.; ID.; WHERE THERE IS NO THIRD PERSON
INVOLVED AND THE CONFLICT ARISES ONLY AMONG THOSE ASSUMING THE FORM
OF A CORPORATION, THERE IS NO CORPORATION BY ESTOPPEL. Corporation
by estoppel is founded on principles of equity and is designed to
prevent injustice and unfairness. It applies when persons assume to
form a corporation and exercise corporate functions and enter into
business relations with third persons. Where there is no third
person involved and the conflict arises only among those assuming
the form of a corporation, who therefore know that it has not been
registered, there is no corporation by estoppel. EATcHD
D E C I S I O N PUNO, J p: This petition for certiorari seeks to
annul and set aside the decision of the Regional Trial Court,
Branch 58, Angeles City which ordered the Municipal Circuit Trial
Court, Mabalacat and Magalang, Pampanga to dismiss Civil Case No.
1214 for lack of jurisdiction. The facts are undisputed. On
December 19, 1995, petitioner Reynaldo M. Lozano filed Civil Case
No. 1214 for damages against respondent Antonio Anda before the
Municipal Circuit Trial Court (MCTC), Mabalacat and Magalang,
Pampanga. Petitioner alleged that he was the president of the
Kapatirang Mabalacat-Angeles Jeepney Drivers' Association, Inc.
(KAMAJDA) while respondent Anda was the president of the Samahang
Angeles-Mabalacat Jeepney Operators' and Drivers' Association, Inc.
(SAMAJODA); in August 1995, upon the request of the Sangguniang
Bayan of Mabalacat, Pampanga, petitioner and private respondent
agreed to consolidate their respective associations and form the
Unified Mabalacat-Angeles Jeepney Operators' and Drivers'
Association, Inc. (UMAJODA); petitioner and private respondent also
agreed to elect one set of officers who shall be given the sole
authority to collect the daily dues from the members of the
consolidated association; elections were held on October 29, 1995
and both petitioner and private respondent ran for president;
petitioner won; private respondent protested and, alleging fraud,
refused to recognize the results of the election; private
respondent also refused to abide by their agreement
-
and continued collecting the dues from the members of his
association despite several demands to desist. Petitioner was thus
constrained to file the complaint to restrain private respondent
from collecting the dues and to order him to pay damages in the
amount of P25,000.00 and attorney's fees of P500.00. 1 Private
respondent moved to dismiss the complaint for lack of jurisdiction,
claiming that jurisdiction was lodged with the Securities and
Exchange Commission (SEC). The MCTC denied the motion on February
9, 1996. 2 It denied reconsideration on March 8, 1996. 3 Private
respondent filed a petition for certiorari before the Regional
Trial Court, Branch 58, Angeles City. 4 The trial court found the
dispute to be intracorporate, hence, subject to the jurisdiction of
the SEC, and ordered the MCTC to dismiss Civil Case No. 1214
accordingly. 5 It denied reconsideration on May 31, 1996. 6 Hence
this petition. Petitioner claims that:
"THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION AND SERIOUS ERROR OF
LAW IN CONCLUDING THAT THE SECURITIES AND EXCHANGE COMMISSION HAS
JURISDICTION OVER A CASE OF DAMAGES BETWEEN HEADS/PRESIDENTS OF TWO
(2) ASSOCIATIONS WHO INTENDED TO CONSOLIDATE/MERGE THEIR
ASSOCIATIONS BUT NOT YET [SIC] APPROVED AND REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION." 7
The jurisdiction of the Securities and Exchange Commission (SEC)
is set forth in Section 5 of Presidential Decree No. 902-A..
Section 5 reads as follows:
"Section 5. . . . [T]he Securities and Exchange Commission [has]
original and exclusive jurisdiction to hear and decide cases
involving: (a) Devices or schemes employed by or any acts of the
board of directors, business associates, its officers or partners,
amounting to fraud and misrepresentation which may be detrimental
to the interest of the public and/or of the stockholders, partners,
members of associations or organizations registered with the
Commission. cdtai (b) Controversies arising out of intracorporate
or partnership relations, between and among stockholders, members
or associates; between any or
all of them and the corporation, partnership or association of
which they are stockholders, members, or associates, respectively;
and between such corporation, partnership or association and the
state insofar as it concerns their individual franchise or right to
exist as such entity. (c) Controversies in the election or
appointment of directors, trustees, officers or managers of such
corporations, partnerships or associations. (d) Petitions of
corporations, partnerships or associations to be declared in the
state of suspension of payments in cases where the corporation,
partnership or association possesses sufficient property to cover
all its debts but foresees the impossibility of meeting them when
they respectively fall due or in cases where the corporation,
partnership or association has no sufficient assets to cover its
liabilities, but is under the management of a Rehabilitation
Receiver or Management Committee created pursuant to this
Decree."
The grant of jurisdiction to the SEC must be viewed in the light
of its nature and function under the law. 8 This jurisdiction is
determined by a concurrence of two elements: (1) the status or
relationship of the parties; and (2) the nature of the question
that is the subject of their controversy. 9 The first element
requires that the controversy must arise out of intracorporate or
partnership relations between and among stockholders, members, or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members
or associates, respectively; and between such corporation,
partnership or association and the State in so far as it concerns
their individual franchises. 10 The second element requires that
the dispute among the parties be intrinsically connected with the
regulation of the corporation, partnership or association or deal
with the internal affairs of the corporation, partnership or
association. 11 After all, the principal function of the SEC is the
supervision and control of corporations, partnerships and
associations with the end in view that investments in these
entities may be encouraged and protected, and their activities
pursued for the promotion of economic development. 12 There is no
intracorporate nor partnership relation between petitioner and
private respondent. The controversy between them arose out of
-
their plan to consolidate their respective jeepney drivers' and
operators' associations into a single common association. This
unified association was, however, still a proposal. It had not been
approved by the SEC, neither had its officers and members submitted
their articles of consolidation in accordance with Sections 78 and
79 of the Corporation Code. Consolidation becomes effective not
upon mere agreement of the members but only upon issuance of the
certificate of consolidation by the SEC. 13 When the SEC, upon
processing and examining the articles of consolidation, is
satisfied that the consolidation of the corporations is not
inconsistent with the provisions of the Corporation Code and
existing laws, it issues a certificate of consolidation which makes
the reorganization official. 14 The new consolidated corporation
comes into existence and the constituent corporations dissolve and
cease to exist. 15 The KAMAJDA and SAMAJODA to which petitioner and
private respondent belong are duly registered with the SEC, but
these associations are two separate entities. The dispute between
petitioner and private respondent is not within the KAMAJDA nor the
SAMAJODA. It is between members of separate and distinct
associations. Petitioner and private respondent have no
intracorporate relation much less do they have an intracorporate
dispute. The SEC therefore has no jurisdiction over the complaint.
The doctrine of corporation by estoppel 16 advanced by private
respondent cannot override jurisdictional requirements.
Jurisdiction is fixed by law and is not subject to the agreement of
the parties. 17 It cannot be acquired through or waived, enlarged
or diminished by, any act or omission of the parties, neither can
it be conferred by the acquiescence of the court. 18 Corporation by
estoppel is founded on principles of equity and is designed to
prevent injustice and unfairness. 19 It applies when persons assume
to form a corporation and exercise corporate functions and enter
into business relations with third persons. Where there is no third
person involved and the conflict arises only among those assuming
the form of a corporation, who therefore know that it has not been
registered there is no corporation by estoppel. 20 IN VIEW WHEREOF,
the petition is granted and the decision dated April 18, 1996 and
the order dated May 31, 1996 of the Regional Trial Court, Branch
58, Angeles City are set aside. The Municipal Circuit Trial Court
of Mabalacat and Magalang, Pampanga is ordered to proceed with
dispatch in resolving Civil Case No. 1214. No costs.
SO ORDERED. Regalado, Romero, Mendoza and Torres, Jr., JJ .,
concur. ||| (Lozano v. De los Santos, G.R. No. 125221, June 19,
1997)
-
THIRD DIVISION [G.R. No. 101897. March 5, 1993.]
LYCEUM OF THE PHILIPPINES, INC., petitioner, vs. COURT OF
APPEALS, LYCEUM OF APARRI, LYCEUM OF CABAGAN, LYCEUM OF
CAMALANIUGAN, INC., LYCEUM OF LALLO, INC., LYCEUM OF TUAO, INC.,
BUHI LYCEUM, CENTRAL LYCEUM OF CATANDUANES, LYCEUM OF SOUTHERN
PHILIPPINES, LYCEUM OF EASTERN MINDANAO, INC. and WESTERN
PANGASINAN LYCEUM, INC., respondents.
Quisumbing, Torres & Evangelista Law Offices and Ambrosio
Padilla for petitioner. Antonio M. Nuyles and Purungan, Chato,
Chato, Tarriela & Tan Law Offices for respondents. Froilan
Siobal for Western Pangasinan Lyceum.
SYLLABUS 1. CORPORATION LAW; CORPORATE NAMES; REGISTRATION OF
PROPOSED NAME WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO THAT OF
ANY EXISTING CORPORATION, PROHIBITED; CONFUSION AND DECEPTION
EFFECTIVELY PRECLUDED BY THE APPENDING OF GEOGRAPHIC NAMES TO THE
WORD "LYCEUM". The Articles of Incorporation of a corporation must,
among other things, set out the name of the corporation. Section 18
of the Corporation Code establishes a restrictive rule insofar as
corporate names are concerned: "Section 18. Corporate name. No
corporate name may be allowed by the Securities an Exchange
Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any
other name already protected by law or is patently deceptive,
confusing or contrary to existing laws. When a change in the
corporate name is approved, the Commission shall issue an amended
certificate of incorporation under the amended name." The policy
underlying the prohibition in Section 18 against the registration
of a corporate name which is "identical or deceptively or
confusingly similar" to that of any existing corporation or which
is "patently deceptive" or "patently confusing" or "contrary to
existing laws," is the avoidance of fraud upon the public which
would have occasion to deal with the entity concerned, the evasion
of legal obligations and duties, and the reduction of difficulties
of administration and supervision over corporations. We do not
consider that the corporate names of private respondent
institutions are "identical with, or deceptively or confusingly
similar" to that of the
petitioner institution. True enough, the corporate names of
private respondent entities all carry the word "Lyceum" but
confusion and deception are effectively precluded by the appending
of geographic names to the word "Lyceum." Thus, we do not believe
that the "Lyceum of Aparri" can be mistaken by the general public
for the Lyceum of the Philippines, or that the "Lyceum of
Camalaniugan" would be confused with the Lyceum of the Philippines.
2. ID.; ID.; DOCTRINE OF SECONDARY MEANING; USE OF WORD "LYCEUM,"
NOT ATTENDED WITH EXCLUSIVITY. It is claimed, however, by
petitioner that the word "Lyceum" has acquired a secondary meaning
in relation to petitioner with the result that word, although
originally a generic, has become appropriable by petitioner to the
exclusion of other institutions like private respondents herein.
The doctrine of secondary meaning originated in the field of
trademark law. Its application has, however, been extended to
corporate names sine the right to use a corporate name to the
exclusion of others is based upon the same principle which
underlies the right to use a particular trademark or tradename. In
Philippine Nut Industry, Inc. v. Standard Brands, Inc., the
doctrine of secondary meaning was elaborated in the following
terms: " . . . a word or phrase originally incapable of exclusive
appropriation with reference to an article on the market, because
geographically or otherwise descriptive, might nevertheless have
been used so long and so exclusively by one producerwith reference
to his article that, in that trade and to that branch of the
purchasing public, the word or phrase has come to mean that the
article was his product." The question which arises, therefore, is
whether or not the use by petitioner of "Lyceum" in its corporate
name has been for such length of timeand with such exclusivity as
to have become associated or identified with the petitioner
institution in the mind of the general public (or at least that
portion of the general public which has to do with schools). The
Court of Appeals recognized this issue and answered it in the
negative: "Under the doctrine of secondary meaning, a word or
phrase originally incapable of exclusive appropriation with
reference to an article in the market, because geographical or
otherwise descriptive might nevertheless have been used so long and
so exclusively by one producer with reference to this article that,
in that trade and to that group of the purchasing public, the word
or phrase has come to mean that the article was his produce (Ana
Ang vs. Toribio Teodoro, 74 Phil. 56). This circumstance has been
referred to as the distinctiveness into which the name or phrase
has evolved through the substantial and exclusive use of the same
for a considerable period of time. . . . No
-
evidence was ever presented in the hearing before the Commission
which sufficiently proved that the word 'Lyceum' has indeed
acquired secondary meaning in favor of the appellant. If there was
any of this kind, the same tend to prove only that the appellant
had been using the disputed word for a long period of time. . . .
In other words, while the appellant may have proved that it had
been using the word 'Lyceum' for a long period of time, this fact
alone did not amount to mean that the said word had acquired
secondary meaning in its favor because the appellant failed to
prove that it had been using the same word all by itself to the
exclusion of others. More so, there was no evidence presented to
prove that confusion will surely arise if the same word were to be
used by other educational institutions. Consequently, the
allegations of the appellant in its first two assigned errors must
necessarily fail." We agree with the Court of Appeals. The number
alone of the private respondents in the case at bar suggests
strongly that petitioner's use of the word "Lyceum" has not been
attended with the exclusivity essential for applicability of the
doctrine of secondary meaning. Petitioner's use of the word
"Lyceum" was not exclusive but was in truth shared with the Western
Pangasinan Lyceum and a little later with other private respondent
institutions which registered with the SEC using "Lyceum" as part
of their corporation names. There may well be other schools using
Lyceum or Liceo in their names, but not registered with the SEC
because they have not adopted the corporate form of organization.
3. ID.; ID.; MUST BE EVALUATED IN THEIR ENTIRETY TO DETERMINE
WHETHER THEY ARE CONFUSINGLY OR DECEPTIVELY SIMILAR TO ANOTHER
CORPORATE ENTITY'S NAME. petitioner institution is not entitled to
a legally enforceable exclusive right to use the word "Lyceum" in
its corporate name and that other institutions may use "Lyceum" as
part of their corporate names. To determine whether a given
corporate name is "identical" or "confusingly or deceptively
similar" with another entity's corporate name, it is not enough to
ascertain the presence of "Lyceum" or "Liceo" in both names. One
must evaluate corporate names in their entirety and when the name
of petitioner is juxtaposed with the names of private respondents,
they are not reasonably regarded as "identical" or "confusingly or
deceptively similar" with each other.
D E C I S I O N FELICIANO, J p:
Petitioner is an educational institution duly registered with
the Securities and Exchange Commission ("SEC"). When it first
registered with the SEC on 21 September 1950, it used the
corporate
name Lyceum of the Philippines, Inc. and has used that name ever
since.
On 24 February 1984, petitioner instituted proceedings before
the SEC to compel the private respondents, which are also
educational institutions, to delete the word "Lyceum" from their
corporate names and permanently to enjoin them from using "Lyceum"
as part of their respective names. prLL
Some of the private respondents actively participated in the
proceedings before the SEC. These are the following, the dates of
their original SEC registration being set out below opposite their
respective names:
Western Pangasinan Lyceum 27 October 1950 Lyceum of Cabagan 31
October 1962 Lyceum of Lallo, Inc. 26 March 1972 Lyceum of Aparri
28 March 1972 Lyceum of Tuao, Inc. 28 March 1972 Lyceum of
Camalaniugan 28 March 1972
The following private respondents were declared in default for
failure to file an answer despite service of summons:
Buhi Lyceum; Central Lyceum of Catanduanes; Lyceum of Eastern
Mindanao, Inc.; and Lyceum of Southern Philippines
Petitioner's original complaint before the SEC had included
three (3) other entities:
1. The Lyceum of Malacanay; 2. The Lyceum of Marbel; and 3. The
Lyceum of Araullo
The complaint was later withdrawn insofar as concerned the
Lyceum of Malacanay and the Lyceum of Marbel, for failure to serve
summons upon these two (2) entities. The case against the Liceum of
Araullo was dismissed when that school motu proprio change its
corporate name to "Pamantasan ng Araullo."
The background of the case at bar needs some recounting.
Petitioner had sometime before commenced in the SEC a proceeding
(SEC-Case No. 1241) against the Lyceum of Baguio, Inc. to require
it to change its corporate name and to adopt another name not
"similar [to] or identical" with that of petitioner. In an Order
dated 20 April 1977, Associate Commissioner Julio Sulit held that
the corporate name of petitioner and that of the Lyceum of Baguio,
Inc. were substantially identical because of the presence of a
"dominant" word,
-
i.e., "Lyceum," the name of the geographical location of the
campus being the only word which distinguished one from the other
corporate name. The SEC also noted that petitioner had registered
as a corporation ahead of the Lyceum of Baguio, Inc. in point of
time, 1 and ordered the latter to change its name to another name
"not similar or identical [with]" the names of previously
registered entities. cdrep
The Lyceum of Baguio, Inc. assailed the Order of the SEC
before the Supreme Court in a case docketed as G.R. No. L-46595.
In a Minute Resolution dated 14 September 1977, the Court denied
the Petition for Review for lack of merit. Entry of judgment in
that case was made on 21 October 1977. 2
Armed with the Resolution of this Court in G.R. No. L-46595,
petitioner then wrote all the educational institutions it could
find using the word "Lyceum" as part of their corporate name, and
advised them to discontinue such use of "Lyceum." When, with the
passage of time, it became clear that this recourse had failed,
petitioner instituted before the SEC SEC-Case No. 2579 to enforce
what petitioner claims as its proprietary right to the word
"Lyceum." The SEC hearing officer rendered a decision sustaining
petitioner's claim to an exclusive right to use the word "Lyceum."
The hearing officer relied upon the SEC ruling in the Lyceum of
Baguio, Inc. case (SEC-Case No. 1241) and held that the word
"Lyceum" was capable of appropriation and that petitioner had
acquired an enforceable exclusive right to the use of that
word.
On appeal, however, by private respondents to the SEC En Banc,
the decision of the hearing officer was reversed and set aside. The
SEC En Banc did not consider the word "Lyceum" to have become so
identified with petitioner as to render use thereof by other
institutions as productive of confusion about the identity of the
schools concerned in the mind of the general public. Unlike its
hearing officer, the SEC En Banc held that the attaching of
geographical names to the word "Lyceum" served sufficiently to
distinguish the schools from one another, especially in view of the
fact that the campuses of petitioner and those of the private
respondents were physically quite remote from each other. 3
Petitioner then went on appeal to the Court of Appeals. In its
Decision dated 28 June 1991, however, the Court of Appeals affirmed
the questioned Orders of the SEC En Banc. 4 Petitioner filed a
motion for reconsideration, without success.
Before this Court, petitioner asserts that the Court of Appeals
committed the following errors:
1. The Court of Appeals erred in holding that the Resolution of
the Supreme Court in G.R. No. L-46595 did not constitute stare
decisis as to apply to this case and in not holding that said
Resolution bound subsequent determinations on the right to
exclusive use of the word Lyceum.
2. The Court of Appeals erred in holding that respondent Western
Pangasinan Lyceum, Inc. was incorporated earlier than
petitioner.
3. The Court of Appeals erred in holding that the word Lyceum
has not acquired a secondary meaning in favor of petitioner.
4. The Court of Appeals erred in holding that Lyceum as a
generic word cannot be appropriated by the petitioner to the
exclusion of others. 5 We will consider all the foregoing ascribed
errors, though not
necessarily seriatim. We begin by noting that the Resolution of
the Court in G.R. No. L-46595 does not, of course, constitute res
adjudicata in respect of the case at bar, since there is no
identity of parties. Neither is stare decisis pertinent, if only
because the SEC En Banc itself has re-examined Associate
Commissioner Sulit's ruling in the Lyceum of Baguio case. The
Minute Resolution of the Court in G.R. No. L-46595 was not a
reasoned adoption of the Sulit ruling.
The Articles of Incorporation of a corporation must, among other
things, set out the name of the corporation. 6 Section 18 of the
Corporation Code establishes a restrictive rule insofar as
corporate names are concerned:
"SECTION 18. Corporate name. No corporate name may be allowed by
the Securities an Exchange Commission if the proposed name
isidentical or deceptively or confusingly similar to that of any
existing corporation or to any other name already protected by law
or is patently deceptive, confusing or contrary to existing laws.
When a change in the corporate name is approved, the Commission
shall issue an amended certificate of incorporation under the
amended name." (Emphasis supplied)
The policy underlying the prohibition in Section 18 against the
registration of a corporate name which is "identical or deceptively
or
-
confusingly similar" to that of any existing corporation or
which is "patently deceptive" or "patently confusing" or "contrary
to existing laws," is the avoidance of fraud upon the public which
would have occasion to deal with the entity concerned, the evasion
of legal obligations and duties, and the reduction of difficulties
of administration and supervision over corporations. 7
We do not consider that the corporate names of private
respondent institutions are "identical with, or deceptively or
confusingly similar" to that of the petitioner institution. True
enough, the corporate names of private respondent entities all
carry the word "Lyceum" but confusion and deception are effectively
precluded by the appending of geographic names to the word
"Lyceum." Thus, we do not believe that the "Lyceum of Aparri" can
be mistaken by the general public for the Lyceum of the
Philippines, or that the "Lyceum of Camalaniugan" would be confused
with the Lyceum of the Philippines. LLphil
Etymologically, the word "Lyceum" is the Latin word for the
Greek lykeion which in turn referred to a locality on the river
Ilissius in ancient Athens "comprising an enclosure dedicated to
Apollo and adorned with fountains and buildings erected by
Pisistratus, Pericles and Lycurgus frequented by the youth for
exercise and by the philosopher Aristotle and his followers for
teaching." 8 In time, the word "Lyceum" became associated with
schools and other institutions providing public lectures and
concerts and public discussions. Thus today, the word "Lyceum"
generally refers to a school or an institution of learning. While
the Latin word "lyceum" has been incorporated into the English
language, the word is also found in Spanish (liceo) and in French
(lycee). As the Court of Appeals noted in its Decision, Roman
Catholic schools frequently use the term; e.g., "Liceo de Manila,"
"Liceo de Baleno" (in Baleno, Masbate), "Liceo de Masbate," "Liceo
de Albay." 9 "Lyceum" is in fact as generic in character as the
word "university." In the name of the petitioner, "Lyceum" appears
to be a substitute for "university;" in other places, however,
"Lyceum," or "Liceo" or "Lycee" frequently denotes a secondary
school or a college. It may be (though this is a question of fact
which we need not resolve) that the use of the word "Lyceum" may
not yet be as widespread as the use of "university," but it is
clear that a not inconsiderable number of educational institutions
have adopted "Lyceum" or "Liceo" as part of their corporate names.
Since "Lyceum" or "Liceo" denotes a school or institution of
learning, it is not unnatural to use this word to
designate an entity which is organized and operating as an
educational institution.
It is claimed, however, by petitioner that the word "Lyceum" has
acquired a secondary meaning in relation to petitioner with the
result that that word, although originally a generic, has become
appropriable by petitioner to the exclusion of other institutions
like private respondents herein.
The doctrine of secondary meaning originated in the field of
trademark law. Its application has, however, been extended to
corporate names sine the right to use a corporate name to the
exclusion of others is based upon the same principle which
underlies the right to use a particular trademark or tradename. 10
In Philippine Nut Industry, Inc. v. Standard Brands, Inc., 11 the
doctrine of secondary meaning was elaborated in the following
terms:
" . . . a word or phrase originally incapable of exclusive
appropriation with reference to an article on the market, because
geographically or otherwise descriptive, might nevertheless have
been used so long and so exclusively by one producer with reference
to his article that, in that trade and to that branch of the
purchasing public, the word or phrase has come to mean that the
arti