Collector of Internal Revenue vs. Club Filipino, Inc.

de Cebu, 5 SCRA 321,

May 31, 1962

FACTS:

Club Filipino, Inc. de Cebu is a civic corporation with an original authorized capital stock
of P22,000.00, which was subsequently increased to P200,000.00, among others, to it
provide, operate, and maintain x x x all sorts of games not prohibited under general laws
and general ordinances; and develop and cultivate sports of every kind and any
denomination for recreation and healthy training of its members and shareholders.

The Club owns and operates a club house, a bowling alley, a golf course, and a bar-
restaurant for its members and their guests, which was a necessary incident to the
operation of the club. The club is operated mainly with funds derived from membership
fees and dues.

As a result of a capital surplus, arising from the increased value due to the revaluation of
its real properties, the Club declared stock dividends; but no actual cash dividends were
distributed to the stockholders.

A BIR agent discovered that the Club has never paid percentage tax on the gross receipts
of its bar and restaurant. The Collector of Internal Revenue assessed against and
demanded from the Club the unpaid percentage tax on the gross receipts plus surcharges.
The Club requested for the cancellation of the assessment. The request having been
denied, the Club filed the instant petition for review.

ISSUE:

Whether or not Club Filipino is a stock corporation.

HELD:

NO. It is a non-stock corporation.

The fact that the capital stock of the respondent Club is divided into shares does not
detract from the finding of the trial court that it is not engaged in the business of operator
of bar and restaurant. What is determinative of whether or not the Club is engaged in
such business is its object or purpose, as stated in its articles and by-laws. It is a familiar
rule that the actual purpose is not controlled by the corporate form or by the commercial
aspect of the business prosecuted, but may be shown by extrinsic evidence, including the
by-laws and the method of operation. From the extrinsic evidence adduced, the Tax Court
concluded that the Club is not engaged in the business as a barkeeper and restaurateur.

Moreover, for a stock corporation to exist, two requisites must be complied with, to wit: (1)
a capital stock divided into shares and (2) an authority to distribute to the holders of such
shares, dividends or allotments of the surplus profits on the basis of the shares held (sec.
3, Act No. 1459). In the case at bar, nowhere in its articles of incorporation or by-laws
could be found an authority for the distribution of its dividends or surplus profits. Strictly
speaking, it cannot, therefore, be considered a stock corporation, within the
contemplation of the corporation law.

ESCRA

Same; Words and Phrases; "Business", meaning of.The plain and ordinary meaning of
business is restricted to activities or affairs where profit is the purpose or livelihood is the
motive, and the term business when used without qualification, should be construed in its
plain and ordinary meaning, restricted to activities for profit or livelihood.

Same; Club Filipino, Inc. de Cebu; Not engaged in bar and restaurant.The Club
Filipino, Inc. de Cebu was organized to develop and cultivate sports of all class and
denomination, for the healthful recreation and entertainment of its stockholders and
members; that upon its dissolution, its remaining assets, after paying debts shall be
donated to a charitable Philippine Institution in Cebu; that it is operated mainly with
funds derived from membership fees and dues; that the Club's bar and restaurant catered
only to its members and their guests; that there was in fact no cash dividend distribution
to its stockholders and that whatever was derived on retail from its bar and restaurant
was used to defray its overall overhead expenses and to improve its golf course (cost-plus-
expenses-basis), it stands to reason that the Club is not engaged in the business of an
operator of bar and restaurant. Collector of Internal Revenue vs. Club Filipino, Inc. de
Cebu, 5 SCRA 321, No. L-12719 May 31, 1962

1. Alhambra Cigar & Cigarette Manufacturing Co., Inc. vs. Securities and Exchange
Commission, 24 SCRA 269, July 29, 1968
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, Alhambras board cannot validly amend its articles of incorporation to extend its
lifespan.

ESCRA
Corporation law; Term of existence; Amendment of articles of incorporation after expiration of its
corporate life.A corporation cannot extend its life by amendment of its articles of incorporation
effected during the three-year statutory period for liquidation when its original term of existence had
already expired.Since the privilege of extension is purely statutory, all of the statutory conditions
precedent must be complied with in order that the extension may be effectuated. And, generally, these
conditions must be complied with, and the steps necessary to effect the extension must be taken, during
the life of the corporation, and before the expiration of its term of existence as originally fixed by its
charter or the general law, since, as a rule, the corporation is ipso facto dissolved as soon as that time
expires (8 Fletcher, Cyclopedia of Corporations, Perm. ed., 1931, pp. 559-560). Alhambra Cigar &
Cigarette Manufacturing Co., Inc. vs. Securities and Exchange Commission, 24 SCRA 269, No. L-
23606 July 29, 1968

2. Philips Export B.V. vs. Court of Appeals, 206 SCRA 457, February 21, 1992
Corporate Trade Name - A corporations 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 corporations 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.
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.

ESCRA
Corporation Law; Trademarks; A corporations right to use its corporate and trade name is a property
right, a right in rem which it may assert and protect against the world in the same manner as it may
protect its tangible property, real or personal against trespass or conversion.As early as Western
Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporations right
to use its corporate and trade name is a property right, a right in rem, which it may assert and protect
against the world in the same manner as it may protect its tangible property, real or personal, against
trespass or conversion. It is regarded, to a certain extent, as a property right and one which cannot be
impaired or defeated by subsequent appropriation by another corporation in the same field.Philips
Export B.V. vs. Court of Appeals, 206 SCRA 457, G.R. No. 96161 February 21, 1992

Same; Same; Same; The general rule as to corporations is that each corporation must have a name by
which it is to sue and be sued and do all legal acts.A name is peculiarly important as necessary to the
very existence of a corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46
S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling
Co. 40 W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence, and essential
to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each
corporation must have a name by which it is to sue and be sued and do all legal acts. The name of a
corporation in this respect designates the corporation in the same manner as the name of an individual
designates the person (Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics
Mfg. Co. vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a part of the
corporate franchise as any other privilege granted. Philips Export B.V. vs. Court of Appeals, 206 SCRA
457, G.R. No. 96161 February 21, 1992

Same; Same; Same; A corporation can no more use a corporate name in violation of the rights of others
than an individual can use his name legally acquired so as to mislead the public and injure another.A
corporation acquires its name by choice and need not select a name identical with or similar to one
already appropriated by a senior corporation while an individuals name is thrust upon him (See
Standard Oil Co. of New Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A
corporation can no more use a corporate name in violation of the rights of others than an individual can
use his name legally acquired so as to mislead the public and injure another. Philips Export B.V. vs.
Court of Appeals, 206 SCRA 457, G.R. No. 96161 February 21, 1992

Same; Same; Same; The right to the exclusive use of a corporate name with freedom from infringement
by similarity is determined by priority of adoption.The right to the exclusive use of a corporate name
with freedom from infringement by similarity is determined by priority of adoption (1 Thompson, p. 80
citing Munn v. Americana Co., 82 N., Eq. 63, 88 Atl. 30; San Francisco Oyster House v. Mihich, 75
Wash. 274; 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners prior adoption of
the name PHILIPS as part of its corporate name. Petitioners Philips Electrical and Philips Industrial
were incorporated on 29 August 1956 and 25 May 1956, respectively, while Respondent Standard
Philips was issued a Certificate of Registration on 19 April 1982, twenty-six (26) years later (Rollo, p.
16). Petitioner PEBV has also used the trademark PHILIPS on electrical lamps of all types and their
accessories since 30 September 1922, as evidenced by Certificate of Registration No. 1651. Philips
Export B.V. vs. Court of Appeals, 206 SCRA 457, G.R. No. 96161 February 21, 1992

Same; Same; Same; In determining the existence of confusing similarity in corporate name, the test is
whether the similarity is such as to mislead a person using ordinary care and discrimination.The
second requisite no less exists in this case. In determining the existence of confusing similarity in
corporate names, the test is whether the similarity is such as to mislead a person using ordinary care
and discrimination. In so doing, the Court must look to the record as well as the names themselves
(Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of
Petitioners and Private Respondent are not identical, a reading of Petitioners corporate names, to wit:
PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL
DEVELOPMENT, INC., inevitably leads one to conclude that PHILIPS is, indeed, the dominant
word in that all the companies affiliated or associated with the principal corporation, PEBV, are known
in the Philippines and abroad as the PHILIPS Group of Companies.

Same; Same; Same; Same; It is settled that proof of actual confusion need not be shown; It suffices that
confusion is probably or likely to occur.Respondents maintain, however, that Petitioners did not
present an iota of proof of actual confusion or deception of the public much less a single purchaser of
their product who has been deceived or confused or showed any likelihood of confusion. It is settled,
however, that proof of actual confusion need not be shown. It suffices that confusion is probably or
likely to occur.Same; Same; Same; A corporation has an exclusive right to the use of its name which
may be protected by injunction upon a principle similar to that upon which persons are protected in the
use of trademarks and tradenames.What is lost sight of, however, is that PHILIPS is a trademark or
trade name which was registered as far back as 1922. Petitioners, therefore, have the exclusive right to
its use which must be free from any infringement by similarity. A corporation has an exclusive right to
the use of its name, which may be protected by injunction upon a principle similar to that upon which
persons are protected in the use of trademarks and tradenames (18 C.J.S 574). Such principle proceeds
upon the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps
carried on its business thereunder, that another should attempt to use the same name, or the same name
with a slight variation in such a way as to induce persons to deal with it in the belief that they are
dealing with the corporation which has given a reputation to the name. Philips Export B.V. vs. Court of
Appeals, 206 SCRA 457, G.R. No. 96161 February 21, 1992

3. Laureano Investment and Development Corporation vs. Court of Appeals, 272 SCRA 253, May 06,
1997
G.R. No. 100468 272 Scra 253
May 6, 1997
By: Karen P. Lustica

Facts: Spouses Reynaldo Laureano and Florence Laureano are majority stockholders of LAUREANO
INVESTMENT & DEVELOPMENT CORPORATION. They entered into a series of loan and credit
transactions with Philippine National Cooperative Bank (PNCB). To secure payment of the loans, they
executed Deeds of Real Estate Mortgage. In view of their failure to pay their indebtedness, PNCB
applied for extrajudicial foreclosure of the real estate mortgages.

Bormaheco, Inc. became the successor of the obligations and liabilities of PNCB over subject lots by
virtue of a Deed of Sale/Assignment.

Bormaheco, Inc. 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. A motion for intervention was filed by
LIDECO Corporation 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. Bormahecos 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.

Both the lower court and CA rendered a decision in favor of Bormaheco.

Issue: May a plaintiff/petitioner which purports to be a corporation validly bring suit under a name
other than that registered with the Securities and Exchange Commission?

Held: No.

Ratio: Section 1, Rule 3 of the Rules of Court provides that only natural or juridical persons or
entities authorized by law may be parties to a civil action. Under the Civil Code, a corporation has
a legal personality of its own (Article 44), and may sue or be sued in its name, in conformity with
the laws and regulations of its organization (Article 46). Additionally, Article 36 of the Corporation
Code similarly provides:

Art. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the
power and capacity:

1. To sue and be sued in its corporate name;

In the case at bar, Lideco Corporation had no personality to intervene since it had not been duly
registered as a corporation. If petitioner legally and truly wanted to intervene, it should have
used its corporate name as the law requires and not another name which it had not registered.
Indeed, as the Respondent Court found, nowhere in the motion for intervention and complaint in
intervention does it appear that Lideco Corporation stands for Laureano Investment and
Development Corporation. Bormaheco, Inc., thus, was not estopped from questioning the juridical
personality of Lideco Corporation, even after the trial court had allowed it to intervene in the case.

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.

Dispositive: The petition is hereby DENIED.

ESCRA
Same; Same; Actions; Parties; Only natural or juridical persons or entities authorized by law m ay be
parties to a civil action.Section 1, Rule 3 of the Rules of Court provides that only natural or juridical
persons or entities authorized by law may be parties to a civil action. Under the Civil Code, a
corporation has a legal personality of its own (Article 44), and may sue or be sued in its name, in
conformity with the laws and regulations of its organization (Article 46). Laureano Investment and
Development Corporation vs. Court of Appeals, 272 SCRA 253, G.R. No. 100468 May 6, 1997

Same; Same; Same; Same; Lideco Corporation had no personality to intervene since it had not been
duly registered as a corporation.Additionally, Article 36 of the Corporation Code similarly provides:
Article 36. Corporate powers and capacity.Every corporation incorporated under this Code has the
power and capacity: 1. To sue and be sued in its corporate name; x x x (italics supplied) As the trial
and appellate courts have held, Lideco Corporation had no personality to intervene since it had not
been duly registered as a corporation. If petitioner legally and truly wanted to intervene, it should have
used its corporate name as the law requires and not another name which it had not registered. Indeed, as
the Respondent Court found, nowhere in the motion for intervention and complaint in intervention does
it appear that Lideco Corporation stands for Laureano Investment and Development Corporation.
Bormaheco, Inc., thus, was not estopped from questioning the juridical personality of Lideco
Corporation, even after the trial court had allowed it to intervene in the case.Laureano Investment and
Development Corporation vs. Court of Appeals, 272 SCRA 253, G.R. No. 100468 May 6, 1997

4. Gala vs. Ellice Agro-Industrial Corporation, 418 SCRA 431, December 11,
2003
Doctrine: The legal right of a taxpayer to reduce the amount of what otherwise, could be his taxes or
altogether to avoid them, by means which the law permits, could be doubted

Facts:
The spouses Manuel and Alicia Gala and their children Guia Domingo, Ofelia Gala, Raul Gala and Rita
Benson, and their encargados (rough translation; representatives) VirgilioGaleon and Julian Jader,
formed and organized Ellice Agro Industrial Corporation (Ellice). As payment for their subscriptions
the Spouses Gala transferred several parcles of land to Ellice. Subsequently, the children and the
encargados formed and organized another corporation, Margo Management and Development
Corporation (Margo). The father, Manuel Gala, sold his shares in Ellice to Margo. Subsequently, Alicia
transferred her shares to Margo.

In 1990, a special stockholders meeting of Margo was held where a new board of directors was
elected. Raul Gala was elected as chairman, president, and general manager. During the meeting, the
board approved the commencement of proceeding to annul the dispositions of Margoss property made
by Alicia Gala. Similarity, a special stockholders meeting was held in Ellice. A new board was
elected and Raul Gala also became chairman, president and GM of Ellice, Raul Gala along with the
respondents filed a case against the petitiones in the SEC for accounting and restitution for alleged
mismanagement of funds of Ellice. In turn the petitioners filed in the SEC a petition for the
nullification of the election of directors of officers of both Margo and Ellice. Essentially, petitioners
sought to disregard the separate juridical personalities of two corporations, namely, Ellice Agro-
Industrial Corporation and Margo Management and Development Corporation, for the purpose of
treating all property purportedly owned by said corporations as properly solely owned by the Gala
Spouses. Among their arguments were: (1) said corporations were organized for purpose of exempting
the property the property of the Gala Spouses from the coverage of land reform laws, and (2) the two
corporations were meant to be used as mere tools for the avoidance of estate taxes.

Issue:
Whether the separate juridical personalities of Ellice and Margo could be disregard on the grounds that
they were meant to be tools to avoid land reform laws and estate taxes.

Held:
NO, a perusal of the Articles of Incorporation of Ellice and Margo shows no sign of the allegedly
illegal purposes that petitioners are complaining of. And even assuming that the petitioners allegations
were true, the legality of the purposes for which the two corporations were formed should be first
threshed out in an administrative case before the Securities and Exchange Commission. (Doctrine of
Primary Jurisdiction). Moreover, on the contention that Ellice and Margo were meant to be tools for the
avoidance of estate taxes, the court said 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. (citing: Liddel& Co., Inc c. CIR)
Note: Simplified, this case is about a feud between family members who organized two corporation.
Petitioners are Alicia Gala (mother), Guia Domingo (sister), and Rita Benson (Sister), Respondents are
Raul Gala (brother), Ellice Inc., and Margo Inc. (the family corporations)

ESCRA
Corporation Law; Actions; Collateral attacks on the legality of the purposes for
which a corporation was organized are prohibited in this jurisdiction.The
petitioners first contention in support of this theory is that 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. Furthermore, they alleged that respondent corporations were run without
any of the conventional corporate formalities. At the outset, 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.

Same; If a corporations 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.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. It is well to note
that, if a corporations 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.

Same; Administrative Law; Doctrine of Primary Jurisdiction; Agrarian Reform;

Jurisdiction; Taxation; 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;
Primary jurisdiction over any violation of Section 13 of RA. No. 3844 that may
have been committed is vested in the Department of Agrarian Reform
Adjudication Board (DARAB); 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.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. Since primary
jurisdiction over any violation of Section 13 of Republic Act No. 3844 that may
have been committed is vested in the Department of Agrarian Reform
Adjudication Board (DARAB), then it is with said administrative agency that the
petitioners must first plead their case. 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 to 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. Gala vs. Ellice Agro-Industrial Corporation, 418 SCRA
431, G.R. No. 156819 December 11, 2003

Corporation Law; To warrant resort to the extraordinary remedy of piercing the

veil of corporate fiction, there must be proof that the corporation is being used as
a cloak or cover for fraud or illegality, or to work injustice.Finally, the petitioners
pray that the veil of corporate fiction that shroud both Ellice and Margo be
pierced, consistent with their earlier allegation that both corporations were
formed for purposes contrary to law and public policy. In sum, they submit that
the respondent corporations are mere business conduits of the deceased Manuel
Gala and thus may be disregarded to prevent injustice, the distortion or hiding of
the truth or the letting in of a just defense. However, to warrant resort to the
extraordinary remedy of piercing the veil of corporate fiction, there must be proof
that the corporation is being used as a cloak or cover for fraud or illegality, or to
work injustice, and the petitioners have failed to prove that Ellice and Margo were
being used thus. They have not presented any evidence to show how the
separate juridical entities of Ellice and Margo were used by the respondents to
commit fraudulent, illegal or unjust acts. Hence, this contention, too, must fail.
Gala vs. Ellice Agro-Industrial Corporation, 418 SCRA 431, G.R. No. 156819
December 11, 2003

Same; Close Corporations; The concept of a close corporation organized for the
purpose of running a family business or managing family property has formed the
backbone of Philippine commerce and industry; A family corporation should serve
as a rallying point for family unity and prosperity, not as a flashpoint for familial
strife.It is always sad to see families torn apart by money matters and property
disputes. The concept of a close corporation organized for the purpose of running
a family business or managing family property has formed the backbone of
Philippine commerce and industry. Through this device, Filipino families have
been able to turn their humble, hard-earned life savings into going concerns
capable of providing them and their families with a modicum of material comfort
and financial security as a reward for years of hard work. A family corporation
should serve as a rallying point for family unity and prosperity, not as a flashpoint
for familial strife. It is hoped that people reacquaint themselves with the concepts
of mutual aid and security that are the original driving forces behind the
formation of family corporations and use these tenets in order to facilitate more
civil, if not more amicable, settlements of family corporate disputes. Gala vs.
Ellice Agro-Industrial Corporation, 418 SCRA 431, G.R. No. 156819 December 11,
2003

5. Young Auto Supply Co. vs. Court of Appeals, 223 SCRA 670, June 25, 1993
1. Young Auto Supply Co Inc. (YASCO) represented by Nemesio Garcia, its president, Nelson Garcia and Vicente
Sy, sold all of their shares of stock in Consolidated Marketing & Development Corporation (CMDC) to Roxas.
Purchase Price: 8M; Downpayment: 4M; Balance: 4M in four postdated checks of 1M each.
2. After the execution of the agreement, Roxas took full control of the four markets of CMDC. However, the
vendors held on to the stock certificates of CMDC as security pending full payment of the balance of the
purchase price.
3. The first check representing the downpayment was honored by the drawee bank but the four other checks
representing the balance of 4M was dishonored. In the meantime, Roxas sold one of the markets to a third party
for the amount of 600K, leaving a balance of 3.4M.
4. Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of the sale of CMDC shares to
 Nemesio Garcia.
5. Petitioners filed a complaint against Roxas in the RTC praying that Roxas be ordered to pay petitioners the sum
of 3.4M or that full control of the three markets be turned over to YASCO and Garcia. The complaint also prayed
for the forfeiture of the partial payment of P4,600,000.00 and the payment of attorney's fees and costs.
6. Failing to submit his answer, the trial court declared Roxas in default. The order of default was, however, lifted
upon motion of Roxas.
7. Roxas filed a motion to dismiss. After a hearing, wherein testimonial and documentary evidence were
presented by both parties, the trial court denied Roxas' motion to dismiss.
8. After receiving said order, Roxas filed another motion for extension of time to submit his
answer. He also filed a motion for reconsideration, which the trial court denied for being pro-forma.
9. Roxas was again declared in default, on the ground that his motion for reconsideration did not toll the running of
the period to file his answer.
10. On 3 May 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not accompanied with
the required affidavit of merit. But without waiting for the resolution of the motion, he filed a petition for certiorari
with the Court of Appeals. The Court of Appeals dismissal of the complaint on the ground of improper venue.
11. A subsequent motion for reconsideration by YASCO was to no avail. YASCO and Garcia filed
the petition.
Issue: Whether the venue for the case against YASCO and Garcia in Cebu City was improperly laid.
Held: A corporation has no residence in the same sense in which this term is applied to a natural person.
But for practical purposes, a corporation is in a metaphysical sense a resident of the place where its
principal office is located as stated in the articles of incorporation. The Corporation Code precisely requires each
corporation to specify in its articles of incorporation the "place where the principal office of the corporation is to be located
which must be within the Philippines." The purpose of this requirement is to fix the residence of a corporation in a definite
place, instead of allowing it to be ambulatory. Actions cannot be filed against a corporation in any place where the
corporation maintains its branch offices. The Court ruled that to allow an action to be instituted in any place where the
corporation has branch offices, would create confusion and work untold inconvenience to said entity. By the same token, a
corporation cannot be allowed to file personal actions in a place other than its principal place of business unless such a
place is also the residence of a co-plaintiff or a defendant. With the finding that the residence of YASCO for purposes of
venue is in Cebu City, where its principal place of business is located, it becomes unnecessary to decide whether Garcia is
also a resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the venue.
The decision of the Court of Appeals was set aside

ESCRA
Remedial Law; Actions; Venue; A corporation is in a metaphysical sense a
resident of the place where its principal office is located as stated in the articles of
incorporation.A corporation has no residence in the same sense in which this
term is applied to a natural person. But for practical purposes, a corporation is in
a metaphysical sense a resident of the place where its principal office is located
as stated in the articles of incorporation (Cohen v. Benguet Commercial Co., Ltd.,
34 Phil. 526 [1916] Clavecilla Radio System v. Antillon, 19 SCRA 379 [1967]).
The Corporation Code precisely requires each corporation to specify in its articles
of incorporation the place where the principal office of the corporation is to be
located which must be within the Philippines (Sec. 14 [3]). The purpose of this
requirement is to fix the residence of a corporation in a definite place, instead of
allowing it to be ambulatory.Same; Same; Same; A corporation cannot be
allowed to file personal actions in a place other than its principal place of business
unless such a place is also the residence of a co-plaintiff or a defendant.In
Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained
why actions cannot be filed against a corporation in any place where the
corporation maintains its branch offices. The Court ruled that to allow an action to
be instituted in any place where the corporation has branch offices, would create
confusion and work untold inconvenience to said entity. By the same token, a
corporation cannot be allowed to file personal actions in a place other than its
principal place of business unless such a place is also the residence of a co-
plaintiff or a defendant. Young Auto Supply Co. vs. Court of Appeals, 223 SCRA
670, G.R. No. 104175 June 25, 1993

6. Republic Planters Bank vs. Court of Appeals, 216 SCRA 738, December 21,
1992

16 SCRA 738 Mercantile Law Business Organization Corporation Law

Liability of Officers Exception Change of Corporate Name
In 1979, World Garment Manufacturing (WGM), 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
However, no payment was made to RPB and the latter sued (WGM) in February 1982. In December
1982, WGM changed its name to Pinch Manufacturing Corporation (PMC). The trial court ruled that
Canlas as well as the other signatory of the promissory note as solidarily liable for the amount stated
therein. Only Canlas appealed. He averred that he cannot be held liable solidarily because in signing
the promissory note, he did so within the scope and authority granted to him by the corporate board
hence he should not be liable. The Court of Appeals agreed with him. The CA also ruled that the
change of name of WGM to PMC extinguished the personality of WGM and hence so is its liability.
ISSUE: Whether or not the Court of Appeals is correct.
HELD: No. The change of name did not create a new corporation. Nor did it render PMC the successor
of WGM. There is still only one corporation to speak of here. It is the same corporation with a different
name, and its character is in no respect changed. 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. The corporation continues, as before,
responsible in its new name for all debts or other liabilities which it had previously contracted or
incurred.
Anent the issue of the liability of Canlas as treasurer of WGM, it is true that 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. However, under the Negotiable Instruments Law,
agents who sign a promissory note without indicating their capacity as such and without disclosing
their principal shall be held personally liable to the promissory note. No parol evidence shall be
admitted to prove the agency. In this case, Canlas signed the promissorny note without indicating that
he did so as agent or treasurer of WGM, hence, he is personally liable pursuant to the Negotiable
Instruments Law.

ESCRA
Corporation Law; The corporation, upon such change in its name, is in no sense a
new corporation, nor the successor 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.

Same; Same; A change in the corporate name does not make a new corporation
and whether affected by special act or under a general law has no effect on the
identity of the corporation or on its property, rights or liabilities.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 effect on the identity of the
corporation, or on its property, rights, or liabilities.

Same; Same; Same; The corporation continues as before responsible in its new
name for all debts or other liabilities which it had previously contracted or
incurred.The corporation continues, as before, responsible in its new name for
all debts or other liabilities which it had previously contracted or incurred.

Same; Same; Same; Same; Generally, 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.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. Republic Planters Bank vs. Court of Appeals, 216 SCRA
738, G.R. No. 93073 December 21, 1992

7. Lyceum of the Philippines, Inc. vs. Court of Appeals, 219 SCRA 610, March 05,
1993

FACTS:
1. Petitioner had sometime commenced before in the SEC a complaint against Lyceum of Baguio, to
require it to change its corporate name and to adopt another name not similar or identical with that of
petitioner. SEC decided in favor of petitioner. Lyceum of Baguio filed petition for certiorari but was
denied for lack of merit.
2. Armed with the resolution of the Court, petitioner instituted before the SEC to compel private
respondents, which are also educational institutions, to delete word Lyceum from their corporate
names and permanently to enjoin them from using such as part of their respective names.
3. Hearing officer sustained the claim of petitioner and held that the word Lyceum was capable of
appropriation and that petitioner had acquired an enforceable right to the use of that word.
4. In an appeal, the decision was reversed by the SEC En Banc. They held that the word Lyceum to
have become identified with petitioner as to render use thereof of other institutions as productive of
consfusion about the identity of the schools concerned in the mind of the general public.
5. Petitioner went to appeal with the CA but the latter just affirmed the decision of the SEC En Banc.

ISSUE:
1. Whether or not the corporate names of the private respondents are identical with or deceptively
similar to that of the petitioner.

2. Whether or not the use by the petitioner of Lyceum in its corporate name has been for such length of
time and with such exclusivity as to have become associated or identified with the petitioner institution
in the mind of the general public (Doctrine of Secondary meaning).

HELD:
1. No. Under the corporation code, no corporate name may be allowed by the SEC 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.
The policy behind this provision is to avoid fraud upon the public, which would have the 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.
The corporate names of private respondents are not identical or deceptively or confusingly similar to
that of petitioners. Confusion and deception has been precluded by the appending of geographic names
to the word Lyceum. Furthermore, the word Lyceum has become associated in time with schools
and other institutions providing public lectures, concerts, and public discussions. Thus, it generally
refers to a school or an institution of learning.
2. No. Petitioner claims that the word has acquired a secondary meaning in relation to petitioner with
the result that the word, although originally generic, has become appropriable by petitioner to the
exclusion of other institutions. The doctrine of secondary meaning is a principle used in trademark law
but has been extended to corporate names since 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. Under this doctrine, 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 for so long and so exclusively by one producer with reference to this article that, in that
trade and to that group of purchasing public, the word or phrase has come to mean that the article was
his produce. The doctrine cannot be made to apply where the evidence didn't prove that the business
has continued for so long a time that it has become of consequence and acquired good will of
considerable value such that its articles and produce have acquired a well known reputation, and
confusion will result by the use of the disputed name.
Petitioner didn't present evidence, which provided that the word Lyceum acquired secondary
meaning. The petitioner failed to adduce evidence that it had exclusive use of the word. Even if
petitioner used the word for a long period of time, it hadnt acquired any 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.

ESCRA

Corporation Law; Names; Fact that other schools use "Lyceum" as part of their
school's name is not a deceptive use thereof relative to Lyceum of the Philippines.
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.

Same; Same; Words and Phrases; "Lyceum" is a generic name.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." 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." "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.

Same; Same; Same; Trademarks; "Secondary meaning," defined.In Philippine

Nut Industry, Inc. v. Standard Brands, Inc., the doctrine of secondary meaning
was elaborated in the following terms: "x x x a word or phrase originally
incapable of exclusive appropriation with reference to an article on the market,
because geographically or otherwise descriptive, might nevertheless have been
used so long and so exclusively by one producer with reference to his article that,
in that trade and to that branch of the purchasing public, the word or phrase has
come to mean that the article was his product."

Same; Same; Same; Same; Lyceum of the Philippines has not gained exclusive
use of "Lyceum" by long passage of time.We agree with the Court of Appeals.
The number alone of the private respondents in the case at bar suggests strongly
that petitioner's use of the word "Lyceum" has not been attended with the
exclusivity essential for applicability of the doctrine of secondary meaning. It may
be noted also that at least one of the private respondents, i.e., the Western
Pangasinan Lyceum, Inc., used the term "Lyceum" seventeen (17) years before
the petitioner registered its own corporate name with the SEC and began using
the word "Lyceum." It follows that if any institution had acquired an exclusive
right to the word "Lyceum," that institution would have been the Western
Pangasinan Lyceum, Inc. rather than the petitioner institution. Lyceum of the
Philippines, Inc. vs. Court of Appeals, 219 SCRA 610, G.R. No. 101897 March 5,
1993

8. People vs. Garcia, 271 SCRA 621, April 18, 1997

271 SCRA 621 Business Organization Corporation Law Corporation By
Estoppel Ostensible Corporation
In 1993, Carlos Garcia, Patricio Botero, and Luisa Miraples were accused of illegal recruitment. It was
alleged that they represented themselves as the incorporators and officers of Ricorn Philippine
International Shipping Lines, Inc.; that Ricorn is a recruitment agency for seamen; that Garcia is the
president, Botero is the vice-president, and Miraples (now at large) is the treasurer. It was later
discovered that Ricorn was never registered with the Securities and Exchange Commission (SEC) and
that it was never authorized to recruit by the Philippine Overseas Employment Agency (POEA). Botero
and Garcia were convicted. Botero appealed.
In his defense, Botero averred that he was not an incorporator; that he was merely an employee of
Ricorn in charge of following up on their documents.
ISSUE: Whether or not Botero is a mere employee of Ricorn.
HELD: No. It was proven by evidence that he was introduced to the applicants as the vice president of
Ricorn. When he was receiving applicants, he was receiving them behind a desk which has a nameplate
representing his name and his position as VP of Ricorn.
But Ricorn was never incorporated? How will this affect his liability in the crime illegal recruitment?
Under the law, if the offender is a corporation, partnership, association or entity, the penalty shall be
imposed upon the officer or officers of the corporation, partnership, association or entity responsible
for violation. In this case, even if Ricorn was not incorporated, Botero and his cohorts are estopped
from denying liability as corporate officers of Ricorn. Section 25 of the Corporation Code provides that
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 the 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.
ESCRA
Same; Same; Same; Corporation Law; 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 the debts, liabilities and damages incurred or arising as a result
thereof.For engaging in recruitment of workers without obtaining the necessary
license from the POEA, Botero should suffer the consequences of Ricorns illegal
act for (i)f the offender is a corporation, partnership, association or entity, the
penalty shall be imposed upon the officer or officers of the corporation,
partnership, association or entity responsible for violation; x x x. The evidence
shows that appellant Botero was one of the incorporators of Ricorn. For reasons
that cannot be discerned from the records, Ricorns incorporation was not
consummated. Even then, appellant cannot avoid his liabilities to the public as an
incorporator of Ricorn. He and his co-accused Garcia held themselves out to the
public as officers of Ricorn. They received money from applicants who availed of
their services. They are thus estopped from claiming that they are not liable as
corporate officials of Ricorn. Section 25 of the Corporation Code provides that
(a)ll 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 the 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. People vs. Garcia, 271 SCRA
621, G.R. No. 117010 April 18, 1997

9. Merrill Lynch Futures, Inc. vs. Court of Appeals, 211 SCRA 824, July 24,
1992
Merrill Lynch Futures, Inc. (MLF) filed a complaint against the spouses Lara for
the recovery of a debt. MLF is a non-resident foreign corp. not doing business in
the Phil., organized under the laws of Delaware, USA. It is a futures commission
merchant duly licensed to act as such in the futures markets and exchanges in
the US, essentially functioning as a broker executing orders to buy and sell
futures contract received from its customers on US futures exchanges. (Futures
contract is a contractual commitment to buy and sell a standardized quantity of a
particular item at a specified future settlement date and at a price agreed upon
with the purchase or sale being executed on a regulated futures exchange.) The
spouses refused to pay and moved to dismiss the case alleging that plaintiff had
no legal capacity to sue because (1) MLF is doing business in the country without
a license; and (2) the transactions were made with Merrill Lynch Pierce, Fenner
and Smith and not with plaintiff MLF.

Issue: Can MLF sue in Philippine courts to establish and enforce its rights against
spouses in light of the undeniable fact that it had transacted business without a
license?

YES. See No. 2 below for the decision of the Court.

ESCRA
1. Same; Corporations; Merrill Lynch Futures, Inc. a foreign corporation is
engaged in business in the Philippines.The Court is satisfied that the facts on
record adequately establish that ML FUTURES, operating in the United States, had
indeed done business with the Lara Spouses in the Philippines over several years,
had done so at all times through Merrill Lynch Philippines, Inc. (MLPI), a
corporation organized in this country, and had executed all these transactions
without ML FUTURES being licensed to so transact business here, and without
MLPI being authorized to operate as a commodity futures trading advisor. These
are the factual findings of both the Trial Court and the Court of Appeals. These,
too, are the conclusions of the Securities & Exchange Commission which denied
MLPIs application to operate as a commodity futures trading advisor, a denial
subsequently affirmed by the Court of Appeals. Prescinding from the proposition
that factual findings of the Court of Appeals are generally conclusive this Court
has been cited to no circumstance of substance to warrant reversal of said
Appellate Courts findings or conclusions in this case.

2. Same; Same; Estoppel; A foreign corporation doing business in the Philippines

may sue in Philippine courts although not authorized to do business here against
a Philippine citizen who had contracted with and been benefited by said
corporation.There would seem to be no question that the Laras received
benefits generated by their business relations with ML FUTURES. Those business
relations, according to the Laras themselves, spanned a period of seven (7)
years; and they evidently found those relations to be of such profitability as
warranted their maintaining them for that no insignificant period of time;
otherwise, it is reasonably certain that they would have terminated their dealings
with ML FUTURES much, much earlier. In fact, even as regards their last
transaction, in which the Laras allegedly suffered a loss in the sum of
US$160,749.69, the Laras nonetheless still received some monetary advantage,
for ML FUTURES credited them with the amount of US$75,913.42 then due to
them, thus reducing their debt to US$84,836.27. Given these facts, and assuming
that the Lara Spouses were aware from the outset that ML FUTURES had no
license to do business in this country and MLPI, no authority to act as broker for
it, it would appear quite inequitable for the Laras to evade payment of an
otherwise legitimate indebtedness due and owing to ML FUTURES upon the plea
that it should not have done business in this country in the first place, or that its
agent in this country, MLPI, had no license either to operate as a commodity
and/ or financial futures broker. Merrill Lynch Futures, Inc. vs. Court of Appeals,
211 SCRA 824, G.R. No. 97816 July 24, 1992