G.R. No.

168639 29 January 2007

Alderito Z. Yujuico, Bonifacio C. Sumbilla, and Dolney S. Sumbilla, Petitioners v
Cezar T. Quiambao, Jose M. Magno III, et al.
DOCTRINE:
CORPORATION "DE FACTO"; DISSOLUTION BY SUIT OF STOCKHOLDERS;
JURISDICTION OF COURT. — An entity whose certificate of incorporation had not
been obtained may be terminated in a private suit for its dissolution between
stockholders, without the intervention of the state. The question as to the right of
minority stockholders to sue for dissolution does not affect the court’s jurisdiction,
and is a matter for decision by the judge, subject to review on appeal by the
aggrieved party at the proper time. 

ID.; RIGHTS OF. — Persons acting as corporation may not claim rights of "de facto"
corporation if they have not obtained certificate of incorporation.
FACTS:
Strategic Alliance Development Corporation (STRADEC) is a domestic corporation
engaged in providing financial and investment advisory services and investing in
projects through consortium or joint venture information. STRADEC’s principal place
of business was located at the 24th floor, One Magnificent Mile-Citra Building, San
Miguel Avenue, Ortigas Center, Pasig City. On 27 July 1998, the SEC approved the
amendment of STRADEC’s Articles of Incorporation authorizing the change of its
principal office from Pasig City to Bayambang, Pangasinan.
On 01 March 2004, STRADEC held its annual stockholders’ meeting in its Pasig City
office as indicated in the notices sent to the stockholders. At the said meeting, the
petitioner’s herein were elected members of the BOD. After five months,
respondents herein filed with the RTC, San Carlos City, Pangasinan, a complaint
against STRADEC praying that: (1) the 01 March 2004 election be nullified on the
ground of improper venue, pursuant to Section 51 of the Corporation Code; (2) all
ensuing transactions conducted by the elected directors be likewise nullified; and (3)
a special stockholders’ meeting be held anew.
As the controversy involves an intra-corporate dispute, the trial court, on 04 October
2004 issued an order transferring the case to RTC Branch 48, Urdaneta City, being
the designated Special Commercial Court.
ISSUE/S:
Whether the dissolution of a de facto corporation, in this case, the Far Eastern
Lumber and Commercial Co., may only be ordered in a quo warranto proceeding in
accordance with section 19 of the Corporation Law.
RULING:
No. Section 19 [Under Act 1459 or The Corporation Law] reads follows:
…The due incorporation of any corporations claiming in good faith to be a
corporation as under this Act and its right to exercise corporate powers shall

ANTIDO, Z.B.
 not be inquired into collaterally in any private suit to which the corporation
may be a party, but such inquiry may be had at the suit of the Insular
Government on information of the Attorney-General.
The Court held that Section 19 of the Corporation Law does not govern the case for
two reasons:
1. The Far Eastern Lumber and Commercial Co., not having obtained the
certificate of incorporation, may not probably claim “in good faith” to be a
corporation, even its stockholders.
Under Section 11 of the Corporation Law, it is the issuance of a certificate of
incorporation by the Director of the Bureau of Commerce and Industry which
calls a corporation into being. The immunity if collateral attack is granted to
corporations “claiming in good faith to be a corporation under this act.” Such a
claim is compatible with the existence of errors and irregularities; but not with
a total or substantial disregard of the law. Unless there has been an evident
attempt to comply with the law, the claim to be a corporation “under this act”
could not be made “in good faith.”

2. The suit is not in which the corporation is a party. It is a litigation between

stockholders of the alleged corporation, for the purpose of obtaining its
dissolution. Even the existence of a de jure corporation may be terminated in
a private suit for its dissolution between stockholders, without the intervention
of the state.
The petition was dismissed.

[Note: The law applied in this case is still our old corporation law under Act 1459 also
known as The Corporation Law since the Batas Pambansa Bilang 68 otherwise
known as the Corporation Code of the Philippines which now governs the rules
and regulations in the establishment and operation of stock and non-stock
corporations in the Philippines was enacted and approved only on 1 May 1980.
Section 19 under The Corporation Law is now Section 20 of the Corporation Code of
the Philippines.]

ANTIDO, Z.B.