SECOND DIVISION

January 11, 2016

G.R. No. 194964-65

UNIVERSITY OF MINDANAO, INC., Petitioner,

vs.
BANGKO SENTRAL NG PILIPINAS, ET AL., Respondents.

DECISION

LEONEN, J.:

Acts of an officer that are not authorized by the board of directors/trustees do not bind the corporation unless the
corporation ratifies the acts or holds the officer out as a person with authority to transact on its behalf.

This is a Petition for Review on Certiorari1 of the Court of Appeals' December 17, 2009 Decision2 and December 20,
2010 Resolution.3 The Court of Appeals reversed the Cagayan De Oro City trial court’s and the Iligan City trial court’s
Decisions to nullify mortgage contracts involving University of Mindanao’s properties.4

University of Mindanao is an educational institution. For the year 1982, its Board of Trustees was chaired by Guillermo B.
Torres. His wife, Dolores P. Torres, sat as University of Mindanao’s Assistant Treasurer.5

Before 1982, Guillermo B. Torres and Dolores P. Torres incorporated and operated two (2) thrift banks: (1) First Iligan
Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings and Loan Association, Inc. (DSLAI). Guillermo B.
Torres chaired both thrift banks. He acted as FISLAI’s President, while his wife, Dolores P. Torres, acted as DSLAI’s
President and FISLAI’s Treasurer.6

Upon Guillermo B. Torres’ request, Bangko Sentral ng Pilipinas issued a P1.9 million standby emergency credit to
FISLAI. The release of standby emergency credit was evidenced by three (3) promissory notes dated February 8, 1982,
April 7, 1982, and May 4, 1982 in the amounts of P500,000.00, P600,000.00, and P800,000.00, respectively. All these
promissory notes were signed by Guillermo B. Torres, and were co-signed by either his wife, Dolores P. Torres, or
FISLAI’s Special Assistant to the President, Edmundo G. Ramos, Jr.7

On May 25, 1982, University of Mindanao’s Vice President for Finance, Saturnino Petalcorin, executed a deed of real
estate mortgage over University of Mindanao’s property in Cagayan de Oro City (covered by Transfer Certificate of Title
No. T-14345) in favor of Bangko Sentral ng Pilipinas.8 "The mortgage served as security for FISLAI’s P1.9 Million
loan[.]"9 It was allegedly executed on University of Mindanao’s behalf.10

As proof of his authority to execute a real estate mortgage for University of Mindanao, Saturnino Petalcorin showed a
Secretary’s Certificate signed on April 13, 1982 by University of Mindanao’s Corporate Secretary, Aurora de Leon.11 The
Secretary’s Certificate stated:

That at the regular meeting of the Board of Trustees of the aforesaid corporation [University of Mindanao] duly convened
on March 30, 1982, at which a quorum was present, the following resolution was unanimously adopted:

"Resolved that the University of Mindanao, Inc. be and is hereby authorized, to mortgage real estate properties with the
Central Bank of the Philippines to serve as security for the credit facility of First Iligan Savings and Loan Association,
hereby authorizing the President and/or Vice-president for Finance, Saturnino R. Petalcorin of the University of
Mindanao, Inc. to sign, execute and deliver the covering mortgage document or any other documents which may be
proper[l]y required."12

The Secretary’s Certificate was supported by an excerpt from the minutes of the January 19, 1982 alleged meeting of
University of Mindanao’s Board of Trustees. The excerpt was certified by Aurora de Leon on March 13, 1982 to be a true
copy of University of Mindanao’s records on file.13 The excerpt reads:

3 – Other Matters:

(a) Cagayan de Oro and Iligan properties: Resolution No. 82-1-8

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Authorizing the Chairman to appoint Saturnino R. Petalcorin, Vice-President for Finance, to represent the University of
Mindanao to transact, transfer, convey, lease, mortgage, or otherwise hypothecate any or all of the following properties
situated at Cagayan de Oro and Iligan City and authorizing further Mr. Petalcorin to sign any or all documents relative
thereto:

1. A parcel of land situated at Cagayan de Oro City, covered and technically described in TRANSFER CERTIFICATE OF
TITLE No. T-14345 of the Registry of Deeds of Cagayan de Oro City;

2. A parcel of land situated at Iligan City, covered and technically described in TRANSFER CERTIFICATE OF TITLE
NO. T-15696 (a.t.) of the Registry of Deeds of Iligan City; and

3. A parcel of land situated at Iligan City, covered and technically described in TRANSFER CERTIFICATE OF TITLE
NO. T-15697 (a.f.) of the Registry of Deeds of Iligan City.14

The mortgage deed executed by Saturnino Petalcorin in favor of Bangko Sentral ng Pilipinas was annotated on the
certificate of title of the Cagayan de Oro City property (Transfer Certificate of Title No. 14345) on June 25, 1982. Aurora
de Leon’s certification was also annotated on the Cagayan de Oro City property’s certificate of title (Transfer Certificate
of Title No. 14345).15

On October 21, 1982, Bangko Sentral ng Pilipinas granted FISLAI an additional loan of P620,700.00. Guillermo B.
Torres and Edmundo Ramos executed a promissory note on October 21, 1982 to cover that amount.16

On November 5, 1982, Saturnino Petalcorin executed another deed of real estate mortgage, allegedly on behalf of
University of Mindanao, over its two properties in Iligan City.1âwphi1 This mortgage served as additional security for
FISLAI’s loans. The two Iligan City properties were covered by Transfer Certificates of Title Nos. T-15696 and T-
15697.17

On January 17, 1983, Bangko Sentral ng Pilipinas’ mortgage lien over the Iligan City properties and Aurora de Leon’s
certification were annotated on Transfer Certificates of Title Nos. T-15696 and T-15697.18 On January 18, 1983, Bangko
Sentral ng Pilipinas’ mortgage lien over the Iligan City properties was also annotated on the tax declarations covering the
Iligan City properties.19

Bangko Sentral ng Pilipinas also granted emergency advances to DSLAI on May 27, 1983 and on August 20, 1984 in the
amounts of P1,633,900.00 and P6,489,000.00, respectively.20

On January 11, 1985, FISLAI, DSLAI, and Land Bank of the Philippines entered into a Memorandum of Agreement
intended to rehabilitate the thrift banks, which had been suffering from their depositors’ heavy withdrawals. Among the
terms of the agreement was the merger of FISLAI and DSLAI, with DSLAI as the surviving corporation. DSLAI later
became known as Mindanao Savings and Loan Association, Inc. (MSLAI).21

Guillermo B. Torres died on March 2, 1989.22

MSLAI failed to recover from its losses and was liquidated on May 24, 1991.23

On June 18, 1999, Bangko Sentral ng Pilipinas sent a letter to University of Mindanao, informing it that the bank would
foreclose its properties if MSLAI’s total outstanding obligation of P12,534,907.73 remained unpaid.24

In its reply to Bangko Sentral ng Pilipinas’ June 18, 1999 letter, University of Mindanao, through its Vice President for
Accounting, Gloria E. Detoya, denied that University of Mindanao’s properties were mortgaged. It also denied having
received any loan proceeds from Bangko Sentral ng Pilipinas.25

On July 16, 1999, University of Mindanao filed two Complaints for nullification and cancellation of mortgage. One
Complaint was filed before the Regional Trial Court of Cagayan de Oro City, and the other Complaint was filed before the
Regional Trial Court of Iligan City.26

University of Mindanao alleged in its Complaints that it did not obtain any loan from Bangko Sentral ng Pilipinas. It also
did not receive any loan proceeds from the bank.27

University of Mindanao also alleged that Aurora de Leon’s certification was anomalous. It never authorized Saturnino
Petalcorin to execute real estate mortgage contracts involving its properties to secure FISLAI’s debts. It never ratified the

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execution of the mortgage contracts. Moreover, as an educational institution, it cannot mortgage its properties to secure
another person’s debts.28

On November 23, 2001, the Regional Trial Court of Cagayan de Oro City rendered a Decision in favor of University of
Mindanao,29 thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against defendants:

1. DECLARING the real estate mortgage Saturnino R. Petalcorin executed in favor of BANGKO SENTRAL NG
PILIPINAS involving Lot 421-A located in Cagayan de Oro City with an area of 482 square meters covered by TCT No.
T-14345 as annuled [sic];

2. ORDERING the Register of Deeds of Cagayan de Oro City to cancel Entry No. 9951 and Entry No. 9952 annotated at
the back of said TCT No. T-14345, Registry of Deeds of Cagayan de Oro City;

Prayer for attorney’s fee [sic] is hereby denied there being no proof that in demanding payment of the emergency loan,
defendant BANGKO SENTRAL NG PILIPINAS was motivated by evident bad faith,

SO ORDERED.30 (Citation omitted)

The Regional Trial Court of Cagayan de Oro City found that there was no board resolution giving Saturnino Petalcorin
authority to execute mortgage contracts on behalf of University of Mindanao. The Cagayan de Oro City trial court gave
weight to Aurora de Leon’s testimony that University of Mindanao’s Board of Trustees did not issue a board resolution
that would support the Secretary’s Certificate she issued. She testified that she signed the Secretary’s Certificate only upon
Guillermo B. Torres’ orders.31

Saturnino Petalcorin testified that he had no authority to execute a mortgage contract on University of Mindanao’s behalf.
He merely executed the contract because of Guillermo B. Torres’ request.32

Bangko Sentral ng Pilipinas’ witness Daciano Pagui, Jr. also admitted that there was no board resolution giving Saturnino
Petalcorin authority to execute mortgage contracts on behalf of University of Mindanao.33

The Regional Trial Court of Cagayan de Oro City ruled that Saturnino Petalcorin was not authorized to execute mortgage
contracts for University of Mindanao. Hence, the mortgage of University of Mindanao’s Cagayan de Oro City property
was unenforceable. Saturnino Petalcorin’s unauthorized acts should be annulled.34

Similarly, the Regional Trial Court of Iligan City rendered a Decision on December 7, 2001 in favor of University of
Mindanao.35 The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendants, as
follows:

1. Nullifying and canceling [sic] the subject Deed of Real Estate Mortgage dated November 5, 1982 for being
unenforceable or void contract;

2. Ordering the Office of the Register of Deeds of Iligan City to cancel the entries on TCT No. T-15696 and TCT No. T-
15697 with respect to the aforesaid Deed of Real Estate Mortgage dated November 5, 1982 and all other entries related
thereto;

3. Ordering the defendant Bangko Sentral ng Pilipinas to return the owner’s duplicate copies of TCT No. T-15696 and
TCT No. 15697 to the plaintiff;

4. Nullifying the subject [f]oreclosure [p]roceedings and the [a]uction [s]ale conducted by defendant Atty. Gerardo
Paguio, Jr. on October 8, 1999 including all the acts subsequent thereto and ordering the Register of Deeds of Iligan City
not to register any Certificate of Sale pursuant to the said auction sale nor make any transfer of the corresponding titles,
and if already registered and transferred, to cancel all the said entries in TCT No. T-15696 and TCT No. T-15697 and/or
cancel the corresponding new TCTs in the name of defendant Bangko Sentral ng Pilipinas;

5. Making the Preliminary Injunction per Order of this Court dated October 13, 2000 permanent.

No pronouncement as to costs.36 (Citation omitted)

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The Iligan City trial court found that the Secretary’s Certificate issued by Aurora de Leon was fictitious37 and irregular
for being unnumbered.38 It also did not specify the identity, description, or location of the mortgaged properties.39

The Iligan City trial court gave credence to Aurora de Leon’s testimony that the University of Mindanao’s Board of
Trustees did not take up the documents in its meetings. Saturnino Petalcorin corroborated her testimony.40

The Iligan City trial court ruled that the lack of a board resolution authorizing Saturnino Petalcorin to execute documents
of mortgage on behalf of University of Mindanao made the real estate mortgage contract unenforceable under Article
140341 of the Civil Code.42 The mortgage contract and the subsequent acts of foreclosure and auction sale were void
because the mortgage contract was executed without University of Mindanao’s authority.43

The Iligan City trial court also ruled that the annotations on the titles of University of Mindanao’s properties do not
operate as notice to the University because annotations only bind third parties and not owners.44 Further, Bangko Sentral
ng Pilipinas’ right to foreclose the University of Mindanao’s properties had already prescribed.45

Bangko Sentral ng Pilipinas separately appealed the Decisions of both the Cagayan de Oro City and the Iligan City trial
courts.46

After consolidating both cases, the Court of Appeals issued a Decision on December 17, 2009 in favor of Bangko Sentral
ng Pilipinas, thus:

FOR THE REASONS STATED, the Decision dated 23 November 2001 of the Regional Trial Court of Cagayan de Oro
City, Branch 24 in Civil Case No. 99-414 and the Decision dated 7 December 2001 of the Regional Trial Court of Iligan
City, Branch 1 in Civil Case No. 4790 are REVERSED and SET ASIDE. The Complaints in both cases before the trial
courts are DISMISSED. The Writ of Preliminary Injunction issued by the Regional Trial Court of Iligan City, Branch 1 in
Civil Case No. 4790 is LIFTED and SET ASIDE.

SO ORDERED.47

The Court of Appeals ruled that "[a]lthough BSP failed to prove that the UM Board of Trustees actually passed a Board
Resolution authorizing Petalcorin to mortgage the subject real properties,"48 Aurora de Leon’s Secretary’s Certificate
"clothed Petalcorin with apparent and ostensible authority to execute the mortgage deed on its behalf[.]"49 Bangko
Sentral ng Pilipinas merely relied in good faith on the Secretary’s Certificate.50 University of Mindanao is estopped from
denying Saturnino Petalcorin’s authority.51

Moreover, the Secretary’s Certificate was notarized. This meant that it enjoyed the presumption of regularity as to the
truth of its statements and authenticity of the signatures.52 Thus, "BSP cannot be faulted for relying on the [Secretary’s
Certificate.]"53

The Court of Appeals also ruled that since University of Mindanao’s officers, Guillermo B. Torres and his wife, Dolores P.
Torres, signed the promissory notes, University of Mindanao was presumed to have knowledge of the transaction.54
Knowledge of an officer in relation to matters within the scope of his or her authority is notice to the corporation.55

The annotations on University of Mindanao’s certificates of title also operate as constructive notice to it that its properties
were mortgaged.56 Its failure to disown the mortgages for more than a decade was implied ratification.57

The Court of Appeals also ruled that Bangko Sentral ng Pilipinas’ action for foreclosure had not yet prescribed because
the due date extensions that Bangko Sentral ng Pilipinas granted to FISLAI extended the due date of payment to five (5)
years from February 8, 1985.58 The bank’s demand letter to Dolores P. Torres on June 18, 1999 also interrupted the
prescriptive period.59

University of Mindanao and Bangko Sentral ng Pilipinas filed a Motion for Reconsideration60 and Motion for Partial
Reconsideration respectively of the Court of Appeals’ Decision. On December 20, 2010, the Court of Appeals issued a
Resolution, thus:

Acting on the foregoing incidents, the Court RESOLVES to:

1. GRANT the appellant’s twin motions for extension of time to file comment/opposition and NOTE the Comment on the
appellee’s Motion for Reconsideration it subsequently filed on June 23, 2010;

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2. GRANT the appellee’s three (3) motions for extension of time to file comment/opposition and NOTE the Comment on
the appellant’s Motion for Partial Reconsideration it filed on July 26, 2010;

3. NOTE the appellant’s "Motion for Leave to File Attached Reply Dated August 11, 2010" filed on August 13, 2010 and
DENY the attached "Reply to Comment Dated July 26, 2010";

4. DENY the appellee’s Motion for Reconsideration as it does not offer any arguments sufficiently meritorious to warrant
modification or reversal of the Court’s 17 December 2009 Decision. The Court finds that there is no compelling reason to
reconsider its ruling; and

5. GRANT the appellant’s Motion for Partial Reconsideration, as the Court finds it meritorious, considering that it ruled in
its Decision that "BSP can still foreclose on the UM’s real property in Cagayan de Oro City covered by TCT No. T-
14345." It then follows that the injunctive writ issued by the RTC of Cagayan de Oro City, Branch 24 must be lifted. The
Court’s 17 December 2009 Decision is accordingly MODIFIED and AMENDED to read as follows:

"FOR THE REASONS STATED, the Decision dated 23 November 2001 of the Regional Trial Court of Cagayan de Oro
City, Branch 24 in Civil Case No. 99-414 and the Decision dated 7 December 2001 of the Regional Trial Court of Iligan
City, Branch 1 in Civil Case No. 4790 are REVERSED and SET ASIDE. The Complaints in both cases before the trial
courts are DISMISSED. The Writs of Preliminary Injunction issued by the Regional Trial Court of Iligan City, Branch 1 in
Civil Case No. 4790 and in the Regional Trial Court of Cagayan de Oro City, Branch 24 in Civil Case No. 99-414 are
LIFTED and SET ASIDE."

SO ORDERED.61 (Citation omitted)

Hence, University of Mindanao filed this Petition for Review.

The issues for resolution are:

First, whether respondent Bangko Sentral ng Pilipinas’ action to foreclose the mortgaged properties had already
prescribed; and

Second, whether petitioner University of Mindanao is bound by the real estate mortgage contracts executed by Saturnino
Petalcorin.

We grant the Petition.

Petitioner argues that respondent’s action to foreclose its mortgaged properties had already prescribed.

Petitioner is mistaken.

Prescription is the mode of acquiring or losing rights through the lapse of time.62 Its purpose is "to protect the diligent
and vigilant, not those who sleep on their rights."63

The prescriptive period for actions on mortgages is ten (10) years from the day they may be brought.64 Actions on
mortgages may be brought not upon the execution of the mortgage contract but upon default in payment of the obligation
secured by the mortgage.65

A debtor is considered in default when he or she fails to pay the obligation on due date and, subject to exceptions, after
demands for payment were made by the creditor. Article 1169 of the Civil Code provides:

ART. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the
thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or
5
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

Article 1193 of the Civil Code provides that an obligation is demandable only upon due date. It provides:

ART. 1193. Obligations for whose fulfillment a day certain has been fixed, shall be demandable only when that day
comes.

Obligations with a resolutory period take effect at once, but terminate upon arrival of the day certain.

A day certain is understood to be that which must necessarily come, although it may not be known when.

If the uncertainty consists in whether the day will come or not, the obligation is conditional, and it shall be regulated by
the rules of the preceding Section.

In other words, as a general rule, a person defaults and prescriptive period for action runs when (1) the obligation becomes
due and demandable; and (2) demand for payment has been made.

The prescriptive period neither runs from the date of the execution of a contract nor does the prescriptive period
necessarily run on the date when the loan becomes due and demandable.66 Prescriptive period runs from the date of
demand,67 subject to certain exceptions.

In other words, ten (10) years may lapse from the date of the execution of contract, without barring a cause of action on
the mortgage when there is a gap between the period of execution of the contract and the due date or between the due date
and the demand date in cases when demand is necessary.68

The mortgage contracts in this case were executed by Saturnino Petalcorin in 1982. The maturity dates of FISLAI’s loans
were repeatedly extended until the loans became due and demandable only in 1990.69 Respondent informed petitioner of
its decision to foreclose its properties and demanded payment in 1999.

The running of the prescriptive period of respondent’s action on the mortgages did not start when it executed the mortgage
contracts with Saturnino Petalcorin in 1982.

The prescriptive period for filing an action may run either (1) from 1990 when the loan became due, if the obligation was
covered by the exceptions under Article 1169 of the Civil Code; (2) or from 1999 when respondent demanded payment, if
the obligation was not covered by the exceptions under Article 1169 of the Civil Code.

In either case, respondent’s Complaint with cause of action based on the mortgage contract was filed well within the
prescriptive period.

Given the termination of all traces of FISLAI’s existence,70 demand may have been rendered unnecessary under Article
1169(3)71 of the Civil Code. Granting that this is the case, respondent would have had ten (10) years from due date in
1990 or until 2000 to institute an action on the mortgage contract.

However, under Article 115572 of the Civil Code, prescription of actions may be interrupted by (1) the filing of a court
action; (2) a written extrajudicial demand; and (3) the written acknowledgment of the debt by the debtor.

Therefore, the running of the prescriptive period was interrupted when respondent sent its demand letter to petitioner on
June 18, 1999. This eventually led to petitioner’s filing of its annulment of mortgage complaints before the Regional Trial
Courts of Iligan City and Cagayan De Oro City on July 16, 1999.

Assuming that demand was necessary, respondent’s action was within the ten (10)-year prescriptive period. Respondent
demanded payment of the loans in 1999 and filed an action in the same year.

II

Petitioner argues that the execution of the mortgage contract was ultra vires. As an educational institution, it may not
secure the loans of third persons.73 Securing loans of third persons is not among the purposes for which petitioner was
established.74

Petitioner is correct.
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Corporations are artificial entities granted legal personalities upon their creation by their incorporators in accordance with
law. Unlike natural persons, they have no inherent powers. Third persons dealing with corporations cannot assume that
corporations have powers. It is up to those persons dealing with corporations to determine their competence as expressly
defined by the law and their articles of incorporation.75

A corporation may exercise its powers only within those definitions. Corporate acts that are outside those express
definitions under the law or articles of incorporation or those "committed outside the object for which a corporation is
created"76 are ultra vires.

The only exception to this rule is when acts are necessary and incidental to carry out a corporation’s purposes, and to the
exercise of powers conferred by the Corporation Code and under a corporation’s articles of incorporation.77 This
exception is specifically included in the general powers of a corporation under Section 36 of the Corporation Code:

SEC. 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;

2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of
incorporation;

3. To adopt and use a corporate seal;

4. To amend its articles of incorporation in accordance with the provisions of this Code;

5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this
Code;

6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the
provisions of this Code; and to admit members to the corporation if it be a non-stock corporation;

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and
personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the
corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;

8. To enter into merger or consolidation with other corporations as provided in this Code;

9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations in aid of any political
party or candidate or for purposes of partisan political activity;

10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and

11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its
articles of incorporation. (Emphasis supplied)

Montelibano, et al. v. Bacolod-Murcia Milling Co., Inc.78 stated the test to determine if a corporate act is in accordance
with its purposes:

It is a question, therefore, in each case, of the logical relation of the act to the corporate purpose expressed in the charter.
If that act is one which is lawful in itself, and not otherwise prohibited, is done for the purpose of serving corporate ends,
and is reasonably tributary to the promotion of those ends, in a substantial, and not in a remote and fanciful, sense, it may
fairly be considered within charter powers. The test to be applied is whether the act in question is in direct and immediate
furtherance of the corporation’s business, fairly incident to the express powers and reasonably necessary to their exercise.
If so, the corporation has the power to do it; otherwise, not.79 (Emphasis supplied)

As an educational institution, petitioner serves:

a. To establish, conduct and operate a college or colleges, and/or university;

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b. To acquire properties, real and/or personal, in connection with the establishment and operation of such college or
colleges;

c. To do and perform the various and sundry acts and things permitted by the laws of the Philippines unto corporations
like classes and kinds;

d. To engage in agricultural, industrial, and/or commercial pursuits in line with educational program of the corporation
and to acquire all properties, real and personal[,] necessary for the purposes[;]

e. To establish, operate, and/or acquire broadcasting and television stations also in line with the educational program of
the corporation and for such other purposes as the Board of Trustees may determine from time to time;

f. To undertake housing projects of faculty members and employees, and to acquire real estates for this purpose;

g. To establish, conduct and operate and/or invest in educational foundations; [As amended on December 15, 1965][;]

h. To establish, conduct and operate housing and dental schools, medical facilities and other related undertakings;

i. To invest in other corporations. [As amended on December 9, 1998]. [Amended Articles of Incorporation of the
University of Mindanao, Inc. – the Petitioner].80

Petitioner does not have the power to mortgage its properties in order to secure loans of other persons. As an educational
institution, it is limited to developing human capital through formal instruction. It is not a corporation engaged in the
business of securing loans of others.

Hiring professors, instructors, and personnel; acquiring equipment and real estate; establishing housing facilities for
personnel and students; hiring a concessionaire; and other activities that can be directly connected to the operations and
conduct of the education business may constitute the necessary and incidental acts of an educational institution.

Securing FISLAI’s loans by mortgaging petitioner’s properties does not appear to have even the remotest connection to
the operations of petitioner as an educational institution. Securing loans is not an adjunct of the educational institution’s
conduct of business.81 It does not appear that securing third-party loans was necessary to maintain petitioner’s business of
providing instruction to individuals.

This court upheld the validity of corporate acts when those acts were shown to be clearly within the corporation’s powers
or were connected to the corporation’s purposes.

In Pirovano, et al. v. De la Rama Steamship Co.,82 this court declared valid the donation given to the children of a
deceased person who contributed to the growth of the corporation.83 This court found that this donation was within the
broad scope of powers and purposes of the corporation to "aid in any other manner any person . . . in which any interest is
held by this corporation or in the affairs or prosperity of which this corporation has a lawful interest."84

In Twin Towers Condominium Corporation v. Court of Appeals, et al.,85 this court declared valid a rule by Twin Towers
Condominium denying delinquent members the right to use condominium facilities.86 This court ruled that the
condominium’s power to promulgate rules on the use of facilities and to enforce provisions of the Master Deed was clear
in the Condominium Act, Master Deed, and By-laws of the condominium.87 Moreover, the promulgation of such rule was
"reasonably necessary" to attain the purposes of the condominium project.88

This court has, in effect, created a presumption that corporate acts are valid if, on their face, the acts were within the
corporation’s powers or purposes. This presumption was explained as early as in 1915 in Coleman v. Hotel De France89
where this court ruled that contracts entered into by corporations in the exercise of their incidental powers are not ultra
vires.90

Coleman involved a hotel’s cancellation of an employment contract it executed with a gymnast. One of the hotel’s
contentions was the supposed ultra vires nature of the contract. It was executed outside its express and implied powers
under the articles of incorporation.91

In ruling in favor of the contract’s validity, this court considered the incidental powers of the hotel to include the execution
of employment contracts with entertainers for the purpose of providing its guests entertainment and increasing
patronage.92

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This court ruled that a contract executed by a corporation shall be presumed valid if on its face its execution was not
beyond the powers of the corporation to do.93 Thus:

When a contract is not on its face necessarily beyond the scope of the power of the corporation by which it was made, it
will, in the absence of proof to the contrary, be presumed to be valid. Corporations are presumed to contract within their
powers. The doctrine of ultra vires, when invoked for or against a corporation, should not be allowed to prevail where it
would defeat the ends of justice or work a legal wrong.94

However, this should not be interpreted to mean that such presumption applies to all cases, even when the act in question
is on its face beyond the corporation’s power to do or when the evidence contradicts the presumption.

Presumptions are "inference[s] as to the existence of a fact not actually known, arising from its usual connection with
another which is known, or a conjecture based on past experience as to what course human affairs ordinarily take."95
Presumptions embody values and revealed behavioral expectations under a given set of circumstances.

Presumptions may be conclusive96 or disputable.97

Conclusive presumptions are presumptions that may not be overturned by evidence, however strong the evidence is.98
They are made conclusive not because there is an established uniformity in behavior whenever identified circumstances
arise. They are conclusive because they are declared as such under the law or the rules. Rule 131, Section 2 of the Rules of
Court identifies two (2) conclusive presumptions:

SEC. 2. Conclusive presumptions.— The following are instances of conclusive presumptions:

(a) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a
particular thing true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act or
omission, be permitted to falsify it;

(b) The tenant is not permitted to deny the title of his landlord at the time of the commencement of the relation of landlord
and tenant between them.

On the other hand, disputable presumptions are presumptions that may be overcome by contrary evidence.99 They are
disputable in recognition of the variability of human behavior. Presumptions are not always true. They may be wrong
under certain circumstances, and courts are expected to apply them, keeping in mind the nuances of every experience that
may render the expectations wrong.

Thus, the application of disputable presumptions on a given circumstance must be based on the existence of certain facts
on which they are meant to operate. "[P]resumptions are not allegations, nor do they supply their absence[.]"100
Presumptions are conclusions. They do not apply when there are no facts or allegations to support them.

If the facts exist to set in motion the operation of a disputable presumption, courts may accept the presumption. However,
contrary evidence may be presented to rebut the presumption.

Courts cannot disregard contrary evidence offered to rebut disputable presumptions. Disputable presumptions apply only
in the absence of contrary evidence or explanations. This court explained in Philippine Agila Satellite Inc. v. Usec.
Trinidad-Lichauco:101

We do not doubt the existence of the presumptions of "good faith" or "regular performance of official duty," yet these
presumptions are disputable and may be contradicted and overcome by other evidence. Many civil actions are oriented
towards overcoming any number of these presumptions, and a cause of action can certainly be geared towards such effect.
The very purpose of trial is to allow a party to present evidence to overcome the disputable presumptions involved.
Otherwise, if trial is deemed irrelevant or unnecessary, owing to the perceived indisputability of the presumptions, the
judicial exercise would be relegated to a mere ascertainment of what presumptions apply in a given case, nothing more.
Consequently, the entire Rules of Court is rendered as excess verbiage, save perhaps for the provisions laying down the
legal presumptions.

If this reasoning of the Court of Appeals were ever adopted as a jurisprudential rule, no public officer could ever be sued
for acts executed beyond their official functions or authority, or for tortious conduct or behavior, since such acts would
"enjoy the presumption of good faith and in the regular performance of official duty." Indeed, few civil actions of any
nature would ever reach the trial stage, if a case can be adjudicated by a mere determination from the complaint or answer
as to which legal presumptions are applicable. For example, the presumption that a person is innocent of a wrong is a
9
disputable presumption on the same level as that of the regular performance of official duty. A civil complaint for damages
necessarily alleges that the defendant committed a wrongful act or omission that would serve as basis for the award of
damages. With the rationale of the Court of Appeals, such complaint can be dismissed upon a motion to dismiss solely on
the ground that the presumption is that a person is innocent of a wrong.102 (Emphasis supplied, citations omitted)

In this case, the presumption that the execution of mortgage contracts was within petitioner’s corporate powers does not
apply. Securing third-party loans is not connected to petitioner’s purposes as an educational institution.

III

Respondent argues that petitioner’s act of mortgaging its properties to guarantee FISLAI’s loans was consistent with
petitioner’s business interests, since petitioner was presumably a FISLAI shareholder whose officers and shareholders
interlock with FISLAI. Respondent points out that petitioner and its key officers held substantial shares in MSLAI when
DSLAI and FISLAI merged. Therefore, it was safe to assume that when the mortgages were executed in 1982, petitioner
held substantial shares in FISLAI.103

Parties dealing with corporations cannot simply assume that their transaction is within the corporate powers. The acts of a
corporation are still limited by its powers and purposes as provided in the law and its articles of incorporation.

Acquiring shares in another corporation is not a means to create new powers for the acquiring corporation. Being a
shareholder of another corporation does not automatically change the nature and purpose of a corporation’s business.
Appropriate amendments must be made either to the law or the articles of incorporation before a corporation can validly
exercise powers outside those provided in law or the articles of incorporation. In other words, without an amendment,
what is ultra vires before a corporation acquires shares in other corporations is still ultra vires after such acquisition.

Thus, regardless of the number of shares that petitioner had with FISLAI, DSLAI, or MSLAI, securing loans of third
persons is still beyond petitioner’s power to do. It is still inconsistent with its purposes under the law104 and its articles of
incorporation.105

In attempting to show petitioner’s interest in securing FISLAI’s loans by adverting to their interlocking directors and
shareholders, respondent disregards petitioner’s separate personality from its officers, shareholders, and other juridical
persons.

The separate personality of corporations means that they are "vest[ed] [with] rights, powers, and attributes [of their own]
as if they were natural persons[.]"106 Their assets and liabilities are their own and not their officers’, shareholders’, or
another corporation’s. In the same vein, the assets and liabilities of their officers and shareholders are not the
corporations’. Obligations incurred by corporations are not obligations of their officers and shareholders. Obligations of
officers and shareholders are not obligations of corporations.107 In other words, corporate interests are separate from the
personal interests of the natural persons that comprise corporations.

Corporations are given separate personalities to allow natural persons to balance the risks of business as they accumulate
capital. They are, however, given limited competence as a means to protect the public from fraudulent acts that may be
committed using the separate juridical personality given to corporations.

Petitioner’s key officers, as shareholders of FISLAI, may have an interest in ensuring the viability of FISLAI by obtaining
a loan from respondent and securing it by whatever means. However, having interlocking officers and stockholders with
FISLAI does not mean that petitioner, as an educational institution, is or must necessarily be interested in the affairs of
FISLAI.

Since petitioner is an entity distinct and separate not only from its own officers and shareholders but also from FISLAI, its
interests as an educational institution may not be consistent with FISLAI’s.

Petitioner and FISLAI have different constituencies. Petitioner’s constituents comprise persons who have committed to
developing skills and acquiring knowledge in their chosen fields by availing the formal instruction provided by petitioner.
On the other hand, FISLAI is a thrift bank, which constituencies comprise investors.

While petitioner and FISLAI exist ultimately to benefit their stockholders, their constituencies affect the means by which
they can maintain their existence. Their interests are congruent with sustaining their constituents’ needs because their
existence depends on that. Petitioner can exist only if it continues to provide for the kind and quality of instruction that is
needed by its constituents. Its operations and existence are placed at risk when resources are used on activities that are not

10
geared toward the attainment of its purpose. Petitioner has no business in securing FISLAI, DSLAI, or MSLAI’s loans.
This activity is not compatible with its business of providing quality instruction to its constituents.

Indeed, there are instances when we disregard the separate corporate personalities of the corporation and its stockholders,
directors, or officers. This is called piercing of the corporate veil.

Corporate veil is pierced when the separate personality of the corporation is being used to perpetrate fraud, illegalities,
and injustices.108 In Lanuza, Jr. v. BF Corporation:109

Piercing the corporate veil is warranted when "[the separate personality of a corporation] is used as a means to perpetrate
fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to confuse
legitimate issues." It is also warranted in alter ego cases "where a corporation is merely a farce since it is a mere alter ego
or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as
to make it merely an instrumentality, agency, conduit or adjunct of another corporation."110

These instances have not been shown in this case. There is no evidence pointing to the possibility that petitioner used its
separate personality to defraud third persons or commit illegal acts. Neither is there evidence to show that petitioner was
merely a farce of a corporation. What has been shown instead was that petitioner, too, had been victimized by fraudulent
and unauthorized acts of its own officers and directors.

In this case, instead of guarding against fraud, we perpetuate fraud if we accept respondent’s contentions.

IV

Petitioner argues that it did not authorize Saturnino Petalcorin to mortgage its properties on its behalf. There was no board
resolution to that effect. Thus, the mortgages executed by Saturnino Petalcorin were unenforceable.111

The mortgage contracts executed in favor of respondent do not bind petitioner. They were executed without authority from
petitioner.

Petitioner must exercise its powers and conduct its business through its Board of Trustees. Section 23 of the Corporation
Code provides:

SEC. 23. The board of directors or trustees.—Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business conducted and all property of such corporations
controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is
no stock, from among the members of the corporation, who shall hold office for one (1) year and until their successors are
elected and qualified.

Being a juridical person, petitioner cannot conduct its business, make decisions, or act in any manner without action from
its Board of Trustees. The Board of Trustees must act as a body in order to exercise corporate powers. Individual trustees
are not clothed with corporate powers just by being a trustee. Hence, the individual trustee cannot bind the corporation by
himself or herself.

The corporation may, however, delegate through a board resolution its corporate powers or functions to a representative,
subject to limitations under the law and the corporation’s articles of incorporation.112

The relationship between a corporation and its representatives is governed by the general principles of agency.113 Article
1317 of the Civil Code provides that there must be authority from the principal before anyone can act in his or her name:

ART. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a
right to represent him.

Hence, without delegation by the board of directors or trustees, acts of a person—including those of the corporation’s
directors, trustees, shareholders, or officers—executed on behalf of the corporation are generally not binding on the
corporation.114

Contracts entered into in another’s name without authority or valid legal representation are generally unenforceable. The
Civil Code provides:

ART. 1317. . . .
11
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it
has been executed, before it is revoked by the other contracting party.

....

ART. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or
who has acted beyond his powers[.]

The unenforceable status of contracts entered into by an unauthorized person on behalf of another is based on the basic
principle that contracts must be consented to by both parties.115 There is no contract without meeting of the minds as to
the subject matter and cause of the obligations created under the contract.116

Consent of a person cannot be presumed from representations of another, especially if obligations will be incurred as a
result. Thus, authority is required to make actions made on his or her behalf binding on a person. Contracts entered into by
persons without authority from the corporation shall generally be considered ultra vires and unenforceable117 against the
corporation.

Two trial courts118 found that the Secretary’s Certificate and the board resolution were either non-existent or fictitious.
The trial courts based their findings on the testimony of the Corporate Secretary, Aurora de Leon herself. She signed the
Secretary’s Certificate and the excerpt of the minutes of the alleged board meeting purporting to authorize Saturnino
Petalcorin to mortgage petitioner’s properties. There was no board meeting to that effect. Guillermo B. Torres ordered the
issuance of the Secretary’s Certificate. Aurora de Leon’s testimony was corroborated by Saturnino Petalcorin.

Even the Court of Appeals, which reversed the trial courts’ decisions, recognized that "BSP failed to prove that the UM
Board of Trustees actually passed a Board Resolution authorizing Petalcorin to mortgage the subject real properties[.]"119

Well-entrenched is the rule that this court, not being a trier of facts, is bound by the findings of fact of the trial courts and
the Court of Appeals when such findings are supported by evidence on record.120 Hence, not having the proper board
resolution to authorize Saturnino Petalcorin to execute the mortgage contracts for petitioner, the contracts he executed are
unenforceable against petitioner. They cannot bind petitioner.

However, personal liabilities may be incurred by directors who assented to such unauthorized act121 and by the person
who contracted in excess of the limits of his or her authority without the corporation’s knowledge.122

Unauthorized acts that are merely beyond the powers of the corporation under its articles of incorporation are not void ab
initio.

In Pirovano, et al., this court explained that corporate acts may be ultra vires but not void.123 Corporate acts may be
capable of ratification:124

[A] distinction should be made between corporate acts or contracts which are illegal and those which are merely ultra
vires. The former contemplates the doing of an act which is contrary to law, morals, or public order, or contravene some
rules of public policy or public duty, and are, like similar transactions between individuals, void. They cannot serve as
basis of a court action, nor acquire validity by performance, ratification, or estoppel. Mere ultra vires acts, on the other
hand, or those which are not illegal and void ab initio, but are not merely within the scope of the articles of incorporation,
are merely voidable and may become binding and enforceable when ratified by the stockholders.125

Thus, even though a person did not give another person authority to act on his or her behalf, the action may be enforced
against him or her if it is shown that he or she ratified it or allowed the other person to act as if he or she had full authority
to do so. The Civil Code provides:

ART. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of
his authority.

12
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it
expressly or tacitly.

ART. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers. (Emphasis supplied)

Ratification is a voluntary and deliberate confirmation or adoption of a previous unauthorized act.126 It converts the
unauthorized act of an agent into an act of the principal.127 It cures the lack of consent at the time of the execution of the
contract entered into by the representative, making the contract valid and enforceable.128 It is, in essence, consent
belatedly given through express or implied acts that are deemed a confirmation or waiver of the right to impugn the
unauthorized act.129 Ratification has the effect of placing the principal in a position as if he or she signed the original
contract. In Board of Liquidators v. Heirs of M. Kalaw, et al.:130

Authorities, great in number, are one in the idea that "ratification by a corporation of an unauthorized act or contract by its
officers or others relates back to the time of the act or contract ratified, and is equivalent to original authority;" and that
"[t]he corporation and the other party to the transaction are in precisely the same position as if the act or contract had been
authorized at the time." The language of one case is expressive: "The adoption or ratification of a contract by a
corporation is nothing more nor less than the making of an original contract. The theory of corporate ratification is
predicated on the right of a corporation to contract, and any ratification or adoption is equivalent to a grant of prior
authority."131 (Citations omitted)

Implied ratification may take the form of silence, acquiescence, acts consistent with approval of the act, or acceptance or
retention of benefits.132 However, silence, acquiescence, retention of benefits, and acts that may be interpreted as
approval of the act do not by themselves constitute implied ratification. For an act to constitute an implied ratification,
there must be no acceptable explanation for the act other than that there is an intention to adopt the act as his or her
own.133 "[It] cannot be inferred from acts that a principal has a right to do independently of the unauthorized act of the
agent."134

No act by petitioner can be interpreted as anything close to ratification. It was not shown that it issued a resolution
ratifying the execution of the mortgage contracts. It was not shown that it received proceeds of the loans secured by the
mortgage contracts. There was also no showing that it received any consideration for the execution of the mortgage
contracts. It even appears that petitioner was unaware of the mortgage contracts until respondent notified it of its desire to
foreclose the mortgaged properties.

Ratification must be knowingly and voluntarily done.135 Petitioner’s lack of knowledge about the mortgage executed in
its name precludes an interpretation that there was any ratification on its part.

Respondent further argues that petitioner is presumed to have knowledge of its transactions with respondent because its
officers, the Spouses Guillermo and Dolores Torres, participated in obtaining the loan.136

Indeed, a corporation, being a person created by mere fiction of law, can act only through natural persons such as its
directors, officers, agents, and representatives. Hence, the general rule is that knowledge of an officer is considered
knowledge of the corporation.

However, even though the Spouses Guillermo and Dolores Torres were officers of both the thrift banks and petitioner,
their knowledge of the mortgage contracts cannot be considered as knowledge of the corporation.

The rule that knowledge of an officer is considered knowledge of the corporation applies only when the officer is acting
within the authority given to him or her by the corporation. In Francisco v. Government Service Insurance System:137

Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in
relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such
knowledge or not.138

The public should be able to rely on and be protected from the representations of a corporate representative acting within
the scope of his or her authority. This is why an authorized officer’s knowledge is considered knowledge of corporation.
However, just as the public should be able to rely on and be protected from corporate representations, corporations should
also be able to expect that they will not be bound by unauthorized actions made on their account.

Thus, knowledge should be actually communicated to the corporation through its authorized representatives. A
corporation cannot be expected to act or not act on a knowledge that had not been communicated to it through an
13
authorized representative. There can be no implied ratification without actual communication. Knowledge of the existence
of contract must be brought to the corporation’s representative who has authority to ratify it. Further, "the circumstances
must be shown from which such knowledge may be presumed."139

The Spouses Guillermo and Dolores Torres’ knowledge cannot be interpreted as knowledge of petitioner. Their knowledge
was not obtained as petitioner’s representatives. It was not shown that they were acting for and within the authority given
by petitioner when they acquired knowledge of the loan transactions and the mortgages. The knowledge was obtained in
the interest of and as representatives of the thrift banks.

VI

Respondent argues that Saturnino Petalcorin was clothed with the authority to transact on behalf of petitioner, based on
the board resolution dated March 30, 1982 and Aurora de Leon’s notarized Secretary’s Certificate.140 According to
respondent, petitioner is bound by the mortgage contracts executed by Saturnino Petalcorin.141

This court has recognized presumed or apparent authority or capacity to bind corporate representatives in instances when
the corporation, through its silence or other acts of recognition, allowed others to believe that persons, through their usual
exercise of corporate powers, were conferred with authority to deal on the corporation’s behalf.142

The doctrine of apparent authority does not go into the question of the corporation’s competence or power to do a
particular act. It involves the question of whether the officer has the power or is clothed with the appearance of having the
power to act for the corporation. A finding that there is apparent authority is not the same as a finding that the corporate
act in question is within the corporation’s limited powers.

The rule on apparent authority is based on the principle of estoppel. The Civil Code provides:

ART. 1431. Through estoppel an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon.

....

ART. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his
failure to repudiate the agency, knowing that another person is acting on his behalf without authority.

Agency may be oral, unless the law requires a specific form.

A corporation is estopped by its silence and acts of recognition because we recognize that there is information asymmetry
between third persons who have little to no information as to what happens during corporate meetings, and the corporate
officers, directors, and representatives who are insiders to corporate affairs.143

In People’s Aircargo and Warehousing Co. Inc. v. Court of Appeals,144 this court held that the contract entered into by the
corporation’s officer without a board resolution was binding upon the corporation because it previously allowed the
officer to contract on its behalf despite the lack of board resolution.145

In Francisco, this court ruled that Francisco’s proposal for redemption of property was accepted by and binding upon the
Government Service Insurance System. This court did not appreciate the Government Service Insurance System’s defense
that since it was the Board Secretary and not the General Manager who sent Francisco the acceptance telegram, it could
not be made binding upon the Government Service Insurance System. It did not authorize the Board Secretary to sign for
the General Manager. This court appreciated the Government Service Insurance System’s failure to disown the telegram
sent by the Board Secretary and its silence while it accepted all payments made by Francisco for the redemption of
property.146

There can be no apparent authority and the corporation cannot be estopped from denying the binding affect of an act when
there is no evidence pointing to similar acts and other circumstances that can be interpreted as the corporation holding out
a representative as having authority to contract on its behalf. In Advance Paper Corporation v. Arma Traders
Corporation,147 this court had the occasion to say:

The doctrine of apparent authority does not apply if the principal did not commit any acts or conduct which a third party
knew and relied upon in good faith as a result of the exercise of reasonable prudence. Moreover, the agent’s acts or
conduct must have produced a change of position to the third party’s detriment.148 (Citation omitted)

14
Saturnino Petalcorin’s authority to transact on behalf of petitioner cannot be presumed based on a Secretary’s Certificate
and excerpt from the minutes of the alleged board meeting that were found to have been simulated. These documents
cannot be considered as the corporate acts that held out Saturnino Petalcorin as petitioner’s authorized representative for
mortgage transactions. They were not supported by an actual board meeting.149

VII

Respondent argues that it may rely on the Secretary’s Certificate issued by Aurora de Leon because it was notarized.

The Secretary’s Certificate was void whether or not it was notarized.

Notarization creates a presumption of regularity and authenticity on the document. This presumption may be rebutted by
"strong, complete and conclusive proof"150 to the contrary. While notarial acknowledgment "attaches full faith and credit
to the document concerned[,]"151 it does not give the document its validity or binding effect. When there is evidence
showing that the document is invalid, the presumption of regularity or authenticity is not applicable.

In Basilio v. Court of Appeals,152 this court was convinced that the purported signatory on a deed of sale was not as
represented, despite testimony from the notary public that the signatory appeared before him and signed the
instrument.153 Apart from finding that there was forgery,154 this court noted:

The notary public, Atty. Ruben Silvestre, testified that he was the one who notarized the document and that Dionisio Z.
Basilio appeared personally before him and signed the instrument himself. However, he admitted that he did not know
Dionisio Z. Basilio personally to ascertain if the person who signed the document was actually Dionisio Z. Basilio
himself, or another person who stood in his place. He could not even recall whether the document had been executed in
his office or not.

Thus, considering the testimonies of various witnesses and a comparison of the signature in question with admittedly
genuine signatures, the Court is convinced that Dionisio Z. Basilio did not execute the questioned deed of sale. Although
the questioned deed of sale was a public document having in its favor the presumption of regularity, such presumption
was adequately refuted by competent witnesses showing its forgery and the Court’s own visual analysis of the
document.155 (Emphasis supplied, citations omitted)

In Suntay v. Court of Appeals,156 this court held that a notarized deed of sale was void because it was a mere sham.157 It
was not intended to have any effect between the parties.158 This court said:

[I]t is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first
place, intended to have any binding legal effect upon the parties thereto.159

Since the notarized Secretary’s Certificate was found to have been issued without a supporting board resolution, it
produced no effect. It is not binding upon petitioner. It should not have been relied on by respondent especially given its
status as a bank.

VIII

The banking institution is "impressed with public interest"160 such that the public’s faith is "of paramount
importance."161 Thus, banks are required to exercise the highest degree of diligence in their transactions.162 In China
Banking Corporation v. Lagon,163 this court found that the bank was not a mortgagee in good faith for its failure to
question the due execution of a Special Power of Attorney that was presented to it in relation to a mortgage contract.164
This court said:

Though petitioner is not expected to conduct an exhaustive investigation on the history of the mortgagor’s title, it cannot
be excused from the duty of exercising the due diligence required of a banking institution. Banks are expected to exercise
more care and prudence than private individuals in their dealings, even those that involve registered lands, for their
business is affected with public interest.165 (Citations omitted)

For its failure to exercise the degree of diligence required of banks, respondent cannot claim good faith in the execution of
the mortgage contracts with Saturnino Petalcorin. Respondent’s witness, Daciano Paguio, Jr., testified that there was no
board resolution authorizing Saturnino Petalcorin to act on behalf of petitioner.166 Respondent did not inquire further as
to Saturnino Petalcorin’s authority.

Banks cannot rely on assumptions. This will be contrary to the high standard of diligence required of them.
15
VI

According to respondent, the annotations of respondent’s mortgage interests on the certificates of titles of petitioner’s
properties operated as constructive notice to petitioner of the existence of such interests.167 Hence, petitioners are now
estopped from claiming that they did not know about the mortgage.

Annotations of adverse claims on certificates of title to properties operate as constructive notice only to third parties—not
to the court or the registered owner.1âwphi1 In Sajonas v. Court of Appeals:168

[A]nnotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property
where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act 496 (now
[Presidential Decree No.] 1529 or the Property Registration Decree), and serves a warning to third parties dealing with
said property that someone is claiming an interest on the same or a better right than that of the registered owner
thereof.169 (Emphasis supplied)

Annotations are merely claims of interest or claims of the legal nature and incidents of relationship between the person
whose name appears on the document and the person who caused the annotation. It does not say anything about the
validity of the claim or convert a defective claim or document into a valid one. 170 These claims may be proved or
disproved during trial.

Thus, annotations are not conclusive upon courts or upon owners who may not have reason to doubt the security of their
claim as their properties' title holders.

WHEREFORE, the Petition is GRANTED. The Court of Appeals' Decision dated December 17, 2009 is REVERSED and
SET ASIDE. The Regional Trial Courts' Decisions of November 23, 2001 and December 7, 2001 are REINSTATED.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

EN BANC
G.R. No. L-8451 December 20, 1957
THE ROMAN CATHOLIC APOSTOLIC ADMINISTRATOR OF DAVAO, INC., petitioner,
vs.
THE LAND REGISTRATION COMMISSION and THE REGISTER OF DEEDS OF DAVAO CITY, respondents.

Teodoro Padilla, for petitioner.

Office of the Solicitor General Ambrosio Padilla, Assistant Solicitor General Jose G. Bautista and Troadio T. Quianzon,
Jr., for respondents.

FELIX, J.:

This is a petition for mandamus filed by the Roman Catholic Apostolic Administrator of Davao seeking the reversal of a
resolution by the Land Registration Commissioner in L.R.C. Consulta No. 14. The facts of the case are as follows:

On October 4, 1954, Mateo L. Rodis, a Filipino citizen and resident of the City of Davao, executed a deed of sale of a
parcel of land located in the same city covered by Transfer Certificate No. 2263, in favor of the Roman Catholic Apostolic
Administrator of Davao Inc., s corporation sole organized and existing in accordance with Philippine Laws, with Msgr.
Clovis Thibault, a Canadian citizen, as actual incumbent. When the deed of sale was presented to Register of Deeds of
Davao for registration, the latter.

having in mind a previous resolution of the Fourth Branch of the Court of First Instance of Manila wherein the Carmelite
Nuns of Davao were made to prepare an affidavit to the effect that 60 per cent of the members of their corporation were
Filipino citizens when they sought to register in favor of their congregation of deed of donation of a parcel of land—

required said corporation sole to submit a similar affidavit declaring that 60 per cent of the members thereof were Filipino
citizens.

16
The vendee in the letter dated June 28, 1954, expressed willingness to submit an affidavit, both not in the same tenor as
that made the Progress of the Carmelite Nuns because the two cases were not similar, for whereas the congregation of the
Carmelite Nuns had five incorporators, the corporation sole has only one; that according to their articles of incorporation,
the organization of the Carmelite Nuns became the owner of properties donated to it, whereas the case at bar, the totality
of the Catholic population of Davao would become the owner of the property bought to be registered.

As the Register of Deeds entertained some doubts as to the registerability if the document, the matter was referred to the
Land Registration Commissioner en consulta for resolution in accordance with section 4 of Republic Act No. 1151. Proper
hearing on the matter was conducted by the Commissioner and after the petitioner corporation had filed its memorandum,
a resolution was rendered on September 21, 1954, holding that in view of the provisions of Section 1 and 5 of Article XIII
of the Philippine Constitution, the vendee was not qualified to acquire private lands in the Philippines in the absence of
proof that at least 60 per centum of the capital, property, or assets of the Roman Catholic Apostolic Administrator of
Davao, Inc., was actually owned or controlled by Filipino citizens, there being no question that the present incumbent of
the corporation sole was a Canadian citizen. It was also the opinion of the Land Registration Commissioner that section
159 of the corporation Law relied upon by the vendee was rendered operative by the aforementioned provisions of the
Constitution with respect to real estate, unless the precise condition set therein — that at least 60 per cent of its capital is
owned by Filipino citizens — be present, and, therefore, ordered the Registered Deeds of Davao to deny registration of
the deed of sale in the absence of proof of compliance with such condition.

After the motion to reconsider said resolution was denied, an action for mandamus was instituted with this Court by said
corporation sole, alleging that under the Corporation Law as well as the settled jurisprudence on the matter, the deed of
sale executed by Mateo L. Rodis in favor of petitioner is actually a deed of sale in favor of the Catholic Church which is
qualified to acquire private agricultural lands for the establishment and maintenance of places of worship, and prayed that
judgment be rendered reserving and setting aside the resolution of the Land Registration Commissioner in question. In its
resolution of November 15, 1954, this Court gave due course to this petition providing that the procedure prescribed for
appeals from the Public Service Commission of the Securities and Exchange Commissions (Rule 43), be followed.

Section 5 of Article XIII of the Philippine Constitution reads as follows:

SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.

Section 1 of the same Article also provides the following:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, water, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be limited to cititzens of the Philippines, or to corporations or
associations at least sixty per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING
RIGHT, grant, lease, or concession AT THE TIME OF THE INAUGURATION OF THE GOVERNMENT
ESTABLISHED UNDER CONSTITUTION. Natural resources, with the exception of public agricultural land, shall not
be alienated, and no license, concession, or leases for the exploitation, development, or utilization of any of the natural
resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to
water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water power, in which
cases other than the development and limit of the grant.

In virtue of the foregoing mandates of the Constitution, who are considered "qualified" to acquire and hold agricultural
lands in the Philippines? What is the effect of these constitutional prohibition of the right of a religious corporation
recognized by our Corporation Law and registered as a corporation sole, to possess, acquire and register real estates in its
name when the Head, Manager, Administrator or actual incumbent is an alien?

Petitioner consistently maintained that a corporation sole, irrespective of the citizenship of its incumbent, is not prohibited
or disqualified to acquire and hold real properties. The Corporation Law and the Canon Law are explicit in their
provisions that a corporation sole or "ordinary" is not the owner of the of the properties that he may acquire but merely the
administrator thereof. The Canon Law also specified that church temporalities are owned by the Catholic Church as a
"moral person" or by the diocess as minor "moral persons" with the ordinary or bishop as administrator.

And elaborating on the composition of the Catholic Church in the Philippines, petitioner explained that as a religious
society or organization, it is made up of 2 elements or divisions — the clergy or religious members and the faithful or lay
members. The 1948 figures of the Bureau of Census showed that there were 277,551 Catholics in Davao and aliens
residing therein numbered 3,465. Ever granting that all these foreigners are Catholics, petitioner contends that Filipino
citizens form more than 80 per cent of the entire Catholics population of that area. As to its clergy and religious
17
composition, counsel for petitioner presented the Catholic Directory of the Philippines for 1954 (Annex A) which revealed
that as of that year, Filipino clergy and women novices comprise already 60.5 per cent of the group. It was, therefore,
allowed that the constitutional requirement was fully met and satisfied.

Respondents, on the other hand, averred that although it might be true that petitioner is not the owner of the land
purchased, yet he has control over the same, with full power to administer, take possession of, alienate, transfer,
encumber, sell or dispose of any or all lands and their improvements registered in the name of the corporation sole and can
collect, receive, demand or sue for all money or values of any kind that may be kind that may become due or owing to
said corporation, and vested with authority to enter into agreements with any persons, concerns or entities in connection
with said real properties, or in other words, actually exercising all rights of ownership over the properties. It was their
stand that the theory that properties registered in the name of the corporation sole are held in true for the benefit of the
Catholic population of a place, as of Davao in the case at bar should be sustained because a conglomeration of persons
cannot just be pointed out as the cestui que trust or recipient of the benefits from the property allegedly administered in
their behalf. Neither can it be said that the mass of people referred to as such beneficiary exercise ant right of ownership
over the same. This set-up, respondents argued, falls short of a trust. The respondents instead tried to prove that in reality,
the beneficiary of ecclesiastical properties are not members or faithful of the church but someone else, by quoting a
portion a portion of the ought of fidelity subscribed by a bishop upon his elevation to the episcopacy wherein he promises
to render to the Pontificial Father or his successors an account of his pastoral office and of all things appertaining to the
state of this church.

Respondents likewise advanced the opinion that in construing the constitutional provision calling for 60 per cent of
Filipino citizenship, the criterion of the properties or assets thereof.

In solving the problem thus submitted to our consideration, We can say the following: A corporation sole is a special form
of corporation usually associated with the clergy. Conceived and introduced into the common law by sheer necessity, this
legal creation which was referred to as "that unhappy freak of English law" was designed to facilitate the exercise of the
functions of ownership carried on by the clerics for and on behalf of the church which was regarded as the property owner
(See I Couvier's Law Dictionary, p. 682-683).

A corporation sole consists of one person only, and his successors (who will always be one at a time), in some particular
station, who are incorporated by law in order to give them some legal capacities and advantages, particularly that of
perpetuity, which in their natural persons they could not have had. In this sense, the king is a sole corporation; so is a
bishop, or dens, distinct from their several chapters (Reid vs. Barry, 93 Fla. 849, 112 So. 846).

The provisions of our Corporation law on religious corporations are illuminating and sustain the stand of petitioner.
Section 154 thereof provides:

SEC. 154. — For the administration of the temporalities of any religious denomination, society or church and the
management of the estates and the properties thereof, it shall be lawful for the bishop, chief priest, or presiding either of
any such religious denomination, society or church to become a corporation sole, unless inconsistent wit the rules,
regulations or discipline of his religious denomination, society or church or forbidden by competent authority thereof.

See also the pertinent provisions of the succeeding sections of the same Corporation Law copied hereunder:

SEC. 155. In order to become a corporation sole the bishop, chief priest, or presiding elder of any religious denomination,
society or church must file with the Securities and Exchange Commissioner articles of incorporation setting forth the
following facts:

xxx xxx xxx.

(3) That as such bishop, chief priest, or presiding elder he is charged with the administration of the temporalities and the
management of the estates and properties of his religious denomination, society, or church within its territorial
jurisdiction, describing it;

xxx xxx xxx.

(As amended by Commonwealth Act No. 287).

SEC. 157. From and after the filing with the Securities and Exchange Commissioner of the said articles of incorporation,
which verified by affidavit or affirmation as aforesaid and accompanied by the copy of the commission, certificate of
election, or letters of appointment of the bishop, chief priest, or presiding elder, duly certified as prescribed in the section
18
immediately preceding such the bishop, chief priest, or presiding elder, as the case may be, shall become a corporation
sole and all temporalities, estates, and properties the religious denomination, society, or church therefore administered or
managed by him as such bishop, chief priest, or presiding elder, shall be held in trust by him as a corporation sole, for the
use, purpose, behalf, and sole benefit of his religious denomination, society, or church, including hospitals, schools,
colleges, orphan, asylums, parsonages, and cemeteries thereof. For the filing of such articles of incorporation, the
Securities and Exchange Commissioner shall collect twenty-five pesos. (As amended by Commonwealth Act. No. 287);
and.

SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or by the
diocese, synod, or district organization of any religious denomination or church shall, on its incorporation, pass to the
corporation and shall be held in trust for the use, purpose behalf, and benefit of the religious society, or order so
incorporated or of the church of which the diocese, or district organization is an organized and constituent part.

The Cannon Law contains similar provisions regarding the duties of the corporation sole or ordinary as administrator of
the church properties, as follows:

Al Ordinario local pertenence vigilar diligentemente sobre la administracion de todos los bienes eclesiasticos que se
hallan en su territorio y no estuvieren sustraidos de su jurisdiccion, salvs las prescriciones legitimas que le concedan mas
aamplios derechos.

Teniendo en cuenta los derechos y las legitimas costumbres y circunstancias, procuraran los Ordinarios regular todo lo
concerniente a la administracion de los bienes eclesciasticos, dando las oportunas instucciones particularles dentro del
narco del derecho comun. (Title XXVIII, Codigo de Derecho Canonico, Lib. III, Canon 1519).1

That leaves no room for doubt that the bishops or archbishops, as the case may be, as corporation's sole are merely
administrators of the church properties that come to their possession, in which they hold in trust for the church. It can also
be said that while it is true that church properties could be administered by a natural persons, problems regarding
succession to said properties can not be avoided to rise upon his death. Through this legal fiction, however, church
properties acquired by the incumbent of a corporation sole pass, by operation of law, upon his death not his personal heirs
but to his successor in office. It could be seen, therefore, that a corporation sole is created not only to administer the
temporalities of the church or religious society where he belongs but also to hold and transmit the same to his successor in
said office. If the ownership or title to the properties do not pass to the administrators, who are the owners of church
properties?.

Bouscaren and Elis, S.J., authorities on cannon law, on their treatise comment:

In matters regarding property belonging to the Universal Church and to the Apostolic See, the Supreme Pontiff exercises
his office of supreme administrator through the Roman Curia; in matters regarding other church property, through the
administrators of the individual moral persons in the Church according to that norms, laid down in the Code of Cannon
Law. This does not mean, however, that the Roman Pontiff is the owner of all the church property; but merely that he is
the supreme guardian (Bouscaren and Ellis, Cannon Law, A Text and Commentary, p. 764).

and this Court, citing Campes y Pulido, Legislacion y Jurisprudencia Canonica, ruled in the case of Trinidad vs. Roman
Catholic Archbishop of Manila, 63 Phil. 881, that:

The second question to be decided is in whom the ownership of the properties constituting the endowment of the
ecclesiastical or collative chaplaincies is vested.

Canonists entertain different opinions as to the persons in whom the ownership of the ecclesiastical properties is vested,
with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many doctors cited
by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more probable that
ownership, strictly speaking, does not reside in the latter, and, consequently, ecclesiastical properties are owned by the
churches, institutions and canonically established private corporations to which said properties have been donated.

Considering that nowhere can We find any provision conferring ownership of church properties on the Pope although he
appears to be the supreme administrator or guardian of his flock, nor on the corporation sole or heads of dioceses as they
are admittedly mere administrators of said properties, ownership of these temporalities logically fall and develop upon the
church, diocese or congregation acquiring the same. Although this question of ownership of ecclesiastical properties has
off and on been mentioned in several decisions of the Court yet in no instance was the subject of citizenship of this
religious society been passed upon.

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We are not unaware of the opinion expressed by the late Justice Perfecto in his dissent in the case of Agustines vs. Court
of First Instance of Bulacan, 80 Phil. 565, to the effect that "the Roman Catholic Archbishop of Manila is only a branch of
a universal church by the Pope, with permanent residence in Rome, Italy". There is no question that the Roman Catholic
Church existing in the Philippines is a tributary and part of the international religious organization, for the word "Roman"
clearly expresses its unity with and recognizes the authority of the Pope in Rome. However, lest We become hasty in
drawing conclusions, We have to analyze and take note of the nature of the government established in the Vatican City, of
which it was said:

GOVERNMENT. In the Roman Catholic Church supreme authority and jurisdiction over clergy and laity alike as held by
the pope who (since the Middle Ages) is elected by the cardinals assembled in conclave, and holds office until his death or
legitimate abdication. . . While the pope is obviously independent of the laws made, and the officials appointed, by
himself or his predecessors, he usually exercises his administrative authority according to the code of canon law and
through the congregations, tribunals and offices of the Curia Romana. In their respective territories (called generally
dioceses) and over their respective subjects, the patriarchs, metropolitans or archbishops and bishops exercise a
jurisdiction which is called ordinary (as attached by law to an office given to a person. . . (Collier's Encyclopedia, Vol. 17,
p. 93).

While it is true and We have to concede that in the profession of their faith, the Roman Pontiff is the supreme head; that in
the religious matters, in the exercise of their belief, the Catholic congregation of the faithful throughout the world seeks
the guidance and direction of their Spiritual Father in the Vatican, yet it cannot be said that there is a merger of
personalities resultant therein. Neither can it be said that the political and civil rights of the faithful, inherent or acquired
under the laws of their country, are affected by that relationship with the Pope. The fact that the Roman Catholic Church
in almost every country springs from that society that saw its beginning in Europe and the fact that the clergy of this faith
derive their authorities and receive orders from the Holy See do not give or bestow the citizenship of the Pope upon these
branches. Citizenship is a political right which cannot be acquired by a sort of "radiation". We have to realize that
although there is a fraternity among all the catholic countries and the dioceses therein all over the globe, the universality
that the word "catholic" implies, merely characterize their faith, a uniformity in the practice and the interpretation of their
dogma and in the exercise of their belief, but certainly they are separate and independent from one another in jurisdiction,
governed by different laws under which they are incorporated, and entirely independent on the others in the management
and ownership of their temporalities. To allow theory that the Roman Catholic Churches all over the world follow the
citizenship of their Supreme Head, the Pontifical Father, would lead to the absurdity of finding the citizens of a country
who embrace the Catholic faith and become members of that religious society, likewise citizens of the Vatican or of Italy.
And this is more so if We consider that the Pope himself may be an Italian or national of any other country of the world.
The same thing be said with regard to the nationality or citizenship of the corporation sole created under the laws of the
Philippines, which is not altered by the change of citizenship of the incumbent bishops or head of said corporation sole.

We must therefore, declare that although a branch of the Universal Roman Catholic Apostolic Church, every Roman
Catholic Church in different countries, if it exercises its mission and is lawfully incorporated in accordance with the laws
of the country where it is located, is considered an entity or person with all the rights and privileges granted to such
artificial being under the laws of that country, separate and distinct from the personality of the Roman Pontiff or the Holy
See, without prejudice to its religious relations with the latter which are governed by the Canon Law or their rules and
regulations.

We certainly are conscious of the fact that whatever conclusion We may draw on this matter will have a far reaching
influence, nor can We overlook the pages of history that arouse indignation and criticisms against church landholdings.
This nurtured feeling that snowbailed into a strong nationalistic sentiment manifested itself when the provisions on natural
to be embodied in the Philippine Constitution were framed, but all that has been said on this regard referred more
particularly to landholdings of religious corporations known as "Friar Estates" which have already bee acquired by our
government, and not to properties held by corporations sole which, We repeat, are properties held in trust for the benefit of
the faithful residing within its territorial jurisdiction. Though that same feeling probably precipitated and influenced to a
large extent the doctrine laid down in the celebrated Krivenco decision, We have to take this matter in the light of legal
provisions and jurisprudence actually obtaining, irrespective of sentiments.

The question now left for our determination is whether the Universal Roman Catholic Apostolic Church in the
Philippines, or better still, the corporation sole named the Roman Catholic Apostolic Administrator of Davao, Inc., is
qualified to acquire private agricultural lands in the Philippines pursuant to the provisions of Article XIII of the
Constitution.

We see from sections 1 and 5 of said Article quoted before, that only persons or corporations qualified to acquire hold
lands of the public domain in the Philippines may acquire or be assigned and hold private agricultural lands.

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Consequently, the decisive factor in the present controversy hinges on the proposition or whether or not the petitioner in
this case can acquire agricultural lands of the public domain.

From the data secured from the Securities and Exchange Commission, We find that the Roman Catholic Bishop of
Zamboanga was incorporated (as a corporation sole) in September, 1912, principally to administer its temporalities and
manage its properties. Probably due to the ravages of the last war, its articles of incorporation were reconstructed in the
Securities and Exchange Commission on April 8, 1948. At first, this corporation sole administered all the temporalities of
the church existing or located in the island of Mindanao. Later on, however, new dioceses were formed and new
corporations sole were created to correspond with the territorial jurisdiction of the new dioceses, one of them being
petitioner herein, the Roman Catholic Apostolic Administrator of Davao, Inc., which was registered with the Securities
and Exchange Commission on September 12, 1950, and succeeded in the administrative for all the "temporalities" of the
Roman Catholic Church existing in Davao.

According to our Corporation Law, Public Act No. 1549, approved April 1, 1906, a corporation sole.

is organized and composed of a single individual, the head of any religious society or church, for the ADMINISTRATION
of the temporalities of such society or church. By "temporalities" is meant estate and properties not used exclusively for
religious worship. The successor in office of such religious head or chief priest incorporated as a corporation sole shall
become the corporation sole on ascension to office, and shall be permitted to transact business as such on filing with the
Securities and Exchange Commission a copy of his commission, certificate of election or letter of appointment duly
certified by any notary public or clerk of court of record (Guevara's The Philippine Corporation Law, p. 223).

The Corporation Law also contains the following provisions:

SECTION 159. Any corporation sole may purchase and hold real estate and personal; property for its church, charitable,
benevolent, or educational purposes, and may receive bequests or gifts of such purposes. Such corporation may mortgage
or sell real property held by it upon obtaining an order for that purpose from the Court of First Instance of the province in
which the property is situated; but before making the order proof must be made to the satisfaction of the Court that notice
of the application for leave to mortgage or sell has been given by publication or otherwise in such manner and for such
time as said Court or the Judge thereof may have directed, and that it is to the interest of the corporation that leave to
mortgage or sell must be made by petition, duly verified by the bishop, chief priest, or presiding elder acting as
corporation sole, and may be opposed by any member of the religious denomination, society or church represented by the
corporation sole: Provided, however, That in cases where the rules, regulations, and discipline of the religious
denomination, society or church concerned represented by such corporation sole regulate the methods of acquiring,
holding, selling and mortgaging real estate and personal property, such rules, regulations, and discipline shall control and
the intervention of the Courts shall not be necessary.

It can, therefore, be noticed that the power of a corporation sole to purchase real property, like the power exercised in the
case at bar, it is not restricted although the power to sell or mortgage sometimes is, depending upon the rules, regulations,
and discipline of the church concerned represented by said corporation sole. If corporations sole can purchase and sell real
estate for its church, charitable, benevolent, or educational purposes, can they register said real properties? As provided by
law, lands held in trust for specific purposes me be subject of registration (section 69, Act 496), and the capacity of a
corporation sole, like petitioner herein, to register lands belonging to it is acknowledged, and title thereto may be issued in
its name (Bishop of Nueva Segovia vs. Insular Government, 26 Phil. 300-1913). Indeed it is absurd that while the
corporations sole that might be in need of acquiring lands for the erection of temples where the faithful can pray, or
schools and cemeteries which they are expressly authorized by law to acquire in connection with the propagation of the
Roman Catholic Apostolic faith or in furtherance of their freedom of religion they could not register said properties in
their name. As professor Javier J. Nepomuceno very well says "Man in his search for the immortal and imponderable, has,
even before the dawn of recorded history, erected temples to the Unknown God, and there is no doubt that he will
continue to do so for all time to come, as long as he continues 'imploring the aid of Divine Providence'" (Nepomuceno's
Corporation Sole, VI Ateneo Law Journal, No. 1, p. 41, September, 1956). Under the circumstances of this case, We might
safely state that even before the establishment of the Philippine Commonwealth and of the Republic of the Philippines
every corporation sole then organized and registered had by express provision of law the necessary power and
qualification to purchase in its name private lands located in the territory in which it exercised its functions or ministry
and for which it was created, independently of the nationality of its incumbent unique and single member and head, the
bishop of the dioceses. It can be also maintained without fear of being gainsaid that the Roman Catholic Apostolic Church
in the Philippines has no nationality and that the framers of the Constitution, as will be hereunder explained, did not have
in mind the religious corporations sole when they provided that 60 per centum of the capital thereof be owned by Filipino
citizens.

21
There could be no controversy as to the fact that a duly registered corporation sole is an artificial being having the right of
succession and the power, attributes, and properties expressly authorized by law or incident to its existence (section 1,
Corporation Law). In outlining the general powers of a corporation. Public Act. No. 1459 provides among others:

SEC. 13. Every corporation has the power:

(5) To purchase, hold, convey, sell, lease, lot, mortgage, encumber, and otherwise deal with such real and personal
property as the purpose for which the corporation was formed may permit, and the transaction of the lawful business of
the corporation may reasonably and necessarily require, unless otherwise prescribed in this Act: . . .

In implementation of the same and specially made applicable to a form of corporation recognized by the same law,
Section 159 aforequoted expressly allowed the corporation sole to purchase and hold real as well as personal properties
necessary for the promotion of the objects for which said corporation sole is created. Respondent Land Registration
Commissioner, however, maintained that since the Philippine Constitution is a later enactment than public Act No. 1459,
the provisions of Section 159 in amplification of Section 13 thereof, as regard real properties, should be considered
repealed by the former.

There is a reason to believe that when the specific provision of the Constitution invoked by respondent Commissioner was
under consideration, the framers of the same did not have in mind or overlooked this particular form of corporation. It is
undeniable that the naturalization and conservation of our national resources was one of the dominating objectives of the
Convention and in drafting the present Article XII of the Constitution, the delegates were goaded by the desire (1) to
insure their conservation for Filipino posterity; (2) to serve as an instrument of national defense, helping prevent the
extension into the country of foreign control through peaceful economic penetration; and (3) to prevent making the
Philippines a source of international conflicts with the consequent danger to its internal security and independence (See
The Framing of the Philippine Constitution by Professor Jose M. Aruego, a Delegate to the Constitutional Convention,
Vol. II. P. 592-604). In the same book Delegate Aruego, explaining the reason behind the first consideration, wrote:

At the time of the framing of Philippine Constitution, Filipino capital had been to be rather shy. Filipinos hesitated s a
general rule to invest a considerable sum of their capital for the development, exploitation and utilization of the natural
resources of the country. They had not as yet been so used to corporate as the peoples of the west. This general apathy, the
delegates knew, would mean the retardation of the development of the natural resources, unless foreign capital would be
encouraged to come and help in that development. They knew that the naturalization of the natural resources would
certainly not encourage the INVESTMENT OF FOREIGN CAPITAL into them. But there was a general feeling in the
Convention that it was better to have such a development retarded or even postpone together until such time when the
Filipinos would be ready and willing to undertake it rather than permit the natural resources to be placed under the
ownership or control of foreigners in order that they might be immediately be developed, with the Filipinos of the future
serving not as owners but utmost as tenants or workers under foreign masters. By all means, the delegates believed, the
natural resources should be conserved for Filipino posterity.

It could be distilled from the foregoing that the farmers of the Constitution intended said provisions as barrier for
foreigners or corporations financed by such foreigners to acquire, exploit and develop our natural resources, saving these
undeveloped wealth for our people to clear and enrich when they are already prepared and capable of doing so. But that is
not the case of corporations sole in the Philippines, for, We repeat, they are mere administrators of the "temporalities" or
properties titled in their name and for the benefit of the members of their respective religion composed of an
overwhelming majority of Filipinos. No mention nor allusion whatsoever is made in the Constitution as to the prohibition
against or the liability of the Roman Catholic Church in the Philippines to acquire and hold agricultural lands. Although
there were some discussions on landholdings, they were mostly confined in the inclusion of the provision allowing the
Government to break big landed estates to put an end to absentee landlordism.

But let us suppose, for the sake of argument, that the above referred to inhibitory clause of Section 1 of Article XIII of the
constitution does have bearing on the petitioner's case; even so the clause requiring that at least 60 per centum of the
capital of the corporation be owned by Filipinos is subordinated to the petitioner's aforesaid right already existing at the
time of the inauguration of the Commonwealth and the Republic of the Philippines. In the language of Mr. Justice Jose P.
Laurel (a delegate to the Constitutional Convention), in his concurring opinion of the case of Gold Creek mining
Corporation, petitioner vs. Eulogio Rodriguez, Secretary of Agriculture and Commerce, and Quirico Abadilla, Director of
the Bureau of Mines, respondent, 66 Phil. 259:

The saving clause in the section involved of the Constitution was originally embodied in the report submitted by the
Committee on Naturalization and Preservation of Land and Other Natural Resources to the Constitutional Convention on
September 17, 1954. It was later inserted in the first draft of the Constitution as section 13 of Article XIII thereof, and
finally incorporated as we find it now. Slight have been the changes undergone by the proviso from the time when it
22
comes out of the committee until it was finally adopted. When first submitted and as inserted to the first draft of the
Constitution it reads: 'subject to any right, grant, lease, or concession existing in respect thereto on the date of the adoption
of the Constitution'. As finally adopted, the proviso reads: 'subject to any existing right, grant, lease, or concession at the
time of the inauguration of the Government established under this Constitution'. This recognition is not mere graciousness
but springs form the just character of the government established. The framers of the Constitution were not obscured by
the rhetoric of democracy or swayed to hostility by an intense spirit of nationalism. They well knew that conservation of
our natural resources did not mean destruction or annihilation of acquired property rights. Withal, they erected a
government neither episodic nor stationary but well-nigh conservative in the protection of property rights. This
notwithstanding nationalistic and socialistic traits discoverable upon even a sudden dip into a variety of the provisions
embodied in the instrument.

The writer of this decision wishes to state at this juncture that during the deliberation of this case he submitted to the
consideration of the Court the question that may be termed the "vested right saving clause" contained in Section 1, Article
XII of the Constitution, but some of the members of this Court either did not agree with the theory of the writer, or were
not ready to take a definite stand on the particular point I am now to discuss deferring our ruling on such debatable
question for a better occasion, inasmuch as the determination thereof is not absolutely necessary for the solution of the
problem involved in this case. In his desire to face the issues squarely, the writer will endeavor, at least as a disgression, to
explain and develop his theory, not as a lucubration of the Court, but of his own, for he deems it better and convenient to
go over the cycle of reasons that are linked to one another and that step by step lead Us to conclude as We do in the
dispositive part of this decision.

It will be noticed that Section 1 of Article XIII of the Constitution provides, among other things, that "all agricultural
lands of the public domain and their disposition shall be limited to citizens of the Philippines or to corporations at least 60
per centum of the capital of which is owned by such citizens, SUBJECT TO ANY EXISTING RIGHT AT THE TIME OF
THE INAUGURATION OF THE GOVERNMENT ESTABLISHED UNDER THIS CONSTITUTION."

As recounted by Mr. Justice Laurel in the aforementioned case of Gold Creek Mining Corporation vs. Rodriguez et al., 66
Phil. 259, "this recognition (in the clause already quoted), is not mere graciousness but springs from the just character of
the government established. The farmers of the Constitution were not obscured by the rhetoric of democracy or swayed to
hostility by an intense spirit of nationalism. They well knew that conservation of our natural resources did not mean
destruction or annihilation of ACQUIRED PROPERTY RIGHTS".

But respondents' counsel may argue that the preexisting right of acquisition of public or private lands by a corporation
which does not fulfill this 60 per cent requisite, refers to purchases of the Constitution and not to later transactions. This
argument would imply that even assuming that petitioner had at the time of the enactment of the Constitution the right to
purchase real property or right could not be exercised after the effectivity of our Constitution, because said power or right
of corporations sole, like the herein petitioner, conferred in virtue of the aforequoted provisions of the Corporation Law,
could no longer be exercised in view of the requisite therein prescribed that at least 60 per centum of the capital of the
corporation had to be Filipino. It has been shown before that: (1) the corporation sole, unlike the ordinary corporations
which are formed by no less than 5 incorporators, is composed of only one persons, usually the head or bishop of the
diocese, a unit which is not subject to expansion for the purpose of determining any percentage whatsoever; (2) the
corporation sole is only the administrator and not the owner of the temporalities located in the territory comprised by said
corporation sole; (3) such temporalities are administered for and on behalf of the faithful residing in the diocese or
territory of the corporation sole; and (4) the latter, as such, has no nationality and the citizenship of the incumbent
Ordinary has nothing to do with the operation, management or administration of the corporation sole, nor effects the
citizenship of the faithful connected with their respective dioceses or corporation sole.

In view of these peculiarities of the corporation sole, it would seem obvious that when the specific provision of the
Constitution invoked by respondent Commissioner (section 1, Art. XIII), was under consideration, the framers of the same
did not have in mind or overlooked this particular form of corporation. If this were so, as the facts and circumstances
already indicated tend to prove it to be so, then the inescapable conclusion would be that this requirement of at least 60
per cent of Filipino capital was never intended to apply to corporations sole, and the existence or not a vested right
becomes unquestionably immaterial.

But let us assumed that the questioned proviso is material. yet We might say that a reading of said Section 1 will show that
it does not refer to any actual acquisition of land up to the right, qualification or power to acquire and hold private real
property. The population of the Philippines, Catholic to a high percentage, is ever increasing. In the practice of religion of
their faithful the corporation sole may be in need of more temples where to pray, more schools where the children of the
congregation could be taught in the principles of their religion, more hospitals where their sick could be treated, more
hallow or consecrated grounds or cemeteries where Catholics could be buried, many more than those actually existing at
the time of the enactment of our Constitution. This being the case, could it be logically maintained that because the
23
corporation sole which, by express provision of law, has the power to hold and acquire real estate and personal property of
its churches, charitable benevolent, or educational purposes (section 159, Corporation Law) it has to stop its growth and
restrain its necessities just because the corporation sole is a non-stock corporation composed of only one person who in
his unity does not admit of any percentage, especially when that person is not the owner but merely an administrator of
the temporalities of the corporation sole? The writer leaves the answer to whoever may read and consider this portion of
the decision.

Anyway, as stated before, this question is not a decisive factor in disposing the case, for even if We were to disregard such
saving clause of the Constitution, which reads: subject to any existing right, grant, etc., at the same time of the
inauguration of the Government established under this Constitution, yet We would have, under the evidence on record,
sufficient grounds to uphold petitioner's contention on this matter.

In this case of the Register of Deeds of Rizal vs. Ung Sui Si Temple, 2 G.R. No. L-6776, promulgated May 21, 1955,
wherein this question was considered from a different angle, this Court through Mr. Justice J.B.L. Reyes, said:

The fact that the appellant religious organization has no capital stock does not suffice to escape the Constitutional
inhibition, since it is admitted that its members are of foreign nationality. The purpose of the sixty per centum requirement
is obviously to ensure that corporation or associations allowed to acquire agricultural land or to exploit natural resources
shall be controlled by Filipinos; and the spirit of the Constitution demands that in the absence of capital stock, the
controlling membership should be composed of Filipino citizens.

In that case respondent-appellant Ung Siu Si Temple was not a corporation sole but a corporation aggregate, i.e., an
unregistered organization operating through 3 trustees, all of Chinese nationality, and that is why this Court laid down the
doctrine just quoted. With regard to petitioner, which likewise is a non-stock corporation, the case is different, because it
is a registered corporation sole, evidently of no nationality and registered mainly to administer the temporalities and
manage the properties belonging to the faithful of said church residing in Davao. But even if we were to go over the
record to inquire into the composing membership to determine whether the citizenship requirement is satisfied or not, we
would find undeniable proof that the members of the Roman Catholic Apostolic faith within the territory of Davao are
predominantly Filipino citizens. As indicated before, petitioner has presented evidence to establish that the clergy and lay
members of this religion fully covers the percentage of Filipino citizens required by the Constitution. These facts are not
controverted by respondents and our conclusion in this point is sensibly obvious.

Dissenting Opinion—Discussed. — After having developed our theory in the case and arrived at the findings and
conclusions already expressed in this decision. We now deem it proper to analyze and delve into the basic foundation on
which the dissenting opinion stands up. Being aware of the transcendental and far-reaching effects that Our ruling on the
matter might have, this case was thoroughly considered from all points of view, the Court sparing no effort to solve the
delicate problems involved herein.

At the deliberations had to attain this end, two ways were open to a prompt dispatch of the case: (1) the reversal of the
doctrine We laid down in the celebrated Krivenko case by excluding urban lots and properties from the group of the term
"private agricultural lands" use in this section 5, Article XIII of the Constitution; and (2) by driving Our reasons to a point
that might indirectly cause the appointment of Filipino bishops or Ordinary to head the corporations sole created to
administer the temporalities of the Roman Catholic Church in the Philippines. With regard to the first way, a great
majority of the members of this Court were not yet prepared nor agreeable to follow that course, for reasons that are
obvious. As to the second way, it seems to be misleading because the nationality of the head of a diocese constituted as a
corporation sole has no material bearing on the functions of the latter, which are limited to the administration of the
temporalities of the Roman Catholic Apostolic Church in the Philippines.

Upon going over the grounds on which the dissenting opinion is based, it may be noticed that its author lingered on the
outskirts of the issues, thus throwing the main points in controversy out of focus. Of course We fully agree, as stated by
Professor Aruego, that the framers of our Constitution had at heart to insure the conservation of the natural resources of
Our motherland of Filipino posterity; to serve them as an instrument of national defense, helping prevent the extension
into the country of foreign control through peaceful economic penetration; and to prevent making the Philippines a source
of international conflicts with the consequent danger to its internal security and independence. But all these precautions
adopted by the Delegates to Our Constitutional Assembly could have not been intended for or directed against cases like
the one at bar. The emphasis and wonderings on the statement that once the capacity of a corporation sole to acquire
private agricultural lands is admitted there will be no limit to the areas that it may hold and that this will pave the way for
the "revival or revitalization of religious landholdings that proved so troublesome in our past", cannot even furnish the
"penumbra" of a threat to the future of the Filipino people. In the first place, the right of Filipino citizens, including those
of foreign extraction, and Philippine corporations, to acquire private lands is not subject to any restriction or limit as to
quantity or area, and We certainly do not see any wrong in that. The right of Filipino citizens and corporations to acquire
24
public agricultural lands is already limited by law. In the second place, corporations sole cannot be considered as aliens
because they have no nationality at all. Corporations sole are, under the law, mere administrators of the temporalities of
the Roman Catholic Church in the Philippines. In the third place, every corporation, be it aggregate or sole, is only
entitled to purchase, convey, sell, lease, let, mortgage, encumber and otherwise deal with real properties when it is
pursuant to or in consonance with the purposes for which the corporation was formed, and when the transactions of the
lawful business of the corporation reasonably and necessarily require such dealing — section 13-(5) of the Corporation
Law, Public Act No. 1459 — and considering these provisions in conjunction with Section 159 of the same law which
provides that a corporation sole may only "purchase and hold real estate and personal properties for its church, charitable,
benevolent or educational purposes", the above mentioned fear of revitalization of religious landholdings in the
Philippines is absolutely dispelled. The fact that the law thus expressly authorizes the corporations sole to receive
bequests or gifts of real properties (which were the main source that the friars had to acquire their big haciendas during the
Spanish regime), is a clear indication that the requisite that bequests or gifts of real estate be for charitable, benevolent, or
educational purposes, was, in the opinion of the legislators, considered sufficient and adequate protection against the
revitalization of religious landholdings.

Finally, and as previously stated, We have reason to believe that when the Delegates to the Constitutional Convention
drafted and approved Article XIII of the Constitution they do not have in mind the corporation sole. We come to this
finding because the Constitutional Assembly, composed as it was by a great number of eminent lawyers and jurists, was
like any other legislative body empowered to enact either the Constitution of the country or any public statute, presumed
to know the conditions existing as to particular subject matter when it enacted a statute (Board of Commerce of Orange
Country vs. Bain, 92 S.E. 176; N. C. 377).

Immemorial customs are presumed to have been always in the mind of the Legislature in enacting legislation. (In re
Kruger's Estate, 121 A. 109; 277 P. 326).

The Legislative is presumed to have a knowledge of the state of the law on the subjects upon which it legislates. (Clover
Valley Land and Stock Co. vs. Lamb et al., 187, p. 723,726.)

The Court in construing a statute, will assume that the legislature acted with full knowledge of the prior legislation on the
subject and its construction by the courts. (Johns vs. Town of Sheridan, 89 N. E. 899, 44 Ind. App. 620.).

The Legislature is presumed to have been familiar with the subject with which it was dealing . . . . (Landers vs.
Commonwealth, 101 S. E. 778, 781.).

The Legislature is presumed to know principles of statutory construction. (People vs. Lowell, 230 N. W. 202, 250 Mich.
349, followed in P. vs. Woodworth, 230 N.W. 211, 250 Mich. 436.).

It is not to be presumed that a provision was inserted in a constitution or statute without reason, or that a result was
intended inconsistent with the judgment of men of common sense guided by reason" (Mitchell vs. Lawden, 123 N.E. 566,
288 Ill. 326.) See City of Decatur vs. German, 142 N. E. 252, 310 Ill. 591, and may other authorities that can be cited in
support hereof.

Consequently, the Constitutional Assembly must have known:

1. That a corporation sole is organized by and composed of a single individual, the head of any religious society or church
operating within the zone, area or jurisdiction covered by said corporation sole (Article 155, Public Act No. 1459);

2. That a corporation sole is a non-stock corporation;

3. That the Ordinary ( the corporation sole proper) does not own the temporalities which he merely administers;

4. That under the law the nationality of said Ordinary or of any administrator has absolutely no bearing on the nationality
of the person desiring to acquire real property in the Philippines by purchase or other lawful means other than by
hereditary succession, who according to the Constitution must be a Filipino (sections 1 and 5, Article XIII).

5. That section 159 of the Corporation Law expressly authorized the corporation sole to purchase and hold real estate for
its church, charitable, benevolent or educational purposes, and to receive bequests or gifts for such purposes;

6. That in approving our Magna Carta the Delegates to the Constitutional Convention, almost all of whom were Roman
Catholics, could not have intended to curtail the propagation of the Roman Catholic faith or the expansion of the activities
of their church, knowing pretty well that with the growth of our population more places of worship, more schools where
25
our youth could be taught and trained; more hallow grounds where to bury our dead would be needed in the course of
time.

Long before the enactment of our Constitution the law authorized the corporations sole even to receive bequests or gifts of
real estates and this Court could not, without any clear and specific provision of the Constitution, declare that any real
property donated, let as say this year, could no longer be registered in the name of the corporation sole to which it was
conveyed. That would be an absurdity that should not receive our sanction on the pretext that corporations sole which
have no nationality and are non-stock corporations composed of only one person in the capacity of administrator, have to
establish first that at least sixty per centum of their capital belong to Filipino citizens. The new Civil Code even provides:

ART. 10. — In case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended
right and justice to prevail.

Moreover, under the laws of the Philippines, the administrator of the properties of a Filipino can acquire, in the name of
the latter, private lands without any limitation whatsoever, and that is so because the properties thus acquired are not for
and would not belong to the administrator but to the Filipino whom he represents. But the dissenting Justice inquires: If
the Ordinary is only the administrator, for whom does he administer? And who can alter or overrule his acts? We will
forthwith proceed to answer these questions. The corporations sole by reason of their peculiar constitution and form of
operation have no designed owner of its temporalities, although by the terms of the law it can be safely implied that the
Ordinary holds them in trust for the benefit of the Roman Catholic faithful to their respective locality or diocese.
Borrowing the very words of the law, We may say that the temporalities of every corporation sole are held in trust for the
use, purpose, behalf and benefit of the religious society, or order so incorporated or of the church to which the diocese,
synod, or district organization is an organized and constituent part (section 163 of the Corporation Law).

In connection with the powers of the Ordinary over the temporalities of the corporation sole, let us see now what is the
meaning and scope of the word "control". According to the Merriam-Webster's New International Dictionary, 2nd ed., p.
580, on of the acceptations of the word "control" is:

4. To exercise restraining or directing influence over; to dominate; regulate; hence, to hold from action; to curb; subject;
also, Obs. — to overpower.

SYN: restrain, rule, govern, guide, direct; check, subdue.

It is true that under section 159 of the Corporation Law, the intervention of the courts is not necessary, to mortgage or sell
real property held by the corporation sole where the rules, regulations and discipline of the religious denomination, society
or church concerned presented by such corporation sole regulates the methods of acquiring, holding, selling and
mortgaging real estate, and that the Roman Catholic faithful residing in the jurisdiction of the corporation sole has no say
either in the manner of acquiring or of selling real property. It may be also admitted that the faithful of the diocese cannot
govern or overrule the acts of the Ordinary, but all this does not mean that the latter can administer the temporalities of the
corporation sole without check or restraint. We must not forget that when a corporation sole is incorporated under
Philippine laws, the head and only member thereof subjects himself to the jurisdiction of the Philippine courts of justice
and these tribunals can thus entertain grievances arising out of or with respect to the temporalities of the church which
came into the possession of the corporation sole as administrator. It may be alleged that the courts cannot intervene as to
the matters of doctrine or teachings of the Roman Catholic Church. That is correct, but the courts may step in, at the
instance of the faithful for whom the temporalities are being held in trust, to check undue exercise by the corporation sole
of its power as administrator to insure that they are used for the purpose or purposes for which the corporation sole was
created.

American authorities have these to say:

It has been held that the courts have jurisdiction over an action brought by persons claiming to be members of a church,
who allege a wrongful and fraudulent diversion of the church property to uses foreign to the purposes of the church, since
no ecclesiastical question is involved and equity will protect from wrongful diversion of the property (Hendryx vs.
Peoples United Church, 42 Wash. 336, 4 L.R.A. — n.s. — 1154).

The courts of the State have no general jurisdiction and control over the officers of such corporations in respect to the
performance of their official duties; but as in respect to the property which they hold for the corporation, they stand in
position of TRUSTEES and the courts may exercise the same supervision as in other cases of trust (Ramsey vs. Hicks,
174 Ind. 428, 91 N.E. 344, 92 N.E. 164, 30 L.R.A. — n.s. — 665; Hendryx vs. Peoples United Church, supra.).

26
Courts of the state do not interfere with the administration of church rules or discipline unless civil rights become
involved and which must be protected (Morris St., Baptist Church vs. Dart, 67 S.C. 338, 45 S.E. 753, and others). (All
cited in Vol. II, Cooley's Constitutional Limitations, p. 960-964.).

If the Constitutional Assembly was aware of all the facts above enumerated and of the provisions of law relative to
existing conditions as to management and operation of corporations sole in the Philippines, and if, on the other hand,
almost all of the Delegates thereto embraced the Roman Catholic faith, can it be imagined even for an instant that when
Article XIII of the Constitution was approved the framers thereof intended to prevent or curtail from then on the
acquisition sole, either by purchase or donation, of real properties that they might need for the propagation of the faith and
for there religious and Christian activities such as the moral education of the youth, the care, attention and treatment of the
sick and the burial of the dead of the Roman Catholic faithful residing in the jurisdiction of the respective corporations
sole? The mere indulgence in said thought would impress upon Us a feeling of apprehension and absurdity. And that is
precisely the leit motiv that permeates the whole fabric of the dissenting opinion.

It seems from the foregoing that the main problem We are confronted with in this appeal, hinges around the necessity of a
proper and adequate interpretation of sections 1 and 5 of Article XIII of the Constitution. Let Us then be guided by the
principles of statutory construction laid down by the authorities on the matter:

The most important single factor in determining the intention of the people from whom the constitution emanated is the
language in which it is expressed. The words employed are to be taken in their natural sense, except that legal or technical
terms are to be given their technical meaning. The imperfections of language as a vehicle for conveying meanings result in
ambiguities that must be resolved by result to extraneous aids for discovering the intent of the framers. Among the more
important of these are a consideration of the history of the times when the provision was adopted and of the purposes
aimed at in its adoption. The debates of constitutional convention, contemporaneous construction, and practical
construction by the legislative and executive departments, especially if long continued, may be resorted to resolve, but not
to create, ambiguities. . . . Consideration of the consequences flowing from alternative constructions of doubtful
provisions constitutes an important interpretative device. . . . The purposes of many of the broadly phrased constitutional
limitations were the promotion of policies that do not lend themselves to definite and specific formulation. The courts
have had to define those policies and have often drawn on natural law and natural rights theories in doing so. The
interpretation of constitutions tends to respond to changing conceptions of political and social values. The extent to which
these extraneous aids affect the judicial construction of constitutions cannot be formulated in precise rules, but their
influence cannot be ignored in describing the essentials of the process (Rottschaeffer on Constitutional Law, 1939 ed., p.
18-19).

There are times that when even the literal expression of legislation may be inconsistent with the general objectives of
policy behind it, and on the basis of equity or spirit of the statute the courts rationalize a restricted meaning of the latter. A
restricted interpretation is usually applied where the effect of literal interpretation will make for injustice and absurdity or,
in the words of one court, the language must be so unreasonable 'as to shock general common sense'. (Vol. 3, Sutherland
on Statutory Construction, 3rd ed., 150.).

A constitution is not intended to be a limitation on the development of a country nor an obstruction to its progress and
foreign relations (Moscow Fire Ins. Co. of Moscow, Russia vs. Bank of New York and Trust Co., 294 N. Y. S.648; 56 N.E.
2d. 745, 293 N.Y. 749).

Although the meaning or principles of a constitution remain fixed and unchanged from the time of its adoption, a
constitution must be construed as if intended to stand for a great length of time, and it is progressive and not static.
Accordingly, it should not receive too narrow or literal an interpretation but rather the meaning given it should be applied
in such manner as to meet new or changed conditions as they arise (U.S. vs. Lassic, 313 U.S. 299, 85 L. Ed., 1368).

Effect should be given to the purpose indicated by a fair interpretation of the language used and that construction which
effectuates, rather than that which destroys a plain intent or purpose of a constitutional provision, is not only favored but
will be adopted (State ex rel. Randolph Country vs. Walden, 206 S.W. 2d 979).

It is quite generally held that in arriving at the intent and purpose the construction should be broad or liberal or equitable,
as the better method of ascertaining that intent, rather than technical (Great Southern Life Ins. Co. vs. City of Austin, 243
S.W. 778).

All these authorities uphold our conviction that the framers of the Constitution had not in mind the corporations sole, nor
intended to apply them the provisions of section 1 and 5 of said Article XIII when they passed and approved the same.
And if it were so as We think it is, herein petitioner, the Roman Catholic Apostolic Administrator of Davao, Inc., could not
be deprived of the right to acquire by purchase or donation real properties for charitable, benevolent and educational
27
purposes, nor of the right to register the same in its name with the Register of Deeds of Davao, an indispensable requisite
prescribed by the Land Registration Act for lands covered by the Torrens system.

We leave as the last theme for discussion the much debated question above referred to as "the vested right saving clause"
contained in section 1, Article XIII of the Constitution. The dissenting Justice hurls upon the personal opinion expressed
on the matter by the writer of the decision the most pointed darts of his severe criticism. We think, however, that this
strong dissent should have been spared, because as clearly indicated before, some members of this Court either did not
agree with the theory of the writer or were not ready to take a definite stand on that particular point, so that there being no
majority opinion thereon there was no need of any dissension therefrom. But as the criticism has been made the writer
deems it necessary to say a few words of explanation.

The writer fully agrees with the dissenting Justice that ordinarily "a capacity to acquire (property) in futuro, is not in itself
a vested or existing property right that the Constitution protects from impairment. For a property right to be vested (or
acquired) there must be a transition from the potential or contingent to the actual, and the proprietary interest must have
attached to a thing; it must have become 'fixed and established'" (Balboa vs. Farrales, 51 Phil. 498). But the case at bar has
to be considered as an exception to the rule because among the rights granted by section 159 of the Corporation Law was
the right to receive bequests or gifts of real properties for charitable, benevolent and educational purposes. And this right
to receive such bequests or gifts (which implies donations in futuro), is not a mere potentiality that could be impaired
without any specific provision in the Constitution to that effect, especially when the impairment would disturbingly affect
the propagation of the religious faith of the immense majority of the Filipino people and the curtailment of the activities of
their Church. That is why the writer gave us a basis of his contention what Professor Aruego said in his book "The
Framing of the Philippine Constitution" and the enlightening opinion of Mr. Justice Jose P. Laurel, another Delegate to the
Constitutional Convention, in his concurring opinion in the case of Goldcreek Mining Co. vs. Eulogio Rodriguez et al., 66
Phil. 259. Anyway the majority of the Court did not deem necessary to pass upon said "vested right saving clause" for the
final determination of this case.

JUDGMENT

Wherefore, the resolution of the respondent Land Registration Commission of September 21, 1954, holding that in view
of the provisions of sections 1 and 5 of Article XIII of the Philippine Constitution the vendee (petitioner) is not qualified
to acquire lands in the Philippines in the absence of proof that at least 60 per centum of the capital, properties or assets of
the Roman Catholic Apostolic Administrator of Davao, Inc. is actually owned or controlled by Filipino citizens, and
denying the registration of the deed of sale in the absence of proof of compliance with such requisite, is hereby reversed.
Consequently, the respondent Register of Deeds of the City of Davao is ordered to register the deed of sale executed by
Mateo L. Rodis in favor of the Roman Catholic Apostolic Administrator of Davao, Inc., which is the subject of the present
litigation. No pronouncement is made as to costs. It is so ordered.

Bautista Angelo and Endencia, JJ., concur.

Paras, C.J., and Bengzon, J., concur in the result.

LABRADOR, J., concurring:

The case at bar squarely present this important legal question: Has the bishop or ordinary of the Roman Catholic Church
who is not a Filipino citizen, as corporation sole, the right to register land, belonging to the Church over which he
presides, in view of the Krivenko decision? Mr. Justice Felix sustains the affirmative view while Mr. Justice J. B. L.
Reyes, the negative. As the undersigned understands it, the reason given for this last view is that the constitutional
provision prohibiting land ownership by foreigners also extends to control because this lies within the scope and purpose
of the prohibition.

To our way of thinking, the question at issue depends for its resolution upon another, namely, who is the owner of the land
or property of the Church sought to be registered? Under the Canon Law the parish and the diocese have the right to
acquire and own property.

SEC. 1. La Iglesia catolica y la Sede Apostolica, libre e independientemente de la potestad civil, tiene derecho innato de
adquirir, retener y administrar bienes temporales para el logro de sus propios fines.

SEC. 2. Tambien las iglesias particulares y demas personas morales erigidas por la autoridad eclesiastica en persona
juridica, tienen derecho, a tenor de los sagrados canones, de adquirir, retener y administrar bienes temporales. (Canon
1495) (Codigo de Derecho Canonico por Miguelez-Alonzo-Cabreros, 4a ed., p. 562.).

28
The Canon Law further states that Church property belongs to the non-collegiate moral person called the parish, or to the
diocese.

In canon law the ownership of ecclesiastical goods belongs to each separate juridical person in the Church (C. 1499). The
property of St. John's Church does not belong to the Pope, the bishop, the pastor, or even to the people of the parish. It
belongs to the non-collegiate moral person called the parish, which has been lawfully erected. It is not like a stock
company. The civil law does not recognize this canonical principle; it insists on an act of civil incorporation or some other
legal device. (Ready Answers in Canon Law by Rev. P.J. Lydon, DD., 3rd ed., 1948, p. 576.).

Parish. 3. A portion or subdivision of a diocese committed to the spiritual jurisdiction or care of a priest or minister, called
rector or pastor. In the Protestant Episcopal Church, it is a territorial division usually following civil bounds, as those of a
town. In the Roman Catholic Church, it is usually territorial, but whenever, as in some parts of the United States there are
different rites and languages, the boundaries and jurisdiction are determined by right or language; as, a Ruthenian or
Polish parish. "5. The inhabitants or members of a parish, collectively.

Diocese. 3. Eccl. The circuit or extent of a bishop's jurisdiction; the district in which a bishop has authority. (Webster's
New International Dictionary).

We are aware of the fact that some writers believe that ownership of ecclesiastical properties resides in the Roman
Catholic Pontiff as Head of the Universal Church, but the better opinion seems to be that they do belong to the parishes
and diocese as above indicated.

Canonists entertain different opinions as to the person in whom the ownership of the ecclesiastical properties is vested,
with respect to which we shall, for our purpose, confine ourselves to stating with Donoso that, while many doctors cited
by Fagnano believe that it resides in the Roman Pontiff as Head of the Universal Church, it is more probable that
ownership, strictly speaking, does not reside in the latter and, consequently, ecclesiastical properties are owned by the
churches, institutions and canonically established private corporations to which said properties have been donated. (3
Campos y Pulido, Legislacion y Jurisprudencia Canonica, P. 420, cited in Trinidad vs. Roman Catholic Archbishop of
Manila, 63 Phil., 881, 888-889.).

The property in question, therefore, appears to belong to the parish or the diocese of Davao. But the Roman Catholics of
Davao are not organized as a juridical person, either under the Canon law or under the Civil Law. Neither is there any
provision in either for their organization as a juridical person. Registration of the property in the name of the Roman
Catholics of Davao is, therefore, impossible.

As under the Civil Law, however, the organization of parishes and dioceses as juridical persons is not expressly provided
for, the corporation law has set up the fiction known as the "corporation sole."

It tolerates the corporation sole wherever and as long as the state law does not permit the legal incorporation of the parish
or diocese. The bishop officially is the legal owner. (Ready Answers in Canon Law, supra, p. 577.) .

and authorizes it to purchase and hold real estate for the Church.

SEC. 159. Any corporation sole may purchase and hold real estate and personal property for its church, charitable,
benevolent, or educational purposes, and may receive bequests or gifts for such purposes. Such corporation may mortgage
or sell real property held by it upon obtaining an order for that purpose from the Court of First Instance of the province in
which the property is situated; but before making the order proof must be made to the satisfaction of the court that notice
of the application for leave to mortgage or sell has been given by publication or otherwise in such manner and for such
time as said court or the judge thereof may have directed, and that it is to the interest of the corporation that leave to
mortgage or sell should be granted. The application for leave to mortgage or sell must be made by petition, duly verified
by the bishop, chief priest, or presiding elder, acting as corporation sole, and may be opposed by any member of the
religious denomination, society, or church represented by the corporation sole: Provided, however, That in cases when the
rules, regulations and discipline of the religious denomination, society or church concerned represented by such
corporation sole regulate the methods of acquiring, holding, selling, and mortgaging real estate and personal property,
such rules, regulations, and discipline shall control and the intervention of the courts shall not be necessary. (The
Corporation Law.)

And in accordance with the above section, temporalities of the Church or of parish or a diocese are allowed to be
registered in the name of the corporation sole for purposes of administration and in trust for the real owners.

29
The mere fact that the Corporation Law authorizes the corporation sole to acquire and hold real estate or other property
does not make the latter the real owner thereof, as his tenure of Church property is merely for the purposes of
administration. As stated above, the bishop is only the legal (technical) owner or trustee, the parish or diocese being the
beneficial owner, or cestui que trust.

Having arrived at the conclusion that the property in question belongs actually either to the parish or to the dioceses of
Davao, the next question that possess for solution is, In case of said property, whose nationality must be considered for the
purpose of determining the applicability of the constitutional provision limiting ownership of land to Filipinos, that of the
bishop or chief priest who registers as corporation sole, or that of the constituents of the parish or diocese who are the
beneficial owners of the land? We believe that of a latter must be considered, and not that of the priest clothed with the
corporate fiction and denominated as the corporation sole. The corporation sole is a mere contrivance to enable a church
to acquire, own and manage properties belonging to the church. It is only a means to an end. The constitutional provision
could not have been meant to apply to the means through which and by which property may be owned or acquired, but to
the ultimate owner of the property. Hence, the citizenship of the priest forming the corporation sole should be no
impediment if the parish or diocese which owns the property is qualified to own and possess the property.

We can take judicial notice of the fact that a great majority of the constituents of the parish or diocese of Davao are
Roman Catholics. The affidavit demanded is therefore, a mere formality.

The dissenting opinion sustains the proposition that control, not actual ownership, is the factor that determines whether the
constitutional prohibition against alien ownership of lands should or should not apply. We may assume the correctness of
the proposition that the Holy See exercises control cannot be real and actual but merely theoretical. In any case, the
constitutional prohibition is limited by its terms to ownership and ownership alone. And should the corporation sole abuse
its powers and authority in relation to the administration or disposal of the property contrary to the wishes of the
constituents of the parish or the diocese, the act may always be questioned as ultra vires.

We agree, therefore, with the reversal of the order.

Montemayor and Reyes, A., JJ., concur.

REYES, J.B.L., dissenting:

I regret not being able to assent to the opinion of Mr. Justice Felix. The decision of the Supreme Court in this case will be
of far reaching results, for once the capacity of corporations sole to acquire public and private agricultural lands is
admitted, there will be no limit to the areas they may hold until the Legislature implements section 3 of Article XIII of the
Constitution, empowering it to set a limit to the size of private agricultural land that may be held; and even then it can
only be done without prejudice to rights acquired prior to the enactment of such law. In other words, even if a limitative
law is adopted, it will not affect the landholdings acquired before the law become effective, no matter how vast the estate
should be.

The Constitutional restrictions to the acquisition of agricultural land are well known:

SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their
disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or
associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant,
lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural
resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the
exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-
five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply fisheries, or
industrial uses other than the development of water power, in which cases beneficial use may be the measure and the limit
of the grant. (Article XII, Constitution of the Phil.).

SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. (Art.
XII, Constitution of the Phil.).

In requiring corporations or associations to have sixty per cent (60%) of their capital owned by Filipino citizens, the
constitution manifestly disregarded the corporate fiction, i.e., the juridical personality of such corporations or associations.
It went behind the corporate entity and looked at the natural persons that composed it, and demanded that a clear majority

30
in interest (60%) should be Filipino. To me this was done to ensure that the control of its properties (not merely the
beneficial ownership thereof) remained in Filipino hands. (Aruego, Framing of the Constitution, Vol. 2. pp. 604, 606.) .

The nationalization of the natural resources of the country was intended (1) to insure their conservation for Filipino
posterity; (2) to serve as an instrument of national defense, helping prevent the extension into the country of foreign
control through peaceful economic penetration; and (3) to prevent making the Philippines a source of international
conflicts with the consequent danger to its internal security and independence. . . .

The convention permitted aliens to acquire an interest in the natural resources of the country and in private agricultural
lands as component elements of corporations or associations. The maximum limit of interest that they could hold in a
corporation or association would be only forty per centum of the capital. Accordingly the control of the corporation or
association would remain in Filipino hands.

In its report the committee on nationalization and preservation of lands and other natural resources recommended that the
maximum limit of interest that aliens could hold in a corporation or association should be only twenty-five per centum of
the capital. The purpose of the committee was to enable Filipino-controlled corporations or associations, if necessary, to
interest aliens to join their technical or managerial staff by giving them a part interest in the same. The sub-committee of
seven embodied this recommendation in the first draft of the Constitution; but in the revised article on General Provisions,
it raised the amount to forty per centum. (emphasis supplied.)

It was in recognition of this basic rule that we held in Register of Deeds vs. Ung Siu Si Temple, 51 Off. Gaz. p. 2866, that
if the association had no capital, its controlling membership must be composed of Filipinos. Because ownership divorced
from control is not true ownership.

From these premises it can be deduced that the preliminary question to be decide by the court is the following: what and
who exercises the power of control in the corporation sole known as "The Roman Catholic Apostolic Administrator of
Davao, Inc."?.

Under section 155 of the Corporation Law, the bishop, or other religious head, as corporation sole, is "charged with the
administration of the temporalities of his church." It becomes then pertinent to inquire: if he is only an administrator, for
whom does he administer? And who can alter or overrule his acts?

If his acts as administrator can not be overridden, or altered, except by himself, then obviously the control of the
corporation and its temporalities is in the bishop himself, and he must be a Filipino citizen. If, on the other hand, the final
say as to management, exploitation, encumbrance or disposition of the temporalities resides in another individual or body
of individuals, then the control resides there. To possess constitutional capacity to acquire agricultural land or other
natural resources, that body making the final decision for the corporation must have at least 60 per cent Filipino
membership.

By this test, the body of members professing the Catholic faith in the diocese of Davao does not constitute the controlling
membership. For under the rules of the Roman Catholic Church the faithful can not control the acts of the Ordinary; they
cannot override his decision, just as they do not elect or remove him. Only his hierarchical superiors can do that; the
control is from above, not from below. Hence, the fact that 90 per cent (or even 100 per cent) of the faithful in the diocese
should be composed of Filipino citizens is totally devoid of significance from the standpoint of the constitutional
restrictions in question (see Codex, Canons 1518 and 1530, paragraph 1, No. 3).

Moreover, I do not think that the body of Catholic faithful in the Davao diocese can be taken, for the purpose here under
consideration, as the Church represented by the Ordinary of Davao. That body does not constitute an entity or unit
separate and apart from the rest of the faithful throughout the world that compose the Roman Catholic Church that has
always claimed ecumenical (universal) character. There is nom Catholic Church of Davao district and independent of the
Catholic Church of Manila, Lipa or Rome. All those professing Catholic faith are members of only one single church or
religious group. Thus the Iglesia Filipina Independiente is not part of the Catholic Church, precisely because of its
independence.

If, the, the Catholic Church of Davao is part and parcel of the universal Catholic Church, it can not be considered separate
and apart from it in this case. And if considered with it, obviously the condition of 60 per cent Filipino membership is not
satisfied when all the Catholic faithful in the world are taken into account.

The unity and singleness of the various diocese of the church appears expressly recognized in section 163 of the
Corporation Law, which provides that the corporation (sole) shall hold the temporalities, not for the diocese; but for the
benefit "of the church of which the diocese — is an organized or constituent part."
31
SEC. 163. The right to administer all temporalities and all property held or owned by a religious order or society, or by the
diocese synod, or district organization of any religious denomination or church shall, on its incorporation, pass to the
corporation and shall be held in trust for the use purpose, behalf, and benefit of the religious society or order so
incorporated or of the church of which the diocese, synod, or district organization is an organized and constituent part.

So that, even from the standpoint of beneficial ownership, the dioceses of Davao can not be viewed as a group legally
isolated from the Catholic Church as a whole.

Nor does court control over the acts of the corporation sole constitute a guarantee of Filipino control that would satisfy the
purposes of the constitution, for the reason that under section 159 (last proviso) of the Corporation law, the court
intervention is dispensed with where the rules and discipline of the church already regulate the acquisition and disposition
of real estate and personal property.

Provided however, that in cases where the rules, regulations and discipline of the religious denomination, society, or
church concerned represented by such corporation sole regulate the methods of acquiring, holding, selling, and
mortgaging real estate and personal property, such rules, regulations, and discipline shall control and the intervention of
the courts shall not be necessary. (emphasis supplied.)

It is argued that a distinction must be drawn between the lands to be devoted to purely religious purposes and the lands
held in ordinary ownership. But where in the Constitution is such a distinction drawn? Under it, capacity to acquire
agricultural land for the erection of a church is capacity to acquire agricultural lands for any lawful purpose, whether it be
for convents or schools or seminaries or haciendas for their support or land to be held solely for enjoyment of the revenue.
Once the capacity to acquire is granted, the way is paved for the revitalization of religious landholdings that proved so
troublesome in our past. I cannot conceive that the Constitution intended to revive them.

It is also argued that, before the Constitution was adopted, the corporations sole had, by express statute, the right to
acquire agricultural land; and that the Constitution was not intended to destroy such "acquired property rights." If
followed, the argument destroys the constitutional restrictions. All aliens had a capacity to acquire agricultural land before
the Constitution came into effect, because no prohibition existed previously. Must their right to acquire and hold
agricultural land be conceded in spite of the Constitution?.

That the law should have expressly conferred capacity to acquire land upon corporations sole was not due any special
predilection for them; it was exclusively due to the principle that corporation, as artificial entities, have no inherent rights,
but only those granted by the sovereign. Unless conferred, the corporate right would not exist.

Furthermore, a capacity to acquire in futuro, is not in itself a vested existing property right that the Constitution protects
from impairment. For a property right to be vested (or acquired) there must be a transition from the potential, or
contingent, to the actual, and the proprietary interest must have attached to a thing, it must have become "fixed or
established "(Balboa vs. Farrales, 51 Phil. 498). If mere potentialities cannot be impaired, then the law would become
unchangeable, for every variation in it will reduce some one's legal ability to do or not to do. Already in Benguet
Consolidated vs. Pineda, 3 52 Off. Gaz. 1961, we have ruled that no one has a vested right in statutory privileges or
exemptions. And in the concurring opinion in Gold Creek Mining Corp. vs. Rodriguez, 66 Phil. 259 (cited by Justice
Felix), Mr. Justice Laurel squarely declared that "contingency or expectation is neither property right." (cas. cit., p. 269.)
Finally, the point is also made that the Ordinary, as religious corporation sole, has no citizenship, and is not an alien. The
answer is that under the Constitution of the Republic, it is not enough that the acquirer of agricultural land be not an alien;
he must be a Filipino or controlled by Filipinos.

Wherefore, I am constrained to conclude:

(1) That the capacity of religious corporations sole to acquire agricultural land depends upon 60 per cent Filipino
membership of the group or body exercising control of the corporation;lawphi1.net

(2) That if control of any such corporation should be vested in a single person, then such person must be a Filipino
citizen;1awphi1.net

(3) That in the absence of evidence on these points, the order appealed from, denying registration of the conveyance,
should be affirmed.

Concepcion, J., concur.

Footnotes
32
1 Translation. — Unless by lawful provisions more ample rights are conferred upon him, to the local Ordinary pertains the
duty to exercise diligence in the administration of all the ecclesiastical properties located within the territory and to avoid
their removal from his jurisdiction.

Taking into account the rights and the legitimate customs and circumstances, every Ordinary shall endeavor to regulate
everything concerning the administration of the ecclesiastical properties and shall give, within the bonds of Common Law,
timely and particular instructions therefor.

FIRST DIVISION

[G.R. No. L-2832. November 24, 1906. ]

REV. JORGE BARLIN, in his capacity as apostolic administrator of this vacant bishopric and legal representative
of the general interests of the Roman Catholic Apostolic Church in the diocese of Nueva Caceres, Plaintiff-
Appellee, v. P. VICENTE RAMIREZ, ex-rector of the Roman Catholic Apostolic Parochial Church of Lagonoy,
AND THE MUNICIPALITY OF LAGONOY, Defendants-Appellants.

Manly & Gallup, for Appellants.

Leoncio Imperial and Chicote, Miranda & Sierra, for Appellee.

SYLLABUS

1. CHURCH BUILDINGS; POSSESSION; ADMINISTRATION; ESTOPPEL. — In an action brought by the Roman

Catholic Church to recover a church building, against a priest whom it has put in possession thereof to administer the
same, the latter is estopped from alleging ownership at the time he took possession either in himself or in a third person.

2. ID.; ID.; EJECTMENT; RECOVERY OF POSSESSION. — Bishop of Cebu v. Mangaron (6 Phil. Rep., 286), followed
to the point that a person in possession of real estate who has been derived of such possession can recover it unless the
defendants can show a better right thereto.

3. ID.; TRANSFER TO MUNICIPALITIES BY GOVERNMENT. — The Government of the Philippine Island has never
undertaken to transfer to the municipalities the ownership or right of possession of the churches therein.

4. ID.; OWNERSHIP; POSSESSION. — Prior to the cession of the Philippines to the United State the King of Spain was
not the owner of the consecrated churches therein and had no right to the possession thereof. The exclusive right to such
possession was in the Roman Catholic Church and such right has continued since cession and now exists.

5. ROMAN CATHOLIC CHURCH. — The Roman Catholic Church is a judicial person in the Philippine Islands.

PER CARSON, J., concurring in the result:chanrob1es virtual 1aw library

6. CHURCH BUILDINGS; OWNERSHIP. — The legal title to the State-constructed churches in the Philippine Island is
in the United States.

7. ID.; USUFRUCT. — The beneficial ownership of these churches is in the people of the Philippine Islands.

8. ID.; POSSESSION AND CONTROL. — The right to the possession and control of these churches is in the Roman
Catholic Church so long as it continues to use them for the purposes for which they were dedicated.

DECISION

WILLARD, J. :

There had been priests of the Roman Catholic Church in the pueblo of Lagonoy, in the Province of Ambos Camarines,
since 1839. On the 13th of January, 1869, the church and convent were burned. They were rebuilt between 1870 and 1873.
There was evidence that this was done by the order of the provincial governor. The labor necessary for this reconstruction
was performed by the people of the pueblo the direction of the cabeza de barangay. Under the law then in force, each man
in the pueblo was required to work for the government, without compensation, for forty days every year. The time spent in
33
the reconstruction of these buildings was counted as a part of the forty days. The material necessary was brought and paid
for in part by the parish priest from the funds of the church and in part was donated by certain individuals of the pueblo.
After the completion of the church it was always administered, until November 14, 1902, by a priest of a Roman Catholic
Communion and all the people of the pueblo professed that faith and belonged to that church.

The defendant, Ramirez, having been appointed by the plaintiff parish priest, took possession of the church on the 5th of
July, 1901. he administered it as such under the orders of his superiors until the 14th day of November, 1902. His
successor having been then appointed, the latter made a demand on this defendant for the delivery to him of the church,
convent, and cemetery, and the sacred ornaments, books, jewels, money, and other property of the church. The defendant,
by a written document of that date, refused to make such delivery. That document is as follows:jgc:chanrobles.com.ph

"At 7 o’clock last night I received through Father Agripino Pisino your respected order of the 12th instant, wherein I am
advised of the appointment of Father Pisino as acting parish priest of this town, and directed to turn over to him this parish
and to report to you at the vicarage. In reply thereto, I have the honor to inform you that the town of Lagonoy, in
conjunction with the parish priest thereof, has seen fit to sever connection with the Pope at Rome and his representatives
in these Islands, and join the Filipino Church, the head of which is at Manila. This resolution of the people was reduced to
writing and triplicate copies made, of which I beg to inclose a copy herewith.

"For this reason I regret to inform you that I am unable to obey your said order by delivering to Father Agripino Pisino the
parish property of Lagonoy which, as I understand, is now outside of the control of the Pope and his representatives in
these Islands. May God guard you many years.

"Lagonoy, November 14, 1902.

(Signed) "VICENTE RAMIREZ.

"RT. REV. VICAR OF THIS DISTRICT."cralaw virtua1aw library

The document, a copy of which is referred to in this letter, is as follows:jgc:chanrobles.com.ph

"LAGONOY, November, 9, 1902.

"The municipality of this town and some of its most prominent citizens having learned through the papers from the capital
of these Islands of the constitution of the Filipino National Church, separate from the control of the Pope at Rome by
reason of the fact that the latter has refused to either recognize or grant the rights to the Filipino clergy which have many
times been urged, and it appearing to us that the reasons advanced why such offices should be given to the Filipino clergy
are evidently well-founded, we have deemed it advisable to consult with the parish priest of this town as to whether it
would be advantageous to join the said Filipino Church and to separate from the control of the Pope as long as he
continues to ignore the rights of the said Filipino clergy, under the conditions that there will be no change in the articles of
faith, and that the sacraments and other dogmas will be recognized and particularly that of the immaculate conception of
the mother of our Lord. But the moment the Pope at Rome recognizes and grants the rights heretofore denied to the
Filipino clergy we will return to his control. In view of this, and subject to this condition, the reverend parish priest,
together with the people of the town, unanimously join in declaring that from this date they separate themselves from the
obedience and control of the Pope and join the Filipino National Church. This assembly and the reverend parish priest
have accordingly adopted this resolution written in triplicate, and resolved to send a copy thereof to the civil government
of this province for its information, and do sign the same below. Vicente Ramirez, Francisco Israel, Ambrosio Bocon,
Florentino Relloso, Macario P. Ledesma, Cecilio Obias, Balbino Imperial, Juan Preseñada, Fernando Deudor, Mauricio
Torres, Adriano Sabater."cralaw virtua1aw library

At the meeting at which the resolution spoken of in this document was adopted, there were present about 100 persons of
the pueblo. There is testimony in the case that the population of the pueblo was at that time 9,000 and that all but 20 of the
inhabitants were satisfied with the action there taken. Although it is of no importance in the case, we are inclined to think
that the testimony to this effect merely means that about 100 of the principal men of the town were in favor of the
resolution and about 20 of such principal men were opposed to it. After the 14th of November, the defendant, Ramirez,
continued in the possession of the church and other property and administered the same under the directions of his
superior, the Obispo Maximo of the Independent Filipino Church. The rites and ceremonies and the manner of worship
were the same after the 14th day of November as they were before, but the relations between the Roman Catholic Church
and the defendant had been entirely severed.

In January, 1904, the plaintiff brought this action against the defendant, Ramirez, alleging in his amended complaint that
the Roman Catholic Church was the owner of the church building, the convent, cemetery, the books, money, and other
34
property belonging thereto, and asking that it be restored to the possession thereof and that the defendant render an
account of the property which he had received and which was retained by him, and for other relief.

The answer of the defendant, Ramirez, in addition to a general denial of the allegation of the complaint, admitted that he
was in the possession and administration of the property described therein with the authority of the municipality of
Lagonoy and of the inhabitants of the same, who were the lawful owners of the said property. After this answer had been
presented, and on the 1st day of November, 1904, the municipality of Lagonoy filed a petition asking that it be allowed to
intervene in the case and join with the defendant, Ramirez, as a defendant therein. This petition been granted, the
municipality of the 1st day of December filed an answer in which it alleged that the defendant, Ramirez, was in
possession of the property described in the complaint under the authority and with the consent of the municipality of
Lagonoy and that such municipality was the owner thereof.

Plaintiff answered this complaint, or answer in intervention, and the case was tried and final judgment in entered therein
in favor of the plaintiff and against the defendants. The defendants then brought the case here by a bill of exceptions.

That the person in the actual possession of the church and other property described in the complaint is the defendant,
Ramirez, is plainly established by the evidence. It does not appear that the municipality, as a corporate body, ever took any
action in reference to this matter until they presented their petition for intervention in this case. In fact, the witnesses for
the defense, when they speak of the ownership of the buildings, say that they are owned by the people of the pueblo, and
one witness, the president, said that the municipality as a corporation had nothing whatever to do with the matter. That the
resolution adopted on the 14th of November, and which has been quoted above, was not the action of the municipality, as
such, is apparent from an inspection thereof.

The witnesses for the defenses speak of a delivery of the church by the people of the pueblo to the defendant, Ramirez,
but there is no evidence in the case of any such delivery. Their testimony in regard to the delivery always refers to the
action taken on the 14th of November, a record of which appears that in the document above quoted. It is apparent that the
action taken consisted simply in separating themselves from the Roman Catholic Church, and nothing is said therein in
reference to the material property then in possession of the defendant, Ramirez.

There are several grounds upon which this judgment must be affirmed.

(1) As to the defendant, Ramirez, it appears that he took possession of the property as the servant or agent of the plaintiff.
The only right which he had to the possession at the time he took it, was the right which was given to him by the plaintiff,
and he took possession under the agreement to return that possession whenever it should be demanded of him. Under such
circumstances he will not be allowed, when the return of such possession is demanded by him the plaintiff, to say that the
plaintiff is not the owner of the property and is not entitled to have it delivered back to him. The principle of law that a
tenant can not deny his landlord’s title, which is found in section 333, paragraph 2, of the Code of Civil Procedure, and
also in the Spanish law, is applicable to a case of this kind. An answer of the defendant, Ramirez, in which he alleged that
he himself was the owner of the property at the time he received it from the plaintiff, or in which he alleged that the
pueblo was the owner of the property at that time, would constitute no defense. There is no claim made by him that since
the delivery of the possession of the property to him by the plaintiff he has acquired the title thereto by other means, nor
does he is own behalf make any claim whatever either to the property or to the possession thereof.

(2) The municipality of Lagonoy, in its answer, claims as such, to be the owner of the property. As we have said before,
the evidence shows that it never was in the physical possession of the property. But waiving this point and assuming that
the possession of Ramirez, which he alleges in his answer is the possession of the municipality, gives the municipality the
rights of a possessor, the question still arises, Who has the better right to the present possession of the property? The
plaintiff, in 1902, had been in the lawful possession thereof for more than thirty years and during all that time its
possession had never been questioned or disturbed. That possession has been taken away from it and it has the right now
to recover the possession from the persons who have so deprived it of such possession, unless the latter can show that they
have a better right thereto. This was the preposition which was discussed and settled in the case of Bishop of Cebu v.
Mangaron, 1 No. 1748, decided June 1, 1906. That decision holds that as against one who has been in possession for the
length of the plaintiff has been in possession, and who had been deprived of his possession, and who can not produce any
written evidence of title, the mere fact that the defendant is in possession does not entitle the defendant to retain that
possession. In order that he may continue in possession, he must show a better right thereto.

The evidence in this case does not show that the municipality has, as such, any right of whatever in the property in
question. It has produced no evidence of ownership. Its claim of ownership is rested in its brief in this court upon the
following propositions: That the property in question belonged prior to the treaty of Paris to the Spanish Government; that
by the treaty of Paris the ownership thereof passed to the Government of the United States; that by section 12 of the act of
Congress of July 1, 1902, such property was transferred to the Government of the Philippine Islands, and that by the
35
circular of that Government, dated November 11, 1902, the ownership and the right to the possession of this property
passed to the municipality of Lagonoy. If, for the purposes of the argument, we should admit that the other propositions
are true, there is no evidence whatever to support the last proposition, namely that the Government of the Philippine
Islands has transferred the ownership of this church to the municipality of Lagonoy. We have found no circular of the date
above referred to. The one of February 10, 1903, which is probably the one intended, contains nothing that indicates any
such transfer. As to the municipality of Lagonoy, therefore, it is very clear that it has neither title, ownership, nor right of
possession.

(3) We have said that it would have no such title or ownership ever admitting that the Spanish Government was the owner
of the property and it has passed by the treaty of Paris to the American Government. But this assumption is not true. As a
matter of law, the Spanish Government at the time the treaty of peace was signed, was not the owner of this property, nor
of any other property like it, situated in the Philippine Islands.

It does not admit of doubt that from the earliest times the parish churches in the Philippine Islands were built by the
Spanish Government. Law 2, title 2, book 1, of the Compilation of the Laws of the Indies is, in part, as
follows:jgc:chanrobles.com.ph

"Having erected all the churches, cathedrals, and parish houses of the Spaniards and natives of our Indian possessions
from their discovery at the cost and expense of our royal treasury, and applied for their service and maintenance the part
of the tithes belonging to us by apostolic concession according to the division we have made."cralaw virtua1aw library

Law 3 of the same title to the construction of parochial churches such as the one in question. That law is as
follows:jgc:chanrobles.com.ph

"The parish churches which was erected in Spanish towns shall be of durable and decent construction. Their costs shall be
divided and paid in three parts: One by our royal treasury, another by the residents and Indian encomenderos of the place
where such churches are constructed, and the other part by the Indians who abide there; and if within the limits of a city,
village, or place there should be any Indians incorporated to our royal crown, we command that for our part there be
contributed the same amount as the residents and encomenderos, respectively, contribute; and the residents who have no
Indians shall also contribute for this purpose in accordance with their stations and wealth, and that which is so given shall
be deducted from the share of the Indians should pay."cralaw virtua1aw library

Law 11 of the same title is as follows:jgc:chanrobles.com.ph

"We command that the part of the tithes which belongs to the fund for the erection of churches shall be given to their
superintendents to be expended for those things necessary for these churches with the advice of the prelates and officials,
and by their warrants, and not otherwise. And we request and charge the archbishops and bishops not to interfere in the
collection and disbursement thereof, but to guard these structures."cralaw virtua1aw library

Law 4, title 3, book 6, is as follows:jgc:chanrobles.com.ph

"In all settlements, even though the Indians are few, there shall be erected a church where mass can be decently held, and
it shall have a donor with a key, notwithstanding the fact that it be the subject to or separate from a parish."cralaw
virtua1aw library

Not only were all the parish churches in the Philippines erected by the King and under his direction, but it was made
unlawful to erect a church without the license of the King. This provision is contained in Law 2, title 6, book 1, which is
as follows:jgc:chanrobles.com.ph

"Whereas it is our intention to erect, institute, found, and maintain all cathedrals, parish churches, monasteries, votive
hospitals, churches, and religious and pious establishments where they are necessary for the teaching, propagation, and
preaching of the doctrine of our sacred Roman Catholic faith, and to aid to this effect with out royal treasury whenever
possible, and to receive information of such places where they should be founded and are necessary, and the ecclesiastical
patronage of all our Indies belonging to us:jgc:chanrobles.com.ph

"We command that there shall not be erected, instituted, founded, or maintained any cathedral, parish church, monastery,
hospital, or votive churches, or other pious or religious establishment without our express permission as is provided in
Law 1, title 2, and Law 1, title 3, of this book, notwithstanding any permission heretofore given by our viceroy or other
ministers, which in this respect we revoke and make null, void, and of no effect."cralaw virtua1aw library

36
By agreement at an early date between the Pope and the Crown of Spain, all tithes in the Indies were given by the former
to the latter and the disposition made the King of the fund thus created is indicated by Law 1, title 16, book 1, which is as
follows:jgc:chanrobles.com.ph

"Whereas the ecclesiastical tithes from the Indies belong to us by the apostolic concessions of the supreme pontiffs, we
command the officials of our royal treasury of those provinces to collect and cause to be collected all tithes due and to
become due from the crops and flocks of the residents in the manner in which it has been the custom to pay the same, and
from these tithes the churches shall be provided with competent persons of good character to serve them and with all
ornaments and things which may be necessary for divine worship, to the end that these churches may be well served and
equipped, and we shall be informed of God, our Lord; this order shall be observed where the contrary has not already been
directed by us in connection with the erection of churches."cralaw virtua1aw library

That the condition of things existing by virtue of the Laws of the Indies was continued to the present time is indicated by
the royal order of the 31st of January, 1856, and by the royal order of the 13th of August, 1876, both relating to the
construction and repair of churches, there being authority for saying that the latter order was in force in the Philippines.

This church, and other churches similarly situated in the Philippines, having been erected by the Spanish Government, and
under its direction, the next question to be considered is, To whom did these churches belong?

Title 28 of the third partida is devoted to the ownership of things and, after discussing what can be called public property
and what can be called private property, speaks, in Law 12, of those things which are sacred, religious, or holy. That law is
as follows:chanrob1es virtual 1aw library

Law XII. — HOW SACRED OR RELIGIOUS THINGS CAN NOT BE OWNED BY ANY PERSON.

"No sacred, religious, or holy thing, devoted to the service of God, can be the subject of ownership by any man, nor can it
be considered as included in his property holdings. Although the priests may have such things in their possession, yet they
are not the owners thereof. They, hold them thus as guardians or servants, or because they have the care of the same and
serve God in or without them. Hence they were allowed to take from the revenues of the church and lands what was
reasonably necessary for their support; the balance, belonging to God, was to be devoted to pious purposes, such as the
feeding and clothing of the poor, the support of orphans, the marrying of poor virgins to prevent their becoming evil
women because of their poverty, and for the redemption of captives and the repairing of the churches, and the buying of
chalices, clothing, books, and others things which they might be in need of, and other similar charitable purposes."cralaw
virtua1aw library

And then taking up for consideration the first of the classes in to which this law has divided these things, it defines in Law
13, title 28, third partida, consecrated things. That law is as follows:jgc:chanrobles.com.ph

"Sacred things, we say, are those which are consecrated by the bishops, such as churches, the altars therein, crosses,
chalices, censers, vestments, books, and all other things which are in tended for the service of the church, and the title to
these things can not be alienated except in certain specific cases as we have already shown in the first partida of this book
by the laws dealing with this subject. We say further that even where a consecrated church is razed, the ground upon
which it formerly stood shall always be consecrated ground. But if any consecrated church should fall into the hands of
the enemies of our faith it shall there and then cease to be sacred as long as the enemy has it under control, although once
recovered by the Christians, it will again become sacred, reverting to its condition before the enemy seized it and shall
have all the right and privileges formerly belonging to it."cralaw virtua1aw library

That the principles of the partida in reference to churches still exist is indicated by Sanchez Roman, whose work on the
Civil Law contains the following statement:jgc:chanrobles.com.ph

"First Group. Spiritual and corporeal or ecclesiastical. A. Spiritual. — From early times distinction has been made by
authors and by law between things governed by divine law, called divine, and those governed by human law, called
human, and although the former can not be the subject of civil juridical relations, their nature and species should be
ascertained either to identify them and exclude them from such relations or because they furnish a complete explanation
of the foregoing tabulated statement, or finally because the laws of the partida deal with them.

"Divine things are those which are either directly or indirectly established by God for his service and sanctification of men
and which are governed by divine or canonical laws. This makes it necessary to divide them into spiritual things, which
are those which have a direct influence on the religious redemption of man such as the sacrament, prayers, fasts,
indulgences, etc., and corporeal or ecclesiastical, which are those means more or less direct for the proper religious
salvation of man.
37
"7. First Group. Divine things. B. Corporeal or ecclesiastical things (sacred, religious, holy, and temporal belonging to the
church). Corporeal or ecclesiastical things are so divided.

"(a) Sacred things are those devoted to God, religion, and worship in general, such as temples, altars, ornaments, etc.
These things can not be alienated except for some pious purpose and in such cases as are provided for in the laws,
according to which their control pertains to the ecclesiastical authorities, and in so far as their use is concerned, to the
believers and the clergy. (2 Derecho Civil Español, Sanchez Roman, p. 480; 8 Manresa, Commentaries on the Spanish
Civil Code, p. 636; 3 Alcubilla, Diccionario de la Administracion Española, p. 486.)"

The partidas defined minutely what things belonged to the public in general and what belonged to private persons. In the
first group churches are not named. The present Civil Code declares in article 338 that property is of public or private
ownership. Article 339, which defines public property, is as follows:jgc:chanrobles.com.ph

"Property of public ownership is —

"1. That destined to the public use, such as roads, canals, rivers, torrents, ports, and bridges constructed by the State, and
banks, shores, roadsteads, and that of similar character.

"2. That belonging exclusively to the state without being for public use and which is destined to some public service, or to
the development of the national wealth, such as walls, fortresses, and other works for the defense of the territory, and
mines, until their concession has been granted."cralaw virtua1aw library

The code also defines the property of provinces and of pueblos, and in defining what property is of public use, article 344
declares as follows:jgc:chanrobles.com.ph

"Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains,
and public waters, the promenades, and public works of general service supported by the said towns or provinces.

"All other property possessed by either is patrimonial, and shall be governed by the provisions of this code, unless
otherwise prescribe in special laws."cralaw virtua1aw library

It will be noticed that in either one of these articles is any mention made of churches. When the Civil Code undertook to
define those things in a pueblo which were for the common use of the inhabitants of the pueblo, or which belonged to the
State, while it mentioned a great many other things, it did not mention churches.

It has been said that article 25 of the Regulations for the Execution of the Mortgage Law indicates that churches belong to
the State and are public property. That article is as follows:jgc:chanrobles.com.ph

"There shall be excepted from the record required by article 2 of the law:jgc:chanrobles.com.ph

"First. Property which belongs exclusively to the eminent domain of the State, and which is for the use of all, such as the
shores of the sea, islands, rivers and their borders, wagon roads, and the roads of all kinds, with the exception of railroads;
streets, parks, public promenades, and commons of towns, provided they are not lands of common profit to the
inhabitants; walls of cities and parks, ports, and roadsteads, and any other analogous property during the time they are in
common and general use, always reserving the servitudes established by law on the shores of the sea and borders of
navigable rivers.

"Second. Public temples dedicated to the Catholic faith."cralaw virtua1aw library

A reading of this article shows that far from proving that churches belong to the State and to the eminent domain thereof,
it proves the contrary, for, if they had belonged to the State, they would have been included in the first paragraph instead
of being placed in a paragraph by themselves.

The truth is that, from the earliest times down to the cession of the Philippines to the United States, churches and other
consecrated objects were considered outside of the commerce of man. They were not public property, nor could they be
subjects of private property in the sense that any private person could the owner thereof. They constituted a kind of
property distinctive characteristic of which was that it was devoted to the worship of God.

But, being material things was necessary that some one should have the care and custody of them and the administration
thereof, and the question occurs, To whom, under the Spanish law, was intrusted that possession and administration? For
38
the purposes of the Spanish law there was only one religion. That was the religion professed by the Roman Catholic
Church. It was for the purposes of that religion and for the observance of its rites that this church and all other churches in
the Philippines were erected. The possession of the churches, their care and custody, and the maintenance of religious
worship therein were necessarily, therefore, intrusted to that body. It was, by virtue of the laws of Spain, the only body
which could under any circumstances have possession of, or any control over, any church dedicated to the worship of
God. By virtue of those laws this possession and right of control were necessarily exclusive. It is not necessary or
important to give any name to this right of possession and control exercised by the Roman Catholic Church in the church
buildings of the Philippines prior to 1898. It is not necessary to show that the church as a juridical person was the owner
of the buildings. It is sufficient to say that this right to the exclusive possession and control of the same, for the purposes
of its creation, existed.

The right of patronage, existing in the King of Spain with reference to the churches in the Philippines, did not give him
any right to interfere with the material possession of these buildings.

Title 6 of book 1 of the Compilation of the laws of the Indies treats Del Patronazgo Real de las Indias. There is nothing in
any one of the fifty-one laws which compose this title which in any way indicates that the King of Spain was the owner of
the churches in the Indies because he had constructed them. These laws relate to the right of presentation to ecclesiastical
charges and offices. For example, Law 49 of the title commences as follows:jgc:chanrobles.com.ph

"Because the patronage and right of presentation of all archbishops, bishops, dignitaries, prevents, curates, and doctrines
and all other beneficiaries and ecclesiastical offices whatsoever belong to us, no other person can obtain or possess the
same without our presentation as provided in Law 1 and other laws of this title."cralaw virtua1aw library

Title 15 of the first partida treats of the right of patronage vesting in private persons, but there is nothing in any one of its
fifteen laws which in any way indicates that the private patron is the owner of the church.

When it is said that this church never belonged to the Crown of Spain, it is not intended to say that the Government and
had no power over it. It may be that by virtue of that power of eminent domain which is necessarily resides in every
government, it might have appropriated this church and other churches, and private property of individuals. But nothing of
this kind was ever attempted in the Philippines.

It, therefore, follows that in 1898, and prior to the treaty of Paris, the Roman Catholic Church had by law the exclusive
right to the possession of this church and it had the legal right to administer the same for the purposes for which the
building was consecrated. It was then in the full and peaceful possession of the church with the rights aforesaid. That these
rights were fully protected by the treaty of Paris is very clear. That treaty, in article 8, provides, among other things, as
follows:jgc:chanrobles.com.ph

"And it is hereby declared that the relinquishment or cession, as the case may be, to which the preceding paragraph refers,
can not in any respect impair the property or rights which by law belong to the peaceful possession of property of all
kinds, or provinces, municipalities, public or private establishments, ecclesiastical or civic bodies, or any other
associations having legal capacity to acquire and possess property in the aforesaid territories renounced or ceded, or of
private individuals, or whatsoever nationality such individuals may be."cralaw virtua1aw library

It is not necessary, however, to invoke the provisions of that treaty. Neither the Government of the United States, nor the
Government of these Islands, has ever attempted in any way to interfere with the rights which the Roman Catholic Church
had in this building when Spanish sovereignty ceased in the Philippines. Any interference that has resulted has been
caused by private individuals, acting without any authority from the Government. Against such interference by private
persons with the rights of others, redress is given in the courts of justice without reference to the provisions of the treaty of
Paris.

No point is made in the brief of the appellant that any distinction should be made between the church and the convent. The
convent undoubtedly was annexed to the church and, as to it, the provisions of Law 19, title 2, book 1, of the Compilation
of the Laws of the Indies would apply. That law is as follows:jgc:chanrobles.com.ph

"We command that the Indians of each town or barrio shall construct such houses as may be deemed sufficient in which
the priests of such towns or barrios may live comfortably adjoining the parish church of the place where that may be built
for the benefit of the priests in charge of such churches and engaged in the education and conversion of their Indian
parishioners, and they shall not be alienated or devoted to any other purpose."cralaw virtua1aw library

The evidence in this case makes no showing in regard to the cemetery. It is always mentioned in connection with the
church and convent and no point is made by the possession of the church and convent, he is not also entitled to recover
39
possession of the cemetery. So, without discussing the question as to whether the rules applicable to churches are all
respects applicable to cemeteries, we hold for the purpose of this case that the plaintiff has the same right to the cemetery
that he has to the church.

(4) It is suggested by the appellant that the Roman Catholic Church has no legal personality in the Philippine Islands. This
suggestion, made with reference to an institution which antedates by almost a thousand years any other personality in
Europe, and which existed "when Grecian eloquence still flourished in Antioch, and when idols were still worshiped in the
temple of Mecca," does not require serious consideration. In the preamble to the budget relating to ecclesiastical
obligations, presented by Montero Rios to the Cortes on the 1st of October 1871, speaking of the Roman Catholic Church,
he says:jgc:chanrobles.com.ph

"Persecuted as an unlawful association since the early days of its existence up to the time of Galieno, who was the first of
the Roman emperors to admit it among the juridical entities protected by the laws of the Empire, it existed until then by
the mercy and will of the faithful and depended for such existence upon pious gifts and offerings. Since the latter half of
the third century, and more particularly since the year 313, when Constantine, by the edict of Milan, inaugurated an era of
protection for the church, the latter gradually entered upon the exercise of such rights as were required for the acquisition,
preservation, and transmission of property the same as any other juridical entity under the laws of the Empire. (3
Dictionary of Spanish Administration, Alcubilla, p. 211. See also the royal order of the 4th of December, 1890, 3
Alcubilla, 189.)"

The judgment of the court below is affirmed, with the costs of this instance against the Appellant. After the expiration of
twenty days from the date hereof let judgment be entered in accordance herewith, and ten days thereafter the record be
remanded to the court below for execution. So ordered.

Arellano, C.J., Torres, Mapa, and Tracey, JJ., concur.

Johnson, J., reserves his vote.

Separate Opinions

CARSON, J., concurring in the result:chanrob1es virtual 1aw library

I am in entire accord with the majority of the court as to the disposition of this case, but I can not adopt the reasoning by
which some of the conclusions appear to have been obtained, nor accept without reserve all of the propositions laid down
in the majority opinion.

Profoundly as I respect the judgment of my associates, and distrustful as I ought to be of my own, the transcendant
importance of the issues involved seems to impose upon me the duty of writing a separate opinion and stating therein as
clearly as may be the precise grounds upon which I base my assent and the reasons which forbid my acceptance of the
majority opinion in its entirety.

I accept the argument and authority of the opinion of the court in so far as it finds: That the Roman Catholic Church is a
juridical entity in the Philippine Islands; that the defendant, Ramirez, can not and should not be permitted in this action to
deny the plaintiff’s right to the possession of the property in question, because he can not be heard to set up title thereto in
himself or a third person, at least until he has first formally surrendered it to the plaintiff who intrusted it to his care; that
the municipality of Lagonoy has failed to show by evidence of record that it is or ever was in physical possession of the
property in question; and that the possession of the defendant Ramirez, can not be relied upon as the possession of the
municipality because the same reason which estops Ramirez from denying the right of possession in the plaintiff estops
any other person claiming possession through him from denying that right. I agree, furthermore, with the finding that the
defendant municipality failed to establish a better right to the possession than the plaintiff in this action, because, claiming
to be the owner by virtue of a grant from the Philippine Government, it failed to establish the existence of such grant; and
because, furthermore, it was shown that the plaintiff or his predecessors had been in possession and control of the property
in question for a long period of years prior to the treaty of Paris by unlawful authority of the King of Spain, and that since
the sovereignty of these Islands has been transferred to the United States the new sovereign has never at any time divested
or attempted to divest the plaintiff of this possession and control.

Thus far I am able to accept the reasoning of the majority opinion, and these propositions, supported as they are by the
law and the evidence in this case, completely dispose of the question before us and establish the right of the plaintiff to a
judgment for possession.

40
I am not prepared, however, to give my assent to the proposition that prior to the Treaty of Paris "The King of Spain was
not the owner of the property in question nor of any other property like it situated in the Philippine Islands," and
inferentially that the United States is not now the owner thereof and has no property rights therein other than, perhaps, the
mere right of eminent domain.

I decline to affirm this proposition, first, because it is not necessary in the decision of this case; and second, because I am
of opinion that, in the unlimited and unrestricted sense in which it is stated in the majority opinion, it is inaccurate and
misleading, if not wholly erroneous.

That it is not necessary for the proper disposition of this case will be apparent if we consider the purpose for which it is
introduced in the argument and the proposition which it is intended to controvert. As stated in the majority opinion, the
claim of ownership of the defendant municipality —

"Is rested upon the following propositions: That the property in question belonged, prior to the treaty of Paris, to the
Spanish Government; that by the treaty of Paris the ownership of thereof passed to the Government of the United States;
that by article 12 of the act of Congress of July 1, 1902, such property was transferred to the Government of the Philippine
Islands, and that by a circular of that Government dated November 11, 1902, the ownership and the right to the possession
of this property passed to the municipality of Lagonoy."cralaw virtua1aw library

It is evident that if any of these propositions is successfully controverted, the defendants’ claim of ownership must fall to
the ground. The majority opinion finds (and I am entire accord as to this finding) that neither the Government of the
United States nor the Philippine Government had ever made, or attempted to make, such transfer, and in making its
finding it completely, conclusively, and finally disposes of defendants’ claim of ownership.

All the acts of the Government of the United States and of the present Government of the Philippine Islands which can
have any relation to the property in question are before us, and so short a period of years has elapsed since the transfer of
the sovereignty of these Islands to the United States that it is possible to demonstrate with the utmost certainty that by no
act of the United States or of the Government of the Philippine Islands has the ownership and possession of this property
been conferred upon the defendant municipality; it is a very different undertaking, however, to review the legislation of
Spain for the three centuries of her Philippine occupation for the purpose of deciding the much-vexed question of the
respective property rights of the Spanish sovereign and the Roman Catholic Church in State-constructed and State-aided
churches in these Islands; and if I am correct in my contention that a holding that the King of Spain was not." and,
inferentially, that the Government of the United States is not, "the owner of this property or any other property like it is
situated in the Philippine Islands" is not necessary for the full, final, and complete determination of the case at bar, then I
think that this court should refrain from making so momentous a finding in a case wherein the United States is not a party
and has never had an opportunity to be heard.

But the mere fact that a finding that the King of Spain had no right of ownership in this property which could pass to the
United States under the provisions of the treaty of Paris is not necessary in my opinion for the disposition of the case at
bar, would not impose upon me the duty of writing a separate opinion if it were in fact and a law a correct holding. I am
convinced, however, that when stated without limitations or restrictions, as it appears in the majority opinion, it is
inaccurate and misleading, and it may not be improper, therefore, to indicate briefly my reasons for doubting it.

As stated in the majority opinion, "it does not admit of doubt that the parish churches in the Philippines were built by the
Spanish Government," and it would seem therefore that prior to their dedication, the beneficial ownership, the legal title,
the possession and control of all this property must be taken to have been vested in that Government. But it must be
admitted that after this property was dedicated, the ownership, in contemplation of Spanish law, was said to have been in
God, and there can be no doubt that the physical possession and control of these churches for the purposes for which they
were dedicated was given to the Roman Catholic Church not, as I think, absolutely and conclusively, but limited by and
subject to the royal patronage (patronato real) which included the right to intervene in the appointment of the
representatives of the church into whose hands the possession and control of the sacred editors were to be intrusted.

The anomalous status thus created might well have given rise to doubts and uncertainties as to the legal title and beneficial
ownership of this property had not the grantor and the lawgiver of Spain expressly and specifically provided that neither
the Roman Catholic Church nor any other person was or could become the owner thereof, and that all these sacred
edifices were to be regarded as beyond the commerce of men.

"No sacred, religious, or holy thing, devoted to the service of God, can be the subject of ownership by any man, nor it can
be considered as included in his property holdings. Although the priests may have such things in their possession, yet they
are not the owners thereof. They hold them thus as guardians or servants, or because they have the care of the same and
serve God in or with them. Hence they were allowed to take from the Revenues of the church and lands what was
41
reasonably necessary for their support; the balance, belonging to God, was to be devoted to pious purposes, such as the
feeding and clothing of the poor, the support of orphans, the marrying of poor virgins to prevent their becoming evil
women because of their poverty; and for the redemption of captivers and the repairing of the churches, and the buying of
chalices, clothing, books, and other things which they might be in seed of, and other similar charitable purposes." (Law
12, title 28, partida 3.)

It is difficult to determine, and still more difficult to state, the precise meaning and legal effect of this disposition of the
ownership, possession, and control of the parish churches in the Philippines; but since it was not possible for God, in any
usual or ordinary sense to take or hold, to enforce or to defend the legal title to this property, it would seem that a grant to
Him by the King or the Government of Spain could not suffice to convey to Him the legal title of the property set out in
the grant, and the truth would seem to be that the treatment of this property in contemplation of Spanish law as the
property of God was a mere arbitrary convention, the purpose and object of which was crystallize the status of all such
property in the peculiar and unusual mold in which it was cast at the time of its dedication.

So long as church and state remained united and so long as the Roman Catholic Church continued to be the church of the
State, this convention served its purpose well; indeed, its very indefiniteness seems to have aided in the accomplishment
of the end for which it was adopted, and on a review of all the pertinent citations of Spanish law which have been brought
to my attention, I am satisfied that the status created by the above-cited law 12 of the partidas continued without
substantial modification to the date of the transfer of sovereignty from the King of Spain to the United States. But this
transfer of sovereignty, and the absolute severance of church and state which resulted therefrom, render it necessary to
ascertain as definitely as may be the true meaning and intent of this conventional treatment of the parish churches in the
Philippines as the property of God, and it is evident that for this purpose we must look to the substance rather than the
form and examine the intention of the grantor and the object he sought to attain, rather than the words and conventional
terms whereby that intent was symbolically expressed.

It is not necessary to go beyond the citations of the majority opinion to see that the objects which the grantor sought to
attain were, first, and chiefly, to advance the cause of religion among the people of the Philippine Islands and to provide
for their religious instruction and edification by furnishing them with parish churches suitable for the worship and
glorification of God; second, to place those sacred edifices under the guardian care and custody of the church of the State;
and, third, to deny to that church and to all others the right of ownership in the property thus dedicated; and since God
could neither take nor hold the legal title to this property, the declaration of the King of Spain as set out in the above-cited
law, that when dedicated these churches became in some peculiar and especial manner the property of God, was in effect
no more than a solemn obligation imposed upon himself to hold them for the purposes for which they were dedicated, and
to exercise no right of property in them inconsistent therewith.

This declaration that these churches are the property of God and the provisions which accompanied it, appear to me to be
precisely equivalent to a declaration of trust by the grantor that he would hold the property as trustee for the use for which
it was dedicated — that is, for the religious edification and enjoyment of the people of the Philippine Islands — and that
he would give to the Roman Catholic Church the physical possession and control thereof, including the disposition of any
funds arising therefrom, under certain stipulated conditions and for the purposes expressly provided by law. In other
words, the people of the Philippine Islands became the beneficial owners of all such property, and the grantor continued to
hold the legal title, in trust nevertheless to hold the property for the purposes for which it was dedicated and on the further
trust to give the custody and control thereof to the Roman Catholic Church. If this interpretation of the meaning and intent
of the convention of Spanish law which treated God as the owner of the parish churches of the Philippine Islands be
correct, a holding that the King of Spain had no right to ownership in this property which could pass to the United States
by virtue of the treaty of Paris can not be maintained; and it is to withhold my assent from this proposition that I have
been compelled to write this separate opinion.

For the purposes of this opinion it is not necessary, nor would it be profitable, to do more than indicate the line of
reasoning which has led me to my conclusions, nor to discuss at length the question of ownership of this property, because
whether it be held to be in abeyance or in God or in the Roman Catholic Church or in the United States it has been shown
without deciding this question of ownership that the right to the possession for the purpose for which it was dedicated is in
the Roman Catholic Church, and while the complaint in this action alleges that the Roman Catholic Church is the owner
of the property in question, the prayer of the complaint is for the possession of this property of which it is alleged that
church has been unlawfully deprived; and because, furthermore, if I am correct in my contention that the legal title to the
State-constructed churches in the Philippines passed to the United States the virtue of the treaty of Paris, it passed,
nevertheless, subject to the trusts under which it was held prior thereto, and the United States can not at will repudiate the
conditions of that trust and retain its place in the circle of civilized nations; and as long as the property continues to be
used for the purposes for which it was dedicated, the Government of the United States has no lawful right to deprive the
Roman Catholic Church of the possession and control thereof under the terms and conditions upon which that possession
and control were originally granted.
42
SECOND DIVISION
G.R. No. 96161 February 21, 1992

PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT,
INC., petitioners,
vs.
COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION and STANDARD PHILIPS
CORPORATION, respondents.

Emeterio V. Soliven & Associates for petitioners.

Narciso A. Manantan for private respondent.

MELENCIO-HERRERA, J.:

Petitioners challenge the Decision of the Court of Appeals, dated 31 July 1990, in CA-GR Sp. No. 20067, upholding the
Order of the Securities and Exchange Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing petitioners'
prayer for the cancellation or removal of the word "PHILIPS" from private respondent's corporate name.

Petitioner Philips Export B.V. (PEBV), a foreign corporation organized under the laws of the Netherlands, although not
engaged in business here, is the registered owner of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM under
Certificates of Registration Nos. R-1641 and R-1674, respectively issued by the Philippine Patents Office (presently
known as the Bureau of Patents, Trademarks and Technology Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips
Electrical, for brevity) and Philips Industrial Developments, Inc. (Philips Industrial, for short), authorized users of the
trademarks PHILIPS and PHILIPS SHIELD EMBLEM, were incorporated on 29 August 1956 and 25 May 1956,
respectively. All petitioner corporations belong to the PHILIPS Group of Companies.

Respondent Standard Philips Corporation (Standard Philips), on the other hand, was issued a Certificate of Registration by
respondent Commission on 19 May 1982.

On 24 September 1984, Petitioners filed a letter complaint with the Securities & Exchange Commission (SEC) asking for
the cancellation of the word "PHILIPS" from Private Respondent's corporate name in view of the prior registration with
the Bureau of Patents of the trademark "PHILIPS" and the logo "PHILIPS SHIELD EMBLEM" in the name of Petitioner,
PEBV, and the previous registration of Petitioners Philips Electrical and Philips Industrial with the SEC.

As a result of Private Respondent's refusal to amend its Articles of Incorporation, Petitioners filed with the SEC, on 6
February 1985, a Petition (SEC Case No. 2743) praying for the issuance of a Writ of Preliminary Injunction, alleging,
among others, that Private Respondent's use of the word PHILIPS amounts to an infringement and clear violation of
Petitioners' exclusive right to use the same considering that both parties engage in the same business.

In its Answer, dated 7 March 1985, Private Respondent countered that Petitioner PEBV has no legal capacity to sue; that
its use of its corporate name is not at all similar to Petitioners' trademark PHILIPS when considered in its entirety; and
that its products consisting of chain rollers, belts, bearings and cutting saw are grossly different from Petitioners' electrical
products.

After conducting hearings with respect to the prayer for Injunction; the SEC Hearing Officer, on 27 September 1985,
ruled against the issuance of such Writ.

On 30 January 1987, the same Hearing Officer dismissed the Petition for lack of merit. In so ruling, the latter declared that
inasmuch as the SEC found no sufficient ground for the granting of injunctive relief on the basis of the testimonial and
documentary evidence presented, it cannot order the removal or cancellation of the word "PHILIPS" from Private
Respondent's corporate name on the basis of the same evidence adopted in toto during trial on the merits. Besides, Section
18 of the Corporation Code (infra) is applicable only when the corporate names in question are identical. Here, there is no
confusing similarity between Petitioners' and Private Respondent's corporate names as those of the Petitioners contain at
least two words different from that of the Respondent. Petitioners' Motion for Reconsideration was likewise denied on 17
June 1987.

On appeal, the SEC en banc affirmed the dismissal declaring that the corporate names of Petitioners and Private
Respondent hardly breed confusion inasmuch as each contains at least two different words and, therefore, rules out any
possibility of confusing one for the other.

43
On 30 January 1990, Petitioners sought an extension of time to file a Petition for Review on Certiorari before this Court,
which Petition was later referred to the Court of Appeals in a Resolution dated 12 February 1990.

In deciding to dismiss the petition on 31 July 1990, the Court of

Appeals1 swept aside Petitioners' claim that following the ruling in Converse Rubber Corporation v. Universal Converse
Rubber Products, Inc., et al, (G. R. No. L-27906, January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be used as
part of Private Respondent's corporate name as the same constitutes a dominant part of Petitioners' corporate names. In so
holding, the Appellate Court observed that the Converse case is not four-square with the present case inasmuch as the
contending parties in Converse are engaged in a similar business, that is, the manufacture of rubber shoes. Upholding the
SEC, the Appellate Court concluded that "private respondents' products consisting of chain rollers, belts, bearings and
cutting saw are unrelated and non-competing with petitioners' products i.e. electrical lamps such that consumers would not
in any probability mistake one as the source or origin of the product of the other."

The Appellate Court denied Petitioners' Motion for Reconsideration on 20 November 1990, hence, this Petition which was
given due course on 22 April 1991, after which the parties were required to submit their memoranda, the latest of which
was received on 2 July 1991. In December 1991, the SEC was also required to elevate its records for the perusal of this
Court, the same not having been apparently before respondent Court of Appeals.

We find basis for petitioners' plea.

As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927), the Court declared that a corporation's right
to use its corporate and trade name is a property right, a right in rem, which it may assert and protect against the 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 (Red Line Transportation Co. vs. Rural Transit Co., September 8, 1934, 20 Phil 549).

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 (Federal Secur. Co. vs. Federal Secur.
Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165, 26 A 36).

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 individual's 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
(Armington vs. Palmer, 21 RI 109. 42 A 308).

Our own Corporation Code, in its Section 18, expressly provides that:

No corporate name may be allowed by the Securities and 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 law. Where a change in a corporate name is approved, the
commission shall issue an amended certificate of incorporation under the amended name. (Emphasis supplied)

The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely:

(1) that the complainant corporation acquired a prior right over the use of such corporate name; and

(2) the proposed name is either:

(a) identical; or

(b) deceptively or confusingly similar

to that of any existing corporation or to any other name already protected by law; or

44
(c) patently deceptive, confusing or contrary to existing law.

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 12 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.

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 Petitioner's
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.

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 (6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of cases).

It may be that Private Respondent's products also consist of chain rollers, belts, bearing and the like, while petitioners deal
principally with electrical products. It is significant to note, however, that even the Director of Patents had denied Private
Respondent's application for registration of the trademarks "Standard Philips & Device" for chain, rollers, belts, bearings
and cutting saw. That office held that PEBV, "had shipped to its subsidiaries in the Philippines equipment, machines and
their parts which fall under international class where "chains, rollers, belts, bearings and cutting saw," the goods in
connection with which Respondent is seeking to register 'STANDARD PHILIPS' . . . also belong" ( Inter Partes Case No.
2010, June 17, 1988, SEC Rollo).

Furthermore, the records show that among Private Respondent's primary purposes in its Articles of Incorporation (Annex
D, Petition p. 37, Rollo) are the following:

To buy, sell, barter, trade, manufacture, import, export, or otherwise acquire, dispose of, and deal in and deal with any
kind of goods, wares, and merchandise such as but not limited to plastics, carbon products, office stationery and supplies,
hardware parts, electrical wiring devices, electrical component parts, and/or complement of industrial, agricultural or
commercial machineries, constructive supplies, electrical supplies and other merchandise which are or may become
articles of commerce except food, drugs and cosmetics and to carry on such business as manufacturer, distributor, dealer,
indentor, factor, manufacturer's representative capacity for domestic or foreign companies. (emphasis ours)

For its part, Philips Electrical also includes, among its primary purposes, the following:

To develop manufacture and deal in electrical products, including electronic, mechanical and other similar products . . . (p.
30, Record of SEC Case No. 2743)

Given Private Respondent's aforesaid underlined primary purpose, nothing could prevent it from dealing in the same line
of business of electrical devices, products or supplies which fall under its primary purposes. Besides, there is showing that
Private Respondent not only manufactured and sold ballasts for fluorescent lamps with their corporate name printed
thereon but also advertised the same as, among others, Standard Philips (TSN, before the SEC, pp. 14, 17, 25, 26, 37-42,
June 14, 1985; pp. 16-19, July 25, 1985). As aptly pointed out by Petitioners, [p]rivate respondent's choice of "PHILIPS"
as part of its corporate name [STANDARD PHILIPS CORPORATION] . . . tends to show said respondent's intention to
ride on the popularity and established goodwill of said petitioner's business throughout the world" (Rollo, p. 137). The
subsequent appropriator of the name or one confusingly similar thereto usually seeks an unfair advantage, a free ride of
another's goodwill (American Gold Star Mothers, Inc. v. National Gold Star Mothers, Inc., et al, 89 App DC 269, 191 F 2d
488).

In allowing Private Respondent the continued use of its corporate name, the SEC maintains that the corporate names of
Petitioners PHILIPS ELECTRICAL LAMPS. INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at least
45
two words different from that of the corporate name of respondent STANDARD PHILIPS CORPORATION, which words
will readily identify Private Respondent from Petitioners and vice-versa.

True, under the Guidelines in the Approval of Corporate and Partnership Names formulated by the SEC, the proposed
name "should not be similar to one already used by another corporation or partnership. If the proposed name contains a
word already used as part of the firm name or style of a registered company; the proposed name must contain two other
words different from the company already registered" (Emphasis ours). It is then pointed out that Petitioners Philips
Electrical and Philips Industrial have two words different from that of Private Respondent's name.

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 (6 Fletcher [Perm Ed], pp. 39-40, citing Borden Ice Cream Co. v. Borden's Condensed Milk Co.,
210 F 510). Notably, too, Private Respondent's name actually contains only a single word, that is, "STANDARD",
different from that of Petitioners inasmuch as the inclusion of the term "Corporation" or "Corp." merely serves the
Purpose of distinguishing the corporation from partnerships and other business organizations.

The fact that there are other companies engaged in other lines of business using the word "PHILIPS" as part of their
corporate names is no defense and does not warrant the use by Private Respondent of such word which constitutes an
essential feature of Petitioners' corporate name previously adopted and registered and-having acquired the status of a well-
known mark in the Philippines and internationally as well (Bureau of Patents Decision No. 88-35 [TM], June 17, 1988,
SEC Records).

In support of its application for the registration of its Articles of Incorporation with the SEC, Private Respondent had
submitted an undertaking "manifesting its willingness to change its corporate name in the event another person, firm or
entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it." Private
respondent must now be held to its undertaking.

As a general rule, parties organizing a corporation must choose a name at their peril; and the use of a name similar to one
adopted by another corporation, whether a business or a nonbusiness or non-profit organization if misleading and likely to
injure it in the exercise in its corporate functions, regardless of intent, may be prevented by the corporation having the
prior right, by a suit for injunction against the new corporation to prevent the use of the name (American Gold Star
Mothers, Inc. v. National Gold Star Mothers, Inc., 89 App DC 269, 191 F 2d 488, 27 ALR 2d 948).

WHEREFORE, the Decision of the Court of Appeals dated 31 July 1990, and its Resolution dated 20 November 1990, are
SET ASIDE and a new one entered ENJOINING private respondent from using "PHILIPS" as a feature of its corporate
name, and ORDERING the Securities and Exchange Commission to amend private respondent's Articles of Incorporation
by deleting the word PHILIPS from the corporate name of private respondent.

No costs.

SO ORDERED.

Paras, Padilla, Regalado and Nocon, JJ., concur.

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.

46
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 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." 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 time and 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.

47
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.

DECISION
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.

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
48
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.

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 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."
(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
49
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.

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 article was his product." 12

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 time and 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. Consequently, the same doctrine or principle
cannot be made to apply where the evidence did not prove that the business (of the plaintiff) has continued for so long a
time that it has become of consequence and acquired a 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 (by the defendant) (Ang
Si Heng vs. Wellington Department Store, Inc., 92 Phil. 448).

With the foregoing as a yardstick, [we] believe the appellant failed to satisfy the aforementioned requisites. 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. Nevertheless, its (appellant) exclusive use of the
word (Lyceum) was never established or proven as in fact the evidence tend to convey that the cross-claimant was already
using the word 'Lyceum' seventeen (17) years prior to the date the appellant started using the same word in its corporate
50
name. Furthermore, educational institutions of the Roman Catholic Church had been using the same or similar word like
'Liceo de Manila,' 'Liceo de Baleno' (in Baleno, Masbate), 'Liceo de Masbate,' 'Liceo de Albay' long before appellant
started using the word 'Lyceum'. The appellant also failed to prove that the word 'Lyceum' has become so identified with
its educational institution that confusion will surely arise in the minds of the public if the same word were to be used by
other educational institutions.

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." 13
(Underscoring partly in the original and partly supplied)

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.

In this connection, petitioner argues that because the Western Pangasinan Lyceum, Inc. failed to reconstruct its records
before the SEC in accordance with the provisions of R.A. No. 62, which records had been destroyed during World War II,
Western Pangasinan Lyceum should be deemed to have lost all rights it may have acquired by virtue of its past
registration. It might be noted that the Western Pangasinan Lyceum, Inc. registered with the SEC soon after petitioner had
filed its own registration on 21 September 1950. Whether or not Western Pangasinan Lyceum, Inc. must be deemed to
have lost its rights under its original 1933 registration, appears to us to be quite secondary in importance; we refer to this
earlier registration simply to underscore the fact that petitioner's use of the word "Lyceum" was neither the first use of that
term in the Philippines nor an exclusive use thereof. 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.

We conclude and so hold that 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.

WHEREFORE, the petitioner having failed to show any reversible error on the part of the public respondent Court of
Appeals, the Petition for Review is DENIED for lack of merit, and the Decision of the Court of Appeals dated 28 June
1991 is hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

THIRD DIVISION

G.R. Nos. 213365-66, December 10, 2018

ASIA PACIFIC RESOURCES INTERNATIONAL HOLDINGS, LTD., Petitioner, v. PAPERONE, INC.,

Respondent.

DECISION
GESMUNDO, J.:

Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the November 28,
2013 Decision2 and the July 9, 2014 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP Nos. 122288 and 122535.
The CA reversed and set aside the November 10, 2011 Decision4 of the Intellectual Property Office (IPO) Director
General, finding Paperone, Inc. (respondent) liable for unfair competition.

51
The Facts

The dispute in this case arose from a complaint for unfair competition, trademark infringement, and damages filed against
respondent by Asia Pacific Resources International Holdings, Ltd. (petitioner).

Petitioner is engaged in the production, marketing, and sale of pulp and premium wood free paper.5 It alleged that it is the
owner of a well�-known trademark, PAPER ONE, with Certificate of Registration No. 4-1999-01957 issued on
September 5, 2003.6 The said trademark enjoyed legal protection in different countries worldwide and enjoyed goodwill
and high reputation because of aggressive marketing and promotion. Petitioner claimed that the use of PAPERONE in
respondent's corporate name without its prior consent and authority was done in bad faith and designed to unfairly ride on
its good name and to take advantage of its goodwill. It was calculated to mislead the public into believing that
respondent's business and/or products were manufactured, licensed or sponsored by petitioner. It was also alleged that
respondent had presumptive, if not actual knowledge, of petitioner's rights to the trademark PAPER ONE, even prior to
respondent's application for registration of its corporate name before the Securities and Exchange Commission (SEC).7

Respondent, on its part, averred that it had no obligation to secure prior consent or authority from petitioner to adopt and
use its corporate name. The Department of Trade and Industry (DTI) and the SEC had allowed it to use Paperone, Inc.,
thereby negating any violation on petitioner's alleged prior rights. Respondent was registered with the SEC, having been
organized and existing since March 30, 2001. Its business name was likewise registered with the DTI. Respondent also
denied any awareness of the existence of petitioner and/or the registration of PAPER ONE, as the latter is a foreign
corporation not doing business in the Philippines. While the business of respondent dealt with paper conversion such as
manufacture of table napkins, notebooks and intermediate/collegiate writing pads, it did not use its corporate name
PAPERONE on any of its products. Further, its products had been widely sold in the Philippines even before petitioner
could claim any business transaction in the country. The public could not have possibly been deceived into believing that
any relation or sponsorship existed between the parties, considering these circumstances.8

In its decision,9 the Bureau of Legal Affairs (BLA) Director, Intellectual Property Office, found respondent liable �or
unfair competition. It ordered respondent to cease and desist from using PAPERONE in its corporate name, and to pay
petitioner P300,000.00, as temperate damages; P200,000.00, as exemplary damages; and P100,000.00, as attorney's fees.
It ruled that petitioner was the first to use PAPER ONE in 1999 which had become a symbol of goodwill of its paper
business. Respondent's use of PAPERONE in its corporate name was to benefit from the established goodwill of
petitioner. There was, however, no trademark infringement since PAPER ONE was registered in the Philippines only in
2003.10

On appeal to the IPO Director General, the BLA decision was affirmed with modification insofar as the increase in the
award of attorney's fees to P300,000.00.11

The CA Ruling

Both parties appealed to the CA. Petitioner maintained that it was entitled to actual damages amounting to P46,032,569.72
due to unfair competition employed by respondent. Respondent claimed that it was not liable for unfair competition.

In its decision, the CA reversed and set aside the IPO Director General's decision. It held that there was no confusing
similarity in the general appearance of the goods of both parties. Petitioner failed to establish through substantial evidence
that respondent intended to deceive the public or to defraud petitioner. Thus, the essential elements of unfair competition
were not present.12

ISSUES

In the petition before us, petitioner raises various issues for our resolution. However, given the facts of this case, we find
that the only issues to be resolved are:
I.
WHETHER RESPONDENT IS LIABLE FOR UNFAIR COMPETITION, and

II.
WHETHER PETITIONER IS ENTITLED TO ACTUAL DAMAGES.
OUR RULING

The core of the controversy is the adoption of "PAPERONE" in the trade name of respondent, which petitioner claims it
has prior right to, since it was the first to use it as its trademark for its paper products. Petitioner claims that respondent
52
committed unfair competition by adopting PAPERONE in its trade name. It is noteworthy that the issue of trademark
infringement is not the subject of the appeal before us.

The relevant provisions of the Intellectual Property Code13 provide:

SECTION 168. Unfair Competition, Rights, Regulation and Remedies. -

168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or
services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the
said goods, business or services so identified, which will be protected in the same manner as other property rights.

168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the
goods manufactured by him or in which he deals, or his business, or services for those of the one having established such
goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall
be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall
be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or
dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or
words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that
the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who, otherwise,
clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any
subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose.
The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the
goods, and (2) intent to deceive the public and defraud a competitor.14 Unfair competition is always a question of fact.15
At this point, it bears to stress that findings of fact of the highly technical agency - the IPO - which has the expertise in
this field, should have been given great weight by the Court of Appeals.16

a) Confusing similarity

As to the first element, the confusing similarity may or may not result from similarity in the marks, but may result from
other external factors in the packaging or presentation of the goods.17 Likelihood of confusion of goods or business is a
relative concept, to be determined only according to peculiar circumstances of each case.18

The marks under scrutiny in this case are hereby reproduced for easy reference:

Petitioner's:

(See image p. 6)

Respondent's:

(See image p. 6)

It can easily be observed that both have the same spelling and are pronounced the same. Although respondent has a
different logo, it was always used together with its trade name. It bears to emphasize that, initially, respondent's trade
name had separate words that read "Paper One, Inc." under its original Articles of Incorporation. This was later on revised
to make it one word, and now reads "Paperone, Inc."19

At first glance, respondent may be correct that there would be no confusion as to the presentation or packaging of its
products since it is not using its corporate name as a trademark of its goods/products. There is an apparent dissimilarity of
presentation of the trademark PAPER ONE and the trade name and logo of Paperone, Inc. Nevertheless, a careful scrutiny
of the mark shows that the use of PAPERONE by respondent would likely cause confusion or deceive the ordinary
purchaser, exercising ordinary care, into believing that the goods bearing the mark are products of one and the same
enterprise.

Relative to the issue on confusion of marks and trade names, jurisprudence has noted two types of confusion, viz.: (1)
confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product
in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although
the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as
might reasonably be assumed to originate with the registrant of an earlier product; and the public would then be deceived
53
either into that belief or into the belief that there is some connection between the two parties, though inexistent.20 Thus,
while there is confusion of goods when the products are competing, confusion of business exists when the products are
non-competing but related enough to produce confusion of affiliation.21

This case falls under the second type of confusion. Although we see a noticeable difference on how the trade name of
respondent is being used in its products as compared to the trademark of petitioner, there could likely be confusion as to
the origin of the products. Thus, a consumer might conclude that PAPER ONE products are manufactured by or are
products of Paperone, Inc. Additionally, although respondent claims that its products are not the same as petitioner's, the
goods of the parties are obviously related as they are both kinds of paper products.

The BLA Director aptly ruled that "[t]o permit respondent to continue using the same or identical Paperone in its
corporate name although not [used] as label for its paper products, but the same line of business, that of manufacturing
goods such as PAPER PRODUCTS, therefore their co�existence would result in confusion as to source of goods and
diversion of sales to [r]espondent knowing that purchasers are getting products from [petitioner] APRIL with the use of
the corporate name Paper One, Inc. or Paperone, Inc. by herein [r]espondent."22

The matter of prior right over PAPERONE, again, is a matter of factual determination; therefore, we give credence to the
findings of the IPO, who has the expertise in this matter, being supported by substantial evidence. The Court has
consistently recognized the specialized functions of the administrative agencies - in this case, the IPO. Berris Agricultural
Co., Inc. v. Abyadang23 states, thus:
The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One may
make advertisements, issue circulars, distribute price lists on certain goods, but these alone will not inure to the claim of
ownership of the mark until the goods bearing the mark are sold to the public in the market. Accordingly, receipts, sales
invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark in trade and
commerce during a certain period of time.

xxxx

Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of
the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the
public as consumers against confusion on these goods. On this matter of particular concern, administrative agencies, such
as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better
position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not
finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be
overwhelming or even p1reponderant. It is not th1e task of the appellate court to weigh once more the evidence submitted
before the administrative body and to substitute its own judgment for that of the administrative agency in respect to
sufficiency of evidence.24 (Emphasis supplied)
The BLA Director found, as affirmed by the IPO Director General, that it was petitioner who has priority rights over
PAPER ONE, thus:
One essential factor that has led this Office to tilt the scales of justice in favor of Complainant is the latter's establishment
of prior use of the word PaperOne for paper products in the Philippines. Records will show that there was prior use and
adoption by Complainant of the word "PaperOne." PaperOne was filed for trademark registration on 22 March 1999
(Exhibit "D", Complainant) in the name of Complainant Asia Pacific Resources International Holdings, Ltd. and matured
into registration on 10 February 2003. Respondent's corporate or trade name is Paper One, Inc. which existed and was
duly registered with the Securities and Exchange Commission on 31 March 2001 (Exhibit "11", Respondent). If anyone
files a suit and can prove priority of adoption, he can assert his right to the exclusive use of a corporate name with
freedom from infringement by similarity (Philips Export B.V. et al. vs. CA, G.R. No. 96161). Respondent was
incorporated in March 2001 by virtue of SEC registration No. A200104788 (Exhibit "11", Complainant) and was
registered two (2) years thereafter as business name with the Department of Trade and Industry under DTI Business Name
Registration No. 00068456 (Exhibit "13", Respondent). Complainant Asia Pacific Resources International Holdings, Ltd.,
APRIL for brevity, presented evidence of its use of the label PaperOne on paper products in the Philippines earlier than
the date of its trademark application in 1999 when its marketing and promotion agent JND International Corporation
("JND" for brevity) licensed one of its clients, National Paper Products & Printing Corporation ("NAPPCO" for brevity)
to import, sell and distribute Complainant's APRIL paper products in 1998 (par. 3, Exhibit "AA", Complainant). To
support this declaration are documents evidencing transactions of NAPPCO with Complainant APRIL with the earliest
documented transaction on 22 January 1999 (Exhibit "G", Complainant) bearing [I]nvoice [N]o. LCA9812133.

[The] fact of earlier use was not disputed by the Respondent. In point of fact, Respondent already knew of Complainant's
APRIL existence prior to Respondent's incorporation as Paper One, Inc. in 2001. Most of the incorporators of National
Paper Products & Printing Corporation or NAPPCO for brevity (Exhibits "H" and "H�-A" to "H-H", Complainant)
which in late 1990s transacted with Complainant APRIL through Invoice No. LCA9812133 dated 22 January 1999, the
54
earliest invoice noted (Exhibit "G", Complainant) are likewise incorporators of Paper One, Inc. (Exhibit "11",
Respondent) namely Tan Tian Siong, Chong Ping Tat, Thelma J. Uy, Conchita Francisco, Sy Siong Sun, to name a few.
Also, NAPPCO, through Complainant's marketing and promotion agent JND International Corporation, or JND for
brevity (Exhibit "AA", Complainant) expressed interest in a letter dated 19 January 2000 to work with JND and APRIL,
as its exclusive distributor and we quote "to become your exclusive distributor of 'Paper One' Multi Purpose Copy Paper"
(Exhibit "AA-1-d", Complainant). Worth mentioning at this point is the jurisprudence pronounced in the case of Converse
Rubber Corporation vs. Universal Rubber Products, Inc. and Tiburcio S. Evalle (G.R. No. L-27906, Jan. 18, 1987) where
the court said:
Knowing therefore that the word "CONVERSE" belongs to and is being used by petitioner, and is in fact the dominant
word in petitioner's corporate name, respondent has no right to appropriate the same for use on its products which are
similar to those being produced by petitioner.25 (Emphasis supplied)
b) intent to deceive the public and defraud a competitor

The element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods26 as
offered for sale to the public.27 Contrary to the ruling of the CA, actual fraudulent intent need not be shown.28 Factual
circumstances were established showing that respondent adopted PAPERONE in its trade name even with the prior
knowledge of the existence of PAPER ONE as a trademark of petitioner. As in all other cases of colorable imitations, the
unanswered riddle is why, of the millions of terms and combinations of letters available, respondent had to choose those
so closely similar to another's trademark if there was no intent to take advantage of the goodwill generated by the other
mark.29

With regard to the issue on damages, we likewise agree with the IPO that the actual damages prayed for cannot be granted
because petitioner has not presented sufficient evidence to prove the amount claimed and the basis to measure actual
damages.

WHEREFORE, the petition is GRANTED. The November 28, 2013 Decision and the July 9, 2014 Resolution of the:
Court of Appeals in CA G.R. SP Nos. 122288 and 122535 are REVERSED and SET ASIDE. Accordingly, the November
10, 2011 Decision of the Intellectual Property Office Director General finding respondent liable for unfair competition is
hereby REINSTATED.

SO ORDERED.

TAKE A BREAK ATTY. <3

FIRST DIVISION

G.R. No. 205548, February 07, 2018

DE LA SALLE MONTESSORI INTERNATIONAL OF MALOLOS, INC., Petitioner, v. DE LA SALLE

BROTHERS, INC., DE LA SALLE UNIVERSITY, INC., LA SALLE ACADEMY, INC., DE LA SALLE-
SANTIAGO ZOBEL SCHOOL, INC. (FORMERLY NAMED DE LA SALLE-SOUTH INC.), DE LA SALLE
CANLUBANG, INC. (FORMERLY NAMED DE LA SALLE UNIVERSITY-CANLUBANG, INC.), Respondents.

DECISION

JARDELEZA, J.:

Petitioner De La Salle Montessori International of Malolos, Inc. filed this petition for review on certiorari1 under Rule 45
of the Rules of Court to challenge the Decision2 of the Court of Appeals (CA) dated September 27, 2012 in CA-G.R. SP
No. 116439 and its Resolution3 dated January 21, 2013 which denied petitioner's motion for reconsideration. The CA
affirmed the Decision4 of the Securities and Exchange Commission (SEC) En Banc dated September 30, 2010, which in
turn affirmed the Order5 of the SEC Office of the General Counsel (OGC) dated May 12, 2010 directing petitioner to
change or modify its corporate name.

Petitioner reserved with the SEC its corporate name De La Salle Montessori International Malolos, Inc. from June 4 to
August 3, 2007,6 after which the SEC indorsed petitioner's articles of incorporation and by-laws to the Department of
Education (DepEd) for comments and recommendation.7 The DepEd returned the indorsement without objections.8
Consequently, the SEC issued a certificate of incorporation to petitioner.9

Afterwards, DepEd Region III, City of San Fernando, Pampanga granted petitioner government recognition for its pre-
elementary and elementary courses on June 30, 2008,10 and for its secondary courses on February 15, 2010.11
55
On January 29, 2010, respondents De La Salle Brothers, Inc., De La Salle University, Inc., La Salle Academy, Inc., De La
Salle-Santiago Zobel School, Inc. (formerly De La Salle-South, Inc.), and De La Salle Canlubang, Inc. (formerly De La
Salle University-Canlubang, Inc.) filed a petition with the SEC seeking to compel petitioner to change its corporate name.
Respondents claim that petitioner's corporate name is misleading or confusingly similar to that which respondents have
acquired a prior right to use, and that respondents' consent to use such name was not obtained. According to respondents,
petitioner's use of the dominant phrases "La Salle" and "De La Salle" gives an erroneous impression that De La Salle
Montessori International of Malolos, Inc. is part of the "La Salle" group, which violates Section 18 of the Corporation
Code of the Philippines. Moreover, being the prior registrant, respondents have acquired the use of said phrases as part of
their corporate names and have freedom from infringement of the same.12

On May 12, 2010, the SEC OGC issued an Order13 directing petitioner to change or modify its corporate name. It held,
among others, that respondents have acquired the right to the exclusive use of the name "La Salle" with freedom from
infringement by priority of adoption, as they have all been incorporated using the name ahead of petitioner. Furthermore,
the name "La Salle" is not generic in that it does not particularly refer to the basic or inherent nature of the services
provided by respondents. Neither is it descriptive in the sense that it does not forthwith and clearly convey an immediate
idea of what respondents' services are. In fact, it merely gives a hint, and requires imagination, thought and perception to
reach a conclusion as to the nature of such services. Hence, the SEC OGC concluded that respondents' use of the phrase
"De La Salle" or "La Salle" is arbitrary, fanciful, whimsical and distinctive, and thus legally protectable. As regards
petitioner's argument that its use of the name does not result to confusion, the SEC OGC held otherwise, noting that
confusion is probably or likely to occur considering not only the similarity in the parties' names but also the business or
industry they are engaged in, which is providing courses of study in pre-elementary, elementary and secondary
education.14 The SEC OGC disagreed with petitioner's argument that the case of Lyceum of the Philippines, Inc. v. Court
of Appeals15 (Lyceum of the Philippines) applies since the word "lyceum" is clearly descriptive of the very being and
defining purpose of an educational corporation, unlike the term "De La Salle" or "La Salle."16 Hence, the Court held in
that case that the Lyceum of the Philippines, Inc. cannot claim exclusive use of the name "lyceum."

Petitioner filed an appeal before the SEC En Banc, which rendered a Decision17 on September 30, 2010 affirming the
Order of the SEC OGC. It held, among others, that the Lyceum of the Philippines case does not apply since the word
"lyceum" is a generic word that pertains to a category of educational institutions and is widely used around the world.
Further, the Lyceum of the Philippines failed to prove that "lyceum" acquired secondary meaning capable of exclusive
appropriation. Petitioner also failed to establish that the term "De La Salle" is generic for the principle enunciated in
Lyceum of the Philippines to apply.18

Petitioner consequently filed a petition for review with the CA. On September 27, 2012, the CA rendered its Decision19
affirming the Order of the SEC OGC and the Decision of the SEC En Banc in toto.

Hence, this petition, which raises the lone issue of "[w]hether or not the [CA] acted with grave abuse of discretion
amounting to lack or in excess of jurisdiction when it erred in not applying the doctrine laid down in the case of [Lyceum
of the Philippines], that LYCEUM is not attended with exclusivity."20

The Court cannot at the outset fail to note the erroneous wording of the issue. Petitioner alleged grave abuse of discretion
while also attributing error of judgment on the part of the CA in not applying a certain doctrine. Certainly, these grounds
do not coincide in the same remedy. A petition for review on certiorari under Rule 45 of the Rules of Court is a separate
remedy from a petition for certiorari under Rule 65. A petition for review on certiorari under Rule 45 brings up for review
errors of judgment, while a petition for certiorari under Rule 65 covers errors of jurisdiction or grave abuse of discretion
amounting to excess or lack of jurisdiction. Grave abuse of discretion is not an allowable ground under Rule 45.21
Nonetheless, as the petition argues on the basis of errors of judgment allegedly committed by the CA, the Court will
excuse the error in terminology.

The main thrust of the petition is that the CA erred in not applying the ruling in the Lyceum of the Philippines case which
petitioner argues have "the same facts and events"22 as in this case.

We DENY the petition and uphold the Decision of the CA.

As early as Western Equipment and Supply Co. v. Reyes,23 the Court declared that a corporation's right to use its
corporate and trade name is a property right, a right in rem, which it may assert and protect against the world in the same
manner as it may protect its tangible property, real or personal, against trespass or conversion.24 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.25 Furthermore, in Philips Export B.V. v. Court of Appeals,26 we held:

56
A name is peculiarly important as necessary to the very existence of a corporation x x x. Its name is one of its attributes,
an element of its existence, and essential to its identity x x x. 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 x x x; and the right to
use its corporate name is as much a part of the corporate franchise as any other privilege granted x x x.

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 individual's name is thrust upon him x x x. A corporation can no more use a corporate
name in violation of the rights of others than an individual can use his nan1e legally acquired so as to mislead the public
and injure another x x x.27
Recognizing the intrinsic importance of corporate names, our Corporation Code established a restrictive rule insofar as
corporate names are concerned.28 Thus, Section 18 thereof provides:
Sec. 18. Corporate name. - No corporate name may be allowed by the Securities and 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.29

Indeed, parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by
another corporation, whether a business or a non-profit organization, if misleading or likely to injure in the exercise of its
corporate functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction
against the new corporation to prevent the use of the name.30

In Philips Export B.V. v. Court of Appeals,31 the Court held that to fall within the prohibition of Section 18, two requisites
must be proven, to wit: (1) that the complainant corporation acquired a prior right over the use of such corporate name;
and (2) the proposed name is either: (a) identical, or (b) deceptively or confusingly similar to that of any existing
corporation or to any other name already protected by law; or (c) patently deceptive, confusing or contrary to existing
law.32

With respect to the first requisite, the Court has held that the right to the exclusive use of a corporate name with freedom
from infringement by similarity is determined by priority of adoption.33

In this case, respondents' corporate names were registered on the following dates: (1) De La Salle Brothers, Inc. on
October 9, 1961 under SEC Registration No. 19569; (2) De La Salle University, Inc. on December 19, 1975 under SEC
Registration No. 65138; (3) La Salle Academy, Inc. on January 26, 1960 under SEC Registration No. 16293; (4) De La
Salle�Santiago Zobel School, Inc. on October 7, 1976 under SEC Registration No. 69997; and (5) De La Salle
Canlubang, Inc. on August 5, 1998 under SEC Registration No. Al998-01021.34

On the other hand, petitioner was issued a Certificate of Registration only on July 5, 2007 under Company Registration
No. CN200710647.35 It being clear that respondents are the prior registrants, they certainly have acquired the right to use
the words "De La Salle" or "La Salle" as part of their corporate names.

The second requisite is also satisfied since there is a confusing similarity between petitioner's and respondents' corporate
names. While these corporate names are not identical, it is evident that the phrase "De La Salle" is the dominant phrase
used.

Petitioner asserts that it has the right to use the phrase "De La Salle" in its corporate name as respondents did not obtain
the right to its exclusive use, nor did the words acquire secondary meaning. It endeavoured to demonstrate that no
confusion will arise from its use of the said phrase by stating that its complete name, "De La Salle Montessori
International of Malolos, Inc.," contains four other distinctive words that are not found in respondents' corporate names.
Moreover, it obtained the words "De La Salle" from the French word meaning "classroom," while respondents obtained it
from the French priest named Saint Jean Baptiste de La Salle. Petitioner also compared its logo to that of respondent De
La Salle University and argued that they are different. Further, petitioner argued that it does not charge as much fees as
respondents, that its clients knew that it is not part of respondents' schools, and that it never misrepresented nor claimed to
be an affiliate of respondents. Additionally, it has gained goodwill and a name worthy of trust in its own right.36

We are not persuaded.

57
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.37

Petitioner's assertion that the words "Montessori International of Malolos, Inc." are four distinctive words that are not
found in respondents' corporate names so that their corporate name is not identical, confusingly similar, patently deceptive
or contrary to existing laws,38 does not avail. As correctly held by the SEC OGC, all these words, when used with the
name "De La Salle," can reasonably mislead a person using ordinary care and discretion into thinking that petitioner is an
affiliate or a branch of, or is likewise founded by, any or all of the respondents, thereby causing confusion.39

Petitioner's argument that it obtained the words "De La Salle" from the French word meaning "classroom," while
respondents obtained it from the French priest named Saint Jean Baptiste de La Salle,40 similarly does not hold water. We
quote with approval the ruling of the SEC En Banc on this matter. Thus:
Generic terms are those which constitute "the common descriptive name of an article or substance," or comprise the
"genus of which the particular product is a species," or are "commonly used as the name or description of a kind of
goods," or "characters," or "refer to the basic nature of the wares or services provided rather than to the more idiosyncratic
characteristics of a particular product," and are not legally protectable. It has been held that if a mark is so commonplace
that it cannot be readily distinguished from others, then it is apparent that it cannot identify a particular business; and he
who first adopted it cannot be injured by any subsequent appropriation or imitation by others, and the public will not be
deceived.

Contrary to [petitioner's] claim, the word salle only means "room" in French. The word la, on the other hand, is a definite
article ("the") used to modify salle. Thus, since salle is nothing more than a room, [respondents'] use of the term is
actually suggestive.

A suggestive mark is therefore a word, picture, or other symbol that suggests, but does not directly describe something
about the goods or services in connection with which it is used as a mark and gives a hint as to the quality or nature of the
product. Suggestive trademarks therefore can be distinctive and are registrable.

The appropriation of the term "la salle" to associate the words with the lofty ideals of education and learning is in fact
suggestive because roughly translated, the words only mean "the room." Thus, the room could be anything - a room in a
house, a room in a building, or a room in an office.

xxx

In fact, the appropriation by [respondents] is fanciful, whimsical and arbitrary because there is no inherent connection
between the words la salle and education, and it is through [respondents'] painstaking efforts that the term has become
associated with one of the top educational institutions in the country. Even assuming arguendo that la salle means
"classroom" in French, imagination is required in order to associate the term with an educational institution and its
particular brand of service.41
We affirm that the phrase "De La Salle" is not merely a generic term. Respondents' use of the phrase being suggestive and
may properly be regarded as fanciful, arbitrary and whimsical, it is entitled to legal protection.42 Petitioner's use of the
phrase "De La Salle" in its corporate name is patently similar to that of respondents that even with reasonable care and
observation, confusion might arise. The Court notes not only the similarity in the parties' names, but also the business they
are engaged in. They are all private educational institutions offering pre-elementary, elementary and secondary courses.43
As aptly observed by the SEC En Banc, petitioner's name gives the impression that it is a branch or affiliate of
respondents.44 It is settled that proof of actual confusion need not be shown. It suffices that confusion is probable or
likely to occur.45

Finally, the Court's ruling in Lyceum of the Philippines46 does not apply.

In that case, the Lyceum of the Philippines, Inc., an educational institution registered with the SEC, commenced
proceedings before the SEC to compel therein private respondents who were all educational institutions, to delete the
word "Lyceum" from their corporate names and permanently enjoin them from using the word as part of their respective
names.

The Court there held that the word "Lyceum" today generally refers to a school or institution of learning. It is as generic in
character as the word "university." Since "Lyceum" 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. Moreover, the Lyceum of
the Philippines, Inc.'s use of the word "Lyceum" for a long period of time did not amount to mean that the word had
58
acquired secondary meaning in its favor because it failed to prove that it had been using the word all by itself to the
exclusion of others. More so, there was no evidence presented to prove that the word has been so identified with the
Lyceum of the Philippines, Inc. as an educational institution that confusion will surely arise if the same word were to be
used by other educational institutions.47

Here, the phrase "De La Salle" is not generic in relation to respondents. It is not descriptive of respondent's business as
institutes of learning, unlike the meaning ascribed to "Lyceum." Moreover, respondent De La Salle Brothers, Inc. was
registered in 1961 and the De La Salle group had been using the name decades before petitioner's corporate registration.
In contrast, there was no evidence of the Lyceum of the Philippines, Inc.'s exclusive use of the word "Lyceum," as in fact
another educational institution had used the word 17 years before the former registered its corporate name with the SEC.
Also, at least nine other educational institutions included the word in their corporate names. There is thus no similarity
between the Lyceum of the Philippines case and this case that would call for a similar ruling.

The enforcement of the protection accorded by Section 18 of the Corporation Code to corporate names is lodged
exclusively in the SEC. By express mandate, the SEC has absolute jurisdiction, supervision and control over all
corporations. It is the SEC's duty to prevent confusion in the use of corporate names not only for the protection of the
corporations involved, but more so for the protection of the public. It has authority to de-register at all times, and under all
circumstances, corporate names which in its estimation are likely to generate confusion.48

Clearly, the only determination relevant to this case is that one made by the SEC in the exercise of its express mandate
under the law.49

Time and again, we have held that findings of fact of quasi-judicial agencies, like the SEC, are generally accorded respect
and even finality by this Court, if supported by substantial evidence, in recognition of their expertise on the specific
matters under their consideration, more so if the same has been upheld by the appellate court, as in this case.50

WHEREFORE, the Petition is DENIED. The assailed Decision of the CA dated September 27, 2012 is AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 184008, August 03, 2016

INDIAN CHAMBER OF COMMERCE PHILS., INC., Petitioner, v. FILIPINO INDIAN CHAMBER OF COMMERCE
IN THE PHILIPPINES, INC., Respondent.

DECISION
JARDELEZA, J.:

This is a Petition for Review on Certiorari1 assailing the Decision and Resolution of the Court of Appeals (CA) dated
May 15, 20082 and August 4, 2008,3 respectively, in CA-G.R. SP No. 97320. The Decision and Resolution affirmed the
Securities and Exchange Commission En Banc (SEC En Banc) Decision dated November 30, 20064 directing petitioner
Indian Chamber of Commerce Phils., Inc. to modify its corporate name.

The Facts

Filipino-Indian Chamber of Commerce of the Philippines, Inc. (defunct FICCPI) was originally registered with the SEC
as Indian Chamber of Commerce of Manila, Inc. on November 24, 1951, with SEC Registration Number 64655 On
October 7, 1959, it amended its corporate name into Indian Chamber of Commerce of the Philippines, Inc., and further
amended it into Filipino-Indian Chamber of Commerce of the Philippines, Inc. on

March 4, 1977,.6 Pursuant to its Articles of Incorporation, and without applying for an extension of its corporate term, the
defunct FICCPI's term of existence expired on November 24, 2001.7chanrobleslaw

SEC Case No. 05-008

On January 20, 2005, Mr. Naresh Mansukhani (Mansukhani) reserved the�� corporate�� name��
"Filipino�� Indian�� Chamber�� of Commerce�� in� the Philippines, Inc." (FICCPI), for the period
from January 20, 2005 to April 20, 2005, with the Company Registration and Monitoring Department (CRMD) of the
59
SEC.8 In an opposition letter dated April 1, 2005, Ram Sitaldas (Sitaldas), claiming to be a representative of the defunct
FICCPI, alleged that the corporate name has been used by the defunct FICCPI since 1951, and that the reservation by
another person who is not its member or representative is illegal.9chanrobleslaw

The CRMD called the parties for a conference and required them to submit their position papers. Subsequently, on May
27, 2005, the CRMD rendered a decision granting Mansukhani's reservation, holding that he possesses the better right
over the corporate name.11 The CRMD ruled that the defunct FICCPI has no legal personality to oppose the reservation
of the corporate name by Mansukhani. After the expiration of the defunct FICCPFs corporate existence, without any act
on its part to extend its term, its right over the name ended. Thus, the name "Filipino Indian Chamber of Commerce in the
Philippines, Inc." is free for appropriation by any party.12chanrobleslaw

Sitaldas appealed the decision of the CRMD to the SEC En Bane, which appeal was docketed as SEC Case No. 05-008.
On December 7, 2005, the SEC En Bane denied the appeal,13 thus:ChanRoblesVirtualawlibrary
WHEREFORE,�� premises�� considered,�� the�� instant appeal is HEREBY DISMISSED for lack
of merit. Let a copy of this decision be furnished the Company Registration and Monitoring Department of this
Commission for its appropriate action.14 (Emphasis in the original.)
Sitaldas appealed the SEC En Banc decision to the CA, docketed as CA-G.R. SP No. 92740. On September 27, 2006, the
CA affirmed the decision of the SEC En Banc15. It ruled that Mansukhani, reserving the name 'Filipino Indian Chamber
of Commerce in the Philippines, Inc.," has the of the better right over the corporate name. It ruled that with the expiration
corporate life of the defunct FICCPI, without an extension having been filed and granted, it lost its legal personality as a
corporation.16 Thus, the CA affirmed the SEC En Banc ruling that after the expiration of its term, the defunct FICCPI's
rights over the name also ended.17 The CA also cited SEC Memorandum Circular No. 14-200018 which gives protection
to corporate names for a period of three years after the approval of the dissolution of the corporation.19 It noted that the
reservation for the use of the corporate name "Filipino Indian Chamber of Commerce in the Philippines, Inc.," and the
opposition were filed only in January 2005, way beyond this three-year period.20chanrobleslaw

On March 14, 2006, pending resolution by the CA, the SEC issued the Certificate of Incorporation of respondent FICCPI,
pursuant to its ruling in SEC Case No. 05-008.

SEC Case No. 06-014

Meanwhile, on December 8, 2005,22 Mr. Pracash Dayacanl, who allegedly represented the defunct FICCPI, filed an
application with the CRMD for the reservation of the corporate name "Indian Chamber of Commerce Phils., Inc."
(ICCPI).23 Upon knowledge, Mansukhani, in a letter dated February 14, 2006,24 formally opposed the application.
Mansukhani cited the SEC En Banc decision in SEC Case No. 05-008 recognizing him as the one possessing the better
right over the corporate name "Filipino Chamber of Commerce in the Philippines, Inc.25cralawredchanrobleslaw

In a letter dated April 5, 200626 the CRMD denied Mansukhani's opposition. It stated that the name "Indian Chamber of
Commerce Phils., Inc." is not deceptively or confusingly similar to "Filipino Indian Chamber of Commerce in the
Philippines, Inc." On the same date, the CRMD approved and issued the Certificate of Incorporation27 of petitioner
ICCPI.

Thus, respondent FICCPI, through Mansukhani, appealed the CRMD's decision to the SEC En Banc.28 The appeal was
docketed as SEC Case No. 06-014. On November 30, 2006, the SEC En Bane granted the appeal filed by FICCPI,29 and
reversed the CRMD's decision. Citing Section 18 of the Corporation Code,30 the SEC En Bane made a finding that "both
from the standpoint of their [ICCPI and FICCPI] corporate names and the purposes for which they were established, there
exist[s] a similarity that could inevitably lead to confusion."31 It also ruled that "oppositor [FICCPI] has the prior right to
use its corporate name to the exclusion of the others. It was registered with the Commission on March 14, 2006 while
respondent [ICCPI] was registered on April 05, 2006. By virtue of oppositor's [FICCPI] prior appropriation and use of its
name, it is entitled to protection against� the use of identical or similar name of another corporation."32
Thus, the SEC En Banc ruled, to wit:
WHEREFORE, the appeal is hereby granted and the assailed Order dated April 05, 2006 is hereby REVERSED and SET
ASIDE and respondent is directed to change or modify its corporate name within thirty (30) days from the date of actual
receipt hereof.

SO ORDERED.33 (Emphasis in the original.)

ICCPI appealed the SEC En Banc decision in SEC Case No. 06-014 to the CA.34 The appeal, docketed as CA-G.R. SP
No. 97320, raised
the following issues:
The Honorable SEC En Banc committed serious error when it held that petitioner's corporate name (ICCPI) could
inevitably lead to confusion;
60
Respondent's corporate name (FICCPI) did not acquire secondary meaning; and cralawlawlibrary

The Honorable SEC En Bane violated the rule of equal protection when it denied petitioner (ICCPI) the use of the
descriptive generic words. 35
In a decision dated May 15, 2008,36 the CA affirmed the decision of the SEC En Banc. It held that by simply looking at
the corporate names of ICCPI and FICCPI, one may readily notice the striking similarity between the two. Thus, an
ordinary person using ordinary care and discrimination may be led to believe that the corporate names of ICCPI and
FICCPI refer to one and the same corporation.37 The CA further ruled that ICCPI's corporate name did not comply with
the requirements of SEC Memorandum Circular No. 14-2000. It noted that under the facts of this case, it is the registered
corporate name, FICCPI, which contains the word (Filipino) making it different from the proposed
corporate name. SEC Memorandum Circular No. 14-2000 requires, however, that it should be the proposed corporate
name which should contain one distinctive word different from the name of the corporation already registered, and not the
other way around, as In this case.39 Finally, the CA held that the SEC En Bane did not violate ICCPFs right to equal
protection when it ordered ICCPI to change its corporate name. The SEC En Bane merely compelled ICCPI to comply
with its undertaking to change its corporate name in case another person or firm has acquired a prior right to the use of the
said name or the same is deceptively or confusingly similar to one already registered with the SEC.40
The dispositive portion of the CA decision reads:
WHEREFORE, premises considered, the petition filed in this case is hereby DENIED and the assailed Decision of the
Securities and Exchange Commission en banc in SEC EN BANC Case No. 06-014 is hereby AFFIRMED.

SO ORDERED.41�� (Emphasis in the original.)

In its Resolution dated August 4, 2008,42 the CA denied the Motion for Reconsideration filed by ICCPI.

The Petition43

ICCPI now appeals the CA decision before this Court raisin; following arguments:
The Honorable Court of Appeals committed serious error when it upheld the findings of the SEC En Banc;

The Honorable Court of Appeals committed serious error when it held that there is similarity between the petitioner and
the respondent (sic) corporate name that would inevitably lead to confusion; and cralawlawlibrary

Respondent's corporate name did not acquire secondarymeaning.44

The Court's Ruling

We uphold the decision of the CA.

Section 18 of the Coiporation Code expressly prohibits the use of a corporate name which is identical or deceptively or
confusingly similar to that of any existing corporation:ChanRoblesVirtualawlibrary
No corporate name may be allowed by the Securities and 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. (Underscoring supplied.)
In Philips Export B. V. v. Court of Appeals,45 this Court ruled that to fall within the prohibition, two requisites must be
proven, to wit:
�that the complainant corporation acquired a prior right over the use of such corporate name; and cralawlawlibrary

�the proposed name is either:

chanRoblesvirtualLawlibrary(a)���� identical; or
(b)��� deceptively or confusingly similar to that of any existing corporation or to any other name already protected
by law; or
(c)���� patently deceptive,� confusing or contrary to existing law.46
These two requisites are present in this case.

FICCPI acquired a prior right over

the use of the corporate name

In Industrial Refractories Corporation of the Philippines v. Court of Appeals,47 the Court applied the priority of adoption
rule to determine prior right, taking into consideration the dates when the parties used their respective corporate names. It
61
ruled that "Refractories Corporation of the Philippines" (RCP), as opposed to "Industrial Refractories Corporation of the
Philippines" (IRCP), has acquired the right to use the word "Refractories" as part of its corporate name, being its prior
registrant on October 13, 1976. The Court noted that IRCP only started using its corporate name when it amended its
Articles of Incorporation on August 23, 1985.48chanrobleslaw

In this case, FICCPI was incorporated on March 14, 2006. On the other hand, ICCPI was incorporated only on April 5,
2006, or a month after FICCPI registered its corporate name. Thus, applying the principle in the Refractories case, we
hold that FICCPI, which was incorporated earlier, acquired a prior right over the use of the corporate name.

ICCPI cannot argue that it first incorporated and held the "Filipino Indian Chamber of Commerce," in 1977; and that it
established the name's goodwill until it failed to renew its name due to oversight.49 It is settled that a corporation is ipso
facto dissolved as soon as its term of existence expires.50 SEC Memorandum Circular No. 14-2000 likewise provides for
the use of corporate names of dissolved corporations:ChanRoblesVirtualawlibrary
14. The name of a dissolved firm shall not be allowed to be used by other firms within three (3) years after the approval of
the dissolution of the corporation by the Commission, unless allowed by the last stockholders representing at least
majority of the outstanding capital stock of the dissolved firm.
When the term of existence of the defunct FICCPI expired on November 24, 2001, its corporate name cannot be used by
other corporations within three years from that date, until November 24, 2004. FICCPI reserved the name "Filipino Indian
Chamber of Commerce in the Philippines, Inc." on January 20, 2005, or beyond the three-year period. Thus, the SEC was
correct when it allowed FICCPI to use the reserved corporate name.

ICCPI's name is identical and

deceptively or confusingly similar to
that of FICCPI

The second requisite in the Philips Export case likewise obtains in two respects: the proposed name is (a) identical or (b)
deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law.

On the first point, ICCPI's name is identical to that of FICCPI. ICCPFs and FICCPFs corporate names both contain the
same words "Indian Chamber of Commerce." ICCPI argues that the word "Filipino" in FICCPFs corporate name makes it
easily distinguishable from ICCPI.51 It adds that confusion and deception are effectively precluded by appending the
word "Filipino" to the phrase "Indian Chamber of Commerce."52 Further, ICCPI claims that the corporate name of
FICCPI uses the words "in the Philippines" while ICCPI uses only "Phils, Inc."53chanrobleslaw

ICCPFs arguments are without merit. These words do not effectively distinguish the corporate names. On the one hand,
the word "Filipino" is merely a description, referring to a Filipino citizen or one living in the Philippines, to describe the
corporation's members. On the other, the words "in the Philippines" and "Phils., Inc." are simply geographical locations of
the corporations which, even if appended to both the corporate names, will not make one distinct from the other. Under
the facts of this case, these words cannot be separated from each other such that each word can be considered to add
distinction to the corporate names. Taken together, the words in the phrase "in the Philippines" and in the phrase "Phils.
Inc." are synonymous�they both mean the location of the corporation.

The same principle was adopted by this Court in Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K. sa
Bansang Pilipinas, Inc. v. Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan:54
Significantly, the only difference between the corporate names of petitioner and respondent are the words SALIGAN and
SUHAY. These words are synonymous-both mean ground, foundation or support. Hence, this case is on all fours with
Universal Mills Corporation v. Universal Textile Mills, Inc., where the Court ruled that the corporate names Universal
Mills Corporation and Universal Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable
care and observation" confusion may arise.55 (Italics in the original.)
Thus, the CA is correct when it ruled, "[a]s correctly found by the SEC en bane, the word 'Filipino' in the corporate name
of the respondent [FICCPI] is merely descriptive and can hardly serve as an effective differentiating medium necessary to
avoid confusion. The other two words alluded to by petitioner [ICCPI] that allegedly distinguishes its corporate name
from that of the respondent are the words� 'in'� and 'the'� in the respondent's corporate name. To our mind, the
presence of the words 'in' and 'the' in respondent's corporate name does not, in any way, make an effective distinction to
that of petitioner."56chanrobleslaw

Petitioner cannot argue that the combination of words in respondent's corporate name is merely descriptive and generic,
and consequently cannot be appropriated as a corporate name to the exclusion of the others.57 Save for the words
"Filipino," "in the," and "Inc.," the corporate names of petitioner and respondent are identical in all other respects. This
issue was also discussed in the Iglesia case where this Court held,

62
Furthermore, the wholesale appropriation by petitioner of respondent's corporate name cannot find justification under the
generic word rule. We agree with the Court of Appeals' conclusion that a contrary ruling would encourage other
corporations to adopt verbatim and register an
existing and protected corporate name, to the detriment of the public.58chanrobleslaw

On the second point, ICCPI's corporate name is deceptively or confusingly similar to that of FICCPI. It is settled that to
determire 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 examine the record as well as the names
themselves.59 Proof of actual confusion need not be shown. It suffices that confusion is probably or likely to
occur.60chanrobleslaw

In this case, the overriding consideration in determining wheiher a person, using ordinary care and discrimination, might
be misled is the circumstance that both ICCPI and FICCPI have a common primary purpose, that is, the promotion of
Filipino-Indian business in the Philippines.

The primary purposes of ICCPI as provided in its Articles of Incorporation are:

Develop a stronger sense of brotherhood;

Enhance the prestige of the Filipino-Indian business community in the Philippines;

Promote cordial business relations with Filipinos and other business� communities� in the� Philippines,� and
other overseas Indian business organizations;

Respond fully to the needs of a progressive economy and the Filipino-Indian Business community;

Promote and foster relations between the people and Governments of the Republics of the Philippines and
India in areas of Industry, Trade, and Culture.61chanroblesvirtuallawlibrary
Likewise, the primary purpose of FICCPI is "[t]o actively promote and enhance the Filipino-Indian business relationship
especially in view of [current] local and global business trends."62chanrobleslaw

Considering these corporate purposes, the� SEC En Banc made a finding that "[i]t is apparent that both from the
standpoint of their corporate names and the purposes for which they were established, there exist a I similarity that could
inevitably lead to confusion."63 This finding of the SEC En Bane was fully concurred with and adopted by the
CA.64chanrobleslaw

Findings of fact of quasi-judicial agencies, like the SEC, are generally accorded respect and even finality by this Court, if
supported by substantial evidence, in recognition of their expertise on the specific matters under their consideration, and
more so if the same has been upheld by the appellate court,65 as in this case.

Petitioner cannot argue that the CA erred when it upheld the SEC En Banc's decision to cancel ICCPFs corporate name.66
By express mandate of law, the SEC has absolute jurisdiction, supervision and control over all corporations.67 It is the
SEC's duty to prevent confusion in the use of corporate names not only for the protection of the corporation involved, but
more so for the protection of the public. It has the authority to de-register at all times, and under all circumstances
corporate names which in its estimation are likely to generate confusion.68chanrobleslaw

Pursuant to its mandate, the SEC En Banc correctly applied Section 18 of the Corporation Code, and Section 15 of SEC
Memorandum Circular No. 14-2000:ChanRoblesVirtualawlibrary
In implementing Section 18 of the Corporation Code of the Philippines (BP 68), the following revised guidelines in the
approval of corporate and partnership names are hereby adopted�� for�� the��� information��
and�� guidelines��� of�� all concerned:

chanRoblesvirtualLawlibrary
xxx

15. Registrant corporations or partnership shall submit a letter undertaking to change their corporate or partnership name
in case another person or firm has acquired a prior right to the use of said firm name or the same is deceptively or
confusingly similar to one already registered unless this undertaking is already included as one of the provisions of the
articles of incorporation or partnership of the registrant.
Finding merit in respondent's claims, the SEC En Bane merely compelled petitioner to comply with its
undertaking.69chanrobleslaw

63
WHEREFORE, the petition is DENIED. The Decision of the CA dated May 15, 2008 in CA-G.R. SP No. 97320 is hereby
AFFIRMED.

SO ORDERED.chanRoblesvirtualLawlibrary

Velasco, Jr., (Chairperson), Peralta, Perez, and Reyes, JJ., concur.

HAPPY READING! KAYA MO YAN 😊 MAGIGING ATTY. KA <3

THIRD DIVISION

September 23, 2015

G.R. NO. 175278

GSIS FAMILY BANK - THRIFT BANK [Formerly Inc.], Petitioner,

vs.
BPI FAMILY BANK, Respondent.

DECISION
JARDELEZA, J.:

This is a Petition for Review on Certiorari filed by GSIS Family Bank - Thrift Bank1 assailing the Court of Appeals
Decision2 dated March 29, 2006 (Decision) and Resolution3 dated October 23, 2006 which denied petitioner's petition for
review of the Securities and Ex.change Commission Decision dated February 22, 2005 (SEC En Banc Decision). The SEC
En Banc Decision4 prohibited petitioner from using the word "Family" as part of its corporate name and ordered
petitioner to delete the word from its name.5

Facts

Petitioner was originally organized as Royal Savings Bank and started operations in 1971. Beginning 1983 and 1984,
petitioner encountered liquidity problems. On July 9, 1984, it was placed under receivership and later temporarily closed
by the Central Bank of the Philippines. Two (2) months after its closure, petitioner reopened and was renamed
Comsavings Bank, Inc. under the management of the Commercial Bank of Manila.6

In 1987, the Government Service Insurance System (GSIS) acquired petitioner from the Commercial Bank of Manila.
Petitioner's management and control was thus transferred to GSIS.7 To improve its marketability to the public, especially
to the members of the GSIS, petitioner sought Securities and Exchange Commission (SEC) approval to change its
corporate name to "GSIS Family Bank, a Thrift Bank."8 Petitioner likewise applied with the Department of Trade and
Industry (DTI) and Bangko Sentral ng Pilpinas (BSP) for authority to use "GSIS Family Bank, a Thrift Bank" as its
business name. The DTI and the BSP approved the applications.9 Thus, petitioner operates under the corporate name
"GSIS Family Bank – a Thrift Bank," pursuant to the DTI Certificate of Registration No. 741375 and the Monetary Board
Circular approval.10

Respondent BPI Family Bank was a product of the merger between the Family Bank and Trust Company (FBTC) and the
Bank of the Philippine Islands (BPI).11 On June 27, 1969, the Gotianum family registered with the SEC the corporate
name "Family First Savings Bank," which was amended to "Family Savings Bank," and then later to "Family Bank and
Trust Company."12 Since its incorporation, the bank has been commonly known as "Family Bank." In 1985, Family Bank
merged with BPI, and the latter acquired all the rights, privileges, properties, and interests of Family Bank, including the
right to use names, such as "Family First Savings Bank,"

"Family Bank," and "Family Bank and Trust Company." BPI Family Savings Bank was registered with the SEC as a
wholly-owned subsidiary of BPI. BPI Family Savings Bank then registered with the Bureau of Domestic Trade the trade
or business name "BPI Family Bank," and acquired a reputation and goodwill under the name.13

Proceedings before the SEC

Eventually, it reached respondent’s attention that petitioner is using or attempting to use the name "Family Bank." Thus,
on March 8, 2002, respondent petitioned the SEC Company Registration and Monitoring Department (SEC CRMD) to
disallow or prevent the registration of the name "GSIS Family Bank" or any other corporate name with the words "Family
64
Bank" in it. Respondent claimed exclusive ownership to the name "Family Bank," having acquired the name since its
purchase and merger with Family Bank and Trust Company way back 1985.14 Respondent also alleged that through the
years, it has been known as "BPI Family Bank" or simply "Family Bank" both locally and internationally. As such, it has
acquired a reputation and goodwill under the name, not only with clients here and abroad, but also with correspondent and
competitor banks, and the public in general.15

Respondent prayed the SEC CRMD to disallow or prevent the registration of the name "GSIS Family Bank" or any other
corporate name with the words "Family Bank" should the same be presented for registration.

Respondent likewise prayed the SEC CRMD to issue an order directing petitioner or any other corporation to change its
corporate name if the names have already been registered with the SEC.16

The SEC CRMD was thus confronted with the issue of whether the names BPI Family Bank and GSIS Family Bank are
confusingly similar as to require the amendment of the name of the latter corporation.

The SEC CRMD declared that upon the merger of FBTC with the BPI in 1985, the latter acquired the right to the use of
the name of the absorbed corporation. Thus, BPI Family Bank has a prior right to the use of the name

Family Bank in the banking industry, arising from its long and extensive nationwide use, coupled with its registration with
the Intellectual Property Office (IPO) of the name "Family Bank" as its trade name. Applying the rule of "priority in
registration" based on the legal maxim first in time, first in right, the SEC CRMD concluded that BPI has the preferential
right to the use of the name "Family Bank." More, GSIS and Comsavings Bank were then fully aware of the existence and
use of the name "Family Bank" by FBTC prior to the latter's merger with BPI.17

The SEC CRMD also held that there exists a confusing similarity between the corporate names BPI Family Bank and
GSIS Family Bank. It explained that although not identical, the corporate names are indisputably similar, as to cause
confusion in the public mind, even with the exercise of reasonable care and observation, especially so since both
corporations are engaged in the banking business.18

In a decision19 dated May 19, 2003, the SEC CRMD said, PREMISES CONSIDERED respondent GSIS FAMILY
BANK is hereby directed to refrain from using the word "Family" as part of its name and make good its commitment to
change its name by deleting or dropping the subject word from its corporate name within [thirty (30) days] from the date
of actual receipt hereof.20

Petitioner appealed21 the decision to the SEC En Banc, which denied the appeal, and upheld the SEC CRMD in the SEC
En Banc Decision.22 Petitioner elevated the SEC En Banc Decision to the Court of Appeals, raising the following issues:

1. Whether the use by GSIS Family Bank of the words "Family Bank" is deceptively and confusingly similar to the name
BPI Family Bank;

2. Whether the use by Comsavings Bank of "GSIS Family Bank" as its business constitutes unfair competition;

3. Whether BPI Family Bank is guilty of forum shopping;

4. Whether the approval of the DTI and the BSP of petitioner's application to use the name GSIS Family Bank constitutes
its authority to the lawful and valid use of such trade name or trade mark;

5. Whether the application of respondent BPI Family Bank for the exclusive use of the name "Family Bank," a generic
name, though not yet approved by IPO of the Bureau of Patents, has barred the GSIS Family Bank from using such trade
mark or name.23

Court of Appeals Ruling

The Court of Appeals ruled that the approvals by the BSP and by the DTI of petitioner’s application to use the name
"GSIS Family Bank" do not constitute authority for its lawful and valid use. It said that the SEC has absolute jurisdiction,
supervision and control over all corporations.24 The Court of Appeals held that respondent was entitled to the exclusive
use of the corporate name because of its prior adoption of the name "Family Bank" since 1969.25 There is confusing
similarity in the corporate names because "[c]onfusion as to the possible association with GSIS might arise if we were to
allow Comsavings Bank to add its parent company’s acronym, ‘GSIS’ to ‘Family Bank.’ This is true especially
considering both companies belong to the banking industry. Proof of actual confusion need not be shown. It suffices that

65
confusion is probably or likely to occur."26The Court of Appeals also ruled out forum shopping because not all the
requirements of litis pendentia are present.27

The dispositive portion of the decision read,

WHEREFORE, the instant petition for review is hereby DISMISSED for lack of merit.28

After its Motion for Reconsideration was denied,29 petitioner brought the decision to this Court via a Petition for Review
on Certiorari.30

Issues in the Petition

Petitioner raised the following issues in its petition:

I. The Court of Appeals gravely erred in affirming the SEC Resolution finding the word "Family" not generic despite its
unregistered status with the IPO of the Bureau of Patents and the use by GSIS-Family Bank in its corporate name of the
words "[F]amily [B]ank" as deceptive and [confusingly similar] to the name BPI Family Bank;31

II. The Court of Appeals gravely erred when it ruled that the respondent is not guilty of forum shopping despite the filing
of three (3) similar complaints before the DTI and BSP and with the SEC without the requisite certification of non-forum
shopping attached thereto;32

III. The Court of Appeals gravely erred when it completely disregarded the opinion of the Banko Sentral ng Pilipinas that
the use by the herein petitioner of the trade name GSIS Family Bank – Thrift Bank is not similar or does not deceive or
likely cause any deception to the public.33

Court's Ruling

We uphold the decision of the Court of Appeals.

Section 18 of the Corporation Code provides,

Section 18. Corporate name. – No corporate name may be allowed by the Securities and 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.

In Philips Export B.V. v. Court of Appeals,34 this Court ruled that to fall within the prohibition of the law on the right to
the exclusive use of a corporate name, two requisites must be proven, namely:

(1) that the complainant corporation acquired a prior right over the use of such corporate name; and

(2) the proposed name is either

(a) identical or

(b) deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law; or

(c) patently deceptive, confusing or contrary to existing law.35

These two requisites are present in this case. On the first requisite of a prior right, Industrial Refractories Corporation of
the Philippines v. Court of Appeals (IRCP case)36 is instructive. In that case, Refractories Corporation of the Philippines
(RCP) filed before the SEC a petition to compel Industrial Refractories Corporation of the Philippines (IRCP) to change
its corporate name on the ground that its corporate name is confusingly similar with that of RCP’s such that the public
may be confused into believing that they are one and the same corporation. The SEC and the Court of Appeals found for
petitioner, and ordered IRCP to delete or drop from its corporate name the word "Refractories." Upon appeal of IRCP, this
Court upheld the decision of the CA.

Applying the priority of adoption rule to determine prior right, this Court said that RCP has acquired the right to use the
word "Refractories" as part of its corporate name, being its prior registrant. In arriving at this conclusion, the Court
considered that RCP was incorporated on October 13, 1976 and since then continuously used the corporate name
66
"Refractories Corp. of the Philippines." Meanwhile, IRCP only started using its corporate name "Industrial Refractories
Corp. of the Philippines" when it amended its Articles of Incorporation on August 23, 1985.37

In this case, respondent was incorporated in 1969 as Family Savings Bank and in 1985 as BPI Family Bank. Petitioner, on
the other hand, was incorporated as GSIS Family – Thrift Bank only in 2002,38 or at least seventeen (17) years after
respondent started using its name. Following the precedent in the IRCP case, we rule that respondent has the prior right
over the use of the corporate name.

The second requisite in the Philips Export case likewise obtains on two points: the proposed name is (a) identical or (b)
deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law.

On the first point (a), the words "Family Bank" present in both petitioner and respondent's corporate name satisfy the
requirement that there be identical names in the existing corporate name and the proposed one.

Respondent cannot justify its claim under Section 3 of the Revised Guidelines in the Approval of Corporate and
Partnership Names,39 to wit:

3. The name shall not be identical, misleading or confusingly similar to one already registered by another corporation or
partnership with the Commission or a sole proprietorship registered with the Department of Trade and Industry.

If the proposed name is similar to the name of a registered firm, the proposed name must contain at least one distinctive
word different from the name of the company already registered.

Section 3 states that if there be identical, misleading or confusingly similar name to one already registered by another
corporation or partnership with the SEC, the proposed name must contain at least one distinctive word different from the
name of the company already registered. To show contrast with respondent's corporate name, petitioner used the words
"GSIS" and "thrift." But these are not sufficiently distinct words that differentiate petitioner's corporate name from
respondent's. While "GSIS" is merely an acronym of the proper name by which petitioner is identified, the word "thrift" is
simply a classification of the type of bank that petitioner is. Even if the classification of the bank as "thrift" is appended to
petitioner's proposed corporate name, it will not make the said corporate name distinct from respondent's because the
latter is likewise engaged in the banking business.

This Court used the same analysis in Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K. sa Bansang Pilipinas,
Inc. v. Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan.40 In that case, Iglesia ng Dios Kay Cristo Jesus
filed a case before the SEC to compel Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus to change its corporate name,
and to prevent it from using the same or similar name on the ground that the same causes confusion among their members
as well as the public. Ang mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus claimed that it complied with SEC
Memorandum Circular No. 14-2000 by adding not only two, but eight words to their registered name, to wit: "Ang Mga
Kaanib" and "Sa Bansang Pilipinas, Inc.," which effectively distinguished it from Iglesia ng Dios Kay Cristo Jesus. This
Court rejected the argument, thus:

The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly observed
by the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in
the Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid confusion or
difficulty in distinguishing petitioner from respondent. This is especially so, since both petitioner and respondent
corporations are using the same acronym – H.S.K.; not to mention the fact that both are espousing religious beliefs and
operating in the same place. Xxx41

On the second point (b), there is a deceptive and confusing similarity between petitioner's proposed name and respondent's
corporate name, as found by the SEC.42 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.43 And even without such
proof of actual confusion between the two corporate names, it suffices that confusion is probable or likely to occur.44

Petitioner's corporate name is "GSIS Family Bank—A Thrift Bank" and respondent's corporate name is "BPI Family
Bank." The only words that distinguish the two are "BPI," "GSIS," and "Thrift." The first two words are merely the
acronyms of the proper names by which the two corporations identify themselves; and the third word simply describes the
classification of the bank. The overriding consideration in determining whether a person, using ordinary care and
discrimination, might be misled is the circumstance that both petitioner and respondent are engaged in the same business
of banking. "The likelihood of confusion is accentuated in cases where the goods or business of one corporation are the
same or substantially the same to that of another corporation."45

67
Respondent alleged that upon seeing a Comsavings Bank branch with the signage "GSIS Family Bank" displayed at its
premises, some of the respondent’s officers and their clients began asking questions. These include whether GSIS has
acquired Family Bank; whether there is a joint arrangement between GSIS and Family Bank; whether there is a joint
arrangement between BPI and GSIS regarding Family Bank; whether Comsavings Bank has acquired Family Bank; and
whether there is there an arrangement among Comsavings Bank, GSIS, BPI, and Family Bank regarding BPI Family Bank
and GSIS Family Bank.46 The SEC made a finding that "[i]t is not a remote possibility that the public may entertain the
idea that a relationship or arrangement indeed exists between BPI and GSIS due to the use of the term ‘Family Bank’ in
their corporate names."47

Findings of fact of quasi-judicial agencies, like the SEC, are generally accorded respect and even finality by this Court, if
supported by substantial evidence, in recognition of their expertise on the specific matters under their consideration, more
so if the same has been upheld by the appellate court, as in this case.48

Petitioner cannot argue that the word "family" is a generic or descriptive name, which cannot be appropriated exclusively
by respondent. "Family," as used in respondent's corporate name, is not generic. Generic marks are commonly used as the
name or description of a kind of goods, such as "Lite" for beer or "Chocolate Fudge" for chocolate soda drink. Descriptive
marks, on the other hand, convey the characteristics, function, qualities or ingredients of a product to one who has never
seen it or does not know it exists, such as "Arthriticare" for arthritis medication.49

Under the facts of this case, the word "family" cannot be separated from the word "bank."50 In asserting their claims
before the SEC up to the Court of Appeals, both petitioner and respondent refer to the phrase "Family Bank" in their
submissions. This coined phrase, neither being generic nor descriptive, is merely suggestive and may properly be regarded
as arbitrary. Arbitrary marks are "words or phrases used as a mark that appear to be random in the context of its use. They
are generally considered to be easily remembered because of their arbitrariness. They are original and unexpected in
relation to the products they endorse, thus, becoming themselves distinctive."51 Suggestive marks, on the other hand, "are
marks which merely suggest some quality or ingredient of goods. xxx The strength of the suggestive marks lies on how
the public perceives the word in relation to the product or service."52

In Ang v. Teodoro,53 this Court ruled that the words "Ang Tibay" is not a descriptive term within the meaning of the
Trademark Law but rather a fanciful or coined phrase.54 In so ruling, this Court considered the etymology and meaning of
the Tagalog words, "Ang Tibay" to determine whether they relate to the quality or description of the merchandise to which
respondent therein applied them as trademark, thus:

We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they
are a descriptive term, i.e., whether they relate to the quality or description of the merchandise to which respondent has
applied them as a trade-mark. The word "ang" is a definite article meaning "the" in English. It is also used as an adverb, a
contraction of the word "anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we
ordinarily say, "Ang ganda!" Tibay is a root word from which are derived the verb magpatibay (to strengthen); the nouns
pagkamatibay (strength, durability), katibayan (proof, support, strength), katibaytibayan (superior strength); and the
adjectives matibay (strong, durable, lasting), napakatibay (very strong), kasintibay or magkasintibay (as strong as, or of
equal strength). The phrase "Ang Tibay" is an exclamation denoting admiration of strength or durability. For instance, one
who tries hard but fails to break an object exclaims, "Ang tibay!" ("How strong!") It may also be used in a sentence thus,
"Ang tibay ng sapatos mo!" ("How durable your shoes are!") The phrase "ang tibay" is never used adjectively to define or
describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to mean "durable shoes," but "matibay na
sapatos" or "sapatos na matibay."

From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the Trade-Mark Law but
rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. xxx55
(Underscoring supplied).

The word "family" is defined as "a group consisting of parents and children living together in a household" or "a group of
people related to one another by blood or marriage."56 Bank, on the other hand, is defined as "a financial establishment
that invests money deposited by customers, pays it out when requested, makes loans at interest, and exchanges
currency."57 By definition, there can be no expected relation between the word "family" and the banking business of
respondent. Rather, the words suggest that respondent’s bank is where family savings should be deposited. More, as in the
Ang case, the phrase "family bank" cannot be used to define an object.

Petitioner’s argument that the opinion of the BSP and the certificate of registration granted to it by the DTI constitute
authority for it to use "GSIS Family Bank" as corporate name is also untenable.

68
The enforcement of the protection accorded by Section 18 of the Corporation Code to corporate names is lodged
exclusively in the SEC. The jurisdiction of the SEC is not merely confined to the adjudicative functions provided in
Section 5 of the SEC Reorganization Act,58 as amended.59 By express mandate, the SEC has absolute jurisdiction,
supervision and control over all corporations.60 It is the SEC’s duty to prevent confusion in the use of corporate names
not only for the protection of the corporations involved, but more so for the protection of the public. It has authority to de-
register at all times, and under all circumstances corporate names which in its estimation are likely to generate
confusion.61

The SEC62 correctly applied Section 18 of the Corporation Code, and Section 15 of SEC Memorandum Circular No. 14-
2000, pertinent portions of which provide:

In implementing Section 18 of the Corporation Code of the Philippines (BP 69), the following revised guidelines in the
approval of corporate and partnership names are hereby adopted for the information and guidance of all concerned:

xxx

15. Registrant corporations or partnership shall submit a letter undertaking to change their corporate or partnership name
in case another person or firm has acquired a prior right to the use of the said firm name or the same is deceptively or
confusingly similar to one already registered unless this undertaking is already included as one of the provisions of the
articles of incorporation or partnership of the registrant.

The SEC, after finding merit in respondent's claims, can compel petitioner to abide by its commitment "to change its
corporate name in the event that another person, firm or entity has acquired a prior right to use of said name or one similar
to it."63

Clearly, the only determination relevant to this case is that one made by the SEC in the exercise of its express mandate
under the law. The BSP opinion invoked by petitioner even acknowledges that "the issue on whether a proposed name is
identical or deceptively similar to that of any of existing corporation is matter within the official jurisdiction and
competence of the SEC."64

Judicial notice65 may also be taken of the action of the IPO in approving respondent’s registration of the trademark "BPI
Family Bank" and its logo on October 17, 2008. The certificate of registration of a mark shall be prima facie evidence of
the validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use the
same in connection with the goods or services and those that are related thereto specified in the certificate.66

Finally, we uphold the Court of Appeals' finding that the issue of forum shopping was belatedly raised by petitioner and,
thus, cannot anymore be considered at the appellate stage of the proceedings. Petitioner raised the issue of forum shopping
for the first time only on appeal.67 Petitioner argued that the complaints filed by respondent did not contain certifications
against non-forum shopping, in violation of Section 5, Rule 7 of the Rules of Court.68

In S.C. Megaworld Construction and Development Corporation vs. Parada,69 this Court said that objections relating to
non-compliance with the verification and certification of non-forum shopping should be raised in the proceedings below,
and not for the first time on appeal. In that case, S.C. Megaworld argued that the complaint for collection of sum of money
should have been dismissed outright by the trial court on account of an invalid nonforum shopping certification. It alleged
that the Special Power of Attorney granted to Parada did not specifically include an authority for the latter to sign the
verification and certification of non-forum shopping, thus rendering the complaint defective for violation of Sections 4
and 5 of Rule 7 of the Rules of Court. On motion for reconsideration of the decision of the Court of Appeals, petitioner
raised for the first time, the issue of forum shopping. The Court ruled against S.C. Megaworld, thus:

It is well-settled that no question will be entertained on appeal unless it has been raised in the proceedings below. Points
of law, theories, issues and arguments not brought to the attention of the lower court, administrative agency or quasi-
judicial body, need not be considered by a reviewing court, as they cannot be raised for the first time at that late stage.
Basic considerations of fairness and due process impel this rule. Any issue raised for the first time on appeal is barred by
estoppel.70

In this case, the fact that respondent filed a case before the DTI was made known to petitioner71 long before the SEC
rendered its decision. Yet, despite its knowledge, petitioner failed to question the alleged forum shopping before the SEC.
The exceptions to the general rule that forum shopping should be raised in the earliest opportunity, as explained in the
cited case of Young v. Keng Seng,72 do not obtain in this case.

69
WHEREFORE, the petition is DENIED. The decision of the Court of Appeals dated March 29, 2006 is hereby
AFFIRMED.

SO ORDERED.

FIRST DIVISION

[G.R. No. 137592. December 12, 2001.]

ANG MGA KAANIB SA IGLESIA NG DIOS KAY KRISTO HESUS, H.S.K. SA BANSANG PILIPINAS, INC.,
Petitioner, v. IGLESIA NG DIOS KAY CRISTO JESUS, HALIGI AT SUHAY NG KATOTOHANAN, Respondent.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review assailing the Decision dated October 7, 1997 1 and the Resolution dated February 16, 1999 2
of the Court of Appeals in CA-G.R. SP No. 40933, which affirmed the Decision of the Securities and Exchange and
Commission (SEC) in SEC-AC No. 539. 3

Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (Church of God in Christ Jesus, the Pillar
and Ground of Truth), 4 is a non-stock religious society or corporation registered in 1936. Sometime in 1976, one Eliseo
Soriano and several other members of respondent corporation disassociated themselves from the latter and succeeded in
registering on March 30, 1977 a new non-stock religious society or corporation, named Iglesia ng Dios Kay Kristo Hesus,
Haligi at Saligan ng Katotohanan.chanrob1es virtua1 1aw 1ibrary

On July 16, 1979, respondent corporation filed with the SEC a petition to compel the Iglesia ng Dios Kay Kristo Hesus,
Haligi at Saligan ng Katotohanan to change its corporate name, which petition was docketed as SEC Case No. 1774. On
May 4, 1988, the SEC rendered judgment in favor of respondent, ordering the Iglesia ng Dios Kay Kristo Hesus, Haligi at
Saligan ng Katotohanan to change its corporate name to another name that is not similar or identical to any name already
used by a corporation, partnership or association registered with the Commission. 5 No appeal was taken from said
decision.

It appears that during the pendency of SEC Case No. 1774, Soriano, Et Al., caused the registration on April 25, 1980 of
petitioner corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa Bansang Pilipinas. The acronym
"H.S.K." stands for Haligi at Saligan ng Katotohanan. 6

On March 2, 1994, respondent corporation filed before the SEC a petition, docketed as SEC Case No. 03-94-4704,
praying that petitioner be compelled to change its corporate name and be barred from using the same or similar name on
the ground that the same causes confusion among their members as well as the public.

Petitioner filed a motion to dismiss on the ground of lack of cause of action. The motion to dismiss was denied.
Thereafter, for failure to file an answer, petitioner was declared in default and respondent was allowed to present its
evidence ex parte.

On November 20, 1995, the SEC rendered a decision ordering petitioner to change its corporate name. The dispositive
portion thereof reads:chanrob1es virtual 1aw library

PREMISES CONSIDERED, judgment is hereby rendered in favor of the petitioner (respondent herein).

Respondent Mga Kaanib sa Iglesia ng Dios Kay Kristo Jesus (sic), H.S.K. sa Bansang Pilipinas (petitioner herein) is
hereby MANDATED to change its corporate name to another not deceptively similar or identical to the same already used
by the Petitioner, any corporation, association, and/or partnership presently registered with the Commission.

Let a copy of this Decision be furnished the Records Division and the Corporate and Legal Department [CLD] of this
Commission for their records, reference and/or for whatever requisite action, if any, to be undertaken at their end.

SO ORDERED. 7

70
Petitioner appealed to the SEC En Banc, where its appeal was docketed as SEC-AC No. 539. In a decision dated March 4,
1996, the SEC En Banc affirmed the above decision, upon a finding that petitioner’s corporate name was identical or
confusingly or deceptively similar to that of respondent’s corporate name. 8

Petitioner filed a petition for review with the Court of Appeals. On October 7, 1997, the Court of Appeals rendered the
assailed decision affirming the decision of the SEC En Banc. Petitioner’s motion for reconsideration was denied by the
Court of Appeals on February 16, 1992.

Hence, the instant petition for review, raising the following assignment of errors:chanrob1es virtua1 1aw 1ibrary

I
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER HAS NOT BEEN
DEPRIVED OF ITS RIGHT TO PROCEDURAL DUE PROCESS, THE HONORABLE COURT OF APPEALS
DISREGARDED THE JURISPRUDENCE APPLICABLE TO THE CASE AT BAR AND INSTEAD RELIED ON
TOTALLY INAPPLICABLE JURISPRUDENCE.

II
THE HONORABLE COURT OF APPEALS ERRED IN ITS INTERPRETATION OF THE CIVIL CODE PROVISIONS
ON EXTINCTIVE PRESCRIPTION, THEREBY RESULTING IN ITS FAILURE TO FIND THAT THE
RESPONDENT’S RIGHT OF ACTION TO INSTITUTE THE SEC CASE HAS SINCE PRESCRIBED PRIOR TO ITS
INSTITUTION.

III
THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER AND PROPERLY APPLY THE EXCEPTIONS
ESTABLISHED BY JURISPRUDENCE IN THE APPLICATION OF SECTION 18 OF THE CORPORATION CODE
TO THE INSTANT CASE.

IV
THE HONORABLE COURT OF APPEALS FAILED TO PROPERLY APPRECIATE THE SCOPE OF THE
CONSTITUTIONAL GUARANTEE ON RELIGIOUS FREEDOM, THEREBY FAILING TO APPLY THE SAME TO
PROTECT PETITIONER’S RIGHTS. 9

Invoking the case of Legarda v. Court of Appeals, 10 petitioner insists that the decision of the Court of Appeals and the
SEC should be set aside because the negligence of its former counsel of record, Atty. Joaquin Garaygay, in failing to file
an answer after its motion to dismiss was denied by the SEC, deprived them of their day in court.

The contention is without merit. As a general rule, the negligence of counsel binds the client. This is based on the rule that
any act performed by a lawyer within the scope of his general or implied authority is regarded as an act of his client. 11
An exception to the foregoing is where the reckless or gross negligence of the counsel deprives the client of due process
of law. 12 Said exception, however, does not obtain in the present case.

In Legarda v. Court of Appeals, the effort of the counsel in defending his client’s cause consisted in filing a motion for
extension of time to file answer before the trial court. When his client was declared in default, the counsel did nothing and
allowed the judgment by default to become final and executory. Upon the insistence of his client, the counsel filed a
petition to annul the judgment with the Court of Appeals, which denied the petition, and again the counsel allowed the
denial to become final and executory. This Court found the counsel grossly negligent and consequently declared as null
and void the decision adverse to his client.chanrob1es virtua1 1aw 1ibrary

The factual antecedents of the case at bar are different. Atty. Garaygay filed before the SEC a motion to dismiss on the
ground of lack of cause of action. When his client was declared in default for failure to file an answer, Atty. Garaygay
moved for reconsideration and lifting of the order of default. 13 After judgment by default was rendered against petitioner
corporation, Atty. Garaygay filed a motion for extension of time to appeal/motion for reconsideration, and thereafter a
motion to set aside the decision. 14

Evidently, Atty. Garaygay was only guilty of simple negligence. Although he failed to file an answer that led to the
rendition of a judgment by default against petitioner, his efforts were palpably real, albeit bereft of zeal. 15

Likewise, the issue of prescription, which petitioner raised for the first time on appeal to the Court of Appeals, is
untenable. Its failure to raise prescription before the SEC can only be construed as a waiver of that defense. 16 At any rate,
the SEC has the authority to de-register at all times and under all circumstances corporate names which in its estimation

71
are likely to spawn confusion. It is the duty of the SEC to prevent confusion in the use of corporate names not only for the
protection of the corporations involved but more so for the protection of the public. 17

Section 18 of the Corporation Code provides:chanrob1es virtual 1aw library

Corporate Name. — No corporate name may be allowed by the Securities and 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 is 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.

Corollary thereto, the pertinent portion of the SEC Guidelines on Corporate Names states:chanrob1es virtual 1aw library

(d) If the proposed name contains a word similar to a word already used as part of the firm name or style of a registered
company, the proposed name must contain two other words different from the name of the company already registered;

Parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by
another corporation, whether a business or a nonprofit organization, if misleading or likely to injure in the exercise of its
corporate functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction
against the new corporation to prevent the use of the name. 18

Petitioner claims that it complied with the aforecited SEC guideline by adding not only two but eight words to their
registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which, petitioner argues, effectively
distinguished it from respondent corporation.

The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner’s name are, as correctly observed
by the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in
the Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid confusion or
difficulty in distinguishing petitioner from Respondent. This is especially so, since both petitioner and respondent
corporations are using the same acronym — H.S.K.; 19 not to mention the fact that both are espousing religious beliefs
and operating in the same place. Parenthetically, it is well to mention that the acronym H.S.K. used by petitioner stands
for "Haligi at Saligan ng Katotohanan." 20

Then, too, the records reveal that in holding out their corporate name to the public, petitioner highlights the dominant
words "IGLESIA NG DIOS KAY KRISTO HESUS, HALIGI AT SALIGAN NG KATOTOHANAN," which is strikingly
similar to respondent’s corporate name, thus making it even more evident that the additional words "Ang Mga Kaanib"
and "Sa Bansang Pilipinas, Inc.", are merely descriptive of and pertaining to the members of respondent corporation. 21

Significantly, the only difference between the corporate names of petitioner and respondent are the words SALIGAN and
SUHAY. These words are synonymous — both mean ground, foundation or support. Hence, this case is on all fours with
Universal Mills Corporation v. Universal Textile Mills, Inc., 22 where the Court ruled that the corporate names Universal
Mills Corporation and Universal Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable
care and observation" confusion may arise.chanrob1es virtua1 1aw 1ibrary

Furthermore, the wholesale appropriation by petitioner of respondent’s corporate name cannot find justification under the
generic word rule. We agree with the Court of Appeals’ conclusion that a contrary ruling would encourage other
corporations to adopt verbatim and register an existing and protected corporate name, to the detriment of the public.

The fact that there are other non-stock religious societies or corporations using the names Church of the Living God, Inc.,
Church of God Jesus Christ the Son of God the Head, Church of God in Christ & By the Holy Spirit, and other similar
names, is of no consequence. It does not authorize the use by petitioner of the essential and distinguishing feature of
respondent’s registered and protected corporate name. 23

We need not belabor the fourth issue raised by petitioner. Certainly, ordering petitioner to change its corporate name is not
a violation of its constitutionally guaranteed right to religious freedom. In so doing, the SEC merely compelled petitioner
to abide by one of the SEC guidelines in the approval of partnership and corporate names, namely its undertaking to
manifest its willingness to change its corporate name in the event another person, firm, or entity has acquired a prior right
to the use of the said firm name or one deceptively or confusingly similar to it.

WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED. The appealed decision of the
Court of Appeals is AFFIRMED in toto.chanrob1es virtua1 1aw 1ibrary

72
SO ORDERED.

FIRST DIVISION

G.R. No. 157900, July 22, 2013

ZUELLIG FREIGHT AND CARGO SYSTEMS, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION
AND RONALDO V. SAN MIGUEL, Respondents.

DECISION
BERSAMIN, J.:

The mere change in the corporate name is not considered under the law as the creation of a new corporation; hence, the
renamed corporation remains liable for the illegal dismissal of its employee separated under that guise.

The Case

Petitioner employer appeals the decision promulgated on November 6, 2002,1 whereby the Court of Appeals (CA)
dismissed its petition for certiorari and upheld the adverse decision of the National Labor Relations Commission (NLRC)
finding respondent Ronaldo V. San Miguel to have been illegally dismissed.

Antecedents

San Miguel brought a complaint for unfair labor practice, illegal dismissal, non-payment of salaries and moral damages
against petitioner, formerly known as Zeta Brokerage Corporation (Zeta).2 He alleged that he had been a checker/customs
representative of Zeta since December 16, 1985; that in January 1994, he and other employees of Zeta were informed that
Zeta would cease operations, and that all affected employees, including him, would be separated; that by letter dated
February 28, 1994, Zeta informed him of his termination effective March 31, 1994; that he reluctantly accepted his
separation pay subject to the standing offer to be hired to his former position by petitioner; and that on April 15, 1994, he
was summarily terminated, without any valid cause and due process.

San Miguel contended that the amendments of the articles of incorporation of Zeta were for the purpose of changing the
corporate name, broadening the primary functions, and increasing the capital stock; and that such amendments could not
mean that Zeta had been thereby dissolved.3

On its part, petitioner countered that San Miguel�s termination from Zeta had been for a cause authorized by the Labor
Code; that its non-acceptance of him had not been by any means irregular or discriminatory; that its predecessor-in-
interest had complied with the requirements for termination due to the cessation of business operations; that it had no
obligation to employ San Miguel in the exercise of its valid management prerogative; that all employees had been given
sufficient time to make their decision whether to accept its offer of employment or not, but he had not responded to its
offer within the time set; that because of his failure to meet the deadline, the offer had expired; that he had nonetheless
been hired on a temporary basis; and that when it decided to hire another employee instead of San Miguel, such decision
was not arbitrary because of seniority considerations.4

Decision of the Labor Arbiter

On November 15, 1999, Labor Arbiter Francisco A. Robles rendered a decision holding that San Miguel had been illegally
dismissed,5 to wit:cralavvonlinelawlibrary

Contrary to respondents� claim that Zeta ceased operations and closed its business, we believe that there was merely a
change of business name and primary purpose and upgrading of stocks of the corporation. Zuellig and Zeta are therefore
legally the same person and entity and this was admitted by Zuellig�s counsel in its letter to the VAT Department of the
Bureau of Internal Revenue on 08 June 1994 (Reply, Annex �A�). As such, the termination of complainant�s
services allegedly due to cessation of business operations of Zeta is deemed illegal. Notwithstanding his receipt of
separation benefits from respondents, complainant is not estopped from questioning the legality of his dismissal.6

xxx x

WHEREFORE, in view of the foregoing, complainant is found to have been illegally dismissed. Respondent Zuellig
Freight and Cargo Systems, Inc. is hereby ordered to pay complainant his backwages from April 1, 1994 up to November
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15, 1999, in the amount of THREE HUNDRED TWENTY FOUR THOUSAND SIX HUNDRED FIFTEEN PESOS
(P324,615.00).

The same respondent is ordered to pay the complainant Ronaldo San Miguel attorney�s fees equivalent to ten percent
(10%) of the total award.

All other claims are dismissed.

SO ORDERED.7

Decision of the NLRC

Petitioner appealed, but the NLRC issued a resolution on April 4, 2001,8 affirming the decision of the Labor Arbiter.
The NLRC later on denied petitioner�s motion for reconsideration via its resolution dated June 15, 2001.9

Decision of the CA

Petitioner then filed a petition for certiorari in the CA, imputing to the NLRC grave abuse of discretion amounting to lack
or excess of jurisdiction, as follows:cralavvonlinelawlibrary

In failing to consider the circumstances attendant to the cessation of business of Zeta;chanroblesvirtualawlibrary

In failing to consider that San Miguel failed to meet the deadline Zeta fixed for its employees to accept the offer of
petitioner for re-employment;chanroblesvirtualawlibrary
In failing to consider that San Miguel�s employment with petitioner from April 1 to 15, 1994 could in no way be
interpreted as a continuation of employment with Zeta;chanroblesvirtualawlibrary
In admitting in evidence the letter dated January 21, 1994 of petitioner�s counsel to the Bureau of Internal Revenue;
and
In awarding attorney�s fees to San Miguel based on Article 2208 of the Civil Code and Article 111 of the Labor Code.

On November 6, 2002, the CA promulgated its assailed decision dismissing the petition for
certiorari,10viz:cralavvonlinelawlibrary

A careful perusal of the records shows that the closure of business operation was not validly made. Consider the
Certificate of Filing of the Amended Articles of Incorporation which clearly shows that petitioner Zuellig is actually the
former Zeta as per amendment dated January 21, 1994. The same observation can be deduced with respect to the
Certificate of Filing of Amended By-Laws dated May 10, 1994. As aptly pointed out by private respondent San Miguel,
the amendment of the articles of incorporation merely changed its corporate name, broadened its primary purpose and
increased its authorized capital stocks. The requirements contemplated in Article 283 were not satisfied in this case. Good
faith was not established by mere registration with the Securities and Exchange Commission (SEC) of the Amended
Articles of Incorporation and By-Laws. The factual milleu of the case, considered in its totality, shows that there was no
closure to speak of. The termination of services allegedly due to cessation of business operations of Zeta was illegal.
Notwithstanding private respondent San Miguel�s receipt of separation benefits from petitioner Zuellig, the former is
not estopped from questioning the legality of his dismissal.

Petitioner Zuellig�s allegation that the five employees who refused to receive the termination letters were verbally
informed that they had until 6:00 p.m. of March 1, 1994 to receive the termination letters and sign the employment
contracts, otherwise the former would be constrained to withdraw its offer of employment and seek for replacements in
order to ensure the smooth operations of the new company from its opening date, is of no moment in view of the
foregoing circumstances. There being no valid closure of business operations, the dismissal of private respondent San
Miguel on alleged authorized cause of cessation of business pursuant to Article 283 of the Labor Code, was utterly illegal.
Despite verbal notice that the employees had until 6:00 p.m. of March 1, 1994 to receive the termination letters and sign
the employment contracts, the dismissal was still illegal for the said condition is null and void. In point of facts and law,
private respondent San Miguel remained an employee of petitioner Zuellig. If at all, the alleged closure of business
operations merely operates to suspend employment relation since it is not permanent in character.

Where there is no showing of a clear, valid, and legal cause for the termination of employment, the law considers the
matter a case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid or
authorized cause.

Findings of facts of the NLRC, particularly when both the NLRC and Labor Arbiter are in agreement, are deemed binding
and conclusive upon the Supreme Court.
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As regards the second and last argument advanced by petitioner Zuellig that private respondent San Miguel is not entitled
to attorney�s fees, this Court finds no reason to disturb the ruling of the public respondent NLRC. Petitioner Zuellig
maintains that the factual backdraft (sic) of this petition does not call for the application of Article 2208 of the Civil Code
and Article 111 of the Labor Code as private respondent�s wages were not withheld. On the other hand, public
respondent NLRC argues that paragraphs 2 and 3, Article 2208 of the Civil Code and paragraph (a), Article 111 of the
Labor Code justify the award of attorney�s fees. NLRC was saying to the effect that by petitioner Zuellig�s act of
illegally dismissing private respondent San Miguel, the latter was compelled to litigate and thus incurred expenses to
protect his interest. In the same passion, private respondent San Miguel contends that petitioner Zuellig acted in gross and
evident bad faith in refusing to satisfy his plainly valid, just and demandable claim.

After careful and judicious evaluation of the arguments advanced to support the propriety or impropriety of the award of
attorney�s fees to private respondent San Miguel, this Court finds the resolutions of public respondent NLRC supported
by laws and jurisprudence. It does not need much imagination to see that by reason of petitioner Zuellig�s feigned
closure of business operations, private respondent San Miguel incurred expenses to protect his rights and interests.
Therefore, the award of attorney�s fees is in order.

WHEREFORE, in view of the foregoing, the resolutions dated April 4, 2001 and June 15, 2001 of the National Labor
Relations Commission affirming the November 15, 1999 decision of the Labor Arbiter in NLRC NCR 05-03639-94 (CA
No. 022861-00) are hereby AFFIRMED and the instant petition for certiorari is hereby DENIED and ordered
DISMISSED.

SO ORDERED.
Hence, petitioner appeals.

Issues

Petitioner asserts that the CA erred in holding that the NLRC did not act with grave abuse of discretion in ruling that the
closure of the business operation of Zeta had not been bona fide, thereby resulting in the illegal dismissal of San Miguel;
and in holding that the NLRC did not act with grave abuse of discretion in ordering it to pay San Miguel attorney�s
fees.11

In his comment,12 San Miguel counters that the CA correctly found no grave abuse of discretion on the part of the NLRC
because the ample evidence on record showed that he had been illegally terminated; that such finding accorded with
applicable laws and jurisprudence; and that he was entitled to back wages and attorney�s fees.

In its reply,13 petitioner reiterates that the cessation of Zeta�s business, which resulted in the severance of San Miguel
from his employment, was valid; that the CA erred in upholding the NLRC�s finding that San Miguel had been illegally
terminated; that his acknowledgment of the validity of his separation from Zeta by signing a quitclaim and waiver
estopped him from claiming that it had subsequently employed him; and that the award of attorney�s fees had no basis
in fact and in law.

Ruling

The petition for review on certiorari is denied for its lack of merit.

First of all, the outcome reached by the CA that the NLRC did not commit any grave abuse of discretion was borne out by
the records of the case. We cannot undo such finding without petitioner making a clear demonstration to the Court now
that the CA gravely erred in passing upon the petition for certiorari of petitioner.

Indeed, in a special civil action for certiorari brought against a court or quasi-judicial body with jurisdiction over a case,
petitioner carries the burden of proving that the court or quasi-judicial body committed not a merely reversible error but a
grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the impugned order.14 Showing mere
abuse of discretion is not enough, for it is necessary to demonstrate that the abuse of discretion was grave. Grave abuse of
discretion means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason
of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused
to perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board exercising
judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction.15
Under the circumstances, the CA committed no abuse of discretion, least of all grave, because its justifications were
supported by the records and by the applicable laws and jurisprudence.

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Secondly, it is worthy to point out that the Labor Arbiter, the NLRC, and the CA were united in concluding that the
cessation of business by Zeta was not a bona fide closure to be regarded as a valid ground for the termination of
employment of San Miguel within the ambit of Article 283 of the Labor Code. The provision pertinently
reads:cralavvonlinelawlibrary

Article 283. Closure of establishment and reduction of personnel. � The employer may also terminate the employment
of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least
one (1) month before the intended date thereof. x x x.

The unanimous conclusions of the CA, the NLRC and the Labor Arbiter, being in accord with law, were not tainted with
any abuse of discretion, least of all grave, on the part of the NLRC. Verily, the amendments of the articles of incorporation
of Zeta to change the corporate name to Zuellig Freight and Cargo Systems, Inc. did not produce the dissolution of the
former as a corporation. For sure, the Corporation Code defined and delineated the different modes of dissolving a
corporation, and amendment of the articles of incorporation was not one of such modes. The effect of the change of name
was not a change of the corporate being, for, as well stated in Philippine First Insurance Co., Inc. v. Hartigan:16 �The
changing of the name of a corporation is no more the creation of a corporation than the changing of the name of a natural
person is begetting of a natural person. The act, in both cases, would seem to be what the language which we use to
designate it imports � a change of name, and not a change of being.�

The consequences, legal and otherwise, of the change of name were similarly dealt with in P.C. Javier & Sons, Inc. v.
Court of Appeals,17 with the Court holding thusly:cralavvonlinelawlibrary

From the foregoing documents, it cannot be denied that petitioner corporation was aware of First Summa Savings and
Mortgage Bank�s change of corporate name to PAIC Savings and Mortgage Bank, Inc. Knowing fully well of such
change, petitioner corporation has no valid reason not to pay because the IGLF loans were applied with and obtained from
First Summa Savings and Mortgage Bank. First Summa Savings and Mortgage Bank and PAIC Savings and Mortgage
Bank, Inc., are one and the same bank to which petitioner corporation is indebted. A change in the corporate name does
not make a new corporation, whether effected by a special act or under a general law. It has no effect on the identity of the
corporation, or on its property, rights, or liabilities. 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. (Bold underscoring supplied for emphasis)

In short, Zeta and petitioner remained one and the same corporation. The change of name did not give petitioner the
license to terminate employees of Zeta like San Miguel without just or authorized cause. The situation was not similar to
that of an enterprise buying the business of another company where the purchasing company had no obligation to rehire
terminated employees of the latter.18 Petitioner, despite its new name, was the mere continuation of Zeta�s corporate
being, and still held the obligation to honor all of Zeta�s obligations, one of which was to respect San Miguel�s
security of tenure. The dismissal of San Miguel from employment on the pretext that petitioner, being a different
corporation, had no obligation to accept him as its employee, was illegal and ineffectual.

And, lastly, the CA rightfully upheld the NLRC�s affirmance of the grant of attorney�s fees to San Miguel. Thereby,
the NLRC did not commit any grave abuse of its discretion, considering that San Miguel had been compelled to litigate
and to incur expenses to protect his rights and interest. In Producers Bank of the Philippines v. Court of Appeals,19 the
Court ruled that attorney�s fees could be awarded to a party whom an unjustified act of the other party compelled to
litigate or to incur expenses to protect his interest. It was plain that petitioner�s refusal to reinstate San Miguel with
backwages and other benefits to which he had been legally entitled was unjustified, thereby entitling him to recover
attorney�s fees.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on November 6, 2002; and
ORDERS petitioner to pay the costs of suit.

SO ORDERED.

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