Facts:

The case involves Cagayan Fishing Development Co., Inc. as the plaintiff and appellant, and Teodoro Sandiko as the defendant and appellee. The events leading to the case began with Manuel Tabora, the registered owner of four parcels of land in Linao, Aparri, Cagayan, who executed a first mortgage on these lands in favor of the Philippine National Bank on August 14, 1929, to secure a loan of P8,000. Subsequently, in April 1930, he executed a second mortgage for another loan of P7,000 and a third mortgage for P2,900 in favor of Severina Buzon. These mortgages were duly registered. On May 31, 1930, Tabora entered into a public document titled "Escritura de Traspaso de Propiedad Inmueble," selling the four parcels to Cagayan Fishing Development Co., Inc., which was still in the process of incorporation, for the nominal sum of P1, subject to the existing mortgages. The condition of the sale stipulated that the title would not be transferred to the company until it fully ...

Facts:

Ownership, Mortgages, and Title

• Manuel Tabora was the registered owner of four parcels of land in the barrio of Linao, town of Aparri, Province of Cagayan, as evidenced by Transfer Certificate of Title No. 217.
• To secure loans, Tabora executed three separate mortgages on these lands:
• A first mortgage in favor of the Philippine National Bank for P8,000 (executed on August 14, 1929).
• A second mortgage in favor of the same bank for P7,000 (executed in April 1930).
• A third mortgage in favor of Severina Buzon for P2,900 (executed on April 16, 1930).
• All mortgages were duly registered, with annotations on the back of the title.

The Transfer to Cagayan Fishing Development Co., Inc.

• On May 31, 1930, Manuel Tabora executed a public document titled "Escritura de Traspaso de Propiedad Inmueble" (Exhibit A), by which he sold the four parcels of land to the plaintiff company for one peso (P1).
• The sale was conditioned upon:
• The land being subject to the existing mortgages.
• The certificate of title not being transferred to the company until the full payment of Tabora’s indebtedness to the Philippine National Bank.
• Notably, the contract identified the buyer as "una sociedad en vias de incrporacion" (a company in the process of incorporation).

Incorporation and Subsequent Transactions

• The plaintiff company filed its articles of incorporation with the Bureau of Commerce and Industry on October 22, 1930 (Exhibit 2), several months after the transfer.
• On October 28, 1931, the board of directors of the company resolved to sell the four parcels of land to Teodoro Sandiko for P42,000 (Exhibit G).
• Thereafter, three key instruments were executed on February 15, 1932:
• Exhibit B: A deed of sale transferring all rights, titles, and interests in the four parcels for P25,300.
• Exhibit C: A promissory note for P25,300 drawn by the defendant in favor of the plaintiff, payable after one year.
• Exhibit D: A deed of mortgage giving the same lands as security for the promissory note.
• The defendant, Teodoro Sandiko, assumed responsibility for the three existing mortgages through these transactions.

Litigation and Procedural History

• The defendant’s failure to honor the promissory note payment led the plaintiff to file an action on January 25, 1934, seeking P25,300 along with legal interest and costs.
• The Court of First Instance of Manila rendered judgment on December 18, 1934, absolving the defendant and awarding costs against the plaintiff.
• A motion for new trial filed by the plaintiff on January 14, 1935, was denied on January 19, 1935.
• The plaintiff appealed to this Court, assigning various errors in the lower court’s decision.

Disputed Validity of the Transactions

• The controversy centers on the validity of the contract (Exhibit A) since it was executed when the plaintiff company was not yet legally incorporated.
• The contract, having been executed before the company acquired a legal existence, was effectively entered into by a non-existent corporate entity.
• The lower court had held that Exhibit B was invalid due to vice in consent and repugnancy to law; although the appellate Court did not agree with that reasoning, it affirmed the judgment on other grounds.
• Additional factual considerations include:
• Manuel Tabora’s actions as both owner and promoter, which resulted in confusion regarding the actual owner of the land.
• The consistent treatment by third parties, such as the Philippine National Bank and the defendant, who regarded Tabora as the owner.
• The fact that the land remained titled in Tabora’s name despite the transaction purportedly transferring ownership.

Issue:

Validity of the Contract of Sale

• Whether the transfer of the land to the Cagayan Fishing Development Co., Inc. via Exhibit A is valid given that it was executed before the company’s legal incorporation.
• Whether the condition stated in the contract (non-transfer of title until debt payment) affects the validity of the transaction.

Juridical Capacity and Corporate Existence

• Whether a non-existent or not-yet-incorporated entity possesses the legal capacity to enter into contracts.
• The implications of promoters acting on behalf of a corporation that had not attained legal existence.

Effect of Ratification Doctrine

• Whether the later incorporation of the company or any subsequent ratification could validate the acts of the promoters.
• The limits of applying the doctrine of ratification when faced with potential fraud or injustice.

Impact on Subsequent Instruments and Transactions

• Whether the invalidity of the initial transfer undermines the validity of subsequent documents (Exhibits B, C, and D) based on that transaction.
• The legal consequences for Teodoro Sandiko, who relied on the apparent ownership based on dealings with Tabora.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)