Case Summary (G.R. No. 187917)
Formation and Initial Business Operations
On May 26, 1947, petitioners and respondents executed articles of incorporation for the Far Eastern Lumber and Commercial Co., Inc., purporting to organize a general lumber business and contracting enterprise. The treasurer’s affidavit attached to the articles declared 23,428 fully paid shares, listing transferred properties. The incorporators then adopted by-laws and elected officers, and the entity commenced business, although no certificate of incorporation had yet been issued.
Filing and Litigation Before CFI Leyte
The articles of incorporation were submitted to the Securities and Exchange Commissioner on December 2, 1947. While the application was pending, Fred Brown, Emma Brown, Hipolita D. Chapman, and Ceferino S. Abella brought Civil Case No. 381 before the Court of First Instance of Leyte on March 22, 1948. They alleged that the Far Eastern Lumber and Commercial Co. operated as an unregistered partnership and sought its dissolution due to dissension among members, alleged mismanagement, fraud, and financial losses. Petitioners moved to dismiss for lack of jurisdiction and insufficiency of cause of action.
CFI’s Dissolution Order and Receiver Appointment
After hearing both sides, Judge Piccio decreed the company’s dissolution. At plaintiffs’ request, he appointed Pedro A. Capuciong as receiver of the corporation’s assets, conditioned on a ₱20,000 bond. Petitioners offered a counter-bond to secure the receiver’s discharge, but the trial court refused the offer, prompting the special civil action in the Supreme Court.
Estoppel Argument and Rejection
Petitioners contended that Fred and Emma Brown, having signed the articles, should be estopped from denying corporate existence. The Court rejected this argument, noting that under Section 11 of the Corporation Law a corporation’s legal personality arises only upon issuance of its certificate of incorporation. No party was misled to their prejudice, so estoppel did not apply.
Applicability of Section 19 on De Facto Corporations
Relying on Section 19 of the Corporation Law, petitioners argued that a court may not entertain collateral attacks on a de facto corporation’s status outside a quo warranto proceeding. The Supreme Court held that Section 19 applies only to entities claiming in good faith to be corporations under the Act. Here, the Far Eastern Lumber and Commercial Co. lacked any certificate of incorporation and thus could not claim corporate status in good faith, rendering Section 19 inapplicable.
Jurisdiction in Private Dissolution Suits
The Court emphasized that even a de jure corporation may be dissolved in a private suit among shareholders, without invoking quo warranto or government intervention. A p
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Facts
- On May 26, 1947, C. Arnold Hall and Bradley P. Hall (petitioners) and Fred Brown, Emma Brown, Hipolita D. Chapman, and Ceferino S. Abella (respondents) signed and acknowledged in Leyte the articles of incorporation of the Far Eastern Lumber and Commercial Co., Inc., for general lumber business and contracting.
- An affidavit of the treasurer, attached to the articles, declared that 23,428 shares had been subscribed and fully paid, with certain properties transferred to the corporation, listed in an appended schedule.
- Immediately after execution, the incorporators adopted by-laws and elected officers, and on December 2, 1947, filed the articles with the Securities and Exchange Commission for issuance of a certificate of incorporation.
- On March 22, 1948, while the incorporation application was pending, Fred Brown et al. filed Civil Case No. 381 in the CFI of Leyte, alleging the Far Eastern Lumber and Commercial Co. was an unregistered partnership, seeking dissolution due to dissension, mismanagement, fraud, and financial losses.
- The petitioners moved to dismiss for lack of jurisdiction and insufficiency of cause of action.
- After hearing, Judge Edmundo S. Piccio ordered dissolution of the company and, at plaintiffs’ request, appointed Pedro A. Capuciong as receiver upon a ₱20,000 bond.
- Petitioners offered a counter-bond to discharge the receiver; the judge refused and continued the receivership, prompting thi