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Case digest · Corporation by estoppel, applied in the reverse
Missionary Sisters of Our Lady of Fatima vs. Alzona
A benefactor signed a deed donating her house and lot to the Sisters who cared for her. Their SEC certificate of incorporation came two days later.
Facts
May 30, 1989
The Missionary Sisters of Our Lady of Fatima, known as the Peach Sisters of Laguna, were established as a religious and charitable group under the patronage of the Roman Catholic Bishop of San Pablo. Their mission is to care for abandoned and neglected elderly persons.
1996 to 1999
Purificacion Y. Alzona became a benefactor of the Sisters in 1996. In 1997 she learned that she had lung cancer, and she asked Mother Concepcion to care for her at home; Mother Concepcion agreed. In October 1999, Purificacion handed Mother Concepcion a handwritten letter donating her house and lot on F. Mercado Street and a riceland at Banlic to the Sisters.
August 2001
At Purificacion’s request, Mother Concepcion met Atty. Nonato Arcillas. He asked whether the group was registered with the SEC, and she replied that it was not.
August 28 to 31, 2001
The Sisters filed their articles of incorporation and by-laws with the SEC on August 28. Purificacion executed a Deed of Donation Inter Vivos on August 29, and Mother Concepcion accepted it the same day. The SEC issued the certificate of incorporation on August 31, two days after the deed.
September to October 2001
Purificacion’s brother, Amando, filed an adverse claim on September 26, 2001, and the Register of Deeds refused to register the donation. Purificacion died without issue on October 30, 2001.
April 9, 2002
Amando sued to annul the deed, arguing that the Sisters had no juridical personality when the donation was made. After his death, his heirs were substituted.
2013 to 2016
The trial court dismissed the complaint, holding that the Sisters were a de facto corporation (August 14, 2013). The Court of Appeals reversed and declared the donation void (January 7, 2016).
Issue
Is a donation valid when the donee association received its SEC certificate of incorporation only after the deed was signed?
Ruling
Yes. The Court reversed the Court of Appeals and upheld the donation through corporation by estoppel and ratification by conduct, although the Sisters were not a de facto corporation.
The trial court erred in calling the Sisters a de facto corporation: their certificate of incorporation was issued only after the deed was executed. But the case called for corporation by estoppel under Section 21 of the Corporation Code (now Sec. 20 of R.A. No. 11232), applied in the reverse. “In this controversy, Purificacion dealt with the petitioner as if it were a corporation.” She acted with full knowledge of the Sisters’ status, so there was no fraud, and the donation was remuneratory: it rewarded the Sisters’ past services, which supplied the benefit the doctrine looks for. Her heirs, as her privies, are bound as she was. The Court gave the unorganized group juridical personality only “for the sole purpose of upholding the contract or transaction.” On a separate ground, the Court held that “the subsequent act by Purificacion of re-conveying the property in favor of the petitioner is a ratification by conduct of the otherwise defective donation,” and the Sisters, after their incorporation, affirmed Mother Concepcion’s authority to accept it.
“While the doctrine is generally applied to protect the sanctity of dealings with the public, nothing prevents its application in the reverse, in fact the very wording of the law which sets forth the doctrine of corporation by estoppel permits such interpretation.”
Doctrine
“Jurisprudence dictates that the doctrine of corporation by estoppel applies for as long as there is no fraud and when the existence of the association is attacked for causes attendant at the time the contract or dealing sought to be enforced was entered into, and not thereafter” (the Court citing Asia Banking Corporation vs. Standard Products Co., Inc., G.R. No. 22106, September 11, 1924). The doctrine is now Sec. 20 of the Revised Corporation Code (formerly Sec. 21, B.P. Blg. 68).
Compare: no attempt to incorporate
In Seventh Day Adventist Conference Church of Southern Philippines, Inc. vs. Northeastern Mindanao Mission of Seventh Day Adventist, Inc., G.R. No. 150416, July 21, 2006, a 1959 donation to a local church was void. That decision turned on de facto status and the capacity to accept, not on estoppel: “While there existed the old Corporation Law (Act 1459), a law under which SPUM-SDA Bayugan could have been organized, there is no proof that there was an attempt to incorporate at that time.”
Bar tip
Corporation by estoppel can work in the reverse: a person who knowingly dealt with an unincorporated group as a corporation, and received a benefit, cannot later deny its existence to undo the transaction. But do not call the group a de facto corporation. Without the certificate of incorporation it was not one, and the Court also rested the result on ratification.
Hear it explained
Corporation by Estoppel, Podcast Ep. 3, at 9:28
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This digest is general legal information for education, not legal advice, and it is not a substitute for reading the decision. Quoted passages are taken word for word from the full text.