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Case digest · De facto corporation
Seventh Day Adventist Conference Church of Southern Philippines, Inc. vs. Northeastern Mindanao Mission of Seventh Day Adventist, Inc.
In 1959, a couple donated land to a local church that was never incorporated. Twenty-one years later, they sold the same land to another church body.
Facts
April 21, 1959
Spouses Felix Cosio and Felisa Cuysona donated a parcel of land in Bayugan, Agusan del Sur, “for Church Site purposes only” to the South Philippine Union Mission of Seventh Day Adventist Church of Bayugan Esperanza, Agusan (SPUM-SDA Bayugan). Liberato Rayos, a church elder, allegedly accepted the donation.
February 28, 1980
Twenty-one years later, the spouses sold the same land to the Seventh Day Adventist Church of Northeastern Mindanao Mission (SDA-NEMM), and TCT No. 4468 was issued in its name. Cosio later testified that he had not intended to sell, because he had already donated the lot.
September 28, 1987
The petitioners, claiming to be the successors-in-interest of the 1959 donee, sued for cancellation of title and reconveyance.
The admission
The petitioners admitted that at the time of the donation they were not registered with the SEC and did not even attempt to organize to comply with legal requirements.
November 20, 1992
The trial court upheld the sale. The Court of Appeals affirmed, but deleted the awards of moral damages and attorney’s fees.
Issue
Was the 1959 donation to a local church that had never incorporated valid, so that its claimed successors could recover the land from the later buyer?
Ruling
No. The donation was void because the donee had no juridical personality when it was made. The Court denied the petition, which left the buyer’s title in place.
When the donation was made, SPUM-SDA Bayugan had no juridical personality, and it was not a de facto corporation. The old Corporation Law (Act No. 1459) existed, but there was no proof of any attempt to incorporate, and the petitioners admitted that they were not registered and did not even attempt to organize. Corporate existence begins only when a certificate of incorporation is issued, and the de facto doctrine exists to protect the public, not the defective organization. A donation cannot be made to, or accepted by, an entity that does not yet exist, and the petitioners “obviously could not have claimed succession to an entity that never came to exist.” The Court agreed with the Court of Appeals that the alleged donation was void. It decided the case on de facto status and the capacity to accept; it did not discuss corporation by estoppel.
“The donation could not have been made in favor of an entity yet inexistent at the time it was made. Nor could it have been accepted as there was yet no one to accept it.”
Doctrine
The Court, citing Villanueva’s Philippine Corporate Law, listed the requisites of a de facto corporation: “(a) the existence of a valid law under which it may be incorporated; (b) an attempt in good faith to incorporate; and (c) assumption of corporate powers.” It added that “The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the existence of a de facto corporation” (citing Hall vs. Piccio, G.R. No. L-2598, June 29, 1950). The de facto corporation provision is now Sec. 19 of the Revised Corporation Code.
Compare: the same question, another ending
In Missionary Sisters of Our Lady of Fatima vs. Alzona, G.R. No. 224307, August 6, 2018, the donee was not a de facto corporation either, yet the donation stood through corporation by estoppel and ratification: “Such that a person who has assumed an obligation in favor of a non-existent corporation, having transacted with the latter as if it was duly incorporated, is prevented from denying the existence of the latter to avoid the enforcement of the contract.”
Bar tip
For a de facto corporation, check the three requisites, and remember that the certificate of incorporation is essential. A group that never even attempted to incorporate could not receive a donation as a corporation. Keep this apart from corporation by estoppel, which this decision did not discuss.
Hear it explained
Corporation by Estoppel, Podcast Ep. 3, at 11:59
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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.