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Section
21 of the Corporation Code of the Philippines provides
that all persons who assume to act as a corporation
knowing it to be without authority to do so shall be
liable as general partners for all debts, liabilities
and damages incurred or arising as a result thereof
provided however, that when any such ostensible
corporation is sued on any transaction entered by it as
a corporation or on any tort committed by it as such, it
shall not be allowed to use as a defense its lack of
corporate personality. One who assumes an obligation to
an ostensible corporation as such, cannot resist
performance thereof on the ground that there was in fact
no corporation.
Thus,
even if the ostensible corporate entity is proven to be
legally nonexistent, a party may be estopped from
denying its corporate existence. The reason behind this
doctrine is obvious, an unincorporated association has
no personality and would be incompetent to act and
appropriate for itself the power and attributes of a
corporation as provided by law; it cannot create agents
or confer authority on another to act in its behalf
thus, those who act or purport to act as its
representatives or agents do so without authority and at
their own risk. And as it is an elementary principle of
law that a person who acts as an agent without authority
or without a principal is himself regarded as the
principal, possessed of all the right and subject to all
the liabilities of a principal. A person acting or
purporting to act on behalf of a corporation, which has
no valid existence assumes such privileges and
obligations and becomes personally liable for contracts
entered into or for other acts performed as agent
thereof (Fay v. Noble, 7 Cushing [Mass.]
188).
The
doctrine of corporation by estoppel may apply to the
alleged corporation and to a third party. In the first
instance, an unincorporated association, which
represented itself to be a corporation, will be estopped
from denying its corporate capacity in a suit against it
by a third person who relied in good faith on such
representation.
It
cannot allege lack of personality to be sued to evade
its responsibility for a contract it entered into and by
virtue of which it received advantages and benefits
(Ibid).
On the
other hand, a third party who, knowing an association to
be unincorporated, nonetheless treated it as a
corporation and received benefits from it, may be barred
from denying its corporate existence in a suit brought
against the alleged corporation. In such case, all those
who benefited from the transaction made by the
ostensible corporation, despite knowledge of its legal
defects, may be held liable for contracts they impliedly
assented to or took advantage of. Clearly, under the law
on estoppel, those acting on behalf of a corporation and
those benefited by it, knowing it to be without valid
existence, are held liable as general partners (Lim Tong
Lim, petitioner, vs. Philippine Fishing Gear Industries
Inc., respondent, G.R. 136448.
November 3, 1999].
In this
jurisdiction, the Supreme Court’s consistent
pronouncement, as held in numerous cases is apropos: The
rule is that a party is estopped to challenge the
personality of a corporation after having acknowledged
the same by entering into a contract with it. And the
“doctrine of estoppel” to deny corporate existence
applies to foreign as well as to domestic corporations.
One who has dealt with a corporation of foreign origin
as a corporate entity is estopped to deny its existence
and capacity. The principle will be applied to prevent a
person, contracting with a foreign corporation, from
later taking advantage of its noncompliance with the
statutes, chiefly in cases where such person has
received the benefits of the contract (Rimbunan Hihau
Group of Companies and Niugine Lumber Merchants Pty.,
Ltd., petitioners, vs. Oriental Wood Processing
Corporation, respondent. G.R.152228. September 23,
2005]. |
