Thursday, February 23, 2012

Cagayan Fishing Development Co., Inc., vs. Sandiko, [G.R. No. L-43350 December 23, 1937]

Facts: Manuel Tabora is the registered owner of four parcels of land. To guarantee the payment of two loans, Manuel Tabora, executed in favor of PNB two mortgages over the four parcels of land between August, 1929, and April 1930. Later, a third mortgage on the same lands was executed also on April, 1930 in favor of Severina Buzon to whom Tabora was indebted. 

On May, 1930, Tabora executed a public document entitled "Escritura de Transpaso de Propiedad Inmueble" (Exhibit A) by virtue of which the four parcels of land owned by him was sold to the plaintiff company, said to under process of incorporation. The plaintiff company filed its article incorporation with the Bureau of Commerce and Industry only on October, 1930 (Exhibit 2). 

A year later, the board of directors of said company adopted a resolution authorizing its president to sell the four parcels of lands in question to Teodoro Sandiko. Exhibits B, C and D were thereafter made and executed. Exhibit B is a deed of sale where the plaintiff sold ceded and transferred to the defendant all its right, titles, and interest in and to the four parcels of land. Exhibit C is a promissory note drawn by the defendant in favor of the plaintiff, payable after one year from the date thereof. Exhibit D is a deed of mortgage executed where the four parcels of land were given a security for the payment of the promissory note, Exhibit C. 

The defendant having failed to pay the sum stated in the promissory note, plaintiff, brought this action in the Court of First Instance of Manila praying that judgment be rendered against the defendant for the sum stated in the promissory note. After trial, the court rendered judgment absolving the defendant. Plaintiff presented a motion for new trial, which motion was denied by the trial court. After due exception and notice, plaintiff has appealed to this court and makes an assignment of various errors. 

Issue: Whether Exhibit B, the deed of sale executed in favor of Teodoro Sandiko, was valid. 

Held: No, it was not. 

The transfer made by Tabora to the Cagayan fishing Development Co., Inc., plaintiff herein, was affected on May 31, 1930 (Exhibit A) and the actual incorporation of said company was affected later on October 22, 1930 (Exhibit 2). In other words, the transfer was made almost five months before the incorporation of the company. 

Unquestionably, a duly organized corporation has the power to purchase and hold such real property as the purposes for which such corporation was formed may permit and for this purpose may enter into such contracts as may be necessary. But before a corporation may be said to be lawfully organized, many things have to be done. Among other things, the law requires the filing of articles of incorporation. 

In the case before us it can not be denied that the plaintiff was not yet incorporated when it entered into a contract of sale, Exhibit A. Not being in legal existence then, it did not possess juridical capacity to enter into the contract. 

Boiled down to its naked reality, the contract here (Exhibit A) was entered into not between Manuel Tabora and a non-existent corporation but between the Manuel Tabora as owner of the four parcels of lands on the one hand and the same Manuel Tabora, his wife and others, as mere promoters of a corporations on the other hand. 

For reasons that are self-evident, these promoters could not have acted as agent for a projected corporation since that which no legal existence could have no agent. A corporation, until organized, has no life and therefore no faculties. 

This is not saying that under no circumstances may the acts of promoters of a corporation be ratified by the corporation if and when subsequently organized. 

There are, of course, exceptions, but under the peculiar facts and circumstances of the present case we decline to extend the doctrine of ratification which would result in the commission of injustice or fraud to the candid and unwary. 

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