Asia Banking Corporation vs. Standard Products Co., Inc.

A person who contracts with an association in a manner that recognizes and admits its legal existence as a corporate body is estopped to deny its corporate existence in any action arising from that contract, in the absence of fraud or grounds that have arisen since the making of the contract. The rule applies to both foreign and domestic corporations.

Asia Banking Corporation filed suit to collect P24,736.47 as the balance due on a promissory note executed by Standard Products Co., Inc. The note, dated November 28, 1921 and payable on demand, was for P37,757.22 with interest at 10% per annum. Partial payments had been made, leaving a remaining principal amount of P24,147.34, for which judgment with interest was sought. At trial, the plaintiff did not introduce any affirmative evidence of the corporate existence of either party. The lower court rendered judgment for the plaintiff, prompting the defendant to appeal and assign the absence of proof of corporate personality as reversible error.

• The Promissory Note: On November 28, 1921, Standard Products Co., Inc., through its President George H. Seaver, executed a promissory note for P37,757.22 in favor of Asia Banking Corporation, payable on demand at its Manila office with interest at 10% per annum.
• Partial Payments: The defendant made partial payments on the note, leaving an unpaid principal balance of P24,147.34 as of November 1, 1923.
• Plaintiff’s Evidence at Trial: At the trial, Asia Banking Corporation did not present any affirmative proof of the corporate existence of either party.
• Lower Court’s Judgment: The trial court found that both parties were corporations with juridical personality and entered judgment for the plaintiff for the sum demanded, with interest on P24,147.34 from November 1, 1923 at 10% per annum, plus costs.

• Proof of Corporate Existence: Standard Products Co., Inc. maintained that the trial court erred in finding that the parties were corporations with juridical personality because the plaintiff had failed to prove affirmatively the corporate existence of either party.

• Estoppel: Asia Banking Corporation contended that the defendant, by executing the promissory note in its favor and making partial payments thereon, had recognized the plaintiff’s corporate existence and was consequently estopped from denying it.

• Proof of Corporate Existence: Whether the trial court erred in finding that the parties were corporations with juridical personality when the plaintiff failed to present affirmative evidence of incorporation.

• Proof of Corporate Existence: No error was committed. The defendant was estopped to deny the corporate existence of the plaintiff because it contracted with the plaintiff as a corporation and made partial payments on the note, thereby recognizing and admitting the plaintiff’s legal existence as a corporate body. By parity of reasoning, the defendant was estopped from denying its own corporate existence. The estoppel rule applies absent fraud or circumstances arising after the contract, and no such circumstances were shown. Because the estoppel operated, no further evidence of corporate existence was required from the plaintiff. The rule is equally applicable to foreign and domestic corporations, and the Court cited Chinese Chamber of Commerce vs. Pua Te Ching and 14 C.J., 227 as authorities.

• Estoppel to Deny Corporate Existence — In the absence of fraud, a person who contracts or deals with an association in a manner that recognizes and admits its legal existence as a corporate body is estopped to deny its corporate existence in any action arising out of that contract or dealing. The estoppel extends to both foreign and domestic corporations and precludes the contracting party from raising the lack of affirmative proof of incorporation, unless grounds attacking the existence have arisen since the making of the contract. Here, the defendant’s execution of the note and partial payments constituted an unequivocal recognition of the plaintiff’s corporate existence and likewise estopped it from denying its own corporate existence.

• “The general rule is that in the absence of fraud a person who has contracted or otherwise dealt with an association in such a way as to recognize and in effect admit its legal existence as a corporate body is thereby estopped to deny its corporate existence in any action leading out of or involving such contract or dealing, unless its existence is attacked for cause which have arisen since making the contract or other dealing relied on as an estoppel and this applies to foreign as well as to domestic corporations.”

• Chinese Chamber of Commerce vs. Pua Te Ching, 14 Phil., 222 — Followed as controlling authority for the doctrine that a party who contracts with an entity as a corporation is estopped to deny its corporate existence in a suit on the contract.

Street, Malcolm, Avanceña, Villamor, and Romualdez, JJ., concurred.