Laureano Investment & Development Corp. vs. Court of Appeals

A corporation must sue and be sued only in its registered corporate name; an entity using a name not registered with the Securities and Exchange Commission lacks juridical personality to be a party to a civil action, and the adverse party is not estopped from challenging such lack of personality even after the intervention was initially granted, particularly where the purported intervenor also fails to demonstrate a legal interest in the subject matter of the litigation.

Spouses Reynaldo and Florence Laureano, majority stockholders of petitioner Laureano Investment and Development Corporation, obtained loans from the Philippine National Cooperative Bank (PNCB) secured by real estate mortgages over two parcels of land in Bel-Air Subdivision, Makati, executed between 1962 and 1964. The spouses defaulted, and PNCB extrajudicially foreclosed the mortgages, purchasing the properties at the foreclosure sale and consolidating titles in its name by February 1984. PNCB did not immediately secure a writ of possession due to pending cases involving the titles. On September 26, 1988, PNCB sold 114 properties, including the two lots, to Bormaheco, Inc. under a bulk sale arrangement. Transfer Certificates of Title were issued in Bormaheco's name on October 12, 1988. Five days later, Bormaheco filed an ex-parte petition for a writ of possession, which prompted the intervention attempt that gave rise to this controversy.

• The Mortgage and Foreclosure: Spouses Reynaldo and Florence Laureano, majority stockholders of petitioner Laureano Investment and Development Corporation, obtained loans from the Philippine National Cooperative Bank (PNCB) secured by real estate mortgages executed on December 11, 1962, January 9, 1963, July 2, 1963, and September 5, 1964, covering amounts of P100,000.00, P20,000.00, P70,000.00, and P13,424.04, respectively. The mortgaged properties consisted of two lots located in Bel-Air Subdivision, Makati, Metro Manila. Upon the spouses' default, PNCB extrajudicially foreclosed the mortgages, purchased the properties at the foreclosure sale, and consolidated titles in its name on February 20, 1984. PNCB did not secure a writ of possession or file ejectment proceedings because of pending cases involving the titles to the lots.

• The Sale to Bormaheco: On September 26, 1988, Bormaheco, Inc. purchased from PNCB, under a bulk sale, 114 titled and untitled properties including the two parcels of land formerly registered in the name of the Laureano spouses. Transfer Certificate of Title Nos. 157724 and 157725 were issued in Bormaheco's name on October 12, 1988.

• The Petition for Writ of Possession: Five days after securing titles, Bormaheco filed an Ex-Parte Petition for the Issuance of Writ of Possession covering Lots 4 and 5, Block 4, Bel-Air Village, Makati, docketed as LRC Case No. M-1530 before Branch 141 of the Regional Trial Court of Makati.

• The Intervention: On January 18, 1989, "Lideco Corporation" filed a Motion for Intervention and to Admit Attached Complaint in Intervention. The motion and complaint represented that the intervenor was "a corporation duly organized and registered in accordance with law." The complaint in intervention did not state that "Lideco Corporation" was an acronym or abbreviated form of Laureano Investment and Development Corporation. On February 9, 1989, the trial court admitted the intervention, finding a prima facie showing that the intervenor had an interest that might be adversely affected. Bormaheco subsequently filed a Motion to Strike Out the Complaint in Intervention, presenting a certification from the Securities and Exchange Commission that "Lideco, Inc." was not registered either as a corporation or as a partnership. The trial court granted the motion to strike out on September 8, 1989, ruling that "Lideco Corporation" and Laureano Investment and Development Corporation were two separate entities and that the former lacked legal personality.

• The Substitution Attempt: On October 4, 1989, Laureano Investment and Development Corporation filed an Urgent Motion to Substitute Party Intervenor and to Adopt Complaint in Intervention and All Pleadings. The trial court denied the motion on May 7, 1990, on two additional grounds: first, the tax declarations attached to the intervention pertained to houses constructed on Lot 3, Block 4, and Lot 3, Block 4 of Bel-Air Village, not Lots 4 and 5, Block 4 which were the subject of the writ of possession petition; second, the same tax declarations had been canceled on July 22, 1982, more than five years before Bormaheco purchased the properties. The court further noted that the substitution sought did not fall under the instances provided in Section 20 (formerly Section 17), Rule 3 of the Rules of Court. The motion for reconsideration was denied on August 8, 1990.

• The Prior Use of the Acronym: Prior to the filing of "Lideco Corporation's" motion for intervention, Bormaheco had filed a motion on January 9, 1989, in which it used "LIDECO" as an acronym for Laureano Investment and Development Corporation, expressly specifying it as the shorter term for the registered corporate name.

• Estoppel: Petitioner contended that Bormaheco was estopped from contesting the legal personality of "Lideco Corporation" because Bormaheco itself had first used "LIDECO" as a shorter term for Laureano Investment and Development Corporation in its motion dated January 9, 1989, filed before "Lideco Corporation" submitted its motion for intervention on January 18, 1989. Petitioner argued that having made such representation, Bormaheco could not subsequently deny knowledge that the two names referred to the same entity.

• Bad Faith: Petitioner maintained that Bormaheco's motion to strike out the complaint in intervention was filed in bad faith and without legal or factual basis, and that the motion should have been denied outright on that ground.

• Lack of Juridical Personality: Bormaheco argued that "Lideco Corporation" could not be a party to the action because it did not satisfy the essential requisites for being a party: (1) natural or juridical personality; (2) legal capacity to sue or be sued; and (3) real interest in the subject matter of the action. Bormaheco presented a certification from the Securities and Exchange Commission showing that "Lideco, Inc." was not registered as a corporation or partnership.

• Alter Ego and Abuse of Process: Bormaheco asserted that petitioner corporation was merely an alter ego of the Laureano spouses, who had already lost their rights over the subject properties by virtue of the extrajudicial foreclosures, and that the intervention was another ploy to prevent subsequent owners from exercising their rights of ownership.

• Forum Shopping: In a motion filed before the Supreme Court, Bormaheco accused petitioner and its chairman, Reynaldo Laureano, of forum shopping by improperly instituting multiple cases through deliberate splitting of causes of action, thereby trifling with the courts and abusing their processes. Bormaheco enumerated various civil actions commenced by the Laureano spouses before the trial court and petitions before the appellate court concerning the same properties.

• Estoppel: Whether Bormaheco, Inc. was estopped from contesting the legal personality to sue of "Lideco Corporation" given Bormaheco's prior use of "LIDECO" as an acronym for Laureano Investment and Development Corporation.

• Bad Faith: Whether bad faith attended the filing of Bormaheco's motion to strike out the complaint in intervention and related pleadings.

• Estoppel: Bormaheco was not estopped from questioning the juridical personality of "Lideco Corporation." The requisites of estoppel by pais were not met because no false representation or concealment could be attributed to Bormaheco. Bormaheco's prior motion had distinctly specified that "LIDECO" was an acronym for Laureano Investment and Development Corporation; it did not represent that "Lideco Corporation" was a separate registered entity. The representation that was subsequently challenged—that "Lideco Corporation" was a duly organized and registered corporation—originated from the intervenor itself in its complaint in intervention, not from Bormaheco. Petitioner could not logically claim reliance on Bormaheco's representation when it was presumed to know its own registered corporate name and the legal provisions governing its use. Under Section 1, Rule 3 of the Rules of Court, only natural or juridical persons may be parties to a civil action, and Article 36 of the Corporation Code explicitly requires a corporation to sue and be sued in its corporate name. Nowhere in the motion for intervention or complaint in intervention did petitioner disclose that "Lideco Corporation" was an acronym for Laureano Investment and Development Corporation. The clarification came only in the opposition to the motion to strike out. Additionally, even assuming the names referred to the same entity, the intervention was correctly disallowed because neither Lideco nor petitioner corporation demonstrated a legal interest in the subject matter of the litigation: the tax declarations attached to the intervention pertained to houses on Lot 3, Block 4, whereas the petition for writ of possession involved Lots 4 and 5, Block 4. This factual finding was affirmed by the Court of Appeals and was beyond the Supreme Court's power of review in a Rule 45 petition, as the Court is not a trier of facts, and petitioner failed to show that the findings fell within any recognized exception.

• Bad Faith: Bad faith was not established. Bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it contemplates a state of mind affirmatively operating with furtive design or ill will. Petitioner offered only bare allegations, failing to demonstrate that Bormaheco acted consciously and deliberately to achieve a dishonest purpose or was motivated by ill will. No false representation was contrived nor concealment made by Bormaheco, nor did Bormaheco deliberately convey facts upon which petitioner relied. Bormaheco's challenge to the juridical personality of "Lideco Corporation" was legally justified.

• Doctrine of Estoppel by Pais — An admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them. The requisites for estoppel by pais as against the party sought to be estopped are: (a) conduct amounting to false representation or concealment of material facts, or at least calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (b) intent, or at least expectation, that this conduct shall be acted upon, or at least influence, the other party; and (c) knowledge, actual or constructive, of the actual facts. In this case, the requisites were not satisfied because Bormaheco's use of "LIDECO" as an acronym for the registered corporate name was truthful and not inconsistent with its later position that "Lideco Corporation" as a distinct entity lacked juridical personality.

• Corporate Name Requirement — Every corporation incorporated under the Corporation Code has the power and capacity to sue and be sued in its corporate name (Article 36, Corporation Code). A corporation has a legal personality of its own under Article 44 of the Civil Code and may sue or be sued in its name in conformity with the laws and regulations of its organization (Article 46, Civil Code). A plaintiff that purports to be a corporation cannot validly bring suit under a name other than that registered with the Securities and Exchange Commission.

• Party Requisites — Under Section 1, Rule 3 of the Rules of Court, only natural or juridical persons or entities authorized by law may be parties to a civil action. The essential requisites for being a party are: (1) natural or juridical personality; (2) legal capacity to sue or be sued, i.e., having all the qualifications and none of the disqualifications provided for by law; and (3) real interest in the subject matter of the action.

• Scope of Review under Rule 45 — The Supreme Court is not a trier of facts; its function is not to examine and evaluate the evidence presented to the tribunal that formed the basis of the questioned decision, resolution, or order. Factual findings of the trial and appellate courts are generally binding and conclusive, subject only to limited exceptions that must be specifically demonstrated.

• Forum Shopping — Forum shopping exists whenever, as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another, raising identical causes of action, subject matter, and issues. Bare allegations and a mere enumeration of case numbers and titles are insufficient to substantiate a charge of forum shopping; the party asserting forum shopping must show convincingly that the cases had identical causes of action, subject matter, and issues.

• Bad Faith — Bad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; it contemplates a state of mind affirmatively operating with furtive design or ill will. Mere allegations, without proof of conscious and deliberate conduct aimed at a dishonest purpose, do not establish bad faith.

• "The equitable doctrine of estoppel was explained by this Court in Caltex (Philippines), Inc. vs. Court of Appeals: Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them." — This passage restates the foundational principle of estoppel and frames the Court's analysis of why the doctrine did not apply to Bormaheco.

• "If petitioner legally and truly wanted to intervene, it should have used its corporate name as the law requires and not another name which it had not registered." — This sentence captures the ratio decidendi on the corporate name issue: compliance with the statutory requirement to sue in the registered corporate name is indispensable, and a party cannot cure non-compliance by later claiming that the unregistered name was merely an acronym.

• "(B)ad faith implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity; . . . bad faith contemplates a state of mind affirmatively operating with furtive design or ill will." — This definition, drawn from Far East Bank and Trust Company v. Court of Appeals, provides the standard against which petitioner's bare allegations of bad faith were measured and found wanting.

• Caltex (Philippines), Inc. vs. Court of Appeals, 212 SCRA 448 (1992) — Cited for the definition and elements of the doctrine of estoppel; the Supreme Court relied on this precedent to articulate the principle that an admission or representation is conclusive upon the person making it and cannot be disproved against the person relying on it.

• Maneclang vs. Baun, 208 SCRA 179 (1992) — Cited for the specific requisites of estoppel by pais: false representation, intent that the representation be acted upon, and knowledge of the actual facts. The Court applied these requisites to determine that Bormaheco's conduct did not satisfy them.

• Trade Unions of the Philippines vs. Laguesma, 236 SCRA 586 (1994) — Cited for the rule that the Supreme Court is not a trier of facts and its function is not to examine and evaluate evidence already considered by lower tribunals.

• Fuentes vs. Court of Appeals, G.R. No. 109849, February 26, 1997 — Cited for the principle that factual findings of the trial and appellate courts are binding unless the case falls within recognized exceptions, which petitioner failed to demonstrate.

• Far East Bank and Trust Company vs. Court of Appeals, 241 SCRA 671 (1995) — Cited for the definition of bad faith as a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.

• First Philippine International Bank vs. Court of Appeals, 252 SCRA 259 (1996) — Cited for the definition of forum shopping as seeking a favorable opinion in another forum after an adverse opinion in one.

• International Container Terminal Services, Inc. vs. Court of Appeals, 249 SCRA 389 (1995) — Cited for the requirement that forum shopping involves identical causes of action, subject matter, and issues.

• Article 36, Corporation Code — Provides that every corporation incorporated under the Code has the power and capacity to sue and be sued in its corporate name. Applied to hold that "Lideco Corporation," not being a registered corporate name, could not validly sue or intervene, and petitioner was required to use its registered name, Laureano Investment and Development Corporation.

• Article 44, Civil Code — Defines juridical persons, including corporations, as having a legal personality of their own. Applied in conjunction with Article 46 and the Corporation Code to underscore that only entities with recognized juridical personality may be parties to a civil action.

• Article 46, Civil Code — Provides that juridical persons may sue or be sued in conformity with the laws and regulations of their organization. Applied to reinforce the requirement that a corporation must act in its own registered name in legal proceedings.

• Section 1, Rule 3, Rules of Court — Provides that only natural or juridical persons or entities authorized by law may be parties to a civil action. Applied to establish that "Lideco Corporation," lacking SEC registration, did not qualify as a party with standing to intervene.

• Section 20 (formerly Section 17), Rule 3, Rules of Court — Governs substitution of parties upon death or transfer of interest. The trial court found that petitioner's motion to substitute did not fall within the instances contemplated by this provision, as the situation involved not a transfer of interest but a correction of the name used in the original pleading.

Chief Justice Andres R. Narvasa, Justice Hilario G. Davide, Jr., Justice Jose A.R. Melo, and Justice Ricardo J. Francisco concurred.

N/A — The decision was unanimous; no dissenting opinions were recorded.