Missionary Sisters of Our Lady of Fatima vs. Alzona

A donee that is not yet incorporated at the time of donation but is subsequently issued a Certificate of Incorporation may enforce a donation against the donor's heirs under the doctrine of corporation by estoppel, provided the donor dealt with the association as a corporation and derived benefit from the transaction; moreover, subsequent ratification by the corporation of its representative's acceptance cures any defect in the donation's perfection.

The petitioner is a religious and charitable congregation established under the patronage of the Roman Catholic Bishop of San Pablo on May 30, 1989, dedicated to caring for abandoned and neglected elderly persons. Purificacion Y. Alzona, a spinster and registered owner of several parcels of land in Calamba City, Laguna, became a benefactor of the petitioner in 1996. After being diagnosed with lung cancer in 1997, Purificacion requested the petitioner's Superior General, Mother Ma. Concepcion R. Realon, to care for her in her home. In 1999, Purificacion expressed her intent to donate her properties to the petitioner to support its charitable mission.

• The Missionary Sisters of Our Lady of Fatima (Peach Sisters of Laguna) is a religious congregation established on May 30, 1989, under the patronage of the Roman Catholic Bishop of San Pablo, with a mission to care for abandoned and neglected elderly persons.
• On August 28, 2001, the petitioner filed its Articles of Incorporation and by-laws with the SEC.
• On August 29, 2001, Purificacion Y. Alzona executed a Deed of Donation Inter Vivos conveying parcels of land covered by TCT Nos. T-57820 and T-162375, and her undivided share in a property covered by TCT No. T-162380, to the petitioner; the deed was notarized by Atty. Nonato Arcillas and accepted by Mother Ma. Concepcion R. Realon, the petitioner's Superior General.
• On August 31, 2001, the SEC issued the Certificate of Incorporation to the petitioner.
• Purificacion died on October 30, 2001, without any issue, survived by her brother Amando Y. Alzona.
• Prior to the donation, Purificacion had been cared for by the petitioner during her illness, and in 1999 had executed a handwritten letter expressing her intent to donate her properties to the petitioner.
• The donation was made "for and in consideration of the love and affection of the DONOR for the DONEE and of the faithful services the latter has rendered in the past to the former."
• The Register of Deeds denied registration of the deed due to an Affidavit of Adverse Claim filed by Amando Alzona on September 26, 2001.
• Amando Alzona and his legal heirs (respondents) claimed that at the time of the donation on August 29, 2001, the petitioner had no juridical personality as it was not yet incorporated, and therefore could not legally accept the donation.

• The petitioner possessed the requisite legal personality to accept donations as a religious institution organized under the Roman Catholic Bishop of San Pablo, a corporation sole, authorized to receive donations.
• Alternatively, the petitioner was a de facto corporation at the time of the donation, having filed its Articles of Incorporation on August 28, 2001, and therefore possessed the capacity to enter into contracts.
• Assuming it was not a de facto corporation, the acceptance by Mother Concepcion constituted a pre-incorporation contract that was perfected and ratified by the petitioner's subsequent incorporation and express acceptance of the donation.
• The doctrine of corporation by estoppel applies to bar the respondents, as heirs of Purificacion, from denying the petitioner's corporate existence because Purificacion dealt with the petitioner as a corporate entity with full knowledge of its status, and the donation was executed in reliance upon such representation.

• Juridical personality to enter into a contract of donation is vested only upon the issuance of a Certificate of Incorporation from the SEC, which occurred on August 31, 2001, two days after the donation was executed.
• The petitioner cannot be considered a de facto corporation because at the time of the donation, there was no bona fide attempt to incorporate; the decision to incorporate was made only after Atty. Arcillas advised Mother Concepcion on August 28, 2001, and for over 20 years prior, the group had never attempted to incorporate.
• As an unregistered corporation on August 29, 2001, the petitioner could not exercise the powers, rights, and privileges expressly granted by the Corporation Code, including the power to acquire and possess property.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether the petitioner was a de facto corporation at the time of the execution of the Deed of Donation on August 29, 2001.
  • Whether the doctrine of corporation by estoppel under Section 21 of the Corporation Code applies to validate the donation despite the petitioner's lack of corporate existence at the time of donation.
  • Whether the subsequent incorporation of the petitioner and ratification of Mother Concepcion's acceptance cured any defect in the donation.

• Procedural: N/A
• Substantive:
  • The petitioner was not a de facto corporation at the time of the donation. The Court held that the existence of a de facto corporation requires both the filing of articles of incorporation and the issuance of a certificate of incorporation. Since the Certificate of Incorporation was issued only on August 31, 2001, the petitioner could not be considered a de facto corporation on August 29, 2001.
  • The doctrine of corporation by estoppel under Section 21 of the Corporation Code applies. The Court ruled that Purificacion dealt with the petitioner as a corporate entity, as evidenced by her execution of two documents (the 1999 handwritten letter and the 2001 Deed) conveying properties to the petitioner, and her referral of Mother Concepcion to a lawyer to process the incorporation. Under Section 21, one who assumes an obligation to an ostensible corporation cannot resist performance on the ground that there was no corporation. This doctrine applies even when the "corporation" is the one enforcing the contract, provided the other party dealt with it as a corporation.
  • The donation was remuneratory or compensatory in nature (for past services rendered during Purificacion's illness), constituting a benefit to the donor that prevents unjust enrichment and allows the application of estoppel.
  • The subsequent incorporation of the petitioner on August 31, 2001, and its ratification of Mother Concepcion's authority as Superior General cured the defect in the acceptance of the donation, validating it retroactively to the date of execution.
  • The respondents, as heirs and successors-in-interest of Purificacion, are bound by the Deed and are estopped from denying the petitioner's corporate existence.

• De Facto Corporation — A corporation de facto exists when there is a colorable compliance with the requirements of incorporation, including the filing of articles of incorporation and the issuance of a certificate of incorporation by the SEC. The filing of articles alone, without the issuance of the certificate, is insufficient to establish de facto corporate status. In this case, the Court found that since the Certificate of Incorporation was issued only after the donation was executed, the petitioner was not a de facto corporation at the relevant time.
• Corporation by Estoppel (Section 21, Corporation Code) — This doctrine, founded on principles of equity, provides that all persons who assume to act as a corporation knowing it to be without authority shall be liable as general partners, and conversely, that one who assumes an obligation to an ostensible corporation cannot resist performance on the ground that no corporation existed. The Court applied this doctrine to hold that Purificacion, having dealt with the petitioner as a corporation, was estopped from denying its existence to invalidate the donation.
• Remuneratory Donation — A donation made to reward the donee for past services rendered to the donor, which services do not amount to a demandable debt. The Court classified the subject donation as remuneratory because it was motivated by gratitude for the petitioner's care during Purificacion's illness, constituting a benefit to the donor that supports the application of estoppel.
• Ratification by Conduct — Express or implied ratification cleanses a contract from its defects from the time of its creation. The Court held that the petitioner's subsequent incorporation and express affirmation of Mother Concepcion's authority to accept the donation constituted ratification that validated the donation retroactively.

• "The doctrine of corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness."
• "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."
• "The Court is both of law and of justice. Thus, the Court's mission and purpose is to apply the law with justice."
• "It is unfortunate that the will of a person moved by the desire to reciprocate the goodness shown to her during the lowest and culminating points of her life is questioned and herein sought to be nullified on strict legality, when the intent of the donor to give is beyond question."

• Seventh Day Adventist Conference Church of Southern Phils., Inc. v. Northeastern Mindanao Mission of Seventh Day Adventist, Inc. — Cited to establish that the filing of articles of incorporation and the issuance of the certificate of incorporation are both essential for the existence of a de facto corporation.
• Lozano v. Hon. Delos Santos — Cited for the principle that the doctrine of corporation by estoppel applies when a non-existent corporation enters into contracts with third persons.
• Asia Banking Corporation v. Standard Products Co. — Cited for the historical application of corporation by estoppel to protect the sanctity of dealings with the public.
• Lim v. Phil. Fishing Gear Industries, Inc. — Cited for the rule that a third party who knowingly treats an unincorporated association as a corporation may be barred from denying its corporate existence.
• Constantino, et al. v. Heirs of Pedro Constantino, Jr. — Cited to establish that respondents, as heirs and successors-in-interest, are privies to the deed and stand in the same position as their predecessor.
• Pirovano, et al. v. De La Rama Steamship Co. — Cited for the definition and characteristics of remuneratory donations.

• Corporation Code, Section 21 — Provides for the doctrine of corporation by estoppel, stating that persons dealing with an ostensible corporation cannot deny its existence to avoid contractual obligations.
• Civil Code, Article 737 — Provides that the donor's capacity is determined at the time of the making of the donation; applied by analogy to determine the donee's capacity at the time of acceptance.
• Civil Code, Articles 738 and 745 — Govern the capacity of persons to accept donations and the requirement of acceptance by the donee or authorized representative.
• Civil Code, Article 749 — Enumerates the essential elements of donation of immovable property, including the requirement of a public document and acceptance.
• Civil Code, Articles 1390 and 1393 — Govern the ratification of voidable contracts, providing that ratification may be effected expressly or tacitly and cleanses the contract from its defects retroactively.
• Civil Code, Article 1311 — Provides that contracts take effect between the parties and their successors-in-interest.
• Civil Code, Article 1910 — Provides that the principal may ratify the acts of an agent even if the agency was not yet validly constituted at the time of the act.