Philippine First Insurance Company, Inc. vs. Maria Carmen Hartigan, CGH, and O. Engkee

A Philippine corporation may validly change its name by amending its articles of incorporation pursuant to Section 18 of the Corporation Law, and such change of name does not dissolve the corporation or affect its legal identity. The corporation remains the same entity, with the same rights and obligations, and may sue and be sued under its new name for rights that accrued under its former name.

The plaintiff, Philippine First Insurance Company, Inc., was originally organized as an insurance corporation under the name "The Yek Tong Lin Fire and Marine Insurance Co., Ltd." Its original articles of incorporation were presented before the Securities and Exchange Commissioner and acknowledged on June 1, 1953. On May 26, 1961, the articles of incorporation were amended pursuant to a certificate of the Board of Directors dated March 8, 1961, changing the corporate name to "Philippine First Insurance Co., Inc." The dispute concerns the legal effect of this name change on the corporation's capacity to enforce contracts entered into under its former name.

The plaintiff, Philippine First Insurance Company, Inc., was originally organized as an insurance corporation under the name "The Yek Tong Lin Fire and Marine Insurance Co., Ltd." Its original articles of incorporation, acknowledged before Notary Public E. D. Ignacio on June 1, 1953, stated the corporate name as "The Yek Tong Lin Fire and Marine Insurance Co., Ltd." On May 26, 1961, the articles of incorporation were amended pursuant to a certificate of the Board of Directors dated March 8, 1961, changing the name of the corporation to "Philippine First Insurance Co., Inc."

The plaintiff, doing business under its old name, signed as co-maker together with defendant Maria Carmen Hartigan, CGH, a promissory note for P5,000.00 in favor of the China Banking Corporation, payable within 30 days with the usual banking interest. The plaintiff agreed to act as co-maker upon the application of Hartigan, who, together with Antonio F. Chua and Chang Ka Fu, signed an indemnity agreement in favor of the plaintiff, undertaking jointly and severally to pay the plaintiff damages, losses, or expenses, including attorney's fees and legal costs, arising from the plaintiff's execution of the promissory note. The China Banking Corporation delivered P5,000.00 to Hartigan, who failed to pay in full. The note was renewed on August 31, 1961, and as of November 27, 1961, the sum of P4,559.50, including interest, remained due. The complaint prayed for judgment against the defendants, jointly and severally, for P4,559.50 with interest at 12% per annum from November 23, 1961, plus P911.90 for attorney's fees and costs. Although O. Engkee was named as a party defendant in the caption, his name does not appear in the body of the complaint, but appears in the Annex A counter-indemnity agreement.

In their answer, the defendants denied that the plaintiff formerly conducted business under the name "The Yek Tong Lin Fire and Marine Insurance Co., Ltd." They admitted executing the indemnity agreement but claimed they signed it in favor of the Yek Tong Lin Fire and Marine Insurance Co., Ltd., not the plaintiff. They admitted failing to pay the promissory note but alleged that since their obligation to the China Banking Corporation still subsisted, the surety who co-signed the note was not entitled to collect from them, lest they be liable for double payment. By way of special defense, they claimed there was no privity of contract between the plaintiff and the defendants, and that the plaintiff had no cause of action because the complaint did not allege that the plaintiff and the old corporation were one and the same or that the plaintiff had acquired the latter's rights. The parties submitted the case for decision based on the pleadings after admitting Exhibit A (the amended articles of incorporation) and Exhibit 1 (a demand letter dated August 16, 1962 from the China Banking Corporation showing the note remained unpaid in the sum of P4,500.00).

The trial court dismissed the action, holding that the change of name was of dubious validity, that it operated to dissolve the original corporation, that the plaintiff was not the real party in interest, and that the dissolved corporation was the proper party to sue within three years from the alleged dissolution. The plaintiff appealed, and the Court of Appeals certified the case to the Supreme Court as involving purely questions of law.

• Change of Corporate Name: The appellant contended that the trial court erred in holding that nothing in the Corporation Law authorizes a change of corporate name, and that such a change is against public policy.
• Effect of Name Change on Corporate Existence: The appellant argued that the trial court erred in declaring that a change of corporate name has the legal effect of dissolving the original corporation.
• Validity of the Name Change: The appellant maintained that the trial court erred in holding that the change of name of the Yek Tong Lin Fire & Marine Insurance Co., Ltd. was of dubious validity.
• Real Party in Interest: The appellant argued that the trial court erred in holding that it was not the right party in interest to sue the defendants-appellees.
• Dismissal of the Complaint: The appellant contended that the trial court finally erred in dismissing the complaint.

• No Privity of Contract: The defendants claimed there was no privity of contract between the plaintiff and the defendants, and consequently the plaintiff had no cause of action, considering that the complaint did not allege that the plaintiff and the Yek Tong Lin Fire and Marine Insurance Co., Ltd. were one and the same or that the plaintiff had acquired the rights of the latter.
• Prematurity of the Claim: The defendants alleged that since their obligation with the China Banking Corporation based on the promissory note still subsisted, the surety who co-signed the promissory note was not entitled to collect the value thereof from the defendants, otherwise they would be liable for double the amount of their obligation, there being no allegation that the surety had paid the obligation to the creditor.

• Change of Corporate Name: Whether a Philippine corporation may change its name and still retain its original personality and individuality as such.
• Real Party in Interest: Whether the plaintiff, having changed its name, was the real party in interest entitled to sue on the indemnity agreement executed under its former name.

• Change of Corporate Name: Yes. A Philippine corporation may change its name by amending its articles of incorporation pursuant to Section 18 of the Corporation Law, and such change does not dissolve the corporation or affect its legal identity.
• Real Party in Interest: Yes. The plaintiff was the real party in interest entitled to sue under its new name, since the change of name did not affect its rights or obligations, and actions brought after a change of name should be brought under the new name even for the enforcement of rights existing at the time the change was made.

• Change of Corporate Name: Section 18 of the Corporation Law explicitly permits the amendment of articles of incorporation for legitimate corporate purposes, and contains no prohibition against the change of name. The section lays down the procedure for amendment and contains provisos restricting the power to amend only as to the term of existence and the increase or decrease of capital stock. The absence of any prohibition against change of name leads to the clear inference that such a change is allowed. While the name of a corporation is essential to its existence, there is no compelling reason why a corporation may not change its name, just as an individual may change his name under certain conditions, provided the procedure prescribed by law is strictly followed. American authorities, which have persuasive force because the Philippine Corporation Law is of American origin, support the view that a general power to alter or amend the charter of a corporation necessarily includes the power to alter the name of the corporation. The Court clarified that its earlier decision in Red Line Transportation Co. vs. Rural Transit Co., Ltd. did not hold that a change of name is against public policy; rather, what was held contrary to public policy was the use by one corporation of the name of another corporation as a trade name. An authorized change in the name of a corporation has no more effect upon its identity than a change of name of a natural person has upon his identity; it does not affect the rights of the corporation or lessen or add to its obligations.

• Real Party in Interest: The approval by the stockholders of the amendment changing the corporate name on March 8, 1961, did not automatically change the name on that date. Under Section 18 of the Corporation Law, the amendment becomes effective only from the time the copy of the amended articles of incorporation is filed with the Securities and Exchange Commissioner. Thus, the appellant rightly acted in its old name when it entered into the indemnity agreement on May 15, 1961, because only after the filing of the amended articles on May 26, 1961, did it legally acquire its new name. It was likewise correct for the appellant to file the case in its new name on December 6, 1961. Actions brought by a corporation after it has changed its name should be brought under the new name, although for the enforcement of rights existing at the time the change was made. The change in the name of a corporation does not affect its right to bring an action on a note given to the corporation under its former name.

• Change of Corporate Name — A Philippine corporation may change its name by amending its articles of incorporation pursuant to Section 18 of the Corporation Law, which contains no prohibition against such change. The absence of an express prohibition leads to the inference that the change is allowed, provided the statutory procedure is strictly followed. The Court applied this doctrine in holding that the plaintiff's change of name from "The Yek Tong Lin Fire and Marine Insurance Co., Ltd." to "Philippine First Insurance Co., Inc." was valid.

• Effect of Name Change on Corporate Identity — An authorized change in the name of a corporation has no more effect upon its identity as a corporation than a change of name of a natural person has upon his identity. It does not affect the rights of the corporation or lessen or add to its obligations. The corporation remains the same entity with a different name, and its character is in no respect changed. The Court applied this doctrine in holding that the plaintiff remained the same corporation and was the real party in interest entitled to sue under its new name.

• Real Party in Interest — A corporation that has changed its name may sue under its new name for the enforcement of rights that existed at the time the change was made. The change of name does not affect the corporation's right to bring an action on obligations incurred under its former name. The Court applied this doctrine in holding that the plaintiff properly filed its complaint under its new name for rights arising from the indemnity agreement executed under its old name.

• "An authorized change in the name of a corporation has no more effect upon its identity as a corporation than a change of name of a natural person has upon his identity. It does not affect the rights of the corporation or lessen or add to its obligations. After a corporation has effected a change in its name it should sue and be sued in its new name ...." — This passage articulates the core doctrine that a corporate name change does not alter the corporation's identity, rights, or obligations, and is central to the Court's ruling that the plaintiff was the real party in interest.

• "The changing of the name of a corporation is no more the creation of a corporation than the changing of the name of a natural person is the begetting of a natural person. The act, in both cases, would seem to be what the language which we use to designate it imports — a change of name, and not a change of being." — This quotation from Pacific Bank vs. De Ro succinctly captures the principle that a name change does not create a new entity, and was relied upon by the Court in reversing the trial court's dissolution theory.

• "What We have held to be contrary to public policy is the use by one corporation of the name of another corporation as its trade name." — This passage clarifies the Court's earlier ruling in Red Line Transportation Co. vs. Rural Transit Co., Ltd., distinguishing between an unauthorized assumption of another corporation's name and a valid change of corporate name.

• Red Line Transportation Co. vs. Rural Transit Co., Ltd., 60 Phil. 549 — Distinguished. The Court clarified that this case did not hold that a change of corporate name is against public policy; rather, it held that the use by one corporation of another corporation's name as a trade name is contrary to public policy.

• Pacific Bank vs. De Ro, 37 Cal. 538 — Cited with approval for the proposition that changing the name of a corporation is not the creation of a corporation, just as changing the name of a natural person is not the begetting of a natural person.

• Ft. Pitt Bldg., etc., Assoc. vs. Model Plan Bldg., etc., Assoc., 159 Pa. St. 308, 28 Atl. 215 — Cited as American authority supporting the view that a general power to alter or amend the charter of a corporation necessarily includes the power to alter the name of the corporation.

• Lomb vs. Pioneer Sav., etc., Co., 106 Ala. 591, 17 So. 670 — Cited for the proposition that actions brought by a corporation after it has changed its name should be brought under the new name, although for the enforcement of rights existing at the time the change was made.

• Section 18, Corporation Law — The Court interpreted this provision as authorizing a corporation to amend its articles of incorporation for legitimate corporate purposes, including a change of corporate name. The Court noted that the section contains no prohibition against change of name, and that the amendment becomes effective only upon filing with the Securities and Exchange Commissioner.

• Section 6, Corporation Law — Cited to show that while the corporate name is one of the matters required to be stated in the articles of incorporation, it is only one among many matters that must be stated therein, and is not singled out for special protection against amendment.

• Sections 11, 13, and 14, Corporation Law — Referenced by the trial court in support of its view that a corporation cannot change its name, but the Supreme Court's ruling effectively rejected this interpretation by holding that Section 18 authorizes such a change.

• Sections 62 and 67, Corporation Law — Cited by the trial court in its theory that the change of name amounted to a dissolution of the original corporation, a theory rejected by the Supreme Court.

• Section 77, Corporation Law — Cited by the trial court in support of its view that the dissolved corporation continued for three years for purposes of prosecuting and defending suits, a theory rendered inapplicable by the Supreme Court's holding that no dissolution occurred.

• Articles 1300 and 1301, New Civil Code — Cited by the trial court regarding conventional subrogation, which the Supreme Court found unnecessary to address given its holding that the plaintiff was the same corporation and thus the real party in interest.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, and Villamor, JJ., concurred.