Salvatierra vs. Garlitos

A person who acts or purports to act on behalf of a corporation which has no valid legal existence assumes the privileges and obligations of a principal and becomes personally liable for contracts entered into or acts performed as such agent.

A lease agreement covering land in Burauen, Leyte for kenaf planting, where the lessee-purported corporation failed to render accounting and deliver the lessor's 30% share of net income as contractually stipulated.

• CFI of Leyte (Civil Case No. 1912): Plaintiff (Salvatierra) filed complaint for accounting, rescission and damages against Philippine Fibers Producers Co., Inc. and Segundino Refuerzo on April 5, 1955
• CFI Decision (June 8, 1955): Granted plaintiff's prayer; ordered defendants to render accounting within 15 days and deliver 30% of net income (P960), with rescission of lease; defendants declared in default
• Execution: Writ issued; Provincial Sheriff attached 3 parcels of land registered in Refuerzo's name (no corporate property found)
• Motion for Relief (Jan. 31, 1956): Refuerzo filed motion to declare decision null as to him, claiming no personal liability
• CFI Order (March 21, 1956): Granted motion; ordered release of Refuerzo's attached properties
• SC: Petitioner filed petition for certiorari after her petition for relief from order was denied

• Manuela T. Vda. de Salvatierra owned land at Maghobas, Poblacion, Burauen, Leyte
• March 7, 1954: Salvatierra entered into 10-year lease contract with "Philippine Fibers Producers Co., Inc." — allegedly a duly organized corporation — represented by Segundino Q. Refuerzo as President
• Contract terms: Lessee to plant kenaf/ramie; lessor entitled to 30% of net income without production cost responsibility; lessee to declare income after every harvest and deliver lessor's share
• April 1954: Defendants planted kenaf on 3 hectares, harvested, processed and sold the crop
• Defendants refused to render accounting or deliver lessor's share despite demand
• Plaintiff discovered subsequent to filing complaint that the corporation was not registered with the Securities and Exchange Commission (no juridical personality)
• Estimated gross income: P4,500; estimated expenses: P1,000; net income: P3,200; 30% share due: P960

• The CFI Judge acted with grave abuse of discretion in issuing the March 21, 1956 order relieving Refuerzo of liability
• Refuerzo is personally liable because he acted as agent of a non-existent corporation without authority
• Fraud exception to estoppel applies: While generally a party dealing with an association as a corporation is estopped from denying its existence, this does not apply where fraud is involved — Refuerzo made plaintiff believe the corporation was duly registered when it was not
• Refuerzo was the "moving spirit" behind the transaction and cannot hide behind corporate fiction

• The complaint contained no allegation pointing to Refuerzo's personal liability
• Refuerzo signed the contract only in his capacity as President of the corporation, not in his personal capacity
• Liability should be limited to the corporate entity only, not the officer/shareholder
• The CFI correctly found that evidence on record made no mention of facts holding movant personally liable

• Procedural Issues: Whether the motion for relief under Rule 38 filed by Refuerzo on January 31, 1956 was filed within the reglementary periods (60 days from knowledge, not more than 6 months from judgment dated June 8, 1955)
• Substantive Issues: Whether Segundino Refuerzo, as president of an unregistered (non-existent) corporation, is personally liable for the contractual obligations entered into in the corporation's name

• Procedural: Denied; motion for relief was filed out of time. The decision was rendered June 8, 1955; the motion was filed January 31, 1956 — a lapse of 7 months and 23 days, beyond the 6-month absolute limit in Rule 38, Section 3. The periods under Rule 38 (60 days from knowledge, 6 months from judgment) are non-extendible, never interrupted, and cannot be subjected to conditions.
• Substantive: Refuerzo is personally liable. A non-existent corporation has no juridical personality separate from its members; it is incompetent to act or create agents. One who acts as its representative does so without authority and at his own risk. Under the principle that an agent without a principal is himself the principal, Refuerzo assumed all rights and liabilities of a principal and is personally bound by the lease contract.

• Rule 38 Periods (Relief from Judgment) — A petition for relief must be verified and filed within 60 days after the petitioner learns of the judgment AND not more than 6 months after such judgment was entered; both periods must be satisfied conjunctively. These periods are of grace, non-extendible, never interrupted, and not subject to conditions.
• Estoppel to Deny Corporate Existence (Fraud Exception) — While a person dealing with an association as a corporate body is generally estopped from denying its existence (Asia Banking Corporation doctrine), this estoppel does not apply where fraud takes part in the transaction.
• Personal Liability of Agents of Non-existent Corporations — An unregistered corporation has no juridical personality; it cannot create agents or confer authority. Persons acting as its agents do so without authority and at their own risk. By acting on behalf of a corporation known to be unregistered, the agent assumes the risk of personal liability.
• Agent Without a Principal = Principal — Elementary agency principle: A person who acts as an agent without authority or without a principal is regarded as the principal himself, possessed of all rights and subject to all liabilities of a principal.
• Moving Spirit Doctrine — As president and moving spirit behind the unregistered corporation's transaction, the officer cannot limit his liability to that imposed upon shareholders of a duly registered corporation.

• "The remedy allowed by Rule 38 to a party adversely affected by a decision or order is certainly an alert of grace or benevolence intended to afford said litigant a penultimate opportunity to protect his interest. Considering the nature of such relief and the purpose behind it, the periods fixed by said rule are non-extendible and never interrupted; nor could it be subjected to any condition or contingency because it is of itself devised to meet a condition or contingency."
• "A corporation which before the law is non-existent has no personality and would be incompetent to act and appropriate for itself the powers and attribute of a corporation as provided by law; it cannot create agents or confer authority on another to act in its behalf; thus, those who act or purport to act as its representatives or agents do so without authority and at their own risk."
• "A person who acts as an agent without authority or without a principal is himself regarded as the principal, possessed of all the rights and subject to all the liabilities of a principal."

• Palomares vs. Jimenez (G.R. No. L-4513, Jan. 31, 1952) — Cited for the rule that Rule 38 periods are non-extendible and never interrupted.
• Asia Banking Corporation vs. Standard Products Co. (46 Phil. 114), Compania Agricola de Ultramar vs. Reyes (4 Phil. 1), Ohta Development Co. vs. Steamship Pompey (49 Phil. 117) — Cited for the general doctrine of estoppel to deny corporate existence of associations dealt with as corporations.
• Walter A. Smith Co. vs. Ford (SC-G.R. No. 42420) — Cited for the principle that a registered corporation has juridical personality separate from stockholders/officers, limiting personal liability.
• Fay vs. Noble (7 Cushing [Mass.] 188) — Cited for the common law principle that an agent without a principal is himself the principal.

• Rule 38, Section 3 of the Rules of Court (Old Rules of Court) — Prescribes the 60-day and 6-month periods for filing petitions for relief from judgment; requires verification and affidavit of fraud, accident, mistake, or excusable negligence.
• General Corporation Law principles — Juridical personality requires registration; only registered corporations enjoy separate legal existence and limited liability shield.