[ G.R. No. 1184. April 22, 1904 ] 4 Phil. 2
[ G.R. No. 1184. April 22, 1904 ]
THE COMPAÑIA AGRICOLA DE ULTRAMAR, PLAINTIFF AND APPELLANT, VS. ANACLETO REYES ET AL., DEFENDANTS AND APPELLEES. D E C I S I O N
JOHNSON, J.:
On the 7th day of January, 1902, the representative of the Compañia Agricola de Ultramar, a partnership legally organized in Madrid, Spain, domiciled in the city of Manila, presented a complaint in the justice’s court of the town of Quingua, Province of Bulacan, against Anacleto Reyes and others, setting forth that the defendants were tenants of the estate called Tabang, San Marcos, and Dampol, the property of the plaintiff company, located in the said town of Quingua, each one of whom were occupying the quantity of land expressed therein without having paid the rent for the years 1899,1900, and 1901, notwithstanding the fact that said payment had been demanded several times at the end of each year. Therefore the plaintiff company prayed that judgment be rendered against said defendants, ordering them to vacate the lands occupied by them and to restore the possession thereof to the plaintiff, with costs against the defendants.
Upon notice, the defendants appeared on the 30th of January of the same year, with the exception of the Chinaman Mariano Yñiguez. After hearing both parties, the justice of the peace, on the 17th of February following, on the supposition that said plaintiff company was a commercial partnership, and subject to the provisions of the Code of Commerce, and had not registered in the commercial registry, denied the petition of the plaintiff, with costs.
An appeal having been interposed by the plaintiff and the parties cited, a hearing was had in the Court of First Instance of Bulacan on the 21st of March, 1902, and the judge, having heard the arguments and petitions of both parties, on the 22d of the same month, rendered judgment confirming the decision of the justice’s court of Quingua, and declared the Compañia Agricola de Ultramar, a commercial partnership, and therefore that its registry in the commercial register was necessary in order to appear in an action, and adjudged the payment of the costs to the plaintiff.
On the 24th of March the plaintiff company, by petition, prayed that the decision before mentioned should be annulled, and that a new trial be granted in view of the reasons set forth. The judge, on the 27th of September, in the presence of both parties, and for the reasons ex pressed by him, declared that the Compañia Agricola de Ultramar, was a civil partnership, to which are applicable the provisions of the Code of Commerce in conformity with article 1670 of the Civil Code, and that said partnership should be registered in the commercial registry before it could appear in an action against the defendants, modifying and revoking that part of the judgment of the 22d of March which did not conform thereto, and confirming that part which agrees with the provisions cited. The plaintiff excepted to this judgment.
In the bill of exceptions appears, among other documents, the articles of incorporation executed on the 6th of February, 1893, before a notary in the court of Madrid, ;Spain, by various residents of the same place, organizing a partnership, entitled Compañia Agricola de Ultramar, which, among other things, expressed the organization of the partnership and its statutes, as well as that the parties therein organized a special civil partnership to exploit the agricultural industry in the Philippine Islands and other Spanish colonies, in accordance with the present Civil Code, and under the following statutes:
“Article 1. The partnership shall be called the Compañia Agricola de Ultramar, and shall have its residence in Manila.
“Art. 2. The duration of the partnership shall be for ninety years from the date of its incorporation. Said period may be extended by a resolution of the board of shareholders.
“Art. 3. In order to exploit and develop the agricultural industry in the Philippine Islands and other Spanish colonies, the partnership may acquire any land, canals, and irrigating marshes or runways, overflows, waterfalls, quarries, and other real estate, and such cattle as may be useful for agricultural exploitation; to exploit or alienate said property, and to rent, by way of a charge, or underlease, as may be convenient for the interests of the partnership, the realty; to establish agricultural colonies and to invest capital at interest with a mortgage upon rural or urban property, and to acquire credits with such guaranties; to grant loans upon crops, cultivated lands, cattle, agricultural machines, and in turn to borrow money on mortgage guaranty; to lease rural or urban property.
“Art. 4. The capital is four million and fifty thousand pesetas, divided into eighty-one shares of fifty thousand pesetas each. Said capital can be increased or decreased, or subdivided in a proportion of five thousand or more pesetas for each one, by resolution of the board of directors.
“Art. 5. Only the capital invested will answer for the obligations of the company. Neither the organizers nor grantors of shares will in any case and under any consideration be responsible for the debts of the partnership.”
“Art. 38. According to the provisions of article three the partnership can loan money upon crops, cultivated land, cattle, and agricultural machinery and implements in general.”
In the bill of exceptions presented to this court by the Compania Agricola de Ultramar, plaintiff and appellant, against the decision of the lower court, it appears that the principal object is to obtain a judicial declaration that the plaintiff herein is a civil partnership, and is not therefore under the obligation of registering in the commercial registry in order to have juridical personality with the power to appear in an action against the defendants.
The organizers of the Compañia Agricola de Ultramar, stated in the articles of incorporation that by the same they organized a special civil corporation for the purposes and ends expressed therein. Granting, for the sake of argument, without, accepting the doctrine that, the character of an association, whether it be civil or mercantile, is determined solely by the business in which it is engaged and not by the form of its organization, in this present cause there is no evidence showing the character of the business of the plaintiff save the articles of its association. We must therefore decide whether this plaintiff was a mercantile or a civil corporation by the purposes declared in its articles of association, and the law governing in such cases.
Mercantile associations, purely, are governed by the mercantile code. Civil associations are governed by the Civil Code.
Article 1 of the Code of Commerce provides that :
“Article 1. The following are merchants for the purposes of this code:
“(1) Those who, having legal capacity to trade, devote themselves thereto habitually.
“(2) Commercial or industrial associations which are formed in accordance with this code.”
The Commercial Code for the Philippines does not attempt anywhere, as some other codes do, to define what are commercial transactions. In the absence of proof to the contrary, therefore, we must be governed as to the purposes of the association by the form adopted by its organization and the purposes declared in its articles of association.
Primarily we must determine whether an association is mercantile or civil simply by the form of its organization.
The Commercial Code provides how mercantile associations shall be organized.
Article 116 defines a commercial association and provides that—
“Articles of association by which two or more persons obligate themselves to place in a common fund any property, industry, or any of these things, in order to obtain profit, shall be commercial, no matter what its nature may be, provided it has been established in accordance with the provisions of this code.
“After a commercial association has been established, it shall have the right to operate as a juristic person in all its acts and contracts.”
Article 122 provides that commercial associations may become a general or limited copartnership or a corporation, according to the particular form of the organization which it may adopt.
Article 121 provides that all commercial associations shall be governed by the clauses and conditions of their articles of association, and that in cases or conditions not so provided for shall be controlled by the general provisions of the Commercial Code.
Article 17 provides that all commercial associations, established in accordance with the provisions of the code, shall be inscribed in the commercial registry.
Article 16 makes provisions for the establishment of commercial registries in all the capitals of the provinces.
Article 21 provides what facts, concerning commercial associations, shall be recorded in such commercial registries.
Article 119 provides that—
“Every commercial association, before beginning business, shall be obliged to record its establishment, agreements, and conditions in a public instrument, which shall be presented for record in the commercial registry, in accordance with the provisions of article seventeen.
“Additional instruments which modify or alter in any manner whatsoever the original contracts of the association are subject to the same formalities, in accordance with the provisions of article twenty-five.
“Partners can not make private agreements, but all must appear in the articles of co- partnership.”
The supreme court of Spain in an opinion rendered on the 14th day of May, 1884, in the cause of Santiago vs. Bautista et al., held under a similar provision of the Commercial Code in force in Spain, that commercial associations have no right to bring actions in the name of the association until after they have complied with the provisions of the code found in articles 17 and 119.
Articles 125-144 contain the general provisions governing general associations.
Articles 145-150 contain the general provisions governing limited associations.
Articles 151-174 contain the general provisions governing corporations.
Articles 175-243 contain the general provisions governing special classes of corporations or associations.
Article 35 of the Civil Code provides what are juridical persons. Its provisions are as follows :
“The following are juridical persons :
“(1) The corporations, associations, and institutions of public interest recognized by law.
“Their personality begins from the very instant in which, in accordance with law, they are legally established.
“(2) Private associations, be they civil, commercial, or industrial, to which the law grants proper personality, independent of that of each member thereof.”
Article 36 provides that—
“The associations referred to in “No.- 2 of the foregoing article, shall be governed by the provisions of their articles of association, according to the nature of the latter.”
Article 37 provides that—
“The civil capacity of corporations shall be governed by the laws which have created or recognized them; that of associations by their by-laws * * *.”
Article 88 provides that the general powers and rights of juridical persons are as follows:
“Juridical persons may acquire and possess property of all kinds, as well as contract obligations and institute civil or criminal actions in accordance with the laws and rules of their organization.”
Article 39 provides for the winding up of the business of corporations and associations organized under the Civil Code and for the disposition of their property.
Article 1665 defines a partnership as follows:
“Partnership is a contract by which two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.'
Article 1666 provides that such partnerships must have lawful objects, and be established for the common interest of all their members.
Article 1667 provides that such partnerships may be established in any form whatever, except when real property or property rights are contributed, in which case a public instrument shall be necessary.
In the present case the property was contributed and a public instrument was duly executed before Manuel de Bofarull, one of the most famous notaries of all Europe.
Article 1670 provides that civil partnerships, on account of the; objects to which they are devoted, may adopt all the forms recognized >y the Commercial Code. In such cases its (Commercial Code) provisions shall be applicable in so far as they do not conflict with the provisions of this code.
It will be seen from this provision that whether or not partnerships shall adopt the forms provided for by the Civil or Commercial Codes is left entirely to their discretion. And furthermore, that such civil partnerships shall only be governed by the forms and provisions of the Commercial Code when they expressly adopt them, and then only in so far as they (rules of the Commercial Code) do not conflict with the provisions of the Civil Code. In this provision the legislature expressly indicates that there may exist two classes, of commercial associations, depending not upon the business in which they are engaged but upon the particular form adopted in their organization. The definition of the partnership found in article 1665 clearly includes associations organized for the purpose, of gain growing out of commercial transactions.
Articles 1671-1678 provide for general and particular partnerships, and give the rules governing the division of the profits.
The Commercial Code makes special provisions for the liability of the members of the different associations organized under it. (See the articles contained in sections 2, 3, 4, 5, and 6 of Book II, Title I.)
The Civil Code here again recognizes the existence of civil partnerships, in contradistinction to commercial partnerships, in expressly providing for the liability of their members. (See arts. 1667-1669 of Chap. II of Title VIII.) Chapter III of the same title contains special provisions for the dissolution of civil associations.
If it is held that an association which adopts the. form for its organization provided for by the Civil Code is controlled by the rules requiring registration under the Commercial Code, then by which code shall the courts be governed in applying the rules of the liability of their members and for the dissolution of the same? We are inclined to the belief that the respective codes, Civil and Commercial, have adopted a complete system for the organization, control, continuance, liabilities, dissolutions, and juristic personalities of associations organized under each.
It will be seen from these provisions of the codes that the Civil Code has expressly provided for the existence of commercial associations, giving them juristic personality and certain rights and privileges. In these provisions no reference is made to the provisions of the Commercial Code. It is contended that notwithstanding this fact, such associations are nevertheless governed by the provisions of the latter code. The Commercial Code was enacted and went info effect on the 1st day of December, 1888. The Civil Code was enacted and took effect on the 31st day of July, 1889. Had it been the-intention of the legislature to provide that all commercial associations, of whatever class, should be governed by the provisions of the Commercial Code, it certainly would not have provided, at a later date, other rules, rights, privileges, and regulations. It is our opinion that associations organized under the different codes are governed by the provisions of the respective codes.
From the articles of association it will be seen that the plaintiff company was organized expressly under the provisions of the Civil Code, on the 6th day of February, 1893.
From the petition of the plaintiff and the bill of exceptions it appears that the defendants failed and refused to pay the rent for the years 1899, 1900, and 1901. It does not appear whether or not the defendants had failed or refused to pay the rent for any of the years previous to 1899. Assuming, without finding it to be a fact, that the defendants had paid the rent for previous years, then they thereby recognized the plain tiff company as an entity and are thereby now estopped from setting up the contrary.
While conditions precedent must always be performed, in order that a corporation may have a legal existence, it does not by any means follow that objection to the existence of a corporation on this ground alone can be raised by any and every person, and in every proceeding. This objection can always, with few exceptions, be raised by the State. (Attorney-General vs. Hanchett, 42 Mich., 436; People vs. Water Co., 97 Cal., 276.)
Persons who assume to form a corporation or business association, and exercise corporate functions, and enter into business relations with third persons, are estopped from denying that they constitute a corporation. So also are the third persons who deal with such a de facto association or corporation, recognizing it as such and thereby incurring liabilities, estopped, when an action is brought on such obligations, from denying the juristic personality of such corporations or associations. (Scheufler vs. Grand Lodge, 45 Minn., 256; Farmers’ Loan and Trust Co. vs. Ann Arbor Ry. Co., 67 Fed. Sep., 49.)
Where there is a corporation de facto, with no want of legislative power to its due and legal existence, when it is proceeding in the performance of a corporate function, andthird persons are dealing with it on the supposition that it is what it professes to be, and the questions are only whether the law has been strictly followed in its organization, it is plainly a dictate alike of justice and public policy, that in controversies between the de facto corporation and those who have entered into contractual relations with it, as corporations or otherwise, such questions should not be suffered to be raised. (Swarthout vs. Michigan, etc., Ey. Co., 224 Mich., 390.)
Where a shareholder of an association is called upon to respond to a liability as such, and where a party has contracted with a corporation and is sued upon the contract, neither is permitted to deny the existence or the legal validity of such corporation. To hold otherwise would be contrary to the plainest principles of reason and good faith. Parties must take the consequences of the position they assume. (Casey vs.Galli, 94 U. S., 673;Bliss on Code Pleading, secs. 252-254.)
From the foregoing considerations, the provisions of the articles of association of the plaintiff company, and the quoted provisions of the Civil and Commercial Codes, we are justified in reaching the following conclusions:
First. That the plaintiff company had statutory authority to organize under the Civil Code for the purposes indicated in its articles of association.
Second. That it did effect its organization under the Civil Code in force in these Islands.
Third. The defendants having recognized the existence of the plaintiff as an entity capable of dealing with private persons, they are thereby estopped from denying that fact.
Fourth. That the plaintiff company, having complied with the forms required for the organization of associations of its class under the Civil Code, is a juristic person recognized by law, and has capacity to maintain the present action.
The judgment of the lower court is therefore hereby reversed, and the cause is hereby ordered to be remanded to the Court of First Instance of the Province of Bulacan, with direction that the defendants be required to appear and answer within the time fixed by law, and upon failure so to do that a judgment be rendered against them by default in accordance with the prayer of the petition filed in said cause.
Cooper and McDonough, JJ., concur.
Mapa, J., did not sit in this case.