No. L-19118. January 30, 1965.
MARIANO A. ALBERT, plaintiff-appellant, vs. UNIVERSITY PUBLISHING CO., INC.,
defendant-appellee.
Corporations; Principle of corporation by estoppel; Not invokable by one who misrepresented
corporation as duly organized against his victim.—One who has induced another to act upon his
wilful misrepresentation that a corporation was duly organized and existing under the law,
cannot thereafter set up against his victim the principle of corporation by estoppel.
Same; Person acting for corporation with no valid existence is personally liable for contracts
entered into as such agent.—A person acting or purporting to act on behalf of a corporation
which has no valid existence assumes such privileges and obligations and becomes personally
liable for contracts entered into or for other acts performed as such agent.
Parties to Action; Suit against corporation with no valid existence; Real defendant is person who
has control of its proceedings.—In a suit against a corporation with no valid existence the person
who had and exercised the rights to control the proceedings, to make defense, to adduce and
cross-examine witnesses, and to appeal from a decision, is the real defendant, and .the
enforcement of a judgment against the corporation upon him is substantial observance of due
process of law.
Same; Real party in interest; Person who acted as representative of non-existent principal and
who reaped benefits from its contracts.—A person who acted as representative of a non-existent
principal, who reaped the benefits resulting from a contract entered into by him as such, and who
violated its terms, thereby precipitating a suit, is the real party to the contract sued upon.
Due Process of Law; Purpose is to secure justice and not to sacrifice it by technicalities.—The
“due process” clause of the Constitution is designed to secure justice as a living reality, not to
sacrifice it by paying undue homage to formality. For substance must prevail over form.
Uy & Artiaga and Antonio M. Molina for plaintiff-appellant.
Aruego, Mamaril & Associates for defendant-appellee.
BENGZON, J.P., J.:
No less than three times have the parties here appealed to this Court.
In Albert vs. University Publishing Co., Inc., L-9300, April 18, 1958, we found plaintiff entitled
to damages (for breach of contract) but reduced the amount from P23,000.00 to P15,000.00.
Then in Albert vs. University Publishing Co., Inc., L-15275, October 24, 1960, we held that the
judgment for P15,000.00 which had become final and executory, should be executed to its full
amount, since in fixing it, payment already made had been considered.
Now we are asked whether the judgment may be executed against Jose M. Aruego, supposed
President of University Publishing Co., Inc., as the real defendant.
Fifteen years ago, on September 24, 1949, Mariano A. Albert sued University Publishing Co.,
Inc. Plaintiff alleged inter alia that defendant was a corporation duly organized and existing
under the laws of the Philippines; that on July 19, 1948, defendant, through Jose M. Aruego, its
President, entered into a contract with plaintiff; that defendant had thereby agreed to pay plaintiff
P30,000.00 for the exclusive right to publish his revised Commentaries on the Revised Penal
Code and for his share in previous sales of the book’s, first edition; that defendant had
undertaken to pay in eight quarterly installments of P3,750.00 starting July 15, 1948; that per
contract failure to pay one installment would render the rest due; and that defendant had failed to
pay the second installment.
Defendant admitted plaintiff’s allegation of defendant’s corporate existence; admitted the
execution and terms of the contract dated July 19, 1948; but alleged that it was plaintiff who
breached their contract by failing to deliver his manuscript. Furthermore, defendant
counterclaimed for damages.
Plaintiff died before trial and Justo R. Albert, his estate’s administrator, was substituted for him.
The Court of First Instance of Manila, after trial, rendered decision on April 26, 1954, stating in
the dispositive portion—
“IN VIEW OF ALL THE FOREGOING, the Court renders judgment in favor of the plaintiff and
against the defendant the University Publishing Co., Inc., ordering the defendant to pay the
administrator Justo R. Albert, the sum of P23,000.00 with legal [rate] of interest from the date of
the filing of this complaint until the whole amount shall have been fully paid. The defendant
shall also pay the costs. The counterclaim of the defendant is hereby dismissed for lack of
evidence.”
As aforesaid, we reduced the amount of damages to P15,000.00, to be executed in full.
Thereafter, on July 22, 1961, the court a quo ordered issuance of an execution writ against
University Publishing Co., Inc. Plaintiff, however, on August 10, 1961, petitioned for a writ of
execution against Jose M. Aruego, as the real defendant, stating, “plaintiff’s counsel and the
Sheriff of Manila discovered that there is no such entity as University Publishing Co., Inc.”
Plaintiff annexed to his petition a certification from the Securities and Exchange Commission
dated July 31, 1961, attesting: “The records of this Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either as a corporation or partnership.” “University
Publishing Co., Inc.” countered by filing, through counsel (Jose M. Aruego’s own law firm), a
“manifestation” stating that “Jose M. Aruego is not a party to this case,” and that, therefore,
plaintiff’s petition should be denied.
Parenthetically, it is not hard to decipher why “University Publishing Co., Inc.,” through counsel,
would not want Jose M. Aruego to be considered a party to the present case: should a separate
action be now instituted against Jose M. Aruego, the plaintiff will have to reckon with the statute
of limitations.
The court a quo denied the petition by order of September 9, 1961, and from this, plaintiff has
appealed.
The fact of non-registration of University Publishing Co., Inc. in the Securities and Exchange
Commission has not been disputed. Defendant would only raise the point that “University
Publishing Co., Inc.,” and not Jose M. Aruego, is the party defendant; thereby assuming that
“University Publishing Co., Inc.” is an existing corporation with an independent juridical
personality. Precisely, however, on account of the non-registration it cannot be considered a
corporation, not even a corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no
personality separate from Jose M. Aruego; it cannot be sued independently.
The corporation-by-estoppel doctrine has not been invoked. At any rate, the same is inapplicable
here. Aruego represented a non-existent entity and induced not only the plaintiff but even the
court to believe in such representation. He signed the contract as “President” of “Univer-sity
Publishing Co., Inc.,” stating that this was “a corporation duly organized and existing under the
laws of the Philippines,” and obviously misled plaintiff (Mariano A. Albert) into believing the
same. One who has induced another to act upon his wilful misrepresentation that a corporation
was duly organized and existing under the law, cannot thereafter set up against his victim the
principle of corporation by estoppel (Salvatiera vs. Garlitos, 56 O.G. 3069).
“University Publishing Co., Inc.” purported to come to court, answering the complaint and
litigating upon the merits. But as stated, “University Publishing Co., Inc.” has no independent
personality; it is just a name. Jose M. Aruego was, in reality, the one who answered and litigated,
through his own law firm as counsel. He was in fact, if not in name, the defendant.
Even with regard to corporations duly organized and existing under the law, we have in many a
case pierced the veil of corporate fiction to administer the ends of justice.*Arnold vs. Willits &
Patterson, Ltd., 44 Phil. 634; Koppel (Phil.), Inc. vs. Yatco, 77 Phil. 496; La Campana Coffee
Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La Campana, 93 Phil. 160; Marvel Building
Corporation vs. David, 94 Phil. 376; Madrigal... And in Salvatiera vs. Garlitos, supra, p. 3073,
we ruled: “A person acting or purporting to act on behalf of a corporation which has no valid
existence assumes
__________________
* Arnold vs. Willits & Patterson, Ltd., 44 Phil. 634; Koppel (Phil.), Inc. vs. Yatco, 77 Phil. 496;
La Campana Coffee Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La Campana, 93 Phil.
160; Marvel Building Corporation vs. David, 94 Phil. 376; Madrigal Shipping Co., Inc. vs.
Ogilvie, L-8431, Oct. 30, 1958; Laguna Transportation Co., Inc. vs. S.S.S., L-14606, April 28,
1960; McConnel vs. CA., L-10510, Mar. 17, 1961; Liddell & Co., Inc. vs. Collector of Internal
Revenue, L-9687, June 30, 1961: Palacio vs. Fely Transportation Co., L-15121, August 31,
1962.
such privileges and obligations and becomes personally liable for contracts entered into or for
other acts performed as such agent.” Had Jose M. Aruego been named as party defendant instead
of, or together with, “University Publishing Co., Inc.,” there would be no room for debate as to
his personal liability. Since he was not so named, the matters of “day in court” and “due process”
have arisen.
In this connection, it must be realized that parties to a suit are “persons who have a right to
control the proceedings, to make defense, to adduce and cross-examine witnesses, and to appeal
from a decision” (67 C.J.S. 887)—and Aruego was, in reality, the person who had and exercised
these rights. Clearly, then, Aruego had his day in court as the real defendant; and due process of
law has been substantially observed.
“By ‘due process of law’ we mean ‘“a law which hears before it condemns; which proceeds
upon inquiry, and renders judgment only after trial, x x x.” (4 Wheaton, U.S. 518, 581.)’; or, as
this Court has said, ‘“Due process of law” contemplates notice and opportunity to be heard
before judgment is, rendered, affecting one’s person or property’ (Lopez vs. Director of Lands,
47 Phil. 23, 32).” (Sicat vs. Reyes, L-11023, Dec. 14, 1956.) And it may not be amiss to mention
here also that the “due process” clause of the Constitution is designed to secure justice as a living
reality; not to sacrifice it by paying undue homage to formality. For substance must prevail over
form. It may now be trite, but none the less apt, to quote what long ago we said in Alonso vs.
Villamor, 16 Phil. 315, 321-322:
“A litigation is not a game of technicalities in which one-more deeply schooled and skilled in the
subtle art of movement and position, entraps and destroys the other. It is, rather, a contest in
which each contending party fully and fairly lays before the court the facts in issue and then,
brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of
procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by
a rapier’s thrust. Technicality, when it deserts its proper office as an aid to justice and becomes
its great hindrance and chief enemy, deserves scant consideration from courts. There should be
no vested rights in technicalities.”
The evidence is patently clear that Jose M. Aruego, acting as representative of a non-existent
principal, was the real party to the contract sued upon; that he was the one who reaped the
benefits resulting from it, so much so that partial payments of the consideration were made by
him; that he violated its terms, thereby precipitating the suit in question; and that in the litigation
he was the real defendant. Perforce, in line with the ends of justice, responsibility under the
judgment falls on him.
We need hardly state that should there be persons who under the law are liable to Aruego for
reimbursement or contribution with respect to the payment he makes under the judgment in
question, he may, of course, proceed against them through proper remedial measures.
PREMISES CONSIDERED, the order appealed from is hereby set aside and the case remanded
ordering the lower court to hold supplementary proceedings for the purpose of carrying the
judgment into effect against University Publishing Co., Inc. and/or Jose M. Aruego. So ordered.
Bengzon, C.J., Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal and
Zaldivar JJ., concur.
Bautista Angelo, J., took no part.
Order set aside and case remanded to lower court for supplementary proceedings.
Note.—This case went to the Supreme Court five times. The first was on April 18, 1958 (L-
9300), then on October 24, 1960 (L-15275), and again on May 17, 1961 (L-18350). It was again
brought up to the Supreme court by certiorari on January 30, 1965 (L-19118) which is the
decision reported in this volume. The last time the case was elevated to the Supreme Court was
on May 29, 1968 (L-26364). The contest in this case was called by the Supreme Court a “legal
marathon.” Albert vs. University Publishing Co., Inc., 13 SCRA 84, No. L-19118 January 30,
1965
