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Republic of the Philippines

EN BANC

G.R. No. L-11442 May 23, 1958

MANUELA T. VDA. DE SALVATIERRA, petitioner,

Jimenez, Tantuico, Jr. and Tolete for petitioner.

FELIX, J.:

This is a petition for certiorari filed by Manuela T. Vda. de Salvatierra seeking to nullify the order of the Court of First
Instance of Leyte in Civil Case No. 1912, dated March 21, 1956, relieving Segundino Refuerzo of liability for the
contract entered into between the former and the Philippine Fibers Producers Co., Inc., of which Refuerzo is the
president. The facts of the case are as follows:

Manuela T. Vda. de Salvatierra appeared to be the owner of a parcel of land located at Maghobas, Poblacion,
Burauen, Teyte. On March 7, 1954, said landholder entered into a contract of lease with the Philippine Fibers
Producers Co., Inc., allegedly a corporation "duly organized and existing under the laws of the Philippines, domiciled
at Burauen, Leyte, Philippines, and with business address therein, represented in this instance by Mr. Segundino Q.
Refuerzo, the President". It was provided in said contract, among other things, that the lifetime of the lease would be
for a period of 10 years; that the land would be planted to kenaf, ramie or other crops suitable to the soil; that the
lessor would be entitled to 30 per cent of the net income accruing from the harvest of any, crop without being
responsible for the cost of production thereof; and that after every harvest, the lessee was bound to declare at the
earliest possible time the income derived therefrom and to deliver the corresponding share due the lessor.

Apparently, the aforementioned obligations imposed on the alleged corporation were not complied with because on
April 5, 1955, Alanuela T. Vda, de Salvatierra filed with the Court of First Instance of Leyte a complaint against the
Philippine Fibers Producers Co., Inc., and Segundino Q. Refuerzo, for accounting, rescission and damages (Civil
Case No. 1912). She averred that sometime in April, 1954, defendants planted kenaf on 3 hectares of the leased
property which crop was, at the time of the commencement of the action, already harvested, processed and sold by
defendants; that notwithstanding that fact, defendants refused to render an accounting of the income derived
therefrom and to deliver the lessor's share; that the estimated gross income was P4,500, and the deductible
expenses amounted to P1,000; that as defendants' refusal to undertake such task was in violation of the terms of the
covenant entered into between the plaintiff and defendant corporation, a rescission was but proper.

As defendants apparently failed to file their answer to the complaint, of which they were allegedly notified, the Court
declared them in default and proceeded to receive plaintiff's evidence. On June 8, 1955, the lower Court rendered
judgment granting plaintiff's prayer, and required defendants to render a complete accounting of the harvest of the
land subject of the proceeding within 15 days from receipt of the decision and to deliver 30 per cent of the net
income realized from the last harvest to plaintiff, with legal interest from the date defendants received payment for
said crop. It was further provide that upon defendants' failure to abide by the said requirement, the gross income
would be fixed at P4,200 or a net income of P3,200 after deducting the expenses for production, 30 per cent of which
or P960 was held to be due the plaintiff pursuant to the aforementioned contract of lease, which was declared
rescinded.

No appeal therefrom having been perfected within the reglementary period, the Court, upon motion of plaintiff, issued
a writ of execution, in virtue of which the Provincial Sheriff of Leyte caused the attachment of 3 parcels of land
registered in the name of Segundino Refuerzo. No property of the Philippine Fibers Producers Co., Inc., was found
available for attachment. On January 31, 1956, defendant Segundino Refuerzo filed a motion claiming that the
decision rendered in said Civil Case No. 1912 was null and void with respect to him, there being no allegation in the
complaint pointing to his personal liability and thus prayed that an order be issued limiting such liability to defendant
corporation. Over plaintiff's opposition, the Court a quo granted the same and ordered the Provincial Sheriff of Leyte
to release all properties belonging to the movant that might have already been attached, after finding that the
evidence on record made no mention or referred to any fact which might hold movant personally liable therein. As
plaintiff's petition for relief from said order was denied, Manuela T. Vda. de Salvatierra instituted the instant action
asserting that the trial Judge in issuing the order complained of, acted with grave abuse of discretion and prayed that
same be declared a nullity.

From the foregoing narration of facts, it is clear that the order sought to be nullified was issued by tile respondent
Judge upon motion of defendant Refuerzo, obviously pursuant to Rule 38 of the Rules of Court. Section 3 of said
Rule, however, in providing for the period within which such a motion may be filed, prescribes that:

SEC. 3. WHEN PETITION FILED; CONTENTS AND VERIFICATION. — A petition provided for in either of
the preceding sections of this rule must be verified, filed within sixty days after the petitioner learns of the
judgment, order, or other proceeding to be set aside, and not more than six months after such judgment or
order was entered, or such proceeding was taken; and must be must be accompanied with affidavit showing
the fraud, accident, mistake, or excusable negligence relied upon, and the facts constituting the petitioner is
good and substantial cause of action or defense, as the case may be, which he may prove if his petition be
granted". (Rule 38)

The aforequoted provision treats of 2 periods, i.e., 60 days after petitioner learns of the judgment, and not more than
6 months after the judgment or order was rendered, both of which must be satisfied. As the decision in the case at
bar was under date of June 8, 1955, whereas the motion filed by respondent Refuerzo was dated January 31, 1956,
or after the lapse of 7 months and 23 days, the filing of the aforementioned motion was clearly made beyond the
prescriptive period provided for by the rules. 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 (Palomares vs. Jimenez, * G.R. No. L-4513, January
31, 1952). On this score alone, therefore, the petition for a writ of certiorari filed herein may be granted. However,
taking note of the question presented by the motion for relief involved herein, We deem it wise to delve in and pass
upon the merit of the same.

Refuerzo, in praying for his exoneration from any liability resulting from the non-fulfillment of the obligation imposed
on defendant Philippine Fibers Producers Co., Inc., interposed the defense that the complaint filed with the lower
court contained no allegation which would hold him liable personally, for while it was stated therein that he was a
signatory to the lease contract, he did so in his capacity as president of the corporation. And this allegation was
found by the Court a quo to be supported by the records. Plaintiff on the other hand tried to refute this averment by
contending that her failure to specify defendant's personal liability was due to the fact that all the time she was under
the impression that the Philippine Fibers Producers Co., Inc., represented by Refuerzo was a duly registered
corporation as appearing in the contract, but a subsequent inquiry from the Securities and Exchange Commission
yielded otherwise. While as a general rule a person who has contracted or dealt with an association in such a way as
to recognize its existence as a corporate body is estopped from denying the same in an action arising out of such
transaction or dealing, (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), yet this doctrine may
not be held to be applicable where fraud takes a part in the said transaction. In the instant case, on plaintiff's charge
that she was unaware of the fact that the Philippine Fibers Producers Co., Inc., had no juridical personality,
defendant Refuerzo gave no confirmation or denial and the circumstances surrounding the execution of the contract
lead to the inescapable conclusion that plaintiff Manuela T. Vda. de Salvatierra was really made to believe that such
corporation was duly organized in accordance with law.

There can be no question that a corporation with registered has a juridical personality separate and distinct from its
component members or stockholders and officers such that a corporation cannot be held liable for the personal
indebtedness of a stockholder even if he should be its president (Walter A. Smith Co. vs. Ford, SC-G.R. No. 42420)
and conversely, a stockholder or member cannot be held personally liable for any financial obligation be, the
corporation in excess of his unpaid subscription. But this rule is understood to refer merely to registered corporations
and cannot be made applicable to the liability of members of an unincorporated association. The reason behind this
doctrine is obvious-since an organization 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. And as it is an elementary principle of law that
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, a person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such privileges and obligations and comes personally liable for
contracts entered into or for other acts performed as such, agent (Fay vs. Noble, 7 Cushing [Mass.] 188. Cited in II
Tolentino's Commercial Laws of the Philippines, Fifth Ed., P. 689-690). Considering that defendant Refuerzo, as
president of the unregistered corporation Philippine Fibers Producers Co., Inc., was the moving spirit behind the
consummation of the lease agreement by acting as its representative, his liability cannot be limited or restricted that
imposed upon corporate shareholders. In acting on behalf of a corporation which he knew to be unregistered, he
assumed the risk of reaping the consequential damages or resultant rights, if any, arising out of such transaction.

Wherefore, the order of the lower Court of March 21, 1956, amending its previous decision on this matter and
ordering the Provincial Sheriff of Leyte to release any and all properties of movant therein which might have been
attached in the execution of such judgment, is hereby set aside and nullified as if it had never been issued. With
costs against respondent Segundino Refuerzo. It is so ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and
Endencia, JJ., concur.

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