An unincorporated entity, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation. It cannot therefore allege lack of personality to be sued to evade its responsibility for a contract it entered into and by virtue of which it received advantages and benefits. (Lim Tong Lim, petitioner, vs. Philippine Fishing Gear Industries Inc., respondent. G.R. 136448.  November 3, 1999]. In relation to Corporation by Estoppel under the Corporation Code of the Philippines, an unincorporated entity finds its significance in the legal effects on the acts of persons who assume to act as a corporation knowing that they are without authority to do so. The doctrine of corporation by estoppel applies to the putative corporation and to a third party.

In our previous writing we introduced the term ostensible corporation as another way of legally describing an unincorporated entity. Section 21 of the Corporation Code of the Philippines provides that all persons who assume to act as a corporation knowing it to be without authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a result thereof. When any such ostensible corporation is sued on any transaction entered into by it as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense to avoid liability, its lack of corporate personality. In fact one who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground that there was in fact no corporation (Ibid). As to the act of a third person, when said third person has entered into a contract with an entity which represented itself to be a corporation, that entity will be estopped from denying its corporate capacity in a suit against it by such third person. It cannot allege lack of capacity to be sued to evade responsibility on a contract it had entered into and by virtue of which it received advantages and benefits (Christian Children’s Fund, petitioner, vs. NLRC, et. al., respondents. [G.R. 84502.  June 30, 1989.]

Thus, even if the unincorporated or ostensible corporation or entity is proven to be legally nonexistent, a party may be estopped from denying its corporate existence.

The reason behind this doctrine is obvious — an unincorporated association (or entity) has no personality and would be incompetent to act and appropriate for itself the power and attributes 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 right and subject to all the liabilities of a principal, a person acting or purporting to act on behalf of a corporation or entity 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 (Salvatierra v. Garlitos, 103 SCRA 757, May 23, 1958, per Felix, J.; citing Fay v. Noble, 7 Cushing [Mass.] 188).

Philippine Airlines (PAL) will proceed with its programmed purchase of six Boeing 777s as it plans to explore new destinations.

Ayala-owned water utility posts 22% earnings rise

MANILA Water Co. (MWC), the water distribution arm of the Ayala group, said net profit for the first quarter of the year grew 22 percent to P625 million as revenues increased 16 percent on the back of higher billed volume and improvements in operating efficiency.

After years of maintaining a minor role in the domestic electronics market, Taiwanese-owned Asus now wants to take its role higher by opening its first dedicated service center in the Philippines.

THE listing of business process outsourcing (BPO) provider SPi Global Solutions, the outsourcing unit of Philippine Long Distance Telephone Co. (PLDT), has been postponed.

Telecom firm Philippine Long Distance Telephone Co. (PLDT) sees core income this year to grow by 5 percent to P37 billion over last year, as it closely monitors inflation, exchange rate and overseas Filipino worker (OFW) remittance levels seen to may affect its financial performance.

An unincorporated entity, which represented itself to be a corporation, will be estopped from denying its corporate capacity in a suit against it by a third person who relied in good faith on such representation.