Hall vs. Piccio (86 Phil 603)

​Doctrine: The immunity from collateral attack is granted to corporations "claiming in good faith to be a corporation under this act. Unless there has been an evident attempt to comply with the law the claim to be a corporation "under this act" could not be made "in good faith."

FACTS:
May 28, 1947, petitioners C. Arnold Hall and Bradley P. Hall, and respondents Fred Brown, Emma Brown, Hipolita D. Chapman and Ceferino S. Abella, signed and acknowledged in Leyte, the article of incorporation of the Far Eastern Lumber and Commercial Co., Inc., organized to engage in a general lumber business to carry on as general contractors, operators and managers. Attached to the article was an affidavit of the treasurer stating that 23,428 shares of stock had been subscribed and fully paid with certain properties transferred to the corporation. The said articles of incorporation was filed in the office of SEC. Pending action of the articles of incorporation by SEC, the respondents filed a civil case against the petitioners alleging that Far Eastern Lumber and Commercial Co was an unregistered partnership and that they wished it dissolved because of bitter dissension among the members, mismanagement and fraud by the managers and heavy financial losses. The court (thru Judge Piccio) ordered the dissolution of the company. Hall offered to file a counter bond for the discharge of the receiver but the judge refused to accept the offer and discharge the receiver. Herein petitioner claims that the corporation is a de facto corporation, that its dissolution may be ordered only in a quo warranto proceedings instituted by the State

ISSUE:
Whether it is a de facto corporation. 
HELD:
NO. Section 20 {Now Sec 19} of the Corporation Law does not apply in this situation. First, not having obtained the certificate of incorporation, the Far Eastern Lumber and Commercial Co. — even its stockholders — may not probably claim "in good faith" to be a corporation. (Under our statue it is to be noted (Corporation Law, sec. 11 – Now Sec 18) that it is the issuance of a certificate of incorporation by the Director of the Bureau of Commerce and Industry which calls a corporation into being. The immunity from collateral attack is granted to corporations "claiming in good faith to be a corporation under this act." Such a claim is compatible with the existence of errors and irregularities; but not with a total or substantial disregard of the law. Unless there has been an evident attempt to comply with the law the claim to be a corporation "under this act" could not be made "in good faith." Second, this is not a suit in which the corporation is a party. This is a litigation between stockholders of the alleged corporation, for the purpose of obtaining its dissolution. Even the existence of a de jure corporation may be terminated in a private suit for its dissolution between stockholders, without the intervention of the state.