1

506949511.docx

Property – Donation – by MBC

176. THE MISSIONARY SISTERS OF OUR LADY OF FATIMA (Peach Sisters Of Laguna),
represented by Rev. Mother Ma. Concepcion R. Realon, et al., Petitioners
vs Amando V. ALZONA, et al., Respondents
G.R. No. 224307, 2018 August 6

DECISION

REYES, JR., J.:

Before this Court is a petition for review on certiorari1 under Rule 45 of the Rules of Court
seeking to annul and set aside the Decision2 dated January 7, 2016 of the Court of Appeals (CA)
in CA-G.R. CV No. 101944, and its Resolution3 dated April 19, 2016, denying the motion for
reconsideration thereof. The assailed decision partly granted the respondents' appeal and set
aside the Decision4 dated August 14, 2013 of the Regional Trial Court (RTC) of Calamba City,
Branch 92 in Civil Case No. 3250-02-C.

The Antecedent Facts

The Missionary Sisters of Our Lady of Fatima (petitioner), otherwise known as the Peach Sisters
of Laguna, is a religious and charitable group was established on May 30, 1989. Its primary
mission is to take care of the abandoned and neglected elderly persons. The petitioner came
into being as a corporation by virtue of a Certificate issued by the Securities and Exchange
Commission (SEC) on August 31, 2001. Mother Ma. Concepcion R. Real on (Mother Concepcion)
is the petitioner's Superior General.

The respondents, on the other hand, are the legal heirs of the late Purificacion Y. Alzona
(Purificacion).

The facts giving rise to the instant controversy follow:

Purificacion, a spinster, is the registered owner of parcels of land covered by Transfer

Certificate of Title (TCT) Nos. T-57820* and T-162375; and a co-owner of another property
covered by TCT No. T-162380, all of which are located in Calamba City, Laguna.

In 1996, Purificacion, impelled by her unmaterialized desire to be nun, decided to devote the
rest of her life in helping others. In the same year, she then became a benefactor of the
petitioner by giving support to the community and its works.

In 1997, during a doctor's appointment, Purificacion then accompanied by Mother

Concepcion, discovered that she has been suffering from lung cancer. Considering the
2
506949511.docx

restrictions in her movement, Purificacion requested Mother Concepcion to take care of her in
her house, to which the latter agreed.

In October 1999, Purificacion called Mother Concepcion and handed her a handwritten letter
dated October 1999. Therein, Purificacion stated that she is donating her house and lot at F.
Mercado Street and Riceland at Banlic, both at Calamba, Laguna, to the petitioner through
Mother Concepcion. On the same occasion, Purificacion introduced Mother Concepcion to her
nephew, Francisco Del Mundo (Francisco), and niece, Ma. Lourdes Alzona Aguto-Africa
(Lourdes). Purificacion, instructed Francisco to give a share of the harvest to Mother
Concepcion, and informed Lourdes that she had given her house to Mother Concepcion.

Sometime in August 2001, at the request of Purificacion, Mother Concepcion went to see Atty.
Nonato Arcillas (Atty. Arcillas) in Los Banos, Laguna. During their meeting, Atty. Arcillas asked
Mother Concepcion whether their group is registered with the SEC, to which the latter replied
in the negative. Acting on the advice given by Atty. Arcillas, Mother Concepcion went to SEC
and filed the corresponding registration application on August 28, 2001.

On August 29, 2001, Purificacion executed a Deed of Donation Inter Vivas (Deed) in favor of
the petitioner, conveying her properties covered by TCT Nos. T-67820 and T-162375, and her
undivided share in the property covered by TCT No. T-162380. The Deed was notarized by Atty.
Arcillas and witnessed by Purificacion's nephews Francisco and Diosdado Alzona, and
grandnephew, Atty. F emando M. Alonzo. The donation was accepted on even date by
Mother Concepcion for and in behalf of the petitioner.

Thereafter, Mother Concepcion filed an application before the Bureau of Internal Revenue
(BIR) that the petitioner be exempted from donor's tax as a religious organization. The
application was granted by the BIR through a letter dated January 14, 2002 of Acting Assistant
Commissioner, Legal Service, Milagros Regalado.12

Subsequently, the Deed, together with the owner's duplicate copies of TCT Nos. T-57820, T-
162375, and T-162380, and the exemption letter from the BIR was presented for registration.
The Register of Deeds, however, denied the registration on account of the Affidavit of
Adverse Claim dated September 26, 2001 filed by the brother of Purificacion, respondent
Amando Y. Alzona (Amando).

On October 30, 2001, Purificacion died without any issue, and survived only by her brother of
full blood, Amando, who nonetheless died during the pendency of this case and is now
represented and substituted by his legal heirs, joined as herein respondents.

On April 9, 2002, Amando filed a Complaint before the RTC, seeking to annul the Deed
executed between Purificacion and the petitioner, on the ground that at the time the
donation was made, the latter was not registered with the SEC and therefore has no juridical
personality and cannot legally accept the donation.
3
506949511.docx

After trial, on August 14, 2013, the RTC rendered its Decision finding no merit in the
complaint, thus ruling:

WHEREFORE, the instant case is hereby DISMISSED with costs against the [respondents]. The
Compulsory counterclaim of the [petitioner] is likewise dismissed for lack of evidence.

SO ORDERED.

In its decision, the RTC held that all the essential elements of a donation are present. The RTC
set aside the allegation by the respondents relating to the incapacity of the parties to enter into
a donation.

In the case of Purificacion, the RTC held that apart from the self-serving allegations by the
respondents, the records are bereft of evidence to prove that she did not possess the proper
mental faculty in making the donation; as such the presumption that every person is of sound
mind stands.

On the capacity of the donee, the RTC held that at the time of the execution of the Deed, the
petitioner was a de facto corporation and as such has the personality to be a beneficiary and
has the power to acquire and possess property. Further then, the petitioner's incapacity
cannot be questioned or assailed in the instant case as it constitutes a collateral attack which is
prohibited by the Corporation Code of the Philippines. In this regard, the RTC found that the
recognition by the petitioner of Mother Concepcion's authority is sufficient to vest the latter
of the capacity to accept the donation.

Acting on the appeal filed by the respondents, the CA rendered the herein assailed Decision on
January 7, 2016, the dispositive portion of which reads:

WHEREFORE, the appeal is PARTLY GRANTED. The assailed August 14, 2013 Decision of the
RTC, Branch 92, Calamba City in Civil Case No. 3250-02 is SET ASIDE by declaring as VOID the
deed of Donation dated August 14, 2013. [The respondents'] prayer for the award of moral
and exemplary damages as well as attorney's fees is nevertheless DENIED.

SO ORDERED.

In so ruling, the CA, citing the case of Seventh Day Adventist Conference Church of Southern
Phils., Inc. v. Northeastern Mindanao Mission of Seventh Day Adventist, Inc., held that the
petitioner cannot be considered as a de facto corporation considering that at the time of the
donation, there was no bona fide attempt on its part to incorporate. As an unregistered
corporation, the CA concluded that the petitioner cannot exercise the powers, rights, and
privileges expressly granted by the Corporation Code. Ultimately, bereft of juridical
personality, the CA ruled that the petitioner cannot enter into a contract of Donation with
Purificacion.
4
506949511.docx

Finally, the CA denied the respondents' claim for actual damages and attorney's fees for
failure to substantiate the same.

The petitioner sought a reconsideration of the Decision dated January 7, 2016, but the CA
denied it in its Resolution dated April 19, 2016.

In the instant petition, the petitioner submits the following arguments in support of its position:

a. The Donation Inter Vivas is valid and binding against the parties therein [Purificacion] and the
[petitioner] and their respective successors in interest:

1.) The [petitioner] has the requisite legal personality to accept donations as a religious
institution under the Roman Catholic Bishop of San Pablo authorized to receive donations;

2.) The [petitioner] has the requisite legal capacity to accept the donation as it may be
considered a de facto corporation.

3.) Regardless of the absence of the Certificate of Registration of [petitioner] at the time of the
execution of the Deed of Donation, the same is still valid and binding having been accepted by a
representative of the [petitioner] while the latter was still waiting for the issuance of the
Certificate of Registration and which acceptance of the donation was duly ratified by the
corporation.

4.) The intestate estate of Purificacion is estopped from questioning the legal personality of [the
petitioner].

b. The Respondents lack the requisite legal capacity t0 question the legality of the deed of
donation.29

In sum, the issue to be resolved by this Court in the instant case is whether or not the Deed
executed by Purificacion in favor of the petitioner is valid and binding. In relation to this, the
Court is called upon to determine the legal capacity of the petitioner, as donee, to accept the
donation, and the authority Mother Concepcion to act on behalf of the petitioner in accepting
the donation.

Ruling of the Court

The petition is meritorious.

The petitioner argues that it has the requisite legal personality to accept the donation as a
religious institution organized under the Roman Catholic Bishop of San Pablo, a corporation
sole.
5
506949511.docx

Regardless, the petitioner contends that it is a de facto corporation and therefore possessed of
the requisite personality to enter into a contract of donation.

Assuming further that it cannot be considered as a de facto corporation, the petitioner submits
that the acceptance by Mother Concepcion while the religious organization is still in the process
of incorporation is valid as it then takes the form of a pre-incorporation contract governed by
the rules on agency. The petitioner argues that their subsequent incorporation and acceptance
perfected the subject contract of donation.31

Ultimately, the petitioner argues that the intestate estate of Purificacion is estopped from
questioning its legal personality considering the record is replete of evidence to prove that
Purificacion at the time of the donation is fully aware of its status and yet was still resolved into
giving her property.

In response, the respondents submit that juridical personality to enter into a contract of
donation is vested only upon the issuance of a Certificate of Incorporation from SEC. Further,
the respondents posit that the petitioner cannot even be considered as a de facto corporation
considering that for more than 20 years, there was never any attempt on its part to
incorporate, which decision came only after Atty. Arcillas' suggestion.

In order that a donation of an immovable property be valid, the following elements must be
present: (a) the essential reduction of the patrimony of the donor; (b) the increase in the
patrimony of the donee; (c) the intent to do an act of liberality or animus donandi; (d) the
donation must be contained in a public document; and e) that the acceptance thereof be made
in the same deed or in a separate public instrument; if acceptance is made in a separate
instrument, the donor must be notified thereof in an authentic form, to be noted in both
instruments.

There is no question that the true intent of Purificacion, the donor and the owner of the
properties in question, was to give, out of liberality the subject house and lot, which she owned,
to the petitioner. This act, was then contained in a public document, the deed having been
acknowledged before Atty. Arcillas, a Notary Public. The acceptance of the donation is made on
the same date that the donation was made and contained in the same instrument as
manifested by Mother Concepcion's signature. In fine, the remaining issue to be resolved is the
capacity of the petitioner as donee to accept the donation, and the authority of Mother
Concepcion to act on its behalf for this purpose.

Under Article 737 of the Civil Code, "the donor's capacity shall be determined as of the time of
the making of the donation." By analogy, the legal capacity or the personality of the donee, or
the authority of the latter's representative, in certain cases, is determined at the time of
acceptance of the donation.

Article 738, in relation to Article 745, of the Civil Code provides that all those who are not
specifically disqualified by law may accept donations either personally or through an authorized
6
506949511.docx

representative with a special power of attorney for the purpose or with a general and sufficient
power.

The Court finds that for the purpose of accepting the donation, the petitioner is deemed vested
with personality to accept, and Mother Concepcion is clothed with authority to act on the
latter's behalf.

At the outset, it must be stated that as correctly pointed out by the CA, the RTC erred in holding
that the petitioner is a de facto corporation.

Jurisprudence settled that "the filing of articles of incorporation and the issuance of the
certificate of incorporation are essential for the existence of a de facto corporation." In fine, it is
the act of registration with SEC through the issuance of a certificate of incorporation that marks
the beginning of an entity's corporate existence.

Petitioner filed its Articles of Incorporation and by-laws on August 28, 2001. However, the SEC
issued the corresponding Certificate of Incorporation only on August 31, 2001, two (2) days after
Purificacion executed a Deed of Donation on August 29, 2001. Clearly, at the time the donation
was made, the Petitioner cannot be considered a corporation de facto.

Rather, a review of the attendant circumstances reveals that it calls for the application of the
doctrine of corporation by estoppel as provided for under Section 21 of the Corporation Code,
viz.:

Sec. 21. Corporation by estoppel. - 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: Provided, however, That when any such
ostensible corporation is sued on any transaction entered by it as a corporation or on any tort
committed by it as such, it shall not be allowed to use as a defense its lack of corporate
personality.

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. (Emphasis Ours)

The doctrine of corporation by estoppel is founded on principles of equity and is designed to

prevent injustice and unfairness.1a\^/phi1 It applies when a non-existent corporation enters
into contracts or dealings with third persons. In which case, the person who has contracted or
otherwise dealt with the non-existent corporation is estopped to deny the latter's legal
existence in any action leading out of or involving such contract or dealing. While the doctrine is
generally applied to protect the sanctity of dealings with the public, nothing prevents its
application in the reverse, in fact the very wording of the law which sets forth the doctrine of
corporation by estoppel permits such interpretation. Such that a person who has assumed an
7
506949511.docx

obligation in favor of a non-existent corporation, having transacted with the latter as if it was
duly incorporated, is prevented from denying the existence of the latter to avoid the
enforcement of the contract.

Jurisprudence dictates that the doctrine of corporation by estoppel applies for as long as there
is no fraud and when the existence of the association is attacked for causes attendant at the
time the contract or dealing sought to be enforced was entered into, and not thereafter.

In this controversy, Purificacion dealt with the petitioner as if it were a corporation. This is
evident from the fact that Purificacion executed two (2) documents conveying her properties in
favor of the petitioner - first, on October 11, 1999 via handwritten letter, and second, on August
29, 2001 through a Deed; the latter having been executed the day after the petitioner filed its
application for registration with the SEC.

The doctrine of corporation by estoppel rests on the idea that if the Court were to disregard the
existence of an entity which entered into a transaction with a third party, unjust enrichment
would result as some form of benefit have already accrued on the part of one of the parties.
Thus, in that instance, the Court affords upon the unorganized entity corporate fiction and
juridical personality for the sole purpose of upholding the contract or transaction.

In this case, while the underlying contract which is sought to be enforced is that of a donation,
and thus rooted on liberality, it cannot be said that Purificacion, as the donor failed to acquire
any benefit therefrom so as to prevent the application of the doctrine of corporation by
estoppel. To recall, the subject properties were given by Purificacion, as a token of appreciation
for the services rendered to her during her illness. In fine, the subject deed partakes of the
nature of a remuneratory or compensatory donation, having been made "for the purpose of
rewarding the donee for past services, which services do not amount to a demandable debt."

As elucidated by the Court in Pirovano, et al. v. De La Rama Steamship Co.:48

In donations made to a person for services rendered to the donor, the donor's will is moved by
acts which directly benefit him. The motivating cause is gratitude, acknowledgment of a favor, a
desire to compensate. A donation made to one who saved the donor's life, or a lawyer who
renounced his fees for services rendered to the donor, would fall under this class of donations.

Therefore, under the premises, past services constitutes consideration, which in turn can be
regarded as "benefit" on the part of the donor, consequently, there exists no obstacle to the
application of the doctrine of corporation by estoppel; although strictly speaking, the petitioner
did not perform these services on the expectation of something in return.

Precisely, the existence of the petitioner as a corporate entity is upheld in this case for the
purpose of validating the Deed to ensure that the primary objective for which the donation was
intended is achieved, that is, to convey the property for the purpose of aiding the petitioner in
the pursuit of its charitable objectives.
8
506949511.docx

Further, apart from the foregoing, the subsequent act by Purificacion of re-conveying the
property in favor of the petitioner is a ratification by conduct of the otherwise defective
donation.

Express or implied ratification is recognized by law as a means to validate a defective contract.

Ratification cleanses or purges the contract from its defects from constitution or establishment,
retroactive to the day of its creation. By ratification, the infirmity of the act is obliterated
thereby making it perfectly valid and enforceable.

The principle and essence of implied ratification require that the principal has full knowledge at
the time of ratification of all the material facts and circumstances relating to the act sought to
be ratified or validated. Also, it is important that the act constituting the ratification is
unequivocal in that it is performed without the slightest hint of objection or protest from the
donor or the donee, thus producing the inevitable conclusion that the donation and its
acceptance were in fact confirmed and ratified by the donor and the donee.

In this controversy, while the initial conveyance is defective, the genuine intent of Purificacion to
donate the subject properties in favor of the petitioner is indubitable. Also, while the petitioner
is yet to be incorporated, it cannot be said that the initial conveyance was tainted with fraud or
misrepresentation. Contrarily, Purificacion acted with full knowledge of circumstances of the
Petitioner. This is evident from Purificacion's act of referring Mother Concepcion to Atty.
Arcillas, who, in turn, advised the petitioner to apply for registration. Further, with the execution
of two (2) documents of conveyance in favor of the petitioner, it is clear that what Purificacion
intended was for the sisters comprising the petitioner to have ownership of her properties to aid
them in the pursuit of their charitable activities, as a token of appreciation for the services they
rendered to her during her illness. To put it differently, the reference to the petitioner was
merely a descriptive term used to refer to the sisters comprising the congregation collectively.
Accordingly, the acceptance of Mother Concepcion for the sisters comprising the congregation
is sufficient to perfect the donation and transfer title to the property to the petitioner.
Ultimately, the subsequent incorporation of the petitioner and its affirmation of Mother
Concepcion's authority to accept on its behalf cured whatever defect that may have attended
the acceptance of the donation.

The Deed sought to be enforced having been validly entered into by Purificacion, the
respondents' predecessor-in-interest, binds the respondents who succeed the latter as heirs.
Simply, as they claim interest in their capacity as Purificacion's heirs, the respondents are
considered as "privies" to the subject Deed; or are "those between whom an action is binding
although they are not literally parties to the said action." As discussed in Constantino, et al. v.
Heirs of Pedro Constantino, Jr.:58

[p]rivity in estate denotes the privity between assignor and assignee, donor and donee, grantor
and grantee, joint tenant for life and remainderman or reversioner and their respective
assignees, vendor by deed of warranty and a remote vendee or assignee. A privy in estate is
9
506949511.docx

one, it has been said, who derives his title to the property in question by purchase; one who
takes by conveyance. In fine, respondents, as successors-in-interest, derive their right from and
are in the same position as their predecessor in whose shoes they now stand.59 (Citation
omitted)

Anent the authority of Mother Concepcion to act as representative for and in behalf of the
petitioner, the Court similarly upholds the same. Foremost, the authority of Mother Concepcion
was never questioned by the petitioner. In fact, the latter affirms and supports the authority of
Mother Concepcion to accept the donation on their behalf; as she is, after all the congregation's
Superior General.60 Furthermore, the petitioner's avowal of Mother Concepcion's authority
after their SEC registration is a ratification of the latter's authority to accept the subject
donation as the petitioner's representative.61

In closing, it must be emphasized that the Court is both of law and of justice. Thus, the Court's
mission and purpose is to apply the law with justice.

Donation is an expression of our social conscience, an act rooted purely on the goodness of
one's heart and intent to contribute.

Purificacion, the donor is worthy of praise for her works of charity. Likewise, the petitioner is
worthy of admiration for with or without the promise of reward or consideration, the Court is
certain that it is impelled by sincere desire to help the petitioner in overcoming her illness.

It is unfortunate that the will of a person moved by the desire to reciprocate the goodness
shown to her during the lowest and culminating points of her life is questioned and herein
sought to be nullified on strict legality, when the intent of the donor to give is beyond question.

The promotion of charitable works is a laudable objective. While not mentioned in the
Constitution, the Court recognizes benevolent giving as an important social fabric that
eliminates inequality. As such, charitable giving must be encouraged through support from
society and the Court.

WHEREFORE, in consideration of the foregoing disquisitions, the instant petition for review on
certiorari is GRANTED. Accordingly, the Decision dated January 7, 2016 and Resolution dated
April 19, 2016 of the Court of Appeals in CA-G.R. CV No. 101944, are hereby REVERSED and SET
ASIDE.