Donation to corporation by estoppel

What is the status of a donation in favor of a done-corporation which, at the time of the donation, was not registered with the Securities and Exchange Commission (SEC)? This was answered in the very interesting case of Missionary Sisters of Our Lady of Fatima vs Alzona, GR. 224307.

The Missionary Sisters of Our Lady of Fatima is a religious and charitable group whose primary mission is to take care of the abandoned and neglected elderly persons.

Purificacion, on the other hand, is the registered owner of parcels of land located in Calamba City, Laguna. Impelled by her unmaterialized desire to be nun, Purificacion decided to devote the rest of her life in helping others. She became a benefactor of the Missionary Sisters by giving support to the community and its works. One day, during a doctor’s appointment, Purificacion discovered that she has been suffering from lung cancer. Considering the restrictions in her movement, Purificacion requested the Mother Superior of the Missionary Sisters to take care of her in her house, to which the latter agreed. Subsequently, Purificacion donated her house and lot to the Missionary Sisters, through the Mother Superior. At the time the donation, however, was made, the Missionary Sisters was not yet incorporated with the SEC.

Years after, Purificacion died without any issue, and survived only by her brother of full blood, Amando. He filed a Complaint before the Regional Trial Court, seeking to annul the Deed executed between Purificacion and the Missionary Sisters, on the ground that at the time the donation was made, the latter was not registered with the SEC and therefore had no juridical personality and could not legally accept the donation.

The question is now whether or not the Deed of Donation executed by Purificacion in favor of the Missionary Sisters is valid and binding? Similarly, does the same religious group have the legal capacity, as donee, to accept the donation?

The Supreme Court rule in the affirmative. It held that Purificacion dealt with the Missionary Sisters as if it were a corporation. While the underlying contract which is sought to be enforced is that of a donation, and thus rooted on liberality, it could not 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. The doctrine of corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness. 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 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.

The High Court added that 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 purposes of rewarding the donee for past services, which services do not amount to a demandable debt.

Precisely, the existence of the Missionary Sisters 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 religious group in the pursuit of its charitable objectives.

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

Indeed, a good act is worth all the reasons to be valid and enforceable.

“The doctrine of corporation by estoppel is founded on principles of equity and is designed to prevent injustice and unfairness.

“The High Court added that the subject properties were given by Purificacion, as a token of appreciation for the services rendered to her during her illness.