International Express Travel v. CA

INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., petitioner,
vs.
HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION, respondents.

G.R. No. 119002
19 October 2000

Facts:

On 30 June 1989, the International Express Travel and Tour Services, Inc. (IETTSI), through its managing director, wrote a letter to the Philippine Football Federation (Federation), through its president, Henri Kahn, wherein the former offered its services as a travel agency to the latter. The offer was accepted. IETTSI secured the airline tickets for the trips of the athletes and officials of the Federation to the South East Asian Games in Kuala Lumpur as well as various other trips to the People’s Republic of China and Brisbane. The total cost of the tickets amounted to P449,654.83. For the tickets received, the Federation made two partial payments, both in September of 1989, in the total amount of P176,467.50. On 4 October 1989, IETTSI wrote the Federation, through Kahn a demand letter requesting for the amount of P265,894.33.

On 30 October 1989, the Federation, through the Project Gintong Alay, paid the amount of P31,603.00. On 27 December 1989, Henri Kahn issued a personal check in the amount of P50,000 as partial payment for the outstanding balance of the Federation. Thereafter, no further payments were made despite repeated demands. This prompted IETTSI to file a civil case before the Regional Trial Court of Manila.

IETTSI sued Henri Kahn in his personal capacity and as President of the Federation and impleaded the Federation as an alternative defendant. IETTSI sought to hold Henri Kahn liable for the unpaid balance for the tickets purchased by the Federation on the ground that Henri Kahn allegedly guaranteed the said obligation. Kahn filed his answer with counterclaim, while the Federation failed to file its answer and was declared in default by the trial court. In due course, the trial court rendered judgment and ruled in favor of IETTSI and declared Henri Kahn personally liable for the unpaid obligation of the Federation.

The complaint of IETTSI against the Philippine Football Federation and the counterclaims of Henri Kahn were dismissed, with costs against Kahn. Only Henri Kahn elevated the decision to the Court of Appeals.

On 21 December 1994, the appellate court rendered a decision reversing the trial court. IETTSI filed a motion for reconsideration and as an alternative prayer pleaded that the Federation be held liable for the unpaid obligation. The same was denied by the appellate court in its resolution of 8 February 1995. IETTSI filed the petition with the Supreme Court.  

Issues: 

1. Whether the Philippine Football Federation has a corporate existence of its own.
2. Whether Kahn should be made personally liable for the unpaid obligations of the Philippine Football Federation.
3. Whether the appellate court properly applied the doctrine of corporation by estoppel.
   
   

Held:

(1) No. Both RA 3135 (the Revised Charter of the Philippine Amateur Athletic Federation) and PD 604 recognized the juridical existence of national sports associations. This may be gleaned from the powers and functions granted to these associations (See Section 14 of RA 3135 and Section 8 of PD 604). The powers and functions granted to national sports associations indicate that these entities may acquire a juridical personality. The power to purchase, sell, lease and encumber property are acts which may only be done by persons, whether natural or artificial, with juridical capacity.

However, while national sports associations may be accorded corporate status, such does not automatically take place by the mere passage of these laws. It is a basic postulate that before a corporation may acquire juridical personality, the State must give its consent either in the form of a special law or a general enabling act. The Philippine Football Federation did not come into existence upon the passage of these laws. Nowhere can it be found in RA 3135 or PD 604 any provision creating the Philippine Football Federation.

These laws merely recognized the existence of national sports associations and provided the manner by which these entities may acquire juridical personality. Section 11 of RA 3135 and Section 8 of PD 604 require that before an entity may be considered as a national sports association, such entity must be recognized by the accrediting organization, the Philippine, Amateur Athletic Federation under RA 3135, and the Department of Youth and Sports Development under PD 604. This fact of recognition, however, Henri Kahn failed to substantiate. A copy of the constitution and by-laws of the Philippine Football Federation does not prove that said Federation has indeed been recognized and accredited by either the Philippine Amateur Athletic Federation or the Department of Youth and Sports Development.

Accordingly, the Philippine Football Federation is not a national sports association within the purview of the aforementioned laws and does not have corporate existence of its own.  

(2) Yes. Henry Kahn should be held liable for the unpaid obligations of the unincorporated Philippine Football Federation. It is a settled principal in corporation law that any person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and becomes personally liable for contract entered into or for other acts performed as such agent. As president of the Federation, Henri Kahn is presumed to have known about the corporate existence or non-existence of the Federation.  

(3) No. The Court cannot subscribe to the position taken by the appellate court that even assuming that the Federation was defectively incorporated, IETTSI cannot deny the corporate existence of the Federation because it had contracted and dealt with the Federation in such a manner as to recognize and in effect admit its existence. The doctrine of corporation by estoppel is mistakenly applied by the appellate court to IETTSI. The application of the doctrine applies to a third party only when he tries to escape liabilities on a contract from which he has benefited on the irrelevant ground of defective incorporation. Herein, IETTSI is not trying to escape liability from the contract but rather is the one claiming from the contract.