INTERNATIONAL EXPRESS TRAVEL & TOUR SERVICES, INC., PETITIONER, VS. HON. COURT OF APPEALS, HENRI KAHN, PHILIPPINE FOOTBALL FEDERATION, RESPONDENTS. D E C I S I O N

On June 30 1989, petitioner International Express Travel and Tour Services,
Inc., through its managing director, wrote a letter to the Philippine Football
Federation (Federation), through its president private respondent Henri Kahn,
wherein the former offered its services as a travel agency to the latter.^[1] The offer was accepted.

Petitioner 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.^[2]

On 4 October 1989, petitioner wrote the Federation, through the private
respondent a demand letter requesting for the amount of P265,894.33.^[3] On 30 October 1989, the Federation,
through the Project Gintong Alay, paid the amount of P31,603.00.^[4]

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.^[5] Thereafter, no further payments were made
despite repeated demands.

This prompted petitioner to file a civil case before the Regional Trial Court
of Manila. Petitioner sued Henri Kahn in his personal capacity and as President
of the Federation and impleaded the Federation as an alternative defendant.
Petitioner 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.^[6]

Henri Kahn filed his answer with counterclaim. While not denying the
allegation that the Federation owed the amount P207,524.20, representing the
unpaid balance for the plane tickets, he averred that the petitioner has no
cause of action against him either in his personal capacity or in his official
capacity as president of the Federation. He maintained that he did not guarantee
payment but merely acted as an agent of the Federation which has a separate and
distinct juridical personality.^[7]

On the other hand, the Federation failed to file its answer, hence, was
declared in default by the trial court.^[8]

In due course, the trial court rendered judgment and ruled in favor of the
petitioner and declared Henri Kahn personally liable for the unpaid obligation
of the Federation. In arriving at the said ruling, the trial court rationalized:

Defendant Henri Kahn would have been correct in his contentions had it been
duly established that defendant Federation is a corporation. The trouble,
however, is that neither the plaintiff nor the defendant Henri Kahn has adduced
any evidence proving the corporate existence of the defendant Federation. In
paragraph 2 of its complaint, plaintiff asserted that “Defendant Philippine
Football Federation is a sports association xxx.”

This has not been denied by defendant Henri Kahn in his Answer. Being the
President of defendant Federation, its corporate existence is within the
personal knowledge of defendant Henri Kahn. He could have easily denied
specifically the assertion of the plaintiff that it is a mere sports
association, if it were a domestic corporation. But he did not.

x x x

A voluntary unincorporated association, like defendant Federation has no
power to enter into, or to ratify, a contract. The contract entered into by its
officers or agents on behalf of such association is not binding on, or
enforceable against it. The officers or agents are themselves personally liable.

x x x^[9]

The dispositive portion of the trial court’s decision reads:

WHEREFORE, judgment is rendered ordering defendant Henri Kahn to pay the
plaintiff the principal sum of P207,524.20, plus the interest thereon at the
legal rate computed from July 5, 1990, the date the complaint was filed, until
the principal obligation is fully liquidated; and another sum of P15,000.00 for
attorney’s fees.

The complaint of the plaintiff against the Philippine Football Federation and
the counterclaims of the defendant Henri Kahn are hereby dismissed.

With the costs against defendant Henri Kahn.^[10]

Only Henri Kahn elevated the above decision to the Court of Appeals. On 21
December 1994, the respondent court rendered a decision reversing the trial
court, the decretal portion of said decision reads:

WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED
and SET ASIDE and another one is rendered dismissing the complaint against
defendant Henri S. Kahn.^[11]

In finding for Henri Kahn, the Court of Appeals recognized the juridical
existence of the Federation. It rationalized that since petitioner failed to
prove that Henri Kahn guaranteed the obligation of the Federation, he should not
be held liable for the same as said entity has a separate and distinct
personality from its officers.

Petitioner 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, where it
stated that:

As to the alternative prayer for the Modification of the Decision by
expressly declaring in the dispositive portion thereof the Philippine Football
Federation (PFF) as liable for the unpaid obligation, it should be remembered
that the trial court dismissed the complaint against the Philippine Football
Federation, and the plaintiff did not appeal from this decision. Hence, the
Philippine Football Federation is not a party to this appeal and consequently,
no judgment may be pronounced by this Court against the PFF without violating
the due process clause, let alone the fact that the judgment dismissing the
complaint against it, had already become final by virtue of the plaintiff’s
failure to appeal therefrom. The alternative prayer is therefore similarly
DENIED.^[12]

Petitioner now seeks recourse to this Court and alleges that the respondent
court committed the following assigned errors:^[13]

A. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD DEALT
WITH THE PHILIPPINE FOOTBALL FEDERATION (PFF) AS A CORPORATE ENTITY AND IN NOT
HOLDING THAT PRIVATE RESPONDENT HENRI KAHN WAS THE ONE WHO REPRESENTED THE PFF
AS HAVING A CORPORATE PERSONALITY.

B. THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING PRIVATE RESPONDENT
HENRI KAHN PERSONALLY LIABLE FOR THE OBLIGATION OF THE UNINCORPORATED PFF,
HAVING NEGOTIATED WITH PETITIONER AND CONTRACTED THE OBLIGATION IN BEHALF OF THE
PFF, MADE A PARTIAL PAYMENT AND ASSURED PETITIONER OF FULLY SETTLING THE
OBLIGATION.

C. ASSUMING ARGUENDO THAT PRIVATE RESPONDENT KAHN IS NOT PERSONALLY LIABLE,
THE HONORABLE COURT OF APPEALS ERRED IN NOT EXPRESSLY DECLARING IN ITS DECISION
THAT THE PFF IS SOLELY LIABLE FOR THE OBLIGATION.

The resolution of the case at bar hinges on the determination of the
existence of the Philippine Football Federation as a juridical person. In the
assailed decision, the appellate court recognized the existence of the
Federation. In support of this, the CA cited Republic Act 3135, otherwise known
as the Revised Charter of the Philippine Amateur Athletic Federation, and
Presidential Decree No. 604 as the laws from which said Federation derives its
existence.

As correctly observed by the appellate court, both R.A. 3135 and P.D. No. 604
recognized the juridical existence of national sports associations. This may be
gleaned from the powers and functions granted to these associations. Section 14
of R.A. 3135 provides:

SEC. 14. Functions, powers and duties of Associations. – The National
Sports’ Association shall have the following functions, powers and duties:

1. To adopt a constitution and by-laws for their internal organization and
   government;
2. To raise funds by donations, benefits, and other means for their purposes.
   
3. To purchase, sell, lease or otherwise encumber property both real and
   personal, for the accomplishment of their purpose;
4. To affiliate with international or regional sports’ Associations after due
   consultation with the executive committee;

x x x

13. To perform such other acts as may be necessary for the proper accomplishment
    of their purposes and not inconsistent with this Act.

Section 8 of P.D. 604, grants similar functions to these sports associations:

SEC. 8. Functions, Powers, and Duties of National Sports Association.
– The National sports associations shall have the following functions, powers,
and duties:

1. Adopt a Constitution and By-Laws for their internal organization and
   government which shall be submitted to the Department and any amendment thereto
   shall take effect upon approval by the Department: Provided,
   however, That no team, school, club, organization, or entity shall be
   admitted as a voting member of an association unless 60 per cent of the athletes
   composing said team, school, club, organization, or entity are Filipino
   citizens;
2. Raise funds by donations, benefits, and other means for their purpose
   subject to the approval of the Department;
3. Purchase, sell, lease, or otherwise encumber property, both real and
   personal, for the accomplishment of their purpose;
4. Conduct local, interport, and international competitions, other than the
   Olympic and Asian Games, for the promotion of their sport;
5. Affiliate with international or regional sports associations after due
   consultation with the Department;

x x x

13. Perform such other functions as may be provided by law.

The above powers and functions granted to national sports associations
clearly 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 we agree with the appellate court that 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. We cannot agree with the view of the appellate court
and the private respondent that the Philippine Football Federation came into
existence upon the passage of these laws. Nowhere can it be found in R.A. 3135
or P.D. 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 R.A. 3135 provides:

SEC. 11. National Sports’ Association; organization and recognition. –
A National Association shall be organized for each individual sports in the
Philippines in the manner hereinafter provided to constitute the Philippine
Amateur Athletic Federation. Applications for recognition as a National Sports’
Association shall be filed with the executive committee together with, among
others, a copy of the constitution and by-laws and a list of the members of the
proposed association, and a filing fee of ten pesos.

The Executive Committee shall give the recognition applied for if it is
satisfied that said association will promote the purposes of this Act and
particularly section three thereof. No application shall be held pending for
more than three months after the filing thereof without any action having been
taken thereon by the executive committee. Should the application be rejected,
the reasons for such rejection shall be clearly stated in a written
communication to the applicant. Failure to specify the reasons for the rejection
shall not affect the application which shall be considered as unacted upon:
Provided, however, That until the executive committee herein provided
shall have been formed, applications for recognition shall be passed upon by the
duly elected members of the present executive committee of the Philippine
Amateur Athletic Federation. The said executive committee shall be dissolved
upon the organization of the executive committee herein provided: Provided,
further, That the functioning executive committee is charged with the
responsibility of seeing to it that the National Sports’ Associations are formed
and organized within six months from and after the passage of this Act.

Section 7 of P.D. 604, similarly provides:

SEC. 7. National Sports Associations. – Application for accreditation
or recognition as a national sports association for each individual sport in the
Philippines shall be filed with the Department together with, among others, a
copy of the Constitution and By-Laws and a list of the members of the proposed
association.

The Department shall give the recognition applied for if it is satisfied that
the national sports association to be organized will promote the objectives of
this Decree and has substantially complied with the rules and regulations of the
Department: Provided, That the Department may withdraw accreditation or
recognition for violation of this Decree and such rules and regulations
formulated by it.

The Department shall supervise the national sports association: Provided,
That the latter shall have exclusive technical control over the development
and promotion of the particular sport for which they are organized.

Clearly the above cited provisions 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
R.A. 3135, and the Department of Youth and Sports Development under P.D. 604.
This fact of recognition, however, Henri Kahn failed to substantiate. In
attempting to prove the juridical existence of the Federation, Henri Kahn
attached to his motion for reconsideration before the trial court a copy of the
constitution and by-laws of the Philippine Football Federation. Unfortunately,
the same 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, we rule that 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.

Thus being said, it follows that private respondent 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.^[14] As president of the Federation, Henri
Kahn is presumed to have known about the corporate existence or non-existence of
the Federation. We cannot subscribe to the position taken by the appellate court
that even assuming that the Federation was defectively incorporated, the
petitioner 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.^[15] The
doctrine of corporation by estoppel is mistakenly applied by the respondent
court to the petitioner. The application of the doctrine applies to a third
party only when he tries to escape liability on a contract from which he has
benefited on the irrelevant ground of defective incorporation.^[16] In the case at bar, the petitioner is not
trying to escape liability from the contract but rather is the one claiming from
the contract.

WHEREFORE, the decision appealed from is REVERSED and
SET ASIDE. The decision of the Regional Trial Court of Manila,
Branch 35, in Civil Case No. 90-53595 is hereby REINSTATED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago,
JJ., concur.