ARMCO STEEL CORPORATION (OF THE PHILIPPINES), PETITIONER, VS. SECURITIES AND EXCHANGE COMMISSION, ARMCO STEEL CORPORATION (OF OHIO, U.S.A.) AND ARMCO MARSTEEL ALLOY CORPORATION,…

Armco Steel Corporation versus Securities and Exchange Commission

The Case

This is a petition for review brought by Armco Steel Corporation of the Philippines against the Securities and Exchange Commission and against Armco Steel Corporation of Ohio, U.S.A. and Armco Marsteel Alloy Corporation. The petitioner asks the Supreme Court to set aside the orders of the Commission that compelled it to drop the word Armco from its corporate name. The case matters because it teaches the rule on the finality of administrative orders and on what does not count as substantial compliance with a final order.

Procedural History

Armco Steel of Ohio and Armco Marsteel Alloy filed a petition with the Securities and Exchange Commission to compel Armco Steel of the Philippines to change its corporate name. The Commission granted the petition in its order of February 14, 1975, directing the respondent to take out the word Armco and to substitute another word in its corporate name. The respondent's motion for reconsideration was denied as filed out of time, and a second motion for reconsideration was likewise denied. The respondent appealed to the Court of Appeals, but the appeal was dismissed in a resolution of January 13, 1976 for having been perfected beyond the reglementary period. The respondent then amended its articles of incorporation to change its name to Armco Structures, Incorporated, which the Commission approved on March 22, 1976. The Commission later issued an order of January 6, 1977 requiring compliance with the February 14, 1975 order, and after proceedings, an order of January 17, 1979 again directed compliance. The respondent appealed to the Commission en banc, which dismissed the appeal for lack of merit in its order of December 14, 1979. Hence, this petition for review before the Supreme Court.

Facts

On July 1, 1965, Armco Steel Corporation, a corporation organized in Ohio, U.S.A., obtained from the Philippine Patent Office a certificate of registration for its trademark consisting of the word Armco and a triangular device for ferrous metals and ferrous metal castings and forgings. In April 1971 it filed an affidavit of use for the trademark, which was accepted.

Armco Marsteel Alloy Corporation was incorporated on July 11, 1972 under its original name Marsteel Alloy Company, Incorporated, and on March 28, 1973 its name was changed to Armco Marsteel Alloy Corporation after Armco of Ohio purchased forty percent of its capital stock. Both corporations are engaged in the manufacture of steel products. Armco Steel Corporation of the Philippines was incorporated on April 25, 1973, also for the manufacture of steel products.

Armco of Ohio and Armco Marsteel then filed a petition with the Securities and Exchange Commission to compel Armco of the Philippines to change its corporate name, on the ground that it is very similar, if not exactly the same, as the name of one of the petitioners. The Commission granted the petition on February 14, 1975. Instead of removing the word Armco, the respondent changed its name to Armco Structures, Incorporated, and secured the approval of the Commission on March 22, 1976. The Commission found that this was done without proper disclosure, and it insisted on compliance with its final order.

Issues

• Whether or not the order of February 14, 1975 had become functus officio, that is, exhausted and no longer enforceable, by reason of the petitioner's alleged substantial compliance.
• Whether or not the approval by the Commission of the amended articles of incorporation changing the petitioner's name to Armco Structures, Incorporated was regular and legal.
• Whether or not the private respondents were no longer entitled to the relief awarded by the February 14, 1975 order.
• Whether or not a hearing should have been held to determine whether there was still a confusing similarity between the corporate names.

Applicable Provisions

The decision does not quote a specific statutory provision. It rests on the rule of finality of judgments and on the terms of the Commission's own final order, which it quotes:

In view of the foregoing, the respondent, ARMCO STEEL CORPORATION, is hereby ordered to take out 'ARMCO' and substitute another word in lieu thereof in its corporate name by amending the articles of incorporation to that effect, within thirty (30) days from date of receipt of a copy of this Order; after which, three (3) copies of the amended articles of incorporation, duly certified by a majority of the board of directors and countersigned by the president and secretary of the corporation, shall be submitted to this Commission, together with the corresponding filing fees, as required by law.

This order is the measure of compliance, and the Court holds that the petitioner did not comply with it.

Ruling

On the first issue, the Court held that the order of February 14, 1975 had long become final and executory, and that the change of name to Armco Structures, Incorporated was not substantial compliance but a contravention of the order. The order required the removal of the word Armco, and the petitioner failed to do so. The Court stressed that even if the change was erroneously accepted and approved by the Commission, that approval could not legalize an unauthorized act done against a final order, and the order was not rendered functus officio.

On the second issue, the Court held that the approval of the amended articles was not regular, because the petitioner did not disclose the existence of the final order. Had it done so, the registration could not have been accepted. The Court found the petitioner's actuations far from regular and much less in good faith.

On the third issue, the Court held that the private respondents remained entitled to the relief, because the arguments of the petitioner would in effect reopen a final and executory order that had already foreclosed the issue. The Court quoted the Commission's findings that the names were not only similar but identical, and that the petitioner had a similar line of business, so that the public might be confused and the goodwill of the petitioners impaired.

On the fourth issue, the Court held that no new hearing was necessary, because a new determination of confusing similarity would transgress the rule on finality of judgments. The Court also noted that an order granting execution of a final judgment cannot be appealed, otherwise there would be no end to litigation.

Doctrine

A final and executory order of the Securities and Exchange Commission can no longer be reopened, modified, or escaped by a party's unilateral act. Substantial compliance means compliance with the very act commanded; where the order requires the removal of a word from a corporate name, changing the name while retaining that word is not compliance but defiance. The approval by the Commission of an amended articles of incorporation, secured without disclosure of a pending final order, does not legalize the act nor render the order functus officio. An order or resolution granting execution of a final judgment cannot be appealed.

Disposition

The petition was dismissed for lack of merit, with costs against the petitioner, and the decision was declared immediately executory.

Remember This

Memorize this line: a final and executory order cannot be defeated by a self-serving change of corporate name that keeps the very word the order commanded to be removed. Examiners use this case on the finality of administrative orders, on the meaning of substantial compliance, and on the rule that an order of execution of a final judgment is not appealable.