Case Digest: Ang mga Kaanib sa Iglesia ng Dios kay Kristo Hesus, H.S.K. sa Bansang Pilipinas, Inc. v. Iglesia ng Diyos kay Kristo Hesus, Haligi at Suhay ng Katotohanan, 372 SCRA 171, December 12, 2001

 Corporation Law | Corporation Name

The name cannot be used if it is the essential and distinguishing feature of another corporation's registered and protected corporate name. A corporation may be directed to change its corporate name in accordance with the undertaking that it submitted to the SEC together with its Articles of Incorporation.

• Respondent Iglesia ng Dios Kay Cristo Jesus, Haligi at Suhay ng Katotohanan (Church of God in Christ Jesus, the Pillar and Ground of Truth), is a non-stock religious society or corporation registered in 1936. 
• In 1976, Eliseo Soriano and several other members of respondent corporation disassociated themselves from the latter and succeeded. In 1977, they formed a new non-stock religious society or corporation, named Iglesia ng Dios Kay Kristo Hesus, Haligi at Saligan ng Katotohanan. 
• In 1979, respondent corporation filed with the SEC a petition to compel the petitioner to change its corporate name.
• SEC: Ruled in favor of respondent, ordering the petitioner to change its corporate name.
• In 1980, during the pendency of the case, Soriano, et al., caused the registration of petitioner corporation, Ang Mga Kaanib sa Iglesia ng Dios Kay Kristo Hesus, H.S.K, sa Bansang Pilipinas. The acronym "H.S.K." stands for Haligi at Saligan ng Katotohanan.
• In 1994, respondent corporation filed before the SEC a petition, compelling the petitioner to change its corporate name and be barred from using the same or similar name.
• SEC: Ordered the petitioner to change its corporate name.
• SEC En Banc: Affirmed the SEC decision, upon a finding that petitioner's corporate name was identical or confusingly or deceptively similar to that of respondent's corporate name.
• Court of Appeals: Affirmed the decision of the SEC En Banc.

WoN the CA failed to consider and properly apply the exceptions established by the jurisprudence in the application of Section 18 of the Corporation Code. NO

Invoking the case of Legarda v. Court of Appeals, petitioner insists that the decision of the Court of Appeals and the SEC should be set aside because the negligence of its former counsel of record, Atty. Joaquin Garaygay, in failing to file an answer after its motion to dismiss was denied by the SEC, deprived them of their day in court.

The contention is without merit. As a general rule, the negligence of counsel binds the client. This is based on the rule that any act performed by a lawyer within the scope of his general or implied authority is regarded as an act of his client. An exception to the foregoing is where the reckless or gross negligence of the counsel deprives the client of due process of law. Said exception, however, does not obtain in the present case.

In Legarda v. Court of Appeals, the effort of the counsel in defending his client's cause consisted in filing a motion for extension of time to file answer before the trial court. When his client was declared in default, the counsel did nothing and allowed the judgment by default to become final and executory. Upon the insistence of his client, the counsel filed a petition to annul the judgment with the Court of Appeals, which denied the petition, and again the counsel allowed the denial to become final and executory. This Court found the counsel grossly negligent and consequently declared as null and void the decision adverse to his client.

The factual antecedents of the case at bar are different. Atty. Garaygay filed before the SEC a motion to dismiss on the ground of lack of cause of action. When his client was declared in default for failure to file an answer, Atty. Garaygay moved for reconsideration and lifting of the order of default. After judgment by default was rendered against petitioner corporation, Atty. Garaygay filed a motion for extension of time to appeal/motion for reconsideration, and thereafter a motion to set aside the decision.

Evidently, Atty. Garaygay was only guilty of simple negligence. Although he failed to file an answer that led to the rendition of a judgment by default against petitioner, his efforts were palpably real, albeit bereft of zeal.

Likewise, the issue of prescription, which petitioner raised for the first time on appeal to the Court of Appeals, is untenable. Its failure to raise prescription before the SEC can only be construed as a waiver of that defense. At any rate, the SEC has the authority to de-register at all times and under all circumstances corporate names which in its estimation are likely to spawn confusion. It is the duty of the SEC to prevent confusion in the use of corporate names not only for the protection of the corporations involved but more so for the protection of the public.

Section 18 of the Corporation Code provides:

Corporate Name. — No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or is contrary to existing laws. When a change in the corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended name.

Corollary thereto, the pertinent portion of the SEC Guidelines on Corporate Names states:

(d) If the proposed name contains a word similar to a word already used as part of the firm name or style of a registered company, the proposed name must contain two other words different from the name of the company already registered;

Parties organizing a corporation must choose a name at their peril; and the use of a name similar to one adopted by another corporation, whether a business or a nonprofit organization, if misleading or likely to injure in the exercise of its corporate functions, regardless of intent, may be prevented by the corporation having a prior right, by a suit for injunction against the new corporation to prevent the use of the name.

Petitioner claims that it complied with the aforecited SEC guideline by adding not only two but eight words to their registered name, to wit: "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.," which, petitioner argues, effectively distinguished it from respondent corporation.

The additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc." in petitioner's name are, as correctly observed by the SEC, merely descriptive of and also referring to the members, or kaanib, of respondent who are likewise residing in the Philippines. These words can hardly serve as an effective differentiating medium necessary to avoid confusion or difficulty in distinguishing petitioner from respondent. This is especially so, since both petitioner and respondent corporations are using the same acronym — H.S.K.; not to mention the fact that both are espousing religious beliefs and operating in the same place. Parenthetically, it is well to mention that the acronym H.S.K. used by petitioner stands for "Haligi at Saligan ng Katotohanan."

Then, too, the records reveal that in holding out their corporate name to the public, petitioner highlights the dominant words "IGLESIA NG DIOS KAY KRISTO HESUS, HALIGI AT SALIGAN NG KATOTOHANAN," which is strikingly similar to respondent's corporate name, thus making it even more evident that the additional words "Ang Mga Kaanib" and "Sa Bansang Pilipinas, Inc.", are merely descriptive of and pertaining to the members of respondent corporation.

Significantly, the only difference between the corporate names of petitioner and respondent are the words SALIGAN and SUHAY. These words are synonymous — both mean ground, foundation or support. Hence, this case is on all fours with Universal Mills Corporation v. Universal Textile Mills, Inc., where the Court ruled that the corporate names Universal Mills Corporation and Universal Textile Mills, Inc., are undisputably so similar that even under the test of "reasonable care and observation" confusion may arise.

Furthermore, the wholesale appropriation by petitioner of respondent's corporate name cannot find justification under the generic word rule. We agree with the Court of Appeals' conclusion that a contrary ruling would encourage other corporations to adopt verbatim and register an existing and protected corporate name, to the detriment of the public.

The fact that there are other non-stock religious societies or corporations using the names Church of the Living God, Inc., Church of God Jesus Christ the Son of God the Head, Church of God in Christ & By the Holy Spirit, and other similar names, is of no consequence. It does not authorize the use by petitioner of the essential and distinguishing feature of respondent's registered and protected corporate name.

We need not belabor the fourth issue raised by petitioner. Certainly, ordering petitioner to change its corporate name is not a violation of its constitutionally guaranteed right to religious freedom. In so doing, the SEC merely compelled petitioner to abide by one of the SEC guidelines in the approval of partnership and corporate names, namely its undertaking to manifest its willingness to change its corporate name in the event another person, firm, or entity has acquired a prior right to the use of the said firm name or one deceptively or confusingly similar to it.

WHEREFORE, in view of all the foregoing, the instant petition for review is DENIED. The appealed decision of the Court of Appeals is AFFIRMED in toto.