Reburiano v CA G.R. No.

102965 | January 21, 1999 | Mendoza Facts: RTC rendered judgment in favor of Pepsi Cola Bottling Co. ordering Reburiano to pay P55,000 with interest for the unpaid bottles of softdrinks it received from the company. RTC issued a writ of execution. However, it appears that prior to the promulgation of the decision of the trial court, private respondent amended its articles of incorporation to shorten its term of existence to July 8, 1983. The amended articles of incorporation was approved by the Securities and Exchange Commission on March 2, 1984. The trial court was not notified of this fact. Reburiano moved to quash the writ of execution on the grounds that when the Court of Appeals rendered its decision, the private respondent was no longer in existence and had no more juridical personality and so, as such, it no longer had the capacity to sue and be sued; and that after Pepsi lost its existence and juridical personality, Atty. Romualdo M. Jubay had no more client in this case and so his appearance in this case was no longer possible and tenable; Private respondent opposed petitioners' motion. It argued that the jurisdiction of the court as well as the respective parties capacity to sue had already been established during the initial stages of the case; and that when the complaint was filed in 1982, private respondent was still an existing corporation so that the mere fact that it was dissolved at the time the case was yet to be resolved did not warrant the dismissal of the case or oust the trial court of its jurisdiction. Private respondent further claimed that its dissolution was effected in order to transfer its assets to a new firm of almost the same name and was thus only for convenience. Private respondent argues that petitioners knew that it had ceased to exist during the course of the trial of the case but did not act upon this information until the judgment was about to be enforced against them; hence, the filing of a Motion to Quash and the present petition are mere dilatory tactics resorted to by petitioners. Private respondent likewise cites the ruling of this Court in Gelano v. Court of Appeals that the counsel of a dissolved corporation is deemed a trustee of the same for purposes of continuing such action or actions as may be pending at the time of the dissolution to counter petitioners' contention that private respondent lost its capacity to sue and be sued long before the trial court rendered judgment and hence execution of such judgment could not be complied with as the judgment creditor has ceased to exist. RTC denied Reburianos petition to quash the writ of execution. An appeal was made. CA dismissed the appeal. Hence, this petition for review on certiorari. Issue: Whether or not Pepsi still had juridical personality to pursue its case against Reburiano after a shortening of its corporate existence. Held: Yes. Petitioners are in error in contending that "a dissolved and non-existing corporation could no longer be represented by a lawyer and concomitantly a lawyer could not appear as counsel for a non-existing judicial person. The only reason for their refusal to execute the same is that there is no existing corporation to which they are indebted. Such argument is fallacious. The law specifically allows a trustee to manage the affairs of the corporation in liquidation. Consequently, any supervening fact, such as the dissolution of the corporation, repeal of a law, or any other fact of similar nature would not serve as an effective bar to the enforcement of such right. Ratio: Sec. 122 of the Corporation Code provides in part: 122. Corporate Liquidation. Every Corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three (3) years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of continuing the business for which it was established. At any time during said three (3) years, said corporation is authorized the empowered to convey all of its property to trustees for the benefit of stockholders, members, creditors, and other persons in interest. From and after any such conveyance by the corporation of its property in trust for the benefit of its stockholders, members, creditors and others in interests, all interests which the corporation had in the property in terminates, the legal interest vests in the trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest. Petitioners argue that while private respondent Pepsi Cola Bottling Company of the Philippines, Inc. undertook a voluntary dissolution on July 3, 1983 and the process of liquidation for three (3) years thereafter, there is no showing that a trustee or receiver was ever appointed. They contend that 122 of the Corporation Code does not authorize a corporation, after the three-year

liquidation period, to continue actions instituted by it within said period of three years. Petitioners cite the case of National Abaca 15 and Other Fibers Corporation v. Pore wherein this court stated: It is generally held, that where a statue continues the existence of a corporation for a certain period after its dissolution for the purpose of prosecuting and defending suits, etc., the corporation becomes defunct upon the expiration of such period, at least in the absence of a provision to the contrary, so that no action can afterwards be brought by or against it, and must be dismissed. Actions pending by or against the corporate when the period allowed by the statue expires, ordinarily abate. This ruling, however, has been modified by subsequent cases. In Board of Liquidators v. Kalaw, this Court stated: . . . The legal interest became vested in the trustee the Board of Liquidators. The beneficial interest remained with the sole stockholder the government. At no time had the government withdrawn the property, or the authority to continue the present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of the Board of Liquidators from prosecuting this case to its final conclusion. The provision of Section 78 (now Section 122) of the Corporation Law the third method of winding up corporate affairs finds application. Indeed, in Gelano vs. Court of Appeals, a case having substantially similar facts as the instant case, this Court held: However, a corporation that has a pending action and which cannot be terminated within the three-year period after its dissolution is authorized under Sec. 78 [now 122] of the Corporation Law to convey all its property to trustees to enable it to prosecute and defend suits by or against the corporation beyond the three-year period. Although private respondent did not appoint any trustee, yet the counsel who prosecuted and defended the interest of the corporation in the instant case and who in fact appeared in behalf of the may be considered a trustee of the corporation at least with respect to the matter in litigation only. Said counsel had been handling the case when the same was pending before the trial court until it was appealed before the Court of Appeals and finally to this Court. We therefore hold that there was substantial compliance with Sec. 78 [now 122] of the Corporation Law and such private respondent Insular Sawmill, Inc. could still continue prosecuting the present case even beyond the period of three (3) years from the time of dissolution. . . . [T]he trustee may commence a suit which can proceed to final judgment even beyond the three-year period. No reason can be conceived why a suit already commenced by the corporation itself during its existence, not by a mere trustee who, by fiction, merely continues the legal personality of the dissolved corporation should not be accorded similar treatment allowed to proceed to final judgment and execution thereof. In the Gelano case, the counsel of the dissolved corporation was considered a trustee. In the later case of Clemente v. Court of Appeals, we held that the board of directors may be permitted to complete the corporate liquidation by continuing as "trustees" by legal implication. For, indeed, as early as 1939, in the case of Sumera v. Valencia, this Court held: It is to be noted that the time during which the corporation, through its own officers, may conduct the liquidation of its assets and sue and be sued as a corporation is limited to three years from the time the period of dissolution commences: but there is no time limit within which the trustees must complete a liquidation placed in their hands. It is provided only (Corp. Law, Sec. 78 [now Sec. 122]) that the conveyance to the trustees must be made within the three-year period. It may be found impossible to complete the work of liquidation within the three-year period or to reduce disputed claims to judgment. The authorities are to the effect that suits by or against a corporation abate when it ceased to be an entity capable of suing or being sued (7 R.C.L., Corps., par. 750); but trustees to whom the corporate assets have been conveyed pursuant to the authority of Sec. 78 [now Sec. 122] may sue and be sued as such in all matters connected with the liquidation. . . . Furthermore, the Corporation Law provides: 145. Amendment or repeal. No right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation or by any subsequent amendment or repeal of this Code or of any part thereof. This provision safeguards the rights of a corporation which is dissolved pending litigation. Other issues: Petitioners anchored their Motion to Quash on the claim that there was a change in the situation of the parties. However, a perusal of the cases which have recognized such a ground as an exception to the general rule shows that the change contemplated by such exception is one which occurred subsequent to the judgment of the trial court. Here, the change in the status of private respondent took place in 1983, when it was dissolved, during the pendecy of its case in the trial court. The change occurred prior to the rendition of judgment by the trial court.

Rules of fair play, justice, and due process dictate that parties cannot raise for the first time on appeal from a denial of a Motion to Quash a Writ of Execution issues which they could have raised but never did during the trial and even on appeal from the decision of the trial court. National Abaca Corp. v Pore G.R. No. L-16779 | August 16, 1961 | Concepcion Facts: On November 14, 1953, plaintiff filed with the Municipal Court of Tacloban, Leyte, a complaint, against defendant Apolonia Pore, for the recovery of P1,213.34, allegedly advanced to her for the purchase of hemp for the account of the former and for which she had allegedly failed to account. In her answer, defendant alleged that she had accounted for all cash advances received by her for the aforementioned purpose from the plaintiff. In due course, said court rendering judgment on April 11, 1956, finding that the defendant had not accounted for cash advances in the sum of P272.49, which she was, accordingly, sentenced to pay to the plaintiff, with legal interest from November 18, 1953, in addition to the costs. Plaintiff appealed to the Court of First Instance of Leyte, in which defendant moved to dismiss the complaint upon the ground that plaintiff has no legal capacity to sue, it having abolished by Executive Order No. 372 of the President of the Philippines, dated November 24,1950. Plaintiff objected thereto upon the ground that pursuant to said executive order, plaintiff "shall nevertheless be continued as a body corporate for a period of three (3) years from the effective date" of said executive order, which was November 30, 1950, "for the purpose of prosecuting and defending suits by or against it and of enabling the Board of Liquidators" thereby created "gradually to settle and close its affairs", . . . and that this case was begun on November 14, 1953, or before the expiration of the period aforementioned. CFI dismissed. Issue: Whether an action, commenced within three (3) years after the abolition of plaintiff, as a corporation, may be continued by the same after the expiration of said period; Held: No. In the absence of statutory provision to the contrary, pending actions by or against a corporation are abated upon expiration of the period allowed by law for the liquidation of its affairs. Ratio: It is generally held, that where a statute continues the existence of a corporation for a certain period after its dissolution for the purpose of prosecuting and defending suits, etc., the corporation becomes defunct upon the expiration of such period, at least in the absence of a provision to the contrary, so that no action can afterwards be brought by or against it, and must be dismissed. Actions pending by or against the corporation when the period allowed by the statute expires, ordinarily abate. . . . This time limit does not apply unless the circumstances are such as to bring the corporation within the provision of the statute. However, the wording of the statutes, in some jurisdictions authorize suits after the expiration of the time limit, where the statute provides that for the purpose of any suit brought by or against the corporation shall continue beyond such period for a further named period after final judgment. (Fletcher's Cyclopedia on Corporations, Vol. 16, pp. 892-893.). Our Corporation Law contains no provision authorizing a corporation, after three (3) years from the expiration of its lifetime, to continue in its corporate name actions instituted by it within said period of three (3) years. in fact, section 77 of said law provides that the corporation shall "be continued as a body corporate for three (3) years after the time when it would have been . . . dissolved, for the purposed of prosecuting and defending suits by or against it . . .", so that, thereafter, it shall no longer enjoy corporate existence for such purpose. For this reason, section 78 of the same law authorizes the corporation, "at any time during said three years . . . to convey all of its property to trustees for the benefit of members, stockholders, creditors and other interested", evidently for the purpose, among others, of enabling said trustees to prosecute and defend suits by or against the corporation begun before the expiration of said period. Hence, commenting on said sections, Judge Fisher, in his work entitled Philippines Law on Stock Corporations (1929 ed.), has the following to say: It is to be noted that the time during which the corporation, through its own officers, may conduct the liquidation of its assets and sue and be sued as a corporation is limited to three years from the time the period of dissolution commences; but that there is no time limited within the trustees must complete a liquidation placed in their hands. It is provided only (Corp. Law, Sec. 78) that the conveyance to the trustees must be made within the three-year period. It may be found impossible to complete the work of liquidation within the three-year period or to reduce disputed claims to judgment. The authorities are to the effect that suits by or against a corporation abate when it ceased to be an entity capable of suing or being sued; but trustees to whom the corporate assets have been conveyed pursuant to the authority of section 78 may used and be sued as such in all matters connected with the liquidation. By the terms of the statute the effect of the conveyance is to make the trustees the legal owners of the property conveyed, subject to the beneficial interest therein of creditors and stockholders.

Obviously, the complete loss of plaintiff's corporate existence after the expiration of the period of three (3) years for the settlement of its affairs is what impelled the President to create a Board of Liquidators, to continue the management of such matters as may then be pending. Other issue: Motion for reconsideration should have been admitted as failure to file in court said original of the amended complaint must have been due either to accident or to excusable negligence on the part of said mailing clerk. Tan Tiong Bio v BIR G.R. No. L-8800 |October 23, 1956 | Reyes Facts: Central Syndicate, a corporation organized for the limited period of two years, addressed a letter to the Collector of Internal Revenue advising the latter of a sale of said corporation by one Dee Hong Lue of surplus properties purchased by the vendor from the Foreign Liquidation Commission, with the condition that the vendee corporation would pay the 3 1/2% sales tax on such surplus properties in the name and in behalf of the vendor Dee Hong Lue. In the same letter, the Syndicate deposited with the Collector the amount of P43,750.00 to answer for the sales tax collectible on the purchase, but representing that Dee Hong Lue expected a refund from the U.S. Government on the original purchase price because of non-delivery of various items included in the contract, and that therefore, the original sales tax due on the sales price was subject to readjustment and reduction. Subsequently, Dee Hong Lue, through counsel, wrote the Collector advising him that the Foreign Liquidation Commission had given him a refund of P31,522.18 on the purchase price of the aforesaid surplus properties, and requesting for the refund of an alleged overpayment of sales tax in the amount of P1,103.28. This request for tax refund was denied. On the same day, the Collector wrote the Central Syndicate, informing it that the investigation made by the Bureau revealed that it was the Syndicate and not Dee Hong Lue that had actually purchased the surplus goods Mystery Pile from the Foreign Liquidation Commission; that the properties were invoiced in the name of Dee Hong Lue in trust for the Syndicate because it was then only in the process of incorporation; and that the Syndicate, after it had been organized, made it appear that the goods were sold to it by Dee Hong Lue, to evade payment of sales tax on its selling prices to the public; and assessed the Syndicate a deficiency sales tax which Syndicate refused to pay. Because of the refusal of the Syndicate to pay the deficiency assessment, and the findings of the Bureau that the corporation had no existing properties to satisfy the assessment, the Collector wrote David Sycip and Yu Khe Thai, manager and president, respectively, of the Syndicate, to pay the corporations tax liability or else be held criminally liable under the Internal Revenue Code. Ultimately, on August 5, 1954, the Collector issued a final definitive ruling reaffirming the deficiency assessment against the Syndicate; from which ruling the latter appealed to the Court of Tax Appeals. In the Court of Tax Appeals, the Solicitor-General moved for the dismissal of the appeal on the ground that the Appellant Central Syndicate no longer had the capacity to sue because its term of existence had expired on August 15, 1948, as shown by its Articles of Incorporation attached to the motion to dismiss. The Appellant Syndicate opposed the motion, alleging that although the corporation had gone defunct, its officers and directors not only stood liable for the assessment but had also been threatened to be held criminally liable therefor; and offered to be substituted as Appellants. After hearing the arguments of both parties, theRespondent Court of Tax Appeals issued a resolution dismissing the appeal, on the ground that whatever judgment it would render in favor of the Government would be unenforceable against the Appellant because it is a non-existing entity. From this resolution, the AppellantSyndicate appealed to us on petition for review. Issue: WON the Court of Tax Appeals should have allowed the substitution of its former officers and directors as parties-Appellants Held: YES. Court of Tax Appeals should have allowed the substitution of its former officers and directors as parties-Appellants, since they are proper parties in interest in so far as they may be (and in fact are) held personally liable for the unpaid deficiency assessments made by the Collector of Internal Revenue against the defunct Syndicate. Ratio: It is true that sections 77 and 78 of our Corporation Law contemplate that corporate existence can be prolonged only for three years from and after the termination of the corporate term, for the purpose of winding up its affairs; and in the case of the Central Syndicate, the three years expired in 1951. On this basis, if it be true that the Syndicate thereafter had no personality to dispute the assessment, it would be equally true that no valid assessment could be imposed on a corporation that no longer had juridical personality. In any event, the government cannot insist on making a tax assessment against a corporation that no longer exists and then turn around and oppose the appeal questioning the legality of the assessment precisely on the ground that the corporation is nonexistent, and has no longer capacity to sue. The government cannot adopt inconsistent stands and thereby deprive the officers and

directors of the defunct corporation of the remedy to question the validity and correctness of the assessment for which, if sustained, they would be held personally liable as successors-in-interest to the corporate property.