Today is Friday, March 02, 2018

Custom Search

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 187456 June 2, 2014

ALABANG DEVELOPMENT CORPORATION, Petitioner,

vs.
ALABANG HILLS VILLAGE ASSOCIATION and RAFAEL TINIO, Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari assailing the Decision1 of the Court of Appeals (CA), dated
March 27, 2009, in CA-G.R. CV No. 88864.

The factual and procedural antecedents of the case, as summarized by the CA, are as follows:

The case traces its roots to the Complaint for Injunction and Damages filed [with the Regional Trial Court (RTC) of
Muntinlupa City] on October 19, 2006 by [herein petitioner, Alabang Development Corporation] ADC against [herein
respondents, Alabang Hills Village Association, Inc.] AHVAI and Rafael Tinio (Tinio), President of AHVAI. The
Complaint alleged that [petitioner] is the developer of Alabang Hills Village and still owns certain parcels of land
therein that are yet to be sold, as well as those considered open spaces that have not yet been donated to [the]
local government of Muntinlupa City or the Homeowner's Association. Sometime in September [2006], ADC learned
that AHVAI started the construction of a multi-purpose hall and a swimming pool on one of the parcels of land still
owned by ADC without the latter's consent and approval, and that despite demand, AHVAI failed to desist from
constructing the said improvements. ADC thus prayed that an injunction be issued enjoining defendants from
constructing the multi-purpose hall and the swimming pool at the Alabang Hills Village.

In its Answer With Compulsory Counterclaim, AHVAI denied ADC's asseverations and claimed that the latter has no
legal capacity to sue since its existence as a registered corporate entity was revoked by the Securities and
Exchange Commission (SEC) on May 26, 2003; that ADC has no cause of action because by law it is no longer the

Create PDF in your applications with the Pdfcrowd HTML to PDF API PDFCROWD
 absolute owner but is merely holding the property in question in trust for the benefit of AHVAI as beneficial owner
thereof; and that the subject lot is part of the open space required by law to be provided in the subdivision. As
counterclaim, it prayed that an order be issued divesting ADC of the title of the property and declaring AHVAI as
owner thereof; and that ADC be made liable for moral and exemplary damages as well as attorney's fees.

Tinio filed his separate Answer With Compulsory Counterclaim, practically reiterating the defenses of AHVAI.2

On January 4, 2007, the RTC of Muntinlupa City, Branch 276, rendered judgment dismissing herein petitioner's
complaint on the grounds (1) that the latter has no personality to file the same; (2) that the subject property "is a
reserved area for the beneficial use of the homeowners, as mandated by law;" and (3) that the Housing and Land
Use Regulatory Board (HLURB), not the RTC, has exclusive jurisdiction over the dispute between petitioner and
respondents.3

Aggrieved, herein petitioner filed a Notice of Appeal of the RTC decision. Herein respondent AHVAI, on the other
hand, moved that it be allowed to prosecute its compulsory counterclaim praying, for this purpose, that the RTC
decision be amended accordingly.

In its Order dated February 20, 2007, the RTC approved petitioner's notice of appeal but dismissed respondent
AHVAI’s counterclaim on the ground that it is dependent on petitioner's complaint. Respondent AHVAI then filed an
appeal with the CA.

In its assailed Decision dated March 27, 2009, the CA dismissed both appeals of petitioner and respondent, and
affirmed the decision of the RTC. With respect to petitioner, the CA ruled that the RTC correctly dismissed
petitioner's complaint as the same was filed when petitioner was already defunct and, as such, it no longer had
capacity to file the said complaint. As regards, respondent AHVAI’s counterclaim, the CA held that "where there is
no claim against the [respondent], because [petitioner] is already in existent and has no capacity to sue, the
counterclaim is improper and it must be dismissed, more so where the complaint is dismissed at the instance of the
[respondent]."

Thus, the instant petition based on the following grounds:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RELYING ON THE CASE OF

"COLUMBIA PICTURES, INC. v. COURT OF APPEALS" IN RESOLVING PETITIONER'S LACK OF
CAPACITY

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING LACK OF CAPACITY

OFTHE PETITIONER IN FILING THE CASE CONTRARY TO THE EARLIER RULINGS OF THIS
HONORABLE COURT THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT
FAILED TO RESOLVE THE ISSUE THAT PETITIONER IS MANDATED TO CEDE PROPERTIES TO
RESPONDENT AHVAI4

Anent the first assigned error, the Court does not agree that the CA erred in relying on the case of Columbia
Pictures, Inc. v. Court of Appeals.5 The CA cited the case for the purpose of restating and distinguishing the

Create PDF in your applications with the Pdfcrowd HTML to PDF API PDFCROWD
 jurisprudential definition of the terms "lack of capacity to sue" and "lack of personality to sue;" and of applying these
definitions to the present case. Thus, the fact that, unlike in the instant case, the corporations involved in the
Columbia case were foreign corporations is of no moment. The definition of the term "lack of capacity to sue"
enunciated in the said case still applies to the case at bar. Indeed, as held by this Court and as correctly cited by the
CA in the case of Columbia: "[l]ack of legal capacity to sue means that the plaintiff is not in the exercise of his civil
rights, or does not have the necessary qualification to appear in the case, or does not have the character or
representation he claims[;] 'lack of capacity to sue' refers to a plaintiff's general disability to sue, such as on account
of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party. ..."6
In the instant case, petitioner lacks capacity to sue because it no longer possesses juridical personality by reason of
its dissolution and lapse of the three-year grace period provided under Section 122 of the Corporation Code, as will
be discussed below.

With respect to the second assigned error, Section 122 of the Corporation Code provides as follows:

SEC. 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 and 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 interest, all interest which the corporation had in the property terminates, the legal interest vests in the
trustees, and the beneficial interest in the stockholders, members, creditors or other persons in interest.

Upon winding up of the corporate affairs, any asset distributable to any creditor or stockholder or member who is
unknown or cannot be found shall be escheated to the city or municipality where such assets are located.

Except by decrease of capital stock and as otherwise allowed by this Code, no corporation shall distribute any of its
assets or property except upon lawful dissolution and after payment of all its debts and liabilities.

This Court has held that:

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

Create PDF in your applications with the Pdfcrowd HTML to PDF API PDFCROWD
 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...7

In the absence of trustees, this Court ruled, thus:

… Still in the absence of a board of directors or trustees, those having any pecuniary interest in the assets, including
not only the shareholders but likewise the creditors of the corporation, acting for and in its behalf, might make proper
representations with the Securities and Exchange Commission, which has primary and sufficiently broad jurisdiction
in matters of this nature, for working out a final settlement of the corporate concerns.8

In the instant case, there is no dispute that petitioner's corporate registration was revoked on May 26, 2003. Based 1âwphi1

on the above-quoted provision of law, it had three years, or until May 26, 2006, to prosecute or defend any suit by or
against it. The subject complaint, however, was filed only on October 19, 2006, more than three years after such
revocation. It is likewise not disputed that the subject complaint was filed by petitioner corporation and not by its
directors or trustees. In fact, it is even averred, albeit wrongly, in the first paragraph of the Complaint9 that "[p]laintiff
is a duly organized and existing corporation under the laws of the Philippines, with capacity to sue and be sued. x x
x"10

Petitioner, nonetheless, insists that a corporation may still sue, even after it has been dissolved and the three-year
liquidation period provided under Section 122 of the Corporation Code has passed. Petitioner cites the cases of
Gelano v. Court of Appeals,11 Knecht v. United Cigarette Corporation,12 and Pepsi-Cola Products Philippines, Inc. v.
Court of Appeals,13 as authority to support its position. The Court, however, agrees with the CA that in the
abovecited cases, the corporations involved filed their respective complaints while they were still in existence. In
other words, they already had pending actions at the time that their corporate existence was terminated.

The import of this Court's ruling in the cases cited by petitioner is that the trustee of a corporation may continue to
prosecute a case commenced by the corporation within three years from its dissolution until rendition of the final
judgment, even if such judgment is rendered beyond the three-year period allowed by Section 122 of the
Corporation Code. However, there is nothing in the said cases which allows an already defunct corporation to initiate
a suit after the lapse of the said three-year period. On the contrary, the factual circumstances in the abovecited
cases would show that the corporations involved therein did not initiate any complaint after the lapse of the three-
year period. In fact, as stated above, the actions were already pending at the time that they lost their corporate
existence.

In the present case, petitioner filed its complaint not only after its corporate existence was terminated but also
beyond the three-year period allowed by Section 122 of the Corporation Code. Thus, it is clear that at the time of the
filing of the subject complaint petitioner lacks the capacity to sue as a corporation. To allow petitioner to initiate the
subject complaint and pursue it until final judgment, on the ground that such complaint was filed for the sole purpose
of liquidating its assets, would be to circumvent the provisions of Section 122 of the Corporation Code.

As to the last issue raised, the basic and pivotal issue in the instant case is petitioner's capacity to sue as a
corporation and it has already been settled that petitioner indeed lacks such capacity. Thus, this Court finds no

Create PDF in your applications with the Pdfcrowd HTML to PDF API PDFCROWD
 cogent reason to depart from the ruling of the CA finding it unnecessary to delve on the other issues raised by
petitioner.

WHEREFORE, the instant petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. CV No.
88864, sustaining the Decision of the Regional Trial Court of Muntinlupa City, Branch 276, in Civil Case No. 06-138,
is AFFIRMED.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

ARTURO D. BRION* MARTIN S. VILLARAMA, JR.**

Associate Justice Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Create PDF in your applications with the Pdfcrowd HTML to PDF API PDFCROWD
 Footnotes
*
Designated additional member in lieu of Associate Justice Jose Catral Mendoza, per Raffle dated March 3,
3010.
**
Designated Acting Member, per Special Order No. 1691 dated May 22, 2014.
1
Penned by Associate Justice Portia Aliño-Hormachuelos, with Associate Justices Jose Catral Mendoza
(now a member of this Court) and Ramon M. Sato, Jr. concurring; Annex "A" to petition, rollo pp. 25-33.
2
Id. at 26-27.
3
See Annex "Q" to petition, id. at 104-108.
4
Rollo, p. 11.
5
329 Phil. 875 (1996).
6
Id. at 901.
7
Reburiano v. Court of Appeals, 361 Phil. 294, 307 (1999), citing Sumera v. Valencia, 67 Phil. 721, 726
(1939).
8
Clemente v. Court of Appeals, G.R. No. 82407, March 27, 1995, 242 SCRA 717, 723
9
Annex "J" to petition, rollo, pp. 56-62.
10
Id.. at 56.
11
G.R. No. L-39050, February 24, 1981, 103 SCRA 90.
12
433 Phil. 380 (2002).
13
486 Phil. 170 (2004).

The Lawphil Project - Arellano Law Foundation

Create PDF in your applications with the Pdfcrowd HTML to PDF API PDFCROWD