G.R. No.

187456 June 2, 2014

ALABANG DEVELOPMENT CORPORATION, Petitioner, The CA cited the case for the purpose of restating and
vs. distinguishing the jurisprudential definition of the terms “lack of
ALABANG HILLS VILLAGE ASSOCIATION and RAFAEL capacity to sue” and “lack of personality to sue;” and of applying
TINIO, Respondents. 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
Ponente: Peralta, J.
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
Facts: in the case, or does not have the character or representation he
1. Alabang Development Corporation,developer of Alabang Hills claims[;] ‘lack of capacity to sue’ refers to a plaintiff’s general
Village filed a complaint for Injunction and Damages against disability to sue, such as on account of minority, insanity,
Alabang Hills Village Association Inc., and its president, Rafael for incompetence, lack of juridical personality or any other general
allegedly starting the construction of a multi-purpose hall and a disqualifications of a party. …” In the instant case, petitioner lacks
swimming pool on one of the parcels of land still owned by ADC, capacity to sue because it no longer possesses juridical personality
without the latter’s consent and approval, and despite demand, by reason of its dissolution and lapse of the three-year grace period
failed to desist from constructing thereof. provided under Section 122 of the Corporation Code, as will be
discussed below.
2. In its answer with counter-claim, AHVAI denied ADC’s allegations
and made the following claims: With respect to the second assigned error, Section 122 of
a. That ADC has no legal capacity to sue because its corporate the Corporation Code provides as follows:
existence was already dissolved by the Securities and Exchange SEC. 122. Corporate liquidation. – Every corporation whose charter
Corporation on May 26, 2003. expires by its own limitation or is annulled by forfeiture or
b. That ADC has no cause of action as it was merely holding the otherwise, or whose corporate existence for other purposes is
property in trust for AHVAI as beneficial owner thereof. terminated in any other manner, shall nevertheless be continued as
c. That the lot is part of the open space required by law to be a body corporate for three (3) years after the time when it would
provided in the subdivision. have been so dissolved, for the purpose of prosecuting and
defending suits by or against it and enabling it to settle and close
3. The RTC dismissed ADC’s complaint holding that: its affairs, to dispose of and convey its property and to distribute its
a. It has no personality to sue and that subject area is a reserved assets, but not for the purpose of continuing the business for which
area for the benefit of the homeowners as required by law. it was established.
b. HLURB has exclusive jurisdiction over the dispute between ADC
and AHVAI. At any time during said three (3) years, said corporation is
authorized and empowered to convey all of its property to trustees
4. ADC filed a Notice of Appeal to elevate the case to the CA, which for the benefit of stockholders, members, creditors, and other
also denied its appeal, holding that it had no capacity to sue as it persons in interest. From and after any such conveyance by the
was already defunct. corporation of its property in trust for the benefit of its
stockholders, members, creditors and others in interest, all interest
Held: which the corporation had in the property terminates, the legal
The Supreme Court: interest vests in the trustees, and the beneficial interest in the
“Anent the first assigned error, the Court does not agree that the stockholders, members, creditors or other persons in interest.
CA erred in relying on the case of Columbia Pictures, Inc. v. Court of
Appeals.
 Upon winding up of the corporate affairs, any asset the Complaint that “[p]laintiff is a duly organized and existing
distributable to any creditor or stockholder or member who is corporation under the laws of the Philippines, with capacity to sue
unknown or cannot be found shall be escheated to the city or and be sued. x x x”
municipality where such assets are located.
Petitioner, nonetheless, insists that a corporation may still
Except by decrease of capital stock and as otherwise sue, even after it has been dissolved and the three-year liquidation
allowed by this Code, no corporation shall distribute any of its period provided under Section 122 of the Corporation Code has
assets or property except upon lawful dissolution and after passed. Petitioner cites the cases of Gelano v. Court of Appeals,
payment of all its debts and liabilities. Knecht v. United Cigarette Corporation, and Pepsi-Cola Products
Philippines, Inc. v. Court of Appeals, as authority to support its
This Court has held that: position. The Court, however, agrees with the CA that in the
It is to be noted that the time during which the corporation, through abovecited cases, the corporations involved filed their respective
its own officers, may conduct the liquidation of its assets and sue complaints while they were still in existence. In other words, they
and be sued as a corporation is limited to three years from the time already had pending actions at the time that their corporate
the period of dissolution commences; but there is no time limit existence was terminated.
within which the trustees must complete a liquidation placed in
their hands. It is provided only (Corp. Law, Sec. 78 [now Sec. 122]) The import of this Court’s ruling in the cases cited by
that the conveyance to the trustees must be made within the three- petitioner is that the trustee of a corporation may continue to
year period. It may be found impossible to complete the work of prosecute a case commenced by the corporation within three years
liquidation within the three-year period or to reduce disputed from its dissolution until rendition of the final judgment, even if
claims to judgment. The authorities are to the effect that suits by or such judgment is rendered beyond the three-year period allowed by
against a corporation abate when it ceased to be an entity capable Section 122 of the Corporation Code. However, there is nothing in
of suing or being sued (7 R.C.L., Corps., par. 750); but trustees to the said cases which allows an already defunct corporation to
whom the corporate assets have been conveyed pursuant to the initiate a suit after the lapse of the said three-year period. On the
authority of Sec. 78 [now Sec. 122] may sue and be sued as such in contrary, the factual circumstances in the abovecited cases would
all matters connected with the liquidation… show that the corporations involved therein did not initiate any
complaint after the lapse of the three-year period. In fact, as stated
In the absence of trustees, this Court ruled, thus: above, the actions were already pending at the time that they lost
… Still in the absence of a board of directors or trustees, those their corporate existence.
having any pecuniary interest in the assets, including not only the
shareholders but likewise the creditors of the corporation, acting for In the present case, petitioner filed its complaint not only
and in its behalf, might make proper representations with the after its corporate existence was terminated but also beyond the
Securities and Exchange Commission, which has primary and three-year period allowed by Section 122 of theCorporation Code.
sufficiently broad jurisdiction in matters of this nature, for working Thus, it is clear that at the time of the filing of the subject
out a final settlement of the corporate concerns. complaint petitioner lacks the capacity to sue as a corporation. To
allow petitioner to initiate the subject complaint and pursue it until
In the instant case, there is no dispute that petitioner’s final judgment, on the ground that such complaint was filed for the
corporate registration was revoked on May 26, 2003. Based on the sole purpose of liquidating its assets, would be to circumvent the
above-quoted provision of law, it had three years, or until May 26, provisions of Section 122 of the Corporation Code.
2006, to prosecute or defend any suit by or against it. The subject
complaint, however, was filed only on October 19, 2006, more than As to the last issue raised, the basic and pivotal issue in the
three years after such revocation. instant case is petitioner’s capacity to sue as a corporation and it
has already been settled that petitioner indeed lacks such capacity.
It is likewise not disputed that the subject complaint was Thus, this Court finds no cogent reason to depart from the ruling of
filed by petitioner corporation and not by its directors or trustees. the CA finding it unnecessary to delve on the other issues raised by
In fact, it is even averred, albeit wrongly, in the first paragraph of petitioner.”
WHEREFORE, the subject judgment of the lower court ordering the The Division Clerk of Court is hereby directed to furnish the
register of deeds of Metro Manila, Makati Branch IV to reconstitute Honorable Minister of Justice a copy of the decision at bar (as well
from Decree No. 15170 and the plan and technical descriptions as a copy, for ready reference, of the decision of January 27, 1981
submitted, the alleged certificate of title, original and owner's in the related Bernal case, G.R. No. L-45168, previously ordered
duplicate copy, in the name of Manuela Aquial is hereby annulled furnished to him) for the institution of appropriate criminal
and set aside, and the petition for reconstitution is ordered proceedings against private respondents and all others who have
dismissed. assisted or conspired with them as may be warranted by the
evidence of record.

The temporary restraining order of June 27, 1980 issued against

respondents is hereby made and declared permanent. With costs SO ORDERED.
jointly and severally against private respondents.