Name: SARACHO, Nicole R.

Topic: Dissolution and Liquidation

Law or Provision Cited: Sec 122 of Corporation Code, RA 8799, Sec. 145
Title: Vitaliano Aguirre II and Fidel Aguirre v FQB+7, Inc, et al.
Source, Date: G.R. No. 170770, 9 January 2013
Facts:
Vitaliano filed in his individual capacity and on behalf of FQB+7 a
complaint for intra-corporate dispute, injunction, inspection of
corporate books and records and damages against Nathaniel and
Priscila Aguirre and Antnio De Villa. Vitaliano discovered that the
General Information Sheet (GIS) of FQB+7, a dissolved corporation in
SEC filed by Francisco Q. Bocobo;s heirs, Nathaniel and Priscila, as
FQB+7s president and secretary/treasurer, respectively had
substantive discrepancies respecting the composition of directors and
subscribers of FQB+7. This prompted Vitaliano to write to the real
Board of Directors (the directors reflected in the Articles of
Incorporation), represented by Fidel N. Aguirre (Fidel). Vitaliano
questioned the validity and truthfulness of the alleged stockholders
meeting. The real Board allegedly ignored Vitalianos request.
RTC granted Vitalianos complaint due to the failure of the
respondents to attend the hearing.
Upon appeal, CA postulated that by virtue of Section 122, it
determined that Vitalianos Complaint, being geared towards the
continuation of FQB+7 business, should be dismissed because the
corporation has lost its juridical personality. Moreover, the CA held that
the trial court does not have jurisdiction to entertain an intra-corporate
dispute when the corporation is already dissolved
Hence, this petition.
Issue: (1) Whether a corporations board is rendered functus officio
after dissolution.
(2) Whether the RTC has jurisdiction over an intra-corporate
dispute involving a dissolved corporation.
Held: NO. Petition partially granted.
Ruling:
(1) NO. Section 122 of the Corporation Code prohibits a dissolved
corporation from continuing its business, but allows it to continue with
a limited personality in order to settle and close its affairs, including its
complete liquidation.
The Supreme Court declared that the dissolution of the
corporation does not render the corporations board of directors
functus officio. The board of directors still has actual legal authority to
direct the affairs of the corporation with respect to the winding up and
liquidation of corporate affairs.
The High Court explained that Section 122 of the Corporation
Code allows the corporation to continue its existence for these limited

purposes. It is necessary that the corporation retains the board which

should continue to act in its behalf while winding up its business and
liquidating its remaining assets, if any, within three (3) years from
dissolution.
Thus, the Complaint by Vitiliano is properly allowed to be heard
only for relief purposes for it does not seek to continue the corporates
business. Its aim is to determine and vindicate an alleged stockholders
right to the return of his stockholdings and to participate in the election
of directors, and a corporations right to remove usurpers and
strangers from its affairs.
(2) YES. R.A. 8799 conferred jurisdiction over intra-corporate
controversies on RTC. The Court elaborated that an intra-corporate
case exists (a) if the issue arose out of intra-corporate or partnership
relations; and (b) if the controversy is intrinsically connected with the
regulation of the corporation or the enforcement of the parties rights
and obligations under the Corporation Code and the internal regulatory
rules of the corporation. The Court held that these two elements exist
in this case even though FQB had been dissolved.
In addition, Section 145 of the Corporation Code assures an
aggrieved party that the corporations dissolution will not impair, much
less remove, his/her rights or remedies against the corporation, its
stockholders, directors or officers.
The dissolution of the corporation simply prohibits it from
continuing its business. The dissolution of the corporation simply
prohibits it from continuing its business. parties. Thus, a cause of
action involving an intra-corporate controversy remains and must be
filed as an intra- corporate dispute despite the subsequent dissolution
of the corporation.