Vigilla vs Philippine College of Criminology Inc | MAA

June 10, 2013

BENIGNO M. VIGILLA, ALFONSO M. BONGOT, ROBERTO CALLESA, LINDA C. CALLO, NILO B. CAMARA,
ADELIA T. CAMARA, ADOLFO G. PINON, JOHN A. FERNANDEZ, FEDERICO A. CALLO, MAXIMA P.
ARELLANO, JULITO B. COSTALES, SAMSON F. BACHAR, EDWIN P. DAMO, RENATO E. FERNANDEZ,
GENARO F. CALLO, JIMMY C. ALETA, and EUGENIO SALINAS, petitioners, vs.

PHILIPPINE COLLEGE OF CRIMINOLOGY INC. and/or GREGORY ALAN F. BAUTISTA, respondents

J. Mendoza

NATURE: Rule 45 petition

SUMMARY: Petitioners in the case at bar are maintenance personnel of Philippine College of
Criminology (PCCr), but are allegedly under MBMSI which is a corporation engaged in providing janitorial
services to clients. Upon PCCr’s discovery that MBMSI’s Certification of Incorporation was revoked, it
dismissed the maintenance personnel. The dismissed employees not filed a complaint for illegal
dismissal against MBMSI, its president, and the president of PCCr. However, quitclaims executed by the
employees were presented by PCCr. The LA, NLRC, CA, as well as the SC all held that facts show that
PCCr was really the employee and being engaged in a labor-only contracting, shall be held solidarily
liable with MBMSI. However, by virtue of the quitclaims, they cannot be held liable. In answering the
argument that sad documents have no validity for being executed after the dissolution of the
corporation, the SC held that the executed releases, waivers and quitclaims are valid and binding
notwithstanding the revocation of MBMSIÊs Certificate of Incorporation. The revocation does not result
in the termination of its liabilities. Section 122 of the Corporation Code provides for a three-year
winding up period for a corporation whose charter is annulled by forfeiture or otherwise to continue as
a body corporate for the purpose, among others, of settling and closing its affairs. Even if said
documents were executed in 2009, six (6) years after MBMSIÊs dissolution in 2003, the same are still
valid and binding upon the parties and the dissolution will not terminate the liabilities incurred by the
dissolved corporation pursuant to Sections 122 and 145 of the Corporation Code.

DOCTRINE:

 What is provided in Section 122 of the Corporation Code is that the conveyance to the trustees
must be made within the three-year period. But it may be found impossible to complete the
work of liquidation within the three-year period or to reduce disputed claims to judgment. The
trustees to whom the corporate assets have been conveyed pursuant to the authority of Section
122 may sue and be sued as such in all matters connected with the liquidation.
 Furthermore, Section 145 of the Corporation Code clearly provides that „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.
Even if no trustee is appointed or designated during the three-year period of the liquidation of
the corporation, the Court has held that the board of directors may be permitted to complete
the corporate liquidation by continuing as trustees by legal implication.

FACTS:

 Philippine College of Criminology (PCCr) is a non-stock educational institution, while the

petitioners were janitors, janitresses and supervisor in the Maintenance Department of PCCr

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  The petitioners were made to understand, upon application with respondent school, that they
were under MBMSI, a corporation engaged in providing janitorial services to clients.
 PCCr later on discovered that the Certificate of Incorporation of MBMSI had been revoked.
Hence, PCCr, through its President Bautista, citing the revocation, terminated the school’s
relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel
under MBMSI, except Alfonso Bongot (Bongot) who was retired.
 The dismissed employees then filed their respective complaints for illegal dismissal against
MBMSI, Atty. Seril (president of MBMSI), and Bautista (president of PCCr). They alleged that it
was really PCCr which was their real employer based on the following grounds:
o MBMSI’s certification had been revoked
o PCCr had direct control over MBMSI’s operations
o There was no contract between MCMSI and PCCr
o And, the selection and hiring of employees were undertaken by PCCr
 Labor Arbiter decision – PCCr was the real principal employer of the petitioners and that MBMSI
was a mere adjunct or alter ego/labor-only contractor
o The LA explained that PCCr was actually the one which exercised control over the means
and methods of the work of the petitioners, thru Atty. Seril, who was acting, throughout
the time in his capacity as Senior Vice President for Administration of PCCr, not in any
way or time as the supposed employer/general manager or president of MBMSI.
 NLRC decision – affirmed LA decision but released PCCr and Bautista from liability by virtue of
the quitclaims executed by petitioners
 CA decision – upheld NLRC decision. Hence, this petition.

ISSUE: WON a dissolved corporation can enter into an agreement such as releases, waivers and
quitclaims beyond the 3-year winding up period under Sec. 122 Corporation Code - YEs

RATIO # 2:

 Petitioners argue that MBMSI had no legal personality to incur civil liabilities as it did not exist
as a corporation on account of the fact that its Certificate of Incorporation had been revoked
 SC holds that the executed releases, waivers and quitclaims are valid and binding
notwithstanding the revocation of MBMSIE’s Certificate of Incorporation
o The revocation does not result in the termination of its liabilities
o Sec. 122 Corporation Code provides for a three-year winding up period for a
corporation whose charter is annulled by forfeiture or otherwise to continue as a body
corporate for the purpose, among others, of settling and closing its affairs.
o Even if said documents were executed six (6) years after MBMSI’s dissolution, the same
are still valid and binding upon the parties and the dissolution will not terminate the
liabilities incurred by the dissolved corporation pursuant to Secs. 122 and 145
Corporation Code
 SC reiterated its ruling in Premiere Development Bank vs Flores:
o although 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, there is no time limit within
which the trustees must complete a liquidation placed in their hands.
o What is provided in Section 122 of the Corporation Code is that the conveyance to the
trustees must be made within the three-year period. But it may be found impossible to
complete the work of liquidation within the three-year period or to reduce disputed
claims to judgment. The trustees to whom the corporate assets have been conveyed
pursuant to the authority of Section 122 may sue and be sued as such in all matters
connected with the liquidation.
o Furthermore, Section 145 of the Corporation Code clearly provides that „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. Even if no trustee is appointed or designated
during the three-year period of the liquidation of the corporation, the Court has held that

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 the board of directors may be permitted to complete the corporate liquidation by
continuing as trustees by legal implication.

Rene Knecht and Knecht Inc., vs. United Cigarette Corp

G.R. No. 139370. July 4, 2002 (Sandoval-Gutierrez J)

FACTS:

Rose Packing Company, Inc. owns 3 parcels of land in Rizal. The largest was covered by a TCT and is
mortgaged with PCIB, while the remaining 2 are unregistered. Rose Packing, through its President Rene
Knecht, sold to the United Cigarette Corporation, the said parcels of land for P800,000. It made a
warranty that the lots are free from all liens and encumbrances, except the REM with PCIB. For its part,
UCC promised to pay the purchase price subject to the terms and conditions. To secure the deal, UCC
paid Rose Packing P80,000.00 as earnest money.

Before the deed of sale could be executed, the parties found that Rose Packing’s actual obligation with
the PCIB far exceeded the P250,000.00 which UCC assumed to pay under the agreement. PCIB
demanded additional collateral for the approval of the sale of the mortgaged property. UCC did not
comply. Meanwhile, Rose Packing again offered to sell the same lots to other buyers without the
knowledge of UCC and without returning to the the earnest money.

Aggrieved, UCC filed a complaint against Rose Packing and Rene Knecht for specific performance and
recovery of damages.

RTC: Rose Packing was in bad faith when it did not inform UCC the amount of its actual obligation with
the PCIB. UCC cannot be compelled to assume the excess obligation.

Rose Packing appealed to the Court of Appeals. During the pendency of this appeal, UCC’s corporate life
expired. Alberto Wong, one of UCC’s major stockholders, was appointed trustee/liquidator of the
dissolved corporation.

CA: Affirmed the Decision

Like UCC, Rose Packing had been dissolved with the expiration of its corporate charter. Thereupon,
Knecht, Inc., undertook the liquidation of Rose Packing’s assets as well as the winding-up of its pending
affairs.

Subsequently, UCC, through its liquidator Alberto Wong, filed a complaint-in-intervention. It sought to
compel Rose Packing to comply with the Decision and prayed that a writ of execution be issued. Knecht
Inc opposed the motion claiming that the Decision can no longer be enforced since more than ten (10)
years had elapsed from its finality. The court issued a writ of execution in favor of UCC.

Knecht, Inc. and Rene Knecht, claiming that they had just discovered UCC’s dissolution on April 10, 1973
and that the three-year period to liquidate its affairs had already expired, again questioned before the
RTC, the validity of the granting the writ of execution. They averred that upon its dissolution, UCC may
no longer move for execution. All in all, a total of 8 appeals/ motion for reconsiderations were filed by
Rene Knecht questioning the execution of the judgment based on the expiration of UCC's existence.

ISSUE: Whether UCC, despite the expiration of its corporate existence, may still pray for a writ of
execution be issued and enforced against Knecht Inc.

RULING: Petition DENIED.

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There is no doubt that the judgment in Civil Case No. 9165 became final and executory on March 23,
1977. That this judgment is still enforceable was decided with finality.

In Reburiano vs. Court of Appeals, a case with similar facts, this Court held:

“the trustee (of a dissolved corporation) may commence a suit which can proceed to final
judgment even beyond the three-year period (of liquidation) x x x, 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 – to proceed to final judgment and execution thereof.” Indeed, the rights of a
corporation (dissolved pending litigation) are accorded protection by law.

“Section 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.”

The dissolution of UCC itself, or the expiration of its three-year liquidation period, should not be a bar
to the enforcement of its rights as a corporation. One of these rights, to be sure, includes the UCC’s
right to seek from the court the execution of a valid and final judgment. To hold otherwise would be to
allow petitioners to unjustly enrich themselves at the expense of UCC. This, in effect, renders nugatory
all the efforts and expenses of UCC in its quest to secure justice, not to mention the undue delay in
disposing of this case prejudicial to the administration of justice.

G.R. No. 187456 June 2, 2014

ALABANG DEVELOPMENT CORPORATION, Petitioner,

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

Ponente: Peralta, J.

Facts:

Alabang Development Corporation,developer of Alabang Hills Village filed a complaint for Injunction and Damages
against Alabang Hills Village Association Inc., and its president, Rafael for allegedly starting 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 despite demand, failed to desist from constructing thereof.

In its answer with counter-claim, AHVAI denied ADC’s allegations and made the following claims:

a. That ADC has no legal capacity to sue because its corporate existence was already dissolved by the
Securities and Exchange Corporation on May 26, 2003.

b. That ADC has no cause of action as it was merely holding the property in trust for AHVAI as beneficial
owner thereof.

c. That the lot is part of the open space required by law to be provided in the subdivision.

The RTC dismissed ADC’s complaint holding that It has no personality to sue and that subject area is a reserved
area for the benefit of the homeowners as required by law. HLURB has exclusive jurisdiction over the dispute
between ADC and AHVAI.

ADC filed a Notice of Appeal to elevate the case to the CA, which also denied its appeal, holding that it had no
capacity to sue as it was already defunct.

Ruling:

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The Supreme Court:
“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.

The CA cited the case for the purpose of restating and distinguishing the 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. …” 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 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…

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.

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

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 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 Complaint 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”

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, Knecht v. United Cigarette Corporation, and Pepsi-Cola Products
Philippines, Inc. v. Court of Appeals, 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 theCorporation 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 cogent reason to depart from the ruling of the CA finding it unnecessary to delve on the other issues
raised by petitioner.”

WHEREFORE, the subject judgment of the lower court ordering the register of deeds of Metro Manila, Makati
Branch IV to reconstitute from Decree No. 15170 and the plan and technical descriptions submitted, the alleged
certificate of title, original and owner's duplicate copy, in the name of Manuela Aquial is hereby annulled and set
aside, and the petition for reconstitution is ordered dismissed.

The temporary restraining order of June 27, 1980 issued against respondents is hereby made and declared
permanent. With costs jointly and severally against private respondents.

The Division Clerk of Court is hereby directed to furnish the Honorable Minister of Justice a copy of the decision at
bar (as well as a copy, for ready reference, of the decision of January 27, 1981 in the related Bernal case, G.R. No.
L-45168, previously ordered furnished to him) for the institution of appropriate criminal proceedings against
private respondents and all others who have assisted or conspired with them as may be warranted by the evidence
of record.

SO ORDERED.

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