June 2014 Philippine Supreme Court Decisions on Commercial Law

Here are select June 2014 ruling of the Supreme Court of the Philippines on commercial law:

Corporations; capacity to sue  of dissolved corporations. 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. Alabang Development Corporation v. Alabang Hills Village Association and Rafael Tinio, G.R. No. 187456, June 2, 2014.

Corporations; refusal to allow inspection is a criminal offense. We find inaccurate the pronouncement of the RTC that the act of refusing to allow inspection of the stock and transfer book is not a punishable offense under the Corporation Code. Such refusal, when done in violation of Section 74( 4) of the Corporation Code, properly falls within the purview of Section 144 of the same code and thus may be penalized as an offense. Aderito Z. Yujuico and Bonifacio C. Sumbilla v. Cezar T. Quiambao and Eric C. Pilapil, G.R. No. 180416, June 2, 2014.

Corporations; persons who may be held liable under Section 74. A perusal of the second and fourth paragraphs of Section 74, as well as the first paragraph of the same section, reveal that they are provisions that obligates a corporation: they prescribe what books or records a corporation is required to keep; where the corporation shall keep them; and what are the other obligations of the corporation to its stockholders or members in relation to such books and records. Hence, by parity of reasoning, the second and fourth paragraphs of Section 74, including the first paragraph of the same section, can only be violated by a corporation. It is clear then that a criminal action based on the violation of the second or fourth paragraphs of Section 74 can only be maintained against corporate officers or such other persons that are acting on behalf of the corporation. Violations of the second and fourth paragraphs of Section 74 contemplates a situation wherein a corporation, acting thru one of its officers or agents, denies the right of any of its stockholders to inspect the records, minutes and the stock and transfer book of such corporation.

The problem with the petitioners’ complaint and the evidence that they submitted during preliminary investigation is that they do not establish that respondents were acting on behalf of STRADEC. Quite the contrary, the scenario painted by the complaint is that the respondents are merely outgoing officers of STRADEC who, for some reason, withheld and refused to tum-over the company records of STRADEC; that it is the petitioners who are actually acting on behalf of STRADEC; and that STRADEC 1s actually merely trying to recover custody of the withheld records. In other words, petitioners are not actually invoking their right to inspect the records and the stock and transfer book of STRADEC under the second and fourth paragraphs of Section 74. What they seek to enforce is the proprietary right of STRADEC to be in possession of such records and book. Such right, though certainly legally enforceable by other means, cannot be enforced by a criminal prosecution based on a violation of the second and fourth paragraphs of Section 74. That is simply not the situation contemplated by the second and fourth paragraphs of Section 74 of the Corporation Code. Aderito Z. Yujuico and Bonifacio C. Sumbilla v. Cezar T. Quiambao and Eric C. Pilapil, G.R. No. 180416, June 2, 2014.

(Hector thanks Mark Xavier D. Oyales for his assistance to Lexoterica.)

 

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