Facts:
Plaintiff filed with the Municipal Court of Tacloban, Leyte, a complaint, against defendant for the recovery of the amount allegedly advanced to her for the purchase of hemp for the account of the former and for which she had allegedly failed to account. In her answer, defendant alleged that she had accounted for all cash advances received by her for the aforementioned purpose from the plaintiff. In due course, said court rendering judgment finding that the defendant had not accounted for cash advances, she was accordingly, sentenced to pay to the plaintiff with legal interest in addition to the costs.
Said court having subsequently denied a reconsideration of this decision, as well a new trial prayed for the plaintiff, the latter appealed to the Court of First Instance of Leyte, in which defendant moved to dismiss the complaint upon the ground that plaintiff has no legal capacity to sue, it having abolished by Executive Order No. 372 of the President of the Philippines, dated November 24, 1950. Plaintiff objected thereto upon the ground that pursuant to said executive order, plaintiff “shall nevertheless be continued as a body corporate for a period of three (3) years from the effective date” of said executive order, which was November 30, 1950, “for the purpose of prosecuting and defending suits by or against it and of enabling the Board of Liquidators” — thereby created — “gradually to settle and close its affairs”, . . . and that this case was begun on November 14, 1953, or before the expiration of the period aforementioned. After due hearing, the court of first instance issued an order directing plaintiff to amend the complaint, within ten (10) days from notice, by including the Board of Liquidators as co-party plaintiff, with the admonition that otherwise the case would be dismissed. Hence, an appeal by plaintiff National Abaca and other Fibers Corporation, from two (2) orders of the Court of First Instance of Leyte.
Issue:
Whether an action, commenced within three (3) years after the abolition of plaintiff, as a corporation, may be continued by the same after the expiration of said period.
Ruling:
The rule appears to be well settled that, in the absence of statutory provision to the contrary, pending actions by or against a corporation are abated upon expiration of the period allowed by law for the liquidation of its affairs.
Our Corporation Law contains no provision authorizing a corporation, after three (3) years from the expiration of its lifetime, to continue in its corporate name actions instituted by it within said period of three (3) years. in fact, section 77 of said law provides that the corporation shall “be continued as a body corporate for three (3) years after the time when it would have been . . . dissolved, for the purposed of prosecuting and defending suits by or against it . . .”, so that, thereafter, it shall no longer enjoy corporate existence for such purpose. For this reason, section 78 of the same law authorizes the corporation, “at any time during said three years . . . to convey all of its property to trustees for the benefit of members, stockholders, creditors and other interested”, evidently for the purpose, among others, of enabling said trustees to prosecute and defend suits by or against the corporation begun before the expiration of said period.
Obviously, the complete loss of plaintiff’s corporate existence after the expiration of the period of three (3) years for the settlement of its affairs is what impelled the President to create a Board of Liquidators, to continue the management of such matters as may then be pending. The first question must, therefore, be answered in the negative.
Wherefore, the orders appealed from are reversed, plaintiff’s amended complaint is hereby admitted, and the record remanded to the lower court for further proceedings.
The Student and The Law 