Vitaliano N. Aguirre Ii and Fidel N. Aguirre, Petitioners, vs. FQB+7, INC., NATHANIEL D. BOCOBO, Priscila Bocobo and Antonio de Villa, Respondents

4/11/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 688
G.R. No. 170770. January 9, 2013.*
VITALIANO N. AGUIRRE II and FIDEL N. AGUIRRE,

petitioners, vs. FQB+7, INC., NATHANIEL D. BOCOBO,
PRISCILA BOCOBO and ANTONIO DE VILLA, respondents.
Corporation Law; Dissolution of Corporations; 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.—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, thus: 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.
Same; Same; A corporation’s board of directors is not rendered functus
officio by its dissolution. Since Section 122 allows a corporation to continue
its existence for a limited purpose, necessarily there must be a board that
will continue acting for and on behalf of the dissolved corporation for that
purpose.—Neither are these issues mooted by the dissolution of the
corporation. A corporation’s board of directors is not rendered functus
officio by its dissolution. Since Section 122 allows a corporation to continue
its existence for a limited purpose, necessarily there must be a board that
will continue acting for and on behalf of the dissolved corporation for that
purpose. In fact, Section 122 authorizes the dissolved corporation’s board of
directors to conduct its liquidation within three years from its dissolution.
Jurisprudence has even recognized the board’s authority to
_______________
* SECOND DIVISION.
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VOL. 688, JANUARY 9, 2013 243
Aguirre II vs. FQB+7, Inc.
act as trustee for persons in interest beyond the said three-year period. Thus,
the determination of which group is the bona fide or rightful board of the
dissolved corporation will still provide practical relief to the parties
involved.
Same; Intra-Corporate Controversies; Regional Trial Courts;
Jurisdiction; Republic Act No. 8799 conferred jurisdiction over intra-
corporate controversies on courts of general jurisdiction or Regional Trial
Courts (RTCs), to be designated by the Supreme Court.—Jurisdiction over
the subject matter is conferred by law. R.A. No. 8799 conferred jurisdiction
over intra-corporate controversies on courts of general jurisdiction or RTCs,
to be designated by the Supreme Court. Thus, as long as the nature of the
controversy is intra-corporate, the designated RTCs have the authority to
exercise jurisdiction over such cases.
Same; Same; Same; Same; Republic Act No. 8799; So long as the
dispute is intra-corporate, the Regional Trial Court, acting as a special
commercial court, has jurisdiction over it.—To be considered as an intra-
corporate dispute, the case: (a) must arise out of intra-corporate or
partnership relations, and (b) the nature of the question subject of the
controversy must be such that it 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. So long as these two criteria are satisfied, the dispute is
intra-corporate and the RTC, acting as a special commercial court, has
jurisdiction over it.
PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
The facts are stated in the opinion of the Court.
Aguirre and Aguirre Law Firm for petitioners.
Francisco T. Mamauag for respondents.
DEL CASTILLO, J.:
Pursuant to Section 145 of the Corporation Code, an existing
intra-corporate dispute, which does not constitute a con-
244
244 SUPREME COURT REPORTS ANNOTATED

tinuation of corporate business, is not affected by the subsequent

dissolution of the corporation.
Before the Court is a Petition for Review on Certiorari of the

June 29, 2005 Decision1 of the Court of Appeals (CA) in CA-G.R.
SP No. 87293, which nullified the trial court’s writ of preliminary
injunction and dismissed petitioner Vitaliano N. Aguirre’s
(Vitaliano) Complaint before the Regional Trial Court (RTC) for
lack of jurisdiction. The dispositive portion of the assailed Decision
reads:
WHEREFORE, the assailed October 15, 2004 Order, as well as the

October 27, 2004 Writ of Preliminary Injunction, are SET ASIDE. With
FQB+7, Inc.’s dissolution on September 29, 2003 and Case No. 04111077’s
ceasing to become an intra-corporate dispute, said case is hereby ordered
DISMISSED for want of jurisdiction.
SO ORDERED.2
Likewise assailed in this Petition is the appellate court’s December

16, 2005 Resolution,3 which denied a reconsideration of the assailed
Decision.
Factual Antecedents
On October 5, 2004, Vitaliano filed, in his individual capacity
and on behalf of FQB+7, Inc. (FQB+7), a Complaint4 for intra-
corporate dispute, injunction, inspection of corporate books and
records, and damages, against respondents Nathaniel D. Bocobo
(Nathaniel), Priscila D. Bocobo (Priscila), and Antonio De Villa
(Antonio). The Complaint alleged that FQB+7 was established in
1985 with the following directors and subscribers, as reflected in its
Articles of Incorporation:
_______________
1 Rollo, pp. 71-99.
2 Id., at p. 98. Penned by Associate Justice Vicente S.E. Veloso and concurred in
by Associate Justices Roberto A. Barrios and Amelita G. Tolentino.
3 Id., at pp. 101-109.
4 Id., at pp. 148-161.
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VOL. 688, JANUARY 9, 2013 245

Directors Subscribers
1. Francisco Q. Bocobo 1. Francisco Q. Bocobo
2. Fidel N. Aguirre 2. Fidel N. Aguirre
3. Alfredo Torres 3. Alfredo Torres
4. Victoriano Santos 4. Victoriano Santos
5. Victorino Santos5 5. Victorino Santos
6. Vitaliano N. Aguirre II
7. Alberto Galang
8. Rolando B. Bechayda6
To Vitaliano’s knowledge, except for the death of Francisco Q.

Bocobo and Alfredo Torres, there has been no other change in the
above listings.
The Complaint further alleged that, sometime in April 2004,
Vitaliano discovered a General Information Sheet (GIS) of FQB+7,
dated September 6, 2002, in the Securities and Exchange
Commission (SEC) records. This GIS was filed by Francisco Q.
Bocobo’s heirs, Nathaniel and Priscila, as FQB+7’s president and
secretary/treasurer, respectively. It also stated FQB+7’s directors and
subscribers, as follows:
Directors Subscribers
1. Nathaniel D. Bocobo 1. Nathaniel D. Bocobo
2 Priscila D. Bocobo 2. Priscila D. Bocobo
3. Fidel N. Aguirre 3. Fidel N. Aguirre
4. Victoriano Santos 4. Victorino7 Santos
5. Victorino Santos 5. Victorino Santos
6. Consolacion Santos8 6. Consolacion Santos9
_______________
5 Id., at p. 150.
6 Id., at p. 152.
7 Should be Victoriano.
8 CA Rollo, Vol. 1, p. 131.
9 Id., at p. 132.
246

Further, the GIS reported that FQB+7’s stockholders held their

annual meeting on September 3, 2002.10
The substantive changes found in the GIS, respecting the
composition of directors and subscribers of FQB+7, prompted
Vitaliano to write to the “real” Board of Directors (the directors
reflected in the Articles of Incorporation), represented by Fidel N.
Aguirre (Fidel). In this letter11 dated April 29, 2004, Vitaliano
questioned the validity and truthfulness of the alleged stockholders
meeting held on September 3, 2002. He asked the “real” Board to
rectify what he perceived as erroneous entries in the GIS, and to
allow him to inspect the corporate books and records. The “real”
Board allegedly ignored Vitaliano’s request.
On September 27, 2004, Nathaniel, in the exercise of his power
as FQB+7’s president, appointed Antonio as the corporation’s
attorney-in-fact, with power of administration over the corporation’s
farm in Quezon Province.12 Pursuant thereto, Antonio attempted to
take over the farm, but was allegedly prevented by Fidel and his
men.13
Characterizing Nathaniel’s, Priscila’s, and Antonio’s continuous

representation of the corporation as a usurpation of the management
powers and prerogatives of the “real” Board of Directors, the
Complaint asked for an injunction against them and for the
nullification of all their previous actions as purported directors,
including the GIS they had filed with the SEC. The Complaint also
sought damages for the plaintiffs and a declaration of Vitaliano’s
right to inspect the corporate records.
The case, docketed as SEC Case No. 04-111077, was assigned to
Branch 24 of the RTC of Manila (Manila RTC),
_______________
10 Id., at p. 129.
11 Id., at pp. 135-136.
12 Id., at p. 137.
13 Id., at pp. 138, 144-145.
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VOL. 688, JANUARY 9, 2013 247

which was a designated special commercial court, pursuant to A.M.

No. 03-03-03-SC.14
The respondents failed, despite notice, to attend the hearing on
Vitaliano’s application for preliminary injunction.15 Thus, in an
Order16 dated October 15, 2004, the trial court granted the
application based only on Vitaliano’s testimonial and documentary
evidence, consisting of the corporation’s articles of incorporation,
by-laws, the GIS, demand letter on the “real” Board of Directors,
and police blotter of the incident between Fidel’s and Antonio’s
groups. On October 27, 2004, the trial court issued the writ of
preliminary injunction17 after Vitaliano filed an injunction bond.
The respondents filed a motion for an extension of 10 days to file
the “pleadings warranted in response to the complaint,” which they
received on October 6, 2004.18 The trial court denied this motion for
being a prohibited pleading under Section 8, Rule 1 of the Interim
Rules of Procedure Governing Intra-corporate Controversies under
Republic Act (R.A.) No. 8799.19
The respondents filed a Petition for Certiorari and Prohibition,20
docketed as CA-G.R. SP No. 87293, before the CA. They later
amended their Petition by impleading Fidel, who allegedly shares
Vitaliano’s interest in keeping them out of the corporation, as a
private respondent therein.21
The respondents sought, in their certiorari petition, the
annulment of all the proceedings and issuances in SEC Case
_______________
14 Re: Consolidation of Intellectual Property Courts with Commercial Courts.
Effective July 1, 2003.
15 CA Rollo, Vol. 1, p. 151.
16 Id., at pp. 151-154; penned by Judge Antonio M. Eugenio, Jr.
17 Id., at pp. 155-157.
18 Id., at p. 372.
19 Id., at p. 376.
20 Id., at pp. 2-35.
21 Id., at pp. 167-169.
248

No. 04-11107722 on the ground that Branch 24 of the Manila RTC

has no jurisdiction over the subject matter, which they defined as
being an agrarian dispute.23 They theorized that Vitaliano’s real goal
in filing the Complaint was to maintain custody of the corporate
farm in Quezon Province. Since this land is agricultural in nature,
they claimed that jurisdiction belongs to the Department of Agrarian
Reform (DAR), not to the Manila RTC.24 They also raised the
grounds of improper venue (alleging that the real corporate address
is different from that stated in the Articles of Incorporation)25 and
forum-shopping26 (there being a pending case between the parties
before the DAR regarding the inclusion of the corporate property in
the agrarian reform program).27 Respondents also raised their
defenses to Vitaliano’s suit, particularly the alleged disloyalty and
fraud committed by the “real” Board of Directors,28 and
respondents’ “preferential right to possess the corporate property” as
the heirs of the majority stockholder Francisco Q. Bocobo.29
The respondents further informed the CA that the SEC had
already revoked FQB+7’s Certificate of Registration on September
29, 2003 for its failure to comply with the SEC reportorial
requirements.30 The CA determined that the cor-
_______________
22 Rollo, pp. 286-287.
23 Id., at pp. 271-274.
24 CA Rollo, Vol. 1, pp. 503-504.
25 Id., at pp. 484-486.
26 Id., at pp. 498-503.
27 The DAR case involves the cancellation of Certificate of Land Ownership
Awards to certain beneficiaries, the exercise of FQB+7’s retention rights, and
exclusion of certain portions of the corporate farm from the coverage of the
Comprehensive Agrarian Reform Program.
28 CA Rollo, Vol. 1, pp. 487-493.

29 Id., at pp. 493-498.
30 Id., at p. 572.
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VOL. 688, JANUARY 9, 2013 249

poration’s dissolution was a conclusive fact after petitioners

Vitaliano and Fidel failed to dispute this factual assertion.31
Ruling of the Court of Appeals
The CA determined that the issues of the case are the following:
(1) whether the trial court’s issuance of the writ of preliminary
injunction, in its October 15, 2004 Order, was attended by grave
abuse of discretion amounting to lack of jurisdiction; and (2)
whether the corporation’s dissolution affected the trial court’s
jurisdiction to hear the intracorporate dispute in SEC Case No. 04-
111077.32
On the first issue, the CA determined that the trial court
committed a grave abuse of discretion when it issued the writ of
preliminary injunction to remove the respondents from their
positions in the Board of Directors based only on Vitaliano’s self-
serving and empty assertions. Such assertions cannot outweigh the
entries in the GIS, which are documented facts on record, which
state that respondents are stockholders and were duly elected
corporate directors and officers of FQB+7, Inc. The CA held that
Vitaliano only proved a future right in case he wins the suit. Since an
injunction is not a remedy to protect future, contingent or abstract
rights, then Vitaliano is not entitled to a writ.33
Further, the CA disapproved the discrepancy between the trial
court’s October 15, 2004 Order, which granted the application for
preliminary injunction, and its writ dated October 27, 2004. The
Order enjoined all the respondents “from entering, occupying, or
taking over possession of the farm owned by Atty. Vitaliano Aguirre
II,” while the writ states that the subject farm is “owned by plaintiff
corporation located in Mulanay, Quezon Province.” The CA held
that this discrep-
_______________
31 Rollo, pp. 93-94.
32 Id., at pp. 85-86.
33 Id., at pp. 86-92.
250
ancy imbued the October 15, 2004 Order with jurisdictional

infirmity.34
On the second issue, the CA postulated that Section 122 of the
Corporation Code allows a dissolved corporation to continue as a
body corporate for the limited purpose of liquidating the corporate
assets and distributing them to its creditors, stockholders, and others
in interest. It does not allow the dissolved corporation to continue its
business. That being the state of the law, the CA determined that
Vitaliano’s Complaint, being geared towards the continuation of
FQB+7, Inc.’s business, should be dismissed because the
corporation has lost its juridical personality.35 Moreover, the CA
held that the trial court does not have jurisdiction to entertain an
intra-corporate dispute when the corporation is already dissolved.36
After dismissing the Complaint, the CA reminded the parties that
they should proceed with the liquidation of the dissolved corporation
based on the existing GIS, thus:
With SEC’s revocation of its certificate of registration on September 29,

2004 [sic], FQB+7, Inc. will be obligated to wind up its affairs. The
Corporation will have to be liquidated within the 3-year period mandated by
Sec. 122 of the Corporation Code.
Regardless of the method it will opt to liquidate itself, the Corporation
will have to reckon with the members of the board as duly listed in the
General Information Sheet last filed with SEC. Necessarily, and as admitted
in the complaint below, the following as listed in the Corporation’s General
Information Sheet dated September 6, 2002, will have to continue acting as
Members of the Board of FQB+7, Inc. viz.:
x x x x37
_______________
34 Id., at p. 91.
35 Id., at pp. 93-97.
36 Id., at pp. 96 and 98.
37 Id., at p. 97.
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VOL. 688, JANUARY 9, 2013 251

Herein petitioners filed a Motion for Reconsideration.38 They

argued that the CA erred in ruling that the October 15, 2004 Order
was inconsistent with the writ. They explained that pages 2 and 3 of
the said Order were interchanged in the CA’s records, which then
misled the CA to its erroneous conclusion. They also posited that the
original sentence in the correct Order reads: “All defendants are
further enjoined from entering, occupying or taking over possession

of the farm owned by plaintiff corporation located in Mulanay,
Quezon.” This sentence is in accord with what is ordered in the writ,
hence the CA erred in nullifying the Order.
On the second issue, herein petitioners maintained that the CA
erred in characterizing the reliefs they sought as a continuance of the
dissolved corporation’s business, which is prohibited under Section
122 of the Corporation Code. Instead, they argued, the relief they
seek is only to determine the real Board of Directors that can
represent the dissolved corporation.
The CA denied the Motion for Reconsideration in its December
16, 2005 Resolution.39 It determined that the crucial issue is the trial
court’s jurisdiction over an intra-corporate dispute involving a
dissolved corporation.40 Based on the prayers in the Complaint,
petitioners seek a determination of the real Board that can take over
the management of the corporation’s farm, not to sit as a liquidation
Board. Thus, contrary to petitioners’ claims, their Complaint is not
geared towards liquidation but a continuance of the corporation’s
business.
Issues
1. Whether the CA erred in annulling the October 15, 2004

Order based on interchanged pages.
_______________
38 Id., at pp. 110-146.
39 Id., at pp. 101-109.
40 Id., at p. 104.
252

2. Whether the Complaint seeks to continue the dissolved

corporation’s business.
3. Whether the RTC has jurisdiction over an intra-corporate
dispute involving a dissolved corporation.
Our Ruling
The Petition is partly meritorious.

On the nullification of the Order of
preliminary injunction.
Petitioners reiterate their argument that the CA was misled by the
interchanged pages in the October 15, 2004 Order. They posit that
had the CA read the Order in its correct sequence, it would not have
nullified the Order on the ground that it was issued with grave abuse
of discretion amounting to lack of jurisdiction.41
Petitioners’ argument fails to impress. The CA did not nullify the
October 15, 2004 Order merely because of the interchanged pages.
Instead, the CA determined that the applicant, Vitaliano, was not
able to show that he had an actual and existing right that had to be
protected by a preliminary injunction. The most that Vitaliano was
able to prove was a future right based on his victory in the suit.
Contrasting this future right of Vitaliano with respondents’ existing
right under the GIS, the CA determined that the trial court should
not have disturbed the status quo. The CA’s discussion regarding the
interchanged pages was made only in addition to its above
ratiocination. Thus, whether the pages were interchanged or not will
not affect the CA’s main finding that the trial court issued the Order
despite the absence of a clear and existing right in favor of the
applicant, which is tantamount to grave abuse of discretion. We
cannot disturb the CA’s find-
_______________
41 Id., at pp. 1012-1015.
253
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ing on this score without any showing by petitioners of strong basis

to warrant the reversal.
Is the Complaint a continuation
of business?
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, thus:
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.
xxxx
Upon learning of the corporation’s dissolution by revocation of

its corporate franchise, the CA held that the intra-corporate
Complaint, which aims to continue the corporation’s business, must

now be dismissed under Section 122.
Petitioners concede that a dissolved corporation can no longer
continue its business. They argue, however, that Section 122 allows
a dissolved corporation to wind up its affairs within 3 years from its
dissolution. Petitioners then maintain that the Complaint, which
seeks only a declaration that respondents are strangers to the
corporation and have no right to sit in the board or act as officers
thereof, and a return of Vitaliano’s stockholdings, intends only to
resolve remaining corporate issues. The resolution of these issues is
allegedly part of corporate winding up.
254

Does the Complaint seek a continuation of business or is it a

settlement of corporate affairs? The answer lies in the prayers of the
Complaint, which state:
PRAYER
WHEREFORE, it is most respectfully prayed of this Honorable Court that
judgment be rendered in favor of the plaintiffs and against the defendants, in the
following wise:
I. ON THE PRAYER OF TRO/STATUS QUO ORDER AND
WRIT OF PRELIMINARY INJUNCTION:
1. Forthwith and pending the resolution of plaintiffs’ prayer for
issuance of writ of preliminary injunction, in order to maintain the
status quo, a status quo order or temporary restraining order (TRO)
be issued enjoining the defendants, their officers, employees, and
agents from exercising the powers and authority as members of the
Board of Directors of plaintiff FQB as well as officers thereof and
from misrepresenting and conducting themselves as such, and
enjoining defendant Antonio de Villa from taking over the farm of
the plaintiff FQB and from exercising any power and authority by
reason of his appointment emanating from his co-defendant
Bocobos.
2. After due notice and hearing and during the pendency of this action,
to issue writ of preliminary injunction prohibiting the defendants
from committing the acts complained of herein, more particularly
those enumerated in the immediately pr[e]ceeding paragraph, and
making the injunction permanent after trial on the merits.
II. ON THE MERITS
After trial, judgment be rendered in favor of the plaintiffs and against the
defendants, as follows:
1. Declaring defendant Bocobos as without any power and authority to
represent or conduct themselves as members of the Board of
Directors of plaintiff FQB, or as officers thereof.
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VOL. 688, JANUARY 9, 2013 255

2. Declaring that Vitaliano N. Aguirre II is a stockholder of plaintiff

FQB owning fifty (50) shares of stock thereof.
3. Allowing Vitaliano N. Aguirre II to inspect books and records of the
company.
4. Annulling the GIS, Annex “C” of the Complaint as fraudulent and
illegally executed and filed.
5. Ordering the defendants to pay jointly and solidarily the sum of at
least P200,000.00 as moral damages; at least P100,000.00 as
exemplary damages; and at least P100,000.00 as and for attorney’s
fees and other litigation expenses.
Plaintiffs further pray for costs and such other relief just and equitable under
the premises.42
The Court fails to find in the prayers above any intention to continue
the corporate business of FQB+7. The Complaint does not seek to
enter into contracts, issue new stocks, acquire properties, execute
business transactions, etc. Its aim is not to continue the corporate
business, but to determine and vindicate an alleged stockholder’s
right to the return of his stockholdings and to participate in the
election of directors, and a corporation’s right to remove usurpers
and strangers from its affairs. The Court fails to see how the
resolution of these issues can be said to continue the business of
FQB+7.
Neither are these issues mooted by the dissolution of the
corporation. A corporation’s board of directors is not rendered
functus officio by its dissolution. Since Section 122 allows a
corporation to continue its existence for a limited purpose,
necessarily there must be a board that will continue acting for and on
behalf of the dissolved corporation for that purpose. In fact, Section
122 authorizes the dissolved corporation’s board of directors to
conduct its liquidation within three years from its dissolution.
Jurisprudence has even recognized the board’s authority to act as
trustee for persons in interest beyond the
_______________
42 Id., at pp. 158-160.
256

said three-year period.43 Thus, the determination of which group is

the bona fide or rightful board of the dissolved corporation will still
provide practical relief to the parties involved.
The same is true with regard to Vitaliano’s shareholdings in the
dissolved corporation. A party’s stockholdings in a corporation,
whether existing or dissolved, is a property right44 which he may
vindicate against another party who has deprived him thereof. The
corporation’s dissolution does not extinguish such property right.
Section 145 of the Corporation Code ensures the protection of this
right, thus:
Sec. 145. Amendment or repeal.—No right or remedy in favor of or

agains 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. (Emphases
supplied.)
On the dismissal of the Complaint

for lack of jurisdiction.
The CA held that the trial court does not have jurisdiction over an
intra-corporate dispute involving a dissolved corporation. It further
held that due to the corporation’s dissolution, the qualifications of
the respondents can no longer be questioned and that the dissolved
corporation must now commence liquidation proceedings with the
respondents as its directors and officers.
_______________
43 Clemente v. Court of Appeals, 312 Phil. 823, 829-830; 242 SCRA 717, 722
(1995); Gelano v. Court of Appeals, 190 Phil. 814, 825; 103 SCRA 90, 98 (1981).
44 Gamboa v. Teves, (Separate Dissenting Opinion of J. Velasco), G.R. No.
176579, June 28, 2011, 652 SCRA 690, 773; National Development Co. v. Court of
Appeals, G.R. No. 98467, July 10, 1992, 211 SCRA 422, 433-434; Rural Bank of
Salinas, Inc. v. Court of Appeals, G.R. No. 96674, June 26, 1992, 210 SCRA 510,
515.
257
VOL. 688, JANUARY 9, 2013 257

The CA’s ruling is founded on the assumptions that intra-

corporate controversies continue only in existing corporations; that
when the corporation is dissolved, these controversies cease to be
intra-corporate and need no longer be resolved; and that the status
quo in the corporation at the time of its dissolution must be

maintained. The Court finds no basis for the said assumptions.
Intra-corporate disputes remain even
when the corporation is dissolved.
Jurisdiction over the subject matter is conferred by law. R.A. No.
879945 conferred jurisdiction over intra-corporate controversies on
courts of general jurisdiction or RTCs,46 to be designated by the
Supreme Court. Thus, as long as the nature of the controversy is
intra-corporate, the designated RTCs have the authority to exercise
jurisdiction over such cases.
So what are intra-corporate controversies? R.A. No. 8799 refers
to Section 5 of Presidential Decree (P.D.) No. 902-A (or The SEC
Reorganization Act) for a description of such controversies:
a) Devices or schemes employed by or any acts, of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholder, partners, members of associations or organizations
registered with the Commission;
_______________
45 THE SECURITIES REGULATION CODE.
46 SECTION 5. Powers and Functions of the Commission.—5.1 x x x
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional
Trial Court branches that shall exercise jurisdiction over these cases. x x x
258

b) Controversies arising out of intra-corporate or partnership relations, between

and among stockholders, members, or associates; between any or all of them
and the corporation, partnership or association of which they are stockholders,
members or associates, respectively; and between such corporation,
partnership or association and the state insofar as it concerns their individual
franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or
managers of such corporations, partnerships or associations.
The Court reproduced the above jurisdiction in Rule 1 of the Interim

Rules of Procedure Governing Intra-corporate Controversies under
R.A. No. 8799:
SECTION 1. (a) Cases Covered—These Rules shall govern the

procedure to be observed in civil cases involving the following:
(1) Devices or schemes employed by, or any act of, the board of
directors, business associates, officers or partners, amounting to fraud or
misrepresentation which may be detrimental to the interest of the public

and/or of the stockholders, partners, or members of any corporation,
partnership, or association;
(2) Controversies arising out of intra-corporate, partnership, or
association relations, between and among stockholders, members, or
associates; and between, any or all of them and the corporation, partnership,
or association of which they are stockholders, members, or associates,
respectively;
(3) Controversies in the election or appointment of directors, trustees,
officers, or managers of corporations, partnerships, or associations;
(4) Derivative suits; and
(5) Inspection of corporate books.
Meanwhile, jurisprudence has elaborated on the above definitions by

providing tests in determining whether a controversy is intra-
corporate. Reyes v. Regional Trial Court of Makati,
259
VOL. 688, JANUARY 9, 2013 259

Br. 14247 contains a comprehensive discussion of these two tests,

thus:
A review of relevant jurisprudence shows a development in the Court’s

approach in classifying what constitutes an intra-corporate controversy.
Initially, the main consideration in determining whether a dispute constitutes
an intra-corporate controversy was limited to a consideration of the intra-
corporate relationship existing between or among the parties. The types of
relationships embraced under Section 5(b) x x x were as follows:
a) between the corporation, partnership, or association and the public;
b) between the corporation, partnership, or association and its
stockholders, partners, members, or officers;
c) between the corporation, partnership, or association and the State as
far as its franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves. xxx
The existence of any of the above intra-corporate relations was sufficient
to confer jurisdiction to the SEC [now the RTC], regardless of the subject
matter of the dispute. This came to be known as the relationship test.
However, in the 1984 case of DMRC Enterprises v. Esta del Sol
Mountain Reserve, Inc., the Court introduced the nature of the
controversy test. We declared in this case that it is not the mere existence of
an intra-corporate relationship that gives rise to an intra-corporate
controversy; to rely on the relationship test alone will divest the regular
courts of their jurisdiction for the sole reason that the dispute involves a
corporation, its directors, officers, or stockholders. We saw that there is no
legal sense in disregarding or minimizing the value of the nature of the

transactions which gives rise to the dispute.
Under the nature of the controversy test, the incidents of that relationship
must also be considered for the purpose of ascertaining whether the
controversy itself is intra-corporate. The controversy
_______________
47 G.R. No. 165744, August 11, 2008, 561 SCRA 593, 609-612.
260

must not only be rooted in the existence of an intra-corporate

relationship, but must as well pertain to the enforcement of the parties’
correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the
relationship and its incidents are merely incidental to the controversy or if
there will still be conflict even if the relationship does not exist, then no
intra-corporate controversy exists.
The Court then combined the two tests and declared that
jurisdiction should be determined by considering not only the status or
relationship of the parties, but also the nature of the question under
controversy. This two-tier test was adopted in the recent case of Speed
Distribution, Inc. v. Court of Appeals:
‘To determine whether a case involves an intra-corporate
controversy, and is to be heard and decided by the branches of the
RTC specifically designated by the Court to try and decide such
cases, two elements must concur: (a) the status or relationship of
the parties, and [b] the nature of the question that is the subject
of their controversy.
The first element requires that the controversy must arise out
of intra-corporate or partnership relations between any or all of
the parties and the corporation, partnership, or association of which
they are stockholders, members or associates, between any or all of
them and the corporation, partnership or association of which they
are stockholders, members or associates, respectively; and between
such corporation, partnership, or association and the State insofar as
it concerns the individual franchises. The second element requires
that the dispute among the parties be intrinsically connected with
the regulation of the corporation. If the nature of the controversy
involves matters that are purely civil in character, necessarily, the
case does not involve an intra-corporate controversy.’ (Citations and
some emphases omitted; emphases supplied.)
Thus, to be considered as an intra-corporate dispute, the case: (a)

must arise out of intra-corporate or partnership relations, and (b) the
nature of the question subject of the contro-
261
VOL. 688, JANUARY 9, 2013 261

versy must be such that it 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. So long as these two criteria are
satisfied, the dispute is intra-corporate and the RTC, acting as a
special commercial court, has jurisdiction over it.
Examining the case before us in relation to these two criteria, the
Court finds and so holds that the case is essentially an intra-
corporate dispute. It obviously arose from the intra-corporate
relations between the parties, and the questions involved pertain to
their rights and obligations under the Corporation Code and matters
relating to the regulation of the corporation. We further hold that the
nature of the case as an intra-corporate dispute was not affected by
the subsequent dissolution of the corporation.
It bears reiterating that Section 145 of the Corporation Code
protects, among others, the rights and remedies of corporate actors
against other corporate actors. The statutory provision assures an
aggrieved party that the corporation’s dissolution will not impair,
much less remove, his/her rights or remedies against the corporation,
its stockholders, directors or officers. It also states that corporate
dissolution will not extinguish any liability already incurred by the
corporation, its stockholders, directors, or officers. In short, Section
145 preserves a corporate actor’s cause of action and remedy against
another corporate actor. In so doing, Section 145 also preserves the
nature of the controversy between the parties as an intra-corporate
dispute.
The dissolution of the corporation simply prohibits it from
continuing its business. However, despite such dissolution, the
parties involved in the litigation are still corporate actors. The
dissolution does not automatically convert the parties into total
strangers or change their intra-corporate relationships. Neither does
it change or terminate existing causes of action, which arose because
of the corporate ties between the
262

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.
WHEREFORE, premises considered, the Petition for Review on
Certiorari is PARTIALLY GRANTED. The assailed June 29, 2005
Decision of the Court of Appeals in CA-G.R. SP No. 87293, as well
as its December 16, 2005 Resolution, are ANNULLED with respect
to their dismissal of SEC Case No. 04-111077 on the ground of lack
of jurisdiction. The said case is ordered REINSTATED before
Branch 24 of the Regional Trial Court of Manila. The rest of the
assailed issuances are AFFIRMED.
SO ORDERED.
Carpio (Chairperson), Brion, Perez and Perlas-Bernabe, JJ.,

concur.
Petition partially granted.
Notes.—Following the voluntary or involuntary dissolution of a

corporation, liquidation is the process of settling the affairs of said
corporation, which consists of adjusting the debts and claims, that is,
of collecting all that is due the corporation, the settlement and
adjustment of claims against it and the payment of its just debts. (Yu
vs. Yukayguan, 589 SCRA 588 [2009])
A derivative suit is fundamentally distinct and independent from
liquidation proceedings—they are neither part of each other nor the
necessary consequence of the other. (Id.)
——o0o——
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4/11/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 688

G.R. No. 170770. January 9, 2013.*

VITALIANO N. AGUIRRE II and FIDEL N. AGUIRRE,

Corporation Law; Dissolution of Corporations; Section 122 of the

VOL. 688, JANUARY 9, 2013 243

Aguirre II vs. FQB+7, Inc.

PETITION for review on certiorari of the decision and resolution of

244 SUPREME COURT REPORTS ANNOTATED

tinuation of corporate business, is not affected by the subsequent

Before the Court is a Petition for Review on Certiorari of the

WHEREFORE, the assailed October 15, 2004 Order, as well as the

Likewise assailed in this Petition is the appellate court’s December

VOL. 688, JANUARY 9, 2013 245

To Vitaliano’s knowledge, except for the death of Francisco Q.

246 SUPREME COURT REPORTS ANNOTATED

Further, the GIS reported that FQB+7’s stockholders held their

Characterizing Nathaniel’s, Priscila’s, and Antonio’s continuous

VOL. 688, JANUARY 9, 2013 247

which was a designated special commercial court, pursuant to A.M.

248 SUPREME COURT REPORTS ANNOTATED

No. 04-11107722 on the ground that Branch 24 of the Manila RTC

28 CA Rollo, Vol. 1, pp. 487-493.

VOL. 688, JANUARY 9, 2013 249

poration’s dissolution was a conclusive fact after petitioners

250 SUPREME COURT REPORTS ANNOTATED

Aguirre II vs. FQB+7, Inc.

ancy imbued the October 15, 2004 Order with jurisdictional

With SEC’s revocation of its certificate of registration on September 29,

VOL. 688, JANUARY 9, 2013 251

Herein petitioners filed a Motion for Reconsideration.38 They

further enjoined from entering, occupying or taking over possession

1. Whether the CA erred in annulling the October 15, 2004

252 SUPREME COURT REPORTS ANNOTATED

2. Whether the Complaint seeks to continue the dissolved

The Petition is partly meritorious.

VOL. 688, JANUARY 9, 2013 253

ing on this score without any showing by petitioners of strong basis

Sec. 122. Corporate liquidation.—Every corporation whose charter

Upon learning of the corporation’s dissolution by revocation of

Complaint, which aims to continue the corporation’s business, must

254 SUPREME COURT REPORTS ANNOTATED

Does the Complaint seek a continuation of business or is it a

Directors of plaintiff FQB, or as officers thereof.

VOL. 688, JANUARY 9, 2013 255

2. Declaring that Vitaliano N. Aguirre II is a stockholder of plaintiff

256 SUPREME COURT REPORTS ANNOTATED

said three-year period.43 Thus, the determination of which group is

Sec. 145. Amendment or repeal.—No right or remedy in favor of or

On the dismissal of the Complaint

VOL. 688, JANUARY 9, 2013 257

The CA’s ruling is founded on the assumptions that intra-

quo in the corporation at the time of its dissolution must be

45 THE SECURITIES REGULATION CODE.

46 SECTION 5. Powers and Functions of the Commission.—5.1 x x x

258 SUPREME COURT REPORTS ANNOTATED

b) Controversies arising out of intra-corporate or partnership relations, between

The Court reproduced the above jurisdiction in Rule 1 of the Interim