Aguirre v. FQB+7

VITALIANO N. AGUIRRE II v.
FQB+7 (2013) the Securities and Exchange Commission (SEC)

records showing substantive changes in the GIS,
[Justice DEL CASTILLO] respecting the composition of directors and
subscribers of FQB+7, prompting Vitaliano to write to
Summary and Doctrine: the "real" Board of Directors (the directors reflected in
the Articles of Incorporation), represented by Fidel N.
Section 122 of the Corporation Code [now Sec. 139, RCC]
Aguirre (Fidel). In this letter, Vitaliano questioned the
prohibits a dissolved corporation from continuing its
business, but allows it to continue with a limited personality validity and truthfulness of the alleged stockholders
in order to settle and close its affairs, including its complete meeting held on September 3, 2002. He asked the
liquidation, thus: "real" Board to rectify what he perceived as erroneous
entries in the GIS, and to allow him to inspect the
Sec. 122. Corporate liquidation. Every corporation corporate books and records. The "real" Board
whose charter expires by its own limitation or is allegedly ignored Vitaliano's request.
annulled by forfeiture or otherwise, or whose corporate
existence for other purposes is terminated in any other On September 27, 2004, Nathaniel, in the exercise of
manner, shall nevertheless be continued as a body his power as FQB+7's president, appointed Antonio
corporate for three (3) years after the time when it as the corporation's attorney-in-fact, with power of
would have been so dissolved, for the purpose of
administration over the corporation's farm in Quezon
prosecuting and defending suits by or against it and
enabling it to settle and close its affairs, to dispose of Province. Pursuant thereto, Antonio attempted to
and convey its property and to distribute its assets, but take over the farm, but was allegedly prevented by
not for the purpose of continuing the business for Fidel and his men.
which it was established.
Characterizing Nathaniel's, Priscila's, and Antonio's
Jurisdiction over the subject matter is conferred by law. R.A. continuous representation of the corporation as a
No. 8799 [SRC] conferred jurisdiction over intra- usurpation of the management powers and
corporate controversies on courts of general prerogatives of the "real" Board of Directors, the
jurisdiction or RTCs, to be designated by the Supreme Complaint asked for an injunction against them and
Court. Thus, as long as the nature of the controversy is for the nullification of all their previous actions as
intra-corporate, the designated RTCs have the authority purported directors, including the GIS they had filed
to exercise jurisdiction over such cases. with the SEC. The Complaint also sought damages
Pursuant to Section 145 of the Corporation Code [now Sec. for the plaintiffs and a declaration of Vitaliano's right to
184, RCC], an existing intra-corporate dispute, which inspect the corporate records.
does not constitute a continuation of corporate
business, is not affected by the subsequent dissolution The complaint was assigned to Branch 24 of the RTC
of the corporation. of Manila (Manila RTC), which was a designated
special commercial court, pursuant to A.M. No.
I. FACTS: 03-03-03-SC pursuant to RA 8799.
Vitaliano Aguirre filed, in his individual capacity and The trial court issued a writ of preliminary injunction
on behalf of FQB+7, Inc., a Complaint for intra- after Vitaliano filed an injunction bond.
corporate dispute, injunction, inspection of corporate The respondents filed a Petition for Certiorari and
books and records, and damages, against Prohibition before the CA. They later amended their
respondents Nathaniel D. Bocobo (Nathaniel), Priscila Petition by impleading Fidel, who allegedly shares
D. Bocobo (Priscila), and Antonio De Villa (Antonio). Vitaliano's interest in keeping them out of the
The Complaint alleged that FQB+7 was established in corporation, as a private respondent therein.
1985 with certain named directors and subscribers, as
reflected in its Articles of Incorporation. CA: CA postulated that Section 122 of the
Corporation Code allows a dissolved corporation to
The Complaint further alleged that, sometime in April continue as a body corporate for the limited purpose
2004, Vitaliano discovered a General Information of liquidating the corporate assets and distributing
Sheet (GIS) of FQB+7, dated September 6, 2002, in them to its creditors, stockholders, and others in
interest. It does not allow the dissolved corporation to The Court fails to find in the prayers in the Complaint
continue its business. That being the state of the law, any intention to continue the corporate business of
the CA determined that Vitaliano's Complaint, being FQB+7. The Complaint does not seek to enter into
geared towards the continuation of FQB+7, Inc.'s contracts, issue new stocks, acquire properties,
business, should be dismissed because the execute business transactions, etc. Its aim is not to
corporation has lost its juridical personality. Moreover, continue the corporate business, but to determine and
the CA held that the trial court does not have vindicate an alleged stockholder's right to the return of
jurisdiction to entertain an intra-corporate dispute his stockholdings and to participate in the election of
when the corporation is already dissolved. directors, and a corporation's right to remove
usurpers and strangers from its affairs. The Court fails
After dismissing the Complaint, the CA reminded the to see how the resolution of these issues can be said
parties that they should proceed with the liquidation of to continue the business of FQB+7.
the dissolved corporation based on the existing GIS.
Neither are these issues mooted by the dissolution of
Petitioners filed an MR, which the CA denied. the corporation. A corporation's board of directors is
II. ISSUES: not rendered functus officio by its dissolution. Since
Section 122 allows a corporation to continue its
a) Whether or not the Complaint seeks to continue the existence for a limited purpose, necessarily there
dissolved corporation's business must be a board that will continue acting for and on
behalf of the dissolved corporation for that purpose. In
a) Whether or not the RTC or has jurisdiction over an
fact, Section 122 authorizes the dissolved
intra-corporate dispute involving a dissolved
corporation's board of directors to conduct its
corporation
liquidation within three years from its dissolution.
III. RATIONALE: Jurisprudence has even recognized the board's
authority to act as trustee for persons in interest
Is the Complaint a continuation of business? beyond the said three-year period. Thus, the
Section 122 of the Corporation Code prohibits a determination of which group is the bona fide or
dissolved corporation from continuing its business, rightful board of the dissolved corporation will still
but allows it to continue with a limited personality in provide practical relief to the parties involved.
order to settle and close its affairs, including its Intra-corporate disputes remain even when the
complete liquidation, thus: corporation is dissolved.
Sec. 122. Corporate liquidation. Every corporation Jurisdiction over the subject matter is conferred by
whose charter expires by its own limitation or is law. R.A. No. 8799[45] conferred jurisdiction over
annulled by forfeiture or otherwise, or whose intra-corporate controversies on courts of general
corporate existence for other purposes is terminated jurisdiction or RTCs,[46] to be designated by the
in any other manner, shall nevertheless be continued Supreme Court. Thus, as long as the nature of the
as a body corporate for three (3) years after the time controversy is intra-corporate, the designated RTCs
when it would have been so dissolved, for the have the authority to exercise jurisdiction over such
purpose of prosecuting and defending suits by or cases.
against it and enabling it to settle and close its affairs,
to dispose of and convey its property and to distribute So what are intra-corporate controversies? The Court
its assets, but not for the purpose of continuing the reproduced the above jurisdiction in Rule 1 of the
business for which it was established. Interim Rules of Procedure Governing Intra-corporate
Controversies under R.A. No. 8799:
Upon learning of the corporation's dissolution by
revocation of its corporate franchise, the CA held that SECTION 1. (a) Cases Covered These Rules shall
the intra-corporate Complaint, which aims to continue govern the procedure to be observed in civil cases
the corporation's business, must now be dismissed involving the following:
under Section 122.
(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.
IV. DISPOSITIVE:
WHEREFORE, premises considered, the Petition for
Review on Certiorari is PARTIALLY GRANTED.
The assailed Decision and Resolution of the
Court of Appeals 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.

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VITALIANO N. AGUIRRE II v.

FQB+7 (2013) the Securities and Exchange Commission (SEC)

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