SECOND DIVISION

[G.R. No. 210538. March 7, 2018.]

DR. GIL J. RICH , petitioner, vs . GUILLERMO PALOMA III, ATTY.

EVARISTA TARCE and ESTER L. SERVACIO , respondents.

DECISION

REYES, JR. , J : p

A corporation which has already been dissolved, be it voluntarily or involuntarily,

retains no juridical personality to conduct its business save for those directed towards
corporate liquidation.

The Case

Challenged before the Court via this Petition for Review on Certiorari under Rule
45 of the Rules of Court are the Decision 1 and Resolution 2 of the Court of Appeals
(CA) in CA-G.R. CV No. 02948 dated February 28, 2013 and November 19, 2013,
respectively. The CA Decision and Resolution reversed and set aside the Decision of the
Regional Trial Court (RTC), Branch 25 of Maasin City, Southern Leyte, dated November
10, 2008.

The Antecedent Facts

Sometime in 1997, Dr. Gil Rich (petitioner) lent P1,000,000.00 to his brother,
Estanislao Rich (Estanislao). 3 The agreement was secured by a real estate mortgage
over a 1000-square-meter parcel of land with improvements, more particularly
described as follows:
A parcel of residential land, located at Brgy. Abgao, Maasin City, Southern Leyte,
covered by Tax Declaration ARP No. 07001-00584, in the name of Estanislao
Rich, containing an area of 1,000 square meters, and bounded on the North by
Donato Demetrio — remaining portion; on the East by Felimon Saavedra; on the
South by Kangleon St.; and on the West by Tuburan River. 4
When Estanislao failed to make good on his obligations under the loan
agreement, the petitioner foreclosed on the subject property via a public auction sale
conducted on March 14, 2005 by respondent Guillermo Paloma III, Sheriff IV of the
RTC. The petitioner was declared the highest bidder, and subsequently, was issued a
Certificate of Sale as purchaser/mortgagee. 5
Without the petitioner's knowledge, however, and prior to the foreclosure, it
appeared from the records that on January 24, 2005, 6 Estanislao entered into an
agreement with Maasin Traders Lending Corporation (MTLC), where loans and
advances amounting to P2.6 million were secured by a real estate mortgage over the
same property. 7
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 On the strength of this document, respondent Ester L. Servacio (Servacio), as
president of MTLC, exercised equitable redemption after the foreclosure proceedings.
She tendered the amount of P2,090,000.00 as the redemption money in the extra-
judicial foreclosure sale. 8 On March 15, 2006, respondent Paloma III, again as sheriff
of the RTC, issued a Deed of Redemption in favor of MTLC.
The deed then became the subject of the complaint for "Annulment of Deed of
Redemption, Damages, Attorney's Fees, Litigation Expenses, Application for Issuance
of T.R.O. &/or Writ of Preliminary Prohibitory Injunction" led before the RTC by the
petitioner against respondent Servacio.
According to the petitioner, MTLC no longer has juridical personality to effect the
equitable redemption as it has already been dissolved by the Securities and Exchange
Commission as early as September 2003. 9 He also asserted that there was a pending
case against respondent Servacio for allegedly forging Estanislao's signature on the
same real estate mortgage that respondent Servacio used as basis for her equitable
redemption of the subject property. 1 0
On January 8, 2007, the case was called for pre-trial. Unfortunately, neither
defendant Servacio nor her lawyer appeared, and as a result of which, defendant
Servacio was "declared as in default." 1 1 The petitioner thus presented his evidence ex
parte.
On the basis of the evidence presented by the petitioner, the RTC rendered a
Decision in the petitioner's favor dated November 10, 2008, the dispositive portion of
which states that:
WHEREFORE, premises considered, this Court orders the following:
1. Declaring the Real Estate Mortgage between Estanislao Rich and MLTC,
Annex :B: (sic) to the Complaint, as null and void;
2. Ordering the City Assessor of the City of Maasin, Southern Leyte to cancel
the Deed of Redemption in favor of MTLC appearing on the Tax
Declaration covering the property.
SO ORDERED. 1 2
Aggrieved, Servacio appealed the case to the CA, arguing that: (1) the allegations
of forgery were not substantiated, nor were they duly proven in the proceedings before
the RTC; 1 3 and (2) the RTC erred in declaring the petitioner as in default despite a valid
and meritorious excuse. 1 4
Eventually, the CA granted the appeal, nding that forgery cannot be presumed
and must be proved by clear, positive, and convincing evidence, which the petitioner
was unable to ful ll. 1 5 The CA likewise emphasized that the assailed real estate
mortgage between Estanislao and MTLC was duly notarized and thus enjoyed the
presumption of authenticity and due execution, which again, the petitioner was unable
to disprove. 1 6
The CA, however, a rmed the RTC nding that respondent Servacio's reasons
for her non-appearance as well as her counsel's absence during the pre-trial were
unjustified 1 7 to warrant a liberal application of Section 4, Rule 18 of the Rules of Court.
18

Thus, the fallo of the CA decision reads:

WHEREFORE , the appeal is GRANTED . The Decision dated November
10, 2008, 8th Judicial Region, Branch 25, Maasin City, Southern Leyte, in Civil
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 Case No. R-3477 is REVERSED and SET ASIDE . The complaint for annulment
of Deed of redemption, damages, attorney's fees, litigation expenses, with
application for issuance of TRO and/or writ of preliminary prohibitory injunction
is ordered DISMISSED . No costs.
SO ORDERED. 1 9
Hence, this petition.

The Issues

The petitioner anchors his prayer for the reversal of the CA decision and
resolution based on the following questions of law:
I. MAY AN APPEAL BE DISMISSED ON ACCOUNT OF THE FAILURE OF THE
APPELLANT'S BRIEF TO COMPLY WITH THE RULES?
II. MAY A CORPORATION NOT INVESTED WITH CORPORATE PERSONALITY
AT THE TIME OF REDEMPTION REDEEM A PROPERTY? 2 0

The Court's Ruling

After a careful perusal of the arguments presented and the evidence submitted,
the Court finds partial merit in the petition.
On the rst issue, the petitioner contends that respondent Servacio violated
Section 13, Rule 44 of the Rules of Court when the latter's Appellant's Brief, which was
submitted to the CA, "failed to contain a subject index with page of reference and
compliant statement of facts." 2 1 This omission, according to the petitioner, should be
enough to warrant a reversal of the CA decision. aScITE

The Court does not agree.

Section 13, Rule 44 of the Rules of Court provides the requisite contents of an
appellant's brief that is to be submitted before the courts. It states that:
SECTION 13. Contents of appellant's brief. — The appellant's brief
shall contain, in the order herein indicated, the following:
(a) A subject index of the matter in the brief with a digest of the
arguments and page references, and a table of cases alphabetically arranged,
textbooks and statutes cited with references to the pages where they are cited;
(b) An assignment of errors intended to be urged, which errors shall
be separately, distinctly and concisely stated without repetition and numbered
consecutively;
(c) Under the heading "Statement of the Case," a clear and concise
statement of the nature of the action, a summary of the proceedings, the
appealed rulings and orders of the court, the nature of the judgment and any
other matters necessary to an understanding of the nature of the controversy,
with page references to the record;
(d) Under the heading "Statement of Facts," a clear and concise
statement in a narrative form of the facts admitted by both parties and of those
in controversy, together with the substance of the proof relating thereto in
sufficient detail to make it clearly intelligible, with page references to the record;
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 (e) A clear and concise statement of the issues of fact or law to be
submitted to the court for its judgments;
(f) Under the heading "Argument," the appellant's arguments on each
assignment of error with page references to the record. The authorities relied
upon shall be cited by the page of the report at which the case begins and the
page of the report on which the citation is found;
(g) Under the heading "Relief," a speci cation of the order or
judgment which the appellant seeks; and
(h) In cases not brought up by record on appeal, the appellant's brief
shall contain, as an appendix, a copy of the judgment or nal order appealed
from. (16a, R46)
Any deviation from the required contents as provided thereunder is dealt with by
Rule 50 of the Rules of Court. For the purpose of this case, the petitioner, while he did
not so specify in his petition, actually anchors his plea on Section 1 (f) of Rule 50, which
particularly mentions the absence of page references in the subject index and
statement of facts in the appellant's brief. It provides that:
RULE 50
Dismissal of Appeal
SECTION 1. Grounds for dismissal of appeal. — An appeal may be
dismissed by the Court of Appeals , on its own motion or on that of the
appellee, on the following grounds:
xxx xxx xxx
(f) Absence of speci c assignment of errors in the appellant's brief,
or of page references to the record as required in Section 13, paragraphs (a), (c),
(d) and (f) of Rule 44;
xxx xxx xxx (Emphasis and underscoring supplied)
To buttress his arguments, the petitioner pointed out that Section 13, Rule 44 of
the Rules of Court uses the word "shall" which is thus "mandatory and compulsory." 2 2
The petitioner further mentions that "an appealing party must strictly comply with the
requisites laid down in the Rules of Court." 2 3
Contrary to this argument, however, the Court, in De Leon vs. Court of Appeals, 2 4
has already ruled that the grounds for dismissal of an appeal under Section 1 of Rule 50
of the Rules of Court are discretionary upon the CA. It said that:
x x x Rule 50, Section 1 which provides speci c grounds for dismissal of
appeal manifestly "confers a power and does not impose a duty." "What is more,
it is directory, not mandatory." With the exception of Sec. 1(b), the grounds for
the dismissal of an appeal are directory and not mandatory, and it is not the
ministerial duty of the court to dismiss the appeal. The discretion, however,
must be a sound one to be exercised in accordance with the tenets of justice
and fair play having in mind the circumstances obtaining in each case. 2 5
(Citations omitted)
Indeed, consistent with the ruling in De Leon, the guiding principle in the
resolution of the foregoing issues is that if the citations found in the appellant's brief
could su ciently enable the CA to locate expeditiously the portions of the records
referred to, then there is substantial compliance with the requirements of Section 13,
Rule 44 of the Rules of Court.

CD Technologies Asia, Inc. 2018 cdasiaonline.com

 In this case, the CA did not exercise the discretion to dismiss the appeal based
on the absence of "a subject index with page of reference and compliant statement of
facts" in the appellant's brief. Clearly, the CA did not nd that the tenets of justice and
fair play were disregarded by this omission. Rather, the CA chose to decide the case on
the merits, which impliedly found the appellant's brief to be substantially su cient
insofar as the guiding principle mentioned above is concerned.
More, it is proper to emphasize that this discretion is particularly vested unto the
CA and not unto this Court. Thus, absent any grave abuse of discretion in the
application of the rules, the Court could not, and would not, interfere with the CA
ndings. Considering too that the petitioner merely (1) quoted the provisions of the
rules that the appellant's brief "violated" and (2) showed the insu ciencies in the
appellant's brief, but did not present any proof of any grave abuse of discretion on the
part of the CA, the Court would not now dismantle a ruling that was reached based on a
discretion which was not improperly exercised.
On the second issue, the petitioner argues that respondent Servacio failed to
contest the RTC nding that MTLC has already lost its juridical personality upon the
redemption of the subject property, which makes the legal action void.
To answer this averment, the Court must qualify.
According to the case of Yu vs. Yukayguan, 2 6 once a corporation is dissolved, be
it voluntarily or involuntarily, liquidation, which is the process of settling the affairs of
the corporation, will ensue. This consists of (1) collection of all that is due the
corporation, (2) the settlement and adjustment of claims against it, and (3) the
payment of its debts. Yu more particularly described this process as that which entails
the following:
"Winding up the affairs of the corporation means the collection of all
assets, the payment of all its creditors, and the distribution of the remaining
assets, if any among the stockholders thereof in accordance with their
contracts, or if there be no special contract, on the basis of their respective
interests. The manner of liquidation or winding up may be provided for in the
corporate by-laws and this would prevail unless it is inconsistent with law." 2 7
(Citations omitted)
These pronouncements draw their basis from Section 122 of the Corporation
Code, 2 8 which empowers every corporation whose corporate existence has been
legally terminated to continue as a body corporate for three (3) years after the time
when it would have been dissolved. This continued existence would only be for the
purposes 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."
29

The rationale for this has already been averred by the Court in the case of
Rebollido vs. Court of Appeals, 3 0 citing Castle's Administrator v. Acrogen Coal, Co. , 3 1
viz.:
This continuance of its legal existence for the purpose of
enabling it to close up its business is necessary to enable the
corporation to collect the demands due it as well as to allow its
creditors to assert the demands against it. If this were not so, then a
corporation that became involved in liabilities might escape the payment of its
just obligations by merely surrendering its charter, and thus defeat its creditors
or greatly hinder and delay them in the collection of their demand. This course
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 of conduct on the part of corporations the law in justice to persons dealing with
them does not permit. The person who has a valid claim against a corporation,
whether it arises in contract or tort should not be deprived of the right to
prosecute an action for the enforcement of his demands by the action of the
stockholders of the corporation in agreeing to its dissolution. The dissolution of
a corporation does not extinguish obligations or liabilities due by or to it. 3 2
(Emphasis and underscoring supplied)
In addition, and as expressly mentioned by the Corporation Code, this extended
authority necessarily excludes the purpose of continuing the business for which it was
established. 3 3 The reason for this is simple: the dissolution of the corporation carries
with it the termination of the corporation's juridical personality. Any new business in
which the dissolved corporation would engage in, other than those for the purpose of
liquidation, "will be a void transaction because of the non-existence of the corporate
party." 3 4
Two things must be said of the foregoing in relation to the facts of this case.
First, if MTLC entered into the real estate mortgage agreement with Estanislao after its
dissolution, then resultantly, such real estate mortgage agreement would be void ab
initio because of the non-existence of MTLC's juridical personality.
Second, if, however, MTLC entered into the real estate mortgage agreement
prior to its dissolution, then MTLC's redemption of the subject property, even if already
after its dissolution (as long as it would not exceed three years thereafter), would still
be valid because of the liquidation/winding up powers accorded by Section 122 of the
Corporation Code to MTLC.
The discourse of this case then turns to one of proven facts. The Court scoured
the records, and after a perusal of all the submissions herein and the rulings of the
lower and appellate courts, the Court nds that: (1) MTLC has already been dissolved
by the Securities and Exchange Commission as early as September 2003; 3 5 (2)
Estanislao and MTLC entered into the real estate mortgage agreement only on January
24, 2005; 3 6 and (3) MTLC, through respondent Servacio, redeemed the property on
December 15, 2005, for which a Deed of Redemption was issued by respondent
Paloma III on March 15, 2006. 3 7
From the foregoing, it is clear that, by the time MTLC executed the real estate
mortgage agreement, its juridical personality has already ceased to exist. The
agreement is void as MTLC could not have been a corporate party to the same. To be
sure, a real estate mortgage is not part of the liquidation powers that could have been
extended to MTLC. It could not have been for the purposes 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." It is, in fact, a new business in
which MTLC no longer has any business pursuing.
Consequently, and contrary to the CA Decision, any redemption exercised by
MTLC pursuant to this void real estate mortgage is likewise void, and could not be
given any effect.
WHEREFORE , premises considered, the Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 02948 dated February 28, 2013 and November 19, 2013,
respectively, are hereby REVERSED and SET ASIDE , and a new one is entered
DECLARING the Real Estate Mortgage executed by Estanislao Rich and MTLC as
NULL and VOID , and ORDERING the City Assessor of Maasin, Southern Leyte to
cancel the Deed of Redemption in favor of MTLC appearing on the Tax Declaration
CD Technologies Asia, Inc. 2018 cdasiaonline.com
 covering the property. HEITAD

SO ORDERED.
Carpio, * Peralta, Perlas-Bernabe and Caguioa, JJ., concur.

Footnotes
* Acting Chief Justice per Special Order No. 2539, dated February 28, 2018.
1. Penned by then Associate, now Executive, Justice Gabriel T. Ingles, and concurred in by
Associate Justices Pampio A. Abarintos and Pedro B. Corales; rollo, pp. 234-250.
2. Id. at 262-263.
3. Id. at 235.

4. Id. at 52-53.
5. Id.
6. Id. at 42, 70-71.
7. Id. at 42, 70-71, 235.
8. Id. at 73, 235.

9. Id. at 33.
10. Id.
11. Id. at 188.
12. Id. at 191.
13. Id. at 241.

14. Id. at 239-241.

15. Id. at 243.
16. Id. at 245-246.
17. Id. at 247.

18. SECTION 4. Appearance of parties. — It shall be the duty of the parties and their counsel to
appear at the pre-trial. The non-appearance of a party may be excused only if a valid
cause is shown therefor or if a representative shall appear in his behalf fully authorized
in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and of documents. (n)

19. Rollo, p. 249.

20. Id. at 24.
21. Id. at 27.
22. Id. at 27.
23. Id.

CD Technologies Asia, Inc. 2018 cdasiaonline.com

 24. 432 Phil. 775 (2002).
25. Id. at 789-790.

26. 607 Phil. 581, 607 (2009).

27. Id. at 608.
28. Batas Pambansa Blg. 68 (1980).
29. Id.
30. 252 Phil. 831, 840 (1989).

31. 145 Ky 591, 140 SW 1034 (1911).

32. Id.
33. Supra note 28.
34. Villanueva, Cesar L., Philippine Corporate Law, pp. 697-698.

35. Rollo, p. 34.

36. Id. at 42, 70-71.
37. Id. at 73-74.

CD Technologies Asia, Inc. 2018 cdasiaonline.com