Clemente vs. Court of Appeals

5/17/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 242
VOL. 242, MARCH 27, 717

1995
Clemente vs. Court of Appeals
G.R. No. 82407. * March 27,

1995.
LUIS C. CLEMENTE, LEONOR

CLEMENTE DE ELEPAÑO, HEIRS
OF ARCADIO C. OCHOA,
Represented by FE O. OCHOA-
BAYBAY, CONCEPCION,
MARIANO, ARTEMIO, VICENTE,
ANGELITA, ROBERTO,
HERNANDO AND LOURDES, all
sur-named ELEPAÑO,
petitioners, vs. THE HON.
COURT OF APPEALS, ELVIRA
PANDINCO-CASTRO AND
VICTOR CASTRO, respondents.
www.central.com.ph/sfsreader/session/000001722084f9f78a06b864003600fb002c009e/t/?o=False 1/25
Corporation Law; Corporation

Code; Dissolution; Sections 117 to
122 of the Corporation Code
provide the various modes for
dissolving, liquidating or winding
up, and terminating the life of the
corporation.—If, indeed, the
sociedad has long become defunct,
it should behoove petitioners, or
anyone else who may have any
interest in the corporation, to take
appropriate measures before a
proper forum for a peremptory
settlement of its affairs. We might
invite attention to the various
modes provided by the
Corporation Code (see Secs. 117-
122) for dissolving, liquidating or
winding up, and terminating the
life of the corporation. Among the
causes for such dissolution are
when the corporate term has
expired or when, upon a verified
complaint and after notice and
hearing, the Securities and

Exchange Commission orders the
dissolution of a corporation for its
continuous inactivity for at least
five (5) years.
Same; Same; Same;

Corporation continues to be a body
corporate for three (3) years after its
dissolution for purposes of
prosecuting and defending suits by
and against it and for enabling it to
settle and close its affairs.—The
corporation continues to be a body
corporate for three (3) years after
its dissolution for purposes of
prosecuting and defending suits by
and against it and for enabling it to
settle and close its affairs,
culminating in the disposition and
distribution of its remaining assets.
Same; Same; Same; The

termination of the life of a juridical
entity does not by itself cause the
extinction or diminution of the

rights and liabilities of such entity
nor those of its owners and
creditors.—It may, during the three-
year term, appoint a trustee or a
receiver who may act beyond that
period. The termination of the life
of a juridical entity does not by
itself cause the extinction or
diminution of the rights and
liabilities of such entity (see
Gonzales vs. Sugar Regulatory
Adminis-
_______________
* THIRD DIVISION.
718
718 SUPREME COURT REPORTS

ANNOTATED
tration, 174 SCRA 377) nor those of

its owners and creditors. If the
three-year extended life has
expired without a trustee or
receiver having been expressly
designated by the corporation
within that period, the board of
directors (or trustees) itself,
following the rationale of the
Supreme Court’s decision in Gelano
vs. Court of Appeals (103 SCRA 90)
may be permitted to so continue as
“trustees” by legal implication to
complete the corporate liquidation.
Still in the absence of a board of
directors or trustees, those having
any pecuniary interest in the assets,
including not only the shareholders
but likewise the creditors of the
corporation, acting for and in its
behalf, might make proper
representations with the Securities
and Exchange Commission, which
has primary and sufficiently broad

jurisdiction in matters of this
nature, for working out a final
settlement of the corporate
concerns.
PETITION for review of a

decision of the Court of
Appeals.
The facts are stated in the

opinion of the Court.
Manuel De M. Baybay and
Vero B. Librojo for petitioners.
Mayor, Manalang, Reyes
& Associates for private
respondents.
VITUG, J.:
In an action (Civil Case No. 467-

83-C), entitled “Declaration of
Ownership with Receivership,”
instituted before the Regional
Trial Court, Fourth Judicial
Region, Branch XXXIV, Calamba,
Laguna, the plaintiffs (herein

petitioners) sought to be
declared the owners of a piece
of land so described as—
“A PARCEL OF LAND (Lot No. 148-

New of the subdivision plan Pls-
502-D being a portion of Lot No.
148 of the cadastral survey of
Calamba G.L.R.O. Records No.
8418), situated in the Barrio of
Lecheria, Municipality of Calamba,
Province of Laguna, Island of
Luzon. Bounded on the Northeast
by the Provincial Road; on the
Southeast by Irrigation Ditch and
Lot No. 1651 of Calamba Cadastre;
on the Southwest by Lot No. 148-B
of Plan Pls-502-D; and on the
Northwest by Calle Burgos.
Beginning at the point marked ‘I’
on the plan being North 71
degrees 88’m; 110.23 meters from
BBML’s Calamba Cadastre, x x x
containing an area of FIVE
THOUSAND THREE HUNDRED
FORTY NINE (5,349) SQUARE

1
METERS, more or less.”
_______________
1 Rollo, p. 61.
719
VOL. 242, MARCH 27, 719

1995
Specifically, the complaint

prayed that judgment be
rendered—
“(a) declaring the plaintiffs

to be owners of the
property described in
paragraph 8 of the
complaint in the
proportion of their
respective
stockholdings:
ordering the
“(b) distribution of the
rentals and other fruits
of the property to the
plaintiffs also in the
proportion of their
ownership; and
“(c) (for) such other reliefs
which this Honorable
Court may deem just
and equitable
2
under the
premises.”
The defendants (herein private

respondents), in their answer,
likewise claimed ownership of
the property by virtue of
acquisitive prescription.
During the hearing, only the
plaintiffs came forward to prove
their allegations, the
defendants did not present any
evidence despite the several
opportunities accorded to them
by the trial court.
Predicating itself on the

averments of the complaint and
assessing solely the evidence
that had been submitted to it
by the plaintiffs, the trial court
stated its findings thusly:
“The ‘Sociedad Popular Calambeña’

an organization conceived by the
parties as a ‘Sociedad Anonima,’
was organized on or about the
advent of the early American
occupation of the Philippines.
Plaintiff says it was at ‘the
beginning of the 20th Century,’ but
the defendant claims it was in
1907. The ‘sociedad’ actually did
business and held itself out as a
corporation from November, 1909
up to September 24, 1932. Its
principal business was cockfighting
or the operation and management
of a cockpit.
“On June 8, 1911, or during its
existence, the ‘Sociedad’ acquired
by installments the parcel of land
above described from the Friar

Lands Estate of Calamba, Laguna at
the total cost of P2,676.00 (Exh. ‘A’).
Installments for the sale started on
June 3, 1911 to June 16, 1931.
Patent No. 38994 was issued in the
name of the ‘Sociedad Popular
Calambeña’ on August 5, 1936
(ibid). The Real Property Tax
Register of the Office of the
Treasurer of Calamba, Laguna
showed:
“ ‘That Lot No. 148-New A, situated at

Burgos Street, Calamba, Laguna, is
declared and assessed for taxation
purpose
_______________
2 Rollo, pp. 164-165.
720

ANNOTATED
in the name of SOCIEDAD POPULAR

CALAMBEÑA (Exh. ‘C’).’
“Plaintiff’s evidence also shows

that Mariano Elepaño and Pablo
Clemente, now both deceased,
were original stockholders of the
aforesaid ‘sociedad.’ Mariano
Elepaño subscribed and paid on
November, 1909 for FORTY (40)
shares of stocks worth TWO
HUNDRED (P200.00) PESOS (Exh.
‘F’). While Pablo Clemente
subscribed and paid FOUR
HUNDRED EIGHTEEN (418) shares
of stocks worth TWO THOUSAND
(P2,000.00) PESOS. Pablo
Clemente’s shares of stocks were
however later distributed and
apportioned to his heirs, in
accordance with a Project of
Partition (Exh. ‘K’) and the Inventory
of Property (Exh. ‘J’), in Civil Case
No. 6127, Court of First Instance,
Laguna, entitled Intestate Estate of

the late Pablo Clemente namely: to
Luis Clemente, shares worth P510;
to Ricardo Clemente, shares worth
P510; to Leonor Clemente de
Elepaño, shares also worth P510,
and to Placida Clemente de
Belarmino shares worth P510.
“On September 24, 1932, in
accordance with the aforesaid
project of partition, the ‘sociedad’
issued stock certificates to the
aforesaid heirs of Pablo Clemente.
Thus, Luis Clemente was issued
Stock Certificate No. 38 (Exh. ‘G’);
Ricardo Clemente, No. 39 (Exh. ‘H’)
and Leonor Clemente de Elepaño
No. 44 (Exh. ‘I’).
“On the basis of their respective
stocks certificates, present plaintiffs
Luis, Ricardo, Leonor and Placida,
all surnamed Clemente, heirs of
Pablo Clemente, and, the heirs of
Mariano Elepaño, namely
Concepcion, Mariano, Artemio,
Vicente, Angelita, Roberto,
Hernando and Lourdes all

surnamed Elepaño, jointly claim
ownership over the above
described property, asserting that
their fathers being the only known
stockholders of the ‘sociedad’
known as the ‘Sociedad Popular
Calambeña,’ they, to the exclusion
of all others, are entitled to be
declared owners of Lot No. 148-
3
New.”
The trial court dismissed the

complaint not merely on what it
apparently perceived to be an
insufficiency of the evidence
that firmly could establish
plaintiffs’ claim of ownership
over the property in dispute but
also on its thesis that, absent a
corporate liquidation, it is the
corporation, not the
stockholders, which can assert,
if at all, any title to the
corporate assets. The court,
even then, expressed some
reservations on the
corporation’s being able to still
validly pursue such a claim. It
said:
_______________
3 Rollo, pp. 62-63.
721
VOL. 242, MARCH 27, 721

1995
“The evidence presented so far,

indicates that Lot No. 148-New
although purchased on installment
on June 8, 1911, was finally
acquired by the ‘sociedad’ on
August 5, 1936 (Exh. ‘A’). It was
declared for tax purposes in the
name of the ‘sociedad’ (Exh. ‘C’).
Strangely however, no proof was
offered showing that taxes were
paid on its (sic) by the ‘sociedad,’

and neither were there efforts
exerted by the latter to consolidate
title over the property. In fact, no
explanation was offered as to how
and when the property came to the
possession of the defendants. This
simply means that the ‘sociedad’
never asserted ownership over Lot
No. 148-New.
“Basic is the rule that one
asserting a right has the burden of
proving it and the fact is, no proof
was introduced demonstrating that
the ‘sociedad’ ever asserted its
right of ownership over the
property during the period of its
existence. The presumption is, ‘that
a person takes ordinary care of his
concern.’ (Rule 131, Sec. 5(a), Rules
4
of Court).”
In sustaining the dismissal of

the complaint, as well as the
counterclaim, the Court of
Appeals, in part, said:
“With the above views that We

take, Sociedad is the legal owner of
the land in dispute, in light of
Exhibit ‘A’ (pp. 97-98, RTC Rollo,
Vol. 1). While a copy of Patent No.
38994, issued on August 5, 1936,
has not been presented during the
trial, there is also no evidence of its
cancellation or muniment of title
presented by plaintiffs-appellants
supportive of their claim of
ownership of the property. Even
assuming that their parents were
the only stockholders of Sociedad,
and assuming further that
Sociedad has ceased to exist, these
do not ipso facto vest ownership
over the property in the hands of
plaintiffs-appellants. Again,
assuming that sociedad is a duly-
organized entity under the laws of
the Philippines, its corporate
existence is separate and distinct
from its stockholders and from
other corporations to which it may
be connected (Yutivo Sons
Hardware Co. vs. Court of Tax

Appeals, 1 SCRA 161, 165). If it was
not organized and registered under
Philippine laws as a private
corporation, it is a de facto
corporation, as found by the court
below, with the right to exercise
corporate powers, and thus it is
imperative that any of the modes
of transferring ownership from said
entity must be shown.
“In a reinvindicatory action, the
plaintiff has the burden of
establishing his case by more than
more (sic) preponderance of
evidence (Vegas vs. Vegas, 56 Phil.
299; Villaruz vs. Delfin, CA-G.R. No.
_______________
4 Rollo, p. 67.
722

ANNOTATED
15918-R, Jan. 18, 1961; Perante vs.

Malinao, CA-G.R. No. 29314-R, Feb.
16, 1962). This the plaintiff has not
5
satisfactorily done in this case.”
Petitioners have assigned

several “errors”; the focal issue,
nevertheless, is still whether or
not petitioners can be held,
given their submissions, to have
succeeded in establishing for
themselves a firm title to the
property in question. Like the
courts below, we find
petitioners’ evidence to be
direly wanting; all that appear
to be certain are that the
“Sociedad Popular Calambeña,”
believed to be a “sociedad
anonima” and for a while
engaged in the operation and
management of a cockpit, has
existed some time in the past;
that it has acquired the parcel
of land here involved; and that

the plaintiffs’ predecessors,
Mariano Elepaño and Pablo
Clemente, had been original
stockholders of the sociedad.
Except in showing that they are
the successors-in-interest of
Elepaño and Clemente,
petitioners have been unable to
come up with any evidence to
substantiate their claim of
ownership of the corporate
asset.
If, indeed, the sociedad has
long become defunct, it should
behoove petitioners, or anyone
else who may have any interest
in the corporation, to take
appropriate measures before a
proper forum for a peremptory
settlement of its affairs. We
might invite attention to the
various modes provided by the
Corporation Code (see Secs.
117-122) for dissolving,
liquidating or winding up, and
terminating the life of the

corporation. Among the causes
for such dissolution are when
the corporate term has expired
or when, upon a verified
complaint and after notice and
hearing, the Securities and
Exchange Commission orders
the dissolution of a corporation
for its continuous inactivity for
at least five (5) years. The
corporation continues to be a
body corporate for three (3)
years after its dissolution for
purposes of prosecuting and
defending suits by and against
it and for enabling it to settle
and close its affairs, culminating
in the disposition and
distribution of its remaining
assets. It may, during the three-
year term, appoint a trustee or
a receiver who may act beyond
that period. The termination of
the life of a juridical entity does
not by itself cause
_______________
5 Rollo, p. 165.
723
VOL. 242, MARCH 27, 723

1995
the extinction or diminution of

the rights and liabilities of such
entity (see Gonzales vs. Sugar
Regulatory Administration, 174
SCRA 377) nor those of its
owners and creditors. If the
three-year extended life has
expired without a trustee or
receiver having been expressly
designated by the corporation
within that period, the board of
directors (or trustees) itself,
following the rationale of the
Supreme Court’s decision in
Gelano vs. Court of Appeals (103
SCRA 90) may be permitted to

so continue as “trustees” by
legal implication to complete
the corporate liquidation. Still in
the absence of a board of
directors or trustees, those
having any pecuniary interest in
the assets, including not only
the shareholders but likewise
the creditors of the corporation,
acting for and in its behalf,
might make proper
representations with the
Securities and Exchange
Commission, which has primary
and sufficiently broad
jurisdiction in matters of this
nature, for working out a final
settlement of the corporate
concerns. WHEREFORE, the
decision appealed from is
AFFIRMED. No costs.
SO ORDERED.
Feliciano (Chairman),
Romero, Melo and Francisco, JJ.,
concur.
Judgment affirmed.
Note.—Grounds for
involuntary dissolution of a
corporation under a quo
warranto proceedings are: (a)
when the corporation has
offended against a provision on
an act for its creation or
renewal; (b) when it has
forfeited its privileges and
franchises by non-user; (c)
when it has committed or
omitted an act which amounts
to a surrender of its corporate
rights, privilege or franchises;
(d) when it misused a right,
privileges or franchise
conferred upon it by law, or
when it has exercised a right,
privilege or franchise in
contravention of law. (Philippine
National Bank vs. Court of First
Instance of Rizal, Pasig, Br. XXI,

209 SCRA 294 [1992])
——o0o——
724
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5/17/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 242

VOL. 242, MARCH 27, 717

G.R. No. 82407. * March 27,

LUIS C. CLEMENTE, LEONOR

Corporation Law; Corporation

hearing, the Securities and

Same; Same; Same;

Same; Same; Same; The

extinction or diminution of the

718 SUPREME COURT REPORTS