National Abaca & Other Fibers Corp. v. Pore
REITERATIONFacts
The Antecedents: Plaintiff National Abaca and other Fibers Corporation (NAFCO) filed a complaint against defendant Apolonia Pore for P1,213.34, allegedly advanced for hemp purchases for which Pore failed to account. The Municipal Court of Tacloban found Pore liable for P272.49. Procedural History: NAFCO appealed to the Court of First Instance (CFI) of Leyte. In the CFI, Pore moved to dismiss, arguing NAFCO lacked legal capacity to sue as it was abolished by Executive Order No. 372. NAFCO countered that its corporate existence was extended for three years from November 30, 1950, for liquidation purposes, and the case was filed within this period. The CFI ordered NAFCO to amend its complaint to include the Board of Liquidators as a co-plaintiff within ten days, otherwise the case would be dismissed. When the amendment was not made, the CFI dismissed the case. The Petition: NAFCO filed a motion for reconsideration, alleging its counsel prepared the amended complaint but the original copy for the court was lost by the mailing clerk, attributing this to excusable negligence. The CFI denied the motion for reconsideration. NAFCO appealed to the Court of Appeals, which forwarded the case to the Supreme Court due to purely legal issues.
Issue(s)
Whether an action commenced by a corporation within its three-year liquidation period may be continued by the corporation after the expiration of said period. Whether the lower court erred in denying the motion for reconsideration of its order dismissing the case.
Ruling
The Supreme Court reversed the orders of the Court of First Instance, admitted NAFCO's amended complaint, and remanded the case for further proceedings.
Ratio Decidendi
On Issue 1: The Court held that an action commenced by a corporation within the statutory three-year liquidation period generally abates upon the expiration of such period, in the absence of statutory provisions to the contrary. Philippine Corporation Law, specifically Section 77, provides for continued corporate existence for three years for the purpose of prosecuting and defending suits, but thereafter, it ceases to enjoy corporate existence for such purposes. Section 78 allows conveyance of assets to trustees within this period, who can then prosecute and defend suits. The Court cited Fletcher's Cyclopedia on Corporations and Judge Fisher's commentary to support the principle that suits abate when a corporation ceases to be an entity capable of suing or being sued after the liquidation period. Therefore, the first question was answered in the negative, meaning the action could not be continued by the corporation in its own name after the expiration of the liquidation period. On Issue 2: The Court found that the lower court erred in not granting the motion for reconsideration. The judgment of the municipal court indicated the validity of NAFCO's claim. The record showed that NAFCO had prepared the amended complaint as directed and had sent a copy to the defendant's counsel. The failure to file the original amended complaint with the court was attributed to accident or excusable negligence on the part of the mailing clerk, as evidenced by the entry in the outgoing correspondence record book and the subsequent discovery of the lost original. The Court considered the circumstances surrounding the failure to file the amended complaint as sufficient grounds to grant the motion for reconsideration and admit the amended complaint, allowing the case to proceed.
Main Doctrine
An action commenced by a corporation within the three-year liquidation period may be dismissed if not properly prosecuted or if the corporation's legal capacity to sue is challenged and not timely rectified, especially after the expiration of the statutory period for liquidation, unless the failure to prosecute is due to excusable negligence.