Philippine Reconstruction Corporation v. Aparente
REITERATIONFacts
The Antecedents: Plaintiff-appellee Philippine Reconstruction Corporation, Inc. (PRC) filed an action for revival of a previous money judgment rendered by the Court of First Instance of Manila in Civil Case No. 13832. The original judgment, dated February 9, 1953, ordered the defendant-appellant Pablo Aparente to pay PRC P4,000.00 with 12% interest per annum from the date each of four promissory notes matured until fully paid, plus P400.00 as attorney's fees and costs. The original case involved recovery on four promissory notes executed by Aparente in favor of PRC, secured by a chattel mortgage on sawmill equipment. Aparente failed to appear at the hearing of the original case, and evidence was received ex parte. Procedural History: The original judgment became final and executory on June 28, 1955. However, the action for revival was only filed on May 25, 1965, more than five years after the judgment became dormant. Aparente filed an answer denying the allegations due to lack of sufficient information and raising special defenses of lack of legal capacity to sue, prescription of the cause of action, and payment/release of obligations. At pre-trial, Aparente abandoned the defense of payment, delimiting the issues to prescription and plaintiff's legal capacity. The trial court ruled that the action had not prescribed and that the alleged lack of legal capacity of PRC did not automatically dissolve the corporation, as no judicial decree to that effect was issued. The trial court ordered the revival of the judgment. The Petition: Aparente appealed the decision, assigning errors concerning the trial court's ruling on the dissolution of the corporation due to non-user of its franchise and its consequent lack of personality to sue, and the order to pay the revived judgment.
Issue(s)
Whether the defendant may challenge the legal capacity of the plaintiff-corporation in an action for the revival of a judgment. Whether the defendant's denial of knowledge regarding the existence of the prior judgment constitutes a valid specific denial. Whether the non-user of a corporate franchise for two years results in the automatic dissolution of the corporation.
Ruling
The Supreme Court affirmed the judgment of the lower court in toto, ordering the defendant to pay the plaintiff the sum of P4,000.00 with interest at the rate of 12% per annum from June 15, 1950, until full payment, plus P500.00 for attorney's fees and costs, with triple costs against the appellant.
Ratio Decidendi
On Issue 1: The Court held that the appellant cannot challenge the legal capacity of the plaintiff-corporation in a revival suit. An action for revival is a procedural mechanism under Section 6, Rule 39 of the Rules of Court, intended only to secure the execution of a dormant judgment. It does not allow for the reopening of the merits of the case or the litigation of issues that could have been raised in the original proceedings. Since the issue of corporate personality existed during the first action, it is now considered foreclosed by the final judgment. Only matters of jurisdiction or those arising after the finality of the first judgment may generally be raised in a new action for revival. On Issue 2: The Court ruled that the defendant's denial of knowledge or information regarding the prior judgment was sham and evasive. Under Rule 8, Section 10, a denial based on lack of knowledge must be made in sincerity and good faith. The Court emphasized that a defendant cannot plead ignorance of a matter of public record, such as a court judgment against him, which is easily accessible. Such an unexplained denial of information that is within the control or reach of the pleader is insufficient to constitute an effective denial. Consequently, this form of denial is treated as an implied admission of the plaintiff's allegations. On Issue 3: The Court clarified that the non-user or abandonment of a corporate franchise does not cause an automatic dissolution. Applying Section 19 of the Corporation Law, the Court noted that a cause for forfeiture of a charter does not ipso facto deprive a corporation of its legal existence. Until a judicial decree is passed in a proper proceeding initiated for that purpose, the corporation continues to exist. Furthermore, individuals cannot avail themselves of such forfeiture in collateral suits, as the right to exercise corporate powers can only be challenged in a direct proceeding brought by the State.
Main Doctrine
An action for revival of a dormant judgment is a procedural remedy to secure execution and does not reopen issues affecting the merits of the original judgment. Matters that could have been raised in the original case, such as the plaintiff's legal capacity to sue, are foreclosed. A denial of knowledge or information sufficient to form a belief must be made in good faith and sincerity; otherwise, it may be treated as an implied admission, warranting a judgment on the pleadings.