Reyes v. Bancom Development Corp.
REITERATIONFacts
The Antecedents: The underlying dispute originated from a Continuing Guaranty executed by the Reyes Group, including petitioners Ramon E. Reyes and Clara R. Pastor, in favor of Bancom Development Corporation. This guaranty covered obligations incurred by Marbella Realty, Inc. under an Underwriting Agreement with Bancom, specifically relating to several sets of Promissory Notes issued by Marbella. Marbella defaulted on these notes, leading Bancom to file a complaint for a sum of money against Marbella as the principal debtor and the Reyes Group as guarantors. Procedural History: The Regional Trial Court (RTC) of Makati ruled that Marbella and the Reyes Group were solidarily liable to Bancom, ordering them to pay the amounts indicated on the Promissory Notes, plus interest and damages. Marbella and the Reyes Group appealed this decision to the Court of Appeals (CA). During the CA proceedings, Bancom's counsel was allowed to withdraw due to being unable to contact the client. The CA subsequently affirmed the RTC's ruling, finding Marbella and the Reyes Group liable based on the Promissory Notes and the Continuing Guaranty, and rejecting their defense that the notes were not binding due to earlier agreements. The petitioners' motion for reconsideration was denied by the CA. The Petition: Petitioners Ramon E. Reyes and Clara R. Pastor filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court with the Supreme Court. They argued that the CA erred in not declaring the suit abated, citing the revocation of Bancom's Certificate of Registration by the Securities and Exchange Commission (SEC). Petitioners also contended that the CA incorrectly relied on the Promissory Notes and the Continuing Guaranty, failing to consider earlier agreements that they claimed absolved them of liability. The Supreme Court denied the petition, holding that the revocation of Bancom's registration did not abate the proceedings and affirming the petitioners' liability as guarantors.
Issue(s)
Whether the present suit should be deemed abated by the revocation by the SEC of the Certificate of Registration issued to Bancom. Whether the CA correctly ruled that petitioners are liable to Bancom for (a) the payment of the loan amounts indicated on the Promissory Notes issued by Marbella, including the award of attorney's fees; and (b) the appropriate computation of interest and penalties.
Ruling
The Supreme Court denied the Petition for Review, affirming the CA's decision with modification regarding the computation of interest and penalties. The Court held that the revocation of Bancom's Certificate of Registration does not justify the abatement of the proceedings, and that petitioners, as guarantors, are liable to Bancom for the outstanding loan amounts, interest, penalties, and attorney's fees.
Ratio Decidendi
On the abatement of the suit: The Court reiterated that the revocation of a corporation's charter does not automatically lead to the abatement of proceedings. Section 122 of the Corporation Code allows a dissolved corporation to continue as a body corporate for three years for the prosecution and defense of suits. Furthermore, jurisprudence has established that even after this period, suits may be continued by appointed receivers, assignees, or trustees, including the board of directors by legal implication. Crucially, Section 145 of the Corporation Code explicitly states that the dissolution of a corporation does not impair any right or remedy in its favor. Therefore, the dissolution of Bancom did not extinguish its right to collect its debts, nor did it abate the collection suit. On the liability of petitioners, the award of attorney's fees, and the computation of interest and penalties: The Court affirmed the CA's finding that petitioners are liable. They executed a Continuing Guaranty, and the genuineness and due execution of the Promissory Notes and the Guaranty were undisputed. Petitioners' defense that the funds were merely additional financing and not loans, and that their obligation was tied to earlier agreements involving Fereit Realty Development Corporation, was rejected. The Court found the obligations under the Promissory Notes and the Continuing Guaranty to be plain and unqualified. Even considering the earlier agreements, the Amendment of Memorandum of Agreement clearly stipulated that Bancom would grant additional financing to Marbella, payable within three years, and that Fereit would reimburse Marbella for expenses incurred in settling this financing. Marbella's obligation to pay Bancom was unconditional, and the Promissory Notes reflected this. The Continuing Guaranty bound petitioners to pay Bancom if Marbella's obligations were not met. The Court noted the lack of sufficient evidence to support the claim that Bancom had complete control over Fereit's assets and activities, which was central to petitioners' defense. The Court found the award of attorney's fees in order, based on the stipulation in the Promissory Notes. However, the Court modified the ruling on the computation of interest and penalties to conform to legal interest rates under prevailing jurisprudence, specifying the rates and periods for legal interest on the principal, penalties, and the total monetary awards.
Main Doctrine
The revocation of a corporation's certificate of registration does not automatically abate suits filed by or against it, as its directors are considered trustees by legal implication for the purpose of winding up its affairs, and the dissolution of a creditor-corporation does not extinguish any right or remedy in its favor.