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Corporate Law Case Digest: Gelano v. CA (1981)

G.R. No. L-39050 February 24, 1981
Lessons Applicable: Who are liable after dissolution and winding-up? (Corporate Law)

FACTS:
  • Insular Sawmill, Inc. leased the paraphernal property of Guillermina M. Gelano (wife) for P1.2K/month

  • November 19, 1947-December 26, 1950:  Carlos Gelano (husband) obtained cash advances of P25,950 on account of rentals

    • agreement: Insular Sawmill, Inc. could deduct the same from the monthly rentals of the leased premises until the cash advances are fully paid

    • Carlos Gelano was able to pay only P5,950.00 thereby leaving an unpaid balance of P20,000.00 which he refused to pay 

    • Guillermina M. Gelano refused to pay on the ground that said amount was for the personal account of her husband asked for by, and given to him, without her knowledge and consent and did not benefit the family

  • May 4, 1948 to September 11, 1949: Spouses Gelanos purchased lumber materials on credit leaving P946.46 unpaid 

  • July 14, 1952: Joseph Tan Yoc Su, as accomdating party, executed a joint and several promissory note with Carlos Gelano in favor of China Banking Corporation bank in the amount of P8,000.00 payable in 60 days to help renew the previous loan of the spouses

    • the bank collected P9,106.00 including interests by debiting the current account of the corp.

    • Carlos only paid P5,000

    • Guillermina refused to pay on the ground that she had no knowledge of such accomodation

  • May 29, 1959: Insular thru Atty. German Lee, filed a complaint for collection against the spouses before the CFI

    • In the meantime, private respondent amended its Articles of Incorporation to shorten its term of existence up to December 31, 1960 only

  • November 20, 1964: CFI favored Insular holding Carlos Gelano liable

  • August 23, 1973: held spouses jointly ad severally liable

ISSUE: W/N a corporation, whose corporate life had ceased by the expiration of its term of existence, could still continue prosecuting and defending suits after its dissolution and beyond the period of 3 years provided for under Act No. 1459, otherwise known as the Corporation law, to wind up its affairs, without having undertaken any step to transfer its assets to a trustee or assignee.

HELD: YES. Affirmed with mod - conjugal property is liable
  • time during which the corporation, through its own officers, may conduct the liquidation of its assets and sue and be sued as a corporation is limited to 3 years from the time the period of dissolution commences; but that there is no time limited within which the trustees must complete a liquidation placed in their hands

    • only the conveyance to the trustees must be made within the 3-year period

    • effect of the conveyance is to make the trustees the legal owners of the property conveyed, subject to the beneficial interest therein of creditors and stockholders

  • trustee may commence a suit which can proceed to final judgment even beyond the 3-year period

  • "trustee" =  general concept - include the counsel to whom was entrusted in the instant case

  • The purpose in the transfer of the assets of the corporation to a trustee upon its dissolution is more for the protection of its creditor and stockholders

    • Debtors may not take advantage of the failure of the corporation to transfer its assets to a trustee

Section 77 of the Corporation Law, when the corporate existence is terminated in any legal manner, the corporation shall nevertheless continue as a body corporate for 3 years after the time when it would have been dissolved, for the purpose of prosecuting and defending suits by or against it