Alhambra Cigar vs SEC (G.R. No. L-23606 July 29, 1968)

Alhambra Cigar & Cigarette Manufacturing Company Inc. vs Securities and Exchange Commission
G.R. No. L-23606 July 29, 1968

Facts: Petitioner Alhambra Cigar and Cigarette Manufacturing Company, Inc. (hereinafter referred to simply as Alhambra) was duly incorporated under Philippine laws on January 15, 1912. By its corporate articles it was to exist for fifty (50) years from incorporation. Its term of existence expired on January 15, 1962. On that date, it ceased transacting business, entered into a state of liquidation. Thereafter, a new corporation. — Alhambra Industries, Inc. — was formed to carry on the business of Alhambra. On May 1, 1962, Alhambra’s stockholders, by resolution named Angel S. Gamboa trustee to take charge of its liquidation. On June 20, 1963 — within Alhambra’s three-year statutory period for liquidation – Republic Act 3531 was enacted into law. It amended Section 18 of the Corporation Law; it empowered domestic private corporations to extend their corporate life beyond the period fixed by the articles of incorporation for a term not to exceed fifty years in any one instance. Previous to Republic Act 3531, the maximum non-extendible term of such corporations was fifty years. On July 15, 1963, at a special meeting, Alhambra’s board of directors resolved to amend paragraph “Fourth” of its articles of incorporation to extend its corporate life for an additional fifty years, or a total of 100 years from its incorporation. On August 26, 1963, Alhambra’s stockholders, representing more than two-thirds of its subscribed capital stock, voted to approve the foregoing resolution. On October 28, 1963, Alhambra’s articles of incorporation as so amended certified correct by its president and secretary and a majority of its board of directors, were filed with respondent Securities and Exchange Commission (SEC). On November 18, 1963, SEC, however, returned said amended articles of incorporation to Alhambra’s counsel with the ruling that Republic Act 3531 “which took effect only on June 20, 1963, cannot be availed of by the said corporation, for the reason that its term of existence had already expired when the said law took effect in short, said law has no retroactive effect.”

Issue: Whether or not the corporate life of a corporation be extended during the period of winding up or after it’s charter has already expired.

Held: No. The common law rule, at the beginning, was rigid and inflexible in that upon its dissolution, a corporation became legally dead for all purposes. Statutory authorizations had to be provided for its continuance after dissolution “for limited and specified purposes incident to complete liquidation of its affairs”. Thus, the moment a corporation’s right to exist as an “artificial person” ceases, its corporate powers are terminated “just as the powers of a natural person to take part in mundane affairs cease to exist upon his death”. There is nothing left but to conduct, as it were, the settlement of the estate of a deceased juridical person.

From July 15 to October 28, 1963, when Alhambra made its attempt to extend its corporate existence, its original term of fifty years had already expired (January 15, 1962); it was in the midst of the three-year grace period statutorily fixed in Section 77 of the Corporation Law, thus: .

SEC. 77. Every corporation whose charter expires by its own limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established.

Plain from the language of the provision is its meaning: continuance of a “dissolved” corporation as a body corporate for three years has for its purpose the final closure of its affairs, and no other; the corporation is specifically enjoined from “continuing the business for which it was established”. The liquidation of the corporation’s affairs set forth in Section 77 became necessary precisely because its life had ended. For this reason alone, the corporate existence and juridical personality of that corporation to do business may no longer be extended.

Silence of the law on the matter is not hard to understand. Specificity is not really necessary. The authority to prolong corporate life was inserted by Republic Act 3531 into a section of the law that deals with the power of a corporation to amend its articles of incorporation. (For, the manner of prolongation is through an amendment of the articles.) And it should be clearly evident that under Section 77 no corporation in a state of liquidation can act in any way, much less amend its articles, “for the purpose of continuing the business for which it was established”.

All these dilute Alhambra’s position that it could revivify its corporate life simply because when it attempted to do so, Alhambra was still in the process of liquidation. It is surely impermissible for us to stretch the law — that merely empowers a corporation to act in liquidation — to inject therein the power to extend its corporate existence.

The pari materia rule of statutory construction, in fact, commands that statutes must be harmonized with each other. So harmonizing, the conclusion is clear that Section 18 of the Corporation Law, as amended by Republic Act 3531 in reference to extensions of corporate existence, is to be read in the same light as Republic Act 1932. Which means that domestic corporations in general, as with domestic insurance companies, can extend corporate existence only on or before the expiration of the term fixed in their charters.

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