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Rich Vs Paloma

The Supreme Court ruled that a corporation that has been dissolved, whether voluntarily or involuntarily, no longer has legal personality to conduct business except for those related to liquidation. In this case, Maasin Traders Lending Corporation (MTLC) had its corporate personality terminated by the SEC in 2003, before it entered a real estate mortgage agreement and later exercised equitable redemption over property involved in a foreclosure by the petitioner. The Court held that the agreement and redemption were void since MTLC lacked capacity as a dissolved corporation to enter new business transactions or agreements.

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Ederic Apao
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116 views2 pages

Rich Vs Paloma

The Supreme Court ruled that a corporation that has been dissolved, whether voluntarily or involuntarily, no longer has legal personality to conduct business except for those related to liquidation. In this case, Maasin Traders Lending Corporation (MTLC) had its corporate personality terminated by the SEC in 2003, before it entered a real estate mortgage agreement and later exercised equitable redemption over property involved in a foreclosure by the petitioner. The Court held that the agreement and redemption were void since MTLC lacked capacity as a dissolved corporation to enter new business transactions or agreements.

Uploaded by

Ederic Apao
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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59.DR. GIL J. RICH , v. GUILLERMO PALOMA III, ATTY. EVARISTA TARCE AND ESTER L.

SERVACIO,
G.R. No. 210538, March 07, 2018

MP: A corporation which has already been dissolved, be it voluntarily or involuntarily, retains no
juridical personality to conduct its business save for those directed towards corporate liquidation.

FACTS
Sometime in 1997, Dr. Gil Rich (petitioner) lent P1,000,000.00 to his brother, Estanislao Rich
(Estanislao), which was secured by a real estate mortgage over a 1000-square-meter parcel of land
with improvements.

When Estanislao failed to make good on his obligations under the loan agreement, the petitioner
foreclosed on the subject property via a public auction sale where he was declared the highest bidder,
and subsequently, was issued a Certificate of Sale as purchaser/mortgagee.

Without the petitioner's knowledge, however, and prior to the foreclosure, Estanislao entered into an
agreement with Maasin Traders Lending Corporation (MTLC), where loans and advances amounting
to P2.6 million were secured by a real estate mortgage over the same property.

On the strength of this document, respondent Ester L. Servacio (Servacio), as president of MTLC,
exercised equitable redemption after the foreclosure proceedings. On March 15, 2006, respondent
Paloma III, again as sheriff of the RTC, issued a Deed of Redemption in favor of MTLC.

Petitioner then filed a complaint alleging, among others, that MTLC no longer has juridical personality
to effect the equitable redemption as it has already been dissolved by the Securities and Exchange
Commission as early as September 2003.

ISSUE
Whether or not a corporation not invested with corporate personality at the time of redemption may
redeem a property.

HELD
No. Section 122 of the Corporation Code xxx empowers every corporation whose corporate existence
has been legally terminated to continue as a body corporate for three (3) years after the time when it
would have been dissolved. This continued existence would only be for the purposes of "prosecuting
and
defending suits by or against it and enabling it to settle and close its affairs, to dispose of and convey
its property and to distribute its assets."

It is clear that by the time MTLC executed the real estate mortgage agreement, its juridical personality
has already ceased to exist. The agreement is void as MTLC could not have been a corporate party to
the same. To be sure, a real estate mortgage is not part of the liquidation powers that could have
been extended to MTLC. It could not have been for the purposes of "prosecuting and defending suits
by or against it and enabling it to settle and close its affairs, to dispose of and convey its property and
to distribute its assets." It is, in fact, a new business in which MTLC no longer has any business
pursuing.

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