Topic: As to corporate term (section 11)

G.R. No. L-23606 July 29, 1968

ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY, INC., petitioner, vs.

SECURITIES & EXCHANGE COMMISSION, respondent

FACTS

On January 15, 1912, the petitioner was duly incorporated under Philippine laws. It was
to exist for fifty years from incorporation pursuant to its corporate articles. Its term of existence
expired on January 15, 1962, to which it ceased transacting business, and entered into a state
of liquidation. A new corporation named Alhambra Industries, Inc. was formed to carry on the
business of the petitioner. In 1962, the petitioner’s stockholders, by resolution named Angel S.
Gamboa trustee to take charge of its liquidation. Subsequently, Republic Act 3531 was enacted
into law and 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, Alhambra's board of directors resolved to change the fourth paragraph
of its articles of incorporation to extend its corporate life for an additional fifty years from its
incorporation. Said resolution was approved by the petitioner’s stockholders. Alhambra's
amended articles of incorporation were filed with the Securities and Exchange Commission
(SEC). But the SEC returned said amended articles which they held 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 a corporation may extend its life by amendment of its articles of
incorporation effected during the three-year statutory period for liquidation when its original term
of existence had already expired

RULING

NO. 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.

Note: 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.