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Securities And: Exchange Commission

1. Lopez Enterprises, Inc. was incorporated in 1936 and dissolved in 1986 after its 50-year term expired. 2. The sole surviving director, Mr. Victor U. Lopez, seeks to act as trustee in liquidation to liquidate the corporation's remaining asset. 3. Under Philippine law, the surviving director may act as trustee in liquidation and liquidate the corporate assets, subject to the right of interested parties to petition for appointment of a new trustee.

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57 views4 pages

Securities And: Exchange Commission

1. Lopez Enterprises, Inc. was incorporated in 1936 and dissolved in 1986 after its 50-year term expired. 2. The sole surviving director, Mr. Victor U. Lopez, seeks to act as trustee in liquidation to liquidate the corporation's remaining asset. 3. Under Philippine law, the surviving director may act as trustee in liquidation and liquidate the corporate assets, subject to the right of interested parties to petition for appointment of a new trustee.

Uploaded by

Jakko Malutao
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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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Republic of the Philippines
SECURITIES AND EXCHANGE COMMISSION
SEC Bldg. EDSA, Greenhills, Mandaluyong City

OFFICE OFTHE GENERAL COUNSEL

29 January 2010

SEC-OGCOpinion No. 10-06

Liquidation

Chato & Vinzons-Chato


Law Offices
th
8 Floor, Strata 2000,
. F. Ortigas, Jr. Road
1605 Ortigas Center, Pasig City

ATTENTION: Atty. Wilfredo M. Chato

Gentlemen:

This refers to your letter dated 22 December 2009 requesting


confirmation of your opinion that your client, being the sole surviving
incorporator-director of a dissolved corporation, has the authority to act as
trustee in liquidation.

You represent that Lopez Enterprises, Inc. was incorporated in October


1936 by the following incorporators:

1. Mr. Benito Lopez


2. Mr. Victor U. Lopez, Jr.
3. Mr. Nelly Lopez de Zamora
4. Mr. Salvador Zamora
5. Ms. Lilia Lopez
6. Ms. Elena H. lopez ~

SEC-aGC Opinion No. 10-05 Page I of 4


• 0.
(,~ ,.

You allege further that the corporation's term of existence, which is fifty
(50) years from the date of its incorporation, expired on October 1986. The
three-year liquidation period lapsed without the appointment of a trustee in
liquidation, and the dissolved corporation's remaining asset, which is a property
at 512 R. Salas St. Ermita, Manila, consisting of land and building, has not been
liquidated yet up to now.

Its latest General Information Sheet, for 1994, lists the following
stockholders and directors:

Directors
1. Mr. Vicente Lopez,Jr.
2. Mr. Victor U. Lopez,Jr.
3. Ms. Ma. Zita Z. Lopez
4. Ms. Ma. Teresa Lopez
5. Ms. Ma. ElenaZ. Lopez

Stockholders

1. Mr. Vicente Lopez,Jr.


2. Mr. Victor U. Lopez,Jr.
3. Ms. Ma. Rita Z. Lopez
4. Ms. Ma. Teresa Lopez
5. Ms. Ma. ElenaZ. Lopez
6. Ms. Lourdes L. Katigbak
7. Ms. Ma. Aurora Z. Lopez
8. Mr. Vicente LopezIII
9. Mr. Jose Mari Lopez

Among them, you claim that only Mr. Victor U. Lopez is presently alive. All
the others are already deceased. It is now your opinion that Mr. Victor U. Lopez
has the sole authority to act as trustee in liquidation for the dissolved
corporation, and that he can act as such even beyond the three-year liquidation
period.

We opine that in case of the death of one or more directors during or


after the three year liquidation period, the surviving directors continue as trustee
in liquidation, and may exercise the powers and duties of the deceased director-
trustee. However, this is subject to the right of creditors, stockholders, and other
persons interested in the corporate assets to petition the courts for the
appointment of a trustee in liquidation.

qfV
SEC-OGCOpin'ion No. 10-05 Page 2 of 4
------------------------------------

..
•
Section 122 of the Corporation Code,l provides:
o
"SEC. 122. Corporate liquidation. - 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 (3) years after the time when it would have been so dissolved,
for the purpose 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, but not for the purpose of continuing
the business for which it was established.

At any time during said three (3) years, said corporation is


authorized and empowered to convey all of its property to trustees for
the benefit of stockholders, members, creditors, and other persons in
interest. From and after any such conveyance by the corporation of its
property in trust for the benefit of its stockholders, members, creditors
and others in interest, all interest which the corporation had in the
property terminates, the legal interest vests in the trustees, and the
beneficial interest in the stockholders, members, creditors or other
persons in interest.

Upon Winding up of the corporate affairs, any asset distributable to


any creditor or stockholder or member who is unknown or cannot be
found shall be escheated to the city or municipality where such assets are
located.

Except by decrease of capital stock and as otherwise allowed by


this Code, no corporation shall distribute any of its assets or property
except upon lawful dissolution and after payment of all its debts and
liabilities."

In the case of Clemente, et al. VS. Court of Appeals, et al.,2 the Supreme
Court held:

"If the three-year extended life has expired without a trustee or


receiver having been expressly designated by the corporation within that
period, the board of directors (or trustees) itself, following the rationale
of the Supreme Court's decision in Gelano VS. Court of Appeals (103 SCRA
90) may be permitted to so continue as "trustees" by legal implication to
complete the corporate liquidation. Still in the absence of a board of
directors or trustees. those having any pecuniary interest in the assets,
includin not onl the shareholders but likewise the creditors af the

I BATAS PAMBANSA alLANG 68 (1950).


2 G.R. No. 82407, March 27, 1995.

SEC-oGC Opinion No. 10-05 Page 3 of 4


... .
" .
• o
corporation, acting for and in its behalf, might make proper
representations with the Securities and ExchangeCommission, which has
primary and sufficiently broad jurisdiction in matters of this nature, for
working out a final settlement of the corporate concerns.,,3

In our jurisdiction, the statutes and jurisprudence are silent regarding the
consequences of the death of a director, acting as trustee in liquidation, during
the liquidation or winding up period. In some American jurisdictions, directors
who become trustees of the corporation on dissolution hold on as joint tenants
with right of survivorship incident to their tenancy.4 In other words, when one or
more directors die, the surviving trustees take the whole title subject to the
5
trust, and the latter may exercise the powers and duties of the deceased
director-trustee. However, it is also provided that in case of the death,
resignation, . inability or refusal to act, of the directors as trustees, or the
survivors, the court may appoint trustees to fill the vacancy, upon the application
of any person interested.6

Adopting these legal principles from American corporation law, from which
our corporation law was patterned, we opine that Mr. Victor U. Lopez may act as
trustee in liquidation. However, this is without prejudice to the right of a person
in interest to .petition the courts for the appointment of a different trustee in
liquidation on account of Mr. Victor U. Lopez's refusal or inability to wind up the
affairs of the dissolved corporation within a reasonable period.

This Opinion is rendered based solely on the facts and circumstances


disclosed and relevant solely to the particular issues raised therein and shall not
be used in the nature of a standing rule binding upon the Commission in other
cases whether of similar or dissimilar circumstances. If, upon investigation, it
will be disclosed that the facts relied upon are different, this opinion shall be
rendered null and void.

Pleasebe guided accordingly.


(j/~
VERNETTEG. UMALI-PACO
General Counsel

3 Underscoring ours.
4 North Carolina. Thomas v. Rogers, 191 NC 736, 133 SE 18.
S Texas. A/drige v. Pardee, 24 Tex Civ App 254, 60 SW 789, 791.

6 Missouri. Hentschel v. Fidelity & Deposit Co. Of Maryland, 87 F2d 833; Montana. State v. District
Court in and for Granite County, 108 Mont 51, 88 P2d 34.

SEC-OGC Opinion No. 10-05 Page 4 of 4

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