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ALHAMBRA CIGAR Vs SEC

The document discusses a case regarding whether a corporation called Alhambra Cigar & Cigarette Manufacturing Company could extend its corporate life after it had already expired. Key points: - Alhambra was incorporated in 1912 for 50 years, so its term expired in 1962 at which point it entered liquidation. - In 1963, a new law was passed allowing corporations to extend their terms, but the SEC refused to allow Alhambra to do so, saying the law did not apply retroactively. - The court ruled that Alhambra could not extend its term, as according to law a corporation in liquidation can only settle its affairs and cannot take any actions to

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94 views3 pages

ALHAMBRA CIGAR Vs SEC

The document discusses a case regarding whether a corporation called Alhambra Cigar & Cigarette Manufacturing Company could extend its corporate life after it had already expired. Key points: - Alhambra was incorporated in 1912 for 50 years, so its term expired in 1962 at which point it entered liquidation. - In 1963, a new law was passed allowing corporations to extend their terms, but the SEC refused to allow Alhambra to do so, saying the law did not apply retroactively. - The court ruled that Alhambra could not extend its term, as according to law a corporation in liquidation can only settle its affairs and cannot take any actions to

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Ira
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© © All Rights Reserved
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ALHAMBRA CIGAR & CIGARETTE MANUFACTURING COMPANY,

INC., petitioner,
vs.
SECURITIES & EXCHANGE COMMISSION, respondent.
G.R. No. L-23606           July 29, 1968
FACTS:
On January 15, 1912, Alhambra Cigar and Cigarette Manufacturing
Company, Inc.(Alhambra) was duly incorporated under Philippine Laws.
According to it corporate articles. it was to exist for 50 years from
incorporation.
On January 15, 1962, its term of existence expired, ceased from
transacting business and entered into a state of liquidation.
Thereafter, a new corporation named Alhambra Industries, Inc. was
formed to carry on the business of Alhambra.
On May 1, 1962 Angela S. Gamboa was named trustee to take charge
of the liquidation through a resolution by the stockholders of Alhambra.
During the 3-year statutory period for liquidation, R.A. 3531 was
enacted. It amended Section 18 of the Corporation Law which gave power to
domestic private corporations to their corporate life beyond the period fixed
by the articles of incorporation for a term not to exceed fifty years in any
one instance. Contrary to the previous statute that 50 years was the
maximum non-extendible term for such corporations.
In a special meeting, the board of directors of Alhambra amended its
articles of incorporation to extend its life for an additional 50 years, to make
it a total of 100 years from its incorporation.
The amended articles were then filed with the Securities and Exchange
Commission. Subsequently the said articles were returned by the SEC to
Alhambra on the grounds 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.”
Alhambra sought reconsideration of SEC's Ruling to which the SEC
denied.
However, one should take note that prior to amendment by Republic
Act 3531, an explicit prohibition existed in Section 18, thus:
… Provided, however, That the life of said corporation shall not be extended
by said amendment beyond the time fixed in the original articles: …
This was displaced by Republic Act 3531 which enfranchises all private
corporations to extend their corporate existence.

ISSUE:
Whether or not the corporate life of a corporation be extended during the
period of winding up or after its charter has 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.
Worth bearing in mind, at this juncture, is the basic development of
corporation law.
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.
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.
Alhambra falls back on the contention that its case is arguably within
the purview of the law. It says that before cessation of its corporate life, it
could not have extended the same, for the simple reason that Republic Act
3531 had not then become law. It must be remembered that Republic Act
3531 took effect on June 20, 1963, while the original term of Alhambra's
existence expired before that date — on January 15, 1962. The mischief that
flows from this theory is at once apparent. It would certainly open the gates
for all defunct corporations — whose charters have expired even long before
Republic Act 3531 came into being — to resuscitate their 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.
Expansive construction is possible only when there is something to
expand. At the time of the passage of Republic Act 3531, Alhambra's
corporate life had already expired. It had overstepped the limits of its limited
existence. No life there is to prolong.

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