Reburiano vs. Court of Appeals

An order denying a motion to quash a writ of execution is generally not appealable, and the recognized exception for a “change in the situation of the parties” contemplates only changes occurring subsequent to the rendition of judgment. A dissolved corporation may validly pursue a pending action to final execution beyond the three-year period under Section 122 of the Corporation Code, with its counsel deemed a trustee for that purpose.

Private respondent Pepsi Cola Bottling Company of the Philippines Inc. filed a complaint for a sum of money against petitioners Urbano (Ben) Reburiano and James Reburiano. While the case was pending before the Regional Trial Court, private respondent amended its articles of incorporation to shorten its corporate term, resulting in its dissolution on July 8, 1983. The amendment was approved by the Securities and Exchange Commission on March 2, 1984. Neither the trial court nor the opposing parties were formally notified of the dissolution during the proceedings.

• Filing of the Complaint: In 1982, private respondent Pepsi Cola Bottling Company of the Philippines Inc. commenced Civil Case No. Q-35598 against petitioners Urbano (Ben) Reburiano and James Reburiano, seeking recovery of P55,000. Petitioner Urbano Reburiano was a former sales manager of the company.

• Dissolution During Pendency: While the case was pending before the trial court, private respondent amended its articles of incorporation to shorten its corporate term, effecting its dissolution on July 8, 1983. The amended articles were approved by the Securities and Exchange Commission on March 2, 1984. The trial court was not informed of this development, and no party raised the dissolution during the proceedings.

• Judgment and Appeal: On June 1, 1987, the RTC rendered a decision ordering petitioners to pay jointly and severally P55,000.00, less the value of any returned empty cases and bottles at P55.00 per case. Private respondent appealed to the Court of Appeals, seeking to modify the valuation of empties. On June 26, 1990, the CA set aside the RTC decision and ordered petitioners to pay P55,000.00 with legal interest from January 1982. That CA decision became final and executory, and the case was remanded.

• Execution and Motion to Quash: Pursuant to the final judgment, the RTC issued a writ of execution on February 5, 1991. On February 13, 1991, petitioners moved to quash the writ, asserting that private respondent had no juridical personality and lacked capacity to sue because it had been dissolved since July 8, 1983; that Atty. Romualdo M. Jubay therefore had no client; and that the decisions of the RTC and the CA were patent nullities for lack of jurisdiction. Private respondent opposed, arguing that capacity was determined at the commencement of the suit, that its dissolution was for convenience, and that petitioners’ motion was a dilatory tactic. The RTC denied the motion on February 28, 1991.

• Appealability of Denial of Motion to Quash: Petitioners argued that the trial court’s order denying their motion to quash fell within the recognized exception to the general rule against appeals from such orders, namely, that a change in the situation of the parties—here, the dissolution of the judgment creditor—had made execution inequitable or unjust.

• Lack of Capacity to Sue: Petitioners maintained that private respondent ceased to exist as a juridical entity in 1983 and consequently lost the capacity to sue and be sued; therefore, the decisions rendered by the RTC and the CA were null and void for lack of jurisdiction.

• Expiration of Liquidation Period: Petitioners contended that under Section 122 of the Corporation Code, a dissolved corporation may prosecute suits only within the three-year liquidation period; after that period, with no trustee or receiver appointed, any pending action must abate. They relied on National Abaca and Other Fibers Corporation v. Pore.

• Capacity Determined at Filing: Private respondent countered that its capacity to sue was established at the time the complaint was filed in 1982, when it was an existing corporation; dissolution during the pendency of the case did not oust the court of jurisdiction or mandate dismissal.

• Dilatory Conduct: Private respondent asserted that petitioners—particularly Urbano Reburiano, a former sales manager—knew of the dissolution but deliberately refrained from raising the issue until execution was imminent, rendering the motion to quash a mere dilatory tactic.

• Counsel as Trustee: Citing Gelano v. Court of Appeals, private respondent argued that its counsel, Atty. Jubay, who had continuously represented it from trial through appeal, was deemed a trustee of the dissolved corporation for purposes of the pending litigation, enabling the suit to proceed to execution even beyond the three-year period.

• Appealability of Order Denying Motion to Quash: Whether the trial court’s order denying petitioners’ motion to quash the writ of execution was appealable.
• Timeliness of Raising Capacity to Sue: Whether petitioners could raise the issue of private respondent’s capacity to sue, based on its dissolution, for the first time on appeal from the denial of the motion to quash.
• Capacity of Dissolved Corporation: Whether a dissolved corporation, after the lapse of the three-year liquidation period under Section 122 of the Corporation Code, could still continue prosecuting a suit filed during its existence and have the judgment executed.

• Appealability of Order Denying Motion to Quash: The order was not appealable. As a general rule, no appeal lies from an order denying a motion to quash a writ of execution; otherwise litigation would become interminable. The exceptions enumerated in Limpin, Jr. v. Intermediate Appellate Court include a “change in the situation of the parties making execution inequitable or unjust,” but that exception is strictly confined to changes occurring subsequent to the trial court’s judgment. Private respondent’s dissolution took place in 1983—before the RTC rendered judgment in 1987—and therefore did not constitute a supervening event that would render execution inequitable. Moreover, a writ will not be recalled on the basis of a defense that could have been made at the time of trial.

• Timeliness of Raising Capacity to Sue: The issue could not be raised for the first time at the execution stage. The ground of lack of capacity to sue existed during the trial and when the case was appealed from the principal decision, yet petitioners never raised it. Rules of fair play, justice, and due process preclude a party from belatedly asserting matters that could have been litigated earlier.

• Capacity of Dissolved Corporation: Even if properly raised, the argument lacked merit. Section 122 of the Corporation Code allows a dissolved corporation to continue as a body corporate for three years to prosecute and defend suits. While actions pending at the expiration of that period ordinarily abate, established jurisprudence has modified the strict rule. The counsel who continuously handled the case from the trial court through appeal is considered a trustee of the corporation for the matter in litigation, in substantial compliance with the law (Gelano v. Court of Appeals; Clemente v. Court of Appeals; Sumera v. Valencia). Section 145 of the Corporation Code further ensures that no right or remedy is removed or impaired by the subsequent dissolution of a corporation. Accordingly, the judgment could validly be executed.

• Appealability of Orders Denying Motion to Quash Writ of Execution — As a general rule, no appeal lies from an order denying a motion to quash a writ of execution. The recognized exceptions, as catalogued in Limpin, Jr. v. Intermediate Appellate Court, are: (1) the writ varies the judgment; (2) there has been a change in the situation of the parties making execution inequitable or unjust; (3) execution is sought against property exempt from execution; (4) the controversy was never submitted to the judgment of the court; (5) the terms of the judgment are unclear; or (6) the writ was improvidently issued, defective in substance, issued against the wrong party, the judgment debt has been paid or otherwise satisfied, or the writ was issued without authority. The “change in the situation of the parties” exception applies only to changes occurring subsequent to the rendition of judgment.

• Trustee-by-Implication for a Dissolved Corporation — Under Section 122 of the Corporation Code, a dissolved corporation may convey its property to trustees to continue the prosecution and defense of suits beyond the three-year liquidation period. Even in the absence of a formal appointment, the counsel who represented the corporation in a pending litigation from its inception through appeal is considered a trustee for that matter, enabling the action to proceed to final judgment and execution (Gelano v. Court of Appeals, 103 SCRA 90). The board of directors may likewise act as trustees by legal implication (Clemente v. Court of Appeals, 242 SCRA 717). The time within which trustees must complete the liquidation is not limited to three years (Sumera v. Valencia, 67 Phil. 721).

• Waiver of Defenses Not Raised During Trial — A defense that could have been raised during the trial or in the appeal from the principal decision may not be invoked for the first time at the execution stage to recall a writ of execution.

• “Certain, it is . . . that execution of final and executory judgments may no longer be contested and prevented, and no appeal should lie therefrom: otherwise, cases would be interminable, and there would be negation of the overmastering need to end litigations.” — quoting Limpin, Jr. v. Intermediate Appellate Court, framing the general rule against appeals from orders denying a motion to quash a writ of execution.

• “[T]he counsel who prosecuted and defended the interest of the corporation in the instant case and who in fact appeared in behalf of the [corporation] may be considered a trustee of the corporation at least with respect to the matter in litigation only. Said counsel had been handling the case when the same was pending before the trial court until it was appealed before the Court of Appeals and finally to this Court. We therefore hold that there was substantial compliance with Sec. 78 [now §122] of the Corporation Law and such private respondent . . . could still continue prosecuting the present case even beyond the period of three (3) years from the time of dissolution.” — quoting Gelano v. Court of Appeals, establishing the trustee-by-implication doctrine.

• “Rules of fair play, justice, and due process dictate that parties cannot raise for the first time on appeal from a denial of a Motion to Quash a Writ of Execution issues which they could have raised but never did during the trial and even on appeal from the decision of the trial court.”

• Limpin, Jr. v. Intermediate Appellate Court, 147 SCRA 516 (1987) — Followed as controlling authority on the non-appealability of orders denying a motion to quash writ of execution and the specific, exclusive exceptions to that rule.
• Gelano v. Court of Appeals, 103 SCRA 90 (1981) — Applied; established that counsel for a dissolved corporation may be treated as a trustee to continue pending litigation beyond the three-year liquidation period.
• Board of Liquidators v. Kalaw, 20 SCRA 987 (1967) — Cited to reinforce the continuing authority of a trustee to prosecute suits after the statutory winding-up period.
• Clemente v. Court of Appeals, 242 SCRA 717 (1995) — Cited to support the trustee-by-implication doctrine, including the recognition that a board of directors may act as trustees by legal implication.
• Sumera v. Valencia, 67 Phil. 721 (1939) — Early authority holding that a conveyance to trustees within three years permits completion of liquidation and pending suits without a time limit.
• National Abaca and Other Fibers Corporation v. Pore, 2 SCRA 989 (1961) — Acknowledged as stating the older rule that actions abate upon expiration of the statutory period; distinguished as modified by subsequent jurisprudence.

• Section 122, Corporation Code (Batas Pambansa Blg. 68) — Governs corporate liquidation; provides that a dissolved corporation continues as a body corporate for three years to prosecute and defend suits and may convey its property to trustees to continue such actions beyond that period. Applied to hold that private respondent’s counsel acted as trustee, allowing execution of the judgment.
• Section 145, Corporation Code — Declares that no right or remedy in favor of or against any corporation shall be removed or impaired by the subsequent dissolution of the corporation. Cited to reinforce that dissolution pendente lite does not extinguish a prevailing party’s right to execution.

Bellosillo, Puno, Quisumbing, and Buena, JJ., concurred.