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CHAPTER XVII- DISSOLUTION

FINANCING CORP. v. Teodoro (1953)
1) Minority stockholders of FINANCING CORP. sues the C and its Pres/GM
Araneta due to the gross mismanagement and fraudulent conduct of the
corporate affairs of the C by Pres/GM Araneta. They prayed for:

a) dissolution of the C
b) appointment of a receiver pendent lite

2) Defense:

Dissolution of a C can be brought and maintained only by the State
through its legal counsel, and that respondents, much less the minority
stockholders of said C have no right or personality to maintain an action
for dissolution.

HELD: The trail court had jurisdiction and properly entertained the
original case.

True is it that the general rule is that the minority stockholders of a C
cannot sue and demand its dissolution. However, there are cases that hold that
even minority stockholders may ask for dissolution, this under the theory that
such minority stockholders, if unable to obtain redress and protection of their
rights w/n the C, must not and not be left w/o redress and remedy.

In this case, allegations of mismanagement and misconduct by its
Pres/GM were made, especially in connection w/ the petition for the appointment
of a receiver.

REPUBLIC OF THE PHILIPPINES v. BISAYA LAND TRANSPORTATION CO.
(1978)
1) RP (through the Solicitor General) filed a Petition for Quo Warranto for the
dissolution of the BISAYA LAND TRANSPORTATION CO. (land and water
transportation).

2) Petition alleges that:

BISAYA LAND TRANSPORTATION CO. (through its
correspondents named therein, acting in their official capacity as officers
and controlling stockholders of the said corporation) by conspiring and
confabulating together and with the aid of their associates, agents and
confederates, had violated and continues to violate, offended and
continues to offend the provisions of the Corporation Law and other
statutes of the Philippines by having committed and continuing to
commit acts amounting to a forfeiture of the respondent
corporation's franchise, rights and privileges and, through various
means, misused and continues to misuse, abused and continues to
abuse, the terms of its franchise, palpably in contravention of the law and
public policy.

3) The acts allegedly committed by the corporation, through its
corespondents, are embodied in nine causes of action which, in substance, are
as follows:

FIRST CAUSE OF ACTION
To conceal its illegal transactions, respondent corporation falsely reconstituted its
articles of incorporation in July 1948 by adding new purposes not originally
included, namely: lumber concessions, cattle ranch, agriculture, and general
merchandise:

SECOND CAUSE OF ACTION
On May 25, 1948, respondent corporation through its Board of Directors, adopted
a resolution authorizing it to acquire 1,024 hectares of public land in Zamboanga
and 10,000 hectares of timber concession in Mindanao in violation of Section 6,
Act No. 143);

THIRD CAUSE OF ACTION
In May, 1949, respondent officials, constituting themselves as Board of Directors
of respondent corporation, passed a resolution authorizing the corporation to
lease a pasture land of 2,000 hectares of cattle ranch on a public land in
Bayawan, Negros Occidental;

FOURTH CAUSE OF ACTION
From August 1946 to the end of 1952, respondent corporation operated a
general merchandise store, a business which is neither necessary for, nor
incidental to, the accomplishment of its principal business for which it was
organized, i.e., the operation of land and water transportation:

FIFTH CAUSE OF ACTION
Respondent corporation allowed Mariano Cuenco and Manuel Cuenco to act as
president in 1945 to 1948 and 1953 to 1954, respectively, when at that time,
neither of them owned a single stock:

SIXTH CAUSE OF ACTION
In violation of its charter and articles of incorporation, as well as applicable
statutes concerning its operation, it engaged in mining by organizing the Jose P.
Velez Coal Mines, and allowing said corporation to use the facilities and assets of
respondent corporation;

SEVENTH CAUSE OF ACTION
It imported and sold at black market prices to third persons truck spare parts, the
proceeds of which were appropriated by respondent directors;

EIGHTH CAUSE OF ACTION
It paid its Laborers and employees wages Wow the minimum wage law to the
great prejudice of its labor fore, and in violation of the laws of the state ,
manipulating its books and records so as to make it appear that its laborers and
employees were and have been paid their salaries and wages in accordance with
the minimum wage law;

NINTH CAUSE OF ACTION
It deliberately failed to maintain accurate and faithful stock and transfer books
since 1945 up to the filing of the petition, enabling it to defraud the state, mislead
the general public, its creditors, investors and its stockholders by not accurately
and faithfully making
a. an adequate, accurate and complete record of dividend distribution, and
b. an adequate, accurate and complete record of transfers of its stocks.

4) Respondent C filed a “Motion for Judgment on Consent” manifesting its
consent to and moving for judgment to be rendered ordering the dissolution of
respondent Bisaya Land Transportation Company, Inc. and, in furtherance of
that dissolution, ordering its BOD to proceed to the liquidation of its assets in
accordance with the provisions of the corporation law.

5) In said “Motion for Judgment on Consent” respondent C did not admit
having committed any act requiring its forcible dissolution, but alleged, as reason
for the filing of said motion, that:

the pendency of the Petition of Quo Warranto had prejudiced the
corporation its business, as well as its innocent stockholders, and

that its business interests required that immediate relief be given to the
corporation and to its thousands of stockholders; and

that the majority of the board of directors and stockholders representing
more than 2/3 of its capital stock had indicated their election to voluntarily
dissolve the corporation as the most feasible remedy to the corporation's
problems brought about by the respondent Miguel Cuenco.

6) After some more motions filed, Solicitor General eventually filed a “Motion
for Dismissal of the Quo Warranto Proceedings” alleging that:

the only purpose of his motion for the dismissal of this quo warranto is to
take the State out of an unnecessary court litigation, so that the dismissal
of the case would result in the disposition solely of the quo warranto by
and between petitioner Republic of the Philippines and the respondents
named therein.

7) Appellant-defendant Miguel Cuenco maintains the negative of the above
proposition, giving three main reasons therefor, namely:

a) The evidence so far adduced was in fact sufficient to dissolve the
respondent corporation;

b) There was a pending motion of respondents for judgment on
consent, by virtue of which instead of dismissal of the petition, the
corporation should be considered dissolved:

c) A cross-claim has been interposed by him which precluded the
dismissal of the petition for quo warranto.

ISSUE: (The pivotal question in this case is) WON the lower court erred in
holding that the Solicitor General was vested with full power to manage and
control the Static's litigation, which includes the power to discontinue such
litigation if and when in his opinion this should be done?

HELD: Meeting squarely the issue of whether or not the Solicitor General
is vested with absolute and unlimited power to discontinue the State's litigation
and, accordingly to have the quo warranto petition dismissed, if and when in his
opinion this should be done, the general rule seems to be that the plaintiff may
do so with the approval of the court subject to well-defined exceptions (such as,
for example, where the answer sets up a counterclaim which cannot stand
independently of the main action).

In view of our conclusion that the court a quo committed no error in
dismissing the quo warranto proceedings, it also stands to reason that it acted
correctly in dismissing appellant Miguel Cuenco's cross-claim. A cross-claim is
proper only where the crossclaimant stands to be prejudiced by the filing of an
action against him. Hence, where such action has been dismissed, his cross-
claim would have no leg to stand on.

Gonzales spouses v. SUGAR REGULATORY ADMINISTRATION (1989)
1) 13 May 80- Gonzales spouses (Petitioners) obtained a loan from the
REPUBLIC PLANTERS BANK (P176,000) secured by a real estate mortgage.

2) The proceeds of the loan were released on a staggered basis.

3) The loan was payable from the 1980-1981 sugar crop, the amortization
payments to be remitted by the PHILSUCOM TO RPB. The deductions
complained of were made by the PHILSUCOM during the period from 1980 to
1984.

4) RPB is owned and controlled by PHILSUCOM.

5) PHILSUCOM also deducted from the export sugar proceeds of Petitioners
(the amount of P421,517) w/o the authority and consent of Petitioners w/ the
result that Petitioners had overpaid the RPB (by P289,260).

6) 28 May ‘86- EO 18 was promulgated abolishing PHILSUCOM and
creating the SRA and authorized the transfer of assets from PHILSUCOM to
SRA.

7) 23 Dec ’87- Petitioner spouses filed a complaint against the RPB,
PHILSUCOM and the SRA:

a) seeking cancellation of the real estate mortgage and
b) PHILSUCOM and SRA be required jointly and severally to
reimburse the petitioners recovery of their overpayment

8) Petitioners filed an Amended Complaint assailing the constitutionality of
EO 18 contending that:

a) the abolition of PHILSUCOM by EO 18 in effect destroyed their
right to recover from PHILSUCOM what petitioners claim in their
complaint is due to them.

c) Hence, they had been deprived of property w/o due process of law
and that the abolition of PHILSUCOM and the transfer, of assets
from PHILSUCOM to respondent SRA, are unconstitutional and
ineffective.

HELD 1: Petitioners' argument on unconstitutionality is too
impressionistic and needs to be more sharply focused.

RATIO 1: The termination of the life of a juridical entity does not by itself imply
the diminution or extinction of rights demandable against such juridical entity.

One who asserts a claim against a juridical entity has no constitutional
right to the perpetual existence of such entity. Juridical persons, whether
incorporated or not, whether owned by the government or the private sector, may
come to an end at one time or another for a variety of reasons, e.g., the
fulfillment or the abandonment of the business purposes for which a corporation
was set up. Thus, the Corporation Code provides for termination of corporate life,
the dissolution of the corporation, the winding up of its operations, the liquidation
of its assets, the payment of its obligations and distribution of any residual assets
to its stockholders.

HELD 2: Petitioners have a CoA against SRA to the extent that they are
able to prove lawful claims against Philsucom, which claims Philsucom is
or may be unable to satisfy, and to the extent respondent SRA did, or does,
in fact take over all or some of the assets of Philsucom.

Should the assets of Philsucom remaining in Philsucom. at the time
of its abolition not be adequate to pay for all lawful claims against
Philsucom, respondent SRA must be held liable for such claims against
Philsucom to the extent of the fair value of assets actually taken over by
the SRA from Philsucom, if any. To this extent, claimants against
Philsucom do have a right to follow Philsucom's assets in the hands of
SRA or any other agency for that matter.

RATIO 2: The right of those who have previously contracted with, or
otherwise acquired lawful claims against, Philsucom, to have the assets of
Philsucom applied to the satisfaction of those claims, is a substantive right and
not merely a procedural remedy. Section 13 cannot be read as permitting the
SRA to destroy that substantive right. We think that such an interpretation would
result in Section 13 of Executive Order No. 18 colliding with the non-impairment
of contracts clause of the Constitution insofar as contractual claims are
concerned, and with the due process clause insofar as the non-contractual
claims are concerned.

2) That the assets of the Philsucom must respond for payment of lawful
obligations of Philsucom, does not appear to require demonstration.

3) The assets which, in accordance with the second paragraph of Section 13
of Executive Order No. 18, may be taken over by the SRA, can thus be only net
or residual assets, assets remaining after payment of the valid and enforceable
liabilities of Philsucom has been made or been adequately provided for. We
believe, in other words, that Section 13 of Executive Order No. 18 is not to be
interpreted as authorizing respondent SRA to disable Philsucom from paying
Philsucom's demandable obligations by simply taking over Philsucom's assets
and immunizing them from legitimate claims against Philsucom.
PEPSI-COLA PRODUCTS PHILS INC. v. CA (2004)
(Sir: why was it dissolved?)
1) PEPSI-COLA PRODUCTS PHIL, INC. EMPLYEES AND WORKERS
UNION (PCEWU) is a duly registered labor union of the PEPSI-COLA
DISTRIBUTORS OF THE PHILIPPINES (PCDP). (none of the members seem to
be Muslims)

2) PCEWU filed against PCDP a Complaint for Payment of Overtime
Services (before Regional Arbitration Branch of DOLE CDO) alleging that there
are 8 recognized Muslim holidays in their areas of assignment.

3) PDCP maintained that:
a) there are only 5 Muslim holidays under the Muslim Code.
b) these overtimes pay should only be given to Muslims

4) EXECUTIVE LABOR ARBITER: for PCEWU

5) NLRC: since PCDP had been giving overtime pay during Muslim
holidays, it is estopped

But there are only 5 recognized Muslim holidays since the other
three are not even celebrated by Muslims.

6) PCDP filed an Motion for Partial Recon of NLRC decision. PCEWU also
filed a MR.

7) Pending the resolution of these motions, ownership of various PEPSI-
COLA bottling plants was transferred to Petitioner PEPSI-COLA PRODUCTS
PHIL. INC. (PCPPI).

8) NLRC directed the parties to file their respective pleadings concerning
PDCP’s existence as a corporate entity.

9) PDCP alleged that it had ceased to exist as a C on 24 July 1989 and that
it has winded up its corporate affairs in accordance with law. It is also now owned
by PCPPI.

10) NLRC: dismissed PCEWU complaint because the cessation and
dissolution of the corporate existence of the PDCP has rendered any judgment
against it incapable of execution and satisfaction.
11) PCEWU alleges that notwithstanding the dissolution of PDCP while the
complaint was pending resolution by the NLRC, PDCP continued to exist as a
corporation for a period of 3 years from the time when it would have been
dissolved conformably to Section 122 of the Code.

HELD: NLRC clearly erred in perceiving that, upon the petitioner’s
acquisition of the PDCP, the latter lost its corporate personality. Under
Section 122 of the Code, a corporation whose corporate existence is terminated
in any manner continues to be a body corporate for three years after its
dissolution for purposes of prosecuting and defending suits by and against it and
to enable it to settle and close its affairs, culminating in the disposition and
distribution of its remaining assets. It may, during the three-year term, appoint a
trustee or a receiver who may act beyond that period.

The termination of the life of a corporate entity does not by itself cause the
extinction or diminution of the rights and liabilities of such entity. If the three year
extended life has expired w/o a trustee or receiver having been expressly
designated by said C, w/n that period, the BOD (or trustees) itself, may be
permitted to so continue as “trustees” by legal implication to complete the
corporate liquidation.

NATIONAL ABACA v. Pore (1961)
(abated doctrine)

1) 24 November ’50- NATIONAL ABACA was abolished by EO of the
President of the Philippines

2) 14 November ’53- NATIONAL ABACA filed a complaint, against
defendant Pore, for the recovery of a sum of money advanced to her for the
purchase of hemp for the account of the former and for which she had failed to
account.

2) LC: for Pore

3) NATIONAL ABACA appealed.

4) Pore moved to dismiss the complaint upon the ground that:

NATIONAL ABACA has no legal capacity to sue since it had been
abolished by EO of the President of the Philippines, dated November 24,
1950.

5) NATIONAL ABACA objected to the MTD on the ground that:

pursuant to said EO, it "shall nevertheless be continued as a body
corporate for a period of 3 years from the effective date" of said EO (30
November 1950) "for the purpose of prosecuting and defending suits by
or against it and of enabling the Board of Liquidators"-thereby created"
gradually to settle and close its affairs", * * * and that this case was begun
on November 14, 1953, or before the expiration of the period
aforementioned.

ISSUE: WON an action, commenced w/n 3 years after the abolition of
plaintiff as a C, may be continued by the same after the expiration of said
period?

HELD: NO! The rule appears to be well settled, that, in the absence of
statutory provision to the contrary, pending actions by or against a C are abated
upon expiration of the period allowed by law for the liquidation of its affairs.

Amended Complaint admitted. Remanded to the LC.

Obviously, the complete loss of plaintiff's corporate existence after the
expiration of the period of three (3) years for the settlement of its affairs is what
impelled the President to create a Board of Liquidators, to continue the
management of such matters as may then be pending.

RATIO: Our Corporation Law contains no provision authorizing a
corporation, after three (3) years from the expiration of its lifetime, to continue in
its corporate name actions instituted by it within said period of three (3) years.

In fact, section 77 of said law provides that the corporation shall "be
continued as a body corporate for three (3) years after the time when it would have been ***
dissolved, for the purpose of prosecuting and defending suits by or against it ***, so that,
thereafter, it shall no longer enjoy corporate existence for such purpose. For this
reason, section 78 of the same law authorizes the corporation, "at any time during
said three years * * * to convey all of its property to trustees for the benefit of members,
stockholders, creditors and other interested" evidently for the purpose, among others, of
enabling said trustees to prosecute and defend suits by or against the
corporation begun before the expiration of said period.

CHINA BANKING CORP. v. MICHELIN & CIE (1933)
1) China Banking Corporation is a creditor of GEORGE O'FARREL & CIE.

2) GEORGE O'FARREL & CIE. (a domestic corporation organized in 1925)
had for a number of years prior to its dissolution been acting as the
representative of the appellee, M. Michelin & Cie., in the Philippine Islands for the
sale and distribution of the rubber tires for motor cars produced by the appellee
and broadly known as "Michelin tires".
3) These business relations between Michelin & Cie (appellee) and
GEORGE O'FARREL & CIE. (the C) lasted until May 1930.

4) When the appellee decided to discontinue them, and upon settlement of
accounts between both concerns it was found that GEORGE O'FARREL & CIE.
(the C) failed to account for a certain sum (P23,268) the sale price of a number of
rubber tires sold by it.

5) Gaston O'Farrell (personally) executed a mortgage in favor of the appellee
of a house belonging to Gaston O'Farrell and of a number of shares of stock of
GEORGE O'FARREL & CIE. (the C) by O'Farrell to guarantee payment of the
said amount to the appellee.

6) 9 July ’30- GEORGE O'FARREL & CIE. (the C) BOD filed a “Petition for
its Dissolution” and for the appointment of its Pres/GM Gaston O'Farrell, as
receiver and liquidator to wind up the affairs of the corporation.

7) According to the petition, GEORGE O'FARREL & CIE. (the C) had a
balance of P57,601 over and above its just debts and liabilities.

8) TC: decreed the dissolution of C and appointed Gaston O'Farrell as
receiver and liquidator to wind tip the affairs of the corporation.

9) Michelin & Cie. (the appellee) filed its claim against C for the aforesaid
balance of P21,968.83 with a prayer that the claim be allowed as a preferred one
against the corporation on the ground that the said amount represented the
proceeds from the sale of a number of rubber tires which were on deposit with
and sold by the corporation. The attorney for the corporation gave his conformity
to the petition by signing at the foot.

10) No notice have been given to anybody else neither of the claim nor of the
hearing.

11) LC order: Michelin & Cie. (the appellee) is a preferred claim against C
and the receiver should pay the amount thereof out of any funds in his
possession.

12) China Banking Corporation, filed a motion praying that:

a) the orders of the LC be set aside as null and void
b) that Michelin & Cie.’s (the appellee) claim be allowed as an
ordinary claim and
c) that the sum of P5,000 paid by the receiver to the appellee on
account of the latter's claim be refunded to the funds of the
corporation in liquidation for the benefit of the rest of the creditors.
HELD: Michelin & Cie.’s (appellee) claim is an ordinary claim.

Even admitting for the sake of argument that the merchandise which sale
price is the subject of appellee's claim was shipped to the corporation under a
commission agreement or any other agreement carrying the obligation to return
either the goods or its price, the fact is that the merchandise in the case at bar
was no longer in the corporation's possession nor could the appellee trace the
proceeds from its sale, and this is made manifest by the very fact of the written
agreement entered into between the appellee and the corporation whereby the
appellee accepted payment of the obligation by installments duly secured with a
mortgage of property to guarantee its payment. But such is not the case,
however, for the very agreement of May 31, 1930, mentioned in paragraph 5 of
appellee's claim, shows that the rubber tires consigned to the corporation were to
be sold by the latter "por orden, cuenta y riesgo de los Sres. M. Michelin & Cie."
and that the customers' accounts were opened "por orden, cuenta y riesgo de M.
Michelin & Cie.", and so much is this true that the uncollected accounts were
turned over to and received by the appellee, M. Michelin & Cie. Under such
circumstances the amount of appellee's claim appears to be in the nature of a
balance of a current account between the two firms more than anything else.

The record in this case shows that Gaston O'Farrell, the receiver herein,
besides being the principal promoter of the corporation and the holder of the
largest number of shares was elected president and general manager and that
he held the said offices ever since the organization of the corporation and his
conduct in executing a mortgage on his own house and giving a pledge on his
shares of stock and on those of Rosario Sanchez represented by him as attorney
in fact, in favor of the appellee to guarantee the latter's claim, lends itself to a
serious suspicion. The facts appearing of record leave no room for doubt that his
administration of the business of the corporation left much to be desired and that
he alone ought to be blamed for the shortage claimed by the appellee, but to
save himself from personal liability he made the corporation shoulder the burden
of the obligation in exchange for a simulated conveyance of his house to the
corporation. No sooner had the corporation become delinquent in the payment of
the obligation under the terms of the written agreement than he resorted to a
judicial proceeding of voluntary dissolution in an attempt to settle appellee's claim
and to free himself from all harm, but fearing that the alleged preference of
appellee's claim might be defeated, in collusion with the appellee they had the
claim allowed summarily as a preferred claim ignoring the rest of the world.
REPUBLIC OF THE PHILIPPINES v. MARSMAN DEV. CO. (
(BIR sued for taxes beyond the 3-year period of winding up)
1) 15 October ’53- Collector of Internal Revenue demanded the payment of
taxes (May ’50- September ‘53) from MARSMAN DEV. CO.

2) 23 April ’54- MARSMAN DEV. CO. extra-judicially dissolved

3) 13 September ’54- BIR sent another assessment to MARSMAN DEV.
CO. demanding payment of taxes

4) 8 November ’54- BIR sent another assessment to MARSMAN DEV. CO.
demanding payment of taxes

5) 8 September ’58- BIR filed a complaint for collection of taxes (of the 3
assessments) against MARSMAN DEV. CO.

6) Defense:

the present action is already barred under Section 77 of the Corporation
Law, Act No. 1459, as amended, which allows the corporate existence of a
corporation to continue only for three years after its dissolution, for the
purpose of presenting or defending suits by or against it and to settle and
close its affairs.

Inasmuch as the Marsman Development Co. was extra-judicially dissolved
on April 23, 1954, a fact admitted in the amended complaint, the filing of
both the original complaint on September 8, 1958 and the amended
complaint on August 26, 1956 was beyond the aforesaid three-year
period.

HELD: The stress given by appellants to the extinction of the corporate
and juridical personality as such of appellant corporation by virtue of its extra-
judicial dissolution which admittedly took place on April 23, 1954 is misdirected.

It is immaterial that the present action was filed after the expiration of
three years after April 23, 1954, for at the very least, and assuming that judicial
enforcement of taxes may not be initiated after said three years despite the fact
that the actual liquidation has not been terminated and the one in charge thereof
is still holding the assets of the corporation, obviously for the benefit of all the
creditors thereof, the assessment aforementioned, made within the three years,
definitely established the Government as a creditor of the corporation for whom
the liquidator is supposed to hold assets of the corporation. And since the suit at
bar is only for the collection of taxes finally assessed against the corporation
within the three years invoked by appellants, their fourth assignment of error
cannot be sustained.
RATIO: It is to be recalled that the assessments against appellant
corporation for deficiency taxes due for its operations since 1947 were made by
the Bureau of Internal Revenue on October 15, 1953, September 13, 1954 and
November 8, 1954, such that Company the first was before its dissolution and
the last two not later than six months after such dissolution.

Thus, in whatever way the matter may be viewed, the Government
became the creditor of the corporation before the completion of its dissolution by
the liquidation of its assets. Appellant F. II. Burgess, whom it chose as liquidator,
became in law the trustee of all its assets for the benefit of all persons
enumerated in Section 78, including its creditors, among whom is the
Government for the taxes herein involved.

To assume otherwise would render the extra-judicial dissolution illegal and
void, since, according to Section 62 of the Corporation Law, such kind of
dissolution is permitted only when it "does not affect the rights of any creditor
having a claim against the corporation."

Tan Tiong Bio v. CIR (1962)
(Sir: pre-emptive)
1) 15 August ’48- CENTRAL SYNDICATE (the corporation) liquidated
and distributed its assets immediately after the sale of the said surplus goods.

2) 4 January ’52- the Collector assessed against the syndicate
deficiency sales tax (GTA: after the 3-year period)

3) 23 September ’54- Collector instituted the present action

4) Petitioners argue

(d) that considering that the Collector instituted the present action on
September 23, 1954 when he filed his answer to the appeal of petitioners,
said action was already barred by prescription pursuant to Sections 77
and 78 of the Corporation Law which allows corporations to continue as a
body corporate only for three years from its dissolution; and

(e) that assuming that petitioners are liable to pay the tax, their liability is
not solidary, but only limited to the benefits derived by them from the
corporation.

ISSUE: W the Central Syndicate having already been dissolved because of
the expiration of its corporate existence, whether the sales tax in question can be
enforced against its successors-in-interest who are the present petitioners?
HELD: Petitioners could be held personally liable for the taxes in
question as successors-in-interest of the defunct corporation.

Considering that the Central Syndicate realized from the sale of the
surplus goods a net profit of P229,073.83, and that the sale of said goods was
the only transaction undertaken by said syndicate, there being no evidence to the
contrary, the conclusion is that said net profit remained intact and was distributed
among the stockholders when the corporation liquidated and distributed its
assets on August 15, 1948, immediately after the sale of the said surplus goods.
Petitioners are therefore the beneficiaries of the defunct corporation and as such
should be held liable to pay the taxes in question. However, there being no
express provision requiring the stockholders of the corporation to be solidarily
liable for its debts which liability must be express and cannot be presumed,
petitioners should be held to be liable for the tax in question only in proportion to
their shares in the distribution of the assets of the defunct corporation. The
decision of the trial court should be modified accordingly.

RATIO:

1) There is good authority to the effect that the creditor of a dissolved
corporation may follow its assets once they passed into the hands of the
stockholders.

2) Thus, recognized are the following rules in American jurisprudence:

The dissolution of a corporation does not extinguish the debts due or owing to it.

A creditor of a dissolved corporation may follow its assets, as in the nature of a
trust fund, into the hands of its stockholders.

An indebtedness of a corporation to the federal government for income and
excess profit taxes is not extinguished by the dissolution of the corporation.

And it has been stated, with reference to the effect of dissolution upon taxes due
from a corporation, "that the hands of the government cannot, of course, collect
taxes from a defunct corporation, it loses thereby none of its rights to assess
taxes which had been due from the corporation, and to collect them from
persons, who by reason of transactions with the corporation, hold property
against which the tax can be enforced and that the legal death of the corporation
no more prevents such action than would the physical death of an individual
prevent the government from assessing taxes against him and collecting them
from his administrator, who holds the property which the decedent had formerly
possessed" (Wonder Bakeries Co. vs. U. S. [1934] Ct. Cl, 6 F. Supp. 228).

Bearing in mind that our corporation law is of American origin, the foregoing
authorities have persuasive effect in considering similar cases in this jurisdiction.
This must have been taken into account when in G. R. No. L-8800 this Court said
that petitioners could be held personally liable for the taxes in question as
successors-in-interest of the defunct corporation.