G.R. No. 127410 - Tiu vs. Court of Appeals

Private respondent Insular Sawmill, Inc. was incorporated on September 17, 1945, with a corporate life of fifty years, set to expire on September 17, 1995. Its business was general lumber and sawmill operations.
The corporation leased from petitioner-wife Guillermina Mendoza de Gelano a parcel of paraphernal property located at the corner of Canonigo and Otis, Paco, Manila, at a rental of ₱1,200.00 per month.
During the lease, petitioner-husband Carlos Gelano was known to the corporation’s officers and directors. He received cash advances on account of rental payments from Insular Sawmill.

From November 19, 1947 to December 26, 1950, Carlos Gelano obtained cash advances totaling ₱25,950.00 from the corporation, to be deducted from the monthly rentals.
Of this amount, only ₱5,950.00 was paid, leaving ₱20,000.00 unpaid, despite repeated demands.
Guillermina Gelano refused to pay this amount, asserting it was for her husband’s personal account, received without her knowledge or consent and did not benefit the conjugal partnership.

Between May 4, 1948 to September 11, 1949, petitioners made credit purchases of lumber materials totaling ₱1,120.46 for repairing and improving their residence.
A partial payment of ₱91.00 was made on November 9, 1949, and taking into account a cash discount of ₱83.00, the remaining balance was ₱946.46, which was unpaid.

On July 14, 1952, Insular Sawmill, through Joseph Tan Yoc Su, executed a joint and several promissory note with Carlos Gelano for ₱8,000.00, payable in 60 days, to help petitioners renew previous bank loans.
Upon non-payment by Carlos Gelano, the bank collected ₱9,106.00 from the corporation’s account.
Carlos Gelano paid ₱5,000.00 to the corporation, with ₱4,106.00 remaining unpaid. Guillermina Gelano again refused to pay due to lack of knowledge of the accommodation.

On May 29, 1959, Insular Sawmill filed a complaint for collection against the petitioners before the Court of First Instance of Manila.
Trial proceeded; during the submission of memorandum, original counsel retired and a new counsel took over.
Meanwhile, Insular Sawmill amended its Articles of Incorporation, shortening its corporate life to December 31, 1960, a fact not notified to the trial court nor was substitution of party effected.

On November 20, 1964, almost four years after dissolution, the trial court ruled in favor of Insular Sawmill, ordering Carlos Gelano and petitioners to pay various sums with interests, including attorney’s fees, and dismissed the defendants’ counterclaims.
Both parties appealed. On August 23, 1973, the Court of Appeals modified the decision, increasing certain amounts and holding the conjugal partnership of the spouses jointly and severally liable.
Petitioners learned of the corporation’s dissolution in 1960 only after receiving the appellate decision, and filed a motion to dismiss on grounds that a dissolved corporation cannot maintain or defend suits without proper winding up and appointment of trustees or assignees.

On October 28, 1973, former directors of the corporation filed a Petition for Receivership before the trial court, still pending.
On July 5, 1974, the Court of Appeals denied petitioners’ motion to dismiss and/or reconsider the case.
Petitioners then filed the present petition for review, raising multiple errors mainly concerning the authority of a dissolved corporation to maintain suit beyond the winding up period and the liability of petitioners for the contracted obligations.

Whether a corporation whose corporate life has expired and which has dissolved can continue to prosecute and defend suits after dissolution and beyond the three-year winding up period without appointing trustees or assignees.
Whether pending litigation filed by or against a dissolved corporation is deemed abated if not properly continued within the statutory period.
Whether the failure to notify the trial court of the corporation’s dissolution constitutes abandonment of the cause of action, resulting in abatement of the suit.
Whether the obligations contracted by petitioner Carlos Gelano were his personal obligations or liabilities of the conjugal partnership, and consequently, whether his spouse Guillermina Mendoza de Gelano is jointly liable.