Title
Clemente vs. Court of Appeals
Case
G.R. No. 82407
Decision Date
Mar 27, 1995
Petitioners, heirs of Sociedad stockholders, claimed ownership of disputed land; courts ruled Sociedad, as a de facto corporation, owned the property, requiring proper liquidation for asset distribution. Petitioners failed to prove ownership.

Case Summary (G.R. No. 206598)

Procedural Posture and Reliefs Sought

Petitioners filed Civil Case No. 467‑83‑C seeking (a) declaration that they are owners of the parcel in proportion to their respective stockholdings; (b) distribution of rentals and other fruits proportionate to ownership; and (c) other just and equitable reliefs. Defendants answered asserting ownership by acquisitive prescription but failed to present evidence at trial. The trial court dismissed the complaint and counterclaim. The Court of Appeals affirmed. Petitioners appealed to the Supreme Court.

Facts Adduced at Trial

The evidence accepted by the trial court established: (1) the existence of an entity termed “Sociedad Popular Calambena,” believed to have functioned as a sociedad anonima from approximately 1909 to September 24, 1932, engaged in cockpit operations; (2) the sociedad acquired the disputed parcel by installment beginning June 3, 1911, with a final patent (No. 38994) allegedly issued in the name of the sociedad on August 5, 1936; (3) official tax assessment records declared the lot in the name of Sociedad Popular Calambena; and (4) two persons, Mariano Elepano and Pablo Clemente, were shown to have been original stockholders, with documentary evidence of subscriptions and later issuance or distribution of stock certificates to heirs of Pablo Clemente.

Plaintiffs’ Theory of Ownership

Petitioners asserted ownership by virtue of succession to stock certificates allegedly issued to their predecessors (Mariano Elepano and Pablo Clemente) in the Sociedad Popular Calambena. They contended that, as successors of the only known stockholders, they were entitled to ownership of the corporate asset (Lot No. 148‑New) in proportion to their stockholdings.

Defendants’ Position and Trial Conduct

The private respondents asserted ownership by acquisitive prescription. However, the defendants did not present any evidence during the hearings despite multiple opportunities; the trial court thus decided based on plaintiffs’ evidence only. The absence of competing proof influenced credibility and burden assessments.

Trial Court Findings and Legal Reasoning

The trial court found that while the sociedad had acquired the parcel and the plaintiffs’ predecessors were stockholders, petitioners failed to prove that the corporate asset had been transferred to them. The court emphasized the principle that corporate property is distinct from the property of individual stockholders and that, absent corporate liquidation or other legally effective transfer, the corporation — not the stockholders — remains the proper owner. The court also noted absence of proof that the sociedad asserted ownership or paid taxes, suggesting neglect and casting doubt on possession and assertion of rights by the corporation. Applying the general evidentiary rule that a party asserting a right bears the burden of proving it (citing Rule 131, Sec. 5(a), Rules of Court), the trial court dismissed the complaint.

Court of Appeals’ Rationale and Affirmation

The Court of Appeals agreed with the trial court. It accepted that the sociedad was the legal owner in light of documentary evidence (installment purchase records and tax declaration) and noted the absence of patent cancellation or muniment of title transferring ownership to petitioners. The appellate court reiterated corporate separateness — a corporation’s existence and assets are distinct from stockholders’ property — and held that the parents’ status as stockholders, or even the cessation of the sociedad’s operations, did not, ipso facto, vest title to corporate assets in petitioners. The Court of Appeals also reiterated the plaintiff’s burden in a reivindicatory action to prove ownership by more than a mere preponderance of evidence and found petitioners’ showing insufficient.

Legal Issues Presented

The central legal issues are: (1) whether petitioners established ownership of the corporate asset (Lot No. 148‑New) by proof of succession to stock certificates of the sociedad’s stockholders; and (2) whether, absent evidence of corporate dissolution and liquidation, stockholder succession confers title in kind to corporate property. Ancillary issues include the evidentiary burden in reinvindicatory actions and the proper procedural mechanisms for resolving rights to assets of a defunct corporation.

Applicable Law and Authorities

Applicable constitutional backdrop: 1987 Philippine Constitution (case decided in 1995). Statutory and procedural authorities invoked by the courts include the Corporation Code provisions on dissolution, liquidation and winding up (Secs. 117–122) and Rule 131, Sec. 5(a) of the Rules of Court governing presumptions and burden of proof. The courts cited jurisprudence underscoring corporate separateness (Yutive Sons Hardware Co. v. Court of Tax Appeals) and authorities on the plaintiff’s burden in a reivindicatory action (Vegas v. Vegas; Villaruz v. Delfin; Perante v. Malinao). The Supreme Court’s prior decisions on corporate liquidation and the post‑dissolution three‑year continuance for winding up (and the Gelano decision permitting implied trusteeship by directors to complete liquidation) were also referenced (Gelano v. Court of Appeals; Gonzales v. Sugar Regulatory Administration).

Supreme Court’s Analysis and Holding

The Supreme Court affirmed the lower courts. It found petitioners’ evidence insufficient to establish firm title over the corporate parcel. The Court emphasized that (a) corporate property remains the property of the corporation unless legally transferred; (b) the mere fact that certain individuals were stockholders does not automatically vest title in their successors when no mode of transfer or liquidation appears; and (c) where a corporation has become defunct, interested parties must pursue formal mechanisms for dissolving, liquidating, or winding up the corporation’s affairs pursuant to the Corporation Code and before the Securities and Exchange Commission. The Court reiterated available statutory procedures: dissolution upon expiration of term, dissolution by SEC after verified complaint for continuous inactivity, a three‑year continuation to settle affairs after dissolution, appointment of trustees or receivers to liquidate, and the possibility

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