G.R. No. L-16779; August 16, 1961
NATIONAL ABACA AND OTHER FIBERS CORPORATION, plaintiff-appellant, vs. APOLONIA PORE, defendant-appellee.

FACTS

The National Abaca and Other Fibers Corporation (NAFCO) filed a collection suit against Apolonia Pore in the Municipal Court of Tacloban on November 14, 1953. The municipal court rendered a partial judgment in favor of NAFCO. NAFCO appealed to the Court of First Instance (CFI). In the CFI, Pore moved to dismiss the complaint on the ground that NAFCO lacked legal capacity to sue, having been abolished by Executive Order No. 372 dated November 24, 1950. NAFCO opposed, citing a provision in the same EO allowing it to continue as a body corporate for three years from November 30, 1950, precisely to prosecute and defend suits.
The CFI, in an order dated August 1, 1956, directed NAFCO to amend its complaint within ten days to include the Board of Liquidators as a co-party plaintiff, warning of dismissal otherwise. The court later found that the amendment was not filed and dismissed the case on September 1, 1956. NAFCO moved for reconsideration, explaining that its counsel had prepared the amended complaint and given it to the mailing clerk for filing on August 24, 1956. While a copy was sent to the defendant’s counsel, the original for the court was lost due to the clerk’s excusable negligence.

ISSUE

The issues are: (1) Whether an action commenced within three years after a corporation’s abolition may be continued by the corporation itself after that period expires; and (2) Whether the lower court should have granted NAFCO’s motion for reconsideration of the dismissal order.

RULING

On the first issue, the Supreme Court ruled negatively. Under Section 77 of the Corporation Law, a dissolved corporation continues to exist for only three years for the purpose of prosecuting and defending suits. After this period, it loses its corporate existence entirely. Since NAFCO was abolished effective November 30, 1950, its three-year corporate lifespan for liquidation purposes ended on November 29, 1953. The suit was filed on November 14, 1953, within the period. However, by the time the CFI issued its order in August 1956, the three-year period had long expired. Consequently, NAFCO could no longer sue in its own name, necessitating the substitution by the Board of Liquidators, which was created to continue the liquidation.
On the second issue, the Court ruled that the CFI erred in denying the motion for reconsideration. The validity of NAFCO’s underlying claim was supported by the municipal court’s partial judgment. The record convincingly showed that the failure to file the amended complaint was due to the excusable negligence of the mailing clerk, as evidenced by the entry in the outgoing correspondence book and the affidavit submitted. The clerk had attempted to comply, and a copy was successfully sent to the opposing counsel. Under the circumstances, the dismissal was too severe a penalty for what was a procedural lapse attributable to a subordinate employee, not to the party itself or its counsel. The interests of substantial justice warranted allowing the amendment. The orders of dismissal were reversed, and the case was remanded for further proceedings.