G.R. No. L-71837 July 26, 1988
CHUNG KA BIO, WELLINGTON CHUNG, CHUNG SIONG PEK, VICTORIANO CHUNG, and MANUEL CHUNG TONG OH, petitioners, vs. INTERMEDIATE APPELLATE COURT (2nd Special Cases Division), SECURITIES and EXCHANGE COMMISSION EN BANC, HON. ANTONIO R. MANABAT, HON. JAMES K. ABUGAN, HON. ANTERO F.L. VILLAFLOR, JR., HON. SIXTO T.J. DE GUZMAN, JR., ALFREDO CHING, CHING TAN, CHIONG TIONG TAY, CHUNG KIAT HUA, CHENG LU KUN, EMILIO TAÑEDO, ROBERTO G. CENON and PHILIPPINE BLOOMING MILLS COMPANY, INC., respondents.

FACTS

The Philippine Blooming Mills Company, Inc. (old PBM) was incorporated in 1952 for a 25-year term that expired on January 19, 1977. On May 14, 1977, before the old PBM’s term ended, its board of directors executed a deed assigning all its assets and liabilities to Chung Siong Pek as treasurer of a new PBM being reincorporated. The new PBM received its certificate of incorporation on June 14, 1977. In 1981, petitioners, stockholders of the old PBM, filed a petition with the SEC for liquidation (but not dissolution) of both corporations. They argued the old PBM became non-existent for failure to extend its corporate life, and the new PBM was ipso facto dissolved for non-use of its charter and failure to operate within two years from incorporation.
The SEC initially dismissed the petition but reinstated it on appeal, ordering an accounting of the old PBM’s assets. This order was appealed to the Intermediate Appellate Court (IAC). Separately, Alfredo Ching, a director of the old PBM, filed a certiorari petition with the IAC, arguing the SEC gravely erred in not dismissing the petition as it amounted to a quo warranto proceeding only the state could institute. Furthermore, the new PBM and Alfredo Ching filed a petition for suspension of payments with the SEC, which petitioners opposed for lack of jurisdiction over an individual petitioner. These cases were consolidated before the IAC.

ISSUE

The primary issues are: (1) whether the board of directors of a corporation whose term is about to expire has the inherent power, without express stockholder consent, to convey all corporate assets to a new corporation; (2) whether the new corporation is accountable for those assets to non-consenting stockholders; (3) whether the new corporation is deemed dissolved for non-user under the Corporation Code; (4) whether a quo warranto proceeding is necessary to dissolve a corporation already “deemed dissolved”; and (5) whether the SEC has jurisdiction over a petition for suspension of payments filed by an individual.

RULING

The Supreme Court affirmed the IAC decision with modification. On the first two issues, the Court ruled that the board’s act of assigning assets before the corporate term’s expiration was within its managerial powers. The old PBM’s term had not yet expired when the deed was executed; thus, the board could validly act. The conveyance was not a winding-up activity under Section 77 of the old Corporation Law, which applies only after dissolution. Since the act was done while the corporation was still existing, the requirement for stockholder approval under Section 28-1/2 did not apply. Consequently, the new PBM is not accountable to the petitioners for the assets.
On the third issue, the Court found the new PBM