GOLANGCO CONSTRUCTION CORPORATION v. PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK (now BANCO DE ORO UNIBANK, INC.)
(G.R. No. 269981, April 2, 2025, Second Division) (CASE DIGEST)
1. Facts
William Golangco Construction Corporation (WGCC) and Philippine Commercial and International Bank (PCIB, now BDO Unibank, Inc.) entered into a contract for a construction project. A defect arose in the building’s exterior walls in 1993, requiring PCIB to hire another contractor for repairs costing PHP 11,665,000.00. PCIB sought arbitration before the Construction Industry Arbitration Commission (CIAC) for reimbursement. The CIAC ultimately awarded WGCC a counterclaim of PHP 5,777,157.84. WGCC subsequently dissolved its corporate existence on April 6, 2013, upon the expiration of its 50-year corporate term, and liquidated its assets, paying its 13 stockholders. After a previous Supreme Court decision affirmed the award in favor of WGCC, the CIAC ordered BDO to pay PHP 8,630,646.46 to the remaining stockholders of WGCC and/or their successors-in-interest. WGCC filed the present petition, arguing that the CIAC failed to correctly appreciate the directive concerning the compensatory and legal interest computation and challenging the CIAC’s order to pay the remaining stockholders directly. BDO sought to dismiss the Petition, arguing that WGCC’s corporate term expired and also questioned the authority of the signatory of the Verification and Certification Against Forum Shopping.
2. Issues
The Supreme Court resolved the following legal questions:
– Whether the Petition should be dismissed outright for failure to attach the proper Verification and Certification Against Forum Shopping.
– Whether the Construction Industry Arbitration Commission (CIAC) has authority to determine the rightful recipients of a judgment award of a dissolved corporation.
– Whether the computation of compensatory interest and legal interest due to petitioner William Golangco Construction Corporation is proper.
3. Ruling
The Supreme Court ruled:
“ACCORDINGLY, the Petition is GRANTED. The August 11, 2023 Order and October 19, 2023 Omnibus Order of the Construction Industry Arbitration Commission in CIAC No. 07-95 are AFFIRMED with MODIFICATION. Respondent Philippine Commercial and International Bank, now Banco De Oro Unibank, Inc. (BDO), Inc., is ORDERED TO PAY petitioner William Golangco Construction Corporation the following: a. PHP 8,630,646.46 less the partial payments made by BDO to the following individuals: [listing of individuals and amounts]… b. Interest on the total value of the remaining principal amount in paragraph (a) at the rate of 12% per annum from June 21, 1996 until June 30, 2013, and 6% per annum from July 1, 2013 until full payment. The total monetary awards shall, in turn, earn 6% interest per annum from the finality of this Decision until full payment.”
Regarding the procedural challenge, the Court ruled that “the alleged procedural infirmities in the Petition do not warrant the outright dismissal of the case”.
4. Essential Elements of Jurisprudence
The controlling doctrines and legal principles established or reiterated by the Court are:
Corporate Personality During Winding Up (Section 139, Revised Corporation Code): A corporation that has dissolved, such as by expiration of its corporate term, is prohibited from continuing its business but retains a limited personality to settle and close its affairs.
Continuation of Pending Suits Beyond the Three-Year Period: A corporation that has a pending action which cannot be terminated within the three-year period after its dissolution is authorized under Section 78 (of the former Corporation Code, now Section 139 of the Revised Corporation Code) to convey all its property to trustees to enable it to prosecute and defend suits. If no formal trustee is appointed, those who prosecuted the action and represented the corporation’s interest may be considered de facto trustees. This ensures that the stockholders and successors-in-interest do not lose the remedy to enforce corporate rights.
CIAC Executory Authority Over Dissolved Corporations: The Construction Industry Arbitration Commission (CIAC) possesses broad executory powers, allowing it to issue orders necessary to relate to and carry out the award. This includes the authority to determine the entity or individuals to whom the award must be given. In the case of a dissolved corporation, the CIAC may correctly direct payment to its stockholders and successors-in-interest.
Computation of Legal Interest (Article 2209, Civil Code): Pursuant to Article 2209 of the Civil Code, the default legal interest for obligations involving the payment of money, where there is no stipulation, is 6% per annum.
Applicable Interest Rates: Following prevailing jurisprudence (Lara’s Gifts & Decors), when compensatory interest is awarded and no specific rate is stipulated, the prevailing legal interest rate prescribed by the Bangko Sentral ng Pilipinas (BSP) shall apply from the time of judicial demand until full payment. Based on this rule, the interest rates applied historically were 12% per annum (from June 21, 1996, to June 30, 2013) and 6% per annum (from July 1, 2013, until full payment).
5. Sample Q&A
Question: Construction firm A (the Creditor) obtained a favorable judgment against Bank B (the Debtor) from the CIAC in 1996. Firm A dissolved in 2015 after the expiration of its corporate term, long before the judgment was fully executed. Bank B refuses to pay the remaining award directly to Firm A’s identified stockholders/successors-in-interest, arguing that (a) the three-year winding-up period has expired; and (b) the CIAC lacks jurisdiction to identify individual stockholders as proper payees. Is Bank B correct? In computing the interest, assuming no rate was stipulated, what are the applicable rates and starting date? (Cite provisions where applicable.)
Answer:
Bank B is incorrect on both counts.
Three-Year Winding-Up Period: The three-year period specified in Section 122 of the Corporation Code (now Section 139 of the Revised Corporation Code) for winding up is not absolute. A corporation may continue its limited legal personality beyond this period for the purpose of concluding pending litigation. Since the judgment award originated from a dispute that commenced before Firm A’s dissolution, the subsequent enforcement of that judgment is considered part of the necessary winding-up process. Furthermore, the stockholders or those prosecuting the claim can be considered de facto trustees authorized to enforce the right, preventing the stockholders from losing their proprietary rights.
CIAC Jurisdiction: The CIAC has broad executory powers that necessarily include the authority to determine the individuals or entities to whom a money award must be distributed. When the winning party is a dissolved corporation, the CIAC has the authority to correctly identify and order payment to the stockholders and successors-in-interest who represent the continuing interest in the judgment award.
Interest Computation: Since no conventional interest rate was stipulated, the obligation to pay money in case of default requires the application of compensatory interest under Article 2209 of the Civil Code. Following prevailing jurisprudence, the interest should be computed from the time of judicial demand (e.g., June 21, 1996) until full payment, applying the prevailing legal interest rates: 12% per annum from the date of judicial demand until June 30, 2013, and 6% per annum from July 1, 2013, until the final judgment award is fully satisfied.
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