Enrique purchased a subdivision unit from Everstone Realty Corporation. He fully paid the purchase price after entering into a loan as well as…

Explanation

The Property Registration Decree requires the owner or developer to deliver the title to the buyer upon full payment of the lot or unit. If there is an outstanding mortgage on the property at the time of issuance of the title, the owner or developer must redeem the mortgage or the corresponding portion within six months from issuance so that the title can be secured and delivered to the buyer. This means that the owner or developer has the obligation to clear any mortgage encumbrance before the title can be released to the buyer.

Under the Revised Corporation Code, the dissolution of a corporation does not extinguish its rights or liabilities. Section 184 explicitly states that no right or remedy in favor of or against a corporation or its officers shall be removed or impaired by the dissolution of the corporation. Furthermore, Section 139 provides that a dissolved corporation continues to exist as a body corporate for three years after dissolution for the purpose of settling and closing its affairs, including prosecuting and defending suits and disposing of property. This means that the dissolved corporations involved—Everstone Realty Corporation, Money Bank, and Vault Bank—retain their corporate existence for winding up their affairs, including obligations related to the subdivision unit.

The case law emphasizes that corporate officers, such as Jan as President of Vault Bank, are generally not personally liable for corporate obligations unless there is gross negligence, bad faith, or unlawful acts. The piercing of the corporate veil is disfavored and only allowed when the corporate entity is used to perpetrate fraud or injustice. Without evidence of such misconduct, Jan cannot be held personally liable for the release of the title or damages.

Application to the facts

Enrique fully paid the purchase price for the subdivision unit from Everstone Realty Corporation, but the title has not been released. The unit was mortgaged to Money Bank, which assigned the loan and mortgage to Vault Bank. All three corporations have been dissolved. Under Section 25 of the Property Registration Decree, Everstone Realty Corporation, as the owner or developer, was required to redeem the mortgage within six months after issuance of the title to Enrique to enable the release of the title. Since the mortgage was assigned to Vault Bank, the obligation to redeem the mortgage and release the title would fall on Vault Bank.

However, all three corporations are dissolved. Under Section 139 of the Revised Corporation Code, these corporations continue to exist for three years after dissolution to settle and close their affairs, including disposing of property and prosecuting or defending suits. Therefore, the corporations still have the capacity to act on their obligations related to the subdivision unit.

Enrique sued Jan, the President of Vault Bank, personally for the release of the title and damages. Based on the case law, corporate officers are not personally liable for corporate obligations unless there is gross negligence or bad faith. There is no indication that Jan acted with gross negligence or bad faith. The corporate veil cannot be pierced merely because the corporations are dissolved. Thus, Jan cannot be held personally liable for the release of the title or damages.

Enrique's proper recourse is against the dissolved corporations themselves, which still exist for winding up their affairs. If the corporations fail to act, Enrique may seek remedies through the proper legal channels, such as filing a case against the corporations or their trustees or assignees if any have been appointed to manage the winding up.