Appeal Ruling

The Eighth First Instance Civil Court of Guatemala, in a ruling dated March 28, 2023, dismissed the extinctive prescription action filed by Reproductores Avícolas, S.A. (successor by merger of Escobio, S.A.) against Lisa, S.A. The plaintiff sought to declare prescribed the dividend payment obligation arising from the Annual Ordinary General Shareholders' Assembly of May 31, 2012. The court concluded that the plaintiff failed to prove the enforceability of the obligation or the starting date for computing the five-year prescription period, because it did not offer the company's articles of incorporation, which govern dividend payment conditions, as evidence. The ruling was electronically notified to Lisa on March 12, 2024.

Case Background

Reproductores Avícolas, S.A. filed the ordinary civil action for extinctive prescription on February 23, 2018, and the case was assigned to the Eighth First Instance Civil Court (Expediente 01044-2018-00272). The lawsuit was originally brought by Escobio, S.A., which was subsequently absorbed by Reproductores Avícolas through a merger.

Lisa, S.A. filed its answer and peremptory exceptions on September 2, 2019. The evidentiary period opened on September 4, 2019 for thirty days. The hearing took place on February 9, 2023. More than five years elapsed between the filing of the complaint and the issuance of the sentence.

Plaintiff's Claims

Reproductores Avícolas sought a declaration that the dividend payment obligation to Lisa, S.A., arising from the May 31, 2012 shareholders' assembly resolution distributing profits, had prescribed. The plaintiff argued that dividends were available to shareholders at the company's registered office the day after the assembly, requiring only each shareholder's request for disbursement, and that Lisa failed to collect within the five-year period established by Article 1508 of the Civil Code.

Defense of Lisa, S.A.

Lisa filed a negative answer and raised two peremptory exceptions.

Non-enforceability of the obligation. Lisa argued that the dividend obligation was conditional, not unconditional. The May 31, 2012 assembly resolution approved the distribution of profits but did not specify the amount per share, the form of collection, or the place of payment. Clause Sixteen of the articles of incorporation (public deed number 59, dated June 23, 1983, authorized by Notary Arturo Larraondo Samayoa) grants the Board of Directors (Consejo de Administración) the authority to determine the date and form of payment of decreed dividends. Until the Board fulfilled that condition, the obligation was not enforceable and the prescription period could not begin to run.

Inapplicability of prescription due to interruption. Lisa invoked two grounds for interruption:

• Lisa's own actions as creditor. Lisa filed a summary action opposing its exclusion as shareholder (Expediente 01044-2011-00108), served on the plaintiff on June 7, 2011, in which Lisa noted that the exclusion resolution failed to address retained dividends owed to it. Lisa also made an extrajudicial demand for payment through a notarial act dated February 28, 2017, authorized by Notary Emilia Carolina Cabrera Rosito, demanding payment of owed dividends. Lisa argued that the plaintiff never responded to that demand, contradicting its assertion that funds were available for collection.

• Actions by the plaintiff and the Avícola Group as grounds for interruption. Lisa identified multiple proceedings brought by Avícola Villalobos Group entities that resulted in embargoes on Lisa's dividends: (1) ordinary proceeding C2-99-9321, brought by Konrad Losen Mass; (2) ordinary proceeding 01046-2009-00357, brought by Avícola Villalobos, S.A.; (3) commercial summary proceeding 01163-2012-00178, brought by Avícola Villalobos, S.A.; (4) ordinary proceeding 01045-2012-00210, brought by Compañía Alimenticia de Centroamérica, S.A.; (5) ordinary proceeding 01045-2012-00242, brought by Industria Forrajera de Mazatenango, S.A.; (6) ordinary proceeding 01044-2012-00279, brought by Reproductores Avícolas, S.A.; and (7) precautionary embargo 01044-2011-00613, brought by Industria Avícola del Sur, S.A. Lisa argued that all dividends within the Avícola Villalobos Group were under judicial embargo at the time the prescription action was filed, and that the decreed dividends had left the company's patrimony to form part of the embargoed estate under the control of judicial interventores.

Lisa characterized the prescription action as a fraudulent maneuver: the same entity that obtained or benefited from the embargoes on Lisa's dividends now sought to have those dividends declared prescribed for non-collection, when it was precisely the existence of the embargoes that prevented payment.

Court's Analysis

On Lisa's peremptory exceptions. The court determined that Lisa filed its evidence late (extemporáneamente), and it was therefore rejected and not admitted for consideration. Without evidence to support its exceptions, the court could not reach the merits of Lisa's defenses. Applying Article 126 of the Code of Civil and Commercial Procedure, which places on each party the burden of proving its factual propositions, the exceptions failed.

On the prescription claim. Even with Lisa's exceptions denied on procedural grounds, the court analyzed the merits of the plaintiff's claim based on the evidence in the record. The court reasoned that extinctive prescription requires three elements: the passage of the statutory period, inaction by the entitled party, and satisfaction of the conditions to which the right is subject.

The analysis centered on enforceability (exigibilidad). The court noted that Article 1508 of the Civil Code computes prescription "from when the obligation could be demanded" and that, under Article 15 of the Commercial Code, commercial companies are governed by the provisions of their articles of incorporation. The court observed that the excerpt from the May 31, 2012 assembly minutes did not indicate when the company became obligated to pay or when the shareholder became entitled to receive payment, which must be determined with precision because the date of enforceability is also the starting point of the prescription computation.

"La noción de exigibilidad de la obligación a la que alude el artículo 1508 del Código Civil (...) no está claramente definida en el caso de estudio; y si bien es cierto que la escritura constitutiva de la sociedad que demanda, se encuentra incorporada en autos, también lo es que la misma no se aportó como medio de prueba lo que imposibilita a la juzgadora conocer del contenido de la misma y por ende no puede valorarla" (Page 30)

The court evaluated each of the plaintiff's evidentiary submissions:

• The certification from the President of the Board of Directors containing the relevant portion of the assembly minutes was given probative value but did not establish when the obligation became enforceable.
• The accounting certification from Certified Public Accountant Mónica Griselda Mendizábal Sinay, which recorded an account payable as of June 1, 2012, was insufficient because it did not identify Lisa, S.A. as the beneficiary of that account.
• The certification confirming that Lisa had not filed any lawsuit challenging the distribution agreement was accepted as authentic but did not cure the central evidentiary deficiency.

The court concluded that the plaintiff failed to reliably establish the facts of its complaint, particularly the date of enforceability of the obligation, without which the prescription period could not be computed.

Ruling

• Lisa's negative answer and peremptory exceptions (non-enforceability of the obligation and inapplicability of prescription due to interruption) were denied for lack of evidentiary support
• The extinctive prescription action filed by Reproductores Avícolas, S.A. against Lisa, S.A. was denied, as the plaintiff failed to establish the enforceability of the obligation or the starting point of the prescription period
• No costs were awarded to either party

Legal Basis

• Articles 12, 28, and 204 of the Constitution of the Republic of Guatemala — due process guarantees, right of petition, and judicial authority
• Articles 1501, 1507, and 1508 of the Civil Code — extinctive prescription and computation of the period from the date of enforceability
• Articles 15 and 105 of the Commercial Code of Guatemala — applicable law for commercial companies and shareholder rights, including the right to participate in distribution of profits
• Articles 126, 572, 573, and 574 of the Code of Civil and Commercial Procedure — burden of proof and costs

Signatories

• Licda. Gloria Aracely Rosales Reynoso de Vásquez, Judge
• Lilian Rosana Balcárcel García, Clerk

Subsequent Proceedings

Reproductores Avícolas, S.A. appealed the ruling to the Fifth Civil and Commercial Court of Appeals, which in its ruling of June 26, 2024 reversed the first-instance decision, declared the dividend obligation prescribed, and ordered Lisa to pay costs. Lisa, S.A. filed a cassation appeal before the Supreme Court of Justice, which remains pending.