Eleventh Civil Court upholds defective-complaint objection, rejects ordinary dividend prescription suit
Jan 20 2020
11th Civil Court
The Eleventh First Instance Civil Court of Guatemala ruled on January 20, 2020, on five preliminary objections filed by Lisa, S.A. against the ordinary prescription action brought by Inversiones Empresariales, S.A. The plaintiff sought a judicial declaration that Lisa's right to collect dividends decreed at a general shareholders' assembly had been extinguished by prescription. The court upheld Lisa's defective-complaint objection and rejected the ordinary lawsuit, defeating Inversiones Empresariales' attempt to extinguish Lisa's dividend rights through prescription.
Inversiones Empresariales, S.A. filed an ordinary action against Lisa, S.A., holder of twenty-five percent of the company's issued shares, claiming that Lisa's right to collect dividends decreed at the annual ordinary general shareholders' assembly of May 2, 2012, including accumulated profits from the fiscal year January 1 to December 31, 2011, had prescribed because more than five years elapsed without Lisa exercising collection. The complaint did not specify the amount of the obligation it sought to declare prescribed.
Lisa, S.A., through its special judicial representative Carmen Ileana Peralta Marroquín, filed five preliminary objections: lack of jurisdiction, defective complaint, lack of legal standing in the plaintiff, failure to comply with a condition to which the right asserted is subject, and failure to comply with the term to which the right asserted is subject.
Inversiones Empresariales argued that once the shareholders' assembly approved the distribution of profits, the obligation to pay dividends arose, and that Lisa allowed the five-year statutory period under Article 1508 of the Civil Code to elapse without exercising its right to collect, causing the obligation to prescribe.
Lack of jurisdiction. Lisa argued that as a Panamanian entity without domicile in Guatemala, the court lacked territorial jurisdiction under Article 12 of the Civil and Commercial Procedural Code.
Defective complaint. Lisa argued the complaint failed to meet the requirements of Articles 106, 107, and 109 of the Civil and Commercial Procedural Code on three grounds: (a) it did not specify the amount of the obligation whose prescription was sought; (b) it did not attach the articles of incorporation of Inversiones Empresariales or the foundational documents establishing the validity of the assembly; and (c) clause twenty-five of Inversiones Empresariales' articles of incorporation provides that disputes between the company and its shareholders must be resolved through summary proceedings, not ordinary proceedings.
Lack of legal standing. Lisa argued that the plaintiff's representative's mandate required prior written authorization from the board of directors for acts of disposition, and that an action to extinguish dividend rights by prescription constitutes an act of disposition that suppresses shareholder rights, a power reserved to the general shareholders' assembly under Article 137 of the Commercial Code.
Failure to comply with condition. Lisa argued that Inversiones Empresariales had not complied with the obligation to convert bearer shares to registered shares under the Asset Forfeiture Law (Decree 55-2010), nor had it delivered Lisa's shares despite multiple demands, meaning the prescription period had not begun to run.
Failure to comply with term. Lisa argued that prescription had been interrupted on two grounds. First, Inversiones Empresariales resolved in 2011 to exclude Lisa as a shareholder and instructed the administration to liquidate Lisa's corresponding share, expressly recognizing Lisa's rights without alleging prescription, triggering the recognition provision of Article 1506(2) of the Civil Code. Second, precautionary embargoes remained in force on Lisa's dividends, obtained by Inversiones Empresariales itself (in the ordinary damages action, File 01041-2012-00224) and by other Avícola Group entities, preventing Lisa from collecting its dividends. Lisa characterized this as fraud on the law: the same entities that embargoed the dividends now sought to declare Lisa's right to collect them extinguished by prescription.
On jurisdiction. The court denied the objection. Although Lisa is a Panamanian entity, the legal acts at issue (dividends originating from assemblies of a Guatemalan company) took place in Guatemala. Under Articles 33 and 34 of the Judiciary Act, Guatemalan courts have jurisdiction over actions relating to legal acts or transactions carried out within the national territory. The court cited Constitutional Court precedent in Files 1161-2004, 3754-2010, and 432-2012.
On the defective complaint. The court upheld this objection. The simple copy of Public Deed Number Sixteen, dated March 6, 1984, executed before Notary Carlos Fernando Rivers Sandoval, to which the court granted full evidentiary value under Article 186 of the Civil and Commercial Procedural Code, contains in clause twenty-five the provision that disputes between the company and its shareholders arising from the corporate charter or corporate activities shall be resolved through summary proceedings before the ordinary courts. The court determined that the conflict originates from corporate activities (the obligation to pay dividends to Lisa as holder of 25% of the shares) and that the clause therefore applies. Invoking the pacta sunt servanda principle under Article 1519 of the Civil Code, the court concluded that the ordinary proceeding was the wrong procedural vehicle and rejected the complaint. The court cited Constitutional Court precedent in Files 4793-2013 and 1675-2014.
On lack of legal standing. The court denied this objection, not on the merits, but because Lisa failed to offer and produce as evidence the mandate document whose limitations it alleged, failing to meet the burden of proof under Article 126 of the Civil and Commercial Procedural Code.
On failure to comply with condition. The court denied the objection, holding that the arguments regarding share conversion and the need for prior assembly approval are substantive matters to be resolved at trial, not through a preliminary objection.
On failure to comply with term. The court denied this objection for the same reason: the arguments regarding prescription interruption by the summary opposition proceedings, the damages action, and the precautionary embargoes are substantive matters to be resolved on the merits.