Eighth Civil Court rejects extinctive prescription of Lisa's dividend rights in Compraventa
Feb 28 2020
8th Civil Court
The Eighth Civil Court of First Instance of Guatemala, in a ruling dated February 28, 2020, rejected the extinctive prescription claim filed by Compraventa de Productos Alimenticios, S.A. against Lisa, S.A. The court concluded that the plaintiff failed to establish when the dividend payment obligation arising from the May 2, 2012 shareholders' assembly became exigible, and that there was no certainty as to whether Lisa had unimpeded access to the dividends. The ruling preserved Lisa's dividend rights at the trial level.
Compraventa de Productos Alimenticios, S.A. (later merged by absorption into Avícola Las Margaritas, S.A.) filed an ordinary lawsuit seeking a declaration of extinctive prescription of the obligation to pay dividends to Lisa, S.A. The complaint was admitted on March 8, 2018. Lisa was served but did not respond within the statutory period, and was declared in default. However, Lisa appeared at the final hearing through its special judicial representative, Jeremías Lutin Castillo.
The Annual General Shareholders' Assembly of Compraventa, held on May 2, 2012, approved the distribution of profits for the fiscal year January 1 through December 31, 2011, as well as accumulated profits in favor of the shareholders. Lisa, S.A. holds 25% of the shares issued by Compraventa.
Compraventa sought a declaration that the dividend payment obligation to Lisa had prescribed, arguing that more than five years had elapsed since the obligation became exigible without Lisa demanding payment. The plaintiff asserted that the day after the assembly, dividends were available to shareholders at the company's registered office, requiring only a request from each shareholder. Compraventa based its claim on Articles 1501 and 1508 of the Civil Code, which establish extinctive prescription after five years counted from when the obligation could be demanded.
Lisa, S.A. presented an extensive defense at the hearing, structured around several grounds.
Non-payment of dividends since 1999. Lisa established that the Avícola Villalobos Group, to which Compraventa belongs alongside 24 other entities, has not paid dividends to Lisa since 1999. The annual dividend amount was $5,481,851.00. Lisa submitted an economic study valuing its total shares and retained dividends across the Avícola Villalobos Group at $334,578,171.00, broken down as $205,614,050.00 in share value and $128,964,121.00 in retained dividends.
Active embargoes on Lisa's dividends. Lisa demonstrated that multiple Avícola Group entities obtained embargo orders on its shares, dividends, participations, and any liquidation across all group companies, including Compraventa. The proceedings that generated these embargoes include the ordinary lawsuit by Reproductores Avícolas, S.A. against Lisa, S.A., the summary proceeding by Avícola Villalobos, S.A. against Lisa, S.A., the ordinary lawsuit by Compañía Alimenticia de Centroamérica, S.A. against Lisa, S.A., the ordinary lawsuit by Industria Forrajera de Mazatenango, S.A. against Lisa, S.A., and the damages lawsuit by Ángel Mauricio Bonifasi Morales (Expediente C2-2000-4199), among others. Lisa pointed out that the plaintiff itself had obtained embargoes on the very dividends it now sought to declare prescribed, a procedural contradiction that prevented prescription from operating under Article 1506 of the Civil Code, which provides that prescription is interrupted by any executed precautionary measure.
Non-exigibility of the obligation. Lisa argued that the articles of incorporation of Compraventa, in Clause Sixteen, vest in the Board of Directors (Consejo de Administración) the authority to determine the date and form of payment of approved dividends. Because the Board never determined the amount, form, date, or place of payment, the obligation never became perfected and the prescription period never commenced.
Extrajudicial demand for payment. Lisa demonstrated that it did demand dividend payment through a notarial act dated February 28, 2017, executed by Notary Igal David Permuth Ostrowiak, which Compraventa never answered.
Fraud of law. Lisa characterized the prescription action as an act executed in fraud of law under Article 4 of the Judiciary Act (Ley del Organismo Judicial), using the legal system to pursue a prohibited result: the misappropriation and undue retention of dividends that constitute shareholder property from the moment they are decreed. Lisa invoked Article 137 of the Commercial Code, which declares null any pact that suppresses or diminishes the rights attributed to minorities by law.
Bermuda judgment. Lisa submitted a copy of the Bermuda Supreme Court judgment ruling in favor of Lisa, S.A. in a related proceeding against Avícola Group entities.
The court began from the premise that extinctive prescription requires verifiable prerequisites: passage of time, inaction by the creditor, and determination of the conditions under which the right becomes exigible.
On exigibility. The court determined that the notion of exigibility under Article 1508 of the Civil Code was not clearly established in this case. The assembly resolution approved the distribution of profits but did not specify the amount per share, the date, the form, or the place of payment. The plaintiff merely asserted that dividends were available from the day after the assembly, without offering proof that the specific conditions of payment had been determined. The court considered it essential to examine the articles of incorporation, since Article 15 of the Commercial Code provides that companies are governed by the stipulations of their corporate charter.
On certainty of Lisa's inaction. A certificate from the Chairman of Compraventa's Board stated that no request from Lisa for dividend payment existed. However, in the party declaration (declaración de parte), Lisa's representative affirmed that extrajudicial collection efforts had been made which Compraventa refused to receive, and that the dividends were recorded as embargoed in the plaintiff's own books. The court concluded there was no certainty as to Lisa's alleged failure to exercise its collection rights.
On availability of the dividends. The court declined to give probative value to the certificate issued by Compraventa's own Board Chairman regarding the absence of lawsuits challenging the distribution agreement, reasoning that such a circumstance should be certified by the Judicial Administrative Services Center (Centro de Servicios Auxiliares de la Administración de Justicia), not by an interested party. The court accordingly found that it could not be established that Lisa had the opportunity to access dividends freely and without any limitation or encumbrance restricting its disposition.
"La noción de exigibilidad de la obligación a la que alude el artículo 1508 del Código Civil: 'La prescripción extintiva se verifica en todos los casos no mencionados en disposiciones especiales, por el transcurso de cinco años, contados desde que la obligación pudo exigirse' no está claramente definida en el caso de estudio; y por lo tanto, la juzgadora no cuenta con el medio de prueba idóneo que le permita determinar con exactitud el punto de partida para computar el plazo de prescripción." (Page 60)
The rejection of the prescription claim was upheld at every subsequent level. The Fifth Civil and Commercial Court of Appeals declared the appeal without merit on December 1, 2020, confirming the first-instance ruling. The Supreme Court of Justice, Civil Chamber, dismissed the cassation appeal on August 11, 2021 due to technical deficiencies in the pleading. Finally, the Constitutional Court denied the amparo filed by Avícola Las Margaritas, S.A. as manifestly inadmissible and imposed a fine of Q1,000.00 on the sponsoring attorney, in its ruling of September 13, 2022.