Grants incompetence exception, refers dividend prescription suit to arbitration
Feb 6 2023
11th Civil Court
The Eleventh Circuit Civil Court of First Instance of the Department of Guatemala, by order dated February 6, 2023, granted the preliminary exception of incompetence filed by Lisa, S.A. and referred the parties to arbitration. The ruling terminated, in the judicial forum, the attempt by Distribuidora Avícola del Norte, S.A. to obtain a declaration of extinctive prescription over the obligation to pay dividends to Lisa. The court grounded its decision in the arbitration clause contained in Distribuidora Avícola del Norte's corporate charter, applying the principle of pacta sunt servanda and the Arbitration Law (Decree 67-95).
Distribuidora Avícola del Norte, S.A., through its general judicial representative Juan Luis Aguilar Salguero, filed an ordinary civil proceeding against Lisa, S.A. seeking a declaration that the obligation to pay dividends decreed by the company's general assemblies of shareholders had prescribed. Lisa, S.A. filed five preliminary exceptions: incompetence, defective complaint, lack of standing in the plaintiff, failure to fulfill the condition to which the right is subject, and failure to fulfill the term to which the right is subject.
Incompetence. Lisa argued the court lacked jurisdiction on two grounds: first, as a Panamanian entity with no domicile in Guatemala, pursuant to Article 12 of the Code of Civil and Commercial Procedure; second, and more significantly, because Clause Twenty-Eight of Distribuidora Avícola del Norte's corporate charter, contained in Public Deed Number 96 executed on July 12, 2002, provides that any dispute between the parties arising from the contract shall be resolved through arbitration under the Arbitration Law.
Defective complaint. Lisa argued the complaint lacked clarity and precision because it failed to state the amount of the obligation whose prescription was sought, and did not attach documents establishing when dividends became payable. Lisa noted that decreeing dividends and setting the payment date are distinct acts, and that under the corporate charter, the General Assembly of Shareholders or the administrative body must fix the date and form of payment.
Lack of standing. Lisa argued that Distribuidora Avícola del Norte's representative lacked sufficient authority, since the mandate itself required prior written authorization from the Board of Directors for acts of disposition, and an extinctive prescription action over dividends constitutes an act affecting shareholder rights. Under Article 137 of the Commercial Code, only the General Assembly of Shareholders, with the majorities required by Article 149 and the consent of the affected shareholder per Article 155, may suppress rights conferred upon a shareholder.
Failure to fulfill condition. Lisa argued that Distribuidora Avícola del Norte failed to comply with the obligation to convert bearer shares to registered shares under the Asset Forfeiture Law (Decree 55-2010), and that by not delivering registered shares to Lisa, it could not claim the prescription period had begun to run.
Failure to fulfill term. Lisa argued that prescription was interrupted on two grounds. First, the plaintiff itself, when it resolved to exclude Lisa as a shareholder in 2011, instructed the company's administration to liquidate Lisa's share, expressly recognizing Lisa's rights without raising any prescription defense, which constitutes the ground for interruption under Article 1506(2) of the Civil Code. Second, the embargo measures decreed on Lisa's dividends, requested by Distribuidora Avícola del Norte itself and by other Avícola Group entities, constitute the ground for interruption under Article 1506(1). Lisa characterized the prescription action as a transparent fraud upon the law: the same entities that have prevented Lisa from collecting its dividends through embargo orders now seek to declare those rights prescribed.
Distribuidora Avícola del Norte maintained that Guatemalan courts have jurisdiction under Articles 203 and 29 of the Constitution, that prescription is a civil law matter not governed by the Commercial Code, and that the arbitration clause does not apply because the prescription action arises from the law rather than the corporate contract.
The court focused its analysis on the incompetence exception based on the arbitration clause. It verified that Public Deed Number 96 of July 12, 2002 contains a valid arbitration agreement in Clause Twenty-Eight, and that Clause Twenty-Five of the same instrument regulates dividend distribution and the form of payment. Because the proceeding sought a declaration that the dividend payment obligation had prescribed, the court concluded that the dispute arises from the corporate contract and falls within the scope of the arbitration clause.
The court applied Article 1519 of the Civil Code (principle of pacta sunt servanda), Article 11(1) of the Arbitration Law (which bars courts from hearing actions subject to arbitration when the interested party invokes the incompetence exception), and Article 3(c) of the same law (which permits arbitration where no special procedure is prescribed by law). The court cited supporting rulings by the Constitutional Court in cases 1792-2005 and 3348-2016.
Having granted the incompetence exception, the court abstained from ruling on the four remaining preliminary exceptions, pursuant to Article 121 of the Code of Civil and Commercial Procedure.
No individual signatories are identified in the document.
The plaintiff, now acting as Administradora de Restaurantes, S.A. (successor by merger of Distribuidora Avícola del Norte, S.A.), appealed the ruling. The First Chamber of the Court of Appeals for Civil and Commercial Matters ruling of August 31, 2023 declined to hear the appeal because Administradora de Restaurantes failed to express grievances within the allotted period, rendering it impossible for the appellate court to review the impugned decision. The first-instance ruling acquired full firmness.