Sustains Lisa's exception, rejects Cerro Colorado's dividend prescription suit for incorrect procedural track
Oct 1 2020
11th Civil Court
The Eleventh First Instance Civil Court of Guatemala, in an order dated October 1, 2020, rejected the ordinary action for extinctive prescription brought by Cerro Colorado, S.A. against Lisa, S.A. by sustaining Lisa's preliminary objection of defective complaint. The court held that the dispute over dividend payment must be litigated through summary proceedings as required by clause twenty-five of Cerro Colorado's articles of incorporation, not through the ordinary track chosen by the plaintiff. The lawsuit sought a declaration that Cerro Colorado's obligation to pay Lisa the dividends decreed at the annual general shareholders' assemblies held in 2006, 2008, 2009, 2010, and 2011 had been extinguished by prescription.
Cerro Colorado, S.A., an entity within the Avícola Villalobos Group incorporated in Guatemala by public deed number fifty-six dated June 15, 1983, filed an ordinary action for extinctive prescription against Lisa, S.A., a Panamanian company and shareholder of Cerro Colorado. The plaintiff alleged that Lisa's right to collect dividends decreed at five annual general shareholders' assemblies had prescribed because more than five years had elapsed without Lisa exercising that right, invoking articles 1501 and 1508 of the Civil Code. Cerro Colorado submitted as evidence a certificate dated February 14, 2017, issued by the secretary of its board of directors, and an accounting certification dated February 2, 2017, from certified accountant Winston Alexander Mencos Caal, attesting to the existence of an account payable generated by the dividend distribution resolutions.
Lisa, S.A., through its special judicial representative Katty Aime Reyes Martínez, raised four preliminary objections:
Incompetence. Lisa argued that, as a Panamanian entity without domicile in Guatemala, the court lacked jurisdiction under article 12 of the Code of Civil and Commercial Procedure, which assigns jurisdiction to the court of the defendant's domicile in personal actions.
Defective complaint. Lisa advanced two grounds. First, that the ordinary track was incorrect because article 1039 of the Commercial Code provides that all commercial actions are to be litigated through summary proceedings, and clause twenty-five of Cerro Colorado's articles of incorporation expressly requires disputes between the company and its shareholders to be resolved through summary proceedings. Second, that the complaint failed to specify the amount of the obligation whose prescription was sought and omitted foundational documents (certified copies of the assembly minutes that decreed the dividend distributions).
Failure to fulfill condition. Lisa argued that the plaintiff had not complied with the condition of obtaining a shareholders' assembly resolution to suppress or modify the right to dividend payment, per articles 137 and 149 of the Commercial Code.
Failure to fulfill term. Lisa invoked two grounds for prescription interruption under article 1506 of the Civil Code. First, in 2011, when Cerro Colorado resolved to exclude Lisa as a shareholder, it expressly recognized Lisa's patrimonial rights by instructing the administration to liquidate Lisa's share, without raising any prescription defense, constituting a tacit acknowledgment that interrupted the prescriptive period. Second, the Avícola Group entities themselves maintained precautionary embargoes on Lisa's dividends, decreed in various judicial proceedings, which prevented Lisa from collecting those dividends while simultaneously interrupting prescription. Lisa characterized the lawsuit as a fraud upon the law: the same entities that had embargoed Lisa's dividends were now seeking to have them declared prescribed.
On incompetence. The court denied the objection. Although Lisa is a Panamanian entity, the action relates to juridical acts performed in Guatemala: the dividends originated from resolutions of the general assembly of a company incorporated and headquartered in Guatemala. The court relied on articles 33 and 34 of the Judiciary Act, which establish Guatemalan court jurisdiction over actions related to acts or juridical transactions performed in the national territory. It cited Constitutional Court rulings in cases 1161-2004, 3754-2010, and 432-2012 confirming this jurisdictional basis.
On defective complaint. The court sustained the objection. It examined clause twenty-five of Cerro Colorado's public deed number fifty-six, which provides: "Disputes arising between the company and the shareholders, or among the shareholders alone, arising from or relating to the articles of incorporation or the company's decisions or activities, that cannot be resolved directly, shall be settled through summary proceedings before the ordinary courts, unless the parties agree to submit them to arbitration." The court determined that the dividend payment dispute originated from the company's activities and was therefore covered by the contractual provision. Applying the pacta sunt servanda principle under article 1519 of the Civil Code, the court concluded that the ordinary track was not the appropriate procedural route and rejected the complaint. It cited Constitutional Court rulings in cases 4793-2013, 4524-2014, and 1675-2014 recognizing the defective complaint objection as the proper vehicle for challenging the procedural track.
On failure to fulfill condition. The court denied the objection, holding that Lisa's arguments (prior demand for payment and the need for an assembly resolution) do not constitute a condition precedent to filing the lawsuit but rather substantive issues to be analyzed at trial.
On failure to fulfill term. The court denied the objection, finding that the arguments regarding prescription interruption (the summary opposition proceeding against Lisa's exclusion, the damages lawsuit, and the precautionary embargoes on dividends) are substantive matters that must be resolved in the merits judgment, not through preliminary objections designed to purify the procedural record.