THIRD
DIVISION
|
SANTIAGO CUA, JR., SOLOMON S. CUA and
EXEQUIEL D. ROBLES, in their capacity as Directors of PHILIPPINE RACING CLUB,
INC.,
Petitioners, - versus
- MIGUEL OCAMPO TAN, Respondents. x -------------------------------------- x SANTIAGO CUA, SR., in his capacity as
Director of PHILIPPINE RACING CLUB, INC.,
Petitioner, - versus
- COURT OF APPEALS, MIGUEL OCAMPO TAN,
JEMIE U. TAN, ATTY. BRIGIDO J. DULAY, and HON. CESAR UNTALAN, Presiding
Judge, Makati Regional Trial Court, Br. 149, Respondents. |
|
G.R. No. 181455-56 G.R. No. 182008 Present: Chairperson, CHICO-NAZARIO,
VELASCO,
JR., NACHURA, and
PERALTA, JJ. Promulgated: December 4, 2009 |
x- - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -x
CHICO-NAZARIO, J.:
Before
this Court are two Petitions: (1) a Petition for Review on Certiorari [1]
under Rule 45 of the Rules of Court filed by petitioners Santiago Cua, Jr.
(Santiago Jr.), Solomon S. Cua (Solomon), and Exequiel D. Robles (Robles), in
their capacity as directors of the Philippine Racing Club, Inc. (PRCI), with
Miguel Ocampo Tan (Miguel), Jemie U. Tan (Jemie) and Atty. Brigido J. Dulay
(Dulay) as respondents, docketed as G.R. No. 181455-56; and (2) a Petition for Certiorari and Prohibition[2]
under Rule 65 of the Rules of Court filed by petitioner Santiago Cua, Sr.
(Santiago Sr.), also in his capacity as PRCI director, likewise naming Miguel,
Jemie, and Dulay as respondents, together with the Court of Appeals and
Presiding Judge Cesar Untalan (Judge Untalan) of the Regional Trial Court
(RTC), Branch 149 of Makati City, docketed as G.R. No. 182008.
Both
Petitions assail the Decision[3]
dated
I
FACTUAL AND
PROCEDURAL ANTECEDENTS
PRCI
is a corporation organized and established under Philippine laws to: (1) carry
on the business of a race course in all its branches and, in particular, to
conduct horse races or races of any kind, to accept bets on the results of the
races, and to construct grand or other stands, booths, stablings, paddocks,
clubhouses, refreshment rooms and other erections, buildings, and conveniences,
and to conduct, hold and promote race meetings and other shows and exhibitions;
and (2) promote the breeding of better horses in the Philippines, lend all
possible aid in the development of sports, and uphold the principles of good
sportsmanship and fair play.[7] To pursue its avowed purposes, PRCI holds a
franchise granted under Republic Act No. 6632, as amended by Republic Act No.
7953, to operate a horse racetrack and manage betting stations. Under its franchise, PRCI may operate only one
racetrack.
In
1999, the Articles of Incorporation of PRCI was amended to include a secondary
purpose, viz:
To acquire real properties and/or develop real
properties into mix-use realty projects including but not limited to leisure,
recreational and memorial parks and to own, operate, manage and/or sell these
real estate projects.[8]
PRCI
is publicly listed with the Philippine Stock Exchange (PSE). In 2006, PRCI had an authorized capital stock
of P1,000,000,000.00 divided into 1,000,000,000 shares, with a par value
of P1.00 each; of which a total of P569,857,749.00, representing
569,857,749 shares, had been subscribed and paid up.[9]
PRCI
owns only two real properties, each covered by several transfer certificates of
title. One is known as the Sta. Ana
Racetrack, located along A. P. Reyes Avenue, Makati City (Makati property),
measuring around 21.2 hectares; and the other is located in the towns of Naic
and Tanza in the province of Cavite (Cavite property).
Following
the trend in the development of properties in the same area,[10]
PRCI wished to convert its
Now as
to its
JTH
was then owned by Jardine Matheson Europe B.V. (JME).[12] It had an authorized capital stock of P25,000,000.00,
divided into 50,000,000 common shares with a par value of P0.50
each. JTH was publicly listed with the
PSE. Its tangible assets substantially
consisted of cash. To determine the
value of JTH, PRCI engaged the services of the accounting firm Sycip Gorres
Velayo & Co. (SGV) to conduct a due diligence study.[13]
Using
the results of the SGV study, PRCI management determined that PRCI could
initially acquire 41,928,290 shares, or 95.55% of the outstanding capital stock
of JTH, for the price of P10.71 per share, or for a total of P449,250,000.00;
in this case, PRCI would be paying a premium of P42,410,450.00 for the
said JTH shares, computed as follows:
|
Total price for all of the issued and subscribed JTH
|
|
|
|
|
shares (at P10.71/share) |
|
|
Less: Unaudited net worth of JTH (purely cash) |
- 426,010,000.00 |
|
|
Total premium for 100% of JTH |
44,408,848.00 |
|
|
Multiply: Interest in JTH to be initially acquired
by |
|
|
|
|
PRCI (95.5%) |
x 0.955 |
|
Premium for the 95.5% interest in JTH to be acquired
|
|
|
|
|
by PRCI |
|
The
PRCI Board of Directors held a meeting on
1.
Declaration of Intention to Acquire and Purchase
Shares of Stock of Another Company -
RESOLVED, as it is hereby resolved, that the Corporation
intends to acquire up to one hundred percent (100%) of the common shares of stock
of JTH Davies Holdings, Inc. by way of negotiated sale;
RESOLVED FURTHER, That Management and the Corporate Secretary shall
prepare and submit the Tender Offer, as well as, to file all the necessary
disclosures and notices in compliance with the Securities Regulation Code, its
implementing rules, and other prevailing regulations;
RESOLVED FURTHERMORE, That the Corporation authorizes its President, Mr.
Solomon S. Cua, to sign and execute any purchase agreements, memoranda, and
such other deeds, and to deliver any documents and papers, perform any acts,
necessary and incidental to implement the foregoing, as well as to source the
funds to implement the same.
2. Special
Stockholders’ Meeting -
RESOLVED, That a Special Stockholders’
Meeting of PRCI shall be held on October 26, 2006 at 10:00 A.M., or at such
later date as may be practicable under the circumstances, in the principal
place of business of PRCI at Santa Ana Park, A.P. Reyes Avenue, Makati City;
RESOLVED FURTHER, That only those
stockholders of record as of end of business day of October 11, 2006 shall be
entitled to notice, to vote and/or to be voted upon, in accordance with the
laws, regulations and by-laws of PRCI;
RESOLVED FURTHERMORE, That the
Corporate Secretary shall be authorized to issue the required notices, set the
time for the submission of, and to receive and validate proxies, as well as, to
order publication of notices and undertake such appropriate and necessary
steps, including the filing of the required disclosures to the regulating
agencies, to effect the foregoing.
3. Authorized
Attorney-In-Fact and Proxy -
In the event of a successful
acquisition of the shares of JTH Davies Holdings, Inc., the Board passed and
approved the following resolutions:
RESOLVED,
that the Corporation shall hereby authorize SANTIAGO CUA, or in his absence, EXEQUIEL ROBLES, or in his absence, SOLOMON S. CUA, or in his absence, SANTIAGO CUA, JR., or in his absence, DATUK SURIN UPATKOON, or in his absence, Laurence Lim Swee Lim, or
in his absence, LIM TEONG LEONG, to
act as its attorney-in-fact/proxy and to vote all shares as may be registered
in the name of the Corporation/lodged with the PCD System, and to exercise all
rights appurtenant thereto during the Annual Stockholders’ Meeting/s and all
regular/special meeting/s of JTH DAVIES HOLDINGS, INC. (formerly JARDINE
DAVIES, INC.);
RESOLVED FURTHER, That these Directors, in the said order of priority, shall have full
power and authority and discretion to nominate, appoint, and/or vote into
office such directors and/or officers during the said Annual Stockholders’
Meeting/s and regular/special meeting/s of JTH HOLDINGS, INC. (formerly JARDINE
DAVIES, INC.);
RESOLVED FINALLY, That these Directors be, as they are hereby granted full power and
authority whatsoever requisite or necessary or proper to be done in these
matters.[14]
The next day,
(a) The consideration for the acquisition was P10.71
per share or P449,250,000.00;
(b) Upon the signing of the [A]greement, the [PRCI] shall
pay P20 Million to an Escrow Agent as deposit; and
(c) The sale and purchase transaction contemplated in the
Agreement shall be consummated at a closing not later than
PRCI also made a tender offer for the remaining 4.45% or
1,954,883 issued and outstanding common shares of JTH at P10.71
each.
In the Special Stockholders’ Meeting held on
V. APPROVAL
OF THE ACQUISITION OF THE SHARES OF STOCK OF JTH DAVIES HOLDINGS, INC.
Thereafter, the Corporate Secretary informed that the
President will present to the stockholders the rationale for the acquisition of
the shares of JTH Davies Holdings, Inc.
According to the President PRCI is intending to
acquire up to 100% of the shares of JTH Davies Holdings, Inc. another listed
company in the PSE. For reference, the
President informed that the latest Annual Report of JTH has been appended to
the Information Statement for guidance.
Also copies of the Board’s resolution presented for approval and
ratification by the stockholders has been posted in the room for convenient
reading of the stockholders.
The President explained that JTH is one of the oldest
holdings company and the name JTH Davies is an internationally acclaimed name
with a reputation for solid and sound financial standing. With PRCI’s acquisition of JTH, it gives PRCI
the necessary vehicle within which to enlarge and broaden the business and
operational alternatives or options of our company. PRCI believes that this JTH will complement
the direction of PRCI in fast tracking the development of PRCI’s plans and
provide it investment opportunities. It
is for this reason that we call this special meeting so you may know soonest
the present opportunity faced by PRCI without need for you to wait until next
year’s annual meeting.
The Vice-Chairman then informed that the resolution
approving the purchase of JTH Davies Holdings, Inc. as presented in the Information
Statement which were furnished to the stockholders is presented for approval to
the body. A stockholder thereafter moved
that the the (sic) resolution be approved which was duly seconded by another
stockholder. The Vice-Chairman declared
the resolution approved. Thereafter,
Atty. Pagunsan took the floor and informed that he is the proxy of various
stockholders (10%) and would like to manifest his vote as “NO” which the
Vice-Chairman duly noted.
Notwithstanding the objection of Atty. Pagunsan, considering the more
than 2/3 of the outstanding capital stock of PRCI has approved and ratified the
resolution, (74%) the Corporate Secretary declared the resolution as duly
approved and ratified.
Thereafter, another stockholder, Mr. Ngo, asked the
President what are the plans of PRCI on the assets of JTH. The President informed that as of now, JTH
has no material hard assets other than its retained earnings. Mr. Ngo asked again what will be the
direction of PRCI on the substantial retained earnings of JTH to which the
President replied that there are several options being considered once the
purchase is complete one of which is the declaration of cash dividend.
Another stockholder took the floor and informed the
Management that he is happy with the transaction of PRCI and the purchase by
PRCI of the JTH shares is a good deal since the value of the goodwill of JTH is
substantial by his estimate. He proceeded
to thank the President and shook hands with him.[16]
By
PRCI
prepared consolidated financial statements for itself and for JTH for the
fiscal year ending
Thereafter,
PRCI again engaged the assistance of SGV in executing its intended spin-off to
JTH of the management and development of PRCI’s P3,817,242,000.00, could be
transferred to JTH in exchange for the unissued portion of the latter’s
recently increase authorized capital stock,[17]
amounting to P397,908,894.50, divided into 795,817,789 shares with a par
value of P0.50 per share. The
difference of P3,419,333,105.50 between the total zonal value of the
Makati property and the aggregate par value of the JTH shares to be issued in
exchange for the same, would be reflected as additional paid-in capital of PRCI
in JTH.
The matter of the proposed exchange was taken up and
approved by the PRCI Board of Directors in its meeting held on
A. Exchange
of the Corporation’s Makati Property with Shares of JTH Davies Holdings, Inc.
President Cua reported on certain
essential matters regarding the Corporation’s Makati Property. After doing so, President Cua proposed the
exchange of this Property with shares of JTH Davies Holdings, Inc. He then presented to the Board financial
facts and figures heavily favoring the transaction.
After due discussion and
deliberation, all the Directors present approved and passed the following
resolution, except Director Brigido Dulay who registered a negative vote:
RESOLVED,
That the Corporation hereby approves and authorizes the exchange of its
RESOLVED FURTHER, That, for this purpose, the Corporation hereby authorizes its
Executive Committee to determine and approve the terms and conditions governing
the exchange as it shall consider for the best interest of the Corporation
subject to approval by the stockholders in compliance with the Corporation
Code;
RESOLVED FURTHER, That the Executive Committee, be, as it is hereby granted full power
and authority whatsoever requisite or necessary or proper to accomplish these;
RESOLVED FINALLY, That SOLOMON CUA,
President & CEO, be, as he is hereby authorized to negotiate with JTH
Davies Holdings, Inc. and to execute, sign, and/or deliver any and all
documents covering the exchange in accordance with the terms and conditions of
the Executive Committee.[18]
Subsequently,
the Annual Stockholders’ Meeting of PRCI was scheduled on
I.
Call to Order;
II.
Proof of Notice;
III.
Certification of
Quorum;
IV.
Approval of the
Minutes of the Annual Stockholders’ Meeting held last June 19, 2006 and of the
Special Stockholders’ Meeting held last November 7, 2006;
V.
Report of the
President;
VI.
Approval of the
Audited Financial Statement for the year ended
VII.
Approval and
Ratification of the acts of the Board of Directors, the Executive Committee and
the Management of the Corporation for the Fiscal Year 2006;
VIII.
Approval of the
Planned Exchange of PRCI’s
IX.
Approval of the
Amendments of the By-Laws to conform with the Manual of Corporate Governance;
X.
Election of the
members of the Board of Directors;
XI.
Appointment of
Independent External Auditors;
XII.
Other Matters;
XIII.
Adjournment.[19]
The
However,
on
|
Stockholder |
No. of
Shares |
Percentage |
|
Miguel Ocampo-Tan |
16,380,000 |
2.87 |
|
|
15,972,720 |
2.80 |
|
Atty. Brigido J. Dulay[20] |
1 |
0.00 |
|
Total |
32,352,721 |
5.67 |
filed before the RTC a
Complaint, denominated as a Derivative Suit with prayer for Issuance of
TRO/Preliminary Injunction, against the rest of the directors of PRCI and/or
JTH. The Complaint was docketed as Civil
Case No. 07-610.
The
Complaint was based on three causes of action: (1) the approval by the majority
directors of PRCI of the Board Resolutions dated 26 September 2006 and 11 May
2007 -- with undue haste and deliberate speed, despite the absence of any
disclosure and information -- was not only anomalous and fraudulent, but also
extremely prejudicial and inimical to interest of PRCI, committed in violation
of their fiduciary duty as directors of the said corporation; (2) respondent
Solomon, as PRCI President, with the acquiescence of the majority directors of
PRCI, maliciously refused and resisted the request of respondents Miguel, et al., for complete and adequate
information relative to the disputed Board Resolutions, brazenly and unlawfully
violating the rights of the minority stockholders to information and to inspect
corporate books and records; and (3) without being officially and formally
nominated, the majority directors of PRCI illegally and unlawfully constituted
themselves as members of the Board of Directors and/or Executive Officers of
JTH, rendering all the actions they have taken as such null and void ab initio. In the end, respondents Miguel, et al., prayed to the RTC, after notice
and hearing, that:
1. A
temporary restraining order and/or writ of preliminary injunction be issued
restraining and enjoining the holding of the Annual Stockholders’ Meeting scheduled
on 17 July 2007 and restraining and enjoining the defendants [PRCI directors]
from enforcing, implementing, “railroading”, or taking any further action in
reliance upon or in substitution or in furtherance of the Disputed Resolutions,
which would inflict grave and irreparable injury in fraud of the Corporation.
2. A
receiver and/or management committee be constituted and appointed to undertake
the management and operations of the Corporation and to take over its assets to
prevent its further loss, wastage and dissipation.
3. To
compel the defendant Majority Directors to render a complete and adequate
disclosure of all documents and information relating to the subject matter of
the Disputed Resolutions as well as the business and affairs of the Corporation
and its wholly-owned subsidiary from the time of the latter’s acquisition until
final judgment.
4. After
trial on the merits, that judgment be rendered in favor of the plaintiffs and
against the defendants, as follows:
(a) Permanently
enjoining and prohibiting defendants from enforcing, implementing, or taking
any action in reliance upon the Disputed Resolutions.
(b) Declaring
the Disputed Resolutions dated 26 September 2006 and 11 May 2007 and the
approval by the Executive Committee of the exchange of the Corporation’s Makati
Property for JTH shares, as well as any and all actions taken in reliance upon
or pursuant to or in furtherance of the Disputed Resolutions and/or approval of
the Executive Committee, as null and void ab
initio.
(c) Declaring
the assumption by defendant Majority Directors as Directors and/or officers of
JTH, including all acts done by defendant Majority Directors as such Directors
and/or officers of JTH, as null and void ab
initio.
(d) Ordering
defendants to pay plaintiffs the sum of P500,000.00, and by way of
attorney’s fees, plus P10,000.00 per court appearance, plus costs of
suit.
Other reliefs just and equitable under the premises
are likewise prayed for.[21]
After
conducting hearings on the prayer for the issuance of a TRO, RTC Judge Untalan
issued a Resolution on
WHEREFORE, premises considered, this court hereby
partially grants the prayer of PRCI for the issuance of Temporary Restraining
Order upon the herein defendants subject to the posting of Php100,000.00 bond
on condition that such bond shall answer to any damage that the Defendants may
sustain by reason of this TRO if the court should finally decide that the
applicants are not entitled thereto.
This TRO shall be effective for TWENTY (20) DAYS only from service of
the same upon the Defendants after posting of the bond.
Therefore, the Defendants, their agents, proxies and
representatives are hereby enjoined, prohibited and forbidden to present to,
discuss, much more to approve the same, at the 2007 Annual Stockholders’
Meeting of PRCI to be held on July 17, 2007 at 8:00 A.M. at the VIP Room, Santa
Ana Park, A.P. Reyes Ave., Makati City, the following Agenda included in the
Notice of said stockholders’ meeting:
1.
Agenda Roman No.
IV – Approval of the Minutes of the Annual Stockholders’ Meeting held last June
19, 2006 and the Special Stockholders’ meeting held last November 7, 2006.
2. Agenda Roman No. VII – Approval and Ratification of
the acts of the Board of Directors, the Executive Committee and the Management
of the Corporation for the Fiscal Year 2006.
3. Agenda Roman No. VIII – Approval of the Planned
Exchange of PRCI’s
Thus, in order that these subject matters and items of
the Agenda of the aforesaid Stockholders’ Meeting shall not be taken up, the
herein Defendants, their agents, proxies and representatives, jointly and
severally, are hereby ordered to delete and remove from the Agenda said three
(3) above stated items of the Agenda before the start and conduct of the said
stockholders’ meeting. Therefore, in
case herein Defendants, their agents, proxies and representatives defy and
disobey this mandate, they have committed already four (4) distinct
contemptuous acts: delete, present, discuss and approve.
This Court appealed to the Corporate Secretary as
Officer of the Court, to please make sure that this mandate is obeyed and
observed by the Defendants, their agents, proxies and representatives, before
and during the conduct of said stockholders’ meeting.
Let the hearing of the main injunction be set on July
23 and 24, 2007 and
The
Annual Stockholders’ Meeting of PRCI scheduled the next day,
On
The
Court of Appeals promulgated its Decision on
According
to the Court of Appeals, the TRO issued by the RTC enjoined the presentation,
discussion, and approval of only three of the 13 items on the Agenda of the
2007 Annual Stockholders’ Meeting. There
is no evidence that the TRO issued by the RTC legally impaired the holding of
the scheduled stockholders’ meeting.
Indeed, the lack of quorum during the said meeting was due to the
absence of petitioners themselves who comprised the majority interest in PRCI. Consequently, the appellate court found no
grave abuse of discretion in the issuance by the RTC of the TRO.
The
Court of Appeals also noted that the Petitions in CA-G.R. SP No. 99769 and No.
99780 as regards the issuance of the TRO already became moot when the 20-day
period of effectivity of said restraining order expired on
Lastly,
the Court of Appeals held that the issues raised by petitioners were factual
and evidentiary in nature which must be threshed out before the RTC as the
designated commercial court in
The
Court of Appeals ruled that there was no reason to dismiss the Complaint in
Civil Case No. 07-610. Although the
Complaint contained mere allegations, which had yet to be supported by
evidence, it was sufficient in form and substance, and the RTC properly took
cognizance of the same. The Court of
Appeals reasoned that:
Rule 8, Section 1 of the Interim Rules of Procedure
for Intra-Corporate Controversies (Interim Rules) provides:
“SECTION
1. Derivative action. – A
stockholder or member may bring an action in the name of a corporation or
association, as the case may be, provided, that:
(1) He was
a stockholder or member at the time the acts or transactions subject of the
action occurred and at the time the action was filed;
(2) He
exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation,
by-laws, laws or rules governing the corporation or partnership to obtain the
relief he desires;
(3) No
appraisal rights are available for the act or acts complained of; and
(4) The
suit is not a nuisance or harassment suit.
In case of nuisance or harassment suit, the court
shall forthwith dismiss the case.”
A reading of the Complaint reveals that the same
sufficiently alleges the foregoing requirements. Complainants essentially allege that they are
PRCI stockholders, that they have opposed the issuance and approval of the
questioned resolutions during the board stockholders’ (sic) meetings, that
prior resort to intra-corporate remedies are futile, that nevertheless, they
have asked for copies of the pertinent documents pertaining to the questioned
transactions which the board has declined to furnish, that they have instituted
the derivative suit in the name of the corporation, that they are questioning
the acts of the majority of the board of directors believing that the herein
petitioners have committed a wrong against the corporation and seeking a
nullification of the questioned board resolutions on the ground of wastage of
the corporate assets.
Thus, contrary to petitioners’ averment, the Complaint
does state a cause of action.[23]
Petitioners
in CA-G.R. SP No. 99769 and No. 99780 filed their respective Motions for
Reconsideration of the foregoing Decision of the Court of Appeals.
In the
meantime, upon the expiration of the TRO issued by RTC Judge Untalan in Civil
Case No. 07-610, the Annual Stockholders’ Meeting of PRCI was again scheduled
on
WHEREFORE, premises considered, this court hereby GRANTS the issuance of PERMANENT INJUNCTION against the
defendants until the instant case is finally resolved, subject to the posting
by plaintiffs of a Php 100,000.00 bond, on condition that such bond shall
answer to any damage that the Defendants may sustain by reason of this
injunction if the court should finally decide that the applicants are not
entitled thereto. This injunction shall
be effective from service of the same upon the Defendants after posting of the
bond.
Therefore, the Defendants, their agents, proxies and
representatives are hereby enjoined, prohibited and forbidden to present to,
discuss, much more to approve the same, at any stockholders’ meeting,
whatsoever kind and nature, of PRCI of the following Agenda:
1. Approval of the Minutes of the Annual Stockholders’
Meeting held last June 19, 2006 and the Special Stockholders’ meeting held last
November 7, 2006 of PRCI.
2. Approval and
Ratification of the acts of the Board of Directors, the Executive Committee and
the Management of PRCI for the Fiscal Year 2006, as far as the acquisition of
JTH and the planned exchange of PRCI’s
3. Approval of the Planned Exchange of PRCI’s
As a
result, the Annual Stockholders’ Meeting of PRCI proceeded as scheduled on
Petitioners
Santiago Jr., et al. filed in CA-G.R.
SP No. 99769 their Motion to Admit Supplemental Petition for Certiorari with the attached
Supplemental Petition for Certiorari;[25]
and petitioner Santiago Sr. filed in CA-G.R. SP No. 99780 a Supplemental
Petition for Certiorari and
Prohibition,[26] to be
followed shortly thereafter by a Motion to Admit (Supplemental Petition).[27] Petitioners intended to additionally assail
in their Supplemental Petitions the
In its
Resolution dated
The
Court of Appeals found that petitioners’ Motions for Reconsideration merely
reiterated the issues and arguments which were raised in the Petitions and/or
which the appellate court already discussed and passed upon. The Court of Appeals reiterated its ruling
that it was premature to prohibit the continuance of the proceedings in Civil
Case No. 07-610 before the RTC; and that the Complaint therein sufficiently
stated a cause of action.
The
Court of Appeals likewise refused to admit petitioners’ Supplemental Petitions
for Certiorari. It noted that Santiago Sr. filed his
Supplemental Petition without asking for leave to file the same. Apparently, the appellate court disregarded
the Motion to Admit (Supplemental Petition) which petitioner
Failing
to obtain any relief from the Court of Appeals, petitioners turned to this
Court.
Petitioners
Santiago Jr., et al., filed a
Petition for Review on Certiorari under
Rule 45 of the Rules of Court, docketed as G.R. No. 181455-56; while petitioner
Santiago Sr. filed a Petition for Certiorari
under Rule 65 of the Rules of Court, docketed as G.R. No. 182008. According to petitioners, the appellate court
committed reversible errors of law and grave abuse of discretion in its
Decision dated
Petitioners
insisted that Civil Case No. 07-610 pending before the RTC did not constitute a
valid derivative suit. Respondents
Miguel, et al., failed to allege in
their Complaint that they had no appraisal rights for the acts they were
complaining of. In fact, the very
allegations made by respondents Miguel, et
al. in their Complaint supported the availability of appraisal rights to
them. The Complaint in Civil Case No.
07-610 was nothing more than a nuisance or harassment suit against petitioners
and the other PRCI directors.
Petitioners
averred that, by finding no grave abuse of discretion on the part of the RTC in
issuing the TRO against petitioners and the other PRCI directors, the Court of
Appeals substituted its own judgment for that of the PRCI Board of Directors,
arbitrarily and capriciously disregarding the business judgment made by the
said Board and approved by PRCI stockholders.
The TRO issued by the RTC was not for the benefit of the PRCI
stockholders. Furthermore, the
expiration of the 20-day TRO did not make their Petitions for Certiorari in CA-GR SP No. 99769 and No.
99780 moot. Said Petitions included the
prayer that the RTC be restrained from proceeding with Civil Case No. 07-610 in
view of the fatally defective Complaint, the grant or denial of which the
appellate court should have still determined despite the expiration of the TRO.
Petitioners
also challenged the refusal by the Court of Appeals to admit their Supplemental
Petitions in CA-GR SP No. 99769 and No. 99780.
They asserted that the issues in their Supplemental Petitions were
closely intertwined with those in their original Petitions.
The
prayer of petitioners Santiago Jr., et
al., in their Petition in G.R. No. 181455-56 reads:
PRAYER
WHEREFORE, in view of the foregoing and in the
interest of justice, it is most respectfully prayed of the Honorable Supreme Court
that:
A. The Decision of the Court of Appeals dated 06
September 2007 (Annex “I”) and the
Resolution of the Court of Appeals dated 22 January 2008 (Annex “M”) be NULLIFIED, REVERSED and SET ASIDE for having been
issued on the basis of reversible error of law and with grave abuse of
discretion amounting to lack of jurisdiction.
B. The Resolutions of Judge Cesar Untalan of Makati
Regional Trial Court, Branch 149 dated 16 July 2007 (Annex “F”) and 08 October 2007 (Annex “G”) be accordingly NULLIFIED, REVERSED and SET ASIDE for
having been issued with grave abuse of discretion amounting to lack of
jurisdiction.
C. The complaint of Respondents be DISMISSED outright for
lack of jurisdiction and cause of action.
D. Such further reliefs just and equitable under the circumstances
be GRANTED.[28]
Petitioners
Santiago Jr., et al., subsequently
filed in G.R. No. 181455-56 an Urgent Motion for Issuance of a Temporary
Restraining Order (Status Quo Ante) and/or Writ of Preliminary Injunction, in
which they additionally asked the Court that “a Temporary Restraining Order
(Status Quo Ante) and/or Writ of Preliminary Injunction be immediately issued
restraining the implementation (sic) Judge Cesar Untalan’s Resolutions dated 16
July 2007 and 08 October 2007 so as not to render inutile this Most Honorable
Court’s exercise of jurisdiction over this action and to prevent the decision
on this case from being rendered ineffectual and academic.”[29]
Meanwhile,
petitioner Santiago Sr. sought the following reliefs from this Court in his Petition
in G.R. No. 182008:
PRAYER
WHEREFORE, premises considered, it is respectfully prayed that
the petition be given due course, and that:
1. Upon
the filing of this petition, a temporary restraining order and/or writ of
preliminary injunction be immediately issued restraining and enjoining the
enforcement or execution of the assailed Court of Appeals’ Decision and
Resolution, and the assailed trial court’s resolutions, particularly that which
mandates the continued enforcement of the Writ of PERMANENT Injunction issued
by the trial, which prevents the stockholders of the corporation from acting on
matters that have to be submitted to them for approval and/ratification at the
regular annual stockholders’ meetings.
2. Thereafter,
a writ of prohibition be issued and/or the preliminary injunction be made
permanent and continuing, during the pendency of the instant case before the
Honorable court.
3. After
due hearing, that the Honorable Court:
(a) Declare
null and void the Honorable Court of Appeals’ 06 September 2007 Decision and 22
January 2008 Resolution, in CA-G.R. SP No. 99780, as well as the Trial Court’s
16 July 2007 and 8 October 2007 Resolutions in Civil Case No. 07-610 of the
Makati Regional Trial Court, and
(b) Order the
dismissal of the Complaint filed by the private respondents against petitioner,
et al., docketed as Civil Case No. 07-610 of the RTC of Makati City.
Other reliefs just and
equitable in the premises are likewise prayed for.[30]
In a
Resolution dated
Acting on the prayer for the issuance of a temporary
restraining order and/or a writ of preliminary injunction dated 24 March 2008,
the Court likewise resolves to ISSUE a TEMPORARY RESTRAINING ORDER enjoining respondents from
enforcing or executing the assailed Court of Appeals’ decision and resolution
and the assailed trial court’s resolutions
particularly that which mandates the continued enforcement of the writ
of permanent injunction issued by the trial court, until further orders from
this Court, and to require petitioner to POST a CASH BOND or a SURETY BOND from a reputable bonding
company of indubitable solvency with terms and conditions acceptable to the Court,
in the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00), within five (5) days
from notice, otherwise, the temporary
restraining order herein issued shall automatically be lifted. Unless and until the Court directs otherwise,
the bond shall be effective from its approval by the Court until this case is
finally decided, resolved or terminated.[31]
Accordingly, the Court
issued the TRO[32] on even
date, directed against the respondents of G.R. No. 182008, namely, respondents
Miguel, et al., and Judge Untalan.
On 21
April 2008, respondents Miguel, et al.
filed with the Court their Comment with Prayer for the Immediate Lifting or
Dissolution of the Temporary Restraining Order in G.R. No. 182008.
Respondents
Miguel, et al., argued that the
Petition for Certiorari in G.R. No.
182008 was dismissible due to several procedural errors. Petitioner Solomon,
who signed the Petition in G.R. No. 182008 on behalf of Santiago Sr., was
guilty of forum shopping for failing to inform the Court of the Petition for
Review in G.R. No. 181455-56, of which he was one of the petitioners. Both Petitions involved the same
transactions, essential facts, and circumstances, as well as identical causes
of action, subject matter, and issues.
The Petition for Certiorari in
G.R. No. 182008 was also not personally verified by petitioner Santiago Sr. as
required by rules and jurisprudence.
Moreover, the Petition for Certiorari
was not a proper remedy, since it was only proper when there was no other
plain, speedy, and adequate remedy in the ordinary course of law. Petitioner Cua himself admitted the
availability of other remedies, except that he was “avoiding the tortuous
manner offered by other remedies.” In fact,
petitioners Santiago Jr., et al.,
filed a Petition for Review in G.R. No. 181455-56. Lastly, errors of judgment could not be
remedied by a Petition for Certiorari. Petitioner Santiago Sr.’s Petition in G.R.
No. 182008 raised issues that were factual and evidentiary in nature, on which
the RTC has yet to make finding.
On substantial
grounds, respondents Miguel, et al.,
explained that their Complaint in Civil Case No. 07-610 was comprised of
several causes of action. It was not
merely a derivative suit, but was also an intra-corporate action arising from
devices or schemes employed by the PRCI Board of Directors amounting to fraud
or misrepresentation and were detrimental to the interest of the PRCI
stockholders. Additionally, the
fraudulent acts and breach of fiduciary duties by the PRCI directors had
already been established by prima facie
factual evidence, which warranted the continuation of the proceedings in Civil
Case No. 07-610 before the RTC for adjudication on the merits. It was also established that there were no
appraisal rights available for the acts complained of, since (1) the PRCI
directors were being charged with mismanagement, misrepresentation, fraud, and
breach of fiduciary duties, which were not subject to appraisal rights; (2)
appraisal rights would only obtain for acts of the Board of Directors in good
faith; and (3) appraisal rights may be exercised by a stockholder who had voted
against the proposed corporate action, and no corporate action had yet been
taken herein by PRCI stockholders, who still had not voted on the intended
property-for-shares exchange between PRCI and JTH. Furthermore, the Court of Appeals correctly
denied admission of the Supplemental Petitions in CA-GR SP No. 99769 and No.
99780. A new and independent cause of
action could not be set by supplemental complaint. The issues raised in the original Petitions
pertain to the grave abuse of discretion committed by the RTC in issuing the
TRO and in taking cognizance of Civil Case No. 07-610, by setting the same for
hearing on the main injunction; in contrast, the issues in the Supplemental
Petitions referred to the issuance of the Writ of Preliminary Injunction.
In
support of their prayer for the immediate lifting or dissolution of the TRO
issued by this Court, respondents Miguel, et
al., contended that:
I
The Temporary Restraining
Order issued by this Honorable Court has impelled herein petitioner and his
co-majority directors to schedule a stockholders’ meeting with the view TO
RENDER MOOT AND ACADEMIC the action and proceedings before the Regional Trial
Court of Makati, Branch 149.
II
The Petitioner herein, having
been impleaded as director and fiduciary of PRCI, does NOT stand to suffer any
irreparable injury.
III
To the contrary, it is PRCI
who stand to suffer grave and irreparable injury if the TRO is not lifted and/or
dissolved.
IV
The petitioner herein has
failed to establish any clear legal right that entitles him to the issuance of
a TRO and/or Writ of preliminary injunction.
V
The TRO was improperly issued
as petitioner has failed to show any extreme urgency to necessitate the
issuance thereof.[33]
In the
end, respondents Miguel, et al., prayed:
PRAYER
WHEREFORE,
premises considered, it is respectfully prayed of this Honorable Supreme Court
that the Temporary Restraining Order be LIFTED or DISSOLVED IMMEDIATELY, and
that the instant Petition be DISMISSED.
Other
just and equitable reliefs are likewise prayed for.[34]
Only
two days later, on
(d) Approval
of the Minutes of the Special Stockholders’ Meeting held on
x x x
x
(g) Approval
and ratification of the acts of the Board of Directors, the Executive Committee,
and Management of the Corporation for Fiscal Years 2006 and 2007;
(h) Approval
of the Planned Exchange of PRCI’s Makati Property for shares of stock of JTH
Davies Holdings, Inc.[36]
On the
same day,
Thereafter,
on
Considering
that the validity of the acts of the PRCI Board of Directors concerning the
property-for-shares exchange are the very issues raised in the Petitions presently
before the Court, while the factual issues relating to the same are still being
litigated before the RTC in Civil Case No. 07-610, the submission of the
exchange to the PRCI stockholders for their approval will render the aforementioned
proceedings before this Court and the RTC moot and academic. It will amount to a denial of the right of
APRI and of respondents Miguel, et al.,
to be heard before the RTC where they are still to present their evidence on
the factual issues. It will likewise
unduly pave the way for the validation of the abuse committed by the majority
directors of PRCI in denying the right of the minority directors and
stockholders of the corporation to information, and for the sanction of the
blatant disregard by the majority directors of their duties of fidelity and
transparency. Unless the TRO is lifted
forthwith, APRI, respondents Miguel, et
al., and all other minority stockholders stand to suffer prejudice. Expectedly, petitioners seek the dismissal,
while respondents Miguel, et al.,
pray for the grant of the motion to intervene of APRI.
Pending
action on the foregoing incidents, petitioners Santiago Jr., et al., filed before the Court a
Manifestation and Motion to Set Case for Oral Arguments.[39]
In
their Manifestation, petitioners Santiago Jr., et al., admitted that the PRCI Board of Directors had already
called and set the Annual Stockholders’ Meeting on
Petitioners
Santiago Jr., et al., brought to the
attention of the Court the fact that on 5 June 2008, another set of minority
stockholders of PRCI, namely, Jalane Christie U. Tan, Marilou U. Pua, Aristeo
G. Puyat, and Ricardo S. Parreno (Jalane, et
al.) filed with the RTC of Makati a Complaint against petitioners and the
other directors of PRCI and/or JTH, docketed as Civil Case No. 08-458. Jalane, et
al., have the following shareholdings in PRCI:
|
Stockholder |
No. of
Shares |
Percentage |
|
Jalane Christie U. Tan |
16,927,560 |
2.97 |
|
|
3,884,400 |
0.68 |
|
Artisteo G. Puyat |
1,633,666 |
0.29 |
|
Ricardo S. Pareño |
5,850 |
0.00 |
|
Total |
22,451,476 |
3.94 |
Jalane,
et al., claimed in their Complaint in
Civil Case No. 08-458 that “[a]part from being a derivative suit, this suit is
also filed based on devices or schemes employed by the Board of Directors
amounting to fraud or misrepresentation which is detrimental to the interest of
the corporation, the public and/or stockholders as provided for under Section
1(a)(1) of the Interim Rules of Procedure for Intra-Corporate Controversies
(A.M. No. 01-2-04-SC).”[40] The Complaint was based on four causes of
action: (1) the acquisition of JTH by PRCI; (2) sale of 29.92% of JTH shares by
PRCI;[41]
(3) exchange of the
PRAYER
WHEREFORE, it is respectfully prayed of this Honorable
Court, after due notice and hearing, that:
1. A Temporary
Restraining Order and/or Writ of Preliminary Mandatory Injunction be issued
enjoining the presentation, discussion and ratification of portions of the
Agenda of the Annual Stockholders Meeting of PRCI scheduled on June 18, 2008,
particularly items IV, VII and VIII;
2. An order be
issued nullifying the
3. An order be
issued nullifying the sale of PRCI shares in JTH in April 2007 and
[Paragraph crossed-out.]
5. An order be
issued directing defendants to pay plaintiffs the sum of P500,000.00 as
and by way of attorney’s fees, plus cost of suit.
Other reliefs, just and equitable under the premises are
likewise prayed for.[42]
Acting
on the Complaint of Jalane, et al. in
Civil Case No. 08-458, Executive Judge Winlove Dumayas (Executive Judge
Dumayas) of the Makati City RTC issued a 72-hour TRO, enjoining PRCI directors
from presenting, discussing, and ratifying the items in the Agenda for the
Annual Stockholders’ Meeting set on 18 June 2008 related to the
property-for-shares exchange between PRCI and JTH. However, upon being apprised of the TRO
issued by this Court on 9 April 2008 in G.R. No. 182008, in relation to Civil
Case No. 07-610 pending before the Makati City RTC, Branch 149, Executive Judge
Dumayas gave verbal advice that the Annual Stockholders’ Meeting of PRCI should
proceed on 18 June 2008 as if the 72-hour TRO had not been issued. Consequently, the Annual Stockholders’
Meeting of PRCI proceeded on
The
Annual Stockholders’ Meeting of PRCI, held on
IV. APPROVAL
OF THE MINUTES OF THE PREVIOUS STOCKHOLDERS’ MEETINGS
Before the next agenda was tackled in the meeting, a
stockholder, Atty. Benjamin Santos asked to be recognized on the floor. The Chairman gave Atty. Santos permission to
speak. Atty. Santos inquired from the
Corporate Secretary if there has already been official notice of service on him
regarding a 72-hour temporary
restraining order which was issued by the Executive Judge of the
For the information of the stockholders present, Atty.
Santos mentioned that a case has been filed by certain minority shareholders,
namely, Jalane Christie U. Tan, Marilou U. Pua, Aristeo G. Puyat and Ricardo S.
Parreno, against the Board of Directors of PRCI (Civil Case No. 08-458, Makati
RTC), and a 72-hour TRO was issued on 17 June 2008 “enjoining defendants
(directors of PRCI), their representatives, employees and/or all those acting
for and in their behalf to refrain from the presentation, discussion and
ratification of portions of the Agenda of the Annual Stockholders’ Meeting of
PRCI scheduled on June 18, 2008 particularly items IV, VII and VIII.” x x x.
x x x x
According to Atty. Santos, the TRO enjoins them in
their capacity as Directors of PRCI. He
further stated that the attendance of all the directors present in the stockholders’
meeting, is in their capacity as stockholders of PRCI and not as directors of
PRCI. The Chairman is present merely to
preside over the meeting, and the Corporate Secretary is not a member of the
Board of Directors. Atty. Santos
likewise informed the stockholders present of the existence of a temporary restraining order issued by the
Supreme Court dated 09 April 2008 (in SC G.R. No. 182008) which “enjoin(ed) respondents from enforcing or
executing the assailed Court of Appeals’ decision and resolution, and the
assailed trial court’s resolutions particularly that which mandates the
continued enforcement of the writ of permanent injunction issued by the trial
court, until further orders from this Court.” Thereafter, Atty. Santos moved that Agenda
Item IV as well as the rest of the items to be taken up since the TRO of the
Makati RTC is defective and should not prevail over the TRO of the Supreme
Court.
Atty. Santos added that the case recently filed by the
abovementioned minority shareholders is a duplicate of another pending case
filed by other minority shareholders also in the Makati RTC. It was pointed out that the shareholders in
the recent case are guilty of forum shopping since they primarily have the same
interests as those who had earlier filed a suit against PRCI. Atty. Santos clarified that the pending case
is currently the subject of a Petition to the Supreme Court wherein the
aforementioned TRO was issued. With this
Comment, the Corporate Secretary took note of the Petition filed with the
Supreme Court and the TRO issued by the Supreme Court.
x x x x
x x x With all the foregoing comments, Atty. Santos
moved that the stockholders proceed with the meeting and that the item under
Agenda IV be approved, which are the following: the Minutes of the Annual
Stockholders’ Meeting held on June 19, 2006, the Minutes of the Special
Stockholders’ Meeting held on November 7, 2006 and the Minutes of the Annual
Stockholders’ Meeting held on October 10, 2007.
Thereafter, Atty. Alexander Carandang asked to be
given permission to speak. The Chairman
asked Atty. Carandang his name and authority to speak, to which, he answered
his name and said he was stockholder of record and a proxy of Aristeo Puyat and
Jose L. Santos. After Atty. Carandang
was recognized, he stated that, contrary to Atty. Santos’ earlier actuations,
the recent complaint filed is different from the complaint earlier filed by the
Dulay group. He also mentioned that the
case which Puyat earlier filed is different because it is a case for inspection
and photocopying of PRCI documents. He
thereafter warned against the tackling of Agenda Item No. 4.
Atty. Brigido Dulay, as a stockholder and proxy to the
Tan group (Miguel Ocampo Tan, Jemie U. Tan, JUT Holdings, Inc., Jalane Christie
U. Tan, etc.) likewise took the floor to manifest his continuing objection to
the proceedings.
Atty. Amado Paolo Dimayuga also took the floor as a
proxy to Marilou Pua and manifested that the complainants in the recent case
filed are not guilty of forum shopping and also manifested his objection to the
taking up of Item IV in the agenda and the continuance of the proceedings in
the stockholders’ meeting. Atty. Pelagio
Ricalde also took the floor as proxy for Aries Prime Resources, Inc. and also
manifested objection to the proceedings.
Both Atty. Dimayuga and Atty. Ricalde manifested continuing objections.
Atty. Dimayuga also mentioned that he received word
that a Motion to Lift was just filed by the PRCI Directors regarding the recent
TRO issued by the Makati RTC. As a
reply, the Corporate Secretary asked that the counsel for the PRCI directors be
allowed to explain such allegations.
Atty. Garbriel Q. Enriquez, the counsel for PRCI Directors Cua, Cua,
Jr., De Villa and Robles informed the stockholders of the wrong information
being given by Atty. Dimayuga. They had
filed a manifestation before the Executive Judge of the RTC which issued the
TRO and informed him of the facts mentioned by Atty. Santos. The Executive Judge said that today’s meeting
should proceed because the plaintiffs therein suppressed the existing TRO in
the Supreme Court, and the TRO of the RTC cannot rise above the Supreme Court
TRO. There is therefore no legal
obstacle to holding the Annual Stockholders’ Meeting, which should proceed so as
not to prejudice the stockholders.
The Corporate Secretary stated that all the objections
are duly noted. There being an earlier
motion for the approval of the Minutes, a stockholder seconded said
motion. The motion having been duly
seconded, the Chairman declared all the minutes for approval as duly approved.
x x x x
VI. RATIFICATION
OF THE ACTS OF THE BOARD OF DIRECTORS, THE EXECUTIVE COMMITTEE AND THE
MANAGEMENT OF THE CORPORATION FOR FISCAL YEARS 2006 AND 2007
The Chairman then proceeded by stating that the next
item on the agenda is the ratification by the Stockholders of the acts of the Board of Directors, the Executive
Committee, and the Management during the last fiscal years 2006 and 2007. The Chairman then explained that as to all
other matters and action affecting the operations, financial performance and
strategic posture of the Corporation, all have been subsumed and discussed in
the Annual Report of the President and likewise reflected in the Information
Statement sent to all stockholders of record and to the SEC.
Once more, Atty. Dulay, Atty. Carandang, Atty.
Dimayuga and Atty. Ricalde all took the floor successively and objected to this
item in the agenda and the Corporate Secretary duly noted these objections.
A stockholder later moved that all the acts of the
Board of Directors, the Executive Committee, and the corporate management be
confirmed, ratified and approved by the stockholders. The said motion was duly seconded,
thus, the stockholders thereafter approved and ratified all the said acts.
At this juncture, Atty. Dulay requested that the
stockholders who moved and seconded the aforementioned acts be named and their
authority to speak be made known. Atty.
Carandang likewise inquired about the same information about a lady stockholder
who earlier seconded the motion. With
this, Atty. Jose Miguel Manalo stated his name and said he was a stockholder of
record. The other stockholders stated
that they were proxies of Mr. Santiago Cualoping III.
VII. APPROVAL
OF THE EXCHANGE OF PRCI’S MAKATI PROPERTY FOR SHARES OF STOCK OF JTH DAVIES
HOLDINGS, INC.
When asked by the Chairman as to the next item in the
agenda, the Corporate Secretary informed all present that the next item is the approval of the exchange of PRCI’s
Yet again, Atty. Dulay, Atty. Carandang, Atty.
Dimayuga and Atty. Ricalde all took the floor successively and objected to this
item in the agenda which were duly noted by the Corporate Secretary.
The Chairman then called the President of PRCI, Mr.
Solomon Cua to officiate on this matter.
At this point, one stockholder moved that the exchange of PRCI’s
With 75.23% of the outstanding capital stock of PRCI
voting in favor of the exchange of its
Hence, at their annual meeting on
4. The
parties understand, acknowledge and agree that this Deed is executed with the intention of availing of
the benefits of Sections 40(C)(2) of the National Internal Revenue Code of 1997
(NIRC), as amended, where, upon subscription of shares hereunder, the
Subscriber shall gain further control of the Company. The parties obtained a ruling from the Bureau of Internal Revenue to the effect
that no gain or loss will be recognized
on the part of each of the parties, pursuant to this Deed, in accordance with
Sections 40(C)(2) of the NIRC, as amended.
The ruling confirmed that the transfer of the Subscriber’s parcels of
land to the Company in exchange for the shares of stock of the latter is not subject to income tax, capital gains
tax, donor’s tax, value-added tax and documentary stamp tax, except for
documentary stamp tax on the original issuance of the Company’s shares of stock
to the Subscriber. [44]
(Emphases ours.)
However,
in a letter dated 15 July 2008, the BIR reversed/revoked its earlier ruling
that the property-for-shares exchange between PRCI and JTH was a tax-free
transaction under Section 40(C)(2) of the National Internal Revenue Code of
1997; and subjected the exchange to value-added tax. As a result, PRCI and JTH executed on 22
August 2008 a Disengagement Agreement,[45]
by virtue of which, effective immediately, PRCI and JTH would disengaged and
would no longer implement the Deed of Transfer with Subscription Agreement
dated 7 July 2008. For all intents and
purposes, the said Deed of Transfer with Subscription Agreement was
rescinded. PRCI disclosed the
Disengagement Agreement to the SEC on
Civil
Case No. 08-458 was eventually also assigned to the only commercial court of Makati
City, i.e., RTC, Branch 149, presided
over by Judge Untalan. Petitioners
Santiago Jr., et al. averred that Judge Untalan refused to dismiss Civil
Case No. 08-458 on the ground of forum shopping, even when it was no different
from Civil Case No. 07-610. They further
asserted that Judge Untalan showed evident partiality in favor of Jalane, et al., during the hearings in Civil
Case No. 08-458, openly making hasty conclusions as to certain marked exhibits
and demonstrating his pre-judgment of the case. On 25 September 2008 and 30 September 2008,
the PRCI directors filed before the RTC a Motion to Inhibit[46]
and a Supplemental Motion to Inhibit,[47]
respectively, urging Judge Untalan to inhibit himself from Civil Case No.
08-458, since he had revealed in several instances his utter bias and prejudice
against the PRCI directors and admitted his being a relative by affinity of
Atty. Amado Paulo Dimayuga,[48]
the initial counsel of Jalane, et al. Judge Untalan has yet to act on such
motions.
At the
end of their Manifestation, petitioners Santiago Jr., et al., asked that this Court grant them the following reliefs:
PRAYER
WHEREFORE, it is respectfully prayed that the
foregoing Manifestation be noted, and that the First Suit [Civil Case No.
07-610] as well as the Second Suit [Civil Case No. 08-458] should now be
dismissed for being moot and academic, without need of remand to the trial
(sic) Court for further proceedings.
It is further respectfully prayed that should the
Honorable Court find it proper and necessary, the instant cases be set for oral
arguments on such date and time as it may deem convenient to its calendar.
Herein petitioners furthermore pray for such other
reliefs as may be just and equitable in the premises.[49]
Petitioner
Santiago Sr. also filed his own Manifestation (To Update the Honorable Court on
Relevant Supervening Proceedings and Incidents) with Motion to Resolve Merits
of Petition and of the Case in the Lower Court (In View of Supervening
Proceedings and Incidents),[50]
essentially recounting the same events in the Manifestation of petitioners
Santiago Jr., et al. The prayer of Santiago Sr. in his
Manifestation and Motion reads:
P R A Y E R
WHEREFORE, it is respectfully prayed that the
Honorable Court:
1. TAKE
COGNIZANCE of the instant Manifestation on relevant supervening proceedings and
incidents in this case, especially and specifically, after the issuance by the
Honorable Court on 09 April 2008 of a temporary restraining order, addressed to
the Court of Appeals, the presiding judge of the Regional Trial Court, Branch
149, Makati City, and the private respondents, and their agents,
representatives and/or any person or persons acting upon their orders or in
their place of stead, who are:
“ENJOINED from enforcing or executing the assailed
Court of Appeals’ decision and resolution, and the assailed trial court’s
resolutions particularly that which mandates the continued enforcement of the
writ of permanent injunction issued by the trial court, until further orders
from this Court.”
2. ORDER
the dismissal of the complaint below on the ground that the same is not a
legitimate and valid derivative suit.
3. ORDER
the dismissal of the complaint below, in any case, on the ground that the
issues raised in the complaint, specifically with respect to the so-called
“disputed” resolutions, have been mooted and/or no longer subsist.
4. ORDER
the private respondents to explain why they should not be cited for contempt of
court for violation of the temporary restraining order issued by the Court on
5. ORDER
the private respondents to explain why they should not be cited for contempt of
court for engaging in forum-shopping.
6. ORDER
that the temporary restraining order issued by the Court on
Other reliefs just and equitable in the premises are
likewise prayed for.[51]
II
ISSUES
The Court identifies the following fundamental issues for
its resolution in the Petitions at bar:
(1) Whether the
Petition of Santiago Sr. in G.R. No. 180028 should be dismissed for its
procedural infirmities?
(2) Whether Civil
Case No. 07-610 instituted by respondents Miguel, et al. before the RTC should be ordered dismissed?
(3) Whether Civil
Case No. 08-458 instituted by Jalane, et
al., before the RTC should be ordered dismissed?
(4) Whether APRI
should be allowed to intervene in the instant Petitions?
III
RULING OF
THE COURT
Procedural
infirmities of Petition in G.R. No. 180028
Respondents Miguel, et
al., call attention to two procedural infirmities of the Petition for Certiorari of petitioner Santiago Sr. in
G.R. No. 180028: (1) the failure to inform the Court of the pendency of the
Petition in G.R. No. 181455-56, thus, violating the rule against
forum-shopping; and (2) its being the wrong mode of appeal.
The
Verification and Certification of Non-Forum Shopping attached to the Petition
for Certiorari of petitioner Santiago
Sr. in G.R. No. 180028 was actually signed by his attorney-in-fact, Solomon,[52]
who is also a petitioner in G.R. No. 181455-56.
It contains the following paragraph:
4. In
compliance with the 1997 Rules of Civil Procedure, I hereby certify that the
petitioner, by himself personally and/or acting through his attorneys-in fact,
has not heretofore commenced any other action or proceeding involving the same
issues in the Supreme Court, the Court of Appeals, or different Divisions
thereof, or any other tribunal or agency, and that to the best of my knowledge,
no such action or proceeding is pending in the Supreme Court, the Court of
Appeals, or different Divisions thereof, or any other tribunal or agency. If I should learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, Court of
Appeals, or different Divisions thereof, or any other tribunal or agency, I
undertake to promptly inform this Honorable Court, the aforesaid courts and
other tribunal or agency within five (5) days therefrom.[53]
Respondents Miguel, et
al., maintain that the failure of Solomon, as petitioner Santiago Sr.’s
attorney-in-fact, to inform the Court as regards the pendency of the Petition
for Review in G.R. No. 181455-56, of which Solomon is one of the petitioners,
is in violation of the rule against forum-shopping and warrants the summary
dismissal of the Petition in G.R. No. 182008.
Forum
shopping is the institution of two or more actions or proceedings grounded on
the same cause on the supposition that one or the other court would make a
favorable disposition. It is an act of malpractice and is prohibited and
condemned as trifling with courts and abusing their processes. In determining
whether or not there is forum shopping, what is important is the vexation
caused the courts and parties-litigants by a party who asks different courts
and/or administrative bodies to rule on the same or related causes and/or grant
the same or substantially the same reliefs and in the process creates the
possibility of conflicting decisions being rendered by the different bodies
upon the same issues.[54]
Forum
shopping is present when, in two or more cases pending, there is identity of
(1) parties (2) rights or causes of action and reliefs prayed for, and (3) the
two preceding particulars, such that any judgment rendered in the other action
will, regardless of which party is successful, amount to res judicata in
the action under consideration.[55]
It is evident that Santiago Sr., the petitioner in G.R. No.
182008, is not a party to G.R. No. 181455-56.
Even though Solomon is admittedly a petitioner in G.R. No. 181455-56, he
is only acting in G.R. No. 182008 as the attorney-in-fact of Santiago Sr., the
actual petitioner in the latter case.
Thus, the very first element for forum shopping, identity of parties, is
lacking.
Respondents
Miguel, et al., cannot insist on
identity of interests between petitioner Santiago Sr. in G.R. No. 182008 and
petitioners Santiago Jr., et al., in
G.R. No. 181455-56, when the Complaint itself of respondents Miguel, et al., before the RTC, docketed as Civil
Case No. 07-610, impleads the petitioners Santiago Sr. and Santiago Jr., et al., as defendants a quo in their individual capacities as PRCI directors, and not collectively as
the PRCI Board of Directors. Each
individual PRCI director, therefore, is not precluded from hiring his own
counsel, presenting his own arguments and defenses, and resorting to his own
procedural remedies, apart and independent from the other PRCI directors. In addition, the consolidation of G.R. No. 181455-56
and G.R. No. 182008 has already eliminated the danger of conflicting decisions
being issued in said cases.
Assuming arguendo
that Solomon did have the legal obligation to inform the Court in G.R. No.
182008 of the pendency of G.R. No. 181455-56, his failure to do so does not
necessarily result in the dismissal of the former. Although the submission of a certificate
against forum shopping is deemed obligatory, it is not jurisdictional.[56]
Hence, in this case in which such a certification was in fact submitted
– only, it was defective -- the Court may still refuse to dismiss and may,
instead, give due course to the Petition in light of attendant exceptional
circumstances.[57]
Santiago Sr. committed another procedural faux pas by filing before this Court a
Petition for Certiorari under Rule 65
of the Rules of Court to assail the Decision dated
The
proper remedy of a party aggrieved by a decision of the Court of Appeals is a
petition for review under Rule 45, which is not similar to a petition for certiorari under Rule 65 of the Rules of
Court. As provided in Rule 45 of the
Rules of Court, decisions, final orders or resolutions of the Court of Appeals
in any case, i.e., regardless of the
nature of the action or proceedings involved, may be appealed to this Court by
filing a petition for review, which would be but a continuation of the
appellate process over the original case.
On the other hand, a special civil action under Rule 65 is an independent
action based on the specific grounds therein provided and, as a general rule,
cannot be availed of as a substitute for the lost remedy of an ordinary appeal,
including that under Rule 45.[58]
Accordingly,
when a party adopts an improper remedy, as in this case, his Petition may be
dismissed outright. However, in the
interest of substantial justice, the strict application of procedural
technicalities should not hinder the speedy disposition of this case on the
merits. Thus, while the instant Petition
is one for certiorari under Rule 65
of the Rules of Court, the assigned errors are more properly addressed in a
petition for review under Rule 45.[59]
The merits of the Petitions in both G.R. No. 181455-56 and
No. 182008 compel this Court to give more weight to substantive justice,
instead of technical rules. Indeed,
where, as here, there is a strong showing that a grave miscarriage of justice
would result from the strict application of the Rules, the Court will not
hesitate to relax the same in the interest of substantial justice. It bears stressing that the rules of
procedure are merely tools designed to facilitate the attainment of
justice. They were conceived and
promulgated to effectively aid the court in the dispensation of justice. Courts are not slaves to or robots of
technical rules, shorn of judicial discretion.
In rendering justice, courts have always been, as they ought to be,
conscientiously guided by the norm that, on the balance, technicalities take a
backseat against substantive rights, and not the other way around. Thus, if the application of the Rules would
tend to frustrate rather than promote justice, it is always within the power of
the Court to suspend the Rules, or except a particular case from its operation.[60]
Derivative suits, in
general
A
corporation, such as PRCI, is but an association of individuals, allowed to
transact under an assumed corporate name, and with a distinct legal
personality. In organizing itself as a
collective body, it waives no constitutional immunities and perquisites
appropriate to such body. As to its
corporate and management decisions, therefore, the State will generally not
interfere with the same. Questions of
policy and of management are left to the honest decision of the officers and
directors of a corporation, and the courts are without authority to substitute
their judgment for the judgment of the board of directors. The board is the business manager of the
corporation, and so long as it acts in good faith, its orders are not
reviewable by the courts.[61]
The
governing body of a corporation is its board of directors. Section 23 of the Corporation Code provides
that “[u]nless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business conducted
and all property of such corporations controlled and held by the board of
directors or trustees x x x.” The
concentration in the board of the powers of control of corporate business and
of appointment of corporate officers and managers is necessary for efficiency
in any large organization. Stockholders are too numerous, scattered and
unfamiliar with the business of a corporation to conduct its business directly.
And so the plan of corporate organization is for the stockholders to choose the
directors who shall control and supervise the conduct of corporate business.[62]
The following discourse on the corporate powers of the
board of directors under Section 23 of the Corporation Code establishes the
extent thereof:
Under the above provision, it is quite clear that,
except in the instances where the Code expressly grants a specific power to the
stockholders or member, the board has the sole power and responsibility to
decide whether a corporation should sue, purchase and sell property, enter into
any contract, or perform any act. Stockholders’
or members’ resolutions dealing with matters other than the exceptions are not
legally effective nor binding on the board, and may be treated by it as merely
advisory, or may even be completely disregarded. Since the law has vested the responsibility
of managing the corporate affairs on the board, the stockholders must abide by
its decisions. If they do not agree with
the policies of the board, their remedy is to wait for the next election of the
directors and choose new ones to take their place. The theory of the law is that although
stockholders are to have all the profit, the complete management of the
enterprise shall be with the board.[63]
The board of directors of a corporation is a creation of the
stockholders. The board of directors, or
the majority thereof, controls and directs the affairs of the corporation; but
in drawing to itself the power of the corporation, it occupies a position of
trusteeship in relation to the minority of the stock. The board shall exercise good faith, care,
and diligence in the administration of the affairs of the corporation, and
protect not only the interest of the majority but also that of the minority of
the stock. Where the majority of the
board of directors wastes or dissipates the funds of the corporation or
fraudulently disposes of its properties, or performs ultra vires acts,
the court, in the exercise of its equity jurisdiction, and upon showing that
intracorporate remedy is unavailing, will entertain a suit filed by the
minority members of the board of directors, for and in behalf of the
corporation, to prevent waste and dissipation and the commission of illegal
acts and otherwise redress the injuries of the minority stockholders against
the wrongdoing of the majority. The action in such a case is said to be brought
derivatively in behalf of the corporation to protect the rights of the minority
stockholders thereof.[64]
It is well settled in
this jurisdiction that where corporate directors are guilty of a breach of
trust — not of mere error of judgment or abuse of discretion — and
intracorporate remedy is futile or useless, a stockholder may institute a suit
in behalf of himself and other stockholders and for the benefit of the
corporation, to bring about a redress of the wrong inflicted directly upon the
corporation and indirectly upon the stockholders.[65]
A derivative suit must be differentiated from individual
and representative or class suits, thus:
Suits by stockholders or members of a corporation
based on wrongful or fraudulent acts of directors or other persons may be
classified into individual suits, class suits, and derivative suits. Where a stockholder or member is denied the
right of inspection, his suit would be individual
because the wrong is done to him personally and not to the other stockholders
or the corporation. Where the wrong is
done to a group of stockholders, as where preferred stockholders’ rights are
violated, a class or representative suit
will be proper for the protection of all stockholders belonging to the same
group. But where the acts complained of
constitute a wrong to the corporation itself, the cause of action belongs to
the corporation and not to the individual stockholder or member. Although in most every case of wrong to the
corporation, each stockholder is necessarily affected because the value of his
interest therein would be impaired, this fact of itself is not sufficient to
give him an individual cause of action since the corporation is a person
distinct and separate from him, and can and should itself sue the
wrongdoer. Otherwise, not only would the
theory of separate entity be violated, but there would be multiplicity of suits
as well as a violation of the priority rights of creditors. Furthermore, there is the difficulty of
determining the amount of damages that should be paid to each individual
stockholder.
However, in cases of mismanagement where the wrongful
acts are committed by the directors or trustees themselves, a stockholder or
member may find that he has no redress because the former are vested by law
with the right to decide whether or not the corporation should sue, and they
will never be willing to sue themselves.
The corporation would thus be helpless to seek remedy. Because of the frequent occurrence of such a
situation, the common law gradually recognized the right of a stockholder to
sue on behalf of a corporation in what eventually became known as a “derivative suit.” It has been proven to be an effective remedy
of the minority against the abuses of management. Thus, an individual stockholder is permitted
to institute a derivative suit on behalf of the corporation wherein he holds
stock in order to protect or vindicate corporate rights, whenever officials of
the corporation refuse to sue or are the ones to be sued or hold the control of
the corporation. In such actions, the
suing stockholder is regarded as the nominal party, with the corporation as the
party in interest.[66]
The
afore-quoted exposition is relevant considering the claim of respondents
Miguel, et al., that its Complaint in
Civil Case No. 07-610 is not just a derivative suit, but also an intracorporate
action arising from devices or schemes employed by the PRCI Board of Directors
amounting to fraud or misrepresentation.[67] A thorough study of the said Complaint,
however, reveals that the distinction is deceptive. The supposed devices and schemes employed by
the PRCI Board of Directors amounting to fraud or misrepresentation are the
very same bases for the derivative suit.
They are the very same acts of the PRCI Board of Directors that have supposedly
caused injury to the corporation. From
the very beginning of their Complaint, respondents have alleged that they are
filing the same “as shareholders, for and in behalf of the Corporation, in
order to redress the wrongs committed against the Corporation and to protect or
vindicate corporate rights, and to prevent wastage and dissipation of corporate
funds and assets and the further commission of illegal acts by the Board of
Directors.” Although respondents Miguel,
et al., also aver that they are
seeking “redress for the injuries of the minority stockholders against the
wrongdoings of the majority,” the rest of the Complaint does not bear this out,
and is utterly lacking any allegation of injury personal to them or a certain
class of stockholders to which they belong.[68]
Indeed,
the Court notes American jurisprudence to the effect that a derivative suit, on
one hand, and individual and class suits, on the other, are mutually exclusive,
viz:
As the Supreme Court has explained: “A shareholder's
derivative suit seeks to recover for the benefit of the corporation and its
whole body of shareholders when injury is caused to the corporation that may
not otherwise be redressed because of failure of the corporation to act. Thus,
‘the action is derivative, i.e., in the corporate right, if the gravamen of the
complaint is injury to the corporation, or to the whole body of its stock and
property without any severance or distribution among individual holders, or it
seeks to recover assets for the corporation or to prevent the dissipation of
its assets.’ [Citations.]” (Jones, supra,
1 Cal.3d 93, 106, 81 Cal.Rptr. 592, 460 P.2d 464.) In contrast, “a direct action [is one]
filed by the shareholder individually (or on behalf of a class of
shareholders to which he or she belongs) for injury to his or her interest as a
shareholder. ... [¶] ... [T]he
two actions are mutually exclusive: i.e.,
the right of action and recovery belongs to either the shareholders
(direct action) *651 or the corporation
(derivative action).” (Friedman, Cal. Practice Guide: Corporations, supra,
¶ 6:598, p. 6-127.)
Thus,
in Nelson v. Anderson (1999) 72
Cal.App.4th 111, 84 Cal.Rptr.2d 753, the **289 minority shareholder
alleged that the other shareholder of the corporation negligently managed the
business, resulting in its total failure. (Id.
at p. 125, 84 Cal.Rptr.2d 753) The appellate court concluded that the plaintiff
could not maintain the suit as a direct action: “Because the gravamen of the
complaint is injury to the whole body of its stockholders, it was for the
corporation to institute and maintain a remedial action. [Citation.] A
derivative action would have been appropriate if its responsible officials had
refused or failed to act.” (Id. at
pp. 125-126, 84 Cal.Rptr.2d 753) The
court went on to note that the damages shown at trial were the loss of
corporate profits. (Id. at p. 126, 84 Cal.Rptr.2d 753) Since “[s]hareholders own neither the property
nor the earnings of the corporation,” any damages that the plaintiff alleged
that resulted from such loss of corporate profits “were incidental to the
injury to the corporation.”[69]
Based on
allegations in the Complaint of Miguel, et
al., in Civil Case No. 07-610, the Court determines that there is only a
derivative suit, based on the devices and schemes employed by the PRCI Board of
Directors that amounts to mismanagement, misrepresentation, fraud, and bad
faith.
At the
crux of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 is their dissent from the passage
by the majority of the PRCI Board of Directors of the “disputed resolutions,”
particularly: (1) the Resolution dated 26 September 2006, authorizing the
acquisition by PRCI of up to 100% of the common shares of JTH; and (2) the
Resolution dated 11 May 2007, approving the property-for-shares exchange
between PRCI and JTH.
Derivative suit (re:
acquisition of JTH)
It is important for the Court to mention that the 26
September 2006 Resolution of the PRCI Board of Directors not only authorized
the acquisition by PRCI of up to 100% of the common stock of JTH, but it also
specifically appointed petitioner Santiago Sr.[70]
to act as attorney-in-fact and proxy who could vote all the shares of PRCI in
JTH, as well as nominate, appoint, and vote into office directors and/or
officers during regular and special stockholders’ meetings of JTH. It was by this authority that PRCI directors
were able to constitute the JTH Board of Directors. Thus, the protest of respondents Miguel, et al., against the interlocking directors
of PRCI and JTH is also rooted in the
After a
careful study of the allegations concerning this derivative suit, the Court
rules that it is dismissible for being moot and academic.
That a
court will not sit for the purpose of trying moot cases and spend its time in
deciding questions, the resolution of which cannot in any way affect the rights
of the person or persons presenting them, is well settled. Where the
issues have become moot and academic, there is no justiciable controversy,
thereby rendering the resolution of the same of no practical use or value.[71]
The Resolution dated
Respondents
Miguel, et al., instituted Civil Case
No. 07-610 only on
In fact,
if the derivative suit, insofar as it concerns the Resolution dated 26
September 2006 of the PRCI Board of Directors, is not dismissible for mootness,
it is still vulnerable to dismissal for failure to implead indispensable
parties, namely, the majority of the PRCI stockholders.
Under
Rule 3, Section 7 of the Rules of Court, an indispensable party is a party-in-interest,
without whom there can be no final determination of an action. The interests of such indispensable party in
the subject matter of the suit and the relief are so bound with those of the
other parties that his legal presence as a party to the proceeding is an
absolute necessity. As a rule, an
indispensable party’s interest in the subject matter is such that a complete
and efficient determination of the equities and rights of the parties is not
possible if he is not joined.[74]
The
majority of the stockholders of PRCI are indispensable parties to Civil Case
No. 07-610, for they have approved and ratified, during the Special
Stockholders’ Meeting on
Respondents
Miguel, et al., cannot simply assert
that the majority of the PRCI Board of Directors named as defendants in Civil
Case No. 07-610 are also the PRCI majority stockholders, because respondents
Miguel, et al., explicitly impleaded
said defendants in their capacity as directors of PRCI and/or JTH, not as
stockholders.
Derivative suit (re:
property-for-shares exchange)
The derivative suit, with respect to the Resolution dated
The Court has recognized that a stockholder’s right to
institute a derivative suit is not based on any express provision of the
Corporation Code, or even the Securities Regulation Code, but is impliedly
recognized when the said laws make corporate directors or officers liable for
damages suffered by the corporation and its stockholders for violation of their
fiduciary duties. In effect, the suit is
an action for specific performance of an obligation, owed by the corporation to
the stockholders, to assist its rights of action when the corporation has been
put in default by the wrongful refusal of the directors or management to adopt suitable
measures for its protection. The basis of a stockholder’s suit is always one of
equity. However, it cannot prosper
without first complying with the legal requisites for its institution.[75]
Rule
8, Section 1 of the Interim Rules of Procedure for Intra-Corporate
Controversies (IRPICC) lays down the following requirements which a stockholder
must comply with in filing a derivative suit:
Sec. 1. Derivative action. – A stockholder or member may bring an action in the name of a corporation or association, as the case may be, provided, that:
(1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of; and
(4) The suit is not a nuisance or harassment suit. (Emphasis ours.)
In their
Complaint before the RTC in Civil Case No. 07-610, respondents Miguel, et al., made no mention at all of
appraisal rights, which could or could not have been available to them. In their Comment on the Petitions at bar,
respondents Miguel, et al., contend
that there are no appraisal rights available for the acts complained of, since
(1) the PRCI directors are being charged with mismanagement, misrepresentation,
fraud, and breach of fiduciary duties, which are not subject to appraisal
rights; (2) appraisal rights will only obtain for acts of the Board of
Directors in good faith; and (3) appraisal rights may be exercised by a
stockholder who shall have voted against the proposed corporate action, and no
corporate action has yet been taken herein by PRCI stockholders, who still have
not voted on the intended property-for-shares exchange between PRCI and JTH.
The Court disagrees.
It bears
to point out that every derivative suit is necessarily grounded on an alleged
violation by the board of directors of its fiduciary duties, committed by
mismanagement, misrepresentation, or fraud, with the latter two situations
already implying bad faith. If the Court
upholds the position of respondents Miguel, et
al. – that the existence of mismanagement, misrepresentation, fraud, and/or
bad faith renders the right of appraisal unavailable – it would give rise to an
absurd situation. Inevitably, appraisal
rights would be unavailable in any derivative suit. This renders the requirement in Rule 8,
Section 1(3) of the IPRICC superfluous and effectively inoperative;
and in contravention of an elementary rule of legal hermeneutics that effect
must be given to every word, clause, and sentence of the statute, and that a
statute should be so interpreted that no part thereof becomes inoperative or
superfluous.[76]
The
import of establishing the availability or unavailability of appraisal rights
to the minority stockholder is further highlighted by the fact that it is one
of the factors in determining whether or not a complaint involving an
intra-corporate controversy is a nuisance and harassment suit. Section 1(b), Rule 1 of IRPICC provides:
(b) Prohibition
against nuisance and harassment suits. - Nuisance and harassment suits are
prohibited. In determining whether a suit is a nuisance or harassment suit, the
court shall consider, among others, the following:
(1) The extent of the shareholding or interest of the
initiating stockholder or member;
(2) Subject matter of the suit;
(3) Legal and factual basis of the complaint;
(4) Availability of appraisal rights for the act or acts complained of; and
(5) Prejudice or damage to the corporation, partnership, or association in relation to the relief sought. [Emphasis ours.]
In case of nuisance or harassment suits, the court may,
motu proprio or upon motion, forthwith dismiss the case.
The
availability or unavailability of appraisal rights should be objectively based
on the subject matter of the complaint, i.e.,
the specific act or acts performed by the board of directors, without regard to
the subjective conclusion of the minority stockholder instituting the
derivative suit that such act constituted mismanagement, misrepresentation,
fraud, or bad faith.
The raison d’etre for the grant of appraisal
rights to minority stockholders has been explained thus:
x x x [Appraisal right] means that a stockholder who
dissented and voted against the proposed corporate action, may choose to get
out of the corporation by demanding payment of the fair market value of his
shares. When a person invests in the
stocks of a corporation, he subjects his investment to all the risks of the
business and cannot just pull out such investment should the business not come
out as he expected. He will have to wait
until the corporation is finally dissolved before he can get back his
investment, and even then, only if sufficient assets are left after paying all
corporate creditors. His only way out
before dissolution is to sell his shares should he find a willing buyer. If there is no buyer, then he has no recourse
but to stay with the corporation. However, in certain specified instances,
the Code grants the stockholder the right to get out of the corporation even
before its dissolution because there has been a major change in his contract of
investment with which he does not agree and which the law presumes he did not
foresee when he bought his shares. Since
the will of two-thirds of the stocks will have to prevail over his objections,
the law considers it only fair to allow him to get back his investment and
withdraw from the corporation. x x x,[77]
(Emphasis ours.)
The
Corporation Code expressly made appraisal rights available to the dissenting
stockholder in the following instances:
Sec. 42. Power to invest corporate funds in another
corporation or business or for any other purpose. – Subject to the
provisions of this Code, a private corporation may invest its funds in any
other corporation or business or for any purpose other than the primary purpose
for which it was organized when approved by a majority of the board of
directors or trustees and ratified by the stockholders representing at least
two-thirds (2/3) of the outstanding capital stock, or by at least two-thirds
(2/3) of the members in case of non-stock corporations, at a stockholders’ or
members’ meeting duly called for the purpose.
Written notice of the proposed investment and the time and place of the
meeting shall be addressed to each stockholder or member at his place of
residence as shown on the books of the corporation and deposited to the
addressee in the post office with postage prepaid, or served personally; Provided, That any dissenting stockholder shall have appraisal right as
provided in this Code: Provided, however,
That where the investment by the corporation is reasonably necessary to
accomplish its primary purpose as stated in the articles of incorporation, the
approval of the stockholders or members shall not be necessary.
Sec. 81. Instances of appraisal right. – Any
stockholder of a corporation shall have the right to dissent and demand payment of the fair value of his shares
in the following instances:
1. In case any amendment to the articles of incorporation has the
effect of changing or restricting the rights of any stockholders or class of
shares, or of authorizing preferences in any respect superior to those of
outstanding shares of any class, or of extending or shortening the term of
corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or
other disposition of all or substantially all of the corporate property and
assets as provided in this Code; and
3. In case of merger or consolidation. (Emphasis ours.)
Respondents
Miguel, et al., themselves admitted
that the property-for-shares exchange between PRCI and JTH, approved by majority
of the PRCI Board of Directors in the Resolution dated 11 May 2007, involved
all or substantially all of the properties and assets of PRCI. They alleged in their Complaint in Civil Case
No. 07-610 that:
49. The Corporation’s Makati Property, consisting of prime
property in the heart of
50. The exchange of the Corporation’s property for JTH shares
would therefore constitute a sale of
substantially all of the assets of the corporation. (Emphasis ours.)
Irrefragably, the property-for-shares exchange between PRCI
and JTH, involving as it did substantially all of the properties and assets of
PRCI, qualified as one of the instances when dissenting stockholders, such as
respondents Miguel, et al., could
have exercised their appraisal rights.
The
Court finds specious the averment of respondents Miguel, et al., that appraisal rights were not available to them, because
appraisal rights may only be exercised by stockholders who had voted against
the proposed corporate action; and that at the time respondents Miguel, et al., instituted Civil Case No. 07-610,
PRCI stockholders had yet to vote on the intended property-for-shares exchange
between PRCI and JTH. Respondents
Miguel, et al., themselves caused the
unavailability of appraisal rights by filing the Complaint in Civil Case No.
07-610, in which they prayed that the 11 May 2007 Resolution of the Board of
Directors approving the property-for-shares exchange between PRCI and JTH be
declared null and void, even before the said Resolution could be presented to
the PRCI stockholders for approval or rejection. More than anything, the argument of
respondents Miguel, et al., raises
questions of whether their derivative suit was prematurely filed for they had
failed to exert all reasonable efforts to exhaust all other remedies available under the articles of incorporation,
by-laws, laws, or rules governing the corporation or partnership, as required
by Rule 8, Section 1(2) of the IRPICC.
The obvious intent behind the rule is to make the derivative suit the
final recourse of the stockholder, after all other remedies to obtain the
relief sought have failed.[78]
Personal action for inspection of corporate books and records
Respondents Miguel, et
al., allege another cause of action, other than the derivative suit -- the
violation of their right to information relative to the disputed Resolutions, i.e., the Resolutions dated
Rule 7
of the IRPICC shall apply to disputes exclusively involving the rights of
stockholders or members to inspect the books and records and/or to be furnished
with the financial statements of a corporation, under Sections 74[79]
and 75[80]
of the Corporation Code.[81]
Rule 7,
Section 2 of IRPICC enumerates the requirements particular to a complaint for
inspection of corporate books and records:
Sec. 2. Complaint. - In addition to the requirements in section 4, Rule 2 of these Rules, the complaint must state the following:
(1) The case is for the enforcement of plaintiff's
right of inspection of corporate orders or records and/or to be furnished with
financial statements under Sections 74 and 75 of the Corporation Code of the
(2) A demand for inspection and copying of books and records and/or to be furnished with financial statements made by the plaintiff upon defendant;
(3) The refusal of defendant to grant the demands of the plaintiff and the reasons given for such refusals, if any; and
(4) The reasons why the refusal of defendant to grant the demands of the plaintiff is unjustified and illegal, stating the law and jurisprudence in support thereof. (Emphasis ours.)
As has already been previously established herein, the
right to information, which includes the right to inspect corporate books and
records, is a right personal to each stockholder. After a closer reading of the Complaint in
Civil Case No. 07-610, the Court observes that only respondent Dulay actually
made a demand for a copy of “all the records, documents, contracts, and
agreements, emails, letters, correspondences, relative to the acquisition of
JTH x x x.” There is no allegation that
his co-respondents (who are his co-plaintiffs in Civil Case No. 07-610) made
similar demands for the inspection or copying of corporate books and
records. Only respondent Dulay complied then
with the requirement under Rule 7, Section 2(2) of IRPICC.
Even so, respondent Dulay’s Complaint should be dismissed
for lack of cause of action, for his demand for copies of pertinent documents
relative to the acquisition of JTH shares was not denied by any of the defendants
named in the Complaint in Civil Case No. 07-610, but by Atty. Jesulito A.
Manalo (Manalo), the Corporate Secretary of PRCI, in a letter dated 17 January
2006. Section 74 of the Corporation
Code, the substantive law on which respondent Dulay’s Complaint for inspection
and copying of corporate books and records is based, states that:
Sec. 74. Books to be kept; stock transfer agent. –
x
x x x
Any officer or
agent of the corporation who shall refuse to allow any director, trustees,
stockholder or member of the corporation to examine and copy excerpts from its
records or minutes, in accordance with the provisions of this Code, shall be liable to such director,
trustee, stockholder or member for damages, and in addition, shall be guilty of
an offense which shall be punishable under Section 144 of this Code: Provided,
That if such refusal is pursuant to a resolution or order of the Board of
Directors or Trustees, the liability under this section for such action shall
be imposed upon the directors or trustees who voted for such refusal: x x x
(Emphasis ours.)
Based on the foregoing, it is Corporate Secretary Manalo
who should be held liable for the supposedly wrongful and unreasonable denial
of respondent Dulay’s demand for inspection and copying of corporate books and
records; but, as previously mentioned, Corporate Secretary Manalo is not among
the defendants named in the Complaint in Civil Case No. 07-610. There is also utter lack of any allegation in
the Complaint that Corporate Secretary Manalo denied respondent Dulay’s demand
pursuant to a resolution or order of the PRCI Directors, so that the latter
(who are actually named defendants in the Complaint) could also be held liable
for the denial.
Supervening events
During the pendency of the cases at bar, supervening events
took place that further justified the dismissal of Civil Case No. 07-610 for
already being moot and academic.
First, during the 2008 Annual
Stockholders’ Meeting of PRCI, held on 18 June 2008, the following agenda items
were finally presented to the stockholders, who approved and ratified the same
by a majority vote: (1) the Minutes of the Special Stockholders’ Meeting dated
7 November 2006, during which the majority of the stockholders approved and
ratified the acquisition of JTH by PRCI; (2) the acts of the Board of
Directors, the Executive Committee, and the Management of PRCI for 2006, which
included the acquisition of JTH by PRCI; and (3) the planned
property-for-shares exchange between PRCI and JTH. Even respondents Miguel, et al.,
themselves admitted in their Comment with Prayer for the Immediate Lifting or
Dissolution of the Temporary Restraining Order in G.R. No. 182008 that:
12. Indeed, the approval and/or ratification of the transfer of
PRCI’s Sta. Ana racetrack property to JTH during the upcoming stockholders’
meeting would render nugatory, moot and academic the action and proceedings
before the Regional Trial Court of Makati, Branch 149, inasmuch as the acts
assailed by private respondents would have already been consummated by such
approval and/or ratification.
13. In the same vein, such approval and/or ratification during the
forthcoming PRCI stockholder’s (sic) meeting would likewise render moot and
academic the proceedings before this Honorable Court in that it would have
effectively granted the reliefs sought by herein petitioner even before this
Honorable Court could finally rule on
the propriety of the Court of Appeals’ Decision/Resolution by herein petitioners.[82]
Second, although already approved and
ratified by majority vote of the PRCI stockholders, and PRCI and JTH executed a
Deed of Transfer with Subscription Agreement on 7 July 2008 to effect the
property-for-shares exchange between the two corporations, the controversial
transaction will no longer push through.
A major consideration for the exchange is that it will be tax-free; but
the BIR ruled that such transaction shall be subject to VAT. Resultantly, PRCI and JTH executed on
Civil Case No.
08-458
The very
nature of Civil Case No. 07-610 as a derivative suit bars Civil Case No. 08-458
and warrants the latter’s dismissal.
In Chua v. Court of Appeals,[83]
the Court stresses that the corporation is the real party in interest in a
derivative suit, and the suing stockholder is only a nominal party:
An individual stockholder is permitted to institute a
derivative suit on behalf of the corporation wherein he holds stocks in order
to protect or vindicate corporate rights, whenever the officials of the
corporation refuse to sue, or are the ones to be sued, or hold the control of
the corporation. In such actions, the
suing stockholder is regarded as a nominal party, with the corporation as the
real party in interest.
x x x
x
x x x For a derivative suit to prosper, it is required
that the minority stockholder suing for and on behalf of the corporation must
allege in his complaint that he is suing
on a derivative cause of action on behalf of the corporation and all other
stockholders similarly situated who may wish to join him in the suit.
It is a condition sine qua non that
the corporation be impleaded as a party because not only is the corporation an
indispensable party, but it is also the present rule that it must be served
with process. The judgment must be made
binding upon the corporation in order that the corporation may get the benefit
of the suit and may not bring subsequent
suit against the same defendants for the same cause of action. In other words, the corporation must be
joined as party because it is its cause
of action that is being litigated and because judgment must be a res adjudicata against it. (Emphases
ours.)
The more extensive discussion by the Court of the nature of
a derivative suit in Asset Privatization
Trust v. Court of Appeals[84]
is presented below:
Settled is the doctrine that in a derivative suit, the
corporation is the real party in interest while the stockholder filing suit for
the corporation’s behalf is only a nominal party. The corporation should be included as a party
in the suit.
An individual stockholder is permitted to institute a
derivative suit on behalf of the corporation wherein he holds stock in order to
protect or vindicate corporate rights, whenever the officials of the
corporation refuse to sue, or are the ones to be sued or hold the control of
the corporation. In such actions, the
suing stockholder is regarded as a nominal party, with the corporation as the
real party in interest. x x x.
It is a condition sine
qua non that the corporation be impleaded as a party because-
x x x. Not only
is the corporation an indispensable party, but it is also the present rule that
it must be served with process. The
reason given is that the judgment must be made binding upon the corporation and
in order that the corporation may get the benefit of the suit and may not bring
a subsequent suit against the same defendants for the same cause of
action. In other words the corporations
must be joined as party because it is its cause of action that is being
litigated and because judgment must be a res
ajudicata against it.
The reasons given for
not allowing direct individual suit are:
(1) x x x “the universally recognized doctrine that a
stockholder in a corporation has no
title legal or equitable to the corporate property; that both of these are
in the corporation itself for the benefit of the stockholders.” In other words, to allow shareholders to sue separately would conflict with the
separate corporate entity principle;
(2) x x x that the prior rights of the creditors may
be prejudiced. Thus, our Supreme Court
held in the case of Evangelista v. Santos,
that “the stockholders may not directly claim those damages for themselves for
that would result in the appropriation by, and the distribution among them of
part of the corporate assets before the dissolution of the corporation and the
liquidation of its debts and liabilities, something which cannot be legally
done in view of Section 16 of the Corporation Law xxx;”
(3) the filing of such suits would conflict with the
duty of the management to sue for the protection of all concerned;
(4) it would produce
wasteful multiplicity of suits; and
(5) it would involve confusion in ascertaining the
effect of partial recovery by an individual on the damages recoverable by the
corporation for the same act.
As established in the foregoing jurisprudence, in a
derivative suit, it is the corporation that is the indispensable party, while
the suing stockholder is just a nominal party.
Under Rule 7, Section 3 of the Rules of Court, an indispensable party is
a party-in-interest, without whom no final determination can be had of an
action without that party being impleaded.
Indispensable parties are those with such an interest in the controversy
that a final decree would necessarily affect their rights, so that the court
cannot proceed without their presence. “Interest,” within the meaning of this
rule, should be material, directly in issue, and to be affected by the decree,
as distinguished from a mere incidental interest in the question involved. On the other hand, a nominal or pro forma party is one who is joined as
a plaintiff or defendant, not because such party has any real interest in the
subject matter or because any relief is demanded, but merely because the
technical rules of pleadings require the presence of such party on the record.[85]
With the corporation as the real party-in-interest and the
indispensable party, any ruling in one of the derivative suits should already
bind the corporation as res judicata
in the other. Allowing two different
minority stockholders to institute separate derivative suits arising from the
same factual background, alleging the same causes of action, and praying for
the same reliefs, is tantamount to allowing the corporation, the real
party-in-interest, to file the same suit twice, resulting in the violation of
the rules against a multiplicity of suits and even forum-shopping. It is also in disregard of the separate-corporate-entity
principle, because it is to look beyond the corporation and to give recognition
to the different identities of the stockholders instituting the derivative
suits.
It is for these reasons that the derivative suit, Civil
Case No. 08-458, although filed by a different set of minority stockholders
from those in Civil Case No. 07-610, should still not be allowed to
proceed.
Furthermore,
the highly suspicious circumstances surrounding the institution of Civil Case
No. 08-458 are not lost upon the Court.
To recall, on 9 April 2008, the Court already issued in G.R. No. 182008
a TRO enjoining the execution and enforcement of the writ of permanent
injunction issued by the RTC in Civil Case No. 07-610, which prevented the PRCI
Board of Directors from presenting to the PRCI stockholders at the Annual
Stockholders’ Meeting, for approval and ratification, the agenda items on the
acquisition by PRCI of JTH shares and the property-for-shares exchange between
PRCI and JTH. The Complaint in Civil
Case No. 08-458 was filed with the RTC on 16 June 2008, just two days before
the scheduled Annual Stockholders’ Meeting on 18 June 2008, where the items
subject of the permanent injunction were again included in the agenda. The 72-hour TRO issued by the RTC in Civil
Case No. 08-458 enjoined the very same acts covered by the writ of permanent
injunction issued by the RTC in Civil Case No. 07-610, the execution and
enforcement of which, in turn, was already enjoined by the TRO dated 9 April
2008 of this Court. Considering that it
is PRCI which is the real party-in-interest in both Civil Cases No. 07-610 and
No. 08-458, then its acquisition in the latter of a TRO exactly similar to the
writ of permanent injunction in the former is but an obvious attempt to
circumvent the TRO of this Court enjoining the execution and enforcement of the
permanent injunction.
Intervention of APRI
It is
also the nature of a derivative suit that prompts the Court to deny the
intervention by APRI in Civil Case No. 07-610.
Once more, the Court emphasizes that PRCI is the real party-in-interest
in Civil Case No. 07-610, not respondents Miguel, et al., whose participation therein is deemed nominal. APRI, moreover, merely echoes the position of
respondents Miguel, et al., and, hence,
renders the participation of APRI in Civil Case No. 07-610 redundant.
Also,
the main concern of APRI was the lifting of the TRO issued by this Court on 9
April 2008 and the execution and enforcement of the permanent injunction issued
by the RTC, enjoining the presentation by the PRCI Board of Directors -- at the
Annual Stockholders’ Meeting scheduled on 18 June 2008, for approval and ratification
by the stockholders – of the agenda items on the acquisition by PRCI of JTH
shares and the property-for-shares exchange between PRCI and JTH. Given that the Annual Stockholders’ Meeting
already took place on
As a final note, respondent Miguel, et al. made repeated allegations that foreigners were taking over
PRCI, and that this must be stopped to protect the Filipino stockholders. They even invoked the ruling of this Court in
Manila Prince Hotel v. Government Service
Insurance System (GSIS).[86]
Respondents
Miguel, et al., however, cannot rely
on Manila Prince Hotel as judicial precedent,
for the facts therein are far different from those in the cases at bar. The Government, through GSIS, owned Manila
Hotel Corporation (MHC), which, in turn, owned the historic Manila Hotel. The case arose from the efforts of GSIS at
privatizing MHC by holding a public bidding for 30-51% of the issued and
outstanding shares of MHC. The Court
ruled that since the Filipino corporation was able to match the higher bid made
by a foreign corporation, then preference should be given to the former, considering
that Manila Hotel had become a landmark, a living testimonial to Philippine
heritage, and part of Philippine economy and patrimony. This was in accord with the Filipino-first
policy in the 1987 Constitution.
In
contrast, PRCI is a publicly listed corporation. Its shares can be freely sold and traded to
the public, subject to regulation by the PSE and the SEC. Without any legal basis therefor, the Court
cannot be expected to allocate or impose limitations on ownership of PRCI
shares by foreigners. What is more,
PRCI, which operates and maintains a horse racetrack and conducts horse racing
and betting, can hardly claim to be “a living testimonial of Philippine
heritage,” like Manila Hotel, that would justify judicial intervention to
protect the interests of Filipino stockholders as against foreign
stockholders.
WHEREFORE, the Court
renders the following judgment:
(1) The Court GRANTS the Petitions of petitioners
(2) The Court LIFTS the TRO issued on
(3) The Court ORDERS the DISMISSAL of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 before
the RTC for lack of cause of action, failure to implead indispensable parties,
and mootness;
(4) The Court ORDERS the DISMISSAL of the Complaint of Jalane, et al., in Civil Case No. 08-458, for being in violation of the
rules on the multiplicity of suits and forum shopping; and
(5) The Court DENIES the Very Respectful Motion for Leave to
Intervene as Co-Respondent in the Petition with the attached Very Respectful
Urgent Motion to Lift Restraining Order of APRI, for redundancy and mootness.
No costs.
SO ORDERED.
|
|
MINITA V. CHICO-NAZARIOAssociate Justice |
WE
CONCUR:
Associate Justice
Chairperson
PRESBITERO J. VELASCO, JR.
Associate Justice |
ANTONIO
EDUARDO B. NACHURA Associate Justice |
|
|
|
DIOSDADO M. PERALTAAssociate Justice |
|
ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
RENATO C. CORONA
Associate Justice
Chairperson,
Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
[1] Rollo of G.R. 181455-56, pp. 45-115
[2] Rollo of G.R. No. 182008, pp. 3-94.
[3] Penned by Associate Justice Noel
G. Tijam, with Associate Justices Martin S. Villarama, Jr. and Sesinando E.
Villon, concurring, rollo of G.R. No.
181455-56, pp. 20-42; rollo of G.R.
No. 182008, pp. 95-116.
[4] Penned by Associate Justice Noel
G. Tijam, with Associate Justices Martin S. Villarama, Jr. and Sesinando E.
Villon, concurring, rollo of G.R. No.
181455-56, pp. 11-19; rollo of G.R.
No. 182008, pp. 118-126.
[5] Penned by Presiding Judge Cesar O.
Untalan, rollo of G.R. No. 181455-56,
pp. 216-223; rollo of G.R. No.
182008, pp. 159-166.
[6] Penned by Presiding Judge Cesar O.
Untalan, rollo of G.R. No. 181455-56,
pp. 482-486; rollo of G.R. No.
182008, pp. 318-322.
[7] Rollo of G.R. No. 181455-56, p. 166; rollo of G.R. No. 182008, p. 199.
[8] Rollo of G.R. No. 182008, p. 445.
[9] Of
the subscribed and paid-up capital of PRCI, P335,817,485.00 (335,817,485
shares) is owned by Filipinos and P234,040,264.00 (234,040,264 shares)
is owned by foreigners. (rollo of
G.R. No. 181455-56, p. 175; rollo of
G.R. No. 182008, p. 207).
[10] Such
as the old Rockwell Power Plant and the former campus of the International
School of Manila.
[11] JTH
was formerly engaged in a range of activities such as the distribution of
agri-chemical products, construction supplies and middle income housing through
former wholly owned units, subsidiaries and affiliates. After undergoing an internal reorganization,
the company amended its primary purpose in October 2004 from wholesale
distribution to that of a holding company. [http://jthdavies.com/index.php?option=com_content&task=view&id=12&Itemid=26].
A holding
company is a corporation that limits its business to the ownership of stock
in and the supervision of management of, other corporations. It is organized specifically to hold the
stock of other companies and ordinarily owns such a dominant interest in the
other company or companies that it can dictate policy. [http://legal-dictionary.thefreedictionary.com/
Holding+ Company]. It has
also been defined as a company that earns income from the payment of dividends,
rent or interest. The investment holding company does not produce goods or
offer services itself, and instead acts as a holding company by owning shares
of other companies. [http://www.businessdictionary.com/
definition/investment-holding-company.html].
[12] A corporation organized and
established according to the laws of the
[13] Involved
the examination of books, records, documents, assets, liabilities, and equity
of JTH.
[14] Rollo of G.R. No. 181455-56, pp.
122-123; rollo of G.R. No. 182008,
pp. 233-234.
[15] Rollo of G.R. No. 181455-56, pp. 56-57.
[16] Rollo of G.R. No. 181455-56, pp.
126-127.
[17] The
authorized capital stock of JTH was increased from P25,000,000.00
(divided into 50,000,000 common shares with a par value of P0.50 each)
to P551,000,000.00 (divided into 1,103,000,000 common shares with a par
value of P0.50 per share). Out of
the increase, P131,649,519.00 (consisting of 263,299,038 shares) were
subscribed and paid in full by way of stock dividends. The remaining unissued portion of the
increased authorized capital stock of JTH would be subscribed and paid for by PRCI
using its
[18] Rollo of G.R. No. 181455-56, pp.
129-130; rollo of G.R. No. 182008,
pp. 464-465.
[19] Rollo of G.R. No. 181455-56, p. 277; rollo of G.R. No. 182008, pp. 21.
[20] Also in his capacity as PRCI
director.
[21] Rollo of G.R. No. 181455-56, pp.
160-163; rollo of G.R. No. 182008,
pp. 194-196.
[22] Rollo of G.R. No. 181455-56, pp.
222-223; rollo of G.R. No. 182008,
pp. 165-166.
[23] Rollo
of G.R. No. 181455-56, pp. 36-37; rollo
of G.R. No. 182008, pp. 111-112.
[24] Rollo of G.R. No. 181455-56, pp. 485-486; rollo of G.R. No. 182008, pp. 321-322.
[25] Rollo
of G.R. No. 181455-56, pp. 442-481.
[26] Rollo
of G.R. No. 182008, pp. 268-314.
[27] Ibid., pp. 323-326.
[28] Rollo of G.R. No. 181455-56, p. 109.
[29]
[30] Rollo of G.R. No. 182008, pp. 86-88.
[31]
[32]
[33]
[34]
[35]
[36]
[37] Rollo
of G.R. No. 181455-56, p. 499; rollo
of G.R. No. 182008, p. 352.
[38] Rollo
of G.R. No. 182008, pp. 557-569.
[39] Rollo
of G.R. No. 181455-56, p. 673-724.
[40] Rollo
of G.R. No. 181455-56, p. 732.
[41] As regards the second cause of
action, Jalane, et al. alleged that
after PRCI acquired 41,928,290 shares or 98.19% of the outstanding capital
stock of JTH for P10.71 per share, the PRCI Board of Directors suddenly
authorized the following sales: (1) the sale to undisclosed persons of
2,271,508 shares or 5.18% of the outstanding capital stock of JTH in April 2007
for P6.60 per share; and (2) the sale again to undisclosed persons of
10,726,000 shares or 24.44% of the outstanding capital stock of JTH on 7 May
2007 for P6.65 per share. As a
result of such sales, the ownership of PRCI in JTH was reduced to only 69.57%;
the remaining 31.43% interest in JTH now belonged to “other” stockholders.
[42] Rollo
of G.R. No. 181455-56, p. 748.
[43] Rollo of G.R. No. 182008, pp. 632-637.
[44]
[45]
[46] Rollo of G.R. No. 181455-56,
pp. 765-772.
[47]
[48] Atty.
Dimayuga is related to Judge Untalan’s daughter-in-law.
[49] Rollo
of G.R. No. 181455-56, p. 691.
[50] Rollo of G.R. No. 182008, pp. 594-626.
[51]
[52] By
virtue of a Special Power of Attorney executed by petitioner Santiago Sr. in
favor of petitioners Santiago Jr. and/or Solomon, notarized on
[53] Rollo
of G.R. No. 182008, p. 89.
[54] MSF
Tire and Rubber, Inc. v. Court of Appeals, 370 Phil. 824, 832 (1999).
[55] La Campana Development Corporation v. See,
G.R. No. 149195,
[56] See
Ateneo de Naga University v. Manalo,
G.R. No. 160455,
[57] In-N-Out Burger, Inc. v. Sehwani,
Incorporated, G.R. No.
179127,
[58] Fortune Guarantee and Insurance Corporation
v. Court of Appeals, 428 Phil. 783, 791 (2002).
[59]
[60] Coronel v. Desierto, 448 Phil. 894, 903
(2003).
[61] Philippine Stock Exchange v. Court of
Appeals, 346 Phil. 218, 234 (1997).
[62] Filipinas Port Services, Inc. v. Go, G.R. No. 161886 ,
[63] Jose
Campos, Jr. and Maria Clara L. Campos, The Corporation Code: Comments, Notes
and Selected Cases (1990 ed.), Vol. I, p. 341.
[64] Angeles v.
[65]
[66] Jose Campos, Jr. and Maria Clara L. Campos, The Corporation Code:
Comments, Notes and Selected Cases (1990 ed.), Vol. I, pp. 819-820.
[67] The Interim Rules of Procedure on Intra-Corporate Controversies (IRPICC) shall apply to the following cases:
Rule 1.
Section 1. (a) Cases covered. - These Rules shall govern the procedure to be observed in civil cases involving the following:
(1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association;
(2) Controversies arising out of
intra-corporate, partnership, or association relations, between and among
stockholders, members, or associates; and between, any or all of them and the
corporation, partnership, or association of which they are stockholders,
members or associates, respectively;
(3) Controversies in the election or
appointment of directors, trustees, officers, or managers of corporations,
partnerships, or associations;
(4) Derivative suits; and
(5)
Inspection of corporate books.
[69]
[70] Followed by several other
individuals as his substitute, in case he is not available.
[71] Delgado v. Court of Appeals, G.R. No.
137881,
[72] Only the approval of the Minutes of
the Special Stockholders’ Meeting on
[73] “Ratification” means that the
principal voluntarily adopts, confirms and gives sanction to some unauthorized
act of its agent on its behalf. It is this voluntary choice, knowingly made, that
amounts to a ratification of what was theretofore unauthorized and becomes the
authorized act of the party so making the ratification. The substance of the
doctrine is confirmation after conduct, amounting to a substitute for a prior
authority. Ratification can be made either expressly or impliedly. (Yasuma v. Heirs of Cecilio S. De Villa, G.R. No. 150350, 22 August 2006, 499 SCRA 466,
471-472.)
[74]
[75] Bitong
v. Court of Appeals, 354 Phil. 516, 545 (1998).
[76]
[77] Jose Campos, Jr. and Maria Clara L. Campos, The Corporation Code:
Comments, Notes and Selected Cases (1990 ed.), Vol. I, pp. 501-502.
[78] Yu v. Yukayguan, G.R. No. 177549,
[79] Sec. 74.
Books to be kept; stock transfer agent. - Every
corporation shall, at its principal office, keep and carefully preserve a
record of all business transactions and minutes of all meetings of stockholders
or members, or of the board of directors or trustees, in which shall be set
forth in detail the time and place of holding the meeting, how authorized, the
notice given, whether the meeting was regular or special, if special its object,
those present and absent, and every act done or ordered done at the meeting.
Upon the demand of any director, trustee, stockholder or member, the time when
any director, trustee, stockholder or member entered or left the meeting must
be noted in the minutes; and on a similar demand, the yeas and nays must be
taken on any motion or proposition, and a record thereof carefully made. The
protest of any director, trustee, stockholder or member on any action or
proposed action must be recorded in full on his demand.
The records of all business transactions of the
corporation and the minutes of any meetings shall be open to the inspection by
any director, trustee, stockholder or member of the corporation at reasonable
hours on business days and he may demand, in writing, for a copy of excerpts
from said records or minutes, at his expense.
Any officer or agent of the corporation who shall
refuse to allow any director, trustee, stockholder or member of the corporation
to examine and copy excerpts from its records or minutes, in accordance with
the provisions of this Code, shall be liable to such director, trustee,
stockholder or member for damages, and in addition, shall be guilty of an
offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is
pursuant to a resolution or order of the board of directors or trustees, the
liability under this section for such action shall be imposed upon the
directors or trustees who voted for such refusal: and Provided, further, That
it shall be a defense to any action under this section that the person
demanding to examine and copy excerpts from the corporation's records and
minutes has improperly used any information secured through any prior
examination of the records or minutes of such corporation or of any other
corporation, or was not acting in good faith or for a legitimate purpose in
making his demand.
Stock corporations must also keep a book to be known
as the "stock and transfer book," in which must be kept a record of
all stocks in the names of the stockholders alphabetically arranged; the
installments paid and unpaid on all stocks for which subscription has been
made, and the date of payment of any installment; a statement of every
alienation, sale or transfer of stock made, the date thereof, and by and to
whom made; and such other entries as the by-laws may prescribe. The stock and
transfer book shall be kept in the principal office of the corporation or in
the office of its stock transfer agent and shall be open for inspection of any
director or stockholder of the corporation at reasonable hours on business
days.
No stock transfer agent or one engaged principally in
the business of registering transfer of stocks in behalf of a stock corporation
shall be allowed to operate in the Philippines unless he secures a license from
the Securities and Exchange Commission and pays a fee as may be fixed by the
Commission, which shall be renewable annually: Provided, That a stock corporation is not precluded from performing
or making transfer of its own stocks, in which case all the rules and
regulations imposed on stock transfer agents, except the payment of a license
fee herein provided, shall be applicable. (51a and 32a; B. P. No. 268.)
[80] Sec. 75. Right
to financial statements. - Within ten (10) days from receipt of a
written request of any stockholder or member, the corporation shall furnish to
him its most recent financial statement, which shall include a balance sheet as
of the end of the last taxable year and a profit or loss statement for said
taxable year, showing in reasonable detail its assets and liabilities and the
result of its operations.
At the
regular meeting of stockholders or members, the board of directors or trustees
shall present to such stockholders or members a financial report of the
operations of the corporation for the preceding year, which shall include
financial statements, duly signed and certified by an independent certified
public accountant.
However,
if the paid-up capital of the corporation is less than P50,000.00, the
financial statements may be certified under oath by the treasurer or any
responsible officer of the corporation. (n)
[81] Rule
7, Section 1 of IPRICC.
[82] Rollo of G.R No. 182008, p. 366.
[83] G.R.
No. 150793,
[84] 360
Phil. 768, 804-806 (1998).
[85] Samaniego v. Aguila, 389 Phil. 782, 787
(2000).
[86] 335
Phil. 82 (1997).