Republic of the
Supreme Court
|
Petitioners,
- versus - AMELIA P.
MUER, SAMUEL M. TANCHOCO, ROMEO TANKIANG, RUDEL PANGANIBAN, DOLORES AGBAYANI,
ARLENEDAL A. YASUMA, GODOFREDO M. CAGUIOA and EDGARDO M. SALANDANAN, Respondents. |
G.R. No. 170783 Present: PERALTA, J.,
Acting Chairperson,* BERSAMIN,** ABAD, VILLARAMA,
JR.,*** and PERLAS-BERNABE,
JJ. Promulgated: June 18, 2012 |
x-----------------------------------------------------------------------------------------x
D E C I S I O N
PERALTA, J.:
This
is a petition for review on certiorari
of the Court of Appeals Decision[1]
dated July 22, 2005 in CA-G.R. CV No. 87684, and its Resolution[2]
dated November 24, 2005, denying petitioners motion for reconsideration.
The
Court of Appeals held that Judge Antonio I. De Castro
of the Regional Trial Court (RTC) of Manila, Branch 3, did not commit grave
abuse of discretion in issuing the Orders dated July 21, 2004 and September 24,
2004 in Civil Case No. 04-109655, denying petitioners Motion to Admit Second Amended Complaint.
The
facts, as stated by the Court of Appeals, are as follows:
Pursuant to the by-laws of Legaspi Towers 300, Inc., petitioners
Lilia Marquinez Palanca, Rosanna D. Imai, Gloria Domingo and Ray Vincent, the
incumbent Board of Directors, set the annual meeting of the members of the
condominium corporation and the election of the new Board of Directors for the
years 2004-2005 on
Out of a total
number of 5,723 members who were entitled to
vote, 1,358 were supposed to vote through their respective proxies and
their votes were critical in determining the existence of a quorum, which was
at least 2,863 (50% plus 1). The Committee on Elections of Legaspi Towers 300, Inc., however, found most of the proxy votes, at its face value, irregular,
thus, questionable; and for lack of time to authenticate the same, petitioners
adjourned the meeting for lack of quorum.
However, the
group of respondents challenged the adjournment of the meeting. Despite petitioners' insistence that no
quorum was obtained during the annual meeting held on April 2, 2004, respondents pushed through with
the scheduled election and were elected as the new Board of Directors and
officers of Legaspi Towers 300, Inc. Subsequently, they submitted a General Information Sheet to
the Securities and Exchange Commission (SEC) with the following new set of
officers: Amelia P. Muer, President; Samuel M. Tanchoco, Internal Vice President;
Romeo V. Tankiang, External Vice-President; Rudel H. Panganiban, Secretary;
Dolores B. Agbayani, Assistant Secretary; Arlenedal A. Yasuma, Treasurer; Godofredo
M. Caguioa, Assistant Treasurer; and Edgardo M. Salandanan, Internal Auditor.
On April 13, 2004, petitioners filed a Complaint for the Declaration of
Nullity of Elections with Prayers for the lssuance of Temporary Restraining
Orders and Writ of Preliminary Injunction and Damages against respondents
with the RTC of Manila. Before respondents could file an Answer to the original Complaint, petitioners filed
an Amended Complaint, which
was admitted by the RTC in an Order
dated April 14, 2004.
On
On
WHEREFORE, pursuant to administrative
Circular No. 20-95 of the
Supreme Court, a seventy-two (72) hour Temporary
Restraining Order is hereby issued, enjoining defendants from taking over
management, or to maintain a status quo,
in order to prevent further irreparable damages and prejudice to the
corporation, as day-to-day activities will be disrupted and will be paralyzed
due to the legal controversy.[3]
On the same
date,
Respondents contended that from the
proceedings of the election reported by SEC representative, Atty. Patricio, it
was clear that the election held on
This case was scheduled to be re-raffled
to regular courts on April 22, 2004, and was assigned to Judge Antonio I. De
Castro of the RTC of Manila, Branch 3 (trial court).
On
Precisely this complaint seeks to annul the election of the Board due to
alleged questionable proxy votes which could not have produced a quorum. As such, there is nothing to enjoin and so
injunction shall fail. As an answer has
been filed, the case is ripe for pre-trial and the parties are directed to file
their pre-trial briefs by
As plaintiffs second amended complaint is
admitted by the Court, defendants are given up to
On
of Directors, which had been recognized by
the trial court in its Order dated
During the pre-trial conference held on
x x x x
On plaintiffs motion to admit amended complaint
(to include Legaspi Towers 300, Inc. as plaintiff), the Court rules to deny the
motion for being improper. (A separate Order of even date is issued.) As prayed
for, movants are given 10 days from today to file a motion for reconsideration thereof,
while defendants are given 10 days from receipt thereof to reply.[8]
The second separate Order,[9] also dated July 21, 2004,
reads:
This resolves plaintiffs motion to amend complaint to include Legaspi
Towers 300, Inc. as party-plaintiff and defendants comment thereto. Finding no merit therein and for the reasons
stated in the comment, the motion is hereby DENIED.
Petitioners
filed a Motion for Reconsideration of the Orders dated July 21, 2004. In the Order[10]
dated September 24, 2004, the trial court denied the motion for reconsideration
for lack of merit.
Petitioners filed a petition for certiorari
with the Court of Appeals alleging that the trial court gravely abused its
discretion amounting to lack or excess of jurisdiction in issuing the Orders
dated July 21, 2004 and September 24, 2004, and praying that judgment be rendered
annulling the said Orders and directing RTC Judge De Castro to admit their Second
Amended Complaint.
In a Decision dated
The Court of Appeals stated that petitioners complaint sought to nullify
the election of the Board of Directors
held on
Petitioners motion
for reconsideration was denied by the Court of Appeals in a Resolution dated
Petitioners filed
this petition raising the following issues:
I
THE HONORABLE COURT OF APPEALS ERRED IN RESOLVING THAT
PUBLIC RESPONDENT-APPELLEE DID NOT COMMIT ANY WHIMSICAL, ARBITRARY AND
OPPRESSIVE EXERCISE OF JUDICIAL AUTHORITY WHEN THE LATTER REVERSED HIS EARLIER
RULING ALREADY ADMITTING THE SECOND AMENDED COMPLAINT OF PETITIONERS-APPELLANTS.
II
THERE IS NO LEGAL BASIS FOR THE HONORABLE COURT OF APPEALS TO RESOLVE THAT
PETITIONERS-APPELLANTS HAVE NO RIGHT AS BOARD OF DIRECTORS TO BRING AN ACTION
IN BEHALF OF LEGASPI TOWERS 300, INC.
III
THERE IS NO LEGAL BASIS FOR THE HONORABLE COURT OF APPEALS TO RESOLVE THAT
THE ELECTIONS CONDUCTED IN
Petitioners
contend that the Court of Appeals erred in not finding that RTC Judge Antonio
I. De Castro committed grave abuse of discretion amounting to lack or excess of
jurisdiction in denying the admission of the Second Amended Complaint in the Orders
dated July 21, 2004 and September 24, 2004, despite the fact that he had
already ordered its admission in a previous Order dated April 26, 2004.
Petitioners contention is unmeritorious.
It is clear that in the Orders dated
x x x The
word admitted in the 3rd paragraph of the Order dated April 26,
2004 should read received for which defendants were told to comment thereon
as an answer has been filed. It was an
oversight of the clerical error in said Order.
The Order of July 21, 2004 states amended
complaint in the 3rd paragraph thereof and so it does not refer to
the second amended complaint. The
amended complaint was admitted by the court of origin Br. 24 in its Order of
Nonetheless, admission
of the second amended complaint is improper.
Why should Legaspi Towers 300, Inc. x x x be included as party-plaintiff
when defendants are members thereof too
like plaintiffs. Both parties are deemed
to be acting in their personal capacities as they
both claim to be the lawful board of directors. The motion for reconsideration
for the admission of the second amended complaint is hereby DENIED.[12]
The courts have the inherent power to amend and control their processes and
orders so as to make them conformable to law and justice.[13] A judge has an inherent
right, while his judgment is still under his control, to correct errors,
mistakes, or injustices.[14]
Next, petitioners state that the Court of Appeals seems to be under the impression
that the action instituted by them is one brought forth solely by way of a
derivative suit. They clarified that the
inclusion of Legaspi Towers 300, Inc. as a party-plaintiff in the Second
Amended Complaint was, first and foremost, intended as a direct action by the
corporation acting through them (petitioners) as the reconstituted Board of
Directors of Legaspi Towers 300, Inc. Petitioners
allege that their act of including the corporation as party-plaintiff is
consistent with their position that the election conducted by respondents was
invalid; hence, petitioners, under their by-laws, could reconstitute themselves
as the Board of Directors of Legaspi Towers 300, Inc. in a hold-over capacity
for the succeeding term. By so doing, petitioners had the right as the rightful
Board of Directors to bring the action in representation of Legaspi Towers 300,
Inc. Thus, the Second Amended
Complaint was intended by the petitioners as a direct suit by the corporation
joined in by the petitioners to protect and enforce their common rights.
Petitioners
contend that Legaspi Towers 300, Inc. is a real party-in- interest as it stands
to be affected the most by the controversy, because it involves the
determination of whether or not the corporations by-laws was properly carried
out in the meeting held on April 2, 2004, when despite the adjournment of the
meeting for lack of quorum, the elections were still conducted. Although
petitioners admit that the action involves their right to vote, they argue that
it also involves the right of the condominium corporation to be managed and run
by the duly-elected Board of Directors, and to seek redress against those who
wrongfully occupy positions of the corporation and who may mismanage the
corporation.
Petitioners argument
is unmeritorious.
The Court notes that
in the Amended Complaint, petitioners as plaintiffs stated that they are the
incumbent reconstituted Board of Directors of Legaspi Towers 300, Inc., and
that defendants, herein respondents, are the newly-elected members of the Board
of Directors; while in the Second Amended Complaint, the plaintiff is Legaspi
Towers 300, Inc., represented by petitioners as the allegedly incumbent
reconstituted Board of Directors of Legaspi Towers 300, Inc.
The Second
Amended Complaint states who the plaintiffs are, thus:
1. That the plaintiffs are: LEGASPI TOWERS
300, INC., non-stock corporation xxx duly represented by the incumbent
reconstituted Board of Directors of Legaspi Towers 300, Inc., namely: ELIADORA FE BOTE VERA xxx, as President;
BRUNO C. HAMAN xxx, as Director; LILY MARQUINEZ PALANCA xxx, as Secretary;
ROSANNA DAVID IMAI xxx, as Treasurer; and members of the Board of Directors,
namely: ELIZABETH GUERRERO xxx, GLORIA DOMINGO xxx, and RAY VINCENT.[15]
The Court agrees
with the Court of Appeals that the Second Amended Complaint is meant to be a
derivative suit filed by petitioners in behalf of the corporation. The Court of
Appeals stated in its Decision that petitioners justified the inclusion of Legaspi
Towers 300, Inc. as plaintiff in Civil Case No. 0410655 by invoking the
doctrine of derivative suit, as petitioners specifically argued, thus:
x x x x
x x x [T]he sudden takeover by private respondents of the management of
Legaspi Towers 300, Inc. has only proven the rightfulness of petitioners move
to include Legaspi Towers 300, Inc. as party-plaintiff. This is because every
resolution passed by private respondents sitting as a board result[s] in
violation of Legaspi Towers 300, Inc.s
right to be managed and represented by herein petitioners.
In short, the amendment of the complaint [to include] Legaspi Towers
300, Inc. was done in order to protect the interest and enforce the right of
the Legaspi [Towers 300,] Inc. to be administered and managed [by petitioners] as
the duly constituted Board of Directors.
This is no different from and may
in fact be considered as a DERIVATIVE SUIT instituted by an individual
stockholder against those controlling the corporation but is being instituted
in the name of and for the benefit of the corporation whose right/s are being
violated.[16]
Is a derivative suit proper
in this case?
Cua, Jr. v. Tan[17] differentiates a
derivative suit and an individual/class suit as follows:
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.[18]
Since it is the corporation that is the real party-in-interest
in a derivative suit, then the reliefs prayed for must be for the benefit or
interest of the corporation.[19]
When the reliefs prayed for do not pertain to the corporation, then it is an
improper derivative suit.[20]
The
requisites for a derivative suit are as follows:
a) the party bringing suit should be a
shareholder as of the time of the act or
transaction complained of, the number of his shares not being material;
b) he has tried to exhaust intra-corporate
remedies, i.e., has made a demand on
the board of directors for the appropriate relief but the latter has failed or
refused to heed his plea; and
c)
the cause of action actually
devolves on the corporation, the wrongdoing or harm having been, or being
caused to the corporation and not to the particular stockholder bringing the
suit.[21]
In this case, petitioners, as
members of the Board of Directors of the condominium corporation before the election in question, filed a
complaint against the newly-elected members of the Board of Directors for the
years 2004-2005, questioning
the validity of the election held on April 2, 2004, as it was allegedly marred
by lack of quorum, and praying for the nullification of the said election.
As stated by the Court of Appeals, petitioners complaint
seek to nullify the said election, and to protect and enforce their individual
right to vote. Petitioners seek the nullification of the election of the Board
of Directors for the years 2004-2005, composed of herein respondents, who pushed through with
the election even if petitioners had adjourned the meeting allegedly due to
lack of quorum. Petitioners are the
injured party, whose rights to vote and to be voted upon were directly affected
by the election of the new set of board of directors. The party-in-interest are
the petitioners as stockholders, who wield such right to vote. The cause of action devolves on petitioners, not the condominium
corporation, which did not have the right to vote. Hence, the
complaint for nullification of the election is a direct action by petitioners, who were the members of the Board of Directors
of the corporation before the
election, against respondents, who are the newly-elected Board of Directors.
Under the circumstances, the derivative suit filed by petitioners in behalf of
the condominium corporation in the Second Amended Complaint is improper.
The stockholders
right to file a derivative suit is not based on any express provision of The Corporation Code, but is impliedly recognized
when the law makes corporate directors or officers liable for damages suffered
by the corporation and its stockholders for violation of their fiduciary
duties,[22] which is not the issue in
this case.
Further, petitioners
change of argument before this Court, asserting that the Second Amended
Complaint is a direct action filed by the corporation, represented by the
petitioners as the incumbent Board of Directors, is an afterthought, and lacks
merit, considering that the newly-elected Board of Directors had assumed
their function to manage corporate affairs.[23]
In fine, the Court of Appeals correctly upheld the Orders of the trial
court dated
Lastly, petitioners contend that the Court of Appeals erred in resolving
that the recent elections conducted by
The Court of Appeals, in its Resolution dated
x x x [T]he election of the corporations new set
of directors for the years 2005-2006 has, finally, rendered the petition at
bench moot and academic. As correctly
argued by private respondents, the nullification of the orders assailed by
petitioners would, therefore, be of little or no practical and legal purpose.[24]
The statement of the
Court of Appeals is correct.
Petitioners question
the validity of the election of the Board of Directors for the years 2004-2005, which election they
seek to nullify in Civil Case No. 04-109655. However, the valid election
of a new set of Board of Directors for the years
2005-2006 would, indeed, render this petition moot and academic.
WHEREFORE,
the petition is DENIED. The Decision of the Court of Appeals in
CA-G.R. CV No. 87684, dated July 22, 2005, and its Resolution dated November
24, 2005 are AFFIRMED.
Costs
against petitioners.
SO ORDERED.
DIOSDADO M.
PERALTA
Associate
Justice
WE CONCUR:
LUCAS P.
BERSAMIN
Associate
Justice
ROBERTO A. ABAD MARTIN S. VILLARAMA, JR.
Associate
Justice Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice
ATTESTATION
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.
DIOSDADO M. PERALTA
Associate
Justice
Acting Chairperson, Third Division
CERTIFICATION
I certify that the conclusion in
the above Division had been reached in consultation before the case was
assigned to the writer of the opinion of the
Court.
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The
Judiciary Act of 1948, as amended)
*
Per Special Order No. 1228 dated June 6, 2012.
** Designated
Acting Member in lieu of Associate Justice Jose Catral Mendoza, per Special
Order No. 1241 dated June 14, 2012.
*** Designated Acting Member in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order No. 1229 dated June 6, 2012.
[1] Penned
by Associate Justice Rebecca De Guia-Salvador, with Associate Justices Conrado
M. Vasquez, Jr. and Aurora Santiago-Lagman, concurring, rollo, pp. 36-49.
[2] Id. at 52-54.
[3] Records, p. 85.
[4]
[5]
[6] RTC Order dated April 26, 2004, rollo, p. 162. (Emphasis and underscoring
supplied.)
[7] CA rollo, p. 36.
[8] Rollo, p. 91.
[9] Id. at 89.
[10] Records,
p. 375.
[11] Rollo, p. 19.
[12]
[13] Sta. Maria v. Ubay, A.M. No.
595-CFI, December 11, 1978, 87 SCRA 179, 187.
[14]
[15] Records, p. 65. (Emphasis supplied.)
[16] CA Decision, rollo, pp. 42-43.
(Emphases supplied by the CA.)
[17] G.R. Nos. 181455-56 & 182008,
[18]
Id. at 690-691. (Emphases and underscoring supplied.)
[19] Cesar L. Villanueva, Philippine Corporate Law, 1998, p. 375.
[20]
[21] San
Miguel Corporation v. Kahn, G.R. No. 85339,
[22] Bitong v. Court of Appeals,
G.R. No. 123553, July 13, 1998, 292 SCRA 503, 532.
[23] Corporation Code: Sec. 36. Corporate powers and capacity. Every
corporation incorporated under this Code has the power and capacity:
To sue and be
sued in its corporate name;
x x x x
Sec. 23. The board of directors or trustees. Unless 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 to be
elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1) year
until their successors are elected and qualified.
[24] Rollo, p. 54.