Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=83692:57923&catid=1587&Itemid=566
Timestamp: 2019-04-20 08:48:45+00:00

Document:
G.R. No. 172843, September 24, 2014 - ALFREDO L. VILLAMOR, JR., Petitioner, v. JOHN S. UMALE, IN SUBSTITUTION OF HERNANDO F. BALMORES, Respondent.; G.R. NO. 172881 - RODIVAL E. REYES, HANS M. PALMA AND DOROTEO M. PANGILINAN, Petitioners, v. HERNANDO F. BALMORES, Respondent.
ALFREDO L. VILLAMOR, JR., Petitioner, v. JOHN S. UMALE, IN SUBSTITUTION OF HERNANDO F. BALMORES, Respondent.
RODIVAL E. REYES, HANS M. PALMA AND DOROTEO M. PANGILINAN, Petitioners, v. HERNANDO F. BALMORES, Respondent.
According to the Court of Appeals, the trial court abandoned its duty to the stockholders in a derivative suit when it refused to appoint a receiver or create a management committee, all during the pendency of the proceedings. The assailed order of the trial court removed from the stockholders their right, in an intra-corporate controversy, to be allowed the remedy of appointment of a receiver during the pendency of a derivative suit, leaving the corporation under the control of an outsider and its assets prone to dissipation.37 The Court of Appeals also ruled that this amounts to "despotic, capricious, or whimsical exercise of judicial power"38 on the part of the trial court.
First, we rule on the issue of whether petitioners properly filed a petition for review on certiorari under Rule 45.
Respondent Balmores argued that the petition raises questions of fact.
Under Rule 45, only questions of law may be raised.51 There is a question of law "when there is doubt or controversy as to what the law is on a certain [set] of facts."52 The test is "whether the appellate court can determine the issue-raised without reviewing or evaluating the evidence."53 Meanwhile, there is a question of fact when there is "doubt... as to the truth or falsehood of facts."54 The question must involve the examination of probative value of the evidence presented.
In this case, petitioners raise issues on the correctness of the Court of Appeals' conclusions.
Specifically, petitioners ask (1) whether respondent Balmores' failure to implead PPC in his action with the trial court was fatal; (2) whether the Court of Appeals correctly characterized respondent Balmores' action as a derivative suit; (3) whether the Court of Appeals' appointment of a management committee was proper; and (4) whether the Court of Appeals may exercise the power to appoint a management committee.
Petitioners, therefore, properly filed, a petition for review under Rule 45.
The suit is not a nuisance or harassment suit.
In case of nuisance or harassment suit, the court shall forthwith dismiss the case.
The fifth requisite for filing derivative suits, while not included in the enumeration, is implied in the first paragraph of Rule 8, Section 1 of the Interim Rules: The action brought by the stockholder or member must be "in the name of [the] corporation or association. ..." This requirement has already been settled in jurisprudence.
In the same case, this court enumerated the reasons for disallowing a direct individual suit.
Respondent Balmores' action in the trial court failed to satisfy all the requisites of a derivative suit.
Respondent Balmores failed to exhaust all available remedies to obtain the reliefs he prayed for. Though he tried to communicate with PPC's directors about the checks in Villamor's possession before he filed an action with the trial court, respondent Balmores was not able to show that this comprised -all the remedies available under the articles of incorporation, by­laws, laws, or rules governing PPC.
An allegation that appraisal rights were not available for the acts complained of is another requisite for filing derivative suits under Rule 8, Section 1(3) of the Interim Rules.
Section 82 of the Corporation Code provides that the stockholder may exercise the right if he or she voted against the proposed corporate action and if he made a written demand for payment on the corporation within thirty (30) days after the date of voting.
Respondent Balmores complained about the alleged inaction of PPC's directors in his letter informing them that Villamor should be made to deliver to PPC and account for MC Home Depot's checks or their equivalent value. He alleged that these are devices or schemes amounting to fraud or misrepresentation detrimental to the corporation's and the stockholders' interests. He also alleged that the directors' inaction placed PPC's assets in imminent and/or actual dissipation, loss, wastage, and destruction.
Granting that (a) respondent Balmores' attempt to communicate with the other PPC directors already comprised all the available remedies that he could have exhausted and (b) the corporation was under full- control of petitioners that exhaustion of remedies became impossible or futile,74 respondent Balmores failed to allege that appraisal rights were not available for the acts complained of here.
Neither did respondent Balmores implead PPC as party in the case nor did he allege that he was filing on behalf of the corporation.
Rule 1, Section 1 (a)(1) of the Interim Rules refers to acts of the board, associates, and officers, amounting to fraud or misrepresentation, which may be detrimental to the interest of the stockholders. This is different from a derivative suit.
Stockholder/s' suits based on fraudulent or wrongful acts of directors, associates, or officers may also be individual suits or class suits.
Respondent Balmores did not bring the action for the benefit of the corporation. Instead, he was alleging that the acts of PPC's directors, specifically the waiver of rights in favor of Villamor's law firm and their failure to take back the MC Home Depot checks from Villamor, were detrimental to his individual interest as a stockholder. In filing an action, therefore, his intention was to vindicate his individual interest and not PPC's or a group of stockholders'.
The essence of a derivative suit is that it must be filed on behalf of the corporation. This is because the cause of action belongs, primarily, to the corporation. The stockholder who sues on behalf of a corporation is merely a nominal party.
Respondent Balmores' intent to file an individual suit removes it from the coverage of derivative suits.
Corporations have a personality that is separate and distinct from their stockholders and directors. A wrong to the corporation does not necessarily create an individual cause of action. "A cause of action is the act or omission by which a party violates the right of another."80 A cause of action must pertain to complainant if he or she is to be entitled to the reliefs sought.
In this case, respondent Balmores did not allege any cause of action that is personal to him. His allegations are limited to the facts that PPC's directors waived their rights to rental income in favor of Villamor's law firm without consideration and that they failed to take action when Villamor refused to turn over the amounts to PPC. These are wrongs that pertain to PPC. Therefore, the cause of action belongs to PPC — not to respondent Balmores or any stockholders as individuals.
For this reason, respondent Balmores is not entitled to the reliefs sought in the complaint. Only the corporation, or arguably the stockholders as a group, is entitled to these reliefs, which should have been sought in a proper derivative suit filed on behalf of the corporation.
PPC will not be bound by a decision granting the application for the appointment of a receiver or management committee. Since it was not impleaded in the complaint, the courts did not acquire jurisdiction over it. On this matter, it is an indispensable party, without which, no final determination can be had.
Hence, it is not only respondent Balmores' failure to implead PPC that is fatal to his action, as petitioners point out. It is the fact that he alleged no cause of action that pertains personally to him that disqualifies him from the reliefs he sought in his complaint.
On this basis alone, the Court of Appeals erred in giving due course to respondent Balmores' petition for certiorari , reversing the trial court's decision, and issuing a new order placing PPC under receivership and creating an interim management committee.
Assuming that respondent Balmores has an individual cause of action, the Court of Appeals still erred in placing PPC under receivership and in creating and appointing a management committee.
Applicants for the appointment of a receiver or management committee need to establish the confluence of these two requisites. This is because appointed receivers and management committees will immediately take over the management of the corporation and will have the management powers specified in law.85 This may have a negative effect on the operations and affairs of the corporation with third parties,86 as persons who are more familiar with its operations are necessarily dislodged from their positions in favor of appointees who are strangers to the corporation's operations and affairs.
PPC waived its rights, without any consideration in favor of Villamor. The checks were already in Villamor's possession. Some of the checks may have already been encashed. This court takes judicial notice that the goodwill money of PI 8,000,000.00 and the rental payments of P4,500,000.00 every month are not meager amounts only to be waived without any consideration. It is, therefore, enough to constitute loss or dissipation of assets under the Interim Rules.
Respondent Balmores, however, failed to show that there was an imminent danger of paralysis of PPC's business operations. Apparently, PPC was- earning substantial amounts from its other sub-lessees. Respondent Balmores did not prove otherwise. He, therefore, failed to show at least one of the requisites for appointment of a receiver or management committee.
The Court of Appeals has no power to appoint a receiver or management committee. The Regional Trial Court has original and exclusive jurisdiction89 to hear and decide intra-corporate controversies,90 including incidents of such controversies.91 These incidents include applications for the appointment of receivers or management committees.
When respondent Balmores filed his petition for certiorari with the Court of Appeals, there was still a pending action in the trial court. No less than the Court of Appeals stated that it allowed respondent Balmores' petition under Rule 65 because the order or resolution in question was an interlocutory one. This means that jurisdiction over the main case was still lodged with the trial court.
The court making the appointment controls and supervises the appointed receiver or management committee. Thus, the Court of Appeals' appointment of a management committee would result in an absurd scenario wherein while the main case is still pending before the trial court, the receiver or management committee reports' to the Court of Appeals.
WHEREFORE, the petitions are GRANTED. The decision of the Court of Appeals dated March 2, 2006 and its resolution dated May 29, 2006 are SET ASIDE.
1Rollo (G.R. No. 172843), pp. 2-32.
6Rollo (G.R. 'No. 172843), p. 63 and rollo (G.R. No. 172881), p. 53.
7 Rollo (G.R. No. 172843), pp. 138-139.
8 Id. at 68 and rollo (G.R. No. 172881), pp. 53-54.
9Rollo (G.R. No. 172881), p. 54.
10 Id. and rollo (G.R. No. 172843), p. 64.
11Rollo (G.R. No. 172881), p. 54.
12Rollo (G.R. No. 172843), p. 78.
13Rollo (G.R. No. 172881), p. 55.
14 Id. and rollo (G.R. No. 172843), p. 67.
16Rollo (G.R. No. 172881), p. 55.
171Rollo (G.R. No. 172843), pp. 69-70.
42Rollo (G.R. No. 172881), pp. 22-28.
(2) Paralyzation of its business operations which may be prejudicial to the interest of the minority stockholders, parties-litigants or the general public.
44Rollo (G.R. No. 172881), pp. 37-38.
46Rollo (G.R. No. 172843), p. 15.
49Rollo (G.R. No. 172881), p. 526.
51 Rules of Court, Rule 45, sec. 1.
52 Central Bank of the Philippines v. Castro, 514 Phil. 425, 434 (2005) [Per J. Puno, Second Division].
55Cunanan v. Lazatin and Lazatin, 74 Phil. 719, 724 (1944) [Per J. Ozaeta, En Banc].
56Hi-Yield Realty, Incorporated v. Court of Appeals, 608 Phil. 350, 358 (2009) [Per J. Quisumbing, Second Division], citing R.N. Symaco Trading Corporation v. Santos, 504 Phil. 573, 589 (2005) [Per J. Callejo, Sr., Second Division].
57 CORP. CODE, sec. 36(1).
58 CORP. CODE, sec. 23; cf. sec. 36(1).
59Hi-Yield Realty, Incorporated v. Court of Appeals, 608 Phil. 350, 358 (2009) [Per J. Quisumbing, Second Division], See also Asset Privatization Trust v. Court of Appeals, 360 Phil. 768, 805 (1998) [Per J. Kapunan, Third Division] and Republic Bank v. Cuaderno, 125 Phil. 1076, 1082 (1967) [Per J. J.B.L. Reyes, En Banc].
60Bitong v. Court of Appeals, 354 Phil. 516, 545 (1998) [Per J. Bellosillo, First Division].
61Hi-Yield Realty, Incorporated v. Court of Appeals, 608 Phil. 350, 358 (2009) [Per J. Quisumbing, Second Division], citing Filipinos Port Services, Inc. v. Go, 547 Phil. 360, 377 (2007) [Per J. Garcia, First Division]. See also Asset' Privatization Trust v. Court of Appeals, 360 Phil. 768, 805 (1998) [Per J. Kapunan, Third Division], citing Gamboa v. Victoriano, 179 Phil. 36, 43 (1979) [Per J. Concepcion, Jr., Second Division].
62Cua, Jr. v. Tan, G.R. Nos. 181455-56 and 182008, December 4, 2009, 607 SCRA 645, 696 [Per J. Chico-Nazario, Third Division].
63 See also Filipinos Port Services, Inc. v. Go, 547 Phil. 360, 378 (2007) [Per J. Garcia, First Division].
64 343 Phil. 742 (1997) [Per J. Hermosisima, Jr., First Division].
65 Id. at 753, citing A. F. AGBAYANI, COMMENTARIES AND JURISPRUDENCE ON THE COMMERCIAL LAWS OF THE PHILIPPINES, vol. III, 543 (1988).
66 403 Phil. 391 (2001) [Per J. Quisumbing, Second Division].
67 485 Phil. 644 (2004) [Per J. Quisumbing, First Division].
68 608 Phil. 350 (2009) [Per J. Quisumbing, Second Division].
69Republic Bank v. Cuaderno, 125 Phil. 1076, 1084 (1967) [Per J. J.B.L. Reyes, En Bane].
70 360 Phil. 768 (1998) [Per J. Kapunan, Third Division].
71 Id. at 805, citing A. F. AGBAYANI, COMMERCIAL LAW OF THE PHILIPPINES, vol. III, 566, citing BALLANTINE, 366-367.
72 Id. at 805-806, citing A. F. AGBAYANI, COMMERCIAL LAW OF THE PHILIPPINES, vol. III, 565-566.
73Cua, Jr. v. Tan, G.R. Nos. 181455-56 and 182008, December 4, 2009, 607 SCRA 645, 696 [Per J. Chico-Nazario, Third Division].
74See Filipinos Port Services, Inc. v. Go, 547 Phil. 360, 377 and 379 (2007) [Per J. Garcia, First Division].
75 Rollo (G.R. No. 172843), p. 60.
76Cua, Jr. v. Tan, G.R. Nos. 181455-56 and 182008, December 4, 2009, 607 SCRA 645, 690 [Per J. Chico-Nazario, Third Division], citing J. Campos, Jr. and M. C. L. Campos, The CORPORATION CODE: Comments, Notes and Selected Cases, vol. 1,819 (1990).
77Cua, Jr. v. Tan, G.R. Nos. 181455-56 and 182008, December 4, 2009, 607 SCRA 645, 690 [Per J. Chico-Nazario, Third Division].
78Rollo (G.R. No. 172843), p. 60.
80 RULES OF COURT, Rule 2, sec. 2.
81 G.R. Nos. 181455-56 and 182008, December 4, 2009, 607 SCRA 645 [Per J. Chico-Nazario, Third Division].
SEC. 3. Receiver and management committee as officers of the court. - The receiver and the members of the management committee in the exercise of their powers and performance of their duties are considered officers of the court and shall be under its control and supervision.
The principle behind receivership under Rule 59 of the Rules of Court as explained in F. D. REGALADO, REMEDIAL LAW COMPENDIUM, vol. 1, 9th ed., 732 (2005), citing Compania General de Tabacos v. Gauzon and Pomar, 20 Phil. 261 (1911) [Per J. Johnson, En Bane]; Normandy v. Duque, 139 Phil. 800 (1969) [Per J. Barredo, En Banc]; and Mallari v. Court of Appeals, et al., 192 Phil. 679 (1981) [Per J. Melencio-Herrera, First Division] may be applied by analogy to receivership under the Interim Rules.
84 Interim Rules, Rule 9, sec. 1.
85Sy Chim v. Sy Siy Ho & Sons, Inc., 516 Phil. 256, 282 (2006) [Per J. Callejo, Sr., First Division].
87 516 Phil. 256(2006) [Per J. Calleja Sr., First Division].
89 Pres. Decree 902-A (1976), otherwise known as SEC Reorganization Act.
(c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.
90 Rep. Act No. 8799 (2000), otherwise known as The Securities Regulation Code.
See also Interim Rules, Rule 1, sec. 9.
91 Interim Rules, Rule 9, sec. 1.
92 Interim Rules, Rule 9, sec. 3.
93 Interim Rules, Rule 9, sec. 10.

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