339 Phil. 433
KAPUNAN, J.:
(1) dismissal with prejudice of all cases pending between the parties here and abroad, except as to claims against ARCI and Interlek with respect to which the dismissals in the aforementioned actions shall be without prejudice;On 12 December 1991, petitioner instituted a complaint for damages before the Regional Trial Court of Makati, Branch 58. On his first cause of action, petitioner alleged that private respondent reneged on its commitment, based on the aforecited SMRA, to rehabilitate Dynetics and Chemark (a subsidiary wholly owned by Dynetics) and this caused the financial ruin of the two corporations. Dynetics and Chemark consequently defaulted on their financial obligations and petitioner, in his capacity as guarantor, was held personally liable. He was forced to compromise with the creditor banks in the total amount of P145,000.000.00.[4]
(2) the assignment to Defendant Philguarantee of all shares of stocks owned and controlled by Chuidian in Interlek;
(3) the assignment to Philguarantee to all shares of Chuidian in ARCI and in Dynetics;
(4) the payment by Dynetics of US$100,000.00 per month to Chuidian for five years, backed by a Letter of Credit; and
(5) the assumption by Dynetics of all the obligations of ARCI in favor of Defendant Philguarantee in the aggregate sum of approximately US$47 Million.[3]
1. On his First Cause of Action, P145,000,000.00 as actual/compensatory damages under the terms and conditions of said compromise agreements mentioned in plaintiff’s First Cause of Action dated January 17, 1989;
2. On his Second Cause of Action, P32,000,000.00 representing actual losses of the book value of plaintiff’s 159,997 shares of stock of Dynetics, Inc. from P200.00 per share to zero amount per share;
3. On his Third Cause of Action, P3,200,000.00 representing losses of plaintiff’s equity in unrealized profit out of said unremitted US$5,000,000.00 due from Interlek;
4. On this Fourth Cause of Action, P15,000,000.00 as moral damages and P10,000,000.00 as exemplary damages.
5. On his Fifth Cause of Action, P30,000,000.00 for and as attorney’s fee (15% of the amount involved).[5]
O R D E RPrivate respondent challenged the trial court’s order before the Court of Appeals which, in a decision dated 23 October 1995, reversed the same. The dispositive portion states thus:
The decision promulgated on May 6, 1992 by the Hon. Court of Appeals in CA-G.R. SP. No. 27685 entitled Phil. Export and Foreign Loan Guarantee Corporation vs. Hon. Presiding Judge, Br. 58, RTC, Makati directing this Court to resolve said petitioner’s motion to dismiss, a copy of said decision having been furnished this Court, is NOTED.
Pending resolution before this Court is the motion to dismiss filed by defendant Philguarantee, the opposition thereto filed by the plaintiff, and the reply to opposition filed by the said defendant. After considering the arguments for and against the motion, the Court resolves to deny the motion. Furthermore, after a meticulous assessment of the record of this case, the Court is more inclined to believe that the nature of this case is for damages rather than an intra-corporate matter and therefore this Court has jurisdiction over this case. Due to the denial of defendant’s motion to dismiss as aforementioned, the said defendant is given fifteen (15) days from receipt of a copy of this order within which to file its answer pursuant to Sec. 4, Rule 16 of the Rules of Court.
Notify the respective counsel of both parties of this order.
SO ORDERED.[6]
SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:Jurisprudence, however, has tempered the aforequoted provision, paragraph (b) in particular:
a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission.
b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any and/or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity.
c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships, or associations.
d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where the corporation, partnership or association possesses sufficient property to cover all of its debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient assets to cover its liabilities but is under the Management Committee created pursuant to this Decree.
x x x. The better policy in determining which body has jurisdiction over a case would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy.[14]We have judiciously gone over petitioner’s original complaint and are not deceived by his cunning arguments. The case at bar is a classic illustration of a dispute between stockholders - - private respondent, the current majority and controlling stockholder of Dynetics and petitioner, the erstwhile majority stockholder of said corporation (although he still holds a substantial interest therein).
1. Plaintiff is a Filipino, of legal age, with business address at 7th Floor, Chemphil Building, Pasay Road, Makati, Metro Manila, where he may be served with all court processes; he was (and still is) at all times relevent to his complaint a major stockholder of Dynetics, Inc. (Dynetics for brevity), a corporation duly organized and existing under the laws of the Philippines;[15] x x x (underscoring ours).Moreover, in the same complaint petitioner also sought to recover the loss in the book value of his shares of stock in Dynetics and his share in the said corporation’s unrealized profits. Although the foregoing may have arisen from the same facts or circumstances, we cannot simply brush these aside as incidental claims because only in his personality as a prejudiced stockholder, and not in his capacity as a mere surety, will petitioner be able to rightly pray for and be granted these claims.
21. On the other hand, at various times before the aforesaid controversy between the Marcoses and Chuidian, Chemark, a subsidiary of Dynetics, obtained various loans from PCIB, IBAA, SBTC and a consortium of banks (PISO, BPI, RCBC, PCIB, and LB) the security for which loans were required by said creditor banks to include guarantee and/or suretyships coming from the principal stockholders of Dynetics and Chemark including plaintiff who had to execute such guarantees and/or suretyships in his personal capacity under a joint and several or solidary type of obligation.[16] (underscoring ours).It is evident from the aforequoted averment that petitioner instituted his complaint primarily as stockholder of Dynetics. Petitioner however, wants us to focus solely on his character as surety and his claim for damages as such to remove the present controversy from Section 5(b) of P.D. 902-A, and corollarily from the jurisdiction of the SEC.
9. At the start of the second quarter of 1985, the defendant, acting apparently upon the instructions of the Marcoses, without assuming formal ownership of the company and employing undue power and influence started to gain control of Dynetics. No major decision or fund disbursement was made without the defendant’s consent. On May 27, 1985, during a stockholders meeting convened at its proddings, the defendant had its nominees, namely, Victor Macalincag, Cesar Macuja and Eduardo Morato (of HSDC) elected and constituted as a majority in the board of Dynetics. Out of five members, only four assumed office. The fourth member was plaintiff. The fifty member, Manuel Lazaro, then the President’s Legal Counsel, was nominated and elected but did not assume office. Chuidian was ousted as a director although he still had sufficient shares in his name and control to elect himself.[17] (underscoring ours).Since both parties in the case at bar are stockholders of the corporation, jurisdiction over their present conflict vests in the SEC pursuant to Sec. 5(b) of P.D. 902-A. Our task, however, does not end here. As stated in Viray v. CA,[18] the establishment of any of the relationships in Sec. 5(b) of PD 902-A does not automatically “confer jurisdiction over the dispute on the SEC to the exclusion of the regular courts.” We are quite aware that not all disagreements between stockholders or between a corporation and its stockholder are intra-corporate in nature. Hence, we proceed to the next test: whether or not the nature of the controversy itself is intra-corporate.
EXPANDED BOARD OF DIRECTORS
It is planned that the consolidated operation will have a simple Board of Directors to be expanded from the present five (5) members to nine (9) members. The four (4) new Board representatives are proposed to be nominated from among the creditor banks.
You will also note that one of the highlights of the projections, aside from the assumed restructuring terms, is a conservative estimate of Dynetics’ overall working capital requirements, of P89.0 Million. This estimate already took into account Dynetics’ financial assistance contemplated for Chemark for about P35.2 million. In this regard, Dynetics management had earlier proposed to source this requirement through short-term borrowings. It is nonetheless the opinion of PHILGUARANTEE that the right funding mix is a combination of short-term borrowings of P45.0 million and fresh equity infusion of the P44.0 million to be supplied by a proposed ‘Investors Group.’ PHILGUARANTEE is pursuing this funding mix so as not to overburden Dynetics in terms of financing cost.
The Integrated Financial Plan amply illustrates the business potential of this group of companies. May I therefore reiterate that your decision to go with this plan will benefit not just the thousands of people depending on these companies for livelihood. In more ways than one, your concerted efforts will go a long way towards achieving the desired stability of the export electronic industry in the Philippines, and should ultimately redound to the benefit of the private sectors like you.
Thank you and regards.
CESAR P. MACUJA
Chairman of the Board Executive Vice President
Dynetics, Incorporated Phil. Export & Foreign
Loan Guarantee Corp.
cc: Philguarantee Board of Directors.[19]
The private respondent, however, vigorously asserts that his case is nothing but an action for damages arising from breach of contractual obligation committed by petitioner in unilaterally withdrawing its agreement to rehabilitate Dynetics and Chemark. The contention is clever, but unacceptable. The fact remains that the claim for damages either depends on, or is inextricably linked with, the resolution of the corporate controversies. For instance, the prayer for moral and exemplary damages is grounded on ‘defendant’s total bad faith and malice knowing fully well that its acts were patently injurious to the rights and interests of said corporations and its stockholders, including plaintiff xxx.’ xxx. Clearly, what private respondent filed against petitioner before the court below was an intra-corporate case under the guise of an action for damages employing civil law terms and phrases.The allegations against herein respondents in the amended complaint unquestionably reveal intra-corporate controversies cleverly concealed, although unsuccessfully, by use of civil law terms and phrases, xxx While it may be said that the same corporate acts also give rise to civil liability for damages, it does not follow that the case is necessarily taken out of the jurisdiction of the SEC as it may award damages which can be considered consequential in the exercise of its adjudicative powers. Besides, incidental issues that properly fall within the authority of a tribunal may also be considered by it to avoid multiplicity of actions. Consequently, in intra-corporate matters such as those affecting the corporation, the issue of consequential damages may just as well be resolved and adjudicated by the SEC. (underscoring supplied).[20]
The teaching of the Court, en banc, penned by Justice Bellosillo, in the recent case of Andaya vs. Abadia, et al., 228 SCRA 707, 711, further illumines the issue:
x x x. The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected and their activities pursued for the promotion of economic development.WHEREFORE, premises considered, the petition for review on certiorari is hereby DENIED.
It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly specified and delimited its jurisdiction to matters intrinsically connnected with the regulation of corporations, partnerships and associations and those dealing with the internal affairs of such corporations, partnerships or associations. (underscoring ours).