558 Phil. 778
On July 3, 2006 x x x Chiang Kai Shek College, Inc. (corporation), a non-stock, non- profit educational institution, and Santiago Cua, in his official capacity as honorary chairman of the board of trustees of the corporation, longest active member of the board of trustees, and incumbent member of the corporation, instituted a derivative suit by filing before public respondent judge a complaint against x x x Chan Cuan in his capacity as chairman of the board of trustees of the corporation and Chien-Yin Shao, a.k.a. Henry Shao, in his personal capacity as he is allegedly not a member of the corporation, nor a member of the board of trustees, nor does he hold any office or position in the corporation, alleging that Chan Cuan and Chien-Yin Shao conspired to violate the provisions of the by-laws of the corporation, in flagrant violation of the rights and interests of the corporation of and to the extreme damage and prejudice of the other trustees, members and the entire community of Chiang Kai Shek College. In particular, [respondents] alleged that Chan Cuan and Chien-Yin Shao are doing, threatening, procuring and suffering to be done the conduct of an election of the officers of the corporation's board of trustees on July 7, 2006 without having first complied with the prerequisites under the corporation's by-laws, more specifically on Chien-Yin Shao's prior admission as member of the corporation. [Respondents] prayed that public respondent judge, through a writ of preliminary injunction, compel Chan Cuan to comply with the aforesaid prerequisite and accordingly hold, at a meeting scheduled on July 7, 2006, a meeting of the general membership of the corporation for the sole purpose of electing the new members of the board of trustees pursuant to the corporation's by-laws, and thereafter to conduct the first regular meeting of the newly elected members of the board to in turn elect the officers of the corporation. On July 4, 2006, the Office of the Executive Judge issued an Order to the effect that a 72-hour temporary restraining order is issued "enjoining respondent Chan Cuan and/or the board (i) from postponing and deferring the scheduled meeting of the general membership of the corporation, scheduled on July 7, 2006, only for the purpose, and no other, to elect new members of the board of trustees from members of the corporation who have been duly admitted as such in accordance with the by-laws of the corporation, and (ii) from conducting the meeting for any other purpose than to duly elect new members of the board of trustees." The 72-hour temporary restraining order was further extended to a twenty (20)-day TRO in public respondent's Order dated 6 July 2006. On July 7, 2006, Chan Cuan convened the scheduled meeting pursuant to the aforesaid Order, informing the body that the court had ordered the meeting to be held without any postponement, to elect the board of trustees and only for the duly admitted members of the corporation to vote. The listing of the twenty-one supposedly admitted members of the corporation distributed by Chan Cuan and to serve as official ballot for the election of members of the board included the name of Chien- Yin Shao. Santiago Cua and some other members and trustees protested Chien-Yin Shao's inclusion in the list but Chan Cuan brushed the protests aside. The election proceeded despite the protestations and objections from Santiago Cua, and Chien-Yin Shao voted and was voted for. Chan Cuan also scheduled the election of the chairman and other officers of the corporation by the new board of trustees on July 14, 2006.From the aforementioned July 27, 2006 Order of the trial court, herein respondents filed with the CA on July 31, 2006 a petition for certiorari, thereat docketed as CA- G.R. SP No. 95467, questioning the aforesaid July 27, 2006 Order of the trial court. This was followed by their supplemental petition on August 1, 2006. On August 4, 2006, the appellate court issued a temporary restraining order enjoining the parties to maintain and preserve the status quo ante pending resolution of the main case (Civil Case No. 115404) before the trial court.
In view of these supervening events, [respondents] filed their Supplemental Complaint, praying, among other things, that Chien-Yin Shao be enjoined and prohibited from participating, voting or be voted for in the election of the officers of the board of trustees until his status as member of the corporation is clarified and resolved, and that the elections held on July 7, 2006 be nullified as contrary to the conditions of the temporary restraining order. On July 12, 2006, public respondent, acting on [respondents'] Supplemental Complaint, issued and Order, to wit:"Wherefore, the court rules to give substance to the spirit of the TRO and to prevent confusion respondent [now petitioner] Chan Cuan is ordered to withhold any action in the matter of the election until the status of Henry Shao as a member of the corporation has been clarified and the issue thereon is finally resolved. Further the election scheduled on July 14, 2006 be suspended until further order from the court."Public respondent (judge) thereafter conducted hearings in relation to the prayer for the issuance of a writ of preliminary mandatory injunction and on the main issue of the status of Chien-Yin Shao as member of the corporation. [Respondents'] contention was that Chien-Yin Shao was not duly admitted as member of the corporation as he was not recommended for admission by the Board of Trustees and was not endorsed for approval at the members' regular annual meeting as required by the corporation's by- laws. Santiago Cua denied having seconded Chien-Yin Shao's nomination as member of the corporation. Chan Cuan and Chien-Yin Shao insisted that Chien-Yin Shao was a duly admitted member of the corporation, presenting evidence to the effect that on the joint special meeting of the board of trustees and members of the corporation held on April 19, 2004, Pedro Tan Tiong Sian nominated Henry Shao as member of the corporation, Santiago Cua seconded the nomination, the nomination was discussed by all present, and Chien-Yin Shao was unanimously voted for as member of the corporation.
On July 27, 2006, public respondent issued the assailed Order, declaring that [respondents] failed to convince the court that they are entitled to the issuance of preliminary mandatory injunction, and hence the application was denied. Public respondent ruled that based on the appreciation and evaluation of evidence, [respondents] are estopped to question the status of Chien-Yin Shao as a member of the corporation, noting that it was even Santiago Cua who had seconded the nomination/invitation for Chien-Yin Shao's admission as member of the corporation and through Santiago Cua's acquiescence of Chien-Yin Shao's membership without raising such issue for almost two years, Santiago Cua is estopped to question the same. Giving weight to Chan Cuan's testimony that it is considered as socially improper for Chien-Yin Shao, being a prominent and distinguished member of the Chinese community, to apply by himself for membership in the corporation, public respondent held that the corporation's conduct of its affairs, including admission of new members to the corporation, is not run solely by its by-laws but also by tradition which is germane in a conservative association like Chiang Kai Shek where culture, habits, beliefs and customs are elements that must be given consideration. Public respondent finally ruled that [respondents] failed to prove existence of irreparable injury or that continuance of the act complained of — that is, membership of Chien-Yin Shao in the corporation — during the litigation would probably work injustice to [respondents]. (Words in brackets supplied)
WHEREFORE, the petition is GRANTED. The assailed Order of public respondent dated 27 July 2006 in Civil Case No. 115404 is NULLIFIED and SET ASIDE. Upon approval of the injunction bond in the amount of Two Hundred Thousand Pesos (P200,000.00) which petitioners (i.e. Chiang Kai Shek College, Inc. and Santiago Cua) are hereby DIRECTED to file to answer for all damages which private respondents may sustain by reason of the injunction if the trial court should finally decide that petitioners are not entitled thereto, let a Writ of Preliminary Injunction ISSUE enjoining and prohibiting the participation of Chien-Yin Shao as member and officer of the board of trustees of Chiang Kai Shek College, Inc. pending final resolution of the derivative suit filed by petitioners, Chiang Kai Shek College, Inc. and Santiago Cua, against private respondents, Chan Cuan and Chien-Yin Shao, a.k.a. Henry Shao, in Civil Case No. 115404 by and which public respondent is DIRECTED to proceed with.With their motion for reconsideration having been denied by the appellate court in its equally challenged Resolution of December 21, 2006, petitioners are now with this Court via the present recourse, claiming that the CA -
Acting on the petition, the Court, in its resolution of January 22, 2007, required the respondents to comment thereon. In the same resolution, the Court enjoined the implementation of the assailed CA decision and issued a status quo order directing the parties to maintain the status quo existing after the issuance of the trial court's Order dated July 27, 2006 and before the filing of the petition in CA-G.R. SP No. 95467, "until further orders from the Court."
XXX ERRED IN TOTALLY IGNORING PETITIONERS' ARGUMENTS THAT SANTIAGO CUA ERRED IN FILING A DERIVATIVE SUIT AS THE NATURE OF THE CASE IS ONE OF QUO WARRANTO.
XXX ERRONEOUSLY DISREGARDED THE FINDINGS OF THE LOWER COURT THAT CHIEN-YIN SHAO IS A LEGITIMATE MEMBER/TRUSTEE OF CHIANG KAI SHEK COLLEGE, INC. AND THERE IS NO LEGAL OR FACTUAL BASIS TO DISQUALIFY HIM AND THAT SANTIAGO CUA IS IN ESTOPPEL.
XXX ERRED IN THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION AS SANTIAGO CUA FAILED TO PRESENT EVIDENCE THAT HE OR CHIANG KAI SHEK COLLEGE, INC. WILL SUFFER IRREPARABLE OR SERIOUS DAMAGE OR INJURY, AND WITHOUT PROOF OF DAMAGE, THERE IS NO LEGAL BASIS TO ISSUE THE WRIT.
XXX ERRED IN GRANTING RESPONDENTS' PETITION FOR CERTIORARI, PROHIBITION AND MANDAMUS AND ISSUING A WRIT OF PRELIMINARY INJUNCTION WHEN THE ACTS SOUGHT TO BE ENJOINED HAVE ALREADY BECOME FAIT ACCOMPLI OR AN ACCOMPLISHED OR CONSUMMATED ACTS.
Reviewing the records, we are convinced of the necessity and propriety of the issuance of injunctive relief. We deem that it would have been more prudent of public respondent to have granted petitioners' [now respondents'] application for preliminary injunction, enjoining the participation of Chien-Yin Shao as member of the corporation, much more as trustee and officer of the board, pending resolution of the complaint instituted by petitioners against Chan Cuan and Chien-Yin Shao. It is indubitably clear that issue of Chien-Yin Shao's due admission as member of the corporation constitutes the very core of the controversy as raised in the complaint filed before public respondent. Denial of the injunctive relief sought, in effect allowing Chien-Yin Shao to participate as member of the corporation and as the newly-elected chairman of the corporation's board of trustees, renders the derivative suit, the most foremost purpose of which, among other reliefs sought, is to assail Chien-Yin Shao's alleged qualification as member of the corporation, moot and academic and ineffectual.In Philippine Ports Authority v. Pier 8 Arrastre & Stevedoring Services, Inc. and Levi Strauss & Co. v. Clinton Apparelle, Inc., the Court conceded that it is not enough, in granting the writ of injunction, to simply say that it appeared after hearing that plaintiff is entitled to the relief prayed for, and nothing else. We reechoed the ruling with greater clarity in University of the Philippines (U.P.) v. Catungal:
We have placed in scrutiny the assailed Order and to Us, it did not write finis to the derivative suit. While the Order mentions of Santiago Cua being in estoppel to question the status of Chien-Yin Shao as a duly admitted member of the corporation, a reading of the same leaves us with the strong impression that the suit remains pending, with issues such as whether Chien-Yin Shao is a member of the corporation or not, still up for final determination. Thus, the urgent need for injunctive relief pending such final determination.
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Public respondent underscored petitioners' failure to prove existence of irreparable injury or that continuance of the act complained, Chien-Yin Shao's participation in the corporation as member and chairman of the board of trustees pending final determination of the validity of his admission to the corporation would probably work injustice to petitioners. We do not agree. We are convinced that the applicants, Santiago Cua and Chiang Kai Shek College, Inc., have sufficiently shown existence of the requisites, under the rules and jurisprudence, for the issuance of a writ of preliminary injunction. Prudence dictates that public respondent grant the injunctive relief prayed for. (Emphasis and italics supplied).
The court must state its own findings of fact and cite the particular law to justify the grant of preliminary injunction. Utmost care in this regard is demanded, and it has been truly said:An examination of the parties' inherently conflicting claims, exacerbated by the ambivalent, subjective tenor of the appellate court's decision — which in effect ill- accomplished any by way of enlightening the parties on their respective rights and obligations under the law - gives us the impression that the right claimed by the respondents as basis for seeking injunctive relief is far from clear. While it is true that respondents' claimed right is not required to be categorically established at this stage, yet it is nevertheless necessary to show, at least incipiently, that such right exists and is not countermanded by the petitioners' own evidence which appears to present a veritable challenge to the respondents' cause. In our view, the respondents have failed to justify their plea for injunctive relief, and the trial court correctly rejected their plea therefor.There is no power the exercise of which is more delicate which requires greater caution, deliberation, and sound discretion, or (which is) more dangerous in a doubtful case than the issuing of an injunction; it is the strong arm of equity that never ought to be extended unless to cases of great injury, where courts law cannot afford an adequate or commensurate remedy in damages.
Any member or an honorary member of Chiang Kai Shek College Alumni Association, Inc. who is of good moral character and reputation in the community; who supports and believes in the principles of democracy and liberty; who subscribes to the purposes of the Corporation; and who agrees to comply with and be bound by these By-Laws, is eligible for membership. An applicant shall first be recommended for admission by the Board of Trustees and then endorsed for approval at the members' regular annual meeting. Such recommendation for admission requires a 2/3 majority vote of the entire membership of the Board of Trustees and shall be further approved by a 2/3 majority vote of the entire membership of the Corporation. The Board of Trustees may prescribe additional qualifications for membership as the purposes for which the Corporation is organized may require.The record likewise reveals that it has been the tradition of the corporation, which tradition has been observed for the last sixty (60) years to the present, to hold regular meetings six (6) times a year, although its by-laws provide for just one.
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;Having failed to object to Shao's election to regular membership, respondent Cua may not now question the same. Since injunction is the strong arm of equity, he who applies for it must come with clean hands. For, among the maxims of equity are that (1) he who seeks equity must do equity, and (2) he who comes into equity must come with clean hands. For purposes of the injunction proceedings, Cua has not shown the requisite injustice he may suffer as a result of Shao's election to regular membership. He even acceded to it.
(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.
 Rule 58, Sec. 3.
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3. Plaintiff Santiago Cua instituted the present action in his capacity as honorary chairman, incumbent trustee and member of the plaintiff corporation, in order to redress wrongs committed by the defendants, who have conspired to violate the provisions of the by-laws of the plaintiff corporation, for their sole interests and benefits, in flagrant violation of the rights and interests, and to the extreme damage and prejudice, of the other trustees and members of the corporation, and of the entire community of the plaintiff corporation, as an educational institution, founded on the principles of democracy and rule of law, and dedicated to a commitment to follow the duly promulgated by-laws in the governance of the plaintiff corporation as an educational institution with its aspirations for excellence;
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5. The cause of action in respect of the derivative suit actually devolves on the plaintiff corporation, the wrongdoings and illegal acts of the defendants having been or are being caused to the plaintiff corporation, and not to plaintiff Santiago Cua, as an honorary chairman, trustee and member of the plaintiff corporation, since he does not seek any remedy or relief for his personal or individual interests, but is demanding, in behalf of the plaintiff corporation, especially, and in particular, in the matter of the election of the members of the board of trustees and of the officers of the plaintiff corporation, for the 20th term from February 2006 to February 2008, which has not been held and effected as of now, and is therefore long overdue.