Title
Abad vs. Philippine Communications Satellite Corp.
Case
G.R. No. 200620
Decision Date
Mar 18, 2015
Dispute over control of sequestered PHILCOMSAT and POTC by factions Nieto-PCGG and Africa-Bildner; contested elections, proxy disputes, and legal battles ensued. Supreme Court affirmed RTC's jurisdiction over intra-corporate inspection rights, remanding for further proceedings.
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Case Digest (G.R. No. 200620)

Facts:

Background of the Case

This case stems from a long-standing dispute between two factions vying for control over two sequestered corporations, Philippine Communications Satellite Corporation (PHILCOMSAT) and Philippine Overseas Telecommunications Corporation (POTC). The corporations were sequestered by the Philippine Commission on Good Government (PCGG) after the 1986 EDSA Revolution. PHILCOMSAT owns 81% of the outstanding capital stock of Philcomsat Holdings Corporation (PHC). The majority shareholders of PHILCOMSAT are seven families, including the Ilusorio, Nieto, Poblador, Africa, Benedicto, Ponce Enrile, and Elizalde families.

Appointment of PCGG Nominees

During the administration of President Gloria Macapagal-Arroyo, Enrique L. Locsin and Manuel D. Andal, along with Julio Jalandoni, were appointed as nominee-directors representing the Republic of the Philippines through the PCGG in the boards of POTC and PHILCOMSAT. These PCGG nominees aligned with the Nieto family against the Africa-Ilusorio group (Africa-Bildner) in the battle for control over the boards of POTC, PHILCOMSAT, and PHC.

Elections and Proxy Disputes

On August 31, 2004, the Nieto-PCGG group conducted the annual stockholders' meeting of PHC, electing Locsin as Acting Chairman and other officers. This election was contested by the Africa-Bildner group, which had held its own elections on July 28, 2004, electing Victor Africa as a Director. The Africa-Bildner group sought to invalidate the proxy issued in favor of Nieto and Locsin, which was used in the PHC elections.

Legal Actions

The Africa-Bildner group filed a case (Civil Case No. 04-1049) to nullify the PHC elections, arguing that the proxy was invalid. Meanwhile, the validity of a compromise agreement dated June 28, 1996, involving the Ilusorio family's shareholdings in POTC, was upheld by the Supreme Court in 2005. This compromise agreement gave the Africa-Bildner group majority control (51.37%) of POTC and PHILCOMSAT.

Inspection of Corporate Books

On November 17, 2005, Victor Africa, as President and CEO of PHILCOMSAT, requested to inspect PHC's books and financial documents for the 3rd quarter of 2005. PHC, under the Nieto-PCGG group, refused the request, citing ongoing legal disputes. PHILCOMSAT then filed a complaint (Civil Case No. 06-095) in the Regional Trial Court (RTC) of Makati to enforce its right of inspection under Sections 74 and 75 of the Corporation Code.

RTC and CA Decisions

The RTC dismissed the complaint, ruling that the Sandiganbayan had jurisdiction over the case since PHILCOMSAT was a sequestered corporation. The Court of Appeals (CA) reversed the RTC's decision, holding that the RTC had jurisdiction over the intra-corporate dispute. The CA remanded the case to the RTC for further proceedings.

Issue:

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Ruling:

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Ratio:

  1. Jurisdiction: The Court ruled that the RTC has jurisdiction over intra-corporate disputes, as provided under Republic Act No. 8799 (The Securities Regulation Code). The Sandiganbayan's jurisdiction is limited to cases involving the recovery of ill-gotten wealth or incidents related to sequestration. Since the case involves a stockholder's right to inspect corporate books, it falls under the RTC's jurisdiction.
  2. Cause of Action: The Court found that the complaint adequately stated a cause of action. The Board Secretary's Certificate demonstrated that PHILCOMSAT's board had authorized Africa to act on its behalf. The legitimacy of the Africa-Bildner group as the controlling interest in PHILCOMSAT had already been settled in previous cases, making the complaint valid.

Conclusion:

The Supreme Court affirmed the CA's decision, ruling that the RTC has jurisdiction over the case and that the complaint stated a valid cause of action. The case was remanded to the RTC for further proceedings.


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