Case Summary (G.R. No. 252353)
Petitioners and Respondents
Petitioners: Angeles P. Balinghasay, Renato M. Bernabe, Alodia L. Del Rosario, Catalina T. Funtila, Teresita L. Gayanilo, Rustico A. Jimenez, Arceli P. Jo, Esmeralda D. Medina, Cecilia S. Montalban, Virgilio R. Oblepias, Carmencita R. Parreño, Emma L. Reyes, Reynaldo L. Savet, Serapio P. Taccad, Vicente I. Valdez, Salvacion F. Villamora, and Dionisia M. Villareal.
Respondents: Cecilia Castillo, Oscar del Rosario, Arturo S. Flores, Xerxes Navarro, Maria Antonia A. Templo, and MCPI.
Key Dates
• 1977 – MCPI organized.
• 1997 – Expiration of third-party service concessions; decision to self-operate ultrasound except by investor group.
• August 14, 1998 & February 5, 1999 – Board meetings concerning ultrasound operation.
• February 5, 1999 – Memorandum of Agreement (MOA) executed to share ultrasound revenues: 60/40 then 55/45 in favor of investors; eventual transfer of machine ownership to MCPI.
• October 6, 1999 & February 7, 2000 – Formal protests to MCPI’s counsel and Board challenging the MOA.
• March 22, 2001 – Derivative suit filed under Section 31 of the Corporation Code.
• March 22, 2005 – Regional Trial Court dismisses complaint.
• May 23, 2008 – Court of Appeals reverses and declares MOA invalid.
• December 12, 2008 – CA denies reconsideration.
• April 8, 2015 – Supreme Court renders final decision.
Applicable Law
• 1987 Philippine Constitution (post-1990 decision).
• Corporation Code, Sec. 31 (liability of directors) and Sec. 32 (voidable transactions with interested directors).
• Rule 45, Rules of Court (certiorari on questions of law).
Factual Background
MCPI initially contracted out laboratory, physical therapy, pulmonary, and ultrasound services. After concession expirations in 1997, the Board decided to provide those services directly but invited investor participation only for the ultrasound unit. A consortium of OB-Gyne doctors, many of whom were MCPI directors and shareholders, raised ₱850,000 to purchase a Hitachi EUB-200 C ultrasound machine. Despite Board awards in 1997, formal approval was deferred until MOA execution in February 1999.
Protest and Derivative Action
Two directors and minority stockholders, led by Flores, repeatedly protested the MOA’s legality, urging the Board to rescind it. When MCPI failed to act, respondents filed a derivative suit on March 22, 2001, seeking annulment of the MOA, accounting of profits, refund to MCPI, and damages.
Defenses and RTC Ruling
Petitioners contended that MCPI was an indispensable party initially and that the MOA was only voidable, not void, and had been ratified by implied acceptance and inaction. On March 22, 2005, the RTC agreed, finding implied ratification, estoppel, and the business judgment rule applicable. It noted MCPI’s benefit from the arrangement, with net shares favoring the corporation.
Court of Appeals Ruling
On May 23, 2008, the CA reversed:
- Declared the MOA invalid for lack of a lawful quorum (petitioners comprised the necessary majority) and absence of 2/3-stockholder ratification.
- Held petitioners liable as constructive trustees under Sec. 31 for profits they unjustly appropriated.
- Ordered joint and several accounting and remittance of all profits that should have accrued to MCPI, plus ₱200,000 in attorney’s fees.
- Denied moral and exemplary damages for lack of corporate standing and proof of malice.
Issues on Appeal
Petitioners urged that the CA:
• Overlooked the urgent hospital necessity and informal genesis of the MOA.
• Misapplied the business judgment rule.
• Erred in imposing attorney’s fees.
Supreme Court Ruling
The Supreme Court:
• Held that the petition presented factual issues unsuitable for Rule 45 review and that no exceptional circumstances justified reevaluation of evidence.
• Noted petitioner
Case Syllabus (G.R. No. 252353)
Facts and Antecedents
- Medical Center Parañaque, Inc. (MCPI) is a domestic corporation organized in 1977 operating Medical Center Parañaque (MCP) in Sucat, Parañaque City.
- Respondents Cecilia Castillo, Oscar Del Rosario, Arturo Flores, Xerxes Navarro and Maria Antonia Templo are minority stockholders of MCPI (each holds 25 Class B shares).
- Nine petitioners (including Balinghasay, Bernabe, Alodia, Jimenez, Oblepias, Savet, Villamora, Valdez, Villareal) hold Class A shares and served as MCPI directors; eight other petitioners hold Class B shares.
- Before 1997, ultrasound and other services in MCP were operated by concessionaires; upon concession expiration, MCPI opted to directly provide services except ultrasound.
- In 1997 the MCPI Board awarded ultrasound unit operation to “ultrasound investors,” mostly OB-GYNE doctors who were also MCPI shareholders and directors. This group purchased a Hitachi EUB-200 C ultrasound unit for ₱850,000 without a formal written contract.
- August 14, 1998 Board meeting (12 directors present, 7 investor-directors) produced only a counter-offer; February 5, 1999 meeting (12 directors, 8 investor-directors) produced a Memorandum of Agreement (MOA): gross income minus sonologist fees to be split 60/40 (investors/MCPI), shifting to 55/45 on April 1, 1999, with eventual equipment transfer to MCPI.
- October 6, 1999 and February 7, 2000, Arturo Flores challenged the MOA’s legality before MCPI’s counsel and Board.
Procedural History
- March 22, 2001: Respondents filed a derivative suit (Civil Case No. 01-0140, RTC Parañaque, Branch 258) against petitioners for violation of Section 31, Corporation Code, praying for annulment of MOA, accounting and refund of profits, damages and attorney’s fees.
- Petitioners’ Answer with Counterclaim: alleged non-joinder of indispensable party MCPI, claimed MOA merely voidable under Section 32, and that MOA had been ratified by subsequent Board and stockholders’ actions (Annual Meeting, Feb. 11, 2000).
- September 11, 2001: Respondents filed an Amended Complaint to implead MCPI; admitted October 12, 2001.
- March 22, 2005: RTC dismissed the amended complaint—MCPI had implicitly ratified MOA, estoppel, MOA was fair, and business judgment rule applied.
- May 23, 2008: Court of Appeals (CA) reversed and set aside RTC—declared MOA invalid, ordered petitioners to account for MCPI