Title
Ceniza vs. Wistehuff, Sr.
Case
G.R. No. 165734
Decision Date
Jun 16, 2006
Petitioner sought accounting, damages, and compliance with a retainer contract against IMPI and Wistehuffs. RTC ruled in favor, but execution and contempt issues arose. SC denied certiorari, clarifying civil contempt nature and proper remedies.
ceniza
wistehuff
lawyer

Case Summary (G.R. No. 165734)

Factual Background

Petitioner and the Wistehuffs organized IMPI, with petitioner holding five percent of the shares. The other stockholders were respondents Daniel Wistehuff III, Marites Gonzales-Wistehuff, and Bryan K. Wistehuff. Petitioner, as plaintiff, filed a Complaint against IMPI and the Wistehuffs in the RTC of Cebu City for accounting, declaration of dividends, specific performance, damages, and attorney’s fees, with a request for a writ of preliminary mandatory injunction.

The complaint was raffled to Branch 11 and docketed as Civil Case No. CEB-26274-SRC. In the prayer, petitioner requested, among others, that a writ of preliminary mandatory injunction be issued directing the defendants to produce the corporation’s financial documents and to comply with the terms of the Retainership Contract, to constitute a receiver or management committee, and to order accounting and the declaration of dividends, together with awards for attorney’s fees and damages. Petitioner later amended the complaint and alleged that it was filed by way of a derivative suit. He then sought accounting and related reliefs.

During the proceedings, the RTC issued an order on October 10, 2001 denying petitioner’s plea for the appointment of a receiver or management committee pendente lite. Subsequently, on March 27, 2003, the RTC rendered judgment in favor of petitioner. The fallo ordered defendants (a) to make a true and correct accounting of the corporation’s earnings to serve as the basis for declaring dividends, (b) to enjoin compliance with the Retainership Contract and to pay the retainer and extra legal services, (c) to order payment of attorney’s fees of P200,000.00, and (d) to order joint and several payment of moral damages and exemplary damages, attorney’s fees, and litigation expenses.

Petitioner moved for execution pending appeal. On August 14, 2003, the RTC issued an omnibus order partially granting execution. It ordered the issuance of a writ of execution to enforce the portion of the March 27, 2003 judgment requiring defendants to make a true and correct accounting for dividends, while denying immediate execution of damages-related awards. It also ordered the release of the receiver’s cash bond in the sum of P25,000.00. A writ of execution was issued on September 11, 2003 and served on the defendants the same day. On September 15, 2003, IMPI, through Atty. Francis M. Zosa, submitted documents to the sheriff, including a report of a firm, balance sheet, statements of operations, changes in equity, cash flows, and notes to financial statements covering the corporation.

Petition for Indirect Contempt and RTC Dismissal

Believing that the defendants and their counsel acted in conspiracy and willfully refused to comply with the execution writ, petitioner filed a petition for indirect contempt in the RTC of Cebu City, invoking Rule 39, Section 11, in relation to Rule 71, Section 3(d). Petitioner alleged, in substance, that respondents and counsel submitted, in collusion, a 2002 Financial Statement that was allegedly fraudulently and incorrectly reported a loss and that, in petitioner’s view, did not comply with the writ’s directive to make a true and correct accounting of earnings to serve as the basis for dividend declaration.

Petitioner sought orders for comment and hearing, processes to compel personal appearance and custody measures pending hearing, and ultimately the imposition of penalties for indirect contempt as provided in Rule 71, Section 7, together with imprisonment until compliance if required. The contempt petition was docketed as Civil Case No. CEB-29783 and raffled to Branch 23, but later re-raffled to Branch 16.

Respondents answered that only the dispositive portion of the decision on the subject execution may be enforced by the sheriff and that they complied with the writ by submitting a true and correct accounting, supported by the submitted accounting documents and the financial statements. They asserted that the petition for indirect contempt should not be sustained because they had complied with the accounting requirement.

On April 15, 2004, the RTC issued an order dismissing the petition for indirect contempt. The RTC ruled that the petition for indirect contempt was criminal in nature, and thus required petitioner to prove guilt beyond reasonable doubt. It held that petitioner failed to overcome the presumption of innocence in favor of respondents and ruled that respondents sufficiently complied with the writ by submitting the 2002 financial statement containing the data required for accounting.

Petitioner’s Motion for Reconsideration and the RTC’s Treatment of Appealability

Petitioner filed a motion for reconsideration on May 3, 2004, arguing that the contempt proceeding was civil, that he had adduced the requisite quantum of evidence, and that respondents failed to present the auditor who prepared the 2002 financial statement, which in petitioner’s view denied him the opportunity for cross-examination and implicating due process. Petitioner cited Slade Perkins v. Director of Prisons as precedent and prayed for reconsideration and for further reliefs, including setting the contempt charge for hearing and expunging a counterclaim.

Respondents’ position and the RTC’s handling led to further procedural rulings. The RTC issued an order on July 7, 2004 denying the motion for reconsideration. It reasoned that acquittal is not appealable, and it characterized the motion for reconsideration as effectively an appeal in contempt proceedings, where the court held that appeal does not lie from dismissal of or exoneration from a contempt charge. Petitioner later obtained an order on July 15, 2004 appointing Atty. Bayani Atup as commissioner in the other principal factual matter tied to the accounting—namely, the “true and correct accounting” of IMPI’s earnings from 1996 to the present. Petitioner then filed a notice of appeal with an alternative motion to “squarely rule” on the appealability issue, arguing that in civil indirect contempt an appeal lay from orders finding guilt or absolving the respondents and that even in criminal proceedings appeal may lie for due process or jurisdictional defects.

On September 30, 2004, the RTC denied the alternative motion and declined to give due course to the notice of appeal. The RTC reasoned that, from the relief prayed for, petitioner’s purpose was primarily punishment and only incidentally compensatory or remedial, and thus the proceeding was treated as criminal in character for appealability purposes. The RTC also held that acquittal was not subject to motion for reconsideration or appeal.

Petitioner received the September 30, 2004 order on October 5, 2004, later sought time to file a petition before the Supreme Court, and eventually filed the Rule 45 petition assailing both RTC and appellate court resolutions relating to injunctive relief that IMPI obtained during the pendency of proceedings.

Court of Appeals’ Interlocutory Reliefs and the Supreme Court Petition

While the Rule 45 petition was pending, IMPI filed in the Court of Appeals a petition for certiorari, prohibition and mandamus challenging the July 15, 2004 order in Civil Case No. CEB-26274-SRC (granting petitioner’s motion for appointment of a commissioner to receive and report evidence on accounting). The case was docketed as CA-G.R. SP No. 85301. The Court of Appeals first granted IMPI’s request for a temporary restraining order on August 4, 2004, and later issued a resolution on October 14, 2004 granting IMPI a writ of preliminary prohibitory injunction. Petitioner then sought, in the Supreme Court, to nullify those CA rulings as well as the RTC orders in Civil Case No. CEB-29783.

In the Supreme Court, petitioner alleged, among others, that the RTC erred in dismissing his petition on the premise that the proceeding was criminal and thus barred by double jeopardy principles and that respondents should have been held liable for indirect contempt. He maintained that contempt proceedings could be civil or criminal depending on the nature and effect, and he insisted that his contempt petition was civil because it was intended to enforce a court order for accounting in favor of petitioner and to compel compliance rather than vindicate the court’s authority.

Respondents countered that the proper remedy to challenge the RTC order denying due course to a notice of appeal was certiorari under Rule 65, not Rule 45. They maintained that the RTC correctly ruled that the contempt petition was criminal in nature and thus not appealable, and they defended their compliance by asserting they submitted a true and correct accounting through the auditor’s report and accompanying documents.

Issues and Disposition: Remedy as to CA Interlocutory Rulings; Character of Contempt; Avoidance of Merits on Indirect Contempt Liability

The Supreme Court confronted multiple issues, including whether the Supreme Court petition properly stated a cause of action; whether the contempt petition below was criminal or civil in nature; whether the RTC orders were appealable; and whether a Rule 65 petition was the proper remedy to nullify the RTC orders. The Court treated the issues as interrelated.

On the first issue, the Supreme Court held that the petition failed to state a cause of action insofar as it sought to nullify interlocutory resolutions of the Court of Appeals. The Court explained that the assailed CA resolutions were interlocutory and not appealable. It ruled that to nullify those interlocutory resolutions, the proper remedy was certiorari under Rule 65 on the allegation that the CA acted with grave abuse of discretion amounting to excess or lack of jurisdiction. As a result, the Supreme Court denied the Rule 45 petition as to the CA resolutions.

On the nature of contempt, the Court discussed the doctrine distinguishing criminal contempt and civil contempt, particularly through Montenegro v. Montenegro. It reiterated that contempt

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