Title
Chua vs. Court of Appeals
Case
G.R. No. 150793
Decision Date
Nov 19, 2004
Lydia Hao filed a criminal complaint against Francis Chua for falsifying Siena Realty Corporation's meeting minutes. The Supreme Court ruled private prosecutors could intervene, affirming the corporation's standing and denying the petition.
private prosecutor
intervention as a petitioner
petition for certiorari
A

Case Summary (G.R. No. 150793)

Factual Background

On February 28, 1996, Lydia C. Hao filed a complaint-affidavit with the City Prosecutor of Manila charging Francis Chua and his wife Elsa Chua with four counts of falsification of public documents. The charge alleged that, on or about May 13, 1994, in Manila, Francis Chua—then a private individual—prepared, certified, and falsified the Minutes of the Annual Stockholders meeting of the Board of Directors of Siena Realty Corporation, notarized before Atty. Juanito G. Garcia and recorded as Doc No. 109, Page 22, Book No. IV, Series of 1994, by causing it to appear that Lydia Hao Chua was present and participated in proceedings held on April 30, 1994, when she was not present and did not participate, to the prejudice of public interest and in violation of public faith and destruction of truth.

The City Prosecutor filed an Information for falsification of public document against Francis Chua, docketed as Criminal Case No. 285721, while dismissing the accusation against Elsa Chua.

Proceedings in the MeTC: Exclusion of Private Prosecutors

In the MeTC trial, private prosecutors Atty. Evelyn Sua-Kho and Atty. Ariel Bruno Rivera appeared as private prosecutors and presented Hao as their first witness. After Hao’s testimony, Francis Chua moved to exclude complainants’ counsels as private prosecutors on the ground that Hao failed to allege and prove any civil liability in the criminal case. In an Order dated April 26, 1999, the MeTC granted the motion and ordered the exclusion of the private prosecutors from actively prosecuting Criminal Case No. 285721.

Hao sought reconsideration, which the MeTC denied.

RTC Certiorari Order Reversing the MeTC

Hao then filed a petition for certiorari, docketed as SCA No. 99-94846, before the RTC of Manila, Branch 19. The petition was entitled “Lydia C. Hao, in her own behalf and for the benefit of Siena Realty Corporation v. Francis Chua and the Honorable Hipolito dela Vega, Presiding Judge, Branch 22, Metropolitan Trial Court of Manila.” The RTC gave due course to the petition.

On October 5, 1999, the RTC reversed the MeTC’s April 26, 1999 order. The RTC directed that Hao be allowed to intervene through her private prosecutors in behalf of the prosecution of the civil aspect of Criminal Case No. 285721, allowing Attys. Evelyn Sua-Kho and Ariel Bruno Rivera to actively participate in the proceedings. The RTC’s dispositive portion ordered the MeTC to allow such intervention for the civil aspect.

Francis Chua moved for reconsideration; the RTC denied the motion.

Court of Appeals Review and Holdings

Francis Chua filed a petition for certiorari before the Court of Appeals, alleging grave abuse of discretion. He claimed, among others, that: (a) Siena Realty Corporation was improperly impleaded or joined as co-petitioner in the RTC certiorari proceeding because it was not a party to the criminal complaint; and (b) the RTC effectively amended the Information in violation of his constitutional rights.

On June 14, 2001, the Court of Appeals denied the petition and affirmed the RTC’s orders in toto. The Court of Appeals held that the action before the RTC was a derivative suit, reasoning that the complaint alleged that Chua falsified documents pertaining to corporate projects and made it appear that Chua was a stockholder and director of the corporation. It further ruled that the corporation was a necessary party in the petition filed with the RTC and that Hao’s filing of the criminal case did not deprive the corporation of its right to present its own claim for damages. The Court of Appeals denied reconsideration on November 20, 2001.

Issues Raised in the Supreme Court

In his petition to the Supreme Court, Francis Chua raised three principal issues: (1) whether the criminal complaint was in the nature of a derivative suit; (2) whether Siena Realty Corporation was a proper petitioner in the RTC certiorari case under Rule 65; and (3) whether private prosecutors should be allowed to actively participate in the trial of Criminal Case No. 285721. He also faulted the Court of Appeals for allegedly omitting the issue of grave abuse of discretion for not dismissing the RTC petition for being a sham pleading.

Derivative Suit: No Proper Allegation for Derivative Relief

On the first issue, the Supreme Court clarified that the petitioner’s reliance on Western Institute of Technology, Inc. v. Salas was misplaced. The Court explained that Western Institute involved a situation where the civil aspect appeal of criminal acquittals was not treated as a derivative suit because the pleading did not comply with essential derivative-suit requirements—namely, that the minority shareholder must allege in the complaint that he or she is suing on a derivative cause of action on behalf of the corporation and similarly situated shareholders who wish to join.

The Supreme Court then applied the governing doctrine on derivative actions under the corporate law framework. Citing Section 36 of the Corporation Code, in relation to Section 23, it stated that when a corporation is an injured party, the power to sue is generally lodged with its board of directors or trustees. It acknowledged that a stockholder may institute a derivative suit to protect or vindicate corporate rights when corporate officials refuse to sue, or when they are the ones to be sued or have control of the corporation. The Court characterized derivative actions as suits by a shareholder to enforce a corporate cause of action, with the corporation as a necessary party, because judgment must bind the corporation and operate as res judicata.

The Court held, however, that not every suit “filed in behalf of the corporation” is a derivative suit. For a derivative suit to prosper, the shareholder must allege in the complaint that he or she is suing on a derivative cause of action for and on behalf of the corporation and other shareholders similarly situated who may wish to join. It treated the corporation as an indispensable party in derivative litigation and emphasized that it must be impleaded because judgment must be binding on the corporation and because the corporation must be served with process.

Applying these principles, the Supreme Court found a fatal defect. In the criminal complaint filed by Hao, “nowhere is it stated” that she filed the complaint in behalf of the corporation in a manner that would satisfy derivative-suit requirements. Accordingly, it held that the criminal complaint and its civil aspect could not be deemed a derivative suit.

Proper Party in Rule 65 Certiorari: Corporation as Offended Party and Necessary Stakeholder

On the second issue, the Supreme Court addressed whether Siena Realty Corporation could properly be included as a party in the RTC certiorari petition under Rule 65. The Court noted that Hao’s petition had been styled as being filed in her personal capacity and “for the benefit of” the corporation. The petitioner argued that the corporation was not a private complainant in Criminal Case No. 285721 and could not thus be treated as an aggrieved party.

The Supreme Court discussed Rule 65, stating that certiorari lies when a tribunal has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or plain, speedy, and adequate remedy in ordinary course of law. It reiterated that the general rule requires that certiorari be filed by an aggrieved party or a person with sufficient standing. It cited prior rulings recognizing that offended parties in criminal cases have sufficient interest and personality to file special civil actions.

The Court also addressed contrary reliance on Ciudad Real & Devt. Corporation v. Court of Appeals, where it had found grave abuse of discretion in permitting a corporation to join a certiorari proceeding despite a refusal of intervention and substitution. It distinguished the present case by holding that Hao’s recourse to the RTC was proper because the petition was brought under her name and also for the corporation’s benefit. Even if the corporation was not the formal complainant in the criminal action, the subject of the alleged falsification was the corporation’s projects, and the falsified documents were corporate documents. For that reason, the Court held that the corporation was a proper party because the criminal proceedings directly and adversely affected it.

Active Participation of Private Prosecutors: Civil Aspect Deemed Instituted and Evidence of Civil Liability Is Required Absent Waiver or Reservation

On the third issue, the Supreme Court considered whether private prosecutors could actively intervene. The petitioner relied on Tan, Jr. v. Gallardo, which had stated that when the offense or statute does not provide for indemnity, the offended party may not intervene. The Supreme Court rejected the contention as inapplicable. It reasoned that, generally, civil liability arises from crime through the basic postulate that every person criminally liable is also civilly liable. It explained that the crime offends both society (through the State) and the individual who is actually or directly injured or damaged by the punishable act or omission. It treated indemnity as integral to the penalty imposed by law and emphasized that the civil action covers restitution, reparation, and indemnification for consequential damages.

The Court then anchored its holding on the Rules of Criminal Procedure. Under Rule 111(a), when a criminal action is instituted, the civil action arising from the offense charged is deemed institu

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