A.M. OCA IPI No. 12-201-CA-J - Ferdez vs. Bato, Jr.

Case Summary (A.M. OCA IPI No. 12-201-CA-J)

Factual Background

The complainants had corporate involvement with NADECOR, a domestic corporation organized in 1956 that owned a gold-copper mining concession in Pantukan, Compostela Valley called the King-King Mine. Fernandez and Henson were elected in August 2010 to NADECOR’s Board of Directors, and Ong was elected to the Board at a stockholders meeting held on June 13, 2012. The records showed that, at the regular annual stockholders meeting held on August 15, 2011 (where ninety-four percent of NADECOR’s outstanding shares was represented), two groups contested control of the corporation—one led by Jose G. Ricafort and the other by Conrado T. Calalang.

Thereafter, the wives and children of JG Ricafort, namely Corazon H. Ricafort, Jose Manuel H. Ricafort, Marie Grace H. Ricafort, and Maria Teresa R. Santos (collectively, the plaintiffs Ricafort), filed SEC Case No. 11-164 in the RTC of Pasig City, Branch 159, seeking to annul the August 15, 2011 stockholders meeting. The plaintiffs Ricafort alleged, among others, that they were not given prior notice in accordance with NADECOR’s by-laws, and that the notice they received announced a time and venue different from those stated in the by-laws.

On December 21, 2011, the RTC granted relief, declared the August 15, 2011 annual stockholders meeting null and void, and directed NADECOR to issue a new notice within three days and to hold a new annual stockholders meeting within thirty days from receipt of the RTC order.

CA Petitions and the Issuance of Injunctive Relief

Following the RTC ruling, four separate certiorari petitions were filed in the CA by members of the new board and by NADECOR, each with requests for temporary restraining order (TRO) and/or writ of preliminary injunction. These were CA-G.R. Nos. 122782, 122784, 122853, and 122854. The cases were initially distributed to different CA divisions and assigned ponentes, but the later stage of the controversy involved their consolidation.

In CA-G.R. SP No. 122782, the CA’s 15th Division denied interim relief on January 16, 2012. In CA-G.R. SP No. 122784, however, the 11th Division issued a TRO on the same day, finding that the conditions for injunctive relief were present. The TRO enjoined the implementation of the RTC’s December 21, 2011 order pending determination of the petition’s merits. It required bond of PHP 100,000.00 each, and it also provided that, during the effectivity of the TRO, the board elected before the August 15, 2011 meeting would discharge functions in a hold-over capacity to prevent a hiatus.

As the TRO operated and the CA proceedings progressed, the CA ordered consolidation of the four petitions in stages. Eventually, the Special 14th Division’s Resolution dated June 13, 2012—the act challenged in this administrative case—granted the application for writ of preliminary injunction in the consolidated CA petitions. The complainants’ allegations centered on the manner by which the CA’s action was taken, the authority of the acting senior member who penned the resolution, and the alleged lack of notice, hearing, and verification for material motions.

The June 13, 2012 Stockholders Meeting and the Challenged Resolution

Because the RTC order had declared the August 15, 2011 meeting void, the CA had instructed that the board elected earlier would act in hold-over capacity during the pendency of the CA petitions. The complainants alleged that, after the TRO’s 60-day period lapsed and before the CA could fully resolve the preliminary injunction application, the corporate secretary of the old board issued on June 6, 2012 a notice for an annual stockholders meeting on June 13, 2012 at the Jollibee Centre in Ortigas.

The notice was published in The Philippine Star on June 7, 2012. The meeting agenda included: (a) ratification of the rescission of memoranda of understanding (MOUs) with St. Augustine Gold & Copper Ltd. and St. Augustine Mining, Ltd. (St. Augustine), and (b) ratification of the sale of unissued shares representing twenty-five percent (25%) of NADECOR’s authorized capital stock (for PHP 1.8 billion) to a new investor later disclosed as controlled by the Villar group.

On June 13, 2012, the stockholders meeting proceeded. The complainants’ narrative described that Calalang was initially presiding but declared the meeting adjourned after he received a facsimile copy of the June 13, 2012 CA resolution. The remaining stockholders overruled him, resumed the meeting, and proceeded with corporate actions including election of a new board, ratification of rescission of MOUs with St. Augustine, and ratification of Queensberry’s subscription.

Critically, the June 13, 2012 CA Resolution issued a writ of preliminary injunction that: (i) enjoined implementation of the RTC’s December 21, 2011 order; (ii) allowed the board elected during the August 15, 2011 meeting to continue acting as board; (iii) enjoined parties, including the hold-over board, from acting as hold-over board and from scheduling or holding any stockholders meeting; and (iv) enjoined effects of the June 13, 2012 meeting, including ratification of rescission MOUs and related transaction agreements with St. Augustine, election of a new board, and the sale and ratification of the sale of unissued shares to Queensberry.

The complainants thus attributed to the CA resolution an alleged contravention of the prior TRO’s hold-over arrangement and a purported expansion of injunction into matters that effectively decided the controversy.

The Administrative Complaint and the Parties’ Theory

The complainants sought to hold the CA justices administratively liable for: (a) acting on unverified motions and supplements containing allegedly new facts without the safeguards required for preliminary injunction; (b) permitting Justice Bato to pen the resolution though he allegedly sat only as acting senior member, and though the consolidated petitions allegedly had not been re-raffled; (c) allegedly violating CA internal rules on who may act on urgent applications for preliminary injunction in the absence of the ponente; and (d) allegedly issuing an injunction that was not merely preservative of the status quo, but disposed of the main case.

In addition, the complainants had earlier attempted to challenge the writ by filing a petition for certiorari and prohibition, G.R. No. 202257, but the Supreme Court dismissed it for lack of personality because the complainants were non-parties and strangers to the consolidated CA petitions.

Supreme Court’s Resolution: Governing Procedure and Threshold Considerations

The Supreme Court began by identifying the procedural framework. Rule 140 of the Rules of Court supplies the procedure for disciplining CA and Sandiganbayan justices. Under Rule 140, administrative proceedings may be instituted motu proprio, upon a verified complaint supported by affidavits or documents, or upon an anonymous complaint supported by public records of indubitable integrity.

The Court found that the essential facts in the verified complaint were not disputed and were verifiable from attached copies of orders and pleadings. Thus, the Court held that the matter did not require referral to a retired member for evaluation and recommendation. The Court then examined the relevant provisions of the CA’s 2009 Internal Rules of the CA (IRCA), particularly Rule VI, Sections 2(d), 4, and 5—provisions on the participation of justices in adjudication of cases, hearing on preliminary injunction, and action by a justice in urgent matters when a justice is absent.

Authority of Justice Bato to Act on the Urgent Application

The Court held that Justice Bato had authority to act on the urgent motions to resolve the application for writ of preliminary injunction while Justice Lantion was on leave. The Court found that Justice Lantion’s extended absence was covered by a valid designation. The Court considered Office Order No. 201-12-ABR, which designated Justice Bato as acting senior member of the Special 14th Division vice Lantion, with authority to act on cases submitted to the division for final resolution and/or appropriate action, except ponencia, from June 1 to 15, 2012 or until Lantion reported back for duty. The Court further noted that the office order stated that the designation held true with other divisions where Lantion had participated as regular member or in an acting capacity.

The complainants had argued that the consolidated petitions allegedly had not been re-raffled to Justice Bato, and that only the two other present regular members could validly act on the application. The Court rejected this approach. It emphasized that the absence of time and the urgency of preliminary injunctive relief were decisive, since the rollos were forwarded only on June 8, 2012 and the stockholders meeting was scheduled for June 13, 2012. The Court held that nothing in the IRCA required that an urgent injunction application be transmitted exclusively to only the two present regular members when the acting senior member could act for final resolution and appropriate action.

The Court also clarified doctrinally the distinction between ponencia and preliminary injunction. It held that a writ of preliminary injunction is not a decision on the merits; it is a provisional, preventive, and ancillary remedy meant to preserve the status quo prior to final judgment. In contrast, ponencia refers to the rendition of a decision that disposes of the main controversy. Accordingly, the Court treated the action on the application for preliminary injunction as within the proper range of authority of an acting member, subject to submission for ratification, modification, or recall on the next working day as contemplated by the IRCA.

Hearing Requirement and Dispensing with It in the Circumstances

The Court also addressed the complainants’ contention that no hearing was conducted and that the CA should have proceeded with the procedure required by Section 5 of Rule 58 of the Rul

Case Syllabus (A.M. OCA IPI No. 12-201-CA-J)

Parties and Procedural Posture

Ethelwoldo E. Fernandez, Antonio A. Henson, and Angel S. Ong filed a verified Joint Complaint-Affidavit against Court of Appeals Associate Justices Ramon M. Bato, Jr., Isaias P. Dicdican, and Eduardo B. Peralta, Jr., then members of the former Special 14th Division, before the Supreme Court.
The complaint sought administrative discipline for the respondents based on alleged grave misconduct, conduct detrimental to the service, gross ignorance of the law, gross incompetence, and manifest partiality.
The Supreme Court previously dismissed the complainants’ petition for certiorari and prohibition in G.R. No. 202257 for lack of personality, holding that the complainants were non-parties and strangers to the consolidated CA petitions where the writ of preliminary injunction had issued.
In the present case, the Supreme Court dismissed the administrative complaint, principally on the ground that the complainants had no personality to assail the assailed interlocutory injunctive order, and thus could not harass the CA Justices through an administrative complaint.

Key Factual Allegations

The complaint alleged that a Resolution dated June 13, 2012—which granted a writ of preliminary injunction—was authored by Justice Bato, acting as acting senior member of the former Special 14th Division.
The complainants alleged that Justice Bato usurped the office of ponente in four consolidated CA cases: CA-G.R. Nos. 122782, 122784, 122853, and 122854.
The complainants alleged that although the cases had been assigned to Justice Lantion as ponente, Justice Bato acted on unverified motions and granted the writ without prior hearing.
The complaint also alleged “connivance” by the other Division members, Justices Dicdican and Peralta, for allowing the writ to issue in the same manner.
The complaint further alleged procedural irregularities, including the lack of rerraffling of the consolidated petitions to Justice Bato and the claim that Internal Rules of the CA limited who could act during the ponente’s absence.
The complainants alleged that the injunctive relief was not merely preservative of the status quo, but in effect disposed of the merits because it restrained corporate actions following the RTC voiding of the August 15, 2011 stockholders meeting.

Antecedent Corporate Dispute

The complainants were elected members of the Board of Directors of Nationwide Development Corporation (NADECOR), a domestic corporation owning the King-King Gold and Copper Mine in Pantukan, Compostela Valley.
After two competing groups sought control of NADECOR during the August 15, 2011 annual stockholders meeting, the plaintiffs Ricafort group filed SEC Case No. 11-164 in the RTC of Pasig City, Branch 159 to annul the August 15, 2011 meeting.
The plaintiffs Ricafort alleged lack of prior notice to their group, notice served only after the meeting, and deviation from the notice time and venue required by NADECOR’s Bylaws.
The RTC, by Order dated December 21, 2011, declared the August 15, 2011 stockholders meeting NULL and VOID, including all acts taken pursuant thereto, and ordered a new notice and meeting.
After that RTC ruling, petitions for certiorari in the CA were filed by members of the new board and NADECOR, each with prayer for TRO and/or writ of preliminary injunction, and these petitions were later consolidated.

CA Actions on TRO and Consolidated Petitions

CA-G.R. SP No. 122782 was raffled to Justice Lantion (as senior member) with Justice Dicdican as chairman and Justice Gacutan as junior member.
The CA 15th Division denied TRO and/or preliminary injunction in CA-G.R. SP No. 122782 on January 16, 2012.
CA-G.R. SP No. 122784 was handled by a different Division, and the 11th Division issued a TRO on January 16, 2012, finding the existence of the traditional injunctive requisites: prima facie right, violation of that right, and urgent necessity to prevent serious damage.
The TRO required the posting of a bond of P100,000.00 each and directed that, during the TRO’s effectivity, the prior board would act in hold-over capacity to prevent operational hiatus.
The CA consolidated the four petitions through subsequent consolidation orders issued in February and March 2012.

Events Surrounding the June 13, 2012 Meeting

After the 60-day TRO lapsed and before the CA resolved the application for preliminary injunction, the corporate secretary issued a notice for an annual stockholders meeting on June 13, 2012.
The meeting was announced to be held at the Jollibee Centre in Ortigas and scheduled at 12:30 p.m., with purposes including ratification of rescission of MOUs with St. Augustine and ratification of the subscription sale of unissued shares to Queensberry.
On the day of the meeting, Calalang initially declared adjournment upon receipt of the CA’s assailed resolution granting preliminary injunction.
The stockholders and directors holding 64% of the shares overruled the presiding officer, walked forward with the meeting after disregarding the writ, and later proceeded with elections and ratifications including the matters enjoined by the assailed resolution.

The Assailed CA Resolution

The assailed June 13, 2012 Resolution granted the application for writ of preliminary injunction and enjoined implementation of the RTC December 21, 2011 order.
The writ required that the board elected during the August 15, 2011 meeting continue to act as board of NADECOR.
The writ prohibited the parties, including the hold-over board, from acting as hold-over board and from scheduling and holding any stockholders meeting, including the already scheduled June 13, 2012 meeting.
The writ additionally enjoined effects of the June 13, 2012 meeting, including the ratification of the MOUs rescission with St. Augustine, the election of any new board, and the ratification of the sale to Queensberry.
The resolution was penned by Justice Bato as acting senior member, and it was concurred in by Justices Dicdican and Peralta.
The CA justified injunctive relief by citing “new and subsequent matters” allegedly not contemplated in the RTC order, such as rescission of MOUs and ratification related to Queensberry’s subscription, and by reasoning that these could affect NADECOR’s future viability and its MPSA.
The CA treated the writ as necessary to prevent serious damage, while stating that the June 13, 2012 meeting would render the consolidated CA petitions moot and academic because a new board would effectively supplant the board whose validity was still being contested.

Administrative Complaint Theory

The complainants alleged that respondents acted on unverified motions and issued a writ of preliminary injunction without notice and hearing allegedly required by Section 5 of Rule 58.
The complainants alleged that it was irregular for Justice Bato to pen the preliminary injunction resolution notwithstanding the consolidated cases had not been re-raffled to him after Justice Lantion’s leave.
The complainants invoked Internal Rules of the CA (specifically Section 5 of Rule VI of the IRCA) to argue that, when urgency exists, only the other present regular division members could act, not the acting member wh