G.R. No. 173780 - Metropolitan Bank and Trust Co. vs. Custodio

Case Summary (G.R. No. 173780)

Factual Background

On January 22, 2005, SAMELCO II’s Board of Directors adopted Resolution No. 5, Series of 2005, which disallowed respondent from attending subsequent Board meetings effective February 2005 and disqualified him for one term from running as director. Respondent, asserting that the resolution curtailed his rights as a director and lacked legal and factual basis, filed an Urgent Petition for Prohibition in the Regional Trial Court (Special Civil Case No. C-2005-1085) seeking nullification of the resolution and injunctive relief. The RTC initially issued a temporary restraining order which was extended, and thereafter proceeded to adjudicate the petition.

RTC Proceedings

In answer, petitioners raised as an affirmative defense that the RTC lacked primary jurisdiction over the subject matter because the National Electrification Administration (NEA) possessed primary authority over matters affecting electric cooperatives. The RTC, by Order dated May 6, 2005, nevertheless sustained its jurisdiction and enjoined petitioners from enforcing Resolution No. 5, Series of 2005. A motion for reconsideration filed by petitioners was denied by the RTC on September 15, 2005.

Court of Appeals Proceedings

Petitioners elevated the matter to the Court of Appeals via certiorari, alleging grave abuse of discretion by the RTC. The CA dismissed petitioners’ petition for certiorari and affirmed the RTC’s orders in its Decision dated January 26, 2006. The CA denied petitioners’ motion for reconsideration in its July 12, 2006 Resolution. Petitioners then sought review under Rule 45 before the Supreme Court.

Issues Presented

Petitioners framed three principal errors: first, that the CA misapplied the doctrine of primary jurisdiction by limiting it to technical disputes; second, that the CA erred in ruling that NEA lacks authority under P.D. No. 269 and P.D. No. 1645 to determine the validity of electric cooperative board resolutions or to entertain remedies such as certiorari, prohibition or mandamus; and third, that the CA erred in sustaining RTC jurisdiction despite the existence of a plain, speedy and adequate administrative remedy, thus precluding a writ of prohibition.

Petitioners' Arguments

Petitioners contended that the doctrine of primary jurisdiction should apply because NEA’s supervisory and control powers under P.D. No. 1645 encompass determinations on the validity of board resolutions of electric cooperatives. They argued that the amendatory provisions broadened NEA’s powers to include the authority to conduct investigations, issue orders, and take preventive or disciplinary measures including suspension or removal of board members. Petitioners therefore maintained that judicial intervention was premature and constituted an intrusion into NEA’s statutory domain.

Respondent's Claims

Respondent maintained that the RTC had jurisdiction to issue the writ of prohibition because the challenged board resolution affected his rights as a director and was allegedly issued with grave abuse of discretion and in violation of due process. He sought immediate judicial relief in the form of injunctive writs to prevent enforcement of the board resolution. The record reflects that respondent did not first file a complaint with the NEA before seeking relief in the RTC.

Applicable Statutory Provisions

The Supreme Court emphasized key statutory provisions. Under P.D. No. 1645, Section 5 amended Section 10 of P.D. No. 269 to grant NEA authority to conduct investigations and to take preventive and disciplinary measures, including suspension, removal and replacement of members of the Board of Directors. Section 7 amended Section 24 of P.D. No. 269 to vest management of a cooperative in its Board “subject to the supervision and control of NEA” and to grant NEA the right to participate in Board meetings and to approve policies and resolutions. Executive Order No. 292, Section 38(1), defines supervision and control to include authority to review, approve, reverse or modify acts of subordinate units. Batas Pambansa Blg. 129, Section 21(1), confirms the RTC’s original jurisdiction to issue a writ of prohibition.

Supreme Court's Analysis on Primary Jurisdiction

The Court found that the CA erred in limiting the doctrine of primary jurisdiction and in holding that the RTC’s jurisdiction over a petition for prohibition rendered NEA’s role irrelevant. The Court observed that while the RTC possessed cognizance to issue a writ of prohibition, the essential question was which forum—court or NEA—had primary competence to decide the validity of the SAMELCO II board resolution. Given NEA’s explicit statutory mandate to exercise supervision and control over electric cooperatives and its power to discipline and remove board members, the Court held that NEA had primary jurisdiction to determine the validity of the subject resolution. The Court concluded that judicial action at that stage would constitute an unnecessary intrusion into NEA’s statutory authority.

Application of Exhaustion Doctrine and Exceptions

The Court reaffirmed that the doctrine of exhaustion of administrative remedies is a corollary of primary jurisdiction and is a precondition to judicial intervention when an administrative remedy is available. The Court listed recognized exceptions to the doctrines but found none applicable on the facts. The Court noted that respondent’s allegation of arbitrariness and due process violation was not established so as to displace the requirement of exhaustion. The Court further observed that the issues raised were not purely legal; they required factual determinations within NEA’s tech

Case Syllabus (G.R. No. 173780)

Parties and Procedural Posture

SAMAR II ELECTRIC COOPERATIVE, INC. (SAMELCO II) was the corporate petitioner and the subject electric cooperative in this litigation.
The individual petitioners were the members of SAMELCO II's Board of Directors identified in the caption and included the General Manager as ex officio director.
Ananias D. Seludo, Jr. was the respondent and a duly elected director whose term expired in May 2005.
Respondent filed an Urgent Petition for Prohibition in the Regional Trial Court (RTC), Special Civil Case No. C-2005-1085, Branch 33, Calbiga, Samar, challenging Resolution No. 5 [Series] of 2005.
The RTC issued a temporary restraining order and later sustained jurisdiction and enjoined petitioners from enforcing Resolution No. 5 [Series] of 2005 in its May 6, 2005 Order and denied reconsideration in its September 15, 2005 Order.
Petitioners elevated the case to the Court of Appeals via a petition for certiorari, which the CA dismissed in its January 26, 2006 Decision and denied reconsideration in its July 12, 2006 Resolution.
The petitioners filed the present petition for review on certiorari under Rule 45, Rules of Court, seeking reversal of the CA Decision and Resolution and the RTC Orders.

Key Factual Allegations

The SAMELCO II Board of Directors adopted Resolution No. 5 [Series] of 2005 on January 22, 2005 disallowing respondent from attending succeeding Board meetings effective February 2005.
The same resolution purportedly disqualified respondent for one term from running as a candidate for director in the upcoming district elections.
Respondent alleged that Resolution No. 5 [Series] of 2005 unlawfully curtailed his rights as a director and therefore filed an urgent petition for prohibition to nullify the resolution and to obtain injunctive relief.
The RTC granted a TRO and later ruled that it had jurisdiction to hear the petition for prohibition and barred enforcement of the challenged resolution.
Petitioners consistently maintained that the matter fell within the primary jurisdiction of the National Electrification Administration (NEA) and that respondent failed to exhaust administrative remedies before seeking judicial relief.

Statutory Framework

P.D. No. 269 as amended by P.D. No. 1645 expanded the NEA's powers and expressly conferred upon the NEA supervision and control over electric cooperatives.
Section 5 of P.D. No. 1645 amended Section 10, Chapter II of P.D. No. 269 to empower the NEA to issue orders, rules and regulations, conduct investigations, and take preventive or disciplinary measures including suspension and removal of Board members.
Section 7 of P.D. No. 1645 amended Subsection (a), Section 24, Chapter III of P.D. No. 269 to vest management of a cooperative in its Board subject to the supervision and control of NEA, with NEA having the right to participate in Board meetings and to approve policies and resolutions.
Executive Order No. 292, Administrative Code of 1987, Section 38(1), Book 4, Chapter 7, defines supervision and control to include the authority to review, reverse or modify acts and decisions of subordinate officials.

Issues Presented

Whether the doctrine of primary jurisdiction applies to the dispute over the validity of Resolution No. 5 [Series] of 2005.
Whether the NEA possesses authority under P.D. No. 269 and P.D. No. 1645 to determine the validity of Board resolutions and to discipline or remove Board members of an electric cooperative.
Whether respondent could invoke a writ of prohibition before the RTC without first exhausting administrative remedies before the NEA.
Whether any exception to the doctrines of primary jurisdiction and exhaustion of administrative remedies justified immediate judicial intervention in this case.

Parties' Contentions

Petitioners contended that the CA erred by narrowing the doctrine of primary jurisdiction and by uph