G.R. No. L-313 - Ibanez vs. Herdez

Case Summary (G.R. No. L-313)

Factual Background

STRADEC, as one of the incorporators, owned 49% of SIDC’s shares. On October 8, 2004, Yujuico and Sumbilla purportedly executed a P10,000,000.00 loan agreement with Wong, secured by pledging STRADEC’s shares in SIDC. Due to STRADEC’s alleged default, the pledged shares were sold in a notarial auction on April 26, 2005. Wong, the sole bidder, received stock certificates registered by SIDC’s secretary. STRADEC contested the authority of Yujuico and Sumbilla to contract the loan and pledge shares, asserting non-receipt of loan proceeds and alleged fraudulent transfer of shares first to Wong, then to CTCII. STRADEC sought judicial relief to nullify these transactions and prevent implementation of related corporate resolutions.

Procedural History

STRADEC filed a petition before the Regional Trial Court (RTC) of Batangas City (Special Commercial Court), seeking nullification of the loan, pledge, sale, share transfer registration, and corporate stockholders’ meetings' validity, along with a preliminary injunction. The RTC denied the preliminary injunction and ruled that for the first two causes of action (nullity of loan and pledge, and auction sale), the venue was improperly laid in Batangas as these were personal actions, requiring filing in the residence of parties or at STRADEC’s principal business place. The RTC held that it lacked jurisdiction to proceed on these and stayed action on other causes until Supreme Court’s determination on the legitimacy of STRADEC’s board. STRADEC’s motion for reconsideration was denied. The Court of Appeals (CA) affirmed the RTC’s rulings.

Issues on Appeal

Whether the Court of Appeals erred in not classifying the first and second causes of action as intra-corporate disputes and in ruling the venue improper in Batangas.
Whether the CA and RTC gravely abused discretion by denying the writ of preliminary injunction despite STRADEC’s showing of clear and unmistakable rights and continuing violations.
Whether RTC’s abeyance of the third and fourth causes of action due to pending related cases was justified.

Legal Analysis: Intra-Corporate Dispute Characterization

An intra-corporate dispute involves controversies arising from intra-corporate relations, including disputes among stockholders or between stockholders and the corporation. The test to distinguish such cases involves:

The relationship test: focuses on the nature of the parties’ relationships (e.g., stockholders, corporation).
The nature of the controversy test: examines the subject matter to see if it involves enforcement of rights and obligations under the Corporation Code or internal corporate rules.

Using these tests, the Court found that STRADEC’s claims on nullifying the loan, pledge, and sale of shares arise from STRADEC’s status as a stockholder alleging unauthorized divestment of shares, clearly relating to intra-corporate relations. The allegations of unauthorized acts by former officers, irregularities in the loan and sale process, and subsequent transfers affecting shareholder rights establish that STRADEC’s first and second causes of action are intra-corporate disputes.

Venue and Jurisdiction Considerations

Venue under Rule 4, Section 2 of the Rules of Civil Procedure for personal actions generally lies at the residence of the parties or principal place of business. The RTC erred in ruling venue was improper, as intra-corporate disputes must be filed at the RTC having jurisdiction over the corporation’s principal office pursuant to Section 5 of the Interim Rules of Procedure Governing Intra-Corporate Controversies. STRADEC had properly filed in the RTC branch exercising jurisdiction over SIDC’s principal place of business, then allegedly transferred to Lipa, Batangas.

Because preliminary objections on venue were not yet raised by respondents, the RTC’s dismissal by reason of improper venue was premature and improper.

Jurisdiction of the Regional Trial Court and SCC Designation

With the transfer under Republic Act No. 8799 (Securities Regulation Code) of cases formerly under the Securities and Exchange Commission to RTCs designated as Special Commercial Courts (SCCs), these RTC branches now exercise general jurisdiction over intra-corporate disputes. This does not limit their jurisdiction to purely special proceedings; they may resolve incidental civil law issues arising from intra-corporate controversies.

Thus, the CA erred in relying on isolated precedents where the Securities and Exchange Commission’s jurisdiction or the nature of parties’ status differed. The SCC’s powers include cognizance over actions like those brought by STRADEC.

Suspension of Proceedings on Third and Fourth Causes of Action

The RTC stayed action on claims concerning invalidation of share transfers registration and corporate meetings due to related pending cases involving STRADEC’s internal corporate affairs. The Court clarified that such pendency should not automatically bar the RTC from adjudicating the transferred shares’ ownership and the corporation’s recognition of such transfers, which involve distinct questions from those pending. Hence, the RTC’s abeyance was unjustified.

Denial of Writ of Preliminary Injunction

The writ of preliminary injunction aims to preserve the status quo pending final determination, preventing serious damage to clear and unmistakable rights. STRADEC, as the owner of the shares, had a clear right to maintain proprietary interests within SIDC. The unauthorized pledge, sale, and transfer threatened to divest STR

Case Syllabus (G.R. No. L-313)

Background and Parties Involved

Petitioner Strategic Alliance Development Corporation (STRADEC) is a Philippine domestic corporation principally engaged in development business with its initial principal office in Bayambang, Pangasinan.
STRADEC, along with several individuals and other corporations, incorporated respondent Star Infrastructure Development Corporation (SIDC) in 1997 for general construction business.
STRADEC owned 2,449,998 shares representing 49% of SIDC’s authorized capital stock of P5,000,000.00.
SIDC moved its principal office from Pasig City to Bayambang, Pangasinan, and subsequently to Lipa, Batangas.
Respondents include individual officers of STRADEC and SIDC, notably respondents Yujuico and Sumbilla (then President and Treasurer of STRADEC), respondent Wong (SIDC incorporator), respondent Caraos (notary public), and respondent Tabalingcos (SIDC Corporate Secretary).
Respondent Cypress Tree Capital Investment, Inc. (CTCII) was alleged to have acquired STRADEC’s shares unlawfully through respondent Wong.

Factual and Procedural History

On October 8, 2004, respondents Yujuico and Sumbilla executed a P10,000,000.00 loan promissory note with respondent Wong purportedly for STRADEC.
As security, respondent Yujuico executed a Deed of Pledge over STRADEC’s entire SIDC shareholdings on April 1, 2005.
STRADEC repeatedly defaulted in loan obligations; shares were sold via a notarial sale on April 26, 2005, by respondent Caraos, with Wong as sole bidder.
Certificates of stock were transferred by respondent Tabalingcos and recorded in SIDC’s stock and transfer book.
STRADEC, represented by President Quiambao, filed suit on July 17, 2006 in the Regional Trial Court (RTC) of Batangas City, challenging:
- Unauthorized loan and pledge by its former officers.
- Lack of proceeds received by STRADEC for the loan.
- Irregularities in the transfer and sale of shares to Wong, and onward to CTCII.
- Invalidity of SIDC stockholders’ meetings recognizing the share transfers and altering corporate governance.
STRADEC sought nullification of loan and pledge, avoidance of the sale, cancellation of share transfer registration, invalidation of stockholders meetings, injunctive reliefs, attorney's fees, and costs.

RTC Rulings on Venue and Procedural Matters

The RTC denied STRADEC’s application for a writ of preliminary injunction to preserve the status quo, citing uncertainty of rights and pendency of related cases in other jurisdictions.
The RTC ruled on venue:
- The first two causes of action (nullity of loan and pledge, and avoidance of the notarial sale) were not properly venued in Batangas because the Rules of Court require the case to be filed where plaintiff or principal defendants reside.
- The third and fourth causes of action (cancellation of share transfer registration, and invalidity of stockholders’ meetings) were held in abeyance pending resolution of who were the legitimate directors of STRADEC.
The RTC refused to dismiss the case despite venue objections, but declined to act on improperly venued claims.
STRADEC’s motion for reconsideration was denied due to lack of pleadings supporting solidary liability and because prior injunctions in intra-corporate disputes did not decide the ownership of shares.

Court of Appeals’ Decision and Rationale

The CA affirmed the RTC’s ruling on venue, rejecting STRADEC’