Case Summary (G.R. No. 113032)
Criminal complaints — charges, factual allegations, and amounts claimed
On March 13, 1991, petitioners filed an affidavit-complaint leading to two informations: (1) falsification of a public document (Art. 171 RPC) — alleged submission to the SEC of an income statement for fiscal year 1985–1986 falsely representing that Resolution No. 48 was passed on March 30, 1986 (within that fiscal year) when it was allegedly passed on June 1, 1986; and (2) estafa (Art. 315(1)(b) RPC) — alleging wrongful disbursement of P186,470.70 as retroactive salaries and continued unauthorized salary payments totaling P1,453,970.79 as of November 15, 1991, plus periodic P19,500 disbursements every 15th and 30th.
Procedural history — consolidation, trial, RTC decision, and petition for certiorari
The two criminal cases were consolidated for trial in RTC Branch 33. After full hearing, the trial court acquitted the accused on both counts (September 6, 1993) and did not impose civil liability. Petitioners moved for reconsideration solely as to civil liability; the motion was denied (November 23, 1993). Petitioners filed a petition for certiorari seeking review of the civil aspect of the RTC decision. WIT later sought and obtained leave to intervene in this Court, disclaiming authority of the counsel who filed the petition and praying for dismissal.
Issue presented
Whether the private respondents, by adopting and acting pursuant to Resolution No. 48 (granting retroactive and continuing compensation), violated Section 30 of the Corporation Code so as to incur criminal and civil liability (falsification of public document, estafa) and whether petitioners may pursue corporate recovery through the present judicial route or must proceed via SEC derivative action.
Legal framework on director compensation (Section 30, Corporation Code)
Section 30 bars directors from receiving compensation "as such directors" except reasonable per diems, unless (a) the by-laws fix their compensation or (b) the stockholders representing a majority of outstanding capital stock approve at a regular or special stockholders’ meeting. The provision also caps total yearly compensation of directors, as such, at ten percent of net income before income tax of the preceding year. The statutory phrase "as such directors" limits the prohibition to compensation for services performed purely in the capacity of director; it does not preclude compensation payable to a trustee who concurrently serves in a separate corporate officer capacity.
Court’s interpretation — officers versus directors/trustees
The Court emphasized that Section 30’s proscription concerns compensation for services “as such directors,” and that directors/trustees may be compensated when they render services in a capacity distinct from their board role — i.e., as corporate officers. Resolution No. 48 granted compensation expressly to the officers of the corporation (Chairman, Vice-Chairman, Corporate Treasurer, Corporate Secretary) for services rendered and not to the respondents solely in their capacity as trustees; therefore, Section 30’s bar on director compensation “as such” did not apply.
Authority under articles and by-laws; RTC’s factual findings on timing of adoption
The RTC found, based on the complete minutes and incorporated corporate instruments, that the grant of compensation was authorized by the Articles of Incorporation and the Amended By-Laws (specifically by-law provisions allowing officers to receive compensation fixed by the Board). The trial court also found that the evidence established the resolution was part of the March 30, 1986 minutes rather than being exclusively a product of a June 1 special meeting, undermining the prosecution’s claim of falsification. These factual findings were upheld as amply supported by the record.
Falsification and estafa claims — RTC’s reasoning and legal effect
On falsification (Art. 171), the RTC concluded the prosecution failed to prove beyond reasonable doubt that the resolution was not passed on March 30, 1986 and that the income statement submitted to the SEC was knowingly falsified. On estafa (Art. 315(1)(b)), the court found no abuse of confidence or misappropriation because the salaries disbursed were paid pursuant to a Board resolution authorized by the corporate charter and by-laws; the funds received "belong to them" insofar as the compensation was legitimately granted. Thus criminal culpability was not established.
Derivative suit argument and SEC jurisdiction over intra-corporate disputes
Petitioners argued they were pursuing a derivative action on behalf of WIT to annul Resolution No. 48. The Court rejected that characterization: the present proceeding was an appeal on the civil aspect of criminal cases, not a properly pleaded derivative suit. The Court reiterated that a derivative suit must be clearly alleged and filed in the proper tribunal; PD No. 902-A (and implementing circulars/rules) vests original and exclusive jurisdiction over intra-corporate controversies, including derivative actions, with the SEC. A derivative action filed in the regular courts instead of the SEC is improperly filed and jurisdictionally defective; the SEC’s decision, if appealed, proceeds to the Court of Appeals and thereafter b
...continue readingCase Syllabus (G.R. No. 113032)
Court, Citation, and Relief Sought
- Decision of the Supreme Court, First Division, reported at 343 Phil. 742, G.R. No. 113032, August 21, 1997.
- Petition for certiorari seeking review of: (1) Decision dated September 6, 1993 and (2) Order dated November 23, 1993 of Branch 33, Regional Trial Court (RTC), Iloilo City, in Criminal Cases Nos. 37097 and 37098 (estafa and falsification of a public document).
- Petitioners seek civil liability (return of corporate funds and interest) against private respondents notwithstanding their acquittal in the criminal cases.
Parties and Corporate Status
- Petitioners: Western Institute of Technology, Inc.; Homero L. Villasis; Preston F. Villasis; Reginald F. Villasis; Dimas Enriquez (minority stockholders of WIT; Reginald Villasis attended the board meeting).
- Private respondents/accused: Ricardo T. Salas; Salvador T. Salas; Soledad Salas-Tubilleja; Antonio S. Salas; Richard S. Salas (members of same family; majority and controlling members of the Board of Trustees of WIT).
- Western Institute of Technology, Inc. (WIT): a stock corporation engaged in operating an educational institution; later filed a Motion for Intervention before the Supreme Court disowning its inclusion among petitioners and denying authority of petitioners’ counsel to represent the corporation.
Factual Background — Board Meetings and Notice
- Petitioners allege a Special Board Meeting took place on June 1, 1986 at WIT’s principal office in La Paz, Iloilo City; attendees included other Board members and Reginald Villasis.
- Prior to the alleged Special Meeting, notices dated May 24, 1986 were distributed to all Board members; the notice allegedly included item No. 6: "Possible implementation of Art. III, Sec. 6 of the Amended By-Laws of Western Institute of Technology, Inc. on compensation of all officers of the corporation."
- Contested minutes and minute pages are central to the dispute over the actual date when Resolution No. 48, Series of 1986 was passed.
Resolution No. 48, Series of 1986 — Text and Effect
- Resolution No. 48, s. 1986 (as recorded in the records) stated:
- On motion of Mr. Richard Salas, seconded by Mrs. Soledad Tubilleja, it was unanimously resolved that:
- "The Officers of the Corporation be granted monthly compensation for services rendered as follows: Chairman - P9,000.00/month, Vice-Chairman - P3,500.00/month, Corporate Treasurer - P3,500.00/month and Corporate Secretary - P3,500.00/month, retroactive June 1, 1985 and the ten percentum of the net profits shall be distributed equally among the ten members of the Board of Trustees. This shall amend and superceed(sic) any previous resolution."
- No other business; Chairman declared meeting adjourned at 5:11 P.M.
- Certificate clause: "This is to certify that the foregoing minutes of the regular meeting of the Board of Trustees of Western Institute of Technology, Inc. held on March 30, 1986 is true and correct to the best of my knowledge and belief." (Signed) Antonio S. Salas, Corporate Secretary.
- On motion of Mr. Richard Salas, seconded by Mrs. Soledad Tubilleja, it was unanimously resolved that:
- Resolution purports retroactivity to June 1, 1985 and authorizes both stipulated monthly salaries and a ten-percent distribution of net profits among trustees.
Criminal Complaints, Informations, and Allegations
- Affidavit-complaint filed March 13, 1991 by petitioners Homero Villasis, Preston Villasis, Reginald Villasis, and Dimas Enriquez with the Office of the City Prosecutor, Iloilo.
- Two separate criminal informations were filed (both dated November 22, 1991) and later consolidated: falsification of public document (Art. 171, RPC) and estafa (Art. 315, par. 1(b), RPC).
- Falsification information alleges:
- Submission to the Securities and Exchange Commission (SEC) of WIT’s income statement for fiscal year 1985-1986 showing disbursement of corporate funds for compensation based on Resolution No. 48, s. 1986, making it appear the resolution was passed on March 30, 1986 (a date within fiscal year 1985-1986: May 1, 1985 to April 30, 1986) when in truth no such resolution was passed on March 30, 1986.
- Accused conspired to prepare, execute and submit the income statement containing the retroactive compensation of P186,470.70.
- Estafa information alleges:
- On or about June 1, 1986 accused, knowing they had no sufficient lawful authority, disbursed corporate funds by effecting payment of their retroactive salaries in the amount of P186,470.70 and then paid themselves every 15th and 30th of the month starting June 15, 1986 until the present at the rate of P19,500.00 per month, treating the funds as their own.
- Despite objections by minority stockholders at the annual stockholders’ meeting on June 14, 1986 and thereafter, the accused refused to rectify payments, causing damage alleged at P1,453,970.79 as of November 15, 1991.
Trial Proceedings and RTC Findings (Judge Porfirio Parian)
- Criminal Cases Nos. 37097 and 37098 were consolidated for trial.
- After full hearing, RTC rendered a verdict of acquittal on both counts in a Decision dated September 6, 1993; no civil liability was imposed against the accused.
- The RTC’s reasoning (as quoted and summarized):
- Prosecution failed to submit the complete minutes of the March 30, 1986 regular meeting (presented only a last page, Exh. aCa). Had the complete minutes (Exh. a1a, five pages) been presented, it would show Resolution No. 48 included under "Other Business, No. 6" and passed March 30, 1986.
- The existence of Exh. aCa is part and parcel of the whole minutes and supports that Resolution No. 48 was passed on March 30, 1986.
- Articles of Incorporation (Eleventh Article) and Amended By-Laws (Art. III, Sec. 6) of the corporation authorize the Board of Directors to fix compensation for officers; officers shall receive such compensation as may be fixed by the Board.
- Granting of compensation through Resolution No. 48 (enact