Corporation Law, Mercantile Law, Remedial Law

VESAGAS v. CA G.R. No. 142924. December 5, 2001 Intra-corporate disputes, RTC Jurisdiction, SEC Jurisdiction, Non-joinder of parties

FACTS:

The respondent spouses are members in good standing of the Luz Village Tennis Club, Inc. (club).

They alleged that petitioner Teodoro B. Vesagas, who claims to be the clubs duly elected president, in conspiracy with petitioner Wilfred D. Asis, who, in turn, claims to be its duly elected vice-president and legal counsel, summarily stripped them of their lawful membership, without due process of law.

They filed a Complaint with the SEC on against the petitioners, asking the Commission to declare as illegal their expulsion from the club as it was allegedly done in utter disregard of the provisions of its by-laws as well as the requirements of due process.

They also sought the annulment of the amendments to the by-laws, changing the annual meeting of the club, and increasing the number of trustees from nine to fifteen.

They prayed for the issuance of a TRO and Writ of Preliminary Injunction. The application for TRO was denied by SEC Hearing Officer.

Petitioners filed a motion to dismiss on the ground that the SEC lacks jurisdiction over the subject matter of the case. The motion was denied.

Their MR was likewise denied. They filed a petition for certiorari with the SEC En Banc seeking a review of the hearing officers orders. The petition and their MR were denied.

Petitioners promptly sought relief with the CA contesting the ruling of the Commission en banc.

The CA dismissed the petition for lack of merit. The subsequent motion for reconsideration was also denied.

 

ISSUES:

  1. Whether the SEC has jurisdiction over the case.
  2. Whether Dismissal is the remedy for non-joinder of parties.

 

RULING:

1.

 

Clearly, the Commission has jurisdiction over the said association.

The finding of the Commission, as the administrative agency tasked with among others the function of registering and administering corporations, is given great weight and accorded high respect. We therefore have no reason to disturb this factual finding relating to the clubs registration and incorporation.

In order that the commission can take cognizance of a case, the controversy must pertain to any of the following relationships:

a) between the corporation, partnership or association and the public;

b) between the corporation, partnership or association and its stockholders, partners, members, or officers;

c) between the corporation, partnership, or association and the state as far as its franchise, permit or license to operate is concerned; and

d) among the stockholders, partners or associates themselves.

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the stockholders and the corporation, does not necessarily place the dispute within the loop of jurisdiction of the SEC.

Jurisdiction should be determined by considering not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy.

We rule that the present dispute is intra-corporate in character. In the first place, the parties here involved are officers and members of the club. Respondents claim to be members of good standing of the club until they were purportedly stripped of their membership in illegal fashion. Petitioners, on the other hand, are its President and Vice-President, respectively. More significantly, the present conflict relates to, and in fact arose from, this relation between the parties. The subject of the complaint, namely, the legality of the expulsion from membership of the respondents and the validity of the amendments in the clubs by-laws are, furthermore, within the Commissions jurisdiction.

The original complaint was filed at the SEC. Hence, the SEC still exercised quasi-judicial functions over this type of suits. It is axiomatic that jurisdiction is conferred by the Constitution and by the laws in force at the time of the commencement of the action.

In particular, the Commission was thereupon empowered, under Sec. 5 of P.D. 902-A, to hear and decide cases involving intra-corporate disputes, thus:

SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of association registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

x x x

  1. b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are the stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity;

x x x.[

 

The enactment of R.A. 8799, otherwise known as the Securities Regulation Code, however, transferred the jurisdiction to resolve intra-corporate controversies to courts of general jurisdiction or the appropriate Regional Trial Courts, thus:

5.2. The Commissions jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.

On August 22, 2000, The SC issued a resolution, in A.M. No. 00-8-10-SC, Directing the Court Administrator and the Securities and Exchange Commission to cause the actual transfer of the records of such cases and all other SEC cases affected by R.A. No. 8799 to the appropriate Regional Trial Courts x x x.

The SC also issued another resolution designating certain branches of the Regional Trial Court to try and decide cases formerly cognizable by the SEC.

Consequently, the case at bar should now be referred to the appropriate Regional Trial Court.

 

 

2.

Dismissal is not the remedy for non-joinder of parties.

Under the Rules, the remedy is to implead the non-party, claimed to be necessary or indispensable, in the action, thus:

SEC. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is a ground for dismissal of an action.

Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.

 

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