Oca vs. Custodio

A status quo order in an intra-corporate controversy may be issued only after hearing the parties and the posting of a bond, and is strictly limited to maintaining the last actual, peaceable, and uncontested state of things which preceded the controversy; it cannot direct the undoing of acts already consummated, which is the proper subject of mandatory injunctive relief requiring compliance with the stricter requirements of a verified application and bond under Rule 58 of the Rules of Court.

St. Francis School of General Trias, Cavite, Inc. (School) is a non-stock, non-profit educational institution established in 1973 with original incorporators including private respondent Laurita Custodio and petitioners Cirila Mojica and Josefina Pascual. In 1988, the School entered into a Memorandum of Agreement (MOA) with De La Salle Greenhills (DLSG) permitting the latter to exercise supervisory powers over academic affairs. Pursuant thereto, DLSG Brothers, including petitioners Bernard Oca and Dennis Magbanua, subsequently became members of the Board of Trustees and officers of the School. A dispute arose when Custodio opposed a proposed new MOA that would have expanded DLSG control over financial and administrative matters. Following the rejection of the proposed MOA and the withdrawal of DLSG academic support, Mojica and Pascual retired from their administrative posts but retained their positions as Members and Trustees. Custodio appointed her son and Herminia Reynante to fill the administrative vacuum. On July 8, 2002, the Board of Trustees removed Custodio as member and trustee pursuant to Sections 28 and 91 of the Corporation Code, and on July 23, 2002, issued a memorandum removing her as Curriculum Administrator.

• Corporate Structure and Dispute: St. Francis School of General Trias, Cavite, Inc. was organized on July 9, 1973 as a non-stock, non-profit educational institution with original incorporators including private respondent Laurita Custodio and petitioners Cirila Mojica and Josefina Pascual. On September 8, 1988, the School executed a Memorandum of Agreement with De La Salle Greenhills (DLSG) permitting the latter to exercise supervisory powers over academic affairs. DLSG Brothers, including petitioners Bernard Oca and Dennis Magbanua, subsequently became members of the Board of Trustees and officers of the School. Custodio disputed the validity of the DLSG Brothers' membership and election, alleging they were never formally admitted as members nor elected through proper corporate proceedings.
• Administrative Conflict: A disagreement arose regarding a proposed MOA that would have granted DLSG supervision over finance, administration, and operations, which Custodio opposed. Following the rejection of the proposed MOA and the withdrawal of DLSG academic support, Mojica and Pascual retired from their administrative posts but retained their positions as Members and Trustees. Custodio appointed her son Joseph Custodio as Officer-in-Charge for Finance and Physical Resource Development and Herminia Reynante as Cashier.
• Removal of Custodio: On July 8, 2002, the Board of Trustees resolved to remove Custodio as member and trustee pursuant to Sections 28 and 91 of the Corporation Code. On July 23, 2002, petitioner Bro. Bernard Oca issued a memorandum informing Custodio of her immediate removal as Curriculum Administrator on grounds of willful breach of trust and loss of confidence.
• Intra-corporate Suit and Trial Court Orders: On October 3, 2002, Custodio filed a complaint with prayer for preliminary injunction before the RTC of Imus, Cavite (SEC Case No. 024-02), assailing the legality of the Board of Trustees. On October 21, 2002, the trial court appointed Reynante as cashier and ordered parties to turn over collected matriculation fees to her. On March 24, 2003, the court ordered petitioners to submit a report and turn over specific funds, including amounts deposited in Special Savings Deposit Nos. 239 and 459 with the Rural Bank of General Trias, Inc., representing teachers' retirement funds. On August 5, 2003, the court denied petitioners' manifestation contesting the inclusion of these funds. On August 21, 2003, the court issued a Status Quo Order allowing Custodio to continue discharging her functions as school director and curriculum administrator until the application for temporary restraining order was resolved. On October 8, 2003, the court ordered petitioners to comply with the March 24 and August 5 orders and to inform the court of the total amount of teachers' retirement funds, and further required Custodio and Reynante to file a bond of ₱300,000.00 each.

• Due Process: Petitioners maintained that the trial court deprived them of due process by issuing the assailed Orders dated August 5, 2003, August 21, 2003, and October 8, 2003 without adequate proceedings or opportunity to be heard on the matters subject thereof.
• Procedural Requirements for Status Quo Order: Petitioners argued that the Court of Appeals erroneously sanctioned the trial court's issuance of the August 21, 2003 Status Quo Order without first requiring respondent to post the requisite bond mandated by Section 1, Rule 10 of the Interim Rules of Procedure for Intra-corporate Controversies.

• Due Process: Respondent countered that the manner of issuance of the assailed Orders did not violate petitioners' due process rights, as petitioners were afforded opportunity to ventilate their arguments through pleadings.
• Validity of Status Quo Order: Respondent argued that valid grounds existed for the issuance of the Status Quo Order and that the alleged failure to require a bond was rendered moot by the October 8, 2003 Order requiring her and Reynante to file a bond of ₱300,000.00 each.

• Due Process: Whether the trial court deprived petitioners of due process in issuing the Orders dated August 5, 2003, August 21, 2003, and October 8, 2003.
• Grave Abuse of Discretion: Whether the trial court committed grave abuse of discretion in issuing the Status Quo Order dated August 21, 2003 by disregarding the requirements of the Interim Rules of Procedure for Intra-corporate Controversies.

• Due Process: No grave abuse of discretion was committed in the issuance of the August 5, 2003 and October 8, 2003 Orders. The right to due process, which safeguards the opportunity to be heard and to submit evidence, was not violated where petitioners were given the opportunity to ventilate their arguments through pleadings that were acknowledged in the text of the questioned rulings. What the law proscribes is the lack of opportunity to be heard, not the lack of actual hearing.
• Status Quo Order Requirements: The issuance of the August 21, 2003 Status Quo Order constituted grave abuse of discretion for three reasons: (1) The order directed the reinstatement of Custodio to her former position, which effectively commanded the undoing of acts already consummated (her removal) and constituted mandatory injunctive relief, whereas a status quo order is limited to maintaining the last actual, peaceable, and uncontested state of things preceding the controversy; (2) The trial court failed to require the posting of a bond prior to the issuance of the status quo order, contrary to the express mandate of Section 1, Rule 10 of the Interim Rules of Procedure for Intra-corporate Controversies that no such order shall be issued save in exceptional cases and only after hearing the parties and the posting of a bond; and (3) The application for the status quo order, which in fact sought injunctive relief, was merely signed by counsel and was unverified, in violation of Section 4, Rule 58 of the Rules of Court requiring a verified application and bond for preliminary injunction. The subsequent October 8, 2003 Order requiring a bond could not cure this defect as the bond required therein was intended solely as security for the teachers' retirement fund, not as the requisite security for the status quo order itself.

• Grave Abuse of Discretion — Defined as such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is insufficient; the power must be exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.
• Due Process in Administrative and Judicial Proceedings — The right to due process safeguards the opportunity to be heard and to submit evidence in support of one's claim or defense. Where the opportunity to be heard, either through verbal arguments or pleadings, is accorded, and the party can present its side or defend its interest in due course, there is no denial of due process. The law proscribes only the lack of opportunity to be heard.
• Nature and Scope of Status Quo Orders — A status quo order is intended merely to maintain the last, actual, peaceable, and uncontested state of things which preceded the controversy. Unlike a temporary restraining order or preliminary injunction, it is more in the nature of a cease and desist order, since it neither directs the doing nor the undoing of acts. An order that directs the reinstatement of a party to a position from which they have been removed effectively grants mandatory injunctive relief, not a status quo order.
• Requirements for Status Quo Orders in Intra-corporate Controversies — Under Section 1, Rule 10 of the Interim Rules of Procedure for Intra-corporate Controversies, no temporary restraining order or status quo order shall be issued save in exceptional cases and only after hearing the parties and the posting of a bond.
• Requirements for Preliminary Injunction — Under Section 4, Rule 58 of the Rules of Court, an application for a preliminary injunction or temporary restraining order must be verified and accompanied by the posting of a bond.

• "Grave abuse of discretion means such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not enough. It must be grave abuse of discretion, as when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law." — Citing Garcia v. Executive Secretary.
• "While it is true that the right to due process safeguards the opportunity to be heard and to submit any evidence one may have in support of his claim or defense, the Court has time and again held that where the opportunity to be heard, either through verbal arguments or pleadings, is accorded, and the party can 'present its side' or defend its 'interest in due course,' there is no denial of due process because what the law proscribes is the lack of opportunity to be heard." — Citing Magtibay v. Indar.
• "A status quo order is merely intended to maintain the last, actual, peaceable and uncontested state of things which preceded the controversy. It further states that, unlike a temporary restraining order or a preliminary injunction, a status quo order is more in the nature of a cease and desist order, since it neither directs the doing or undoing of acts as in the case of prohibitory or mandatory injunctive relief." — Citing Mayor Garcia v. Hon. Mojica.
• "SECTION 1. Provisional remedies. - A party may apply for any of the provisional remedies provided in the Rules of Court as may be available for the purposes. However, no temporary restraining order or status quo order shall be issued save in exceptional cases and only after hearing the parties and the posting of a bond." — Section 1, Rule 10 of the Interim Rules of Procedure for Intra-corporate Controversies.

• Garcia v. Executive Secretary, G.R. No. 198554, July 30, 2012 — Controlling precedent defining grave abuse of discretion.
• Magtibay v. Indar, A.M. No. RTJ-11-2271, September 24, 2012 — Followed for the principle that due process requires only opportunity to be heard, not necessarily an actual hearing.
• Mayor Garcia v. Hon. Mojica, 372 Phil. 892 (1999) — Followed for the definition and nature of a status quo order.
• Prado v. Veridiano II, G.R. No. 98118, December 6, 1991 — Followed for the requirement of verified application and bond for preliminary injunction under Section 4, Rule 58 of the Rules of Court.

• Section 1, Rule 10 of the Interim Rules of Procedure for Intra-corporate Controversies — Governs the issuance of provisional remedies in intra-corporate controversies, specifically requiring a hearing and bond before issuance of status quo orders.
• Section 4, Rule 58 of the Rules of Court — Requires that applications for preliminary injunction or temporary restraining orders be verified and accompanied by a bond.
• Sections 28 and 91 of the Corporation Code — Cited in the factual background regarding the removal of corporate members and trustees.

Maria Lourdes P.A. Sereno (Chief Justice), Lucas P. Bersamin, Jose P. Perez, and Estela M. Perlas-Bernabe.