Yujuico vs. Quiambao

A pairing judge's authority terminates upon the regular judge's appointment and assumption to duty, so that any order thereafter issued is void; and a preliminary injunction that effectively decides the merits of an intra-corporate election contest without trial, absent a clear and unmistakable right and preservation of the status quo, constitutes grave abuse of discretion.

Strategic Alliance Development Corporation (STRADEC) is a domestic corporation engaged in providing financial and investment advisory services and investing through consortium or joint venture. Its principal place of business was at the 24th Floor, One Magnificent Mile-Citra Building, San Miguel Avenue, Ortigas Center, Pasig City, until the Securities and Exchange Commission approved on July 27, 1998 an amendment transferring its principal office to Bayambang, Pangasinan. Pursuant to Republic Act No. 8799, jurisdiction over intra-corporate controversies under Section 5 of Presidential Decree No. 902-A was transferred to Regional Trial Courts designated as Special Commercial Courts, including RTC, Branch 48, Urdaneta City.

From its inception, Strategic Alliance Development Corporation's principal place of business was at the 24th Floor, One Magnificent Mile-Citra Building, San Miguel Avenue, Ortigas Center, Pasig City. On July 27, 1998, the Securities and Exchange Commission approved the amendment of its Articles of Incorporation authorizing the change of principal office from Pasig City to Bayambang, Pangasinan. On March 1, 2004, STRADEC held its annual stockholders' meeting in its Pasig City office as indicated in the notices sent to stockholders. At that meeting, Alderito Z. Yujuico, Bonifacio C. Sumbilla, Dolney S. Sumbilla, Cezar T. Quiambao, Jose M. Magno III and Ma. Christina Ferreros were elected members of the Board of Directors, with Yujuico as Chairman and President and Bonifacio Sumbilla as Treasurer, and all thereafter discharged the duties of office.

After five months, on August 16, 2004, respondents filed with the Regional Trial Court, San Carlos City, Pangasinan a Complaint against STRADEC, represented by petitioners as board members, docketed as Civil Case No. SCC-2874 and raffled to Branch 56. The complaint prayed for nullification of the March 1, 2004 election for improper venue pursuant to Section 51 of the Corporation Code, nullification of all ensuing transactions by the elected directors, and the holding anew of a special stockholders' meeting. Respondents thereafter filed an Amended Complaint dated September 2, 2004 praying for a temporary restraining order and writ of preliminary injunction to enjoin petitioners from discharging their functions, and a Supplemental Complaint praying that Export Industry Bank, Cezar T. Quiambao and Bonifacio G. Sumbilla be directed to surrender the original and reconstituted Stock and Transfer Book and other corporate documents and that the reconstituted book and all transactions be nullified. Both pleadings were admitted, and on October 4, 2004 the trial court transferred the case as an intra-corporate dispute to RTC, Branch 48, Urdaneta City, a designated Special Commercial Court, re-docketed as Civil (SEC) Case No. U-14. Since Branch 48 then had no presiding judge, Judge Meliton G. Emuslan acted as pairing judge until appointment and assumption of a regular judge.

On November 2, 2004, petitioners filed their Answer with Counterclaim praying for dismissal on the grounds that the complaint stated no cause of action, was barred by prescription for having been filed beyond the 15-day period under Section 2, Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies under Republic Act No. 8799, that the prayer for a meeting in Bayambang was premature pending establishment of a principal office there, and that respondents waived venue objection by attending and participating without protest. Meanwhile Judge Aurelio R. Ralar, Jr. was appointed presiding judge of Branch 48, took his oath on November 9, 2004 before Associate Justice Diosdado M. Peralta, and assumed duties on November 12, 2004. Nevertheless, on November 25, 2004, pairing Judge Emuslan issued an Order granting preliminary injunction upon a P500,000.00 bond, restraining petitioners from acting as officers, ordering a special stockholders' meeting in Bayambang on December 10, 2004 under court supervision, and ordering Bonifacio Sumbilla to surrender not later than December 3, 2004 the duplicate key to the safety deposit box in Export Industry Bank, Shaw Boulevard, Pasig City where the original Stock and Transfer Book deposited by him and Quiambao was kept. In compliance, the court sheriff caused the opening of the safety deposit box and took custody of its contents.

On December 10, 2004, petitioners filed with the Court of Appeals a Petition for Certiorari assailing the November 25, 2004 Order, docketed as CA-G.R. SP No. 87785. On the same day, as directed, the special stockholders' meeting was held in Bayambang wherein Cezar T. Quiambao, Anthony K. Quiambao and Simplicio T. Quiambao, Jr. were elected directors for 2004-2005, who in turn elected Cezar T. Quiambao as Chairman and President, Eric C. Pilapil as Corporate Secretary, Anthony K. Quiambao as Corporate Treasurer, and Albert M. Rasalan as Assistant Corporate Secretary. According to respondents' witnesses at the injunction hearing, Yujuico unlawfully denied a request for a special meeting, the stock book was illegally reconstituted, unauthorized sales of shares occurred, and Magno III and another stockholder neither attended the March 1, 2004 meeting nor authorized representation, contrary to petitioners' Answer.

• Jurisdiction to Call Meeting: Petitioner argued that only the SEC, not the RTC, has jurisdiction to order the holding of a special stockholders' meeting involving an intra-corporate controversy, to be held under its supervision.
• Authority of Pairing Judge: Petitioner maintained that Judge Meliton Emuslan had no authority to issue the Order dated November 25, 2004 because Judge Aurelio Ralar, Jr. was already the presiding judge of RTC, Branch 48, Urdaneta City, having assumed duties on November 12, 2004.
• Grave Abuse of Discretion: Petitioner argued that even assuming authority, Judge Emuslan acted with grave abuse of discretion amounting to lack or excess of jurisdiction because the Order effectively disposed of the merits of the main case without trial.

• Transferred Jurisdiction: Respondent countered that the appellate court correctly ruled that power to hear intra-corporate disputes and matters incidental and necessary thereto was transferred from the SEC to RTCs designated as Special Commercial Courts.
• Necessity of Incidental Power: Respondent argued that it would be absurd to require filing a separate case with the SEC solely to order a special stockholders' meeting where a case involving the same matter was already pending before the proper court.
• Best Interest of Corporation: Respondent averred that Judge Emuslan only had the best interest of STRADEC in mind when he issued the questioned Order.

• Power to Order Meeting: Whether the RTC, as Special Commercial Court, has the power to order the holding of a special stockholders' meeting involving an intra-corporate controversy.
• Authority of Pairing Judge: Whether pairing Judge Emuslan had authority to issue the November 25, 2004 Order after the appointment and assumption of the regular presiding judge.
• Validity of Preliminary Injunction: Whether the November 25, 2004 Order granting preliminary injunction was issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

• Power to Order Meeting: Yes. The RTC's transferred jurisdiction over intra-corporate controversies carries authority to issue orders necessary or incidental thereto, including a court-supervised special stockholders' meeting in appropriate cases.
• Authority of Pairing Judge: No. The pairing judge's authority automatically ceased upon the regular judge's assumption on November 12, 2004, so the November 25, 2004 Order issued thirteen days later was without authority and void.
• Validity of Preliminary Injunction: No. The injunction was void for grave abuse of discretion, having been granted without specific findings of a clear right and irreparable injury and having disposed of the main election case without trial.

• Power to Order Meeting: The complaint involves an intra-corporate controversy among stockholders and officers concerning election validity and corporate books. Under Section 5 of Presidential Decree No. 902-A, as transferred by Section 5.2 of Republic Act No. 8799 to courts of general jurisdiction and implemented through designated Special Commercial Courts and the Interim Rules, the RTC hears election contests under Rule 6, Sections 1 and 2. Concomitant to that express power is authority to issue necessary or incidental orders, including under Morato vs. Court of Appeals the compulsion of officers to call meetings under supervision.
• Authority of Pairing Judge: Jurisdictional questions may be raised at any time, so laches or estoppel did not bar review and oral argument should not have been denied on that ground. Under Circular No. 19-98, a paired judge takes cognizance only until appointment and assumption to duty of the regular judge. Because Judge Ralar, Jr. assumed on November 12, 2004, Judge Emuslan's pairing authority had ceased when he issued the November 25, 2004 Order. Jurisdiction is distinct from its exercise; an order rendered without authority is no order at all, void and incapable of creating rights or obligations, correctible by certiorari.
• Validity of Preliminary Injunction: A writ requires (1) a clear and unmistakable right to be protected and (2) urgent paramount necessity to prevent serious damage. The Order merely named respondents' witnesses without substantial narration of testimony, specific evidence formally offered, or findings of right and irreparable loss, leaving its basis uncertain. Moreover, instead of preserving the last actual peaceable uncontested status — the March 1, 2004 meeting and ensuing election — it ordered a new election that impliedly voided the prior one and resolved the principal action without full trial. Respondents' right was doubtful and disputed by serious defenses of prematurity for lack of an established Bayambang office and prescription, the March 1 election having been challenged only on August 16, 2004 beyond the 15-day period for election contests under Section 3, Rule 6.

• Intra-corporate controversy; transfer of SEC jurisdiction to RTCs — An intra-corporate controversy pertains to relations (1) between the corporation, partnership or association and the public, (2) between it and the State as to franchise, permit or license, (3) between it and its stockholders, partners, members or officers, and (4) among stockholders, partners or associates themselves. Pursuant to Section 5.2 of Republic Act No. 8799, the SEC's jurisdiction over cases enumerated in Section 5 of Presidential Decree No. 902-A, including election controversies, was transferred to courts of general jurisdiction or the appropriate RTC as designated Special Commercial Courts. Applied here, Civil (SEC) Case No. U-14 was properly cognizable by RTC, Branch 48, Urdaneta City, which could issue incidental orders such as calling a supervised meeting.
• Election contest; prescriptive period — Under Rule 6, Sections 1 and 2 of the Interim Rules of Procedure Governing Intra-Corporate Controversies, an election contest covers any controversy involving title or claim to elective office, validation of proxies, manner and validity of elections, qualifications of candidates, and proclamation of winners. Section 3, Rule 6 requires filing within 15 days from the date of election. Applied here, respondents' challenge to the March 1, 2004 election filed August 16, 2004 was invoked by petitioners as prescribed and as rendering the claimed injunctive right doubtful.
• Pairing judge; cessation of authority — Under Circular No. 19-98, the paired judge takes cognizance of all cases in a vacant sala only until appointment and assumption to duty of the regular judge or designation of an acting presiding judge or return of the incumbent. Applied here, Judge Emuslan's authority as pairing judge of Branch 48 ended November 12, 2004 upon Judge Ralar, Jr.'s assumption, voiding the November 25, 2004 Order.
• Jurisdiction vs. exercise of jurisdiction — Jurisdiction is the authority to decide a cause, not the decision rendered therein; where jurisdiction over person and subject matter exists, errors in deciding other questions are but exercise of jurisdiction, yet acts without authority or in grave abuse of discretion are null and correctible by certiorari. Applied here, although Branch 48 had jurisdiction, Judge Emuslan's unauthorized exercise was void.
• Preliminary injunction; requisites and status quo — The applicant must show a clear and unmistakable right to be protected and urgent paramount necessity to prevent serious damage; doubtful or disputed rights do not warrant injunction, and possibility of irreparable damage without proof of actual existing right is insufficient. The writ is a provisional, preservative remedy to maintain the last actual peaceable uncontested status preceding the controversy and must not dispose of the main case without trial. Applied here, the hazy order lacking factual and legal findings destroyed the March 1, 2004 status quo by installing a new board and impliedly nullifying the prior election.

• "5.2. The Commission's jurisdiction over all cases enumerated in 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." — States the statutory transfer of intra-corporate jurisdiction from the SEC to the RTCs that underlies the ruling sustaining the Special Commercial Court's cognizance.
• "x x x. Jurisdiction is not the same as the exercise of jurisdiction. As distinguished from the exercise of jurisdiction, jurisdiction is the authority to decide a cause, not the decision rendered therein. Where there is jurisdiction over the person and the subject matter, the decision on all other questions arising in the case is but an exercise of the jurisdiction. x x x." — Defines the distinction relied upon to hold that Branch 48 possessed jurisdiction but the pairing judge's unauthorized exercise was void.
• "The status quo is the last actual peaceable uncontested status that preceded the controversy" — Provides the canonical measure used to find that the injunction destroyed rather than preserved the status quo established by the March 1, 2004 meeting and election.
• "x x x. Injunction is not designed to protect contingent or future rights. It is not proper when the complainant's right is doubtful or disputed." — Articulates the limitation applied to deny injunctive relief where prescription and prematurity defenses rendered respondents' right doubtful.

• Morato vs. Court of Appeals, G.R. No. 141510, August 13, 2004 — Followed as enumerating SEC powers transferred to RTCs, including compelling officers to call stockholders' meetings under supervision and exercising incidental powers.
• Tolentino vs. Leviste, G.R. No. 156118, November 19, 2004 — Followed for the distinction between jurisdiction and exercise of jurisdiction in voiding an unauthorized order.
• Manila International Airport Authority vs. Court of Appeals, G.R. No. 118249, February 14, 2003 — Followed to hold that an injunction order bereft of findings of fact and law on the essential elements, and issued without a clear right in esse, constitutes grave abuse of discretion.
• Selegna Management and Development Corporation vs. United Coconut Planters Bank, G.R. No. 165662, May 3, 2006 — Followed to hold that courts should avoid issuing a writ that in effect disposes of the main case without trial and that injunction does not protect contingent or future rights.
• Embassy Farms, Inc. vs. Court of Appeals, G.R. No. 80682, August 13, 1990 — Cited for the definition of intra-corporate controversy covering disputes among stockholders and between them and the corporation and its officers.

• Section 5, Presidential Decree No. 902-A — Vested the SEC with original and exclusive jurisdiction over fraud devices, intra-corporate and partnership controversies, election controversies, and suspension of payments/rehabilitation; cited as the source of jurisdiction later transferred to RTCs.
• Section 5.2, Republic Act No. 8799 (Securities Regulation Code) — Transferred SEC jurisdiction over Section 5 cases to courts of general jurisdiction or appropriate RTC, with Supreme Court designation of branches; applied to sustain Branch 48's cognizance of Civil (SEC) Case No. U-14.
• Rule 6, Sections 1, 2 and 3, Interim Rules of Procedure Governing Intra-Corporate Controversies — Define and limit election contests to disputes over title to elective office, proxies, manner and validity of elections, qualifications and proclamation, required to be filed within 15 days from election; applied to characterize respondents' nullification suit and to support the prescription defense.
• Circular No. 19-98 dated February 18, 1998 — Expands pairing judge authority to all matters but limits it until appointment and assumption of the regular judge; applied to terminate Judge Emuslan's authority on November 12, 2004.
• Section 51, Corporation Code — Invoked by respondents as the venue rule allegedly violated by holding the March 1, 2004 meeting in Pasig City instead of Bayambang, Pangasinan; central to the election-validity dispute.

REYNATO S. PUNO, Chief Justice, Chairperson, RENATO C. CORONA, Associate Justice, ADOLFO S. AZCUNA, Associate Justice, CANCIO C. GARCIA, Associate Justice