Tan v. Sr. Sto. Niño De Cebu Resources and Development Corp.

FIRST DIVISION [G.R. No. 252954. January 12, 2021.] RICHARD TAN and SUSANA TAN , petitioners , vs . SR. STO. NIO DE CEBU RESOURCES AND DEVELOPMENT CORPORATION , respondent . NOTICE Sirs/Mesdames : Please take notice that the Court, First Division, issued a Resolution dated January 12, 2021 which reads as follows: "G.R. No. 252954 (Richard Tan and Susana Tan v. Sr. Sto. Nio De Cebu Resources and Development Corporation) . Petitioners assail under Rule 45 of the Consolidated 1 Decision dated October 18, 2019 and Resolution 2 dated July 27, 2020 of the Court of Appeals (CA) in CA-G.R. SP Nos. 158640, 158686, and 159043. Facts of the Case Respondent Sr. Sto. Nio De Cebu Resources and Devt. Corp. (SNRDC), a domestic corporation engaged in the development and sale of real estate property. Petitioner Richard Tan was the vice president of SNRDC, while his wife, petitioner Susana Tan, was a member of the board of directors. 3 SNRDC initiated several complaints against petitioners for accounting and turn-over of profits and properties supposedly held by them in trust. The complaints were all premised on Sections 31 4 and 34 5 of the Corporation Code and that in violation of said provisions, alleged that spouses Richard Tan and Susana Tan, Vice President and Director of SNRDC, respectively, were guilty of disloyalty to the corporation by acquiring personal interest in real properties that SNRDC had opportunity to conduct business with. 6 The contents of each complaint are summarized in the table below: COMPLAINT CAUSE OF ACTION FIRST COMPLAINT (RTC SEC Case No. 131-2018-C) 7 That Richard Tan was the vice president of SNRDC from its inception until September 4, 2014 and was tasked to find properties for development and to represent the company in transacting with the owners of such properties either for sale or joint venture. For his service, he is paid a salary that is paid through check or by bank deposit; 8 That Susana Tan was director of SNRDC from 1994 to September 2017; 9 On November 16, 2010, SNRDC's board resolved to authorize Richard Tan to represent the company and to sign pertinent documents in the purchase of 19 parcels of land located in Bauan, Batangas; 10 Without the knowledge of the board, the spouses Tan and SNRDC's president agreed to allow the former to purchase the Bauan properties with a promise that SNRDC will be the one to develop said properties; 11 Five (5) of the 19 properties were eventually purchased by the spouses under the name of SNRDC; however, the new transfer of certificates of title issued to SNRDC are being held by the spouses; 12 The other 14 Bauan properties were purchased by the spouses Tan, depriving SNRDC of a business opportunity; 13 Under Sections 31 and 34 of the Corporation Code, the petitioners are liable for disloyalty, must pay damages, must be declared as holding the Bauan properties in trust for SNRDC, and render an account of such properties and for the profits that would have otherwise accrued to the corporation for the lost business opportunity. 14 SECOND COMPLAINT (RTC SEC Case No. 132-2018-C) 15 Richard Tan was the vice president of SNRDC and was tasked to find properties for development and to represent the company in transacting with the owners of such properties either for sale or joint venture. For his service, he is paid a salary that is paid through check or by bank deposit; 16 Susana Tan was director of SNRDC from 1994 to September 2017; 17 On February 7, 2011, the Board of Directors of SNRDC resolved to authorize Richard Tan to represent SNRDC in the purchase of two parcels of land located in Imus, Cavite then owned by Philippine Savings Bank; 18 Petitioners, using the name of SNRDC, purchased the said properties with their own money; 19 New certificates of title over said properties were issued in the name of SNRDC but the latter could not come into possession of them because petitioners refused to turn over the properties, the certificates of title, and other documents of ownership despite a demand letter dated January 9, 2017; 20 By such acts, petitioners deprived SNRDC of a business opportunity; 21 The properties have appreciated in value for six years since they were purchased; 22 Under Section 34 of the Corporation Code, petitioners are liable for disloyalty, damages, and must render an account of the profits that would have otherwise accrued in favor of SNRDC. 23 THIRD COMPLAINT (RTC SEC Case No. 133-2018-C) 24 That Richard Tan was the vice president of SNRDC from its inception until September 4, 2014 and was tasked to find properties for development and to represent the company in transacting with the owners of such properties either for sale or joint venture. For his service, he is paid a salary that is paid through check or by bank deposit; 25 That Susana Tan was director of SNRDC from 1994 to September 2017; 26 On January 14, 2009, the Board of SNRDC resolved to authorize Richard Tan to represent the corporation in the purchase of two parcels of land situated in Tayabas, Quezon. At the time, Susana Tan was a member of the Board of Directors. As such, the couple held positions of great trust and responsibility. 27 With intent to defraud the corporation, the couple convinced SNRDC's president to allow a "relative" of Susana Tan to purchase the Tayabas properties. SNRDC would then enter into a joint venture with said relative to develop the properties. Petitioners proceeded to purchase the Tayabas properties for SNRDC but reported that the same was paid by Susana's "relative." However, it was spouses who actually bought the Tayabas properties with their own funds to develop them under their own business, usurping SNRDC of a business opportunity. Thereafter, petitioners requested SNRDC's president to disburse a cash advance in the amount of P6.2 million to reimburse Susana's "relative." 28 Seven years later, the Tayabas properties remained undeveloped as the local government of Tayabas refused to issue the necessary permits for development. Yet, Susana's "relative" did not inquire or complain about why development failed to proceed. 29 The Tayabas properties appreciated in value in the 9 years since they were purchased by petitioners to the latter's profit. 30 Under Sections 31 and 34 of the Corporation Code, petitioners are liable for disloyalty, must pay damages, and render an account of the money advanced to them and for the profits that would have otherwise accrued to the corporation for the lost business opportunity. 31 FOURTH COMPLAINT (RTC SEC Case No. 136-2018-C) 32 That Richard Tan was the vice president of SNRDC from its inception until September 4, 2014 and was tasked to find properties for development and to represent the company in transacting with the owners of such properties either for sale or joint venture. For his service, he is paid a salary that is paid through check or by bank deposit; 33 That Susana Tan was director of SNRDC from 1994 to September 2017; 34 "FLAMINGO PROJECT" In the pursuance of his duty, Richard Tan found a property located in Antipolo City owned by Dionisio S. Pua and Patricia Mole Pua (Spouses Pua) who wanted said property to be subdivided and developed; 35 On July 16, 2004, SNRDC, represented by Richard Tan, entered into a joint venture agreement (JVA) with the spouses Pua. In the JVA (Flamingo Project), SNRDC undertook to contribute the money, labor, machinery, marketing, and other resources to develop the Puas' property. The parties agreed on an 85-15 split of the profits of the project. However, the spouses Tan usurped SNRDC's undertaking and proceeded to develop the property at their own cost; 36 In October 2012, unbeknownst to SNRDC's board, petitioners acquired the Puas' interest in the JVA through a special power of attorney authorizing Richard Tan to offer for sale the Antipolo property, sign pertinent documents, and to collect sums of money on account of such sale. As such, petitioners was able to take a complete hold of the project. 37 "BLOOMINGDALE PROJECT" On February 23, 2006, SNRDC entered into a JVA with spouses Ernesto and Anita Chua Co Kion (Spouses Chua Co Kion) for the development of the latter's property located in Imus, Cavite. Under the JVA (Bloomingdale Project), the Spouses Chua Co Kion would contribute said property while SNRDC undertook to develop the same into a subdivision. They would then split the profits of the project 60-40; 38 Petitioners usurped SNRDC's interest the JVA by undertaking construction of house units without the knowledge or consent of SNRDC's board. As a result, Richard Tan received P4.3 million as property developer. Thus, they denied SNRDC of a business opportunity it was entitled to under the JVA. 39 Despite demand, petitioners did not render an account or turn over the profit they made in the Bloomingdale project. 40 Under Sections 31 and 34 of the Corporation Code, petitioners are liable for disloyalty; must pay damages; be declared to be holding in trust the profits and properties of the projects to the extent of SNRDC's share in the JVAs; and render an account of and turn over the profits that would have otherwise accrued to the corporation if it had developed the projects. 41 Petitioners filed motions to dismiss against the 2nd, 3rd, and 4th complaints on the grounds of being nuisance or harassment suits and that there was identity of causes of action with the 1st complaint, thus violating the prohibition against splitting of actions, willful forum shopping, and litis pendentia . 42 SNRDC maintained that the complaints are not nuisance or harassment suits as each complaint referred to different transactions, contracts, and properties. 43 In separate Orders dated August 22, September 18, and November 26, 2018, the RTC dismissed the Motions to Dismiss on the ground that under Section 8, Rule 1 of the Interim Rules of Procedure for Intra-Corporate Controversies (A.M. No. 01-2-04-SC), such motions are a prohibited and that the grounds relied upon by the petitioners are evidentiary matters that must be properly ventilated in a full-blown trial. 44 Petitioners filed separate petitions for certiorari before the CA, seeking to overturn the RTC's Orders. Said petitions were consolidated and decided upon simultaneously by the CA. 45 On October 18, 2019, the CA affirmed the RTC's denial of petitioners' motions to dismiss. The CA clarified that there is an exception to the general rule prohibiting motions to dismiss in intra-corporate cases. Under Section 1 (b) of the Interim Rules, a complaint may be dismissed by the court motu proprio or upon motion by a party if the complaint is a nuisance or harassment suit. In this case, however, petitioners failed to convince the CA that the cases were harassment suits on the basis of litis pendentia , forum shopping, splitting of causes of action, and/or failure to state a cause of action. The CA reviewed the complaints and found that SNRDC was able to state its causes of actions against petitioners. 46 Furthermore, the CA ruled that evidence is necessary to prove that the cases are harassment suits. Therefore, the CA ordered that the cases be remanded to the RTC for continuation of proceedings. 47 Petitioners moved for reconsideration, but the same was denied by the CA in its Resolution dated July 27, 2020. 48 Hence, this petition. Petitioners maintain that the causes of action in the complaints are identical as they all proceed from Secs. 31 and 34 of the Corporation Code. Therefore, the filing of the 2nd, 3rd, and 4th complaints violated the rules against splitting of actions, litis pendentia , forum shopping and that in effect, the complaints fail to state a cause of action. 49 Petitioners argue that the violations alleged in the 2nd, 3rd, and 4th complaints constitute a single cause of action as they were in existence at the time of the filing of the first complaint. 50 In support of such view, they cited a passage of the Court's decision City of Bacolod v. San Miguel Brewery, Inc. , 51 which quoted De Larena v. Villanueva , 52 that if several installments of rent are due on a lease contract, all of them shall constitute a single cause of action and should be included in a single complaint. 53 Furthermore, they argue that the CA failed to consider the effect of its decision on their counterclaims in the first case. They point out that the transactions and properties referred to in the 2nd, 3rd, and 4th complaints were already covered in their counterclaim to the 1st complaint. Thus, they are precluded from litigating such counterclaim in the latter cases, lest they themselves would be found splitting their causes of action or forward issues that are litis pendentia . 54 Issue The issue to be resolved is whether the 2nd, 3rd, and 4th complaints are nuisance or harassment suits for having causes of action that are identical to the 1st complaint such that they constitute splitting of causes of action, litis pendentia , and forum shopping. Ruling of the Court The petition lacks merit. The complaints readily show that there is no identity in their respective causes of action. While it is true that the respondent anchored the legal premise of their complaints on Sections 31 and 34 of the Corporation Code, the ultimate facts differ from one complaint to another. Petitioners erroneously believe that the causes of action are the same just because SNRDC invoked the same provision of law in all the of complaints. However, the law is only one element of a cause of action. A cause of action is the act or omission of one party in violation of the legal right of another. It has three elements, to wit: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. 55 The cause of action is laid out in the ultimate facts alleged in the complaint. 56 Ultimate facts are those important and substantial facts which either directly form the basis of the primary right and duty, or which directly make up the wrongful acts or omissions of the defendant. 57 In Salita v. Hon. Magtolis , 58 We said that the ultimate facts of a complaint are those facts which the expected evidence will support. It refers to the facts which the evidence in trial will prove and not the evidence which will be required to prove the existence of those facts. Meanwhile, in Riviera Golf Club, Inc. v. CCA Holding, B.V. , 59 citing Esperas v. The Court of Appeals , 60 the Court said that the ultimate test in determining the presence of identity of causes of action is to consider whether the same evidence would support the cause of action in both the first and the second cases. Under the "same evidence test," when the same evidence support and establish both the present and the former causes of action, there is an identity of causes of action. While the legal moorings of the subject complaints are the same, i.e. , Sections 31 and 34 of the Corporation Code, the manner by which said statutory provisions were supposedly violated by petitioners vary from one complaint to another. There is considerable variance in the ultimate facts alleged in the complaints. Specifically, the complaints alleged different corporate acts or different board resolutions done on different dates in which SNRDC resolved to authorize Richard Tan to represent the corporation in different transactions for the purchase and/or development of different properties from different owners . These allegations are separate and independent of each other and the evidence required to prove each set of allegations in trial are not necessarily the same. Petitioners have the burden to show that the subject complaints would be proven by the same evidence during trial. However, they have failed to do so. As it stands, We find that the subject complaints do not violate the rules against splitting of causes of action, litis pendentia , and forum-shopping. Consequently, SNRDC did not fail to state a distinct cause of action in each complaint. Petitioners' reliance on City of Bacolod v. San Miguel Brewery, Inc . 61 is misplaced. In that case the City of Bacolod filed two cases against San Miguel for failing to pay bottling charges as required under a local ordinance: (1) for the payment of the basic charge; and (2) for payment of the surcharges as a consequence of non-payment to the basic charge. Thus, the relief prayed for by the city in the second case was based on the same obligation to pay invoked in the first case. Here, the reliefs prayed for by SNRDC in the 2nd, 3rd, and 4th complaints have no direct relation to those prayed for in the 1st complaint inasmuch as they refer to several obligations, albeit from the same provision of law. Furthermore, common questions of fact or law posed by petitioners' counterclaim in the first complaint do not justify dismissal of the 2nd, 3rd, and 4th complaints. Rather, under Rule 31 of the Rules of Court, 62 the presence of such common questions would only justify a consolidation of trial for said cases. Whether consolidation is proper in this case, however, is to be determined by the RTC. In light of the foregoing, the petitioners have not shown any reversible error on the part of the CA. WHEREFORE , the petition is DENIED . The Decision dated October 18, 2019 and the Resolution dated July 27, 2020 of the Court of Appeals in CA-G.R. SP Nos. 158640, 158686, and 159043 are hereby AFFIRMED . The notice of change of respondent's address, by Atty. Gabriel Paulo R. Uy, respondent's counsel, is NOTED , and said counsel's request that copies of orders, resolutions, notices and other pleadings be furnished to respondent at Lot 10-A, Purok 1, Brgy. Makiling, Calamba City, Laguna, is GRANTED ; the motion of respondent's counsel for leave and to admit attached manifestation, stating that to properly inform the Court of the change of his address, he would like to make a manifestation, is GRANTED ; and the petitioners are required to SUBMIT within five (5) days from notice hereof, a verified declaration of the petition for review on certiorari pursuant to A.M. Nos. 10-3-7-SC and 11-9-4-SC. SO ORDERED." By authority of the Court: (SGD.) LIBRADA C. BUENA Division Clerk of Court By: MARIA TERESA B. SIBULO Deputy Division Clerk of Court Footnotes 1. Penned by Associate Justice Jane Aurora C. Lantion, with the concurrence of Associate Justices Marie Christine Azcarraga-Jacob and Gabriel T. Robeniol; rollo , pp. 77-84. 2. Penned by Associate Justice Gabriel T. Robeniol, with the concurrence of Associate Justices Ramon A. Cruz and Marie Christine B. Azcarraga-Jacob; id. at 85-87. 3. Id. at 78. 4. Section 31 of the Corporation Code: Liability of directors, trustees or officers . Directors or trustees who wilfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholder or members and other persons. When a director, trustee, or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation. 5. Section 34 of the Corporation Code: Disloyalty of a director . Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. 6. Rollo , p. 78. 7. Id. at 104-113. 8. Id. at 105, 119. 9. Id. at 105. 10. Id. at 106. 11. Id. at 107. 12. Id. 13. Id. at 108. 14. Id. at 110-111. 15. Id. at 116-124. 16. Id. at 117-118. 17. Id. at 117. 18. Id. at 118. 19. Id. 20. Id. at 119. 21. Id. 22. Id. at 121. 23. Id. at 120. 24. Id. at 125-134 25. Id. at 126-127. 26. Id. at 126. 27. Id. at 128. 28. Id. at 128-129. 29. Id. at 129. 30. Id. 31. Id. at 130-131. 32. Id. at 136-150. 33. Id. at 137-138. 34. Id. at 137. 35. Id. at 139. 36. Id. at 140. 37. Id. at 141. 38. Id. at 143. 39. Id. at 144. 40. Id. at 145. 41. Id. at 145-147. 42. Id. at 78-79. 43. Id. at 79. 44. Id. 45. Id. at 77. 46. Id. at 82-83. 47. Id. at 83. 48. Supra note 2. 49. Rollo , p. 44. 50. Id. 51. 140 Phil. 363 (1969). 52. 53 Phil. 923, 927 (1928). 53. Rollo , p. 52. 54. Id. at 54. 55. Relucio v. Lopez , 424 Phil. 617, 623 (2002). 56. Remitere v. Montinola , 123 Phil. 57 (1966), citing Moran, Rules of Court, Vol. I, 1963, Ed., p. 213. 57. Id. citing Montemayor v. Raborar , 53 O.G. No. 19, p. 6596, citing Pomeroy, Code Remedies, 5th Ed., Section 420. 58. Salita v. Hon. Magtolis , 303 Phil. 106, 111 (1994). 59. 760 Phil. 655 (2015). 60. 395 Phil. 803, 811 (2000). 61. 760 Phil. 655 (2015). 62. RULE 31 CONSOLIDATION OR SEVERANCE Section 1. Consolidation . When actions involving a common question of law or fact are pending before the court, it may order a joint hearing or trial of any or all the matters in issue in the actions; it may order all the actions consolidated; and it may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.