Magna Realty Corp. v. Lejano

May 6, 1999 SEC CASE NO. 3885 MAGNA REALTY CORPORATION, ET AL. , plaintiffs , vs .PACIFICO C. LEJANO, ET AL. , defendants . D E C I S I O N Before the Commission is a petition for specific performance filed by Magna Realty Corp. (Magna for brevity) and J. Antonio Leviste, against Pacifico C. Lejano, Pedro L. Lejano, Spouses Amparo C. Lejano and Patricio M. Jonson, Vicente C. Lejano, Leopoldo C. Lejano, Lydia C. Lejano, Angelina C. Lejano, Spouses Julieta C. Lejano, and Reynaldo I. Limjoco, Corazon C. Lejano, and Spouses Luzviminda C. Lejano and Bernardo R. Bautista for the latter to convey to plaintiff Magna all the real properties covered by TCT Nos. T-32888, T-18274, T-39217, T-30638, T-30787, T-38999 of the Registry of Deeds of Batangas and Lot No. 44, PSD. 27578 which are all situated in Lian, Batangas and allegedly in exchange for P1,300,000 worth of shares of stocks in the said corporation by virtue of a Pre-Registration Memorandum of Agreement (Agreement in brevity) and to reimburse spouses Artemio T. Madamba and Antonia A. Madamba the amount of P100,000.00 which represent alleged advances made by the said spouses to defendants Pacifico, Vicente, Leopoldo and Pedro Lejano as their paid-in capital in Magna Realty. Plaintiffs allege that respondents agreed to contribute their real properties covered by the different titles enumerated in the Agreement in exchange for P1,300,000.00 worth of shares of stock which plaintiff Magna would issue upon its incorporation in accordance therewith; and that after the incorporation of plaintiff Magna, plaintiffs repeatedly demanded defendants to execute the necessary documents to effect the transfer of the said parcels of land to Magna Realty, although the latter refused and continued to refuse without any valid reason and for which plaintiffs were compelled to hire the services of a counsel for the enforcement of their right and interest. On the other hand, defendants contend that plaintiffs have no cause of action against them and/or the complaint failed to state a sufficient cause of action considering that: (a) the Agreement has no binding effect as it was entered into without any consideration; (b) Magna Realty was not the corporation agreed upon in the Agreement to be incorporated, because the stockholders thereof, its primary purpose or business and/or the number or amount of shares that each stockholder subscribed and paid are not the very same parties, primary purpose, and number of shares and amount that should be subscribed and paid per provision of the Agreement; (c) while Magna had a P5,000,000 authorized capital and a total P1,000,000 subscribed capital, four of the defendants were issued only P450,000 worth of shares, hence there could be no legal basis on the part of Magna to compel the defendants in transferring the enumerated real properties in the Agreement which they then valued at P1,300,000.00; (d) plaintiff Magna was dissolved when it did not organize and commence its business within the two-year period from its incorporation last December 13, 1978; (e) Magna's Board did not call for the transfer of the said real properties; (f) the transfers from Joyce Caparas to spouses Madambas and from them to plaintiff J. Antonio Leviste were null and void because they were made without the knowledge and consent of defendants; and (g) the transfer of the real properties to Magna would constitute unjust enrichment. cHCSDa Defendants likewise interposed counter-claims like attorney's fees and moral damages on account of the filing of this case. The relevant facts of the case as culled from evidence are as follows: Plaintiff Magna Realty Corp. is a corporation duly organized under the laws of the Philippines (Exh. "C") while co-plaintiff J. Antonio Leviste is of legal age and a Filipino. Both have their addresses at the Penthouse LPL Towers, 112 Legaspi St.,Legaspi Village, Makati City. Likewise, all of the defendants are Filipinos, of legal age and residents of Lian, Batangas. Plaintiff J. Antonio Leviste appears to be a mere transferee of the rights, titles, and interest of spouses Madamba as subscriber in plaintiff Magna by virtue of a Deed of Assignment (Exh. "R").On the other hand, only four among the defendants, namely: Pacifico C. Lejano, Pedro L. Lejano, Vicente C. Lejano, and Leopoldo C. Lejano, are stockholders of Magna Realty. The remaining nine (9) defendants particularly spouses Amparo C. Lejano and Patricio M. Jonson, Lydia C. Lejano, Angelina C. Lejano, spouses Julieta C. Lejano and Reynaldo I. Limjoco, Corazon C. Lejano and Bernardo R. Bautista do not appear to be stockholders thereof (Exhs. "C" to "C-7") although they were parties to the Agreement. Sometime in 1978 all of the defendants executed with certain Hermilando Mandanas and Joyce Caparas the Agreement (Exhs. "B","B-1" and "B-2") wherein they agreed to engage in a joint venture business for the development of the former's realty in Lian, Batangas as a tourist spot and attraction. They further agreed that, for the said purpose a corporation be formed and registered with an authorized capital stock of P5,000,000.00 and whose name be determined only upon incorporation. Likewise, they agreed that, in the corporation to be formed and upon its incorporation, defendants should subscribe P1,300,000.00 worth of shares and should fully pay the same by using their parcels of land in Lian, Batangas which they agreed to be developed and which they then valued at P1,300,000.00; Mandanas and Caparas should subscribe P1,588,888.00 worth of shares and should partially pay P500,500.00 in cash not later than December 31, 1978 and without prejudice to the calling of the balance by the Board; and regardless of the value of defendants' parcels of land, they shall have only 45% equity while both Mandanas and Caparas shall have 55% equity and with Caparas owning 45% and Mandanas owning 15%. On November 5, 1978 and unknown to defendants, said Joyce Caparas assigned all her rights, title, interest, and obligations in the Agreement to certain spouses Artemio T. Madamba and Antonia A. Madamba. (Exh. "A").There is no showing that Hermilando Mandanas transferred his interest in the Agreement. On December 14, 1978, plaintiff Magna Realty was incorporated (Exhs. "C" to "C-7") with Artemio T. Madamba, Antonia A. Madamba, Pacifico C. Lejano, Pedro L. Lejano, Leopoldo C. Lejano, Vicente C. Lejano and certain Antonio R. Mangubat as the only incorporators, directors and stockholders thereof. Magna Realty has an authorized capital stock of P5,000,000.00, with a total subscribed capital of P1,000,000 and paid-up capital in cash in the amount of P250,000.00. Of the said subscribed and paid- up capital, spouses Madambas subscribed P450,000 (45%) and paid P112,500.00; the four (4) Lejano stockholders subscribed P112,500.00 each or a total of P450,000.00 (45%) and paid P28,125.00 each in cash or in the total amount of P112,500.00 which was advanced by the spouses Madambas (TSN, January 13, 1977, pp. 27 and 28);and Antonio R. Mangubat subscribed P100,000.00 (10%) and paid P25,000.00 therefor. Mr. Artemio T. Madamba was designated Treasurer of Magna Realty. Thereafter, plaintiff Magna Realty disbursed its funds for certain transactions which consisted mostly of architectural services rendered by Architect Antonio Mercado in the total amount of P390,000.00 (Exhs. "F","I","M","O",and "P"),office equipments and furniture in the amount of P49,240.00 (Exhs. "J" and "K"),corporate registration expenses of P500,000 (Exh. "L") and payment to Pedro C. Lejano for the improvements that will be made on his property in the amount of P10,000.00 (Exh. "N"). On April 11, 1980, spouses Madamba (by their counsel) sent a demand letter to and for the defendants to effect the transfer to plaintiff Magna Realty of all the real properties which they agreed to be transferred as such in accordance with the Pre-Registration Memorandum of Agreement between them. (Exhs. "Q" to "Q-3") One year thereafter, Magna Realty and the spouses Madamba filed with the Court of First Instance of Batangas a Civil Case (No. 1339) against and for herein defendants to convey to Magna Realty all the said real properties. The said case was, however, dismissed for lack of jurisdiction on August 21, 1990 by the Court of Appeals in a petition for certiorari. Thereafter and without informing the other stockholders of Magna Realty, the spouses Madamba assigned all their shares of stock in it to herein plaintiff J. Antonio Leviste on September 5, 1990. Immediately on October 5, 1990 the instant case was filed with the Commission by plaintiff J. Antonio Leviste, who solely verified the complaint. An answer with Motion To Dismiss was filed by defendants on November 2, 1990. After due hearing on the motion, the then Hearing Officer dismissed the instant case on the ground that the complaint failed to state a cause of action although the same was reversed on appeal by the Commission En Banc which further remanded back the case for trial on the merit. The issues to be resolved are: 1. Whether or not plaintiffs can compel the defendants in conveying to plaintiff Magna Realty all the realties covered by TCT Nos. T-32888, T-18274, T-15200, T-39217, T-30638, T-30787, T-38999, (all) of the Registry of Deeds of Batangas, and Lot No. 44 PSD-27578 in Lian, Batangas as payment for shares of stock in Magna Realty worth P1,300,000.00; 2. Whether or not plaintiffs can compel defendants in solidarily reimbursing to spouses Madamba the amount of P100,000.00 which said spouses had advanced as paid-in capital for defendants Pacifico, Vicente, Leopoldo, and Pedro Lejano in Magna Realty; and 3. Whether or not plaintiffs are entitled to attorney's and appearance fees. This Hearing Officer holds, hence rules, as follows: While there is clearly an intra-corporate relationship between plaintiff Magna Realty, on the one hand, and defendants Pacifico C. Lejano, Pedro L. Lejano, Vicente C. Lejano, and Leopoldo G. Lejano, on the other, as it appears that the latter are organizing stockholders of the former, the same relationship does not exist insofar as between Magna Realty and the other defendants, particularly, spouses Amparo C. Lejano, and Patricio M. Jonson, Lydia C. Lejano, Angelina C. Lejano, spouses Julieta C. Lejano and Reynaldo I. Limjoco, Corazon C. Lejano and Bernard R. Bautista are concerned. Said defendants are not stockholders of the former, hence there is no intracorporate relationship and/or controversy between them (P.D. 902-A, Section 5(b); Union Glass Corp. v. SEC, 126 SCRA 31) which fact therefore necessitates the dismissal of the instant case insofar as it relates to them for lack of jurisdiction on the part of the Commission to pass it upon. Similarly, and relative to plaintiff J. Antonio Leviste and all of the defendants, there is technically no intracorporate controversy between them because, as clearly gleaned from paragraph 1.2 of the complaint and from the evidence presented (TSN, March 13, 1997, pp. 5 to 9), the former is not a registered stockholder of Magna Realty but just a mere assignee of rights and shares (Rivera v. Florendo, 144 SCRA 643) who has not yet complied with Section 63 of the Corporation Code that would have made the said assignment to him valid and effective to make him a rightful stockholder as against third parties. Hence, this Commission has no jurisdiction over this particular cause with respect to plaintiff Leviste and the defendants. This particular finding does not run counter to the earlier ruling of the Court of Appeals to the effect that it is this Commission which has jurisdiction over this particular cause because, unlike in the instant case, Magna Realty's co-plaintiffs in the Civil Case, filed with the Court of First Instance of Batangas were the spouses Madamba who were then the organizing stockholders. With respect to the first issue or relief for an order compelling the defendants, particularly, Pacifico C. Lejano, Pedro L. Lejano, Vicente C. Lejano and Leopoldo C. Lejano, to deliver to plaintiff Magna Realty all the real properties enumerated in the agreement, the same is bereft of merit, hence in the negative. Contrary to defendants' contention and as clearly established by evidence, Magna Realty was the corporation that was incorporated pursuant to and as agreed upon in the foregoing Agreement. There were no other reasons, except by this agreement, that led spouses Madamba (Assignees of Joyce Caparas) and four of the Lejanos in organizing Magna Realty. In fact, prior to its incorporation, there was no evidence to show that the Madambas and the Lejanos knew each other or met each other to conceive the formation of other corporation than the one envisioned in the Agreement. Nonetheless, while Magna Realty was the actual corporation organized pursuant to the Agreement and to which and for whose benefit all the enumerated parcels of land were to be delivered in exchange and as payment for shares of stock which it would issue to the defendants under the said Agreement, the same cannot compel the defendants to deliver the said parcels of land for the reason that said obligation had been extinguished or modified by novation in the principal obligation and/or in the person of the debtors/obligees (Arts. 1291 (1 and 2), 1292 and 1293 of the New Civil Code) that resulted from the incorporation of Magna Realty with entirely new obligation being created and which were incompatible to the old one as earlier agreed upon in the Agreement and/or without including the other parties in said Agreement particularly the nine (9) Lejanos and certain Hermilando Mandanas as stockholders thereof. Noteworthy is the condition in the Agreement that upon incorporation of the corporation to be registered, shares of stock worth P1,300,000.00 be issued to all the defendants who shall also be obliged to deliver the parcels of land enumerated in the said Agreement as full payment thereof. When Magna Realty was organized and registered, the same condition was however, totally discarded. The spouses Madamba together with one Antonio Mangubat and only four of the Lejanos, as incorporators and stockholders thereof, instead subsequently agreed to issue to the four Lejanos only P450,000.00 worth of shares for which they actually and partially paid in cash in the amount of P112,500.00. Accordingly, the sole new obligation that is left then to said four Lejanos who became stockholders of Magna Realty is the payment of the unpaid portion of their P450,000.00 subscription. The old obligation to transfer the said parcels of land as payment for P1,300,000 shares which should have been issued at the time of Magna Realty's incorporation had been accordingly modified. Similarly, novation extinguished the obligation of the other defendants Lejanos who were not made stockholders of Magna Realty. As may be gleaned from the Agreement it is a principal condition that before each and everyone of the defendants Lejanos is obliged to deliver his or her respective assigned share in the parcels of land, he/she should be reciprocally issued the corresponding shares of stock by Magna Realty. This principal condition was not however, complied with or the same was changed or abandoned when Magna Realty was incorporated without issuing shares of stock to the other Lejanos, namely defendants Amparo C. Lejano, Lydia C. Lejano, Angelina C..Lejano, Julieta C. Lejano, Corazon C. Lejano, and Luzviminda C. Lejano. Hence, their obligation to deliver their shares in the parcels of land as co-owners thereof had been extinguished by a change in the principal condition. Moreover, the non-inclusion of the aforementioned defendants Lejanos as stockholders of Magna Realty constitutes a novation by substitution of the person of the "First Part" as debtor/obligee. Noteworthy is the fact that, in the Agreement, the "First Part" constitutes all of the defendants Lejanos as a group. They are collectively considered the debtor or obligee insofar as the obligation to deliver the subject parcels of land in payment for P1,300,000.00 worth of shares in Magna Realty is concerned. The person of the "First Part" as obligee had been nevertheless and in effect substituted by the persons of defendants Pacifico C. Lejano, Pedro L. Lejano, Vicente C. Lejano, and Leopoldo C. Lejano who, in their individual rights, were the only Lejanos being issued with shares of stock by Magna Realty. Accordingly, said four Lejanos stepped into the shoes of the "First Part" and assumed thereby the right to subscribe the shares of stock worth P1,300,000.00 and the obligation to pay thereof by the use of the subject parcels of land were it not for the timely novation of the said obligation to mere subscription of P450,000 worth of shares and partial payment thereof in cash per Magna Realty's Articles of Incorporation which implemented the Agreement. The required consent of the other parties in the Agreement with respect to this substitution was given by the spouses Madamba when they themselves initiated the incorporation of Magna Realty and correspondingly signed the Articles of Incorporation thereof. Hence, novation was effected in the person of the obligee. Be that as it may, plaintiffs have not likewise sufficiently substantiated a cause of action against the defendants Lejanos. Under Rule 2, Section 2 of the 1997 Rules of Civil Procedure, a cause of action is defined as the "act or omission by which a party violates a right of another". Accordingly, the essential elements are (1) legal right of the plaintiff, (2) correlative obligation of the defendant; and (3) act or omission of the defendant in violation of said legal right. (Ma-ao Sugar Central vs. Barrios, 79, Phil. 606). In the case at bar, while the Agreement had established both plaintiffs' legal right to demand for and defendants' obligation to effect the delivery of the subject parcels of land, the same had been, as discussed above, extinguished or modified by novation. Likewise, even if there was no novation, still there is no sufficient cause of action because the third essential element is not present. Defendants have not yet faulted or incurred in delay in complying with their obligation to deliver the subject parcels of land as payment for P1,300,000.00 worth of Magna Realty shares. There is yet no violation to plaintiffs' legal right to have the parcels of land delivered by the defendants. Per Agreement, Magna Realty's issuance of P1,300,000.00 worth of shares of stock to defendants and defendants' payment thereof (as First Part) by using and delivering the subject parcels of land are reciprocal obligations. Accordingly, neither Magna Realty nor defendants have defaulted or incurred in delay in complying with their respective obligation until one or the other has complied with or been ready to comply with what is incumbent upon him. (Art. 1169 of the New Civil Code of the Philippines). Since plaintiffs had not shown by evidence that Magna Realty had issued or had convened its Board to approve the issuance of and to show its readiness in issuing the P1,300,000.00 worth of shares to defendants, this Commission cannot legally order the latter to effect the delivery of the subject parcels of land upon the former as payment thereof. They cannot be made to pay for shares of stock which are not yet issued. Plaintiffs further claim that plaintiff Leviste (as assignee of the Madambas) has complied with or is ready to comply with his obligation under the Agreement, that is, to bring in P500,500.00 in cash to the coffer of Magna Realty as payment for P1,588,888.00 worth of shares to be issued to them, the same is not that reciprocal obligation wherein the compliance thereof by plaintiff Leviste will give rise to default or delay on the part of the defendants. Such an obligation is not a pre-condition to defendants' delivery of the subject parcels of land to Magna Realty. Besides, evidence does not show that plaintiff Leviste or his assignors (Madambas) had already delivered to Magna Realty the amount of P500,500.00 as payment for P1,588,888.00 worth of shares. There is no specific receipt showing that said amount was paid to Magna Realty as payment for shares of stock or as investment. What had been utmost proven by plaintiffs' evidence are the facts that Magna Realty had a total paid-in capital of P250,000.00 which constituted the paid-up capital of the Madambas (P112,500.00),of the four of the Lejanos (P112,500.00) and Antonio Mangubat (P25,000.00);and that it had disbursed and paid the total amount of P449,740.00 out of its coffer. There is no clear showing that this whole amount came from the Madambas or plaintiff Leviste as compliance of their obligation in the Agreement and as payment for his subscription in Magna. EaCDAT As regards the second issue, neither Magna Realty nor J. Antonio Leviste is the real party in interest to claim reimbursement of the amount of P112,500.00, either for themselves or in behalf of the spouses Madamba. Herein plaintiffs have accordingly no cause of action or a legal right in obtaining or collecting such amount from the defendants. While evidence would show that it was the spouses Madamba who advanced the P112,500.00 paid-in capital of the four Lejanos in Magna Realty, there is however, no showing that either of the plaintiffs is subrogated to the right of or authorized by the Madambas to file this case in so far as this cause or issue is concerned. What had been transferred in the Deed of Assignment to plaintiff Leviste as assignee of the Madambas is limited to the right of an assignee of shares of stock in Magna Realty. It did not include the right of recovering the amount of P112,500.00 which the Madambas had loaned to the Lejanos. Beside, an action to recover a loan, being ordinary civil litigation, is beyond the jurisdiction of the Commission even if intracorporate relationship may exist between the parties. (Viray vs. CA, 191 SCRA 308) Again, this finding does not nevertheless, contradict the earlier declaration of the Court of Appeals to the effect that it was this commission which has jurisdiction because, in the earlier Civil Case (No. 1339) filed with the RTC of Batangas between herein parties, this particular cause or issue had not been raised therein. Finally, with the foregoing findings and discussion, it follows that the third issue on attorney's and appearance fee is also ruled in the negative, as there could be no basis for awarding the same. WHEREFORE, judgment is hereby rendered DISMISSING the case for lack of merit. There is no pronouncement as to costs. SO ORDERED. City of Mandaluyong. May 6, 1999. (SGD.) PAULINO Q. GALLEGOS Hearing Officer