China Chiang Jiang Energy Corporation, et al. vs. Catalino Tan, et al.

[SEC-SICD * CASE NO. 06-97-5676. February 11, 1998.] CHINA CHIANG JIANG ENERGY CORPORATION (GROUP) represented by its Vice President, ZHANG HAO TIAN , petitioners , vs . CATALINO TAN, JESSE D. ALTO, ERWIN TAN, CHAN BUN PEN, YU DONG MING, HERMANO HO, RICHARD LEE, ALEXANDER GO, LAW CHO SHEK, ZHI AN YU, LU FUWU, XIE SHOU GOU, NORTHERN POWER AND DEVELOPMENT, INC., and BINGA HYDROELECTRIC PLANT, INC. , respondents . O R D E R For resolution by this Panel is a Motion to Dismiss dated July 16, 1997 filed by respondents Catalino Tan, Jesse D. Alto, Chan Bun Pen, Erwin Tan, Richard Lee, Alexander Go, Law Cho Shek, Northern Power and Development, Inc. and Binga Hydroelectric Plant, Inc. Petitioners filed its Opposition dated July 28, 1997 which herein movants responded to with a reply dated August 12, 1997. Subsequently, the petitioners still filed a rejoinder dated August 18, 1997 while the movants filed their Sur-Rejoinder dated August 21, 1997. LLjur By way of antecedent facts: On June 19, 1977, herein petitioner filed the instant petition for declaration of nullity of shares, with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction and the appointment of a management committee, essentially anchored on the alleged unauthorized assignment of shares by respondent Zhi An Yu (or Yu Zhi An). Herein movants, instead of joining the issues with the instant petition, filed a Motion to Dismiss dated July 16, 1997 grounded on their assertion that: (a) this Commission has no jurisdiction over the subject matter of the case, (b) the petitioner has no legal capacity to sue, (c) the petition is barred by estoppel and/or laches and/or failure to comply with Section 1 Rule IV of the SICD Revised Rules of Procedure , (d) the petition fails to state a sufficient cause of action and (e) this Commission has not acquired jurisdiction over the case. After a judicious review of the respective pleadings, arguments and submissions of the parties herein, this Panel hereby sustains the movants' motion to dismiss for the following reasons: First: Although the instant petition seeks a relief which may pertain to this Commission, the averments thereof, as well as the supporting documents of the instant case, bear out that this Commission is without jurisdiction to take cognizance of the present controversy. The petitioner in paragraph 9 of its petition alleges that respondent Yu Zhi An, as president of the petitioner, assigned the shares subject of the instant case without a requisite board authority, but it candidly admits in its Opposition dated July 28, 1997 that such was actually its practice for respondent Yu Zhi An to act for and on behalf of the petitioner corporation without any authority from its board. As a matter of fact, the questioned Deed of Assignment of Shares of Stock executed on May 20, 1995 appears to have been signed by Zhi An Yu as the President of petitioner corporation. It is elementary that a corporation transacts its business only through its officers or agents (Boyer-Roxas vs. CA, G.R. No. 100866, July 14, 1992) and so the deed could be said to be regular on its face. What is therefore involved here is clearly a situation not between a corporation and its stockholders which may be devoted as falling within an intra-corporate controversy, but one between a principal and its agent which is within the exclusive and original jurisdiction of the regular courts. In Viray vs. CA, G.R. No. 92481, November 9, 1990, it was held that: . . . the petitioners cannot divest the regional trial court of jurisdiction by simply asserting that they are stockholders of OTSI and their dispute with the private respondents is intra-corporate in nature. llcd The establishment of any of the relationship mentioned in Union will not necessarily always confer jurisdiction over the dispute on the SEC to the exclusion of the regular courts. The statement made in one case that the rule admits no exception or distinction is not that absolute. The better policy in determining which body has jurisdiction over the case would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy." If at all there is any controversy existing, it is one which cannot qualify as intra-corporate in nature. In Peneyra vs. IAC, G.R. No. 68935, January 22, 1990, it was also held that: ". . . the present controversy cannot qualify as an intra-corporate controversy, its root being a contractual breach separate and distinct from the corporate relationship between petitioners and Corregidor College, Inc. . . . . It was therefore patent error for the Court of Appeals to immediately rule that the present case belongs to the SEC just because petitioners alleged that they are stockholders of Corregidor College, Inc." A perusal of the petition shows that herein petitioner is not questioning Zhi An Yu as its president. What is being questioned is the act of its legitimate president alone without the alleged necessary Board resolution or the required authority, knowledge and consent of herein petitioner. It is thus clear that the controversy is between petitioner as the principal and Zhi An Yu as its agent. It is an elementary principle of law that a person who acts as an agent without authority is himself regarded as the principal possessed of all rights and subject to all liabilities of a principal, and becomes personally liable for contracts entered into or for other acts performed as such agent. Enigmatically, petitioner has not presented proof that it has filed criminal charges against Zhi An Yu. Second: As admitted by the petitioner, it is its practice to allow respondent Zhi An Yu to act for herein petitioner without the backing of any board resolution as shown by Annex "B-1" (Declaration of Trust) of the petition itself. Furthermore, the Deed of Assignment of Shares of Stock dated 20 May 1995, Annex "I" of the instant petition, also indicates in accordance with their practice that it was being done for and on behalf of the petitioner, without any claim of ownership by respondent Zhi An Yu thereof. It appears that it was executed in the usual manner and practice of the petitioner. These circumstances necessarily bar the present claim because it is estopped thereby. (Magana vs. Auditor General, et al., G.R. No. L-2180, April 29, 1960, 107 Phil 900). In Cuison vs. CA, G.R. No. 88539, October 26, 1993, the Supreme Court ruled that. "By his representations, petitioner is now estopped from disclaiming liability for the transaction entered into by Tiu Huy Tiac on his behalf. It matters not whether the representations were intentional or merely negligent so long as innocent third persons relied upon such representations in good faith and for value." It is a well established rule that one who clothes another with apparent authority as his agent and holds him out to the public as such can not be permitted to deny the authority of such person to act as his agent to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be (Macke, et al. vs. Camps, G.R. No. L-2962, February 27, 1907, 7 Phil. 553, cited in Cuison vs. CA, G.R. No. 88539, October 26, 1993) With the foregoing reasons, the instant petition is, as it is hereby DISMISSED. The other pending incident having been rendered moot hereby, no longer requires resolution. WHEREFORE, premises considered the instant petition is DISMISSED. (SGD.) ROSITA R. GUERRERO (SGD.) MANOLITO S. SOLLER Hearing Officer Hearing Officer