Marcelo C. Lipana, et al. vs. Surfactant Marketing Corp., et al.

[SEC-SICD * CASE NO. 2437. March 10, 1986.] MARCELO C. LIPANA, ET AL. , petitioners , vs .SURFACTANT MARKETING CORP.,ET AL. , respondents . D E C I S I O N On April 20, 1983, petitioners filed a verified petition against respondents praying, among others, that a writ of preliminary injunction be issued (ex-parte) forthwith restraining and enjoining respondents, their agents and/or representatives and/or persons acting under their control, direction, instruction and/or supervision, from using, employing and/or applying in any manner, form or means whatever, the name "Surfactant Marketing Corporation" and from engaging in any business for the purpose of realizing any of the primary and secondary purposes set forth in the Articles of Incorporation of respondent Surfactant Marketing Corporation and that after trial, judgment be rendered as follows: cdll "a) Confirming and making permanent and perpetual the writ of preliminary injunction herein prayed for. b) Cancelling the Articles of Incorporation and By-Laws of Surfactant Marketing Corporation and permanently and perpetually barring or enjoining it from engaging in the line of business stated in its Articles of Incorporation; c) Revoking the Certificate of Incorporation of Surfactant Marketing Corporation; d) Removing respondents Lorenzo R. Regino, Reynaldo Miguel and Rodolfo Cruz from their positions as directors and officers of Surfactants Manufacturing Corp. and disqualifying them from further holding any position therein; e) Ordering respondents, jointly and severally, to account for and turn over to Surfactants Manufacturing Corp. all income, profits and other revenue earned by Surfactant Marketing Corporation"; The undisputed facts are as follows: Petitioners and respondents Lorenzo R. Regino, Reynaldo Miguel and Rodolfo Cruz are all incorporators and stockholders of Surfactants Manufacturing Corp. (Exh. "B").Likewise, all the individual respondents are incorporators and stockholders of Surfactant Marketing Corporation (Exhs. "A" & "15").Respondents Lorenzo R. Regino, Reynaldo Miguel, Rodolfo Cruz, Isabelita C. Regino and Luzviminda Rayos de Sol are all members of the Board of Directors of Surfactant Marketing Corporation (Exhs. "A" & "15") with respondent Lorenzo R. Regino as Chairman of the Board and President, respondent Reynaldo Miguel as Treasurer and Senior Vice-President, respondent Rodolfo Cruz as Vice-President. Petitioners are neither incorporators nor stockholders of respondent Surfactant Marketing Corporation. On February 12, 1975, petitioners together with respondents Lorenzo R. Regino, Reynaldo Miguel and Rodolfo Cruz formed a corporation known as Surfactants Manufacturing Corp. (Exhs. "B" & "B-1") with the following purposes: PRIMARY PURPOSES "To carry on the business of manufacturing or processing agricultural, industrial or institutional products, goods, wares and merchandise of every class and description such as industrial chemicals, foods and cosmetics. SECONDARY PURPOSES "1) To carry on a general mercantile and commercial business of buying, acquiring, holding, selling at retail or wholesale, indenting, importing, exporting, bartering, or otherwise disposing of and dealing in any goods, wares, merchandise and commodities of all kinds, and products, natural or artificial, of the Philippines or other countries, which are or may become articles of commerce, such as but not limited to chemicals, hospital items and wood products; On July 8, 1980 Golden Gluck Industries Incorporated (Golden Gluck, for short) was registered before this Commission (Exh. "1") for the following purposes: PRIMARY "To carry on the business of manufacturing or processing, industrial, agricultural or institutional products, goods, wares and merchandise of every class and description such as industrial chemicals, food and cosmetics." (Exh, "1-a") SECONDARY "To carry on a general merchandise and commercial business of buying, acquiring, holding, selling at retail or wholesale, indenting, importing, exporting, bartering or otherwise disposing of and dealing in any goods, wares, merchandise and commodities of all kinds and products, natural or artificial, of the Philippines or other countries, which are or may become articles of commerce, such as but not limited to chemicals, hospital items and wood products." prLL and with petitioner Manuel L. Lipana as one of the incorporators and directors (Exh. "1-b"). Sometime in May, 1982, petitioner Marcelo C. Lipana filed an action (For: a sum of money and damages with preliminary attachment) against Surfactants Manufacturing Corp. and respondent Lorenzo E. Regino with the Court of First Instance of Bulacan (now Regional Trial Court of Bulacan) which resulted to the garnishment of "all goods, effects, interest, credits moneys, stocks, shares, any interests in stocks and shares, and any other personal property" belonging to or in the possession of or under the control of Surfactants Manufacturing Corp. and respondent Lorenzo R. Regino sufficient to cover the sum of P80,900.00 (Exhs. "F" & "9"). On June 12, 1982, the individual respondents organized the respondent Surfactant Marketing Corporation (Exhs. "A" & "15") for the following purposes: PRIMARY PURPOSE "To carry on a general mercantile and commercial business of buying, acquiring, holding, selling at retail or wholesale, indenting, importing, exporting, bartering, or otherwise disposing of and dealing in any goods, wares, merchandise and commodities of all kinds and products, natural or artificial of the Philippines or other countries, which are or may become articles of commerce, such as but not limited to, chemicals, hospital items and wood products." SECONDARY PURPOSES "(2) To carry on the business of manufacturing or processing agricultural, industrial or institutional products, goods, wares and merchandise of every class and description such as industrial, chemicals, foods and cosmetics." The issue now is whether or not petitioners are qualified to bring this action against respondents. The petitioners, in the instant case, never alleged that they are entitled to an office or position usurped or illegally held by another. Neither did they allege that they have a legal right to the franchise now held by the individual respondents' corporation. Instead, the petition sought to cancel the Articles of Incorporation and By-laws of Surfactant Marketing Corporation and revoke its Certificate of Incorporation in which case the action is a Quo Warranto proceeding or in the least, a proceeding of its nature and should be commenced by the Commission, or the Solicitor General or Fiscal as provided for under Sections 2 and 3, Rule XX of the New Rules of Procedure in the Commission. But even assuming that the present action has been commenced by the proper party, said action would still not prosper considering that Quo Warranto or proceedings of its nature is a remedy designed to vindicate public rather private rights, and it is not employed primarily in the interest of any individual. The wrongs complained of are of public, not private concern and the proceedings is not a private action, even though instituted as a result of information given the government officer authorized to institute the action by a private individual or association. The remedy is not available for the enforcement of private rights of for the redress of private or local grievances. This is true whether the remedy is invoked by the public prosecutor or by a private citizen. To the effectuation of the public purpose, the protection of private interests which may be involved is only incidental. (Fletcher Vol. 5, pp. 1028-1029 citing People vs. Healy, 230 III 280, 82 NE 599, 15 LRA (N.S.) 603, etc.,State vs. Norborne Land Drainage Dist. Co. of Carsoll 290 Mo. 91, 234 S.W. 344, etc. People vs. California Protective Corp.,76 Cal. App. 354, 244 Pac, 1089, etc. State vs. Des Moines City Ry Co. 135 Iowa 694, 109 N.W. 867). dctai Except in one particular instance as provided in Section 6, Rule 66 of the Rules of Court, a petition for Quo Warranto cannot be instituted by any individual, but it is a sole prerogative of the Solicitor General or the Fiscal. To allow otherwise would open a pandora box of litigations by individuals with grievances, real or imaginary, against corporations similarly situated. We believe that such situations are precisely what the provisions of the Rules of Court seek to prevent. Thus, in the absence of statutory provision extending its scope, quo warranto can be resorted to only when the act or wrong complained of does injury to the public. Consequently, it cannot generally be involved for the redress of mere private grievances or the vindication of private rights. (44 Am Jur. 98, cited in the Revised R ule s of Court in the Philippines by Francisco, Vol. IV-B, p. 299.) Petitioners, however, argue that individual respondents particularly respondents Lorenzo R. Regino, Reynaldo Miguel and Rodolfo Cruz are guilty of disloyalty as directors of Surfactants Manufacturing Corp. and have violated Sections 31 and 34 of the Corporation Code of the Philippines (Code, in short) for having organized and operated respondent Surfactant Marketing Corporation and acquired for themselves business opportunities which allegedly should belong to Surfactants Manufacturing Corp.; that respondents Lorenzo R. Regino, Reynaldo Miguel and Rodolfo Cruz have likewise violated their duties as directors and officers of Surfactants Manufacturing Corp. by attempting to acquire or acquiring interest adverse to the latter. To support their claim, petitioners contend that the business of respondent Surfactant Marketing Corporation is exactly the same as, and directly competitive with the business of Surfactants Manufacturing Corp. and that there is a complete identity in the corporate purposes of these two corporations; that respondent Surfactant Marketing Corporation can engage in all the businesses which Surfactants Manufacturing Corp. can engage in (TSN, June 7, 1983, p. 47);that respondent Surfactants Manufacturing Corporation buys raw materials for Surfactants Manufacturing Corp. to produce and manufacture and to sell to market the finished goods to end-users like San Miguel Corp.,Wyeth Suaco, Coca-Cola and Magnolia which are all former customers of Surfactants Manufacturing Corp. (TSN, May 24, 1983, pp. 35-38);that Surfactants Manufacturing Corp. used to be engaged both in the manufacture and marketing of industrial chemicals; that aside from manufacturing and selling industrial chemicals, it was Surfactants Manufacturing Corp. that directly bought materials from suppliers; that it was the one directly sold the finished products to suppliers; that it was also the one that used to deliver and later on collect the price of the raw materials to suppliers; that now it only manufactures the industrial chemicals and respondent Surfactant Marketing Corporation is the one that handles the marketing side (TSN, May 24, 1983 p. 39);that for the manufacture of the raw materials supplied by respondent Surfactant Marketing Corporation into finished products, Surfactants Manufacturing Corp. is given only 10% of the gross sales as contractual fee which is the only income now of the latter, (TSN, June 7, 1983, pp. 13-14);that the office equipments and other properties of Surfactants Manufacturing Corp. are also being used by Surfactant Marketing Corporation; that the two Ford Fieras owned by Surfactants Manufacturing Corp. but registered in the names of respondents Luzviminda Rayos del Sol and Lorenzo R. Regino are being used by Surfactant Marketing Corporation and the latter's name appears in the said panels (TSN, June 23, 1983, pp. 37-41);that these vehicles are being used by Surfactant Marketing Corporation without additional compensation to Surfactants Manufacturing Corp.,the compensation being already part of the aforesaid 10% contractual fee; that respondent Surfactant Marketing Corporation likewise utilizes 3/4 of the office space of Surfactants Manufacturing Corp. at Suite 205, Jovan Condominium, Shaw Blvd.,Mandaluyong, Metro Manila. We disagree. Section 31 of the Code enumerates the instances where a director or trustee may be held liable for damages, as follows: 1. When a director willfully and knowingly votes to assent to patently "unlawful" acts of the Corporation; 2. When he is guilty of gross negligence or bad faith in directing the affairs of the Corporation; 3. When he acquires any personal or pecuniary interest in conflict with his duty as such director or trustee. The incorporation of respondent Surfactant Marketing Corporation by the individual respondents is not an unlawful act. If we are also to say that individual respondents are guilty of disloyalty, then with more reason that petitioners are more guilty than the individual respondents when they established Golden Gluck which has similar, if not identical, purposes as Surfactants Manufacturing Corp. As to whether individual respondents are guilty of gross negligence or bad faith and whether the latter acquire any personal or pecuniary interest in conflict with their duty as directors or trustees of Surfactants Manufacturing Corp. is a matter of evidence which petitioners failed to prove in the trial. Petitioners likewise failed to substantiate their claim that respondents acquired for themselves business opportunity which should belong to Surfactants Manufacturing Corp.,thereby obtaining profits to the prejudice of the latter. IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered dismissing the instant petition without pronouncement as to costs. SO ORDERED. (SGD.) ROLANDO C. MALABONGA Hearing Officer