Ricardo Belbes, et al. vs. Board of Trustees of Arroyo Samahan Kabuhayan Inc.

[SEC-SICD * CASE NO. 3431. February 13, 1989.] RICARDO BELBES, ET AL. , plaintiffs , vs . THE BOARD OF TRUSTEES OF ARROYO SAMAHAN KABUHAYAN INC., represented by its president RUBEN M. AGUILAR SR. , defendants . D E C I S I O N This is a complaint for the annulment of the CONTRACT OF PROMISE TO SELL entered into by and between the ARROYO SAMAHAN KABUHAYAN, INC., and the herein plaintiffs, and for the issuance of a writ of preliminary injunction against the Board of Trustees of the Association and/or its officers enjoining its treasurer from collecting and imposing amortization, interests, penalties and other charges based on the said contract. LibLex In their complaint, plaintiffs alleged, among others, that they are the corporate members of the ARROYO SAMAHAN KABUHAYAN, INC. (Association), while the defendant Board of Trustees is the governing body of the-Association; that on December 21, 1983, the Philippine National Bank (PNB) through its branch office at Iriga City, represented by its Manager, Max C. Abania, executed a DEED OF PROMISE TO SELL (First Contract) in favor of the Association, represented by its President, Zacarias Prado, Jr., for the purchase by installment of the plaintiffs' home lots; that on January 30, 1987, the Association, represented by its President, Jose D. Amon, executed a CONTRACT OF PROMISE TO SELL (Second Contract) in favor of its individual members, covering the same home lots on installment basis; that in the course of amortization payments, plaintiffs noticed an unusual increase of the interest/penalty collected by the corporate treasurer of the Association; that when the plaintiffs sought legal assistance, it was discovered that the Second Contract was detrimental to the interest of the plaintiffs; that the Second Contract is a subtle scheme employed by the defendant amounting to fraud and misrepresentation; that the defendant misrepresented that the Second Contract is merely the members' evidence and right to claim from the Association their respective home lots; and that stipulations contained therein were already clearly spelled out in the First Contract, thereby subjecting the plaintiffs to double taxation; that the defendant misrepresented that the Association will execute the final deed of sale in favor of the plaintiffs, knowing fully well that only a single deed of sale will be executed by the PNB in favor of the plaintiffs under the First Contract. LLpr In answer to the complaint, defendant alleged that the plaintiffs have no cause of action and that the Commission has no jurisdiction to hear the case because the allegations in the complaint are purely civil in nature and triable by the Regional Trial Court. Defendant further alleged, that the Second Contract was freely and voluntarily executed between the plaintiffs and the defendant and that all provisions thereof were explained and even translated into the Bicol dialect; that the Second Contract was individually notarized; that the Second Contract was purposely introduced to the plaintiffs by the defendant as a safeguard to future corruption that may be committed by the officers of the Association; that the amortization being charged from the plaintiffs are in accordance with the charges imposed by the PNB; and that the present action of the plaintiffs is dilatory in nature in the sense that the plaintiffs have not paid their monthly amortization. Defendant likewise interposed by way of counterclaim, the amount of Six Thousand (P6,000.00) Pesos as Attorney's Fee plus One Thousand (P1,000.00) Pesos as appearance fee of counsel and Ten Thousand (P10,000.00) Pesos actual damage, for having acted in bad faith in filing the case. During the hearing on the application for the issuance of a writ of preliminary injunction, counsel for the plaintiffs, upon being informed that counsel for the defendant is willing to admit the authenticity of the exhibits already marked, rested his case insofar as the injunction incident is concerned and offered to proceed with the trial on the merits and immediately thereafter, preliminary conference hearing was held. The principal issue to be resolved in this case is the legality of the Second Contract. Perusal of the First and Second Contracts will readily show that the basis of the defendant in entering into the Second Contract is the First Contract wherein the Vendor (PNB) promised to sell to the defendant the property described in Appendix "A" of said First Contract. It is stipulated in the First Contract that upon full payment of the consideration, only a single sale to all members of the defendant association shall be executed by the vendor. Based on such stipulation, the defendant could not legally enter into the Second Contract whereby the defendant is promising to sell individual lot holders/possessors, because it is PNB who is supposed to execute "a single sale to all the members" of the association. In effect, therefore, the defendant is guilty of misrepresentation, which is, promising something it cannot legally do. On the defendant's contention that the plaintiffs have no cause of action against the defendant, suffice it to say as per the facts alleged in the complaint a claim for relief does exist. On this Commission's lack of jurisdiction to hear the case, Section 5 of Presidential Decree No. 902-A enumerates the cases over which this Commission has original and exclusive jurisdiction to hear and decide involving: a) Devices or schemes employed by any acts of the board of directors, business associations its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission. b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any and/or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and c) Controversies in the election or appointments of directors, trustees, officers of managers of such corporations, partnerships or associations. It is well settled that when there is an intra-corporate relationship existing between the parties and the controversy arose from the said relationship, the case falls within the exclusive jurisdiction of this Commission to hear and decide. In the case of Union Glass and Container Corp., et al., v. SEC and Carolina Hofilena, G.R. No. L-64013, November 28, 1983, 126 SCRA 31, 38 (1983), the Supreme Court ruled that P.D. 902-A explicitly specified and delimited the jurisdiction of SEC on matters intrinsically connected with the regulation of the corporation, partnerships and associations and those dealing with the internal affairs of said corporations, partnerships and associations. In the same case, the Supreme Court also authorized the SEC to rule on the nullity of a contract when it said, "action for recovery of glass plant could be brought by the dissenting stockholder to the regular courts only if and when the SEC rendered final judgment annulling the dacion en pago ". (Emphasis supplied). In the case of DBP v. Illustre, Jr., G.R. No. L-57905, August 1, 1985, the Supreme Court granted the SEC jurisdiction on the complaint for rescission of a compromise agreement when there is an intra-corporate relationship existing between the parties. WHEREFORE, judgment is hereby rendered declaring the Contract of Promise to Sell (Second Contract) null and void and the defendant is permanently enjoined from collecting amortization and interest charges other than that provided for in the Deed of Promise to Sell (First Contract). Defendant's counterclaim should be, as it is hereby DISMISSED, for lack of merit. SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer