Strategic Alliance Development Corp. v. Cypress Tree Capital Investments, Inc.

THIRD DIVISION

[G.R. No. 213855. November 14, 2018.]

STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, petitioner, vs. CYPRESS TREE CAPITAL INVESTMENTS, INC., STAR INFRASTRUCTURE DEVELOPMENT CORPORATION, AND SECURITIES AND EXCHANGE COMMISSION, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Third Division, issued a Resolution datedNovember 14, 2018, which reads as follows:

"G.R. No. 213855 — (Strategic Alliance Development Corporation, petitioner, v. Cypress Tree Capital Investments, Inc., Star Infrastructure Development Corporation, and Securities and Exchange Commission, respondents). — This resolves a Petition for Indirect Contempt 1 filed by petitioner Strategic Alliance Development Corporation (Strategic Alliance) against respondents, Cypress Tree Capital Investments, Inc. (Cypress Tree), Star Infrastructure Development Corporation (Star Infrastructure), and the Securities and Exchange Commission. This arose from Cypress Tree and Star Infrastructure's alleged refusal to comply with the injunction issued by this Court in Strategic Alliance Dev't. Corp. v. Star Infrastructure Dev't. Corp., et al., 2 docketed as G.R. No. 187872.

As summarized in G.R. No. 187872, the factual antecedents that resulted in the injunction are as follows:

Petitioner Strategic Alliance Development Corporation (STRADEC) is a domestic corporation primarily engaged in the business of a development company in all the elements and details thereof, with principal place of business at Poblacion Sur, Bayambang, Pangasinan. Along with five individuals and three other corporations, STRADEC incorporated respondent Star Infrastructure Development Corporation (SIDC) on 28 October 1997, for the purpose of engaging in the general construction business. As such incorporator, STRADEC fully paid and owned 2,449,998 shares or 49% of the 5,000,000 shares of stock into which SIDC's authorized capital stock of P5,000,000.00 were divided. Pursuant to an amendment of its Articles of Incorporation on 5 June 1998, SIDC transferred its principal place of business from Pasig City to Poblacion Sur, Bayambang, Pangasinan and, later, to Lipa, Batangas.

On 8 October 2004, respondents Aderito Z. Yujuico and Bonifacio C. Sumbilla, in their respective capacities as then President and Treasurer of STRADEC, executed a Promissory Note for and in consideration of a loan in the sum of P10,000,000.00 ostensibly extended in favor of said corporation by respondent Robert L. Wong, one of the incorporators of SIDC. As security for the payment of the principal as well as the stipulated interests thereon, a pledge constituted over STRADEC's entire shareholdings in SIDC was executed by respondent Yujuico on 1 April 2005. In view of STRADEC's repeated default on its obligations, however, the shares thus pledged were sold by way of the 26 April 2005 notarial sale conducted in Makati City by respondent Raymond M. Caraos. Having tendered the sole bid of P11,800,000.00, respondent Wong was issued the corresponding certificates of stocks by respondent Bede S. Tabalingcos, SIDC's Corporate Secretary for the years 2004 and 2005, after the transfer was recorded in the corporation's stock and transfer book. 3 (Citations omitted) HcDSaT

Subsequently, on July 17, 2006, Cezar T. Quiambao, President and Chairman of the Board of Directors of Strategic Alliance, filed a petition before the Regional Trial Court of Batangas City. This petition was docketed as Civil Case No. 7956. 4 As narrated in G.R. No. 187872, an amended petition dated July 31, 2006 was filed, alleging in part that:

[R]espondents Yujuico and Sumbilla were not authorized to enter into any loan agreement with respondent Wong, much less pledge its SIDC shareholdings as security therefor; that it did not receive the proceeds of the supposed loan and immediately apprised SIDC of the irregularity of the transaction upon discovering the same; that it was only able to ascertain the details of the transaction and transfer of the subject shares from a narration thereof in a Certification dated 3 September 2005 issued by respondent Tabalingcos; and, that respondent Wong subsequently sold the shares to respondent Cypress Tree Capital Investment, Inc. (CTCII), a corporation he formed with members of his own family on 5 July 2005.

STRADEC further averred that it already caused the National Bureau of Investigation (NBI) to conduct an investigation of the unlawful transfer of its shares; that it was altogether eased out during the 30 July 2005 SIDC annual stockholders' meeting where respondent Wong was acknowledged as the holder of the subject shares and the further transfer of the corporation's principal place of business to Lipa, Batangas was approved; and, that despite being left out in the notice sent by respondent Cynthia Laureta, SIDC's new Corporate Secretary, it fielded a proxy to the 20 July 2006 SIDC stockholders' special meeting where the increase of the corporation's authorized capital stock to P850,000,000.00 was discussed together with the decrease of the number of its directors from nine to five. 5

Thus, Strategic Alliance prayed for a temporary restraining order and/or writ of preliminary injunction "to enjoin, among other matters, [Cypress Tree]'s exercise of proprietary rights over the subject shares, [Star Infrastructure]'s implementation of the resolutions passed during the 20 July 2006 stockholders' meeting and any action thereon by respondent Securities and Exchange Commission (SEC)[.]" 6

As narrated in G.R. No. 187872, on August 30, 2006, the Regional Trial Court denied Strategic Alliance's application for injunctive relief. 7 Thus, it filed a petition for certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 96945, assailing, among others, the Regional Trial Court's denial of its application for a writ of preliminary injunction. The Court of Appeals, however, denied its application for injunctive relief. 8 Thus, it initiated G.R. No. 187872, where this Court reversed the Court of Appeals Decision and granted the preliminary injunction prayed for. The Decision in G.R. No. 187872 read, in part: ASTcaE

Considering that the determination of the factual and legal issues presented in the case can proceed independent of those being litigated in the other cases filed against each other by the members of STRADEC's Board of Directors, we find that the CA finally erred in denying STRADEC's application of a writ of preliminary injunction to restrain (a) CTCII from further exercising proprietary rights over the subject shares; (b) SIDC and its officers from recognizing the transfer or further transfers of the same; (c) the implementation of the resolutions passed during the 20 July 2006 SIDC stockholders' special meeting; and (d) the SEC from acting on any report submitted in respect thereto. A provisional remedy which has, for its object, the preservation of the status quo, preliminary injunction may be resorted to by a party in order to preserve and protect certain rights and interests during the pendency of an action. By both law and jurisprudence, said provisional writ may be issued upon the concurrence of the following essential requisites, to wit: (1) that the invasion of the right is material and substantial; (2) that the right of complainant is clear and unmistakable; and, (3) that there is an urgent and paramount necessity for the writ to prevent serious damage.

As the owner, STRADEC is undoubtedly possessed of clear and unmistakable rights over the subject SIDC shares which respondent Yujuico pledged in favor of respondent Wong. Unless collectively restrained, the aforesaid acts will completely divest STRADEC of its shares and unfairly deprive it of participation in SIDC's corporate affairs pending the determination of the validity of the impugned transfers. Given that the parties have already submitted their arguments for and against the writ of preliminary injunction sought, STRADEC is, however, required to put up an injunction bond pursuant to Section 1, Rule 10 of the Interim Rules. Conditioned to answer for damages respondents may sustain as a consequence of the issuance of the writ, the amount of the bond is fixed at P10,000,000.00 which is equivalent to the supposed loan for which STRADEC's shares were pledged by respondent Yujuico.

WHEREFORE, premises considered, the petition is GRANTED and the assailed decision and resolution are, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered ORDERING the resumption of proceedings in Civil Case No. 7956 without further delay. Subject to the posting of the requisite bond in the sum of P10,000,000.00, STRADEC's application for a writ of preliminary injunction is likewise GRANTED.

SO ORDERED.9 (Emphasis in the original, citations omitted)

Respondents filed motions seeking reconsideration of the November 17, 2010 Decision. Petitioner submitted an injunction bond in the amount of P10,000,000.00. On April 11, 2011, this Court issued a Resolution admitting and approving petitioner's injunction bond, and denying respondents' motions for reconsideration. 10

Thus, in Civil Case No. 7956, petitioner filed a Motion to Direct Respondents to Submit Sworn or Certified Proofs of Compliance dated July 29, 2013. On September 18, 2013, after hearing, the Regional Trial Court issued an Order granting petitioner's Motion to Direct. 11 Thus, Cypress Tree, 12 Star Infrastructure, 13 and the Securities and Exchange Commission 14 filed their respective Compliances.

In its Compliance, respondent Star Infrastructure submitted a certification made by its Assistant Corporate Secretary Atty. Judy Hao, and pointed out the following facts: cDSAEI

2.1 SIDC has five (5) seats on its Board of Directors following the amendment of its Articles of Incorporation on 23 April 2008 duly approved by the SEC;

2.2 It maintains an authorized capital stock of Five Hundred Million Pesos (P500,000,000.00) divided into Five Million (5,000,000) common shares, each with a par value of One Hundred Pesos (P100.00) all of which shares have been subscribed and fully paid;

2.3 CTCII has been recorded, and is the registered owner of Four Million Nine Hundred Ninety[-]Nine Thousand Nine Hundred Eighty[-]Nine (4,999,989) shares representing 99.99978% of the outstanding capital stock of the Corporation;

2.4 From 11 April 2011, or the date when the writ of preliminary injunction became effective, SIDC has not taken any acts that will require the vote of the stockholders representing more than a majority of the outstanding capital stock. Hence, the participation of shareholders holding 49% of the shares was not and has not been necessary in approving the acts of SIDC during the period covered.

xxx xxx xxx

4. Similarly, while the implementation of the resolution of the stockholders of SIDC, passed at their 20 July 2006 meeting, approving the decrease in the number of directors from nine (9) to five (5), is one of the enjoined acts under the writ of preliminary injunction, the said resolution was implemented on 23 April 2008, or prior to the issuance and effective date of the writ of preliminary injunction. 15

Respondent Cypress Tree adopted in its Compliance the certification submitted by respondent Star Infrastructure as proof that the former has not exercised the right of voting on the disputed shares since the effectivity of the writ of preliminary injunction. 16

The Securities and Exchange Commission manifested in its Compliance that since 2006, respondent Star Infrastructure has been filing General Information Sheets and Annual Financial Statements. It pointed out that receipt of the reports is a ministerial function, and does not constitute approval of its contents. Thus, to comply with the injunction in G.R. No. 187872, and to apprise the public of the pendency of Civil Case No. 7956, it has stamped "DISPUTED" over Star Infrastructure's General Information Sheet and its amendments, covering the period of 2005 to 2012. 17

Petitioner filed the instant Petition before this Court on September 4, 2014. 18 Respondents filed their respective Comments, 19 to which petitioner filed its Consolidated Reply. 20

Petitioner insists that respondents refuse to comply with this Court's injunctive orders issued in relation to G.R. No. 187872, and that this refusal constitutes indirect contempt of court. Its contention is based on Cypress Tree's continuous exercise of proprietary rights over the disputed shares, 21 and the General Information Sheets, which, as of the date when the Petition was filed, reflected this, constituting a recognition of the transfer of shares made in favor of Cypress Tree. 22 Further, the number of directors in the company has not been restored to nine (9). 23

Respondents argue that the injunction was not a mandatory injunction, as it did not command them to perform any positive acts. Rather, it only required the resumption of the proceedings in Civil Case No. 7956 and directed petitioner to post a bond. 24 Since the issuance of the injunctive writ, respondents have refrained from acting or utilizing the shares registered in their names for general corporate business, and no meeting was called that required the voting of shares beyond what Cypress Tree undisputedly owns. 25 EDCcaS

The issue for this Court's resolution is whether or not respondents Cypress Tree Capital Investments, Inc. and Star Infrastructure Development Corporation acted contumaciously by the latter's filing of General Information Sheets and maintenance of its corporate books, in relation to the injunction issued in G.R. No. 187872.

The Petition is denied.

Utmost self-restraint must be observed by courts when wielding the power of contempt. In In the Matter to Declare in Contempt of Court Hon. Simeon A. Datumanong, Secretary of DPWH, 26 this Court emphasized how judiciously and sparingly this power must be exercised:

The power to declare a person in contempt of court and in dealing with him accordingly is an inherent power lodged in courts of justice, to be used as a means to protect and preserve the dignity of the court, the solemnity of the proceedings therein, and the administration of justice from callous misbehavior, offensive personalities, and contumacious refusal to comply with court orders. This contempt power, however plenary it may seem, must be exercised judiciously and sparingly with utmost self-restraint with the end in view of utilizing the same for correction and preservation of the dignity of the court, not for retaliation or vindication. It should not be availed of unless necessary in the interest of justice. 27 (Citations omitted)

Thus, contempt power is resorted to only in clear cases of contumacious behavior, when necessary in the interest of justice. In Rivulet Agro-Industrial Corp. v. Paruñgao, et al., 28 this Court defined contumacious behavior:

Contempt of court is defined as a disobedience to the court by acting in opposition to its authority, justice, and dignity, and signifies not only a willful disregard of the court's order, but such conduct which tends to bring the authority of the court and the administration of law into disrepute or, in some manner, to impede the due administration of justice. To be considered contemptuous, an act must be clearly contrary to or prohibited by the order of the court. 29 (Citation omitted)

This Court explained that to constitute contumacious behavior, an act alleged to be forbidden or required to be done must leave no uncertainty on what specific act or thing is forbidden or required:

[A] person cannot be punished for contempt for disobedience of an order of the Court, unless the act which is forbidden or required to be done is clearly and exactly defined, so that there can be no reasonable doubt or uncertainty as to what specific act or thing is forbidden or required. 30 (Citation omitted)

Given this firm standard, this Court denies the Petition for lack of clear and contumacious refusal to disobey this Court's directives.

To recall, the injunction in G.R. No. 187872 restrained only the following acts:

(a) CTCII from further exercising proprietary rights over the subject shares; (b) SIDC and its officers from recognizing the transfer or further transfers of the same; (c) the implementation of the resolutions passed during the 20 July 2006 SIDC stockholders' special meeting; and (d) the SEC from acting on any report submitted in respect thereto. 31

The text of the injunction clearly pertains to restraining respondents from committing prospective acts, and does not contain language requiring them to perform any of the acts demanded by petitioner.

To support its contention that the injunction requires respondents to perform positive acts, petitioner relies on the discussions in the Decision in G.R. No. 187872, where this Court said: ISHaCD

As the owner, STRADEC is undoubtedly possessed of clear and unmistakable rights over the subject SIDC shares which respondent Yujuico pledged in favor of respondent Wong. Unless collectively restrained, the aforesaid acts will completely divest STRADEC of its shares and unfairly deprive it of participation in SIDC's corporate affairs pending the determination of the validity of the impugned transfers. 32

Petitioner also relies on the April 11, 2011 Resolution in G.R. No. 187872, where this Court said:

[R]espondents also argue that the writ of preliminary injunction granted in the decision sought to be reconsidered is directed against acts already consummated. Although the general rule is to the effect that a writ of preliminary injunction cannot be issued against acts already fait accompli, it has been held, however, that consummated acts which are continuing in nature may still be enjoined by the courts. 33 (Citations omitted)

However, the foregoing pronouncements do not constitute clear instructions requiring respondents to perform the acts insisted upon by petitioner. Aside from the text of the injunction's plain meaning, which pertains to a prospective restriction, even the discussions in the Decision and Resolution in G.R. No. 187872 contain no clear directive requiring them to undo what they had already done and accomplished before the issuance of the injunctive writ. Absent such clear directive from this Court, respondents' failure to perform the acts demanded by petitioner is not clear disobedience of the injunction issued in G.R. No. 187872.

Contrary to petitioner's position, in determining whether to grant a preliminary mandatory injunction, courts rely on standards higher than those used in determining whether to grant preliminary injunction. In Power Sites and Signs, Inc. v. United Neon, 34 this Court highlighted the difference in standards used: DHESca

A preliminary injunction may be granted only where the plaintiff appears to be clearly entitled to the relief sought and has substantial interest in the right sought to be defended. While the existence of the right need not be conclusively established, it must be clear. The standard is even higher in the case of a preliminary mandatory injunction, which should only be granted —

. . . in cases of extreme urgency; where the right is very clear; where considerations of relative inconvenience bear strongly in complainant's favor; where there is a willful and unlawful invasion of plaintiff's right against his protest and remonstrance, the injury being a continuing one; and where the effect of the mandatory injunction is rather to reestablish and maintain a preexisting continuing relation between the parties, recently and arbitrarily interrupted by the defendant, than to establish a new relation. . . . 35 (Citations omitted)

Similarly, in Heirs of Melencio Yu, et al. v. Court of Appeals, et al., 36 this Court emphasized the higher degree of caution that a court must exercise in issuing preliminary mandatory injunctions:

A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a party or a court, agency or a person to refrain from a particular act or acts. It may also require the performance of a particular act or acts, in which case it shall be known as a preliminary mandatory injunction. To justify the issuance of a writ of preliminary mandatory injunction, it must be shown that: (1) the complainant has a clear legal right; (2) such right has been violated and the invasion by the other party is material and substantial; and (3) there is an urgent and permanent necessity for the writ to prevent serious damage. An injunction will not issue to protect a right not in esse, or a right which is merely contingent and may never arise since, to be protected by injunction, the alleged right must be clearly founded on or granted by law or is enforceable as a matter of law. As this Court opined in Dela Rosa v. Heirs of Juan Valdez:

A preliminary mandatory injunction is more cautiously regarded than a mere prohibitive injunction since, more than its function of preserving the status quo between the parties, it also commands the performance of an act. Accordingly, the issuance of a writ of preliminary mandatory injunction is justified only in a clear case, free from doubt or dispute. When the complainant's right is doubtful or disputed, he does not have a clear legal right and, therefore, the issuance of a writ of preliminary mandatory injunction is improper. While it is not required that the right claimed by applicant, as basis for seeking injunctive relief, be conclusively established, it is still necessary to show, at least tentatively, that the right exists and is not vitiated by any substantial challenge or contradiction.

Thus, a preliminary mandatory injunction should only be granted "in cases of extreme urgency; where the right is very clear; where considerations of relative inconvenience bear strongly in complainant's favor; where there is a willful and unlawful invasion of plaintiff's right against his protest and remonstrance, the injury being a continuing one; and where the effect of the mandatory injunction is rather to re-establish and maintain a pre-existing continuing relation between the parties, recently and arbitrarily interrupted by the defendant, than to establish a new relation." 37 (Citations omitted)

A close reading of the pronouncements in G.R. No. 187872 reveals no clear intention to issue any mandatory injunction. What is clear from the text is that a preliminary injunction was issued to restrain: (1) Cypress Tree from further exercising proprietary rights over the disputed shares; (2) Star Infrastructure from recognizing the transfer or further transfers of the disputed shares; (3) respondents from implementing the resolutions passed during the July 20, 2006 Star Infrastructure stockholders' special meeting; and (4) the Securities and Exchange Commission from acting on any submitted report pertaining to it. 38 There was, however, no clear directive requiring respondents to undo what had already been done, or to restore the status quo ante. TEHIaD

This Court appreciates that certain statements made in G.R. No. 187872 may appear to generally support petitioner's contentions. However, caution must be exercised in issuing mandatory injunctions. Even more caution must be exercised in interpreting a text to be a mandatory injunction, when the text itself neither characterizes itself as such, nor directs the parties to do any positive actions.

In this light, the text in the Decision in G.R. No. 187872 is insufficient to deem respondents' acts as an opposition to this Court's authority, justice, and dignity for purposes of the exercise of contempt power.

WHEREFORE, premises considered, the Petition to cite respondents Star Infrastructure Development Corporation and Cypress Tree Capital Investments, Inc. in indirect contempt is DENIED for lack of merit. cCHITA

SO ORDERED." (Gesmundo and Hernando, JJ., on wellness leave.)

Very truly yours,

(SGD.) WILFREDO V. LAPITANDivision Clerk of Court

 

Footnotes

1.Rollo, pp. 3-18.

2. 649 Phil. 669 (2010) [Per J. Perez, First Division].

3.Id. at 673-674.

4.Id. at 674-675.

5.Id. at 675.

6.Id.

7.Id. at 676.

8.Id. at 678.

9.Id. at 690-691.

10.Rollo, p. 6.

11.Id. at 7.

12.Id. at 85-88.

13.Id. at 89-94.

14.Id. at 95-98.

15.Id. at 90-92.

16.Id. at 86.

17.Id. at 95-96.

18.Id. at 3.

19.Id. at 142.

20.Id. at 220-232.

21.Id. at 9.

22.Id. at 10.

23.Id. at 11-12.

24.Id. at 148.

25.Id. at 149.

26. 529 Phil. 619 (2006) [Per J. Ynares-Santiago, First Division].

27.Id. at 625.

28. 701 Phil. 444 (2013) [Per J. Perlas-Bernabe, Second Division].

29.Id. at 452.

30.Id.

31.Strategic Alliance Dev't. Corp. v. Star Infrastructure Dev't. Corp., et al., 649 Phil. 669, 690 (2010) [Per J. Perez, First Division].

32.Id. at 691.

33.Strategic Alliance Dev't. Corp. v. Star Infrastructure Dev't. Corp., et al., 663 Phil. 94, 109 (2011) [Per J. Perez, First Division].

34. 620 Phil. 205 (2009) [Per J. Del Castillo, Second Division].

35.Id. at 217.

36. 717 Phil. 284 (2013) [Per J. Peralta, Third Division].

37.Id. at 295-296.

38.Rollo, p. 70.