Valle Verde Country Club, Inc. v. Eizmendi

SECOND DIVISION

[G.R. No. 209120. October 14, 2013.]

VALLE VERDE COUNTRY CLUB, INC., REPRESENTED BY ITS HOLD-OVER BOARD OF DIRECTORS, ETC., petitioners, vs. FRANCISCO C. EIZMENDI, JR., ET AL., respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 14 October 2013 which reads as follows:

G.R. No. 209120 (Valle Verde Country Club, Inc., represented by its hold-over Board of Directors, etc. v. Francisco C. Eizmendi, Jr., et al.). — For resolution is a petition for review on certiorari 1 filed by petitioner Valle Verde Country Club, Inc. (Valle Verde) assailing the September 18, 2013 decision 2 of the Court of Appeals (CA) in CA-G.R. SP No. 130465.

The Factual Antecedents

On March 1, 2013, Valle Verde filed a complaint for misrepresentation of corporate office against respondents Francisco C. Eizmendi, Jr., Jose S. Tayag, Jr., Joaquin L. San Agustin, Eduardo V. Francisco, Edmidio V. Ramos, Jr., Albert G. Blancaflor, Rey Nathaniel C. Ifurung, and Manuel H. Acosta, Jr. before the Regional Trial Court of Pasig City (RTC). CIAcSa

Valle Verde alleged that it held its annual meeting on February 23, 2013 for the purpose of electing its directors. However, the meeting was adjourned because only 248, out of 1,936, membership shares were represented in the annual meeting. It averred that the respondents still proceeded with the election and declared themselves as its directors and officers despite the adjournment of the meeting. Thus, it prayed that the respondents be permanently enjoined from misrepresenting themselves as its directors and officers. 3

In defense, the respondents claimed that the election was valid. They contended that the members and proxies who attended the meeting represented 1,003, out of the only 1,500, issued membership shares as reflected in Valle Verde's By-Laws. They also averred that the corporate secretary illegally disallowed 580 proxies which were solicited in an annual meeting dated September 29, 2012. They further disputed Valle Verde's assertion that there was an adjournment of the meeting. They maintained that the chairman and the corporate secretary merely left the meeting but did not declare its adjournment. They also posited that Valle Verde had no cause of action because the real parties-in-interest in this case were their opposing candidates in the election. 4

The RTC Ruling

In an order 5 dated May 28, 2013, the RTC dismissed the complaint for lack of cause of action. It held that the real parties-in-interest in the present case were the respondents' contenders because the complaint was essentially an election contest. It pointed out that the case involved the conflicting private interest of the candidates in the election of Valle Verde's directors and officers. It also declared that the complaint was filed beyond the reglementary period. Under Section 3, Rule 6 of the Interim Rules on Intra-Corporate Controversies, a complaint for election contest must be filed within fifteen days from the date of the election if the by-laws of the corporation do not provide for a procedure for resolution of the controversy, or within fifteen days from the resolution of the controversy by the corporation as provided in its by-laws. Thus, Valle Verde elevated the case to the CA, praying for the issuance of a writ of preliminary injunction to permanently enjoin the respondents from acting as its directors and officers. HEDCAS

The CA Ruling

In a decision dated September 18, 2013, the CA affirmed the RTC ruling. The CA denied Valle Verde's application for preliminary injunction on the ground that Valle Verde failed to show that it was entitled to the relief demanded. It agreed with the RTC that the respondents had no cause of action. It pointed out that the complaint was essentially an election contest for the reason that Valle Verde was seeking the respondents' ouster from their positions. It stated that an election contest encompasses controversies arising from the validation of proxies, as well as the manner and validity of the elections of corporate directors, pursuant to Section 2, Rule 6 of the Interim Rules on Intra-Corporate Controversies. Aggrieved, Valle Verde filed the present petition. 6

The Petition

In a petition before this Court, Valle Verde points out that it is not challenging the validity of proxies, but merely the respondents' unlawful misrepresentation of corporate office. It stresses that the election did not take place since the annual meeting was already adjourned prior to the respondents' declaration as winners in the "election." Consequently, its complaint is not an election contest as there were actually no winning candidates on February 23, 2013. It also argues that it is a real party-in-interest in this case because the respondents' misrepresentation causes confusion among its members and employees, and disrupts its operations.

Our Ruling

We find the petition unmeritorious.

Section 2, Rule 6 of the Interim Rules on Intra-Corporate Controversies defines an election contest as "any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stockholders in a close corporation or by members of a non-stock corporation where the article of incorporation or by-laws so provide."

The present complaint falls under the definition of election contest because it raises the issues of the validation of proxies, and the manner and validity of elections. Furthermore, a reading of Valle Verde's allegations, as well as its prayers in the complaint, shows that the complaint is essentially for the nullification of the election on the ground that the election was unlawfully conducted due to the adjournment of the meeting for lack of quorum. DaTICc

The determination of the validity of the proxies and of the manner and validity of elections is necessary in adjudicating whether the respondents are the lawful directors and officers of Valle Verde. Consequently, Valle Verde cannot claim that it did not raise these factual issues because no election was conducted last February 23, 2013 due to the adjournment of the meeting for lack of quorum. Valle Verde's assertion that there was no election is merely an effect of the declaration of the nullity of the election if the current petition would be found meritorious.

The factual issues raised relate to the rights of the opposing candidates of the respondents to vote and be voted for; 7 thus, the CA correctly ruled that Valle Verde has no cause of action. The lower courts also correctly ruled that Valle Verde is not the real party-in-interest in this case because a corporation does not have the right to vote; 8 the reliefs that Valle Verde prayed for in the complaint are for the benefit of the respondents' contenders. Thus, the present derivative suit is improper because the respondents' alleged wrongdoing was not caused to the corporation but to the respondents' contenders in the election.

WHEREFORE, premises considered, we DENY the petition sought for lack of any reversible error.

SO ORDERED. cITaCS

Very truly yours,

(SGD.) MA. LOURDES C. PERFECTODivision Clerk of Court

Footnotes

* Del Castillo, J., on official leave; Reyes, J., designated as Acting Member per Special Order No. 1564 dated October 11, 2013.

1. Dated October 4, 2013 and filed under Rule 45 of the Rules of Court; rollo, pp. 3-21.

2. Id. at 28-40; penned by Associate Justice Zenaida T. Galapate-Laguilles, and concurred in by Associate Justices Mariflor P. Punzalan Castillo and Melchor Quirino C. Sadang.

3. Id. at 115-143.

4. Id. at 125-147.

5. Id. at 41-44.

6. Supra note 2.

7. Legaspi Towers 300, Inc. v. Muer, G.R. No. 170783, June 18, 2012, 673 SCRA 453.

8. Id. at 467.