Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-29618 January 9, 1978
BISAYA LAND TRANSPORTATION CO., INC., MANUEL CUENCO, LOURDES CUENCO, JOSE P. VELEZ, FEDERICO A. REYES and JESUS P. VELEZ,
petitioners,
vs.
HON. FRANCISCO GERONIMO, as Presiding Judge of the Court of First Instance of Manila, Branch XII, and MIGUEL CUENCO, respondents.
Antonio Cuenco for petitioners.
Jose P. Bengzon and Bengzon, Villegas, Zarraga, Narciso & Cudala for private respondent.
CASTRO, C.J.:
The instant petition for certiorari seeks to annul the order of respondent judge, dated August 17, 1968, denying petitioners' motion to discharge the receiver of the Bisaya Land Transportation Co., Inc.
The facts pertinent to the action are as follows:
On March 21, 1959, the Republic of the Philippines, through the then Solicitor General Edilberto Barot, in the Court of First Instance of Manila, filed a petition for quo warranto, docketed as ;special Civil Case No. 39766, for the dissolution of Bisaya Land Transportation Company, a corporation organized on or about June 10, 1935, under Act No. 1459, otherwise known as the Corporation Law, for the principal purpose of engaging in the business of land and water transportation, with its domicile and principal place of business in Cebu City. The petition, after making proper allegations, also prayed for the appointment of a receiver.
Herein private respondent Miguel Cuenco (a co-respondent therein) filed his answer with a cross-claim against herein petitioners (respondents therein) praying that the same time for the appointment of a receiver without bond for the purpose or preserving the assets of respondent corporation. To said cross-claim, a motion to dismiss was flied by petitioners, the resolution of which was held in abeyance until after trial on the merits.
Prior to private respondent Miguel Cuenco's answer, a motion to dismiss the petition for quo warranto was filed by petitioners which was, however, denied; so that on September 25, 1959, they filed their answer to the petition for quo warranto. Also, on October 19, 1959, petitioners filed their answer to the cross-claim of Miguel Cuenco.
Thereafter, various incidents transpired, which for purposes of the present action, need not be mentioned.
On February 28, 1962, therein respondent Corporation filed a motion for judgment on consent manifesting its consent to and moving for judgment to be rendered ordering the demolition and liquidation of petitioner Bisaya Land Transportation Company, Inc. Private respondent Miguel Cuenco filed his answer agreeing to such judgment but urging the appointment of a receiver.
Subsequently. a motion to withdraw the motion for judgment on consent was filed by petitioners on May 27, 1963 which was objected to by private respondent Miguel Cuenco who pressed for the appointment of a receiver. This was, in turn, objected to by petitioner corporation.
On December 3, 1963, the motion to withdraw judgment on consent was denied by the lower court which, however, granted receivership after hearing. From this order, petitioner corporation riled a petition for certiorari with the Court of Appeals (CA-G.R. No. 33266-R), which issued an ex- parte writ of preliminary injunction enjoining the lower court from enforcing its order of Decembers 1963. On January 29, 1968, this Court, in G.R. No. L-23012, annulled all the proceedings in the Court of Appeals in CA-G.R. No. 33266-R, on the ground that the latter court had no jurisdiction over said case.
On October 20, 1966, the then Solicitor General Barredo (now Supreme Court Justice), filed a motion for dismissal of the quo warranto proceedings, to which motion private respondent Miguel Cuenco interposed an opposition. Notwithstanding this opposition, the court below issued a resolution dated April 3, 1968 granting the motion for the dismissal of the action for quo warranto, dismissing private respondent Miguel Cuenco's cross-claim; and ruling, with respect to the receivership, that
Once this order becomes final, the receiver is hereby ordered to render a complete accounting of his receivership to the Court within thirty days for the purpose of turning over the management of the corporation to its board of Directors.
Private respondent Miguel Cuenco appealed the resolution to this Court (docketed as G.R. No. L-31490) insofar as it granted the motion for dismissal of the quo warranto and dismissed his cross-claim.
After the perfection of that appeal, petitioners filed with the court below a motion to discharge receiver, allegedly under Section 4, Rule 39 of the Revised Rules of Court, concomitantly praying for the issuance of a writ of preliminary injunction to restrain the receiver from further continuing as such, to which an objection was raised by private respondent Miguel Cuenco. Petitioner replied thereto and on August 17, 1968, the trial judge denied said motion to discharge receiver. Dissatisfied, petitioners resorted to this Court for a writ of certiorari asking that the order of August 17, 1968. be annulled and that the lower court be ordered to discharge the receiver.
Petitioner rest their case on the following propositions: (1) Respondent judge's order of April 3, 1968 is a judgment in receivership action which is covered by Section 4, Rule 39 of the Revised Rules of Court which provides, "a ... judgment in a receivership action ... shall riot be stayed after its rendition or before an appeal is taken or during the pendency of an appeal," and receivership - being an ancillary or provisional remedy must perforce be discharged by the dismissal of the main action for quo warranto; (2) a full consideration of the motives of respondent Miguel Cuenco when he sought the appointment of a receiver would show that the continuous maintenance of the same would yield serious effects and consequences that will cause irreparable injury or injustice to the petitioners who are entitled to as much consideration as the private respondent Miguel Cuenco; (3) that the pleadings submitted in the lower court show the presence of adverse claim of petitioners to a greater portion of the assets in question, so that the constitution and continuous existence of the receivership although protective of the rights of herein respondent Miguel Cuenco would, on the other hand, cause disproportionate injury to the rights of herein petitioners; (4) that the findings of fraud made by the court a quo cannot bind the petitioners; and (5) the facts and circumstances of the case do not justify the maintenance of the receivership and the respondent judge, therefore, should have immediately ordered the termination of the same.
Private respondent Miguel Cuenco, in equally impressive arguments embodied in his very exhaustive memorandum, meets the above propositions, and asserts, in brief, that: (1) the motion to discharge receiver having been filed with the lower court after the perfection of the appeal, the court a quo had lost jurisdiction to entertain the same; (2) the appeal necessarily precluded the discharge of the receiver; (3) petitioners cannot execute the appealed resolution of April 3, 1968 by conveniently resorting to certiorari; (4) petitioners do not have any cause of action for certiorari in view of the fact that no motion for reconsideration had been previously filed by them with the court below; (5) the provisions of the Rules of Court cited by petitioners (Section 4, Rule 39) do not support their motion to discharge receiver but, on the contrary, is a legal ground for maintaining the receiver during the pendency of the appeal; (6) that the resolution of the lower court which has already been appealed cannot be amended partially during the pendency of the appeal by a recourse to certiorari, and (7) that irreparable injury will be inflicted upon the stockholders and the public, in general, if the receiver would be discharged. Quite irrelevantly, private respondent Miguel Cuenco also raises the issue of erroneous dismissal of the quo warranto case by the respondent judge.
Upon the above matters, these are, in brief, our conclusions:
The issues position by both parties relative to the propriety or impropriety of the appointment of the receiver in question as well as of the dismissal of the quo warranto case do not appear to be of first impression.
As mentioned earlier, the "Resolution" of April 3, 1968 was the subject of an appeal by private respondent Miguel Cuenco docketed as G.R. No. L- 31490, entitled "Republic of the Philippines, Petitioner-Appellee, versus Bisaya Land Transportation Co., Inc., et al., Respondents-Appellees. Miguel Cuenco, Respondent-Crossclaimant-Appellant." Although the appeal concerns the resolution only insofar as it granted the motion for the dismissal of the quo warranto action and dismissed private respondent Miguel Cuenco's cross-claim, facts, circumstances, and issues (except the technical and procedural points impleaded by the parties herein) similar to those of the instant petition were directly and indirectly exhibited, and this Court, after a careful, mature and extensive deliberation on the arguments brought forth by the parties, promulgated a Decision on January 6, 1978, the dispositive portion of which reads as follows:
ACCORDINGLY, without prejudice to the rights of the private parties herein to take proper steps to enforce whatever causes of action they may have against each other, the order of the lower court embodied in its 'Resolution dated April 3, 1968, granting the Solicitor General's motion to dismiss the quo warranto proceedings and dismissing appellant Miguel Cuenco's cross-claim, is hereby upheld; the receivership on the respondent corporation's property and assets is hereby ordered terminated, effective upon the lapse of thirty (30) days from the date of promulgation of this decision; and the receiver is directed to render, within three (3) months from the finality of this decision, a full and complete accounting to the Board of Directors of the respondent corporation. No costs.
The above decision is replete with pronouncements on the identical issues raised- the doctrines enunciated therein apply to the case at bar. We, therefore, find it unecessary to further discuss the questions herein raised on the circumstances that led to the appointment of the receiver and the dismissal of the quo warranto case.
More importantly, the instant petition is for the purpose of annulling the order of the respondent judge denying the petitioners' petition to discharge the receiver. In other words, it seeks the termination of the receivership. The decision adverted above, in bold relief, decrees the termination of the receivership of the petitioner corporation's assets and property effective upon the lapse of thirty (30) days from the date of the promulgation of the decision. With this, a determination of the merits of the instant petition has become purely moot and academic. As things now stand, the decision above adverted to sets firmly the entire core of the instant petition, and our jurisprudence does not countenance any further lengthy discussion, for it has been held, in a line of cases, that this Court will not decide purely academic questions 1 the other legal procedural and technical issues presented by both parties need not therefore occupy our attention.
ACCORDINGLY, the petition for certiorari is hereby dismissed. No costs.
Muñoz Palma, Martin, Fernandez and Guerrero, JJ., concur.
Makasiar, J., took no part.
Separate Opinions
TEEHANKEE, J., dissenting:
Since the decisions in these two are intertwined with L-29618 being declared moot as a result of the judgment in L-31490, this consolidated separate opinion for the two cases is herewith filed. The judgment in the main case L-31490 provides that
ACCORDINGLY, without prejudice to the rights of the private parties herein to take proper steps to enforce whatever causes of action they may have against each other, the order of the lower court embodied in its 'Resolution' dated April 3, 1968, granting the Solicitor general's motion to dismiss the quo 'warrant proceedings and dismissing appellant Miguel Cuenco's cross-claim, is hereby upheld; the receivership on the respondent corporation's property and assets is hereby ordered terminated, effective upon the lapse of thirty (30) days from the date of promulgation of this decision; and the receiver is directed to render, within three (3) months from the finality of this decision, a full and complete accounting to the Board of Directors of the respondent corporation. No costs.
And the judgment in the secondary case L-29618 accordingly dismissal the petition therein on the ground that its object of seeking an annulment of respondent judge's order denying therein petitioner's petition to discharge the receiver has been rendered moot and attained by the judgment in L-31490 which decrees precisely the termination of the receivership upon the lapse of 30 days from date of promulgation of the decision.
I am constrained to dissent from the majority which would sustain the lower court's Resolution dated April 3, 1968 abruptly terminating and setting at naught the and far advanced proceedings below (which had been commenced nine (9) years earlier on March 21, 1959) instead of finally settling and determining the intra-corporate dispute between the respondent stockholders and which would now in 1978 after nineteen (19) years leave them as they were and have them start all over again 'to take proper steps to enforce whatever causes of action they may have against each other," for the following reasons and considerations:
1. This is the fourth time in its 19-year pendency that the main case for dissolution of respondent corporation, Bisaya Land Transportation Co., Inc., by forcible forfeiture of its corporate franchise under the quo warranto proceedings instituted in 1959 by the Solicitor General on behalf of the Republic of the Philippines or by judgment on consent by motion of respondent corporation itself (filed in February, 1962 with the required 2/3 stockholders' vote) has reached this Court and been disposed of without a definitive conclusion of the case or a final adjudication of its merits. 1
The first time in 1960, respondents corporation and majority stockholders filed a petition for certiorari (L-16593) challenging the lower court's orders denying their motion to dismiss the State's quo warranto action and deferring resolution on their motion to dismiss Miguel Cuenco's cross-claim against them. On February 11, 1960, this Court dismissed the petition since the questioned orders were interlocutory and it was proper and in order that the lower Court hear and resolve the case on the merits.
Soon thereafter on February 23, 1960, the hearings in the case below began before a commissioner. Two years later on February 28, 1%2, respondent corporation (and its majority directors) filed a motion for judgment on consent ordering its own dissolution and directing that its board of directors proceed with the liquidation of its assets in accordance with law. The Solicitor General agreed to the rendition of such judgment on consent (since it was in accordance with the quo warranto petition seeking precisely the dissolution of the corporation), stating however that its implementation be submitted to the discretion of the lower court. Respondent Miguel Cuenco likewise agreed to the rendition of said judgment but urged that a receiver be appointed to wind up the affairs of the corporation and that judgment be rendered on his cross-claim against respondents majority directors to recover from them for the benefit of the corporation the aggregate sum of P4,336,701.19.
A year and three months thereafter, on May 27,1963, respondents majority directors now back-tracked and filed their motion to withdraw the motion for judgment on consent on the ground that the condition to which the motion was subject had not been accepted. Respondents corporation and majority directors for the second time elevated the case to this Court through a petition for prohibition (L-22097) this time questioning the alleged lack of jurisdiction of the lower court in Manila because of the corporation's domicile in Cebu. This Court again peremptorily dismissed the petition on November 15, 1963.
The lower court on December 3, 1963 denied the motion to withdraw the standing motion for judgment on consent and granted receivership as prayed for by Miguel Cuenco. Respondents corporation and majority stockholders this time filed petition for certiorari with the Court of Appeals which issued on January 15, 1964 an ex-parte writ of preliminary injunction and rendered on June 6, 1964 its decision annulling the lower court's receivership order. The main case reached this Court for the third time. Upon petition for certiorari (L-23013) filed in turn on June 3, 196.4 by Miguel Cuenco assailing the Court of Appeals' lack of jurisdiction over the case by virtue of his cross-claim for over P4-million (since at the Court of Appeals' jurisdiction was limited to cases where the value in controversy did not exceed P200,000.00) this Court issued a writ of preliminary injunction commanding the Court of Appeals to desist from enforcing its preliminary injunction against the receivership order of the lower court. This Court rendered judgment on January 29, 1968 annulling all the proceedings in the Court of Appeals for lack of jurisdiction and declaring as "clearly untenanble" respondents' contention "that the jurisdiction of the appellate court should be determined by the allegations of the [Republic's] petition for quo warranto, which is incapable of pecuniary estimation, and that a cross- claim Miguel Cuenco's] is improper in quo warranto proceedings." 2
This Court rendered its said decision of January 29, 1968 declaring the proceedings in the Court of Appeals as 'null and void ab initio" for lack of jurisdiction precisely by virtue of Miguel Cuenco's cross-claim on behalf of the corporation against respondents majority directors for over P4-million on behalf of the corporation after then Solicitor General (who was appointed and assumed office in early 1966, now Associate Justice of this Court) Barredo filed on October 20, 1966 the motion for dismissal of the quo warranto proceedings subject matter of the present main case (L-31490) and after the Solicitor General on behalf of the Republic and the respondent corporation had filed with the lower court a motion for judgment based on a 64 "compromise" between them, whereby
a. respondent corporation be ordered to amend within six (6) months its articles of incorporation so as to exclude from its purpose clause the operation of lumber concessions, cattle ranch, agricultural lands, and a general merchandise store;
b. respondent corporation be ordered to sell or otherwise dispose of within six (6) months its cattle ranch;
c. respondent corporation be authorized to continue serving the public in the field of public transportation only and to post such bond as the appropriate court may require to secure and protect whatever rights or claims any complaining stockholder, including Miguel Cuenco, may have against the corporation,2*
which this Cart as not being relevant to the issues and which compromise at any rate now appears to have been and aborted with the Republics motion for outright dismissal of the quo warranto proceedings, as precipitately granted by the lower court in its Resolution of April 3, 1968 notwithstanding this Court's decision just two months earlier upholding its action sustaining the dissolution and granting receivership.
2. Given the foregoing antecedents with this very Court in three cases between 1960 and 1968 having cleared the way for the main case below to be heard and adjudicated on the merits, (during which time then Solicitor General 's in office had successfully instituted and maintained on behalf of the Republic the quo warranto against respondent corporation), the advanced state of the and the volume of the evidence proffered and the long pendency of the case, and the demands of public policy and public interest that there be a definitive end to litigation and that the courts of justice discharge their main role which is to assist in the enforcement of the rule of law and the maintenance peace and order by settling judicial controversies with finality 3
the case at bar presents a manifest exception to the general power of the Solicitor General to control and discontinue a litigation on behalf of the State. From the controlling jurisprudence cited in the main opinion 4
it is evident that such discontinuance and dismissal of an action may be sanctioned only "when (a) it clearly appears that there is no longer a necessity therefor, or (b) when it clearly appears that to continue the action, the result would be prejudicial to the interests of the public." Here the contrary quite clearly is the case since the imperatives of public policy and public interest call for the continuation and termination of the case on its merits.
3. Prescinding from the foregoing, no plausible justification has been given why the lower court should not have (as urged by appellant Miguel Cuenco) granted respondent corporation's motion for judgment on consent and rendered judgment for its dissolution on the strength of its own motion consenting to and praying for such judgment of dissolution which furthermore was formally agreed to by the Solicitor General on behalf of the Republic as the petitioner in quo warranto which had been instituted precisely to effect such dissolution.
The lower court had in effect and in substance actually granted respondent corporation's motion for judgment ordering its dissolution on its own consent when on December 3, 1963 the lower court denied the motion seeking to withdraw the motion for judgment on consent on the ground that the conditions to which the motion was subject had not been accepted and instead granted receivership as prayed for by Miguel Cuenco (when he formally manifested also his agreement to the rendition of such judgment for dissolution on consent) in consonance with Rule 66, 13 that "Appointment of receiver when corporation dissolved. — The court rendering judgment dissolving a corporation shall appoint a receiver of all its assets who shall proceed to administer the same in administer the same in accordance with the provisions of Rule 59." All that was really lacking was the lower court's formal judgment for dissolution of the corporation on the strength of its own motion for such dissolution by consent.
4. This Court in the 1968 case of Cuenco vs. Court of Appeals 5 and sustained the lower court's action of denying respondents' motion to withdraw their motion for judgment on consent and of granting instead a receivership against respondent corporation when it rendered judgment upholding the receivership and making permanent the preliminary injunction against the Court of Appeals' writ and decision to the contrary and expressly denied respondent corporation's motions directly filed with this Court for an injunction against the receivership and for the dismissal of Miguel Cuenco's petition. 6
It should be noted that respondent corporation's ground for seeking the dismissal of Miguel Cuenco's petition for certiorari against the Court of Appeals' decision was that it and the Republic had riled with the lower court a motion for judgment on compromise, supra. 7 This motion for judgment on compromise, although aborted by the Republic's abrupt motion for dismissal in October, 1966 is significant in that
(a) It bears out certain of the Republic's causes of action for seeking respondent corporation's dissolution such that the corporation would be ordered to amend its articles of incorporation so as to exclude from its purpose certain activities objected to by the Republic and likewise ordered to sell or dispose of its cattle ranch (which was in conflict with its charter as a public transportation company);
(b) The corporation would be permitted to continue operating in the field of public transportation only; and
(c) The cross-claim of Miguel Cuenco was recognized and the corporation would post a bond to protect his rights and claims and those of any other complaining stockholders.
With these facts, it is difficult to justify the lower court's findings in granting the abrupt and summary dismissal of the main case below at the Solicitor General's motion in October, 1966 "that the several acts of misuse and misapplication of the funds and/or assets of the Bisaya Land Transportation Co., Inc. were committed more particularly by the respondent Dr. Manuel Cuenco with the cooperation of Jose P. Velez [being majority directors] for the commission of which they may be personally held liable 8 and 'that rather than public interest the personal interests of both Manuel Cuenco and Mr. Miguel Cuenco are principally involved in this controversy" as sustained by the main opinion — when the Republic's petition for quo warranto specified nine (9) causes of action whose sufficiency had been upheld both by the lower court and this Court which dismissed summarily respondents' petition in the first case in 1960 (L-16593) questioning the lower court, denial of their motion to dismiss the State's quo warranto action for dissolution of the corporation and the cited motion for judgment on compromise brought out the truth of several of the charges.
Furthermore, it is axiomatic that a corporation can only act through its officials and majority directors and their misuse and misapplication of corporate funds with the acquaintance of the majority do not make it a mere matter of personal conflict and interest with the complaining stockholder, for the State's interest is the public one of seeing to it that the corporation's charter as granted by the State through the Corporation Law is not violated. At any rate, even if the trial court were disposed to, as it did, grant the Solicitor general's October, 1966 motion for dismissal of the quo warranto action on April 3, 1968 notwithstanding that this Court had once again upheld in its January 29, 1968 decision the proceedings below and the receivership granted by it, it should nevertheless have at least rendered judgment that the corporation be ousted from the continuance of offenses and the exercise of any power usurped by it as brought out in the motion for compromise, as required by Rule 66, section 12. 9
5. The main opinion advances as justification for upholding the lower court's failure to render judgment dissolving the corporation on the strength of its own motion for such judgment on consent is that "there was no meeting of minds among the parties hereto with respect to the motion for judgment on consent filed by appellee corporation ration and agreed to by petitioner appellee [the Republic]. 10
This is based on a misconception, since the protagonists and principal parties insofar as the quo warranto action is concerned were and are exclusively the appellee (respondent) corporation Bisaya Land Transportation Co., Inc. whose dissolution was sought by the Republic in its petition below and who had moved and prayed for judgment on cement for its own dissolution and the appellee (petitioner) Republic which had admittedly formally expressed its agreement thereto.
Miguel Cuenco was not even an indispensable or necessary party insofar as the quo warranto action for dissolution of the corporation under Rule 66, section 2 is concerned. The Rule provides that the action shill be brought against the corporation alone. Miguel Cuenco was impleaded by the State only as co-respondent together with the other respondents majority officials and majority directors-stockholders who according to the State's petition had conspired and confabulated to violate the corporation's charter such as to warrant its forcible dissolution. That Miguel Cuenco in agreeing to respondents' motion for judgment on consent urged that a receiver be appointed and that judgment be rendered on his cross-claim 11 was immaterial and irrelevant. since strictly speaking, he was not even a party to the quo warranto action which had been brought solely by the Republic.
The point is that since there was plain and formal agreement between petitioner Republic and respondent corporation for the rendition of judgment for the corporation's dissolution upon its own motion and prayer, there was no legal ground whatsoever for its withdrawal (as in fact this Court sustained the lower court's denial of the motion to withdraw) nor for the lower court's failure to grant respondents' motion for judgment on consent and accordingly to order dissolution of respondent corporation.
As to respondent corporation's prayer that its dissolution be effected by its board of directors, suffice it to point out that section 13 of Rule 66, supra, 12 mandates that upon a judgment of dissolution, a receiver (not the board of directors whose members would be subject to conflict of interests) shall be appointed to administer the corporate assets in accordance with Rule 59 on receivers.
6. On the crucial point invoked by Miguel Cuenco that at the stage of the proceedings in 1966 (nine (9) years after the firing of the quo warranto action by the State) the Solicitor General could not abruptly move for the summary dismissal of the case over his objection as cross-claimant against his co-respondents majority directors for the recovery of over P4 million for the benefit of respondent corporation unless his cross-claim could remain pending for independent adjudication by the court under the provisions of Rule 17, sections 2 and 4, the crucial question is assuming that despite all the foregoing considerations, the Republic could nevertheless insist on the dismissal of the quo warranto action on the premise accepted in the main opinion that
The Solicitor General himself asserts that the only purpose of his motion for dismissal of this quo warranto is to take the State out of an unnecessary court litigation so that the dismissal of the case would result in the disposition solely of quo warranto by and between petitioner Republic of the Philippines and the respondents named therein. Other interested parties who might feel aggrieved, therefore, would not be without their remedies since they can still maintain whatever claims they may have against each other. 13
was it not grave error for the lower court to dismiss Miguel Cuenco's cross- claim together with its dismissal of the quo warranto?
This was manifestly a grave error. In consonance with the Solicitor General's above-quoted stand that he merely wanted to 'take the State out of an unnecessary litigation" leaving the parties free to "maintain whatever claims they may have against each other," the cross-claim of Miguel Cuenco should not be dismissed but left pending for independent adjudication by the courts.
This is expressly sanctioned by Rule 17, section 2 and 4, with -section 2 further expressly providing that once the answers to the complaint or petition are filed (and more so when the hearings ever a period of years are far advanced) "an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon which terms and conditions as the court deems proper." The Rule precisely sanctions that the Court impose terms and conditions for the dismissal of plaintiff's suit, viz in this ease that Miguel Cuencos cross- claim against the majority directors stockholders for the benefit of respondent corporation be maintained for independent adjudication.
Manifestly, as already indicated above, it is but to serve the demands of public policy and public interest that the cross-claim subsist notwithstanding dismissal of the quo warranto and be finally and definitively adjudicated, rather than to have the parties start now all over again after nineteen (19) years and set at naught all the time and great effort and expense incurred by them in the prosecution of the case below.
As succinctly stressed previously by this Court in the 1968 case of Cuenco vs. Court of Appeals. supra, in sustaining the lower court's denial of respondents' motion to dismiss Miguel Cuenco's cross-claim and upholding its receivership order issued pursuant to Miguel Cuenco's cross-claim, "after due hearing on the merits of the petition and the cross-claim, the trial court would have to render. therefore, a decision on both. In doing so, it may dismiss the cross-claim in its entirety, or render judgment for the cross-claimant, either for the full amount of the cross-claim, or for part thereof. In either case, the party adversely affected by the decision may appeal therefrom. There can be no doubt that such appeal would be within the exclusive jurisdiction, not of the Court of Appeals, but of the Supreme Court. And such would be the case, regardless of whether the cross-claim was properly filed in the trial court or not." 14
Under these circumstances, how could the "dismissal of the main action ... only benefit the cross-claimant and not result in any prejudice or disadvantage to him" as stated in the main opinion? 15
7. Finally, if it be conceded as shown by the record that the Republic and respondent corporation as the protagonists in the quo warranto proceeding below had expressly agreed that judgment for the corporation's dissolution be rendered on the basis of the corporation's own motion for such judgment on consent, the lower court should be ordered to enter such judgment and Miguel Cuenco's cross-claim for the benefit of respondent corporation must necessarily be maintained and likewise adjudged since any recovery thereon would have to be taken into account in the process of dissolution of the corporation.
On the other hand, even if the dismissal of the quo warranto at the Solicitor General's October, 1966 motion were upheld notwithstanding the above-cited imperatives of public policy and public interest to the contrary, Miguel Cuenco's cross-claim should nevertheless be continued and maintained for final adjudication on the merits for the benefit of all the litigants (who are entitled to know where they finally stand) rather than compel them to start all over again after 19 years at great and needless expense when the proceedings thereon in the lower court are already far advanced. This would be but to uphold the very raison d' etre of the courts to settle and determine litigations with fairness and finality and with the least expense and delay.
Separate Opinions
TEEHANKEE, J., dissenting
Since the decisions in these two are intertwined with L-29618 being declared moot as a result of the judgment in L-31490, this consolidated separate opinion for the two cases is herewith filed. The judgment in the main case L-31490 provides that
ACCORDINGLY, without prejudice to the rights of the private parties herein to take proper steps to enforce whatever causes of action they may have against each other, the order of the lower court embodied in its 'Resolution' dated April 3, 1968, granting the Solicitor general's motion to dismiss the quo 'warrant proceedings and dismissing appellant Miguel Cuenco's cross-claim, is hereby upheld; the receivership on the respondent corporation's property and assets is hereby ordered terminated, effective upon the lapse of thirty (30) days from the date of promulgation of this decision; and the receiver is directed to render, within three (3) months from the finality of this decision, a full and complete accounting to the Board of Directors of the respondent corporation. No costs.
And the judgment in the secondary case L-29618 accordingly dismissal the petition therein on the ground that its object of seeking an annulment of respondent judge's order denying therein petitioner's petition to discharge the receiver has been rendered moot and attained by the judgment in L-31490 which decrees precisely the termination of the receivership upon the lapse of 30 days from date of promulgation of the decision.
I am constrained to dissent from the majority which would sustain the lower court's Resolution dated April 3, 1968 abruptly terminating and setting at naught the and far advanced proceedings below (which had been commenced nine (9) years earlier on March 21, 1959) instead of finally settling and determining the intra-corporate dispute between the respondent stockholders and which would now in 1978 after nineteen (19) years leave them as they were and have them start all over again 'to take proper steps to enforce whatever causes of action they may have against each other," for the following reasons and considerations:
1. This is the fourth time in its 19-year pendency that the main case for dissolution of respondent corporation, Bisaya Land Transportation Co., Inc., by forcible forfeiture of its corporate franchise under the quo warranto proceedings instituted in 1959 by the Solicitor General on behalf of the Republic of the Philippines or by judgment on consent by motion of respondent corporation itself (filed in February, 1962 with the required 2/3 stockholders' vote) has reached this Court and been disposed of without a definitive conclusion of the case or a final adjudication of its merits. 1
The first time in 1960, respondents corporation and majority stockholders filed a petition for certiorari (L-16593) challenging the lower court's orders denying their motion to dismiss the State's quo warranto action and deferring resolution on their motion to dismiss Miguel Cuenco's cross-claim against them. On February 11, 1960, this Court dismissed the petition since the questioned orders were interlocutory and it was proper and in order that the lower Court hear and resolve the case on the merits.
Soon thereafter on February 23, 1960, the hearings in the case below began before a commissioner. Two years later on February 28, 1%2, respondent corporation (and its majority directors) filed a motion for judgment on consent ordering its own dissolution and directing that its board of directors proceed with the liquidation of its assets in accordance with law. The Solicitor General agreed to the rendition of such judgment on consent (since it was in accordance with the quo warranto petition seeking precisely the dissolution of the corporation), stating however that its implementation be submitted to the discretion of the lower court. Respondent Miguel Cuenco likewise agreed to the rendition of said judgment but urged that a receiver be appointed to wind up the affairs of the corporation and that judgment be rendered on his cross-claim against respondents majority directors to recover from them for the benefit of the corporation the aggregate sum of P4,336,701.19.
A year and three months thereafter, on May 27,1963, respondents majority directors now back-tracked and filed their motion to withdraw the motion for judgment on consent on the ground that the condition to which the motion was subject had not been accepted. Respondents corporation and majority directors for the second time elevated the case to this Court through a petition for prohibition (L-22097) this time questioning the alleged lack of jurisdiction of the lower court in Manila because of the corporation's domicile in Cebu. This Court again peremptorily dismissed the petition on November 15, 1963.
The lower court on December 3, 1963 denied the motion to withdraw the standing motion for judgment on consent and granted receivership as prayed for by Miguel Cuenco. Respondents corporation and majority stockholders this time filed petition for certiorari with the Court of Appeals which issued on January 15, 1964 an ex-parte writ of preliminary injunction and rendered on June 6, 1964 its decision annulling the lower court's receivership order. The main case reached this Court for the third time. Upon petition for certiorari (L-23013) filed in turn on June 3, 196.4 by Miguel Cuenco assailing the Court of Appeals' lack of jurisdiction over the case by virtue of his cross-claim for over P4-million (since at the Court of Appeals' jurisdiction was limited to cases where the value in controversy did not exceed P200,000.00) this Court issued a writ of preliminary injunction commanding the Court of Appeals to desist from enforcing its preliminary injunction against the receivership order of the lower court. This Court rendered judgment on January 29, 1968 annulling all the proceedings in the Court of Appeals for lack of jurisdiction and declaring as "clearly untenanble" respondents' contention "that the jurisdiction of the appellate court should be determined by the allegations of the [Republic's] petition for quo warranto, which is incapable of pecuniary estimation, and that a cross- claim Miguel Cuenco's] is improper in quo warranto proceedings." 2
This Court rendered its said decision of January 29, 1968 declaring the proceedings in the Court of Appeals as 'null and void ab initio" for lack of jurisdiction precisely by virtue of Miguel Cuenco's cross-claim on behalf of the corporation against respondents majority directors for over P4-million on behalf of the corporation after then Solicitor General (who was appointed and assumed office in early 1966, now Associate Justice of this Court) Barredo filed on October 20, 1966 the motion for dismissal of the quo warranto proceedings subject matter of the present main case (L-31490) and after the Solicitor General on behalf of the Republic and the respondent corporation had filed with the lower court a motion for judgment based on a 64 "compromise" between them, whereby
a. respondent corporation be ordered to amend within six (6) months its articles of incorporation so as to exclude from its purpose clause the operation of lumber concessions, cattle ranch, agricultural lands, and a general merchandise store;
b. respondent corporation be ordered to sell or otherwise dispose of within six (6) months its cattle ranch;
c. respondent corporation be authorized to continue serving the public in the field of public transportation only and to post such bond as the appropriate court may require to secure and protect whatever rights or claims any complaining stockholder, including Miguel Cuenco, may have against the corporation,2*
which this Cart as not being relevant to the issues and which compromise at any rate now appears to have been and aborted with the Republics motion for outright dismissal of the quo warranto proceedings, as precipitately granted by the lower court in its Resolution of April 3, 1968 notwithstanding this Court's decision just two months earlier upholding its action sustaining the dissolution and granting receivership.
2. Given the foregoing antecedents with this very Court in three cases between 1960 and 1968 having cleared the way for the main case below to be heard and adjudicated on the merits, (during which time then Solicitor General 's in office had successfully instituted and maintained on behalf of the Republic the quo warranto against respondent corporation), the advanced state of the and the volume of the evidence proffered and the long pendency of the case, and the demands of public policy and public interest that there be a definitive end to litigation and that the courts of justice discharge their main role which is to assist in the enforcement of the rule of law and the maintenance peace and order by settling judicial controversies with finality 3
the case at bar presents a manifest exception to the general power of the Solicitor General to control and discontinue a litigation on behalf of the State. From the controlling jurisprudence cited in the main opinion 4
it is evident that such discontinuance and dismissal of an action may be sanctioned only "when (a) it clearly appears that there is no longer a necessity therefor, or (b) when it clearly appears that to continue the action, the result would be prejudicial to the interests of the public." Here the contrary quite clearly is the case since the imperatives of public policy and public interest call for the continuation and termination of the case on its merits.
3. Prescinding from the foregoing, no plausible justification has been given why the lower court should not have (as urged by appellant Miguel Cuenco) granted respondent corporation's motion for judgment on consent and rendered judgment for its dissolution on the strength of its own motion consenting to and praying for such judgment of dissolution which furthermore was formally agreed to by the Solicitor General on behalf of the Republic as the petitioner in quo warranto which had been instituted precisely to effect such dissolution.
The lower court had in effect and in substance actually granted respondent corporation's motion for judgment ordering its dissolution on its own consent when on December 3, 1963 the lower court denied the motion seeking to withdraw the motion for judgment on consent on the ground that the conditions to which the motion was subject had not been accepted and instead granted receivership as prayed for by Miguel Cuenco (when he formally manifested also his agreement to the rendition of such judgment for dissolution on consent) in consonance with Rule 66, 13 that "Appointment of receiver when corporation dissolved. - The court rendering judgment dissolving a corporation shall appoint a receiver of all its assets who shall proceed to administer the same in administer the same in accordance with the provisions of Rule 59." All that was really lacking was the lower court's formal judgment for dissolution of the corporation on the strength of its own motion for such dissolution by consent.
4. This Court in the 1968 case of Cuenco vs. Court of Appeals 5 and sustained the lower court's action of denying respondents' motion to withdraw their motion for judgment on consent and of granting instead a receivership against respondent corporation when it rendered judgment upholding the receivership and making permanent the preliminary injunction against the Court of Appeals' writ and decision to the contrary and expressly denied respondent corporation's motions directly filed with this Court for an injunction against the receivership and for the dismissal of Miguel Cuenco's petition. 6
It should be noted that respondent corporation's ground for seeking the dismissal of Miguel Cuenco's petition for certiorari against the Court of Appeals' decision was that it and the Republic had riled with the lower court a motion for judgment on compromise, supra. 7 This motion for judgment on compromise, although aborted by the Republic's abrupt motion for dismissal in October, 1966 is significant in that
(a) It bears out certain of the Republic's causes of action for seeking respondent corporation's dissolution such that the corporation would be ordered to amend its articles of incorporation so as to exclude from its purpose certain activities objected to by the Republic and likewise ordered to sell or dispose of its cattle ranch (which was in conflict with its charter as a public transportation company);
(b) The corporation would be permitted to continue operating in the field of public transportation only; and
(c) The cross-claim of Miguel Cuenco was recognized and the corporation would post a bond to protect his rights and claims and those of any other complaining stockholders.
With these facts, it is difficult to justify the lower court's findings in granting the abrupt and summary dismissal of the main case below at the Solicitor General's motion in October, 1966 "that the several acts of misuse and misapplication of the funds and/or assets of the Bisaya Land Transportation Co., Inc. were committed more particularly by the respondent Dr. Manuel Cuenco with the cooperation of Jose P. Velez [being majority directors] for the commission of which they may be personally held liable 8 and 'that rather than public interest the personal interests of both Manuel Cuenco and Mr. Miguel Cuenco are principally involved in this controversy" as sustained by the main opinion — when the Republic's petition for quo warranto specified nine (9) causes of action whose sufficiency had been upheld both by the lower court and this Court which dismissed summarily respondents' petition in the first case in 1960 (L-16593) questioning the lower court, denial of their motion to dismiss the State's quo warranto action for dissolution of the corporation and the cited motion for judgment on compromise brought out the truth of several of the charges.
Furthermore, it is axiomatic that a corporation can only act through its officials and majority directors and their misuse and misapplication of corporate funds with the acquaintance of the majority do not make it a mere matter of personal conflict and interest with the complaining stockholder, for the State's interest is the public one of seeing to it that the corporation's charter as granted by the State through the Corporation Law is not violated. At any rate, even if the trial court were disposed to, as it did, grant the Solicitor general's October, 1966 motion for dismissal of the quo warranto action on April 3, 1968 notwithstanding that this Court had once again upheld in its January 29, 1968 decision the proceedings below and the receivership granted by it, it should nevertheless have at least rendered judgment that the corporation be ousted from the continuance of offenses and the exercise of any power usurped by it as brought out in the motion for compromise, as required by Rule 66, section 12. 9
5. The main opinion advances as justification for upholding the lower court's failure to render judgment dissolving the corporation on the strength of its own motion for such judgment on consent is that "there was no meeting of minds among the parties hereto with respect to the motion for judgment on consent filed by appellee corporation ration and agreed to by petitioner appellee [the Republic]. 10
This is based on a misconception, since the protagonists and principal parties insofar as the quo warranto action is concerned were and are exclusively the appellee (respondent) corporation Bisaya Land Transportation Co., Inc. whose dissolution was sought by the Republic in its petition below and who had moved and prayed for judgment on cement for its own dissolution and the appellee (petitioner) Republic which had admittedly formally expressed its agreement thereto.
Miguel Cuenco was not even an indispensable or necessary party insofar as the quo warranto action for dissolution of the corporation under Rule 66, section 2 is concerned. The Rule provides that the action shill be brought against the corporation alone. Miguel Cuenco was impleaded by the State only as co-respondent together with the other respondents majority officials and majority directors-stockholders who according to the State's petition had conspired and confabulated to violate the corporation's charter such as to warrant its forcible dissolution. That Miguel Cuenco in agreeing to respondents' motion for judgment on consent urged that a receiver be appointed and that judgment be rendered on his cross-claim 11 was immaterial and irrelevant. since strictly speaking, he was not even a party to the quo warranto action which had been brought solely by the Republic.
The point is that since there was plain and formal agreement between petitioner Republic and respondent corporation for the rendition of judgment for the corporation's dissolution upon its own motion and prayer, there was no legal ground whatsoever for its withdrawal (as in fact this Court sustained the lower court's denial of the motion to withdraw) nor for the lower court's failure to grant respondents' motion for judgment on consent and accordingly to order dissolution of respondent corporation.
As to respondent corporation's prayer that its dissolution be effected by its board of directors, suffice it to point out that section 13 of Rule 66, supra, 12 mandates that upon a judgment of dissolution, a receiver (not the board of directors whose members would be subject to conflict of interests) shall be appointed to administer the corporate assets in accordance with Rule 59 on receivers.
6. On the crucial point invoked by Miguel Cuenco that at the stage of the proceedings in 1966 (nine (9) years after the firing of the quo warranto action by the State) the Solicitor General could not abruptly move for the summary dismissal of the case over his objection as cross-claimant against his co-respondents majority directors for the recovery of over P4 million for the benefit of respondent corporation unless his cross-claim could remain pending for independent adjudication by the court under the provisions of Rule 17, sections 2 and 4, the crucial question is assuming that despite all the foregoing considerations, the Republic could nevertheless insist on the dismissal of the quo warranto action on the premise accepted in the main opinion that
The Solicitor General himself asserts that the only purpose of his motion for dismissal of this quo warranto is to take the State out of an unnecessary court litigation so that the dismissal of the case would result in the disposition solely of quo warranto by and between petitioner Republic of the Philippines and the respondents named therein. Other interested parties who might feel aggrieved, therefore, would not be without their remedies since they can still maintain whatever claims they may have against each other. 13
was it not grave error for the lower court to dismiss Miguel Cuenco's cross- claim together with its dismissal of the quo warranto?
This was manifestly a grave error. In consonance with the Solicitor General's above-quoted stand that he merely wanted to 'take the State out of an unnecessary litigation" leaving the parties free to "maintain whatever claims they may have against each other," the cross-claim of Miguel Cuenco should not be dismissed but left pending for independent adjudication by the courts.
This is expressly sanctioned by Rule 17, section 2 and 4, with section 2 further expressly providing that once the answers to the complaint or petition are filed (and more so when the hearings ever a period of years are far advanced) "an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon which terms and conditions as the court deems proper." The Rule precisely sanctions that the Court impose terms and conditions for the dismissal of plaintiff's suit, viz in this ease that Miguel Cuencos cross- claim against the majority directors stockholders for the benefit of respondent corporation be maintained for independent adjudication.
Manifestly, as already indicated above, it is but to serve the demands of public policy and public interest that the cross-claim subsist notwithstanding dismissal of the quo warranto and be finally and definitively adjudicated, rather than to have the parties start now all over again after nineteen (19) years and set at naught all the time and great effort and expense incurred by them in the prosecution of the case below.
As succinctly stressed previously by this Court in the 1968 case of Cuenco vs. Court of Appeals. supra, in sustaining the lower court's denial of respondents' motion to dismiss Miguel Cuenco's cross-claim and upholding its receivership order issued pursuant to Miguel Cuenco's cross-claim, "after due hearing on the merits of the petition and the cross-claim, the trial court would have to render. therefore, a decision on both. In doing so, it may dismiss the cross-claim in its entirety, or render judgment for the cross-claimant, either for the full amount of the cross-claim, or for part thereof. In either case, the party adversely affected by the decision may appeal therefrom. There can be no doubt that such appeal would be within the exclusive jurisdiction, not of the Court of Appeals, but of the Supreme Court. And such would be the case, regardless of whether the cross-claim was properly filed in the trial court or not." 14
Under these circumstances, how could the "dismissal of the main action ... only benefit the cross-claimant and not result in any prejudice or disadvantage to him" as stated in the main opinion? 15
7. Finally, if it be conceded as shown by the record that the Republic and respondent corporation as the protagonists in the quo warranto proceeding below had expressly agreed that judgment for the corporation's dissolution be rendered on the basis of the corporation's own motion for such judgment on consent, the lower court should be ordered to enter such judgment and Miguel Cuenco's cross-claim for the benefit of respondent corporation must necessarily be maintained and likewise adjudged since any recovery thereon would have to be taken into account in the process of dissolution of the corporation.
On the other hand, even if the dismissal of the quo warranto at the Solicitor General's October, 1966 motion were upheld notwithstanding the above-cited imperatives of public policy and public interest to the contrary, Miguel Cuenco's cross-claim should nevertheless be continued and maintained for final adjudication on the merits for the benefit of all the litigants (who are entitled to know where they finally stand) rather than compel them to start all over again after 19 years at great and needless expense when the proceedings thereon in the lower court are already far advanced. This would be but to uphold the very raison d' etre of the courts to settle and determine litigations with fairness and finality and with the least expense and delay.
Footnotes
1 Meralco Workers Union vs. Yatco, L-19785, January 30, 1967, 19 SCRA 177; Cruz vs. Encarnacion, 91 Phil, 868, 875; Castro vs. Tan, 100 Phil. 911, 912-913; Nierras vs. Po, February 22, 1957, L-10878, Unreported, 100 Phil. 1079; Perez vs. Court of Tax Appeals, 101 Phil. 630, 635; Roxas vs. Rodriguez, September 18, 1957, L-8927, Unreported, 102 Phil. 1155; Henderson Trippe Shipping Co. vs. Reyes, May 28, 1958, L-11763, Unreported, 103 Phil. 1164; National Labor Unit vs. Northern Motors, Inc., July 31, 1958, L-10021, Unreported, 104 Phil. 1049.
Teehankee, J.
1 The background facts are mostly culled from the main opinion and supplemented by this Court's own narration in the previous case of Cuenco vs. Court of Appeals, 22 SCRA 257 (1968).
For the sake of clarity, the parties are referred to in their respectively capacities in the quo warranto action below. Hence, the corporation Bisaya Land Transportation Co., Inc. is referred to as respondent corporation; its principal co-respondents as respondent majority directors, and the minority director simply as Miguel Cuenco, and the petition Republic of the Philippines as represented by the Solicitor General simply as the Republic or the State.
2 Cuenco vs. Court of Appeals, L-23012, 22 SCRA 257, 264, per Concepcion, C.J.
2* Emphasis supplied.
3 Calvez vs. PLDT, 3 SCRA 418, 423, Oct. 31, 1961, Concepcion, J. quoted in Dy Pac workers Union v. Dy Pac & Co., Inc., 38 SCRA 263, 269, Mar. 31, 1971, per Castro, J.
4 City of Manila vs. Ruymann, 37 Phil. 421; Metropolitan Voter District vs. De los Angeles, 55 Phil. 776, cited on pp. 14-15 of the main opinion.
5 Supra, see fns. 1 and 2.
6 The dispositive portion of this Court's decision reads:
WHEREFORE, the motions of Bisaya for a writ of preliminary injunction, for dismissal of the present case and for the elevation to this Court of the records of the Court of Appeals in CA-G.R. No. 33266-R are hereby denied, and the writ of preliminary injunction and the aforementioned decision in said case are, accordingly, annulled. The writ of preliminary injunction, issued by this Court is hereby made permanent, with costs against herein respondents, excluding the Court of Appeals. it is so ordered." (22 SCRA at page 266)
7 At page 4 hereof.
8 At page 11 thereof; emphasis supplied.
9 The pertinent portion of the Rule reads: "Sec. 12. ... When it is found that the corporation has offended in a matter or manner which does not by law work as a surrender or forfeiture' judgment shall be rendered that it be ousted from the continuance of such offense and the exercise of any power usurped by it. (Rule 66)
10 Main opinion, at page 10, emphasis supplied.
11 Manila opinion, page 7.
12 At page 6 hereof.
13 Main opinion, at page 13.
14 29 SCRA at pages 265-266,
15 At page 19.
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