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DESCRIPTION
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THIRD DIVISION
ANA MARIA A. KORUGA,Petitioner,
- versus -
TEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO, FRANCISCO A. RIVERA, and THE HONORABLE COURT OF APPEALS, THIRD DIVISION,
Respondents.x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xTEODORO O. ARCENAS, JR., ALBERT C. AGUIRRE, CESAR S. PAGUIO, and FRANCISCO A. RIVERA,
Petitioners,
- versus -
HON. SIXTO MARELLA, JR., Presiding Judge, Branch 138, Regional Trial Courtof Makati City, and ANA MARIA A. KORUGA,
Respondents.
G.R. No. 168332
G.R. No. 169053
Present:
YNARES-SANTIAGO, J., Chairperson,CARPIO,*
CORONA,**
NACHURA, andPERALTA, JJ.
Promulgated:
June 19, 2009
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before this Court are two petitions that originated from a Complaint filed by
Ana Maria A. Koruga (Koruga) before the Regional Trial Court (RTC) of Makati City against the Board of Directors of Banco Filipino and the Members of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) for violation of the Corporation Code, for inspection of records of a corporation by a stockholder, for receivership, and for the creation of a management committee. G.R. No. 168332
The first is a Petition for Certiorari under Rule 65 of the Rules of Court, docketed as G.R. No. 168332, praying for the annulment of the Court of Appeals (CA) Resolution[1] in CA-G.R. SP No. 88422 dated April 18, 2005 granting the prayer for a Writ of Preliminary Injunction of therein petitioners Teodoro O. Arcenas, Jr., Albert C. Aguirre, Cesar S. Paguio, and Francisco A. Rivera (Arcenas, et al.).
Koruga is a minority stockholder of Banco Filipino Savings and Mortgage Bank. On August 20, 2003, she filed a complaint before the Makati RTC which was raffled to Branch 138, presided over by Judge Sixto Marella, Jr.[2] Koruga’s complaint alleged:
10. 1 Violation of Sections 31 to 34 of the Corporation
Code (“Code”) which prohibit self-dealing and conflicts of interest of directors and officers, thus:
(a) For engaging in unsafe, unsound, and fraudulent banking
practices that have jeopardized the welfare of the Bank, its shareholders, who includes among others, the Petitioner, and depositors. (sic)
(b) For granting and approving loans and/or “loaned” sums of money to six (6) “dummy” borrower corporations (“Borrower Corporations”) which, at the time of loan approval, had no financial capacity to justify the loans. (sic)
(c) For approving and accepting a dacion en pago, or
payment of loans with property instead of cash, resulting to a diminished future cumulative interest income by the Bank and a decline in its liquidity position. (sic)
(d) For knowingly giving “favorable treatment” to the
Borrower Corporations in which some or most of them have interests, i.e. interlocking directors/officers thereof, interlocking ownerships. (sic)
(e) For employing their respective offices and functions as the
Bank’s officers and directors, or omitting to perform their functions and duties, with negligence, unfaithfulness or abuse of confidence of fiduciary duty, misappropriated or misapplied or ratified by inaction the misappropriation or misappropriations, of (sic) almost P1.6 Billion Pesos (sic) constituting the Bank’s funds placed under their trust and administration, by unlawfully releasing loans to the Borrower Corporations or refusing or failing to impugn these, knowing before the loans were released or thereafter that the Bank’s cash resources would be dissipated thereby, to the prejudice of the Petitioner, other Banco Filipino depositors, and the public.
10.2 Right of a stockholder to inspect the records of a corporation
(including financial statements) under Sections 74 and 75 of the Code, as implemented by the Interim Rules;
(a) Unlawful refusal to allow the Petitioner from inspecting or
otherwise accessing the corporate records of the bank despite repeated demand in writing, where she is a stockholder. (sic) 10.3 Receivership and Creation of a Management Committee pursuant to:
(a) Rule 59 of the 1997 Rules of Civil Procedure (“Rules”);
(b) Section 5.2 of R.A. No. 8799;
(c) Rule 1, Section 1(a)(1) of the Interim Rules;
(d) Rule 1, Section 1(a)(2) of the Interim Rules;
(e) Rule 7 of the Interim Rules;
(f) Rule 9 of the Interim Rules; and
(g) The General Banking Law of 2000 and the New Central
Bank Act.[3]
On September 12, 2003, Arcenas, et al. filed their Answer raising, among others, the trial court’s lack of jurisdiction to take cognizance of the case. They also filed a Manifestation and Motion seeking the dismissal of the case on the following grounds: (a) lack of jurisdiction over the subject matter; (b) lack of jurisdiction over the persons of the defendants; (c) forum-shopping; and (d) for being a nuisance/harassment suit. They then moved that the trial court rule on their affirmative defenses, dismiss the intra-corporate case, and set the case for preliminary hearing.
In an Order dated October 18, 2004, the trial court denied the Manifestation and Motion, ruling thus:
The result of the procedure sought by defendants Arcenas, et al. (sic) is for the Court to conduct a preliminary hearing on the affirmative defenses raised by them in their Answer. This [is] proscribed by the Interim Rules of Procedure on Intracorporate (sic) Controversies because when a preliminary hearing is conducted it is “as if a Motion to Dismiss was filed” (Rule 16, Section 6, 1997 Rules of Civil Procedure). A Motion to Dismiss is a prohibited pleading under the Interim Rules, for which reason, no favorable consideration can be given to the Manifestation and Motion of defendants, Arcenas, et al. The Court finds no merit to (sic) the claim that the instant case is a nuisance or harassment suit. WHEREFORE, the Court defers resolution of the affirmative defenses raised by the defendants Arcenas, et al.[4]
Arcenas, et al. moved for reconsideration[5] but, on January 18, 2005, the
RTC denied the motion.[6] This prompted Arcenas, et al. to file before the CA a Petition forCertiorari and Prohibition under Rule 65 of the Rules of Court with a prayer for the issuance of a writ of preliminary injunction and a temporary retraining order (TRO).[7]
On February 9, 2005, the CA issued a 60-day TRO enjoining Judge Marella from conducting further proceedings in the case.[8]
On February 22, 2005, the RTC issued a Notice of Pre-trial[9] setting the case
for pre-trial on June 2 and 9, 2005. Arcenas, et al. filed a Manifestation and Motion[10]before the CA, reiterating their application for a writ of preliminary injunction. Thus, on April 18, 2005, the CA issued the assailed Resolution, which reads in part:
(C)onsidering that the Temporary Restraining Order issued by this Court on February 9, 2005 expired on April 10, 2005, it is necessary that a writ of preliminary injunction be issued in order not to render ineffectual whatever final resolution this Court may render in this case, after the petitioners shall have posted a bond in the amount of FIVE HUNDRED THOUSAND (P500,000.00) PESOS. SO ORDERED.[11]
Dissatisfied, Koruga filed this Petition for Certiorari under Rule 65 of the
Rules of Court. Koruga alleged that the CA effectively gave due course to Arcenas, et al.’s petition when it issued a writ of preliminary injunction without factual or legal basis, either in the April 18, 2005 Resolution itself or in the records of the case. She prayed that this Court restrain the CA from implementing the writ of preliminary injunction and, after due proceedings, make the injunction against the assailed CA Resolution permanent.[12]
In their Comment, Arcenas, et al. raised several procedural and substantive
issues. They alleged that the Verification and Certification against Forum-Shopping attached to the Petition was not executed in the manner prescribed by Philippine law since, as admitted by Koruga’s counsel himself, the same was only a facsimile.
They also averred that Koruga had admitted in the Petition that she never asked for reconsideration of the CA’s April 18, 2005 Resolution, contending that the Petition did not raise pure questions of law as to constitute an exception to the requirement of filing a Motion for Reconsideration before a Petition for Certiorari is filed.
They, likewise, alleged that the Petition may have already been rendered
moot and academic by the July 20, 2005 CA Decision,[13] which denied their Petition, and held that the RTC did not commit grave abuse of discretion in issuing the assailed orders, and thus ordered the RTC to proceed with the trial of the case.
Meanwhile, on March 13, 2006, this Court issued a Resolution granting the prayer for a TRO and enjoining the Presiding Judge of Makati RTC, Branch 138, from proceeding with the hearing of the case upon the filing by Arcenas, et al. of a P50,000.00 bond. Koruga filed a motion to lift the TRO, which this Court denied on July 5, 2006.
On the other hand, respondents Dr. Conrado P. Banzon and Gen. Ramon Montaño also filed their Comment on Koruga’s Petition, raising substantially the same arguments as Arcenas, et al. G.R. No. 169053
G.R. No. 169053 is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, with prayer for the issuance of a TRO and a writ of preliminary injunction filed by Arcenas, et al.
In their Petition, Arcenas, et al. asked the Court to set aside the Decision[14] dated July 20, 2005 of the CA in CA-G.R. SP No. 88422, which denied their petition, having found no grave abuse of discretion on the part of the Makati RTC. The CA said that the RTC Orders were interlocutory in nature and, thus, may be assailed by certiorari or prohibition only when it is shown that the court acted without or in excess of jurisdiction or with grave abuse of discretion. It added that the Supreme Court frowns upon resort to remedial measures against interlocutory orders.
Arcenas, et al. anchored their prayer on the following grounds: that, in their
Answer before the RTC, they had raised the issue of failure of the court to acquire jurisdiction over them due to improper service of summons; that the Koruga action is a nuisance or harassment suit; that there is another case involving the same parties for the same cause pending before the Monetary Board of the BSP, and this
constituted forum-shopping; and that jurisdiction over the subject matter of the case is vested by law in the BSP.[15]
Arcenas, et al. assign the following errors: I. THE COURT OF APPEALS, IN “FINDING NO GRAVE ABUSE OF
DISCRETION COMMITTED BY PUBLIC RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE ASSAILED ORDERS,” FAILED TO CONSIDER AND MERELY GLOSSED OVER THE MORE TRANSCENDENT ISSUES OF THE LACK OF JURISDICTION ON THE PART OF SAID PUBLIC RESPONDENT OVER THE SUBJECT MATTER OF THE CASE BEFORE IT, LITIS PENDENTIA AND FORUM SHOPPING, AND THE CASE BELOW BEING A NUISANCE OR HARASSMENT SUIT, EITHER ONE AND ALL OF WHICH GOES/GO TO RENDER THE ISSUANCE BY PUBLIC RESPONDENT OF THE ASSAILED ORDERS A GRAVE ABUSE OF DISCRETION.
II. THE FINDING OF THE COURT OF APPEALS OF “NO GRAVE
ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT REGIONAL TRIAL COURT OF MAKATI, BRANCH 138, IN ISSUING THE ASSAILED ORDERS,” IS NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.[16]
Meanwhile, in a Manifestation and Motion filed on August 31, 2005, Koruga prayed for, among others, the consolidation of her Petition with the Petition for Review onCertiorari under Rule 45 filed by Arcenas, et al., docketed as G.R. No. 169053. The motion was granted by this Court in a Resolution dated September 26, 2005.
Our Ruling
Initially, we will discuss the procedural issue.
Arcenas, et al. argue that Koruga’s petition should be dismissed for its
defective Verification and Certification Against Forum-Shopping, since only a facsimile of the same was attached to the Petition. They also claim that the Verification and Certification Against Forum-Shopping, allegedly executed
in Seattle, Washington, was not authenticated in the manner prescribed by Philippine law and not certified by the Philippine Consulate in the United States.
This contention deserves scant consideration.
On the last page of the Petition in G.R. No. 168332, Koruga’s counsel executed an Undertaking, which reads as follows:
In view of that fact that the Petitioner is currently in the United States,
undersigned counsel is attaching a facsimile copy of the Verification and Certification Against Forum-Shopping duly signed by the Petitioner and notarized by Stephanie N. Goggin, a Notary Public for the Sate (sic) of Washington. Upon arrival of the original copy of the Verification and Certification as certified by the Office of the Philippine Consul, the undersigned counsel shall immediately provide duplicate copies thereof to the Honorable Court.[17]
Thus, in a Compliance[18] filed with the Court on September 5, 2005, petitioner submitted the original copy of the duly notarized and authenticated Verification and Certification Against Forum-Shopping she had executed.[19] This Court noted and considered the Compliance satisfactory in its Resolution dated November 16, 2005. There is, therefore, no need to further belabor this issue.
We now discuss the substantive issues in this case. First, we resolve the prayer to nullify the CA’s April 18, 2005 Resolution.We hold that the Petition in G.R. No. 168332 has become moot and
academic. The writ of preliminary injunction being questioned had effectively been dissolved by the CA’s July 20, 2005 Decision. The dispositive portion of the Decision reads in part:
The case is REMANDED to the court a quo for further proceedings and to
resolve with deliberate dispatch the intra-corporate controversies and determine whether there was actually a valid service of summons. If, after hearing, such service is found to have been improper, then new summons should be served forthwith.[20]
Accordingly, there is no necessity to restrain the implementation of the writ of preliminary injunction issued by the CA on April 18, 2005, since it no longer exists.
However, this Court finds that the CA erred in upholding the jurisdiction of, and remanding the case to, the RTC.
The resolution of these petitions rests mainly on the determination of one
fundamental issue: Which body has jurisdiction over the Koruga Complaint, the RTC or the BSP?
We hold that it is the BSP that has jurisdiction over the case.
A reexamination of the Complaint is in order.
Koruga’s Complaint charged defendants with violation of Sections 31 to 34 of the Corporation Code, prohibiting self-dealing and conflict of interest of directors and officers; invoked her right to inspect the corporation’s records under Sections 74 and 75 of the Corporation Code; and prayed for Receivership and Creation of a Management Committee, pursuant to Rule 59 of the Rules of Civil Procedure, the Securities Regulation Code, the Interim Rules of Procedure Governing Intra-Corporate Controversies, the General Banking Law of 2000, and the New Central Bank Act. She accused the directors and officers of Banco Filipino of engaging in unsafe, unsound, and fraudulent banking practices, more particularly, acts that violate the prohibition on self-dealing.
It is clear that the acts complained of pertain to the conduct of Banco Filipino’s banking business. A bank, as defined in the General Banking Law,[21] refers to an entity engaged in the lending of funds obtained in the form of deposits.[22] The banking business is properly subject to reasonable regulation under the police power of the state because of its nature and relation to the fiscal affairs of the people and the revenues of the state. Banks are affected with public interest because they receive funds from the general public in the form of deposits. It is the Government’s responsibility to see to it that the financial interests of those who deal with banks and banking institutions, as depositors or otherwise, are protected. In this country, that task is delegated to the BSP, which pursuant to its
Charter, is authorized to administer the monetary, banking, and credit system of the Philippines. It is further authorized to take the necessary steps against any banking institution if its continued operation would cause prejudice to its depositors, creditors and the general public as well.[23]
The law vests in the BSP the supervision over operations and activities of
banks. The New Central Bank Act provides:
Section 25. Supervision and Examination. - The Bangko Sentral shall have supervision over, and conduct periodic or special examinations of, banking institutions and quasi-banks, including their subsidiaries and affiliates engaged in allied activities.[24]
Specifically, the BSP’s supervisory and regulatory powers include:
4.1 The issuance of rules of conduct or the establishment of standards of operation for uniform application to all institutions or functions covered, taking into consideration the distinctive character of the operations of institutions and the substantive similarities of specific functions to which such rules, modes or standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by the Monetary Board;
4.3 Overseeing to ascertain that laws and Regulations are complied with; 4.4 Regular investigation which shall not be oftener than once a year
from the last date of examination to determine whether an institution is conducting its business on a safe or sound basis: Provided, That the deficiencies/irregularities found by or discovered by an audit shall be immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or 4.6 Enforcing prompt corrective action.[25]
Koruga alleges that “the dispute in the trial court involves the manner with which the Directors’ (sic) have handled the Bank’s affairs, specifically the fraudulent loans anddacion en pago authorized by the Directors in favor of several
dummy corporations known to have close ties and are indirectly controlled by the Directors.”[26] Her allegations, then, call for the examination of the allegedly questionable loans. Whether these loans are covered by the prohibition on self-dealing is a matter for the BSP to determine. These are not ordinary intra-corporate matters; rather, they involve banking activities which are, by law, regulated and supervised by the BSP. As the Court has previously held:
It is well-settled in both law and jurisprudence that the Central Monetary
Authority, through the Monetary Board, is vested with exclusive authority to assess, evaluate and determine the condition of any bank, and finding such condition to be one of insolvency, or that its continuance in business would involve a probable loss to its depositors or creditors, forbid bank or non-bank financial institution to do business in the Philippines; and shall designate an official of the BSP or other competent person as receiver to immediately take charge of its assets and liabilities.[27]
Correlatively, the General Banking Law of 2000 specifically deals with loans contracted by bank directors or officers, thus:
SECTION 36. Restriction on Bank Exposure to Directors, Officers,
Stockholders and Their Related Interests. — No director or officer of any bank shall, directly or indirectly, for himself or as the representative or agent of others, borrow from such bank nor shall he become a guarantor, indorser or surety for loans from such bank to others, or in any manner be an obligor or incur any contractual liability to the bank except with the written approval of the majority of all the directors of the bank, excluding the director concerned: Provided, That such written approval shall not be required for loans, other credit accommodations and advances granted to officers under a fringe benefit plan approved by the Bangko Sentral. The required approval shall be entered upon the records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate supervising and examining department of the Bangko Sentral.
Dealings of a bank with any of its directors, officers or stockholders and
their related interests shall be upon terms not less favorable to the bank than those offered to others.
After due notice to the board of directors of the bank, the office of any
bank director or officer who violates the provisions of this Section may be declared vacant and the director or officer shall be subject to the penal provisions of the New Central Bank Act.
The Monetary Board may regulate the amount of loans, credit accommodations and guarantees that may be extended, directly or indirectly, by a bank to its directors, officers, stockholders and their related interests, as well as investments of such bank in enterprises owned or controlled by said directors, officers, stockholders and their related interests.However, the outstanding loans, credit accommodations and guarantees which a bank may extend to each of its stockholders, directors, or officers and their related interests, shall be limited to an amount equivalent to their respective unencumbered deposits and book value of their paid-in capital contribution in the bank: Provided, however, That loans, credit accommodations and guarantees secured by assets considered as non-risk by the Monetary Board shall be excluded from such limit: Provided, further, That loans, credit accommodations and advances to officers in the form of fringe benefits granted in accordance with rules as may be prescribed by the Monetary Board shall not be subject to the individual limit.
The Monetary Board shall define the term “related interests.” The limit on loans, credit accommodations and guarantees prescribed
herein shall not apply to loans, credit accommodations and guarantees extended by a cooperative bank to its cooperative shareholders.[28]
Furthermore, the authority to determine whether a bank is conducting business in an unsafe or unsound manner is also vested in the Monetary Board. The General Banking Law of 2000 provides:
SECTION 56. Conducting Business in an Unsafe or Unsound
Manner. — In determining whether a particular act or omission, which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-banks or trust entities, may be deemed as conducting business in an unsafe or unsound manner for purposes of this Section, the Monetary Board shall consider any of the following circumstances:
56.1. The act or omission has resulted or may result in material loss or
damage, or abnormal risk or danger to the safety, stability, liquidity or solvency of the institution;
56.2. The act or omission has resulted or may result in material loss or
damage or abnormal risk to the institution's depositors, creditors, investors, stockholders or to the Bangko Sentral or to the public in general;
56.3. The act or omission has caused any undue injury, or has given any
unwarranted benefits, advantage or preference to the bank or any party in the discharge by the director or officer of his duties and
responsibilities through manifest partiality, evident bad faith or gross inexcusable negligence; or
56.4. The act or omission involves entering into any contract or
transaction manifestly and grossly disadvantageous to the bank, quasi-bank or trust entity, whether or not the director or officer profited or will profit thereby.
Whenever a bank, quasi-bank or trust entity persists in conducting its
business in an unsafe or unsound manner, the Monetary Board may, without prejudice to the administrative sanctions provided in Section 37 of the New Central Bank Act, take action under Section 30 of the same Act and/or immediately exclude the erring bank from clearing, the provisions of law to the contrary notwithstanding.
Finally, the New Central Bank Act grants the Monetary Board the power to impose administrative sanctions on the erring bank:
Section 37. Administrative Sanctions on Banks and Quasi-banks. -
Without prejudice to the criminal sanctions against the culpable persons provided in Sections 34, 35, and 36 of this Act, the Monetary Board may, at its discretion, impose upon any bank or quasi-bank, their directors and/or officers, for any willful violation of its charter or by-laws, willful delay in the submission of reports or publications thereof as required by law, rules and regulations; any refusal to permit examination into the affairs of the institution; any willful making of a false or misleading statement to the Board or the appropriate supervising and examining department or its examiners; any willful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor; or any commission of irregularities, and/or conducting business in an unsafe or unsound manner as may be determined by the Monetary Board, the following administrative sanctions, whenever applicable:
(a) fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed Thirty thousand pesos (P30,000) a day for each violation, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the bank or quasi-bank; (b) suspension of rediscounting privileges or access to Bangko Sentral credit facilities; (c) suspension of lending or foreign exchange operations or authority to accept new deposits or make new investments;
(d) suspension of interbank clearing privileges; and/or (e) revocation of quasi-banking license. Resignation or termination from office shall not exempt such director or
officer from administrative or criminal sanctions. The Monetary Board may, whenever warranted by circumstances,
preventively suspend any director or officer of a bank or quasi-bank pending an investigation: Provided, That should the case be not finally decided by the Bangko Sentral within a period of one hundred twenty (120) days after the date of suspension, said director or officer shall be reinstated in his position: Provided, further, That when the delay in the disposition of the case is due to the fault, negligence or petition of the director or officer, the period of delay shall not be counted in computing the period of suspension herein provided.
The above administrative sanctions need not be applied in the order of
their severity. Whether or not there is an administrative proceeding, if the institution
and/or the directors and/or officers concerned continue with or otherwise persist in the commission of the indicated practice or violation, the Monetary Board may issue an order requiring the institution and/or the directors and/or officers concerned to cease and desist from the indicated practice or violation, and may further order that immediate action be taken to correct the conditions resulting from such practice or violation. The cease and desist order shall be immediately effective upon service on the respondents.
The respondents shall be afforded an opportunity to defend their action in
a hearing before the Monetary Board or any committee chaired by any Monetary Board member created for the purpose, upon request made by the respondents within five (5) days from their receipt of the order. If no such hearing is requested within said period, the order shall be final. If a hearing is conducted, all issues shall be determined on the basis of records, after which the Monetary Board may either reconsider or make final its order.
The Governor is hereby authorized, at his discretion, to impose upon
banking institutions, for any failure to comply with the requirements of law, Monetary Board regulations and policies, and/or instructions issued by the Monetary Board or by the Governor, fines not in excess of Ten thousand pesos (P10,000) a day for each violation, the imposition of which shall be final and executory until reversed, modified or lifted by the Monetary Board on appeal.[29]
Koruga also accused Arcenas, et al. of violation of the Corporation Code’s provisions on self-dealing and conflict of interest. She invoked Section 31 of the Corporation Code, which defines the liability of directors, trustees, or officers of a corporation for, among others, acquiring any personal or pecuniary interest in conflict with their duty as directors or trustees, and Section 32, which prescribes the conditions under which a contract of the corporation with one or more of its directors or trustees – the so-called “self-dealing directors”[30] – would be valid. She also alleged that Banco Filipino’s directors violated Sections 33 and 34 in approving the loans of corporations with interlocking ownerships, i.e., owned, directed, or managed by close associates of Albert C. Aguirre.
Sections 31 to 34 of the Corporation Code provide:
Section 31. Liability of directors, trustees or officers. - Directors or trustees who wilfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
Section 32. Dealings of directors, trustees or officers with the
corporation. - A contract of the corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present:
1. That the presence of such director or trustee in the board meeting in
which the contract was approved was not necessary to constitute a quorum for such meeting;
2. That the vote of such director or trustee was not necessary for the
approval of the contract; 3. That the contract is fair and reasonable under the circumstances; and
4. That in case of an officer, the contract has been previously authorized by the board of directors.
Where any of the first two conditions set forth in the preceding paragraph
is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances.
Section 33. Contracts between corporations with interlocking directors. -
Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking director in one corporation is substantial and his interest in the other corporation or corporations is merely nominal, he shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned.
Stockholdings exceeding twenty (20%) percent of the outstanding capital
stock shall be considered substantial for purposes of interlocking directors. Section 34. Disloyalty of a director. - Where a director, by virtue of his
office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture.
Koruga’s invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of corporations, while the New Central Bank Act regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof. As between a general and special law, the latter shall prevail – generalia specialibus non derogant.[31]
Consequently, it is not the Interim Rules of Procedure on Intra-Corporate
Controversies,[32] or Rule 59 of the Rules of Civil Procedure on Receivership, that
would apply to this case. Instead, Sections 29 and 30 of the New Central Bank Act should be followed, viz.:
Section 29. Appointment of Conservator. - Whenever, on the basis of a
report submitted by the appropriate supervising or examining department, the Monetary Board finds that a bank or a quasi-bank is in a state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a conservator with such powers as the Monetary Board shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said institution, and exercise all powers necessary to restore its viability. The conservator shall report and be responsible to the Monetary Board and shall have the power to overrule or revoke the actions of the previous management and board of directors of the bank or quasi-bank.
x x x x The Monetary Board shall terminate the conservatorship when it is
satisfied that the institution can continue to operate on its own and the conservatorship is no longer necessary. The conservatorship shall likewise be terminated should the Monetary Board, on the basis of the report of the conservator or of its own findings, determine that the continuance in business of the institution would involve probable loss to its depositors or creditors, in which case the provisions of Section 30 shall apply.
Section 30. Proceedings in Receivership and Liquidation. - Whenever,
upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:
(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community; (b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or (c) cannot continue in business without involving probable losses to its depositors or creditors; or (d) has willfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in
the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution. x x x x
The actions of the Monetary Board taken under this section or under
Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction. The petition forcertiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship.
The designation of a conservator under Section 29 of this Act or the appointment of a receiver under this section shall be vested exclusively with the Monetary Board. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.[33]
On the strength of these provisions, it is the Monetary Board that exercises exclusive jurisdiction over proceedings for receivership of banks.
Crystal clear in Section 30 is the provision that says the “appointment of a
receiver under this section shall be vested exclusively with the Monetary Board.” The term “exclusively” connotes that only the Monetary Board can resolve the issue of whether a bank is to be placed under receivership and, upon an affirmative finding, it also has authority to appoint a receiver. This is further affirmed by the fact that the law allows the Monetary Board to take action “summarily and without need for prior hearing.”
And, as a clincher, the law explicitly provides that “actions of the Monetary Board taken under this section or under Section 29 of this Act shall be final and executory, and may not be restrained or set aside by the court except on a petition for certiorari on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.”
From the foregoing disquisition, there is no doubt that the RTC has no jurisdiction to hear and decide a suit that seeks to place Banco Filipino under receivership.
Koruga herself recognizes the BSP’s power over the allegedly unlawful acts of Banco Filipino’s directors. The records of this case bear out that Koruga, through her legal counsel, wrote the Monetary Board[34] on April 21, 2003 to bring to its attention the acts she had enumerated in her complaint before the RTC. The letter reads in part:
Banco Filipino and the current members of its Board of Directors should
be placed under investigation for violations of banking laws, the commission of irregularities, and for conducting business in an unsafe or unsound manner. They should likewise be placed under preventive suspension by virtue of the powers granted to the Monetary Board under Section 37 of the Central Bank Act. These blatant violations of banking laws should not go by without penalty. They have put Banco Filipino, its depositors and stockholders, and the entire banking system (sic) in jeopardy.
xxxx We urge you to look into the matter in your capacity as regulators. Our
clients, a minority stockholders, (sic) and many depositors of Banco Filipino are prejudiced by a failure to regulate, and taxpayers are prejudiced by accommodations granted by the BSP to Banco Filipino[35]
In a letter dated May 6, 2003, BSP Supervision and Examination
Department III Director Candon B. Guerrero referred Koruga’s letter to Arcenas for comment.[36] On June 6, 2003, Banco Filipino’s then Executive Vice President and Corporate Secretary Francisco A. Rivera submitted the bank’s comments essentially arguing that Koruga’s accusations lacked legal and factual bases.[37]
On the other hand, the BSP, in its Answer before the RTC, said that it had been looking into Banco Filipino’s activities. An October 2002 Report of Examination (ROE) prepared by the Supervision and Examination Department (SED) noted certain dacion payments, out-of-the-ordinary expenses, among other dealings. On July 24, 2003, the Monetary Board passed Resolution No. 1034 furnishing Banco Filipino a copy of the ROE with instructions for the bank to file its comment or explanation within 30 to 90 days under threat of being fined or of
being subjected to other remedial actions. The ROE, the BSP said, covers substantially the same matters raised in Koruga’s complaint. At the time of the filing of Koruga’s complaint on August 20, 2003, the period for Banco Filipino to submit its explanation had not yet expired.[38]
Thus, the court’s jurisdiction could only have been invoked after the
Monetary Board had taken action on the matter and only on the ground that the action taken was in excess of jurisdiction or with such grave abuse of discretion as to amount to lack or excess of jurisdiction.
Finally, there is one other reason why Koruga’s complaint before the RTC cannot prosper. Given her own admission – and the same is likewise supported by evidence – that she is merely a minority stockholder of Banco Filipino, she would not have the standing to question the Monetary Board’s action. Section 30 of the New Central Bank Act provides:
The petition for certiorari may only be filed by the stockholders of record representing the majority of the capital stock within ten (10) days from receipt by the board of directors of the institution of the order directing receivership, liquidation or conservatorship. All the foregoing discussion yields the inevitable conclusion that the CA
erred in upholding the jurisdiction of, and remanding the case to, the RTC. Given that the RTC does not have jurisdiction over the subject matter of the case, its refusal to dismiss the case on that ground amounted to grave abuse of discretion.
WHEREFORE, the foregoing premises considered, the Petition in G.R. No.
168332 is DISMISSED, while the Petition in G.R. No. 169053 is GRANTED. The Decision of the Court of Appeals dated July 20, 2005 in CA-G.R. SP No. 88422 is hereby SET ASIDE. The Temporary Restraining Order issued by this Court on March 13, 2006 is made PERMANENT. Consequently, Civil Case No. 03-985, pending before the Regional Trial Court of Makati City, is DISMISSED.
SO ORDERED.
G.R. No. 159507. April 19, 2006.*ANICETO G. SALUDO, JR., petitioner, vs. AMERICAN EXPRESS
INTERNATIONAL, INC., and/or IAN T. FISH and DOMINIC MASCRINAS, respondents.PETITION for review on certiorari of the decision and resolution of the Court of
Appeals.Petitioner’s counsel: Carla Paz B. Manto and Ronette O. FrancoRespondents’ counsel: Sycip, Salazar, Hernandez and GatmaitanPonente: CALLEJO, SR., J.Other SC Justices: Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-Martinez
and Chico-Nazario, JJ., concur.CA Justices: Associate Justice Renato C. Dacudao, with Associate Justices Godardo A. Jacinto (Chairman) and Rodrigo V. Cosico, concurringRTC Judge: Honorable Romeo M. GomezKP: Digest is very detailed because sir wants us to recite on this case.EMERGENCY: Congressman SALUDO filed a complaint for damages against AMEX
and its officers Fish (VP and Country Manager), and Mascrinas (Head of Operations) with the RTC of Maasin City, Southern Leyte. SALUDO alleges that he is a resident of Ichon, Macrohon, Southern Leyte. The complaint’s cause of action stemmed from the alleged wrongful dishonor of petitioner Saludo’s AMEX credit card and the supplementary card issued to his daughter. The 1st dishonor happened when petitioner Saludo’s daughter used her supplementary credit card to pay her purchases in the United States. The 2nd dishonor occurred when petitioner Saludo used his principal credit card to pay his account at the Hotel Okawa in Tokyo, Japan while he was there with other delegates from the Philippines to attend the Congressional Recognition in honor of Mr. Hiroshi Tanaka.SALUDO says the acts of dishonor were unjustified. He says that AMEX ET AL unilaterally suspended his account for failure to pay its balance covering the period of March 2000 when he did not received the corresponding statement of account.Because of the great inconvenience, wounded feelings, mental anguish, embarrassment, humiliation and besmirched political and professional standing as a
result of AMEX ET AL’s acts which were committed in gross and evident bad faith, and in
wanton, reckless and oppressive manner, he prays that AMEX ET AL be adjudged to pay him actual, moral and exemplary damages, and attorney’s fees.AMEX ET AL, in its answer, as affirmative defense says that the complaint should be dismissed on the ground that venue was improperly laid because none of the parties was a resident of Leyte, alleging that even SALUDO himself is not a resident of Leyte. As proof: SALUDO’s community tax certificate, which was presented when he executed the complaint’s verification and certification of non-forum shopping, was issued at Pasay CitySaludo’s complaint was prepared in Pasay City and signed by a lawyer of the said cityRTC-MAASIN: Favors SALUDO. DENIED AFFIRMATIVE DEFENSES OF AMEX ET AL. Says that venue was proper since a man can have but one domicile, but he may have numerous places of residence. Here RTC says that although SALUDO is domiciled
in Leyte, he has residence both in Pasay AND Leyte. Moreover, RTC says that as congressman of the province, his residence there can be taken judicial notice of.AMEX ET AL’s MR DENIED. Hence, AMEX ET AL files petition for certiorari under Rule 65 with CA.CA: Reverses RTC. Favors AMEX ET AL. VENUE IMPROPERLY LAID. Declared that petitioner Saludo was not a resident of Leyte. CA referred to his community tax certificate which was issued at Pasay City. CA says that under RA 7160, the community tax certificate shall be paid in the place of residence of the individual. CA also pointed out that petitioner Saludo’s law office, which was also representing him in the present case, is in Pasay City. CA said it was wrong for the RTC to take judicial notice of SALUDO’s residence.ISSUE: WON venue was improperly laid in RTC because not one of the parties, including petitioner Saludo, as plaintiff, was a resident of Southern Leyte at the time of filing of the complaint. VENUE IS PROPER.Petitioner Saludo’s complaint for damages is a personal action. As such, it is governed by Section 2, Rule 4 of ROC1.The term “residence” as employed in the rule on venue on personal actions filed with the courts of first instance means the place of abode whether permanent or temporary, of the plaintiff or the defendant, as distinguished from “domicile” which denotes a fixed permanent residence to which, when absent, one has the intention of
Zamoranos married anew on December 20, 1989. As she had previously done in her first nuptial to De Guzman, Zamoranos wed Samson Pacasum, Sr. (Pacasum), her subordinate at the Bureau of Customs where she worked, under Islamic rites and in order to strengthen the ties of their marriage, Zamoranos and Pacasum renewed their marriage vows in a civil ceremony.
Zamoranos and Pacasum were then de facto separated. Pacasum filed cases for the annulment of their marriage, criminal case for bigamy and an administrative case for disbarment against Zamoranos. Pacasum contracted a second marriage. The prosecutor found prima facie evidence to hold Zamoranos liable for Bigamy but the same was thereafter dismissed upon a motion for reconsideration filed by Zamboranos.
Pacasum filed a Petition for Review before the Office of the Secretary of Justice assailing the dismissal of the complaint for bigamy. The DOJ Secretary granted the petition and reversed the dismissal. Zamoranos immediately filed an Omnibus Motion and Supplement to the Urgent Omnibus Motion: (1) for Reconsideration; (2) to Hold in Abeyance Filing of the Instant Case; and (3) to Hold in Abeyance or Quash Warrant of Arrest before the Secretary of Justice. Unfortunately for Zamoranos, her twin motions were denied by the Secretary of Justice in a resolution. Zamoranos’ second motion for reconsideration, as with her previous motions, was likewise denied.
On the other civil litigation front on the Declaration of a Void Marriage, the lower court rendered a decision in favor of Zamoranos, dismissing the petition of Pacasum for lack of jurisdiction. The court found that Zamoranos and De Guzman are Muslims, and were such at the time of their marriage, whose marital relationship was governed by Presidential Decree (P.D.) No. 1083, otherwise known as the Code of Muslim Personal Laws of the Philippines, which provides that the Shari’a Circuit Courts shall have exclusive original jurisdiction over the same. And any divorce proceeding undertaken before the Shari’[a] Court is valid, recognized, binding and sufficient divorce proceedings.
The court held that the affirmative defenses which are in the nature of motion to dismiss is hereby granted. The CA and the SC affirmed the dismissal and the same became final and executory and was recorded in the Book of Entries of Judgments.
The RTC of Iligan, upon motion of Pacasum, issued an Order reinstating criminal case for Bigamy against Zamoranos.
Zamoranos filed a Motion to Quash the Information, arguing that the RTC had no jurisdiction over her person and over the offense charged. Zamoranos asseverated, in the main, that the decision of the RTC categorically declared her and Pacasum as Muslims, resulting in the mootness and the inapplicability of the RPC provision on Bigamy to her marriage to Pacasum and prayed for the dismissal of the case.
The motion to quash and motion for reconsideration filed by Zamoranos was denied. She then filed a petition for certiorari for the nullification and reversal of the order of the RTC. The CA dismissed Zamoranos’ petition. The CA dwelt on the propriety of a petition for certiorari to assail the denial of a Motion to Quash the Information. She now comes to the SC in a petition for certiorari alleging grave abuse of discretion.
Issue:
Whether or not an appeal is a legally permissible remedy in an order denying a motion to quash.
Held:
No. The Court granted the petition for certiorari and granted the motion to quash filed by Zamoranos. The denial of a motion to quash, as in the case at bar, is not appealable. It is an interlocutory order which cannot be the subject of an appeal.
Moreover, it is settled that a special civil action for certiorari and prohibition is not the proper remedy to assail the denial of a motion to quash an information. The established rule is that, when such an adverse interlocutory order is rendered, the remedy is not to resort forthwith to certiorari or prohibition, but to continue with the case in due course and, when an unfavorable verdict is handed down, to take an appeal in the manner authorized by law.
However, on a number of occasions, we have recognized that in certain situations, certiorari is considered an appropriate remedy to assail an interlocutory order, specifically the denial of a motion to quash. We have recognized the propriety of the following exceptions: (a) when the court issued the order without or in excess of jurisdiction or with grave abuse of discretion; (b) when the interlocutory order is patently erroneous and the remedy of appeal would not afford adequate and expeditious relief; (c) in the interest of a "more enlightened and substantial justice"; (d) to promote public welfare and public policy; and (e) when the cases "have attracted nationwide attention, making it essential to proceed with dispatch in the consideration thereof." The first four of the foregoing exceptions occur in this instance.
Contrary to the asseverations of the CA, the RTC, Branch 6, Iligan City, committed an error of jurisdiction, not simply an error of judgment, in denying Zamoranos’ motion to quash.
As a rule, certiorari lies when: (1) a tribunal, board, or officer exercises judicial or quasi-judicial functions; (2) the tribunal, board, or officer has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law.
The writ of certiorari serves to keep an inferior court within the bounds of its jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to excess
or lack of jurisdiction, or to relieve parties from arbitrary acts of courts—acts which courts have no power or authority in law to perform.
True, the Shari’a Circuit Court is not vested with jurisdiction over offenses penalized under the RPC. Certainly, the RTC, Branch 6, Iligan City, is correct when it declared that:
The Regional Trial Courts are vested the exclusive and original jurisdiction in all criminal cases not within the exclusive original jurisdiction of any court, tribunal, or body. [Sec. 20 (b), BP Blg. 129] The Code of Muslim Personal Laws (PD 1083) created the Sharia District Courts and Sharia Circuit Courts with limited jurisdiction. Neither court was vested jurisdiction over criminal prosecution of violations of the Revised Penal Code. There is nothing in PD 1083 that divested the Regional Trial Courts of its jurisdiction to try and decide cases of bigamy. Hence, this Court has jurisdiction over this case.
Nonetheless, it must be pointed out that even in criminal cases, the trial court must have jurisdiction over the subject matter of the offense. In this case, the charge of Bigamy hinges on Pacasum’s claim that Zamoranos is not a Muslim, and her marriage to De
Guzman was governed by civil law. This is obviously far from the truth, and the fact of Zamoranos’ Muslim status should have been apparent to both lower courts, the RTC,
Branch 6, Iligan City, and the CA.
The subject matter of the offense of Bigamy dwells on the accused contracting a second marriage while a prior valid one still subsists and has yet to be dissolved. At the very least, the RTC, Branch 6, Iligan City, should have suspended the proceedings until Pacasum had litigated the validity of Zamoranos and De Guzman’s marriage before the Shari’a Circuit Court and had successfully shown that it had not been dissolved despite the divorce by talaq entered into by Zamoranos and De Guzman.
Zamoranos was correct in filing the petition for certiorari before the CA when her liberty was already in jeopardy with the continuation of the criminal proceedings against her.
In a pluralist society such as that which exists in the Philippines, P.D. No. 1083, or the Code of Muslim Personal Laws, was enacted to "promote the advancement and effective participation of the National Cultural Communities x x x, [and] the State shall consider their customs, traditions, beliefs and interests in the formulation and implementation of its policies."
Trying Zamoranos for Bigamy simply because the regular criminal courts have jurisdiction over the offense defeats the purpose for the enactment of the Code of Muslim Personal Laws and the equal recognition bestowed by the State on Muslim Filipinos.
If both parties are Muslims, there is a presumption that the Muslim Code or Muslim law is complied with. If together with it or in addition to it, the marriage is likewise solemnized in accordance with the Civil Code of the Philippines, in a so-called
combined Muslim-Civil marriage rites whichever comes first is the validating rite and the second rite is merely ceremonial one. But, in this case, as long as both parties are Muslims, this Muslim Code will apply. In effect, two situations will arise, in the application of this Muslim Code or Muslim law, that is, when both parties are Muslims and when the male party is a Muslim and the marriage is solemnized in accordance with Muslim Code or Muslim law. A third situation occur[s] when the Civil Code of the Philippines will govern the marriage and divorce of the parties, if the male party is a Muslim and the marriage is solemnized in accordance with the Civil Code.
One of the effects of irrevocable talaq, as well as other kinds of divorce, refers to severance of matrimonial bond, entitling one to remarry. It stands to reason therefore that Zamoranos’ divorce from De Guzman, as confirmed by an Ustadz and Judge Jainul of the Shari’a Circuit Court, and attested to by Judge Usman, was valid, and, thus, entitled her to remarry Pacasum in 1989. Consequently, the RTC, Branch 6, Iligan City, is without jurisdiction to try Zamoranos for the crime of Bigamy.
BANK OF AMERICA VS. AMERICAN REALTY Leave a commentBank of America vs American Realty CorporationGR 133876 December 29, 1999Facts:Petitioner granted loans to 3 foreign corporations. As security, the latter mortgaged a property located in the Philippines owned by herein respondent ARC. ARC is a third party mortgagor who pledged its own property in favor of the 3 debtor-foreign corporations.
The debtors failed to pay. Thus, petitioner filed collection suits in foreign courts to enforce the loan. Subsequently, it filed a petition in the Sheriff to extra-judicially foreclose the said mortgage, which was granted.
On 12 February 1993, private respondent filed before the Pasig RTC, Branch 159, an action for damages against the petitioner, for the latter’s act of foreclosing extra-judicially the real estate mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.
Issue:WON petitioner’s act of filing a collection suit against the principal debtors for the recovery of the loan before foreign courts constituted a waiver of the remedy of foreclosure.
Held: Yes.1. Loan; Mortgage; remedies:
In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action or debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself.
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or upon the filing of the complaint in an action for foreclosure of mortgage. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not with any court of justice but with the Office of the Sheriff of the province where the sale is to be made.
In the case at bar, petitioner only has one cause of action which is non-payment of the debt. Nevertheless, alternative remedies are available for its enjoyment and exercise. Petitioner then may opt to exercise only one of two remedies so as not to violate the rule against splitting a cause of action.
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extra-judicially the mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute books.
2. Conflicts of Law
Incidentally, petitioner alleges that under English Law, which according to petitioner is the governing law with regard to the principal agreements, the mortgagee does not lose its security interest by simply filing civil actions for sums of money.
We rule in the negative.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is no judicial notice of any foreign law. A foreign law must be properly pleaded and proved as a fact. Thus, if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internallaw. This is what we refer to as the doctrine of processual presumption.In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and proved in said foreign law would still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of the forum, the said foreign law, judgment or order shall not be applied.
Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.
The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction proscribing the splitting up of a single cause of action.
Moreover, foreign law should not be applied when its application would work undeniable injustice to the citizens or residents of the forum. To give justice is the most important function of law; hence, a law, or judgment or contract that is obviously unjust negates the fundamental principles of Conflict of Laws.
BAYAN MUNA VS. ROMULO Leave a commentBayan Muna vs RomuloG. R. No. 159618, February 01, 2011Facts:Petitioner Bayan Muna is a duly registered party-list group established to represent the marginalized sectors of society. Respondent Blas F. Ople, now deceased, was the Secretary of Foreign Affairs during the period material to this case. Respondent Alberto Romulo was impleaded in his capacity as then Executive Secretary.
Rome Statute of the International Criminal Court
Having a key determinative bearing on this case is the Rome Statute establishing the International Criminal Court (ICC) with “the power to exercise its jurisdiction over persons for the most serious crimes of international concern x x x and shall be complementary to the national criminal jurisdictions.” The serious crimes adverted to cover those considered grave under international law, such as genocide, crimes against humanity, war crimes, and crimes of aggression.
On December 28, 2000, the RP, through Charge d’Affaires Enrique A. Manalo, signed the Rome Statute which, by its terms, is “subject to ratification, acceptance or approval” by the signatory states. As of the filing of the instant petition, only 92 out of the 139 signatory countries appear to have completed the ratification, approval and concurrence process. The Philippines is not among the 92.RP-US Non-Surrender AgreementOn May 9, 2003, then Ambassador Francis J. Ricciardone sent US Embassy Note No. 0470 to the Department of Foreign Affairs (DFA) proposing the terms of the non-surrender bilateral agreement (Agreement, hereinafter) between the USA and the RP.Via Exchange of Notes No. BFO-028-037 dated May 13, 2003 (E/N BFO-028-03, hereinafter), the RP, represented by then DFA Secretary Ople, agreed with and accepted the US proposals embodied under the US Embassy Note adverted to and put in effect the Agreement with the US government. In esse, the Agreement aims to protect what it refers to and defines as “persons” of the RP and US from frivolous and harassment suits that might be brought against them in international tribunals.8 It is reflective of the increasing pace of the strategic security and defense partnership between the two countries. As of May 2, 2003, similar bilateral agreements have been effected by and between the US and 33 other countries.The Agreement pertinently provides as follows:
1. For purposes of this Agreement, “persons” are current or former Government officials, employees (including contractors), or military personnel or nationals of one Party.
2. Persons of one Party present in the territory of the other shall not, absent the express consent of the first Party,
(a) be surrendered or transferred by any means to any international tribunal for any purpose, unless such tribunal has been established by the UN Security Council, or
(b) be surrendered or transferred by any means to any other entity or third country, or expelled to a third country, for the purpose of surrender to or transfer to any international tribunal, unless such tribunal has been established by the UN Security Council.
3. When the [US] extradites, surrenders, or otherwise transfers a person of the Philippines to a third country, the [US] will not agree to the surrender or transfer of that person by the third country to any international tribunal, unless such tribunal has been established by the UN Security Council, absent the express consent of the Government of the Republic of the Philippines [GRP].
4. When the [GRP] extradites, surrenders, or otherwise transfers a person of the [USA] to a third country, the [GRP] will not agree to the surrender or transfer of that person by the third country to any international tribunal, unless such tribunal has been established by the UN Security Council, absent the express consent of the Government of the [US].
5. This Agreement shall remain in force until one year after the date on which one party notifies the other of its intent to terminate the Agreement. The provisions of this Agreement shall continue to apply with respect to any act occurring, or any allegation arising, before the effective date of termination.
In response to a query of then Solicitor General Alfredo L. Benipayo on the status of the non-surrender agreement, Ambassador Ricciardone replied in his letter of October 28, 2003 that the exchange of diplomatic notes constituted a legally binding agreement under international law; and that, under US law, the said agreement did not require the advice and consent of the US Senate.In this proceeding, petitioner imputes grave abuse of discretion to respondents in concluding and ratifying the Agreement and prays that it be struck down as unconstitutional, or at least declared as without force and effect.Issue: Whether or not the RP-US NON SURRENDER AGREEMENT is void ab initio for contracting obligations that are either immoral or otherwise at variance with universally recognized principles of international law.Ruling: The petition is bereft of merit.Validity of the RP-US Non-Surrender Agreement
Petitioner’s initial challenge against the Agreement relates to form, its threshold posture being that E/N BFO-028-03 cannot be a valid medium for concluding the Agreement.
Petitioners’ contention––perhaps taken unaware of certain well-recognized international doctrines, practices, and jargons––is untenable. One of these is the doctrine of incorporation, as expressed in Section 2, Article II of the Constitution, wherein the Philippines adopts the generally accepted principles of international law and international jurisprudence as part of the law of the land and adheres to the policy of peace, cooperation, and amity with all nations. An exchange of notes falls “into the category of inter-governmental agreements,” which is an internationally accepted form of international agreement. The United Nations Treaty Collections (Treaty Reference Guide) defines the term as follows:
An “exchange of notes” is a record of a routine agreement, that has many similarities with the private law contract. The agreement consists of the exchange of two documents, each of the parties being in the possession of the one signed by the representative of the other. Under the usual procedure, the accepting State repeats the text of the offering State to record its assent. The signatories of the letters may be government Ministers, diplomats or departmental heads. The technique of exchange of notes
is frequently resorted to, either because of its speedy procedure, or, sometimes, to avoid the process of legislative approval.
In another perspective, the terms “exchange of notes” and “executive agreements” have been used interchangeably, exchange of notes being considered a form of executive agreement that becomes binding through executive action. On the other hand, executive agreements concluded by the President “sometimes take the form of exchange of notes and at other times that of more formal documents denominated ‘agreements’ or ‘protocols.’” As former US High Commissioner to the Philippines Francis B. Sayre observed in his work, The Constitutionality of Trade Agreement Acts:
The point where ordinary correspondence between this and other governments ends and agreements – whether denominated executive agreements or exchange of notes or otherwise – begin, may sometimes be difficult of ready ascertainment. x x xIt is fairly clear from the foregoing disquisition that E/N BFO-028-03––be it viewed as the Non-Surrender Agreement itself, or as an integral instrument of acceptance thereof or as consent to be bound––is a recognized mode of concluding a legally binding international written contract among nations.Agreement Not Immoral/Not at Variancewith Principles of International LawPetitioner urges that the Agreement be struck down as void ab initio for imposing immoral obligations and/or being at variance with allegedly universally recognized principles of international law. The immoral aspect proceeds from the fact that the Agreement, as petitioner would put it, “leaves criminals immune from responsibility for unimaginable atrocities that deeply shock the conscience of humanity; x x x it precludes our country from delivering an American criminal to the [ICC] x x x.”63
The above argument is a kind of recycling of petitioner’s earlier position, which, as already discussed, contends that the RP, by entering into the Agreement, virtually abdicated its sovereignty and in the process undermined its treaty obligations under the Rome Statute, contrary to international law principles.
The Court is not persuaded. Suffice it to state in this regard that the non-surrender agreement, as aptly described by the Solicitor General, “is an assertion by the Philippines of its desire to try and punish crimes under its national law. x x x The agreement is a recognition of the primacy and competence of the country’s judiciary to try offenses under its national criminal laws and dispense justice fairly and judiciously.”
Petitioner, we believe, labors under the erroneous impression that the Agreement would allow Filipinos and Americans committing high crimes of international concern to escape criminal trial and punishment. This is manifestly incorrect. Persons who may have committed acts penalized under the Rome Statute can be prosecuted and punished in the Philippines or in the US; or with the consent of the RP or the US, before the ICC, assuming, for the nonce, that all the formalities necessary to bind both countries to the Rome Statute have been met. For perspective, what the Agreement contextually prohibits is the surrender by either party of individuals to international tribunals, like the ICC, without the consent of the other party, which may desire to prosecute the crime under its existing laws. With the view we take of things, there is nothing immoral or violative of international law concepts in the act of the Philippines of assuming criminal jurisdiction pursuant to the non-surrender agreement over an offense considered criminal by both Philippine laws and the Rome Statute.
