DMRC Enterprises v. Este del Sol Mountain Reserve, Inc.
REITERATIONFacts
The Antecedents: Petitioner DMRC Enterprises, a partnership engaged in construction and equipment leasing, entered into a written offer with respondent Este del Sol Mountain Reserve, Inc. for the lease of three heavy equipment units. The agreement stipulated that a portion of the payment would be in the form of shares of stock of the respondent corporation. Petitioner performed its obligations, but respondent failed to pay the outstanding obligations, which included both cash and shares of stock. Procedural History: Petitioner filed a complaint for collection of money and delivery of personal property before the Court of First Instance (CFI) of Rizal, Quezon City. Respondent filed a motion to dismiss, arguing that the CFI had no jurisdiction over the case by virtue of Presidential Decree No. 902-A, and that the Securities and Exchange Commission (SEC) was the proper forum. The CFI granted the motion to dismiss. The Petition: Petitioner sought a review of the CFI's order, arguing that the case was a simple collection of money and delivery of personal property within the competence of regular courts.
Issue(s)
Whether the Court of First Instance has jurisdiction over a complaint for collection of money and delivery of personal property arising from a contract of lease, where payment involves shares of stock. Whether the controversy falls under the original and exclusive jurisdiction of the Securities and Exchange Commission; specifically, whether the present case constitutes an intra-corporate controversy.
Ruling
The petition is GRANTED. The order of the respondent Presiding Judge of the Court of First Instance of Rizal, Quezon City, Branch LII dated April 23, 1981, in Civil Case No. Q-29585, is REVERSED and SET ASIDE.
Ratio Decidendi
On the issue of jurisdiction: The Court held that jurisdiction is conferred by law and is determined by the allegations in the complaint. The complaint filed by DMRC Enterprises was for the collection of money and delivery of personal property arising from a contract of lease. While the payment involved shares of stock, the primary nature of the action was a collection suit based on a lease agreement. The Court emphasized that the Judiciary Act of 1948 grants Courts of First Instance original jurisdiction in cases where the demand, exclusive of interest or value of the property, amounts to more than ten thousand pesos, which was met in this case. The complaint was styled as a "sum of money" and sought to enforce Article 1657(1) of the Civil Code, which obligates the lessee to pay the price of the lease according to the terms stipulated. The Court found that determining the rights of the parties under the contract of lease and enforcing the claim for payment fell within the jurisdiction of the regular courts. The SEC's jurisdiction would only be invoked if a question later arose regarding the issuance or transfer of shares after entitlement was established and the contract implemented. On the jurisdiction of the Securities and Exchange Commission (SEC) and whether the present case constitutes an intra-corporate controversy: The Court clarified that the SEC's expanded jurisdiction under Presidential Decree No. 902-A pertains to matters intrinsically connected with the regulation of corporations, partnerships, and associations, and those dealing with their internal affairs. Specifically, Section 5(b) of PD 902-A grants the SEC jurisdiction over controversies arising out of intra-corporate or partnership relations. However, the Court found no averment of fraud or misrepresentation in the complaint that would bring it under paragraph (a), nor was there an issue concerning elections or appointments under paragraph (c). The core of the dispute was a contractual obligation for lease rentals, not an intra-corporate dispute between stockholders or partners. The Court stressed that the petitioner DMRC Enterprises had no intra-corporate relation with the respondent corporation. The petitioner was a creditor seeking payment for services rendered under a lease contract, and the respondent was the debtor. The fact that the payment was to be made in shares of stock did not, by itself, convert the nature of the action into an intra-corporate controversy. The Court noted that the greater portion of the petitioner's claim was in terms of cash, and splitting the claim for money from the claim for shares would result in a multiplicity of suits. The Court distinguished the present case from PAIC Securities, where the SEC's jurisdiction was upheld. In PAIC Securities, the controversy arose from stock transactions between a stockholder and a stockbroker, which clearly fell within the SEC's regulatory powers. The present case, however, is a straightforward collection suit based on a lease agreement, not an action directly involving stock operations or internal corporate governance.
Main Doctrine
The Securities and Exchange Commission (SEC) has original and exclusive jurisdiction over controversies arising out of intra-corporate relations. However, a simple collection of money and delivery of personal property arising from a contract of lease, even if payment involves shares of stock, falls within the jurisdiction of the regular courts, as it does not involve intra-corporate matters.