Aguirre v. Dumlao
REITERATIONFacts
1. The Antecedents: Jose Dumlao, a shareholder and elected trustee of Zambales Colleges, Inc., contested his removal from the Board of Trustees. The stockholders had voted to reduce the number of trustees from seven to five and elected a new board, excluding Dumlao. Dumlao and others initiated a quo warranto proceeding to challenge the legality of this meeting and election. 2. Procedural History: The quo warranto proceeding (Civil Case No. 1374) was initially dismissed by the Court of First Instance of Zambales. On appeal to the Court of Appeals (CA-G.R. No. 8305-R), the appellate court modified the decision, dismissing the case as moot because the term of the contested board had expired. Subsequently, Dumlao filed a separate action (Civil Case No. 1714) for damages and attorney's fees against Ricardo Aguirre, Felixberto Valdes, Esteban Rivera, and Zambales Colleges, Inc., alleging unlawful ouster and malicious prosecution for estafa. The trial court awarded Dumlao actual, moral, and nominal damages for his removal, while dismissing the claim for malicious prosecution. The defendants appealed this decision to the Court of Appeals, which affirmed the trial court's ruling. 3. The Petition: The petitioners, who were the defendants-appellants in the Court of Appeals, seek review of that court's decision affirming the award of damages. Their sole assignment of error is that the Court of Appeals erred in holding that a director or trustee of a corporation cannot be removed from office before their term expires unless for misfeasance. The petitioners argue that the legality of Dumlao's removal is the central issue, despite the Court of Appeals' prior ruling in the quo warranto case that the removal was illegal but moot. The Supreme Court, however, views the legality of the removal as a settled issue based on the prior Court of Appeals decision, which is considered the law of the case, and thus dismisses the petition.
Issue(s)
Whether the removal of Jose Dumlao as a member of the Board of Trustees was illegal. Whether the petitioners are liable for damages on account of the alleged unlawful removal of Jose Dumlao from the Board of Trustees.
Ruling
The petition is DISMISSED. The decision of the Court of Appeals is affirmed. Costs against the petitioners. This Decision is IMMEDIATELY EXECUTORY.
Ratio Decidendi
On the illegality of the removal: The Court noted that the issue of the legality of the removal was already declared illegal by the Court of Appeals in the prior quo warranto case. The Court emphasized that ruling on the legality or illegality of the removal would be resurrecting a dead issue, as the Court of Appeals' decision declaring the removal illegal had attained finality and had become the law of the case between the parties. The Court acknowledged that the question of whether a director could be removed without cause under the old Corporation Law was controversial but stated it was not the issue presented for resolution in the current case. On the liability for damages: The Court held that the petitioners are liable for damages. It reasoned that the Court of Appeals' prior declaration that Dumlao's removal was illegal, despite the dismissal of the quo warranto case on grounds of mootness, served as a proper basis for a damage suit. The Court cited Section 15 of Rule 66 of the Rules of Court, which allows a person adjudged entitled to an office to bring an action against the defendant to recover damages sustained by reason of the usurpation. Therefore, while the mootness of the quo warranto case barred reinstatement, it did not impede a recourse to damages for the unlawful removal.
Main Doctrine
A corporation's by-laws do not authorize special elections as a means to depose a member of the Board of Trustees, and a prior declaration by the Court of Appeals that a removal was illegal, even if the case was dismissed on grounds of mootness, can serve as a basis for a subsequent damage suit for unlawful ouster.