Alleje v. Court of Appeals
REITERATIONFacts
The Antecedents: Respondent SPORTS HEALTH AND PHYSICAL EDUCATION (SHAPE) CENTER, INC. (SHAPE), a non-stock, non-profit corporation, filed a complaint for injunction and damages against petitioner Manuel M. Alleje, its former Executive Vice President (EVP), for alleged misappropriation of corporate funds and assets. SHAPE alleged that Alleje, without authority, reversed entries in the books of account to make it appear that SHAPE-Quezon City was his personal property, registered the service name "SHAPE Centre" in his own name, withdrew P604,189.60 as "advances for liquidation" and P760,505.12 as "personal advances" without liquidation, solicited pledges from clients to set up his own fitness center, deposited P1,519,567.67 of SHAPE's collections into his personal account, encashed P50,000.00 from a concessionaire, and encashed P375,000.00 from three cashier's checks without remitting the proceeds to SHAPE. Alleje also allegedly removed three "nautilus" machines from SHAPE's gym for his personal business. SHAPE prayed for an accounting, payment of P12,685,691.00, and reconveyance of assets. A supplemental complaint alleged that Alleje coined the name "SHAPE CAMP" for his centers, misrepresenting a connection with SHAPE. Procedural History: Instead of filing an answer, Alleje filed a motion to dismiss, arguing that the Regional Trial Court (RTC) lacked jurisdiction and that the case was an intracorporate controversy cognizable by the Securities and Exchange Commission (SEC). The RTC denied the motion, finding the case to be a simple recovery of assets. The Court of Appeals (CA) sustained the RTC, holding that Alleje was sued as a former officer for breach of trust, not as a stockholder. The Petition: Alleje filed the instant petition with the Supreme Court, seeking to reverse the CA's decision.
Issue(s)
Whether the Regional Trial Court (RTC) has jurisdiction over an action for recovery of corporate funds and assets allegedly misappropriated by a former corporate officer, or if it falls under the exclusive jurisdiction of the Securities and Exchange Commission (SEC). Whether the acts imputed to the petitioner constitute an intracorporate controversy cognizable by the SEC under PD 902-A.
Ruling
The Supreme Court granted the petition, reversed the Resolution of the Court of Appeals, and ordered the Regional Trial Court of Pasig to dismiss the case for lack of jurisdiction, without prejudice to filing the appropriate action with the SEC.
Ratio Decidendi
On the issue of jurisdiction: The Supreme Court held that jurisdiction over the subject matter is conferred by law and is determined by the allegations in the complaint. Pursuant to Section 5(a) of PD 902-A, the SEC has original and exclusive jurisdiction to hear and decide cases involving "devises or schemes employed by or any acts of the Board of Directors, business associates, its officers and partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or to the stockholders, partners, members of associations or organizations registered with the Commission." The averments in SHAPE's complaint, including the alleged reversal of book entries, registration of corporate names in his own name, withdrawal of corporate funds as personal advances without liquidation, solicitation of client pledges for his personal business, deposit of corporate collections into his personal account, encashment of corporate checks without remittance, and unauthorized removal of corporate equipment for his own business, clearly alleged acts of fraud and misrepresentation committed by Alleje in his capacity as an officer of SHAPE. These acts were detrimental to the interest of the corporation and its members, thereby transposing an ordinary action for recovery into an intracorporate controversy falling within the exclusive adjudicative powers of the SEC. The Court reiterated that even if the complaint ultimately involves the collection of money, the recovery of which would ordinarily fall within the competence of regular courts, the nature of the dispute as an intracorporate controversy involving fraud and misrepresentation dictates that it should be heard by the SEC. On whether the acts constitute an intracorporate controversy: The Court found that the complaint sufficiently alleged that Alleje, as an officer of SHAPE, employed devises or schemes tantamount to fraud and misrepresentation to divert corporate funds and assets for his personal use. The alleged acts, such as withdrawing corporate funds as personal advances, failing to remit funds, unauthorized removal of corporate equipment, and using a similar business name to mislead the public, were all acts committed by Alleje by virtue of his position as EVP. These actions were not merely ordinary contractual breaches but constituted a breach of trust and fiduciary duty owed to the corporation, falling squarely within the definition of intracorporate disputes involving fraud and misrepresentation as contemplated by PD 902-A. The Court emphasized that the complaint imputed "unmistakable acts of fraud" to Alleje as an officer, which resulted in the corporation's financial losses, thus establishing the existence of an intracorporate controversy.
Main Doctrine
Actions involving alleged acts of fraud and misrepresentation by a corporate officer, which are detrimental to the interest of the corporation and its members, fall under the exclusive jurisdiction of the Securities and Exchange Commission (SEC) pursuant to Section 5(a) of PD 902-A, even if the complaint ultimately involves the recovery of money and properties.