Premium Marble Resources, Inc. v. Court of Appeals
REITERATIONFacts
1. The Antecedents: Premium Marble Resources, Inc. (Premium) and Printline Corporation (Printline), sister companies, each filed separate complaints for damages against International Corporate Bank (ICB). Premium alleged that ICB improperly allowed the deposit of three checks, totaling P31,663.88, payable to Premium, into the account of Intervest Merchant Finance, a conduit corporation of former Premium officers, Saturnino G. Belen, Jr. and others. Premium claimed these former officers deposited the checks without authority, and ICB, despite the checks being crossed and payable to Premium, accepted them for deposit and collection, causing prejudice to Premium. Premium sought restitution of the check amount, exemplary damages, and attorney's fees. ICB, in its defense, argued that Premium lacked the capacity to sue and that the complaint failed to state a cause of action. 2. Procedural History: Civil Case No. 14413 (Premium vs. ICB) and Civil Case No. 14444 (Printline vs. ICB) were consolidated. Subsequently, a motion to dismiss was filed in Premium's case by the Siguion Reyna, Montecillio and Ongsiako Law Office, asserting that the filing of the case was unauthorized by Premium's board of directors. This motion was adopted by ICB. Atty. Arnulfo Dumadag, counsel for Premium, opposed the motion, arguing that the signatories of the board resolution authorizing the dismissal were not directors and were former officers dismissed for irregularities. He also contended that the Siguion Reyna Law Office represented Belen and Nograles, not Premium. The trial court, considering an intra-corporate dispute pending before the Securities and Exchange Commission (SEC) regarding the rightful officers and directors of Premium, concluded that neither the group represented by Atty. Dumadag nor the group represented by Siguion Reyna Law Office had the legal capacity to sue on behalf of Premium until the SEC case was resolved. The Court of Appeals affirmed the trial court's dismissal of the consolidated cases. 3. The Petition: Petitioners Premium Marble Resources, Inc. and Printline Corporation filed a petition for review with the Supreme Court, assailing the Court of Appeals' decision that affirmed the dismissal of their consolidated complaints. They raised several assignments of error, primarily arguing that the Court of Appeals erred in giving due course to the motion to dismiss filed by the Siguion Reyna Law Office, which they claimed was not filed on behalf of Premium but for the benefit of Belen's group. They also contended that the appellate court erred in ruling that their counsel, Atty. Dumadag, was not authorized by the Board of Directors to file the cases and that the incumbent directors could not act for the corporation while the SEC case was pending. The Supreme Court's review focused on whether the filing of the damage suit was authorized by a duly constituted Board of Directors of Premium, noting that the determination of the rightful corporate officers was crucial and pending before the SEC.
Issue(s)
Whether the Court of Appeals erred in giving due course to the motion to dismiss filed by Siguion Reyna Law Office, considering the question of authority to file the case. Whether the Court of Appeals erred in ruling that the undersigned counsel was not authorized by the Board of Directors to file the cases, and the related issue of jurisdiction over intra-corporate disputes. Whether the Court of Appeals erred in concluding that the incumbent directors could not act for and in behalf of the corporation pending resolution of the SEC case, specifically regarding the impact on the cause of action against the defendant bank.
Ruling
The petition is denied for lack of merit. The decision of the Court of Appeals affirming the dismissal of the consolidated cases is affirmed.
Ratio Decidendi
On the authority to file the case: The Court affirmed the finding of the Court of Appeals that the filing of the case for damages against the respondent bank was not authorized by a duly constituted Board of Directors of the petitioner corporation. The power to sue and be sued is lodged with the board of directors, which exercises the corporate powers. Without a board resolution authorizing the action, the suit must fail. The petitioner failed to substantiate its claim that the officers represented by Atty. Dumadag were the incumbent officers authorized to file the suit. The evidence presented, particularly the Articles of Incorporation and the Minutes of the Board Meeting on April 1, 1982, were contradicted by the General Information Sheet and Certification from the SEC as of March 4, 1981, which listed a different set of officers. The Court emphasized that in the absence of proof of election and reporting to the SEC as required by Section 26 of the Corporation Code, the claim of incumbency by the set of officers represented by Atty. Dumadag was not sufficiently proven. Therefore, the filing of the action by Atty. Dumadag lacked the necessary corporate authorization. On the jurisdiction over intra-corporate disputes and the authority to file the case: The Court agreed with the lower courts that the issue of authority and the validity of the subscription, which were part of an intra-corporate controversy pending before the Securities and Exchange Commission (SEC Case No. 2688), were matters that needed to be resolved by the SEC. The existence of a cause of action against the defendant bank was dependent upon the resolution of this intra-corporate dispute. On the impact of the SEC case resolution: Consequently, before the SEC case could be decided, neither set of officers could definitively prosecute cases in the name of the corporation. This underscores the principle that the SEC has primary jurisdiction over intra-corporate controversies, including the determination of who are the legitimate directors and officers of a corporation.
Main Doctrine
The power of a corporation to sue and be sued is lodged with its board of directors. In the absence of any board resolution authorizing the filing of a case, the action must fail. The determination of who are the legitimate officers and directors of a corporation, especially in cases of intra-corporate disputes, falls within the jurisdiction of the Securities and Exchange Commission.