Western Institute of Technology, Inc. v. Salas
NEW DOCTRINEFacts
1. The Antecedents: The underlying dispute concerns the disbursement of corporate funds by the Board of Trustees of Western Institute of Technology, Inc. (WIT) to its officers, who were also board members. Petitioners, minority stockholders, alleged that Resolution No. 48, series of 1986, which granted monthly compensation to private respondents as corporate officers and distributed a percentage of net profits among board members, was illegally passed and constituted estafa and falsification of a public document. The compensation was granted retroactively and included subsequent monthly payments, totaling a significant sum. 2. Procedural History: Petitioners filed an affidavit-complaint leading to two criminal informations for estafa and falsification of a public document against the private respondents before the Regional Trial Court (RTC) of Iloilo City. The RTC, after consolidating the cases, acquitted the private respondents of both charges in a decision dated September 6, 1993. A subsequent motion for reconsideration regarding the civil aspect was denied by the RTC in an order dated November 23, 1993. The case reached the Supreme Court via a petition for certiorari. 3. The Petition: The petitioners seek to hold the private respondents civilly liable for the disbursed corporate funds, despite their acquittal in the criminal cases. They argue that the grant of compensation was proscribed by Section 30 of the Corporation Code, as it was given to directors in their capacity as directors, not as officers. The petition also touches upon whether the case should be considered a derivative suit, which would fall under the jurisdiction of the Securities and Exchange Commission. The petitioners are appealing the RTC's decision on the civil aspect of the criminal cases, seeking to overturn the acquittal's effect on civil liability.
Issue(s)
Whether the petitioners can hold the private respondents civilly liable despite their acquittal in the criminal cases for estafa and falsification of public document. Whether the grant of compensation to private respondents as corporate officers was illegal under Section 30 of the Corporation Code. Whether the instant case could be treated as a derivative suit.
Ruling
The Supreme Court denied the petition. It held that the acquittal of the private respondents in the criminal cases, based on a finding that they did not commit the acts complained of, barred any civil action ex delicto. The Court also found that the compensation granted was for services rendered as corporate officers, not as directors, and was authorized by the corporation's Articles of Incorporation and By-Laws, thus not violating Section 30 of the Corporation Code. Furthermore, the Court ruled that the case was not a derivative suit and, even if it were, it was filed in the wrong forum.
Ratio Decidendi
On the civil liability despite acquittal: The Court reiterated that under Section 2(b) of Rule 111 and the last paragraph of Section 2, Rule 120 of the New Rules on Criminal Procedure, an acquittal based on a finding that the accused did not commit the criminal acts complained of extinguishes the civil action ex delicto. The acquittal in this case was not merely based on reasonable doubt but on a positive finding that the private respondents did not commit the criminal acts. Therefore, the civil action could not prosper. The Court emphasized that the judgment of acquittal declared that the fact from which the civil liability might arise did not exist. This ruling is consistent with settled jurisprudence on the matter. On the legality of compensation under Section 30 of the Corporation Code: The Court clarified that Section 30 of the Corporation Code prohibits compensation to directors as such directors, except for reasonable per diems, unless granted by a vote of stockholders representing a majority of the outstanding capital stock or provided for in the by-laws. However, the prohibition is delimited by the phrase "as such directors," implying that directors may receive compensation when they render services in a capacity other than as directors. In this case, Resolution No. 48 granted compensation to private respondents not in their capacity as board members but as corporate officers (Chairman, Vice-Chairman, Treasurer, Secretary). The Court found that the Articles of Incorporation and By-Laws authorized the Board of Directors to provide compensation to corporate officers. Therefore, the grant of compensation was not a violation of Section 30 of the Corporation Code. On the nature of the suit as a derivative suit: The Court held that the case was not a derivative suit but merely an appeal on the civil aspect of the criminal cases. A derivative suit is an action brought by minority shareholders in the name of the corporation to redress wrongs committed against it, for which the directors refuse to sue. The petitioners failed to allege in their complaint that they were suing on a derivative cause of action on behalf of the corporation. Moreover, even if it were considered a derivative suit, it was filed in the wrong forum, as such intra-corporate disputes fall under the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC) under Section 5(b) of P.D. No. 902-A.
Main Doctrine
An acquittal in a criminal case based on a finding that the accused did not commit the criminal acts imputed to them bars any civil action ex delicto arising therefrom, as the extinction of the penal action proceeds from a declaration in a final judgment that the fact from which the civil liability might arise did not exist.