Barrameda v. Atienza
REITERATIONFacts
The Antecedents: Petitioners, claiming to be rightful directors of Camarines Norte Electric Cooperative (CANORECO), a cooperative organized under P.D. No. 269 and R.A. No. 6938, filed a petition for quo warranto against respondents, who were elected directors in a general assembly called by a presidential ad hoc committee. CANORECO had a loan agreement with the National Electrification Administration (NEA) which included provisions for NEA to take over management in case of default. Due to default, NEA appointed an acting general manager in 1995. On May 28, 1995, a general membership assembly elected a new board, and NEA appointed a new general manager. The group of former manager Reynaldo V. Abundo contested this, leading the Cooperative Development Authority (CDA) to declare the May 28, 1995 board meeting and elections void ab initio for lack of quorum. Subsequently, on December 3, 1996, President Fidel V. Ramos issued Memorandum Order No. 409, creating an ad hoc committee to temporarily manage CANORECO's affairs, which then called for a special general membership meeting on February 16, 1997, leading to the election of the respondent directors on March 23, 1997. Procedural History: The Supreme Court previously declared Memorandum Order No. 409 invalid in G.R. No. 127249. The CDA had issued a writ of execution enabling petitioners to resume control, but this was later temporarily restrained by the Supreme Court on November 16, 1998. The present petition for quo warranto seeks to determine the rightful directors. The Petition: Petitioners claim they are the rightful directors, challenging the validity of the elections held under the ad hoc committee appointed by Memorandum Order No. 409, which was later declared unconstitutional.
Issue(s)
Whether Memorandum Order No. 409, which created an ad hoc committee to manage CANORECO and led to the election of the respondent directors, is valid. Whether the respondents are the rightful directors of CANORECO.
Ruling
The petition is DENIED. Respondents are allowed to continue occupying their positions pending the holding of a general assembly for the purpose of electing directors.
Ratio Decidendi
On the validity of Memorandum Order No. 409: The Supreme Court reiterated its previous ruling that Memorandum Order No. 409 is unconstitutional and has no statutory or legal basis. The Court emphasized that the Cooperative Code (R.A. No. 6938 and R.A. No. 6939) vests the management of cooperatives in their elected board of directors and prohibits the State from interfering in their internal affairs, except as provided by law. Memorandum Order No. 409 improperly removed the power of the board of directors to manage CANORECO's affairs and transferred it to an ad hoc committee, effectively suspending or removing the incumbent directors and officers without legal basis. The Court cited Article 38 and 39 of R.A. No. 6938, which vest management in the board of directors, and Article 34 and 51, which grant the general assembly the exclusive power to elect and remove directors. The Court also noted that the dispute was an intra-cooperative dispute that should have been settled amicably or through mediation and conciliation as provided by Article 121 of the Cooperative Code, not by presidential fiat. On the effect of the unconstitutional Memorandum Order No. 409 and the status of the respondents' positions: The Court applied the "operative fact" doctrine, stating that while an unconstitutional act is void and confers no rights, its existence prior to the declaration of unconstitutionality can have consequences that cannot be justly ignored. However, in this case, the Court clarified that the unconstitutionality of Memorandum Order No. 409 means it conferred no rights, and therefore, the board of directors elected under its authority did not legally exist as if no election was held. The Court cited Municipality of Malabang v. Benito to emphasize that an unconstitutional act is inoperative as though it had never been passed. Despite the invalidity of MO 409, the Court noted that the election of respondents occurred before the declaration of invalidity, and their positions are presumed valid until nullified. The Court also considered the loan agreement between CANORECO and NEA, which allowed NEA to appoint a project supervisor or general manager in case of default, but this did not grant NEA the power to supersede the Cooperative Code's provisions on the management of cooperatives by the board of directors. Although Memorandum Order No. 409 was declared unconstitutional, the Court found that the petition for quo warranto had not yet been decided on its merits. Furthermore, the term of office of the directors had expired sometime in 1996. Given these circumstances, and without prejudice to the holding of a new general assembly for the election of directors, the Court allowed the respondents to continue occupying their positions until their successors are duly elected and qualified. This was a pragmatic approach to maintain stability in the cooperative's management while the legal issues were being resolved.
Main Doctrine
A Presidential Memorandum Order that takes over the internal management of a cooperative, suspending or removing its board of directors and officers without statutory or constitutional basis, is void and confers no rights, as it violates the principle of non-interference in the management of cooperatives and the democratic administration of their affairs by elected or appointed persons as agreed by the members. Such an unconstitutional act is inoperative as though it had never been passed, and its existence as an operative fact cannot justify the validity of subsequent actions or elections conducted under its authority.