Hi-Yield Realty v. Torres
REITERATIONFacts
1. The Antecedents: Roberto H. Torres, on behalf of Honorio Torres & Sons, Inc. (HTSI), filed a Petition for Annulment of Real Estate Mortgage and Foreclosure Sale concerning two parcels of land located in Marikina and Quezon City. The suit was filed against Leonora, Ma. Theresa, Glenn, and Stephanie Torres, the respective Registers of Deeds, and Hi-Yield Realty, Inc. (Hi-Yield). The core of the dispute revolves around allegations of unauthorized corporate actions, including incurring loan obligations and allowing company properties to be foreclosed, which Roberto H. Torres claims were detrimental to HTSI. 2. Procedural History: The case was initially filed as Civil Case No. 03-892 with Branch 148 of the Regional Trial Court (RTC) of Makati City. Hi-Yield moved to dismiss the petition on grounds of improper venue and insufficient docket fees, but the RTC denied this motion, classifying the case as a real action cognizable by a special commercial court. After Hi-Yield's motion for reconsideration was denied, it filed a petition for certiorari and prohibition with the Court of Appeals. The appellate court affirmed the RTC's ruling, finding the action to be a derivative suit and the annulment of mortgage and foreclosure as incidental. The Court of Appeals dismissed Hi-Yield's petition but directed the RTC to compute and collect the proper docket fees. 3. The Petition: Hi-Yield Realty, Inc. filed this special civil action for certiorari under Rule 65 of the Rules of Court, seeking to nullify the Court of Appeals' decision and resolution. Hi-Yield argues that the Court of Appeals gravely abused its discretion by not dismissing the case for improper venue, given that the action was deemed a real action and the properties are located outside Makati. It also contends that the appellate court erred in holding that the annulment of the real estate mortgage and foreclosure sale was merely incidental to the derivative suit, asserting that the primary aim of the action was to recover the lands. Hi-Yield further claims it was wrongly impleaded as a non-stockholder defendant.
Issue(s)
Whether the Court of Appeals gravely abused its discretion in not dismissing the case against Hi-Yield for improper venue despite findings by the trial court that the action is a real action. Whether the Court of Appeals erred in not dismissing the complaint as against Hi-Yield even if the joinder of parties in the complaint violated the rules on venue. Whether the Court of Appeals erred in holding that the annulment of real estate mortgage and foreclosure sale in the complaint is merely incidental to the derivative suit.
Ruling
The petition is dismissed. The Decision dated March 10, 2005, and the Resolution dated May 26, 2005, of the Court of Appeals in CA-G.R. SP. No. 83919 are affirmed.
Ratio Decidendi
On the propriety of the petition for certiorari, the nature of the action, and venue: The Court held that a petition for certiorari under Rule 65 is proper only when there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law. Since the CA's decision and resolution were reviewable by a petition for review on certiorari under Rule 45, the filing of a Rule 65 petition before the Supreme Court was improper. The Court noted that the petitioner filed the present petition belatedly, suggesting an attempt to substitute for a lost appeal. The Court reiterated that errors of judgment, as opposed to errors of jurisdiction, are not proper subjects of a certiorari petition. The Court affirmed the findings of both the RTC and the CA that the action filed by Roberto H. Torres was a derivative suit, despite being captioned as a petition for annulment of real estate mortgage and foreclosure sale. A derivative suit is a suit by a shareholder to enforce a corporate cause of action, where the corporation is the real party-in-interest. The Court found that Roberto satisfied the requisites for a derivative suit, including alleging that he was suing on behalf of the corporation due to mismanagement by its officers and controlling stockholders, and that exhausting intra-corporate remedies was rendered futile due to the corporation being under the control of the alleged wrongdoers. The Court clarified that derivative suits are governed by the Interim Rules of Procedure Governing Intra-Corporate Controversies (A.M. No. 01-2-04-SC). Section 5, Rule 1 of these rules explicitly states that such actions shall be commenced and tried in the Regional Trial Court which has jurisdiction over the principal office of the corporation. Since HTSI's principal office was registered in Metro Manila, the action was correctly filed in the RTC of Makati City, where its head office was located. Therefore, the CA did not commit grave abuse of discretion in upholding the venue chosen by the respondents. On the venue of derivative suits: The Court clarified that derivative suits are governed by the Interim Rules of Procedure Governing Intra-Corporate Controversies (A.M. No. 01-2-04-SC). Section 5, Rule 1 of these rules explicitly states that such actions shall be commenced and tried in the Regional Trial Court which has jurisdiction over the principal office of the corporation. Since HTSI's principal office was registered in Metro Manila, the action was correctly filed in the RTC of Makati City, where its head office was located. Therefore, the CA did not commit grave abuse of discretion in upholding the venue chosen by the respondents. On the joinder of parties and incidental nature of the annulment: The Court found no grave abuse of discretion on the part of the CA. The ruling that the annulment of the real estate mortgage and foreclosure sale was merely incidental to the derivative suit was consistent with the nature of a derivative action, where the primary goal is to redress wrongs done to the corporation. The alleged unauthorized acts of corporate officers led to the mortgage and foreclosure, making the annulment a consequential relief. The Court did not find that the joinder of Hi-Yield as a party violated the rules on venue, as the action was properly filed in Makati based on the corporation's principal office.
Main Doctrine
The venue for derivative suits is governed by the Interim Rules of Procedure Governing Intra-Corporate Controversies, which mandates that such actions be commenced and tried in the Regional Trial Court having jurisdiction over the principal office of the corporation.