National Development Co. v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondents filed a complaint for reconveyance of shares of stock in International Corporate Bank (Interbank), alleging that Vicente T. Tan and other officials were arrested and detained by military agents, and under duress, Tan was compelled to assign 359,615 shares of Continental Bank (later Interbank) to three corporations allegedly fronts for Herminio Disini. These corporations were allegedly incapable of fulfilling their assumed obligations. The bank was later reopened as Interbank under new management, and subsequently, the National Development Company (NDC) acquired 99% of its shares, and American Express Bank, Ltd. (AMEX) acquired 40% from NDC. Private respondents claimed NDC and AMEX had notice of the infirmities of the original transfer and thus were obligated under constructive trust to reconvey the shares. Procedural History: The Regional Trial Court (RTC) denied motions to dismiss filed by NDC and AMEX, as well as by the Central Bank (CB). The CB filed a petition for certiorari with the Court of Appeals (CA), which was granted, ordering the dismissal of the complaint against CB. NDC and AMEX also filed a petition for certiorari and prohibition with the CA, which was initially granted, ordering the dismissal of the complaint. However, a Division of Five of the CA reconsidered and set aside its earlier decision, holding that the complaint stated a sufficient cause of action, prescription was a matter of defense, and no intra-corporate matters were involved. This resolution by the Division of Five is the subject of the present petition for review. The Petition: Petitioners NDC and AMEX seek to set aside the resolution of the CA's Division of Five, arguing that the CA erred in holding that a cause of action exists against subsequent purchasers, that prescription should be resolved at trial, that the case is not within the SEC's jurisdiction, and that the trial court acquired no jurisdiction due to non-payment of filing fees.
Issue(s)
Whether the complaint states a cause of action against petitioners NDC and AMEX, who are subsequent transferees and not the original assignees, and whether the action for reconveyance is barred by prescription. Whether the failure to implead the original assignees warrants the dismissal of the action due to the absence of indispensable parties. Whether the case falls within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC). Whether the trial court acquired jurisdiction over the complaint due to alleged non-payment of correct filing fees. Whether the issuance of an injunction by the trial court was attended by grave abuse of discretion.
Ruling
The petition is granted. The Resolution of the Court of Appeals in C.A.-G.R. SP No. 18865 promulgated on April 11, 1991, is reversed and set aside, and its Decision therein, promulgated on April 30, 1990, is reinstated, ordering the dismissal of Civil Case No. 15707.
Ratio Decidendi
On the lack of cause of action and prescription: The Supreme Court reiterated its ruling in G.R. No. 90365, which affirmed the dismissal of the complaint against the Central Bank. The Court held that a cause of action for reconveyance of shares can only exist against the original assignees, not against subsequent transferees like NDC and AMEX, who had no direct transaction with the private respondents. The complaint failed to allege any act or omission by NDC and AMEX that violated the private respondents' rights, which is an essential element of a cause of action. Furthermore, the Court found that the action had already prescribed. The eight-year prescriptive period for recovering movables, as provided in Article 1140 of the Civil Code, had lapsed. The Court rejected the argument that the period of authoritarian rule interrupted prescription, noting that Vicente Tan was able to pursue other legal remedies during that time, demonstrating that detention was not an impediment to seeking judicial assistance. The Court concluded that the private respondents filed their complaint too late, more than ten years after the loss of the shares. On indispensable parties: The Court emphasized that the original assignees were indispensable parties to the action for reconveyance. No final determination could be had without them, as the reliefs prayed for against the impleaded defendants were anchored on the voidability or nullity of the deeds of assignment to which these defendants were not parties. The failure to implead indispensable parties warrants the dismissal of the action. On jurisdiction of the SEC: The Court previously ruled in G.R. No. 90365 that an action to recover corporate shares of stock between parties claiming to be stockholders of the same corporation falls within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC) under Section 5 of P.D. No. 902-A. Although the CA's Division of Five attempted to distinguish this by stating that private respondents were not claiming or enforcing rights incident to corporate stock ownership, the Supreme Court's prior pronouncement on the matter, which was affirmed with finality, remains controlling. On filing fees: While the Court noted that private respondents later paid additional filing fees, the initial failure to pay the correct amount could have deprived the trial court of jurisdiction. However, given the other grounds for dismissal, this issue became secondary. On injunction: The Court found it unnecessary to delve into the alleged grave abuse of discretion in issuing the injunction, as the case was being dismissed on substantive grounds.
Main Doctrine
A complaint for reconveyance of shares of stock, based on allegations of duress and constructive trust, may be dismissed for failure to state a cause of action against subsequent transferees who are not the original assignees, and for being barred by prescription, especially when a prior Supreme Court decision has already ruled on these issues.