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G.R. No. 182738, February 24, 2014 - CAPITOL HILLS GOLF & COUNTRY CLUB, INC. AND PABLO B. ROMAN, JR., Petitioners, v. MANUEL O. SANCHEZ, Respondent.

G.R. No. 182738, February 24, 2014 - CAPITOL HILLS GOLF & COUNTRY CLUB, INC. AND PABLO B. ROMAN, JR., Petitioners, v. MANUEL O. SANCHEZ, Respondent.

PHILIPPINE SUPREME COURT DECISIONS

THIRD DIVISION

G.R. No. 182738, February 24, 2014

CAPITOL HILLS GOLF & COUNTRY CLUB, INC. AND PABLO B. ROMAN, JR., Petitioners, v. MANUEL O. SANCHEZ, Respondent.

D E C I S I O N

PERALTA, J.:

Before Us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the March 13, 2008 Decision1 and April 28, 2008 Resolution2 of the Court of Appeals (CA) in CA–G.R. SP No. 100911, which affirmed the September 3, 2007 Resolution3 of the Quezon City Regional Trial Court (RTC), Branch 226.

The relevant facts are as follows:

On July 1, 2002, respondent Manuel O. Sanchez (respondent), a stockholder of petitioner Capitol Hills Golf & Country Club, Inc. (Corporation) filed a petition for the nullification of the annual meeting of stockholders of May 21, 2002 and the special meeting of stockholders of April 23, 2002.4 Petitioners, along with their co–defendants, filed an Answer with Counterclaims5 and, thereafter, a Motion for Preliminary Hearing of Defendants’ Affirmative Defenses,6 which was denied on August 9, 20027 by Hon. Apolinario D. Bruselas, Jr., then Presiding Judge of the RTC of Quezon City, Branch 93, now a member of the Court of Appeals.

On August 12, 2002, respondent filed a Motion for Production and Inspection of Documents, which the court granted in an Order dated September 10, 2002 directing, thus:chanRoblesvirtualLawlibrary
On motion of the plaintiff, without objection from the defendants, and pursuant to Rule 3 of the Interim Rules of Procedure Governing Intra–Corporate Controversies, in relation to Rule 27 of the 1997 Rules of Civil Procedure, the defendants are ordered to produce and make available for inspection and photocopying by the plaintiff the following documents:chanRoblesvirtualLawlibrary
1. The list of stockholders of record as of March 2002;

2. All proxies, whether validated or not, which have been received by the defendants;

3. The specimen signatures of all stockholders as contained in the Stock and Transfer Book or on the stub of the stock certificate; and

4. The tape recording of the stockholders’ meeting on April 23, 2002 and May 21, 2002.
The production, inspection and photocopying must be undertaken in the office premises of defendant corporation within reasonable business hours of a business day before the pre–trial with costs to be shouldered by the plaintiff.

SO ORDERED.8ChanRoblesVirtualawlibrary
Petitioners filed a motion for reconsideration9 (MR) of the August 9, 2002 Order, which denied their motion for preliminary hearing. Subsequently, they filed a Supplement to Defendants’ Motion for Reconsideration,10 attaching therewith an alleged certification issued by the National Printing Office to support their contention of lack of cause of action on the grounds, among others, that the Securities and Exchange Commission (SEC) Memorandum Circular No. 5, Series of 1996, as amended, has not been duly published in accordance with law and jurisprudence. Pending resolution of the MR, petitioners filed on January 21, 2003 a Motion for Deferment of Implementation of the September 10, 2002 Order.11cralawred

For his part, respondent, on October 7, 2002, filed an Omnibus Motion to immediately allow him to inspect and photocopy the documents and to compel petitioners to deposit with the court the documents subject of the September 10, 2002 Order.

On December 9, 2002, then Presiding Judge Bruselas issued an Order12 denying petitioners’ MR of the Order dated August 9, 2002 and considered respondent’s omnibus motion as a reiteration of his earlier motion for inspection and production of documents; thus, the immediate implementation of the September 10, 2002 Order was simultaneously ordered.

Petitioners elevated the case to the CA via a petition for certiorari assailing the Orders dated August 9, 2002 and December 9, 2002. However, the CA denied the same in its Decision dated June 29, 2004. Petitioners’ MR was likewise denied on November 3, 2004. A petition for review was filed before this Court, but We denied it per Resolution dated January 10, 2005.

In the meantime, respondent sought to enforce the September 10, 2002 Order. The supposed inspection on September 30, 2002 was not held per the trial court’s Order dated September 27, 2002.13 The January 22, 2003 inspection also did not push through after petitioners and their co–defendants again moved for its deferment.14 When the court eventually denied their motion on June 16, 2003, respondent set the inspection to August 1, 2003.15 On said date, however, Atty. Matias V. Defensor, then Corporate Secretary of the Corporation, was alleged to be out of town and petitioner Pablo B. Roman, Jr. (Roman) purported to have shown no willingness to comply with the directive.16 The matter was reported to the trial court, which merely noted respondent’s Report and Manifestation.17 On November 3, 2003, respondent moved for the issuance of an order for immediate implementation of the September 10, 2002 Order, as reiterated in the Order dated June 16, 2003, but the court denied the same in its May 24, 2004 Order.18 Respondent’s motion for issuance of writ of execution suffered the same fate when the trial court denied it on February 10, 2005.19

When this Court settled petitioners’ challenge to the Orders dated August 9, 2002 and December 9, 2002, respondent filed a Manifestation with Omnibus Motion for Clarification and to Resolve Plaintiff’s Pending Motion for the Issuance of a Writ of Execution and to Set the Case for Pre–Trial Conference.20 Acting thereon, Judge Ramon Paul L. Hernando, likewise now a member of the Court of Appeals, who took over Branch 93 after the appointment of Judge Bruselas to the CA, issued the July 10, 2006 Order,21 which directed the immediate execution of the September 10, 2002 Order, and set the case for pre–trial.

On February 9, 2007, Judge Hernando issued an Order22 inhibiting himself from handling the case in view of his “close friendship relation” with petitioners’ counsel and ordering the transmittal of the records of the case to the Office of the Clerk of Court for re–raffle to another sala. The case was subsequently re–raffled to RTC Branch 90 presided by Judge Reynaldo B. Daway, who likewise voluntarily recused himself from the case per Order23 dated July 13, 2007. Finally, on July 30, 2007, the case was re–raffled to RTC Branch 226 presided by Judge Leah S. Domingo Regala.24

On November 28, 2006, the parties agreed to defer the pre–trial conference until the actual conduct of the inspection of records/documents on December 12, 2006.25 Before said date, however, petitioners and their co–defendants moved to hold the inspection to January 11, 2007, which the court granted.26

During the January 11, 2007 inspection, the only document produced by the Acting Corporate Secretary, Atty. Antonio V. Meriz, and one of the staff, Malou Santos, was the Stock and Transfer Book of the Corporation. They alleged that they could not find from the corporate records the copies of the proxies submitted by the stockholders, including the tape recordings taken during the stockholders’ meetings, and that they needed more time to locate and find the list of stockholders as of March 2002, which was in the bodega of the Corporation.27 This prompted respondent to file a Manifestation with Omnibus Motion praying that an order be issued in accordance with Section 3, Paragraphs (a) to (d) of Rule 29 of the Rules of Court (Rules), in relation to Section 4, Rule 3 of the Interim Rules of Procedure Governing Intra–Corporate Controversies under Republic Act No. 8799 (Interim Rules).

On September 3, 2007, the trial court issued a Resolution, the concluding portion of which ordered:chanRoblesvirtualLawlibrary
In order to give both the plaintiff and defendants one last chance to comply with the order dated September 10, 2002, this Court reiterates the said order:

“On motion of the plaintiff, without objection from the defendants, and pursuant to Rule 3 of the Interim Rules of Procedure Governing Intra–Corporate Controversies[,] in relation to Rule 27 of the 1997 Rule[s] of Civil Procedure, the defendants are ordered to produce and make available for inspection and photocopying by the plaintiff the following documents:chanRoblesvirtualLawlibrary
1. The list of stockholders of record as of March 2002;

2. All proxies, whether validated or not, which have been received by the defendants;

3. The specimen signatures of all stockholders as contained in the Stock and Transfer Book or on the stub of the stock certificate; and

4. The tape recording of the stockholders’ meeting on April 23, 2002 and May 21, 2002.
The production, inspection and photocopying must be undertaken in the office premises of defendant corporation within reasonable business hours of a business day before the pre–trial with costs to be shouldered by the plaintiff.

SO ORDERED.”

This Court orders the defendants to strictly comply with this order. Failure of the defendants to comply with all the requirements of the order dated September 10, 2002 will result in this court citing all the defendants in contempt of court. This Court shall order defendants solidarily to pay a fine of P10,000.00 for every day of delay to comply with the order of September 10, 2002 until the defendants shall have fully and completely complied with the said order.

Further sanctions shall be meted upon defendants should the Court find that defendants have been in bad faith in complying with the order of September 10, 2002 despite the order of this Court.

Both plaintiff and counsel, as well as defendants and counsel, are therefore ordered to meet on November 13, 2007 at the corporate offices of defendant firm between 9:00 a.m. to 4:00 p.m. so that faithful compliance with the order of September 10, 2002 may be done, otherwise, this Court shall allow the plaintiff to present evidence to prove their prayer in their Manifestation with Omnibus Motion filed on January 31, 2007 and issue a resolution based on the same accordingly.

SO ORDERED.28ChanRoblesVirtualawlibrary
Petitioners questioned the aforesaid Resolution via Petition for Certiorari (With Application for Temporary Restraining Order and/or Writ of Preliminary Injunction).29 In resolving the petition, the CA ruled that there is no indication that the RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction. According to the appellate court, the September 3, 2007 Resolution was issued pursuant to Section 3,30 Rule 3 of the Interim Rules, with the suppletory application of Section 1,31 Rule 27 of the Rules. It noted that, except for the sanctions contained therein, the assailed Resolution merely reiterated the September 10, 2002 Order of Judge Bruselas, which petitioners did not dispute in accordance with Section 2,32 Rule 3 of the Interim Rules or via petition for certiorari. The CA further held that petitioners were not denied due process as they were able to move for a reconsideration of the September 10, 2002 Order, but not opted to file the same with respect to the September 3, 2007 Resolution.

Anent the argument against the threatened imposition of sanction for contempt of court and the possible payment of a hefty fine, the CA opined that the case of Dee v. Securities and Exchange Commission33 cited by petitioners is inapplicable, since the September 3, 2007 Resolution merely warned petitioners that they would be cited for contempt and be fined if they fail to comply with the court’s directive. Moreover, it said that the penalty contained in the September 3, 2007 Resolution is in accord with Section 4,34 Rule 3 of the Interim Rules, in relation to Section 3,35 Rule 29 of the Rules.

Petitioners moved to reconsider the CA Decision, but it was denied.36

Before Us, petitioners contend that the “threatened imminent action” by the RTC to penalize them sua sponte or without regard to the guideline laid down by the Court in Engr. Torcende v. Judge Sardido37 is not proper and calls for the exercise of Our power of supervision over the lower courts. Likewise, citing Panaligan v. Judge Ibay,38 among others, they claim that the threatened citation for contempt is not in line with the policy that there should be wilfullness or that the contumacious act be done deliberately in disregard of the authority of the court.

We deny.

A person guilty of disobedience of or resistance to a lawful order of a court39 or commits any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the administration of justice40 may be punished for indirect contempt. In particular, Section 4, Rule 3 of the Interim Rules states that, in addition to a possible treatment of a party as non–suited or as in default, the sanctions prescribed in the Rules for failure to avail of, or refusal to comply with, the modes of discovery shall apply. Under Section 3, Rule 29 of the Rules, if a party or an officer or managing agent of a party refuses to obey an order to produce any document or other things for inspection, copying, or photographing or to permit it to be done, the court may make such orders as are just. The enumeration of options given to the court under Section 3, Rule 29 of the Rules is not exclusive, as shown by the phrase “among others.” Thus, in Republic v. Sandiganbayan,41 We said:chanRoblesvirtualLawlibrary
To ensure that availment of the modes of discovery is otherwise untrammeled and efficacious, the law imposes serious sanctions on the party who refuses to make discovery, such as dismissing the action or proceeding or part thereof, or rendering judgment by default against the disobedient party; contempt of court, or arrest of the party or agent of the party; payment of the amount of reasonable expenses incurred in obtaining a court order to compel discovery; taking the matters inquired into as established in accordance with the claim of the party seeking discovery; refusal to allow the disobedient party support or oppose designated claims or defenses; striking out pleadings or parts thereof; staying further proceedings.42ChanRoblesVirtualawlibrary
If adjudged guilty of indirect contempt, the respondent who committed it against a Regional Trial Court or a court of equivalent or higher rank may be punished with a fine not exceeding thirty thousand pesos, or imprisonment not exceeding six (6) months, or both.43 In this case, the threatened sanction of possibly ordering petitioners to solidarily pay a fine of P10,000.00 for every day of delay in complying with the September 10, 2002 Order is well within the allowable range of penalty.

As far as the proceedings for indirect contempt is concerned, the case of Baculi v. Judge Belen44 is instructive:chanRoblesvirtualLawlibrary
x x x Under the Rules of Court, there are two ways of initiating indirect contempt proceedings: (1) motu proprio by the court; or (2) by a verified petition.

In the Matter of the Contempt Orders against Lt. Gen. Jose M. Calimlim and Atty. Domingo A. Doctor, Jr. (Calimlim) clarified the procedure prescribed for indirect contempt proceedings. We held in that case:chanRoblesvirtualLawlibrary
In contempt proceedings, the prescribed procedure must be followed. Sections 3 and 4, Rule 71 of the Rules of Court provide the procedure to be followed in case of indirect contempt. First, there must be an order requiring the respondent to show cause why he should not be cited for contempt. Second, the respondent must be given the opportunity to comment on the charge against him. Third, there must be a hearing and the court must investigate the charge and consider respondent’s answer. Finally, only if found guilty will respondent be punished accordingly. (Citations omitted.)chanroblesvirtualawlibrary
As to the second mode of initiating indirect contempt proceedings, that is, through a verified petition, the rule is already settled in Regalado v. Go:chanRoblesvirtualLawlibrary
In cases where the court did not initiate the contempt charge, the Rules prescribe that a verified petition which has complied with the requirements of initiatory pleadings as outlined in the heretofore quoted provision of second paragraph, Section 4, Rule 71 of the Rules of Court, must be filed.
The Rules itself is explicit on this point:chanRoblesvirtualLawlibrary
In all other cases, charges for indirect contempt shall be commenced by a verified petition with supporting particulars and certified true copies of documents or papers involved therein, and upon full compliance with the requirements for filing initiatory pleadings for civil actions in the court concerned. If the contempt charges arose out of or are related to a principal action pending in the court, the petition for contempt shall allege that fact but said petition shall be docketed, heard and decided separately, unless the court in its discretion orders the consolidation of the contempt charge and the principal action for joint hearing and decision. (Emphasis added.)chanroblesvirtualawlibrary
Thus, where there is a verified petition to cite someone in contempt of court, courts have the duty to ensure that all the requirements for filing initiatory pleadings have been complied with. It behooves them too to docket the petition, and to hear and decide it separately from the main case, unless the presiding judge orders the consolidation of the contempt proceedings and the main action.

But in indirect contempt proceedings initiated motu proprio by the court, the above rules, as clarified in Regalado, do not necessarily apply. First, since the court itself motu proprio initiates the proceedings, there can be no verified petition to speak of. Instead, the court has the duty to inform the respondent in writing, in accordance with his or her right to due process. This formal charge is done by the court in the form of an Order requiring the respondent to explain why he or she should not be cited in contempt of court.

In Calimlim, the Judge issued an Order requiring the petitioners to explain their failure to bring the accused before the RTC for his scheduled arraignment. We held in that case that such Order was not yet sufficient to initiate the contempt proceedings because it did not yet amount to a show–cause order directing the petitioners to explain why they should not be cited in contempt. The formal charge has to be specific enough to inform the person, against whom contempt proceedings are being conducted, that he or she must explain to the court; otherwise, he or she will be cited in contempt. The Order must express this in clear and unambiguous language.

x x x

Second, when the court issues motu proprio a show–cause order, the duty of the court (1) to docket and (2) to hear and decide the case separately from the main case does not arise, much less to exercise the discretion to order the consolidation of the cases. There is no petition from any party to be docketed, heard and decided separately from the main case precisely because it is the show–cause order that initiated the proceedings.

What remains in any case, whether the proceedings are initiated by a verified petition or by the court motu proprio, is the duty of the court to ensure that the proceedings are conducted respecting the right to due process of the party being cited in contempt. In both modes of initiating indirect contempt proceedings, if the court deems that the answer to the contempt charge is satisfactory, the proceedings end. The court must conduct a hearing, and the court must consider the respondent’s answer. Only if found guilty will the respondent be punished accordingly.

x x x

In contempt proceedings, the respondent must be given the right to defend himself or herself and have a day in court – a basic requirement of due process. This is especially so in indirect contempt proceedings, as the court cannot decide them summarily pursuant to the Rules of Court. As We have stated in Calimlim, in indirect contempt proceedings, the respondent must be given the opportunity to comment on the charge against him or her, and there must be a hearing, and the court must investigate the charge and consider the respondent’s answer.45ChanRoblesVirtualawlibrary
In this case, the proceedings for indirect contempt have not been initiated. To the Court’s mind, the September 3, 2007 Resolution could be treated as a mere reiteration of the September 10, 2002 Order. It is not yet a “judgment or final order of a court in a case of indirect contempt” as contemplated under the Rules. The penalty mentioned therein only serves as a reminder to caution petitioners of the consequence of possible non–observance of the long–overdue order to produce and make available for inspection and photocopying of the requested records/documents. In case of another failure or refusal to comply with the directive, the court or respondent could formally initiate the indirect contempt proceedings pursuant to the mandatory requirements of the Rules and existing jurisprudence.

Even if We are to treat the September 3, 2007 Resolution as a “judgment or final order of a court in a case of indirect contempt,” this would still not work to petitioners’ advantage. Section 11, Rule 71 of the Rules of Court lays down the proper remedy from a judgment in indirect contempt proceedings. It states:chanRoblesvirtualLawlibrary
Sec. 11. Review of judgment or final order; bond for stay.––The judgment or final order of a court in a case of indirect contempt may be appealed to the proper court as in criminal cases. But execution of the judgment or final order shall not be suspended until a bond is filed by the person adjudged in contempt, in an amount fixed by the court from which the appeal is taken, conditioned that if the appeal be decided against him he will abide by and perform the judgment or final order.
The recourse provided for in the above–mentioned provision is clear enough: the person adjudged in indirect contempt must file an appeal under Rule 41 (Appeal from the Regional Trial Courts) and post a bond for its suspension pendente lite.46 Obviously, these were not done in this case. Instead, petitioners filed a petition for certiorari under Rule 65 of the Rules and did not post the required bond, effectively making the September 3, 2007 Resolution final and executory.

WHEREFORE, premises considered, the instant Petition is DENIED. The March 13, 2008 Decision and April 28, 2008 Resolution of the Court of Appeals in CA–G.R. SP No. 100911, which affirmed the September 3, 2007 Resolution of the Quezon City Regional Trial Court, Branch 226, are AFFIRMED.chanroblesvirtualawlibraryChanRoblesVirtualawlibrary

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin,* Mendoza, and Leonen, JJ., concur.

Endnotes:


* Designated Acting Member in lieu of Associate Justice Roberto A. Abad, per Special Order No. 1640 dated February 19, 2014.

1 Penned by Associate Justice Myrna Dimaranan Vidal, with Associate Justices Jose L. Sabio, Jr. and Jose C. Reyes, Jr., concurring; rollo, pp. 28–41.

2Rollo, p. 42.

3Id. at 120–143.

4Id. at 44–56.

5Id. at 69–77.

6Id. at 78–79.

7Id. at 80–81.

8Id. at 82.

9Id. at 83–85.

10Id. at 90–94.

11Id. at 86–87.

12Id. at 88–89.

13Id. at 96–97, 129.

14Id. at 97, 131.

15Id.

16Id. at 97–98, 131.

17Id. at 98, 131.

18Id. at 98, 132.


19Id. at 99, 133.

20Id. at 95–106.

21Id. at 112, 117.

22Id. at 113, 118.

23Id. at 114, 119.

24Id. at 139.

25Id. at 133–134.

26Id. at 134.

27Id. at 121.

28Id. at 142–143.

29Id. at 144–165.

30 SEC. 3. Compliance. – Compliance with any mode of discovery shall be made within ten (10) days from receipt of the discovery device, or if there are objections, from receipt of the ruling of the court.

31 SEC. 1. Motion for production or inspection; order. – Upon motion of any party showing good cause therefor, the court in which an action is pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain evidence material to any matter involved in the action and which are in his possession, custody or control; or (b) order any party to permit entry upon designated land or other property in his possession or control for the purpose of inspecting, measuring, surveying, or photographing the property or any designated relevant object or operation thereon. The order shall specify the time, place and manner of making the inspection and taking copies and photographs, and may prescribe such terms and conditions as are just.

32 SEC. 2. Objections. – Any mode of discovery such as interrogatories, request for admission, production or inspection of documents or things, may be objected to within ten (10) days from receipt of the discovery device and only on the ground that the matter requested is patently incompetent, immaterial, irrelevant or privileged in nature.

The court shall rule on the objections not later than fifteen (15) days from the filing thereof.

33 276 Phil. 258 (1991).

34 SEC. 4. Sanctions. – The sanctions prescribed in the Rules of Court for failure to avail of, or refusal to comply with, the modes of discovery shall apply. In addition, the court may, upon motion, declare a party non–suited or as in default, as the case may be, if the refusal to comply with a mode of discovery is patently unjustified.

35 SEC. 3. Other consequences. — If any party or an officer or managing agent of a party refuses to obey an order made under section 1 of this Rule requiring him to answer designated questions, or an order under Rule 27 to produce any document or other thing for inspection, copying, or photographing or to permit it to be done, or to permit entry upon land or other property or an order made under Rule 28 requiring him to submit to a physical or mental examination, the court may make such orders in regard to the refusal as are just, and among others the following:

(a) An order that the matters regarding which the questions were asked, or the character or description of the thing or land, or the contents of the paper, or the physical or mental condition of the party, or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;

(b) An order refusing to allow the disobedient party to support or oppose designated claims or defenses or prohibiting him from introducing in evidence designated documents or things or items of testimony, or from introducing evidence of physical or mental condition;

(c) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party; and

(d) In lieu of any of the foregoing orders or in addition thereto, an order directing the arrest of any party or agent of a party for disobeying any of such orders except an order to submit to a physical or mental examination.

36Rollo, pp. 166–174, 42.

37 444 Phil. 12 (2003).

38 525 Phil. 22 (2006).

39 Rules of Court, Rule 71, Sec. 3 (b).

40 Rules of Court, Rule 71, Sec. 3 (d).

41 G.R. No. 90478, November 21, 1991, 204 SCRA 212.

42Republic v. Sandiganbayan, supra, at 225.

43 Rules of Court, Rule 71, Sec. 7.

44 A.M. No. RTJ–09–2179 (Formerly A.M. OCA I.P.I. No. 08–2873–RTJ) and A.M. No. RTJ–10–2234 (Formerly A.M. OCA I.P.I. No. 08–2879–RTJ), September 24, 2012, 681 SCRA 489.

45Baculi v. Judge Belen, supra, at 505–508. (Citations omitted)

46Id. at 502.
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