THIRD DIVISION
G.R. No. 233646, June 16, 2021
FLORENCIO T. MALLARE, ARISTOTLE Y. MALLARE AND MELODY TRACY MALLARE, Petitioners, v. A&E INDUSTRIAL CORPORATION, Respondent.
D E C I S I O N
DELOS SANTOS, J.:
Before the Court is a Petition for Review on Certiorari [With Prayer for Issuance of Temporary Restraining Order (TRO) and Writ of Preliminary Injunction (WPI)]1 under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision2 dated August 18, 2017 of the Court of Appeals (CA) in CA-G.R. SP No. 143728. The CA annulled and set aside the Order3 dated October 6, 2015 of the Regional Trial Court (RTC) of Manila, Branch 46, which denied the application for the issuance of a WPI incorporated in the Verified Complaint (With Application for the Issuance of a Writ of Preliminary Injunction/ for injunction, quo warranto, and damages filed by respondent A&E Industrial Corporation (A&E).
The present controversy stemmed from an intra-corporate dispute between the two factions of stockholders of A&E: (1) petitioners Florencio T. Mallare (Florencio), Aristotle Y. Mallare (Aristotle), and Melody Tracy Mallare (Melody) who are collectively known as the Mallare Group; and (2) Anthony Hwang (Anthony), Evelyn Hwang (Evelyn), Elizabeth Lim Tong (Elizabeth), Stefan Hugo Hwang (Stefan), and Sarah Patricia Hwang (Sarah) who are collectively referred to as the Hwang Group.
Meanwhile, A&E's directors and officers are:chanroblesvirtualawlibrary
NAME SHARES SUBSCRIBED AMOUNT Florencio T. Mallare 117,500 P1,175,000.00 Jane Y. Mallare 120,000 P1,200,000.00 Anthony Edmund Hwang 118,750 P1,187,500.00 Evelyn L. Hwang 75,000 P750,000.00 Aristotle Y. Mallare 118,750 P1,187,500.00 Melody Tracy Mallare 75,000 P750,000.00 Total 625,000 P6,250,000.00
On December 9, 2011 , Jane died and the positions of corporate secretary and CFO were left vacant.7
DIRECTORS CORPORATE POSITION Florencio T. Mallare President Jane Y. Mallare Chief Finance Officer and
Corporated Secretary Anthony Edmund Hwang Vice President Aristotle Y. Mallare Chief Executive Officer
A&E did not hold an annual stockholders' meeting for the year 2012. Thus, the designated officers and directors of A&E continued holding their positions in a holdover capacity.23
DIRECTORS CORPORATE POSITION Florencio T. Mallare President Anthony Edmund Hwang Chief Finance Officer/Corporated Secretary Aristotle Y. Mallare Chief Executive Officer
On November 26, 2012, Anthony also filed a criminal case for perjury against Florencio and Aristotle.29 Thereafter, he executed three separate Deeds of Assignment of Shares of Stock in favor of Elizabeth, Stefan, and Sarah, assigning to them the right to vote one share of stock each in A&E.30
- 1. The Mallare group prevented Anthony from having any access to the files, records, and documents of A&E,24
- The Mallare group did not secure Anthony's consent, approval, or signature for A&E 's transactions;25
- On May 22, 2012, Florencio and Aristotle executed a Notice of Adverse Claim, alleging that Anthony had misrepresented himself as A&E's corporate secretary when he submitted the 2011 GIS to the SEC;26
- On May 31, 2012, Florencio wrote to the SEC, claiming that A&E's GIS filed on March 16, 2012 and signed by Anthony is false. He also submitted a GIS signed by Aristotle, stating that no annual stockholders' meeting was held in February 2012;27 and
- On July 13, 2012, Florencio filed a criminal complaint for perjury, estafa, and other fonns of swindling against Anthony in the Office of the City Prosecutor of Quezon City.28
The shares of Jane were represented by Anthony by virtue of the Assignment of Voting Rights dated May 17, 2011 executed by Jane.33
Stockholders Present: Shares:Anthony Edmund Hwang 118,747Evelyn L. Hwang 75,000Eli zabeth Lim Tong 1Stefan Hugo Hwang 1Sarah Patricia Hwang 1 Stockholders Represented: Shares:Jane Y. Mallare 120,000Total 313,750Total No. of Shares Outstanding 625,000Percentage of Shares Present and Outstanding 50.20%
- 1. Filing of a false GIS;37
- Demanding from A&E's board of directors to cease and desist from performing their functions;38
- Interfering with corporate matters, including the collection of lease payments;39
- Disbursing and appropriating corporate funds for persona1 use;40
- Unauthorized opening of a new bank account in the name of A&E;41
- Continued possession of corporate office and properties to the exclusion of A&E's duly elected board of directors and officers;42 and
- Harassment of A&E employees.43
WHEREFORE, premises considered the prayer for the issuance of the Writ of Preliminary Injunction is hereby DENIED.The RTC ratiocinated that considering the evidence presented during the hearing for the issuance of the writ, it was discernable that resolving the intricacies of the requisites of preliminary injunction would also technically resolve the merits of the main case.48
Let a NOTICE OF PRE-TRIAL be issued to the parties.
SO ORDERED.47
WHEREFORE, premises considered, the instant petition is GRANTED. There being grave abuse of discretion on the part of public respondent, the assailed Order dated October 6, 2015 is hereby ANNULLED and SET ASIDE.The CA held that the issuance of the WPI would not result in a prejudgment of the main case. It emphasized that the grant of preliminary injunction is provisional and that its purpose is only to preserve the status quo to protect the interests of A&E, represented by the Hwang Group as its duly elected board members and officers, during the pendency of the main action. It noted that the fact that Florencio, Aristotle, and Melody are holdover directors and officers of A&E has been supervened by the holding of the annual stockholders' meeting on Febmary 23, 2013, which is given presumptive validity until nullified.52
Accordingly, let a WRIT OF PRELIMINARY INJUNCTION be issued, as it is hereby issued, enjoining herein private respondents from usurping the office and position of the Board of Directors and officers of A&E Industrial Corporation elected on February 23, 2013 and from misrepresenting to third parties and to the public as such and from possessing and disbursing corporate funds, properties and assets of A&E Industrial Corporation, conditioned upon the posting of a bond by petitioner A&E-Hwang in the amount of Two Hundred Thousand Pesos (Php200,000.00).
The proceedings in the lower court should continue with dispatch.
SO ORDERED.51
Section 3. Grounds for issuance of preliminary injunction. - AIt bears stressing, however, that even if the factual circumstances of the case fall under any of the grounds enumerated in Rule 58, Section 3, a writ of injunction will only lie when the applicant has satisfactorily shown that: (1) he/she/it has a clear and unmistakable right to be protected; (2) there is a material and substantial invasion of such right; (3) there exists an urgent need for the writ to prevent irreparable injury to the applicant; and (4) no other ordinary, speedy, and adequate remedy exists to prevent the infliction of ineparable injury.63 Of these, the most crucial is the existence of a right to be protected. The applicant must be able to establish a right in esse that is "clearly founded on or granted by law or is enforceable as a matter of law."64
preliminary injunction may be granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts either for a limited period or perpetually;
(b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or i s procuring or suffering to be done some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.
Based on the initial evidence, documentary and testimonial, presented by petitioner A&E-Hwang during the scheduled hearings for the application for preliminary injunction, petitioner A&E-Hwang was able to establish that it has a clear and legal right to be protected from the acts of herein private respondents representing themselves as corporate officers/Board of A&E corporation. It was able to show that through the annual stockholders meeting held on February 23, 2013, Anthony Edmund Hwang, Evelyn L. Hwang, Elizabeth Lim Tong, Stefan Hugo Hwang and Sarah Patricia Hwang were elected as Board of Directors of A&E corporation and that the elected officers were: Anthony Edmund Hwang, as Corporate Secretary; Evelyn L. Hwang, as Chairman/President; and Elizabeth Lim Tong, as Treasurer. Further, petitioner A&E-Hwang was able to establish that the required notices were sent to all stockholders of record and that the existence of a quorum was determined to valid ly proceed with the said annual stockholders meeting. As it appears, Anthony is the majority shareholder of A&E corporation. He has the right to vote 238,750 shares in A&E corporation: (1) 120,000 shares as assignee of Jane pursuant to the deed of Assignment o( Voting Rights; and (2) 118,750 shares as owner thereof.Here, the Hwang Group consistently claims that it has clear and legal right to exercise corporate powers after having been elected as directors and officers during the February 23, 2013 stockholders' meeting of A&E, at which meeting a quorum was purportedly present. Anthony represented and voted the shares of stock registered in the name of his deceased moth er Jane on the strength of the Assignment of Voting Rights executed by Jane in his favor.68 TheCA readily welcomed such assertion and accorded presumptive validity to the meeting and election notwithstanding the Mallare Group's legitimate objection as to Anthony's right to represent and vote Jane's shares. However, it is well to note that at the time the CA rendered its Decision and granted the injunctive relief, Florencio was al ready appointed special administrator of Jane's estate. Both the law and jurisprudence hold that in case of death of a sh areholder, the executor or administrator duly appointed by the court is vested with the legal title to the share and entitled to vote it. The shares of stocks of the decedent are held by the administratoro division of the estate is effected.69
This Court gives preswnptive validity to the elections held on February 23, 2013 wherein the Hwang group was the elected members of the Board and officers of A&E corporation. Until a determination by the public respondent as to the validity of the Assignment of Voting Rights executed by Jane in favor of her son. Anthony, i. e ., whether Anthony can validly exercise and vote said shares in the meeting, whether said deed of Assignment of Voting Rights is null and void , whether it is the Special Administrator who is entitled to vote said shares, among others - this Court thus recognizes, in the meantime, the Hwang group as the duly elected members of the Board and officers of A&E corporation.
Private respondents contend that the Assignment of Voting Rights is null and void on the ground of defect in its notarization, i.e., that the Notary Public did not notarize the said deed; that there is no record of said deed in the Notarial Section of the Office of the Clerk of Court of RTC, Quezon City; and that Anthony did not appear before the said Notary Public because he was not in the Phili ppines at that time. However, this alleged defect in the notarization of the Assignment of Voting Rights would not affect the genuineness of the signature of Jane as appearing in said deed, unless proven otherwise. Hence, in the meantime, this Court gives presumptive validity to the elections held on February 23, 2013, wherein Anthony had the right to vote 238,750 shares, including that of the 120,000 shares of Jane which the latter assigned to Anthony.
Be it noted that private respondents claim that they are the holdover directors and officers of A&E corporation, as reflected in the March 14, 2011 GIS of the corporation. There being no election held on 2012 and that the election held on February 23, 2013 did not push through for failure to muster a quorum, private respondents assert that they are exercising the functions of their office as directors and officers of the corporation in a holdover capacity. As such, they are the legitimate members of the Board and officers of A&E corporation.
However, the fact that they are holdover directors and officers of A&E has been supervened by the holding of the annual stockholders meeting on February 23, 2013, which, as We have explained above, is given presumptive validity until nullified. Moreover, records show that private respondents have not initiated any action to challenge the validity of the February 23, 2013 elections. While it appears that private respondents already knew of the said election on April 1, 2013, the fact remains that they have not assailed the same through any proceeding.
Thus, in the meantime, this Court makes a provisional determination, only for the purpose of resolving the propriety of issuing a writ of preliminary injuncti on, that it is the Hwang group which is the duly elected directors and officers of A&E corporation, and they are rightfully entitled to exercise the corporate powers of the corporation. This is the status quo - the last actual, peaceable and uncontested situation which preceded the instant controversy.67 (Underscoring supplied)
Endnotes:
* On official l eave.
1Rollo (Vol. 1), pp. 3-77.
2 Id. a t 78-93; penned by Associate Justice Rosmari D. Cara ndang (now a Member of the Court), with Associate Justices Stephen C. Cruz and Carmelita Salandanan-Manahan, concurring.
3Rollo (Vol. II), pp. 473-480; penned by Presiding Judge Rainelda H. Estacio-Montesa.
4 Id. a t 429-470. Docketed as Civil Case No. 14131241 .
5 "Jane Yu", "Jane Yu Mallare," and "You Yunn Chyo" in some parts of the records.
6 Rollo (Vol. 1), pp. 78-79.
7 Id. at 79-80.
8 Id. at 8.
9 Id.
10 Id. at 9.
11 Id.
12 Id.
13 Id. at 10.
14 Id. at 11.
15 Id. at 11-12.
16 Id. at 14.
17 Id. at 15.
18 Id.
19 Id.
20 Supra note 4.
21Rollo (Vol. 1), p. 16.
22 See Comment/Opposition [To Petition for Review on Certiorari (With Prayer for Issuance of Temporary Restraining Order and Wri t of Preliminary Injunction) dated 7 September 2017] of A&E Industrial Corporation; rollo (Vol. III), pp. 793-904.
23 Id . at 806.
24 Id.
25 Id.
26 Id. at 807.
27 Id.
28 Id.
29 Id.
30 Id. at 812.
31 Id. at 811.
32 Id. at 813.
33 Id.
34 Id. at 8l4.
35 Id.
36 Id.
37 Id. at 816.
38 Id. at 816-817.
39 Id. at 817-819.
40 Id. at 819-821.
41 Id. at 821-823.
42 Id. at 823.
43 Id. at 824.
44Rollo (Vol. II), pp. 471-472.
45 Id. at 472.
46 Supra note 3.
47Rollo (Vol. II), p. 480.
48 Id. at 478.
49Rollo (Vol. III), pp. 905-1005.
50Rollo (Vol. I), p. 39.
51 Id . at 92.
52 Id. at 88-91.
53 Id. at 22.
54 Id. at 26.
55 Id. at 30-33.
56Rollo (Vol. III ), p. 849.
57 Id. at 853.
58
RULE 6
ELECTION CONTESTS
SECTION 1. Cases covered. - The provisions of this rule shall apply to election contests in stock and non-stock corporations.
SEC. 2. Definition. - An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected by the stock holders in a close corporation or by members of a non-stock corporation where the articles of incorporation or by-laws so provide.
SEC. 3. Complaint. - In addition to the requirements in section 4, Rule 2 of these Rules, the complaint in an election contest must state the following:cralawlawlibrary59Rollo (Vol. III), p. 861.
- The case was filed within fifteen (15) days from the date ofthe election if the by-laws of the corporation do not provide for a procedure for resolution of the controversy, or within fifteen ( 15) days from the resolution of the controversy by the corporation as provided in its by-laws; and
- The plaintiff has exhausted all intra-corporate remedies in election cases as provided for in the by-laws of the corporation.
60 Section 1. Preliminary Injunction defined; classes. -A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or final order, requiring a part y or a court, agency or a person to refrain from a particular act or acts. It may also require the performa nce of a particular act or acts, in which case it shall be known as a preliminary mandatory injunction.
61Rollo (Vol. II), p. 429.
62Philippine Charity Sweepstakes Office v. TMA Group of Companies Pty Ltd., G.R. Nos. 212143, 225457 & 236888, August 28, 2019.
63Municipality of Famy, Laguna v. Municipality of Siniloan, Laguna, G.R. No. 203806, February 10, 2020.
64 Lim v. BPI Agricultural Development Bank, 628 Phil. 601, 607 (2010).
65United Coconut Planters Bank v. Lumbo, 723 Phil. 314, 330 (2013).
66Bicol Medical Center v. Bator , 819 Phil. 447, 459 (2017).
67Rollo (Vol. 1), pp. 89-91.
68 Id. at 40.
69Tan v. Sycip, 530 Phil. 609, 625 (2006); see Section 54 of the Revised Corporation Code, which
provides:
Section 54. Right to Vote of Secures Creditors and Administrators. - In case a stockholder grants securit y in terest in his or her shares in stock corporations, the stockholder-grantor shall have the right to attend and vote at meetings of stock holders, unless the secured creditor is expressly given by the stockholder-grantor such right in writing which is recorded in the appropriate corporate books.
Executors, administrators, recei vers, and other legal representatives duly appointed by the court may attend and vote on behalf of the stockholders or members without need of any written proxy. (Underscoring supplied)
70 Section 51. Quorum in Meetings. - Unless otherwise provided in this Code or in the bylaws, a quorum shall consist of the stock holders representing a majority stock or a majority of the members in the case of nonstock corporations. (Underscoring supplied)
71 Section 23. Election of Directors or Trustees.
x x x
At all elections of directors or trustees, there must be present, either in person or through a representative authorized to act by written proxy, the owners of majority of the outsta nding capital stock, or if there be no capital stock, a majority of the members entitl ed to vote. When so authorized in the bylaws or by a majority of the board of directors, the stockholders or members may also vote through remote communication or in absentia: Provided , That the right to vote through such modes may be exercised in corporations vested with public interest, notwithstanding the absence of a provision in the bylaws of s uch corporations. (Underscoring supplied)
72 Supra note 66.
73Philippine Ports Authority v. Pier 8 Arrastre, 512 Phil. 74, 90-91 (2005).
74Olalia v. Hizon, 274 Phil. 66 (1991).
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