CONSOLIDATED MINES, INC., PETITIONER, VS. HON. EMIGDIO V. NIETES, IN HIS CAPACITY AS ACTING PRESIDING JUDGE OF BRANCH IV, COURT OF FIRST INSTANCE OF MANILA: THE SHERIFF OF THE P…

Petition for certiorari against an order of the Court of First
Instance of Manila, in its Civil Case No. 34222, ordering execution of the
final decision of the Court of Appeals in Case CA-G.R. No. 34387-R, promulgated
on 28 January 1966, and requiring petitioner Consolidated Mines, Inc., to
deliver to the respondent Credit Corporation of the Philippines –

“the 280,000 shares of stock, together
with all the cash and stock dividends mentioned in and attached to the motion
of March 25, 1966 as Annex A thereto.”

Consolidated Mines, Inc., a Philippine corporation, had
originally filed in the court below (Civil Case No. 34222) a complaint in
inter-pleader against Manuel L. Limsico and the Credit Corporation of the
Philippines, averring that according to the petitioner’s pre-war ledger, the
Credit Corporation (hereinafter designated as Credit) appeared as owner of
certain pre-war stock certificates covering 280,000 shares of plaintiff
Consolidated; that when no claim thereto was filed on or prior to 18 October
1951, said shares reverted to the issuer as treasury stock, pursuant to
Republic Act No. 62, as amended by Republic Act Nos. 148 and 408; that in
March,1956, Manuel Limsico filed an affidavit claiming ownership of the 280,000
shares allegedly purchased by him from Credit, through one Benito Lim; that on
May, 1957 Credit filed its own claim to the same shares of stock, denying
having sold or transferred the same, and that the certificates had been
destroyed on occasion of the liberation; that plaintiff Consolidated advised both
claimants that the shares had reverted to it as treasury stock, but that its
Board of Directors had been authorized to recognize belated claims to the
shares on the merits of the individual claims provided the ownership were
established by final Judgment of the courts. Hence, Consolidated prayed the court a quo to require both
claimants to interplead pursuant to Rule 14 of the original Rules of Court and
determine, after trial, who was entitled to recognition as owner of the shares.

In due course, defendants below, Credit and Limsico, interposed
their respective answers in interpleader, each demanding recognition of title
to the shares and denying the other’s title thereto. Credit also laid claim to the “corresponding stock and/or
cash dividends declared and issued or paid by plaintiff” Consolidated on
the shares in dispute (Court of Appeals Decision, Annex E, petition for
certiorari), but plaintiff opposed the demand.

After trial, the Court of First Instance declared Credit to be
the true and lawful owner of the 280,000 shares, but awarded it no divi­dends;
and both claimants appealed to the Court of Appeals. The latter decided affirming the ownership of Credit against
Limsico, but also found that Credit’s failure to submit proof of ownership of
the shares was not its fault and that –

“We do not believe it to be proper to
hold that the shares lawfully owned by the Credit Corporation are unclaimed
shares and have become part of plaintiff’s treasury stock. And since the shares remain to be the
property of the Credit Corporation, it is entitled to the dividends which are
the civil fruits thereof” (Decision, Annex E, page 6).

The Court of Appeals further found that there was no waiver of
the claim to the dividends. The
dispositive part of the decision was in the following terms:

“WHEREFORE, the Credit Corporation is hereby declared the
owner of the 280,000 shares of stock of the Consolidated Mines, Inc. covered by
stock certificates Nos. 40019, 40484 and 47129 and is entitled to receive what­ever
dividends had been declared and issued or paid corresponding thereto, and the
latter is ordered to account for and deliver such divi­dends to the
former. Costs in this instance to be
taxed against the Consolidated Mines, Inc. and Manuel L. Limsico.”

This judgment became final and executory.

After the records were remanded to the court of origin, Credit
moved for execution of the judgment averring that its 280,000 shares had earned
another 616,000 shares as stock dividends and P66,934.00 as cash
dividends. Consolidated opposed,
declaring itself ready to issue and deliver to the defendant Credit the 2 80,
000 shares referred to in the judgment of the Court of Appeals, and to pay
P1,540.00 representing the total amount of dividends earned by the shares as of
5 September 1951, as no dividends were earned by said shares after October,
1951. This point Credit contested, and
by order of 26 April 1966 (Annex H, petition) the Court of First Instance
declared itself without power to change or modify the decision of the Court of
Appeals, stating:

“…………………………………………………………………… This Court, therefore, cannot do
otherwise than to order the execution of the the judgment rendered by the Court
of Appeals, which is to order the plaintiff Consolidated Mines, Incorporated to
deliver to the defendant The Credit Corporation of the Philippines the 280,000
shares of stock and ‘whatever dividends had been declared and issued or paid
corresponding thereto, that is, those that pertain to the said shares whether
or not they have been actually paid or issued to the com­pany itself. It would be absurd to admit that the Credit
Corporation of the Philippines is entitled to those dividends and yet it cannot
receive them simply because the Consolidated Mines, Incorpora­ted, has
manipulated its own books in such a manner as to deprive the Credit Corporation
of the Philip­pines of its own property.

“FOR ALL THE FOREGOING, the Court hereby orders the execution
of the judgment of the Court of Appeals, dated January 2 8, 1966, requiring the
plaintiff to deliver to the defendant The Credit Cor­poration of the
Philippines the 280,000 shares of stock, together with all the cash and stock
dividends mentioned in arid attached to the motion of March 25, 1966, as Annex
A thereto.”

Its motion for reconsideration having been denied, Consoli­dated
resorted to this Court for certiorari, urging that the order complained of
unduly enlarged the scope of the judgment of the Court of Appeals, without even
requiring evidence on the aver­ments of Credit as to the stock and cash dividends;
that the order and the refusal to reconsider it were in violation of due
process, and in abuse of discretion amounting to lack of jurisdiction.

Respondents answered, pointing out that Consolidated had not
offered any evidence, nor requested a formal hearing for presenta­tion of
evidence; that petitioner never challenged the correctness of Credit’s schedule
of cash and stock dividends submitted with its motion for execution; and that
petitioner’s remedy was appeal and not certiorari.

We agree with petitioner that the orders complained of actually
deviate from the final decision of the Court of Appeals, in so far as they
equate “whatever dividends had been declared and issued or paid”
(corresponding to the litigated 280,000 shares of capital stock), as adjudged
by the appellate court, with “those (dividends) that pertain to the said
shares whether or not they have been actually paid or issued to the
company itself”. The final
decision being executed did not require nor order the corporation to declare
dividends on the li­tigated shares adjudicated to respondent Credit; it merely
adjudged the latter entitled to dividends that had been “declared and
issued or paid corresponding thereto”. There is justification for such award, notwith­standing the declaration
in the body of its decision that the shares were not treasury stock. For it stands to reason that whether
corporate divi­dends “pertain” to any particular shares or
shareholder primarily depends on the terms of the resolution declaring
them. Even if the petitioner
Consolidated had erroneously considered the disputed shares as not entitled to
dividends because they had become treasury stock in 1951, if it had exhausted
the surplus then available for dividends by distri­buting it among the other
outstanding shares of stock, any dividends to be paid now upon the 280,000
shares would be in excess of the surplus, and in violation of law.^[1] The results would be particularly serious in
the case of stock dividends: for here any stock dividend in addition to that
originally declared could dilute the other outstanding share holdings beyond
what was contemplated by the stockholders in authorizing or ratifying the
original stock dividend, and could result in extending the increase in the
number of shares beyond what was authorized in the amended articles of
incorporation or in the certificates of increase of capital recorded with the
Securities and Exchange Commission.

It is plain from the foregoing that the opposing claims of the
parties raise issues that should be threshed out in a formal hearing and upon
com­petent evidence. To adjudicate said
issues without evidence, as the court below has done, is arbitrary and
constitutes a grave abuse of discretion.

The contention that the petitioner never challenged the cor­rectness
of respondent Credit’s schedule of cash and stock dividends attached to its
motion for execution is untenable, for there is a plain contradiction between
that schedule and the amount of dividends re­cognized by Consolidated in its
opposition to the motion for execution. As against 616,000 shares and P66,934.00 claimed as dividends by Credit,
Consolidated attached to its opposition a certified statement showing that only
P1,540.00 were earned as dividends. An
issue was thus adequately posited, and the absence of a formal challenge
becomes irrelevant.

Finally, under the circumstances of the present case herein
adverted to and because the court below arbitrarily ordered that the petitioner
turn over property to the private respondent not covered by the previous judg­ment,
without any evidence in support of the order, we think that recourse to
certiorari was proper, since appeal with its attendant delays was not an
adequate remedy.

WHEREFORE, the writ prayed for is granted, and the orders
of the Court of First Instance of Manila now complained of are set aside, and
the preliminary writ of injunction issued is made permanent. The records are ordered returned to the
Court a quo for further proceedings conformable to this opinion. Costs against private respondent Credit
Corporation of the Philippines.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, and Fernando, JJ., concur.

Teehankee, J., did not take
part.

Barredo, J., in the result.

Villamor, J., on leave.

^[1]
Section 16, Corporation Law as amended by republic Act 3518.