MANUEL D. RECTO, CESAR A. DIGNOS, AND FRANCISCO S. AÑONUEVO, PETITIONERS, VS. BISHOP FEDERICO O. ESCALER, S.J., JOAQUINA DE ARANAZ, FILOMENA BAGAMASBAD, ELADIA BANGUILAN, TEODON…

Recto versus Escaler

The Case

This is a petition for review on certiorari brought by Manuel D. Recto, Cesar A. Dignos, and Francisco S. Añonuevo against Bishop Federico O. Escaler, S.J., and other members of Buklod ng Pag-ibig Foundation, Incorporated. The dispute began as an intra-corporate controversy over the validity of the foundation's Amended By-laws, but it reaches the Supreme Court on a narrower and more instructive question: whether a trial court may render judgment on the merits of an intra-corporate case without first conducting the pre-trial conference that the Interim Rules of Procedure for Intra-Corporate Controversies make mandatory. The case matters because it teaches that procedural rules on pre-trial are not idle ceremony; a judgment rendered before the case is ripe is premature and must be set aside, and the Supreme Court will not resolve factual questions that were never ventilated in a proper trial.

Procedural History

The controversy started before the Securities and Exchange Commission, where the respondents filed a petition to declare the Amended By-laws null and void, with a prayer for a temporary restraining order and a writ of preliminary injunction. The Commission issued a temporary restraining order and conducted hearings on the injunction applications, but did not reach the merits. When the Securities Regulation Code took effect in August 2000, the case was transferred to the Regional Trial Court of Quezon City, Branch 93.

The trial court resolved to proceed with the case on the principal prayer for nullification of the Amended By-laws and to resolve the injunction incidents, and directed the parties to submit memoranda. Without holding a pre-trial conference, the trial court then rendered its Judgment, finding the amendment of the by-laws irregular and declaring the Amended By-laws of May 14, 2000 null and void, while dismissing the counterclaim and awarding no damages.

Both parties appealed to the Court of Appeals. The Court of Appeals granted the respondents' appeal, dismissed the petitioners' appeal, vacated and set aside the trial court's Judgment, and remanded the case for the required pre-trial conference and further proceedings, holding that the trial court had failed to comply with the mandatory pre-trial rule. The petitioners then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Buklod ng Pag-ibig Foundation, Incorporated is a non-stock, non-profit foundation registered with the Securities and Exchange Commission. Its principal co-founder and Spiritual Director, Father Pascual Adorable, S.J., passed away on June 24, 1997, and Father Nicasio Cruz, S.J., succeeded him as Spiritual Director.

On September 15, 1999, the petitioners, sitting as the Foundation's Council of Elders, wrote to the Jesuit Provincial informing him that they were returning Father Cruz to the Jesuit Order, and they sent Father Cruz a letter terminating him as Spiritual Director. Bishop Teodoro Bacani intervened on behalf of the Manila Archbishop and reinstated Father Cruz until he could turn over the position to Bishop Federico Escaler, S.J., a proposal the petitioners accepted. On May 10, 2000, Bishop Escaler, acting as Spiritual Director, informed the Foundation's apostles that the term of the present Elders should have ended on March 17, 2000, and set May 19, 2000 for the selection of a new set of Elders. Instead of complying, the petitioners issued a bulletin stating that Bishop Escaler was not their Spiritual Director, and they submitted Amended By-laws to the Securities and Exchange Commission, which approved them on May 16, 2000.

The respondents then filed a petition before the Securities and Exchange Commission to declare the Amended By-laws null and void, alleging that Bishop Escaler did not preside over the meeting and that the majority of qualified members were not notified. After the case was transferred to the Regional Trial Court, that court rendered judgment on the merits without any pre-trial, and the Court of Appeals set the judgment aside as premature. Hence this petition.

Issues

• Whether or not the trial court validly rendered judgment on the merits of the intra-corporate controversy without first conducting the mandatory pre-trial conference under the Interim Rules of Procedure for Intra-Corporate Controversies.
• Whether or not the questions raised by the petitioners, concerning the status of Bishop Escaler as Spiritual Director and the validity of the Amended By-laws, are questions of fact that the Supreme Court may resolve in a petition for review on certiorari.

Applicable Provisions

Rule 4, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies provides:

Section 1. Pre-trial conference; mandatory nature. - Within five (5) days in Rule 3 hereof, whichever comes later, the court shall issue and serve an order immediately setting the case for pre-trial conference and directing the after the period for availment of, and compliance with, the modes of discovery prescribed parties to submit their respective pre-trial briefs. The parties shall file with the court and furnish each other copies of their respective pre-trial brief in such manner as to ensure its receipt by the court and the other party at least five (5) days before the date set for pre-trial.

This provision makes the pre-trial conference mandatory, and it is the very rule the trial court failed to observe when it rendered judgment without any pre-trial.

Rule 4, Section 4 of the same Interim Rules provides:

Sec. 4. Judgment before pre-trial. - If, after submission of the pre-trial briefs, the court determines that, upon consideration of the pleadings, the affidavits and other evidence submitted by the parties, a judgment may be rendered, the court may order the parties to file simultaneously their respective memoranda within a non-extendible period of twenty (20) days from receipt of the order. Thereafter, the court shall render judgment, either full or otherwise, not later than ninety (90) days from the expiration of the period to file the memoranda.

This provision allows a judgment even before trial, but only after the pre-trial briefs are submitted and the parties are ordered to file memoranda, none of which happened in this case.

Ruling

On the first issue, the Court held that the petition has no merit and affirmed the Court of Appeals. The conduct of a pre-trial is mandatory under the Interim Rules. The trial court never ordered the submission of the parties' pre-trial briefs, and neither were they made to submit their memoranda on the merits. The only memoranda earlier required dealt with the threshold question of whether the trial court should proceed to hear the case at all, and both parties agreed that it should, believing the case was not yet ripe for final disposition. The trial court's Judgment was bereft of any justification for dispensing with pre-trial and trial, and there was no showing that the parties had waived pre-trial. Because there was no pre-trial, it remained unclear exactly what issues were to be resolved. The Court also stressed that the only matter heard and submitted when the case was transferred was the prayer for preliminary injunction, and an injunctive writ is not a judgment on the merits, being based on initial and incomplete evidence, so that substantial proceedings were still needed to put the main controversy to rest.

On the second issue, the Court held that the questions raised by the petitioners are questions of fact that are not within the province of the Supreme Court to decide, and more importantly, they were never ventilated in the proper proceedings before the trial court because the case did not even reach the pre-trial stage. Nothing less than a full-blown trial is needed to test the conflicting claims of the parties.

Doctrine

A Bar candidate should retain these rules. First, the pre-trial conference in intra-corporate controversies is mandatory under Rule 4, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies, and a judgment rendered on the merits without it is premature and must be set aside. Second, a court may render judgment before pre-trial only in the manner Rule 4, Section 4 allows, that is, after the submission of pre-trial briefs and after ordering the parties to file their memoranda; absent these steps, the judgment is voidable on appeal. Third, a writ of preliminary injunction is not a judgment on the merits, since it rests on initial and incomplete evidence, so the findings made in resolving an injunction application are interlocutory and cannot supply the basis for a final adjudication of the main case. Fourth, questions of fact are not the proper subject of a petition for review on certiorari under Rule 45, especially where they were never tried below.

Disposition

The Supreme Court denied the petition and affirmed the Decision of the Court of Appeals, directing the Regional Trial Court of Quezon City to conduct a pre-trial in the case and thereafter to hear and decide it with dispatch.

Remember This

Memorize this line: pre-trial in intra-corporate cases is mandatory, and a judgment on the merits rendered without it is premature. Examiners use this case to test the mandatory nature of pre-trial under the Interim Rules and the rule that a preliminary injunction is never a judgment on the merits.