CEFERINO ZAIDE, JR., REPRESENTING CEFERINO ZAIDE, SR., LUCITA GA­CUTAN, AND HON. CICERO JURADO, PETITIONERS, VS. COURT OF APPEALS (FIRST SPECIAL DIVISION) AND STA. LUCIA LANDLES…

Zaide versus Sta. Lucia Landless Association

The Case

This is a petition brought before the Supreme Court by Ceferino Zaide, Junior, representing his deceased father Ceferino Zaide, Senior, together with Lucita Gacutan, against the Court of Appeals and the Sta. Lucia Landless Association, Incorporated. The petitioners ask the Court to reverse the appellate court's ruling that the ordinary courts have no jurisdiction over their complaint to compel the corporation to convey to them the lots they had fully paid for. The case matters because it draws the boundary between the jurisdiction of the Securities and Exchange Commission and that of the Regional Trial Courts over disputes between a corporation and its members, and it teaches that the intra-corporate character of a controversy is not changed by the death of the member or by the transfer of his claim to his heir.

Procedural History

Zaide and Gacutan filed a complaint in the Court of First Instance of Rizal to compel the corporation to execute deeds of absolute sale over the lots in question and to pay damages and attorney's fees. The defendants failed to answer despite an extension of time, and they were declared in default. The trial court rendered a judgment by default ordering the execution of the deeds of absolute sale and awarding moral and exemplary damages, actual damages, and attorney's fees to both plaintiffs.

On petition of the corporation and its officers, the Intermediate Appellate Court issued a writ of certiorari annulling and setting aside the default judgment. It held that the Court of First Instance had no competence over the dispute, which it characterized as one arising out of intra-corporate relations over which the Securities and Exchange Commission has original and exclusive jurisdiction. Zaide and Gacutan then came to the Supreme Court on appeal to reverse that judgment.

Facts

A parcel of land in Barrio Santolan, Manggahan, Pasig, then part of Rizal, used to belong to the Roman Catholic Archbishop of Manila. It was occupied by numerous persons who in 1972 organized themselves into a non-stock corporation called the Sta. Lucia Landless Association, Incorporated, which they registered with the Securities and Exchange Commission. The chief purpose of the corporation was to secure lands from the government or from private persons and to distribute them to the members at reasonable cost, so that each member might have a lot.

Even before the corporation acquired the land from the Archbishop, it had already entered into agreements with its members for the sale to them, on installment, of particular portions of the property. Among those members were Ceferino Zaide, Senior and Lucita Gacutan, who both completed payment of the stipulated price for their lots. The corporation did not dispute the completion of payment, but it averred that the agreements included the members' implicit undertaking to contribute to the expenses of subdivision, survey, approval of the survey plan, documentation, registration of titles, and assessment with the proper government office.

On March 31, 1979, the corporation purchased the land from the Archbishop. After the purchase, Zaide and Gacutan demanded conveyance of the lots they had paid for, and the corporation refused for the reason already stated. In March 1982, they sued the corporation in the Court of First Instance of Rizal, impleading its president and secretary as defendants.

Issues

• Whether or not the Securities and Exchange Commission has exclusive jurisdiction over the dispute between the corporation and Zaide and Gacutan concerning the conveyance of the lots they had paid for.
• Whether or not the death of Ceferino Zaide, Senior and the substitution of his son, who is not a member of the corporation, removed the controversy from the category of an intra-corporate dispute.
• Whether or not the default judgment of the trial court had become final and executory because no appeal was taken from it.

Applicable Provisions

Section 3 of Presidential Decree Number 902-A, as quoted in the decision, provides:

The Securities and Exchange Commission in the exercise of its absolute jurisdiction, supervision and control over all corporations is exclusively empowered to prevent, correct and adjudicate devices or schemes employed by the board of directors or officers amounting to fraud and misrepresentation which are detrimental to the interest of the public and/or of members of the organization.

This provision is the source of the Commission's exclusive jurisdiction over intra-corporate controversies, and it is the basis for holding that the dispute in this case belongs to the Commission and not to the ordinary courts.

Ruling

On the first issue, the Court held that the appellate court's factual conclusions are binding: the corporation is not engaged in the business of acquiring and subdividing lands for sale to the public; it was organized by landless occupants to pool their resources and acquire the land for apportionment among themselves; and the land was bought with funds raised from membership dues and installment payments of members. These facts negate any possibility of success by the petitioners. As regards the lot of Ceferino Zaide, Senior, the transaction was one between the corporation and a member. He was able to purchase the property in virtue of his being a member and an actual occupant of a portion of the land bought precisely for distribution to members. Were he not a member and an actual occupant, the corporation would not have had the right under its charter and by-laws to sell to him any part of the land, and such a sale would have been ultra vires, that is, beyond the corporation's lawful powers, and fatally defective.

On the second issue, the Court held that the nature of the dispute was not altered by the death of Zaide, Senior. His son simply stepped into his shoes, and the rights sought to be enforced against the corporation are the self-same rights acquired by the father as a member and actual occupant. The dispute is cognizable exclusively by the Securities and Exchange Commission in accordance with Presidential Decree Number 902-A, and it is the Commission which shall eventually determine whether the defense of the corporation is tenable. So too, Lucita Gacutan purchased the land as actual occupant and as member of the association; she would not otherwise have had the right or capacity to buy it, and its sale to her would have been an ultra vires act. In any event, whether the association could refuse to convey the land to her until she paid her share in the expenses, and whether the sale to her, assuming she is not a member, is valid or annullable at the instance of the corporation, are matters that are intra-corporate controversies exclusively cognizable by the Commission.

On the third issue, the Court held that the argument that the judgment had become final is untenable. The judgment was null and void because it was rendered without jurisdiction over the subject matter, and its nullity may be raised at any stage of the action, for a void judgment may be assailed or impugned at any time.

Doctrine

A dispute between a non-stock corporation and its members concerning the sale and distribution of lots acquired by the corporation for apportionment among its members is an intra-corporate controversy, over which the Securities and Exchange Commission has original and exclusive jurisdiction under Section 3 of Presidential Decree Number 902-A, and not the ordinary courts. The capacity of a member to buy a portion of the corporate land flows from his membership and actual occupancy; without these, the sale would be ultra vires and fatally defective. The death of the member does not convert the controversy into an ordinary civil action, because the heir merely steps into the shoes of the deceased and enforces the self-same rights. Finally, a judgment rendered without jurisdiction over the subject matter is void, and its nullity may be raised at any stage of the action.

Disposition

The Supreme Court affirmed the decision of the Intermediate Appellate Court, with costs against the petitioners, and the default judgment of the trial court was annulled for having been rendered without jurisdiction.

Remember This

Memorize the line that a dispute between a corporation and its member over the conveyance of corporate land acquired for distribution to members is an intra-corporate controversy exclusively cognizable by the Securities and Exchange Commission, and that the member's death does not change its nature. Examiners use this case to test jurisdiction over intra-corporate disputes and the rule that a void judgment may be assailed at any time.