METRO MANILA TRANSIT CORPORATION, PETITIONER, VS. HON. CONCHITA C. MORALES, PRESIDING JUDGE, REGIONAL TRIAL COURT, BRANCH 110, PASAY CITY, PEDRO M. SAN JUAN, JR., PARALUMAN D. B…

In the questioned resolution of March 16, 1988, the Court held that the controversy
between petitioner Metro Manila Transit Corporation (MMTC) and private
respondents, sole stockholders of CBL Transit Incorporated (CBLT), is intracorporate and therefore cognizable by the Securities
and Exchange Commission to the exclusion of the regular courts.

Such conclusion did not sit well with private respondents who
forthwith moved for a reconsideration on the following
grounds:

[a]      The
Court’s finding that petitioner’s takeover of the management and operations of
CBLT was with the consent of private respondents is without factual basis;

[b]      Without that consent,
petitioner’s takeover was patently illegal and therefore petitioner was an
intruder.  Any dispute between the CBLT
stockholders and an intruder could never be considered as intracorporate
to bring the case within the competence of the SEC;

[c]      The proceedings
before respondent trial court had progressed past the midway point and to
transfer the case to the SEC at that stage could only mean that the parties
would have to start all over again.

At the instance of private respondents, both parties were heard
by the Court in oral argument on May 4,
1988 “to elucidate further on important facts and legal issues
in person”, after which they were directed to submit their respective
memoranda.

Acting thereon, the Court “Resolved to DENY the motion for
reconsideration and the denial is FINAL.”

In seeking reconsideration, private respondents advanced the
basic premise that petitioner was an intruder in the newly-organized CBLT and
hence there is no intracorporate dispute exclusively
cognizable by the SEC.  We are not so
persuaded.

It will be recalled that upon the execution of the Lease-Purchase
Agreement on March 11, 1981,
petitioner MMTC was already a stockholder of CBLT, with five (5) shares in its
name and assured one (1) seat in the board of directors.^[1]
This privilege was enjoyed by then Metro Manila Commission Vice
Governor Ismael Mathay,
Jr.  Thus, it is not accurate to state
that petitioner was an outsider.

Then there was the Voting Trust Agreement dated November 25, 1982 whereby petitioner
became private respondents’ trustee of their 7,475 shares in CBLT.^[2]
By virtue of that agreement, title to the 7,475 shares passed to petitioner
which then possessed all the voting and other rights pertaining to those
shares.  While the agreement was
effective for only five (5) years, it was still very much in force on August 14, 1987 when private
respondents commenced the present “derivative” suit against
petitioner.  Clearly then, the civil
action between private respondents, as stockholders of CBLT, and petitioner, as
their trustee, was within the nature of corporate relations falling under the
jurisdiction of the SEC.

Private respondents also contended that contrary to the finding
of this Court, they did not give their consent to the takeover on November 10, 1982 and, therefore,
said undertaking on the part of petitioner was completely illegal.

The absence of consent would have been a strong argument in favor
of private respondents but their subsequent actuations have militated against
such an assertion.  We shall explain.

There is no question of concealment or want of knowledge in the
case.  As two of the private respondents
allowed themselves to be named vice-chairman and vice president/general
chairman of the board (Llamas, Jr. and Cutiongco,
respectively), they are charged from the start with knowledge of the precise
terms and stipulations contained in the Lease-Purchase Agreement.  They were aware that, at he very least, the
takeover was irregular since it was not provided for in the agreement.  But for all their justified misgivings, it
was only on August 14, 1987,
or five years subsequent to the takeover in question, that the complaining
stockholders filed the aforementioned suit demanding, among others, the return
to them of the management and control of the ertswhile
privately-owned bus firm.  It was only
when petitioner notified them that their past due account representing unpaid
rentals, interests and others had reached the astronomical amount of P21,496,637 as of June
30, 1987 that they woke up from their deep slumber.

So far as the evidence disclosed, private respondents raised no
overt protest against the takeover. 
(They were more vocal about the alleged deplorable condition of the
leased buses.) While it is debatable whether or not they did agree to the
takeover, the cold fact remains that they took no direct action to promptly
disavow or disaffirm the takeover and the election of the MMTC nominees into
the board of directors of CBLT which followed as a natural consequence.  For while private
respondents might have been “muted” by reason of the repressive
martial law regime, they are estopped at this late
stage to deny the existence of a corporate relationship with petitioner.  By their continued silence, they have permitted
this particular group of individuals, the MMTC-appointees and two of their own
included, to hold sway over their corporation as its
bona fide officers.  Private respondents
cannot now be heard, after a prolonged period of time, to denounce such corporate
officers as “interlopers” when the latter should have been ousted
from the very beginning, given the proper proceedings initiated for that
purpose.

The rule of acquiescence by silence has made the instant case the
same as though the “interlopers” had been duly elected to the board.
“To hold otherwise would be contrary to the plainest principles of reason
and of good faith, and involve a mockery of justice.  Parties must take consequences of the
position they assume.  They are estopped to deny the reality of the state of things which
they have made appear to exist, and upon which others have been led to
rely.  Sound ethics require that the
apparent in its effects and consequences should be as if it were real, and the
law properly so regards.^[3]

Thus, from the allegations in the complaint in Civil Case No.
5141-P and as amply demonstrated by private respondents themselves, the Court
is convinced that there is an intracorporate
relationship between the parties, thus bringing their dispute under the
preclusive ambit of the SEC.  Both
petitioner and private respondents are stockholders of CBLT; the action,
admittedly derivative, primarily sought to regain from the MMTC-dominated board
of directors the control and management of CBLT; and while the takeover of November
10, 1982 might have been without the conformity of private respondents, the
same has become insignificant in the light of the latter’s acquiescence and
silence which call for the application of the doctrine of estoppel,
with the end result that the “interlopers” are regarded as bona fide
directors.

The Court cannot understand private respondents’ marked
reluctance to bringing their case before the SEC.  For them to state that the current dispute is
beyond the agency’s expertise is grossly unfair to that
body and completely unfounded. 
Precisely, the present trend is towards increased reliance on the
specialized training of an agency like the SEC which is better equipped to deal
with particular types of conflict. “In this era of clogged court dockets,
the need for specialized administrative boards or commissions with the special
knowledge, experience and capability to hear and determine promptly disputes on
technical matters or essentially factual matters, subject to judicial review in
case of grave abuse of discretion, has become well high indispensable.  x x x Between the power lodged in an
administrative body and a court, the unmistakable trend has been to refer it to
the former.”^[4]

The Court is not unaware of the fact that the trial before the
lower court had already passed the halfway mark.  That is regrettable.  But be that as it may, the question of proper
forum is not a mere technicality to be peremptorily discarded for the sake of
expediency and practicality.  PD 902-A
has categorically decreed that the SEC has the original and sole legal
authority to hear and decide cases involving intracorporate
disputes.  So should it be for the
instant case.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin, and Cortes, JJ., concur.

^[1] Rollo, p. 27.

^[2] Rollo, p. 85.

^[3] Casey
v. Galli, 94 US
673, 680, 24 L. Ed. 168; 28 Am Jur 2d 641, note 5.

^[4] Abejo v. De la Cruz, G.R. Nos. 63558, 68450-51, May
19, 1987, 149 SCRA 654, 670.