EMBASSY FARMS, INC., PETITIONER, VS. HON. COURT OF APPEALS (INTERMEDIATE APPELLATE COURT), HON. ZENAIDA S. BALTAZAR, JUDGE OF THE REGIONAL TRIAL COURT, BRANCH CLVIII (158), PASI…

This is a petition for certiorari and prohibition with
preliminary injunction seeking to set aside the resolution* dated
October 13, 1987 in CA-G.R. SP No. 12817 entitled “Eduardo B. Evangelista
v. Honorable Camilo O. Montesa,
et al.” and CA-G.R. SP. No. 12834 entitled “Embassy Farms, Inc. v. Hon. Zenaida
S. Baltazar, et al.” lifting the restraining
order dated September 22, 1987, and the resolution dated November 3, 1987
denying petitioner’s motion for reconsideration.

It appears on record that sometime on August 2, 1984, Alexander G. Asuncion (AGA
for short) and Eduardo B. Evangelista (EBE for short) entered into a Memorandum
of Agreement (Annex “A” of the petition).  Under said agreement EBE obligated himself to transfer to AGA 19 parcels of
agricultural land registered in his name with an aggregate area of 104,447
square meters located in Loma de Gato, Marilao, Bulacan, together with
the stocks, equipment and facilities of a piggery farm owned by Embassy Farms, Inc., a registered corporation wherein
ninety (90) per cent of its shares of stock is owned by EBE.  EBE also obligated himself to cede, transfer
and convey “in a manner absolute and irrevocable any and all of his shares
of stocks” in Embassy Farms Inc. to AGA or his nominees “until the total of said shares of stock so transferred shall constitute 90% of
the paid-in-equity of said corporation” within a reasonable time from
signing of the document.  Likewise, EBE
obligated to turnover to AGA the effective control and management of the
piggery upon the signing of the
agreement.

On the other hand, AGA obligated himself, upon signing of the
agreement to pay to EBE the total sum of close to P8,630,000.00.  Within reasonable time from signing of the
agreement AGA obligated himself to organize and register a new corporation with an authorized capital stock
of P10,000,000.00 which upon registration will take over all the rights and
liabilities of AGA.

Pursuant to clause 8 of the Memorandum of Agreement, on August 2, 1984, EBE turned over to AGA
the effective control and management of
the piggery at Embassy Farms.  Likewise,
in accordance with clause 15 of the Memorandum of Agreement EBE served
as President and Chief Executive of the Embassy Farms with a monthly salary of P15,000.  EBE also endorsed in blank all his shares of
stock including that of his wife and three nominees with minor holdings in
Embassy Farms Inc.  Out of the total
3,125 shares of stocks EBE has 2,725 shares, his wife Epifania
has 250 shares, while Angel Santos, Armando Martin and Teofilo
Mesina had 50 shares, each registered in their
names.  Said shares of 3,125 correspond
to the paid subscription because as reflected in the Articles of Incorporation
(Annexes “B”) EBE subscribed 10,900 shares, Epifania
Evangelista 1,000 shares, while Angel Santos, Armando Martin and Teofilo Mesina had 200 shares
each subscription in the capital
stocks of the corporation.  However,
despite the indorsement, EBE retained possession of
said shares and opted to deliver to AGA only upon full compliance of the latter
of his obligations under the Memorandum of Agreement.

Notwithstanding the non-delivery of the shares of stocks, in a Deed of Transfer of Shares of Stock dated August 1984, but notarized
on June 20, 1985,
AGA transferred a total of 8,602 shares to several persons.

For failure to comply with his obligations, EBE intimated the
institution of appropriate legal action.

On April 10, 1986,
AGA pre-empted EBE by filing an action for rescission of the Memorandum of
Agreement with damages.  The case was
docketed as Civil Case No. 53335 and assigned to Branch CLVIII, Regional Trial
Court, National Capital Judicial Region, Pasig, Metro Manila alleging among
others, EBE’s misrepresentation on the piggery business
since said business is actually losing
and EBE’s failure to execute
the deeds of conveyance of the 19 parcels of land.

The Pasig
Court in its order dated July 30, 1987, granted a writ of preliminary
injunction the dispositive portion of which reads, viz:

“WHEREFORE, this Court hereby orders the issuance of a writ of
preliminary injunction whereby restraining the plaintiff, his nominees, agents,
security guards, employees and all persons claiming under him from disposing of
in any manner removing and carrying away
the stocks including rights sucklings,
equipment and other facilities in Embassy Farms, Inc. in Bo. Loma de Gato, Marilao, Bulacan; from harrassing
defendant and his employees and associates; and preventing defendant, assisted by his said employees
and associates from discharging, performing and exercising his duties, prerogatives as director, president and
chief executive of Embassy Farms, Inc. until
further orders from this Court subject to defendant’s filing a bond with this
Court in the amount of P1,750,000,00 executed
in favor of herein plaintiff, Alexander G. Asuncion, conditioned upon
defendant’s payment to such plaintiff Asuncion of all damages which the latter
may sustain by reason of this injunction in the event the Court shall finally decide
otherwise and in case said plaintiff, Alexander G. Asunsion
is adjudged entitled to such damages.

SO ORDERED.” (p.
258, Rollo)

On September 14, 1987,
the Pasig Court
on EBE’s motion issued an order to break open the
premises of Embassy Farms to enforce the writ of preliminary injunction dated July 30, 1987.

On September 18, 1987,
Embassy Farms, Inc. filed a petition with the Court of Appeals for prohibition
with preliminary injunction.  The case
was docketed as CA-G.R. 12834
and entitled “Embassy Farms, Inc. v. the Hon. Zenaida
S. Baltazar, et al.” In its resolution dated September 22, 1987, the Fifth Division of the Court of Appeals enjoined the
enforcement of the Pasig Court’s
order dated July 30, 1987.

Meanwhile, on July 20,
1987, Embassy Farms Incorporated instituted an action for
Injunction with damages against EBE.  In
its complaint it alleged that sometime on July 11, 1987, EBE forced his way inside the Embassy Farms
and while inside took some cash and check amounting to P423,275.45.  The case was docketed as Civil Case No.
348-11-89 and raffled to Branch 19, Regional Trial Court’s 3rd Judicial Region,
Malolos, Bulacan.

On August 10, 1987,
upon a motion to dismiss filed by EBE, the Malolos Court issued an order,
the dispositive portion provides, viz:

“WHEREFORE, the motion to dismiss is hereby denied for lack of
merit, and a writ of preliminary injunction is hereby issued enjoining
defendant, his agent and/or any person claiming right under him to refrain or
desist from interfering in the management and operation of Embassy Farms, Inc.
at Barangay Loma de Gato, Marilao, Bulacan, until further
orders from this Court, subject to plaintiff’s filing of a bond in the amount
of P150,000.00 executed in favor
of defendant conditioned for the payment of all damages which the latter may
sustain by reason of this injunction and in case said defendant is adjudged
entitled thereto.

SO ORDERED.” (p. 296, Rollo)

On August 27, 1987,
EBE filed a motion for the reconsideration of the order dated August 10, 1987 of the Malolos Court.

On September 15, 1987,
without awaiting the resolution of his motion for reconsideration, EBE filed a
Petition for Certiorari and Prohibition with preliminary injunction with
the Court of Appeals, docketed as CA-G.R. No. 12817.

On October 13, 1987,
the Fifth Division of the Court of Appeals issued a consolidated resolution in
CA-G.R. Nos. 12817 and 12834 sustaining the order dated July 30, 1987 of the Pasig Court.  Accordingly, it set aside and lifted the
restraining order dated September 22,
1987 it issued in CA-G.R. SP No. 12834.  The appellate court based its resolution on
its findings in the hearing that the Board of Directors of Embassy Farms are
nominees of AGA so that it considered AGA and Embassy Farms as one and the same
person.  It noted that EBE has not
delivered the certificate of stock outstanding in his name in the books of the
corporation to AGA because the latter allegedly has not complied with the terms
and conditions of the memorandum of agreement. 
Also the appellate court opined that “(I)n the instant case, it
will appear that no transfer of shares of stock has been made by Evangelista to
Asuncion as there had been no delivery of the certificate in order to produce
or effect the transfer of such shares of stock.” (Rollo,
pp. 231-232).

Embassy Farms filed a motion for reconsideration thereto but it
was denied in the resolution dated November
5, 1987 of the appellate court. 
Hence, this petition.

The primary issue for resolution is whether or not the appellate
court committed a reversible error when it sustained the order dated July 13,
1987 of the Pasig Court and lifted the restraining
order it had issued in CA-G.R. SP No. 12834.

It is the contention of Petitioner that the appellate court acted
without jurisdiction or in excess of jurisdiction and/or gravely abused its
discretion when it sustained the order dated July 30, 1987 of the Pasig Court and lifted the restraining order it had issued
on September 22, 1987 in CA-G.R. SP No. 12834. 
Petitioner argued that the Pasig Court has no jurisdiction to hear and decide EBE’s application for the issuance of a writ of preliminary
injunction in Civil Case No. 53335 because the ouster of EBE and his
reinstatement as President and Chief Executive Officer of Embassy Farms is an
intra-corporate matter within the exclusive and original jurisdiction of the
Securities and Exchange Commission. 
Petitioner also claimed that the Pasig Court did not acquire jurisdiction over Embassy
Farms because it was not made a party in Civil Case No. 53335.  Neither could the orders of the Pasig Court be enforced at Loma de Gato,
Marilao, Bulacan, the
principal office of the corporation, because it is located outside of the
National Capital Judicial Region. 
Petitioner likewise claimed that the writ of preliminary injunction
issued in Civil Case No. 53335 was
irregularly issued because it
was issued one day ahead of the injunction bond.

We do not agree
with the petitioner.

It must be stressed at the outset that the case at bar is merely
an offshoot of a controversy yet to be decided on the merits by the Pasig Court.  The action for rescission filed by AGA in
Civil Case No. 53335 now pending before the Pasig Court will ultimately
settle the controversy as to whether it is AGA or EBE or both parties who have reneged on their obligations under the memorandum of agreement.  We
do not want to pre-empt the Pasig Court on the main case.

From the pleadings submitted by the parties it is clear that
although EBE has indorsed in blank the shares outstanding in his name he has
not delivered the certificate of stocks to AGA because the latter has not fully
complied with his obligations under the memorandum of agreement.  There being
no delivery of the indorsed shares of stock AGA cannot therefore effectively transfer to other person or his nominees the undelivered shares of
stock.  For an effective transfer of
shares of stock the mode and manner of transfer as prescribed by law
must be followed (Navea v. Peers Marketing
Corp. 74 SCRA 65).  As provided under
Section 3 of Batas Pambansa Bilang
68, otherwise known as the Corporation Code of the Philippines, shares of stock may be transferred by delivery to the transferree of the certificate properly indorsed.  Title may be vested in the transferree by the delivery
of the duly indorsed certificate of stock (18 C.J.S. 928, cited in Rivera
v. Florendo, 144 SCRA 643).  However, no transfer shall be valid, except
as between the parties until the transfer is properly recorded in the books of
the corporation (Sec. 63 Corporation Code of the Philippines).

In the case at bar the indorsed certificate of stock was not
actually delivered to AGA so that EBE is still the controlling stockholder of
Embassy Farms despite the execution of the memorandum of agreement and the turn over of control and management of
the Embassy Farms to AGA on August 2, 1984.

When AGA filed on April
10, 1986 an action for the rescission of contracts with damages the
Pasig Court
merely restored and established the status quo prior to the execution of the
memorandum of agreement by the issuance of a restraining order on July 10, 1987 and the writ of
preliminary injunction on July 30,
1987.  It would be unjust and
unfair to allow AGA and his nominees to control and manage the Embassy Farms despite the fact that AGA who is
the source of their supposed shares of stock in the corporation is not asking
for the delivery of the indorsed certificate of stock but for the rescission of
the memorandum of agreement.  Rescission
would result in mutual restitution (Magdalena Estate v. Myrick, 71 Phil. 344)
so it is but proper to allow EBE to manage the farm.  Compared to AGA or his nominees EBE would be
more interested in the preservation of the assets, equipment and facilities of
Embassy Farms during the pendency of the main case.

Contrary to petitioner’s contention the dispute at bar is not an intracorporate controversy within the exclusive and
original jurisdiction of the Securities and Exchange Commission under
Presidential Decree No. 902-A as amended by Presidential Decree No. 1758.  To be an intracorporate
controversy it must pertain to any of the following relationships:  (1) between the corporation, partnership or
association and the public; (2) between the corporation, partnership or
association and the state in so far as its franchise, permit or license to
operate is concerned; (3) between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) among the
stockholders, partners or associates themselves (Union Glass and Container
Corp. v. SEC 126 SCRA 31; DMRC Enterprises v. Este
Del Sol Mountain Reserve Inc. 132 SCRA 293; Rivera v. Florendo,144 SCRA 643; Abeijo v. De la Cruz. 149 SCRA 654).

Basically the conflict here is between AGA and EBE arising from a
contract denominated as a memorandum of agreement.  Here the controversy in reality involves the
contractual rights and obligations of AGA and EBE under the memorandum of
agreement and not to the enforcement of rights and obligations under the
corporation code or the internal or intracorporate
affairs of the corporation.  AGA or his
nominees are not even the lawful stockholders of Embassy Farms because EBE for
a justifiable reason has withheld the delivery of the indorsed certificate of
stocks so that the suppose transfer by virtue of the memorandum of agreement
could not be properly recorded in the book of the corporation.  The dispute therefore does not fall within
the special jurisdiction of the Securities and Exchange Commission but with
regular Courts.  AGA or his nominees unduly dragged the petitioner
Embassy Farms in order to resist the order
of the Pasig Court
and to confuse the real and legitimate issue in the case at bar.

On the enforceability of the order of the Pasig Court, We see no cogent
reason to depart from the ruling of the trial court which was sustained by the
Court of Appeals.  Generally, an
injunction under Section 21 of Batas Pambansa Bilang 129 is enforceable within the region.  The reason is that the trial court has no
jurisdiction to issue a writ of preliminary injunction to enjoin acts being
performed or about to be performed outside its territorial boundaries.  (C.F. Tan vs. Sarmiento,
L-24971, June 20, 1975).  However, to
avoid an irreparable prejudice We allowed in Dagupan
Electric Corporation et al. v. Pano (95 SCRA 693) the
enforcement of an injunction to restrain acts committed outside the territorial
jurisdiction of the issuing Court.  In Dagupan case We ruled that a Court of First Instance has
jurisdiction to try a case although the acts sought be restrained are committed
outside its territorial jurisdiction where the principal business addresses of
the parties and the decisions on the
acts to be restrained are located and originated within the Court’s
jurisdiction.

Here to avoid an injustice and irreparable injury We apply the
exception rather than the general rule. 
Both parties are residents of the National Capital Region.  AGA is a resident of 7-A
Lake Street, San Juan, Metro
Manila while EBE is residing at 113 R. Tirana Street, BF Homes, Paranaque, Metro Manila.  AGA filed the case with the Pasig Court and the injunction as an equitable remedy
intended to preserve the status quo is directed against AGA, his nominees and
agents.  Besides, as noted by the Pasig Court all orders to be enforced and executed at
Embassy Farms in Loma de Gato, Marilao,
Bulacan emanated from its main office which is
located at the 2nd Floor, Agora Complex, Domingo Street, San Juan, Metro
Manila.

Finally, on the issue whether or not the writ of injunction was
irregularly issued as it was issued on July 30, 1987 one day ahead of the
injunction bond, suffice it to say that aside from the factual findings of the
Court of Appeals that the date July 31,
1987, appearing on the bond is a typographical error it must be pointed out
that with the injunction bond the party enjoined is amply protected against loss or damage in case it is finally decided that the injunction ought not to
have ben granted.

WHEREFORE, the instant petition is hereby
DENIED for lack of merit.

SO ORDERED.

Melencio-Herrera, (Chairman),
Padilla, and Regalado,
JJ., concur.

Sarmiento, J., on leave.

* Penned by Associate Justice Celso
L. Magsino and concurred in by Associate Justices Jose A. R. Melo and Esteban M. Lising.