VICMAR DEVELOPMENT CORP., AND/OR VICENTE L. ANGLIONGTO, PETITIONERS, VS. THE COURT OF APPEALS, THE SECURITIES & EXCHANGE COMMISSION, ALBERTO P. ATAS, AND RUFINO T. NASSER, RESPO…

Vicmar Development versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Vicmar Development Corporation and its president, Vicente Angliongto, against the Court of Appeals, the Securities and Exchange Commission, and private respondent Rufino Nasser. The petitioners challenge the validity of the Court of Appeals decision of January 21, 1988, which affirmed the orders of the Securities and Exchange Commission recalling its earlier order directing the enforcement of a writ of preliminary injunction. The case matters because it fixes the rule on the recall of a preliminary injunction in an intracorporate controversy, and because it teaches when the extraordinary remedy of certiorari will lie against an interlocutory order of the Securities and Exchange Commission.

Procedural History

The dispute began before the Securities and Exchange Commission, where Vicmar and Angliongto filed a verified petition against Nasser in an intracorporate controversy. After hearing, the Commission's hearing officer issued a writ of preliminary injunction on September 19, 1983, enjoining Nasser from acting as Executive Vice-President, General Manager, or officer in any capacity of the corporation. Nasser challenged that writ before the then Intermediate Appellate Court, which denied and dismissed his petition on April 30, 1985. That decision became final and executory.

Vicmar then moved for implementation of the writ. On March 5, 1986, the hearing officer granted the motion and directed the Provincial Commander of Cagayan de Oro City to implement the writ. Acting on Nasser's manifestation and motion of March 17, 1986, the Commission recalled that order on March 18, 1986, and denied reconsideration on May 13, 1986. Vicmar and Angliongto then filed a petition for certiorari, prohibition, and mandamus before the Court of Appeals, which dismissed the petition on January 21, 1988 and dissolved its temporary restraining order. Hence, this petition for review on certiorari before the Supreme Court, which was given due course.

Facts

In August 1982, a conflict arose between Vicente Angliongto and Rufino Nasser over the exclusive control and management of Vicmar Development Corporation. Nasser had served as a director, Executive Vice-President, and General Manager from 1974 until the annual stockholders' meeting of August 26, 1982, when he was not re-elected to the board or to his management positions. Angliongto, the incoming president, advised Nasser that he would actively manage the corporate affairs, and asked him to turn over all corporate books and records. Nasser did not heed the demand and continued to hold office and enter into transactions.

On July 7, 1983, Vicmar and Angliongto filed a verified petition before the Securities and Exchange Commission, praying for a restraining order and a permanent injunction. On September 19, 1983, after hearing, the hearing officer issued a writ of preliminary injunction enjoining Nasser from acting as, or representing himself to be, an officer of the corporation. Nasser's petition against that writ was dismissed by the Intermediate Appellate Court on April 30, 1985, and the dismissal became final.

Meanwhile, in November 1983, during the pendency of that appellate case, Angliongto and Nasser entered into an Agreement dated November 10, 1983. Under it, simultaneously with the delivery by Angliongto to Nasser of all corporate books in his possession, including the stock and transfer book, stock certificate books, and all stock certificates of Vicmar duly indorsed in blank, Nasser would deliver to Angliongto the sum of four million two hundred thousand pesos as part of the consideration for the settlement. When Vicmar later moved to implement the injunction, Nasser manifested that Angliongto and his associates and relatives had transferred all their shares to him under that Agreement. The Commission then recalled the order of implementation, pending hearing on Nasser's motion.

Issues

• Whether or not the Securities and Exchange Commission abused its discretion in recalling its order to enforce the writ of preliminary injunction.
• Whether or not the determination of who holds the exclusive right of ownership, control, and management of the corporation under the Agreement of November 10, 1983 falls within the jurisdiction of the Securities and Exchange Commission.
• Whether or not the petitioners are estopped by laches from contesting the recalled orders.

Applicable Provisions

Section 6-a of Presidential Decree Number 902-A, as discussed by the Court, provides:

In order to effectively exercise such jurisdiction, the SEC possesses, inter alia, the power to issue preliminary or permanent injunction, whether prohibitory or mandatory in accordance with the pertinent provisions of the Rules of Court.

This provision supplies the Commission's authority to issue and, as the Court holds, to recall a preliminary injunction in an intracorporate controversy.

Ruling

On the first issue, the Court held that no grave abuse of discretion can be attributed to the Securities and Exchange Commission. A writ of preliminary injunction, which the Court calls the strong arm of equity, issues only upon a showing of a clear and present right to be protected and facts violative of that right. Here, the Agreement of November 10, 1983 showed a transfer of ownership, control, and management of Vicmar from Angliongto to Nasser. To allow execution of the writ in favor of the petitioners despite that transfer would be baseless, the contract having shown prima facie that Nasser is entitled to remain as Vice-President and General Manager. The Court stressed that the issuance or recall of a preliminary injunction is an interlocutory matter that remains at all times within the control of the court, and that the grant or denial of an injunction rests upon the sound discretion of the lower tribunal.

On certiorari, the Court explained that the only question involved is jurisdiction, either the want or excess thereof, and that abuse of discretion warrants the extraordinary remedy only when it is so grave, so patent, and so gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined, or to act at all, as to be equivalent to having acted without jurisdiction. That standard finds no application here.

On the second issue, the Court held that the determination of who between the parties has the exclusive right of ownership, control, and management under the Agreement vests with the Securities and Exchange Commission, because the issue involves an intracorporate controversy, that is, one which arises between the stockholder and the corporation. The Court quoted its earlier ruling that there is no distinction, qualification, or any exemption whatsoever.

On the third issue, the Court noted that the petitioners filed their petition for certiorari to annul the order of March 18, 1986 only on December 3, 1986, after the lapse of almost nine months and after having formally offered their evidence before the Commission. Estoppel by laches arises from negligence or omission to assert a right within a reasonable time, and after having submitted to the jurisdiction of the tribunal. The petitioners are therefore estopped from contesting the orders.

Doctrine

A writ of preliminary injunction, whether prohibitory or mandatory, is issued to protect a party's rights before final determination, and only upon a showing of a clear and present right to be protected and facts violative of that right. The issuance or recall of a preliminary injunction is an interlocutory matter that remains at all times within the control of the court, and the grant or denial of an injunction rests upon the sound discretion of the lower tribunal. Certiorari lies only for grave abuse of discretion, meaning a capricious and arbitrary exercise of judgment so patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined, or to act at all, as to be equivalent to having acted without jurisdiction. The Securities and Exchange Commission has jurisdiction over intracorporate controversies, which include disputes between a stockholder and the corporation, and its authority to issue injunctions under Section 6-a of Presidential Decree Number 902-A carries with it the authority to recall them. Finally, estoppel by laches arises from negligence or omission to assert a right within a reasonable time, especially after submitting to the jurisdiction of the tribunal.

Disposition

The petition was denied and the judgment of the Court of Appeals was affirmed in toto, with costs against the petitioners.

Remember This

The single line worth memorizing is that the issuance or recall of a preliminary injunction is an interlocutory matter that remains at all times within the control of the court, reviewable only for grave abuse of discretion. Examiners use this case to test the standard for certiorari against interlocutory orders of the Securities and Exchange Commission and the doctrine of estoppel by laches.