Strategic Alliance v. Star Infrastructure

G.R. No. 187872 (November 17, 2010)

Court deemed disputes over loans, shares intra-corporate, ensuring stockholder rights protected.

Facts:

Petitioner Strategic Alliance Development Corporation (STRADEC) is a domestic corporation engaged in development activities, with its principal office located in Bayambang, Pangasinan. STRADEC was one of the incorporators of the respondent Star Infrastructure Development Corporation (SIDC), owning 49% of its shares. In 2004, certain officers of STRADEC executed a promissory note for a loan of P10,000,000 from Robert L. Wong, another incorporator of SIDC, and pledged STRADEC's shares in SIDC as security. Due to STRADEC's defaults, Wong acquired the pledged shares through a notarial sale.

In July 2006, STRADEC, through its President Cezar T. Quiambao, filed a petition in the Regional Trial Court (RTC) of Batangas City, seeking to nullify the loan agreement, the pledge, and the subsequent sale of its shares, claiming that the officers who executed the agreements lacked authority. STRADEC also sought to invalidate certain stockholders' meetings and the registration of the share transfers in SIDC's books.

The RTC denied STRADEC's application for a preliminary injunction, ruling that the venue was improperly laid and that the case should be filed where the defendants resided. STRADEC's motion for reconsideration was also denied, leading to an appeal to the Court of Appeals (CA).

The CA upheld the RTC's decision, stating that STRADEC's first two causes of action were civil in nature and not intra-corporate disputes, thus affirming the RTC's ruling on venue and the holding of further proceedings in abeyance due to related cases pending in other courts.

Issues:

  1. Whether the first and second causes of action in STRADEC's petition qualify as intra-corporate disputes.
  2. Whether the RTC erred in ruling that venue was improperly laid for the first and second causes of action.
  3. Whether the RTC's decision to hold further proceedings in abeyance was justified.
  4. Whether the RTC erred in denying STRADEC's application for a writ of preliminary injunction.

Arguments:

  • Petitioner (STRADEC):

    • STRADEC argued that its first and second causes of action, which sought to nullify the loan and pledge agreements, were intra-corporate disputes as they involved issues between stockholders and the corporation.
    • STRADEC contended that the RTC's ruling on venue was erroneous and that the case should have been heard in Batangas City, where it maintained its principal office.
    • STRADEC claimed that the holding of further proceedings in abeyance was unjustified, as the issues could be resolved independently of other pending cases.
    • STRADEC asserted that it had a clear and unmistakable right to a preliminary injunction to protect its interests in the shares.

  • Respondents (Wong, Yujuico, Sumbilla, and SIDC):

    • The respondents maintained that the first and second causes of action were purely civil in nature and did not constitute intra-corporate disputes, thus justifying the RTC's ruling on venue.
    • They argued that the RTC acted within its discretion in holding further proceedings in abeyance due to the related cases pending in other courts.
    • The respondents contended that STRADEC failed to demonstrate a clear right to the issuance of a preliminary injunction.

Court's Decision and Legal Reasoning:

The Supreme Court found merit in STRADEC's petition, reversing the CA's decision. The Court held that STRADEC's first and second causes of action were indeed intra-corporate disputes, as they arose from the relationships between the stockholders and the corporation. The Court applied both the relationship test and the nature of the controversy test to determine that the issues were rooted in intra-corporate relations and involved the enforcement of rights and obligations under the Corporation Code.

The Court ruled that the RTC erred in its venue determination, as the case could be properly filed in Batangas City, where STRADEC's principal office was located. The Court emphasized that venue is not jurisdictional and can be waived, and that the RTC should have allowed the case to proceed.

Furthermore, the Court found that the RTC's decision to hold further proceedings in abeyance was unjustified, as the issues presented by STRADEC could be resolved independently of the other pending cases. The Court also granted STRADEC's application for a writ of preliminary injunction, stating that STRADEC had a clear right to protect its interests in the shares pending the resolution of the case.

Significant Legal Principles Established:

  1. The definition of intra-corporate disputes encompasses actions arising from relationships between stockholders and the corporation, as well as the enforcement of rights and obligations under the Corporation Code.
  2. Venue in intra-corporate disputes can be laid where the corporation's principal office is located or where the defendants reside, and such determinations are not strictly jurisdictional.
  3. Courts have the discretion to allow cases to proceed despite related cases pending in other jurisdictions, particularly when the issues can be resolved independently.
  4. The issuance of a preliminary injunction requires a clear and unmistakable right, and courts should afford litigants the opportunity to protect their interests during the pendency of litigation.