OMICTIN vs. COURT OF APPEALS

This is a case of intra-corporate dispute. A scene typical mostly in the private sector. Like five or six men puts up a corporation, something comes up, and the gentlemen couldn't handle their differences. So apparently everything comes to a still, assets liquidated, business dissolved.

Well not obviously in this case since the intra-corporate dispute had transpired in its foreign parent company but the repercussions had somehow resulted a domino effect on the Filipino key players in this case sending another intra-corporate dispute locally. This case is bombarded with so many inter-locking issues. Well one is should we apply the doctrine of primary jurisdiction?

Actually just the dissolution of it's local branch alone made the whole damn thing hugely complicated. You see that's the usual question when a company is dissolved. Whose handling who or what, who or which faction has a better right. And usually contractual stipulations in agreements and provisions on its charter are disregarded and set aside.

BTW The inserted image is the actual case. Mejo nakakalito pero try to take note of the highlighted words. The yellow are the names of the important characters in this case so you could easily track them down.  The green highlighted words are the companies. 3 lang naman yan and all are just 1 company they call Saag Corporation (BHD) originating in Malaysia.

SAAG CORPORATION (BHD) - Malaysia

SAAG (S) PTE. LTD. - Singapore

SAAG PHILIPPINES, INC. - Philippines

If you browse the company in the web their now called SAAG Consolidated (M) Bhd. An industrial firm engaged in engineering, procurement, and commissioning of turbo machinery, rigs, and other equipment related to the oil and gas. I dunno but, this case may have been an offshoot of that internal dispute which consequently have changed the Saag name from Corporation to Consolidated. Sorry, that's far as the inside story I could infer from this case.  

So obviously they have already successfully made expansion to another Asian country which is Singapore. And in this particuar case they're caught making expansion in our local soil.

The root of the argument is the refusal of the return of two company cars, but that's just the tip of the ice-berg, there's a deeper strain to it. Everybody couldn't just get along.

This is a battle between two Filipino Operations Managers. One has risen as company president and then defunct, the other appointed temporarily.

Let's take a look and see what eventually happened.

FACTS

Petitioner VINCENT OMICTIN, Operations Manager Ad Interim (Ad Interim meaning temporary capacity) of Saag Phils., Inc., filed a complaint for two counts of ESTAFA with the Prosecutor's Office of the City of Makati against private respondent GEORGE LAGOS. Take note.. Lagos is the ex-Operations Manager. Omictin alleged in his criminal complaint that Lagos, despite repeated demands, refused to return the two company vehicles entrusted to him when he was still the president of Saag Phils., Inc..

Private respondent filed a motion to recuse praying that Presiding Judge REINATO QUILALA inhibit himself from hearing the case, based on the order of the presiding judge which 1.  summarily denied respondent’s motion to defer issuance of the warrant of arrest and that 2. immediately before the issuance of the above-mentioned order, the presiding judge and Atty. Alex Y. Tan, SAAG Philippines, Inc.’s Ad Interim President, were seen together.

This is what seems to be happening:

Actually before the institution of the criminal action, there was a pending proceeding with an administrative body. LAGOS earlier had filed with the SEC a petition for the declaration of nullity of the respective appointments of ALEX Y. TAN and petitioner OMICTIN  as President Ad Interim and Operations Manager Ad Interim of Saag Phils., Inc., Lagos averred that SAAG (S) PTE. LTD. is a foreign corporation organized and existing under the laws of Singapore, and is fully owned by SAAG CORPORATION (BHD).  LAGOS filed a motion to suspend this administrative body proceedings on the basis of a prejudicial question because of a pending petition with the SEC involving the same parties.

Here's what really happened:

Previously  LAGOS was appointed as Area Sales Manager in the Philippines by THIANG SHIANG HIANG, manager of the Singaporean based SAAG (S) PTE. LTD. And pursuant to his appointment, LAGOS was authorized to organize a local joint venture corporation to be known as SAAG PHILIPPINES, INC. for the wholesale trade and service of industrial products for oil, gas and power industries in the Philippines.

So clearly a joint venture agreement (JVA) between LAGOS and the Singaporean based SAAG (S) PTE. LTD through Thiang Shiang Hiang  started this whole thing.

SAAG PHILIPPINES, INC. was incorporated with SAAG (S) PTE. LTD. as the majority stockholder. Private respondent LAGOS was appointed to the board of directors, along with Rommel I. Lagos, Jose E. Geronimo, Gan Ching Lai and Thiang Shiang Hiang, (Take note: Gan & Thiang are stockholders to the Malaysian corp and key men in the Singaporean corp  Gan is the director, and Thiang the  Executive Director of SAAG (S) PTE. LTD.)  and was elected president of the domestic corporation.

Due to intra-corporate disputes, GAN and THIANG resigned and divested their shares in SAAG CORPORATION (BHD), thereby resulting in a change in the controlling interest in SAAG (S) PTE. LTD.

take note:

Barely 3 months after the Gan-Thiang incident, LAGOS resigned his post as president of SAAG PHILS., INC. while still retaining his position as a director of the company.

And there lies the controversy. 

LAGOS was retaining his position as a director of the company because According to him the joint venture agreement (JVA) between him or SAAG PHILS., INC. and SAAG (S) PTE. LTD. provided that should the controlling interest in the latter company, or its parent company SAAG CORP. (BHD), be acquired by any other person or entity without his prior consent, he has the option either to require the other stockholders to purchase his shares or to terminate the JVA and dissolve SAAG PHILS., INC. altogether. 

Thus, pursuant to this provision, since LAGOS did not give his consent as regards the transfer of shares made by Gan and Thiang, he made several requests to NICHOLAS NG, who replaced Gan as director, and JANIFER YEO, Executive Director of SAAG (S) PTE. LTD., to call for a board meeting in order to discuss implementation of the board resolution declaring dividends and the acquisition of his (LAGOS) shares by SAAG (S) PTE. LTD.;  and the dissolution of SAAG PHILS., INC.; and the termination of the JVA.

O nga naman. Iwanan ba ako sa ere? Porket nakuha nyo na shares nyo mga lintik na hinayupak kayo! 

Eto matinde..

NG and YEO failed to appear in the scheduled board meetings. And instead, they issued a letter appointing ALEX Y. TAN as President Ad Interim of SAAG PHILS., INC. Tan, in turn, appointed petitioner OMICTIN as the company’s Operations Manager Ad Interim.

And dun nagkagulu-gulo..

Citing as a reason the absence of a board resolution authorizing the continued operations of SAAG PHILS., INC., LAGOS  retained his possession of the office equipment of the company in a fiduciary capacity as director of the corporation pending its dissolution and/or the resolution of the intra-corporate dispute. He likewise changed the locks of the offices of the company allegedly to prevent Tan and petitioner from seizing company property.

E kaya naman pala ayaw isurender pati yun 2 company car. Yan and Pinoy! Lumalaban. 

LAGOS stressed that TAN’s appointment was invalid because it was in derogation of the company by-laws requiring that the president must be chosen from among the directors, and elected by the affirmative vote of a majority of all the members of the board of directors. As Tan’s appointment did not have the acquiescence of the board of directors, PETITIONER’S APPOINTMENT BY THE FORMER IS LIKEWISE ALLEGEDLY INVALID. Thus, neither has the power or the authority to represent or act for SAAG PHILS., Inc. in any transaction or action before the SEC or any court of justice.

Here's the 2 main point argument of petitioner OMICTIN in this case:

1. The action before the SEC and the criminal case before the trial court do not involve any prejudicial question.13 SEC Case No. 01-99-6185 mainly involves the dissolution of Saag (S) Pte. Ltd., the appointment of a receiver, the distribution of profits, and the authority of petitioner and Tan to represent Saag Phils., Inc. The entity which is being sued is Saag (S) Pte. Ltd., a foreign corporation over which the SEC has yet to acquire jurisdiction. Hence, any decision that may be rendered in the SEC case will neither be determinative of the innocence or guilt of the accused nor bind Saag Phils., Inc. because the same was not made a party to the action even if the former is its holding corporation;

2. Saag Phils., Inc. has a separate corporate existence and is to be treated as a separate entity from its holding or parent company, Saag (S) Pte. Ltd. The mere fact that one or more corporations are owned or controlled by the same or single stockholder is not a sufficient ground for disregarding separate corporate personalities;

RTC denied LAGOS’ motion to suspend proceedings and motion to recuse. 

LAGOS therefore filed with the CA a petition for certiorari assailing the aforesaid orders. CA modified the RTC ruling and GRANTED LAGOS’ motion to suspend proceedings because A PREJUDICIAL QUESTION EXISTS IN THE SEC CASE. BUT the denial of the motion to recuse was AFFIRMED.

Petitioner OMICTIN  question the CA decision alleging grave abuse of discretion amounting to lack or excess of jurisdiction and elevates the case to the Supreme Court.

ISSUE

1. WAS THERE REALLY  A PREJUDICIAL QUESTION EXISTING IN THE SEC CASE FILED BY PRIVATE RESPONDENT AGAINST SAAG (S) PTE. LTD., A FOREIGN CORPORATION, 

2. ALTHOUGH THE PRIVATE COMPLAINANT IN THE CRIMINAL CASE FOR ESTAFA (WHERE PRIVATE RESPONDENT IS THE ACCUSED THEREIN) IS ACTUALLY SAAG PHILIPPINES, INC. A DOMESTIC CORPORATION WITH A SEPARATE JURIDICAL PERSONALITY OF ITS OWN AND WHICH IS NOT EVEN A PARTY IN THE SEC CASE

HELD

A prejudicial question is defined as that which arises in a case, the resolution of which is a logical antecedent of the issue involved therein and the cognizance of which pertains to another tribunal. Here, the case which was lodged originally before the SEC and which is now pending before the RTC of Mandaluyong City by virtue of Republic Act No. 8799 involves facts that are intimately related to those upon which the criminal prosecution is based.

Ultimately, the resolution of the issues raised in the intra-corporate dispute will determine the guilt or innocence of private respondent in the crime of estafa filed against him by petitioner before the RTC of Makati. As correctly stated by the CA, one of the elements of the crime of estafa with abuse of confidence under Article 315, par. 1(b) of the Revised Penal Code is a demand made by the offended party to the offender:

The elements of Estafa with abuse of confidence under subdivision No. 1, par. (b) of Art. 315 are as follows:
1. That money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return the same;
2. That there be misrepresentation or conversion of such money or property by the offender, or denial on his part of such receipt;
3. That such misappropriation or conversion or denial is to the prejudice of another; and
4. That there is a demand made by the offended party to the offender.

Logically, under the circumstances, since the alleged offended party is Saag Phils., Inc., the validity of the demand for the delivery of the subject vehicles rests upon the authority of the person making such a demand on the company’s behalf. Private respondent is challenging petitioner’s authority to act for Saag Phils., Inc. in the corporate case pending before the RTC of Mandaluyong. 

Taken in this light, if the supposed authority of petitioner is found to be defective, it is as if no demand was ever made, hence, the prosecution for estafa cannot prosper.

Moreover, the mere failure to return the thing received for safekeeping or on commission, or for administration, or under any other obligation involving the duty to deliver or to return the same or deliver the value thereof to the owner could only give rise to a civil action and does not constitute the crime of estafa.  This is because the crime is committed by misappropriating or converting money or goods received by the offender under a lawful transaction.

As stated in the case of United States v. Bleibel: 

The crime of estafa is not committed by the failure to return the things received for sale on commission, or to deliver their value, but, as this class of crime is defined by law, by misappropriating or converting the money or goods received on commission. Delay in the fulfillment of a commission or in the delivery of the sum on such account received only involves civil liability. So long as the money that a person is under obligation to deliver is not demanded of him, and he fails to deliver it for having wrongfully disposed of it, there is no estafa, whatever be the cause of the debt.

I know it's applicable but wag na tayo pumunta sa Doctrine of Primary Jurisdiction in this case okay? Corpo aspect lang tayo, and whether the criminal suit has basis.

So in view of the foregoing, the Court finds no substantial basis in petitioner’s contention that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction. 

So the petition was DISMISSED. The CA decision and resolution was AFFIRMED.

Lagos wins this case.