You are on page 1of 41

VOL.

480,JANUARY27,2006
465
SyChimvs.SySiyHo&Sons,Inc.
G.R.No.164958.January27,2006.*
SYCHIMandFELICIDADCHANSY,petitioners, vs.SYSIYHO&
SONS, INC., doing business under the name and style GUAN YIAC
HARDWARE,respondents.
CorporationLaw;InterimRulesofProcedureforIntraCorporateControversies
(R.A. 8799); The Interim Rules of Procedure for IntraCorporate Controversies
(InterimRules)whichtookeffectonApril1,2001,waspromulgatedbytheCourt
pursuant to its power to promulgate rules concerning pleading, practice and
procedureinallcourtsxxxprovidingforsimplifiedandinexpensiveprocedurefor
thespeedydispositionofcasesunderSection5(5),ArticleVIIIoftheConstitution.
Section 1, Rule 9 of the Interim Rules provides: SECTION 1. Creation of a
managementcommittee.AsanincidenttoanyofthecasesfiledundertheseRules
or the Interim Rules on Corporate Rehabilitation, a party may apply for the
appointment of a management committee for the corporation, partnership or
association, when there is imminent danger of: (1) Dissipation, loss, wastage or
destruction of assets or other properties; and (2) Paralyzation of its business
operations which may be prejudicial to the interest of the minority stockholders,
partieslitigantsorthegeneralpublic.ThesaidRules,whichtookeffectonApril1,
2001, was promulgated by the Court pursuant to its power to promulgate rules
concerning pleading, practice and procedure in all courts x x x providing for
simplified and inexpensive procedure for the speedy disposition of cases under
Section5(5),ArticleVIIIoftheConstitution.
_______________

*FIRSTDIVISION.

466
466
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
Same;Same;Tworequisitesmustbepresentbeforeamanagementcommittee
may be created and a receiver appointed by the RTC: He must show that the
corporatepropertyisindangerofbeingwastedanddestroyed;thatthebusinessof
thecorporationisbeingdivertedfromthepurposeforwhichithasbeenorganized;
andthatthereisaseriousparalyzationofoperationsalltohisdetriment.Wedo
notagreewithpetitionerscontentionthatthewordandinSection1,Rule9ofthe
InterimRulesshouldbeinterpretedtomeanor.WhileitistruethatinSection6(d)
ofPresidentialDecreeNo.902A,anapplicantfortheappointmentofamanagement
committeeismandatedtoproveonlyoneofthetworequisitesprovidedtherein,the
Court,inJacintov.FirstWomensCreditCorporation,ruledthatthetworequisites
shouldbepresentbeforeamanagementcommitteemaybecreatedandareceiver
appointedbytheRTC:Areadingoftheaforecitedlegalprovisionrevealsthatfora
minoritystockholdertoobtaintheappointmentofaninterimmanagementcommittee,
hemustdomorethanmerelymakeaprimafacieshowingofadenialofhisrightto
shareintheconcernsofthecorporation;hemustshowthatthecorporatepropertyis
indangerofbeingwastedanddestroyed;thatthebusinessofthecorporationisbeing
divertedfromthepurposeforwhichithasbeenorganized;andthatthereisserious
paralyzationofoperationsalltohisdetriment....
Same;Same;Therationalefortheneedtoestablishtheconfluenceofthetwo
(2) requisites under Section 1, Rule 9 by an applicant for the appointment of a
managementcommitteeisprimarilybaseduponthefactthatsuchcommitteeand
receiverappointedbythecourtwillimmediatelytakeoverthemanagementofthe
corporation, partnership or association, including such power as it may deem
appropriate,andanyofthepowersspecifiedinSection5oftheRule.Therationale
fortheneedtoestablishtheconfluenceofthetwo(2)requisitesunderSection1,Rule
9byanapplicantfortheappointmentofamanagementcommitteeisprimarilybased
upon the fact that such committee and receiver appointed by the court will
immediatelytakeoverthemanagementofthecorporation,partnershiporassociation,
includingsuchpowerasitmaydeemappropriate,andanyofthepowersspecifiedin
Section 5 of the Rule. Indeed, upon the appointment of a receiver, the duly
elected/appointedofficersofthecorporationaredivestedofthemanagementofsuch
corporationinfavorofthemanagementcommittee/receiver.Suchtransferenceofthe
corporationsmanagementwillcertainlyhaveanegative,ifnot
467

VOL.480,JANUARY27,2006
467
SyChimvs.SySiyHo&Sons,Inc.
cripplingeffect,ontheoperations/affairsofthecorporationnotonlywithbanks
andotherbusinessinstitutionsincludingthoseabroadwhichitdealsbusinesswith.A
wallofuncertaintyiserected;theshortandlongtermplansofthemanagementofthe
corporationaredisrupted,ifnotderailed.
Same;Same;Thecreationandappointmentofamanagementcommitteeanda
receiver is an extraordinary and drastic remedy to be exercised with care and
caution;andonlywhentherequirementsundertheInterimRulesareshown.The
creation and appointment of a management committee and a receiver is an
extraordinaryanddrasticremedytobeexercisedwithcareandcaution;andonly
whentherequirementsundertheInterimRulesareshown.Itisadrasticcoursefor
thebenefitoftheminoritystockholders,thepartieslitigantsorthegeneralpublicare
allowedonlyunderpressingcircumstancesand,whenthereisinadequacy,ineffectual
orexhaustionoflegalorotherremedies.Thepowertointervenebeforethelegal
remedyisexhaustedandmisusedwhenitisexercisedinaidofsuchapurpose.The
powerofthecourttocontinueabusinessofacorporation,partnershiporassociation
must be exercised with the greatest care and caution. There should be a full
consideration of all the attendant facts, including the interest of all the parties
concerned.
Same;Same;WordsandPhrases;Dangerisageneralterm,includingperil,
jeopardy,hazardandrisk,asusedintheRule,itreferstoexposureorliabilityto
injury. Imminent refers to something which is threatening to happen at once,
somethingcloseathand,somethingtohappenupontheinstant,closealthoughnot
yet happening, andon theverge ofhappening.Neither Presidential Decree No.
902A and Republic Act No. 8799 nor the Interim Rules of Procedure define
imminentdanger.Dangerisageneralterm,includingperil,jeopardy,hazardand
risk;asusedintheRule,itreferstoexposureorliabilitytoinjury.Imminentrefers
to something which is threatening to happen at once, something close at hand,
somethingtohappenupontheinstant,closealthoughnotyethappening,andonthe
vergeofhappening.
Same; Same;Intheabsenceofastrongshowingofanimminentdangerof
dissipation, loss, wastage or destruction of assets or other properties of a
corporationandparalysisofitsbusinessoperations,themereapprehensionoffuture
misconductbaseduponpriormis
468

468
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
management will not authorize the appointment of a management
committee/receiver.Weagreethatpastconductandconditionofthecorporation
maybeconsideredindeterminingthepresentsituationandwhatthefuturewillbe.
However,amanagementcommitteeorreceiverwillnotbeappointedmerelybecause
of things done or attempted at a past time when the present situation and the
prospectsforthefuturearenotsuchastowarranttakingthecontroloftheproperty
outofthehandsofitsowners.Thecircumstancestojustifytheappointmentofa
managementcommittee/receivermustbeextraordinaryandsomethingmoremustbe
shown than past misconduct and a mere apprehension based thereon of future
wrongdoing.Torepeat,intheabsenceofastrongshowingofanimminentdangerof
dissipation,loss,wastageordestructionofassetsorotherpropertiesofacorporation
andparalysisofitsbusinessoperations,themereapprehensionoffuturemisconduct
based upon prior mismanagement will not authorize the appointment of a
managementcommittee/receiver.
Same;Same;SupremeCourtholdsthatanindependentauditisimperativein
thiscasesothat,basedonsuchreports,theRTCwouldbeabletodeterminethe
veracitynotonlyofrespondentsclaimthatpetitionersmisappropriatedcorporate
fundsandassets,butalsothatofpetitionerswhoclaimotherwise.Wenotethat
petitionersprayedfortheappointmentofanindependentauditor,andthatrespondent
did not even object to the motion. Consequently, the RTC appointed the
Punongbayan&Araullofirmtoconducttheaudit.However,respondentmadeavolte
face andfileditsManifestationandMotiondatedNovember26,2003andposited
thatanindependentauditorwasnotnecessarysinceinitscomplaint,itmerelyprayed
foranaccountingofthefundswhichweremissingbasedonthereportoftheBanaria
Banaria&Companyauditingfirm.Weholdthatanindependentauditisimperative
inthiscasesothat,basedonsuchreport,theRTCwouldbeabletodeterminethe
veracitynot onlyofrespondentsclaimthatpetitionersmisappropriatedcorporate
fundsandassets,butalsothatofpetitionerswhoclaimotherwise.
PETITIONforreviewoncertiorariofadecisionoftheCourtofAppeals.
ThefactsarestatedintheopinionoftheCourt.
469
VOL.480,JANUARY27,2006
469
SyChimvs.SySiyHo&Sons,Inc.
Divino&GavinoforpetitionersSyChimandFelicidadChanSy.
EmilioGayoforrespondentSySiyHo&Sons,Inc.
CALLEJO,SR.,J.:

TheSySiyHo&Sons,Inc.(hereinafterreferredtoasthecorporation)isa
domestic corporation which was organized in the 1940s, 1 engaged
primarilyinimporting,buyingandsellinghardware,machineries,spare
parts, supplies and other allied products and merchandise to be sold
exclusivelyonwholesalebasis.Itwasdoingbusinessunderthenameand
styleGuanYiacHardware2 withofficeatNo.453455T.PinpinStreet,
Binondo,Manila.
The corporation was owned and controlled by Sy Chim and his
children.Sometimein1990,acontroversyensuedbetweenSyChimstwo
sons,SyTiongShiouandSyTiongBiowhowasthentheVicePresident
for Finance. Sy Chim sided with Sy Tiong Shiou. The intracorporate
disputereachedtheSecuritiesandExchangeCommission(SEC),docketed
asSECCaseNo.04443.
OnMay31,1993,thestockholdersofrecord,SyChimandSyTiong
Shiou(SyChimGroup),ontheonehand,andSyTiongBio,SyTiong
Gue, Sy Tiong Sim, Sy Tiong Han and Sy Tiong Yan (Sy Tiong Bio
Group),ontheother,executedaCompromiseAgreement,3wherethelatter
grouprelinquishedtheirsharestoSyChim.Thepartiesalsoagreedto
divideanddistributetheassetsandliabilitiesofthecorporationasfollows:
1. (a)
Mr.SYCHIMGROUPFour(4)parts,orthree(3)partsSyChim,one
(1)partSyTiongShiou.
_______________

1Rollo,p.6.

2Records,Vol.II,p.31.

3Records,Vol.III,pp.5768.

470
470
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
1. (b)
Mr.SYTIONGBIOGROUPFive(5)partsattherateofone(1)each.4
SomeofthesharesofstockswereassignedtoFelicidadChanSy,wifeof
SyChim.ThespousesSyChimandFelicidadChanSy,andspousesSy
TiongShiouandJuanitaTanSy,andtheirchildren,Charlie,Romerand
JesseJamesTan,thenbecamestockholdersandmembersoftheBoardof
Directors of the corporation. The officers of the corporation were as
follows:SyChim,President;FelicidadChanSy,AssistantTreasurer;Sy
TiongShiou,VicePresidentandGeneralManager;JuanitaTanSy(wife
ofSyTiongShiou),CorporateTreasurer;andCharlieTan(sonofspouses
SyTiongShiou),AssistantGeneralManager.
As of the year 2000, the corporation had a gross profit of
P45,084,908.11andP42,954,252.32in2001.5AsofApril19,2002,ithad
acapitalstockofP150,000,000.00,dividedinto150,000shares,withapar
value of P1,000.00 per share. The treasury stocks amounted to
P70,720,000.00.Ithadasubscribedandpaidupcapitalof103,733shares
and P103,733,000.00 respectively. The stockholders and the respective
shareholdingswereasfollows:
Stockholder
No.ofSharesSubscribed
AmountSubscribedandPaid(PHP)
SYCHIM
35,013
35,013,000
FELICIDADCHANSY
17,509
17,509,000
CHARLIETAN
20,338
20,338,000
ROMERTAN
19,636
19,636,000
JESSEJAMESTAN
11,233
11,233,000
SYTIONGSHIOU
2
2,000
JUANITATANSY
_______2
_________2,000
TOTAL
103,733
PHP103,733,0006
_______________

4Id.,atp.57.

5 Comparative IncomeStatementforthe YearsEndingDecember31,2000&2001,

Rollo,p.956.
6Records,Vol.II,p.54.

471
VOL.480,JANUARY27,2006
471
SyChimvs.SySiyHo&Sons,Inc.
Afteralmostadecadelater,anotherintracorporatedisputeensued,this
timebetweenSyChimandhiswife,ontheonehand,andtheirsonSy
TiongShiou,ontheother.Inaletteraddressedtothecorporationdated
February3,2003,CorporateTreasurerJuanitaTanSyrequestedthatshe
immediately be removed from all responsibilities and obligations
pertaining to all corporate funds of the corporation, considering that
FelicidadChanSywastheonewhohandledandmanagedalldepositsand
fundswhileSyChimsupervisedallexpenditures.Shefurtherreportedthat
Felicidad Chan Sy did not make any cash deposit to any bank from
November1,2002toJanuary31,2003,andthatthetotalamountofcash
asreflectedinthebankstatementsisfarlessthanthatreportedinthe
corporationsfinancialstatementsandotherrecords.Shethenproposed
thattheBoardcallaspecialmeetingtodiscussthesematters.7 Thus,on
March24,2003,aspecialmeetingoftheboardofdirectorswasheldwith
thespousesSyTiongShiouandJuanitaTanSyandtheirsonsCharlie,
RomerandJesseJamesTaninattendance.Intwoseparateresolutions,
Juanita Tan Sy was removed as corporate treasurer and relieved of all
responsibilities; the spouses Sy Chim were held accountable for the
undeposited money; and a new external auditor was hired to make a
completeauditofallbooksandrecords. 8BanariaBanariaandCompany
thensubmittedFinancialReportscovering2001and2002.9
InaLetter10datedApril15,2003,SyTiongShiouinformedhisparents
of the corporations cash balance shortage as of March 31, 2003 (as
reflectedintheauditorsreport)andthattherewasalsoanundeposited
amountofP2,000,000.00forthecurrentsalaryandemergencyfunds,and
theyhadseveralpostdatedchecksintheirpossession.SyTiongShioure
_______________

7Records,Vol.I,pp.2021.

8Id.,atpp.2327.

9Id.,atpp.2836.

10Id.,atp.37.
472
472
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
questedthattheshortagebeaccountedfor,andthattheundepositedfunds
be remitted. He also requested that the postdated checks and original
receipts for all disbursements of corporate funds be turned over to
Corporate Treasurer Juanita Tan Sy. The spouses Sy Chim did not
respond.
Spouses Sy Tiong Shiou and Juanita Tan Sy, their three sons held
anothermeetingonApril21,2003,againwithoutwrittennoticetothe
spousesSyChim,andapprovedaresolution11 authorizingRomerTanto
file a complaint for and in behalf of the corporation against the said
spousesintheRegionalTrialCourt(RTC)ofManila.SyTiongShiouwas
electedPresidentofthecorporation.
The complaint12 for accounting anddamages against the spouses Sy
Chim was filed onMay 6,2003. Thecomplaint alleged that Felicidad
ChanSy,ascustodianofallcashcollections,hadbeendepositingamounts
less than those appearing in the financial statements which are in the
defendantscustodyandthatnodepositsweremadeinthecorporations
account from November 1, 2002 to January 31, 2003. Based on the
accountants report, Felicidad Chan Sy failed to account for
P67,117,230.30.Plaintifffurtherallegedthat,basedonthecorporations
General Information Sheet for 2003, the subscribed shares of the
corporationwereasfollows:
NameofSubscriber
No.ofSharesSubscribed
AmountPaidUp
SyTiongShiou
27,987
P27,987,000.00
JuanitaTan
32,017
32,017,000.00
CharlieTan
12,512
12,512,000.00
RomerTan
12,079
12,079,000.00
JesseJamesTan
6,910
6,910,000.00
SyChim
21,539
21,539,000.00
FelicidadChanSy
___10,771
___10,771,000.00
Total
123,815
P123,815,000.0013
_______________

11Id.,atp.13.

12Id.,atpp.312.

13Id.,atp.5.

473
VOL.480,JANUARY27,2006
473
SyChimvs.SySiyHo&Sons,Inc.
Plaintiffprayedthat,afterdueproceedings,judgmentberenderedinits
favor,asfollows:
1. a.
Orderingdefendantstorenderafull,completeandtrueaccountingofallthe
amounts,proceedsandfundspaidto,receivedandearnedbytheplaintiffsince
1993andtorestitutetotheplaintiff,jointlyandseverally,allsuchamounts,
proceedsandfundsthattheyhavemisappropriated;
2. b.
Orderingdefendantstopay,jointlyandseverally,theplaintifftheamountofOne
Million(P1,000,000.00)Pesosbywayofexemplarydamages,andOneMillion
(P1,000,000.00)PesosbywayofattorneysfeesplusFiveThousand
(P5,000.00)Pesospercourtappearanceandlitigationexpensesintheamount
ofnotlessthanOneHundredThousand(P100,000.00)Pesos;
3. c.
Costofsuit.
Plaintiff further prays for such other reliefs [it] deems just and equitable in the
premises.14
Intheiranswer15tothecomplaint,defendantsaverred,interalia,thatany
unaccounted cash account and irregularities in the management of the
corporation,ifany,werethefullresponsibilityofSyTiongShiou,Romer
Tans own father, since he has direct and actual management of the
corporation under the bylaws. Sy Chim, as corporate president, wasa
merefigurehead,whoonlyhadgeneralsupervisionoverthecorporations
officers. Juanita Tan Sy, as corporate treasurer, had custody of the
corporationsfundsandshouldhavekeptacompleteandaccuraterecord
of receipts, disbursements, and other commercial transactions of the
corporation.FelicidadChanSymerelyperformedclericalworkandacted
asCorporateTreasureronlyintheabsenceofJuanitaTanSyandunderthe
lattersclosesupervision.Theyaverredthatanyandallmeetingsofthe
stockholdersandmembersofthecorporationsBoardofDirectorswere
nullandvoidastheyvio
_______________

14Id.,atpp.1011.

15Id.,atpp.4060.

474
474
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
latedthecorporatebylawsaswellastheCorporationCode.Defendants
furtherdeniedexecutinganydeedordocumentauthorizingthetransferof
theirshares,orthattreasuryshareshadbeenissuedbythecorporation.
Assumingthattreasuryshareswerevalidlyissuedin2002asclaimedin
thecomplaint,defendantsshouldhavebeenallowedtoexercisetheirpre
emptiverightsoversuchshares.
Defendantsprayedthattheybegrantedthefollowingreliefs:
1. (1)
DismissingtheinstantComplaintforutterlackofmerit;
2. (2)
OrderingPlaintiffMr.RomerS.Tantopaythefollowing:
3. (a)
ThreeMillionPesos(PHP3,000,000.00),bywayofmoraldamages;
4. (b)
ThreeMillionPesos(PHP3,000,000.00),bywayofexemplarydamages;
5. (c)
TwoMillionPesos(PHP2,000,000.00),bywayofattorneysfees;
6. (d)
Costsofsuit.
Otherreliefsjustandequitableunderthepremisesare,likewiseprayedfor.16
Feelingaggrieved,thespousesSyChimandFelicidadChanSyfileda
criminalcomplaintintheOfficeoftheCityProsecutorofMakatiagainst
thespousesSyTiongShiouandtheirchildrenforviolationofSection74
oftheCorporationCode.
In the meantime, Sy Chim, as corporate president, called for a
stockholdersmeetingonJune11,2003.Anamendedcomplaintwasfiled
onJuly1,2003,prayingfortheissuanceofatemporaryrestrainingorder
and/orwritofpreliminaryprohibitoryinjunction.Itwasalleged,among
others,thatonApril15,2003,defendantSyChimandhisotherchildren
andthesiblingsofSyTiongShiou,namely,SyYuHuiPabilona,
_______________

16Id.,atpp.5758.

475
VOL.480,JANUARY27,2006
475
SyChimvs.SySiyHo&Sons,Inc.
SyTiongGue,SyTiongYan,SyYuSan,SyYuSiong,SyYuBunand
herson,BryanLim,withtwoarmedunidentifiedmen,forciblyenteredthe
office and took P6,500,000.00 in cash and postdated checks and other
importantdocuments,includingfiveboxesofHennesyX.O.wine.Since
defendantSyChimabandonedhisdutiesandresponsibilitiesaspresident,
theboardofdirectorselectedSyTiongShiouaspresidentduringaspecial
meeting on May 6, 2003. Sy Chim issued a Notice of Stockholders
MeetingonJune11,2003althoughhewasnolongerthepresidentofthe
corporation. The amended complaint further alleged that a criminal
complaintforrobberywasfiledagainsttheculpritsintheOfficeofthe
CityProsecutorofManila.
The plaintiff corporation prayed for that the court grant injunctive
relief,asfollows:
1. a.
Anorderbeissuedmakingthepreliminaryinjunctionpermanent;
2. b.
Orderingdefendantstorenderafull,completeandtrueaccountingofallthe
amounts,proceedsandfundspaidto,receivedandearnedbytheplaintiffsince
1993andtorestitutetotheplaintiff,jointlyandseverally,allsuchamounts,
proceedsandfundsthattheyhavemisappropriated;
3. c.
Orderingdefendantstopay,jointlyandseverally,theplaintifftheamountofOne
Million(P1,000,000.00)Pesosbywayofexemplarydamages,andOneMillion
(P1,000,000.00)PesosbywayofattorneysfeesplusFiveThousand
(P5,000.00)Pesospercourtappearanceandlitigationexpensesintheamount
ofnotlessthanOneHundredThousand(P100,000.00)Pesos;
4. d.
Costofsuit.
Plaintiff further prays for such other reliefs [it] deems just and equitable in the
premises.17
_______________

17Id.,atpp.133134.

476
476
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
Duringthehearingofplaintiffspetitionforinjunctiverelief,defendants
submitted the following to the court: a Joint Affidavit, 18the Joint
Supporting Affidavit19 of See Cha and See Su Pe, and the Complaint
Affidavit20 of Felicidad Chan Sy for violation of Section 74 of the
CorporationCodeagainstthespousesSyTiongShiouandJuanitaTanSy,
JolieRossTan,CharlieTan,RomerTanandJesseJamesTanfiledinthe
OfficeoftheCityProsecutor.
OnAugust6,2003,theRTCissuedanOrder21grantingthepleafora
writofpreliminaryinjunctiononabondofP500,000.00,andenjoined
defendantSyChimoranypersonactingforandinhisbehalffromcalling
orholdingastockholdersand/orBoardofDirectorsmeetingsofthe
corporation.Thiswasfollowedbyawritofpreliminaryinjunction.22
On July 18, 2003, defendants filed a Motion for Production and
InspectionofDocuments23 (allthecorporatebooks,accountingrecords,
financialstatementsandotherdocumentsmentionedin,andpertinentto,
theallegationsofthecomplaint),prayingthattheybepermittedtoinspect,
examine and photocopy such documents. Plaintiff opposed the motion,
contendingthatitwasprematurebecausedefendantshadnotyetfiledtheir
answer to the complaint.24On August 5, 2003, defendants also filed a
MotionfortheAppointmentofanIndependentAuditor,toconductan
auditofthefundsandassetsoftheplaintiffcorporation.25
Plaintiffdidnotobjecttothemotion.26TheRTCgrantedthemotionon
August8,2003andappointedtheaccounting
_______________

18Records,Vol.II,pp.69.

19Id.,atpp.1013.

20Id.,atpp.2529.

21Id.,atpp.289291.

22Id.,atp.416.

23Id.,atpp.230234.

24Id.,atpp.238241.

25Id.,atpp.245251.

26Id.,atp.417.

477
VOL.480,JANUARY27,2006
477
SyChimvs.SySiyHo&Sons,Inc.
firmofPunongbayan&Araullotoconducttheauditofthecorporations
books and records covering the period from 1993 to the present. The
Motion for Production and Inspection of Documents filed by the
defendantswas,however,denied.Instead,thepartieshavebeendirectedto
provide the accounting firm of all the books of accounts, vouchers,
receipts, purchase orders and similar other documents necessary, and
warned that failure to comply with the order will be dealt with as for
contempt.TheRTCalsodirectedplaintifftomakeitsrecordsavailableto
theaccountingfirm,andaftercompletionofthefirmstask,tomakesuch
recordsavailablefordefendantsinspection.27
Intheiranswertotheamendedcomplaint,defendantsaverredthatthe
meetingsofthestockholdersandboardofdirectorswerenullandvoidfor
havingbeenconductedwithoutpriornoticetothem.28
Meanwhile,plaintiffmovedthatthecourtsetasideitsOrderappointing
anindependentauditor.
OnAugust26,2003,defendantsfiledaMotionfortheAppointmentof
aManagementCommittee,29thus:
1. 3.
DefendantsallegedthatunderArticleIVoftheByLawsofSySiyHo&
Sons,Inc.,thefundsofthecorporationareunderthesupervision,
controlandadministrationofSyTiongShiou,astheGeneral
Manager,andSyTiongShiouswife,JuanitaTan,asTreasurer;and
thatthedirectionandcontrolofthebusinessandoperationsofGuan
YiacHardwarewereinthehandsoftheGeneralManagerSyTiong
Shiou,whohadthepowertodirectandactivelymanageGuanYiac
Hardware.
2. 4.
Thus,defendantsallegedthatforanyunaccounteddifferenceofthe
corporationsaccount,includingthePHP67,117,230.30allegedin
theAmendedComplaint,itisSyTiongShiouandJuanitaTanwho
areatfaultinviewoftheirpowersasGeneralManager
_______________

27Id.

28Records,Vol.III,pp.1821.

29Id.,atpp.105110.

478
478
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
1. and Treasurer under the ByLaws of the Corporation and in actual
practicesincetheyhaveactivecontrolofthedaytodayoperations
oftheCorporation.
2. 5.
However,whilethisHonorableCourtwillstilldetermine,inthecourse
oftheseproceedings,whetheritisdefendantsSyChimandFelicidad
ChanSyorwhetheritisSyTiongShiouandJuanitaTanwhoarethe
partiesresponsibleforthedissipationandlossofthecorporatefunds
andassetsofSySiyHo&Sons,Inc.,theactivedaytodaycontrol
andmanagementofSySiyHo&Sons,Inc.isstillunderthecontrol
andsupervisionofSyTiongShiouandJuanitaTan,especiallyso
sincedefendantshadbeenphysicallyoustedfromtheirresidenceby
SyTiongShiouandhisfamilysince15April2003,anddefendants
havebeendeniedaccesstothecorporatepremisesanditsbooksand
records.
3. 6.
Theplaintiffitselfhasallegedthattherehasbeenamassivedissipation
andlossofitscorporateassetsandfunds,andthisCourtisstillinthe
processofdeterminingwhethertheGeneralManager,SyTiong
Shiou,andTreasurer,JuanitaTan,arethepartiesresponsiblefor
suchdissipationandloss.Inviewoftheforegoing,untilthis
HonorableCourtresolveswithfinalitythatSyTiongShiouandhis
wife,JuanitaTan,arenotresponsibleforthedissipationandloss,the
controlandmanagementoftheCorporationmustbetransferredtoan
independentpartytoensurethepreservationofthecorporateassets.
4. 7.
WhileSyTiongShiouandJuanitaTanremainincontrolofthe
managementofthecorporation,thereisimminentdangeroffurther
dissipation,loss,wastageordestructionofthecorporatefundsand
assets.
5. 8.
Norcancontrolandmanagementofthecorporationbetransferredtothe
otherstockholdersRomerSyTan,JesseJamesTanandCharlieTan,
ortheCorporateSecretaryJolieRossS.Tan,whoareallchildrenof
SyTiongShiouandJuanitaTan.
6. 9.
AnnexesEandJoftheAmendedComplaint,showthatRomerSy
Tan,JesseJamesTanandCharlieTan,andJolieRossS.Tan,
allegedlyactingasthemembersoftheBoardofDirectorsandthe
corporatesecretaryofSySiyHo&Sons,Inc.,tookpartinthe
actuationsagainstdefendants.
7. 9.1
PlaintiffsannexEshowsthatRomerSyTan,JesseJamesTanand
CharlieTanallsignedtheminutesofthe
479
VOL.480,JANUARY27,2006
479
SyChimvs.SySiyHo&Sons,Inc.
1. purportedspecialmeetingoftheboardofdirectorswherein,inahighly
selfservingmanner,JuanitaTanwasdeclaredtohavenoknowledge
ofthedeposits,disbursementsandexpendituresoftheplaintiffsince
1993,andthatalloftheseaswellasthedepositswereinthecontrol
of the defendants. Jolie Ross Tan, on the other hand, signed the
Secretarys Certificate wherein Juanita Tan was removed of all
responsibilitiespertainingtothefundsofthecorporationsince1993.
2. 9.2
Ontheotherhand,AnnexJofplaintiffsAmendedComplaintshows
thatRomerSyTan,JesseJamesTanandCharlieTan,andJolieRoss
S.Tanallsignedtheminutesofthepurportedspecialjointmeeting
oftheboardofdirectorsandstockholderswhereintheysupposedly
declareddefendantSyChimashavingabandonedhisposition,made
SyTiongShiouthePresidentandChairmanoftheBoardof
Directorsofthecorporation,madeJuanitaTantheVicePresidentof
thecorporation,andcancelleddefendantSyChimsauthorityasa
signatoryonthecorporationsbankaccounts.
3. 9.3
RomerSyTanisalsoactingastherepresentativeofSySiyHo&Sons,
Inc.inthisandinanothercaseagainstthedefendants.
4. 10.
Hence,allofthechildrenofSyTiongShiouandJuanitaTanhavetaken
actionagainsttheirgrandparents,defendantsSyChimandFelicidad
ChanSy.Obviously,theentirefamilyofSyTiongShiouandJuanita
Tanisactingagainstthedefendants.Inviewoftheforegoing,the
managementandcontrolofSySiyHo&Sons,Inc.cannotbe
transferredtoanyorallofthechildrenofSyTiongShiouandJuanita
Tansincetheyobviouslywouldnotprotecttheinterestsof
defendantsSyChimandFelicidadChanSyasstockholdersofSySiy
Ho&Sons,Inc.
5. 11.
Thus,thereexistsanurgentneedfortheimmediateappointmentofa
managementcommitteetoadminister,manageandpreservethe
assets,funds,propertiesandrecordsofSySiyHo&Sons,Inc.in
ordertopreventanyfurtherdissipation,wastageandloss.30
_______________
30Id.,atpp.106108.

480
480
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
The control and management of the corporation must be
transferredpendentelitetoanindependentpartytoensurethepreservation
ofthecorporateassets.31
Plaintiff opposed the motion, contending that defendants failed to
allegeandestablishthetworequisitesforthecreationofamanagement
committeeunderSection1,Rule9oftheInterimRulesofProcedurefor
IntraCorporateControversies(InterimRulesforbrevity)underRepublic
Act No. 8799. It averred that, compared to previous years under the
managementofSyTiongShiou,thevolumeofsalesandimportationof
the corporation had considerably increased, and that its obligation of
P29,404,664.00toMetrobankwaspaid,andwasthusincurrentstatus.
Plaintiffalsoallegedthat:
8.Thekindofplaintiffsbusinessrequiresaspecialtalentormanagerialsagacity
thatonlyapersonwhohasbeenexposedtoitforalongandcontinuousperiodof
timepossesses.SyTiongShiouisthatkindofindividualbecausehehasbeeninthis
kindofbusinessformorethanforty(40)years,startingasanordinaryemployeeand
now as President and General Manager of the plaintiff. As such, he knows its
intimatedetailsandnuances.
9.Theappointmentofamanagementcommitteetomanagethebusinessaffairsof
theplaintiffwouldnotonlybeunwiseandilladvised.Itmightleadtoadisastrous
consequence for all its stockholders and instead of saving the enterprise, as
defendantswouldclaim,itwillonlyresulttoitsuntimelydemise.Ifthiswillhappen,
theinterestofallthestockholdersaswellasthewelfareofitsmorethanseventy(70)
employees,includingthatoftheirfamilies,willbegreatlyaffectedandjeopardized.x
xx32
OnSeptember9,2003,defendantsfiledaMotionforLeavetoFileand
ThirdPartyComplaintagainstSyTiongShiouandJuanitaTanSy,with
thefollowingprayer:
_______________

31Id.

32Id.,atp.117.
481
VOL.480,JANUARY27,2006
481
SyChimvs.SySiyHo&Sons,Inc.
1. 1.
DeclaringthirdpartydefendantsSyTiongShiouandJuanitaTan
directlyandsolelyliableinrespectofplaintiffsclaimforaccounting
anddamagesand,inthesamejudgment,intheremoteeventthat
thirdpartyplaintiffsSyChimand/orFelicidadChanSyareadjudged
liabletoplaintiff,orderingSyTiongShiouandJuanitaTantopayall
amountsnecessarytodischargeSyChimsandFelicidadChanSys
liabilitytoplaintiffbywayofindemnityorreimbursement;
2. 2.
Orderingthirdpartydefendantstopaythirdpartyplaintiffstheamount
ofP300,000.00aslitigationexpensesandattorneysfees.
ThirdpartyplaintiffsfurtherprayforsuchotherreliefsastheHonorable
Courtmaydeemjustandequitableunderthepremises.33
Fortheirpart,SyTiongShiouandJuanitaTanSyalleged
1. 31.
Asshown,since1993,thirdpartydefendantsSyTiongShiouand
JuanitaTanhavehadfullandcompletecontrolofthedaytoday
operationsandcompletecustodyandcontrolofthecorporatefunds
ofSySiyHo&Sons,Inc.,hence,theyaretherealpartiesininterest
inthiscase.
2. 32.
Asshown,thirdpartydefendantsSyTiongShiouandJuanitaTanare
liableforanyshortfallorunaccounteddifferenceofcashaccountof
SySiyHo&Sons,Inc.fortheperiod1993to2003,includingthe
PHP67,117,230.30allegedinparagraph12oftheAmended
Complaintdated30June2003,especiallysosincethirdparty
plaintiffshavebeenphysicallyoustedfromtheirresidencebySy
TiongShiouandhisfamilysince15April2003,anddeniedaccessto
thecorporatepremisesbySyTiongShiouandhisfamilyaswellas
itsbooksandrecords.
3. 33.
Hence,thirdpartydefendantsSyTiongShiouandJuanitaTanshould
renderafull,completeandtrueaccountingofalltheamounts,
proceedsandfundspaidto,receivedandearnedbySySiyHo&
Sons,Inc.since1993,andshouldbedeclaredsolelyliabletoSySiy
Ho&Sons,Inc.foranyshortfallorunaccounteddifferenceofcash
accountofSySiyHo&Sons,Inc.fortheperiod19932003,
_______________

33Id.,atp.145.

482
482
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
1. including the PHP67,117,230.30 alleged in paragraph 12 of the
AmendedComplaintdated30June2003,andintheremoteevent
that this Honorable Court holds Sy Chim and Felicidad Chan Sy
liabletoplaintiff,SyChimandFelicidadChanSyareentitledtofull
indemnityandreimbursementfromSyTiongShiouandJuanitaTan
inrespectofplaintiffsclaim.34
OnSeptember12,2003,theRTCissuedanOrder35grantingthemotionfor
thecreationofamanagementcommitteependentelitetobecomposedof
threemembers,onetobedesignatedbythecourtaschairman,andtwo
otherstobenominatedbythepartieswithin10days,failingwhichthe
courtwouldappointthesame.Suchmanagementcommitteewouldhave
thepowerandfunctionsenumeratedunderSection5,Rule9oftheInterim
Rules.36TheRTCjustifiedtheissuanceofitsorderonitsfindingthatthe
partieswerepointingaccusingfingersateachotherfortheunaccounted
funds.Accordingtothetrialcourt,thequestionofwhoshouldbeheld
responsiblefortheunaccountedfundswouldonlybedeterminedafteran
extensiveauditofthecompanysbooks.Moreover,whilethemaincaseis
yettobeheard,thefactremainsthatcorporateassets,funds,propertiesand
recordswereinimminentdangeroffurtherdissipationortotalloss.Thus,
itwouldservethebestinterestofthecompany,aswellasitsstockholders
and creditors, to have the corporation managed by an independent
committeeexclusivelyaccountabletothecourt.AccordingtotheRTC,the
corporations assets, income and properties would be protected and
preserveduntilthefinaldeterminationofthemaincontroversy.
Thecourtfurtherstatedthattheappointmentofareceiverwasjustified
wherepleadingsrequestingappointmentwerewithoutqualificationasto
informationandbeliefandwere
_______________

34Id.,atp.144.

35Id.,atpp.184187.

36Id.,atp.186.

483
VOL.480,JANUARY27,2006
483
SyChimvs.SySiyHo&Sons,Inc.
not controverted by defendants.37 It noted that sufficient allegations of
misappropriationofcorporateassetsweremade,andthattheappointment
of a receiver is justified upon a showing that one who is president,
director,managingofficerandcontrollingstockholderhasallowedhimself
unauthorized salary increases, used corporate funds for his private
purposes,entrustedhisdutiestoothers,conductedacompetingbusiness
andmadeasecretprofitbytransactionsbetweenthetwoconcerns,used
employeesandequipmentofthecompanyforhisownbusiness,failedto
keep complete corporate accounts, incurred penalties for delinquent
corporatetaxes,andotherwisecausedwasteandloss.38
OnOctober8,2003,theRTCgranteddefendantsMotiontoFilea
ThirdParty Complaint and ordered that such complaint be admitted.39
Thirdparty defendants failed to file their answer thereon and were
declaredindefaultuponmotionofthethirdpartyplaintiffs.
Plaintiff corporation filed a motion for reconsideration of the
September 12, 2003 Order of the trial court creating a management
committee.Plaintiffreiteratingitsclaimthatdefendantsfailedtoadduce
evidencetoprovethetwinrequisitesforthecreationofamanagement
committeeunderSection1,Rule9oftheInterimRules.
On October 15, 2003, the trial court issued a Supplemental
Order40directing the president, vice president, secretary, treasurer,
accountant,bookkeeperofthecorporationoranypersonactingontheir
behalf or under their instruction to allow the parties or their duly
authorizedrepresentativestobepresentduringtheaudit.Thesaidofficers
werelikewiseenjoinedtosecurecourtapprovalbeforedisbursingfundsin
_______________

37CitingRichardsonv.ArizonaFuelsCorp.,614P.2d636,citedin16Fletcher(1989),

p.99.
38Id.,citing16Fletcher(1989),204,citingHowellv.Poff,122Neb.793,241NW548.

39Rollo,pp.344347.

40Id.,atpp.363364.

484
484
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
excess of P10,000.00. Finally, the officers were directed to submit the
namesofthebanksthecorporationdidbusinesswithandtoindicatethe
balanceofitsaccounts.Thetrialcourtgavethesaidofficersten(10)days
tocomplywiththisorderandthat,upontheirfailuretodoso,wouldbe
dealtwithasforcontemptandmetedtheappropriatepenaltyaswarranted
bytheevidence.
However,Punongbayan&Araullowithdrewasindependentauditor. 41
PlaintifffiledamotionforthereconsiderationoftheSupplementalOrder,
and,thereafter,aManifestationandMotion,42prayingthattheorderofthe
courtappointinganindependentauditorbeexecuted.OnDecember11,
2003,defendantsfiledaComment/OppositiontoPlaintiffManifestation
andMotion.43Plaintiffmadeareplythereto.
In an Order44 dated December 19, 2003, the RTC denied plaintiffs
motion for reconsideration of the Supplemental Order. The trial court
designated Wencita C. Salvador as comptroller tasked to oversee the
maintenance of corporate books of accounts, budget administration,
internalcontrolondisbursements,reportingandinterpretationoffinancial
statements, tax administration, protection of assets, financial evaluation
andgovernmentreporting.Shewasalsodesignatedasacosignatorytoall
checksorwithdrawalsoffunds,toreceiveamonthlyfeeofP50,000.00.
The RTC reserved the authority to expand her authority. However, it
modifieditsOrderdatedOctober15,2003,inthatitspriorapprovalwas
nolongerrequiredinthedisbursementoffunds,exceptthoseinexcessof
P500,000.00.Itfurtherorderedplaintiffnottoobtainanyloanorother
creditaccommodationswithoutitspriorapproval,anddirectedplaintiffs
depositorybankstobeadvisedofitsorder.
_______________

41Id.,atpp.384385.

42Id.,atpp.411414.

43Id.,atpp.416423.

44Id.,atpp.433438.

485
VOL.480,JANUARY27,2006
485
SyChimvs.SySiyHo&Sons,Inc.
ThehearingfortheformationofthemanagementcommitteewassetonJanuary9,
2004.45 PlaintifffiledamotionforreconsiderationofthetrialcourtsOrderdated
December19,2003.
ThespousesSyTiongShiouandJuanitaTanSyfiledapetitionforcertiorariin
theCourtofAppeals(CA)assailingtheOctober8,2003andDecember19,2003
OrdersoftheRTC.Thepetition,docketedasCAG.R.SPNo.81897andraffledto
theappellatecourts7thDivision,containedthefollowingprayer:
1. 1.
Uponthefilingofthispetition,atemporaryrestrainingorderand/orwritof
preliminaryinjunctionbeissuedrestraining/enjoiningtheHonorable
RespondentJUDGEfromundertakingfurtherproceedingsinCivilCaseNo.
03106456untilfurtherordersfromthisHonorableCourt;
2. 2.
Afterdueproceedings,thispetitionbegivenduecourseand,thereafter,judgment
berenderedannullingandsettingasidetheassailedOrdersdatedOctober8,
2003(AnnexH,supra)andtheOrderdatedDecember19,2003(AnnexR,
supra)andstrikingoutandquashingtheThirdPartyComplaintororderingthe
HonorableRespondentJUDGEtostrikeoutandquashtheThirdParty
Complaint.
Petitionersalsoprayforcostsandforsuchotherreliefsasjustandequitableunder
thepremises.46
Meantime,inanOrder47datedJanuary27,2004,theRTCdeclaredthatits
December19,2003OrderdesignatingWencitaSalvadorascomptroller
wasimmediatelyexecutory.Shewas,likewise,directedtoimmediately
assume her functions and ordered all the corporation officers to
immediatelyturnoverallcorporatebooksandrecordsasmayberequired
byher,andtocooperatefully.Thecourtdesignatedtheaccount
_______________

45Id.,atp.437.

46Id.,atp.460.

47Id.,atpp.477478.

486
486
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
ingfirmofR.S.Bernaldo&Associatestoconducttheaudit.Thecourt
alsodirectedthepartiestoprovidethefirmwithallthefinancialbooksof
thecorporation.
InaLetterdatedJanuary30,2004,Salvadorinformedthecorporation
thatshewasassumingthepositionofcomptrollereffectiveFebruary2,
2004.
ThecorporationfiledanUrgentMotion48 tolifttheJanuary27,2004
Order of the RTC, but before the RTC could resolve the motion, the
corporationfiledapetitionforcertiorariwithinjunctivereliefintheCA,
docketedasCAG.R.SPNo.82171.Thefollowingallegationsweremade:
1. A.
THERESPONDENTJUDGEGRAVELYABUSEDHIS
DISCRETIONANDACTEDWITHOUTORINEXCESSOF
JURISDICTIONANDVIOLATEDPETITIONERSRIGHTTO
DUEPROCESSINISSUINGTHEORDEROF12SEPTEMBER
2003(AnnexF)GRANTINGTHEMOTIONOFTHE
DEFENDANTS(PrivateRespondentsherein)FORTHE
CREATIONOFAMANAGEMENTCOMMITTEEPENDENTE
LITE,ANDINNOTRESOLVINGBUTINSTEADMOOTING
PETITIONERSMOTIONFORRECONSIDERATION(Annex
G)ANDSUPPLEMENTALMOTIONFOR
RECONSIDERATIONOFSAIDORDER(AnnexH).
2. B.
THERESPONDENTJUDGEGRAVELYABUSEDHIS
DISCRETIONANDACTEDWITHOUTORINEXCESSOF
JURISDICTIONANDVIOLATEDPETITIONERSRIGHTTO
DUEPROCESSINISSUINGTHESUPPLEMENTARYORDER
DATEDOCTOBER15,2003(AnnexI),ANDINNOT
RESOLVINGBUTINSTEADMOOTINGPETITIONERS
MOTIONFORRECONSIDERATIONOFSAIDORDER(Annex
J).
3. C.
THERESPONDENTJUDGEGRAVELYABUSEDHIS
DISCRETIONANDACTEDWITHOUTORINEXCESSOF
JURISDICTIONANDVIOLATEDPETITIONERSRIGHTTO
DUEPROCESSINISSUINGTHEORDERDATEDDECEMBER
19,2003(AnnexP),ANDINNOTRESOLVINGBUTINSTEAD
_______________

48Id.,atpp.479481.

487
VOL.480,JANUARY27,2006
487
SyChimvs.SySiyHo&Sons,Inc.
1. MOOTING PETITIONERS MOTION FOR RECONSIDERATION
OFSAIDORDER(AnnexQ).
2. D.
THERESPONDENTJUDGEGRAVELYABUSEDHIS
DISCRETIONANDACTEDWITHOUTORINEXCESSOF
JURISDICTIONANDVIOLATEDPETITIONERSRIGHTTO
DUEPROCESSINISSUINGTHEORDERDATEDJANUARY
27,2004(AnnexS)ANDINNOTRESOLVINGBUTINSTEAD
MOOTINGPETITIONERSURGENTMOTIONTOLIFTORDER
DATEDJANUARY27,2004(AnnexT).49
Theappellatecourtsetthehearingonthepleaforinjunctiverelief.50
OnJune29,2005,theCArenderedjudgmentgrantingthepetitionand
nullifyingtheordersissuedbytheRTC.Thefalloofthedecisionreads:
WHEREFORE,inviewoftheforegoing,thepetitionisGRANTED.TheOrdersof
September12,2003,October15,2003,December19,2003andJanuary27,2004,are
herebyANNULLEDandSETASIDE.TheinstantcaseisremandedtotheRegional
TrialCourtofManila,Branch46,forfurtherproceedingswithspecialinstructionsto
resolvethesamewithdeliberatedispatchinaccordancewiththerulesonsummary
procedure as defined by the Interim Rules of Procedure for IntraCorporate
Controversies.Nopronouncementastocost.
SOORDERED.51
The CA ruled that respondents failed to prove a requirement for the
creation of a management committee under Section 1, Rule 9 of the
InterimRules:thattherewasimminentdangerofmassivedissipation,loss,
wastageordestructionofassetsandotherpropertiesofthecorporation.
The appellate court declared that other than the bare allegations of Sy
ChimandFelicidadChanSythattheycouldnotprotect
_______________

49CARollo,Vol.I,p.19.

50Id.,atpp.446447.

51Rollo,pp.12451246.

488
488
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
theirinterestsbecauseofdissentionamongthemselvesontheonehand,
andmembersoftheboardofdirectorsontheother,theyfailedtoshow
thatthebusinessoperationsofthecorporationwereparalyzed.TheCA
emphasizedthatthecreationofamanagementcommitteeisforthebenefit
ofalltheinterestedparties,notexclusivelyforthebenefitofthepartyat
whoseinstanceitistobecreated.Theappellatecourtstatedthatasimple
turnoverofpertinentreceiptswouldfacilitatetheaccountingsoughtfor,
withoutresortingtothecreationofamanagementcommittee;theaccuracy
ofthevalidityoftheaccountingreportmadeasbasisofthecomplaintfor
accounting and damages should then be validated during trial on the
merits.CitingJacintov.FirstWomensCreditCorporation,52theCAruled
thatthetrialcourtabuseditsdiscretionamountingtoexcessofjurisdiction
inorderingthecreationofamanagementcommitteependentelite.
The CA also ruled that the trial court abused its discretion in
designating a comptroller and an accounting firm to assess the
corporations financial books and records. The CA stated that the
appointmentofacomptrollerwasnotauthorizedbytheInterimRules.
Thus,whileSection2,Rule9oftheInterimRulesallowstheappointment
ofareceiver,therewasnopointindiscussingthesamesincethetrialcourt
committedabuseofitsdiscretionincreatingamanagementcommittee.
The CA concluded that, when the trial court created a management
committeeanddesignatedanauditingfirmandacomptroller,itthereby
imposedadditionalburdenonthecorporation.
TheCAlikewisedeclaredthattheorderimposingalimitationofFive
HundredThousandPesos(P500,000.00)disbursementwithoutpriorcourt
approvalwaslikewiseunnecessaryandhasnodirectbearingtotheissue
involvedinthecasependingbeforethecourtaquo.
_______________

52G.R.No.154049,August28,2003,410SCRA140(2003).

489
VOL.480,JANUARY27,2006
489
SyChimvs.SySiyHo&Sons,Inc.
SpousesSyChimandFelicidadChanSyfiledamotionforthepartial
reconsiderationofthedecision,whichtheappellatecourtdenied.53
Saidspouses,nowpetitioners,filedtheinstantpetitionforreviewon
certiorari,allegingthat:
I

RESPONDENTCOURTOFAPPEALSERREDININTERPRETINGSECTION1,
RULE 9 OF THE INTERIM RULES OF PROCEDURE GOVERNING INTRA
CORPORATECONTROVERSIESBECAUSEITFAILSTOGIVEFULLFORCE
ANDEFFECTTOTHEPROTECTIVEPOWERSOFTHECOURT.
II

RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE


AUDITANDASSESSMENTOFTHECORPORATEBOOKSANDRECORDS
OF THE CORPORATION IS UNNECESSARY AND IS MORE THAN WHAT
THECASEDEMANDS.
III

RESPONDENT COURT OF APPEALS ERRED IN RULING ON THE 8


AUGUST2003ORDEROFTHETRIALCOURTDIRECTINGTHECONDUCT
OFANAUDITOFTHEBOOKSANDRECORDSOFSYSIYHO&SONS,INC.
(SSHI) BECAUSE SUCH ORDER WAS NOT COVERED BY THE PETITION
BEFORETHECOURTOFAPPEALS.
IV
RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE
TRIAL COURT HAS NO POWER AND AUTHORITY TO DESIGNATE A
COMPTROLLER AND TO MONITOR THE DISBURSEMENTS OF THE
CORPORATION.
V

RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE


APPOINTMENTOFANAUDITINGFIRMISPREMATURE.
_______________

53Rollo,pp.12661267.

490
490
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
VI

RESPONDENTCOURTOFAPPEALSERREDINRULINGTHATTHETRIAL
COURTGRAVELYABUSEDITSDISCRETIONINISSUINGTHEASSAILED
ORDERS.54
ThethresholdissueiswhetherornottheRTCcommittedgraveabuseof
itsdiscretionamountingtoexcessorlackofjurisdictionin(a)creatinga
management committee; (b) designating an independent auditor and
orderinganauditofthecorporatebooksandrecordsofthecorporation;
and (c) appointing acomptroller; andwhether the issues raised in this
CourtarefactualinnatureandproscribedbyRule45oftheRulesofCivil
Procedure.
Onthefirstissue,petitionersaverthattheCAerredinstrictlyapplying
therequisitesunderSection1,Rule9oftheInterimRulesregardingthe
creationofamanagementcommittee.Thepetitionerspositthattheword
andinSection1(1),Rule9shouldbeinterpretedasor,sincealiteral
interpretationoftheprovisionwouldfrustratetheplainintentionofthe
Rule.Theypointoutthattheappellatecourtsstrictinterpretationofthe
ruleiscontrarytothespiritofPresidentialDecreeNo.902A.Theyfurther
assertthattheRTCisempoweredtoactandputastoptomisappropriation
ofacorporationsfundsandthuspreventbusinessoperationsfrombeing
paralyzed. According to the petitioners, for the Court to idly wait and
watch as assets of the corporation are plundered until the business is
paralyzed,wouldrenderinutileSection1,Rule9oftheInterimRules.
Petitionersassertthatatthetimethecomplaintwasfiledinthetrial
court, respondents abused their positions and mismanaged corporate
affairs, thus necessitating the immediate creation of a management
committee.
Petitionersmaintainthatcorporatefundshavemassivelydissipatedand
wouldcontinueaslongasthemanagement
_______________

54Id.,atpp.2324.

491
VOL.480,JANUARY27,2006
491
SyChimvs.SySiyHo&Sons,Inc.
and control of the corporation remained with respondents. In fact,
respondents admitted in their complaint that there had been massive
dissipationofthefundsandassetsofthecorporationsince1993whenthey
(respondents)werestillcorporateofficers.Contrarytotherulingofthe
CA, the creation of the management committee would ensure the
continuity of the corporations business operations and remove the
managementofthebusinessfromthehandsofthoseresponsibleforthe
dissipation of its assets. Thus, petitioners insist, the interest of the
corporationanditsstockholderswouldbepreservedandprotectedthrough
thecreationofamanagementcommittee.
Petitioners further assert that the appointment of an independent
auditingfirmwouldsatisfythecorporationsclaimforafullaccounting
andensurethatallbooks,recordsanddocumentsofthecorporationwould
besubmittedtotheauditortoensureafair,impartialandfullaccounting.
Suchaccountingwoulddeterminethefullextentofmisappropriationof
corporate funds, as well as the shareholdings of its stockholders.
Petitionersinsistthattherewasanecessityforthecourttodosoinorderto
determinethetruestatusofcorporatefunds,andtodeterminewhoshould
beheldresponsiblefortheallegedmisappropriation.Petitionersassertthat
theauditorsreportisofdoubtfulcredibilityasitisinconsistentwiththe
externalauditorsreport(whichhasnoindicationofanymissingfund).
Moreover,theappointmentofanexternalauditorisnecessitatedbytime
constraintsandthevolumeoffinancialrecordstobeexamined.Petitioners
pointoutthat,asgleanedfromtheamendedcomplaint,thecorporation
prayed forthe accounting ofthemissingfunds;the appointment ofan
impartialandcompetentauditortoconducttheauditachievesthispurpose.
Petitionersmaintainthatrespondentcorporationsfailuretoquestion
the trial courts appointment of an independent auditor and accounting
firmthroughamotionforreconsiderationeffectivelyestoppedthemfrom
assailingsuchorders;
492
492
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
insteadoffilingapetitionforcertiorariintheCA,respondentshouldhave
movedthatsuchordersbereconsidered.
On the issue of whether or not the trial court may designate a
comptroller,petitionerspointoutthatalthoughSection1,Rule9ofthe
Interim Rules does not specifically authorize the RTC to appoint a
comptroller,thesameruleauthorizessuchcourttoappointareceiver;this
latterpowernecessarilyimpliestheauthoritytodesignateacomptroller.
According to petitioners, a comptroller would exercise more limited
functionsandensurethatnoillegitimatecorporateexpenditureswouldbe
madeandthatallgovernmentrequirementswillbecompliedwithbefore
theformationofamanagementcommittee.
By way of comment, respondent avers that the issues raised by
petitionersarefactual,whichisproscribedbyRule45oftheRulesofCivil
Procedure; whether or not there is factual basis for the creation of a
managementcommitteeunderSection1,Rule9oftheInterimRulesisa
questionoffact.TheCAcorrectlyruledthatpetitionersfailedtoallege
andsubstantiatetheneedfortheappointmentofanauditingfirm,aswell
astherequisitesforthecreationofamanagementcommittee.TheOrderof
the trial court dated August 8, 2003 had already been overtaken and
renderedmootbytheJanuary27,2004OrderoftheRTCwhichtheCA
affirmed. Also, whether or not there is a need for the appointment of
comptrollerandthelimitsofherpowerarequestionsoffactwhichshould
notberaisedinthisCourt.
Thepetitionispartiallygranted.
Section1,Rule9oftheInterimRulesprovides:
SECTION1.Creationofamanagementcommittee.Asanincidenttoanyofthe
casesfiledundertheseRulesortheInterimRulesonCorporateRehabilitation,a
partymayapplyfortheappointmentofamanagementcommitteeforthecorporation,
partnershiporassociation,whenthereisimminentdangerof:
493
VOL.480,JANUARY27,2006
493
SyChimvs.SySiyHo&Sons,Inc.
1. (1)
Dissipation,loss,wastageordestructionofassetsorotherproperties;
and
2. (2)
Paralyzationofitsbusinessoperationswhichmaybeprejudicialtothe
interestoftheminoritystockholders,partieslitigantsorthegeneral
public.55
ThesaidRules,whichtookeffectonApril1,2001,waspromulgatedby
theCourtpursuanttoitspowertopromulgaterulesconcerningpleading,
practiceandprocedureinallcourtsxxxprovidingforsimplifiedand
inexpensiveprocedureforthespeedydispositionofcasesunderSection
5(5),ArticleVIIIoftheConstitution.
Wedonotagreewithpetitionerscontentionthatthewordandin
Section1,Rule9oftheInterimRulesshouldbeinterpretedtomeanor.
WhileitistruethatinSection6(d)ofPresidentialDecreeNo.902A, 56an
applicantfortheappointmentofamanagementcommitteeismandatedto
proveonlyoneofthetworequisitesprovidedtherein,theCourt,inJacinto
v.FirstWomensCreditCorporation,57ruledthatthetworequisitesshould
bepresentbeforeamanagementcommitteemaybecreatedandareceiver
appointedbytheRTC:
Areadingoftheaforecitedlegalprovisionrevealsthatforaminoritystockholderto
obtaintheappointmentofaninterimmanagementcommittee,hemustdomorethan
merelymakeaprimafacieshowingofadenialofhisrighttoshareintheconcernsof
thecorporation;hemustshowthatthecorporatepropertyisindangerof
_______________

55Emphasissupplied.

56Sec.6.Inordertoeffectivelyexercisesuchjurisdiction,theCommissionshallpossess

thefollowingpowers:xxxd)Tocreateandappointamanagementcommittee,board,or
bodyuponpetitionor motupropriowhenthereisimminentdangerofdissipation,loss,
wastageordestructionofassetsorotherpropertiesorparalyzationofbusinessoperations
of such corporations or entities which may be prejudicial to the interest of minority
stockholders,partieslitigantsorthegeneralpublic(emphasissupplied).
57Supra,note52.

494
494
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
beingwastedanddestroyed;thatthebusinessofthecorporationisbeingdiverted
from the purpose for which it has been organized; and that there is serious
paralyzationofoperationsalltohisdetriment....
The rationale for the need to establish the confluence of the two (2)
requisitesunderSection1,Rule9byanapplicantfortheappointmentofa
management committee is primarily based upon the fact that such
committeeandreceiverappointedbythecourtwillimmediatelytakeover
themanagementofthecorporation,partnershiporassociation,including
suchpowerasitmaydeemappropriate,andanyofthepowersspecifiedin
Section5oftheRule.58
_______________

58 SEC.5. Powersandfunctionsofthemanagementcommittee.Uponassumptionto

officeofthemanagementcommittee,thereceivershallimmediatelyrenderareportandturn
overthemanagementandcontroloftheentityunderhisreceivershiptothemanagement
committee.
The managementcommittee shallhave thepowertotakecustodyofandcontrolall
assetsandpropertiesownedorpossessedbytheentityundermanagement.Itshalltakethe
placeofthemanagementandboardofdirectorsoftheentityundermanagement,assume
their rights and responsibilities, and preserve the entitys assets and properties in its
possession.
Without limiting the generality of the foregoing, the management committee shall
exercisethefollowingpowersandfunctions:
1. (1)
Toinvestigatetheacts,conduct,properties,liabilities,andfinancialconditionofthe
corporation,associationorpartnershipundermanagement;
2. (2)
Toexamineunderoaththedirectorsandofficersoftheentityandanyotherwitnessesthat
itmaydeemappropriate;
3. (3)
Toreporttothecourtanyfactascertainedbyitpertainingtothecausesoftheproblems,
fraud,misconduct,mismanagementandirregularitiescommittedbythestockholders,
directors,managementoranyotherperson;
495
VOL.480,JANUARY27,2006
495
SyChimvs.SySiyHo&Sons,Inc.
Indeed, upon the appointment of a receiver, the duly elected/appointed
officers of the corporation are divested of the management of such
corporation in favor of the management committee/receiver. Such
transferenceofthecorpora
_______________

1. (4)
Toemploysuchpersonorpersonssuchaslawyers,accountants,auditors,appraisersand
staffasarenecessaryinperformingitsfunctionsanddutiesasmanagement
committee;
2. (5)
Toreporttothecourtanymaterialadversechangeinthebusinessofthecorporation,
associationorpartnershipundermanagement;
3. (6)
Toevaluatetheexistingassetsandliabilities,earningsandoperationsofthecorporation,
associationorpartnershipundermanagement;
4. (7)
Todetermineandrecommendtothecourtthebestwaytosalvageandprotecttheinterest
ofthecreditors,stockholdersandthegeneralpubic,includingtherehabilitationof
thecorporation,associationorpartnershipundermanagement;
5. (8)
Toprohibitandreporttothecourtanyencumbrances,transfer,ordispositionofthe
debtorspropertyoutsideoftheordinarycourseofbusinessorwhatisallowedbythe
court;
6. (9)
Toprohibitandreporttothecourtanypaymentsmadeoutsideoftheordinarycourseof
business;
7. (10)
Tohaveunlimitedaccesstotheemployees,premises,books,recordsandfinancial
documentsduringbusinesshours;
8. (11)
Toinspect,copy,photocopyorphotographanydocument,paper,bookaccountorletter,
whetherinthepossessionofthecorporation,associationorpartnershiporother
persons;
9. (12)
Togainentryintoanypropertyforthepurposesofinspecting,measuring,surveying,or
photographingitoranydesignatedrelevantobjectoroperationthereon;
10. (13)
Tobringtotheattentionofthecourtanymaterialchangeaffectingtheentitysabilityto
meetitsobligations;
496
496
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
tionsmanagementwillcertainlyhaveanegative,ifnotcripplingeffect,
ontheoperations/affairsofthecorporationnotonlywithbanksandother
businessinstitutionsincludingthoseabroadwhichitdealsbusinesswith.
A wall of uncertainty is erected; the short and longterm plans of the
managementofthecorporationaredisrupted,ifnotderailed.59
Thus,thecreationandappointmentofamanagementcommitteeanda
receiverisanextraordinaryanddrasticremedytobeexercisedwithcare
andcaution;andonlywhentherequirementsundertheInterimRulesare
shown.Itisadrasticcourseforthebenefitoftheminoritystockholders,
thepartieslitigantsorthegeneralpublicareallowedonlyunderpressing
circumstancesand,whenthereisinadequacy,ineffectualorexhaustionof
legalorotherremedies.Thepowertointervenebeforethelegalremedyis
exhaustedandmisusedwhenitisexercisedinaidofsuchapurpose.60The
powerof
_______________

1. (14)
TorevokeresolutionspassedbytheExecutiveCommitteeorBoardofDirectors/Trustees
oranygoverningbodyoftheentityundermanagementandpassresolutionin
substitutionofthesametoenableittomoreeffectivelyexerciseitspowersand
functions;
2. (15)
Tomodify,nullifyorrevoketransactionscomingtoitsknowledgewhichitdeems
detrimentalorprejudicialtotheinterestoftheentityundermanagement;
3. (16)
Torecommendtheterminationoftheproceedingsandthedissolutionoftheentityifit
determinesthatthecontinuanceinbusinessofsuchentityisnolongerfeasibleor
profitableornolongerworkstothebestinterestofthestockholders,partieslitigants,
creditorsorthegeneralpublic;
4. (17)
Toapplytothecourtforanyorderordirectivethatitmaydeemnecessaryordesirableto
aiditintheexerciseofitspowersandperformanceofitsdutiesandfunctions;and
5. (18)
Toexercisesuchotherpowersasmay,fromtimetotime,beconferreduponitbythe
court.
59Statev.Londe,132S.W.2d501.

60Shapirov.Wilgus,287US348,53S.Ct.142.

497
VOL.480,JANUARY27,2006
497
SyChimvs.SySiyHo&Sons,Inc.
thecourttocontinueabusinessofacorporation,partnershiporassociation
mustbeexercisedwiththegreatestcareandcaution.Thereshouldbeafull
considerationofalltheattendantfacts,includingtheinterestofallthe
partiesconcerned.
NeitherPresidentialDecreeNo.902AandRepublicActNo.8799nor
theInterimRulesofProceduredefineimminentdanger.Dangerisa
generalterm,includingperil,jeopardy,hazardandrisk;asusedinthe
Rule, it refers to exposure or liability to injury. Imminent refers to
something which is threatening to happen at once, something close at
hand, something to happen upon the instant, close although not yet
happening,andonthevergeofhappening.61
Inthepresentcase,petitionersfailedtomakeastrongshowingthat
therewasanimminentdangerofdissipation,loss,wastageordestruction
ofassetsorotherpropertiesofrespondentcorporationandparalysisofits
businessoperationswhichmaybeprejudicialtotheinterestoftheparties
litigants,petitioners,orthegeneralpublic.TheRTCthuscommittedgrave
abuseofitsdiscretionamountingtoexcessofjurisdictionincreatinga
managementcommitteeandthesubsequentappointmentofacomptroller.
The bone of contention between the parties is whether there was a
shortage or unaccounted funds of the corporation, including
P67,117,230.30allegedlyincurredfrom1993(whenpetitionerSyChim
assumedofficeasPresident,FelicidadChanSyasAssistantTreasurer,Sy
Tiong Shiou as General Manager, and Juanita Tan Sy as Corporate
Treasurer);andwhoshouldbeheldaccountabletherefor.Petitionersblame
Sy Tiong Shiou and Juanita Tan Sy, while the latter pin liability on
petitioners based on the financial report of the Banaria Banaria and
CompanyandtheclaimofJuanitaTanSy.However,theseissuesoffact
haveyettobedeterminedbythetrialcourtafterdueproceedings.Indeed,
petitionersadmitted
_______________

61 ContinentalIllinoisWesternBank,etc.v.UnitedStatesofAmerica,504F.2d586

(1974).
498
498
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
the following in their motion for the appointment of a management
committee:
1. 4.
Thus,defendantsallegethatforanyunaccounteddifferenceofthe
corporationsaccount,includingthePHP67,117,230.30allegedin
theAmendedComplaint,itisSyTiongShiouandJuanitaTanwho
areatfaultinviewoftheirpowersasGeneralManagerand
TreasurerundertheBylawsoftheCorporationandinactualpractice
sincetheyhaveactivecontrolofthedaytodayoperationsofthe
Corporation.
2. 5.
However,whilethisHonorableCourtwillstilldetermine,inthecourse
oftheseproceedings,whetheritisdefendantsSyChimandFelicidad
ChanSyorwhetheritisSyTiongShiouandJuanitaTanwhoarethe
partiesresponsibleforthedissipationandlossofthecorporatefunds
andassetsofSySiyHo&Sons,Inc.,theactivedaytodaycontrol
andmanagementofSySiyHoandSons,Inc.isstillunderthe
controlandsupervisionofSyTiongShiouandJuanitaTan,
especiallysosincedefendantshavebeenphysicallyoustedfromtheir
residencebySyTiongShiouandhisfamilysince15April2003,and
defendantshavebeendeniedaccesstothecorporatepremisesandits
booksandrecords.62
Petitionersfailedtoadduceashredofevidenceduringthehearingoftheir
motiontoprovetheirclaimthattherewasimminentdangerofdissipation,
loss,wastageordestructionoftheassetsorotherpropertiesofrespondent
eversinceSyTiongShioubecamepresidentandJuanitaTanSycontinued
dischargingherdutiesascorporatetreasurer;noristhereproofthatthere
was imminent danger of paralyzing the business operations of the
corporation.
Wehavereviewedtherecordsandfindthat,contrarytothefindingsof
theRTC,thereisnoimminentdangerofdissipationortotallossofthe
assets, funds, properties and records of respondent corporation, or
paralysisofbusinessoperations.Infact,recordsshowthattherehasbeen
noslackinthebusinessoperationsofrespondentcorporation.
_______________

62Rollo,p.621.

499
VOL.480,JANUARY27,2006
499
SyChimvs.SySiyHo&Sons,Inc.
Petitioners were divested of their corporate positions, and thus
stockholdingsinthecorporationwerereduced.PetitionersclaimthatSy
TiongShiouandJuanitaTanSy(thirdpartydefendantsbelow)andtheir
children unlawfully ousted them from their positions andreducedtheir
shareholdingsinthecorporation.Theypositthattheformersclaimthat
they(petitioners)misappropriatedthefundsandassetsofrespondentwas
designedtojustifytheunlawfulousterofpetitionersfromthemanagement
ofrespondentcorporation.Suchclaims,however,haveyettobeproven.
WhiletheallegationthatSyTiongShiouandJuanitaTanSyabused
theirpositionsandmismanagedtheaffairsofrespondentcorporationisa
distinct possibility, petitioners failed to adduce proof thereon. Mere
possibilitywithoutproofofabusingcorporatepositionsanddissipationof
assets and properties of the corporation is not a valid ground for the
appointmentofamanagementcommittee/receiver.Petitionersevenfailed
toadduceevidencetocontrovertthefollowingallegationsofrespondent:
1. b.
Acomparativebreakdownofthevolumeofsalesandimportationofthe
plaintifffortheyears2002and2003,duringthewatchofdefendant
SyChimasPresidentandduringthetimethatSyTiongShioutook
overasPresidentwouldclearlyshowthatithastremendously
increased.Acopyofthecomparativechartisattachedheretoas
AnnexB;
2. c.
InacertificationdatedAugust29,2003issuedbyAmelinS.Yap,SVP,
CenterHeadofMetrobank,itisdemonstratedthatplaintiff,through
theableandcompetentmanagementandleadershipofSyTiong
Shiou,hasbeenabletoserviceandpayitsfinancialobligationswhen
itpaidFourteenMillionNineHundredElevenThousandSix
HundredSixtyFour(P14,911,664.00)Pesosundertrustreceipt
obligationfromtheperiodofApril2003uptoAugust2003.
Likewise,ithasalsopaidFourteenMillionFourHundredNinety
ThreeThousand(P14,493,000.00)Pesosunderloanobligationfrom
theperiodApril2003toAugust2003.Further,thebankcertifiedthat
plaintiffsobligationsareincurrentstatus.Photocopyofthesaid
certificationisattachedheretoasAnnexC;
500
500
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
1. d.
OnSeptember1,2003,CHINABANK,throughitsSeniorAssistantVice
President,InternationalBankingGroup,ElaineMarissaL.Ong
issuedacertificationthat,asperrecordsasofAugust28,2003,
plaintiffsoutstandingtrustreceiptsamountedonlytoP9,462,835.90
andthatthesetrustreceiptsarenotbeyond180days.Photocopyof
thesaidcertificationisattachedheretoasAnnexD;
2. e.
Likewise,onSeptember1,2003,AlliedBankingCorporation,through
itsSeniorAssistantVicePresidentFlorentinaGarrovillo,issueda
certificationthat,asperrecordsasofAugust29,2003,plaintiffs
outstandingtrustreceiptsamountedtoSevenMillionTwoHundred
NinetyFourThousandThreeHundredSixPesos&77/100
(Php7,294,306.77)andthat,asofthatdate,thesetrustreceiptsare
notbeyond180days.Photocopyofthesaidcertificationisattached
heretoasAnnexE.
...
3. 7.
Incontrast,duringdefendantSyChimsincumbencyasPresident,the
plaintiffcouldhardlypayitsfinancialobligationswithitscreditor
banks.Infact,ithastoaskandrequestforextensions.WhenTrust
ReceiptwithReferenceNo.014/TR/000631/02felldueonFebruary
7,2003after180days,defendantSyChimasPresidentofthe
plaintiffcouldnotpaythesameandinsteadaskedforanextensionof
90daysoruptoMay8,2003.Photocopyofthedocumentshowing
thistransactionisattachedheretoasAnnexF.63
We agree that past conduct and condition of the corporation may be
consideredindeterminingthepresentsituationandwhatthefuturewillbe.
However, a management committee or receiver will not be appointed
merelybecauseofthingsdoneorattemptedatapasttimewhenthepresent
situationandtheprospectsforthefuturearenotsuchastowarranttaking
the control of the property out of the hands of its owners.64 The
circumstances to justify the appointment of a management committee/
receivermustbeextraordinaryand
_______________

63Rollo,pp.628630.

64OriginalViennaBakeryv.Heissler,1893W.L.2136;Ill.App.1Dist;50Ill.App.406.

501
VOL.480,JANUARY27,2006
501
SyChimvs.SySiyHo&Sons,Inc.
something more must be shown than past misconduct and a mere
apprehension based thereon of future wrongdoing.65 To repeat, in the
absenceofastrongshowingofanimminentdangerofdissipation,loss,
wastageordestructionofassetsorotherpropertiesofacorporationand
paralysis of its business operations, the mere apprehension of future
misconduct based upon prior mismanagement will not authorize the
appointmentofamanagementcommittee/receiver.66
WealsoagreewiththeCArulingthattheRTCcommittedgraveabuse
ofitsdiscretioninexcessofitsjurisdictioninappointingacomptrollerand
ordering her to immediately assume office before the creation of a
managementcommittee.However,theCAruledthattheRTCcommitteda
graveabuseofitsdiscretionamountingtoexcessofitsjurisdiction,thus:
AsdefinedinBlacksLawDictionary,acomptrollerisanofficerofabusiness,
chargedwithcertaindutiesinrelationtothefiscalaffairsofthesame,principallyto
examineandaudittheaccounts,tokeeprecords,andreportthefinancialsituation
from time to time. We have perused the Interim Rules of Procedure for Intra
Corporate Controversies and nowhere in the said rules does it authorize the
designationofacomptroller.Rule9,Section2oftheProcedure,however,mandates
that,intheeventthecourtfindstheapplicationforthecreationofamanagement
committeesufficientinformandsubstance,thecourtshallissueanorderappointing
a receiver ofknownprobity,integrityandcompetenceandwithoutanyconflictof
interestasthereindefinedtoimmediatelytakeoverthecorporation,partnershipor
association, specifying such powers as it may deem appropriate under the
circumstances,includinganyofthepowersspecifiedinSection5ofsaidRule.We
seenoneedtodiscusswhetheritwouldhavebeenappropriateforthecourtaquoto
appointareceiverinviewofthefindingofthisCourtthatthe
_______________

65Waterburyv.MerchantsUnionExp.Co.,1867WL6250,50Barb.N.Y.157.

66SeeCampbellv.PennsylvaniaIndustries,Inc.,99F.Supp.199(1951).

502
502
SUPREMECOURTREPORTSANNOTATED
SyChimvs.SySiyHo&Sons,Inc.
creationofamanagementcommitteewasdoneingraveabuseofdiscretion.67
Indeed,theRTCcommittedgraveabuseofitsdiscretioninorderingthe
appointmentofWencitaSalvadorascomptroller.Wedonotforeclosethe
powerofamanagementcommitteetoappointacomptrollerunderSection
5,Rule9oftheInterimRules.However,withtheCourtsrulingthatthe
creationofsuchcommitteeandtheappointmentofareceiveriswithout
factualbasis,itfollowsthattheappointmentofacomptrolleris,likewise,
unnecessary.
We agree with petitioners contention that the RTC acted in the
exercise of its discretion in appointing an independent auditor. Such
appointmentisappropriateandevennecessaryifonlytolimittheissues
fortrialandthusabbreviatetheproceedings.Theousterofpetitionersas
president and treasurer of respondent and the takeover by thirdparty
defendants and their children of the management and control of the
corporation is based on the claim of Juanita Tan Sy that petitioner
FelicidadChanSyhadashortageofP67,117,230.30for2001and2002
per the report of the auditing firm, Banaria Banaria & Company.
Petitioners,fortheirpart,claimthatsuchreportisinconsistentwiththatof
respondentsexternalauditorAnitaUyfrom1994to2002whichwere
submittedtotheBureauofInternalRevenueandtheSECshowingthatno
amountwasduetostockholders.InthereportoftheBanariaBanaria&
Company,thecorporationhadretainedearningsofP56,170,114.89forthe
periodendingDecember31,2001,whereasperreportofUy,respondent
had net earnings of only P16,252,114.89, hence, the need for an
independent auditor. Moreover, such audit would forestall any
misappropriationofcorporatefundsandassetsofrespondentcorporation
intheinterim.
Wenotethatpetitionersprayedfortheappointmentofanindependent
auditor,andthatrespondentdidnotevenobject
_______________

67Rollo,pp.12441245.

503
VOL.480,JANUARY27,2006
503
SyChimvs.SySiyHo&Sons,Inc.
to the motion. Consequently, the RTC appointed the Punongbayan &
Araullofirmtoconducttheaudit.However,respondentmadeavolteface
and filed its Manifestation and Motion dated November 26, 2003 and
posited that an independent auditor was not necessary since in its
complaint,itmerelyprayedforanaccountingofthefundswhichwere
missingbasedonthereportoftheBanariaBanaria&Companyauditing
firm.
Weholdthatanindependentauditisimperativeinthiscasesothat,
basedonsuchreport,theRTCwouldbeabletodeterminetheveracitynot
only of respondents claim that petitioners misappropriated corporate
fundsandassets,butalsothatofpetitionerswhoclaimotherwise.
INLIGHTOFALLTHEFOREGOING,thepetitionisPARTIALLY
GRANTED.TheDecisionoftheCourtofAppealsisAFFIRMEDWITH
THEMODIFICATIONthattheOrdersoftheRegionalTrialCourtdated
August8,2003,October15,2003andJanuary27,2004,relativetothe
appointmentofR.S.BernabeandAssociatesasindependentauditor,are
AFFIRMED.
Nocosts.
SOORDERED.
Panganiban (C.J., Chairperson), YnaresSantiago, Austria
MartinezandChicoNazario,JJ.,concur.
Petitionpartiallygranted,judgmentaffirmedwithmodification.
Note.The enactment of Republic Act No. 8799 (Securities
Regulation Code) transferred the jurisdiction to resolve intracorporate
controversiestocourtsofgeneraljurisdictionortheappropriateRegional
TrialCourts.(Vesagasvs.CourtofAppeals,371SCRA508[2001])
o0o

504
Copyright 2014 Central Book Supply, Inc. All rights reserved.