Rules of Procedure on Intra-Corporate Controversies

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INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTROVERSIES: 

1 INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTROVERSIES 9 th National Convention Integrated Bar of the Philippines Philippine International Convention Center 23 May 2003 Francis Lim, Esq. Co-Managing Partner ACCRALAW OFFICES Makati City

Some Historical Perspectives : 

2 Some Historical Perspectives Pre-1976 Jurisdiction belonged to the regular courts Rules of Court 1976 to August, 2000 P.D. 902-A, as amended. SEC Rules of Procedure

Some Historical Perspectives : 

3 August, 2000 to present Securities Regulation Code (R.A. 8799) Jurisdiction re-transferred to the regular courts Rules of Procedure on Intra-Corporate Controversies - effective 1 April 2001 Some Historical Perspectives

Scope of Application: 

4 Scope of Application All cases that were under the original and exclusive jurisdiction of the SEC pursuant to P.D. 902-A, as amended, e.g ., Intra-corporate Disputes Disputes between stockholders and corporation Disputes between/among stockholders Disputes between stockholders and their directors or officers

Scope of Application: 

5 Scope of Application Derivative suits Inspection of corporate books Election contests (Sec. 1, Rule 1)

Basic Policy Objectives: 

6 Basic Policy Objectives Summary Proceedings Transparency Avoidance of Nuisance and Harassment Suits

Summary Proceedings: 

7 Summary Proceedings Limited pleadings Only pleadings authorized are complaint, answer, compulsory counterclaims or cross-claims pleaded in the answer, and answers to counter-claims and cross-claims. No reply allowed - all matters alleged in the answer, except cross-claims, are deemed denied even if not answered. (Secs. 2 & 6, Rule 2) Prohibited Pleadings Motion to dismiss, motion for bill of particulars, motion for extension of time or postponement, except for clearly compelling reasons. Motion must be under oath. (Sec. 8, Rule 1)

Summary Proceedings: 

8 Summary Proceedings Default Judgment Decision without need of ex parte evidence No relief beyond or different from that prayed for. (Sec. 7, Rule 2) Judgment before pre-trial conference Proper after submission of pre-trial briefs where warranted by the affidavits and other evidence submitted by the parties. Memoranda within 20-day inextendible period. Judgment within 90 days from expiration of period, with or without memoranda. May be partial or total. (Sec. 4, Rule 4)

Summary Proceedings: 

9 Summary Proceedings Judgment after pre-trial and before trial Proper where evidence submitted during pre-trial so warrants May be partial or total. If total, no trial is needed. (Sec. 5, Rule 4)

Summary Proceedings: 

10 Summary trial mechanism Trial to commence not later than 30 days from date of pre-trial order 60-day trial period (Sec. 2, Rule 5) Affidavit (question and answer form) in lieu of oral direct examination Affidavit must affirmatively show competence of affiant Must comply with the rules of admissibility (Sec. 8, Rule 2; Sec. 1, Rule 5) Summary Proceedings

Summary Proceedings: 

11 Summary Proceedings Only affidavits and documents attached to the pleading or submitted with the pre-trial brief admissible in evidence, except: Testimony of: Adverse party witness Hostile or unwilling witness Newly discovered evidence Where failure to submit is for meritorious and compelling reasons (Sec. 8, Rule 2)

Summary Proceedings: 

12 Summary Proceedings Special summary procedure for election contest and inspection of corporate books (Rules 6 & 7) No temporary restraining or status quo orders shall be issued, save in exceptional cases and only after hearing the parties and posting of bond . (Sec. 1, Rule 10) Decisions and orders immediately executory . (Sec. 4, Rule 1)

Transparency: 

13 Allegations of ultimate facts not sufficient All facts material and relevant to cause of action must be pleaded (Sec. 4, Rule 2) Pleading supported by affidavits and documentary evidence. (Sec. 8, Rule 2) Discovery devices encouraged Objections limited to patently incompetent, irrelevant, immaterial and privileged matters. (Sec. 2, Rule 3) In addition to RoC penalties, party may be non-suited or defaulted if failure to comply is patently unjustified. (Sec. 4, Rule 3) Transparency

Transparency: 

14 Transparency Detailed Pre-trial brief In addition to Rules of Court requirements, must include: Brief nature of the case, including theory in clear and concise language Allegations expressly admitted Allegations deemed admitted Documents not specifically denied under oath Documents and other evidence not earlier submitted. (Sec. 1, Rule 4)

Transparency: 

15 Transparency Must be received not later than 5 days before the pre-trial conference - to enable the judge and other party to prepare. ( id .) Active participation of the judge during pre-trial amicable settlement Determination of admissions Obtaining stipulation of facts Rulings on evidence

Transparency: 

16 Transparency Possibility of submitting the case for decision based on position papers, affidavits and documentary evidence (Sec. 2, Rule 4) Detailed pre-trial order Admitted/disputed facts Summary/purpose of documentary evidence Names of witnesses and estimated length of testimony (Sec. 5, Rule 4)

Avoidance of Nuisance and Harassment Suits: 

17 Avoidance of Nuisance and Harassment Suits Express prohibition against harassment and nuisance suits Extent of shareholding or interest Availability of appraisal rights Prejudice or damage to the corporation, partnership or association in relation to the relief sought (Sec. 1(b), Rule 1) Complaint must be accompanied by certification on no forum shopping (Sec. 4, Rule 2)

Avoidance of Nuisance and Harassment Suits: 

18 Avoidance of Nuisance and Harassment Suits Complaint/answer must : state the law, rule or regulation relied upon be accompanied by affidavits and other documentary evidence (Secs. 4 & 5, Rule 2) Signature of attorney on pleading is certification that: well grounded in fact, warranted by existing law, and good faith argument for application, extension, modification or reversal of existing jurisprudence.

Avoidance of Nuisance and Harassment Suits: 

19 Avoidance of Nuisance and Harassment Suits Not for improper motive such as to harass or cause unnecessary delay or needless increase in the cost of litigation. (Sec. 7, Rule 1)

Sanction Mechanism: 

20 Penalty on the party for: nuisance and harassment suits false certification unwarranted denials in the answer willful concealment or non-disclosure of material facts. (Sec. 1, Rule 11) Sanctions include payment of reasonable expenses and attorney’s fees. ( id. ) Sanction Mechanism

Sanction Mechanism: 

21 Sanction Mechanism Disciplinary sanctions on the judge for: Failure to issue detailed pre-trial order Failure to follow summary procedures prescribed by the Rules (Sec. 2, Rule 11)

INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTROVERSIES: 

22 INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTROVERSIES 9 th National Convention Integrated Bar of the Philippines Philippine International Convention Center 23 May 2003 Francis Lim, Esq. Co-Managing Partner ACCRALAW OFFICES Makati City