This case clarifies the rules on serving summons to a corporation, especially when a management committee is in place due to internal disputes. The Supreme Court ruled that serving the summons to the corporate secretary, who was also a member of the management committee, was valid. This is because the corporate secretary is considered a responsible officer who can receive summons on behalf of the corporation, according to the rules of procedure. This decision emphasizes the importance of following proper procedures to ensure the court acquires jurisdiction over the corporation, and also considers the effect of the Securities and Exchange Commission (SEC) orders in intra-corporate disputes.

Corporate Turmoil: Who Speaks for Tyson’s When Internal Disputes Cloud the Picture?

In October 1992, Romana Dela Cruz leased several parcels of land to Tyson’s Super Concrete, Inc. for twenty years. However, in March 1995, internal disagreements between the major stockholders of Tyson’s led to the SEC creating a Management Committee to oversee the corporation’s operations. This committee was tasked with managing Tyson’s, safeguarding its assets, and protecting the interests of its stockholders and creditors. On February 27, 1996, Dela Cruz filed an ejectment case against Tyson’s in the Metropolitan Trial Court (MeTC) of Caloocan City for failing to pay rentals. When Tyson’s failed to answer the complaint, the MeTC ruled in favor of Dela Cruz.

Tyson’s challenged the MeTC judgment, arguing that the court never obtained jurisdiction over the corporation because the summons was not served validly. The summons had been received by Francis Chua, the corporate secretary and a member of the SEC-appointed Management Committee, but Tyson’s argued that service should have been made on the chairman of the Management Committee. The Regional Trial Court (RTC) dismissed Tyson’s petition, but the Court of Appeals (CA) initially reversed this decision, siding with Tyson’s. However, upon Dela Cruz’s motion for reconsideration, the CA reversed itself again, prompting Tyson’s to bring the case to the Supreme Court.

The Supreme Court tackled two primary issues. First, whether extrinsic fraud deprived Tyson’s of its day in court, and second, whether the service of summons on Tyson’s was valid. The petitioners argued that Francis Chua, connived with Dela Cruz and committed extrinsic fraud by not furnishing the committee and the other stockholders with the summons issued by the MeTC. Petitioners contend that, as such, the MeTC did not acquire jurisdiction over it; consequently, its judgment rendered in favor of Dela Cruz and against petitioners is null and void.

In deciding this issue, the Court looked into what constitutes extrinsic fraud. Extrinsic fraud is defined as any fraudulent act by the winning party in a lawsuit that occurs outside the trial and prevents the losing party from fully presenting their case. The Supreme Court found no proof that Chua, as the corporate secretary, engaged in behavior to prevent Tyson’s from defending itself in court, noting that, as a matter of fact, Francis Chua’s lawyer sent a letter to the Committee informing it that the complaint was received on March 21, 1996, and that Tyson’s is required to file an answer within fifteen days from receipt.

The Supreme Court stated that under procedural law at the time, specifically Section 13 of Rule 14 of the Revised Rules of Court, service upon a domestic corporation could be made on the president, manager, secretary, cashier, agent, or any of its directors. The Supreme Court emphasized that the key point was that Chua was both the corporate secretary and a member of the Management Committee. Even if the Management Committee had taken over the functions of the board of directors, Chua still qualified as an agent of the corporation, thereby making the service of summons valid.

Moreover, the court dismissed the argument that only the chairman of the Management Committee could receive the summons, holding that it could not find any basis to conclude that only its chairman is authorized to receive summons. The Court found that the SEC order creating the management committee does not restrict the service of summons solely to the chairman. Furthermore, the Supreme Court clarified that internal rules set by the SEC or the Management Committee cannot override the Rules of Court. In effect, because Chua was both a committee member and a senior corporate officer, serving him with the summons was legally valid.

Therefore, based on these grounds, the Court ruled that the CA was correct in its amended decision, emphasizing the legitimacy of the MeTC’s authority and upholding the eviction order. The court highlighted that summons had been validly served upon Tyson’s, giving the MeTC the authority to try the case.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Tyson’s Super Concrete, Inc. v. Court of Appeals, G.R. NO. 140081, June 23, 2005

FAQs

What was the key issue in this case?	The central issue was whether Tyson’s Super Concrete, Inc. was validly served with a summons, which is essential for a court to have jurisdiction over a corporation. This involved deciding whether service to the corporate secretary, who was also a member of a management committee, was sufficient.
Who was Francis Chua, and why was he important to the case?	Francis Chua was the corporate secretary of Tyson’s Super Concrete and a member of the management committee created by the SEC. His role was crucial because the summons for the ejectment case was served to him, and the validity of this service was contested.
What is a Management Committee in the context of this case?	The Management Committee was formed by the SEC due to internal disputes within Tyson’s Super Concrete. It was responsible for managing the corporation’s assets, funds, and records to protect the interests of stockholders and creditors.
What does “extrinsic fraud” mean, as discussed in the decision?	Extrinsic fraud involves actions by the winning party outside the trial that prevent the losing party from fully presenting their case. In this case, Tyson’s argued that Chua deliberately withheld information about the lawsuit to ensure a default judgment against the corporation.
What did the Supreme Court decide about the validity of the summons?	The Supreme Court determined that the service of summons to Francis Chua was valid, affirming that, as both corporate secretary and a member of the management committee, he was a proper agent to receive the summons on behalf of the corporation.
Can internal rules of the SEC or a management committee override the Rules of Court?	No, the Supreme Court clarified that internal rules or procedures established by the SEC or a management committee cannot supersede the Rules of Court. The Rules of Court, promulgated by the Supreme Court, govern procedural matters.
What was the practical outcome for Tyson’s Super Concrete as a result of this decision?	As a result of the Supreme Court’s decision, the ejectment order against Tyson’s Super Concrete was upheld. This meant the corporation was required to vacate the leased premises and pay the due rentals, as initially ordered by the MeTC.
Why didn’t the existence of a Management Committee automatically suspend the ejectment case?	While the existence of a management committee typically suspends actions against a distressed corporation, the Supreme Court considered that the case had been pending for a decade, rendering the suspension impractical. Continuing the existing proceedings was deemed to serve the greater interest of justice.

The Supreme Court’s decision underscored the necessity of abiding by established service of summons rules, solidifying a vital principle in corporate legal procedures. Serving a summons properly guarantees that all parties receive a fair hearing and that judgments reached are valid. By emphasizing the key roles that corporate secretaries and committee members play, this decision gives more clarity on proper service. Furthermore, it guarantees responsibility and transparency, upholding the standards of justice and due process. This ruling highlights how crucial it is for corporations to be informed, especially when their governance is managed by a committee set up during internal conflicts.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Tyson’s Super Concrete, Inc. v. Court of Appeals, G.R. NO. 140081, June 23, 2005