Court Decision

THE Final Decision On the Islamic Bank Edited OCTOBER5, 2009

BY Abdel aziz Dimapunong Founding Chairman, Amanah Islamic Bank(19921998) The Charter of the Islamic Bank, R.A. Act 6848 has gone through the grind of the judicial branch of the government in the case of Abdel Aziz Dimapunong, et. al, vs. Hon. Zosimo Angeles, as Judge of RTC Makati, Branch 58, and Roberto De Ocampo, et. al.. Docketed as C.A. - G.R. SP No. 28445, The case involves mostly on intracorporate controversies in the Islamic Bank. It also touches on the powers and functions of the Board of Arbitration of the Islamic Bank as provided for under Section 9 of its Charter. What follows below is the complete text of a Decision of the Hon. Court of Appeals.

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COURT OF APPEALS SEVENTEENTH DIVISION DECISION Promulgated January 13, 1993 Members: HERRERA, O., MONTOYA, and MONTENEGRO, J.J. MONTOYA J.: From the pleadings filed in this petition, it appears that on June 1, 1992, the Al Amanah Islamic Investment Bank of the Philippines (AIIBP) filed a complaint for injunction with damages before the respondent Regional Trial Court of Makati (Br. 58) against Abdel Aziz Dimapunong, et al. The AIIBP alleged in its complaint that it is managed by a Board consisting of six (6) members who are to serve until the scheduled stockholders meeting in June, 1992; that on April 28, 1992, the defendants Dimapunong, et. al. declared themselves to be the newly elected directors and officers of the AIIBP after an alleged annual stockholders meeting held at the Army and Navy Club in Manila; that said defendants have circulated to the general public and all government offices concerned, official notices of their alleged assumption of office, directing everyone to recognize them as such and threatening legal prosecution of any one who may deal with the old Board unless authorized by Dimapunong; that while the incumbent management of the AIIBP was discussing the proper legal action to take, Dimapunong et. al. with the assistance of military/police authorities and other armed persons, ISLAMIC BANKING IN THE PHILIPPINES

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stormed the premises of the bank at the Pacific Star Building in Makati and its branch office at the Manulife Center Building in Salcedo Village, Makati and insisted on entering said offices to install themselves thereat; and that while the security forces at said premises were able to prevent the defendants' siege of the building, the latter have declared their intention to return for the same purpose. The AIIBP prayed for the issuance of a restraining order; pending resolution of its prayer for a writ of preliminary injunction, to prevent the defendants from committing further acts of misrepresentation and from sowing further chaos and disrupting the normal banking operations of the plaintiff; and for the issuance of a permanent writ of injunction against the defendants and for an order directing them to pay the AIIBP moral, actual, and exemplary damages, plus attorneys fees and costs of suit. On June 2, 1992 respondent court issued a temporary restraining order as prayed for by the AIIBP. The defendants Dimapunong, et. al. filed a "Motion to Dismiss and Dissolve Restraining Order", alleging that the respondent court had no jurisdiction over the subject and nature of the action; that venue was improperly laid; that the plaintiff has no capacity to sue; and that there is no cause of action, the plaintiff is not entitled to the relief demanded, and the complaint itself was insufficient. The defendants argued, among others, that the issue between the parties is intra-corporate and falls under the exclusive and original jurisdiction of the Securities and Exchange Commission under P.D. No. ISLAMIC BANKING IN THE PHILIPPINES

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902-A as amended; that the person who signed the complaint, Oscar S. Ramirez, had no capacity to sue as he is not a stockholder or a member of the alleged Board of Directors and there is no Board resolution authorizing him to file the complaint; that since the AIIBP is a government bank, only the Corporate Counsel for the Solicitor General can initiate the action; and that power to sue is vested in the Board of Directors. The defendants prayed for the dismissal of the complaint and for the dissolution of the temporary restraining order issued by the respondent court. On June 23, 1992, the respondent court denied the motion to dismiss filed by defendants Dimapunong, et. al., stating in its Order: "x x x It is noted that an intracorporate controversy has been defined as 'one which arises between a stockholder and the corporation'. (Rivera vs. Florendo, 144 SCRA 643) In the case at bar, it appears that not all of the defendants are stockholders or shareholders of plaintiff corporation and therefore any controversy between the plaintiff and the defendants cannot be said to be an intracorporate controversy which will fall within the jurisdiction of the Securities and Exchange Commission. Furthermore, in the case of Sunset View Condiminium Corporation versus Campos, Jr., 104 SCRA 303, April 27, 1981, the Hon. Supreme Court has held ' that cases of private respondents who are not stockholders of the corporation, cannot be a controversy arising out of intracorporate or partnership relations x x x."

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A " Motion for Reconsideration" filed by the defendants was denied on July 6, 1992 by the respondent court which, however, found plaintiff's officials Roberto de Ocampo and Ernesto Duran in contempt of court for having violated its temporary restraining order. The defendants Dimapunong, et. al. are now before this Court on a petition for certiorari with prohibition with a prayer for the issuance of a preliminary injunction, seeking the annulment and setting aside of the aforecited Orders of June 23, 1992 and July 6, 1992, on the following grounds: "1. THAT THE COURT ERRED IN DENYING PETITIONERS MOTION TO DISMISS DATED JUNE 8, 1992 AND MOTION FOR RECONSIDERATION DATED JUNE 26, 1992 BECAUSE IT IS THE SECURITIES AND EXCHANGE COMMISSION UNDER PD NO. 902-A, NOT THE REGULAR COURTS, THAT HAS JURISDICTION TO HEAR AND DECIDE INTRACORPORATE CONTROVERSIES. "2. THE CASE AT BAR SHOULD HAVE BEEN SETTLED BY THE BOARD OF ARBITRATORS UNDER R.A. NO. 6848. "3. OSCAR RAMIREZ DOES NOT HAVE THE CAPACITY TO SUE SINCE HE IS NOT A SHARE-HOLDER OR DIRECTOR OF THE ISLAMIC BANK." The private respondents, commenting on this petition and in opposition thereto aver that:

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Significantly, however, the Office of the Solicitor General, representing the public respondents, filed a manifestation that on the basis of law and jurisprudence, it agrees with the position of the petitioners and submits that jurisdiction over the controversy below is legally vested with the Securities and Exchange Commission, and recommends that respondent judge be ordered to lift the preliminary injunction (actually only a temporary restraining order) issued, enjoined from further proceeding with Civil Case No. 92-1487, and directed to dismiss the said case. We agree with the petitioners and the Solicitor General that it is the Securities and Exchange Commission which has jurisdiction over the controversy subject of the proceedings before the respondent court. Presidential Decree No. 902-A provides that the SEC is vested with absolute jurisdiction, supervision and control over all corporations, partnership or associations, who are the grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines (Section 3). The primary franchise of a corporation may either be its certificate of incorporation issued by the SEC or a special law which creates a corporation and serves as its charter. There is no question that the AIIBP is a corporation created by R.A. NO. 6848 to replace the former Philippine Amanah Bank and is therefore under the jurisdiction and subject to the control and supervision of the SEC. The same P.D. No. 902-A likewise provides under Section 5 thereof that the SEC shall have original and exclusive jurisdiction to hear and decide cases involving the following: ISLAMIC BANKING IN THE PHILIPPINES

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"a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or organizations registered with the Commission; b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnership or association x x x (emphasis supplied) A reading of the complaint filed before the respondent court shows that the controversy submitted by the plaintiff involves the validity of the calling and holding of the shareholders' meeting held on April 28, 1992 and the election during said meeting of the defendants Dimapunong, et. al. as directors and officers of the corporation. Another set of officers, led by Roberto de Ocampo, claim to be the legitimate directors and officers of the AIIBP and the main issue to be resolved therefore is, which of the two (2) sets of officers is the legitimate one --- a matter clearly within the competence of the SEC to resolve. And although the private respondents claim that petitioners Abdel Aziz Dimapunong and Victor ISLAMIC BANKING IN THE PHILIPPINES

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Santos are not shareholders of AIIBP and do not have the authority to represent the Office of the President and of the Government Service Insurance System, respectively, there is no question that the other petitioners, Abbas, Dianaton, and Malambut, are shareholders of the bank. There should be nor more doubt, therefore, that under the aforecited provisions of both Sec. 3 and Sec. 5 of P.D. 902-A it is the SEC, not the Civil Courts, that has jurisdiction over the case filed before the respondent court. The Solicitor General aptly cites Union Glass & Container Corp. vs. SEC, 126 SCRA 31, 38 on this point: "The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected, and their activities pursued for the promotion of economic development. It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus, the law explicitly specified and delimited its jurisdiction to matters intrinsically connected with the regulation of corporations, partnership and associations and those dealing with internal affairs of such corporations, partnership or associations (emphasis supplied)." And as held in Viray vs. Court of Appeals, 191 SCRA 308, the better policy in determining which body has jurisdiction over a case is to consider not only the status or relationship of the parties but also ISLAMIC BANKING IN THE PHILIPPINES

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the nature of the question that is the subject of the controversy. We find no need to dwell on the two (2) other issues presented by the petitioners as the same have been rendered moot and academic with our ruling on the question of jurisdiction in favor of the SEC. WHEREFORE, the respondent court dated 1992 are SET ASIDE and to dismiss Civil Case jurisdiction.

questioned Orders of the June 23, 1992 and July 6, said respondent is ordered No. 92-1487 for lack of

No costs. SO ORDERED. (SGD.)

SALOME

A.

MONTOYA Associate Justice WE CONCUR: (SGD.) OSCAR M. HERRERA Associate Justice (SGD.) EDUARDO G. MONTENEGRO Associate Justice CERTIFICATION I hereby certify that this Decision was reached after due consultation among the members of the Division in accordance with the provisions of Section 13, Article VIII of the Constitution. (SGD) OSCAR M. HERRERA Chairman Seventeenth Division ISLAMIC BANKING IN THE PHILIPPINES

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