Monday, May 22, 2017
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PROPERTY RULES

No way they can intervene

The sudden demise of her husband opened a Pandora’s box. Laida, Gene’s widow, was constrained to have herself appointed as a special administratix of the estate of her late husband.

In order to recover the ownership of a valuable property, Laida, as the special administratix, filed a civil case against SLC Corp., the FM Bank and the Register of Deeds.

In her complaint, Laida alleged that she and Gene acquired, through the use of their hard earned money, a parcel of land in Zambales.

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Upon the death of her beloved spouse, she discovered—much to her dismay and surprise—that Gene, during his lifetime, caused the annotation of an affidavit on the back of the land’s transfer certificate title stating that the land was acquired through the use of his exclusive funds.

Worse, Laida found out that their Zambales property was transferred in favor of SLC Corp. through a deed of assignment purportedly executed by Gene. It further appears that the said land was mortgaged by the SLC Corp. in favor of FM Bank.

Laida thus asked the court to declare the foregoing acts as void given that they were done in an attempt to defraud the conjugal partnership and that the assignment was done without her marital consent.

Gene’s sisters came to know of the civil suit. Gene’s sisters, through their counsel, sought the approval of the court for them to intervene and participate in the said court case.

The sisters averred that their brother conveyed to them one-half of his shareholdings in SLC Corp., and by reason thereof, they have come to own around 41 percent of the total outstanding shares of stocks of the said corporation.

The sisters posit that their ownership of 41 percent of the entire outstanding capital stock of SLC Corp. would be severely affected if the only tangible asset of the corporation would be declared as the conjugal property of Laida and Gene.

Q: What is intervention?

A: Intervention is an act or proceeding by which a third person is permitted to become a party to an action or proceeding between other persons, and which results merely in the addition of a new party or parties to an original action, for the purpose of hearing and determining at the same time all conflicting claims which may be made to the subject matter in litigation.

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Q: Who can intervene?
A: Pursuant to Section 1 of Rule 19 of the 1997 Rules of Civil Procedure, a person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action.

Q: When will the court grant intervention?
A: For intervention to be allowed: [a] it must be shown that the movant has legal interest in the matter in litigation, or otherwise qualified; and [b] consideration must be given as to whether the adjudication of the rights of the original parties may be delayed or prejudiced, or whether the intervenor’s rights may be protected in a separate proceeding or not.

Both requirements must concur as the first is not more important than the second.

Q: What is legal interest?

A: The interest which entitles a person to intervene in a suit between other parties must be in the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment.

Otherwise, if persons not parties of the action could be allowed to intervene, proceedings will become unnecessarily complicated, expensive and interminable. And this is not the policy of the law.

Q: Can the sisters legally intervene in the civil suit?

A: No, the sisters’ interest, if it exists at all, is indirect, contingent, remote, conjectural, consequential and collateral.

At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature. Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person.

Moreover, the sisters cannot claim the right to intervene on the strength of the transfer of shares allegedly executed by their late brother. The transfer of shares were not recorded and thus will prejudice third parties.

(Sources: Section 1, Rule 19 of the 1997 Rules of Civil Procedure; Labrador vs. CA, G.R. No. 58168 December 19, 1989; Saw vs. CA, G.R. No. 90580, April 8, 1991)
Ma. Soledad Deriquito-Mawis is currently the Dean for the Lyceum of the Philippines University; president of the Philippines Association of Law Schools; and Senior Partner, Gatchalian Castro &
Mawis Law Office

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