Corporate Securities Info
Service of writs on companies
Philippine Daily Inquirer
Last Tuesday’s impeachment trial of Chief Justice Renato Corona was a virtual tutorial on how not to enforce a court order on a corporation.
By way of background, in 2001 Corona’s wife, Cristina, sued her uncle, Jose Ma. Basa III and several relatives for libel arising from statements in connection with a dispute over a building owned by their family.
The court found Basa and two others guilty. They were given a jail sentence and ordered to pay P500,000 in moral damages and attorney’s fees. Before the judgment became final, Basa died in 2002.
His death, under the law, automatically extinguished all his criminal and civil liabilities.
In 2003, upon the request of Cristina, who concealed the fact of Basa’s death, the court issued a writ of execution to seize Basa’s stocks in Basa-Guidote Enterprises Inc. to satisfy the P500,000 damages earlier awarded to her.
Through cross-examination by prosecution lawyer Winston Gines of the sheriff who enforced the writ of execution, several glaring errors were shown to have been committed in the way those shares (worth at least P32 million then) were attached, sold and transferred to Corona’s daughter, Carla Castillo, for P28,000.
Service
The sheriff admitted that, first, he served the writ in a place other than the company’s official business address and, second, the writ was served on a building caretaker, not to a person authorized by the law to receive court processes on behalf of a corporation.
There were other irregularities that appeared to have attended the seizure and sale of Basa’s stocks, but for this article, we shall limit our discussion to these two items.
Under existing rules, if a private corporation is sued or otherwise involuntarily brought into a court case, all summonses and other court papers are initially served by the sheriff at its business address, as indicated by the party that wants it impleaded.
A company may have offices or branches as the needs of its business may require, but it can have one business address only and this should be stated in its Articles of Incorporation with the Securities and Exchange Commission.
Any changes in that address must be effected by way of an amendment of the Articles of Incorporation. Until the change is approved and recorded by the SEC, the original address is controlling for purposes of determining whether a legal process or court order has been properly served on a corporation.
Responsibility
Finding the business address of a corporation for the purpose of serving court orders is not enough; it is essential that it is served on any of the following members of its staff: president, managing partner, general manager, corporate secretary, treasurer and in-house counsel.
This listing is exclusive, i.e., if the documents are received by people other than those mentioned, the service will not be considered as properly made on the corporation.
The Rules of Court presume that the named persons possess sufficient competence and discretion to immediately inform management about the papers or otherwise take the appropriate measures to protect the company’s interests.
Thus, for example, service on a stockholder who owns 99 percent of the company, but does not hold any of the positions enumerated, will not be binding on the corporation. Any action taken by the litigants or the court based on such invalid service is null and void.
However, if, after the initial service on the corporation at its business address and on the proper person is made, a lawyer enters his appearance in court as counsel for the company, all court papers intended for the company may be sent instead to the lawyer’s office address.
Diligence
Although the libel case filed by Cristina Corona against her relatives stemmed from a dispute over a building by the family-owned Basa-Guidote Enterprises, the firm was neither a complainant nor a defendant in the case.
It got involved or came into the picture only because Cristina wanted to get hold of her late uncle’s stocks in it to satisfy the damages the court awarded to her in the libel case.
Under these circumstances, the sheriff should have inquired from Cristina about the business address of the corporation and the name of the person authorized to receive the writ of execution against Basa’s stocks.
Upon questioning by Senate President Enrile, the sheriff admitted he did not check the SEC records to get that information and that he relied on the say-so of Cristina, who represented herself as the company’s corporate secretary, on where and on whom the writ should be served.
The sheriff’s cavalier attitude in the enforcement of the writ is understandable. With no less than the wife of a justice of the highest court of the land, which supervises the activities of all court personnel, showing interest in the enforcement of the writ of execution, a sheriff who occupies a low position in the judicial totem pole cannot be expected to go by the book in doing his job.
The irregularity in the manner by which Basa’s stocks were sold to Corona’s daughter is compounded by the fact that the covering certificate of sale was issued by the sheriff only this year.
If it takes nine years to accomplish that simple act, it’s not surprising that the average span of a court case from filing to final resolution is 12 years.
(For feedback, write to <rpalabrica@inquirer.com.ph>.)
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Tags: companies , Corona impeachment , court , Cristina Corona
