The Extent of Relief in Default Judgments: A Philippine Corporate Dispute

UBS MARKETING CORPORATION AND JOHNNY K.H. UY, PETITIONERS, VS. THE HONORABLE SPECIAL THIRD DIVISION OF THE COURT OF APPEALS, BAN HUA U. FLORES, BAN HA U. CHUA, AND ROLANDO M. KING, RESPONDENTS. G.R. No. 130328, May 31, 2000

Imagine a family business torn apart by disputes, leading to a legal battle over corporate assets and accounting records. The question arises: Can a court grant relief beyond what was initially requested in the pleadings? This case clarifies that in default judgments, courts can indeed grant relief warranted by the facts proven, even if not explicitly prayed for.

Legal Context: SEC Jurisdiction and Default Judgments

In the Philippines, disputes within a corporation (intra-corporate controversies) fall under the jurisdiction of the Securities and Exchange Commission (SEC). Presidential Decree No. 902-A, as amended, grants the SEC original and exclusive jurisdiction over these matters. This jurisdiction extends to issues involving the rights of stockholders, directors, and officers within a corporation.

A key aspect of this case involves default judgments. When a defendant fails to respond to a complaint within the prescribed time, they can be declared in default. The court then hears evidence from the plaintiff and renders a judgment based on the facts presented. The extent of relief that can be granted in a default judgment is governed by the Rules of Procedure of the SEC. Section 6 states: “…render judgment granting such relief as the petition or complaint and the facts proven may warrant.”

This provision allows the SEC to grant relief justified by the evidence, even if it goes beyond the specific prayers in the complaint. For example, if a complaint seeks the turnover of specific assets, and the evidence reveals broader financial mismanagement, the SEC can order a full accounting of the corporation’s finances.

Case Breakdown: A Family Feud and Corporate Accounting

The case of UBS Marketing Corporation v. Ban Hua Uy-Flores stems from a bitter dispute between siblings over the division of a family business. Johnny K.H. Uy and his sisters, Ban Hua Uy-Flores and Ban Ha Uy-Chua, were all stockholders and officers in UBS Marketing Corporation and Soon Kee Commercial, Inc.

Due to irreconcilable differences, the family decided to divide the business, with Johnny taking UBS Marketing and the sisters taking Soon Kee Commercial. However, after the segregation, Johnny alleged that his sisters refused to turn over corporate books and account for funds and properties belonging to UBS Marketing.

The procedural history of this case is complex:

• Johnny filed a complaint with the SEC seeking the recovery of corporate records and an accounting of funds.
• The sisters moved to dismiss, arguing the SEC lacked jurisdiction.
• The SEC initially denied the motion, but the Court of Appeals (CA) reversed this decision.
• The Supreme Court (SC) ultimately ruled that the SEC had jurisdiction over the intra-corporate dispute.
• The sisters were declared in default for failing to file an answer, and the SEC hearing officer rendered a judgment against them.
• The SEC en banc modified the hearing officer’s decision, ordering the sisters to render a full accounting of the assets of both companies.
• The CA reversed the SEC en banc, arguing that the order for a full accounting exceeded the relief requested in the complaint.

The Supreme Court, however, disagreed with the Court of Appeals, stating:

“Even if the Rules of Court were to be applied in this case, still it cannot be said that the relief granted by the SEC en banc was ‘different in kind from that prayed for’ by the petitioners. Rather, said relief was plainly warranted by the allegations contained in the petition a quo as well as by the facts as found by both the SEC hearing officer and the SEC en banc.”

The SC further emphasized that the prayers in the complaint, such as accounting for “slow moving receivables” and turning over separation pay and bonuses, could not be separated from the broader financial picture of the corporations. Therefore, a full accounting was warranted.

“It is a rule of pleading that the prayer for relief, though part of the complaint, is no part of the cause of action, and plaintiff is entitled to as much relief as the facts may warrant.”

Practical Implications: What This Means for Corporate Disputes

This case establishes that in corporate disputes before the SEC, the scope of relief in a default judgment is not strictly limited to the specific prayers in the complaint. The SEC can grant relief that is supported by the facts proven during the hearing, even if it was not explicitly requested. This ruling has significant implications for both plaintiffs and defendants in SEC cases.

For plaintiffs, it means that they should present all relevant evidence to support their claims, even if it reveals issues beyond the initial scope of the complaint. For defendants, it underscores the importance of responding to complaints and participating in the proceedings to avoid default judgments that could result in broader relief than anticipated.

Key Lessons:

• Plaintiffs in SEC cases should present comprehensive evidence.
• Defendants must actively participate in SEC proceedings.
• The SEC can grant relief warranted by the facts, even in default judgments.

Frequently Asked Questions

Q: What is an intra-corporate dispute?

A: An intra-corporate dispute is a conflict arising within a corporation, typically involving stockholders, directors, or officers, and relating to their rights and responsibilities within the company.

Q: What happens if a defendant doesn’t respond to a complaint in an SEC case?

A: If a defendant fails to respond, they can be declared in default. The SEC will then hear evidence from the plaintiff and render a judgment based on the facts presented.

Q: Can the SEC order relief that wasn’t specifically requested in the complaint?

A: Yes, the SEC can grant relief warranted by the facts proven during the hearing, even if it wasn’t explicitly requested in the complaint.

Q: What should I do if I’m involved in an intra-corporate dispute?

A: It’s crucial to seek legal advice from a qualified attorney experienced in corporate law and SEC proceedings. They can help you understand your rights and obligations and navigate the complex legal process.

Q: Why is it important to participate actively in SEC proceedings?

A: Active participation ensures your side of the story is heard and protects you from potentially unfavorable default judgments. It allows you to present evidence, cross-examine witnesses, and argue your case effectively.

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