G.R. No. 233646 , June 16, 2021
FLORENCIO T. MALLARE, ARISTOTLE Y. MALLARE AND MELODY TRACY MALLARE, PETITIONERS, VS. A&E INDUSTRIAL CORPORATION, RESPONDENT.

FACTS

The case involves an intra-corporate dispute between two factions of stockholders of A&E Industrial Corporation (A&E): the Mallare Group (petitioners Florencio T. Mallare, Aristotle Y. Mallare, and Melody Tracy Mallare) and the Hwang Group (Anthony Hwang, Evelyn Hwang, Elizabeth Lim Tong, Stefan Hugo Hwang, and Sarah Patricia Hwang). A&E was incorporated in 1975 by Florencio, Jane Mallare (Florencio’s wife), Anthony (Jane’s son from a former partner), Evelyn (Anthony’s wife), and Pacencia Mallare. After Jane died on December 9, 2011, the positions of corporate secretary and CFO were left vacant.
The Mallare Group claimed that after Jane’s death, Aristotle was designated as interim corporate secretary. A&E failed to hold a stockholders’ meeting in 2012 due to lack of quorum, so the directors and officers continued in a holdover capacity. On February 23, 2013, a stockholders’ meeting was conducted but adjourned for failure to constitute a quorum, with only 49.8% of shares represented (Aristotle 19%, Florencio 18.8%, Melody 12%). Aristotle filed A&E’s 2013 GIS indicating no quorum and carrying over the 2012 directors and officers.
The Hwang Group claimed that upon Jane’s death, Anthony was designated as corporate secretary, CFO, and treasurer in a board meeting on December 22, 2011. Anthony filed the 2011 GIS reflecting this. The Mallare Group later became antagonistic, preventing Anthony’s access to records, filing an adverse claim, and initiating criminal complaints. On February 23, 2013, the Hwang Group conducted a separate stockholders’ meeting, with 313,750 shares or 50.2% of total outstanding shares voting, including Jane’s 120,000 shares represented by Anthony via an Assignment of Voting Rights dated May 17, 2011. A new board (the Hwang Group) and officers were elected, reflected in a GIS dated February 25, 2013. However, the Mallare Group continued to act as directors and officers.
On January 6, 2014, A&E (represented by the Hwang Group) filed a Verified Complaint for injunction, quo warranto, and damages with an application for a Writ of Preliminary Injunction (WPI) before the RTC Manila. The RTC denied the application for WPI in an Order dated October 6, 2015, reasoning that resolving the injunction would technically resolve the merits of the main case. A&E filed a Petition for Certiorari with the CA. The CA granted the petition, annulled the RTC Order, and issued a WPI enjoining the Mallare Group from usurping the offices of the directors and officers elected on February 23, 2013. The Mallare Group elevated the case to the Supreme Court via a Petition for Review on Certiorari.

ISSUE

Whether the Court of Appeals erred in granting the Writ of Preliminary Injunction.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals. The CA did not err in granting the Writ of Preliminary Injunction.
The Court held that a preliminary injunction is a provisional remedy to preserve the status quo and prevent threatened or continuous irremediable injury before a final judgment. For its issuance, the applicant must establish: (1) a clear and unmistakable right to be protected; (2) a material and substantial invasion of that right; (3) an urgent need for the writ to prevent irreparable injury; (4) no other ordinary, speedy, and adequate remedy exists; and (5) the applicant must post a bond.
The Court found that A&E (through the Hwang Group) established a clear legal right based on the February 23, 2013 stockholders’ meeting where a quorum (50.2% of outstanding shares) was present, leading to the election of a new board. Jane’s shares were validly represented by Anthony under the Assignment of Voting Rights, and the three assignees (Elizabeth, Stefan, Sarah) each had the right to vote one share. The Mallare Group’s continued assertion of authority as holdover directors, despite the election, constituted a material invasion of this right. Their actions, including filing a false GIS, disbursing corporate funds, and harassing employees, threatened irreparable injury to A&E. No other speedy and adequate remedy existed, as the intra-corporate dispute required judicial resolution. The injunction would not prejudge the main case but merely preserve the status quo ante (the board elected in 2013) pending final judgment. The CA correctly required a bond. Thus, the CA committed no reversible error in issuing the WPI.