G.R. No. 215280 , September 5, 2018
FRANCISCO C. EIZMENDI JR., ET AL. AND VALLE VERDE COUNTRY CLUB, INC., Petitioners, vs. TEODORICO P. FERNANDEZ, Respondent.

FACTS

Respondent Teodorico P. Fernandez, a proprietary member of Valle Verde Country Club, Inc. (VVCCI), filed a complaint for Invalidation of Corporate Acts and Resolutions. He challenged the authority of the individual petitioners, who constituted themselves as the new Board of Directors (BOD) following an annual members’ meeting on February 23, 2013. Fernandez alleged the meeting lacked a quorum, rendering the election invalid. Consequently, he argued this invalid board had no legal authority to suspend his membership for six months in October 2013. He sought to nullify the election, subsequent board meetings, and his suspension, while also claiming damages.
During pre-trial for his application for a preliminary injunction, the Regional Trial Court (RTC) limited the hearing strictly to the issue of his suspension. The RTC explicitly refused to receive evidence on the validity of the February 2013 election, stating that to question the board’s composition was essentially an election contest. The RTC held that such a contest, filed in November 2013, was filed beyond the 15-day prescriptive period mandated by the Interim Rules of Procedure for Intra-Corporate Controversies. The Court of Appeals (CA) reversed the RTC, directing it to allow evidence on the election’s validity, prompting petitioners to elevate the case to the Supreme Court.

ISSUE

Whether the Court of Appeals erred in directing the trial court to allow the presentation of evidence to invalidate the February 23, 2013 election of VVCCI’s Board of Directors.

RULING

Yes, the Supreme Court reversed the Court of Appeals and reinstated the RTC’s orders. The Court held that Fernandez’s action, insofar as it sought to invalidate the claims of the individual petitioners to the office of director based on the alleged invalidity of the February 2013 election, was in substance an election contest. The Interim Rules of Procedure for Intra-Corporate Controversies prescribe a 15-day reglementary period to file an election contest, counted from the date of the election, proclamation, or announcement of the results, whichever is later. Fernandez filed his complaint in November 2013, clearly beyond this 15-day period.
The Court emphasized that the nature of an action is determined by the allegations in the complaint and the relief sought. Fernandez’s primary objective was to declare the individual petitioners’ claims to the directorship invalid due to a defective election. This objective falls squarely within the definition of an election contest. The Court rejected the argument that the action was a derivative suit or one for nullification of corporate acts, noting that the central issue of the board’s legitimacy stemmed directly from the challenged election. Allowing such a belated challenge would undermine the stability of corporate governance and the statutory policy behind the short prescriptive period. Therefore, the RTC correctly barred evidence on the election, and the case should proceed only on the ancillary issue of the validity of Fernandez’s suspension, independent of the election’s validity.