G.R. No. 68935; January 22, 1990
JOSE PENEYRA and MILAGROS CALDERON, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT and HONORABLE GODOFREDO RILLORAZA, respondents.

FACTS

Petitioners, stockholders of Corregidor College, Inc., were awarded the management and operation of the college canteen by its Board of Trustees. Subsequently, upon instructions of Eulogio Dizon, the Board Chairman, their rental payments were refused and a partial demolition of the canteen was effected. Petitioners filed a damages suit with preliminary mandatory injunction against Dizon personally in the Court of First Instance. After petitioners rested their case, they moved to amend their complaint to include Corregidor College, Inc. as an additional defendant. The trial court denied the motion, ruling the amendment would substantially alter the cause of action and was filed too late.
During the pendency of their motion for reconsideration of the denial, defendant Eulogio Dizon died. The trial court subsequently dismissed the entire complaint, ruling the action for damages did not survive Dizon’s death. The Intermediate Appellate Court affirmed the dismissal, holding that the Securities and Exchange Commission (SEC) had jurisdiction over the case as an intra-corporate dispute, the amendment was correctly denied, and the action was extinguished by Dizon’s death.

ISSUE

The issues are: (1) whether jurisdiction pertains to the SEC or the regular courts; (2) whether the trial court correctly denied the motion to amend the complaint; and (3) whether the action for damages survived the death of defendant Dizon.

RULING

The Supreme Court modified the appellate court’s decision. On the first issue, the Court held jurisdiction was vested in the regular courts, not the SEC. The cause of action stemmed from a breach of the contractual management agreement for the canteen, not from petitioners’ status as stockholders. The controversy was not intrinsically connected to the corporation’s internal affairs or its regulation, which is the limit of SEC jurisdiction under P.D. 902-A. To rule otherwise would improperly remove all corporate-related disputes from regular courts regardless of the transaction’s nature.
On the second issue, the Court affirmed the denial of the motion to amend the complaint. The motion was filed only after petitioners had rested their case, following a lapse of over two years. Permitting the amendment at that late stage would delay proceedings and substantially alter the cause of action by transforming the alleged personal liability of Dizon into a corporate liability, thereby prejudicing his defense.
On the third issue, the Court ruled that the action for damages did survive the death of Dizon. The complaint alleged damages arising from the unlawful demolition of the canteen, constituting an injury to property. Under Section 1, Rule 87 of the Rules of Court, actions for recovery of damages for injury to property survive and may be prosecuted against the executor or administrator of the deceased defendant’s estate. Therefore, the trial court erred in dismissing the case outright.
The Supreme Court set aside the dismissal and ordered the reinstatement of the civil case, with instructions for the deceased defendant to be substituted by the legal representative of his estate. The denial of the motion to amend was affirmed.