When a Corporate Dispute Is Not Intra-Corporate: Tortious Interference and Court Jurisdiction

The Supreme Court has clarified an important boundary in Philippine corporate litigation: not every dispute that touches on corporate affairs automatically becomes an intra-corporate controversy. In Bitmicro Networks, Inc. v. Cunanan (G.R. No. 224189, December 6, 2021), the Court ruled that a suit for tortious interference and quasi-delict against individuals who are not stockholders, directors, or officers of a corporation is an ordinary civil action, not an intra-corporate dispute. This distinction matters because it determines which court has jurisdiction and how the case will proceed.

The Dispute Behind the Case

The case arose from a power struggle within Bitmicro Networks International, Inc. (BNII-PH), a Philippine company wholly owned by Bitmicro Networks, Inc. (BNI-US), a U.S. corporation. The two companies had a Service Agreement under which BNII-PH provided services to BNI-US, and all developed technology belonged exclusively to BNI-US.

In 2013, BNI-US removed the existing board and officers of BNII-PH and elected a new set of directors. The ousted group, led by Rey Bruce, refused to recognize the new board. Bruce appointed Gilberto Cunanan as Officer-in-Charge, and the company's IT director, Jermyn Ong, later resigned. The new management was barred from entering the office, and the company's operations were disrupted.

The new management filed a complaint for tortious interference and quasi-delict against Bruce, Cunanan, Ong, and a security agency. The defendants moved to dismiss, arguing that the case was really an intra-corporate dispute that belonged to a special commercial court.

The Two Tests for Intra-Corporate Disputes

The Supreme Court applied two established tests to determine whether a case is intra-corporate:

The relationship test asks whether the conflict is between the corporation and the public, the corporation and the State, the corporation and its stockholders or officers, or among the stockholders themselves. In this case, Cunanan and Ong were not stockholders, directors, or officers of BNII-PH. Ong had already resigned, and Cunanan was merely an officer-in-charge appointed by Bruce. The Court rejected the suggestion to add a fifth "stakeholder" category, noting that this would make the test so broad that anyone with a business interest could qualify.

The nature of the controversy test asks whether the dispute involves the enforcement of parties' rights and obligations under the Corporation Code and the corporation's internal rules. Here, the complaint sought damages and injunctive relief based on Articles 1314 and 2176 of the Civil Code, which govern tortious interference and quasi-delict. The complaint did not ask the court to determine any rights under the Corporation Code, the articles of incorporation, or the by-laws.

Why the Case Was an Ordinary Civil Action

The Court emphasized that jurisdiction is determined by the allegations in the complaint. The plaintiffs alleged that the defendants interfered with a valid contract without legal justification. These are the elements of tortious interference with contractual relations, which requires: (1) a valid contract, (2) the third person's knowledge of the contract, and (3) interference without legal justification.

The fact that the dispute arose during a corporate power struggle did not change its nature. The Court noted that the civil case could be resolved without deciding who validly sits on BNII-PH's board. A ruling on tortious interference would not preempt the separate intra-corporate case pending before the commercial court.

The Court also noted that the reliefs sought, including an injunction, are within the general jurisdiction of the Regional Trial Court.

Practical Takeaways

• Not every corporate-related dispute is intra-corporate. The relationship test and the nature of the controversy test must both be satisfied. A suit against third parties who are not stockholders, directors, or officers may be an ordinary civil action.
• Jurisdiction depends on the complaint's allegations. Courts look at what the plaintiff actually pleads, not at how the defendant characterizes the dispute. If the complaint is based on the Civil Code and does not invoke corporate law rights, it may proceed as an ordinary civil case.
• Tortious interference has specific elements. To sue a third person for inducing a party to breach a contract, the plaintiff must show a valid contract, the third person's knowledge of it, and interference without legal justification.
• Parallel cases can proceed separately. A civil action for damages can run alongside an intra-corporate case if the issues are distinct and one does not preempt the other.
• Be careful with forum shopping. While parallel cases may be allowed, filing identical claims in different courts can expose a party to dismissal for forum shopping.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.