Tan vs.

Sycip (499 SCRA 216 [2006])

FACTS
Grace Christian High School (GCHS), a nonstock, non-profit educational
corporation, faced a challenge during its annual members' meeting due to the
absence of a quorum. Out of the eleven-living member-trustees, seven attended
the meeting through proxies. At the meeting, four deceased member-trustees
were replaced by new members, including petitioners Ernesto Tanchi, Edwin Ngo,
Virginia Khoo, and Judith Tan. However, the Securities and Exchange Commission
(SEC) declared the meeting null and void, emphasizing that the quorum should be
based on the number specified in the articles of incorporation, not just the living
members. The SEC also interpreted GCHS's By-Laws in conjunction with the
Corporation Code, leading to the denial of petitioners' appeal.

ISSUE
W/N dead members should still be counted in the determination of the quorum,
for purposes of conducting the annual members' meeting.

RULING
NO. In nonstock corporations, membership and associated rights are personal and
non-transferable, unless the articles of incorporation or bylaws state otherwise.
The entitlement of "dead members" (or their representatives) to exercise voting
rights hinges on the provisions outlined in these documents. According to GCHS's
By-Laws, membership ceases upon a member's death. Section 91 of the
Corporation Code also states that death extinguishes a member's rights unless the
articles of incorporation or bylaws stipulate otherwise.

In this context, dead members removed from the membership roster per GCHS's
By-Laws should not be included in determining the necessary vote or quorum for
corporate matters. Applying Section 91, the court ruled that deceased members
dropped from the roster, as per GCHS's By-Laws, should not be counted. With 11
remaining members, a quorum required six attendees, making the annual
members' meeting, conducted with six members present, valid. For stock
corporations, the "quorum" referred to in Section 52 of the Corporation Code is
based on the number of outstanding voting stocks. For nonstock corporations,
only those who are actual, living members with voting rights shall be counted in
determining the existence of a quorum during members’ meetings. Dead
members shall not be counted.
 Majority Stockholders of Ruby Industrial Corp. vs. Lim (650 SCRA 461 [2011])
FACTS
Ruby Industrial Corporation (RUBY) faced financial distress in 1980, leading to a
petition for suspension of payments filed on December 13, 1983. The Securities
and Exchange Commission (SEC) declared RUBY under suspension of payments on
December 20, 1983, restricting property disposition except for necessary
operations and legitimate expenses. In August 1984, the SEC established a
management committee (MANCOM) comprising representatives from various
entities, including RUBY. The MANCOM's responsibilities included managing RUBY,
evaluating its assets and liabilities, and formulating a rehabilitation plan.

Two rehabilitation plans were proposed: the BENHAR/RUBY Plan by majority

stockholders led by Yu Kim Giang and an Alternative Plan by minority stockholders
represented by Miguel Lim. Over 90% of RUBY's creditors, including three
MANCOM members, objected to the BENHAR/RUBY Plan, asserting concerns
about BENHAR's involvement, asset protection issues, and lack of stockholder
approval. Despite these objections, the SEC approved the Revised BENHAR/RUBY
Plan on September 18, 1991, dissolving the existing MANCOM and forming a new
one, which included BENHAR. The new MANCOM was tasked with overseeing the
revised rehabilitation plan's implementation by the Board of Directors.

ISSUES
W/N the minority's pre-emptive rights were violated?

RULING YES.
the pre-emptive rights of stockholders as outlined in Section 39 of the Corporation
Code. These right grants stockholders the ability to subscribe to new shares in
proportion to their existing holdings. However, this right can be limited or denied
as per the articles of incorporation, but within legal boundaries. The case
highlights the delicate balance between majority rule and minority protection in
corporate decisions.

In this context, the court emphasizes the necessity of transparency and

accountability, especially during critical corporate events such as reorganizations
or suspension of payments. It underscores the need to protect minority
shareholders and unsecured creditors from potential abuses by the majority.
While majority rule is the standard in corporate decisions, there are exceptions to
prevent tyranny, ensuring that the rights of minority stakeholders are
safeguarded.

The court also criticizes the Securities and Exchange Commission (SEC) for not
adequately addressing the concerns of minority shareholders and the
management committee. The SEC's decision to extend the corporation's term was
contested due to doubts regarding the validity of the vote and compliance with
legal requirements. Despite these concerns, the SEC approved the extension,
indicating a lack of thorough examination. The ruling concludes with the denial of
the motion to declare the extension invalid, highlighting the complexities involved
in balancing the rights and interests of different stakeholders in corporate
decision-making.
 Republic Planters Bank vs. Agana (269 SCRA 1 [1997])
FACTS
In this case, the petitioner extended a loan of P120,000.00 to the private
respondent corporation in 1961. As part of the loan arrangement, the petitioner
issued preferred shares of stock to the corporation. These shares came with
specific terms and conditions, including the right to receive a quarterly dividend of
1% and the option for redemption by the corporation after two years. In 1979, the
private respondents, officers of the corporation, filed a complaint against the
petitioner, claiming their entitlement to dividends and requesting the redemption
of the preferred shares based on the stock certificates' terms.

The petitioner attempted to dismiss the complaint, arguing lack of jurisdiction,

unenforceability under substantive law, and being barred by the statute of
limitations and laches. The trial court denied the motion to dismiss and ruled in
favor of the private respondents. The court ordered the petitioner to pay the face
value of the stock certificates as the redemption price, along with a 1% quarterly
interest until full payment.

The petitioner appealed the decision to the Supreme Court, focusing on legal
issues. The case before the Supreme Court revolves around the interpretation of
the terms and conditions of the preferred shares and the validity of the private
respondents' claims, raising important questions of law regarding the
enforceability of the stock certificates' provisions and the obligations of the
parties involved.

ISSUES
Whether or not private respondents are entitled to the payment of dividends as a
matter of right.
RULING NO.
The Supreme Court finds in favor of the petitioner in this case concerning
preferred shares and their redemption. Preferred shares entitle holders to certain
preferences over common stockholders, including preferences in asset
distribution during liquidation or dividends. However, the declaration of dividends
depends on the availability of surplus profits or unrestricted retained earnings.

Redeemable shares, typically preferred shares, can be repurchased by the issuing

corporation, even without unrestricted retained earnings, as long as the
corporation has assets covering debts and liabilities after the redemption.

Regarding the issue of prescription, the Court rules in favor of the petitioner. The
claim made by the private respondents is barred by both prescription and laches.
The right of action based on a written contract, as in this case, prescribes in ten
years. The private respondents' claim was made almost eighteen years after
receiving the stock certificate, well beyond the prescribed period. Additionally, the
private respondents should have inquired about the redemption after the
specified period mentioned in the stock certificate. Consequently, the petition is
granted, the challenged decision is set aside, and the complaint against the
petitioner is dismissed.
 W.G. Philpotts vs. Philippine Mfg. Co. (40 Phil. 471 [1919])
FACTS
the petitioner, a stockholder in the Philippine Manufacturing Company, sought a
writ of mandamus to compel the respondents to permit him, or his duly
authorized agent or attorney, to inspect the records of the company dating back
to 1918. The respondents argued that the right to inspect granted to a stockholder
must be exercised in person, not through a representative.

ISSUE
W/N the right to inspect granted to a stockholder must be exercised in person, not
through a representative.

RULING NO.
The Court held that the right of inspection given to a stockholder under the
Corporation Law can be exercised either by the stockholder personally or by a duly
authorized representative or attorney. The law does not restrict the stockholder's
right to inspect the company's records to personal examination only. This ruling is
in line with the general rule that what a person can do in person, they can also do
through another person, such as an agent or attorney.

The Court emphasized that the right to inspect corporate records should be
liberally construed, allowing stockholders to exercise this right effectively. It cited
precedents from the United States, where it was established that stockholders
could be aided by experts and counsel in inspecting corporate books and records,
making the inspection valuable to them.

However, the Court noted that there might be certain confidential company
information, like undisclosed manufacturing processes, which a corporation could
keep secret. In this case, there was no indication that the petitioner was seeking
access to such confidential information.
Yujuico vs. Quiambao (G.R. No. 180416, June 2, 2014)
FACTS
The petitioner, Aderito Z. Yujuico, and other petitioners, filed a criminal complaint
against the respondents, including Cezar T. Quiambao, the former president and
chairman of Strategic Alliance Development Corporation (STRADEC). The
complaint alleged that Quiambao and others violated the Corporation Code by
refusing to turn over corporate records and the stock and transfer book of
STRADEC.

After a preliminary investigation, the Office of the City Prosecutor (OCP) found
probable cause to charge the respondents with offenses related to refusing access
to corporate records and the stock and transfer book. Two criminal cases were
filed against the respondents in the Metropolitan Trial Court (MeTC) of Pasig City.

The MeTC initially dismissed one of the cases (Criminal Case No. 89723) but
ordered the issuance of a warrant of arrest in the other case (Criminal Case No.
89724) based on the finding of probable cause. The respondents filed a certiorari
petition before the Regional Trial Court (RTC) challenging the issuance of the
arrest warrant.

The RTC granted the certiorari petition, finding that there was no probable cause
to issue a warrant of arrest. The RTC held that the evidence presented did not
support the finding of probable cause and that refusing access to the stock and
transfer book, as opposed to other corporate records, was not punishable as an
offense under the Corporation Code.

The petitioners, dissatisfied with the RTC's decision, filed the current petition
before the Supreme Court.
ISSUE
W/N refusing access to the stock and transfer book is punishable as an offense
under the Corporation Code.

RULING YES.
The Court clarified that the act of refusing to allow inspection of the stock and
transfer book of a corporation, when done in violation of Section 74(4) of the
Corporation Code, is punishable as an offense under Section 144 of the same
code. However, a criminal action based on the violation of a stockholder's right to
examine or inspect corporate records and the stock and transfer book can only be
maintained against corporate officers or persons acting on behalf of the
corporation. In this case, the petitioners failed to establish that the respondents
were acting on behalf of STRADEC; instead, the scenario presented suggested that
the respondents were outgoing officers withholding records, while the petitioners
were seeking to enforce STRADEC's right to possess the records. Therefore, the
criminal case lacked probable cause and was properly dismissed. The Supreme
Court upheld the decision of the Regional Trial Court in dismissing the case.
 Ang-Abaya vs. Ang (573 SCRA 129 [2008])
FACTS
Vibelle Manufacturing Corporation (VMC) and Genato Investments, Inc. (Genato)
are family-owned corporations, where petitioners and private respondent
Eduardo Ang are shareholders, officers and members of the board of directors.
Prior to the instant controversy, VMC, Genato, and Oriano Manufacturing Corp.
filed a Civil case 4257-MC against Eduardo, together with Michael, and some
other persons for allegedly conniving to fraudulently wrest control/management
of the corporations.
During the pendency of the above-mentioned Civil Case, particularly in July 2004,
Eduardo sought permission to inspect the corporate books of VMC and Genato on
account of petitioners alleged failure to update him on the financial and business
activities of these family corporations.

Petitioners denied the request claiming that Eduardo would use the information
obtained from said inspection for purposes inimical to the corporations’ interests.
Because of petitioners’ refusal to grant Eduardo’s request, the latter filed an
Affidavit-Complaint against petitioners, charging them with violation of two
counts of Sec. 74 (Corporation Code), in relation to Sec. 144.

Petitioners denied violating Sec. 74 and reiterated the allegations contained in

their complaint in Civ. Case 4257-MC. They alleged that Eduardo consistently
pressured petitioner Flordeliza, his daughter, to improperly transfer ownership of
the corporations’ V.A.G building to him. When the proposed transfer of the V.A.G.
building did not materialize, petitioners claim that Eduardo instituted an action to
compel donation of said property to him. Moreover, they claim that Eduardo
attempted to forcibly evict petitioner Jason from his office at VMC so he can
occupy the same; that Eduardo and his cohorts constantly created trouble by
intervening in the daily operations of the corporations without the knowledge or
consent of the board of directors.

ISSUE
W/N petitioners violated Sec, 74 of the Corporation Code of the PH.

RULING NO.
The stockholders’ right to inspect corporate books is not without limitations. It is
now expressly required as a condition for such examination that the one
requesting it must not have been guilty of using improperly any information
secured through a prior examination, or that the person asking for such
examination must be acting in good faith and for a legitimate purpose in making
his demand.

In order therefore for the penal provision under Sec 144 of the Corporation Code
to apply in a case of violation of a stockholder or members right to inspect the
corporate books/records the elements provided for under Sec 74 must be present.

The petition is GRANTED.

 Yu vs. Yukayguan (589 SCRA 588 [2009])
FACTS
Petitioners are members of the Yu Family while respondents belong to the
Yukayguan Family. Anthony Yu is the older half-brother of Joseph Yukayguan, both
of them are the heads of their respective families. Both families are stockholders
of Winchester Industrial Supply, Inc., a domestic corporation engaged in the
operation of a general hardware and industrial supply and equipment business.

On 15 October 2002, respondents Yukayguan filed against petitioners Yu a verified

Complaint for Accounting, Inspection of Corporate Books and Damages through
Embezzlement and Falsification of Corporate Records and Accounts before the
RTC of Cebu. The Complaint was filed by respondents, in their own behalf and as a
derivative suit on behalf of Winchester, Inc.

During the pendency of the proceedings before the RTC, the parties were able to
reach an amicable settlement wherein they agreed to divide the assets of
Winchester, Inc. among themselves. This amicable settlement was already
partially implemented by the parties but respondents repudiated the same, for
which reason the RTC proceeded with the case on its merits. On 10 November
2004, the RTC promulgated its Decision dismissing respondents’ Complaint for
failure to comply with essential pre-requisites before they could avail themselves
of the remedies under the Interim Rules of Procedure Governing Intra-Corporate
Controversies; and for inadequate substantiation of respondents’ allegations in
said Complaint after consideration of the pleadings and evidence on record.

On appeal, the Court of Appeals, in its Decision dated 15 February 2006, affirmed
the findings of the RTC that respondents did not abide by the requirements for a
derivative suit, nor were they able to prove their case by a preponderance of
evidence. Respondents filed a Motion for Reconsideration of said judgment of the
appellate court, insisting that they were able to meet all the conditions for filing a
derivative suit. Pending resolution of respondents’ Motion for Reconsideration,
the Court of Appeals urged the parties to again strive to reach an amicable
settlement of their dispute, but the parties were unable to do so. The parties were
not able to submit to the appellate court, within the given period, any amicable
settlement; and filed, instead, their Position Papers. The parties opted to submit
respondents’ Motion for Reconsideration of the 15 February 2006 Decision of the
Court of Appeals, and petitioners’ opposition to the same, for resolution by the
appellate court on the merits.

In accordance with respondents’ allegation in their Position Paper that the parties
subsequently filed with the SEC, and the SEC already approved, a petition for
dissolution of Winchester, Inc., the Court of Appeals remanded the case to the
RTC so that all the corporate concerns between the parties regarding Winchester,
Inc. could be resolved towards final settlement. The Court of Appeals converted
the derivative suit between the parties into liquidation proceedings.

ISSUES
W/N the decision of the Court of Appeals in converting the derivative suit
between the parties into liquidation proceeding proper?

RULING
No. The action filed before the trial court and appealed before the appellate court
is one of a derivative suit. The Court held that a derivative suit is fundamentally
distinct and independent from liquidation proceedings. They are neither part of
each other nor the necessary consequence of the other. There is totally no
justification for the Court of Appeals to convert what was supposedly a derivative
suit instituted by respondents, on their own behalf and on behalf of Winchester,
Inc. against petitioners, to a proceeding for the liquidation of Winchester, Inc.
What is a derivative suit?

The general rule is that where a corporation is an injured party, its power to sue is
lodged with its board of directors or trustees. Nonetheless, an individual
stockholder is permitted to institute a derivative suit on behalf of the corporation
wherein he holds stocks in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones to be
sued, or hold the control of the corporation. In such actions, the suing stockholder
is regarded as a nominal party, with the corporation as the real party in interest. A
derivative action is a suit by a shareholder to enforce a corporate cause of action.
The corporation is a necessary party to the suit. And the relief which is granted is
a judgment against a third person in favor of the corporation. Similarly, if a
corporation has a defense to an action against it and is not asserting it, a
stockholder may intervene and defend on behalf of the corporation. By virtue of
Republic Act No. 8799, otherwise known as the Securities Regulation Code,
jurisdiction over intra-corporate disputes, including derivative suits, is now vested
in the Regional Trial Courts designated by this Court pursuant to A.M. No. 00-11-
03-SC promulgated on 21 November 2000.

What is liquidation?

Following the voluntary or involuntary dissolution of a corporation, liquidation is

the process of settling the affairs of said corporation, which consists of adjusting
the debts and claims, that is, of collecting all that is due the corporation, the
settlement and adjustment of claims against it and the payment of its just debts.
More particularly, it entails the following:
Winding up the affairs of the corporation means the collection of all assets, the
payment of all its creditors, and the distribution of the remaining assets, if any
among the stockholders thereof in accordance with their contracts, or if there be
no special contract, on the basis of their respective interests. The manner of
liquidation or winding up may be provided for in the corporate by-laws and this
would prevail unless it is inconsistent with law.

It may be undertaken by the corporation itself, through its Board of Directors; or

by trustees to whom all corporate assets are conveyed for liquidation; or by a
receiver appointed by the SEC upon its decree dissolving the corporation.

The Court has recognized that a stockholder’s right to institute a derivative suit is
not based on any express provision of the Corporation Code, or even the
Securities Regulation Code, but is impliedly recognized when the said laws make
corporate directors or officers liable for damages suffered by the corporation and
its stockholders for violation of their fiduciary duties. Hence, a stockholder may
sue for mismanagement, waste or dissipation of corporate assets because of a
special injury to him for which he is otherwise without redress. In effect, the suit
is an action for specific performance of an obligation owed by the corporation to
the stockholders to assist its rights of action when the corporation has been put in
default by the wrongful refusal of the directors or management to make suitable
measures for its protection. The basis of a stockholder’s suit is always one in
equity. However, it cannot prosper without first complying with the legal
requisites for its institution.

What are the requirements for filing a derivative suit?

Section 1, Rule 8 of the Interim Rules of Procedure Governing Intra-Corporate

Controversies lays down the following requirements which a stockholder must
comply with in filing a derivative suit:
Sec. 1. Derivative action. – A stockholder or member may bring an action in the
name of a corporation or association, as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions

subject of the action occurred and at the time the action was filed;
(2) He exerted all reasonable efforts, and alleges the same with particularity in
the complaint, to exhaust all remedies available under the articles of
incorporation, by-laws, laws or rules governing the corporation or partnership to
obtain the relief he desires;
(3) No appraisal rights are available for the act or acts complained of; and
(4) The suit is not a nuisance or harassment suit.
The wordings of Section 1, Rule 8 of the Interim Rules of Procedure Governing
Intra-Corporate Controversies are simple and do not leave room for statutory
construction. The second paragraph thereof requires that the stockholder filing a
derivative suit should have exerted all reasonable efforts to exhaust all remedies
available under the articles of incorporation, by-laws, laws or rules governing the
corporation or partnership to obtain the relief he desires; and to allege such fact
with particularity in the complaint. The obvious intent behind the rule is to make
the derivative suit the final recourse of the stockholder, after all other remedies to
obtain the relief sought had failed.

The allegation of respondent Joseph in his Affidavit of his repeated attempts to

talk to petitioner Anthony regarding their dispute hardly constitutes “all
reasonable efforts to exhaust all remedies available.” Respondents did not refer
to or mention at all any other remedy under the articles of incorporation or by-
laws of Winchester, Inc., available for dispute resolution among stockholders,
which respondents unsuccessfully availed themselves of. And the Court is not
prepared to conclude that the articles of incorporation and by-laws of Winchester,
Inc. absolutely failed to provide for such remedies.
Neither can this Court accept the reasons proffered by respondents to excuse
themselves from complying with the second requirement under Section 1, Rule 8
of the Interim Rules of Procedure Governing Intra-Corporate Controversies. They
are flimsy and insufficient, compared to the seriousness of respondents’
accusations of fraud, misappropriation, and falsification of corporate records
against the petitioners. The fact that Winchester, Inc. is a family corporation
should not in any way exempt respondents from complying with the clear
requirements and formalities of the rules for filing a derivative suit. There is
nothing in the pertinent laws or rules supporting the distinction between, and the
difference in the requirements for, family corporations vis-à-vis other types of
corporations, in the institution by a stockholder of a derivative suit.
 Cua, Jr. vs. Tan (607 SCRA 645 [2009])
FACTS
In this complex legal dispute involving the Philippine Racing Club, Inc. (PRCI), the
company sought to diversify its assets by acquiring JTH Davies Holdings, Inc. (JTH),
a move that faced opposition from minority shareholders. The dispute revolved
around the acquisition of JTH and subsequent resolutions to exchange PRCI's
Makati property for shares of JTH. Minority shareholders, led by Miguel and
others, filed a derivative suit against the majority directors of PRCI, alleging
fraudulent and prejudicial actions. The case escalated through various court
levels, including the Court of Appeals, where the minority shareholders obtained a
temporary restraining order (TRO) preventing specific resolutions. Despite the
directors' appeals, the TRO was upheld. The case highlighted issues of corporate
governance, fiduciary duties, and shareholder rights, illustrating the complexities
of corporate decision-making and legal recourse within a publicly traded company.

ISSUE
W/N the derivative suit should be dismissed for its procedural infirmities?

RULING YES.
Miguel and others, claimed their complaint was not just a derivative suit but an
intracorporate action arising from fraudulent activities by the PRCI Board of
Directors. The court found that the distinction between the two claims was
misleading. The alleged fraudulent activities forming the basis of the
intracorporate action were the same acts that caused harm to the corporation,
forming the grounds for the derivative suit. The court noted that although the
plaintiffs claimed to act on behalf of the corporation and minority shareholders,
their complaint lacked specific allegations of personal injury, making it essentially
a derivative suit rather than an individual or class action.

the court discusses the resolution dated 26 September 2006 by the PRCI Board of
Directors, which authorized the acquisition of JTH. The court notes that this
resolution was subsequently approved and ratified by the majority of PRCI
stockholders during a special meeting on 7 November 2006. The court argues that
this ratification made the resolution binding and valid. Therefore, any challenge
against the resolution, such as the derivative suit filed by respondents Miguel and
others, became moot and academic. The court emphasizes the principle that it
does not decide moot cases that no longer have practical use or value.
Furthermore, the court points out that even if the derivative suit were not moot,
it could still be dismissed for failure to include indispensable parties, namely the
majority of PRCI stockholders who approved the resolution, as defendants in the
case. The court asserts that these stockholders are essential parties as their
interests are intricately linked to the subject matter of the suit, and without their
participation, a complete and just resolution of the case cannot be achieved.

In the case discussed, the court found that certain derivative claims were not
valid. One claim related to the acquisition of another company, but since this
action had been ratified by the majority of shareholders, the derivative suit was
moot. Another claim was about a property-for-shares exchange, which qualified
for appraisal rights. However, the shareholders initiating the derivative suit had
prevented these rights from being exercised by filing the lawsuit before the
stockholders could vote on the exchange.

The discussion emphasizes the importance of following proper legal procedures

and exhausting all remedies within the corporation before resorting to a
derivative suit.
Derivative Suits: Shareholders can file derivative suits on behalf of the corporation
if the board of directors engages in a breach of trust. These suits are meant to
protect the rights of minority shareholders against the majority’s wrongdoings.

Types of Suits: There are three types of suits: individual suits (when a stockholder
is personally affected), class suits (for violations against a group of stockholders),
and derivative suits (when the corporation is wronged, and shareholders sue on
its behalf).

Requirements for Derivative Suits: To file a derivative suit, a shareholder must

have been a shareholder at the time of the alleged wrong, must have tried other
available remedies, and must not be seeking appraisal rights. Appraisal rights are
available in specific instances, such as substantial changes to the corporation,
allowing dissenting shareholders to demand fair value for their shares.

Dismissal of Derivative Suit: A derivative suit can be dismissed if it becomes moot

(no practical use or value), if it lacks essential parties like majority stockholders, or
if the shareholder did not fulfill the legal requirements, like not exhausting other
remedies or failing to consider appraisal rights.
 San Miguel Corp. vs. Kahn (176 SCRA 447 [1989])
FACTS
In 1983, 33,133,266 shares of San Miguel Corporation were acquired by 14
corporations and placed under a Voting Trust Agreement for Andres Soriano, Jr.
When Soriano died, Eduardo Cojuangco, Jr. became the trustee. After political
changes in 1986, Cojuangco left amid suspicions of misusing company funds. In
1986, an agreement was made for Soriano to buy the shares, but the PCGG
sequestered them, alleging they belonged to Cojuangco, an associate of Marcos.
The sequestration was lifted but later reinstated. San Miguel suspended payment,
leading to lawsuits. PCGG directed San Miguel to issue shares to certain
individuals. San Miguel's board assumed Neptunia's loans. Eduardo de los Angeles
contested this, leading to a legal dispute.
the main issue revolves around the legal capacity of de los Angeles, a shareholder
of San Miguel Corporation (SMC) and a nominee director of the Presidential
Commission on Good Government (PCGG), to bring a derivative suit on behalf of
SMC. The defendants, including Ernest Kahn, argue that de los Angeles lacks the
legal capacity to sue because of his limited number of shares, his position as a
PCGG nominee director, and a supposed conflict of interest.

ISSUES
W/N DE LOS ANGELES HAVE THE LEGAL CAPACITY TO FILE A DERIVATIVE SUIT?

RULING YES.
Firstly, the court establishes that de los Angeles satisfies the requirements for a
derivative suit: he is a shareholder, he attempted to exhaust intra-corporate
remedies, and the cause of action pertains to the corporation and not solely to
him as an individual shareholder. The number of shares owned by de los Angeles
is irrelevant as long as he is a legitimate shareholder, and his claim is on behalf of
the corporation, not just for his personal benefit.

Secondly, the court dismisses the conflict-of-interest argument. Just because de

los Angeles is a nominee director of the PCGG does not mean he is obligated to
vote in alignment with PCGG's interests. Directors have the responsibility to
exercise their independent judgment for the benefit of the company. Additionally,
de los Angeles also owns 20 shares of SMC in his own right, and he is not
beholden to the PCGG in this regard.

The court clarifies that de los Angeles' complaint is focused on the validity of SMC
assuming the indebtedness of another corporation, Neptunia Co., Ltd., which he
believes is detrimental to the interests of SMC and its stockholders. This matter
falls within the realm of intra-corporate disputes and is within the jurisdiction of
the Securities and Exchange Commission (SEC). The court refutes the argument
that the PCGG has no power to vote sequestered shares, emphasizing that de los
Angeles' nomination as a director by the PCGG does not affect his legal capacity to
sue as a shareholder.

In summary, the court rules that de los Angeles has the legal capacity to bring a
derivative suit on behalf of SMC, and the case falls within the SEC's jurisdiction
due to its nature as an intra-corporate dispute related to the corporation's affairs.
The arguments presented by the defendants are not valid reasons to dismiss de
los Angeles' suit.
 BSP vs. Campa, Jr., et.al. (G.R. No.185979, March 16, 2016)
FACTS
In 2000, Bankwise applied for a loan from BSP and mortgaged third-party
properties as collateral. When Bankwise failed to repay, BSP foreclosed the
mortgaged properties and obtained certificates of sale. Eduardo Aliño, allegedly a
stockholder of VR Holdings, alleged that his properties were used as collateral
with assurances of their return. Aliño claimed BSP agreed to a settlement plan
involving these properties. Haru Gen Beach Resort and other individuals also
intervened, asserting their properties were mortgaged without their consent. The
trial court allowed their intervention. BSP appealed, arguing lack of legal interest
and a separate proceeding for these claims. The Court of Appeals upheld the
intervention, finding no abuse of discretion. BSP's motion for reconsideration was
denied in 2009.

ISSUES
W/N THERE IS A LEGAL CAPACITY TO FILE A DERIVATIVE SUIT

RULING NO.
In the case presented, Aliño filed a complaint alleging harm caused to him
personally due to the foreclosure of his properties, which were used as collateral.
The court determined that these allegations did not meet the requirements of a
derivative suit. Specifically, the damages claimed were personal in nature and
related to the foreclosure of Aliño's properties, not to any harm suffered by the
corporation (VR Holdings) itself.
Because the suit did not fulfill the criteria of a derivative action, the court found it
inappropriate to continue as such. Consequently, the court ruled that the
complaint was not a derivative suit and therefore lacked jurisdiction. In this
context, "lack of jurisdiction" means that the court did not have the authority to
hear the case because it did not meet the necessary legal requirements to be
considered a derivative suit. Therefore, the court would likely have dismissed the
case based on this lack of jurisdiction.
A derivative action is a lawsuit brought by a shareholder on behalf of a
corporation to enforce or defend a legal right or claim, which the corporation has
failed to do. The Corporation Code of the Philippines allows individual
stockholders to file derivative suits when corporate officials refuse to sue or are
the ones to be sued, or when they control the corporation. The purpose of a
derivative suit is to protect or vindicate corporate rights.

To initiate a derivative suit, certain requirements must be met, including:

The party bringing the suit must be a shareholder at the time of the alleged
wrongdoing.
**The shareholder must have tried to exhaust all available intra-corporate
remedies by making a demand on the board of directors, but the board refused to
act.
**The cause of action must belong to the corporation, not the individual
shareholder.
The corporation must be impleaded as a party in the suit.
In this case, Aliño filed the derivative suit on behalf of VR Holdings, claiming that
his properties were used as collateral based on assurances that they would be
returned and he would not be exposed to the risk of foreclosure. However, the
court found that the damages claimed by Aliño were personal in nature, relating
to the foreclosure of his properties, and not to any harm suffered by the
corporation. The court ruled that the suit was not a true derivative action because
the harm alleged did not pertain to the corporation itself. Therefore, Aliño lacked
the legal standing to file the derivative suit.

Regarding the intervention of other parties, the court clarified that intervention in
a derivative suit is only appropriate when the intervenors are stockholders of the
corporation in question. Since the main derivative suit lacked merit due to Aliño's
lack of legal standing, the intervention of additional parties was also deemed
inappropriate.

Additionally, the court emphasized that a derivative suit must be brought in a

court with jurisdiction over intra-corporate controversies. While the case was
initially filed in the correct court, the subsequent re-raffling of the case to
different branches of the RTC where it was not designated as a special commercial
court was improper. Despite this procedural error, the court did not dismiss the
case. Instead, it ordered the re-raffling of the case to all the RTC branches in the
place where the complaint was originally filed, allowing the case to proceed in the
appropriate jurisdiction.

In summary, the court ruled against Aliño's derivative suit due to his lack of legal
standing and the personal nature of the damages claimed. Consequently, the
intervention of other parties was also disallowed. However, the case was not
dismissed; instead, it was ordered to be re-raffled to the appropriate courts for
further proceedings.