G.R. No. 174909, 20 January 2016


The case involves a Complaint for Declaration of Nullity of Issuances, Transfers and Sale of Shares in People’s Broadcasting Service, Inc. (PBSI) and All Posterior Subscriptions and Increases thereto with Damages. The concerned corporation, some of the transferees, transferors and other parties involved in the assailed transactions are not impleaded as parties. PBSI sought the services of Sycip Gorres Velayo and Co. (SGV & Co.) in order to determine the ownership of equity in the corporation.

Accordingly, SGV & Co. submitted a report detailing the movements of the corporation’s shares. No categorical statement on equity ownership was given as PBSI’s records were incomplete.

Subsequently, Marcelino, Jr., Ma. Elena, and Raul Muyco (Marcelino, Jr. Group) filed before the RTC the complaint stated above against Diamel Corporation, Rogelio, Sr., Imelda Florete, Margaret Florete, and Rogelio Florete, Jr. (Rogelio, Sr. Group). The former seeks to nullify the following transactions on the shares of stock of PBSI:

a. Issuance of 1,240 shares to Consolidated Broadcasting System, Inc. (CBSI);
b. Transfer of 10 shares from Salome to CBSI;
c. Issuance of 610 shares to Newsounds Broadcasting Network, Inc. (NBNI);
d. Transfer of 610 shares from NBNI to Rogelio, Sr.;
e. Transfer of 750 shares from CBSI to Marcelino, Sr.;
f. Transfer of 500 shares from CBSI to Rogelio, Sr.;
g. Transfer of 680 shares from Marcelino, Sr. to the following: 370 shares to Rogelio, Sr., 270 shares to Divinagracia, 20 shares to Marcelino, Jr., and 20 shares to Teresita;
h. Increase in the authorized capital stock to PI00,000,000.00 divided into 1,000,000 shares with a par value of PI00.00 per share on December 8, 1989, and the resulting subscriptions.

For the issuance of 1,250 shares to CBSI, the Marcelino, Jr. Group argues that the board resolution used as the basis for the issuance of the same was a forgery as it was passed without a quorum. Salome who allegedly transferred her 10 shares to complete the 1,250-share transfer was already dead at the time of the alleged transfer. Moreover, no member of the Board attended the meeting referred to in the board resolution and the signature of Marcelino, Sr. in the same board resolution is a forgery because he was confined in a hospital on the day of the meeting.

With respect to the issuance of 610 shares to NBNI and their subsequent transfer to Rogelio, Sr., the Marcelino, Jr. Group argues that there is no deed of conveyance to support the transfer and that the stock certificates representing the 610 shares are missing. Because of the absence of the stock certificates, there is no valid delivery and endorsement and the transfer is invalid.

Regarding the increase in the authorized capital stock of PBSI, the Marcelino, Jr. Group argues that the increase was procured by fraud because it was made by the new Board of Directors who were elected by stockholders who were transferees of the illegal, fraudulent and anomalous transfers, and therefore have no power and authority to procure such increase.

The RTC issued a decision dismissing the Marcelino, Jr. Group’s complaint. The Marcelino, Jr. Group did not have a cause of action against the Rogelio, Sr. Group. Indispensible parties were not joined in their complaint. The Court of Appeals denied the Marcelino, Jr. Group’s Petition and affirmed the trial court Decision.


Whether it was proper for the RTC to dismiss the Complaint filed by the Marcelino, Jr. Group.


Yes A stockholder may suffer from a wrong done to or involving a corporation but this does not vest in the aggrieved stockholder a sweeping license to sue in his or her own capacity. The determination of the stockholder’s appropriate remedy—whether it is an individual suit, a class suit, or a derivative suit—hinges on the object of the wrong done. When the object of the wrong done is the corporation itself or the whole body of its stock and property without any severance or distribution among individual holders, it is a derivative suit, not an individual suit or class/representative suit, that a stockholder must resort to.

An action should be a proper derivative suit even if the assailed acts do not pertain to a corporation’s transactions with third persons. The pivotal consideration is whether the wrong done as well as the cause of action arising from it accrues to the corporation itself or to the whole body of its stockholders. An action seeking to nullify and invalidate the duly constituted acts of a corporation entails a cause of action that rightfully pertains to the corporation itself and which stockholders cannot exercise except through a derivative suit.

In the case at bar, what the Marcelino, Jr. Group asks is the complete reversal of a number of corporate acts undertaken by PBSI’s different Boards of Directors. These Board of Directors supposedly engaged in outright fraud or, at the very least, acted in such a manner that amounts to wanton mismanagement of the corporation. The remedies that the Marcelino, Jr. Group seeks are for PBSI itself to avail as the specific provisions claimed by the Marcelino, Jr. Group to have been violated signify alleged wrongdoing committed against the corporation itself and not uniquely to those stockholders who now comprise the Marcelino, Jr. Group.

For instance, a violation of Sections 23 and 25 of the Corporation Code implies that a decision was wrongly made for the entire corporation and not just with respect to a handful of stockholders. Section 65, on the other hand, specifically mentions that a director’s or officer’s liability for the issuance of watered stocks is solidary to the corporation and its creditors, not to any specific stockholder.

Transfers of shares made in violation of the registration requirement in Section 63 are invalid, thus, enable the corporation to impugn the transfer. Notably, those in the Marcelino, Jr. Group have not shown any specific interest in, or unique entitlement or right to, the shares supposedly transferred in violation of Section 63.

Accordingly, it was upon PBSI itself that the causes of action now claimed by the Marcelino Jr. Group accrued. While the stockholders in the Marcelino, Jr. Group were permitted to seek relief, they should have done so not in their unique capacity as individuals or as a group of stockholders but in place of the corporation itself through a derivative suit. As they sought relief in their individual capacity, they did so bereft of a cause of action.

Likewise, they did so without even the slightest averment that the requisites for the filing of a derivative suit, as spelled out in Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies, have been satisfied. Since the Complaint lacked a cause of action and failed to comply with the requirements of the Marcelino, Jr. Group’s vehicle for relief, it was only proper for the complaint to have been dismissed.

Erroneously pursuing a derivative suit as a class suit not only meant that the Marcelino, Jr. Group lacked a cause of action as it also meant that they failed to implead an indispensable party. In derivative suits, the corporation concerned must be impleaded as a party. Hence, the Marcellino Jr. Group’s complaint must fail for failure to implead PBSI.

*Case Digest by Rezeile S. Morandarte, Refresher, Andres Bonifacio College, SY 2019 – 2020