G.R. No. 131889, 12 March 2001
FACTS:
Felix Gochan and Sons Realty Corporation (Gochan Realty) was registered with the SEC with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as incorporators. Felix Gochan Sr.’s daughter, Alice, mother of respondents, inherited 50 shares of stock in Gochan Realty from the former. She died in 1955, leaving the 50 shares to her husband, John Young, Sr. In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her children, Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary Young Hsu and Alexander Thomas Young. Having earned dividends, these stocks numbered 179 by 20 September 1979.
Five days later (25 September), at which time all the children had reached the age of majority, their father John Sr., requested Gochan Realty to partition the shares of his late wife by cancelling the stock certificates in his name and issuing in lieu thereof, new stock certificates in the names of the children. Gochan Realty refused. Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for issuance of shares of stock to the rightful owners, nullification of shares of stock, reconveyance of property impressed with trust, accounting, removal of officers and directors and damages against Virginia Gochan, et. al. (Gochans).
ISSUES:
1. Whether or not the Spouses Uy have the personality to file an action before the SEC against Gochan Realty Corporation;
2. Whether or not the Spouses Uy could properly bring a derivative suit in the name of Gochan Realty to redress wrongs allegedly committed against it for which the directors refused to sue; and
3. Whether or not the intestate estate of John D. Young Sr. is an indispensable party in the SEC case considering that the individual heirs shares are still in the decedent stockholders name.
RULING:
No. A derivative suit has been defined as “an action brought by minority shareholders in the name of the corporation to redress wrongs committed against it, for which the directors refuse to sue. It is a remedy designed by equity and has been the principal defense of the minority shareholders against abuses by the majority.” In a derivative action, the real party in interest is the corporation itself, not the shareholder(s) who actually instituted it. If the suit filed by Yu was indeed derivative in character, then Yu may not have the capacity to sue. The reason is that she would be acting in representation of the corporation, an act which the TRO enjoins her from doing.
Hence, Yu’s suit cannot be characterized as derivative, because she was complaining only of the violation of her preemptive right under Section 39 of the Corporation Code. She was merely praying that she be allowed to subscribe to the additional issuances of stocks in proportion to her shareholdings to enable her to preserve her percentage of ownership in the corporation. She was therefore not acting for the benefit of the corporation. Quite the contrary, she was suing on her own behalf, out of a desire to protect and preserve her preemptive rights. Unquestionably, the TRO did not prevent her from pursuing that action.
1. As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined by the allegations in the complaint. For purposes of resolving a motion to dismiss, Cecilia Uy’s averment in the Complaint — that the purchase of her stocks by the corporation was null and void ab initio is deemed admitted. It is elementary that a void contract produces no effect either against or in favor of anyone; it cannot create, modify or extinguish the juridical relation to which it refers. 9 Thus, Cecilia Uy remains a stockholder of the corporation in view of the nullity of the Contract of Sale. Although she was no longer registered as a stockholder in the corporate records as of the filing of the case before the SEC, the admitted allegations in the Complaint made her still a bona fide stockholder of Felix Gochan & Sons Realty Corporation (FGSRC), as between said parties. In any event, the present controversy, whether intra-corporate or not, is no longer cognizable by the SEC, in view of RA 8799, which transferred to regional trial courts the formers jurisdiction over cases involving intra-corporate disputes.
2. In the present case, the Complaint alleges all the components of a derivative suit. The allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation. The personal injury suffered by the spouses cannot disqualify them from filing a derivative suit on behalf of the corporation. It merely gives rise to an additional cause of action for damages against the erring directors. This cause of action is also included in the Complaint filed before the SEC. The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit of the corporation. The reason is that, as earlier discussed, the allegations of the Complaint make them out as stockholders at the time the questioned transaction occurred, as well as at the time the action was filed and during the pendency of the action.
3. As to the Intestate Estate of John Young, Sr., permitting an executor or administrator to represent or to bring suits on behalf of the deceased, do not prohibit the heirs from representing the deceased. These rules are easily applicable to cases in which an administrator has already been appointed. But no rule categorically addresses the situation in which special proceedings for the settlement of an estate have already been instituted, yet no administrator has been appointed. In such instances, the heirs cannot be expected to wait for the appointment of an administrator; then wait further to see if the administrator appointed would care enough to file a suit to protect the rights and the interests of the deceased; and in the meantime do nothing while the rights and the properties of the decedent are violated or dissipated.
*Case Digest by Krishianne Louise C. Labiano, JD – 4, Andres Bonifacio College, SY 2019 – 2020