G.R. No. 172843, 24 September 2014

FACTS:

MC Home Depot occupied a prime property (Rockland area) in Pasig which was part of the area owned by Mid-Pasig Development Corporation. Pasig Printing Corporation (PPC) obtained an option to lease the Rockland area. PPC’s Board of Directors (BOD) issued a resolution waiving all its rights, interests, and participation in the option to lease contract in favor of the law firm of Atty. Villamor. PPC, represented by Atty. Villamor, entered into a memorandum of agreement (MOA) with MC Home Depot who would continue to occupy the area for 4 years, renewable for another 4 years, at a monthly rental of P4,500,000.00 plus goodwill of P18,000,000.00.

In compliance with the terms of the MOA, MC Home Depot issued 20 post-dated checks. The checks were given to Atty. Villamor who did not turn these or the equivalent amount over to PPC, upon encashment. Hernando Balmores, stockholder and director of PPC, wrote a letter addressed to PPC’s BOD informing them that Atty. Villamor should be made to deliver to PPC and account for the checks or their equivalent value.

Due to the alleged inaction of the BOD, Balmores filed with the RTC an intra-corporate controversy complaint against petitioners for their alleged devices or schemes amounting to fraud or misrepresentation. He alleged that because of petitioners’ actions, PPC’s assets were not only in imminent danger, but have actually been dissipated, lost, wasted and destroyed. He prayed that a receiver be appointed from his list of nominees and that the petitioners be prohibited from selling, encumbering, transferring or disposing any of PPC’s properties.

The RTC denied Balmores’ prayer for the appointment of a receiver or the creation of a management committee. PPC’s entitlement to the checks was doubtful as the resolution issued by PPC’s BOD waiving its rights to the option to lease contract must be accorded prima facie validity. The CA, on the other hand, reversed the RTC’s decision and issued an order placing PPC under receivership and creating an interim management committee. The waiver of PPC’s rights in favor of Villamor’s law firm without any consideration and its inaction on Villamor’s failure to turn over the proceeds of rental payments to PPC warrant the creation of a management committee. Also, the case filed by Balmores was a derivative suit because there were allegations of fraud by PPC’s directors.

ISSUE:

Whether the CA correctly characterized Balmores’ action as a derivative suit.

RULING:

No. The requisites of a derivative suit are as follows:

a. 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;
b. 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;
c. No appraisal rights are available for the act or acts complained of; and
d. The suit is not a nuisance or harassment suit. In case of nuisance or harassment suit, the court shall forthwith dismiss the case.

Balmores’ action in the trial court failed to satisfy all the requisites of a derivative suit. Balmores failed to exhaust all the available remedies to obtain the reliefs he prayed for. Though he tried to communicate with PPC’s directors about the checks before he filed an action with the trial court, he was not able to show that this comprised all the remedies available under the articles of incorporation, bylaws, laws, or rules governing PPC.

Moreover, Balmores did not implead PPC as party in the case nor did he allege that he was filing on behalf of the corporation. It must be further noted that he described the nature of his action as an action under Rule 1, Section l(a)(l) of the Interim Rules and not an action under Rule 1, Section l(a)(4) of the Interim Rules which refers to derivative suits. It is clear that he did not bring the action for the benefit of the corporation when he alleged in the complaint that the acts of PPC’s directors were detrimental to his individual interest as a stockholder.

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