SECOND DIVISION
G.R. No. 174909, January 20, 2016
MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO AND RAUL A. MUYCO, Petitioners, v. ROGELIO M. FLORETE, IMELDA C. FLORETE, DIAMEL CORPORATION, ROGELIO C. FLORETE JR., AND MARGARET RUTH C. FLORETE, Respondents.
G.R. NO. 177275
ROGELIO M. FLORETE SR., Petitioner, v. MARCELINO M. FLORETE, JR., MARIA ELENA F. MUYCO AND RAUL A. MUYCO, Respondents.
D E C I S I O N
LEONEN, J.:
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,"1 it is a derivative suit, not an individual suit or class/representative suit, that a stockholder must resort to.
This resolves consolidated cases involving a Complaint for Declaration of Nullity of Issuances, Transfers and Sale of Shares in People's Broadcasting Service, Inc. and All Posterior Subscriptions and Increases thereto with Damages.2 The Complaint did not implead as parties the concerned corporation, some of the transferees, transferors and other parties involved in the assailed transactions. The Petition3 docketed as G.R. No. 174909 assails the Court of Appeals Decision affirming the dismissal of the Complaint and sustaining the award of P25,000,000.00 as moral damages and P5,000,000.00 as exemplary damages in favor of Rogelio Florete, Sr. The Petition4 docketed as G.R. No. 177275 assails the Court of Appeals Decision that disallowed the immediate execution of the same award of damages.
Spouses Marcelino Florete, Sr. and Salome Florete (now both deceased) had four (4) children: Marcelino Florete, Jr. (Marcelino, Jr.), Maria Elena Muyco (Ma. Elena), Rogelio Florete, Sr. (Rogelio, Sr.), and Teresita Menchavez (Teresita), now deceased.5chanroblesvirtuallawlibrary
People's Broadcasting Service, Inc. (People's Broadcasting) is a private corporation authorized to operate, own, maintain, install, and construct radio and television stations in the Philippines.6 In its incorporation on March 8, 1966,7 it had an authorized capital stock of P250,000.00 divided into 2,500 shares at PI00.00 par value per share.8
Twenty-five percent (25%) of the corporation's authorized capital stock were then subscribed to as follows:
Stockholder | Number of Shares |
Marcelino Florete, Sr. (Marcelino, Sr.) | 250 shares |
Salome Florete (Salome) | 100 shares |
Ricardo Berlin (Berlin) | 50 shares |
Pacifico Sudario (Sudario) | 50 shares |
Atty. Santiago Divinagracia (Divinagracia), now deceased9 | 50 shares10 |
B. PEOPLE'S BROADCASTING SERVICE, INC. (PBS)
The movements in the capital stock accounts (by beneficial stockholders) are as follows:
Beneficial Stockholder | Shareholdings Nov. 27, 1967 (A) | Additional Subscription Sept. 1, 1982 (B) | Transfer of Shares of Stock March 1, 1983 (C) | Transfer of Shares of Stock (D) | Transfer of Shares of Stock June 5, 1987 (E) | Increase (F) | Shareholdings Oct. 31, 1993 |
Marcelino M. Florete, Sr. | 560 | - | 750 | (680) | - | 62,344.19 | 62,974.19 |
Salome M. Florete | 30 | (30) | - | - | - | ||
Rogelio M. Florete | 20 | 5 | 1110 | 370 | (5) | 149,624.75 | 151,124.75 |
Ma. Elena F. Muyco | 20 | 5 | - | - | (25) | 2,493.68 | 2,493.68 |
Teresita F. Menchavez | - | 5 | - | 20 | (25) | 2,493.69 | 2,493.69 |
Marcelino M. Florete, Jr. | - | 5 | - | 20 | (20) | 2,493.44 | 2,493.44 |
Santiago C. Divinagracia | 20 | - | - | 270 | 75 | 29,925.25 | 30,290.25 |
Newsound Broadcasting18 | 610 | - | (610) | ||||
Consolidated Broadcasting | - | 1,250 | (1,250) | ||||
Total | 1,260 | 1,250 | 249,375.00 | 251,875.00 |
(A) The People's Broadcasting Service, Inc. was incorporated in 1965 with an authorized capital stock of P250,000 divided into 2,500 shares at PI00 par value. As of November 23, 1967, the total subscribed shares of stock was [sic] 1,260. The 610 shares issued in the name of [Newsounds Broadcasting Network, Inc.] was [sic] authorized by the Board of Directors in payment for the obligation of the Corporation to [Newsounds Broadcasting Network, Inc.]. . . . . (B) On August 5, 1982, the Board of Directors passed Resolution No. 4 which authorized Atty. Divinagracia to negotiate the purchase of two stations of Consolidated Broadcasting System, Inc. (CBS), DYMF and DXMF in Cebu and Davao, respectively. In consideration thereof, [People's Broadcasting Service, Inc.] shall issue 1,250 shares of stock in favor of [Consolidated Broadcasting System, Inc.]. In pursuance thereof, on September 1, 1982, the Corporation issued the remaining 1,240 shares of unissued capital stock to [Consolidated Broadcasting System, Inc.]. To complete the consideration of 1,250 shares, it was explained that [Salome] transferred her 10 shares to [Consolidated Broadcasting System, Inc.] and distributed her remaining 20 shares to her children, at 5 shares each. (C)On March 1, 1983, all the 610 shares of [Newsounds Broadcasting Network, Inc.] were transferred to [Rogelio, Sr.]. We were not able to determine the person who endorsed the certificate in [sic] behalf [of] [Newsounds Broadcasting Network, Inc.] as the certificate was not found on file. On the same day, the entire investment of [Consolidated Broadcasting System, Inc.] were transferred to [Marcelino, Sr.] and [Rogelio, Sr.] at the proportion of 750 shares and 500 shares, respectively. The cancelled certificates of [Consolidated Broadcasting System, Inc.] were endorsed by [Rogelio, Sr.] in [sic] its behalf.
(D) On February 28 and August 1, 1983, [Marcelino, Sr.] transferred 680 shares from his block to the following:
Transferee No. of Shares Date of Transfer Rogelio M. Florete [Sr.] 370 February 28, 1983 Santiago C. Divinagracia 270 August 1, 1983 Marcelino M. Florete, Jr. 20 August 1, 1983 Teresita F. Menchavez 20 August 1, 1983 Total 680
(E) On June 3, 1987, the Corporation effected the transfer of 75 shares to [Divinagracia] by virtue of the deeds of sale executed by the transferors concerned in his favor. (F) On December 8, 1989, the [Securities and Exchange Commission] approved the application of the Corporation to increase the authorized capital stock to P100,000,000.00 divided into 1,000,000 shares at P100 par value. Of the increase, 249,375 shares were subscribed for P24,937,500 and P6,234,375 thereof was paid-up. The subscribers to the increase were as indicated in the foregoing.
Because the procedures included certain assumptions as represented by the corporate secretaries mentioned in Attachment I and we have not verified the documents supporting some of the transactions, we do not express an opinion on the capital stock accounts of the respective companies [including People's Broadcasting] as at October 31, 1993.21 (Emphasis supplied)
Stockholder | No. of Shares |
1. Diamel Corporation | 30,000.00 |
2. Rogelio Florete [Sr.] | 153,881.53 |
3. Marcelino Florete, Jr. | 18,240.99 |
4. Ma. Elena Muyco | 18,227.23 |
5. Santiago Divinagracia | 30,289.25 |
6. Imelda Florete | 1,000.00 |
7. Rogelio Florete, Jr. | 100.00 |
8. Margaret Ruth Florete | 100.00 |
9. Raul Muyco | 10.00 |
10. Manuel Villa, Jr. | 10.00 |
11 .Gregorio Rubias | 1.00 |
12. Cyril Regaldao | 1.00 |
13. Jose Mari Trenas | 1.00 |
14. Enrico Jacomille | 1.00 |
15. Joseph Vincent Go | 1.00 |
16. Jerry Trenas | 1.00 |
17. Efrain Trenas | 10.00 |
[Marcelino, Sr.] and/or his estate and/or his heirs, [Salome] and/or her estate and/or her heirs, [Divinagracia] and/or his estate and/or his successors-in-interest, [Teresita] and/or her estate and/or her own successors-in-interest, the other [People's Broadcasting Service, Inc.] stockholders who may be actually beneficial owners and not purely nominees, all the so called nominal stockholders. . . [and] the various [People's Broadcasting Service, Inc.] Corporate Secretaries[.]"28chanrobleslaw
WHEREFORE, premises duly considered, the instant "Complaint" of the plaintiffs is hereby DISMISSED for lack of merit.
The "Counterclaim" of defendant Rogelio Florete Sr. is hereby given DUE COURSE but only insofar as the claims for moral and exemplary damages are concerned. Consequently, the plaintiffs herein are hereby ordered to pay, jointly and severally, defendant Rogelio Florete Sr., the following sums, to wit:
1. TWENTY FIVE MILLION PESOS (P25,000,000.00) as and for MORAL DAMAGES; and,
2. FIVE MILLION PESOS (P5,000,000.00) as and for EXEMPLARY DAMAGES.
The "Counterclaim(s)" of the other defendants and the prayer for the recovery of attorney's fees and litigation expenses of defendant Rogelio Florete, Sr. are hereby DISMISSED likewise for lack of merit.
SO ORDERED.30chanrobleslaw
(a) | Issuance of 1,240 shares to Consolidated Broadcasting System, Inc. on September 1, 1982, |
(b) | Transfer of 10 shares from Salome to Consolidated Broadcasting System, Inc. on September 1, 1982, |
(c) | Issuance of 610 shares to Newsounds Broadcasting Network, Inc. on November 17, 1967, |
(d) | Transfer of 610 shares from Newsounds Broadcasting Network, Inc. to Rogelio, Sr. on March 1, 1983, |
(e) | Transfer of 750 shares from Consolidated Broadcasting System, Inc. to Marcelino, Sr. on March 1, 1983, |
(f) | Transfer of 500 shares from Consolidated Broadcasting System, Inc. 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, and |
(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.57 |
Beneficial Stockholder | No. of Shares | % |
Marcelino Florete, Sr. | 660 | 81.48 |
Salome Florete | 100 | 12.35 |
Santiago Divinagracia | 50 | 6.17 |
Total | 810 | 100.00 |
Individual suits are filed when the cause of action belongs to the individual stockholder personally, and not to the stockholders as a group or to the corporation, e.g., denial of right to inspection and denial of dividends to a stockholder. If the cause of action belongs to a group of stockholders, such as when the rights violated belong to preferred stockholders, a class or representative suit may be filed to protect the stockholders in the group.83chanroblesvirtuallawlibrary
However, in cases of mismanagement where the wrongful acts are committed by the directors or trustees themselves, a stockholder or member may find that he has no redress because the former are vested by law with the right to decide whether or not the corporation should sue, and they will never be willing to sue themselves. The corporation would thus be helpless to seek remedy. Because of the frequent occurrence of such a situation, the common law gradually recognized the right of a stockholder to sue on behalf of a corporation in what eventually became known as a "derivative suit." It has been proven to be an effective remedy of the minority against the abuses of management. Thus, an individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever 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 the nominal party, with the corporation as the party in interest.87chanrobleslaw
Although in most every case of wrong to the corporation, each stockholder is necessarily affected because the value of his interest therein would be impaired, this fact of itself is not sufficient to give him an individual cause of action since the corporation is a person distinct and separate from him, and can and should itself sue the wrongdoer.88chanrobleslaw
The reasons given for not allowing direct individual suit are:
(1) . . . "the universally recognized doctrine that a stockholder in a corporation has no title legal or equitable to the corporate property; that both of these are in the corporation itself for the benefit of the stockholders." In other words, to allow shareholders to sue separately would conflict with the separate corporate entity principle;
(2) . . . that the prior rights of the creditors may be prejudiced. Thus, our Supreme Court held in the case of Evangelista v. Santos, that 'the stockholders may not directly claim those damages for themselves for that would result in the appropriation by, and the distribution among them of part of the corporate assets before the dissolution of the corporation and the liquidation of its debts and liabilities, something which cannot be legally done in view of Section 16 of the Corporation Law...";
(3) the filing of such suits would conflict with the duty of the management to sue for the protection of all concerned;
(4) it would produce wasteful multiplicity of suits; and
(5) it would involve confusion in ascertaining the effect of partial recovery by an individual on the damages recoverable by the corporation for the same act.90chanrobleslaw
Indeed, the Court notes American jurisprudence to the effect that a derivative suit, on one hand, and individual and class suits, on the other, are mutually exclusive, viz.:ChanRoblesVirtualawlibraryAs the Supreme Court has explained: "A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, 'the action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.'" In contrast, "a direct action [is one] filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder.. . . [T]he two actions are mutually exclusive: i.e., the right of action and recovery belongs to either the shareholders (direct action) or the corporation (derivative action)."
Thus, in Nelson v. Anderson, the minority shareholder alleged that the other shareholder of the corporation negligently managed the business, resulting in its total failure. The appellate court concluded that the plaintiff could not maintain the suit as a direct action: "Because the gravamen of the complaint is injury to the whole body of its stockholders, it was for the corporation to institute and maintain a remedial action. A derivative action would have been appropriate if its responsible officials had refused or failed to act." The court went on to note that the damages shown at trial were the loss of corporate profits. Since "[shareholders own neither the property nor the earnings of the corporation," any damages that the plaintiff alleged that resulted from such loss of corporate profits "were incidental to the injury to the corporation."93 (Emphasis supplied, citations omitted)
Rule 8, Section 1 of the Interim Rules of Procedure for Intra Corporate Controversies (Interim Rules) provides the five (5) requisites for filing derivative suits:ChanRoblesVirtualawlibrarySECTION 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:The fifth requisite for filing derivative suits, while not included in the enumeration, is implied in the first paragraph of Rule 8, Section 1 of the Interim Rules: The action brought by the stockholder or member must be "in the name of [the] corporation or association. . . ." This requirement has already been settled in jurisprudence.
(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.
In case of nuisance or harassment suit, the court shall forthwith dismiss the case.
Thus, in Western Institute of Technology, Inc., et al. v. Salas, et al, this court said that "[a]mong the basic requirements for a derivative suit to prosper is that the minority shareholder who is suing for and on behalf of the corporation must allege in his complaint before the proper forum that he is suing on a derivative cause of action on behalf of the corporation and all other shareholders similarly situated who wish to join [him]." ...
Moreover, it is important that the corporation be made a party to the case.94 (Citations omitted)
The reliefs sought in the Complaint, namely that of enjoining defendants from acting as officers and Board of Directors of the corporation, the appointment of a receiver, and the prayer for damages in the amount of the decrease in the value of the shares of stock, clearly show that the Complaint was filed to curb the alleged mismanagement of [Subic Bay Gold and Country Club]. The causes of action pleaded by petitioners do not accrue to a single shareholder or a class of shareholders but to the corporation itself.109 (Emphasis supplied)
Not only is the corporation an indispensible party, but it is also the present rule that it must be served with process. The reason given is that the judgment must be made binding upon the corporation in order that the corporation may get the benefit of the suit and may not bring a subsequent suit against the same defendants for the same cause of action. In other words the corporation must be joined as party because it is its cause of action that is being litigated and because judgment must be a res ajudicata [sic] against it.126chanroblesvirtuallawlibrary
As it is clear that the acts being assailed are those of PHHC, this case cannot prosper for failure to implead the proper party, PHCC.
An indispensable party is defined as one who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest. In the recent case of Nagkakaisang Lakas ng Manggagawa sa Keihin (NLMK-OLALIA-KMU) v. Keihin Philippines Corporation, the Court had the occasion to state that:ChanRoblesVirtualawlibraryUnder Section 7, Rule 3 of the Rules of Court, "parties in interest without whom no final determination can be had of an action shall be joined as plaintiffs or defendants." If there is a failure to implead an indispensable party, any judgment rendered would have no effectiveness. It is "precisely 'when an indispensable party is not before the court (that) an action should be dismissed.' The absence of an indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even to those present." The purpose of the rules on joinder of indispensable parties is a complete determination of all issues not only between the parties themselves, but also as regards other persons who may be affected by the judgment. A decision valid on its face cannot attain real finality where there is want of indispensable parties.Similarly, in the case of Plasabas v. Court of Appeals, the Court held that a final decree would necessarily affect the rights of indispensable parties so that the Court could not proceed without their presence. In support thereof, the Court in Plasabas cited the following authorities, thus:ChanRoblesVirtualawlibraryThe general rule with reference to the making of parties in a civil action requires the joinder of all indispensable parties under any and all conditions, their presence being a sine qua non of the exercise of judicial power. For this reason, our Supreme Court has held that when it appears of record that there are other persons interested in the subject matter of the litigation, who are not made parties to the action, it is the duty of the court to suspend the trial until such parties are made either plaintiffs or defendants, x x x Where the petition failed to join as party defendant the person interested in sustaining the proceeding in the court, the same should be dismissed, x x x When an indispensable party is not before the court, the action should be dismissed.From all indications, PHCC is an indispensable party and should have been impleaded, either as a plaintiff or as a defendant, in the complaint filed before the HLURB as it would be directly and adversely affected by any determination therein. To belabor the point, the causes of action, or the acts complained of, were the acts of PHCC as a corporate body[.]127 (Citations omitted)
Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants. The burden of procuring the presence of all indispensable parties is on the plaintiff. The evident purpose of the rule is to prevent the multiplicity of suits by requiring the person arresting a right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in the same position, so that the whole matter in dispute may be determined once and for all in one litigation.
While the failure to implead an indispensable party is not per se a ground for the dismissal of an action, considering that said party may still be added by order of the court, on motion of the party or on its own initiative at any stage of the action and/or such times as are just, it remains essential — as it is jurisdictional — that any indispensable party be impleaded in the proceedings before the court renders judgment. This is because the absence of such indispensable party renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent parties but even as to those present.131 (Emphasis supplied, citation omitted)
A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final and any writ of execution based on it is void: x x x it may be said to be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head.140 (Emphasis supplied)
Endnotes:
* Designated acting member per S.O. No. 2312 dated January 19, 2016.
1Cua v. Tan, 622 Phil. 661, 717 (2009) [Per J. Leonardo-de Castro, First Division], citing Oakland Raiders v. National Football League, 131 Cal. App. 4th 621, 32 Cal. Rptr. 3d 266, Cal. App. 6 Dist, 2005, 28 July 2005.
2Rollo (G.R. No. 174909), p. 546.
3 Id. at 42-159.
42 (G.R. No. 177275), pp. 9-24.
5 Id. at 60, Court of Appeals Decision.
6 Id. at 60-61.
7 Id. at 60.
8 Id. at 61.
9Rollo (GR. No. 174909), p. 1479, Petitioners' Memorandum.
10Rollo (GR. No. 177275), p. 61, Court of Appeals Decision.
11 Id.
12 Id.
13] Id. at 62.
14 Id.
15Rollo (GR. No. 174909), p. 49, Petition.
16 Id. at 483, Placitum.
17Rollo (GR. No. 177275), p. 63, Court of Appeals Decision.
18 Newsound Broadcasting is sometimes referred to as Newsounds Broadcasting Network, Inc. For uniformity, Newsounds Broadcasting Network, Inc. will be used.
19Rollo (G.R. No. 174909), pp. 646-647, Sycip Gorres and Velayo, Co. Report.
20 Id. at 483, Placitum.
21 Id. at 640, Sycip Gorres and Velayo, Co. Report.
22 Rollo (G.R. No. 177275), p. 63, Court of Appeals Decision.
23 Id.
24Rollo (G.R. No. 174909), pp. 1455-1456, Petitioners' Memorandum.
25 Id. at 546-603.
26 Id. at 546, Complaint.
27Rollo (G.R. No. 177275), p. 64, Court of Appeals Decision.
28 Id. at 504.
29 Id. at 545.
30 Id. The case was docketed as SCC Case No. 03-002. The Placitum was penned by Judge J. Cedric O. Ruiz of Branch 39, Regional Trial Court Iloilo.
31 Sec. 4. Executory Nature of Decisions and Orders.—All decisions and orders issued under these Rules shall immediately be executory. No appeal or petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall not be subject to appeal.
32Rollo (G.R. No. 177275), p. 130, Comment.
33 The Petition was filed under Rule 43 of the Rules of Court.
34Rollo (G.R. No. 177275), p. 130, Comment.
35 Id. at 109, Court of Appeals Decision.
36 Id. at 59-86. The case was docketed as CA-G.R. SP No. 00994. The Decision was penned by Associate Justice Apolinario D. Bruselas, Jr. and concurred in by Associate Justices Arsenio Magpale and Vicente Yap of the Eighteenth Division, Court of Appeals Cebu.
37 Id. at 83.
38 Id.
39 Id. at 67.
40 Id. at 68-69.
41 Id. at 70.
42Rollo (G.R. No. 174909), pp. 187-258.
43Rollo (G.R. No. 177275), p. 131, Comment.
44 Id. at. 109-110.
45 Id. at 131.
46 Id. at 132. The Petition was filed pursuant to Rule 65 of the Rules of Court.
47 Id. at 131-132.
48 Id. at 132.
49 The case was docketed as CA-G.R. CEB-SP No. 01818.
50Rollo (G.R. No. 177275), pp. 115-123.
51 Id. at 124-125.
52 Id. at 85-86.
53Rollo (G.R. No. 174909), pp. 42-159.
54Rollo (G.R. No. 177275), pp. 9-24.
55Rollo (G.R. No. 174909), p. 1472, Petitioners' Memorandum.
56 Id. at 1478-1480.
57 Id. at 1553-1554.
58 Id. at 1506.
59 Id.
60 Id.
61 Id. at 1508.
62 Id. at 1507.
63 Id. at 1508.
64 Id. at 1511.
65 Id. at 1511-1512.
66 Id. at 1508-1510. The Marcelino, Jr. Group quoted from the testimony of Dr. Matias T. Apistar, a specialist on Adult Cardiology, Heart Diseases, Cardiac Rehabilitation, and Echocardiography, and the attending physician of Marcelino, Sr.
67 Id. at 1531-1532.
SEC. 63. Certificate of stock and transfer of shares.—The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.
68 Id. at 1537-1538.
69 Id. at 576-577, Complaint. The Marcelino, Jr., Group enumerated the subscribers to the increase as the following: Elsa Marie Divinagracia, Ruth Marie Divinagracia, Llane Grace Divinagracia, Ricardo Divinagracia, Fe Emily Divinagracia, Liza Roquero, Tessie Banares, Santiago Divinagracia, Jerry Lucero, Lorenzo Caperonce, Estarella Mirasol, Francisco Jamili, Emmanuel Billones, Ignacio Debuque, Oscar Leo Billena, Rodrigo Jagorin, Rodrigo Martirizar, Ricardo Badilles, and Marie Julie Sancho.
70 Id. at 597 and 601.
71 Id. at 1540, Petitioners' Memorandum.
72 Id. at 1549.
73 Id. at 1423.
74 Id. at 1426.
75 Id. at 1427.
76 Id. at 1423.
77 Id. at 1431.
78Rollo (G.R. No. 177275), pp. 14-15, Petition for Review.
79 Id. at 14.
80 Id. at 18.
81Rollo (G.R. 174909), p. 546.
82 G.R. Nos. 172843, 172881, September 24, 2014, 736 SCRA 325 [Per J. Leonen, Second Division].
83 Id. at 348, citing Cua, Jr. v. Tan, 622 Phil. 661 (2009) [Per J. Chico-Nazario, Third Division], in turn citing 1 J. CAMPOS, JR. AND M. C. L. CAMPOS, THE CORPORATION CODE: COMMENTS, NOTES AND SELECTED CASES 819 (1990 ed.).
84 Id. at 340, citing Hi-Yield Realty, Incorporated v. Court of Appeals, 608 Phil. 350, 358 (2009) [Per J. Quisumbing, Second Division], in turn citing R.N. Symaco Trading Corporation v. Santos, 504 Phil. 573, 589 (2005) [Per J. Callejo, St., Second Division].
85 Cua, Jr. v. Tan, 622 Phil. 661, 715 (2009) [Per J. Chico-Nazario, Third Division], citing I JOSE CAMPOS, JR. AND MARIA CLARA L. CAMPOS, THE CORPORATION CODE: COMMENTS, NOTES AND SELECTED CASES 819-820 (1990 ed.).
86 Id. at 721.
87Id. at 715-716.
88 Id. at 715, citing I JOSE CAMPOS, JR. AND MARIA CLARA L. CAMPOS, THE CORPORATION CODE: COMMENTS, NOTES AND SELECTED CASES 819-820 (1990 ed.).
89 360 Phil. 768 (1998) [Per J. Kapunan, Third Division].
90 Id. at 805-806, citing III A. F. AGBAYANI, COMMERCIAL LAW OF THE PHILIPPINES 565-566.
91Cua, Jr. v. Tan, 622 Phil. 661, 717 (2009) [Per J. Chico-Nazario, Third Division], citing Oakland A Raiders v. National Football League, 131 Cal.App.4th 621, 32 Cal.Rptr.3d 266, Cal. App. 6 Dist, 2005, 28 July 2005.
92 622 Phil. 661 (2009) [Per J. Chico-Nazario, Third Division].
93 Id. at 717-718, citing Oakland Raiders v. National Football League, 131 Cal.App.4th 621, 32 Cal.Rptr.3d 266, Cal. App. 6 Dist., 2005, 28 July 2005.
94Villamor v. Umale, G.R. Nos. 172843, 172881, September 24, 2014, 736 SCRA 325, 341-343 [Per J. Leonen, Second Division].
95 608 Phil. 350 (2009) [Per J. Quisumbing, Second Division].
96 Id. at 354.
97 Id. at 356.
98 622 Phil. 661, 719 (2009) [Per J. Chico-Nazario, Third Division].
99 Id. at 726.
100 Id. at 719.
101 Id. at 722.
102 686 Phil. 1160 (2012) [Per J. Mendoza, Third Division].
103 Id. at 1166.
104 Id. at 1178.
105 G.R. No. 174353, September 10, 2014, 734 SCRA 569 [Per J. Leonardo-De Castro, First Division]
106 Id. at 573.
107 Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:
(a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission.
108 Ching and Wellington v. Subic Bay Golf and Country Club, G.R. No. 174353, September 10, 2014, 734 SCRA 569, 580 [Per J. Leonardo-De Castro, First Division].
109 Id. at 584,
110 179 Phil. 36 (1979) [Per J. Concepcion, Jr., Second Division].
111 Id. at 43.
112 Id. at 43.
113 Id. The entirety of the relevant portion in the Decision reads: "The petitioners further contend that the proper remedy of the plaintiffs would be to institute a derivative suit against the petitioners in the name of the corporation in order to secure a binding relief after exhausting all the possible remedies available within the corporation.
"An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock 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. In the case at bar, however, the plaintiffs are alleging and vindicating their own individual interests or prejudice, and not that of the corporation. At any rate, it is yet too early in the proceedings since the issues have not been joined. Besides, misjoinder of parties is not a ground to dismiss an action" (Id.).
114 Sec. 23. The Board of Directors or Trustees.—Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified. (28a)
Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. Trustees of non-stock corporations must be members thereof. A majority of the directors or trustees of all corporations organized under this Code must be residents of the Philippines.
115 Sec. 25. Corporate Officers, Quorum.—Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
116 SEC. 39. Power to Deny Pre-emptive Right.—All stockholders of a stock corporation shall enjoy preemptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation or an amendment thereto: Provided, That such pre-emptive right shall not extend to shares to be issued in compliance with laws requiring stock offerings or minimum stock ownership by the public; or to shares to be issued in good faith with the approval of the stockholders representing two-thirds (2/3) of the outstanding capital stock, in exchange for property needed for corporate purposes or in payment of a previously contracted debt.
117 SEC. 102. Pre-emptive Right in Close Corporations.—The pre-emptive right of stockholders in close corporations shall extend to all stock to be issued, including reissuance of treasury shares, whether for money or for property or personal services, or in payment of corporate debts, unless the articles of incorporation provide otherwise.
118 SEC. 62. Consideration for stocks.—Stocks shall not be issued for a consideration less than the par or issued price thereof. Consideration for the issuance of stock may be any or a combination of any two or more of the following:
- Actual cash paid to the corporation;
- Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued;
- Labor performed for or services actually rendered to the corporation;
- Previously incurred indebtedness of the corporation;
- Amounts transferred from unrestricted retained earnings to stated capital; and
- Outstanding shares exchanged for stocks in the event of reclassification or conversion.
Where the consideration is other than actual cash, or consists of intangible property such as patents of copyrights, the valuation thereof shall initially be determined by the incorporators or the board of directors, subject to approval by the Securities and Exchange Commission.
Shares of stock shall not be issued in exchange for promissory notes or future service.
The same considerations provided for in this section, insofar as they may be applicable, may be used for the issuance of bonds by the corporation.
The issued price of no-par value shares may be fixed in the articles of incorporation or by the board of directors pursuant to authority conferred upon it by the articles of incorporation or the bylaws, or in the absence thereof, by the stockholders representing at least a majority of the outstanding capital stock at a meeting duly called for the purpose.
119 Sec. 63. Certificate of Stock and Transfer of Shares.—The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be transferable in the books of the corporation.
120 Sec. 65. Liability of directors for watered stocks.—Any director or officer of a corporation consenting to the issuance of stocks for a consideration less than its par or issued value or for a consideration in any form other than cash, valued in excess of its fair value, or who, having knowledge thereof, does not forthwith express his objection in writing and file the same with the corporate secretary, shall be solidarity, liable with the stockholder concerned to the corporation and its creditors for the difference between the fair value received at the time of issuance of the stock and the par or issued value of the same.
121Rollo (G.R. No. 174909), p. 601. That is, situations as they were "before the liquidation of the estates of the late Marcelino, Sr. and Salome and before the exercise of pre-emptive rights by the beneficial stockholders" (Id.).
122Ching and Wellington v. Subic Bay Golf and Country Club, G.R. No. 174353, September 10, 2014, 734 SCRA 569, 584 [Per J. Leonardo-De Castro, First Division].
123Go v. Distinction Properties Development and Construction, Inc., 686 Phil. 1160, 1174 (2012) [Per J. Mendoza, Third Division].
124Villamor v. Umale, G.R. Nos. 172843, 172881, September 24, 2014, 736 SCRA 325, 340 [Per J. Leonen, Second Division].
125 To paraphrase Oakland Raiders v. National Football League, 131 Cal.App.4th 621, 32 Cal.Rptr.3d 266, Cal. App. 6 Dist, 2005, 28 July 2005, as cited in Cua, Jr. v. Tan, 622 Phil. 661, 717 (2009) [Per J. Chico-Nazario, Third Division].
126Asset Privatization Trust v. Court of Appeals, 360 Phil. 768, 805-806 (1998) [Per J. Kapunan, Third Division], citing III A. F. AGBAYANI, COMMERCIAL LAW OF THE PHILIPPINES 565-566.
127 Go v. Distinction Properties Development and Construction, Inc., 686 Phil. 1160, 1175-1177 (2012) [Per J. Mendoza, Third Division].
128Arcelona v. Court of Appeals, 345 Phil. 250, 267-268 (1997) [Per J. Panganiban, Third Division]. See also People of the Philippines v. Go, G.R. No. 201644, September 24, 2014, 736 SCRA 501, 506-507 [Per J. Perlas-Bernabe, First Division].
129Divinagracia v. Parilla, G.R. No. 196750, March 11, 2015 [Per J. Perlas-Bernabe, First Division].
130Arcelona v. Court of Appeals, 345 Phil. 250, 267-268 (1997) [Per J. Panganiban, Third Division]. See also People of the Philippines v. Go, G.R. No. 201644, September 24, 2014, 736 SCRA 501, 506 [Per J. Perlas-Bernabe, First Division].
131People of the Philippines v. Go, G.R. No. 201644, September 24, 2014, 736 SCRA 501, 506 [Per J. Perlas-Bernabe, First Division].
132 417 Phil. 303 (2001) [Per J. Panganiban, Third Division].
133 345 Phil. 250 (1997) [Per J. Panganiban, Third Division].
134People of the Philippines v. Go, G.R. No. 201644, September 24, 2014, 736 SCRA 501, 506 [Per J. Perlas-Bernabe, First Division].
135 G.R. No. 196750, March 11, 2015 [Per J. Perlas-Bernabe, First Division].
136 G.R. No. 186610, July 29, 2013, 702 SCRA 496 [Per J. Peralta, Third Division].
137 G.R. No. 201644, September 24, 2014, 736 SCRA 501 [Per J. Perlas-Bernabe, First Division].
138 620 Phil. 268 (2009) [Per J. Abad, Second Division].
139 RULES OF COURT, Rule 3, sec. 11 states:
Section 11. Misjoinder and non-joinder of parties. — Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.
140Arcelona v. Court of Appeals, 345 Phil. 250, 287 (1997) [Per J. Panganiban, Third Division], citing Leonor v. Court of Appeals, 326 Phil. 74 (1996) [Per J. Panganiban, Third Division].