Case Summary (G.R. No. 201675)
Facts — Corporate ownership and management
SMBI is a family corporation. Stockholders and shares as reflected in the record: Juanito Ang (8,750), Anecita Ang (1,250), Jeannevie Ang (2,500), Roberto Ang (8,750), Rachel Lu‑Ang (3,750), total 25,000. Roberto served as President; Juanito as Vice‑President; Rachel as Corporate Secretary; Anecita as Treasurer. Nancy Ang (sister) was formerly a stockholder but was no longer listed in SMBI’s SEC reportorial filings by 1996.
Facts — Loan transaction and subsequent instruments
On 31 July 1995 Nancy and Theodore Ang extended funds evidenced by a $1,000,000 check payable to “Juanito Ang and/or Anecita Ang and/or Roberto Ang and/or Rachel Ang.” There was no written loan agreement. Loan proceeds were used to settle obligations of SMBI and other Ang‑owned corporations and to purchase real properties for Juanito and Roberto. Payments allegedly ceased after 2006. A demand letter was sent to the Ang spouses on 24 November 2008. On 8 January 2009 Juanito and Anecita executed a Deed of Acknowledgment and Settlement Agreement and an Extra‑Judicial Real Estate Mortgage acknowledging the $1,000,000 loan and purporting to secure it by various listed properties and claimed shares; Kenneth Locsin signed for Nancy and Theodore under an unfiled Special Power of Attorney.
Complaint and interim relief sought
Juanito filed a stockholder derivative suit on behalf of SMBI on 29 January 2009 (with prayer for an ex‑parte writ of attachment/receivership). He alleged that Roberto and Rachel refused to settle their 50% share of the obligation and that their conduct threatened SMBI’s financial viability; he also alleged exclusion from management, forcible removal of corporate records, and general fraud. Reliefs sought included ex‑parte writs of attachment and break‑open orders, receivership, enforcement of management participation rights, accounting for utilization of the loan, payment of 50% of the loan, restoration of managerial rights, and attorney’s fees.
Trial court proceedings and RTC ruling
On 29 January 2009 the RTC issued an ex‑parte writ of attachment and break‑open order and directed the proposed receiver to post bond. Defendants moved to quash and set aside the orders, alleging denial of due process. Rachel filed an Answer arguing the action was not a bona fide derivative suit but a disguised collection action benefiting Nancy and Theodore, and that Juanito failed to allege exhaustion of intra‑corporate remedies as required by the Interim Rules. A Motion for Preliminary Hearing on Affirmative Defenses was filed. Juanito asserted exceptions, invoked Hi‑Yield Realty, and filed contempt charges against counsel and others for alleged interference. On 27 September 2010 the RTC ruled the action was a derivative suit, denied the defendants’ motion to dismiss, and found that Rachel and Roberto’s acts showed fraud and complete control over SMBI such that exhaustion of intra‑corporate remedies was not required.
Court of Appeals ruling
The Court of Appeals–Cebu reversed the RTC on 20 September 2011, holding that the Complaint was a harassment or nuisance suit, not a bona fide derivative suit. The CA found the loan was a personal obligation of the Ang siblings/spouses because the check was made payable to individuals, the proceeds were used for other family corporations and personal properties, and SMBI was not a party to the Settlement Agreement or Mortgage. The CA concluded there was no showing that non‑payment of the loan would damage SMBI and that Juanito failed to exhaust intra‑corporate remedies. A motion for reconsideration was denied.
Issues presented to the Supreme Court
- Whether the Complaint, on its allegations, is a derivative suit, and whether the CA erred in dismissing it as not a derivative suit.
- Whether the CA improperly considered evidence outside the complaint in determining the nature of the action, contrary to the rule that jurisdictional questions are determined from the complaint’s allegations.
- Alternatively, if the Complaint is an ordinary civil action, whether the CA erred in dismissing the petition when the RTC would have jurisdiction to proceed as an ordinary civil action.
Supreme Court ruling — disposition
The Supreme Court denied the petition and affirmed the CA‑Cebu decision.
Supreme Court reasoning — derivative suit requirements and application
The Court reiterated the nature of a derivative suit as one brought by a stockholder on behalf of the corporation to enforce corporate rights against directors/officers, where the real party in interest is the corporation. It cited the Interim Rules (Section 1, Rule 8) which require: (1) the plaintiff be a stockholder at the time of the challenged acts and at filing; (2) a particularized allegation that the plaintiff exerted all reasonable efforts to exhaust intra‑corporate remedies; (3) no appraisal rights are available; and (4) the suit is not a nuisance or harassment suit.
Applying these requisites, the Court found the Complaint failed to show detriment to SMBI. The loan instruments (check and subsequent Settlement Agreement and Mortgage) indicated a personal obligation of the individual Angs, not SMBI: the check was payable to named individuals, the Settlement Agreement and Mortgage were executed by Juanito and Anecita in their personal capacities, SMBI was not a co‑debtor or guarantor and was not party to those instruments, and the proceeds financed obligations of other family corporations and personal property acquisitions. The Mortgage described conveyance of the mortgagors’ “50% rights and interests” and identified the mortgagors as spouses Juanito and Anecita, indicating a claim of pro‑indiviso personal ownership rather than an act by SMBI’s corporate owners to mortgage corporate assets. The Court cited the Civil Code rule that only an absolute owner may validly mortgage proper
...continue readingCase Syllabus (G.R. No. 201675)
The Case
- Petition for review under Rule 45 of the 1997 Rules of Civil Procedure challenging the Decision of the Court of Appeals–Cebu (CA-Cebu) dated 20 September 2011 in CA-G.R. SP No. 05546.
- The CA-Cebu reversed and set aside the Order of the Regional Trial Court, Branch 53, Bacolod City (RTC Bacolod) dated 27 September 2010 in Commercial Court Case No. OQ-070 entitled Sunrise Marketing (Bacolod), Inc., represented by Juanito Ang v. Spouses Roberto and Rachel Ang.
- The Supreme Court, through Carpio, J., delivered the Decision on 19 June 2013 in G.R. No. 201675.
Parties, Roles and Corporate Identity
- Petitioner: Juanito Ang, for and in behalf of Sunrise Marketing (Bacolod), Inc. (SMBI).
- Respondents: Spouses Roberto and Rachel Ang.
- SMBI is a duly registered corporation owned by the Ang family.
- Corporate officers and shareholder roles:
- Roberto Ang: President of SMBI.
- Juanito Ang: Vice President of SMBI.
- Rachel Lu-Ang: Corporate Secretary of SMBI.
- Anecita Limoco-Ang: Corporate Treasurer of SMBI.
- Juanito and Roberto are siblings; Anecita is Juanito’s wife; Jeannevie is their daughter.
Shareholdings
- SMBI stockholders and shares as stated in the record:
- Juanito Ang — 8,750 shares.
- Anecita Ang — 1,250 shares.
- Jeannevie Ang — 2,500 shares.
- Roberto Ang — 8,750 shares.
- Rachel Ang — 3,750 shares.
- Total authorized/issued shares shown: 25,000 shares.
The Loan Transaction (31 July 1995) and Parties to the Loan
- On 31 July 1995, Nancy Ang (sister of Juanito and Roberto) and her husband, Theodore Ang, agreed to extend a loan to settle obligations of SMBI and other Ang family corporations (Bayshore Aqua Culture Corporation, Oceanside Marine Resources and JR Aqua Venture).
- Nancy and Theodore issued a check in the amount of $1,000,000.00 payable to “Juanito Ang and/or Anecita Ang and/or Roberto Ang and/or Rachel Ang.”
- Nancy was a former stockholder of SMBI but no longer appears in SMBI’s General Information Sheets as early as 1996.
- Nancy and Theodore subsequently resided in the United States.
- There was no written loan agreement because of the close relationship between the parties.
- Part of the loan proceeds were used to purchase real properties for SMBI, for Juanito, and for Roberto.
Increase in Capital Stock and Related Allegations
- On 22 December 2005, SMBI increased its authorized capital stock to P10,000,000.00; the Certificate of Increase of Capital Stock was signed by Juanito, Anecita, Roberto, and Rachel as directors.
- Juanito contended that the increase of SMBI’s capital stock was done in contravention of the Corporation Code.
- Juanito alleged that when he and Anecita left for Canada, Spouses Roberto and Rachel took active management of SMBI and manipulated stock shareholdings between themselves to a 50-50 arrangement without observing the procedures mandated by the Corporation Code on increase of capital stock, claiming no valid Board meeting materialized.
Demand, Responses, and Subsequent Instruments
- Payments to Nancy and Theodore allegedly ceased sometime after 2006.
- On 24 November 2008, Nancy and Theodore, through counsel in the Philippines, sent a demand letter to “Spouses Juanito L. Ang/Anecita L. Ang and Spouses Roberto L. Ang/Rachel L. Ang” demanding payment of $1,000,000.00 plus interest at ten percent (10%) per annum, totaling $2,585,577.37, within ten days.
- On 5 January 2009, Roberto and Rachel responded through counsel that they were not complying with the demand because they had not personally contracted a loan from Nancy and Theodore.
- On 8 January 2009, Juanito and Anecita executed:
- A Deed of Acknowledgment and Settlement Agreement (Settlement Agreement); and
- An Extra-Judicial Real Estate Mortgage (Mortgage).
- Under these instruments, Juanito and Anecita admitted that they, together with Roberto and Rachel, obtained a loan from Nancy and Theodore for $1,000,000.00 on 31 July 1995 and agreed to secure the loan by certain enumerated properties and interests (listed in the instruments).
Properties and Interests Identified in the Mortgage/Settlement Agreement
- The loan was to be secured by:
- Juanito and Anecita’s fifty percent share over a parcel of land registered in the name of SMBI;
- A parcel of land registered in the name of Juanito Ang;
- Juanito’s fifty percent share in seven parcels of land registered in his and Roberto’s name;
- A parcel of land registered in the name of Roberto;
- A parcel of land registered in the name of Rachel;
- Roberto and Rachel’s fifty percent share in two parcels registered in the name of their son, Livingstone L. Ang, and another lot registered in the names of Livingstone and Alvin Limoco Ang.
Representative for Nancy and Theodore
- Kenneth C. Locsin signed on behalf of Nancy and Theodore under a Special Power of Attorney (SPA) that was not attached to the Settlement Agreement or the Mortgage, nor included in the case records.
The Complaint: Stockholder Derivative Suit (29 January 2009)
- On 29 January 2009, Juanito filed a “Stockholder Derivative Suit with prayer for an ex-parte Writ of Attachment/Receivership” before the RTC Bacolod.
- Allegations in the Complaint included:
- The intentional and malicious refusal of Roberto and Rachel to settle their 50% share of the total obligation would affect the financial viability of SMBI.
- Juanito was allegedly illegally excluded from the management and participation in the business of SMBI through force, violence, and intimidation.
- Rachel and Roberto allegedly seized and carted away SMBI records from its office.
- Reliefs sought in the Complaint included:
- Issuance of an ex-parte Writ of Attachment and/or Garnishment, with a Break Open Order covering the assets of Roberto and Rachel or any interest they may have against third parties;
- Placement of SMBI under Receivership pending resolution of the case;
- Enforcement of Juanito’s right to actively participate in the management of SMBI;
- Issuance of an Order compelling Roberto and Rachel to:
- Render an accounting of the utilization of the loan amounting to $2,585,577.37 or P120,229,347.26;
- Pay fifty percent of the aforementioned loan, amounting to P60,114,673.62;
- Explain why Nancy was removed as a stockholder in SMBI’s reportorial requirements with the SEC;
- Restore Juanito’s right to actively manage the affairs of the corporation;
- Pay attorney’s fees amounting to P20,000.00.
Initial RTC Action and Immediate Reactions
- On 29 January 2009, the RTC Bacolod issued an Order granting the application for an ex-parte writ of attachment and break open order; Atty. Jerry Basiao, who sought appointment as Receiver of SMBI, was directed to furnish the required Receivership Bond.
- On the same date, Roberto and Rachel moved to quash the writ of attachment and set aside the break open order and appointment of receiver, claiming violation of due process in issuance and service of the writ.
- Respondents’ counsel alleged the clerk of court clandestinely prepared the writ after representing no writ had been prepared and after counsel had indicated intent to move to quash the following morning; the clerk nonetheless furnished a copy of the order that afternoon.
Defenses and Pleadings by Rachel (Verified Answer Ad Cautelam and Motions)
- In her Verified Answer Ad Cautelam filed on 10 February 2009, Rachel argued:
- The Complaint was not a bona fide derivative suit as defined under the Interim Rules of Procedure for Intra-Corporate Controversies (Interim Rules); rather it was a collection suit where the real party in interest was Nancy and Theodore, not SMBI.
- The cause of action pertained to the right of the spouses Theodore and Nancy Ang, as creditors, to collect the amount allegedly owed.
- The Complaint failed to allege that Juanito had “exerted all reasonable efforts to exhaust all intra-corporate remedies” as required by the Interim Rules.
- During cross-examination, Juanito admitted:
- There was no prior demand for accounting or liquidation.
- No written objection was made to SMBI’s increase of capital stoc