Case Summary (G.R. No. 164437)
BSP’s role and principal position
BSP is the mortgagee and purchaser at foreclosure sale. It sought extra-judicial foreclosure of third-party mortgages after Bankwise defaulted, became registered owner by certificates of sale, opposed interventions by third-party mortgagors in a commercial action initiated by Eduardo Alifio, and petitioned for review of appellate rulings that allowed intervention.
Respondents
Third‑party mortgagors and their claims
The Campa respondents are registered owners of foreclosed properties that had been mortgaged in favor of BSP as security for Bankwise’s SLF. They assert legal interest in the foreclosure litigation, claim they mortgaged properties in accommodation to Bankwise under assurances against foreclosure, and sought leave to intervene and file a complaint-in-intervention asserting causes of action essentially parallel to those alleged by Alifio.
Key Dates
Procedural timeline highlights
- Bankwise mortgaged third‑party properties sometime around 2000 in connection with SLF.
- Extra‑judicial foreclosures and BSP’s acquisition by public auction occurred thereafter.
- Eduardo Alifio filed Commercial Case No. 06‑114866 (Complaint) on 18 April 2006.
- Haru Gen’s intervention motion denied by RTC on 23 October 2003.
- Campa respondents filed Motion for Leave to Intervene on 3 January 2007; RTC (Judge Emma S. Young) granted intervention on 24 April 2007.
- BSP appealed to the Court of Appeals; CA affirmed on 15 July 2008 and denied BSP’s motion for reconsideration on 9 January 2009.
- BSP filed petition for review to the Supreme Court; Supreme Court decision disposed of the petition (petition partly granted).
Applicable Law and Constitutional Basis
Governing legal authorities
The decision is rendered under the 1987 Constitution (as the decision date is after 1990). Relevant statutory and procedural authorities include the Corporation Code (including appraisal rights under Section 81), Republic Act No. 8799 (and the Interim Rules of Procedure Governing Intra‑Corporate Controversies), and jurisprudence on derivative suits, intervention, and jurisdiction of commercial courts and the Regional Trial Courts.
Factual Background
Mortgages, foreclosure, and contested representations
Bankwise obtained SLF credit from BSP and, per BSP’s instruction, procured third‑party mortgages as additional security. Several third‑party mortgagors (including Alifio, Haru Gen, and the Campa respondents) executed mortgages over their properties. After Bankwise defaulted, BSP foreclosed extra‑judicially and bought the properties at public auction. Alifio contended that BSP had agreed to accept dacion en pago and that Bankwise and VR Holdings had represented that mortgaged properties would be returned or otherwise protected from foreclosure; he also alleged that BSP acted callously by foreclosing despite having received titles offered for dacion.
Procedural Posture — Original Action and Intervention Motions
Alifio’s complaint and subsequent intervention attempts
Alifio filed suit seeking TROs, preliminary injunctions, and substantive relief including declarations that third‑party real estate mortgages were extinguished by novation/dacion en pago, and recovery/return of mortgaged titles. Haru Gen earlier moved to intervene and was denied by the RTC (denial held final). The Campa respondents later sought and obtained leave to intervene and filed a complaint‑in‑intervention repeating Alifio’s allegations; BSP opposed and appealed the RTC order.
Legal Issue Presented
Core legal questions framed by BSP’s petition
- Whether the Campa respondents satisfied requisites for intervention in the principal action. 2) Whether the nature of Alifio’s complaint made the action a derivative suit (thus affecting who may properly intervene). 3) Whether respondents’ intervention should be treated differently from Haru Gen’s previously denied motion. 4) Whether the trial court and appellate court committed grave abuse in allowing intervention.
Doctrine of Derivative Suits
Nature, requisites, and jurisprudential standards
A derivative suit is one filed by a shareholder to enforce a corporate cause of action when corporate officials refuse to sue, are the ones to be sued, or control the corporation; the corporation is the real party in interest and the suing shareholder is nominal. Prior jurisprudence (e.g., San Miguel Corp. v. Kahn) articulated requisites: (1) plaintiff must be a shareholder at the time of the complained acts and at filing; (2) exhaustion of intra‑corporate remedies (demand on the board) must be shown; and (3) the cause of action must belong to the corporation. These requisites were incorporated in the Interim Rules (A.M. No. 01‑2‑04‑SC, Section 1, Rule 8), which added that appraisal rights must be unavailable and the suit must not be a nuisance or harassment.
Application of Derivative Suit Doctrine to Alifio’s Complaint
Court’s assessment that complaint is not a derivative suit
The Supreme Court found Alifio’s complaint does not allege injury to the corporation but seeks recovery of properties registered in the names of third‑party mortgagors; the harm alleged is personal to mortgagors, not to VR Holdings or Bankwise. The complaint’s allegations and prayers (recovery and return of specific titles, injunctions against consolidation of title by BSP) indicate relief individual to mortgagors. Consequently, the action is not one that “devolves upon the corporation,” a threshold requirement for a derivative suit.
Exhaustion of Corporate Remedies Requirement
Failure to show demand on the board or adequate particulars
The Court emphasized that Alifo did not adequately allege exhaustion of intra‑corporate remedies with particularity. The complaint referred to “supplications” and attached demand letters addressed to the presidents of VR Holdings and Bankwise, not to their boards of directors; a single demand letter did not suffice. Therefore the requirement that a derivative suitor must have made a demand on the board (or allege futility with particularity) was unmet.
On Appraisal Rights and Harassment Suit Classification
Inapplicability of appraisal right and harassment evaluation
The Court noted appraisal rights under Section 81 of the Corporation Code are not implicated because the acts complained of concern private property of mortgagors rather than corporate acts that would trigger dissenters’ appraisal remedies. The Court further observed that the complaint exhibited hallmarks of a harassment suit under the Interim Rules (Rule I, Section 1(b)) because the alleged damage was not to the corporation and the relief sought was personal, factors that weigh against a derivative character.
Jurisdictional Considerations and Re‑raffling Rule
Re‑raffling rather than dismissal after Gonzales v. GJH Land
Although earlier jurisprudence required dismissal when a complaint was not a derivative suit, the Court recognized the shift in Gonzales v. GJH Land which disallowed dismissal on that ground and instead required re‑raffling. The Court explained that special commercial court designations are procedural and do not abrogate general RTC jurisdiction over ordinary civil cases. Therefore, where an action filed in a special commercial court is found not to be an intra‑corporate controversy, the appropriate remedy is to re‑raffle to all RTC branches in the place where filed rather than dismiss for lack of jurisdiction.
Intervention as Ancillary and Practical Consequence
Nature of complaint‑in‑intervention and required administrative remedy
The Court reiterated that a complaint‑in‑intervention is ancillary to the principal action; intervention presupposes a suit pending in a court of competent jurisdiction and derives its jurisdiction from the main action. Given the Supreme Court’s finding that Alifio’s complaint is not a derivative suit and should be treated as an ordinary civil case, the Court directed administrative re‑docketing and re‑raffling. The Complaint‑in‑Intervention should be refiled in the court wh
...continue readingCase Syllabus (G.R. No. 164437)
Facts of the Case
- Bankwise applied for a Special Liquidity Facility (SLF) loan from the Bangko Sentral ng Pilipinas (BSP) sometime in 2000.
- BSP required Bankwise to submit mortgages of properties owned by third parties to secure its outstanding obligation to BSP; Bankwise complied by mortgaging several real properties owned by third-party mortgagors.
- The third-party mortgagors and the titles/locations involved included:
- Eduardo Alifio and co-owners — TCT Nos. T-4685 and T-4686 — Barrio Masiga, Gasan, Marinduque.
- Haru Gen Beach Resort and Hotel Corporation — TCT Nos. 11849 and 11850 — Barrio Igang, Virac, Catanduanes.
- Vicente Jose Campa, Miriam Campa, Maria Antonia Ortigas, Maria Teresa Arevalo, Maria Nieves Alvarez, Marian Campa, and Balbino Jose Campa — TCT Nos. 25849, 25850, 25851 and 9087 — Mandaluyong City.
- When Bankwise defaulted, BSP initiated extrajudicial foreclosure of the third-party mortgages; BSP was the highest bidder at public auction for all mortgaged properties and corresponding certificates of sale were registered.
- Eduardo Alifio filed a Complaint on 18 April 2006 (Commercial Case No. 06-114866) for specific performance, novation of contracts and damages with application for TRO/preliminary injunction against BSP and Bankwise.
- Alifio alleged: (a) he is a 10% stockholder of VR Holdings; (b) he permitted his properties to be used as collateral because Bankwise and VR Holdings assured return and no risk of foreclosure; (c) BSP allegedly assured acceptance of dacion en pago to settle Bankwise’s obligations; (d) BSP accepted numerous properties in partial settlement and Alifio alleged BSP’s foreclosures proceeded despite the alleged dacion en pago arrangement.
- Haru Gen Beach Resort previously sought leave to intervene and to admit a Complaint-in-Intervention; the trial court denied Haru Gen’s motion on 23 October 2003 on the ground that any cause of action was properly the subject of a separate proceeding; BSP opposed Haru Gen’s intervention.
- On 3 January 2007, the Campa respondents filed a Motion for Leave to Intervene and Admit Complaint-in-Intervention, alleging legal interest as registered owners of mortgaged properties given in accommodation to Bankwise; they repleaded causes of action similar to Alifio’s complaint. BSP opposed the motion.
- On 24 April 2007, the Regional Trial Court (RTC) of Manila, Branch 36 (Judge Emma S. Young) granted leave to intervene and admitted the respondents’ Complaint-in-Intervention.
- BSP sought relief from the Court of Appeals by petition for certiorari, alleging grave abuse of discretion by the trial court in admitting the intervention; the Court of Appeals, in a Decision dated 15 July 2008, denied BSP’s petition and found no grave abuse of discretion. BSP’s motion for reconsideration was denied by the Court of Appeals on 9 January 2009.
- BSP filed the instant petition for review with the Supreme Court to challenge the Court of Appeals’ denial of reconsideration and the admission of the Complaint-in-Intervention.
Procedural History and Relief Sought by BSP
- BSP appealed the RTC order admitting intervention to the Court of Appeals via certiorari, asserting:
- respondents did not satisfy the requisites for intervention;
- respondents’ Complaint-in-Intervention and supplement lack cause of action;
- respondents’ cause of action, if any, should be filed as a separate proceeding;
- Haru Gen’s prior final denial of intervention should preclude admission of other third-party mortgagors’ interventions;
- respondents sought intervention merely to delay consolidation of title in BSP’s name and BSP’s possession of properties; and
- respondents’ allegations were devoid of merit.
- The Court of Appeals (15 July 2008) affirmed the trial court and denied BSP’s petition; BSP’s motion for reconsideration at the Court of Appeals was denied on 9 January 2009.
- BSP then filed a petition for review with the Supreme Court (G.R. No. 185979).
Parties’ Contentions
- Petitioners (BSP):
- The respondents failed to meet requisites for intervention.
- Respondents should not be treated differently from Haru Gen, whose intervention was denied with finality.
- The principal action is a derivative suit filed by Alifio as a stockholder of VR Holdings; therefore, non-stockholders (the respondents) cannot have an actual legal interest entitling them to intervene.
- The respondents’ intervention was a scheme to delay consolidation of title and possession after foreclosure.
- Respondents (Campa et al. and Alifio as original plaintiff):
- Respondents asserted legal interest as registered owners of the mortgaged properties and presented causes of action repleading allegations similar to Alifio’s Complaint (i.e., claims seeking recovery/return of their properties and reliefs tied to alleged dacion en pago and novation).
Nature and Characterization of the Main Action (Derivative Suit Issue)
- The petition frames the primary legal issue as whether the main complaint is a derivative suit and the consequences of such characterization for intervention by non-stockholders.
- The Supreme Court summarized the concept of a derivative action:
- A derivative action is a suit by a shareholder to enforce a corporate cause of action.
- The power to sue for corporate injury is ordinarily lodged with the board of directors/trustees; an individual stockholder may institute a derivative suit to protect corporate rights when officials refuse to sue, are themselves the ones to be sued, or hold control of the corporation.
- In derivative suits, the corporation is the real party-in-interest, and the stockholder suing is a nominal party.
- The decision referenced jurisprudence and rule-based requirements for derivative suits:
- San Miguel Corporation v. Kahn (jurisprudential requirements): (1) plaintiff must be a shareholder at the time of the act complained of; (2) plaintiff must have exhausted intra-corporate remedies (demand on the board); and (3) cause of action must belong to the corporation (wrongdoing caused to the corporation).
- These requirements are reflected in Section 1, Rule 8 of A.M. No. 01-2-04-SC