Title
Florete, Jr. vs. Florete
Case
G.R. No. 174909
Decision Date
Jan 20, 2016
A family dispute over PBS share transfers led to a dismissed complaint due to lack of cause of action and failure to implead indispensable parties; damages awarded were voided.

Case Summary (G.R. No. 174909)

Procedural History

• June 2003: The Marcelino Jr. Group filed in the RTC a Complaint for Declaration of Nullity of Issuances, Transfers and Sale of Shares and All Posterior Subscriptions and Increases thereto with Damages against Rogelio Sr. and related parties.
• August 2005: RTC dismissed the Complaint for lack of cause of action, for failure to join indispensable parties, and estoppel; it granted Rogelio Sr.’s counterclaim and awarded ₱25 million moral and ₱5 million exemplary damages.
• 2006: The Court of Appeals affirmed the dismissal and award but later, in a separate petition, disallowed immediate execution of damages.
• November 2006: The Marcelino Jr. Group filed G.R. No. 174909; Rogelio Sr. filed G.R. No. 177275 to enforce execution.
• March 2009: The Supreme Court consolidated both petitions.

Issues Presented

  1. Whether the RTC erred in dismissing the Marcelino Jr. Group’s Complaint.
  2. Whether the challenged share transactions must be nullified on the merits.
  3. Whether the award of moral and exemplary damages in favor of Rogelio Sr. may be executed at this stage.

Applicable Law

• 1987 Philippine Constitution (decision post-1990)
• Corporation Code (B.P. Blg. 68):
– Sec. 23 (corporate powers vested in the board)
– Sec. 25 (quorum requirements)
– Secs. 39, 102 (stockholders’ pre-emptive rights)
– Sec. 62 (consideration for issuance of shares)
– Sec. 63 (requirements for valid transfer)
– Sec. 65 (liability for watered stock)
• Interim Rules of Procedure for Intra-Corporate Controversies, Rule 8, Sec. 1 (requisites of a derivative suit)

Stockholder Remedies and Characterization of the Suit

Stockholders may sue:
• Individually (for personal rights)
• As a class (for shared interests of a definite group)
• Derivatively (to enforce corporate rights when the corporation refuses to act)
The Marcelino Jr. Group attacked corporate acts affecting the entire equity structure—acts that injured People’s Broadcasting itself. Such wrongs require a derivative suit.

Requisites and Indispensable Parties in Derivative Suits

A valid derivative suit must allege:

  1. Stock ownership at the time of mismanagement and at filing;
  2. Exhaustion of internal remedies;
  3. No appraisal rights available;
  4. Suit is not a nuisance or harassment;
  5. It must be brought in the name of and include the corporation as a party.
    Failure to join the corporation or other indispensable parties deprives the court of jurisdiction.

Supreme Court’s Findings on the Complaint

• The Marcelino Jr. Group’s causes of action—challenges to board resolutions, share issuances, transfers and capital increases—accrued to the corporation, not to individual or class stockholders.
• They lacked both a direct cause of action and any allegation that derivative-suit requisites were met.
• They failed to implead People’s Broadcas




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