Case Summary (G.R. No. 165744)
Petitioner and Respondents
Petitioner: Oscar C. Reyes
Respondents: Regional Trial Court (RTC) of Makati, Branch 142; Zenith Insurance Corporation; Rodrigo C. Reyes
Key Dates
May 9, 2000 Rodrigo files derivative-style complaint with the SEC
November 29, 2002 RTC denies Oscar’s motion to dismiss for nuisance and limits cognizance to derivative claims
May 26, 2004 Court of Appeals affirms RTC order
August 11, 2008 Supreme Court decision
Applicable Law
1987 Philippine Constitution; Rule 45, Rules of Court; Interim Rules of Procedure for Intra-Corporate Controversies; P.D. No. 902-A § 5 (fraud schemes and intra-corporate disputes); R.A. 8799; Corporation Code § 63; Rule 6–8, Rules of Court
Background Facts
– Pedro’s estate was judicially partitioned; Anastacia’s was not.
– As of mid-1990, shareholdings: Anastacia 136,598; Oscar 8,715,637; Rodrigo 4,250.
– Rodrigo alleged Oscar fraudulently appropriated Anastacia’s shares, demanding an accounting and distribution.
Procedural History
Rodrigo commenced a “derivative” complaint before the SEC; upon R.A. 8799 transferring SEC disputes to special commercial courts, the case moved to RTC Makati (Civil Case No. 00-1553). Oscar moved to dismiss as a harassment suit and for lack of jurisdiction; the RTC denied relief except to strike estate-settlement aspects. The Court of Appeals upheld the RTC order. Oscar filed a Rule 45 petition.
Issues
- Whether the RTC, as a special commercial court, had jurisdiction under P.D. 902-A § 5.
- Whether Rodrigo’s complaint was a bona fide derivative suit.
Supreme Court’s Ruling
The petition is granted. The complaint is dismissed for lack of jurisdiction.
Jurisdiction Under P.D. 902-A § 5(a) – Fraudulent Schemes
– Section 5(a) requires particularized allegations of corporate fraud.
– Rodrigo’s complaint recited conclusions of “illegal and fraudulent” share transfers without detailing how corporate powers or offices facilitated the fraud.
– Absent specific ultimate facts, the complaint cannot invoke special commercial court jurisdiction.
Intra-Corporate Controversy Test (P.D. 902-A § 5(b))
– Jurisdiction depends on (1) an intra-corporate relationship and (2) a controversy intrinsically connected to corporate regulation.
– Rodrigo’s interest in Anastacia’s shares arises as heir, not as a recorded shareholder; succession vests co-ownership in heirs but does not bind the corporation until shares are transferred and registered per Corporation Code § 63.
– No estate settlement has determined specific allotments nor led to registration of shares in Rodrigo’s name.
– Thus, Rodrigo is not yet a stockholder regarding Anastacia’s shares and cannot invoke intra-corporate relations.
Nature of the Controversy Test
– The true dispute is partition and distribution of Anastacia’s estate, not corporate governance or shareholder rights.
– The accounting sought is merely incidental to determining individual inheritance, a matter for probate courts under Rule 90, not a s
Case Syllabus (G.R. No. 165744)
Background Facts
- Oscar C. Reyes and Rodrigo C. Reyes are two of the four children of spouses Pedro and Anastacia Reyes, who each owned shares in Zenith Insurance Corporation.
- Pedro Reyes died in 1964; Anastacia Reyes died in 1993.
- Pedro’s estate was judicially partitioned in the 1970s, but Anastacia’s estate—including her Zenith shares—remained unsettled.
- As of June 30, 1990, Anastacia owned 136,598 shares; Oscar owned 8,715,637 shares; Rodrigo owned 4,250 shares.
Proceedings Before the SEC and RTC
- On May 9, 2000, Zenith and Rodrigo filed a derivative complaint with the SEC (SEC Case No. 05-00-6615) seeking:
- An accounting of corporate funds and assets controlled by Oscar.
- A determination and distribution of shares belonging to the deceased spouses that Oscar allegedly appropriated.
- Oscar’s Answer and Counterclaim:
- Denied illegal acquisition of Anastacia’s shares, asserting he bought them with personal funds as unissued stock.
- Contended the suit was not a bona fide derivative action and challenged SEC’s jurisdiction over estate settlement.
- Under R.A. No. 8799, SEC’s exclusive jurisdiction over certain matters was transferred to designated RTC branches; the SEC case was docketed as Civil Case No. 00-1553, RTC Makati, Branch 142.
Motion to Declare Complaint as Nuisance Suit
- On October 22, 2002, Oscar moved to dismiss Rodrigo’s complaint as a nuisance or harassment under the Interim Rules of Procedure for Intra-Corporate Controversies and for being an estate-settlement action outside special commercial court jurisdiction.
- RTC Order (November 29, 2002):
- Identified two causes of action in the complaint:
• A derivative suit for corporate accounting and appointment of a management committee.
• An action for determination, accounting, and delivery of shares of the deceased spouses. - Denied the motion in part, retaining only the derivative suit for accounting.
- Identified two causes of action in the complaint:
Court of Appeals Decision
- Oscar petitioned the CA for certiorari, prohibition, and mandamus, seeking to annul the RTC Order and halt proceedings.
- CA Decision (May 26, 2004) and Resolution (October 21, 2004):
- Affirmed the RTC Order, upheld retention of the derivative accounting cause of action, and denied Oscar’s petition and motion for reconsideration.
Issues on Review
- Whether the complaint is a mere nuisance or harassment suit warranting dismissal under the Interim Rules for Intra-Corporate Controversies.
- Whether the complaint is not a bona fide derivative suit but rather