OSCAR C. REYES, petitioner,
HON. REGIONAL TRIAL COURT OF MAKATI, Branch 142, ZENITH INSURANCE CORPORATION and RODRIGO C. REYES, respondents.
[G.R. No. 165744. August 11, 2008]
Petitioner and private respondent were siblings together with two others, namely Pedro and Anastacia, in a family business established as Zenith Insurance Corporation (Zenith), from which they owned shares of stocks. The Pedro and Anastacia subsequently died. The former had his estate judicially partitioned among his heirs, but the latter had not made the same in her shareholding in Zenith. Zenith and Rodrigo filed a complaint with the Securities and Exchange Commission (SEC) against petitioner (1) a derivative suit to obtain accounting of funds and assets of Zenith, and (2) to determine the shares of stock of deceased Pedro and Anastacia that were arbitrarily and fraudulently appropriated [by Oscar, and were unaccounted for]. In his answer with counterclaim, petitioner denied the illegality of the acquisition of shares of Anastacia and questioned the jurisdiction of SEC to entertain the complaint because it pertains to settlement of [Anastacia’s] estate. The case was transferred to. Petitioner filed Motion to Declare Complaint as Nuisance or Harassment Suit and must be dismissed. RTC denied the motion. The motion was elevated to the Court of Appeals by way of petition for certiorari, prohibition and mandamus, but was again denied.
(1) Whether or not Rodrigo may be considered a stockholder of Zenith with respect to the shareholdings originally belonging to Anastacia.
(2) Whether or not there is an intra-corporate relationship between the parties that would characterize the case as an intra-corporate dispute?
(1) Whether or not the complaint is a mere nuisance or harassment suit that should be dismissed under the Interim Rules of Procedure of Intra-Corporate Controversies;
(2) Whether or not the complaint is a derivative suit within the jurisdiction of the RTC acting as a special commercial court.
(1) No. Rodrigo must, hurdle two obstacles before he can be considered a stockholder of Zenith with respect to the shareholdings originally belonging to Anastacia. First, he must prove that there are shareholdings that will be left to him and his co-heirs, and this can be determined only in a settlement of the decedent’s estate. No such proceeding has been commenced to date. Second, he must register the transfer of the shares allotted to him to make it binding against the corporation. He cannot demand that this be done unless and until he has established his specific allotment (and prima facie ownership) of the shares. Without the settlement of Anastacia’s estate, there can be no definite partition and distribution of the estate to the heirs. Without the partition and distribution, there can be no registration of the transfer. And without the registration, we cannot consider the transferee-heir a stockholder who may invoke the existence of an intra-corporate relationship as premise for an intra-corporate controversy within the jurisdiction of a special commercial court. The subject shares of stock (i.e., Anastacia’s shares) are concerned – Rodrigo cannot be considered a stockholder of Zenith.
(2) No. Court cannot declare that an intra-corporate relationship exists that would serve as basis to bring this case within the special commercial court’s jurisdiction under Section 5(b) of PD 902-A, as amended because Rodrigo’s complaint failed the relationship test above.
(1) Yes. The rule is that a complaint must contain a plain, concise, and direct statement of the ultimate facts constituting the plaintiff’s cause of action and must specify the relief sought. Section 5, Rule 8 of the Revised Rules of Court provides that in all averments of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity. These rules find specific application to Section 5(a) of P.D. No. 902-A which speaks of corporate devices or schemes that amount to fraud or misrepresentation detrimental to the public and/or to the stockholders.
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are largely conclusions of law that, without supporting statements of the facts to which the allegations of fraud refer, do not sufficiently state an effective cause of action. Fraud and mistake are required to be averred with particularity in order to enable the opposing party to controvert the particular facts allegedly constituting such fraud or mistake. Tested against these standards, charges of fraud against Oscar were not properly supported by the required factual allegations. While the complaint contained allegations of fraud purportedly committed by him, these allegations are not particular enough to bring the controversy within the special commercial court’s jurisdiction; they are not statements of ultimate facts, but are mere conclusions of law: how and why the alleged appropriation of shares can be characterized as “illegal and fraudulent” were not explained nor elaborated on. The case must be dismissed.
(2) No. The allegations of the present complaint do not amount to a derivative suit. First, as already discussed above, Rodrigo is not a shareholder with respect to the shareholdings originally belonging to Anastacia; he only stands as a transferee-heir whose rights to the share are inchoate and unrecorded. Second, in order that a stockholder may show a right to sue on behalf of the corporation, he must allege with some particularity in his complaint that he has exhausted his remedies within the corporation by making a sufficient demand upon the directors or other officers for appropriate relief with the expressed intent to sue if relief is denied. Lastly, Court found no injury, actual or threatened, alleged to have been done to the corporation due to Oscar’s acts. If indeed he illegally and fraudulently transferred Anastacia’s shares in his own name, then the damage is not to the corporation but to his co-heirs; the wrongful transfer did not affect the capital stock or the assets of Zenith.
In summary, whether as an individual or as a derivative suit, the RTC – sitting as special commercial court – has no jurisdiction to hear Rodrigo’s complaint since what is involved is the determination and distribution of successional rights to the shareholdings of Anastacia Reyes. Rodrigo’s proper remedy, under the circumstances, is to institute a special proceeding for the settlement of the estate of the deceased Anastacia Reyes, a move that is not foreclosed by the dismissal of his present complaint.