Art. 1856.

A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate; provided that after such payment is made, whether from property of the partnership or that of a general partner, the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on account of their contributions and to general partners. Profit or compensation of limited partners Art. 1856 speaks of profit or compensation by way of income, Art. 1857 deals generally with return of contribution. Third party creditors have priority over the limited partners rights. In determining the liabilities of the partnership, the liabilities to the limited partners for their contributions and to general partners, whether for contributions or not, are not included. (see Art. 1857.) Liabilities to limited partners other than on account of their contributions arising from business transactions by them with the partnership, enjoy protection, subject to the preferential rights of partnership creditors. (see Art. 1854.)

Art. 1857. A limited partner shall not receive from a general partner or out of partnership property any part of his contributions until: (1) All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them; (2) The consent of all members is had, unless the return of the contribution may be rightfully demanded under the provisions of the second paragraph; and (3) The certificate is cancelled or so amended as to set forth the withdrawal or reduction. Subject to the provisions of the first paragraph, a limited partner may rightfully demand the return of his contribution: (1) On the dissolution of a partnership; or (2) When the date specified in the certificate for its return has arrived, or

(3) After he has six months' notice in writing to all other members, if no time is specified in the certificate, either for the return of the contribution or for the dissolution of the partnership. In the absence of any statement in the certificate to the contrary or the consent of all members, a limited partner, irrespective of the nature of his contribution, has only the right to demand and receive cash in return for his contribution. A limited partner may have the partnership dissolved and its affairs wound up when: (1) He rightfully but unsuccessfully demands the return of his contribution, or (2) The other liabilities of the partnership have not been paid, or the partnership property is insufficient for their payment as required by the first paragraph, No. 1, and the limited partner would otherwise be entitled to the return of his contribution. When contributions of limited partners can be returned 1. The first paragraph deals with the CONDITIONS that must exist before contributions (or part thereof) by a limited partner can be returned to him: All liabilities of the partnership have been paid or if they have not yet been paid, the assets of the partnership are sufficient to pay such liabilities. As in Article 1856, liabilities to limited partners on account of their contributions and to general partnership are not considered The consent of all the members (general and limited partners) has been obtained except when the return may be rightfully demanded; and The certificate is cancelled or so amended as to set forth the withdrawal or reduction of the contribution.

2. The second paragraph deals with the TIME when such contributions can be returned: On the dissolution of the partnership; or Upon the arrival of the date specified in the certificate for the

return; or After the expiration of the 6 months notice in writing given by him to the other partners if no time is fixed in the certificate for the return of the contribution or for the dissolution of the partnership.

3. Under the third paragraph, even if a limited partner has contributed property, he has only the right to demand and receive cash for his contribution. Exceptions: When there is stipulation to the contrary in the certificate; 4. 5. Where all the partners (general and limited) consent to the return other than in the form of cash. 4. The fourth paragraph provides for additional grounds for the dissolution of the partnership upon petition of a limited partner. (See Arts. 1851[3], 1831.): (1)When his demand for the return of his contribution is denied although he has a right to such return; or (2)When his contribution is not paid although he is entitled to its return because the other liabilities of the partnership have not been paid or the partnership property is insufficient for their payment. In other words, were it not for this first condition in the first paragraph of Article 1857 which is not present, he would have been entitled to the return of his contribution because of the presence of the second and third conditions. The limited partner must first ask the other partners to have the partnership dissolved; if they refuse, then he can seek the dissolution of the partnership by judicial decree. ART. 1858. A limited partner is liable to the partnership: (1) For the difference between his contribution as actually made and that stated in the certificate as having been made, and (2) For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate. A limited partner holds as trustee for the partnership: (1) Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned, and

(2) Money or other property wrongfully paid or conveyed to him on account of his contribution. The liabilities of a limited partner as set forth in this article can be waived or compromised only by the consent of all members; but a waiver or compromise shall not affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before a cancellation or amendment of the certificate, to enforce such liabilities. When a contributor has rightfully received the return in whole or in part of the capital of his contribution, he is nevertheless liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors who extended credit or whose claims arose before such return. Liabilities of a limited partner to partnership As limited partners are not principals in the transaction of a partnership, their liability except for known false statement in the certificate (Art 1847) is to the partnership, not to the creditors of the partnership (Art 1866). The general partners cannot waive any liability of the limited partners to the prejudice of such creditors. Liability for unpaid contribution Example: A and B are limited partners in a partnership. In the certificate of partnership, it appears that A contributed P10,000.00. Actually, he contributed only P8,000.00. In the certificate too, B promised to give an additional contribution of P4,000.00 at a specified date. So, A should pay the difference of P2,000.00 and B, the amount of P4,000.00 on the date specified or now, if the date has arrived. Liability as trustee (refer to 2nd paragraph of this Article) These liabilities can be waived or compromised only by consent of ALL the members; but a waiver or compromise shall NOT affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before the cancellation or amendment of the certificate, to enforce such liabilities. Art. 1849. After the formation of a lifted partnership, additional limited partners may be admitted upon filing an amendment to the

original certificate in accordance with the requirements of Article 1865. The proper amendment to the certificate must be signed and sworn to by all the partners including the new limited partners and filed in the SEC If without the proper amendment certificate with the SEC, this does not dissolve the limited partnership

Art. 1859. A limited partner's interest is assignable. A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership. An assignee, who does not become a substituted limited partner, has no right to require any information or account of the partnership transactions or to inspect the partnership books; he is only entitled to receive the share of the profits or other compensation by way of income, or the return of his contribution, to which his assignor would otherwise be entitled. An assignee shall have the right to become a substituted limited partner if all the members consent thereto or if the assignor, being thereunto empowered by the certificate, gives the assignee that right. An assignee becomes a substituted limited partner when the certificate is appropriately amended in accordance with Article 1865. The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of his assignor, except those liabilities of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. The substitution of the assignee as a limited partner does not release the assignor from liability to the partnership under Articles 1847 and 1848. When assignee may become substituted limited partner. A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership.

The following are the requisites in order that the assignee may become a substituted limited partner: (1) All the members must consent to the assignee becoming a substituted limited partner or the limited partner, being empowered by the certificate, must give the assignee the right to become a limited partner; The certificate must be amended in accordance with Article 1865; and The certificate as amended must be registered in the Securities and Exchange Commission.

(2)

(3)

Liability of substituted partner and assignor. It must be observed that the substituted limited partner is liable for all the liabilities of his assignor except only those of which he was ignorant at the time he became a limited partner and which could not be ascertained from the certificate. Similarly, the assignor is not released from liability to persons who suffered damage by reliance on a false statement in the certificate (Art. 1847.) and to creditors who extended credit or whose claims arose before the substitution. (Art. 1858.) Art. 1866. A contributor, unless he is a general partner, is not a proper party to proceedings by or against a partnership, except where the object is to enforce a limited partner's right against or liability to the partnership. He is practically a stranger in the limited partnership whose liability is limited to his interest in the firm (Art. 1843.), without any right and power to participate in the management and control of the business. (see Arts. 1848, 1851.) A limited partner is, therefore, not prohibited from engaging in business for himself even in competition with that conducted by the partnership (see Arts. 1789, 1808.) and may transact business with the partnership for ordinary purposes as though he were a stranger. (see Art. 1854.) Parties to action by or against partnership. Since limited partners are not principals in partnership transactions, their liability, as a general rule, is to the partnership, not to the creditors of the

partnership. (see Art. 1858.) For the same reason, they have no right of action against third persons against whom the partnership has any enforceable claim. Hence, unless a limited partner is also a general partner, or has become liable as a general partner, he is not a proper party to proceedings by or against the partnership. When limited partner a proper party. (1)The limited partner may maintain an action in his own name where the object is to enforce his individual rights against the partnership (Art. 1851.), and to recover damages for violation of such right. Similarly, he is a proper party to a proceeding to enforce his liability to the partnership. (Art. 1858.) An action at law may be maintained by creditors of a firm against a limited partner to account for and restore sums withdrawn by him from the capital of the firm with outstanding debts on a voluntary dissolution. But there is authority that such relief against limited partners who have withdrawn their contributions from an insolvent firm on dissolution is confined to judgment creditors of the firm with unsatisfied executions against the general partners, and this remedy has been denied to creditors who have not exhausted their remedies at law against the general partners. Nature of limited partners interest in firm. (1)A loan of money to a person engaged in business, under a detailed agreement for its payment and security, does not constitute a limited partnership. Conversely, the limited partners contributions to the firm is not a loan, and he is not a creditor of the firm because of his contribution thereto. (2)A limited partners contribution is not a mere investment, as in the case of one purchasing stock in a corporation. (3)A limited partner is, in a sense, an owner, which in interest in the capital of the firm and its business as such, but he has no property right in the firms assets. He is not the owner of the property of the partnership any more than are the stockholders in the corporation; but in accordance with statutory provisions, a limited partner may be a co-owner with his partners of partnership property, holding as a tenant in partnership and his interest may be defined as a tenancy in partnership. (4)A limited partners interest is in personal property, and it is immaterial whether the firms assets consist of realty or tangible or intangible personalty. The nature of the limited partners interest in the firm amounts to a share in the partnership assets after its liabilities have been deducted

and a balance struck. This interest is a chose in action, and hence, intangible personal property.

Art. 1852. Without prejudice to the provisions of Article 1848, a person who has contributed to the capital of a business conducted by a person or partnership erroneously believing that he has become a limited partner in a limited partnership, is not, by reason of his exercise of the rights of a limited partner, a general partner with the person or in the partnership carrying on the business, or bound by the obligations of such person or partnership, provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business, or other compensation by way of income. Example: A, B, C, D and E agreed to form a limited partnership with the first two as general partners and the rest as limited partners but as recorded in the SEC and in the certificate, A and B were really named as general partners, but only C and D were included as limited (special partners). E, who had contributed money, was LEFT OUT. If e erroneously believes that he has become a limited partner and thereupon exercises the rights of a limited partner, he should not generally be considered as liable as general partner (general because the public cannot be blamed for considering him a limited partner). Status of person erroneously believing himself to be a limited partner. (1)Conditions for exemption from liability as general partner. A person who has contributed capital to a partnership, erroneously believing that he has become a limited partner, as when his name appears in the certificate as a general partner or he is not designated as a limited partner (see Art. 1844[d].), is not personally liable as a general partner by reason of his exercise of the rights of a limited partner, provided: (a) On ascertaining the mistake, he promptly renounces his interest in the profits of the business or other compensation by way of income (Art. 1852.); (b)His surname does not appear in the partnership name (Art. 1846.); and (c) He does not participate in the management of the business. (Art.

1848.) (2) Necessity of renouncing his interest. The person, however, must promptly renounce his interest (e.g., selling it to the general partners) before the partnership has become liable to third persons who cannot be blamed for considering him a general partner. Where no partnership creditors are prejudiced, it would seem that renunciation of his interest is not necessary. (3) Obligation to pay back profits and compensation already received. An interesting question arises: whether it is necessary for such person to pay back all past profits and interest to avoid being held liable as a general partner, or whether he need only renounce all further interest in the profits of the business. It would seem that the requirement of renunciation refers only to profits or compensation not yet paid over for a person can hardly be said to have an interest in profits or compensation he has already received, and this is fortified by the general usage of the word renounce which does not commonly have the meaning of return. Hence, there is no obligation to return or pay back profits or compensation already received. However, the opposite view also has merit. The intention behind the provision should be given more importance than the actual words used. The most that the statute could have intended was to put partnership creditors in the position they would have occupied had there been no limited partner at the time the obligations were contracted. Limited partner who participated in the control cannot take advantage of the Article - The person referred to in Art 1848 cannot take advantage of Art 1852

Art. 1853. A person may be a general partner and a limited partner in the same partnership at the same time, provided that this fact shall be stated in the certificate provided for in Article 1844. A person who is a general, and also at the same time a limited partner, shall have all the rights and powers and be subject to all the restrictions of a general partner; except that, in respect to his contribution, he shall have the rights against the other members which he would have had if he were not also a general partner.

Rights Generally, his rights are those of a general partner (third parties can go against his individual properties Art 1816) EXCEPTION: Regarding his contribution (like the right to have it returned on the proper occasions) he would be considered a limited partner, with the rights of a limited partner, insofar as the others partners are concerned (Arts 1855-1858). This means that while he is not relieved from personal liability to third persons for partnership debts, he is entitled to recover from the general partners the amount he has paid to such third persons; and in settling accounts after dissolution, he shall have priority over general partners in the return of their respective contributions. (Art. 1863.) Art. 1860. The retirement, death, insolvency, insanity or civil interdiction of a general partner dissolves the partnership, unless the business is continued by the remaining general partners: (1) Under a right so to do stated in the certificate, or (2) With the consent of all members. Keyword: DRICI (death, retirement, insolvency, civil interdiction, insanity of a GENERAL PARTNER) The retirement or withdrawal, death, insolvency, insanity, or civil interdiction of a general partner dissolves the partnership (see Art. 1830.), while any of such causes affecting a limited partner (see Art. 1861.) does not result in its dissolution unless, of course, there is only one limited partner. (see Art. 1843.) If the business is continued by the remaining partners under the rights given in the certificate or with the consent of all the members, the limited partnership is not dissolved but the certificate must be amended as required by Article 1864, paragraph 2, No. (5) to reflect the change in order that the limited partners may avail of the protection granted by law. Art. 1861. On the death of a limited partner his executor or administrator shall have all the rights of a limited partner for the purpose of setting his estate, and such power as the deceased had to constitute his assignee a substituted limited partner. The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner. Right of executor on death of a limited partner.

On the death of a limited partner, his executor or administrator shall acquire all the rights for purposes of settling the affairs of the limited partner (see Art. 1851.) and the right to constitute the deceaseds assignee as substituted limited partner. Note that the executor or administrator may constitute the assignee as a substituted limited partner only if the deceased partner was empowered to do so in the certificate. (Art. 1859, par. 4.) Under the second paragraph, the estate of the deceased limited partner is liable for all his liabilities contracted while he was a limited partner. (see Art. 1858.) Art. 1864. The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such. A certificate shall be amended when: (1) There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner; (2) A person is substituted as a limited partner; (3) An additional limited partner is admitted; (4) A person is admitted as a general partner; (5) A general partner retires, dies, becomes insolvent or insane, or is sentenced to civil interdiction and the business is continued under Article 1860; (6) There is a change in the character of the business of the partnership; (7) There is a false or erroneous statement in the certificate; (8) There is a change in the time as stated in the certificate for the dissolution of the partnership or for the return of a contribution; (9) A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate, or (10) The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement among them.

When certificate shall be cancelled or amended. (1)The certificate shall be cancelled, not merely amended: (a) When the partnership is dissolved other than by rea-son of the expiration of the term of the partnership; or (b)When all the limited partners cease to be such. A limited partnership cannot exist as such if there are no more limited partners. (Art. 1843.) (2)In all other cases, only an amendment of the certificate is required. (Art. 1864, Nos. 1-10.) Art. 1863. In setting accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order: (1) Those to creditors, in the order of priority as provided by law, except those to limited partners on account of their contributions, and to general partners; (2) Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions; (3) Those to limited partners in respect to the capital of their contributions; (4) Those to general partners other than for capital and profits; (5) Those to general partners in respect to profits; (6) Those to general partners in respect to capital. Subject to any statement in the certificate or to subsequent agreement, limited partners share in the partnership assets in respect to their claims for capital, and in respect to their claims for profits or for compensation by way of income on their contribution respectively, in proportion to the respective amounts of such claims. (1) Causes. A limited partnership is dissolved in much the same way as an ordinary partnership. It may be dissolved for the misconduct of a general partner, for fraud practiced on the limited partner by the general partner or on the retirement, death, etc. of a general partner (Art. 1860.), or when all the limited partners ceased to be such (Art. 1864, par. 1.), or on the expiration of the term for which it was to exist (Art. 1844[1, e].), or by

mutual consent of the partners before the expiration of the firms original term. (2) Suit for dissolution. A limited partner may bring a suit for the dissolution of the firm, an accounting, and the appointment of a receiver when the misconduct of a general partner or the insolvency of the firm warrants it. Similarly, creditors of a limited partnership are entitled to such relief where the firm is insolvent. A limited partner may have the partnership dissolved and its affairs wound up when he rightfully but unsuccessfully demands the return of his contribution, or the other liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have not been paid, or the partnership property is insufficient for their payment, and the limited partner would otherwise be entitled to the return of his contribution. (Art. 1857, par. 4; see Arts. 1830-1831.) (3) Notice of dissolution. When the firm is dissolved by the expiration of the term fixed in the certificate, notice of the dissolution need not be given since the papers filed and recorded in the Securities and Exchange Commission are notice to all the world of the term of the partnership. Where, however, the dissolution is by the express will of the partners, the certificate shall be cancelled, and a dissolution of the partnership is not effected until there has been compliance with the requirement in this respect. (4) Winding up. The consequences of the dissolution of a general partnership apply to limited partnership. Therefore, the partnership continues in operation while winding up. When a limited partnership has been duly dissolved, the general partners have the right and power to wind up its affairs, as in a general partnership. It is not the duty of the limited partner or of the representative of a deceased limited partner to care for or collect the assets of the firm. The representatives of the general partners, not the limited partners, succeed the general partners. Partnership creditors are entitled to first distribution, followed by limited partners who take priority over general partners. Note that in a general partnership, the claims of the general partners in respect of capital enjoy preference over those in respect of profits. (see Art. 1839[1, c, d].) Share of limited partners in partnership assets. In the absence of any statement in the certificate as to the share of the profits which each partner shall receive by reason of his contribution (Art.

1844, par. 1[1].) and subject to any subsequent agreement, limited partners share in the partnership assets in respect to their claims for capital and profits in proportion to the respective amounts of such claims. This proportional sharing by the limited partners takes place where the partnership assets are insufficient to pay such claims. Priority of claims of limited partners. The members of a limited partnership, as among themselves, may include in the partnership articles an agreement for priority of distribution on the winding up of partnership affairs. Such agreement ordinarily becomes controlling as between the partners themselves. In the absence of any contrary agreement, all the limited partners stand upon equal footing. The claims of limited partners for profits and other compensation by way of income and return of capital contributions rate ahead with respect to all claims of general partners. For claims arising from individual loans to, or other business transactions with, the partnership, other than for capital contributions, the limited partner is placed in the same category as a nonmember creditor. (Art. 1854, par. 1.) If return is made to a limited partner of his contribution before creditors are paid, he is under an obligation to reimburse such payments, with interest, so far as necessary to satisfy the claims of creditors. (see Art. 1858, last par.) In the event of insolvency of the partnership, its creditors take preference over both general and limited partners. PRESIDENTIAL DECREE NO. 902-A SEC REORGANIZATION ACT March 11, 1976 REORGANIZATION OF THE SECURITIES AND EXCHANGE COMMISSION WITH ADDITIONAL POWERS AND PLACING THE SAID AGENCY UNDER THE ADMINISTRATIVE SUPERVISION OF THE OFFICE OF THE PRESIDENT.

Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers (a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply; (b) To punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of, and penalties prescribed by, the Rules of Court;

(c) To compel the officers of any corporation or association registered by it to call meetings of stockholders or members thereof under its supervision; (d) To pass upon the validity of the issuance and use of proxies and voting trust agreements for absent stockholders or members; (e) To issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases order search and seizure or cause the search and seizure of all documents, papers, files and records as well as books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it; (f) To impose fines and/or penalties for violation of this Decree or any other laws being implemented by the Commission, the pertinent rules and regulations, its orders, decisions and/or rulings; (g) To authorize the establishment and operation of stock exchanges, commodity exchanges and such other similar organization and to supervise and regulate the same; including the authority to determine their number, size and location, in the light of national or regional requirements for such activities with the view to promote, conserve or rationalize investment; (h) To pass upon, refuse or deny, after consultation with the Board of Investments, Department of Industry, National Economic and Development Authority or any other appropriate government agency, the application for registration of any corporation, partnership or association or any form of organization falling within its jurisdiction, if their establishment, organization or operation will not be consistent with the declared national economic policies. (i) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: [1] Fraud in procuring its certificate of registration; [2] Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public; [3] Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to a grave violation of its franchise; [4] Continuous inoperation for a period of at least five (5) years;

[5] Failure to file by-laws within the required period; [6] Failure to file required reports in appropriate forms as determined by the Commission within the prescribed period; (j) To exercise such other powers as implied, necessary or incidental to the carrying out the express powers granted to the Commission or to achieve the objectives and purposes of this Decree. In the exercise of the foregoing authority and jurisdiction of the Commission, hearings shall be conducted by the Commission or by a Commissioner or by such other bodies, boards, committees and/or any officer as may be created or designated by the Commission for the purpose. The decision, ruling or order of any such Commissioner, bodies, boards, committees and/or officer may be appealed to the Commission sitting en banc within thirty (30) days after receipt by the appellant of notice of such decision, ruling or order. The Commission shall promulgate rules of procedures to govern the proceedings, hearings and appeals of cases falling within its jurisdiction. The aggrieved party may appeal the order, decision or ruling of the Commission sitting en banc to the Supreme Court by petition for petition for review in accordance with the pertinent provisions of the Rules of Court. REPUBLIC ACT NO. 7899 AN ACT AMENDING SECTION FOUR AND SECTION SIXTEEN OF REPUBLIC ACT NUMBERED FOUR THOUSAND SEVEN HUNDRED TWENTYSIX, OTHERWISE KNOWN AS THE CONDOMINIUM ACT

SECTION 5. Any transfer or conveyance of a unit or an apartment, office or store or other space therein, shall include the transfer or conveyance of the undivided interest in the common areas or, in a proper case, the membership or shareholdings in the condominium corporation; Provided, however, That were the common areas in the condominium project are held by the owners of separate units as coowners thereof, no condominium unit therein shall be conveyed or transferred to persons other than Filipino citizens or corporation at least 60% of the capital stock of which belong to Filipino citizens, except in cases of hereditary succession. Where the common areas in a condominium project are held by a corporation, no

transfer or conveyance of a unit shall be valid if the concomitant transfer of the appurtenant membership or stockholding in the corporation will cause the alien interest in such corporation to exceed the limits imposed by existing laws. INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTROVERSIES Rule I GENERAL PROVISIONS Section 1. (a) Cases covered. - These Rules shall govern the procedure to be observed in civil cases involving the following: (1) Devices or schemes employed by, or any act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, or members of any corporation, partnership, or association; (2) Controversies arising out of intra-corporate, partnership, or association relations, between and among stockholders, members, or associates; and between, any or all of them and the corporation, partnership, or association of which they are stockholders, members, or associates, respectively; (3) Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations; (4) Derivative suits; and (5) Inspection of corporate books. (b) Prohibition against nuisance and harassment suits. - Nuisance and harassment suits are prohibited. In determining whether a suit is a nuisance or harassment suit, the court shall consider, among others, the following: (1) The extent of the shareholding or interest of the initiating stockholder or member; (2) Subject matter of the suit; (3) Legal and factual basis of the complaint; (4) Availability of appraisal rights for the act or acts complained of; and cralaw

(5) Prejudice or damage to the corporation, partnership, or association in relation to the relief sought. In case of nuisance or harassment suits, the court may, motu proprio or upon motion, forthwith dismiss the case. Sec. 2. Suppletory application of the Rules of Court . - The Rules of Court, in so far as they may be applicable and are not inconsistent with these Rules, are hereby adopted to form an integral part of these Rules. Sec. 3. Construction. - These Rules shall be liberally construed in order to promote their objective of securing a just, summary, speedy and inexpensive determination of every action or proceeding. Sec. 4. Executory nature of decisions and orders . - All decisions and orders issued under these Rules shall immediately be executory. No appeal or petition taken therefrom shall stay the enforcement or implementation of the decision or order, unless restrained by an appellate court. Interlocutory orders shall not be subject to appeal. Sec. 5. Venue. - All actions covered by these Rules shall be commenced and tried in the Regional Trial Court which has jurisdiction over the principal office of the corporation, partnership, or association concerned. Where the principal office of the corporation, partnership or association is registered in the Securities and Exchange Commission as Metro Manila, the action must be filed in the city or municipality where the head office is located. Sec. 6. Service of pleadings. - When so authorized by the court, any pleading and/or document required by these Rules may be filed with the court and/or served upon the other parties by facsimile transmission (fax) or electronic mail (e-mail). In such cases, the date of transmission shall be deemed to be prima facie the date of service. Sec. 7. Signing of pleadings, motions and other papers . - Every pleading, motion, and other paper of a party represented by an attorney shall be signed by at least one attorney of record in the attorney's individual name, whose address shall be stated. A party who is not represented by an attorney shall sign the pleading, motion, or other paper and state his address. The signature of an attorney or party constitutes a certification by the signer that he ha read the pleading, motion, or other paper; that to the best of his knowledge, information, and belief formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing jurisprudence; and

that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. If a pleading, motion, or other paper is not signed, it shall be stricken off the record unless it is promptly signed by the pleader or movant, after he is notified of the omission. Sec. 8. Prohibited pleadings. - The following pleadings are prohibited: (1) Motion to dismiss; (2) Motion for a bill of particulars; (3) Motion for new trial, or for reconsideration of judgment or order, or for re-opening of trial; (4) Motion for extension of time to file pleadings, affidavits or any other paper, except those filed due to clearly compelling reasons. Such motion must be verified and under oath; and (5) Motion for postponement and other motions of similar intent, except those filed due to clearly compelling reasons. Such motion must be verified and under oath. Sec. 9. Assignment of cases. - All cases filed under these Rules shall be tried by judges designated by the Supreme Court to hear and decide cases transferred from the Securities and Exchange Commission to the Regional Trial Courts and filed directly with said courts pursuant to Republic Act No. 8799, otherwise known as the Securities Regulation Code.