SAPPARI K. SAWADJAAN V. CA (G.R. NO.

141735)

Facts:
Petitioner Sawadjaan was an appraiser/investigator in the Philippine Amanah Bank (PAB)
when on the basis of his report, a credit line was granted to Compressed Air Machineries
and Equipment Corporation (CAMEC) by virtue of the two parcels of land it offered as
collaterals. Meanwhile, Congress passed a law which created Al-Amanah Investment Bank
of the Philippines (AIIBP) and repealed the law creating PAB, transferring all its assets,
liabilities and capital accounts to AIIBP. Later, AIIBP discovered that the collaterals were
spurious, thus conducted an investigation and found petitioner Sawadjaan at fault. Petitioner
appealed before the SC which ruled against him. Petitioner moved for a new trial claiming
he recently discovered that AIIBP had not yet adopted its corporate by-laws and since it
failed to file within 60 days from the passage of its law, it had forfeited its franchise or charter
and thus has no legal standing to initiate an administrative case. The motion was denied.

Issue:
Whether or not the failure of AIIBP to file its by-laws within the period prescribed results to a
nullity of all actions and proceedings it has initiated.

Ruling: NO.
The AIIBP was created by Rep. Act No. 6848. It has a main office where it conducts
business, has shareholders, corporate officers, a board of directors, assets, and personnel.
It is, in fact, here represented by the Office of the Government Corporate Counsel, “the
principal law office of government-owned corporations, one of which is respondent bank.” At
the very least, by its failure to submit its by-laws on time, the AIIBP may be considered
a de facto corporation whose right to exercise corporate powers may not be inquired into
collaterally in any private suit to which such corporations may be a party.
Moreover, a corporation which has failed to file its by-laws within the prescribed period does
not ipso facto lose its powers as such. The SEC Rules on Suspension/Revocation of the
Certificate of Registration of Corporations, details the procedures and remedies that may be
availed of before an order of revocation can be issued. There is no showing that such a
procedure has been initiated in this case.
China Banking Corporation vs. Court of Appeals
[GR 117604, 26 March 1997]
Facts: On 21 August 1974, Galicano Calapatia, Jr., a stockholder of Valley Golf & Country
Club, Inc. (VGCCI), pledged his Stock Certificate 1219 to China Banking Corporation (CBC).
On 16 September 1974, CBC wrote VGCCI requesting that the pledge agreement be
recorded in its books. In a letter dated 27 September 1974, VGCCI replied that the deed of
pledge executed by Calapatia in CBC's favor was duly noted in its corporate books. On 3
August 1983, Calapatia obtained a loan of P20,000.00 from CBC, payment of which was
secured by the pledge agreement still existing between Calapatia and CBC. Due to
Calapatia's failure to pay his obligation, CBC, on 12 April 1985, filed a petition for extrajudicial
foreclosure before Notary Public Antonio T. de Vera of Manila, requesting the latter to
conduct a public auction sale of the pledged stock. On 14 May 1985, CBC informed VGCCI
of the foreclosure proceedings and requested that the pledged stock be transferred to its
name and the same be recorded in the corporate books. However, on 15 July 1985, VGCCI
wrote CBC expressing its inability to accede to CBC's request in view of Calapatia's unsettled
accounts with the club. Despite the foregoing, Notary Public de Vera held a public auction
on 17 September 1985 and CBC emerged as the highest bidder at P20,000.00 for the
pledged stock. Consequently, CBC was issued the corresponding certificate of sale.
On 21 November 1985, VGCCI sent Calapatia a notice demanding full payment of his
overdue account in the amount of P18,783.24. Said notice was followed by a demand letter
dated 12 December 1985 for the same amount and another notice dated 22 November 1986
for P23,483.24. On 4 December 1986, VGCCI caused to be published in the newspaper
Daily Express a notice of auction sale of a number of its stock certificates, to be held on 10
December 1986 at 10:00 a.m. Included therein was Calapatia's own share of stock (Stock
Certificate 1219). Through a letter dated 15 December 1986, VGCCI informed Calapatia of
the termination of his membership due to the sale of his share of stock in the 10 December
1986 auction. On 5 May 1989, CBC advised VGCCI that it is the new owner of Calapatia's
Stock Certificate 1219 by virtue of being the highest bidder in the 17 September 1985 auction
and requested that a new certificate of stock be issued in its name. On 2 March 1990, VGCCI
replied that "for reason of delinquency" Calapatia's stock was sold at the public auction held
on 10 December 1986 for P25,000.00. On 9 March 1990, CBC protested the sale by VGCCI
of the subject share of stock and thereafter filed a case with the Regional Trial Court of
Makati for the nullification of the 10 December 1986 auction and for the issuance of a new
stock certificate in its name. On 18 June 1990, the Regional Trial Court of Makati dismissed
the complaint for lack of jurisdiction over the subject matter on the theory that it involves an
intra-corporate dispute and on 27 August 1990 denied CBC's motion for reconsideration. On
20 September 1990, CBC filed a complaint with the Securities and Exchange Commission
(SEC) for the nullification of the sale of Calapatia's stock by VGCCI; the cancellation of any
new stock certificate issued pursuant thereto; for the issuance of a new certificate in
petitioner's name; and for damages, attorney's fees and costs of litigation.
On 3 January 1992, SEC Hearing Officer Manuel P. Perea rendered a decision in favor of
VGCCI, stating in the main that considering that the said share is delinquent, VGCCI had
valid reason not to transfer the share in the name of CBC in the books of VGCCI until
liquidation of delinquency. Consequently, the case was dismissed. On 14 April 1992,
Hearing Officer Perea denied CBC's motion for reconsideration. CBC appealed to the SEC
en banc and on 4 June 1993, the Commission issued an order reversing the decision of its
hearing officer; holding that CBC has a prior right over the pledged share and because of
pledgor's failure to pay the principal debt upon maturity, CBC can proceed with the
foreclosure of the pledged share; declaring that the auction sale conducted by VGCCI on 10
December 1986 is declared NULL and VOID; and ordering VGCCI to issue another
membership certificate in the name of CBC. VGCCI sought reconsideration of the order.
However, the SEC denied the same in its resolution dated 7 December 1993. The sudden
turn of events sent VGCCI to seek redress from the Court of Appeals. On 15 August 1994,
the Court of Appeals rendered its decision nullifying and setting aside the orders of the SEC
and its hearing officer on ground of lack of jurisdiction over the subject matter and,
consequently, dismissed CBC's original complaint. The Court of Appeals declared that the
controversy between CBC and VGCCI is not intra-corporate; nullifying the SEC orders and
dismissing CBC’s complaint. CBC moved for reconsideration but the same was denied by
the Court of Appeals in its resolution dated 5 October 1994. CBC filed the petition for review
on certiorari.
Issue: Whether CBC is bound by VGCCI's by-laws.
Held: In order to be bound, the third party must have acquired knowledge of the pertinent
by-laws at the time the transaction or agreement between said third party and the
shareholder was entered into. Herein, at the time the pledge agreement was executed.
VGCCI could have easily informed CBC of its by-laws when it sent notice formally
recognizing CBC as pledgee of one of its shares registered in Calapatia's name. CBC's
belated notice of said by-laws at the time of foreclosure will not suffice. By-laws signifies the
rules and regulations or private laws enacted by the corporation to regulate, govern and
control its own actions, affairs and concerns and its stockholders or members and directors
and officers with relation thereto and among themselves in their relation to it. In other words,
by-laws are the relatively permanent and continuing rules of action adopted by the
corporation for its own government and that of the individuals composing it and having the
direction, management and control of its affairs, in whole or in part, in the management and
control of its affairs and activities. The purpose of a by-law is to regulate the conduct and
define the duties of the members towards the corporation and among themselves. They are
self-imposed and, although adopted pursuant to statutory authority, have no status as public
law. Therefore, it is the generally accepted rule that third persons are not bound by by-laws,
except when they have knowledge of the provisions either actually or constructively. For the
exception to the general accepted rule that third persons are not bound by by-laws to be
applicable and binding upon the pledgee, knowledge of the provisions of the VGCCI By-laws
must be acquired at the time the pledge agreement was contracted. Knowledge of said
provisions, either actual or constructive, at the time of foreclosure will not affect pledgee's
right over the pledged share. Article 2087 of the Civil Code provides that it is also of the
essence of these contracts that when the principal obligation becomes due, the things in
which the pledge or mortgage consists maybe alienated for the payment to the creditor.
Further, VGCCI's contention that CBC is duty-bound to know its by-laws because of Article
2099 of the Civil Code which stipulates that the creditor must take care of the thing pledged
with the diligence of a good father of a family, fails to convince. CBC was never informed of
Calapatia's unpaid accounts and the restrictive provisions in VGCCI's by-laws. Furthermore,
Section 63 of the Corporation Code which provides that "no shares of stock against which
the corporation holds any unpaid claim shall be transferable in the books of the corporation"
cannot be utilized by VGCCI. The term "unpaid claim" refers to "any unpaid claim arising
from unpaid subscription, and not to any indebtedness which a subscriber or stockholder
may owe the corporation arising from any other transaction." Herein, the subscription for the
share in question has been fully paid as evidenced by the issuance of Membership
Certificate 1219. What Calapatia owed the corporation were merely the monthly dues.
Hence, Section 63 does not apply.
  since the cash and other contributions now sought to be returned already belong to
FLADC, an innocent third party, said remedy may no longer be availed of under the
Ong Yong V. Tiu (2003) law.
 Any contract for the acquisition of unissued stock in an existing corporation or a
corporation still to be formed shall be deemed a subscription within the meaning of
FACTS: this Title, notwithstanding the fact that the parties refer to it as a purchase or some
other contract
 1994: construction of the Masagana Citimall in Pasay City was threatened with
stoppage, when its owner, the First Landlink Asia Development Corporation (FLADC),  allows the distribution of corporate capital only in three instances: (1) amendment of
owned by the Tius, became heavily indebted to the Philippine National Bank (PNB) the Articles of Incorporation to reduce the authorized capital stock,24 (2) purchase of
for P190M redeemable shares by the corporation, regardless of the existence of unrestricted
retained earnings,25 and (3) dissolution and eventual liquidation of the corporation.
 To save the 2 lots where the mall was being built from foreclosure, the Tius invited
Ong Yong, Juanita Tan Ong, Wilson T. Ong, Anna L. Ong, William T. Ong and Julia  They want this Court to make a corporate decision for FLADC.
Ong Alonzo (the Ongs), to invest in FLADC.  The Ongs' shortcomings were far from serious and certainly less than substantial;
 Pre-Subscription Agreement: Ongs and the Tius agreed to maintain equal they were in fact remediable and correctable under the law. It would be totally against
shareholdings in FLADC all rules of justice, fairness and equity to deprive the Ongs of their interests on petty
and tenuous grounds.
 Ongs: subscribe to 1,000,000 shares
 Tius: subscribe to an additional 549,800 shares in addition to their already existing
subscription of 450,200 shares
 Tius: nominate the Vice-President and the Treasurer plus 5 directors
 Ongs nominate the President, the Secretary and 6 directors (including the chairman)
to the board of directors of FLADC and right to manage and operate the mall.
 Tius: contribute to FLADC a 4-storey building P20M (for 200K shares)and 2 parcels of
land P30M (for 300K shares) and P49.8M (for 49,800 shares)
 Ongs: paid P190M to settle the mortgage indebtedness of FLADC to PNB (P100M in
cash for their subscription to 1M shares)
 February 23, 1996: Tius rescinded the Pre-Subscription Agreement
 February 27, 1996: Tius filed at the Securities and Exchange Commission
(SEC) seeking confirmation of their rescission of the Pre-Subscription Agreement
 SEC: confirmed recission of Tius
 Ongs filed reconsideration that their P70M was not a premium on capital stock but
an advance loan
 SEC en banc: affirmed it was a premium on capital stock
 CA: Ongs and the Tius were in pari delicto (which would not have legally entitled them
to rescission) but, "for practical considerations," that is, their inability to work together,
it was best to separate the two groups by rescinding the Pre-Subscription Agreement,
returning the original investment of the Ongs and awarding practically everything else
to the Tius.
ISSUE: W/N Specific performance and NOT recission is the remedy

HELD: YES. Ongs granted.

 did not justify the rescission of the contract
 providing appropriate offices for David S. Tiu and Cely Y. Tiu as Vice-President and
Treasurer, respectively, had no bearing on their obligations under the Pre-
Subscription Agreement since the obligation pertained to FLADC itself
 failure of the Ongs to credit shares of stock in favor of the Tius for their property
contributions also pertained to the corporation and not to the Ongs
 the principal objective of both parties in entering into the Pre-Subscription Agreement
in 1994 was to raise the P190 million
 law requires that the breach of contract should be so "substantial or fundamental" as
to defeat the primary objective of the parties in making the agreement
LEGASPI TOWERS 300, INC., LILIA MARQUINEZ PALANCA, ROSANNA D. IMAI,
GLORIADOMINGO and RAY VINCENT, Petitioners, vs. AMELIA P. MUER, SAMUEL
M. TANCHOCO, ROMEO TANKIANG, RUDEL PANGANIBAN,DOLORES AGBAYANI,
ARLENEDAL A. YASUMA, GODOFREDO M. CAGUIOA and EDGARDO
M.SALANDANAN, Respondents.

FACTS: Pursuant to the by-laws of Legaspi Towers 300, Inc., petitioners, the incumbent
Board of Directors, set the annual meeting of the members of the condominium corporation
and the election of the new Board of Directors at the lobby of Legaspi Towers 300, Inc.
The Committee on Elections of Legaspi Towers 300, Inc., however, found most of the
proxy votes, at its face value, irregular, thus, questionable; and for lack of time to
authenticate the same, petitioners adjourned the meeting for lack of quorum. However, the
group of respondents challenged the adjournment of the meeting. Despite petitioners’
insistence that no quorum was obtained during the annual meeting held on April 2, 2004,
respondents pushed through with the scheduled election and were elected as the new
Board of Directors and officers of Legaspi Towers 300, Inc. and subsequently submitted a
General Information Sheet to the Securities and Exchange Commission (SEC). On
plaintiffs’ motion to admit amended complaint to include Legaspi Towers 300, Inc. as
plaintiff),the RTC ruled denying the motion for being improper. Then, petitioners filed with
the Court of Appeals and held that Judge Antonio I. De Castro of the Regional Trial Court
(RTC) of Manila, did not commit grave abuse of discretion in issuing the Orders denying
petitioners’ Motion to Admit Second Amended Complaint and that petitioners the justified
the inclusion of Legaspi Towers 300, Inc. as plaintiff by invoking the doctrine of derivative
suit. Petitioners’ motion for reconsideration was denied by the Court of Appeals thereafter.
Hence this petition.

ISSUE: Whether or not Derivative Suit proper in this case?

RULING: The Supreme Court DENIED the petition and AFFIRMED the Decision of the
Court of Appeals. Derivative Suit is not applicable. Since it is the corporation that is the real
party-in-interest in a derivative suit, then the reliefs prayed for must be for the benefit or
interest of the corporation. When the reliefs prayed for do not pertain to the corporation,
then it is an improper derivative suit. The requisites for a derivative suit are as follows:

a) the party bringing suit should be a shareholder as of the time of the act or transaction
complained of, the number of his shares not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board
of directors for the appropriate relief but the latter has failed or refused to heed his plea;
and
c) the cause of action actually devolves on the corporation, the wrongdoing or harm having
been, or being caused to the corporation and not to the particular stockholder bringing the
suit.
As stated by the Court of Appeals, petitioners’ complaint seek to nullify the said election,
and to protect and enforce their individual right to vote. The cause of action devolves on
petitioners, not the condominium corporation, which did not have the right to vote. Hence,
the complaint for nullification of the election is a direct action by petitioners, who were the
members of the Board of Directors of the corporation before the election, against
respondents, who are the newly-elected Board of Directors. Under the circumstances, the
derivative suit filed by petitioners in behalf of the condominium corporation in the Second
Amended Complaint is improper.
Expert Travel & Tours vs. CA
G.R. No. 152392; May 26, 2005

FACTS:
Korean Airlines (KAL) is a corporation established and registered in the Republic
of South Korea and licensed to do business in the Philippines. Its general manager in the
Philippines is Suk Kyoo Kim, while its appointed counsel was Atty. Mario Aguinaldo and his
law firm.
KAL, through appointed counsel, filed a complaint against Expert Travel with the
RTC for the collection of sum of money. The verification and certification against forum
shopping was signed by the same appointed counsel, who indicated therein that he was the
resident agent and legal counsel of KAL and had caused the preparation of the complaint.
Expert Travel filed a motion to dismiss the complaint on the ground that the appointed
counsel was not authorized to execute the verification and certificate of non-forum shopping
as required by the Rules of Court. KAL opposed the motion, contending that he is a resident
agent and was registered as such with the SEC as required by the Corporation Code. He
also claimed that he had been authorized to file the complaint through a resolution of the
KAL Board of Directors approved during a special meeting, wherein the board of directors
conducted a special teleconference which he attended. It was also averred that in the same
teleconference, the board of directors approved a resolution authorizing him to execute the
certificate of non-forum shopping and to file the complaint. Suk Kyoo Kim alleged, however,
that the corporation had no written copy of the aforesaid resolution. TC denied motion to
dismiss. CA affirms.

ISSUE:
Can a special teleconference be recognized as legitimate means to approved a
board resolution and authorize an agent to execute an act in favor of the corporation?

HELD:
YES. In this age of modern technology, the courts may take judicial notice that
business transactions may be made by individuals through teleconferencing.
teleconferencing and videoconferencing of members of board of directors of private
corporations is a reality, in light of Republic Act No. 8792. The Securities and Exchange
Commission issued SEC Memorandum Circular No. 15, on November 30, 2001, providing
the guidelines to be complied with related to such conferences.
HOWEVER, in the case at bar, even given the possibility that Atty. Aguinaldo and
Suk Kyoo Kim participated in a teleconference along with the respondent’s Board of
Directors, the Court is not convinced that one was conducted; even if there had been one,
the Court is not inclined to believe that a board resolution was duly passed specifically
authorizing Atty. Aguinaldo to file the complaint and execute the required certification against
forum shopping. Facts and circumstances show that there was gross failure
http://www.lawphil.net/judjuris/juri2005/may2005/gr_152392_2005.html - fnt24on the part of
company to prove that there was indeed a special teleconference such as failure to produce
a written copy of the board resolution via teleconference.

NOTE: Read SEC Memo Circular No. 15-2001, the guidelines for the conduct of
teleconferencing and videoconferencing.
42 FIL-ESTATE GOLD AND DEV. INC., el. AUTHOR: Kylie Dado FELI’s ARGUMENT: It is not a party to the contract. It was just recklessly dragged into the
al. v. VERTEX SALES AND TRAIDING, INC. Notes: action due to a mistake committed by FEGDI’s staff when their counsel used the letterhead of
G.R. No 202079 FELI instead of FEGDI in its reply-letter to Vertex; and when they used the receipt of FELI for
TOPIC: Transfer of Stock Ownership receipt of the documentary stamp tax paid by Vertex.
PONENTE: Brion, J.
CASE LAW/ DOCTRINE: In a sale of shares of stock, physical delivery of a stock certificate
is one of the essential requisites for the transfer of ownership of the stocks purchased.

Emergency Recit: RS Asuncion sold its Class “C” Common Share of Forest Hills to Vertex.
Despite Vertex’s full payment, the share remained in the name of FEGDI, the former owner of
the said share. Vertex demanded the issuance of a stock certificate in its name however despite
final demand and payment of transfer fees, no stock certificate was issued. Vertex filed a
complaint for rescission of the contract. During the pendency of the case, a certificate of stock
was issued in Vertex’s name but the latter refused to accept it. FEGDI argued that the delay
cannot be considered a substantial breach because Vertex was unequivocally recognized as
a shareholder of Forest Hills. In fact, Vertex’s nominees fully enjoyed and utilized all its facilities.
The SC ruled that in “a sale of shares of stock, physical delivery of a stock certificate is one of
the essential requisites for the transfer of ownership of the stocks purchased.” FEGDI clearly
failed to deliver the stock certificates within a reasonable time from the point the shares should
have been delivered. This was a substantial breach of their contract that entitles Vertex the
right to rescind the sale under Article 1191 of CC. The enjoyment of the rights of a shareholder
cannot suffice where the law, by its express terms, requires a specific form to transfer
ownership.
FACTS:
FEGDI is a stock corporation whose primary business is the development of golf courses. It
was the developer of Forest Hills Gold and Country Club (Forest Hills). In consideration for its
financing support and construction efforts, it was issued several shares of stock of Forest Hills.
One day, FEGDI sold, on installment, to RS Asuncion one Class “C” Common Share of Forest
Hills for P1.1M. Prior to the full payment, RS Asuncion, sold said shares to Vertex Sales. RS
Asuncion advised FEGDI of the sale so FEGDI instructed Forest Hills to recognize Vertex as
ISSUE: Whether the delay in the issuance of a stock certificate can be considered a
a shareholder. Vertex enjoyed membership privileges in Forest Hills.
substantial breach as to warrant rescission of the contract of sale.
HELD: YES
Despite Vertex’s full payment, the share remained in the name of FEGDI so 17 months after
the sale, Vertex wrote FEGDI a letter demanding the issuance of a stock certificate in its name. RATIO:
FELI replied requesting Vertex to pay the transfer fees however despite Vertex’s payment, no In Raquel-Santos v. CA, the Court held that in “a sale of shares of stock, physical delivery of a
certificate was issued. Vertex’s final demand went unheeded therefore it filed a Complaint for stock certificate is one of the essential requisites for the transfer of ownership of the stocks
Rescission with Damages and Attachment against FEGDI, FELI and Forest Hills. Vertex purchased.” Also in Section 69 of the Corp Code it was stated, “…shares of stock so issued
averred that said corporations defaulted in their obligation as sellers when they failed and are personal property and may be transferred by delivery of the certificate or certificates
refused to issue stock certificate. On the basis of Art. 1191 of CC, Vertex prayed for rescission indorsed by the owner or his attorney-in-fact or other person legally authorized to make the
of the sale and demanded reimbursement. transfer.”

During the pendency of the case, a certificate of stock was issued in Vertex’s name but the Vertex fully paid the purchase price by February 11, 1999 but the stock certificate was only
latter refused to accept it. delivered on January 23, 2002 after Vertex filed an action for rescission against FEGDI.

RTC: Dismissed for insufficiency of evidence. Issuance of the stock certificate is just a collateral
matter to the sale and the stock certificate is not essential to “the creation of the relation of
shareholder.”
CA: Reversed. There can be no valid transfer of shares where there is no delivery of the stock
certificate. Prolonged issuance of the stock certificate a substantial breach that served as basis
for Vertex to rescind the sale.
FEGDI’s ARGUMENT: Delay cannot be considered a substantial breach because Vertex was
unequivocally recognized as a shareholder of Forest Hills. In fact, Vertex’s nominees fully
enjoyed and utilized all its facilities.
Under these facts, FEGDI clearly failed to deliver the stock certificates within a reasonable time
from the point the shares should have been delivered. This was a substantial breach of their
contract that entitles Vertex the right to rescind the sale under Article 1191 of CC. It is not
entirely correct to say that a sale had already been consummated as Vertex already enjoyed
the rights a shareholder can exercise. The enjoyment of these rights cannot suffice where the
law, by its express terms, requires a specific form to transfer ownership.
Regarding the involvement of FELI in this case, no privity of contract exists between Vertex
and FELI. The Civil Code upholds the spirit over the form; thus, it deems an agreement to exist,
provided the essential requisites are present. FELl was only dragged into the action when its
staff used the wrong letterhead in replying to Vertex and issued the wrong receipt for the
payment of transfer taxes. Thus FELl should be absolved from any liability.
 TERELAY v. YULO
July 1, 2015| Bersamin, J. |
Digester: Alexis Bea
SUMMARY: Cecilia Yulo wrote a letter to TERELAY requesting that she be allowed to
inspect its books and records which the corporation continually denied. Thus, Yulo went to
the SEC. They agreed in the Preliminary Conference that Yulo is a registered stockholder of
TERELAY. However, one of the issues stipulated in said hearing is the right of Yulo to inspect
its books and records. One of Terelay’s arguments was that conceding that Yulo is a
stockholder, she is an owner of 0.001% of stock thus, she has no right to examine its books.
Because of the enactment of RA 8799, the case was transferred from the SEC to RTC. RTC
then ruled for Yulo. CA and SC affirms RTC ruling.
DOCTRINE: The Corporation Code has granted to all stockholders the right to inspect the
corporate books and records, and in so doing has not required any specific amount of
interest for the exercise of the right to inspect. Ubi lex non distinguit nee nos distinguere
debemos. When the law has made no distinction, we ought not to recognize any distinction.
FACTS:
 Asserting her right as a stockholder, Cecilia Teresita Yulo wrote a letter addressed to
Terelay Investment and Development Corporation (TERELAY) requesting that she be
allowed to examine its books and records on September 17, 1999 at 1:30 o'clock in
the afternoon at the latter's office on the 25th floor, Citibank Tower, Makati City.
 TERELAY denied the request for inspection and instead demanded that she show
proof that she was a bona fide stockholder.
 Cecilia Yulo again sent another letter clarifying that her request for examination of the
corporate records was for the purpose of inquiring into the financial condition of
TERELAY and the conduct of its affairs by the principal officers. The following day,
Cecilia Yulo received a faxed letter from TERELAY's counsel advising her not to
continue with the inspection in order to avoid trouble.
 Cecilia Yulo filed with the SEC, a Petition for Issuance of a Writ of Mandamus with
prayer for Damages against TERELAY
 She prayed that judgment be rendered ordering TERELAY to allow her to:
o inspect its corporate records, books of account and other financial records;
o to pay her actual damages representing attorney's fees and litigation
expenses of not less P100,000.00
o to pay her exemplary damages; a
o nd to pay the costs of the suit
 Preliminary conference:
o The parties agreed on the following:
 Petitioner Cecilia Teresita Yulo is registered as a stockholder in the
corporation's stock and transfer book subject to the qualification in
the Answer, and
 Petitioner had informed the respondent, through demand letter, of
her desire to inspect the records of the corporation, but the same
was denied by the respondent.
o Stipulated issues:
 Right of Yulo to inspect and examine Terelay’s corporate records,
books of accounts, and other financial records (Sec. 74 of the
Corporation Code)
 If Yulo’s mere desire to inquire into the financial condition of
respondent corporation and conduct of the affairs of the
corporation is a just and sufficient ground for inspection of the
corporate records.
 Republic Act No. 8799 (The Securities Regulation Code) was enacted, so the case
was transferred from the SEC to the RTC.
 RTC: Decided for Yulo and granted her application for inspection of corporate records
is granted pursuant to Rule 7 of the Interim Rules in relation to Section 74 and 75 of
the Corporation Code. It also awarded her P50,000 attorney’s fees.
 CA: Affirmed.
RULING: Decision AFFIRMED
Whether or not Yulo was a stockholder who is entitled to inspect the corporation’s
books and records despite her shareholding being a measly 0.001% interest—YES
 YULO: The law does not require substantial shareholding before she can exercise her
right of inspection as a stockholder.
 TERELAY: RTC was misled into believing that there was a stipulation or admission
that Cecilia Yulo is a registered stockholder in its stock and transfer book.
o The admission or stipulation was that she was registered in the Articles of
Incorporation is separate and distinct from being so in the stock and transfer
book.
 COURT: TERELAY's argument cannot be sustained. A careful review of the records
would show that in the Preliminary Conference both parties represented by their
respective counsels, agreed on the fact that petitioner-appellee was "registered as a
stockholder in respondent-appellant's stock and transfer book subject to the
qualifications in the Answer."
 The records failed to disclose any objection by TERELAY. Neither did TERELAY raise
this matter in the SEC hearing held on August 7, 2000 as one of the issues to be
determined and resolved.
 TERELAY:
o Yulo’s name as incorporator, stockholder and director in the Articles of
Incorporation and Amendments were unsigned; that she did not pay for the
five (5) shares appearing in the Amended Articles of Incorporation and
General Information Sheet of TERELAY;
o that she did not subscribe to the shares; that she has neither been in
possession of nor seen the certificate of stock covering the five (5) shares of
stock;
o that the donation of the five (5) shares claimed by her was null and void for
failure to comply with the requisites of a donation under Art. 748 of the Civil
Code; and that there was no acceptance of the donation by her as donee.
 COURT: TERELAY's position has no merit.
 The records disclose that the corporate documents submitted, which include the
Articles of Incorporation and the Amended Articles of Incorporation, as well as the
General Information Sheets and the Quarterly Reports all bear the signatures of the
proper parties and their authorized custodians.
 The signature of appellee under the name Cecilia J. Yulo appears in the Articles of
Incorporation of TERELAY. Likewise, her signatures under the name Cecilia Y.
Blancaflor appear in the Amended Articles of Incorporation where she signed as
Director and Corporate Secretary of TERELAY.
 The General Information Sheets all exhibited that she was recognized as director and
corporate secretary, and that she had subscribed to five (5) shares of stock. The
quarterly reports do not show otherwise.
 Yulo has thus presented enough evidence that she is a stockholder of TERELAY. The
corporate documents presented support her claim that she is a registered stockholder
 in TERELAY's stock and transfer book thus giving her the right, under Section 74 par.
2 and Section 75 of the Philippine Corporation Law, to inspect TERELAY's books,
records, and financial statements.
 Secondly, TERELAY's submission that the respondent's "insignificant holding" of only
.001% of the petitioner's stockholding did not justify the granting of her application for
inspection of the corporate books and records is unwarranted.
 The Corporation Code has granted to all stockholders the right to inspect the
corporate books and records, and in so doing has not required any specific amount of
interest for the exercise of the right to inspect. Ubi lex non distinguit nee nos
distinguere debemos. When the law has made no distinction, we ought not to
recognize any distinction.
 Neither could the petitioner arbitrarily deny the respondent's right to inspect the
corporate books and records on the basis that her inspection would be used for a
doubtful or dubious reason. Under Section 74, third paragraph, of the Corporation
Code, the only time when the demand to examine and copy the corporation's records
and minutes could be refused is when the corporation puts up as a defense to any
action that "the person demanding" had "improperly used any information secured
through any prior examination of the records or minutes of such corporation or of any
other corporation, or was not acting in good faith or for a legitimate purpose in making
his demand."
 The right of the shareholder to inspect the books and records of the petitioner should
not be made subject to the condition of a showing of any particular dispute or of
proving any mismanagement or other occasion rendering an examination proper, but
if the right is to be denied, the burden of proof is upon the corporation to show that the
purpose of the shareholder is improper, by way of defense.
 COURT: Cecilia Yulo as the right to be fully informed of TERELAY's corporate
condition and the manner its affairs are being managed. It is well-settled that the
ownership of shares of stock gives stockholders the right under the law to be
protected from possible mismanagement by its officers. This right is predicated upon
self-preservation. In any case, TERELAY did not adduce sufficient proof that Cecilia
Yulo was in bad faith or had an ulterior motive in demanding her right under the law.
 Among the purposes held to justify a demand for inspection are the following:
o (1) To ascertain the financial condition of the company or the propriety of
dividends;
o (2) the value of the shares of stock for sale or investment;
o (3) whether there has been mismanagement;
o (4) in anticipation of shareholders' meetings to obtain a mailing list of
shareholders to solicit proxies or influence voting;
o (5) to obtain information in aid of litigation with the corporation or its officers
as to corporate transactions.
 Among the improper purposes which may justify denial of the right of inspection are:
o (1) Obtaining of information as to business secrets or to aid a competitor;
o (2) to secure business "prospects" or investment or advertising lists;
o (3) to find technical defects in corporate transactions in order to bring "strike
suits" for purposes of blackmail or extortion.
 In general, however, officers and directors have no legal authority to close the office
doors against shareholders for whom they are only agents, and withhold from them
the right to inspect the books which furnishes the most effective method of gaining
information which the law has provided, on mere doubt or suspicion as to the motives
of the shareholder.

Whether or not the award of attorney’s fees was proper—YES

 Finally, the Court agrees with the ruling of the court a quo that the petitioner is entitled
Whether or not RTC had jurisdiction to determine whether or not she was a to the reasonable amount of P50,000.00 representing attorney's fees for having been
stockholder—YES compelled to litigate in order to exercise her right of inspection.
 TERELAY: it is not within the jurisdiction of the trial court to determine whether or not
Yulo is its stockholder.
o There is a petition for the probate of the will of Cecilia's father, the late Luis
A. Yulo, and the settlement of his estate was filed with the Regional Trial
Court of Manila.
o The inventory of the estate includes the five (5) shares which Cecilia is
claiming.
o Being a court of limited jurisdiction, the court a quo could not decide whether
or not Luis A. Yulo donated five (5) shares to Cecilia during his lifetime.
 Court: Position of TERELAY untenable. The main issue in this case is the question of
whether or not she is a stockholder and therefore, has the right to inspect the
corporate books and records. This issue is within the competence of the Regional
Trial Court, acting as a special court for intra-corporate controversies, and not in the
proceeding for the settlement of the estate of the late Luis Yulo.

Whether or not her purpose for the inspection (inquire into the financial condition
and conduct of affairs by principal officers) was a valid ground to examine corporate
records—YES
 TERELAY further contends that Cecilia Yulo's purpose in inspecting the books was to
inquire into its financial condition and the conduct of its affairs by the principal officers
which are not sufficient and valid reasons. Therefore, the presumption of good faith
cannot be accorded her.
Additional Case No. 10: Uy Cua Jr. v. Tan
G.R. No. 181455-56; December 4, 2009
Topic: Board of Directos; Derivative Suit
Ponente: J. Chico-Nazario
DOCTRINE: It is well settled in this jurisdiction that where corporate directors are guilty of a
breach of trust — not of mere error of judgment or abuse of discretion — and intracorporate
remedy is futile or useless, a stockholder may institute a suit in behalf of himself and other
stockholders and for the benefit of the corporation, to bring about a redress of the wrong
inflicted directly upon the corporation and indirectly upon the stockholders. A derivative suit,
however, must be differentiated from individual and representative or class suits. Suits by
stockholders or members of a corporation based on wrongful or fraudulent acts of directors
or other persons may be classified into individual suits, class suits, and derivative suits.
FACTS:
Philippine Racing Club Inc. (PRCI) was organized to carry on the business of a racecourse
in all its branches and promote the breeding of better horses in the Philippines. PRCI owns
two real properties: (1) the Sta. Ana Ractrack or the “Makati property” and (2) the “Cavite
property”. PRCI management decided that it was best to spin off the management and
development of the Makati property to a wholly owned subsidiary. It then opted to acquire
another domestic corporation, JTH Davies Holdings, Inc. (JTH).
PRCI management determined that it could initially acquire 41,928,290 shares, or 95.55%
of the outstanding capital stock of JTH. The PRCI Board of Directors held a meeting on 26
Sep 2006. Among the directors present were petitioners Santiago Sr., Santiago Jr., and
Solomon, as well as respondent Dulay. After deliberating on the matter of the acquisition of
JTH by PRCI, all the directors present, except respondent Dulay, voted affirmatively to pass
and approve the following resolutions: (1) Declaration of Intention to Acquire and Purchase
Shares of Stock of Another Company; (2) a Special Stockholders’ meeting; (3) Authorized
Attorney-in-Fact and Proxy. The next day, PRCI entered into a Sale and Purchase
Agreement for the acquisition from JME of 99.5% of the outstanding capital stock of JTH. In
the Special Stockholders’ Meeting held on 7 November 2006, attended by stockholders with
481,045,887 shares or 84.42% of the outstanding capital stock of PRCI, the acquisition by
PRCI of JTH was presented for approval. Several stockholders expressed their satisfaction
with PRCI’s decision to purchase JTH shares due to the latter’s goodwill.
Thereafter, PRCI again engaged the assistance of SGV. It was then determined that the
Makati property could be transferred to JTH in exchange for the unissued portion of the
latter’s recently increase authorized capital stock. The matter of the proposed exchange was
approved by the PRCI Board of Directors in its meeting, again with the lone dissent of
respondent Dulay. Subsequently, the Annual Stockholders’ Meeting of PRCI was scheduled.
It included the property-for-shares exchange between PRCI and JTH, which was supposed
to be presented for approval by stocjholders under their agenda during the special meeting.
However, respondents Miguel, et al., as minority stockholders of PRCI filed before the
RTC a Complaint, denominated as a Derivative Suit with prayer for Issuance of
TRO/Preliminary Injunction, against the directors of PRCI and/or JTH based on their
alleged devices or schemes amounting to fraud or misrepresentation.
ISSUE: Whether or not respondents’ complaint constituted a valid derivative suit? NO
RULING: It is well settled in this jurisdiction that where corporate directors are guilty of a
breach of trust — not of mere error of judgment or abuse of discretion — and intracorporate
remedy is futile or useless, a stockholder may institute a suit in behalf of himself and other
stockholders and for the benefit of the corporation, to bring about a redress of the wrong
inflicted directly upon the corporation and indirectly upon the stockholders. A derivative suit,
however, must be differentiated from individual and representative or class suits. Suits by
stockholders or members of a corporation based on wrongful or fraudulent acts of directors
or other persons may be classified into individual suits, class suits, and derivative suits.
According to the SC, a shareholder's derivative suit seeks to recover for the benefit
of the corporation and its whole body of shareholders when injury is caused to the
corporation that may not otherwise be redressed because of failure of the corporation
to act. Thus, ‘the action is derivative, i.e., in the corporate right, if the gravamen of the
complaint is injury to the corporation, or to the whole body of its stock and property
without any severance or distribution among individual holders, or it seeks to recover
assets for the corporation or to prevent the dissipation of its assets.’ In contrast,
"a direct action is one filed by the shareholder individually (or on behalf of a class of
shareholders to which he or she belongs) for injury to his or her interest as
a shareholder. The two actions are mutually exclusive: i.e., the right of action and
recovery belongs to either the shareholders (direct action) or
the corporation (derivative action)."
As regards the derivative suit re: acquisition of JTH, the Court held that it is dismissible
for being moot and academic. It should be noted that the 26 September 2006 Resolution of
the PRCI Board of Directors not only authorized the acquisition by PRCI of up to 100% of
the common stock of JTH, but it also specifically appointed petitioner Santiago Sr. to act as
attorney-in-fact and proxy who could vote all the shares of PRCI in JTH, as well as nominate,
appoint, and vote into office directors and/or officers during regular and special stockholders’
meetings of JTH. It was by this authority that PRCI directors were able to constitute the JTH
Board of Directors. Subsequently, the disputed Resolution was approved and ratified by the
stockholders, holding 74% of the outstanding capital stock in PRCI, during the Special
Stockholders’ Meeting held on 7 November 2006. Respondents Miguel, et al., instituted the
derivative suit against herein petitioners in their capacity as directors of PRCI and/or JTH.
Clearly, the acquisition by PRCI of JTH and the constitution of the JTH Board of Directors
are no longer just the acts of the majority of the PRCI Board of Directors, but also of the
majority of the PRCI stockholders. By ratification, even an unauthorized act of an agent
becomes the authorized act of the principal. To declare the Resolution dated 26 September
2006 of the PRCI Board of Directors null and void will serve no practical use or value, or
affect any of the rights of the parties, because the Resolution of the PRCI stockholders --
approving and ratifying said acquisition and the manner in which PRCI shall constitute the
JTH Board of Directors -- will still remain valid and binding. In fact, if the derivative suit,
insofar as it concerns the Resolution dated 26 September 2006 of the PRCI Board of
Directors, is not dismissible for mootness, it is still vulnerable to dismissal for failure to
implead indispensable parties, namely, the majority of the PRCI stockholders.
The derivative suit, with respect to the Resolution dated 11 May 2007 of the PRCI
Board of Directors, is similarly dismissible for lack of cause of action. Rule 8, Section 1 of
the Interim Rules of Procedure for Intra-Corporate Controversies (IRPICC) lays down the
following requirements, which a stockholder must comply with in filing a derivative suit. In
the case at bar, the Court found that the third requisite, that “no appraisal rights are available
for the acts complained of”, was lacking. The Court found the averment of respondents
Miguel, et al., that appraisal rights were not available to them untenable, because appraisal
rights may only be exercised by stockholders who had voted against the proposed corporate
action; and that at the time respondents Miguel, et al., instituted the derivative suit, PRCI
stockholders had yet to vote on the intended property-for-shares exchange between PRCI
and JTH. Respondents Miguel, et al., themselves caused the unavailability of appraisal
rights by filing the Complaint, in which they prayed that the 11 May 2007 Resolution of the
Board of Directors approving the property-for-shares exchange between PRCI and JTH be
declared null and void, even before the said Resolution could be presented to the PRCI
stockholders for approval or rejection. More than anything, the argument of respondents
Miguel, et al., raises questions of whether their derivative suit was prematurely filed for they
had failed to exert all reasonable efforts to exhaust all other remedies available under the
articles of incorporation, by-laws, laws, or rules governing the corporation or partnership, as
required by Rule 8, Section 1(2) of the IRPICC. The obvious intent behind the rule is to make
the derivative suit the final recourse of the stockholder after all other remedies to obtain the
relief sought have failed.

DISPOSITIVE PORTION: WHEREFORE, the Court renders the following judgment: (1) The
Court GRANTS the Petitions of petitioners Santiago, et al., and petitioner Santiago Sr. in
G.R. No. 181455-56 and G.R. No. 182008, respectively. It REVERSES and SETS ASIDE
the Decision dated 6 September 2007 and Resolution dated 22 January 2008 of the Court
of Appeals in CA-G.R. SP No. 99769 and No. 99780; (2) The Court LIFTS the TRO issued
on 9 April 2008 in G.R. No. 180028 and CANCELS and RETURNS the cash bond posted
by petitioner Santiago Sr. The permanent injunction issued by the RTC on 8 October 2007,
the execution and enforcement of which the TRO dated 9 April 2008 of this Court enjoins,
has been rendered moot, since the agenda items subject of said permanent injunction were
already presented to, and approved and ratified by a majority of the PRCI stockholders at
the Annual Stockholders’ Meeting held on 18 June 2008; (3) The Court ORDERS the
DISMISSAL of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 before
the RTC for lack of cause of action, failure to implead indispensable parties, and mootness;
(4) The Court ORDERS the DISMISSAL of the Complaint of Jalane, et al., in Civil Case No.
08-458, for being in violation of the rules on the multiplicity of suits and forum shopping; and
(5) The Court DENIES the Very Respectful Motion for Leave to Intervene as Co-Respondent
in the Petition with the attached Very Respectful Urgent Motion to Lift Restraining Order of
APRI, for redundancy and mootness.

G.R. No. 187872 November 17, 2010
STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner,
vs.
STAR INFRASTRUCTURE DEVELOPMENT CORPORATION ET AL., Respondents.
Facts:
Petitioner Strategic Alliance Development Corporation (STRADEC) is a domestic
corporation primarily engaged in the business of a development with principal place of
business at Bayambang, Pangasinan t. Along with five individuals4 and three other
corporations,5 STRADEC incorporated respondent Star Infrastructure Development
Corporation (SIDC) for the purpose of engaging in the general construction business with
the original principal place of business at Pasig City, then moved to Poblacion Sur,
Bayambang, Pangasinan7 and, later, to Lipa, Batangas. STRADEC fully paid and owned
49% of the 5,000,000 shares of stock into which SIDC’s authorized capital stock.
In 2004, respondents Yujuico and Sumbilla, in their respective capacities as then
President and Treasurer of STRADEC, executed a Promissory Note for and in consideration
of a loan in the sum ofP10,000,000.00 ostensibly extended in favor of said corporation by
respondent Robert L. Wong, one of the incorporators of SIDC. 9 As security for the payment
of the principal as well as the stipulated interests thereon, a pledge constituted over
STRADEC’s entire shareholdings in SIDC was executed by respondent Yujuico on 1 April
2005.10
In view of STRADEC’s repeated default on its obligations, 11 however, the shares
thus pledged were sold by way of the 26 April 2005 notarial sale conducted in Makati City
by respondent Raymond M. Caraos. Having tendered the sole bid
of P11,800,000.00,12 respondent Wong was issued the corresponding certificates of stocks
by respondent Bede S. Tabalingcos, SIDC’s Corporate Secretary for the years 2004 and
2005, after the transfer was recorded in the corporation’s stock and transfer book. 13
In 2006,Quiambao, in his capacity as President and Chairman of the Board of
Directors of STRADEC, commenced the instant suit with the filing of the petition before a
commercial court in Batangas City alleging four causes of action, to wit: that respondents
Yujuico and Sumbilla were not authorized to enter into any loan agreement with respondent
Wong, that the auction sale was held in a wrong venue, that the transfer of STRADED shares
in SIDC was made fraudulently and that the 30 July 2005 annual stockholders meeting and
20 July 2006 special stockholder’s meeting of SIDC where the change of principal place of
business was approved is invalid pending determination of the legitimate Board of Directors
for STRADEC.
Issue: Whether or not the cause of action of petitioners is an intra-corporate dispute.
Ruling:
Meritorious.
An intra-corporate dispute is understood as a suit arising from intra-
corporate relations or between or among stockholders or between any or all of them
and the corporation. Applying what has come to be known as the relationship test, it has
been held that the types of actions embraced by the foregoing definition include the following
suits: (a) between the corporation, partnership or association and the public; (b) between
the corporation, partnership or association and its stockholders, partners, members, or
officers; (c) between the corporation, partnership or association and the State insofar as its
franchise, permit or license to operate is concerned; and, (d) among the stockholders,
partners or associates themselves. As the definition is broad enough to cover all kinds
of controversies between stockholders and corporations, the traditional
interpretation was to the effect that the relationship test brooked no distinction,
qualification or any exemption whatsoever.
However, the unqualified application of the relationship test has been modified on
the ground that the same effectively divests regular courts of jurisdiction over cases for the
sole reason that the suit is between the corporation and/or its corporators. It was held that
the better policy in determining which body has jurisdiction over a case would be to
consider not only the status or relationship of the parties but also the nature of the
question that is the subject of their controversy.33 Under the nature of the controversy
test, the dispute must not only be rooted in the existence of an intra-corporate relationship,
but must also refer to the enforcement of the parties' correlative rights and obligations under
the Corporation Code as well as the internal and intra-corporate regulatory rules of the
corporation.34 The combined application of the relationship test and the nature of the
controversy test has, consequently, become the norm in determining whether a case is an
intra-corporate controversy or is purely civil in character.
In the case at bench, STRADEC’s first and second causes of action seek the
nullification of the loan and pledge over its SIDC shareholding contracted by respondents
Yujuico, Sumbilla and Wong as well the avoidance of the notarial sale of said shares
conducted by respondent Caraos.
Applying the relationship test, we find that STRADEC’s first and second causes of
action qualify as intra-corporate disputes since said corporation and respondent Wong are
incorporators and/or stockholders of SIDC. Having acquired STRADEC’s shares thru the
impugned notarial sale conducted by respondent Caraos, respondent Wong appears to have
further transferred said shares in favor of CTCII, a corporation he allegedly formed with
members of his own family. By reason of said transfer, CTCII became a stockholder of SIDC
and was, in fact, alleged to have been recognized as such by the latter and its corporate
officers.
Considering that they fundamentally relate to STRADEC’s status as a stockholder
and the alleged fraudulent divestment of its stockholding in SIDC, the same causes of action
also qualify as intra-corporate disputes under the nature of the controversy test. As part of
the fraud which attended the transfer of its shares, STRADEC distinctly averred, among
other matters, that respondents Yujuico and Sumbilla had no authority to contract a loan
with respondent Wong; that the pledge executed by respondent Yujuico was simulated since
it did not receive the proceeds of the loan for which its shares in SIDC were set up as
security; that irregularities attended the notarial sale conducted by respondent Caraos who
sold said shares to respondent Wong; that the latter unlawfully transferred the same shares
in favor of CTCII; and, that SIDC and its officers recognized and validated said transfers
despite being alerted about their defects. Ultimately, the foregoing circumstances were
alleged to have combined to rid STRADEC of its shares in SIDC and its right as a stockholder
to participate in the latter’s corporate affairs.
 Moreover, pursuant to Section 5.2 of Republic Act No. 8799, 41 otherwise known as
the Securities Regulation Code, the jurisdiction of the SEC over all cases enumerated under
Section 5 of Presidential Decree No. 902-A has been transferred to RTCs designated by this
Court as SCCs42 pursuant to A.M. No. 00-11-03-SC promulgated on 21 November 2000.

On the issue of venue and jurisdiction, unlike the SEC which is a tribunal of limited
jurisdiction, special commercial courts (SCC) like the RTC are still competent to tackle civil
law issues incidental to intra-corporate disputes filed before them.

Section 5.2 of R.A. No. 8799 directs merely the Supreme Court's designation of
RTC branches that shall exercise jurisdiction over intra-corporate disputes. Nothing in the
language of the law suggests the diminution of jurisdiction of those RTCs to be designated
as SCCs. The assignment of intra-corporate disputes to SCCs is only for the purpose of
streamlining the workload of the RTCs so that certain branches thereof like the SCCs can
focus only on a particular subject matter.

The RTC exercising jurisdiction over an intra-corporate dispute can be likened to

an RTC exercising its probate jurisdiction or sitting as a special agrarian court. The
designation of the SCCs as such has not in any way limited their jurisdiction to hear and
decide cases of all nature, whether civil, criminal or special proceedings.

At any rate, it cannot be gainsaid that STRADEC correctly commenced its petition
before the RTC exercising jurisdiction over SIDC’s principal place of business which was
alleged to have been transferred from Bayambang, Pangasinan to Lipa, Batangas. 51 It
matters little that STRADEC, as pointed out by respondents, also questions the validity of
the 30 July 2005 SIDC stockholders’ annual meeting where the aforesaid change in the
address of its principal place of business was allegedly approved. Said matter should be
properly threshed out in the proceedings before the RTC alongside such issues as the
validity of the transfers of STRADEC’s shares to respondents Wong and CTCII, the propriety
of the recording of said transfers in SIDC’s books, STRADEC’s status as a stockholder of
SIDC, the legality of the 20 July 2006 SIDC stockholders’ special meeting or, for that matter,
Cezar T. Quiambao’s authority to represent STRADEC in the case at bench.1avvphi1

On the principle that a corporation is a legal entity with a personality separate and distinct
from its individual stockholders or members and from that of its officers who manage and
run its affairs,56 we find that the other pending actions have little or no bearing to the issues
set forth in STRADEC’spetition which, at bottom, involve the transfer of its own shareholding
in SIDC and its status and rights as such stockholder.