San Miguel Corporation vs.

Khan
G.R. No. 85339; August 11, 1989

FACTS:
Fourteen corporations initially acquired shares of outstanding capital stock of
SMC and constituted a Voting Trust thereon in favor of Andres Soriano, Jr. When the
latter died Eduardo Cojuanco was elected as the substitute trustee. However, after
the EDSA revolution, Cojuanco fled out of the country, and subsequently an
agreement was entered into between the 14 corporations and Andres Soriano III (as
an agent of several persons) for the purchase of the shares held by the former.
Actually the buyer of the shares was Neptunia Corporation, a foreign
corporation and wholly-owned subsidiary of another subsidiary wholly owned by
SMC. Neptunia paid the downpayment from the proceeds of certain loans. PCGG
then sequestered the shares subject of the sale so SMC suspended all the other
installments of the price to the sellers. The 14 corporations then sued for rescission
and damages.
Meanwhile, PCGG directed SMC to issue qualifying shares to seven (7)
individuals including Eduardo de los Angeles from the sequestered shares for them
to hold in trust. Then, the SMCs board of directors passed a resolution assuming the
loans incurred by Neptunia for the downpayment. De los Angeles assailed the
resolution alleging that it was not passed by the board aside from its deleterious
effects on the corporations interest. When his efforts to obtain relief within the
corporation proved futile, he filed this action with the SEC. Respondent directors
alleged that de los Angeles has no legal standing having been merely imposed by
the PCGG and that the twenty (20) shares owned by him personally cannot fairly
and adequately represent the interest of the minority.

ISSUE:
WON de los Angeles have the legal standing to sue. (Derivative suit)

HELD:
YES. The bona fide ownership by a stockholder in his own right suffices to
invest him with the standing to bring a derivative suit for the benefit of the
corporation. The number of his shares is immaterial since he is not suing in his own
behalf, or for the protection or vindication of his own particular right, or the redress

of a wrong committed against him individually but in behalf and for the benefit of
the corporation.
The requisites of a derivative suit are: (1) the party bringing the suit
should be a stockholder as of the time of the act or transactions complained of, the
number of shares not being material; (2) exhaustion of intra-corporate remedies
(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 (3) the cause of action actually
devolves on the corporation and not to the particular stockholder bringing the suit.