GR No.

174353 / September 10, 2014

Nestor Ching and Andrew Wellington v. Subic Bay Gold and Country Club, Inc. (SBGCCI) and its Officers

Facts:
Ching and Wellington are stockholders in SBGCCI and members of SB Golfers and Shareholders, Inc.
(SBGSI). They filed complaint, allegedly in the behalf of SBGSI, against SBGCC and its officers because the
amendment in their Articles of Incorporation (AI) allegedly made the shares non-proprietary, taking
away the right of shareholders to participate in the pro-rata distribution of assets after corporation
dissolves. Such amendment was allegedly passed without a stockholder’s meeting. For its prayer, it
seeks to enjoin officers from managing the corporation. Such complaint was dismissed for failure to
exhaust remedies within the corporation and that they were not authorized by SBGSI to file the
complaint and thus, they have no personality to file the same in the behalf of them. Hence, the appeal
saying that the nature of their action is not a derivative suit and that the courts have jurisdiction over
individual complaints of fraudulent acts or misrepresentation of corporate directors by any
stockholders.

Issue:
Whether or not complaint filed by petitioners is a derivative giving them personality to sue.

Held:
No, the complaint filed by petitioners is not a derivative suit to give them personality to sue. A derivative
suit is a suit available to individual stockholders in behalf of the corporation to vindicate wrongs done to
the corporation by its officials. In this case, petitioners do not have proof of authorization to file action
by the SBGSI in the behalf of them. And to file one, the following are the requisites: 1) the complainant
must be a stockholder or member at the time the acts occurred and the time the complaint was filed; 2)
he extended all reasonable efforts to available under the AI or the by-laws; 3) no appraisal rights are
available for the acts complained of; and 4) that the suit is not a nuisance or harassment suit. The
second and fourth requisites are not met. Failure to follow these requisites gives ground for the
complaint’s dismissal. Dismissible