•Mobilia Products, Inc. vs.

Umezawa (452 SCRA 736 [2005])

https://lawphil.net/judjuris/juri2005/mar2005/gr_149357_2005.html

Facts:

Mobilia Products, Inc., a furniture manufacturer, is at the center of a controversy involving its President
and General Manager, Hajime Umezawa, and the creation of a rival entity known as Astem Philippines
Corporation. Mobilia primarily operates through its parent company, Mobilia Products Japan, which
handles marketing and order bookings. However, without the knowledge of Mobilia's Board of
Directors, Umezawa established Astem Philippines Corporation, a competitor in the same industry.
Astem's intention was to participate in the International Furniture Fair '95 in Singapore, a challenging
endeavor given its lack of equipment, personnel, and machinery.

Allegations against Umezawa and his associates include the theft of prototype furniture from Mobilia for
presentation as Astem's exhibits at the Singapore Fair. Umezawa is accused of masterminding these
thefts, which involved storing the stolen furniture in a warehouse owned by Henry Chua, one of
Mobilia's suppliers. Additionally, Umezawa is alleged to have committed further thefts of valuable
furniture from Mobilia's factory in February 1995, exploiting his position to facilitate these acts.
Furthermore, Umezawa is accused of directing the production of furniture using Mobilia's resources,
such as supplies, materials, machinery, labor, and time, all of which were intended exclusively for
Mobilia's use but were diverted for Astem's benefit or personal gain. These actions led to a legal
complaint against Umezawa and the initiation of a legal case. Initially, the prosecution sought a
preliminary attachment of Umezawa's properties, prompting him to file a motion to quash the charges,
discharge the attachment, and request a preliminary investigation. Parallelly, MPI filed additional
criminal complaints against Umezawa and others for theft and misappropriation. Despite Umezawa's
attempts to suspend the proceedings due to a petition with the Securities and Exchange Commission
(SEC), the trial court denied his request. Ultimately, the court dismissed the cases, arguing they were
intra-corporate disputes under the SEC's jurisdiction. However, this led to a petition for certiorari and
mandamus filed by the People of the Philippines, represented by the Office of the Solicitor General,
before the Court of Appeals, marking the continuation of the legal battle.

Issue:

Whether or not the SEC has jurisdiction of the case

Ruling:

The mere fact that the respondent held the positions of president and general manager within the
petitioner corporation at the time the alleged crimes occurred, along with being a stockholder, does not,
by itself, divest the lower court of its exclusive jurisdiction over the alleged offenses. It's important to
note that the corporation's property is distinct from the personal property of its stockholders or officers
who happen to be stockholders. As a guiding principle, the Court emphasized that assets registered
under the corporation's name are its own separate entity, wholly separate from its members. While
shares of stock constitute personal property, they do not equate to ownership of the corporation's
assets. Instead, a share of stock represents a proportionate interest in the corporation's property,
entailing the right to a share of its profits as legally and equitably distributed. Importantly, a stockholder
does not possess ownership of any portion of the corporation's capital or have a claim to specific parts
of its property or assets. Consequently, a stockholder does not hold the status of a co-owner or tenant
in common of the corporate property. The court also noted that disputes between corporations and
their stockholders can coexist, with criminal charges falling under the regular court's jurisdiction.

The Court of Appeals (CA) correctly determined that the Securities and Exchange Commission (SEC) did
not have jurisdiction over the cases filed in the lower court. The CA's reliance on Section 5(b) of
Presidential Decree No. 902 (P.D. No. 902) lacked factual and legal basis. The court explained that while
the SEC has authority over certain cases, the filing of a civil or intra-corporate case with the SEC does not
prevent simultaneous criminal proceedings in regular courts. In this case, the respondent could still be
prosecuted for estafa and qualified theft due to his alleged fraudulent actions, regardless of his position
as the corporation's president and general manager and his stockholder status. The court ultimately
reversed the CA's resolution

•Tan vs. Sycip

https://lawphil.net/judjuris/juri2006/aug2006/gr_153468_2006.html

Facts:

Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation with fifteen regular
members, who also constitute the board of trustees. During an annual members' meeting held on April
6, 1998, only eleven living member-trustees were present, as four had already died. Seven attended the
meeting through proxies. In this meeting, four new member-trustees were elected to replace the
deceased members. The controversy reached the SEC, where it was argued that the deceased member-
trustees should not be counted in determining the quorum for the meeting. SEC Hearing Officer Militar
declared the meeting null and void for lack of quorum, emphasizing that the basis for quorum
determination should be the number of members specified in the articles of incorporation. The SEC en
banc upheld this decision. The Court of Appeals (CA) dismissed the appeal based on a defective
verification and certification.

Issues:

1. Whether the CA erred in denying the Petition based on a defective Verification and Certification.

2. Whether deceased members should be counted in determining the quorum for annual members'
meetings in nonstock corporations.

Rulings:

1. Procedural Issue: Verification and Certification

The initial procedural lapse in the petition's verification and certification was excused due to the
substantial merits of the case and the purely legal question involved. The substantial merits and legal
nature of the case justify an exception to the strict requirements of verification and certification.

2. Main Issue: Basis for Quorum

In stock corporations, quorum is determined based on the outstanding capital stock. In nonstock
corporations, quorum is based on the actual number of members with voting rights. Dead members
should not be counted in determining quorum if the corporation's bylaws or articles of incorporation
provide for termination of membership upon death. In this case, GCHS's bylaws terminated membership
upon the death of a member. Therefore, dead members should not be counted in determining the
quorum for the annual members' meeting.

Vacancy in the Board of Trustees

Vacancies in the board of trustees may be filled either by the remaining trustees (if they constitute a
quorum) or by the stockholders or members in a meeting called for that purpose. The By-Laws of GCHS
prescribed the mode of filling vacancies by a majority vote of the remaining members of the board.
However, this provision could not justify the election of new trustees during an annual members'
meeting. The election of trustees must be conducted by the board of trustees, not during a members'
meeting.

Conclusion:

The CA's dismissal of the petition based on a defective verification and certification was excused due to
the substantial merits and legal nature of the case. Dead members should not be counted in
determining quorum for annual members' meetings in nonstock corporations, provided that the bylaws
or articles of incorporation specify termination of membership upon death. However, the election of
trustees should be conducted by the board of trustees, not during a members' meeting.

•Majority Stockholders of Ruby Industrial Corp. vs. Lim (650 SCRA 461 [2011])

https://chanrobles.com/cralaw/2011junedecisions.php?id=506

Facts:

- Ruby Industrial Corporation (RUBY) is a domestic corporation engaged in glass manufacturing. It faced
severe liquidity problems beginning in 1980 and filed a petition for suspension of payments with the SEC
in 1983.

- A management committee (MANCOM) was created by the SEC in 1984 to study, review, and evaluate a
proposed rehabilitation plan for RUBY.

- Two rehabilitation plans were submitted, but both were enjoined by the SEC and the Court of Appeals
(CA).

- On September 18, 1991, the SEC issued an order approving the Revised BENHAR/RUBY Plan and
dissolved the MANCOM.
- The Revised Plan proposed calling for a subscription of unissued shares to raise capital.

- On October 2, 1991, RUBY's board of directors held a special meeting to implement the Revised Plan,
authorizing the issuance of additional shares.

- Minority directors claimed they were not notified of the meeting.

- On September 1, 1996, a stockholders' meeting was scheduled, where the majority stockholders
claimed to have increased their shares by subscribing to unissued shares.

- Minority stockholders objected, and the SEC later ruled in favor of the majority.

- Lim, a minority stockholder, filed a motion in 2000 to declare the additional capital infusion and
extension of RUBY's corporate term as null and void.

- The SEC overruled the objections, and the CA affirmed it.

Issue:

Was the additional capital infusion valid?

Ruling:

No, the additional capital infusion was not valid.

Additional Capital Infusion: The court found the additional capital infusion to be invalid as it was done in
breach of trust by the controlling stockholders. The majority sought to impose their will and dilute
minority shareholdings, which was detrimental to RUBY, minority stockholders, and unsecured creditors.

SEC's Handling of Minority Stockholders' Objections: The SEC failed to properly consider the objections
of minority stockholders. The SEC should have acted decisively on the motions filed by the minority
stockholders regarding the capital infusion, expiration of corporate term, and void deeds of assignment
of credit. The minority's concerns were legitimate, especially after the rejection of the Revised
BENHAR/RUBY Plan by the courts.

- While a stock corporation has the power to issue shares, it must be done through a board resolution.

- The issuance does not need approval from stockholders unless the articles of incorporation or bylaws
require it.

- The SEC's reliance on the presumption of regularity and indifference to the minority stockholders'
objections was unjustified.

- The actions of the majority stockholders appeared to be an attempt to dilute the minority's
shareholdings and were done in violation of court orders.

- The SEC should have considered the minority's concerns, especially in light of the evidence provided,
and acted decisively on the motions filed by the minority stockholders.

- Liquidation should have been an option to address the situation and compel accountability.
Overall, the SEC failed to protect the legitimate interests of Ruby, the minority stockholders, and
unsecured creditors, allowing the majority to impose their will and engage in questionable actions. The
additional capital infusion was not valid due to the breach of trust by the controlling stockholders.

•Republic Planters Bank vs. Agana (269 SCRA 1 [1997])

https://chanrobles.com/scdecisions/jurisprudence1997/mar1997/gr_51765_1997.php

**Facts:**

- On September 18, 1961, a private respondent corporation secured a loan from the petitioner bank in
the amount of P120,000.00.

- As part of the loan, preferred shares of stocks were issued to the private respondent corporation.
These shares were partly given as money and partly in the form of stock certificates.

- The stock certificates, numbered 3204 and 3205, each represented 400 shares with a par value of
P10.00 per share.

- The stock certificates contained terms and conditions, including the right to receive a quarterly
dividend of 1%, cumulative and participating, and the possibility of redemption by the corporation after
two years from the date of issue.

- In 1979, the private respondents filed a complaint against the petitioner, seeking to collect dividends
on the preferred shares and to have the shares redeemed according to the stock certificates.

- The Central Bank had issued a directive in 1973 prohibiting the redemption of preferred shares by the
petitioner due to its chronic reserve deficiency.

**Issues:**

1. Can the private respondents compel the petitioner to redeem the preferred shares as per the stock
certificates?

2. Are the preferred shares considered "interest-bearing stocks" entitling the private respondents to
dividends as a matter of right?

3. Is the claim of the private respondents barred by prescription or laches?

**Rulings:**

1. The court ruled that the private respondents cannot compel the petitioner to redeem the preferred
shares. The stock certificates clearly indicated that the option to redeem rested with the corporation
(the petitioner bank). The terms and conditions used the word "may," signifying discretion, and the
option was not vested in the private respondents. The court found that the Central Bank's directive
prohibiting redemption was a valid exercise of police power to protect the bank's financial stability.
2. The court rejected the notion that the preferred shares were "interest-bearing stocks" granting the
private respondents the right to dividends as a matter of right. Dividends are generally subject to the
availability of profits, and the issuance of dividends requires the approval of stockholders.

3. The court held that the private respondents' claim was barred by prescription. A right of action
founded upon a written contract prescribes in ten years under Article 1144 of the New Civil Code. The
private respondents' letter-demand was made almost eighteen years after the issuance of the stock
certificates, and no evidence of prior demand was presented. Additionally, the claim was barred by
laches, as the private respondents had waited an unreasonably long time to assert their rights, which
could have been done much earlier.

**Emphasis on Corporate/Commercial Law:**

- The case highlights the importance of clearly defined terms and conditions in stock certificates and the
discretion of the corporation regarding the redemption of preferred shares.

- It demonstrates that dividend payments are not automatic and depend on the availability of profits
and stockholder approval.

- The case underscores the concept of police power, allowing regulatory bodies like the Central Bank to
issue directives to protect the financial stability of financial institutions.

- It illustrates the application of prescription and laches in commercial disputes and the need for timely
assertion of rights in commercial transactions.

•W.G. Philpotts vs. Philippine Mfg. Co. (40 Phil. 471 [1919])

https://chanrobles.com/cralaw/1919novemberdecisions.php?id=114

**Facts:**

- The petitioner, W. G. Philpotts, is a stockholder in the Philippine Manufacturing Company, one of the
respondents in this case.

- Philpotts seeks a writ of mandamus to compel the respondents to allow him, or his duly authorized
agent or attorney, to inspect and examine the records of business transactions conducted by the
Philippine Manufacturing Company since January 1, 1918.

- The petition was filed with the court, and the respondents raised a demurrer challenging the suit's
validity on specific grounds.

**Issues:**

1. Whether there is a defect of parties in the lawsuit due to the naming of the secretary of the
corporation as a co-defendant.

2. Whether a stockholder's right to inspect corporate records under Section 51 of the Corporation Law
can be exercised through an authorized agent or attorney.
**Rulings:**

1. The court held that the naming of the secretary of the corporation as a co-defendant is proper. While
the corporation was the necessary party in such a proceeding, naming the secretary, who is typically the
custodian of corporate records, is customary and acceptable. The president of the corporation could
also be joined later if necessary.

2. The court ruled that a stockholder's right to inspect corporate records, as granted under Section 51 of
the Corporation Law, can be exercised by the stockholder through an authorized agent or attorney.
There is nothing in the statute that restricts this right to personal examination by the stockholder. The
court emphasized that the right to inspection should be liberally construed and may be exercised
through another person properly authorized.

**Significance of the Case:**

- This case establishes that a stockholder's right to inspect corporate records can be exercised through
an authorized agent or attorney.

- The ruling aligns with the general principle that if an action can be done by an individual personally, it
can also be done through a representative.

- The court emphasizes the importance of liberally construing the right to inspection granted to
stockholders and underscores the practicality of allowing stockholders to use agents or attorneys to
exercise this right, especially when they may lack the necessary knowledge or expertise.

•Yujuico vs. Quiambao (G.R. No. 180416, June 2, 2014)

https://lawphil.net/judjuris/juri2014/jun2014/gr_180416_2014.html

Facts:

- Strategic Alliance Development Corporation (STRADEC) is a domestic corporation.

- In March 2004, Aderito Z. Yujuico was elected as the president and chairman of STRADEC, replacing
Cezar T. Quiambao.

- Disputes arose when Yujuico and other appointed officers demanded access to corporate records,
which Quiambao and others allegedly refused to provide.

- Criminal complaints were filed against the respondents, accusing them of violating Section 74 of the
Corporation Code by refusing access to corporate records and the stock and transfer book of STRADEC.

Issues:

1. Whether the act of refusing to allow inspection of the stock and transfer book is punishable under the
Corporation Code.

2. Whether a criminal action based on the violation of a stockholder's right to inspect corporate records
and the stock and transfer book can be maintained against respondents.
Rulings:

1. The act of refusing to allow inspection of the stock and transfer book, when done in violation of
Section 74(4) of the Corporation Code, is punishable as an offense under Section 144 of the same code.

2. A criminal action based on the violation of a stockholder's right to examine or inspect the corporate
records and the stock and transfer book of a corporation under the second and fourth paragraphs of
Section 74 of the Corporation Code can only be maintained against corporate officers or any other
persons acting on behalf of such corporation. The complaints failed to establish that respondents were
acting on behalf of STRADEC, leading to the dismissal of the case.

Emphasis on Corporation/Commercial Law:

- The case revolves around the interpretation and application of Section 74 and Section 144 of the
Corporation Code, focusing on the right of stockholders to access corporate records and the penalties
for violations.

- The ruling clarifies that refusing to allow inspection of the stock and transfer book, when violating
Section 74(4), is punishable under the Corporation Code.

- The case highlights the distinction between enforcing a stockholder's inspection rights and pursuing
proprietary rights of a corporation, emphasizing that criminal actions under Section 74 apply to actions
against corporate officers acting on behalf of the corporation.

•Ang-Abaya vs. Ang (573 SCRA 129 [2008])

https://lawphil.net/judjuris/juri2008/dec2008/gr_178511_2008.html

Facts:

- Vibelle Manufacturing Corporation (VMC) and Genato Investments, Inc. (Genato) are family-owned
corporations with shareholders, officers, and board members including petitioners Ma. Belen Flordeliza
C. Ang-Abaya, Francis Jason A. Ang, Vincent G. Genato, Hanna Zorayda A. Ang, and private respondent
Eduardo G. Ang.

- Civil Case No. 4257-MC was filed by VMC, Genato, and Oriana Manufacturing Corporation against
Eduardo, Michael Edward Chi Ang, and others, alleging fraudulent attempts to gain control of the
corporations.

- During this dispute, Eduardo requested permission to inspect the corporate books of VMC and Genato,
which was denied by petitioners.

- Eduardo filed an Affidavit-Complaint against petitioners for violating Section 74 of the Corporation
Code by refusing the inspection of corporate books.

- Petitioners argued that Eduardo's motive was improper, citing extravagant personal loans, demands
for property transfers, office space, and other coercive behavior.
- The City Prosecutor's Office recommended filing charges against petitioners, but the Department of
Justice (DOJ) reversed this recommendation, directing the withdrawal of the charges.

- The Court of Appeals (CA) nullified the DOJ's decision, stating that it had to address the defense of
improper use and motive during the preliminary investigation.

Issues:

1. Whether the Secretary of Justice exceeded authority by considering the defense of improper use and
motive during preliminary investigation.

2. Whether the CA erred in nullifying the DOJ's decision and requiring an inquiry into the motive behind
Eduardo's inspection request.

Rulings:

1. The Secretary of Justice did not exceed authority by considering the defense of improper use and
motive during preliminary investigation. Section 74 of the Corporation Code provides that a
stockholder's right to inspect corporate books may be denied if the person demanding it acted
improperly or lacked good faith. This defense is relevant and should be addressed during the preliminary
investigation.

2. The CA erred in nullifying the DOJ's decision. A preliminary investigation is essential to determine the
existence of probable cause, and the defense of improper use and motive is relevant in evaluating
whether Section 74 of the Corporation Code was violated. The DOJ had the authority to weigh the
evidence and dismiss the charges if it found that the defense had merit. The CA should not have
interfered with the DOJ's discretionary power.

Emphasis on Corporation/Commercial Law:

- The case highlights the importance of a stockholder's right to inspect corporate books under Section 74
of the Corporation Code.

- It emphasizes that the defense of improper use and motive is a legitimate consideration during the
preliminary investigation stage.

- The case underscores the role of the Department of Justice in evaluating evidence and deciding
whether to file charges based on the existence of probable cause in cases involving corporate law
violations.
•Yu vs. Yukayguan (589 SCRA 588 [2009])

https://lawphil.net/judjuris/juri2009/jun2009/gr_177549_2009.html

**Facts:**

This case revolves around two families, the Yus (petitioners) and the Yukayguans (respondents), who are
stockholders of Winchester Industrial Supply, Inc., a domestic corporation engaged in the hardware and
industrial supply business. The respondents initiated a derivative suit against the petitioners, alleging
embezzlement and falsification of corporate records. During the proceedings, the parties initially
reached an amicable settlement, but this was later repudiated by the respondents. The Regional Trial
Court (RTC) dismissed the complaint for failure to comply with essential prerequisites and inadequate
substantiation of allegations. On appeal, the Court of Appeals affirmed the RTC's findings.

**Issues:**

1. Whether the Court of Appeals was correct in converting the derivative suit into a liquidation
proceeding.

2. Whether the requirements for filing a derivative suit were met by the respondents.

**Rulings:**

1. The Court ruled that the conversion of the derivative suit into a liquidation proceeding was improper.
A derivative suit is distinct from liquidation proceedings and should not be merged with them. The Court
of Appeals had no basis to make such a conversion.

2. The Court held that the requirements for filing a derivative suit were not met by the respondents.
They failed to exhaust all available remedies under the corporation's articles of incorporation, by-laws,
laws, or rules. Moreover, their reasons for not meeting these requirements were deemed insufficient.
Family corporation status does not exempt stockholders from complying with the formalities of
derivative suit rules.
Cua, Jr. vs. Tan (607 SCRA 645 [2009])

https://lawphil.net/judjuris/juri2009/dec2009/gr_181455_2009.html

FACTS:

- Philippine Racing Club, Inc. (PRCI) is a corporation engaged in horse track racing and related businesses
under Philippine laws.

- PRCI sought to convert its Makati property from a racetrack to urban residential and commercial use
while developing a new racetrack in Cavite.

- To manage the Cavite property, PRCI acquired another corporation, JTH Davies Holdings, Inc., through
a Sale and Purchase Agreement.

- Minority stockholders of PRCI filed a Derivative Suit against the majority directors of PRCI and/or JTH,
alleging three causes of action related to the acquisition of JTH shares and property exchange.

- The causes of action included allegations of fraud, violation of fiduciary duties, refusal to provide
information, and illegal constitution of the board of JTH.

- A TRO was issued by the RTC, which was affirmed by the CA.

ISSUE:

Whether or not the derivative suit is properly constituted.

RULING:

No, the court reversed the decision and lifted the TRO issued.

- The court noted that when corporate directors breach trust, and intracorporate remedies are futile or
useless, a stockholder may file a derivative suit for the benefit of the corporation and its stockholders.

- Respondents argued that their complaint was both a derivative suit and an intracorporate action based
on fraud or misrepresentation. However, the court found this distinction deceptive.

- The alleged devices and schemes employed by the PRCI Board of Directors were the same bases for the
derivative suit, causing injury to the corporation and, indirectly, to the stockholders.

- While respondents claimed to seek redress for minority stockholders, the rest of their complaint lacked
allegations of personal injury.

- The court emphasized that a corporation has its distinct legal personality, and its management
decisions are generally not subject to interference by the courts, as long as they are made in good faith.

- In a derivative suit, the corporation is the real party in interest, and the suing stockholder is considered
a nominal party. To prosper, the complaint must allege that it is brought on behalf of the corporation
and all similarly situated stockholders.
- The corporation is an indispensable party in a derivative suit and must be served with process.

In this case, the court found that the derivative suit was improperly constituted, and the TRO was lifted.

•San Miguel Corp. vs. Kahn (176 SCRA 447 [1989])

https://lawphil.net/judjuris/juri1989/aug1989/gr_85339_1989.html

**Facts:**

In December 1983, 33,133,266 shares of San Miguel Corporation (SMC) were acquired by 14
corporations and placed under a Voting Trust Agreement in favor of Andres Soriano Jr. After Soriano Jr.'s
death, Eduardo M. Cojuangco Jr. became the Substitute Trustee. Following the 1986 revolution,
Cojuangco left the country amid allegations of irregular cash disbursements and support for Ferdinand
Marcos's candidacy. On March 26, 1986, an agreement was made for the sale of these shares to Andres
Soriano III. However, the shares were sequestered by the Presidential Commission on Good Government
(PCGG) on the grounds of violating Executive Orders prohibiting the transfer of assets acquired by
Marcos and associates.

**Issues:**

The primary issue revolves around the ownership and sale of the 33,133,266 SMC shares, with questions
concerning whether they rightfully belonged to Eduardo Cojuangco Jr., their sale's legality, and whether
the PCGG had authority to sequester them. Additionally, there is a corporate governance issue
surrounding the assumption of Neptunia Corporation's loans by SMC and the actions of its board of
directors.

**Rulings:**

The Supreme Court clarified that the PCGG's sequestration of the SMC shares did not deprive the
Securities and Exchange Commission (SEC) of jurisdiction over the dispute. The matter concerns
corporate governance, not the ownership of sequestered assets tied to the Marcos regime.

Regarding the conflict-of-interest claim, the Court held that a stockholder's legal capacity to bring a
derivative suit is not determined by the number of shares held but by the fulfillment of certain
requisites, such as ownership at the time of the transaction, attempting to exhaust intra-corporate
remedies, and that the cause of action affects the corporation. Thus, de los Angeles, who owned 20
shares, had the legal capacity to bring the derivative suit.

Furthermore, the Court rejected the argument that the PCGG's voting of sequestered shares was
unauthorized. The Baseco decision had allowed such voting under certain conditions, and in the absence
of evidence to the contrary, it must be assumed that the PCGG acted within those parameters.
In conclusion, the case underscores the jurisdiction of the SEC in corporate governance disputes, affirms
the legal capacity of a stockholder with minimal shares to bring a derivative suit, and recognizes the
PCGG's authority to vote sequestered shares for the benefit of corporations when necessary.

•BSP vs. Campa, Jr., et.al. (G.R. No.185979, March 16, 2016)

https://chanrobles.com/cralaw/2016marchdecisions.php?id=239

**Facts:**

In the case of **Bangko Sentral ng Pilipinas v. Vicente Jose Campa, Jr., et al.** (G.R. No. 185979, March
16, 2016), the Bangko Sentral ng Pilipinas (BSP) was involved in a dispute with Bankwise, which had
obtained a Special Liquidity Facility (SLF) loan from BSP. BSP required Bankwise to secure its loan with
mortgages on properties owned by third parties. When Bankwise defaulted on its obligations, BSP
initiated extra-judicial foreclosure proceedings on these third-party mortgaged properties and acquired
them through public auction.

Eduardo Aliño, a stockholder of VR Holdings, filed a complaint against BSP and Bankwise, seeking
specific performance, novation of contracts, and damages. Aliño claimed that he allowed his properties
to be used as collateral for the loan based on assurances from Bankwise and VR Holdings that the
properties would be returned to him without the risk of foreclosure. Subsequently, respondents, who
were the registered owners of some of the mortgaged properties, sought to intervene in the case,
asserting their legal interest in the matter due to their ownership of these properties and their
accommodation of Bankwise's request, which had also assured them that there was no risk of
foreclosure.

**Issues:**

The primary issue in this case revolves around whether Commercial Case No. 06-114866 qualifies as a
derivative suit. Specifically, the court needed to determine whether the harm or injury sought to be
prevented pertains to properties registered under Aliño and other third-party mortgagors, and whether
Aliño and respondents had exhausted all available remedies and met the requirements for a derivative
suit.

**Rulings:**

The Supreme Court ruled that Commercial Case No. 06-114866 was not a derivative suit. The essence of
a derivative suit is to protect or vindicate corporate rights when corporate officials refuse to sue, are the
ones to be sued, or hold control of the corporation. However, in this case, the harm and injury did not
devolve on the corporation; it pertained to properties registered under Aliño and other third-party
mortgagors.
Furthermore, the suit was not for the benefit of the corporation, as a judgment in favor of Aliño would
mean the recovery of his personal property. There was no actual or threatened injury alleged to have
been done to the corporation due to the foreclosure of properties belonging to third-party mortgagors.

Additionally, the court found that Aliño failed to exhaust all remedies available to him as a stockholder
of VR Holdings and that the complaint did not satisfy the requirements for a derivative suit. The
unavailability of appraisal rights as a requirement for derivative suits did not apply in this case since the
subject of the act complained of involved the private properties of a stockholder, not that of the
corporation.

In summary, the court concluded that the case was not a derivative suit but appeared to be a
harassment suit. Therefore, the Court of Appeals' ruling in favor of respondents and the admission of
their Complaint-in-Intervention were affirmed, and BSP's motion for reconsideration was denied.