FIRST DIVISION

[ G.R. No. 218738. March 09, 2022 ]

METROPOLITAN BANK & TRUST COMPANY (METROBANK),
PETITIONER, VS. SALAZAR REALTY CORPORATION*
REPRESENTED BY INCORPORATORS/ STOCKHOLDERS RAMON
ANG SALAZAR, JR., ROBERT ANG SALAZAR, ROGER ANG
SALAZAR, AND ROSEMARIE SALAZAR FERNANDEZ,**
RESPONDENTS.
DECISION

GAERLAN, J.:

The present petition for review on certiorari[1] assails the Decision[2] and the Resolution[3] of
the Court of Appeals (CA) in CA-G.R. SP No. 05050, which dismissed Metropolitan Bank &
Trust Company's (Metrobank) petition for certiorari against the June 16, 2009[4] and February
23, 2010[5] Orders issued by Branch 9 of the Regional Trial Court (RTC) of Tacloban City, in
Civil Case No. 2001-11-164.

Antecedents

Petitioner Metrobank and respondent Salazar Realty Corporation (SARC) are both Philippine
corporations. Metrobank is engaged in the banking business,[6] while SARC is engaged in the
real estate business.[7] Also involved in the events preceding the present litigation is another
Philippine corporation, Tacloban RAS Construction Corporation (Tacloban RAS).

On November 5, 2001, SARC filed an action for quieting of title and nullification of contracts
against Metrobank before the RTC of Tacloban City.[8] The petition was docketed as Civil Case
No. 2001-11-164.[9] SARC alleged that:

1) Based on its latest filings at the time of the filing of the petition, SARC had the following
officers, who also composed its board of directors:[10] Raymund A. Salazar, President; Ramon
Ve. Salazar, Vice President; Ralph A. Salazar,[11] Secretary; Rosemarie A. Salazar, Treasurer;
Consuelo A. Salazar,[12] Member, Board of Directors.

2) On October 6, 1992, Tacloban RAS obtained a loan from Metrobank in the amount of ten
million pesos (P10,000,000.00).[13] On January 9, 1996, the loan amount was increased to
twelve million pesos (P12,000,000.00); and on October 6, 1999 it was further increased to
eighteen million five hundred thousand pesos (P18,500,000.00).[14] This final amount was
reflected in a promissory note executed on October 6, 1999 between Tacloban RAS and
Metrobank, which was signed by Consuelo and Ralph as president and corporate secretary,
respectively, of Tacloban RAS.[15] To secure the loan, Metrobank and SARC entered into a
mortgage contract on January 9, 1996, with Consuelo and Ralph still signing, this time on
behalf of SARC.[16] The mortgage covered five parcels of land located in Tacloban City, which
were all registered in the name of SARC.[17] The mortgage was likewise amended to cover the
final amount of the loan.[18]

3) Meanwhile, on March 30, 1995, Ramon Ve. Salazar, SARC's Vice President and director,
passed away. Consuelo likewise passed away on October 21, 2001. The vacancies left by their
passing were left unfilled.[19]

4) The remaining directors of SARC, including Ralph, issued a board resolution approving the
mortgage of the five SARC-owned lots to secure the loan obligation of Tacloban RAS.[20]

5) Tacloban RAS defaulted on the loan, prompting Metrobank to initiate extrajudicial

foreclosure proceedings before the RTC of Tacloban City.[21] Metrobank emerged as the
winning bidder in the auction sale.[22] Upon issuance of the certificate of sale[23] and filing of
the affidavit of consolidation of ownership,[24] SARC's certificates of title were cancelled and
new ones were issued in Metrobank's favor.[25]

6) Upon hearing about the auction sale, Ramon Ang Salazar, Jr., Robert Ang Salazar, Roger Ang
Salazar and Rosemarie Salazar Fernandez (hereinafter referred to as Ramon et al.) as
incorporators and stockholders acting in behalf of SARC, immediately checked the status of the
disputed lands with the Register of Deeds. They discovered that SARC's certificates of title had
been cancelled.[26] In response, Ramon et al. registered an adverse claim on the new certificates
of title that were issued to Metrobank.[27]

7) In view of the SARC board's inaction and tacit approval of the unauthorized encumbrance
and subsequent loss of the corporation's real properties, Ramon et al. filed the present suit on
SARC's behalf.

8) The loan agreement is void because Consuelo is not a stockholder or officer of Tacloban
RAS, based on its incorporation papers filed with the SEC.[28]

9) The mortgage agreement and the foreclosure proceedings are void because Tacloban RAS has
no authority to use SARC's properties as collateral. Rather, the authorization for such purpose
was issued by the SARC board to a single proprietorship named RAS Construction, which is an
entity distinct and separate from Tacloban RAS.[29]

10) SARC exceeded its corporate powers when it entered into a mortgage contract to secure the
obligation of a separate, distinct, and unrelated corporation. Tacloban RAS is not a subsidiary of
SARC. It likewise holds no shares or any other form of investment in the latter corporation.
Thus, the mortgage contract is void for being ultra vires insofar as SARC is concerned.[30]
11) SARC's principal corporate assets are limited to six (6) parcels of land. Consequently, the
mortgage of the five parcels in dispute, including the lot on which SARC's principal office is
located, constitutes an encumbrance of substantially all the assets of the corporation which must
be authorized by SARC's stockholders in a meeting for that purpose, pursuant to Section 40 of
the Corporation Code. Absent such authorization, the mortgage contract is null and void.[31]

12) SARC board and stockholder approvals for the mortgage contract and the amendments
thereto were not annotated on SARC's certificates of title, giving rise to the presumption that
neither the SARC board nor its stockholders approved said contract and the amendments
thereto.[32]

13) Metrobank failed to exercise due diligence when it extended an eighteen-million-peso loan
to Tacloban RAS, whose authorized capital stock was only three million pesos. Furthermore, the
loan was secured by properties owned by SARC, whose authorized capital stock was only five
million pesos. More importantly, Metrobank was guilty of negligence when it failed to
thoroughly investigate Consuelo and Ralph's authority to enter contracts and encumber
properties on behalf of Tacloban RAS and SARC.[33]

14) Assuming that the loan and mortgage contracts are valid and binding, the foreclosure
proceedings are nevertheless null and void, for the following reasons: a) Metrobank's petition
for foreclosure lacks several material details which render it fatally defective under A.M. No.
99-10-05-0;[34] b) SARC was not given personal notice of the foreclosure sale; c) the
publication of the notice of sale was defective because copies thereof were attached to the
record only after the auction sale had taken place, and notices of publication were not furnished
for all instances of publication, in violation of A.M. No. 99-10-05-0; d) there was only one
bidder in the auction sale, in violation of item 5 of A.M. No. 99-10-05-0; and e) Section 47 of
Republic Act No. 8791 which sets different redemption periods for natural and juridical persons
is unconstitutional.[35]

Accordingly, SARC prayed that the cloud on its title be removed by: 1) nullifying the loan and
mortgage agreements between Metrobank and Tacloban RAS/SARC; 2) nullifying the
foreclosure proceedings initiated by Metrobank; and 3) cancelling the certificates of title issued
to Metrobank.[36]

SARC's petition was raffled to Branch 9 of the Tacloban City RTC, which assumed jurisdiction
over the case.

On February 13, 2002, Metrobank filed a Comment with Motion to Dismiss. It argued that
Ralph had authority to enter into the loan and mortgage agreements, and that the mortgaged
properties were personally owned by Ralph and Consuelo.[37] Metrobank further alleged that
Consuelo personally bound herself as surety;[38] and that the final amount of the loan was
agreed upon pursuant to a restructuring upon Ralph's request, with the approval of the boards of
directors of both Tacloban RAS and SARC.[39]

Metrobank also argued that SARC and its stockholders have no standing to seek the
cancellation of the loan and mortgage agreements since SARC is not a party thereto.[40] It also
argued that the petition filed by SARC through Ramon et al. is in the nature of a derivative suit
which must be directed against SARC's officers, directors, or stockholders. Likewise, since the
petition is in the nature of a derivative suit, it is an intra-corporate controversy over which
regular courts like Branch 9 of the Tacloban City RTC have no jurisdiction.[41] Metrobank thus
prayed that the petition be dismissed for lack of standing on the part of both Ramon et al. and
SARC, and for lack of jurisdiction.

In its Reply, SARC reiterated Ralph's lack of authority to bind Tacloban RAS and SARC. It also
disputed Metrobank's argument on standing, maintaining that the case was properly filed against
Metrobank, who was responsible for clouding its titles by initiating the foreclosure proceedings.
[42] In the same vein, SARC also rejected Metrobank's characterization of the petition as an
intra-corporate controversy, arguing that the loan and mortgage contracts, as well as the
foreclosure proceedings, are clouds on SARC's title which may only be removed by the RTC,
thus:[43]

12.3 x x x [W]hat [SARC] is claiming is that [Metrobank] violated the right of

ownership of the [SARC] over the lands which are the subject matter of this suit by
having the same sold at foreclosure proceedings and having the titles of [SARC]
corporation cancelled and transferred in [Metrobank]'s name when it did not have
the right to do the same because [SARC] did not consent to the Mortgage Contract
under which [Metrobank] is claiming rights and such Mortgage is not supported by a
valid principal obligation as the loan was not consented to by [Tacloban RAS] based
on the petition filed by [Metrobank] for the extrajudicial foreclosure of the Mortgage
allegedly executed by Petitioner Salazar Ang Realty Corporation.

12.4 The relief sought which is the declaration of nullity of the mortgage contract
and foreclosure proceedings is demandable only from the [Metrobank] as the holder
of rights under the contract as Mortgagee and the public officials responsible for
performing duties under Act 3135 and not from Ralph Salazar who is not a party to
the contract in question - the parties involved being Salazar Ang Realty Corporation
as the alleged Mortgagor and [Metrobank] as the Mortgagee.[44]

On April 25, 2002, the trial court denied Metrobank's motion to dismiss, and ordered SARC to
file an answer or other responsive pleading.[45] Thereafter, the parties filed their respective pre-
trial briefs. On March 11, 2003, Metrobank filed a motion for inhibition,[46] which was denied.
[47] On November 6, 2005, the trial court granted SARC's request for preliminary injunction to

prevent Metrobank from further enforcing its claim to the properties.[48] On February 1, 2005,
Metrobank filed a Motion for Leave to File an Amended Answer with Motion to Dismiss, which
was denied in an Order dated December 6, 2005.[49]

On February 2, 2009, Metrobank filed yet another motion to dismiss,[50] reiterating its argument
that SARC's petition is a derivative suit and therefore an intra-corporate controversy. Under
A.M. No. 00-11-03-SC, a special commercial court was created in the Tacloban City RTC;
however, Branch 9, which is a regular trial court, continued to exercise jurisdiction over the
present case even if it has no jurisdiction thereover other than to dismiss it.[51] SARC filed an
opposition to Metrobank' s motion to dismiss,[52] reiterating its stance that the case falls within
the jurisdiction of the regular courts regardless of its nature as a derivative suit because the
reliefs sought are within the jurisdiction of the regular courts.[53]

On June 16, 2009, the trial court issued the first assailed order denying Metrobank's latest
motion to dismiss. The trial court ruled that the requirement that cases formerly cognizable by
the SEC be filed with a special commercial court does not apply to the present case, which was
filed before A.M. No. 03-03-03-SC took effect on July 1, 2003. Assuming that the requirement
is applicable, the trial court ruled that it retains the jurisdiction to transfer the case to the special
commercial court in the Tacloban City RTC, on the ground that jurisdiction, once acquired,
continues until final resolution of the case.[54] The trial court further ruled that the present case
does not involve an intra-corporate controversy, because it does not involve a dispute between a
corporation and its stockholders; rather, it involves a suit by a corporation through its
shareholders against another corporation and certain public officers. Furthermore, as SARC
correctly points out, its causes of action are within the jurisdiction of the regular courts.[55]

On February 23, 2010, the trial court rendered the second assailed order[56] denying
Metrobank's motion for reconsideration.[57]

Still adamant that the case involves an intra-corporate controversy, Metrobank elevated the
matter to the CA, arguing that the trial court committed grave abuse of discretion in narrowly
defining intra-corporate controversies as limited to suits involving disputes between a
corporation and its stockholders.[58]

In dismissing Metrobank's petition, the CA ruled that under Rule 1 of A.M. No. 01-2-04-SC, or
the Interim Rules of Procedure Governing Intra­-Corporate Controversies (2001 IRPIC),
derivative suits are also intra-corporate controversies. Therefore, to determine if SARC's
petition must be tried under the 2001 IRPIC by a special commercial court, it must pass the two-
tier intra-corporate controversy test. The appellate court found that SARC's petition does not
pass the two-tier test. It satisfies neither the relationship test, since it does not involve any of the
intra-corporate relationships enumerated in Section 5(b) of Presidential Decree No. 902-A;[59]
nor the controversy test, since it does not involve a dispute which is intrinsically connected with
the regulation of SARC or a dispute which arises out of intra-corporate relations within SARC.
[60] Rather, the case involves the removal of the cloud on SARC's titles, which was created by
the contracts executed by Ralph and Consuelo allegedly on behalf of Tacloban RAS and SARC.
[61] Furthermore, Ramon et al. are not stockholders of the corporation they are suing; rather,

they are suing on behalf of the corporation in which they hold shares.[62] Citing jurisprudence,
the CA held that "Where the complaint is for annulment of mortgage with the mortgagee
bank as one of the defendants, the jurisdiction over said complaint is lodged with the
regular courts because the mortgagee bank has no intra-corporate relationship with the
stockholders;"[63] and that "the question as to who is the true owner of the disputed property is
civil in nature and should be threshed out by a regular court," not by a special commercial court.
[64]
The CA denied Metrobank's motion for consideration[65] through the assailed resolution; hence,
this petition, which raises the following errors:

1). THE COURT OF APPEALS SERIOUSLY ERRED IN USING THE TWO TIER
TEST AS A GAUGE IN DETERMINING WHETHER OR NOT A SUIT IS A
DERIVATIVE SUIT. ITS CONSEQUENT EMPLOYMENT OF SUCH TEST IS
WITHOUT BASIS AND VIOLATES SETTLED JURISPRUDENCE, SUCH AS,
THE CASE OF FILIPINAS PORT SERVICES INC V. GO AND HI-YIELD
REALTY V. COURT OF APPEALS AND THE INTERIM RULES OF
PROCEDURE GOVERNING INTRACO[R]PORATE CASES.

2). THE REGIONAL TRIAL COURT, BRANCH [9] TACLOBAN CITY, WHICH
IS AN ORDINARY COURT AND NOT A COMMERCIAL COURT, DOES NOT
HAVE JURISDICTION OVER A DERIVATIVE SUIT.

3). THE FINDING OF THE COURT OF APPEALS THAT THE CASE A QUO IS
NOT A DERIVATIVE SUIT BECAUSE THE STOCKHOLDERS WHO
BROUGHT THE SUIT FOR OR ON BEHALF OF RESPONDENT
CORPORATION ARE NOT STOCKHOLDERS OF PETITIONER, ASSUMING
EX ARGUMENTI, IS CORRECT WILL CAUSE THE DISMISSAL OF THE
CASE A QUO ON THE GROUND OF LACK OF CAUSE OF ACTION OR
PERSONALITY TO SUE.[66]

The essential issue raised by the petition is whether Branch 9 of the Tacloban City RTC, not
being a special commercial court, has jurisdiction over a derivative suit to annul a mortgage
allegedly entered into by corporate officers without proper authorization and where the
defendants are third parties with no relation to the suing corporation.

The Court's Ruling

I.

Metrobank argues that jurisdiction over derivative suits is vested in the special commercial
courts. It asserts that the CA erred in applying the two-tier test to determine whether the case
should be tried by a special commercial court. The two-tier test applies only to the
determination of the existence of an intra-corporate controversy, and not to the determination of
whether an action is a derivative suit, which is determined using a different three-part test.

The special commercial courts were organized pursuant to the provisions of the Securities
Regulation Code (SRC).[67] Sections 4.1 and 5.2 thereof provide:

Section 4. Administrative Agency. - 4.1. This Code shall be administered by the

Securities and Exchange Commission (hereinafter referred to as the "Commission")
as a Collegial body, composed of a chairperson and (4) Commissioners, appointed
by the President for a term of (7) seven years each and who shall serve as such until
their successor shall have been appointed and qualified. A Commissioner appointed
to fill a vacancy occurring prior to the expiration of the term for which his/her
predecessor was appointed, shall serve only for the unexpired portion of their terms
 under Presidential Decree No. 902-A. Unless the context indicates otherwise, the
term "Commissioner" includes the Chairperson.

5.2. The Commission's jurisdiction over all cases enumerated under section 5 of
Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, That the
Supreme Court in the exercise of its authority may designate the Regional Trial
Court branches that shall exercise jurisdiction over the cases. The Commission
shall retain jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally
disposed. (Underscoring and emphasis supplied)

In turn, Section 5 of Presidential Decree No. 902-A, or the SEC Reorganization Decree, defines
certain classes of disputes and the tribunal with jurisdiction over them. Over time, these classes
of disputes have become known as intra-corporate disputes or intra-corporate controversies.
[68]

Pursuant to the transfer of jurisdiction effected therein, Section 5.2 of the SRC also authorized
the Supreme Court to designate certain RTCs to try intra-corporate disputes. Thus, the Supreme
Court designated certain RTCs as special commercial courts[69] and enacted the 2001 IRPIC to
provide for the procedure to be observed in trying the above-enumerated cases.[70] Interestingly,
Rule 1, Section 1(a) of the 2001 IRPIC also enumerates the cases to which it shall be applicable.
At this point, we compare this provision with Section 5 of the SEC Reorganization Decree,
which remains the source provision for the subject matter jurisdiction of the special commercial
courts:

Section 5, SEC Reorganization Decree Rule 1, Section 1(a), 2001 IRPIC

SECTION 5. In addition to the regulatory SECTION 1. (a) Cases Covered — These
and adjudicative functions of the Rules shall govern the procedure to be
Securities and Exchange Commission observed in civil cases involving the
over corporations, partnerships and other following:
forms of associations registered with it as
expressly granted under existing laws and
decrees, it shall have original and
exclusive jurisdiction to hear and
decide cases involving: (1) Devices or schemes employed by, or
any act of, the board of directors,
a) Devices or schemes employed by or business associates, officers or partners,
any acts, of the board of directors, amounting to fraud or misrepresentation
business associates, its officers or which may be detrimental to the interest
partners, amounting to fraud and of the public and/or of the stockholders,
misrepresentation which may be partners, or members of any corporation,
detrimental to the interest of the public partnership, or association;
and/or of the stockholder, partners,
members of associations or organizations (2) Controversies arising out of intra-
registered with the Commission; corporate, partnership, or association
 relations, between and among
b) Controversies arising out of intra- stockholders, members, or associates; and
corporate or partnership relations, between, any or all of them and the
between and among stockholders, corporation, partnership, or association of
members, or associates; between any or which they are stockholders, members, or
all of them and the corporation, associates, respectively;
partnership or association of which they
are stockholders, members or associates,
respectively; and between such
corporation, partnership or association (3) Controversies in the election or
and the state insofar as it concerns their appointment of directors, trustees,
individual franchise or right to exist as officers, or managers of corporations,
such entity; partnerships, or associations;

c) Controversies in the election or (4) Derivative suits; and

appointments of directors, trustees,
officers or managers of such corporations, (5) Inspection of corporate books.
partnerships or associations.

Conspicuous here is the fact that the first three items of both enumerations are essentially the
same, for the obvious reason that the 2001 IRPIC was intended to serve as the procedural
regime for the cases defined in Section 5 of the SEC Reorganization Decree, jurisdiction over
which has been transferred to the RTCs. The confusion which arose in the present case is
engendered partly by the addition of derivative suits as a separate item in the 2001 IRPIC.

II.

A derivative suit is one of three kinds of suits that may be filed by a stockholder or member of a
corporation or association, viz.:

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. Where a stockholder or member is denied the right of
inspection, his suit would be individual because the wrong is done to him personally
and not to the other stockholders or the corporation. Where the wrong is done to a
group of stockholders, as where preferred stockholders' rights are violated, a class or
representative suit will be proper for the protection of all stockholders belonging to
the same group. But where the acts complained of constitute a wrong to the
corporation itself, then the cause of action belongs to the corporation and not to the
individual stockholder or member. Although in most every case of wrong to the
corporation, each stockholder is necessarily affected because the value of his interest
therein would he impaired, this fact of itself is not sufficient to give him an
individual cause of action since the corporation is a person distinct and separate from
him, and can and should itself sue the wrongdoers. Otherwise, not only would the
theory of separate entity be violated, but there would be multiplicity of suits as well
as a violation of the priority rights of creditors. Furthermore, there is the difficulty of
determining the amount of damages that should be paid to each individual
stockholder.
 However, in cases of mismanagement where the wrongful acts committed by the
directors or trustees themselves, a stockholder or member may find that he has
no redress because the former are vested by law with the right to decide
whether or not the corporation should sue, and they will never be willing to sue
themselves. The corporation would thus be helpless to seek remedy. Because of
the frequent occurrence of such a situation, the common law gradually
recognized the right of a stockholder to sue on behalf of the corporation in what
eventually became known as a "derivative suit." It has been proven to be an
effective remedy of the minority against abuses of management. Thus, an
individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holds stock in order to protect or vindicate corporate
rights, whenever officials of the corporation refuse to sue or are the ones to be
sued or hold the control of the corporation. In such actions, the suing stockholder
is regarded as the nominal party, with the corporation as the party in interest.[71]

In Ago Realty & Development Corp. v. Ago,[72] we further elaborated on this basic principle that
derivative suits are equitable exception to the rule that a corporation's power to bring suits may
only be exercised through its board of directors:

While corporations are subjected to the State's broad regulatory powers, it is their
directors and officers who are tasked with addressing questions of internal policy
and management. The business of a corporation is conducted by its board of
directors, and so long as the board acts in good faith, the State, through the courts,
may not interfere with its management decisions. This finds support in Section 23 of
the Corporation Code, which provides that a corporation exercises its powers,
conducts its business, and controls and holds its property through its board of
directors.

As creatures of the law, corporations only possess those powers that are granted
through statute, either expressly or by way of implication, or those that are incidental
to their existence.

One of the powers expressly granted by law to corporations is the power to sue. As
with other corporate powers, the power to sue is lodged in the board of directors,
acting as a collegial body. Thus, in the absence of any clear authority from the board,
charter, or by-laws, no suit may be maintained on behalf of the corporation. A case
instituted by a corporation without authority from its board of directors is subject to
dismissal on the ground of failure to state a cause of action.
 
In certain instances, however, the
stockholders may sue on behalf of the 
corporation

As an exception to the foregoing rule, jurisprudence has recognized certain instances

when minority stockholders may bring suits on behalf of corporations. Where the
board of directors itself is a party to the wrong, either because it is the author thereof
or because it refuses to take remedial action, equity permits individual stockholders
to seek redress. These actions have come to be known as derivative suits. In Chua v.
 Court of Appeals, the Court defined a derivative suit as "a suit by a shareholder to
enforce a corporate cause of action."

In derivative suits, it is the corporation that is the victim of the wrong. As such, it is
the corporation that is properly regarded as the real party in interest, while the
relator-stockholder is merely a nominal party. The corporation must be impleaded so
that the benefits of the suit accrue to it and also because it must be barred from
bringing a subsequent case against the same defendants for the same cause of action.
Stated otherwise, the judgment rendered in the suit must constitute res judicata
against the corporation, even though it refuses to sue through its board of directors.

xxxx

The right of stockholders to bring derivative suits is not based on any provision of
the Corporation Code or the Securities Regulation Code, but is a right that is implied
by the fiduciary duties that directors owe corporations and stockholders. Derivative
suits are, therefore, grounded not on law, but on equity.[73]

Jurisprudence has developed three requisites for a derivative suit, which are first enumerated
together in the 1989 case of San Miguel Corporation v. Kahn:[74]

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;

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.[75]

This is the three-part test insisted upon by Metrobank; however, this test has been superseded by
Rule 8, Section 1 of the 2001 IRPIC, which obliquely defines a derivative suit, or a derivative
action, as an action brought by a stockholder or member in the name of a corporation or
association.[76] That same provision states that such actions may be brought, provided that the
following requisites, which must be specifically alleged in the complaint,[77] are met:

(1) The party suing on the corporation or association's behalf was a stockholder or
member at the time the acts or transactions subject of the action occurred and at the
time the action was filed;

(2) Such party exerted all reasonable efforts, and alleges the same with particularity
in the complaint, to exhaust all remedies available under the articles of
incorporation, by-laws, laws or rules governing the corporation or partnership to
obtain the relief he desires;
 (3) No appraisal rights are available for the act or acts complained of; and

(4) The suit is not a nuisance or harassment suit.

(5) The suit must be brought in the name of the corporation.[78]

III.

Prior to the enactment of the SEC Reorganization Decree in 1976, jurisdiction over derivative
suits was lodged with the courts of general jurisdiction.[79]

With the advent of the SEC Reorganization Decree, jurisprudence has resorted to Section 5
thereof to allocate jurisdiction between the SEC and the regular courts. The application of
Section 5 was eventually standardized into a two-tier test which has been applied to all kinds of
stockholder suits, whether individual, class, or derivative.[80] The two "tiers" are actually two
separate tests: the first test assesses the relationship of the parties of the case to one another,[81]
and the second test assesses nature of the controversy among the parties:[82]

To determine whether a case involves an intra-corporate controversy, x x x two

elements must concur: (a) the status or relationship of the parties; and (2) the nature
of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or
partnership relations between any or all of the parties and the corporation,
partnership or association of which they are stockholders, members or associates;
between any or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and between such
corporation, partnership or association and the State insofar as it concerns their
individual franchises. The second element requires that the dispute among the parties
be intrinsically connected with the regulation of the corporation. If the nature of the
controversy involves matters that are purely civil in character, necessarily, the case
does not involve an intra-corporate controversy.[83]

The two-tier test ensures that cases involving corporations but do not involve actual intra-
corporate disputes are filtered out:

[I]n the 1984 case of DMRC Enterprises v. Este del Sol Mountain Reserve, Inc., the
Court introduced the nature of the controversy test. We declared in this case that it is
not the mere existence of an intra-corporate relationship that gives rise to an intra-
corporate controversy; to rely on the relationship test alone will divest the regular
courts of their jurisdiction for the sole reason that the dispute involves a corporation,
its directors, officers, or stockholders. We saw that there is no legal sense in
disregarding or minimizing the value of the nature of the transactions which gives
rise to the dispute.

Under the nature of the controversy test, the incidents of that relationship must also
 be considered for the purpose of ascertaining whether the controversy itself is intra-
corporate. The controversy must not only be rooted in the existence of an intra-
corporate relationship, but must as well pertain to the enforcement of the parties'
correlative rights and obligations under the Corporation Code and the internal and
intra-corporate regulatory rules of the corporation. If the relationship and its
incidents are merely incidental to the controversy or if there will still be conflict
even if the relationship does not exist, then no intra-corporate controversy exists.[84]

Subsequent decisions further hold that the following relationships are considered intra-
corporate: (1) those between the corporation, partnership or association and the public; (2) those
between the corporation, partnership or association and the State insofar as its franchise, permit
or license to operate is concerned; (3) those between the corporation, partnership or association
and its stockholders, partners, members or officers; and (4) those among the stockholders,
partners or associates themselves.[85] Likewise, a controversy is intra-corporate in nature if it
involves the enforcement of the parties' correlative rights and obligations under the Corporation
Code and the internal and intra-corporate regulatory rules of the corporation.[86]

Thus, under the regime of the SEC Reorganization Decree, it appears that derivative suits which
satisfy the two-tier test must be tried by the SEC, while those that do not must be tried by the
regular courts.[87] This view is manifested in the 2012 case of Lisam Enterprises v. Banco de
Oro Unibank (Lisam),[88] which, like the present case, also involved a derivative suit for
annulment of mortgage filed by a shareholder against the president and the treasurer of the
corporation, as well as the mortgagee bank. The bank filed a motion to dismiss, claiming the
stockholder's lack of legal capacity to sue, failure to state a cause of action, and litis pendentia.
The trial court granted the motion to dismiss and denied the stockholder's motion to amend the
complaint to include an allegation that she tried to exhaust intra-corporate remedies. We allowed
the stockholder to resort directly to the Supreme Court to resolve pure questions of law, and
reversed the trial court, viz.:

With the amendment stating "that plaintiff Lolita A. Soriano likewise made demands
upon the Board of Directors of Lisam Enterprises, Inc., to make legal steps to protect
the interest of the corporation from said fraudulent transaction, but unfortunately,
until now, no such legal step was ever taken by the Board, hence, this action for the
benefit and in behalf of the corporation," does the amended complaint now
sufficiently state a cause of action? In Hi-Yield Realty, Incorporated v. Court of
Appeals, the Court enumerated the requisites for filing a derivative suit, as follows:

a) the party bringing the 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.
A reading of the amended complaint will reveal that all the foregoing requisites had
been alleged therein. Hence, the amended complaint remedied the defect in the
original complaint and now sufficiently states a cause of action.

Respondent PCIB should not complain that admitting the amended complaint after
they pointed out a defect in the original complaint would be unfair to them. They
should have been well aware that due to the changes made by the 1997 Rules of
Civil Procedure, amendments may now substantially alter the cause of action or
defense. It should not have been a surprise to them that petitioners would redress the
defect in the original complaint by substantially amending the same, which course of
action is now allowed under the new rules.

The next question then is, upon admission of the amended complaint, would it still
be proper for the trial court to dismiss the complaint? The Court answers in the
negative.

Saura v. Saura, Jr. is closely analogous to the present case. In Saura, the petitioners
therein, stockholders of a corporation, sold a disputed real property owned by the
corporation, despite the existence of a case in the Securities and Exchange
Commission (SEC) between stockholders for annulment of subscription, recovery of
corporate assets and funds, etc. The sale was done without the knowledge of the
other stockholders, thus, said stockholders filed a separate case for annulment of
sale, declaration of nullity of deed of exchange, recovery of possession, etc., against
the stockholders who took part in the sale, and the buyer of the property, filing said
case with the regular court (RTC). Petitioners therein also filed a motion to dismiss
the complaint for annulment of sale filed with the RTC, on the ground of forum
shopping, lack of jurisdiction, lack of cause of action, and litis pendentia among
others. The Court held that the complaint for annulment of sale was properly filed
with the regular court, because the buyer of the property had no intra-corporate
relationship with the stockholders, hence, the buyer could not be joined as party-
defendant in the SEC case. To include said buyer as a party-defendant in the case
pending with the SEC would violate the then existing rule on jurisdiction over intra-
corporate disputes. The Court also struck down the argument that there was forum
shopping, ruling that the issue of recovery of corporate assets and funds pending
with the SEC is a totally different issue from the issue of the validity of the sale, so a
decision in the SEC case would not amount to res judicata in the case before the
regular court. Thus, the Court merely ordered the suspension of the proceedings
before the RTC until the final outcome of the SEC case.

The foregoing pronouncements of the Court are exactly in point with the issues in
the present case. Here, the complaint is for annulment of mortgage with the
mortgagee bank as one of the defendants, thus, as held in Saura, jurisdiction over
said complaint is lodged with the regular courts because the mortgagee bank has no
intra-corporate relationship with the stockholders. There can also be no forum
shopping, because there is no identity of issues. The issue being threshed out in
the SEC case is the due execution, authenticity or validity of board resolutions
and other documents used to facilitate the execution of the mortgage, while the
issue in the case filed by petitioners with the RTC is the validity of the mortgage
 itself executed between the bank and the corporation, purportedly represented
by the spouses Leandro and Lilian Soriano, the President and Treasurer of
petitioner LEI, respectively. Thus, there is no reason to dismiss the complaint in
this case.[89]

Obviously, Lisam relies heavily on the earlier ruling in Saura v. Saura, Jr. (Saura),[90] which
was decided prior to the transfer of jurisdiction over intra-corporate controversies from the SEC
to the courts. One of the reasons put forth by the Saura court in making a distinction between
derivative suits cognizable by the SEC and derivative suits cognizable by the regular courts is
that the SEC is a specialized administrative agency which has jurisdiction over intra-corporate
disputes but not over actions to annul mortgages or sales:

"It is true that the trend is towards vesting administrative bodies like the SEC with
the power to adjudicate matters coming under their particular specialization, to
insure a more knowledgeable solution of the problems submitted to them. This
would also relieve the regular courts of a substantial number of cases that would
otherwise swell their already clogged dockets. But as expedient as this policy may
be, it should not deprive the courts of justice of their power to decide ordinary cases
in accordance with the general laws that do not require any particular expertise or
training to interpret and apply. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render the
judiciary virtually impotent in the discharge of the duties assigned to it by the
Constitution."

Since Sandalwood has no intra-corporate relationship with the respondents, it cannot

be joined as party-defendant in the SEC case as to do so would violate the rule on
jurisdiction. Therefore, respondents' complaint against Sandalwood for the
annulment of the sale of realty was properly filed before the regular court. This
action must await the final ruling of the issue raised in SEC Case No. 2968,
questioning the validity of the deed of exchange, the resolution of which is a logical
antecedent of the issue involved in the civil action against Sandalwood. Thus,
respondents' complaint for annulment of sale can only succeed if final judgment is
rendered in SEC Case No. 2968, annulling the deed of exchange executed in favor of
VGFI.[91]

IV.

Upon the transfer of the SEC's jurisdiction over intra-corporate disputes pursuant to Section 5.2
of the SRC and the 2001 IRPIC, the distinction between "intra-corporate" and "non-intra-
corporate" derivative suits was obliterated; and jurisdiction over all derivative suits was
returned to the trial courts.

Relative thereto, we have already mentioned that the 2001 IRPIC was intended to serve as the
procedural regime to govern the cases defined in Section 5 of the SEC Reorganization Decree,
Thus, the express inclusion of derivative suits in the classes of cases governed by the 2001
IRPIC implies that all derivative suits must now be tried by the special commercial courts. This
conclusion is further bolstered by an examination of the concept and nature of a derivative suit.
Since a derivative suit is an equity-based procedural device which allows an unauthorized
person to sue on behalf of a corporation in order to remedy official or directorial
mismanagement, the very act of instituting a derivative suit implies the existence of an intra-
corporate dispute, regardless of the relief sought by such suit or the parties impleaded therein.
Couched in the language of Section 5(b) of the SEC Reorganization Decree, the mere resort to
a derivative suit implies the existence of a "controvers[y] arising out of intra-corporate x x x
relations, between and among stockholders [or] members; between any or all of them and
the corporation x x x or association of which they are stockholders [or] members." In the
case of a derivative suit, this would normally entail a dispute between an individual stockholder
or a group of stockholders, against the directors, the officers, or the majority stockholders.

This view is based not only on the text of the statute but also on jurisprudence. In an obiter
dictum in the 1997 case of Western Institute of Technology, Inc. v. Salas, the Court expressly
acknowledged that a derivative suit is an intra-corporate dispute as defined in Section 5(b) of
the SEC Reorganization Decree.[92] This obiter dictum became doctrine in Forest Hills Golf
and Country Club, Inc. v. Fil-Estate Properties, Inc.,[93] where we rejected the suing
shareholder's argument that the case, while admittedly a derivative suit, did not involve an intra-
corporate dispute because he was suing the other shareholders not in their capacity as
shareholders but as third-party developers of a property owned by the corporation, viz.:

Petitioner FHGCCI's contention that the instant case does not involve an intra-
corporate controversy as it was filed against respondents FEPI and FEGDI as
developers, and not as shareholders of the corporation holds no water. Apparent in
the Complaint are allegations of the interlocking directorships of the Board of
Directors of petitioner FHGCCI and respondents FEPI and FEGDI, the conflict of
interest of the Board of Directors of petitioner FHGCCI, and their bad faith in
carrying out their duties. Likewise alleged is that respondent FEPI and, later,
respondent FEGDI are shareholders of petitioner FHGCCI which under the project
agreement, respondent FEPI was tasked to perform the development and
construction work and other obligations and undertakings of the project as full
payment of its subscription to the authorized capital stock of petitioner FHGCCI,
which it later assigned to respondent FEGDI. Considering these allegations, we find
that, contrary to the claim of petitioner FHGCCI, there are unavoidably intra-
corporate controversies intertwined in the specific performance case.

Moreover, a derivative suit is a remedy designed by equity as a principal defense of

the minority shareholders against the abuses of the majority. Under the Corporation
Code, the corporation's power to sue is lodged with its board of directors or trustees.
However, when its officials refuse to sue, or are the ones to be sued, or hold control
of the corporation, an individual stockholder may be permitted to institute a
derivative suit to enforce a corporate cause of action on behalf of a corporation in
order to protect or vindicate its rights. In such actions, the corporation is the real
party in interest, while the stockholder suing on behalf of the corporation is only a
nominal party. Considering its purpose, a derivative suit, therefore, would
necessarily touch upon the internal affairs of a corporation. It is for this reason
that a derivative suit is among the cases covered by the Interim Rules of Procedure
Governing Intra-Corporate Controversies, A.M. No. 01-2-04-SC, March 13, 2001.
[94]
 V.

The cognizability of derivative suits by the special commercial courts is further bolstered by the
2015 case of Gonzales, et al. v. GJH Land, Inc., et al. (Gonzales),[95] where the Court En Banc
laid down the following guidelines:

1. If a commercial case filed before the proper RTC is wrongly raffled to its regular
branch, the proper courses of action are as follows:

1.1 If the RTC has only one branch designated as a Special Commercial
Court, then the case shall be referred to the Executive Judge for re-
docketing as a commercial case, and thereafter, assigned to the sole
special branch;

1.2 If the RTC has multiple branches designated as Special Commercial

Courts, then the case shall be referred to the Executive Judge for re-
docketing as a commercial case, and thereafter, raffled off among those
special branches; and

1.3 If the RTC has no internal branch designated as a Special

Commercial Court, then the case shall be referred to the nearest RTC
with a designated Special Commercial Court branch within the judicial
region. Upon referral, the RTC to which the case was referred to should
re-docket the case as a commercial case, and then: (a) if the said RTC has
only one branch designated as a Special Commercial Court, assign the
case to the sole special branch; or (b) if the said RTC has multiple
branches designated as Special Commercial Courts, raffle off the case
among those special branches.

2. If an ordinary civil case filed before the proper RTC is wrongly raffled to its
branch designated as a Special Commercial Court, then the case shall be referred to
the Executive Judge for re-docketing as an ordinary civil case. Thereafter, it shall be
raffled off to all courts of the same RTC (including its designated special branches
which, by statute, are equally capable of exercising general jurisdiction same as
regular branches), as provided for under existing rules.[96]

The Gonzales guidelines are based on the Court En Banc's ruling therein that the transfer of
jurisdiction effected by Section 5.2 of the SRC was directed at "the courts of general
jurisdiction," that is, to the RTCs in general, rather than to the special commercial courts alone.
In authorizing the Supreme Court to designate special commercial courts, the statute did not
delegate the power to define subject matter jurisdiction; rather, it authorized the Supreme Court
to designate the specific branches of the RTCs which will exercise the jurisdiction that has
been vested in the RTCs in general.[97] This interpretation supersedes previous rulings which
mandated the dismissal of intra-corporate cases that were mistakenly filed with the regular
RTCs.[98] Under the current rules, mistakenly filed intra-corporate cases and non-intra­-
corporate cases can now be shuttled to the proper RTC.

Given that jurisdiction over both derivative suits and intra-corporate controversies has now been
essentially coalesced with the RTCs, the objection interposed in Saura and Lisam with respect
to the SEC's lack of competence and jurisdiction over non-corporate issues that may be
implicated in a derivative suit, or over parties without any relation to the corporation, has
already been obviated. In Concorde Condominium, Inc. v. Baculio,[99] we ruled that special
commercial courts are still considered courts of general jurisdiction, and are therefore
empowered not only to hear and decide cases under its general jurisdiction, but also to assume
jurisdiction over parties unrelated to the corporation.[100]

Furthermore, splitting the exercise of jurisdiction over cases governed by the 2001 IRPIC
between the regular courts and the special commercial courts, as the assailed CA decision
decrees, could lead to confusion and case management problems. For the sake of uniformity and
efficiency in judicial administration, it is imperative that all cases governed by the 2001 IRPIC,
derivative suits included, be tried by the special commercial courts.

VI.

Applying the foregoing disquisitions to the case at bar, we find that while SARC's suit is indeed
a derivative suit which is transferable to the relevant special commercial court in accordance
with the Gonzales guidelines, it nevertheless suffers from fatal defects which merit its dismissal.

SARC's petition expressly alleges that it is being filed as a derivative suit:

6. This is a stockholder's derivative suit instituted by PETITIONERS RAMON A.

SALAZAR, JR., ROGER A. SALAZAR, ROBERT A. SALAZAR and
ROSEMARIE S. FERNANDEZ for and in behalf of SALAZAR ANG REALTY
CORPORATION (Plaintiff-corporation), as its incorporators and stockholders x x x.
Said Petitioners were stockholders of the corporation at the time that: 1) a loan in the
amount of EIGHTEEN MILLION FIVE HUNDRED THOUSAND PESOS was
obtained from the Respondent Bank evidenced by a promissory note (Annex "B")
allegedly signed by the late Consuelo Ang Salazar and Ralph Ang Salazar as
representatives of Tacloban RAS Construction Corporation x x x; 2) the mortgage
contract (Annex "C") in favor of the Respondent bank was allegedly executed by the
corporation through the late Consuelo A. Salazar who was described as the
corporation's President and its Secretary Ralph A. Salazar x x x;

xxxx

7. This suit is brought by the above[-]mentioned incorporators and stockholders for

the following reasons:

xxxx

7.2. Ramon Ve. Salazar, director and Vice President of the Corporation died on
March 30, 1995, before the mortgage contract which is sought to be declared null
and void was executed. No document was filed with the SEC which shows that an
election was held by the board of directors in order to fill the vacancy. Consuelo A.
Salazar passed away last October 21, 2001. The remaining directors of the
corporation have not taken any steps to vindicate the corporation's rights. Demand
 upon the board of directors to file suit in behalf of the corporation would be useless
in that the mortgage contract, the validity of which is being questioned in this suit
appeared to have been approved by said board through a supposed board resolution
certified by the corporate secretary Ralph A. Salazar and the Secretary's Certificate
of said resolution was annotated on the titles issued in the name of Salazar Ang
Realty Corporation. This however, cannot be determined with certainty by the
Petitioners stockholders as Ralph A. Salazar acting as the corporate secretary of
Plaintiff Corporation has custody of the stock and transfer book as well as the
resolutions and other documents and papers of the corporation.

7.3. Time is of the essence considering that corporate assets have now been
registered in the name of the Respondent Bank and the exhaustion of remedies
within the corporation which would delay the filing of a suit would only cause
irreparable damage to the corporation.[101]

Apart from the express statement in paragraph 6, the rest of the petition's allegations clearly
reveal that the crux of the dispute is the illegal and ultra vires approval of the mortgage by the
SARC board without the consent of the suing shareholders, and despite the vacancies in the
board created by the deaths of Ramon Sr. and Consuelo. These allegations unmistakably show
the existence of a "controversy arising out of intra-corporate relations," with the suing
shareholders assailing the decisions of Ralph and the SARC board. The non-joinder of Ralph
and the other officers or shareholders of SARC, or even of Tacloban RAS, is of no moment,
because non-joinder of parties is not a ground for dismissal, and the court can order their
inclusion at any time.[102] While the reliefs sought are directed at Metrobank and the officers
who conducted the auction sale, the suing shareholders' cause of action is ultimately rooted in
the illegal and improper ratification and authorization of the mortgage contract by Ralph and the
SARC board.

Having established that the petition is a derivative suit, we determine its compliance with the
requisites therefor under the 2001 IRPIC.

There is no question that the suit was brought in SARC's name by Ramon et al., who were
stockholders at the time the assailed mortgage contract was entered into. The petition also
contains allegations justifying the non-exhaustion of intra-corporate remedies.[103] However, it
does not comply with Rule 1, Section 1(3) of the 2001 IRPIC, regarding the availment of
appraisal rights.

Among the grounds raised by SARC for the nullification of the mortgage contract is that it
constitutes an encumbrance of substantially all the assets of the corporation which must be
authorized by its stockholders in a meeting for that purpose, pursuant to Section 40 of the
Corporation Code.[104] Under that provision, a mortgage of all or substantially all of the
corporation's assets is subject to the exercise of the appraisal right. It was therefore incumbent
upon herein respondents to make particular allegations regarding their availment of their
appraisal rights or the impossibility or futility thereof.[105] Under the 2001 IRPIC, a derivative
suit must particularly allege that there are no appraisal rights available against the assailed
corporate action.[106] Conversely, if appraisal rights are available, such fact must be alleged and
the non-availment thereof must be properly explained, moreso since a derivative suit must
particularly allege that the stockholder exerted all reasonable efforts to exhaust all remedies
available under the laws and regulations governing the corporation.[107]

Furthermore, SARC's petition lacks a categorical statement that it is not a nuisance or

harassment suit. In order to provide legal justification for what is essentially an unauthorized
suit filed on behalf of the corporation, stockholders who resort to the equitable remedy of a
derivative suit must categorically declare under oath that the remedy is being sought for just and
legitimate purposes and not as a form of nuisance or harassment.[108] This principle is now
enshrined in Rule 8, Section 1 of the 2001 IRPIC, which explicitly states that nuisance or
harassment suits shall be dismissed.[109]

To conclude, we reiterate that a derivative suit is an equitable exception to the rule that the
corporate power of suit is exercisable only through the board of directors. A proper resort to this
equitable procedural device must satisfy the requisites laid down by law and procedure for its
institution; thus, courts must deny resort when such requisites are not met.[110]

WHEREFORE, the present petition is GRANTED. The March 25, 2014 Decision and the
May 8, 2015 Resolution of the Court of Appeals in CA-­G.R. SP No. 05050 are hereby
REVERSED and SET ASIDE. Civil Case No. 2001-11-164, entitled Salazar Ang Realty
Corporation, represented by Incorporators-Stockholders Ramon A. Salazar, Jr., Robert A.
Salazar, Roger A. Salazar and Rosemarie Salazar-Fernandez, versus Metropolitan Bank &
Trust Company, Ex Officio Sheriff Atty. Blanche Astilla Salino, Sheriff IV Luis G. Copuaco, and
the Register of Deeds, Tacloban City, is hereby DISMISSED.

SO ORDERED.

Gesmundo, C.J., (Chairperson), Caguioa, Inting, and Dimaampao, JJ., concur.

* Also referred to in the records as "Salazar Ang Realty Corporation".

**Presiding Judge Rogelio C. Sescon of the Regional Trial Court of Tacloban City, Branch 9
was dropped as a party respondent pursuant to Rule 45, Section 4 of the Rules of Court. See
Supreme Court Resolution dated August 17, 2015, rollo, p. 528.

[1] Id. at 32-68.

[2]Id. at 12-24. Promulgated on March 25, 2014. Penned by Associate Justice Marilyn B.
Lagura-Yap, with Associate Justices Gabriel T. Ingles and Ma. Luisa C. Quijano-Padilla
concurring.

[3]
Id. at 27-29. Promulgated on May 8, 2015. Penned by Associate Justice Marilyn B. Lagura-
Yap, with Associate Justices Gabriel T. Ingles and Ma. Luisa C. Quijano-Padilla concurring.

[4] Id. at 140-145.

[5] Id. at 146.

[6] Id. at 34.

[7] Id. at 178-180.

[8] Id. at 147.

[9] Id.

[10] Id. at 149, 195.

[11]Hereinafter referred to as Ralph. Also referred to in the records as "Ralph Pastor A.

Salazar".

[12] Hereinafter referred to as Consuelo.

[13] Rollo, p. 148.

[14] Id. at 162

[15] Id. at 148.

[16] Id. at 148-149, 193-194, 225.

[17] Id. at 150-153.

[18] Id. at 162.

[19] Id. at 149.

[20] Id. at 150.

[21] Id. at 225-226.

[22] Id. at 275-281, 300.

[23] Id. at 216.

[24] Id. at 215.

[25] Id. at 210-214.

[26] Id. at 150-153.

[27] Id. at 219-223.

[28] Id. at 154-155.

[29] Id. at 156-157.

[30] Id. at 157-160.

[31] Id. at 160-161.

[32] Id. at 161-162.

[33] Id. at 162-164.

[34] Procedure in Extra-Judicial Foreclosure of Mortgage.

[35] Rollo, pp. 164-173.

[36] Id. at 174.

[37] Id. at 305-307.

[38] Id. at 307.

[39] Id. at 307-308.

[40] Id. at 311-312.

[41] Id. at 311.

[42] Id. at 337.

[43] Id.

[44] Id. at 338.

[45] Id. at 350.

[46] Id. at 426-431.

[47] Id. at 435-437.

[48] Id. at 433-434.

[49] Id. at 79.

[50] Id. at 454-456.

[51] Id. at 455-456.

[52] Id. at 459-464.

[53] Id. at 459-461.

[54] Id. at 144.

[55] Id. at 145.

[56] Id. at 146.

[57] Id. at 465-473.

[58] Id. at 115-116.

[59] Decree on the Reorganization of the Securities and Exchange Commission. Hereinafter
referred to as SEC Reorganization Decree.

[60] Rollo, pp. 85-87.

[61] Id. at 87.

[62] Id. at 86-87.

[63] Id. at 87. Emphasis in the original.

[64] Id. at 87-88.

[65] Id. at 478-493.

[66] Id. at 51-52. Citations omitted.

[67] REPUBLIC ACT NO. 8799, enacted on July 19, 2000.

[68]See Sunset View Condominium Corp. v. Hon. Campos, Jr. etc., et al., 191 Phil. 606, 610-611
(1981); Philex Mining Corp. v. Hon. Reyes, et al., 204 Phil. 241, 245-246 (1982); Union Glass
& Container Corp., et al. v. SEC, et al., 211 Phil. 222, 236 (1983); DMRC Enterprises v. Este
Del Sol Mountain Reserve, Inc., 217 Phil. 280, 287 (1984); Zaide, Jr. v. Court of Appeals, 263
Phil. 464, 469 (1990); Securities and Exchange Commission v. Court of Appeals, 278 Phil. 141,
154 (1991); Espino v. NLRC, et al., 310 Phil. 60, 73 (1995).

[69] A.M. No. 00-11-03-SC, Designation of Certain Branches of RTCs to Try and Decide Cases
Formerly Cognizable by SEC, November 21, 2000; A.M. No. 03-03-03-SC, Re: Consolidation
of Intellectual Property Courts with Commercial Courts, June 17, 2003.

[70]The original heading of the resolution enacting the 2001 IRPIC is "RE: Proposed Interim
Rules of Procedure Governing Intra-Corporate Controversies under R.A. No. 8799".

[71]Cua, Jr., et al. v. Tan, et al., 622 Phil. 661, 715-716 (2009), citing I Jose C. Campos & Ma.
Clara Lopez­-Campos, THE CORPORATION CODE: COMMENTS, NOTES, AND
SELECTED CASES 819-820 (1990). Emphasis and underlining supplied.

[72] G.R. Nos. 210906 & 211203, October 16, 2019.

[73] Id. Citations omitted.

[74] 257 Phil. 459 (1989).

[75] Id. at 470. Citations omitted. These requisites are derived from earlier jurisprudence. See
citations in the original reported text. See also I Jose C. Campos & Ma. Clara Lopez-Campos,
supra note 71 at 820- 821.

[76] Villamor, Jr. v. Umale, 744 Phil. 31, 46-47 (2014).

[77]Forest Hills Golf and Country Club, Inc. v. Fil-Estate Properties, Inc., et al., 790 Phil. 729,
743-744 (2016).

[78] The bringing of the suit in the corporation's name is a requisite for a derivative suit which is
implicit from the first sentence of Rule 8, Section 1 of the 2001 IRPIC. Villamor, Jr. v. Umale,
supra note 76. The corporation is an indispensable party in a derivative suit. Cua, Jr., et al. v.
Tan, et al., supra note 71 at 688. Thus, any judgment rendered without impleading the
corporation is null and void. See Guy, et al. v. Guy, 694 Phil. 354 (2012).

[79]See REPUBLIC ACT NO. 296, Sections 44 & 86, in relation to the following cases:
Gamboa v. Victoriano, 179 Phil. 36, 42-43 (1979); Republic Bank v. Cuaderno, et al., 125 Phil.
1076, 1083 (1967); Evangelista v. Santos, 86 Phil. 387, 395 (1950); Everett v. Asia Banking
Corporation, et al., 49 Phil. 512, 527 (1926); and Pascual v. Del Saz Orozco, 19 Phil. 82, 95-96
(1911).

[80] See Lisam Enterprises, Inc., et al. v. Banco de Oro Unibank, Inc., et al., 686 Phil. 293
(2012); Saura v. Saura, Jr., 372 Phil. 337 (1999); Union Glass & Container Corp., et al. v. SEC,
et al., 211 Phil. 222 (1983).

[81] SEC REORGANIZATION DECREE, Section 5, Paragraph (b).

[82]Id., id., Paragraphs (a) and (c). See Ku v. RCBC Securities, Inc., G.R. No. 219491, October
17, 2018, citing Medical Plaza Makati Condominium Corp. v. Cullen, 720 Phil. 732, 742-743
(2013).

[83]Speed Distributing Corp. v. Court of Appeals, 469 Phil. 739, 758-759 (2004). Citations
omitted.

[84]Reyes v. Hon. RTC of Makati, Branch 142, et al., 583 Phil. 591, 608 (2008). Citations
omitted.

[85]PHILCOMSAT Corp., et al. v. Sandiganbayan 5th Division, et al., 760 Phil. 893, 905
(2015).

[86] San Jose, et al. v. Ozamiz, 813 Phil. 669, 679 (2017).

[87] See Imperial, et al. v. Judge Armes, et al., 804 Phil. 439, 470 (2017), and cases cited therein.

[88] Supra note 80.

[89] Id. at 305.

[90] Supra note 80.

[91]
Id. at 348-349. Contra, Aquino, J., dissenting in Union Glass & Container Corp., et al. v.
SEC, et al., supra note 80.

[92] 343 Phil. 742, 754 (1997).

[93] Supra note 77.

[94] Id. at 741-742. Citations omitted, emphasis and underlining supplied.

[95] 772 Phil. 483 (2015).

[96] Id. at 518-519.

[97] Id. at 506.

[98] See Calleja v. Panday, 518 Phil. 801, 809 (2006).

[99] 781 Phil. 174 (2016).

[100]See also GD Express Worldwide N.V., et al. v. Court of Appeals (4th Div.), et al., 605 Phil.
406, 418-419 (2009).

[101] Rollo, pp. 148-150. Underlining and emphasis supplied.

[102]
RULES OF COURT, Rule 3, Section 11; Divinagracia v. Parilla, et al., 755 Phil. 783, 792
(2015); Gamboa v. Victoriano, 179 Phil. 36 (1979).

[103]Non-exhaustion of intra-corporate remedies is justified where demand upon the board to

exercise the corporate power of suit is pointless, e.g., when the defendants are in complete
control of the corporation, or the acts complained of were ostensibly approved by a majority of
shareholders despite proof of prejudice to the corporation. See Ago Realty & Development
Corp. v. Ago, supra note 72; Republic Bank v. Cuaderno, Evangelista v. Santos, and Everett v.
Asia Banking Corp., supra note 79.

[104] Id. at 160-161.

[105] Cf. Villamor, Jr. v. Umale, supra note 76 at 50.

[106]Forest Hills Golf and Country, Club, Inc. v. Fil-Estate Properties, Inc., supra note 77 at
741; Spouses Yu, et al. v. Yukayguan, et al., 607 Phil. 581, 611 (2009).

[107]
Ching, et al. v. Subic Bay Golf and Country, Club, Inc., et al., 742 Phil. 606, 614 (2014);
Spouses Yu, et al. v. Yukayguan, id.

[108] Spouses Yu, et al. v. Yukayguan, id. at 611.

[109] See Cua, Jr., et al. v. Tan, et al., supra note 71 at 722; Spouses Yu, et al. v. Yukayguan, id. at
612.

[110]Forest Hills Golf and Country Club, Inc. v. Fil-Estate Properties, Inc., supra note 77 at
744; Spouses Yu, et al. v. Yukayguan, id. at 596, citing Bitong v. Court of Appeals, 354 Phil. 516,
545 (1998).

Source: Supreme Court E-Library | Date created: March 29, 2023

This page was dynamically generated by the E-Library Content Management System