OSCAR C. REYES CA & ZENITH INSURANCE CORPORATION and RODRIGO C.

REYES,
[G.R. No. 165744. August 11, 2008]
FACTS: Petitioner and private respondent were siblings together with two others, namely Pedro
and Anastacia, in a family business established as Zenith Insurance Corporation (Zenith), from
which they owned shares of stocks. The Pedro and Anastacia subsequently died. The former
had his estate judicially partitioned among his heirs, but the latter had not made the same in her
shareholding in Zenith. Zenith and Rodrigo filed a complaint with the Securities and Exchange
Commission (SEC) against petitioner (1) a derivative suit to obtain accounting of funds and
assets of Zenith, and (2) to determine the shares of stock of deceased Pedro and Anastacia that
were arbitrarily and fraudulently appropriated [by Oscar, and were unaccounted for]. In his
answer with counterclaim, petitioner denied the illegality of the acquisition of shares of
Anastacia and questioned the jurisdiction of SEC to entertain the complaint because it pertains
to settlement of [Anastacias] estate. The case was transferred to. Petitioner filed Motion to
Declare Complaint as Nuisance or Harassment Suit and must be dismissed. RTC denied the
motion. The motion was elevated to the Court of Appeals by way of petition for certiorari,
prohibition and mandamus, but was again denied.
ISSUES:
Mercantile Law
(1) Whether or not Rodrigo may be considered a stockholder of Zenith with respect to the
shareholdings originally belonging to Anastacia.
(2) Whether or not there is an intra-corporate relationship between the parties that would
characterize the case as an intra-corporate dispute?
Remedial Law
(1) Whether or not the complaint is a mere nuisance or harassment suit that should be
dismissed under the Interim Rules of Procedure of Intra-Corporate Controversies;
(2) Whether or not the complaint is a derivative suit within the jurisdiction of the RTC acting as
a special commercial court.
RULINGS:
Mercantile Law
(1) No. Rodrigo must, hurdle two obstacles before he can be considered a stockholder of
Zenith with respect to the shareholdings originally belonging to Anastacia. First, he must prove
that there are shareholdings that will be left to him and his co-heirs, and this can be determined
only in a settlement of the decedents estate. No such proceeding has been commenced to
date. Second, he must register the transfer of the shares allotted to him to make it binding
against the corporation. He cannot demand that this be done unless and until he has
established his specific allotment (and prima facie ownership) of the shares. Without the
settlement of Anastacias estate, there can be no definite partition and distribution of the estate

to the heirs. Without the partition and distribution, there can be no registration of the transfer.
And without the registration, we cannot consider the transferee-heir a stockholder who may
invoke the existence of an intra-corporate relationship as premise for an intra-corporate
controversy within the jurisdiction of a special commercial court. The subject shares of stock
(i.e., Anastacias shares) are concerned Rodrigo cannot be considered a stockholder of
Zenith.
(2) No. Court cannot declare that an intra-corporate relationship exists that would serve as
basis to bring this case within the special commercial courts jurisdiction under Section 5(b) of
PD 902-A, as amended because Rodrigos complaint failed the relationship test above.
Remedial Law
(1) Yes. The rule is that a complaint must contain a plain, concise, and direct statement of the
ultimate facts constituting the plaintiffs cause of action and must specify the relief sought.
Section 5, Rule 8 of the Revised Rules of Court provides that in all averments of fraud or
mistake, the circumstances constituting fraud or mistake must be stated with particularity.
These rules find specific application to Section 5(a) of P.D. No. 902-A which speaks of corporate
devices or schemes that amount to fraud or misrepresentation detrimental to the public and/or
to the stockholders.
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are largely
conclusions of law that, without supporting statements of the facts to which the allegations of
fraud refer, do not sufficiently state an effective cause of action. Fraud and mistake are required
to be averred with particularity in order to enable the opposing party to controvert the particular
facts allegedly constituting such fraud or mistake. Tested against these standards, charges of
fraud against Oscar were not properly supported by the required factual allegations. While the
complaint contained allegations of fraud purportedly committed by him, these allegations are not
particular enough to bring the controversy within the special commercial courts jurisdiction; they
are not statements of ultimate facts, but are mere conclusions of law: how and why the alleged
appropriation of shares can be characterized as illegal and fraudulent were not explained nor
elaborated on. The case must be dismissed.
(2) No. The allegations of the present complaint do not amount to a derivative suit. First, as
already discussed above, Rodrigo is not a shareholder with respect to the shareholdings
originally belonging to Anastacia; he only stands as a transferee-heir whose rights to the share
are inchoate and unrecorded. Second, in order that a stockholder may show a right to sue on
behalf of the corporation, he must allege with some particularity in his complaint that he has
exhausted his remedies within the corporation by making a sufficient demand upon the directors
or other officers for appropriate relief with the expressed intent to sue if relief is denied. Lastly,
Court found no injury, actual or threatened, alleged to have been done to the corporation due to
Oscars acts. If indeed he illegally and fraudulently transferred Anastacias shares in his own
name, then the damage is not to the corporation but to his co-heirs; the wrongful transfer did not
affect the capital stock or the assets of Zenith.

In summary, whether as an individual or as a derivative suit, the RTC sitting as special

commercial court has no jurisdiction to hear Rodrigos complaint since what is involved is the
determination and distribution of successional rights to the shareholdings of Anastacia Reyes.
Rodrigos proper remedy, under the circumstances, is to institute a special proceeding for the
settlement of the estate of the deceased Anastacia Reyes, a move that is not foreclosed by the
dismissal of his present complaint.

EDITO GULFO and EMMANUELA GULFO vs. JOSE P. ANCHETA

G.R. No. 175301 August 15, 2012
Facts: Parties are neighbors in a duplex residential unit in a subdivision in Las Pinas City. Their
units adjoin each other. Sometime in 1998, Anchetas septic tank overflowed; human wastes
and other offensive materials spread throughout his entire property. As a result, he and his
family lived through a very unsanitary environment, suffering foul odor and filthy premises for
several months.
It was then discovered that the underground drainage pipe, which connected respondents
septic tank to the subdivisions drainage system, had been closed by cement that blocked the
free flow of the wastes from the septic tank to the drainage system.
Ancheta filed a case for complaint for damages against his Gulfo. He narrated that Gulfo and his
wife had just recently renovated their duplex unit and, in the process, had made some diggings
in the same portion where the drainage pipe had been cemented. The closing of the drainage
pipe with cement could not have been the result of an accident, but was the malicious act by his
neighbors.
In their motion to dismiss, Gulfo contended that the case should not be entertained by the
Regional Trial Court because this is a dispute between members of the same homeowners
association, therefore an intra-corporate dispute which should be decided by the HIGC (now, it
is the Housing and Land Use Regulatory Board (HLURB), which has jurisdiction over the case.
(The HLURB is the government agency tasked with among others, the resolution of disputes
between competing sets of homeowners association in a subdivision or condominium project, or
determine the membership of a homeowners association. Aside from these, it is also mandated
to regulate all housing and condominium projects in the country. It also settles disputes between
developers and buyers of a subdivision or condominium project)
Issues: Does the Regional Trial Court have jurisdiction to try the case between the neighbours
involving the overflowed septic tank?
Held: Yes it does. Even a cursory reading of these allegations yield no conclusion other than
that the complaint is an ordinary action for damages that is purely civil rather than corporate in
character. The respondent merely seeks to be indemnified for the harm he suffered; no question

about the membership of the petitioners in the association is involved, nor is the existence of the
association in any manner under question. In fact, these allegations are based on either Articles
19, 20, and 21 of the Civil Code on human relations, and on the provisions on damages under
Title XVIII of the Civil Code. Thus, the CA decision is correct when it held that the acts alleged in
the subject complaint may also give rise to indemnification under Article 2176 of the Civil Code,
which provides:
Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
Since the issue of damages arising from the Civil Code, not intra-corporate controversy, is
involved, the RTC is the appropriate court with the power to try the case, not the homeowners
association, pursuant to Section 19(8) of Batas Pambansa Bilang 129, as amended by Republic
Act No. 7691.

Guy vs Hon Calo

Facts: Gilbert G. Guy son of spouses Simny and Francisco Guy, claims to own 80% of their
multi-million family corporation GoodGold Realty Development Inc, stating that he owns 519,
997 shares (fully paid upon incorporation) out of the 650,000 subscribed capital stock. His
mother Simny however contends that it was she and her husband who established the
corporation and only placed the bulk of the shares in Gilberts name because being their son,
they had entrusted to him the future of their corporations. She further claims that during the
incorporation of GoodGold, they were advised by their lawyers to issue the stock certificates
with corresponding blank endorsements signed by Francisco as President and Atty. Paras as
Corporate Secretary.; including Stock Certificate Nos. 004-014 under Gilberts name.
In 1999, Francisco gave instructions to redistribute the shares of the corporation evenly among
his children while maintaining a proportionate share for himself and Simny. Hence, GoodGolds
certificates were cancelled and new ones were issued showing that the 4 siblings had 65,000
shares each while the spouses had 195,000 shares each.
Five years after the redistribution, Gilbert brought an action against his mother Simny and his
sisters for the annulment of the said transfers of shares along with some corporate documents,
alleging fraud and that his signatures at the back of the stock certificates which purportedly
endorsed the same were forged and must be nullified. NBI reports on the examination of
signatures however showed them to be authentic. Gilbert withdrew his complaint. Three years
thereafter, a new action was filed by Gilbert with the caption Intra-corporate Controversy: For
the Declaration of Nullity of Fraudulent Transfers of Shares of Stock Certificates, Fabricated
Shares of Stocks, Falsified General Information Sheets, Minutes of Meetings, etc against his
mother and sisters.

Gilbert claims that he is unaware of any document signed by him that would justify and support
the transfer of his shares to herein petitioners.
Simny and daughters filed their manifestation that the action filed by Gilbert was a mere
nuisance and harassment suit under Sec 1(b), Rule 1 of the Interim Rules of Procedure on
Intra-Corporate Controversies.
RTC dismissed the case as a nuisance and harassment suit, CA reversed RTC on the grounds
that there was indeed merit to the plaintiffs claims and that a full blown trial was in order.
Issue: W/N this suit is a harassment suit under the interim rules of procedure of inter-corporate
controversies.
Held: Allegations of deceit, machination, false pretenses, misrepresentation, and threats are
largely conclusions of law that, without supporting statements of the facts to which the
allegations of fraud refer, do not sufficiently state an effective cause of action.
Tested against established standards, we find that the charges of fraud which Gilbert accuses
his siblings are not supported by the required factual allegations.
Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will
bring the case within the special commercial courts jurisdiction. To fall within this jurisdiction,
there must be sufficient nexus showing that the corporations nature, structure, or powers, were
used to facilitate the fraudulent device or scheme.
Failure to specifically allege the fraudulent acts in intra-corporate controversies is indicative of a
harassment or nuisance suit and may be dismissed motu proprio.
In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a
ground for dismissal since such a defect can be cured by a bill of particulars.
A bill of particulars may be ordered as to a defense of fraud or mistake if the circumstances
constituting fraud or mistake are not stated with the particularity required by the rule.
The above-stated rule, however, does not apply to intra-corporate controversies In cases
governed by the Interim Rules of Procedure on Intra-corporate Controversies, a bill of
particulars is a prohibited pleading This is because fraud in intra-corporate controversies must
be based on devises and schemes, employed by, or any act of, the board of directors, business
associates, officers or partners, amounting to fraud or misrepresentation which may be
detrimental to the interest of the public and/or of the stockholders, partners, or members of any
corporation, partnership, or association, as stated under Rule 1, Section 1 (a)(1) of the Interim
Rules. The act of fraud or misrepresentation complained of becomes a criterion in determining

whether the complaint on its face has merits, or within the jurisdiction of special commercial
court, or merely a nuisance suit.
When a stock certificate is endorsed in blank by the owner thereof, it constitutes what is termed
as a street certificate, so that upon its face the holder is entitled to demand its transfer to his
name from the issuing corporation.
With Gilberts failure to allege specific acts of fraud in his complaint and his failure to rebut the
NBI report, this court pronounces, as a consequence thereof, that the signatures appearing on
the stock certificates, including his blank endorsement thereon were authentic. With the stock
certificates having been endorsed in blank by Gilbert which he himself delivered to his parents,
the same can be cancelled and transferred in the names of herein petitioners.