2. Gochan v.

Young
G.R. No. 131889.
March 12, 2001

topic: doctrine of separate juridical personality

Petitioner: Gochan
Respondent: Young
Ponente: Panganiban, J.

Doctrine: The fact that certain persons are not registered as stockholders in the books of the corporation
will not bar them from filing a derivative suit, if it is evident from the allegations in the complaint that they
are bona fide stockholders

Facts:

- Felix Gochan and Sons Realty Corporation (Gochan Realty) was registered with the SEC on June 1951,
with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and
Crispo Gochan as its incorporators. Felix Gochan Sr.'s daughter, Alice inherited 50 shares of stock in
Gochan Realty from the former.

- Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr. In 1962, the Regional Trial
Court of Cebu adjudicated 6/14 of these shares to her children, Richard Young, David Young, Jane
Young Llaban, John Young Jr., Mary Young Hsu and Alexander Thomas Young (the Youngs). Having
earned dividends, these stocks numbered 179 by 20 September 1979. 5 days later (25 September), at
which time all the children had reached the age of majority, their father John Sr., requested Gochan
Realty to partition the shares of his late wife by cancelling the stock certificates in his name and issuing
in lieu thereof, new stock certificates in the names of the Youngs.

- On 17 October 1979, Gochan Realty refused, citing as reason, the right of first refusal granted to the
remaining stockholders by the Articles of Incorporation. In 1990, John, Sr. died, leaving the shares to the
Youngs. On 8 February 1994, Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for
issuance of shares of stock to the rightful owners, nullification of shares of stock, reconveyance of
property impressed with trust, accounting, removal of officers and directors and damages against Virginia
Gochan, et. al. (Gochans) A Notice of Lis Pendens was annotated to the real properties of the
corporation.

- On 16 March 1994, the Gochans moved to dismiss the complaint alleging that: (1) the SEC had no
jurisdiction over the nature of the action; (2) the the Youngs were not the real parties-in-interest and had
no capacity to sue; and (3) the Youngs' causes of action were barred by the Statute of Limitations. The
motion was opposed by the Youngs. On 29 March 1994, the Gochans filed a Motion for cancellation of
Notice of Lis Pendens. The Youngs opposed the said motion.

- On 9 December 1994, the SEC, through its Hearing Officer, granted the motion to dismiss and ordered
the cancellation of the notice of lis pendens annotated upon the titles of the corporate lands; holding
that the Youngs never been stockholders of record of FGSRC to confer them with the legal capacity to
bring and maintain their action, and thus, the case cannot be considered as an intra-corporate
controversy within the jurisdiction of the SEC; and that on the allegation that the Youngs brought the
action as a derivative suit on their own behalf and on behalf of Gochan Realty, the failure to comply
with the jurisdictional requirement on derivative action necessarily result in the dismissal of the
complaint. The Youngs filed a Petition for Review with the Court of Appeals.
- On 28 February 1996, the Court of Appeals ruled that the SEC had no jurisdiction over the case as far
as the heirs of Alice Gochan were concerned, because they were not yet stockholders of the
corporation. On the other hand, it upheld the capacity of Cecilia Gochan Uy and her spouse Miguel Uy.
It also held that the Intestate Estate of John Young Sr. was an indispensable party. The appellate court
further ruled that the cancellation of the notice of lis pendens on the titles of the corporate real estate
was not justified. Moreover, it declared that the Youngs' Motion for Reconsideration before the SEC
was not pro forma; thus, its filing tolled the appeal period. The Gochans moved for reconsideration but
were denied in a Resolution dated 18 December 1997. The Gochans filed the Petition for Review on
Certiorari.

Issue: W/N the Spouses Uy could bring a derivative suit in the name of Gochan Realty to redress wrongs
allegedly committed against it for which the directors refused to sue

Held: YES Petitioners contend that the action filed by the Spouses was not a derivative suit, because the
spouses and not the corporation were the injured parties. The Court is not convinced!

The Complaint shows allegations of injury to the corporation itself:

(1) There was conspiracy and fraud in depressing the value of the stock of the Corporation and to induce
the minority stockholders to sell their shares of stock for an inadequate consideration. Petitioner Esteban
Gochan et al unlawfully and fraudulently appropriated for themselves the funds of the Corporation by
drawing excessive amounts in the form of salaries and cash advances and charging their purely personal
expenses to the Corporation.

(2) The payment of P1,200,000 by the Corporation to Respondent Cecilia for her shares of stock constituted
an unlawful and partial liquidation and distribution of assets to a stockholder, resulting in the impairment of
the capital of the Corporation and prevented it from otherwise utilizing said amount for its regular and lawful
business, to the damage and prejudice of the Corporation, its creditors, and of complainants as minority
stockholders

As early as 1911, this Court has recognized the right of a single stockholder to file derivative suits. In its
words:

Where corporate directors have committed a breach of trust either by their frauds, ultra vires acts, or
negligence, and the corporation is unable or unwilling to institute suit to remedy the wrong, a single
stockholder may institute that suit, suing on behalf of himself and other stockholders and for the benefit of
the corporation, to bring about a redress of the wrong done directly to the corporation and indirectly to the
stockholders.

The allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation. The
personal injury suffered by the spouses cannot disqualify them from filing a derivative suit on behalf of the
corporation.

2. Sub-Issue: W/N the Spouses Uy have the personality to file an action before the SEC against Gochan
Realty Corporation.

Held: YES Petitioners argue that Spouses Cecilia and Miguel had no capacity to bring the suit since they
were no longer stockholders at the time. Allegedly, the corporation had already purchased their stocks.
Cecilia averred that the purchase contract of her stocks was null and void which the court admitted. Thus,
Cecilia remains to be a stockholder of the corporation. Although she was no longer registered as a
stockholder in the corporate records as of the filing of the case before the SEC, the admitted allegations in
the Complaint made her still a bona fide stockholder of Gochan Realty, as between said parties.