Oscar Reyes vs RTC of Makati, Zenith Insurance Corp and Rodrigo Reyes GR 165744

Facts:
Oscar and private respondent are two of the four children of Pedro and Anastacia Reyes. All four
own shares of stocks on Zenith Insurance Corporation, a company that the family established. Pedro
died in 1973 and his estate has been judicially partitioned among his heirs. When Anastacia died,
there appears to be no similar partition done with her estate including her shares in Zenith. On May
2009 Rodrigo filed a derivative suite against Oscar with the SEC for an accounting of the share of
stocks which he alleged was acquired by Oscar aribitrarily and fraudulently. Oscar moved to have the
complaint dismissed as a form of harassment and not in accordance with the Interim Rules for Intracorporate controversies. The RTC of Makati in its designation as a commercial court denied Rodrigo's
motion ruling that it is a valid derivative suit. Oscar went to to the CA but the CA approved the RTC
ruling. Now Oscar went to the SC for a petition for review on certiorari under rule 45.
Issue: WON it is a valid derivative suit

Held:
The following are the requirements for a valid derivative suit:
a. the party bringing suit should be a shareholder during the time of the act or transaction
complained of, the number of shares not being material;
b. the party 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.
Based on these standards, we hold that 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. With respect to his own individually-held shareholdings, Rodrigo has not
alleged any individual cause or basis as a shareholder on record to proceed against Oscar.
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.35 Paragraph 8 of the complaint hardly satisfies
this requirement since what the rule contemplates is the exhaustion of remedies within the corporate
setting:
8. As members of the same family, complainant Rodrigo C. Reyes has resorted [to] and
exhausted all legal means of resolving the dispute with the end view of amicably settling the
case, but the dispute between them ensued.

Lastly, we find 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. As already mentioned, neither has Rodrigo alleged any particular
cause or wrongdoing against the corporation that he can champion in his capacity as a shareholder on
record.