RULES ON

INTRA-CORPORATE
DISPUTES
ACCRALAW Davao Legal Forum 2015
Atty. Jessa G. Wong-Cantano

INTRA-CORPORATE DISPUTE:
WHAT IS IT ANYWAY?

It is a suit
Arising from intra-corporate
relations, or
Between or among stockholders,
or
Between any or all of them and
the corporation.
(STRADEC v. SIDC [2010])

HOW DO WE KNOW IF IT IS AN INTRACORPORATE DISPUTE?

1. RELATIONSHIP TEST
(a) between the corporation, partnership or association
and the public;
(b) between the corporation, partnership or association
and its stockholders, partners, members, or officers;
(c) between the corporation, partnership or association
and the State insofar as its franchise, permit or license
to operate is concerned; and,
(d) among the stockholders, partners or associates
themselves.

HOW DO WE KNOW IF IT IS AN INTRACORPORATE DISPUTE?

2. NATURE OF THE CONTROVERSY
TEST
The dispute must not only be rooted in the existence
of an intra-corporate relationship, but must also refer
to the enforcement of the parties' correlative rights
and obligations under the Corporation Code as well
as the internal and intra-corporate regulatory rules of
the corporation.
The dispute among the parties must be intrinsically
connected with the regulation of the corporation.
(Real v. Sangu Phil., Inc. [2011])

there must be a concurrence

of [the] following elements, to wit:
(1) the status or relationship of
the parties; and (2) the nature of
the question that is the subject of
their controversy.
(Lopez Realty Inc. v. Spouses Tanjangco, [2014])

WHY DO WE NEED TO KNOW IF IT IS AN

INTRA-CORPORATE DISPUTE?
JURISDICTION AND VENUE where do we file the
case?
It could be a labor, and not an intra-corporate case (Real v.
Sangu Phil. Inc., G.R. NO. 168757, 19 January 2011)
It could be an ordinary civil case, and not intra-corporate in
nature (Abad and Abad v. Court of First Instance, G.R. Nos. L58507-08 26 February 1992)
It could be a case for the settlement of the estate, and not an
intra-corporate dispute (Reyes v. RTC of Makati Branch 142,
G.R. No. 165744, 11 August 2008)

APPLICABILITY OF THE SPECIAL RULES OF

PROCEDURE FOR INTRA-CORPORATE DISPUTES
Including the modes of appeal

There are special rules governing

intra-corporate disputes, which are
intended to decide on a controversy in
a
speedy
fashionThis
is
in
recognition of the fact that businesses
are the engines of the economy, and
disputes among shareholders must be
speedily decided for the good of the
company
and
its
stockholders,
employees,
creditors
and
other
stakeholders like the community and
the state.

A.M. No. 01-2-04-SC, 13 March 2001

Re: PROPOSED INTERIM RULES OF PROCEDURE
GOVERNING INTRA-CORPORATE CONTROVERSIES
SALIENT PROVISIONS:
Cases covered
Different rules of procedure for intra-corporate disputes
Jurisdiction and venue
Construction and objective of the rules
Service of pleadings
Summons
Prohibited pleadings
Immediate execution of decision
Judgment before pre-trial or after pre-trial
Summary trial mechanism; No conduct of hearings, unless
deemed necessary by the court; Trial schedule
Sanctions

A.M. No. 01-2-04-SC, 13 March 2001

Re: PROPOSED INTERIM RULES OF PROCEDURE
GOVERNING INTRA-CORPORATE CONTROVERSIES

Election contests
Inspection and copying of corporate books and records
Derivative suits
Management Committee
Other Provisions
Appeals

WHAT ARE THE CASES COVERED BY

THE RULES?
1. Devices or 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;
2. Controversies arising out of intra-corporate, partnership,
or association relations, between and among stockholders,
members, or associates; and between, any or all of them and
the corporation, partnership, or association of which they are
stockholders, members, or associates, respectively;
3. Controversies in the election or appointment of directors,
trustees, officers, or managers of corporations, partnerships, or
associations;
4. Derivative suits; and
5. Inspection of corporate books.

Election Contests
Any controversy or dispute involving title or claim to any elective
office in a stock or non-stock corporation, the validation of proxies,
the manner and validity of elections, and the qualifications of
candidates, including the proclamation of winners, to the office of
director, trustee or other officer directly elected by the stockholders
in a close corporation or by members of a non-stock corporation
where the articles of incorporation or by-laws so provide.
The complaint in an election contest must state the following:
The case was filed within fifteen (15) days from the date of the
election if the by-laws of the corporation do not provide for a
procedure for resolution of the controversy, or within fifteen (15)
days from the resolution of the controversy by the corporation as
provided in its by-laws; and
The plaintiff has exhausted all intra-corporate remedies in
election cases as provided for in the by-laws of the corporation.

Inspect and Copy Corporate

Books and Records
The stockholder's right of inspection of the corporation's
books and records is based upon their ownership of the
assets and property of the corporation. It is, therefore, an
incident of ownership of the corporate property, whether
this ownership or interest be termed an equitable ownership,
a beneficial ownership, or a quasi-ownership. This right is
predicated upon the necessity of self-protection. It is generally
held by majority of the courts that where the right is granted
by statute to the stockholder, it is given to him as such and
must be exercised by him with respect to his interest as a
stockholder and for some purpose germane thereto or in the
interest of the corporation. In other words, the inspection has
to be germane to the petitioner's interest as a stockholder,
and has to be proper and lawful in character and not inimical
to the interest of the corporation.
(And-Abaya v. Ang [2008])

COMMERCIAL CASE
The complaint must state the following:
(1) The case is for the enforcement of plaintiff's right of
inspection of corporate orders or records and/or to be
furnished with financial statements under Sections 74 and
75 of the Corporation Code of the Philippines;
(2) A demand for inspection and copying of books and records
and/or to be furnished with financial statements made by
the plaintiff upon defendant;
(3) The refusal of defendant to grant the demands of the
plaintiff and the reasons given for such refusals, if any; and
(4) The reasons why the refusal of defendant to grant the
demands of the plaintiff is unjustified and illegal, stating the
law and jurisprudence in support thereof.

CRIMINAL CASE
1.

2.

3.

4.

A director, trustee, stockholder or member has made a prior

demand in writing for a copy of excerpts from the corporation's
records or minutes;
Any officer or agent of the concerned corporation shall refuse to
allow the said director, trustee, stockholder or member of the
corporation to examine and copy said excerpts;
If such refusal is made pursuant to a resolution or order of the
board of directors or trustees, the liability under this section for
such action shall be imposed upon the directors or trustees who
voted for such refusal; and,
Where the officer or agent of the corporation sets up the defense
that the person demanding to examine and copy excerpts from the
corporation's records and minutes has improperly used any
information secured through any prior examination of the records
or minutes of such corporation or of any other corporation, or was
not acting in good faith or for a legitimate purpose in making his
demand, the contrary must be shown or proved.

Derivative Suits
Essentially, it is a suit instituted by a
shareholder or a member of the
corporation, for and in behalf of the
corporation, for its protection from acts
committed by directors, trustees, corporate
officers, and even third persons.
It is conditioned upon a situation where the
Board of Directors is not in a position to
exercise business judgment for the benefit
of the corporation.
(Villanueva, Philippine Corporate Law, 2010, p. 495-496)

Requisites for a Derivative Suit:

(1) He was a stockholder or member at the time the
acts or transactions subject of the action occurred
and the time the action was filed;
(2) He 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 acts or
acts complained of;
(4) The suits is not a nuisance or harassment suit.

Management Committee
As an incident to any of the cases filed under these
Rules a party may apply for the appointment of a
management
committee for the corporation,
partnership or association, when there is imminent
danger of:

1.Dissipation, loss, wastage or destruction of

assets or other properties; and
2.Paralyzation of its business operations
which may be prejudicial to the interest of
the minority stockholders, parties-litigants
or the general public.

Management Committee
Considered as officers of the court and shall be under its
control and supervision.
Composed of 3 members chosen by the court.
Take custody of and control all assets and properties owned or
possessed by the entity under management; Take the place of
the management and board of directors of the entity under
management, assume their rights and responsibilities, and
preserve the entity's assets and properties in its possession.
Exercise other powers and functions, as enumerated under the
Rules.
Members of the management committee and the persons
employed by them shall be immune from suit.
A majority of its members shall be necessary for the
management committee to act or make a decision.
Entitled to reasonable professionals fees and reimbursement of
expenses.

Other provisions
PROVISIONAL REMEDIES
SANCTIONS
ON THE PARTIES OR COUNSEL
ON THE JUDGE

Appeals
A.M. No. 04-9-07-SC, or Re: Mode of
Appeals In Cases Formerly Cognizable by
the Securities and Exchange Commission
(14 September 2004).
Petition for Review under Rule 43 of the
Rules of Court
Within fifteen (15) days from notice of the
decision or final order of the Regional Trial
Court

END