Facts:
The controversy began on May 5, 2008 when Belo Medical Group received a request from Santos for the inspection of corporate records. Santos claimed that he was a registered shareholder and a co-owner of Belo’s shares, as these were acquired while they cohabited as husband and wife. Santos sought advice on his probable removal as director of the corporation considering that he was not notified of meetings where he could have been removed. He also inquired on the election of Alfredo Henares (Henares) as Corporate Secretary in 2007 when Santos had not been notified of a meeting for Henares’ possible election. Finally, he sought explanation on the corporation’s failure to inform him of the 2007 annual meeting and the holding of an annual meeting in 2008. Santos’ concern over the corporate operations arose from the alleged death of a patient in one (1) of its clinics.
Santos was unsuccessful in inspecting the corporate books as Henares, the officer-in-charge of corporate records, was travelling.
Belo wrote Belo Medical Group on May 14, 2007 to repudiate Santos’ co-ownership of her shares and his interest in the corporation. She claimed that Santos held the 25 shares in his name merely in trust for her, as she, and not Santos, paid for these shares. She informed Belo Medical Group that Santos already had a pending petition with the Regional Trial Court to be declared as co-owner of her properties. She asserted that unless a decision was rendered in Santos’ favor, he could not exercise ownership rights over her properties.
Belo also informed Belo Medical Group that Santos had a business in direct competition with it. She suspected that Santos’ request to inspect the records of Belo Medical Group was a means to obtain a competitor’s business information, and was, therefore, in bad faith.
Thus, Belo Medical Group filed a Complaint for Interpleader with the Regional Trial Court alleged that while Santos appeared to be a registered stockholder, there was nothing on the record to show that he had paid for the shares under his name. The Complaint was filed “to protect its interest and compel [Belo and Santos] to interplead and litigate their conflicting claims of ownership of, as well as the corresponding right of inspection arising from, the twenty-five (25) [Belo Medical Group] shares between themselves.
On December 8, 2008, the assailed Joint Resolution was issued by the trial court resolving the following incidents: Belo Medical Group’s Omnibus Motion for Clarificatory Hearing and for Leave to File Consolidated Reply and Motion to Declare Santos in Default, and Santos’ Motion to Dismiss. The trial court declared the case as an intra-corporate controversy but dismissed the Complaints.
The trial court characterized the dispute as “intrinsically connected with the regulation of the corporation as it involves the right of inspection of corporate records.” Included in Santos and Belo’s conflict was a shareholder’s exclusive right to inspect corporate records. In addition, the issue on the ownership of shares requires the application of laws and principles regarding corporations.
Belo filed her Petition for Review before the Court of Appeals. Belo Medical Group argues that it is enough that there are two (2) people who have adverse claims against each other and who are in positions to make effective claims for interpleader to be given due course. The Court of Appeals dismissed Belo’s Petition for Review and ruled that the pending case before this Court was the more appropriate vehicle to determine the issues.
Issue:
Whether the Motion to Dismiss on the Interpleader should have been allowed.
Held:
Yes, Santos should not have been allowed to file a Motion to Dismiss. The trial court should have continued on with the case as an intra-corporate dispute considering that it called for the judgments on the relationship between a corporation and its two warring stockholders and the relationship of these two stockholders with each other.
To determine whether an intra-corporate dispute exists and whether this case requires the application of these rules of procedure, this Court evaluated the relationship of the parties. The types of intra-corporate relationships is as follows:
[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 in so far as its franchise, permit or license to operate is concerned; and
[d] among the stockholders, partners or associates themselves.
For as long as any of these intra-corporate relationships exist between the parties, the controversy would be characterized as intra-corporate.
The nature of controversy test is another means to determine if the dispute should be considered as intra-corporate. SC held that it was not just the relationship of the parties that mattered but also the conflict between them. The purpose and the wording of the law escapes the respondent. Nowhere in said decree do we find even so much as an intimidation that absolute jurisdiction and control is vested in the Securities and Exchange Commission in all matters affecting corporations. To uphold the respondent’s argument would remove without legal imprimatur from the regular courts all conflicts over matters involving or affecting corporations, regardless of the nature of the transactions which give rise to such disputes. The courts would then be divested of jurisdiction not by reason of the nature of the dispute submitted to them for adjudication, but solely for the reason that the dispute involves a corporation. This cannot be done. To do so would not only be to encroach on the legislative prerogative to grant and revoke jurisdiction of the courts but such a sweeping interpretation may suffer constitutional infirmity.
Applying the nature of the controversy test, this is still an intra-corporate dispute. The Complaint for interpleader seeks a determination of the true owner of the shares of stock registered in Santos’ name. Ultimately, however, the goal is to stop Santos from inspecting corporate books. This goal is so apparent that, even if Santos is declared the true owner of the shares of stock upon completion of the interpleader case, Belo Medical Group still seeks his disqualification from inspecting the corporate books based on bad faith. Therefore, the controversy shifts from a mere question of ownership over movable property to the exercise of a registered stockholder’s proprietary right to inspect corporate books.
adrianantazo.com 