[LOPEZ] G.R. No.
L-1721 May 19, 1950 Venue of the action was incorrect
JUAN D. EVANGELISTA ET. AL., plaintiffs-appellants vs. RAFAEL
SANTOS, defendant-appelee
Topic: Derivative Suits
*Note: the bulk of the case talked about venue of actions re: corporations
based on the old Rules of Court and a super old law (Act 190).
Facts:
1. Plaintiffs Evangelista et. al. were minority stockholders of the Vitali
Lumber Company, Inc. (Vitali Lumber), a corporation organized for
exploitation of lumber concessions in Zamboanga.
2. Defendant Santos holds more than 50% of the stocks of Vitali
Lumber. He was also the President, Manager and Treasurer of the
corporation.
3. Plaintiffs Evangelista et. al. filed an action for damages, alleging that
through Santos fault, neglect and abandonment, he allowed its
lumber concession to lapse and its properties (machineries,
buildings, etc.) to disappear. They alleged that such mismanagement
of affairs and misuse of its assets caused the ruin of the corporation
and depreciation of its stocks.
Evangelista et. al. had no cause of action to file the case
4. Their complaint prayed for a judgment requiring Santos to render an
account of his administration of corporate affairs and assets, and to
pay Evangelista et. al. the value of their respective participation
in said assets on the basis of the value of their stocks.
5. The complaint did not give the plaintiffs residence but alleged that
Santos resides in Pasay, Province of Rizal. Having been served
summons in Pasay, Santos filed an MTD on the ground of improper
venue, and that the complaint did not state a cause of action in
favor of the plaintiffs.
6. Santos alleged that he was a resident of Iloilo. While he had a house
in Pasay in order to easily attend to his interests in Manila, he has
permanent residence in Iloilo where he is a registered voter and has
been paying his residence certificate.
7. The lower court granted the MTD on both grounds. Hence, this
appeal to this Court.
Issue: 1.) W/N Evangelista et. al correctly brought the case to the proper
venue in Pasay; 2.) W/N Evangelista et. al had the right to bring this action
for their benefit.
Held: 1.) No. 2.) No.
1. Laying of the venue of the action is not left to plaintiffs caprice as it is
a matter regulated by the Rules of Court. This action is one in
personam, in which Sec. 1 of Rule 5 can be applied, which provides:
Civil actions in Courts of First Instance may be
commenced and tried where the defendant or any of the defendant
resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff.
2. The lower court found, based on Santos sworn statement not
rebutted by contrary proof, that he resided in Iloilo, and not in Pasay.
3. At first blush, such provision may seem to authorize laying of venue
in the province where defendant may be found. However,
jurisprudence has already construed such phrase to only be
applicable where defendant has no residence in the Philippine
islands. This applies to a domestic corporation. (Cohen vs. Benguet
Commercial Co.)
4. The fact that Santos was sojourning in Pasay when he was served
summons does not make him a resident of such place for purposes
of venue. Residence permanent home, the place to which one
intends to return.
1. Generally, if the injury complained of is primarily to the corporation,
the suit for damages should be claimed only by the corporation. The
stockholders may not directly claim those damages for themselves,
as that would result in the appropriation by, and the distribution of
part of the corporate assets before dissolution and liquidation. Such
cannot be done in view of Sec. 16 of the Corporation Law:
No shall corporation shall make or declare any stock or
bond dividend or any dividend whatsoever from the profits arising
from its business, or divide or distribute its capital stock or property
other than actual profits among its members or stockholders until
after the payment of its debts and the termination of its existence
by limitation or lawful dissolution.
2. [DOCTRINE] However, if the officers of the corporation refuse to
sue, or where demand upon them to file a suit would be futile as they
are the very ones to be sued or because they hold controlling
interest, then the stockholders may be allowed to bring the suit. But
in such derivative suit, the stockholder is the nominal party plaintiff
for the benefit of the corporation, as the real party in interest is still
the corporation (the damages recovered should still pertain to the
corporation).
3. In this case, Evangelista et. al. brought this action not for the benefit
of the corporation, but for their own benefit, since they pray that
Santos make good the losses accrued by his mismanagement and
for him to pay the value with respect to their respective shares.
Clearly, this cannot be done until there is a lawful dissolution and
liquidation.
4. Thus, Evangelista et. al. shows no cause of action. Such action,
however, is susceptibleof being converted into a derivative suit by a ACTION IS DISMISSED, WITHOUT PREJUDICE TO FILING OF ACTION
mere amendment in the prayer. Such amendment, however, is not IN THE PROPER VENUE.
possible now since the action was filed in the wrong venue.