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SIMNY G. GUY v. GILBERT G. GUY

FACTS:

The case involves a dispute over the ownership and redistribution of shares of stock in GoodGold Realty & Development Corporation (GoodGold). Gilbert Guy, the respondent, claimed to practically own almost 80 percent of the capital stock of GoodGold, reflected in Stock Certificate Nos. 004-014. The remaining shares were divided among Francisco Guy, Simny Guy, Benjamin Lim, and Paulino Delfin Pe. Simny, one of the petitioners, alleged that she and her husband established GoodGold and put the shares under Gilbert's name. She claimed that they issued stock certificates reflecting the shares held by each stockholder, including Stock Certificate Nos. 004-014, which were always in the possession of Francisco and Simny. In 1999, Francisco instructed Benjamin Lim to collaborate with a lawyer to redistribute GoodGold's shareholdings among their children, including Gilbert. New certificates were issued to represent the redistribution of shares. In 2004, Gilbert filed a complaint to nullify the transfers of shares and alleged forgery of his signature on the stock certificates. He later withdrew the complaint after the National Bureau of Investigation authenticated his signature. In 2008, Gilbert filed a new complaint against his mother, sisters, and the heirs of his late sister, claiming that he never signed any document justifying the transfer of his shares and denying the existence of stock certificates. He alleged that the General Information Sheets submitted to the Securities and Exchange Commission by his siblings were spurious.

Gilbert filed a complaint against his siblings, Simny, Geraldine, Gladys, and the heirs of the late Grace, before the Regional Trial Court (RTC) alleging that they committed acts detrimental to his rights as a stockholder of a corporation owned by their family. Gilbert claimed that the stock transfer documents submitted to the Securities and Exchange Commission (SEC) were fake, and that there was no valid stockholders' annual meeting for the year 2004. He also argued that his siblings, being foreign citizens, cannot own more than forty percent of the authorized capital stock of the corporation. Gilbert sought the issuance of a Writ of Preliminary and Mandatory Injunction to protect his rights. The RTC denied Gilbert's motion for injunctive relief and his motion for reconsideration. Gilbert also filed a motion for the inhibition of Judge Sorongon, which was also denied by the RTC. The RTC eventually dismissed the case, declaring it a nuisance and harassment suit. Gilbert appealed the RTC’s decision to the Court of Appeals (CA), which upheld the RTC’s refusal to inhibit and denied Gilbert's petition for the issuance of a Writ of Preliminary Injunction. However, the CA agreed with Gilbert that the complaint should be heard on its merits. Two separate petitions were then filed before the Supreme Court, questioning the dismissal of the case and the denial of the motion to defer the pre-trial.

ISSUES:

  1. Whether an individual suit by a stockholder against a corporation is a valid remedy.

  2. Whether Francisco is an indispensable party in the case.

  3. Whether the allegations of fraud in the complaint are sufficiently stated with particularity.

  4. Whether the failure to specifically allege the fraudulent acts in intra-corporate controversies is a ground for the dismissal of the complaint.

  5. Whether or not Gilbert's complaint on its face has merits or is merely a nuisance suit.

  6. Whether or not the signatures on the stock certificates, including Gilbert's blank endorsement, were authentic.

  7. Whether or not the stock certificates can be cancelled and transferred in the names of the petitioners.

  8. Whether or not the transfer of the stock certificates is valid despite the endorsement in blank.

  9. Whether Gilbert holds legal title to the shares of stock in question.

  10. Whether the transfer of the shares of stock to respondent sisters is fraudulent.

RULING:

  1. Yes, an individual suit by a stockholder against a corporation is a valid remedy. However, it is essential that the suing stockholder has a cause of action against the corporation.

  2. Yes, Francisco is an indispensable party in the case. The inclusion of Francisco's shares in the complaint makes him an indispensable party. Moreover, the pronouncement about Francisco's shares would impact on the hereditary rights of the contesting parties or on the conjugal properties of the spouses, thus he must be included in the case.

  3. The allegations of fraud in the complaint are not sufficiently stated with particularity. The complaint contains conclusions of law without supporting statements of the facts to which the allegations of fraud refer. The circumstances constituting fraud must be stated with particularity to appraise the other party and determine whether the facts alleged amount to fraud. The failure to specifically allege the fraudulent acts indicates a harassment or nuisance suit and may be dismissed.

  4. Yes, the failure to specifically allege the fraudulent acts in intra-corporate controversies is a ground for the dismissal of the complaint. In intra-corporate controversies, a bill of particulars is prohibited, and it is essential for the complaint to show on its face what are claimed to be the fraudulent corporate acts if the complainant wishes to invoke the court's special commercial jurisdiction.

  5. Gilbert's complaint is deemed a nuisance suit, as he failed to allege specific acts of fraud and did not rebut the National Bureau of Investigation's report which authenticated the signatures on the stock certificates.

  6. The signatures on the stock certificates, including Gilbert's blank endorsement, are deemed authentic.

  7. The stock certificates can be cancelled and transferred in the names of the petitioners.

  8. Even though the stock certificates were endorsed in blank, they can still be transferred in the names of the holders as they were in the undisturbed possession of Gilbert's parents who were the beneficial owners thereof and caused the transfer in their names.

  9. The evidence on record indicates that the stock certificates representing the contested shares are in the respondents' possession, while there is no evidence to support Gilbert's claim of legal title. Therefore, the Court agrees with the Court of Appeals' ruling that Gilbert is merely a trustee of the shares for the benefit of his sisters.

  10. Gilbert failed to establish by clear and convincing evidence that the transfer of the shares of stock to his sisters was fraudulent. Fraud is never presumed and must be proven. Thus, the Court upholds the Court of Appeals' conclusion that the transfer was valid.

PRINCIPLES:

  • Individual suits by stockholders against other stockholders or against a corporation are recognized remedies under the Interim Rules on Intra-Corporate Controversy.

  • The absence of an indispensable party renders all subsequent actions of the court null and void.

  • An indispensable party is a party who has such an interest in the controversy that a final adjudication cannot be made without injuring or affecting that interest.

  • Joinder of indispensable parties is compulsory and failure to include an indispensable party warrants the dismissal of the action.

  • Allegations of fraud or mistake must be stated with particularity to appraise the other party and determine whether the facts alleged amount to fraud. This includes stating the time, place, and specific acts of fraud committed.

  • Failure to specifically allege the fraudulent acts in intra-corporate controversies may indicat

  • The act of fraud or misrepresentation complained of becomes a criterion in determining whether a complaint has merits or is merely a nuisance suit.

  • When a stock certificate is endorsed in blank by the owner, it constitutes a "street certificate" which gives the holder the right to demand its transfer into their name from the issuing corporation.

  • An endorsement in blank of a stock certificate, coupled with its delivery, entitles the holder to demand its transfer in their name from the issuing corporation.

  • The endorsement in blank of the stock certificates being in the undisturbed possession of the beneficial owners allows for the cancellation and transfer of said stock certificates.

  • A trust is a fiduciary relationship where property is held by one party for the benefit of another.

  • Fraud must be established by clear and convincing evidence and is never presumed.