Reyes V RTC & Zenith

REYES VS. RTC, BR. 142, ZENITH INSURANCE CORP. 2.
Whether or not there is an inra-corporate relationship between the

August 11, 2008 | Brion, J. | Proprietary Rights parties that would characterize the case as an intra-corporate dispute;
3. Whether or not the complaint is a derivative suit within the
PETITIONER: Oscar Reyes jurisdiction of the RTCacting as a special commercial court.
RESPONDENTS: RTC, Br. 142, Zenith Insurance Corp., and Rodrigo Reyes
SUMMARY: Pettitoner and private respondent were siblings together with RULING:
others, namely Pedro and Anastacia, in a family business established as
Zenith Insurance Corporation, from which they owned shares of stocks. No. Rodrigo must hurdle 2 obstacles before he can be considered a
Pedro and Anastacia subsequently died. The former has his estate stockholder of Zenith with respect to the shareholdings originally belonging
judiciallypartitioned among his heirs but the latter had not made the same in to Anastacia :
her shareholding in Zenith. Zenith and Rodrigo filed a complaint with the
SEC against petitioner: 1. He must prove that there are shareholdings that will be left to him and
his co-heirs, and this can be determined only in a settlement of the
DOCTRINE: 2-TIER TEST: (1) Status or Relationship Test; and (2) Nature of the decedent’s estate. No such proceeding has been commenced as to
Controversy Test date.
2. He must register the transfer of the shares allotted to him to make it
binding against the corporation. He cannot demand that this be done
unless and until he has established his specific allotment (and prima
FACTS: facie ownership) of the shares without the settlement of Anastacia’s
estate, there can be no definite partition and distribution of the estate
Pettitoner and private respondent were siblings together with others, namely of the heirs. Without the partition and distribution, there can be no
Pedro and Anastacia, in a family business established as Zenith Insurance registration of the transfer. And without the registration, the
Corporation, from which they owned shares of stocks. Pedro and Anastacia corporation cannot consider the transferee-kin a stockholder who may
subsequently died. The former has his estate judiciallypartitioned among his invoke the existence of an intra-corporate relationship as premise for
heirs but the latter had not made the same in her shareholding in Zenith. an intra-corporate controversy, within the jurisdiction of a special
Zenith and Rodrigo filed a complaint with the SEC against petitioner: commercial court. Insofar as the subject shares of stock of Anastacia,
Rodrigo cannot be considered a stockholder of Zenith.
1. Derivative suit to obtain accounting of fundsand assets of Zenith;
2. To determine shares of stock of deceased Pedro and Anastacia that were Where there is an absence of partition and transfer of shares, an heir cannot
arbitrarily and fraudulently appropriated by Oscar. yet to be considered a stockholder of a corporation, and the Curt, therefore,
cannot declare that an intra-corporate relationship exists that would serve as
Petitioner denied the illegality of the acquisition of shares of Anastacia and questioned basis in bringing the case within the special commercial court’s jurisdiction.
the jurisdiction of the SEC to entertain the complaint because it pertains to the
settlement of Anastacia’s estate.
Not every allegation of fraud done in a corporate setting or perpetrated by
Petitioner filed Motion to Declare Complaint as Nuisance or Harassment Suit must be corporate officers will bring the case within the special commercial court’s
dismissed. RTC denied the motion. The motion was elevated to the CA. jurisdiction. There must be sufficient nexus showing that the corporation’s
nature, structure, or powers were used to facilitate the fraudulent device or
ISSUES: scheme. Contrary to this concept, the complaint presented a reverse situation.
NO corporate power or office was alleged to have facilitated the transfer of the
1. Whether or not Rodrigo may be considered a stockholder of Zenith shares; rather, Oscar, as an INDIVIDUAL and WITHOUT REFERENCE TO
with respect to the shareholdings originally belonging to Anastacia; HIS COPRPORATE PERSONALITY, was alleged to have transferred the
shares of Anastacia to his name, allowing him to become the majority and
controlling stockholder of Zenith, and eventually the corporation’s President.
This is the essence of the complaint read as a whole. In summary, whether as an individual or as a derivative suit, the RTC – sitting
as special commercial court – has no jusridiction to hear Rodrigo’s complaint
A review of relevant jusrisprudence shows a development in the Court’s since what is involved is the determination and sitribution of successional
approach in classifying what constitutes an intra-corporate controversy – rights to the shareholdings of Anastacia Reyes. Rodrigo’s proper remedy,
initially, the main consideration in determining whether a dispute constitutes under the circumstances, is to institute a special proceeding for the settlement
an intra-corporate controversy was limited to a consideration of the of the estate of the deceased Anastacia Reyes, a move that is not foreclosed by
INTRA-CORPORATE RELATIONSHIP existing between or among the the dismissal of the present complaint.
parties.
The Types of Relationship as declared in the case of Union Glass & Container
Corp. v. SEC, were as follows:
1. Between the corporation, partnership, or association and the public;

2. Between the corporation, partnership, or association and its
stockholders, partners, members, or officers,
3. Between the corporation, partnership, or association and the State as
far as its franchise, permit or license to operate is concerned, and
4. Among the stockholders, partners, or association themselves.
The existence of any of the above intra-corporate relations were sufficient to

confer jusrisdiction to the SEC, regardless of the subject matter of the dispute.
This came to known as the RELATIONSHIP TEST.
In DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced
the NATURE OF THE CONTROVERSY TEST, under which test the
incidents of that relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate.
Hence, the controversy must not only be rooted in the existence of an intra-
corporate relationship, but must as well pertain to the enforcement of the
parties’ correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the
relationship and its incidents are merely incidental to the controversy or if
there will be still conflict even of the relationship does not exist, then
NO INTRA-CORPORATE CONTROVERSY EXISTS.
The TWO-TIER TEST was adopted in the case of Speed Distobution Onc. v. CA.
The court to try and decide such cases, 2 ELEMENTS must concur:
1. STATUS OR RELATIONSHIP of the parties; and

2. The NATURE OF THE QUESTION that is the subject of their
controversy.

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REYES VS. RTC, BR. 142, ZENITH INSURANCE CORP. 2.

Whether or not there is an inra-corporate relationship between the

1. Between the corporation, partnership, or association and the public;

The existence of any of the above intra-corporate relations were sufficient to

1. STATUS OR RELATIONSHIP of the parties; and

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