8.) Nestor Ching and Andrew Wellington vs.

Subic Bay Golf And Country Club,

Inc., Hu Ho Hsiu Lien alias Susan Hu, Hu Tsung Chieh alias Jack Hu, Hu Tsung
Hui, Hu Tsung Tzu and Reynald R. Suarez, G.R. No. 174353, September 10, 2014
FACTS:
Petitioners Nestor Ching and Andrew Wellington own stocks of the Subic Bay Golf and Country Club, Inc.
(SBGCCI). On June 27, 1996, Securities and Exchange Commission (SEC) approved amendments to
SBGCCI Articles of Incorporation which the petitioners allege make their shares non-proprietary.
Petitioners allege that this change was made without the appropriate disclosure of SBGCCI to its
shareholders.
Furthermore, petitioners allege several instances of fraud committed by SBGCCIs board of directors in its
February 26, 2003 complaint.
Respondents answered the complaint by refuting allegations made by petitioners. As a way of defense,
respondents underscored petitioners failure to:
show that it was authorized by SBGSI to file complaint on said companys behals
comply with the requisites for filing a derivative suit and an action for receivership
justify their prayer for injunctive relief since the complaint may be considered a nuisance or harassment
suit
Thus, respondents prayed for dismissal of the complaint.
On July 28, 2003, the RTC held that the action is a derivative suit and issued an order dismissing the
complaint.
Petitioners elevated the case to the Court of Appeals but the appellate court affirmed the RTC decision.
ISSUE:
WON the petitioners are proper party in interest
WON the complaint is a derivative suit
RULING:
Petitioners did not offer proof that they were authorized to represent SBGSI.
The Court ruling in Cua, Jr. v. Tan elaborated the three (3) types of suit: individual, class or
representative, and derivative suit.
The reliefs prayed for by petitioners, to wit: (i) enjoining defendants from acting as officers and Board of
Directors of the corporation, (ii) the appointment of receiver, (iii) damages, clearly show that the
complaint was filed to curb the alleged mismanagement of SBGCCI. The cause of action pleaded by
petitioners do not accrue to a single shareholder or a class of shareholders but to the corporation itself.
While there were allegations of fraud in the subscription, petitioners do not wish to have their
subscription rescinded. Instead, the petitioners asked that the respondents be removed from the
management of the corporation. Petitioners only possible cause of action as the minority shareholder
against the actions of the board is to file the common law right to file a derivative suit. As minority
shareholders, petitioners do not have any statutory right to override the business judgements of SBGCCIs
officers and board of directors on the ground of the latters alleged lack of qualification to manage a golf
course. The legal standing of the petitioners is not a statutory right, there being no provision in the
Corporation Code or related statutes, but is instead a product of jurisprudence based on equity. However,
a derivative suit cannot prosper without first complying with the legal requisites for its institution:
Interim Rules Governing Intra-Corporate Controversies.
Petitioners failed to comply with second requisite: 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

Thus, a complaint which contained no allegation whatsoever of any effort to avail

of intra-corporate remedies allows the court to dismiss it, even motu proprio.
Indeed, even if petitioners thought it was futile to exhaust intra-corporate
remedies, they should have stated the same in the Complaint and specified the
reasons for such opinion. The requirement of this allegation in the Complaint is
not a useless formality which may be disregarded at will.