Philippine Supreme Court Resolutions > Year 2011 > August 2011 Resolutions > [G.R. No. 192329 : August 24, 2011] MAXIMINO T. SIAPUATCO, GERARDO T. SIAPUATCO AND IRENE SIAPUATCO-CASTRO, PETITIONERS, V. PEERS INDUSTRIAL CORPORATION AND/OR VICENTE T. SIAPUATCO, RESPONDENTS. :

Please take notice that the Court, Second Division, issued a Resolution dated 24 August 2011 which reads as follows:

G.R. No. 192329: MAXIMINO T. SIAPUATCO, GERARDO T. SIAPUATCO and IRENE SIAPUATCO-CASTRO, petitioners, v. PEERS INDUSTRIAL CORPORATION and/or VICENTE T. SIAPUATCO, respondents.

This petition for review assails the Resolutions^[1] of the Court of Appeals dismissing the appeal filed by petitioners Maximino T. Siapuatco, Gerardo T. Siapuatco, and. Irene Siapuatco-Castro for being a wrong remedy; and denying petitioners' motion for reconsideration.

Petitioners are stockholders of respondent Peers Industrial. Corporation, which is a domestic corporation engaged in the manufacture, sale and distribution of truck suspension and leaf springs.

On 30 September 1997, a Joint Special Meeting between the stockholders and directors of respondent corporation was held for the approval of the declaration of 60 percent cash dividends.^[2]

Claiming non-payment of the full amount of the dividends due them despite their repeated demands, petitioners filed with the Regional Trial Court of Para�aque City a Complaint for recovery of unpaid dividends.^[3]

Respondents filed their Answer with Compulsory Counterclaim denying the allegations in the complaint and claiming overpayment of dividends in the form of "cash advances" from the corporation.

On 21 October 2008, the trial court rendered a Decision, dismissing the complaint for petitioners' failure to prove their case by preponderance of evidence.^[4]

Petitioners filed a Notice of Appeal on 3 November 2008.

Subsequently, respondents filed a Motion to Dismiss Appeal, alleging that the Court of Appeals lacked jurisdiction over the appeal.

In the Resolution of 30 July 2009, the Court of Appeals dismissed the appeal for being a wrong remedy. The Court of Appeals found this case an intra-corporate controversy where petitioners should have filed a petition for review under Rule 43, instead of a notice of appeal, pursuant to A.M. No. 04-9-07-SC.^[5]

Petitioners moved for reconsideration, which the Court of Appeals denied in a Resolution dated 17 May 2010.

Hence, this petition.

The issue in this case is whether the instant controversy is intra-corporate in nature which in turn determines whether the Court of Appeals erred in dismissing the appeal for being a wrong remedy.

We deny the petition.

To determine whether a controversy is intra-corporate in character, jurisprudence has developed a two-tier test based on the relationship of the parties and the nature of the controversy.^[6]

Under the relationship test, the suit must arise from intra-corporate relations or between or among stockholders or between any or all of them and the corporation.^[7]

Under the nature of the controversy test, the dispute must not only be rooted in the existence of an intra-corporate relationship, but must also refer to the enforcement of the parties' correlative rights and obligations under the Corporation Code as well as the internal and intra-corporate regulatory rules of the corporation.^[8]

The instant case satisfies both.

The complaint for recovery of unpaid dividends was filed by petitioners, as stockholders of respondent corporation, against the corporation and its president. Since it is an action between stockholders, on one hand, and the corporation and a corporate officer on the other, this case successfully passes the relationship test.

As regards the nature of controversy test, petitioners submit that the complaint for recovery of unpaid dividends is an ordinary collection suit because a creditor-debtor relationship arises between the stockholders and the corporation once dividends had been declared but remained unpaid.

Petitioners' theory fails to impress us. The allegations in the complaint clearly establish that petitioners invoke their rights as stockholders of respondent corporation in claiming the purportedly unpaid dividends. Specifically, petitioners anchor their cause of action on Section 43 of the Corporation Code.^[9] Further, petitioners impleaded Vicente Siapuatco, respondent corporation's president, for his alleged violation of the corporation's By Laws,^[10]  particularly, his non-performance of official functions. Based on the foregoing allegations, it is clear that the instant case involves the enforcement of the parties' correlative rights and duties under the Corporation Code and the corporation's By Laws making it an intra-corporate controversy.

Since this case involves an intra-corporate dispute, the mode of appeal for assailing the decision of the trial court is a petition for review under Rule 43 of the Rules of Court,^[11] and not a notice of appeal, pursuant to A.M. No. 04-9-07-SC. Therefore, the Court of Appeals correctly dismissed petitioners' appeal for being a wrong remedy.

WHEREFORE, we DENY the petition. Sereno, J., on leave; Peralta, J., designated additional member per S.O. No. 1067. Reyes, J., on official leave; Mendoza, J., designated additional member per S.O. No. 1066.

SO ORDERED.

Very truly yours,

(Sgd.) MA. LUISA L. LAUREA
Division Clerk of Court

Endnotes:

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^[1] Rollo, pp. 74-82. The Resolution dated 30 July 2009 was penned by Associate Justice Mariano C. Del Castillo (now a member of this Court), with Associate Justices Monina Arevalo-Zenarosa and Priscilla J. Baltazar-Padilla, concurring. The Resolution dated 17 May 2010 was penned by Associate Justice Priscilla J. Baltazar-Padilla with Associate Justices Josefina Guevara-Salonga and Celia C. Librea-Leagogo concurring.

^[2] Id. at 296. 

^[3] In the sum of P2,000,000 each. 

^[4] Id. at 109. 

^[5] Re: Mode of Appeal in Cases Formerly Cognizable by the Securities and Exchange Commission. Promulgated on 14 September 2004 and took effect on 15 October 2004. 

^[6] Real v. Sangu Philippines, Inc., G.R. No. 168757, 19 January 2011, 640 SCRA 67; Speed Distributing Corp. v. Court of Appeals, 469 Phil. 739 (2004); Saura v. Saura, 372 Phil. 337 (1999); DMRC Enterprises v. Este Del Sol Mountain Reserve, Inc., 217 Phil. 280 (1984). 

^[7] Strategic Alliance Development Corporation v. Star Infrastructure Development Corporation, G.R. No. 187872, 17 November 2010, 635 SCRA 380. 

^[8] Id. 

^[9] Section 43. Power to declare dividends. - The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis of outstanding stock held by them: Provided, That any cash dividends due on delinquent stock shall first be applied to the unpaid balance on the subscription plus costs and expenses, while stock dividends shall be withheld from the delinquent stockholder until his unpaid subscription is fully paid: Provided, further, That no stock dividend shall be issued without the approval of stockholders representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose. 

x x x

^[10] Paragraphs 19-22 of the Complaint.

^[11] China Banking Corporation v. Cebu Printing and Packaging Corporation, G.R. No. 172880, 11 August 2010, 628 SCRA 154.