38 - Forest Hills Golf Country Club V Fil-Estate Properties

TOPIC: Derivative Suit
38_Forest Hills Golf and Country Club v Fil-Estate Properties

G.R. No. 206649| July 20, 2016
Digest by: Asuncion
Ponente: J. Del Castillo
DOCTRINE: For a derivative suit to prosper, the exhaustion of available remedies, absence of
appraisal rights, and it being not a nuisance or harassment suit must be alleged in the Complaint
with particularity; otherwise, it will be dismissed.
FACTS:
 Kingsville Construction (Kingsville) and Kings Properties Corporation (KPC) entered a
Project Agreement with Fil-Estate Properties (FEPI). Their Agreement contained the
following stipulations:
- FEPI agreed to finance and cause the development of several parcels of land owned
by Kingsville in Antipolo into Forest Hills Residential Estate and Golf and Country
Club (FHGCCI);
- Fil-Estate was tasked to incorporate Forest Hills Golf and Country Club with
authorized stock of 3,600 shares and to perform the development and construction
work and other undertakings as full payment of its subscription to the authorized
capital stock of the club.
 FEPI assigned its rights over the project to Fil-Estate Golf Development (FEGDI).
Meanwhile, Rainier Madrid purchased two Class A shares for 380k each and applied for
a membership to the club for 25k.
 Due to delayed construction of the Golf Course, Madrid wrote two demand letters to the
Board of Directors of FHGCCI asking them to initiate the appropriate legal action against
FEPI and FEGDI. However, the Board refused to act on the demand letters.
 As recourse, Madrid, in a derivative capacity on behalf of FHGCCI, filed with the RTC
of Antipolo City a Complaint for Specific Performance.
 Arguments of FEPI and FEGDI:
- The action is not a proper derivative suit as petitioner FHGCCI failed to exhaust all
remedies available under the articles of incorporation and bylaws;
- FHGCCI failed to implead its Board of Directors as indispensable parties.
- The present case is an intra-corporate controversy as the allegations in the Complaint
clearly show that petitioner FHGCCI is suing FEPI and FEGDI not only as
developers but also as stockholders of FHGCCI
 Arguments of FHGCCI
- The case does not involve an intra-corporate controversy and that the exhaustion of
intra-corporate remedies was futile and useless as the BOD of FHGCCI also own
FEGDI;
- Although FEGDI is a stockholder of FHGCCI, it does not make the case an intra-
corporate dispute as the case for specific performance was filed against FEPI and
FEGDI as developers, and not as stockholders of FHGCCI.
 Decision of RTC: Dismissed the case for lack of jurisdiction, without prejudice to the
refiling of the case with proper commercial court sitting at Binangonan.
ISSUES:
 WON RTC has jurisdiction over the derivative suit initiated by Madrid in behalf of FEPI
and FEGDI. [NO]
 WON the Complaint filed by Madrid is a valid derivative suit. [NO]
RULING:
AS TO FIRST ISSUE: NO. RTC has no jurisdiction over the derivative suit.
 RULE: Upon the enactment of RA 8799, jurisdiction over intra-corporate disputes,
including derivative suits, is now vested in RTCs designated as special commercial courts
 IN THIS CASE: The fact that FHGCCI denominated the Complaint as derivative suit for
specific performance is sufficient reason for the RTC to dismiss it for lack of jurisdiction,
as the RTC where the Complaint was raffled is not a special commercial court.
AS TO SECOND ISSUE: No. The Complaint fails to comply with the requisites of valid
derivative suit.
 RULE: Under Rule 8, Section 1 of the Interim Rules of Procedure Governing Intra-
Corporate Controversies, a stockholder or member may bring an action in the name of the
corporation or association, provides that:
1. He was a stockholder or member at the time the acts or transactions subject of the
action occurred and at the time the action was filed;
2. He exerted all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of incorporation,
bylaws, laws or rules governing the corporation or partnership to obtain the relief he
desires;
3. No appraisal rights are available for the act or acts complained of; and
4. The suit is not a nuisance or harassment suit.
 IN THIS CASE: Madrid failed to alleged with particularity in the Complaint, and even
in the Amended Complaint, the following:
a. That he exerted all reasonable efforts to exhaust all remedies available under the AOI,
bylaws, or rules governing the corporation.
b. That no appraisal rights are available for the act or acts complained of;
c. That the suit is not a nuisance or harassment suit
- Although the Complaint alleged that demand letters were sent to the Board of
Directors of FHGCCI and that these were unheeded, these allegations will not suffice.
 THUS: For failing to meet the requirements set forth in Interim Rules, the Complaint,
denominated as derivative suit for specific performance, must be DISMISSED.
FALLO: The Petition is hereby DENIED

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TOPIC: Derivative Suit

38_Forest Hills Golf and Country Club v Fil-Estate Properties

FALLO: The Petition is hereby DENIED

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