DERIVATIVE SUITS, INDIVIDUAL AND REPRESENTATIVE OR CLASS SUITS

Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or other persons may be classified into individual suits, class suits, and derivative suits. Where a stockholder or member is denied the right of inspection, his suit would be individual because the wrong is done to him personally and not to the other stockholders or the corporation. Where the wrong is done to a group of stockholders, as where preferred stockholders’ rights are violated, a class or representative suit will be proper for the protection of all stockholders belonging to the same group. But where the acts complained of constitute a wrong to the corporation itself, the cause of action belongs to the corporation and not to the individual stockholder or member. Although in most every case of wrong to the corporation, each stockholder is necessarily affected because the value of his interest therein would be impaired, this fact of itself is not sufficient to give him an individual cause of action since the corporation is a person distinct and separate from him, and can and should itself sue the wrongdoer. Otherwise, not only would the theory of separate entity be violated, but there would be multiplicity of suits as well as a violation of the priority rights of creditors. Furthermore, there is the difficulty of determining the amount of damages that should be paid to each individual stockholder.

          However, in cases of mismanagement where the wrongful acts are committed by the directors or trustees themselves, a stockholder or member may find that he has no redress because the former are vested by law with the right to decide whether or not the corporation should sue, and they will never be willing to sue themselves. The corporation would thus be helpless to seek remedy. Because of the frequent occurrence of such a situation, the common law gradually recognized the right of a stockholder to sue on behalf of a corporation in what eventually became known as a "derivative suit." It has been proven to be an effective remedy of the minority against the abuses of management. Thus, an individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever officials of the corporation refuse to sue or are the ones to be sued or hold the control of the corporation. In such actions, the suing stockholder is regarded as the nominal party, with the corporation as the party in interest. (Jose Campos, Jr. and Maria Clara L. Campos, The Corporation Code: Comments, Notes and Selected Cases (1990 ed.), Vol. I, pp. 819-820).

The afore-quoted exposition is relevant in the case of Santiago Cua, Jr. et. al. vs. Miguel Ocampo Tan, et. al. considering that the claim therein of respondents Miguel, et al., that its Complaint in Civil Case No. 07-610 is not just a derivative suit, but also an intracorporate action arising from devices or schemes employed by the PRCI Board of Directors amounting to fraud or misrepresentation.

The Supreme Court declared that a thorough study of the said Complaint, however, reveals that the distinction is deceptive. The supposed devices and schemes employed by the PRCI Board of Directors amounting to fraud or misrepresentation are the very same bases for the derivative suit. They are the very same acts of the PRCI Board of Directors that have supposedly caused injury to the corporation. From the very beginning of their Complaint, respondents have alleged that they are filing the same "as shareholders, for and in behalf of the Corporation, in order to redress the wrongs committed against the Corporation and to protect or vindicate corporate rights, and to prevent wastage and dissipation of corporate funds and assets and the further commission of illegal acts by the Board of Directors." Although respondents Miguel, et al., also aver that they are seeking "redress for the injuries of the minority stockholders against the wrongdoings of the majority," the rest of the Complaint does not bear this out, and is utterly lacking any allegation of injury personal to them or a certain class of stockholders to which they belong.

Indeed, the Court notes American jurisprudence to the effect that a derivative suit, on one hand, and individual and class suits, on the other, are mutually exclusive, viz:

As the Supreme Court has explained: "A shareholder's derivative suit seeks to recover for the benefit of the corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise be redressed because of failure of the corporation to act. Thus, ‘the action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets.’ [Citations.]" (Jones, supra, 1 Cal.3d 93, 106, 81 Cal.Rptr. 592, 460 P.2d 464.) In contrast, "a direct action [is one] filed by the shareholder individually (or on behalf of a class of shareholders to which he or she belongs) for injury to his or her interest as a shareholder. ... [¶] ... [T]he two actions are mutually exclusive: i.e., the right of action and recovery belongs to either the shareholders (direct action) *651 or the corporation (derivative action)." (Friedman, Cal. Practice Guide: Corporations, supra, ¶ 6:598, p. 6-127.)

Thus, in Nelson v. Anderson (1999) 72 Cal.App.4th 111, 84 Cal.Rptr.2d 753, the **289 minority shareholder alleged that the other shareholder of the corporation negligently managed the business, resulting in its total failure. (Id. at p. 125, 84 Cal.Rptr.2d 753) The appellate court concluded that the plaintiff could not maintain the suit as a direct action: "Because the gravamen of the complaint is injury to the whole body of its stockholders, it was for the corporation to institute and maintain a remedial action. [Citation.] A derivative action would have been appropriate if its responsible officials had refused or failed to act." (Id. at pp. 125-126, 84 Cal.Rptr.2d 753) The court went on to note that the damages shown at trial were the loss of corporate profits. (Id. at p. 126, 84 Cal.Rptr.2d 753) Since "[s]hareholders own neither the property nor the earnings of the corporation," any damages that the plaintiff alleged that resulted from such loss of corporate profits "were incidental to the injury to the corporation."

Based on allegations in the Complaint of Miguel, et al., in Civil Case No. 07-610, the Court determines that there is only a derivative suit, based on the devices and schemes employed by the PRCI Board of Directors that amounts to mismanagement, misrepresentation, fraud, and bad faith. (SANTIAGO CUA, JR., et. al. vs. MIGUEL OCAMPO TAN et. al., G.R. No. 181455-56, December 4, 2009, CHICO-NAZARIO, J.).

ELECTRONIC EVIDENCE RULE: THE RULES ON ELECTRONIC EVIDENCE APPLIES ONLY TO CIVIL ACTIONS, QUASI-JUDICIAL PROCEEDINGS, AND ADMINISTRATIVE PROCEEDINGS. IT DOES NOT APPLY TO CRIMINAL CASES. (RUSTAN ANG Y PASCUA VS. COURT OF APPEALS AND IRISH SAGUD)

In a charge for the crime of violence against women (RA 9262 VAWC) by Irish against her former boyfriend Rustan, is the act of the latter in sending a picture of a naked woman, not her, but with her face on it through text message covered by the Electronic Evidence Rule?

Rustan claims that the obscene picture sent to Irish through a text message constitutes an electronic document. Thus, it should be authenticated by means of an electronic signature, as provided under Section 1, Rule 5 of the Rules on Electronic Evidence (A.M. 01-7-01-SC). Thus:

RULE 5 

AUTHENTICATION OF ELECTRONIC DOCUMENTS 

   
            SECTION 1. Burden of proving authenticity. – The person seeking to introduce an electronic document in any legal proceeding has the burden of proving its authenticity in the manner provided in this Rule. 

           

            SEC. 2. Manner of authentication. – Before any private electronic document offered as authentic is received in evidence, its authenticity must be proved by any of the following means: 

            (a) by evidence that it had been digitally signed by the person purported to have signed the same; 

            (b) by evidence that other appropriate security procedures or devices as may be authorized by the Supreme Court or by law for authentication of electronic documents were applied to the document; or 

            (c) by other evidence showing its integrity and reliability to the satisfaction of the judge. 

            SEC. 3. Proof of electronically notarized document. - A document electronically notarized in accordance with the rules promulgated by the Supreme Court shall be considered as a public document and proved as a notarial document under the Rules of Court (emphasis supplied). 

But, firstly, Rustan is raising this objection to the admissibility of the obscene picture, Exhibit A, for the first time before this Court. The objection is too late since he should have objected to the admission of the picture on such ground at the time it was offered in evidence. He should be deemed to have already waived such ground for objection (People v. Mendoza, G.R. No. 180501, December 24, 2008, 575 SCRA 616, 625-626.).

Besides, the rules he cites do not apply to the present criminal action. The Rules on Electronic Evidence applies only to civil actions, quasi-judicial proceedings, and administrative proceedings. (A.M. No. 01-7-01-SC, Rule 1, Section 2). Be that as it may, in conclusion, the Supreme Court found that the prosecution has proved each and every element of the crime charged beyond reasonable doubt (RUSTAN ANG y PASCUA vs. THE HONORABLE COURT OF APPEALS and IRISH SAGUD, G.R. No. 182835, April 20, 2010, ABAD, J.).

RES GESTAE PRINCIPLE, AN EXCEPTION TO THE HEARSAY RULE

Res gestae refers to statements made by the participants or the victims of, or the spectators to, a crime immediately before, during, or after its commission. These statements are a spontaneous reaction or utterance inspired by the excitement of the occasion, without any opportunity for the declarant to fabricate a false statement. 

An important consideration is whether there intervened, between the occurrence and the statement, any circumstance calculated to divert the mind and thus restore the mental balance of the declarant; and afford an opportunity for deliberation .

For spontaneous statements to be admitted in evidence, the following must concur: 1) the principal act, the res gestae, is a startling occurrence; 2) the statements were made before the declarant had time to contrive or devise; and 3) the statements concerned the occurrence in question and its immediately attending circumstances (Marturillas v. People, G.R. No. 163217, April 18, 2006, 487 SCRA 273, 308-309).

In People vs. Fallones, the Supreme Court held that the principle of res gestae applies. Thus:

Fallones’ act of forcing himself into Alice is a startling event. And Amalia happened to be just outside his house when she heard Alice cry out “tama na, tama na!”  When Fallones opened the door upon Amalia’s incessant knocking, Alice came out from behind him, uttering “Amalia, may napkin na binigay si Romy o.”  The admissibility of Alice’s spontaneous statements rests on the valid assumption that they were spoken under circumstances where there had been no chance to contrive.[Id.]  It is difficult to lie in an excited state and the impulsiveness of the expression is a guaranty of trustworthiness (Capila v. People, G.R. No. 146161, July 17, 2006, 495 SCRA 276, 281-282  x x x x

For his defense, Fallones claimed that the members of Alice’s family pressured her into pointing to him as her abuser.  But he has been unable to establish any possible ill-motive that could prompt Alice’s family into charging him falsely.  Indeed, Fallones admitted at the trial that there had been no animosity between Alice’s family and him.  

      Fallones argues that Alice’s actuations after the incident negate rape, invoking the Court’s ruling in People v. Dela Cruz, 388 Phil. 678 (2000).  But the circumstances of the latter case are far too different from those existing in the present case.  In Dela Cruz, although the victim was seven years old when the supposed rape took place, she was not mentally retarded.  Further, she was already 19 years old when she reported the incident 12 years after it happened.  Besides, the medical findings revealed that her hymen remained intact. Thus, the Court did not believe that she had been raped when she was seven.

In sum, the testimony of the witnesses, the physical evidence, the medico-legal finding, and the psychologist’s report all establish that Fallones raped Alice. The defense offered no witness or evidence of Fallones’ innocence other than his bare denial. Again, the Court will not disturb the RTC’s findings and conclusion being the first-hand observer of the witnesses’ attitude and behavior during trial. The defense counsel was unsuccessful in impeaching Amalia during cross-examination. In fine, the guilt of the accused has been proved beyond reasonable doubt.Alice is dead but, as Shakespeare wrote in his Sonnets—The Winter’s Tale, "the silence often of pure innocence persuades when speaking fails" (Bartlett’s Familiar Quotations" by John Bartlett, p. 222, par. 22). (PEOPLE OF THE PHILIPPINES vs. ROMY FALLONES y LABANA, G.R. No. 190341, March 16, 2011, ABAD, J.).

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JAYSON IVLER CASE: PRIOR CONVICTION OR ACQUITTAL FOR RECKLESS IMPRUDENCE BARS SUBSEQUENT PROSECUTION FOR THE SAME QUASI-OFFENSE

In Jayson Ivler Y Aguilar vs. Hon. Maria Rowena Modesto-San Pedro, the Supreme Court sufficiently explained that the doctrine that reckless imprudence under Article 365 is a single quasi-offense by itself and not merely a means to commit other crimes such that conviction or acquittal of such quasi-offense bars subsequent prosecution for the same quasi-offense, regardless of its various resulting acts, undergirded this Court’s unbroken chain of jurisprudence on double jeopardy as applied to Article 365 starting with People v. Diaz, [94 Phil. 715 (1954)] decided in 1954.

There, a full Court, speaking through Mr. Justice Montemayor, ordered the dismissal of a case for "damage to property thru reckless imprudence" because a prior case against the same accused for "reckless driving," arising from the same act upon which the first prosecution was based, had been dismissed earlier. Since then, whenever the same legal question was brought before the Court, that is, whether prior conviction or acquittal of reckless imprudence bars subsequent prosecution for the same quasi-offense, regardless of the consequences alleged for both charges, the Court unfailingly and consistently answered in the affirmative in People v. Belga [100 Phil. 996 (1957) (barring subsequent prosecutions for physical injuries thru reckless imprudence and damage to property thru reckless imprudence following an acquittal for "reckless imprudence with physical injury")] (promulgated in 1957 by the Court en banc, per Reyes, J.), Yap v. Lutero [105 Phil. 1307 (1959) (Unrep.) (barring subsequent prosecution for "serious physical injuries" following an acquittal for "reckless driving")] (promulgated in 1959, unreported, per Concepcion, J.), People v. Narvas [107 Phil. 737 (1960) (barring subsequent prosecution for "damage to property thru reckless imprudence" following a conviction for "multiple slight and serious physical injuries thru reckless imprudence.")] (promulgated in 1960 by the Court en banc, per Bengzon J.), People v. Silva [No. L-15974, 30 January 1962, 4 SCRA 95 (barring subsequent prosecution for "homicide thru reckless imprudence" following an acquittal for "slight physical injuries thru reckless imprudence").] (promulgated in 1962 by the Court en banc, per Paredes, J.), People v. Macabuhay [123 Phil. 48 (1966) (barring subsequent prosecution for "damage to property thru reckless imprudence" following an acquittal for two counts of "slight physical injuries thru reckless imprudence.")] (promulgated in 1966 by the Court en banc, per Makalintal, J.), People v. Buan [131 Phil. 498 (1968) (barring subsequent prosecution for "serious physical injuries and damage to property thru reckless imprudence" following an acquittal for "slight physical injuries thru reckless imprudence").] (promulgated in 1968 by the Court en banc, per Reyes, J.B.L., acting C. J.), Buerano v. Court of Appeals [200 Phil. 486 (1982) (reversing a subsequent conviction for "damage to property thru reckless imprudence" following a conviction for "slight and serious physical injuries thru reckless imprudence").] (promulgated in 1982 by the Court en banc, per Relova, J.), and People v. City Court of Manila [206 Phil. 555 (1983) (barring subsequent prosecution for "homicide thru reckless imprudence" following a conviction for "serious physical injuries thru reckless imprudence").] (promulgated in 1983 by the First Division, per Relova, J.). These cases uniformly barred the second prosecutions as constitutionally impermissible under the Double Jeopardy Clause.

The reason for this consistent stance of extending the constitutional protection under the Double Jeopardy Clause to quasi-offenses was best articulated by Mr. Justice J.B.L. Reyes in Buan, where, in barring a subsequent prosecution for "serious physical injuries and damage to property thru reckless imprudence" because of the accused’s prior acquittal of "slight physical injuries thru reckless imprudence," with both charges grounded on the same act, the Court explained: [131 Phil. 498, 500 (1968).]

Reason and precedent both coincide in that once convicted or acquitted of a specific act of reckless imprudence, the accused may not be prosecuted again for that same act. For the essence of the quasi offense of criminal negligence under article 365 of the Revised Penal Code lies in the execution of an imprudent or negligent act that, if intentionally done, would be punishable as a felony. The law penalizes thus the negligent or careless act, not the result thereof. The gravity of the consequence is only taken into account to determine the penalty, it does not qualify the substance of the offense. And, as the careless act is single, whether the injurious result should affect one person or several persons, the offense (criminal negligence) remains one and the same, and can not be split into different crimes and prosecutions. x x x (Emphasis supplied) x x x x x

Evidently, the Diaz line of jurisprudence on double jeopardy merely extended to its logical conclusion the reasoning of Quizon.      x x x x Hence, the Supreme Court found merit in petitioner’s submission that the lower courts erred in refusing to extend in his favor the mantle of protection afforded by the Double Jeopardy Clause.

A more fitting jurisprudence could not be tailored to petitioner’s case than People v. Silva, No. L-15974, 30 January 1962, 4 SCRA 95, a Diaz progeny. There, the accused, who was also involved in a vehicular collision, was charged in two separate Informations with "Slight Physical Injuries thru Reckless Imprudence" and "Homicide with Serious Physical Injuries thru Reckless Imprudence." Following his acquittal of the former, the accused sought the quashal of the latter, invoking the Double Jeopardy Clause. The trial court initially denied relief, but, on reconsideration, found merit in the accused’s claim and dismissed the second case.  x x x x

Ergo, the Supreme Court granted the petition and DISMISSED the Information in Criminal Case No. 82366 against petitioner Jason Ivler y Aguilar pending with the Metropolitan Trial Court of Pasig City, Branch 71 on the ground of double jeopardy (JASON IVLER y AGUILAR vs. HON. MARIA ROWENA MODESTO-SAN PEDRO, G.R. No. 172716, November 17, 2010, CARPIO, J.). 

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THE COURT OF APPEALS CORRECTLY DISMISSED THE SPECIAL CIVIL ACTION FOR CERTIORARI, WHICH QUESTIONED THE RTC’S GRANT OF BAIL TO RESPONDENT, FOR HAVING BEEN FILED IN THE NAME OF THE OFFENDED PARTIES AND WITHOUT THE OSG’S INTERVENTION.

The grant of bail or its denial has no impact on the civil liability of the accused that depends on conviction by final judgment.  Ergo, the Court of Appeals correctly dismissed the special civil action for certiorari, which questioned the RTC’s grant of bail to respondent, for having been filed in the name of the offended parties and without the OSG’s intervention.

the question of granting bail to the accused is but an aspect of the criminal action, preventing him from eluding punishment in the event of conviction. The grant of bail or its denial has no impact on the civil liability of the accused that depends on conviction by final judgment.

While in Narciso v. Sta. Romana-Cruz, 385 Phil. 208 (2000), the Supreme Court allowed the offended party to challenge before it the trial court's order granting bail. Nonetheless, in that case, the trial court gravely abused its discretion amounting to lack of jurisdiction in granting bail without conducting any hearing at all.  Thus, to disallow the appeal on the basis of lack of intervention of the OSG would "leave the private complainant without any recourse to rectify the public injustice." (People v. Calo, G.R. No. 88531, June 18, 1990, 186 SCRA 620, 624).

On the contrary, the Supreme Court in Burgos vs. Court of Appeals, emphatically stated that since respondent Co has already been arraigned, the trial and judgment, with award for civil liability when warranted, could proceed even in his absence.

This is true because the trial court took time to hear the parade of witnesses that the prosecution presented before reaching the conclusion that the evidence of guilt of respondent Co was not strong.  Ergo, the CA correctly dismissed the special civil action of certiorari, which questioned the RTC’s grant of bail to respondent Co, for having been filed in the name of the offended parties and without the OSG’s intervention (BURGOS vs. CA, G.R. No. 169711, February 08, 2010, ABAD, J.).