Lim v. Lim-Yu (G.R. No. 138343)

Facts:

The Board of Directors of Limpan Corporation issued a resolution authorizing the partial payment for the legal services rendered by petitioner Lim to be in form of shares of stock there being no available funds to pay the same. As a result, the unsubscribed shares of LIMPAN were issued and all of its authorized capital stock became fully subscribed with petitioner Lim ending up controlling 62.5% of the shares. Respondent Yu filed a complaint against the members who approved the resolution. Petitioners moved to dismiss alleging Yu had no legal capacity to sue on the basis of a TRO issued by the SC on her guardianship case and thus incapacitated from filing a derivative suit. The SEC Hearing Officer held in abeyance the motion but the SEC En Banc ordered the case to proceed. CA affirmed the SEC En Banc.

Issue:

Whether or not the suit brought by the respondent is a derivative suit that the TRO restricts her from doing.

Ruling: NO.

There appears to be a confusion on the nature of the suit initiated before the SEC. Petitioners describe it as a derivative suit, which has been defined as “an action brought by minority shareholders in the name of the corporation to redress wrongs committed against it, for which the directors refuse to sue. It is a remedy designed by equity and has been the principal defense of the minority shareholders against abuses by the majority.” In a derivative action, the real party in interest is the corporation itself, not the shareholder(s) who actually instituted it. “If the suit filed by respondent was indeed derivative in character, then respondent may not have the capacity to sue. The reason is that she would be acting in representation of the corporation, an act which the TRO enjoins her from doing.

We hold, however, that the suit of respondent cannot be characterized as derivative, because she was complaining only of the violation of her preemptive right under Section 39 of the Corporation Code. She was merely praying that she be allowed to subscribe to the additional issuances of stocks in proportion to her shareholdings to enable her to preserve her percentage of ownership in the corporation. She was therefore not acting for the benefit of the corporation. Quite the contrary, she was suing on her own behalf, out of a desire to protect and preserve her preemptive rights. Unquestionably, the TRO did not prevent her from pursuing that action.

The TRO allows Respondent Patricia Lim-Yu to act for herself and to enter into any contract on her own behalf. However, she cannot transact in representation of or for the benefit of her parents, brothers or sisters, or the Limpan Investment Corporation. Contrary to what petitioners suggest, all that is prohibited is any action that will bind them. In short, she can act only on and in her own behalf, not that of petitioners or the Corporation.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s