Belo Medical Group received a request from Jose Santos for the inspection of corporate records.
Belo objected to this request and wrote Belo Medical Group to repudiate Santos co-ownership of her shares and his interest in the corporation, claiming that the 25 shares in his name were merely in trust for her, as she, and not Santos, paid for these shares.
Thus, Belo Medical Group filed a Complaint for Interpleader to compel [Belo and Santos] to interplead and litigate their conflicting claims and for declaratory relief, praying that Santos be perpetually barred from inspecting its books. Said complaints were raffled to the special commercial court, thus classifying them as intra-corporate.
Belo prayed that the case be tried as a civil case and not as an intra-corporate controversy, arguing that intra-corporate controversies did not include special civil actions for interpleader and declaratory relief, and clarified that the issue of ownership of the shares of stock must first be resolved before the issue on inspection could even be considered ripe for determination.
Instead of filing an answer, Santos filed a Motion to Dismiss.
Though a motion to dismiss is a prohibited pleading under the Interim Rules of Procedure Governing Intra-Corporate Controversies, the trial court ruled that according to the Rules of Court, motions to dismiss are allowed in interpleader cases, while the complaint for Declaratory Relief was struck down as improper.
Belo filed her Petition for Review before the CA.
Belo Medical Group, on the other hand, directly filed its Petition for Review with this Court.
The CA dismissed Belo’s Petition.
Whether or not the present controversy is intra-corporate.
Belo Medical Group filed a case for interpleader, the proceedings of which are covered by the Rules of Court. At its core, however, it is an intra-corporate controversy.
To determine whether an intra-corporate dispute exists and whether this case requires the application of the rules of procedure, this Court evaluated the relationship of the parties. The types of intra-corporate relationships were reviewed in Union Glass & Container Corporation v. SEC:
[a] between the corporation, partnership or association and the public;
[b] between the corporation, partnership or association and its stockholders, partners, members, or officers;
[c] between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate is concerned; and
[d] among the stockholders, partners or associates themselves.
For as long as any of these intra-corporate relationships exist between the parties, the controversy would be characterized as intra-corporate. This is known as the “relationship test.”
DMRC Enterprises v. Este del Sol Mountain Reserve, Inc. employed what would later be called as the “nature of controversy test.”
In said case, this Court held that it was not just the relationship of the parties that mattered but also the conflict between them.
This Court now uses both the relationship test and the nature of the controversy test to determine if an intra-corporate controversy is present.
Applying the relationship test, this Court notes that both Belo and Santos are named shareholders in Belo Medical Group’s Articles of Incorporation and General Information Sheet for 2007.
The conflict is clearly intra-corporate as it involves two shareholders although the ownership of stocks of one stockholder is questioned.
Applying the nature of the controversy test, this is still an intra-corporate dispute. In the interpleader case, Belo Medical Group sought his disqualification from inspecting the corporate books based on bad faith. Therefore, the controversy shifts from a mere question of ownership over movable property to the exercise of a registered stockholder’s proprietary right to inspect corporate books.
The circumstances of the case and the aims of the parties must not be taken in isolation from one another.
As an intra-corporate dispute, Santos should not have been allowed to file a Motion to Dismiss. The trial court should have continued on with the case as an intra-corporate dispute considering that it called for the judgments on the relationship between a corporation and its two warring stockholders and the relationship of these two stockholders with each other.