Ago Realty & Development Corporation (ARDC), Emmanuel F. Ago and Corazon Castañeda-Ago Vs. Dr. Angelita F. Ago, Teresita Paloma-Apin, and Maribel Amaro G.R. No. 210906/G.R. No. 211203. October 16, 2019

Ago Realty & Development Corporation (ARDC), Emmanuel F. Ago and Corazon Castañeda-Ago Vs. Dr. Angelita F. Ago, Teresita Paloma-Apin, and Maribel Amaro G.R. No. 210906/G.R. No. 211203. October 16, 2019

Andres Reyes Jr.

https://sc.judiciary.gov.ph/9660/

## Issues

* Section 1. Derivative action. - A stockholder or member may bring an action in the name of a corporation or association, as the case may be, provided, that:

    (1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and 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, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires;
    (3) No appraisal rights are available for the acts or acts complained of; and
    (4) The suits is not a nuisance or harassment suit.But in situations where the board's decision is tantamount to breaching the trust reposed in it by the minority, equity necessitates that the aggrieved stockholders be given a remedy. Thus, the minority, in a derivative capacity, may sue or defend on behalf of the corporation.

* The role of the board of directors is impressed with such importance that corporate business cannot properly be conducted without it
* Majority shareholders cannot be allowed to bypass the formation of a board and directly conduct corporate business themselves. The Court cannot stress enough that the law mandates corporations to exercise their powers through their governing boards.
* Their failure to elect a board ultimately resulted in their failure to exhaust all legal remedies to obtain the relief they desired. Since this case could have been brought by ARDC, through its board, its stockholders cannot maintain the suit themselves, purporting to sue in a derivative capacity. Emmanuel, et al. should not be allowed to use a derivative suit to shortcut the law.
* Emmanuel's designation as President was ineffectual because ARDC did not have a board of directors. Section 25 of the Corporation Code explicitly requires the president of a corporation to concurrently hold office as a director.
* The lower courts correctly refused to award damages
* Since it is settled that she introduced improvements on ARDC's property without its consent, it follows that the complaint was not baseless at all. However, because the case was not brought by the corporation, but by its stockholders, its dismissal was properly decreed by the trial court.

If she did not introduce improvements on ARDC's property, Emmanuel *et al.*
 would have no reason to institute an action against her. Since she
treated corporate property as if it was her own, she should have
reasonably expected retaliatory action from the other shareholders.

## Decisions

**WHEREFORE**, the September 26, 2013 Decision and January 10, 2014 Resolution rendered by the Court of Appeals in CA-G.R. CV No. 99771 are **AFFIRMED**.