G.R. No. 168863 ; June 23, 2009
HI-YIELD REALTY, INCORPORATED, Petitioner, vs. HON. COURT OF APPEALS, HON. CESAR O. UNTALAN, in his capacity as PRESIDING JUDGE OF RTC-MAKATI, BRANCH 142, HONORIO TORRES & SONS, INC., and ROBERTO H. TORRES, Respondents.

FACTS

On July 31, 2003, Roberto H. Torres, for and on behalf of Honorio Torres & Sons, Inc. (HTSI), filed a Petition for Annulment of Real Estate Mortgage and Foreclosure Sale over two parcels of land located in Marikina and Quezon City against Leonora, Ma. Theresa, Glenn and Stephanie, all surnamed Torres, the Registers of Deeds, and petitioner Hi-Yield Realty, Inc. The case was docketed as Civil Case No. 03-892 in the RTC of Makati City. Petitioner moved to dismiss on grounds of improper venue and insufficient docket fees, arguing the action was a real action concerning lands located outside Makati. The RTC denied the motion, holding the case was a derivative suit, an intra-corporate controversy cognizable by a special commercial court. The Court of Appeals affirmed the RTC, ruling the annulment of mortgage and foreclosure was incidental to the main derivative suit and directing the computation and payment of proper docket fees. Petitioner’s motion for reconsideration was denied.

ISSUE

1. Whether venue was properly laid.
2. Whether there was proper joinder of parties.
3. Whether the action to annul the real estate mortgage and foreclosure sale is a mere incident of the derivative suit.

RULING

The Supreme Court dismissed the petition. The Court found that the petition before it was a special civil action for certiorari under Rule 65, which is improper as a petition for review on certiorari under Rule 45 was the available remedy to correct any error of judgment by the Court of Appeals. The filing was belated, indicating an attempt to substitute a lost appeal. Furthermore, no grave abuse of discretion was found. The Court agreed with the lower courts that the action filed by Roberto H. Torres was a derivative suit. The petition explicitly stated it was instituted by a minority stockholder by way of a derivative suit to redress wrongs done to the corporation due to unauthorized acts by its officers and controlling stockholders. Derivative suits are governed by the Interim Rules of Procedure Governing Intra-Corporate Controversies (A.M. No. 01-2-04-SC), which under Section 5, Rule 1, provides that such actions shall be commenced in the RTC which has jurisdiction over the principal office of the corporation. Since HTSI’s principal office was in Makati, venue was properly laid. The annulment of the mortgage and foreclosure was a logical consequence of the main derivative action. The requisites for a derivative suit were satisfied: Roberto was a shareholder; demand on the board would have been futile as the alleged wrongdoers controlled the corporation; and the cause of action devolved on the corporation.