G.R. No. 85318; June 3, 1991
Commart (Phils.) Inc., Jesus, Corazon, Alberto, and Bernard all surnamed Maglutac, petitioners, vs. Securities & Exchange Commission and Alice Maglutac, respondents.

FACTS

Commart (Phils.), Inc. was a family corporation engaged in brokerage, primarily run by brothers Jesus and Mariano Maglutac. In June 1984, Mariano sold his 25% shareholding to Jesus. Mariano’s wife, Alice Maglutac, a stockholder and director, retained her shares. Subsequently, Mariano allegedly discovered that Jesus and his wife Corazon had been diverting substantial commission income from Commart to their private foreign bank accounts. Consequently, spouses Mariano and Alice Maglutac filed a complaint with the SEC against Jesus, Corazon, and other directors for accounting, restitution of misappropriated funds, and other reliefs, including the rescission of Mariano’s stock sale.
The petitioners (Jesus, Corazon, and others) moved to dismiss the complaint on grounds including lack of SEC jurisdiction and Mariano’s lack of capacity to sue as a former stockholder. The complainants then filed an Amended Complaint, re-characterizing the action as a derivative suit filed by Alice, a minority stockholder, on behalf of Commart, which was impleaded as a nominal party. Commart later filed a Manifestation seeking to withdraw the suit. The SEC Hearing Officer dismissed the case, but the SEC en banc reversed, reinstating the derivative suit and remanding it for further proceedings.

ISSUE

Whether the SEC en banc committed grave abuse of discretion in reinstating the derivative suit and refusing its dismissal.

RULING

The Supreme Court upheld the SEC en banc’s order, finding no grave abuse of discretion. The Court clarified that a derivative suit is an action filed by a minority stockholder on behalf of the corporation to redress wrongs committed against it, particularly when those in control refuse to sue. The Amended Complaint properly alleged a derivative cause of action for the recovery of corporate funds allegedly misappropriated by controlling directors. The Court ruled that the corporation’s subsequent attempt to withdraw the suit, likely under the influence of the accused directors, could not defeat the action, as doing so would render the derivative remedy illusory. The recovery, if any, would benefit the corporation itself.
Furthermore, the petitioners’ defense that private respondent Alice Maglutac had a conflict of interest due to her stake in a rival company was deemed a matter of evidence to be properly threshed out during a full hearing on the merits, not a ground for dismissal at the preliminary stage. Jurisdiction is determined by the allegations in the complaint, not by the defenses in a motion to dismiss. Thus, the SEC correctly remanded the case for trial to ascertain the factual and legal merits of the claims. The petition was dismissed for lack of merit.