G.R. No. 77860 – 249 Phil. 495 – 167 SCRA 540 – Mercantile Law – Corporation Law – Jurisdiction – Intra-Corporate Dispute
Nilcar Fajilan was a stockholder and the president of Boman Environmental Development Corporation (Boman). In 1984, he wrote a letter to the Board tendering his resignation and his offer to sell his shareholdings for P300k. The Board accepted the resignation as well as his offer to sell. The Board advised Fajilan that Boman will be paying the shares in installment. Fajilan is to transfer the shares upon completion of payment. Boman paid the first two P50k installments but defaulted in paying the remaining P200k. Fajilan then sued Boman in the RTC of Makati.
ISSUE: Whether or not the RTC of Makati has jurisdiction.
HELD: No. This is an intra-corporate dispute and as such the Securities and Exchange Commission (SEC) has jurisdiction. This case involves an intra-corporate controversy because the parties are a stockholder and the corporation. Fajilan is still a stockholder. There has been no actual transfer of his shares to the corporation. In the books of the corporation he is still a stockholder. Fajilan’s suit against the corporation to enforce the latter’s promissory note or compel the corporation to pay for his shareholdings is cognizable by the SEC alone which shall determine whether such payment will not constitute a distribution of corporate assets to a stockholder in preference over creditors of the corporation. The SEC has exclusive supervision, control and regulatory jurisdiction to investigate whether the corporation has unrestricted retained earnings to cover the payment for the shares, and whether the purchase is for a legitimate corporate purpose.
NOTE: This is a 1988 case, now the RTC has expanded jurisdiction. Some RTCs are granted special jurisdiction to hear and decide intra-corporate disputes.
