1) The plaintiffs filed a lawsuit in Pasay against the defendant, who was the majority shareholder and president of their corporation. However, the court found that the defendant's residence was actually in Iloilo.
2) For a lawsuit to be filed in the proper venue, it must be filed where the defendant resides, according to the Rules of Court. Since the defendant resided in Iloilo, not Pasay, venue was incorrect.
3) Additionally, the court found the plaintiffs did not have a valid cause of action because their lawsuit sought damages for their individual losses, not for losses to the corporation. For a derivative suit on behalf of the corporation to be valid, it must seek damages for the
1) The plaintiffs filed a lawsuit in Pasay against the defendant, who was the majority shareholder and president of their corporation. However, the court found that the defendant's residence was actually in Iloilo.
2) For a lawsuit to be filed in the proper venue, it must be filed where the defendant resides, according to the Rules of Court. Since the defendant resided in Iloilo, not Pasay, venue was incorrect.
3) Additionally, the court found the plaintiffs did not have a valid cause of action because their lawsuit sought damages for their individual losses, not for losses to the corporation. For a derivative suit on behalf of the corporation to be valid, it must seek damages for the
1) The plaintiffs filed a lawsuit in Pasay against the defendant, who was the majority shareholder and president of their corporation. However, the court found that the defendant's residence was actually in Iloilo.
2) For a lawsuit to be filed in the proper venue, it must be filed where the defendant resides, according to the Rules of Court. Since the defendant resided in Iloilo, not Pasay, venue was incorrect.
3) Additionally, the court found the plaintiffs did not have a valid cause of action because their lawsuit sought damages for their individual losses, not for losses to the corporation. For a derivative suit on behalf of the corporation to be valid, it must seek damages for the
L-1721 May 19, 1950 Venue of the action was incorrect
JUAN D. EVANGELISTA ET. AL., plaintiffs-appellants vs. RAFAEL 1. Laying of the venue of the action is not left to plaintiffs caprice as it is SANTOS, defendant-appelee a matter regulated by the Rules of Court. This action is one in Topic: Derivative Suits personam, in which Sec. 1 of Rule 5 can be applied, which provides: Civil actions in Courts of First Instance may be *Note: the bulk of the case talked about venue of actions re: corporations commenced and tried where the defendant or any of the defendant based on the old Rules of Court and a super old law (Act 190). resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff. Facts: 2. The lower court found, based on Santos sworn statement not 1. Plaintiffs Evangelista et. al. were minority stockholders of the Vitali rebutted by contrary proof, that he resided in Iloilo, and not in Pasay. Lumber Company, Inc. (Vitali Lumber), a corporation organized for 3. At first blush, such provision may seem to authorize laying of venue exploitation of lumber concessions in Zamboanga. in the province where defendant may be found. However, 2. Defendant Santos holds more than 50% of the stocks of Vitali jurisprudence has already construed such phrase to only be Lumber. He was also the President, Manager and Treasurer of the applicable where defendant has no residence in the Philippine corporation. islands. This applies to a domestic corporation. (Cohen vs. Benguet 3. Plaintiffs Evangelista et. al. filed an action for damages, alleging that Commercial Co.) through Santos fault, neglect and abandonment, he allowed its 4. The fact that Santos was sojourning in Pasay when he was served lumber concession to lapse and its properties (machineries, summons does not make him a resident of such place for purposes buildings, etc.) to disappear. They alleged that such mismanagement of venue. Residence permanent home, the place to which one of affairs and misuse of its assets caused the ruin of the corporation intends to return. and depreciation of its stocks. Evangelista et. al. had no cause of action to file the case 4. Their complaint prayed for a judgment requiring Santos to render an 1. Generally, if the injury complained of is primarily to the corporation, account of his administration of corporate affairs and assets, and to the suit for damages should be claimed only by the corporation. The pay Evangelista et. al. the value of their respective participation stockholders may not directly claim those damages for themselves, in said assets on the basis of the value of their stocks. as that would result in the appropriation by, and the distribution of 5. The complaint did not give the plaintiffs residence but alleged that part of the corporate assets before dissolution and liquidation. Such Santos resides in Pasay, Province of Rizal. Having been served cannot be done in view of Sec. 16 of the Corporation Law: summons in Pasay, Santos filed an MTD on the ground of improper No shall corporation shall make or declare any stock or venue, and that the complaint did not state a cause of action in bond dividend or any dividend whatsoever from the profits arising favor of the plaintiffs. from its business, or divide or distribute its capital stock or property 6. Santos alleged that he was a resident of Iloilo. While he had a house other than actual profits among its members or stockholders until in Pasay in order to easily attend to his interests in Manila, he has after the payment of its debts and the termination of its existence permanent residence in Iloilo where he is a registered voter and has by limitation or lawful dissolution. been paying his residence certificate. 2. [DOCTRINE] However, if the officers of the corporation refuse to 7. The lower court granted the MTD on both grounds. Hence, this sue, or where demand upon them to file a suit would be futile as they appeal to this Court. are the very ones to be sued or because they hold controlling interest, then the stockholders may be allowed to bring the suit. But Issue: 1.) W/N Evangelista et. al correctly brought the case to the proper in such derivative suit, the stockholder is the nominal party plaintiff venue in Pasay; 2.) W/N Evangelista et. al had the right to bring this action for the benefit of the corporation, as the real party in interest is still for their benefit. the corporation (the damages recovered should still pertain to the corporation). Held: 1.) No. 2.) No. 3. In this case, Evangelista et. al. brought this action not for the benefit of the corporation, but for their own benefit, since they pray that Santos make good the losses accrued by his mismanagement and for him to pay the value with respect to their respective shares. Clearly, this cannot be done until there is a lawful dissolution and liquidation. 4. Thus, Evangelista et. al. shows no cause of action. Such action, however, is susceptibleof being converted into a derivative suit by a ACTION IS DISMISSED, WITHOUT PREJUDICE TO FILING OF ACTION mere amendment in the prayer. Such amendment, however, is not IN THE PROPER VENUE. possible now since the action was filed in the wrong venue.