CHING V SUBIC, GR 174353

Facts: On February 26, 2003, petitioners Nestor Ching and Andrew Wellington filed a Complaint with
the RTC of Olongapo City on behalf of the members of Subic Bay Golf and Country Club, Inc. (SBGCCI)
against the said country club and its Board of Directors and officers under the provisions of Presidential
Decree No. 902-A in relation to Section 5.2 of the Securities Regulation Code. The Subic Bay Golfers and
Shareholders Incorporated (SBGSI), a corporation composed of shareholders of the defendant
corporation, was also named as plaintiff. The officers impleaded as defendants were the following: (1)
its President, Hu Ho Hsiu Lien alias Susan Hu; (2) its treasurer, Hu Tsung Chieh alias Jack Hu; (3)
corporate secretary Reynald Suarez; and (4) directors Hu Tsung Hui and Hu Tsung Tzu.
Petitioners claimed in the Complaint that the defendant corporation did not disclose to them
the amendment which allegedly makes the shares non-proprietary, as it takes away the right of the
shareholders to participate in the pro-rata distribution of assets of the corporation after its dissolution.
According to the petitioners, that constitute fraud. The BOD and officers didn’t call any meeting duly for
that purpose in violation to Sec. 50 of Corporation Code and the By-Laws of the corporation. They also
presented other particular instances that constitute fraud in the management of the corporation by the
BOD and officers.
In their Answers, the respondents specifically denied the allegations of the Complaint as those
things averred by the petitioners were done lawfully and justifiably by them. It wasn’t against the code
and the By-Laws of the Corporation. They also claimed that petitioners failed (a) to show that it was
authorized by SBGSI to file the Complaint on the said corporation’s behalf; (b) to comply with the
requisites for filing a derivative suit and an action for receivership; and (c) to justify their prayer for
injunctive relief since the Complaint may be considered a nuisance or harassment suit under Section 1 of
the Rule 1 of the Interim Rules of Procedure for Intra-Corporate Controversies. Thus, they prayed for
the dismissal of the Complaint. RTC dismissed the Complaint and held the action is a derivative suit.

Issue: Whether or not the RTC erred in dismissing the Complaint

Ruling: No. Because it was not a Complaint but a derivative suit. It is a suit is filed by the stockholder in
the name and in behalf of the corporation to protect corporate rights or redress wrongdoings
committed by the directors/trustees themselves, as they will never be willing to sue themselves. In
order for a derivative suit to prosper, it should follow the requisites imposed by Section 1, Rule 8 of the
Interim Rules of Procedure Governing Intra-Corporate Controversies. The second requisite wasn’t
complied. The stockholder-petitioners failed to state with particularity in the complaint that they had
exerted all reasonable efforts to exhaust all remedies available under the articles of incorporation, by-
laws, and laws or rules governing the corporation to obtain the relief they desire. Indeed, even if
petitioners thought it was futile to exhaust intra-corporate remedies, they should have stated the same
in the Complaint and specified the reasons for such opinion. Failure to do so allows the RTC to dismiss
the Complaint, even motu proprio, in accordance with the Interim Rules. The requirement of this
allegation in the Complaint is not a useless formality which may be disregarded at will.