In the case of San Jose v. Ozamiz, the Supreme Court affirmed the right of a stockholder to inspect corporate books, even when the corporation is partly owned by entities under government sequestration. The Court underscored that an intra-corporate dispute—such as a stockholder’s demand to inspect corporate records—falls under the jurisdiction of the Regional Trial Court (RTC), not the Sandiganbayan, unless the corporation itself is subject to a writ of sequestration or the case directly involves the recovery of ill-gotten wealth. This decision clarifies the scope of shareholder rights and reinforces the RTC’s authority in resolving intra-corporate controversies, providing a legal recourse for stockholders seeking transparency and accountability from their corporations.

The Shareholder’s Gaze: Can a Stockholder Pierce the Corporate Veil Despite Sequestration Claims?

The legal battle began when Jose Ma. Ozamiz, a stockholder of Philcomsat Holdings Corporation (PHC), requested access to the company’s minutes of meetings from 2000 to 2007. Roberto V. San Jose, then Corporate Secretary, and Delfin P. Angcao, Assistant Corporate Secretary, initially delayed the request, citing a pending similar case and the need for board approval. When Ozamiz filed a complaint for inspection of books with the RTC, the petitioners argued that the Sandiganbayan had jurisdiction because PHC was largely owned by Philippine Communications Satellite Corporation (Philcomsat), which, in turn, was wholly owned by Philippine Overseas Telecommunications Corporation (POTC)—both under sequestration by the Presidential Commission on Good Government (PCGG). The RTC initially dismissed the complaint for lack of jurisdiction, but the Court of Appeals (CA) reversed this decision, asserting that the case was a simple intra-corporate dispute falling under the RTC’s jurisdiction. This ultimately led to the Supreme Court review.

At the heart of the matter was determining the proper jurisdiction for a case involving a stockholder’s right to inspect corporate books when the corporation had ties to sequestered entities. The petitioners contended that since a significant portion of PHC was owned by Philcomsat—a sequestered corporation—the case should fall under the Sandiganbayan’s jurisdiction, which handles cases related to the recovery of ill-gotten wealth. However, the Supreme Court clarified that the jurisdiction of the Sandiganbayan is limited to cases directly involving assets sequestered by the PCGG or matters incidental to the recovery of ill-gotten wealth under Executive Orders Nos. 1, 2, 14, and 14-A. The Court emphasized that the mere fact that a corporation’s shares are owned by a sequestered corporation does not automatically bring a case under the Sandiganbayan’s purview.

The Supreme Court applied two key tests to determine whether the case was indeed an intra-corporate dispute: the relationship test and the nature of the controversy test. The relationship test examines whether the conflict is between the corporation and its stockholders, while the nature of the controversy test assesses whether the dispute arises from the enforcement of rights and obligations under the Corporation Code and internal corporate rules. In this instance, the Court found that Ozamiz’s demand to inspect PHC’s books, as a stockholder, and PHC’s denial, clearly constituted an intra-corporate controversy under both tests.

The Court also cited its previous ruling in Abad v. Philippine Communications Satellite Corporation, which involved a similar issue regarding a stockholder’s right of inspection against the same corporation, PHC. In Abad, the Court had already categorized such disputes as intra-corporate, arising from relations between stockholders and the corporation. Building on this precedent, the Supreme Court reiterated that the core of the controversy was Ozamiz’s right as a stockholder versus PHC’s refusal to allow inspection—a quintessential intra-corporate matter.

Furthermore, the Supreme Court underscored that Republic Act No. 8799 transferred jurisdiction over intra-corporate disputes from the Securities and Exchange Commission (SEC) to the Regional Trial Courts (RTCs). This legislative shift affirmed that RTCs are the appropriate venues for resolving such controversies, reinforcing the CA’s decision to remand the case to the RTC for proper adjudication. The Court highlighted that the Interim Rules of Procedure for Intra-Corporate Controversies explicitly include inspection of corporate books as a type of case governed by these rules, further cementing the RTC’s jurisdiction.

The petitioners’ reliance on Del Moral v. Republic of the Philippines was deemed misplaced by the Court. In Del Moral, the case involved assets that were actually sequestered by the PCGG, with a writ of sequestration annotated on the property’s title. The Supreme Court distinguished this from the San Jose v. Ozamiz case, where PHC itself was not under sequestration, and no asset or property of PHC was directly involved in the dispute. Therefore, the principles established in Del Moral were not applicable.

The Supreme Court emphasized the importance of distinguishing between a corporation whose assets are directly subject to a sequestration order and one that is merely owned, in part, by a sequestered entity. The Court made it clear that the effects of sequestration should not automatically extend to entities merely connected to sequestered corporations, unless there is a direct link to ill-gotten wealth or the need to preserve assets under sequestration. This distinction ensures that legitimate business operations of non-sequestered entities are not unduly hampered by ongoing sequestration proceedings.

FAQs

What was the key issue in this case?	The central issue was whether the Regional Trial Court (RTC) or the Sandiganbayan had jurisdiction over a stockholder’s complaint for inspection of corporate books, given that the corporation was partly owned by entities under government sequestration. The Court determined that the RTC had jurisdiction.
What is an intra-corporate dispute?	An intra-corporate dispute is a conflict arising between a corporation and its stockholders, or among the stockholders themselves, concerning their rights and obligations under the Corporation Code and the corporation’s internal rules. It involves matters integral to the corporation’s governance and operation.
What are the ‘relationship test’ and ‘nature of the controversy test’?	These are two tests used to determine if a case involves an intra-corporate dispute. The ‘relationship test’ focuses on the parties’ relationship, while the ‘nature of the controversy test’ examines whether the dispute arises from rights and obligations under the Corporation Code.
When does the Sandiganbayan have jurisdiction over a case involving a corporation?	The Sandiganbayan has jurisdiction over cases involving corporations when they are directly related to the recovery of ill-gotten wealth under Executive Orders issued in 1986, or when the corporation’s assets are subject to a writ of sequestration by the PCGG. Mere ownership by a sequestered entity is insufficient.
What was the ruling in Abad v. Philippine Communications Satellite Corporation?	In Abad, the Supreme Court categorized a stockholder’s suit to enforce the right of inspection against Philippine Communications Satellite Corporation (PHC) as an intra-corporate dispute, solidifying that such cases fall under the jurisdiction of regular courts. This case served as a precedent for San Jose v. Ozamiz.
What is the significance of Republic Act No. 8799?	Republic Act No. 8799 transferred jurisdiction over intra-corporate disputes from the Securities and Exchange Commission (SEC) to the Regional Trial Courts (RTCs), making the RTC the proper venue for resolving such cases. This law was crucial in determining jurisdiction in this case.
Why was the case of Del Moral v. Republic of the Philippines not applicable?	Del Moral involved assets that were actually sequestered by the PCGG, with a writ of sequestration annotated on the property’s title. In contrast, San Jose v. Ozamiz did not involve a direct sequestration order on PHC’s assets, making Del Moral inapplicable.
What is the practical implication of this ruling for stockholders?	This ruling reinforces the right of stockholders to inspect corporate books and clarifies that they can pursue this right through the Regional Trial Court (RTC) even if the corporation has ties to sequestered entities, provided the corporation itself is not under sequestration. It strengthens shareholder rights.

The Supreme Court’s decision in San Jose v. Ozamiz provides essential clarity on the jurisdictional boundaries in intra-corporate disputes involving companies with links to sequestered entities. By upholding the RTC’s jurisdiction, the Court safeguards the rights of stockholders to access crucial corporate information, fostering transparency and accountability within corporate governance. This ruling reinforces the importance of proper legal venues in resolving intra-corporate conflicts, ensuring efficient and fair adjudication.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ROBERTO V. SAN JOSE AND DELFIN P. ANGCAO, VS. JOSE MA. OZAMIZ, G.R. No. 190590, July 12, 2017