SECOND DIVISION

[G.R. No. L-40620. May 5, 1979]

RICARDO L. GAMBOA, LYDIA R. GAMBOA, HONORIO DE LA RAMA,

EDUARDO DE LA RAMA, and the HEIRS OF MERCEDES DE LA RAMA-
BORROMEO , petitioners, vs. HON. OSCAR R. VICTORIANO as
Presiding Judge of the Court of First Instance of Negros
Occidental, Branch II, BENJAMIN LOPUE, SR., BENJAMIN LOPUE,
JR., LEONITO LOPUE, and LUISA U. DACLES , respondents.

Exequiel T. Alejandro for petitioners.

Acua, Lirazan & Associates for private respondents.

SYNOPSIS

Plaintiffs filed a complaint to nullify the sale of unissued 823 shares of stock to
defendants on the ground that such sale violated plaintiffs' pre-emptive rights and was
made without the approval of the board of directors representing 2/3 of the outstanding
capital stock. After the issuance of an injunction, three of the defendants entered into a
compromise agreement waiving their rights over the questioned shares of stock in favor
of plaintiffs. The agreement, however, provided that the same shall not be considered as a
waiver or abandonment of plaintiffs' claim against the other defendants. Defendants,
thereafter, moved to dismiss on the ground that plaintiffs' cause of action had been
abandoned, and that they are estopped from prosecuting the case since they have in
effect, acknowledged the validity of the issuances of the disputed shares. In an addendum
to this motion, defendants claimed that respondent court had no jurisdiction to interfere
with the management of the corporation by the board of directors. The trial court denied
the motion. Hence, this petition for certiorari.
The Supreme Court held that an order denying a motion to dismiss is interlocutory, and
unless the same is issued capriciously, whimsically or arbitrarily, it cannot be subject of a
certiorari petition; that respondent court has jurisdiction over an action by a stockholder to
nullify contracts intra vires entered into by the board of directors if such contracts are
unconscionable and oppressive as to amount to a wanton destruction of the rights of the
minority.

SYLLABUS

1. CERTIORARI, INTERLOCUTORY ORDER NOT PROPER SUBJECT OF. An order

denying the motion to dismiss a complaint is merely interlocutory and cannot be the
subject of a petition for certiorari. The proper procedure to be followed in such a case is to
continue with the trial of the case on the merits and, if the decision is adverse, to reiterate
the issue on appeal. It would be a branch of orderly procedure to allow a party to come
before the Supreme Court every time an order is issued with which he does not agree.
2. CERTIORARI, NOT PROPER IF ASSAILED ORDER WAS NOT ISSUED CAPRICIOUSLY.
Where a motion to dismiss is based on a compromised agreement between the
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 plaintiffs and some of the defendants, but the agreement expressly provided that the
same "shall not in any way constitute or be considered as a waiver or abandonment of any
claim or cause of action against the other defendants," the trial court's denial of the said
motion cannot be said to have been issued capriciously, arbitrarily, or whimsically, so as to
warrant the issuance of a writ of certiorari.
3. CONTRACTS; ESTOPPEL, NOT A CASE OF. The fact that plaintiffs after filing a
complaint to nullify a resolution of defendants directors authorizing the sale of unissued
shares of stock to themselves (defendants directors) later entered into a compromise
agreement with some of the defendants, whereby the later waived or transferred their
rights over the questioned shares in favor of plaintiffs, but no consideration was
mentioned in the agreement for such transfer of rights, it was held that the plaintiffs are
not estopped from pursuing the case against the other defendants as there is nothing in
the agreement which could be construed as an admission by plaintiffs, that the resolution
was valid. On the contrary, the fact that no consideration was mentioned in the agreement
for transfer of the rights to plaintiffs, the agreement may be construed as an admission by
contracting defendants of the validity of plaintiff' claim.
4. CERTIORARI; JURISDICTION OF COURTS OVER MATTER AFFECTING
MANAGEMENT OF A CORPORATION. The well-known rule is that courts cannot
undertake to control the discretion of the board of directors about administrative matters
as to which they have legitimate to power of action, and contracts intra vires entered into
by the board of directors are binding upon the corporation and courts will not interfere
unless such contracts are so unconscionable and oppressive as to amount to wanton
destruction to the rights of the minority, as when plaintiffs aver that the defendants
(members of the board), have concluded a transaction among themselves as will result to
serious injury to the plaintiffs stockholders.
5. CORPORATION LAW; RIGHT OF THE STOCKHOLDER TO INSTITUTE A DERIVATIVE
SUIT. An individual stockholder is permitted to institute a derivative suit on behalf of the
corporation wherein he holds stock in order to protect and vindicate corporate rights,
whenever the officials of the corporation refuses to sue, or are the ones to be used or hold
the control of the corporation. In such actions, the suing stockholders is regarded as a
nominal party, with the corporation as the real party in interest. Thus, a derivative suit will
not lie where stockholders are vindicating their own individual interest or prejudice, and not
that of the corporation.
6. ACTIONS; DISMISSAL, MISJOINDER OF PARTIES NOT A GROUND FOR. Misjoinder
of parties is not a ground to dismiss an action.

DECISION

CONCEPCION, JR. , J : p

Petition for certiorari to review the order of the respondent judge, dated January 2, 1975,
denying the petitioners' motion to dismiss the complaint filed in Civil Case No. 10257 of
the Court of First Instance of Negros Occidental, entitled, "Benjamin Lopue, Sr., et al.,
plaintiffs, versus Ricardo Gamboa, et al., defendants," as well as the order dated April 4,
1975, denying the motion for the reconsideration of said order.

CD Technologies Asia, Inc. 2016 cdasiaonline.com

 In the aforementioned Civil Case No. 10257 of the Court of First Instance of Negros
Occidental, the herein petitioners, Ricardo L. Gamboa, Lydia R. Gamboa, Honorio de la
Rama, Eduardo de la Rama, and the late Mercedes de la Rama-Borromeo, now represented
by her heirs, as well as Ramon de la Rama, Paz de la Rama-Battistuzzi, and Enzo Battistuzzi,
were sued by the herein private respondents, Benjamin Lopue, Sr., Benjamin Lopue, Jr.,
Leonito Lopue, and Luisa U. Dacles, to nullify the issuance of 823 shares of stock of the
Inocentes de la Rama, Inc. in favor of the said defendants. The gist of the complaint, filed
on April 4, 1972, is that the plaintiffs, with the exception of Anastacio Dacles, who was
joined as a formal party, are the owners of 1,328 shares of stock of the Inocentes de la
Rama, Inc., a domestic corporation, with an authorized capital stock of 3,000 shares, with a
par value of P100.00 per share, 2,177 of which were subscribed and issued, thus leaving
823 shares unissued; that upon the plaintiffs' acquisition of the shares of stock held by
Rafael Ledesma and Jose Sicangco, Jr., then President and Vice-President of the
corporation, respectively, the defendants Mercedes R. Borromeo, Honorio de la Rama, and
Ricardo Gamboa, remaining members of the board of directors of the corporation, in order
to forestall the takeover by the plaintiffs of the afore-named corporation, surreptitiously
met and elected Ricardo L. Gamboa and Honorio de la Rama as president and vice-
president of the corporation, respectively, and thereafter passed a resolution authorizing
the sale of the 823 unissued shares of the corporation to the defendants, Ricardo L.
Gamboa, Lydia R. Gamboa, Honorio de la Rama, Ramon de la Rama, Paz R. Battistuzzi,
Eduardo de la Rama, and Mercedes R. Borromeo, at par value, after which the defendants
Honorio de la Rama, Lydia de la Rama-Gamboa, and Enzo Battistuzzi were elected to the
board of directors of the corporation; that the sale of the unissued 823 shares of stock of
the corporation was in violation of the plaintiffs' and pre-emptive rights and made without
the approval of the board of directors representing 2/3 of the outstanding capital stock,
and is in disregard of the strictest relation of trust existing between the defendants, as
stockholders thereof; and that the defendants Lydia de la Rama-Gamboa, Honorio de la
Rama, and Enzo Battistuzzi were not legally elected to the board of directors of the said
corporation and has unlawfully usurped or intruded into said office to the prejudice of the
plaintiffs. Wherefore, they prayed that a writ of preliminary injunction be issued restraining
the defendants from committing, or continuing the performance of an act tending to
prejudice, diminish or otherwise injure the plaintiffs' rights in the corporate properties and
funds of the corporation, and from disposing, transferring, selling, or otherwise impairing
the value of the 823 shares of stock illegally issued by the defendants; that a receiver be
appointed to preserve and administer the property and funds of the corporation; that
defendants Lydia de la Rama-Gamboa, Honorio de la Rama, and Enzo Battistuzzi be
declared as usurpers or intruders into the office of director in the corporation and,
consequently, ousting them therefrom and declare Luisa U. Dacles as a legally elected
director of the corporation; that the sale of 823 shares of stock of the corporation be
declared null and void; and that the defendants be ordered to pay damages and attorney's
fees, as well as the costs of suit. 1
Acting upon the complaint, the respondent judge, after proper hearing, directed the clerk of
court "to issue the corresponding writ of preliminary injunction restraining the defendants
and/or their representatives, agents, or persons acting in their behalf from the commission
or continuance of any act tending in any way to prejudice, diminish or otherwise injure
plaintiffs' rights in the corporate properties and funds of the corporation 'Inocentes de la
Rama, Inc.' and from disposing, transferring, selling or otherwise impairing the value of the
certificates of stock allegedly issued illegally in their names on February 11, 1972, or at any
date thereafter, and ordering them to deposit with the Clerk of Court the corresponding
certificates of stock for the 823 shares issued to said defendants on February 11, 1972,
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 upon plaintiffs' posting a bond in the sum of P50,000.00, to answer for any damages and
costs that may be sustained by the defendants by reason of the issuance of the writ, copy
of the bond to be furnished to the defendants.' 2 Pursuant thereto, the defendants
deposited with the clerk of court the corporation's certificates of stock Nos. 80 to 86,
inclusive, representing the disputed 823 shares of stock of the corporation. 3

On October 31, 1972, the plaintiffs therein, now private respondents, entered into a
compromise agreement with the defendants Ramon de la Rama, Paz de la Rama-
Battistuzzi, and Enzo Battistuzzi, 4 whereby the contracting parties withdrew their
respective claims against each other and the aforenamed defendants waived and
transferred their rights and interests over the questioned 823 shares of stock in favor of
the plaintiffs, as follows:
"3. That the defendants Ramon L. de la Rama, Paz de la Rama Battistuzzi
and Enzo Battistuzzi will waive, cede, transfer or otherwise convey, as they hereby
waive, cede, transfer and convey, free from all liens and encumbrances unto the
plaintiffs, in such proportion as the plaintiffs may among themselves determine,
all of the rights, interests, participations or title that the defendants Ramon L. de
la Rama, Paz de la Rama Battistuzzi, Enzo Battistuzzi now have or may have in
the eight hundred twenty-three (823) shares in the capital stock of the corporation
'INOCENTES DE LA RAMA, INC.' which were issued in the names of the
defendants in the above-entitled case on or about February 11, 1972, or at any
date thereafter and which shares are the subject-matter of the present suit."

The compromise agreement was approved by the trial court on December 4, 1972. 5
As a result, the defendants filed a motion to dismiss the complaint, on November 19, 1974,
upon the grounds: (1) that the plaintiffs' cause of action had been waived or abandoned;
and (2) that they were estopped from further prosecuting the case since they have, in
effect, acknowledged the validity of the issuance of the disputed 823 shares of stock. The
motion was denied on January 2, 1975. 6
The defendants also filed a motion to declare the defendants Ramon L. de la Rama, Paz de
la Rama-Battistuzzi, and Enzo Battistuzzi in contempt of court, for having violated the writ
of preliminary injunction when they entered into the aforesaid compromise agreement with
the plaintiffs, but the respondent judge denied the said motion for lack of merit. 7
On February 10, 1975, the defendants filed a motion for the reconsideration of the order
denying their motion to dismiss the complaint, 8 and subsequently, an Addendum thereto,
claiming that the respondent court has no jurisdiction to interfere with the management of
the corporation by the board of directors, and the enactment of a resolution by the
defendants, as members of the board of directors of the corporation, allowing the sale of
the 823 shares of stock to the defendants was purely a management concern which the
courts could not interfere with. 9 When the trial court denied said motion and its
addendum, the defendants filed the instant petition for certiorari for the review of said
orders. LLjur

The petition is without merit. The questioned order denying the petitioners' motion to
dismiss the complaint is merely interlocutory and cannot be the subject of a petition for
certiorari. The proper procedure to be followed in such a case is to continue with the trial
of the case on the merits and, if the decision is adverse, to reiterate the issue on appeal. It
would be a breach of orderly procedure to allow a party to come before this Court every
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 time an order is issued with which he does not agree.
Besides, the order denying the petitioners' motion to dismiss the complaint was not
capriciously, arbitrarily, or whimsically issued, or that the respondent court lacked
jurisdiction over the cause as to warrant the issuance of the writ prayed for. As found by
the respondent judge, the petitioners have not waived their cause of action against the
petitioners by entering into a compromise agreement with the other defendants in view of
the express provision of the compromise agreement that the same "shall not in any way
constitute or be considered a waiver or abandonment of any claim or cause of action
against the other defendants." There is also no estoppel because there is nothing in the
agreement which could be construed as an affirmative admission by the plaintiff of the
validity of the resolution of the defendants which is now sought to be judicially declared
null and void. The foregoing circumstances and the fact that no consideration was
mentioned in the agreement for the transfer of rights to the said shares of stock to the
plaintiffs are sufficient to show that the agreement was merely an admission by the
defendants Ramon de la Rama, Paz de la Rama-Battistuzzi, and Enzo Battistuzzi of the
validity of the claim of the plaintiffs.
The claim of the petitioners, in their Addendum to the motion for reconsideration of the
order denying the motion to dismiss the complaint, questioning the trial court's jurisdiction
on matters affecting the management of the corporation, is without merit. The well-known
rule is that courts cannot undertake to control the discretion of the board of directors
about administrative matters as to which they have legitimate power of action, 1 0 and
contracts intra vires entered into by the board of directors are binding upon the
corporation and courts will not interfere unless such contracts are so unconscionable and
oppressive as to amount to a wanton destruction of the rights of the minority. 1 1 In the
instant case, the plaintiffs aver that the defendants have concluded a transaction among
themselves as will result to serious injury to the interests of the plaintiffs, so that the trial
court has jurisdiction over the case.
The petitioners further contend that the proper remedy of the plaintiffs would be to
institute a derivative suit against the petitioners in the name of the corporation in order to
secure a binding relief after exhausting all the possible remedies available within the
corporation. cdll

An individual stockholder is permitted to institute a derivative suit on behalf of the

corporation wherein he holds stock in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones to be sued or hold
the control of the corporation. In such actions, the suing stockholder is regarded as a
nominal party, with the corporation as the real party in interest. 1 2 In the case at bar,
however, the plaintiffs are alleging and vindicating their own individual interests or
prejudice, and not that of the corporation. At any rate, it is yet too early in the proceedings
since the issues have not been joined. Besides, misjoinder of parties is not a ground to
dismiss an action. 1 3
WHEREFORE, the petition should be, as it is hereby DISMISSED for lack of merit. With
costs against the petitioners.
SO ORDERED.
Antonio, Aquino, Santos and Abad Santos., JJ., concur.
Barredo, J., is on leave.
CD Technologies Asia, Inc. 2016 cdasiaonline.com
 Footnotes

1. Rollo, p. 48.

2. Id., p. 10.
3. Id., p. 102.

4. Id., p. 63.
5. Id., p. 12.
6. Id., p. 15.

7. Id., p. 99.
8. Id., p. 4, par. VII of the Petition.
9. Id., p. 147, p. 2 of Memorandum for the Respondents.

10. Govt. vs. El Hogar Filipino, 50 Phil. 399.

11. Ingersoll vs. Malabon Sugar Co., 53 Phil. 745.
12. Republic Bank vs. Cuaderno, L-22399, March 30, 1967, 19 SCRA 671 and cases cited
therein.
13. Sec. 11, Rule 3, Revised Rules of Court.

CD Technologies Asia, Inc. 2016 cdasiaonline.com