Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 181455-56               December 4, 2009

SANTIAGO CUA, JR., SOLOMON S. CUA and EXEQUIEL D. ROBLES, in their capacity as Directors of
PHILIPPINE RACING CLUB, INC., Petitioners,
vs.
MIGUEL OCAMPO TAN, JEMIE U. TAN and ATTY. BRIGIDO J. DULAY, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 182008

SANTIAGO CUA, SR., in his capacity as Director of PHILIPPINE RACING CLUB, INC., Petitioner,
vs.
COURT OF APPEALS, MIGUEL OCAMPO TAN, JEMIE U. TAN, ATTY. BRIGIDO J. DULAY, and HON.
CESAR UNTALAN, Presiding Judge, Makati Regional Trial Court, Br. 149, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court are two Petitions: (1) a Petition for Review on Certiorari 1 under Rule 45 of the Rules of Court
filed by petitioners Santiago Cua, Jr. (Santiago Jr.), Solomon S. Cua (Solomon), and Exequiel D. Robles
(Robles), in their capacity as directors of the Philippine Racing Club, Inc. (PRCI), with Miguel Ocampo Tan
(Miguel), Jemie U. Tan (Jemie) and Atty. Brigido J. Dulay (Dulay) as respondents, docketed as G.R. No.
181455-56; and (2) a Petition for Certiorari and Prohibition 2 under Rule 65 of the Rules of Court filed by
petitioner Santiago Cua, Sr. (Santiago Sr.), also in his capacity as PRCI director, likewise naming Miguel, Jemie,
and Dulay as respondents, together with the Court of Appeals and Presiding Judge Cesar Untalan (Judge
Untalan) of the Regional Trial Court (RTC), Branch 149 of Makati City, docketed as G.R. No. 182008.

Both Petitions assail the Decision3 dated 6 September 2007 and Resolution 4 dated 22 January 2008 of the Court
of Appeals in the consolidated cases CA-G.R. SP No. 99769 and No. 99780. In its 6 September 2007 Decision,
the Court of Appeals dismissed for lack of merit, mootness, and prematurity, the Petition for Certiorari of
petitioners Santiago Jr., Solomon, and Robles (Santiago Jr., et al.); and the Petition for Certiorari and Prohibition
of petitioner Santiago Sr., which sought the nullification of the Resolution 5 dated 16 July 2007 of the RTC in Civil
Case No. 07-610 granting the Temporary Restraining Order (TRO) prayed for by respondents Miguel, Jemie,
and Dulay (Miguel, et al.). In its 22 January 2008 Resolution, the appellate court denied the Motions for
Reconsideration of petitioners and the Motion to Admit Supplemental Petition for Certiorari of petitioner Santiago
Jr, et al. The same Resolution did not consider the Supplemental Petition for Certiorari and Prohibition filed by
petitioner Santiago Sr. for the latter’s failure to seek leave of court for its filing and admittance. Petitioners would
have wanted to challenge in their Supplemental Petitions the Resolution 6 dated 8 October 2007 of the RTC in
Civil Case No. 07-610 granting the issuance of a "permanent injunction" against petitioners and the other PRCI
directors until the said case was resolved.

I
FACTUAL AND PROCEDURAL ANTECEDENTS

PRCI is a corporation organized and established under Philippine laws to: (1) carry on the business of a race
course in all its branches and, in particular, to conduct horse races or races of any kind, to accept bets on the
results of the races, and to construct grand or other stands, booths, stablings, paddocks, clubhouses,
refreshment rooms and other erections, buildings, and conveniences, and to conduct, hold and promote race
meetings and other shows and exhibitions; and (2) promote the breeding of better horses in the Philippines, lend
all possible aid in the development of sports, and uphold the principles of good sportsmanship and fair play. 7 To
pursue its avowed purposes, PRCI holds a franchise granted under Republic Act No. 6632, as amended by
Republic Act No. 7953, to operate a horse racetrack and manage betting stations. Under its franchise, PRCI
may operate only one racetrack.
In 1999, the Articles of Incorporation of PRCI was amended to include a secondary purpose, viz:

To acquire real properties and/or develop real properties into mix-use realty projects including but not limited to
leisure, recreational and memorial parks and to own, operate, manage and/or sell these real estate projects. 8

PRCI is publicly listed with the Philippine Stock Exchange (PSE). In 2006, PRCI had an authorized capital stock
of ₱1,000,000,000.00 divided into 1,000,000,000 shares, with a par value of ₱1.00 each; of which a total of
₱569,857,749.00, representing 569,857,749 shares, had been subscribed and paid up. 9

PRCI owns only two real properties, each covered by several transfer certificates of title. One is known as the
Sta. Ana Racetrack, located along A. P. Reyes Avenue, Makati City (Makati property), measuring around 21.2
hectares; and the other is located in the towns of Naic and Tanza in the province of Cavite (Cavite property).

Following the trend in the development of properties in the same area, 10 PRCI wished to convert its Makati
property from a racetrack to urban residential and commercial use. Given the location and size of its Makati
property, PRCI believed that said property was severely under-utilized. Hence, PRCI management decided to
transfer its racetrack from Makati to Cavite. PRCI began developing its Cavite property as a racetrack,
scheduled to be completed by April 2008.

Now as to its Makati property, PRCI management decided that it was best to spin off the management and
development of the same to a wholly owned subsidiary, so that PRCI could continue to focus its efforts on
pursuing its core business competence of horse racing. Instead of organizing and establishing a new corporation
for the said purpose, PRCI management opted to acquire another domestic corporation, JTH Davies Holdings,
Inc. (JTH).11

JTH was then owned by Jardine Matheson Europe B.V. (JME). 12 It had an authorized capital stock of
₱25,000,000.00, divided into 50,000,000 common shares with a par value of ₱0.50 each. JTH was publicly listed
with the PSE. Its tangible assets substantially consisted of cash. To determine the value of JTH, PRCI engaged
the services of the accounting firm Sycip Gorres Velayo & Co. (SGV) to conduct a due diligence study. 13

Using the results of the SGV study, PRCI management determined that PRCI could initially acquire 41,928,290
shares, or 95.55% of the outstanding capital stock of JTH, for the price of ₱10.71 per share, or for a total of
₱449,250,000.00; in this case, PRCI would be paying a premium of ₱42,410,450.00 for the said JTH shares,
computed as follows:

Total price for all of the issued and subscribed JTH  

  shares (at P10.71/share) P 470,418,848.00
Less: Unaudited net worth of JTH (purely cash) - 426,010,000.00
Total premium for 100% of JTH 44,408,848.00
Multiply: Interest in JTH to be initially acquired by  
  PRCI (95.5%) x 0.955
Premium for the 95.5% interest in JTH to be acquired  
  by PRCI P 42,410,450.00

The PRCI Board of Directors held a meeting on 26 September 2006. Among the directors present were
petitioners Santiago Sr., Santiago Jr., and Solomon, as well as respondent Dulay. After discussing and
deliberating on the matter of the acquisition of JTH by PRCI, all the directors present, except respondent Dulay,
voted affirmatively to pass and approve the following resolutions:

1. Declaration of Intention to Acquire and Purchase Shares of Stock of Another Company -

RESOLVED, as it is hereby resolved, that the Corporation intends to acquire up to one hundred
percent (100%) of the common shares of stock of JTH Davies Holdings, Inc. by way of
negotiated sale;

RESOLVED FURTHER, That Management and the Corporate Secretary shall prepare and
submit the Tender Offer, as well as, to file all the necessary disclosures and notices in
compliance with the Securities Regulation Code, its implementing rules, and other prevailing
regulations;
 RESOLVED FURTHERMORE, That the Corporation authorizes its President, Mr. Solomon S.
Cua, to sign and execute any purchase agreements, memoranda, and such other deeds, and to
deliver any documents and papers, perform any acts, necessary and incidental to implement the
foregoing, as well as to source the funds to implement the same.

2. Special Stockholders’ Meeting -

RESOLVED, That a Special Stockholders’ Meeting of PRCI shall be held on October 26, 2006 at
10:00 A.M., or at such later date as may be practicable under the circumstances, in the principal
place of business of PRCI at Santa Ana Park, A.P. Reyes Avenue, Makati City;

RESOLVED FURTHER, That only those stockholders of record as of end of business day of
October 11, 2006 shall be entitled to notice, to vote and/or to be voted upon, in accordance with
the laws, regulations and by-laws of PRCI;

RESOLVED FURTHERMORE, That the Corporate Secretary shall be authorized to issue the
required notices, set the time for the submission of, and to receive and validate proxies, as well
as, to order publication of notices and undertake such appropriate and necessary steps,
including the filing of the required disclosures to the regulating agencies, to effect the foregoing.

3. Authorized Attorney-In-Fact and Proxy -

In the event of a successful acquisition of the shares of JTH Davies Holdings, Inc., the Board passed
and approved the following resolutions:

RESOLVED, that the Corporation shall hereby authorize SANTIAGO CUA, or in his absence,
EXEQUIEL ROBLES, or in his absence, SOLOMON S. CUA, or in his absence, SANTIAGO
CUA, JR., or in his absence, DATUK SURIN UPATKOON, or in his absence, Laurence Lim
Swee Lim, or in his absence, LIM TEONG LEONG, to act as its attorney-in-fact/proxy and to vote
all shares as may be registered in the name of the Corporation/lodged with the PCD System, and
to exercise all rights appurtenant thereto during the Annual Stockholders’ Meeting/s and all
regular/special meeting/s of JTH DAVIES HOLDINGS, INC. (formerly JARDINE DAVIES, INC.);

RESOLVED FURTHER, That these Directors, in the said order of priority, shall have full power
and authority and discretion to nominate, appoint, and/or vote into office such directors and/or
officers during the said Annual Stockholders’ Meeting/s and regular/special meeting/s of JTH
HOLDINGS, INC. (formerly JARDINE DAVIES, INC.);

RESOLVED FINALLY, That these Directors be, as they are hereby granted full power and
authority whatsoever requisite or necessary or proper to be done in these matters. 14

The next day, 27 September 2006, PRCI entered into a Sale and Purchase Agreement for the acquisition from
JME of 41,928,290 common shares or 95.55% of the outstanding capital stock of JTH. Among the principal
terms of the Sale and Purchase Agreement were:

(a) The consideration for the acquisition was ₱10.71 per share or ₱449,250,000.00;

(b) Upon the signing of the [A]greement, the [PRCI] shall pay P20 Million to an Escrow Agent as deposit;
and

(c) The sale and purchase transaction contemplated in the Agreement shall be consummated at a
closing not later than November 30, 2006 or the 50th day from the start of the JTH Offer or such date
which shall in no case be later than December 11, 2006. 15

PRCI also made a tender offer for the remaining 4.45% or 1,954,883 issued and outstanding common shares of
JTH at ₱10.71 each.

In the Special Stockholders’ Meeting held on 7 November 2006, attended by stockholders with 481,045,887
shares or 84.42% of the outstanding capital stock of PRCI, the acquisition by PRCI of JTH was presented for
approval. The events during said meeting were duly recorded in the Minutes, to wit:
V. APPROVAL OF THE ACQUISITION OF THE SHARES OF STOCK OF JTH DAVIES HOLDINGS, INC.

Thereafter, the Corporate Secretary informed that the President will present to the stockholders the rationale for
the acquisition of the shares of JTH Davies Holdings, Inc.

According to the President PRCI is intending to acquire up to 100% of the shares of JTH Davies Holdings, Inc.
another listed company in the PSE. For reference, the President informed that the latest Annual Report of JTH
has been appended to the Information Statement for guidance. Also copies of the Board’s resolution presented
for approval and ratification by the stockholders has been posted in the room for convenient reading of the
stockholders.

The President explained that JTH is one of the oldest holdings company and the name JTH Davies is an
internationally acclaimed name with a reputation for solid and sound financial standing. With PRCI’s acquisition
of JTH, it gives PRCI the necessary vehicle within which to enlarge and broaden the business and operational
alternatives or options of our company. PRCI believes that this JTH will complement the direction of PRCI in fast
tracking the development of PRCI’s plans and provide it investment opportunities. It is for this reason that we call
this special meeting so you may know soonest the present opportunity faced by PRCI without need for you to
wait until next year’s annual meeting.

The Vice-Chairman then informed that the resolution approving the purchase of JTH Davies Holdings, Inc. as
presented in the Information Statement which were furnished to the stockholders is presented for approval to the
body. A stockholder thereafter moved that the the (sic) resolution be approved which was duly seconded by
another stockholder. The Vice-Chairman declared the resolution approved. Thereafter, Atty. Pagunsan took the
floor and informed that he is the proxy of various stockholders (10%) and would like to manifest his vote as "NO"
which the Vice-Chairman duly noted. Notwithstanding the objection of Atty. Pagunsan, considering the more
than 2/3 of the outstanding capital stock of PRCI has approved and ratified the resolution, (74%) the Corporate
Secretary declared the resolution as duly approved and ratified.

Thereafter, another stockholder, Mr. Ngo, asked the President what are the plans of PRCI on the assets of JTH.
The President informed that as of now, JTH has no material hard assets other than its retained earnings. Mr.
Ngo asked again what will be the direction of PRCI on the substantial retained earnings of JTH to which the
President replied that there are several options being considered once the purchase is complete one of which is
the declaration of cash dividend.

Another stockholder took the floor and informed the Management that he is happy with the transaction of PRCI
and the purchase by PRCI of the JTH shares is a good deal since the value of the goodwill of JTH is substantial
by his estimate. He proceeded to thank the President and shook hands with him. 16

By 22 November 2006, PRCI was able to additionally acquire 1,160,137 common shares of JTH from the
minority stockholders of the latter, giving PRCI ownership of 98.19% of the outstanding capital stock of JTH.

PRCI prepared consolidated financial statements for itself and for JTH for the fiscal year ending 31 December
2006. The financial statements were audited by the accounting firm Punongbayan & Araullo which gave the
following unqualified opinion of the same: "In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements present fairly, in all material respects, the consolidated financial position of the
Philippine Racing Club, Inc. and Subsidiary as of December 31, 2006, and their consolidated financial
performance and their cash flows for the year then ended in accordance with Philippine Financial Reporting
Standards." The audited financial statements of PRCI and JTH for 2006 were presented to the stockholders of
PRCI and submitted to the Securities and Exchange Commission (SEC), the Bureau of Internal Revenue (BIR),
and the Philippine Stock Exchange (PSE).

Thereafter, PRCI again engaged the assistance of SGV in executing its intended spin-off to JTH of the
management and development of PRCI’s Makati property. It was then determined that the Makati property, with
a total zonal value of ₱3,817,242,000.00, could be transferred to JTH in exchange for the unissued portion of the
latter’s recently increase authorized capital stock, 17 amounting to ₱397,908,894.50, divided into 795,817,789
shares with a par value of ₱0.50 per share. The difference of ₱3,419,333,105.50 between the total zonal value
of the Makati property and the aggregate par value of the JTH shares to be issued in exchange for the same,
would be reflected as additional paid-in capital of PRCI in JTH.

The matter of the proposed exchange was taken up and approved by the PRCI Board of Directors in its meeting
held on 11 May 2007, again with the lone dissent of respondent Dulay. According to the Minutes of the said
meeting, the following occurred:
A. Exchange of the Corporation’s Makati Property with Shares of JTH Davies Holdings, Inc.

President Cua reported on certain essential matters regarding the Corporation’s Makati Property. After doing so,
President Cua proposed the exchange of this Property with shares of JTH Davies Holdings, Inc. He then
presented to the Board financial facts and figures heavily favoring the transaction.

After due discussion and deliberation, all the Directors present approved and passed the following resolution,
except Director Brigido Dulay who registered a negative vote:

RESOLVED, That the Corporation hereby approves and authorizes the exchange of its Makati property with
shares of JTH Davies Holdings, Inc.;

RESOLVED FURTHER, That, for this purpose, the Corporation hereby authorizes its Executive Committee to
determine and approve the terms and conditions governing the exchange as it shall consider for the best interest
of the Corporation subject to approval by the stockholders in compliance with the Corporation Code;

RESOLVED FURTHER, That the Executive Committee, be, as it is hereby granted full power and authority
whatsoever requisite or necessary or proper to accomplish these;

RESOLVED FINALLY, That SOLOMON CUA, President & CEO, be, as he is hereby authorized to negotiate with
JTH Davies Holdings, Inc. and to execute, sign, and/or deliver any and all documents covering the exchange in
accordance with the terms and conditions of the Executive Committee. 18

Subsequently, the Annual Stockholders’ Meeting of PRCI was scheduled on 17 July 2007, the Agenda for which
is reproduced below:

I. Call to Order;

II. Proof of Notice;

III. Certification of Quorum;

IV. Approval of the Minutes of the Annual Stockholders’ Meeting held last June 19, 2006 and of the
Special Stockholders’ Meeting held last November 7, 2006;

V. Report of the President;

VI. Approval of the Audited Financial Statement for the year ended December 31, 2006;

VII. Approval and Ratification of the acts of the Board of Directors, the Executive Committee and the
Management of the Corporation for the Fiscal Year 2006;

VIII. Approval of the Planned Exchange of PRCI’s Makati property for shares of stock;

IX. Approval of the Amendments of the By-Laws to conform with the Manual of Corporate Governance;

X. Election of the members of the Board of Directors;

XI. Appointment of Independent External Auditors;

XII. Other Matters;

XIII. Adjournment.19

The 11 May 2007 Resolution of the PRCI Board of Directors on the property-for-shares exchange between PRCI
and JTH was supposed to be presented for approval by the stockholders under the afore-quoted Items No. VII
and No. VIII of the Agenda.

However, on 10 July 2007, respondents Miguel, et al., as minority stockholders of PRCI, with the following
shareholdings:
 Stockholder No. of Shares Percentage
Miguel Ocampo-Tan 16,380,000 2.87
Jemie U. Tan 15,972,720 2.80
Atty. Brigido J. Dulay20 1 0.00
Total 32,352,721 5.67

filed before the RTC a Complaint, denominated as a Derivative Suit with prayer for Issuance of TRO/Preliminary
Injunction, against the rest of the directors of PRCI and/or JTH. The Complaint was docketed as Civil Case No.
07-610.

The Complaint was based on three causes of action: (1) the approval by the majority directors of PRCI of the
Board Resolutions dated 26 September 2006 and 11 May 2007 -- with undue haste and deliberate speed,
despite the absence of any disclosure and information -- was not only anomalous and fraudulent, but also
extremely prejudicial and inimical to interest of PRCI, committed in violation of their fiduciary duty as directors of
the said corporation; (2) respondent Solomon, as PRCI President, with the acquiescence of the majority
directors of PRCI, maliciously refused and resisted the request of respondents Miguel, et al., for complete and
adequate information relative to the disputed Board Resolutions, brazenly and unlawfully violating the rights of
the minority stockholders to information and to inspect corporate books and records; and (3) without being
officially and formally nominated, the majority directors of PRCI illegally and unlawfully constituted themselves as
members of the Board of Directors and/or Executive Officers of JTH, rendering all the actions they have taken as
such null and void ab initio. In the end, respondents Miguel, et al., prayed to the RTC, after notice and hearing,
that:

1. A temporary restraining order and/or writ of preliminary injunction be issued restraining and enjoining
the holding of the Annual Stockholders’ Meeting scheduled on 17 July 2007 and restraining and
enjoining the defendants [PRCI directors] from enforcing, implementing, "railroading", or taking any
further action in reliance upon or in substitution or in furtherance of the Disputed Resolutions, which
would inflict grave and irreparable injury in fraud of the Corporation.

2. A receiver and/or management committee be constituted and appointed to undertake the

management and operations of the Corporation and to take over its assets to prevent its further loss,
wastage and dissipation.

3. To compel the defendant Majority Directors to render a complete and adequate disclosure of all
documents and information relating to the subject matter of the Disputed Resolutions as well as the
business and affairs of the Corporation and its wholly-owned subsidiary from the time of the latter’s
acquisition until final judgment.

4. After trial on the merits, that judgment be rendered in favor of the plaintiffs and against the defendants,
as follows:

(a) Permanently enjoining and prohibiting defendants from enforcing, implementing, or taking any
action in reliance upon the Disputed Resolutions.

(b) Declaring the Disputed Resolutions dated 26 September 2006 and 11 May 2007 and the
approval by the Executive Committee of the exchange of the Corporation’s Makati Property for
JTH shares, as well as any and all actions taken in reliance upon or pursuant to or in furtherance
of the Disputed Resolutions and/or approval of the Executive Committee, as null and void ab
initio.

(c) Declaring the assumption by defendant Majority Directors as Directors and/or officers of JTH,
including all acts done by defendant Majority Directors as such Directors and/or officers of JTH,
as null and void ab initio.

(d) Ordering defendants to pay plaintiffs the sum of ₱500,000.00, and by way of attorney’s fees,
plus ₱10,000.00 per court appearance, plus costs of suit.

Other reliefs just and equitable under the premises are likewise prayed for. 21

After conducting hearings on the prayer for the issuance of a TRO, RTC Judge Untalan issued a Resolution on
16 July 2007, the dispositive portion of which reads:
WHEREFORE, premises considered, this court hereby partially grants the prayer of PRCI for the issuance of
Temporary Restraining Order upon the herein defendants subject to the posting of Php100,000.00 bond on
condition that such bond shall answer to any damage that the Defendants may sustain by reason of this TRO if
the court should finally decide that the applicants are not entitled thereto. This TRO shall be effective for
TWENTY (20) DAYS only from service of the same upon the Defendants after posting of the bond.

Therefore, the Defendants, their agents, proxies and representatives are hereby enjoined, prohibited and
forbidden to present to, discuss, much more to approve the same, at the 2007 Annual Stockholders’ Meeting of
PRCI to be held on July 17, 2007 at 8:00 A.M. at the VIP Room, Santa Ana Park, A.P. Reyes Ave., Makati City,
the following Agenda included in the Notice of said stockholders’ meeting:

1. Agenda Roman No. IV – Approval of the Minutes of the Annual Stockholders’ Meeting held last June
19, 2006 and the Special Stockholders’ meeting held last November 7, 2006.

2. Agenda Roman No. VII – Approval and Ratification of the acts of the Board of Directors, the Executive
Committee and the Management of the Corporation for the Fiscal Year 2006.

3. Agenda Roman No. VIII – Approval of the Planned Exchange of PRCI’s Makati property for shares of
stock.

Thus, in order that these subject matters and items of the Agenda of the aforesaid Stockholders’ Meeting shall
not be taken up, the herein Defendants, their agents, proxies and representatives, jointly and severally, are
hereby ordered to delete and remove from the Agenda said three (3) above stated items of the Agenda before
the start and conduct of the said stockholders’ meeting. Therefore, in case herein Defendants, their agents,
proxies and representatives defy and disobey this mandate, they have committed already four (4) distinct
contemptuous acts: delete, present, discuss and approve.

This Court appealed to the Corporate Secretary as Officer of the Court, to please make sure that this mandate is
obeyed and observed by the Defendants, their agents, proxies and representatives, before and during the
conduct of said stockholders’ meeting.

Let the hearing of the main injunction be set on July 23 and 24, 2007 and August 2, 2007, all at two o’clock in
the afternoon.22

The Annual Stockholders’ Meeting of PRCI scheduled the next day, 17 July 2007, failed to push through for lack
of quorum.

On 19 July 2007, petitioners Santiago Jr., et al., as PRCI directors filed a Petition for Certiorari with the Court of
Appeals, docketed as CA-G.R. SP No. 99769. On 20 July 2007, Santiago Sr., also as PRCI director, filed his
own Petition for Certiorari and Prohibition, docketed as CA-G.R. SP No. 99780. Both Petitions assailed the RTC
Resolution dated 16 July 2007, granting the issuance of a TRO, for being rendered with grave abuse of
discretion amounting to lack or excess of jurisdiction. CA-G.R. SP No. 99769 and No. 99780 were subsequently
consolidated.

The Court of Appeals promulgated its Decision on 6 September 2007 dismissing the Petitions in CA-G.R. SP
No. 99769 and No. 99780 for lack of merit, mootness, and prematurity.

According to the Court of Appeals, the TRO issued by the RTC enjoined the presentation, discussion, and
approval of only three of the 13 items on the Agenda of the 2007 Annual Stockholders’ Meeting. There is no
evidence that the TRO issued by the RTC legally impaired the holding of the scheduled stockholders’ meeting.
Indeed, the lack of quorum during the said meeting was due to the absence of petitioners themselves who
comprised the majority interest in PRCI. Consequently, the appellate court found no grave abuse of discretion in
the issuance by the RTC of the TRO.

The Court of Appeals also noted that the Petitions in CA-G.R. SP No. 99769 and No. 99780 as regards the
issuance of the TRO already became moot when the 20-day period of effectivity of said restraining order expired
on 5 August 2007, even before the Petitions were submitted for resolution.

Lastly, the Court of Appeals held that the issues raised by petitioners were factual and evidentiary in nature
which must be threshed out before the RTC as the designated commercial court in Makati. The appellate court
would not interfere with the proceedings a quo considering that Civil Case No. 07-610 had not yet gone to trial
and had not yet been resolved or terminated by the RTC. Therefore, for being premature, the Court of Appeals
could not prohibit the continuance of the RTC proceedings in Civil Case No. 07-610.

The Court of Appeals ruled that there was no reason to dismiss the Complaint in Civil Case No. 07-610.
Although the Complaint contained mere allegations, which had yet to be supported by evidence, it was sufficient
in form and substance, and the RTC properly took cognizance of the same. The Court of Appeals reasoned that:

Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies (Interim Rules) provides:

"SECTION 1. Derivative action. – A stockholder or member may bring an action in the name of a corporation or
association, as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions subject of the action occurred
and at the time the action was filed;

(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust
all remedies available under the articles of incorporation, by-laws, laws or rules governing the
corporation or partnership to obtain the relief he desires;

(3) No appraisal rights are available for the act or acts complained of; and

(4) The suit is not a nuisance or harassment suit.

In case of nuisance or harassment suit, the court shall forthwith dismiss the case."

A reading of the Complaint reveals that the same sufficiently alleges the foregoing requirements. Complainants
essentially allege that they are PRCI stockholders, that they have opposed the issuance and approval of the
questioned resolutions during the board stockholders’ (sic) meetings, that prior resort to intra-corporate remedies
are futile, that nevertheless, they have asked for copies of the pertinent documents pertaining to the questioned
transactions which the board has declined to furnish, that they have instituted the derivative suit in the name of
the corporation, that they are questioning the acts of the majority of the board of directors believing that the
herein petitioners have committed a wrong against the corporation and seeking a nullification of the questioned
board resolutions on the ground of wastage of the corporate assets.

Thus, contrary to petitioners’ averment, the Complaint does state a cause of action. 23

Petitioners in CA-G.R. SP No. 99769 and No. 99780 filed their respective Motions for Reconsideration of the
foregoing Decision of the Court of Appeals.

In the meantime, upon the expiration of the TRO issued by RTC Judge Untalan in Civil Case No. 07-610, the
Annual Stockholders’ Meeting of PRCI was again scheduled on 10 October 2007. However, Judge Untalan
issued on 8 October 2007 a Resolution with the following decree:

WHEREFORE, premises considered, this court hereby GRANTS the issuance of PERMANENT INJUNCTION
against the defendants until the instant case is finally resolved, subject to the posting by plaintiffs of a Php
100,000.00 bond, on condition that such bond shall answer to any damage that the Defendants may sustain by
reason of this injunction if the court should finally decide that the applicants are not entitled thereto. This
injunction shall be effective from service of the same upon the Defendants after posting of the bond.

Therefore, the Defendants, their agents, proxies and representatives are hereby enjoined, prohibited and
forbidden to present to, discuss, much more to approve the same, at any stockholders’ meeting, whatsoever
kind and nature, of PRCI of the following Agenda:

1. Approval of the Minutes of the Annual Stockholders’ Meeting held last June 19, 2006 and the Special
Stockholders’ meeting held last November 7, 2006 of PRCI.

2. Approval and Ratification of the acts of the Board of Directors, the Executive Committee and the
Management of PRCI for the Fiscal Year 2006, as far as the acquisition of JTH and the planned
exchange of PRCI’s Makati property for shares of stock of JTH are concerned.
 3. Approval of the Planned Exchange of PRCI’s Makati property for shares of stock of JTH. 24

As a result, the Annual Stockholders’ Meeting of PRCI proceeded as scheduled on 10 October 2007 without
taking up the matters covered by the permanent injunction issued by the RTC.

Petitioners Santiago Jr., et al. filed in CA-G.R. SP No. 99769 their Motion to Admit Supplemental Petition for
Certiorari with the attached Supplemental Petition for Certiorari; 25 and petitioner Santiago Sr. filed in CA-G.R. SP
No. 99780 a Supplemental Petition for Certiorari and Prohibition, 26 to be followed shortly thereafter by a Motion
to Admit (Supplemental Petition).27 Petitioners intended to additionally assail in their Supplemental Petitions the 8
October 2007 Resolution of the RTC granting the issuance of the permanent injunction.

In its Resolution dated 22 January 2008, the Court of Appeals denied the Motions for Reconsideration of
petitioners and the Motion to Admit Supplemental Petition for Certiorari of petitioners Santiago Jr., et al.

The Court of Appeals found that petitioners’ Motions for Reconsideration merely reiterated the issues and
arguments which were raised in the Petitions and/or which the appellate court already discussed and passed
upon. The Court of Appeals reiterated its ruling that it was premature to prohibit the continuance of the
proceedings in Civil Case No. 07-610 before the RTC; and that the Complaint therein sufficiently stated a cause
of action.

The Court of Appeals likewise refused to admit petitioners’ Supplemental Petitions for Certiorari. It noted that
Santiago Sr. filed his Supplemental Petition without asking for leave to file the same. Apparently, the appellate
court disregarded the Motion to Admit (Supplemental Petition) which petitioner Santiago filed separately from
and at a later date than his Supplemental Petition. In addition, the Court of Appeals adjudged that the
Supplemental Petitions which petitioners hoped to be admitted involved a subject matter not covered in their
original Petitions. Although the TRO and the permanent injunction were both issued by the RTC in Civil Case
No. 07-610, the two issuances were independent of each other, and only the TRO was the subject of the original
Petitions. Hence, the Supplemental Petitions assailing the permanent injunction granted by the RTC could not
be considered as merely augmenting the matters, issues, and causes of action of the original Petitions; and
should be challenged in a separate petition for certiorari.

Failing to obtain any relief from the Court of Appeals, petitioners turned to this Court.

Petitioners Santiago Jr., et al., filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
docketed as G.R. No. 181455-56; while petitioner Santiago Sr. filed a Petition for Certiorari under Rule 65 of the
Rules of Court, docketed as G.R. No. 182008. According to petitioners, the appellate court committed reversible
errors of law and grave abuse of discretion in its Decision dated 6 September 2007 and Resolution dated 22
January 2008 in CA-G.R. SP No. 99769 and No. 99780.

Petitioners insisted that Civil Case No. 07-610 pending before the RTC did not constitute a valid derivative suit.
Respondents Miguel, et al., failed to allege in their Complaint that they had no appraisal rights for the acts they
were complaining of. In fact, the very allegations made by respondents Miguel, et al. in their Complaint
supported the availability of appraisal rights to them. The Complaint in Civil Case No. 07-610 was nothing more
than a nuisance or harassment suit against petitioners and the other PRCI directors.

Petitioners averred that, by finding no grave abuse of discretion on the part of the RTC in issuing the TRO
against petitioners and the other PRCI directors, the Court of Appeals substituted its own judgment for that of the
PRCI Board of Directors, arbitrarily and capriciously disregarding the business judgment made by the said Board
and approved by PRCI stockholders. The TRO issued by the RTC was not for the benefit of the PRCI
stockholders. Furthermore, the expiration of the 20-day TRO did not make their Petitions for Certiorari in CA-GR
SP No. 99769 and No. 99780 moot. Said Petitions included the prayer that the RTC be restrained from
proceeding with Civil Case No. 07-610 in view of the fatally defective Complaint, the grant or denial of which the
appellate court should have still determined despite the expiration of the TRO.

Petitioners also challenged the refusal by the Court of Appeals to admit their Supplemental Petitions in CA-GR
SP No. 99769 and No. 99780. They asserted that the issues in their Supplemental Petitions were closely
intertwined with those in their original Petitions.

The prayer of petitioners Santiago Jr., et al., in their Petition in G.R. No. 181455-56 reads:

PRAYER
WHEREFORE, in view of the foregoing and in the interest of justice, it is most respectfully prayed of the
Honorable Supreme Court that:

A. The Decision of the Court of Appeals dated 06 September 2007 (Annex "I") and the Resolution of the
Court of Appeals dated 22 January 2008 (Annex "M") be NULLIFIED, REVERSED and SET ASIDE for
having been issued on the basis of reversible error of law and with grave abuse of discretion amounting
to lack of jurisdiction.

B. The Resolutions of Judge Cesar Untalan of Makati Regional Trial Court, Branch 149 dated 16 July
2007 (Annex "F") and 08 October 2007 (Annex "G") be accordingly NULLIFIED, REVERSED and SET
ASIDE for having been issued with grave abuse of discretion amounting to lack of jurisdiction.

C. The complaint of Respondents be DISMISSED outright for lack of jurisdiction and cause of action.

D. Such further reliefs just and equitable under the circumstances be GRANTED. 28

Petitioners Santiago Jr., et al., subsequently filed in G.R. No. 181455-56 an Urgent Motion for Issuance of a
Temporary Restraining Order (Status Quo Ante) and/or Writ of Preliminary Injunction, in which they additionally
asked the Court that "a Temporary Restraining Order (Status Quo Ante) and/or Writ of Preliminary Injunction be
immediately issued restraining the implementation (sic) Judge Cesar Untalan’s Resolutions dated 16 July 2007
and 08 October 2007 so as not to render inutile this Most Honorable Court’s exercise of jurisdiction over this
action and to prevent the decision on this case from being rendered ineffectual and academic." 29

Meanwhile, petitioner Santiago Sr. sought the following reliefs from this Court in his Petition in G.R. No. 182008:

PRAYER

WHEREFORE, premises considered, it is respectfully prayed that the petition be given due course, and that:

1. Upon the filing of this petition, a temporary restraining order and/or writ of preliminary injunction be
immediately issued restraining and enjoining the enforcement or execution of the assailed Court of
Appeals’ Decision and Resolution, and the assailed trial court’s resolutions, particularly that which
mandates the continued enforcement of the Writ of PERMANENT Injunction issued by the trial, which
prevents the stockholders of the corporation from acting on matters that have to be submitted to them for
approval and/ratification at the regular annual stockholders’ meetings.

2. Thereafter, a writ of prohibition be issued and/or the preliminary injunction be made permanent and
continuing, during the pendency of the instant case before the Honorable court.

3. After due hearing, that the Honorable Court:

(a) Declare null and void the Honorable Court of Appeals’ 06 September 2007 Decision and 22
January 2008 Resolution, in CA-G.R. SP No. 99780, as well as the Trial Court’s 16 July 2007
and 8 October 2007 Resolutions in Civil Case No. 07-610 of the Makati Regional Trial Court, and

(b) Order the dismissal of the Complaint filed by the private respondents against petitioner, et al.,
docketed as Civil Case No. 07-610 of the RTC of Makati City.

Other reliefs just and equitable in the premises are likewise prayed for. 30

In a Resolution dated 9 April 2008 in G.R. No. 182008, the Court granted petitioner Santiago Sr.’s prayer for the
issuance of a TRO, to wit:

Acting on the prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction
dated 24 March 2008, the Court likewise resolves to ISSUE a TEMPORARY RESTRAINING ORDER enjoining
respondents from enforcing or executing the assailed Court of Appeals’ decision and resolution and the assailed
trial court’s resolutions particularly that which mandates the continued enforcement of the writ of permanent
injunction issued by the trial court, until further orders from this Court, and to require petitioner to POST a CASH
BOND or a SURETY BOND from a reputable bonding company of indubitable solvency with terms and
conditions acceptable to the Court, in the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00),
within five (5) days from notice, otherwise, the temporary restraining order herein issued shall automatically be
lifted. Unless and until the Court directs otherwise, the bond shall be effective from its approval by the Court until
this case is finally decided, resolved or terminated. 31

Accordingly, the Court issued the TRO32 on even date, directed against the respondents of G.R. No. 182008,
namely, respondents Miguel, et al., and Judge Untalan.

On 21 April 2008, respondents Miguel, et al. filed with the Court their Comment with Prayer for the Immediate
Lifting or Dissolution of the Temporary Restraining Order in G.R. No. 182008.

Respondents Miguel, et al., argued that the Petition for Certiorari in G.R. No. 182008 was dismissible due to
several procedural errors. Petitioner Solomon, who signed the Petition in G.R. No. 182008 on behalf of Santiago
Sr., was guilty of forum shopping for failing to inform the Court of the Petition for Review in G.R. No. 181455-56,
of which he was one of the petitioners. Both Petitions involved the same transactions, essential facts, and
circumstances, as well as identical causes of action, subject matter, and issues. The Petition for Certiorari in
G.R. No. 182008 was also not personally verified by petitioner Santiago Sr. as required by rules and
jurisprudence. Moreover, the Petition for Certiorari was not a proper remedy, since it was only proper when there
was no other plain, speedy, and adequate remedy in the ordinary course of law. Petitioner Cua himself admitted
the availability of other remedies, except that he was "avoiding the tortuous manner offered by other remedies."
In fact, petitioners Santiago Jr., et al., filed a Petition for Review in G.R. No. 181455-56. Lastly, errors of
judgment could not be remedied by a Petition for Certiorari. Petitioner Santiago Sr.’s Petition in G.R. No. 182008
raised issues that were factual and evidentiary in nature, on which the RTC has yet to make finding.

On substantial grounds, respondents Miguel, et al., explained that their Complaint in Civil Case No. 07-610 was
comprised of several causes of action. It was not merely a derivative suit, but was also an intra-corporate action
arising from devices or schemes employed by the PRCI Board of Directors amounting to fraud or
misrepresentation and were detrimental to the interest of the PRCI stockholders. Additionally, the fraudulent acts
and breach of fiduciary duties by the PRCI directors had already been established by prima facie factual
evidence, which warranted the continuation of the proceedings in Civil Case No. 07-610 before the RTC for
adjudication on the merits. It was also established that there were no appraisal rights available for the acts
complained of, since (1) the PRCI directors were being charged with mismanagement, misrepresentation, fraud,
and breach of fiduciary duties, which were not subject to appraisal rights; (2) appraisal rights would only obtain
for acts of the Board of Directors in good faith; and (3) appraisal rights may be exercised by a stockholder who
had voted against the proposed corporate action, and no corporate action had yet been taken herein by PRCI
stockholders, who still had not voted on the intended property-for-shares exchange between PRCI and JTH.
Furthermore, the Court of Appeals correctly denied admission of the Supplemental Petitions in CA-GR SP No.
99769 and No. 99780. A new and independent cause of action could not be set by supplemental complaint. The
issues raised in the original Petitions pertain to the grave abuse of discretion committed by the RTC in issuing
the TRO and in taking cognizance of Civil Case No. 07-610, by setting the same for hearing on the main
injunction; in contrast, the issues in the Supplemental Petitions referred to the issuance of the Writ of Preliminary
Injunction.

In support of their prayer for the immediate lifting or dissolution of the TRO issued by this Court, respondents
Miguel, et al., contended that:

The Temporary Restraining Order issued by this Honorable Court has impelled herein petitioner and his
co-majority directors to schedule a stockholders’ meeting with the view TO RENDER MOOT AND
ACADEMIC the action and proceedings before the Regional Trial Court of Makati, Branch 149.

II

The Petitioner herein, having been impleaded as director and fiduciary of PRCI, does NOT stand to
suffer any irreparable injury.

III

To the contrary, it is PRCI who stand to suffer grave and irreparable injury if the TRO is not lifted and/or
dissolved.

IV
 The petitioner herein has failed to establish any clear legal right that entitles him to the issuance of a
TRO and/or Writ of preliminary injunction.

The TRO was improperly issued as petitioner has failed to show any extreme urgency to necessitate the
issuance thereof.33

In the end, respondents Miguel, et al., prayed:

PRAYER

WHEREFORE, premises considered, it is respectfully prayed of this Honorable Supreme Court that the
Temporary Restraining Order be LIFTED or DISSOLVED IMMEDIATELY, and that the instant Petition be
DISMISSED.

Other just and equitable reliefs are likewise prayed for. 34

Only two days later, on 23 April 2008, respondents Miguel, et al., again urgently moved 35 for the lifting and/or
dissolution of the TRO issued by this Court. They informed the Court that the PRCI Board of Directors passed
and approved on 22 April 2008 a Resolution setting the Annual Stockholders’ Meeting of PRCI on 18 June 2008,
including in the proposed Agenda therefor the following items:

(d) Approval of the Minutes of the Special Stockholders’ Meeting held on 7 November 2006, and the Minutes of
the Annual Stockholders’ Meeting held on 10 October 2007;

xxxx

(g) Approval and ratification of the acts of the Board of Directors, the Executive Committee, and Management of
the Corporation for Fiscal Years 2006 and 2007;

(h) Approval of the Planned Exchange of PRCI’s Makati Property for shares of stock of JTH Davies Holdings,
Inc.36

On the same day, 23 April 2008, the Court issued a Resolution 37 consolidating G.R. No. 181455-56 and No.
182008.

Thereafter, on 16 June 2008, Aris Prime Resources, Inc. (APRI), a minority stockholder of PRCI – with
5,000,000.00 shares or 0.88% of the outstanding capital stock of PRCI – filed a Very Respectful Motion for
Leave to Intervene as Co-Respondent in the Petition with the attached Very Respectful Urgent Motion to Lift
Restraining Order.38 It relayed to the Court that it received Notice of the Annual Stockholders’ Meeting of PRCI
set on 18 June 2008, where the items on the property-for-shares exchange between PRCI and JTH were
included in the Agenda.

Considering that the validity of the acts of the PRCI Board of Directors concerning the property-for-shares
exchange are the very issues raised in the Petitions presently before the Court, while the factual issues relating
to the same are still being litigated before the RTC in Civil Case No. 07-610, the submission of the exchange to
the PRCI stockholders for their approval will render the aforementioned proceedings before this Court and the
RTC moot and academic. It will amount to a denial of the right of APRI and of respondents Miguel, et al., to be
heard before the RTC where they are still to present their evidence on the factual issues. It will likewise unduly
pave the way for the validation of the abuse committed by the majority directors of PRCI in denying the right of
the minority directors and stockholders of the corporation to information, and for the sanction of the blatant
disregard by the majority directors of their duties of fidelity and transparency. Unless the TRO is lifted forthwith,
APRI, respondents Miguel, et al., and all other minority stockholders stand to suffer prejudice. Expectedly,
petitioners seek the dismissal, while respondents Miguel, et al., pray for the grant of the motion to intervene of
APRI.

Pending action on the foregoing incidents, petitioners Santiago Jr., et al., filed before the Court a Manifestation
and Motion to Set Case for Oral Arguments.39
In their Manifestation, petitioners Santiago Jr., et al., admitted that the PRCI Board of Directors had already
called and set the Annual Stockholders’ Meeting on 18 June 2008, and among the items on the Agenda for
confirmation and approval by the stockholders was the property-for-shares exchange between PRCI and JTH.

Petitioners Santiago Jr., et al., brought to the attention of the Court the fact that on 5 June 2008, another set of
minority stockholders of PRCI, namely, Jalane Christie U. Tan, Marilou U. Pua, Aristeo G. Puyat, and Ricardo S.
Parreno (Jalane, et al.) filed with the RTC of Makati a Complaint against petitioners and the other directors of
PRCI and/or JTH, docketed as Civil Case No. 08-458. Jalane, et al., have the following shareholdings in PRCI:

Stockholder No. of Shares Percentage

Jalane Christie U. Tan 16,927,560 2.97

Marilou U. Pua 3,884,400 0.68

Artisteo G. Puyat 1,633,666 0.29

Ricardo S. Pareño 5,850 0.00

Total 22,451,476 3.94

Jalane, et al., claimed in their Complaint in Civil Case No. 08-458 that "[a]part from being a derivative suit, this
suit is also filed based on devices or schemes employed by the Board of Directors amounting to fraud or
misrepresentation which is detrimental to the interest of the corporation, the public and/or stockholders as
provided for under Section 1(a)(1) of the Interim Rules of Procedure for Intra-Corporate Controversies (A.M. No.
01-2-04-SC)."40 The Complaint was based on four causes of action: (1) the acquisition of JTH by PRCI; (2) sale
of 29.92% of JTH shares by PRCI;41 (3) exchange of the Makati property of PRCI for JTH shares; and (4)
interlocking of Directors of PRCI and JTH. The Complaint of Jalane, et al., contained the following prayer:

PRAYER

WHEREFORE, it is respectfully prayed of this Honorable Court, after due notice and hearing, that:

1. A Temporary Restraining Order and/or Writ of Preliminary Mandatory Injunction be issued

enjoining the presentation, discussion and ratification of portions of the Agenda of the Annual
Stockholders Meeting of PRCI scheduled on June 18, 2008, particularly items IV, VII and VIII;

2. An order be issued nullifying the Sale and Purchase Agreement dated September 27, 2006 for
the acquisition of JTH Davies Holdings, Inc.

3. An order be issued nullifying the sale of PRCI shares in JTH in April 2007 and May 7, 2007;

[Paragraph crossed-out.]

5. An order be issued directing defendants to pay plaintiffs the sum of ₱500,000.00 as and by
way of attorney’s fees, plus cost of suit.

Other reliefs, just and equitable under the premises are likewise prayed for. 42

Acting on the Complaint of Jalane, et al. in Civil Case No. 08-458, Executive Judge Winlove Dumayas
(Executive Judge Dumayas) of the Makati City RTC issued a 72-hour TRO, enjoining PRCI directors from
presenting, discussing, and ratifying the items in the Agenda for the Annual Stockholders’ Meeting set on 18
June 2008 related to the property-for-shares exchange between PRCI and JTH. However, upon being apprised
of the TRO issued by this Court on 9 April 2008 in G.R. No. 182008, in relation to Civil Case No. 07-610 pending
before the Makati City RTC, Branch 149, Executive Judge Dumayas gave verbal advice that the Annual
Stockholders’ Meeting of PRCI should proceed on 18 June 2008 as if the 72-hour TRO had not been issued.
Consequently, the Annual Stockholders’ Meeting of PRCI proceeded on 18 June 2008. 1avvphi1

The Annual Stockholders’ Meeting of PRCI, held on 18 June 2008, was attended by stockholders with a total of
493,017,509 shares or 86.52% of the outstanding capital stock of PRCI, more than the necessary 2/3 to
constitute a quorum. Discussed in the meeting were the same items, whose presentation to the stockholders
was sought to be enjoined by respondents Miguel, et al., in Civil Case No. 07-610 and by Jalane, et al., in Civil
Case No. 08-458. The actions taken by the stockholders on the controversial items were duly recorded in the
Minutes of the meeting, as follows:

IV. APPROVAL OF THE MINUTES OF THE PREVIOUS STOCKHOLDERS’ MEETINGS

Before the next agenda was tackled in the meeting, a stockholder, Atty. Benjamin Santos asked to be
recognized on the floor. The Chairman gave Atty. Santos permission to speak. Atty. Santos inquired from the
Corporate Secretary if there has already been official notice of service on him regarding a 72-hour temporary
restraining order which was issued by the Executive Judge of the Makati Regional Trial Court (RTC). The
Corporation (sic) Secretary answered in the negative.

For the information of the stockholders present, Atty. Santos mentioned that a case has been filed by certain
minority shareholders, namely, Jalane Christie U. Tan, Marilou U. Pua, Aristeo G. Puyat and Ricardo S. Parreno,
against the Board of Directors of PRCI (Civil Case No. 08-458, Makati RTC), and a 72-hour TRO was issued on
17 June 2008 "enjoining defendants (directors of PRCI), their representatives, employees and/or all those acting
for and in their behalf to refrain from the presentation, discussion and ratification of portions of the Agenda of the
Annual Stockholders’ Meeting of PRCI scheduled on June 18, 2008 particularly items IV, VII and VIII." x x x.

xxxx

According to Atty. Santos, the TRO enjoins them in their capacity as Directors of PRCI. He further stated that the
attendance of all the directors present in the stockholders’ meeting, is in their capacity as stockholders of PRCI
and not as directors of PRCI. The Chairman is present merely to preside over the meeting, and the Corporate
Secretary is not a member of the Board of Directors. Atty. Santos likewise informed the stockholders present of
the existence of a temporary restraining order issued by the Supreme Court dated 09 April 2008 (in SC G.R. No.
182008) which "enjoin(ed) respondents from enforcing or executing the assailed Court of Appeals’ decision and
resolution, and the assailed trial court’s resolutions particularly that which mandates the continued enforcement
of the writ of permanent injunction issued by the trial court, until further orders from this Court." Thereafter, Atty.
Santos moved that Agenda Item IV as well as the rest of the items to be taken up since the TRO of the Makati
RTC is defective and should not prevail over the TRO of the Supreme Court.

Atty. Santos added that the case recently filed by the abovementioned minority shareholders is a duplicate of
another pending case filed by other minority shareholders also in the Makati RTC. It was pointed out that the
shareholders in the recent case are guilty of forum shopping since they primarily have the same interests as
those who had earlier filed a suit against PRCI. Atty. Santos clarified that the pending case is currently the
subject of a Petition to the Supreme Court wherein the aforementioned TRO was issued. With this Comment, the
Corporate Secretary took note of the Petition filed with the Supreme Court and the TRO issued by the Supreme
Court.

xxxx

x x x With all the foregoing comments, Atty. Santos moved that the stockholders proceed with the meeting and
that the item under Agenda IV be approved, which are the following: the Minutes of the Annual Stockholders’
Meeting held on June 19, 2006, the Minutes of the Special Stockholders’ Meeting held on November 7, 2006
and the Minutes of the Annual Stockholders’ Meeting held on October 10, 2007.

Thereafter, Atty. Alexander Carandang asked to be given permission to speak. The Chairman asked Atty.
Carandang his name and authority to speak, to which, he answered his name and said he was stockholder of
record and a proxy of Aristeo Puyat and Jose L. Santos. After Atty. Carandang was recognized, he stated that,
contrary to Atty. Santos’ earlier actuations, the recent complaint filed is different from the complaint earlier filed
by the Dulay group. He also mentioned that the case which Puyat earlier filed is different because it is a case for
inspection and photocopying of PRCI documents. He thereafter warned against the tackling of Agenda Item No.
4.

Atty. Brigido Dulay, as a stockholder and proxy to the Tan group (Miguel Ocampo Tan, Jemie U. Tan, JUT
Holdings, Inc., Jalane Christie U. Tan, etc.) likewise took the floor to manifest his continuing objection to the
proceedings.

Atty. Amado Paolo Dimayuga also took the floor as a proxy to Marilou Pua and manifested that the complainants
in the recent case filed are not guilty of forum shopping and also manifested his objection to the taking up of Item
IV in the agenda and the continuance of the proceedings in the stockholders’ meeting. Atty. Pelagio Ricalde also
took the floor as proxy for Aries Prime Resources, Inc. and also manifested objection to the proceedings. Both
Atty. Dimayuga and Atty. Ricalde manifested continuing objections.

Atty. Dimayuga also mentioned that he received word that a Motion to Lift was just filed by the PRCI Directors
regarding the recent TRO issued by the Makati RTC. As a reply, the Corporate Secretary asked that the counsel
for the PRCI directors be allowed to explain such allegations. Atty. Garbriel Q. Enriquez, the counsel for PRCI
Directors Cua, Cua, Jr., De Villa and Robles informed the stockholders of the wrong information being given by
Atty. Dimayuga. They had filed a manifestation before the Executive Judge of the RTC which issued the TRO
and informed him of the facts mentioned by Atty. Santos. The Executive Judge said that today’s meeting should
proceed because the plaintiffs therein suppressed the existing TRO in the Supreme Court, and the TRO of the
RTC cannot rise above the Supreme Court TRO. There is therefore no legal obstacle to holding the Annual
Stockholders’ Meeting, which should proceed so as not to prejudice the stockholders.

The Corporate Secretary stated that all the objections are duly noted. There being an earlier motion for the
approval of the Minutes, a stockholder seconded said motion. The motion having been duly seconded, the
Chairman declared all the minutes for approval as duly approved.

xxxx

VI. RATIFICATION OF THE ACTS OF THE BOARD OF DIRECTORS, THE EXECUTIVE COMMITTEE AND
THE MANAGEMENT OF THE CORPORATION FOR FISCAL YEARS 2006 AND 2007

The Chairman then proceeded by stating that the next item on the agenda is the ratification by the Stockholders
of the acts of the Board of Directors, the Executive Committee, and the Management during the last fiscal years
2006 and 2007. The Chairman then explained that as to all other matters and action affecting the operations,
financial performance and strategic posture of the Corporation, all have been subsumed and discussed in the
Annual Report of the President and likewise reflected in the Information Statement sent to all stockholders of
record and to the SEC.

Once more, Atty. Dulay, Atty. Carandang, Atty. Dimayuga and Atty. Ricalde all took the floor successively and
objected to this item in the agenda and the Corporate Secretary duly noted these objections.

A stockholder later moved that all the acts of the Board of Directors, the Executive Committee, and the corporate
management be confirmed, ratified and approved by the stockholders. The said motion was duly seconded,
thus, the stockholders thereafter approved and ratified all the said acts.

At this juncture, Atty. Dulay requested that the stockholders who moved and seconded the aforementioned acts
be named and their authority to speak be made known. Atty. Carandang likewise inquired about the same
information about a lady stockholder who earlier seconded the motion. With this, Atty. Jose Miguel Manalo
stated his name and said he was a stockholder of record. The other stockholders stated that they were proxies
of Mr. Santiago Cualoping III.

VII. APPROVAL OF THE EXCHANGE OF PRCI’S MAKATI PROPERTY FOR SHARES OF STOCK OF JTH
DAVIES HOLDINGS, INC.

When asked by the Chairman as to the next item in the agenda, the Corporate Secretary informed all present
that the next item is the approval of the exchange of PRCI’s Makati property for shares of stock of JTH Davies
Holdings which was duly approved by the Board of Directors during its 11 May 2007 meeting. The exchange
was duly reported and disclosed to the SEC and the information thereof was included in the Information
Statements mailed to all stockholders of PRCI.

Yet again, Atty. Dulay, Atty. Carandang, Atty. Dimayuga and Atty. Ricalde all took the floor successively and
objected to this item in the agenda which were duly noted by the Corporate Secretary.

The Chairman then called the President of PRCI, Mr. Solomon Cua to officiate on this matter. At this point, one
stockholder moved that the exchange of PRCI’s Makati property for JTH shares be approved by the
stockholders, which was duly seconded by another stockholder. President Cua then asked that the total
percentage of those who are in favor of the exchange be taken. Mr. Santiago Cua, Jr., a stockholder and a proxy
of approximately 31.39% of the shareholdings voted in favor of the exchange. Then, Mr. Lawrence Lim Swee
Lin, representing Magnum Investment Ltd. and Leisure Management Ltd. who own 39.15% of the shareholdings,
also voted in favor of the exchange. Mr. Exequiel D. Robles also voted in favor of the exchange, as proxy of Sta.
Lucia Realty & Development, Inc. owning 4.19% of the shares. Lastly, Atty. Santos also wanted his vote of
approval be counted whi his shares of stock of 117 shares.

With 75.23% of the outstanding capital stock of PRCI voting in favor of the exchange of its Makati property for
shares of stock of JTH Davies, the Chairman then declared said motion as carried and approved. 43

Hence, at their annual meeting on 18 June 2008, the PRCI stockholders had already confirmed and approved
the actions and resolutions of the PRCI Board of Directors, which were to subject matters of Civil Cases No. 07-
610 and No. 08-458. Resultantly, on 7 July 2008, PRCI and JTH duly signed and executed a Deed of Transfer
with Subscription Agreement, covering the exchange of the Makati property of PRCI for shares of stock of JTH.
Paragraph 4 of said Deed expressly provides:

4. The parties understand, acknowledge and agree that this Deed is executed with the intention of availing of the
benefits of Sections 40(C)(2) of the National Internal Revenue Code of 1997 (NIRC), as amended, where, upon
subscription of shares hereunder, the Subscriber shall gain further control of the Company. The parties obtained
a ruling from the Bureau of Internal Revenue to the effect that no gain or loss will be recognized on the part of
each of the parties, pursuant to this Deed, in accordance with Sections 40(C)(2) of the NIRC, as amended. The
ruling confirmed that the transfer of the Subscriber’s parcels of land to the Company in exchange for the shares
of stock of the latter is not subject to income tax, capital gains tax, donor’s tax, value-added tax and
documentary stamp tax, except for documentary stamp tax on the original issuance of the Company’s shares of
stock to the Subscriber. 44 (Emphases ours.)

However, in a letter dated 15 July 2008, the BIR reversed/revoked its earlier ruling that the property-for-shares
exchange between PRCI and JTH was a tax-free transaction under Section 40(C)(2) of the National Internal
Revenue Code of 1997; and subjected the exchange to value-added tax. As a result, PRCI and JTH executed
on 22 August 2008 a Disengagement Agreement, 45 by virtue of which, effective immediately, PRCI and JTH
would disengaged and would no longer implement the Deed of Transfer with Subscription Agreement dated 7
July 2008. For all intents and purposes, the said Deed of Transfer with Subscription Agreement was rescinded.
PRCI disclosed the Disengagement Agreement to the SEC on 26 August 2008.

Civil Case No. 08-458 was eventually also assigned to the only commercial court of Makati City, i.e., RTC,
Branch 149, presided over by Judge Untalan. Petitioners Santiago Jr., et al. averred that Judge Untalan refused
to dismiss Civil Case No. 08-458 on the ground of forum shopping, even when it was no different from Civil Case
No. 07-610. They further asserted that Judge Untalan showed evident partiality in favor of Jalane, et al., during
the hearings in Civil Case No. 08-458, openly making hasty conclusions as to certain marked exhibits and
demonstrating his pre-judgment of the case. On 25 September 2008 and 30 September 2008, the PRCI
directors filed before the RTC a Motion to Inhibit46 and a Supplemental Motion to Inhibit,47 respectively, urging
Judge Untalan to inhibit himself from Civil Case No. 08-458, since he had revealed in several instances his utter
bias and prejudice against the PRCI directors and admitted his being a relative by affinity of Atty. Amado Paulo
Dimayuga,48 the initial counsel of Jalane, et al. Judge Untalan has yet to act on such motions.

At the end of their Manifestation, petitioners Santiago Jr., et al., asked that this Court grant them the following
reliefs:

PRAYER

WHEREFORE, it is respectfully prayed that the foregoing Manifestation be noted, and that the First Suit [Civil
Case No. 07-610] as well as the Second Suit [Civil Case No. 08-458] should now be dismissed for being moot
and academic, without need of remand to the trial (sic) Court for further proceedings.

It is further respectfully prayed that should the Honorable Court find it proper and necessary, the instant cases
be set for oral arguments on such date and time as it may deem convenient to its calendar.

Herein petitioners furthermore pray for such other reliefs as may be just and equitable in the premises. 49

Petitioner Santiago Sr. also filed his own Manifestation (To Update the Honorable Court on Relevant
Supervening Proceedings and Incidents) with Motion to Resolve Merits of Petition and of the Case in the Lower
Court (In View of Supervening Proceedings and Incidents), 50 essentially recounting the same events in the
Manifestation of petitioners Santiago Jr., et al. The prayer of Santiago Sr. in his Manifestation and Motion reads:
 PRAYER

WHEREFORE, it is respectfully prayed that the Honorable Court:

1. TAKE COGNIZANCE of the instant Manifestation on relevant supervening proceedings and incidents
in this case, especially and specifically, after the issuance by the Honorable Court on 09 April 2008 of a
temporary restraining order, addressed to the Court of Appeals, the presiding judge of the Regional Trial
Court, Branch 149, Makati City, and the private respondents, and their agents, representatives and/or
any person or persons acting upon their orders or in their place of stead, who are:

"ENJOINED from enforcing or executing the assailed Court of Appeals’ decision and resolution, and the
assailed trial court’s resolutions particularly that which mandates the continued enforcement of the writ of
permanent injunction issued by the trial court, until further orders from this Court."

2. ORDER the dismissal of the complaint below on the ground that the same is not a legitimate and valid
derivative suit.

3. ORDER the dismissal of the complaint below, in any case, on the ground that the issues raised in the
complaint, specifically with respect to the so-called "disputed" resolutions, have been mooted and/or no
longer subsist.

4. ORDER the private respondents to explain why they should not be cited for contempt of court for
violation of the temporary restraining order issued by the Court on 09 April 2008.

5. ORDER the private respondents to explain why they should not be cited for contempt of court for
engaging in forum-shopping.

6. ORDER that the temporary restraining order issued by the Court on 09 April 2008 be made
PERMANENT.

Other reliefs just and equitable in the premises are likewise prayed for. 51

II
ISSUES

The Court identifies the following fundamental issues for its resolution in the Petitions at bar:

(1) Whether the Petition of Santiago Sr. in G.R. No. 180028 should be dismissed for its procedural
infirmities?

(2) Whether Civil Case No. 07-610 instituted by respondents Miguel, et al. before the RTC should be
ordered dismissed?

(3) Whether Civil Case No. 08-458 instituted by Jalane, et al., before the RTC should be ordered
dismissed?

(4) Whether APRI should be allowed to intervene in the instant Petitions?

III
RULING OF THE COURT

Procedural infirmities of Petition in G.R. No. 180028

Respondents Miguel, et al., call attention to two procedural infirmities of the Petition for Certiorari of petitioner
Santiago Sr. in G.R. No. 180028: (1) the failure to inform the Court of the pendency of the Petition in G.R. No.
181455-56, thus, violating the rule against forum-shopping; and (2) its being the wrong mode of appeal.

The Verification and Certification of Non-Forum Shopping attached to the Petition for Certiorari of petitioner
Santiago Sr. in G.R. No. 180028 was actually signed by his attorney-in-fact, Solomon, 52 who is also a petitioner
in G.R. No. 181455-56. It contains the following paragraph:
4. In compliance with the 1997 Rules of Civil Procedure, I hereby certify that the petitioner, by himself personally
and/or acting through his attorneys-in fact, has not heretofore commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, and that to the best of my knowledge, no such action or proceeding is pending in the
Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency. If I should
learn that a similar action or proceeding has been filed or is pending before the Supreme Court, Court of
Appeals, or different Divisions thereof, or any other tribunal or agency, I undertake to promptly inform this
Honorable Court, the aforesaid courts and other tribunal or agency within five (5) days therefrom. 53

Respondents Miguel, et al., maintain that the failure of Solomon, as petitioner Santiago Sr.’s attorney-in-fact, to
inform the Court as regards the pendency of the Petition for Review in G.R. No. 181455-56, of which Solomon is
one of the petitioners, is in violation of the rule against forum-shopping and warrants the summary dismissal of
the Petition in G.R. No. 182008.

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the
supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is
prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not
there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who
asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or
substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by
the different bodies upon the same issues.54

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or
causes of action and reliefs prayed for, and (3) the two preceding particulars, such that any judgment rendered
in the other action will, regardless of which party is successful, amount to res judicata in the action under
consideration.55

It is evident that Santiago Sr., the petitioner in G.R. No. 182008, is not a party to G.R. No. 181455-56. Even
though Solomon is admittedly a petitioner in G.R. No. 181455-56, he is only acting in G.R. No. 182008 as the
attorney-in-fact of Santiago Sr., the actual petitioner in the latter case. Thus, the very first element for forum
shopping, identity of parties, is lacking.

Respondents Miguel, et al., cannot insist on identity of interests between petitioner Santiago Sr. in G.R. No.
182008 and petitioners Santiago Jr., et al., in G.R. No. 181455-56, when the Complaint itself of respondents
Miguel, et al., before the RTC, docketed as Civil Case No. 07-610, impleads the petitioners Santiago Sr. and
Santiago Jr., et al., as defendants a quo in their individual capacities as PRCI directors, and not collectively as
the PRCI Board of Directors. Each individual PRCI director, therefore, is not precluded from hiring his own
counsel, presenting his own arguments and defenses, and resorting to his own procedural remedies, apart and
independent from the other PRCI directors. In addition, the consolidation of G.R. No. 181455-56 and G.R. No.
182008 has already eliminated the danger of conflicting decisions being issued in said cases.

Assuming arguendo that Solomon did have the legal obligation to inform the Court in G.R. No. 182008 of the
pendency of G.R. No. 181455-56, his failure to do so does not necessarily result in the dismissal of the former.
Although the submission of a certificate against forum shopping is deemed obligatory, it is not
jurisdictional.56 Hence, in this case in which such a certification was in fact submitted – only, it was defective --
the Court may still refuse to dismiss and may, instead, give due course to the Petition in light of attendant
exceptional circumstances.57

Santiago Sr. committed another procedural faux pas by filing before this Court a Petition for Certiorari under
Rule 65 of the Rules of Court to assail the Decision dated 6 September 2007 and Resolution dated 22 January
2008 of the Court of Appeals in CA-G.R. SP No. 99769 and No. 99780.

The proper remedy of a party aggrieved by a decision of the Court of Appeals is a petition for review under Rule
45, which is not similar to a petition for certiorari under Rule 65 of the Rules of Court. As provided in Rule 45 of
the Rules of Court, decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless of
the nature of the action or proceedings involved, may be appealed to this Court by filing a petition for review,
which would be but a continuation of the appellate process over the original case. On the other hand, a special
civil action under Rule 65 is an independent action based on the specific grounds therein provided and, as a
general rule, cannot be availed of as a substitute for the lost remedy of an ordinary appeal, including that under
Rule 45.58
Accordingly, when a party adopts an improper remedy, as in this case, his Petition may be dismissed outright.
However, in the interest of substantial justice, the strict application of procedural technicalities should not hinder
the speedy disposition of this case on the merits. Thus, while the instant Petition is one for certiorari under Rule
65 of the Rules of Court, the assigned errors are more properly addressed in a petition for review under Rule
45.59

The merits of the Petitions in both G.R. No. 181455-56 and No. 182008 compel this Court to give more weight to
substantive justice, instead of technical rules. Indeed, where, as here, there is a strong showing that a grave
miscarriage of justice would result from the strict application of the Rules, the Court will not hesitate to relax the
same in the interest of substantial justice. It bears stressing that the rules of procedure are merely tools
designed to facilitate the attainment of justice. They were conceived and promulgated to effectively aid the court
in the dispensation of justice. Courts are not slaves to or robots of technical rules, shorn of judicial discretion. In
rendering justice, courts have always been, as they ought to be, conscientiously guided by the norm that, on the
balance, technicalities take a backseat against substantive rights, and not the other way around. Thus, if the
application of the Rules would tend to frustrate rather than promote justice, it is always within the power of the
Court to suspend the Rules, or except a particular case from its operation. 60

Derivative suits, in general

A corporation, such as PRCI, is but an association of individuals, allowed to transact under an assumed
corporate name, and with a distinct legal personality. In organizing itself as a collective body, it waives no
constitutional immunities and perquisites appropriate to such body. As to its corporate and management
decisions, therefore, the State will generally not interfere with the same. Questions of policy and of management
are left to the honest decision of the officers and directors of a corporation, and the courts are without authority
to substitute their judgment for the judgment of the board of directors. The board is the business manager of the
corporation, and so long as it acts in good faith, its orders are not reviewable by the courts. 61

The governing body of a corporation is its board of directors. Section 23 of the Corporation Code provides that
"[u]nless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall
be exercised, all business conducted and all property of such corporations controlled and held by the board of
directors or trustees x x x." The concentration in the board of the powers of control of corporate business and of
appointment of corporate officers and managers is necessary for efficiency in any large organization.
Stockholders are too numerous, scattered and unfamiliar with the business of a corporation to conduct its
business directly. And so the plan of corporate organization is for the stockholders to choose the directors who
shall control and supervise the conduct of corporate business.62

The following discourse on the corporate powers of the board of directors under Section 23 of the Corporation
Code establishes the extent thereof:

Under the above provision, it is quite clear that, except in the instances where the Code expressly grants a
specific power to the stockholders or member, the board has the sole power and responsibility to decide whether
a corporation should sue, purchase and sell property, enter into any contract, or perform any act. Stockholders’
or members’ resolutions dealing with matters other than the exceptions are not legally effective nor binding on
the board, and may be treated by it as merely advisory, or may even be completely disregarded. Since the law
has vested the responsibility of managing the corporate affairs on the board, the stockholders must abide by its
decisions. If they do not agree with the policies of the board, their remedy is to wait for the next election of the
directors and choose new ones to take their place. The theory of the law is that although stockholders are to
have all the profit, the complete management of the enterprise shall be with the board. 63

The board of directors of a corporation is a creation of the stockholders. The board of directors, or the majority
thereof, controls and directs the affairs of the corporation; but in drawing to itself the power of the corporation, it
occupies a position of trusteeship in relation to the minority of the stock. The board shall exercise good faith,
care, and diligence in the administration of the affairs of the corporation, and protect not only the interest of the
majority but also that of the minority of the stock. Where the majority of the board of directors wastes or
dissipates the funds of the corporation or fraudulently disposes of its properties, or performs ultra vires acts, the
court, in the exercise of its equity jurisdiction, and upon showing that intracorporate remedy is unavailing, will
entertain a suit filed by the minority members of the board of directors, for and in behalf of the corporation, to
prevent waste and dissipation and the commission of illegal acts and otherwise redress the injuries of the
minority stockholders against the wrongdoing of the majority. The action in such a case is said to be brought
derivatively in behalf of the corporation to protect the rights of the minority stockholders thereof. 64
It is well settled in this jurisdiction that where corporate directors are guilty of a breach of trust — not of mere
error of judgment or abuse of discretion — and intracorporate remedy is futile or useless, a stockholder may
institute a suit in behalf of himself and other stockholders and for the benefit of the corporation, to bring about a
redress of the wrong inflicted directly upon the corporation and indirectly upon the stockholders. 65

A derivative suit must be differentiated from individual and representative or class suits, thus:

Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or other
persons may be classified into individual suits, class suits, and derivative suits. Where a stockholder or member
is denied the right of inspection, his suit would be individual because the wrong is done to him personally and
not to the other stockholders or the corporation. Where the wrong is done to a group of stockholders, as where
preferred stockholders’ rights are violated, a class or representative suit will be proper for the protection of all
stockholders belonging to the same group. But where the acts complained of constitute a wrong to the
corporation itself, the cause of action belongs to the corporation and not to the individual stockholder or member.
Although in most every case of wrong to the corporation, each stockholder is necessarily affected because the
value of his interest therein would be impaired, this fact of itself is not sufficient to give him an individual cause of
action since the corporation is a person distinct and separate from him, and can and should itself sue the
wrongdoer. Otherwise, not only would the theory of separate entity be violated, but there would be multiplicity of
suits as well as a violation of the priority rights of creditors. Furthermore, there is the difficulty of determining the
amount of damages that should be paid to each individual stockholder.

However, in cases of mismanagement where the wrongful acts are committed by the directors or trustees
themselves, a stockholder or member may find that he has no redress because the former are vested by law
with the right to decide whether or not the corporation should sue, and they will never be willing to sue
themselves. The corporation would thus be helpless to seek remedy. Because of the frequent occurrence of
such a situation, the common law gradually recognized the right of a stockholder to sue on behalf of a
corporation in what eventually became known as a "derivative suit." It has been proven to be an effective
remedy of the minority against the abuses of management. Thus, 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 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 the nominal party, with the corporation
as the party in interest.66

The afore-quoted exposition is relevant considering the claim of respondents Miguel, et al., that its Complaint in
Civil Case No. 07-610 is not just a derivative suit, but also an intracorporate action arising from devices or
schemes employed by the PRCI Board of Directors amounting to fraud or misrepresentation. 67 A thorough study
of the said Complaint, however, reveals that the distinction is deceptive. The supposed devices and schemes
employed by the PRCI Board of Directors amounting to fraud or misrepresentation are the very same bases for
the derivative suit. They are the very same acts of the PRCI Board of Directors that have supposedly caused
injury to the corporation. From the very beginning of their Complaint, respondents have alleged that they are
filing the same "as shareholders, for and in behalf of the Corporation, in order to redress the wrongs committed
against the Corporation and to protect or vindicate corporate rights, and to prevent wastage and dissipation of
corporate funds and assets and the further commission of illegal acts by the Board of Directors." Although
respondents Miguel, et al., also aver that they are seeking "redress for the injuries of the minority stockholders
against the wrongdoings of the majority," the rest of the Complaint does not bear this out, and is utterly lacking
any allegation of injury personal to them or a certain class of stockholders to which they belong. 68

Indeed, the Court notes American jurisprudence to the effect that a derivative suit, on one hand, and individual
and class suits, on the other, are mutually exclusive, viz:

As the Supreme Court has explained: "A shareholder's derivative suit seeks to recover for the benefit of the
corporation and its whole body of shareholders when injury is caused to the corporation that may not otherwise
be redressed because of failure of the corporation to act. Thus, ‘the action is derivative, i.e., in the corporate
right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property
without any severance or distribution among individual holders, or it seeks to recover assets for the corporation
or to prevent the dissipation of its assets.’ [Citations.]" (Jones, supra, 1 Cal.3d 93, 106, 81 Cal.Rptr. 592, 460
P.2d 464.) In contrast, "a direct action [is one] filed by the shareholder individually (or on behalf of a class of
shareholders to which he or she belongs) for injury to his or her interest as a shareholder. ... [¶] ... [T]he two
actions are mutually exclusive: i.e., the right of action and recovery belongs to either the shareholders (direct
action) *651 or the corporation (derivative action)." (Friedman, Cal. Practice Guide: Corporations, supra, ¶ 6:598,
p. 6-127.)
Thus, in Nelson v. Anderson (1999) 72 Cal.App.4th 111, 84 Cal.Rptr.2d 753, the **289 minority shareholder
alleged that the other shareholder of the corporation negligently managed the business, resulting in its total
failure. (Id. at p. 125, 84 Cal.Rptr.2d 753) The appellate court concluded that the plaintiff could not maintain the
suit as a direct action: "Because the gravamen of the complaint is injury to the whole body of its stockholders, it
was for the corporation to institute and maintain a remedial action. [Citation.] A derivative action would have
been appropriate if its responsible officials had refused or failed to act." (Id. at pp. 125-126, 84 Cal.Rptr.2d 753)
The court went on to note that the damages shown at trial were the loss of corporate profits. (Id. at p. 126, 84
Cal.Rptr.2d 753) Since "[s]hareholders own neither the property nor the earnings of the corporation," any
damages that the plaintiff alleged that resulted from such loss of corporate profits "were incidental to the injury to
the corporation."69

Based on allegations in the Complaint of Miguel, et al., in Civil Case No. 07-610, the Court determines that there
is only a derivative suit, based on the devices and schemes employed by the PRCI Board of Directors that
amounts to mismanagement, misrepresentation, fraud, and bad faith.

At the crux of the Complaint of respondents Miguel, et al., in Civil Case No. 07-610 is their dissent from the
passage by the majority of the PRCI Board of Directors of the "disputed resolutions," particularly: (1) the
Resolution dated 26 September 2006, authorizing the acquisition by PRCI of up to 100% of the common shares
of JTH; and (2) the Resolution dated 11 May 2007, approving the property-for-shares exchange between PRCI
and JTH.

Derivative suit (re: acquisition of JTH)

It is important for the Court to mention that the 26 September 2006 Resolution of the PRCI Board of Directors
not only authorized the acquisition by PRCI of up to 100% of the common stock of JTH, but it also specifically
appointed petitioner Santiago Sr.70 to act as attorney-in-fact and proxy who could vote all the shares of PRCI in
JTH, as well as nominate, appoint, and vote into office directors and/or officers during regular and special
stockholders’ meetings of JTH. It was by this authority that PRCI directors were able to constitute the JTH Board
of Directors. Thus, the protest of respondents Miguel, et al., against the interlocking directors of PRCI and JTH is
also rooted in the 26 September 2006 Resolution of the PRCI Board of Directors.

After a careful study of the allegations concerning this derivative suit, the Court rules that it is dismissible for
being moot and academic.

That a court will not sit for the purpose of trying moot cases and spend its time in deciding questions, the
resolution of which cannot in any way affect the rights of the person or persons presenting them, is well settled.
Where the issues have become moot and academic, there is no justiciable controversy, thereby rendering the
resolution of the same of no practical use or value. 71

The Resolution dated 26 September 2006 of the PRCI Board of Directors was approved and ratified by the
stockholders, holding 74% of the outstanding capital stock in PRCI, during the Special Stockholders’ Meeting
held on 7 November 2006.72

Respondents Miguel, et al., instituted Civil Case No. 07-610 only on 10 July 2007, against herein petitioners
Santiago Sr., Santiago Jr., Solomon, and Robles, together with Renato de Villa, Lim Teong Leong, Lawrence
Lim Swee Lin, Tham Ka Hon, and Dato Surin Upatkoon, in their capacity as directors of PRCI and/or JTH.
Clearly, the acquisition by PRCI of JTH and the constitution of the JTH Board of Directors are no longer just the
acts of the majority of the PRCI Board of Directors, but also of the majority of the PRCI stockholders. By
ratification, even an unauthorized act of an agent becomes the authorized act of the principal. 73 To declare the
Resolution dated 26 September 2006 of the PRCI Board of Directors null and void will serve no practical use or
value, or affect any of the rights of the parties, because the Resolution dated 7 November 2006 of the PRCI
stockholders -- approving and ratifying said acquisition and the manner in which PRCI shall constitute the JTH
Board of Directors -- will still remain valid and binding.

In fact, if the derivative suit, insofar as it concerns the Resolution dated 26 September 2006 of the PRCI Board
of Directors, is not dismissible for mootness, it is still vulnerable to dismissal for failure to implead indispensable
parties, namely, the majority of the PRCI stockholders.

Under Rule 3, Section 7 of the Rules of Court, an indispensable party is a party-in-interest, without whom there
can be no final determination of an action. The interests of such indispensable party in the subject matter of the
suit and the relief are so bound with those of the other parties that his legal presence as a party to the
proceeding is an absolute necessity. As a rule, an indispensable party’s interest in the subject matter is such that
a complete and efficient determination of the equities and rights of the parties is not possible if he is not joined. 74

The majority of the stockholders of PRCI are indispensable parties to Civil Case No. 07-610, for they have
approved and ratified, during the Special Stockholders’ Meeting on 7 November 2006, the Resolution dated 26
September 2006 of the PRCI Board of Directors. Obviously, no final determination of the validity of the
acquisition by PRCI of JTH or of the constitution of the JTH Board of Directors can be had without consideration
of the effect of the approval and ratification thereof by the majority stockholders.

Respondents Miguel, et al., cannot simply assert that the majority of the PRCI Board of Directors named as
defendants in Civil Case No. 07-610 are also the PRCI majority stockholders, because respondents Miguel, et
al., explicitly impleaded said defendants in their capacity as directors of PRCI and/or JTH, not as stockholders.

Derivative suit (re: property-for-shares exchange)

The derivative suit, with respect to the Resolution dated 11 May 2007 of the PRCI Board of Directors, is similarly
dismissible for lack of cause of action.

The Court has recognized that a stockholder’s right to institute a derivative suit is not based on any express
provision of the Corporation Code, or even the Securities Regulation Code, but is impliedly recognized when the
said laws make corporate directors or officers liable for damages suffered by the corporation and its
stockholders for violation of their fiduciary duties. In effect, the suit is an action for specific performance of an
obligation, owed by the corporation to the stockholders, to assist its rights of action when the corporation has
been put in default by the wrongful refusal of the directors or management to adopt suitable measures for its
protection. The basis of a stockholder’s suit is always one of equity. However, it cannot prosper without first
complying with the legal requisites for its institution. 75

Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies (IRPICC) lays down the
following requirements which a stockholder must comply with in filing a derivative suit:

Sec. 1. Derivative action. – A stockholder or member may bring an action in the name of a corporation or
association, as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions subject of the action occurred
and at the time the action was filed;

(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust
all remedies available under the articles of incorporation, by-laws, laws or rules governing the
corporation or partnership to obtain the relief he desires;

(3) No appraisal rights are available for the act or acts complained of; and

(4) The suit is not a nuisance or harassment suit. (Emphasis ours.)

In their Complaint before the RTC in Civil Case No. 07-610, respondents Miguel, et al., made no mention at all of
appraisal rights, which could or could not have been available to them. In their Comment on the Petitions at bar,
respondents Miguel, et al., contend that there are no appraisal rights available for the acts complained of, since
(1) the PRCI directors are being charged with mismanagement, misrepresentation, fraud, and breach of fiduciary
duties, which are not subject to appraisal rights; (2) appraisal rights will only obtain for acts of the Board of
Directors in good faith; and (3) appraisal rights may be exercised by a stockholder who shall have voted against
the proposed corporate action, and no corporate action has yet been taken herein by PRCI stockholders, who
still have not voted on the intended property-for-shares exchange between PRCI and JTH.

The Court disagrees.

It bears to point out that every derivative suit is necessarily grounded on an alleged violation by the board of
directors of its fiduciary duties, committed by mismanagement, misrepresentation, or fraud, with the latter two
situations already implying bad faith. If the Court upholds the position of respondents Miguel, et al. – that the
existence of mismanagement, misrepresentation, fraud, and/or bad faith renders the right of appraisal
unavailable – it would give rise to an absurd situation. Inevitably, appraisal rights would be unavailable in any
derivative suit. This renders the requirement in Rule 8, Section 1(3) of the IPRICC superfluous and effectively
inoperative; and in contravention of an elementary rule of legal hermeneutics that effect must be given to every
word, clause, and sentence of the statute, and that a statute should be so interpreted that no part thereof
becomes inoperative or superfluous.76

The import of establishing the availability or unavailability of appraisal rights to the minority stockholder is further
highlighted by the fact that it is one of the factors in determining whether or not a complaint involving an intra-
corporate controversy is a nuisance and harassment suit. Section 1(b), Rule 1 of IRPICC provides:

(b) Prohibition against nuisance and harassment suits. - Nuisance and harassment suits are prohibited. In
determining whether a suit is a nuisance or harassment suit, the court shall consider, among others, the
following:

(1) The extent of the shareholding or interest of the initiating stockholder or member;

(2) Subject matter of the suit;

(3) Legal and factual basis of the complaint;

(4) Availability of appraisal rights for the act or acts complained of; and

(5) Prejudice or damage to the corporation, partnership, or association in relation to the relief sought.
[Emphasis ours.]

In case of nuisance or harassment suits, the court may, motu proprio or upon motion, forthwith dismiss the case.

The availability or unavailability of appraisal rights should be objectively based on the subject matter of the
complaint, i.e., the specific act or acts performed by the board of directors, without regard to the subjective
conclusion of the minority stockholder instituting the derivative suit that such act constituted mismanagement,
misrepresentation, fraud, or bad faith.

The raison d’etre for the grant of appraisal rights to minority stockholders has been explained thus:

x x x [Appraisal right] means that a stockholder who dissented and voted against the proposed corporate action,
may choose to get out of the corporation by demanding payment of the fair market value of his shares. When a
person invests in the stocks of a corporation, he subjects his investment to all the risks of the business and
cannot just pull out such investment should the business not come out as he expected. He will have to wait until
the corporation is finally dissolved before he can get back his investment, and even then, only if sufficient assets
are left after paying all corporate creditors. His only way out before dissolution is to sell his shares should he find
a willing buyer. If there is no buyer, then he has no recourse but to stay with the corporation. However, in certain
specified instances, the Code grants the stockholder the right to get out of the corporation even before its
dissolution because there has been a major change in his contract of investment with which he does not agree
and which the law presumes he did not foresee when he bought his shares. Since the will of two-thirds of the
stocks will have to prevail over his objections, the law considers it only fair to allow him to get back his
investment and withdraw from the corporation. x x x,77 (Emphasis ours.)

The Corporation Code expressly made appraisal rights available to the dissenting stockholder in the following
instances:

Sec. 42. Power to invest corporate funds in another corporation or business or for any other purpose. – Subject
to the provisions of this Code, a private corporation may invest its funds in any other corporation or business or
for any purpose other than the primary purpose for which it was organized when approved by a majority of the
board of directors or trustees and ratified by the stockholders representing at least two-thirds (2/3) of the
outstanding capital stock, or by at least two-thirds (2/3) of the members in case of non-stock corporations, at a
stockholders’ or members’ meeting duly called for the purpose. Written notice of the proposed investment and
the time and place of the meeting shall be addressed to each stockholder or member at his place of residence
as shown on the books of the corporation and deposited to the addressee in the post office with postage
prepaid, or served personally; Provided, That any dissenting stockholder shall have appraisal right as provided
in this Code: Provided, however, That where the investment by the corporation is reasonably necessary to
accomplish its primary purpose as stated in the articles of incorporation, the approval of the stockholders or
members shall not be necessary.
Sec. 81. Instances of appraisal right. – Any stockholder of a corporation shall have the right to dissent and
demand payment of the fair value of his shares in the following instances:

1. In case any amendment to the articles of incorporation has the effect of changing or restricting the
rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to
those of outstanding shares of any class, or of extending or shortening the term of corporate existence;

2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially
all of the corporate property and assets as provided in this Code; and

3. In case of merger or consolidation. (Emphasis ours.)

Respondents Miguel, et al., themselves admitted that the property-for-shares exchange between PRCI and JTH,
approved by majority of the PRCI Board of Directors in the Resolution dated 11 May 2007, involved all or
substantially all of the properties and assets of PRCI. They alleged in their Complaint in Civil Case No. 07-610
that:

49. The Corporation’s Makati Property, consisting of prime property in the heart of Makati City worth billions of
pesos in its current value constitutes substantially all of the assets of the Corporation and is the sole and
exclusive location on which it conducts its business of a race course.

50. The exchange of the Corporation’s property for JTH shares would therefore constitute a sale of substantially
all of the assets of the corporation. (Emphasis ours.)

Irrefragably, the property-for-shares exchange between PRCI and JTH, involving as it did substantially all of the
properties and assets of PRCI, qualified as one of the instances when dissenting stockholders, such as
respondents Miguel, et al., could have exercised their appraisal rights.

The Court finds specious the averment of respondents Miguel, et al., that appraisal rights were not available to
them, because appraisal rights may only be exercised by stockholders who had voted against the proposed
corporate action; and that at the time respondents Miguel, et al., instituted Civil Case No. 07-610, PRCI
stockholders had yet to vote on the intended property-for-shares exchange between PRCI and JTH.
Respondents Miguel, et al., themselves caused the unavailability of appraisal rights by filing the Complaint in
Civil Case No. 07-610, in which they prayed that the 11 May 2007 Resolution of the Board of Directors
approving the property-for-shares exchange between PRCI and JTH be declared null and void, even before the
said Resolution could be presented to the PRCI stockholders for approval or rejection. More than anything, the
argument of respondents Miguel, et al., raises questions of whether their derivative suit was prematurely filed for
they had failed to exert all reasonable efforts to exhaust all other remedies available under the articles of
incorporation, by-laws, laws, or rules governing the corporation or partnership, as required by Rule 8, Section
1(2) of the IRPICC. The obvious intent behind the rule is to make the derivative suit the final recourse of the
stockholder, after all other remedies to obtain the relief sought have failed. 78

Personal action for inspection of corporate books and records

Respondents Miguel, et al., allege another cause of action, other than the derivative suit -- the violation of their
right to information relative to the disputed Resolutions, i.e., the Resolutions dated 16 September 2006 and 11
May 2007 of the PRCI Board of Directors.

Rule 7 of the IRPICC shall apply to disputes exclusively involving the rights of stockholders or members to
inspect the books and records and/or to be furnished with the financial statements of a corporation, under
Sections 7479 and 7580 of the Corporation Code.81

Rule 7, Section 2 of IRPICC enumerates the requirements particular to a complaint for inspection of corporate
books and records:

Sec. 2. Complaint. - In addition to the requirements in section 4, Rule 2 of these Rules, the complaint must state
the following:

(1) The case is for the enforcement of plaintiff's right of inspection of corporate orders or records and/or
to be furnished with financial statements under Sections 74 and 75 of the Corporation Code of the
Philippines;
 (2) A demand for inspection and copying of books and records and/or to be furnished with financial
statements made by the plaintiff upon defendant;

(3) The refusal of defendant to grant the demands of the plaintiff and the reasons given for such refusals,
if any; and

(4) The reasons why the refusal of defendant to grant the demands of the plaintiff is unjustified and
illegal, stating the law and jurisprudence in support thereof. (Emphasis ours.)

As has already been previously established herein, the right to information, which includes the right to inspect
corporate books and records, is a right personal to each stockholder. After a closer reading of the Complaint in
Civil Case No. 07-610, the Court observes that only respondent Dulay actually made a demand for a copy of "all
the records, documents, contracts, and agreements, emails, letters, correspondences, relative to the acquisition
of JTH x x x." There is no allegation that his co-respondents (who are his co-plaintiffs in Civil Case No. 07-610)
made similar demands for the inspection or copying of corporate books and records. Only respondent Dulay
complied then with the requirement under Rule 7, Section 2(2) of IRPICC.

Even so, respondent Dulay’s Complaint should be dismissed for lack of cause of action, for his demand for
copies of pertinent documents relative to the acquisition of JTH shares was not denied by any of the defendants
named in the Complaint in Civil Case No. 07-610, but by Atty. Jesulito A. Manalo (Manalo), the Corporate
Secretary of PRCI, in a letter dated 17 January 2006. Section 74 of the Corporation Code, the substantive law
on which respondent Dulay’s Complaint for inspection and copying of corporate books and records is based,
states that:

Sec. 74. Books to be kept; stock transfer agent. –

xxxx

Any officer or agent of the corporation who shall refuse to allow any director, trustees, stockholder or member of
the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of
this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be
guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is
pursuant to a resolution or order of the Board of Directors or Trustees, the liability under this section for such
action shall be imposed upon the directors or trustees who voted for such refusal: x x x (Emphasis ours.)

Based on the foregoing, it is Corporate Secretary Manalo who should be held liable for the supposedly wrongful
and unreasonable denial of respondent Dulay’s demand for inspection and copying of corporate books and
records; but, as previously mentioned, Corporate Secretary Manalo is not among the defendants named in the
Complaint in Civil Case No. 07-610. There is also utter lack of any allegation in the Complaint that Corporate
Secretary Manalo denied respondent Dulay’s demand pursuant to a resolution or order of the PRCI Directors, so
that the latter (who are actually named defendants in the Complaint) could also be held liable for the denial.

Supervening events

During the pendency of the cases at bar, supervening events took place that further justified the dismissal of
Civil Case No. 07-610 for already being moot and academic.

First, during the 2008 Annual Stockholders’ Meeting of PRCI, held on 18 June 2008, the following agenda items
were finally presented to the stockholders, who approved and ratified the same by a majority vote: (1) the
Minutes of the Special Stockholders’ Meeting dated 7 November 2006, during which the majority of the
stockholders approved and ratified the acquisition of JTH by PRCI; (2) the acts of the Board of Directors, the
Executive Committee, and the Management of PRCI for 2006, which included the acquisition of JTH by PRCI;
and (3) the planned property-for-shares exchange between PRCI and JTH. Even respondents Miguel, et al.,
themselves admitted in their Comment with Prayer for the Immediate Lifting or Dissolution of the Temporary
Restraining Order in G.R. No. 182008 that:

12. Indeed, the approval and/or ratification of the transfer of PRCI’s Sta. Ana racetrack property to JTH during
the upcoming stockholders’ meeting would render nugatory, moot and academic the action and proceedings
before the Regional Trial Court of Makati, Branch 149, inasmuch as the acts assailed by private respondents
would have already been consummated by such approval and/or ratification.
13. In the same vein, such approval and/or ratification during the forthcoming PRCI stockholder’s (sic) meeting
would likewise render moot and academic the proceedings before this Honorable Court in that it would have
effectively granted the reliefs sought by herein petitioner even before this Honorable Court could finally rule on
the propriety of the Court of Appeals’ Decision/Resolution by herein petitioners. 82

Second, although already approved and ratified by majority vote of the PRCI stockholders, and PRCI and JTH
executed a Deed of Transfer with Subscription Agreement on 7 July 2008 to effect the property-for-shares
exchange between the two corporations, the controversial transaction will no longer push through. A major
consideration for the exchange is that it will be tax-free; but the BIR ruled that such transaction shall be subject
to VAT. Resultantly, PRCI and JTH executed on 22 August 2008 a Disengagement Agreement, by virtue of
which, both corporations rescinded the Deed of Transfer with Subscription Agreement dated 7 July 2008 and
immediately disengaged from implementing the said Deed.

Civil Case No. 08-458

The very nature of Civil Case No. 07-610 as a derivative suit bars Civil Case No. 08-458 and warrants the
latter’s dismissal.

In Chua v. Court of Appeals, 83 the Court stresses that the corporation is the real party in interest in a derivative
suit, and the suing stockholder is only a nominal party:

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein he holds
stocks 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.

xxxx

x x x For a derivative suit to prosper, it is required that the minority stockholder suing for and on behalf of the
corporation must allege in his complaint that he is suing on a derivative cause of action on behalf of the
corporation and all other stockholders similarly situated who may wish to join him in the suit. It is a condition sine
qua non that the corporation be impleaded as a party because not only is the corporation an indispensable party,
but it is also the present rule that it must be served with process. The judgment must be made binding upon the
corporation in order that the corporation may get the benefit of the suit and may not bring subsequent suit
against the same defendants for the same cause of action. In other words, the corporation must be joined as
party because it is its cause of action that is being litigated and because judgment must be a res adjudicata
against it. (Emphases ours.)

The more extensive discussion by the Court of the nature of a derivative suit in Asset Privatization Trust v. Court
of Appeals84 is presented below:

Settled is the doctrine that in a derivative suit, the corporation is the real party in interest while the stockholder
filing suit for the corporation’s behalf is only a nominal party. The corporation should be included as a party in the
suit.

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. x x x.

It is a condition sine qua non that the corporation be impleaded as a party because-

x x x. Not only is the corporation an indispensable party, but it is also the present rule that it must be served with
process. The reason given is that the judgment must be made binding upon the corporation and in order that the
corporation may get the benefit of the suit and may not bring a subsequent suit against the same defendants for
the same cause of action. In other words the corporations must be joined as party because it is its cause of
action that is being litigated and because judgment must be a res ajudicata against it.

The reasons given for not allowing direct individual suit are:
 (1) x x x "the universally recognized doctrine that a stockholder in a corporation has no title legal or
equitable to the corporate property; that both of these are in the corporation itself for the benefit of the
stockholders." In other words, to allow shareholders to sue separately would conflict with the separate
corporate entity principle;

(2) x x x that the prior rights of the creditors may be prejudiced. Thus, our Supreme Court held in the
case of Evangelista v. Santos, that "the stockholders may not directly claim those damages for
themselves for that would result in the appropriation by, and the distribution among them of part of the
corporate assets before the dissolution of the corporation and the liquidation of its debts and liabilities,
something which cannot be legally done in view of Section 16 of the Corporation Law xxx;"

(3) the filing of such suits would conflict with the duty of the management to sue for the protection of all
concerned;

(4) it would produce wasteful multiplicity of suits; and

(5) it would involve confusion in ascertaining the effect of partial recovery by an individual on the
damages recoverable by the corporation for the same act.

As established in the foregoing jurisprudence, in a derivative suit, it is the corporation that is the indispensable
party, while the suing stockholder is just a nominal party. Under Rule 7, Section 3 of the Rules of Court, an
indispensable party is a party-in-interest, without whom no final determination can be had of an action without
that party being impleaded. Indispensable parties are those with such an interest in the controversy that a final
decree would necessarily affect their rights, so that the court cannot proceed without their presence. "Interest,"
within the meaning of this rule, should be material, directly in issue, and to be affected by the decree, as
distinguished from a mere incidental interest in the question involved. On the other hand, a nominal or pro forma
party is one who is joined as a plaintiff or defendant, not because such party has any real interest in the subject
matter or because any relief is demanded, but merely because the technical rules of pleadings require the
presence of such party on the record.85

With the corporation as the real party-in-interest and the indispensable party, any ruling in one of the derivative
suits should already bind the corporation as res judicata in the other. Allowing two different minority stockholders
to institute separate derivative suits arising from the same factual background, alleging the same causes of
action, and praying for the same reliefs, is tantamount to allowing the corporation, the real party-in-interest, to file
the same suit twice, resulting in the violation of the rules against a multiplicity of suits and even forum-shopping.
It is also in disregard of the separate-corporate-entity principle, because it is to look beyond the corporation and
to give recognition to the different identities of the stockholders instituting the derivative suits.

It is for these reasons that the derivative suit, Civil Case No. 08-458, although filed by a different set of minority
stockholders from those in Civil Case No. 07-610, should still not be allowed to proceed.

Furthermore, the highly suspicious circumstances surrounding the institution of Civil Case No. 08-458 are not
lost upon the Court. To recall, on 9 April 2008, the Court already issued in G.R. No. 182008 a TRO enjoining the
execution and enforcement of the writ of permanent injunction issued by the RTC in Civil Case No. 07-610,
which prevented the PRCI Board of Directors from presenting to the PRCI stockholders at the Annual
Stockholders’ Meeting, for approval and ratification, the agenda items on the acquisition by PRCI of JTH shares
and the property-for-shares exchange between PRCI and JTH. The Complaint in Civil Case No. 08-458 was filed
with the RTC on 16 June 2008, just two days before the scheduled Annual Stockholders’ Meeting on 18 June
2008, where the items subject of the permanent injunction were again included in the agenda. The 72-hour TRO
issued by the RTC in Civil Case No. 08-458 enjoined the very same acts covered by the writ of permanent
injunction issued by the RTC in Civil Case No. 07-610, the execution and enforcement of which, in turn, was
already enjoined by the TRO dated 9 April 2008 of this Court. Considering that it is PRCI which is the real party-
in-interest in both Civil Cases No. 07-610 and No. 08-458, then its acquisition in the latter of a TRO exactly
similar to the writ of permanent injunction in the former is but an obvious attempt to circumvent the TRO of this
Court enjoining the execution and enforcement of the permanent injunction.

Intervention of APRI

It is also the nature of a derivative suit that prompts the Court to deny the intervention by APRI in Civil Case No.
07-610. Once more, the Court emphasizes that PRCI is the real party-in-interest in Civil Case No. 07-610, not
respondents Miguel, et al., whose participation therein is deemed nominal. APRI, moreover, merely echoes the
position of respondents Miguel, et al., and, hence, renders the participation of APRI in Civil Case No. 07-610
redundant.

Also, the main concern of APRI was the lifting of the TRO issued by this Court on 9 April 2008 and the execution
and enforcement of the permanent injunction issued by the RTC, enjoining the presentation by the PRCI Board
of Directors -- at the Annual Stockholders’ Meeting scheduled on 18 June 2008, for approval and ratification by
the stockholders – of the agenda items on the acquisition by PRCI of JTH shares and the property-for-shares
exchange between PRCI and JTH. Given that the Annual Stockholders’ Meeting already took place on 18 June
2008, during which the subject agenda items were presented to and approved and ratified by the stockholders,
the intervention of APRI is already moot.

As a final note, respondent Miguel, et al. made repeated allegations that foreigners were taking over PRCI, and
that this must be stopped to protect the Filipino stockholders. They even invoked the ruling of this Court in
Manila Prince Hotel v. Government Service Insurance System (GSIS). 86

Respondents Miguel, et al., however, cannot rely on Manila Prince Hotel as judicial precedent, for the facts
therein are far different from those in the cases at bar. The Government, through GSIS, owned Manila Hotel
Corporation (MHC), which, in turn, owned the historic Manila Hotel. The case arose from the efforts of GSIS at
privatizing MHC by holding a public bidding for 30-51% of the issued and outstanding shares of MHC. The Court
ruled that since the Filipino corporation was able to match the higher bid made by a foreign corporation, then
preference should be given to the former, considering that Manila Hotel had become a landmark, a living
testimonial to Philippine heritage, and part of Philippine economy and patrimony. This was in accord with the
Filipino-first policy in the 1987 Constitution.

In contrast, PRCI is a publicly listed corporation. Its shares can be freely sold and traded to the public, subject to
regulation by the PSE and the SEC. Without any legal basis therefor, the Court cannot be expected to allocate
or impose limitations on ownership of PRCI shares by foreigners. What is more, PRCI, which operates and
maintains a horse racetrack and conducts horse racing and betting, can hardly claim to be "a living testimonial of
Philippine heritage," like Manila Hotel, that would justify judicial intervention to protect the interests of Filipino
stockholders as against foreign stockholders.

WHEREFORE, the Court renders the following judgment:

(1) The Court GRANTS the Petitions of petitioners Santiago, et al., and petitioner Santiago Sr. in G.R.
No. 181455-56 and G.R. No. 182008, respectively. It REVERSES and SETS ASIDE the Decision dated
6 September 2007 and Resolution dated 22 January 2008 of the Court of Appeals in CA-G.R. SP No.
99769 and No. 99780;

(2) The Court LIFTS the TRO issued on 9 April 2008 in G.R. No. 180028 and CANCELS and RETURNS
the cash bond posted by petitioner Santiago Sr. The permanent injunction issued by the RTC on 8
October 2007, the execution and enforcement of which the TRO dated 9 April 2008 of this Court enjoins,
has been rendered moot, since the agenda items subject of said permanent injunction were already
presented to, and approved and ratified by a majority of the PRCI stockholders at the Annual
Stockholders’ Meeting held on 18 June 2008;

(3) The Court ORDERS the DISMISSAL of the Complaint of respondents Miguel, et al., in Civil Case No.
07-610 before the RTC for lack of cause of action, failure to implead indispensable parties, and
mootness;

(4) The Court ORDERS the DISMISSAL of the Complaint of Jalane, et al., in Civil Case No. 08-458, for
being in violation of the rules on the multiplicity of suits and forum shopping; and

(5) The Court DENIES the Very Respectful Motion for Leave to Intervene as Co-Respondent in the
Petition with the attached Very Respectful Urgent Motion to Lift Restraining Order of APRI, for
redundancy and mootness.