G.R. No.

189486 September 5, 2012

SIMNY G. GUY et al vs GILBERT G. GUY

With 519,997 shares of stock, respondent Gilbert G. Guy (Gilbert) practically

owned almost 80 percent of the 650,000 subscribed capital stock of GoodGold
Realty & Development Corporation (GoodGold),1 one of the multi-million
corporations which Gilbert claimed to have established in his 30s. GoodGold’s
remaining shares were divided among Francisco Guy (Francisco) with 130,000
shares, Simny Guy (Simny), Benjamin Lim and Paulino Delfin Pe, with one share
each, respectively. Gilbert is the son of spouses Francisco and Simny. Simny, one
of the petitioners, however, alleged that it was she and her husband who
established GoodGold, putting the bulk of its shares under Gilbert’s name. She
claimed that with their eldest son, Gaspar G. Guy (Gaspar), having entered the
Focolare Missionary in 1970s, renouncing worldly possessions,2 she and Francisco
put the future of the Guy group of companies in Gilbert’s hands. Gilbert was
expected to bring to new heights their family multi-million businesses and they, his
parents, had high hopes in him.

Simny further claimed that upon the advice of their lawyers, upon the
incorporation of GoodGold, they issued stock certificates reflecting the shares held
by each stockholder duly signed by Francisco as President and Atty. Emmanuel
Paras as Corporate Secretary, with corresponding blank endorsements at the back
of each certificate – including Stock Certificate Nos. 004-014 under Gilbert’s
name.3 These certificates were all with Gilbert’s irrevocable endorsement and
power of attorney to have these stocks transferred in the books of corporation.4 All
of these certificates were always in the undisturbed possession of the spouses
Francisco and Simny, including Stock Certificate Nos. 004-014.5

In 1999, the aging Francisco instructed Benjamin Lim, a nominal shareholder of

GoodGold and his trusted employee, to collaborate with Atty. Emmanuel Paras, to
redistribute GoodGold’s shareholdings evenly among his children, namely, Gilbert,
Grace Guy-Cheu (Grace), Geraldine Guy (Geraldine), and Gladys Guy (Gladys),
while maintaining a proportionate share for himself and his wife, Simny.6

Accordingly, some of GoodGold’s certificates were cancelled and new ones were
issued to represent the redistribution of GoodGold’s shares of stock. The new
certificates of stock were signed by Francisco and Atty. Emmanuel Paras, as
President and Corporate Secretary, respectively.
In September 2004, or five years after the redistribution of GoodGold’s shares of
stock, Gilbert filed with the Regional Trial Court (RTC) of Manila, a Complaint
for the "Declaration of Nullity of Transfers of Shares in GoodGold and of General
Information Sheets and Minutes of Meeting, and for Damages with Application for
a Preliminary Injunctive Relief," against his mother, Simny, and his sisters,
Geraldine, Grace, and Gladys.8 Gilbert alleged, among others, that no stock
certificate ever existed;9 that his signature at the back of the spurious Stock
Certificate Nos. 004-014 which purportedly endorsed the same and that of the
corporate secretary, Emmanuel Paras, at the obverse side of the certificates were
forged, and, hence, should be nullified.10

Gilbert, however, withdrew the complaint, after the National Bureau of

Investigation (NBI) submitted a report to the RTC of Manila authenticating
Gilbert’s signature in the endorsed certificates.11 The NBI report concluded that:

A. The questioned and the standard specimen/exemplar

signatures of Gilbert G. Guy were written by one and the same
person;

B. The questioned and the standard specimen/exemplar

signatures of "EMMANUEL C. PARAS" were written by one
and the same person.

The present controversy arose, when in 2008, three years after the complaint with
the RTC of Manila was withdrawn, Gilbert again filed a complaint, this time, with
the RTC of Mandaluyong, captioned as "Intra-Corporate Controversy: For the
Declaration of Nullity of Fraudulent Transfers of Shares of Stock Certificates,
Fabricated Stock Certificates, Falsified General Information Sheets, Minutes of
Meetings, and Damages with Application for the Issuance of a Writ of Preliminary
and Mandatory Injunction, against his mother, Simny, his sisters, Geraldine,
Gladys, and the heirs of his late sister Grace.13

Gilbert alleged that he never signed any document which would justify and support
the transfer of his shares to his siblings and that he has in no way, disposed,
alienated, encumbered, assigned or sold any or part of his shares in GoodGold.14
He also denied the existence of the certificates of stocks. According to him, "there
were no certificates of stocks under his name for the shares of stock subscribed by
him were never issued nor delivered to him from the time of the inception of the
corporation."15
Gilbert added that the Amended General Information Sheets (GIS) of GoodGold
for the years 2000 to 2004 which his siblings submitted to the Securities and
Exchange Commission (SEC) were spurious as these did not reflect his true shares
in the corporation which supposedly totaled to 595,000 shares;16 that no valid
stockholders’ annual meeting for the year 2004 was held, hence proceedings taken
thereon, including the election of corporate officers were null and void;17 and, that
his siblings are foreign citizens, thus, cannot own more than forty percent of the
authorized capital stock of the corporation.18

Gilbert also asked in his complaint for the issuance of a Writ of Preliminary and
Mandatory Injunction to protect his rights.19

In an Order dated 30 June 2008,20 the RTC denied Gilbert’s Motion for Injunctive
Relief21 which constrained him to file a motion for reconsideration, and, thereafter,
a Motion for Inhibition against Judge Edwin Sorongon, praying that the latter
recuse himself from further taking part in the case.

Meanwhile, Gilbert’s siblings filed a manifestation claiming that the complaint is a

nuisance and harassment suit under Section 1(b), Rule 1 of the Interim Rules of
Procedure on Intra-Corporate Controversies.

In an Order dated 6 November 2008,22 the RTC denied the motion for inhibition.
The RTC also dismissed the case, declaring it a nuisance and harassment suit

This constrained Gilbert to assail the above Order before the Court of Appeals
(CA).

In a Decision24 dated 27 May 2009, the CA upheld Judge Sorongon’s refusal to

inhibit from hearing the case on the ground that Gilbert failed to substantiate his
allegation of Judge Sorongon’s partiality and bias.25

The CA, in the same decision, also denied Gilbert’s Petition for the Issuance of
Writ of Preliminary Injunction for failure to establish a clear and unmistakable
right that was violated as required under Section 3, rule 58 of the 1997 Rules of
Civil Procedure.26

The CA, however, found merit on Gilbert’s contention that the complaint should
be heard on the merits. Hence, these consolidated petitions.

G.R. No. 189486 is a Petition for Review under Rule 45 of the Rules of Court filed
by Simny, Geraldine, Gladys, and the heirs of the late Grace against Gilbert, which
prays that this Court declare Civil Case No. SEC-MC08-112, a harassment or
nuisance suit.

Meanwhile, during the pendency of G.R. No. 189486, the trial court set the pre-
trial conference on the case subject of this controversy, constraining the petitioners
to file a Motion to defer the pre-trial, which was, however, denied by the court a
quo in an Order dated 11 September 2009

WHEREFORE, premises considered, the Motion to Defer Pre-Trial Conference

and Further Proceedings filed by petitioners is hereby DENIED. Set the pre-trial on
October 20, 2009, at 8:30 in the morning.

The denial of the petitioners’ motion to defer pre-trial, compelled them to file with
this Court a Petition for Certiorari with Urgent Application for the Issuance of
TRO and/or A Writ of Preliminary Injunction, docketed as G.R. No. 189699.
Because of the pendency of the G.R. No. 189486 before us, the petitioners deemed
proper to question the said denial before us as an incident arising from the main
controversy.

Issue: won there is fraud

Held:

The absence of an indispensable

party in a case renders all
subsequent actions of the court null
and void for want of authority to act,
not only as to the absent parties but
even as to those present.

Settled is the rule that joinder of indispensable parties is compulsory40 being a sine
qua non for the exercise of judicial power,41 and, it is precisely "when an
indispensable party is not before the court that the action should be dismissed" for
such absence renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present. 42

It bears emphasis that Gilbert, while suing as a stockholder against his co-
stockholders, should have also impleaded GoodGold as defendant. His complaint
also prayed for the annulment of the 2004 stockholders’ annual meeting, the
annulment of the 2004 election of the board of directors and of its officers, the
annulment of 2004 GIS submitted to the SEC, issuance of an order for the
accounting of all monies and rentals of GoodGold, and the issuance of a writ of
preliminary and mandatory injunction. We have made clear that GoodGold is a
separate juridical entity distinct from its stockholders and from its directors and
officers. The trial court, acting as a special commercial court, cannot settle the
issues with finality without impleading GoodGold as defendant. Like Francisco,
and for the same reasons, GoodGold is an indispensable party which Gilbert should
have impleaded as defendant in his complaint.

Allegations of deceit, machination,

false pretenses, misrepresentation,
and threats are largely conclusions
of law that, without supporting
statements of the facts to which the
allegations of fraud refer, do not
sufficiently state an effective cause of
action.43

"In all averments of fraud or mistake, the circumstances constituting fraud or

mistake must be stated with particularity"44 to "appraise the other party of what he
is to be called on to answer, and so that it may be determined whether the facts and
circumstances alleged amount to fraud."45 These particulars would necessarily
include the time, place and specific acts of fraud committed.46 "The reason for this
rule is that an allegation of fraud concerns the morality of the defendant’s conduct
and he is entitled to know fully the ground on which the allegations are made, so
he may have every opportunity to prepare his case to clear himself at the trial."47

Tested against established standards, we find that the charges of fraud which
Gilbert accuses his siblings are not supported by the required factual allegations. In
Reyes v. RTC of Makati,49 which we now reiterate, mutatis mutandis, while the
complaint contained allegations of fraud purportedly committed by his siblings,
these allegations are not particular enough to bring the controversy within the
special commercial court’s jurisdiction; they are not statements of ultimate facts,
but are mere conclusions of law: how and why the alleged transfer of shares can be
characterized as "fraudulent" were not explained and elaborated on.50 As
emphasized in Reyes:

Not every allegation of fraud done in a corporate setting or perpetrated by

corporate officers will bring the case within the special commercial court’s
jurisdiction. To fall within this jurisdiction, there must be sufficient nexus showing
that the corporation’s nature, structure, or powers were used to facilitate the
fraudulent device or scheme.

Significantly, no corporate power or office was alleged to have facilitated the

transfer of Gilbert’s shares. How the petitioners perpetrated the fraud, if ever they
did, is an indispensable allegation which Gilbert must have had alleged with
particularity in his complaint, but which he failed to.

Failure to specifically allege the

fraudulent acts in intra-corporate
controversies is indicative of a
harassment or nuisance suit and may
be dismissed motu proprio.

It did not escape us that Gilbert, instead of particularly describing the fraudulent
acts that he complained of, just made a sweeping denial of the existence of stock
certificates by claiming that such were not necessary, GoodGold being a mere
family corporation.55 As sweeping and bereft of particulars is his claim that he "is
unaware of any document signed by him that would justify and support the transfer
of his shares to herein petitioners."56 Even more telling is the contradiction between
the denial of the existence of stock certificates and the denial of the transfer of his
shares of stocks "under his name under the books of the corporations."

It is unexplained that while Gilbert questioned the authenticity of his signatures

indorsing the stock certificates, and that of Atty. Emmanuel Paras, the corporate
secretary, he did not put in issue as doubtful the signature of his father which also
appeared in the certificate as President of the corporation. Notably, Gilbert, during
the entire controversy that started with his 2004 complaint, failed to rebut the NBI
Report which authenticated all the signatures appearing in the stock certificates.
âwphi1

When a stock certificate is endorsed

in blank by the owner thereof, it
constitutes what is termed as "street
certificate," so that upon its face, the
holder is entitled to demand its
transfer his name from the issuing
corporation.

With Gilbert’s failure to allege specific acts of fraud in his complaint and his
failure to rebut the NBI report, this Court pronounces, as a consequence thereof,
that the signatures appearing on the stock certificates, including his blank
endorsement thereon were authentic. With the stock certificates having been
endorsed in blank by Gilbert, which he himself delivered to his parents, the same
can be cancelled and transferred in the names of herein petitioners.

While there is a contrary ruling, as an exception to the general rule enunciated

above, what the Court held in Neugene Marketing Inc., et al., v CA,62 where stock
certificates endorsed in blank were stolen from the possession of the beneficial
owners thereof constraining this Court to declare the transfer void for lack of
delivery and want of value, the same cannot apply to Gilbert because the stock
certificates which Gilbert endorsed in blank were in the undisturbed possession of
his parents who were the beneficial owners thereof and who themselves as such
owners caused the transfer in their names. Indeed, even if Gilbert’s parents were
not the beneficial owners, an endorsement in blank of the stock certificates coupled
with its delivery, entitles the holder thereof to demand the transfer of said stock
certificates in his name from the issuing corporation.63

Article 1440 of the Civil Code provides that:

"ART. 1440. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is
known as the trustee; and the person for whose benefit the trust has been created is
referred to as the beneficiary."

In the early case of Gayondato v. Treasurer of the Philippine Islands, this Court
defines trust, in its technical sense, as "a right of property, real or personal, held by
one party for the benefit of another." Differently stated, a trust is "a fiduciary
relationship with respect to property, subjecting the person holding the same to the
obligation of dealing with the property for the benefit of another person."

Both Lincoln Continental and Gilbert claim that the latter holds legal title to the
shares in question. But record shows that there is no evidence to support their
claim. Rather, the evidence on record clearly indicates that the stock certificates
representing the contested shares are in respondents' possession. Significantly,
there is no proof to support his allegation that the transfer of the shares of stock to
respondent sisters is fraudulent. As aptly held by the Court of Appeals, fraud is
never presumed but must be established by clear and convincing evidence. Gilbert
failed to discharge this burden. We agree with the Court of Appeals that
respondent sisters own the shares of stocks, Gilbert being their mere trustee.