LEONEN-WRITTEN CASES FOR 2020 BAR

TAKERS

THIRD DIVISION
[ G.R. No. 185894, August 30, 2017 ]
BELO MEDICAL GROUP, INC., PETITIONER, VS. JOSE L. SANTOS AND
VICTORIA G. BELO, RESPONDENTS.

DECISION

LEONEN, J.:

A conflict between two (2) stockholders of a corporation does not

automatically render their dispute as intra-corporate. The nature of the
controversy must also be examined.[1]

In this Petition for Review on Certiorari[2] under Rule 45 of the Rules of

Court, Belo Medical Group, Inc. (Belo Medical Group) assails the Regional
Trial Court December 8, 2008 Joint Resolution in Civil Case No. 08-
397.[3] This Joint Resolution granted respondent Jose L. Santos' (Santos)
Motion to Dismiss and Belo Medical Group's Complaint for interpleader and
Supplemental Complaint for Declaratory Relief against Santos and Victoria
G. Belo (Belo), and declared all other pending incidents as moot.[4]

The controversy began on May 5, 2008[5] when Belo Medical Group received
a request from Santos for the inspection of corporate records.[6] Santos
claimed that he was a registered shareholder and a co-owner of Belo's
shares, as these were acquired while they cohabited as husband and
wife.[7] Santos sought advice on his probable removal as director of the
corporation considering that he was not notified of meetings where he could
have been removed. He also inquired on the election of Alfredo Henares
(Henares) as Corporate Secretary in 2007 when Santos had not been
notified of a meeting for Henares' possible election. Finally, he sought
explanation on the corporation's failure to inform him of the 2007 annual
meeting and the holding of an annual meeting in 2008.[8] Santos' concern
over the corporate operations arose from the alleged death of a patient in
 one (1) of its clinics.[9]

Santos was unsuccessful in inspecting the corporate books as Henares, the

officer-in-charge of corporate records, was travelling. Belo Medical Group
asked for time in order for Henares to accommodate Santos' request.[10]

After the first attempt to inspect, Belo wrote Belo Medical Group on May 14,
2007 to repudiate Santos' co-ownership of her shares and his interest in the
corporation. She claimed that Santos held the 25 shares in his name merely
in trust for her, as she, and not Santos, paid for these shares. She informed
Belo Medical Group that Santos already had a pending petition with the
Regional Trial Court to be declared as co-owner of her properties. She
asserted that unless a decision was rendered in Santos' favor, he could not
exercise ownership rights over her properties.[11]

Belo also informed Belo Medical Group that Santos had a business in direct
competition with it. She suspected that Santos' request to inspect the
records of Belo Medical Group was a means to obtain a competitor's
business information, and was, therefore, in bad faith.[12]

A second inspection was attempted through a written demand by Santos on

May 15, 2008.[13] Again, he was unsuccessful.

Belo wrote to Belo Medical Group on May 20, 2008 to reiterate her
objections to Santos' attempts at inspecting corporate books and his inquiry
regarding a patient. Belo further manifested that she was exercising her
right as a shareholder to inspect the books herself to establish that the 25
shares were not owned by Santos, and that he did not pay for these
shares.[14]

Thus, Belo Medical Group filed a Complaint for Interpleader[15] with Branch
149, Regional Trial Court, Makati City on May 21, 2008. Belo Medical Group
alleged that while Santos appeared to be a registered stockholder, there
was nothing on the record to show that he had paid for the shares under his
name. The Complaint was filed "to protect its interest and compel [Belo and
Santos] to interplead and litigate their conflicting claims of ownership of, as
well as the corresponding right of inspection arising from, the twenty-five
(25) [Belo Medical Group] shares between themselves pursuant to Rule
62 of the 1997 Rules of Civil Procedure . . ."[16] The following reliefs were
prayed for:
(i) issue an Order summoning and requiring defendants Santos and Belo to
interplead with each other to resolve their conflicting claims of ownership of
 the 25 shares of stock of [Belo Medical Group], including their opposing
claims of exclusive entitlement to inspect [Belo Medical Group] corporate
records;

(ii) after due proceedings render judgment in favor of the proper

defendant; and

(iii) allow plaintiff [Belo Medical Group] to recover attorney's fees and
litigation expenses in the amount of at least Php1,000,000.00 jointly and
solidarity against both defendants and for them to pay the costs of suit.[17]
On the same day, Henares wrote Belo's and Santos' respective counsels to
inform them of the Complaint.[18] Despite receipt, Santos' counsel still
proceeded to Belo Medical Group's Makati office on May 22, 2008, where,
again, they were unsuccessful in inspecting the corporate books.[19]

Santos, for the third time, sent a letter on May 22, 2008 to schedule an
inspection of the corporate books and warned that continued rejection of his
request exposed the corporation to criminal liability.[20] Nothing came out of
this last attempt as well.

Bela and Bela Medical Group wrote to Santos on May 27, 2008 to inform
him that he was barred from accessing corporate records because doing so
would be inimical to Belo Medical Group's interests.[21] Through another
letter on May 28, 2008, Santos was reminded of his majority share in The
Obagi Skin Health, Inc. the owner and operator of the House of Obagi
(House of Obagi) clinics. He was likewise reminded of the service of a notice
of the 2007 special meeting of stockholders to his address at Valero Street,
Makati City, contrary to his claim.[22]

On May 29, 2008, Belo Medical Group filed a Supplemental Complaint[23] for
declaratory relief under Rule 63 of the Rules of Court. In its Supplemental
Complaint, Belo Medical Group relied on Section 74[24] of the Corporation
Code to deny Santos' request for inspection. It prayed that Santos be
perpetually barred from inspecting its books due to his business interest in
a competitor.[25] Should the ruling for interpleader be in favor of Santos,
Belo Medical Group prayed that the trial court:
a. exercise its power under Rule 63 of the Revised Rules of Civil Procedure
and give a proper construction of Sections 74 and 75 of the Corporation
Code in relation to the facts presented above, and declare that plaintiff can
rightfully decline defendant Santos's request for inspection under those
sections and related provisions and jurisprudence; and
 b. allow plaintiff to recover attorney's fees and litigation expenses from
defendant Santos in the amount of at least PHP1,000,000.00 and the costs
of suit.[26]
Belo Medical Group's Complaint and Supplemental Complaint were raffled to
Branch 149 of the Regional Trial Court of Makati, a special commercial
court,[27] thus classifying them as intra-corporate.[28]

Belo filed her Answer Ad Cautelam with Cross-Claim to put on record her
defenses that Santos had no right to inspect the books as he was not the
owner of the 25 shares of stock in his name and that he was acting in bad
faith because he was a majority owner of House of Obagi.[29]

Belo further argued that the proceedings should not have been classified as
intra-corporate because while their right of inspection as shareholders may
be considered intra-corporate, "it ceases to be that and becomes a full-
blown civil law question if competing rights of ownership are asserted as the
basis for the right of inspection."[30]

Meanwhile, on several dates, the trial court sheriff attempted to personally

serve Santos with summons.[31] After unsuccessful attempts,[32] the sheriff
resorted to substituted service in Santos' Makati office condominium unit.[33]

On July 4, 2008, Belo Medical Group filed an Omnibus Motion for

Clarificatory Hearing and for Leave to File Consolidated Reply,[34] praying
that the case be tried as a civil case and not as an intra-corporate
controversy. It argued that the Interim Rules of Procedure Governing Intra-
Corporate Controversies[35] did not include special civil actions for
interpleader and declaratory relief found under the Rules of Court. Belo
Medical Group clarified that the issue on ownership of the shares of stock
must first be resolved before the issue on inspection could even be
considered ripe for determination.[36]

Belo Medical Group later on moved that Santos be declared in

default.[37] Instead of filing an answer Santos filed a Motion to Dismiss.[38]

Apart from procedural infirmities, Santos argued that Belo Medical Group's
Complaint and Supplemental Complaint must be dismissed "for its failure to
state, and ultimately, lack of, a cause of action."[39] No ultimate facts were
given to establish the act or omission of Santos and Belo that violated Belo
Medical Group's rights. There was simply no conflict on the ownership of the
25 shares of stock under Santos' name. Based on the corporation's 2007
Articles of Incorporation and General Information Sheet, Santos was
 reflected as a stockholder and owner of the 25 shares of stock. No
documentary evidence was submitted to prove that Belo owned these
shares and merely transferred them to Santos as nominal shares.[40]

Santos further argued that the filing of the complaints was an afterthought
to take attention away from Belo Medical Group's criminal liability when it
refused Santos' demand to inspect the records of the corporation. For
years, neither Belo Medica1 Group nor Belo questioned Santos' standing in
the corporation. No change in ownership from Santos to another person
was reflected in the company's General Information Sheet.[41]

Santos also invoked the doctrine of piercing the corporate veil as Belo
owned 90% of Belo Medical Group. Her claim over the 25 shares was a ploy
to defeat Santos' right to inspect corporate records. He asserts that the
Complaint for interpleader was an anticipatory move by the company to
evade criminal liability upon its denial of Santos' requests.[42]

In addition, Santos argued that a prerequisite to filing these cases is that

the plaintiff has not yet incurred liability to any of the parties. Since Belo
Medical Group had already incurred criminal liability, it could no longer file a
complaint for interpleader or declaratory relief.[43]

Santos denied any conflict of interest because Belo Medical Group's

products and services differed from House of Obagi's[44] Belo Medical
Group's primary purpose was the management and operation of skin
clinics[45] while the House of Obagi's main purpose was the sale and
distribution of high-end facial products.[46]

On October 29, 2008, Belo Medical Group filed its Opposition[47] and argued
that the Motion to Dismiss was a prohibited pleading under Section 8 of the
Interim Rules of Procedure Governing Intra-Corporate Controversies.

Belo Medical Group reiterated that Belo and Santos must litigate against
each other to determine who rightfully owned the 25 shares. An
accommodation of one of them, absent a resolution to this issue, would
make Belo Medical Group liable to the other.[48]

On its supposed criminal liability when it refused Santos access to corporate

records, Belo Medical Group explained that the independent liability
necessary to defeat complaints for interpleader arose from a final judgment
and not merely a cause of action that has accrued.[49]
Finally, Belo Medical Group averred that substantiation must be done during
trial. The dismissal of the case would be premature.[50]

Belo's Opposition dated October 29, 2008 raised the same arguments of
Belo Medical Group.[51]

Santos filed his Reply to the Oppositions on November 18, 2008.[52] He

agreed that the controversy was not intra-corporate but civil in nature, as it
involved ownership.[53]However, he stood firm on his arguments that the
case should be dismissed due to the Complaints' failure to state a cause of
action[54] and the trial court's failure to acquire jurisdiction over his
person.[55]

On December 8, 2008, the assailed Joint Resolution[56] was issued by the

trial court resolving the following incidents: Belo Medical Group's Omnibus
Motion for Clarificatory Hearing and for Leave to File Consolidated Reply and
Motion to Declare Santos in Default, and Santos' Motion to Dismiss. The
trial court declared the case as an intra-corporate controversy but
dismissed the Complaints.[57]

The trial court characterized the dispute as "intrinsically connected with the
regulation of the corporation as it involves the right of inspection of
corporate records."[58] Included in Santos and Belo's conflict was a
shareholder's exclusive right to inspect corporate records. In addition, the
issue on the ownership of shares requires the application of laws and
principles regarding corporations.[59]

However, the Complaint could not flourish as Belo Medical Group "failed to
sufficiently allege conflicting claims of ownership over the subject
shares."[60] In justifying failure to state a cause of action, the trial court
reasoned:
Plaintiff clearly admits in the complaint that defendant Santos is the
registered stockholder of the subject shares albeit no records show that he
made any payments thereof. Also, notwithstanding defendant Belo's claim
that she is the true owner thereof, there was no allegation that defendant
Santos is no longer the holder on record of the same or that it is now
defendant Belo who is the registered stockholder thereof. In fact, the
complaint even alleges that defendant Santos holds the 25 BMGI shares
merely as nominal qualifying shares in trust for defendant Belo. Thus, the
complaint failed to state a cause of action that would warrant the resort to
an action for interpleader.[61]
Though a motion to dismiss is a prohibited pleading under the Interim Rules
of Procedure Governing Intra-Corporate Controversies, the trial court ruled
that Section 2, Rule 1 of these rules allowed for the Rules of Court to apply
suppletorily. According to the Rules of Court, motions to dismiss are allowed
in interpleader cases.[62]

Finally, the Complaint for Declaratory Relief was struck down as improper
because it sought an initial determination on whether Santos was in bad
faith and if he should be barred from inspecting the books of the
corporation. Only after resolving these issues can the trial court determine
his rights under Sections 74 and 75 of the Corporation Code. The act of
resolving these issues is not within the province of the special civil action as
declaratory relief is limited to the construction and declaration of actual
rights and does not include the determination of issues.[63]

From the Joint Resolution, Belo and Belo Medical Group pursued different
remedies.

Belo filed her Petition for Review before the Court of Appeals docketed as
CA G.R. No. 08-397.[64]

Belo Medical Group, on the other hand, directly filed its Petition for Review
with this Court, alleging that purely questions of law are at issue.

Belo Medical Group argues that it is enough that there are two (2) people
who have adverse claims against each other and who are in positions to
make effective claims for interpleader to be given due course.[65] Belo
Medical Group cites Lim v. Continental Development Corporation,[66] which
allowed a complaint for interpleader to continue because two (2) parties
claimed ownership over the same shares of stock.[67]

On January 30, 2009, Belo Medical Group filed a

Manifestation/Disclosure[68] informing this Court that on January 28, 2009,
it received Belo's Petition for Review filed before the Court of Appeals. On
February 4, 2009, this Court also received Belo's Manifestation[69] that she
filed a Petition for Review before the Court of Appeals, assailing the Joint
Resolution primarily because it dismissed her counterclaims. She also
furnished this Court a copy of her Manifestation filed with the Court of
Appeals to inform it of Belo Medical Group's Petition for Review before this
Court.[70]

On April 15, 2009, Belo filed her Comment[71] and manifested that she
 agrees with the arguments raised by Belo Medical Group.

On April 28, 2009, Santos filed his Comment.[72] He argues that the Petition
filed by Belo Medical Group should be dismissed as the wrong mode of
appeal. It should have filed an appeal under Rule 43, pursuant to the
Interim Rules on Intra-Corporate Disputes.[73] He alleges that Belo Medical
Group committed forum shopping. It filed the present Petition for Review
after Belo had already filed an appeal under Rule 43 before the Court of
Appeals. He asserts that Belo and Belo Medical Group have the san1e
interest. Belo, owner of 90% of the shares of stock of the corporation,
dictates Belo Medical Group's actions, which were ultimately for Belo's
benefit and interests.[74]

Meanwhile, on July 31, 2009, the Court of Appeals dismissed Belo's Petition
for Review and ruled that the pending case before this Court was the more
appropriate vehicle to determine the issues.[75]

The issues for this Court's resolution are as follows:

First, whether or not Belo Medical Group, Inc. committed forum shopping;

Second, whether or not the present controversy is intra-corporate; Third,

whether or not Belo Medical Group, Inc. came to this Court using the
correct mode of appeal; and

Finally, whether or not the trial court had basis in dismissing Belo Medica]
Group, Inc.'s Complaint for Declaratory Relief.

Neither Belo nor the Belo Medical Group is guilty of forum shopping.

Forum shopping exists when parties seek multiple judicial remedies

simultaneously or successively, involving the same causes of action, facts,
circumstances, and transactions, in the hopes of obtaining a favorable
decision.[76] It may be accomplished by a party defeated in one forum, in an
attempt to obtain a favorable outcome in another, "other than by appeal or
a special civil action for certiorari."[77]

Forum shopping trivializes rulings of courts, abuses their processes,

cheapens the administration of justice, and clogs court dockets.[78] In Top
Rate Construction & General Services, Inc. v. Paxton Development
Corporation:[79]
What is critical is the vexation brought upon the courts and the litigants by
a party who asks different courts to rule on the same or related causes and
grant the same or substantially the same reliefs and in the process creates
the possibility of conflicting decisions being rendered by the different fora
upon the same issues.[80]
Rule 7, Section 5 of the Rules of Court contains the rule against forum
shopping:
Section 5. Certification against forum shopping. - The plaintiff or principal
party shall certify under oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced
any action or filed any claim involving the same issues in any court, tribunal
or quasi-judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other per ding action
or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been
filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been
filed.

Failure to comply with the foregoing requirements shall not be curable by

mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice; unless otherwise
provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall
constitute indirect contempt of court, without prejudice to the
corresponding administrative and criminal actions. If the acts of the party
or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall
constitute direct contempt, as well as a cause for administrative sanctions.
When willful and deliberate violation is clearly shown, it can be a ground for
all pending cases' summary dismissal with prejudice[81] and direct
contempt [82]

Belo Medical Group filed its Petition for Review on Certiorari under Rule 45
before this Court to appeal against the Joint Resolution of the trial court. It
did not file any other petition related to the case, as indicated in it
verification and certification against forum shopping. It was Belo, a
defendant in Belo Medical Groups Complaint, who filed a separate appeal
under Rule 43 with the Court of Appeals primarily to protect her
 counterclaims. Belo and Belo Medical Group both filed their respective
Petitions for Review on January 28, 2009, the lat day within the period
allowed to do so.[83] The Court of Appeals already ruled that litis
pendencia was present when Belo and Belo Medical Group filed their
respective petitions on the same date before different fora. The two
petitions involved the same parties, rights and reliefs sought, and causes of
action.[84] This is a decision this Court can no longer disturb.

Neither Belo Medical Group nor Belo can be faulted for willful and deliberate
violation of the rule against forum shopping. Their prompt compliance of the
certification against forum shopping appended to their Petitions negates
willful and deliberate intent.

Belo Medical Group was not remiss in its duty to inform this Court of a
similar action or proceeding related to its Petition. It promptly manifested
before this Court its receipt of Belo's Petition before the Court of Appeals.
Belo Medical Group and Belo manifested before this Court that Belo filed a
Rule 43 petition to protect her counterclaims and to question the same Joint
Resolution issued by the trial court. Both did so within five (5) days from
discovery, as they undertook in their respective certificates against forum
shopping.

The issue of forum shopping has become moot. The appeal under Rule 43
filed by Belo has been dismissed by the Court of Appeals on the ground
of litis pendencia.[85] The purpose of proscribing forum shopping is the
proliferation of contradictory decisions on the same controversy.[86] This
possibility no longer exists in this case.

II

Belo Medical Group filed a case for interpleader, the proceedings of which
are covered by the Rules of Court. At its core, however, it is an intra-
corporate controversy.

A.M. No. 01-2-04-SC, or the Interim Rules of Procedure Governing Intra-

Corporate Controversies, enumerates the cases where the rules will apply:
Section 1. (a) Cases Covered - These Rules shall govern the procedure to
be observed in civil cases involving the following:

1. Devices or schemes employed by, or any act of, the board of directors,
business associates, officers or partners, amounting to fraud or
misrepresentation which may be detrimental to the interest of the
 public and/or of the stockholders, partners, or members of any
corporation, partnership, or association;

2. Controversies arising out of intra-corporate, partnership, or association

relations, between and among stockholders, members, or associates;
and between, any or all of them and the corporation, partnership, or
association of which they are stockholders, members, or associates,
respectively;

3. Controversies in the election or appointment of directors, trustees,

officers, or managers of corporations, partnerships, or associations;

4. Derivative suits; and

5. Inspection of corporate books.[87]

The same rules prohibit the filing of a motion to dismiss:

Section 8. Prohibited Pleadings. -The following pleadings are prohibited: (1)
Motion to dismiss;

(2) Motion for a bill of particulars;

(3) Motion for new trial or for reconsideration of judgment or order, or for
reopening of trial;

(4) Motion for extension of time to file pleadings, affidavits or any other
paper, except those filed due to clearly compelling reasons. Such motion
must be verified and under oath; and

(5) Motion for postponement and other motions of similar intent, except
those filed due to clearly compelling reasons. Such motion must be verified
and under oath.
To determine whether an intra-corporate dispute exists and whether this
case requires the application of these rules of procedure, this Court
evaluated the relationship of the parties. The types of intra-corporate
relationships were reviewed in Union Glass & Container Corporation v.
Securities and Exchange Commission:[88]
[a] between the corporation, partnership or association and the public; [b]
between the corporation, partnership or association and its stockholders,
partners, members, or officers; [c] between the corporation, partnership or
association and the state in so far as its franchise, permit or license to
operate is concerned; and [d] among the stockholders, partners or
associates themselves.[89]
For as long as any of these intra-corporate relationships exist between the
parties, the controversy would be characterized as intra-corporate.[90] This
is known as the "relationship test."

DMRC Enterprises v. Este del Sol Mountain Reserve, Inc.[91] employed what
would later be called as the "nature of controversy test." It became another
means to determine if the dispute should be considered as intra-corporate.

In DMRC Enterprises, Este del Sol leased equipment from DMRC

Enterprises. Part of Este del Sol's payment was shares of stock in the
company. When Este del Sol defaulted, DMRC Enterprises filed a collection
case before the Regional Trial Court. Este del Sol argued that it should have
been filed before the Securities and Exchange Commission as it involved an
intra-corporate dispute where a corporation was being compelled to issue
its shares of stock to subscribers. This Court held that it was not just the
relationship of the parties that mattered but also the conflict between them:
The purpose and the wording of the law escapes the respondent. Nowhere
in said decree do we find even so much as an intimidation that absolute
jurisdiction and control is vested in the Securities and Exchange
Commission in all matters affecting corporations. To uphold the
respondent's argument would remove without legal imprimatur from the
regular courts all conflicts over matters involving or affecting corporations,
regardless of the nature of the transactions which give rise to such
disputes. The courts would then be divested of jurisdiction not by reason of
the nature of the dispute submitted to them for adjudication, but solely for
the reason that the dispute involves a corporation. This cannot be done. To
do so would not only be to encroach on the legislative prerogative to grant
and revoke jurisdiction of the courts but such a sweeping interpretation
may suffer constitutional infirmity. Neither can we reduce jurisdiction of the
courts by judicial fiat (Article X, Section 1, The Constitution).[92]
This Court now uses both the relationship test and the nature of the
controversy test to determine if an intra-corporate controversy is
present.[93]

Applying the relationship test, this Court notes that both Belo and Santos
are named shareholders in Belo Medical Group's Articles of
Incorporation[94] and General Information Sheet for 2007.[95] The conflict is
clearly intra-corporate as it involves two (2) shareholders although the
ownership of stocks of one stockholder is questioned. Unless Santos is
adjudged as a stranger to the corporation because he holds his shares only
in trust for Belo, then both he and Belo, based on official records, are
stockholders of the corporation. Belo Medical Group argues that the case
 should not have been characterized as intra-corporate because it is not
between two shareholders as only Santos or Belo can be the rightful
stockholder of the 25 shares of stock. This may be true. But this finding can
only be made after trial where ownership of the shares of stock is decided.

The trial court cannot classify the case based on potentialities. The two
defendants in that case are both stockholders on record. They continue to
be stockholders until a decision is rendered on the true ownership of the 25
shares of stock in Santos' name. If Santos' subscription is declared fictitious
and he still insists on inspecting corporate books and exercising rights
incidental to being a stockholder, then, and only then, shall the case cease
to be intra-corporate.

Applying the nature of the controversy test, this is still an intra-corporate

dispute. The Complaint for interpleader seeks a determination of the true
owner of the shares of stock registered in Santos' name. Ultimately,
however, the goal is to stop Santos from inspecting corporate books. This
goal is so apparent that, even if Santos is declared the true owner of the
shares of stock upon completion of the interpleader case, Belo Medical
Group still seeks his disqualification from inspecting the corporate books
based on bad faith. Therefore, the controversy shifts from a mere question
of ownership over movable property to the exercise of a registered
stockholder's proprietary right to inspect corporate books.

Belo Medical Group argues that to include inspection of corporate books to

the controversy is premature considering that there is still no determination
as to who, between Belo and Santos, is the rightful owner of the 25 shares
of stock. Its actions belie its arguments. Belo Medical Group wants the trial
court not to prematurely characterize the dispute as intra-corporate when,
in the same breath, it prospectively seeks Santos' perpetual disqualification
from inspecting its books. This case was never about putting into light the
ownership of the shares of stock in Santos' name. If that was a concern at
all, it was merely secondary. The primary aim of Belo and Belo Medical
Group was to defeat his right to inspect the corporate books, as can be
seen by the filing of a Supplemental Complaint for declaratory relief.

The circumstances of the case and the aims of the parties must not be
taken in isolation from one another. The totality of the controversy must be
taken into account to improve upon the existing tests. This Court notes that
Belo Medical Group used its Complaint for interpleader as a subterfuge in
order to stop Santos, a registered stockholder, from exercising his right to
inspect corporate books.
 Belo made no claims to Santos' shares before he attempted to inspect
corporate books, and inquired about the Henares' election as corporate
secretary and the conduct of stockholders' meetings. Even as she claimed
Santos' shares as hers, Belo proffered no initial proof that she had paid for
these shares. She failed to produce any document except her bare
allegation that she had done so. Even her Answer Ad Cautelam with Cross-
Claim[96] contained bare allegations of ownership.

According to its Complaint, although Belo Medical Group's records reflect

Santos as the registered stockholder of the 25 shares, they did not show
that Santos had made payments to Belo Medical Group for these shares,
"consistent with Bela's claim of ownership over them."[97] The absence of
any document to establish that Santos had paid for his shares does not
bolster Belo's claim of ownership of the same shares. Santos remains a
stockholder on record until the contrary is shown.

Belo Medical Group cites Lim v. Continental Development Corporation[98] as

its basis for filing its Complaint for interpleader. In Lim, Benito Gervasio Tan
(Tan) appeared as a stockholder of Continental Development Corporation.
He repeatedly requested the corporation to issue certificates of shares of
stock in his name but Continental Development Corporation could not do
this due to the claims of Zoila Co Lim (Lim). Lim alleged that her mother,
So Bi, was the actual owner of the shares that were already registered in
the corporate books as Lim's, and she delivered these in trust to Lim before
she died. Lim wanted to have the certificates of shares cancelled and new
ones re-issued in his name. This Court ruled that Continental Development
Corporation was correct in filing a case for interpleader:
Since there is an active conflict of interests between the two defendants,
now herein respondent Benito Gervasio Tan and petitioner Zoila Co Lim,
over the disputed shares of stock, the trial court gravely abused its
discretion in dismissing the complaint for interpleader, which practically
decided ownership of the shares of stock in favor of defendant Benito
Gervasio Tan. The two defendants, now respondents in G.R. No. L-41831,
should be given full opportunity to litigate their respective claims.

Rule 63, Section 1 of the New Rules of Court tells us when a cause of action
exists to support a complaint in interpleader:
Whenever conflicting claims upon the same subject matter are or may be
made against a person, who claims no interest whatever in the subject
matter, or an interest which in whole or in part is not disputed by the
claimants, he may bring an action against the conflicting claimants to
 compel them to interplead and litigate their several claims among
themselves . . .
This provision only requires as an indispensable requisite:
that conflicting claims upon the same subject matter are or may be made
against the plaintiff-in-interpleader who claims no interest whatever in the
subject matter or an interest which in whole or in part is not disputed by
the claimants (Beltran vs. People's Homesite and Housing Corporation, No.
L-25138, 29 SCRA 145).
This ruling, penned by Mr. Justice Teehankee, reiterated the principle in
Alvarez vs. Commonwealth (65 Phil. 302), that
The action of interpleader, under section 120, is a remedy whereby a
person who has personal property in his possession. or an obligation to
render wholly or partially, without claiming any right in both comes to court
and asks that the persons who claim the said personal property or who
consider themselves entitled to demand compliance with the obligation. be
required to litigate among themselves, in order to determine finally who is
entitled to one or the other thing. The remedy is afforded not to protect a
person against a double liability but to protect him against a double
vexation in respect of one liability.
An interpleader merely demands as a sine qua non element
. . . that there be two or more claimants to the fund or thing in dispute
through separate and different interests. The claims must be adverse before
relief can be granted and the parties sought to be interpleaded must be in a
position to make effective claims (33 C.J. 430).
Additionally, the fund thing, or duty over which the parties assert adverse
claims must be one and the same and derived from the same source (33
C.J., 328; Martin, Rules of Court, 1969 ed., Vol. 3, 133-134; Moran, Rules
of Court, 1970 ed., Vol. 3, 134-136).

Indeed, petitioner corporation is placed in the same situation as a lessee

who does not know the person to whom he will pay the rentals due to the
conflicting claims over t[h]e property leased, or a sheriff who finds himself
puzzled by conflicting claims to a property seized by him. In these
examples, the lessee (Pangkalinawan vs. Rodas, 80 Phil. 28) and the sheriff
(Sy-Quia vs. Sheriff, 46 Phil. 400) were each allowed to file a complaint in
interpleader to determine the respective rights of the claimants.[99]
In Lim, the corporation was presented certificates of shares of stock in So
Bi's name. This proof was sufficient for Continental Development
Corporation to reasonably conclude that controversy on ownership of the
shares of stock existed.

Furthermore, the controversy in Lim was between a registered stockholder

 in the books of the corporation and a stranger who claimed to be the
rightful transferee of the shares of stock of her mother. The relationship of
the parties and the circumstances of the case establish the civil nature of
the controversy, which was plainly, ownership of shares of stock.
Interpleader was not filed to evade or defeat a registered stockholder's
right to inspect corporate books. It was borne by the sincere desire of a
corporation, not interested in the certificates of stock to be issued to either
claimant, to eliminate its liability should it favor one over the other.

On the other hand, based on the facts of this case and applying the
relationship and nature of the controversy tests, it was understandable how
the trial court could classify the interpleader case as intra-corporate and
dismiss it. There was no ostensible debate on the ownership of the shares
that called for an interpleader case. The issues and remedies sought have
been muddled when, ultimately, at the front and center of the controversy
is a registered stockholder's right to inspect corporate books.

As an intra-corporate dispute, Santos should not have been allowed to file a

Motion to Dismiss.[100] The trial court should have continued on with the
case as an intra-corporate dispute considering that it called for the
judgments on the relationship between a corporation and its two warring
stockholders and the relationship of these two stockholders with each other.

III

Rule 45 is the wrong mode of appeal.

A.M. No. 04-9-07-SC promulgated by this Court En Banc on September 14,

2004 laid down the rules on modes of appeal m cases formerly cognizable
by the Securities and Exchange Commission:
1. All decisions and final orders in cases falling under the Interim Rules of
Corporate Rehabilitation and the Interim Rules of Procedure Governing
Intra-Corporate Controversies under Republic Act No. 8799 shall be
appealable to the Court of Appeals through a petition for review under Rule
43 of the Rules of Court.

2. The petition for review shall be taken within fifteen (15) days from notice
of the decision or final order of the Regional Trial Court. Upon proper
motion and the payment of the full amount of the legal fee prescribed in
Rule 141 as amended before the expiration of the reglementary period, the
Court of Appeals may grant an additional period of fifteen (15) days within
which to file the petition for review. No further extension shall be granted
 except for the most compelling reasons and in no case to exceed fifteen
(15) days.
On the other hand, Rule 43 of the Rules of Court allows for appeals to the
Court of Appeals to raise questions of fact, of law, or a mix of both. Hence,
a party assailing a decision or a final order of the trial court acting as a
special commercial court, purely on questions of law, must raise these
issues before the Court of Appeals through a petition for review.[101] A.M.
No. 04-9-07-SC mandates it. Rule 43 allows it.

Belo Medical Group argues that since it raises only questions of law, the
proper mode of appeal is Rule 45 filed directly to this Court. This is correct
assuming there were no rules specific to intra-corporate disputes.
Considering that the controversy was still classified as intra-corporate upon
filing of appeal, special rules, over general ones, must apply.

Based on the policy of judicial economy and for practical

considerations,[102] this Court will not dismiss the case despite the wrong
mode of appeal utilized. For one, it would be taxing in time and resources
not just for Belo Medical Group but also for Santos and Belo to dismiss this
case and have them refile their petitions for review before the Court of
Appeals. There would be no benefit to any of the parties to dismiss the case
especially since the issues can already be resolved based n the records
before this Court. Also, the Court of Appeals already referred the matter to
this Court when it dismissed Belo's Petition for Review. Remanding this case
to the Court of Appeals would not only be unprecedented, it would further
delay its resolution.

IV

At the outset, this Court notes that two cases were filed by Belo Medical
Group: the Complaint for interpleader and the Supplemental Complaint for
Declaratory Relief. Under Rule 2, Section 5 of the Rules of Court, a joinder
of cause of action is allowed, provided that it follows the conditions
enumerated below:
Section 5. Joinder of Causes of Action. A party may in one pleading assert,
in the alternative or otherwise, as many causes of action as he may have
against an opposing party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on
joinder of parties;

(b) The joinder shall not include special civil actions or actions
 governed by special rules;

(c) Where the causes of action are between the same parties but pertain to
different venues or jurisdictions, the joinder may be allowed in the Regional
Trial Court provided one of the causes of action falls within the jurisdiction
of said court and the venue lies therein; and

(d) Where the claims in all the causes of action are principally for recovery
of money, the aggregate amount claimed shall be the test of jurisdiction.
(Emphasis supplied)
Assuming this case continues on as an interpleader, it cannot be joined with
the Supplemental Complaint for declaratory relief as both are special civil
actions. However, as the case was classified and will continue as an intra-
corporate dispute, the simultaneous complaint for declaratory relief
becomes superfluous. The right of Santos to inspect the books of Belo
Medical Group and the appreciation for his motives to do so will necessarily
be determined by the trial court together with determining the ownership of
the shares of stock under Santos' name.

The trial court may make a declaration first on who owns the shares of
stock and suspend its ruling on whether Santos should be allowed to inspect
corporate records. Or, it may rule on whether Santos has the right to
inspect corporate books in the meantime while there has yet to be a
resolution on the ownership of shares. Remedies are available to Belo
Medical Group and Belo at any stage of the proceeding, should they carry
on in prohibiting Santos from inspecting the corporate books.

WHEREFORE, the Petition for Review of Belo Medical Group, Inc.

is PARTIALLY GRANTED. The December 8, 2008 Joint Resolution of
Branch 149, Regional Trial Court, Makati City in Civil Case No. 08-397
is REVERSED regarding its dismissal of the intra-corporate case. Let this
case be REMANDED to the commercial court of origin for further
proceedings.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

November 29, 2017

 NOTICE OF JUDGMENT

Sirs / Mesdames:

Please take notice that on August 30, 2017 a Decision, copy attached
hereto, was rendered by the Supreme Court in the above-entitled case, the
original of which was received by this Office on November 29, 2017 at 2:20
p.m.
Very truly yours,
(SGD)
WILFREDO V.
LAPITAN
Division Clerk of Court

[1]
Reyes v. Hon. Regional Trial Court of Makati, etc., et al., 583 Phil. 591
(1984) [Per J. Brion, Second Division].

[2]
Rollo, pp. 3-32.

[3]
Id. at 33-35. The Joint Resolution was penned by Presiding Judge Cesar
O. Untalan of Branch 149, Regional Trial Court, Makati City.

[4]
Id. at 35.

[5]
Id. at 7.

[6]
Id. at 43-44.

[7]
Id. at 43.

[8]
Id. at 43-44.

[9]
Id. at 70-74, as culled from the April 25, 2008 letters of Santos' counsel
to Belo Medical Group and Belo Medical Group's May 14, 2008 reply.

[10]
Id. at 45, Belo Medical Group's letter to Santos' counsel dated May 14,
2008.

[11]
Id. at 46-47.
 [12]
Id. at 47.

[13]
Id. at 48-49.

[14]
Id. at 50-51.

[15]
Id. at 52-59.

[16]
Id. at 56.

[17]
Id.

[18]
Id. at 75.

[19]
Id. at 76.

[20]
Id. at 76-77.

[21]
Id. at 78-79.

[22]
Id. at 80-81.

[23]
Id. at 82-92.

[24]
CORP. CODE, sec. 74 provides:

Section 74. Books to be kept; stock transfer agent. - Every corporation shall
keep and carefully preserve at its principal office a record of all business
transactions and minutes of all meetings of stockholders or members, or of
the board of directors or trustees, in which shall be set forth in detail the
time and place of holding the meeting, how authorized, the notice given,
whether the meeting was regular or special, if special its object, those
present and absent, and every act done or ordered done at the meeting.
Upon the demand of any director, trustee, stockholder or member, the time
when any director, trustee, stockholder or member entered or left the
meeting must be noted in the minutes; and on a similar demand, the yeas
and nays must be taken on any motion or proposition, and a record thereof
carefully made. The protest of any director, trustee, stockholder or member
on any action or proposed action must be recorded in full on his demand.

The records of all business transactions of the corporation and the minutes
of any meetings shall be open to inspection by any director, trustee,
stockholder or member of the corporation at reasonable hours on business
days and he may demand, in writing, for a copy of excerpts from said
records or minutes, at his expense.

Any officer or agent of the corporation who shall refuse to allow any
director, trustee, 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
made pursuant to a resolution or order of the board of directors or trustees,
the liability under this section tor such action shall be imposed upon the
directors or trustees who voted for such refusal: and Provided, further, That
it shall be a defense to any action under this section that the person
demanding to examine and copy excerpts from the corporation's records
and minutes has improperly used any information secured through any
prior examination of the records or minutes of such corporation or of any
other corporation, or was not acting in good faith or for a legitimate
purpose in making his demand.

[25]
Rollo, pp. 88-89.

[26]
Id. at 90.

[27]
Pursuant to A.M. No. 03-03-03-SC (2003).

[28]
Rollo, p. 13.

[29]
Id. at 114-122.

[30]
Id. at 118.

[31]
Id. at 155-156, as indicated in Sheriff Robert V. Alejo's Sheriffs Returns.

[32]
Id. at 155.

[33]
Id. at 156.

[34]
Id. at 128-135.

[35]
A.M. No. 01-2-04-SC (2001).
 [36]
Id. at 131.

[37]
Id. at 150-158.

[38]
Id. at 165-189.

[39]
Id. at 174.

[40]
Id. at 179.

[41]
Id. at 180-181.

[42]
Id. at 182-183.

[43]
Id. at 183-184, 189.

[44]
Id. at 185.

[45]
Id. at 192, Articles of Incorporation of Belo Medical Group, Inc.

[46]
Id. at 36, Articles of Incorporation of the Obago Skin Health, Inc.

[47]
Id. at 207-22l.

[48]
Id. at 216.

[49]
Id. at 218 citing Wack Wack Golf & Country Club, Inc. v. Won, 162 Phil.
233 (1976) [Per J. Castro, En Banc].

[50]
Id. at 219.

[51]
Id. at 222-254.

[52]
Id. at 265-290.

[53]
Id. at 266-272.

[54]
Id. at 284-288.

[55]
Id. at 274-284.

[56]
Id. at 33-35.
 [57]
Id. at 35.

[58]
Id. at 33.

[59]
Id.

[60]
Id. at 34.

[61]
Id.

[62]
Id.

[63]
Id. at 35 citing Kawasaki Port Service Corp. v. Amores, 276 Phil. 249
(1991) [Per J. Bidin, Third Division].

[64]
Id. at 334-388.

[65]
Id. at 21.

[66]
161 Phil. 453 (1976) [Per J. Makasiar, First Division].

[67]
Rollo, p. 20.

[68]
Id. at 329-332.

[69]
Id. at 390-395.

[70]
Id. at 683-686.

[71]
Id. at 701-706.

[72]
Id. at 707-729.

[73]
Id. at 707.

[74]
Id. at 718.

[75]
Id. at 820-831.

[76]
See Asia United Bank v. Goodland Company, 660 Phil. 504 (2011) [Per
J. Del Castillo, First Division].
[77]
Yap v. Chua, 687 Phil. 392, 399 (2012) [Per J. Reyes, Second Divison].

[78]
Catayas v. Court of Appeals, 693 Phil. 451, 456 (2012) [Per J. Medoza,
Second Division].

[79]
457 Phil. 740 (2003) [Per J. Bellosillo, Second Division].

[80]
Id. at 748.

[81]
See Ao-as v. Court of Appeals, 524 Phil. 645 (2006) [Per J. (Chico-
Nazario, First Division).

RULES OF COURT, Rule 7, sec. 5; Municipality of Taguig v. Court of

[82]

Appeals, 506 Phil. 567, 581 (2005) [Per J. Austria-Martinez, Second

Division] citing Biñan Steel Corporation v. Court of Appeals, 439 Phil. 688
(2002) [Per J. Corona, Third Division] and Supreme Court Circular No. 28-
91.

[83]
Rollo, pp. 3 and 390.

[84]
Id. at 826-829.

[85]
Id. at 821-831.

[86]
Philippine Postal Corporation v. Court of Appeal and Guzman, 722 Phil.
860 (2013) [Per J. Perlas-Bernabe, Second Division].

[87]
Id.

[88]
211 Phil. 222 (1983) [Per J. Escolin, En Banc].

[89]
Id. at 231.

[90]
See Philex Mining Corporation v. Hon. Reyes, 204 Phil. 241 (1982) [Per
J. Melencio-Herrera, First Division].

[91]
217 Phil. 280 (1984) [Per J. Gutierrez, Jr., First Division].

[92]
Id. at 287.

[93]
See Aguirres II v. FQB+7, Inc., 701 Phil. 216 (2013) [Per J. Del Castillo,
Second Division]; Reyes v. Hon. Regional Trial Court of Makati, etc., et al.,
583 Phil. 591 (2008) [Per J. Brion, Second Division]; Speed Distributing
Corp. et al. v. Court of Appeals and Rufina Lim, 469 Phil. 739 (2004) [Per J.
Callejo, Sr., Second Division].

[94]
Rollo, pp. 190-199.

[95]
Id. at 200-206.

[96]
Id. at 114-122.

[97]
Id. at 56.

[98]
161 Phil. 453 (1976) [Per J. Makasiar, First Division].

[99]
Id. at 460-462.

[100]
See Aldersgate College, Inc. v. Gauuan, et al., 698 Phil. 821 (2012)
[Per J. Perlas-Bernabe, Second Division].

San Jose v. Ozamis, G.R. No. 190590, July 12, 2017,

[101]

<http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2017/
july2017/I90590.pdf> 7 [Per J. Carpio, Second Division].

[102]
Cathay Metal Corp. v. Laguna West Multi Purpose Cooperative, Inc.,
738 Phil. 37, 63 (2014) [Per J. Leonen, Third Division].