Mr. Y filed a case captioned as “Injunction with Prayer for Status Quo Order, Temporary Restraining Order and Damages” against Z Company to prohibit the latter from selling shares which Mr. Y purportedly bought from Z Company. Mr. Y alleged that the subscription for the said shares was already partly paid by him, but the subject shares were nonetheless being offered for sale by Z Company to the corporation’s other stockholders.
(a) Is the case filed by Mr. Y against Z Company considered an intra-corporate dispute? Explain. (2.5%)
(b) Assuming that it was Z Company which instead filed a case against Mr. Y in order to collect the unpaid balance of his stock subscriptions, is the case considered an intra-corporate dispute? Explain. (2.5%)
Suggested answer only. Not an official answer and not legal advice.
(a) No, Mr. Y's injunction case is not an intra-corporate dispute. (b) Yes, Z Company's collection suit is an intra-corporate dispute.
Under jurisprudence, an intra-corporate dispute requires satisfying both the relationship test and the nature of the controversy test. The relationship test requires a conflict between the corporation and a stockholder, while the controversy test requires enforcing rights under the Corporation Code.
Here, in (a), Mr. Y's status as a stockholder is unproven, and stopping share sales does not enforce Corporation Code rights. In (b), collecting unpaid subscriptions meets both tests as a corporation enforcing statutory subscription duties against a subscriber.
Therefore, Mr. Y's injunction case is not intra-corporate, but Z Company's collection suit is an intra-corporate dispute.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Under Philippine corporate law, what two tests must concurrently be satisfied to classify a case as an intra-corporate dispute?
An intra-corporate dispute requires satisfying both the relationship test and the nature of the controversy test.
Under the relationship test, what status must be established between the opposing parties to a corporate dispute?
The relationship test requires a controversy between the corporation and its stockholders, directors, or officers.
Why does an injunction suit to stop share sales fail the relationship test when the plaintiff's stockholder status is unproven?
The relationship test fails when the plaintiff's status as a stockholder is not yet established.
Why is a corporation's collection suit against a subscriber for unpaid stock subscriptions considered an intra-corporate dispute?
A collection suit for unpaid stock subscriptions satisfies both tests as a corporation enforcing statutory subscription obligations.
Which procedural rules govern intra-corporate controversies transferred from the SEC to Regional Trial Courts?
A.M. No. 01-2-04-SC governs intra-corporate disputes in designated Regional Trial Courts.
Learn more about these topics
1. Relationship Test
Under settled Philippine corporate jurisprudence, the relationship test determines whether an intra-corporate controversy exists by evaluating the intrinsic status of the opposing parties. The dispute must explicitly arise between declared corporate stockholders, officers, or directors, or between the corporation and its shareholders, officers, or directors. If the plaintiff's status as a stockholder or shareholder is disputed, unproven, or purely contingent upon the outcome of the litigation itself, the relationship test is not satisfied, and the controversy cannot be classified as an intra-corporate dispute.
2. Controversy Test
Under the nature of the controversy test, the dispute must intrinsically involve the enforcement of statutory corporate rights and obligations regulated under the Revised Corporation Code, corporate bylaws, or internal governance rules. The subject matter must directly pertain to core corporate governance, such as election of directors, corporate management, or enforcement of subscription agreements. A simple civil action for injunction or breach of contract that does not seek to enforce statutory corporate rights fails the controversy test, even if framed against a corporate entity.
3. Unpaid Subscription Suits
A corporate legal action instituted by a corporation against a subscriber to collect the unpaid balance of stock subscriptions constitutes a classic intra-corporate dispute. Under the Revised Corporation Code, subscription contracts create statutory rights and obligations between the corporate entity and its subscribers. A collection suit satisfies both the relationship test, involving the corporation and its stock subscriber, and the nature of the controversy test, enforcing statutory obligations governing corporate capital contributions and stock subscription calls.