the assumption of the loan and not the assumption of the loan per

se.

SAN MIGUEL v. KAHN

DOCTRINE:
3 requisites for a derivative suit:

5. He filed a derivative suit in behalf of SMC against 10 of the 15

members of the BOD.

a) party bringing suit should be a shareholder at the time of

the act/transaction complained of,

ISSUES:

b) he has exhausted intra-corporate remedies, i.e., has

made a demand on the board of directors for the appropriate
relief but the latter has failed or refused to heed his plea; and

Sub issues:

c) cause of action actually devolves on the corporation,

the ,wrongdoing or harm having been caused to the
corporation and not to .the particular stockholder bringing the
suit;

Whether or not de los Angeles can sue on behalf of SMC

Whether he has legal capacity to sue via a minority suit because a) PCGG merely imposed that he become a director; conflict of interest
issue
b) He holds only 20 shares and cannot adequately represent

HELD:
FACTS:
1.

Over 33 million shares of stock were owned by 14 different

corporations. Through its trustees and a subsidiary corporation
(Neptunia) who acquired loans for the purchase, SMC undertook to
buy the shares back.1

2. These shares were sequestered by the PCGG based on suspicion

that they were being held by Eduardo Cojuangco as dummy for the
Marcoses. This was later lifted after SMC made representations that
the owner corporations were owned by coconut farmers. Along with
the PCGG order however, SMC was forbidden to encumber any of
the shares of stock without PCGG authority.
3. SMC suspended payment of the instalments for the shares. The
seller corporations sued for rescission and damages. Nonetheless,
through a board resolution, SMC decided to assume the loans by
Neptunia (wholly owned by SMC).
4. This board resolution however was questioned by Eduardo de los
Angeles, a PCGG representative in the SMC board. He claimed that
what was resolved was the undertaking to assume further study for

1 This was how I understood the case in the simplest way I

could possibly summarize it

YES. (see doctrine)

YES:
a) While he seems to support PCGG position that shares are owned by
Marcoses, the current subject matter of this complaint is regarding
the assumption of Neptunia debt by SMC and nothing else, therefore
no conflict. Furthermore, he owned stocks in his own right and not
merely because of PCGG.
b) Bona fide ownership of stocks in his own right is enough to give a
stockholder standing to file a derivative suit. The law does not
support the argument that one needs to own a significant block of
stock as a requirement; number of shares is immaterial since he is
not suing in his own behalf but for the benefit of the corporation.