A.M. NO.

01-2-04-SC

[March 13, 2001] RE : PROPOSED INTERIM RULES OF PROCEDURE O!ERNIN INTRA-CORPORATE CONTRO!ERSIES UNDER R.A. NO. "#$$ EN BANC RESOLUTION Acting on the Memorandum of the Committee on SEC Cases submitting for this Court's consideration and approval the Proposed Interim Rules of Procedure for Intra-Corporate Controversies, the Court Resolved to approve the same !he Interim Rules shall ta"e effect on April #, $%%# follo&ing its publication in t&o '$( ne&spapers in general circulation March #), $%%#, Manila *avide, +r , C.J , ,ellosillo, Melo, Puno, -itug, .apunan, Mendo/a, Panganiban, 0uisumbing, Pardo, ,uena, 1on/aga-Re2es, 3naresSantiago, *e 4eon, +r and Sandoval-1utierre/, JJ , concur
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INTERIM RULES OF PROCEDURE FOR INTRA-CORPORATE CONTRO!ERSIES

Rule I ENERAL PRO!ISIONS Section # 'a( Cases covered. - !hese Rules shall govern the procedure to be observed in civil cases involving the follo&ing5 '#( *evices or schemes emplo2ed b2, or an2 act of, the board of directors, business associates, officers or partners, amounting to fraud or misrepresentation &hich ma2 be detrimental to the interest of the public and6or of the stoc"holders, partners, or members of an2 corporation, partnership, or association7 '$( Controversies arising out of intra-corporate, partnership, or association relations, bet&een and among stoc"holders, members, or associates7 and bet&een, an2 or all of them and the corporation, partnership, or association of &hich the2 are stoc"holders, members, or associates, respectivel27 ')( Controversies in the election or appointment of directors, trustees, officers, or managers of corporations, partnerships, or associations7 '8( *erivative suits7 and '9( Inspection of corporate boo"s 'b( Prohibition against nuisance and harassment suits. - :uisance and harassment suits are prohibited In determining &hether a suit is a nuisance or harassment suit, the court shall consider, among others, the follo&ing5
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'#( !he e;tent of the shareholding or interest of the initiating stoc"holder or member7 '$( Sub<ect matter of the suit7 ')( 4egal and factual basis of the complaint7 '8( Availabilit2 of appraisal rights for the act or acts complained of7 and '9( Pre<udice or damage to the corporation, partnership, or association in relation to the relief sought In case of nuisance or harassment suits, the court ma2, motu proprio or upon motion, forth&ith dismiss the case Sec $ Suppletory application of the Rules of Court - !he Rules of Court, in so far as the2 ma2 be applicable and are not inconsistent &ith these Rules, are hereb2 adopted to form an integral part of these Rules Sec ) Construction - !hese Rules shall be liberall2 construed in order to promote their ob<ective of securing a <ust, summar2, speed2 and ine;pensive determination of ever2 action or proceeding Sec 8 Executory nature of decisions and orders - All decisions and orders issued under these Rules shall immediatel2 be e;ecutor2 :o appeal or petition ta"en therefrom shall sta2 the enforcement or implementation of the decision or order, unless restrained b2 an appellate court Interlocutor2 orders shall not be sub<ect to appeal Sec 9 Venue - All actions covered b2 these Rules shall be commenced and tried in the Regional !rial Court &hich has <urisdiction over the principal office of the corporation, partnership, or association concerned =here the principal office of the corporation, partnership or association is registered in the Securities and E;change Commission as Metro Manila, the action must be filed in the cit2 or municipalit2 &here the head office is located Sec > Service of pleadings. - =hen so authori/ed b2 the court, an2 pleading and6or document re?uired b2 these Rules ma2 be filed &ith the court and6or served upon the other parties b2 facsimile transmission 'fa;( or electronic mail 'e-mail( In such cases, the date of transmission shall be deemed to be prima facie the date of service Sec @ Signing of pleadings, motions and other papers - Ever2 pleading, motion, and other paper of a part2 represented b2 an attorne2 shall be signed b2 at least one attorne2 of record in the attorne2's individual name, &hose address shall be stated A part2 &ho is not represented b2 an attorne2 shall sign the pleading, motion, or other paper and state his address !he signature of an attorne2 or part2 constitutes a certification b2 the signer that he ha read the pleading, motion, or other paper7 that to the best of his "no&ledge, information, and belief formed after reasonable in?uir2, it is &ell grounded in fact and is &arranted b2 e;isting la& or a good faith argument for the e;tension, modification, or reversal of e;isting <urisprudence7 and that it is not interposed for an2 improper purpose, such as to harass or to cause unnecessar2 dela2 or needless increase in the cost of litigation If a pleading, motion, or other paper is not signed, it shall be stric"en off the record unless it is promptl2 signed b2 the pleader or movant, after he is notified of the omission
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Sec A Prohibited pleadings - !he follo&ing pleadings are prohibited5 '#( Motion to dismiss7 '$( Motion for a bill of particulars7 ')( Motion for ne& trial, or for reconsideration of <udgment or order, or for re-opening of trial7 '8( Motion for e;tension of time to file pleadings, affidavits or an2 other paper, e;cept those filed due to clearl2 compelling reasons Such motion must be verified and under oath7 and '9( Motion for postponement and other motions of similar intent, e;cept those filed due to clearl2 compelling reasons Such motion must be verified and under oath Sec B ssignment of cases. - All cases filed under these Rules shall be tried b2 <udges designated b2 the Supreme Court to hear and decide cases transferred from the Securities and E;change Commission to the Regional !rial Courts and filed directl2 &ith said courts pursuant to Republic Act :o A@BB, other&ise "no&n as the Securities Regulation Code
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Rule 2 COMMENCEMENT OF ACTION AND PLEADIN S Section # Commencement of action - An action under these Rules is commenced b2 the filing of a verified complaint &ith the proper Regional !rial Court Sec $ Pleadings allo!ed. - !he onl2 pleadings allo&ed to be filed under these Rules are the complaint, ans&er, compulsor2 counterclaims or cross-claims pleaded in the ans&er, and the ans&er to the counterclaims or cross-claims Sec ) Verification - !he complaint and the ans&er shall be verified b2 an affidavit stating that the affiant has read the pleading and the allegations therein are true and correct based on his o&n personal "no&ledge or on authentic records Sec 8 Complaint. " !he complaint shall state or contain5 '#( the names, addresses, and other relevant personal or <udicial circumstances of the parties7 '$( all facts material and relevant to the plaintiff's cause or causes of action, &hich shall be supported b2 affidavits of the plaintiff or his &itnesses and copies of documentar2 and other evidence supportive of such cause or causes of action7 ')( the la&, rule, or regulation relied upon, violated, or sought to be enforced7 '8( a certification that 'a( the plaintiff has not therefore commenced an2 action or filed an2 claim involving the same issues in an2 court, tribunal or ?uasi-<udicial agenc2, and, to the best of his "no&ledge, no such other action or claim is pending therein7 'b( if there is such other action or claim, a complete statement of the present status thereof7 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 &ithin five '9( da2s therefrom to the court7 and '9( the relief sought
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Sec 9 Summons. - !he summons and the complaint shall be served together not later than five '9( da2s from the date of filing of the complaint 'a( Service upon domestic private #uridical entities - If the defendant is a domestic corporation, service shall be deemed ade?uate is made upon an2 of the statutor2 or corporate officers as fi;ed b2 the b2-la&s or their respective secretaries If the defendant is a partnership, service shall be deemed ade?uate if made upon an2 of the managing or general partners or upon their respective secretaries If the defendant is an association service shall be deemed ade?uate if made upon an2 of its officers or their respective secretaries 'b( Service upon foreign private #uridical entity - =hen the defendant is a foreign private <uridical entit2 &hich is transacting or has transacted business in the Philippines, service ma2 be made on its resident agent designated in accordance &ith la& for that purpose, or, if there be no such agent, on the government official designated b2 la& to that effect, or on an2 of its officers or agents &ithin the Philippines Sec > ns!er - !he defendant shall file his ans&er to the complaint, serving a cop2 thereof on the plaintiff, &ithin fifteen '#9( da2s from service of summons In the ans&er, the defendant shall5 '#( Specif2 each material allegation of fact the truth of &hich he admits7 '$( Specif2 each material allegation of fact the truth of &hich he does not admit =here the defendant desires to den2 onl2 a part of an averment, he shall specif2 so much of it as true and material and shall den2 onl2 the remainder7 ')( Specif2 each material allegation of facts as to &hich truth he has no "no&ledge or information sufficient to form a belief, and this shall have the effect of a denial7 '8( State the defenses, including grounds for a motion to dismiss under theRules of Court7 '9( State the la&, rule, or regulation relied upon7 '>( Address each of the causes of action stated in the complaint7 '@( State the facts upon &hich he relied for his defense, including affidavits of &itnesses and copies of documentar2 and other evidence supportive of such cause or causes of action7 'A( State an2 compulsor2 counterclaim6s and cross-claim6s7 and 'B( State the relief sought !he ans&er to counterclaims or cross-claims shall be filed &ithin ten '#%( da2s from service of the ans&er in &hich the2 are pleaded Sec @ Effect of failure to ans!er - If the defendant fails to ans&er &ithin the period above provided, he shall be considered in default Cpon motion or motu proprio, the court shall render <udgment either dismissing the complaint or granting the relief pra2ed for as the records ma2 &arrant In no case shall the court a&ard a relief be2ond or different from that pra2ed for Sec A ffidavits, documentary and other evidence. - Affidavits shall be based on personal "no&ledge, shall set forth such facts as &ould be admissible in evidence, and shall sho& affirmativel2 that the affiant is
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competent to testif2 on the matters stated therein !he affidavits shall be in ?uestion and ans&er form, and shall compl2 &ith the rules on admissibilit2 of evidence Affidavits of &itnesses as &ell as documentar2 and other evidence shall be attached to the appropriate pleading5 Provided, ho!ever, that affidavits, documentar2 and other evidence not so submitted ma2 be attached to the pre-trial brief re?uired under these Rules Affidavits and other evidence not so submitted shall not be admitted in evidence, e;cept in the follo&ing cases5 '#( !estimon2 of un&illing, hostile, or adverse part2 &itnesses A &itness is presumed prima facie hostile if he fails or refuses to e;ecute an affidavit after a &ritten re?uest therefor7 '$( If the failure to submit the evidence is for meritorious and compelling reasons7 and ')( :e&l2 discovered evidence In case of '$( and ')( above, the affidavit and evidence must be submitted not later than five '9( da2s prior to its introduction in evidence Rule 3 MODES OF DISCO!ER%
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Section # $n general - A part2 can onl2 avail of an2 of the modes of discover2 not later than fifteen '#9( da2s from the <oinder of issues Sec $ %b#ections - An2 mode of discover2 such as interrogatories, re?uest for admission, production or inspection of documents or things, ma2 be ob<ected to &ithin ten '#%( da2s from receipt of the discover2 device and onl2 on the ground that the matter re?uested is patentl2 incompetent, immaterial, irrelevant or privileged in nature !he court shall rule on the ob<ections not later than fifteen '#9( da2s from the filing thereof Sec ) Compliance. - Compliance &ith an2 mode of discover2 shall be made &ithin ten '#%( da2s from receipt of the discover2 device, or if there are ob<ections, from receipt of the ruling of the court Sec 8 Sanctions - !he sanctions prescribed in the Rules of Court for failure to avail of, or refusal to compl2 &ith, the modes of discover2 shall appl2 In addition, the court ma2, upon motion, declare a part2 non-suited or as in default, as the case ma2 be, if the refusal to compl2 &ith a mode of discover2 is patentl2 un<ustified
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R&'( 4 PRE-TRIAL Section # Pre"trial conference& mandatory nature - =ithin five '9( da2s after the period for availment of, and compliance &ith, the modes of discover2 prescribed in Rule ) hereof, &hichever comes later, the court shall issue and serve an order immediatel2 setting the case for pre-trial conference and directing the parties to submit their respective pre-trial briefs !he parties shall file &ith the court and furnish each other copies of their respective pre-trial brief in such manner as to ensure its receipt b2 the court and the other part2 at least five '9( da2s before the date set for the pre-trial

!he parties shall set forth in their pre-trial briefs, among other matters, the follo&ing5 '#( ,rief statement of the nature of the case, &hich shall summari/e the theor2 or theories of the part2 in clear and concise language7 '$( Allegations e;pressl2 admitted b2 either or both parties7 ')( Allegations deemed admittedl2 b2 either or both parties7 '8( *ocuments not specificall2 denied under oath b2 either or both parties7 '9( Amendments to the pleadings7 '>( Statement of the issues, &hich shall separatel2 summari/e the factual and legal issues involved in the case7 '@( :ames of &itnesses to be presented and the summar2 of their testimon2 as contained in their affidavits supporting their positions on each of the issues7 'A( All other pieces of evidence, &hether documentar2 of other&ise and their respective purposes7 'B( Specific proposals for an amicable settlement7 '#%( Possibilit2 of referral to mediation or other alternative modes of dispute resolution7 '##( Proposed schedule of hearings7 and '#$( Such other matters as ma2 aid in the <ust and speed2 disposition of the case Sec $ 'ature and purpose of pre"trial conference - *uring the pretrial conference, the court shall, &ith its active participation, ensure that the parties consider in detail all of the follo&ing5 '#( !he possibilit2 of an amicable settlement7 '$( Referral of the dispute to mediation or other forms of dispute resolution7 ')( Dacts that need not be proven, either because the2 are matters of <udicial notice or e;pressl2 or deemed admitted7 '8( Amendments to the pleadings7 '9( !he possibilit2 of obtaining stipulations and admission of facts and documents7 '>( Eb<ections to the admissibilit2 of testimonial, documentar2 and other evidence7 '@( Eb<ections to the form or substance of an2 affidavit, or part thereof7 'A( Simplification of the issues7 'B( !he possibilit2 of submitting the case for decision on the basis of position papers, affidavits, documentar2 and real evidence7 '#%( A complete schedule of hearing dates7 and '##( Such other matters as ma2 aid in the speed2 and summar2 disposition of the case Sec ) (ermination - !he preliminar2 conference shall be terminated not later than ten '#%( da2s after its commencement, &hether or not the parties have agreed to settle amicabl2 Sec 8 Judgment before pre"trial - If, after submission of the pre-trial briefs, the court determines that, upon consideration of the pleadings, the affidavits and other evidence submitted b2 the parties, a <udgment ma2 be rendered, the court ma2 order the parties to file simultaneousl2 their respective memoranda &ithin a non-e;tendible
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period of t&ent2 '$%( da2s from receipt of the order !hereafter, the court shall render <udgment, either full or other&ise, not later than ninet2 'B%( da2s from the e;piration of the period to file the memoranda Sec 9 Pre"trial order& #udgment after pre"trial. - !he proceedings in the pre-trial shall be recorded =ithin ten '#%( da2s after the termination of the pre-trial, the court shall issue an order &hich shall recite in detail the matters ta"en up in the conference, the actions ta"en thereon, the amendments allo&ed in the pleadings, and the agreements or admissions made b2 the parties as to an2 of the matters considered !he court shall rule on all ob<ections to or comments on the admissibilit2 of an2 documentar2 or other evidence, including an2 affidavit or an2 part thereof Should the action proceed to trial, the order shall e;plicit define and limit the issues to be tried and shall strictl2 follo& the form set forth in Annex "A" of these Rules !he contents of the order shall control the subse?uent course of the action, unless modified before trial to prevent manifest in<ustice After the pre-trial, the court ma2 render <udgment, either full or partial, as the evidence presented during the pre-trial ma2 &arrant
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Rule 5 TRIAL Section # )itnesses. - If the court deems necessar2 to hold hearings to determine specific factual matters before rendering <udgment, it shall, in the pre-trial order set the case for trial on the dates agreed upon b2 the parties Enl2 persons &hose affidavits &ere submitted ma2 be presented as &itnesses, e;cept in cases specified in Section A, Rule $ of these Rules !he affidavits of the &itnesses shall serve as their direct testimonies, sub<ect to cross-e;amination in accordance &ith e;isting rules on evidence Sec $ (rial schedule. " Cnless <udgment is rendered pursuant to Rule 8 of these Rules, the initial hearing shall be held not later than thirt2 ')%( da2s from the date of the pre-trial order !he hearings shall be completed not later than si;t2 '>%( da2s from the date of the initial hearing, thirt2 ')%( da2s of &hich shall be allotted to the plaintiffs and thirt2 ')%( da2s to the defendants in the manner prescribed in the pretrial order !he failure of a part2 to present a &itness on a scheduled hearing date shall be deemed a &aiver of such hearing date Fo&ever, a part2 ma2 present such &itness or &itnesses &ithin his remaining allotted hearing dates Sec ) )ritten offer of evidence. - Evidence not other&ise admitted b2 the parties or ruled upon b2 the court during the pre-trial conference shall be offered in &riting not later than five '9( da2s from the completion of the presentation of evidence of the part2 concerned !he opposing part2 shall have five '9( da2s from receipt of the offer to file his comments or ob<ections !he court shall ma"e its ruling on the offer &ithin five '9( da2s from the e;piration of the period to file comments or ob<ections
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Sec 8 *emoranda. " Immediatel2 after ruling on the last offer of evidence, the court shall order the parties to simultaneousl2 file, &ithin thirt2 ')%( da2s from receipt of the order, their respective memoranda !he memoranda shall contain the follo&ing5 '#( A +Statement of the Case,+ &hich is a clear and concise statement of the nature of the action and a summar2 of the proceedings7 '$( A +Statement of the ,acts,+ &hich is a clear and concise statement in narrative form of the established facts, &ith reference to the testimonial, documentar2 or other evidence in support thereof7 ')( A +Statement of the $ssues,+ &hich is a clear and concise statement of the issues presented to the court for resolution7 '8( !he + rguments,+ &hich is a clear and concise presentation of the argument in support of each issue7 and '9( !he +Relief,+ &hich is a specification of the order or <udgment &hich the part2 see"s to obtain :o repl2 memorandum shall be allo&ed
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Sec 9 -ecision after trial. " !he court shall render a decision not later than 'B%( da2s from the lapse of the period to file the memoranda, &ith or &ithout said pleading having been filed Rule 6 ELECTION CONTESTS Section # Cases covered - !he provisions of this rule shall appl2 to election contests in stoc" and non-stoc" corporations Sec $ -efinition. - An election contests refers to an2 controvers2 or dispute involving title or claim to an2 elective office in a stoc" or nonstoc" corporation, the validation of pro;ies, the manner and validit2 of elections, and the ?ualifications of candidates, including the proclamation of &inners, to the office of director, trustee or other officer directl2 elected b2 the stoc"holders in a close corporation or b2 members of a non-stoc" corporation &here the article of incorporation or b2-la&s so provide Sec ) Complaint. - In addition to the re?uirements in Section 8, Rule $ of these Rules, the complaint in an election contests must state the follo&ing5 '#( !he case &as filed fifteen '#9( da2s from the date of the election if the b2-la&s of the corporation do not provide for a procedure for resolution of the controvers2, or &ithin fifteen '#9( da2s from the resolution of the controvers2 b2 the corporation as provided in its b2la&s7 and '$( !he plaintiff has e;hausted all intra-corporate remedies in election cases as provided for in the b2-la&s of the corporation Sec 8 -uty of the court upon the filing of the complaint. - =ithin t&o '$( da2s from the filing of the complaint, the court, upon a consideration of the allegations thereof, ma2 dismiss the complaint outright if it is not sufficient in form and substance, or, if it is sufficient, order the issuance of summons &hich shall be served, together &ith a cop2 of the complaint, on the defendant &ithin t&o '$( da2s from its issuance
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Sec 9 ns!er. - !he defendant shall file his ans&er to the complaint, serving a cop2 thereof on the plaintiff, &ithin ten '#%( da2s from service of summons and the complaint !he ans&er shall contain the matters re?uired in Section >, Rule $ of these Rules Sec > ffidavits, documentary and other evidence. - !he parties shall attach to the complaint and ans&er the affidavits of &itnesses, documentar2 and other evidence in support thereof, if an2 Sec @ Effect of failure to ans!er - If the defendants fails to file an ans&er &ithin the period above, the court shall, &ithin ten '#%( da2s from the lapse of said period, motu proprio or on motion, render <udgments as ma2 be &arranted b2 the allegations of the complaint, as &ell as the affidavits, documentar2 and other evidence on record In no case shall the court a&ard a relief be2ond or different from that pra2ed for Sec A (rial. " If the court deems it necessar2 to hold a hearing to clarif2 specific factual matters before rendering <udgment, it shall, &ithin ten '#%( da2s from the filling of the last pleading, issue an order setting the case for hearing for the purpose !he order shall, in clear and concise terms, specif2 the factual matters the court desires to be clarified and the &itnesses, &hose affidavits have been submitted, &ho &ill give the necessar2 clarification !he hearing shall be set on a date not later than ten '#%( da2s from the date of the order, and shall be completed not later than fifteen '#9( da2s from the date of the first hearing !he affidavit of a &itness &ho fails to appear for clarificator2 ?uestions of the court shall be ordered stric"en off the record Sec B -ecision - !he Court shall render a decision &ith fifteen '#9( da2s from receipt of the last pleading, or from the date of the last hearing as the case ma2 be !he decision shall be based on the pleadings, affidavits, documentar2 and other evidence attached thereto and the ans&ers of the &itnesses to the clarificator2 ?uestions of the court given during the hearings
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Rule 7 INSPECTION OF CORPORATE )OO*S AND RECORDS Section # Cases covered - !he provisions of this Rule shall appl2 to disputes e;clusivel2 involving the rights of stoc"holders or members to inspect the boo"s and records and6or to be furnished &ith the financial statements of a corporation, under Sections @8 and @9 of ,atas Pambansa ,lg >A, other&ise "no&n as the Corporation Code of the Philippines Sec $ Complaint - In addition to the re?uirements in section 8, Rule $ of these Rules, the complaint must state the follo&ing5 '#( !he case is for the enforcement of plaintiff's right of inspection of corporate orders or records and6or to be furnished &ith financial statements under Sections @8 and @9 of the Corporation Code of the Philippines7 '$( A demand for inspection and cop2ing of boo"s and records and6or to be furnished &ith financial statements made b2 the plaintiff upon defendant7
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')( !he refusal of defendant to grant the demands of the plaintiff and the reasons given for such refusals, if an27 and '8( !he reasons &h2 the refusal of defendant to grant the demands of the plaintiff is un<ustified and illegal, stating the la& and <urisprudence in support thereof Sec ) -uty of the court upon the filing of the complaint. - =ithin t&o '$( da2s from the filing of the complaint, the court, upon a consideration of the allegations thereof, ma2 dismiss the complaint outright if it is not sufficient in form and substance, or, if it is sufficient, order the issuance of summons &hich shall be served, together &ith a cop2 of the complaint, on the defendant &ithin t&o '$( da2s from its issuance Sec 8 ns!er - !he defendant shall file his ans&er to the complaint, serving a cop2 thereof on the plaintiff, &ithin ten '#%( da2s from the service of summons and the complaint In addition to the re?uirements in Section >, Rule $ of these Rules, the ans&er must state the follo&ing5 '#( !he grounds for the refusal of defendant to grant the demands of the plaintiff, stating the la& and <urisprudence in support thereof7 '$( !he conditions or limitations on the e;ercise of the right to inspect &hich should be imposed b2 the court7 and ')( !he cost of inspection, including manpo&er and photocop2ing e;penses, if the right to inspect is granted Sec 9 ffidavits, documentary and other evidence. - !he parties shall attach to the complaint and ans&er the affidavits of &itnesses, documentar2 and other evidence in support thereof, if an2 Sec > Effect of failure to ans!er. - If the defendants fails to file an ans&er &ithin the period above provided, the court, &ithin ten '#%( da2s from the lapse of the said period, motu proprio or upon motion, shall render <udgment as &arranted b2 the allegations of the complaint, as &ell as the affidavits, documentar2 and other evidence on record In no case shall the court a&ard a relief be2ond or different from that pra2ed for Sec @ -ecision - !he court shall render a decision based on the pleadings, affidavits and documentar2 and other evidence attached thereto &ithin fifteen '#9( da2s from receipt of the last pleading A decision ordering defendants to allo& the inspection of boo"s and records and6or to furnish copies thereof shall also order the plaintiff to deposit the estimated cost of the manpo&er necessar2 to produce the boo"s and records and the cost of cop2ing, and state, in clear and categorical terms, the limitations and conditions to the e;ercise of the right allo&ed or enforced
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Rule 8 DERI!ATI!E SUITS Section # -erivative action G A stoc"holder or member ma2 bring an action in the name of a corporation or association, as the case ma2 be, provided, that5
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'#( Fe &as a stoc"holder or member at the time the acts or transactions sub<ect of the action occurred and the time the action &as filed7 '$( Fe e;erted all reasonable efforts, and alleges the same &ith particularit2 in the complaint, to e;haust all remedies available under the articles of incorporation, b2-la&s, la&s or rules governing the corporation or partnership to obtain the relief he desires7 ')( :o appraisal rights are available for the acts or acts complained of7 and '8( !he suits is not a nuisance or harassment suit In case of nuisance of harassment suit, the court shall forth&ith dismiss the case Sec $ -iscontinuance. - A derivative action shall not be discontinued, compromised or settled &ithout approval of the court *uring the pendenc2 of the action, an2 sale of shares of the complaining stoc"holders shall be approved b2 the court If the court determines that the interest of the stoc"holders or members &ill be substantiall2 affected b2 the discontinuance, compromise or settlement, the court ma2 direct that notice, b2 publication or other&ise, be given to the stoc"holders or members &hose interest it determines &ill be so affected
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Rule 9 MANA EMENT COMMITTEE Section # Creation of a management committee - As an incident to an2 of the cases filed under these Rules or the Interim Rules Corporate Rehabilitation, a part2 ma2 appl2 for the appointment of a management committee for the corporation, partnership or association, &hen there is imminent danger of5 '#( *issipation, loss, &astage or destruction of assets or other properties7 and '$( Paral2/ation of its business operations &hich ma2 be pre<udicial to the interest of the minorit2 stoc"holders, parties-litigants or the general public Sec $ Receiver. -- In the event the court finds the application to be sufficient in form and substance, the court shall issue an order7 'a( appointing a receiver of "no&n probit2, integrit2 and competence and &ithout an2 conflict of interest as hereunder defined to immediatel2 ta"e over the corporation, partnership or association, specif2ing such po&ers as it ma2 deem appropriate under the circumstances, including an2 of the po&ers specified in Section 9 of this Rule7 'b( fi;ing the bond of the receiver7 'c( directing the receiver to ma"e a report as to the affairs of the entit2 under receivership and on other relevant matters &ithin si;t2 '>%( da2s from the time he assumes office7 'd( prohibiting the incumbent management of the compan2, partnership or association from selling, encumbering, transferring or disposing in an2 manner an2 of its properties e;cept in the ordinar2 course of business7 and 'e( directing the pa2ment in full of all administrative e;penses incurred after the issuance of the order
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Sec ) Receiver and management committee as officers of the court. !he receiver and the members of the management committee in the e;ercise of their po&ers and performance of their duties are considered officers of the court and shall be under its control and supervision Sec 8 Composition of the management committee. - After due notice and hearing, the court ma2 appoint a management committee composed of three ')( members chosen b2 the court In the appointment of the members of the management committee, the follo&ing ?ualifications shall be ta"en into consideration b2 the court '#( E;pertise and acumen to manage and operate a business similar in si/e and completel2 as that the corporation, association or partnership sought to be put under management committee7 '$( .no&ledge in management and finance7 ')( 1ood moral character, independence and integrit27 '8( A lac" of a conflict of interest as defined in these Rules7 and '9( =illingness and abilit2 to file a bond in such amount as ma2 be determined b2 the court =ithout limiting the generalit2 of the follo&ing, a member of a management committee ma2 be deemed to have a conflict of interest if5 '#( Fe is engaged in a line of business &hich completes &ith the corporation, association or partnership sought to be placed under management7 '$( Fe is a director, officer or stoc"holder charged &ith mismanagement, dissipation or &astage of the properties of the entit2 under management7 or ')( Fe is related b2 consanguinit2 or affinit2 &ithin the fourth civil degree to an2 director, officer or stoc"holder charged &ith mismanagement, dissipation or &astage of the properties of the entit2 under management Sec 9 Po!ers and functions of the management committee. - Cpon assumption to office of the management committee, the receiver shall immediatel2 render a report and turn over the management and control of the entit2 under his receivership to the management committee !he management committee shall have the po&er to ta"e custod2 of and control all assets and properties o&ned or possessed b2 the entit2 under management It shall ta"e the place of the management and board of directors of the entit2 under management, assume their rights and responsibilities, and preserve the entit2's assets and properties in its possession
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=ithout limiting the generalit2 of the foregoing, the management committee shall e;ercise the follo&ing po&ers and functions5 '#( !o investigate the acts, conduct, properties, liabilities, and financial condition of the corporation, association or partnership under management7 '$( !o e;amine under oath the directors and offices of the entit2 and an2 other &itnesses that it ma2 deem appropriate7
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')( !o report to the court an2 fact ascertained b2 it pertaining to the causes of the problems, fraud, misconduct, mismanagement and irregularities committed b2 the stoc"holders, directors, management or an2 other person7 '8( !o emplo2 such person or persons such as la&2ers, accountants, auditors, appraisers and staff as are necessar2 in performing its functions and duties as management committee7 '9( !o report to the court an2 material adverse change in the business of the corporation, association or partnership under management7 '>( !o evaluate the e;isting assets and liabilities, earnings and operations of the corporation, association or partnership under management7 '@( !o determine and recommended to the court the best &a2 to salvage and protect the interest of the creditors, stoc"holders and the general public, including the rehabilitation of the corporation, association or partnership under management7 'A( !o prohibit and report to the court an2 encumbrance, transfer, or disposition of the debtor's propert2 outside of the ordinar2 course of business or &hat is allo&ed b2 the court7 'B( !o prohibit and report to the court an2 pa2ments made outside of the ordinar2 course of business7 '#%( !o have unlimited access to the emplo2ees, premises, boo"s, records and financial documents during business hours7 '##( !o inspect, cop2, photocop2 or photograph an2 document, paper, boo", account or letter, &hether in the possession of the corporation, association or partnership or other persons7 '#$( !o gain entr2 into an2 propert2 for the purposes of inspecting, measuring, surve2ing, or photographing it or an2 designated relevant ob<ect or operation thereon7 '#)( !o bring to the attention of the court an2 material change affecting the entit2's abilit2 to meet its obligations7 '#8( !o revo"e resolutions passed b2 the E;ecutive Committee or ,oard of *irectors6!rustees or an2 governing bod2 of the entit2 under management and pass resolution in substitution of the same to enable it to more effectivel2 e;ercise its po&ers and functions7 '#9( !o modif2, nullif2 or revo"e transactions coming to its "no&ledge &hich it deems detrimental or pre<udicial to the interest of the entit2 under management7 '#>( !o recommend the termination of the proceedings and the dissolution of the entit2 if determines that the continuance in business of such entr2 is no longer feasible or profitable or no longer &or"s to the best interest of the stoc"holders, parties-litigants, creditors or the general public7 '#@( !o appl2 to the court for an2 order or directive that it ma2 deem necessar2 or desirable to aid it in the e;ercise of its po&ers and performance of its duties and functions7 and '#A( !o e;ercise such other po&ers as ma2, from time to time, be conferred upon it b2 the court Sec > ction by management committee - A ma<orit2 of its members shall be necessar2 for the management committee to act or ma"e a decision !he chairman of the management committee shall be chosen
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b2 the members from among themselves !he committee ma2 delegate its management functions as ma2 be necessar2 to operate the business of the entit2 under management and preserve its assets Sec @ (ransactions deemed to be in bad faith - All transactions made b2 the previous management and directors shall be deemed fraudulent and are rescissible if made &ithin thirt2 ')%( da2s prior to the appointment of the receiver or management committee or during their incumbenc2 as receiver or management committee Sec A ,ees and expenses. - !he receiver or the management committee and the persons hired b2 it shall be entitled to reasonable professionals fees reimbursement of e;penses &hich shall be considered as administrative e;penses Sec B $mmunity from suit - !he receiver and members of the management committee and the persons emplo2ed b2 them shall not be sub<ect to an2 action, claim or demand in connection &ith an2 act done or omitted b2 them in good faith in the e;ercise of their functions and po&ers All official acts and transactions of the receiver or management committee dul2 approved or ratified b2 the court shall render them immune from an2 suit in connection &ith such act or transaction Sec #% Reports - =ithin a period of si;t2 '>%( da2s from the appointment of its members, the management committee shall ma"e a report to the court on the state of the corporation, partnership or association under management !hereafter, the management committee shall report ever2 three ')( months to the court or as often as the court ma2 re?uire on the general condition of the entit2 under management Sec ## Removal and replacement of a member of the management committee. " A member of the management is deemed removed upon appointment b2 the court of his replacement chosen in accordance &ith Section 8 of this Rule Sec #$ -ischarge of the management committee - !he management committee shall be discharged and dissolved under the follo&ing circumstances5 '#( =henever the court, on motion of motu proprio, has determined that the necessit2 for the management committee no longer e;ist7 '$( ,2 agreement of the parties7 and ')( Cpon termination of the proceedings Cpon its discharge and dissolution, the management committee shall submit its final report and render accounting of its management &ithin such reasonable time as the court ma2 allo&
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Rule 10 PRO!ISIONAL REMEDIES Section # Provisional remedies. " A part2 ma2 appl2 for an2 of the provisional remedies provided in the Rules of Court as ma2 be available for the purposes Fo&ever, no temporar2 restraining order or status .uo order shall be issued save in e;ceptional cases and onl2 after hearing the parties and the posting of bond

Rule 11 SANCTIONS Section # Sanctions of the parties or counsel. - In an2 of the follo&ing cases, the court ma2, upon motion motu proprio, impose appropriate sanctions5 '#( In case the court determines in the course of the proceeding that the action is a nuisance or harassment suit7 '$( In case a pleading, motion or other paper is filed in violation of Section @, Rule # of these Rules7 ')( In case a part2 omits or violates the certification re?uired under Section 8, Rule $ of these Rules7 '8( In case or un&arranted denials in the ans&er to the complaint7 '9( In case of &illful concealment or non-disclosure of material facts or evidence7 !he sanctions ma2 include an order to pa2 the other part2 of parties the amount of the reasonable e;penses incurred because of the act complained of, including reasonable attorne2's fees Sec $ -isciplinary sanctions on the #udge. - !he presiding <udge ma2, upon a verified complaint filed &ith the Effice of the Court Administrator, be sub<ect to disciplinar2 action under an2 of the follo&ing cases7 '#( Dailure to observe this special summar2 procedures prescribed in these Rules7 or '$( Dailure to issue a pre-trial order in form prescribed in these Rules Rule 12 FINAL PRO!ISIONS
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Section # Severability. " If an2 provision or section of these Rules is held invalid, the remaining provisions or sections shall not be affected thereb2

Sec $ Effectivity - !hese Rules shall ta"e effect on # April $%%# follo&ing its publication in t&o '$( ne&spapers of general circulation in the Philippines

ANNE+ ,A,

Republic of the Philippines HHHHHH +udicial Region Regional !rial Court ,ranch HHHHH

:AME's( ED P4AI:!IDD6S, Plaintiff6s, -versus-

:AME's( ED *EDE:*A:!6S, *efendants ;----------------------------------------; PRE-!RIA4 ER*ER I Summar2 of the Case II Preliminar2 Matters A Amendments allo&ed in the pleadings , Rulings on all ob<ections to or comments on admissibilit2 of an2 documentar2 or other evidence C Ether matters ta"en up in conference not covered b2 the subse?uent items and actions ta"en thereon III Statement of the Dacts A Admitted , *isputed # -ersion of the Plaintiff $ -ersion of the *efendant I- Issues to be Resolved A Dactual , 4egal - Applicable 4a&s -I Evidence for the Parties All evidence to be adduced and presented b2 both parties shall be limited to those identified belo& All documentar2 evidence have alread2 been pre-mar"ed and copies thereof, after comparison &ith the original, have been given the other part2 or such part2 has been given an opportunit2 to e;amine the same cases &hen generating copies proves impractical !he testimonies of the &itnesses have all been reduced to affidavit form in accordance &ith these Rules and copies thereof given to the other part2
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:o other evidence shall be allo&ed other than those indicated belo& e;cept in accordance &ith Section A, Rule $ of the Interim Rules of Procedure for Intra-Corporate Controversies A Evidence of the Plaintiff # *ocumentar2 Evidence a( *ocument :o # 'E;h HH ( '#( '$( ')( '8( :ame6!2pe Pre-Mar"ing :umber Summar2 Purpose

b( *ocument :o $ 'E;h HH ( '#( :ame6!2pe '$( Pre-Mar"ing :umber ')( Summar2

'8( Purpose 'Additional documentar2 evidence shall be similarl2 presented( $ !estimonial Evidence a( :ame of Dirst =itness '#( Purpose of the testimon2 '$( Estimated length of testimon2 b( :ame of Second =itness '#( Purpose of the testimon2 '$( Estimated length of testimon2 'Additional &itnesses shall be similarl2 presented( ) Ether Evidence , Evidence of the *efendant # *ocumentar2 Evidence a( *ocument :o # 'E;h HH ( '#( :ame6!2pe '$( Pre-Mar"ing :umber ')( Summar2 '8( Purpose b( *ocument :o $ 'E;h HH ( '#( :ame6!2pe '$( Pre-Mar"ing :umber ')( Summar2 '8( Purpose 'Additional documentar2 evidence shall be similarl2 presented( $ !estimonial Evidence a( :ame of Dirst =itness '#( Purpose of the testimon2 '$( Estimated length of testimon2 b( :ame of Second =itness '#( Purpose of the testimon2 '$( Estimated length of testimon2 'Additional &itnesses shall be similarl2 presented( ) Ether Evidence -II Fearing *ates !hese hearing dates, &hich should be scheduled not later than thirt2 ')%( da2s from the completion at the pre-trial, shall be strictl2 follo&ed and all postponements b2 either part2 shall be deducted from such part2's allotted time to present evidence A Schedule of Plaintiff's Presentation of Evidence , Schedule of *efendant's Presentation of Evidence