This is  an appeal from a decision  of the Court of  First Instance of  Manila, sustaining a demurrer to the  complaint.  The plaintiffs declined to  amend and judgment was rendered dismissing the  case.   The  complaint in question reads as follows:

"The  above named  plaintiffs,  by  Thomas Cary Welch, their  attorney,  complain  of the  above-named  defendants and for cause of  action against them allege:

"1st.  That  at  all times  in  this  complaint mentioned the plaintiffs Harrie S. Everett, Ellis  H. Teal and George W. Robinson were  and now  are residents of the City of Manila,  Philippine Islands.  That the plaintiff Carl G. Clifford was  formerly a'  resident of said City of Manila and now is a resident of  the  City of Washington, District of Columbia.

"2nd. That at all times in this complaint mentioned the defendant the Asia Banking Corporation hereinafter called 'the Bank,' was and now is a foreign thanking corporation duly licensed to transact banking business in the Philippine Islands, having its principal office and place of business at Manila aforesaid  and  that said Asia Banking Corporation never has been empowered by law or licensed to do any business other  than commercial banking in the Philippine Islands.  That the defendants Nicholas E, Mullen, Alfred F. Kelly, John W. Mears, and Charles D. McIntosh were  residents of said City of  Manila and were officers, agents and employees of the  said Asia Banking Corporation, the  said Mullen being the General  Manager thereof in  said City; That: the defendant Eric Barclay is now a resident of Los Angeles, California, and the defendant McIntosh is  also residing  in the United  States, his  exact  residence being unknown.

"3rd.  That at all times in this complaint mentioned  Teal & Company hereinafter called  'the Company,'  was  and now is a domestic corporation  duly incorporated under the laws of the Philippine  Islands  and having pits  principal office  and  place of business at  Manila  aforesaid.  That during said times the  plaintiffs Everett, Clifford, Teal and Robinson were the principal stockholders in the  Company owning a total of  4,478 shares therein and that the defendant Barclay "was  the  only other stockholder, owning one share thereof.

"4th.  That in the year  1921, the said Teal & Company has become indebted to the firm of H. W. Peabody & Company  in  about  the sum of ^300,000, being for tractors, plows and parts which had been ordered and delivered, the Bank and other banks in  Manila held  drafts accepted by the Company  under  said  H.  W. Peabody & Company's guarantee.  That  said tractors  having become unsalable by reason of the financial and agricultural depression that had overtaken the Islands, the said tractors were all returned to the said H. W. Peabody & Company and as these plaintiffs are  informed and verily believes were by it returned to the United States, and while the events herein set forth were taking place the Company made payments on its indebtedness through the Bank to  H.  W. Peabody & Company, amounting to  the sum of at least P150,000.  That at about the same time the Company  had ordered another lot of tractors, etc., from a business house  in the United States, known as Smith, Kirkpatrick & Co., under a commercial letter  of credit which the Company had had from the Bank in New York City, but that shipment of  such tractors  had been  delayed until  the  credit had  been rescinded by the Bank and that upon such rescission  Smith, Kirkpatrick & Co., had. been  advised by  telegraph  that the order was  cancelled and not to ship the tractors.  That nevertheless and  contrary to such advice the  said  Smith, Kirkpatrick & Co. did ship the tractors doing so under D/A drafts  therefor  and that when said tractors  arrived  in Manila and in order, if possible to save Smith, Kirkpatrick & Co. from additional loss, the Company at the request and on  the advice of the said Bank  accepted the drafts and stored the same in a warehouse in Manila rented by it and gave receipts therefor.

"5th. That thereafter and on or about March, 1921, the Bank persuaded the Company and the said H. W. Peabody & Co.  and Smith, Kirkpatrick & Co. to enter into a so- called  'creditors  agreement'  with itself, wherein it  was mutually agreed  that neither of the parties should  take action  to collect its  debts  from the Company for  the term of two years after the date thereof.   That these  plaintiffs have no  copy  of said agreement but beg leave to refer to the original of same, in possession of the Bank, for greater certainty.

"6th. That the business of said Company consisted mainly in the merchandising of automobiles, trucks, tractors, spare parts and accessories  therefor, and the repairing thereof. That on the 29th day of December, 1922, said company was solvent and in the enjoyment of a large,  growing, and lucrative business  and in the  possession of a valuable reputation and  good-will.   That 'since its  organization in May, 1919, it had done its banking business and financing almost exclusively  thru and with the Bank and by reason of  such continued relations the  officers of  the  Company had acquired trust and confidence in the integrity and good intentions of the said Bank and its officers and  the  other defendants in their friendliness to themselves and the Company.

"7th. That on said 29th day of December, 1922, the said Company was indebted to the Bank in about the sum of P750,000, which said sum was secured  by  mortgage on its personal property  and the improvements upon the real estate  occupied by it,  which real estate was held under a ninety-nine years lease upon very favorable terms and which lease was a valuable asset and constantly increasing in value, and that the said Bank held acceptances, warehouse receipts or pledges for such other indebtedness,  as was not covered by  the last mentioned mortgage,  which said security was ample to cover the amount of  the indebtedness.

"8th. That toward the end of  the year  1922, the Bank, through its manager the defendant Mullen represented to the Company and its managers that for the protection both of the Bank and the Company it was  advisable  for  them both that the Bank should temporarily obtain control of the management and affairs of the Company in order that the affairs of the Company could  be conducted by the Bank without interference or  hindrance from  outside, and to this end that it would  be necessary for  the stockholders in the Company to place their shares therein in a Voting Trust to be held by the Bank or one of its officers for the benefit of the Company and represented  that if this were done the Bank would then finance the Company under its own supervision and that if and when  the same  were successful and in position to resume independent operation the said trust  would be terminated and the  stock returned to its true owners, and further represented that in case at anytime the Bank decided to discontinue operation under the said trust that then the stock also would  be so returned.

"9th. That it was further represented  by the Bank and the said Mullen that in order to protect the mutual interests of the Bank and the Company it was necessary to carry into effect the said proposed voting trust without the knowledge of the creditors above named and thereby place  the  Bank in an advantageous position with  regard to them.  That relying upon the previous friendly relations between the bank and the Company and between the individual defendants and these plaintiffs and relying upon the promise and representations of the defendants, these plaintiffs were induced to sign and did sign and deliver to the Bank simultaneously  a so-called  'Voting Trust Agreement/  executed by the plaintiff stockholders and a 'Memorandum of Agreement' executed by the Company, both dated  and  executed and delivered the 29th day of  December, 1922,  the two forming one  document, and a copy  of which is hereto attached and marked Exhibit A.

"10th. That by reason of the facts above set forth and of their reliance upon the good faith and goodwill of the defendants these  plaintiffs were induced to sign  the  'Memorandum of Agreement/ and  'Voting Trust Agreement,' Exhibit A, understanding from the defendants  that the same were intended for the protection of all parties thereto from  outside creditors,  but that they were  not  intended to be enforced according to the letter thereof, and  that they did not contain the true agreement between the Bank and the Company which was to finance the Company  with- out interference from the above named  creditors, to  hold the voting trust as a protection to the bank as against the said creditors and for its own  advances, and the further agreement that in case the Bank did not operate under the said voting trust because of the disapproval by  its New York headquarters of such action, or for any other cause, the said trust would be cancelled and the stock in and control of the Company returned to its true owners.

"11th. That shortly subsequent to the execution and delivery of the voting trust and memorandum of agreement herein-above described,  in violation of the obligations  and duties imposed by law  upon the trustee and in pursuance of a  scheme to defraud these plaintiffs here-inbelow more fully set forth, the said voting trustee, the defendant Mullen, caused and procured, by virtue of the powers delegated in the said voting trust, the displacement and removal from the Board of Directors of the Company of each and every person  who  was at the  time  of  the execution  of  the said  voting  trust a stockholder  in the Company and the substitution in their places  as such directors, of the above named persons defendant, or of other persons at the time employees and servants of the Bank, that  thereafter  and at no subsequent time did the said trustee allow or permit to act as a Director of the Company any person who  was in fact a stockholder in the Company; that no one of the so-called directors so placed in ostensible office, at any time has ever purchased  from any stockholder of the Company a single  share of the capital  stock thereof,  or paid to  any stockholder  or the Company any money or consideration whatsoever for the stock by virtue of the assumed ownership  of which  he has assumed to be a director of the Company, and that at all  time since,  the  Company has been exclusively controlled and managed by the said defendants none  of whom had any legal or equitable right to  a voice in the control  or management thereof.

"12th. That in pursuance  of  the  above-mentioned  and hereinafter described scheme to defraud these plaintiffs, the new  so-called directors  proceeded to remove from office the Secretary of the Company,  and to discharge from employment all of the old responsible managers and foremen in the office and shops  who were loyal to the Company and to these plaintiffs as the stockholders thereof and to displace them substitute  for them creatures of their own chosing whose interest consisted wholly in pleasing themselves and the Bank, and who were wholly foreign to the stockholders, these plaintiffs who were and are the real owners of the Company.  That thereafter said defendants  conducted the business  of the  Company  without consulting  the stockholders thereof .and denied to the stockholders  any knowledge or information as to their actions,  or the business of the Company, and at all times thereafter carried on the business and management in all respects as if they and the Bank were the real stockholders and owners thereof and in utter  and  entire disregard  of the  rights and interests of these plaintiffs who were and are the real owners.   That the said  individual defendants, as  such pretended stockholders and directors as aforesaid, from time to time gave new mortgages upon the properties of the Company to the Bank as  it from time to time required and without regard to the interest of  the Company and looking solely to the advantage of the Bank whose employees and henchmen all of them  were and are.

"13th.  That after excluding the  real owners from  voice in the management or knowledge of the  affairs of the Company, the said individual defendants and or the  Bank by agreement among themselves or because  the individual defendants as employees were coerced  by  the Bank, the said defendants gave pledges and mortgages from the  Company to  the Bank and entered into contracts as directed by the Bank, and permitted the Bank to  foreclose the  same and to sell the property of the Company at such times and in such manners as to be solely to the interests  of the  Bank or of themselves, and wholly without regard to the best  interests of  the Company itself in disregard to the duties and obligations  of a  trustee,  and  permitted the  Bank to bring suit or suits against the Company, in which the  Company was not represented by anyone having its interest at heart and in which by reason of the above set forth relation of the Company to the Bank, the Bank in truth occupied  the position of both plaintiff and defendant and tricked and deluded the courts into giving judgments in which the rights of the real parties were concealed  and unknown to the courts.

"14th.  That on or about the 18th  day of August, 1923, in order  more effectually  to plunder the Company and to defraud these plaintiffs the said defendants, Mullen,  Barclay, Mears and McIntosh, made, executed  and filed in the Bureau of Commerce and Industry of the Philippine Islands, articles of incorporation of a  corporation called the 'Philippine Motors Corporation having  its principal office in the City  of Manila, a capital stock  of  P25,000, of which the sum of P5,000, was alleged to have been subscribed and paid as follows:  the  defendant Barclay P200, defendant Mears Pl,200, defendant Kelly P1,200, defendant McIntosh P1,200, defendant Mullen P1,200, the treasurer thereof being the defendant Mears.  And these plaintiffs beg leave to refer to the original articles of Incorporation on file in the said  Bureau for greater certainty.

"That  at the time of such incorporation each and every one of the last above named  defendants was an officer or employee of the defendant Bank.  That these plaintiffs have no information nor means of  obtaining information as to whether the money alleged to have been described by them for their shares  of stock was  of their  personal funds and property or whether it was money furnished them by the Bank for the purpose.   That  in  case  such  subscriptions were  of  their personal  moneys such incorporation was a fraud upon these plaintiffs for the reason  that it was intended for the sole purpose of taking over the assets of the. Company and said defendants were enabled to effectuate such intent by reason of their  positions  as  officers and employees of the Bank  and because each and every one of them  were nominally and  de  facto directors of the Company, by reason of their appointments as such by the defendant  Mullen,  the  Voting  Trustee,   under  the Voting Trust hereinabove set forth, of which facts each and every one of said defendant incorporators were  at the time fully informed as these plaintiffs verily believe.

"15th. That after the incorporation described in the last preceding paragraph the said Bank turned over to the Philippine Motors Corporation all of the business  and assets of the company of every name nature and description and with  the connivance and consent of the individual  defendants acting in  their double capacity as directors of both corporations, permitted  and assisted the said  Philippine Motors Corporation to enter and possess  itself of the premises and good will of the Company and to continue and carry on the said business for the sole benefit of the new corporation and to  collect the debts owing to the Company and  convert  the advantages, profits  and  proceeds  thereof to itself.  And that at all times since the said Philippine Motors Corporation has continued to conduct and advantage itself of the  business of the  Company to  the  disregard of and detriment to the rights of these plaintiffs and to their damage.

"16th. That these plaintiffs, by reason of the facts hereinabove set forth were and are ignorant of the exact relations  that have existed and do  exist between the  Bank and the said Philippine Motors Corporation, or between the Bank and  the  individual defendants as  ostensible stockholders thereof and  that the Bank has prevented these plaintiffs from obtaining any such information  by refusing after demand to return to these plaintiffs their stock in the Company or to dissolve the Voting Trust or in any wise to allow them to regain control of what is left of the Company or its records and  has endeavored to forestall  and  prevent any action toward regaining  such  control or  enforcement of their rights by bringing suit  against one of the principal stockholders  in the Company, the  plaintiff Everett, based on an alteration and falsification of the books of the Company and by threat of proceedings against another principal  stockholder in the  Company, the plaintiff Clifford, to collect a large sum of money as  and for an alleged non-payment of a subscription to the stock of the Company, which the records of the Company plainly  show does not exist  and has no foundation in equity or in law.

"That by reason of the  ignorance,  so generated and maintained, of facts  wholly within  the knowledge of defendants and concealed from these plaintiffs, they are unable to allege positively and therefore must charge as they do charge in the  alternative;

"(a)  That  the said Philippine Motors  Corporation is a fictitious entity  brought into  semblance of being by the Bank through the control of its employees the above named individual defendants acting as  pretended incorporators, stockholders and directors, when in  truth and  in fact the said individuals  had and have no personal property interest therein, and that in case of foregoing  is found to be the fact the said Philippine Motors Corporation never obtained and has now no legal existence for the  reason that it was and is the Bank itself operating under  a  disguise and because said  Bank, under its license to do business in the Philippine Islands, is without power or authority to engage in the business  assumed by the Philippine Motors Corporation, and because said corporation so pretendedly created by the Bank is  in  violation of its duties and  obligations assumed by it as Trustee of the stockholders of the Company, Or

"(b)  That in  case the individual defendants as individuals created the said, the Philippine Motors Corporation, and the same is  the property of themselves as stockholders and bona fide investors of their own 'money in the stock of the same, then such creation and all  subsequent operations of the said Corporation were a fraud upon these  plaintiffs because such incorporation and subsequent acts  of the Corporation were caused and procured by  said individual defendants, the defendant Mullen being the voting trustee of the Company and at the same time being the Manager in the Philippine Islands of the  Bank,  and by virtue of the power so focused and concentrated in himself together with the powers of the others individual defendants as agents and employees of the Bank, and simultaneously as officers and directors of the Company  enabled the said individual de- fendants to take advantage of their position in respect to the Company and the Bank and  to, sue the same to the de- fraudation of these plaintiffs.

"17th. That the return  to the above named individual plaintiffs by the  Trustee of  the stock in the Company, transferred to it by said Voting Trust Agreement, has been demanded and refused.

"18th. That by reason of the facts above alleged these plaintiffs have been kept and are in ignorance of accurate knowledge of the actions  of the defendants  and of  the amount of damage thereby caused these plaintiffs and represent to the court what accurate information  can only be obtained by a discovery/by the defendants and each of them of all and every fact relevant to this cause.

"19th. That these  plantiffs are credibly  informed and verily believe that the defendants are now confabulating among themselves further to conceal the facts and to damage  these  plaintiffs  by a  sale  of  the Philippine Motors Corporation and all its assets tangible and intangible to a new purchaser,  in which  new purchaser the said defendants will have interests, and that in case such sale should be made it will damage these plaintiffs in  a  manner for which there is no adequate remedy and will cause and produce a  multiplicity of actions.

"Wherefore these plaintiffs demand the decrees and judgment of this court:

"1st.  Enjoining and restraining the defendants  and each of them from  transferring the corporation, called Philippine Motors  Corporation or  any of the capital  stock therein to any person or corporation  during the pendency of this action.

"2nd. Ordering the said  defendants at once to cancel the said Voting  trust  and to  return to these plaintiffs their shares of the stock of Teal & Company, taken under said trust and to return to them all the books and records of every kind  and nature of said Teal  & Company, and to regain to these defendants their pretended positions in and control of Teal & Company.

"3rd. Decreeing that the defendants  and each of them make full and true discovery of all the facts in relation to the formation, incorporation, and ownership of the Philippine Motors Corporation  and of all dealings and transactions between the defendant Asia Banking Corporation and said  Philippine Motors Corporation to the end that the court and these plaintiffs shall have information whether said Philippine Motors Corporation  is in fact the  Asia Banking Corporation  operating under a disguise or is the creation of  the individual  defendants availing themselves of their connections with and  positions in the said Bank in order to  take advantage of these plaintiffs  and  of Teal & Company.

"4th. Decreeing that the said defendants make discovery of all and every  one  of their  acts and transactions  with respect to Teal & Company since  the same was taken by them adding and including a full  and true discovery of all sales of the property of Teal &  Company of every kind and nature with the  full  and  true consideration  received  in every case, the amount received from any compromise entered into by them in the name  of Teal & Company and the true  consideration therefor.

"5th. In case it be found that the said Philippine Motors Corporation is in fact the  Asia Banking Corporation that a decree be entered ordering the said  Bank  immediately to dissolve the same and to account to these plaintiffs for all profits made thereby since its organization.

"6th. For judgment against said defendants jointly .and severally for the  damages caused by their acts aforesaid which the plaintiffs charged to be not less than P500,000.

"7th. For such other or  further relief,  or both,  in the premises as to this court  may seem  just  and equitable."

To this complaint the defendants demurred on the grounds (1)  that it is ambiguous, unintelligible and uncertain; (2) that the plaintiffs have not the legal capacity to bring this action;  (3) that the complaint does not state facts sufficient to constitute a cause of action, and (4) that there is a defect or misjoinder of parties defendant.

The court  below sustained the demurrer  on  all  four grounds and held that the complaint, especially in its paragraphs  4 and 5, is ambiguous, confusing, unintelligible and vague;  that Teal  & Company should have been joined as a party plaintiff; that, as far as. the Philippine Motors Corporation is concerned, the plaintiffs, not being stockholders in that corporation, had  no legal right to proceed against it in this  case;  and that the court could not be called  upon to act as investigator of the facts referred to in paragraphs 3 and 4 of the complaint, but that such investigations fall within the duty of the interested party, the Attorney-General, the Insular Auditor or the Insular Treasurer.


If this were an ordinary action at law, the ruling of the court below would be correct in most respects; it must be conceded that the  complaint violates at least three of the four principal  rules as to the manner of stating facts in complaints in such actions.  It suffers from duplicity, the facts are not stated  with certainty, and the statement is sometimes indirect and partly in the alternative. But we are not here dealing with a complaint in an action at law; this is in effect a bill of discovery and the proceeding is primarily one for equitable relief,  though it may eventually develop  into an action at law.  In such proceedings considerable latitude in the manner of stating  facts in the pleadings is  allowed.  "The minute and varied statements of the probative facts, the charges to anticipate a defense, and the interrogatories, become necessary in the equity practice, because bills are for discovery as well as for relief,  and in order to search the conscience of the defendant, he is treated, in the pleading, somewhat as though placed upon  the  stand and examined  as an unwilling witness."   (Bliss on Code Pleading, 3rd  edition, section  319.)

Counsel for  the defendants argue that there is no  express provision in the Code of Civil Procedure for a proceeding such as the present, and that, therefore, proceedings for discovery must be considered limited to the taking of depositions under subsection 1 of section 355 of the Code and the compulsory attendance of  witnesses by means of subpoena.   But, upon  a moment's  reflection,  it  becomes evident that' the means of discovery suggested by counsel are  not always available  or  adequate.   Before they can be  utilized there must be an  action pending, or,  in  other words, a  complaint must  have been filed  and summons served upon the defendants.   Now, there are cases where facts, essential  to the plaintiff's cause of action, are within the knowledge of the defendants, but of which the plaintiff is so imperfectly informed that he  cannot state them with certainty, even on information and belief.  He may,  however, know that one  out of two or more sets of fact is true without knowing which of them is true.   In  such circumstances  the plaintiff cannot,  of course, state any  of the  facts with certainty  and it stands to reason that he cannot be required to plead with  certainty facts which he does not definitely  believe to be true.  But the facts being essential to this cause of action, he must state them in one form or another and cannot  very well file his  complaint before so doing.  And if he cannot file  his complaint, he cannot, as we  have already stated, avail  himself  of  the remedy, provided for  in subsection 1 of section 355,  supra.  It seems clear that, in such a case, the proper procedure is for the plaintiff  to state the facts within  his  knowledge  with certainty, but to plead in the alternative the, to  him, doubtful facts,  which are wholly within  the defendant's knowledge and  call upon the defendant to make a full disclosure of these facts.   That is exactly  what the plaintiffs  have done in the present case, and bearing in mind the purpose of the  action, their complaint  seems sufficiently intelligible and free from ambiguity.

The fact that there is  no special or express provision in the Code of  Civil  Procedure for bills of discovery of this character,  does not necessarily  signify that the remedy does not exist  in this  jurisdiction.  The maxim of equity that "Equity will  not permit a wrong without  a remedy" still holds  good, and our liberal Code of  Civil Procedure is, if properly interpreted, sufficiently broad and flexible to enable the courts to apply all necessary  remedies, both legal and equitable.


Invoking the well-known rule that shareholders cannot ordinarily sue in equity to redress wrongs done to the corporation, but that  the action must be  brought by the Board of  Directors, the  appellees argue and the  court below held that the  corporation Teal  & Company is a necessary party plaintiff  and that the plaintiff stockholders, not having made any  demand on the Board to bring  the action, are not the proper parties plaintiff.  But, like most rules, the rule in question has its exceptions.  It is alleged in the complaint and, consequently, admitted through the demurrer that the corporation Teal & Company is under the complete control of the  principal defendants in the case, and, in these circumstances, it  is obvious that a demand upon the  Board of Directors to institute  action and prosecute the same effectively would have  been useless, and the law does not require litigants to  perform useless acts. (Exchange Bank of Wewoka vs. Bailey, 29 Okla., 246; Fleming and Hewins  vs. Black Warrior  Copper Co., 15 Ariz., 1; Wickersham vs. Crittenden, 106 Cal., 329; Glenn  vs. Kittanning Brewing Co., 259 Pa., 510; Hawes vs. Contra Costa Water Company, 104 U.  S., 450.)


The conclusion of the court below that the plaintiffs, not being  stockholders in the Philippine Motors  Corporation, had no legal right to proceed against that corporation in the manner suggested in the complaint evidently rest upon a misconception of the character of the action.  In this proceeding it was necessary for the plaintiffs to set forth in full the history of  the  various transactions which eventually led to the alleged loss of their property and,  in making a full disclosure, references to the Philippine Motors Corporation appear to have been inevitable.  It is to be noted that the plaintiffs  seek no judgment against the corporation itself at this  stage of  the proceedings.


The court below also erred in holding that the investigation of the transactions referred to in  the complaint is not within the province of the courts, but should be conducted by some other agency.  That discovery, such as that demanded in the present action, is one of the functions of a court of equity is so well established as to require no discussion.

In our opinion the plaintiffs state a good cause of action for equitable  relief  and their complaint is not in  any respect fatally defective.  The judgment of the court below is therefore reversed, the defendants demurrer is overruled, and it is ordered that the defendants answer the complaint within ten days from the return of  the record to the Court of First Instance.   So ordered.

Avanceña, C. J., Street,  Villamor, Johns, Romualdez, and Villa-Real, JJ., concur.