corpo last word

8/17/2019 Corpo Last Word

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Islamic Directorate vs. CA

Case Title : J. F. RAMIREZ, plaintiff and appellee, vs. THE ORIENTALIST Co., and RAMON J.

FERNANDEZ, defendants and appellants.

Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Harvey, J.

Syllabi Class : PLEADING|CORPORATIONS|CONTRACTS|DUE EXECUTION OF CONTRACT|CORPORATIONS|CONTRACTS|POWER OF BOARD|SURETY

Syllabi:

1. PLEADING; DUE EXECUTION OF CONTRACT; AUTHORITY OF OFFICER TO BIND

CORPORATION.-

Where the name of a corporation is signed to the document which is the basis of an action, the

failure

2. PLEADING; CORPORATIONS; WANT OF AUTHORITY IN AGENT AS SPECIAL DEFENSE.-

Where a corporation seeks to evade liability on a contract on the ground of lack of authority on the

part of the person who assumed to act for it, such defense should be specially pleaded.3. PLEADING; AMENDMENTS.-

While immaterial variances between allegations in the pleadings and the proof adduced at the

hearing may be disregarded, it is, nevertheless, still true that relief can be granted only upon matter

which is put in issue by the pleadings; and if the proof varies materially from the allegations, the

pleadings may, upon the application of the party interested, be amended in order to bring them into

conformity with the facts proved.

4. PLEADING; SPECIAL DEFENSE.-

The rule above stated applies equally to a special defense stated in the answer as to the plaintiff's

cause of action.

5. CORPORATIONS; CONTRACTS; POWER OF BOARD; RATIFICATION.-The power to make corporate contracts resides primarily in the company's board of directors; but

the board may ratify an unauthorized contract made by an officer of the corporation. Ratification in

this case is held to have occurred when the board, with knowledge that the contract had been

made, adopted a resolution recognizing the existence of the contract and directing that steps be

taken to enable the corporation to utilize its benefits.

6. CORPORATIONS; CONTRACTS; ACTION OF STOCKHOLDERS.-

Where a corporate contract has been effected with the approval of the board of directors, a

resolution adopted at a meeting of stockholders refusing to recognize the contract or repudiating it

is without effect.7. CONTRACTS; SURETY; PAROL EVIDENCE TO SHOW CHARACTER IN WHIGH PARTY IS

BOUND.-

The written contract which was the subject of this action contained the corporate name signed at

the lower right-hand corner of the contract, in the manner usual with a party signing in the

character of principal obligor. The name of another individual was signed somewhat below and to

the left of the corporate signature, after the customary manner of those who sign in a subsidiary

capacity; but no words were written to indicate clearly whether this individual signed as a principal

obligor or as surety. Held: That parol evidence


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Case Title : THE BOARD OF LIQUIDATORS representing THE GOVERNMENT OF THE

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. HEIRS OF MAXIMO M. KALAW, JUAN

BOCAR, ESTATE OF THE DECEASED CASIMIRO GARCIA, and LEONOR MOLL, defendants-

appellees.

Case Nature : APPEAL from a judgment of the Court of First Instance of Manila, Enriquez, J.

Syllabi Class : Courts|Corporations|Board of Liquidators|Settlement of decedent's estate|Contracts|Damages|Judgment|Right of Board of Liquidators to proceed as partyplaintiff|Actions|Actions that

survive

Syllabi:

1. Courts; Judgment; Appeals.-

An appellate court may base its decision of affirmance of the judgment below on a point or points

ignored by the trial court on which said court was in error.

2. Corporations; Three methods of winding up corporate affairs.-

Accepted in this jurisdiction are three methods by which a corporation may wind up its affairs: (1)

under Section 3, Rule 104, of the Rules of Court (which superseded Section 66 of the CorporationLaw), whereby, upon voluntary dissolution of a corporation, the court may direct "such disposition

of its assets as justice requires, and may appoint a receiver to collect such assets and pay the

debts of the corporation"; (2) under Section 77 of the Corporation Law, whereby a corporation

whose corporate existence is terminated, "shall nevertheless be continued as a body corporate for

three years after the time when it would have been so dissolved, for the purpose of prosecuting

and defending suits by or against it and of enabling it gradually to settle and close its affairs, to

dispose of and convey its property and to divide its capital stock, but not for the purpose of

continuing the business for which it was established"; and (3) under Section 78 of the Corporation

Law, by virtue of which the corporation, within the three-year period just mentioned, "is authorized

and empowered to convey all of its property to trustees for the benefit of members, stockholders,creditors, and others interested,"

3. Board of Liquidators; Trustee for government.-

By Executive Order No. 372, the government, the sole stockholder, abolished the National Coconut

Corporation (NACOCO) and placed its assets in the hands of the Board of Liquidators. The Board

thus became the trustee on behalf of the government. It was an express trust. The legal interest

became vested in the trustee, the Board of Liquidators. The beneficial interest remained with the

sole stockholder, the government. The Board took the place of the dissolved government

corporations after the expiration of the statutory three-year period for the liquidation of their affairs.

4. Board of Liquidators; No term for life of Board.-No time limit has been tacked to the existence of the Board of Liquidators and its function of

closing the affairs of various government corporations. Its term of life is not fixed.

5. Board of Liquidators; Right of Board of Liquidators to proceed as partyplaintiff; Case at bar.-

At no time had the government withdrawn the property. or the authority to continue the present suit,

from the Board of Liquidators. Hence, the Board can prosecute this case to its final conclusion. The

provisions of Section 78 of the Corporation Law, the third method of winding up corporate affairs,

find application. The Board has personality to proceed as party-plaintiff in this case.

6. Settlement of decedent's estate; Actions; Actions that survive; Executors and administrators.-

The actions that survive against a decedent's executors or administrators are: (1) actions to

recover real and personal property from the estate; (2) actions to enforce a lien thereon; and (3)


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actions to recover damages for an injury to person or property. A suit to recover damages, based

on the alleged tortious acts of the manager of a government corporation, survives. It is not a mere

money claim that is extinguished upon the death of a party.

7. Corporations; Implied authority of corporate officer to enter into contracts.-

A corporate officer, entrusted with the general management and control of its business, has implied

authority to make any contract or do any other act which is necessary or appropriate to the conductof the ordinary business of the corporation. As such officer, he may, without any special authority

from the Board of Directors, perform all acts of an ordinary nature, which by usage or necessity are

incident to his office, and may bind the corporation by contracts in matters arising in the usual

course of business.

8. Corporations; Where similar acts of manager were approved by directors.-

Where similar acts have been approved by the directors as a matter of general practice, custom,

and policy, the general manager may bind the company without formal authorization of the board of

directors. In varying language, existence of such authority is established by proof of the course of

business, the usages and practices of the company and by the knowledge which the board ofdirectors has, or must be presumed to have, of acts and doings of its subordinates in and about the

affairs of the corporation. Where the practice of the corporation has been to allow its general

manager to negotiate and execute contracts in its copra trading activities for and in Nacoco's behalf

without prior board approval, and the board itself, by its acts and through acquiescence, practically

laid aside the by-law requirement of prior approval, the contracts of the general manager, under the

given circumstances, are valid corporate acts.

9. Corporations; Ratification by corporation of unauthorized contract of its officers.-

Ratification by a corporation of an unauthorized act or contract by its officers or others relates back

to the time of the act or contract ratified and is equivalent to original authority. The corporation and

the other party to the transaction are in precisely the same position as if the act or contract hadbeen authorized at the time. The adoption or ratif ication of a contract by a corporation is nothing

more nor less than the making of an original contract. The theory of corporate ratification is

predicated on the right of a corporation to contract, and any ratification or adoption is equivalent to

a grant of prior authority.

10. Contracts; Bad faith.-

Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or

some moral obliquity and conscious doing of wrong; it means breach of a known duty through

some motive or interest or ill-will; it partakes of the nature of fraud.

11. Damages; Damnum absque injuria.-The present case is one of damnum absque injuria. Conjunction of damage and wrong is here

absent. There cannot be an actionable wrong if either one or the other is wanting.

Morano vs. Vivo,

Case Title : FRED M. HARDEN, J. D. HIGHSMITH, and JOHN C. HART, in their own behalf and in

that of all other stockholders of the Balatoc Mining Company, etc., plaintiffs and appellants, vs.


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BENGUET CONSOLIDATED MINING COMPANY, BALATOC MINING COMPANY, H. E. RENZ,

JOHN W. HAUSSERMANN, and A. W. BEAM, defendants and appellees.

Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Goddard, J.

Syllabi Class : CORPORATIONS|MlNING CORPORATION

Syllabi:

1. CORPORATIONS; MlNING CORPORATION; PROHIBITION AGAINST OWNING INTEREST INOTHER MINING CORPORATION; RIGHT OF ACTION.-

Inasmuch as the Corporation Law contains, in section 190 (A), provisions fully penalizing the

violation of subsection 5 of section 13 of Act No. 1459,—which prohibits the acquisition by one

mining corporation of any interest in another,—and inasmuch as these provisions have been

enacted in the exercise of the general police powers of the Government, it results that, where one

mining corporation acquires a prohibited interest in another such corporation, the shareholders of

the latter cannot maintain an action to annul the contract by which such interest was acquired. The

remedy must be sought in a criminal proceeding or quo warranto action, under section 190 (A),

instituted by the Government. Until thus assailed in a direct proceeding the contract by which theinterest was acquired will be treated as valid, as between the parties.

Case Title : W. S. PRICE and THE SULU DEVELOPMENT COMPANY, plaintiffs and appellants,

vs. H. MARTIN, defendant and appellant, THE AGUSAN COCONUT COMPANY, defendant and

appellee.

Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Diaz, J.

Syllabi Class : SHARES OF STOCK |MORTGAGE|PARTICIPATION IN STOCKHOLDERS'

MEETINGSyllabi:

1. SHARES OF STOCK; PARTICIPATION IN STOCKHOLDERS' MEETING; TRANSFER OF

SHARES.-

Plaintiffs contend that the transference on the books of the S. D. Co. of 97 shares of stock in the

name of Mrs, W. was fraudulent and illegal. The evidence of record, however, under all the

circumstances of the case, fails to demonstrate the allegation of fraud, and the court believes that

she acted in good faith and in the honest belief that she had not only a legal right but a duty to

participate in the stockholders' meeting.

2. SHARES OF STOCK; PARTICIPATION IN STOCKHOLDERS' MEETING; ID.-Until challenged in a proper proceeding, a stockholder according to the books of the company has

a right to participate in any meeting, and in the absence of fraud the action of thestockholders'

meeting cannot be collaterally attacked on account of such participation.

3. SHARES OF STOCK; PARTICIPATION IN STOCKHOLDERS' MEETING; ID.-

"A person who has purchased stock, and who desires to be recognized as a stockholder, for the

purpose of voting, must secure such a standing by having the transfer recorded upon the books. If

the transfer is not duly made upon request, he has, as his remedy, to compel it to be made."

(Morrill vs. Little Falls, Mfg. Co., 53 Minn., 371.)

4. MORTGAGE; CONSIDERATION.-


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A morgtage given to cover past advancement of funds executed upon the advice of competent

attorneys and to avoid litigation is not made without consideration.

Case Title : RAMON DE LA RAMA, FRANCISCO RODRIGUEZ, HORTENCIA SALAS, PAZ

SALAS and PATRIA SALAS, heirs of Magdalena Salas, as stockholders on their own behalf and onthe benefit of the Ma-ao Sugar Central Co., Inc., and other stockholders thereof who may wish to

join in this action, plaintiffs-appellants, vs. MA-AO SUGAR CENTRAL Co., INC., J. AMADO

ARANETA, MRS. RAMON S. ARANETA, ROMUALDO M. ARANETA, and RAMON A. YULO,

defendants-appellants.

Case Nature : APPEAL from a judgment of the Court of First Instance of Manila. Gatmaitan, J.

Syllabi Class : Corporation Law|Counterclaims|Dismissal

Syllabi:

1. Corporation Law; Investment of corporate funds in another corporation; When not violative of

Section ½ of the Corporation Law.-Plaintiffs-appellants contend that the investment of corporate funds by defendants-appellants in

another corporation constitutes a violation of section ½ of the Corporation Law. The Supreme

Court held that “such an act, if done pursuance of the corporate purpose, does not need the

approval of the stockholders; but when the purchase of shares of another corporation is done

solely for investment and not to accomplish the purpose of its incorporation, the vote of approval of

the stockholders is necessary,” and further states that “when purpose or purposes as stated in its

articles of incorporation, the approval of the stockholders is not necessary.” (Guevara, Philippine

Corp. Law, 1967 ed., p. 89).

2. Counterclaims; Dismissal; When justified.-

The defendant’s counterclaim on the allegation that the complaint of plaintiff was premature,improper, malicious and that the language is unnecessarily vituperative, abusive and insulting

cannot be sustained in the case at bar. On the contrary, the lower court found otherwise, as could

be gleaned from the decision. With respect to the allegation that the complaint was abusive and

insulting, there is no finding that plaintiff had been actuated by bad faith, nor is there anything in the

complaint essentially libelous especially as the rule is that allegations in pleadings where relevant,

are privileged even though they may not be clearly proved afterwards.

3. Corporation Law; Investment of corporation for other corporations not similar with its business;

Deemed proper by Section 17½ of the Corporation Law.-

The lower court’s order refraining the appellant corporation from making investment in othercompanies whose purpose is not connected with the sugar central business should be reversed.

This is because section 17½ of the Corporation Law allows a corporation to “invest its funds in any

other corporation or business, or for any purpose other than the main purpose for which it was

organized,” provided that its board of directors has been so authorized by the affirmative vote of

stockholders holding shares entitling” them to exercise at least two-thirds of the voting power.

Case Title : JOHN GOKONGWEI, JR., petitioner, vs. SECURITIES AND EXCHANGE

COMMISSION, ANDRES M. SORIANO, JOSE M. SORIANO, ENRIQUE ZOBEL, ANTONIO

ROXAS, EMETERIO BUÑAO, WALTHRODE B. CONDE, MIGUEL ORTIGAS, ANTONIO PRIETO,


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SAN MIGUEL CORPORATION, EMIGDIO TANJUATCO, SR., and EDUARDO R. VISAYA,

respondents.

Case Nature : ORIGINAL ACTION in the Supreme Court. Certiorari, mandamus and injunction.

Syllabi Class : Supreme Court|Corporation Law|Judgments|Securities and Exchange Commission|

Corporation Law|Constitutional Law|Due Process

Syllabi:1. Supreme Court; Judgments; Securities and Exchange Commission; Corporation Law; Supreme

Court always strives to settle a legal controversy in a single proceeding.-

xxx In the case at bar, there are facts which cannot be denied, viz.: that the amended by-laws were

adopted by the Board of Directors of the San Miguel Corporation in the exercise of the power

delegated by the stockholders ostensibly pursuant to section 22 of the Corporation Law; that in a

special meeting on February 10, 1977 held specially for that purpose, the amended by-laws were

ratified by more than 80% of the stockholders of record; that the foreign investment in the

Hongkong Brewery and Distillery, a beer manufacturing company in Hongkong, was made by the

San Miguel Corporation in 1948; and that in the stockholders’ annual meeting held in 1972 and1977, all foreign investments and operations of San Miguel Corporation were ratified by the

stockholders.

2. Corporation Law; While reasonableness of a by-law is a legal question, where reasonableness

of a by-law provision is one in which reasonable minds may differ a court will not be justified in

subsisting its judgment for those authorized to make the by-laws.-

The validity or reasonableness of a by-law of a corporation is purely a question of law. Whether the

by-law is in conflict with the law of the land, or with the charter of the corporation, or is in a legal

sense unreasonable and therefore unlawful is a question of law. This rule is subject, however, to

the limitation that where the reasonableness of a by-law is a mere matter of judgment, and one

upon which reasonable minds must necessarily differ, a court would not be warranted insubstituting its judgment instead of the judgment of those who are authorized to make by-laws and

who have exercised their authority.

3. Corporation Law; Under the Corporation Law a corporation is authorized to prescribe the

qualification of its directors.-

In this jurisdiction, under Section 21 of the Corporation Law, a corporation may prescribed in its by-

laws “the qualifications, duties and compensation of directors, officers and employees ***.” This

must necessarily refer to a qualification in addition to that specified by section 30 of the Corporation

Law, which provides that “every director must own in his right at least one share of the capital stock

of the stock corporation of which he is a director * * *.”4. Corporation Law; Stockholder has no vested right to be elected as stockholder.-

Any person “who buys stock in a corporation does so with the knowledge that its affairs are

dominated by a majority of the stockholders and that he implied contracts that the will of the

majority shall govern in all matters within the limits of the act of incorporation and lawfully enacted

by-laws and not forbidden by law.” To this extent, therefore, the stockholder may be considered to

have “parted with his personal right or privilege to regulate the disposition of his property which he

has invested in the capital stock of the corporation and surrendered it to the will of the majority or

his fellow incorporators. **** It can not therefore be justly said that the contract, express or implied,

between the corporation and the stockholders is infringed *** by any act of the former which is

authorized by a majority, ***.”


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5. Corporation Law; A director stands in a fiduciary relation to the competition and its stockholders.

The disqualification of a competition from being elected to the board of directors is a reasonable

exercise of corporate authority.-

Although in the strict and technical sense, directors of a private corporation are not regarded as

trustees, there cannot be any doubt that their character is that of a fiduciary insofar as the

corporation for the collective benefit of the stockholders, “they occupy a fiduciary relation, and inthese sense the relation is one of trust.”

6. Corporation Law; Same.-

It is obviously to prevent the creation of an opportunity for an officer or director of San Miguel

Corporation, who is also the officer or owner of competing corporation, from taking advantage of

the information which he acquires as director to promote his individual or corporate interests to the

prejudice of San Miguel Corporation and its stockholders, that the questioned amendment of the

by-laws was made. Certainly, where two corporations are competitive in a substantial sense, it

would seem improbable, if not impossible, for the director, if he were to discharge effectively his

duty, to satisfy his loyalty to both corporations and place the performance of his corporate dutiesabove his personal concerns.


Sound principles of corporate management counsel against sharing sensitive information with a

director whose fiduciary duty to loyalty may well require that he disclose this information to a

competitive rival. These dangers are enhanced considerably where the common director such as

the petitioner is a controlling stockholder of two of the competing corporations. It would seem

manifest that in such situations, the director has an economic incentive to appropriate for the

benefit of his own corporation the corporate plans and policies of the corporation where he sits as

director.

8. Corporation Law; Another reason for upholding a by-law provision that forbids a competitor to beelected as corporate director are the laws prohibiting cartels.-

There is another important consideration in determining whether or not the amended by-laws are

reasonable. The Constitution and the law prohibit combinations in restraint of trade or unfair

competition. Thus, Section 2 of Article XIV of the Constitution provides: “That State shall regulate

or prohibit private monopolies when the public interest so requires. No combinations in restraint of

trade or unfair competition shall be allowed.”


Basically, these anti-trust laws or laws against monopolies or combinations in restraint of trade are

aimed at raising levels of competition by improving the consumers’ effectiveness as the final arbiterin free markets. These laws are designed to preserve free and unfettered competition as the rule of

trade. “It rests on the premise that the unrestrained interaction of competitive forces will yield the

best allocation of our economic resources, the lowest prices and the highest quality ***.” They

operate to forestall concentration of economic power. The law against monopolies and

combinations in restraint of trade is aimed at contracts and combinations that, by reason of the

inherent nature of the contemplated acts, prejudice the public interest by unduly restraining

competition or unduly obstructing the course of trade.

10. Corporation Law; Election of petitioner as San Miguel Corporation Director may run counter to

the prohibition contained in Section 13(5) of Corporation Law on investments in corporations

engaged in agriculture.-


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Finally, considering that both Robina and SMC are, to a certain extent, engaged in agriculture, then

the election of petitioner to the Board of SMC may constitute a violation of the prohibition contained

in Section 13(5) of the Corporation Law. Said section provides in part that “any stockholder of more

than one corporation organized for the purpose of engaging in agriculture may hold his stock in

such corporations solely for investment and not for the purpose of bringing about or attempting to

bring about a combination to exercise control of such corporations. ***.”11. Corporation Law; The by-law amendment of SMC applies equally to all and does not

discriminate against petitioner only.-

However, the by-law, by its terms, applies to all stockholders. The equal protection clause of the

Constitution requires only that the by-laws operate equally upon all persons of a class. Besides,

before petitioner can be declared ineligible to run for director, there must be hearing and evidence

must be submitted to bring his case within the ambit of the disqualification. Sound principles of

public policy and management, therefore, support the view that a by-law which disqualifies a

competitor from election to the Board of Directors of another corporation is valid and reasonable.

12. Corporation Law; Petitioner is not ipso facto disqualified to run on SMC director. He must begiven full opportunity by the SEC to show that he is not covered by the disqualification.-

While We here sustain the validity of the amended by-laws, it does not follow as a necessary

consequence that petitioner is ipso facto disqualified. Consonant with the requirement of due

process, there must be due hearing at which the petitioner must be given the fullest opportunity to

show that he is not covered by the disqualification. As trustees of the corporation and of the

stockholders, it is the responsibility of directors to act with fairness to the stockholders. Pursuant to

this obligation and to remove any suspicion that this power may be utilized by the incumbent

members of the Board to perpetuate themselves in power, any decision of the Board to disqualify a

candidate for the Board of Directors should be reviewed by the Securities and Exchange

Commission en banc and its decision shall be final unless reversed by this Court on certiorari.13. Corporation Law; Every stockholder has the right to inspect corporate books and records.-

The stockholder’s right of inspection of the corporation’s books and records is based upon their

ownership of the assets and property of the corporation. It is, therefore, an incident of ownership of

the corporate property, whether this ownership or interest be termed an equitable ownership, a

beneficial ownership, or a quasi-ownership. This right is predicated upon the necessity of

selfprotection. It is generally held by majority of the courts that where the right is granted by statute

to the stockholder, it is given to him as such and must be exercised by him with respect to his

interest as a stockholder and for some purpose germane thereto or in the interest of the

corporation. In other words, the inspection has to germane to the petitioner’s interest as astockholder, and has to be proper and lawful in character and not inimical to the interest of the

corporation.

14. Corporation Law; The right of stockholder to inspect corporate books extends to a wholly-

owned subsidiary.-

In the case at bar, considering that the foreign subsidiary is wholly owned by respondent San

Miguel Corporation and, therefore, under its control, it would be more in accord with equity, good

faith and fair dealing to construe the statutory right of petitioner as stockholder to inspect the books

and records of the corporation as extending to books and records of such wholly owned subsidiary

which are in respondent corporation’s possession and control.


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15. Corporation Law; Purely ultra vires corporate acts of corporate officers to invest corporate funds

in another business or corporation, i.e., acts not contrary to law, morals, public order as public

policy, may be ratified by the stockholders holding 2/3 of the voting power.-

Assuming arguendo that the Board of Directors of San Miguel Corporation had no authority to

make the assailed investment, there is no question that a corporation, like an individual, may ratify

and thereby render binding upon it the originally unauthorized acts of its officers or other agents.This is true because the questioned investment is neither contrary to law, morals, public order or

public policy. It is a corporate transaction or contract which is within the corporate powers, but

which is defective from a purported failure to observe in its execution the requirement of the law

that the investment must be authorized by the affirmative vote of the stockholders holding twothirds

of the voting power. This requirement is for the benefit of the stockholders. The stockholders for

whose benefit the requirement was enacted may, therefore, ratify the investment and its ratification

by said stockholders obliterates any defect which it may have had at the outset. “Mere ultra vires

acts”, said this Court in Pirovano, “or those which are not illegal and void ab initio, but are not

merely within the scope of the articles of incorporation, are merely voidable and may becomebinding and enforceable when ratified by the stockholders.”

16. Corporation Law; Judgment; The doctrine of the law of the case.-

We hold on our part that the doctrine of the law of the case invoked by Mr. Justice Barredo has no

applicability for the following reasons: a) Our jurisprudence is quite clear that this doctrine may be

invoked only where there has been a final and conclusive determination of an issue in the first case

later invoked as the law of the case.

17. Corporation Law; Judgment; When doctrine of the law of the case not applicable.-

The doctrine of the law of the case, therefore, has no applicability whatsoever herein insofar as the

question of the validity or invalidity of the amended by-laws is concerned. The Court’s judgment of

April 11, 1979 clearly shows that the voting on this question inconclusive with six against fourJustices and two other Justices (the Chief Justice and Mr. Justice Fernando) expressly reserving

their votes thereon, and Mr. Justice Aquino while taking no part in effect likewise expressly

reserved his vote thereon. No final aad conclusive determination could be reached on the issue

and pursuant to the provisions of Rule 56, section 11, since this special civil action originally

commenced in this Court, the action was simply dismissed with the result that no law of the case

was laid down insofar as the issue of the validity or invalidity of the questioned by-laws is con-

cerned, and the relief sought herein by petitioner that this Court bypass the SEC which has yet to

hear and determine the same issue pending before it below and that this Court itself directly

resolve the said issue stands denied.18. Corporation Law; Judgment; Constitutional Law; Due Process; When procedural due process

was not observed.-

The entire Court, therefore, recognized that petitioner had not been given procedural due process

by the SMC board on the matter of his disqualification and that he was entitled to a “new and

proper hearing”. It stands to reason that in such hearing, petitioner could raise not only questions of

fact but questions of law, particularly questions of law affecting the investing public and their right to

representation on the board as provided by law—not to mention that as borne out by the fact that

no restriction whatsoever appears in the Court’s decision, it was never contemplated that petitioner

was to be limited questions of fact and could not raise the fundamental question of law bearing on

the invalidity of the questioned amended by-laws at such hearing before the SMC board.


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Furthermore, it was expressly provided unanimously in the Court’s decision that the SMC board’s

decision on the disqualification of petitioner (“assuming the board of directors of San Miguel

Corporation should, after the proper hearing, disqualify him” as qualified in Mr. Justice Barredo’s

own separate opinion, at page 2) shall be appealable to respondent Securities and Exchange

Commission “deliberating and acting en banc” and “ultimately to this Court.”

19. Corporation Law; Judgment; Reservation of the vote of the Chief Justice.-As expressly stated in the Chief Justice’s reservation of his vote, the matter of the question of the

applicability of the said section 13(5) to petitioner would be heard by this Court at the appropriate

time after the proceedings below (and necessarily the question of the validity of the amended by-

laws would be taken up anew and the Court would at that time be able to reach a final and

conclusive vote).

20. Corporation Law; Judgment; Validity of the amended by-laws.-

The six votes cast by Justices Makasiar, Antonio, Santos, Abad Santos, De Castro and this writer

in favor of validity of the amended by-laws in question, with only four members of this Court,

namely, Justices Teehankee, Concepcion Jr., Fernandez and Guerrero opining otherwise, and withChief Justice Castro and Justice Fernando reserving their votes thereon and Justice Aquino and

Melencio Herrera not voting, thereby resulting in the dismissal of the petition “insofar as it assails

the validity of the amended by-laws . . . . for lack of necessary votes”, has no other legal

consequence than that it is the law of the case far as the parties herein are concerned, albeit the

majority opinion of six against four Justices is not doctrinal in the sense that it cannot be cited as

necessarily a precedent for subsequent cases. This means that petitioner Gokongwei and the

respondents, including the Securities and Exchange Commission, are bound by the foregoing

result, namely, that the Court en banc has not found merit in the claim that the amended by-laws in

question are invalid. Indeed, it is one thing to say that dismissal of the case is not doctrinal and

entirely another thing to maintain that such dismissal leaves the issue unsettled.21. Corporation Law; Judgment; Where petitioner can no longer revive the issue validity of the

amended by-laws.-

I reiterate, therefore, that as between the parties herein, the issue of validity of the challenged

bylaws is already settled. From which it follows that the same are already enforceable insofar as

they are concerned. Petitioner Gokongwei may not hereafter act on the assumption that he can

revive the issue of validity whether in the Securities Exchange Commission, in this Court or in any

other forum, unless he proceeds on the basis of a factual milieu different from the setting of this

case. Not even the Securities and Exchange Commission may pass on such question anymore at

the instance of herein petitioner or anyone acting in his stead or on his behalf. The vote of four justices to remand the case thereto cannot alter the situation.

22. Corporation Law; Judgment; Where Court has not found merit in the claim that the amended

by-laws in question are valid.-

I concur in Justice Barredo’s statement that the dismissal (for lack of necessary votes) of the

petition to the extent that “it assails the validity of the amended by-laws,” is the law of the case at

bar, which means in effect that as far and only in so far as the parties and the Securities and

Exchange Commission are concerned, the Court has not found merit in the claim that the amended

by-laws in question are valid.

23. Corporation Law; Judgment; Term and meaning of “farming.”-


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This is my view, even as I am for a restrictive interpretation of Section 13(5) of the Philippine

Corporation Law, under which I would limit the scope of the provision to corporations engaged in

agriculture, but only as the word “agriculture” refers to its more limited meaning as distinguish- ed

from its general and broad connotation. The term would then mean “farming” or raising the natural

products of the soil, such as by cultivation, in the acquisition of agricultural land such as by

homestead, before the patent may be issued.24. Corporation Law; Judgment; Poultry raising or piggery is included in the term “agriculture.”-

It is my opinion that under the public land statute, the development of a certain portion of the land

applied for a specified in the law as a condition precedent before the applicant may obtain a patent,

is cultivation, not let us say, poultry raising or piggery, which may be included in the term

“Agriculture” in its broad sense. For under Section 13(5) of the Philippine Corporation Law,

construed not in the strict way as I believe it should because the provision is in derogation of

property rights, the petitioner in this case would be disqualified from becoming an officer of either

the San Miguel Corporation or his own supposedly agricultural corporations.

Lanuza v Court of Appeals

Case Title : RAMON C. LEE and ANTONIO DM. LACDAO, petitioners, vs. THE HON. COURT OF

APPEALS, SACOBA MANUFACTURING CORP., PABLO GONZALES, JR. and THOMAS

GONZALES, respondents.

Case Nature : PETITION for certiorari to review the decision and resolution of the Court of

Appeals.

Syllabi Class : Mercantile Law|Remedial Law|Corporation Code|Voting Trusts|Civil Procedure|

Service of summons

Syllabi:1. Mercantile Law; Corporation Code; Every director must own at least one (1) share of the capital

stock of the corporation of which he is a director which share shall stand in his name on the books

of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital

stock of the corporation of which he is a director shall thereby cease to be a director.-

Under the old Corporation Code, the eligibility of a director, strictly speaking, cannot be adversely

affected by the simple act of such director being a party to a voting trust agreement inasmuch as

he remains owner (although beneficial or equitable only) of the shares subject of the voting trust

agreement pursuant to which a transfer of the stockholder's shares in favor of the trustee is

required (section 36 of the old Corporation Code). No disqualification arises by virtue of the phrase"in his own right" provided under the old Corporation Code. With the omission of the phrase "in his

own right" the election of trustees and other persons who in fact are not the beneficial owners of

the shares registered in their names on the books of the corporation becomes formally legalized

(see Campos and Lopez-Campos, supra, p. 296) Hence, this is a clear indication that in order to

be eligible as a director, what is material is the legal title to, not beneficial ownership of, the stock

as appearing on the books of the corporation (2 Fletcher, Cyclopedia of the Law of Private

Corporations, section 300, p. 92 [1969] citing People v. Lihme, 269111. 351, 109 N.E. 1051).

2. Mercantile Law; Corporation Code; Voting Trusts; A voting trust agreement results in the

separation of the voting rights of a stockholder from his other rights such as the right to receive


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dividends and other rights to which a stockholder may be entitled until the liquidation of the

corporation.-

There can be no reliance on the inference that the five-year period of the voting trust agreement in

question had lapsed in 1986 so that the legal title to the stocks covered by the said voting trust

agreement ipso facto reverted to the petitioners as beneficial owners pursuant to the 6th paragraph

of section 59 of the new Corporation Code which reads: "Unless expressly renewed, all rightsgranted in a voting trust agreement shall automatically expire at the end of the agreed period, and

the voting trust certificates as well as the certificates of stock in the name of the trustee or trustees

shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of

the transferors." On the contrary, it is manifestly clear from the terms of the voting trust agreement

between ALFA and the DBP that the duration of the agreement is contingent upon the fulfillment of

certain obligations of ALFA with the DBP.

3. Remedial Law; Civil Procedure; Service of summons; If the defendant is a corporation organized

under the laws of the Philippines, service may be made on the president, manager, secretary,

cashier, agent or any of its directors.-It is a basic principle in Corporation Law that a corporation has a personality separate and distinct

from the officers or members who compose it. (See Sulo ng Bayan Inc. v. Araneta, Inc., 72 SCRA

347 [1976]; Osias Academy v. Department of Labor and Employment, et al., G.R. Nos. 83257-58,

December 21, 1990). Thus, the above rule on service of processes on a corporation enumerates

the representatives of a corporation who can validly receive court processes on its behalf. Not

every stockholder or officer can bind the corporation considering the existence of a corporate entity

separate from those who compose it. The rationale of the aforecited rule is that service must be

made on a representative so integrated with the corporation sued as to make it a priori supposable

that he will realize his responsibilities and know what he should do with any legal papers served on

him. (Far Corporation v. Francisco, 146 SCRA 197 [1986] citing Villa Rey Transit, Inc. v. Far EastMotor Corp., 81 SCRA 303 [1978]).

Case Title : NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, EUSEBIO

VILLATUYA, MARIO Y. CONSING and ROBERTO S. BENEDICTO, petitioners, vs. HON.

BENJAMIN AQUINO, in his official capacity as Presiding Judge of Branch VIII of the Court of First

Instance of Rizal, BATJAK, INC., GRACIANO A. GARCIA and MARCELINO CALINAWAN, JR.,

respondents., PHILIPPINE NATIONAL BANK, petitioner, vs. HON. BENJAMIN H. AQUINO, in his

capacity as Presiding Judge of the Court of First Instance of Rizal, Branch VIII and BATJAK,INCORPOEATED, respondents.

Case Nature : PETITIONS for certiorari and prohibition with preliminary injunction to review the

orders of the Court of First Instance of Rizal, Br. VIII. Aquino, J.

Syllabi Class : Remedial Law|Corporations|Certiorari|Mjotion to Quash|General Rule|Jurisdiction|

Venue|Actions|Mandamus|nature of|Receivership|Voting Trust Agreement

Syllabi:

1. Remedial Law; Certiorari; Mjotion to Quash; General Rule; An order denying a motion to quash

or to dismiss is interlocutory and cannot be subject ofa petition for certiorari; Remedies ofthe

aggrieved party; Exceptions to the general ruJe.+


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2. Remedial Law; Certiorari; Mjotion to Quash; Jurisdiction; Jurisdiction of CFI to issue a writ of

preliminary or permanent injunction is confmed within the province where the land in question is

situated.+

3. Remedial Law; Certiorari; Mjotion to Quash; Venue; Respondent Batjak's complaint should have

been filed in the provinces where the oil mills are located pursuajit to Sec. 2, Rule 4, par. A ofRules

ofCourt.+4. Remedial Law; Certiorari; Mjotion to Quash; Actions; Every action must beprosecuted and

defended in the name ofthe real party in interest.+

5. Remedial Law; Certiorari; Mjotion to Quash; Mandamus, nature of; Legal Right, defined in Sec.

3, Rule 65 ofRules of Court.+

6. Remedial Law; Certiorari; Mjotion to Quash; Mandamus, nature of; Writ of mandamus will not

issue to give the applicant anything to which he is not entitled by law; Case at bar.+

7. Remedial Law; Certiorari; Mjotion to Quash; Receivership; A receiver ofproperty subject of the

action may be appointed by the court when the party applying for the appointment of a receiver has

an interest in said property.+8. Remedial Law; Certiorari; Mjotion to Quash; Receivership; Prevention of imminent danger to

property, the guiding principle that governs courts in appointing receivers.+

9. Corporations; Voting Trust Agreement; A voting trust transfers only voting or other rights

pertaining to the shares subject of the agreement or control over the stock.-

ln any event, a voting trust transfers only voting or other rights pertaining to the shares subject of

the agreement, or control over the stock. The law on the matter is Section 59, paragraph 1 of the

Corporation Code (BP 68) which provides: "Sec. 59. Voting Trusts—One or more stockholders of a

stock corporation may create a voting trust for the purpose of confer- ing upon a trustee or trusties

the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at

any one time: x x x”

Case Title : W. G. PHILPOTTS, petitioner, vs. PHILIPPINE MANUFACTURING COMPANY and F.

N. BERRY, respondents.

Case Nature : ORIGINAL ACTION in the Supreme Court. Mandamus.

Syllabi Class : CORPORATIONS|EXAMINATION OF COMPANY'S AFFAIRS BY STOCKHOLDER

Syllabi:

1. CORPORATIONS; EXAMINATION OF COMPANY'S AFFAIRS BY STOCKHOLDER; RIGHT OF

STOCKHOLDER TO ACT THROUGH REPRESENTATIVE.-The right of examination into corporate affairs which is conceded to the stockholder by section 51

of the Corporation Law may be exercised either by the stockholder in person or by any duly

authorized representative.

Pardo v Hercules

Veraguth v Isabela Sugar,


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Case Title : RAMON A. GONZALES, petitioner, vs. THE PHILIPPINE NATIONAL BANK,

respondent.

Case Nature : SPECIAL CIVIL ACTION for mandamus to review the decision of the Court of First

Instance of Manila.

Syllabi Class : Corporation Law|Banks

Syllabi:1. Corporation Law; Under the new Corporation Code (B.P. No. 68) the right of a stockholder to

examine the books of a corporation is subject to certain limitations.-

As may be noted from the abovequoted provisions, among the changes introduced in the new

Code with respect to the right of inspection granted to a stockholder are the following: the records

must be kept at the principal office of the corporation; the inspection must be made on business

days; the stockholder may demand a copy of the excerpts of the records or minutes; and the

refusal to allow such inspection shall subject the erring officer or agent of the corporation to civil

and criminal liabilities. However, while seemingly enlarging the right of inspection, the new Code

has prescribed limitations to the same. It is now expressly required as a condition for suchexamination that the one requesting it must not have been guilty of using improperly any

information secured through a prior examination, and that the person asking for such examination

must be “acting in good faith and for a legitimate purpose in making his demand.”

2. Corporation Law; The unqualified provision on the right of a stockholder to examine corporate

books under the old law (Act 1459) no longer holds true under B.P. No. 68.-

The unqualified provision on the right of inspection previously contained in Section 51, Act No.

1459, as amended, no longer holds true under the provisions of the present law. The argument of

the petitioner that the right granted to him under Section 51 of the former Corporation Law should

not be dependent on the propriety of his motive or purpose in asking for the inspection of the books

of the respondent bank loses whatever validity it might have had before the amendment of the law.If there is any doubt in the correctness of the ruling of the trial court that the right of inspection

granted under Section 51 of the old Corporation Law must be dependent on a showing of proper

motive on the part of the stockholder demanding the same, it is now dissipated by the clear

language of the pertinent provision contained in Section 74 of Batas Pambansa Blg. 68.

3. Corporation Law; Stockholder has the duty of showing good motive or purpose for demanding

an examination of corporate books. One who acquired one share of stock of a bank to be able to

examine its books can hardly be said to have been motivated with good faith or proper purpose in

demanding inspection of the bank’s transactions before he became a stockholder.-

Although the petitioner has claimed that he has justifiable motives in seeking the inspection of thebooks of the respondent bank, he has not set forth the reasons and the purposes for which he

desires such inspection, except to satisfy himself as to the truth of published reports regarding

certain transactions entered into by the respondent bank and to inquire into their validity. The

circumstances under which he acquired one share of stock in the respondent bank purposely to

exercise the right of inspection do not argue in favor of his good faith and proper motivation.

Admittedly he sought to be a stockholder in order to pry into transactions entered into by the

respondent bank even before he became a stockholder. His obvious purpose was to arm himself

with materials which he can use against the respondent bank for acts done by the latter when the

petitioner was a total stranger to the same. He could have been impelled by a laudable sense of


15/20

civic consciousness, but it could not be said that his purpose is germane to his interest as a

stockholder.

4. Corporation Law; Banks; The Philippine National Bank is not governed, as a rule, by the

Corporation Code, but by its Charter.-

The Philippine National Bank is not an ordinary corporation. Having a charter of its own, it is not

governed, as a rule, by the Corporation Code of the Philippines. Section 4 of the said Codeprovides: “SEC. 4. Corporations created by special laws or charters.—Corporations created by

special laws or charters shall be governed primarily by the provisions of the special law or charter

creating them or applicable to them, supplemented by the provisions of this Code, insofar as they

are applicable.”

5. Corporation Law; Banks; The right of a stockholder to examine corporate books under the new

Corporation Code does not apply to the Philippine National Bank.-

The provision of Section 74 of Batas Pambansa Blg. 68 of the new Corporation Code with respect

to the right of a stockholder to demand an inspection or examination of the books of the corporation

may not be reconciled with the above-quoted provisions of the charter of the respondent bank. It isnot correct to claim, therefore, that the right of inspection under Section 74 of the new Corporation

Code may apply in a supplemental capacity to the charter of the respondent bank.

Richardson vs. Arizona Fuels Corp

Bitong vs. CA

Case Title : SAN MIGUEL CORPORATION, represented by EDUARDO DE LOS ANGELES,

petitioners, vs. ERNEST KAHN, ANDRES SORIANO III, BENIGNO TODA, JR., ANTONIO ROXAS,

ANTONIO PRIETO, FRANCISCO EIZMENDI, JR., EDUARDO SORIANO, RALPH KARR and

RAMON DEL ROSARIO, JR., respondents.

Case Nature : PETITION to review the decision of the Court of Appeals.

Syllabi Class : Actions|Corporation Law|Jurisdiction|Derivative Suit

Syllabi:

1. Actions; Jurisdiction; De los Angeles’ complaint does not involve any property illegally acquired

or misappropriated by Marcos, et al., or “any incidents arising from, incidental to or related to” anycase involving such property but assets indisputably belonging to San Miguel Corporation.-

The subject matter of his complaint in the SEC does not therefore fall within the ambit of this

Court’s Resolution of August 10, 1988 on the cases just mentioned, to the effect that, citing PCGG

v. Peña, et al, “all cases of the Commission regarding ‘the funds, moneys, assets, and properties

illegally acquired or misappropriated by former President Ferdinand Marcos, Mrs. Imelda

Romualdez Marcos, their close relatives, Subordinates, Business Associates, Dummies, Agents, or

Nominees, whether civil or criminal, are lodged within the exclusive and original jurisdiction of the

Sandiganbayan,’ and all incidents arising from, incidental to, or related to, such cases necessarily

fall likewise under the Sandiganbayan’s exclusive and original jurisdiction, subject to review on

certiorari exclusively by the Supreme Court.” His complaint does not involve any property illegally


16/20

acquired or misappropriated by Marcos, et al., or “any incidents arising from, incidental to, or

related to” any case involving such property, but assets indisputably belonging to San Miguel

Corporation which were, in his (de los Angeles’) view, being illicitly committed by a majority of its

board of directors to answer for loans assumed by a sister corporation, Neptunia Co., Ltd.

2. Actions; Jurisdiction; The contention therefore that in view of this Court’s ruling as regards the

sequestered SMC stock, the SEC has no jurisdiction over the de los Angeles complaint cannot besustained and must be rejected.-

De los Angeles’ complaint, in fine, is confined to the issue of the validity of the assumption by the

corporation of the indebtedness of Neptunia Co., Ltd., allegedly for the benefit of certain of its

officers and stockholders, an issue evidently distinct from, and not even remotely requiring inquiry

into the matter of whether or not the 33,133,266 SMC shares sequestered by the PCGG belong to

Marcos and his cronies or dummies (on which issue, as already pointed out, de los Angeles, in

common with the PCGG, had in fact espoused the affirmative). De los Angeles’ dispute, as

stockholder and director of SMC, with other SMC directors, an intra-corporate one, to be sure, is of

no concern to the Sandiganbayan, having no relevance whatever to the ownership of thesequestered stock. The contention, therefore, that in view of this Court’s ruling as regards the

sequestered SMC stock above adverted to, the SEC has no jurisdiction over the de los Angeles

complaint, cannot be sustained and must be rejected. The dispute concerns acts of the board of

directors claimed to amount to fraud and misrepresentation which may be detrimental to the

interest of the stockholders, or is one arising out of intra-corporate relations between and among

stockholders, or between any or all of them and the corporation of which they are stockholders.

3. Corporation Law; Derivative Suit; Theory that de los Angeles has no personality to bring suit in

behalf of the corporation cannot be sustained.-

The theory that de los Angeles has no personality to bring suit in behalf of the corporation—

because his stockholding is minuscule, and there is a “conflict of interest” between him and thePCGG—cannot be sustained, either.

4. Corporation Law; Derivative Suit; The implicit argument that a stockholder to be considered as

qualified to bring a derivative suit must hold a substantial or significant block of stock finds no

support whatever in the law; Requisites for a derivative suit.-

It is claimed that since de los Angeles’ 20 shares (owned by him since 1977) represent only .

00001644% of the total number of outstanding shares (121,645,860), he cannot be deemed to

fairly and adequately represent the interests of the minority stockholders. The implicit argument—

that a stockholder, to be considered as qualified to bring a derivative suit, must hold a substantial or

significant block of stock—finds no support whatever in the law. The requisites for a derivative suitare as follows: a) the party bringing suit should be a shareholder as of the time of the act or

transaction complained of, the number of his shares not being material; b) he has tried to exhaust

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 c) the cause of action actually

devolves on the corporation, the wrongdoing or harm having been, or being caused to the

corporation and not to the particular stockholder bringing the suit.

5. Corporation Law; Derivative Suit; Bona fide ownership by a stockholder of stock in his own right

suffices to invest him with standing to bring a derivative action for the benefit of the corporation;

Number of shares is immaterial.-


17/20

The bona fide ownership by a stockholder of stock in his own right suffices to invest him with

standing to bring a derivative action for the benefit of the corporation. The number of his shares is

immaterial since he is not suing in his own behalf, or for the protection or vindication of his own

particular right, or the redress of a wrong committed against him, individually, but in behalf and for

the benefit of the corporation.

6. Corporation Law; Derivative Suit; Theory of conflict-of-interest cannot be upheld.-Neither can the “conflict-of-interest” theory be upheld. From the conceded premise that de los

Angeles now sits in the SMC Board of Directors by the grace of the PCGG, it does not follow that

he is legally obliged to vote as the PCGG would have him do, that he cannot legitimately take a

position inconsistent with that of the PCGG, or that, not having been elected by the minority

stockholders, his vote would necessarily never consider the latter’s interests. The proposition is not

only logically indefensible, non sequitur, but also constitutes an erroneous conception of a

director’s role and function, it being plainly a director’s duty to vote according to his own

independent judgment and his own conscience as to what is in the best interests of the company.

Moreover, it is undisputed that apart from the qualifying shares given to him by the PCGG, he owns20 shares in his own right, as regards which he cannot from any aspect be deemed to be

“beholden” to the PCGG, his ownership of these shares being precisely what he invokes as the

source of his authority to bring the derivative suit.

7. Corporation Law; Derivative Suit; Argument that the PCGG has no power to vote sequestered

shares of stock as an act of dominion but only in pursuance of its power of administration is

strained and of no merit.-

It is also theorized, on the authority of the BASECO decision, that the PCGG has no power to vote

sequestered shares of stock as an act of dominion but only in pursuance to its power of

administration. The inference is that the PCGG’s act of voting the stock to elect de los Angeles to

the SMC Board of Directors was unauthorized and void; hence, the latter could not bring suit in thecorporation’s behalf. The argument is strained and obviously of no merit. As already more than

plainly indicated, it was not necessary for de los Angeles to be a director in order to bring a

derivative action; all he had to be was a stockholder, and that he was—owning in his own right 20

shares of stock, a fact not disputed by the respondents.

8. Corporation Law; Derivative Suit; Nothing in the Baseco decision which can be interpreted as

ruling that sequestered stock may not under any circumstances be voted by the PCGG to elect a

director in the company in which such stock is held.-

Nor is there anything in the Baseco decision which can be interpreted as ruling that sequestered

stock may not under any circumstances be voted by the PCGG to elect a director in the company inwhich such stock is held. On the contrary, that it held such act permissible is evident from the

context of its reference to the Presidential Memorandum of June 26, 1986 authorizing the PCGG,

“pending the outcome of proceedings to determine the ownership of x x sequestered shares of

stock,” “to vote such shares x x at all stockholders’ meetings called for the election of directors x x”

the only caveat being that the stock is not to be voted simply because the power to do so exists,

whether it be to oust and replace directors or to effect substantial changes in corporate policy,

programs or practice, but only “for demonstrably weighty and defensible grounds” or “when

essential to prevent disappearance or wastage of corporate property.”


18/20

Pascual vs. Orosco

Case Title : JUAN D. EVANGELISTA ET AL., plaintiffs and appellants, vs. RAFAEL SANTOS,

defendant and appellee.

Case Nature : APPEAL from an order of the Court of First Instance of Rizal. Tan, J.Syllabi Class : PLEADING AND PRACTICE|PARTIES|VENUE|CORPORATION

Syllabi:

1. PLEADING AND PRACTICE; VENUE; MERE SOJOURNING IN A PLACE DOES NOT MAKE

THE LATTER A RESIDENT FOR PURPOSES OF VENUE-

The facts in this case show that the objection to the venue is well-founded. The fact that defendant

was sojourning in Pasay at the time he was served with summons does not make him a resident of

that place for purposes of venue.

2. PARTIES; CORPORATION; MISMANAGEMENT BY ITS OFFICER; RIGHT OF

STOCKHOLDERS TO BRING SUIT.-The plaintiff stockholders have brought the action not for the benefit of the corporation but f or their

own benefit, since they ask that the def endant make good the losses occasioned by his

mismanagement and pay to them the value of their respective participation in the corporate assets

on the basis of their respective holdings.Clearly, this cannot be, done until all corporate debts, if

there be any, are paid and the existence of the corporation terminated by the limitation of its charter

or by lawful dissolution in view of the provisions of section 16 of the Corporation Law.

Case Title : REPUBLIC BANK, represented in this action by DAMASO P. PEREZ, etc., plaintiff-

appellant, vs. MIGUEL CUADERNO, BlENVENIDO DlZON, PABLO ROMAN, THE BOARD OFDlRECTORS OF THE REPUBLIC BANK AND THE MONETARY BOARD OF THE CENTRAL

BANK OF THE PHILIPPINES, defendants-appellees.

Case Nature : APPEAL from an order of dismissal rendered by the Court of First Instance of

Manila. Lantin, 7.

Syllabi Class : Corporation|Pleadings|Banks|Motion to dismiss|Actions

Syllabi:

1. Corporation; Banks; Derivative suit by stockholder.-

An individual stockholder may institute a derivative or representative suit on behalf of the

corporation, wherein he holds stock, in order to protect or vindicate corporate rights, whenever theof f icials of the corporation refuse to sue, or are the ones to be sued or hold control of the

corporation. In such actions, the suing stockholder is regarded as a nominal party, with the

corporation as the real party in interest.

2. Corporation; When authority of corporation to bring suit is not required.-

Such a suit need not be authorized by the corporation where its objective is to nullify the action

taken by its manager and the board of directors, in which case any demand for intra-corporate

remedy would be futile.

3. Corporation; Nonjoinder of other stockholders.-

The fact that no other stockholder has made common cause with the plaintiff is irrelevant since the

smallness of plaintiff’s holding is no ground for denying him relief.


19/20

4. Corporation; Joinder of corporation.-

Whether in a derivative suit filed by a stockholder, the corporation should be joined as a plaintiff or

a defendant is not important. What is important is that the corporation should be made a party in

order to make the court’s judgment binding upon it and thus bar future relitigations of the issues.

Misjoinder of parties is not a ground for dismissing an action.

5. Corporation; Derivative suit is not a quo warranto proceeding.-A derivative suit by a stockholder for the purpose of annulling the appointment of a defendant as

Chairman of the Board of Directors is not a quo warranto proceeding. The plaintiff is not claiming

title to the position of Chairman of the Board of Directors. His action is designed to prevent

diversion of the corporate funds for the payment of the salary of said Chairman.

6. Corporation; Stockholder’s suit to annul actions of bank’s Board of Directors.-

A stockholder has a cause of action to annul certain actions of the Board of Directors of a bank,

which actions were considered anomalous and a breach of trust prejudicial to the bank.

7. Pleadings; Motion to dismiss; Hypothetical admission of facts alleged in the complaint.-

The facts pleaded in the complaint are deemed hypothetically admitted by the defendants who filea motion to dismiss the complaint for failure to state a cause of action.

8. Pleadings; Actions; Sufficiency of cause of action.-

The test of sufficiency of the facts alleged in the complaint is whether or not the court could render

a valid judgment as prayed for, accepting as true the exclusive facts set forth in the complaint. If the

court should doubt the truth of the facts averred, it must not dismiss the complaint but should

require an answer and proceed to trial on the merits.

9. Pleadings; Pendency of other cases.-

A case should not be dismissed due to the pendency of other litigations between the same parties

if said ground was not invoked in the motion to dismiss, The .fact that said case may be

incorporated, by amendment, in any one of the other pending actions does not justify its dismissalsince the amendment of the complaint in the other cases rests on the discretion of the court. It is

possible that the amendment would not be allowed.

Case Title : CATALINA R. REYES, petitioner, vs. HON.BIENVENIDO A. TAN, as Judge of the

Court of First Instance of Manila, Branch XIII and FRANCISCA R. JUSTINIANI,respondents.

Case Nature : PETITION for review by certiorari of an order of the Court of First Instance of Manila.

Tan, J.

Syllabi Class : Corporations|Appointment of a receiverSyllabi:

1. Corporations; Appointment of a receiver; When derivative suit may be brought.-

Where corporate directors are guilty of a breach of trust—not of mere error of judgment or abuse of

discretion—and intra-corporate remedy is futile or useless, a stockholder may institute a suit in

behalf of himself and other stockholders and for the benefit of the corporation, to bring about a

redress of the wrong inflicted directly upon the corporation and indirectly upon the stockholders

(Angeles vs. Santos, 64 Phil. 697).

2. Corporations; Failure of stockholder to take remedial steps against the corporation within two

years from commission of fraud not fatal to suit.-


20/20

Although the stockholder did not take steps to remedy the illegal importation by the corporation for

a period of two years, that act does not bar him from bringing an action for the appointment of a

receiver, because during that period of time he had the right to assume and expect that the

directors would remedy the anomalous situation of the corporation brought about by their own

wrong doing. Only after such period had elapsed could he conclude that the directors were remiss

in their duty to protect the corporation property and business.3. Corporations; When expedient is necessary.-

Where the directors of the corporation permitted the fraudulent transaction to go unpunished by

allowing the importation of finished textile instead of raw cotton for the textile mill, and nothing

appears to have been done to remove the erring purchasing managers, the appointment of a

receiver may have been thought of by the court so that the dollar allocation for raw material may be

reviewed and the textile mill placed on an operating basis, because it is possible that if a receiver in

which the Central Bank may have confidence is appointed, the dollar allocation for raw material

may be restored.

Rural Bank Of Milaor vs. Ocfemia

corpo last word

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