November
18, 1926
Ponente: Street, J.
FACTS:
·
Binalbagan Estate, Inc. was a corporation
engaged in the manufacture of raw sugar in Negros Occidental.
·
In 1924, the possessors of a majority of the
shares of the corporation formed a voting trust composed of three members,
namely, Salvador Laguna, Segunda Monteblanco, and Arthur F. Fisher, as trustee.
As per the voting trust, the trustees were authorized to represent and vote the
shares pertaining to their constituents. To this end, the shareholders
undertook to assign their shares to the trustees on the books of the company.
The total number of outstanding shares of the corporation was somewhat over
5,500, while the number of shares controlled by the voting trust was less than
3,000.
·
In the general annual shareholders' meeting in
1926, the voting trust, represented by J. P. Heilbronn, was able to nominate
and elect a board of directors of his own liking, without opposition from the
minority.
·
Since the creation of the voting trust, there
had been a number of vacancies caused by resignations and departures of
officers. As such, various substitutions were made in the personnel of the
voting trust. This didn't sit well with Roxas, Echaus, and Lacson, who were
members of the voting trust. So they called for a shareholders' general meeting
"for the election of the board of directors, for the amendment of the
By-Laws, and for any other business that can be dealt with in said
meeting." Essentially, however, the planned meeting was merely a ruse to
oust the incumbent officers.
·
Subsequently, Agustin Coruña, as member of the
existing board, and Mauro Ledesma, as a simple shareholder of the corporation,
instituted a civil action in the CFI of Negros Occidental against Roxas, et al.
and the Binalbagan Estate, Inc., for the purpose of enjoining them from holding
the planned meeting..
·
CFI: Binalbagan Estate, Inc., its
lawyers, agents, representatives, and all others who may be assisting or
corroborating with them, are restrained from holding the general shareholders'
meeting called for the date mentioned and from electing new directors for the
company in substitution of the present incumbents, said injunction to be
effective until further order of the court.
·
Hence, the instant petition.
RULING:
Whether
Judge Dela Rosa erred in issuing the subject restraining order. – NO.
Whether the members of the voting trust (i.e., Roxas, et al) can validly call for the election of a new set of officers. – NO.
·
ROXAS, et al.: The
issuance of the subject restraining order was beyond the legitimate powers of
Judge Dela Rosa.
·
SC: Judge Dela Rosa acted within his
legitimate powers when he issued the subject restraining order.
·
Under the law the directors of a corporation
may only be removed from office by a vote of the stockholders representing at
least two-thirds of the subscribed capital stock entitled to vote (Act No.
1459, sec. 34); while vacancies in the board, when they exist, can be filled by
mere majority vote, (Act No. 1459, sec. 25). Moreover, the law requires that
when action is to be taken at a special meeting to remove the directors, such
purpose shall be indicated in the call (Act No. 1459, sec. 34).
Voting
trust did not have a clear 2/3 majority
·
Under the law the directors of a corporation
may only be removed from office by a vote of the stockholders representing at
least two-thirds of the subscribed capital stock entitled to vote.
·
While the voting trust controlled a majority
of the stock, it did not have a clear two-thirds majority. In fact, it
controlled less than 3,000 of the corporation's over 5,500 outstanding shares –
less than the required 2/3 vote, which was 3,300.
Purpose of
the meeting was not indicated in the call
·
The call was limited to the election of the
board of directors. However, it was clear and beyond doubt that the intention
of the voting trust was to elect a new board (i.e., oust the imcumbent officials) as if the directorate had been
then vacant.
No
vacancies in the Board to warrant an election
·
The law contemplates and intends that there
will be one set of directors at a time and that new directors shall be elected
only as vacancies occur in the directorate by death, resignation, removal, or
otherwise.
·
Members of the present directorate (i.e., those sought to be ousted) were
regularly elected at the general annual meeting held in February 1926. There
was no showing of any hint of irregularity in their election. Granted, the
present members of the board of directors were the de facto incumbents of the
office whose acts shall be valid until they shall have been lawfully removed
from office or ceased from the discharge of their functions.
·
Judge Dela Rosa was therefore correct in
issuing the subject restraining order. Had he failed to issue such an order, it
would have resulted in the election of a rival set of directors, who would
probably need the assistance of judgment of court in an independent action of
quo warranto to get them installed into office, even supposing that their title
to the office could be maintained.