Saturday, January 4, 2020

[CASE DIGEST] BALDOMERO ROXAS, ENRIQUE ECHAUS and ROMAN J. LACSON v. Honorable MARIANO DE LA ROSA, Auxiliary Judge of First Instance of Occidental Negros, AGUSTIN CORUNA, MAURO LEDESMA and BINALBAGAN ESTATE, INC. (G.R. No. 26555)


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: 

Petition denied.

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.