Ramon dela Rama vs Ma-ao sugar.docx

7/25/2019 Ramon dela Rama vs Ma-ao sugar.docx

1/4

RAMON DE LA RAMA vs. MA-AO SUGAR CENTRAL CO., INC., J. AMADO ARANETA

This was a representative or derivative suit commenced on October 20, 1953, in the Court of FirstInstance of ani!a b" four minorit" stoc#ho!ders a$ainst the a%ao &u$ar Centra! Co', Inc' and (' )mado

)raneta and three other directors of the corporation'

The comp!aint comprisin$ the period *ovember, 19+ to October, 1952, stated five causes of action, towit- .1/ for a!!e$ed i!!e$a! and u!tra%vires acts consistin$ of se!f%dea!in$ irre$u!ar !oans, and unauthoriedinvestments .2/ for a!!e$ed $ross mismana$ement .3/ for a!!e$ed forfeiture of corporate ri$hts warrantin$disso!ution .+/ for a!!e$ed dama$es and attorne"s fees and .5/ for receivership' defendants interposed aspecia! defenses and counterc!aim'

)fter tria!, the ower Court rendered its 4ecision the dispositive portion of which reads-

I* I67 7866OF, the Court dismisses the petition for disso!ution but condemns (' )mado )raneta topa" unto a%ao &u$ar Centra! Co', Inc' the amount of :+,2;0'00 with unction be as it is hereb" made, permanent and orders it to refrain from ma#in$ investments in )co>e

inin$, abuha" :rintin$, and an" other compan" whose purpose is not connected with the &u$arCentra! business costs of p!aintiffs to be borne b" the Corporation and (' )mado )raneta'

From this >ud$ment both parties appea!ed direct!" to the &upreme Court' ?efore ta#in$ up the errorsrespective!", assi$ned b" the parties, we shou!d state that the fo!!owin$ findin$s of the ower Court on thecommission of corporate irre$u!arities b" the defendants have not been @uestioned b" the defendants-

.1'/ Fai!ure to ho!d stoc#ho!ders meetin$s re$u!ar!"' *o stoc#ho!ders meetin$s were he!d in 19+;, 1950and 1951 .2'/ Irre$u!arities in the #eepin$ of the boo#s' Antrue entries were made in the boo#s whichcou!d not simp!" be considered as innocent errors .3'/ I!!e$a! investments in the abuha" :rintin$,:2,2e inin$, :;,000'00' The investments were made not in pursuance of thecorporate purpose and without the re@uisite authorit" of two%thirds of the stoc#ho!ders .+'/ Anauthoried!oans to (' )mado )raneta tota!!in$ :132,0


2/4

III' T86 O76 COAT 664 I* 8O4I* T8)T T86 4I&CII*)TOD )CT& COITT64))I*&T :)*T6& 4I4 *OT CO*&TITAT6 I&)*)66*T'

I' T86 O76 COAT 664 I* 8O4I* T8)T IT& CA:)?6 )CT& 766 I*&AFFICI6*T FOT86 4I&&OATIO* OF T86 CO:O)TIO*'

On the other hand, the errors assi$ned in the appea! of the defendants as appe!!ants are as fo!!ows-

I' T86 O76 COAT 664 I* )4(A4I* (' ))4O ))*6T) TO :)D TO )%)O &A)C6*T) CO', I*C', T86 )OA*T OF :+,2;0'00, 7IT8 ect of derivative suit, but,at most, constituted a cause of action of the individua! p!anters and .3/ that the acts of mismana$ementcomp!ained of and proved do not >ustif" a disso!ution of the corporation'

7hether inso!venc" eEists is usua!!" a @uestion of fact, to be determined from an inventor" of the assetsand their va!ue, as we!! as a consideration of the !iabi!ities'''' ?ut the mere impairment of capita! stoc#a!one does not estab!ish inso!venc" there bein$ other evidence as to the corporation bein$ a $oin$concern with sufficient assets' )!so, the eEcess of !iabi!ities over assets does not estab!ish inso!venc",when other assets are avai!ab!e' .F!etcher C"c' of the aw of :rivate Corporations, o!' 15), 193< 6d pp'3+%3; 6mphasis supp!ied/'

?ut re!ief b" disso!ution wi!! be awarded in such cases on!" where no other ade@uate remed" is avai!ab!e,and is not avai!ab!e where the ri$hts of the stoc#ho!ders can be, or are, protected in some other wa"'

T$e %irst Assignment of Errorin the brief of the p!aintiffs as appe!!ants, contendin$ that the investmentof corporate funds b" the a%ao &u$ar Co', Inc', in another corporation .the :hi!ippine Fiber :rocessin$

Co', Inc'/ constitutes a vio!ation of &ec' 1;%of the Corporation aw, deserves consideration'

Plaintiffs-appellants contend that in 1950 the Ma-ao Sugar Central Co., Inc., through its President, J.Aado Araneta,, su!scri!ed for P"00,000.00 #orth of capital stoc$ of the Philippine %i!er Processing Co.Inc., that pa&ents on the su!scription #ere ade on Septe!er '0, 1950, for P150,000.00, on April "0,1951, for P50,000.00, and on March (, 195', for P100,000.00) that at the tie the first t#o pa&ents#ere ade there #as no !oard resolution authori*ing the in+estent) and that it #as onl& on o+e!er'(, 1951, that the President of Ma-ao Sugar Central Co., Inc., #as so authori*ed !& the oard of

irectors. In addition, "55,000 shares of stoc$ of the sae Philippine %i!er Processing Co., Inc., o#ned!& /u*on Industrial, corporation #ere transferred on Ma& "1, 195', to the defendant Ma-ao Sugar CentralCo., Inc., #ith a +aluation of P"55,000.00 on the !asis of P1.00 par +alue per share. Again thein+estent #as ade #ithout prior !oard resolution, the authori*ing resolution ha+ing !eensu!seuentI& appro+ed onl& on June 2, 195'.

:!aintiffs%appe!!ants a!so contend that even assumin$, ar$uendo, that the said ?oard eso!utions areva!id, the transaction, is sti!! wantin$ in !e$a!it", no reso!ution havin$ been approved b" the affirmative vote


3/4

of stoc#ho!ders ho!din$ shares in the corporation entit!in$ them to eEercise at !east two%thirds of the votin$

power, as re@uired in &ec' 1;%of the Corporation aw'

T$e &eg!& 'rovision invo(e" )* t$e '&!intiffs, !s !''e&&!nts, Se+. - of t$e Cor'or!tion L!,

'rovi"es/*o corporation or$anied under this act sha!! invest its funds in an" other corporation or

business, or for an" purpose other than the main purpose for which it was or$anied, un!ess its board of

directors has been so authoried in a reso!ution b" the affirmative vote of stoc#ho!ders ho!din$ shares inthe corporation entit!in$ them to eEercise at !east two%thirds of the votin$ power on such proposa! at astoc#ho!ders meetin$ ca!!ed for the purpose ''''

On t$e ot$er $!n", t$e "efen"!nts, !s !''e&&ees, invo(e" Se+. , '!r. 0 of t$e Cor'or!tion L!,$i+$ 'rovi"es/

&6C' 13' 6ver" corporation has the power- E E E E E E E E E

.9/ To enter into an" ob!i$ation or contract essentia! to the proper administration of its corporate affairs ornecessar" for the proper transaction of the business or accomp!ishment of the purpose for which thecorporation was or$anied

.10/ 6Ecept as in this section otherwise provided, and in order to accomp!ish its purpose as stated in theartic!es of incorporation, to ac@uire, ho!d, mort$a$e, p!ed$e or dispose of shares, bonds, securities andother evidences of indebtedness of an" domestic or forei$n corporation'

) readin$ of the two afore%@uoted provisions shows that there is need for interpretation of the apparentconf!ict' In his wor# entit!ed The :hi!ippine Corporation aw, now in its 5th edition, :rofessor &u!picio &'uevara of the Aniversit" of the :hi!ippines, Co!!e$e of aw, a we!!%#nown authorit" in commercia! !aw,reconci!ed these two apparent!" conf!ictin$ !e$a! provisions, as fo!!ows-

1. oer to !+34ire or "is'ose of s$!res or se+4rities. A 'riv!te +or'or!tion, in or"er to

!++om'&is$ its '4r'ose !s st!te" in its !rti+&es of in+or'or!tion, !n" s4)1e+t to t$e &imit!tionsim'ose" )* t$e Cor'or!tion L!, $!s t$e 'oer to !+34ire, $o&", mortg!ge, '&e"ge or "is'ose ofs$!res, )on"s, se+4rities, !n" ot$er evi"en+es of in"e)te"ness of !n* "omesti+ or foreign

+or'or!tion. S4+$ !n !+t, if "one in '4rs4!n+e of t$e +or'or!te '4r'ose, "oes not nee" t$e!''rov!& of t$e sto+($o&"ers5 )4t $en t$e '4r+$!se of s$!res of !not$er +or'or!tion is "oneso&e&* for investment !n" not to !++om'&is$ t$e '4r'ose of its in+or'or!tion, t$e vote of !''rov!&of t$e sto+($o&"ers is ne+ess!r*. In !n* +!se, t$e '4r+$!se of s4+$ s$!res or se+4rities m4st )es4)1e+t to t$e &imit!tions est!)&is$e" )* t$e Cor'or!tion L!5 n!me&*, 6!7 t$!t no !gri+4&t4r!& ormining +or'or!tion s$!&& in !n*ise )e intereste" in !n* ot$er !gri+4&t4r!& or mining +or'or!tion5or 6)7 t$!t ! non-!gri+4&t4r!& or non-mining +or'or!tion s$!&& )e restri+te" to on not more t$!n89 of t$e voting sto+( of !n* !gri+4&t4r!& or mining +or'or!tion5 !n" 6+7 t$!t s4+$ $o&"ings s$!&&)e so&e&* for investment !n" not for t$e '4r'ose of )ringing !)o4t ! mono'o&* in !n* &ine of+ommer+e or +om)in!tion in restr!int of tr!"e. 6T$e $i&i''ine Cor'or!tion L! )* S4&'i+io S.

G4ev!r!, :; E"., '. !n" 'rovi"e" f4rt$er, t$!t no !gri+4&t4r!& or mining +or'or!tion s$!&& in!n*ise )e intereste" in !n* ot$er !gri+4&t4r!& or mining +or'or!tion. @$en t$e investment isne+ess!r* to !++om'&is$ its '4r'ose or '4r'oses !s st!te" in it !rti+&es of in+or'or!tion, t$e!''rov!& of t$e sto+($o&"ers is not ne+ess!r*. 6I"., '. 0


4/4

7e a$ree with :rofessor uevara'

@e t$erefore !gree it$ t$e fin"ing of t$e Loer Co4rt t$!t t$e investment in 34estion "oes not

f!&& 4n"er t$e '4rvie of Se+. - of t$e Cor'or!tion L!.

7ith respect to the "efen"!nts> !ssignment of errors, t$e se+on" .referrin$ to the counterc!aim/ is

c!ear!" without merit' )s the ower Court apt!" ru!ed in its Order of &eptember 3, 190 .reso!vin$ thedefendants otion for econsideration/ the findin$s of fact were enou$h to >ustif" a dismissa! of thecounterc!aim, because the counterc!aims were based on the fact that the comp!aint was premature,improper, ma!icious and that the !an$ua$e is unnecessari!" vituperative abusive and insu!tin$ but theCourt has not found that the comp!aint is premature nor has the Court found that the comp!aint wasma!icious these findin$s can be $!eaned from the decision with respect to the a!!e$ation that thecomp!aint was abusive and insu!tin$, the Court does not concur for it has not seen an"thin$ in theevidence that wou!d >ustif" a findin$ that p!aintiffs had been actuated b" bad faith, nor is there an"thin$ inthe comp!aint essentia!!" !ibe!ous especia!!" as the ru!e is that a!!e$ations in p!eadin$s where re!evant, areprivi!e$ed even thou$h the" ma" not be c!ear!" proved afterwards '''

As reg!r"s "efen"!nts> first !ssignment of error, referrin$ to the status of the account of (' )mado)raneta in the amount of :+,2;0'00, this Court !i#ewise a$rees with the findin$ of the ower Court that6Ehibit 5, photostatic cop" of the pa$e on !oans receivab!e does not constitute definite primar" proof ofactua! pa"ment, particu!ar!" in this case where there is evidence that the account in @uestion wastransferred from one account to another' There is no better substitute for an officia! receipt and acance!!ed chec# as evidence of pa"ment'

In the >ud$ment, the !ower court ordered the mana$ement of the a%ao &u$ar Centra! Co', Inc' to refrainfrom ma#in$ investments in )co>e inin$, abuha" :rintin$ and an" other compan" whose purpose isnot connected with the su$ar centra! business' This portion of the decision shou!d be reversed because,

&ec' 1;% of the Corporation aw a!!ows a corporation to invest its fund in an" other corporation or

business, or for an" purpose other than the main purpose for which it was or$anied, provided that itsboard of directors has been so authoried b" the affirmative vote of stoc#ho!ders ho!din$ shares entit!in$them to eEercise at !east two%thirds of the votin$ power'

I* I67 OF ) T86 FO6OI*, that part of the >ud$ment which orders the a%ao &u$ar Centra! Co',Inc' to refrain from ma#in$ investments in )co>e inin$, abuha" :rintin$, and an" other- compan"whose purpose is not connected with the su$ar centra! business, is reversed' The other parts of the

>ud$ment are, affirmed' *o specia! pronouncement as to costs'

Documents

Ramon dela Rama vs Ma-ao sugar.docx