Corpo Cases III

8/15/2019 Corpo Cases III

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G.R. No. L-40620 May 5, 1979

RICARDO L. GAMBOA, LYDIA R. GAMBOA, HONORIO DE 1A RAMA, EDUARDO DE LA RAMA, an !"# HEIR$O% MERCEDE$ DE LA RAMA-BORROMEO,petitioners,vs.HON. O$CAR R. &IC'ORIANO a( )*#(+ +n # o/ !"# Co *! o/ %+*(! In(!an # o/ N# *o( O + #n!a , B*an "II, BEN AMIN LO)UE, $R., BEN AMIN LO)UE, R., LEONI'O LO)UE, an LUI$A U. DACLE$respondents.

Exequiel T. A Alejandro for petitioners.

Acuña, Lirazan & Associates for private respondents.

CONCE)CION R., J,:

Petition for certiorari to review the order of the respondent judge, dated January 2, 1975, denying the petitioners'motion to dismiss the comp aint fi ed in !ivi !ase "o. 1#257 of the !ourt of $irst %nstance of "egros &ccidenta ,entit ed,"Benjamin Lopue r., et al., plaintiffs, versus !icardo am#oa, et al., defendants, as we as the order dated

(pri ), 1975, denying the motion for the reconsideration of *aid order.

%n the aforementioned !ivi !ase "o. 1#257 of the !ourt of $irst %nstance of "egros &ccidenta , the herein petitioners,+icardo . -am oa, ydia +. -am oa, /onorio de a +ama, 0duardo de a +ama, and the ate ercedes de a +ama3orromeo, now represented y her heirs, as we as +amon de a +ama, Pa4 de a +ama 3attistu44i, and 0n4o

3attistu44i, were sued y the herein private respondents, 3enjamin opue, *r., 3enjamin opue, Jr., eonito opue,and uisa . 6ac es to nu ify the issuance of 28 shares of stoc of the %nocentes de a +ama, %nc. in favor of the saiddefendants. :he gist of the comp aint, fi ed on (pri ), 1972, is that the p aintiffs, with the e;ception of (nastacio 6ac eswho was joined as a forma party, are the owners of 1,82 shares of stoc of the %nocentes de a +ama, %nc., adomestic corporation, with an authori4ed capita stoc of 8,### shares, with a par va ue of P1##.## per share, 2,177 of which were su scri ed and issued, thus eaving 28 shares unissued< that upon the p aintiffs' ac=uisition of the sharesof stoc he d y +afae edesma and Jose *icangco, Jr., then President and >ice President of the corporation,respective y, the defendants ercedes +. 3orromeo, /onorio de a +ama, and +icardo -am oa, remaining mem ersof the oard of directors of the corporation, in order to foresta the ta eover y the p aintiffs of the afore namedcorporation, surreptitious y met and e ected +icardo . -am oa and /onorio de a +ama as president and vicepresident of the corporation, respective y, and thereafter passed a reso ution authori4ing the sa e of the 28 unissuedshares of the corporation to the defendants, +icardo . -am oa, ydia +. -am oa, /onorio de a +ama, +amon de a+ama, Pa4 +. 3attistu44i 0duardo de a +ama, and ercedes +. 3orromeo, at par va ue, after which the defendants/onorio de a +ama, ydia de a +ama -am oa, and 0n4o 3attistu44i were e ected to the oard of directors of thecorporation< that the sa e of the unissued 28 shares of stoc of the corporation was in vio ation of the p aintiffs' andpre emptive rights and made without the approva of the oard of directors representing 2?8 of the outstanding capita

stoc , and is in disregard of the strictest re ation of trust e;isting etween the defendants, as stoc ho ders thereof< andthat the defendants ydia de a +ama -am oa, /onorio de a +ama, and 0n4o 3attistu44i were not ega y e ected tothe oard of directors of the said corporation and has un awfu y usurped or intruded into said office to the prejudice ofthe p aintiffs. @herefore, they prayed that a writ of pre iminary injunction e issued restraining the defendants fromcommitting, or continuing the performance of an act tending to prejudice, diminish or otherwise injure the p aintiffs'rights in the corporate properties and funds of the corporation, and from disposing, transferring, se ing, or otherwiseimpairing the va ue of the 28 shares of stoc i ega y issued y the defendants< that a receiver e appointed topreserve and administer the property and funds of the corporation< that defendants ydia de a +ama -am oa,/onorio de a +ama, and 0n4o 3attistu44i e dec ared as usurpers or intruders into the office of director in thecorporation and, conse=uent y, ousting them therefrom and dec are uisa . 6ac es as a ega y e ected director of thecorporation< that the sa e of 28 shares of stoc of the corporation e dec ared nu and void< and that the defendants

e ordered to pay damages and attorney's fees, as we as the costs of suit . 1

(cting upon the comp aint, the respondent judge, after proper hearing, directed the c er of court to issue thecorresponding writ of pre iminary injunction restraining the defendants and?or their representatives, agents, or personsacting in their eha f from the commission or continuance of any act tending in any way to prejudice, diminish orotherwise injure p aintiffs' rights in the corporate properties and funds of the corporation %nocentes de a +ama, %nc.'and from disposing, transferring, se ing or otherwise impairing the va ue of the certificates of stoc a eged y issuedi ega y in their names on $e ruary 11, 1972, or at any date thereafter, and ordering them to deposit with the ! er of!ourt the corresponding certificates of stoc for the 28 shares issued to said defendants on $e ruary 11, 1972, uponp aintiffs' posting a ond in the sum of P5#,###.##, to answer for any damages and costs that may e sustained y thedefendants y reason of the issuance of the writ, copy of the ond to e furnished to the defendants. 2 Pursuantthereto, the defendants deposited with the c er of court the corporation's certificates of stoc "os. # to A, inc usive,representing the disputed 28 shares of stoc of the corporation.

&n &cto er 81, 1972, the p aintiffs therein, now private respondents, entered into a compromise agreement with thedefendants +amon de a +ama, Pa4 de a +ama 3attistu44i and 0n4o 3attistu44i , 4 where y the contracting partieswithdrew their respective c aims against each other and the aforenamed defendants waived and transferred theirrights and interests over the =uestioned 28 shares of stoc in favor of the p aintiffs, as fo owsB

8. :hat the defendants +amon . de a +ama, Pa4 de a +ama 3attistu44i and 0n4o 3attistu44iwi waive, cede, transfer or other wise convey, as they here y waive, cede, transfer andconvey, free from a iens and encum rances unto the p aintiffs, in such proportion as thep aintiffs may among themse ves determine, a of the rights, interests, participations or tit e thatthe defendants +amon . de a +ama, Pa4 de a +ama 3attistu44i 0n4o 3attistu44i now haveor may have in the eight hundred twenty three C 28D shares in the capita stoc of thecorporation %"&!0":0* 60 ( +( (, %"!.' which were issued in the names of thedefendants in the a ove entit ed case on or a out $e ruary 11, 1972, or at any date thereafterand which shares are the su ject matter of the present suit.

:he compromise agreement was approved y the tria court on 6ecem er ), 1972, 5 (s a resu t, the defendants fi ed amotion to dismiss the comp aint, on "ovem er 19, 197), upon the groundsB C1D that the p aintiffs' cause of action had

een waived or a andoned< and C2D that they were estopped from further prosecuting the case since they have, ineffect, ac now edged the va idity of the issuance of the disputed 28 shares of stoc . :he motion was denied onJanuary 2, 1975. 6

:he defendants a so fi ed a motion to dec are the defendants +amon . de a +ama, Pa4 de a +ama 3attistu44i and0n4o 3attistu44i in contempt of court, for having vio ated the writ of pre iminary injunction when they entered into theaforesaid compromise agreement with the p aintiffs, ut the respondent judge denied the said motion for ac ofmerit. 7

&n $e ruary 1#, 1975, the defendants fi ed a motion for the reconsideration of the order denying their motion todismiss the comp aint' and su se=uent y, an (ddendum thereto, c aiming that the respondent court has no jurisdictionto interfere with the management of the corporation y the oard of directors, and the enactment of a reso ution y the

defendants, as mem ers of the oard of directors of the corporation, a owing the sa e of the 28 shares of stoc to thedefendants was pure y a management concern which the courts cou d not interfere with. @hen the tria court deniedsaid motion and its addendum, the defendants fi ed the instant petition for certiorari for the review of said orders.

:he petition is without merit. :he =uestioned order denying the petitioners' motion to dismiss the comp aint is mere yinter ocutory and cannot e the su ject of a petition for certiorari. :he proper procedure to e fo owed in such a caseis to continue with the tria of the case on the merits and, if the decision is adverse, to reiterate the issue on appea . %twou d e a reach of order y procedure to a ow a party to come efore this !ourt every time an order is issued withwhich he does not agree.

3esides, the order denying the petitioners' motion to dismiss the comp aint was not capricious y, ar itrari y, orwhimsica y issued, or that the respondent court ac ed jurisdiction over the cause as to warrant the issuance of the


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writ prayed for. (s found y the respondent judge, the petitioners have not waived their cause of action against thepetitioners y entering into a compromise agreement with the other defendants in view of the e;press provision of thecompromise agreement that the same sha not in any way constitute or e considered a waiver or a andonment ofany c aim or cause of action against the other defendants. :here is a so no estoppe ecause there is nothing in theagreement which cou d e construed as an affirmative admission y the p aintiff of the va idity of the reso ution of thedefendants which is now sought to e judicia y dec ared nu and void. :he foregoing circumstances and the fact thatno consideration was mentioned in the agreement for the transfer of rights to the said shares of stoc to the p aintiffsare sufficient to show that the agreement was mere y an admission y the defendants +amon de a +ama, Pa4 de a+ama 3attistu44i and 0n4o 3attistu44i of the va idity of the c aim of the p aintiffs.

:he c aim of the petitioners, in their (ddendum to the motion for reconsideration of the order denying the motion to

dismiss the comp aint, =uestioning the tria court's jurisdiction on matters affecting the management of the corporation,is without merit. :he we nown ru e is that courts cannot underta e to contro the discretion of the oard of directorsa out administrative matters as to which they have egitimate power of, 10 action and contracts intra vires entered into

y the oard of directors are inding upon the corporation and courts wi not interfere un ess such contracts are sounconsciona e and oppressive as to amount to a wanton destruction of the rights of the minority. 11 %n the instantcase, the p aintiffs aver that the defendants have conc uded a transaction among themse ves as wi resu t to seriousinjury to the interests of the p aintiffs, so that the tria court has jurisdiction over the case.

:he petitioners further contend that the proper remedy of the p aintiffs wou d e to institute a derivative suit against thepetitioners in the name of the corporation in order to secure a inding re ief after e;hausting a the possi e remediesavai a e within the corporation.

(n individua stoc ho der is permitted to institute a derivati ve suit on eha f of the corporation wherein he ho ds stocin order to protect or vindicate corporate rights, whenever the officia s of the corporation refuse to sue, or are the onesto e sued or ho d the contro of the corporation. %n such actions, the suing stoc ho der is regarded as a nomina party,

with the corporation as the rea party in interest.12

%n the case at ar, however, the p aintiffs are a eging andvindicating their own individua interests or prejudice, and not that of the corporation. (t any rate, it is yet too ear y inthe proceedings since the issues have not een joined. 3esides, misjoinder of parties is not a ground to dismiss anaction. 1

@/0+0$&+0, the petition shou d e, as it is here y 6%* %**06 for ac of merit. @ith costs against the petitioners.

*& &+60+06.

G.R. No. L-45911 A3*+ 11, 1979

OHN GO ONG EI, R.,petitioner,vs.$ECURI'IE$ AND E CHANGE COMMI$$ION, ANDRE$ M. $ORIANO, O$E M. $ORIANO, ENRI UE 8OBEL,

AN'ONIO RO A$, EME'ERIO BUNAO, AL'HRODE B. CONDE, MIGUEL OR'IGA$, AN'ONIO )RIE'O, $ANMIGUEL COR)ORA'ION, EMIGDIO 'AN UA'CO, $R., an EDUARDO R. &I$AYA,respondents.

$e antos, Bal%os & erez for petitioner.

An%ara, A#ello, 'oncepcion, !e%ala, 'ruz La( )ffices for respondents orianos

i%uion !e*na, +ontecillo & )n%sia o for respondent an +i%uel 'orporation.

!. T 'apulon% for respondent Eduardo !. -isa*a.

AN'ONIO, J.:

:he instant petition for certiorari, mandamus and injunction, with prayer for issuance of writ of pre iminary injunction,arose out of two cases fi ed y petitioner with the *ecurities and 0;change !ommission, as fo owsB

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&n &cto er 22, 197A, petitioner, as stoc ho der of respondent *an igue !orporation, fi ed with the *ecurities and0;change !ommission C*0!D a petition for dec aration of nu ity of amended y aws, cance ation of certificate offi ing of amended y aws, injunction and damages with prayer for a pre iminary injunction against the majority of themem ers of the 3oard of 6irectors and *an igue !orporation as an unwi ing petitioner. :he petition, entit ed John-o ongwei Jr. vs. (ndres *oriano, Jr., Jose . *ori ano, 0nri=ue Eo e , (ntonio +o;as, 0meterio 3unao, @a throde 3.!onde, igue &rtigas, (ntonio Prieto and *an igue !orporation , was doc eted as *0! !ase "o. 1875.

(s a first cause of action, petitioner a eged that on *eptem er 1 , 197A, indi vidua respondents amended y y aws of the corporation, asing their authority to do so on a reso ution of the stoc ho ders adopted on arch 18, 19A1, whenthe outstanding capita stoc of respondent corporation was on y P7#,189.7)#.##, divided into 5,518,97) commonshares at P1#.## per share and 15#,### preferred shares at P1##.## per share. (t the time of the amendment, theoutstanding and paid up shares tota ed 8#,127,#)7 with a tota par va ue of P8#1,27#,)8#.##. %t was contended thataccording to section 22 of the !orporation aw and (rtic e >%%% of the y aws of the corporation, the power to amend,modify, repea or adopt new y aws may e de egated to the 3oard of 6irectors on y y the affirmative vote ofstoc ho ders representing not ess than 2?8 of the su scri ed and paid up capita stoc of the corporation, which 2?8shou d have een computed on the asis of the capita i4ation at the time of the amendment. *ince the amendment

was ased on the 19A1 authori4ation, petitioner contended that the 3oard acted without authority and in usurpation ofthe power of the stoc ho ders.

(s a second cause of action, it was a eged that the authority granted in 19A1 had a ready een e;ercised in 19A2 and19A8, after which the authority of the 3oard ceased to e;ist.

(s a third cause of action, petitioner averred that the mem ership of the 3oard of 6irectors had changed since theauthority was given in 19A1, there eing si; CAD new directors.

(s a fourth cause of action, it was c aimed that prior t o the =uestioned amendment, petitioner had a the =ua ificationsto e a director of respondent corporation, eing a *u stantia stoc ho der thereof< that as a stoc ho der, petitionerhad ac=uired rights inherent in stoc ownership, such as the rights to vote and to e voted upon in the e ection ofdirectors< and that in amending the y aws, respondents purpose y provided for petitioner's dis=ua ification anddeprived him of his vested right as afore mentioned hence the amended y aws are nu and void. 1

(s additiona causes of action, it was a eged that corporations have no inherent power to dis=ua ify a stoc ho der fr omeing e ected as a director and, therefore, the =uestioned act is ultra vires and void< that (ndres . *oriano, Jr. and?or

Jose . *oriano, whi e representing other corporations, entered into contracts Cspecifica y a management contractDwith respondent corporation, which was a owed ecause the =uestioned amendment gave the 3oard itse f theprerogative of determining whether they or other persons are engaged in competitive or antagonistic usiness< that theportion of the amended y aws which states that in determining whether or not a person is engaged in competitive

usiness, the 3oard may consider such factors as usiness and fami y re ationship, is unreasona e and oppressiveand, therefore, void< and that the portion of the amended y aws which re=uires that a nominations for e ection ofdirectors ... sha e su mitted in writing to the 3oard of 6irectors at east five C5D wor ing days efore the date of the

(nnua eeting is i ewise unreasona e and oppressive.


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%t was, therefore, prayed that the amended y aws e dec ared nu and void and the certificate of fi ing thereof ecance ed, and that individua respondents e made to pay damages, in specified amounts, to petitioner.

&n &cto er 2 , 197A, in connection with the same case, petitioner fi ed with the *ecurities and 0;change !ommissionan rgent otion for Production and %nspection of 6ocuments , a eging that the *ecretary of respondent corporationrefused to a ow him to inspect its records despite re=uest made y petitioner for production of certain documentsenumerated in the re=uest, and that respondent corporation had een attempting to suppress information from itsstoc ho ders despite a negative rep y y the *0! to its =uery regarding their authority to do so. (mong the documentsre=uested to e copied were CaD minutes of the stoc ho der's meeting fie d on arch 18, 19A1, C D copy of themanagement contract etween *an igue !orporation and (. *oriano !orporation C("*!&+D< CcD atest a ancesheet of *an igue %nternationa , %nc.< CdD authority of the stoc ho ders to invest the funds of respondent corporation in

*an igue %nternationa , %nc.< and CeD ists of sa aries, a owances, onuses, and other compensation, if any, receivedy (ndres . *oriano, Jr. and?or its successor in interest.

:he rgent otion for Production and %nspection of 6ocuments was opposed y respondents, a eging, amongothers that the motion has no ega asis< that the demand is not ased on good faith< that the motion is prematuresince the materia ity or re evance of the evidence sought cannot e determined unti the issues are joined, that it fai sto show good cause and constitutes continued harrasment, and that some of the information sought are not part of therecords of the corporation and, therefore, privi eged.

6uring the pendency of the motion for production, respondents *an igue !orporation, 0nri=ue !onde, igue&rtigas and (ntonio Prieto fi ed their answer to the petition, denying the su stantia a egations therein and stating, yway of affirmative defenses that the action ta en y the 3oard of 6irectors on *eptem er 1 , 197A resu ting in the ...amendments is va id and ega ecause the power to amend, modify, repea or adopt new 3y aws de egated to said3oard on arch 18, 19A1 and ong prior thereto has never een revo ed of * ! < that contrary to petitioner's c aim,

the vote re=uirement for a va id de egation of the power to amend, repea or adopt new y aws is determined in

re ation to the tota su scri ed capita stoc at the time the de egation of said power is made, not when the 3oard optsto e;ercise said de egated power < that petitioner has not avai ed of his intra corporate remedy for the nu ification ofthe amendment, which is to secure its repea y vote of the stoc ho ders representing a majority of the su scri edcapita stoc at any regu ar or specia meeting, as provided in (rtic e >%%%, section % of the y aws and section 22 of the!orporation aw, hence the, petition is premature< that petitioner is estopped from =uestioning the amendments on theground of ac of authority of the 3oard. since he fai ed, to o ject to other amendments made on the asis of the same19A1 authori4ationB that the power of the corporation to amend its y aws is road, su ject on y to the condition thatthe y aws adopted shou d not e respondent corporation inconsistent with any e;isting aw< that respondentcorporation shou d not e prec uded from adopting protective measures to minimi4e or e iminate situations where itsdirectors might e tempted to put their persona interests over t % hat of the corporation< that the =uestioned amended

y aws is a matter of interna po icy and the judgment of the oard shou d not e interfered withB :hat the y aws, asamended, are va id and inding and are intended to prevent the possi i ity of vio ation of crimina and civi awsprohi iting com inations in restraint of trade< and that the petition states no cause of action. %t was, therefore, prayedthat the petition e dismissed and that petitioner e ordered to pay damages and attorney's fees to respondents. :heapp ication for writ of pre iminary injunction was i ewise on various grounds.

+espondents (ndres . *oriano, Jr. and Jose . *oriano fi ed their opposition to the petition, denying the materiaaverments thereof and stating, as part of their affirmative defenses, that in (ugust 1972, the niversa +o ina!orporation C+o inaD, a corporation engaged in usiness competitive to that of respondent corporation, eganac=uiring shares therein. unti *eptem er 197A when its tota ho ding amounted to A22,9 7 sharesB that in &cto er1972, the !onso idated $oods !orporation C!$!D i ewise egan ac=uiring shares in respondent Ccorporation. unti itstota ho dings amounted to P5)8,959.## in *eptem er 197A< that on January 12, 197A, petitioner, who is president andcontro ing shareho der of +o ina and !$! C oth c osed corporationsD purchased 5,### shares of stoc of respondentcorporation, and thereafter, in eha f of himse f, !$! and +o ina, conducted ma evo ent and ma icious pu icitycampaign against * ! to generate support from the stoc ho der in his effort to secure for himse f and inrepresentation of +o ina and !$! interests, a seat in the 3oard of 6irectors of * ! , that in the stoc ho ders' meetingof arch 1 , 197A, petitioner was rejected y the stoc ho ders in his id to secure a seat in the 3oard of 6irectors onthe asic issue that petitioner was engaged in a competitive usiness and his securing a seat wou d have su jected

respondent corporation to grave disadvantages< that petitioner neverthe ess vowed to secure a seat in the 3oard of6irectors at the ne;t annua meeting< that thereafter the 3oard of 6irectors amended the y aws as afore stated.

(s counterc aims, actua damages, mora damages, e;emp ary damages, e;penses of itigation and attorney's feeswere presented against petitioner.

*u se=uent y, a Joint &mni us otion for the stri ing out of the motion for production and inspection of documentswas fi ed y a t he respondents. :his was du y opposed y petit ioner. (t this juncture, respondents 0migdio :anjuatco,*r. and 0duardo +. >isaya were a owed to intervene as oppositors and they according y fi ed their oppositionsintervention to the petition.

&n 6ecem er 29, 197A, the *ecurities and 0;change !ommission reso ved the motion for production and inspectionof documents y issuing &rder "o. 2A, *eries of 1977, stating, in part as fo owsB

!onsidering the evidence su mitted efore the !ommission y the petitioner and respondentsin the a ove entit ed case, it is here y orderedB

1. :hat respondents produce and permit the inspection, copying and photographing, y or oneha f of the petitioner movant, John -o ongwei, Jr., of the minutes of the stoc ho ders'

meeting of the respondent *an igue !orporation he d on arch 18, 19A1, which are in thepossession, custody and contro of the said corporation, it appearing that the same is materiaand re evant to the issues invo ved in the main case. (ccording y, the respondents shou d a owpetitioner movant entry in the principa office of the respondent !orporation, *an igue!orporation on January 1), 1977, at 9B8# o'c oc in the morning for purposes of enforcing therights herein granted< it eing understood that the inspection, copying and photographing of the

said documents sha e underta en under the direct and strict supervision of this !ommission.Provided, however, that other documents and?or papers not heretofore inc uded are notcovered y this &rder and any inspection thereof sha re=uire the prior permission of this!ommission<

2. (s to the 3a ance *heet of *an igue %nternationa , %nc. as we as the ist of sa aries,a owances, onuses, compensation and?or remuneration received y respondent Jose .*oriano, Jr. and (ndres *oriano from *an igue %nternationa , %nc. and?or its successors ininterest, the Petition to produce and inspect the same is here y 60"%06, as petitioner movantis not a stoc ho der of *an igue %nternationa , %nc. and has, therefore, no inherent right toinspect said documents<

8. %n view of the anifestation of petitioner movant dated "ovem er 29, 197A, withdrawing hisre=uest to copy and inspect the management contract etween *an igue !orporation and (.*oriano !orporation and the renewa and amendments thereof for the reason that he had

a ready o tained the same, the !ommission ta es note thereof< and

). $ina y, the !ommission ho ds in a eyance the reso ution on the matter of production andinspection of the authority of the stoc ho ders of *an igue !orporation to invest the funds ofrespondent corporation in *an igue %nternationa , %nc., unti after the hearing on the merits ofthe principa issues in the a ove entit ed case.

:his &rder is immediate y e;ecutory upon its approva . 2

6issatisfied with the foregoing &rder, petitioner moved for its reconsideration.


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eanwhi e, on 6ecem er 1#, 197A, whi e the petition was yet to e heard, respondent corporation issued a notice ofspecia stoc ho ders' meeting for the purpose of ratification and confirmation of the amendment to the 3y aws ,setting such meeting for $e ruary 1#, 1977. :his prompted petitioner to as respondent !ommission for a summary

judgment insofar as the first cause of action is concerned, for the a eged reason that y ca ing a specia stoc ho ders'meeting for the aforesaid purpose, private respondents admitted the inva idity of the amendments of *eptem er 1 ,197A. :he motion for summary judgment was opposed y private respondents. Pending action on the motion,petitioner fi ed an rgent otion for the %ssuance of a :emporary +estraining &rder , praying that pending thedetermination of petitioner's app ication for the issuance of a pre iminary injunction and?or petitioner's motion forsummary judgment, a temporary restraining order e issued, restraining respondents from ho ding the speciastoc ho der's meeting as schedu ed. :his motion was du y opposed y respondents.

&n $e ruary 1#, 1977, respondent !ommission issued an order denying the motion for issuance of temporaryrestraining order. (fter receipt of the order of denia , respondents conducted the specia stoc ho ders' meeting whereinthe amendments to the y aws were ratified. &n $e ruary 1), 1977, petitioner fi ed a conso idated motion forcontempt and for nu ification of the specia stoc ho ders' meeting.

( motion for reconsideration of the order denying petitioner's motion for summar y judgment was fi ed y petitionerefore respondent !ommission on arch 1#, 1977. Petitioner a eges that up to the time of the fi ing of the instant

petition, the said motion had not yet een schedu ed for hearing. i ewise, the motion for reconsideration of the ordergranting in part and denying in part petitioner's motion for production of record had not yet een reso ved.

%n view of the fact that the annu stoc ho ders' meeting of respondent corporation had een schedu ed for ay 1#,1977, petitioner fi ed with respondent !ommission a anifestation stating that he intended to run for the position ofdirector of respondent corporation. :hereafter, respondents fi ed a anifestation with respondent !ommission,su mitting a +eso ution of the 3oard of 6irectors of respondent corporation dis=ua ifying and prec uding petitioner from

eing a candidate for director un ess he cou d su mit evidence on ay 8, 1977 that he does not come within the

dis=ua ifications specified in the amendment to the y aws, su ject matter of *0! !ase "o. 1875. 3y reason thereof,petitioner fi ed a manifestation and motion to reso ve pending incidents in the case and to issue a writ of injunction,a eging that private respondents were see ing to nu ify and render ineffectua the e;ercise of jurisdiction y therespondent !ommission, to petitioner's irrepara e damage and prejudice, ( eged y despite a su se=uent

anifestation to prod respondent !ommission to act, petitioner was not heard prior to the date of the stoc ho ders'meeting.

Petitioner a eges that there appears a de i erate and concerted ina i ity on the part of the *0! to act hence petitionercame to this !ourt.

E'. 'A E ). /340

Petitioner i ewise a eges that, having discovered that respondent corporation has een investing corporate funds inother corporations and usinesses outside of the primary purpose c ause of the corporation, in vio ation of section 171?2 of the !orporation aw, he fi ed with respondent !ommission, on January 2#, 1977, a petition see ing to haveprivate respondents (ndres . *oriano, Jr. and Jose . *oriano, as we as the respondent corporation dec ared gui tyof such vio ation, and ordered to account for such investments and to answer for damages.

&n $e ruary ), 1977, motions to dismiss were fi ed y private respondents, to which a conso idated motion to stri eand to dec are individua respondents in defau t and an opposition ad a#undantiorem cautelam were fi ed y petitioner.6espite the fact that said motions were fi ed as ear y as $e ruary ), 1977, the commission acted thereon on y on (pri25, 1977, when it denied respondents' motion to dismiss and gave them two C2D days within which to fi e their answer,and set the case for hearing on (pri 29 and ay 8, 1977.

+espondents issued notices of the annua stoc ho ders' meeting, inc uding in the (genda thereof, the fo owingB

A. +e affirmation of the authori4ation to the 3oard of 6irectors y the stoc ho ders at themeeting on arch 2#, 1972 to invest corporate funds in other companies or usinesses or forpurposes other than the main purpose for which the !orporation has een organi4ed, andratification of the investments thereafter made pursuant thereto.

3y reason of the foregoing, on (pri 2 , 1977, petitioner fi ed with the *0! an urgent motion for the issuance of a writof pre iminary injunction to restrain private respondents from ta ing up %tem A of the (genda at the annuastoc ho ders' meeting, re=uesting that the same e set for hearing on ay 8, 1977, the date set for the second hearingof the case on the merits. +espondent !ommission, however, cance ed the dates of hearing origina y schedu ed andreset the same to ay 1A and 17, 1977, or after the schedu ed annua stoc ho ders' meeting. $or the purpose ofurging the !ommission to act, petitioner fi ed an urgent manifestation on ay 8, 1977, ut this notwithstanding, no

action has een ta en up to the date of the fi ing of the instant petition.

@ith respect to the afore mentioned *0! cases, it is petitioner's contention efore this !ourt that respondent!ommission grave y a used its discretion when it fai ed to act with de i erate dispatch on the motions of petitionersee ing to prevent i ega and?or ar itrary impositions or imitations upon his rights as stoc ho der of respondentcorporation, and that respondent are acting oppressive y against petitioner, in gross derogation of petitioner's rights toproperty and due process. /e prayed that this !ourt direct respondent *0! to act on co atera incidents pending

efore it.

&n ay A, 1977, this !ourt issued a temporary restraining order restraining private respondents from dis=ua ifying orpreventing petitioner from running or from eing voted as director of respondent corporation and from su mitting forratification or confirmation or from causing the ratification or confirmation of %tem A of the (genda of the annuastoc ho ders' meeting on ay 1#, 1977, or from a ing effective the amended y aws of respondent corporation, untifurther orders from this !ourt or unti the *ecurities and 0; change !ommission acts on the matters comp ained of inthe instant petition.

&n ay 1), 1977, petitioner fi ed a *upp ementa Petition, a eging that after a restraining order had een issued ythis !ourt, or on ay 9, 1977, the respondent !ommission served upon petitioner copies of the fo owing ordersB

C1D &rder "o. ))9, *eries of 1977 C*0! !ase "o. 1875D< denying petitioner's motion for reconsideration, with itssupp ement, of the order of the !ommission denying in part petitioner's motion for production of documents,petitioner's motion for reconsideration of the order denying the issuance of a temporary restraining order denying theissuance of a temporary restraining order, and petitioner's conso idated motion to dec are respondents in contemptand to nu ify the stoc ho ders' meeting<

C2D &rder "o. )5#, *eries of 1977 C*0! !ase "o. 1875D, a owing petitioner to run as a director of respondentcorporation ut stating that he shou d not sit as such if e ected, unti such time that the !ommission has decided theva idity of the y aws in dispute, and denying deferment of %tem A of the (genda for the annua stoc ho ders' meeting<and

C8D &rder "o. )51, *eries of 1977 C*0! !ase "o. 1875D, denying petitioner's motion for reconsideration of the order of respondent !ommission denying petitioner's motion for summary judgment<

%t is petitioner's assertions, anent the foregoing orders, C1D that respondent !ommission acted with indecent haste andwithout circumspection in issuing the aforesaid orders to petitioner's irrepara e damage and injury< C2D that it actedwithout jurisdiction and in vio ation of petitioner's right to due process when it decided en #anc an issue not raised

efore it and sti pending efore one of its !ommissioners, and without hearing petitioner thereon despite petitioner'sre=uest to have the same ca endared for hearing , and C8D that the respondents acted oppressive y against thepetitioner in vio ation of his rights as a stoc ho der, warranting immediate judicia intervention.


5/97

%t is prayed in the supp ementa petition that the *0! orders comp ained of e dec ared nu and void and thatrespondent !ommission e ordered to a ow petitioner to underta e discovery proceedings re ative to *an igue%nternationa . %nc. and thereafter to decide *0! !ases "o. 1875 and 1)28 on the merits.

&n ay 17, 1977, respondent *0!, (ndres . *oriano, Jr. and Jose . *oriano fi ed their comment, a eging that thepetition is without merit for the fo owing reasonsB

C1D that the petitioner the interest he represents are engaged in usiness competitive and antagonistic to that ofrespondent *an igue !orporation, it appearing that the owns and contro s a greater portion of his * ! stoc thruthe niversa +o ina !orporation and the !onso idated $oods !orporation, which corporations are engaged in

usiness direct y and su stantia y competing with the a ied usinesses of respondent * ! and of corporations inwhich * ! has su stantia investments. $urther, when !$! and +o ina had accumu ated investments. $urther, when!$! and +o ina had accumu ated shares in * !, the 3oard of 6irectors of * ! rea i4ed the c ear and presentdanger that competitors or antagonistic parties may e e ected directors and there y have easy and direct access to* !'s usiness and trade secrets and p ans<

C2D that the amended y aw were adopted to preserve and protect respondent * ! from the c ear and present danger that usiness competitors, if a owed to ecome directors, wi i ega y and unfair y uti i4e their direct access to its

usiness secrets and p ans for their own private gain to the irrepara e prejudice of respondent * !, and, u timate y,its stoc ho ders. $urther, it is asserted that mem ership of a competitor in the 3oard of 6irectors is a atant disregardof no ess that the !onstitution and pertinent aws against com inations in restraint of trade<

C8D that y aws are va id and inding since a corporation has the inherent right and duty to preserve and protect itse fy e;c uding competitors and antogonistic parties, under the aw of se f preservation, and it shou d e a owed a wideatitude in the se ection of means to preserve itse f<

C)D that the de ay in the reso ution and disposition of *0! !ases "os. 1875 and 1)28 was due to petitioner's own actsor omissions, since he fai ed to have the petition to suspend, pendente lite the amended y aws ca endared forhearing. %t was emphasi4ed that it was on y on (pri 29, 1977 that petitioner ca endared the aforesaid petition forsuspension Cpre iminary injunctionD for hearing on ay 8, 1977. :he instant petition eing dated ay ), 1977, it isapparent that respondent !ommission was not given a chance to act with de i erate dispatch , and

C5D that, even assuming that the petition was meritorious was, it has ecome moot and academic ecause respondent!ommission has acted on the pending incidents, comp ained of. %t was, therefore, prayed that the petition edismissed.

&n ay 21, 1977, respondent 0migdio -, :anjuatco, *r. fi ed his comment, a eging that the petition has ecome mootand academic for the reason, among others that the acts of private respondent sought to e enjoined have referenceto the annua meeting of the stoc ho ders of respondent *an igue !orporation, which was he d on may 1#, 1977<that in said meeting, in comp iance with the order of respondent !ommission, petitioner was a owed to run and e

voted for as director< and that in the same meeting, %tem A of the (genda was discussed, voted upon, ratified andconfirmed. $urther it was averred that the =uestions and issues raised y petitioner are pending in the *ecurities and0;change !ommission which has ac=uired jurisdiction over the case, and no hearing on the merits has een had<hence the e evation of these issues efore the *upreme !ourt is premature.

Petitioner fi ed a rep y to the aforesaid comments, stating that the petition presents justicia e =uestions for thedetermination of this !ourt ecause C1D the respondent !ommission acted without circumspection, unfair y andoppresive y against petitioner, warranting the intervention of this !ourt< C2D a derivative suit, such as the instant case, isnot rendered academic y the act of a majority of stoc ho ders, such that the discussion, ratification and confirmationof %tem A of the (genda of the annua stoc ho ders' meeting of ay 1#, 1977 did not render the case moot< that theamendment to the y aws which specifica y ars petitioner from eing a director is void since it deprives him of hisvested rights.

+espondent !ommission, thru the *o icitor -enera , fi ed a separate comment, a eging that after receiving a copy ofthe restraining order issued y this !ourt and noting that the restraining order did not forec ose action y it, the!ommission en #anc issued &rders "os. ))9, )5# and )51 in *0! !ase "o. 1875.

%n answer to the a egation in the supp ementa petition, it states that &rder "o. )5# which denied deferment of %tem Aof the (genda of the annua stoc ho ders' meeting of respondent corporation, too into consideration an urgentmanifestation fi ed with the !ommission y petitioner on ay 8, 1977 which prayed, among others, that the discussionof %tem A of the (genda e deferred. :he reason given for denia of deferment was that such action is within theauthority of the corporation as we as fa ing within the sphere of stoc ho ders' right to now, de i erate upon and?or toe;press their wishes regarding disposition of corporate funds considering that their investments are the ones direct yaffected. %t was a eged that the main petition has, therefore, ecome moot and academic.

&n *eptem er 29,1977, petitioner fi ed a second supp ementa petition with prayer for pre iminary injunction, a egingthat the actuations of respondent *0! tended to deprive him of his right to due process, and that a possi e=uestions on the facts now pending efore the respondent !ommission are now efore this /onora e !ourt whichhas the authority and the competence to act on them as it may see fit. C+eno, pp. 927 92 .D

Petitioner, in his memorandum, su mits the fo owing issues for reso ution<

C1D whether or not the provisions of the amended y aws of respondent corporation, dis=ua ifying a competitor fromnomination or e ection to the 3oard of 6irectors are va id and reasona e<

C2D whether or not respondent *0! grave y a used its discretion in denying petitioner's re=uest for an e;amination ofthe records of *an igue %nternationa , %nc., a fu y owned su sidiary of *an igue !orporation< and

C8D whether or not respondent *0! committed grave a use of discretion in a owing discussion of %tem A of the (gendaof the (nnua *toc ho ders' eeting on ay 1#, 1977, and the ratification of the investment in a foreign corporation ofthe corporate funds, a eged y in vio ation of section 17 1?2 of the !orporation aw.

%

56et6er or not amended #*7la(s are valid is purel* a le%al question (6ic6 pu#lic interest requires to #e resolved 8

%t is the position of the petitioner that it is not necessary to remand the case to respondent *0! for an appropriateru ing on the intrinsic va idity of the amended y aws in comp iance with the princip e of e;haustion of administrativeremedies , considering thatB firstB whether or not the provisions of the amended y aws are intrinsica y va id ... ispure y a ega =uestion. :here is no factua dispute as to what the provisions are and evidence is not necessary todetermine whether such amended y aws are va id as framed and approved ... < secondB it is for the interest andguidance of the pu ic that an immediate and fina ru ing on the =uestion e made ... < thirdB petitioner was denied

due process y *0! when !ommissioner de -u4man had open y shown prejudice against petitioner ... , and!ommissioner *u it ... approved the amended y aws ex7parte and o vious y found the same intrinsica y va id< and

fina yB to remand the case to *0! wou d on y entai de ay rather than serve the ends of justice.

+espondents (ndres . *oriano, Jr. and Jose . *oriano simi ar y pray that this !ourt reso ve the ega issues raisedy the parties in eeping with the cherished ru es of procedure that a court shou d a ways strive to sett e the entire

controversy in a sing e proceeding eaving no root or ranch to ear the seeds of future igiation , citing a*on% v.a*os. :o the same effect is the prayer of *an igue !orporation that this !ourt reso ve on the merits the va idity of

its amended y aws and the rights and o igations of the parties thereunder, otherwise the time spent and efforte;erted y the parties concerned and, more important y, y this /onora e !ourt, wou d have een for naught ecausethe main =uestion wi come ac to this /onora e !ourt for fina reso ution. +espondent 0duardo +. >isaya su mitsa simi ar appea .


6/97

%t is on y the *o icitor -enera who contends that the case shou d e remanded to the *0! for hearing and decision ofthe issues invo ved, invo ing the atter's primary jurisdiction to hear and decide case invo ving intra corporatecontroversies.

%t is an accepted ru e of procedure that the *upreme !ourt shou d a ways strive to sett e the entire controversy in asing e proceeding, eaving nor root or ranch to ear the seeds of future itigation. 4 :hus, in 9rancisco v. 'it* of$avao, 5 this !ourt reso ved to decide the case on the merits instead of remanding it to the tria court for furtherproceedings since the ends of justice wou d not e su served y the remand of the case. %n !epu#lic v. ecurit*'redit and Acceptance 'orporation, et al., 6 this !ourt, finding that the main issue is one of aw, reso ved to decide thecase on the merits ecause pu ic interest demands an ear y disposition of the case , and in !epu#lic v. 'entral

uret* and :nsurance 'ompan*, 7 this !ourt denied remand of the third party comp aint to the tria court for further

proceedings, citing precedent where this !ourt, in simi ar situations reso ved to decide the cases on the merits, insteadof remanding them to the tria court where CaD the ends of justice wou d not e su served y the remand of the case< or C D where pu ic interest demand an ear y disposition of the case< or CcD where the tria court had a ready received athe evidence presented y oth parties and the *upreme !ourt is now in a position, ased upon said evidence, todecide the case on its merits. %t is sett ed that the doctrine of primary jurisdiction has no app ication where on y a=uestion of aw is invo ved. a 3ecause uniformity may e secured through review y a sing e *upreme !ourt,=uestions of aw may appropriate y e determined in the first instance y courts. : %n the case at ar, there are factswhich cannot e denied, vi4.B that the amended y aws were adopted y the 3oard of 6irectors of the *an igue!orporation in the e;ercise of the power de egated y the stoc ho ders ostensi y pursuant to section 22 of the!orporation aw< that in a specia meeting on $e ruary 1#, 1977 he d specia y for that purpose, the amended y awswere ratified y more than #F of the stoc ho ders of record< that the foreign investment in the /ong ong 3reweryand 6iste ery, a eer manufacturing company in /ong ong, was made y the *an igue !orporation in 19) < andthat in the stoc ho ders' annua meeting he d in 1972 and 1977, a foreign investments and operations of *an igue!orporation were ratified y the stoc ho ders.

%%

56et6er or not t6e amended #*7la(s of +' of disqualif*in% a competitor from nomination or election to t6e Board of$irectors of +' are valid and reasona#le 8

:he va idity or reasona eness of a y aw of a corporation in pure y a =uestion of aw. 9 @hether the y aw is inconf ict with the aw of the and, or with the charter of the corporation, or is in a ega sense unreasona e and thereforeun awfu is a =uestion of aw.10 :his ru e is su ject, however, to the imitation that where the reasona eness of a y

aw is a mere matter of judgment, and one upon which reasona e minds must necessari y differ, a court wou d not ewarranted in su stituting its judgment instead of the judgment of those who are authori4ed to ma e y aws and whohave e;ercised their authority. 11

Petitioner c aims that the amended y aws are inva id and unreasona e ecause they were tai ored to suppress theminority and prevent them from having representation in the 3oard , at the same time depriving petitioner of his

vested right to e voted for and to vote for a person of his choice as director.

pon the other hand, respondents (ndres . *oriano, Jr., Jose . *oriano and *an igue !orporation content thate;. conc usion of a competitor from the 3oard is egitimate corporate purpose, considering that eing a competitor,petitioner cannot devote an unse fish and undivided oya ty to the corporation< that it is essentia y a preventivemeasure to assure stoc ho ders of *an igue !orporation of reasona e protective from the unrestrained se f interestof those charged with the promotion of the corporate enterprise< that access to confidentia information y a competitor may resu t either in the promotion of the interest of the competitor at the e;pense of the *an igue !orporation, or thepromotion of oth the interests of petitioner and respondent *an igue !orporation, which may, therefore, resu t in acom ination or agreement in vio ation of (rtic e 1 A of the +evised Pena !ode y destroying free competition to thedetriment of the consuming pu ic. %t is further argued that there is not vested right of any stoc ho der under Phi ippine

aw to e voted as director of a corporation. %t is a eged that petitioner, as of ay A, 197 , has e;ercised, persona yor thru two corporations owned or contro ed y him, contro over the fo owing shareho dings in *an igue

!orporation, vis .B CaD John -o ongwei, Jr. G A,825 shares< C D niversa +o ina !orporation G 78 ,A)7 shares< CcD!$! !orporation G A5 ,818 shares, or a tota of 1,)#8,2 5 shares. *ince the outstanding capita stoc of *an igue!orporation, as of the present date, is represented y 88,189,7)9 shares with a par va ue of P1#.##, the tota sharesowned or contro ed y petitioner represents ).28))F of the tota outstanding capita stoc of *an igue !orporation.%t is a so contended that petitioner is the president and su stantia stoc ho der of niversa +o ina !orporation and!$! !orporation, oth of which are a eged y contro ed y petitioner and mem ers of his fami y. %t is a so c aimed that

oth the niversa +o ina !orporation and the !$! !orporation are engaged in usinesses direct y and su stantia ycompeting with the a eged usinesses of *an igue !orporation, and of corporations in which * ! has su stantiainvestments.

ALLE E$ A!EA )9 ')+ ET:T:) BET5EE ET:T:) E!; ')! )!AT:) A $ A +:


7/97

A )9 ')! )!AT:) T) !E '!:BE ? ') 9E!!E$B> LA5

Private respondents contend that the disputed amended y aws were adopted y the 3oard of 6irectors of *anigue !orporation a , a measure of se f defense to protect the corporation from the c ear and present danger that the

e ection of a usiness competitor to the 3oard may cause upon the corporation and the other stoc ho ders insepara eprejudice. *u mitted for reso ution, therefore, is the issue G whether or not respondent *an igue !orporation cou d,as a measure of se f protection, dis=ua ify a competitor from nomination and e ection to its 3oard of 6irectors.

%t is recogni4ed y an authorities that 'every corporation has the inherent power to adopt y aws 'for its internagovernment, and to regu ate the conduct and prescri e the rights and duties of its mem ers towards itse f and amongthemse ves in reference to the management of its affairs. 12 (t common aw, the ru e was that the power to ma e andadopt y aws was in6erent in every corporation as one of its necessary and insepara e ega incidents. (nd it issett ed throughout the nited *tates that in the a sence of positive egis ative provisions imiting it, every privatecorporation has this inherent power as one of its necessary and insepara e ega incidents, independent of anyspecific ena ing provision in its charter or in genera aw, such power of se f government eing essentia to ena e thecorporation to accomp ish the purposes of its creation. 1

%n this jurisdiction, under section 21 of the !orporation aw, a corporation may prescri e in its y aws the=ua ifications, duties and compensation of directors, officers and emp oyees ... :his must necessari y refer to a=ua ification in addition to that specified y section 8# of the !orporation aw, which provides that every director mustown in his right at east one share of the capita stoc of the stoc corporation of which he is a director ... %novernment v. El =o%ar, 14 the !ourt sustained the va idity of a provision in the corporate y aw re=uiring thatpersons e ected to the 3oard of 6irectors must e ho ders of shares of the paid up va ue of P5,###.##, which sha ehe d as security for their action, on the ground that section 21 of the !orporation aw e;press y gives the power to thecorporation to provide in its y aws for the =ua ifications of directors and is high y prudent and in conformity with good

practice.

) -E TE$ !: =T )9 T)' =)L$E! T) BE ELE'TE$ $:!E'T)!

(ny person who uys stoc in a corporation does so with the now edge that its affairs are dominated #* a majorit* ofthe stoc ho ders and that 6e impliedl* contracts t6at t6e (ill of the majority sha govern in a matters within the imitsof the act of incorporation and awfu y enacted y aws and not for idden y aw.15 :o this e;tent, therefore, thestoc ho der may e considered to have parted with his persona right or privi ege to regu ate the disposition of hisproperty which he has invested in the capita stoc of the corporation, and surrendered it to the wi of the majority ofhis fe ow incorporators. ... %t cannot therefore e just y said that the contract, e;press or imp ied, etween thecorporation and the stoc ho ders is infringed ... y any act of the former which is authori4ed y a majority ... . 16

ursuant to section / of t6e 'orporation La(, an* corporation ma* amend its articles of incorporation #* a vote or(ritten assent of t6e stoc 6olders representin% at least t(o7t6irds of t6e su#scri#ed capital stoc of t6e corporation :ft6e amendment c6an%es, diminis6es or restricts t6e ri%6ts of t6e existin% s6are6olders t6en t6e disentin% minorit* 6asonl* one ri%6t, viz.C to o ject thereto in writing and demand payment for his share. nder section 22 of the same aw,the owners of the majority of the su scri ed capita stoc may amend or repea any y aw or adopt new y aws. %tcannot e said, therefore, that petitioner has a vested right to e e ected director, in the face of the fact that the aw atthe time such right as stoc ho der was ac=uired contained the prescription that the corporate charter and the y awsha e su ject to amendment, a teration and modification. 17

%t eing sett ed that the corporation has the power to provide for the =ua ifications of its directors, the ne;t =uestion thatmust e considered is whether the dis=ua ification of a competitor from eing e ected to the 3oard of 6irectors is areasona e e;ercise of corporate authorit y.

A $:!E'T)! TA $ : A 9:$7LA5 5=:'= !E $E! A T)' =)L$E! : EL: :BLE T) BE$:!E'T)!, :9 =E BE AL ) $:!E'T)! : A ')! )!AT:) 5=) E B< : E : : ')+ ET:T:) 5:T=T=AT )9 T=E )T=E! ')! )!AT:) , =A BEE < TA: E$ A -AL:$

%t is a sett ed state aw in the nited *tates, according to $ etcher, that corporations have the power to ma e y awsdec aring a person emp oyed in the service of a riva company to e ine igi e for the corporation's 3oard of


8/97

6irectors. ... C(Dn amendment which renders ine igi e, or if e ected, su jects to remova , a director if he e a so adirector in a corporation whose usiness is in competition with or is antagonistic to the other corporation isva id.24 :his is ased upon the princip e that where the director is so emp oyed in the service of a riva company, hecannot serve oth, ut must etray one or the other. *uch an amendment advances the enefit of the corporation andis good. (n e;ception e;ists in "ew Jersey, where the *upreme !ourt he d that the !orporation aw in "ew Jerseyprescri ed the on y =ua ification, and therefore the corporation was not empowered to add additiona=ua ifications.25 :his is the e;act opposite of the situation in the Phi ippines ecause as stated heretofore, section 21of the !orporation aw e;press y provides that a corporation may ma e y aws for the =ua ifications of directors.:hus, it has een he d that an officer of a corporation cannot engage in a usiness in direct competition with that of thecorporation where he is a director y uti i4ing information he has received as such officer, under the esta ished awthat a director or officer of a corporation may not enter into a competing enterprise which cripp es or injures the

usiness of the corporation of which he is an officer or director. 26

%t is a so we esta ished that corporate officers are not permitted to use their position of trust and confidence tofurther their private interests. 27 %n a case where directors of a corporation cance ed a contract of the corporation fore;c usive sa e of a foreign firm's products, and after esta ishing a riva usiness, the directors entered into a newcontract themse ves with the foreign firm for e;c usive sa e of its products, the court he d that e=uity wou d regard thenew contract as an offshoot of the o d contract and, therefore, for the enefit of the corporation, as a fau t ess fiduciarymay not reap the fruits of his misconduct to the e;c usion of his principa . 2

:he doctrine of corporate opportunity 29 is precise y a recognition y the courts that the fiduciary standards cou d note uphe d where the fiduciary was acting for two entities with competing interests. :his doctrine rests fundamenta y on

the unfairness, in particu ar circumstances, of an officer or director ta ing advantage of an opportunity for his ownpersona profit when the interest of the corporation just y ca s for protection. 0

%t is not denied that a mem er of the 3oard of 6irectors of the *an igue !orporation has access to sensitive and

high y confidentia information, such asB CaD mar eting strategies and pricing structure< C D udget for e;pansion anddiversification< CcD research and deve opment< and CdD sources of funding, avai a i ity of personne , proposa s ofmergers or tie ups with other firms.

%t is o vious y to prevent the creation of an opportunity for an officer or director of *an igue !orporation, who is a sothe officer or owner of a competing corporation, from ta ing advantage of the information which he ac=uires as director to promote his individua or corporate interests to the prejudice of *an igue !orporation and its stoc ho ders, thatthe =uestioned amendment of the y aws was made. !ertain y, where two corporations are competitive in asu stantia sense, it wou d seem impro a e, if not impossi e, for the director, if he were to discharge effective y hisduty, to satisfy his oya ty to oth corporations and p ace the performance of his corporation duties a ove his personaconcerns.

:hus, in +c ee & 'o. v. 9irst ational Ban of an $ie%o , supra the court sustained as va id and reasona e anamendment to the y aws of a an , re=uiring that its directors shou d not e directors, officers, emp oyees, agents,nominees or attorneys of any other an ing corporation, affi iate or su sidiary thereof. !hief Judge Par er,

in +c ee, e;p ained the reasons of the court, thusB

... ( an director has access to a great dea of informati on concerning the usiness and p ansof a an which wou d i e y e injurious to the an if nown to another an , and it wasreasona e and prudent to en arge this minimum dis=ua ification to inc ude any director, officer,emp oyee, agent, nominee, or attorney of any other an in !a ifornia. :he As6 ins case,supra, specifica y recogni4es protection against riva s and others who might ac=uireinformation which mi%6t e used against the interests of the corporation as a egitimate o jectof y aw protection. @ith respect to attorneys or persons associated with a firm which isattorney for another an , in addition to the direct conf ict or potentia conf ict of interest, thereis a so the danger of inadvertent ea age of confidentia information through casua officediscussions or accessi i ity of fi es. 6efendant's directors determined that its we fare was est

protected if this opportunity for conf icting oya ties and potentia misuse and ea age ofconfidentia information was forec osed.

%n+c ee the !ourt further isted =ua ificationa y aws uphe d y the courts, as fo owsB

C1D ( director sha not e direct y or indirect y interested as a stoc ho der in any other firm,company, or association which competes with the su ject corporation.

C2D ( director sha not e the immediate mem er of the fami y of any stoc ho der in any otherfirm, company, or association which competes with the su ject corporation,

C8D ( director sha not e an officer, agent, emp oyee, attorney, or trustee in any other firm,company, or association which compete with the su ject corporation.

C)D ( director sha e of good mora character as an essentia =ua ification to ho ding office.

C5D "o person who is an attorney against the corporation in a aw suit is e igi e for service onthe oard. C(t p. 7.D

:hese are not ased on theorica a stractions ut on human e;perience G that a person cannot serve two hosti emasters without detriment to one of them.

:he offer and assurance of petitioner that to avoid any possi i ity of his ta ing unfair advantage of his position asdirector of *an igue !orporation, he wou d a sent himse f from meetings at which confidentia matters wou d ediscussed, wou d not detract from the va idity and reasona eness of the y aws here invo ved. (part from theimpractica resu ts that wou d ensue from such arrangement, it wou d e inconsistent with petitioner's primary motive inrunning for oard mem ership G which is to protect his investments in *an igue !orporation. ore important, sucha proposed norm of conduct wou d e against a accepted princip es under ying a director's duty of fide ity to thecorporation, for the po icy of the aw is to encourage and enforce responsi e corporate management. (s e;p ained y& ec B1 :he aw win not to erate the passive attitude of directors ... without active and conscientious participation inthe manageria functions of the company. (s directors, it is their duty to contro and supervise the day to day usinessactivities of the company or to promu gate definite po icies and ru es of guidance with a vigi ant eye toward seeing to itthat these po icies are carried out. %t is on y then that directors may e said to have fu fi ed their duty of fea ty to thecorporation.

*ound princip es of corporate management counse against sharing sensitive information with a director whosefiduciary duty of oya ty may we re=uire that he disc ose this information to a competitive arriva . :hese dangers areenhanced considera y where the common director such as the petitioner is a contro ing stoc ho der of two of thecompeting corporations. %t wou d seem manifest that in such situations, the director has an economic incentive to

appropriate for the enefit of his own corporation the corporate p ans and po icies of the corporation where he sits asdirector.

%ndeed, access y a competitor to confidentia information regarding mar eting strategies and pricing po icies of *anigue !orporation wou d su ject the atter to a competitive disadvantage and unjust y enrich the competitor, for

advance now edge y the competitor of the strategies for the deve opment of e;isting or new mar ets of e;isting ornew products cou d ena e said competitor to uti i4e such now edge to his advantage. 2

:here is another important consideration in determining whether or not the amended y aws are reasona e. :he!onstitution and the aw prohi it com inations in restraint of trade or unfair competition. :hus, section 2 of (rtic e K%>of the !onstitution providesB :he *tate sha regu ate or prohi it private monopo ies when the pu ic interest sore=uires. "o com inations in restraint of trade or unfair competition sha e snowed.


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(rtic e 1 A of the +evised Pena !ode a so providesB

(rt. 1 A. +onopolies and com#inations in restraint of trade . G:he pena ty of prisioncorrecciona in its minimum period or a fine ranging from two hundred to si; thousand pesos, or

oth, sha e imposed uponB

1. (ny person who sha enter into any contract or agreement or sha ta e part in anyconspiracy or com ination in the form of a trust or otherwise, in restraint of trade or commerceor to prevent y artificia means free competition in the mar et.

2. (ny person who shag monopo i4e any merchandise or o ject of trade or commerce, or shacom ine with any other person or persons to monopo i4e said merchandise or o ject in order toa ter the price thereof y spreading fa se rumors or ma ing use of any other artifice to restrainfree competition in the mar et.

8. (ny person who, eing a manufacturer, producer, or processor of any merchandise or o jectof commerce or an importer of any merchandise or o ject of commerce from any foreigncountry, either as principa or agent, who esa e or retai er, sha com ine, conspire or agree inany manner with any person i ewise engaged in the manufacture, production, processing,assem ing or importation of such merchandise or o ject of commerce or with any otherpersons not so simi ar y engaged for the purpose of ma ing transactions prejudicia to awfucommerce, or of increasing the mar et price in any part of the Phi ippines, or any suchmerchandise or o ject of commerce manufactured, produced, processed, assem ed in orimported into the Phi ippines, or of any artic e in the manufacture of which such manufactured,produced, processed, or imported merchandise or o ject of commerce is used.

:here are other egis ation in this jurisdiction, which prohi it monopo ies and com inations in restraint of trade.

3asica y, these anti trust aws or aws against monopo ies or com inations in restraint of trade are aimed at raisingeve s of competition y improving the consumers' effectiveness as the fina ar iter in free mar ets. :hese aws are

designed to preserve free and unfettered competition as the ru e of trade. %t rests on the premise that the unrestrainedinteraction of competitive forces wi yie d the est a ocation of our economic resources, the owest prices and thehighest =ua ity ... . 4 they operate to foresta concentration of economic power. 5 :he aw against monopo ies andcom inations in restraint of trade is aimed at contracts and com inations that, y reason of the inherent nature of thecontemp ated acts, prejudice the pu ic interest y undu y restraining competition or undu y o structing the course oftrade. 6

:he terms monopo y , com ination in restraint of trade and unfair competition appear to have a we definedmeaning in other jurisdictions. ( monopo y em races any com ination the tendency of which is to preventcompetition in the road and genera sense, or to contro prices to the detriment of the pu ic. 7 %n short, it is the

concentration of usiness in the hands of a few. :he materia consideration in determining its e;istence is not thatprices are raised and competition actua y e;c uded, ut that po(er e;ists to raise prices or e;c ude competition whendesired. $urther, it must e considered that the %dea of monopo y is now understood to inc ude a condition produced

y the mere act of individua s. %ts dominant thought is the notion of e;c usiveness or unity, or the suppression ofcompetition y the =ua ification of interest or management, or it may e thru agreement and concert of action. %t is, in

rief, unified tactics with regard to prices. 9

$rom the foregoing definitions, it is apparent that the contentions of petitioner are not in accord with rea ity. :hee ection of petitioner to the 3oard of respondent !orporation can ring a out an i ega situation. :his is ecause ane;press agreement is not necessary for the e;istence of a com ination or conspiracy in restraint of trade. 40 %t isenough that a concert of action is contemp ated and that the defendants conformed to the arrangements, 41 and whatis to e considered is what the parties actua y did and not the words they used. $or instance, the ! ayton (ct prohi its

a person from serving at the same time as a director in any two or more corporations, if such corporations are, yvirtue of their usiness and ocation of operation, competitors so that the e imination of competition etween themwou d constitute vio ation of any provision of the anti trust aws.42 :here is here a statutory recognition of the anticompetitive dangers which may arise when an individua simu taneous y acts as a director of two or more competingcorporations. ( common director of two or more competing corporations wou d have access to confidentia sa es,pricing and mar eting information and wou d e in a position to coordinate po icies or to aid one corporation at thee;pense of another, there y stif ing competition. :his situation has een apt y e;p ained y :ravers, thusB

:he argument for prohi iting competing corporations from sharing even one director is thatthe interloc permits t6e coordination of policies #et(een nominall* independent firms to anextent t6at competition #et(een t6em ma* #e completel* eliminated . %ndeed, if a director, for

e;amp e, is to e faithfu to oth corporations, some accommodation must resu t. *uppose K isa director of oth !orporation ( and !orporation 3. K cou d hard y vote for a po icy y ( thatwou d injure 3 without vio ating his duty of oya ty to 3 at the same time he cou d hard y a stainfrom voting without depriving ( of his est judgment. :f t6e firms reall* do compete G in thesense of vying for economic advantage at the e;pense of the other G t6ere can 6ardl* #e an*reason for an inter oc etween competitors other than the suppression ofcompetition. 4 C0mphasis supp ied.D

(ccording to the +eport of the /ouse Judiciary !ommittee of the . *. !ongress on section 9 of the ! ayton (ct, itwas esta ished thatB 3y means of the inter oc ing directorates one man or group of men have een a e to dominateand contro a great num er of corporations ... to the detriment of the sma ones dependent upon them and to the injuryof the pu ic.44

*hared information on cost accounting may ead to price fi;ing. !ertain y, shared information on production, orders,shipments, capacity and inventories may ead to contro of production for the purpose of contro ing prices.

& vious y, if a competitor has access to the pricing po icy and cost conditions of the products of *an igue!orporation, the essence of competition in a free mar et for the purpose of serving the owest priced goods to theconsuming pu ic wou d e frustrated, :he competitor cou d so manipu ate the prices of his products or vary itsmar eting strategies y region or y rand in order to get the most out of the consumers. @here the two competingfirms contro a su stantia segment of the mar et this cou d ead to co usion and com ination in restraint of trade.+eason and e;perience point to the inevita e conc usion that the inherent tendency of inter oc ing directorates

etween companies that are re ated to each other as competitors is to unt the edge of riva ry etween thecorporations, to see out ways of compromising opposing interests, and thus e iminate competition. (s respondent* ! apt y o serves, now edge y !$! +o ina of * !'s costs in various industries and regions in the country winena e the former to practice price discrimination. !$! +o ina can segment the entire consuming popu ation ygeographica areas or income groups and change varying prices in order to ma;imi4e profits from every mar etsegment. !$! +o ina cou d determine the most profita e vo ume at which it cou d produce for every product ine inwhich it competes with * !. (ccess to * ! pricing po icy y !$! +o ina wou d in effect destroy free competitionand deprive the consuming pu ic of opportunity to uy goods of the highest possi e =ua ity at the owest prices.

$ina y, considering that oth +o ina and * ! are, to a certain e;tent, engaged in agricu ture, then the e ection ofpetitioner to the 3oard of * ! may constitute a vio ation of the prohi ition contained in section 18C5D of the!orporation aw. *aid section provides in part that any stoc ho der of more than one corporation organi4ed for thepurpose of engaging in agricu ture may ho d his stoc in such corporations solel* for investment and not for thepurpose of ringing a out or attempting to ring a out a com ination to e;ercise contro of incorporations ... .

"either are @e persuaded y the c aim that the y aw was %ntended to prevent the candidacy of petitioner for e ectionto the 3oard. %f the y aw were to e app ied in the case of one stoc ho der ut waived in the case of another, then itcou d e reasona y c aimed that the y aw was eing app ied in a discriminatory manner. /owever, the y aw, y itsterms, app ies to a stoc ho ders. :he e=ua protection c ause of the !onstitution re=uires on y that the y aw operatee=ua y upon a persons of a c ass. 3esides, efore petitioner can e dec ared ine igi e to run for director, there must


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e hearing and evidence must e su mitted to ring his case within the am it of the dis=ua ification. *ound princip esof pu ic po icy and management, therefore, support the view that a y aw which dis=ua ifies a competition frome ection to the 3oard of 6irectors of another corporation is va id and reasona e.

%n the a sence of any ega prohi ition or overriding pu ic po icy, wide atitude may e accorded to the corporation inadopting measures to protect egitimate corporation interests. :hus, where the reasona eness of a y aw is a merematter of judgment, and upon which reasona e minds must necessari y differ, a court wou d not e warranted insu stituting its judgment instead of the judgment of those who are authori4ed to ma e y aws and who havee;pressed their authority. 45

( though it is asserted that the amended y aws confer on the present 3oard powers to perpetua themse ves in power such fears appear to e misp aced. :his power, ut is very nature, is su ject to certain we esta ished imitations.&ne of these is inherent in the very convert and definition of the terms competition and competitor . !ompetitionimp ies a strugg e for advantage etween two or more forces, each possessing, in su stantia y simi ar if not %denticadegree, certain characteristics essentia to the usiness sought. %t means an independent endeavor of two or morepersons to o tain the usiness patronage of a third y offering more advantageous terms as an inducement to securetrade. 46 :he test must e whether the usiness does in fact compete, not whether it is capa e of an indirect andhigh y unsu stantia dup ication of an iso ated or non characteristics activity.47 %t is, therefore, o vious that not everyperson or entity engaged in usiness of the same ind is a competitor. *uch factors as =uantum and p ace of

usiness, %dentity of products and area of competition shou d e ta en into consideration. %t is, therefore, necessary toshow that petitioner's usiness covers a su stantia portion of the same mar ets for simi ar products to the e;tent ofnot ess than 1#F of respondent corporation's mar et for competing products. @hi e @e here sustain the va idity of theamended y aws, it does not fo ow as a necessary conse=uence that petitioner is ipso facto dis=ua ified. !onsonantwith the re=uirement of due process, there must e due hearing at which the petitioner must e given the fu estopportunity to show that he is not covered y the dis=ua ification. (s trustees of the corporation and of thestoc ho ders, it is the responsi i ity of directors to act with fairness to the stoc ho ders. 4 Pursuant to this o igationand to remove any suspicion that this power may e uti i4ed y the incum ent mem ers of the 3oard to perpetuatethemse ves in power, any decision of the 3oard to dis=ua ify a candidate for the 3oard of 6irectors shou d e reviewed

y the *ecurities ehind 0;change !ommission en anc and its decision sha e fina un ess reversed y this !ourton certiorari. 49 %ndeed, it is a sett ed princip e that where the action of a 3oard of 6irectors is an a use of discretion, or for idden y statute, or is against pu ic po icy, or is u tra vires, or is a fraud upon minority stoc ho ders or creditors, orwi resu t in waste, dissipation or misapp ication of the corporation assets, a court of e=uity has the power to grantappropriate re ief. 50

%%%

56et6er or not respondent E' %ravel* a#used its discretion in den*in% petitioner;s request for an examination of t6erecords of an +i%uel :nternational :nc., a full* o(ned su#sidiar* of an +i%uel 'orporation 8

+espondent *an igue !orporation stated in its memorandum that petitioner's c aim that he was denied inspectionrights as stoc ho der of * ! was made in the teeth of undisputed facts that, over a specific period, petitioner had

een furnished numerous documents and information, to witB C1D a comp ete ist of stoc ho ders and theirstoc ho dings< C2D a comp ete ist of pro;ies given y the stoc ho ders for use at the annua stoc ho ders' meeting ofay 1 , 1975< C8D a copy of the minutes of the stoc ho ders' meeting of arch 1 ,197A< C)D a rea down of * !'s

P1 A.A mi ion investment in associated companies and other companies as of 6ecem er 81, 1975< C5D a isting of thesa aries, a owances, onuses and other compensation or remunerations received y the directors and corporateofficers of * !< CAD a copy of the * L1## mi ion 0uro 6o ar oan (greement of * !< and C7D copies of the minutesof all meetings of the 3oard of 6irectors from January 1975 to ay 197A, with de etions of sensitive data, whichde etions were not o jected to y petitioner.

$urther, it was averred that upon re=uest, petitioner was informed in writing on *eptem er 1 , 197A< C1D that * !'sforeign investments are hand ed y *an igue %nternationa , %nc., incorporated in 3ermuda and who y owned y* !< this was * !'s first venture a road, having started in 19) with an initia out ay of I5##,###.##, augmented y

a oan of /ong ong LA mi ion from a foreign an under the persona guaranty of * !'s former President, the ate!o . (ndres *oriano< C2D that as of 6ecem er 81, 1975, the estimated va ue of * % wou d amount to a most P)##mi ion C8D that the tota cash dividends received y * ! from * % since 1958 has amount to * L 9.) mi ion< and C)Dthat from 1972 1975, * % did not dec are cash or stoc dividends, a earnings having een used in ine with aprogram for the setting up of reweries y * %

:hese averments are supported y the affidavit of the !orporate *ecretary, enc osing photocopies of the aforementioned documents. 51

Pursuant to the second paragraph of section 51 of the !orporation aw, CtDhe record of a usiness transactions ofthe corporation and minutes of any meeting sha e open to the inspection of any director, mem er or stoc ho der ofthe corporation at reasona e hours.

:he stoc ho der's right of inspection of the corporation's oo s and records is ased upon their ownership of theassets and property of the corporation. %t is, therefore, an incident of ownership of the corporate property, whether thisownership or interest e termed an e=uita e ownership, a eneficia ownership, or a ownership. 52 :his right ispredicated upon the necessity of se f protection. %t is genera y he d y majority of the courts that where the right isgranted y statute to the stoc ho der, it is given to him as such and must e e;ercised y him with respect to hisinterest as a stoc ho der and for some purpose germane thereto or in the interest of the corporation. 5 %n other words,the inspection has to e germane to the petitioner's interest as a stoc ho der, and has to e proper and awfu incharacter and not inimica to the interest of the corporation. 54 %n re* v. :nsular Lum#er, 55 this !ourt he d that theright to e;amine the oo s of the corporation must e e;ercised in good faith, for specific and honest purpose, and notto gratify curiosity, or for specific and honest purpose, and not to gratify curiosity, or for specu ative or ve;atiouspurposes. :he weight of judicia opinion appears to e, that on app ication for mandamus to enforce the right, it isproper for the court to in=uire into and consider the stoc ho der's good faith and his purpose and motives in see inginspection. 56 :hus, it was he d that the right given y statute is not a so ute and may e refused when the information

is not sought in good faith or is used to the detriment of the corporation.57

3ut the impropriety of purpose such as widefeat enforcement must e set up the corporation defensive y if the !ourt is to ta e cogni4ance of it as a =ua ification.%n other words, the specific provisions ta e from the stoc ho der the urden of showing propriety of purpose and p aceupon the corporation the urden of showing impropriety of purpose or motive. 5 %t appears to e the genera ru e thatstoc ho ders are entit ed to fu information as to the management of the corporation and the manner of e;penditure ofits funds, and to inspection to o tain such information, especia y where it appears that the company is eingmismanaged or that it is eing managed for the persona enefit of officers or directors or certain of the stoc ho ders tothe e;c usion of others. 59

@hi e the right of a stoc ho der to e;amine the oo s and records of a corporation for a awfu purpose is a matter ofaw, the right of such stoc ho der to e;amine the oo s and records of a who y owned su sidiary of the corporation in

which he is a stoc ho der is a different thing.

*ome state courts recogni4e the right under certain conditions, whi e others do not. :hus, it has een he d that wherea corporation owns appro;imate y no property e;cept the shares of stoc of su sidiary corporations which are mere y

agents or instrumenta ities of the ho ding company, the ega fiction of distinct corporate entities may e disregardedand the oo s, papers and documents of a the corporations may e re=uired to e produced for e;amination, 60 andthat a writ of mandamus, may e granted, as the records of the su sidiary were, to a incontents and purposes, therecords of the parent even though su sidiary was not named as a party. 61 mandamus was i ewise he d proper toinspect oth the su sidiary's and the parent corporation's oo s upon proof of sufficient contro or dominion y theparent showing the re ation of principa or agent or something simi ar thereto. 62

&n the other hand, mandamus at the suit of a stoc ho der was refused where the su sidiary corporation is a separateand distinct corporation domici ed and with its oo s and records in another jurisdiction, and is not ega y su ject tothe contro of the parent company, a though it owned a vast majority of the stoc of the su sidiary. 6 i ewise,inspection of the oo s of an a ied corporation y stoc ho der of the parent company which owns a the stoc of the


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su sidiary has een refused on the ground that the stoc ho der was not within the c ass of persons having aninterest. 64

%n the as6 case, 65 :he *upreme !ourt of "ew Mor he d that the contractua right of former stoc ho ders to inspectoo s and records of the corporation inc uded the right to inspect corporation's su sidiaries' oo s and records which

were in corporation's possession and contro in its office in "ew Mor .

%n theBaile* case, 66 stoc ho ders of a corporation were he d entit ed to inspect the records of a contro ed su sidiarycorporation which used the same offices and had %dentica officers and directors.

%n his rgent otion for Production and %nspection of 6ocuments efore respondent *0!, petitioner contended thatrespondent corporation had een attempting to suppress information for the stoc ho ders and that petitioner, asstoc ho der of respondent corporation, is entit ed to copies of some documents which for some reason or another,respondent corporation is very re uctant in revea ing to the petitioner notwithstanding the fact that no harm wou d ecaused there y to the corporation. 67 :here is no =uestion that stoc ho ders are entit ed to inspect the oo s andrecords of a corporation in order to investigate the conduct of the management, determine the financia condition of thecorporation, and genera y ta e an account of the stewardship of the officers and directors. 6

%n the case at ar, considering that the foreign su sidiary is who y owned y respondent *an igue !orporation and,therefore, under its contro , it wou d e more in accord with e=uity, good faith and fair dea ing to construe the statutoryright of petitioner as stoc ho der to inspect the oo s and records of the corporation as e;tending to oo s andrecords of such who y su sidiary which are in respondent corporation's possession and contro .

%>

56et6er or not respondent E' %ravel* a#used its discretion in allo(in% t6e stoc 6olders of respondent corporationto ratif* t6e investment of corporate funds in a forei%n corporation

Petitioner reiterates his contention in *0! !ase "o. 1)28 that respondent corporation invested corporate funds in * %without prior authority of the stoc ho ders, thus vio ating section 17 1?2 of the !orporation aw, and a eges thatrespondent *0! shou d have investigated the charge, eing a statutory offense, instead of a owing ratification of theinvestment y the stoc ho ders.

+espondent *0!'s position is that su mission of the investment to the stoc ho ders for ratification is a soundcorporate practice and shou d not e thwarted ut encouraged.

*ection 17 1?2 of the !orporation aw a ows a corporation to invest its funds in any other corporation or usiness orfor any purpose other than the main purpose for which it was organi4ed provided that its 3oard of 6irectors has eenso authori4ed y the affirmative vote of stoc ho ders ho ding shares entit ing them to e;ercise at east two thirds of the

voting power. %f the investment is made in pursuance of the corporate purpose, it does not need the approva of thestoc ho ders. %t is on y when the purchase of shares is done so e y for investment and not to accomp ish the purposeof its incorporation that the vote of approva of the stoc ho ders ho ding shares entit ing them to e;ercise at east twothirds of the voting power is necessary. 69

(s stated y respondent corporation, the purchase of eer manufacturing faci ities y * ! was an investment in thesame usiness stated as its main purpose in its (rtic es of %ncorporation, which is to manufacture and mar et eer. %tappears that the origina investment was made in 19)7 19) , when * !, then *an igue 3rewery, %nc., purchased a

eer rewery in /ong ong C/ong ong 3rewery H 6isti ery, td.D for the manufacture and mar eting of *an igueeer thereat. +estructuring of the investment was made in 197# 1971 thru the organi4ation of * % in 3ermuda as a ta;

free reorgani4ation.

nder these circumstances, the ru ing in $e la !ama v. +anao u%ar 'entral 'o., :nc., supra, appears re evant. %nsaid case, one of the issues was the ega ity of an investment made y anao *ugar !entra !o., %nc., without priorreso ution approved y the affirmative vote of 2?8 of the stoc ho ders' voting power, in the Phi ippine $i er Processing!o., %nc., a company engaged in the manufacture of sugar ags. :he ower court said that there is more ogic in thestand that if the investment is made in a corporation whose usiness is important to the investing corporation andwou d aid it in its purpose, to re=uire authority of the stoc ho ders wou d e to undu y curtai the power of the 3oard of6irectors. :his !ourt affirmed the ru ing of the court a quo on the matter and, =uoting Prof. *u picio *. -uevara, saidB

j. o(er to acquire or dispose of s6ares or securities. G ( private corporation, in order toaccomp ish is purpose as stated in its artic es of incorporation, and su ject to the imitationsimposed y the !orporation aw, has the power to ac=uire, ho d, mortgage, p edge or dispose

of shares, onds, securities, and other evidence of inde tedness of any domestic or foreigncorporation. uc6 an act, if done in pursuance of t6e corporate purpose, does not need t6eapproval of stoc 6oldersD #ut (6en t6e purc6ase of s6ares of anot6er corporation is donesolel* for investment and not to accomplis6 t6e purpose of its incorporation, t6e vote ofapproval of t6e stoc 6olders is necessar* . %n any case, the purchase of such shares orsecurities must e su ject to the imitations esta ished y the !orporations aw< name y, CaDthat no agricu tura or mining corporation sha e restricted to own not more than 15F of thevoting stoc of nay agricu tura or mining corporation< and CcD that such ho dings sha e so e yfor investment and not for the purpose of ringing a out a monopo y in any ine of commerce of com ination in restraint of trade. :he Phi ippine !orporation aw y *u picio *. -uevara, 19A70d., p. 9D C0mphasis supp ied.D

)#. o(er to invest corporate funds . G ( private corporation has the power to invest itscorporate funds in any other corporation or usiness, or for any purpose other than the mainpurpose for which it was organi4ed, provide that 'its oard of directors has een so authori4edin a reso ution y the affirmative vote of stoc ho ders ho ding shares in the corporation entit ingthem to e;ercise at east two thirds of the voting power on such a propose at a stoc ho ders'meeting ca ed for that purp

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Corpo Cases III