G.R. No. 85339, 11 August 1989
Eduardo de los Angeles was a director appointed by PCGG who sequestered the shares of Andres Soriano III claiming it to belong to Eduardo Conjuangco, a close associate and dummy of then President Marcos. De los Angeles initiated a derivative suit against herein respondents, in behalf of SMC, for the revocation of a Board Resolution adopted to assume the loans incurred by Neptunia Corporation, a foreign company, said to be a wholly-owned subsidiary of SMC. The action was dismissed by the SEC on the grounds that De los Angeles does not have adequate shares to represent the interest of the stockholders and that his assumed role as a PCGG appointed director is inconsistent with his assumed role as a representative of minority stockholders.
1. Whether or not de los Angeles had the personality to bring suit in behalf of the corporation.
2. Whether or not a sequestered stock may be voted by the PCGG to elect a director in the company in which such stock is held.
1. Yes. The bona fide ownership by a stockholder in his own right suffices to invest him with the standing to bring a derivative suit for the benefit of the corporation. The number of his shares is immaterial since he is not suing in his own behalf, or for the protection or vindication of his own particular right, or the redress of a wrong committed against him individually but in behalf and for the benefit of the corporation. The requisites of a derivative suit are the following:1. The party bringing the suit should be a stockholder as of the time of the act or transactions complained of, the number of shares not being material;
2. Exhaustion of intra-corporate remedies (has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea); and
3. The cause of action actually devolves on the corporation and not to the particular stockholder bringing the suit.
The proposition that de los Angeles is legally obliged to vote as the PCGG would have him do, that he cannot legitimately take a position inconsistent with that of the PCGG, or that, not having been elected by the minority stockholders, his vote would necessarily never consider their interests is plainly contrary to a director’s duty to vote according to his own independent judgment and his own conscience as to what is in the best interests of the company.
Moreover, it is undisputed that apart from the qualifying shares given to him by the PCGG, he owns 20 shares in his own right, as regards which he cannot from any aspect be deemed to be “beholden” to the PCGG.
2. YES. It is also theorized, on the authority of the BASECO decision, that the PCGG has no power to vote sequestered shares of stock as an act of dominion but only in pursuance — to its power of administration. But the SC said that there is nothing in the BASECO decision which can be interpreted that way.
On the contrary, that it held such act permissible is evident from the context of its reference to the Presidential Memorandum of June 26, 1986 authorizing the PCGG, “pending the outcome of proceedings to determine the ownership of “sequestered shares of stock,”‘ to vote such shares at all stockholders’ meetings called for the election of directors ..”.
The only caveat is, that the stock is not to be voted simply because the power to do so exists, whether it be to oust and replace directors or to effect substantial changes in corporate policy, programs or practice, but only “for demonstrably weighty and defensible grounds” or “when essential to prevent disappearance or wastage of corporate property.”
*Case Digest by Krishianne Louise C. Labiano, JD – 4, Andres Bonifacio College, SY 2019 – 2020