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[ GR No. 26555, Nov 16, 1926 ]



49 Phil. 609

[ G. R. No. 26555, November 16, 1926 ]




This  is an  original petition  for the writ of certiorari whereby the petitioners, Baldomero Roxas, Enrique Echaus, and Roman J. Lacson, seek to procure the abrogation of an  order of the respondent  judge granting a preliminary injunction in an action  in the Court  of First Instance of Occidental Negros, instituted by Agustin Coruña and Mauro Ledesma against the petitioners and the Binalbagan Estate, Inc.  The cause is now before us  upon the issues made by the answers filed by the respondents.

It appears that the Binalbagan Estate, Inc., is a corporation having its principal plant in  Occidental Negros where it is engaged in the manufacture  of raw sugar from canes grown upon farms accessible to its central.  In July, 1924, the possessors of a majority of the shares of the Binalbagan Estate, Inc., formed a voting trust composed of three members, namely, Salvador Laguda, Segundo Monteblanco, and Arthur F. Fisher, as trustees.  By  the document constituting this voting trust the trustees were authorized to represent and vote the  shares pertaining to their constituents, and to this end the  shareholders undertook to assign  their shares to the trustees on the books of the company.  The total  number of outstanding shares of the corporation is somewhat over 5,500, while the number of shares controlled by the voting trust is less than 3,000.

On February 1, 1926,  the general annual meeting of the shareholders of the Binalbagan Estate, Inc., took  place, at which Mr. J. P. Heilbronn appeared as representative  of the voting trust,  his authority  being  recognized by  the holders of all  the other shares present  at this  meeting.

Upon said  occasion Heilbronn, by virtue of controlling the majority of the shares,  was able to nominate and elect a board  of directors to his  own liking,  without opposition from the minority.  After the board of directors had been thus elected and had qualified, they chose a set of officers consisting  of Jose M. Yusay, president, Timoteo Unson, vice-president,  Jose G. Montalvo, secretary-treasurer, and H. W. Corp and Agustin Coruña, as members.  Said officials immediately entered upon the discharge of their duties and have  continued in possession of their respective offices until the present time.

Since the creation of the voting trust there have been a number of vacancies  caused by resignation or the absence of members  from the Philippine Islands, with the result that various substitutions have been made in the personnel of the voting trust.  At the  present time the petitioners Roxas, Echaus, and Lacson presumably constitute its membership.  We say presumably, because  in the present  proceeding an issue of fact is made by the respondents upon the point whether the three individuals named have been regularly substituted for their several predecessors.  In the view we take of the  case it is not  necessary to determine this issue;  and we shall assume provisionally that the three petitioners are the lawful  components of the voting trust.

Although the present  officers of the  Binalbagan Estate, Inc., were elected by the representative of the voting trust, the present trustees are apparently desirous of ousting said officers, without awaiting the termination of their official term at the expiration of one year from the date of their election.  In order to effect this purpose the petitioners; in their character as members of the voting trust, on August 2, 192.6, caused the secretary of the Binalbagan Estate, Inc., to issue to the shareholders a notice calling for a special general meeting of shareholders to be held at 10 a. m., on August  16, 1926, "for the election of the board  of directors, for the amendment  of the By-Laws, and for any other business  that can be dealt with in said meeting."

Within a few days after said notice was issued Agustin Coruña, as member  of the existing board, and Mauro Ledesma, as a simple shareholder of the corporation, instituted a civil action (No. 3840) in the Court of First Instance  of Occidental Negros against the trustees and the Binalbagan Estate, Inc., for the  purpose of enjoining the meeting contemplated in the notice above-mentioned.

In response to a prayer for a preliminary injunction,  in connection with said action, the respondent judge issued the restraining order, or preliminary injunction, which gave rise to the present petition for the writ of certiorari.   In the dispositive  part  of  said order the Binalbagan  Estate, Inc., its lawyers, agents, representatives,  and all others who may be assisting or collaborating with them, are restrained from holding the  general shareholders' meeting called for the date mentioned and from electing new directors for the company  in substitution  of the present incumbents, said injunction to be effective until further order of the court. It is now asserted here by the petitioners that the making of  this order  was beyond the legitimate powers of the respondent judge, and  it is accordingly prayed that said order be set aside.

We are of the opinion that this contention is untenable and that the respondent judge acted within his legitimate powers in making the order against  which relief is sought. In order to expose the true inwardness of the situation before us it is necessary to take note  of the fact that under the law the directors of a corporation can only be removed from office by  a vote of the  stockholders representing  at least two-thirds of the  subscribed capital stock entitled  to vote (Act No. 1459, sec. 34) ; while vacancies in the board, when they exist, can  be filled by mere majority vote  (Act No. 1459, sec. 25).  Moreover, the law requires that when action is  to  be  taken at a special meeting to remove the directors, such purpose shall  be indicated in  the call  (Act No. 1459, sec. 34).

Now, upon examining into the number of shares controlled by the voting trust, it will be seen that, while the trust controls a majority of the stock, it does not have a clear  two-thirds majority.  It was therefore impolitic for the petitioners,  in forcing the call for the meeting of August 16, to come out frankly and say in the notice that one of the purposes  of the meeting was to remove the directors of the corporation from office.  Instead, the call was limited to the election of the board of directors,  it being the evident intention of the voting trust to elect a new board as if the directorate had been then vacant

But the complaint in civil action No. 3840 directly asserts that the members of the present directorate were regularly elected at the  general annual meeting held  in February, 1926; and if that assertion be true, the proposal to  elect another directorate, as per the call of August 2, if carried into effect, would result in the election of a rival set of directors, who would probably need the assistance of judgment of court in an independent action of quo warranto to get them installed into office, even supposing that their title to the office could be maintained.  That the trial judge had jurisdiction to forestall that step and enjoin the contemplated election is a matter about which there  cannot be the slightest  doubt.  The law  contemplates  and intends that there shall be one set of directors at a time and that new directors  shall  be  elected  only as vacancies occur  in the directorate by death, resignation, removal, or otherwise.

It is insinuated that there was some irregularity or another in the election of the  present  directorate.  We see nothing upon which this suggestion can be safely planted; and at any rate the present board of directors are de  facto incumbents of the office whose acts will be valid until they shall be lawfully removed from office or cease from the discharge of their functions.  In this case it is not necessary for us to agitate ourselves over the question whether the  respondent  judge properly  exercised his judicial  discretion in granting  the order complained of.  It suffices to know that in making the order he  was acting within the limits of his judicial powers.

It will be noted that the order in question enjoins the defendants from holding the meeting called for  August 16; and said order must not be understood as constituting any obstacle for the holding of the regular meeting  at the time appointed in  the by-laws of the corporation.

For the reasons stated the petition will be denied, and it is so ordered, with  costs.

Johnson, Malcolm, Ostrand, Johns, Romualdez, and Villa- Real, JJ., concur.