Facts:

This case, G.R. No. L-34344, involves petitioners Ricardo Aguirre, Felixberto Valdez, Esteban Rivera, and Zambales Colleges, Inc. against respondents Jose Dumlao and the Court of Appeals. The events trace back to 1931 when Jose Dumlao purchased five shares of stock in Zambales Colleges. On July 15, 1950, he was elected to the Board of Trustees of Zambales Academy, Inc., for a term of one year. On October 7, 1950, a special meeting of stockholders was held, in which the number of trustees was reduced from seven to five. This meeting resulted in the removal of all seven trustees, including Dumlao, who was not re-elected. Dumlao subsequently initiated a quo warranto proceeding contesting the legality of the stockholders’ meeting and the election of new trustees, which was dismissed by the Court of First Instance of Zambales. His appeal to the Court of Appeals, labeled as CA-G.R. No. 8305-R, was also dismissed on August 7, 1954. It concluded that the question of Dumlao's restora

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Facts:

Background of Corporate Ownership and Shareholding

• In 1931, Jose Dumlao purchased five shares of stock in Zambales Colleges.
• His status as a shareholder later became material when he was elected to the Board of Trustees.

Election to the Board of Trustees and Subsequent Removal

• In July 1950, Dumlao was elected as a member of the Board of Trustees of the institution then known as Zambales Academy, Inc. (now Zambales Colleges, Inc.) for a term of one year or until his successor was duly elected and qualified.
• On October 7, 1950, at a special meeting of the stockholders, the board was reorganized by reducing the number of trustees from seven to five.
• During this special meeting, all seven incumbent members were removed and replaced by five new trustees, from which Dumlao was conspicuously omitted.

Initiation of Quo Warranto Proceedings

• Dumlao, together with others, filed a quo warranto proceeding challenging the legality of the special meeting and the removal of the previous board members.
• The quo warranto case, initially filed as Civil Case No. 1374 in the Court of First Instance of Zambales, was dismissed.
• Upon appeal, the Court of Appeals reasoned that if the new trustees had been duly elected on May 13, 1951, and had assumed their duties, then the earlier election (and consequently Dumlao’s tenure) was terminated, rendering any restoration claim moot.

Subsequent Damage Suit for Unlawful Ouster and Estafa Prosecution

• On March 7, 1955, Dumlao instituted a separate action for recovery of damages and attorney’s fees in the same Court of First Instance against the petitioners (Ricardo Aguirre, Felixberto Valdes, Esteban Rivera, and Zambales Colleges, Inc.).
• His claim was based on his alleged unlawful ouster from the board and the prosecution for estafa that ensued.
• Although the defendants did not refute the core allegations concerning his removal, they argued that his replacement had been legally effected under the Corporation Law, and there was no malice in the concurrent estafa prosecution.

Trial Court Proceedings and Decisions

• The trial court, rendering its decision on February 8, 1965, awarded Dumlao actual, moral, and nominal damages against Zambales Colleges, Inc.
• The award was based on the finding of evidence that substantiated his claim of damages resulting from his removal, while dismissing the second cause of action for lack of evidence.

Appeal and Issues Raised

• The defendants (petitioners-appellants) appealed the trial court decision, asserting errors in holding that Dumlao’s removal was illegal and in awarding him damages.
• They contended that under the Corporation Law and the by-laws of the institution, removal through a special election was not permissible unless for misfeasance.

Court of Appeals and Supreme Court Involvement

• The Court of Appeals had earlier clarified that although the removal was declared illegal in its quo warranto proceedings, the effect of a later proper election rendered Dumlao’s claim for reinstatement moot.
• Notwithstanding the mootness regarding restoration, the issue of damages was still actionable, a point later upheld by the Supreme Court.
• The Supreme Court dismissed Dumlao’s petition on the grounds that the removal’s legality had been conclusively settled and that the litigation for damages was procedurally barred by the moot nature of the election issue, despite the availability of a damages remedy under Section 15 of Rule 66.

Issue:

Legality of the Removal of a Board Member

• Whether the removal of Jose Dumlao from the Board of Trustees through a special meeting and subsequent election of new trustees was legal under the Corporation Law and the institution’s by-laws.
• Whether the board member’s tenure, which was to last until his successor was duly elected and qualified, had been improperly truncated.

Recovery of Damages Despite Mootness of Reinstatement

• Whether Dumlao, notwithstanding the moot nature of his claim for reinstatement—owing to the proper subsequent election of new trustees—could rightfully recover damages for his alleged unlawful ouster.
• The applicability of Section 15 of Rule 66 of the Rules of Court as a basis for awarding damages in cases of usurpation of office.

Interpretation of Corporate By-laws Regarding Special Elections

• Whether the by-laws of Zambales Colleges, Inc. authorize a special election as a means of ousting an incumbent trustee prior to the expiration of his term, except in cases of misfeasance.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)