Case Digest (G.R. No. L-32370) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Wolfgang Aurbach, et al. v. Sanitary Wares Manufacturing Corporation, et al., decided on December 15, 1989, the Supreme Court consolidated three petitions (G.R. Nos. 75875, 75951, 75975-76) arising from disputes over the 1983 election of directors of Sanitary Wares Manufacturing Corporation (“Saniwares”). Saniwares was incorporated in 1961 by Filipino entrepreneurs, and on August 15, 1962 entered into an Agreement with American Standard Inc. (ASI), a Delaware-domiciled foreign corporation, and Filipino investors. Under the Agreement, the Board of Directors was to comprise nine members, three designated by ASI and six by Filipino stockholders, with cumulative voting expressly provided. In practice, ASI’s minority status (initially 30%, later 40% of capital stock) was safeguarded by veto powers and super-majority requirements, while Filipino nationals held at least 60% equity to maintain Board of Investments incentives.At the annual stockholders’ meeting on March 8, 1983, A
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Case Digest (G.R. No. L-32370) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Incorporation and Joint‐Venture Agreement
- In 1961, Sanitary Wares Manufacturing Corporation (Saniwares) was incorporated by Filipino investors, including Baldwin Young, to manufacture sanitary wares.
- On August 15, 1962, American Standard Inc. (ASI), a Delaware corporation, entered into a written Agreement with Saniwares and Filipino investors:
- Section 3 provided for cumulative voting for directors and super‐majority or veto requirements for certain corporate acts.
- Section 5(a) vested management in a nine‐member board: three directors to be “designated” by ASI (holding 40% of stock) and six by the other stockholders (holding 60%).
- Breakdown of Relations and 1983 Stockholders’ Meeting
- By March 8, 1983, relations between ASI and Filipino investors deteriorated over export expansion.
- At the annual meeting, ASI nominated three directors; Filipino investors nominated six; additional nominations (Salazar, Chamsay) were ruled out of order by Chairman Young pursuant to the Agreement.
- A dispute over vote casting led ASI and allies to hold a separate session, cumulatively voting to elect four ASI nominees plus Salazar.
- SEC Proceedings and Intermediate Appeals
- Filipino investors filed SEC Case No. 2417 for preliminary injunction; ASI and Salazar filed SEC Case No. 2718 for quo warranto and receivership; both were consolidated.
- The SEC hearing officer and SEC en banc upheld the Filipino investors’ slate of directors and dismissed ASI’s quo warranto petition.
- ASI and Salazar appealed to the Intermediate Appellate Court, which remanded for a new meeting and was thereafter amended by the Court of Appeals to:
- Limit ASI to three board nominations.
- Allow cumulative voting within each group (Filipino and ASI) to choose their respective nominees.
- Petitions for Review to the Supreme Court
- G.R. No. 75875 (ASI group): challenged deprivation of full voting rights and imposition of terms not in the Agreement.
- G.R. Nos. 75975–76 (Salazar): assailed Court of Appeals’ disregard of contractual terms and alleged property‐rights deprivation.
- G.R. No. 75951 (Filipino investors): argued the Court of Appeals failed to enforce the Agreement’s intent and did not declare their nominees as duly elected directors.
Issues:
- Whether the parties’ Agreement created a joint venture relationship or a plain corporation.
- Whether Section 5(a) of the Agreement, designating the allocation of board seats (3 for ASI, 6 for Filipino investors), is valid and enforceable.
- Whether ASI may cumulate votes from its additional 10% equity to elect more than three directors under Section 24 (cumulative voting) of the Corporation Code.
- Who were the duly elected directors of Saniwares at the March 8, 1983 annual stockholders’ meeting.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)