Title
C. N. Hodges vs. Lezama
Case
G.R. No. L-17327
Decision Date
Aug 30, 1963
Majority stockholders accused corporate officers of mismanagement, sought receivership, and contested refusal to register share transfers; court upheld jurisdiction, ordered transfer, and affirmed secretary's duty under Corporation Law.
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Case Digest (G.R. No. L-17327)

Facts:

  1. Corporate Background:

    • The La Paz Ice Plant & Cold Storage Co., Inc. is a corporation engaged in the manufacture and sale of ice in Iloilo City.
    • Plaintiffs C. N. Hodges and Ricardo Gurrea are majority stockholders, while defendants Jose Manuel Lezama and Paquita B. Lezama are the President-Manager and Secretary, respectively.
  2. Ownership and Transfer of Shares:

    • C. N. Hodges owned 2,230 shares, which he sold to Ricardo Gurrea on September 18, 1958, for P80,000.
    • Ricardo Gurrea and his wife Susie Gurrea owned 249 shares, while Esteban Salvador (brother-in-law of Lezama) owned 1 share, totaling 2,520 shares. Plaintiffs and Mrs. Gurrea owned 2,490 shares, while defendants owned 29 shares.
  3. Allegations of Mismanagement:

    • Plaintiffs accused Jose Manuel Lezama of mismanagement, including failure to render accounting to stockholders, diversion of corporate funds, excessive salaries, and causing losses amounting to P100,000 since 1949.
    • Plaintiffs sought the appointment of a receiver to protect the corporation’s assets and requested a court order to call a stockholders' meeting to elect new officers.
  4. Refusal to Register Share Transfers:

    • In July and August 1958, Ricardo Gurrea sold some of his shares to third parties, but the defendants refused to register the transfers in the corporate books or issue new certificates.
  5. Appointment of Receiver:

    • The court appointed Jose Dineros as receiver on September 26, 1958, instead of Ricardo Gurrea, who was a party to the suit.
  6. Defendants’ Defense:

    • Defendants denied mismanagement, attributing losses to competition and alleging that Gurrea’s lawsuit aimed to eliminate competition and hinder a separate case against him for unauthorized withdrawals.
  7. Motion to Register Share Transfers:

    • Ricardo Jeruta, Jr., Felipe Espinosa, and Isidro Perlado filed a motion to register their purchase of seven shares from Gurrea. The court ordered the transfer, but the defendant secretary refused, arguing that the receiver should decide.

Issue:

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Ruling:

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Ratio:

  1. Jurisdiction of the Trial Court:

    • The trial court has jurisdiction to order acts necessary to protect and preserve the properties of a corporation under receivership, including the transfer of shares in the corporate books.
  2. Duty of the Corporate Secretary:

    • Under Sections 35 and 52 of the Corporation Law, the corporate secretary is obligated to register valid transfers of shares upon surrender of the stock certificates. There is no restriction on whom the shares may be transferred or sold.
  3. Protection of Stockholders’ Interests:

    • The court’s order was aimed at protecting the interests of the stockholders and ensuring the proper administration of the corporation’s affairs during receivership.
  4. Validity of Share Transfers:

    • The transfer of shares was valid, and the refusal of the secretary to register the transfer was unjustified, especially since the legality of the transfer was not questioned.


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