Case Digest (G.R. No. L-17504)
Facts:
In Ramon de la Rama et al. v. Ma-ao Sugar Central Co., Inc. et al. (136 Phil. 418, February 28, 1969), four minority stockholders of the Ma-ao Sugar Central Co., Inc.—Ramon de la Rama, Francisco Rodriguez, Hortencia Salas, Paz Salas, and Patria Salas, heirs of Magdalena Salas—filed a representative or derivative suit on October 20, 1953, in the Court of First Instance of Manila. They alleged that from November 1946 to October 1952 the corporation’s president, J. Amado Araneta, together with three other directors, committed ultra vires acts, irregular loans, unauthorized investments, and gross mismanagement; they further claimed corporate forfeiture grounds warranting dissolution, sought damages and attorney’s fees, and prayed for receivership. The lower court found multiple irregularities: failure to hold regular stockholders’ meetings (1947, 1950, 1951), untrue book entries, unauthorized loans to Araneta (totaling P132,082.00), illegal investments in Mabuhay Printing (P2,280.00Case Digest (G.R. No. L-17504)
Facts:
- Nature of the Action and Parties
- On October 20, 1953, four minority stockholders filed a representative (derivative) suit in the Court of First Instance of Manila against Ma-ao Sugar Central Co., Inc. and four of its directors (J. Amado Araneta, Mrs. Ramon S. Araneta, Romualdo M. Araneta, and Ramon A. Yulo).
- Plaintiffs sued on behalf of Ma-ao Sugar Central Co., seeking relief for alleged corporate wrongdoing during November 1946–October 1952.
- Complaint and Causes of Action
- First Cause: Illegal and ultra vires acts—self-dealing, irregular loans, unauthorized investments.
- Second Cause: Gross mismanagement—improper withdrawals, discretionary backpay, crop-loan account discrepancies.
- Third Cause: Forfeiture of corporate rights—prayer for dissolution and distribution of net assets.
- Fourth Cause: Damages and attorney’s fees—P300,000 by way of compensatory, moral, and exemplary damages plus costs.
- Fifth Cause: Application for provisional remedy of receivership.
- Defendants’ Answer, Special Defenses, and Counterclaim
- Denial of wrongful corporate conduct as “gratuitous, exaggerated conclusions.”
- Special Defenses: Complaint premature; plaintiffs failed to exhaust intracorporate remedies; no actual loss to the corporation; debtors had fully paid; dissolution/receivership would impair contracts.
- Counterclaim: Complaint was malicious, vituperative, and insulting, seeking actual, moral, exemplary damages and attorney’s fees.
- Lower Court Findings and Disposition
- Found unchallenged irregularities:
- Failure to hold stockholders’ meetings (omitted in 1947, 1950, 1951).
- Irregular bookkeeping—untrue entries not innocent errors.
- Unauthorized investments in Mabuhay Printing (P2,280) and Acoje Mining (P7,000).
- Unauthorized loans to J. Amado Araneta totalling P132,082 in violation of by-laws.
- Diversion of funds to affiliated corporations (totaling over P1.9 million).
- Disposed of the case as follows:
- Dismissed petition for dissolution.
- Condemned J. Amado Araneta to pay P46,270 with 8% interest from filing date.
- Made injunctions permanent—restraining future loans/advances to officers and forbidding investments outside sugar-central business.
- Costs against the corporation and J. Amado Araneta.
- Appeals and Assigned Errors
- Plaintiffs-appellants assigned errors regarding:
- Legality of investment in Philippine Fiber Processing Co., Inc. under Sec. 17-1/2 of the Corporation Law.
- Alleged insolvency of the corporation.
- Mismanagement in discriminatory acts against planters.
- Sufficiency of proved acts to dissolve the corporation.
- Defendants-appellants assigned errors regarding:
- Order for J. Amado Araneta to pay P46,270 (claiming full payment).
- Dismissal of their counterclaim for damages.
Issues:
- Whether the investment in Philippine Fiber Processing Co., Inc. violated Sec. 17-1/2 of the Corporation Law.
- Whether Ma-ao Sugar Central Co., Inc. was insolvent.
- Whether discriminatory acts against planters constituted corporate mismanagement warranting derivative relief.
- Whether the proved acts of wrongdoing justified dissolution of the corporation.
- Whether the Lower Court erred in ordering J. Amado Araneta to pay P46,270 with interest.
- Whether the counterclaim of the defendants should have been granted.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)