Case Digest (G.R. No. L-10085) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In John Gokongwei, Jr. v. Securities and Exchange Commission (178 Phil. 266, April 11, 1979), petitioner John Gokongwei, Jr., a substantial stockholder of San Miguel Corporation (SMC), filed on October 22, 1976 with the Securities and Exchange Commission (SEC) SEC Case No. 1375 for “declaration of nullity of amended by-laws, cancellation of certificate of filing of amended by-laws, injunction and damages” targeting amendments adopted by the SMC board on September 18, 1976. He alleged that the board lacked authority—under Section 22 of the Corporation Law and SMC’s Articles VIII—to amend by-laws without a fresh vote of stockholders representing two-thirds of the paid-up capital based on the then-current capitalization, that the board’s delegated power had lapsed, and that the amendments were tailored to disqualify him and other competitors from nomination or election as directors, violating his vested rights. Petitioner also sought production of corporate documents including minu Case Digest (G.R. No. L-10085) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- SEC Case No. 1375 (By‐laws Amendment Dispute)
- John Gokongwei, Jr., as stockholder of San Miguel Corporation (SMC), filed on October 22, 1976 a petition seeking:
- Declaration of nullity of the September 18, 1976 by‐laws amendments.
- Cancellation of its certificate of filing, injunction and damages, plus a preliminary injunction.
- Grounds alleged:
- Board lacked authority to amend by-laws under Sec. 22, Corporation Law, because stockholder authorization must be based on current capital.
- Prior 1961 delegation had been exercised and extinguished; board membership changed; amendments targeted petitioner’s right to be elected director.
- Ultra vires disqualification of stockholder-directors, unfair nomination process and oppressive competitive‐business clause.
- Incidents and responses:
- Petitioner’s urgent motion to inspect corporate documents; partial relief granted by SEC Order No. 26 (1977).
- Preliminary injunction, summary judgment and contempt motions filed; special meeting called and amendments ratified February 10, 1977.
- SEC orders on production, injunctive relief and summary judgment resolved in part; motions for reconsideration pending.
- SEC Case No. 1423 (Foreign Investment Challenge)
- January 20, 1977 petition by petitioner alleged SMC and certain directors violated Sec. 17-½, Corporation Law, by investing corporate funds in San Miguel International, Inc. (SMI) without stockholder authorization.
- Respondents moved to dismiss; SEC delayed action until April 25, 1977, denying dismissal and setting case for hearing on the merits after the May 10, 1977 annual meeting, which item on ratification of foreign investments was included in the agenda.
- Petition to the Supreme Court
- Petitioner claimed SEC abused discretion by undue delay and by issuing inconsistent orders, depriving him of due process and property rights.
- Pray for writs of certiorari, mandamus and injunction compelling the SEC to act with dispatch on pending incidents and to resolve main issues.
- Temporary restraining order issued May 6, 1977, restraining enforcement of by-laws amendment and agenda ratification; multiple supplemental petitions and comments followed.
Issues:
- Whether a stockholder of SMC may inspect and copy the books and records of its wholly owned foreign subsidiary, SMI.
- Whether the September 18, 1976 amendments to SMC’s by-laws disqualifying “competitive” stockholders from board membership are valid and reasonable.
- Whether the SEC gravely abused its discretion by delaying or denying motions to annul the by-laws amendments and to defer or enjoin ratification of foreign investments at the May 10, 1977 stockholders’ meeting.
- Whether shareholder ratification cured any procedural defect in SMC’s investment in SMI under Sec. 17-½, Corporation Law.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)