G.R. No. 154049 - Jacinto vs. 1st Women's Credit Corp.

The case arises from a derivative suit filed by Shig Katayama, a director and minority stockholder of First Women's Credit Corporation (FWCC).
Petitioners Ramon P. Jacinto and Jaime J. Colayco, respectively the President and Vice-President of FWCC, are accused of mismanaging corporate funds.

Katayama alleged that petitioners committed company plunder by withdrawing and diverting a total of P720,333,266.00 from FWCC.
The diverted funds were allegedly transferred to RJ Group of Companies—which includes RJ Guitars, RJ Holdings, RJ Music, RJ Bistro, Rajah Broadcasting Network, RJ FM, and RJ Productions—and to companies affiliated with FWCC such as Quantum, Shigra, RJ Ventures Realty Corporation, and Save-a-Lot.
The withdrawals took place from 1993 to 1997 without proper Board authorization, according to a Special Audit Report prepared by FWCC’s external auditor, Carlos J. Valdez & Associates.

The diversion of funds left FWCC financially debilitated, causing it to default on multiple obligations with creditor banks like Land Bank of the Philippines and Philippine National Bank.
Due to the financial strain, several FWCC offices were closed across the country.
The alleged mismanagement included placing virtually all operating funds in petitioner Jacinto’s companies rather than diversifying loans among many customers.

In response to the alleged mismanagement, Katayama moved for the appointment of an Interim Management Committee (IMC) to protect FWCC’s assets pending resolution of the dispute.
Hearing Officer George T. Palmares, after a series of evidentiary hearings, ordered the presentation of evidence and eventually created the IMC on November 17, 1999.
Petitioners, while admitting to transferring funds, contended that these withdrawals were legitimate advances and loans extended in the ordinary course of business. They further argued that the funds were managed to maximize FWCC’s idle resources.
Petitioners claimed that Katayama had consented to the financial arrangements, including the acceptance of his dollar investments at high interest rates, and that RJ Group of Companies had settled their obligations to FWCC through an off-setting agreement.

After Hearing Officer Palmares’ creation of the IMC, petitioners filed a motion for reconsideration which was denied.
The SEC en banc subsequently upheld the appointment of the IMC, emphasizing its power to act in cases of imminent danger of dissipation or loss of corporate assets.
Petitioners appealed the SEC decision to the Court of Appeals, arguing that a drastic remedy like the IMC should only be applied as a last resort and that its imposition deprived the Board of its management powers.
The Court of Appeals denied their appeal, upholding the SEC’s decision.
Finally, petitioners filed a petition for review before the Supreme Court challenging the previous decisions.

Whether the appointment of an Interim Management Committee (IMC) by Hearing Officer Palmares—upheld by both the SEC en banc and the Court of Appeals—was within the bounds of the law.
Whether the alleged diversion and unauthorized transfer of FWCC funds without Board authorization amounted to company plunder and constituted grave mismanagement.
Whether the discretion exercised by the SEC and Hearing Officer to appoint the IMC was justified by the evidence of imminent danger to FWCC’s corporate assets.
Whether the actions taken by petitioners in managing corporate funds, including the alleged lending practices and off-setting agreements, can be legally characterized as mismanagement warranting intervention.
Whether the drastic measure of appointing an interim management committee was appropriate under the circumstances and in light of the interests of all stakeholders, including minority stockholders.