Case Digest (G.R. No. L-5174)
Facts:
Candido Pascual v. Eugenio del Saz Orozco et al, G.R. No. 5174. March 17, 1911, the Supreme Court En Banc, Trent, J., writing for the Court.
Plaintiff-appellant Candido Pascual sued the defendants-appellees, who were members of the board of directors and the board of government of the Banco Español-Filipino, alleging that during the years 1903–1907 the defendants, without the knowledge or assent of the stockholders, deducted their compensation from the bank's gross income rather than from net profits, thereby defrauding the bank and its stockholders of about P20,000 per annum. Pascual alleged that he became a stockholder on November 13, 1903, that he made demand for repayment which was refused, and that the defendants, who constitute a majority of the current board, controlled the corporation and prevented corporate action so that he had exhausted intra-corporate remedies.
In a second cause of action Pascual charged that the defendants' immediate predecessors (1899–1902) had committed the same illegality; that during the following four years the present defendants were in a position to investigate or prosecute recovery but neglected to do so; that Pascual was the only person aware of the wrongs after he acquired his shares; that demand was made and refused; and that no remedy remained within the corporation.
The lower court sustained demurrers to the first and second causes of action. The demurrer advanced four grounds (lack of legal capacity to sue, failure to state a cause of action, defect of parties plaintiff, and uncertainty), and the court below sustained the demurrer on the ground of failure to state facts constituting a cause of action. The demurrer to the third cause of action was overruled and is not before the Court.
Pleadings alleged that the bank was chartered originally by royal decree in 1854 (later modified) and was a bank of issue of quasi-public character; its charter (article 30) provided that directors receive a percentage of the net profits (10% to directors, 5% to board of government, remainder to sharehol...(Pro-only)
Issues:
- Procedural: Was the demurrer properly sustained to the first cause of action for failure to state a cause of action despite the plaintiff's acquisition of stock on November 13, 1903?
- Substantive: May a stockholder who was not a shareholder at the time of the alleged wrongful acts (here, acts of 1899–1902) maintain a derivative suit on behalf of the corporation t...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)