Case Digest (G.R. No. 85339)
Facts:
San Miguel Corporation, represented by Eduardo de los Angeles v. Ernest Kahn et al., G.R. No. 85339, August 11, 1989, Supreme Court First Division, Narvasa, J., writing for the Court.In 1983 fourteen corporations acquired 33,133,266 shares of San Miguel Corporation (SMC) and placed them under a voting trust in favor of the late Andres Soriano, Jr. After Soriano’s death and subsequent trustee appointments, and following the February 1986 events, an Agreement dated March 26, 1986 provided for the sale of those shares at P100 per share (aggregate P3,313,326,600). The purported buyer was Andres Soriano III (or, as respondents later asserted, a Hong Kong subsidiary, Neptunia Corporation Ltd.), which made a P500,000,000 down payment allegedly from borrowed funds.
The Presidential Commission on Good Government (PCGG) sequestered the 33,133,266 SMC shares on the theory they belonged to associates or dummies of former President Marcos; the sequestration was lifted and later reimposed with an order (May 19, 1986) forbidding any transfer or registration of those shares without PCGG authority. SMC suspended further payments under the purchase agreement; the fourteen seller corporations sued for rescission and damages in the Manila RTC (Civil Case No. 13865). On June 4, 1986 the PCGG directed issuance of qualifying shares to certain individuals; in December 1986 the SMC Board (by Resolution No. 86-12-2) decided to assume Neptunia’s loans incurred for the P500M down payment.
Director Eduardo de los Angeles, a PCGG nominee on the SMC board who also owned 20 shares in his own right, protested the December resolution and, after intra-corporate efforts failed, filed a derivative complaint in the Securities and Exchange Commission (SEC) in April 1987 (SEC Case No. 3152) seeking to enjoin SMC’s assumption of Neptunia’s indebtedness, nullify the board resolution, and obtain damages for alleged breaches of fiduciary duty. Ernest Kahn moved to dismiss on jurisdictional grounds and on the ground that de los Angeles lacked capacity/standing to institute a derivative action because his shareholding was negligible and because his status as a PCGG nominee created a conflict of interest. The SEC Hearing Officer denied the motion to dismiss on September 4, 1987, holding that ownership of even one share sufficed, that de los Angeles had exhausted intra-corporate remedies, and that SEC could inquire where business judgment transgressed the law.
Respondents sought and obtained from a Special Division of the Court of Appeals a grant of certiorari annulling the SEC order by a 3–2 vote, the majority finding de los Angeles lacked capacity to bring the derivative suit and expressing concern about his tiny shareholding and possible conflict as a PCGG nominee. De los Angeles then appe...(Pro-only)
Issues:
- Does the Securities and Exchange Commission have jurisdiction to entertain de los Angeles’ derivative complaint against SMC directors?
- Does Eduardo de los Angeles, a 20‑shareholder and PCGG nominee director, have legal capacity/standing to bring a derivative suit on behalf of SMC?
- Was the Court of Appeals correct to annul the SEC Hearin...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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