Case Summary (G.R. No. 37331)
Petitioner’s Claims and Relief Sought
– Annulment of a certificate for 600,000 shares of Balatoc Mining Company issued to Benguet Consolidated Mining Company
– Recovery of sums allegedly unlawfully collected by Benguet, with legal interest, less amounts legitimately expended under the March 9, 1927 development contract
– Annulment of the March 9, 1927 contract
Procedural History
– Trial Court (CI Manila) granted preliminary injunction preventing transfer or removal of 600,000 Balatoc shares
– Upon hearing, the trial court dismissed the complaint and dissolved the injunction, awarding costs against plaintiffs
– Plaintiffs appealed to the Supreme Court
Factual Background
- Benguet Consolidated Mining Co. formed June 1903 under Spanish sociedad anonima law; Balatoc Mining Co. formed December 1925 under Act No. 1459 (Corporation Law). Both engaged in gold mining in Benguet.
- Balatoc’s undeveloped property led to suspended operations July 31, 1926. A stockholders’ committee sought outside capital; A. W. Beam (president of Benguet) negotiated terms.
- March 9, 1927 Contract: Benguet to develop Balatoc’s mine, build a 100-ton-per-day mill (85% gold recovery), power plant and tramlines; in exchange, Balatoc would issue up to 600,000 shares (₱600,000 par value) as payment for advances.
- By May 31, 1929, Benguet had expended ₱1,417,952.15. It received a 600,000-share certificate; the ₱817,952.15 excess was paid in cash. Meanwhile, Balatoc shares rose to over ₱11 each.
- Plaintiffs, once supportive, filed suit seeking to void Benguet’s interest as unlawful under mining‐corporation prohibition, thereby enriching other Balatoc shareholders.
Applicable Law
– Philippine Bill (July 1, 1902): Section 75 originally prohibited any corporation or member thereof engaged in mining from interest in another mining corporation.
– Corporation Law (Act No. 1459, 1912): Incorporated Section 75’s prohibition in section 13(5) and treated Spanish sociedades anonimas under the new law.
– Act No. 3518 (Mar 1, 1929): Amended prohibition to limit members’ holdings to 15% of another mining corporation’s outstanding stock and confined corporate prohibitions to entities organized for mining or agriculture.
– Act No. 3518, Section 190(A) (Dec 3, 1928): Penal provision permitting only the Attorney-General or a provincial fiscal to pursue dissolution or criminal sanctions for statutory violations.
– Civil Code Article 1305: Permits an innocent party to recover consideration from an illegal contract
Issues Presented
- Whether private stockholders may maintain a civil action to annul the contract and share certificate based on alleged statutory violation by Benguet Consolidated Mining Company.
- Whether a Spanish‐law sociedad anonima like Benguet qualifies as a “corporation” under the mining‐corporation prohibition.
Court’s Analysis – Private Right of Action
– The prohibition reflects public policy governing mining rights; its enforcement is entrusted exclusively to public officers via criminal prosecution or quo warranto proceedings under Section 190(A).
– No civil remedy is provided to private parties; plaintiffs suffered no direct civil wrong. The mining plant and improvements cannot be unwound, and restoring money to Balatoc’s shareholde
Case Syllabus (G.R. No. 37331)
Procedural History
- Original complaint filed in the Court of First Instance of Manila by Harden on behalf of himself and other Balatoc stockholders, later joined by Highsmith and Hart.
- Plaintiffs sought annulment of a 600,000-share certificate issued to Benguet Consolidated, recovery of sums allegedly unlawfully collected, and rescission of the March 9, 1927 contract.
- Preliminary injunction obtained restraining sale or transfer of the shares, including those held by trustee H. E. Renz.
- Trial court dismissed the complaint and dissolved the injunction, assessing costs against plaintiffs.
- Plaintiffs appealed to this Court.
Factual Background
- Benguet Consolidated Mining Co. incorporated in June 1903 under Spanish sociedad anonima; Balatoc Mining Co. incorporated in December 1925 under Act No. 1459.
- Both companies mining gold in Benguet, properties a few miles apart.
- Balatoc’s capital stock: 1,000,000 shares at ₱1 par each; initial development funds insufficient, work suspended July 31, 1926.
- November 1926 stockholders’ meeting authorized committee to secure outside capital; approached A. W. Beam of Benguet Consolidated.
- March 9, 1927 contract: Benguet to develop Balatoc mine, build 100-ton/day mill (85% gold extraction), power plant, tramlines, surface buildings.
- Payment: Benguet to receive ₱600,000 in Balatoc shares for first ₱600,000 advanced; actual expenditure by May 31, 1929: ₱1,417,952.15.
- Delivery of 600,000 shares certificate; excess ₱817,952.15 paid in cash.
- Share value increased to over ₱11 per share; dividends paid to Balatoc stockholders.
Plaintiffs’ Contentions
- Contract unlawful under Philippine Bill and Corporation Law: mining corporation prohibited from interest in another mining corporation.
- Certificate and contract must be annul