Case Summary (G.R. No. 154049)
Petitioner and Respondent
The petitioners are Ramon P. Jacinto and Jaime J. Colayco. The respondent is First Women's Credit Corporation, represented in the derivative suit by Shig Katayama.
Background of the Case
Shig Katayama filed a derivative suit against the petitioners, alleging that they engaged in corporate plunder by diverting an amount of P720,333,266.00 from FWCC to several companies associated with Jacinto. Katayama argued that these withdrawals occurred without Board authorization and led to significant financial distress for FWCC. The suit sought not only accountability for the funds but also the establishment of an IMC to protect the company from further loss.
Financial Allegations
Katayama submitted a Special Audit Report indicating that petitioners withdrew vast sums from FWCC and provided it to the RJ Group of Companies and other affiliated entities. This diversion of funds severely impacted FWCC's financial position, resulting in defaults on obligations to creditor banks such as the Land Bank of the Philippines and the Philippine National Bank.
Petitioners' Defense
In response, Jacinto and Colayco contended that their actions were legitimate business decisions aimed at maximizing returns from idle funds. They asserted that the funds were advanced as loans in the ordinary course of business and pointed out that any financial challenges the company faced were the result of market conditions and mismanagement by Katayama.
Appointment of the Interim Management Committee
Hearing Officer George T. Palmares ordered the creation of an IMC amidst evidence suggesting significant fund diversion and corporate mismanagement. The SEC affirmed this decision, highlighting the urgent necessity to protect FWCC's assets amid ongoing disputes among stockholders, which threatened the corporation's functionality.
Court of Appeals and Supreme Court Review
The Court of Appeals upheld the SEC's ruling, stating that the need for an IMC was justified by the imminent danger of asset dissipation and the paralysis of corporate operations. Petitioners challenged this ruling, arguing that such drastic measures should be reserved for extreme cases and that they had acted within their rights as corporate officers.
Legal Standards for An IMC Appointment
The legal basis for appointing an IMC is found in the provisions of PD 902-A, which allows the SEC to appoint a committee when there is imminent danger of loss or destruction of corporate assets or paralysis of business operations. The court underscored that minority stockholders must demonstrate clear evidence of significant harm or risk to corporate assets to warrant an IMC's appointment.
Findings Supporting the IMC
The Supreme Court found that the
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Introduction
- This case revolves around the legality and necessity of appointing an Interim Management Committee (IMC) to manage the First Women’s Credit Corporation (FWCC).
- The case was brought to the Supreme Court to review the decision of the Court of Appeals affirming the Securities and Exchange Commission (SEC) order for the creation of the IMC.
Background of the Case
- Petitioners Ramon P. Jacinto and Jaime J. Colayco were the President and Vice President of FWCC, respectively.
- The respondent, Shig Katayama, a director and minority stockholder of FWCC, filed a derivative suit against the petitioners alleging plunder involving the diversion of approximately P720,333,266.00 from FWCC to companies associated with Jacinto.
- Katayama claimed that the petitioners mismanaged FWCC's funds, leading to severe financial distress, including defaults on obligations to creditor banks.
Allegations and Evidence Presented
- Katayama accused Jacinto and Colayco of withdrawing substantial amounts from FWCC without Board authorization, thus committing grave mismanagement.
- He provided a Special Audit Report from Carlos J. Valdez & Associates revealing unauthorized withdrawals and transfers of funds.
- The financial mismanagement led to FWCC being unable to sustain its operations, resulting in closure of several branch offices and the inability to repay debts.
Petitioners’ Defense
- The petitioners admitted to withdrawing funds for the benefit of companies associated with Jacinto but contended that these acti