Gokongwei V SEC

2/11/2017 G.R. No.
L-45911
TodayisSaturday,February11,2017
RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.L45911April11,1979
JOHNGOKONGWEI,JR.,petitioner,
vs.
SECURITIESANDEXCHANGECOMMISSION,ANDRESM.SORIANO,JOSEM.SORIANO,ENRIQUEZOBEL,
ANTONIOROXAS,EMETERIOBUNAO,WALTHRODEB.CONDE,MIGUELORTIGAS,ANTONIOPRIETO,SAN
MIGUELCORPORATION,EMIGDIOTANJUATCO,SR.,andEDUARDOR.VISAYA,respondents.
DeSantos,Balgos&Perezforpetitioner.
Angara,Abello,Concepcion,Regala,CruzLawOfficesforrespondentsSorianos
SiguionReyna,Montecillo&OngsiakoforrespondentSanMiguelCorporation.
R.TCapulongforrespondentEduardoR.Visaya.
ANTONIO,J.:
Theinstantpetitionforcertiorari,mandamusandinjunction,withprayerforissuanceofwritofpreliminaryinjunction,
aroseoutoftwocasesfiledbypetitionerwiththeSecuritiesandExchangeCommission,asfollows:
SECCASENO1375
OnOctober22,1976,petitioner,asstockholderofrespondentSanMiguelCorporation,filedwiththeSecuritiesand
ExchangeCommission(SEC)apetitionfor"declarationofnullityofamendedbylaws,cancellationofcertificateof
filingofamendedbylaws,injunctionanddamageswithprayerforapreliminaryinjunction"againstthemajorityof
themembersoftheBoardofDirectorsandSanMiguelCorporationasanunwillingpetitioner.Thepetition,entitled
"John Gokongwei Jr. vs. Andres Soriano, Jr., Jose M. Soriano, Enrique Zobel, Antonio Roxas, Emeterio Bunao,
WalthrodeB.Conde,MiguelOrtigas,AntonioPrietoandSanMiguelCorporation",wasdocketedasSECCaseNo.
1375.
Asafirstcauseofaction,petitionerallegedthatonSeptember18,1976,individualrespondentsamendedbybylaws
ofthecorporation,basingtheirauthoritytodosoonaresolutionofthestockholdersadoptedonMarch13,1961,
when the outstanding capital stock of respondent corporation was only P70,139.740.00, divided into 5,513,974
common shares at P10.00 per share and 150,000 preferred shares at P100.00 per share. At the time of the
amendment,theoutstandingandpaidupsharestotalled 30,127,047withatotalparvalueofP301,270,430.00.It
wascontendedthataccordingtosection22oftheCorporationLawandArticleVIIIofthebylawsofthecorporation,
thepowertoamend,modify,repealoradoptnewbylawsmaybedelegatedtotheBoardofDirectorsonlybythe
affirmative vote of stockholders representing not less than 2/3 of the subscribed and paid up capital stock of the
corporation,which2/3shouldhavebeencomputedonthebasisofthecapitalizationatthetimeoftheamendment.
Since the amendment was based on the 1961 authorization, petitioner contended that the Board acted without
authorityandinusurpationofthepowerofthestockholders.
Asasecondcauseofaction,itwasallegedthattheauthoritygrantedin1961hadalreadybeenexercisedin1962
and1963,afterwhichtheauthorityoftheBoardceasedtoexist.
Asathirdcauseofaction,petitioneraverredthatthemembershipoftheBoardofDirectorshadchangedsincethe
authoritywasgivenin1961,therebeingsix(6)newdirectors.
As a fourth cause of action, it was claimed that prior to the questioned amendment, petitioner had all the
qualifications to be a director of respondent corporation, being a Substantial stockholder thereof that as a
stockholder,petitionerhadacquiredrightsinherentinstockownership,suchastherightstovoteandtobevoted
http://www.lawphil.net/judjuris/juri1979/apr1979/gr_l_45911_1979.html 1/41
2/11/2017 G.R. No. L-45911
uponintheelectionofdirectorsandthatinamendingthebylaws,respondentspurposelyprovidedforpetitioner's
disqualificationanddeprivedhimofhisvestedrightasaforementionedhencetheamendedbylawsarenulland
void.1
Asadditionalcausesofaction,itwasallegedthatcorporationshavenoinherentpowertodisqualifyastockholder
frombeingelectedasadirectorand,therefore,thequestionedactisultraviresandvoidthatAndresM.Soriano,Jr.
and/or Jose M. Soriano, while representing other corporations, entered into contracts (specifically a management
contract)withrespondentcorporation,whichwasallowedbecausethequestionedamendmentgavetheBoarditself
theprerogativeofdeterminingwhethertheyorotherpersonsareengagedincompetitiveorantagonisticbusiness
that the portion of the amended bylaws which states that in determining whether or not a person is engaged in
competitivebusiness,theBoardmayconsidersuchfactorsasbusinessandfamilyrelationship,isunreasonableand
oppressiveand,therefore,voidandthattheportionoftheamendedbylawswhichrequiresthat"allnominationsfor
electionofdirectors...shallbesubmittedinwritingtotheBoardofDirectorsatleastfive(5)workingdaysbeforethe
dateoftheAnnualMeeting"islikewiseunreasonableandoppressive.
Itwas,therefore,prayedthattheamendedbylawsbedeclarednullandvoidandthecertificateoffilingthereofbe
cancelled,andthatindividualrespondentsbemadetopaydamages,inspecifiedamounts,topetitioner.
On October 28, 1976, in connection with the same case, petitioner filed with the Securities and Exchange
Commission an "Urgent Motion for Production and Inspection of Documents", alleging that the Secretary of
respondentcorporationrefusedtoallowhimtoinspectitsrecordsdespiterequestmadebypetitionerforproduction
ofcertaindocumentsenumeratedintherequest,andthatrespondentcorporationhadbeenattemptingtosuppress
informationfromitsstockholdersdespiteanegativereplybytheSECtoitsqueryregardingtheirauthoritytodoso.
Among the documents requested to be copied were (a) minutes of the stockholder's meeting field on March 13,
1961, (b) copy of the management contract between San Miguel Corporation and A. Soriano Corporation
(ANSCOR)(c)latestbalancesheetofSanMiguelInternational,Inc.(d)authorityofthestockholderstoinvestthe
fundsofrespondentcorporationinSanMiguelInternational,Inc.and(e)listsofsalaries,allowances,bonuses,and
othercompensation,ifany,receivedbyAndresM.Soriano,Jr.and/oritssuccessorininterest.
The "Urgent Motion for Production and Inspection of Documents" was opposed by respondents, alleging, among
othersthatthemotionhasnolegalbasisthatthedemandisnotbasedongoodfaiththatthemotionispremature
since the materiality or relevance of the evidence sought cannot be determined until the issues are joined, that it
fails to show good cause and constitutes continued harrasment, and that some of the information sought are not
partoftherecordsofthecorporationand,therefore,privileged.
During the pendency of the motion for production, respondents San Miguel Corporation, Enrique Conde, Miguel
OrtigasandAntonioPrietofiledtheiranswertothepetition,denyingthesubstantialallegationsthereinandstating,
bywayofaffirmativedefensesthat"theactiontakenbytheBoardofDirectorsonSeptember18,1976resultingin
the...amendmentsisvalidandlegalbecausethepowerto"amend,modify,repealoradoptnewBylaws"delegated
to said Board on March 13, 1961 and long prior thereto has never been revoked of SMC" that contrary to
petitioner'sclaim,"thevoterequirementforavaliddelegationofthepowertoamend,repealoradoptnewbylawsis
determined in relation to the total subscribed capital stock at the time the delegation of said power is made, not
whentheBoardoptstoexercisesaiddelegatedpower"thatpetitionerhasnotavailedofhisintracorporateremedy
for the nullification of the amendment, which is to secure its repeal by vote of the stockholders representing a
majorityofthesubscribedcapitalstockatanyregularorspecialmeeting,asprovidedinArticleVIII,sectionIofthe
bylaws and section 22 of the Corporation law, hence the, petition is premature that petitioner is estopped from
questioning the amendments on the ground of lack of authority of the Board. since he failed, to object to other
amendmentsmadeonthebasisofthesame1961authorization:thatthepowerofthecorporationtoamenditsby
laws is broad, subject only to the condition that the bylaws adopted should not be respondent corporation
inconsistent with any existing law that respondent corporation should not be precluded from adopting protective
measures to minimize or eliminate situations where its directors might be tempted to put their personal interests
overtIhatofthecorporationthatthequestionedamendedbylawsisamatterofinternalpolicyandthejudgment
oftheboardshouldnotbeinterferedwith:Thatthebylaws,asamended,arevalidandbindingandareintendedto
preventthepossibilityofviolationofcriminalandcivillawsprohibitingcombinationsinrestraintoftradeandthatthe
petition states no cause of action. It was, therefore, prayed that the petition be dismissed and that petitioner be
orderedtopaydamagesandattorney'sfeestorespondents.Theapplicationforwritofpreliminaryinjunctionwas
likewiseonvariousgrounds.
RespondentsAndresM.Soriano,Jr.andJoseM.Sorianofiledtheiroppositiontothepetition,denyingthematerial
averments thereof and stating, as part of their affirmative defenses, that in August 1972, the Universal Robina
Corporation (Robina), a corporation engaged in business competitive to that of respondent corporation, began
acquiringsharestherein.untilSeptember1976whenitstotalholdingamountedto622,987shares:thatinOctober
1972,theConsolidatedFoodsCorporation(CFC)likewisebeganacquiringsharesinrespondent(corporation.until
its total holdings amounted to P543,959.00 in September 1976 that on January 12, 1976, petitioner, who is
president and controlling shareholder of Robina and CFC (both closed corporations) purchased 5,000 shares of
stockofrespondentcorporation,andthereafter,inbehalfofhimself,CFCandRobina,"conductedmalevolentand
2/11/2017 G.R. No. L-45911
malicious publicity campaign against SMC" to generate support from the stockholder "in his effort to secure for
himself and in representation of Robina and CFC interests, a seat in the Board of Directors of SMC", that in the
stockholders'meetingofMarch18,1976,petitionerwasrejectedbythestockholdersinhisbidtosecureaseatin
theBoardofDirectorsonthebasicissuethatpetitionerwasengagedinacompetitivebusinessandhissecuringa
seatwouldhavesubjectedrespondentcorporationtogravedisadvantagesthat"petitionerneverthelessvowedto
secureaseatintheBoardofDirectorsatthenextannualmeetingthatthereaftertheBoardofDirectorsamended
thebylawsasaforestated.
Ascounterclaims,actualdamages,moraldamages,exemplarydamages,expensesoflitigationandattorney'sfees
werepresentedagainstpetitioner.
Subsequently,aJointOmnibusMotionforthestrikingoutofthemotionforproductionandinspectionofdocuments
was filed by all the respondents. This was duly opposed by petitioner. At this juncture, respondents Emigdio
Tanjuatco, Sr. and Eduardo R. Visaya were allowed to intervene as oppositors and they accordingly filed their
oppositionsinterventiontothepetition.
On December 29, 1976, the Securities and Exchange Commission resolved the motion for production and
inspectionofdocumentsbyissuingOrderNo.26,Seriesof1977,stating,inpartasfollows:
Considering the evidence submitted before the Commission by the petitioner and respondents in the
aboveentitledcase,itisherebyordered:
1.Thatrespondentsproduceandpermittheinspection,copyingandphotographing,byoronbehalfof
the petitionermovant, John Gokongwei, Jr., of the minutes of the stockholders' meeting of the
respondentSanMiguelCorporationheldonMarch13,1961,whichareinthepossession,custodyand
control of the said corporation, it appearing that the same is material and relevant to the issues
involved in the main case. Accordingly, the respondents should allow petitionermovant entry in the
principal office of the respondent Corporation, San Miguel Corporation on January 14, 1977, at 9:30
o'clockinthemorningforpurposesofenforcingtherightshereingranteditbeingunderstoodthatthe
inspection,copyingandphotographingofthesaiddocumentsshallbeundertakenunderthedirectand
strict supervision of this Commission. Provided, however, that other documents and/or papers not
heretofore included are not covered by this Order and any inspection thereof shall require the prior
permissionofthisCommission
2.AstotheBalanceSheetofSanMiguelInternational,Inc.aswellasthelistofsalaries,allowances,
bonuses,compensationand/orremunerationreceivedbyrespondentJoseM.Soriano,Jr.andAndres
Soriano from San Miguel International, Inc. and/or its successorsin interest, the Petition to produce
and inspect the same is hereby DENIED, as petitionermovant is not a stockholder of San Miguel
International,Inc.andhas,therefore,noinherentrighttoinspectsaiddocuments
3.InviewoftheManifestationofpetitionermovantdatedNovember29,1976,withdrawinghisrequest
to copy and inspect the management contract between San Miguel Corporation and A. Soriano
Corporationandtherenewalandamendmentsthereofforthereasonthathehadalreadyobtainedthe
same,theCommissiontakesnotethereofand
4.Finally,theCommissionholdsinabeyancetheresolutiononthematterofproductionandinspection
of the authority of the stockholders of San Miguel Corporation to invest the funds of respondent
corporationinSanMiguelInternational,Inc.,untilafterthehearingonthemeritsoftheprincipalissues
intheaboveentitledcase.
ThisOrderisimmediatelyexecutoryuponitsapproval.2
DissatisfiedwiththeforegoingOrder,petitionermovedforitsreconsideration.
Meanwhile,onDecember10,1976,whilethepetitionwasyettobeheard,respondentcorporationissuedanoticeof
special stockholders' meeting for the purpose of "ratification and confirmation of the amendment to the Bylaws",
settingsuchmeetingforFebruary10,1977.ThispromptedpetitionertoaskrespondentCommissionforasummary
judgment insofar as the first cause of action is concerned, for the alleged reason that by calling a special
stockholders'meetingfortheaforesaidpurpose,privaterespondentsadmittedtheinvalidityoftheamendmentsof
September18,1976.Themotionforsummaryjudgmentwasopposedbyprivaterespondents.Pendingactionon
the motion, petitioner filed an "Urgent Motion for the Issuance of a Temporary Restraining Order", praying that
pending the determination of petitioner's application for the issuance of a preliminary injunction and/or petitioner's
motion for summary judgment, a temporary restraining order be issued, restraining respondents from holding the
specialstockholder'smeetingasscheduled.Thismotionwasdulyopposedbyrespondents.
On February 10, 1977, respondent Commission issued an order denying the motion for issuance of temporary
restraining order. After receipt of the order of denial, respondents conducted the special stockholders' meeting
2/11/2017 G.R. No. L-45911
whereintheamendmentstothebylawswereratified.OnFebruary14,1977,petitionerfiledaconsolidatedmotion
forcontemptandfornullificationofthespecialstockholders'meeting.
Amotionforreconsiderationoftheorderdenyingpetitioner'smotionforsummaryjudgmentwasfiledbypetitioner
beforerespondentCommissiononMarch10,1977.Petitionerallegesthatuptothetimeofthefilingoftheinstant
petition, the said motion had not yet been scheduled for hearing. Likewise, the motion for reconsideration of the
ordergrantinginpartanddenyinginpartpetitioner'smotionforproductionofrecordhadnotyetbeenresolved.
Inviewofthefactthattheannulstockholders'meetingofrespondentcorporationhadbeenscheduledforMay10,
1977,petitionerfiledwithrespondentCommissionaManifestationstatingthatheintendedtorunforthepositionof
director of respondent corporation. Thereafter, respondents filed a Manifestation with respondent Commission,
submittingaResolutionoftheBoardofDirectorsofrespondentcorporationdisqualifyingandprecludingpetitioner
frombeingacandidatefordirectorunlesshecouldsubmitevidenceonMay3,1977thathedoesnotcomewithin
thedisqualificationsspecifiedintheamendmenttothebylaws,subjectmatterofSECCaseNo.1375.Byreason
thereof, petitioner filed a manifestation and motion to resolve pending incidents in the case and to issue a writ of
injunction,allegingthatprivaterespondentswereseekingtonullifyandrenderineffectualtheexerciseofjurisdiction
by the respondent Commission, to petitioner's irreparable damage and prejudice, Allegedly despite a subsequent
ManifestationtoprodrespondentCommissiontoact,petitionerwasnotheardpriortothedateofthestockholders'
meeting.
Petitioner alleges that there appears a deliberate and concerted inability on the part of the SEC to act hence
petitionercametothisCourt.
SEC.CASENO.1423
Petitionerlikewiseallegesthat,havingdiscoveredthatrespondentcorporationhasbeeninvestingcorporatefundsin
othercorporationsandbusinessesoutsideoftheprimarypurposeclauseofthecorporation,inviolationofsection
17 1/2 of the Corporation Law, he filed with respondent Commission, on January 20, 1977, a petition seeking to
have private respondents Andres M. Soriano, Jr. and Jose M. Soriano, as well as the respondent corporation
declaredguiltyofsuchviolation,andorderedtoaccountforsuchinvestmentsandtoanswerfordamages.
OnFebruary4,1977,motionstodismisswerefiledbyprivaterespondents,towhichaconsolidatedmotiontostrike
and to declare individual respondents in default and an opposition ad abundantiorem cautelam were filed by
petitioner.DespitethefactthatsaidmotionswerefiledasearlyasFebruary4,1977,thecommissionactedthereon
onlyonApril25,1977,whenitdeniedrespondents'motiontodismissandgavethemtwo(2)dayswithinwhichto
filetheiranswer,andsetthecaseforhearingonApril29andMay3,1977.
Respondentsissuednoticesoftheannualstockholders'meeting,includingintheAgendathereof,thefollowing:
6.ReaffirmationoftheauthorizationtotheBoardofDirectorsbythestockholdersatthemeetingon
March20,1972toinvestcorporatefundsinothercompaniesorbusinessesorforpurposesotherthan
the main purpose for which the Corporation has been organized, and ratification of the investments
thereaftermadepursuantthereto.
Byreasonoftheforegoing,onApril28,1977,petitionerfiledwiththeSECanurgentmotionfortheissuanceofa
writ of preliminary injunction to restrain private respondents from taking up Item 6 of the Agenda at the annual
stockholders' meeting, requesting that the same be set for hearing on May 3, 1977, the date set for the second
hearing of the case on the merits. Respondent Commission, however, cancelled the dates of hearing originally
scheduledandresetthesametoMay16and17,1977,orafterthescheduledannualstockholders'meeting.Forthe
purpose of urging the Commission to act, petitioner filed an urgent manifestation on May 3, 1977, but this
notwithstanding,noactionhasbeentakenuptothedateofthefilingoftheinstantpetition.
With respect to the aforementioned SEC cases, it is petitioner's contention before this Court that respondent
Commissiongravelyabuseditsdiscretionwhenitfailedtoactwithdeliberatedispatchonthemotionsofpetitioner
seeking to prevent illegal and/or arbitrary impositions or limitations upon his rights as stockholder of respondent
corporation,andthatrespondentareactingoppressivelyagainstpetitioner,ingrossderogationofpetitioner'srights
topropertyanddueprocess.HeprayedthatthisCourtdirectrespondentSECtoactoncollateralincidentspending
beforeit.
OnMay6,1977,thisCourtissuedatemporaryrestrainingorderrestrainingprivaterespondentsfromdisqualifying
orpreventingpetitionerfromrunningorfrombeingvotedasdirectorofrespondentcorporationandfromsubmitting
forratificationorconfirmationorfromcausingtheratificationorconfirmationofItem6oftheAgendaoftheannual
stockholders'meetingonMay10,1977,orfromMakingeffectivetheamendedbylawsofrespondentcorporation,
until further orders from this Court or until the Securities and Exchange Commission acts on the matters
complainedofintheinstantpetition.
2/11/2017 G.R. No. L-45911
OnMay14,1977,petitionerfiledaSupplementalPetition,allegingthatafterarestrainingorderhadbeenissuedby
thisCourt,oronMay9,1977,therespondentCommissionserveduponpetitionercopiesofthefollowingorders:
(1) Order No. 449, Series of 1977 (SEC Case No. 1375) denying petitioner's motion for reconsideration, with its
supplement, of the order of the Commission denying in part petitioner's motion for production of documents,
petitioner's motion for reconsideration of the order denying the issuance of a temporary restraining order denying
the issuance of a temporary restraining order, and petitioner's consolidated motion to declare respondents in
contemptandtonullifythestockholders'meeting
(2) Order No. 450, Series of 1977 (SEC Case No. 1375), allowing petitioner to run as a director of respondent
corporationbutstatingthatheshouldnotsitassuchifelected,untilsuchtimethattheCommissionhasdecidedthe
validity of the bylaws in dispute, and denying deferment of Item 6 of the Agenda for the annual stockholders'
meetingand
(3)OrderNo.451,Seriesof1977(SECCaseNo.1375),denyingpetitioner'smotionforreconsiderationoftheorder
ofrespondentCommissiondenyingpetitioner'smotionforsummaryjudgment
Itispetitioner'sassertions,anenttheforegoingorders,(1)thatrespondentCommissionactedwithindecenthaste
andwithoutcircumspectioninissuingtheaforesaidorderstopetitioner'sirreparabledamageandinjury(2)thatit
actedwithoutjurisdictionandinviolationofpetitioner'srighttodueprocesswhenitdecidedenbancanissuenot
raised before it and still pending before one of its Commissioners, and without hearing petitioner thereon despite
petitioner's request to have the same calendared for hearing , and (3) that the respondents acted oppressively
againstthepetitionerinviolationofhisrightsasastockholder,warrantingimmediatejudicialintervention.
It is prayed in the supplemental petition that the SEC orders complained of be declared null and void and that
respondent Commission be ordered to allow petitioner to undertake discovery proceedings relative to San Miguel
International.Inc.andthereaftertodecideSECCasesNo.1375and1423onthemerits.
OnMay17,1977,respondentSEC,AndresM.Soriano,Jr.andJoseM.Sorianofiledtheircomment,allegingthat
thepetitioniswithoutmeritforthefollowingreasons:
(1) that the petitioner the interest he represents are engaged in business competitive and antagonistic to that of
respondentSanMiguelCorporation,itappearingthattheownsandcontrolsagreaterportionofhisSMCstockthru
the Universal Robina Corporation and the Consolidated Foods Corporation, which corporations are engaged in
businessdirectlyandsubstantiallycompetingwiththealliedbusinessesofrespondentSMCandofcorporationsin
which SMC has substantial investments. Further, when CFC and Robina had accumulated investments. Further,
when CFC and Robina had accumulated shares in SMC, the Board of Directors of SMC realized the clear and
presentdangerthatcompetitorsorantagonisticpartiesmaybeelecteddirectorsandtherebyhaveeasyanddirect
accesstoSMC'sbusinessandtradesecretsandplans
(2) that the amended by law were adopted to preserve and protect respondent SMC from the clear and present
dangerthatbusinesscompetitors,ifallowedtobecomedirectors,willillegallyandunfairlyutilizetheirdirectaccess
to its business secrets and plans for their own private gain to the irreparable prejudice of respondent SMC, and,
ultimately, its stockholders. Further, it is asserted that membership of a competitor in the Board of Directors is a
blatantdisregardofnolessthattheConstitutionandpertinentlawsagainstcombinationsinrestraintoftrade
(3)thatbylawsarevalidandbindingsinceacorporationhasthe inherentrightanddutyto preserveandprotect

itselfbyexcludingcompetitorsandantogonisticparties,underthelawofselfpreservation,anditshouldbeallowed
awidelatitudeintheselectionofmeanstopreserveitself
(4)thatthedelayintheresolutionanddispositionofSECCasesNos.1375and1423wasduetopetitioner'sown
actsoromissions,sincehefailedtohavethepetitiontosuspend,pendentelitetheamendedbylawscalendaredfor
hearing. It was emphasized that it was only on April 29, 1977 that petitioner calendared the aforesaid petition for
suspension(preliminaryinjunction)forhearingonMay3,1977.TheinstantpetitionbeingdatedMay4,1977,itis
apparentthatrespondentCommissionwasnotgivenachancetoact"withdeliberatedispatch",and
(5) that, even assuming that the petition was meritorious was, it has become moot and academic because
respondent Commission has acted on the pending incidents, complained of. It was, therefore, prayed that the
petitionbedismissed.
On May 21, 1977, respondent Emigdio G, Tanjuatco, Sr. filed his comment, alleging that the petitionhas become
moot and academic for the reason, among others that the acts of private respondent sought to be enjoined have
referencetotheannualmeetingofthestockholdersofrespondentSanMiguelCorporation,whichwasheldonmay
10,1977thatinsaidmeeting,incompliancewiththeorderofrespondentCommission,petitionerwasallowedto
runandbevotedforasdirectorandthatinthesamemeeting,Item6oftheAgendawasdiscussed,votedupon,
ratifiedandconfirmed.Furtheritwasaverredthatthequestionsandissuesraisedbypetitionerarependinginthe
2/11/2017 G.R. No. L-45911
SecuritiesandExchangeCommissionwhichhasacquiredjurisdictionoverthecase,andnohearingonthemerits
hasbeenhadhencetheelevationoftheseissuesbeforetheSupremeCourtispremature.
Petitioner filed a reply to the aforesaid comments, stating that the petition presents justiciable questions for the
determination of this Court because (1) the respondent Commission acted without circumspection, unfairly and
oppresively against petitioner, warranting the intervention of this Court (2) a derivative suit, such as the instant
case, is not rendered academic by the act of a majority of stockholders, such that the discussion, ratification and
confirmationofItem6oftheAgendaoftheannualstockholders'meetingofMay10,1977didnotrenderthecase
moot that the amendment to the bylaws which specifically bars petitioner from being a director is void since it
depriveshimofhisvestedrights.
RespondentCommission,thrutheSolicitorGeneral,filedaseparatecomment,allegingthatafterreceivingacopyof
the restraining order issued by this Court and noting that the restraining order did not foreclose action by it, the
CommissionenbancissuedOrdersNos.449,450and451inSECCaseNo.1375.
Inanswertotheallegationinthesupplementalpetition,itstatesthatOrderNo.450whichdenieddefermentofItem
6 of the Agenda of the annual stockholders' meeting of respondent corporation, took into consideration an urgent
manifestation filed with the Commission by petitioner on May 3, 1977 which prayed, among others, that the
discussionofItem6oftheAgendabedeferred.Thereasongivenfordenialofdefermentwasthat"suchactionis
withintheauthorityofthecorporationaswellasfallingwithinthesphereofstockholders'righttoknow,deliberate
uponand/ortoexpresstheirwishesregardingdispositionofcorporatefundsconsideringthattheirinvestmentsare
theonesdirectlyaffected."Itwasallegedthatthemainpetitionhas,therefore,becomemootandacademic.
On September 29,1977, petitioner filed a second supplemental petition with prayer for preliminary injunction,
alleging that the actuations of respondent SEC tended to deprive him of his right to due process, and "that all
possible questions on the facts now pending before the respondent Commission are now before this Honorable
Courtwhichhastheauthorityandthecompetencetoactonthemasitmayseefit."(Reno,pp.927928.)
Petitioner,inhismemorandum,submitsthefollowingissuesforresolution
(1)whetherornottheprovisionsoftheamendedbylawsofrespondentcorporation,disqualifyingacompetitorfrom
nominationorelectiontotheBoardofDirectorsarevalidandreasonable
(2)whetherornotrespondentSECgravelyabuseditsdiscretionindenyingpetitioner'srequestforanexamination
oftherecordsofSanMiguelInternational,Inc.,afullyownedsubsidiaryofSanMiguelCorporationand
(3) whether or not respondent SEC committed grave abuse of discretion in allowing discussion of Item 6 of the
Agenda of the Annual Stockholders' Meeting on May 10, 1977, and the ratification of the investment in a foreign
corporationofthecorporatefunds,allegedlyinviolationofsection171/2oftheCorporationLaw.
Whetherornotamendedbylawsarevalidispurelyalegalquestionwhichpublicinterestrequirestoberesolved
Itisthepositionofthepetitionerthat"itisnotnecessarytoremandthecasetorespondentSECforanappropriate
rulingontheintrinsicvalidityoftheamendedbylawsincompliancewiththeprincipleofexhaustionofadministrative
remedies",consideringthat:first:"whetherornottheprovisionsoftheamendedbylawsareintrinsicallyvalid...is
purelyalegalquestion.Thereisnofactualdisputeastowhattheprovisionsareandevidenceisnotnecessaryto
determinewhethersuchamendedbylawsarevalidasframedandapproved..."second:"itisfortheinterestand
guidanceofthepublicthatanimmediateandfinalrulingonthequestionbemade..."third:"petitionerwasdenied
due process by SEC" when "Commissioner de Guzman had openly shown prejudice against petitioner ... ", and
"Commissioner Sulit ... approved the amended bylaws exparteand obviously found the same intrinsically valid
andfinally:"toremandthecasetoSECwouldonlyentaildelayratherthanservetheendsofjustice."
Respondents Andres M. Soriano, Jr. and Jose M. Soriano similarly pray that this Court resolve the legal issues
raisedbythepartiesinkeepingwiththe"cherishedrulesofprocedure"that"acourtshouldalwaysstrivetosettle
theentirecontroversyinasingleproceedingleavingnorootorbranchtobeartheseedsoffutureligiation",citing
Gayongv.Gayos. 3 To the same effect is the prayer of San Miguel Corporation that this Court resolve on the merits the
validityofitsamendedbylawsandtherightsandobligationsofthepartiesthereunder,otherwise"thetimespentandeffort
exertedbythepartiesconcernedand,moreimportantly,bythisHonorableCourt,wouldhavebeenfornaughtbecausethe
mainquestionwillcomebacktothisHonorableCourtforfinalresolution."RespondentEduardoR.Visayasubmitsasimilar
appeal.
ItisonlytheSolicitorGeneralwhocontendsthatthecaseshouldberemandedtotheSECforhearinganddecision
of the issues involved, invoking the latter's primary jurisdiction to hear and decide case involving intracorporate
controversies.
2/11/2017 G.R. No. L-45911
ItisanacceptedruleofprocedurethattheSupremeCourtshouldalwaysstrivetosettletheentirecontroversyina
single proceeding, leaving nor root or branch to bear the seeds of future litigation. 4 Thus, in Francisco v. City of
Davao,5thisCourtresolvedtodecidethecaseonthemeritsinsteadofremandingittothetrialcourtforfurtherproceedings
sincetheendsofjusticewouldnotbesubservedbytheremandofthecase.InRepublicv.SecurityCreditandAcceptance
Corporation,etal.,6thisCourt,findingthatthemainissueisoneoflaw,resolvedtodecidethecaseonthemerits"because
publicinterestdemandsanearlydispositionofthecase",andinRepublicv.CentralSuretyandInsuranceCompany, 7this
Courtdeniedremandofthethirdpartycomplainttothetrialcourtforfurtherproceedings,citingprecedentwherethisCourt,
in similar situations resolved to decide the cases on the merits, instead of remanding them to the trial court where (a) the
endsofjusticewouldnotbesubservedbytheremandofthecaseor(b)wherepublicinterestdemandanearlydispositionof
thecaseor(c)wherethetrialcourthadalreadyreceivedalltheevidencepresentedbybothpartiesandtheSupremeCourt
isnowinaposition,baseduponsaidevidence,todecidethecaseonitsmerits. 8Itissettledthatthedoctrineofprimary
jurisdiction has no application where only a question of law is involved. 8a Because uniformity may be secured through
reviewbyasingleSupremeCourt,questionsoflawmayappropriatelybedeterminedinthefirstinstancebycourts.8bInthe
caseatbar,therearefactswhichcannotbedenied,viz.:thattheamendedbylawswereadoptedbytheBoardofDirectors
oftheSanMiguelCorporationintheexerciseofthepowerdelegatedbythestockholdersostensiblypursuanttosection22of
theCorporationLawthatinaspecialmeetingonFebruary10,1977heldspeciallyforthatpurpose,theamendedbylaws
were ratified by more than 80% of the stockholders of record that the foreign investment in the Hongkong Brewery and
Distellery,abeermanufacturingcompanyinHongkong,wasmadebytheSanMiguelCorporationin1948andthatinthe
stockholders'annualmeetingheldin1972and1977,allforeigninvestmentsandoperationsofSanMiguelCorporationwere
ratifiedbythestockholders.
II
WhetherornottheamendedbylawsofSMCofdisqualifyingacompetitorfromnominationorelectiontotheBoard
ofDirectorsofSMCarevalidandreasonable
The validity or reasonableness of a bylaw of a corporation in purely a question of law. 9 Whether the bylaw is in
conflict with the law of the land, or with the charter of the corporation, or is in a legal sense unreasonable and therefore
unlawfulisaquestionoflaw.10Thisruleissubject,however,tothelimitationthatwherethereasonablenessofabylawisa
merematterofjudgment,andoneuponwhichreasonablemindsmustnecessarilydiffer,acourtwouldnotbewarrantedin
substitutingitsjudgmentinsteadofthejudgmentofthosewhoareauthorizedtomakebylawsandwhohaveexercisedtheir
authority.11
Petitionerclaimsthat the amendedbylawsareinvalidandunreasonablebecausetheyweretailoredto suppress

theminorityandpreventthemfromhavingrepresentationintheBoard",atthesametimedeprivingpetitionerofhis
"vestedright"tobevotedforandtovoteforapersonofhischoiceasdirector.
Upontheotherhand,respondentsAndresM.Soriano,Jr.,JoseM.SorianoandSanMiguelCorporationcontentthat
ex.conclusionofacompetitorfromtheBoardislegitimatecorporatepurpose,consideringthatbeingacompetitor,
petitioner cannot devote an unselfish and undivided Loyalty to the corporation that it is essentially a preventive
measure to assure stockholders of San Miguel Corporation of reasonable protective from the unrestrained self
interestofthosechargedwiththepromotionofthecorporateenterprisethataccesstoconfidentialinformationbya
competitor may result either in the promotion of the interest of the competitor at the expense of the San Miguel
Corporation,orthepromotionofboththeinterestsofpetitionerandrespondentSanMiguelCorporation,whichmay,
therefore,resultinacombinationoragreementinviolationofArticle186oftheRevisedPenalCodebydestroying
freecompetitionto thedetrimentofthe consumingpublic.Itisfurtherarguedthat thereisnotvestedrightofany
stockholderunderPhilippineLawtobevotedasdirectorofacorporation.Itisallegedthatpetitioner,asofMay6,
1978, has exercised, personally or thru two corporations owned or controlled by him, control over the following
shareholdings in San Miguel Corporation, vis.: (a) John Gokongwei, Jr. 6,325 shares (b) Universal Robina
Corporation738,647shares(c)CFCCorporation658,313shares,oratotalof1,403,285shares.Sincethe
outstandingcapitalstockofSanMiguelCorporation,asofthepresentdate,isrepresentedby33,139,749shares
with a par value of P10.00, the total shares owned or controlled by petitioner represents 4.2344% of the total
outstanding capital stock of San Miguel Corporation. It is also contended that petitioner is the president and
substantial stockholder of Universal Robina Corporation and CFC Corporation, both of which are allegedly
controlledbypetitionerandmembersofhisfamily.ItisalsoclaimedthatboththeUniversalRobinaCorporationand
theCFCCorporationareengagedinbusinessesdirectlyandsubstantiallycompetingwiththeallegedbusinessesof
SanMiguelCorporation,andofcorporationsinwhichSMChassubstantialinvestments.
ALLEGED AREAS OF COMPETITION BETWEEN PETITIONER'S CORPORATIONS AND SAN MIGUEL

CORPORATION
AccordingtorespondentSanMiguelCorporation,theareasof,competitionareenumeratedinitsBoardtheareasof
competitionareenumeratedinitsBoardResolutiondatedApril28,1978,thus:
ProductLineEstimatedMarketShareTotal
1977SMCRobinaCFC
2/11/2017 G.R. No. L-45911
TableEggs0.6%10.0%10.6%
LayerPullets33.0%24.0%57.0%
DressedChicken35.0%14.0%49.0%
Poultry&HogFeeds40.0%12.0%52.0%
IceCream70.0%13.0%83.0%
InstantCoffee45.0%40.0%85.0%
WovenFabrics17.5%9.1%26.6%
Thus,accordingtorespondentSMC,in1976,theareasofcompetitionaffectingSMCinvolvedproductsalesofover
P400 million or more than 20% of the P2 billion total product sales of SMC. Significantly, the combined market
sharesofSMCandCFCRobinainlayerpulletsdressedchicken,poultryandhogfeedsicecream,instantcoffee
andwovenfabricswouldresultinapositionofsuchdominanceastoaffecttheprevailingmarketfactors.
Itisfurtherassertedthatin1977,theCFCRobinagroupwasindirectcompetitiononproductlineswhich,forSMC,
representedsalesamountingtomorethan?478million.Inaddition,CFCRobinawasdirectlycompetinginthesale
ofcoffeewithFilipro,asubsidiaryofSMC,whichproductlinerepresentedsalesforSMCamountingtomorethan
P275million.TheCFCRobinagroup(Robitex,excludingLittonMillsrecentlyacquiredbypetitioner)ispurportedly
alsoindirectcompetitionwithRamieTextile,Inc.,subsidiaryofSMC,inproductsalesamountingtomorethanP95
million.TheareasofcompetitionbetweenSMCandCFCRobinain1977represented,therefore,forSMC,product
salesofmorethanP849million.
According to private respondents, at the Annual Stockholders' Meeting of March 18, 1976, 9,894 stockholders, in
personorbyproxy,owning23,436,754sharesinSMC,ormorethan90%ofthetotaloutstandingsharesofSMC,
rejected petitioner's candidacy for the Board of Directors because they "realized the grave dangers to the
corporationintheeventacompetitorgetsaboardseatinSMC."OnSeptember18,1978,theBoardofDirectorsof
SMC,by"virtueofpowersdelegatedtoitbythestockholders,"approvedtheamendmentto'hebylawsinquestion.
AtthemeetingofFebruary10,1977,theseamendmentswereconfirmedandratifiedby5,716shareholdersowning
24,283,945 shares, or more than 80% of the total outstanding shares. Only 12 shareholders, representing 7,005
shares, opposed the confirmation and ratification. At the Annual Stockholders' Meeting of May 10, 1977, 11,349
shareholders, owning 27,257.014 shares, or more than 90% of the outstanding shares, rejected petitioner's
candidacy, while 946 stockholders, representing 1,648,801 shares voted for him. On the May 9, 1978 Annual
Stockholders' Meeting, 12,480 shareholders, owning more than 30 million shares, or more than 90% of the total
outstandingshares.votedagainstpetitioner.
AUTHORITY OF CORPORATION TO PRESCRIBE QUALIFICATIONS OF DIRECTORS EXPRESSLY

CONFERREDBYLAW
Private respondents contend that the disputed amended by laws were adopted by the Board of Directors of San
MiguelCorporationa,ameasureofselfdefensetoprotectthecorporationfromtheclearandpresentdangerthat
the election of a business competitor to the Board may cause upon the corporation and the other stockholders
inseparable prejudice. Submitted for resolution, therefore, is the issue whether or not respondent San Miguel
Corporationcould,asameasureofselfprotection,disqualifyacompetitorfromnominationandelectiontoitsBoard
ofDirectors.
It is recognized by an authorities that 'every corporation has the inherent power to adopt bylaws 'for its internal
government, and to regulate the conduct and prescribe the rights and duties of its members towards itself and
amongthemselvesinreferenceto the managementofitsaffairs. 12 At common law, the rule was "that the power to
makeandadoptbylawswasinherentineverycorporationasoneofitsnecessaryandinseparablelegalincidents.Anditis
settledthroughouttheUnitedStatesthatintheabsenceofpositivelegislativeprovisionslimitingit,everyprivatecorporation
has this inherent power as one of its necessary and inseparable legal incidents, independent of any specific enabling
provision in its charter or in general law, such power of selfgovernment being essential to enable the corporation to
accomplishthepurposesofitscreation.13
In this jurisdiction, under section 21 of the Corporation Law, a corporation may prescribe in its bylaws "the
qualifications, duties and compensation of directors, officers and employees ... " This must necessarily refer to a
qualificationinadditiontothatspecifiedbysection30oftheCorporationLaw,whichprovidesthat"everydirector
mustowninhisrightatleastoneshareofthecapitalstockofthestockcorporationofwhichheisadirector..."In
Governmentv.ElHogar, 14theCourtsustainedthevalidityofaprovisioninthecorporatebylawrequiringthatpersons
electedtotheBoardofDirectorsmustbeholdersofsharesofthepaidupvalueofP5,000.00,whichshallbeheldassecurity
fortheiraction,onthegroundthatsection21oftheCorporationLawexpresslygivesthepowertothecorporationtoprovide
initsbylawsforthequalificationsofdirectorsandis"highlyprudentandinconformitywithgoodpractice."
NOVESTEDRIGHTOFSTOCKHOLDERTOBEELECTEDDIRECTOR
Anyperson"whobuysstockinacorporationdoessowiththeknowledgethatitsaffairsaredominatedbyamajority
ofthestockholdersandthatheimpliedlycontractsthatthewillofthemajorityshallgoverninallmatterswithinthe
2/11/2017 G.R. No. L-45911
limitsoftheactofincorporationandlawfullyenactedbylawsandnotforbiddenbylaw." 15Tothisextent,therefore,
the stockholder may be considered to have "parted with his personal right or privilege to regulate the disposition of his
property which he has invested in the capital stock of the corporation, and surrendered it to the will of the majority of his
fellowincorporators....Itcannotthereforebejustlysaidthatthecontract,expressorimplied,betweenthecorporationand
thestockholdersisinfringed...byanyactoftheformerwhichisauthorizedbyamajority...."16
Pursuanttosection18oftheCorporationLaw,anycorporationmayamenditsarticlesofincorporationbyavoteor
writtenassentofthestockholdersrepresentingatleasttwothirdsofthesubscribedcapitalstockofthecorporationIf
theamendmentchanges,diminishesorrestrictstherightsoftheexistingshareholdersthenthedisentingminority
has only one right, viz.: "to object thereto in writing and demand payment for his share." Under section 22 of the
samelaw,theownersofthemajorityofthesubscribedcapitalstockmayamendorrepealanybylaworadoptnew
bylaws.Itcannotbesaid,therefore,thatpetitionerhasavestedrighttobeelecteddirector,inthefaceofthefact
thatthelawatthetimesuchrightasstockholderwasacquiredcontainedtheprescriptionthatthecorporatecharter
andthebylawshallbesubjecttoamendment,alterationandmodification.17
Itbeingsettledthatthecorporationhasthepowertoprovideforthequalificationsofitsdirectors,thenextquestion
thatmustbeconsiderediswhetherthedisqualificationofacompetitorfrombeingelectedtotheBoardofDirectors
isareasonableexerciseofcorporateauthority.
ADIRECTORSTANDSINAFIDUCIARYRELATIONTOTHECORPORATIONANDITSSHAREHOLDERS
Although in the strict and technical sense, directors of a private corporation are not regarded as trustees, there
cannotbeanydoubtthattheircharacteristhatofafiduciaryinsofarasthecorporationandthestockholdersasa
bodyareconcerned.Asagentsentrustedwiththemanagementofthecorporationforthecollectivebenefitofthe
stockholders,"theyoccupyafiduciaryrelation,andinthissensetherelationisoneoftrust." 18 "The ordinary trust
relationshipofdirectorsofacorporationandstockholders",accordingtoAshamanv.Miller,19"isnotamatterofstatutoryor
technicallaw.Itspringsfromthefactthatdirectorshavethecontrolandguidanceofcorporateaffairsandpropertyandhence
ofthepropertyinterestsofthestockholders.Equityrecognizesthatstockholdersaretheproprietorsofthecorporateinterests
andareultimatelytheonlybeneficiariesthereof***.
Justice Douglas, in Pepper v. Litton, 20 emphatically restated the standard of fiduciary obligation of the directors of
corporations,thus:
A director is a fiduciary. ... Their powers are powers in trust. ... He who is in such fiduciary position
cannotservehimselffirstandhiscestuissecond....Hecannotmanipulatetheaffairsofhiscorporation
totheirdetrimentandindisregardofthestandardsofcommondecency.Hecannotbytheintervention
of a corporate entity violate the ancient precept against serving two masters ... He cannot utilize his
insideinformationandstrategicpositionforhisownpreferment.Hecannotviolaterulesoffairplayby
doingindirectlythroughthecorporationwhathecouldnotdosodirectly.Hecannotviolaterulesoffair
play by doing indirectly though the corporation what he could not do so directly. He cannot use his
powerforhispersonaladvantageandtothedetrimentofthestockholdersandcreditorsnomatterhow
absolute in terms that power may be and no matter how meticulous he is to satisfy technical
requirements. For that power is at all times subject to the equitable limitation that it may not be
exercised for the aggrandizement, preference or advantage of the fiduciary to the exclusion or
detrimentofthecestuis.
AndinCrossv.WestVirginiaCent,&P.R.R.Co.,21itwassaid:
... A person cannot serve two hostile and adverse master, withoutdetriment to one of them. A judge
cannotbeimpartialifpersonallyinterestedinthecause.Nomorecanadirector.Humannatureistoo
weak for this. Take whatever statute provision you please giving power to stockholders to choose
directors, and in none will you find any express prohibition against a discretion to select directors
havingthecompany'sinterestatheart,anditwouldsimplybegoingfartodenybymereimplicationthe
existenceofsuchasalutarypower
...Ifthebylawistobeheldreasonableindisqualifyingastockholderinacompetingcompanyfrombeingadirector,
thesamereasoningwouldapplytodisqualifythewifeandimmediatememberofthefamilyofsuchstockholder,on
account of the supposed interest of the wife in her husband's affairs, and his suppose influence over her. It is
perhapstruethatsuchstockholdersoughtnottobecondemnedasselfishanddangeroustothebestinterestofthe
corporation until tried and tested. So it is also true that we cannot condemn as selfish and dangerous and
unreasonabletheactionoftheboardinpassingthebylaw.Thestrifeoverthematterofcontrolinthiscorporation
asinmanyothersisperhapscarriedonnotaltogetherinthespiritofbrotherlyloveandaffection.Theonlytestthat
wecanapplyisastowhetherornottheactionoftheBoardisauthorizedandsanctionedbylaw.....22
TheseprincipleshavebeenappliedbythisCourtinpreviouscases.23
2/11/2017 G.R. No. L-45911
ANAMENDMENTTOTHECORPORATIONBYLAWWHICHRENDERSASTOCKHOLDERINELIGIBLETOBE
DIRECTOR,IFHEBEALSODIRECTORINACORPORATIONWHOSEBUSINESSISINCOMPETITIONWITH
THATOFTHEOTHERCORPORATION,HASBEENSUSTAINEDASVALID
ItisasettledstatelawintheUnitedStates,accordingtoFletcher,thatcorporationshavethepowertomakebylaws
declaring a person employed in the service of a rival company to be ineligible for the corporation's Board of
Directors....(A)namendmentwhichrendersineligible,orifelected,subjectstoremoval,adirectorifhebealsoa
directorinacorporationwhosebusinessisincompetitionwithorisantagonistictotheothercorporationisvalid."24
Thisisbasedupontheprinciplethatwherethedirectorissoemployedintheserviceofarivalcompany,hecannotserve
both, but must betray one or the other. Such an amendment "advances the benefit of the corporation and is good." An
exceptionexistsinNewJersey,wheretheSupremeCourtheldthattheCorporationLawinNewJerseyprescribedtheonly
qualification,andthereforethecorporationwasnotempoweredtoaddadditionalqualifications. 25Thisistheexactopposite
ofthesituationinthePhilippinesbecauseasstatedheretofore,section21oftheCorporationLawexpresslyprovidesthata
corporationmaymakebylawsforthequalificationsofdirectors.Thus,ithasbeenheldthatanofficerofacorporationcannot
engageinabusinessindirectcompetitionwiththatofthecorporationwhereheisadirectorbyutilizinginformationhehas
receivedassuchofficer,under"theestablishedlawthatadirectororofficerofacorporationmaynotenterintoacompeting
enterprisewhichcripplesorinjuresthebusinessofthecorporationofwhichheisanofficerordirector.26
Itisalsowellestablishedthatcorporateofficers"arenotpermittedtousetheirpositionoftrustandconfidenceto
further their private interests." 27 In a case where directors of a corporation cancelled a contract of the corporation for
exclusivesaleofaforeignfirm'sproducts,andafterestablishingarivalbusiness,thedirectorsenteredintoanewcontract
themselveswiththeforeignfirmforexclusivesaleofitsproducts,thecourtheldthatequitywouldregardthenewcontractas
anoffshootoftheoldcontractand,therefore,forthebenefitofthecorporation,asa"faultlessfiduciarymaynotreapthefruits
ofhismisconducttotheexclusionofhisprincipal.28
Thedoctrineof"corporateopportunity"29ispreciselyarecognitionbythecourtsthatthefiduciarystandardscouldnotbe
upheld where the fiduciary was acting for two entities with competing interests. This doctrine rests fundamentally on the
unfairness,inparticularcircumstances,ofanofficerordirectortakingadvantageofanopportunityforhisownpersonalprofit
whentheinterestofthecorporationjustlycallsforprotection.30
ItisnotdeniedthatamemberoftheBoardofDirectorsoftheSanMiguelCorporationhasaccesstosensitiveand
highlyconfidentialinformation,suchas:(a)marketingstrategiesandpricingstructure(b)budgetforexpansionand
diversification (c) research and development and (d) sources of funding, availability of personnel, proposals of
mergersortieupswithotherfirms.
ItisobviouslytopreventthecreationofanopportunityforanofficerordirectorofSanMiguelCorporation,whois
alsotheofficerorownerofacompetingcorporation,fromtakingadvantageoftheinformationwhichheacquiresas
director to promote his individual or corporate interests to the prejudice of San Miguel Corporation and its
stockholders, that the questioned amendment of the bylaws was made. Certainly, where two corporations are
competitive in a substantial sense, it would seem improbable, if not impossible, for the director, if he were to
dischargeeffectivelyhisduty,tosatisfyhisloyaltytobothcorporationsandplacetheperformanceofhiscorporation
dutiesabovehispersonalconcerns.
Thus,inMcKee&Co.v.FirstNationalBankofSanDiego,suprathecourtsustainedasvalidandreasonablean
amendmenttothebylawsofabank,requiringthatitsdirectorsshouldnotbedirectors,officers,employees,agents,
nominees or attorneys of any other banking corporation, affiliate or subsidiary thereof. Chief Judge Parker, in
McKee,explainedthereasonsofthecourt,thus:
... A bank director has access to a great deal of information concerning the business and plans of a
bankwhichwouldlikelybeinjurioustothebankifknowntoanotherbank,anditwasreasonableand
prudent to enlarge this minimum disqualification to include any director, officer, employee, agent,
nominee,orattorneyofanyotherbankinCalifornia.TheAshkinscase,supra,specificallyrecognizes
protection against rivals and others who might acquire information which might be used against the
interests of the corporation as a legitimate object of bylaw protection. With respect to attorneys or
persons associated with a firm which is attorney for another bank, in addition to the direct conflict or
potentialconflictofinterest,thereisalsothedangerofinadvertentleakageofconfidentialinformation
through casual office discussions or accessibility of files. Defendant's directors determined that its
welfarewasbestprotectedifthisopportunityforconflictingloyaltiesandpotentialmisuseandleakage
ofconfidentialinformationwasforeclosed.
InMcKeetheCourtfurtherlistedqualificationalbylawsupheldbythecourts,asfollows:
(1)Adirectorshallnotbedirectlyorindirectlyinterestedasastockholderinanyotherfirm,company,or
associationwhichcompeteswiththesubjectcorporation.
2/11/2017 G.R. No. L-45911
(2) A director shall not be the immediate member of the family of any stockholder in any other firm,
company,orassociationwhichcompeteswiththesubjectcorporation,
(3)Adirectorshallnotbeanofficer,agent,employee,attorney,ortrusteeinanyotherfirm,company,
orassociationwhichcompetewiththesubjectcorporation.
(4)Adirectorshallbeofgoodmoralcharacterasanessentialqualificationtoholdingoffice.
(5) No person who is an attorney against the corporation in a law suit is eligible for service on the
board.(Atp.7.)
Thesearenotbasedontheoricalabstractionsbutonhumanexperiencethatapersoncannotservetwohostile
masterswithoutdetrimenttooneofthem.
Theofferandassuranceofpetitionerthattoavoidanypossibilityofhistakingunfairadvantageofhispositionas
directorofSanMiguelCorporation,hewouldabsenthimselffrommeetingsatwhichconfidentialmatterswouldbe
discussed, would not detract from the validity and reasonableness of the bylaws here involved. Apart from the
impracticalresultsthatwouldensuefromsucharrangement,itwouldbeinconsistentwithpetitioner'sprimarymotive
inrunningforboardmembershipwhichistoprotecthisinvestmentsinSanMiguelCorporation.Moreimportant,
suchaproposednormofconductwouldbeagainstallacceptedprinciplesunderlyingadirector'sdutyoffidelityto
the corporation, for the policy of the law is to encourage and enforce responsible corporate management. As
explained by Oleck: 31 "The law win not tolerate the passive attitude of directors ... without active and conscientious
participationinthemanagerialfunctionsofthecompany.Asdirectors,itistheirdutytocontrolandsupervisethedaytoday
businessactivitiesofthecompanyortopromulgatedefinitepoliciesandrulesofguidancewithavigilanteyetowardseeing
to it that these policies are carried out. It is only then that directors may be said to have fulfilled their duty of fealty to the
corporation."
Sound principles of corporate management counsel against sharing sensitive information with a director whose
fiduciarydutyofloyaltymaywellrequirethathedisclosethisinformationtoacompetitivearrival.Thesedangersare
enhancedconsiderablywherethecommondirectorsuchasthepetitionerisacontrollingstockholderoftwoofthe
competingcorporations.Itwouldseemmanifestthatinsuchsituations,thedirectorhasaneconomicincentiveto
appropriateforthebenefitofhisowncorporationthecorporateplansandpoliciesofthecorporationwherehesits
asdirector.
Indeed,accessbyacompetitortoconfidentialinformationregardingmarketingstrategiesandpricingpoliciesofSan
Miguel Corporation would subject the latter to a competitive disadvantage and unjustly enrich the competitor, for
advanceknowledgebythecompetitorofthestrategiesforthedevelopmentofexistingornewmarketsofexistingor
newproductscouldenablesaidcompetitortoutilizesuchknowledgetohisadvantage.32
Thereisanotherimportantconsiderationindeterminingwhetherornottheamendedbylawsarereasonable.The
Constitutionandthelawprohibitcombinationsinrestraintoftradeorunfaircompetition.Thus,section2ofArticle
XIVoftheConstitutionprovides:"TheStateshallregulateorprohibitprivatemonopolieswhenthepublicinterestso
requires.Nocombinationsinrestraintoftradeorunfaircompetitionshallbesnowed."
Article186oftheRevisedPenalCodealsoprovides:
Art.186.Monopoliesandcombinationsinrestraintoftrade.Thepenaltyofprisioncorreccionalinits
minimumperiodorafinerangingfromtwohundredtosixthousandpesos,orboth,shallbeimposed
upon:
1. Any person who shall enter into any contract or agreement or shall take part in any conspiracy or
combination in the form of a trust or otherwise, in restraint of trade or commerce or to prevent by
artificialmeansfreecompetitioninthemarket.
2. Any person who shag monopolize any merchandise or object of trade or commerce, or shall
combinewithanyotherpersonorpersonstomonopolizesaidmerchandiseorobjectinordertoalter
the price thereof by spreading false rumors or making use of any other artifice to restrain free
competitioninthemarket.
3. Any person who, being a manufacturer, producer, or processor of any merchandise or object of
commerceoranimporterofanymerchandiseorobjectofcommercefromanyforeigncountry,either
as principal or agent, wholesale or retailer, shall combine, conspire or agree in any manner with any
personlikewiseengagedinthemanufacture,production,processing,assemblingorimportationofsuch
merchandiseorobjectofcommerceorwithanyotherpersonsnotsosimilarlyengagedforthepurpose
ofmakingtransactionsprejudicialtolawfulcommerce,orofincreasingthemarketpriceinanypartof
thePhilippines,oranysuchmerchandiseorobjectofcommercemanufactured,produced,processed,
2/11/2017 G.R. No. L-45911
assembled in or imported into the Philippines, or of any article in the manufacture of which such
manufactured,produced,processed,orimportedmerchandiseorobjectofcommerceisused.
Thereareotherlegislationinthisjurisdiction,whichprohibitmonopoliesandcombinationsinrestraintoftrade.33
Basically,theseantitrustlawsorlawsagainstmonopoliesorcombinationsinrestraintoftradeareaimedatraising
levelsofcompetitionbyimprovingtheconsumers'effectivenessasthefinalarbiterinfreemarkets.Theselawsare
designed to preserve free and unfettered competition as the rule of trade. "It rests on the premise that the
unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest
prices and the highest quality ... ." 34 they operate to forestall concentration of economic power. 35 The law against
monopolies and combinations in restraint of trade is aimed at contracts and combinations that, by reason of the inherent
nature of the contemplated acts, prejudice the public interest by unduly restraining competition or unduly obstructing the
courseoftrade.36
The terms "monopoly", "combination in restraint of trade" and "unfair competition" appear to have a well defined
meaning in other jurisdictions. A "monopoly" embraces any combination the tendency of which is to prevent
competition in the broad and general sense, or to control prices to the detriment of the public. 37 In short, it is the
concentrationofbusinessinthehandsofafew.Thematerialconsiderationindeterminingitsexistenceisnotthatpricesare
raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired. 38
Further,itmustbeconsideredthattheIdeaofmonopolyisnowunderstoodtoincludeaconditionproducedbythemereact
of individuals. Its dominant thought is the notion of exclusiveness or unity, or the suppression of competition by the
qualificationofinterestormanagement,oritmaybethruagreementandconcertofaction.Itis,inbrief,unifiedtacticswith
regardtoprices.39
From the foregoing definitions, it is apparent that the contentions of petitioner are not in accord with reality. The
electionofpetitionertotheBoardofrespondentCorporationcanbringaboutanillegalsituation.Thisisbecausean
express agreement is not necessary for the existence of a combination or conspiracy in restraint of trade. 40 It is
enoughthataconcertofactioniscontemplatedandthatthedefendantsconformedtothearrangements, 41andwhatisto
beconsiderediswhatthepartiesactuallydidandnotthewordstheyused.Forinstance,theClaytonActprohibitsaperson
from serving at the same time as a director in any two or more corporations, if such corporations are, by virtue of their
businessandlocationofoperation,competitorssothattheeliminationofcompetitionbetweenthemwouldconstituteviolation
of any provision of the antitrust laws. 42 There is here a statutory recognition of the anticompetitive dangers which may
arisewhenanindividualsimultaneouslyactsasadirectoroftwoormorecompetingcorporations.Acommondirectoroftwo
ormorecompetingcorporationswouldhaveaccesstoconfidentialsales,pricingandmarketinginformationandwouldbeina
positiontocoordinatepoliciesortoaidonecorporationattheexpenseofanother,therebystiflingcompetition.Thissituation
hasbeenaptlyexplainedbyTravers,thus:
Theargumentforprohibitingcompetingcorporationsfromsharingevenonedirectoristhattheinterlock
permitsthecoordinationofpoliciesbetweennominallyindependentfirmstoanextentthatcompetition
betweenthemmaybecompletelyeliminated.Indeed,ifadirector,forexample,istobefaithfultoboth
corporations, some accommodation must result. Suppose X is a director of both Corporation A and
Corporation B. X could hardly vote for a policy by A that would injure B without violating his duty of
loyalty to B at the same time he could hardly abstain from voting without depriving A of his best
judgment. If the firms really do compete in the sense of vying for economic advantage at the
expenseoftheothertherecanhardlybeanyreasonforaninterlockbetweencompetitorsotherthan
thesuppressionofcompetition.43(Emphasissupplied.)
AccordingtotheReportoftheHouseJudiciaryCommitteeoftheU.S.Congressonsection9oftheClaytonAct,it
was established that: "By means of the interlocking directorates one man or group of men have been able to
dominateandcontrolagreatnumberofcorporations...tothedetrimentofthesmallonesdependentuponthemand
totheinjuryofthepublic.44
Sharedinformationoncostaccountingmayleadtopricefixing.Certainly,sharedinformationonproduction,orders,
shipments,capacityandinventoriesmayleadtocontrolofproductionforthepurposeofcontrollingprices.
Obviously, if a competitor has access to the pricing policy and cost conditions of the products of San Miguel
Corporation,theessenceofcompetitioninafreemarketforthepurposeofservingthelowestpricedgoodstothe
consuming public would be frustrated, The competitor could so manipulate the prices of his products or vary its
marketingstrategiesbyregionorbybrandinordertogetthemostoutoftheconsumers.Wherethetwocompeting
firmscontrolasubstantialsegmentofthemarketthiscouldleadtocollusionandcombinationinrestraintoftrade.
Reason and experience point to the inevitable conclusion that the inherent tendency of interlocking directorates
between companies that are related to each other as competitors is to blunt the edge of rivalry between the
corporations,toseekoutwaysofcompromisingopposinginterests,andthuseliminatecompetition.Asrespondent
SMCaptlyobserves,knowledgebyCFCRobinaofSMC'scostsinvariousindustriesandregionsinthecountrywin
enable the former to practice price discrimination. CFCRobina can segment the entire consuming population by
2/11/2017 G.R. No. L-45911
geographical areas or income groups and change varying prices in order to maximize profits from every market
segment.CFCRobinacoulddeterminethemostprofitablevolumeatwhichitcouldproduceforeveryproductlinein
whichitcompeteswithSMC.AccesstoSMCpricingpolicybyCFCRobinawouldineffectdestroyfreecompetition
anddeprivetheconsumingpublicofopportunitytobuygoodsofthehighestpossiblequalityatthelowestprices.
Finally,consideringthatbothRobinaandSMCare,toacertainextent,engagedinagriculture,thentheelectionof
petitioner to the Board of SMC may constitute a violation of the prohibition contained in section 13(5) of the
CorporationLaw.Saidsectionprovidesinpartthat"anystockholderofmorethanonecorporationorganizedforthe
purpose of engaging in agriculture may hold his stock in such corporations solely for investment and not for the
purposeofbringingaboutorattemptingtobringaboutacombinationtoexercisecontrolofincorporations...."
Neither are We persuaded by the claim that the bylaw was Intended to prevent the candidacy of petitioner for
election to the Board. If the bylaw were to be applied in the case of one stockholder but waived in the case of
another,thenitcouldbereasonablyclaimedthatthebylawwasbeingappliedinadiscriminatorymanner.However,
thebylaw,byitsterms,appliestoallstockholders.TheequalprotectionclauseoftheConstitutionrequiresonlythat
thebylawoperateequallyuponallpersonsofaclass.Besides,beforepetitionercanbedeclaredineligibletorun
for director, there must be hearing and evidence must be submitted to bring his case within the ambit of the
disqualification.Soundprinciplesofpublicpolicyandmanagement,therefore,supporttheviewthatabylawwhich
disqualifiesacompetitionfromelectiontotheBoardofDirectorsofanothercorporationisvalidandreasonable.
Intheabsenceofanylegalprohibitionoroverridingpublicpolicy,widelatitudemaybeaccordedtothecorporation
inadoptingmeasurestoprotectlegitimatecorporationinterests.Thus,"wherethereasonablenessofabylawisa
merematterofjudgment,anduponwhichreasonablemindsmustnecessarilydiffer,acourtwouldnotbewarranted
in substituting its judgment instead of the judgment of those who are authorized to make bylaws and who have
expressedtheirauthority.45
Although it is asserted that the amended bylaws confer on the present Board powers to perpetua themselves in
power such fears appear to be misplaced. This power, but is very nature, is subject to certain well established
limitations.Oneoftheseisinherentintheveryconvertanddefinitionoftheterms"competition"and"competitor".
"Competition"impliesastruggleforadvantagebetweentwoormoreforces,eachpossessing,insubstantiallysimilar
ifnotIdenticaldegree,certaincharacteristicsessentialtothebusinesssought.Itmeansanindependentendeavorof
two or more persons to obtain the business patronage of a third by offering more advantageous terms as an
inducementtosecuretrade. 46Thetestmustbewhetherthebusinessdoesinfactcompete,notwhetheritiscapableof
anindirectandhighlyunsubstantialduplicationofanisolatedornoncharacteristicsactivity. 47Itis,therefore,obviousthat
not every person or entity engaged in business of the same kind is a competitor. Such factors as quantum and place of
business,Identityofproductsandareaofcompetitionshouldbetakenintoconsideration.Itis,therefore,necessarytoshow
thatpetitioner'sbusinesscoversasubstantialportionofthesamemarketsforsimilarproductstotheextentofnotlessthan
10%ofrespondentcorporation'smarketforcompetingproducts.WhileWeheresustainthevalidityoftheamendedbylaws,
itdoesnotfollowasanecessaryconsequencethatpetitionerisipsofactodisqualified.Consonantwiththerequirementof
dueprocess,theremustbeduehearingatwhichthepetitionermustbegiventhefullestopportunitytoshowthatheisnot
coveredbythedisqualification.Astrusteesofthecorporationandofthestockholders,itistheresponsibilityofdirectorstoact
withfairnesstothestockholders.48Pursuanttothisobligationandtoremoveanysuspicionthatthispowermaybeutilized
by the incumbent members of the Board to perpetuate themselves in power, any decision of the Board to disqualify a
candidate for the Board of Directors should be reviewed by the Securities behind Exchange Commission en banc and its
decisionshallbefinalunlessreversedbythisCourtoncertiorari.49Indeed,itisasettledprinciplethatwheretheactionofa
BoardofDirectorsisanabuseofdiscretion,orforbiddenbystatute,orisagainstpublicpolicy,orisultravires,orisafraud
uponminoritystockholdersorcreditors,orwillresultinwaste,dissipationormisapplicationofthecorporationassets,acourt
ofequityhasthepowertograntappropriaterelief.50
III
WhetherornotrespondentSECgravelyabuseditsdiscretionindenyingpetitioner'srequestforanexaminationof
therecordsofSanMiguelInternationalInc.,afullyownedsubsidiaryofSanMiguelCorporation
RespondentSanMiguelCorporationstatedinitsmemorandumthatpetitioner'sclaimthathewasdeniedinspection
rightsasstockholderofSMC"wasmadeintheteethofundisputedfactsthat,overaspecificperiod,petitionerhad
been furnished numerous documents and information," to wit: (1) a complete list of stockholders and their
stockholdings(2)acompletelistofproxiesgivenbythestockholdersforuseattheannualstockholders'meetingof
May18,1975(3)acopyoftheminutesofthestockholders'meetingofMarch18,1976(4)abreakdownofSMC's
P186.6millioninvestmentinassociatedcompaniesandothercompaniesasofDecember31,1975(5)alistingof
thesalaries,allowances,bonusesandothercompensationorremunerationsreceivedbythedirectorsandcorporate
officers of SMC (6) a copy of the US $100 million EuroDollar Loan Agreement of SMC and (7) copies of the
minutesofallmeetingsoftheBoardofDirectorsfromJanuary1975toMay1976,withdeletionsofsensitivedata,
whichdeletionswerenotobjectedtobypetitioner.
2/11/2017 G.R. No. L-45911
Further,itwasaverredthatuponrequest,petitionerwasinformedinwritingonSeptember18,1976(1)thatSMC's
foreigninvestmentsarehandledbySanMiguelInternational,Inc.,incorporatedinBermudaandwhollyownedby
SMCthiswasSMC'sfirstventureabroad,havingstartedin1948withaninitialoutlayof?500,000.00,augmented
byaloanofHongkong$6millionfromaforeignbankunderthepersonalguarantyofSMC'sformerPresident,the
late Col. Andres Soriano (2) that as of December 31, 1975, the estimated value of SMI would amount to almost
P400million(3)thatthetotalcashdividendsreceivedbySMCfromSMIsince1953hasamounttoUS$9.4million
and(4)thatfrom19721975,SMIdidnotdeclarecashorstockdividends,allearningshavingbeenusedinlinewith
aprogramforthesettingupofbreweriesbySMI
These averments are supported by the affidavit of the Corporate Secretary, enclosing photocopies of the afore
mentioneddocuments.51
Pursuanttothesecondparagraphofsection51oftheCorporationLaw,"(t)herecordofallbusinesstransactionsof
thecorporationandminutesofanymeetingshallbeopentotheinspectionofanydirector,memberorstockholder
ofthecorporationatreasonablehours."
The stockholder's right of inspection of the corporation's books and records is based upon their ownership of the
assetsandpropertyofthecorporation.Itis,therefore,anincidentofownershipofthecorporateproperty,whether
thisownershiporinterestbetermedanequitableownership,abeneficialownership,oraownership. 52Thisrightis
predicateduponthenecessityofselfprotection.Itisgenerallyheldbymajorityofthecourtsthatwheretherightisgrantedby
statute to the stockholder, it is given to him as such and must be exercised by him with respect to his interest as a
stockholderandforsomepurposegermanetheretoorintheinterestofthecorporation.53Inotherwords,theinspectionhas
tobegermanetothepetitioner'sinterestasastockholder,andhastobeproperandlawfulincharacterandnotinimicalto
theinterestofthecorporation. 54InGrey v. Insular Lumber, 55 this Court held that "the right to examine the books of the
corporationmustbeexercisedingoodfaith,forspecificandhonestpurpose,andnottogratifycuriosity,orforspecificand
honestpurpose,andnottogratifycuriosity,orforspeculativeorvexatiouspurposes.Theweightofjudicialopinionappears
to be, that on application for mandamus to enforce the right, it is proper for the court to inquire into and consider the
stockholder's good faith and his purpose and motives in seeking inspection. 56 Thus, it was held that "the right given by
statuteisnotabsoluteandmayberefusedwhentheinformationisnotsoughtingoodfaithorisusedtothedetrimentofthe
corporation."57Butthe"improprietyofpurposesuchaswilldefeatenforcementmustbesetupthecorporationdefensivelyif
theCourtistotakecognizanceofitasaqualification.Inotherwords,thespecificprovisionstakefromthestockholderthe
burden of showing propriety of purpose and place upon the corporation the burden of showing impropriety of purpose or
motive. 58 It appears to be the general rule that stockholders are entitled to full information as to the management of the
corporation and the manner of expenditure of its funds, and to inspection to obtain such information, especially where it
appearsthatthecompanyisbeingmismanagedorthatitisbeingmanagedforthepersonalbenefitofofficersordirectorsor
certainofthestockholderstotheexclusionofothers."59
Whiletherightofastockholdertoexaminethebooksandrecordsofacorporationforalawfulpurposeisamatterof
law,therightofsuchstockholdertoexaminethebooksandrecordsofawhollyownedsubsidiaryofthecorporation
inwhichheisastockholderisadifferentthing.
Some state courts recognize the right under certain conditions, while others do not. Thus, it has been held that
whereacorporationownsapproximatelynopropertyexceptthesharesofstockofsubsidiarycorporationswhichare
merely agents or instrumentalities of the holding company, the legal fiction of distinct corporate entities may be
disregarded and the books, papers and documents of all the corporations may be required to be produced for
examination,60andthatawritofmandamus,maybegranted,astherecordsofthesubsidiarywere,toallincontentsand
purposes, the records of the parent even though subsidiary was not named as a party. 61 mandamus was likewise held
propertoinspectboththesubsidiary'sandtheparentcorporation'sbooksuponproofofsufficientcontrolordominionbythe
parentshowingtherelationofprincipaloragentorsomethingsimilarthereto.62
On the other hand, mandamus at the suit of a stockholder was refused where the subsidiary corporation is a
separateanddistinctcorporationdomiciledandwithitsbooksandrecordsinanotherjurisdiction,andisnotlegally
subject to the control of the parent company, although it owned a vast majority of the stock of the subsidiary. 63
Likewise,inspectionofthebooksofanalliedcorporationbystockholderoftheparentcompanywhichownsallthestockof
thesubsidiaryhasbeenrefusedonthegroundthatthestockholderwasnotwithintheclassof"personshavinganinterest."
64
IntheNashcase,65TheSupremeCourtofNewYorkheldthatthecontractualrightofformerstockholderstoinspectbooks
and records of the corporation included the right to inspect corporation's subsidiaries' books and records which were in
corporation'spossessionandcontrolinitsofficeinNewYork."
In the Bailey case, 66 stockholders of a corporation were held entitled to inspect the records of a controlled subsidiary
corporationwhichusedthesameofficesandhadIdenticalofficersanddirectors.
2/11/2017 G.R. No. L-45911
In his "Urgent Motion for Production and Inspection of Documents" before respondent SEC, petitioner contended
thatrespondentcorporation"hadbeenattemptingtosuppressinformationforthestockholders"andthatpetitioner,
"as stockholder of respondent corporation, is entitled to copies of some documents which for some reason or
another,respondentcorporationisveryreluctantinrevealingtothepetitionernotwithstandingthefactthatnoharm
wouldbecausedtherebytothecorporation." 67Thereisnoquestionthatstockholdersareentitledtoinspectthebooks
andrecordsofacorporationinordertoinvestigatetheconductofthemanagement,determinethefinancialconditionofthe
corporation,andgenerallytakeanaccountofthestewardshipoftheofficersanddirectors.68
Inthecaseatbar,consideringthattheforeignsubsidiaryiswhollyownedbyrespondentSanMiguelCorporation
and,therefore,underitscontrol,itwouldbemoreinaccordwithequity,goodfaithandfairdealingtoconstruethe
statutoryrightofpetitionerasstockholdertoinspectthebooksandrecordsofthecorporationasextendingtobooks
andrecordsofsuchwhollysubsidiarywhichareinrespondentcorporation'spossessionandcontrol.
IV
WhetherornotrespondentSECgravelyabuseditsdiscretioninallowingthestockholdersofrespondentcorporation
toratifytheinvestmentofcorporatefundsinaforeigncorporation
PetitionerreiterateshiscontentioninSECCaseNo.1423thatrespondentcorporationinvestedcorporatefundsin
SMIwithoutpriorauthorityofthestockholders,thusviolatingsection171/2oftheCorporationLaw,andallegesthat
respondent SEC should have investigated the charge, being a statutory offense, instead of allowing ratification of
theinvestmentbythestockholders.
Respondent SEC's position is that submission of the investment to the stockholders for ratification is a sound
corporatepracticeandshouldnotbethwartedbutencouraged.
Section171/2oftheCorporationLawallowsacorporationto"investitsfundsinanyothercorporationorbusiness
orforanypurposeotherthanthemainpurposeforwhichitwasorganized"providedthatitsBoardofDirectorshas
been so authorized by the affirmative vote of stockholders holding shares entitling them to exercise at least two
thirds of the voting power. If the investment is made in pursuance of the corporate purpose, it does not need the
approval of the stockholders. It is only when the purchase of shares is done solely for investment and not to
accomplish the purpose of its incorporation that the vote of approval of the stockholders holding shares entitling
themtoexerciseatleasttwothirdsofthevotingpowerisnecessary.69
Asstatedbyrespondentcorporation,thepurchaseofbeermanufacturingfacilitiesbySMCwasaninvestmentinthe
samebusinessstatedasitsmainpurposeinitsArticlesofIncorporation,whichistomanufactureandmarketbeer.It
appearsthattheoriginalinvestmentwasmadein19471948,whenSMC,thenSanMiguelBrewery,Inc.,purchased
abeerbreweryinHongkong(HongkongBrewery&Distillery,Ltd.)forthemanufactureandmarketingofSanMiguel
beerthereat.Restructuringoftheinvestmentwasmadein19701971thrutheorganizationofSMIinBermudaasa
taxfreereorganization.
Underthesecircumstances,therulinginDelaRamav.ManaoSugarCentralCo.,Inc.,supra,appearsrelevant.In
saidcase,oneoftheissueswasthelegalityofaninvestmentmadebyManaoSugarCentralCo.,Inc.,withoutprior
resolution approved by the affirmative vote of 2/3 of the stockholders' voting power, in the Philippine Fiber
Processing Co., Inc., a company engaged in the manufacture of sugar bags. The lower court said that "there is
morelogicinthestandthatiftheinvestmentismadeinacorporationwhosebusinessisimportanttotheinvesting
corporation and would aid it in its purpose, to require authority of the stockholders would be to unduly curtail the
poweroftheBoardofDirectors."ThisCourtaffirmedtherulingofthecourtaquoonthematterand,quotingProf.
SulpicioS.Guevara,said:
"j.Powertoacquireordisposeofsharesorsecurities.Aprivatecorporation,inordertoaccomplish
is purpose as stated in its articles of incorporation, and subject to the limitations imposed by the
Corporation Law, has the power to acquire, hold, mortgage, pledge or dispose of shares, bonds,
securities,andotherevidenceofindebtednessofanydomesticorforeigncorporation.Suchanact,if
doneinpursuanceofthecorporatepurpose,doesnotneedtheapprovalofstockholdersbutwhenthe
purchase of shares of another corporation is done solely for investment and not to accomplish the
purpose of its incorporation, the vote of approval of the stockholders is necessary. In any case, the
purchaseofsuchsharesorsecuritiesmustbesubjecttothelimitationsestablishedbytheCorporations
lawnamely,(a)thatnoagriculturalorminingcorporationshallberestrictedtoownnotmorethan15%
ofthevotingstockofnayagriculturalorminingcorporationand(c)thatsuchholdingsshallbesolely
for investment and not for the purpose of bringing about a monopoly in any line of commerce of
combinationinrestraintoftrade."ThePhilippineCorporationLawbySulpicioS.Guevara,1967Ed.,p.
89)(Emphasissupplied.)
40. Power to invest corporate funds. A private corporation has the power to invest its corporate
funds"inanyothercorporationorbusiness,orforanypurposeotherthanthemainpurposeforwhichit
2/11/2017 G.R. No. L-45911
was organized, provide that 'its board of directors has been so authorized in a resolution by the
affirmativevoteofstockholdersholdingsharesinthecorporationentitlingthemtoexerciseatleasttwo
thirdsofthevotingpoweronsuchaproposeatastockholders'meetingcalledforthatpurpose,'and
providedfurther,thatnoagriculturalorminingcorporationshallinanywisebeinterestedinanyother
agricultural or mining corporation. When the investment is necessary to accomplish its purpose or
purposesasstatedinitsarticlesofincorporationtheapprovalofthestockholdersisnotnecessary.""
(Id.,p.108)(Emphasisours.)(pp.258259).
AssumingarguendothattheBoardofDirectorsofSMChadnoauthoritytomaketheassailedinvestment,thereis
no question that a corporation, like an individual, may ratify and thereby render binding upon it the originally
unauthorizedactsofitsofficersorotheragents. 70Thisistruebecausethequestionedinvestmentisneithercontraryto
law,morals,publicorderorpublicpolicy.Itisacorporatetransactionorcontractwhichiswithinthecorporatepowers,but
whichisdefectivefromasupportedfailuretoobserveinitsexecutionthe.requirementofthelawthattheinvestmentmustbe
authorized by the affirmative vote of the stockholders holding twothirds of the voting power. This requirement is for the
benefit of the stockholders. The stockholders for whose benefit the requirement was enacted may, therefore, ratify the
investment and its ratification by said stockholders obliterates any defect which it may have had at the outset. "Mere ultra
viresacts", said this Court in Pirovano, 71 "or those which are not illegal and void abinitio, but are not merely within the
scope of the articles of incorporation, are merely voidable and may become binding and enforceable when ratified by the
stockholders.
Besides, the investment was for the purchase of beer manufacturing and marketing facilities which is apparently
relevanttothecorporatepurpose.Themerefactthatrespondentcorporationsubmittedtheassailedinvestmentto
thestockholdersforratificationattheannualmeetingofMay10,1977cannotbeconstruedasanadmissionthat
respondent corporation had committed an ultra vires act, considering the common practice of corporations of
periodicallysubmittingforthegratificationoftheirstockholderstheactsoftheirdirectors,officersandmanagers.
WHEREFORE,judgmentisherebyrenderedasfollows:
TheCourtvotedunanimouslytograntthepetitioninsofarasitpraysthatpetitionerbeallowedtoexaminethebooks
andrecordsofSanMiguelInternational,Inc.,asspecifiedbyhim.
On the matter of the validity of the amended bylaws of respondent San Miguel Corporation, six (6) Justices,
namely,JusticesBarredo,Makasiar,Antonio,Santos,AbadSantosandDeCastro,votedtosustainthevalidityper
se of the amended bylaws in question and to dismiss the petition without prejudice to the question of the actual
disqualification of petitioner John Gokongwei, Jr. to run and if elected to sit as director of respondent San Miguel
Corporation being decided, after a new and proper hearing by the Board of Directors of said corporation, whose
decision shall be appealable to the respondent Securities and Exchange Commission deliberating and acting en
bancand ultimately to this Court. Unless disqualified in the manner herein provided, the prohibition in the afore
mentionedamendedbylawsshallnotapplytopetitioner.
Theaforementionedsix(6)Justices,togetherwithJusticeFernando,votedtodeclaretheissueonthevalidityof
theforeigninvestmentofrespondentcorporationasmoot.
ChiefJusticeFredRuizCastroreservedhisvoteonthevalidityoftheamendedbylaws,pendinghearingbythis
Courtontheapplicabilityofsection13(5)oftheCorporationLawtopetitioner.
JusticeFernandoreservedhisvoteonthevalidityofsubjectamendmenttothebylawsbutotherwiseconcursinthe
result.
Four(4)Justices,namely,JusticesTeehankee,Concepcion,Jr.,FernandezandGuerrerofiledaseparateopinion,
whereintheyvotedagainstthevalidityofthequestionedamendedbylawsandthatthisquestionshouldproperlybe
resolved first by the SEC as the agency of primary jurisdiction. They concur in the result that petitioner may be
allowed to run for and sit as director of respondent SMC in the scheduled May 6, 1979 election and subsequent
elections until disqualified after proper hearing by the respondent's Board of Directors and petitioner's
disqualificationshallhavebeensustainedbyrespondentSECenbancandultimatelybyfinaljudgmentofthisCourt.
Inresume,subjecttothequalificationsaforestatedjudgmentisherebyrenderedGRANTINGthepetitionbyallowing
petitioner to examine the books and records of San Miguel International, Inc. as specified in the petition. The
petition, insofar as it assails the validity of the amended by laws and the ratification of the foreign investment of
respondentcorporation,forlackofnecessaryvotes,isherebyDISMISSED.Nocosts.
Makasiar,SantosAbadSantosandDeCastro,JJ.,concur.
Aquino,andMelencioHerreraJJ.,tooknopart.
2/11/2017 G.R. No. L-45911

SeparateOpinions
TEEHANKEE,CONCEPCIONJR.,FERNANDEZandGUERRERO,JJ.,concurring:
AscorrectlystatedinthemainopinionofMr.JusticeAntonio,theCourtisunanimousinitsjudgmentgrantingthe
petitionerasstockholderofrespondentSanMiguelCorporationtherighttoinspect,examineandsecurecopiesof
therecordsofSanMiguelInternational,inc.(SMI),awhollyownedforeignsubsidiarycorporationofrespondentSan
MiguelCorporation.RespondentcommissionsenbancOrderNo.449,Seriesof1977,denyingpetitioner'srightof
inspectionfor"notbeingastockholderofSanMiguelInternational,Inc."hasbeenaccordinglysetaside.Itneedbe
onlypointedoutthat:
a) The commission's reasoning grossly disregards the fact that the stockholders of San Miguel
CorporationarelikewisetheownersofSanMiguelInternational,Inc.asthecorporation'swhollyowned
foreignsubsidiaryandthereforehaveeveryrighttohaveaccesstoitsbooksandrecords.otherwise,
thedirectorsandmanagementofanyPhilippinecorporationbythesimpledeviceoforganizingwiththe
corporation's funds foreign subsidiaries would be granted complete immunity from the stockholders'
scrutinyofitsforeignoperationsandwouldhaveaconduitfordissipating,ifnotmisappropriating,the
corporationfundsandassetsbymerelychannelingthemintoforeignsubsidiaries'operationsand
b) Petitioner's right of examination herein recognized refers to all books and records of the foreign
subsidiarySMIwhicharewhichare"inrespondentcorporation'spossessionandcontrol"1,meaningto
sayregardlessofwhetherornotsuchbooksandrecordsarephysicallywithinthePhilippines.allsuchbooks
and records of SMI are legally within respondent corporation's "possession and control" and if nay books or
records are kept abroad, (e.g. in the foreign subsidiary's state of domicile, as is to be expected), then the
respondent corporation's board and management are obliged under the Court's judgment to bring and make
them(ortruecopiesthereofavailablewithinthePhilippinesforpetitioner'sexaminationandinspection.
II
OntheothermainissueoftheValidityofrespondentSanMiguelCorporation'samendmentofitsbylaws2whereby
respondent corporation's board of directors under its resolution dated April 29, 1977 declared petitioner ineligible to be
nominated or to be voted or to be elected as of the board of directors, the Court, composed of 12 members (since Mme.
Justice Ameurfina Melencio Herrera inhibited herself from taking part herein, while Mr. Justice Ramon C. Aquino upon
submittal of the main opinion of Mr. Justice Antonio decided not to take part), failed to reach a conclusive vote or, the
requiredmajorityof8votestosettletheissueonewayortheother.
Six members of the Court, namely, Justices Barredo, Makasiar, Antonio, Santos, Abad Santos and De Castro,
consideredtheissuepurelylegalandvotedtosustainthevalidityperse of the questioned amended bylaws but
neverthelessvotedthattheprohibitionanddisqualificationthereinprovidedshallnotapplytopetitionerGokongwei
untilandafterheshallhavebeengivenanewandproperhearing"bythecorporation'sboardofdirectorsandthe
board's decision of disqualification she'll have been sustained on appeal by respondent Securities and Exchange
CommissionandultimatelybythisCourt.
TheundersignedJusticesdonotconsidertheissueaspurelylegalinthelightofrespondentcommission'sOrder
No.451,Seriesof1977,denyingpetitioner's"MotionforSummaryJudgment"onthegroundthat"theCommission
enbancfindsthatthere(are)unresolvedandgenuineissuesoffact"3aswellasitspositioninthiscasetotheSolicitor
General that the case at bar is "premature" and that the administrative remedies before the commission should first be
availedofandexhausted.4
We are of the opinion that the questioned amended bylaws, as they are, (adopted after almost a century of
respondentcorporation'sexistenceasapubliccorporationwithitssharesfreelypurchasedandtradedintheopen
marketwithoutrestrictionanddisqualification)whichwouldbarpetitionerfromqualification,nominationandelection
asdirectorandworse,granttheboardby3/4votethearbitrarypowertobaranystockholderfromhisrighttobe
elected as director by the simple expedient of declaring him to be engaged in a "competitive or antagonistic
business" or declaring him as a "nominee" of the competitive or antagonistic" stockholder are illegal, oppressive,
arbitraryandunreasonable.
We consider the questioned amended bylaws as being specifically tailored to discriminate against petitioner and
deprivinghiminviolationofsubstantivedueprocessofhisvestedsubstantialrightsasstockholderofrespondent
corporation.WefurtherconsidersaidamendedbylawsasviolatingspecificprovisionsoftheCorporationLawwhich
grant and recognize the right of a minority stockholder like petitioner to be elected director by the process of
2/11/2017 G.R. No. L-45911
cumulativevotingordainedbytheLaw(secs21and30)andtherightofaminoritydirectoronceelectednottobe
removedfromofficeofdirectorexceptforcauseby vote of the stockholders holding 2/3 of the subscribed capital
stock (sec. 31). If a minority stockholder could be disqualified by such a bylaws amendment under the guise of
providingfor"qualifications,"thesemandatesoftheCorporationLawwouldhavenomeaningorpurpose.
ThesevestedandsubstantialrightsgrantedstockholdersundertheCorporationLawmaynotbedilutedordefeated
bythegeneralauthoritygrantedbytheCorporationLawitselftocorporationstoadopttheirbylaws(insection21)
whichdealprincipallywiththeproceduresgoverningtheirinternalbusiness.Thebylawsofanycorporationmust,
bealwayswithinthecharacterlimits.WhattheCorporationLawhasgrantedstockholdersmaynotbe taken away
by the corporation's bylaws. The amendment is further an instrument of oppressiveness and arbitrariness in that
the incumbent directors are thereby enabled to perpetuate themselves in office by the simple expedient of
disqualifyinganyunwelcomecandidate,nomatterhowmanyvoteshemayhave.
However,inviewoftheinconclusivenessofthevote,wesustainrespondentcommission'sstandasexpressedinits
OrdersNos.450and451,Seriesof1977thatthereareunresolvedandgenuineissuesoffact"andthatithasyetto
ruleonandfinallydecidethevalidityofthedisputedbylawprovision",subjecttoappealbyeitherpartytothisCourt.
Inviewofprematurityoftheproceedingshere(aslikewiseexpressedbyMr.JusticeFernando),thecaseshouldas
aconsequenceberemandedtotheSecuritiesandExchangeCommissionastheagencyofprimaryjurisdictionfora
fullhearingandreceptionofevidenceofallrelevantfacts(whichshouldpropertybesubmittedtothecommission
insteadofthepiecemealdocumentssubmittedasannexestothisCourtwhichisnotatrieroffacts)concerningnot
only the petitioner but the members of the board of directors of respondent corporation as well, so that it may
determineonthebasisthereoftheissueofthelegalityofthequestionedamendedbylaws,andassumingChatit
holdsthesametobevalidwhetherthesamearearbitrarilyandunreasonablyappliedtopetitionervisavisother
directors,who,petitionerclaims,shouldinsucheventbelikewisedisqualifiedfromsittingintheboardofdirectorsby
virtue of conflict of interests or their being likewise engaged in competitive or antagonistic business" with the
corporationsuchasinvestmentandfinance,coconutoilmillscement,milkandhotels.5
It should be noted that while the petition may be dismissed in view of the inconclusiveness of the vote and the
Court's failure to affair, the required 8vote majority to resolve the issue, such as dismissal (for lack of necessary
votes) is of no doctrine value and does not in any manner resolve the issue of the validity of the questioned
amended bylaws nor foreclose the same. The same should properly be determined in a proper case in the first
instancebytheSecuritiesandExchangeCommissionastheagencyofprimaryjurisdiction,asaboveindicated.
TheCourtisunanimous,therefore,initsjudgmentthatpetitionerGokongweimayrunfortheofficeof,andifelected,
sitas,memberoftheboardofdirectorsofrespondentSanMiguelCorporationasstatedinthedispositiveportionof
themainopinionofMr.JusticeAntonio,towit:Untilandafterpetitionerhasbeengivena"newandproperhearing
bytheboardofdirectorsofsaidcorporation,whosedecisionshallbeappealableLotherespondentSecuritiesand
Exchange Commission deliverating and acting en banc and ultimately to this Court" and until ' disqualified in the
manner herein provided, the prohibition in the aforementioned amended bylaws shall not apply to petitioner," In
other words, until and after petitioner shall have been given due process and proper hearing by the respondent
boardofdirectorsastothequestionofhisqualificationordisqualificationunderthequestionedamendedbylaws
(assuming that the respondent Securities and Exchange C commission ultimately upholds the validity of said by
laws),andsuchdisqualificationshallhavebeensustainedbyrespondentSecuritiesandExchangeCommissionand
ultimately by final judgment of this Court, petitioner is deemed eligible for all legal purposes and effects to be
nominated and voted and if elected to sit as a member of the hoard of directors of respondent San Miguel
Corporation.
In view of the Court's unanimous judgment on this point the portion of respondent commission's Order No. 450,
Seriesof977whichimposed"theconditionthathe[petitioner]cannotsitasboardmemberifelecteduntilafterthe
Commissionshallhavefinallydecidedthevalidityofthedisputedbylawprovision"hasbeenlikewiseaccordingly
setaside.
III
Bywayofrecapitulation,sothattheCourt'sdecisionandjudgmentmaybeclearandnotsubjecttoambiguity,we
statethefollowing.
1.WiththevotesofthesixJusticesconcurringunqualifiedlyinthemainopinionaddedtoourfourvotes,plusthe
Chief Justice's vote and that of Mr. Justice Fernando, the Court has by twelve (12) votes unanimously rendered
judgment granting petitioner's right to examine and secure copies of the books and records of San Miguel
International, Inc. as a foreign subsidiary of respondent corporation and respondent commission's Order No. 449,
Seriesof1977,tothecontraryissetaside:
2.Withthesametwelve(12)votes,theCourthasalsounanimouslyrenderedjudgmentdeclaringthatuntilandafter
petitioner shall have been given due process and proper hearing by the respondent board of directors as to the
question of his disqualification under the questioned amended by laws (assuming that the respondent Securities
2/11/2017 G.R. No. L-45911
andExchangeCommissionultimatelyupholdsthevalidityofsaidbylaws),andsuchdisqualificationshallhavebeen
sustained by respondent Securities and Exchange Commission and ultimately by final judgment of this Court
petitionerisdeemedeligibleforalllegalpurposesandeffecttobenominatedandvotedandifelectedtositasa
member of the board of directors of respondent San Miguel Corporation. Accordingly, respondent commission's
OrderNo.450,Seriesof1977tothecontraryhaslikewisebeensetasideand
3. The Court's voting on the validity of respondent corporation's amendment of the bylaws (sec. 2, Art. 111) is
inconclusive without the required majority of eight votes to settle the issue one way or the other having been
reached.NojudgmentisrenderedbytheCourtthereonandthestatementsofthesixJusticeswhohavesignedthe
mainopiniononthelegalitythereofhavenobindingeffect,muchlessdoctrinalvalue.
Thedismissalofthepetitioninsofarasthequestionofthevalidityofthedisputedbylawsamendmentisconcerned
isnotbyanjudgmentwiththerequiredeightvotesbutsimplybyforceofRule56,sectionIIoftheRulesofCourt,
thepertinentportionofwhichprovidesthat"wherethecourtenbancisequallydividedinopinion,orthenecessary
majoritycannotbehad,thecaseshallbereheard,andifonrehearingnodecisionisreached,theactionshallbe
dismissed if originally commenced in the court ...." The end result is that the Court has thereby dismissed the
petition which prayed that the Court bypass the commission and directly resolved the issue and therefore the
respondent commission may now proceed, as announced in its Order No. 450, Series of 1977, to hear the case
before it and receive all relevant evidence bearing on the issue as hereinabove indicated, and resolve the
"unresolved and genuine issues of fact" (as per Order No. 451, Series of 1977) and the issues of legality of the
disputedbylawsamendment.
Teehankee,Concepcion,Jr.,andFernandez,JJ.,concur.
Guerrero,J.,concurred.
TEEHANKEE,CONCEPCIONJR.,
FERNANDEZandGUERRERO,JJ.,concurring:
ThissupplementalopinionisissuedwithreferencetotheadvanceseparateopinionofMr.JusticeBarredoissuedby
himasto"certainmisimpressionsastotheimportofthedecisioninthiscase"whichmightbeproducedbyourjoint
separate opinion of April 11, 1979 and "urgent(ly) to clarify (his) position in respect to the rights of the parties
resultingfromthedismissalofthepetitionhereinandtheoutlineoftheprocedurebywhichthedisqualificationof
petitionerGokongweicanbemadeeffective."
1.Mr.JusticeBarredo'sadvancesseparateopinion"thatasbetweenthepartiesherein,theissueofthevalidityof
thechallengedbylawsisalreadysettled"had,ofcourse,nobindingeffect.ThejudgmentoftheCourtisfoundon
pages5961ofthedecisionofApril11,1979,pennedbyMr.JusticeAntonio,whereinonthequestionofthevalidity
oftheamendedbylawstheCourt'sinconclusivevotingissetforthasfollows:
Chief Justice Fred Ruiz Castro reserved his vote on the validity of the amended bylaws, pending
hearingbythisCourtontheapplicabilityofsection13(5)oftheCorporationLawtopetitioner.
JusticeFernandoreservedhisvoteonthevalidityofsubjectamendmenttothebylawsbutotherwise
concursintheresult.
Four (4) Justices, namely, Justices Teehankee, Concepcion Jr., Fernandez and Guerrero filed a
separateopinion,whereintheyvotedagainstthevalidityofthequestionedamendedbylawsandthat
thisquestionshouldproperlyberesolvedfirstbytheSECastheagencyofprimaryjurisdiction...1
Asstatedinsaidjudgmentitself,forlackofthenecessaryvotes,thepetition,insofarasitassailsthevalidityofthe
questionedbylaws,wasdismissed.
2.Mr.JusticeBarredonowcontendscontrarytotheundersigned'sunderstanding,asstatedonpages8and9ofour
jointseparateopinionofApril11,1979thatthelegaleffectofthedismissalofthepetitiononthequestionofvalidity
of the amended bylaws for lack of the necessary votes simply means that "the Court has thereby dismissed the
petition which prayed that the Court bypass the commission and directly resolve the issue and therefore the
'unresolved and genuine issues of fact' (as per Order No. 451, Series of 1977) and the issue of legality of the
disputed bylaws amendment," that such dismissal "has no other legal consequence than that it is the law of the
caseasfarasthepartiesareconcerned,albeitthemajorityoftheopinionofsixagainstfourJusticesisnotdoctrinal
inthesensethatitcannotbecitedasnecessarilyaprecedentforsubsequentcases."
WeholdonourpartthatthedoctrineofthelawofthecaseinvokedbyMr.JusticeBarredohasnoapplicabilityfor
thefollowingreasons:
2/11/2017 G.R. No. L-45911
a) Our jurisprudence is quite clear that this doctrine may be invoked only where there has been a final and
conclusivedeterminationofanissueinthefirstcaselaterinvokedasthelawofthecase.
Thus,inPeoplevs.Olarte,2weheldthat
"Law of the case" has been defined as the opinion delivered on a former appeal More specifically, it
meansthatwhateverisonceirrevocablyestablishedasthecontrollinglegalruleofdecisionbetween
the same parties in the same case continues to he the law of the case, whether correct on general
principlesornot,solongasthefactsonwhichsuchdecisionwaspredicatedcontinuetobethefactsof
thecasebeforethecourt....
ItneednotbestatedthattheSupremeCourt,beingthecourtoflastresort,isthefinalarbiterofalllegal
questionsproperlybroughtbeforeitandthatitsdecisioninanygivencaseconstitutesthelawofthat
particularcase.Onceitsjudgmentbecomesfinalitisbindingonallinferiorcourts,andhencebeyond
theirpowerandauthoritytoalterormodifyKabigtingvs.ActingDirectorofPrisons,G.R.No.L15548,
October30,1962).
ThedecisionofthisCourtonthatappealbythegovernmentfromtheorderofdismissal,holdingthat
said appeal did not place the appellants, including Absalon Bignay, in double jeopardy, signed and
concurredinbysixJusticesasagainstthreedissentersheadedbytheChiefJustice,promulgatedway
backintheyear1952,haslongbecomethelawofthecase.Itmaybeerroneous,judgedbythelawon
double jeopardy as recently interpreted by this same Tribunal Even so, it may not be disturbed and
modified.Ourrecentinterpretationofthelawmaybeappliedtonewcases,butcertainlynottoanold
onefinallyandconclusivelydetermined.Asalreadystated,themajorityopinioninthatappealisnow
thelawofthecase.(Peoplevs.Pinuila)
Thedoctrineofthelawofthecase,therefore,hasnoapplicabilitywhatsoeverhereininsofarasthequestionofthe
validityorinvalidityoftheamendedbylawsisconcerned.TheCourt'sjudgmentofApril11,1979clearlyshowsthat
thevotingonthisquestionwasinconclusivewithsixagainstfourJusticesandtwootherJustices(theChiefJustice
and Mr. Justice Fernando) expressly reserving their votes thereon, and Mr. Justice Aquino while taking no part in
effectlikewiseexpresslyreservedhisvotethereon.Nofinalandconclusivedeterminationcouldbereachedonthe
issueandpursuanttotheprovisionsofRule56,section11,sincethisspecialcivilactionoriginallycommencedin
thisCourt,theactionwassimplydismissedwiththeresultthatnolawofthecasewaslaiddowninsofarastheissue
ofthevalidityorinvalidityofthequestionedbylawsisconcerned,andthereliefsoughthereinbypetitionerthatthis
CourtbypasstheSECwhichhasyettohearanddeterminethesameissuependingbeforeitbelowandthatthis
Courtitselfdirectlyresolvethesaidissuestandsdenied.
b)ThecontentionofMr.JusticeBarredothattheresultofthedismissofthecasewasthat"petitionerGokongwei
maynothereafteractontheassumptionthathecanrevivetheissueofthevaliditywhetherintheSecuritiesand
Exchange Commission, in this Court or in any other forum, unless he proceeds on the basis of a factual milieu
different from the setting of this case Not even the Securities and Exchange Commission may pass on such
questionanymoreattheinstanceofhereinpetitioneroranyoneactinginhissteadoronhisbehalf,"appearstous
tobeuntenable.
TheCourtthroughthedecisionofApril11,1979,bytheunanimousvotesofthetwelveparticipatingJusticesheaded
bytheChiefJustice,ruledthatpetitionerGokongweiwasentitledtoa"newandproperhearing"bytheSMCboard
ofdirectorsonthematterofhisdisqualificationunderthequestionedbylawsandthattheboard's"decisionshallbe
appealabletotherespondentSecuritiesandExchangeCommissiondeliberatingandactingenbancandultimately
tothisCourt(and)unlessdisqualifiedinthemannerhereinprovided,theprohibitionintheaforementionedamended
bylawsshallnotapplytopetitioner."
TheentireCourt,therefore,recognizedthatpetitionerhadnotbeengivenproceduraldueprocessbytheSMCboard
onthematterofhisdisqualificationandthathewasentitledtoa"newandproperhearing".Itstandstoreasonthat
insuchhearing,petitionercouldraisenotonlyquestionsoffactbutquestionsoflaw,particularlyquestionsoflaw
affectingtheinvestingpublicandtheirrighttorepresentationontheboardasprovidedbylawnottomentionthat
asborneoutbythefactthatnorestrictionwhatsoeverappearsinthecourt'sdecision,itwasnevercontemplated
thatpetitionerwastobelimitedtoquestionsoffactandcouldnotraisethefundamentalquestionsoflawbearingon
the invalidity of the questioned amended bylaws at such hearing before the SMC board. Furthermore, it was
expressly provided unanimously in the Court's decision that the SMC board's decision on the disqualification of
petitioner("assumingtheboardofdirectorsofSanMiguelCorporationshould,aftertheproperhearing,disqualify
him" as qualified in Mr. Justice Barredo's own separate opinion, at page 2) shall be appealable to respondent
Securities and Exchange Commission "deliberating and acting en banc and "untimately to this Court." Again, the
Court'sjudgmentassetforthinitsdecisionofApril11,1979containsnothingthatwouldwarranttheopinionnow
expressed that respondent Securities and Exchange Commission may not pass anymore on the question of the
invalidityoftheamendedbylaws.Certainly,itcannotbecontendedthattheCourtindismissingthepetitionforlack
of necessary votes actually bypassed the Securities and Exchange Commission and directly ruled itself on the
2/11/2017 G.R. No. L-45911
invalidity of the questioned bylaws when it itself could not reach a final and conclusive vote (a minimum of eight
votes) on the issue and three other Justices (the Chief Justice and Messrs. Justices Fernando and Aquino) had
expresslyreservedtheirvoteuntilafterfurtherhearings(firstbeforetheSecuritiesandExchangeCommissionand
ultimatelyinthisCourt).
Such a view espoused by Mr. Justice Barredo could conceivably result in an incongruous situation where
supposedlyunderthelawofthiscasethequestionedbylawswouldbeheldvalidasagainstpetitionerGokongwei
andyetthesamemaybestrickenoffasinvalidastoallotherSMCshareholdersinapropercase.
3.ItneedonlybepointedoutthatMr.JusticeBarredo'sadvanceseparateopinioncaninnowayaffectormodifythe
judgmentofthisCourtassetforthinthedecisionofApril11,1979anddiscussedhereinabove.Thesamebearsthe
unqualifiedconcurrenceofonlythreeJusticesoutofthesixJusticeswhooriginallyvotedforthevalidityperseof
thequestionedbylaws,namely,Messrs.JusticesAntonio,SantosandDeCastro.Messrs.JusticesFernandoand
Makasiar did not concur therein but they instead concurred with the limited concurrence of the Chief Justice
touching on the law of the case which guardedly held that the Court has not found merit in the claim that the
amendedbylawsinquestionareinvalidbutwithoutinanymannerforeclosingtheissueandasamatteroffactand
law,withoutinanymannerchangingormodifyingtheabovequotedvoteoftheChiefJusticeasofficiallyrenderedin
thedecisionofApril11,1979,whereinheprecisely"reserved(his)voteonthevalidityoftheamendedbylaws."
4.AwordontheseparateopinionofMr.JusticePacificodeCastroattachedtotheadvanceseparateopinionofMr.
JusticeBarredo.Mr.JusticeDeCastroadvanceshisinterpretationastoarestrictiveconstructionofsection13(5)of
thePhilippineCorporationLaw,ignoringordisregardingthefactthatduringtheCourt'sdeliberationsitwasbrought
outthatthisprohibitoryprovisionwasandisnotraisedinissueinthiscasewhetherhereorintheSecuritiesand
Exchange Commission below (outside of a passing argument by Messrs. Angara, Abello, Concepcion, Regala &
Cruz, as counsels for respondent Sorianos in their Memorandum of June 26, 1978 that "(T)he disputed ByLaws
doesnotprohibitpetitionerfromholdingonto,orevenincreasinghisSMCinvestmentitonlyrestrictsanyshiftingon
thepartofpetitionerfrompassiveinvestortoadirectorofthecompany."3
Asaconsequence,theCourtabandonedtheIdeaofcallingforanotherhearingwhereinthepartiescouldproperly
raise and discuss this question as a new issue and instead rendered the decision in question, under which the
questionofsection13(5)couldberaisedatanewandproperhearingbeforetheSMCboardandintheSecurities
and Exchange Commission and in due course before this Court (but with the clear understanding that since both
corporations,theRobinaandSMCareengagedinagricultureassubmittedbytheSorianos'counselintheirsaid
memorandum,theissuecouldberaisedlikewiseagainstSMCanditsothershareholders,directors,ifnotagainst
SMC itself. As expressly stated in the Chief Justices reservation of his vote, the matter of the question of the
applicability of the said section 13(5) to petitioner would be heard by this Court at the appropriate time after the
proceedings below (and necessarily the question of the validity of the amended bylaws would be taken up anew
andtheCourtwouldatthattimebeabletoreachafinalandconclusivevote).
Mr.JusticeDeCastro'spersonalinterpretationofthedecisionofApril11,1979thatpetitionermaybeallowedtorun
forelectiondespiteadversedecisionofboththeSMCboardandtheSecuritiesandExchangeCommission"onlyif
he comes to this Court and obtains an injunction against the enforcement of the decision disqualifying him" is
patentlycontradictoryofhisvoteonthematterasexpresslygiveninthejudgmentintheCourt'sdecisionofApril11,
1979 (at page 59) that petitioner could run and if elected, sit as director of the respondent SMC and could be
disqualifiedonlyaftera"newandproperhearingbytheboardofdirectorsofsaidcorporation,whosedecisionshall
be appealable to the respondent Securities and Exchange Commission deliberating and acting en banc and
ultimately to this Court. Unlessdisqualified in the manner herein provided, the prohibition in the aforementioned
amendedbylawsshallnotapplytopetitioner."
Teehankee,ConcepcionJr.,FernandezandGuerrero,JJ.,concur.
BARREDO,J.,concurring:
Ireservedthefilingofaseparateopinioninordertostatemyownreasonsforvotinginfavorofthevalidityofthe
amendedbylawsinquestion.Regrettably,Ihavenotyetfinishedpreparingthesame.Inview,however,ofthejoint
separate opinion of Justices Teehankee, Concepcion Jr., Fernandez and Guerrero, the full text of which has just
cometomyattention,andwhichIamafraidmightproducecertainmisimpressionsastotheimportofthedecisionin
thiscase,Iconsideriturgenttoclarifymypositioninrespecttotherightsofthepartiesresultingfromthedismissal
ofthepetitionhereinandtheoutliningoftheprocedurebywhichthedisqualificationofpetitionerGokongweicanbe
madeeffective,hencethisadvanceseparateopinion.
To start with, inasmuch as petitioner Gokongwei himself placed the issue of the validity of said amended bylaws
squarelybeforetheCourtforresolution,becausehefeels,rightlyorwrongly,hecannolongerhavedueprocessor
justice from the Securities and Exchange Commission, and the private respondents have joined with him in that
respect,thesixvotescastbyJusticesMakasiar,Antonio,Santos,AbadSantos,deCastroandthiswriterinfavorof
validity of the amended bylaws in question, with only four members of this Court, namely, Justices Teehankee,
Concepcion Jr., Fernandez and Guerrero opining otherwise, and with Chief Justice Castro and Justice Fernando
2/11/2017 G.R. No. L-45911
reserving their votes thereon, and Justices Aquino and Melencio Herrera not voting, thereby resulting in the
dismissalofthepetition"insofarasitassailsthevalidityoftheamendedbylaws...forlackofnecessaryvotes",has
nootherlegalconsequencethanthatitisthelawofthecaseasfarasthepartieshereinareconcerned,albeitthe
majority opinion of six against four Justices is not doctrinal in the sense that it cannot be cited as necessarily a
precedent for subsequent cases. This means that petitioner Gokongwei and the respondents, including the
SecuritiesandExchangeCommission,areboundbytheforegoingresult,namely,thattheCourtenbanchasnot
foundmeritintheclaimthattheamendedbylawsinquestionareinvalid.Indeed,itisonethingtosaythatdismissal
ofthecaseisnotdoctrinalandentirelyanotherthingtomaintainthatsuchdismissalleavestheissueunsettled.Itis
somewhat of a misreading and misconstruction of Section 11 of Rule 56, contrary to the wellknown established
normobservedbythisCourt,tostatethatthedismissalofapetitionforlackofthenecessaryvotesdoesnotamount
toadecisiononthemerits.Unquestionably,theCourtisdeemedtofindnomeritinapetitionintwoways,namely,
(1)wheneightormoremembersvoteexpresslyinthatsenseand(2)whentherequirednumberofjusticesneeded
tosustainthesamecannotbehad.
I reiterate, therefore, that as between the parties herein, the issue of validity of the challenged bylaws is already
settled. From which it follows that the same are already enforceableinsofar as they are concerned. Petitioner
GokongweimaynothereafteractontheassumptionthathecanrevivetheissueofvaliditywhetherintheSecurities
andExchangeCommission,inthisCourtorinanyotherforum,unlessheproceedsonthebasisofafactualmilieu
different from the setting of this case. Not even the Securities and Exchange Commission may pass on such
questionanymoreattheinstanceofhereinpetitioneroranyoneactinginhissteadoronhisbehalf.Thevoteoffour
justicestoremandthecasetheretocannotalterthesituation.
Itisveryclearthatunderthedecisionherein,theissueofvalidityisasettledmatterforthepartieshereinasthelaw
of the case, and it is only the actual implementation of the impugned amended bylaws in the particular case of
petitionerthatremainstobepasseduponbytheSecuritiesandExchangeCommission,andonappealtherefromto
Us,assumingtheboardofdirectorsofSanMiguelCorporationshould,aftertheproperhearing,disqualifyhim.
To be sure, the record is replete with substantial indications, nay admissions of petitioner himself, that he is a
controllingstockholderofcorporationswhicharecompetitorsofSanMiguelCorporation.Theverysubstantialareas
ofsuchcompetitioninvolvinghundredsofmillionsofpesosworthofbusinessesstanduncontrovertedintherecords
hereof.Infact,petitionerhasevenoffered,ifheshouldbeelected,asdirector,nottotakepartwhentheboardtakes
upmattersaffectingthecorrespondingareasofcompetitionbetweenhiscorporationandSanMiguel.Nonetheless,
perhaps,itisbestthatsuchevidencebeformallyofferedatthehearingcontemplatedinOurdecision.
As to whether or not petitioner may sit in the board if he wins, definitely, under the decision in this case, even if
petitioner should win, he will have to immediately leave his position or should be ousted the moment this Court
settlestheissueofhisactualdisqualification,eitherinafullblowndecisionorbydenyingthepetitionforreviewof
correspondingdecisionoftheSecuritiesandExchangeCommissionunfavorabletohim.And,ofcourse,asamatter
ofprinciple,itistobeexpectedthatthematterofhisdisqualificationshouldberesolvedexpeditiouslyandwithinthe
shortestpossibletime,soastoavoidasmuchjuridicalinjuryaspossible,consideringthatthematterofthevalidity
of the prohibition against competitors embodied in the amended bylaws is already unquestionable among the
partieshereinandtoallowhimtobeintheboardforsometimewouldcreateanobviouslyanomalousandlegally
incongruous situation that should not be tolerated. Thus, all the parties concerned must act promptly and
expeditiously.
Additionally,myreservationtoexplainmyvoteonthevalidityoftheamendedbylawsstillstands.
Castro,C.J.,concursinJusticeBarredo'sstatementthatthedismissal(forlackofnecessaryvotes)ofthepetitionto
theextentthat"itassailsthevalidityoftheamendedbylaws,"isthelawofthecaseatbar,whichmeansineffect
thatasfarandonlyinsofarasthepartiesandtheSecuritiesandExchangeCommissionareconcerned,theCourt
hasnotfoundmeritintheclaimthattheamendedbylawsinquestionareinvalid.
AntonioandSantos,JJ.,concur.
DECASTRO,J.,concurring:
AsstatedinthedecisionpennedbyJusticeAntonio,Ivotedtoupholdthevalidityoftheamendmenttothebylaws
inquestion.Whatinducedmetothisviewisthepracticalconsiderationeasilyperceivedinthefollowingillustration:
Ifapersonbecomesastockholderofacorporationandgetshimselfelectedasadirector,andwhileheissucha
director,heformshisowncorporationcompetitiveorantagonistictothecorporationofwhichheisadirector,and
becomes Chairman of the Board and President of his own corporation, he may be removed from his position as
director,admittedlyoneoftrustandconfidence.Ifthisisso,asseemsundisputablytobethecase,apersonalready
controlling,andalsotheChairmanoftheBoardandPresidentof,acorporation,maybebarredfrombecominga
member of the board of directors of a competitive corporation. This is my view, even as I am for a restrictive
interpretationofSection13(5)ofthePhilippineCorporationLaw,underwhichIwouldlimitthescopeoftheprovision
to corporations engaged in agriculture, but only as the word agriculture" refers to its more stated meaning as
distinguished from its general and broad connotation. The term would then mean "farming" or raising the natural
2/11/2017 G.R. No. L-45911
productsofthesoil,suchasbycultivation,inthemannerasisrequiredbythePublicLandActintheacquisitionof
agriculturalland,suchasbyhomestead,beforethepatentmaybeissued.Itismyopinionthatunderthepublicland
statute,thedevelopmentofacertainportionofthelandappliedforasspecifiedinthelawasaconditionprecedent
before the applicant may obtain a patent, is cultivation, not let us say, poultry raising or piggery, which may be
included in the term Is agriculture" in its broad sense. For under Section 13(5) of the Philippine Corporation Law,
construednotinthestrictwayasIbelieveitshould,becausetheprovisionisinderogationofpropertyrights,the
petitionerinthiscasewouldbedisqualifiedfrombecominganofficerofeithertheSanMiguelCorporationorhisown
supposedly agricultural corporations. It is thus beyond my comprehension why, feeling as though I am the only
memberoftheCourtforarestrictedinterpretationofSection13(5)ofAct1459,doubtstillseemstobeintheminds
ofothermembersgivingthecitedprovisionanunrestrictedinterpretation,astothevalidityoftheamendedbylaws
inquestion,orevenholdingthemnullandvoid.
IconcurwiththeobservationofJusticeBarredothatdespitethatlessthansixvotesareforupholdingthevalidityof
thebylaws,theirvalidityisdeemedupheld,asconstitutingthe"lawofthecase."Itcouldnotbeotherwise,afterthe
presentpetitionisdismissedwiththereliefsoughttodeclarenullandvoidthesaidbylawsbeingdeniedineffect.A
viciouscirclewouldbecreatedif,shouldpetitionerGokongweibebarredordisqualifiedfromrunningbytheBoard
ofDirectorsofSanMiguelCorporationandtheSecuritiesandExchangeCommissionsustaintheBoard,petitioner
couldcomeagaintoUs,raisingthesamequestionhehasraisedinthepresentpetition,unlesstheprincipleofthe
"lawofthecase"isapplied.
Clarifying therefore, my position, I am of the opinion that with the validity of the bylaws in question standing
unimpaireditisnowforpetitionertoshowthathedoesnotcomewithinthedisqualificationasthereinprovided,both
to the Board and later to the Securities and Exchange Commission, it being a foregone conclusion that, unless
petitioner disposes of his stockholdings in the socalled competitive corporations, San Miguel Corporation would
applythebylawsagainsthim,Hisright,therefore,torundependsonwhat,onelectionday,May8,1979,theruling
oftheBoardand/ortheSecuritiesandExchangeCommissiononhisqualificationtorunwouldbe,certainly,notthe
final ruling of this Court in the event recourse thereto is made by the party feeling aggrieved, as intimated in the
"Joint Separate Opinion" of Justices Teehankee, Concepcion, Jr., Fernandez and Guerrero, that only after
petitioner's"disqualification"hasultimatelybeenpasseduponbythisCourtshouldpetitioner,notbeallowedtorun.
Petitionermaybeallowedtorun,despiteanadversedecisionofboththeBoardandtheSecuritiesandExchange
Commission, only if he comes to this Court and obtain an injunction against the enforcement of the decision
disqualifyinghim.Withoutsuchinjunctionbeingrequired,allthatpetitionerhastodoistotakehistimeincomingto
thisCourt,andinsodoing,hewouldinthemeantime,beallowedtorun,andifhewins,tosit.Thiswould,however,
be contrary to the doctrine that gives binding, if not conclusive, effect of findings of facts of administrative bodies
exercising quasijudicial functions upon appellate courts, which should, accordingly, be enforced until reversed by
thisTribunal.
FernandoandMakasiar,JJ.,concurs.
AntonioandSantos,JJ.,concur
DECASTRO,J.:concurring:
director, admittedly one of trust case, a person already controlling, and also the Chairman of the Board and
President of, a corporation, may be barred from becoming a member of the board of directors of a competitive
corporation.Thisismyview,evenasIamforrestrictiveinterpretationofSection13(5)ofthePhilippineCorporation
Law, under which I would limit the scope of the provision to corporations engaged in agriculture, but only as the
word"agriculture"referstoitsmorelimitedmeaningasdistinguishedfromitsgeneralandbroadconnotation.The
termwouldthenmean"farming"orraisingthenaturalproductsofthesoil,suchasbycultivation,inthemannerasin
requiredbythePublicLandActintheacquisitionofagriculturalland,suchasbyhomestead,beforethepatentmay
beissued.Itismyopinionthatunderthepubliclandstatute,thedevelopmentofacertainportionofthelandapplied
forasspecifiedinthelawasaconditionprecedentbeforetheapplicantmayobtainapatent,iscultivation,notletus
say,poultryraisingorpeggery,whchmaybeincludedintheterm"agriculture"initsbroadsense.ForunderSection
13(5)ofthePhilippineCorporationLaw,construednotinthestrictwayasIbelieveitshould,becausetheprovision
isinderogationofpropertyrights,thepetitionerinthiscasewouldbedisqualifiedfrombecominganofficerofeither
the SanMiguelCorporationorhisownsupposedlyagriculturalcorporations.Itisthusbeyondmycomprehension
why, feeling as though I am the only members of the Court for a restricted interpretation of Section 13(5) of Act
1459,doubtstillseemstobeinthemindsofothermembersgivingthecitedprovisionanunrestrictedinterpretation,
astothevalidityoftheamendedbylawsinquestion,orevenholdingthemnullandvoid.
2/11/2017 G.R. No. L-45911
presentpetitionisdimissedwiththereliefsoughttodeclarenullandvoidthesaidbylawsbeingdeniedineffect.A
viciouscirclewouldbecreatedif,shouldpetitionerGokongweibebarredordisqualifiedfromrunningbytheBoard,
petitioner could come again to Us, raising the same question he has raised in the present petition, unless the
principleofthe"lawofthecase"isapplied.
unimpaired,itisnowforpetitionertoshowthathedoesnotcomepaired,itisnowforpetitionertoshowthathedoes
notcomewithinthedisqualificationasthereinprovided,bothtotheBoardandlatertotheSecuritiesandExhange
Commission, it being a foregone conclusion that, unless petitioner disposes of his stockholdings in the socalled
competitivecorporations,SanMiguelCorporationwouldapplythebylawsagainsthim.Hisright,therefore,torun
depends on what, on election day, May 8, 1979, the ruling of the Board and/or the Securities and Exchange
Commission on his qualification to run would be, certainly, not the final ruling of this Court in the event recourse
theretoismadebythepartyfeelingaggrieved,asintimatedinthe"JointSeparateOpinion"ofJusticesTeehankee,
Concepcion,Jr.,FernandezandGuerrero,thatonlyafterpetitioner's"disqualification"hasultimatelybeenpassed
upon by this Court should petitioner not be allowed to run. Petitioner may be allowed to run, despite anadverse
decisionofboththeBoardandtheSecuritiesandExchangeCommission,onlyifhecomestothisCourtandobtain
aninjunctionagainsttheenforcementofthedecisiondisqualifyinghim.Withoutsuchinjunctionbeingrequired,all
thatpetitionerhastodoistotakehistimeincomingtothisCourt,andinsodoing,hewouldinthemeantime,be
allowed to run, and if he wins, to sit. This would, however, be contrary to the doctrine that gives binding, if not
conclusive, effect of findings of facts of administrative bodies exercising quasijudicial functions upon appellate
courts,whichshould,accordingly,beenforceduntilreversedbythisTribunal.
SeparateOpinions
onlypointedoutthat:
a) The commission's reasoning grossly disregards the fact that the stockholders of San Miguel
corporation's funds foreign subsidiaries would be granted complete immunity from the stockholders'
b) Petitioner's right of examination herein recognized refers to all books and records of the foreign
and records of SMI are legally within respondent corporation's "possession and control" and if nay books or
records are kept abroad, (e.g. in the foreign subsidiary's state of domicile, as is to be expected), then the
respondent corporation's board and management are obliged under the Court's judgment to bring and make
II
respondent corporation's board of directors under its resolution dated April 29, 1977 declared petitioner ineligible to be
nominated or to be voted or to be elected as of the board of directors, the Court, composed of 12 members (since Mme.
Justice Ameurfina Melencio Herrera inhibited herself from taking part herein, while Mr. Justice Ramon C. Aquino upon
submittal of the main opinion of Mr. Justice Antonio decided not to take part), failed to reach a conclusive vote or, the
Six members of the Court, namely, Justices Barredo, Makasiar, Antonio, Santos, Abad Santos and De Castro,
consideredtheissuepurelylegalandvotedtosustainthevalidityperse of the questioned amended bylaws but
2/11/2017 G.R. No. L-45911
board's decision of disqualification she'll have been sustained on appeal by respondent Securities and Exchange
General that the case at bar is "premature" and that the administrative remedies before the commission should first be
We are of the opinion that the questioned amended bylaws, as they are, (adopted after almost a century of
elected as director by the simple expedient of declaring him to be engaged in a "competitive or antagonistic
business" or declaring him as a "nominee" of the competitive or antagonistic" stockholder are illegal, oppressive,
We consider the questioned amended bylaws as being specifically tailored to discriminate against petitioner and
grant and recognize the right of a minority stockholder like petitioner to be elected director by the process of
removedfromofficeofdirectorexceptforcauseby vote of the stockholders holding 2/3 of the subscribed capital
stock (sec. 31). If a minority stockholder could be disqualified by such a bylaws amendment under the guise of
bealwayswithinthecharacterlimits.WhattheCorporationLawhasgrantedstockholdersmaynotbe taken away
by the corporation's bylaws. The amendment is further an instrument of oppressiveness and arbitrariness in that
the incumbent directors are thereby enabled to perpetuate themselves in office by the simple expedient of
only the petitioner but the members of the board of directors of respondent corporation as well, so that it may
virtue of conflict of interests or their being likewise engaged in competitive or antagonistic business" with the
It should be noted that while the petition may be dismissed in view of the inconclusiveness of the vote and the
Court's failure to affair, the required 8vote majority to resolve the issue, such as dismissal (for lack of necessary
votes) is of no doctrine value and does not in any manner resolve the issue of the validity of the questioned
amended bylaws nor foreclose the same. The same should properly be determined in a proper case in the first
Exchange Commission deliverating and acting en banc and ultimately to this Court" and until ' disqualified in the
manner herein provided, the prohibition in the aforementioned amended bylaws shall not apply to petitioner," In
other words, until and after petitioner shall have been given due process and proper hearing by the respondent
(assuming that the respondent Securities and Exchange C commission ultimately upholds the validity of said by
2/11/2017 G.R. No. L-45911
ultimately by final judgment of this Court, petitioner is deemed eligible for all legal purposes and effects to be
nominated and voted and if elected to sit as a member of the hoard of directors of respondent San Miguel
Corporation.
In view of the Court's unanimous judgment on this point the portion of respondent commission's Order No. 450,
setaside.
III
statethefollowing.
Chief Justice's vote and that of Mr. Justice Fernando, the Court has by twelve (12) votes unanimously rendered
judgment granting petitioner's right to examine and secure copies of the books and records of San Miguel
International, Inc. as a foreign subsidiary of respondent corporation and respondent commission's Order No. 449,
petitioner shall have been given due process and proper hearing by the respondent board of directors as to the
question of his disqualification under the questioned amended by laws (assuming that the respondent Securities
sustained by respondent Securities and Exchange Commission and ultimately by final judgment of this Court
member of the board of directors of respondent San Miguel Corporation. Accordingly, respondent commission's
3. The Court's voting on the validity of respondent corporation's amendment of the bylaws (sec. 2, Art. 111) is
inconclusive without the required majority of eight votes to settle the issue one way or the other having been
dismissed if originally commenced in the court ...." The end result is that the Court has thereby dismissed the
petition which prayed that the Court bypass the commission and directly resolved the issue and therefore the
"unresolved and genuine issues of fact" (as per Order No. 451, Series of 1977) and the issues of legality of the
separate opinion of April 11, 1979 and "urgent(ly) to clarify (his) position in respect to the rights of the parties
Chief Justice Fred Ruiz Castro reserved his vote on the validity of the amended bylaws, pending
concursintheresult.
2/11/2017 G.R. No. L-45911
Four (4) Justices, namely, Justices Teehankee, Concepcion Jr., Fernandez and Guerrero filed a
of the amended bylaws for lack of the necessary votes simply means that "the Court has thereby dismissed the
petition which prayed that the Court bypass the commission and directly resolve the issue and therefore the
'unresolved and genuine issues of fact' (as per Order No. 451, Series of 1977) and the issue of legality of the
disputed bylaws amendment," that such dismissal "has no other legal consequence than that it is the law of the
a) Our jurisprudence is quite clear that this doctrine may be invoked only where there has been a final and
"Law of the case" has been defined as the opinion delivered on a former appeal More specifically, it
the same parties in the same case continues to he the law of the case, whether correct on general
October30,1962).
"ThedecisionofthisCourtonthatappealbythegovernmentfromtheorderofdismissal,holdingthat
said appeal did not place the appellants, including Absalon Bignay, in double jeopardy, signed and
double jeopardy as recently interpreted by this same Tribunal Even so, it may not be disturbed and
thelawofthecase."(Peoplevs.Pinuila)
and Mr. Justice Fernando) expressly reserving their votes thereon, and Mr. Justice Aquino while taking no part in
Exchange Commission, in this Court or in any other forum, unless he proceeds on the basis of a factual milieu
different from the setting of this case Not even the Securities and Exchange Commission may pass on such
tobeuntenable.
2/11/2017 G.R. No. L-45911
the invalidity of the questioned amended bylaws at such hearing before the SMC board. Furthermore, it was
expressly provided unanimously in the Court's decision that the SMC board's decision on the disqualification of
him" as qualified in Mr. Justice Barredo's own separate opinion, at page 2) shall be appealable to respondent
Securities and Exchange Commission "deliberating and acting en banc and "untimately to this Court." Again, the
expressed that respondent Securities and Exchange Commission may not pass anymore on the question of the
of necessary votes actually bypassed the Securities and Exchange Commission and directly ruled itself on the
invalidity of the questioned bylaws when it itself could not reach a final and conclusive vote (a minimum of eight
votes) on the issue and three other Justices (the Chief Justice and Messrs. Justices Fernando and Aquino) had
Such a view espoused by Mr. Justice Barredo could conceivably result in an incongruous situation where
Makasiar did not concur therein but they instead concurred with the limited concurrence of the Chief Justice
touching on the law of the case which guardedly held that the Court has not found merit in the claim that the
Exchange Commission below (outside of a passing argument by Messrs. Angara, Abello, Concepcion, Regala &
Cruz, as counsels for respondent Sorianos in their Memorandum of June 26, 1978 that "(T)he disputed ByLaws
raise and discuss this question as a new issue and instead rendered the decision in question, under which the
and Exchange Commission and in due course before this Court (but with the clear understanding that since both
SMC itself. As expressly stated in the Chief Justices reservation of his vote, the matter of the question of the
applicability of the said section 13(5) to petitioner would be heard by this Court at the appropriate time after the
proceedings below (and necessarily the question of the validity of the amended bylaws would be taken up anew
he comes to this Court and obtains an injunction against the enforcement of the decision disqualifying him" is
1979 (at page 59) that petitioner could run and if elected, sit as director of the respondent SMC and could be
be appealable to the respondent Securities and Exchange Commission deliberating and acting en banc and
2/11/2017 G.R. No. L-45911
ultimately to this Court. Unlessdisqualified in the manner herein provided, the prohibition in the aforementioned
separate opinion of Justices Teehankee, Concepcion Jr., Fernandez and Guerrero, the full text of which has just
To start with, inasmuch as petitioner Gokongwei himself placed the issue of the validity of said amended bylaws
justice from the Securities and Exchange Commission, and the private respondents have joined with him in that
validity of the amended bylaws in question, with only four members of this Court, namely, Justices Teehankee,
Concepcion Jr., Fernandez and Guerrero opining otherwise, and with Chief Justice Castro and Justice Fernando
reserving their votes thereon, and Justices Aquino and Melencio Herrera not voting, thereby resulting in the
majority opinion of six against four Justices is not doctrinal in the sense that it cannot be cited as necessarily a
precedent for subsequent cases. This means that petitioner Gokongwei and the respondents, including the
somewhat of a misreading and misconstruction of Section 11 of Rule 56, contrary to the wellknown established
I reiterate, therefore, that as between the parties herein, the issue of validity of the challenged bylaws is already
settled. From which it follows that the same are already enforceableinsofar as they are concerned. Petitioner
different from the setting of this case. Not even the Securities and Exchange Commission may pass on such
of the case, and it is only the actual implementation of the impugned amended bylaws in the particular case of
To be sure, the record is replete with substantial indications, nay admissions of petitioner himself, that he is a
As to whether or not petitioner may sit in the board if he wins, definitely, under the decision in this case, even if
petitioner should win, he will have to immediately leave his position or should be ousted the moment this Court
of the prohibition against competitors embodied in the amended bylaws is already unquestionable among the
incongruous situation that should not be tolerated. Thus, all the parties concerned must act promptly and
expeditiously.
2/11/2017 G.R. No. L-45911
member of the board of directors of a competitive corporation. This is my view, even as I am for a restrictive
to corporations engaged in agriculture, but only as the word agriculture" refers to its more stated meaning as
distinguished from its general and broad connotation. The term would then mean "farming" or raising the natural
before the applicant may obtain a patent, is cultivation, not let us say, poultry raising or piggery, which may be
included in the term Is agriculture" in its broad sense. For under Section 13(5) of the Philippine Corporation Law,
supposedly agricultural corporations. It is thus beyond my comprehension why, feeling as though I am the only
to the Board and later to the Securities and Exchange Commission, it being a foregone conclusion that, unless
petitioner disposes of his stockholdings in the socalled competitive corporations, San Miguel Corporation would
final ruling of this Court in the event recourse thereto is made by the party feeling aggrieved, as intimated in the
"Joint Separate Opinion" of Justices Teehankee, Concepcion, Jr., Fernandez and Guerrero, that only after
Commission, only if he comes to this Court and obtain an injunction against the enforcement of the decision
be contrary to the doctrine that gives binding, if not conclusive, effect of findings of facts of administrative bodies
exercising quasijudicial functions upon appellate courts, which should, accordingly, be enforced until reversed by
thisTribunal.
FernandoandMakasiar,JJ.,concurs.
AntonioandSantos,JJ.,concur
#SeparateOpinions
2/11/2017 G.R. No. L-45911
onlypointedoutthat:
a)Thecommission'sreasoninggrosslydisregardsthefactthatthestockholdersofSanMiguel
corporation'sfundsforeignsubsidiarieswouldbegrantedcompleteimmunityfromthestockholders'
b)Petitioner'srightofexaminationhereinrecognizedreferstoallbooksandrecordsoftheforeign
andrecordsofSMIarelegallywithinrespondentcorporation's"possessionandcontrol"andifnaybooksor
recordsarekeptabroad,(e.g.intheforeignsubsidiary'sstateofdomicile,asistobeexpected),thenthe
respondentcorporation'sboardandmanagementareobligedundertheCourt'sjudgmenttobringandmake
II
respondentcorporation'sboardofdirectorsunderitsresolutiondatedApril29,1977declaredpetitionerineligibletobe
nominatedortobevotedortobeelectedasoftheboardofdirectors,theCourt,composedof12members(sinceMme.
JusticeAmeurfinaMelencioHerrerainhibitedherselffromtakingpartherein,whileMr.JusticeRamonC.Aquinoupon
submittalofthemainopinionofMr.JusticeAntoniodecidednottotakepart),failedtoreachaconclusivevoteor,the
SixmembersoftheCourt,namely,JusticesBarredo,Makasiar,Antonio,Santos,AbadSantosandDeCastro,
consideredtheissuepurelylegalandvotedtosustainthevalidityperseofthequestionedamendedbylawsbut
board'sdecisionofdisqualificationshe'llhavebeensustainedonappealbyrespondentSecuritiesandExchange
Generalthatthecaseatbaris"premature"andthattheadministrativeremediesbeforethecommissionshouldfirstbe
Weareoftheopinionthatthequestionedamendedbylaws,astheyare,(adoptedafteralmostacenturyof
electedasdirectorbythesimpleexpedientofdeclaringhimtobeengagedina"competitiveorantagonistic
business"ordeclaringhimasa"nominee"ofthecompetitiveorantagonistic"stockholderareillegal,oppressive,
Weconsiderthequestionedamendedbylawsasbeingspecificallytailoredtodiscriminateagainstpetitionerand
grantandrecognizetherightofaminoritystockholderlikepetitionertobeelecteddirectorbytheprocessof
removedfromofficeofdirectorexceptforcausebyvoteofthestockholdersholding2/3ofthesubscribedcapital
stock(sec.31).Ifaminoritystockholdercouldbedisqualifiedbysuchabylawsamendmentundertheguiseof
2/11/2017 G.R. No. L-45911
bealwayswithinthecharacterlimits.WhattheCorporationLawhasgrantedstockholdersmaynotbetakenaway
bythecorporation'sbylaws.Theamendmentisfurtheraninstrumentofoppressivenessandarbitrarinessinthat
theincumbentdirectorsaretherebyenabledtoperpetuatethemselvesinofficebythesimpleexpedientof
onlythepetitionerbutthemembersoftheboardofdirectorsofrespondentcorporationaswell,sothatitmay
virtueofconflictofinterestsortheirbeinglikewiseengagedincompetitiveorantagonisticbusiness"withthe
Itshouldbenotedthatwhilethepetitionmaybedismissedinviewoftheinconclusivenessofthevoteandthe
Court'sfailuretoaffair,therequired8votemajoritytoresolvetheissue,suchasdismissal(forlackofnecessary
votes)isofnodoctrinevalueanddoesnotinanymannerresolvetheissueofthevalidityofthequestioned
amendedbylawsnorforeclosethesame.Thesameshouldproperlybedeterminedinapropercaseinthefirst
ExchangeCommissiondeliveratingandactingenbancandultimatelytothisCourt"anduntil'disqualifiedinthe
mannerhereinprovided,theprohibitionintheaforementionedamendedbylawsshallnotapplytopetitioner,"In
otherwords,untilandafterpetitionershallhavebeengivendueprocessandproperhearingbytherespondent
(assumingthattherespondentSecuritiesandExchangeCcommissionultimatelyupholdsthevalidityofsaidby
ultimatelybyfinaljudgmentofthisCourt,petitionerisdeemedeligibleforalllegalpurposesandeffectstobe
nominatedandvotedandifelectedtositasamemberofthehoardofdirectorsofrespondentSanMiguel
Corporation.
InviewoftheCourt'sunanimousjudgmentonthispointtheportionofrespondentcommission'sOrderNo.450,
setaside.
III
statethefollowing.
ChiefJustice'svoteandthatofMr.JusticeFernando,theCourthasbytwelve(12)votesunanimouslyrendered
judgmentgrantingpetitioner'srighttoexamineandsecurecopiesofthebooksandrecordsofSanMiguel
International,Inc.asaforeignsubsidiaryofrespondentcorporationandrespondentcommission'sOrderNo.449,
petitionershallhavebeengivendueprocessandproperhearingbytherespondentboardofdirectorsastothe
questionofhisdisqualificationunderthequestionedamendedbylaws(assumingthattherespondentSecurities
sustainedbyrespondentSecuritiesandExchangeCommissionandultimatelybyfinaljudgmentofthisCourt
memberoftheboardofdirectorsofrespondentSanMiguelCorporation.Accordingly,respondentcommission's
2/11/2017 G.R. No. L-45911
3.TheCourt'svotingonthevalidityofrespondentcorporation'samendmentofthebylaws(sec.2,Art.111)is
inconclusivewithouttherequiredmajorityofeightvotestosettletheissueonewayortheotherhavingbeen
dismissediforiginallycommencedinthecourt...."TheendresultisthattheCourthastherebydismissedthe
petitionwhichprayedthattheCourtbypassthecommissionanddirectlyresolvedtheissueandthereforethe
respondentcommissionmaynowproceed,asannouncedinitsOrderNo.450,Seriesof1977,tohearthecase
beforeitandreceiveallrelevantevidencebearingontheissueashereinaboveindicated,andresolvethe
"unresolvedandgenuineissuesoffact"(asperOrderNo.451,Seriesof1977)andtheissuesoflegalityofthe
separateopinionofApril11,1979and"urgent(ly)toclarify(his)positioninrespecttotherightsoftheparties
ChiefJusticeFredRuizCastroreservedhisvoteonthevalidityoftheamendedbylaws,pending
concursintheresult.
Four(4)Justices,namely,JusticesTeehankee,ConcepcionJr.,FernandezandGuerrerofileda
oftheamendedbylawsforlackofthenecessaryvotessimplymeansthat"theCourthastherebydismissedthe
petitionwhichprayedthattheCourtbypassthecommissionanddirectlyresolvetheissueandthereforethe
respondentcommissionmaynowproceed,asannouncedinitsOrderNo.450,Seriesof1977,tohearthecase
beforeitandreceiveallrelevantevidencebearingontheissueashereinaboveindicated,andresolvethe
'unresolvedandgenuineissuesoffact'(asperOrderNo.451,Seriesof1977)andtheissueoflegalityofthe
disputedbylawsamendment,"thatsuchdismissal"hasnootherlegalconsequencethanthatitisthelawofthe
a)Ourjurisprudenceisquiteclearthatthisdoctrinemaybeinvokedonlywheretherehasbeenafinaland
"Lawofthecase"hasbeendefinedastheopiniondeliveredonaformerappealMorespecifically,it
2/11/2017 G.R. No. L-45911
thesamepartiesinthesamecasecontinuestohethelawofthecase,whethercorrectongeneral
October30,1962).
"ThedecisionofthisCourtonthatappealbythegovernmentfromtheorderofdismissal,holdingthat
saidappealdidnotplacetheappellants,includingAbsalonBignay,indoublejeopardy,signedand
doublejeopardyasrecentlyinterpretedbythissameTribunalEvenso,itmaynotbedisturbedand
thelawofthecase."(Peoplevs.Pinuila)
andMr.JusticeFernando)expresslyreservingtheirvotesthereon,andMr.JusticeAquinowhiletakingnopartin
ExchangeCommission,inthisCourtorinanyotherforum,unlessheproceedsonthebasisofafactualmilieu
differentfromthesettingofthiscaseNoteventheSecuritiesandExchangeCommissionmaypassonsuch
tobeuntenable.
theinvalidityofthequestionedamendedbylawsatsuchhearingbeforetheSMCboard.Furthermore,itwas
expresslyprovidedunanimouslyintheCourt'sdecisionthattheSMCboard'sdecisiononthedisqualificationof
him"asqualifiedinMr.JusticeBarredo'sownseparateopinion,atpage2)shallbeappealabletorespondent
SecuritiesandExchangeCommission"deliberatingandactingenbancand"untimatelytothisCourt."Again,the
expressedthatrespondentSecuritiesandExchangeCommissionmaynotpassanymoreonthequestionofthe
ofnecessaryvotesactuallybypassedtheSecuritiesandExchangeCommissionanddirectlyruleditselfonthe
invalidityofthequestionedbylawswhenititselfcouldnotreachafinalandconclusivevote(aminimumofeight
votes)ontheissueandthreeotherJustices(theChiefJusticeandMessrs.JusticesFernandoandAquino)had
SuchaviewespousedbyMr.JusticeBarredocouldconceivablyresultinanincongruoussituationwhere
2/11/2017 G.R. No. L-45911
MakasiardidnotconcurthereinbuttheyinsteadconcurredwiththelimitedconcurrenceoftheChiefJustice
touchingonthelawofthecasewhichguardedlyheldthattheCourthasnotfoundmeritintheclaimthatthe
ExchangeCommissionbelow(outsideofapassingargumentbyMessrs.Angara,Abello,Concepcion,Regala&
Cruz,ascounselsforrespondentSorianosintheirMemorandumofJune26,1978that"(T)hedisputedByLaws
raiseanddiscussthisquestionasanewissueandinsteadrenderedthedecisioninquestion,underwhichthe
andExchangeCommissionandinduecoursebeforethisCourt(butwiththeclearunderstandingthatsinceboth
SMCitself.AsexpresslystatedintheChiefJusticesreservationofhisvote,thematterofthequestionofthe
applicabilityofthesaidsection13(5)topetitionerwouldbeheardbythisCourtattheappropriatetimeafterthe
proceedingsbelow(andnecessarilythequestionofthevalidityoftheamendedbylawswouldbetakenupanew
hecomestothisCourtandobtainsaninjunctionagainsttheenforcementofthedecisiondisqualifyinghim"is
1979(atpage59)thatpetitionercouldrunandifelected,sitasdirectoroftherespondentSMCandcouldbe
beappealabletotherespondentSecuritiesandExchangeCommissiondeliberatingandactingenbancand
ultimatelytothisCourt.Unlessdisqualifiedinthemannerhereinprovided,theprohibitionintheaforementioned
separateopinionofJusticesTeehankee,ConcepcionJr.,FernandezandGuerrero,thefulltextofwhichhasjust
Tostartwith,inasmuchaspetitionerGokongweihimselfplacedtheissueofthevalidityofsaidamendedbylaws
justicefromtheSecuritiesandExchangeCommission,andtheprivaterespondentshavejoinedwithhiminthat
validityoftheamendedbylawsinquestion,withonlyfourmembersofthisCourt,namely,JusticesTeehankee,
ConcepcionJr.,FernandezandGuerreroopiningotherwise,andwithChiefJusticeCastroandJusticeFernando
reservingtheirvotesthereon,andJusticesAquinoandMelencioHerreranotvoting,therebyresultinginthe
majorityopinionofsixagainstfourJusticesisnotdoctrinalinthesensethatitcannotbecitedasnecessarilya
precedentforsubsequentcases.ThismeansthatpetitionerGokongweiandtherespondents,includingthe
2/11/2017 G.R. No. L-45911
somewhatofamisreadingandmisconstructionofSection11ofRule56,contrarytothewellknownestablished
Ireiterate,therefore,thatasbetweenthepartiesherein,theissueofvalidityofthechallengedbylawsisalready
settled.Fromwhichitfollowsthatthesamearealreadyenforceableinsofarastheyareconcerned.Petitioner
differentfromthesettingofthiscase.NoteventheSecuritiesandExchangeCommissionmaypassonsuch
ofthecase,anditisonlytheactualimplementationoftheimpugnedamendedbylawsintheparticularcaseof
Tobesure,therecordisrepletewithsubstantialindications,nayadmissionsofpetitionerhimself,thatheisa
Astowhetherornotpetitionermaysitintheboardifhewins,definitely,underthedecisioninthiscase,evenif
petitionershouldwin,hewillhavetoimmediatelyleavehispositionorshouldbeoustedthemomentthisCourt
oftheprohibitionagainstcompetitorsembodiedintheamendedbylawsisalreadyunquestionableamongthe
incongruoussituationthatshouldnotbetolerated.Thus,allthepartiesconcernedmustactpromptlyand
expeditiously.
becomesChairmanoftheBoardandPresidentofhisowncorporation,hemayberemovedfromhispositionas
memberoftheboardofdirectorsofacompetitivecorporation.Thisismyview,evenasIamforarestrictive
tocorporationsengagedinagriculture,butonlyasthewordagriculture"referstoitsmorestatedmeaningas
distinguishedfromitsgeneralandbroadconnotation.Thetermwouldthenmean"farming"orraisingthenatural
beforetheapplicantmayobtainapatent,iscultivation,notletussay,poultryraisingorpiggery,whichmaybe
includedinthetermIsagriculture"initsbroadsense.ForunderSection13(5)ofthePhilippineCorporationLaw,
2/11/2017 G.R. No. L-45911
supposedlyagriculturalcorporations.Itisthusbeyondmycomprehensionwhy,feelingasthoughIamtheonly
Clarifyingtherefore,myposition,Iamoftheopinionthatwiththevalidityofthebylawsinquestionstanding
totheBoardandlatertotheSecuritiesandExchangeCommission,itbeingaforegoneconclusionthat,unless
petitionerdisposesofhisstockholdingsinthesocalledcompetitivecorporations,SanMiguelCorporationwould
finalrulingofthisCourtintheeventrecoursetheretoismadebythepartyfeelingaggrieved,asintimatedinthe
"JointSeparateOpinion"ofJusticesTeehankee,Concepcion,Jr.,FernandezandGuerrero,thatonlyafter
Commission,onlyifhecomestothisCourtandobtainaninjunctionagainsttheenforcementofthedecision
becontrarytothedoctrinethatgivesbinding,ifnotconclusive,effectoffindingsoffactsofadministrativebodies
exercisingquasijudicialfunctionsuponappellatecourts,whichshould,accordingly,beenforceduntilreversedby
thisTribunal.
#Footnotes
1Thepertinentamendmentsreadsasfollows:
RESOLVED,ThatSection2,ArticleIIIoftheBylawsofSanMiguelCorporation,which
readsasfollows:
SECTION2.Anystockholderhavingatleastfivethousandsharesregisteredinhisname
maybeelecteddirector,butheshallnotbequalifiedtoholdofficeunlesshepledgessaid
fivethousandsharestotheCorporationtoanswerforhisconduct.
SECTION2.Anystockholderhavingatleastfivethousandsharesregisteredinhisname
maybeelectedDirector,provided,however,thatnopersonshallqualifyorbeeligiblefor
nominationorelectiontotheBoardofDirectorsifheisengagedinanybusinesswhich
competeswithorisantagonistictothatoftheCorporation.Withoutlimitingthegenerality
oftheforegoing,apersonshallbedeemedtobesoengaged:
(a)ifheisanofficer,managerorcontrollingpersonof,ortheowner(eitherofrecordor
beneficially)of10%ormoreofanyoutstandingclassofsharesof,anycorporation(other
thanoneinwhichthecorporationownsatleast30%ofthecapitalstock)engagedina
businesswhichtheBoard,byatleastthreefourthsvote,determinestobecompetitiveor
antagonistictothatoftheCorporationor
(b)Ifheisanofficer,managerorcontrollingpersonof,ortheowner(eitherofrecordor
beneficially)or10%ormoreofanyoustandingclassofsharesof,anyothercorporationor
entityengagedinanylineofbusinessoftheCorporation,wheninthejudgmentofthe
Board,byatleastthreefourthsvote,thelawsagainstcombinationsinrestraintoftrade
shallbeviolatedbysuchperson'smembershipintheBoardofDirectors.
(c)IftheBoard,intheexerciseofitsjudgmentingoodfaith,determinesbyatleastthree
fourthsvotethatheisthenomineeofanypersonsetforthin(a)or(b).
Indeterminingwhetherornotapersonisacontrollingperson,beneficialowner,orthe
nomineeofanother,theBoardmaytakeintoaccountsuchfactorsasbusinessandfamily
relationship.
2/11/2017 G.R. No. L-45911
Fortheproperimplementationofthisprovision,allnominationsforelectionofDirectorsby
thestockholdersshallbesubmittedinwritingtotheBoardofDirectorsatleastfive
workingdaysbeforethedateoftheAnnualMeeting.'"(Rollo,pp.462463).
2Annex"H",petition,pp.168169,Rollo.
3L27812,September26,1975,67SCRA146.
4Gayosv.Gayos,Ibid.,citingMarquezv.Marquez,No.47792,July24,1941,73Phil.74,78Keramik
Industries,Inc.v.Guerrero,L38866,November29,1974,61SCRA265.
5L20654,December24,1964,12SCRA628.
6L20583,January23,1967,19SCRA58.
7L27802,October26,1968,25SCRA641.
8Samalv.CourtofAppeals,L8579,May25,1956,99Phil.230.
8a2Am.Jur.2d696.697.
8bPanAmericanP.Corp.v.SupremeCourtofDelaware,336US656,6L.ed.2d584.
9Fleischerv.BoticaNolascoCo.,Inc.,No.23241.March14,1925,47Phil.583,590.
10C.J.S.Corporation,Sec.189,p.603.
11Peopleexrel.Wildiv.Ittner,165III.App.360,367(1911),citedinFlectcher,Cyclopedia
Corporations,Sec.4191.
12Mckee&Companyv.FirstNationalBankofSanDiego,265F.Supp.1(1967),citingOlicyv.Merle
NormanCosmetics,Inc.,200Cal.App.20,260,19Cal.Reptr.387(1962).
13Fletcher,CyclopediaCorporations,Sec.4171,citedinMcKee&Company,supra.
14No.26649,July13,1927,50Phil.399,441.
156Thompson369,Sec.4490.
16Ibid.
17MobilePressRegister,Inc.,v.McGowin,277Ala.414,124So.2d812Brundagev.TheNew
JerseyZincCo.,226A2d585.
18Fletcher,CyclopediaCorporations,1975Ed.,Vol.3p.144,Sec.838.
19101Fed.2d85,citedinAleck,ModernCorporationLaw,Vol.2,Sec.959.
20308U.S.30984L.ed.281,289291.
2116S.E.587,18L.R.A.582.
22265F.Supp.,pp.89.
23Barretov.Tuason,No.23923,Mar.23,1926,50Phil.888Severinov.Severino,No.18058,Jan.
16,1923,44Phil.343Thomasv.Pineda,L2411,June28,1951,89Phil.312,326.
242FletcherCyclopediaCorporations,Sec.297(1969),p.87.
25Costellov.ThomasCusackco.,125A.15,94N.J.Eq.923,(1923).
26hallv.Dekker,115P.2d15,July9,1941.
27Thaverv.Gaebler,232NW563.
28SialkotImportingCorporationv.Berlin,68NE2d501,503.
29SchildbergRockProductsCo.v.Brooks,140NW2d132,137.ChiefJusticeGarfieldquotesthe
doctrineasfollows:
2/11/2017 G.R. No. L-45911
(5)Thedoctrine"corporateopportunity"isnotnewtothelawandisbutonephaseofthe
cardinalruleofundividedloyaltyonthepartofthefiduciaries.3FlectherCyc.
Corporations,Perm.Ed.,1965RevisedVolume,section861.1,page22719Am.Jur.2d.
corporations,section1311,page717.Ourownconsiderationofthequotedtermsassuch
ismainlyinOntjesv.MacNider,supra,232Iowa562,579,5N.W.,2d860,869,which
quotesatlengthwithapprovalfromGuthv.Loft,Inc.,23Del.Ch.255,270,5A2d503,
511,aleadingcaseinthisareaofthelaw.Thequotationcitesseveralprecedentsforthis:
"***ifthereispresentedtoacorporateofficerordirectorabusinessopportunitywhichthe
corporationisfinanciallyabletoundertake,isfromitsnature,inthelineofthe
corporation'sbusinessandisofpracticaladvantagetoit,isoneinwhichthecorporation
hasaninterestorareasonableexpectancy,andbyembracingtheopportunity,theself
interestoftheofficerordirectorwillbebroughtintoseizetheopportunityforhimself.And,
if,insuchcircumstances,theinterestsofthecorporationarebetrayed,thecorporation
mayelecttoclaimallofthebenefitsofthetransactionforitself.andthelawwillimpressa
trustinfavorofthecorporationupontheproperty.interestsandprofitssoacquired.
30Paulmanv.Kritzer,74III.App.2d284,291NE2d541TowerRecreation,Inc.v.Beard,141Ind.
App.649,231NE2d154.
31Oleck,ModernCorporationLaw,Vol.2,Section960.
32TheCFCandRobinacompanies,whicharereportedlyworthmorethanP500Million,areprincipally
ownedandcontrolledbyMr.GokongweiandareinsubstantialcompetitiontoSanMiguel.Asagainst
hisalmost100%ownershipinthesebasicallyfamilycompanies,Mr.Gokongwei'sholdinginSan
Miguelareapproximately4%ofthetotalshareholdingsofyourCompany.Asaconsequence,One
Peso(P1.00)ofprofitresultingfromasalebyCFCandRobinainthelinescompetingwithSanMiquel,
isearnedalmostcompletelybyMr.Gokongwei,hisimmediatefamilyandcloseassociates.Onthe
otherhand,thelossofthatsaletoSanMiguel,resultinginaOnePeso(P1.00)lossofprofittoSan
Miquel,inthelinescompetingwithCFCandRobina,wouldresultinalossinprofitofonlyFour
Centavos(0.04)toMr.Gokongwei."(LettertostockholdersofSMC,datedApril3,1978,Annex"R",
MemoforrespondentSanMiguelCorporation,rollo,p.1967.
33Article28,CivilCodeSection4,par.5,ofRep.ActNo.5455andSection7(g)ofRep.ActNo.
6173.Cf.Section17,paragraph2.oftheJudiciaryAct.
34StandardOilCo.v.UnitedStates,55L.Ed.619.
35Blake&Jones,ContractsinAntitrustTheory,65ColumbiaL.Rev.377,383(1965).
36FilipinasCompaniadeSegurosv.Mandanas,L19638,June20,1966,17SCRA391.
37Lovev.KozyTheaterCo.,236SW243,245,26ALR364.
38AldeaRochelle,Inc.v.AmericanSocietyofComposers,AuthorsandPublishers,D.D.N.Y.,80F.
Suppl.888,893:
39NationalCottonOilCo.v.StateofTexas,25S.T.379,383,49L.Ed.689.
40NorfolkMonumentCo.v.WoodlawnMemorialGardens,Inc.,394U.S.700v.GeneralMotors
Corp.,384U.S.127.
41U.S.v.ParamountPictures,334U.S.131.
42Section8,15U.S.C.A.19.
43Travers,InterlocksinCorporateManagementandtheAntiTrustLaws,46TexasL.Rev.819,840
(1968).
4451Cong.Rec.9091.
45Peopleexrel.Wildiv.Ittner,supra,citingThompsononCorporation,Section1002(2ndEd.).
46Schillv.RemingtonPutnamBookCo.,17A2d175,180,179Md.83.
47Peopleexrel.Broderickv.Goldfogle,205NYS870,877,123Misc.399.
48Swansonv.AmericanConsumerIndustries,Inc.,288F.Supp.60.
2/11/2017 G.R. No. L-45911
49Sections3and5ofPresidentialDecreeNo.902Aprovides:
SEC.3.TheCommissionshallhaveabsolutejurisdictionsupervisionandcontroloverall
corporations***whoaregranteesof***licenseorpermitissuedbythegovernment***
SEC.5.InadditiontotheregulatoryandadjudicativefunctionsoftheSecuritiesand
ExchangeCommissionovercorporationspartnershipsandotherformsofassociations
registeredwithitsasexpresslygrantedunderexistinglawsanddecrees,itshallhave
originalandexclusivejurisdictiontohearanddecidecasesinvolving.
a)Devicesorschemesemployedbyornayacts,oftheboardofdirectors,business
associates,itsofficersorpartnersamountingtofraudandmisrepresentationwhichmay
bedetrimentaltotheinterestofthepublicand/orofthestockholders,partners,members
ofassociationsororganizationsregisteredwiththeCommission.
b)Controversiesarisingoutofintracorporateorpartnershiprelations,betweenand
amongstockholders,membersorassociatesbetweenanyorallofthemandthe
corporation,partnershiporassociationofwhichtheyarestockholders,membersor
associates,respectivelyandbetweensuchcorporationstheirindividualfranciseorrightto
existassuchentity
c)Controversiesintheelectionorappointmentsofdirectors,trustees,officersor
managersofsuchcorporations,partnershiporassociations.
50Moorev.KeystoneMacaroniMfg.Co.,29ALR2d1256.
51Annex"A"ofSMC'sCommentonSupplementalPetitionpp.680688,Rollo.
52FletcherCyc,PrivateCorporations,Vol.5,1976Rev.Ed.Section2213,p.693.
53Fletcher,Ibid.,Section2218,p.709.
54Fletcher,Ibid.,Section2222,p.725.
5540O.G.,1stSuppl.1.April3,1939,citing14C.J.S.854,855.
56Fletcher,supra,p.716.
57Statev.Monida&YellowstoneStageCo.,110Minn.193,124NW791,125NW676Statev.Cities
ServiceCo.,114A463.
58Fletcher,supra,Section2220,p.717.
59Fletcher,supra,Section2223,p.728.
60Martinv.D.B.MartinCo.,10Del.Ch.211,88A.612,102A.373.
61Woodwardv.OldSecondNationalBank,154Mich,459,117NW893,118NW581.
62Martinv.D.B.MartinCo.,supra.
63Statev.ShermanOilCo.,1W.W.Harr.(31Del)570,117A.122.
64Lislev.Shipp,96Cal.App.264,273P.1103.
65Nashv.GayApparelCorp.,193NYS2d246.
66Baileyv.BoxboundProductsCo.,314Pa.45,170A.127.
67Rollo,pp.5051.
6818Am.Jur.2d718.
69DelaRamav.MaaoSugarCentralCo.,Inc.,L17504andL17506,February28,1969,27SCRA
247,260.
70Boycev.ChemicalPlastics,175F2d839,citing13Am.Jur.,Section972.
71Pirovanov.DelaRamaSteamshipCo.,L537,96Phil.335,December29,1954.
2/11/2017 G.R. No. L-45911
*IncludestheSupplementalpetitionsfiledbypetitioner.
JOINTSEPARATEOPINION
1Mainopinion,p.55.
2Sec.2,Art.IIIofrespondentcorporation'sByLaws,reproducedinfootnote1ofthemainopinion,
pages3and4.
3Rollo,Vol.I,page392E.
4SECmemo,page9and10.
5Petitioner'smemoranduminsupportoforalargument,pp.1820
SUPPLEMENTTOJOINTSEPARATEOPINION
1Atp.60emphasissupplied.
219SCRA494citingPeoplevs.Pinnila,L11374,May30,1958,citedinLeevs.Aligaen,76SCRA
416(1977)perAntonio,J.
3Soriano'sMemorandumatpage94.
TheLawphilProjectArellanoLawFoundation

Gokongwei V SEC

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Gokongwei V SEC

Uploaded by

Copyright:

Available Formats

2/11/2017 G.R. No.

(3)thatbylawsarevalidandbindingsinceacorporationhasthe inherentrightanddutyto preserveandprotect

Petitionerclaimsthat the amendedbylawsareinvalidandunreasonablebecausetheyweretailoredto suppress

ALLEGED AREAS OF COMPETITION BETWEEN PETITIONER'S CORPORATIONS AND SAN MIGUEL

AUTHORITY OF CORPORATION TO PRESCRIBE QUALIFICATIONS OF DIRECTORS EXPRESSLY

You might also like