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ALEJANDRINO V.

DE LEON of Pampanga Sugar through Pambul to secure sufficient proxies for their
G.R. No. 49043/DEC 29, 1943 /./Proxy Device /ECPPOTIAN purpose
NATURE Quo warranto As a result the pledgors- stockholders could do nothing even if they should
PETITIONERS Jose Alejandrino make use of their right to vote when and if the management should commit
RESPONDENTS Jose de Leon et al. corporate abuses, excesses, and mistakes.
Petitioner further alleges that irrevocable proxies are contrary to good
SUMMARY. Parties are stockholders of PASUDECO. A meeting was held to elect a morals and public policy and thus void.
new board and 9 respondents were voted, each with more than 19K votes, with
respondent Jose de Leon getting 19,907 votes, while pet Alejandrino got only 14K ISSUES & RATIO.
votes. However, 6k shares held by Alejandrino given to him by 18 stockholders were 1. WON the irrevocable proxies were contrary to good morals or public policy
not accepted by the chairman and the secretary for registration and election, and are therefore VOID -- NO.
reasoning that the 18 SHs previously executed pledges in favor of Pambul Inc.,
whereby they granted the pledgee the right to vote the shares. Alejandrino alleged First, Petitioner did not adduce evidence to prove that irrevocable proxies were
that Pambul was an alter ego of Pasudeco and its principal SH de Leon, that Pambul contrary to good morals or public policy. The right of a SH to vote is inherent in
was organized pursuant to a resolution of Pasudeco SHs as a financing corporation, ownership, and if the owner can dispose of the property itself, it is apparent that he
that the SHs of Pasudeco automatically became SHs of Pambul, that Pambul offered can dispose the right to manage it.
Pasudeco SHs loans with lenient terms, and that as a result of the irrevocable proxies
in the pledge agreements, only 2 families with only 30% of Pasudeco outstanding Second, there are no allegations that the proxies were procured thru error, deceit,
capital stock have monopolized the directorship. He asserts that the act of pledging fraud or intimidation. The circumstances of the case are not sufficient in law to
such shares to Pambul, a corporation created as a financing corporation that takes vitiate or invalidate the proxies. The desire and design of a majority of stockholders
shares as collateral, is void because such act is contrary to good morals and public of a private corporation to control management and operation is legitimate per se.
policy. The Court held that it is not, as there is no showing that pledging shares and The allegations of monopoly positions in a corporation, without any
irrevocable proxies are acts that a shareholder could not and should not do. It is also allegation of fraud or irregularity resulting therefrom to the prejudice of
not a case of bribery, as the loan agreement is not imbued with public interest. any stockholder, are not actionable per se.

DOCTRINE. The allegations of monopoly positions in a corporation, without any The SH owning 30% of the outstanding stock of a corporation cannot secure its
allegation of fraud or irregularity resulting therefrom to the prejudice of any control without the willingness, adherence, cooperation, or support of other SHs.
stockholder, are not actionable per se. If proxies were given in consideration of Assuming that the two families owning 30% of the capital stock have been able to
pledge, in good faith without fraudulent intent, it cannot be deemed immoral just procure such support by organizing Pambul for the purposes above indicated, it
because it offers a temptation to abuse power and to oppress minority SHs. would be admitted that the organization of Pambul was accomplished by vote of the
majority and not of only 30% of capital stock of Pampanga Sugar.

It cannot be assumed that the meeting in which the organization of Pambul was
FACTS
agreed upon the SHs other than the two families referred to were deprived of their
Quo warranto to annul the election of all or any one of the respondents as
vote by means of the proxies now assailed, because said proxies could not have
directors of Pampanga Sugar Development Co. or PASUDECO and to declare existed before Pambul was organized. Even now the SHs of Pambul are also the SHs
petitioner Alejandrino as director. of Pampanga Sugar, the former cannot be said to be under the control of the said
Parties are stockholders of PASUDECO, with petitioner owning 112 shares two families because the latter are not alleged from the facts. In other words,
(par value of P30 each). Pambul SHs are free to vote their stock and elect the directors they want; and the
A meeting was held to elect a new board and the 9 respondents were board of directors of Pambul is at liberty to change any or all of the conditions of the
voted, each with more than 19K votes, with Jose de Leon getting 19,907 contract of pledge in question.
votes, while petitioner Alejandrino got only 14K votes.
Alejandrino contests the action of the Chairman and Secretary of the BOD Even assuming that respondent de Leon controls Pampanga Sugar, it would
because they refused to register the 6084 shares held by petitioner, given not necessarily follow that he or the company also hold voting proxies on
to him by 18 SHs. The Chair and Secretary assert that the 18 SHs the shares of stock of Pambul. Therefore the SHs of Pambul are free to vote their
previously executed pledges in favor of Pambul Inc., whereby they granted shares at the election of its directors. It is thus clear that if the alleged minority SHs
the pledgee the right to vote the shares. of Pampanga Sugar cannot or do not elect even one candidate to represent them in
He alleged that Pambul was an alter ego of PASUDECO. Pambul Inc was its BOD, nothing appears to prevent them from doing so except their own volition.
organized by the controlling SHs of PASUDECO as a financing corporation. Nobody forces them to pledge their stock to Pambul. They must either be
The setup is that the SHs of PASUDECO automatically became SHs of satisfied with the management or indifferent with regard to voting. Only Alejandrino,
Pambul. as one of the minority SHs, owning 112 shares, has come before the court to assail
According to Alejandrino, Pambul is being used as a scheme to perpetuate the contracts of pledged entered into by 18 other SHs and in which he is not even a
the monopoly of the directorship and executive positions of Pampanga party.
sugar by loaning money to its SHs at as low a rate of interest as 7% per
annum on the security of their shares of stock, the amount of the loans Third, Petitioner alleged that terms of loans were way of bribing SHs to vote for
being as high as 90% of the par value of the shares, thereby inducing the management. But to vote at stockholders meeting is not like a political
SHs to avail themselves of the loan and thereby enabling the management franchise. It is an exercise of the right of ownership involving no public
interest. It can no more be called bribery than the payment by the purchaser of the consideration of pledge, in good faith without fraudulent intent, it cannot
price of goods he bought. be deemed immoral just because it offers a temptation to abuse power and
to oppress minority SHs. No SH is compelled to borrow money from and pledge
Fourth, it is admitted that the pledge and transfer of the stock itself was perfectly his shares to Pambul. The benefits are mutual. So long as management acts
lawful and unobjectionable; but it is contended that the transfer of the right to vote honestly, no one can question their acts, which are purely intra vires.
is contrary to good morals and public policy. If proxies were given in

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