RIGHT TO INSPECT: REMEDIES of law conceding the right of inspection to stockholders of
corporations are to be liberally construed.
G.R. No. L-15568 November 8, 1919
W. G. PHILPOTTS vs. PHILIPPINE MANUFACTURING COMPANY and
F. N. BERRY
W. G. Philpotts, a stockholder in the Philippine Manufacturing
Company, seeks to obtain a writ of mandamus to compel the
respondents to permit him to inspect and examine the records of
the business transacted by said company since January 1, 1918.
It appears that the respondent corporation has refused to allow the
petitioner or his duly authorized agent or attorney to examine
anything relating to the affairs of the company. Respondents
conceded that there is a right of examination in the stockholder, but
it is insisted that this right must be exercised in person.
ISSUE: WON the right which the law concedes to a stockholder to
inspect the records can be exercised by a proper agent or attorney
of the stockholder as well as by the stockholder in person.
HELD: YES.
"The record of all business transactions of the corporation and the
minutes of any meeting shall be open to the inspection of any
director, member or stockholder of the corporation at reasonable
hours.” The right of inspection given to a stockholder can be
exercised either by himself or by any proper representative or
attorney in fact, and either with or without the attendance of the
stockholder. This is in conformity with the general rule that what a
man may do in person he may do through another. The provisions
:
"The right may be regarded as personal, in the sense that only a
stockholder may enjoy it; but the inspection and examination may
be made by another. Otherwise it would be unavailing in many
instances."
“The possession of the right in question would be futile if the
possessor of it, through lack of knowledge necessary to exercise it,
were debarred the right of procuring in his behalf the services of
one who could exercise it."
However, there are some things which a corporation may
undoubtedly keep secret, notwithstanding the right of inspection
given by law to the stockholder; as for instance, where a
corporation, engaged in the business of manufacture, has acquired
a formula or process, not generally known, which has proved of
utility to it in the manufacture of its products. It is not our intention
to declare that the authorities of the corporation might not adopt
measures for the protection of such process form publicity. There is,
however, nothing in the petition which would indicate that the
petitioner in this case is seeking to discover anything which the
corporation is entitled to keep secret; and if anything of the sort is
involved in the case it may be brought out at a more advanced stage
of the proceedings.
ADDITIONAL ISSUE: WON an action cannot be maintained jointly
against the corporation and its secretary without the addition of the
allegation that the latter is the custodian of the business records of
the respondent company.
HELD: YES. The propriety of naming the secretary of the corporation
as a codefendant cannot be questioned, since such official is
customarily charged with the custody of all documents,
correspondence, and records of a corporation, and he is presumably
the person against whom the personal orders of the court would be
made effective in case the relief sought should be granted. Both the
corporation and its officers may be joined as defendants.
G.R. No. L-22442 August 1, 1924
ANTONIO PARDO vs. THE HERCULES LUMBER CO., INC., and
IGNACIO FERRER, as its acting secretary
Antonio Pardo, a stockholder in the Hercules Lumber, seeks to
obtain a writ of mandamus to compel the respondents to permit
him and his duly authorized agent and representative to examine
the records and business transactions of said company.
The defense interposed mainly that in article 10 of their By-laws, it
is declared that "Every shareholder may examine the books of the
company upon the days which the board of directors shall annually
fix." It is further averred that the BOD passed a resolution to the
effect that the books of the company are at the shareholders’
disposition from the 15th to 25th of March for examination, in
appropriate hours.
The contention for the respondent is that this resolution of the
board constitutes a lawful restriction on the right conferred by
statute; and that as the petitioner has not availed himself of the
permission to inspect the books and transactions of the company
within the ten days thus defined, his right to inspection and
examination is lost, at least for this year.
:
ISSUE: WON the respondents’ argument is tenable.
HELD: NO.
It may be admitted that the officials in charge of a corporation may
deny inspection when sought at unusual hours or under other
improper conditions; but neither the executive officers nor the
board of directors have the power to deprive a stockholder of the
right altogether. A by-law unduly restricting the right of inspection
is undoubtedly invalid. The statutory right of inspection is not
affected by the adoption by the board of directors of a resolution
providing for the closing of transfer books thirty days before an
election.
It will be noted that our statute declares that the right of inspection
can be exercised "at reasonable hours." This means at reasonable
hours on business days throughout the year, and not merely during
some arbitrary period of a few days chosen by the directors.
NOTE: The motive of the shareholder exercising the right is
immaterial.
G.R. No. L-37064 October 4, 1932
EUGENIO VERAGUTH vs. SABELA SUGAR COMPANY, INC., GIL
MONTILLA and AGUSTIN B. MONTILLA
Eugenio Veraguth, a director and stockholder of the Isabela Sugar
Company, Inc prays amongst others that an absolute writ of
mandamus be issued to respondent corporation, its acting president
and its secretary to notify immediately the petitioner of all regular
and special meetings of the board of directors of the corporation
and to place at his disposal its minutes, documents, and books for
his inspection as director and stockholder.
It appears that Director Veraguth was telegraphing the secretary of
the company, asking the latter to forward a certified copy of the
resolution of the board of directors concerning the payment of
attorney's fees in the case against the Isabela Sugar and others. To
this the secretary answered that, since the minutes of the meeting
in question had not been signed by the directors present, a certified
copy could not be furnished and that as to other proceedings of the
stockholders, a request should be made to the president of the
Isabela Sugar. It further appears that the board of directors adopted
a resolution providing for inspection of the books and the taking of
copies "by authority of the President of the corporation previously
obtained in each case."
ISSUE: WON the failure of the secretary to issue Veraguth a copy of
the said minutes is justified.
HELD: YES.
Directors of a corporation have the unqualified right to inspect the
books and records of the corporation at all reasonable times.
Pretexts may not be put forward by officers of corporations to
keep a director or shareholder from inspecting the books and
minutes of the corporation, and the right of inspection is not to be
denied on the ground that the director or shareholder is on
unfriendly terms with the officers of the corporation whose
records are sought to be inspected. A director or stockholder can of
course make copies, abstracts, and memoranda of documents,
books, and papers as an incident to the right of inspection, but
:
cannot, without an order of a court, be permitted to take books
from the office of the corporation. We do not conceive, however,
that a director or stockholder has any absolute right to secure
certified copies of the minutes of the corporation until these
minutes have been written up and approved by the directors.
Nothing improper occurred when the secretary declined to furnish
certified copies of minutes which had not been approved by the
board of directors, and that while the last resolution of the board of
directors as provides for prior approval of the president before the
books of the corporation can be inspected puts an illegal obstacle in
the way of a stockholder or director, that resolution has not been
enforced to the detriment of anyone. As such, a relief by mandamus
cannot prosper.
G.R. No. L-33320 May 30, 1983
RAMON A. GONZALES vs. THE PHILIPPINE NATIONAL BANK
Previous to the present action, the petitioner instituted several
cases in this Court questioning different transactions entered into
by PNB with other parties. In the first case, the personality of
petitioner to sue the bank was raised. In view thereof, he acquired
one share of stock of the bank from Congressman Justiniano
Montano. Subsequently, petitioner, in his dual capacity as a
taxpayer and stockholder, filed another three cases involving PNB.
On January 11, 1969, petitioner expressed its desire to look into the
records of the bank covering certain specific transactions. The bank
denied his request for not being germane to his interest as a one-
share stockholder and for the cloud of doubt as to his real intention
and purpose in acquiring said share.
The lower court then denied the prayer of the petitioner that he be
allowed to examine and inspect the books and records of PNB on
the grounds that the right of a stockholder to inspect the record of
the business transactions of a corporation is not absolute, but is
limited to purposes reasonably related to the interest of the
stockholder, must be asked for in good faith for a specific and
honest purpose and not gratify curiosity or for speculative or vicious
purposes; that such examination would violate the confidentiality of
the records of the respondent bank as provided in Section 16 of its
charter; and that the petitioner has not exhausted his
administrative remedies.
Petitioner maintains that the above-quoted provision does not
justify the qualification made by the lower court that the inspection
of corporate records may be denied on the ground that it is
intended for an improper motive or purpose, the law having
granted such right to a stockholder in clear and unconditional
terms. He further argues that, assuming that a proper motive or
purpose for the desired examination is necessary for its exercise,
there is nothing improper in his purpose for asking for the
examination and inspection herein involved.
ISSUE: WON the lower court erred in ruling that his alleged
improper motive in asking for an examination of the books and
records disqualifies him to exercise the right of a stockholder to
such inspection.
HELD: NO.
Petitioner may no longer insist on his interpretation of Section 51
of Act No. 1459 since the former Corporation Law has been
:
replaced by Batas Pambansa Blg. 68, otherwise known as the
"Corporation Code of the Philippines." (NOTE: Sec. 74)
The right of inspection granted to a stockholder under Section 51 of
Act No. 1459 has been retained, but with some modifications.
Among the changes introduced in the new Code are the following:
the records must be kept at the principal office of the corporation;
the inspection must be made on business days; the stockholder may
demand a copy of the excerpts of the records or minutes; and the
refusal to allow such inspection shall subject the erring officer or
agent of the corporation to civil and criminal liabilities. However,
while seemingly enlarging the right of inspection, the new Code
has prescribed limitations to the same. It is now expressly required
as a condition for such examination that the one requesting it
must not have been guilty of using improperly any information
through a prior examination, and that the person asking for such
examination must be "acting in good faith and for a legitimate
purpose in making his demand."
Although the petitioner has claimed that he has justifiable motives
in seeking the inspection of the books of the respondent bank, he
has not set forth the reasons and the purposes for which he desires
such inspection, except to satisfy himself as to the truth of
published reports regarding certain transactions entered into by the
respondent bank and to inquire into their validity. The
circumstances under which he acquired one share of stock in the
respondent bank purposely to exercise the right of inspection do
not argue in favor of his good faith and proper motivation.
Admittedly he sought to be a stockholder in order to pry into
transactions entered into by the respondent bank even before he
became a stockholder. It could not be said that his purpose is
germane to his interest as a stockholder.
We also find merit in the contention of the respondent bank that
the inspection sought to be exercised by the petitioner would be
violative of the provisions of its charter. (Republic Act No. 1300, as
amended.) Section 16 of the said charter provide that any
information relative to the funds in its custody, its current accounts
or deposits belonging to private individuals, corporations, or any
other entity cannot be disclosed except upon order of a Court of
competent jurisdiction.
The Philippine National Bank is not an ordinary corporation. Having
a charter of its own, it is not governed, as a rule, by the Corporation
Code of the Philippines.
The provision of Section 74 of the new Corporation Code with
respect to the right of a stockholder to demand an inspection or
examination of the books of the corporation may not be reconciled
with the abovequoted provisions of the charter of the respondent
bank.
DERIVATIVE SUITS
Donald J. RICHARDSON vs. ARIZONA FUELS CORPORATION
No. 15691 May 1, 1980
Plaintiffs are stockholders of Major who brought this action
individually and on behalf of all other stockholders of Major.
Arizona Fuels is alleged to be the legal or beneficial owner of 47% of
the issued and outstanding shares of stock of Major. Eugene Dalton
:
is alleged to be the controlling stockholder, officer and director of
Arizona Fuels and the controlling officer and director of Major.
The action is brought as a class action pursuant to Rule 23 and as a
stockholders' derivative action pursuant to Rule 23.1. Plaintiffs
moved for an order certifying this suit as a class action and for
appointment of a receiver for Major pursuant to Rule 66. Both
motions were granted by the district court.
ISSUE: WON this matter is a class action.
HELD: NO.
A class action and a derivative action rest upon fundamentally
different principles of substantive law. A derivative action must
necessarily be based on a claim for relief which is owned by the
stockholders' corporation. Indeed, a prerequisite for filing a
derivative action is the failure of the corporation to initiate the
action in its own name. The stockholder, as a nominal party, has no
right, title or interest whatsoever in the claim itself whether the
action is brought by the corporation or by the stockholder on behalf
of the corporation.
A class action, on the other hand, is predicated on ownership of
the claim for relief sued upon in the representative of the class
and all other class members in their capacity as individuals.
Shareholders of the corporation may, of course, have claims for
relief directly against their corporation because the corporation
itself has violated rights possessed by the shareholders, and a class
action would be an appropriate means for enforcing their claims. A
recovery in a class action is a recovery which belongs directly to the
shareholders. However, in a derivative action, the plaintiff
shareholder recovers nothing and the judgment runs in favor of
the corporation.
Suits which are said to be derivative, and therefore come within the
rule, are those which seek to enforce any right which belongs to the
corporation and is not being enforced, such as the liability of
corporate officers or majority shareholders for mismanagement, to
recover corporate assets and related claims, to enforce rights of the
corporation by virtue of its contract with a third person, and to
enjoin those in charge of the corporation from causing it to commit
an ultra vires act.
On the other hand, [i]f the injury is one to the plaintiff as a
stockholder and to him individually, and not to the corporation, as
where the action is based on a contract to which he is a party, or on
a right belonging severally to him, or on a fraud affecting him
directly, it is an individual action.
In this case, neither the memorandum decision nor the order of the
district court does any more than recite that the suit may be
maintained as a class action. Furthermore, the amended complaint
in alleging that the action should be maintained as a class action,
does no more than mimic the language of Rule 23. We therefore
direct our attention to the contents of the verified amended
complaint, which was the basis upon which the district court made
its determination.
The amended complaint states twelve causes of action, the first
eight of which allege some fraudulent appropriation of or scheme to
appropriate Major's assets by defendants. These causes of action
seek to require the defendants to disgorge and return to Major the
:
assets wrongfully obtained. Three seek compensatory or punitive
damages for injury attributable to alleged breaches of fiduciary duty
implicit in the fraudulent acts enumerated in the first eight causes,
while the final cause of action seeks appointment of a receiver.
There is no doubt that the first eight causes of action allege injury to
the corporation only. The injury alleged can be asserted by
plaintiffs only derivatively as stockholders on behalf of the
corporation. This leaves the ninth, tenth and eleventh causes of
action to be analyzed to determine if they state claims which may
be pursued by the stockholders as a class to redress injuries to the
stockholders as individuals.
The ninth cause of action alleges that the defendants "breached
their fiduciary duties to Major Oil and to its stockholders." As a
general rule, directors and other officers of a corporation stand in a
fiduciary relation to the corporation. While directors and officers
stand in a like relation to the stockholders of the corporation, it is
clear that that relation is to the stockholders collectively. The
distinction between a fiduciary duty owed to the corporation as a
whole as opposed to the stockholders collectively does not appear
to be one of substance in this case. There is no important issue as to
whether the cause of action states a corporate claim. Although
plaintiff frames this claim, in the alternative, as one belonging to
the shareholders, the claim for relief belongs to the corporation.
The ninth cause of action then goes on to allege that the defendants
"mismanaged the corporate and prudential affairs of Major Oil.”
The rulie is that mismanagement of the corporation gives rise to a
cause of action in the corporation, even if the mismanagement
results in damage to stockholders by depreciating the value of the
corporation's stock. Therefore, any compensatory damages which
may be recovered on account of any breach by defendants of their
fiduciary duty as directors and officers or arising as a result of
mismanagement of the corporation by defendants belong to the
corporation and not to the stockholders individually.
In short, the ninth cause of action states a claim belonging to the
corporation and precludes that claim from being alleged as a class
action.
The tenth cause of action alleges that the defendants "defrauded
the stockholders of Major Oil Company." The fraud is premised on
defendants' fiduciary duty owed to the stockholders of the
corporation. Each of the six alleged defalcations states a claim
belonging to the corporation and not to the stockholders or any of
them individually. The tenth cause of action is rounded out by
allegations of the defendants' knowledge of their wrongful conduct,
the reasonable reliance of the plaintiffs on defendants' performance
of defendants' fiduciary duties, and the resulting damage to the
stockholders. However, in no regard can the tenth cause of action
be interpreted as stating a claim belonging to the stockholders
individually, and therefore that claim for relief will not support a
class action.
The eleventh cause of action alleges the possibility of other
conversions of Major's assets and alleges that the defendants
should be required to account to the stockholders for all of the
assets of Major and disgorge themselves of any assets so converted.
This claim also clearly belongs to the corporation.
:
The class action device, if used inappropriately and in lieu of a
derivative action, is likely to result in grave injustices, not the least
of which is the diversion of assets recovered in a lawsuit from
creditors of a corporation to stockholders, thereby reversing long
established substantive rules of law as to the relative priorities of
the claims of creditors and stockholders to the assets of an insolvent
corporation.
NOTE: Receivers have historically been appointed in cases where
misappropriation of corporate assets by corporate insiders is
asserted. Defendants had abundant opportunity to provide factual
support for their contention that insolvency is not imminent. They
did not do so. The appointment of a receiver is among those
discretionary powers subject to review for abuse, but we cannot
find abuse where the ground for appointment is stated in the
language of the rules and remains uncontroverted through a full
hearing with extensive preliminary written memoranda.
G.R. No. 123553 July 13, 1998
NORA A. BITONG vs. CA
Petitioner Bitong allegedly acting for the benefit of Mr. & Ms. Co.
filed a derivative suit before the SEC against respondent spouses
Apostol, who were officers in said corporation, to hold them liable
for fraud and mismanagement in directing its affairs. Respondent
spouses moved to dismiss on the ground that petitioner had no
legal standing to bring the suit as she was merely a holder-in-trust
of shares of JAKA Investments which continued to be the true
stockholder of Mr. & Ms. Petitioner contends that she was a holder
of proper stock certificates and that the transfer was recorded. She
further contends that even in the absence of the actual certificate,
mere recording will suffice for her to exercise all stockholder rights,
including the right to file a derivative suit in the name of the
corporation. The SEC Hearing Panel dismissed the suit. On appeal,
the SEC En Banc found for petitioner. CA reversed the SEC En Banc
decision.
ISSUE: WON petitioner is the true holder of stock certificates to be
able institute a derivative suit.
HELD: NO.
Sec 63 of the Corporation Code envisions a formal certificate of
stock which can be issued only upon compliance with certain
requisites. First, the certificates must be signed by the president or
vice-president, countersigned by the secretary or assistant
secretary, and sealed with the seal of the corporation. A mere
typewritten statement advising a stockholder of the extent of his
ownership in a corporation without qualification and/or
authentication cannot be considered as a formal certificate of stock.
Second, delivery of the certificate is an essential element of its
issuance. Hence, there is no issuance of a stock certificate where it
is never detached from the stock books although blanks therein are
properly filled up if the person whose name is inserted therein has
no control over the books of the company. Third, the par value, as
to par value shares, or the full subscription as to no par value
shares, must first be fully paid. Fourth, the original certificate must
be surrendered where the person requesting the issuance of a
certificate is a transferee from a stockholder.
:
The certificate of stock itself once issued is a continuing affirmation
or representation that the stock described therein is valid and
genuine and is at least prima facie evidence that it was legally issued
in the absence of evidence to the contrary. However, this
presumption may be rebutted. Aside from petitioner’s own
admissions, several corporate documents disclose that the true
party-in-interest is not petitioner but JAKA. It should be emphasized
that JAKA executed, a deed of sale over 1,000 Mr. & Ms. shares in
favor of respondent Eugenio D. Apostol. On the same day,
respondent Apostol signed a declaration of trust stating that she
was the registered owner of 1,000 Mr. & Ms. shares covered by a
Certificate of Stock. And, there is nothing in the records which
shows that JAKA had revoked the trust it reposed on respondent
Eugenia D. Apostol. Neither was there any evidence that the
principal had requested her to assign and transfer the shares of
stock to petitioner. In fine, the records are unclear on how
petitioner allegedly acquired the shares of stock of JAKA.
Thus, for a valid transfer of stocks, the requirements are as follows:
(a) There must be delivery of the stock certificate; (b) The certificate
must be endorsed by the owner or his attorney-in-fact or other
persons legally authorized to make the transfer; and, (c) to be valid
against third parties, the transfer must be recorded in the books of
the corporation. At most, in the instant case, petitioner has satisfied
only the third requirement. Compliance with the first two requisites
has not been clearly and sufficiently shown.
*The basis of a stockholder’s suit is always one in equity. However,
it cannot prosper without first complying with the legal requisites
for its institution. The most important of these is the bona fide
ownership by a stockholder of a stock in his own right at the time of
the transaction complained of which invests him with standing to
institute a derivative action for the benefit of the corporation.
G.R. No. 85339 August 11, 1989
SAN MIGUEL CORPORATION vs. ERNEST KAHN
Fourteen corporations initially acquired shares of outstanding
capital stock of SMC and constituted a Voting Trust thereon in favor
of Andres Soriano, Jr. When the latter died Eduardo Cojuanco was
elected as the substitute trustee. However, after the EDSA
revolution, Cojuanco fled out of the country, and subsequently an
agreement was entered into between the 14 corporations and
Andres Soriano III (as an agent of several persons) for the purchase
of the shares held by the former.
Actually the buyer of the shares was Neptunia Corporation, a
foreign corporation and wholly-owned subsidiary of another
subsidiary wholly owned by SMC. Neptunia paid the downpayment
from the proceeds of certain loans. PCGG then sequestered the
shares subject of the sale so SMC suspended all the other
installments of the price to the sellers. The 14 corporations then
sued for rescission and damages.
Meanwhile, PCGG directed SMC to issue qualifying shares to seven
(7) individuals including Eduardo de los Angeles from the
sequestered shares for them to hold in trust. Then, the SMC’s board
of directors passed a resolution assuming the loans incurred by
Neptunia for the downpayment. De los Angeles assailed the
resolution alleging that it was not passed by the board aside from its
deleterious effects on the corporation’s interest. When his efforts to
obtain relief within the corporation proved futile, he filed this action
:
with the SEC. Respondent directors alleged that de los Angeles has
no legal standing having been merely “imposed” by the PCGG and
that the twenty (20) shares owned by him personally cannot fairly
and adequately represent the interest of the minority.
ISSUE: WON de los Angeles have the legal standing to sue.
(Derivative suit)
HELD: YES.
The bona fide ownership by a stockholder in his own right suffices
to invest him with the standing to bring a derivative suit for the
benefit of the corporation. The number of his shares is immaterial
since he is not suing in his own behalf, or for the protection or
vindication of his own particular right, or the redress of a wrong
committed against him individually but in behalf and for the benefit
of the corporation.
The requisites of a derivative suit are: (1) the party bringing the suit
should be a stockholder as of the time of the act or transactions
complained of, the number of shares not being material; (2)
exhaustion of intra-corporate remedies (has made a demand on the
board of directors for the appropriate relief but the latter has failed
or refused to heed his plea); and (3) the cause of action actually
devolves on the corporation and not to the particular stockholder
bringing the suit.
(PASCUAL vs. OROSCO to REPUBLIC BANK vs. CUADERNO: check
notes)
G.R. No. L-16982 September 30, 1961
CATALINA R. REYES vs. HON. BIENVENIDO A. TAN, as Judge of the
Court of First Instance of Manila, Branch XIII and FRANCISCA R.
JUSTINIANI
Roxas-Kalaw Textile Mills, Inc., was organized by defendants for and
on behalf of the following primary principals with the following
shareholdings: Adelia K. Roxas, 1200 Class A shares; I. Sherman, 900
Class A shares; Robert W. Born, 450 Class A shares and Morris
Wilson, 450 Class A shares. Apparently, the plaintiff holds both Class
A and Class B shares. On May 8, 1957, the Board of Directors
approved a resolution designating one Dayaram as co-manager with
the specific understanding that he was to act as defendant
Wadhumal Dalamal's designee. An office in New York was opened
for the purpose of supervising purchases. Several purchases
aggregating $289,678.86 were made in New York for raw materials
for the textile mill and shipped to the Philippines, which shipment
were found out to consist not of raw materials but already finished
products, for which reasons the Central Bank of the Philippines
stopped all dollar allocations for raw materials for the corporation
which necessarily led to the paralyzation of the operation of the
textile mill and its business. The supplier of the aforesaid finished
goods was the United Commercial Company of New York in which
defendant Dalamal had interests and the letter of credit for said
goods were guaranteed by the Indian Commercial Company and the
Indian Traders in which firms defendant Dalamal likewise held
interests. The resale of the finished goods was the business of the
Indian Commercial Company of Manila, which company could not
obtain dollar allocations for importations of finished goods under
the Central Bank regulations. As such, plaintiff and some members
of the board of directors urged defendants to proceed against
:
Dalamal, exposing his offense to the Central Bank, and to initiate
suit against Dalamal for his fraud against the corporation.
Defendants, however, refused to proceed against Dalamal and
instead continued to deal with the Indian Commercial Company to
the damage and prejudice of the corporation. The As such, plaintiff
asked for the appointment of a receiver and a judgment marking
defendants jointly and severally liable for the damages. Amongst
others, the defendant argued that the plaintiff has no cause of
action. they claim that Justiniani neither alleged nor proved the
existence of an emergency requiring the immediate appoinment of
a receiver of the Roxas-Kalaw Textile Mill, Inc.; that the alleged
fraudulent transaction took place more than two years before the
application for receivership, and so was the refusal of the directors
to sue or prosecute Dalamal.
The CFI eventually ruled in favour of plaintiff, holding that plaintiff
has sufficient averred facts constituting a cause or basis for a
derivative suit for "injuries to the corporation, as by negligence,
mismanagement or fraud of its directors, are normally dealt with as
wrong to the whole group of share holders in their corporate
capacity, to be redressed in a suit by or on behalf of the
corporation.
Evident from the defendants' motion to dismiss is their complete
failure to come up with a valid and substantial defense against or
denial of the complaint's allegations of mismanagement, if not the
actual commission of ultra vires and illegal acts. Invariably the props
of defendants' motion consist of the unconvincing countercharges
of the plaintiff's non-observance of technicalities. It is clear that the
controlling majority did nothing for two years to protect the
interests of corporation.
The defendants themselves having admitted in open court that the
majority stockholders will under any condition entertain any
suggestion of the minority shareholders, the appointment of an
independent third party in the management of the corporation
becomes imperative for the survival of the company.
After this incident wherein it was clearly shown that the minority
stockholders, represented by the plaintiff, have no recourse
whatsoever before the majority stockholders of the company, and
after it has been shown that the majority has violated the law by
importing into the Philippines finished goods instead of raw
materials as stipulated in their license, and since these acts are
prejudicial to the company because it might result in the
cancellation of their license, the Court is of the opinion and so holds
that the appointment of a receiver is absolutely necessary for the
protection not only of the rights of the minority but also those of
the majority stockholders of the company.
ISSUE: WON plaintiff has a cause of action.
HELD: YES.
At the hearing of the petition for the appointment of a receiver held
on January 30, 1960, various records of shipments of finished textile
goods on dollar allocations for raw materials were exhibited.
Publicity had also been given to the importations of textiles by the
corporation, in place of cotton raw materials. The record shows the
list of the various documents proving the purchase of letters of
credit for textiles. These textiles were denied importation and had
to be re-exported. The fact of the importation of finished textiles on
:
dollar allocations for raw materials in violation of Central Bank
regulations was, therefore, conclusively shown.
It is also not denied by defendants that the allocation of dollars to
the corporation for the importation of raw materials was
suspended. In the eyes of the court below, as well as in our own,
the importation of textiles instead of raw materials, as well as the
failure of the Board of Directors to take action against those directly
responsible for the misuse of dollar allocations constitute fraud, or
consent thereto on the part of the directors. Therefore, a breach of
trust was committed which justified the derivative suit by a
minority stockholder on behalf of the corporation.
Where corporate directors are guilty of a breach of trust — not of
mere error of judgment or abuse of discretion — and intracorporate
remedy is futile or useless, a stockholder may institute a suit in
behalf of himself and other stockholders and for the benefit of the
corporation, to bring about a redress of the wrong inflicted directly
upon the corporation and indirectly upon the stockholders.
The claim that respondent Justiniani did not take steps to remedy
the illegal importation for a period of two years is also without
merit. During that period of time respondent had the right to
assume and expect that the directors would remedy the anomalous
situation of the corporation brought about by their own wrong
doing. Only after such period of time had elapsed could respondent
conclude that the directors were remiss in their duty to protect the
corporation property and business.
Counsel for petitioner claims that respondent Justiniani was
treasurer of the corporation for sometime and had control of funds
and this notwithstanding, she had not taken the steps to remedy
the situation. In answer we state that the fraud consisted in
importing finished textile instead of raw cotton for the textile mill;
the fraud, therefore, was committed by the manager of the
business and was consented to by the directors, evidently beyond
reach of respondent.
The directors permitted the fraudulent transaction to go
unpunished and nothing appears to have been done to remove the
erring purchasing managers. In a way the appointment of a receiver
may have been thought of by the court below so that the dollar
allocation for raw material may be revived and the textile mill
placed on an operating basis. It is possible that if a receiver in which
the Central Bank may have confidence is appointed, the dollar
allocation for raw material may be restored. Claim is made that if a
receiver is appointed, the Philippine National Bank to which the
corporation owes considerable sums of money might be led to
foreclose the mortgage. Precisely the appointment of a receiver in
whom the bank may have had confidence might rehabilitate the
business and bring a restoration of the dollar allocation much
needed for raw material and an improvement in the business and
assets the corporation, thus insuring the collection of the bank's
loan.
The appointment of a receiver was not only expedient but also
necessary to restore the faith and confidence of the Central Bank
authorities in the administration of the affairs of the corporation,
thus ultimately leading to a restoration of the dollar allocation so
essential to the operation of the textile mills.
:
ISSUE 2: Defendants claim that the management has been changed
and the new management has not been afforded a chance to show
what it can do.
HELD:
The supposed new management, alleged as a ground for the
reversal of the order of the court below appointing a receiver, is not
in itself a ground of objection to the appointment of a receiver. The
parties found to be guilty of the fraud, as a cause of which
receivership proceedings were instituted, were the Board of
Directors, which took no action to stop the anomalies being
perpetrated by the management. But it appears that the
management must have acted directly under orders of the Board of
Directors. The appointment of a new management, therefore,
would not remedy the anomalous situation in which the corporation
is found, because such situation was not due to the management
alone but principally because of direction of the Board of Directors.
ROLE OF DOT: GENERALLY
G.R. No 137686 February 8, 2000
RURAL BANK OF MILAOR vs. OCFEMIA
Several parcels of land were mortgaged by the respondents during
the lifetime of the respondent’s grandparents to the Rural bank of
Milaor as shown by the Deed of Real Estate Mortgage and the
Promissory Note. Spouses Felicisimo Ocfemia and Juanita Ocfemia,
one of the respondents, were not able to redeem the mortgaged
properties consisting of seven parcels of land and so the mortgage
was foreclosed and thereafter ownership was transferred to the
petitioner bank. Out of the seven parcels of land that were
foreclosed, five of them are in the possession of the respondents
because these five parcels of land were sold by the petitioner bank
to the respondents as evidenced by a Deed of Sale. However, the
five parcels of land cannot be transferred in the name of the
parents of Merife Nino, one of the respondents, because there is a
need to have the document of sale registered. The Register of
deeds, however, said that the document of sale cannot be
registered without the board resolution of the petitioner bank
confirming both the Deed of sale and the authority of the bank
manager, Fe S. Tena, to enter such transaction.
The petitioner bank refused her request for a board resolution and
made many alibis. Respondents initiated the present proceedings so
that they could transfer to their names the subject five parcel of
land and subsequently mortgage said lots and to use the loan
proceeds for the medical expenses of their ailing mother.
ISSUE: May the Board of Directors of a rural banking corporation be
compelled to confirm a deed of absolute sale of real property
owned by the corporation which deed of sale was executed by the
bank manager without prior authority of the board of directors of
the rural banking corporation?
HELD: YES.
The bank acknowledges, by its own acts or failure to act, the
authority of Fe S. Tena to enter into binding contracts. After the
execution of the Deed of Sale, respondents occupied the properties
in dispute and paid the real estate taxes. If the bank management
:
believed that it had title to the property, it should have taken
measured to prevent the infringement and invasion of title thereto
and possession thereof. Likewise, Tena had previously transacted
business on behalf of the bank, and the latter had acknowledged
her authority. A bank is liable to innocent third persons where
representation is made in the course of its normal business by an
agent like Manager Tena even though such agent is abusing her
authority. Clearly, persons dealing with her could not be blamed for
believing that she was authorized to transact business for and on
behalf of the bank.
The bank is estopped from questioning the authority of the bank to
enter into contract of sale. If a corporation knowingly permits one
of its officers or any other agent to act within the scope of an
apparent authority, it holds the agent out to the public as
possessing the power to do those acts; thus, the corporation will, as
against anyone who has in good faith dealt with it through such
agent, be estopped from denying the agent’s authority.
OUALIFICATIONS OF DT
DETECTIVE PROTECTIVE BUREAU INC vs HON. CLORIBEL
Fausto Alberto (respondent) was the managing director of Detective
Protective Bureau Inc. (petitioner) from 1952-1964. Petitioner filed
a complaint with the CFI against Alberto alleging that on 1963, he
had illegally seized and took control of all the assets as well as the
books, records, vouchers and receipts of the corporation from the
accountant-cashier, concealed them illegally and refused to allow
any member of the corporation to see and examine the same. They
claimed that on January 1964, the stockholders, in a meeting,
removed defendant as managing director and elected Jose de la
Rosa in his stead, but not only did Alberto refuse to vacate his office
and deliver the assets to de la Rosa, but he also continued to
perform unauthorized acts for and in behalf of the petitioner
corporation. Alberto was also required to submit a financial
statement and to render an accounting of his administration from
1952 but he failed to do so. Alberto has been, contrary to the
resolution adopted by the Board of Directors, illegally disposing of
corporate funds.
Respondent Judge Cloribel issued a writ of preliminary injuction as
prayed for by the petitioner, however, when Alberto filed a motion
to admit a counter-bond for the purpose of lifting said writ, Judge
Cloribel issued an order admitting the counter-bond and setting
aside the writ of preliminary injuction. Thus this petition for
certiorari.
ISSUE: Whether Judge Cloribel gravely abused his discretion
HELD: NO.
One of the reasons petitioners allege Judge Cloribel gravely abused
his discretion is that Alberto had arrogated to himself the powers of
the Board of Directors of the corporation because he refused to
vacate the office and surrender the same to Jose de la Rosa who
had been elected managing director by the Board to succeed him.
This assertion, however, was disputed by respondent Alberto who
stated that Jose de la Rosa could not be elected managing director
because he did not own any stock in the corporation.
There is in the record no showing that Jose de la Rosa owned a
share of stock in the corporation. If he did not own any share of
:
stock, certainly he could not be a director pursuant to the
mandatory provision of Section 30 of the Corporation Law, which in
part provides: "Sec. 30. Every director must own in his own right at
least one share of the capital stock of the stock corporation of
which he is a director, which stock shall stand in his name on the
books of the corporation .." If he could not be a director, he could
also not be a managing director of the corporation, pursuant to
Article V, Section 3 of the By-Laws of the Corporation.
If the managing director-elect was not qualified to become
managing director, respondent Fausto Alberto could not be
compelled to vacate his office and cede the same to the managing
director-elect because the by-laws of the corporation provides in
Article IV, Section 1 that "Directors shall serve until the election and
qualification of their duly qualified successor."
[there were four other grounds alleged namely: (1) the motion to
admit respondent's counter- bond for the dissolution of the writ
was not supported by affidavits as required by Section 6 of Rule 58
of the Rules of Court; (2 & 3) The second and third reasons alleged
by petitioner in its petition for certiorari assume that a preliminary
injunction issued after hearing and in accordance with Rule 58
cannot be set aside; (4) the counter-bond could not compensate for
the irreparable damage that the corporation would suffer by reason
of the continuance of respondent Fausto Alberto as managing
director of the corporation. All of these were set aside by the court]
QUALIFICATIONS: DIRECTORS
GRACE CHRISTIAN HS vs. CA
Grace Christian High School (GCHS) is an educational institution.
Grace Village Association, Inc. (GVAI) is the homeowners association
in Grace Village where GCHS is located. GVAI has an existing by-laws
which was already in effect since 1968. But in 1975, the board of
directors made a draft amending the by-laws whereby the
representative of GCHS shall have a permanent seat in the 15-seat
board. The draft however was never presented to the general
membership for approval. But nevertheless, the representative of
GCHS held a seat in the board for 15 years until in 1990 when a
proposal was made to the board to reconsider the practice of
allowing the GCHS representative in taking a permanent seat.
Thereafter, an election was scheduled for the 15 seat in the board.
GCHS opposed the election as it insists that the election should only
be for 14 directors because it has a permanent seat. GVAI argued
that GCHS claim has no basis because the 1975 proposed
amendment was never ratified. GCHS averred that it was ratified
when it was allowed to take the seat for 15 years and as such its
right has already vested.
ISSUE: Whether or not the representative from Grace Christian High
School should be allowed to have a permanent seat in the board of
directors.
HELD: NO.
The Corporation Code is clear when it provides that members of the
board of a corporation must be elected by the stockholders (stock
corporation) or the members (non-stock corporation). Admittedly,
there are corporations who allow some of their directors to sit in
the board without being elected – but such practice cannot prevail
over provisions of law. Practice, no matter how long continued,
:
cannot give rise to any vested right if it is contrary to law. Further,
there is no reason as to why a representative from GCHS should be
given an automatic seat. It should therefore go through the process
of election. It cannot also be argued that the draft of the by-laws in
1975 was ratified when GCHS was allowed to take its seat for 15
years without an election. In the first place, the proposal was
merely a draft and even if passed and approved by the general
membership, it cannot be given effect because it is void and
contrary to the law. GCHS’ seat in the corporate board is at best
merely tolerated by GVAI.
TERM OF OFFICE/HOLD-OVER PRINCIPLE
PONCE vs. ENCARNACION
Daguhoy Enterprises, Inc., was a duly registered corporation. On
April 1951 a meeting was called where the voluntary dissolution of
the corporation and the appointment of Potenciano Gapol as
receiver were agreed upon. Instead of filing a petiton for voluntary
dissolution however, the respondent Potenciano Gapol, who is the
largest stockholder of the corporation, changed his mind and filed a
complaint to compel the petitioners to render an accounting of the
funds and assets of the corporation, to reimburse it, jointly and
severally such sum as may be found after the accounting shall have
been rendered to have been misspent, misapplied, misappropriated
and converted by the petitioner Domingo Ponce (the president of
the company) to his own use and benefit. Gapol filed an action with
the TC and prayed for an order directing him to a call a meeting of
the stockholders of the corporation and to preside at such meeting
in accordance with section 26 of the Corporation law.
TC granted their petition and gave an order granting Potenciano
Gapol authority, pursuant to section 26, Act No. 1459, otherwise
known as the Corporation Law, to call a meeting of the stockholders
of the Dagunoy Enterprises, Inc. and to preside at such meeting by
giving proper notice to the stockholders, as required by law or by
laws of the corporation, until after the majority of the stockholders
present and qualified to vote shall have chosen one of them to act
as presiding officer of the meeting.
The subsequent motions to set aside the order was denied. Thus
this is a petition for a writ of certiorari.
ISSUE: Whether the TC can validly call for a stockholder’s meeting
under the Corporation Code
HELD: YES.
On the showing of good cause therefor, the court may authorize a
stockholder to call a meeting and to preside thereat until the
majority stockholders representing a majority of the stock present
and permitted to be voted shall have chosen one among them to
preside it. And this showing of good cause therefor exists when the
court is apprised of the fact that the by-laws of the corporation
require the calling of a general meeting of the stockholders to elect
the board of directors but the call for such meeting has not been
done.
The requirement that "on the showing of good cause therefor, " the
court may grant to a stockholder the authority to call such meeting
and to preside thereat does not mean that the petition for such
authority must be set for hearing with notice served upon the board
of directors. The respondent court was satisfied that there was a
:
showing of good cause for authorizing the respondent Potenciano
Gapol to call a meeting of the stockholders for the purpose of
electing the board of directors as required and provided for in the
by-laws, because the chairman of the board of directors called upon
to do so had failed, neglected, or refused to perform his duty. It may
be likened to a writ of preliminary injunction or of attachment
which may be issued ex-parte upon compliance with the
requirements of the rules and upon the court being satisfied that
the same should issue. Such provisional reliefs have not been
deemed and held as violative of the due process of law clause of the
Constitution. Petitioners claim they were deprived of due process,
but they had no right to continue as directors of the corporation
unless reelected by the stockholders in a meeting called for that
purpose every even year. They had no right to a hold-over brought
about by the failure to perform the duty incumbent upon one of
them.
REMOVAL OF DT
G.R. No. L-26555 November 16, 1926
ROXAS vs. DELA ROSA
Removal of Directors: Under the law the directors of a corporation
can only be removed from office by a vote of the stockholders
representing at least two-thirds of the subscribed capital stock
entitled to vote (Act No. 1459, sec. 34); while vacancies in the
board, when they exist, can be filled by mere majority vote, (Act No.
1459, sec. 25).
Moreover, the law requires that when action is to be taken at a
special meeting to remove the directors, such purpose shall be
indicated in the call (Act No. 1459, sec. 34)
SUMMARY:
Representatives of the voting trust, holding majority of the shares,
calls for a shareholders meeting with the purpose of electing the
members of the board of directors notwithstanding the fact that all
the positions in the board are occupied by the members elected in a
previous shareholders meeting. A civil action was filed to enjoin
such meeting and the petitioners filed a certiorari proceeding for
the issuance of the CFI judge of a restraining order to enjoin the
meeting. SC held that the restraining order was valid because in
order to remove the current members of the BOD, a vote of at least
2/3 of the shareholders is necessary.
FACTS:
Binalbagan Estate, Inc. (BEI), is a corporation having its principal
plant in Occidental Negros where it is engaged in the manufacture
of raw sugar from canes grown upon farms accessible to its central.
In July, 1924, the possessors of a majority of the shares of the
Binalbagan Estate, Inc., formed a voting trust composed of three
members, namely, Salvador Laguna, Segunda Monteblanco, and
Arthur F. Fisher, as trustee.
By the document constituting this voting trust, the trustees were
authorized to represent and vote the shares pertaining to their
constituents, and to this end the shareholders undertook to assign
their shares to the trustees on the books of the company.
:
The total number of outstanding shares of the corporation is
somewhat over 5,500, while the number of shares controlled by the
voting trust is less than 3,000.
On 26 Feb 1926, BEI held its General Annual Shareholders Meeting
at which Mr. J. P. Heilbronn appeared as representative of the
voting trust, his authority being recognized by the holders of all the
other shares present at this meeting.
Heilbronn having the control of the majority of the shares (the case
didn’t say how that happened – maybe he owned several shares
plus the shares of the voting trust he was representing to make up
the majority – it’s just an inference) was able to nominate and elect
a board of directors to his own liking, without opposition from the
minority.
After the board of directors had been thus elected and had
qualified, they chose a set of officers constituting of Jose M. Yusay,
president, Timoteo Unson, vice-president, Jose G. Montalvo,
secretary-treasurer, and H. W. Corp and Agustin Coruna, as
members. Said officials immediately entered upon the discharged of
their duties and have continued in possession of their respective
offices until the present time.
Since the creation of the voting trust there have been a number of
vacancies caused by resignation or the absence of members from
the Philippine Islands, with the result that various substitutions have
been made in the personnel of the voting trust. At the present time
the petitioners Roxas, Echaus, and Lacson presumably constitute its
membership.
The current members of the voting trust (petitioners) wanted to
oust the current officers/directors of the corporation, even though
it was the previous representative of the voting trust (Heilbronn)
who elected them. Thus, the petitioners in their character as
members of the voting trust, on August 2, 1926, caused the
secretary of the Binalbagan Estate, Inc., to issue to the shareholders
a notice calling for a special general meeting of shareholders to be
held at 10 a. m., on August 16, 1926, "for the election of the board
of directors, for the amendment of the By-Laws, and for any other
business that can be dealt with in said meeting."
Respondents Coruna and Ledesma, as director and shareholder of
the corporation respectively, filed a civil action before CFI to enjoin
the meeting to be held on Aug. 16, 1926. Respondent judge De La
Rosa issued a restraining order or preliminary injunction to enjoin
the meeting which gave rise to the present certiorari proceeding
filed by petitioners.
ISSUE: WON it was within the judicial powers of Judge De La Rosa to
issue the restraining order or preliminary injunction? (YES)
MAIN ISSUE: WON the petitioners can hold another shareholders
meeting for the election of board of directors even though no
vacancies have occurred to justify such election? (NO)
RULING:
Vacancies in the Board of Directors occur either due to death,
resignation, removal, or otherwise. The law requires that for a
director to be removed, a vote of at least two-thirds of the
subscribed capital stock is necessary. In this case, the voting trust
:
only has the majority of the shares. Majority is not equivalent to
two-thirds.
It must be noted that there are no vacancies in the board of
directors. Therefore, a call for an election of the board of directors
made by the petitioners is tantamount to an ousting of the current
members of the board. The present board of directors are de facto
incumbents of the office whose acts will be valid until they shall be
lawfully removed from the office or cease from the discharge of
their functions. In this case it is not necessary for us to agitate
ourselves over the question whether the respondent judge properly
exercised his judicial discretion in granting the order complained of.
If suffices to know that in making the order he was acting within the
limits of his judicial powers.
Now, upon examining into the number of shares controlled by the
voting trust, it will be seen that, while the trust controls a majority
of the stock, it does not have a clear two-thirds majority. It was
therefore impolitic for the petitioners, in forcing the call for the
meeting of August 16, to come out frankly and say in the notice that
one of the purpose of the meeting was to removed the directors of
the corporation from office. Instead, the call was limited to the
election of the board of directors, it being the evident intention of
the voting trust to elect a new board as if the directorate had been
then vacant.
But the complaint in civil No. 3840 directly asserts that the
members of the present directorate were regularly elected at the
general annual meeting held in February, 1926; and if that assertion
be true, the proposal to elect, another directorate, as per the call of
August 2, if carried into effect, would result in the election of a rival
set of directors, who would probably need the assistance of
judgment of court in an independent action of quo warranto to get
them installed into office, even supposing that their title to the
office could be maintained. That the trial judge had jurisdiction to
forestall that step and enjoin the contemplated election is a matter
about which there cannot be the slightest doubt. The law
contemplates and intends that there will be one of directors at a
time and that new directors shall be elected only as vacancies occur
in the directorate by death, resignation, removal, or otherwise.
MEETINGS OF DTs
G.R. No. 152392 May 26, 2005
EXPERTRAVEL TOURS vs. CA
Korean Airlines (KAL) is a corporation established and registered in
the Republic of South Korea and licensed to do business in the
Philippines. Its general manager in the Philippines is Suk Kyoo Kim,
while its appointed counsel was Atty. Mario Aguinaldo and his law
firm.
On September 6, 1999, KAL, through Atty. Aguinaldo, filed a
Complaint in RTC for the collection of the principal amount etc.
against Expertravel and Tours, Inc. (ETI). Where the latter sought for
the dismissal of the case, however, private respondent filed the
verification and certification against forum shopping was signed by
Atty. Aguinaldo, who indicated therein that he was the resident
agent and legal counsel of KAL and had caused the preparation of
the complaint where He claimed that he had been authorized to file
the complaint through a resolution of the KAL Board of Directors
approved during a special meeting held on June 25, 1999. KAL also
:
contended that Atty. Aguinaldo was its resident agent and was
registered as such with the Securities and Exchange Commission
(SEC). It was further alleged that Atty. Aguinaldo was also the
corporate secretary of KAL, showing that he was the lawyer of KAL.
The petitioner on the other hand, maintains that the RTC cannot
take judicial notice of the said teleconference without prior hearing,
nor any motion therefore. Finally, KAL submitted on March 6, 2000
an Affidavit of even date, executed by its general manager Suk Kyoo
Kim, alleging that the board of directors conducted a special
teleconference on June 25, 1999, which he and Atty. Aguinaldo
attended. It was also averred that in that same teleconference, the
board of directors approved a resolution authorizing Atty. Aguinaldo
to execute the certificate of non-forum shopping and to file the
complaint. Suk Kyoo Kim also alleged, however, that the
corporation had no written copy of the aforesaid resolution.
But, the petitioner pointed out that there are no rulings on the
matter of teleconferencing as a means of conducting meetings of
board of directors for purposes of passing a resolution; until and
after teleconferencing is recognized as a legitimate means of
gathering a quorum of board of directors, such cannot be taken
judicial notice of by the court. The RTC and CA dismiss the petition,
hence this appeal.
ISSUE: Whether or not teleconferencing is a valid means of holding
its corporate meetings.
HELD: NO.
In this age of modern technology, the courts may take judicial
notice that business transactions may be made by individuals
through teleconferencing. Teleconferencing is interactive group
communication (three or more people in two or more locations)
through an electronic medium. In general terms, teleconferencing
can bring people together under one roof even though they are
separated by hundreds of miles.
a board resolution was duly passed specifically authorizing Atty.
Aguinaldo to file the complaint and execute the required
certification against forum shopping.

A teleconference represents a unique alternative to face-to-face

(FTF) meetings. It was first introduced in the 1960’s with American
Telephone and Telegraph’s Picture phone. At that time, however,
no demand existed for the new technology. Travel costs were
reasonable and consumers were unwilling to pay the monthly
service charge for using the picture phone, which was regarded as
more of a novelty than as an actual means for everyday
communication. In time, people found it advantageous to hold
teleconferencing in the course of business and corporate
governance, because of the money saved.

In the Philippines, teleconferencing and videoconferencing of

members of board of directors of private corporations is a reality, in
light of Republic Act No. 8792. The Securities and Exchange
Commission issued SEC Memorandum Circular No. 15, on
November 30, 2001, providing the guidelines to be complied with
related to such conferences. Thus, the Court agrees with the RTC
that persons in the Philippines may have a teleconference with a
group of persons in South Korea relating to business transactions or
corporate governance.

Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim
participated in a teleconference along with the respondent’s Board
of Directors, the Court is not convinced that one was conducted;
even if there had been one, the Court is not inclined to believe that