Alejandrino v. De Leon

Quo warranto to annul the election of all or any one of the respondents as directors of Pampanga Sugar Development Co. or Pasudeco and to declare petitioner as director.

P and R are stockholders of Pasudeco. A meeting was held to elect a new board and 9 Rs were voted, each with more than 19K votes, with R Jose de Leon getting 19,907 votes, while P got only 14K votes. However, 6k shares held by P given to him by 18 SHs were not accepted by the chairman and the secretary for registration and election, reasoning that the 18 SHs previously executed pledges in favor of Pambul Inc., whereby they granted the pledgee the right to vote the shares.

P alleged that Pambul was an alter ego of Pasudeco and its principal SH de Leon, that Pambul was organized pursuant to a resolution of Pasudeco SHs as a financing corporation, that the SHs of Pasudeco automatically became SHs of Pambul, that Pambul offered 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 capital stock have monopolized the directorship.

P alleges that irrevocable proxies are contrary to good morals and public policy and thus void or revocable.

SC:

1. P did not adduce evidence to prove that irrevocable proxies were contrary to good morals or public policy. The right of an SH to vote is inherent in ownership, and if the owner can dispose of the property itself, it is apparent that he can dispose the right to manage it.

2. No allegation that the proxies were procured thru error, deceit, fraud or intimidation. The circumstances of the case are not sufficient in law to vitiate or invalidate the proxies. The desire and design of a majority of stockholders of a private corporation to control management and operation is legitimate per se. The monopoly of corporations is not actionable per se. Also, the organization of Pambul was accomplished by a vote of the majority of Pasudeco SHs. Stockholders of Pambul are free to vote their shares.

3. P alleged that terms of loans were way of bribing SHs to vote for management. But to vote at SHs meeting is not a political franchise and involves no public interest. It can no more be called bribery than the payment by the purchaser of the price of goods he bought.

4. If proxies were given in consideration of pledge, in good faith without fraudulent intent, it cannot be deemed immoral just because it offers a temptation to abuse power and to oppress minority SHs.

5. No SH is compelled to borrow money from and pledge his shares to Pambul. The benefits are mutual. So long as management acts honestly, no one can question their acts, which are purely intra vires.