CORPORATION LAW | B2015

CASE DIGESTS

ROXAS v. DE LEON
November 16, 1928
Street, J
Luciano, Noel Christian O.

SUMMARY: A Voting Trust was formed controlling a

majority of the stocks of Binalabagan Estate, Inc. The
trustees wanted to oust the incumbent Board of Directors
even if their 1-year term has not yet expired. The trustees
then caused the Corporate Secretary to issue a notice
calling for a special general meeting for the purpose of,
among others, electing a new board. A member of the
incumbent Board filed an injunction suit seeking to enjoin
the calling of said meeting. CFI granted and issued a
restraining order. The trustees filed a petition for certiorari
before the SC assailing the order of the judge. SC affirmed
and held that it was within the Judges jurisdiction to issue
said order in order to forestall the calling of a meeting to
elect a new set of directors which was legally infirm to
begin with.
DOCTRINE: Directors of a corporation can only be
removed from office by a vote of the stockholders
representing at least 2/3 of the subscribed capital stock
entitled to vote. Vacancies in the board, when they exist,
can be filled by mere majority vote. When action is to be
taken at a special meeting to remove the directors, such
purpose shall be indicated in the call.
FACTS: The Binalabagan Estate, Inc. is a corporation
engaged in the manufacture of raw sugar from canes grown
upon farms accessible to its central.
Possessors of the majority shares formed a VOTING
TRUST composed of 3 members as trustees (Laguna,
Monteblanco, and Fisher). With this set-up, the trustees were
authorized to represent and vote the shares pertaining to
their constituents. Shareholders who wanted to be part of
the Trust assigned their shares to the trustees on the books
of the company.

Out of over 5,000 outstanding shares of

corporation, less than 3,000 are controlled by the Trust.

the

In its general annual meeting of the shareholders,

Heilbronn appeared as representative of the voting trust.
Since the Trust virtually controlled majority of the shares,
Heilbronn was able to nominate and elect a Board of
Directors to his own liking, without opposition from minority.
Now it appears that various substitutions have been
made in the personnel of the Trust (remember that before it
was Laguna, Monteblanco and Fisher). The current trustees
are the petitioners in this case: Roxas, Echaus, and Lacson.
Roxas, et al. wanted to oust the current Board (the
one elected by Heilbronn) without awaiting termination of
their 1-year term. They then caused the Corporate Secretary
to issue a notice calling for a special general meeting of
shareholders for the election of the board of directors,
amendment of the By-Laws, and for any other business
COMPLAINT: Upon receipt of the notice, Coruna (member
of the existing Board) and Ledesma (shareholder) filed a
case against the trustees and the Binalabagan Estate for the
purpose of enjoining the contemplated meeting.
CFI DECISION: Judge De Leon issued a restraining order, or
preliminary injunction enjoining the Trust and the
Corporation as well as anyone in connivance with them from
electing new directors.
PETITION: Roxas, et al. then filed this present action for
certiorari.
They argue that it was beyond the powers of the
Judge to issue the order.
ISSUE: Whether Judge De Leon acted with grave abuse of
discretion in issuing the assailed order.
RULING: NO. Jude De Leon acted within his legitimate
powers in making the order.

CORPORATION LAW | B2015

CASE DIGESTS

I.

Concepts:
A. Directors of a corporation can only be removed
from office by a vote of the stockholders
representing at least 2/3 of the subscribed
capital stock entitled to vote
B. Vacancies in the board, when they exist, can be
filled by mere majority vote
C. When action is to be taken at a special meeting
to remove the directors, such purpose shall be
indicated in the call.

II. In this case, while the Trust controls a majority of the

stock, it DOES NOT HAVE a clear 2/3 majority
A. It was thus impolitic for Roxas, et al. in forcing the
call of a meeting to remove the directors
1. The evident intention of the call was for the
Voting Trust to elect a new board as if the
directorate had been then vacant
B. The complaint directly asserts that the members
of the present directorate were regularly elected
1. If this be true and the special general meeting
be enforced, this would result in the election
of a rival set of directors who would probably
need a quo warranto to get them installed into
office
2. THUS, Judge De Leon had jurisdiction to
forestall this step
C. The law contemplates and intends that there will
be one of the directors at the time and that new
directors shall be elected only as vacancies occur
in the directorate
III. It is instituted that there was some irregularity in the
election of the present directorate
A. There is no proof to this effect
B. At any rate, the present directors are de facto
incumbents of the office whose acts will be valid
until lawfully removed from office or cease from
discharging their functions

DISPOSITIVE:
enjoined.

Petition denied. The proposed meeting