Proxy

Alejandrino vs De Leon b. Pambul Inc. was a financing corporation organized in 1939 by Pasudeco pursuant to a
, J. resolution of its stockholders. Pasudeco purchased all of Pambul Inc’s stocks, with the end
Alejandrino filed a petition for quo warranto to annul the elction of all or any of the result that Pasudeco’s stockholders became Pambul’s, and the controlling stockholders of
respondents as members of the board of directors of Pasudeco, holding that he earned Pasudeco naturally also became Pambul’s.
more votes during the election, but the proxies in his favor were not allowed to be
registered and voted because of Pasudeco’s officers upholding a contractual stipulation. c. Pambul would give out ordinary loans only to Pasudeco’s stockholders, and as security
The shares of stock involved in said proxies had been pledged in favor of Pambul Inc requires and accepts only Pasudeco’s shares of stock. Also as inducement, it offers much
{corporation organized by Pasudeco}, granting their owner-stockholders loans at favorable lower interest rates than banking institutions would grant {7% per annum}, and the amount
rates in exchange for their right to vote. SC ruled IFO of De Leon, bc of the doctrine below. of the loans being as high as 90% of the par value of the shares.

d. As a result of this arrangement, only two families who owned about 30% of Pasudeco’s
DOCTRINE outstanding capital stock have monopolized the directorship and executive positions in
The right of the stockholder to vote his shares is inherent and in and incidental to his Pasudeco, as well as perpetuated their nominees.
owndership of the stock, just as with the ownership of any other kind ofproperty goes the
right to manage and control it. The right of a stockholder to vote his shares is a private 7. hence, Alejandrino filed a petition for quo warranto against Pasudeco.
right of property, and there’s nothing sacrosanct and inalienable about it. He can dispose
of it, and dispose of the right to manage it. ISSUE with HOLDING
1. Was the irrevovcable proxy contained in the contracts of pledge contrary to good
Since there’s nothing against public policy or good morals to demand the right to loan morals and public policy?
money on shares of stock, there’s nothing against his being able to demand, as part of the
consideration for the loan, the right to protect his investment y exercising the right to vote SC: NO.
the stock/manage the property delivered to him as security, so long as the loan is unpaid. The right of the stockholder to vote his shares is inherent and in and incidental to his
owndership of the stock, just as with the ownership of any other kind ofproperty goes
the right to manage and control it. The right of a stockholder to vote his shares is a
FACTS
private right of property, and there’s nothing sacrosanct and inalienable about it. He
can dispose of it, and dispose of the right to manage it.
2. July 10, 1943 – Pasudeco held the elections for its board of directors. Alejandrino
received 14,305 votes/ The respondents received more than 19,000 votes each. Jose de
Since there’s nothing against public policy or good morals to demand the right to loan
Leon scored the highest, with 19,907 votes.
money on shares of stock, there’s nothing against his being able to demand, as part
of the consideration for the loan, the right to protect his investment y exercising the
3. The root of Alejandrino’s complaint was, he ought to have won, gotten more votes
right to vote the stock/manage the property delivered to him as security, so long as
because he held proxies given him by 18 other stockholders worth an aggregate of 6,084
the loan is unpaid.
shares. By said proxies, those stockholders revoked any and all proxies theretofore given
them by any other persons. {Total number of votes for Alejandrino would’ve been 20,389.}
SC held the situation that would be violative of public policy/good faith/etc would be if
someone took out a loan using his shares of stock, and then reneged on the
4. Before voting, Alejandrino offered to register and vote said proxies, but both the
conditions attached to such loan without paying.
chairman and the secretary of the meaning refused to do so.
Pasudeco’s management haven’t done anything to commit abuses against/do
5. Reason for rejecting the proxies: the 18 stockholders who gave the proxies in question
anything prejudicial to the rights of its stockholders. If and when that happens would
had previously executed contracts of pledge in favor of Pambul, Inc. wherein it was
be the time for Alejandrino to complain.
stipulated “that during the existence of the pledge the pledger grants irrevocably in favor of
the President of the pledgee, or whoever shal be acting in his place, the right to vote the
2. Do the “peculiar circumstances of this case” render said proxy “grossly and
shares pledged in any meeting of the Pasudeco.
manifestly contrary to good morals and public policy” and therefore void, or at least
revocable?
6. Alejandrino – that clause of the contracts of pledge executed in Pambul’s favor is null
and void as contrary to good morals and public policy because:
SC: Nope.
a. Pambul, Inc. was a mere agency/instrumentality of Pasudeco and its principal
No intimation that the irrevocable proxies were procured or given through error,
stockholder {De Leon} and to uphold such irrevocable proxy would be to allow the use of
deceit, fraud, or intimidation.
corporate fiction of separate entity to defraud Pasudeco’s stockholders, by allowing De
Leon and co to monopolize its directorships and executive positions and perpetuate
themselves in office, regardless of what the stockholders want.
1
 Alleged circumstances between Pasudeco and Pambul aren’t enough to
vititate/invalidate/render revocable the irrevocable proxies in question. “Stockholders
who own the majority of the stock of a corporation may elect themselves as directors
or appoint themselves as agents, or form and carry into effect policies of management
as freely as if the business were their own, and so long asthey act honestly, and do
not devote the corporate assets or business to their own private gain or to the
prejudice of other stockholders, no once can question their acts, which are surely intra
vires.

Also Alejandrino’s statement that the respondents own only 30% of Pasudeco’s OCS
actually militates against him since it shows that the prganization of Pambul had been
done by the vote of the majority, and not only 30% of Pasudeco’s OCS. So how can
they monopolize it as per Alejandrino’s allegations?

3. Also, are the: liberal terms of the loans given out by Pambul = bribery?

SC: NO.

To vote at a meeting of the stockholders of a private corporation is, unlike a political

franchise, but an exercise of the right of ownership involving no public interest. To call
the transfer of such right coupled with interest “bribery” is to distort the meaning of the
word.

Also. Alejandrino’s dependence on In Re Election of Directors of Germicide Co. {New

York case} is unavailing. In that case, the proxy was held to be invalid bc:

1. There the right to vote the stock was pedged separately from and independently of
the stock itself. {Guy named Cohm was indebted to Feuchtwanger, pledgesd tohim as
collateral security shares of stock. Then he delivered to another guy named Isaace an
irrevocable proxy for voting upon said stock.} Here the possession and virtual
ownership of the stock itself was transferred conditionally tPambul together with the
right to vote it, the condition being the right to vote shall remain with Pambul so long
as the loan/consideration for the transfer isn’t paid.

2. Invalidity of irrevocable proxy in that case was based on a New York statute
forbidding the stockholders from selling his vote/issuing a proxy to vote upon any
stock or bonds.

DISPOSITIVE PORTION
SC ruled IFO of De Leon
OTHER NOTES

DIGESTER: Hil