Harden vs Benguet Consolidated Mining Company, Balatoc Mining Company - Section 75 of the Philippine Bill generally prohibited corporations

ohibited corporations engaged in mining and

G.R. No. L-37331 March 18, 1933 members of such corporations from being interested in any other corporation engaged in
Author: Dayao, Abby mining. This was amended by section 7 of Act No. 3518 of the Philippine Legislature, which
modified the explicit prohibition against corporations holding an interest in any other
Ponente: Street corporation engaged in agriculture or in mining to just limiting the restriction to corporations
Doctrine: organized for the purpose of engaging in agriculture or in mining.
Even where corporate contracts are illegal per se, when only public or - The provision referred to was adopted by the lawmakers with a sole view that public policy
government policy is at stake and no private wrong is committed, the courts will should control in the granting of mining rights. Furthermore, the penalties imposed in what is now
leave the parties as they are, in accordance with their original contractual section 190 (A) of the Corporation Law for the violation of the prohibition in question are of such
expectations. nature that they can be enforced only by a criminal prosecution or by an action of quo
warranto ,initiated only by the Attorney-General in representation of the Government.
Name of the parties: - In upholding the dismissal of the complaint by the trial court, the Court noted that, although the
Petitioner: Fred M. Harden, J.D. Highsmith, John C. Hart, all other stockholders of Balatoc Mining contract between the two mining companies was illegal for contravening the Corporation Law,
Company the statutory provision in question was adopted by the legislature with the intention that public
Respondent: Benguet Consolidated Mining Company, Balatoc Mining Company, H.E. Renz, John policy should be controlling in the granting of mining rights.
W. Jaussermann, A.W. Beam - The Court observed that, insofar as the parties were concerned, no civil wrong had been
committed between them, and if public wrong had been committed, then the directors of
Facts: Balatoc Mining Company and the plaintiff Harden himself, were the active inducers of the
- F.M. Harden, acting in his own behalf and all other stockholders of the Balatoc Mining Co., commission of that wrong.
instituted this action against defendants, Benguet Consolidated and Balatoc Mining, H.E. Renz, - But more importantly, the Court observed that the contract, supposing it to have been unlawful
A.W. Beam and John W. Haussermann. in fact, has been performed on both sides, by the building of the Balatoc plant by the Benguet
- The Benguet Consolidated Mining Co. was organized in June, 1903, as a sociedadanonimain Company and the delivery to the latter of the certificate of 600,000 shares of the Balatoc
conformity with the provisions of Spanish law whereas the Balatoc Mining Co. was organized in Company. There is no possibility of really undoing what has been done.
December 1925, as a corporation, in conformity with the provisions of the Corporation Law (Act
No. 1459). Both entities were organized for the purpose of engaging in the mining of gold in the
Philippines.
- When the Balatoc Mining Co. was first organized the properties acquired by it were largely
undeveloped; and the original stockholders were unable to supply the means needed for
profitable operation. Hence Balatoc’s board of directors ordered a suspension of all work,
effective July 31, 1926. Later in November, a general meeting of the company's stockholders
appointed a committee for the purpose of interesting outside capital in the mine.
- Under the authority of this resolution, the committee approached A. W. Beam, then president
and general manager of the Benguet Company, to secure the capital necessary to the
development of the Balatoc property.
- A contract, formally authorized by the management of both companies, was executed. The
principal features of which were that the Benguet Company was to proceed with the
development and construct a milling plant for the Balatoc mine. In exchange, Balatoc agreed
to give Benguet Company shares of a par value of P600,000,
- Eventually, the value of the shares of Balatoc increased and the dividends of the company
enriched its stockholders. As soon as the success of Balatoc company became apparent,
petitioner Harden, owner of thousands of shares of Balatoc Company, questioned the transfer
of 600,000 shares to Benguet Company.
- The lower court dismissed petitioner’s complaint.

Contention of Petitioner Harden:

- It is unlawful for the Benguet Company to hold any interest in a mining corporation and that the
contract by which the interest here in question was acquired must be annulled, with the
consequent obliteration of the certificate issued to the Benguet Company and the corresponding
enrichment of the shareholders of the Balatoc Company.

Issue:
Whether or not Harden’s suit should prosper? - NO
Ruling: