Professional Documents
Culture Documents
Gokongwei vs. SEC
Gokongwei vs. SEC
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* EN BANC.
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by the San Miguel Corporation in 1948; and that in the stockholders’ annual
meeting held in 1972 and 1977, all foreign investments and operations of
San Miguel Corporation were ratified by the stockholders.
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Same; Every stockholder has the right to inspect corporate books and
records.—The stockholder’s right of inspection of the corporation’s books
and records is based upon their ownership of the assets and property of the
corporation. It is, therefore, an incident of ownership of the corporate
property, whether this ownership or interest be termed an equitable
ownership, a beneficial ownership, or a quasi-ownership. This right is
predicated upon the necessity of selfprotection. It is generally held by
majority of the courts that where the right is granted by statute to the
stockholder, it is given to him as such and must be exercised by him with
respect to his interest as a stockholder and for some purpose germane
thereto or in the interest of the corporation. In other words, the inspection
has to germane to the petitioner’s interest as a stockholder, and has to be
proper and lawful in character and not inimical to the interest of the
corporation.
Same; The right of stockholder to inspect corporate books extends to a
wholly-owned subsidiary.—In the case at bar, considering that the foreign
subsidiary is wholly owned by respondent San Miguel Corporation and,
therefore, under its control, it would be more in accord with equity, good
faith and fair dealing to construe the statutory right of petitioner as
stockholder to inspect the books and records of the corporation as extending
to books and records of such wholly owned subsidiary which are in
respondent corporation’s possession and control.
Same; Purely ultra vires corporate acts of corporate officers to invest
corporate funds in another business or corporation, i.e., acts not contrary to
law, morals, public order as public policy, may be ratified
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acts”, said this Court in Pirovano, “or those which are not illegal and void
ab initio, but are not merely within the scope of the articles of incorporation,
are merely voidable and may become binding and enforceable when ratified
by the stockholders.”
Corporation Law; Judgment; The doctrine of the law of the case.—We
hold on our part that the doctrine of the law of the case invoked by Mr.
Justice Barredo has no applicability for the following reasons: a) Our
jurisprudence is quite clear that this doctrine may be invoked only where
there has been a final and conclusive determination of an issue in the first
case later invoked as the law of the case.
Same; Same; When doctrine of the law of the case not applicable.—
The doctrine of the law of the case, therefore, has no applicability
whatsoever herein insofar as the question of the validity or invalidity of the
amended by-laws is concerned. The Court’s judgment of April 11, 1979
clearly shows that the voting on this question inconclusive with six against
four Justices and two other Justices (the Chief Justice and Mr. Justice
Fernando) expressly reserving their votes thereon, and Mr. Justice Aquino
while taking no part in effect likewise expressly reserved his vote thereon.
No final aad conclusive determination could be reached on the issue and
pursuant to the provisions of Rule 56, section 11, since this special civil
action originally commenced in this Court, the action was simply dismissed
with the result that no law of the case was laid down insofar as the issue of
the validity or invalidity of the questioned by-laws is con-
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cerned, and the relief sought herein by petitioner that this Court bypass the
SEC which has yet to hear and determine the same issue pending before it
below and that this Court itself directly resolve the said issue stands denied.
Same; Same; Constitutional Law; Due Process; When procedural due
process was not observed.—The entire Court, therefore, recognized that
petitioner had not been given procedural due process by the SMC board on
the matter of his disqualification and that he was entitled to a “new and
proper hearing”. It stands to reason that in such hearing, petitioner could
raise not only questions of fact but questions of law, particularly questions
of law affecting the investing public and their right to representation on the
board as provided by law—not to mention that as borne out by the fact that
no restriction whatsoever appears in the Court’s decision, it was never
contemplated that petitioner was to be limited questions of fact and could
not raise the fundamental question of law bearing on the invalidity of the
questioned amended by-laws at such hearing before the SMC board.
Furthermore, it was expressly provided unanimously in the Court’s decision
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case. Not even the Securities and Exchange Commission may pass on such
question anymore at the instance of herein petitioner or anyone acting in his
stead or on his behalf. The vote of four justices to remand the case thereto
cannot alter the situation.
Same; Same; Where Court has not found merit in the claim that the
amended by-laws in question are valid.—I concur in Justice Barredo’s
statement that the dismissal (for lack of necessary votes) of the petition to
the extent that “it assails the validity of the amended by-laws,” is the law of
the case at bar, which means in effect that as far and only in so far as the
parties and the Securities and Exchange Commission are concerned, the
Court has not found merit in the claim that the amended by-laws in question
are valid.
Same; Same; Term and meaning of “farming.”—This is my view, even
as I am for a restrictive interpretation of Section 13(5) of the Philippine
Corporation Law, under which I would limit the scope of the provision to
corporations engaged in agriculture, but only as the word “agriculture”
refers to its more limited meaning as distinguish-
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ed from its general and broad connotation. The term would then mean
“farming” or raising the natural products of the soil, such as by cultivation,
in the acquisition of agricultural land such as by homestead, before the
patent may be issued.
Same; Same; Poultry raising or piggery is included in the term
“agriculture.”—It is my opinion that under the public land statute, the
development of a certain portion of the land applied for a specified in the
law as a condition precedent before the applicant may obtain a patent, is
cultivation, not let us say, poultry raising or piggery, which may be included
in the term “Agriculture” in its broad sense. For under Section 13(5) of the
Philippine Corporation Law, construed not in the strict way as I believe it
should because the provision is in derogation of property rights, the
petitioner in this case would be disqualified from becoming an officer of
either the San Miguel Corporation or his own supposedly agricultural
corporations.
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ANTONIO, J.:
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‘SECTION 2. Any stockholder having at least five thousand shares registered in his name may
be elected director, but he shall not be qualified to hold office unless he pledges said five
thousand shares to the Corporation to answer for his conduct.’ be, and the same hereby is,
amended, to read as follows;
‘SECTION 2. Any stockholder having at least five thousand shares registered in his name
may be elected Director, provided, however, that no person shall qualify or be eligible for
nomination or election to the Board of Directors if he is engaged in any business which
competes with or is antagonistic to that of the Corporation. Without limiting the generality of
the foregoing, a person shall be deemed to be so engaged:
(a) if he is an officer, manager or controlling person of, or the owner (either of record or beneficially) of
10% or more of any outstanding class of shares of, any corporation (other than one in which the
corporation owns at least 30% of the capital stock) engaged in a business which the Board, by at least
three-fourths vote, determines to be competitive or antagonistic to that of the Corporation; or
(b) If he is an officer, manager or controlling person of, or the owner (either of record or beneficially)
of 10% or more of any outstanding class of shares of, any other corporation or entity engaged in any line
of business of the Corporation, when in the judgment of the Board, by at least three-fourths vote, the laws
against combinations in restraint of trade shall be violated by such person’s membership in the Board of
Directors.
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(c) If the Board, in the exercise of its judgment in good faith, determines by at least three-fourths vote
that he is the nominee of any person set forth in (a) or (b).
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sofar as the first cause of action is concerned, for the alleged reason
that by calling a special stockholders’ meeting for the aforesaid
purpose, private respondents admitted the invalidity of the
amendments of September 18, 1976. The motion for summary
judgment was opposed by private respondents. Pending action on
the motion, petitioner filed an “Urgent Motion for the Issuance of a
Temporary Restraining Order”, praying that pending the
determination of petitioner’s application for the issuance of a
preliminary injunction and/or petitioner’s motion for summary
judgment, a temporary restraining order be issued, restraining
respondents from holding the special stockholders’ meeting as
scheduled. This motion was duly opposed by respondents.
On February 10, 1977, respondent Commission issued an order
denying the motion for issuance of temporary restraining order.
After receipt of the order of denial, respondents conducted the
special stockholders’ meeting wherein the amendments to the by-
laws were ratified. On February 14, 1977, petitioner filed a
consolidated motion for contempt and for nullification the special
stockholders’ meeting.
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(1) Order No. 449, Series of 1977 (SEC Case No. 1375);
denying petitioner’s motion for reconsideration, with its
supplement, of the order of the Commission denying in part
petitioner’s motion for production of documents,
petitioner’s motion for reconsideration of the order denying
the issuance of a temporary restraining order denying the
issuance of a temporary restraining order, and petitioner’s
consolidated motion to declare respondents in contempt and
to nullify the stockholders’ meeting;
(2) Order No. 450, Series of 1977 (SEC Case No. 1375),
allowing petitioner to run as a director of respondent
corporation but stating that he should not sit as such if
elected, until such time that the Commission has decided
the validity of the by-laws in dispute, and denying
deferment of Item 6 of the Agenda for the annual
stockholders’ meeting; and
(3) Order No. 451, Series of 1977 (SEC Case No. 1375),
denying petitioner’s motion for reconsideration of the order
of respondent Commission denying petitioner’s motion for
summary judgment;
petitioner’s request to have the same calendared for hearing; and (3)
that the respondents acted oppressively against the petitioner in
violation of his rights as a stockholder, warranting immediate
judicial intervention.
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357
358
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did not render the case moot; that the amendment to the bylaws
which specifically bars petitioner from being a director is void since
it deprives him of his vested rights.
Respondent Commission, thru the Solicitor General, filed a
separate comment, alleging that after receiving a copy of the
restraining order issued by this Court and noting that the restraining
order did not foreclose action by it, the Commission en banc issued
Orders Nos. 449, 450 and 451 in SEC Case No. 1375.
In answer to the allegation in the supplemental petition, it states
that Order No. 450 which denied deferment of Item 6 of the Agenda
of the annual stockholders’ meeting of respondent corporation, took
into consideration an urgent manifestation filed with the
Commission by petitioner on May 3, 1977 which prayed, among
others, that the discussion of Item 6 of the Agenda be deferred. The
reason given for denial of deferment was that “such action is within
the authority of the corporation as well as falling within the sphere
of stockholders’ right to know, deliberate upon and/or to express
their wishes regarding disposition of corporate funds considering
that their investments are the ones directly affected.” It was alleged
that the main petition has, therefore, become moot and academic.
On September 29, 1977, petitioner filed a second supplemental
petition with prayer for preliminary injunction, alleging that the
actuations of respondent SEC tended to deprive him of his right to
due process, and “that all possible questions on the facts now
pending before the respondent Commission are now before this
Honorable Court which has the authority and the competence to act
on them as it may see fit.” (Rollo, pp. 927-928.)
Petitioner, in his memorandum, submits the following issues for
resolution;
(1) whether or not the provisions of the amended by-laws of
respondent corporation, disqualifying a competitor from nomination
or election to the Board of Directors are valid and reasonable;
(2) whether or not respondent SEC gravely abused its discretion
in denying petitioner’s request for an examination
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the same effect is the prayer of San Miguel Corporation that this
Court resolve on the merits the validity of its amended bylaws and
the rights and obligations of the parties thereunder, otherwise “the
time spent and effort exerted by the parties concerned and, more
importantly, by this Honorable Court, would have been for naught
because the main question will come back to this Honorable Court
for final resolution.” Respondent Eduardo R. Visaya submits a
similar appeal.
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It is only the Solicitor General who contends that the case should
be remanded to the SEC for hearing and decision of the issues
involved, invoking the latter’s primary jurisdiction to hear and
decide cases involving intra-corporate controversies.
It is an accepted rule of procedure that the Supreme Court should
always strive to settle the entire controversy in a single proceeding,
4
leaving no root or branch to bear
5
the seeds of future litigation. Thus,
in Francisco v. City of Davao, this Court resolved to decide the case
on the merits instead of remanding it to the trial court for further
proceedings since the ends of justice would not be subserved by the
remand of the case.6 In Republic v. Security Credit and Acceptance
Corporation, et al., this Court, finding that the main issue is one of
law, resolved to decide the case on the merits “because public
interest demands an early disposition of the7
case”, and in Republic v.
Central Surety and Insurance Company, this Court denied remand
of the third-party complaint to the trial court for further proceedings,
citing precedents where this Court, in similar situations, resolved to
decide the cases on the merits, instead of remanding them to the trial
court where (a) the ends of justice would not be subserved by the
remand of the case; or (b) where public interest demands an early
disposition of the case; or (c) where the trial court had already
received
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4 Gayos v. Gayos, ibid., citing Marquez v. Marquez, No. 47792, July 24, 1941, 73
Phil. 74, 78; Keramik Industries, Inc. v. Guerrero, L-38866, November 29, 1974, 61
SCRA 265.
5 L-20654, December 24, 1964, 12 SCRA 628.
6 L-20583, January 23, 1967, 19 SCRA 58.
7 L-27802, October 26, 1968, 25 SCRA 641.
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all the evidence presented by both parties and the Supreme Court is
now in a position,
8
based upon said evidence, to decide the case on
its merits. It is settled that the doctrine of primary jurisdiction
8a
has
no application where only a question of law is involved. Because
uniformity may be secured through review by a single Supreme
Court, questions of8blaw may appropriately be determined in the first
instance by courts. In the case at bar, there are facts which cannot
be denied, viz.: that the amended by-laws were adopted by the Board
of Directors of the San Miguel Corporation in the exercise of the
power delegated by the stockholders ostensibly pursuant to section
22 of the Corporation Law; that in a special meeting on February 10,
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1977 held specially for that purpose, the amended by-laws were
ratified by more tna 80% of the stockholders of record; that the
foreign investment in the Hongkong Brewery and Distillery, a beer
manufacturing company in Hongkong, was made by the San Miguel
Corporation in 1948; and that in the stockholders’ annual meeting
held in 1972 and 1977, all foreign investments and operations of San
Miguel Corporation were ratified by the stockholders.
II
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362
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11 People ex rel. Wildi v. Ittner, 165 Ill. App. 360, 367 (1911), cited in Fletcher,
Cyclopedia Corporations, Sec. 4191.
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364
feeds, ice cream, instant coffee and woven fabrics would result in a
position of such dominance as to affect the prevailing market
factors.
It is further asserted that in 1977, the CFC-Robina group was in
direct competition on product lines which, for SMC, represented
sales amounting to more than P478 million. In addition, CFC-
Robina was directly competing in the sale of coffee with Filipro, a
subsidiary of SMC, which product line represented sales for SMC
amounting to more than P275 million. The CFC-Robina group
(Robitex, excluding Litton Mills recently acquired by petitioner) is
purportedly also in direct competition with Ramie Textile, Inc.,
subsidiary of SMC, in product sales amounting to more than P95
million. The areas of competition between SMC and CFC-Robina in
1977 represented, therefore, for SMC, product sales of more than
P849 million.
According to private respondents, at the Annual Stockholders’
Meeting of March 18, 1976, 9,894 stockholders, in person or by
proxy, owning 23,436,754 shares in SMC, or more than 90% of the
total outstanding shares of SMC, rejected petitioner’s candidacy for
the Board of Directors because they “realized the grave dangers to
the corporation in the event a competitor gets a board seat in SMC.”
On September 18, 1978, the Board of Directors of SMC, by “virtue
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12 McKee & Company v. First National Bank of San Diego, 265 F. Supp. 1 (1967),
citing Olincy v. Merle Norman Cosmetics, Inc., 200 Cal. App. 20, 260, 19 Cal. Reptr.
387 (1962).
13 Fletcher, Cyclopedia Corporations, Sec. 4171, cited in McKee & Company,
supra.
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17 Mobile Press Register, Inc. v. McGowin, 277 Ala. 414, 124 So. 2d 812;
Brundage v. The New Jersey Zinc Co., 226 A 2d 585.
18 Fletcher, Cyclopedia Corporations, 1975 Ed., Vol. 3, p. 144, Sec. 838.
19 101 Fed. 2d 85, cited in Aleck, Modern Corporation Law, Vol. 2, Sec. 959.
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apply to disqualify the wife and immediate member of the family of such
stockholder, on account of the supposed interest of the wife in her husband’s
affairs, and his supposed influence over her. It is perhaps true that such
stockholders ought not to be condemned as selfish and dangerous to the best
interest of the corporation until tried and tested. So it is also true that we
cannot condemn as selfish and dangerous and unreasonable the action of the
board in passing the by-law. The strife over the matter of control in this
corporation as in many others is perhaps carried on not altogether in the
spirit of brotherly love and affection. The only test that we can apply is as to
whether 22
or not the action of the Board is authorized and sanctioned by law.
* * *.”
23
These principles have been applied by this Court in previous cases.
AN AMENDMENT TO THE CORPORATE BY-LAW WHICH
RENDERS A STOCKHOLDER INELIGIBLE TO BE DIRECTOR, IF
HE BE ALSO DIRECTOR IN A CORPORATION WHOSE
BUSINESS IS IN COMPETITION WITH THAT OF THE OTHER
CORPORATION, HAS BEEN SUSTAINED AS VALID
It is a settled state law in the United States, according to Fletcher,
that corporations have the power to make by-laws declaring a person
employed in the service of a rival company to be ineligible for the
corporation’s Board of Directors. “* * * (A)n amendment which
renders ineligible, or if elected, subjects to removal, a director if he
be also a director in a corporation whose business is in competition
24
with or is antagonistic to the other corporation is valid.” This is
based
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25 Costello v. Thomas Cusack Co., 125 A. 15, 94 N.J. Eq. 923, (1923).
26 Hall v. Dekker, 115 P. 2d 15, July 9, 1941.
27 Thaver v. Gaebler, 232 NW 563.
28 Sialkot Importing Corporation v. Berlin, 68 NE 2d 501, 503.
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29 Schildberg Rock Products Co. v. Brooks, 140 NW 2d 132, 137. Chief Justice
Garfield quotes the doctrine as follows:
“(5) The doctrine ‘corporate opportunity’ is not new to the law and is but one phase of the
cardinal rule of undivided loyalty on the part of the fiduciaries. 3 Fletcher Cyc. Corporations,
Perm. Ed., 1965 Revised Volume, section 861.1, page 227; 19 Am. Jur. 2d, Corporations,
section 1311, page 717. Our own consideration of the quoted terms as such is mainly in Ontjes
v. MacNider, supra, 232 Iowa 562, 579, 5 N.W., 2d 860, 869, which quotes at length with
approval from Guth v. Loft, Inc., 23 Del. Ch. 255, 270, 5 A 2d 503, 511, a leading case in this
area of the law. The quotation cites several precedents for this: ‘* * * if there is presented to a
corporate officer or director a business opportunity which the corporation is financially able to
undertake, is from its nature, in the line of the corporation’s business and is of practical
advantage to it, is one in which the corporation has an interest or a reasonable expectancy, and
by embracing the opportunity, the self-interest of the officer or director will be brought into
conflict with that of his corporation, the law will not permit him to seize the opportunity for
himself. And, if, in such circumstances, the interests of the corporation are betrayed, the
corporation may elect to claim all of the benefits of the transaction for itself, and the law will
impress a trust in favor of the corporation upon the property, interests and profits so acquired.”
30 Paulman v. Kritzer, 74 III. App. 2d 284, 291 NE 2d 541; Tower Recreation, Inc.
v. Beard, 141 Ind. App. 649, 231 NE 2d 154.
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if known to another bank, and it was reasonable and prudent to enlarge this
minimum disqualification to include any director, officer, employee, agent,
nominee, or attorney of any other bank in California. The Ashkins case,
supra, specifically recognizes protection against rivals and others who might
acquire information which might be used against the interests of the
corporation as a legitimate object of by-law protection. With respect to
attorneys or persons associated with a firm which is attorney for another
bank, in addition to the direct conflict or potential conflict of interest, there
is also the danger of inadvertent leakage of confidential information through
casual office discussions or accessibility of files. Defendant’s directors
determined that its welfare was best protected if this opportunity for
conflicting loyalties and potential misuse and leakage of confidential
information was foreclosed.”
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vigilant eye toward seeing to it that these policies are carried out. It
is only then that directors may be said to have fulfilled their duty of
fealty to the corporation.”
Sound principles of corporate management counsel against
sharing sensitive information with a director whose fiduciary duty of
loyalty may well require that he disclose this information to a
competitive rival. These dangers are enhanced considerably where
the common director such as the petitioner is a controlling
stockholder of two of the competing corporations. It would seem
manifest that in such situations, the director has an economic
incentive to appropriate for the benefit of his own corporation the
corporate plans and policies of the corporation where he sits as
director.
Indeed, access by a competitor to confidential information
regarding marketing strategies and pricing policies of San Miguel
Corporation would subject the latter to a competitive disadvantage
and unjustly enrich the competitor, for advance knowledge by the
competitor of the strategies for the development of existing or new
markets of existing or new products could 32
enable said competitor to
utilize such knowledge to his advantage.
There is another important consideration in determining whether
or not the amended by-laws are reasonable. The Con-
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32 “The CFC and Robina companies, which are reportedly worth more than P500
Million, are principally owned and controlled by Mr. Gokongwei and are in
substantial competition to San Miguel. As against his almost 100% ownership in
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these basically family companies, Mr. Gokongwei’s holding in San Miguel are
approximately 4% of the total shareholdings of your Company. As a consequence,
One Peso (P1.00) of profit resulting from a sale by CFC and Robina in the lines
competing with San Miguel, is earned almost completely by Mr. Gokongwei, his
immediate family and close associates. On the other hand, the loss of that sale to San
Miguel, resulting in a One Peso (P1.00) loss of profit to San Miguel, in the limes
competing with CFC and Robina, would result in a loss in profit of only Four
Centavos (P0.04) to Mr. Gokongwei.” (Letter to stockholders of SMC, dated April 3,
1978, Annex “R”, Memo for respondent San Miguel Corporation, rollo, p. 1867).
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33 Article 28, Civil Code; Section 4, par. 5, of Rep. Act No. 5455; and Section 7
(g) of Rep. Act No. 6173. Cf. Section 17, paragraph 2. of the Judiciary Act.
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377
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39 National Cotton Oil Co. v. State of Texas, 25 S.T. 379, 383, 49 L. Ed. 689.
40 Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700;
U.S. v. General Motors Corp., 384 U.S. 127.
41 U.S. v. Paramount Pictures, 334 U.S. 131.
42 Section 8, 15 U.S.C.A. 19.
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various industries and regions in the country will enable the former
to practice price discrimination. CF-Robina can segment the entire
consuming population by geographical areas or income groups and
change varying prices in order to maximize profits from every
market segment. CFC-Robina could determine the most profitable
volume at which it could produce for every product line in which it
competes with SMC. Access to SMC pricing policy by CFC-Robina
would in effect destroy free competition and deprive the consuming
public of opportunity to buy goods of the highest possible quality at
the lowest prices.
Finally, considering that both Robina and SMC are, to a certain
extent, engaged in agriculture, then the election of petitioner to the
Board of SMC may constitute a violation of the prohibition
contained in section 13(5) of the Corporation Law. Said section
provides in part that “any stockholder of more than one corporation
organized for the purpose of engaging in agriculture may hold his
stock in such corporations solely for investment and not for the
purpose of bringing about or attempting to bring about a
combination to exercise control of such corporations * *).”
Neither are We persuaded by the claim that the by-law was
intended to prevent the candidacy of petitioner for election to the
Board. If the by-law were to be applied in the case of one
stockholder but waived in the case of another, then it could be
reasonably claimed that the by-law was being applied in a
discriminatory manner. However, the by-law, by its terms, applies to
all stockholders. The equal protection clause of the Constitution
requires only that the by-law operate equally upon all persons of a
class. Besides, before petitioner can be declared ineligible to run for
director, there must be hearing and evidence must be submitted to
bring his case within the ambit of the disqualification. Sound
principles of public policy and management, therefore, support the
view that a by-law which disqualifies a competition from election to
the Board of Directors of another corporation is valid and
reasonable.
In the absence of any legal prohibition or overriding public
policy, wide latitude may be accorded to the corporation in
380
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a) Devices or schemes employed by or any acts, of the board of directors, business associates,
its officers or partners amounting to fraud and misrepresentation which may be detrimental to
the interest of the public and/or of the stockholders, partners, members of associations or
organizations registered with the Commission.
b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or associates, respectively;
and between such corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity;
c) Controversies in the election or appointments of directors, trustees, officers or managers
of such corporations, partnership or associations.”
382
III
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383
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384
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385
Some state courts recognize the right under certain conditions, while
others do not. Thus, it has been held that, where a corporation owns
approximately no property except the shares of stock of subsidiary
corporations which are merely agents or instrumentalities of the
holding company, the legal fiction of distinct corporate entities may
be disregarded and the books, papers and documents of all60 the
corporations may be required to be produced for examination, and
that a writ of mandamus may be granted, as the records of the
subsidiary were, to all intents and parposes, the records61of the parent
even though the subsidiary was not named as a party. Mandamus
was likewise held proper to inspect both the subsidiary’s and the
parent corporation’s books upon proof of sufficient control or
dominion by the parent showing
62
the relation of principal or agent or
something similar thereto.
On the other hand, mandamus at the suit of a stockholder was
refused where the subsidiary corporation is a separate and distinct
corporation domiciled and with its books and records in another
jurisdiction, and is not legally subject to the control of the parent
company, 63although it owned a vast majority of the stock of the
subsidiary. Likewise, inspection of the books of an allied
corporation by a stockholder of the parent company which owns all
the stock of the subsidiary has been refused on the ground that the
stockholder
64
was not within the class of “persons having an
interest.” 65
In the Nash case, The Supreme Court of New York held that the
contractual right of former stockholders to inspect books and records
of the corporation “included the right to in-
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386
IV
________________
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69 De la Rama v. Ma-ao Sugar Central Co., Inc., L-17504 and L17506, February
28, 1969, 27 SCRA 247, 260.
388
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389
or business, or for any purpose other than the main purpose for which it was
organized, provided that ‘its board of directors has been so authorized in a
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70 Boyce v. Chemical Plastics, 175 F 2d 839, citing 13 Am. Jur., Section 972.
71 Pirovano v. De la Rama Steamship Co., L-53-7, 96 Phil. 335, December 29,
1954.
390
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391
________________
392
CERTIFICATION
393
II
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purely legal and voted to sustain the validity per se of the questioned
amended by-laws but nevertheless voted that the prohibition and
disqualification therein provided shall not apply to petitioner
Gokongwei until and after he shall have been given “a new and
proper hearing” by the corporation’s board of directors and the
board’s decision of disqualification shall have been sustained on
appeal by respon-
________________
394
_________________
395
396
________________
397
III
thereon and the statements of the six Justices who have signed the
main opinion on the legality thereof have no binding effect, much
less doctrinal value.
The dismissal of the petition insofar as the question of the
validity of the disputed by-laws amendment is concerned is not by
any judgment with the required eight votes but simply by force of
Rule 56, section 11 of the Rules of Court, the pertinent portion of
which provides that “where the court en banc is equally divided in
opinion, or the necessary majority cannot be had, the case shall be
reheard, and if on re-hearing no decision is reached, the action shall
be dismissed if originally commenced in the court x x x.” The end
result is that the Court has thereby dismissed the petition which
prayed that the Court bypass the commission and directly resolved
the issue and therefore the respondent commission may now
proceed, as announced in its Order No. 450, Series of 1977, to hear
the case before it and receive all relevant evidence bearing on the
issue as hereinabove indicated, and resolve the “unresolved and
genuine issues of fact” (as per Order No. 451, Series of 1977) and
the issues of legality of the disputed by-laws amendment.
399
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“Chief Justice Fred Ruiz Castro reserved his vote on the validity of the
amended by-laws, pending hearing by this Court on the applicability of
section 13(5) of the Corporation Law to petitioner.
“Justice Fernando reserved his vote on the validity of subject
amendment to the by-laws but otherwise concurs in the result.
“Four (4) Justices, namely, Justices Teehankee, Concepcion Jr.,
Fernandez and Guerrero filed a separate opinion, wherein they voted
against the validity of the questioned amended by-laws and that this
question should properly be 1
resolved first by the SEC as the agency of
primary jurisdiction x x x.”
As stated in said judgment itself, for lack of the necessary votes, the
petition, insofar as it assails the validity of the questioned by-laws,
was dismissed.
2. Mr. Justice Barredo now contends contrary to the
undersigned’s understanding, as stated on pages 8 and 9 of our joint
separate opinion of April 11, 1979 that the legal effect of the
dismissal of the petition on the question of validity of the amended
by-laws for lack of the necessary votes simply means that “the Court
has thereby dismissed the petition which prayed that the Court by-
pass the commission and directly resolve the issue and therefore the
respondent commission may now proceed, as announced in its Order
No. 450, Series of
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400
1977, to hear the case before it and receive all relevant evidence
bearing on the issue as hereinabove indicated, and resolve the
‘unresolved and genuine issues of fact’ (as per Order No. 451, Series
of 1977) and the issue of legality of the disputed by-laws
amendment,” that such dismissal “has no other legal consequence
than that it is the law of the case as far as the parties are concerned,
albeit the majority of the opinion of six against four Justices is not
doctrinal in the sense that it cannot be cited as necessarily a
precedent for subsequent cases.”
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We hold on our part that the doctrine of the law of the case
invoked by Mr. Justice Barredo has no applicability for the
following reasons:
a) Our jurisprudence is quite clear that this doctrine may be
invoked only where there has been a final and conclusive
determination of an issue in the first case later invoked as the law of
the case. 2
Thus, in People vs. Olarte , we held that
“ ‘Law of the case’ has been defined as the opinion delivered on a former
appeal. More specifically, it means that whatever is once irrevocably
established as the controlling legal rule of decision between the same parties
in the same case continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which such decision was
predicated continue to be the facts of the case before the court. x x x
- - - - -
“It need not be stated that the Supreme Court, being the court of last
resort, is the final arbiter of all legal questions properly brought before it
and that its decision in any given case constitutes the law of that particular
case. Once its judgment becomes final it is binding on all inferior courts,
and hence beyond their power and authority to alter or modify (Kabigting
vs. Acting Director of Prisons, G. R. No. L-15548, October 30, 1962).
“ ‘The decision of this Court on that appeal by the government from the
order of dismissal, holding that said appeal did not place the
________________
2 19 SCRA 494; citing People vs. Pinnila, L-11374, May 30, 1958, cited in Lee vs.
Aligaen, 76 SCRA 416 (1977) per Antonio, J.
401
402
The Court through the decision of April 11, 1979, by the unanimous
votes of the twelve participating Justices headed by the Chief
Justice, ruled that petitioner Gokongwei was entitled to a “new and
proper hearing” by the SMC board of directors on the matter of his
disqualification under the questioned by-laws and that the board’s
“decision shall be appealable to the respondent Securities and
Exchange Commission deliberating and acting en banc and
ultimately to this Court (and) unless disqualified in the manner
herein provided, the prohibition in the aforementioned amended by-
laws shall not apply to petitioner.”
The entire Court, therefore, recognized that petitioner had not
been given procedural due process by the SMC board on the matter
of his disqualification and that he was entitled to a “new and proper
hearing”. It stands to reason that in such hearing, petitioner could
raise not only questions of fact but questions of law, particularly
questions of law affecting the investing public and their right to
representation on the board as provided by law—not to mention that
as borne out by the fact that no restriction whatsoever appears in the
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403
404
________________
405
ADVANCESEPARATEOPINION
BARREDO, J.:
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406
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408
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SEPARATEOPINION
DE CASTRO, J.:
409
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410
411
——o0o——
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412
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