Lups-Gamboa Vs Victoriano

G.R. No.
L-40620 May 5, 1979
RICARDO L. GAMBOA, LYDIA R. GAMBOA, HONORIO DE 1A RAMA, EDUARDO

DE LA RAMA, and the HEIRS OF MERCEDES DE LA RAMA-
BORROMEO, petitioners,
vs.
HON. OSCAR R. VICTORIANO as Presiding Judge of the Court of First Instance of
Negros Occidental, Branch II, BENJAMIN LOPUE, SR., BENJAMIN LOPUE, JR.,
LEONITO LOPUE, and LUISA U. DACLES respondents.
Facts:
Petitioners were sued by the private respondents to nullify the issuance of 823 shares of
stock of the Inocentes de la Rama, Inc..
The Lopue’s, are the owners of 1,328 shares of stock of the Inocentes de la Rama, Inc.,
a domestic corporation, with an authorized capital stock of 3,000 shares, with a par
value of P100.00 per share, 2,177 of which were subscribed and issued, thus leaving
823 shares unissued;
The Lopue’s acquired of the shares of stock held by Rafael Ledesma and Jose
Sicangco, Jr., then President and Vice-President of the corporation.
The petitioners Mercedes R. Borromeo, Honorio de la Rama, and Ricardo Gamboa,

remaining members of the board of directors of the corporation, to forestall the takeover
by the Lopue’s of the corporation, surreptitiously met and elected Ricardo L. Gamboa
and Honorio de la Rama as president and vice-president of the corporation, and
thereafter passed a resolution authorizing the sale of the 823 unissued shares of the
corporation to the Ricardo L. Gamboa, Lydia R. Gamboa, Honorio de la Rama, Ramon
de la Rama, Paz R. Battistuzzi Eduardo de la Rama, and Mercedes R. Borromeo, at par
value, Honorio de la Rama, Lydia de la Rama-Gamboa, and Enzo Battistuzzi were
elected to the board of directors of the corporation;
Private respondents alleged that the sale of the unissued 823 shares of stock of the
corporation was in violation of the plaintiffs' and pre-emptive rights and made without
the approval of the board of directors representing 2/3 of the outstanding capital stock,
and is in disregard of the strictest relation of trust existing between the defendants, as
stockholders thereof; and that the defendants Lydia de la Rama-Gamboa, Honorio de la
Rama, and Enzo Battistuzzi were not legally elected to the board of directors of the said
corporation and has unlawfully usurped or intruded into said office to the prejudice of
the plaintiffs.
-They prayed that a writ of preliminary injunction be issued restraining the petitioners
from committing, or continuing the performance of an act tending to prejudice, diminish
or otherwise injure the plaintiffs' rights in the corporate properties and funds of the
corporation, and from disposing, transferring, selling, or otherwise impairing the value of
the 823 shares of stock illegally issued by the defendants; that a receiver be appointed
to preserve and administer the property and funds of the corporation;
-that defendants Lydia de la Rama-Gamboa, Honorio de la Rama, and Enzo Battistuzzi

be declared as usurpers or intruders into the office of director in the corporation and,
consequently, ousting them therefrom and declare Luisa U. Dacles as a legally elected
director of the corporation; that the sale of 823 shares of stock of the corporation be
declared null and void; and that the defendants be ordered to pay damages and
attorney's fees, as well as the costs of suit .
The respondent judge issued the corresponding writ of preliminary injunction restraining
the defendants and/or their representatives, agents, or persons acting in their behalf
from the commission or continuance of any act tending in any way to prejudice, diminish
or otherwise injure plaintiffs' rights in the corporate properties and funds of the
corporation Inocentes de la Rama, Inc.' and from disposing, transferring, selling or
otherwise impairing the value of the certificates of stock allegedly issued illegally in their
names and ordering them to deposit with the Clerk of Court the corresponding
certificates of stock for the 823 shares issued to said defendants, upon plaintiffs' posting
a bond in the sum of P50,000.00, to answer for any damages and costs that may be
sustained by the defendants by reason of the issuance of the writ, copy of the bond to
be furnished to the defendants. "
The defendants deposited with the clerk of court the corporation's certificates of stock
Nos. 80 to 86 representing the disputed 823 shares of stock of the corporation. 3
The private respondents, entered into a compromise agreement with Ramon de la

Rama, Paz de la Rama Battistuzzi and Enzo Battistuzzi , 4 whereby the contracting
parties withdrew their respective claims against each other and the petitioners waived
and transferred their rights and interests over the questioned 823 shares of stock in
favor of the plaintiffs.
The compromise agreement was approved by the trial court. The defendants filed a
motion to dismiss the complaint upon the grounds: (1) that the plaintiffs' cause of action
had been waived or abandoned; and (2) that they were estopped from further
prosecuting the case since they have, in effect, acknowledged the validity of the
issuance of the disputed 823 shares of stock. The motion was denied.
The defendants also filed a motion to declare the defendants Ramon L. de la Rama,
Paz de la Rama Battistuzzi and Enzo Battistuzzi in contempt of court, for having
violated the writ of preliminary injunction when they entered into the aforesaid
compromise agreement with the plaintiffs, but the respondent judge denied the said
motion for lack of merit.
The defendants filed a motion for the reconsideration of the order denying their motion
to dismiss the complaint' and subsequently, an Addendum thereto, claiming that the
respondent court has no jurisdiction to interfere with the management of the corporation
by the board of directors, and the enactment of a resolution by the defendants, as
members of the board of directors of the corporation, allowing the sale of the 823
shares of stock to the defendants was purely a management concern which the courts
could not interfere with.
When the trial court denied said motion and its addendum, the defendants filed the
instant petition for certiorari for the review of said orders.
Issue:
W/N the respondent court has jurisdictionto interfere with the management of the
corporation and the enactment of resolution.
Ruling: As a general rule. No.
The well-known rule is that courts cannot undertake to control the discretion of the
board of directors about administrative matters as to which they have legitimate power
of, 10 action and contracts intra vires entered into by the board of directors are binding
upon the corporation and courts will not interfere unless such contracts are so
unconscionable and oppressive as to amount to a wanton destruction of the rights of the
minority.
In the instant case, the plaintiffs aver that the defendants have concluded a transaction
among themselves as will result to serious injury to the interests of the plaintiffs, so that
the trial court has jurisdiction over the case.
The claim of the petitioners, in their Addendum to the motion for reconsideration of the
order denying the motion to dismiss the complaint, questioning the trial court's
jurisdiction on matters affecting the management of the corporation, is without merit.
The petitioners further contend that the proper remedy of the plaintiffs would be to
institute a derivative suit against the petitioners in the name of the corporation in order
to secure a binding relief after exhausting all the possible remedies available within the
corporation.
An individual stockholder is permitted to institute a derivative suit on behalf of the

corporation wherein he holds stock in order to protect or vindicate corporate rights,
whenever the officials of the corporation refuse to sue, or are the ones to be sued or
hold the control of the corporation. In such actions, the suing stockholder is regarded as
a nominal party, with the corporation as the real party in interest. 12
In the case at bar, however, the plaintiffs are alleging and vindicating their own
individual interests or prejudice, and not that of the corporation. At any rate, it is yet too
early in the proceedings since the issues have not been joined. Besides, misjoinder of
parties is not a ground to dismiss an action. 13

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G.R. No.

L-40620 May 5, 1979

RICARDO L. GAMBOA, LYDIA R. GAMBOA, HONORIO DE 1A RAMA, EDUARDO

The petitioners Mercedes R. Borromeo, Honorio de la Rama, and Ricardo Gamboa,

-that defendants Lydia de la Rama-Gamboa, Honorio de la Rama, and Enzo Battistuzzi

The private respondents, entered into a compromise agreement with Ramon de la

Ruling: As a general rule. No.

An individual stockholder is permitted to institute a derivative suit on behalf of the

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