REPUBLIC OF THE PHILIPPINES vs.
EDUARDO CONJUANGCO GR 166859, 12 April 2011 FACTS:
Danding Cojuangco is being accused of using public funds to finance his acquisition of shares in the San Miguel Corporation. Through the coconut levy fund, was is being accused of buying out shareholders in the corporation in order to become a substantial shareholder himself. To carry out his scheme, he used dummy shareholders who shall be trustors of the shares on his behalf.
Contention rises on his culpability as a public official during the time that he bought the shares. It is claimed by the Sandiganbayan that he was able to amass vast shares of the corporation through the use of the coconut levy fund, which is public in nature. Therefore, it but apparent that he be held liable for his actions in taking control of the corporation.
ISSUE:
Whether or not Conjuangco illegally used ill-gotten wealth to buy shares of SMC.
RULING: NO.
The funds are in fact loaned from UCPB, which was organized as a depositary of the coconut levy funds of the corporation. Also, the Government failed to adduce substantial evidence linking Cojuangco to the use of Marcos ill-gotten wealth.
All these judicial pronouncements demand two concurring elements to be present before assets or properties were considered as ill-gotten wealth, namely: (a) they must have ―originated from the government itself,‖ and (b) they must have been taken by former President Marcos, his immediate family, relatives, and close associates by illegal means.
But settling the sources and the kinds of assets and property covered by E.O. No. 1 and related issuances did not complete the definition of ill-gotten wealth. The further requirement was that the assets and property should have been amassed by former President Marcos, his immediate family, relatives, and close associates both here and abroad. In this regard, identifying former President Marcos, his immediate family, and relatives was not difficult, but identifying other persons who might be the close associates of former President Marcos presented an inherent difficulty, because it was not fair and just to include within the term close associates everyone who had had any association with President Marcos, his immediate family, and relatives.
It does not suffice, as in this case, that the respondent is or was a government official or employee during the administration of former Pres. Marcos. There must be a prima facie showing that the respondent unlawfully accumulated wealth by virtue of his close association or relation with former Pres. Marcos and/or his wife. This is so because otherwise the respondent‘s case will fall under existing general laws and procedures on the matter.
179 | P a g e CHARLES W. MEAD
vs.
E.C. MCCULLOUGH, et. al. GR 6217, 26 December 2011 FACTS:
On March 15, 1902, the plaintiff (Mead will be referred to as the plaintiff in this opinion unless it is otherwise stated) and the defendant organized the "Philippine Engineering and Construction Company.
Shortly after the organization, the directors held a meeting and elected the plaintiff as general manager. The plaintiff held this position with the company for nine months, when he resigned to accept the position of engineer of the Canton and Shanghai Railway Company.
The contract and work undertaken by the company during the management of Mead were the wrecking contract with the Navy Department at Cavite for the raising of the Spanish ships sunk by Admiral Dewey; the contract for the construction of certain warehouses for the quartermaster department; the construction of a wharf at Fort McKinley for the Government; The supervision of the construction of the Pacific Oriental Trading Company's warehouse; and some other odd jobs not specifically set out in the record.
Shortly after the plaintiff left the Philippine Islands for China, the other directors, the defendants in this case, held a meeting on December 24, 1903, for the purpose of discussing the condition of the company at that time and determining what course to pursue.
The assignees of the wrecking contract, including McCullough, formed was not known as the "Manila Salvage Association." This association paid to McCullough $15,000 Mexican Currency cash for the assignment of said contract. In addition to this payment, McCullough retained a one-sixth interest in the new company or association.
ISSUE:
Whether or not the respondents are self-dealing directors. RULING:
NO.
While a corporation remains solvent, there is no reason why a director or officer, by the authority of a majority of the stockholders or board of managers, may not deal with the corporation, loan it money or buy property from it, in like manner as a stranger. So long as a purely private corporation remains solvent, its directors are agents or trustees for the stockholders. They owe no duties or obligations to others. But the moment such a corporation becomes insolvent, its directors are trustees of all the creditors, whether they are members of the corporation or not, and must manage its property and assets with strict regard to their interest; and if they are themselves creditors while the insolvent corporation is under their management, they will not be permitted to secure to themselves by purchasing the corporate property or otherwise any personal advantage over the other creditors. Nevertheless, a director or officer may in good faith and for an adequate consideration purchase from a majority of the directors or stockholders the property even of an insolvent corporation, and a sale thus made to him is valid and binding upon the minority.
180 | P a g e PRIME WHITE CEMENT
vs.
INTERMEDIATE APPELLATE COURT, ALEJANDRO TE GR 68555, 19 March 1993
FACTS:
On the 16th day of July, 1969, plaintiff and defendant corporation thru its President, Mr. Zosimo Falcon and Justo C. Trazo, as Chairman of the Board, entered into a dealership agreement (Exhibit A) whereby said plaintiff was obligated to act as the exclusive dealer and/or distributor of the said defendant corporation of its cement products in the entire Mindanao area.
Prime, however, amended the agreement made with Te, forcing the latter to demand the performance of the conditions stated in the original contract. Aside from that, Prime entered into a dealership contract with Napoleon Co, therefore violating the exclusive rights of Te in Mindanao. Te thereafter filed for specific performance against Prime.
Prime questioned the validity of the contract, claiming it is null and void due to the fact that Te is a Director and the Auditor of the cement company.
ISSUE:
Whether or not the dealership contract between Prime and Te is valid. RULING:
NO.
The requisites for the approval of a contract with a ‗self dealing director‘ was not satisfied. A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the latter to his own advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship "is not a matter of statutory or technical law. It springs from the fact that directors have the control and guidance of corporate affairs and property and hence of the property interests of the stockholders."
A director's contract with his corporation is not in all instances void or voidable. If the contract is fair and reasonable under the circumstances, it may be ratified by the stockholders provided a full disclosure of his adverse interest is made.
Granting arguendo that the "dealership agreement" involved here would be valid and enforceable if entered into with a person other than a director or officer of the corporation, the fact that the other party to the contract was a Director and Auditor of the petitioner corporation changes the whole situation. First of all, the contract was neither fair nor reasonable. The "dealership agreement" entered into in July, 1969, was to sell and supply to respondent Te 20,000 bags of white cement per month, for five years starting September, 1970, at the fixed price of P9.70 per bag. Respondent Te is a businessman himself and must have known, or at least must be presumed to know, that at that time, prices of commodities in general, and white cement in particular, were not stable and were expected to rise. At the time of the contract, petitioner corporation had not even commenced the manufacture of white cement, the reason why delivery was not to begin until 14 months later. He must have known that within that period of six years, there would be a considerable rise in the price of white cement. In fact, respondent Te's own Memorandum shows that in September, 1970, the price per bag was P14.50, and by the middle of 1975, it was already P37.50 per bag. Despite this, no provision was made in the "dealership agreement" to allow for an increase in price mutually acceptable to the parties. Instead, the price was pegged at P9.70 per bag for the whole five years of the contract. Fairness on his part as a director of the corporation from whom he was to buy the cement, would require such a provision.
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