Ricardo L. Gamboaq, et al.
v.
Hon. Oscar R. Victoriano, et al.
[90 SCRA 40, 1979]
Doctrine:
Courts cannot undertake to control the discretion of the board of directors about administrative
matters as to which they have legitimate power of, 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.
Facts:
Gamboas et al were sued by private respondents Lopues. Lopues wanted to nullify the issuance of
823 shares of stock of Inocentes de la Rama Inc. their favor. Plaintiffs own 1,328 shares of stock of Inocentes,
which has an ACS of 3,000 shares, par value of 100 per share. 2,177 of those were subscribed and issued,
leaving 823 unissued. Upon plaintiff’s acquisition of the shares held by Ledesma and Sicangco (then
President and Vice President), Gamboa, de la Rama and Borromeo were the remaining members of the
Board of Directors. They met and secretly elected Gamboa and De la Rama as Pres and VP respectively, in
order to prevent/ forestall the takeover of the corp. They then passed a resolution authorizing the sale of such
823 shares among themselves, and elected their board of directors. Complaint was filed in 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.
They prayed for injunction, receivership, nullification of sale of the 823 shares and damages. The RTC judge
issued an order for preliminary injunction. The Lopues entered into a compromise agreement with the board
members, that Lopues will withdraw their claim; but in return, De La Rama and Batistuzi will waive and
transfer their rights to the shares in favor of plaitiffs. The Compromise Agreement was approved by the trial
court, but the motion to dismiss was not granted. Gamboas filed for motion for reconsideration, claiming the
court has no jurisdiction to interfere with the management of the corporation by the board of directors. The
motion for reconsideration was denied, hence this appeal.
Issue:
Does the court have the jurisdiction to interfere with the management of the corporation by the Board
of Directors?
Held:
YES. 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, 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 trial court possesses jurisdiction over the case because
they are alleging that the defendants have concluded a transaction among themselves as which will result to
serious injury towards the interests of the plaintiffs. 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.
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. was merely an
admission by the defendants Ramon de la Rama, Paz de la Rama Battistuzzi and Enzo Battistuzzi of the
validity of the claim of the plaintiffs. 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.
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.
