G.R. No. L-5883; November 28, 1953
Domingo Ponce and Buhay L. Ponce, petitioners, vs. Demetrio B. Encarnacion, Judge of the Court of First Instance of Manila, Branch I, and Potenciano Gapol, respondents.

FACTS

Petitioners Domingo Ponce and Buhay L. Ponce were members of the board of directors of Daguhoy Enterprises, Inc., a corporation duly registered on June 24, 1948. On April 16, 1951, a meeting was held where the voluntary dissolution of the corporation and the appointment of respondent Potenciano Gapol (the largest stockholder) as receiver were agreed upon. However, instead of filing the petition for voluntary dissolution, Gapol filed a complaint (Civil Case No. 13753) against the petitioners to compel an accounting and reimbursement of corporate funds allegedly misused by Domingo Ponce. On May 18, 1951, Gapol moved for the removal of the petitioners as directors, which was denied. On January 3, 1952, Gapol filed a petition (Civil Case No. 15445) under Section 26 of the Corporation Law ( Act No. 1459 ) praying for an order authorizing him to call and preside at a stockholders’ meeting. On January 5, 1952, without notice to the petitioners or other directors, the respondent court issued the order granting Gapol such authority. The petitioners learned of this order only on February 27, 1952, when their bank refused to recognize checks drawn by a newly elected board of directors. The petitioners filed motions to set aside the January 5 order, alleging lack of notice and violation of the Rules of Court, but these were denied by the respondent court. They also contended that one elected director, Juanito R. Tianzon, was not qualified under the corporation’s by-laws, which required directors to be members of the Legionarios del Trabajo.

ISSUE

Whether the respondent court may, under Section 26 of the Corporation Law, issue an ex parte order authorizing a stockholder to call and preside at a stockholders’ meeting without prior notice to the board of directors.

RULING

Yes. The Supreme Court denied the petition for certiorari. Section 26 of the Corporation Law authorizes a Court of First Instance judge, upon a showing of good cause, to issue an order directing a stockholder to call a meeting and preside thereat if the officer authorized to do so refuses, fails, or neglects to call such meeting. The requirement of “showing of good cause” does not necessitate a hearing with notice to the board of directors. The respondent court was satisfied that good cause existed because the by-laws of Daguhoy Enterprises, Inc. (Articles 9 and 20) required a general meeting of stockholders to elect directors every even year in January, and the chairman of the board had failed to call such a meeting. The ex parte issuance of the order is similar to provisional remedies like preliminary injunctions or attachments, which are not violations of due process. The court acted within its jurisdiction and did not abuse its discretion. The petitioners’ claim of deprivation of due process is without merit, as they had no right to continue as directors without being reelected at a properly called meeting. Any alleged illegality in the election of a particular director is a separate matter that may be challenged via quo warranto and does not affect the validity of the court’s order. The prior agreement to dissolve the corporation also does not invalidate the order.