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LEE vs CA- Voting Trust Agreement

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LEE vs CA- Voting Trust Agreement
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  LEE vs. CAG.R. No. 93695 February 4, 1992GUTIERREZ, R.,  J.:,  THIRD DIVISION !o #$% Trus A%ree&e$ sFACT'(  On November 15, 1985, a complaint for a sum of mone !as le# b t$eInternational %orporate &an', Inc( a)ainst t$e private respon#ents S*%O&*+*N-*%TRIN. %OR/(, /*&0O .ON*02S, 3R( an# THO+*S .ON*02S !$o, in turn, le# at$ir# part complaint a)ainst *0-* an# t$e petitioners R*+ON %( 022 an# *NTONIO D+(0*%D*O on +arc$ 14, 198( On September 14, 1984, t$e petitioners le# a motion to #ismiss t$e t$ir# partcomplaint !$ic$ t$e Re)ional Trial %ourt of +a'ati, &ranc$ 58 #enie#( +ean!$ile, on 3ul 16,1988, t$e trial court issue# an or#er re7uirin) t$e issuance of an alias  summons upon *0-*t$rou)$ t$e D&/ as a conse7uence of t$e petitioners letter informin) t$e court t$at t$esummons for *0-* !as erroneousl serve# upon t$em consi#erin) t$at t$e mana)ement of *0-* $a# been transferre# to t$e D&/( On *u)ust 1, 1988, t$e private respon#ents le# a +anifestation an# +otion for t$eDeclaration of /roper Service of Summons !$ic$ t$e trial court )rante#( On motion forreconsi#eration, petitioners conten# t$at Rule 1, section 1: of t$e Revise# Rules of %ourt isnot applicable since t$e !ere no lon)er o;cers of *0-* an# t$at t$e private respon#entss$oul# $ave availe# of anot$er mo#e of service un#er Rule 1, Section 1 of t$e sai#Rules, i ( e ( , t$rou)$ publication to e<ect proper service upon *0-*( In t$eir %omment to t$e +otion for Reconsi#eration #ate# September 64, 1988, t$eprivate respon#ents ar)ue# t$at t$e votin) trust a)reement #ate# +arc$ 11, 1981 #i# not#ivest t$e petitioners of t$eir positions as presi#ent an# e=ecutive vice>presi#ent of *0-* sot$at service of summons upon *0-* t$rou)$ t$e petitioners as corporate o;cers !as proper(On 3anuar 6, 1989, t$e trial court up$el# t$e vali#it of t$e service of summons on *0-*t$rou)$ t$e petitioners( On secon# motion for reconsi#eration, petitioners reiterate t$eirstan# t$at b virtue of t$e votin) trust a)reement t$e cease# to be o;cers an# #irectors of *0-*, $ence, t$e coul# no lon)er receive summons or an court processes for or on be$alf of *0-*( On *pril 65, 1989, t$e trial court reverse# itself b settin) asi#e its previous Or#eran# #eclare# t$at service upon t$e petitioners !$o !ere no lon)er corporate o;cers of *0-*cannot be consi#ere# as proper service of summons on *0-*( On +a 15, 1989, t$e privaterespon#ents move# for a reconsi#eration of t$e above Or#er !$ic$ !as a;rme# b t$ecourt in its Or#er #ate# *u)ust 1, 1989 #enin) t$e private respon#ents motion forreconsi#eration( On September 18, 1989, a petition for certiorari !as belate#l submitte# bt$e private respon#ent before t$e public respon#ent( +ean!$ile, t$e trial court, not $avin)been noti e# of t$e pen#in) petition for certiorari  !it$ public respon#ent issue# an Or#er#eclarin) as nal t$e Or#er #ate# *pril 65, 1989( T$e le# petition for certiorari before t$e%* !as )iven #ue course settin) asi#e t$e or#ers of respon#ent ?u#)e #ate# *pril 65, 1989an# *u)ust 1, 1989( +otion for reconsi#eration !as li'e!ise #enie#( I''UE'(   1)What is the nature of the voting trust agreement executed between two parties in this case? Sec. 59. Voting Trusts — One or more stockholders of a stock corporation may create avoting trust for the purpose of conferring upon a trustee or trustees the right to vote andother rights pertaining to the share for a period rights pertaining to the shares for a period not exceeding ve !5 years at any one time# $rovided, that in the case of avoting trust specically re%uired as a condition in a loan agreement, said voting trust may &e for a period exceeding !5 years &ut shall automatically expire upon full payment of the loan. ' voting trust agreement must &e in (riting and notari)ed, and shall specify the terms and conditions thereof. ' certied copy of such agreement shall &e led (ith  the corporation and (ith the Securities and *xchange +ommission other(ise, saidagreement is ine-ective and unenforcea&le. The certicate or certicates of stock covered &y the voting trust agreement shall &e cancelled and ne( ones shall &e issuedin the name of the trustee or trustees stating that they are issued pursuant to saidagreement. n the &ooks of the corporation, it shall &e noted that the transfer in thename of the trustee or trustees is made pursuant to said voting trust agreement. & its ver nature, a votin) trust a)reement results in t$e separation of t$e votin) ri)$ts of astoc'$ol#er from $is ot$er ri)$ts suc$ as t$e ri)$t to receive #ivi#en#s, t$e ri)$t to inspectt$e boo's of t$e corporation, t$e ri)$t to sell certain interests in t$e assets of t$ecorporation an# ot$er ri)$ts to !$ic$ a stoc'$ol#er ma be entitle# until t$e li7ui#ation of t$e corporation( Ho!ever, in or#er to #istin)uis$ a votin) trust a)reement from pro=ies an#ot$er votin) pools an# a)reements, it must pass t$ree criteria or tests, namel@ A1B t$at t$evotin) ri)$ts of t$e stoc' are separate# from t$e ot$er attributes of o!ners$ipC A6B t$at t$evotin) ri)$ts )rante# are inten#e# to be irrevocable for a #e nite perio# of timeC an# A:B t$att$e principal purpose of t$e )rant of votin) ri)$ts is to ac7uire votin) control of t$ecorporation(  T$e la! simpl provi#es t$at a votin) trust a)reement is an a)reement in !ritin)!$ereb one or more stoc'$ol#ers of a corporation consent to transfer $is or t$eir s$ares toa trustee in or#er to vest in t$e latter votin) or ot$er ri)$ts pertainin) to sai# s$ares for aperio# not e=cee#in) ve ears upon t$e ful llment of statutor con#itions an# suc$ ot$erterms an# con#itions speci e# in t$e a)reement( T$e ve ear>perio# ma be e=ten#e# incases !$ere t$e votin) trust is e=ecute# pursuant to a loan a)reement !$ereb t$e perio#is ma#e contin)ent upon full pament of t$e loan( 2)Who owns the stocks of the corporation under the terms of the voting trust agreement? &ot$ un#er t$e ol# an# t$e ne! %orporation %o#es t$ere is no #ispute as to t$e mostimme#iate e<ect of a votin) trust a)reement on t$e status of a stoc'$ol#er !$o is a part toits e=ecution  from le)al title$ol#er or o!ner of t$e s$ares sub?ect of t$e votin) trusta)reement, $e becomes t$e e7uitable or bene cial o!ner( )!id a director of the corporation cease to be such upon the creation of thevoting trust agreement? Section /0 of the old +ode states that#*very director must o(n in his o(n right at least one share of the capitalstock of the stock corporation of (hich he is a director, (hich stock shall standin his name on the &ooks of the corporation. ' director (ho ceases to &e theo(ner of at least one share of the capital stock of a stock corporation of (hichis a director shall there&y cease to &e a director . . . !*mphasis supplied n#er t$e ol# %orporation %o#e, t$e eli)ibilit of a #irector, strictl spea'in), cannot bea#versel a<ecte# b t$e simple act of suc$ #irector bein) a part to a votin) trusta)reement inasmuc$ as $e remains o!ner Aalt$ou)$ bene cial or e7uitable onlB of t$es$ares sub?ect of t$e votin) trust a)reement pursuant to !$ic$ a transfer of t$estoc'$ol#ers s$ares in favor of t$e trustee is re7uire# Asection : of t$e ol# %orporation%o#eB( No #is7uali cation arises b virtue of t$e p$rase Ein $is o!n ri)$tE provi#e# un#er t$eol# %orporation %o#e(Fit$ t$e omission of t$e p$rase Ein $is o!n ri)$tE t$e election of trustees an# ot$erpersons !$o in fact are not bene cial o!ners of t$e s$ares re)istere# in t$eir names on t$eboo's of t$e corporation becomes formall le)aliGe#( Hence, t$is is a clear in#ication t$at inor#er to be eli)ible as a #irector, !$at is material is t$e le)al title to, not bene cialo!ners$ip of, t$e stoc' as appearin) on t$e boo's of t$e corporation( T$e facts of t$is cases$o! t$at t$e petitioners, b virtue of t$e votin) trust a)reement e=ecute# in 1981 #ispose#of all their shares through assignment and delivery in favor of the 12$, as trustee (%onse7uentl, t$e petitioners cease# to o!n at least one s$are stan#in) in t$eir names ont$e boo's of *0-* as re7uire# un#er Section 6: of t$e ne! %orporation %o#e( T$e also  cease# to $ave ant$in) to #o !it$ t$e mana)ement of t$e enterprise( T$e petitionerscease# to be #irectors( Hence, t$e transfer of t$e petitioners s$ares to t$e D&/ create#vacancies in t$eir respective positions as #irectors of *0-*( T$e transfer of s$ares from t$estoc'$ol#er of *0-* to t$e D&/ is t$e essence of t$e sub?ect votin) trust a)reement( %onsi#erin) t$at t$e votin) trust a)reement bet!een *0-* an# t$e D&/ transferre# le)alo!ners$ip of t$e stoc' covere# b t$e a)reement to t$e D&/ as trustee, t$e latter becamet$e stoc'$ol#er of recor# !it$ respect to t$e sai# s$ares of stoc's( In t$e absence of as$o!in) t$at t$e D&/ $a# cause# to be transferre# in t$eir names one s$are of stoc' for t$epurpose of 7ualifin) as #irectors of *0-*, t$e petitioners can no lon)er be #eeme# to $averetaine# t$eir status as o;cers of *0-* !$ic$ !as t$e case before t$e e=ecution of t$esub?ect votin) trust a)reement( T$ere appears to be no #ispute from t$e recor#s t$at D&/$as ta'en over full control an# mana)ement of t$e rm(   )#ow $ong can a voting trust agreement remain va$id and e%ective?  T$ere can be no reliance on t$e inference t$at t$e ve>ear perio# of t$e votin) trusta)reement in 7uestion $a# lapse# in 198 so t$at t$e le)al title to t$e stoc's covere# b t$esai# votin) trust a)reement ipso facto  reverte# to t$e petitioners as bene cial o!nerspursuant to t$e t$ para)rap$ of section 59 of the ne( +orporation +ode (hich reads#3nless expressly rene(ed, all rights granted in a voting trust agreement shallautomatically expire at the end of the agreed period, and the voting trust certicate as (ell as the certicates of stock in the name of the trustee or trustees shall there&y &e deemed cancelled and ne( certicates of stock shall&e reissued in the name of the transferors. On t$e contrar, it is manifestl clear from t$e terms of t$e votin) trust a)reement bet!een*0-* an# t$e D&/ t$at t$e #uration of t$e a)reement is contin)ent upon t$e ful llment of certain obli)ations of *0-* !it$ t$e D&/( Ha# t$e ve>ear perio# of t$e votin) trusta)reement e=pire# in 198, t$e D&/ !oul# not $ave transferre# all its ri)$ts, titles an#interests in *0-* Ee<ective 3une :, 198E to t$e national )overnment t$rou)$ t$e *sset/rivatiGation Trust A*/TB( T$ere is evi#ence on recor# t$at at t$e time of t$e service of summons on *0-* t$rou)$ t$e petitioners on *u)ust 61, 1984, t$e votin) trust a)reement in7uestion !as not et terminate# so t$at t$e le)al title to t$e stoc's of *0-*, t$en, stillbelon)e# to t$e D&/( &)Whether or not there was proper service of summons on '(' through the petitioners as president and vice*president, a$$eged$+, of the subect corporation after the execution of a voting trust agreement between '('and the !-? n#er section 1:, Rule 1 of t$e Revise# Rules of %ourt, it is provi#e# t$at@ Sec. 4/. Service upon private domestic corporation or partnership. — f thedefendant is a corporation organi)ed under the la(s of the $hilippines or a partnership duly registered, service may &e made on the president, manager,secretary, cashier, agent or any of its directors.  T$e service of summons upon *0-*, t$rou)$ t$e petitioners, t$erefore, is not vali#( To ruleot$er!ise, as correctl ar)ue# b t$e petitioners, !ill contravene t$e )eneral principle t$at acorporation can onl be boun# b suc$ acts !$ic$ are !it$in t$e scope of t$e o;cers ora)ents aut$orit(
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