[ G.R. No. 27225. April 01, 1927 ] 50 Phil. 348
[ G.R. No. 27225. April 01, 1927 ]
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, PLAINTIFF, VS. GREGORIO AGONCILLO, BALDOMERO ROXAS, AND CATALINO LAVADIA, DEFENDANTS. GERONIMO SANTIAGO ET AL., INTERVENORS. D E C I S I O N
MALCOLM, J.:
These are quo warranto proceedings instituted by the Government of the Philippine Islands against the defendants, to oust them from their offices of directors of the Philippine National Bank, to which they were named by the legislative members of the Board of Control created by Acts Nos. 2747 and 2938. The fundamental legal issue is the validity of the amendments to section 4 of Act No. 2612, made by section 1 of Act No. 2747 and section 1 of Act No. 2938, which provide that “The voting power of all the stock of the National Bank owned and controlled by the Government of the Philippine Islands shall be vested exclusively in a board, the short title of which shall be ‘Board of Control,’ composed of the Governor-General, the President of the Senate, and the Speaker of the House of Representatives.” The facts are stipulated. The Philippine National Bank is a corporation created by Acts of the Philippine Legislature. (Act No. 2612, as amended by Acts Nos. 2747 and 2938.) The authorized capital of the bank was originally placed at P20,000,000, was later increased to P50,000,000, and was finally reduced to P10,000,000. (Act No. 2612, sec. 3; Act No. 2938, sec. 1; Act No. 3174, sec. 1.) The Government was first authorized to purchase a majority of the shares of the bank at par. (Act No. 2612, sec. 4.) Subsequently, the Government was further authorized to buy not less than 153,000 of the shares and to buy the shares held privately. (Act No. 2938, sec. 1; Act No. 3174, sec. 1.) Of the present outstanding capital stock of the bank consisting of 100,000 shares of a par value of P100 each, 97,332 shares are held by the Government and the remaining 2,668 shares are held by private persons. The original bank charter provided that the voting power of all the stock of the bank purchased by the Philippine Government “shall be vested exclusively in the Governor-General.” (Act No. 2612, sec. 5.) Thereafter it was provided that the voting of the Government stock in the Philippine National Bank shall be “vested exclusively in a committee consisting of the Governor-General, the President of the Senate, and the Speaker of the House of Representatives.” (Act No. 2747, sec. 1.) Finally, the provisions relating to the voting power of the Government stock were amended to read as quoted in the opening paragraph of this decision. (Act No. 2938, sec. 1.) The affairs of the Philippine National Bank are managed by a board of nine directors. Prior to December 23, 1926, A. Gideon, one of the directors of the Philippine National Bank, resigned his office. At the meeting of the board convened on the date mentioned, Director Cotterman offered a resolution providing that a special meeting be held to fill the vacancy so created, and to consider the advisability of repealing section 51 of the by-laws of the bank, by which it had been provided that vacancies in the board should be filled by the vote of the remaining members, pending action by the stockholders at the annual election. Action on this motion was postponed until the next meeting of the board. This meeting took place on December 28, 1926. Mr. Cotterman’s resolution was then again discussed but was defeated. Immediately Director Cotterman presented a petition signed by the Governor-General on behalf of the Philippine Government and of five other shareholders of the Philippine National Bank, in which a demand was made that a special meeting of the stockholders of the bank be called for the purpose of considering the advisability of removing Directors Gregorio Agoncillo, Baldomero Roxas, and Catalino Lavadia, the repeal of section 51 of the by-laws of the bank, the filling of the vacancy caused by the resignation of Director Gideon, and the election of other directors to fill the vacancies created by the removal of the directors named, should that action be taken by the stockholders. It was requested that the special meeting in question be held at 3 o’clock, p. m., on the 17th day of January, 1927, at the office of the corporation. After submitting the petition, Director Cotterman moved that the special meeting of the stockholders be held in accordance with the petition. On the motion being put to vote, of the eight members of the board present, four voted “yes,” three voted “no,” and the president of the board remained silent. The chairman thereupon announced that the motion to call a special meeting as requested by the petition was approved. The secretary of the bank sent printed notices of the time, place, and purposes of the proposed special meeting to every shareholder of record of the Philippine National Bank. Notice of call was given by publication in two newspapers of general circulation. The special meeting was attended by twenty-six private persons owning and representing the owners of ninety-four of the privately-owned shares of the bank, and by the Governor-General asserting the right to attend the meeting in the name and on behalf of the Philippine Government, and to vote the 97,332 shares of stock owned by the Government. The President of the Senate and the Speaker of the House of Representatives failed to attend the meeting, and contented themselves with writing a letter of protest against the meeting on the ground that the Govvernor-General alone has no right to represent the Philippine Government in relation to the exercise of the voting power of its stock in the bank. The President of the Bank, acting as chairman of the meeting, ruled that he could not recognize the right of the Governor-General to vote the Government stock without the concurrence of the President of the Senate and the Speaker of the House of Representatives, and that, therefore, a quorum was not present. Upon this he declared the meeting adjourned. The GovernorGeneral protested against the ruling and insisted that a quorum was present. The President of the Bank and several of the private shareholders then left the room. After all this had happened, the Governor-General and the other stockholders, twenty in number, remained and organized by the election of a chairman pro tempore and a secretary pro tempore. They then proceeded with the business for which the meeting had been called. It was determined by unanimous vote (a) To remove Directors Gregorio Agoncillo, Baldomero Roxas, and Catalino Lavadia; (b) to amend the by-laws of the bank by striking out section 51 thereof; and (c) to elect Messrs, Manuel Yriarte, John Gordon, A. Gideon, and Leon M. Heras to fill the vacancies created by the resignation of Director Gideon and the removal of the other three directors abovementioned. Mr. Heras subsequently declined the position. On January 21, 1927, a regular meeting of the board of directors of the Philippine National Bank was held at its office. Messrs. Gregorio Agoncillo, Baldomero Roxas, and Catalino Lavadia as well as the other five directors of the bank whose seats were not contested were present. After the meeting was called to order, Messrs. Manuel Yriarte, John Gordon, and A. Gideon presented themselves, produced their certificates of election, and made demand that they be permitted to participate in the meeting as members-elect of the board of directors of the Philippine National Bank, and that Messrs. Gregorio Agoncillo, Baldomero Roxas, and Catalino Lavadia withdraw from the meeting and cease to exercise any of the duties and powers inherent in the offices of directors of the bank. The presiding officer, who was the President of the Bank, refused to recognize the right of Messrs. Yriarte, Gordon, and Gideon to membership in the board, and Messrs. Agoncillo, Roxas, and Lavadia refused to vacate the offices held by them, in favor of Messrs. Yriarte, Gordon, and Gideon. Messrs. Agoncillo, Roxas, and Lavadia have since January 17, 1927, exercised the functions of directors of the Philippine National Bank and claim to be entitled to do so. There grew out of the facts which have been outlined the action of quo warranto brought by the Government of the Philippine Islands. The defendants answered admitting certain facts and denying others. The intervention of the holders of 713 shares of stock having a par value of P71,300 was permitted by stipulation duly approved by this court. The intervenors have made common cause with the defendants. The main issue has been sufficiently discussed in the previous case of the Government of the Philippine Islands vs. Springer ([1927], p. 259, ante). What was said in that decision may be taken as incorporated herein. What differences there are between the two cases on the principal question incline to strengthen rather than weaken the instant case. In the National Coal Company case, there was merely a provision for the voting of the stock of the Government in the company by a committee composed of the Governor-General, the President of the Senate, and the Speaker of the House of Representatives. In the Philippine National Bank case which is before us, there is not alone a provision providing for a “Board of Control,” but other provisions directing and authorizing the “Board of Control” to perform many other functions. It is provided in the amended charter of the bank (Act No. 2938) that: (a) Foreign agencies of the bank may not be incorporated without the consent of the Board of Control (sec. 10); (b) the bank may not rediscount commercial paper in cases of emergency without the approval of the Board of Control (sec. 14); (c) the board of directors may not appoint a general manager of the bank or remove him, and may not fix the salary of the general manager of the bank or the assistant general manager without the approval of the Board of Control (sec. 18); (d) the manager of the bank is required to give the Board of Control any information in his possession regarding the operations of the bank (sec. 20); (e) a representative of the Insular Auditor who shall act as chief of the auditing department of the bank and other employees of the department cannot be appointed without the approval of the Board of Control (sec. 22); (f) the payment of compensation to the President or Vice President of the Bank for the performance of the duties of other officers may not be made without the approval of the Board of Control (sec. 23); (g) the Secretary of Finance cannot suspend the requirement of maintaining the proportion of the reserve funds without the approval of the Board of Control (sec. 44); (h) the bank may not guarantee payment of certain bonds and may not buy bonds of other incorporated companies without the approval of the Board of Control (sec. 45). The application of the doctrine relating to partial invalidity is also here fortified by the rule that where amendments to statute are unconstitutional, the original statute as it existed before the attempted amendment remains in force. (Eberle vs. Michigan [1914], 232 U. S., 700; People vs. Mensching [1907], 187 N. Y. S., 8; 10 L. R. A., 625.) In this connection, it should be recalled that the original statute vested the voting power of the stock owned by the Government in the bank exclusively in the Governor-General, which was legal, while the amendments found invalid, without express repeal, attempted to transfer this power to an illegally constituted Board of Control. With the main issue disposed of, the remaining points invite but brief comment. While this is obviously a test case, it is not a moot case as contended by intervenors. It arises from a real and important controversy. The special meeting was properly called at the request of the stockholders owning more than one-third of all the stock of the bank in accordance with section 43 of the by-laws of the bank. Section 34 of the Corporation Law provides that directors of a corporation “may be removed from office by a vote of two-thirds of the members entitled to vote,” without specifying whether a motion must be for cause or may be without cause. But here as the defendants are unlawfully holding office, the matter really has little importance. Moreover, even under the system of comulative voting, the intervenors could not have elected one director. Being guided by the decision in the companion case of Government of the Philippine Islands vs. Springer, supra, it results that the defendants shall be ousted and altogether excluded from the offices of directors of the Philippine National Bank which they are unlawfully holding, and that the three directors selected by the Governor-General shall be placed in possession of those offices. It is so ordered, without costs. Street, Ostrand, Johns, and Romualdez, JJ., concur.