G.R. No. 51765 March 3, 1997REPUBLIC PLANTERS BANK, petitioner, vs. HON. ENRIQUE A.
AGANA, SR., as Presiding Judge, Court of First Instance of Rizal, Branch
XXVIII, Pasay City, ROBES-FRANCISCO REALTY & DEVELOPMENT CORPORATION and
ADALIA F. ROBES, respondents.
FACTS:
On September 18, 1961, Robes-Francisco Realty &
Development Corporation secured a loan from Republic Planters Bank (RPB) in the
amount of P120,000.00. Instead of giving the legal tender totaling to the full
amount of the loan, petitioner lent such amount partially in the form of money
and partially in the form of stock certificates numbered 3204 and 3205, each
for 400 shares with a par value of P10.00 per share, or for P4,000.00 each, for
a total of P8,000.00. Said stock certificates were in the name of private
respondent Adalia F. Robes
Said certificates of stock bear the following terms and
conditions:
“The Preferred Stock shall have the following rights,
preferences, qualifications and limitations, to wit:
1.
Of the right to receive a quarterly dividend of
One Per Centum (1%), cumulative and participating.
x x x
2.
That such preferred shares may be redeemed, by
the system of drawing lots, at any time after two (2) years from the date of
issue at the option of the Corporation. x x x.
On January 31, 1979, private respondents proceeded against RPB
and filed a Complaint anchored on their alleged rights to collect dividends
under the preferred shares in question and to have RPB redeem the same under
the terms and conditions of the stock certificates.
Petitioner filed a Motion to Dismiss private respondents’
Complaint on the following grounds: (1) that the trial court had no
jurisdiction over the subject-matter of the action; (2) that the action was
unenforceable under substantive law; and (3) that the action was barred by the
statute of limitations and/or laches. Petitioner’s Motion to Dismiss was denied
by the trial court.
On September 7, 1979, the trial court rendered the herein
assailed decision in favor of private respondents. The trial court ruled:
“From a further perusal of the pleadings, it appears that
the provision of the stock certificates in question to the effect that the
plaintiffs shall have the right to receive a quarterly dividend of One Per
Centum (1%), cumulative and participating, clearly and unequivocably indicates
that the same are ‘interest bearing stocks’ which are stocks issued by a
corporation under an agreement to pay a certain rate of interest thereon. As
such, plaintiffs become entitled to the payment thereof as a matter of right
without necessity of a prior declaration of dividend.”
Aggrieved by the decision of the trial court, petitioner
elevated the case before the Supreme Court.
ISSUE(S):
1.
Whether
or not the respondent judge committed a grave abuse of discretion in
disregarding the order of the Central Bank to petitioner to desist from
redeeming its preferred shares and from paying dividends.
2.
Whether
or not the respondent judge committed a grave abuse of discretion in ordering
petitioner to pay respondent Adalia F. Robes interests on her preferred shares
RULING:
1. YES, the respondent judge committed a grave abuse of discretion in disregarding the order of the Central Bank to petitioner to desist from redeeming its preferred shares and from paying dividends.
While the SC agreed with the respondent judge’s in ruling that petitioner must redeem the shares in question, what respondent judge failed to recognize was that while the stock certificate does allow redemption, the option to do so was clearly vested in the petitioner bank. The redemption therefore is clearly the type known as “optional.” Thus, except as otherwise provided in the stock certificate, the redemption rests entirely with the corporation and the stockholder is without right to either compel or refuse the redemption of its stock.” Furthermore, the terms and conditions set forth therein use the word “may.” It is a settled doctrine in statutory construction that the word “may” denotes discretion, and cannot be construed as having a mandatory effect.
The redemption of said shares cannot be allowed. As pointed out by the
petitioner, the Central Bank made a finding that said petitioner has been
suffering from chronic reserve deficiency, and that such finding resulted in a
directive issued by the BSP Gov. prohibiting the RPB from redeeming any
preferred share, on the ground that said redemption would reduce the assets of
the Bank to the prejudice of its depositors and creditors. Redemption of
preferred shares was prohibited for a just and valid reason. The directive
issued by the Central Bank Governor was obviously meant to preserve the status
quo, and to prevent the financial ruin of a banking institution that would have
resulted in adverse repercussions, not only to its depositors and creditors,
but also to the banking industry as a whole. The directive, in limiting the
exercise of a right granted by law to a corporate entity, may thus be
considered as an exercise of police power. The respondent judge insists that
the directive constitutes an impairment of the obligation of contracts. It has,
however, been settled that the Constitutional guaranty of non-impairment of
obligations of contract is limited by the exercise of the police power of the
state, the reason being that public welfare is superior to private rights.
2. YES, the respondent judge committed a grave abuse of discretion in ordering petitioner to pay respondent Adalia F. Robes interests on her preferred shares.
Both Sec. 16 of the Corporation Law and Sec. 43 of the present Corporation Code prohibit the issuance of any stock dividend without the approval of stockholders, representing not less than two-thirds (2/3) of the outstanding capital stock at a regular or special meeting duly called for the purpose. These provisions underscore the fact that payment of dividends to a stockholder is not a matter of right but a matter of consensus. Furthermore, “interest bearing stocks,” on which the corporation agrees absolutely to pay interest before dividends are paid to common stockholders, is legal only when construed as requiring payment of interest as dividends from net earnings or surplus only.
Clearly, the respondent judge, in compelling the petitioner to redeem the shares in question and to pay the corresponding dividends, committed grave abuse of discretion amounting to lack or excess of jurisdiction in ignoring both the terms and conditions specified in the stock certificate, as well as the clear mandate of the law.
WHEREFORE, the instant petition, being impressed with merit, is hereby GRANTED. The challenged decision of respondent judge is set aside and the complaint against the petitioner is dismissed.
Comments
Post a Comment