G.R. No. 154049 ; August 28, 2003
RAMON P. JACINTO and JAIME J. COLAYCO, Petitioners, vs. FIRST WOMEN’S CREDIT CORPORATION, represented in this derivative suit by SHIG KATAYAMA, Respondents.

FACTS

Minority stockholder Shig Katayama filed a derivative suit before the Securities and Exchange Commission (SEC) against petitioners Ramon P. Jacinto and Jaime J. Colayco, the President and Vice-President of First Women’s Credit Corporation (FWCC). Katayama alleged that petitioners committed corporate plunder by diverting approximately ₱720 million from FWCC to the RJ Group of Companies and other affiliated entities without proper board authorization. A Special Audit Report by the external auditor supported this claim. Katayama prayed for an accounting and the return of the funds, and sought the appointment of an interim management committee (IMC) to prevent further dissipation of corporate assets, citing that FWCC had been left insolvent, defaulting on bank obligations and closing offices.
Petitioners admitted the fund transfers but claimed these were legitimate loans and advances made to maximize FWCC’s idle funds, arguing the board intended to earn higher interest compared to money market placements. They asserted Katayama had consented to these transactions and that the obligations had been fully paid through an offsetting agreement. Katayama denied any knowledge or consent, alleging board members were instructed to conceal the disbursements from him.

ISSUE

Whether the Hearing Officer of the SEC gravely abused his discretion in appointing an Interim Management Committee for FWCC pendente lite.

RULING

No. The Supreme Court affirmed the appointment of the IMC, finding no grave abuse of discretion. The legal logic rests on the principle that a management committee may be appointed pendente lite in a derivative suit when there is an urgent necessity to preserve corporate assets and prevent paralysis of business operations. The Court emphasized that such appointment is a ministerial act of the court for the benefit of all interested parties, not merely the complaining stockholder.
The evidence demonstrated clear peril to corporate welfare: the massive, unauthorized diversion of funds created a prima facie case of grave mismanagement; FWCC was rendered insolvent and unable to meet its obligations; and the bitter internal feud between the majority (petitioners) and the minority (Katayama) had completely paralyzed the company’s operations and hampered collection efforts. The Court held that these circumstances—threatened dissipation of assets and total operational deadlock—constituted sufficient grounds for the drastic but necessary remedy of an IMC to oversee and preserve the corporation pending litigation. The IMC acts as an arm of the court, managing property for the ultimate benefit of all rightful claimants, thereby negating petitioners’ claim of undue injury. The orders of the Hearing Officer, the SEC en banc, and the Court of Appeals were thus sustained.