G.R. No. 27225 , April 1, 1927
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff, vs. GREGORIO AGONCILLO, BALDOMERO ROXAS, and CATALINO LAVADIA, defendants. GERONIMO SANTIAGO ET AL., intervenors.

DOCTRINE:
The power to vote government-owned shares in a corporation is an incident of ownership. When the legislature vests that voting power in a specific board (the Board of Control), the members of that board must act collectively. One member alone, even the Governor-General, cannot exercise that power without the concurrence of the other designated members.

FACTS

1. The Philippine National Bank (PNB) was a government-controlled corporation. Of its 100,000 shares, 97,332 were owned by the Government.
2. The voting power of the government-owned shares was vested by law ( Act No. 2938 ) in a “Board of Control” composed of the Governor-General, the President of the Senate, and the Speaker of the House of Representatives.
3. A vacancy arose in the PNB Board of Directors. A group of shareholders, including the Governor-General (acting on behalf of the Government), demanded a special stockholders’ meeting to remove directors Agoncillo, Roxas, and Lavadia, and to elect their replacements.
4. At the special meeting, the Governor-General claimed the right to vote all 97,332 government shares by himself. The President of the Senate and the Speaker of the House did not attend and protested his unilateral action.
5. The PNB President, as meeting chairman, ruled that the Governor-General alone could not vote the government stock, and due to the lack of a quorum, adjourned the meeting.
6. The Governor-General and the remaining private shareholders (owning only 94 shares) proceeded with the meeting. They voted to remove the three directors and elect new ones (Yriarte, Gordon, and Gideon).
7. At the next regular board meeting, the newly elected directors presented themselves, but the incumbent directors (Agoncillo, Roxas, and Lavadia) refused to yield their seats.
8. The Government, through the Attorney-General, filed a quo warranto proceeding to oust Agoncillo, Roxas, and Lavadia and to seat the newly elected directors.

ISSUE

Was the special stockholders’ meeting of January 17, 1927, validly constituted, such that the removal of directors Agoncillo, Roxas, and Lavadia and the election of their replacements were lawful?

RULING

NO. The special meeting was not validly constituted, and the acts taken therein were void. Consequently, Agoncillo, Roxas, and Lavadia remain lawful directors.

1. The Governor-General Could Not Vote the Government Shares Alone. The core legal issue was the validity of the “Board of Control.” The Court upheld its constitutionality. Since the law ( Act No. 2938 ) expressly vested the voting power of the government stock in the three-member Board of Control, that power could only be exercised by the board acting as a body. The Governor-General, acting singly, had no authority to cast the vote for the government’s 97,332 shares.
2. No Quorum Was Present. With the Governor-General unable to vote the government shares, only the privately-owned shares (94 out of 100,000) were represented and eligible to vote. This was far less than the majority needed for a quorum under the Corporation Law. Therefore, the meeting called to order by the PNB President was correctly adjourned for lack of a quorum.
3. The Subsequent “Rump” Meeting Was Void. The proceedings conducted by the Governor-General and the private shareholders after the legitimate adjournment were a nullity. They had no authority to reorganize and conduct business. All actions taken at this void meetingthe removal of directors and the election of new oneswere without legal effect.
4. Incumbent Directors Rightfully Retained Their Seats. Since the attempted removal was invalid, Gregorio Agoncillo, Baldomero Roxas, and Catalino Lavadia never ceased to be lawful directors. They were therefore correct in refusing to vacate their seats at the subsequent board meeting.

DISPOSITION:
The petition for quo warranto was DISMISSED. The Court ordered that Gregorio Agoncillo, Baldomero Roxas, and Catalino Lavadia be maintained in their positions as directors of the Philippine National Bank. The demurrer (a challenge to the legal sufficiency of the government’s complaint) was sustained.