GR L 4420; (May, 1952) (Digest)
G.R. No. L-4420; May 19, 1952
CESAR REYES, ET ALS., plaintiffs-appellants, vs. MAX BLOUSE, ET ALS., defendants-appellees.
FACTS
Plaintiffs, minority stockholders of Laguna Tayabas Bus Co. (LTB), filed an action to restrain its Board of Directors from carrying out a resolution approved by approximately 92½% of the stockholders. The resolution authorized the Board to take steps to consolidate the properties and franchises of LTB with those of Batangas Transportation Co. (BTC). Plaintiffs alleged the consolidation would be prejudicial to LTB and to them, as they did not own BTC shares, citing comparative dividend histories, pre-war market share prices, and 1947 profit figures showing LTB’s superior performance. They also claimed the consolidation was illegal for lack of unanimous stockholder consent and was contrary to law. The trial court dismissed the complaint and lifted a preliminary injunction, ruling the proposed acts were within the authority granted under Section 28½ of the Corporation Law.
ISSUE
Whether the proposed consolidation or merger of LTB and BTC can be legally carried out under existing Philippine law.
RULING
The Supreme Court affirmed the trial court’s decision. The disputed resolution authorized the Board to consolidate properties and franchises under a new corporation via asset transfer in exchange for stock. This falls squarely within Section 28½ of the Corporation Law, which permits a corporation to dispose of all its property and assets upon authorization by shareholders holding at least two-thirds of the voting power. The transaction was not a strict merger requiring corporate dissolution, as LTB would continue to exist. Even if viewed as a merger, it is permitted under Section 20(g) of the Public Service Law ( Commonwealth Act No. 146 ), which allows merger or consolidation of public services with the approval of the Public Service Commission. Act No. 2772 , regulating railroad mergers, does not apply to land transportation companies. The Court also found no merit in the claim of prejudice, upholding the trial court’s assessment of the evidence that the consolidation would be beneficial due to operational economies and was approved by an overwhelming majority. The remedy for dissenting stockholders is to demand payment for their shares as provided by law.