G.R. No. L-4900; August 31, 1953
Financing Corporation of the Philippines and J. Amado Araneta, petitioners, vs. Hon. Jose Teodoro, Judge of the Court of First Instance of Negros Occidental, Branch II, and Encarnacion Lizares Vda. de Panlilio, respondents.

FACTS

In Civil Case No. 1924 of the Court of First Instance of Negros Occidental, minority stockholders, including respondent Encarnacion Lizares Vda. de Panlilio, filed a complaint against the Financing Corporation of the Philippines and its president and general manager, J. Amado Araneta. The complaint alleged gross mismanagement and fraudulent conduct by Araneta, sought the dissolution of the corporation, demanded that Araneta be held personally accountable for unauthorized and fraudulent disbursements, and requested the appointment of a receiver to take possession of the corporate books, records, and assets pending trial. The trial court, presided by respondent Judge Jose Teodoro, granted the petition and appointed a receiver over the defendants’ strong objection. The defendants (petitioners herein) failed to secure a reconsideration and subsequently filed this petition for certiorari with preliminary injunction to revoke the order appointing the receiver.

ISSUE

Whether the trial court acted without jurisdiction or with grave abuse of discretion in appointing a receiver pendente lite in an action for dissolution of a corporation filed by minority stockholders.

RULING

The Supreme Court denied the petition for certiorari. It held that while the general rule is that minority stockholders cannot sue for corporate dissolution—an action typically brought by the State through a quo warranto proceeding—there are exceptional cases where minority stockholders may maintain such a private suit, particularly when they are unable to obtain redress and protection of their rights within the corporation and the State’s intervention cannot be obtained. The trial court, having properly entertained the main action for dissolution, had jurisdiction to appoint a receiver pendente lite. The appointment was within the court’s sound discretion, and considering the serious allegations of mismanagement and fraud detailed in the trial court’s order—including unauthorized diversion of corporate funds, profitless pledging of corporate securities, illegal transfer of assets, and violations of corporate law—the respondent judge neither exceeded his jurisdiction nor abused his discretion in appointing a receiver to preserve the corporate assets. The writ of preliminary injunction previously issued by the Supreme Court was ordered dissolved.