FINANCING CORPORATION vs.

TEODORO

(G.R. No. L-4900; August 31, 1953)

FACTS: In civil case No. 1924 of the Court of First Instance of Negros Occidental, Asuncion Lopez Vda.
de Lizares, EncarnacionLizaresVda. de Panlilio and EfigeniaVda. de Paredes, in their own behalf and
in behalf of the other minority stockholders of the Financing Corporation of the Philippines, filed a
complaint against the said corporation and J. Amado Araneta, its president and general manager,
claiming among other things alleged gross mismanagement and fraudulent conduct of the corporate
affairs of the defendant corporation by J. Amado Araneta, and asking that the corporation be
dissolved; that J. Amado Araneta be declared personally accountable for the amounts of the
unauthorized and fraudulent disbursements and disposition of assets made by him, and that he be
required to account for said assets, and that pending trial and disposition of the case on its merits a
receiver be appointed to take possession of the books, records and assets of the defendant
corporation preparatory to its dissolution and liquidation and distribution of the assets. Over the
strong objection of the defendants, the trial court granted the petition for the appointment of a
receiver and designated Mr. Alfredo Yulo as such receiver with a bond of P50,000.

ISSUE: Whether or not a suit for the dissolution of a corporation can be brought and maintained only
by the State through its legal counsel, and that respondents, much less the minority stockholders of
said corporation, have no right or personality to maintain the action for dissolution

RULING: True it is that the general rule is that the minority stockholders of a corporation cannot sue
and demand its dissolution. However, there are cases that hold that even minority stockholders may
ask for dissolution, this, under the theory that such minority members, if unable to obtain redress
and protection of their rights within the corporation, must not and should not be left without
redress and remedy. This was what probably prompted this Court to state in the case of Hall, et al.
vs. Judge Piccio,* G.R. No. L-2598 (47 Off. Gaz. No. 12 Supp., p. 200) that even the existence of a de
jure corporation may be terminated in a private suit for its dissolution by the stockholders without
the intervention of the State.Although as a rule, minority stockholders of a corporation may not ask
for its dissolution in a private suit, and that such action should be brought by the Government
through its legal officer in a quo warranto case, at their instance and request, there might be
exceptional cases wherein the intervention of the State, for one reason or another, cannot be
obtained, as when the State is not interested because the complaint is strictly a matter between the
stockholders and does not involve, in the opinion of the legal officer of the Government, any of the
acts or omissions warranting quo warranto proceedings, in which minority stockholders are entitled
to have such dissolution. When such action or private suit is brought by them, the trial court had
jurisdiction and may or may not grant the prayer, depending upon the facts and circumstances
attending it. The appointment of a receiver pendentelite is left to the sound discretion of the trial
court as well as the proper showing to appoint a receiver pendentelite for the corporation. It should
be noted that although the appointment of a receiver upon application of the minority stockholders
is a power to be exercised with great caution, nevertheless, it should be exercised necessary in order
not to entirely ignore and disregard the rights of said minority stockholders, especially when said
minority stockholders are unable to obtain redress and protection of their rights within the
corporation itself.