GOKONG-WEI V SEC

G.R. No. L-45911 April 11, 1979

TOPIC: Qualifications and Disqualifications of Directors/Trustees (Secs. 22 and 26)

ACTION: a petition for "declaration of nullity of amended by-laws, cancellation of certificate of

filing of amended by- laws, injunction and damages with prayer for a preliminary injunction"

Contesting the validity of the amendments based on proper authority for enactment.

Challenging the disqualification clauses that nullified his directorship rights.

Alleging delays, lack of due process, and unfair treatment by the SEC.

FACTS: John Gokongwei Jr., a stockholder of San Miguel Corporation, filed a petition with the
Securities and Exchange Commission (SEC) contesting the amended by-laws introduced by the majority
of the Board of Directors.

Gokongwei challenged the amendments, claiming they were enacted without proper authority and that
the original 1961 authorization was no longer valid due to subsequent changes in the corporation's
capital structure.

He argued that the amendments purposefully disqualified him from directorship, despite his
qualifications as a stockholder, nullifying his vested rights.

Gokongwei filed motions requesting the production and inspection of specific documents to support his
case. There were oppositions and delays in the SEC's resolution on these requests.

Gokongwei contested a special stockholders' meeting scheduled to ratify the amendments. He sought
temporary restraining orders to prevent the meeting.

The SEC denied some of these restraining orders, and the meeting proceeded, resulting in the ratification
of the amendments.

The SEC issued orders regarding Gokongwei's motions for reconsideration, requests for document
production, and the conduct of the special stockholders' meeting.

Gokongwei found the SEC's orders dissatisfactory, alleging delays, lack of due process, and unfair
treatment.

Gokongwei elevated the case to the Supreme Court, alleging that the SEC had acted oppressively and
unfairly. He sought judicial intervention due to perceived delays and violations of his rights as a
stockholder.

In defense, the respondents argue that:

 Defending the amendments as necessary to safeguard the corporation against potential conflicts
of interest.
  Arguing that the case had become moot due to subsequent actions taken during stockholders'
meetings and SEC rulings.
 The case was riddled with contentions about the validity of the amendments, the rights of the
stockholder, the authority of the SEC, and the fairness of the legal proceedings. Gokongwei
sought relief from the Supreme Court due to perceived injustices and violations of his rights.

ISSUES:

(1) whether or not the provisions of the amended by-laws of respondent corporation, disqualifying a
competitor from nomination or election to the Board of Directors are valid and reasonable;

(2) whether or not respondent SEC gravely abused its discretion in denying petitioner's request for an
examination of the records of San Miguel International, Inc., a fully owned subsidiary of San Miguel
Corporation; and

(3) whether or not respondent SEC committed grave abuse of discretion in allowing discussion of Item
6 of the Agenda of the Annual Stockholders' Meeting on May 10, 1977, and the ratification of the
investment in a foreign corporation of the corporate funds, allegedly in violation of section 17-1/2 of the
Corporation Law.

RULING:

The validity or reasonableness of a by-law of a corporation in purely a question of law. 9Whether the by-
law is in conflict with the law of the land, or with the charter of the corporation, or is in a legal sense
unreasonable and therefore unlawful is a question of law.