Facts:

Respondent State Investment House Inc entered into a sales agreement with Sipalay Mining
whereby Sipalay Mining sold to State Investment House 200,000,000 common shares of its
capital stock in the amount of PHP2,600,000.

Subsequently, State Investment House requested Sipalay Mining to transfer 200,000,000 shares
to Anselmo Trinidad & Co(ATCO), to which it had sold the shares. Sipalay Mining then
transferred the 200M shares.

After 2 years, ATCO sold 198,500,000 of the shares to VULCAN. ATCO requested Sipalay
Mining to transfer the 198,500,000 shares to VULCAN. By resolution of the board of Sipalay
Mining, its president was directed to sign the certificate of stock transferred to VULCAN.

Before the annual stockholders’ meeting of Sipalay Mining, the petitioners in this case filed
before the SEC a petition to nullify the sale of the shares to VULCAN, with a prayer for issuance
of a writ of preliminary injunction to enjoin VULCAN from voting the shares.

The SEC temporarily restrained VULCAN from voting its 198,500,000 shares pending the
petition for the issuance of a writ of preliminary injunction. The annual stockholders’ meeting of
Sipalay Mining proceeded without the participation of VULCAN’s 198,500,000 shares and the
members of the Board of Directors were elected.

ISSUE:
W/N VULCAN was validly restrained from voting its 198,500,000 shares.

HELD:

SEC stated that the issue on the defect of transfer of said shares from ATCO to VULCAN
is not sufficient basis to enjoin said shares from being votes in a stockholders’ meeting.
Considering that the questioned shares constitute the majority, it is more equitable that the same
be allowed to vote rather than be enjoined.

The Supreme Court upheld the decision of the SEC. The sale of the shares of stock had
long been perfected and is presumed valid until declared otherwise. The directive of the Board of
Directors of Sipalay Mining to its president to sign the stock certificate that would evidence
ownership of the shares by VULCAN is valid and runs against the petitioner’s contention that
they have the right to relief. It is a well known rule of law that questions of policy or of
management are left solely to the honest decision of officers and directors of a corporation, and
the court is without authority to substitute its judgment for the judgment of the board of
directors; the board is the business manager of the corporation, and as long as it acts in good
faith its orders are not reviewable by courts.

In this case, the board of directors were acting in good faith when it transferred
198,500,000 shares to VULCAN, as well as when it directed the president to sign the stock
certificates.
 Therefore, VULCAN had the right to vote its 198,500,000 shares of stocks during the
annual shareholders’ meeting.