Voting Trust Lee vs. CA

VOTING TRUST
GR. NO. 93695, FEBRUARY 04, 1992

RAMON C. LEE VS. CA
Facts:
On 15 November 1985, a complainant for sum of money was filed by the International Corporate Bank,
Inc. against private respondents who, in turn, filed a third party complaint against ALFA and the
petitioners. On 17 September 1987, Lee and Lacdao filed a motion to dismiss the third party complaint
which the RTC denied. On 18 July 1988, petitioners filed their answer to the third party complaint.
Meanwhile, on 12 July 1988, the trial issued an order requiring the issuance of an alias summons upon
ALFA through the DBP as a consequence of Lee and Lacdao's letter informing the court that the
summons for ALFA was erroneously served upon them considering that the management of ALFA had
been transferred to the DBP. In a manifestation, the DBP claimed that it was not authorized to receive
summons on behalf of ALFA since the DBP had not taken over the company which has a separate and
distinct corporate personality and existence. The trial court issued an order advising Sacoba
Manufacturing, et. al. to take the appropriate steps to serve the summons to ALFA. Sacoba
Manufacturing, et. al. filed a Manifestation and Motion for the Declaration of Proper Service of
Summons which the trial court granted.
On 12 September 1988, petitioners filed a motion for reconsideration submitting that the Rule 14,
section 13 of the Revised Rules of Court is not applicable since they were no longer officers of ALFA and
Sacoba Manufacturing, et. al. should have availed of another mode of service under Rule 14, Section 16
of the said Rules, i.e., through publication to effect proper service upon ALFA. On 2 January 1989, the
trial court upheld the validity of the service of summons on ALFA through petitioners, thus, denying the
latter's motion for reconsideration and requiring ALFA to file its answer through Lee and Lacdao as its
corporate officers. A second motion for reconsideration was filed by Lee and Lacdao reiterating their
stand that by virtue of the voting trust agreement they ceased to be officers and directors of ALFA,
hence, they could no longer receive summons or any court processes for or on behalf of ALFA. In
support of their second motion for reconsideration, Lee and Lacdao attached thereto a copy of the
voting trust agreement between all the stockholders of ALFA and DBP, whereby the management and
control of ALFA became vested upon the DBP. On 25 April 1989, the trial court reversed itself by setting
aside its previous Order dated 2 January 1989 and declared that service upon Lee and Lacdao who were
no longer corporate officers of ALFA cannot be considered as proper service of summons on ALFA. On
15 May 1989, Sacoba Manufacturing, et. al. moved for a reconsideration of the Order which was
affirmed by the court in is Order dated 14 August 1989 denying Sacoba Manufacturing, et. al.'s motion
for reconsideration.
Issue: Whether or not there was proper service of summons on ALFA Integrated Textile Mills through
the petitioners as president and vice-president, allegedly, of the subject corporation after the execution
of a voting trust agreement between ALFA and DBP.
Ruling:
The facts of this case show that the petitioners (Lee and Lacdao), by virtue of the voting trust agreement
executed in 1981 disposed of all their shares through assignment and delivery in favor of the DBP, as
trustee. Consequently, the petitioners ceased to own at least one share standing in their names on the
books of ALFA as required under Section 23 of the new Corporation Code. They also ceased to have
anything to do with the management of the enterprise. Lee and Lacdao ceased to be directors. Hence,
the transfer of their shares to the DBP created vacancies in their respective positions as directors of
ALFA. The transfer of shares from the stockholders of ALFA to the DBP is the essence of the subject
voting trust agreement. Considering that the voting trust agreement between ALFA and the DBP
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transferred legal ownership of the stocks covered by the agreement to the DBP as trustee, the latter
because the stockholder of record with respect to the said shares of stocks. In the absence of a showing
that the DBP had caused to be transferred in their names one share of stock for the purpose of
qualifying as directors of ALFA, Lee and Lacdao can no longer be deemed to have retained their status as
officers of ALFA which was the case before the execution of the subject voting trust agreement. There is
no dispute from the records that DBP has taken over full control and management of the firm.
The 6th paragraph of section 59 of the new Corporation Code reads that "Unless expressly renewed, all
rights granted in a voting trust agreement shall automatically expire at the end of the agreed period,
and the voting trust certificates as well as the certificates of stock in the name of the trustee or trustees
shall thereby be deemed cancelled and new certificates of stock shall be reissued in the name of the
transferors." However, it is manifestly clear from the terms of the voting trust agreement between ALFA
and the DBP that the duration of the agreement is contingent upon the fulfillment of certain obligations
of ALFA with the DBP. Had the five-year period of the voting trust agreement expired in 1986, the DBP
would not have transferred an its rights, titles and interests in ALFA "effective June 30, 1986" to the
national government through the Asset Privatization Trust (APT) as attested to in a Certification dated
24 January 1989 of the Vice President of the DBP's Special Accounts Department II. In the same
certification, it is stated that the DBP, from 1987 until 1989, had handled s account which included
ALFA's assets pursuant to a management agreement by and between the DBP and APT. Hence, there is
evidence on record that at the time of the service of summons on ALFA through Lee and Lacdao on 21
August 1987, the voting trust agreement in question was not yet terminated so that the legal title to the
stocks of ALFA, then, still belonged to the DBP.
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VOTING TRUST

GR. NO. 93695, FEBRUARY 04, 1992

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