ELTON W. CHASE, AS MINORITY STOCKHOLDER AND ON BEHALF OF OTHER STOCKHOLDERS SIMILARLY SITUATED AND FOR THE BENEFIT OF AMERICAN MACHINERY AND PARTS MANUFACTURING, INC., PETITIONE…

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This is an action for certiorari
filed by Elton Chase to review and annul the orders of the Court of First
Instance of Manila, Branch XIV, in Civil Case No. 43946 entitled “Elton W.
Chase, etc. vs. Dr. Victor Buencamino, Sr. et al.” denying his application for
receivership of American Machinery & Parts Manufacturing, Inc., a domestic
corporation hereinafter referred to as AMPARTS.

On August 20, 1960, petitioner, a
minority stockholder of AMPARTS, filed a derivative suit in the Court of First
Instance of Manila against Dr. Victor Buencamino Sr., Victor Buencamino, Jr.,
Dolores A. Buencamino and Julio B. Francis, Jr., majority stockholders and
corporate directors of AMPARTS charging them with breach of trust; praying for
their removal as directors and, if necessary, for the dissolution and liquidation
of said corporation. Attached to the complaint was an application for the
appointment of a receiver of AMPARTS.

Respondents opposed the application
for receivership and subsequently filed their answer to the complaint. After a
hearing on the application the court, then presided by the Hon. Magno S.
Gatmaitan, issued an order dated June 10, 1961 denying the same, but requiring
respondents to file a bond in the amount of P100,000.00 to answer for whatever
damages petitioner might suffer by reason of the denial. Petitioner’s motion
for reconsideration was likewise denied.

After trial on the merits, the
court rendered judgment finding Dr. Buencamino guilty of mismanagement and
condemning him “to pay Amparts the sum of P1,970,200 with legal interest
from date of the filing of the complaint; he is also prohibited from collecting
any interest on the sum of P300,000.00 paid by him on the 15th July, 1955 on
the initial subscription, and such interest as has already been paid to him is
ordered refunded with legal Interest from the date of the filing of the
complaint; x x x”.

On May 8, 1962, petitioner filed a motion for the
appointment of Lawrence Moran as receiver of AMPARTS until the full amount of
the above judgment against respondent Buencamino is fully satisfied or until
the dissolution or liquidation of said corporation.

On May 12,
1962 , the
Court issued the following order:

“After hearing the parties and
with a view to protect the interests of both and to prevent a possibility of
abuse, the Court resolves that until further orders, the hereinafter while the
case is pending,

“(1) Me. Chase shall have free access to
AMPARTS and its records personally and/or through representative duly
authorized;

“(2) Decisions of Dr.
Buencamino and/at management of AMPARTS shall be made known to Chase who shall
have the right to object and if so, the matter shall be notified to the Court
which shall resolve the difficulties; in the Interim, pending the objection,
the decision shall not be enforced or made operative;

“With this resolution, the
Court disposes for the present of the issue of receivership.”

Supplementing the above-quoted
order, the respondent court, now presided by the Hon. Jesus de Veyra, issued
the following order of August 27, 1962:

“As for the appointment of a
receiver, Judge Gatmaitan decided on the temporary measure of giving plaintiff
(petitioner herein) a veto right, appealable to this Court, on all decisions of
management. Considering that up to the present, the Buencaminos own 2/3 of the
stock of the corporation, the solution is equitable and must be allowed to
continue subject to the condition that once a decision of management is made
known to plaintiff, he must make known his objection thereto to the Court
within five (5) days from receipt of said decision, otherwise he shall be
deemed to have waived any objection to the decision.”

The only Issue to be resolved,
considering the above facts, is whether or not the respondent court committed a
grave abuse of discretion in issuing its orders of June 10,
1961, June
21, 1961, May
12, 1962,
and August 27 of the same year mentioned heretofore.

It is well settled in this
jurisdiction that where corporate directors are guilty of a breach of trust and
intracorporate remedy is futile, the minority stockholders may resort to the
courts for appropriate relief and, incidentally, ask for the appointment of a
receiver for the protection of their rights. In such case, however, the
appointment of a receiver is a matter addressed to the sound discretion of the
court, and it has been frequently held that such discretion to appoint a
receiver who would take over the administration of the corporate business
should be exercised with great caution and only when the necessity therefor is
clear.

The facts of the present case show
that, in connection with the order of June 10, 1961, which denied petitioner’s
application for the appointment of a receiver, the court required respondents
herein to file a bond in the amount of P100,000.00 to answer for whatever
damages petitioner might suffer by reason of the denial. Again, perhaps by
reason of the judgment rendered against Dr. Buencamino finding him guilty of
mismanagement etc., the respondent court, through the Hon. Jesus de Veyra,
issued the order of August 27, 1962 whose pertinent portion is quoted
above.

Upon the facts of the case, and
considering the precautionary measures adopted by the respondent court for the
protection of petitioner’s rights and interest in AMPARTS, We can not find our
way clear to ruling that said court had committed a grave abuse of discretion
in issuing the orders complained of.

WHEREFORE, the petition for certiorari is
dismissed, with costs.

Concepcion, C.J., Reyes, J. B. L.,
Regala, Makalintal, Bengzon, J. P., Zaldivar and Sanchez, JJ., concur
.

Barrera, J., on leave.