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De La Rama VS. Ma-Ao Sugar Central Co. (1969)

De La Rama et al. contended that Ma-ao Sugar Central Co.'s president invested PHP 300,000 in Philippine Fiber Processing Co. Inc. without proper board authorization. The Supreme Court ruled that the investment was valid because (1) investments in other corporations can be made to further the corporate purpose, and (2) Philippine Fiber's bag manufacturing business fell under Ma-ao's needs as a sugar producer. The Court also noted that boards have discretion to invest corporate funds to generate returns without stockholder approval.

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57 views1 page

De La Rama VS. Ma-Ao Sugar Central Co. (1969)

De La Rama et al. contended that Ma-ao Sugar Central Co.'s president invested PHP 300,000 in Philippine Fiber Processing Co. Inc. without proper board authorization. The Supreme Court ruled that the investment was valid because (1) investments in other corporations can be made to further the corporate purpose, and (2) Philippine Fiber's bag manufacturing business fell under Ma-ao's needs as a sugar producer. The Court also noted that boards have discretion to invest corporate funds to generate returns without stockholder approval.

Uploaded by

Allen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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De La Rama VS. Ma-ao Sugar Central Co.

(1969)

Facts:
De la Rama et. al. contend that Ma-ao Sugar Central through its President, subscribed Php
300,000 worth of capital stock of Philippine Fiber Processing Co. Inc. They allege that the time of the first
two payments were made there was no board resolution authorizing the investment and that it was
only before the third payment that the President was so authorized by the Board of Directors. De la
Rama also contends that even assuming arguendo, that the said Board Resolutions are valid, the
transaction is still wanting in legality, no resolution having been approved by the affirmative vote of the
stockholders holding shares in the corporation, entitling them to atleast 2/3 of the voting power.

Issue:
W/N the investment of corporate funds of Ma-ao were in violation of corporation law.

Ruling:
No.
Investment of corporate funds in another corporation if done in pursuance of the corporate
purpose, does not need the approval of the stockholders, but where the purchase of the shares of
another corporation is done solely for investment and not to accomplish the purpose of its
incorporation, the vote of the approval of the stockholders is necessary. The investment made in
Philippine Fiber was upheld by the SC. Philippine Fiber was engaged in the manufacture of bags or
investments in another corporation engaged in the manufacture engaged in the manufacture of bags.
Since the sugar central is engaged in the manufacture of sugars, sugar bags necessarily would come
under the purview of its needs under the regular course of business.
Any corporation whatever its primary purpose has a choice of placing such fund either in savings
or time deposit account or in money market placements, or treasury bills, or even in shares of stocks of
other corporations which are traded in the stock exchange. The exercise of such business judgment on
the part of the board in consistency with the primary purpose, since it is expected even from the
stockholders to believe, that it is within the ordinary business discretion of the Board to place the
corporation’s investible fund in the form of investment that would yield the best possible return to the
corporation and would not require the ratification of the stockholders or members each time.

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