01 Mathay v. Consolidated Bank and Trust Co
01 Mathay v. Consolidated Bank and Trust Co
01 Mathay v. Consolidated Bank and Trust Co
*
No. L-23136. August 26, 1974.
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* SECOND DIVISION.
560
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as said above, did not constitute the common interest over the
subject matter indispensable in a class suit. The right to purchase
or subscribe to the shares of the proposed Bank, claimed by
appellants herein, is analogous to the right of preemption that
stockholders have when their corporation increases its capital.
The right of preemption, it has been said, is personal to each
stockholder, and while a stockholder may maintain a suit to
compel the issuance of his proportionate share of stock, it has
been ruled, nevertheless, that he may not maintain a
representative action on behalf of other stockholders who are
similarly situated.
Same; Same; In a class suit there must be a showing that
sufficient representative parties had been joined.—Where it
appeared that no sufficient representative parties had been
joined, the dismissal by the trial court of the action, despite the
contention by plaintiffs that it was a class suit, was correct.
Same; Motion to Dismiss; When ground of motion to dismiss
is lack of cause of action only allegations of the complaint must be
considered.—As a rule the sufficiency of the complaint, when
challenged in a motion to dismiss, must be determined exclusively
on the basis of the facts alleged therein.
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subscription. These alleged specific facts did not even show that
appellants were entitled to subscribe to the capital stock of the
proposed Bank, for said right depended on a condition precedent,
which was, that they were qualified under the law to become
stockholders of the Bank, and there was no direct averment in the
complaint of the facts that qualified them to become stockholders
of the Bank. The allegation of the fact that they subscribed to the
stock did not, by necessary implication, show that they were
possessed of the necessary qualifications to become stockholders
of the proposed Bank.
Same; Trusts; Question of law and facts; Allegation that
defendants held shares as trustees for plaintiffs is a condusion of
law.—The allegation in the complaint that the defendants-
appellees held their shares “in trust” for plaintiffs-appellants
without averment of the facts from which the court could conclude
the existence of the alleged trust, was not deemed admitted by the
motion to dismiss for that was a conclusion of law.
Same; Question of law and facts; Allegation that one acquired
stocks in breach of law, trust or agreement is one of law.—The
allegation that the defendants-appellees acquired stockholdings
far in excess of what they were lawfully entitled, in violation of
law and in breach of trust and of contractual agreement, is also
mere conclusion of law.
Same; Same; Allegation that an act was unlawful or wrongful
is a
563
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ZALDIVAR, J.:
568
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569
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570
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571
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572
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573
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574
there were three types of class suits, namely: the true, the
hybrid, and the spurious, and these three had only one
feature in common, that is, in each the persons constituting
the class must be so numerous as to make it impracticable
to bring them all before the court. The authorities cited by
plaintiffs-appellants refer to the spurious class action (Rule
23 (a) (3) which involves a right sought to be enforced,
which is several, and there is a common question of law or
fact affecting
14
the several rights and a common relief is
sought. The spurious class action is merely a permissive
joinder device; between the members of the class there is
no jural relationship, and the right or liability of each is
distinct, the class being formed15solely by the presence of a
common question of law or fact. This permissive joinder is
provided in Section 6 of Rule 3, of our Rules of Court. Such
joinder is not and cannot be regarded as a class suit, which
this action purported and was intended to be as per
averment of the complaint.
It may be granted that the claims of all the appellants
involved the same question of law. But this alone, as said
above, did not constitute the common interest over the
subject matter indispensable in a class suit. The right to
purchase or subscribe to the shares of the proposed Bank,
claimed by appellants herein, is analogous to the right of
preemption that stockholders have when their corporation
increases its capital. The right of preemption,
16
it has been
said, is personal to each stockholder, and while a
stockholder may maintain a suit to compel the issuance of
his proportionate share of stock, it has been ruled,
nevertheless, that he may not maintain a representative
action on behalf of other stockholders who are
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14 See Barron and Holtsoff, Federal Practice and Procedure Vol 2, page
139.
15 Moore’s Federal Practice, Vol. 3, pages 3442–3443.
16 11 Fletcher’s Cyclopedia of the Law of Private Corporation 1932,
page 231.
575
17
similarly situated. By analogy, the right of each of the
appellants to subscribe to the waived stocks was personal,
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17 Dousman v. Wisconsin & L.S. Min. & Smelting Co., 40 Wis. 418 in 12
L.R.A., New Series, 1908, page 972.
18 Brief for the Plaintiffs-Appellants and Movants-Intervenors-
Appellants, page 25.
19 Niembra, et al., vs. Director of Lands, L-20084, July 17, 1964, 11
SCRA 525, 528.
20 Brief for Plaintiffs-Appellants and Movants-Intervenors-Appellants,
pages 32–34.
576
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577
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578
27
appropriate relief . On the other hand, Section 3 of Rule 6
of the Rules of Court provides that the complaint must
state the ultimate facts constituting the plaintiffs cause of
action. Hence, where the complaint states ultimate facts
that constitute the three essential elements of28 a cause of
action, the complaint states a cause of action; otherwise,
the complaint must succumb to a motion to dismiss on that
ground.
The legal principles having been premised, let us now
analyze and discuss appellant’s various causes of action.
Appellants’ first cause of action, pursuant to what has
been premised above, should.have consisted of: (1) the right
of appellants as well as of the other CMI stockholders to
subscribe, in proportion to their equities established under
their respective “Pre-Incorporation Agreements to
Subscribe”, to that portion of the capital stock which was
unsubscribed because of failure of the CMI stockholders to
exercise their right to subscribe thereto; (2) the legal duty
of the appellees to have said portion of the capital stock to
be subscribed by appellants and other CMI stockholders;
and (3) the violation or breach of said right of appellants
and other CMI stockholders by the appellees.
Did the complaint state the important and substantial
facts directly forming the basis of the primary right
claimed by plaintiffs? Before proceeding to elucidate this
question, it should be noted that a bare allegation that one
is entitled to something is an allegation of a conclusion.
Such allegation adds nothing to the pleading, it being
necessary to plead specifically
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the facts upon which such
conclusion is founded. The complaint alleged that
appellants were stockholders of the CMI; that as such
stockholders, they were entitled, by virtue of the resolution
of March 28, 1962, to subscribe to the capital stock of the
proposed Consolidated Bank and Turst Co., at par value to
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27 Ma-ao Sugar Central Co., Inc. vs. Barrios, et al., 79 Phil. 666, 667;
Ramitere, et al. vs. Montinola Vda. de Yulo, et al. L-1975l, February 28,
1966, 16 SCRA 251, 255.
28 Community Investment and Finance Corp. vs. Garcia, 88 Phil. 215,
218.
29 41 Am. Jur., page 303.
579
“If from the facts in evidence, the result can be reached by that
process of natural reasoning adopted in the investigation of truth,
it becomes an ultimate fact, to be found as such. If, on the other
hand,
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580
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581
Board of Organizers
38
of the defendant Bank and their
assignees"; that in the Articles of Incorporation prepared
by the Board of Organizers, the individuals-defendants-
appellees
39
alone appeared to have subscribed to the 50,000
shares; and that individuals-defendants-appellees
40
again
subscribed to all the additional 30,000 shares. From these
facts, appellants concluded that they were denied 41
their
right to subscribe in proportion to their equities; that the
individuals-defendants-appellees unlawfully acquired
stockholdings far in excess of what they were lawfully
entitled in violation of 42law and in breach of trust and of
contractual agreement; and that, because of matters
already alleged, the individuals-defendants-appellees “hold 43
their shares in the defendant bank in trust for plaintiffs."
The allegeation in the complaint that the individuals-
defendants-appellees held their shares “in trust” for
plaintiffs-appellants without averment of the facts from
which the court could conclude the existence of the alleged
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582
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583
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584
———o0o———
585
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