Corporate Law Case Digest: Datu Tagoranao Benito v. SEC (1983)

G.R. No. L-56655 July 25, 1983

Lessons Applicable: Preemptive Rights (Sec. 39) (Corporate Law)

FACTS:

• February 6, 1959: Articles of Incorporation (AIC) of Jamiatul Philippine-Al Islamia, Inc. (Jamiatul) (originally Kamilol Islam Institute, Inc.) were filed with the SEC
• December 14, 1962: approved AIC
• The corporation had an authorized capital stock of P200K divided into 20K shares at a par value of P10 each. Of the authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and fully paid for
• Datu Tagoranao Benito subscribed to 460 shares worth P4,600
• October 28, 1975: filed a certificate of increase of its capital stock from P200K to P1M
• November 25, 1975: stockholders meeting was held were P191,560.00 worth of shares were represented
• P110,980 worth of shares were subsequently issued by the corporation from the unissued portion of the authorized capital stock of P200,000
• Of the increased capital stock of P1M0, P160K worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman and Mrs. Moki-in Alonto.
• November 18, 1976: Datu Tagoranao filed with SEC a petition alleging that the additional issue (worth P110,980) was made in violation of his pre-emptive right to said additional issue and that the increase in the authorized capital stock was illegal considering that the stockholders of record were not notified of the meeting wherein the proposed increase was in the agenda
• SEC: 
• issuance by the corporation of its unissued shares was validly made and was not subject to the pre-emptive rights of stockholders
• directed Jamiatul to allow petitioner to subscribe thereto, at par value, proportionate to his present shareholdings, adding thereto the 2,540 shares transferred to him by Mr. Domocao Alonto and Mrs. Moki-in Alonto

ISSUES: 

1. W/N the issuance of the P110,980 of authorized capital stock of P200,000 is in violation of pre-emptive right - NO
2. W/N the issuance of the increase in the authorized capital stock is in violation of pre-emptive right

HELD: Dismissed for lack of merit

1. NO

• GR: pre-emptive right is recognized only with respect to new issue of shares, and not with respect to additional issues of originally authorized shares
• Theory: when a corporation at its inception offers its first shares, it is presumed to have offered all of those which it is authorized to issue
• original subscriber is deemed to have taken his shares knowing that they form a definite proportionate part of the whole number of authorized shares
• When the shares left unsubscribed are later re-offered, he cannot therefore claim a dilution of interest.

     2.  NO

• stockholders' meeting was held which included the increase of its capital stock from P200,000.00 to P1,000,000.00 
• he was not notified of said meeting and that he never attended the same as he was out of the country at the time
• administrative bodies will not be interfered with by the courts in the absence of grave abuse of discretion on the part of said agencies, or unless the aforementioned findings are not supported by substantial evidence