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Turner v.

Lorenzo Shipping Corporation


G.R. No. 157479

Facts:

Petitioners Philip and Elnora Turner were the owners of 1,010,000 shares of
stocks of Respondent Lorenzo Shipping Corporation.
Petitioners voted against the restriction of pre-emptive right to newly issued
stocks, to be effected via the amendment of the articles of incorporation of
the Respondent Corporation. They alleged that it is prejudicial to their
interests as shareholders.
Thus, through the exercise of their appraisal right, they demanded the
payment of their shares at P2.276/share (P2,298,760.00).
Respondent Corporation countered that it was an acceptable amount alleging
that, the FMV of Petitioners shares before the implementation of the
corporate action to deny pre-emptive right was at P0.41/share (P414,100.00).
Respondent Corporation further alleged that the corporation had no
unrestricted retained earnings at the time the demand was made.
Disagreement to stock valuation led to the constitution of an appraisal
committee which valued the shares in dispute at P2.54/share (2,565,000.00).
Petitioners then asked for payment at said value plus 2% interest per month
from the date of original demand.
Respondent Corporation, through a letter, told Petitioners that they cannot
pay due to the absence of URE, and that the corporation had a deficit of
P72,973,114.00. This led petitioner to file an action for collection of sum of
money and damages with RTC Makati.
Respondent Corporation alleged that the cause of action of the Petitioners
has not yet accrued due to the absence of the formers URE
RTC Makati, in finding that the suit was an intracorporate dispute, ordered the
re-raffle of the case pursuant to the Interim Rules of Intracorporate Dispute.
The case was raffled in RTC Manila, the court which exercise territorial
jurisdiction in the place where the principal office of Respondent Corporation
is found
RTC Manila, in ruling in favor of the Petitioners and ordering the Respondent
to pay, stated that the Corporation Code does not require that URE must exist
at the time of demand. Even if there is no URE at such time, if there would be
URE later, the FMV of the stocks shall be paid, provided that there must be
sufficient funds to cover creditors after such payment.
Respondents, aggrieved, elevated the case to the Court of Appeals which
reversed the RTC Decision and enjoined the payment to the petitioners. This
prompted the Petitioners to elevate the same to the Supreme Court, thus,
this recourse.

Issue: Whether or not the Court of Appeals erred in reversing the RTC Decision.

Ruling:

No. The RTC erred in ordering the Respondent Corporation to pay, and that
the same exceeded in the exercise of its jurisdiction in rendering judgment in
favor of Petitioners and in the issuance of writ of execution. A stock holder
who dissents certain corporate actions has the right to demand FMV of his
share (appraisal right), provided that the corporation has URE as provided for
under Sec. 81 of the Corporation Code. Such right may be exercised when
there is a change in the AoI prejudicing the interests of the stockholder. No
payment shall be made unless there are unrestricted retained earnings in its
books to cover such payment. Payment by the corporation to a dissenting
stockholder exercising his appraisal right without the existence of URE is in
violation of the trust fund doctrine which proscribes the distribution of assets
to a stockholder without first paying corporate debts because the assets of
the corporation are held in trust by the same for the benefit of its creditors.
Payment made under such circumstance is prejudicial to the corporate
creditors and is null and void. Creditors are always preferred over
stockholders.
Petitioners cause of action is premature, because there is no URE at the time
of demand. Right to demand has not yet accrued. No valid demand, no
actionable wrong. The subsequent existence of URE does not cure the lack of
cause of action. Petition for Certiorari Denied. Yeah.