CHASE vs. CFI

G.R. No. L-20395 May 13, 1985

Corporation, Derivative Suit

FACTS:

Elton Chase in his capacity a minority stockholder of American Machinery and Parts Manufacturing, Inc. (AMPARTS) and in behalf of the other stockholders of said corporation similarly situated and for the benefit of Amparts filed a derivative suit against Dr. Victor Buencamino, a major stockholders and some other officers, charging them with breach of trust; praying for their removal as directors and, if necessary, for the dissolution and liquidation of said corporation.

The lower court ruled that there was breach of obligation committed by Dr. Buencamino but denied the application for receivership hence ordering the defendant to file a bond amounting to P100,00.00 to answer for the damages that plaintiff may suffer by the non-appointment of a receiver.

The plaintiff contended that the respondent court erred in not ordering the ouster of the defendant from management and in not granting the applied dissolution and receivership.

ISSUE:

W/N removal of defendants who are stockholders/directors shall be granted?

RULING:

In this jurisdiction, it is a "fundamental and settled rule that conclusions and findings of fact by the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the case." 

We have reviewed the evidence on record thoroughly and We are satisfied that the lower court has not overlooked factors of substance and value which if considered, might affect the result of the case. We therefore uphold the findings and conclusions of the lower court.

The record further shows that there were other precautionary measures adopted by lower court for the protection of Chase's rights and interest in Amparts. 

The removal of a stockholder (in this case a majority stockholder) from the management of the corporation and/or the dissolution of a corporation in a suit filed by a minority stockholder is a drastic measure. It should be resorted to only when the necessity is clear which is not the situation in the case at bar.