FINANCING CORPORATION OF THE PHILIPPINES v.

TEODORO
G.R. No. L-4900; August 31, 1953; Montemayor, J.
Digest prepared by Jackie Canlas
FACTS:
Lizares et al., in their own behalf and in behalf of the other minority stockholders of the Financing
Corporation of the Philippines sued the Corporation and J Amado Araneta, its President and GM,
alleging gross mismanagement and fraudulent conduct of the corporate affairs by Araneta and
asking that (1) the corporation be dissolved, (2) Araneta be declared personally accountable for
the unauthorized and fraudulent disbursements of the corporate assets and violations of the
Corporation Law and the by-laws of the Corporation, and (3) the best means to protect and
preserve the assets of Corporation is the appointment of a receiver.
Among the allegations specified in the complaint were:
1. wrongful and unauthorized diversion from corporate purposes and use for personal benefit;
2. unauthorized and profitless pledging of securities owned by Corporation to secure obligations
amounting to P588,645.34 of another corporation controlled by Araneta;
3. unauthorized and profitless using of the name of the Corporation in the shipping of sugar
belonging to other corporations controlled by Araneta to the benefit of said corporations in the
amount of at least P104,343.36;
4. refusal by Araneta to endorse to the Corporation shares of stock and other securities belonging
to it but which are still in his name;
5. negligent failure to endorse other shares of stock belonging to Corporation but still in the
names of the respective vendors; and
6. illegal and unauthorized transfer and deposit in the US of 6,426,281 shares of the Atok-Big
Wedge Mining Company;
7. refusal to allow minority stockholders to examine the books and records of the Corporation;
8. failure to call and hold stockholders' and directors' meetings;
9. virtual disregard and ignoring of the board of directors who has been and is conducting the
affairs of the Corporation under his absolute control and for his personal benefit and for the
benefit of the corporations controlled by him; and
10. irregularity in the keeping and errors and omissions in the books and failure of the same to
reflect the real and actual transactions of the Corporation.
Judge Teodoro granted petition for appointment of a receiver (Yulo).
The Corporation filed the present petition for certiorari with preliminary injunction to revoke and
set aside the order appointing a receiver, alleging that:
1. The appointment of a receiver was merely an auxiliary remedy;
2. The principal remedy sought by Lizares et al. was dissolution;
3. A suit for the dissolution of a corporation can be brought and maintained only by the State
through its legal counsel, and Lizares et al., much less the minority shareholders, have no
right or personality to maintain the action for dissolution.
4. Since the action cannot be maintained legally by Lizares et al., the auxiliary remedy of
appointment of a receiver has no basis.
The lower court granted the writ of preliminary injunction upon the filing of a bond by the
Corporation.
ISSUE/HELD: WON the appointment of a receiver by the lower court was proper YES.
PETITION DENIED. WRIT OF PRELIMINARY INJUCTION DISSOLVED.
RATIO:
GENERAL RULE: Minority shareholders of a corporation cannot sue and demand dissolution in a
private suit. The action should be brought by the Government through its legal officer, via a quo
warranto proceeding.
o EXCEPTION: cases wherein the intervention of the State cannot be obtained because the
complaint is a matter strictly between the shareholders and the corporation and does not
involve issues which involve acts/omissions warranting a quo warranto.

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When such action is brought, the trial court has jurisdiction and has discretion to grant the
prayer or not. Having such jurisdiction, the appointment of a receiver pendente lite is left to
the sound discretion of the trial court.
The appointment of a receiver upon petition by the minority shareholders is a power that must
be exercised with great caution, and should be exercised when necessary to protect their
rights, especially when they cannot obtain redress through or within the corporation.