Ramon C. Lee and Antonio Lacdao vs CA, Sacoba Manufacturing Corp.

,
Pablo Gonzales, Jr. and Thomas Gonzales
GR No. 93695
February 4, 1992

Facts:
The petitioners, as president and vice president of Alfa Integrated Textile Mills (ALFA), by virtue of the
voting trust agreement executed in 1981, disposed of all their shares through assignment and delivery
in favor of the DBP, as trustee.

In 1985, a complaint for sum of money was filed by the International Corporate Bank, Inc. against the
private respondents who, in turn, filed a third party complaint against ALFA and the petitioners. The trial
court denied the motion to dismiss the 3rd party complaint filed by petitioners and ordered the
respondents to serve summons to ALFA.

Initially the summons was served to ALFA through the DBP as a consequence of the petitioner's letter
informing the court that the summons for ALFA was erroneously served upon them considering that the
management of ALFA had been transferred to the DBP. On the other hand, the DBP claimed that it was
not authorized to receive summons on behalf of ALFA since the DBP had not taken over the company
which has a separate and distinct corporate personality and existence.

Private respondents filed a Manifestation and Motion for the Declaration of Proper Service of Summons
which the trial court granted, and which was opposed by the petitioners contending that there was
improper service of summons because they were no longer officers of ALFA by virtue of a voting trust
agreement.

Petitioners contend that the voting trust agreement between them and the other stockholders of
ALFA, as one party, and the DBP as the other, the petitioners assigned and transferred all their shares
to DBP. Therefore, petitioners should not be served with summons.

Issue:
WON the voting trust agreement conferred upon DBP the rights of petitioners as Director and Officers of
ALFA, hence an invalid service of summons on them

Decision:
Yes, the voting trust agreement results in the separation of the voting rights of a stockholder from his
other rights such as the right to receive dividends, the right to inspect the books of the corporation, the
right to sell certain interests in the assets of the corporation.

Section 59 of the Corporation Code provides that a voting trust agreement may confer upon a trustee
not only the stockholder’s voting rights but also other rights pertaining to his shares as long as the
voting trust agreement is not entered for the purpose of circumventing the law against monopolies
and illegal combinations in restraint of trade or for fraud.
Under the old Corporation Code, the eligibility of the Director cannot be adversely affected by the
simple act of being a party to a voting trust agreement inasmuch as he remains owner of the shares.
With the omission of the phrase “in his own right” under the new Code, in order to be eligible as a
director, the legal title to the stock as appearing on the books of the corporation is material, not mere
beneficial ownership.

Thus, by virtue of the 1981 voting trust agreement, petitioners disposed of all their shares through
assignment and delivery in favour of the DBP, as trustee. Petitioners ceased to own at least one share
standing in their names on the books of ALFA.

Despite the provision in the voting trust agreement that it should expire after five years or until the
obligation remains outstanding, it may be seen that at the time of the service of summons on ALFA
through the petitioners in 1987, the voting trust agreement was not yet terminated so that the legal title
of the stocks of ALFA still belonged to the DBP.

The Rules of Court on service of summons provide that service must be made on a representative
specifically enumerated in the Rules who are so integrated with the corporation sued as to make it a
priori supposable that he will realize his responsibilities and know what he should do with any legal
papers served on him.

Petition GRANTED, the service of summons upon ALFA, through the petitioners, is not valid.