Everett vs. The Asia Banking Corporation Facts: The plaintifs, by Thomas Cary Welch, Welch, complaint o the deendants and or cause o action against them allege: •
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This complaint complaint mentioned mentioned the deendant deendant the Asia Bank Bankin ing g Corp Corpor orat atio ion( n(th the e Bank Bank, , !as !as a ore oreig ign n bank bankin ing g corp corpor orat ation ion duly duly lice licens nsed ed to tran transa sact ct banking business in the "hilippine and its principal o#ce and place o business at $anila but ne%er has been been empo empo!e !ere red d by la! la! or lice licens nsed ed to do any any busin business ess other other than than commer commercia ciall bankin banking g in the "hilippine &slands' That the deendants deendants $ullen, Alred F' elly, $ears, and $acintosh !ere o#cers, agents and employees o the said Bank' The Teal and Company (the Company !as a domestic domestic corporat corporation ion duly incorpor incorporated ated under under the la!s o the "hilippine and principal o#ce and place o business business at $anila' $anila' The plaintif plaintifs s )%erett )%erett,, Cliford, Cliford, Teal Teal and *obinson *obinson !ere the principal stockholders in the Company that the deendant deendant Barclay !as the only other stockholder, o!ning one share' &n +-+, The Company has become indebted to the .rm o /' W' "eabody and Company in about the sum o "011, "011,11 111, 1, being being or tracto tractors, rs, plo!s plo!s and parts parts !hich had been ordered ordered and deli%ered, deli%ered, the Bank and other banks in $anila held drats accepted by the Company under said /' W' "eabody and Company2s guara guarant ntee ee'' The Compan Company y made made paymen payments ts on its indebtedness through the Bank to /' W' "eabody and Company' &n +-+, the Bank persuaded the Company and the said /' W' "eabody and Co' and 3mith, irkpatrick and and Co' Co' to ente enterr into into a so call called ed 4cr 4credit editor ors s
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agree agreemen ment4 t4 !ith !ith itsel itsel,, !here !herein in it !as mutua mutually lly agreed that neither o the parties should take action to collect its debts rom the Company or the term o t!o years ater the date thereo' The plaintifs ha%e no copy o said agreement but beg lea%e to reer to the original o same, in possession o the Bank, or greater cert ainty' ainty' &n 5ecember, +--, said company !as sol%ent and in the en6oyment en6oyment o a large, large, gro!ing gro!ing,, and lucrati%e lucrati%e busi busine ness ss and and in the the poss posses essi sion on o a %alu %aluab able le reputation and good7!ill and had done its banking business and .nancing almost e8clusi%ely thru and !ith !ith the the Bank Bank and by reaso reason n o such such contin continue ued d relations the o#cers o the Company had ac9uired trust trust and con.de con.denc nce e in the the integ integrit rity y and and good good intentions o the said bank and its o#cers and the other deendants' Toward oward the end of the year 1922, the Bank, Bank, through through its defendant defendant Mullen represente represented d to the Copany Copany and its anag anagers ers that for the prote!tion "oth of the Bank and the Copany it was advisa"le for the "oth that the Bank shou should ld tep tepor orar aril ily y o"ta o"tain in !ont !ontro roll of the the anage anageen entt and and a#airs a#airs of the Copan Copany y in order that the a#airs of the Copany !ould "e !ondu!ted "y the Bank without interferen!e or hindran!e fro outside, and to this end that it would "e ne!essary for the sto!kholders in the Copan Copany y to pla!e pla!e their their shares shares therein therein in a $oting Trust to "e held "y the Bank would then %nan!e the Copany under its own supervision and that if and when the sae were su!!essful and and in posi positi tion on to resu resue e inde indepe pend nden entt operation the said trust would "e terinated and the sto!k returned to its true owners, and in !ase !ase the the Bank Bank de!i de!ide ded d to dis! dis!on onti tinu nue e
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operation under the said trust then the sto!k also would "e so returned. &t !as also stated by $ullen that in order to protect the mutual interests o the Bank and the Company it !as necessary to carry into efect the proposed %oting trust !ithout the kno!ledge o the creditors place the Bank in an ad%antageous position !ith regard to them' The plaintifs !ere induced to sign and did sign and deli%er to the Bank simultaneously a so7called 4oting Trust Agreement,4 e8ecuted by the plaintif stockholders and a $emorandum o Agreement e8ecuted by the Company' 3ubse9uent to the e8ecution and deli%ery o the %oting trust and $;A the deendant $ullen, caused and procured, by %irtue o the po!ers delegated in the said %oting trust, the displacement and remo%al rom the Board o 5irectors o the Company o each and e%ery person !ho !as at the time o the e8ecution o the said %oting trust a stockholder in the Company and the substitution in their places as such directors, the deendants, or employees o the Bank, and no subse9uent time did the trustee allo! to act as a 5irector o the Company any person !ho !as in act a stockholder in the Company, and the latter has been e8clusi%ely controlled and managed by the said deendants' To deraud these plaintifs, the ne! so7called directors proceeded to remo%e rom o#ce the 3ecretary o the Company, and to discharge rom employment all o the old managers and the stockholders ("laintifs, !ho !ere also the real o!ners' The said deendants ga%e pledges and mortgages rom the Company to the Bank and entered contracts oreclose and to sell the property o the Company !ithout kno!ing the interests o the Company in
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!hich the Company !as not represented by anyone deendant and tricked and deluded the courts into gi%ing 6udgments in !hich the rights o the real parties !ere concealed and unkno!n to the courts' &n August +-0, said deendants, .led in the Bureau o Commerce and &ndustry o the "hilippine &slands, articles o incorporation o a corporation called the 4"hilippine $otors Corporation,4 and the deendants !ere o#cers or employee o the Bank' 3uch incorporation !as a raud upon these plaintifs or the reason that it !as intended or the sole purpose o taking o%er the assets o the Company and said deendants !ere enabled to efectuate such intent by reason o their positions as o#cers and employees o the Bank and because each o them !ere de facto directors o the Company, by reason o their appointments by deendant $ullen, the oting Trustee' Thereater said Bank turned o%er to the "hilippine $otors Corporation all o the business and assets o the company o e%ery name nature and description' 3ince then, the "$C has continued to conduct and ad%antage itsel o the business o the Company'
&ssue: W;< the plaintifs, not being stockholders in corporation, had a legal right to proceed the case= >)3
the
/eld: The court belo! held ? that the corporation Teal and Company is a necessary party plaintif and that the plaintif stockholders, not ha%ing made any demand on the Board to bring the action, are not the proper parties plaintifs' But, like most rules, the rule in &uestion has its e'!eptions. (t is alleged in the !oplaint and, !onse&uently, aditted through
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the deurrer that the !orporation Teal and Copany is under the !oplete !ontrol of the prin!ipal defendants in the !ase, and, in these !ir!ustan!es, it is o"vious that a deand upon the Board of )ire!tors to institute an a!tion and prose!ute the sae e#e!tively would have "een useless, and the law does not re&uire litigants to perfor useless a!ts. &t !as necessary or the plaintifs to set orth in ull the history o the %arious transactions !hich e%entually led to the alleged loss o their property and, in making a ull disclosure, reerences to the "hilippine $otors Corporation appear to ha%e been
ine%itable' &t is to be noted that the plaintifs seek no 6udgment against the corporation itsel at this stage o the proceedings' The 6udgment o the court belo! is thereore re%ersed, the deendants demurrer is o%erruled Take note: The court recogni@ed the right o the transerring stockholders to set aside the trust agreement !hen their rights are trampled upon by the trustee' nder the general principles o la!, stockholders !ho are derauded by their trustees ha%e a right to re%oke the trust and reco%er damages rom such trustees'
