Strong and Strong vs. Repide 41 Phil.

947 PONENTE: Justice Peckham FACTS: Among the lands comprising the riar lands are the !ominican lands" the only #alua$le asset o%ned $y the corporation Philippine &ugar 'states !e#elopment (ompany )imited *Philippine &ugar 'states+. ,rancisco -utierre. /epide */epide+" de endant" %as the ma0ority stockholder and one o the i#e directors o Philippine &ugar 'states. 1e %as like%ise elected $y the $oard as the agent and administrator general o such company. 2he actual $ackdrop $eing during 3& occupation" the 3& -o#ernment %anted to secure title o#er the riar lands. 2o accomplish this o$0ecti#e" -o#ernor or the Philippines entered into negotiations or the purchase o the !ominican lands" during %hich /epide represented Philippine &ugar 'states. 2he irst o er o the -o#ernor %as to purchase the su$0ect lands in the amount o 45"043"619.47. As the ma0ority stockholder o Philippine &ugar 'states and %ithout prior consultation %ith the other stockholders" /epide re0ected the o er. ,or the second o er" the purchase price %as increased to 47"737"000. 8hile negotiations or the second o er %ere ongoing and %hile still holding out or a higher price o the !ominican lands" /epide took steps to purchase the 900 shares o stock o Philippine &ugar 'states. 2hese shares %ere o%ned $y Mrs. 'leanor &trong *&trong+ %hich %ere then in the possession o her agent" ,. &tuart Jones *Jones+. /epide" instead o seeing Jones" employed :au man %ho later on employed &loan" a $roker" to purchase the shares o &trong. Jones sold the 900 shares o &trong or 15"000 Me;ican currency. ,or this sale transaction a check o one /ueda /amos %as issued. )ater on" the negotiations or the purchase o the !ominican lands %ere concluded and a contract o sale %as su$se<uently e;ecuted. 2his sale transaction increased the #alue o the shares o stocks originally o%ned $y &trong rom 15"000 Me;ican currency to 75"675 3& currency. !uring the negotiations regarding the purchase o the shares o stock o &trong" not one %ord o the acts a ecting the #alue o this stock %as made kno%n to her nor her agent" Jones. A ter the sale o !ominican lands and a ter the purchase o the 900 shares o &trong" /epide $ecame the o%ner o 30"400 out o the 46"030 shares o Philippine &ugar 'states. 3 May 1909

&trong iled a complaint or the reco#ery o her 900 shares. &he argued that her agent Jones had no authority to sell her shares and that /epide raudulently concealed the acts a ecting their #alue. ISSUE: 8as there raud in e ecting the purchase o &trong=s shares> RULING: ?es. 8ith the actual circumstances o this case" it $ecame the duty o /epide" acting in good aith" to state the acts $e ore making the purchase o &trong=s shares. 2hat /epide %as one o the directors o Philippine &ugar 'states %as $ut one o the acts upon %hich lia$ility is asserted. 1e %as not only a director" $ut he o%ned three@ ourths o the shares o its stock" and %as" at the time o the purchase o the stock" administrator general o the company %ith large po%ers and engaged in the negotiations %hich inally led to the sale o the company=s lands at a price %hich greatly enhanced the #alue o the stock. 1e %as the negotiator or the sale o the !ominican lands and %as acting su$stantially as the agent o the shareholders o Philippine &ugar 'states $y reason o his o%nership o the shares in the company. Aecause o such o%nership and agency" no one kne% as %ell as he does a$out the e;act condition o the negotiations. 1e %as the only one %ho kne% o the pro$a$ility o the sale o the !ominican lands to the go#ernment and o the pro$a$le purchase price. 3nder these circumstances" /epide employed an agent to purchase the stock o &trong" concealed his o%n identity and his kno%ledge o the state o negotiations and their pro$a$le result. 2he concealment o his identity %hile procuring the purchase o the stock" $y his agent" %as in itsel strong e#idence o raud on the part o /epide. Ay such means" the more easily %as he a$le to a#oid <uestions relati#e to the negotiations or the sale o !ominican lands and actual misrepresentations regarding that su$0ect. 1e kept up the concealment as long as he could $y gi#ing the check o a third person /ueda /amos" or the purchase money. 2his mo#e o /epide %as a studied and intentional omission to $e characteri.ed as part o the deceit ul machinations to o$tain the purchase %ithout gi#ing any in ormation %hate#er as to the state and pro$a$le result o the negotiations and to o$tain a lo%er price or the shares o &trong. A ter the purchase o stock" he continued negotiations or the sale o the !ominican lands as the administrator general and e#entually entered into a contract o sale. 2he %hole transaction gi#es conclusi#e e#idence o the o#er%helming in luence /epide had in the negotiations and it is clear that the inal consummation %as in his hands at all times. OBITER DICTU :

2he directors are declared to $e mandatories o

the society and that they are

prohi$ited rom ac<uiring $y purchase" e#en at pu$lic or 0udicial auction" the property the administration or sale o %hich" may ha#e $een entrusted to them" and that this is the e;tent o the prohi$ition.