10. Strong v Gutierrez Repide
G.R. No. 2101. November 15, 1906.
Plaintiff-Appellees: ELEANOR ERICA STRONG AND RICHARD P. STRONG
Defendant-Appellant: FRANCISCO GUTIERREZ REPIDE
RULING: Denied. Their accountability is expressly confined to property
"with the administration or alienation of which they are charged." They
are not charged with the administration or alienation of the shares in
the hands of the members and in respect to them they are not
mandatories and hold no trust relation to the owners.
SUMMARY OF FACTS: (found online, not in the case)
This is an insider trading case arising from the sale of stock in the Philippine
Sugar Estates Development Company to one of the directors of the company. The
defendant, while negotiating the purchase of the plaintiff’s stock, was
simultaneously negotiating the sale of the corporate land assets to the Philippine
government. The defendant took extraordinary efforts to conceal the information
about the negotiations. As a result, the purchaser was able to obtain the stock
from the stockholder for about one-tenth of its actual value.
FACTS
This is an action to recover 800 shares of capital stock of the Philippines Sugar
Estate Development Company Limited, (PSEDC) an anonymous society formed to
hold the Dominican Friar lands.
The shares were the property of the Plaintiff Mrs. Strong, as part of the estate of
her first husband. Defendant Repide is the director, managing agent and is a
majority stockholder of the society. The defendant purchased the said property
through a broker which dealt with the plaintiff’s agent who made the sale without
her knowledge. The script (of the property) is in the possession of the agent Jones,
who was acting gratuitously as agent for the plaintiff, not only under a written
power special in terms to collect money but also as a general agent managing all
her business under a parol employment, the precise terms of which are not in
evidence. He held other securities for the plaintiff and had on one prior occasion,
at least, without special instruction, sold other of her stocks, understanding that
the act was within the scope of his general agency1
Plaintiff’s argument:
Her agent had no power to sell or deliver her stock in the Philippine Sugar
Estates Development Company, Limited. That the sale, through her agent, was
procured by fraud on the part of the defendant.
Defendant’s argument:
Plaintiff is estopped to question Jones’ authority to sell.
It is also contended that the defendant was protected in his purchase by the
provisions of the Code of Commerce. This stock was, pursuant to the charter of
1Art. 1712 Civil Code “An agency stated in general terms only includes acts of
administration. In order to compromise, alienate, mortgage, or to execute any, other act of
the company, payable to the bearer and was therefore transferable by delivery.
ISSUES
1. Whether or not the agent, Jones, has the authority to sell the stock – NO
2. Whether or not consent was gained by deceit the director’s "insidious
machinations" inducing the plaintiff to execute a contract (art. 1269). -
NO
RULING: The Respondent Judge should have pierced the veil of corporate fiction
of PADCO.
RATIO
1. Power of agency may be either oral or written, may stand by itself or may be
included in the general power, the one vital thing being that the right to sell shall
be express or shall be a necessary ingredient of the power that is expressed.
The only express commission in evidence to dispose of this or any stock id found
in an interview between the plaintiffs and Jones on the Luneta, in Manila, before
the negotiation, in which she told him, speaking of her shares, "not part with
them until I got their face value. This is a vague statement
The sale by Jones of other stock at another time, his possession of the shares,
and the reference of the broker to him by the plaintiff’s husband add force to
those words. But all these things fail to reveal the terms of the preexisting power;
it may have been general or special, it may have been express, but on the other
hand it may have been, as indicated by the evidence, merely assumed by the
plaintiff and Jones to follow as a matter of course, from his general power of
administration. This would lead to the very assumption prohibited by article
1713. It is also apparent that the general management of the plaintiff’s property
did not necessitate incidentally the sale of stock.
It is also apparent that the general management of the plaintiff’s property did not
necessitate incidentally the sale of stock. We fail to find, therefore, proof of an
effective power given Jones to dispose of this stock.
Acts of agents, beyond the limitation of their power, are null; third persons who
dealt with them at their peril and are bound to inquire as to the extent of the
power of the agent with whom they contract; that where neither the actual power
nor the appearance of it, for which the principal is responsible, exists, a third
party is not protected without such inquiry. In this case the defendant is not
shown to have made an inquiry whatever, but apparently relied unquestioningly
upon Jones’ assumption of authority and took risk in so doing.
strict ownership an express mandate is required”

2. The machinations with which the defendant is charged consist in the
suppression of his identity while negotiating for the stock and were paying for it
and also of his intention as majority stockholder in the company to close the
negotiation then pending with the Government for the sale of the friar lands
owned by the company. The prospect of such a sale would have materially
affected the price of the stock. This negotiation and the defendant’s management
of it in behalf of the vendors was known to Jones and had been for same time a
matter of public notoriety and newspaper comment in the Islands.
"2. Mandatories, the properties with the administration or alienation of which
they have been charged." (See Manresa’s Commentary on this article, vol. 10, p.
100.)
Their accountability is this expressly confined to property "with the
administration or alienation of which they are charged." They are not charged
with the administration or alienation of the shares in the hands of the members
and in respect to them they are not mandatories and hold no trust relation to the
owners.

The members have no title to corporate property as such, which, on the contrary,
Neither the plaintiff nor her agent applied to the defendant for information or is distinct from the shares held by them. The right of the associate in a society is
communicated with him in a way. Nor is the defendant shown to have put forth only in effect a right to an interest remaining after liquidation and not an actual
statements, either in a public or a private, for the purpose of influencing the sale. and active ownership in the objects which compose the social property.
Consequently the defendant violated no duty in not communicating to the
The court found nothing irregular with the defendant’s acts. He was its managing plaintiff his purpose in buying her shares and has been guilty of no fraud.
director and conducted this transactions without formal authorization by his
society but after informal discussion of the director’s meeting. He was also in
person the holder of a large majority of the stock, thus not only controlling the
negotiations with the Government through all its stages but also its ultimate
result by his own vote in the shareholders’ meeting.
Did his knowledge of what was being done and what would be done incapacitate
him dealing with a fellow- stockholder not so enlightened? Was he in duty bound
to disclose either his information or his intentions or even his identity?
While up to a recent date we have no private corporations, so termed in our
statutes, we have their likeness in anonymous societies or partnerships. The
essential concept of a corporation is a legal entity endowed with succession of
membership and merging in itself the primary individual liability and right of the
societies. Individual liability is completely extinguished; the membership is
determined by ownership of stock and the managers are chosen by stockholders.
They are declared to be mandatories of the society (Code of Commerce, 156), and
they are also responsible to the individual stockholders (Dalloz, Societe, arts.
1499 and 1539). But nowhere to do we find their responsibility extended beyond a
corporate property actually under their control. It is not suggested that they owe
any duty to the members in respect to their individual stock, which is fully
recognized as a separate property, whose character and transmission is provided
for in laws peculiar to it. This appears to be the limit of their responsibility under
the law governing this case. Article 1459 of the Civil Code
reads:jgc:chanroblecom.ph

"The following persons can not acquire by purchase, even at public or judicial
auction, neither in person by an agent:jgc:chanrobles.com.ph

"1. The tutor or protutor, the goods of the person or persons who are under his
tutelage.