VII.

Directors, Trustees and Officers

A. Term; qualifications etc.
Case No. 1
Seeres vs.COMELEC
FACTS: In 1999, Melquiades Robles was elected president and chairperson of BUHAY, a
party-list group duly registered with the Commission on Elections (COMELEC). The
constitution of BUHAY provides for a three-year term for all its party officers, without reelection. BUHAY participated in the 2001 and 2004 elections, with Robles as its president.
All the required Manifestations of Desire to Participate in the said electoral exercises,
including the Certificates of Nomination of representatives, carried the signature of
Robles as president of BUHAY. On January 26, 2007, in connection with the May 2007
elections, BUHAY again filed a Manifestation of its Desire to Participate in the Party-List
System of Representation. As in the past two elections, the manifestation to participate
bore the signature of Robles as BUHAY president.
Dr. Hans Christian Seeres, on the other hand, filed with the COMELEC a Petition to Deny
Due Course to Certificates. In it, Seeres alleged that he was the acting president and
secretary-general of BUHAY, having assumed that position since August 17, 2004 when
Robles vacated the position. Seeres also claim that the nominations made by Robles
(nominations pertaining as to who should represent BUHAY in Congress) were, for lack of
authority, void owing to the expiration of the latters term as party president.
Furthermore, Seeres asserted that Robles was, under the Constitution, disqualified from
being an officer of any political party, the latter being the Acting Administrator of the
Light Railway Transport Authority (LRTA), a government-controlled corporation. Robles, so
Seeres would charge, was into a partisan political activity which civil service members,
like the former, were enjoined from engaging in.
On July 9 and July 18, 2007, respectively, the COMELEC issued two resolutions
proclaiming BUHAY as a winning party-list organization for the May 2007 elections
entitled to three (3) House seats and it also declared Robles as the duly authorized
representative of BUHAY.
ISSUE: Whether or not Robles should be disqualified as president of BUHAY.
HELD: No, Robles is not disqualified as the president of BUHAY. His being the chairman
of LRTA and the president of BUHAY, a party-list group, is not compatible. There is no law
prohibiting that the LRTA chair cannot be a president of a party-list group. Further, Robles
is not guilty of electioneering. Robles act of nominating BUHAY representatives to
Congress is not electioneering. The crime electioneering is clearly defined under Section
79 (b) of the Omnibus Election Code but Robles did not commit any act defined
thereunder.
Anent the issue that Robles term as president of BUHAY already expired when he made
the nominations hence the nominations are void, the Supreme Court ruled that the
nominations are valid. This is because of the Hold-Over doctrine under corporation
law. As a general rule, officers and directors of a corporation hold over after the

expiration of their terms until such time as their successors are elected or appointed. The
holdover doctrine has, to be sure, a purpose which is at once legal as it is practical. It
accords validity to what would otherwise be deemed as dubious corporate acts and gives
continuity to a corporate enterprise in its relation to outsiders.
Case No. 2
South Cotabato vs Sto. Tomas
FACTS:
Case No. 3
Lopez Realty vs Spouses Tanjangco
HELD:
Anent the first procedural issue, the Court had summarized the jurisprudential principles
on the matter in Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue.
[15] In said case, we held that a President of a corporation, among other enumerated
corporate officers and employees, can sign the verification and certification against of
non-forum shopping in behalf of the said corporation without the benefit of a board
resolution. We quote the pertinent portion of the decision here:
It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code,
clearly enunciates that all corporate powers are exercised, all business conducted, and
all properties controlled by the board of directors. A corporation has a separate and
distinct personality from its directors and officers and can only exercise its corporate
powers through the board of directors. Thus, it is clear that an individual corporate officer
cannot solely exercise any corporate power pertaining to the corporation without
authority from the board of directors. This has been our constant holding in cases
instituted by a corporation.
In a slew of cases, however, we have recognized the authority of some corporate officers
to sign the verification and certification against forum shopping. In Mactan-Cebu
International Airport Authority v. CA, we recognized the authority of a general manager
or acting general manager to sign the verification and certificate against forum
shopping; in Pfizer v. Galan, we upheld the validity of a verification signed by an
employment specialist who had not even presented any proof of her authority to
represent the company; in Novelty Philippines, Inc. v. CA, we ruled that a personnel
officer who signed the petition but did not attach the authority from the company is
authorized to sign the verification and non-forum shopping certificate; and in Lepanto
Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we
ruled that the Chairperson of the Board and President of the Company can sign the
verification and certificate against non-forum shopping even without the submission of
the boards authorization.
In sum, we have held that the following officials or employees of the company can sign
the verification and certification without need of a board resolution: (1) the Chairperson
of the Board of Directors, (2) the President of a corporation, (3) the General Manager or
Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a
labor case.

While the above cases do not provide a complete listing of authorized signatories to the
verification and certification required by the rules, the determination of the sufficiency of
the authority was done on a case to case basis. The rationale applied in the foregoing
cases is to justify the authority of corporate officers or representatives of the corporation
to sign the verification or certificate against forum shopping, being in a position to
verify the truthfulness and correctness of the allegations in the petition.[16] (Emphases
supplied.)
It must be stressed, however, that the Cagayan ruling qualified that the better procedure
is still to append a board resolution to the complaint or petition to obviate questions
regarding the authority of the signatory of the verification and certification.[17]
Nonetheless, under the circumstances of this case, it bears reiterating that the
requirement of the certification of non-forum shopping is rooted in the principle that a
party-litigant shall not be allowed to pursue simultaneous remedies in different fora, as
this practice is detrimental to an orderly judicial procedure. However, the Court has
relaxed, under justifiable circumstances, the rule requiring the submission of such
certification considering that, although it is obligatory, it is not jurisdictional. Not being
jurisdictional, it can be relaxed under the rule of substantial compliance.[18]
In the case at bar, the Court holds that there has been substantial compliance with
Sections 4 and 5, Rule 7 of the 1997 Revised Rules on Civil Procedure on the petitioners
part in consonance with our ruling in the Lepanto Consolidated Mining Company v. WMC
Resources International PTY LTD.[19] that we laid down in 2003 with the rationale that
the President of petitioner-corporation is in a position to verify the truthfulness and
correctness of the allegations in the petition. Petitioner Benzonan clearly satisfies the
aforementioned jurisprudential requirement because he is the President of petitioner
South Cotabato Communications Corporation. Moreover, he is also named as corespondent of petitioner-corporation in the labor case which is the subject matter of the
special civil action for certiorari filed in the Court of Appeals.
Clearly, it was error on the part of the Court of Appeals to dismiss petitioners special
civil action for certiorari despite substantial compliance with the rules on procedure. For
unduly upholding technicalities at the expense of a just resolution of the case, normal
procedure dictates that the Court of Appeals should be tasked with properly disposing
the petition, a second time around, on the merits.

The Court is mindful of previous rulings which instructs us that when there is enough
basis on which a proper evaluation of the merits can be made, we may dispense with the
time-consuming procedure in order to prevent further delays in the disposition of the
case.[20] However, based on the nature of the two remaining issues propounded before
the Court which involve factual issues and given the inadequacy of the records,
pleadings, and other evidence available before us to properly resolve those questions,
we are constrained to refrain from passing upon them.
After all, the Court has stressed that its jurisdiction in a petition for review on certiorari
under Rule 45 of the Rules of Court is limited to reviewing only errors of law, not of fact,
unless the findings of fact complained of are devoid of support by the evidence on
record, or the assailed judgment is based on the misapprehension of facts.[21]

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Resolutions of the Court
of Appeals are REVERSED and SET ASIDE. The case is REMANDED to the Court of Appeals
for proper disposition of CA-G.R. SP No. 00179-MIN.
E. Meetings, type
Case No 3
Lopez Realty vs Spouses Tajangco
By virtue of ratification, the acts of the board of directors become the acts of the
stockholders themselves, even if those acts were, at the outset, unauthorized.
G.R. No. 154291, 12 November 2014
FACTS:
Lopez Realty, Inc. (LRI) and Asuncion Lopez-Gonzalez initiated a Complaint for
annulment of sale, cancellation of title, reconveyance and damages with prayer for the
issuance of temporary restraining order (TRO) and/or writ of preliminary injunction
against the spouses Tanjangco, Arturo and the Registrar of Deeds of Manila.
Previously, LRI and Dr. Jose Tanjangco (Jose) were the registered co-owners of three
parcels of land and the building erected thereon known as the Trade Center Building
Joses one-half share in the subject properties were later transferred and registered in
the name of his son Reynaldo Tanjangco and daughter-in-law, Maria Luisa Arguelles
(spouses Tanjangco).
These were the stockholders of record of LRI at the time material to this case:
Asuncion Lopez-Gonzalez (Asuncion, Director & Corporate Secretary) 7,831 shares;
Arturo F. Lopez (Arturo) 7,830 shares;
Teresita Lopez-Marquez (Teresita) 7,830 shares;
Rosendo de Leon (Rosendo, Director) 5 shares
Benjamin Bernardino (Benjamin, Director) 1 share;
Augusto de Leon (Augusto, Director) 1 share; and
Leo Rivera (Leo, Director) 1 share
During a special stockholders meeting held on 27 July 1981, the sale of 1/2 share of LRI
in the Trade Center Building was taken up. While the selling price was at P4 M, the
Tanjancos offered P3.8 M. To this, Asuncion countered with P5 M which was not accepted
by the Tanjancos. Thus, the board agreed to give Asuncion the priority to equal the
Tanjanco offer and the same to be exercised within ten (10) days. Otherwise, the
Tanjanco offer will be deemed accepted. Just a day after, Teresita died (her estates
executor Juanito L. Santos represented her afterwards).
As Asuncion failed to exercise her option to purchase the subject properties, and while
she was abroad, the remaining directors: Rosendo, Benjamin and Leo convened in a
special meeting passing and approving the 17 August 1981 Resolution authorizing
Arturo to negotiate and carry out the complete termination of the sale terms and

conditions as embodied in the Resolution of July 27, 1981, among others. Subsequently,
the sale was perfected with payments subsequently made.
After learning of the sale, Asuncion filed this complaint challenging the validity of the 17
August 1982 Resolution on the ground that she was not notified of the meeting.
HELD: The sale was valid. The 17 August 1981 Board Resolution did not give Arturo the
authority to act as LRIs representative in the sale as the meeting of the board of
directors where such was passed was conducted without giving any notice to Asuncion.
This is in violation of Section 53 of the Corporation Code which requires sending of
notices for regular or special meetings to every director.
As a result, a meeting of the board of directors is legally infirm if there is failure to
comply with the requirements or formalities of the law or the corporations by laws and
any action taken on such meeting may be challenged as a consequence.
Notwithstanding, the actions taken in such a meeting by the directors or trustees may
be ratified expressly or impliedly. In the case of ratification, it means that the principal
voluntarily adopts, confirms and gives sanction to some unauthorized act of its agent on
its behalf.
Here, the ratification was expressed through the July 30, 1982 Board Resolution.
Regarding Asuncions claims that the 30 July 1982 Board Resolution did not ratify the 17
August 1981 Resolution due to Juanitos disqualification and Leos negative vote.
Asuncion assails the authority of Juanito to vote because he was not a director and he
did not own any share of stock which would qualify him to be one. On the contrary,
Juanito defends his right to vote as the representative of Teresitas estate. Upon
examination of the July 30, 1982 minutes of the meeting, it can be deduced that the
meeting is a joint stockholders and directors meeting. The Court takes into account that
majority of the board of directors except for Asuncion, had already approved of the sale
to the spouses Tanjangco prior to this meeting. As a consequence, the power to ratify the
previous resolutions and actions of the board of directors in this case lies in the
stockholders, not in the board of directors. It would be absurd to require the board of
directors to ratify their own actsacts which the same director s already approved of
beforehand. Hence, Juanito, as the administrator of Teresitas estate even though not a
director, is entitled to vote on behalf of Teresitas estate as the administrator thereof.
Citing jurisprudence, in stock corporations, shareholders may generally transfer their
shares. Thus, on the death of a shareholder, the executor or administrator duly
appointed by the Court is vested with the legal title to the stock and entitled to vote it.
Until a settlement and division of the estate is effected, the stocks of the decedent are
held by the administrator or executor.
As there exists no corporate secretarys certification of the minutes of the meeting, only
Juanito, Benjamin and Roseno, whose signature appeared on the minutes, could be
considered as to have ratified the sale to the spouses Tanjangco. As Leo owns only 1
share, the results are the same against the overwhelming shares who voted in favor of
ratification.
In sum, whatever defect there was on the sale to the spouses Tanjangco pursuant to the
August 17, 1981 Board Resolution, the same was cured through its ratification in the July
30, 1982 Board Resolution. It is of no moment whether Arturo was authorized to merely
negotiate or to enter into a contract of sale on behalf of LRI as all his actions in

connection to the sale were expressly ratified by the stockholders holding 67% of the
outstanding capital stock.
Citing jurisprudence, the Court held that by virtue of ratification, the acts of the board of
directors become the acts of the stockholders themselves, even if those acts were, at the
outset, unauthorized.
G. Duties
Case No. 4
Gokongwei vs SEC
1979 Case:
Facts: Petitioner, stockholder of San Miguel Corp. filed a petition with the SEC for the
declaration of nullity of the by-laws etc. against the majority members of the BOD and
San Miguel. It is stated in the by-laws that the amendment or modification of the by-laws
may only be delegated to the BODs upon an affirmative vote of stockholders
representing not less than 2/3 of the subscribed and paid uo capital stock of the
corporation, which 2/3 could have been computed on the basis of the capitalization at
the time of the amendment. Petitioner contends that the amendment was based on the
1961 authorization, the Board acted without authority and in usurpation of the power of
the stockholders n amending the by-laws in 1976. He also contends that the 1961
authorization was already used in 1962 and 1963. He also contends that the amendment
deprived him of his right to vote and be voted upon as a stockholder (because it
disqualified competitors from nomination and election in the BOD of SMC), thus the
amended by-laws were null and void. While this was pending, the corporation called for a
stockholders meeting for the ratification of the amendment to the by-laws. This
prompted petitioner to seek for summary judgment. This was denied by the SEC. In
another case filed by petitioner, he alleged that the corporation had been using
corporate funds in other corps and businesses outside the primary purpose clause of the
corporation in violation of the Corporation Code.
Issue: Are amendments valid?
Held: The validity and reasonableness of a by-law is purely a question of law. Whether
the by-law is in conflict with the law of the land, or with the charter of the corporation or
is in legal sense unreasonable and therefore unlawful is a question of law. However, this
is limited where the reasonableness of a by-law is a mere matter of judgment, and one
upon which reasonable minds must necessarily differ, a court would not be warranted in
substituting its judgment instead of the judgment of those who are authorized to make
by-laws and who have exercised authority. The Court held that a corporation has
authority prescribed by law to prescribe the qualifications of directors. It has the inherent
power to adopt by-laws for its internal government, and to regulate the conduct and
prescribe the rights and duties of its members towards itself and among themselves in
reference to the management of its affairs. A corporation, under the Corporation law,
may prescribe in its by-laws the qualifications, duties and compensation of directors,
officers, and employees. Any person who buys stock in a corporation does so with the
knowledge that its affairs are dominated by a majority of the stockholders and he
impliedly contracts that the will of the majority shall govern in all matters within the
limits of the acts of incorporation and lawfully enacted by-laws and not forbidden by law.
Any corporation may amend its by-laws by the owners of the majority of the subscribed
stock. It cannot thus be said that petitioners has the vested right, as a stock holder, to be

elected director, in the face of the fact that the law at the time such stockholder's right
was acquired contained the prescription that the corporate charter and the by-laws shall
be subject to amendment, alteration and modification. A Director stands in a fiduciary
relation to the corporation and its shareholders, which is characterized as a trust
relationship. An amendment to the corporate by-laws which renders a stockholder
ineligible to be director, if he be also director in a corporation whose business is in
competition with that of the other corporation, has been sustained as valid. This is based
upon the principle that where the director is employed in the service of a rival company,
he cannot serve both, but must betray one or the other. The amendment in this case
serves to advance the benefit of the corporation and is good. Corporate officers are also
not permitted to use their position of trust and confidence to further their private needs,
and the act done in furtherance of private needs is deemed to be for the benefit of the
corporation. This is called the doctrine of corporate opportunity.
1980 Decision:
In this petition for review, petitioner seeks to nullify and set aside the resolution en banc
dated May 7, 1979 of respondent Securities and Exchange Commission in SEC Case No.
1375, sustaining the findings of the San Miguel Corporation's Board of Directors that
petitioner is engaged in a business competitive with or antagonistic to that of the San
Miguel Corporation and, therefore, ineligible for election as director, pursuant to Section
3, Article III of the amended by-laws. Petitioner alleges that the matter of petitioner's
disqualification should not have been heard in view of the pendency of petitioner's
motion for reconsideration with this Court; that when respondent Commission sustained
the disqualification of petitioner, it failed to consider that private respondents are
precluded from disqualifying petitioner because of the rule of pari delicto; and that the
resolution of disqualification of the respondent Board of Directors was an "over exertion
of corporate power" because by this act the afore-mentioned Board of Directors intended
to perpetuate themselves in power. Considering the afore-mentioned allegations and the
comments thereto, We find no merit in the petition.
Aside from the presumptive validity of the amended by-laws at the time the questioned
resolution was rendered by respondent Securities and Exchange Commission, the Chief
Justice and six (6) Justices of this Court had already promulgated their opinions that the
validity of the amended by-laws insofar and only insofar as the parties herein are
concerned, can no longer be relitigated on the basis of the "law of the. case" doctrine
and, therefore, the enforcement of the amended by-laws could not have been ipso factor
stayed by the motion for reconsideration. Petitioner's allegation that respondent
Commission (Securities and Exchange Commission) could not have validly sustained the
resolution of the San Miguel Corporation Board because some members of the Board
were also disqualified as they were situated like petitioner appears inapposite. The
alleged disqualification of some members of the Board was never in issue during the
hearing of the disqualification case, and petitioner has not submitted any evidence in
support of his contention. Petitioner's assertion that the order of respondent Commission
disqualifying him is based on evidence which are "at the most, contingent and flimsy"
appears unsupported by the records. The order of respondent Commission was based
principally on the affidavits of Nazario Avenda
D. Stock Certificate
Case No.5
Ponce vs Alsons Cement

Nature of Certificate of Stock (Corporate Law)

Remedy if Registration is Refused (Corporate Law)
FACTS:
February 8, 1968: Vicente C. Ponce and Fausto Gaid, incorporator of Victory Cement
Corporation (VCC), executed a Deed of Undertaking and Indorsement whereby Gaid
acknowledges that Ponce is the owner of the shares and he was therefore
assigning/endorsing it to Ponce. VCC was renamed Floro Cement Corporation (FCC) and
then to Alsons Cement Corporation (ACC). Up to the present, no certificates of stock
corresponding to the 239,500 subscribed and fully paid shares of Gaid were issued in the
name of Fausto G. Gaid and/or the plaintiff. Despite repeated demands, the ACC refused
to issue the certificates of stocks. SEC Hearing Officer Enrique L. Flores, Jr. granted the
motion to dismiss. Upon appeal, the Commission En Banc reversed the decision of the
Hearing Officer. Ponce, filed a complaint with the SEC for mandamus
CA: mandamus should be dismissed for failure to state a cause of action in the absence
of any allegation that the transfer of the shares was registered in the stock and transfer
book
ISSUE: W/N the cert. of stocks of Gaid can be transferred to Ponce

HELD: NO. Petition Denied.

SEC. 63. Certificate of stock and transfer of shares.The capital stock of stock
corporations shall be divided into shares for which certificates signed by the president or
vice-president, countersigned by the secretary or assistant secretary, and sealed with
the seal of the corporation shall be issued in accordance with the by-laws. Shares of
stock so issued are personal property and may be transferred by delivery of the
certificate or certificates indorsed by the owner or his attorney-in-fact or other person
legally authorized to make the transfer. No transfer, however, shall be valid, except as
between the parties, until the transfer is recorded in the books of the corporation so as
to show the names of the parties to the transaction, the date of the transfer, the number
of the certificate or certificates and the number of shares transferred.
No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.
The stock and transfer book is the basis for ascertaining the persons entitled to the
rights and subject to the liabilities of a stockholder
Where a transferee is not yet recognized as a stockholder, the corporation is under no
specific legal duty to issue stock certificates in the transferees name. In a case such as
that at bar, a mandamus should not issue to compel the secretary of a corporation to
make a transfer of the stock on the books of the company. Unless it affirmatively appears
that he has failed or refused so to do, upon the demand either of the person in whose
name the stock is registered, or of some person holding a power of attorney for that
purpose from the registered owner of the stock. Mere indorsee of a stock certificate,
claiming to be the owner, will not necessarily be recognized as such by the corporation
and its officers, in the absence of express instructions of the registered owner to make
such transfer to the indorsee, or a power of attorney authorizing such transfer.

mandamus - proper remedy to make him the rightful owner and holder of a stock
certificate to be issued in his name

IX. Rights and obligations of Stockholders and Members

A. Dividends
Case No. 6
Puno vs Puno Enterprise
FACTS:
Carlos L. Puno, who died on June 25, 1963, was an incorporator of respondent Puno
Enterprises, Inc. On March 14, 2003, petitioner Joselito Musni Puno, claiming to be an
heir of Carlos L. Puno, initiated a complaint for specific performance against respondent.
Petitioner averred that he is the son of the deceased with the latters common-law wife,
Amelia Puno. As surviving heir, he claimed entitlement to the rights and privileges of his
late father as stockholder of respondent. The complaint thus prayed that respondent
allow petitioner to inspect its corporate book, render an accounting of all the
transactions it entered into from 1962, and give petitioner all the profits, earnings,
dividends, or income pertaining to the shares of Carlos L. Puno. Respondent filed a
motion to dismiss on the ground that petitioner did not have the legal personality to sue
because his birth certificate names him as "Joselito Musni Muno." Apropos, there was yet
a need for a judicial declaration that "Joselito Musni Puno" and "Joselito Musni Muno"
were one and the same. After submitting his corrected birth certificate, the court ordered
Jesusa Puno and/or Felicidad Fermin to allow the plaintiff to inspect the corporate books
and records of the company from 1962 up to the present including the financial
statements of the corporation. CA ordered the dismissal of the complaint in its Decision
dated October 11, 2006. According to the CA, petitioner was not able to establish the
paternity of and his filiation to Carlos L. Puno since his birth certificate was prepared
without the intervention of and the participatory acknowledgment of paternity by Carlos
L. Puno. Accordingly, the CA said that petitioner had no right to demand that he be
allowed to examine respondents books. Moreover, petitioner was not a stockholder of
the corporation but was merely claiming rights as an heir of Carlos L. Puno, an
incorporator of the corporation. His action for specific performance therefore appeared to
be premature; the proper action to be taken was to prove the paternity of and his filiation
to Carlos L. Puno in a petition for the settlement of the estate of the latter.
ISSUE: WON petitioner automatically became stockholder of the corporation and acquire
the rights and privileges of the deceased as shareholder of the corporation.
HELD: No. Upon the death of a shareholder, the heirs do not automatically become
stockholders of the corporation and acquire the rights and privileges of the deceased as
shareholder of the corporation. The stocks must be distributed first to the heirs in estate
proceedings, and the transfer of the stocks must be recorded in the books of the
corporation. Section 63 of the Corporation Code provides that no transfer shall be valid,
except as between the parties, until the transfer is recorded in the books of the
corporation. During such interim period, the heirs stand as the equitable owners of the
stocks, the executor or administrator duly appointed by the court being vested with the
legal title to the stock.
Until a settlement and division of the estate is effected, the stocks of the decedent are
held by the administrator or executor. Consequently, during such time, it is the

administrator or executor who is entitled to exercise the rights of the deceased as

stockholder.
Thus, even if petitioner presents sufficient evidence in this case to establish that he is
the son of Carlos L. Puno, he would still not be allowed to inspect respondents books and
be entitled to receive dividends from respondent, absent any showing in its transfer book
that some of the shares owned by Carlos L. Puno were transferred to him. This would
only be possible if petitioner has been recognized as an heir and has participated in the
settlement of the estate of the deceased.
Corollary to this is the doctrine that a determination of whether a person, claiming
proprietary rights over the estate of a deceased person, is an heir of the deceased must
be ventilated in a special proceeding instituted precisely for the purpose of settling the
estate of the latter. The status of an illegitimate child who claims to be an heir to a
decedents estate cannot be adjudicated in an ordinary civil action, as in a case for the
recovery of property. The doctrine applies to the instant case, which is one for specific
performance to direct respondent corporation to allow petitioner to exercise rights
that pertain only to the deceased and his representatives.
Petition denied.
Case No. 7
Yujuico vs Quiambao
HELD:
Corporations; refusal to allow inspection is a criminal offense. We find inaccurate the
pronouncement of the RTC that the act of refusing to allow inspection of the stock and
transfer book is not a punishable offense under the Corporation Code. Such refusal, when
done in violation of Section 74( 4) of the Corporation Code, properly falls within the
purview of Section 144 of the same code and thus may be penalized as an offense.
Case No. 8
Lanuza vs CA

Facts:
Petitioners seek to nullify the Court of Appeals Decision in CAG.R. SP No.
414731 promulgated on 18 August 1997, affirming the SEC Order dated 20 June 1996,
and the Resolution2 of the Court of Appeals dated 31 October 1997 which denied
petitioners motion for reconsideration.
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with
seven hundred (700) founders shares and seventy-six (76) common shares as its initial
capital stock subscription reflected in the articles of incorporation
Onrubia et. al, who were in control of PMMSI registered the companys stock and
transfer book for the first time in 1978, recording thirty-three (33) common shares as the
only issued and outstanding shares of PMMSI.
In 1979, a special stockholders meeting was called and held on the basis of what was
considered as a quorum of twenty-seven (27) common shares, representing more than
two-thirds (2/3) of the common shares issued and outstanding.
In 1982, Juan Acayan, one of the heirs of the incorporators filed a petition for the
registration of their property rights was filed before the SEC over 120 founders shares
and 12 common shares owned by their father

1.

2.

1.
2.

SEC Hearing Officer: heirs of Acayan were entitled to the claimed shares and called
for a special stockholders meeting to elect a new set of officers.
SEC en banc: affirmed the decision
As a result, the shares of Acayan were recorded in the stock and transfer book.
On May 6, 1992, a special stockholders meeting was held to elect a new set of
directors
Onrubia et al filed a petition with SEC questioning the validity of said
meeting alleging that the quorum for the said meeting should not be based on the 165
issued and outstanding shares as per the stock and transfer book, but on the initial
subscribed capital stock of seven hundred seventy-six (776) shares, as reflected in the
1952 Articles of Incorporation
Petition was dismissed
SC en banc: shares of the deceased incorporators should be duly represented by their
respective administrators or heirs concerned. Called for a stockholders meeting on the
basis of the stockholdings reflected in the articles of incorporation for the purpose of
electing a new set of officers for the corporation
Lanuza, Acayan et al, who are PMMSI stockholders, filed a petition for review with the
CA, raising the following issues:
whether the basis the outstanding capital stock and accordingly also for determining
the quorum at stockholders meetings it should be the 1978 stock and transfer book or if
it should be the 1952 articles of incorporation
(They contended that the basis is the stock and transfer book, not articles of
incorporation in computing the quorum)
whether the Espejo decision (decision of SEC en banc ordering the recording of the
shares of Jose Acayan in the stock and transfer book) is applicable to the benefit of
Onrubia et al
CA decision:
For purposes of transacting business, the quorum should be based on the
outstanding capital stock as found in the articles of incorporation
To require a separate judicial declaration to recognize the shares of the original
incorporators would entail unnecessary delay and expense. Besides. the incorporators
have already proved their stockholdings through the provisions of the articles of
incorporation.
Appeal was made by Lanuza et al before the SC
Lanuza et al contention:
a.
1992 stockholders meeting was valid and legal
b.
Reliance on the 1952 articles of incorporation for determining the quorum negates
the existence and validity of the stock and transfer book Onrubia et al prepared
c.
Onrubia et al must show and prove entitlement to the founders and common
shares in a separate and independent action/proceeding in order to avail of the benefits
secured by the heirs of Acayan
Onrubia et als contention, based on the Memorandum: petition should be dismissed
on the ground of res judicata
Another appeal was made
Lanuza et als contention: instant petition is separate and distinct from G.R. No.
131315, there being no identity of parties, and more importantly, the parties in the two
petitions have their own distinct rights and interests in relation to the subject matter in
litigation
Onrubia et als manifestation and motion: moved for the dismissal of the case

Issue: What should be the basis of quorum for a stockholders meetingthe

outstanding capital stock as indicated in the articles of incorporation or that contained in
the companys stock and transfer book?

Ruling:
Articles of Incorporation
Defines the charter of the corporation and the contractual relationships between the
State and the corporation, the stockholders and the State, and between the corporation
and its stockholders.
Contents are binding, not only on the corporation, but also on its shareholders.
Stock and transfer book
Book which records the names and addresses of all stockholders arranged
alphabetically, the installments paid and unpaid on all stock for which subscription has
been made, and the date of payment thereof; a statement of every alienation, sale or
transfer of stock made, the date thereof and by and to whom made; and such other
entries as may be prescribed by law
necessary as a measure of precaution, expediency and convenience since it provides
the only certain and accurate method of establishing the various corporate acts and
transactions and of showing the ownership of stock and like matters
Not public record, and thus is not exclusive evidence of the matters and things which
ordinarily are or should be written therein
In this case, the articles of incorporation indicate that at the time of incorporation, the
incorporators were bona fide stockholders of 700 founders shares and 76 common
shares. Hence, at that time, the corporation had 776 issued and outstanding shares.
According to Sec. 52 of the Corp Code, a quorum shall consist of the stockholders
representing a majority of the outstanding capital stock. As such, quorum is based on
the totality of the shares which have been subscribed and issued, whether it be
founders shares or common shares
To base the computation of quorum solely on the obviously deficient, if not inaccurate
stock and transfer book, and completely disregarding the issued and outstanding shares
as indicated in the articles of incorporation would work injustice to the owners and/or
successors in interest of the said shares.
The stock and transfer book of PMMSI cannot be used as the sole basis for
determining the quorum as it does not reflect the totality of shares which have been
subscribed, more so when the articles of incorporation show a significantly larger amount
of shares issued and outstanding as compared to that listed in the stock and transfer
book.
One who is actually a stockholder cannot be denied his right to vote by the
corporation merely because the corporate officers failed to keep its records accurately. A
corporations records are not the only evidence of the ownership of stock in a
corporation.
It is no less than the articles of incorporation that declare the incorporators to have in
their name the founders and several common shares. Thus, to disregard the contents of
the articles of incorporation would be to pretend that the basic document which legally
triggered the creation of the corporation does not exist and accordingly to allow great
injustice to be caused to the incorporators and their heirs
WHEREFORE, the petition is DENIED and the assailed Decision is AFFIRMED. Costs
against petitioners