Lanuza v.

CA

In 1952, Philippine Merchant Marine School Inc. (PMMSI) was incorporated with 700 founders
share and 76 common shares totaling 776 shares of stocks as reflected in the Articles of
Incorporation. However, only in 1978 when their stock and transfer book was registered and now
only 33 common shares reflected in such records.

In 1982, one of the heirs of original incorporators certain Juan Acayan filed petition for the
registration of their property rights which SEC granted the 120 founders shares and 12 common
shares in favor to them and the same was recorded in the stock and transfer book now totaling
165 issued and outstanding shares of stocks.( 33 +120+12=165)

Now a meeting was called to elect new set of board of directors on the basis of 165 shares.
Certain Onrubia et al, stockholders contend that the basis of majority should not the 165 shares
rather the 776 shares stated in the Articles of Incorporation. SEC en banc approved the petition.

Now Lanuza, Acayan and others sought petition for review. Claimed that it negates the validity
and existence of stock transfer book.

ISSUE is apparent, which shall prevail between the Articles of Incorporation and the stock and
transfer book which is conflicting in determining the majority of stocks for purposes of electing
members of Board of director.

HELD:

1952 Articles of Incorporation should prevail.

Reasons:

Articles of incorporation define the charter and contractual relationship between the State and
Corporation, State and Stockholders and Corporation and Stockholders. Contents are binding
not only on the corporation but also on its stockholders.

Stock and transfer book is not public record, not exclusive evidence of the matters stated therein.
To base on such records we disregard the issued and outstanding stocks indicated in the Articles
of Incorporation, likewise it will work injustice to the owners or their successors in interest. The
same stockholders cannot be denied of his rights merely because the record is inaccurate.

According to sec 5 of the corporation code, a quorum shall consist of the stock of the
stockholders representing a majority of the outstanding capital stock. By this quorum is based on
the totality of the shares which have been subscribed and issued, whether it is founder’s shares or
common shares.