Gokongwei vs.

SEC Case Digest

Gokongwei vs. Securities and Exchange Commission
[GR L-45911, 11 April 1979]

Facts: [SEC Case 1375] On 22 October 1976, John Gokongwei Jr., as stockholder of San Miguel Corporation,
filed with the Securities and Exchange Commission (SEC) a petition for "declaration of nullity of amended by-
laws, cancellation of certificate of filing of amended by-laws, injunction and damages with prayer for a preliminary
injunction" against the majority of the members of the Board of Directors and San Miguel Corporation as an
unwilling petitioner. As a first cause of action, Gokongwei alleged that on 18 September 1976, Andres Soriano,
Jr., Jose M. Soriano, Enrique Zobel, Antonio Roxas, Emeterio Buñao, Walthrode B. Conde, Miguel Ortigas, and
Antonio Prieto amended by bylaws of the corporation, basing their authority to do so on a resolution of the
stockholders adopted on 13 March 1961, when the outstanding capital stock of the corporation was only
P70,139.740.00, divided into 5,513,974 common shares at P10.00 per share and 150,000 preferred shares at
P100.00 per share. At the time of the amendment, the outstanding and paid up shares totalled 30,127,043, with
a total par value of P301,270,430.00.

It was contended that according to section 22 of the Corporation Law and Article VIII of the by-laws of the
corporation, the power to amend, modify, repeal or adopt new by-laws may be delegated to the Board of Directors
only by the affirmative vote of stockholders representing not less than 2/3 of the subscribed and paid up capital
stock of the corporation, which 2/3 should have been computed on the basis of the capitalization at the time of
the amendment. Since the amendment was based on the 1961 authorization, Gokongwei contended that the
Board acted without authority and in usurpation of the power of the stockholders. As a second cause of action,
it was alleged that the authority granted in 1961 had already been exercised in 1962 and 1963, after which the
authority of the Board ceased to exist. As a third cause of action, Gokongwei averred that the membership of
the Board of Directors had changed since the authority was given in 1961, there being 6 new directors. As a
fourth cause of action, it was claimed that prior to the questioned amendment, Gokogwei had all the qualifications
to be a director of the corporation, being a substantial stockholder thereof; that as a stockholder, Gokongwei had
acquired rights inherent in stock ownership, such as the rights to vote and to be voted upon in the election of
directors; and that in amending the by-laws, Soriano, et. al. purposely provided for Gokongwei's disqualification
and deprived him of his vested right as afore-mentioned, hence the amended by-laws are null and void. As
additional causes of action, it was alleged that corporations have no inherent power to disqualify a stockholder
from being elected as a director and, therefore, the questioned act is ultra vires and void; that Andres M. Soriano,
Jr. and/or Jose M. Soriano, while representing other corporations, entered into contracts (specifically a
management contract) with the corporation, which was avowed because the questioned amendment gave the
Board itself the prerogative of determining whether they or other persons are engaged in competitive or
antagonistic business; that the portion of the amended by-laws which states that in determining whether or not
a person is engaged in competitive business, the Board may consider such factors as business and family
relationship, is unreasonable and oppressive and, therefore, void; and that the portion of the amended by-laws
which requires that "all nominations for election of directors shall be submitted in writing to the Board of Directors
at least five (5) working days before the date of the Annual Meeting" is likewise unreasonable and oppressive. It
was, therefore, prayed that the amended by-laws be declared null and void and the certificate of filing thereof be
cancelled, and that Soriano, et. al. be made to pay damages, in specified amounts, to Gokongwei. On 28 October
1976, in connection with the same case, Gokongwei filed with the Securities and Exchange Commission an
"Urgent Motion for Production and Inspection of Documents", alleging that the Secretary of the corporation
refused to allow him to inspect its records despite request made by Gokongwei for production of certain
documents enumerated in the request, and that the corporation had been attempting to suppress information
from its stockholders despite a negative reply by the SEC to its query regarding their authority to do so.

The motion was opposed by Soriano, et. al. The Corporation, Soriano, et. al. filed their answer, and their
opposition to the petition, respectively. Meanwhile, on 10 December 1976, while the petition was yet to be heard,
the corporation issued a notice of special stockholders' meeting for the purpose of "ratification and confirmation
of the amendment to the By-laws", setting such meeting for 10 February 1977. This prompted Gokongwei to ask
the SEC for a summary judgment insofar as the first cause of action is concerned, for the alleged reason that by
calling a special stockholders' meeting for the aforesaid purpose, Soriano, et. al. admitted the invalidity of the
amendments of 18 September 1976. The motion for summary judgment was opposed by Soriano, et. al. Pending
action on the motion, Gokongwei filed an "Urgent Motion for the Issuance of a Temporary Restraining Order",
praying that pending the determination of Gokongwei's application for the issuance of a preliminary injunction
and or Gokongwei's motion for summary judgment, a temporary restraining order be issued, restraining Soriano,
et. al. from holding the special stockholders' meeting as scheduled. This motion was duly opposed by Soriano,
et. al. On 10 February 1977, Cremation issued an order denying the motion for issuance of temporary restraining
order. After receipt of the order of denial, Soriano, et. al. conducted the special stockholders' meeting wherein
the amendments to the by-laws were ratified. On 14 February 1977, Gokongwei filed a consolidated motion for
contempt and for nullification of the special stockholders' meeting. A motion for reconsideration of the order
denying Gokongwei's motion for summary judgment was filed by Gokongwei before the SEC on 10 March 1977.

[SEC Case 1423] Gokongwei alleged that, having discovered that the corporation has been investing corporate
funds in other corporations and businesses outside of the primary purpose clause of the corporation, in violation
of section 17-1/2 of the Corporation Law, he filed with SEC, on 20 January 1977, a petition seeking to have
Andres M. Soriano, Jr. and Jose M. Soriano, as well as the corporation declared guilty of such violation, and
ordered to account for such investments and to answer for damages. On 4 February 1977, motions to dismiss
were filed by Soriano, et. al., to which a consolidated motion to strike and to declare Soriano, et. al. in default
and an opposition ad abundantiorem cautelam were filed by Gokongwei. Despite the fact that said motions were
filed as early as 4 February 1977, the Commission acted thereon only on 25 April 1977, when it denied Soriano,
et. al.'s motions to dismiss and gave them two (2) days within which to file their answer, and set the case for
hearing on April 29 and May 3, 1977. Soriano, et. al. issued notices of the annual stockholders' meeting, including
in the Agenda thereof, the "reaffirmation of the authorization to the Board of Directors by the stockholders at the
meeting on 20 March 1972 to invest corporate funds in other companies or businesses or for purposes other
than the main purpose for which the Corporation has been organized, and ratification of the investments
thereafter made pursuant thereto." By reason of the foregoing, on 28 April 1977, Gokongwei filed with the SEC
an urgent motion for the issuance of a writ of preliminary injunction to restrain Soriano, et. al. from taking up Item
6 of the Agenda at the annual stockholders' meeting, requesting that the same be set for hearing on 3 May 1977,
the date set for the second hearing of the case on the merits. The SEC, however, cancelled the dates of hearing
originally scheduled and reset the same to May 16 and 17, 1977, or after the scheduled annual stockholders'
meeting. For the purpose of urging the Commission to act, Gokongwei filed an urgent manifestation on 3 May
1977, but this notwithstanding, no action has been taken up to the date of the filing of the instant petition.

Gokongwei filed a petition for petition for certiorari, mandamus and injunction, with prayer for issuance of writ of
preliminary injunction, with the Supreme Court, alleging that there appears a deliberate and concerted inability
on the part of the SEC to act.

Issue:
1. Whether the corporation has the power to provide for the (additional) qualifications of its directors.
2. Whether the disqualification of a competitor from being elected to the Board of Directors is a
reasonable exercise of corporate authority.
3. Whether the SEC gravely abused its discretion in denying Gokongwei's request for an
examination of the records of San Miguel International, Inc., a fully owned subsidiary of San Miguel
Corporation.
4. Whether the SEC gravely abused its discretion in allowing the stockholders of San Miguel
Corporation to ratify the investment of corporate funds in a foreign corporation.
Held:

1. It is recognized by all authorities that "every corporation 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.'" In this jurisdiction under section 21 of the
Corporation Law, a corporation may prescribe in its by-laws "the qualifications, duties and compensation of
directors, officers and employees." This must necessarily refer to a qualification in addition to that specified by
section 30 of the Corporation Law, which provides that "every director must own in his right at least one share
of the capital stock of the stock corporation of which he is a director." 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 that he impliedly
contracts that the will of the majority shall govern in all matters within the limits of the act of incorporation and
lawfully enacted by-laws and not forbidden by law." To this extent, therefore, the stockholder may be considered
to have "parted with his personal right or privilege to regulate the disposition of his property which he has invested
in the capital stock of the corporation, and surrendered it to the will of the majority of his fellow incorporators. It
can not therefore be justly said that the contract, express or implied, between the corporation and the
stockholders is infringed by any act of the former which is authorized by a majority." Pursuant to section 18 of
the Corporation Law, any corporation may amend its articles of incorporation by a vote or written assent of the
stockholders representing at least two-thirds of the subscribed capital stock of the corporation. If the amendment
changes, diminishes or restricts the rights of the existing shareholders, then the dissenting minority has only one
right, viz.: "to object thereto in writing and demand payment for his share." Under section 22 of the same law,
the owners of the majority of the subscribed capital stock may amend or repeal any by-law or adopt new by-
laws. It cannot be said, therefore, that Gokongwei has a vested right to be elected director, in the face of the fact
that the law at the time such right as stockholder was acquired contained the prescription that the corporate
charter and the by-law shall be subject to amendment, alteration and modification.

2. Although in the strict and technical sense, directors of a private corporation are not regarded as trustees, there
cannot be any doubt that their character is that of a fiduciary insofar as the corporation and the stockholders as
a body are concerned. As agents entrusted with the management of the corporation for the collective benefit of
the stockholders, "they occupy a fiduciary relation, and in this sense the relation is one of trust." "The ordinary
trust relationship of directors of a corporation and stockholders is not a matter of statutory or technical law. It
springs from the fact that directors have the control and guidance of corporate affairs and property and hence of
the property interests of the stockholders. Equity recognizes that stockholders are the proprietors of the corporate
interests and are ultimately the only beneficiaries thereof." A director is a fiduciary. Their powers are powers in
trust. He who is in such fiduciary position cannot serve himself first and his cestuis second. He cannot manipulate
the affairs of his corporation to their detriment and in disregard of the standards of common decency. He cannot
by the intervention of a corporate entity violate the ancient precept against serving two masters. He cannot utilize
his inside information and strategic position for his own preferment. He cannot violate rules of fair play by doing
indirectly through the corporation what he could not do so directly. He cannot violate rules of fair play by doing
indirectly through the corporation what he could not do so directly. He cannot use his power for his personal
advantage and to the detriment of the stockholders and creditors no matter how absolute in terms that power
may be and no matter how meticulous he is to satisfy technical requirements. For that power is at all times
subject to the equitable limitation that it may not be exercised for the aggrandizement, preference, or advantage
of the fiduciary to the exclusion or detriment of the cestuis. The doctrine of "corporate opportunity" is precisely a
recognition by the courts that the fiduciary standards could not be upheld where the fiduciary was acting for two
entities with competing interests. This doctrine rests fundamentally on the unfairness, in particular
circumstances, of an officer or director taking advantage of an opportunity for his own personal profit when the
interest of the corporation justly calls for protection. It is not denied that a member of the Board of Directors of
the San Miguel Corporation has access to sensitive and highly confidential information, such as: (a) marketing
strategies and pricing structure; (b) budget for expansion and diversification; (c) research and development; and
(d) sources of funding, availability of personnel, proposals of mergers or tie-ups with other firms. It is obviously
to prevent the creation of an opportunity for an officer or director of San Miguel Corporation, who is also the
officer or owner of a competing corporation, from taking advantage of the information which he acquires as
director to promote his individual or corporate interests to the prejudice of San Miguel Corporation and its
stockholders, that the questioned amendment of the by-laws was made. Certainly, where two corporations are
competitive in a substantial sense, it would seem improbable, if not impossible, for the director, if he were to
discharge effectively his duty, to satisfy his loyalty to both corporations and place the performance of his
corporation duties above his personal concerns. The offer and assurance of Gokongwei that to avoid any
possibility of his taking unfair advantage of his position as director of San Miguel Corporation, he would absent
himself from meetings at which confidential matters would be discussed, would not detract from the validity and
reasonableness of the by-laws involved. Apart from the impractical results that would ensue from such
arrangement, it would be inconsistent with Gokongwei's primary motive in running for board membership —
which is to protect his investments in San Miguel Corporation. More important, such a proposed norm of conduct
would be against all accepted principles underlying a director's duty of fidelity to the corporation, for the policy of
the law is to encourage and enforce responsible corporate management.

3. Pursuant to the second paragraph of section 51 of the Corporation Law, "(t)he record of all business
transactions of the corporation and minutes of any meeting shall be open to the inspection of any director,
member or stockholder of the corporation at reasonable hours." The stockholder's right of inspection of the
corporation's books and records is based upon their ownership of the assets and property of the corporation. It
is, therefore, an incident of ownership of the corporate property, whether this ownership or interest be termed an
equitable ownership, a beneficial ownership, or a quasi-ownership. This right is predicated upon the necessity
of self-protection. It is generally held by majority of the courts that where the right is granted by statute to the
stockholder, it is given to him as such and must be exercised by him with respect to his interest as a stockholder
and for some purpose germane thereto or in the interest of the corporation. In other words, the inspection has to
be germane to the petitioner's interest as a stockholder, and has to be proper and lawful in character and not
inimical to the interest of the corporation. The "general rule that stockholders are entitled to full information as to
the management of the corporation and the manner of expenditure of its funds, and to inspection to obtain such
information, especially where it appears that the company is being mismanaged or that it is being managed for
the personal benefit of officers or directors or certain of the stockholders to the exclusion of others." While the
right of a stockholder to examine the books and records of a corporation for a lawful purpose is a matter of law,
the right of such stockholder to examine the books and records of a wholly-owned subsidiary of the corporation
in which he is a stockholder is a different thing. Stockholders are entitled to inspect the books and records of a
corporation in order to investigate the conduct of the management, determine the financial condition of the
corporation, and generally take an account of the stewardship of the officers and directors. herein, considering
that the foreign subsidiary is wholly owned by San Miguel Corporation and, therefore, under Its control, it would
be more in accord with equity, good faith and fair dealing to construe the statutory right of petitioner as
stockholder to inspect the books and records of the corporation as extending to books and records of such wholly
owned subsidiary which are in the corporation's possession and control.

4. Section 17-1/2 of the Corporation Law allows a corporation to "invest its funds in any other corporation or
business or for any purpose other than the main purpose for which it was organized" provided that its Board of
Directors has been so authorized by the affirmative vote of stockholders holding shares entitling them to exercise
at least two-thirds of the voting power. If the investment is made in pursuance of the corporate purpose, it does
not need the approval of the stockholders. It is only when the purchase of shares is done solely for investment
and not to accomplish the purpose of its incorporation that the vote of approval of the stockholders holding shares
entitling them to exercise at least two-thirds of the voting power is necessary. As stated by the corporation, the
purchase of beer manufacturing facilities by SMC was an investment in the same business stated as its main
purpose in its Articles of Incorporation, which is to manufacture and market beer. It appears that the original
investment was made in 1947-1948, when SMC, then San Miguel Brewery, Inc., purchased a beer brewery in
Hongkong (Hongkong Brewery & Distillery, Ltd.) for the manufacture and marketing of San Miguel beer thereat.
Restructuring of the investment was made in 1970-1971 thru the organization of SMI in Bermuda as a tax free
reorganization. Assuming arguendo that the Board of Directors of SMC had no authority to make the assailed
investment, there is no question that a corporation, like an individual, may ratify and thereby render binding upon
it the originally unauthorized acts of its officers or other agents. This is true because the questioned investment
is neither contrary to law, morals, public order or public policy. It is a corporate transaction or contract which is
within the corporate powers, but which is defective from a purported failure to observe in its execution the
requirement of the law that the investment must be authorized by the affirmative vote of the stockholders holding
two-thirds of the voting power. This requirement is for the benefit of the stockholders. The stockholders for whose
benefit the requirement was enacted may, therefore, ratify the investment and its ratification by said stockholders
obliterates any defect which it may have had at the outset. Besides, the investment was for the purchase of beer
manufacturing and marketing facilities which is apparently relevant to the corporate purpose. The mere fact that
the corporation submitted the assailed investment to the stockholders for ratification at the annual meeting of 10
May 1977 cannot be construed as an admission that the corporation had committed an ultra vires act, considering
the common practice of corporations of periodically submitting for the ratification of their stockholders the acts of
their directors, officers and managers.
Lee vs. Court of Appeals
[GR 93695, 4 February 1992]

Facts: On 15 November 1985, a complainant for sum of money was filed by the International Corporate Bank,
Inc. against Sacoba Manufacturing Corp., Pablo Gonzales Jr., and Tomas Gonzales who, in turn, filed a third
party complaint against Alfa Integrated Textile Mills (ALFA), Ramon C. Lee (ALFA's president) and Antonio DM.
Lacdao (ALFA's vice president) on 17 March 1986. On 17 September 1987, Lee and Lacdao filed a motion to
dismiss the third party complaint which the Regional Trial Court of Makati, Branch 58 denied in an Order dated
27 June 1988. On 18 July 1988, Lee and Lacdao filed their answer to the third party complaint. Meanwhile, on
12 July 1988, the trial issued an order requiring the issuance of an alias summons upon ALFA through the DBP
as a consequence of Lee and Lacdao's letter informing the court that the summons for ALFA was erroneously
served upon them considering that the management of ALFA had been transferred to the DBP. In a manifestation
dated 22 July 1988, the DBP claimed that it was not authorized to receive summons on behalf of ALFA since the
DBP had not taken over the company which has a separate and distinct corporate personality and existence. On
4 August 1988, the trial court issued an order advising Sacoba Manufacturing, et. al. to take the appropriate
steps to serve the summons to ALFA. On 16 August 1988, Sacoba Manufacturing, et. al. filed a Manifestation
and Motion for the Declaration of Proper Service of Summons which the trial court granted on 17 August 1988.

On 12 September 1988, Lee and Lacdao filed a motion for reconsideration submitting that the Rule 14, section
13 of the Revised Rules of Court is not applicable since they were no longer officers of ALFA and Sacoba
Manufacturing, et. al. should have availed of another mode of service under Rule 14, Section 16 of the said
Rules, i.e., through publication to effect proper service upon ALFA. On 2 January 1989, the trial court upheld the
validity of the service of summons on ALFA through Lee and Lacdao, thus, denying the latter's motion for
reconsideration and requiring ALFA to file its answer through Lee and Lacdao as its corporate officers. On 19
January 1989, a second motion for reconsideration was filed by Lee and Lacdao reiterating their stand that by
virtue of the voting trust agreement they ceased to be officers and directors of ALFA, hence, they could no longer
receive summons or any court processes for or on behalf of ALFA. In support of their second motion for
reconsideration, Lee and Lacdao attached thereto a copy of the voting trust agreement between all the
stockholders of ALFA (Lee and Lacdao included), on the one hand, and the DBP, on the other hand, whereby
the management and control of ALFA became vested upon the DBP. On 25 April 1989, the trial court reversed
itself by setting aside its previous Order dated 2 January 1989 and declared that service upon Lee and Lacdao
who were no longer corporate officers of ALFA cannot be considered as proper service of summons on ALFA.
On 15 May 1989, Sacoba Manufacturing, et. al. moved for a reconsideration of the Order which was affirmed by
the court in is Order dated 14 August 1989 denying Sacoba Manufacturing, et. al.'s motion for reconsideration.

On 18 September 1989, a petition for certiorari was belatedly submitted by Sacoba Manufacturing, et. al. before
the Court of Appeals which, nonetheless, resolved to give due course thereto on 21 September 1989. On 17
October 1989, the trial court, not having been notified of the pending petition for certiorari with the appellate court
issued an Order declaring as final the Order dated 25 April 1989. Sacoba Manufacturing, et. al. in the said Order
were required to take positive steps in prosecuting the third party complaint in order that the court would not be
constrained to dismiss the same for failure to prosecute. Subsequently, on 25 October 1989 Sacoba
Manufacturing, et. al. filed a motion for reconsideration on which the trial court took no further action. On 19
March 1990, after Lee and Lacdao filed their answer to Sacoba Manufacturing, et. al.'s petition for certiorari, the
appellate court rendered its decision, setting aside the orders of trial court judge dated 25 April 1989 and 14
August 1989. On 11 April 1990, Lee and Lacdao moved for a reconsideration of the decision of the appellate
court which resolved to deny the same on 10 May 1990. Lee and Lacdao filed the petition for certiorari. In the
meantime, the appellate court inadvertently made an entry of judgment on 16 July 1990 erroneously applying
the rule that the period during which a motion for reconsideration has been pending must be deducted from the
15-day period to appeal. However, in its Resolution dated 3 January 1991, the appellate court set aside the
aforestated entry of judgment after further considering that the rule it relied on applies to appeals from decisions
of the Regional Trial Courts to the Court of Appeals, not to appeals from its decision to the Supreme Court
pursuant to the Supreme Court's ruling in the case of Refractories Corporation of the Philippines v. Intermediate
Appellate Court, 176 SCRA 539 [1989].

Issue:
 1. Whether the execution of the voting trust agreement by Lee and Lacdao whereby all their shares
to the corporation have been transferred to the trustee deprives the stockholder of their positions as
directors of the corporation.
2. Whether the five-year period of the voting trust agreement in question had lapsed in 1986 so that
the legal title to the stocks covered by the said voting trust agreement ipso facto reverted to Lee and
Lacdao as beneficial owners pursuant to the 6th paragraph of section 59 of the new Corporation Code.
3. Whether there was proper service of summons on ALFA through Lee and Lacdao, to bind ALFA.
Held:

1. Lee and Lacdao, by virtue of the voting trust agreement executed in 1981 disposed of all their shares through
assignment and delivery in favor of the DBP, as trustee. Consequently, Lee and Lacdao ceased to own at least
one share standing in their names on the books of ALFA as required under Section 23 of the new Corporation
Code. They also ceased to have anything to do with the management of the enterprise. Lee and Lacdao ceased
to be directors. Hence, the transfer of their shares to the DBP created vacancies in their respective positions as
directors of ALFA. The transfer of shares from the stockholders of ALFA to the DBP is the essence of the subject
voting trust agreement. Considering that the voting trust agreement between ALFA and the DBP transferred
legal ownership of the stocks covered by the agreement to the DBP as trustee, the latter because the stockholder
of record with respect to the said shares of stocks. In the absence of a showing that the DBP had caused to be
transferred in their names one share of stock for the purpose of qualifying as directors of ALFA, Lee and Lacdao
can no longer be deemed to have retained their status as officers of ALFA which was the case before the
execution of the subject voting trust agreement. There is no dispute from the records that DBP has taken over
full control and management of the firm.

2. The 6th paragraph of section 59 of the new Corporation Code reads that "Unless expressly renewed, all rights
granted in a voting trust agreement shall automatically expire at the end of the agreed period, and the voting
trust certificates as well as the certificates of stock in the name of the trustee or trustees shall thereby be deemed
cancelled and new certificates of stock shall be reissued in the name of the transferors." However, it is manifestly
clear from the terms of the voting trust agreement between ALFA and the DBP that the duration of the agreement
is contingent upon the fulfillment of certain obligations of ALFA with the DBP. Had the five-year period of the
voting trust agreement expired in 1986, the DBP would not have transferred an its rights, titles and interests in
ALFA "effective June 30, 1986" to the national government through the Asset Privatization Trust (APT) as
attested to in a Certification dated 24 January 1989 of the Vice President of the DBP's Special Accounts
Department II. In the same certification, it is stated that the DBP, from 1987 until 1989, had handled s account
which included ALFA's assets pursuant to a management agreement by and between the DBP and APT. Hence,
there is evidence on record that at the time of the service of summons on ALFA through Lee and Lacdao on 21
August 1987, the voting trust agreement in question was not yet terminated so that the legal title to the stocks of
ALFA, then, still belonged to the DBP.

3. It is a basic principle in Corporation Law that a corporation has a personality separate and distinct from the
officers or members who compose it. Thus, the role on service of processes on a corporation enumerates the
representatives of a corporation who can validly receive court processes on its behalf. Not every stockholder or
officer can bind the corporation considering the existence of a corporate entity separate from those who compose
it. The rationale of the rule is that service must be made on a representative so integrated with the corporation
sued as to make it a priori supposable that he will realize his responsibilities and know what he should do with
any legal papers served on him. Herein, Lee and Lacdao do not fall under any of the enumerated officers. The
service of summons upon ALFA, through Lee and Lacdao, therefore, is not valid. To rule otherwise will
contravene the general principle that a corporation can only be bound by such acts which are within the scope
of the officer's or agent's authority.
Valle Verde Country Club, Inc. v. Africa, G.R. No.151969, September 4, 2009.
[BRION, J.]
FACTS
On February 27, 1996, during the Annual Stockholders’ Meeting of petitioner Valle Verde Country Club, Inc.
(VVCC), the VVCC Board of Directors were elected including Eduardo Makalintal (Makalintal) among others. In
the years 1997, 1998, 1999, 2000, and 2001, however, the requisite quorum for the holding of the stockholders’
meeting could not be obtained. Consequently, the directors continued to serve in the VVCC Board in a hold-
over capacity. Later, Makalintal resigned as member of the VVCC Board. He was replaced by Jose Ramirez
(Ramirez), who was elected by the remaining members of the VVCC Board on March 6, 2001.
Respondent Africa (Africa), a member of VVCC, questioned the election of Ramirez as members of the VVCC
Board with the Regional Trial Court (RTC), respectively. Africa claimed that a year after Makalintal’s election as
member of the VVCC Board in 1996, his [Makalintal’s] term – as well as those of the other members of the VVCC
Board – should be considered to have already expired. Thus, according to Africa, the resulting vacancy should
have been filled by the stockholders in a regular or special meeting called for that purpose, and not by the
remaining members of the VVCC Board, as was done in this case. The RTC sustained Africa’s complaint.
ISSUE
Whether the remaining directors of the corporation’s Board, still constituting a quorum, can elect another
director to fill in a vacancy caused by the resignation of a hold-over director.
RULING
NO.
When Section 23 of the Corporation Code declares that “the board of directors…shall hold office for one (1) year
until their successors are elected and qualified,” we construe the provision to mean that the term of the members
of the board of directors shall be only for one year; their term expires one year after election to the office. The
holdover period – that time from the lapse of one year from a member’s election to the Board and until his
successor’s election and qualification – is not part of the director’s original term of office, nor is it a new term; the
holdover period, however, constitutes part of his tenure. Corollary, when an incumbent member of the board of
directors continues to serve in a holdover capacity, it implies that the office has a fixed term, which has expired,
and the incumbent is holding the succeeding term.
[Here], when remaining members of the VVCC Board elected Ramirez to replace Makalintal, there was no more
unexpired term to speak of, as Makalintal’s one-year term had already expired. Pursuant to law, the authority to
fill in the vacancy caused by Makalintal’s leaving lies with the VVCC’s stockholders, not the remaining members
of its board of directors. To assume – as VVCC does – that the vacancy is caused by Makalintal’s resignation in
1998, not by the expiration of his term in 1997, is both illogical and unreasonable. His resignation as a holdover
director did not change the nature of the vacancy; the vacancy due to the expiration of Makalintal’s term had
been created long before his resignation.
RANIEL vs JOCHICO
Facts:
Petitioners first questioned their removal in SEC Case No. 02-98-5902 for Declaration of Nullity of the
Illegal Acts of Respondents, Damages and Injunction. Petitioners, together with respondents Paul Jochico
(Jochico), John Steffens and Surya Viriya, were incorporators and directors of Nephro, with Raniel acting as
Corporate Secretary and Administrator. The conflict started when petitioners questioned respondents' plan to
enter into a joint venture with the Butuan Doctors' Hospital and College, Inc. sometime in December 1997.
Because of this, petitioners claim that respondents tried to compel them to waive and assign their shares with
Nephro but they refused. Thereafter, Raniel sought an indefinite leave of absence due to stress, but this was
denied by Jochico, as Nephro President. Raniel, nevertheless, did not report for work, causing Jochico to
demand an explanation from her why she should not be removed as Administrator and Corporate Secretary.
Raniel replied, expressing her sentiments over the disapproval of her request for leave and respondents' decision
with regard to the Butuan venture.

On January 30, 1998, Jochico issued a Notice of Special Board Meeting on February 2, 1998. Despite
receipt of the notice, petitioners did not attend the board meeting. In said meeting, the Board passed several
resolutions ratifying the disapproval of Raniel's request for leave, dismissing her as Administrator of Nephro,
declaring the position of Corporate Secretary vacant, appointing Otelio Jochico as the new Corporate Secretary
and authorizing the call of a Special Stockholders' Meeting on February 16, 1998 for the purpose of the removal
of petitioners as directors of Nephro.

Otelio Jochico issued the corresponding notices for the Special Stockholders' Meeting to be held on
February 16, 1998 which were received by petitioners on February 2, 1998. Again, they did not attend the
meeting. The stockholders who were present removed the petitioners as directors of Nephro. Thus, petitioners
filed SEC Case No. 02-98-5902.

On October 27, 2000, the SEC rendered its Decision, the dispositive portion of which reads:
WHEREFORE, the Commission so holds that complainants cannot be awarded the reliefs prayed
for in reinstating Nectarina S. Raniel as secretary and administrator.
The corporation acting thru its Board of Directors can validly remove its corporate officers,
particularly complainant Nectarina S. Raniel as corporate secretary, treasurer and administrator of the
Dialysis Clinic.
Also, the Commission cannot grant the relief prayed for by complainants in restraining the
respondents from interfering in the administration of the Dialysis Clinic owned by the corporation and the
use of corporate funds.
The administration of the Dialysis Clinic of the corporation and the use of corporate funds,
rightfully belong to the officers of the corporation, which in this case are the respondents.
The counterclaim of respondents to return or assign back the complainants' shares in favor of
respondent Paul Jochico or his nominee is hereby denied for lack of merit.
The respondents failed to show any clear and convincing evidence to rebut the presumption of
the validity and truthfulness of documents submitted to the Commission in the grant of corporate license.
The claim for attorney's fees and damages of both parties are likewise denied for lack of merit, as
neither party should be punished for vindicating a right, which he/she believes should be protected or
enforced.
 SO ORDERED.

Dissatisfied, petitioners filed a petition for review with the CA.

Both the SEC and the CA held that Pag-ong's removal as director and Raniel's removal as director and
officer of Nephro were valid. For its part, the SEC ruled that the Board of Directors had sufficient ground to
remove Raniel as officer due to loss of trust and confidence, as her abrupt and unauthorized leave of absence
exhibited her disregard of her responsibilities as an officer of the corporation and disrupted the operations of
Nephro. The SEC also held that the Special Board Meeting held on February 2, 1998 was valid and the
resolutions adopted therein are binding on petitioners.
The CA upheld the SEC's conclusions, adding further that the special stockholders' meeting on February
16, 1998 was likewise validly held. The CA also ruled that Pag-ong's removal as director of Nephro was justified
as it was due to her undenied delay in the release of Nephro's medical supplies from the warehouse of the Fly-
High Brokerage where she was an officer, on top of her and her co-petitioner Raniel's absence from the
aforementioned directors' and stockholders' meetings of Nephro despite due notice.
Issue:
Whether or not the removal of Pag-Ong and Raniel by the Board of Directors is proper.
Held:
Yes. A corporation exercises its powers through its board of directors and/or its duly authorized officers and
agents, except in instances where the Corporation Code requires stockholders approval for certain specific acts.
Based on Section 23 of the Corporation Code which provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business conducted
and all property of such corporations controlled and held by the board of directors or trustees x x x.

a corporations board of directors is understood to be that body which (1) exercises all powers provided for under
the Corporation Code; (2) conducts all business of the corporation; and (3) controls and holds all property of the
corporation. Its members have been characterized as trustees or directors clothed with a fiduciary character.
Moreover, the directors may appoint officers and agents and as incident to this power of appointment, they may
discharge those appointed.
In this case, petitioner Raniel was removed as a corporate officer through the resolution of Nephro's
Board of Directors adopted in a special meeting on February 2, 1998. As correctly ruled by the SEC, petitioners'
removal was a valid exercise of the powers of Nephro's Board of Directors, viz.:
In the instant complaint, do respondents have sufficient grounds to cause the removal of Raniel from her
positions as Corporate Secretary, Treasurer and Administrator of the Dialysis Clinic? Based on the facts proven
during the hearing of this case, the answer is in the affirmative.
Raniel's letter of January 26, 1998 speaks for itself. Her request for an indefinite leave, immediately
effective yet without prior notice, reveals a disregard of the critical responsibilities pertaining to the sensitive
positions she held in the corporation. Prior to her hasty departure, Raniel did not make a proper turn-over of her
duties and had to be expressly requested to hand over documents and records, including keys to the office and
the cabinets.
xxxx
 Since Raniel occupied all three positions in Nephro, it is not difficult to foresee the disruption that her
immediate and indefinite absence can inflict on the operations of the company. By leaving abruptly, Raniel
abandoned the positions she is now trying to reclaim. Raniel's actuation has been sufficiently proven to warrant
loss of the Board's confidence.
The SEC also correctly concluded that petitioner Raniel was removed as an officer of Nephro in
compliance with established procedure, thus:

The resolutions of the Board dismissing complainant Raniel from her various positions in Nephro are
valid. Notwithstanding the absence of complainants from the meeting, a quorum was validly constituted. x x x.
xxxx
Based on its articles of incorporation, Nephro has five directors two of the positions were occupied by
complainants and the remaining three are held by respondents. This being the case, the presence of all three
respondents in the Special Meeting of the Board on February 2, 1998 established a quorum for the conduct of
business. The unanimous resolutions carried by the Board during such meeting are therefore valid and binding
against complainants.
Petitioners Raniel and Pag-ong's removal as members of Nephro's Board of Directors was likewise valid.
Only stockholders or members have the power to remove the directors or trustees elected by them, as
laid down in Section 28 of the Corporation Code, which provides in part:
SEC. 28. Removal of directors or trustees. -- Any director or trustee of a corporation may be
removed from office by a vote of the stockholders holding or representing at least two-thirds (2/3) of the
outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of at least two-thirds
(2/3) of the members entitled to vote: Provided, that such removal shall take place either at a regular
meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous
notice to stockholders or members of the corporation of the intention to propose such removal at the
meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal
of directors or trustees or any of them, must be called by the secretary on order of the president or on
the written demand of the stockholders representing or holding at least a majority of the outstanding
capital stock, or if it be a non-stock corporation, on the written demand of a majority of the members
entitled to vote. x x x Notice of the time and place of such meeting, as well as of the intention to propose
such removal, must be given by publication or by written notice as prescribed in this Code. x x x Removal
may be with or without cause: Provided, That removal without cause may not be used to deprive minority
stockholders or members of the right of representation to which they may be entitled under Section 24 of
this Code. (Emphasis supplied)
Petitioners do not dispute that the stockholders' meeting was held in accordance with Nephro's By-Laws.
The ownership of Nephro's outstanding capital stock is distributed as follows: Jochico - 200 shares; Steffens -
100 shares; Viriya - 100 shares; Raniel - 75 shares; and Pag-ong - 25 shares,[17] or a total of 500 shares. A
two-thirds vote of Nephro's outstanding capital stock would be 333.33 shares, and during the Stockholders'
Special Meeting held on February 16, 1998, 400 shares voted for petitioners' removal. Said number of votes is
more than enough to oust petitioners from their respective positions as members of the board, with or without
cause.
Expert Travel & Tours vs. CAG.R. No. 152392; May 26, 2005

FACTS: Korean Airlines (KAL) is a corporation established and registered in the Republic of South Korea and
licensed to do business in the Philippines. Its general manager in the Philippines is Suk Kyoo Kim, while its
appointed counsel was Atty. Mario Aguinaldo and his law firm. KAL, through appointed counsel, filed a complaint
against Expert Travel with the RTC for the collection of sum of money. The verification and certification against
forum shopping was signed by the same appointed counsel, who indicated therein that he was the resident agent
and legal counsel of KAL and had caused the preparation of the complaint. Expert Travel filed a motion to dismiss
the complaint on the ground that the appointed counsel was not authorized to execute the verification and
certificate of non-forum shopping as required by the Rules of Court. KAL opposed the motion, contending that
he is a resident agent and was registered as such with the SEC as required by the Corporation Code. He also
claimed that he had been authorized to file the complaint through are solution of the KAL Board of Directors
approved during a special meeting, wherein the board of directors conducted a special teleconference which he
attended. It was also averred that in the same teleconference, the board of directors approved a resolution
authorizing him to execute the certificate of non-forum shopping and to file the complaint.Suk Kyoo Kim alleged,
however, that the corporation had no written copy of the aforesaid resolution. TC denied motion to dismiss. CA
affirms.

ISSUE: Can a special teleconference be recognized as legitimate means to approved a boardresolution and
authorize an agent to execute an act in favor of the corporation?

HELD: YES. In this age of modern technology, the courts may take judicial notice that business transactions
may be made by individuals through teleconferencing and videoconferencing of members of board of directors
of private corporations is a reality, in light of Republic Act No. 8792. The Securities and Exchange Commission
issued SEC Memorandum Circular No. 15, on November 30, 2001, providing the guidelines to be complied with
related to such conferences. HOWEVER, in the case at bar, even given the possibility that Atty. Aguinaldo and
Suk
Kyoo Kim participated in a teleconference along with the respondent’s Board of Directors,
the Court is not convinced that one was conducted; even if there had been one, the Court is not inclined to
believe that a board resolution was duly passed specifically authorizing Atty.Aguinaldo to file the complaint and
execute the required certification against forum shopping. Facts and circumstances show that there was gross
failure on the part of company to prove that there was indeed a special teleconference such as failure to produce
a written copy of the board resolution via teleconference.
NOTE:
Read SEC Memo Circular No. 15-2001, the guidelines for the conduct of a teleconferencing
and videoconferencing.
 ANTONIO CARAG VS NLRC ET. AL.
G.R NO. 147590, APRIL 2, 2007
FACTS:
National Federation of Labor Unions (NAFLU) and Mariveles Apparel Corporation Labor Union
(MACLU), on behalf of all of MAC’s rank and file employees, filed a complaint against MAC for illegal dismissal
brought about by its illegal closure of business. They included in their complaint Mariveles Apparel Corporation’s
Chairman of the Board Antonio Carag in order to be solidarily liable for the illegal dismissal and illegal closure of
business. According to the Labor Union of MAC, the Corporation suddenly closed its business without following
the notice as laid down in the Labor Law of the Philippines. The Labor Arbiter decided in favor of the Labor Union
and held that Antonio Carag being the owner of the corporation be solidarily liable for the payment of separation
pay and backwages of the rank and file employees. Antonio Carag questioned the decision of the Labor Arbiter
and alleged that the Corporation and its officers have separate and distinct personality and the latter cannot be
held liable solidarily in cases of payment of damages.
Issue:
Whether or not Antonio Carag be held solidarily liable for the payment of the illegally dismissed
employees.
Held:
The Supreme Court held that the rule is that a director is not personally liable for the debts of the
corporation, which has a separate legal personality of its own. Section 31 of the Corporation Code lays down
the exceptions to the rule, as follows:

Liability of directors, trustees or officers. - Directors or trustees who wilfully and

knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty
of gross negligence or bad faith in directing the affairs of the corporation or acquire any
personal or pecuniary interest in conflict with their duty as such directors or trustees shall
be liable jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.
Section 31 makes a director personally liable for corporate debts if he wilfully and knowingly votes for or
assents to patently unlawful acts of the corporation. Section 31 also makes a director personally liable if he
is guilty of gross negligence or bad faith in directing the affairs of the corporation.
Complainants did not allege in their complaint that Carag wilfully and knowingly voted for or assented to
any patently unlawful act of MAC. Complainants did not present any evidence showing that Carag wilfully and
knowingly voted for or assented to any patently unlawful act of MAC. Neither did Arbiter Ortiguerra make any
finding to this effect in her Decision.
For a wrongdoing to make a director personally liable for debts of the corporation, the wrongdoing
approved or assented to by the director must be a patently unlawful act. Mere failure to comply with the notice
requirement of labor laws on company closure or dismissal of employees does not amount to a patently unlawful
act. Patently unlawful acts are those declared unlawful by law which imposes penalties for commission of
such unlawful acts. There must be a law declaring the act unlawful and penalizing the act.

Wherefore, Antonio Carag is not liable to the debt of the Corporation as to the illegally dismissed
employees of MAC.
FILIPINAS PORT SERVICES INC v. GO, ET AL.
FACTS:

The case involves a petition for review on certiorari.

We have here Eliodoro C. Cruz suing on behalf of the stockholders of Filipinas Port Services alleging
that there has been numerous cases of mismanagement by the board of directors:

1. creation of an executive committee not provided for in the by-laws of the corporation
2. disproportionate increase in the salary of officials
3. re-creation of already existing positions
4. creation of additional positions with holders not doing any work to deserve any monthly
remuneration.
He prayed for the return of the salary received by all the unnecessarily appointed members.

The Trial Court sided with the respondent and ruled that the creation of the executive committee and the
additional position was legitimate given that it was provided by the corporation’s by-law. However, the prayer for
the return of salaries received was granted, even if the positions and the committee were valid, for the court
ruled that Filipinas Port Services is not a big corporation requiring multiple executive positions.

The respondents appealed the decision and they received a favourable decision as the Court of Appeals granted
the respondents’ appeal, reversed and set aside the appealed decision of the trial court and accordingly
dismissed the so-called derivative suit filed by Cruz, et al.,

Cruz did not take the decision sitting down, hence the petition.

To counter the appeal filed by Cruz, respondents also claim that what Cruz filed is not a derivative suit.

The petition was denied and the challenged decision of the CA was affirmed. Only, the Supreme Court
clarified the issue involving the legitimacy of the derivative suit.

ISSUE:

Whether or not there is mismanagement.

Was the case filed by Cruz, on behalf of Filipinas Port Services Inc., a derivative suit?

HELD:
1. NO. Section 35 of the Corporation Code, the creation of an executive committee (as powerful as the BOD)
must be provided for in the bylaws of the corporation. Notwithstanding the silence of Filport’s bylaws on the
matter, we cannot rule that the creation of the executive committee by the board of directors is illegal or
unlawful. One reason is the absence of a showing as to the true nature and functions of executive
committee. But even assuming there was mismanagement resulting to corporate damages and/or business
losses, respondents may not be held liable in the absence of a showing of bad faith in doing the acts
complained of. ("dishonest purpose","some moral obliquity","conscious doing of a wrong", "partakes of the
nature of fraud"). determination of the necessity for additional offices and/or positions in a corporation is a
management prerogative which courts are not wont to review in the absence of any proof that such
prerogative was exercised in bad faith or with malice
 2. YES.Under the Corporation Code, where a corporation is an injured party, its power to sue is lodged with
its board of directors or trustees. But an individual stockholder or an individual trustee may be permitted
to institute a derivative suit in behalf of the corporation in order to protect or vindicate corporate rights
whenever the officials of the corporation refuse to sue, or when a demand upon them to file the necessary
action would be futile because they are the ones to be sued, or because they hold control of the
corporation. In such actions, the corporation is the real party-in-interest while the suing stockholder, in
behalf of the corporation, is only a nominal part.

Here, the action below is principally for damages resulting from alleged mismanagement of the affairs of
Filport by its directors/officers, it being alleged that the acts of mismanagement are detrimental to the interests
of Filport. Thus, the injury complained of primarily pertains to the corporation so that the suit for relief should be
by the corporation. However, since the ones to be sued are the directors/officers of the corporation itself, a
stockholder, like petitioner Cruz, may validly institute a “derivative suit” to vindicate the alleged corporate injury,
in which case Cruz is only a nominal party while Filport is the real party-in-interest.

Besides, the requisites before a derivative suit can be filed by a stockholder or individual trustee are present in
this case, to wit:

a) the party bringing suit should be a shareholder as of the time of the act or transaction complained of, the
number of his shares not being material;

b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for
the appropriate relief but the latter has failed or refused to heed his plea; and

c) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being
caused to the corporation and not to the particular stockholder bringing the suit.

Indisputably, petitioner Cruz (1) is a stockholder of Filport; (2) he sought without success to have its board of
directors remedy what he perceived as wrong when he wrote a letter requesting the board to do the necessary
action in his complaint; and (3) the alleged wrong was in truth a wrong against the stockholders of the corporation
generally, and not against Cruz or Minterbro, in particular. And while it is true that the complaining stockholder
must show to the satisfaction of the court that he has exhausted all the means within his reach to attain within
the corporation itself the redress for his grievances, or actions in conformity to his wishes, nonetheless, where
the corporation is under the complete control of the principal defendants or other trustees, as here, there is no
necessity of making a demand upon the directors. The reason is obvious: a demand upon the board to institute
an action and prosecute the same effectively would have been useless and an exercise in futility.

Bottom line, when it comes to cases involving two or more trustees, an individual trustee can file a derivative suit
duly following the requisites without the need to exhaust internal remedies where the trusteeship is under the
complete control of the other trustees for it will be a waste of time.
GRACE CHRISTIAN HIGH SCHOOL, petitioner,vs. THE COURT OF APPEALS, GRACE VILLAGE
ASSOCIATION, INC., ALEJANDRO G. BELTRAN, and ERNESTO L. GO, respondents.

G.R. No. 108905 October 23, 1997

MENDOZA, J.:

Petitioner Grace Christian High School is an educational institution located at the Grace Village in Quezon City,
while Private respondent Grace Village Association, Inc. ["Association'] is an organization of lot and/or building
owners, lessees and residents at Grace Village.

The original 1968 by-laws provide that the Board of Directors, composed of eleven (11) members, shall serve
for one (1) year until their successors are duly elected and have qualified.

On 20 December 1975, a committee of the board of directors prepared a draft of an amendment to the
by-laws which provides that "GRACE CHRISTIAN HIGH SCHOOL representative is a permanent
Director of the ASSOCIATION."

However, this draft was never presented to the general membership for approval. Nevertheless, from 1975 to
1990, petitioner was given a permanent seat in the board of directors of the association.

On 13 February 1990, the association's committee on election sought to change the by-laws and informed the
Petitioner's school principal "the proposal to make the Grace Christian High School representative as a
permanent director of the association, although previously tolerated in the past elections should be
reexamined."

Following this advice, notices were sent to the members of the association that the provision on election of
directors of the 1968 by-laws of the association would be observed. Petitioner requested the chairman of the
election committee to change the notice to honor the 1975 by-laws provision, but was denied.

The school then brought suit for mandamus in the Home Insurance and Guaranty Corporation (HIGC) to
compel the board of directors to recognize its right to a permanent seat in the board.

Meanwhile, the opinion of the SEC was sought by the association, and SEC rendered an opinion to the effect
that the practice of allowing unelected members in the board was contrary to the existing by-laws of the
association and to §92 of the Corporation Code (B.P. Blg. 68). This was adopted by the association in its
Answer in the mandamus filed with the HIGC.

The HIGC hearing officer ruled in favor of the association, which decision was affirmed by the HIGC Appeals
Board and the Court of Appeals.

Issue: W/N the 1975 provision giving the petitioner a permanent board seat was valid.

Ruling: No.

Section 23 of the Corporation Code (and its predecessor Section 28 and 29 of the Corporation Law) leaves no
room for doubt that the Board of Directors of a Corporation must be elected from among the stockholders or
members.

There may be corporations in which there are unelected members in the board but it is clear that in these
instances, the unelected members sit as ex officio members, i.e., by virtue of and for as long as they hold a
particular office (e.g. whoever is the Archbishop of Manila is considered a member of the board of Cardinal
Santos Memorial Hospital, Inc.)

But in the case of petitioner, there is no reason at all for its representative to be given a seat in the board. Nor
does petitioner claim a right to such seat by virtue of an office held. In fact it was not given such seat in the
beginning. It was only in 1975 that a proposed amendment to the by-laws sought to give it one.

Since the provision in question is contrary to law, the fact that it has gone unchallenged for fifteen years cannot
forestall a later challenge to its validity. Neither can it attain validity through acquiescence because, if it is
contrary to law, it is beyond the power of the members of the association to waive its invalidity.

It is more accurate to say that the members merely tolerated petitioner's representative and tolerance cannot
be considered ratification.

Nor can petitioner claim a vested right to sit in the board on the basis of "practice." Practice, no matter how
long continued, cannot give rise to any vested right if it is contrary to law.
PEOPLE'S AIRCARGO AND WAREHOUSING CO. INC. VS. COURT OF APPEALS
FACTS:
People's Aircargo and Warehousing Co. Inc. (PAWCI) is a domestic corporation, organized in 1986 to operate
a customs bonded warehouse at the old Manila International Airport in Pasay City.
Now, to obtain a license for the corporation from the Bureau of Customs, ANTONIO PUNSALAN JR., the
corporation president, solicited a proposal from STEFANI SAÑO for the preparation of a feasibility study. Saño
submitted a letter of proposal ("First Contract") to Punsalan, for the project feasibility study (market, technical,
and financial feasibility) and preparation of pertinent documentation requirements for the application, worth
P350,000.
Initially, Cheng Yong, the majority stockholder of PAWCI, objected to Saño's offer, as another company priced
a similar proposal at only P15,000. However, Punsalan preferred Saño's services because of the latter's
membership in the task force, which was supervising the transition of the Bureau of Customs from the Marcos
government to the Aquino Administration. PAWCI, through Punsalan, sent Saño a letter confirming their
agreement. Accordingly, Saño prepared a feasibility study for PAWCI which eventually paid him the balance of
the contract price.
Upon Punsalan's request, Saño sent PAWCI another letter-proposal ("Second Contract") formalizing its proposal
for consultancy services in the amount of P400,000. ANDY VILLACEREN, vice president of PAWCI, received
the operations manual prepared by Saño. PAWCI submitted said operations manual to the Bureau of Customs
in connection with the former's application to operate a bonded warehouse where thereafter, the Bureau issued
to it a license to operate, enabling it to become one of the three public customs bonded warehouses at the
international airport. Saño also conducted, in the warehouse of PAWCI, a three-day training seminar for the
latter's employees.
Thereafter, Saño joined the Bureau of Customs as special assistant to then Commissioner ALEX PADILLA, a
position he held until he became technical assistant to then Commissioner MIRIAM DEFENSOR-SANTIAGO.
Meanwhile, Punsalan sold his shares in PAWCI and resigned as its president in 1987.
Saño thereupon, filed a collection suit against PAWCI. He alleged that he had prepared an operations manual
for PAWCI, conducted a seminar-workshop for its employees and delivered to it a computer program; but that,
despite demand, PAWCI refused to pay him for his services.
PAWCI, in its answer, denied that Saño had prepared an operations manual and a computer program or
conducted a seminar-workshop for its employees. It further alleged that THE LETTER-AGREEMENT WAS
SIGNED BY PUNSALAN WITHOUT AUTHORITY, IN COLLUSION WITH SAÑO in order to unlawfully get some
money from PAWCI, and despite his knowledge that a group of employees of the company had been
commissioned by the board of directors to prepare an operations manual.
RTC of Pasay City rendered a Decision declaring the Second Contract unenforceable or simulated. However,
since Saño had actually prepared the operations manual and conducted a training seminar for PAWCI and its
employees, the trial court awarded P60,000 to the former, on the ground that no one should be unjustly enriched
at the expense of another (Article 2142, Civil Code). The trial Court determined the amount "in light of the
evidence presented by defendant on the usual charges made by a leading consultancy firm on similar services."
Upon appeal, the appellate court modified the decision of the trial court, and declared the Second Contract valid
and binding on PAWCI, which was held liable to Saño in the full amount of P400,000, representing payment of
Saño services in preparing the manual of operations and in the conduct of a seminar for PAWCI.
PAWCI filed the Petition for Review.
ISSUE:

Whether a single instance where the corporation had previously allowed its president to enter into a contract
with another without a board resolution expressly authorizing him, has clothed its president with apparent
authority to execute the subject contract.

RULING:
APPARENT AUTHORITY is derived not merely from practice. Its existence may be ascertained through
(1) the general manner in which the corporation holds out an officer or agent as having the power to act or, in
other words, the apparent authority to act in general, with which it clothes him; or
(2) the acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, whether
within or beyond the scope of his ordinary powers.
It requires presentation of evidence of similar act(s) executed either in its favor or in favor of other parties.
It is not the quantity of similar acts which establishes apparent authority, but the vesting of a corporate officer
with the power to bind the corporation.
What happened here is that PAWCI, through its president Antonio Punsalan Jr., entered into the First Contract
without first securing board approval. Despite such lack of board approval, PAWCI DID NOT OBJECT TO OR
REPUDIATE SAID CONTRACT, THUS "CLOTHING" ITS PRESIDENT WITH THE POWER TO BIND THE
CORPORATION. The grant of apparent authority to Punsalan is evident in the testimony of Yong — senior vice
president, treasurer and major stockholder of PAWCI.
The First Contract was consummated, implemented and paid without a hitch. Hence, Sano should not be faulted
for believing that Punsalan's conformity to the contract in dispute was also binding on petitioner. IT IS FAMILIAR
DOCTRINE THAT IF A CORPORATION KNOWINGLY PERMITS ONE OF ITS OFFICERS, OR ANY OTHER
AGENT, TO ACT WITHIN THE SCOPE OF AN APPARENT AUTHORITY, IT HOLDS HIM OUT TO THE PUBLIC
AS POSSESSING THE POWER TO DO THOSE ACTS; AND THUS, THE CORPORATION WILL, AS
AGAINST ANYONE WHO HAS IN GOOD FAITH DEALT WITH IT THROUGH SUCH AGENT, BE ESTOPPED
FROM DENYING THE AGENT'S AUTHORITY.
Furthermore, Saño prepared an operations manual and conducted a seminar for the employees of PAWCI in
accordance with their contract. PAWCI accepted the operations manual, submitted it to the Bureau of Customs
and allowed the seminar for its employees. AS A RESULT OF ITS AFOREMENTIONED ACTIONS, PAWCI
WAS GIVEN BY THE BUREAU OF CUSTOMS A LICENSE TO OPERATE A BONDED WAREHOUSE.
Granting arguendo then that the Second Contract was outside the usual powers of the president, PAWCI'S
RATIFICATION OF SAID CONTRACT AND ACCEPTANCE OF BENEFITS HAVE MADE IT BINDING,
NONETHELESS. The enforceability of contracts under Article 1403(2) is ratified "by the acceptance of benefits
under them" under Article 1405.
003 PAUL LEE TAN, ANDREW LIUSON, ESTHER WONG, STEPHEN CO, JAMES TAN, JUDITH TAN, ERNESTO TANCHI JR.,
EDWIN NGO, VIRGINIA KHOO, SABINO PADILLA JR., EDUARDO P. LIZARES and GRACE CHRISTIAN HIGH SCHOOL v.
PAUL SYCIP and MERRITTO LIM

GR No. 153468 and August 17, 2006

Topic: QUORUM

Ponente: PANGANIBAN, C.J.

DOCTRINE: For stock corporations, the "quorum" referred to in Section 52 of the Corporation Code is based on
the number of outstanding voting stocks. For nonstock corporations, only those who are actual, living members
with voting rights shall be counted in determining the existence of a quorum during members’ meetings. Dead
members shall not be counted.

FACTS:
1. Petitioner Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation with fifteen
(15) regular members, who also constitute the board of trustees.
2. April 6, 1998: Only 11 member-trustees were still living and 4 were already dead. Out of the 11, 7 attended
the meeting through proxies. The meeting was convened and chaired by Atty. Sabino Padilla Jr. over the
objection of Atty. Antonio C. Pacis, who argued that there was no quorum.
3. In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were voted to replace
the 4 members trustees who already died. The controversy reached the SEC.
4. PETIONERS SAY: Member trustees who were already dead should not be counted when the quorum is
computed, because, upon their death, members automatically lost all their rights (including the right to vote)
and interests in the corporation.
5. April 6, 1998: SEC Hearing Officer Malthie G. Militar declared the meeting null and void for lack of quorum.
According to her: (a) the basis for determining the quorum should be the number of the members as specified
in the articles of incorporation, not simply the number of living members; (b) the qualifying phrase "entitled to
vote" in Section 24 of the Corporation Code, which provided the basis for determining a quorum for the election
of directors or trustees, should be read together with Section 89; (c) Article III (2) of the By-Laws of GCHS, insofar
as it prescribed the mode of filling vacancies in the board of trustees, must be interpreted in conjunction with
Section 29 12 of the Corporation Code.
6. Petitioners appealed, but the SEC en banc denied it and and affirmed the Decision of the hearing officer in
toto, finding untenable their contention that the word "members," as used in Section 52 14 of the Corporation
Code, referred only to the living members of a nonstock corporation. 15
7. CA: Dismissed appeal of Petitioners., because the Verification and Certification of Non-Forum Shopping had
been signed only by Atty. Sabino Padilla Jr. No Special Power of Attorney had been attached to show his
authority to sign for the rest of the petitioners. Hence, this Petition.

ISSUE: Whether dead members should still be counted in the determination of the quorum, for purposes of conducting
the annual members’ meeting.

RULING: The right to vote is inherent in and incidental to the ownership of corporate stocks. 33 It is settled that
unissued stocks may not be voted or considered in determining whether a quorum is present in a stockholders’
meeting, or whether a requisite proportion of the stock of the corporation is voted to adopt a certain measure
or act. Only stock actually issued and outstanding may be voted. 34 Under Section 6 of the Corporation Code,
each share of stock is entitled to vote, unless otherwise provided in the articles of incorporation or declared
delinquent 35 under Section 67 of the Code.

In nonstock corporations, the voting rights attach to membership. 39 Members vote as persons, in accordance
with the law and the bylaws of the corporation. Each member shall be entitled to one vote unless so limited,
broadened, or denied in the articles of incorporation or bylaws. 40 We hold that when the principle for
determining the quorum for stock corporations is applied by analogy to nonstock corporations, only those who
are actual members with voting rights should be counted.

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. 44

On the other hand, membership in and all rights arising from a nonstock corporation are personal and non-
transferable, unless the articles of incorporation or the bylaws of the corporation provide otherwise. 45 In other
words, the determination of whether or not "dead members" are entitled to exercise their voting rights (through
their executor or administrator), depends on those articles of incorporation or bylaws.

Under the By-Laws of GCHS, membership in the corporation shall, among others, be terminated by the death of
the member. 46 Section 91 of the Corporation Code further provides that termination extinguishes all the rights
of a member of the corporation, unless otherwise provided in the articles of incorporation or the bylaws.

Applying Section 91 to the present case, we hold that dead members who are dropped from the membership
roster in the manner and for the cause provided for in the By-Laws of GCHS are not to be counted in determining
the requisite vote in corporate matters or the requisite quorum for the annual members’ meeting. With 11
remaining members, the quorum in the present case should be 6. Therefore, there being a quorum, the annual
members’ meeting, conducted with six 47 members present, was valid.

DISPOSITIVE PORTION:

WHEREFORE, the Petition is partly GRANTED. The assailed Resolutions of the Court of Appeals are hereby
REVERSED AND SET ASIDE. The remaining members of the board of trustees of Grace Christian High School
(GCHS) may convene and fill up the vacancies in the board, in accordance with this Decision. No pronouncement
as to costs in this instance.
 Turner v . Lorenzo Shipping Corp., G.R. No. 157479, November 24, 2010

DOCTRINE/S: The right of appraisal under Section 81 of the Corporation Code grants a stockholder who dissents from
certain corporate actions the right to demand payment of the fair value of his or her shares. However, , no payment shall
be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its books to cover the
payment.

FACTS: ● The petitioners held shares of stock of the respondent, a domestic corporation engaged in cargo shipping
activities. In June 1999, the respondent decided to amend its articles of incorporation to remove the stockholders’ pre-
emptive rights to newly issued shares of stock. Feeling that the corporate move would be prejudicial to their interest as
stockholders, the petitioners voted against the amendment and demanded payment of their shares ● Because of the
disagreement on the valuation of the shares, the parties constituted an appraisal committee which reported its valuation
of P2.54/ share. ● Petitioners then demanded for payment in accordance with the valuation of the committed but the
respondent refused the petitioners’ demand, explaining that pursuant to the Corporation Code, the dissenting
stockholders exercising their appraisal rights could be paid only when the corporation had unrestricted retained earnings
to cover the fair value of the shares, but that it had no retained earnings at the time of the petitioners’ demand, as borne
out by its Financial Statements for Fiscal Year 1999

ISSUE/S: WON dissenting stockholders can recover the value of their shareholdings?

HELD: NO. It is true that a stockholder who dissents from certain corporate actions has the right to demand payment of
the fair value of his or her shares. This right, known as the right of appraisal, is expressly recognized in Section 81 of the
Corporation Code . The right of appraisal may be exercised when there is a fundamental change in the charter or articles
of incorporation substantially prejudicing the rights of the stockholders. It does not vest unless objectionable corporate
action is taken. It serves the purpose of enabling the dissenting stockholder to have his interests purchased and to retire
from the corporation. However, no payment shall be made to any dissenting stockholder unless the corporation has
unrestricted retained earnings in its books to cover the payment. In case the corporation has no available unrestricted
retained earnings in its books, Section 83 of the Corporation Code provides that if the dissenting stockholder is not paid
the value of his shares within 30 days after the award, his voting and dividend rights shall immediately be restored. The
trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the payment of the shares of
stocks of the withdrawing stockholders. Under the doctrine, the capital stock, property, and other assets of a corporation
are regarded as equity in trust for the payment of corporate creditors, who are preferred in the distribution of corporate
assets. The creditors of a corporation have the right to assume that the board of directors will not use the assets of the
corporation to purchase its own stock for as long as the corporation has outstanding debts and liabilities. There can be no
distribution of assets among the stockholders without first paying corporate debts. Thus, any disposition of corporate
funds and assets to the prejudice of creditors is null and void.
TURNER vs. LORENZO SHIPPING
Stockholder’s Right of Appraisal

The Corporation Code defines how the right of appraisal is exercised, as well as the implications of the right of appraisal, as
follows:

1) The appraisal right is exercised by any stockholder who has voted against the proposed corporate action by making a written
demand on the corporation within 30 days after the date on which the vote was taken for the payment of the fair value of
his shares. The failure to make the demand within the period is deemed a waiver of the appraisal right.
2) If the withdrawing stockholder and the corporation cannot agree on the fair value of the shares within a period of 60 days
from the date the stockholders approved the corporate action, the fair value shall be determined and appraised by three
disinterested persons, one of whom shall be named by the stockholder, another by the corporation, and the third by the two
thus chosen. The findings and award of the majority of the appraisers shall be final, and the corporation shall pay their
award within 30 days after the award is made. Upon payment by the corporation of the agreed or awarded price, the
stockholder shall forthwith transfer his or her shares to the corporation.
3) All rights accruing to the withdrawing stockholder’s shares, including voting and dividend rights, shall be suspended from
the time of demand for the payment of the fair value of the shares until either the abandonment of the corporate action
 involved or the purchase of the shares by the corporation, except the right of such stockholder to receive payment of the fair
value of the shares.
4) Within 10 days after demanding payment for his or her shares, a dissenting stockholder shall submit to the corporation the
certificates of stock representing his shares for notation thereon that such shares are dissenting shares. A failure to do so
shall, at the option of the corporation, terminate his rights under this Title X of the Corporation Code. If shares represented
by the certificates bearing such notation are transferred, and the certificates are consequently canceled, the rights of the
transferor as a dissenting stockholder under this Title shall cease and the transferee shall have all the rights of a regular
stockholder; and all dividend distributions that would have accrued on such shares shall be paid to the transferee.
5) If the proposed corporate action is implemented or effected, the corporation shall pay to such stockholder, upon the
surrender of the certificates of stock representing his shares, the fair value thereof as of the day prior to the date on which
the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action.

Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless the corporation
has unrestricted retained earnings in its books to cover the payment. In case the corporation has no available
unrestricted retained earnings in its books, Section 83 of the Corporation Code provides that if the dissenting stockholder
is not paid the value of his shares within 30 days after the award, his voting and dividend rights shall immediately be
restored.

The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the payment of the shares
of stocks of the withdrawing stockholders. Under the doctrine, the capital stock, property, and other assets of a corporation
are regarded as equity in trust for the payment of corporate creditors, who are preferred in the distribution of corporate
assets. The creditors of a corporation have the right to assume that the board of directors will not use the assets of the
corporation to purchase its own stock for as long as the corporation has outstanding debts and liabilities. There can be no
distribution of assets among the stockholders without first paying corporate debts. Thus, any disposition of corporate funds
and assets to the prejudice of creditors is null and void.
LEGASPI TOWERS v MUER
FACTS: Legaspi Towers 300 set the annual meeting of the members of the condominium
corporation and the election of the new Board of Directors. Out of a total number of 5,723 members
who were entitled to vote, 1,358 were supposed to vote through their respective proxies and their votes
were critical in determining the existence of a quorum, which was at least 2,863 (50% plus 1). The
Committee on Elections however, found most of the proxy votes, at its face value, irregular, thus,
questionable; and for lack of time to authenticate the same, petitioners adjourned the meeting for lack
of quorum.
Despite petitioners' insistence that no quorum was obtained during the annual meeting respondents
pushed through with the scheduled election and were elected as the new Board of Directors and
officers.
Subsequently, they submitted a General Information Sheet to the Securities and Exchange
Commission (SEC) with the following new set of officers:
petitioners filed a Complaint for the Declaration of Nullity of Elections with Prayers for the lssuance of
Temporary Restraining Orders and Writ of Preliminary Injunction and Damages against respondents
with the RTC of Manila.
Petitioners filed a petition for certiorari with the Court of Appeals dismissed the petition.
ISSUE: W or N the honorable court of appeals erred in resolving that public respondent-appellee
did not commit any whimsical, arbitrary and oppressive exercise of judicial authority when the
latter reversed his earlier ruling already admitting the second amended complaint of petitioners-
appellants.

HELD: Petitioners’ contention is unmeritorious. The trial court did not admit the Second Amended
Complaint wherein petitioners made the condominium corporation, Legaspi Towers 300, Inc., the party-
plaintiff.

Admission of the second amended complaint is improper. Why should Legaspi Towers 300, Inc. x x x
be included as party-plaintiff when defendants are members thereof too like plaintiffs. Both parties
are deemed to be acting in their personal capacities as they both claim to be the lawful board of
directors.

Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or

other persons may be classified into individual suits, class suits, and derivative suits. Where a
stockholder or member is denied the right of inspection, his suit would be individual because the wrong
is done to him personally and not to the other stockholders or the corporation. Where the wrong is done
to a group of stockholders, as where preferred stockholders' rights are violated, a class or
representative suit will be proper for the protection of all stockholders belonging to the same group. But
where the acts complained of constitute a wrong to the corporation itself, the cause of action belongs
to the corporation and not to the individual stockholder or member.

However, in cases of mismanagement where the wrongful acts are committed by the directors or
trustees themselves, a stockholder or member may find that he has no redress because the former
are vested by law with the right to decide whether or not the corporation should sue, and they will never
be willing to sue themselves.

Thus, an individual stockholder is permitted to institute a derivative suit on behalf of the

corporation wherein he holds stock in order to protect or vindicate corporate rights, whenever officials
of the corporation refuse to sue or are the ones to be sued or hold the control of the corporation. In
such actions, the suing stockholder is regarded as the nominal party, with the corporation as the party-
in- interest.

The election of the corporation’s new set of directors for the years 2005-2006 has, finally, rendered the
petition at bench moot and academic. As correctly argued by private respondents, the nullification of
the orders assailed by petitioners would, therefore, be of little or no practical and legal purpose.
SIMNY G. GUY, as minority stockholder and for and in behalf of GOODLAND COMPANY, INC. vs. GILBERT G.
GUY, ALVIN AGUSTIN T. IGNACIO and JOHN and/or JANE DOES
G.R. No. 184068. April 19, 2016.

FACTS:
GCI is a family-owned corporation of the Guy family duly organized and existing under Philippine laws. Simny Guy
is a stockholder of record and member of the BOD of the corporation. Gilbert Guy, et al. are also GCI stockholders of
record who were allegedly elected as new directors by virtue of the assailed stockholders' meeting held on 7
September 2004.
On 10 September 2004, Paulino Delfin Pe and Benjamin Lim (stockholders of record of GCI) informed Simny that
they had received a notice dated 31 August 2004 calling for the holding of a special stockholders' meeting on 7
September 2004 at the Manila Diamond Hotel. The said meeting is for the purpose of the election of the BOD for the
year 2004-2005. 15 days after the stockholders' meeting, Simny received the said notice.
On 30 September 2004, Simny, for himself and on behalf of GCI and Grace Guy Cheu, filed a Complaint against
respondents before the RTC for the "Nullification of Stockholders' Meeting and Election of Directors, Nullification of
Acts and Resolutions, Injunction and Damages with Prayer for TRO and/or Writ of Preliminary Injunction." It was
assailed on the following grounds: (1) there was no previous notice to Simny and Cheu; (2) the meeting was not
called by the proper person; and (3) the notices were not issued by the person who had the legal authority to do so.
Gilbert argued that the meeting on was legally called and held; that the notice of meeting was signed by the
authorized officer of GCI and sent in accordance with the by-laws of the corporation; and that Cheu was not a
stockholder of record of the corporation, a status that would have entitled her to receive a notice of the meeting.
ISSUE:
Whether or not the notice of the stockholders' meeting was properly sent in compliance with law and the by-laws of
the corporation

HELD:
YES. Special meetings of stockholders or members shall be held at any time deemed necessary or as provided in the
by-laws: Provided, however, that at least one (1) week written notice shall be sent to all stockholders or members,
unless otherwise provided in the by-laws. Notice of any meeting may be waived, expressly or impliedly, by any
stockholder or member.
Whenever, for any cause, there is no person authorized to call a meeting, the SEC, upon petition of a stockholder or
member, and on the showing of good cause therefor, may issue an order to the petitioning stockholder or member
directing him to call a meeting of the corporation by giving proper notice required by this Code or by the by-laws.
The petitioning stockholder or member shall preside thereat until at least a majority of the stockholders or members
present have chosen one of their number as presiding officer.
In the case at bar, under the by-laws of GCI, the notice of meeting shall be mailed not less than five (5) days prior to
the date set for the special meeting. The pertinent provision reads:
Section 3. Notice of meeting written or printed for every regular or special meeting of the stockholders shall be prepared
and mailed to the registered post office address of each stockholder not less than five (5) days prior to the date set for
such meeting, and if for a special meeting, such notice shall state the object or objects of the same. No failure or
irregularity of notice of any meeting shall invalidate such meeting at which all the stockholders are present and voting
without protest.
The Corporation Code itself permits the shortening (or lengthening) of the period within which to send the notice to
call a special (or regular) meeting. Thus, no irregularity exists in the mailing of the notice sent by respondent Gilbert
on 2 September 2004 calling for the special stockholders' meeting to be held on 7 September 2004, since it abides
by what is stated in GCI's by-laws as quoted above.
The Court finds that the provisions under Sec. 50 of the Corporation Code and the by-laws of GCI are clear and
unambiguous. They do not admit of two or more meanings, nor do they make reference to two or more things at the
same time. The provisions only require the sending/mailing of the notice of a stockholders' meeting to the
stockholders of the corporation. Sending/mailing is different from filing or service under the Rules of Court. Had the
lawmakers intended to include the stockholder's receipt of the notice, they would have clearly reflected such
requirement in the law. Absent that requirement, the word "send" should be understood in its plain meaning:
"Send" means to deposit in the mail or deliver for transmission by any other usual means of communication with
postage or cost of transmission provided for and properly addressed and in the case of an instrument to an address
specified thereon or otherwise agreed, or if there be none, to any address reasonable under the circumstances. The
receipt of any writing or notice within the time at which it would have arrived if properly sent has the effect of a
proper sending.
Clearly, respondents are only mandated to notify petitioner by depositing in the mail the notice of the stockholders'
special meeting, with postage or cost of transmission provided and the name and address of the stockholder properly
specified. With respect to the latter part of the definition of "send" under Black's Law Dictionary, the term "receipt"
only has the effect of proper sending when a mail matter is received in the usual course of transmission.
It should be emphasized here that the period of mailing, that is, at least five (5) days prior mailing of notice of meeting
as provided in the By-laws of GOODLAND is reasonable enough for the petitioner Simny Guy to receive the notice of
meeting prior to the holding of the subject stockholders' meeting considering the relative distance of the Post Office
(Meralco Post Office, Pasig City) where the said notice of meeting was mailed vis-à-vis the place of residence of
petitioner Simny Guy located at Greenmeadows, Quezon City.
Therefore, petitioner is considered to have received notice of the special stockholders' meeting after said notice was
properly mailed by respondents.