Interport vs.

SSIA

Facts:

In January 1977, Oceanic Oil & Mineral Resources, Inc. (Oceanic) entered into a subscription agreement with R.C. Lee, a
domestic corporation engaged in the trading of stocks and other securities. Thereupon, R.C. Lee paid 25% of the
subscription, leaving 75% unpaid.

On July 28, 1978, Oceanic merged with Interport, with the latter as the surviving corporation. Under the terms of the
merger, each share of Oceanic was exchanged for a share of Interport.

SSI, a domestic corporation registered as a dealer in securities, received in the ordinary course of business Oceanic
Subscription Agreements all outstanding in the name of R.C. Lee, and Oceanic official receipts showing that 25% of the
subscriptions had been paid. The Oceanic subscription agreements were duly delivered to SSI through stock assignments
indorsed in blank by R.C. Lee.

On February 8, 1989, Interport issued a call for the full payment of subscription receivables, setting March 15, 1989 as the
deadline. SSI tendered payment prior to the deadline through two stockbrokers of the Manila Stock Exchange. However,
the stockbrokers reported to SSI that Interport refused to honor the Oceanic subscriptions. Interport originally rejected
the tender of payment for all unpaid subscriptions on the ground that the Oceanic subscription agreements should have
been previously converted to shares in Interport. However, Interport failed to show any proof of any notice requiring the
conversion of shares and SEC also confirmed having no record of a board resolution requiring said conversion. Despite
that, Interport still rejected SSI's tender of payment for the 5,000,000 shares.

SSI learned that Interport had issued the 5,000,000 shares to R.C. Lee, relying on the latter's registration as the owner of
the subscription agreements in the books of the former, and on the affidavit executed by the President of R.C. Lee stating
that no transfers or encumbrances of the shares had ever been made. Thus, on April 27, 1989, SSI wrote R.C. Lee
demanding the delivery of the 5,000,000 Interport shares on the basis of a purported assignment of the subscription
agreements covering the shares made in 1979. R.C. Lee failed to return the subject shares inasmuch as it had already sold
the same to other parties.

SSI commenced this case in the SEC to compel the respondents to deliver the 5,000,000 shares and to pay damages. It
alleged fraud and collusion between Interport and R.C. Lee in rejecting the tendered payment and the transfer of the
shares covered by the subscription agreements.

ISSUES:

W/N Interport was liable to deliver to SSI the Oceanic Shares of stock?

HELD:

Yes Interport is liable

The SEC correctly categorized the assignment of the subscription agreements as a form of novation by substitution of a
new debtor and which required the consent of or notice to the creditor. We agree. Under the Civil Code, obligations may
be modified by: (1) changing their object or principal conditions; or (2) substituting the person of the debtor; or (3)
subrogating a third person in the rights of the creditor. Novation, which consists in substituting a new debtor in the place
of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent
of the creditor. In this case, the change of debtor took place when R.C. Lee assigned the Oceanic shares to SSI so that the
latter became obliged to settle the 75% unpaid balance on the subscription.

The SEC likewise did not err in appreciating the fact that Interport was duly notified of the assignment when SSI tendered
its payment for the 75% unpaid balance, and that it could not anymore refuse to recognize the transfer of the subscription
that SSI sufficiently established by documentary evidence.
Yet, Interport claims that SSI waived its rights over the 5,000,000 shares due to its failure to register the assignment in the
books of Interport; and that SSI was estopped from claiming the assigned shares, inasmuch as the assignor, R.C. Lee, had
already transferred the same to third parties.

Interport's claim cannot be upheld. It should be stressed that novation extinguished an obligation between two parties.
Clearly, the effect of the assignment of the subscription agreements to SSI was to extinguish the obligation of R.C. Lee to
Oceanic, now Interport, to settle the unpaid balance on the subscription. As a result of the assignment, Interport was no
longer obliged to accept any payment from R.C. Lee because the latter had ceased to be privy to Subscription
Agreements for having been extinguished insofar as it was concerned. On the other hand, Interport was legally bound to
accept SSI's tender of payment for the 75% balance on the subscription price because SSI had become the new debtor
under Subscription Agreements.
RURAL BANK OF SALINAS, INC. and MANUEL SALUD ET. AL., vs. CA, SEC and MELANIA GUERRERO ET. AL. G.R. No. 96674.
June 26, 1992

FACTS:

Clemente Guerrero, President of the Rural Bank of Salinas, Inc., executed a Special Power of Attorney in favor of his wife,
Melania, giving and granting the latter full power of authority to sell or otherwise dispose of and/or mortgage 473 shares
of stock of the Bank registered in his name. before the death of Clemente, Melania, pursuant to the said SPA, executed Deed
of Assignments for the shares of stock in favor of private respondents. After the death of Clemente, Melania proceeded in
presenting the said Deeds and for registration with a request for the transfer in the Bank’s stock and transfer book of the
473 shares of stock so assigned, the cancelation of stock certificates in the name of Clemente and the issuance of new stock
certificates in the name of the new owners thereof. The Bank however denied the request. Melania then filed with SEC an
action for Mandamus against Rural Bank of Salinas, its President and Secretary. The latter bank contended in its answer that
the shares of Guerrero became the property of his estate and thus must be first settled and liquidated before distribution.

ISSUES:

1. Whether SEC has jurisdiction over the matter.

2. Whether petitioner may restrict the registration of shares of stock or its transfer.

RULING:

1. YES. Sec. 5 (b) of PD 902-A grants to the SEC the original and exclusive jurisdiction to hear and decide cases involving
intracorporate controversies. An intracorporate controversy has been defined as one which arises between a stockholder
and the corporation. There is no distinction, qualification, not any exception whatsoever. The case at bar involves shares of
stock, their registration, cancellation and issuances thereof by petitioner.

2. NO. Sec. 63 of the Corporation Code provides that the shares of stock issued are personal property and may be transferred
by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized
to make the transfer. A corporation either by its Board, its by-laws, or the act of its officers, cannot create restrictions in stock
transfer. The Restrictions in the transfer of stock must have their source in legislative enactment, as the corporation itself
cannot create such impediment. By-laws are intended merely for the protection of the corporation, and prescribe regulation,
not restriction; they are always subject to the charter of the corporation. The corporation, in the absence of such power,
cannot ordinarily inquire into or pass upon the legality of the transactions by which its stock passes from one person to
another, nor can it question the consideration upon which a sale is based. The right to transfer shares is inherent from the
stockholders ownership of the same, thus whenever a corporation refuses to transfer and register stocks, mandamus will lie
to compel the officers of the corporation to transfer said stocks to the books of the corporation.
Lee V. CA (1992)
G.R. No. 93695 February 4, 1992
Lessons Applicable: Voting Trust Agreements (Corporate Law)

FACTS:
 November 15, 1985: a complaint for a sum of money was filed by the International Corporate Bank, Inc. (ICB) against
the private respondents

 March 17, 1986: private respondents, in turn, filed a 3rd-party complaint against ALFA and ICB

 September 17, 1987: petitioners filed a motion to dismiss the third party complaint - denied

 July 12, 1988: trial court issued an order requiring the issuance of an alias summons upon ALFA through the DBP

 consequence of the petitioner's letter that ALFA management was transferred to DBP

 July 22, 1988: DBP claimed that it was not authorized to receive summons on behalf of ALFA

 August 4, 1988: trial court issued an order advising the private respondents to take the appropriate steps to serve the
summons to ALFA

 September 12, 1988: petitioners filed a motion for reconsideration submitting that Rule 14, section 13 of the Revised
Rules of Court is not applicable since they were no longer officers of ALFA and that the private respondents 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 - denied

 January 19, 1989: 2nd motion for reconsideration was filed by the petitioners reiterating their stand that by virtue of
the voting trust agreement they ceased to be officers and directors of ALFA

 attached a copy of the voting trust agreement between all the stockholders of ALFA and the DBP whereby the
management and control of ALFA became vested upon the DBP

 April 25, 1989: trial court reversed itself by setting aside its previous Order dated January 2, 1989 and declared that
service upon the petitioners who were no longer corporate officers of ALFA cannot be considered as proper service of
summons on ALFA

 October 17, 1989: trial court (NOT notified of the petition for certiorari) declared final its decision on April 25, 1989

ISSUE: W/N the voting trust agreement is valid despite being contrary to the general principle that a corporation can only
be bound by such acts which are within the scope of its officers' or agents' authority

HELD:
 voting trust

 trust created by an agreement between a group of the stockholders of a corporation and the trustee or by a group of
identical agreements between individual stockholders and a common trustee, whereby it is provided that for a term of
years, or for a period contingent upon a certain event, or until the agreement is terminated, control over the stock
owned by such stockholders, either for certain purposes or for all purposes, is to be lodged in the trustee, either with
or without a reservation to the owners, or persons designated by them, of the power to direct how such control shall
be used (Ballentine's Law Dictionary)

 Sec. 59. Voting Trusts — One or more stockholders of a stock corporation may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote and other rights pertaining to the share for a period rights
pertaining to the shares for a period not exceeding 5 years at any one time: Provided, that in the case of a voting trust
specifically required as a condition in a loan agreement, said voting trust may be for a period exceeding 5 years but
shall automatically expire upon full payment of the loan. A voting trust agreement must be in writing and notarized,
and shall specify the terms and conditions thereof. A certified copy of such agreement shall be filed with the
corporation and with the Securities and Exchange Commission; otherwise, said agreement is ineffective and
unenforceable. The certificate or certificates of stock covered by the voting trust agreement shall be cancelled and
new ones shall be issued in the name of the trustee or trustees stating that they are issued pursuant to said
agreement. In the books of the corporation, it shall be noted that the transfer in the name of the trustee or trustees is
made pursuant to said voting trust agreement.
LANUZA VS CA (G.R. NO. 131394 MARCH 28, 2005)

Lanuza vs Court of Appeals; G.R. No. 131394 March 28, 2005

J. Tinga

Facts: In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven hundred (700) founders’
shares and seventy-six (76) common shares as its initial capital stock subscription reflected in the articles of incorporation.
However, private respondents and their predecessors who were in control of PMMSI registered the company’s stock and
transfer book for the first time in 1978, recording thirty-three (33) common shares as the only issued and outstanding shares
of PMMSI. Sometime in 1979, a special stockholders’ meeting was called and held on the basis of what was considered as a
quorum of twenty-seven (27) common shares, representing more than two-thirds (2/3) of the common shares issued and
outstanding.

On 06 May 1992, a special stockholders’ meeting was held to elect a new set of directors. Private respondents thereafter
filed a petition with the SEC questioning the validity of the 06 May 1992 stockholders’ meeting, alleging that the quorum
for the said meeting should not be based on the 165 issued and outstanding shares as per the stock and transfer book, but
on the initial subscribed capital stock of seven hundred seventy-six (776) shares, as reflected in the 1952 Articles of
Incorporation.

Issue: Whether or not the quorum should be based on the outstanding capital stock as indicated in the Articles of
Incorporation.

Held: Yes. The articles of incorporation has been described as one that defines the charter of the corporation and the
contractual relationships between the State and the corporation, the stockholders and the State, and between the
corporation and its stockholders. When PMMSI was incorporated, the prevailing law was Act No. 1459, otherwise known as
“The Corporation Law.”

There is no gainsaying that the contents of the articles of incorporation are binding, not only on the corporation, but also
on its shareholders. In theinstant case, the articles of incorporation indicate that at the time ofincorporation, the
incorporators were bona fide stockholders of seven hundred (700) founders’ shares and seventy-six (76) common shares.
Hence, at thattime, the corporation had 776 issued and outstanding shares.

On the other hand, a stock and transfer book is the book which records the names and addresses of all stockholders arranged
alphabetically, the installments paid and unpaid on all stock for which subscription has been made, and the date of payment
thereof; a statement of every alienation, sale or transfer of stock made, the date thereof and by and to whom made; and
such other entries as may be prescribed by law. A stock and transfer book is necessary as a measure of precaution,
expediency and convenience since it provides the only certain and accurate method of establishing the various corporate
acts and transactions and of showing the ownership of stock and like matters. However, a stock and transfer book, like other
corporate books and records, is not in any sense a public record, and thus is not exclusive evidence of the matters and things
which ordinarily are or should be written therein. In fact, it is generally held that the records and minutes of a corporation
are not conclusive even against the corporation but are prima facie evidence only, and may be impeached or even
contradicted by other competent evidence. Thus, parol evidence may be admitted to supply omissions in the records or
explain ambiguities, or to contradict such records.

Thus, quorum is based on the totality of the shares which have been subscribed and issued, whether it be founders’ shares
or common shares. In the instant case, two figures are being pitted against each other — those contained in the articles of
incorporation, and those listed in the stock and transfer book.

To base the computation of quorum solely on the obviously deficient, if not inaccurate stock and transfer book, and
completely disregarding the issued and outstanding shares as indicated in the articles of incorporation would work injustice
to the owners and/or successors in interest of the said shares. This case is one instance where resort to documents other
than the stock and transfer books is necessary. The stock and transfer book of PMMSI cannot be used as the sole basis for
determining the quorum as it does not reflect the totality of shares which have been subscribed, more so when the articles
of incorporation show a significantly larger amount of shares issued and outstanding as compared to that listed in the stock
and transfer book. As aptly stated by the SEC in its Order dated 15 July 1996:

It is to be explained, that if at the onset of incorporation a corporation has 771 shares subscribed, the Stock and Transfer
Book should likewise reflect 771 shares. Any sale, disposition or even reacquisition of the company of its own shares, in
which it becomes treasury shares, would not affect the total number of shares in the Stock and Transfer Book. All that will
change are the entries as to the owners of the shares but not as to the amount of shares already subscribed.

This is precisely the reason why the Stock and Transfer Book was not given probative value. Did the shares, which were not
recorded in the Stock and Transfer Book, but were recorded in the Articles of Incorporation just vanish into thin air? . . . .
Tan V. Sycip (2006)
G.R. No. 153468 August 17, 2006
Lessons Applicable: Release from Subscription Obligation (Corporate Law)

FACTS:
 Grace Christian High School (GCHS) is a nonstock, non-profit educational corporation w/ 15 regular members, who
also constitute the board of trustees.
 April 6, 1998: During the annual members’ meeting only 11 living member-trustees, as 4 had already died.
 7 attended the meeting through their respective 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.
 In the meeting, Petitioners Ernesto Tanchi, Edwin Ngo, Virginia Khoo, and Judith Tan were voted to replace the 4
deceased member-trustees.
 SEC: meeting void due to lack of quorum (NOT living but based on AIC)
 Sec 24 read together with Sec 89
 CA: Dismissed due to technicalities

ISSUE: W/N dead members should still be counted in the quorum - NO based on by-laws

HELD: NO. remaining members of the board of trustees of GCHS may convene and fill up the vacancies in the board
 Except as provided, the vote necessary to approve a particular corporate act as provided in this Code shall be deemed
to refer only to stocks with voting rights:
 1. Amendment of the articles of incorporation;
 2. Adoption and amendment of by-laws;
 3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporation property;
 4. Incurring, creating or increasing bonded indebtedness;
 5. Increase or decrease of capital stock;
 6. Merger or consolidation of the corporation with another corporation or other corporations;
 7. Investment of corporate funds in another corporation or business in accordance with this Code; and
 8. Dissolution of the corporation.
 quorum in a members’ meeting is to be reckoned as the actual number of members of the corporation
 stock corporations - shareholders may generally transfer their shares
 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
 nonstock corporation - personal and non-transferable unless the articles of incorporation or the bylaws of the
corporation provide otherwise
 Section 91 of the Corporation Code: termination extinguishes all the rights of a member of the corporation, unless
otherwise provided in the articles of incorporation or the bylaws.
 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
 By-Laws of GCHS: membership in the corporation shall be terminated by the death of the member
 With 11 remaining members, the quorum = 6.
 SECTION 29. Vacancies in the office of director or trustee. -- Any vacancy occurring in the board of directors or
trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of
at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must
be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to
fill a vacancy shall be elected only for the unexpired term of his predecessor in office.
 the filling of vacancies in the board by the remaining directors or trustees constituting a quorum is merely permissive,
not mandatory
 either by the remaining directors constituting a quorum, or by the stockholders or members in a regular or special
meeting called for the purpose
 By-Laws of GCHS prescribed the specific mode of filling up existing vacancies in its board of directors; that is, by a
majority vote of the remaining members of the board
 remaining member-trustees must sit as a board (as a body in a lawful meeting)
in order to validly elect the new ones
DONNINA C. HALLEY v. PRINTWELL, GR No. 157549, 2011-05-30

Facts:
The petitioner was an incorporator and original director of Business Media Philippines, Inc. (BMPI), which, at its
incorporation on November 12, 1987,[3] had an authorized capital stock of P3,000,000.00 divided into 300,000 shares each
with a par value of P10.00,of which 75,000 were initially subscribed Printwell engaged in commercial and industrial
printing.
BMPI commissioned Printwell for the printing of the magazine Philippines, Inc. (together with wrappers and subscription
cards) that BMPI published and sold.
For that purpose, Printwell extended 30-day credit... accommodations to BMPI.
In the period from October 11, 1988 until July 12, 1989, BMPI placed with Printwell several orders on credit, evidenced by
invoices and delivery receipts totaling P316,342.76.
BMPI paid only P25,000.00, Printwell sued BMPI on January 26, 1990 for the collection... of the unpaid balance of
P291,342.76 in the RTC.
Printwell amended the complaint in order to implead as defendants all the original stockholders and incorporators to
recover on their unpaid subscriptions... defendants filed a consolidated answer,[6]averring that they all had paid their
subscriptions in full... that BMPI had a separate personality from those of its stockholders
To prove payment of their subscriptions, the defendant stockholders submitted in evidence BMPI official receipt
RTC rendered a decision in favor of Printwell, rejecting the allegation of payment in full of the subscriptions in view of an
irregularity in the issuance of the ORs and observing that the defendants had used BMPI's corporate personality to evade
payment... and create injustice
Assuming arguendo that the individual defendants have paid their unpaid subscriptions, still, it is very apparent that
individual defendants merely used the corporate fiction as a cloak or cover to create an injustice; hence, the alleged
separate personality of defendant... corporation should be disregarded
Applying the trust fund doctrine, the RTC declared the defendant stockholders liable to Printwell pro rata
CA affirmed the RTC, holding that the defendants' resort to the corporate personality would create an injustice because
Printwell would thereby be at a loss against whom it would assert the right to collect

Issues:
the propriety of disregarding the separate personalities of BMPI and its stockholders by piercing the thin veil that
separated them

Ruling:
Although a corporation has a personality separate and distinct from those of its stockholders, directors, or
officers,[26]such separate and distinct personality is merely a fiction created by law for the sake of convenience and to
promote the ends of... justice.
The corporate personality may be disregarded, and the individuals composing the corporation will be treated as
individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; as
an... alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders.
As a general rule, a corporation is looked upon as a legal entity, unless and until sufficient reason to the contrary appears.
The prevailing rule is that a stockholder is personally liable for the financial obligations of... the corporation to the extent
of his unpaid subscription.
In view of the petitioner's unpaid subscription being worth P262,500.00, she was liable up to that amount.

Principles:
Stockholders of a corporation are liable for the debts of the corporation up to the extent of their unpaid subscriptions.
They cannot invoke the veil of corporate identity as a shield from liability, because the veil may be lifted to avoid
defrauding... corporate creditors.
Lopez Realty, Inc. v. Sps. Reynaldo Tanjangco
2014 | Reyes, J.
By virtue of ratification, the acts of the board of directors become the acts of the stockholders themselves, even if
those acts were, at the outset, unauthorized.

Facts:
Lopez Realty, Inc. (LRI) and Asuncion Lopez-Gonzalez initiated a “Complaint for annulment of sale, cancellation of
title, reconveyance and damages with prayer for the issuance of temporary restraining order (TRO) and/or writ of
preliminary injunction against the spouses Tanjangco, Arturo and the Registrar of Deeds of Manila.”
Previously, LRI and Dr. Jose Tanjangco (Jose) “were the registered co-owners of three parcels of land and the
building erected thereon known as the ‘Trade Center Building’… Jose’s one-half share in the subject properties were later
transferred and registered in the name of his son Reynaldo Tanjangco and daughter-in-law, Maria Luisa Arguelles
(spouses Tanjangco).”
These were the stockholders of record of LRI at the time material to this case:
1. Asuncion Lopez-Gonzalez (Asuncion, Director & Corporate Secretary) – 7,831 shares;
2. Arturo F. Lopez (Arturo) – 7,830 shares;
3. Teresita Lopez-Marquez (Teresita) – 7,830 shares;
4. Rosendo de Leon (Rosendo, Director) – 5 shares
5. Benjamin Bernardino (Benjamin, Director) – 1 share;
6. Augusto de Leon (Augusto, Director) – 1 share; and
7. Leo Rivera (Leo, Director) – 1 share

During a special stockholders’ meeting held on 27 July 1981, the sale of 1/2 share of LRI in the Trade Center
Building was taken up. While the selling price was at P4 M, the Tanjancos offered P3.8 M. To this, Asuncion countered with
P5 M which was not accepted by the Tanjancos. Thus, the board agreed to give Asuncion the priority to equal the
Tanjanco offer and the same to be exercised within ten (10) days. Otherwise, the Tanjanco offer will be deemed accepted.
Just a day after, Teresita died (her estate’s executor Juanito L. Santos represented her afterwards).

As Asuncion failed to exercise her option to purchase the subject properties, and while she was abroad, “the remaining
directors: Rosendo, Benjamin and Leo convened in a special meeting” passing and approving the 17 August 1981
Resolution authorizing Arturo to negotiate and “carry out the complete termination of the sale terms and conditions as
embodied in the Resolution of July 27, 1981″, among others. Subsequently, the sale was perfected with payments
subsequently made.
After learning of the sale, Asuncion filed this complaint challenging the validity of the 17 August 1982 Resolution on the
ground that she was not notified of the meeting.

W/N the sale was valid. Yes.

The 17 August 1981 Board Resolution did not give Arturo the authority to act as LRI’s representative in the sale
- This is because “the meeting of the board of directors where such was passed was conducted without giving any
notice to Asuncion.”
- This is in violation of Section 53 of the Corporation Code which requires sending of notices for regular or special
meetings to every director.
- As a result, “a meeting of the board of directors is legally infirm if there is failure to comply with the requirements
or formalities of the law or the corporation’s by laws and any action taken on such meeting may be challenged as
a consequence.”

HOWEVER, “the actions taken in such a meeting by the directors or trustees may be ratified expressly or impliedly.”
- In the case of ratification, it means that “the principal voluntarily adopts, confirms and gives sanction to some
unauthorized act of its agent on its behalf.”
- Here, “the ratification was expressed through the July 30, 1982 Board Resolution.”

RE: Asuncion’s claims that the 30 July 1982 Board Resolution did not ratify the 17 August 1981 Resolution due to Juanito’s
disqualification and Leo’s negative vote.
 - She assails the authority of Juanito to vote because he was not a director and he did not own any share of stock
which would qualify him to be one.
SC: On the contrary, Juanito defends his right to vote as the representative of Teresita’s estate.
- Upon examination of the July 30, 1982 minutes of the meeting, it can be deduced that the meeting is a joint
stockholders and directors’ meeting. The Court takes into account that majority of the board of directors except
for Asuncion, had already approved of the sale to the spouses Tanjangco prior to this meeting. As a consequence,
the power to ratify the previous resolutions and actions of the board of directors in this case lies in the
stockholders, not in the board of directors.
o It would be absurd to require the board of directors to ratify their own acts—acts which the same director
s already approved of beforehand. Hence, Juanito, as the administrator of Teresita’s estate even though
not a director, is entitled to vote on behalf of Teresita’s estate as the administrator thereof.”
- Citing jurisprudence, in stock corporations, “shareholders may generally transfer their shares. Thus, on the death
of a shareholder, the executor or administrator duly appointed by the Court is vested with the legal title to the
stock and entitled to vote it. Until a settlement and division of the estate is effected, the stocks of the decedent
are held by the administrator or executor.”
- As there exists no corporate secretary’s certification of the minutes of the meeting, “only Juanito, Benjamin and
Roseno, whose signature appeared on the minutes, could be considered as to have ratified the sale to the spouses
Tanjangco.” As Leo owns only 1 share, the results are the same against the overwhelming shares who voted in
favor of ratification.

“In sum, whatever defect there was on the sale to the spouses Tanjangco pursuant to the August 17, 1981 Board
Resolution, the same was cured through its ratification in the July 30, 1982 Board Resolution. It is of no moment whether
Arturo was authorized to merely negotiate or to enter into a contract of sale on behalf of LRI as all his actions in
connection to the sale were expressly ratified by the stockholders holding 67% of the outstanding capital stock.”
Citing jurisprudence, “the Court held that by virtue of ratification, the acts of the board of directors become the acts of
the stockholders themselves, even if those acts were, at the outset, unauthorized.”
MATLING INDUSTRIAL VS COROS (G.R. NO. 157802 OCTOBER 13, 2010)

Matling Industrial and Commercial Corporation vs Coros

G.R. No. 157802 October 13, 2010

Facts: After his dismissal by Matling as its Vice President for Finance and Administration, the respondent filed on August 10,
2000 a complaint for illegal suspension and illegal dismissal against Matling and some of its corporate officers (petitioners)
in the NLRC, Sub-Regional Arbitration Branch XII, Iligan City. The petitioners moved to dismiss the complaint, raising the
ground, among others, that the complaint pertained to the jurisdiction of the Securities and Exchange Commission (SEC)
due to the controversy being intracorporate inasmuch as the respondent was a member of Matlings Board of Directors aside
from being its Vice-President for Finance and Administration prior to his termination. The respondent opposed the
petitioners motion to dismiss, insisting that his status as a member of Matlings Board of Directors was doubtful, considering
that he had not been formally elected as such; that he did not own a single share of stock in Matling, considering that he
had been made to sign in blank an undated indorsement of the certificate of stock he had been given in 1992; that Matling
had taken back and retained the certificate of stock in its custody; and that even assuming that he had been a Director of
Matling, he had been removed as the Vice President for Finance and Administration, not as a Director, a fact that the notice
of his termination dated April 10, 2000 showed. On October 16, 2000, the LA granted the petitioners motion to dismiss,
ruling that the respondent was a corporate officer because he was occupying the position of Vice President for Finance and
Administration and at the same time was a Member of the Board of Directors of Matling; and that, consequently, his removal
was a corporate act of Matling and the controversy resulting from such removal was under the jurisdiction of the SEC,
pursuant to Section 5, paragraph (c) of Presidential Decree No. 902.

Issue: Whether or not the respondent is a corporate officer within the jurisdiction of the regular courts.

Held: No. As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the
LA. This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows:

Article 217. Jurisdiction of the Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following
cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding
five thousand pesos (P 5,000.00) regardless of whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. (c) Cases arising
from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said agreements.

Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the jurisdiction
of the Securities and Exchange Commission (SEC), because the controversy arises out of intra-corporate or partnership
relations between and among stockholders, members, or associates, or between any or all of them and the corporation,
partnership, or association of which they are stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as the controversy concerns their individual franchise or right
to exist as such entity; or because the controversy involves the election or appointment of a director, trustee, officer, or
manager of such corporation, partnership, or association. Such controversy, among others, is known as an intra-corporate
dispute.

Effective on August 8, 2000, upon the passage of Republic Act No. 8799, otherwise known as The Securities Regulation
Code, the SECs jurisdiction over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2 of RA No.
8799.

Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the corporate officers
enumerated in the by-laws are the exclusive Officers of the corporation and the Board has no power to create other
Offices without amending first the corporate By-laws. However, the Board may create appointive positions other than the
positions of corporate Officers, but the persons occupying such positions are not considered as corporate officers within
the meaning of Section 25 of the Corporation Code and are not empowered to exercise the functions of the corporate
Officers, except those functions lawfully delegated to them. Their functions and duties are to be determined by the Board
of Directors/Trustees.

Moreover, the Board of Directors of Matling could not validly delegate the power to create a corporate office to the
President, in light of Section 25 of the Corporation Code requiring the Board of Directors itself to elect the corporate
officers. Verily, the power to elect the corporate officers was a discretionary power that the law exclusively vested in the
Board of Directors, and could not be delegated to subordinate officers or agents. The office of Vice President for Finance
and Administration created by Matlings President pursuant to By Law No. V was an ordinary, not a corporate, office.

The criteria for distinguishing between corporate officers who may be ousted from office at will, on one hand, and
ordinary corporate employees who may only be terminated for just cause, on the other hand, do not depend on the
nature of the services performed, but on the manner of creation of the office. In the respondents case, he was supposedly
at once an employee, a stockholder, and a Director of Matling. The circumstances surrounding his appointment to office
must be fully considered to determine whether the dismissal constituted an intra-corporate controversy or a labor
termination dispute. We must also consider whether his status as Director and stockholder had any relation at all to his
appointment and subsequent dismissal as Vice President for Finance and Administration.
VALLEY GOLF & COUNTRY CLUB, INC., Petitioner, vs. ROSA O. VDA. DE CARAM,
Respondent.
G.R. No. 158805 | April 16, 2009

FACTS:

Petitioner is a duly constituted non-stock, non-profit corporation which operates a golf course. The members and their
guests are entitled to play golf on the said course and avail of the facilities and privilege. The shareholders are likewise
assessed monthly membership dues. Cong. Fermin Z. Caram, Jr., respondent’s husband, subscribed and paid in full 1 Golf
Share of the petitioner and was subsequently issued with a stock certificate which indicated a par value of P9,000.00. It was
alleged by the petitioner that Caram stopped paying his monthly dues and that it has sent 5 letters to Caram concerning
his delinquent account. The Golf Share was subsequently sold at public auction for P25,000.00 after the BOD had
authorized the sale and the Notice of Auction Sale was published in the Philippine Daily Inquirer Caram thereafter died
and hiis wife initiated intestate proceedings before the RTC of IloIlo. Unaware of the pending controversy
over the Golf Share, the Caram family and the RTC included the Golf Share as part of Caram’s estate. The RTC
approved a project of partition of Caram’s estate and the Golf Share was adjudicated to the wife, who
paid the corresponding estate tax due, including that on the golf Share.

It was only through a letter that the heirs of Caram learned of the sale of the Golf Share following their
inquiry with Valley Golf about the Golf Share. After a series of correspondence, the Caram heirs were subsequently
informed in a letter that they were entitled to the refund of P11,066.52 out of the proceeds of the sale of the Golf Share,
which amount had been in the custody of the petitioner.

Caram’s wife filed an action for reconveyance of the Golf Share with damages before the SEC against Valley Golf. The SEC
Hearing Officer rendered a decision in favor of the wife, ordering Valley Golf to convey ownership of the Golf Share, or in
the alternative. to issue one fully paid share of stock of Valley Golf of the same class as the Golf Share to
the wife. Damages totaling P90,000.00 were also awarded to the wife.

The SEC hearing officer ruled that under Section 67, paragraph 2 of the Corporation Code, a share stock could only be
deemed delinquent and sold in an extrajudicial sale at public auction only upon the failure of the stockholder to pay the
unpaid subscription or balance for the share.

However, the section could not have applied in Caram’s case since he had fully paid for the Golf Share and he had been
assessed not for the share itself but for his delinquent club dues.

The procedure under Section 67 of the Corporation Code for the stock corporation’s recourse on unpaid subscriptions is
inapt to a non-stock corporation vis-à-vis a member’s outstanding dues. In the latter, the member has fully paid for his
membership share, while in the former, the stockholder has not yet fully paid for the share he subscribed thereby authorizing
the stock corporation to call on the unpaid subscription, declare the shares delinquent and subject the delinquent shares to
a sale at public auction. In the case at bar, the share of Caram in Valley Golf is already fully paid. On the other hand, there is
a specific provision under Title XI on Non-Stock Corporations of the Corporation Code dealing with the termination of
membership. Section 91 of the Corporation Code provides:

Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the by-laws.
Termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its property,
unless otherwise provided in the articles of incorporation or the by-laws. Clearly, the right of a non-stock corporation such
as Valley Golf to expel a member through the forfeiture of the Golf Share may be established in the by-laws alone as is the
situation in this case.

Thus, both the SEC and the CA are wrong in holding that the establishment of a lien and the loss of the Golf Share consequent
to the enforcement of the lien should have been provided for in the articles of incorporation.
FACTS

Petitioner operates a golf course. The members and their guests are entitled to play golf on the said course and avail of the
facilities and privilege. The shareholders, however, are assessed with monthly membership dues.

Cong. Fermin Z. Caram, Jr., respondent’s husband, subscribed and paid in full 1 Golf Share and was subsequently issued with
a stock certificate. It was alleged that Caram stopped paying his monthly dues and 5 letters concerning the delinquent
account were sent to Caram through the mailing address he has allegedly given. Pursuant to the provisions of the by-laws,
the petitioner warned Caram that should he continue to default on his membership dues, it would exercise its right to sell
the Golf Share to satisfy the outstanding amount. Eventually, the Golf Share was sold at public auction after the BOD had
authorized the sale and the notice of auction sale was published. It turned out that Caram already died. Unaware of the
pending controversy over the Golf Share, the the Golf Share was included as part of Caram’s estate. It was only through a
letter that his heirs learned of the sale of the Golf Share following their inquiry with the petitioner.

Consequently, Rosa O. Vda. De Caram filed an action for reconveyance before SEC. The SEC rendered a decision in favor of
Rosa, ordering the petitioner to convey ownership of the Golf Share, or in the alternative, to issue 1 fully paid share of stock
of Valley Golf of the same class as the Golf Share. It was ruled that, under Section 67 of the Corporation Code, a share stock
could only be deemed delinquent and sold in an extrajudicial sale at public auction upon the failure of the stockholder to
pay the unpaid subscription for the share. Such could not have applied in Caram’s case since he had fully paid for the Golf
Share and he had been assessed for his delinquent club dues. As such, the auction sale had no basis in law. Moreover, as to
the argument that the sale was authorized under the by-laws, it was ruled that pursuant to Section 6 of the Corporation
Code, a provision creating a lien upon shares of stock for unpaid debts of stockholders to the corporation should be
embodied in the articles of incorporation and not merely in the by-laws. The articles of incorporation of the petitioner did
not impose any lien, liability or restriction on the Golf Share or even any condition that the Golf Share would be subject to
assessment of monthly dues or a lien on the share for non-payment of such dues.

Lastly, it was ruled that Caram was not properly notified of the delinquencies, citing Caram’s letter about the change in his
mailing address. Most of the letters were also after Caram’s death. The CA affirmed this SEC decision.

ISSUE:

A. Whether the SEC and CA, using Section 67 of the Corporation Code, are correct in ruling that Valley Golf wrongly sold
Caram’s share. (YES)
B. Whether the SEC and CA are correct in ruling that the lien on the Golf Share is not valid since the power to constitute
such a lien should be provided in the articles of incorporation and not merely in the by-laws per Article 6 of the Corporation
Code (NO)
and, consequently, whether the sale is valid (NO)

RULING (A) The procedure under Section 67 of the Corporation Code for the stock corporation’s recourse on unpaid
subscriptions is inapt to a non-stock corporation vis-à-vis a member’s outstanding dues. The basic factual backdrops in the
two situations are different. In the latter, the member has fully paid for his membership share, while in the former, the
stockholder has not yet fully paid for the share he subscribed thereby authorizing the stock corporation to call on the unpaid
subscription, declare the shares delinquent and subject the delinquent shares to a sale at public auction. In the case at bar,
the share of Caram in Valley Golf is already fully paid. (B) There is a specific provision under Title XI on Non-Stock
Corporations of the Corporation Code dealing with the termination of membership. Section 91 of the Corporation Code
provides: Membership shall be terminated in the manner and for the causes provided in the articles of incorporation or the
by-laws. Termination of membership shall have the effect of extinguishing all rights of a member in the corporation or in its
property, unless otherwise provided in the articles of incorporation or the by-laws. Clearly, the right of a non-stock
corporation such as Valley Golf to expel a member through the forfeiture of the Golf Share may be established in the by-
laws alone as is the situation in this case. Thus, both the SEC and the CA are wrong in holding that the establishment of a
lien and the loss of the Golf Share consequent to the enforcement of the lien should have been provided for in the articles
of incorporation. Be that as it may, the Court declare the sale as invalid. Valley Golf acted in bad faith when it sent the final
notice to Caram under the pretense that it believed him to be still alive when in fact it had very well known that he had
already died. It must be noted that the 3rd and 4th letter which were sent after Caram had died were both addressed to
"Est. of Fermin Z. Caram, Jr.". However, the 5th and final letter was again addressed to Fermin Caram himself and not to his
estate as if he was still alive. As such, the Court concluded that this signifies that Valley Golf was bent on selling the Golf
Share, impervious to potential complications that would impede its intentions, such as the need to pursue the claim before
the estate proceedings of Caram. By pretending to assume that Caram was then still alive, Valley Golf would have been able
to capitalize on his previous unresponsiveness to their notices and proceed in feigned good faith with the sale.
MARCELINO M. FLORETE v. ROGELIO M. FLORETE, GR No. 174909, 2016-01-20

Facts:
Spouses Marcelino Florete, Sr. and Salome Florete (now both deceased) had four (4) children: Marcelino Florete, Jr.
(Marcelino, Jr.), Maria Elena Muyco (Ma. Elena), Rogelio Florete, Sr. (Rogelio, Sr.), and Teresita Menchavez (Teresita), now
deceased.[5]
People's Broadcasting Service, Inc. (People's Broadcasting) is a private corporation authorized to operate, own, maintain,
install, and construct radio and television stations in the Philippines.[6]
Salome died on November 22, 1980.[13] Marcelino, Sr. suffered a stroke on July 12, 1982, which left him paralyzed and
bedridden until his death on October 3, 1990.[14] After Marcelino, Sr.'s stroke, their son, Rogelio, Sr. started... managing
the affairs of People's Broadcasting.[15]
On November 2, 1994, Sycip Gorres Velayo and Co. submitted a... report detailing the movements of the corporation's
shares from November 23, 1967 to December 8, 1989.
On February 1, 1997, the Board of Directors of People's Broadcasting approved Sycip Gorres Velayo and Co.'s report.[22]
On June 23, 2003, Marcelino, Jr., Ma. Elena, and Raul Muyco (Marcelino, Jr. Group) filed before the Regional Trial Court a
Complaint[25] for Declaration of Nullity of Issuances, Transfers and Sale of Shares in People's Broadcasting Service, Inc.
On July 25, 2003, the Rogelio, Sr. Group filed their Answer with compulsory counterclaim.[27]
On August 2, 2005, the Regional Trial Court issued a Decision (which it called a "Placitum") dismissing the Marcelino, Jr.
Group's Complaint. It ruled that the Marcelino, Jr. Group did not have a cause of action against the Rogelio, Sr. Group and
that the former is estopped from... questioning the assailed movement of shares of People's Broadcasting. It also ruled
that indispensible parties were not joined in their Complaint.
In its Decision[36] dated March 29, 2006, the Court of Appeals denied the Marcelino, Jr. Group's Petition and affirmed the
trial court Decision.
On April 26, 2006, the Marcelino, Jr. Group filed a Motion for Reconsideration dated April 24, 2006.
On September 15, 2006, the Court of Appeals denied the Marcelino, Jr. Group's Motion for Reconsideration dated April 24,
2006.[52]

Issues:
assuming that it was error for the Regional Trial Court to dismiss the Complaint and that the case may be decided on the
merits, whether the transfers of shares assailed by the Marcelino, Jr. Group should be nullified;

Ruling:
This characterization requires a determination of the cause of action through which the Marcelino, Jr. Group came to court
for relief. It will, thus, clarify the parties who must be included in... their action and the procedural and substantive
requirements they must satisfy if their action is to prosper.
The remedies that the Marcelino, Jr. Group seeks are for People's Broadcasting itself to avail. Ordinarily, these reliefs may
be unavailing because objecting stockholders such as those in the Marcelino, Jr. Group do not hold the controlling interest
in People's Broadcasting.
The Complaint filed by Marcelino M. Florete, Jr., Maria Elena F. Muyco, and Raul A. Muyco for Declaration of Nullity of
Issuances, Transfers and Sale of Shares in People's Broadcasting Service, Inc. and All Posterior Subscriptions and Increases
thereto with Damages is dismissed... as the complainants have no cause of action.
Principles:
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.
G.R. No. 188769 – August 3, 2016
Joseph Omar Andaya, (Petitioner) v. Rural Bank of Cabadbaran, Inc., Demosthenes Oraiz and Ricardo Gonzalez,
(Respondents)

Facts:

Andaya bought from Concepcion Chute 2,200 shares of stock in the Rural Bank of Cabadbaran for Php220,000, evidenced
by a notarized document denominated as Sale of Shares of Stocks. Chute endorsed and delivered the certificates of stock
to Andaya and requested the bank to register the transfer in the bank's stock and transfer book and to issue new stock
certificates in favor of the latter.

However, the bank's corporate secretary Demosthenese Oraiz denied the request, stating that under a stockholders'
Resolution, existing stockholders have a right of first refusal in the event shares of other stockholders are offered for sale.
Andaya opposed the denial and claimed that the restriction did not appear in the bank's Articles of Incorporation, by-laws,
or certificates of stock.

The bank eventually denied to register the transfer to Andaya due to conflict of interest. It claimed that Andaya was then
president and CEO of the Green bank of Caraga, a competitor bank, and that the purchase “could be the beginning of a
hostile bid to take-over control” of the bank. It also maintained that stockholders have a right of first refusal.

Andaya instituted an action for mandamus and damages against the bank, its corporate secretary, Oraiz and its legal
counsel, Ricardo Gonzales to compel them to record the transfer and to issue new certificates in his name.

The RTC dismissed the complaint on the ground that Andaya had no standing for failing to show that he was authorized
by Chute to make the transfer. Andaya filed a petition for review to the SC on pure questions of law.

Issue:

Whether or not Andaya, the transferee of shares of stock, may compel the bank to record the transfer of shares and issue
new stock certificates in his name

Ruling:

Yes. A bona fide transferee, who is able to establish a clear legal right to the registration of the transfer, may resort to the
remedy of mandamus to compel corporations that wrongfully or unjustifiably refuse to record the transfer or to issue new
certificates of stock.

Andaya has been able to establish that he is a bona fide transferee of Chute's shares of stock. He presented to the RTC tha
notarized Sale of Shares of Stocks, a Documentary Stamp Tax Declaration/Return, a Capital Gains Tax Return and stock
certificates covering the subject shares duly endorsed by Chute. There is no doubt that Andaya had the standing to initiate
an action for manadamus to compel the bank to record the transfer of shares in its stock and transfer book and to issue
new stock certificates in his name.

Moreover, the Section 98 of the Corporation Code, upon which the bank relies, applied only to close corporations.

SECTION 98. Validity restrictions on transfer of shares. - Restrictions on the right to transfer shares must appear in the
articles of incorporation and in the by-laws as well as in the certificate of stock;
otherwise, the same shall not be binding on any purchaser thereof in good faith. Said restrictions shall not be more than
onerous than granting the existing stockholders or the corporation the option to purchase the shares of the transferring
stockholder with such reasonable terms, conditions or period stated therein. If upon the expiration of said period, the
existing stockholders or the corporation fails to exercise the option to purchase, the transferring stockholder may sell his
shares to any third person. (Emphases supplied)
There must first be a factual determination that the bank is indeed a close corporation before the abovementioned section
can be applied in the instant case.
 Securities and Exchange Commission vs. Subic bay Gold and Country Club, Inc and Universal International Group
Development Corporation
GR no, 179047, March 11, 2015 | Second Division, Leonon J.

Intra-corporate controversies, previously under the SEC’s jurisdiction, are now under the jurisdiction of the RTC designated
as commercial courts. However, the transfer of jurisdiction to the trial courts does not oust the SEC of its jurisdiction to
determine if administrative rules and regulations were violated.

On April 25 1996, Subic Bay Golf and Country Club, Inc (SBGCCI) and Universal International Group Development
Corporation (UIGDC) entered into a Development Agreement. UIGDC agreed to “finance, construct and develop the golf
course, for an in consideration of the payment by SBGCCI of it’s 1,530 shares of stock.”

Upon, SBGCCI’s application, SEC issued an order for the registration of 3,000 no par value shares of SBGCCI on July 8, 1996.
SBGCCI was also issued a certificate of permit to offer securities for sale to the Public of its 1, 530 no par value proprietary
shares on August 9, 1996. The shares are sold at P425,000 per share and the same were used to pay UIGDC for the
development of the golf course.

Complainants Filart and Villareal informed SEC that they had been asking UIGDC for the refund of their payment for their
SGGBCCI shares. UIGDC did not act on their requests. They alleged that they purchased shares in the promise of SBGCCI
and UIGDC to deliver the ff:1) swimming pool and tennis court; 2) 18 hole golf course; 3) 9 hole executive course and etc.
However, these promises were not delivered. And despite the undelivered promises, they started to charged monthly dues
They were even threated that their shares would be auctioned off if their back dues would remain unpaid.

SBGCCI and UIGDC averred that they had already substantially complied with their commitment. SEC conducted an
inspection and found that SBGCCI and UIGDC failed to substantially comply with their commitment to complete the project.
They found out that Filart and Villareal invested because of SBGCCI and UIGDC’s representation of a 27-hole world class
golf course being developed. Hence, the Corporate Finance Dept of SEC ordered the return of purchase price of the shares.

SBGCCI and UIGDC in a petition for review questioned the order and jurisdiction of the Corporation Finance Deparment’s
order before the SEC since the same involved an intra-corporate dispute. SEC ruled that the proceedings were administrative
in nature. It was only conducted to determining if SEC’s rules and regulations were violated. SEC has power to investigate
possible violations and impose appropriate administrative sanctions. CA, however, declared SEC’s decision as null and void
since it found the case as an intra-corporate controversy not under SEC’s jurisdiction.

Who between the SEC and the RTC has jurisdiction over this case

HELD:

Before solving the issue, we have to determine whether SEC has the authority to order the return of purchase price of
securities upon finding that there were fraudulent representation in the prospectus.

The Court rules for SBGCCI and UIGDC.

Under PD No. 902-A, SEC has jurisdiction over acts amunting to fraud and misrepresentation by a corporation’s board of
directors, business association and officers, even intra-corporate disputes. However, jurisdiction over intra-corporate
disputes and all other cases enumerated in Sec 5 had already been transferred to designated RTC under RA no. 8799. For a
dispute to be intra-corporate, it must satisfy the relationship and nature of controversy tests.
 Relationship test – requires that the dispute be between a:
o corporation/partnership/association and the public;
o a corporation/partnership/association and the state regarding the entity’s franchise, permit or license to
operate;
o a corporation/partnership/association and its stockholders, partners, members or officers; and
o among stockholders, partners or associates of the entity
  Nature of the Controversy Test – requires that the action involves the enforcement of corporate rights and
obligations.

In Medical Plaza Makati Condominium Corporation vs. Cullen: “The controversy must not only be rooted in the existence of
an intra-corporate relationship, but must as well pertain to the enforcement of parties’ correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation.”

This case is an intra-corporate dispute, over which the RTC has jurisdiction. It involves a dispute between the corporation,
SBGCCI and its shareholders, Villareal and Filart. Their right to a refund of the value of their shares was based on SBGCCI
and UIGDC's alleged failure to abide by their representations in their prospectus. It involves the determination of a
shareholder's rights under the Corporation Code or other intra-corporate rules when the corporation or association fails to
fulfill its obligations.

HOWEVER, even though it is intra-corporate in nature, it does not necessarily oust the Commission of its regulatory and
administrative jurisdiction to determine and act if there were administrative violations committed. n relation to securities,
the Securities and Exchange Commission's regulatory power pertains to the approval and rejection, and suspension or
revocation, of applications for registration of securities for, among others, violations of the law, fraud, and
misrepresentations. (CF: Sec 13 and 15)

To ensure compliance with the law and the rules, SEC is empowered to impose fines and penalties. It may also investigate
motu propio to see whether corporations are compliant. Any fraud or misrepresentation in the issuance of securities injures
the public. However, the Securities and Exchange Commission's regulatory power does not include the authority to order
the refund of the purchase price of Villareal's and Filart's shares in the golf club. The issue of refund is intra-corporate or
civil in nature. Similar to issues such as the existence or inexistence of appraisal rights, pre-emptive rights, and the right to
inspect books and corporate records, the issue of refund is an intra- corporate dispute that requires the court to determine
and adjudicate the parties' rights based on law or contract. Injuries, rights, and obligations involved in intra-corporate
disputes are specific to the parties involved. They do not affect the Securities and Exchange Commission or the public
directly.

Hence, the issue of refund should be litigated in the appropriate Regional Trial Court. This issue is both intra-corporate and
civil in nature, which is under the jurisdiction of the designated Regional Trial Courts.
LYDIA LAO, JEFFREY ONG, HENRY SY, SY TIAN TIN, SY TIAN TIN, JR., and PAUL CHUA, Petitioners, -versus - YAO BIO LIM
AND PHILIP KING, Respondents. G.R. No. 201306, SECOND DIVISION, August 9, 2017, LEONEN, J.

Section 50 of the Corporation Code prescribes that regular meetings of stockholders or members shall be held annually
on a date fixed in the by-laws. PSI's by-laws fixed the annual meeting of stockholders on the 3rd Friday of March of every
year. March 15, 2002 was the 3rd Friday of March 2002.

Moreover, the Court held that the 2002 Annual Stockholders’ Meeting was a regular meeting. Hence, the object and
purpose requirement does not apply to the notice therefor. Likewise, the PSI's by-laws providing only for a 5-day prior
notice must prevail over the 2-week notice under the Corporation Code.

By the latter’s express terms, the fixing of the period within which to send the notice to call a meeting is allowed.
Moreover, King was a legitimate stockholder of PSI. The transfer of shares by Seng to his son, King, was valid, and the
issue of rightful ownership over the stocks was already resolved by the Court.

As to the stock dividend declaration, the declaration must be annulled as the 300% stock dividends were not validly
declared by the PSI BOD. The handwritten minutes of the meeting was questionable as the number of stock dividends to
be declared and the number of shares held by the stockholders were not indicated. The required 2/3 votes for the stock
dividend declaration also was not met.

FACTS

Philadelphia School, Inc. (PSI) was organized with an authorized capital stock of P2,000,000.00 divided into 20,000 shares
with a par value of P100 per share. Ong Y. Seng, King's father, held 1,200 shares. Before his death in 1994, he transferred
the said shares to King. Since then, King had been consistently elected as a member of the Board of Directors (BOD).
During the special stockholders' meeting on May 23, 1998, a new set of directors and officers was elected with Lim, as
President, and King, as Vice President. Lao, the former president, refused to acknowledge the newly elected directors and
officers as well as King's ownership of the 1,200 PSI shares.

Subsequently, Lao issued a Secretary's Certificate stating that there was a board resolution to nullify the transfer to King of
the shares owned by his father. Upon discovery of the holding of stockholders' meeting where new members of the BOD
were elected, King filed a petition before the SEC to enjoin the newly elected officers and members from representing
themselves. When RA No. 8799 took effect, the case was transferred to the RTC.

The RTC rendered a decision in favor of King, granting among others, the nullification of the meeting held and the acts
performed by the alleged officers as well as the restoration of his 1,200 shares. The CA upheld the decision of the RTC.
Meanwhile, on March 15, 2002, a general stockholders' meeting was held wherein the petitioners were elected as
members of the BOD. This prompted the respondents to file a petition before the RTC for the annulment of the said
election, the issuance of stock dividends, and the illegal transfer of shares of stocks.

On March 20, 2007, the RTC rendered its decision in favor of Lim and King. The CA affirmed the RTC decision.

ISSUES

A. Whether the notice of regular meeting should be sent at least 2 weeks prior, despite a different provision in the by-laws
of PSI. (NO)
B. Whether King is a stockholder of PSI (YES)
and whether the declaration of stock dividends is valid (NO)

RULING

(A) Section 50 of the Corporation Code prescribes that regular meetings of stockholders or members shall be held
annually on a date fixed in the by-laws. PSI's by-laws fixed the annual meeting of stockholders on the 3rd Friday of March
of every year. March 15, 2002 was the 3rd Friday of March 2002. Moreover, the Court held that the 2002 Annual
Stockholders’ Meeting was a regular meeting. Hence, the object and purpose requirement does not apply to the notice
therefor. Likewise, the PSI's by-laws providing only for a 5-day prior notice must prevail over the 2-week notice under the
Corporation Code. By the latter’s express terms, the fixing of the period within which to send the notice to call a meeting is
allowed.

(B) King was a legitimate stockholder of PSI. The transfer of shares by Seng to his son, King, was valid, and the issue of
rightful ownership over the stocks was already resolved by the Court. As to the stock dividend declaration, the 300% stock
dividends were not validly declared by the PSI BOD. The handwritten minutes of the meeting was questionable as the
number of stock dividends to be declared and the number of shares held by the stockholders were not indicated. The
required 2/3 votes for the stock dividend declaration also was not met. Thus, the declaration must be annulled.
 SECURITIES AND EXCHANGE COMMISSION, Petitioner, vs. THE HONORABLE COURT OF APPEALS, OMICO CORPORATION,
EMILIO S. TENG AND TOMMY KIN HING TIA, Respondents.
G.R. No. 187702 October 22, 2014
PONENTE: Sereno
TOPIC: SRC, proxy, jurisdiction of SEC

FACTS:

Omico Corporation (Omico) is a company whose shares of stock are listed and traded in the Philippine Stock
Exchange, Inc. Astra Securities Corporation (Astra) is one of the stockholders of Omico owning about 18% of the latter’s
outstanding capital stock.

Omico scheduled its annual stockholders’ meeting on 3 November 2008. It set the deadline for submission of
proxies on 23 October 2008 and the validation of proxies on 25 October 2008.

Astra objected to the validation of the proxies issued in favor of Tia, representing about 38% of the outstanding
capital stock of Omico. Astra also objected to the inclusion of the proxies issued in favor of Tia and/or Martin Buncio,
representing about 2% of the outstanding capital stock of Omico.

Astra maintained that the proxy issuers, who were brokers, did not obtain the required express written
authorization of their clients when they issued the proxies in favor of Tia. In so doing, the issuers were allegedly in violation
of SRC Rules. Furthermore, the proxies issued in favor of Tia exceeded, thereby giving rise to the presumption of solicitation
thereof under said rules. Tia did not also comply with the rules on proxy solicitation, in violation of the SRC.

Despite the objections of Astra, Omico’s Board of Inspectors declared that the proxies issued in favor of Tia were
valid.

ISSUE:

1. Whether or not SEC has jurisdiction over controversies arising from the validation of proxies for the election of the directors
of a corporation.
2. Whether or not SEC may appeal a reversal of its ruling.

HELD:

FIRST ISSUE: None.

The Court held that when proxies are solicited in relation to the election of corporate directors, the resulting
controversy, even if it ostensibly raised the violation of the SEC rules on proxy solicitation, should be properly seen as an
election controversy within the original and exclusive jurisdiction of the trial courts by virtue of Section 5.2 of the SRC. Hence,
the jurisdiction is still with the Special Commercial Courts.

An election contest covers any controversy or dispute involving the validation of proxies, in general. Thus, it can
only refer to all the beneficial purposes that validation of proxies can bring about when made in connection with a
forthcoming election of directors. Thus, there is no point in making distinctions between who has jurisdiction before and
who has jurisdiction after the election of directors, as all controversies related thereto – whether before, during or after –
shall be passed upon by regular courts as provided by law.

SECOND ISSUE: No.

 The Court held that quasi-judicial agencies do not have the right to seek the review of an appellate court
decision reversing any of their rulings. This is because they are not real parties-in-interest. Thus, the Court expunged the
petition filed by the SEC for the latter’s lack of capacity to file the suit.
LIM v. MOLDEX
Mary E. Lim Vs. Moldex Land, Inc., et al.
G.R. No. 206038
January 25, 2017

FACTS:

On July 21, 2012 Condocor (Condominium Corporation) a non-stock, non-profit corporation, which is the registered
condominium corporation for the Golden Empire Tower held its annual general membership meeting. Moldex became a
member of Condocor on the basis of its ownership of the 220 unsold units in the Golden Empire Tower.

During the meeting, an existence of a quorum was declared even though only 29 of the 108 unit buyers were present. The
declaration was based on the presence of the majority of the voting rights, including those pertaining to the 220 unsold
units held by Moldex through its representatives. Lim, through her attorney-in-fact, objected to the validity of the meeting.
The objection was denied. Thus, Lim and all the other unit owners present, except for one, walked out and left the meeting.

Despite the walkout, the individual respondents and the other unit owner proceeded with the meeting and elected the new
members of the Board of Directors for 2012-2013. All four (4) individual respondents (JAMINOLA, MACALINTAL, MILANES,
and ROMAN) were voted as members of the board, together with other 3 members.

Consequently, Lim filed an election protest before the RTC. Lim claimed that herein respondents are not entitled to be
members of the Board of Directors because they are non-unit buyers. However, said court ruled in favor for the respondents.
Not in conformity, Lim filed the present petition.

ISSUES:

1) Whether or not the July 21, 2012 membership meeting was valid.
2) Whether or not Moldex can be deemed a member of Condocor.
3) Whether or not representatives of Moldex who are non-members can be elected as a member of the Board of Directors
of Condocor.

HELD:

I
No. The July 21, 2012 membership meeting was not valid.
A stockholders' or members' meeting must comply with the following requisites to be
valid:

1. The meeting must be held on the date fixed in the ByLaws or in accordance with law;
2. Prior written notice of such meeting must be sent to all stockholders/members of record;
3. It must be called by the proper party;
4. It must be held at the proper place; and
5. Quorum and voting requirements must be met.

Of these five ( 5) requirements, the existence of a quorum is crucial. Any act or transaction made during a meeting without
quorum is rendered of no force and effect, thus,

not binding on the corporation or parties concerned. In relation thereto, Section 52 of the
Corporation Code of the Philippines (Corporation Code) provides:

Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a quorum shall consist of
the stockholders representing a majority of the outstanding capital stock or a majority of the members in the case of non-
stock corporations.
Thus, for stock corporations, the quorum is based on the number of outstanding voting stocks while for non-stock
corporations, only those who are actual, living members with voting rights shall be counted in determining the existence of
a quorum.

The By-Laws of Condocor has no rule different from that provided in the Corporation Code with respect the determination
of the existence of a quorum. The quorum during the July 21, 2012 meeting should have been majority of Condocor's
members in good standing. Accordingly, there was no quorum during the July 21, 2012 meeting considering that only 29 of
the 108 unit buyers were present. As there was no quorum, any resolution passed during the July 21,2012 annual
membership meeting was null and void and, therefore, notbinding upon the corporation or its members. The meeting being
null andvoid, the resolution and disposition of other legal issues emanating from the null and void July 21, 2012 membership
meeting has been rendered unnecessary.

II

Yes. Moldex can be deemed a member of Condocor.

Lim asserted that only unit buyers are entitled to become members of Condocor. Respondents, for their part, countered
that a registered owner of a unit in a condominium project or the holders of duly issued condominium certificate of title
(CCT), automatically becomes a member of the condominium corporation, relying on Sections 2 and 10 of the Condominium
Act, the Master Deed and Declaration of Restrictions, as well as the By-Laws of Condocor. For said reason, respondents
averred that as Moldex is the owner of 220 unsold units and the parking slots and storage areas attached thereto, it
automatically became a member of Condocor upon the latter's creation.

On this point, respondents are correct. Section 2 of the Condominium Act states:

Sec. 2. A condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or
commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in
other common areas of the building. A condominium may include, in addition, a separate interest in other portions of such
real property. Title to the common areas, including the land, or the appurtenant interests in such areas, may be held by a
corporation specially formed for the purpose (hereinafter known as the "condominium corporation") in which the holders
of separate interest shall automatically be members or shareholders, to the exclusion of others, in proportion to the
appurtenant interest of their respective units in the common areas

It is erroneous to argue that the ownership must result from a sale transaction between the owner-developer and the
purchaser. Such interpretation would mean that persons who inherited a unit, or have been donated one, and properly
transferred title in their names cannot become members of a condominium corporation.

III

No. Representatives of Moldex who are non-members cannot be elected as a member of the Board of Directors of Condocor.

A corporation can act only through natural persons duly authorized for the purpose or by a specific act of its board of
directors.45 Thus, in order for

Moldex to exercise its membership rights and privileges, it necessarily has to appoint its representatives. However, individual
respondents who are non-members cannot be elected as directors and officers of the Condocor.

While Moldex may rightfully designate proxies or representatives, the latter, however, cannot be elected as directors or
trustees of Condocor. First, the Corporation Code clearly provides that a director or trustee must be a member of record of
the corporation. Further, the power of the proxy is merely to vote. If said proxy is not a member in his own right, he cannot
be elected as a director or proxyndominium corporation.
CORAZON H. RICAFORT, JOSE MANUEL H. RICAFORT AND MARIE GRACE H. RICAFORT, Petitioners, -versus - THE
HONORABLE ISAIAS P. DICDICAN, THE HONORABLE RAMON M. BATO, JR., AND THE HONORABLE EDUARDO B. PERALTA,
JR., IN THEIR OFFICIAL CAPACITIES AS MEMBERS OF THE SPECIAL FOURTEENTH DIVISION OF THE COURT OF APPEALS,
NATIONWIDE DEVELOPMENT CORPORATION, ROBERTO R. ROMULO, CONRADO T. CALALANG, ALFREDO I. AYALA, JOHN
ENGLE, LEOCADIO NITORREDA AND LUIS MANUEL GATMAITAN, Respondents. G.R. Nos. 202647-50, THIRD DIVISION,
March 9, 2016, REYES, J. CORAZON H. RICAFORT, JOSE MANUEL H. RICAFORT AND MARIE GRACE H. RICAFORT,
Petitioners, -versus - OBERTO R. ROMULO, CONRADO T. CALALANG, ALFREDO I. AYALA, JOHN ENGLE, LEOCADIO
NITORREDA, NATIONWIDE DEVELOPMENT CORPORATION AND LUIS MANUEL L. GATMAITAN, Respondents.
G.R. Nos. 205921-24, THIRD DIVISION, March 9, 2016, REYES, J.

There can be no denying that the petitioners were seeking the holding of a new election for members of the BOD of
NADECOR for 2011-2012 by asserting their right to choose the persons who will direct, manage and operate the
corporation because they said they had been unlawfully deprived thereof due to late notification of the aforesaid meeting
and by praying for the voiding of the August 15, 2011 ASM and for other just and equitable reliefs.

Moreover, in a case on all fours with the present case, the Court expressly ruled that where one of the reliefs sought in the
complaint is to nullify the election of the BOD at the ASM, the complaint involves an election contest. Considering the
foregoing, under Sections 1 to 3 of Rule 6 of the Interim Rules, the case should have been dismissed for having been filed
beyond the 15- day prescriptive period allowed for an election protest.

The petitioners also participated in the ASM through their authorized representative and proxy, JG Ricafort. In his Affidavit,
Gatmaitan categorically declared under oath that JG Ricafort held a valid irrevocable proxy from the petitioners to attend
and vote their shares at all meetings of the stockholders and that JG Ricafort signed the attendance sheet for and in behalf
of the petitioners.

Moreover, the petitioners do not deny that they each executed a Nominee Agreement wherein they acknowledged that JG
Ricafort is the true and beneficial owner of the shares of stock in their names. Considering the foregoing, lack of notice to
the petitioners is inconsequential because JG Ricafort attended and represented them at the August 15, 2011 ASM. It
defies reason, too, that he could not have informed his wife and children, who live in the same house with him, of the
scheduled ASM.

Also, by failing to file their complaint seasonably, the petitioners must be deemed to have waived their right to notice of
the August 15, 2011 ASM. The same section of the Corporation Code provides in effect that failure to give notice of the
regular or annual meetings, when the date thereof is fixed in the bylaws, as in Section 1, Article 1 of the Amended By-Laws
of NADECOR, which is "at 12:30 P.M., on the 3rd MONDAY OF AUGUST in each year, if not a legal holiday, and if a legal
holiday, then on the 1st day following which is not a legal holiday," will not affect the validity of the ASM or the
proceedings therein.

FACTS

The Nationwide Development Corporation (NADECOR) is a holder of a Mining Production Sharing Agreement (MPSA)
which covers the King-king Gold and Copper Project (King-king Project). Pursuant to NADECOR's Amended By-Laws, its
regular annual stockholders' meeting (ASM) was held on August 15, 2011 to elect its Board of Directors (BOD) for 2011-
2012. In his Affidavit, Gatmaitan, NADECOR’s Corporate Secretary, attested to the presence of a quorum representing
94.81% of the outstanding shares of stock and the election of new set of BOD.

More than 2 months after the ASM, the petitioners, claiming to be stockholders of record, filed a complaint before the RTC
to declare null and void the August 15, 2011 ASM of NADECOR including all the proceedings taken thereat, all the
consequences thereof, and all acts carried out pursuant thereto against NADECOR itself, the newly-elected members of its
BOD, and Gatmaitan (respondents). The petitioners alleged, among others, that they had no knowledge or prior notice of,
and were thus unable to attend, participate in, and vote at the said ASM. They received the notice of the ASM, 1 day late,
in violation of the 3-day notice provided in NADECOR's By-Laws.

The respondents, on the other hand, sought the dismissal the case on the following grounds:
a. That the complaint involved an election contest since it sought to nullify the election of the BOD of NADECOR for 2011-
2012 and under Section 3, Rule 6 of the Interim Rules of Procedure Governing Intra-Corporate Controversies (Interim
Rules), it should have been filed within 15 days from the date of the election;
b. That the complaint is not only barred by prescription as stated above. The petitioners have no cause of action because
they were duly served with notice of the said meeting per NADECOR messenger, Mario S. San Juan (San Juan), who mailed
the notices 4 days prior to the scheduled ASM;
c. That a valid ASM was held on August 15, 2011, the third Monday of August 2011, at which the required quorum was
present and that the petitioners, although physically absent, were in fact represented by their proxy, JG Ricafort, by virtue
of irrevocable proxies which they executed;
d. That JG Ricafort attended and signed the attendance sheet as their proxy and participated in the ASM for himself as well
as in their behalf;
e. That the true and beneficial owner of the shares of stock issued in their names is JG Ricafort as shown in the Nominee
Agreements which they executed;
f. That aided by the irrevocable proxies and Nominee Agreements, JG Ricafort won election to the NADECOR BOD.

The RTC ruled that the petitioners were not validly served with notice of the ASM as required in the Amended By-Laws.

Moreover, their complaint did not involve an election contest, thus, was not subject to the 15-day prescriptive period for
filing an election protest.

Accordingly, the RTC declared as void and of no force and effect the assailed ASM and nullified all acts performed by the
new BOD elected thereat. The CA nullified and set aside the order of the RTC.

ISSUES

A. Whether the case involves an election contest subject to the 15-day prescriptive period for filling an election protest.
(YES)
B. Whether the petitioners have cause of action despite their execution of an irrevocable proxy in favor of JG Ricafort.
(NONE)
C. Whether the ASM and the proceedings therein will be invalidated assuming that proper notice was not given to
petitioners (NO)

RULING

(A) An election contest refers to any controversy or dispute involving title or claim to any elective office in a stock or
non-stock corporation, the validation of proxies, the manner and validity of elections, and the qualifications of
candidates, including the proclamation of winners, to the office of director, trustee or other officer directly elected
by the stockholders in a close corporation or by members of a non-stock corporation where the articles of
incorporation or by-laws so provide. In the case at bar, there can be no denying that the petitioners were seeking
the holding of a new election for members of the BOD of NADECOR for 2011-2012 by asserting their right to
choose the persons who will direct, manage and operate the corporation because they said they had been
unlawfully deprived thereof due to late notification of the aforesaid meeting and by praying for the voiding of the
August 15, 2011 ASM and for other just and equitable reliefs. As the CA noted, by seeking to nullify the said ASM,
the petitioners were clearly challenging the validity of the election of the new BOD. NADECOR's Amended By-
Laws even provides that the purpose of the ASM is for the election of directors and for the transaction of general
business of its office.

(B) Moreover, in a case on all fours with the present case, the Court expressly ruled that where one of the reliefs
sought in the complaint is to nullify the election of the BOD at the ASM, the complaint involves an election
contest. Considering the foregoing, under Sections 1 to 3 of Rule 6 of the Interim Rules, the case should have
been dismissed for having been filed beyond the 15-day prescriptive period allowed for an election protest.
 The petitioners did participate in the ASM through their authorized representative and proxy, JG Ricafort. In his
Affidavit, Gatmaitan categorically declared under oath that JG Ricafort held a valid irrevocable proxy from the
petitioners to attend and vote their shares at all meetings of the stockholders and that JG Ricafort signed the
attendance sheet for and in behalf of the petitioners. It must be noted that JG Ricafort's proxy authority was "to
attend and represent the petitioners at any and all meetings of the shareholders of the Company, and for and on
behalf of the petitioners, to vote upon any and all matters to be taken up at said meeting, according to the
number of shares of stock of the Company of which the petitioners are the lawful record and beneficial owners,
and which they would be entitled to vote if personally present."

Moreover, the petitioners do not deny that they each executed a Nominee Agreement wherein they
acknowledged that JG Ricafort is the true and beneficial owner of the shares of stock in their names. Each of the
nominee agreements uniformly provide that “The nominee holds the legal title to the shares for and in behalf of
principal who is the beneficial owner thereof.” As nominees, the petitioners expressly acknowledged further that
"any and all payments made by the nominee on the shares, including but not limited to the subscription payment
therefor, were funded by, and made on behalf and for the benefit of the principal [JG Ricafort]."

Thus, the petitioners misled the trial court into thinking that they had an inherent right to vote as an incident of
their ownership of corporate stock although they always knew that JG Ricafort was the real and beneficial owner.
Considering the foregoing, lack of notice to the petitioners is inconsequential because JG Ricafort attended and
represented them at the August 15, 2011 ASM. It defies reason, too, that he could not have informed his wife and
children, who live in the same house with him, of the scheduled ASM.

(C) Under NADECOR's Amended By-Laws, what is required is the mailing out of notices by registered mail at least 3
days before the ASM. The shorter notice of 3 days instead of 2 weeks for stockholders' regular or special meeting
is clearly allowed under Section 50 of the Corporation Code. Furthermore, by failing to file their complaint
seasonably, the petitioners must be deemed to have waived their right to notice of the August 15, 2011 ASM.

The same section of the Corporation Code provides in effect that failure to give notice of the regular or annual
meetings, when the date thereof is fixed in the by-laws, as in Section 1, Article 1 of the Amended By-Laws of
NADECOR, which is "at 12:30 P.M., on the 3rd MONDAY OF AUGUST in each year, if not a legal holiday, and if a
legal holiday, then on the 1st day following which is not a legal holiday," will not affect the validity of the ASM or
the proceedings therein.