Lao v. Lao
REITERATIONFacts
The Antecedents: Petitioners David C. Lao and Jose C. Lao initiated a legal action seeking to be declared as stockholders and directors of Pacific Foundry Shop Corporation (PFSC). They also sought the issuance of stock certificates in their names and the right to examine the corporation's books. Petitioners claimed to have acquired shares through alleged transfers from their father and directly from the respondent, asserting their status as stockholders based on their inclusion in the company's General Information Sheets (GIS) filed with the Securities and Exchange Commission (SEC). Procedural History: The case began with a petition filed by the petitioners before the SEC. Following the enactment of Republic Act 8799, which transferred jurisdiction over intra-corporate disputes to the Regional Trial Court (RTC), the case was transferred to RTC Branch 11 in Cebu City. The RTC denied the petitioners' claims, ruling that they had not acquired shares through legally recognized modes and lacked proper registration in the corporate books. The Court of Appeals (CA) initially modified the RTC's decision, declaring the petitioners as owners of shares and ordering the issuance of certificates. However, after the ponente of the CA decision voluntarily inhibited himself, the CA issued an Amended Decision affirming the RTC's ruling and denying the petitioners' claims. The Petition: The petitioners are now before the Supreme Court via a petition for review on certiorari under Rule 45 of the Rules of Court. They challenge the CA's Amended Decision, raising issues concerning the propriety of a justice's voluntary inhibition, the validity of the Amended Decision following the inhibition, and the substantive question of whether their inclusion in the General Information Sheets, along with other documentary evidence, constitutes sufficient proof of their ownership of shares in PFSC, or if adherence to the Stock and Transfer Book and proper endorsement and delivery of certificates are paramount.
Issue(s)
Whether the voluntary inhibition of Justice Arsenio J. Magpale was proper. Whether the determination of ownership of shares of stock shall be based solely on the Stock and Transfer Book or if other evidence can be considered. Whether the admissions and representations in the General Information Sheets, Sworn Statements, and Minutes of Meetings are sufficient proof of petitioners' ownership of stocks. Whether respondent is estopped from questioning petitioners' ownership of stocks due to his admissions in the General Information Sheets.
Ruling
The petition is denied. The Amended Decision of the Court of Appeals affirming the Regional Trial Court's decision is affirmed in full.
Ratio Decidendi
On the propriety of Justice Magpale's inhibition: Voluntary inhibition is within the sound discretion of a judge. Justice Magpale voluntarily inhibited himself to free the court from any suspicion of bias or prejudice. The Court held that it cannot nullify a judge's decision to recuse himself, as it is a matter of discretion. The voluntary inhibition was considered fait accompli and did not affect the Amended Decision subsequently issued by the CA. Petitioners could not assume that Justice Magpale would have ruled in their favor had he not inhibited himself, nor could they logically presume that the Amended Decision would not have been issued without his participation. On the sufficiency of proof of share ownership: The Court reiterated that the mere inclusion of names in a corporation's General Information Sheet (GIS) is insufficient proof of share ownership. A stock certificate is the evidence of a holder's interest and status in a corporation, and its absence is a significant indicator against ownership claims. Petitioners failed to present any written document, such as a deed of assignment, evidencing the claimed sale of shares. Furthermore, they did not prove possession of the certificates of shares in the name of the alleged sellers nor the due delivery of such certificates to them. Section 63 of the Corporation Code requires that a transfer of shares must be registered in the books of the corporation to be valid, except as between the parties. Petitioners failed to show compliance with these requirements. On the weight of GIS, Sworn Statements, and Minutes of Meetings as proof of ownership: While the GIS, sworn statements, and minutes of meetings may contain representations of share ownership, they do not conclusively prove ownership, especially when contradicted by the corporate books. The CA correctly ruled that mere inclusion in GIS does not make one a stockholder, as this could be due to mistake, expediency, or negligence, particularly when done to comply with reportorial requirements. The Court emphasized that as between the GIS and the corporate books, the latter are controlling. Petitioners' failure to present stock certificates or evidence of registration in the Stock and Transfer Book meant they did not establish their standing as registered stockholders. On estoppel: The Court found that respondent was not estopped from questioning petitioners' ownership. While petitioners relied on the GIS submitted by respondent, the Court held that the information in the GIS must be correlated with the corporate books, which are controlling. The CA's reasoning that practice, no matter how long continued, cannot give rise to a vested right was cited. Petitioners bore the burden of proof to show they were shareholders, especially since they lacked stock certificates and were not registered shareholders. Their bare assertion of ownership, unsupported by documentary or testimonial evidence, could not prevail over the respondent's evidence of ownership and the lack of proper registration of transfer in the corporate books.
Main Doctrine
The mere inclusion of names in a corporation's General Information Sheet (GIS) is insufficient proof of share ownership. Ownership of shares must be evidenced by stock certificates, proper endorsement, delivery, and registration in the Stock and Transfer Book. Voluntary inhibition of a judge is within their sound discretion.