Lopez v. Lopez
REITERATIONFacts
1. The Antecedents: The underlying dispute concerns the validity of special stockholders' meetings and the subsequent elections of the boards of directors for three corporations: iSpecialist Development Corporation, LC Lopez Resources, Inc., and Conqueror International, Inc. Petitioner Lily C. Lopez alleged that these meetings, held on February 11 and 14, 2019, were tainted with legal infirmities, including the improper issuance of shares and the exclusion of certain stockholders, which affected the quorum and the validity of the elections. The core of the dispute revolves around whether the meetings and elections were conducted in accordance with corporate law and the respective corporations' by-laws and articles of incorporation. 2. Procedural History: Lily C. Lopez filed an election contest before the Regional Trial Court (RTC) of Quezon City concerning iSpecialist, and another before the RTC of Marikina City concerning LC Lopez and Conqueror. The RTC-QC ruled in favor of Lily, declaring the iSpecialist meeting and election void. The RTC-Marikina also ruled in favor of Lily, declaring the LC Lopez and Conqueror meetings and elections void. The respondents appealed both decisions to the Court of Appeals (CA). The CA, however, reversed the RTCs' rulings, declaring the meetings and elections valid. Lily then filed a Petition for Review on Certiorari with the Supreme Court. In its June 15, 2022 Decision, the Supreme Court granted Lily's petition, setting aside the CA's ruling and reinstating the RTCs' decisions. The respondents subsequently filed a Motion for Reconsideration, which is now before the Court. 3. The Petition: The current proceedings stem from a Motion for Reconsideration filed by the respondents, challenging the Supreme Court's June 15, 2022 Decision. The respondents argue that the Supreme Court erred in its findings regarding the timeliness of their appeal to the CA in CA-G.R. SP No. 162134, the status of Christina and John Rusty Lopez as stockholders of LC Lopez and Conqueror, and the validity of Lolito S. Lopez's purchase of unissued shares. The respondents contend that the CA's decision, which found the stockholders' meetings and elections valid, should be reinstated. The core arguments presented in the Motion for Reconsideration focus on procedural technicalities concerning the appeal period and substantive issues regarding stock ownership and share issuance, aiming to overturn the Supreme Court's prior ruling.
Issue(s)
Whether the petition in CA-G.R. SP No. 162134 was timely filed. Whether Christina and John Rusty are stockholders of record of the subject corporations. Whether Lolito's purchase of unissued shares of stock was valid.
Ruling
The Supreme Court GRANTED the Motion for Reconsideration, SET ASIDE its June 15, 2022 Decision, and REINSTATED the Court of Appeals' Decision declaring the special stockholders' meetings and elections VALID.
Ratio Decidendi
On Issue 1: The Court ruled that the appeal was timely because service of the RTC decision to an unauthorized person does not commence the reglementary period. Richard Velasco, who personally received the decision at the RTC, was not an employee or authorized representative of the counsel of record, and the Certification from the RTC clerk could not override the lack of actual authority. Under Rule 13, Section 17 of the Rules of Court, proof of service must be strictly followed, and service to any person other than the counsel of record is legally ineffective. Consequently, the reckoning point for the appeal was the date the counsel actually received the copy via registered mail, making the petition timely. On Issue 2: The Court emphasized that the Stock and Transfer Book (STB) is the primary basis for determining shareholders under Section 63 of the Corporation Code. Although Christina and John Rusty were listed in the General Information Sheet (GIS), they were absent from the STB and possessed no stock certificates or deeds of assignment proving their acquisition of shares. Jurisprudence, specifically Lao v. Lao, dictates that the GIS is insufficient proof of ownership and the STB remains controlling in determining stockholders of record. Testimonial evidence that they were 'treated' as stockholders cannot overcome the lack of registration in the corporate books; thus, their exclusion did not affect the quorum. On Issue 3: The issuance of additional shares to Lolito without a board resolution was characterized as an ultra vires act, which is merely voidable and not void ab initio. Since the power to sell shares is inherent in stock corporations under Section 36 of the Corporation Code, the lack of a resolution is a procedural infirmity that can be cured by shareholder ratification. Similarly, a violation of pre-emptive rights under Section 39 does not automatically nullify the issuance as it is also susceptible to ratification. Applying the Business Judgment Rule, the Court found that the infusion of capital was a good-faith effort to protect corporate funds, and since the shares were registered in the STB, they were validly voted to establish a quorum.
Main Doctrine
In Philippine corporate law, the Stock and Transfer Book (STB) serves as the primary and controlling evidence of a person's status as a stockholder of record. While the General Information Sheet (GIS) is a required reportorial document, its entries do not create vested rights nor override the STB in determining the right to vote or the presence of a quorum. Furthermore, corporate acts performed without a board resolution, such as the issuance of shares, are generally classified as ultra vires and voidable rather than void ab initio, provided the act is within the corporation's inherent powers and is susceptible to ratification by the stockholders.