Articles of incorporation 1978 stock and transfer book or if it should be the 1952 articles of

Lanuza vs. CA incorporation

GR No. 131394 | March 28, 2005 (They contended that the basis is the stock and transfer book, not articles
of incorporation in computing the quorum)
Facts: 2. whether the Espejo decision (decision of SEC en banc ordering the
Petitioners seek to nullify the Court of Appeals Decision in CAG.R. recording of the shares of Jose Acayan in the stock and transfer book) is
SP No. 414731 promulgated on 18 August 1997, affirming the SEC Order applicable to the benefit of Onrubia et al
dated 20 June 1996, and the Resolution2 of the Court of Appeals dated 31 CA decision:
October 1997 which denied petitioners motion for reconsideration. 1. For purposes of transacting business, the quorum should be based
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was on the outstanding capital stock as found in the articles of incorporation
incorporated, with seven hundred (700) founders shares and seventy-six 2. To require a separate judicial declaration to recognize the shares of
(76) common shares as its initial capital stock subscription reflected in the the original incorporators would entail unnecessary delay and expense.
articles of incorporation Besides. the incorporators have already proved their stockholdings through
Onrubia et. al, who were in control of PMMSI registered the the provisions of the articles of incorporation.
companys stock and transfer book for the first time in 1978, recording Appeal was made by Lanuza et al before the SC
thirty-three (33) common shares as the only issued and outstanding shares Lanuza et al contention:
of PMMSI. 1992 stockholders meeting was valid and legal
In 1979, a special stockholders meeting was called and held on the Reliance on the 1952 articles of incorporation for determining the quorum
basis of what was considered as a quorum of twenty-seven (27) common negates the existence and validity of the stock and transfer book Onrubia
shares, representing more than two-thirds (2/3) of the common shares et al prepared
issued and outstanding. Onrubia et al must show and prove entitlement to the founders and
In 1982, Juan Acayan, one of the heirs of the incorporators filed a common shares in a separate and independent action/proceeding in order
petition for the registration of their property rights was filed before the SEC to avail of the benefits secured by the heirs of Acayan
over 120 founders shares and 12 common shares owned by their father Onrubia et als contention, based on the Memorandum: petition
SEC Hearing Officer: heirs of Acayan were entitled to the claimed should be dismissed on the ground of res judicata
shares and called for a special stockholders meeting to elect a new set of Another appeal was made
officers. Lanuza et als contention: instant petition is separate and distinct
SEC en banc: affirmed the decision from G.R. No. 131315, there being no identity of parties, and more
As a result, the shares of Acayan were recorded in the stock and importantly, the parties in the two petitions have their own distinct rights
transfer book. and interests in relation to the subject matter in litigation
On May 6, 1992, a special stockholders meeting was held to elect a Onrubia et als manifestation and motion: moved for the dismissal of
new set of directors the case
Onrubia et al filed a petition with SEC questioning the validity of said
meeting alleging that the quorum for the said meeting should not be Issue: What should be the basis of quorum for a stockholders meeting
based on the 165 issued and outstanding shares as per the stock and the outstanding capital stock as indicated in the articles of incorporation or
transfer book, but on the initial subscribed capital stock of seven hundred that contained in the companys stock and transfer book?
seventy-six (776) shares, as reflected in the 1952 Articles of Incorporation
Petition was dismissed Ruling:
SC en banc: shares of the deceased incorporators should be duly Articles of Incorporation
represented by their respective administrators or heirs concerned. Called - Defines the charter of the corporation and the contractual
for a stockholders meeting on the basis of the stockholdings reflected in relationships between the State and the corporation, the stockholders and
the articles of incorporation for the purpose of electing a new set of officers the State, and between the corporation and its stockholders.
for the corporation - Contents are binding, not only on the corporation, but also on its
Lanuza, Acayan et al, who are PMMSI stockholders, filed a petition shareholders.
for review with the CA, raising the following issues: Stock and transfer book
1. whether the basis the outstanding capital stock and accordingly also - Book which records the names and addresses of all stockholders
for determining the quorum at stockholders meetings it should be the 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 The stock and transfer book of PMMSI cannot be used as the sole
thereof and by and to whom made; and such other entries as may be basis for determining the quorum as it does not reflect the totality of
prescribed by law shares which have been subscribed, more so when the articles of
- necessary as a measure of precaution, expediency and convenience incorporation show a significantly larger amount of shares issued and
since it provides the only certain and accurate method of establishing the outstanding as compared to that listed in the stock and transfer book.
various corporate acts and transactions and of showing the ownership of One who is actually a stockholder cannot be denied his right to vote
stock and like matters by the corporation merely because the corporate officers failed to keep its
- Not public record, and thus is not exclusive evidence of the matters records accurately. A corporations records are not the only evidence of the
and things which ordinarily are or should be written therein ownership of stock in a corporation.
In this case, the articles of incorporation indicate that at the time of It is no less than the articles of incorporation that declare the
incorporation, the incorporators were bona fide stockholders of 700 incorporators to have in their name the founders and several common
founders shares and 76 common shares. Hence, at that time, the shares. Thus, to disregard the contents of the articles of incorporation
corporation had 776 issued and outstanding shares. would be to pretend that the basic document which legally triggered the
According to Sec. 52 of the Corp Code, a quorum shall consist of the creation of the corporation does not exist and accordingly to allow great
stockholders representing a majority of the outstanding capital stock. As injustice to be caused to the incorporators and their heirs
such, quorum is based on the totality of the shares which have been
subscribed and issued, whether it be founders shares or common shares WHEREFORE, the petition is DENIED and the assailed Decision is
To base the computation of quorum solely on the obviously deficient, AFFIRMED. Costs against petitioners
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 Corporate name
shares.