won vs wackwack

doctrine: law does not prescribe a period within which the registration
should be effected, the action to enforce the right does not accrue until
there has been a demand and a refusal concerning the transfer.
facts: Wack wack gold a non-stock corporation issued to teruyama membership
certificate which was assigned to M.T. Reyes. Such certificate was transferred to
Lee Won. After the war an action was filed to register in its book the assignment in
favor of Lee Won and to issue a new certificate. WackWack's defense is that it
was beyond the 5 year period fixed by the civil code. The certificate in question
contains a condition to the effect that no assignment thereof shall be effective
with respect to the club until such assignment is registered in the books of the
club, as provided in the By-Laws. CFI dismissed the complaint
issue: WON the plaintiff was bound, under said condition and By-Laws of the
defendant or any statutory rule for that matter, to present and register the
certificate assigned to him in 1944 within any definite or fixed period
ruling: The existence of a right is one thing, and the duration of said right is
another.
On the other hand, it is stated in the appealed order of dismissal that
the plaintiff sought to register the assignment on April 13, 1955; whereas in
plaintiffs brief it is alleged that it was only in February, 1955, when the defendant
refused to recognize the plaintiff. If, as already observed, there is no fixed
period for registering an assignment, how can the complaint be considered as
already barred by the Statute of Limitations when it was filed on April 26, 1955, or
barely a few days (according to the lower court) and two months (according to the
plaintiff), after the demand for registration and its denial by the defendant.
Plaintiffs right was violated only sometime in 1955, and it could not accordingly
have asserted any cause of action against the defendant before that.

WON the provisions of preferential right in by-laws may be used as a defense to

deny registration?
Held: NO
By-laws = not inconsistent with any existing law for the transferring of its
stock

The holder of shares, as owner of personal property, is at liberty to

dispose of them in favor of whomsoever he pleases

without any other limitation than the general provisions of law

Rule = Corporation Code contemplates no restriction as to whom

they may be transferred or sold

by-law cannot
a)
operate to defeat his rights as a purchaser who obtained
them in good faith and for a valuable consideration
b)
justify an unreasonable restriction upon the right to sell

PADGETT vs BABCOCK & TEMPLETON, INC.

Padgett = Babcock & Templation Inc

= bought 35 shares P100 and 9 shares from Christmas bonus ( 100
par )
12 certificates were issued word "nontransferable"
Before leaving the corporation = proposed
1.
to buy his 44 shares at par value plus the interest
2.
he be authorized to sell them to other
the president offered to buy @ 85. Refused to sell
ISSUE:
W/N the shares are transferable despite the restriction appearing therein?

The defendant seems to believe that the plaintiff was compelled

immediately to register his assignment. Any such compulsion is obviously for the
benefit of the plaintiff, because it is only after registration that the transfer would
be binding against the defendant. But we are not here concerned with a situation
where the plaintiff claims anything against the defendant allegedly accruing under
the outstanding certificate in question between the date of the assignment to the
plaintiff and the date of the latters demand for registration and issuance of a new
certificate.

Held: YES
word "nontransferable" appearing on the 12 certificates = Null and Viod

GR: SH may dispose of them as he sees fit

Exception:
1.
the corporation has been dissolved
2.
the right to do so is properly restricted
3.
owner's privilege of disposing of his shares has been
hampered by his own action

LAMBERT vs FOX
Creditors of John R. Edgar & Co decided to take over the business =
INCOPORATE = Accept stocks in payment

In the absence of a similar contractual obligation and of a legal provision

applicable thereto, it is logical to conclude that it would be unjust and
unreasonable to compel the said defendants to comply with a non-existent or
imaginary obligation

Lambert and Fox became two largest stockholders = Agreement not to sell shares
w/in 1 year

SANTAMARIA vs THE HONGKONG AND SHANGHAI

Despite this Fox sold his stocks 9 months after = Lambert Protested
Trial court decided the case in favor of the Fox. Hence appeal
Issue:
WON suspending the power to sell the stock = illegal stipulation / restraint of trade
w/c violates public policy?
Held: NO
There is valid suspension of the right to sell stock in a corporation when
1.
has a beneficial purpose
2.
results in the protection of the corporation as well as of the individual
parties to the contract
3.
reasonable as to the length of time of the suspension

Santa Maria bought shares of Batangas Minerals ( broker = Woo )

Santa Maria received = stock certificates in the name of Woo and indorsed in
blank by the firm.
Santamaria bought shares of Crown Mines, Inc. ( broker = R.J. Campos & Co. )
** Sta Maria gave her shares in Batangas Minerals = as security
** Still in the name of Woo
Rj Campos was ordered by SEC to discontinue transacting business AND
Batangas Minerals stock was pledged to HSBC
HSBC sent the certificate to Batangas Minerals, Inc. for registration = WAS
REGISTERED

FLEISCHER vs BOTICA NOLASCO

Hence, this civil action

Gonzales requested Botica Nolasco = effect of transferred to Fleischer's name

Issue:
WON the Bank was obligated to inquire who was the real owner of the shares
represented by the certificate of stock?

It was registered to the name of BOTICA ( has preferential right to buy the
shares )
Fleischer = demanded that the stocks should be registered in his name
Filed Mandamus
Boticas Defense:
article 12 of its by-laws: it had preferential right to buy the shares
Trial court ordered Botica to register. Hence appeal
Issue:

Held: NO
The Bank was not obligated to look beyond the certificate to ascertain the
ownership of the stock

This certificate is what it is known as = street certificate

it is a well-known practice that a certificate of stock, indorsed in blank,

is deemed quasi negotiable

ERGO = transferee thereof is justified in believing that it belongs to

the holder and transferor
A bona fide pledgee or transferee of a stock from the apparent owner is not
chargeable with knowledge of the limitations placed on it by the real owner, or of
any secret agreement relating to the use which might be made of the stock by the
holder.

De Los Santos vs Republic

Gokongwei vs. SEC

De los Santos ALLEGES that he acquired 1.6 million shares of the Lepanto
Consolidated FROM Juan Campos and Carl Hess

Gokongwei = filed w/ SEC declaration of nullity of amended by-laws

Injunction against the majority of the members of
the BOD of San Miguel

shares are registered in the name of Vicente Madrigal in the books of the
corporation
AFTER the WAR = property was sequestered being classified as Japanese
Property
Attorney General argues that:
1.
shares were bought by Madrigal in trust for Mitsuis ( Japanese
corp )
2.
Madrigal delivered to Mitsuis with his blank indorsement on it
3.
The said shares were never sold and were most probably lost or
stolen during liberation
Issue:
WON the contested certificates of stock could be transferred to De Los Santos?
Held: NO
RULE = if the owner of the certificate has indorsed it in blank + stolen from
him = no title is acquired by an innocent purchaser for value

Madrigal never disposed of the said shares except by

delivery to Mitsuis

Managers of Mitsui = also did not disposed of the

properties

evidence of a receipt of the alleged purchase by De Los

Santos from Campos and Hess ( Not Registered
owners ) was lost in fire
Supplementary Notes

Shares of stock are personal property and may be transferred by

endorsement of the corresponding stock certificate, coupled with its
delivery.

Certificates are mere evidence. Just because you hold it does not
automatically translate into you being a stockholder. Stock and
transfer book as the best evidence to determine who the real
stockholder is.
CASE AT BAR
: The one who claims to be the owner of the shares of stock as evidenced by
certificate of stock has the burden of proving that he acquired it from the
registered owner thereof or his duly appointed representatives.

GAMBOA vs VICTORIANO

Contentions
1.
Soriano, Jr. et al amended by bylaws of the corporation, basing their
authority to do so on a resolution of the stockholders adopted on

section 22 of the Corporation Law

Power to Amend may be delegated to the BOD ONLY by = vote

of 2/3 SH

Computation of 2/3 = on the basis of the capitalization at the

time of the amendment

contended that the Board acted without authority and in

usurpation of the power of the stockholders

the authority granted in 1961 had already been exercised in

1962 and 1963, after which the authority of the Board ceased to
exist

the membership of the Board of Directors had changed since

the authority was given in 1961, there being 6 new directors
2.

prior to the questioned amendment = Gokogwei had all the qualifications

to be a director of the corporation = being a substantial stockholder
thereof

Gokongwei had acquired rights inherent in stock ownership

rights to vote and to be voted upon in the election of directors

Soriano, et purposely provided for Gokongwei's disqualification

and deprived him of his vested right as afore-mentioned

3.

corporations have no inherent power to disqualify a stockholder from being

elected as a director = THEREFORE questioned act is ultra vires and void

Soriano, Jr. while representing other corporations entered into

management contracts with San Miguel

WRONG = questioned amendment gave the Board itself

the prerogative of determining whether they or other
persons are engaged in competitive or antagonistic
business

portion of the amended by-laws which states that in

determining whether or not a person is engaged in competitive
business, the Board may consider such factors as business
and family relationship, is unreasonable and oppressive and,
therefore, void

4.

the corporation has been investing corporate funds in other corporations

and businesses outside of the primary purpose clause of the corporation

Issue:
1.
2.

Lopue et al = bought shares of stock of the Inocentes de la Rama, Inc.

3.

To prevent the acquisition = Gamboa et al passed a resolution authorizing the

sale of those unissued shares to them
Lopue filed a complaint contending that:

the sale of the unissued shares was in violation of the plaintiffs'

and pre-emptive rights and made without the approval of the
board of directors representing 2/3 of the outstanding capital
stock

4.

Held:
1.

YES. A corporation may prescribe in its by-laws "the

qualifications, duties and compensation of directors, officers and
employees." -- Corporation Law

RULE = Any person "who buys stock in a corporation

does so with the knowledge that its affairs are
dominated by a majority of the stockholders and that
he impliedly contracts that the will of the majority
shall govern in all matters within the limits of the act of
incorporation and lawfully enacted by-laws and not
forbidden by law."

SH = parted with his personal right or privilege to regulate

his investment to the will of the majority of his fellow
incorporators

the owners of the majority of the subscribed capital stock

may amend or repeal any by-law or adopt new by-laws

Gokongwei has NO VESTED RIGHT to be elected director

= By-laws is SUBJECT TO CHANGE

2.

YES. "they occupy a fiduciary relation, and in this sense the

relation is one of trust."

Directors = agents entrusted with the management of the

corporation for the collective benefit of the stockholders

He who is in such fiduciary position cannot serve himself

first and his cestuis second.

Gamboa motioned to dismiss the case contending that:

1.
court has no jurisdiction to interfere with the management of the
corporation by the board of directors
2.
the enactment of a resolution was purely a management concern
which the courts could not interfere with
Trial Court denied the motion
Issue:
WON trial court has jurisdiction on matters affecting the management of the
corporation?
Held: YES
GR = courts cannot undertake to control the discretion of the board of
directors about administrative matters as to which they have legitimate
power of, action and contracts intra vires entered into by the board of
directors are binding upon the corporation and courts will not interfere
Exception: contracts are so unconscionable and oppressive as to amount
to a wanton destruction of the rights of the minority

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

doctrine of "corporate opportunity" = the fiduciary

standards could not be upheld where the fiduciary
was acting for two entities with competing interests.
** based fundamentally on the unfairness officer or
director taking advantage of an opportunity
for his own personal profit when the interest
of the corporation justly calls for protection
Amendment = obviously to prevent the creation of an
opportunity for an officer of a competing corporation from
taking advantage of the information which he acquires as
director to promote his individual or corporate interests

3.

NO. This right is predicated upon the necessity of self-protection.

where the right is granted by statute to the stockholder = it

is given to him with respect to his interest as a stockholder

has to be proper and lawful in character and not

inimical to the interest of the corporation

4.

NO. If the investment is made in pursuance of the corporate

purpose, it does not need the approval of the stockholders.

the purchase of beer manufacturing facilities by SMC was

an investment in the same business stated as its main
purpose in its Articles of Incorporation

Purpose = manufacture and market beer

Assuming arguendo No authority = there is no question

that a corporation, like an individual, may ratify and
thereby render binding upon it the originally
unauthorized acts of its officers or other agents.

This is true because the questioned investment is neither

contrary to law, morals, public order or public policy.

The mere fact that the corporation submitted the

assailed investment to the stockholders for
ratification at the annual meeting cannot be construed
as an admission that the corporation had committed
an ultra vires act

ISLAMIC DIRECTORATE OF THE PHILIPPINES vs COURT OF APPEALS

IDP-Tamano Group alleges = Islamic leaders of all Muslim major tribal groups
organized and incorporated the ISLAMIC DIRECTORATE OF THE PHILIPPINES
(IDP)
Libyan government donated money to the IDP to purchase land
After the purchase = Martial Law was declared
Two Muslim groups sprung = Carpizo Group and Abbas Group claiming to be the
legitimate IDP
SEC declaring the election of both the Carpizo Group and the Abbas Group as
IDP board members to be null and void
** ORDERED = to prepare and adopt their by-laws for submission to the
Commission.
Neither group took the necessary steps prescribed by the SEC

2.

NO CONSENT = hence void and produces no effect

whatsoever.

Carpizo Group-INC sale is further deemed null and void ab initio

because of the Carpizo Group's failure to comply with Section 40 of
the Corporation Code

Tandang Sora property = constitutes the only property of

the IDP

Falls w/in the sale or disposition of all the corporate

property

Requires: ( Both not Met)

1.
majority vote of the legitimate Board
2.
concurred in by the vote of at least 2/3 of
the bona fide members of the corporation

RAMIREZ VS ORIENTALIST (must act as a body)

Orientalist company = in charge of maintaining a theatre in manila.

= authorized to manufacture all accessories necessary for
conducting such a business.
Ramirez a french resident was engaged in production, distribution of
cinematographic material he was represented by his son in manila.
Orientalist Contracted w/ Ramirez for an exclusive distribution of their films
FERNANDEZ ( officer and treasurer ) was active on the deal = They agreed to
show such films
Orientalist has no funds to meet the obligations = HENCE sued by ramirez.
Trial court ruled out that orientalist company is principal debtor while fernandez is
subsidary liable as guarantor.
Issue :
WON orientalist co. liable for acts of treasurer?
Ruling: YES ,
Fernandez was the particular officer and member of the board of directors who
was most active in the effort to secure the films for the corporation.

The negotiations were conducted by him with the knowledge and

consent of other members of the board

contract was made with their prior approval

RULE = If contract was approved by the BOD and that the company is
bound unless the subsequent failure of the stockholders to approve
said contracts had the effect of abrogating the liability thus created.
FERNANDEZ is liable = intended to be that of a guarantor

have us believe that his name was signed as a guaranty that the
contract would be approved by the corporation
BOARD OF LIQUIDATORS VS KALAW,ESTATE
Maximo Kalaw = GM and Chairman of NACOCO
4 typhoons that hit the country = NACOCO was unable to fulfill its obligations

STILL Carpizo Group caused to be signed an alleged Board Resolution =

authorizing the sale of the subject two parcels of land to INC

Louis Dreyfus ltd = filed a suit against NACOCO

IDP Board of Trustees filed a petition before the SEC seeking to declare the sale
Null and Void

NACOCOC was subsequently abolished by EO 372 = giving the Board of

Liquidators the function of settling and closing its affairs

INC filed an action for Specific Performance against Carpizo Group

BOL now seeks to recover from GM Kalaw and the other two directors = Grounds:
1.
Negligence for having approved and entered into the aforementioned
unprofitable contracts
2.
by-laws required prior approval of the board
3.
Kalaw entered into the contracts alone as general manager and without
the boards prior approval

During pendency of SEC Case = Trial court ordered IDP-Carpizo Group to comply
with its obligation
SEC ruled that since there was NO BOD the resolution of sale was Null and
void
INC appealed to CA = set aside the ruling made. Hence IDP-Tamano Group
petitioned for certiorari
Issue:
WON CA erred in setting aside SECs ruling?
Held: YES
1.
all acts carried out by the Carpizo Board = have to be struck down for
having been done without the consent of the IDP thru a legitimate
Board of Trustees

consent is essential for the existence of a contract

the IDP, owner of the subject parcels of land, never gave its
consent, thru a legitimate Board of Trustees

Issue:
WON Kalaw and the rest of the board were guilty negligence and bad faith and/or
breach of trustfor having entered into the unprofitable contracts?
Held: NO
Kalaws acts were valid corporate acts.

GR: laws required that a general manager first procure approval

of the board members beforeentering into contracts that would
bind the corporation
Exception: contrary practice ratified by the Board

Evidence = it was the practice of the corporation to allow its general

manager to negotiate contracts

copra trading for and in NACOCOs behalf = without prior board

approval


Supplementary Notes:

It is possible for an express provision of the by-laws to be violated and

the Board may, incertain corporate actions, bind the corporation in
spite of the fact that it is contrary to the by-law provision

There are 2 ways by which corporate actions may come about

through its Board of Directors:
a)
The board may empower or authorize the act or contract
b)
Ratification from the board

As long as there is approval by the board, express or implied, it is

valid to bind the corporation.

ACUA vs BATAC PRODUCERS

2.

Acuna was assured that there need not be any board approval for his
constitution as agent for it would only be a mere formality.

Benguet Company has committed no civil wrong against the plaintiffs

directors of the Balatoc Company and Harden = active

inducers of the commission of that wrong

The contract IS unlawful in fact = has been performed on

both sides

NOTE:

Though the arrangement of the mining companies is prohibited by law, the

shareholders cannot maintain an action to annul the contract by which such
prohibited interest was acquired

Even where corporate contracts are illegal per se, when only public or
government policy is at stake and no private wrong is committed, the courts
will leave the parties as they are in accordance with their original contractual
expectations.

The only contracts that the courts will touch are contracts which are
void for being illegal per se.

Acuna entered into an agreement with Verano, manager of PROCOMA,

Acuna would be constituted as the PROCOMAs agent = diligently went about his
business and even used personal funds for the benefit of the corporation

THEREFORE Until thus assailed in a direct proceeding,

the contract by which the interest was acquired will be
treated as valid as between the parties

PRICE VS MARTIN

Later on, the board disapproved the agency and did not pay him.
Issue:
WON Acunas acts are binding to PROCOMA?
Held: YES
The SC ruled that the agreement was valid due to the ratification of the corp.
proven by these acts:
1.
He was assured by the board that no board approval was necessary.
2.
He delivered P 20,000, performed his work with the knowledge of the
board.
3.
Due to acquiescence, the board cannot disown or disapprove the
contract.

FRED M. HARDEN vs BENGUET CONSOLIDATED MINING COMPANY

Benguet Consolidated Mining and Balatoc Mining Co. = organized for the purpose
of engaging in the mining of gold in the Philippines

Sulu corporation filed a case = to dissolve a mortgage executed by it in favor of

agusan coco company.
Principal contentions of price
1.
at the stockholders' meeting = Officers were elected and mortgage
was approved
2.
97 shares of stock of the Sulu Development Company voted by the
proxy of Mrs. Worcester
3.
HE WAS THE OWNER OF THE SAID SHARES
Issue:
WON Price may dissolve the mortgage executed?
Held: NO
Until challenged in a proper proceeding = a stockholder according to the books of
the company has a right to participate in that meeting

in the absence of fraud = the action of the stockholders' meeting

cannot be collaterally attacked on account of such participation

As to whether the stock was rightfully the property of Martin = that is a

question for the courts and for a stockholder's meeting

Balatoc were unable to supply the means for profitable operation = board ordered
a suspension of all work

"A person who has purchased stock, and who desires to be recognized as a
stockholder, for the purpose of voting, must secure such a standing by having the
transfer recorder upon the books. If the transfer is not duly made upon
request, he has, as his remedy, to compel it to be made."

Balatoc called for a meeting = to establish a committee to find investors

( APPROVED BY SH )

RAMON DE LA RAMA vs MA-AO SUGAR CENTRAL CO

The said committee = approached Bean ( Pres and GM of Benguet )

= to secure the necessary capital for the development of
the Balatoc properties
Benguet and Balatoc = executed a contract which provides that:
1.
Benguet was to Construc a milling plant AND Erect a power plant
2.
Benguet would receive 600k shares of Balatoc
Benguet began to perform his side of the contract = Business and Stock valuation
flourished
When success of the development had become apparent = Harden filed a suit
against Benguet to annul the certificate issued to them
*** Contending that = it is unlawful for the Benguet Company to hold any interest
in a mining corporation
The trial court dismissed the complaint, Hence this petition.
Issue:
WON it is unlawful for Benguet to hold any interest in another mining corporation?
Held: YES
1.
section 75 of the Act Congress of July 1, 1902 prohibits any such
member of a mining corporation to hold more than 15% outstanding
capital stock of another mining corporation

SEC. 190 (A) of the Corporation Law states that = If the

violation is committed by a corporation = corporation shall
be dissolved by quo warranto proceedings

enforced only by a criminal prosecution or by an action of

quo warranto

Derivative suit = by minority stockholders against the Ma-ao Sugar Central Co.,
Inc and its officers namely Araneta
= illegal and ultra-vires acts consisting of unauthorized
investments
Lower Court rendered its Decision = ordered to refrain from making investments
to company whose purpose is not connected with the Sugar Central business
= BUT UPHELD THE
INVESTMENT MADE IN Philippine Fiber
Reason: Ma-ao was engaged in the manufacture of sugar bags = perfectly
legitimate to invest in another corporation engaged in said manufacture
Hence Appeal = Grounds:
** There should be authorized by two-thirds of the voting power of the
stockholders
Issue:
WON the investments made were valid?
Held: NO
The Law should be understood to mean = that it is prohibited to the Corporation to
invest in shares of another corporation unless such an investment is
authorized by two-thirds of the voting power of the stockholders IF the
purpose of the corporation in which investment is made is foreign to the purpose
of the investing corporation
BUT IF the investment is made in a corporation whose business is important to
the investing corporation and would aid it in its purpose = to require authority of
the stockholders would be to unduly curtail the Power of the Board of
Directors

Such an act, if done in pursuance of the corporate purpose, does not need the
approval of the stockholders; but when the purchase of shares of another
corporation is done solely for investment and not to accomplish the purpose of its
incorporation, the vote of approval of the stockholders is necessary.
Gokongwei vs. SEC
NO. If the investment is made in pursuance of the corporate purpose, it
does not need the approval of the stockholders.

the purchase of beer manufacturing facilities by SMC was

an investment in the same business stated as its main
purpose in its Articles of Incorporation

Purpose = manufacture and market beer

Assuming arguendo No authority = there is no question

that a corporation, like an individual, may ratify and
thereby render binding upon it the originally
unauthorized acts of its officers or other agents.

This is true because the questioned investment is neither

contrary to law, morals, public order or public policy.

The mere fact that the corporation submitted the

assailed investment to the stockholders for
ratification at the annual meeting cannot be construed
as an admission that the corporation had committed
an ultra vires act

Sacoba Manufacturing Corp filed a third party complaint against ALFA and Lee
and Lacdao
Lee contested that:
1.
they ceased to be officers and directors of ALFA, hence, they could no
longer receive summons or any court processes for or on behalf of
ALFA
2.
DBP was the proper party to be called for
issue:
1.
2.
3.
Held:
1.

YES. DBP has taken over full control and management of the firm

Lee and Lacdao already disposed of all their shares

ceased to own at least one share standing as required

under Section 23 of the new Corporation Code =
HENCE ceased to be directors

The transfer of shares from the stockholders of ALFA to

the DBP is the essence of the subject voting trust
agreement

2.

NO. The duration of the agreement is contingent upon the

fulfillment of certain obligations of ALFA with the DBP Hence Not
yet Lapsed.

the five-year period of the voting trust agreement expired

in 1986 = DBP would not have transferred an its rights

Due to the Asset Privatization Trust (APT)

stated that the DBP from 1987 until 1989, had handled
accounts which included ALFA's assets pursuant to a
management agreement by and between the DBP and
APT

voting trust agreement in question was not yet terminated

3.

NO. Corporation Law that a corporation has a personality

separate and distinct from the officers or members who compose
it.

Rules of Court enumerates the representatives of a

corporation who can validly receive court processes on its
behalf

Lee and Lacdao do not fall under any of the enumerated

officers

Therefore service of summons through Lee and Lacdao,

therefore, is not valid

Lunuza vs CA
doctrine : outstanding capital stock is the totality of all shares, AOI is the
charter of corporation and the contractual relationship between state and
corporation, SH to state , and corpo and SH
PMMSI was incorporated with 700 founders share and 76 common shares
BUT only 33 common shares was reflected in their AOI = registered as
outstanding share of PMMSI
A meeting was called for and it was held as constituting quorum with only
27 common shares representing more than 2/3 of common shares issued
and outstanding
Acayan filed for property registration having 120 founders share and 12 common
shares = It was granted by the SEC
election of new officers = onrubia questioned its validity = Grounds:
** should not be based on the 165 issued and outstanding shares in the transfer
book but on the 776 shares stated in the AOI.
Issue:
WON the basis for determining quorum and outstanding capital be the stock
corporation transfer book or the AOI?
Held: The AOI
because it is binding not just to the stockholders but also to the state

stock transfer book = a record of the company THEREFORE is not

binding to the public

quorum in meeting provided for by the code is the stockholders

representing majority of the outstanding capital stock .

outstanding capital stock = means the total shares of stock issued to

subscribers or stockholders whether or not fully or partially paid (as
long as there is binding subscription agreement) except treasury
shares.
Additional notes:

WON the execution of the voting trust agreement and transferring all
their shares to the trustees deprives the stockholder of their positions
as directors of the Corp?
WON the lapsed voting trust agreement ipso facto reverted the legal
title to the stocks o Lee and Lacdao?
WON proper service of summons on ALFA through Lee and Lacdao
binding?

Supplementary Notes

what is a 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.
NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION vs AQUINO

what is AOI?
-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.
-Contents are binding, not only on the corporation, but also on its shareholders.

Batjak was indebted to some private banks and to the Philippine National Bank
(PNB)
** security = mortgage (3) coco-processing oil mills

What Is stock transfer book?

-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
-Not public record, and thus is not exclusive evidence of the matters and things
which ordinarily are or should be written therein

Aaccepted by Batjak

Lee vs. CA
International Corporate Bank = filed complainant for sum of money against
Sacoba Manufacturing Corp

Requested for another financial assistance w/ PNB = Among those conditions is

** voting trust agreement for five (5) years over 60% of the outstanding paid up
and subscribed shares shall be executed by your stockholders in favor
of NIDC

Due to insolvency of Batjak = PNB AND NIDC instituted extrajudicial foreclosure

proceedings against the oil mills of Batjak
Batjak requested NIDC to return their assets since NIDC was no longer interested
in renewing the Voting Trust Agreement
NIDC = no intention to comply with the demands of Batjak.
Hence filed a case. Contentions:

1.
2.

NIDC was constituted trustee of the assets operations and

management of Batjak
Hence upon expiration of the VTC = NIDC should relinquish possession
of the Oil Mills to Batjak

Issue:
WON NIDC should return the asset since they do not want to continue the VTA?
Held: NO
A voting trust transfers only voting or other rights pertaining to the shares
subject of the agreement, or control over the stock

Under their VTA (termination clause) = what are to be returned to

Batjak are only the certificates of stock representing 60% shareholding
subject of the VTA

nowehere in said VTA does it appear that properties were ceded to

NIDC

That PNB/NIDC ended up in possession of the mills isbecause of

its capacity as foreclosing creditor andnot as trustee per the VTA