G.R. No.

189486 September 5, 2012

SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF THE LATE GRACE G.
CHEU, Petitioners,
vs.
GILBERT G. GUY, Respondent.

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G.R. No. 189699

SIMNY G. GUY, GERALDINE G. GUY, GLADYS G. YAO, and the HEIRS OF THE LATE GRACE G.
CHEU, Petitioners,
vs.
THE HON. OFELIA C. CALO, in her capacity as Presiding Judge of the RTC -Mandaluyong City - Branch 211
and GILBERT G. GUY, Respondents.

FACTS
Goodland Company Inc. (GCI) is a family-owned corporation of the Guy family duly created and existing
under Philippine laws. Petitioner Simny G. Guy (Simny) is a stockholder of record and a member of the BOD of
the corporation. Respondents are also GCI stockholders of record who were allegedly elected as new directors
by virtue of the assailed special stockholders’ meeting held on 7 September 2004. On September 22, 2004, or
15 days after the said meeting, the Simny received the notice about the said hearing. On September 30, 2004,
Simny, for himself and on behalf of GCI and Grace Cheu (Cheu), filed a Complaint against respondents before
the RTC of Manila for the Nullification of the said Meeting and Election of Directors with a prayer for TRO and/or
WPI. Simny avered that there was no previous notice to him and Cheu, that the meeting was not called by the
proper person and that the notices were not issued by the person who had legal authority to do so. Respondent
Gilbert Guy (Gilbert) argued that the meeting was legally called and held, that the notice of meeting was signed
by an authorized officer (him, as Vice President) and sent in accordance with the bylaws, and that Cheu was not
a stockholder of record. The RTC dismissed the complaint. The CA affirmed in toto the RTC ruling. Hence the
petition before the SC.

ISSUE
Whether the assailed special stockholder’s meeting was void.

RULING
No. Notice of the stockholders’ meeting was properly sent in compliance with law and the by-laws of the
corporation. For a stockholders' special meeting to be valid, certain requirements must be met with respect to
notice, quorum and place. In relation to Section 50 of B.P. 68, one of the requirements is a previous written
notice sent to all stockholders at least one (1) week prior to the scheduled meeting, unless otherwise provided
in the by-laws. Under the by-laws, the notice shall be mailed not less than five (5) days prior to the date set for
the special meeting. The requirements under the bylaws were met when Gilbert Guy caused for the mailing of
the notice on September 2, 2004 calling for the assailed special stockholder’s meeting. Since the bylaws were
clear that only mailing was required, the courts must apply the law and must not add an additional requirement
of actual receipt of the notice prior to the date of meeting. It was proven that notice to Simny was sent on Sept.
2, 2004 (5 days prior to the meeting).

The claim that the notice suffered fatal defects as it was not called by the proper person was also without
merit. Under the by-laws, special meetings may be called by order of the President and must be called upon the
request of stockholders representing (1/3) of the outstanding stock provided that the VP, if qualified shall exercise
all the functions of the president in absence or disability of the latter. It was not disputed that the President
suffered Alzheimer’s; that Gilbert was the VP; and that he represented 79.99% (more than 1/3) of the outstanding
stock of GCI. Thus, the requirements under the bylaws were met. The requirement that the VP be qualified must
be construed to mean that he must not be disqualified under the Corpo Code. The records do show that 1, he is
a stockholder, and 2, he is neither also Secretary nor Treasurer. Hence, he is qualified to act as President.

Cheu was not a stockholder of record and therefore not entitled to any notice of meeting. Cheu alleged
that she was considered a stockholder of record for being in possession of stock certificate of Paulino and
Benjamin. As a rule, however, a person who desires to be recognized as a stockholder for the prupose of
exercising stockholders’ right must secure standing by having his ownership of share recorded on the stock and
transfer book. Thus, only those whose ownership of shares are duly registered in the stock and transfer book
are considered stockholders of record and are entitled to all rights of a stockholder. The requirements for transfer,
not having been met, Cheu is not a stockholder of record, and thus not entitled to notice.

Suits by stockholders or members of a corporation based on wrongful or fraudulent acts of directors or other
persons may be classified into individual suits, class suits, and derivative suits.30

An individual suit may be instituted by a stockholder against another stockholder for wrongs committed against him
personally, and to determine their individual rights31 – this is an individual suit between stockholders. But an
individual suit may also be instituted against a corporation, the same having a separate juridical personality, which
by its own may be sued. It is of course, essential that the suing stockholder has a cause of action against the
corporation.32

Individual suits against another stockholder or against a corporation are remedies which an aggrieved stockholder
may avail of and which are recognized in our jurisdiction as embedded in the Interim Rules on Intra-Corporate
Controversy. Together with this right is the parallel obligation of a party to comply with the compulsory joinder of
indispensable parties whether they may be stockholders or the corporation itself.

The absence of an indispensable party in a case renders all subsequent actions of the court null and
void for want of authority to act, not only as to the absent parties but even as to those present.

FRAUDULENT ACTS

Failure to specifically allege the fraudulent acts in intra-corporate controversies is indicative of a

harassment or nuisance suit and may be dismissed motu proprio.

In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for
dismissal since such a defect can be cured by a bill of particulars.52 Thus:

Failure to allege fraud or mistake with as much particularity as is desirable is not fatal if the general purport
of the claim or defense is clear, since all pleadings should be so construed as to do substantial justice. Doubt as to
the meaning of the pleading may be resolved by seeking a bill of particulars.

A bill of particulars may be ordered as to a defense of fraud or mistake if the circumstances constituting
fraud or mistake are not stated with the particularity required by the rule.

Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will bring the case
within the special commercial court’s jurisdiction. To fall within this jurisdiction, there must be sufficient nexus showing
that the corporation’s nature, structure, or powers were used to facilitate the fraudulent device or scheme.

STOCK CERTIFICATE

When a stock certificate is endorsed in blank by the owner thereof, it constitutes what is termed as
"street certificate," so that upon its face, the holder is entitled to demand its transfer his name from the
issuing corporation.
With Gilbert’s failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI report, this Court
pronounces, as a consequence thereof, that the signatures appearing on the stock certificates, including his blank
endorsement thereon were authentic. With the stock certificates having been endorsed in blank by Gilbert, which he
himself delivered to his parents, the same can be cancelled and transferred in the names of herein petitioners.

In Santamaria v. Hongkong and Shanghai Banking Corp.,61 this Court held that when a stock certificate is endorsed
in blank by the owner thereof, it constitutes what is termed as "street certificate," so that upon its face, the holder is
entitled to demand its transfer into his name from the issuing corporation. Such certificate is deemed quasi-
negotiable, and as such the transferee thereof is justified in believing that it belongs to the holder and transferor. 1âw phi 1

Both Lincoln Continental and Gilbert claim that the latter holds legal title to the shares in question. But record
shows that there is no evidence to support their claim. Rather, the evidence on record clearly indicates that the
stock certificates representing the contested shares are in respondents' possession. Significantly, there is no proof
to support his allegation that the transfer of the shares of stock to respondent sisters is fraudulent. As aptly held by
the Court of Appeals, fraud is never presumed but must be established by clear and convincing evidence. Gilbert
failed to discharge this burden. We agree with the Court of Appeals that respondent sisters own the shares of
stocks, Gilbert being their mere trustee.

WHEREFORE, premises considered, the petitions in G.R. Nos. 189486 and 189699 are hereby GRANTED.
The Decision dated 27 May 2009 of the Court of Appeals and its Resolution dated 03 September 2009
are REVERSED and SET ASIDE. The Court DECLARES that SEC-MC08-112 now pending before the Regional
Trial Court, Branch 211, Mandaluyong City, is a nuisance suit and hereby ORDERS it to IMMEDIATELY
DISMISS the same for reasons discussed herein.

SO ORDERED.