Case Digest (G.R. No. 163356-57)
Facts:
Petitioners in G.R. Nos. 163356-57, Jose A. Bernas et al. (Bernas Group), were incumbent directors of Makati Sports Club (MSC) whose terms were to expire in 1998–1999. Petitioners in G.R. Nos. 163368-69, Jovencio F. Cinco, Ricardo G. Librea and Alex Y. Pardo (Cinco Group), were proclaimed elected at the Special Stockholders Meeting of 17 December 1997 called by the MSC Oversight Committee (MSCOC); the new board expelled Bernas and sold his shares, and the Bernas Group filed SEC Case No. 5840 contesting the meeting as improperly called.
The SICD nullified the December 1997 meeting and related acts; the SEC en banc reversed; the Court of Appeals held the December 1997 meeting invalid but sustained most actions of the subsequent annual meetings (20 April 1998, 19 April 1999, 17 April 2000); both sides sought review before the Supreme Court.
Issues:
- Did the Court of Appeals err in ruling that the 17 December 1997 Special Stockholders Meeting was invalid?
- Did the Court of Appeals err in failing to nullify the Annual Stockholders Meetings of 20 April 1998, 19 April 1999 and 17 April 2000?
Ruling:
The Supreme Court affirmed the Court of Appeals. It ruled that the 17 December 1997 Special Stockholders Meeting called by the MSCOC was invalid and produced no legal effect; the removal of the Bernas Group, the expulsion of Jose A. Bernas and the public sale of his shares were void. The Court nevertheless upheld the validity of the annual meetings of April 1998, April 1999 (held under SEC supervision) and April 2000, except insofar as those meetings purported to ratify the void acts originating from the December 1997 meeting; the consolidated petitions were denied.
Ratio:
The Court applied Section 28, Corporation Code and the MSC by-laws to hold that only the persons authorized therein (president, board or secretary on proper demand) could call a special meeting for removal of directors, and the MSCOC had no such authority; acts performed at a meeting called by unauthorized persons are void ab initio and cannot be validated by later ratification. The SEC’s power under Section 50, Corporation Code to compel the calling of meetings does not retroactively cure or validate acts that were void from the outset. The Court also found the de facto officership doctrine inapplicable to validate removals and punitive acts effected by persons whose election was void, while recognizing that SEC-supervised annual meetings give rise to the presumption of regularity for other corporate acts.
Doctrine:
- Section 28, Corporation Code governs the procedure to call a special meeting to remove directors and such procedure is mandatory.
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