G.R. No. 131394 - Lanuza vs. Court of Appeals

In 1952, Philippine Merchant Marine School, Inc. (PMMSI) was incorporated under Act No. 1459 with an authorized capital of ₱90,000 divided into:

Only ₱21,600 (21.6% of authorized) was actually subscribed: 700 founders’ shares and 76 common shares, as reflected in the articles of incorporation.

In 1978, the company first registered its stock and transfer book, showing only 33 common shares issued and outstanding.
In 1979, a special stockholders’ meeting was held on the basis of a quorum of 27 common shares (2/3 of 33).

In 1982, heirs of incorporator Juan Acayan petitioned the SEC to recognize their rights over 120 founders’ shares and 12 common shares. The SEC Hearing Officer and En Banc affirmed their entitlement and ordered their shares recorded in the stock and transfer book.
On 6 May 1992, a special meeting to elect new directors was convened. Private respondents challenged its validity, arguing quorum should be based on the 776 shares in the articles, not the 165 reflected in the stock book. The SEC En Banc agreed, directing a new meeting on the basis of the articles.
Petitioners and other stockholders filed consolidated petitions for review with the Court of Appeals, contending the quorum basis should remain the stock and transfer book entries, not the articles. The CA affirmed the SEC’s order and denied motions for reconsideration.
Petitioners brought the case to the Supreme Court, which considered also respondents’ plea of res judicata and forum-shopping.

Whether the basis for determining quorum at PMMSI stockholders’ meetings is the outstanding capital stock as indicated in the original articles of incorporation (776 shares) or the shares recorded in the company’s stock and transfer book (initially 33, later 165 shares).
Whether the Court of Appeals committed reversible error in applying the SEC’s “Espejo Decision” to include unregistered incorporators’ shares in favor of private respondents.