Title
Supreme Court
Lopez vs. Lopez
Case
G.R. No. 254957-58
Decision Date
Jun 15, 2022
Election contests over corporate meetings; unissued shares illegally voted; CA reversed, SC reinstated RTC rulings, nullifying meetings and share purchases.

Case Digest (G.R. No. 202131)
Expanded Legal Reasoning Model

Facts:

  • Proceedings in the Quezon City Regional Trial Court (RTC-QC)
    • On March 1, 2019, Lily C. Lopez (petitioner) and Ma. Christina Patricia C. Lopez (Christina) filed an election contest case against Lolito S. Lopez and several co-respondents—including Ma. Rachel Nicolette Lopez, Barbara Villas, Benedicto Villafuerte, Ma. Luisa Paras, Ruel Villacorta, Teresita C. Fernando, and i Specialist Development Corporation—docketed as Commercial Case No. R-QZN-19-03290-CV in Branch 93, a special commercial court.
    • Facts specific to i Specialist Development Corporation:
      • The corporation manages and operates a public market and leases market stalls at New Nova Plaza Market.
      • Since its incorporation in 2011, it was being run by petitioner and her husband, respondent Lolito, who also served as its president; both owned the majority of the shares.
    • Special Stockholders’ Meeting on February 14, 2019:
      • Lolito, as the president and in his capacity for i Specialist, called a special stockholders’ meeting held at Anabel’s Restaurant in Quezon City.
      • New members of the Board of Directors were elected, including Lolito himself, Ma. Rachel Nicolette Lopez, Teresita Fernando, Barbara Villas, and Benedicto Villafuerte.
      • Petitioner challenged the meeting on several grounds:
        • It was held at a venue other than the principal office as required by the by-laws.
        • The meeting’s date did not match the requirement explicitly mandated by the by-laws.
        • Christina, who claimed to be a stockholder, was prevented from attending.
        • The election also involved the use of 33,495 unissued shares whose sale was not properly authorized by any Board resolution, thereby violating petitioner’s pre-emptive right.
        • Additionally, Lolito’s exercise of his voting rights on shares described as conjugal (acquired during marriage) was contested.
    • The RTC-QC rendered a Decision on July 29, 2019, finding for petitioner and Christina by declaring the February 14, 2019, meetings and the ensuing elections null and void.
      • The court found that the sale of unissued shares was invalid because it lacked prior Board authorization as required by both the Articles of Incorporation and Section 23 of the Corporation Code.
      • Lolito’s admission that no board resolution existed further supported the decision.
      • The decision emphasized that corporate business had to be conducted by the Board, not by an individual officer acting alone.
  • Proceedings in the Marikina City Regional Trial Court (RTC-Marikina)
    • Separate election contest was filed by petitioner, Christina, and John Rusty Lito C. Lopez involving LC Lopez Resources, Inc. (LC Lopez), Conqueror International, Inc. (Conqueror), and Russ Marketing, Inc.
      • The case was docketed as SEC Case Nos. 2019-29 to 31 before Branch 273.
      • Allegations included improper notice of a stockholders’ meeting held on February 11, 2019.
    • Irregularities in the Meeting:
      • Petitioners contended they received notice signed by Lolito (in his capacity as chairman and president), yet despite sending proxies and personal attendance attempts, they were either turned away or forced to leave.
      • Testimonies indicated that although Christina and John Rusty were not recorded in the Stock and Transfer Book (STB), they appeared in the General Information Sheet (GIS) as stockholders, supported by respondent testimonies.
      • Evidence revealed that stock certificates were issued improperly:
        • The STB entries were made by Edna Victoria, an unauthorized accounting head, rather than by the corporate secretary.
        • The certificates, signed shortly before the meeting, lacked compliance with jurisprudential requisites such as full payment of par value or full subscription for no par value shares.
    • Additional aspect involved respondent Lolito’s purchase on November 26, 2018, of unissued shares in LC Lopez and Conqueror without a corresponding Board resolution.
    • RTC-Marikina rendered a Decision on September 13, 2019, finding in favor of petitioner and co-plaintiffs by declaring the special stockholders’ meeting and the subsequent board elections void due to:
      • The lack of a proper quorum, calculated based on the GIS, where only Lolito’s shares were represented.
      • The invalid issuance and voting of unissued shares without first offering them to petitioner, violating her pre-emptive right.
  • Proceedings in the Court of Appeals (CA) and Consolidation of Petitions
    • Respondents filed Petitions for Review before the CA:
      • The Quezon City case was docketed as CA-G.R. SP No. 162134.
      • The Marikina City case was docketed as CA-G.R. SP No. 162787.
    • Respondents’ Arguments:
      • They asserted that in both instances, a proper quorum had been attained.
      • They maintained that the purchase of the unissued shares, although ultra vires, was voidable and justified by the urgent need for additional capital.
      • The respondents also argued that Christina was not a valid stockholder since her name did not appear in the STB.
    • CA Decision on February 26, 2020:
      • The CA granted respondents’ petitions, reversing the RTC decisions, and declared the special stockholders’ meetings valid.
      • The ruling leaned heavily on the procedural certificate stating that service and receipt of the earlier decision were properly effected, as well as on the notion that the share purchase was merely a voidable ultra vires act.
  • Petition for Review on Certiorari Before the Supreme Court
    • Petitioner filed a petition assailing the CA ruling on both procedural and substantive grounds.
      • Procedurally, petitioner challenged the timeliness issues related to the certification and receipt of the February 26, 2020, decision.
      • Substantively, petitioner argued that:
        • Christina was indeed a stockholder, supported by evidence beyond the erroneous STB entries.
        • The unissued share purchase was invalid since it was undertaken without a necessary Board resolution, thereby nullifying the special stockholders’ meeting due to lack of quorum.
    • The case was consolidated for resolution, complete with extensive references to legal provisions and prior similar cases, such as Yap vs. Lagtapon, Lao v. Lao, and the doctrines on corporate authority and stockholder rights.

Issues:

  • Procedural Issue
    • Whether the petition in CA-G.R. SP No. 162134 was timely filed, particularly considering the certification issued by RTC-QC’s Branch 93 regarding the receipt of the decision by respondents’ counsel.
  • Substantive Issues
    • Whether Christina qualifies as a stockholder of the relevant corporations given her name’s absence from the Stock and Transfer Book versus her inclusion in the General Information Sheet and corroborated testimonies.
    • Whether respondent Lolito’s purchase and use of unissued shares—as executed without a Board resolution—was valid or void.
    • Whether the special stockholders’ meetings held by the corporations were valid, especially in light of issues concerning venue, proper notice, and attainment of a quorum.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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