Case Summary (G.R. No. 223321)
Key Dates
• October 7, 1966 – Marsal’s organization and initial capitalization.
• June 1, 1982 – Shareholdings recorded.
• September 19, 1989 – Death of Teresita F. Menchavez.
• 1992–1995 – Probate proceedings on Teresita’s estate; Compromise Agreement and Deed of Assignment transferring her 3,464 Marsal shares to Rogelio.
• October 3, 1990 – Death of Marcelino M. Florete, Sr.; probate and partition approved in May 1995 noting the share transfer.
• February 21, 2012 – Complaint filed before the Regional Trial Court for annulment of the share sale.
• April 26, 2013 – RTC dismissal of the annulment case.
• August 3, 2015 – Court of Appeals decision annulling the share transfer.
• February 19, 2016 – CA denial of motion for reconsideration.
• April 2, 2018 – Supreme Court decision.
Applicable Law
• 1987 Philippine Constitution (applicable post-1990 decisions).
• Corporation Code (Batas Pambansa Blg. 68), particularly:
– Section 97(1): Permits close corporations to qualify shares and restrict transfers in articles of incorporation.
– Section 98: Validity and requirements of transfer restrictions.
– Section 99(3)–(5): Presumptive notice, corporate refusal to register, and exception by unanimous consent or amendment.
Facts
- Marsal’s Articles of Incorporation were repeatedly amended to increase capital but retained Paragraph 7, imposing a five-day notice from director to stockholders and a ten-day exercise period for preemptive rights, with unauthorized transfers held void.
- As of 1982, five family members held shares; Teresita held 3,464 shares.
- Upon Teresita’s death, her husband Ephraim obtained letters of administration and, in 1995, entered a court-approved compromise with Rogelio, ceding all her corporate shares, including Marsal. No formal notice under Paragraph 7 was recorded.
- In the 1995 intestate proceedings of Marcelino Sr., the probate court expressly noted the sale of Teresita’s inherited shares to Rogelio.
- In 2012, Marcelino Jr. and Ma. Elena filed for annulment of the 1995 share transfer, alleging violation of Paragraph 7’s preemptive-right procedure. The RTC dismissed for lack of cause; the CA reversed, declaring the transfer null and void.
Issue
Whether the 1995 transfer of Teresita’s 3,464 Marsal shares to Rogelio, unaccompanied by the formal preemptive-rights notice procedure of Paragraph 7 of the Articles, was void for violating the transfer restriction.
Supreme Court Ruling
The petition is granted. The CA decision and resolution are reversed and set aside. The share transfer is valid and may be registered, as Paragraph 7 was effectively waived by respondents’ actual knowledge and consent, and Section 99(5) of the Corporation Code permits transfer in violation of restrictions when all stockholders consent.
Rationale
- Judicial Admission: Petitioners admitted in pleadings that Marsal is a close corporation subject to transfer restrictions, rendering their challenge to the nature of the corporation inadmissible.
- Close-Corporation Restrictions: Article-of-Incorporation restrictions are valid under Sections 97–
Case Syllabus (G.R. No. 223321)
Background of Marsal & Co., Inc.
- Organized on October 7, 1966 as a close family corporation by the Florete siblings and parents
- Authorized capital stock increased from ₱500,000 to ₱5,000,000 through successive amendments
- Core shareholders at incorporation: Marcelino Sr., Salome, Rogelio, Marcelino Jr., Ma. Elena, Teresita
Article 7 Transfer Restriction
- Requires any selling stockholder to notify the Board of Directors in writing
- Board must inform all stockholders of record within five days of such notice
- Each stockholder has ten days from their notice to exercise a preemptive right at book value
- Any sale in breach of this procedure is declared null and void; provision printed on each certificate
Shareholding Structure as of June 1, 1982
- Marcelino M. Florete, Sr.: 7,569 shares
- Rogelio M. Florete: 3,489 shares
- Ma. Elena F. Muyco: 3,489 shares
- Marcelino M. Florete, Jr.: 3,489 shares
- Teresita F. Menchavez: 3,464 shares
Death of Teresita and Letters of Administration
- Teresita died on September 19, 1989
- Ephraim Menchavez filed for letters of administration over her estate in 1992
- Opposition by Rogelio and Marsal alleged Ephraim’s incompetency; later granted
Compromise Agreement and Deed of Assignment
- In 1995, special administrator Ephraim ceded all of Teresita’s corporate shares (including Marsal’s 3,464 shares) and other inherited properties to Rogelio
- Probate Court approved the agreement on February 14, 1995
Intestate Proceeding of Marcelino Sr.
- Marcelino Sr. died on October 3, 1990; Rogelio appointed administrator
- Project of partition filed listing all properties, including notice of sale of Teresita’s shares to Rogelio
- May 16, 1995 Order adjudicated one-half share to Rogelio; one-fourth each to Ma. Elena and Marcelino Jr.
RTC Annulment/Rescission Case (2012)
- Respondents Marcelino Jr. and Ma. Elena filed for annulment of sale and exercise of preemptive rights, claiming nu