Case Summary (G.R. No. 93695)
Legal vs. Equitable Ownership
Upon execution, the trustors (original shareholders) become beneficial (equitable) owners, while the trustee holds legal title. The separation extinguishes the trustors’ direct voting rights and alters the legal ownership recorded in the corporation’s books.
Duration and Termination of Voting Trust
Section 59 limits voting trusts to five years, renewable if linked to loan obligations. Trusts may exceed five years when required by a loan agreement but terminate automatically upon loan repayment. Absent renewal, trustee certificates and stock certificates revert to the transferors at period end.
Director Qualification under Section 23
Section 23 requires each director to own at least one share standing in his name on the corporation’s books. Loss of legal title to all shares automatically vacates directorship. The removal of the phrase “in his own right” in the 1981 Code reinforces that legal title, not merely beneficial interest, is essential.
Effect of the ALFA–DBP Voting Trust on Petitioners
By assigning and physically transferring their ALFA share certificates to DBP in 1981, petitioners relinquished legal title to all their shares. DBP became the shareholder of record. Certification by DBP confirmed petitioners ceased appearing as officers “as of April 1982.” Hence, petitioners no longer qualified as directors under Section 23.
Proper Service of Summons on a Corporation
Under Rule 14, Section 13, service on a domestic corporation may validly be made only on specified officers or directors. Because petitioners were legally divested of all shares and directorship in 1981, they were neither officers nor directors at the time service was attempted
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Facts
- On November 15, 1985, International Corporate Bank, Inc. filed a complaint for sum of money against the private respondents.
- The private respondents filed a third-party complaint against ALFA and petitioners on March 17, 1986.
- Petitioners moved to dismiss on September 17, 1987; the trial court denied the motion on June 27, 1988.
- Trial court issued alias summons for ALFA through DBP on July 12, 1988, upon petitioners’ letter claiming management had passed to DBP.
- DBP manifested on July 22, 1988 that it was unauthorized to receive summons for ALFA.
- Trial court granted private respondents’ motion to declare service proper on August 17, 1988.
- Petitioners’ motions for reconsideration (September 12, 1988 and January 19, 1989) argued they ceased to be ALFA officers under the voting trust agreement.
- On April 25, 1989, trial court set aside its earlier order and held service through petitioners was improper.
- Private respondents’ motion for reconsideration denied on August 14, 1989.
- Private respondents filed belated certiorari petition with the Court of Appeals, which gave it due course on September 21, 1989.
- Trial court, unaware of certiorari, declared April 25, 1989 order final on October 17, 1989.
- On March 19, 1990, Court of Appeals set aside trial court’s April and August 1989 orders, ruling service proper through petitioners.
- Petitioners moved for reconsideration of CA decision; denied on May 10, 1990.
- Petitioners filed this certiorari petition alleging grave abuse of discretion.
Issues
- What is the nature and legal effect of the voting trust agreement entered into by ALFA stockholders and DBP?
- Who holds legal title to A