G.R. No. 154291 - Lopez Realty, Inc. vs. Spouses Tanjangco

Case Summary (G.R. No. 154291)

July 27, 1981 stockholders meeting and option given to Asuncion

A July 27, 1981 special meeting recorded offers for LRI’s one-half share in Trade Center Building: a selling price pegged at P4,000,000 with the Tanjangcos offering P3,600,000 plus 50% of receivables (total P3,800,000) with specified payment terms. Asuncion counteroffered P5,000,000 and was given a ten-day priority/option to match the Tanjangcos’ offer; failure to act would be deemed acceptance of the Tanjangcos’ offer.

August 17, 1981 board resolution and Arturo’s authority

On August 17, 1981, a special board meeting (while Asuncion was abroad) produced a resolution authorizing Arturo to “immediately negotiate” with the Tanjangcos and to carry out complete termination of sale terms embodied in the July 27, 1981 minutes, including signing on behalf of LRI. This resolution became the basis for subsequent deeds of sale.

Deeds of sale, payment and registration

Acting under the August 17 authority, Arturo executed a Deed of Sale on August 25, 1981 in favor of Jose (represented by Manuel) and a similar Deed on October 5, 1981 in favor of spouses Tanjangco. Price fixed at P3,600,000—50% upon registration and 50% within 30 days. The spouses Tanjangco paid P1,800,000 (receipt issued) and registered the deed, producing new TCTs in their name and cancellation of the earlier titles.

Attempts to halt sale and board responses upon Asuncion’s return

Asuncion sent cablegrams (August 25) requesting the sale not proceed. The Board on September 1, 1981 adopted a resolution postponing final action to enable Asuncion to be “enlightened” upon her return. At the September 16, 1981 meeting Asuncion moved to repeal/amend the earlier resolutions; the Board deferred action pending settlement between Arturo and Asuncion.

Procedural history: trial court suit, TRO, SEC proceedings

LRI and Asuncion filed suit (Nov. 4, 1981) for annulment of sale, cancellation of title, reconveyance and damages, and sought injunctive relief; TRO issued Nov. 11, 1981 enjoining balance payment acceptance. Arturo moved to dismiss for lack of jurisdiction and litis pendentia, invoking SEC’s exclusive jurisdiction over intra-corporate disputes and noting SEC Case No. 2164 filed by Asuncion. In 1985, Asuncion and Arturo filed a joint motion to dismiss SEC Case No. 2164, which the SEC granted.

July 30, 1982 stockholders and directors meeting — ratification claimed

On July 30, 1982 a joint meeting of stockholders and directors recorded a motion to ratify and confirm the sale to the spouses Tanjangco and to ratify all minutes relative to the sale. The minutes show votes by certain attendees; the minutes’ preparation and signatory anomalies later became contentious (e.g., whether Juanito, as executor, could vote and whether Leo actually voted “yes” despite absence of signature).

RTC ruling (June 25, 1997): annulment of sale and reasons

The RTC declared the October 5, 1981 Deed of Sale null and void and ordered cancellation/reinstatement of TCTs, accounting and remittance for rentals, and other monetary directions. RTC’s principal findings: (1) the August 17, 1981 board meeting was illegal for failure to give required notice to Asuncion under Section 53 of the Corporation Code, rendering the resolution invalid; (2) the July 30, 1982 ratification failed for lack of a majority, since only two directors’ signatures (de Leon and Bernardino) appeared on the minutes and Santos’s vote was disregarded as he was purportedly not qualified; (3) no perfected compromise agreement existed and, accordingly, Asuncion’s claim for damages for breach of such agreement was denied.

CA decision (Feb 22, 2002): reversal and grounds

The Court of Appeals reversed the RTC. It relied on the Supreme Court’s prior ruling in Lopez Realty, Inc. v. Fontecha (1995) that defects from lack of notice to a director can be cured by ratification, expressly or impliedly. CA held that the July 30, 1982 meeting constituted an express ratification by stockholders and directors, and that sufficient votes (including the cumulative votes reflected in the minutes) amounted to at least two-thirds of outstanding capital stock required under Section 40 for disposition of corporate assets. CA also found the RTC had jurisdiction and recognized Asuncion’s right to bring a derivative suit. The CA affirmed absence of a perfected compromise agreement.

Issues before the Supreme Court on review

The Supreme Court reviewed whether: (a) the August 17, 1981 Board Resolution was invalid for lack of notice under Section 53; (b) that defect, if any, was cured by ratification; (c) Arturo’s authority extended to concluding the sale; (d) the July 30, 1982 meeting validly ratified the sale (including whether votes of certain persons counted); (e) the SEC had exclusive jurisdiction; (f) Asuncion had legal personality to sue derivatively; and (g) a perfected compromise agreement existed to warrant damages.

Supreme Court on Section 53 defect and ratification principles

The Court agreed the August 17, 1981 meeting was conducted without notice to Asuncion and thus was procedurally infirm under Section 53. However, the Court explained that an act of the board taken at an improperly convened meeting may be ratified expressly or impliedly. It distinguished Fontecha (where ratification was implied) from the present case in which ratification was claimed to be expressed at the July 30, 1982 stockholders meeting. The Court emphasized that ratification may cure prior procedural defects.

Supreme Court on capacity of Juanito (executor) to vote and the July 30, 1982 ratification

The Court found the July 30, 1982 meeting to be a joint stockholders and directors meeting where stockholders’ ratification power was decisive. It held that Juanito, as executor/administrator of Teresita’s estate, held legal title to her shares and was entitled to vote them pending settlement of the estate, consistent with precedent (Tan v. Sycip). The Court rejected the petitioners’ argument that only those identified as directors could vote on the ratification: the central power to ratify lies with stockholders, and the minutes reflected stockholder votes representing sufficient shares. Accordingly, even if the August 17 meeting was defective, the July 30, 1982 ratification by stockholders representing approximately two-thirds (67%) cured the defect and validated the sale and all related acts, including Arturo’s conduct.

Supreme Court on probative value of minutes and signatures

The Court acknowledged that absence of the corporate secretary’s signature undermines the probative value of minutes; the corporate secretary normally prepares, records, and certifies minutes. Because Asuncion, the corporate secretary, refused to prepare or sign the July 30, 1982 minutes, other attendees carried the burden to prove accuracy. The Court examined the minutes and signatories and concluded that, even counting only those who signed (Juanito, Benjamin, Rosendo), Asuncion and Leo were outvoted in terms of shareholding weight. The Court thus found ratification effective despite signature anomalies and distinguished the case from People v. Dumlao on the particular facts.

Supreme Court on scope of Arturo’s authority

Although the August 17 resolution was worded as authorization

Case Syllabus (G.R. No. 154291)

Antecedent facts and subject properties

Lopez Realty, Inc. (LRI) and Dr. Jose Tanjangco (Jose) were registered co-owners of three parcels of land and the building known as the "Trade Center Building," covered by Transfer Certificates of Title (TCT) Nos. 127778, 127779 and 127780 (the subject properties).
Jose's one-half share in the subject properties was later transferred and registered in the name of his son Reynaldo Tanjangco and daughter-in-law Maria Luisa Arguelles (the spouses Tanjangco).
At the times material to the case, the following were the record stockholders of LRI with the indicated shareholdings: Asuncion Lopez-Gonzalez (Asuncion) — 7,831 shares; Arturo F. Lopez (Arturo) — 7,830 shares; Teresita Lopez-Marquez (Teresita) — 7,830 shares; Rosendo de Leon (Rosendo) — 5 shares; Benjamin Bernardino (Benjamin) — 1 share; Augusto de Leon (Augusto) — 1 share; Leo Rivera (Leo) — 1 share. Except for Arturo and Teresita, the rest were members of the Board of Directors.
Asuncion was LRI’s Corporate Secretary.

July 27, 1981 special stockholders meeting — initial offer and priority option

Minutes of the July 27, 1981 special meeting record discussions on sale of LRI’s one-half share in the Trade Center Building.
Atty. Benjamin B. Bernardino reported the asking price at Php 4,000,000; the Tanjangcos' offer was Php 3,600,000 plus 50% of receivables (totaling Php 3,800,000) with payment terms: 50% upon registration; 50% thirty (30) days thereafter; all expenses and documentary stamp tax to be borne by the Tanjangcos; transfer tax and reserve fund to be borne by LRI.
Asuncion countered for Php 5,000,000, clean; Teresita and Benjamin urged Asuncion to accept (match) the Tanjangcos' offer.
It was agreed Asuncion be given priority to accept (match) the Tanjangcos' offer within ten (10) days and that failure to act within that period would result in the offer being deemed accepted. (Emphasis in the minutes.)

August 17, 1981 board resolution and later execution of sale

On August 17, 1981, while Asuncion was abroad and after Teresita’s death (July 28, 1981), the remaining directors Rosendo, Benjamin and Leo met and passed a resolution:
- Authorizing Arturo to immediately negotiate with the Tanjangcos and to carry out the complete termination of sale terms and conditions as embodied in the July 27, 1981 Resolution, and to sign for and on behalf of Lopez Realty, Inc.
Acting on the August 17, 1981 board resolution, on August 25, 1981 Arturo executed a Deed of Sale selling LRI’s one-half interest to Jose (represented by his son Manuel) for Php 3,600,000, payable 50% upon registration (Php 1,800,000) and 50% within thirty days thereafter.
Asuncion sent cablegrams on August 25, 1981 to Rosendo and Jose asking them not to proceed.

September meetings, October deed, payment, registration

On September 1, 1981 the Board passed a resolution postponing final action on the sale in view of Asuncion’s cable and to enlighten her on proceedings during her absence.
On September 16, 1981 upon Asuncion’s return she moved for repeal/amendment of the August 17 and August 24 board resolutions; action was deferred pending conference between Arturo and Asuncion.
Jose’s one-half interest had already been transferred to the spouses Tanjangco, after which on October 5, 1981 Arturo executed a Deed of Sale in favor of the spouses Tanjangco similar to the August 25 deed.
The spouses Tanjangco paid LRI Php 1,800,000 (Official Receipt No. 723) and registered the Deed of Sale with the Register of Deeds of Manila, causing cancellation of TCT Nos. 127778–127780 and issuance of TCT Nos. 145983–145985 in their name.

Pre-litigation acts, TRO and related SEC matters

On November 4, 1981 LRI and Asuncion filed a complaint in the Court of First Instance of Manila (Civil Case No. 144667) for annulment of sale, cancellation of title, reconveyance and damages, with a prayer for TRO/writ of preliminary injunction against the spouses Tanjangco, Arturo and the Registrar of Deeds of Manila.
On November 11, 1981 the trial court issued a TRO enjoining the spouses Tanjangco from paying the balance and Arturo from accepting payment.
Manuel, representing the spouses Tanjangco, tendered a manager’s check for Php 1,743,000 on November 13, 1981 to cover the balance less transfer tax and other deductions; acceptance was deferred due to pending intra-corporate cases and SEC orders restraining Rosendo from acting.
Several intra-corporate disputes involving LRI directors and shareholders were pending before the SEC, including Asuncion’s challenge to the August 17, 1981 board resolution docketed as SEC Case No. 2164.
On March 1, 1985 Asuncion and Arturo filed a Joint Motion to Dismiss in SEC Case No. 2164 stating a final settlement had been reached; the SEC granted the motion.

July 30, 1982 stockholders meeting — ratification attempt and vote record

On July 30, 1982 stockholders and directors met to vote on ratification and confirmation of the sale to the spouses Tanjangco and related minutes.
The minutes state a joint vote "among the stockholders and Directors present" with the following attendance and share representation: Sony (Asuncion) Lopez — 7,831 shares; Benjamin Bernardino — 1 share (representing Arturo F. Lopez — 7,831 shares); Juanito L. Santos (representing the Estate of Teresita Lopez-Marquez) — 7,830 shares; Leo R. Rivera — 1 share; Rosendo de Leon — 5 shares; total shares represented 23,499.
The minutes record that Juanito Santos moved for ratification and confirmation of the sale and that the matter was put to a vote, with the minutes indicating affirmative votes; Asuncion later stated she would not prepare these minutes and did not sign them.

Trial court proceedings, findings and decision (RTC, Branch 25) — June 25, 1997 decision

The trial court rendered judgment on June 25, 1997, declaring null and void the October 5, 1981 Deed of Sale in favor of the spouses Tanjangco; ordering cancellation and reinstatement of titles; directing the spouses Tanjangco to account for rentals from October 5, 1981 and remit half the net amounts with 12% yearly interest; directing LRI to return Php 1,800,000 to the spouses Tanjangco; and awarding LRI Php 150,000 as attorney’s fees.
The trial court’s key factual and legal findings:
- The August 17, 1981 board meeting was illegal for lack of notice to Asuncion as required by Section 53 of the Corporation Code; the defendants had not contested the absence of notice and the meeting was therefore illegal, making its resolution not binding upon the corporation.
- The sale had not been validly ratified as the July 30, 1982 meeting lacked the required number of valid votes: only de Leon and Bernardino (two votes) signed the minutes; Santos’s vote was not counted because he was not qualified as director; Leo and Gonzalez (Asuncion) did not sign; therefore a majority required for ratification was not established.
- There was no perfected compromise agreement; the alleged compromise was not reduced to writing and the spouses Tanjangco were not legally compelled to sign; hence