G.R. No. 261125 - Marasigan vs. Marasigan, Ganco Resorts and Recreation Inc.

Case Summary (G.R. No. 261125)

Procedural Posture and Relief Sought

Trial court: Regional Trial Court (RTC), Branch 159, Pasig City — case docketed R-PSG-18-01223-CV, Complaint for Declaration of Nullity of Meetings, Board Resolutions and Election of Officers with prayer for TRO/preliminary injunction.
Court of Appeals (CA): CA-G.R. SP No. 168189, reversed the RTC in part.
Supreme Court: Petition for Review on Certiorari under Rule 45 by petitioner Peter seeking reversal of the CA Decision and Resolution. The Supreme Court denied the petition and affirmed the CA decisions.

Key Dates

Incorporation: 2013.
Peter’s leave and Luz’s death: August–November 2017; Luz died November 3, 2017.
Alleged special meetings and elections: November 6 and November 12, 2017.
Annual meeting at issue: May 15, 2018.
RTC Decision: February 3, 2021.
CA Decision: December 28, 2021; CA Resolution denying reconsideration: May 24, 2022.
Supreme Court Decision: July 26, 2023. Applicable constitutional framework: 1987 Philippine Constitution.

Applicable Law

Old Corporation Code (Batas Pambansa Blg. 68, approved May 1, 1980) — provisions principally relied upon: Section 25 (corporate officers; quorum for directors’ meetings and election of officers), Section 52 (quorum for stockholders’ meetings), Section 96 (definition of close corporation), Section 97 (permitted provisions for close corporations), and Section 101 (ratification by directors).
Ganco’s governing documents: Articles of Incorporation (AOI) and By-laws, which (a) declare that “the business of the Corporation shall be managed by the board of directors who are the stockholders,” (b) state “a majority of the outstanding capital stock shall constitute a quorum,” and (c) contain by-law provisions regarding stockholders’ meetings and the election/appointment of officers.

Facts Relevant to the Dispute

After Luz’s death while Peter was on vacation, family members who are Ganco stockholders/directors convened meetings on November 6 and November 12, 2017; minutes reflect attendance and actions including declaration of quorum and election of officers (removal of Peter as President and appointment of an interim President). Minutes recorded that eight of the 14 stockholders/directors were present and that the meeting was a “special board and stockholders meeting.”
On May 11, 2018, the Corporate Secretary issued notice that the annual meeting should not proceed pending settlement of Luz’s estate, yet an annual meeting was held on May 15, 2018 where another set of officers were purportedly elected; disputes arose over control of corporate bank accounts and operation of La Luz Beach Resort.
Respondents filed suit to nullify the November and May meetings and elections, seeking recognition as legitimate officers and preliminary injunctions (denied by the RTC for lack of extreme urgency and eventually by decision).

RTC Ruling and Rationale

The RTC dismissed the complaint, holding that because Luz’s estate had not been settled, neither party automatically succeeded to her shares and therefore could not exercise stockholder rights that are incidents of ownership for the purpose of quorum and election of officers. The RTC concluded meetings on November 6, 12, 2017 and May 15, 2018 lacked proper quorum due to the majority stockholder’s death and ordered reinstatement in hold-over capacity of the officers elected prior to Luz’s death.

Court of Appeals Ruling and Rationale

The CA reversed the RTC: it acknowledged that neither party automatically acquired Luz’s shares upon her death but held that the November special meetings and elections were valid and ratified. The CA reasoned that, under Section 25 of the Old Corporation Code, the quorum for the election of officers is based on the majority of all members of the board of directors (not the majority of outstanding capital stock), and because Ganco’s stockholders were designated as the board, eight of 14 directors constituted a quorum for election. The CA also held that the May 15, 2018 annual meeting and election were void for lack of quorum and for failure to comply with by-law notice requirements; it applied Section 101 regarding ratification where no prompt written objection is made, and found timely objections to May 15.

Issues Presented to the Supreme Court

Whether the CA erred in holding the November 6 and 12, 2017 special meeting elections valid and ratified.
Whether the respondents made duplicitous statements in other proceedings (an ancillary contention raised by petitioner).

Supreme Court’s General Approach and Preliminary Conclusions

The Supreme Court reviewed the records and the applicable statutory provisions of the Old Corporation Code. It affirmed the CA’s reversal of the RTC, finding no reversible error and concluding that the CA correctly applied the law to Ganco’s AOI and by-laws and the documentary evidence (minutes, notices, objections).

Close Corporation Doctrine and Requirements (Sections 96 and 97)

Section 96 sets out the definition and requisites of a close corporation; Section 97 permits close corporations to provide special governance arrangements in their AOI, including management by stockholders, classification of directors, and greater quorum or voting requirements.
The Court emphasized that a corporation’s status as a close corporation and its exercise of close-corporation prerogatives must be affirmatively and expressly established in the AOI. Merely having concentrated share ownership does not alone create a close corporation or permit invocation of privileges reserved for close corporations.

Ganco’s AOI and By-laws: Management by Stockholders as Directors

Ganco’s AOI expressly stated that the business “shall be managed by the board of directors who are the stockholders,” and that “the stockholders shall be deemed to be the directors and shall function as such without need of further election or appointment.” The by-laws similarly treat stockholders as the board and set meeting and quorum provisions under Article II.
The Court construed these provisions to mean the stockholders were designated members of the board of directors; each stockholder, regardless of shareholding size, is a director with one vote in board decisions when acting in that capacity.

Nature of the November 6 and 12, 2017 Meetings: Directors’ Meetings

The CRA and the minutes show that those meetings were treated as “special board and stockholders meeting[s],” included an agenda item regarding the status of the President and a vote thereon, and resulted in the election of corporate officers (a function traditionally performed by the board). The Court therefore concluded that the stockholders were acting as directors when they elected officers, bringing the meetings within the ambit of Section 25 governing directors’ meetings and the election of officers.

Quorum and Voting Rules: Plain Meaning of Section 25 versus Ganco’s AOI/By-laws

Section 25 prescribes that, unless AOI/by-laws provide for a greater majority, a majority of the number of directors as fixed in the AOI constitutes a quorum for board business, and the election of officers requires the vote of the majority of all board members. For Ganco, that meant eight of 14 directors constitute a quorum and the election of officers requires at least eight votes.
Ganco’s AOI/by-laws attempted to prescribe a single quorum rule of “a majority of the outstanding capital stock.” The Court held that Section 97 allows close corporations to require a greater majority, but that “greater majority” must be interpreted as a quantitative increase above the statutory majority within the same basis (i.e., more than a simple majority of directors for directors’ meetings or more than a simple majority of outstanding shares for stockholders’ meetings). It rejected the notion that a close corporation may swap the basis of quorum (from number of directors to outstanding capital stock or vice versa), holding t

Case Syllabus (G.R. No. 261125)

Procedural Posture

Petition for Review on Certiorari under Rule 45 assails the Court of Appeals (CA) Decision dated December 28, 2021 and Resolution dated May 24, 2022 in CA-G.R. SP No. 168189.
The CA Decision reversed and set aside the Regional Trial Court (RTC), Branch 159, Pasig City Decision dated February 3, 2021, which had declared certain Ganco meetings lacked proper quorum due to the death of majority stockholder Luz Marasigan.
Petition filed by petitioner Peter Paul G. Marasigan (Peter) against respondents Benito, Orlando, and Rommel Marasigan (collectively, respondents).
Supreme Court, after review, denied the petition for failure to show reversible error in the CA ruling and affirmed the CA Decision and Resolution.

Parties and Corporate Subject

All parties in the original complaint are children of the late spouses Cesar and Luz Marasigan, except Cesar Augustine C. Marasigan III, who is their grandson.
Ganco Resorts & Recreation Incorporated (Ganco) is a close corporation organized by Luz with her 13 children in 2013; principal office established at the Mabini Street property (conjugal dwelling).
Subscribed capital: 5,600 total shares; Luz subscribed to 3,000 shares; each of her 13 children subscribed to 200 shares each, totaling 2,600 shares for the children.
Petitioners and respondents are among Ganco’s stockholders/officers as described in the case record.

Facts: Key Events and Meetings

Cesar died in 2001; his estate remained unsettled as of the events.
Luz died on November 3, 2017 while Peter was on approved six-week leave; Peter cut his leave and returned November 5, 2017.
November 6, 2017: family stockholders met at Rommel’s office and elected a new set of officers. Of 14 stockholders (Luz and her 13 children), eight were considered present (five physically, three via video conference). The meeting was conducted without prior notice, agenda, or valid call (per petitioner’s claim). Corporate Secretary Orlando declared a quorum and labeled the gathering a Special Board and Stockholders Meeting. Benito declared himself assuming the position of President and replaced Peter as Interim President.
November 12, 2017: Luz’s burial; nine family members discussed estate settlement, estate taxes, and Mabini Street property.
May 11, 2018: Corporate Secretary Orlando issued notice to stockholders that the Annual Shareholders’ Meeting would not proceed pending settlement/distribution of Luz’s majority shares.
May 15, 2018: Annual Stockholders’ Meeting held; Orlando and Regina physically present, seven others joined via video conference. Officers elected included: Gabriel (Chair), Regina (President), Peter (Vice President and Secretary), Renato (Treasurer). New bank signatories appointed (Regina, Peter, Renato).
After May 15, 2018 meeting, respondents refused to recognize newly elected officers or turnover corporate assets/records; banks froze accounts after conflicting authorizations were communicated by competing officers.
Respondents allegedly collected resort fees in cash or through personal accounts and resisted acceptance of checks/online payments.
Respondents, joined by Jose and Gerardo (siblings), filed Complaint for Declaration of Nullity of Meetings, Board Resolutions and Election of Officers with Prayer for TRO and/or Writ of Preliminary Injunction — docketed R-PSG-18-01223-CV.

Pleadings, Relief Sought and Preliminary RTC Orders

Respondents sought recognition as legitimate officers and nullification of May 15, 2018 Annual Stockholders’ Meeting.
RTC Orders: TRO denied June 1, 2018 for lack of extreme urgency; application for writ of preliminary injunction denied January 6, 2020.
Jose and Gerardo were dropped as plaintiffs on motion of the defendants (Peter et al.) in RTC proceedings.

RTC Decision (February 3, 2021)

RTC held that because Luz’s estate had not been settled, parties did not automatically acquire ownership or transferee rights of Luz’s shares and therefore could not exercise stockholder rights—particularly for purposes of quorum and election of officers.
RTC found Cesar Augustine could not validly exercise stockholder rights of his father, Cesar Jr.
RTC dismissed the complaint.
RTC concluded meetings on November 6, 2017, November 12, 2017 (note: RTC misstated second meeting as November 17, 2017), and May 15, 2018 lacked quorum due to death of majority stockholder; therefore, immediately reinstated previous officers (elected before Luz’s death) in a hold-over capacity until valid election.

CA Proceedings and Ruling (December 28, 2021) and Resolution (May 24, 2022)

CA reversed and set aside RTC Decision.
CA declared the special meeting and election of petitioners as officers on November 12, 2017 valid and ratified; those officers to continue until regular officers are elected pursuant to law and by-laws.
CA declared the annual meeting and election of May 15, 2018, and subsequent resolutions arising from it, null and void.
CA denied prayer for damages and attorney’s fees.
CA reasoned that while parties did not automatically acquire ownership of Luz’s shares upon her death, the quorum for election of officers is based on the majority of all members of the board of directors per Section 25 of the Old Corporation Code, not on majority of outstanding capital stock.
CA noted absence of prompt written objection to nomination/election (invoked Section 101 ratification), thereby treating November meetings as ratified.
CA denied Peter’s Motion for Reconsideration in its May 24, 2022 Resolution.

Issues Presented to the Supreme Court

Whether the CA erred in ruling that the special meetings and election of petitioners as officers of Ganco on November 6 and 12, 2017 were valid and ratified.
Whether the respondents made duplicitous statements in a separate related criminal case (argument raised by petitioner).
More broadly: determination of the nature of the assailed meetings (stockholders’ vs. directors’ meetings) and which quorum and voting rules under the Old Corporation Code and Ganco’s AOI/by-laws apply.

Petitioner’s Principal Arguments (as presented)

Ganco is a close corporation governed primarily by Title XII (Close Corporations) of the Old Corporation Code; rules on election of officers under Section 25 do not apply.
Section 25 provides only a minimum requirement and allows AOI/by-laws to provide otherwise; Ganco’s by-laws allegedly provide for a greater majority quorum.
Ganco’s by-laws designate that stockholders, not directors, shall elect board officers (Ganco has no elected board), so the Section 25 scenario of an elected board does not pertain.
The Revised Corporation Code’s Section 25 (post-2019) compels shares represented to constitute a quorum regardless of AOI/by-laws—but petitioner cites this in argument (contextual).
Section 101 of the Old Corporation Code was misapplied by CA because petitioner claims the November and May meetings are stockholders’ meetings, not directors’ meetings.
Respondents made inconsistent statements in a related criminal case claiming there was no functioning board after Luz’s