Title
Marasigan vs. Marasigan, Ganco Resorts and Recreation Inc.
Case
G.R. No. 261125
Decision Date
Jul 26, 2023
Dispute over validity of close corporation meetings and officer elections; court affirmed CA ruling validating directors' meetings quorum under Corp Code, denying petition to overturn.
close corporation
stockholders
board of directors

Case Summary (G.R. No. 261125)

Factual Background

The parties are members of the Marasigan family. The late spouses Cesar and Luz Marasigan owned several properties, including La Luz Beach Resort and the Mabini Street property where Ganco Resorts & Recreation Incorporated (Ganco) established its principal office. In 2013, Luz and her 13 children organized Ganco as a close corporation. Of Ganco’s 5,600 subscribed shares, Luz held 3,000 and the children subscribed to 200 each, totaling 2,600. Ganco’s Articles of Incorporation provided that the corporation’s business “shall be managed by the board of directors who are the stockholders,” a structure mirrored in its by‑laws. In 2017, Luz was Chairman, and PETER PAUL G. MARASIGAN served as President. Peter took a six‑week leave in August 2017. Luz died on November 3, 2017. While Peter was on leave, family meetings occurred on November 6 and November 12, 2017 in which new officers were declared. On May 15, 2018 an alleged annual meeting elected a different slate, precipitating a dispute over control, access to bank accounts, and management of corporate assets.

RTC Proceedings and Ruling

Respondents filed a Complaint for Declaration of Nullity of Meetings, Board Resolutions and Election of Officers with prayer for injunctive relief. The RTC denied the initial TRO and the subsequent writ of preliminary injunction. The RTC held that because Luz’s estate remained unsettled, neither party had automatically acquired ownership of her shares and therefore could not exercise stockholder rights for quorum purposes. The RTC concluded that meetings on November 6, November 12, 2017 and May 15, 2018 lacked quorum and dismissed the complaint, reinstating the officers elected before Luz’s death in hold‑over capacity.

Court of Appeals Decision and Rationale

The CA reversed the RTC in a decision dated December 28, 2021. The CA declared valid and ratified the special meeting and election of officers on November 12, 2017, holding that the quorum for the election of officers under Section 25 of the Old Corporation Code is based on the number of members of the board of directors, not on the majority of outstanding capital stock. Because the AOI designated stockholders as directors, the remaining 13 stockholders/directors validly convened with a quorum of eight directors. The CA found the May 15, 2018 meeting invalid for lack of quorum under the stockholders’ quorum rule and for failure to comply with Ganco’s by‑laws regarding notice; it denied claims for damages and attorney’s fees. The CA denied Peter’s motion for reconsideration on May 24, 2022.

Issues Presented

The core questions were whether the CA erred in ruling that the November 6 and 12, 2017 special meetings and the election of officers were valid and ratified, and whether respondents made duplicitous statements in separate proceedings. Resolution required determining whether the contested meetings were stockholders’ meetings or directors’ meetings and which quorum rules and by‑law or statutory provisions applied under the Old Corporation Code.

Petitioner’s Contentions

Petitioner argued that as a close corporation Ganco is governed by Title XII of the Old Corporation Code and that Section 25’s rules on election of officers do not apply. He asserted that Section 25 sets a minimum that may be altered by AOI or by‑laws and that Ganco’s by‑laws provide a different quorum and vest election of officers in the stockholders rather than the board. Petitioner also contested the CA’s reliance on Section 101 and alleged inconsistent statements by respondents in another criminal case.

The Court’s Analysis on Close Corporation Status and AOI Requirements

The Court found that Ganco’s AOI satisfied the statutory requisites of a close corporation under Section 96 of the Old Corporation Code. The Court explained that the privileges and exceptions available to close corporations under Section 97 must be expressly invoked in the AOI. The Court stressed that the mere organization as a close corporation does not automatically import every privilege; the AOI must specifically provide for management by stockholders or for other derogations from the general rules. Ganco’s AOI explicitly provided 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 Court’s Analysis on Nature of the November Meetings

Given the AOI and the Minutes, the Court concluded that the November 6 and 12, 2017 meetings were properly characterized as directors’ meetings because the stockholders were acting in their capacity as board members when they elected corporate officers. The Minutes expressly described a “special board and stockholders meeting,” and recorded the election and removal of officers, acts that pertain to board prerogatives. The Court emphasized that when stockholders are designated as directors each stockholder, regardless of shareholding, is deemed a director entitled to one vote in board matters. Thus the Marasigan siblings were acting as directors when they elected officers.

The Court’s Analysis on Quorum and Section 25

The Court held that Section 25 of the Old Corporation Code controls the quorum and voting requirements applicable to directors’ meetings and officer elections unless the AOI or by‑laws validly provide for a greater majority. Section 25 sets the quorum for directors at a majority of the number of directors fixed in the AOI and requires the election of officers to receive the vote of a majority of all board members. The Court explained that a close corporation may adopt a greater majority under Section 97, but that a greater majority must be a quantitative increase in the number of directors required, not a change in the constitution of what comprises a quorum (for example, switching from

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