Lanuza Et Al V CA Et Al

LOPEZ, KMBERLY O.
CORPORATION LAW: JD3B
48. JESUS V. LANUZA, et.al vs. COURT OF APPEALS, et.al,

G.R. No. 131394, March 28, 2005
DOCTRINE: In determining quorum records in the stock and transfer book cannot be used as the sole basis as it
generally as it does not reflect the totality of shares which have been subscribed, hence injustice will take place; rather
quorum should be based on the outstanding capital stock as indicated in the corporation’s Articles of Incorporation as
it duly records all pertinent and complete information of its stockholders and their shares.
FACTS:
1. In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven hundred (700)
founders’ shares and seventy-six (76) common shares.
2. In 1978, the company’s stock and transfer book was registered recording thirty-three (33) common shares
as the only issued and outstanding shares of PMMSI.
3. In 1982, the heirs of Acayan, one of the original incorporators, Juan Acayan, petitioned for the registration
of their property rights over one hundred (120) founders’ shares and twelve (12) common shares owned
by their father which was later on granted.
4. On 06 May 1992, a special stockholders’ meeting was held to elect a new set of directors. Respondents
challenged the validity of the stockholders meeting alleging that the quorum for the said meeting should
not be based on the 165 issued and outstanding shares as per the stock and transfer book, but on the initial
subscribed capital stock of seven hundred seventy-six (776) shares, as reflected in its 1952 Articles of
Incorporation.
5. SEC dismissed the petition but it was overturned by SEC En Banc on appeal holding that the shares of the
deceased incorporators should be duly represented by their respective administrators or heirs concerned
and directed the parties to call for a stockholders meeting on the basis of the stockholdings reflected in the
articles of incorporation.
6. CA, on appeal of the petitioners affirmed the decision of SEC En Banc.
ISSUE: Whether or not the quorum should be based on the outstanding capital stock as indicated in the Articles of
Incorporation.
RULING:
Yes, quorum should be based on the outstanding capital stock as indicated in the Articles of Incorporation.
The rules provide that Articles of Incorporation defines the charter of the corporation and the contractual
relationships between the State and the corporation, the stockholders and the State, and between the corporation
and its stockholder, hence its contents are binding, not only on the corporation, but also on its shareholders. On the
other hand, stock and transfer book is the book which records the names and addresses of all stockholders
arranged alphabetically, the installments paid and unpaid on all stock for which subscription has been made, and
the date of payment. It records the only certain and accurate method of establishing the various corporate acts and
transactions and of showing the ownership of stock and like matters. BP 68 provides that quorum shall consist of
the stockholders representing a majority of the outstanding capital stock which means the total shares of stock
issued to subscribers or stockholders whether or not fully or partially paid except treasury shares. Thus, quorum is
based on the totality of the shares which have been subscribed and issued, whether it be founders’ shares or
common shares.
In this case, the stock and transfer book of PMMSI cannot be used as the sole basis for determining the
quorum as it does not reflect the totality of shares which have been subscribed, more so when the articles of
incorporation show a significantly larger amount of shares issued and outstanding as compared to that listed in the
stock and transfer book, which in this case is 771 shares versus 33 shares actually recorded in the books. To
disregard the remaining shares as recorded in the article because of inaccurate recording in the books will work
injustice to its owners and/or successors in interest and will deprive them of their right to vote for their desired
officers as in this case.
Therefore, quorum should be based on the outstanding capital stock as indicated in the Articles of
Incorporation.

Lanuza Et Al V CA Et Al

Uploaded by

Copyright:

Available Formats

Lanuza Et Al V CA Et Al

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lanuza Et Al V CA Et Al

Uploaded by

Copyright:

Available Formats

LOPEZ, KMBERLY O.

CORPORATION LAW: JD3B

48. JESUS V. LANUZA, et.al vs. COURT OF APPEALS, et.al,

You might also like