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Case Digest for Every Law Student

Tuesday, March 12, 2013

Blog Archive
Lanuza vs. CA
2013 (7)
Lanuzavs.CA March (7)
GRNo.131394|March28,2005 Lanuza vs. CA
Red Line Transport vs.
Facts:
Rural Transit
Pe onersseektonullifytheCourtofAppealsDecisioninCAG.R.SPNo.414731promulgatedon18August1997,
Roxas vs. CTA
armingtheSECOrderdated20June1996,andtheResoluon2oftheCourtofAppealsdated31October1997
whichdeniedpe onersmo onforreconsidera on. CIR vs. Algue Inc.
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was incorporated, with seven hundred (700)
American Bible Society
founderssharesandseventysix(76)commonsharesasitsini alcapitalstocksubscrip onreectedinthear cles
vs. City of Manila
ofincorpora on
Onrubiaet.al,whowereincontrolofPMMSIregisteredthecompanysstockandtransferbookfortherst mein Intel Technology Phils vs.
1978,recordingthirtythree(33)commonsharesastheonlyissuedandoutstandingsharesofPMMSI. CIR
In1979,aspecialstockholdersmee ngwascalledandheldonthebasisofwhatwasconsideredasaquorumof Yu Cong Eng vs. Trinidad
twentyseven (27) common shares, represen ng more than twothirds (2/3) of the common shares issued and
outstanding.
In1982,JuanAcayan,oneoftheheirsoftheincorporatorsledape onfortheregistra onoftheirproperty
rightswasledbeforetheSECover120founderssharesand12commonsharesownedbytheirfather
SEC Hearing Ocer: heirs of Acayan were en tled to the claimed shares and called for a special stockholders About Me
mee ngtoelectanewsetofocers.
law.student
SECenbanc:armedthedecision
Asaresult,thesharesofAcayanwererecordedinthestockandtransferbook. I am a former law student who's
OnMay6,1992,aspecialstockholdersmee ngwasheldtoelectanewsetofdirectors willing to help out other law students
Onrubiaetalledape onwithSECques oningthevalidityofsaidmee ngallegingthatthequorumforthesaid by providing comprehensive case
mee ngshouldnotbebasedonthe165issuedandoutstandingsharesasperthestockandtransferbook,buton digests. All digests are originally made
by me.
theini alsubscribedcapitalstockofsevenhundredseventysix(776)shares,asreectedinthe1952Ar clesof
Incorpora on View my complete profile
Pe onwasdismissed
SCenbanc:sharesofthedeceasedincorporatorsshouldbedulyrepresentedbytheirrespec veadministratorsor
heirs concerned. Called for a stockholders mee ng on the basis of the stockholdings reected in the ar cles of Labels
incorpora onforthepurposeofelec nganewsetofocersforthecorpora on
Lanuza,Acayanetal,whoarePMMSIstockholders,ledape onforreviewwiththeCA,raisingthefollowing Corporation Law
issues:
1. whether the basis the outstanding capital stock and accordingly also for determining the quorum at Digest
stockholders mee ngs it should be the 1978 stock and transfer book or if it should be the 1952 ar cles of
incorpora on Law
(They contended that the basis is the stock and transfer book, not ar cles of incorpora on in compu ng the
Taxation
quorum)
2.whethertheEspejodecision(decisionofSECenbancorderingtherecordingofthesharesofJoseAcayanin
thestockandtransferbook)isapplicabletothebenetofOnrubiaetal
CAdecision:
1.Forpurposesoftransac ngbusiness,thequorumshouldbebasedontheoutstandingcapitalstockasfound
inthear clesofincorpora on
2. Torequireaseparatejudicialdeclara ontorecognizethesharesoftheoriginalincorporatorswouldentail
unnecessarydelayandexpense.Besides.theincorporatorshavealreadyprovedtheirstockholdingsthrough
theprovisionsofthear clesofincorpora on.
AppealwasmadebyLanuzaetalbeforetheSC
Lanuzaetalconten on:
a. 1992stockholdersmee ngwasvalidandlegal
b. Relianceonthe1952ar clesofincorpora onfordeterminingthequorumnegatestheexistenceandvalidityof
thestockandtransferbookOnrubiaetalprepared
c. Onrubia et al must show and prove en tlement to the founders and common shares in a separate and
independentac on/proceedinginordertoavailofthebenetssecuredbytheheirsofAcayan

Onrubiaetalsconten on,basedontheMemorandum:pe onshouldbedismissedonthegroundofresjudicata

Anotherappealwasmade
Lanuzaetalsconten on:instantpe onisseparateanddis nctfromG.R.No.131315,therebeingnoiden tyof
par es, and more importantly, the par es in the two pe ons have their own dis nct rights and interests in
rela ontothesubjectma erinli ga on
Onrubiaetalsmanifesta onandmo on:movedforthedismissalofthecase

Issue:Whatshouldbethebasisofquorumforastockholdersmee ngtheoutstandingcapitalstockasindicatedin
thear clesofincorpora onorthatcontainedinthecompanysstockandtransferbook?

Ruling:
Ar clesofIncorpora on
Denesthecharterofthecorpora onandthecontractualrela onshipsbetweentheStateandthecorpora on,
thestockholdersandtheState,andbetweenthecorpora onanditsstockholders.
Contentsarebinding,notonlyonthecorpora on,butalsoonitsshareholders.
Stockandtransferbook
Bookwhichrecordsthenamesandaddressesofallstockholdersarrangedalphabe cally,theinstallmentspaid
andunpaidonallstockforwhichsubscrip onhasbeenmade,andthedateofpaymentthereof;astatement
of every aliena on, sale or transfer of stock made, the date thereof and by and to whom made; and such
otherentriesasmaybeprescribedbylaw
necessary as a measure of precau on, expediency and convenience since it provides the only certain and
accuratemethodofestablishingthevariouscorporateactsandtransac onsandofshowingtheownershipof
stockandlikema ers
Notpublicrecord,andthusisnotexclusiveevidenceofthema ersandthingswhichordinarilyareorshouldbe
wri entherein
In this case, the ar cles of incorpora on indicate that at the me of incorpora on, the incorporators
werebonadestockholdersof700founderssharesand76commonshares.Hence,atthat me,thecorpora on
had776issuedandoutstandingshares.
AccordingtoSec.52oftheCorpCode,aquorumshallconsistofthestockholdersrepresen ngamajorityofthe
outstandingcapitalstock.Assuch,quorumisbasedonthetotalityoftheshareswhichhavebeensubscribedand
issued,whetheritbefounderssharesorcommonshares
Tobasethecomputa onofquorumsolelyontheobviouslydecient,ifnotinaccuratestockandtransferbook,and
completelydisregardingtheissuedandoutstandingsharesasindicatedinthear clesofincorpora onwouldwork
injus cetotheownersand/orsuccessorsininterestofthesaidshares.
ThestockandtransferbookofPMMSIcannotbeusedasthesolebasisfordeterminingthequorumasitdoesnot
reect the totality of shares which have been subscribed, more so when the ar cles of incorpora on show a
signicantlylargeramountofsharesissuedandoutstandingascomparedtothatlistedinthestockandtransfer
book.
One who is actually a stockholder cannot be denied his right to vote by the corpora on merely because the
corporate ocers failed to keep its records accurately. A corpora ons records are not the only evidence of the
ownershipofstockinacorpora on.
Itisnolessthanthear clesofincorpora onthatdeclaretheincorporatorstohaveintheirnamethefoundersand
severalcommonshares.Thus,todisregardthecontentsofthear clesofincorpora onwouldbetopretendthat
thebasicdocumentwhichlegallytriggeredthecrea onofthecorpora ondoesnotexistandaccordinglytoallow
greatinjus cetobecausedtotheincorporatorsandtheirheirs

WHEREFORE,thepe onisDENIEDandtheassailedDecisionisAFFIRMED.Costsagainstpe oners

Posted by law.student at 1:49 AM

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