Case Digest: Lily C. Lopez and Ma. Christina Patricia C. Lopez v. Lolito S. Lopez, Ma. Rachel Nicolette Lopez, Barbara Villas, Benedicto Villafuerte, Ma. Luisa Paras, Ruel Villacorta, Teresita C. Fernando, iSpecialist Development Corporation; and Lolito S. Lopez, Mario S. Lopez, Andresito S. Lopez, Barbara O. Villas, Benedicto L. Villafuerte, Ma. Luisa I. Paras, Ruel S. Villacorta, Teresita C. Fernando, LC Lopez Resources, Inc., and Conqueror International, Inc. G.R. Nos. 254957-58, June 15, 2022 Supreme Court, First Division Ponente: Justice Ricardo R. Rosario

 

FACTS

The controversy arose from the validity of special stockholders' meetings conducted by iSpecialist Development Corporation, LC Lopez Resources, Inc., and Conqueror International, Inc. During these meetings, new members of the respective boards of directors were elected after respondent Lolito S. Lopez, acting as president of the corporations, convened the meetings. Petitioners Lily C. Lopez and Ma. Christina Patricia C. Lopez questioned the validity of the meetings and the elections, alleging that they were conducted in violation of the corporations' by-laws and the Corporation Code of the Philippines (Batas Pambansa Blg. 68). They also asserted that Christina, who claimed to be a stockholder, was prevented from attending the meeting and that thousands of unissued shares were unlawfully voted.

The Regional Trial Court (RTC) of Quezon City declared the elections in iSpecialist null and void after finding that 33,495 unissued shares had been voted without prior authorization from the board of directors. Similarly, the RTC of Marikina invalidated the meetings and elections in LC Lopez Resources, Inc. and Conqueror International, Inc., holding that the sale of unissued shares violated the petitioners' pre-emptive rights and that the meetings lacked the required quorum.

On appeal, the Court of Appeals (CA) reversed both RTC decisions. It ruled that the petitions before it were timely filed, upheld the validity of the meetings and elections, recognized the issuance of the questioned shares, and concluded that the corporations had validly elected their new boards of directors. Aggrieved, the petitioners elevated the matter to the Supreme Court through a Petition for Review on Certiorari under Rule 45 of the Rules of Court.

ISSUE

Whether or not the Court of Appeals correctly ruled that the petition involving CA-G.R. SP No. 162134 was timely filed despite the evidence presented by petitioners regarding the date of receipt of the RTC Decision.

Whether or not the special stockholders' meetings and the corresponding elections of the boards of directors of the subject corporations were valid under the Corporation Code and the corporations' by-laws.

Whether or not the issuance and voting of the unissued shares violated the pre-emptive rights of stockholders under Section 39 of the Corporation Code and rendered the meetings void for lack of quorum.

HELD

The Supreme Court GRANTED the petition and SET ASIDE the Decision of the Court of Appeals. The Court first ruled that the petition in CA-G.R. SP No. 162134 should have been dismissed for having been filed out of time. It upheld the presumption of regularity in the performance of official duties and gave weight to the RTC certification showing the date when respondents' counsel received the RTC Decision. Since the appeal was not perfected within the period prescribed by law, the RTC judgment became final and executory. The Court reiterated that the timely perfection of an appeal is mandatory and jurisdictional, and failure to comply renders the judgment final.

On the merits of the remaining case, the Court ruled that the sale and voting of the unissued shares were void. Under Section 39 of the Corporation Code, existing stockholders possess pre-emptive rights to subscribe to new shares unless such right has been validly denied or limited. The Court found that the questioned unissued shares were issued without proper authority from the board of directors and in violation of the petitioners' statutory pre-emptive rights. Consequently, the issuance of those shares produced no legal effect and could not be used in determining the voting power of the stockholders.

The Court further held that the special stockholders' meetings were void for lack of quorum. In determining the existence of a quorum, the Court relied on the General Information Sheets (GIS) instead of the Stock and Transfer Books because the latter contained entries of doubtful authenticity. Based on the valid outstanding shares reflected in the GIS, the shares represented during the meetings did not constitute the majority required under the Corporation Code to transact corporate business. Accordingly, the meetings, the election of the directors, and all corporate acts arising therefrom were declared null and void.