Carolina Que Villongco, et al. Vs. Cecilia Que Yabut, et al.

G.R. No. 225022, February 05, 2018

DOCTRINE: Total outstanding capital stocks, without distinction as to disputed or undisputed shares of
stock, is the basis in determining the presence of quorum.

FACTS:
Phil-Ville Development and Housing Corporation (Phil-Ville) is a family corporation founded by Geron-
ima Gallego Que (Geronima) that is engaged in the real estate business. The authorized capital stock of
Phil-Ville is P20,000,000 divided into 200,000 shares with a par value of P100.00 per share. During her
lifetime, Geronima owned 3,140 shares of stock while the remaining 196,860 shares were equally distrib-
uted among Geronima's six children, namely: Carolina Que Villongco, Ana Maria Que Tan, Angelica
Que Gonzales, Cecilia Que Yabut, Ma. Corazon Que Garcia, and Maria Luisa Que Camara.

Geronima died on August 31, 2007. By virtue of the Sale of Shares of Stocks purportedly executed by
Cecilia as the attorney-in-fact of Geronima, Cecilia allegedly effected an inequitable distribution of the
3,140 shares that belonged to Geronima.

Accordingly, the distribution of Geronima's shares was reflected in the General Information Sheets filed
by Phil-Ville in 2010 and 2011.

Cecilia, Eumir Carlo Que Camara and Ma. Corazon [Cecilia Que, et. al.] wrote a letter to Ana Maria,
Corporate Secretary of Phil-Ville, to send out notices for the holding of the annual stockholders' meeting.
However, before Ana Maria could reply thereto, several letters were sent to Phil-Ville's stockholders con-
taining a document captioned "Notice of Annual Stockholders' Meeting" signed by Cecilia and Ma. Cora-
zon as directors.

Thereafter, Carolina, Ana Maria, and Angelica, comprising the majority of the Board of Directors of Phil-
Ville held an emergency meeting and made a decision, by concensus, to postpone the annual stockholders'
meeting of Phil-Ville until the issue of the distribution of the 3,140 shares of stocks in the name of certain
stockholders is settled. All the stockholders were apprised of the decision to postpone the meeting in a
letter dated. Ana Maria, in her capacity as Corporate Secretary and Director of Phil-Ville likewise gave
notice to the SEC with regard to the postponement of the meeting.

Despite the postponement, however, [Cecilia Que, et al.] proceeded with the scheduled annual stockhold-
er's meeting participated only by a few stockholders. In the said meeting, they elected the new members
of the Board of Directors and officers of Phil-Ville namely: Cecilia, Ma. Corazon and Eumir, Chair-
man/Vice President/Treasurer, President/General Manager, and Secretary, respectively.

Meantime, two days prior to the stockholders' meeting, Carolina, Ana Maria, and Angelica, together with
several others, had already filed a Complaint for Annulment of Sale/Distribution or Settlement of Shares
of Stock/Injunction against Cecilia, Eumir Carlo and Ma. Corazon. They subsequently filed an Amended
and Supplemental Complaint for Annulment of Sale/Distribution or Settlement of Shares of
Stock/Annulment of Meeting/Injunction (with Prayer for the Issuance of Temporary Restraining Order
and Writ of Preliminary Prohibitory and Mandatory Injunction).

While the civil case was still pending, Eumir Carlo sent a Notice of Annual Stockholders' Meeting to all
the stockholders of Phil-Ville, notifying them of the setting of the annual stockholders' meeting on Janu-
ary 25, 2014 at 5:00 P.M. at Max's Restaurant, Gov. Pascual comer M.H. Del Pilar Streets, Tugatog, Ma-
labon City. During the meeting, Cecilia, Ma. Corazon and Eumir Carlo were elected as directors and later
elected themselves to the following positions: Cecilia as Chairperson/Vice President/Treasurer; Ma. Co-
razon as Vice Chairperson/President/General Manager; and Eumir Carlo as Corporate Secre-
tary/Secretary.

Consequently, on February 10, 2014, Carolina, Ana Maria, Angelica, Elaine and Edison Williams [Caro-
lina, et al.] filed the instant election case against [Cecilia Que, et al.] before the RTC of Malabon City.
The Complaint prayed that the election of directors be declared void considering the invalidity of the
holding of the meeting for lack of quorum therein, the questionable manner by which it was conducted,
including the invalid inclusion in the voting of the shares of the late Geronima, the questionable valida-
tion of proxies, the representation and exercise of voting rights by the alleged proxies representing those
who were not personally present at the said meeting, and the invalidity of the proclamation of the win-
ners. [Carolina, et al.] also questioned the election of Cecilia, Ma. Corazon and Eumir Carlo as officers of
the corporation. They likewise prayed that all the actions taken by the petitioners in relation to their elec-
tion as directors and officers of the corporation be declared void, including but not limited to the filing of
the General Information Sheet with the SEC.

RTC RULING: Declared the election of Cecilia Que, et al. as void and of no effect considering the lack
of quorum during the annual stockholders' meeting conducted by the latter.

CA RULING: Declared the annual stockholders meeting conducted by Cecilia Que, et al. void for lack of
quorum.

They filed Motions for Partial Reconsideration, CA declared all acts performed by petitioners by reason
of said election, including but not limited to the filing of the General Information Sheet with the SEC on
January 27, 2014, were ultra vires as they were not legally clothed with corporate authority to do so.

They filed Petitions for Review on Certiorari to the SC.

ISSUE/S: Whether the total undisputed shares of stocks in Phil-Ville should be the basis in determining
the presence of a quorum.

HELD:

Total outstanding capital stocks, without distinction as to disputed or undisputed shares of stock, is the
basis in determining the presence of quorum.

Carolina et. al., claimed that the basis for determining quorum should have been the total number
of undisputed shares of stocks of Phil-Ville due to the exceptional nature of the case since the 3,140
shares of the late Geronima and the fractional .67, .67, and .66 shares of Eumir Que Camara, Paolo Que
Camara and Abimar Que Camara are the subject of another dispute filed before the RTC. Thus, excluding
the 3,142 shares from the 200,000 outstanding capital stock, the proper basis of determining the presence
of quorum should be 196,858 shares of stocks. We do not agree.

Section 52. Quorum in meetings. - Unless otherwise provided for in this Code or in the by-laws, a quor-
um shall consist of the stockholders representing a majority of the outstanding capital stock or a majority
of the members in the case of non-stock corporations.

Section 137. Outstanding capital stock defined. - The term "outstanding capital stock", as used in this
Code, means the total shares of stock issued under binding subscription agreements to subscribers or
stockholders, whether or not fully or partially paid, except treasury shares.
The right to vote is inherent in and incidental to the ownership of corporate stocks. It is settled that unis-
sued stocks may not be voted or considered in determining whether a quorum is present in a stockholders'
meeting. Only stocks actually issued and outstanding may be voted. Thus, for stock corporations, the
quorum is based on the number of outstanding voting stocks. The distinction of undisputed or disputed
shares of stocks is not provided for in the law or the jurisprudence. Ubi lex non distinguit nec nos dis-
tinguere debemus — when the law does not distinguish we should not distinguish. Thus, the 200,000 out-
standing capital stocks of Phil-Ville should be the basis for determining the presence of a quorum, with-
out any distinction.

Therefore, to constitute a quorum, the presence of 100,001 shares of stocks in Phil-Ville is necessary.

We agree with the CA when it held that only 98,430 shares of stocks were present during the January 25,
2014 stockholders meeting at Max's Restaurant, therefore, no quorum had been established.

There is no evidence that the 3,140 shares which allegedly had been transferred to 1) Carolina's children,
namely: Francis Villongco, Carlo Villongco, Michael Villongco and Marcelia Villongco; 2) Ana Maria's
daughter, namely: Elaine Victoria Que Tan; 3) Angelica Que; 4) Cecilia's children, namely: Geminiano,
Carlos, Geronimo and John Elston; 5) Ma. Corazon's son, Anthony; and, 6) Maria Luisa's children, name-
ly: Eumir Carlo Camara, Paolo Camara, and Abimar Camara; were transferred and recorded in the stocks
and transfer book of Phil-Ville.
Section 63 of the Corporation Code states that "No transfer, however, shall be valid, except as between
the parties, until the transfer is recorded in the books of the corporation showing the names of the parties
to the transaction, the date of the transfer, the number of the certificate or certificates and the number of
shares transferred. "

As held in the case of Interport Resources Corporation v. Securities Specialist, Inc., held that:
A transfer of shares of stock not recorded in the stock and transfer book of the corporation is non-existent
as far as the corporation is concerned. As between the corporation on the one hand, and its shareholders
and third persons on the other, the corporation looks only to its books for the purpose of determining who
its shareholders are. It is only when the transfer has been recorded in the stock and transfer book that a
corporation may rightfully regard the transferee as one of its stockholders. From this time, the consequent
obligation on the part of the corporation to recognize such rights as it is mandated by law to recognize
arises.

The contention of Cecilia Que, et al., that they should not be faulted for their failure to present the stock
and transfer book because the same is in the possession of the corporate secretary, Ana Maria Que Tan,
who has an interest adverse from them, is devoid of merit. It is basic that a stockholder has the right to
inspect the books of the corporation, and if the stockholder is refused by an officer of the corporation to
inspect or examine the books of the corporation, the stockholder is not without any remedy. The Corpora-
tion Code grants the stockholder a remedy—to file a case in accordance with Section 144.

Thus, insofar as Phil-Ville is concerned, the 3,140 shares of the late Geronima allegedly transferred to
several persons is non-existent. Therefore, the transferees of the said shares cannot exercise the rights
granted unto stockholders of a corporation, including the right to vote and to be voted upon.