Jesus Lanuza vs. Court of Appeals (Adao)
Jesus Lanuza vs. Court of Appeals (Adao)
DOCTRINE: For purposes of transacting business, the quorum should ISSUE: What should be the basis of quorum for a stockholders’ meeting
be based on the outstanding capital stock as found in the articles of —the outstanding capital stock as indicated in the articles of
incorporation and not based on the company’s stock and transfer book. incorporation or that contained in the company’s stock and transfer
book?
FACTS:
In 1952, the Philippine Merchant Marine School, Inc. (PMMSI) was RULING: CA Ruling affirmed; For purposes of transacting business, the
incorporated, with 700 founders’ shares and 76 common shares as its quorum should be based on the outstanding capital stock as found in
initial capital stock subscription reflected in the articles of the articles of incorporation.
incorporation. However, private respondents (Onrubia, et al.) and their
predecessors who were in control of PMMSI registered the company’s RATIO:
stock and transfer book for the first time in 1978, recording 33 The articles of incorporation has been described as one that defines the
common shares as the only issued and outstanding shares of PMMSI. In charter of the corporation and the contractual relationships between
1982, additional 132 shares were recorded in the stock and transfer the State and the corporation, the stockholders and the State, and
book in the name of the heirs of one of the original incorporators, Juan between the corporation and its stockholders. There is no gainsaying
Acayan. that the contents of the articles of incorporation are binding, not only
on the corporation, but also on its shareholders. In the instant case, the
articles of incorporation indicate that at the time of incorporation, the
incorporators were bona fide stockholders of 700 founders’ shares and interest of the said shares. This case is one instance where resort to
76 common shares. Hence, at that time, the corporation had 776 issued documents other than the stock and transfer books is necessary. The
and outstanding shares. 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
On the other hand, a stock and transfer book is the book which records which have been subscribed, more so when the articles of
the names and addresses of all stockholders arranged alphabetically, incorporation show a significantly larger amount of shares issued and
the installments paid and unpaid on all stock for which subscription has outstanding as compared to that listed in the stock and transfer book.
been made, and the date of payment thereof; a statement of every
alienation, sale or transfer of stock made, the date thereof and by and to As shown above, at the time the corporation was set-up, there were
whom made; and such other entries as may be prescribed by law. A already 776 issued and outstanding shares as reflected in the articles of
stock and transfer book is necessary as a measure of precaution, incorporation. No proof was adduced as to any transaction effected on
expediency and convenience since it provides the only certain and these shares from the time PMMSI was incorporated up to the time the
accurate method of establishing the various corporate acts and instant petition was filed, except for the 33 shares which were recorded
transactions and of showing the ownership of stock and like matters. in the stock and transfer book in 1978, and the additional 132 in 1982.
However, a stock and transfer book, like other corporate books and But obviously, the shares so ordered recorded in the stock and transfer
records, is not in any sense a public record, and thus is not exclusive book are among the shares reflected in the articles of incorporation as
evidence of the matters and things which ordinarily are or should be the shares subscribed to by the incorporators named therein.
written therein. In fact, it is generally held that the records and minutes
of a corporation are not conclusive even against the corporation but are One who is actually a stockholder cannot be denied his right to vote by
prima facie evidence only, and may be impeached or even contradicted the corporation merely because the corporate officers failed to keep its
by other competent evidence. Thus, parol evidence may be admitted to records accurately. A corporation’s records are not the only evidence of
supply omissions in the records or explain ambiguities, or to contradict the ownership of stock in a corporation. In the instant case, no less than
such records. the articles of incorporation declare the incorporators to have in their
name the founders and several common shares. Thus, to disregard the
A quorum is necessary for election of directors or trustees. A quorum contents of the articles of incorporation would be to pretend that the
shall consist of the stockholders representing a majority of the basic document which legally triggered the creation of the corporation
outstanding capital stock or majority of the members in the case of non- does not exist and accordingly to allow great injustice to be caused to
stock corporation. (Sec 52) The term "outstanding capital stock" as the incorporators and their heirs.
used in this code, means the total shares of stock issued to subscribers
or stockholders whether or not fully or partially paid (as long as there WHEREFORE, the petition is DENIED and the assailed Decision is
is binding subscription agreement) except treasury shares. (Sec 137). AFFIRMED.
Thus, quorum is based on the totality of the shares which have been
subscribed and issued, whether it be founders’ shares or common
shares.