Guy vs. Guy

A special stockholders' meeting is validly noticed when the notice is sent or mailed to stockholders of record in accordance with Section 50 of the Corporation Code and the corporate by-laws; actual receipt of the notice before the meeting is not required where the law and by-laws speak only of sending or mailing. Only a stockholder of record, whose ownership is duly recorded in the stock and transfer book, is entitled to notice of a stockholders' meeting.

GCI is a family-owned corporation of the Guy family. Petitioner Simny G. Guy was a stockholder of record and member of the board of directors, while respondent Gilbert G. Guy was also a GCI stockholder of record. The Corporation Code and GCI's by-laws govern the calling and notice of stockholders' meetings.

At the time of the dispute, GCI's shares were held by members of the Guy family, with petitioner Simny G. Guy owning 7,982 of the 80,000 subscribed and issued shares, or around 9.97%, and respondent Gilbert G. Guy owning 63,996 shares, or around 79.99%. Petitioner was a stockholder of record and member of the board of directors. Grace Guy Cheu claimed to be a stockholder by virtue of stock certificates in the names of Paulino Delfin Pe and Benjamin Lim, but the certificates she presented were valid, existing, and uncancelled and remained in the names of Pe and Lim.

On 10 September 2004, Paulino Delfin Pe and Benjamin Lim, stockholders of record of GCI, informed petitioner that they had received a notice dated 31 August 2004 calling for a special stockholders' meeting on 7 September 2004 at the Manila Diamond Hotel. The notice stated that the meeting was for, among others, the election of the Board of Directors for 2004-2005 and consideration of such other matters as may arise, and it was signed by Gilbert G. Guy as Executive Vice-President. The notice was sent to petitioner by registered mail on 2 September 2004, five days before the meeting, but the registry return card showed that petitioner received it only on 22 September 2004, fifteen days after the meeting.

On 30 September 2004, petitioner, for himself and on behalf of GCI and Cheu, filed a Complaint before the RTC of Manila to nullify the stockholders' meeting and election of directors, the acts and resolutions, and to obtain injunction and damages, with prayer for a temporary restraining order and/or writ of preliminary injunction. He assailed the election on the grounds that (a) there was no previous notice to him and Cheu, (b) the meeting was not called by the proper person, and (c) the notices were not issued by the person who had legal authority to do so. On 18 October 2004, the RTC issued a TRO enjoining respondents and their officers, agents, assigns, and all other persons deriving authority from them from acting or holding themselves out as new directors/officers of the corporation.

In his Answer, Gilbert argued that the 7 September 2004 stockholders' meeting was legally called and held, that the notice was signed by the authorized officer of GCI and sent in accordance with the by-laws, and that Cheu was not a stockholder of record entitled to notice.

In its Decision dated 25 June 2007, the RTC found that the notice of the special stockholders' meeting was sent to petitioner by registered mail on 2 September 2004, five days before the 7 September 2004 meeting, in accordance with Article II, Section 3 of GCI's by-laws; that petitioner owned 7,982 shares, or around 9.97%; that Cheu failed to show proof of ownership because she presented uncancelled certificates in the names of Pe and Lim; that Gilbert owned 63,996 shares, or around 79.99%; and that Gilbert, as Vice-President and director, could act as President because the incumbent President Francisco Guy Co Chia was incapacitated by Alzheimer's Disease, which petitioners did not dispute.

• Due Notice and Actual Receipt: Petitioner argued that although the notice was sent by registered mail on 2 September 2004, the registry return card showed he received it only on 22 September 2004, fifteen days after the 7 September 2004 meeting; he insisted that actual receipt of the notice before the meeting is mandatory.
• Statutory Construction: Petitioner argued that Section 50 of the Corporation Code and GCI's by-laws should be construed according to the rule that statutes should receive a sensible construction to give effect to legislative intention and avoid an unjust or absurd conclusion, so that the notice must be actually received, not merely sent, before the meeting.
• Completeness of Service: Petitioner cited the Rules of Court provision on completeness of service, which states that service by registered mail is complete upon actual receipt by the addressee or after five days from receipt of the first notice of the postmaster, whichever is earlier, to support his actual-receipt theory.
• Authority to Issue Notice and Call Meeting: Petitioner argued that the notice was defective because it was not issued by the corporate secretary of GCI under its by-laws, and that the stockholders' meeting was not called by the proper person under the Corporation Code and the by-laws.
• Notice to Cheu: Petitioner argued that the special stockholders' meeting was invalid for lack of due notice to Grace Guy Cheu, whom he treated as a stockholder of record because she was in possession of the stock certificates of Paulino Delfin Pe and Benjamin Lim.

• Validity of Meeting and Notice: Respondent Gilbert G. Guy argued that the stockholders' meeting on 7 September 2004 was legally called and held, that the notice of meeting was signed by the authorized officer of GCI and sent in accordance with the by-laws, and that Cheu was not a stockholder of record entitled to receive notice.
• Mootness: Respondents prayed for dismissal of the Complaint and later of the Petition on the ground that the issues had become moot and academic by virtue of the 2005 annual stockholders' meeting.

• Validity of Notice: Whether the special stockholders' meeting held on 7 September 2004 was validly noticed under Section 50 of the Corporation Code and GCI's by-laws despite petitioner's actual receipt of the notice only on 22 September 2004, after the meeting.
• Authority to Call Meeting and Issue Notice: Whether the special stockholders' meeting was validly called and the notice validly issued by respondent Gilbert G. Guy as Vice-President acting as President and as owner of more than one-third of GCI's outstanding stock, rather than by the corporate secretary.
• Cheu's Entitlement to Notice: Whether Grace Guy Cheu was a stockholder of record entitled to notice of the special stockholders' meeting.

• Validity of Notice: Yes. The notice was validly sent by registered mail on 2 September 2004 for the 7 September 2004 meeting, complying with Section 50 and the by-laws; actual receipt before the meeting was not required.
• Authority to Call Meeting and Issue Notice: Yes. Gilbert, as Vice-President acting as President and owner of around 79.99% of the outstanding stock, validly called the meeting; the notice and calling complied with the by-laws and Corporation Code.
• Cheu's Entitlement to Notice: No. Cheu was not a stockholder of record, so she was not entitled to notice.

• Validity of Notice: Section 50 of B.P. 68 requires written notice of regular meetings at least two weeks prior and of special meetings at least one week prior, unless a different period is required or provided by the by-laws. GCI's by-laws, Article II, Section 3, require the notice to be prepared and mailed to the registered post office address of each stockholder not less than five days before the meeting, and for a special meeting to state the object. The Corporation Code permits the by-laws to shorten or lengthen the notice period. The notice for the 7 September 2004 special meeting was mailed on 2 September 2004, five days before the meeting, and stated the purpose of electing the board and considering other matters. The SC held that Section 50 and the by-laws are clear and unambiguous and require only sending or mailing, not actual receipt. Sending or mailing means depositing in the mail or delivering for transmission with postage and proper address; it is different from filing or service under the Rules of Court. The Rules of Court provision on completeness of service does not apply. Petitioner's actual receipt on 22 September 2004 did not invalidate the meeting because the law and by-laws did not require receipt before the meeting. The SC applied the plain-meaning rule and Rizal Commercial Banking Corp. vs. Intermediate Appellate Court's definition of ambiguity, finding no ambiguity.
• Authority to Call Meeting and Issue Notice: Under GCI's by-laws, Article II, Section 2, a special meeting may be called by resolution of the Board of Directors or by order of the President and must be called upon the written request of stockholders owning at least one-third of the total outstanding stock. Article IV, Section 3 provides that the Vice-President, if qualified, shall exercise all the functions and perform all the duties of the President in the absence or disability of the latter. The RTC found, and the CA affirmed, that Gilbert owned 63,996 shares, or around 79.99% of the total subscribed shares, more than one-third of the outstanding stock, so he could validly call the special meeting. The incumbent President, Francisco Guy Co Chia, was incapacitated by Alzheimer's Disease, which petitioners did not dispute. Gilbert was the duly elected Vice-President, also not disputed. The phrase "if qualified" means the Vice-President must also be a director because the President must be a director under Section 25 of the Corporation Code; Gilbert was both Vice-President and an incumbent director. Thus, Gilbert was qualified to act as President and validly ordered the calling of the special stockholders' meeting. The SC rejected the claim that the notice was defective for not being issued by the corporate secretary, finding no reversible error in the RTC and CA rulings that the notice and calling complied with the by-laws and the Corporation Code.
• Cheu's Entitlement to Notice: A stockholder of record is a person whose ownership of shares is duly registered in the stock and transfer book; only such stockholders are entitled to all rights of a stockholder, including notice. Section 63 of the Corporation Code provides that no transfer shall be valid, except as between the parties, until recorded in the books of the corporation. Batangas Laguna Tayabas Bus Company, Inc. vs. Bitanga held that until registration, a transfer, though valid between the parties, cannot be effective against the corporation; the unrecorded transferee cannot vote or be voted for, and until the transfer is registered, the transferee is not a stockholder but an outsider. GCI's by-laws, Article I, Sections 2, 3 and 4, similarly provide that the corporation shall not consider any transfer effective until the indorsed certificate is submitted for cancellation and a new certificate is issued in the transferee's name, and that certificates submitted for transfer shall be marked "CANCELLED" by the Secretary. Cheu presented valid, existing and uncancelled stock certificates Nos. 49, 50, 58 and 59 in the names of Paulino Delfin Pe and Benjamin C. Lim. The RTC and CA found that she was not a stockholder of record. Therefore, she was not entitled to notice of the special stockholders' meeting.

• Notice of special stockholders' meeting — sending vs. receipt — Under Section 50 of the Corporation Code, written notice of a special stockholders' meeting must be sent to all stockholders at least one week before the meeting unless the by-laws provide otherwise; the by-laws may shorten or lengthen the period. The SC applied this by holding that mailing the notice on 2 September 2004 for a 7 September 2004 meeting complied with GCI's five-day by-law, and that actual receipt by the stockholder before the meeting was not required because the law and by-laws speak only of sending or mailing.
• Stockholder of record — Only a person whose ownership of shares is duly registered in the stock and transfer book is a stockholder of record entitled to all rights of a stockholder, including notice and voting. An unrecorded transferee is not a stockholder but an outsider as against the corporation; the transfer, though valid between the parties, is not effective against the corporation until registration. The SC applied this to Cheu, who held uncancelled certificates in the names of Pe and Lim and was not recorded in GCI's stock and transfer book.
• Calling of special stockholders' meeting and acting President — A special stockholders' meeting may be called by order of the President under the by-laws, and the Vice-President, if qualified, exercises all the functions and duties of the President in the latter's absence or disability. The qualification requires the Vice-President to be a director because the President must be a director. The SC applied this to Gilbert, who was Vice-President and a director and acted as President because the incumbent President was incapacitated by Alzheimer's Disease; as owner of around 79.99% of the outstanding stock, he could also validly call the meeting under the by-laws.
• Plain meaning rule (verba legis) — Where the law is clear and unambiguous, it must be applied literally without interpretation; only ambiguous laws may be construed. The SC applied this to Section 50 and GCI's by-laws, finding that they clearly require sending or mailing, not actual receipt, of the notice.
• Completeness of service under the Rules of Court not applicable — The Rules of Court rule that service by registered mail is complete upon actual receipt or after five days from the first notice of the postmaster does not govern the sending of notice of stockholders' meetings under the Corporation Code; sending/mailing is different from filing or service under the Rules. The SC applied this to reject petitioner's actual-receipt argument.

• "The provisions only require the sending/mailing of the notice of a stockholders' meeting to the stockholders of the corporation. Sending/mailing is different from filing or service under the Rules of Court. Had the lawmakers intended to include the stockholder's receipt of the notice, they would have clearly reflected such requirement in the law." — The SC rejects the actual-receipt requirement and distinguishes the Corporation Code's sending/mailing from service under the Rules of Court.
• "A person who desires to be recognized as stockholder for the purpose of exercising stockholders' right must secure standing by having his ownership of share recorded on the stock and transfer book. Thus, only those whose ownership of shares are duly registered in the stock and transfer book are considered stockholders of record and arc entitled to all rights of a stockholder." — This defines stockholder of record and supports the ruling that Cheu, whose certificates were in the names of Pe and Lim, was not entitled to notice.
• "Until the transfer is registered, the transferee is not a stockholder but an outsider." — Quoting Batangas Laguna Tayabas Bus Company, Inc. vs. Bitanga, the SC explains why an unrecorded transferee cannot exercise stockholder rights against the corporation.
• "Where the law speaks in clear and categorical language, there is no room for interpretation; there is only room for application." — The SC uses the plain-meaning rule to apply Section 50 and the by-laws as written and to reject petitioner's construction requiring actual receipt.

• Rizal Commercial Banking Corp. vs. Intermediate Appellate Court, 378 Phil. 10-31 (1999) — Cited for the definition of ambiguity; the SC applied it to find Section 50 of the Corporation Code and GCI's by-laws clear and unambiguous.
• Batangas Laguna Tayabas Bus Company, Inc. vs. Bitanga, 415 Phil. 43 (2001) — Controlling precedent on stockholder of record; the SC relied on it to hold that an unrecorded transferee is not a stockholder and cannot vote or be voted for until registration.

• Section 50, Batas Pambansa Blg. 68 (Corporation Code of the Philippines) — Requires written notice of regular meetings at least two weeks prior and of special meetings at least one week prior, unless a different period is required or provided by the by-laws; allows waiver of notice. Applied: the by-laws' five-day notice period governed; mailing on 2 September 2004 for the 7 September 2004 meeting complied; actual receipt not required.
• Section 25, Corporation Code — Provides that immediately after election, directors must organize by electing a president who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen, and other officers; no one shall act as president and secretary or president and treasurer at the same time. Applied by the CA: Gilbert, as Vice-President and director, was qualified to act as President.
• Section 63, Corporation Code — Provides that shares may be transferred by delivery of the certificate indorsed by the owner or authorized person, but no transfer shall be valid, except as between the parties, until recorded in the books of the corporation. Applied: Cheu's possession of certificates in the names of Pe and Lim did not make her a stockholder of record.
• Article II, Section 2, GCI By-laws — Provides that special meetings may be called by resolution of the Board of Directors or by order of the President and must be called upon written request of stockholders owning at least one-third of the total outstanding stock. Applied: Gilbert owned around 79.99% and could validly call the meeting; as acting President, he ordered the calling.
• Article II, Section 3, GCI By-laws — Requires written or printed notice for every regular or special meeting to be prepared and mailed to the registered post office address of each stockholder not less than five days before the meeting, and for a special meeting to state the object. Applied: the notice was mailed on 2 September 2004 for the 7 September 2004 meeting, complying with the five-day period.
• Article IV, Section 3, GCI By-laws — Provides that the Vice-President, if qualified, shall exercise all functions and perform all duties of the President in the absence or disability of the latter. Applied: Gilbert acted as President because the incumbent President was incapacitated by Alzheimer's Disease, and Gilbert was qualified as a director.
• Article I, Sections 2, 3 and 4, GCI By-laws — Provide that certificates surrendered for transfer shall be cancelled; the corporation shall not consider any transfer effective until the indorsed certificate is submitted for cancellation and a new certificate issued in the transferee's name; and certificates submitted for transfer shall be marked "CANCELLED" by the Secretary. Applied: Cheu's certificates were not transferred or recorded in her name.
• Rule 43 and Rule 45, Rules of Court — Rule 43 governed petitioner's appeal from the RTC intra-corporate case to the CA, and Rule 45 governed the Petition for Review on Certiorari to the SC. Applied: the case reached the SC through a Rule 45 petition after the CA affirmed the RTC.