Lily C. Lopez vs. Lolito S. Lopez

A stockholders’ meeting is void for lack of quorum where the shares purportedly voted were issued without prior board authorization and in violation of the stockholders’ preemptive right, and a person’s status as stockholder may be proved by evidence other than the Stock and Transfer Book—such as corporate officers’ admissions and entries in the General Information Sheet—where the STB entries are of doubtful veracity. A petition for review not perfected within the reglementary period is jurisdictionally defective and renders the assailed judgment final and executory.

Lily C. Lopez and Lolito S. Lopez, spouses, were majority shareholders and directors of three family corporations: i Specialist Development Corporation, LC Lopez Resources, Inc., and Conqueror International, Inc. Marital discord led Lolito, as president, to call special stockholders’ meetings in February 2019. In those meetings, new boards of directors were elected that excluded Lily and their children. Lily and two of their children filed election contests in the trial courts, alleging violations of by-laws and the Corporation Code, including the improper issuance and voting of unissued shares and the exclusion of legitimate stockholders.

The i Specialist Meeting (Quezon City Case)
On 14 February 2019, respondent Lolito S. Lopez, as president of i Specialist Development Corporation, called a special stockholders’ meeting at Anabel’s Restaurant in Quezon City. A new Board of Directors was elected, composed of Lolito and his co-respondents. Petitioner Lily C. Lopez was the wife of Lolito and, together with him, held the majority shares of i Specialist. She filed a complaint seeking to nullify the meeting and election, alleging violations of the corporation’s By-Laws (meeting not held at the principal office and on a date different from that prescribed), that her daughter Christina was prevented from attending, that 33,495 unissued shares were voted without her preemptive right being observed, and that Lolito’s shares were conjugal and could not be voted solely by him. Respondents countered that the president could call special meetings under the By-Laws and the venue was within the city of the principal office, as permitted by Section 51 of the Corporation Code.

The Quezon City RTC Ruling
The trial court found that i Specialist’s 2013 General Information Sheet showed only 12,500 common shares, with petitioner and Lolito each holding 5,592. Lolito claimed to have infused personal money to purchase 33,495 unissued shares. The court held that unissued shares could be issued only with prior board authorization under Section 23 of the Corporation Code. Lolito admitted no board resolution authorized the sale. Because the sale was invalid, the shares could not be voted. The number of invalidly issued shares was substantial enough to affect the election; thus, the meeting and elections were declared null and void ab initio.

The LC Lopez and Conqueror Meeting (Marikina City Case)
On 11 February 2019, Lolito, as chairman/president of LC Lopez Resources, Inc. and Conqueror International, Inc., held a stockholders’ meeting. Petitioner Lily, along with her children Christina and John Rusty, who were listed as stockholders in the 2017 GIS of both corporations, were either turned away (proxies of Christina and John Rusty were rejected on the ground that they were not stockholders) or walked out (Lily was disallowed from having her lawyer present). The meeting proceeded and elected a new board that excluded the petitioners. Petitioners alleged that Lolito had purchased 252,125 unissued LC Lopez shares and 97,050 unissued Conqueror shares without board resolution, and used those shares to elect his co-respondents.

The Marikina RTC Ruling
The trial court found Christina and John Rusty were indeed stockholders, relying on the GIS, testimonies of Lolito and two other respondents confirming their status, the fact that the corporations were family enterprises, and the irregularity of the Stock and Transfer Book entries. The STB was filled out only days before the meeting by Edna Victoria, the accounting head, not by the corporate secretary, in violation of the By-Laws; the entries lacked supporting documents. The stock certificates were held void for non-compliance with the requirement of full payment of subscription. The purchase of unissued shares was invalid for lack of board resolution and violation of Lily’s preemptive right. Without the excluded stockholders, only Lolito’s shares were represented—61,750 of 162,500 outstanding shares in LC Lopez, and 17,100 of 45,000 in Conqueror—insufficient to constitute a quorum. The meeting and elections were declared void.

The Court of Appeals Reversal
The CA held the petition in CA-G.R. SP No. 162134 was timely filed, discrediting the RTC’s certification of personal service on respondents’ counsel’s staff. On the merits, it declared Christina was not a stockholder because her name did not appear in the STB, and ruled Lolito’s purchase of unissued shares was merely voidable (ultra vires) and justified by the need to infuse capital.

• Timeliness of CA Petition: Petitioner maintained that the petition in CA-G.R. SP No. 162134 was filed beyond the 15-day reglementary period under A.M. 04-9-07-SC, as evidenced by a certification from the RTC civil-in-charge showing that respondents’ counsel, through a representative, personally received the decision on 6 August 2019.
• Stockholder Status of Christina: Petitioner argued that Christina was a stockholder of LC Lopez and Conqueror, her status being evidenced not only by the GIS but by the admissions of respondent Lolito and his co-respondents, and by the practice of the family corporations.
• Validity of Unissued Shares: Petitioner contended that the purchase of unissued shares by Lolito was void for lack of board resolution, as required by Section 23 of the Corporation Code, and violated her preemptive right under Section 39 (Section 38) of the same Code.
• Lack of Quorum: Given the invalidity of the unissued shares and the wrongful exclusion of stockholders, petitioner asserted no quorum existed to validly conduct the meetings.

• Timeliness: Respondents countered that the petition was filed on time, asserting that their counsel’s inquiry with the RTC revealed no letter from the law firm requesting the court to furnish a staff member with an original duplicate of the decision; they argued petitioner failed to prove the recipient was their authorized representative.
• Stockholder Status: Respondents insisted Christina was not a stockholder because her name was not recorded in the Stock and Transfer Book, invoking the rulings in Lao v. Lao and F & S Velasco, Co., Inc. v. Madrid that the STB controls stockholder status over the GIS.
• Purchase of Unissued Shares: The purchase was merely voidable as an ultra vires act, subject to ratification, and was justified by the corporations’ extreme need for capital infusion and alleged misuse of assets by petitioner.
• Quorum: The meetings were validly constituted because a quorum was attained based on the shareholdings as reflected in the STB, and the exclusion of petitioner and her children was proper as they were not stockholders.

• Timeliness of Appeal: Whether the petition for review in CA-G.R. SP No. 162134 was timely filed within the reglementary period.
• Stockholder Status: Whether Ma. Christina Patricia C. Lopez was a stockholder of LC Lopez Resources, Inc. and Conqueror International, Inc. at the time of the special stockholders’ meeting.
• Validity of Purchase of Unissued Shares: Whether respondent Lolito Lopez’s acquisition of unissued shares of stock in the subject corporations, without a board resolution and without offering them to existing stockholders, was valid.

• Timeliness of Appeal: The petition in CA-G.R. SP No. 162134 was dismissed as untimely. The certification issued by an officer of the RTC, attesting that respondents’ counsel received a copy of the decision on 6 August 2019 through a representative, carried a presumption of regularity. Respondents failed to present clear and convincing evidence to overcome that presumption. The perfection of an appeal within the prescribed period is jurisdictional; non-compliance renders the judgment final and executory. Without ruling on the merits, the dismissal of the appeal with respect to the Quezon City case was upheld.
• Stockholder Status: Christina Lopez was held to be a stockholder of LC Lopez and Conqueror. The ruling in Lao v. Lao was distinguished on the facts: unlike in Lao, Christina presented evidence beyond the GIS—namely, the testimonies of Lolito and other respondents confirming her stockholder status, and the fact that Lolito sent her notices for the meeting. Lolito was estopped from denying her status, having previously represented her as a stockholder in bank transactions. The trial court properly relied on the GIS to determine stockholdings because the Stock and Transfer Book entries were shown to be of doubtful veracity, having been prepared by an unauthorized person days before the meeting without supporting documents.
• Validity of Purchase of Unissued Shares: The purchase of unissued shares was void. Section 23 of the Corporation Code requires that all corporate powers be exercised by the Board of Directors; no individual officer may solely exercise corporate power without board authority. Lolito admitted no board resolution authorized the sale. Additionally, the sale violated petitioner’s right of preemption under Section 39 (Section 38) of the Corporation Code, which requires that all stockholders be offered the right to subscribe to new issuances in proportion to their holdings. Consequently, the shares could not be legally voted.

• Presumption of Regularity of Official Acts — Official acts of public officers, including certifications issued by court personnel, are presumed regular. To overcome this presumption, clear and convincing evidence to the contrary must be presented. (Yap v. Lagtapon applied.)
• Perfection of Appeal as Jurisdictional — The right to appeal is statutory and must be exercised strictly in the manner and within the period prescribed by law. Failure to perfect an appeal within the reglementary period renders the decision final and executory, and the appellate court acquires no jurisdiction. (Building Care Corp. v. Macaraeg applied.)
• Determination of Stockholder Status: STB Not Exclusively Controlling — While the general rule is that the Stock and Transfer Book is the controlling record of a corporation’s stockholders, a person may prove stockholder status through other evidence where the STB entries are of questionable veracity or were irregularly prepared. The General Information Sheet, coupled with admissions of corporate officers and other documentary and testimonial evidence, may suffice. (Lao v. Lao and F & S Velasco v. Madrid distinguished.)
• Estoppel of Corporate Officer re Stockholder Status — A corporate officer who has previously recognized and held out a person as a stockholder in business dealings cannot subsequently deny that person’s stockholder status when it becomes disadvantageous.
• Requirement of Board Authorization for Issuance of Unissued Shares — Under Section 23 of the Corporation Code, the sale or issuance of unissued shares is a corporate act that requires prior authorization by a resolution of the Board of Directors. An individual officer acting alone cannot validly effect such issuance.
• Preemptive Right of Stockholders — Under Section 39 (now Section 38) of the Corporation Code, all stockholders enjoy a preemptive right to subscribe to all issues or dispositions of shares of any class in proportion to their respective shareholdings, unless denied by the articles of incorporation. An issuance of shares that does not respect this right is void.

• “The certification, having been issued by an officer of the court, carried with it the presumption of regularity. Perforce, it should be given credence and accorded full faith.”
• “[T]he perfection of an appeal within the period and in the manner prescribed by law is jurisdictional and non-compliance with such legal requirements is fatal and has the effect of rendering the judgment final and executory.”
• “It is clear then that without the board resolution authorizing the sale of the erstwhile unissued shares, respondent Lolito could not have validly purchased them. The sale being invalid, respondent Lolito could not have legally used the same in voting for a new set of directors in the concerned corporations.”
• “In determining the quorum, We would have to refer to the GIS of the subject corporations, instead of the STB, in view of the undisputed findings of the court a quo that the entries therein were of doubtful veracity …”

• Yap v. Lagtapon, 803 Phil. 652 (2017) — Followed for the doctrine that the presumption of regularity in the performance of official duties can only be overcome by clear and convincing evidence.
• Building Care Corp. v. Macaraeg, 700 Phil. 749 (2012) — Followed for the principle that the perfection of an appeal within the period and manner prescribed by law is jurisdictional.
• Lao v. Lao, 588 Phil. 844 (2008) — Distinguished. In Lao, stockholder status was denied because the claimant relied solely on the GIS; here, additional evidence supported the claim.
• F & S Velasco, Co., Inc. v. Madrid, 772 Phil. 628 (2015) — Distinguished on similar grounds as Lao.
• Bitong v. Court of Appeals, 354 Phil. 516 (1998) — Cited by the trial court for the requisites of a valid stock certificate (full payment of subscription).

• Section 23, Corporation Code (BP 68) — Vests the exercise of corporate powers in the Board of Directors. Applied to invalidate Lolito’s sole purchase of unissued shares without board authorization.
• Section 39, Corporation Code (now Section 38) — Grants stockholders preemptive right to subscribe to new issues of shares in proportion to their holdings. The sale of unissued shares to Lolito without offering them to other stockholders violated this right.
• Rule 13, Section 6, Rules of Court — Governs personal service of pleadings and judgments. The CA’s interpretation was rejected; service through a representative who personally received the decision at the court was deemed effective.
• A.M. No. 04-9-07-SC (Rule on Corporate Rehabilitation and Intra-Corporate Controversies) — Prescribes the 15-day period for filing petitions for review; non-compliance was fatal to respondents’ appeal.

Gesmundo, C.J. (Chairperson), Hernando, Zalameda, and Marquez, JJ., concur.