ASG Law

Tag: Corporate Governance

  • Valid Notice in Corporate Meetings: Mailing vs. Receipt in the Philippines

    The Supreme Court has clarified that providing notice for a special stockholders’ meeting requires only the mailing of the notice within the period prescribed by the corporation’s by-laws, not necessarily the actual receipt by the stockholder before the meeting date. This ruling underscores the importance of adhering to corporate by-laws regarding notification procedures. It also distinguishes the requirements for notice in corporate settings from those in court proceedings, emphasizing that ‘sending’ notice is sufficient compliance. The decision impacts minority stockholders, ensuring that as long as a notice is properly mailed, the meeting’s validity is not compromised by non-receipt, thus maintaining corporate governance efficiency.

    When is Mailed Notice Enough? Examining Corporate Meeting Requirements

    This case revolves around a family-owned corporation, Goodland Company, Inc. (GCI), and a dispute over the validity of a special stockholders’ meeting held on September 7, 2004. Simny G. Guy, a minority stockholder, challenged the meeting, asserting that he and another stockholder, Grace Guy Cheu, did not receive proper notice. He argued that the lack of timely notice invalidated the election of new directors and officers during that meeting. Gilbert G. Guy, along with Alvin Agustin T. Ignacio, defended the meeting’s validity, stating that notices were sent in accordance with the corporation’s by-laws. This dispute reached the Supreme Court, which was tasked with determining whether the mailing of the notice, as opposed to its actual receipt, satisfied the legal requirements for a valid stockholders’ meeting.

    The central issue hinges on interpreting Section 50 of Batas Pambansa Blg. 68 (B.P. 68), the Corporation Code of the Philippines, which stipulates the notice requirements for stockholders’ meetings. Specifically, the law states:

    SECTION 50. Regular and Special Meetings of Stockholders or Members. — …at least one (1) week written notice shall be sent to all stockholders or members, unless otherwise provided in the by-laws.

    Furthermore, GCI’s by-laws provide that:

    Section 3. Notice of meeting written or printed for every regular or special meeting of the stockholders shall be prepared and mailed to the registered post office address of each stockholder not less than five (5) days prior to the date set for such meeting.

    Simny Guy contended that actual receipt of the notice prior to the meeting date was mandatory, citing principles of statutory construction and completeness of service under the Rules of Court. However, the Supreme Court disagreed, emphasizing that the law’s requirement is for the notice to be sent, not necessarily received.

    The Court highlighted that the language of Section 50 of the Corporation Code and GCI’s by-laws is clear and unambiguous. They mandate only the sending or mailing of the notice to the stockholders. The Supreme Court then reasoned that the term “send” should be interpreted according to its plain meaning, which, according to Black’s Law Dictionary, means:

    “Send” means to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and in the case of an instrument to an address specified thereon or otherwise agreed, or if there be none, to any address reasonable under the circumstances.

    The Court also pointed out that if lawmakers had intended to require receipt of the notice, they would have explicitly included such a requirement in the law. Since the law only requires the mailing of the notice within the prescribed period, the Court found that the respondents had met their obligation.

    Moreover, the petitioner argued that the notice was defective because it was not issued by the corporate secretary, as well as the meeting was not called by the proper person. The Court dismissed these arguments, citing Article II, Sec. 2 of GCI’s by-laws, which allows the President or, in their absence, the Vice President, to call a special stockholders’ meeting. The Court noted that the respondent, Gilbert Guy, was the Vice President and owned more than one-third of the outstanding stock of GCI. Therefore, he was authorized to call the meeting.

    Finally, the petitioner claimed that Grace Cheu, another stockholder, did not receive notice of the meeting, invalidating it. The Court dismissed this claim on the ground that Cheu was not a stockholder of record. The Court explained that to be recognized as a stockholder and exercise stockholders’ rights, ownership must be recorded in the stock and transfer book. Section 63 of the Corporation Code also states:

    No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation so as to show 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.

    The Court emphasized that until the transfer is registered, the transferee is not a stockholder but an outsider. In this case, Cheu had not registered her alleged stock ownership in GCI’s books and therefore was not entitled to notice of the stockholders’ meeting.

    In summary, the Supreme Court affirmed the lower courts’ decisions, holding that the special stockholders’ meeting held on September 7, 2004, was valid. The Court emphasized that the Corporation Code and GCI’s by-laws require only the mailing of the notice within the prescribed period. Actual receipt by the stockholder is not a mandatory requirement. The Court also clarified that to be considered a stockholder of record, ownership must be registered in the corporation’s books.

    FAQs

    What was the key issue in this case? The central issue was whether the mailing of a notice for a special stockholders’ meeting, rather than its actual receipt, satisfied the legal requirements for a valid meeting under the Corporation Code and the company’s by-laws.
    Does the Corporation Code require actual receipt of meeting notices? No, the Corporation Code requires that notice be sent to all stockholders, but it does not explicitly mandate that stockholders must actually receive the notice.
    What does it mean to be a ‘stockholder of record’? A ‘stockholder of record’ is a person whose ownership of shares is duly registered in the corporation’s stock and transfer book, entitling them to all the rights of a stockholder, including the right to receive meeting notices.
    What is the significance of a corporation’s by-laws in this context? The corporation’s by-laws set the specific procedures for providing notice of meetings, including the timeframe for mailing notices to stockholders. These by-laws must comply with the Corporation Code but can provide additional details.
    Who is authorized to call a special stockholders’ meeting? According to the Goodland Company, Inc.’s by-laws, a special stockholders’ meeting can be called by the President or, in their absence or disability, by the Vice President, especially if they own a significant portion of the company’s stock.
    What evidence is needed to prove stock ownership? To prove stock ownership, one must show that their ownership is duly recorded in the corporation’s stock and transfer book, not just possession of stock certificates.
    Why was Grace Cheu not considered a stockholder in this case? Grace Cheu was not considered a stockholder of record because she had not registered her alleged stock ownership in the company’s books, despite possessing stock certificates in the names of other individuals.
    What is the key takeaway for corporations regarding meeting notices? Corporations should ensure that they comply with their by-laws and the Corporation Code by properly mailing meeting notices to all stockholders of record within the prescribed timeframe, as this constitutes sufficient compliance.

    This case clarifies the requirements for providing notice of stockholders’ meetings, emphasizing the importance of following corporate by-laws and maintaining accurate records of stock ownership. The ruling helps ensure that corporate meetings are conducted fairly and efficiently, while also providing clarity for minority stockholders about their rights and responsibilities.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Simny G. Guy v. Gilbert G. Guy, G.R. No. 184068, April 19, 2016

  • Corporate Control and Stock Ownership: Resolving Disputes in Philippine Corporations

    In the case of Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee, the Supreme Court addressed a dispute over the rightful control of Philippine International Life Insurance Company, Inc. (Philinterlife). The Court ruled that the petitioners, representing the Estate of Dr. Ortañez, failed to prove they held the majority of the corporation’s outstanding capital stock during a contested stockholders’ meeting. This decision underscores the importance of presenting credible evidence to substantiate claims of majority ownership in corporate disputes, affecting how companies are managed and controlled. The ruling emphasizes that previous court decisions cannot be overstretched to invalidate corporate actions that were legitimately undertaken.

    Ortañez Estate vs. Lee Group: Who Really Controls Philinterlife?

    The central issue in Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee revolves around a protracted battle for control over Philinterlife. Dr. Ortañez, the founder, held a significant stake in the company. Upon his death, disputes arose among his heirs regarding the ownership and sale of his shares. The petitioners, representing Dr. Ortañez’s estate, challenged the validity of a stockholders’ meeting conducted by the Lee group, arguing that they, the petitioners, represented the majority ownership and therefore the election of the Lee group as directors was invalid.

    The petitioners relied heavily on a previous Supreme Court decision, G.R. No. 146006, to support their claim of majority ownership. They contended that this prior ruling invalidated all increases in the authorized capital stock of Philinterlife, implying that the company’s capital stock remained at 5,000 shares, of which they owned more than 51%. However, the Supreme Court clarified that G.R. No. 146006 only invalidated those increases in capital stock that were approved based on illegally acquired shares. This distinction was crucial to the Court’s present decision.

    The Court found that the petitioners failed to provide sufficient evidence to prove that Philinterlife’s outstanding capital stock was indeed 5,000 shares during the contentious stockholders’ meeting. The Court highlighted that the increases in capital stock before the illegal sales were never challenged and were in fact mandated by law. This underscores a crucial point: corporate actions undertaken before any legal challenges are presumed valid, unless proven otherwise.

    “We observed in the aforesaid decision that Juliana Ortañez (Juliana) and her three sons invalidly entered into a Memorandum of Agreement extra-judicially partitioning the intestate estate among themselves, despite their knowledge that there were other heirs or claimants to the Estate and before the final settlement of the Estate by the intestate court. Since the appropriation of the estate properties was invalid, the subsequent sale thereof by Juliana and Lee to a third party (FLAG), without court approval, was likewise void.”

    Furthermore, the Court examined the capital structure of Philinterlife over time, noting that the Estate’s percentage of ownership decreased as the company’s capital stock increased. By December 15, 1980, the Estate owned 40.58% of the outstanding shares. This percentage further diminished as the capital stock grew to 10,000 shares by 1988. Thus, the petitioners’ claim of always holding a majority stake was demonstrably false.

    The Supreme Court also emphasized the significance of a certification issued by the Insurance Commission, which mandated domestic insurance companies to increase their minimum paid-up capital. This legal requirement further validated the increases in Philinterlife’s capital stock. In essence, the Court recognized that corporations must comply with regulatory requirements, and these actions cannot be easily invalidated without concrete proof of illegality.

    The Court agreed with the lower courts that the election of the respondents as directors and officers of Philinterlife was presumed valid in the absence of compelling evidence to the contrary. This presumption of regularity is a cornerstone of corporate law, protecting the decisions and actions of corporate boards unless proven to be illegal or fraudulent. The decision reinforces the principle that those challenging corporate actions bear the burden of proof.

    In practical terms, this case underscores the importance of maintaining accurate corporate records and adhering to legal requirements for increasing capital stock. It serves as a reminder that previous court rulings must be interpreted narrowly and applied only to the specific issues they addressed. Moreover, parties seeking to challenge corporate actions must present clear and convincing evidence to support their claims, rather than relying on broad interpretations of past decisions.

    FAQs

    What was the key issue in this case? The central issue was whether the respondents were validly elected as the Board of Directors during the annual stockholders’ meeting of Philinterlife, based on the claim that the petitioners represented the majority of the outstanding capital stock.
    What was the basis of the petitioners’ claim? The petitioners claimed that a prior Supreme Court decision (G.R. No. 146006) invalidated all increases in Philinterlife’s capital stock, thereby maintaining their majority ownership based on the original capital structure.
    How did the Supreme Court rule on the capital stock increases? The Supreme Court clarified that G.R. No. 146006 only invalidated increases in capital stock approved based on illegally acquired shares, not all increases, especially those mandated by law.
    What evidence did the petitioners fail to present? The petitioners failed to present credible and convincing evidence that Philinterlife’s outstanding capital stock during the 2006 meeting was 5,000 shares and that they owned more than 51% of those shares.
    What role did the Insurance Commission play in this case? The Insurance Commission’s certification confirmed that domestic insurance companies were required to increase their minimum paid-up capital, supporting the validity of Philinterlife’s capital stock increases.
    What is the significance of the presumption of regularity in corporate law? The presumption of regularity means that corporate actions, such as the election of directors, are presumed valid unless proven otherwise, placing the burden of proof on those challenging the actions.
    What was the Estate’s ownership percentage over time? The Estate’s ownership percentage decreased as the company’s capital stock increased, starting from 50.72% and eventually dropping to 4.05%, negating their claim of always holding a majority stake.
    What is the key takeaway for corporations and shareholders from this case? The key takeaway is the importance of maintaining accurate corporate records, complying with legal requirements, and presenting clear evidence when challenging corporate actions to substantiate claims of majority ownership.

    In conclusion, the Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee case underscores the critical role of evidence and legal compliance in corporate disputes. Parties seeking to challenge corporate actions must present compelling evidence, and courts will generally uphold the validity of corporate actions undertaken in accordance with legal and regulatory requirements.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Estate of Dr. Juvencio P. Ortañez vs. Jose C. Lee, G.R. No. 184251, March 09, 2016

  • Upholding Corporate Meeting Validity: Proxy Rights and Timeliness in Intra-Corporate Disputes

    The Supreme Court ruled that a complaint questioning the validity of a corporate annual stockholders’ meeting (ASM) was filed out of time because it effectively contested the election of the board of directors. The Court emphasized that stockholders who were represented by a valid proxy at the meeting could not later claim lack of notice to invalidate the meeting’s proceedings. This decision reinforces the importance of adhering to procedural rules and respecting proxy rights in corporate governance, thereby ensuring stability in corporate affairs.

    King-king Project Fiasco: Can Shareholders Feign Ignorance to Overturn Board Elections?

    The case of Ricafort v. Dicdican [G.R. Nos. 202647-50, 205921-24, March 9, 2016] arose from a bitter intra-corporate dispute within Nationwide Development Corporation (NADECOR), a company holding significant mining rights over the King-king Gold and Copper Project. Corazon H. Ricafort, along with her children, Jose Manuel H. Ricafort and Marie Grace H. Ricafort (petitioners), claiming to be stockholders of record, filed a complaint to nullify the August 15, 2011, ASM of NADECOR. They alleged that they did not receive timely notice of the meeting and were thus unable to participate, violating NADECOR’s By-Laws. The respondents, including members of the newly-elected Board of Directors and NADECOR’s Corporate Secretary, countered that the complaint was essentially an election contest filed beyond the prescribed 15-day period and that the petitioners were, in fact, represented at the ASM by their proxy, Jose G. Ricafort (JG Ricafort). This legal battle highlighted the critical question of whether a complaint challenging a stockholders’ meeting, based on lack of notice, should be considered an election contest subject to a shorter prescriptive period, especially when the complaining stockholders were represented by proxy.

    At the heart of the dispute was NADECOR’s August 15, 2011, ASM, which resulted in the election of a new Board of Directors. The petitioners sought to invalidate this meeting, claiming a violation of their right to participate due to late receipt of the meeting notice. The Regional Trial Court (RTC) initially sided with the petitioners, declaring the ASM null and void, and ordering a new meeting. However, the Court of Appeals (CA) reversed this decision, prompting the petitioners to elevate the matter to the Supreme Court. The CA found that the complaint was, in essence, an election contest and was therefore time-barred under the Interim Rules of Procedure Governing Intra-Corporate Controversies. The Interim Rules, specifically Section 3, Rule 6, dictate that such contests must be filed within 15 days from the date of the election or resolution of the controversy by the corporation, if its by-laws provide a procedure for resolution.

    The Supreme Court agreed with the CA, emphasizing that despite the petitioners’ attempts to frame the issue as a mere lack of notice, the true intent of the complaint was to challenge the election of the Board of Directors. The Court referenced its prior ruling in Yujuico v. Quiambao, where it held that a complaint seeking to nullify the election of a Board of Directors at an ASM constitutes an election contest. The Court stated:

    Indeed, to nullify the August 15, 2011 ASM would have had no practical effect except to void the election of the Board of Directors. And no doubt, this was the trial court’s understanding of the petitioners’ intent when it voided the August 15, 2011 ASM and all matters taken up thereat.

    Furthermore, the Court scrutinized the petitioners’ claim of non-participation, noting that they were represented at the ASM by JG Ricafort through an irrevocable proxy. The Court underscored the significance of proxy representation, stating that stockholders cannot claim deprivation of their right to participate when they have duly authorized a proxy to act on their behalf. The Court highlighted the irrevocable proxy agreement, which granted JG Ricafort the authority to attend and vote on any matter at any shareholders’ meeting. The Supreme Court cited Gatmaitan’s affidavit, NADECOR Corporate Secretary, who declared under oath that JG Ricafort held a valid irrevocable proxy from the petitioners to attend and vote their shares at all meetings of the stockholders.

    A key aspect of the case revolved around the petitioners’ relationship with JG Ricafort. The respondents presented evidence, including Nominee Agreements, indicating that JG Ricafort was the true and beneficial owner of the shares registered in the petitioners’ names. These agreements stipulated that the petitioners held legal title to the shares on behalf of JG Ricafort, who retained beneficial ownership. The Court observed that this arrangement undermined the petitioners’ claim of being unlawfully deprived of their right to vote, as JG Ricafort had, in fact, exercised this right on their behalf. The Supreme Court stated:

    As Nominees, the petitioners expressly acknowledged that they held “the legal title to the Shares for and in behalf of Principal [JG Ricafort] who is the beneficial owner thereof” and that “[a]ny and all payments made by the Nominee on the Shares, including but not limited to the subscription payment therefor, were funded by, and made on behalf and for the benefit of the Principal [JG Ricafort].”

    The petitioners also argued that they did not receive proper notice of the ASM, as required by NADECOR’s By-Laws. However, the Court found that NADECOR had complied with the By-Laws by mailing the notices to the petitioners’ address at least three days before the meeting. Moreover, the Court noted that even if there were any irregularities in the notice, NADECOR’s By-Laws stipulated that such irregularities would not affect the validity of the ASM. Section 3, Article 1 of NADECOR’s Amended By-Laws states that “Failure to give notice of annual meeting, or any irregularity in such notice, shall not affect the validity of such annual meeting or of any proceedings at such meeting”. The Supreme Court ultimately concluded that the RTC had erred in nullifying NADECOR’s August 15, 2011, ASM and dismissing SEC Case No. 11-164, thus upholding the CA’s decision.

    This case underscores the importance of timely action in corporate disputes. The 15-day prescriptive period for election contests, as defined in the Interim Rules, is designed to ensure swift resolution and prevent prolonged uncertainty in corporate governance. By filing their complaint beyond this period, the petitioners forfeited their right to challenge the ASM. The decision also highlights the significance of proxy representation. Stockholders who choose to exercise their rights through a proxy are bound by the proxy’s actions and cannot later disavow those actions based on alleged lack of personal notice. Building on this principle, the case affirms that clear and unequivocal proxy authorizations are crucial for maintaining order and legitimacy in corporate proceedings.

    Furthermore, the Ricafort case serves as a reminder of the importance of transparency and honesty in corporate dealings. The petitioners’ attempt to conceal the true nature of their complaint and their relationship with JG Ricafort did not escape the Court’s scrutiny. The Court’s emphasis on the Nominee Agreements and the actual exercise of voting rights by JG Ricafort demonstrates a commitment to looking beyond formal titles to the underlying economic realities of corporate ownership. This approach contrasts with a purely formalistic interpretation of corporate law and emphasizes the need for stockholders to act in good faith.

    FAQs

    What was the key issue in this case? The key issue was whether the complaint filed by the petitioners constituted an election contest and was therefore subject to the 15-day prescriptive period under the Interim Rules of Procedure Governing Intra-Corporate Controversies.
    Why did the petitioners claim the ASM was invalid? The petitioners claimed the ASM was invalid because they allegedly did not receive timely notice of the meeting, thereby violating their right to participate as stockholders.
    How did the respondents counter the petitioners’ claim? The respondents argued that the complaint was essentially an election contest filed beyond the 15-day prescriptive period and that the petitioners were, in fact, represented at the ASM by their proxy, JG Ricafort.
    What is an irrevocable proxy, and how did it affect this case? An irrevocable proxy is a written authorization granting another person the power to attend and vote at corporate meetings on behalf of a stockholder. In this case, the petitioners had granted JG Ricafort an irrevocable proxy, which the Court found valid and binding.
    What role did the Nominee Agreements play in the Court’s decision? The Nominee Agreements showed that JG Ricafort was the true and beneficial owner of the shares registered in the petitioners’ names, undermining their claim of being unlawfully deprived of their right to vote.
    What was the significance of the Court referencing Yujuico v. Quiambao? The Court referenced Yujuico v. Quiambao to support its finding that a complaint seeking to nullify the election of a Board of Directors at an ASM constitutes an election contest, subject to the 15-day prescriptive period.
    How did the RTC and CA differ in their rulings? The RTC initially sided with the petitioners, declaring the ASM null and void, while the CA reversed this decision, finding that the complaint was time-barred as an election contest.
    What is the practical implication of this case for stockholders? The practical implication is that stockholders must act promptly in challenging corporate decisions and ensure that their rights are clearly and effectively exercised through proper representation, such as a valid proxy.

    In conclusion, the Supreme Court’s decision in Ricafort v. Dicdican reaffirms the importance of adhering to procedural rules and respecting proxy rights in corporate governance. This ruling provides clarity on what constitutes an election contest and emphasizes the need for timely action in challenging corporate decisions. By upholding the validity of the NADECOR ASM, the Court has contributed to maintaining stability and order in the corporation’s affairs.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Ricafort v. Dicdican, G.R. Nos. 202647-50, 205921-24, March 9, 2016

  • Derivative Suit: Protecting Corporate Rights and Stockholder Remedies in Intra-Corporate Disputes

    In the case of Marcelino M. Florete, Jr., et al. v. Rogelio M. Florete, et al., the Supreme Court clarified the distinction between individual, class, and derivative suits, emphasizing the importance of pursuing the correct legal avenue based on the nature of the wrong suffered. The Court ruled that when a wrong affects the corporation as a whole, a derivative suit—filed on behalf of the corporation—is the proper remedy, not an individual or class action. This decision underscores the principle that shareholders cannot bypass corporate structures to directly claim damages when the primary injury is to the corporation itself, ensuring that corporate governance and the rights of all stakeholders are properly balanced.

    Family Feud or Corporate Duty? Unraveling Shareholder Rights in People’s Broadcasting

    The consolidated cases before the Supreme Court arose from a complaint filed by Marcelino Florete, Jr., Maria Elena Muyco, and Raul A. Muyco (collectively, the Marcelino, Jr. Group) against Rogelio M. Florete, Imelda C. Florete, Diamel Corporation, Rogelio C. Florete Jr., and Margaret Ruth C. Florete (collectively, the Rogelio, Sr. Group). The dispute centered on the declaration of nullity of issuances, transfers, and sale of shares in People’s Broadcasting Service, Inc. (People’s Broadcasting), along with claims for damages. At its core, the case questions whether the Marcelino, Jr. Group appropriately sought legal recourse in their individual capacities regarding corporate actions that primarily affected People’s Broadcasting.

    People’s Broadcasting, a corporation engaged in radio and television broadcasting, became the battleground for a family conflict over share ownership and control. The Marcelino, Jr. Group contested several transactions, including the issuance of shares to Consolidated Broadcasting System, Inc. and Newsounds Broadcasting Network, Inc., as well as subsequent transfers of these shares. They alleged that these transactions were fraudulent, unauthorized, and detrimental to their interests as stockholders. These claims were rooted in alleged violations of the Corporation Code, particularly concerning decision-making authority, quorum requirements, pre-emptive rights, and the issuance of watered stocks.

    The pivotal issue before the Supreme Court was to determine the nature of the Marcelino, Jr. Group’s action—whether it was an individual suit, a class suit, or a derivative suit. The Court emphasized that the appropriate remedy hinges on the object of the wrong done. Individual suits are filed when the cause of action belongs to an individual stockholder personally, while class suits address violations affecting a group of stockholders. In contrast, a derivative suit is an action filed by stockholders to enforce a corporate action, concerning a wrong to the corporation itself.

    Building on this principle, the Supreme Court highlighted that derivative suits are crucial when those responsible for managing the corporation’s affairs fail to act. As Justice Leonen stated, the remedies are mutually exclusive, stating that:

    Although in most every case of wrong to the corporation, each stockholder is necessarily affected because the value of his interest therein would be impaired, this fact of itself is not sufficient to give him an individual cause of action since the corporation is a person distinct and separate from him, and can and should itself sue the wrongdoer.[88]

    The Court outlined the requisites for filing a derivative suit, as stipulated in Rule 8, Section 1 of the Interim Rules of Procedure for Intra-Corporate Controversies. These include the stockholder’s status at the time of the action, exhaustion of internal remedies, unavailability of appraisal rights, and the absence of nuisance or harassment. Critically, the action must be brought in the name of the corporation.

    Applying these principles, the Supreme Court determined that the Marcelino, Jr. Group’s action was indeed a derivative suit, as the core issues pertained to corporate actions affecting the entire capital structure of People’s Broadcasting. The Court highlighted that the alleged violations of the Corporation Code, such as improper decision-making by the board of directors and the issuance of watered stocks, primarily harmed the corporation, not just specific stockholders. For example, a director’s or officer’s liability for the issuance of watered stocks in violation of Section 62 is solidary “to the corporation and its creditors,” not to any specific stockholder.

    The Court pointed to the implications of these actions: the damage inflicted upon People’s Broadcasting’s individual stockholders, if any, was indiscriminate. Because it pertained to “the whole body of [People’s Broadcasting’s] stock,” it was upon People’s Broadcasting itself that the causes of action now claimed by the Marcelino Jr. Group accrued.

    Furthermore, the Supreme Court noted that the Marcelino, Jr. Group failed to implead People’s Broadcasting as a party, a critical requirement in derivative suits. The Court emphasized that the inclusion of the corporation is a jurisdictional requirement, as it is the corporation’s cause of action that is being litigated, and the judgment must be binding upon it. As the Court explained:

    Not only is the corporation an indispensible party, but it is also the present rule that it must be served with process. The reason given is that the judgment must be made binding upon the corporation in order that the corporation may get the benefit of the suit and may not bring a subsequent suit against the same defendants for the same cause of action. In other words the corporation must be joined as party because it is its cause of action that is being litigated and because judgment must be a res ajudicata [sic] against it.[126]

    Given these deficiencies, the Supreme Court concluded that the Regional Trial Court lacked jurisdiction over the case, rendering its decision—including the award of damages to Rogelio, Sr.—null and void. The Court underscored that a void judgment cannot be the source of any right or obligation. Therefore, the Court set aside the order for immediate execution of the trial court’s decision.

    FAQs

    What is a derivative suit? A derivative suit is an action filed by stockholders on behalf of a corporation to protect or vindicate corporate rights when the corporation’s officers or directors fail to act.
    What is the key difference between a derivative suit and an individual suit? A derivative suit addresses wrongs done to the corporation, while an individual suit addresses wrongs done to a stockholder personally. The nature of the harm dictates the appropriate type of suit.
    What are the requirements for filing a derivative suit? The requirements include being a stockholder at the time of the action, exhausting internal remedies, the unavailability of appraisal rights, and bringing the action in the name of the corporation.
    Why is it important to implead the corporation in a derivative suit? Impleading the corporation is a jurisdictional requirement to ensure the judgment is binding and that the corporation benefits from the suit.
    What was the main issue in the Florete case? The main issue was whether the Marcelino, Jr. Group appropriately filed an individual suit instead of a derivative suit, given that their claims primarily concerned corporate actions affecting People’s Broadcasting.
    What did the Supreme Court decide in the Florete case? The Supreme Court ruled that the Marcelino, Jr. Group should have filed a derivative suit and, because they did not, the lower court lacked jurisdiction, rendering its decision void.
    What happens if a necessary party, like the corporation, is not included in a lawsuit? The court lacks jurisdiction and any judgment rendered is considered null and void. The case may be dismissed or remanded to include the necessary party.
    Can moral and exemplary damages be awarded in cases of erroneously filed individual suits? The Supreme Court found no basis to award moral and exemplary damages in cases where individual suits were erroneously filed and dismissed.

    The Supreme Court’s decision in Florete v. Florete serves as a reminder of the importance of understanding the distinct nature of shareholder actions and the necessity of pursuing the correct legal avenue. By clarifying the boundaries between individual, class, and derivative suits, the Court ensures that corporate governance is upheld and that the rights of all stakeholders are properly protected. This ruling underscores that shareholders cannot bypass corporate structures to directly claim damages when the primary injury is to the corporation itself, thereby maintaining a balanced approach in intra-corporate disputes.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: MARCELINO M. FLORETE, JR., ET AL. VS. ROGELIO M. FLORETE, ET AL., G.R. NO. 174909, January 20, 2016

  • Striking a Balance: Upholding Club Rules vs. Ensuring Procedural Fairness

    The Supreme Court held that a golf club’s decision to suspend two members for violating its rules was valid, emphasizing the importance of upholding internal regulations while also ensuring procedural fairness. The Court found that while strict adherence to procedural rules is generally required, especially in appeals, exceptions can be made to serve substantial justice. This decision clarifies the extent to which courts will interfere with the internal disciplinary actions of private organizations, balancing the need for autonomy with the protection of individual rights.

    Fair Play on the Green: When Club Rules Tee Off Against Due Process

    This case revolves around Ernesto Yu and Manuel Yuhico, members of The Orchard Golf & Country Club, Inc., who were suspended for violating the club’s “no twosome” policy and other regulations. The incident occurred on May 28, 2000, when Yu and Yuhico, unable to find a third player, teed off without permission and without securing a tee time control slip. This led to a report filed by the assistant golf director and subsequent suspension by the club’s board of directors. The legal question at the heart of the matter is whether the club’s actions were justified and whether the subsequent legal proceedings, including the initial appeal, were properly handled.

    Initially, Yu and Yuhico sought injunctions from the Securities and Exchange Commission (SEC), which were later affected by SEC guidelines limiting their duration. Subsequent legal battles ensued, including actions in the Regional Trial Court (RTC) and the Court of Appeals (CA), leading to conflicting decisions and appeals. The Imus RTC ultimately ruled in favor of Yu and Yuhico, declaring their suspension void and awarding damages. However, the golf club appealed, leading to the present Supreme Court decision, which re-evaluates the entire process and underlying merits of the case.

    The Supreme Court addressed the procedural issue of whether the CA erred in initially granting the golf club an extension to file its petition for review, then later reversing itself. The Court acknowledged that while procedural rules are generally strict, they can be relaxed to serve substantial justice. In this case, the golf club initially filed a notice of appeal instead of a petition for review under Rule 43, realizing its mistake shortly thereafter. The delay in filing the correct petition was only seven days, which the Court deemed excusable given the circumstances.

    The Court distinguished this case from others where procedural lapses were not excused. Citing Land Bank of the Philippines v. Ascot Holdings and Equities, Inc., the Court noted that in that case, the bank violated procedural rules by filing a prohibited pleading, which did not toll the reglementary period to appeal. Similarly, in Atty. Abrenica v. Law Firm of Abrenica, Tungol & Tibayan, the petitioner failed to comply with the rules despite being aware of them for an extended period. Here, the golf club’s error was promptly corrected, and there was no material prejudice to Yu and Yuhico.

    Building on this principle, the Supreme Court delved into the substantive merits of the case. The Court found that Yu and Yuhico admitted to violating the club’s rules, including the “no twosome” policy and the requirement to secure a tee time slip. While Yu and Yuhico argued that the “no twosome” policy was sometimes relaxed, they failed to provide concrete evidence to support this claim. Moreover, the Court noted that even if such relaxation occurred, the assistant golf director was within his rights to disallow Yu and Yuhico from playing without a prior reservation, especially on a busy day.

    The Court also considered Yu’s and Yuhico’s behavior towards club staff. Yu admitted to using disrespectful language towards the assistant golf director. These actions, combined with the violation of club rules, provided sufficient grounds for disciplinary action. The Court emphasized that clubs have the right to discipline their members for conduct that is inimical to the club’s interests.

    Furthermore, the Supreme Court found that the damages awarded by the Imus RTC were not justified. Yu and Yuhico claimed to have suffered damages due to their suspension, including social ostracization and business setbacks. However, they failed to provide sufficient evidence to support these claims. The Court noted that the damages, if any, were a result of Yu and Yuhico’s own actions in violating the club’s rules, and thus, fell under the principle of damnum absque injuria, meaning damage without legal injury. Citing Spouses Custodio v. CA, the Court reiterated that:

    xxx [T]he mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the recovery of damages, there must be both a right of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong.

    The Court also found that Yu and Yuhico were given due notice and an opportunity to be heard before the board of directors imposed the suspension. Both were informed of the charges against them and given a chance to explain their side of the story. While Yu and Yuhico argued that the board’s decision was invalid because it did not meet the required affirmative vote of eight members, the Court dismissed this argument, noting that the club’s bylaws limited the number of directors to seven, making the eight-member requirement an oversight.

    The Supreme Court underscored the importance of clubs having the power to discipline their members and protect their interests. As expressed, “the Club should not be powerless to discipline its members and be helpless against acts inimical to its interest.” The penalty of suspension, as provided in the club’s bylaws, serves as a means to protect and preserve the club’s interests and purposes. As such, the suspension of Yu and Yuhico did not warrant the grant of moral and exemplary damages, attorney’s fees, and litigation costs.

    The Court’s decision underscores the delicate balance between upholding internal regulations and ensuring procedural fairness. While clubs have the right to enforce their rules, they must do so in a manner that respects the rights of their members. In cases where procedural errors are made, courts may excuse such errors if doing so serves substantial justice and does not prejudice the other party. Ultimately, the Supreme Court’s ruling reinforces the principle that membership in a club is a privilege subject to the club’s rules and regulations, and that members must bear the consequences of their own actions in violating those rules.

    FAQs

    What was the key issue in this case? The key issue was whether the golf club’s suspension of two members for violating club rules was valid, considering both procedural and substantive aspects. This involved assessing if the club followed due process and if the members’ actions warranted disciplinary measures.
    Why did the Supreme Court initially allow the club to file its appeal late? The Supreme Court excused the club’s initial procedural error because the delay was minimal (seven days), and the club demonstrated a clear intent to appeal. The Court emphasized that procedural rules can be relaxed to serve substantial justice, especially when no prejudice is caused to the other party.
    What is the “no twosome” policy, and why was it relevant in this case? The “no twosome” policy prohibits groups of less than three players from teeing off on weekends and public holidays before 1:00 p.m. Yu and Yuhico violated this rule when they played as a twosome without permission, contributing to the grounds for their suspension.
    What does damnum absque injuria mean, and how did it apply to this case? Damnum absque injuria means damage without legal injury. The Court applied this principle because any damages suffered by Yu and Yuhico were a result of their own violations of club rules, not from any wrongful act by the club.
    Were Yu and Yuhico given a chance to defend themselves before being suspended? Yes, the Court found that Yu and Yuhico were given due notice and an opportunity to be heard before the board of directors imposed the suspension. They were informed of the charges against them and given a chance to explain their side of the story, satisfying due process requirements.
    Why did the Court reject the argument that the board’s decision required eight affirmative votes? The Court rejected this argument because the club’s bylaws limited the number of directors to seven, making the eight-member requirement an oversight. The Court reasoned that requiring eight votes would be impossible and would effectively prevent the club from disciplining its members.
    What is the significance of a club’s power to discipline its members? The Court emphasized that clubs have the right to discipline their members to protect their interests and maintain order. Without this power, clubs would be helpless against acts that are inimical to their purposes, undermining their ability to function effectively.
    What evidence did Yu and Yuhico present to support their claim for damages? Yu and Yuhico presented self-serving declarations of social ostracization and business setbacks. But the court deemed that they failed to provide sufficient testimonial or documentary evidence to substantiate their claims, leading the Court to dismiss their claim for damages.
    How does this case affect other club memberships and their rules? This case reinforces the principle that membership in a club is a privilege subject to the club’s rules and regulations. It highlights that club members must adhere to these rules and can face disciplinary action for violations. Also, it clarifies the extent to which courts will interfere with the internal disciplinary actions of private organizations.

    In conclusion, the Supreme Court’s decision in The Orchard Golf & Country Club, Inc. v. Yu reaffirms the importance of balancing procedural fairness with the need to uphold internal regulations within private organizations. The ruling underscores that while strict adherence to procedural rules is generally required, exceptions can be made to serve substantial justice, especially when there is no material prejudice to the parties involved. This decision provides valuable guidance for clubs and their members, clarifying the boundaries of permissible disciplinary actions and the role of the courts in overseeing such matters.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: THE ORCHARD GOLF & COUNTRY CLUB, INC. VS. ERNESTO V. YU, G.R. No. 191033, January 11, 2016

  • Unveiling Corporate Authority: When Contracts Exceed Presidential Power

    In a significant ruling, the Supreme Court affirmed that a corporation is not bound by contracts entered into by its president without proper board authorization, especially when those contracts fall outside the scope of the corporation’s primary business objectives. This decision highlights the importance of due diligence when dealing with corporate entities. It serves as a warning to those who enter into agreements without verifying the extent of an officer’s authority. The court emphasized that corporations act through their board of directors, and extraordinary transactions require explicit board approval. This case underscores the limits of a president’s apparent authority and protects corporations from unauthorized obligations, ultimately safeguarding the interests of their members and shareholders.

    Racing to a Housing Project: Was the Finish Line Legal?

    The Philippine Race Horse Trainer’s Association, Inc. (PRHTAI), an organization dedicated to uplifting the economic conditions of horse trainers, found itself embroiled in a legal dispute with Piedras Negras Construction and Development Corporation (PNCDC). This stemmed from a series of contracts related to a housing project. PRHTAI initially contracted with Fil-Estate Properties, Inc. for the construction of 170 housing units. Fil-Estate later assigned its rights to PNCDC. Over time, the project saw multiple contracts, with the final one significantly increasing the project cost. This increase led to questions about the validity and enforceability of the final contract, sparking a legal battle that reached the Supreme Court.

    The central issue revolved around whether PRHTAI’s president, Rogelio Catajan, had the authority to enter into the third and final contract with PNCDC. The Construction Industry Arbitration Commission (CIAC) initially ruled that the contract was unenforceable due to lack of proper authorization, finding that Catajan had exceeded his authority. The Court of Appeals (CA), however, reversed this decision, stating that PRHTAI had ratified the contract through subsequent actions. This divergence in opinions prompted the Supreme Court to review the case and clarify the extent of Catajan’s authority and the validity of the contract.

    At the heart of the dispute was the interpretation of a Board Resolution from September 26, 2000. The resolution authorized Catajan to sign a Memorandum of Agreement with Fil-Estate Properties Corp. regarding the housing benefit of its members. PNCDC argued that this resolution implicitly authorized Catajan to enter into subsequent contracts with them, including the final contract that significantly increased the project cost. However, the Supreme Court disagreed, stating that the resolution specifically authorized Catajan to contract with Fil-Estate, not PNCDC. The Court found no evidence that the board of directors had ever explicitly authorized Catajan to enter into the third contract with PNCDC or to agree to the increased contract price.

    The Supreme Court placed significant emphasis on the fact that PNCDC should have exercised greater due diligence. The court noted that PNCDC relied on a Secretary’s Certificate dated March 1, 2005, which the CIAC found to be falsified. This certificate referred to statements that were not found in the original Board Resolution. Citing the nature of PNCDC’s business and its experience with numerous past contracts, the court held that ordinary prudence should have prompted PNCDC to examine the terms of the Board Resolution itself, instead of relying solely on the Secretary’s Certificate. This failure to exercise due diligence weakened PNCDC’s claim that Catajan had the apparent authority to bind PRHTAI.

    Building on this, the Supreme Court addressed the issue of ratification. The CA had argued that PRHTAI’s new board of directors had ratified the questioned indebtedness through a letter dated May 27, 2008, acknowledging the existence of the debt to PNCDC. However, the Supreme Court disagreed, stating that the letter was merely a request for copies of documents related to the project and did not contain any explicit acknowledgment or ratification of the debt. The court emphasized that ratification requires clear and unequivocal acts that demonstrate an intention to adopt or confirm a previously unauthorized act. No such intention was evident in the letter. The letter cannot reasonably be interpreted as a recognition or ratification of said debt.

    Furthermore, the Supreme Court addressed the doctrine of apparent authority. The CA had invoked this doctrine, arguing that PRHTAI had allowed Catajan to act as if he had the authority to enter into the contract, thus binding the corporation. The Supreme Court clarified that apparent authority arises when a corporation knowingly permits an officer or agent to act within the scope of an apparent authority, leading third parties to reasonably believe that the officer or agent has the power to act on behalf of the corporation. This requires evidence that the corporation engaged in conduct that led the third party to believe in the agent’s authority and that the third party relied on that conduct in good faith.

    The Court found that the circumstances necessary for applying the doctrine of apparent authority were lacking in this case. PNCDC did not act in good faith, given its reliance on the questionable Secretary’s Certificate. Also, the Court emphasized that corporate power is vested in the board of directors, not the president. While a president is generally presumed to have authority, that authority is limited to the ordinary course of the corporation’s business. In this case, PRHTAI’s primary business was not engaging in large-scale housing projects. Therefore, Catajan’s actions in entering into a P101,150,000.00 construction contract exceeded the scope of his usual duties and the general objectives of PRHTAI’s business.

    Finally, the Supreme Court addressed the interest rate applicable to the overpayment that PNCDC was ordered to return to PRHTAI. The CIAC had initially imposed an interest rate of 12% per annum after finality of the award, citing the doctrine that this interim period would be deemed a forbearance of credit. However, the Supreme Court modified this, citing Bangko Sentral ng Pilipinas Circular No. 799, Series of 2013, which reduced the legal rate of interest to 6% per annum. The Court held that the 6% interest rate should apply from the time of the finality of the Decision until its full satisfaction.

    FAQs

    What was the central legal issue in this case? The central legal issue was whether the president of a corporation had the authority to enter into a contract without explicit authorization from the board of directors, and whether the corporation could be bound by such a contract.
    What did the CIAC initially rule? The CIAC initially ruled that the third contract between PRHTAI and PNCDC was unenforceable because PRHTAI’s president, Rogelio Catajan, lacked the authority to enter into it, and that PRHTAI had overpaid PNCDC.
    How did the Court of Appeals view the CIAC decision? The Court of Appeals reversed the CIAC’s decision, finding that PRHTAI had ratified the contract and was obligated to pay PNCDC the remaining balance.
    What was the Supreme Court’s ruling on the matter? The Supreme Court reversed the Court of Appeals’ decision and affirmed the CIAC’s original ruling with a modification on the interest rate. It found that the president lacked authority and that the contract was unenforceable.
    What was the significance of the Board Resolution? The Board Resolution was crucial because it defined the scope of authority granted to PRHTAI’s president. The Court found that the resolution only authorized him to contract with Fil-Estate, not PNCDC, and did not authorize the subsequent increase in project costs.
    Why did the Supreme Court emphasize PNCDC’s due diligence? The Supreme Court emphasized PNCDC’s lack of due diligence because it found that PNCDC should have verified the president’s authority by examining the Board Resolution itself, instead of relying on a questionable Secretary’s Certificate.
    What is the doctrine of apparent authority? The doctrine of apparent authority states that a corporation can be bound by the actions of its officers or agents if it knowingly permits them to act as if they have the authority to do so, leading third parties to reasonably believe in that authority.
    How did the Supreme Court modify the CIAC’s award? The Supreme Court modified the CIAC’s award by changing the interest rate on the overpayment amount from 12% per annum to 6% per annum, in accordance with Bangko Sentral ng Pilipinas Circular No. 799.

    The Supreme Court’s decision reinforces the importance of verifying the authority of corporate officers and adhering to corporate governance principles. It serves as a cautionary tale for those entering into contracts with corporations, emphasizing the need for due diligence and clear authorization from the board of directors. This ruling ensures that corporations are protected from unauthorized obligations and that their assets are managed in accordance with the will of the board.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: PHILIPPINE RACE HORSE TRAINER’S ASSOCIATION, INC. vs. PIEDRAS NEGRAS CONSTRUCTION AND DEVELOPMENT CORPORATION, G.R. No. 192659, December 02, 2015

  • Corporate Stock Transfers: The Imperative of Registration in Corporate Books

    In F & S Velasco Company, Inc. v. Madrid, the Supreme Court addressed a dispute over the control of a family corporation. The central issue revolved around the validity of a stockholders’ meeting called by Dr. Rommel L. Madrid, who claimed majority ownership of shares inherited from his deceased spouse. The Court ruled that while Madrid was indeed the heir to the shares, his failure to register the transfer of these shares in the corporation’s Stock and Transfer Book invalidated the meeting he convened. This case underscores the critical importance of formally recording stock transfers within a corporation to validate a stockholder’s rights, ensuring transparency and order in corporate governance.

    Family Feud or Corporate Coup: When Inherited Shares Fail to Secure Control

    The case originated from a family-owned corporation, F & S Velasco Company, Inc. (FSVCI), established in 1987. Following the death of key shareholders, Angela V. Madrid inherited a majority stake, positioning her as the controlling stockholder. Upon Angela’s subsequent death, her spouse, Dr. Rommel L. Madrid, executed an Affidavit of Self-Adjudication, claiming ownership of Angela’s shares. Believing he was now the majority shareholder, Madrid called for a Special Stockholders’ and Re-Organizational Meeting. However, this move was contested by other members of the Velasco family, leading to a legal battle over the legitimacy of the meeting and the control of FSVCI.

    The core legal issue centered on whether Madrid could exercise the rights of a majority stockholder based solely on the Affidavit of Self-Adjudication, without formally registering the transfer of shares in the corporation’s books. The Supreme Court emphasized the significance of Section 63 of the Corporation Code, which governs the transfer of shares. This provision explicitly states:

    SEC. 63. Certificate of stock and transfer of shares. – The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. 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.

    Building on this principle, the Court cited Batangas Laguna Tayabas Bus Co., Inc. v. Bitanga, clarifying that an owner of shares cannot exercise stockholder rights, such as calling meetings or voting, until their ownership is recorded in the Stock and Transfer Book. The purpose of this requirement is twofold: to enable the transferee to exercise all rights of a stockholder and to inform the corporation of changes in ownership. The Stock and Transfer Book, as described in Section 74 of the Corporation Code, serves as the official record of stock ownership within the corporation:

    SEC. 74. Books to be kept; stock transfer agent. – x x x.

     x x x x

    Stock corporations must also keep a book to be known as the “stock and transfer book”, in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stock for which subscription has been made, and the date of payment of any installment; a statement of every alienation, sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the by-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection by any director or stockholder of the corporation at reasonable hours on business days.

    In this case, while Madrid had inherited the shares, he had not yet registered the transfer in FSVCI’s Stock and Transfer Book at the time he called the meeting. The Court rejected the Court of Appeals’ argument that the submission of a General Information Sheet (GIS) to the Securities and Exchange Commission (SEC) sufficed as registration. While the GIS provides public information about the corporation’s officers and stockholders, it is not conclusive evidence of stock ownership.

    The Supreme Court emphasized that the corporate books, particularly the Stock and Transfer Book, are the controlling documents for determining stock ownership. Jurisprudence in Lao v. Lao supports this view:

    The mere inclusion as shareholder of petitioners in the General Information Sheet of PFSC is insufficient proof that they are shareholders of the company.

    Petitioners bank heavily on the General Information Sheet submitted by PFSC to the SEC in which they were named as shareholders of PFSC. They claim that respondent is now estopped from contesting the General Information Sheet.

    While it may be true that petitioners were named as shareholders in the General Information Sheet submitted to the SEC, that document alone does not conclusively prove that they are shareholders of PFSC. The information in the document will still have to be correlated with the corporate books of PFSC. As between the General Information Sheet and the corporate books, it is the latter that is controlling.

    This ruling highlights the critical distinction between equitable ownership and registered ownership. While Madrid possessed an equitable right to the shares through inheritance, he lacked the formal registration necessary to exercise the full rights of a stockholder. Because of this, the Court nullified the November 18, 2009 Meeting, reinstating the Board of Directors that existed prior to Angela’s death. The Court also dissolved the Management Committee that the Court of Appeals had improperly established.

    The appointment of a Management Committee is an extraordinary remedy, justified only when there is imminent danger of asset dissipation or business paralysis, as outlined in the Interim Rules of Procedure Governing Intra-Corporate Controversies:

    SEC. 1. Creation of a management committee. – As an incident to any of the cases filed under these Rules or the Interim Rules on Corporate Rehabilitation, a party may apply for the appointment of a management committee for the corporation, partnership or association, when there is imminent danger of:

    (1) Dissipation, loss, wastage or destruction of assets or other properties; and

    (2) Paralyzation of its business operations which may be prejudicial to the interest of the minority stockholders, parties-litigants or the general public.

    The Court found that the CA’s decision lacked the evidentiary basis required for such a drastic measure. The Court emphasized that allegations of conflict or embezzlement alone do not justify the appointment of a Management Committee, particularly when unsupported by concrete evidence.

    FAQs

    What was the key issue in this case? The central issue was whether a stockholder could exercise the rights of ownership, such as calling a meeting, based on an Affidavit of Self-Adjudication without registering the stock transfer in the corporate books.
    What is the significance of the Stock and Transfer Book? The Stock and Transfer Book is the official record of stock ownership in a corporation. Registration in this book is necessary for a transferee to exercise the rights of a stockholder.
    Does submitting a General Information Sheet (GIS) to the SEC suffice as registration of stock transfer? No, the GIS provides public information about the corporation but does not substitute for the required registration of stock transfers in the Stock and Transfer Book.
    What are the requirements for appointing a Management Committee in a corporation? A Management Committee can only be appointed when there is imminent danger of asset dissipation or business paralysis that could prejudice minority stockholders, litigants, or the general public.
    What was the court’s ruling on the appointment of a Management Committee in this case? The Court found that the appointment of a Management Committee by the Court of Appeals was improper because there was no sufficient evidence of imminent danger to the corporation’s assets or operations.
    What is the effect of inheriting shares of stock on the right to vote? Inheriting shares grants equitable ownership, but the right to vote and exercise other stockholder rights arises only after the transfer is registered in the Stock and Transfer Book.
    What corporate document is controlling in determining stock ownership? According to the Supreme Court, the corporate books, especially the Stock and Transfer Book, are controlling in determining stock ownership.
    How did the Court resolve the issue of the contested stockholders’ meeting? The Court declared the stockholders’ meeting called by Dr. Madrid null and void because he had not yet registered the transfer of shares in the corporation’s books.

    The F & S Velasco Company, Inc. v. Madrid case serves as a crucial reminder of the importance of adhering to the formal requirements of corporate law, particularly regarding the registration of stock transfers. Failing to properly record these transactions can have significant consequences, affecting the validity of corporate actions and the exercise of stockholder rights. This case emphasizes the need for meticulous record-keeping and compliance with corporate governance rules to ensure stability and prevent disputes within family-owned and other corporations.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: F & S Velasco Company, Inc. v. Madrid, G.R. No. 208844, November 10, 2015

  • Right to Inspect: Protecting Minority Stockholders’ Interests in Philippine Corporations

    This case affirms that even a stockholder with a minimal shareholding (0.001%) has the right to inspect a corporation’s books and records. The Supreme Court emphasized that the Corporation Code does not impose a minimum ownership threshold for exercising this right, ensuring that all stockholders can access information to protect their investments from potential mismanagement. This decision reinforces transparency and accountability within Philippine corporations, regardless of the size of a stockholder’s stake.

    Can a Tiny Stakeholder Demand Corporate Transparency? The Terelay Investment Case

    The case of Terelay Investment and Development Corporation v. Cecilia Teresita J. Yulo (G.R. No. 160924, August 5, 2015) revolves around a stockholder, Cecilia Teresita J. Yulo, who held a very small shareholding in Terelay Investment and Development Corporation (TERELAY). Despite owning only 0.001% of the company’s stock, Yulo sought to exercise her right to inspect TERELAY’s corporate books and records. TERELAY denied her request, arguing that her insignificant shareholding and alleged ulterior motives should prevent her from accessing sensitive company information. This legal battle ultimately reached the Supreme Court, raising critical questions about the scope of a stockholder’s right to inspect and the limitations a corporation can impose on that right.

    At the heart of this case lies Section 74 of the Corporation Code, which governs the right of stockholders to inspect corporate records. The law states:

    The records of all business transactions of the corporation and the minutes of any meetings shall be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, writing, for a copy of excerpts from said records or minutes, at his expense.

    TERELAY attempted to restrict Yulo’s access, claiming that her small stake and suspected motives invalidated her right. However, the Supreme Court firmly rejected this argument, emphasizing that the law does not discriminate based on the size of a stockholder’s holdings. The Court underscored the principle of ubi lex non distinguit nec nos distinguere debemos, meaning “where the law has made no distinction, we ought not to recognize any distinction.”

    Building on this principle, the Court affirmed the lower courts’ rulings, which had granted Yulo’s application for inspection. The Court of Appeals (CA) highlighted that Yulo had presented sufficient evidence to establish her status as a registered stockholder in TERELAY’s stock and transfer book. This registration, the CA noted, triggered her right to inspect under Section 74 of the Corporation Code. TERELAY’s attempts to discredit Yulo’s shareholding, by questioning the validity of its donation, were deemed irrelevant as the subscription to the shares was what granted the statutory and common rights to stockholders.

    Moreover, the Supreme Court addressed TERELAY’s concerns about Yulo’s motives for inspection. The Court clarified that a corporation cannot arbitrarily deny a stockholder’s right to inspect based on mere suspicion. Section 74, third paragraph, of the Corporation Code provides a specific defense for corporations in such cases:

    …it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation’s records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand.

    The Court emphasized that the burden of proof lies with the corporation to demonstrate that the stockholder is acting in bad faith or for an illegitimate purpose. TERELAY failed to provide sufficient evidence to support its claims against Yulo, leading the Court to uphold her right to inspection. The Court highlighted that the right of a shareholder to inspect the books and records of the petitioner should not be made subject to the condition of a showing of any particular dispute or of proving any mismanagement or other occasion rendering an examination proper. This decision serves as a powerful reminder that the right to inspect is a fundamental protection for all stockholders, regardless of their ownership stake.

    The implications of this ruling extend beyond the specific facts of the TERELAY case. It reinforces the importance of transparency and accountability in corporate governance in the Philippines. By affirming the right of even minority stockholders to access corporate information, the Supreme Court has strengthened their ability to monitor the management of their investments and hold corporate officers accountable. This decision is particularly relevant in a business environment where minority stockholders may be vulnerable to the actions of controlling shareholders or management teams.

    This approach contrasts with arguments that would restrict the right to inspect based on shareholding size or subjective assessments of motive. The Supreme Court’s decision prioritizes the statutory right granted to all stockholders, placing the burden on corporations to justify any restrictions on that right. This balance ensures that stockholders have the necessary tools to protect their interests while preventing the abuse of inspection rights for malicious purposes. The court cited the American case of *Guthrie v. Harkness*, wherein it was held that the writ of mandamus to allow inspection of corporate books should not be granted for speculative purposes or to gratify idle curiosity or to aid a blackmailer, but it may not be denied to the stockholder who seeks the information for legitimate purposes.

    In summary, Terelay Investment and Development Corporation v. Cecilia Teresita J. Yulo stands as a significant affirmation of stockholders’ rights in the Philippines. The decision underscores the importance of transparency and accountability in corporate governance and provides valuable guidance for corporations and stockholders alike. It clarifies the scope of the right to inspect under Section 74 of the Corporation Code, emphasizing that this right is not contingent on the size of a stockholder’s ownership stake or the subjective assessment of their motives, absent clear evidence of bad faith or improper purpose.

    FAQs

    What was the key issue in this case? The key issue was whether a stockholder with a minimal shareholding (0.001%) had the right to inspect the corporation’s books and records, despite the corporation’s objections.
    What did the Supreme Court decide? The Supreme Court affirmed that even a stockholder with a minimal shareholding has the right to inspect corporate books and records, as the Corporation Code does not impose a minimum ownership requirement.
    What is Section 74 of the Corporation Code? Section 74 of the Corporation Code governs the right of stockholders to inspect corporate records, ensuring transparency and accountability within the corporation. It states that records of business transactions and meeting minutes shall be open to inspection by any stockholder.
    Can a corporation deny a stockholder’s right to inspect? A corporation can deny inspection only if it can prove that the stockholder has improperly used information from prior inspections or is acting in bad faith or for an illegitimate purpose. The burden of proof lies with the corporation.
    What does ubi lex non distinguit nec nos distinguere debemos mean? It is a Latin legal principle meaning “where the law has made no distinction, we ought not to recognize any distinction.” This means courts should not create exceptions or limitations that the law itself does not provide.
    Why is this case important for minority stockholders? This case protects minority stockholders by ensuring they have access to information to monitor their investments and hold corporate officers accountable, regardless of their ownership stake.
    What evidence did the stockholder present in this case? The stockholder presented corporate documents, including the Articles of Incorporation, Amended Articles of Incorporation, and General Information Sheets, all bearing her signature as a director and corporate secretary with subscribed shares.
    What was the basis for the attorney’s fees awarded in this case? The attorney’s fees were awarded because the stockholder was compelled to litigate in order to exercise her right of inspection, which the corporation had initially denied.

    This ruling serves as a clear signal that Philippine courts will uphold the rights of stockholders to access corporate information, fostering greater transparency and accountability. It encourages corporations to respect the rights of all stockholders, regardless of their ownership stake, and to refrain from imposing arbitrary restrictions on the right to inspect. By upholding these principles, the Supreme Court has contributed to a more equitable and transparent corporate governance environment in the Philippines.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Terelay Investment and Development Corporation, vs. Cecilia Teresita J. Yulo, G.R. No. 160924, August 05, 2015

  • Beyond the Certificate: Proving Stockholder Status in Philippine Corporations

    In the Philippines, proving you’re a stockholder in a corporation isn’t solely about holding a stock certificate. The Supreme Court clarified that other evidence, like official receipts and corporate records, can also establish ownership. This means individuals can assert their rights as stockholders even without a physical certificate, ensuring broader participation and protection within corporate governance.

    Unlocking Corporate Rights: When Paper Trails Trump Stock Certificates

    The case of Grace Borgoña Insigne, et al. v. Abra Valley Colleges, Inc. and Francis Borgoña (G.R. No. 204089, July 29, 2015) revolves around a family dispute over Abra Valley Colleges, Inc. (Abra Valley). Several siblings, the petitioners, sought to exercise their rights as stockholders, including inspecting corporate records and demanding a stockholders’ meeting. However, Abra Valley and its president, Francis Borgoña, argued that the siblings weren’t stockholders of record because they couldn’t present stock certificates in their names. The central legal question became: Is presenting a stock certificate the only way to prove shareholding in a corporation?

    The Regional Trial Court (RTC) initially dismissed the petitioners’ complaint for failing to produce the stock certificates. The Court of Appeals (CA) affirmed this decision, emphasizing the importance of the certificate as proof of ownership. However, the Supreme Court reversed these rulings, providing a more nuanced understanding of stockholder status. The Court emphasized that a stock certificate is only prima facie evidence of stock ownership, not the sole determinant.

    The Supreme Court anchored its decision on the provisions of the Corporation Code of the Philippines, specifically Sections 50, 74, and 75, which outline the rights of stockholders regarding meetings, inspection of corporate records, and access to financial statements. These rights, the Court reasoned, should not be unduly restricted by a rigid adherence to the stock certificate requirement. The Court underscored the petitioners’ burden to prove they were stockholders of Abra Valley to avail of the rights provided under the Corporation Code. However, this burden can be satisfied even without presenting the stock certificates. The Court also stated that the respondents, having filed the Motion for Preliminary Hearing of Special and Affirmative Defenses, actually bore the burden of proving that the petitioners were not stockholders of Abra Valley, a burden they failed to discharge.

    Section 50. Regular and special meetings of stockholders or members. – Regular meetings of stockholders or members shall be held annually on a date fixed in the by-laws, or if not so fixed, on any date in April of every year as determined by the board of directors or trustees: Provided, That written notice of regular meetings shall be sent to all stockholders or members of record at least two (2) weeks prior to the meeting, unless a different period is required by the by-laws.

    The Court noted that the petitioners presented other compelling evidence to support their claim of stock ownership. This evidence included official receipts for payments of stock subscriptions, SEC-certified documents indicating the issuance of shares to the petitioners, and minutes of corporate meetings where the petitioners participated as stockholders and even served as members of the Board of Directors. The presentation of these documents was enough for the Court to rule that the petitioners sufficiently proved their status as stockholders of Abra Valley.

    The Court also invoked the principle of estoppel. Since Abra Valley had previously allowed the petitioners to act as stockholders and even serve on the Board of Directors, the corporation could not later deny their status as stockholders. This highlights the importance of consistent corporate conduct and fair dealing.

    Furthermore, the Supreme Court addressed the issue of registering stock transfers in the corporation’s Stock and Transfer Book (STB). While Section 63 of the Corporation Code states that a transfer is not valid, except as between the parties, until recorded in the STB, the Court clarified that the STB is not the exclusive evidence of stock ownership.

    Section 63. Certificate of stock and transfer of shares. – x x x Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. 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.

    The Court highlighted the petitioners’ motion to compel Abra Valley to produce its STB, which the lower courts had failed to act on. This was deemed a critical error, as the STB could have provided further evidence of the petitioners’ shareholding. The Court emphasized the importance of the rules of discovery, which allow parties to obtain information relevant to their case.

    The Supreme Court’s decision provides a more flexible and equitable approach to proving stockholder status. It recognizes that stock certificates are not always readily available and that other evidence can be equally persuasive. This ruling protects the rights of individuals who have legitimately acquired shares in a corporation, even if they lack a physical stock certificate.

    FAQs

    What was the key issue in this case? The key issue was whether presenting a stock certificate is the only way to prove shareholding in a corporation, allowing one to exercise stockholder rights. The Supreme Court ruled it is not the only way.
    What evidence, besides a stock certificate, can prove stock ownership? Other evidence includes official receipts for stock payments, SEC-certified documents showing share issuance, and corporate meeting minutes demonstrating participation as a stockholder. These documents can establish ownership even without a certificate.
    What is the Stock and Transfer Book (STB)? The Stock and Transfer Book is a corporate record that lists stockholders and their share transactions. While it is important, the Supreme Court clarified that it is not the exclusive evidence of stock ownership.
    What is the significance of Section 63 of the Corporation Code? Section 63 governs the transfer of shares and states that a transfer is not valid until recorded in the STB, except between the parties. However, the Court clarified that the STB is not the only evidence of stock ownership.
    What is the doctrine of estoppel, and how did it apply in this case? Estoppel prevents a party from denying a previous representation or action that another party relied upon. Abra Valley was estopped from denying the petitioners’ stockholder status because it had previously allowed them to act as stockholders and serve on the Board.
    What are the rules of discovery, and why were they important in this case? The rules of discovery allow parties to obtain information relevant to their case, such as documents in the other party’s possession. The Court noted that the RTC erred in not acting on the petitioners’ motion to compel Abra Valley to produce its STB.
    What are the implications of this ruling for corporations? Corporations must recognize that individuals can prove stock ownership through various means, not just stock certificates. This promotes fairness and transparency in corporate governance.
    What are the implications of this ruling for stockholders? Stockholders can assert their rights even without a physical stock certificate, provided they can present other credible evidence of their ownership. This strengthens their position within the corporation.

    The Supreme Court’s decision in Insigne v. Abra Valley Colleges offers a valuable lesson: substance prevails over form. While stock certificates remain important, they are not the be-all and end-all of proving stock ownership. This ruling empowers stockholders and promotes a more equitable corporate environment.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Grace Borgoña Insigne, et al. v. Abra Valley Colleges, Inc. and Francis Borgoña, G.R. No. 204089, July 29, 2015

  • Corporate Governance vs. Contractual Obligations: Enforcing Corporate Powers

    The Supreme Court ruled that a corporation’s management and control reside in its Board of Directors, not in individual agreements between stockholders and third parties. This decision reinforces the principle that corporate powers are exercised through the board, protecting the corporation from external interference and ensuring stability in its operations. The Court intervened to prevent an individual, based on a private agreement, from taking control of a corporation, thus upholding the corporate structure mandated by law. This ruling ensures that the interests of the corporation are safeguarded and that deviations from established corporate governance norms are not tolerated.

    Whose Company Is It Anyway?: Power Struggles and Boardroom Battles

    The case of Richard K. Tom v. Samuel N. Rodriguez revolves around a power struggle within Golden Dragon International Terminals, Inc. (GDITI), a company providing shore reception facilities. The central issue arose when Samuel N. Rodriguez, based on a Memorandum of Agreement (MOA) with a GDITI stockholder, sought to manage and control the corporation’s operations. This move was contested by Richard K. Tom, who argued that such control should be vested in the Board of Directors, as mandated by corporate law. The legal question before the Supreme Court was whether an individual could assume corporate powers based solely on a private agreement with a stockholder, bypassing the authority of the Board of Directors. The Court’s decision clarified the lines of authority within a corporation, reinforcing the principle that corporate governance rests with the Board, not individual agreements.

    The factual background involves a series of transactions and disputes over GDITI’s shares. Fidel Cu, a shareholder, initially sold shares to Virgilio S. Ramos and Cirilo C. Basalo, Jr., but later resold them to Edgar D. Lim, Eddie C. Ong, and Arnold Gunnacao due to non-payment. Subsequently, Cu resold the shares again to Basalo, leading to further complications. This prompted Cu to intervene in an injunction case, claiming ownership due to the unpaid considerations from previous sales. He then granted a Special Power of Attorney (SPA) to Cezar O. Mancao II, which he later revoked. Mancao and Basalo then filed a specific performance case against Cu and Tom, alleging interference with their management rights. The plot thickened when Samuel Rodriguez intervened, asserting his right to manage GDITI based on an MOA with Basalo. Rodriguez successfully sought a preliminary mandatory injunction from the RTC-Nabunturan, placing him in control of GDITI’s Luzon operations, prompting Tom to challenge the order before the Court of Appeals (CA).

    The CA denied Tom’s plea for a temporary restraining order (TRO) and/or writ of preliminary injunction, leading Tom to elevate the matter to the Supreme Court. The Supreme Court, while noting that Tom erroneously invoked Rule 45 (petition for review on certiorari) instead of Rule 65 (petition for certiorari), opted to treat the petition as one for certiorari in the interest of substantial justice. The Court emphasized that grave abuse of discretion exists when a court exercises its judgment in a capricious or whimsical manner, tantamount to a lack of jurisdiction. It highlighted the requisites for issuing a TRO or preliminary injunction: a clear right to be protected, a direct threat to that right, a substantial invasion of the right, and an urgent necessity to prevent irreparable damage.

    The Court then delved into the core issue of corporate governance. It cited Section 23 of Batas Pambansa Bilang 68, the Corporation Code of the Philippines, which explicitly states:

    SEC. 23. The board of directors or trustees. – Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their successors are elected and qualified.

    This provision underscores that the Board of Directors is the central authority in managing and controlling a corporation. Building on this principle, the Court reasoned that the CA committed grave abuse of discretion by effectively affirming the RTC’s order that placed Rodriguez, a mere intervenor, in control of GDITI based on a MOA with Basalo. This directly contravened the Corporation Code, which vests such powers in the Board of Directors. The Supreme Court emphasized that allowing such an arrangement would undermine the established corporate structure and potentially lead to mismanagement and instability.

    The Supreme Court also clarified that Tom had the legal standing to seek the injunctive writ, as he was an original party-defendant in the specific performance case. Furthermore, the Court noted that Tom had been elected as a member of the Board of Directors of GDITI. This further solidified his right to challenge the RTC’s order and seek the intervention of the appellate courts. The Court’s decision serves as a reminder that corporate powers are not freely transferable through private agreements but are governed by the Corporation Code and exercised through the Board of Directors. This ensures that the corporation operates under a consistent and legally sound framework.

    FAQs

    What was the key issue in this case? The key issue was whether an individual could assume corporate powers based on a private agreement with a stockholder, bypassing the authority of the Board of Directors. The Supreme Court clarified that corporate governance rests with the Board, not individual agreements.
    Who is Richard K. Tom? Richard K. Tom was a defendant in the specific performance case and later a member of the Board of Directors of GDITI. He challenged the RTC’s order that placed Samuel Rodriguez in control of the corporation.
    What is GDITI? Golden Dragon International Terminals, Inc. (GDITI) is a company that provides shore reception facilities. It is the exclusive Shore Reception Facility (SRF) Service Provider of the Philippine Ports Authority (PPA).
    What is a writ of preliminary injunction? A writ of preliminary injunction is a court order that restrains a party from performing certain acts. It is issued to prevent irreparable injury and preserve the status quo pending the resolution of a case.
    What is the role of the Board of Directors in a corporation? The Board of Directors is responsible for exercising corporate powers, conducting business, and controlling the property of the corporation. It is the central authority in corporate governance.
    What is the significance of Section 23 of the Corporation Code? Section 23 of the Corporation Code vests corporate powers in the Board of Directors, ensuring that the corporation operates under a consistent and legally sound framework. It prevents individuals from assuming control based on private agreements.
    What was the effect of the Supreme Court’s decision? The Supreme Court’s decision nullified the CA’s resolutions and issued a writ of preliminary injunction against Samuel N. Rodriguez, preventing him from exercising management and control over GDITI. This upheld the authority of the Board of Directors.
    What is grave abuse of discretion? Grave abuse of discretion refers to a capricious or whimsical exercise of judgment that is equivalent to a lack of jurisdiction. It occurs when a court acts arbitrarily or despotically.

    This case underscores the importance of adhering to corporate governance principles and respecting the authority of the Board of Directors. The Supreme Court’s decision provides clarity on the lines of authority within a corporation and reinforces the protections afforded by the Corporation Code.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Richard K. Tom vs. Samuel N. Rodriguez, G.R. No. 215764, July 06, 2015