G.R. No. 261125 , July 26, 2023
Peter Paul G. Marasigan, Petitioner, vs. Benito G. Marasigan, et al., Respondents.

FACTS

The parties are children of the late spouses Cesar and Luz Marasigan. In 2013, Luz and her 13 children incorporated Ganco Resorts & Recreation Incorporated (Ganco) as a close corporation. Luz subscribed to 3,000 of the 5,600 total shares, with each child subscribing to 200 shares. Ganco’s Articles of Incorporation and by-laws provided that the corporation “shall be managed by the board of directors who are the stockholders.” In 2017, Luz was Chairman, petitioner Peter Paul Marasigan (Peter) was President, respondent Benito Marasigan was Vice President, Regina Marasigan-Palileo was Treasurer, and respondent Orlando Marasigan was Secretary. In August 2017, Peter took a six-week vacation leave with Luz’s permission. Luz died on November 3, 2017, while Peter was abroad. He returned on November 5, 2017.
On November 6, 2017, eight of the thirteen stockholders (five physically present, three via video conference) held a meeting without prior notice or agenda. Respondent Orlando declared a quorum. In this meeting, Benito declared he was assuming the presidency, removing Peter for alleged absence without leave, and was elected Interim President. On November 12, 2017, after Luz’s burial, nine family members gathered and discussed estate settlement and corporate matters.
On May 11, 2018, Corporate Secretary Orlando issued a notice that the Annual Shareholders’ Meeting would not proceed pending settlement of Luz’s estate. Despite this, an Annual Stockholders’ Meeting was held on May 15, 2018, with two physically present and seven via video conference. A new set of officers was elected, with Gabriel Marasigan as Chairman, Regina as President, Peter as Vice President and Secretary, and Renato as Treasurer. New bank signatories were appointed. The respondents refused to recognize the new officers and turnover assets. The corporation’s bank accounts were frozen due to conflicting claims of authority.
Respondents Benito, Orlando, and Rommel Marasigan, along with two other siblings, filed a Complaint for Declaration of Nullity of Meetings, Board Resolutions and Election of Officers with the Regional Trial Court (RTC), seeking to be recognized as legitimate officers and to nullify the May 15, 2018 meeting.

ISSUE

The primary issue is whether the stockholders’/directors’ meetings held on November 6, 2017, November 12, 2017, and May 15, 2018, and the elections of officers conducted therein, were valid given the death of the majority stockholder, Luz Marasigan, and the unsettled status of her estate.

RULING

The Supreme Court denied the Petition for Review, affirming the Court of Appeals (CA) Decision. The CA ruling, which reversed the RTC, was upheld.
The RTC had declared all three meetings (Nov. 6, Nov. 12, 2017, and May 15, 2018) null and void for lack of quorum. It reasoned that since Luz’s estate was unsettled, her shares could not be voted, and the parties did not automatically acquire ownership of her shares. It reinstated the 2017 officers in a hold-over capacity.
The CA reversed the RTC. It agreed that the parties did not automatically acquire ownership of Luz’s shares but held that the special meetings on November 6 and 12, 2017, were valid. The CA ruled that under Section 25 of the Corporation Code, the quorum for electing corporate officers is based on a majority of all members of the board of directors, not a majority of the outstanding capital stock. Since all stockholders were also directors, the eight stockholders present constituted a valid quorum. The CA also found the acts in these meetings were ratified under Section 101 of the Corporation Code due to lack of prompt written objection. However, the CA declared the Annual Stockholders’ Meeting on May 15, 2018, null and void. It held that for this meeting, the quorum required was a majority of the outstanding capital stock, which was not met due to Luz’s unvoted shares. The meeting also violated Ganco’s by-laws as no proper notice was sent by the Corporate Secretary, who had earlier notified stockholders the meeting would not proceed.
The Supreme Court found no reversible error in the CA’s decision. It emphasized that Ganco, as a close corporation, had a unique structure where all stockholders were also the directors managing the corporation. For the election of officers (President, Vice-President, etc.) among these director-stockholders, the applicable quorum under the law was a majority of the board of directors. The presence of eight out of thirteen director-stockholders on November 6 and 12, 2017, satisfied this requirement. The unsettled estate of Luz affected the voting rights attached to her shares but did not alter the total number of directors required for a quorum to elect officers from among themselves. Consequently, the elections held on those dates were valid. In contrast, the May 15, 2018 meeting, purportedly an annual stockholders’ meeting, required a quorum based on capital stock, which was lacking. Furthermore, the failure to provide proper notice rendered the meeting invalid.