GR 163356 So; (July, 2015) (Digest)
G.R. No. 163356 -57, July 10, 2015
JOSE A. BERNAS, ET AL., ACTING IN THEIR CAPACITY AS INDIVIDUAL DIRECTORS OF MAKATI SPORTS CLUB, INC., AND ON BEHALF OF THE BOARD OF DIRECTORS OF MAKATI SPORTS CLUB, Petitioners, vs. JOVENCIO F. CINCO, ET AL., Respondents. (Consolidated with G.R. Nos. 163368-69)
FACTS
The case involves a dispute over the directorship of Makati Sports Club, Inc. (MSC). A Special Stockholders’ Meeting was held on December 17, 1997, called by the MSC Oversight Committee (MSCOC) at the instance of certain stockholders. During this meeting, the Bernas Group was removed from office as directors, and the Cinco Group was elected in their place. Subsequent meetings were held on April 20, 1998, and April 19, 1999 (the latter under SEC supervision), which purported to ratify the acts of the December 17, 1997 meeting. During a February 27, 1998 meeting, the Cinco Group, acting as directors, expelled Jose A. Bernas from MSC and sold his shares.
ISSUE
The primary legal issue addressed in the concurring opinion is the validity of the December 17, 1997 Special Stockholders’ Meeting and the subsequent acts taken, specifically the removal of the Bernas Group, the election of the Cinco Group, and the expulsion of Bernas and sale of his shares.
RULING
The concurring opinion agrees that the December 17, 1997 Special Stockholders’ Meeting is void. However, it bases this conclusion on different legal grounds than the main opinion (ponencia). The ruling holds that:
1. The applicable law is Section 28 of the Corporation Code, not Section 50 of the Corporation Code or Section 10 of the MSC by-laws. Section 28 specifically governs the removal of directors and requires that a special meeting for such purpose must be called by the corporate secretary upon order of the president or on written demand of stockholders representing at least a majority of the outstanding capital stock. This specific procedure was not followed. The call was improperly made by the MSCOC, which lacked the authority to do so under the law.
2. The December 17, 1997 meeting, being contrary to the mandatory procedure of Section 28 of the Corporation Code, is void ab initio (illegal from the start).
3. Following the doctrine in Pirovano v. De la Rama Steamship Co., corporate acts that are illegal and void ab initio cannot be ratified. Therefore, the subsequent ratification attempts during the April 20, 1998 and April 19, 1999 meetings were ineffective to validate the void acts of removal and election from the December 17, 1997 meeting.
4. The Cinco Group cannot be considered de facto directors because their election was invalid. Consequently, their acts of expelling Bernas from MSC and selling his shares during the February 27, 1998 meeting are also void and without legal effect.
5. The issue of directorship has been rendered moot and academic by the lapse of the three-year staggered term for MSC directors, as the corporation now has a new set of directors not including the parties.
The concurring opinion votes to DENY the consolidated petitions, affirming the nullity of the challenged corporate acts.