G.R. No. 164958; January 27, 2006
Sy Chim and Felicidad Chan Sy, Petitioners, vs. Sy Siy Ho & Sons, Inc., doing business under the name and style Guan Yiac Hardware, Respondents.

FACTS

Sy Siy Ho & Sons, Inc. is a family-owned corporation. After a prior intra-corporate dispute was settled via a 1993 Compromise Agreement, control rested with Sy Chim, his wife Felicidad Chan Sy, and their son Sy Tiong Shiou’s family. Sy Chim served as President, and Felicidad as Assistant Treasurer, handling cash collections. In 2003, a new dispute arose between Sy Chim and his son’s faction. Corporate Treasurer Juanita Tan Sy (Sy Tiong Shiou’s wife) reported that Felicidad had not been depositing all cash collections, creating a significant cash shortage.
The Sy Tiong Shiou group called a special board meeting on March 24, 2003, without written notice to the spouses Sy Chim. In that meeting, they passed resolutions removing Juanita as Treasurer (at her request), holding the spouses accountable for undeposited funds, and hiring an external auditor. Based on the subsequent audit alleging a massive cash shortage, the board, in another meeting on April 21, 2003, again without notice to the Sy Chim spouses, authorized the filing of a complaint for accounting and damages against them. Sy Tiong Shiou was also elected President in this meeting.

ISSUE

Whether the special board meetings held on March 24, 2003, and April 21, 2003, and the resolutions passed therein, are valid despite the alleged lack of proper notice to directors Sy Chim and Felicidad Chan Sy.

RULING

No, the meetings and resolutions are invalid. The legal logic hinges on the mandatory requirement of notice under the Corporation Code. Section 53 of the Code mandates that written notice of regular or special meetings must be sent to every director at their registered address. Notice is a fundamental prerequisite to validate any board proceeding, as it safeguards a director’s right to participate in corporate governance.
The respondents failed to prove that proper written notices were sent to the petitioner-directors for the contentious meetings. The mere allegation that the petitioners were “notified” is insufficient. The requirement is not satisfied by verbal information or mere knowledge derived from other sources; the burden of proof rests on the party asserting the validity of the meeting to show strict compliance with the notice requirement. Since no valid notices were proven, the meetings were improperly convened. Consequently, all actions taken therein—including the resolutions to hold the spouses accountable, hire an auditor, file the lawsuit, and elect a new president—are void and have no legal effect. The complaint, being a product of an invalid board authorization, was filed without proper corporate authority.