G.R. No. 223321 . APRIL 2, 2018.
ROGELIO M. FLORETE, SR., THE ESTATE OF THE LATE TERESITA F. MENCHAVEZ, represented by MARY ANN THERESE F. MENCHAVEZ, ROSIE JILL F. MENCHAVEZ, MA. ROSARIO F. MENCHAVEZ, CRISTINE JOY F. MENCHAVEZ, and EPHRAIM MENCHAVEZ, and DIANE GRACE F. MENCHAVEZ, Petitioners, vs. MARCELINO M. FLORETE, JR. and MA. ELENA F. MUYCO, Respondents.

FACTS

Marsal & Co., Inc. is a close corporation owned by the Florete family. Its Articles of Incorporation contain a restriction (Paragraph 7) requiring a stockholder intending to sell shares to notify the Board, which must then notify all stockholders of record, who have a preemptive right to purchase the shares on a book value basis within ten days. In 1995, the estate of the late stockholder Teresita F. Menchavez, through a court-approved Compromise Agreement, sold her 3,464 Marsal shares to another stockholder, petitioner Rogelio Florete, Sr. The sale was noted in a 1995 probate court order approving the project of partition for the estate of their father, Marcelino Florete, Sr.
Seventeen years later, in 2012, respondents Marcelino Florete, Jr. and Ma. Elena F. Muyco, also stockholders, filed a complaint for annulment of the sale. They argued the transfer violated Paragraph 7 of the Articles as they were not notified and were deprived of their preemptive rights. The Regional Trial Court dismissed the complaint, ruling the sale to a fellow stockholder was not a sale to an outsider that would trigger the restriction, and that laches had set in due to respondents’ 17-year inaction. The Court of Appeals reversed, declaring the sale null and void for violating the Articles.

ISSUE

Whether the sale of Teresita Menchavez’s Marsal shares to Rogelio Florete, Sr. is valid despite the preemptive rights clause in the corporation’s Articles of Incorporation.

RULING

The Supreme Court reversed the Court of Appeals and reinstated the RTC dismissal, upholding the validity of the sale. The legal logic centers on the application of the Corporation Code provisions governing close corporations. While Paragraph 7 of the Articles imposes a restriction on transfer, Section 105 of the Corporation Code provides an exception: a transfer made in violation of such a restriction is still valid if consented to by all stockholders of the close corporation.
The Court found such consent was present. Respondents, through their counsel (who was also the husband of respondent Ma. Elena), conformed to the Motion to Approve the very Compromise Agreement that included the sale of the Marsal shares. Furthermore, the 1995 probate court order, which noted the sale and adjudicated the estate of Marcelino Florete, Sr., was not appealed by respondents. Their active participation in these judicial proceedings and their failure to object for seventeen years constituted clear consent to the transfer, thereby validating it under Section 105. Consequently, there was no violation of the Articles, and the action was also barred by laches.