G.R. No. 225022 and G.R. No. 225024, February 5, 2018
Carolina Que Villongco, et al. vs. Cecilia Que Yabut, et al. and Cecilia Que Yabut, et al. vs. Carolina Que Villongco, et al.

FACTS

Phil-Ville Development and Housing Corporation is a family-owned corporation. A dispute arose over the validity of a Sale of Shares of Stocks dated June 11, 2005, which Cecilia Que Yabut purportedly executed as attorney-in-fact for the matriarch, Geronima Gallego Que, resulting in an allegedly inequitable distribution of Geronima’s 3,140 shares upon her death. The corporation’s corporate secretary, Ana Maria Que Tan, received a request from Cecilia’s group to send notices for the 2013 annual stockholders’ meeting. Before she could act, Cecilia’s group unilaterally sent out their own notices. The majority of the board, comprising Carolina, Ana Maria, and Angelica, held an emergency meeting, decided to postpone the meeting due to the unsettled share distribution issue, and duly notified all stockholders and the SEC.
Despite the official postponement, Cecilia’s group proceeded with the meeting and elected themselves as new directors and officers. This prompted the other faction to file a complaint. While that case was pending, Cecilia’s group again called for and held an annual stockholders’ meeting on January 25, 2014, electing themselves once more. The opposing faction then filed a petition for nullification of this 2014 meeting with the SEC.

ISSUE

The core issue is whether the annual stockholders’ meeting held on January 25, 2014, was valid, particularly regarding the existence of a quorum.

RULING

The Supreme Court affirmed the Court of Appeals’ ruling that the January 25, 2014 meeting was void for lack of quorum. The legal logic hinges on the proper determination of outstanding capital stock for quorum computation under the Corporation Code. The Court held that shares subject of a pending controversy over their validity, such as the 3,140 shares from the disputed 2005 sale, cannot be counted in determining a quorum until the controversy is authoritatively resolved. These shares are considered disputed and cannot be included in the computation of “outstanding capital stock” for meeting purposes.
Consequently, when these disputed shares were excluded, the total number of shares present or represented at the January 2014 meeting fell below the required majority to constitute a quorum. Without a quorum, no valid corporate business could be transacted. Therefore, all acts performed during that meeting, including the election of the new set of directors and officers by Cecilia Que Yabut’s group, were declared null and void ab initio as ultra vires acts performed without legal authority. The Court emphasized that corporate power must be exercised through proper channels, and a meeting without quorum is a fatal defect that invalidates all proceedings.