SECOND DIVISION

[G.R. NO. 160358 : August 31, 2006]

LYDIA LAO, WILLIAM CHUA LIAN, JEFFREY ONG and HENRY

SY, Petitioners, v. PHILIP KING, Respondent.

DECISION

GARCIA, J.:

In this Petition for Review on Certiorari under Rule 45 of the Rules

of Court, herein petitioners Lydia Lao, William Chua Lian, Jeffrey
Ong and Henry Sy assail and seek to set aside the Decision1 dated
April 30, 2003 of the Court of Appeals (CA) in CA-G.R. SP No.
74948, as reiterated in its Resolution2 of October 13, 2003, which
held that Judge Apolinario D. Bruselas, Jr., presiding judge,
Regional Trial Court (RTC) of Quezon City, Branch 93, did not abuse
his discretion in granting the respondent's motion for execution in
Civil Case No. Q-01-42972.

The facts:

Petitioners and respondent Philip King are stockholders of the

Philadelphia School, Inc., an educational institution with principal
office in Quezon City. The school was organized in 1970 with an
authorized capital stock of P2,000,000.00, of which 4,600 shares
have been subscribed and paid-up.

Respondent's father, Ong Seng, had the most number of the

subscribed shares totaling 1,200. Before his death in 1994, Ong
Seng requested for the transfer of his shares of stock to his eldest
son, Felimon Ong, who was later known as Philip King, the herein
respondent. Ong Seng's request was duly approved by the board of
directors of the corporation in its meeting on December 17, 1993.
Since then, the respondent had been consistently elected as a
member of the board since 1994.

On May 23, 1998, a special meeting of the stockholders was held,

resulting in the election of a new set of directors and officers.
Respondent was elected as vice-president while petitioners Lydia
Lao and William Chua Lian were elected as school administrator and
assistant treasurer, respectively. Following the election, the new
board passed a resolution designating the signatories of the
corporation for its bank accounts, namely, Yao Bio Lim who was
elected as president, Betty Lao who was elected as treasurer,
petitioner Chua Lian, and the herein respondent. Thereafter, Yao Bio
Lim and the respondent, duly introduced to the school community
as the newly-elected president and vice-president, respectively,
acted as such.

Barely four months after the May 23, 1998 special stockholders'
meeting, petitioner Lydia Lao wrote a letter to the corporate
president Yao Bio Lim questioning the validity of said meeting and
the elections resulting therefrom on the ground that the respondent
was allowed to vote his 1,200 shares despite the fact that 700 of
which remained unpaid. In the same letter, petitioner Lydia Lao
insisted that the old board, of which she was the president, should
continue to govern the corporation.

Further, on August 15, 1998, petitioner Lao issued a Secretary's

Certificate to the effect that the board held a meeting on that same
date and passed a resolution declaring null and void the transfer to
the respondent of his father's shares in the corporation. Thereafter,
petitioner Lao continued to represent herself as the corporation's
president with authority to withdraw funds from its bank accounts.

Then, in April 1999, the respondent learned that petitioner Lao had
filed with the Securities and Exchange Commission (SEC) a General
Information Sheet (GIS) showing that a stockholders' meeting was
held on March 19, 1999 during which Lao herself and the other
petitioners herein, namely, Chua Lian, Jeffrey Ong and Henry Sy,
were allegedly elected as new members of the board. In the same
GIS, it is also indicated that the respondent's shares were only 500
instead of 1,200.

On account of the petitioners' failure to notify the respondent of the

alleged stockholders' meetings on August 15, 1998 and on March
19, 1999, coupled with their refusal to recognize his ownership of
the 1,200 corporate shares of stock, the respondent filed with the
SEC a petition to enjoin the herein petitioners from representing
themselves as officers and members of the board of directors of the
Philadelphia School, Inc. and to nullify all acts done and resolutions
passed by them. The petition was docketed as SEC Case No. 05-99-
6297.

While the case was pending with the SEC, Republic Act No. 8799,
otherwise known as the Securities Regulation Code, took
effect.3 The statute transferred the jurisdiction over intra-corporate
disputes from the SEC to the RTCs.4

Consequent thereto, SEC Case No. 05-99-6297 was transferred to

the RTC of Quezon City, whereat it was docketed as Civil Case No.
Q-01-42972 and raffled to Branch 93 thereof presided by Judge
Apolinario D. Bruselas, Jr.

On September 25, 2002, Judge Bruselas, Jr. rendered his decision

in the case, the decretal portion of which reads:

WHEREFORE, the foregoing premises considered, the court finds for

the [respondent] and as prayed for, hereby orders as follows:

1) The meetings held by the [petitioners] on 15 August 1998 and all

acts performed by them as the alleged officers and Board of
Directors of the corporation are declared null and void:

2) The alleged election of [petitioner] Lydia Lao as president and

other [petitioners] as members of the Board of Directors of the
corporation during the aforementioned meeting, declared null and
void;

3) The reduction in the shareholdings of [the respondent] from

1,200 shares to only 500 shares, declared null and void; the shares
of the [respondent] should be restored to 1,200 and which number
he is entitled to vote;

4) The increase in the number of the shares of Mr. Sy Tian Ting and
Dy Siok Bee, declared null and void;
5) The [petitioners] to account for the funds of the corporation
disbursed by them during the period they took control;

6) The new elections of the corporate directors and officers should

be based on the shareholdings reflected in the Articles of
Incorporation modified only by such transfers as may be shown to
be valid and legitimate.

SO ORDERED. (Words in brackets supplied.)

On October 14, 2002, the petitioners filed a Notice of Appeal. Four

days later, or on October 18, 2002, the respondent filed with the
same court a Motion for Execution, invoking Section 4, Rule 39, of
the Rules of Court.5

On December 26, 2002, Judge Bruselas, Jr. issued an Order

granting the respondent's motion for execution. In full, the Order
runs:

Section 4, Rule 1 of the Interim Rules of Procedure Governing Intra-

Corporate Controversies Under Republic Act No. 8799 provides as
follows:

"Section 4. Executory nature of decisions and orders. - All decisions

and orders issued under these Rules shall immediately be
executory. No appeal or petition taken therefrom shall stay the
enforcement or implementation of the decision or order, unless
restrained by an appellate court. Interlocutory orders shall not be
subject to appeal."

In its judgment, the court ruled in favor of the [respondent] who

now invokes the aforecited provisions in enforcing said judgment.

Given the clear provision of the interim rules, the court cannot give
credence to the [petitioners'] "Notice of Appeal."

ACCORDINGLY, the court resolves to grant [respondent's] "motion

for execution" as it hereby GRANTS the same.
LET therefore a writ of execution be issued in accordance with the
disposition of the issues as contained in the judgment of the court.

SO ORDERED. (Words in brackets supplied.)

From the aforequoted Order, the petitioners went on certiorari to

the CA whereat their recourse was docketed as CA-G.R. SP No.
74948, imputing grave abuse of discretion on the part of Judge
Bruselas, Jr. in issuing said Order. To the petitioners, the Order
issued by the judge varied the terms of the judgment in Civil Case
No. Q-01-42972 sought to be executed in the respondent's motion
for execution.

In a decision6 dated April 30, 2003, the CA rejected the imputation

of grave abuse of discretion against the judge and accordingly
dismissed the petitioners' certiorari recourse. Partly says the
appellate court in its decision:

A cursory reading of the questioned motion reveals that what was

sought for therein was really the execution of the Judgment of 25
September 2002. Hence, in paragraph 2 thereof, King cited Section
4, Rule 39 of the Rules of Court to emphasize that the nature of the
aforesaid judgment was that, it was enforceable upon rendition.

xxx

The public respondent categorically stated that the writ to be issued

must be in accordance with the disposition of the issues as
contained in the judgment of 25 September 2002. Clearly, the
public respondent minced no words in mandating that the writ to be
issued must conform substantially to every essential particular of
the judgment promulgated. In short, the writ must be issued in
accordance with the grant. xxx. It must conform, more particularly,
to that ordained or decreed in the dispositive portion of the
decision.

Thus, when respondent court issued the order dated 26 December

2002 it did not do so with grave abuse of discretion amounting to
excess or lack of jurisdiction.
With their motion for reconsideration having been denied by the CA
in its reiteratory resolution of October 13, 2003, the petitioners are
now with this Court via this Petition for Review submitting for our
consideration the following issues:

(a) Whether an order of execution which granted a motion for

execution praying for reliefs not included in the decretal portion of
the judgment as well as for reliefs prayed for in another case is
valid.

(b) Whether a motion for execution which prays for reliefs not
included in the decretal portion of the judgment as well as for reliefs
prayed for in another case is legally defective and should be denied.

We DENY.

Prescinding from the premise that the trial judge's Order of

December 26, 2002, granting the respondent's motion for execution
in Civil Case No. Q-01-42972, varied the terms of the judgment
rendered in that case, the petitioners contend that the Order in
question is a nullity. To them, the respondent's motion for execution
which was granted under the questioned Order prayed for reliefs not
included in the decretal portion of the decision rendered in the main
case.

In fine, the issues raised essentially boil down to the question of

whether or not the subject Order and the respondent's motion for
execution are at variance with the decretal portion of the judgment
dated September 25, 2002.

Concededly, it is a fundamental legal axiom that an order of

execution must substantially conform to the dispositive portion of
the decision sought to be executed. The order of execution may not
vary, or go beyond, the terms of the judgment it seeks to enforce.
If it does, the order is null and void.7

But did the Order herein involved really vary the terms of the
judgment it seeks to execute? It did not.
For emphasis, we restate the dispositive portion of the trial court's
decision of September 25, 2002 in Civil Case No. Q-01-42972:

WHEREFORE, the foregoing premises considered, the court finds for

the [respondent] and as prayed for, hereby orders as follows:

1) The meetings held by the [petitioners] on 15 August 1998 and all

acts performed by them as the alleged officers and Board of
Directors of the corporation are declared null and void;

2) The alleged election of [petitioner] Lydia Lao as president and

other [petitioners] as members of the Board Of Directors of the
corporation during the aforementioned meeting, declared null and
void;

3) The reduction in the shareholdings of [respondent] from 1,200

shares to only 500 shares, declared null and void; the shares of the
[respondent] should be restored to 1,200 and which number he is
entitled to vote;

4) The increase in the number of the shares of Mr. Sy Tian Ting and
Dy Siok Bee, declared null and void;

5) The [petitioners] to account for the funds of the corporation

disbursed by them during the period they took control;

6) The new elections of the corporate directors and officers should

be based on the shareholdings reflected in the Articles of
Incorporation modified only by such transfers as may be shown to
be valid and legitimate.

SO ORDERED. (Words on brackets supplied.)

On the other hand, the Order8 in question reads in part:

ACCORDINGLY, the court resolves to grant plaintiff's "motion for

execution" as it hereby GRANTS the same.

LET therefore a writ of executionbe issued in accordance with the

disposition of the issues as contained in the judgment of the
court.
SO ORDERED. (Emphasis supplied.)

The Court does not find any inconsistency between the trial court's
September 25, 2002 judgment and its Order of December 26, 2002.
Quite the contrary, a careful perusal of the two readily discloses the
erroneous assumption of the petitioners that the latter varies the
former. As it is, the Order stresses that the writ of execution to be
issued pursuant thereto must be "in accordance with the
disposition of the issues as contained in the judgment of the
court." In short, the Order directs in no uncertain terms that the
writ must conform with the judgment of September 25, 2002 as
embodied in the dispositive portion of its decision. The Order is
categorical and unequivocal in its language. It is in harmony with
the judgment it seeks to enforce. The alleged variance is a mere
imagination of the petitioners. Hence, it is futile for them to lay
stress on established jurisprudence that an order of execution
cannot vary nor go beyond the terms of the judgment sought to be
executed. As it were, the petitioners' basic premise in this case is
simply faulty. It follows that the jurisprudence relied upon by them
finds no application herein.

Petitioners insist, however, that the respondent's motion for

execution is at variance with the September 25, 2002 judgment
because the motion prayed for reliefs not included in the dispositive
portion of the decision. To prove their point, the petitioners cite the
respondent's prayers in his motion for execution, to wit:

WHEREFORE, premises considered, it is respectfully prayed that, to

give immediate effect to the judgment dated 25 September 2002 of
the Honorable Court, an order be issued:

1. Enjoining respondents [herein petitioners] from continuing to act

as the President and members of the Board of Directors of
Philadelphia School, Inc.

2. Directing the immediate holding of a new election under the

supervision of representatives of the Honorable Court wherein
petitioner [herein respondent] will be allowed to vote his 1,200
shares and Sy Tian Tin and Dy Siok Bee prevented from voting
more than 300 and 50 shares respectively.
3. Declaring illegal the declaration by [petitioners] of 300 percent
stock dividends and enjoining them from allowing the supposed
stock dividends from being voted.

4. Directing the newly elected officers and members of the Board of

Directors of Philadelphia School, Inc. to pay [respondent] his 100
percent cash dividends.

5. Directing [petitioners] to immediately render an accounting of the

finances of the corporation and allowing [respondent] to examine
the corporate and financial records of the corporation.

Other reliefs which are just and equitable under the premises are
likewise prayed for.9 (Words in brackets supplied.)

We are far from convinced.

To our mind, there is no significant point of variance between the

judgment and the respondent's motion for execution. For sure, the
reliefs prayed for by the respondent in his motion are intertwined
with the disposition of issues in the trial court's decision of
September 25, 2002, as contained in its dispositive portion.

First, the respondent's prayer to enjoin the herein petitioners from

continuing to act as officers and members of the board of directors
is obviously consistent with the first item in the decretal portion of
the decision which states that all acts performed by the herein
petitioners as the alleged officers and members of the board are null
and void. Inasmuch as the trial court declared all acts done by the
petitioners as null and void, it is only appropriate for the respondent
to ask that the petitioners be prohibited from continuing to act as
officers and members of the board.

Second, the respondent's prayer to hold a new election of officers to

allow him to vote his 1,200 shares and to prevent Sy Tian Tin and
Dy Siok Bee from voting more than 300 and 50 shares,
respectively, is indubitably in consonance with the following
pronouncements in the dispositive portion of the trial court's
decision: (1) the election of the petitioners as officers and members
of the board is null and void, (2) the shareholdings of the
respondent should be restored to 1,200 which number he is entitled
to vote, (3) the increase in the number of shares of Sy Tian Tin
(from 300 to 400 shares) and that of Dy Siok Bee (from 50 to 100
shares) is null and void, and (4) the new elections of the corporate
directors and officers should be based on the shareholdings of the
stockholders.

Third, the respondent's prayer that the petitioners should

immediately render an accounting of the finances of the corporation
clearly conforms with the judgment ordering the petitioners to
account for the funds which they disbursed during the time they
took control of the corporation.

Thus, the alleged variance between the trial court's decision of

September 25, 2002 and the respondent's Motion for Execution is
mere figment of the petitioners' imagination. As we see it, the
reliefs sought by the respondent in his said motion are merely the
logical and necessary consequences of the judgment rendered by
Judge Bruselas, Jr. in his decision in Civil Case No. Q-01-42972.

Besides, and as correctly pointed out by the CA, the respondent's

motion prayed for the issuance of an order of execution so as "to
give immediate effect to the judgment dated 25 September
2002." This only shows that the respondent merely intended to
enforce the necessary implications of what was adjudged by the trial
court in its decision.

Too, the petitioners might have lost sight of the fact that there was
no order by the trial court which specifically granted the reliefs
prayed for by the respondent. As it is, the questioned Order merely
directed, in general terms, the issuance of a writ of execution in
accordance with the court's resolution of the issues, as embodied in
the dispositive portion of its decision. Clearly, the Order did not
grant any relief not otherwise granted in the decision of September
25, 2002.

Finally, it bears stressing that under Section 4, Rule 1 of the Interim

Rules of Procedure Governing Intra-Corporate Controversies under
Republic Act No. 8799, the prevailing party has the right to file a
motion for the immediate execution of a decision or judgment. The
law explicitly provides:

Section 4. Executory nature of decisions and orders. - All decisions

and orders issued under these Rules shall immediately be
executory. No appeal or petition taken therefrom shall stay the
enforcement or implementation of the decision or order, unless
restrained by an appellate court. Interlocutory orders shall not be
subject to appeal.

WHEREFORE, the petition is DENIED and the assailed decision of the

CA is AFFIRMED.

Costs against the petitioners.

SO ORDERED.

Lao v. Yao Bio Lim

G.R. No. 201306, 9 August 2017

FACTS:

PSI was organized in 1970 with an authorized capital stock of P2,000,000.00, divided into 20,000
shares with a par value of P100 per share. Out of this authorized capital stock, 4,600 shares were
subscribed and paid up.

Ong Y. Seng, King’s father, had the most number of subscribed shares, holding 1,200 shares.
Before his death in 1994, he sought, and was granted, the approval of the PSI board of directors to
transfer his shares to King. Since then, King had been consistently elected as a member of the PSI
board of directors.

During the special stockholders’ meeting on May 23, 1998, a new set of directors and officers was
elected. Yao Bio Lim was elected President and King was Vice President.

Lao, the former president, refused to acknowledge the newly elected directors and officers as well as
King’s ownership of 1,200 PSI shares. On August 15, 1998, Lao issued a Secretary’s Certificate
stating that a board meeting was held on the same date wherein the board of directors resolved to
nullify the transfer to King of the shares owned by his father.

In April 1999, King discovered that a stockholders’ meeting was conducted on March 19, 1999,
wherein Lao, William Chua Lian (Chua Lian), Jeffrey Ong (Ong), and Henry Sy were elected as new
members of the board of directors.
King filed a petition before the Securities and Exchange Commission “to enjoin [Lao, Chua Lian,
Ong, and Henry Sy] from representing themselves as officers and members of the board of directors
of the Philadelphia School, Inc. and to nullify all acts done and resolutions passed by them. The
petition was docketed as SEC Case No. 05-99-6297 which was granted.

Meanwhile, on March 15, 2002, a general stockholders’ meeting was held wherein Lao, Ong, Henry-
Sy, Sy Tian Tin, Sy Tian Tin, Jr. and Paul Chua (petitioners) were elected as members of the board
of directors, with Chua Lian as chairman of the board.

On March 26, 2002, Yao Bio Lim and King filed a petition before Branch 90, Regional Trial Court,
Quezon City against petitioners, the newly elected board of directors. They sought, among others, to
annul: (1) “the elections held on March 15, 2002 and all corporate acts of the supposedly new board
of directors and officers of [PSI],” (2) the “issuance of stock dividends,” and (3) the “illegal transfer of
shares of stock.”[22] They also prayed that petitioners, together with Chua Lian, be ordered to
account for damages and for the funds and assets of the corporation since August 1998.

Yao Bio Lim and King averred that on March 10, 2002, they received the Notice of meeting informing
them about the general stockholders’ meeting to be held on March 15, 2002 at 9:00 a.m. at the PSI’s
board room. “The notice, however, did not state the agenda or the purpose of the meeting.”[24]
Moreover, they alleged that the Notice sent to King was still in the name of his father, Ong Y. Seng,
while that sent to Yao Bio Lim included the name of his deceased father, Yao Chek.

Yao Bio Lim claimed that he acquired his PSI shares from his father, who owned 300 PSI shares
during his lifetime. Specifically, in 1995, Yao Chek transferred one (1) share to him and 100 shares
to his brother, Yao Tok Lim. After Yao Chek’s death in 1999, his remaining shares were divided
among his five (5) children. Yao Bio Lim’s brothers, in turn, agreed to assign their corresponding
shares to Yao Bio Lim and Yao Juan Lim.[26]

During the meeting, “Philip King and a certain Atty. Garaygay were asked to leave the board room
because they were allegedly not stockholders.”[27] On the other hand, Yao Bio Lim was allowed to
vote for only one (1) share during the elections despite the proxies he held for his brothers, Yao Tok
Lim and Yao Juan Lim.[28]

Yao Bio Lim and King further attested that the Securities and Exchange Commission and the
Regional Trial Court had previously ordered that the stockholders listed in the 1997 General
Information Sheet be used as basis for the 2000 and 2001 elections of PSI board of directors. Lao,
Chua Lian, Ong, and Henry Sy allegedly violated these orders when they used a different list of
stockholders during the elections held on March 15, 2002. Moreover, they had purportedly
previously issued 300% stock dividends to some stockholders without the required approval of
stockholders representing two-thirds (2/3) of the outstanding capital stock of PSI.[29]

Finally, Yao Bio Lim and King assailed the transfer of the following shares of stocks without the
required prior notice to all stockholders, which allegedly deprived them of “the opportunity to
exercise their option to buy the shares”[30]:

SELLER                                TRANSFEREE                           NUMBER OF SHARES

David Lio                               Betty Lao/Lydia Lao                             200 shares

Ong Giok King                       Lydia Lao/Sy Tian Tin                          99 shares
William Chua Lian                 Paul Chua                                            1 shares [sic][31]

On March 20, 2007, the trial court rendered its decision in favor of Yao Bio Lim and King. The
dispositive portion of this decision read:
IN VIEW OF THE FOREGOING, judgment is rendered in favor of [respondents] and against
[petitioners] as follows:

(a) Declaring the March 15, 2002 general stockholders’ meeting and elections null and void and the
results thereof invalid;
(b) Declaring the issuance of 300% stock dividend[s] by [petitioners]/Philadelphia School, Inc. in
199[7][33] null and void;
(c) Declaring the sale/transfer of shares of stocks of David Lao, Ong Giok King and William Chua
Lian illegal and void;
(d) Ordering [petitioners] to pay [respondents]: (i) PhP100,000.00 as temperate damages, (ii)
PhP50,000.00 as moral damages, (iii) PhP100,000 as reasonable attorney’s fees and expenses of
litigation plus costs of suit.
All other claims are dismissed fort (sic) lack of factual/legal basis.

The Court of Appeals affirmed the Regional Trial Court Decision. It held that there were valid
grounds to nullify the March 15, 2002 stockholders’ meeting. First, the Notice of meeting did not
state the purpose of the stockholders’ meeting as required by Article VIII (5) of PSI’s by-laws.[35]
Additionally, it was not sent to the stockholders at least two (2) weeks prior to the meeting as
required under Section 50 of the Corporation Code.[36]

Finally, petitioners used a schedule of stockholders different from the list contained in the 1997
General Information Sheet, contrary to previous orders of the Securities and Exchange Commission
and of the Regional Trial Court.[37]

The Court of Appeals further found that the issuance of 300% stock dividends was not approved by
stockholders representing two-thirds (2/3) of the outstanding capital stock in violation of Section 43
of the Corporation Code.[38]

ISSUE:

I. Whether or not Section 50 of the Corporation Code was complied with before conducting the
March 15, 2002 general stockholders’ meeting.
II. Whether or not the CA is correct in affirming the RTC’s decision declaring the March 15, 2002
general stockholders meeting as null and void, and the results thereof invalid.
III. Whether or not the issuance of 300% stock dividends by (petitioners)/Philadelphia School, Inc. in
1997 null and void.
IV. Whether or not the transfer of shares of stocks of David Lao, Ong Giok King and William Chua
Lian illegal and void.

RULING:

I. Section 50 of Batas Pambansa Blg. 68 or the Corporation Code prescribes that “regular

meetings of stockholders or members shall be held annually on a date fixed in the by-laws.”
Respondents do not dispute that Article VIII (3) of the PSI’s by-laws fixed the annual meeting of
stockholders on the third Friday of March of every year. This Court takes judicial notice that March
15, 2002 was the third Friday of March 2002.

Thus, this Court holds that the March 15, 2002 annual stockholders’ meeting was a regular meeting.
Hence, the requirement to state the object and purpose in case of a special meeting as provided for
in Article VIII (5) of the PSI’s by-laws does not apply to the Notice for the March 15, 2002 annual
stockholders’ meeting.
Regarding the time for serving notice of the meeting to all the stockholders, Section 50 of Batas
Pambansa Blg. 68 reads in part:

Section 50. Regular and Special Meetings of Stockholders or Members. — Regular meetings of
stockholders or members shall be held annually on a date fixed in the by-laws, or if not so fixed, on
any date in April of every year as determined by the board of directors or trustees: Provided, That
written notice of regular meetings shall be sent to all stockholders or members of record at least two
(2) weeks prior to the meeting, unless a different period is required by the by-laws.

II. Despite the foregoing circumstances, there were other grounds to nullify the March 15, 2002
annual stockholders’ meeting. As found by the Court of Appeals, petitioners did not recognize
respondents’ rights as stockholders, making the proceedings and elections during the March 15,
2002 meeting void. The Court of Appeals discussed:

During the same meeting, [petitioners] made use of a schedule of stockholders which was different
from the list contained in the 1997 [General Information Sheet]. Obviously, [petitioners] defied the
previously issued Order of both the SEC and the RTC requiring the use of the 1997 [General
Information Sheet], it being the last, official and recorded submission by the Philadelphia School in
keeping with its reportorial requirement with the SEC. As disclosed in the records, the 1997 [General
Information Sheet] specified the stockholders of Philadelphia School and their respective
shareholdings. Since the composition in 1997 [General Information Sheet] was not changed up to
the time the March 15, 2002 meeting was called, the same should have been used as the basis for
the schedule of stockholders and their respective shareholdings relative to the election of its board of
directors. By so defying the Order of both the SEC and the RTC as regards the use of the 1997
[General Information Sheet], [petitioners], in effect, refused to recognize [respondents’]
shareholdings and their right to vote, thus, rendering void all the acts done during the meeting,
particularly the holding of the election of the officers and the declaration and issuance of the 300%
stock dividend.

III. On the issue of the validity of the 300% stock dividends declaration, petitioners insist that the
300% stock dividends were validly declared by the PSI board of directors. They claim that these
were ratified by the stockholders owning two-thirds (2/3) of the outstanding capital stock in the
meeting held on March 22, 1997, although its distribution was implemented only on February 28,
2002.[59]

The Court of Appeals rejected this stance. It held that the handwritten minutes of the March 22, 1997
meeting offered by petitioners as proof that the declaration and issuance of stock dividends were
valid was questionable because “it [did] not even indicate the number of stock dividends to be
declared.”[60]

This Court agrees with the Court of Appeals.

Clearly, the foregoing minutes alone would be insufficient to prove petitioners’ claim that the 300%
stock dividends were approved by the board of directors and ratified by the stockholders in the
March 22, 1997 meeting. The minutes did not provide any other detail that would convincingly show
that the 300% stock, dividends distributed in 2002 were the same stock dividends that were ratified
by the stockholders in 1997.

This Court finds no reversible error on the part of the Court of Appeals in nullifying the 300% stock
dividends, a declaration on the basis of the following findings of the Regional Trial Court:
[O]n the declaration, issuance and distribution of a three hundred percent (300%) stock dividend by
[petitioners] in favor of certain stockholders, the evidence shows that the action or actions of the
[petitioners] with respect to the 300% stock dividends was or were done without the approval of. . .
Yao Bio Lim, . . . Philip King and Lucia Cheng who own and/or are entitled to vote one thousand nine
hundred fifty (1,950) shares of stocks of the outstanding capital stock of the School of 4,600 shares,
or approximately forty-two percent (42%) of the outstanding capital stock of the School. The act/s of
the [petitioners] violated Section 43 of the Corporation Code which provides that “. . . no stock
dividend shall be issued without the approval of stockholders representing not less than two-thirds
(2/3) of the capital stock[.]”[62]

WHEREFORE, the petition is DENIED.

SO ORDERED.

*Case Digest by Jelyn C. Ondong, Refresher, Andres Bonifacio College, SY: 2019-2020