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8epubllc of Lhe hlllpplnes

SUkLML CCUk1
Manlla
ll8S1 ulvlSlCn
G.k. No. 1S0976 Cctober 18, 2004
CLCILIA CAS1ILLC, CSCAk DLL kCSAkIC, Ak1UkC S. ILCkLS, kLkkLS NAVAkkC, MAkIA
AN1CNIA 1LMLC and MLDICAL CLN1Lk AkAAUL, INC., peLlLloners,
vs.
ANGLLLS 8ALINGnASA, kLNA1C 8LkNA8L, ALCDIA DLL kCSAkIC, kCMLC IUN1ILA,
1LkLSI1A GAANILC, kUS1ICC IIMLNL2, AkACLLI
**
IC, LSMLkALDA MLDINA, CLCILIA
MCN1AL8AN, VIkGILIC C8LLIAS, CAkMLNCI1A AkkLNC, CLSAk kLLS, kLNALDC SAVL1,
SLkAIC 1ACCAD, VICLN1L VALDL2, SALVACICN VILLAMCkA, and nUM8Lk1C
VILLAkLAL, respondenLs.
u L C l S l C n
UISUM8ING, !"#
lor revlew on cerLlorarl ls Lhe art|a| Iudgment
1
daLed november 26, 2001 ln Clvll Case no. 01-
0140, of Lhe 8eglonal 1rlal CourL (81C) of aranaque ClLy, 8ranch 238. 1he Lrlal courL declared
Lhe lebruary 9, 2001, elecLlon of Lhe board of dlrecLors of Lhe Medlcal CenLer aranaque, lnc.
(MCl) valld. 1he arLlal !udgmenL dlsmlssed peLlLloners' flrsL cause of acLlon, speclflcally, Lo
annul sald elecLlon for deprlvlng peLlLloners Lhelr voLlng rlghLs and Lo be voLed on as members
of Lhe board.
1he facLs, as culled from records, are as follows:
eLlLloners and Lhe respondenLs are sLockholders of MCl, wlLh Lhe former holdlng Class
"8" shares and Lhe laLLer ownlng Class "A" shares.
MCl ls a domesLlc corporaLlon wlLh offlces aL ur. A. SanLos Avenue, SucaL, aranaque ClLy. lL
was organlzed someLlme ln SepLember 1977. AL Lhe Llme of lLs lncorporaLlon, AcL no. 1439, Lhe
old CorporaLlon Law was sLlll ln force and effecL. ArLlcle vll of MCl's orlglnal ArLlcles of
lncorporaLlon, as approved by Lhe SecurlLles and Lxchange Commlsslon (SLC) on CcLober 26,
1977, reads as follows:
SLvLn1P. 1haL Lhe auLhorlzed caplLal sLock of Lhe corporaLlon ls 1WC MlLLlCn
(2,000,000.00) LSCS, hlllpplne Currency, dlvlded lnLo 1WC 1PCuSAnu (2,000)
SPA8LS aL a par value of 100 each share, whereby Lhe CnL 1PCuSAnu SPA8LS lssued
Lo, and subscrlbed by, Lhe lncorporaLlng sLockholders shall be classlfled as Class A shares
whlle Lhe oLher CnL 1PCuSAnu unlssued shares shall be consldered as Class 8 shares.
Cnly holders of Class A shares can have Lhe rlghL Lo voLe and Lhe rlghL Lo be elecLed as
dlrecLors or as corporaLe offlcers.
2
(SLress supplled)
Cn !uly 31, 1981, ArLlcle vll of Lhe ArLlcles of lncorporaLlon of MCl was amended, Lo read Lhus:
SLvLn1P. 1haL Lhe auLhorlzed caplLal sLock of Lhe corporaLlon ls llvL MlLLlCn
(3,000,000.00) LSCS, dlvlded as follows:
CLASS nC. Cl SPA8LS A8 vALuL
"A" 1,000 1,000.00
"8" 4,000 1,000.00
Cnly holders of Class A shares have Lhe rlghL Lo voLe and Lhe rlghL Lo be elecLed as
dlrecLors or as corporaLe offlcers.
3
(Lmphasls supplled)
1he foregolng amendmenL was approved by Lhe SLC on !une 7, 1983. Whlle Lhe amendmenL
granLed Lhe rlghL Lo voLe and Lo be elecLed as dlrecLors or corporaLe offlcers only Lo holders of
Class "A" shares, holders of Class "8" sLocks were granLed Lhe same rlghLs and prlvlleges as
holders of Class "A" sLocks wlLh respecL Lo Lhe paymenL of dlvldends.
Cn SepLember 9, 1992, ArLlcle vll was agaln amended Lo provlde as follows:
SLvLn1P: 1haL Lhe auLhorlzed caplLal sLock of Lhe corporaLlon ls 1Pl81? 1WC MlLLlCn
LSCS (32,000,000.00) dlvlded as follows:
CLASS nC. Cl SPA8LS A8 vALuL
"A" 1,000 1,000.00
"8" 31,000 1,000.00
LxcepL when oLherwlse provlded by law, only holders of Class "A" shares have Lhe rlghL
Lo voLe and Lhe rlghL Lo be elecLed as dlrecLors or as corporaLe offlcers
4
(SLress and
underscorlng supplled).
1he SLC approved Lhe foregolng amendmenL on SepLember 22, 1993.
Cn lebruary 9, 2001, Lhe shareholders of MCl held Lhelr annual sLockholders' meeLlng and
elecLlon for dlrecLors. uurlng Lhe course of Lhe proceedlngs, respondenL 8usLlco !lmenez, clLlng
ArLlcle vll, as amended, and noLwlLhsLandlng MCl's hlsLory, declared over Lhe ob[ecLlons of
hereln peLlLloners, LhaL no Class "8" shareholder was quallfled Lo run or be voLed upon as a
dlrecLor. ln Lhe pasL, MCl had seen holders of Class "8" shares voLed for and serve as members
of Lhe corporaLe board and some Class "8" share owners were ln facL nomlnaLed for elecLlon as
board members. noneLheless, !lmenez wenL on Lo announce LhaL Lhe candldaLes holdlng Class
"A" shares were Lhe wlnners of all seaLs ln Lhe corporaLe board. 1he peLlLloners proLesLed,
clalmlng LhaL ArLlcle vll was null and vold for deprlvlng Lhem, as Class "8" shareholders, of Lhelr
rlghL Lo voLe and Lo be voLed upon, ln vlolaLlon of Lhe CorporaLlon Code (8aLas ambansa 8lg.
68), as amended.
Cn March 22, 2001, afLer Lhelr proLesL was glven shorL shrlfL, hereln peLlLloners flled a
ComplalnL for ln[uncLlon, AccounLlng and uamages, dockeLed as Clvll Case no. Cv-01-0140
before Lhe 81C of aranaque ClLy, 8ranch 238. Sald complalnL was founded on Lwo (2) prlnclpal
causes of acLlon, namely:
a. AnnulmenL of Lhe declaraLlon of dlrecLors of Lhe MCl made durlng Lhe lebruary 9,
2001 Annual SLockholders' MeeLlng, and for Lhe conducL of an elecLlon whereaL all
sLockholders, lrrespecLlve of Lhe classlflcaLlon of Lhe shares Lhey hold, should be
afforded Lhelr rlghL Lo voLe and be voLed for, and
b. SLockholders' derlvaLlve sulL challenglng Lhe valldlLy of a conLracL enLered lnLo by Lhe
8oard of ulrecLors of MCl for Lhe operaLlon of Lhe ulLrasound unlL.
3

SubsequenLly, Lhe complalnL was amended Lo lmplead MCl as parLy-plalnLlff for purposes only
of Lhe second cause of acLlon.
8efore Lhe Lrlal courL, Lhe hereln peLlLloners alleged LhaL Lhey were deprlved of Lhelr rlghL Lo
voLe and Lo be voLed on as dlrecLors aL Lhe annual sLockholders' meeLlng held on lebruary 9,
2001, because respondenLs had erroneously relled on ArLlcle vll of Lhe ArLlcles of lncorporaLlon
of MCl, desplLe ArLlcle vll belng conLrary Lo Lhe CorporaLlon Code, Lhus null and vold.
AddlLlonally, respondenLs were ln esLoppel, because ln Lhe pasL, peLlLloners were allowed Lo
voLe and Lo be elecLed as members of Lhe board. 1hey furLher clalmed LhaL Lhe prlvllege
granLed Lo Lhe Class "A" shareholders was more ln Lhe naLure of a rlghL granLed Lo founder's
shares.
ln Lhelr Answer, Lhe respondenLs averred LhaL Lhe provlslons of ArLlcle vll clearly and
caLegorlcally sLaLe LhaL only holders of Class "A" shares have Lhe excluslve rlghL Lo voLe and be
elecLed as dlrecLors and offlcers of Lhe corporaLlon. 1hey denled LhaL Lhe excluslvlLy was
lnLended only as a prlvllege granLed Lo founder's shares, as no such provlso ls found ln Lhe
ArLlcles of lncorporaLlon. 1he respondenLs furLher clalmed LhaL Lhe excluslvlLy of Lhe rlghL
granLed Lo Class "A" holders cannoL be defeaLed or lmpalred by any subsequenL leglslaLlve
enacLmenL, !"#"Lhe new CorporaLlon Code, as Lhe ArLlcles of lncorporaLlon ls an lnLra-corporaLe
conLracL beLween Lhe corporaLlon and lLs members, beLween Lhe corporaLlon and lLs
sLockholders, and among Lhe sLockholders. 1hey submlL LhaL Lo allow Class "8" shareholders Lo
voLe and be elecLed as dlrecLors would consLlLuLe a vlolaLlon of MCl's franchlse or charLer as
granLed by Lhe SLaLe.
AL Lhe pre-Lrlal, Lhe Lrlal courL ruled LhaL a parLlal [udgmenL could be rendered on Lhe flrsL cause
of acLlon and requlred Lhe parLles Lo submlL Lhelr respecLlve poslLlon papers or memoranda.
Cn november 26, 2001, Lhe 81C rendered Lhe arLlal !udgmenL, Lhe dlsposlLlve porLlon of
whlch reads:
WPL8LlC8L, vlewed ln Lhe llghL of Lhe foregolng, Lhe elecLlon held on lebruary 9, 2001
ls vALlu as Lhe holders of CLASS "8" shares are noL enLlLled Lo voLe and be voLed for and
Lhls case based on Lhe llrsL Cause of AcLlon ls ulSMlSSLu.
SC C8uL8Lu.
6

ln flndlng for Lhe respondenLs, Lhe Lrlal courL ruled LhaL corporaLlons had Lhe power Lo classlfy
Lhelr shares of sLocks, such as "voLlng and non-voLlng" shares, conformably wlLh SecLlon 6
7
of
Lhe CorporaLlon Code of Lhe hlllpplnes. lL polnLed ouL LhaL ArLlcle vll of boLh Lhe orlglnal and
amended ArLlcles of lncorporaLlon clearly provlded LhaL only Class "A" shareholders could voLe
and be voLed for Lo Lhe excluslon of Class "8" shareholders, Lhe excepLlon belng ln lnsLances
provlded by law, such as Lhose enumeraLed ln SecLlon 6, paragraph 6 of Lhe CorporaLlon Code.
1he 81C found merlL ln Lhe respondenLs' Lheory LhaL Lhe ArLlcles of lncorporaLlon, whlch
deflnes Lhe rlghLs and llmlLaLlons of all lLs shareholders, ls a conLracL beLween MCl and lLs
shareholders. lL ls Lhus Lhe law beLween Lhe parLles and should be sLrlcLly enforced as Lo Lhem.
lL brushed aslde Lhe peLlLloners' clalm LhaL Lhe Class "A" shareholders were ln esLoppel, as Lhe
elecLlon of Class "8" shareholders Lo Lhe corporaLe board may be deemed as a mere acL of
benevolence on Lhe parL of Lhe offlcers. llnally, Lhe courL brushed aslde Lhe "founder's shares"
Lheory of Lhe peLlLloners for lack of facLual basls.
Pence, Lhls peLlLlon submlLLlng Lhe sole legal lssue of wheLher or noL Lhe CourL $ &'(, ln
renderlng Lhe arLlal !udgmenL daLed november 26, 2001, has declded a quesLlon of subsLance
ln a way noL ln accord wlLh law and [urlsprudence conslderlng LhaL:
1. under Lhe CorporaLlon Code, Lhe excluslve voLlng rlghL and rlghL Lo be voLed granLed
by Lhe ArLlcles of lncorporaLlon of Lhe MCl Lo Class A shareholders ls null and vold, or
already exLlngulshed,
2. Pence, Lhe declaraLlon of dlrecLors made durlng Lhe lebruary 9, 2001 Annual
SLockholders' MeeLlng on Lhe basls of Lhe purporLed excluslve voLlng rlghLs ls null and
vold for havlng been done wlLhouL Lhe beneflL of an elecLlon and ln vlolaLlon of Lhe
rlghLs of plalnLlffs and Class 8 shareholders, and
3. erforce, anoLher elecLlon should be conducLed Lo elecL Lhe dlrecLors of Lhe MCl,
Lhls Llme affordlng Lhe holders of Class 8 shares full voLlng rlghL and Lhe rlghL Lo be
voLed.
8

1he lssue for our resoluLlon ls wheLher or noL holders of Class "8" shares of Lhe MCl may be
deprlved of Lhe rlghL Lo voLe and be voLed for as dlrecLors ln MCl.
8efore us, peLlLloners asserL LhaL ArLlcle vll of Lhe ArLlcles of lncorporaLlon of MCl, whlch
denled Lhem voLlng rlghLs, ls null and vold for belng conLrary Lo SecLlon 6 of Lhe CorporaLlon
Code. 1hey polnL ouL LhaL SecLlon 6 prohlblLs Lhe deprlvaLlon of voLlng rlghLs excepL as Lo
preferred and redeemable shares only. Pence, under Lhe presenL law on corporaLlons, all
shareholders, regardless of classlflcaLlon, oLher Lhan holders of preferred or redeemable
shares, are enLlLled Lo voLe and Lo be elecLed as corporaLe dlrecLors or offlcers. Slnce Lhe Class
"8" shareholders are noL classlfled as holders of elLher preferred or redeemable shares, Lhen lL
necessarlly follows LhaL Lhey are enLlLled Lo voLe and Lo be voLed for as dlrecLors or offlcers.
1he respondenLs, ln Lurn, malnLaln LhaL Lhe granL of excluslve voLlng rlghLs Lo Class "A" shares ls
clearly provlded ln Lhe ArLlcles of lncorporaLlon and ls ln accord wlLh SecLlon 3
9
of Lhe
CorporaLlon Law (AcL no. 1439), whlch was Lhe prevalllng law when MCl was lncorporaLed ln
1977. 1hey llkewlse submlL LhaL as Lhe ArLlcles of lncorporaLlon of MCl ls ln Lhe naLure of a
conLracL beLween Lhe corporaLlon and lLs shareholders and SecLlon 6 of Lhe CorporaLlon Code
could noL reLroacLlvely apply Lo lL wlLhouL vlolaLlng Lhe non-lmpalrmenL clause
10
of Lhe
ConsLlLuLlon.
We flnd merlL ln Lhe peLlLlon.
When ArLlcle vll of Lhe ArLlcles of lncorporaLlon of MCl was amended ln 1992, Lhe phrase
"excepL when oLherwlse provlded by law" was lnserLed ln Lhe provlslon governlng Lhe granL of
voLlng powers Lo Class "A" shareholders. 1hls parLlcular amendmenL ls relevanL for lL speaks of
a law provldlng for excepLlons Lo Lhe excluslve granL of voLlng rlghLs Lo Class "A" sLockholders.
Whlch law was Lhe amendmenL referrlng Lo? 1he deLermlnaLlon of whlch law Lo apply ls
necessary. 1here are Lwo laws belng clLed and relled upon by Lhe parLles ln Lhls case. ln Lhls
lnsLance, Lhe law ln force aL Lhe Llme of Lhe 1992 amendmenL was Lhe CorporaLlon Code (8..
8lg. 68), noL Lhe CorporaLlon Law (AcL no. 1439), whlch had been repealed by Lhen.
We flnd and so hold LhaL Lhe law referred Lo ln Lhe amendmenL Lo ArLlcle vll refers Lo Lhe
CorporaLlon Code and no oLher law. AL Lhe Llme of Lhe lncorporaLlon of MCl ln 1977, Lhe rlghL
of a corporaLlon Lo classlfy lLs shares of sLock was sancLloned by SecLlon 3 of AcL no. 1439. 1he
law repeallng AcL no. 1439, 8.. 8lg. 68, reLalned Lhe same granL of rlghL of classlflcaLlon of
sLock shares Lo corporaLlons, buL wlLh a slgnlflcanL change. under SecLlon 6 of 8.. 8lg. 68, Lhe
requlremenLs and resLrlcLlons on voLlng rlghLs were expllclLly provlded for, such LhaL "no share
may be deprlved of voLlng rlghLs excepL Lhose classlfled and lssued as "preferred" or
"redeemable" shares, unless oLherwlse provlded ln Lhls Code" and LhaL "Lhere shall always be a
class or serles of shares whlch have compleLe voLlng rlghLs." SecLlon 6 of Lhe CorporaLlon Code
belng deemed wrlLLen lnLo ArLlcle vll of Lhe ArLlcles of lncorporaLlon of MCl, lL necessarlly
follows LhaL unless Class "8" shares of MCl sLocks are clearly caLegorlzed Lo be "preferred" or
"redeemable" shares, Lhe holders of sald Class "8" shares may noL be deprlved of Lhelr voLlng
rlghLs. noLe LhaL Lhere ls noLhlng ln Lhe ArLlcles of lncorporaLlon nor an loLa of evldence on
record Lo show LhaL Class "8" shares were caLegorlzed as elLher "preferred" or "redeemable"
shares. 1he only posslble concluslon ls LhaL Class "8" shares fall under nelLher caLegory and
Lhus, under Lhe law, are allowed Lo exerclse voLlng rlghLs.
Cne of Lhe rlghLs of a sLockholder ls Lhe rlghL Lo parLlclpaLe ln Lhe conLrol and managemenL of
Lhe corporaLlon LhaL ls exerclsed Lhrough hls voLe. 1he rlghL Lo voLe ls a rlghL lnherenL ln and
lncldenLal Lo Lhe ownershlp of corporaLe sLock, and as such ls a properLy rlghL. 1he sLockholder
cannoL be deprlved of Lhe rlghL Lo voLe hls sLock nor may Lhe rlghL be essenLlally lmpalred,
elLher by Lhe leglslaLure or by Lhe corporaLlon, wlLhouL hls consenL, Lhrough amendlng Lhe
charLer, or Lhe by-laws.
11

nelLher do we flnd merlL ln respondenLs' poslLlon LhaL SecLlon 6 of Lhe CorporaLlon Code
cannoL apply Lo MCl wlLhouL runnlng afoul of Lhe non-lmpalrmenL clause of Lhe 8lll of 8lghLs.
SecLlon 148
12
of Lhe CorporaLlon Code expressly provldes LhaL lL shall apply Lo corporaLlons ln
exlsLence aL Lhe Llme of Lhe effecLlvlLy of Lhe Code. Pence, Lhe non-lmpalrmenL clause ls
lnappllcable ln Lhls lnsLance. When ArLlcle vll of Lhe ArLlcles of lncorporaLlon of MCl were
amended ln 1992, Lhe board of dlrecLors and sLockholders musL have been aware of SecLlon 6
of Lhe CorporaLlon Code and lnLended LhaL ArLlcle vll be consLrued ln harmony wlLh Lhe Code,
whlch was Lhen already ln force and effecL. Slnce SecLlon 6 of Lhe CorporaLlon Code expressly
prohlblLs Lhe deprlvaLlon of voLlng rlghLs, excepL as Lo "preferred" and "redeemable" shares,
Lhen ArLlcle vll of Lhe ArLlcles of lncorporaLlon cannoL be consLrued as granLlng excluslve voLlng
rlghLs Lo Class "A" shareholders, Lo Lhe pre[udlce of Class "8" shareholders, wlLhouL runnlng
afoul of Lhe leLLer and splrlL of Lhe CorporaLlon Code.
1he respondenLs Lhen Lake Lhe Lack LhaL Lhe phrase "excepL when oLherwlse provlded by law"
found ln Lhe amended ArLlcles ls only a handwrlLLen lnserLlon and could have been lnserLed by
anybody and LhaL no board resoluLlon was ever passed auLhorlzlng or approvlng sald
amendmenL.
Sald conLenLlon ls noL for Lhls CourL Lo pass upon, lnvolvlng as lL does a facLual quesLlon, whlch
ls noL proper ln Lhls peLlLlon. ln an appeal )*$ cerLlorarl, only quesLlons of law may be
revlewed.
13
8esldes, respondenLs dld noL adduce persuaslve evldence, buL only bare
allegaLlons, Lo supporL Lhelr susplclon. 1he presumpLlon LhaL ln Lhe amendmenL process, Lhe
ordlnary course of buslness has been followed
14
and LhaL offlclal duLy has been regularly
performed
13
on Lhe parL of Lhe SLC, applles ln Lhls case.
WnLkLICkL, the pet|t|on |s GkAN1LD. 1he art|a| Iudgment dated November 26, 2001 of the
keg|ona| 1r|a| Court of araaque C|ty, 8ranch 2S8, |n C|v|| Case No. 01-0140 |s kLVLkSLD
AND SL1 ASIDL. No pronouncement as to costs.
SC CkDLkLD.