JULIO SALES vs. SEC G.R. No. L-54330. January 13, 1989. Cortes, J.

Where the corporation sold its shares to an investment house on the condition that the same shall be sold to the public through stockbrokers in block of 1 million shares per buyer and the condition was not fulfilled, the sale is, nevertheless, presumed to be valid unless set aside by a competent court. Thus, the buyer, as a stockholder, cannot be deprived of his right to vote his shares as it is a right inherent to ownership. The stockholder may be deprived of the right to vote only upon clear showing of its lawful denial under the articles of incorporation or by-laws of a corporation. Further, issues relating to the directive of the board of directors of the issuing corporation to issue a stock certificate in favor of the buyer are questions of policy or management and are left solely to the honest decision of officers and directors of a corporation, and so long as they act in good faith, their orders are not reviewable by the courts. Facts: State Investment House entered into a sales agreement with Sipalay Mining whereby the latter sold to the former 200M common shares of its capital stock, on the condition that State Investment shall not sell more than 1M shares per buyer. Subsequently, the restriction on the sale of the shares was modified by allowing sale in blocks from 1M shares to 5M shares per buyer. State Investment sold the 200M shares to Anselmo Trinidad & Co., Inc. (ATCO). During the time that ATCO held the shares, it voted them in the stockholders' meetings of Sipalay Mining. Later on, ATCO in turn sold 198.5M of the shares to VULCAN. By resolution of the BODs of Sipalay Mining, its President was directed to sign the certificate of stock that would effect the transfer. Prior to the scheduled annual stockholders meeting of Sipalay Mining, petitioners filed before the SEC a petition to nullify the sale of the shares to VULCAN, with a prayer for the issuance of a writ of preliminary injunction to enjoin VULCAN from voting the shares. The SEC temporarily restrained VULCAN from voting its 198.5M shares at the 1979 annual stockholders meeting pending resolution of petitioners petition for the issuance of a writ of preliminary injunction. The annual stockholders meeting of Sipalay Mining proceeded without the participation of VULCANs 198.5M shares and the members of the BODs were elected. Issue: W/N the sale of shares to VULCAN is valid and that the shares in question be counted for quorum and be allowed to vote and be voted for pending resolution of the validity of the sale with the court. Held: YES; The sale of the shares of stock had long been perfected and is presumed valid until declared otherwise by a competent court.

Thus, during the pendency of the case on the issue of validity of sale,, VULCAN (the buyer), as a stockholder, has the right to vote his shares because the right to vote in the annual stockholders meeting is inherent in stock ownership and can only be deprived from the stockholders if it is provided for in the articles of incorporation or by-laws of the corporation. The Court is not at liberty to review whether or not the decision of the board to direct its President to sign the stock certificate was to the best interest of the corporation: It is a well-known rule of law that questions of policy or of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment for the judgment of the board of directors; the board is the business manager of the corporation, and so long as it acts in good faith its orders are not reviewable by courts. Petition is DISMISSED.