In The Matter of Island Accents

[PED * CASE NO. 99-2292. August 30, 1999.] IN THE MATTER OF ISLAND ACCENTS, INC. R E S O L U T I O N Complainant in the present case, one Gloria C. Pascual, sought action of this Commission praying that ISLAND ACCENTS, INC., a duly registered corporation organized primarily to engage in export trading business, be investigated for alleged violation of laws enforced and administered by the Commission. The COMPLAINT-AFFIDAVIT alleges among others that: (1) Hagedorn invited her to be part of a corporation named ISLAND ACCENTS, INC. and agreed to give her 1% of the annual gross sales of the said company plus salaries and other incentives but refused to reduce the same in writing; (2) Although Hagedorn had full control of the company being the sole owner thereof, he used dummies in the corporation and his name does not appear as incorporator of said corporation; (3) When ISLAND ACCENTS, INC., was approved as a BOI-registered export trader, Hagedorn came out in the open and appointed his wife as Chairman of the Board and his father as one of the Director without notice to the Commission; (4) In the meantime, due to the company's growth and enjoyment of tax holidays, it posted a gross sales of P1,647,819,096.28 from May 1985 to March 1996; (5) Said " unlawful " acts of Hagedorn amount devices or schemes amounting to fraud and misrepresentation which may be detrimental to the interest of the public which is subject to sanctions of this Commission (See Pages 1 to 2, AFFIDAVIT-COMPLAINT). As directed, ISLAND ACCENTS, INC., filed its Answer to the Complaint with Motion To Dismiss, while Hagedorn filed his Counter-Affidavit. The COUNTER-AFFIDAVIT of Hagedorn essentially denied the averments of Pascual that he promised to give her a 1% share of the gross sales of the ISLAND ACCENTS, INC., claiming that the same is a total lie considering that the nature of the job of the complainant as shipping manager is "clerical" in nature. Respondent Hagedorn maintained that he is not in a position to make that offer, not being the President of the company nor even a stockholder or director thereof. Further, Hagedorn also denied that he is the " sole owner " or a stockholder of the company pointing out that it is his wife, MRS. CARMEN LOPEZ-HAGEDORN, a Filipino national, who acquired an interest in the company in 1987. He also maintained that it is Salvador Sordo who is the President and majority stockholder of the company, and it is a grave personal insult against the intelligence and integrity of the latter to be termed as a " dummy ". While maintaining that he is not a stockholder of ISLAND ACCENTS, INC., Hagedorn pointed out that there is actually no legal or contractual prohibition for him to own shares in ISLAND ACCENTS, INC., and the "ANTI DUMMY LAW" ( Commonwealth Act No. 108, as amended ) has no application in the instant case because the company is in the export trade business which is not fully or partially nationalized. Respondent Hagedorn maintained that the instant complaint is part of the scheme of complainant Pascual, a "disgruntled employee," to harass and prejudice them and to extort money from him and ISLAND ACCENTS, INC.. In its ANSWER to the Complaint with MOTION TO DISMISS, ISLAND ACCENTS, INC., through Salvador Sordo, essentially echoed and collaborated the averments of Hagedorn and vehemently denied complainant's claims, enclosing documents in support of its averments. Complainant filed a REPLY to the COUNTER-AFFIDAVIT of Hagedorn and the ANSWER of ISLAND ACCENTS, INC. In response thereto, the respondents filed a REJOINDER. Thereafter, the parties were directed by the Commission to file their respective POSITION PAPER after which the case shall be deemed submitted for resolution. The main issue to be resolved in the case at bar is whether or not the acts complained of constitute devices or schemes amounting to fraud and misrepresentation detrimental to the interest of the public which may warrant appropriate sanctions by the Commission. cHSIAC This Commission, after careful perusal of all the documents adduced by the parties and the evidence on records, hereby rules that the claim of the complainant for her supposed 1% share in the gross sales of the company is a matter not within the ambit of this Department's jurisdictional authority, as it squarely falls within the purview of the jurisdiction of the NATIONAL LABOR RELATIONS COMMISSION (NLRC), the same being in the nature of a claim for " profit sharing " which is a part of her supposed compensation and/or fringe benefit as an employee of the company and arising out of the employer-employee relationship between them. As pointed out by the respondent, Pascual has already lodged the appropriate case before the NLRC, a fact which she does not deny (Please see: Paragraphs 34 to 36, Pages 5 to 6, COUNTER-AFFIDAVIT; Paragraphs 42, Page 13, ANSWER WITH MOTION TO DISMISS. The subject corporation is engaged in export trading business, an industry which does not appear to be fully or partially nationalized. As properly pointed out by the respondents, the Government, through the BOARD OF INVESTMENTS (BOI) under REPUBLIC ACT NO. 7042 otherwise known as the "FOREIGN INVESTMENTS ACT" in fact encourages investments in this industry by foreign firms and individuals. As correctly cited by the respondents: "[A]s a general rule, there are no restrictions on foreign ownership on export enterprises. . . ." (See Paragraph 2 of Section 2 [Declaration of Policy] of R.A. NO. 7042). Moreover, the law specifically declares that: "SEC. 6. Foreign Investments in Export Enterprises . Foreign investment in export enterprises whose products and services do not fall within Lists A and B of the Foreign Investment Negative List under Section 8 hereof is allowed up to one hundred percent (100%) ownership " [See Section 6 of R.A. NO. 7042] The products of ISLAND ACCENTS, INC., consisting of handicrafts, are not included in the Negative Lists A and B of the said law. Although CA No. 108, as Amended, otherwise known as the Anti-Dummy Law, is not one of those laws enforced and administered by the Commission, the Commission, takes this occasion to opine that there is no basis to apply the penal provision of CA No. 108 because the very said law explicitly states that it shall apply only (I)n all cases in which any constitutional or legal provision requires Philippine or any other specific citizenship as a requisite for the exercise of a right, franchise or privilege " (See Section 1, C.A. No. 108, as amended). The complainant's claims that Hagedorn is the " sole owner " or that he was actually the President and/or a stockholder of ISLAND ACCENTS, INC., are in fact belied and contradicted by records on file with this Commission, which records include a number of General Information Sheets (GIS) and/or Minutes of Board and/or Stockholders' Meetings executed and attested to under oath by the complainant herself as well as her principal witness, OLGA SERRANO-VILLASEOR, when they were serving as Corporate Secretary of ISLAND ACCENTS, INC., ANNEXES "3, "3-A," "4" and "5-A" and ANNEXES "1," "2" and "2-A", respectively. The complainant simply failed to substantiate the claims she made in her AFFIDAVIT-COMPLAINT. Contrary to the claim of the complainant, there appears to be no damage or prejudice to the interest of the public caused by respondent Hagedorn or the subject corporation, ISLAND ACCENTS, INC., which would warrant the intervention of and/or prosecution by the Commission. In fact, as can be gathered from documents submitted by the complainant herself (ANNEXES "A-1," "A-2," "A-3," "A-4, "A-5" and "A-6" of the AFFIDAVIT-COMPLAINT) and elsewhere from the pleadings filed by the parties, ISLAND ACCENTS, INC., appears to be an important contributor to the economy in terms of the taxes it pays and employment it generates. Finally, this Commission takes cognizance of the fact that the case was filed after almost fourteen (14) years from the time the complainant first worked for the respondents sometime in 1985 and around three (3) years after she left the employ of the company in March 1996. This fact clearly vitiates and impairs the credibility and purity of the complainant's motive in initiating the instant suit. If indeed complainant had a valid or lawful cause of action against the respondents, it is difficult to believe and it is contrary to natural human conduct that she waited for many long years before filing her suit when there appears to have been no obstacle for her to file the same earlier. Indeed, it does appear that the instant suit has been filed as a mere afterthought. WHEREFORE, in view of all the foregoing considerations, this Department is now terminating the investigation of this case and the matter considered CLOSED AND TERMINATED. SO RESOLVED. Mandaluyong City, Metro Manila, August 30, 1999. (SGD.) RUBEN C. LADIA Acting Director, PED