Vicente C. Ponce, et al. vs. Iligan Cement Corp., et al.

[SEC-AC NO. 398. March 1, 1993.] VICENTE C. PONCE, ET AL., complainants-appellees, vs .ILIGAN CEMENT CORPORATION, ET AL. , respondents-appellants . O R D E R For consideration by this Commission en banc is an appeal from the decision of the hearing officer in SEC Case No. 2507 declaring as null and void the July 1, 1977 reduction of the par value of the common shares of stock of Iligan Cement Corporation, Inc. (ICC) from P1.00 to P0.25, declaring Vicente Ponce as owner of at least 50% of the authorized capital stock of ICC and directing ICC to correct its stock and transfer book to record payments for shares totalling P5,301,518.00 in favor of Vicente Ponce. LibLex Records of the case show that on August 4, 1983, Vicente Ponce, Nelia Ponce and Levi Mariano filed a complaint before the Securities Investigation and Clearing Department of this Commission against Iligan Cement Corporation (ICC),et al.,praying, among others, for the declaration of nullity of the reduction of the par value of ICC shares from P1.00 to P0.25 in July 1977 and the resolution declaring stock dividends out of reappraisal surplus. Complainants also prayed for an order to direct respondents to disclose all deeds, documents, resolutions and various contracts relative to guarantee fees, management and marketing fees and for a full and true accounting of all transactions to show complete and accurate stockholdings of all stockholders of ICC. Complainants likewise prayed for an order placing ICC under a receivership committee. The complaint alleged that as of March 6, 1970, complainants owned P6,472,567 worth of shares of ICC representing 58.85% of the corporation's authorized capital stock. That certificates for only 3,017,757 shares were delivered to them in June 1983. It also advanced the argument that on July 1, 1977 ICC illegally reduced the par value of its shares from P1.00 to P0.25. That with the illegal reduction of the par value and the subsequent increase in the authorized capital of ICC, the Alcantara group illegally and fraudulently gained control of the corporation and have since devised ways of imposing burdens and onerous contracts on the respondent corporation. In their answer with counterclaim, respondents denied the material averments in the complaint and acknowledged that the number of shares to which complainants are entitled are limited to those registered in the corporate books. It was further claimed that complainant Vicente Ponce was a member of the board of directors of ICC until 1982 while Nelia Ponce was likewise a member thereof until 1980 and in no instance did any of them took exception to any of the numerous transactions presented to the board for its approval principally because they were fair, just and reasonable. Hearings were conducted and on March 30, 1987, hearing officer Antonio Esteves denied the application for receivership for lack of merit. A second application for receivership was filed on November 21, 1991 and on September 1, 1992, the hearing officer, Alberto Atas, issued the questioned order, the dispositive portion of which reads as follows: "WHEREFORE, judgment is hereby rendered, as follows: a) Declaring as null and void ab initio the reduction of the par value of the common shares of ICC from P1.00 to P0.25; b) Declaring Vicente Ponce as owner of at least 50% of the total authorized capital stock of ICC; c) Directing ICC to make the corresponding corrections in its stock and transfer book by recording therein complainant Vicente Ponce's unrecorded payments of 1) P511,000.00, 2) P1,640,000.00, 3) P40,000.00, 4) P1,160,518.00, 5) P800,000.00, 6) P500,000.00, 7) P250,000.00, 8) P178,000.00, 9) P222,000.00; including all its fair and consequent increments of their said unrecorded payments. The equivalent in shares of all these unrecorded payments shall be computed based on a par value of P1.00 per share; d) Denying complainants' second application for receivership. However, in order to protect the interest of both complainants and respondents pending finality of the resolution of this case, it is hereby ordered that: 1. Complainant Vicente Ponce shall have free access to Iligan Cement Corporation, and all its books and records, personally, and/or thru his duly authorized representatives; 2. Decisions of the Board of Directors and/or management of Iligan Cement Corporation shall be made known to complainant Vicente Ponce who shall have the right to object and if so, the matter shall be referred to this Commission for the latter's resolution; in the interim, pending objection, the decision shall not be enforced or made operative. Complainant Vicente Ponce shall have a period of five (5) days from notice within which to submit his objections, otherwise, he shall be deemed to have waived his objection to the decision; 3. Ordering respondents, jointly and severally, to pay complainants the sum of P1,000,000 as moral damages, P500,000.00 as exemplary damages and P500,000.00 as attorney's fees. SO ORDERED." LexLib The hearing officer's decision is premised on the following: Based on the testimony of Vicente Ponce, he had a gentlemen's agreement with Conrado Alcantara (who died on March 19, 1983) that they will always maintain a 50-50 sharing of ownership over ICC, regardless of recording to the contrary. The agreement is evidenced by a "Schedule of Paid-up Capital as of August 31, 1968" marked as Exh. "9-H".It is signed by Vicente Ponce as president, attested by Conrado Alcantara as treasurer and Edgardo Angara as Secretary, the authenticity of which is not disputed. The exhibit states in full: "SCHEDULE OF PAID-UP CAPITAL" As of August 31, 1968 Subscription Paid-up Balance 1. Julius Labrador P1,640,000.00 P1,640,000.00 P- 2. Julio C. Ponce 40,000.00 40,000.00 - 3. Lope Leonio 50,000.00 50,000.00 - 4. Nelia G. Ponce 668,457.00 668,457.00 - 5. Edgardo Angara 10,000.00 10,000.00 - 6. Vicente C. Ponce 1,591,543.00 1,170,518.00 421,025.00 7. Conrado Alcantara 4,000,000.00 P2,050,000.00 P1,950,000.00 Total P8,000,000.00 P5,628,975.00 P2,371,025.00 Between July 1, 1967 to March 6, 1970, Vicente Ponce made stock payments to ICC totalling P4,996,792.41 which were all unrecorded. Within the period from 1970 to 1982, ICC's capital stock was increased twice. Indeed, had the P4,996,792.41 claimed payments by the Ponce group been properly credited to them by way of stock payments, they (complainants) definitely would have majority ownership and control over ICC. Based on this, the reduction in par value of ICC shares from P1.00 to P0.25 in July 1977 is void for failure to muster the required number of shares necessary to amend the articles of incorporation. The hearing officer, however, found that the necessity for the appointment of a receiver for the company is not so clear hence the precautionary measures indicated in the September 1, 1992 order. On September 18, 1992, respondents filed this appeal, Nicasio Alcantara filed a supplemental Memorandum on Appeal on October 2, 1992 while the other respondents in SEC Case No. 2507, Bienvenido Tan III, Simeon Reyes and Alfredo de Borja filed their separate consolidated Supplemental Memorandum on Appeal on October 12, 1992. Meanwhile, or on October 1, 1992, complainants filed a Motion to Execute the Decision on the ground that the appeal filed on the 18th day from receipt of the decision has rendered the same final and executory in view of the provisions of the 1987 Administrative Code which provides for a period of 15 days within which to perfect an appeal. This was opposed by the respondents-appellants and on October 13, 1992, this Commission en banc, thru Associate Commissioner Fe Eloisa C. Gloria, directed the complainants-appellees to file their Comment and/or Reply Memorandum. Counsel for appellees opted to file, instead, on October 26, 1992, an anti-graft case against Commissioner Gloria and Nicasio Alcantara with the Ombudsman without filing the required Reply Memorandum. On November 6, 1992, the hearing officer denied the motion for execution. Complainants-appellees elevated the denial directly to the Supreme Court which dismissed the same on December 2, 1992. A motion for reconsideration was filed but was denied with finality on January 20, 1993, and, on February 3, 1993 the Supreme Court ordered an entry of judgment. The appellants advance the arguments that: 1) The hearing officer erred in declaring Vicente Ponce the owner of at least 50% of the total authorized capital stock of ICC. LLphil 2) The hearing officer erred in declaring as null and void the reduction of the par value of ICC shares from P1.00 to P0.25 in July 1977 on the ground of failure to muster the required number of votes to amend the ICC charter; 3) The hearing officer erred in ordering the correction of the ICC's stock and transfer book to include the "unrecorded" payments of Vicente Ponce; 4) The hearing officer erred in granting virtual execution pending appeal without a hearing; and, 5) The hearing officer erred in awarding damages in favor of the complainants. We are inclined to rule in favor of the appellants. A reading from the complaint filed before the SICD shows that it does not contain an allegation that Vicente Ponce and Conrado Alcantara agreed to share ownership of ICC on a 50-50 basis. The issues in this case, therefore, should be limited to those presented in the pleadings. (see Moran, Rules of Court, Vol. I, p. 311, citing Lianga Lumber Co. v. Lianga Timber Co.) The Supreme Court has thus held that a party cannot prove a matter not alleged in the pleading. (Ramirez v. Orientalist, G.R. No. 11897, September 24, 1918, 38 Phil. 634, see also Balmes vs. Suson, G.R. No. L-27235, May 22, 1969) Even if there was such an allegation in the pleading, the same could not be entertained. When Vicente Ponce testified to prove the existence of the oral agreement, counsel for the respondents-appellants objected under the dead man's law (T.S.N., Dec. 12, 1984) The objection, however, was denied but under Section 23 of Rule 130 of the Rules of Court, the testimony should have been disallowed because Ponce cannot testify on a matter of fact occurring before the death of Conrado Alcantara on a claim or demand against the deceased. This is so because "if testimony to the character offered by plaintiff is allowed, then all sorts of fictitious claims might be presented and allowed by designing persons." (See Maxilom v. Tabotabo, G.R. No. L-3505, December 20, 1907, 9 Phil. 390) As was said by then Chief Justice Brickell in the case of Louis v. Easton, cited in the Maxilon case, "if death has closed the lips of one party, the policy of the law is to close the lips of the other." Assuming that the above is not applicable, the claim of complainants-appellees is self-serving and while Exh. "9-H" shows that Alcantara subscribed to 4,000,000 out of the 8,000,000 common shares of ICC, and the Ponce group the remaining 4,000,000 shares, the same does not, in itself, prove the existence of a 50-50 gentlemen's agreement nor that they will maintain the said sharing. There were subsequent events that will prove that the Ponce group waived to maintain the alleged sharing if, at all, it existed, such as waivers of pre-emptive rights to subscribe to subsequent increases in capital stock and deeds of transfer and assignments. In fact, the alleged 50-50 sharing oral agreement has no binding effect to the other stockholders who are likewise subscribers to the capital stock of ICC and who may, in one way or another, disturb such sharing. This Commission en banc is likewise constrained to rule that the judgment that Vicente Ponce is the "owner of at least 50% of the ICC capital stock" is a nullity because it is indeterminate. At least 50% could mean from 50% to 99%.The actual holdings of Ponce should have been clearly and completely determined and stated since the particulars of one's stockholdings cannot be left for determination after judgment. (see Moran, Vol. I, p. 193 citing Ignacio v. Hilario, 76 Phil. 605) As to the reduction of the par value of ICC shares, it appears that Vicente and Nelia Ponce approved by written ratification or at the least by acquiescence the reduction of the par value of the common stocks of the company from P1.00 to P0.25. The hearing officer failed to consider that on October 19, 1978, complainants made a written ratification of the meeting held on even date (Exh "3") where the stockholders unanimously approved and ratified the 1977 reduction of par value/capital as the first step toward ICC's capitalization program. Vicente and Nelia Ponce signed the minutes and certified it as READ and APPROVED by them. It states: "Mr. Jalbuena informed the stockholders that the move to increase the company's authorized capital is not new, it being a part of the capitalization program formulated by management and presented to and approved in principle by stockholders and directors at previous meetings. The first consisted in the reduction of the par value of common shares in order to create a more favorable climate for fresh capital to be infused. This has already been accomplished. With said reduction, the second step was implemented by the issuance of Four Million (4,000,000) unissued common shares. This has likewise been done and as a consequence the common capital stock has been fully subscribed and paid. And to meet the long term capital requirements of the company and to accommodate shares that will be issued in connection therewith, an increase in the company's authorized capital stock has become necessary. Considering the requirements of the corporation and the directions mapped out for it by the directors, it was decided by management and the Board of Directors to recommend to the stockholders the increase of the corporation's authorized capital stock to Thirty-Eight Million Pesos (P38,000,000.00) through the creation of One Hundred Five Million (105,000.00) common shares of the par value of Twenty-Five P . 025 centavos each." (Exh. "3" p. 5).(Emphasis ours) Ponce therefore, could not now come before this Commission questioning the validity of the reduction of the par value of the shares as he himself approved and ratified the minutes of the October 19, 1978 meeting. More so, the reduction took place in July 1977 and appellees filed the case only on August 24, 1983 or after more than six (6) years and after subsequent increases in the corporate capital showing the par value of the common shares at P0.25 each which they themselves approved. To allow them to question the act which has likewise been approved by the SEC would defeat the rule on estoppel by laches which, in a general sense, is failure or neglect, for an unexcusable and unexplained length of time, to do that which, by exercising diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it." (Tijam v. Sibonghanoy, G.R. No. L-21450, April 15, 1968) Likewise, ICC has dealings with creditors, investors and the public at large who rely on its capital structure as approved by the SEC. To uphold the hearing officer's ruling that the reduction of the par value/capital of ICC is null and void would destroy the reliability and integrity of the SEC approval of corporate actions which would include the subsequent increases in the capital stock of the corporation in 1978 and 1979 and therefore discourage investments and hinder the promotion of economic development. Likewise, the reduction of the par value of ICC shares in 1977 did not reduce Vicente and Nelia Ponce's proportionate interests in ICC. This is so because a decrease of capital stock and the decrease in par value does not affect the proportion of stockholdings in a corporation. (Sec. 37, Corporation Code) It did not, therefore, result in the dilution of the stockholdings of the Ponces'. The dilution was a result of transfers and waivers of preemptive rights executed by the Ponces. Apparently, the hearing officer failed to appreciate the pieces of documentary evidence showing that Vicente Ponce transferred shares to Conrado Alcantara and that Vicente and Nelia Ponce voted to increase the capital stock of ICC in 1970, 1978 and 1979 but waived their pre-emptive rights to subscribe to the said increases. Records reveal that ICC was incorporated in June 1, 1967. Its shares were equally owned between the groups of Ponce and Pablo Floro. In that same year, Vicente Ponce bought out Pablo Floro and in 1968 invited Conrado Alcantara to invest in the company such that on April 18, 1968. Vicente Ponce assigned 10,000 shares to Conrado Alcantara. To follow for the additional investment of Conrado Alcantara, ICC increased its capital on May 8, 1968 from P10 million to 12 million divided into 8,000,000 common shares at P1.00 per share and 40,000 preferred shares at P100.00 per share. Only Conrado Alcantara subscribed to the extent of 1,500 shares. The increase in capital stock was approved by the SEC on July 17, 1968. In accordance with Exh. "9-H",as of August 31, 1968, all common stocks of ICC were fully subscribed, 4,000,000 by Conrado Alcantara and the balance by other persons therein named. Vicente Ponce had in his name 1,591.543 shares while Nelia Ponce had 668,457. The stockholders maintained this proportion of subscriptions up to October 5, 1969. On February 9, 1970, Vicente Ponce assigned to Conrado Alcantara 792,500 shares. (Memorandum of Agreement, Exh. "B",also Exh. "1") On March 24, 1970, Vicente Ponce made two other assignments transfers, this time in favor of Julio Macuja for 500 shares (Exh. "21") and 500 shares to Anselmo Sevilla (Exh. "20").On record, these transfers reduced Vicente Ponce's shares to 789,043. Thus, in the list of stockholders as of May 8, 1970 prepared by the then secretary Julio C. Ponce, Vicente's brother, (Exh. "22") the following appeared: Subscription Paid-Up Balance 1. Conrado Alcantara 4,787,490 P4,787,490.00 - 2. Julius Labrador 1,640,000 1,640,000.00 - 3. Vicente Ponce 798,043 576,043.00 P222,000.00 4. Nelia G. Ponce 668,457 668,457.00 - 5. Lope Leonio 50,000 50,000.00 - 6. Julio C. Ponce 40,000 40,000.00 - 7. Edgardo Angara 10,000 10,000.00 - 8. Julio Macuja 500 500.00 - 9. Anselmo Sevilla 500 500.00 - 10. Simeon Reyes 10 10.00 - 11. Luis de Jesus 5,000 5,000.00 - On May 8, 1970, ICC further increased its capital stock from P12 million to P23 million divided into 15,000,000 common shares and 80,000 preferred shares at the same par value. Out of the increase in capital only Conrado Alcantara and Julius Labrador subscribed thereto at 2,500,000 and 500,000 common shares respectively. (Cert. of Filing of increase of Capital Stock, Exh. "27",also, Exh. "28" signed by ICC directors including Vicente Ponce and Nelia Ponce, and Exh. "28-A").The other stockholders, the Ponces included, executed a waiver of preemptive rights (Exh. "32-A" and Exh. D-2") This resulted to Conrado Alcantara's increased stockholdings of 7,287,490 while that of V. Ponce remained at 798,043 and Nelia Ponce at 668,457. Labrador's share increased to 2,140,000. On August 31, 1970, V. Ponce assigned and transferred 400,000 shares to Conrado Alcantara as evidenced by a deed of assignment. (Exh. "23") As of May 10, 1973, the minutes of the annual stockholders' meeting (Exh. "25") duly signed by no less than Vicente and Nelia Ponce would show the following stockholdings in ICC as follows: prcd No. of Shares Conrado Alcantara 7,687.08 Julius Labrador 2,140,000 Vicente Ponce 398,043 Luis M. de Jesus 5,000 Anselmo Sevilla 500 Julio Macuja 500 Simeon Reyes 10 Alfredo de Borja 10 Nelia G. Ponce 718,457 Nicasio Alcantara 200 Levi Mariano 40,000 Edgardo Angara 10,000 Felicisimo Alcantara 200 Total 11,000,000 The Ponce group, consisting of Vicente Ponce, Anselmo Sevilla, Julio Macuja, Nelia Ponce, Levi Mariano and Edgardo Angara in effect, held 10.62% while the Alcantara group 69.93% and Julius Labrador at 19.45%. On July 1, 1977, a special stockholders' meeting was held where the stockholders of ICC approved and resolve to decrease the par value of ICC's common stocks from P1.00 to P0.25 per share. The Ponce group moved to defer discussion of the proposal but when the issue was put to a vote, the motion was denied. As per minutes of meeting, (Exh. "2") when the motion for the reduction of the common shares of the company was submitted on the floor for approval, the Ponce group interposed no objection. Julius Labrador voted his 19.45% shares in favor of the reduction as he was still the stockholder of record at that time. During the meeting of even date, stockholders representing 10,230,843 shares out of the 11,000,000 shares outstanding were present in person while 759,157 shares were represented by proxies. There were, therefore, 10,990,000 shares duly present or represented thereat such that the required number of vote was mustered contrary to the hearing officer's findings. This is so because the vote of the Alcantara group alone, which is 69.93% or more than 2/3 of the outstanding capital stock of 100 is sufficient to muster the vote required. The reduction of the par value/capital was subsequently approved by this Commission on September 20, 1978. Meanwhile, or on January 23, 1978, the stockholdings of Julius Labrador were registered in the books of ICC in the name of V. Ponce by virtue of a deed of assignment (Exh. 'AA") This increased the stockholders of the Ponce group to 30.0% as against the Alcantaras' 69.93%. On October 19, 1978, ICC again increased its authorized capital stock from P11,750,000.00 (after the decrease in capital) to 38 million divided into 120 million shares of common stock of P0.25 per share and 80,000 preferred shares at P100.00 per share. This was approved by the SEC on December 26, 1978. Of the increase of P26,250,000.00 equivalent to 105 million common shares, 21,000,000 shares were subscribed as follows: Subscriber No. of Shares Conrado Alcantara 20,949,351 Edgardo Angara 19,090 Luis M. de Jesus 9,800 Julio Macuja 20,955 Felicisimo Alcantara 381 Nicasio Alcantara 381 Simeon Reyes 21 Faustino Agbada 11 Alfredo de Borja 10 21,000,000 Vicente Ponce and Nelia signed the minutes of meeting. (Exh. "31") The existing stockholders were given 10 days to subscribe to the shares in order that they may exercise their preemptive rights. (Exh. "31-G") Vicente Ponce and Nelia Ponce did not exercise their preemptive rights. Thus, as per minutes of the annual meeting of the stockholders of ICC on May 31, 1979 duly signed by Vicente Ponce and Nelia Ponce (Exh. "26") the stockholders of record of ICC were as follows: LLphil No. of Shares Percentage PONCE GROUP Vicente Ponce 2,038,043 Nelia Ponce 979,714 Julio Macuja 21,637 Anselmo Sevilla 500 Edgardo Angara 32,726 Levi Mariano 40,000 3,112,620 8.65 ALCANTARA GROUP Conrado Alcantara 32,869,197 Luis de Jesus 16,800 Simeon Reyes 36 Alfredo de Borja 17 Felicisimo Alcantara 653 Nicasio Alcantara 653 Julius Labrador 5 Faustino Agdaba 19 32,887,380 91.35 36,000,000 100.00 On May 31, 1979, ICC passed a resolution for the reclassification of its shares to allow foreign investors to invest in the company. This was approved by the SEC on February 14, 1980. On November 27, 1979, the stockholders of ICC approved to increase the capital from P38 million to P78,000,000.00 divided into 72 million Class "A" common shares at P0.25 per share, 48 million Common "B" shares at P0.25 per share, 80,000 preferred "A" at P100.00 per share and 160,000,000 preferred "B" at P0.25 per share. The minutes (Exh. "26") was signed by Vicente Ponce and Nelia Ponce. Holderbank Financiers Glaris, Ltd. invested 22 million Common "B" shares and diluted both Filipino groups' stockholdings to 56.70% for the Alcantaras and 5.37% for the Ponces'.The amendment was approved by the SEC on April 8, 1980. On December 1, 1980, Conrado Alcantara transferred 197 shares to Tomas Alcantara and 7,531,943 to Alsons Development & Investment Corporation on April 23, 1982 thereby reducing his stockholdings to 25,337,057. On November 11, 1982, ICC declared a 100% stock dividends to Class "A" and "B" common shares out of revaluation increment in property charged to operations through depreciation charges. The amount of P14,500,000.00 was transferred from revaluation increment in property to retained earnings. This is permissible as a matter of SEC policy. With the 100% stock dividends, the stockholdings of ICC as of December 31, 1982 would show the following: Stockholdings Percentage Paid-in ALCANTARA GROUP Conrado Alcantara 50,674,114 43.68 P12,668,528.50 Alfredo de Borja 34 .00 8.50 Nicasio Alcantara 1,306 .00 326.50 Felicisimo Alcantara 1,306 .00 326.50 Luis M. de Jesus 31,600 .03 7,900.00 Simeon A. Reyes 72 .00 18.00 Julius Labrador 10 .00 2.50 Faustino Agbada 38 .00 9.50 Tomas Alcantara 394 .00 98.50 ALDEVINCO 15,063,886 12.99 3,765,971.50 Bienvenido Tan 2,000 .00 500.00 65,774,760 56.70 P16,443,690.00 PONCE GROUP Edgardo Angara 65,452 0.06 16,363.00 Vicente Ponce 4,076,086 3.51 1,019,021.00 Nelia Ponce 1,959,428 1.69 489,857.00 Julio Macuja 43,274 0.04 10,818.50 Anselmo Sevilla 1,000 .00 250.00 Levi Mariano 80,000 0.07 20,000.00 6,225,240 5.37 P1,556,310.00 Total Common Class "A" 72,000,000 62.07 P18,000,000.00 Common Class "B" (HOLDERGREEN GROUP) Joseph S. Broker 2 .00 0.50 Andres Gatmaitan 2 .00 0.50 Holdergreen Ltd. 43,999,994 37.93 10,999,998.50 J.M. Robinson 2 .00 0.50 Total Common "B" 44,000,000 37.93 P11,000,000.00 Total Common Stocks 116,000,000 100 29,000,000.00 Except for some transfers made by Alcantara and Alsons Development and Investment Corporation, the above stockholdings remained unchanged up to the time that the case was instituted in August 1983. Apparently therefore, the pieces of evidence in the case only confirms that Vicente and Nelia Ponce subscribed to 1,591,543 and 668,457 common shares of ICC as of August 31, 1968 (exh. "9-H").After a series of transfers and increases, all to our mind, valid and binding as they were approved by the stockholders including the appellees, the Ponces' were entitled and were thus issued in June 1983, stock certificates corresponding to their stockholdings in accordance with the Stock and Transfer Book of the company. They cannot now, complain since it has been held that "a stockholder cannot complain, if after having been given a chance to get his proportion of additional issues of stock on same terms as those interested, he is unwilling to risk more money in the venture and prefers to let others interested take their chances on ultimate success." (Greenbaun v. American Metal Climax, Inc. 278, N.Y.S.,123) cdll As to the "unrecorded payments" claim of Vicente Ponce worth P5,301,518 supposedly made between May 28, 1968 to January 30, 1970, the same is highly questionable. During the period mentioned, ICC had only 8,000,000 common shares all of which were fully issued and subscribed. Vicente Ponce subscribed to only 1,591,543 common shares and Nelia Ponce to 668,457 shares. (Exh. "9-H") It was legally and physically impossible for Vicente Ponce to pay P5,301,518.00 and receive the corresponding common shares because his subscriptions were much less. There were no subscription contract between ICC and Vicente Ponce granting the latter the right to subscribe the corresponding number of shares. Thus, even assuming that he made payments, he cannot be issued shares because of the lack of subscription agreement. This is so because a "person may become a holder of shares in a corporation either (1) by subscription contract with the corporation for the issue of new shares; (2) by purchase from the corporation of treasury shares; (3) by the transfer from a shareholder of outstanding shares by which transfer he is substituted in place of the transferor." (Agbayani, Commercial Laws, Vol. 3, p. 436, citing Ballantine).And, "in the absence of element of estoppel, no person can become a stockholder in a corporation by virtue of subscription for stock, unless there is a valid contract between him and the corporation." (4 Fletcher, 1982 Rev. Ed.,p. 63, citing White v. Kahn, 103 Ala. 308, and Cornwell v. Burning Gold & Silver Min. Co.)."There must in every case be some sort of subscription or contract whereby the subscriber obtains the right, upon some conditions, to demand stock and to exercise the rights of a stockholder." (Fletcher, supra, citing Butler University v. Scoonover) In fine, therefore, the claims of Vicente Ponce for alleged "unrecorded payments" are without legal basis as they were not supported by valid subscription contracts. In the interest of justice, however, we are constrained to look into the alleged "unrecorded payments". The P511,000 worth of shares Pablo Floro allegedly assigned to Vicente Ponce on August 30, 1967 is not substantiated. There is no proof that Floro subscribed the shares or of their assignment to Ponce. Possession of one official receipt by Ponce is not evidence of a subscription. In fact the evidence shows that the amounts were booked as "advances from officers".(Exh. "8-5","8-D-6","8-D-7") which were paid by ICC to Floro (Exh. "8","8-A","8-H") Also, petitioner-appellees exhibits ("Y","Y-1",and "Y-2") likewise refer to the "advances" extended by Floro to ICC. Being advances therefore, Ponce cannot claim them as payments for shares since "advances from officers" are liability accounts of the corporation. In fact, the hearing officer even found that the Cash Vouchers showing payment to Pablo Floro (Exh. "8","8-A",etc.) totals P511,000.00 and tallies with the claim of the same amount alleged as "unrecorded payments". Admittedly, the P1,640,000.00 claim of petitioners-appellees, represents payment for shares subscribed which were recorded in the name of Julius Labrador, that is, the 1,640,000 common shares of Labrador actually belonged to Ponce. However, this claim has been rendered academic when, on January 23, 1978, Labrador assigned the shares to Ponce (Exh. "AA").Although Labrador voted them in the 1977 decrease in capital because he was then the registered owner, Vicente and Nelia Ponce ratified the reduction in 1978. To credit the same amount in favor of Vicente Ponce would result in a double entry since the shares it represents were already recorded in his name and formed part of the shares for which a certificate was issued to him in 1983. The 40,000 payment of ICC shares allegedly made on January 7, 1968 evidenced by Prudential Bank Check No. 50478 is not supported by a receipt to show that these were for subscription payments. The non-production of the official receipt which he should have had full control of gives rise to the disputable presumption that if such evidence were produced, it would have been unfavorable to him. (See 22 CJS, 11-112) In fact. there is no subscription contract to show that such were intended for subscription payment. The said check was issued by Nelia Ponce who was then the treasurer and who had the duty to issue an official receipt especially so where she was the issuer of the check. Respondents have argued that the payment formed part of the payment of the 1,640,000 shares subsequently assigned by Labrador. As to the claimed payment of P1,160,518 by authority of ICC Board Resolution No. 40-68 dated August 30, 1968, the same is likewise not very clear. prcd While the resolution provides: "RESOLVED, that the promissory note executed by Pablo Floro in favor of Vicente Ponce on July 14, 1968 in the amount of P1,160,518.00 where the former will supply cement to the latter be accepted by Iligan Cement Corporation as payment of Vicente C. Ponce's subscription to the capital stock of ICC to the extent of P1,160,518.00." ICC recorded the endorsement as receivable (Exh. "9-F-2"). However, the cement delivered was only worth P136,775.52 (Exh. "9-M") Thus, on September 30, 1969, ICC reversed the entry in the journal to recognize only the P136,775.52 payment (Exh. "9-F-4) which was credited to Vicente Ponce's subscriptions. Having been credited as such, he cannot now claim the payment of P1,160,518.00 since Article 1181 of the Civil Code provides that "in conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired," shall depend on the happening of the event which constitutes the condition. And, in Gaite v. Fonacier, G.R. No. L-11827, July 31, 1961," if the suspensive condition does not take place, the parties would stand as if the conditional obligation never existed." Nonetheless, the said P136,775.52 was still credited in Ponce's favor. What is controlling, we believe, is Exh. "9-H" where Vicente Ponce certified that his subscription to ICC capital was 1,591,543 common shares for which he paid P1,170,518.00. He could not have paid another P1,160,518.00 for the reason that ICC common shares were already fully issued and subscribed. The check payment of P800,000.00 on December 14, 1967 was made at the time that ICC was fully owned and controlled by the Ponce group (Decision pp. 37-39) or when Alcantara was not yet a stockholder. The said amount was recorded under the account "Cash in Bank Prudential" and "Paid-up" capital. It would seem, therefore, that the amount was credited in the name of the incorporators including the Floros. This is so because it is highly inconceivable for Vicente Ponce, then the President and Nelia Ponce, the treasurer, to allow such stock payments to remain unrecorded until 1983 when they have, by themselves, been signing documents showing the stockholdings in the corporation including the amount paid for such subscriptions. The P500,000.00 organizational/promotion expenses allegedly incurred by Vicente Ponce and recognized in Board Resolution No. 4 dated May 3, 1968 likewise deserves scant consideration. While the resolution reads: "RESOLVED, that ICC common stocks of P6 million be increased to P8 million in order to provide for additional working capital, and for the provisions of P500,000.00 worth of common shares of stock to be taken from additional P2 million increase in common stocks that will be subscribed and applied to pre-organization and promotion fees, as provided in the ICC Project Study." it appears, from the records on file with ICC's corporate papers that out of the increase in capital of the corporation, only Conrado Alcantara subscribed to the amount of P1,500,000.00 and paid P400,000.00 thereof. All the stockholders waived their pre-emptive rights to subscribed thereto. There is nothing to show that Vicente Ponce has incurred such expenses nor in the records of ICC whether those kept by it or on file with us which would confirm the alleged organizational expenses. This is merely word of mouth and not to be believed. The minutes pertaining to the said resolution is in fact signed only by Julio Ponce, brother of Vicente, as the then corporate secretary, and no entry in the corporate books regarding said expenses can support the same. The P250,000.00 payment for alleged subscription of stocks (Exhs. "QQ" to "UU") is not supported by a subscription contract. This alleged payment supposedly took place in November 1969 from a loan proceed from the Bank of Asia. Appellants herein argued, and was not rebutted, that OR Nos. 116, 117, 118 and 121 were recorded in ICC's books as advances from officers. That subsequently, Alcantara assumed the loan resulting to the settlement of Ponce's loan with the Bank of Asia. Again, this claim of payment made by Ponce is belied by the minutes of the annual stockholders ' meeting (Exh. "25") where the stockholding in ICC as of May 10, 1973 was reflected without showing such additional subscription/payment made by Ponce. The said minutes was duly signed by the spouses Ponce themselves. Vicente Ponce asserts that on July 30, 1968, he paid P178,000.00 for his stock subscriptions evidenced by ICC Official Receipt No. 050 and covered by MBC Check No. 183028, which payment was allegedly not recorded in ICC's books is deserving of scant consideration. Preponderance of evidence shows that a certain Howard Weber leased heavy equipment to ICC. On July 3, 1969, V. Ponce, as President and General Manager of ICC, sent a letter to Weber (Exh. "11") proposing to settle the rentals due to Weber by paying him in the form of ICC shares of stock instead of cash which shares will be placed in trust for H. Weber. On July 28, 1969, ICC, and not Ponce, issued MBC Check No. 183028 in the amount of P178,000.00 in partial payment of ICC's account with Weber. The check was received by Weber on July 29, 1969 in ICC's cash voucher No. 573 dated July 28, 1969 (Exh. "11-A") This was recorded in page 14 of ICC's 1969 BIR registered cash disbursement book (Exh. "11-C" and "11-C-1"). LibLex In compliance with the agreement between ICC and H. Weber that rental payments will be in the form of stocks, H. Weber endorsed back MBC Check No. 183028 in favor of ICC on July 30, 1969. On account thereof, ICC issued OR No. 050 which was duly recorded in page 15 of ICC's BIR registered cash Receipts Book (Exhs. " 11-D" and " 11-D-1 "). On August 30, 1970, the shares of stock held in trust by V. Ponce were finally assigned to H. Weber and journal voucher No. 667 recorded the assignment. The transaction was likewise entered in p. 89 of ICC's BIR registered general journal book for the year 1970. (Exh. "11-F") It appears to us, therefore, that the amount of P178,000.00 does not represent V. Ponce's alleged unrecorded payments for stock subscriptions. The alleged P222,000.00 worth of preferred shares that Vicente Ponce sought to be converted into common shares could not possibly be executed. This is because preferred shares are non-convertible. (see Articles of Incorporation, d, Article VII).In fact, there is no showing in the records of the corporation that such preferred stock subscription were ever made by Vicente Ponce. What appears on record is that said preferred shares were merely held in trust by V. Ponce for H. Weber and Theo Davies such that on August 31, 1970 the shares were assigned to Weber (Exh. "11 -E" and " 11-F") The P151,475.00 payment allegedly made by Vicente Ponce for 41,500 bags of cement delivered by Mindanao Portland Cement Corporation to ICC in 1968 is not likewise supported by any subscription contract. Besides, the evidence presented by the herein appellants show that the payment was made by the Development Bank of the Philippines by virtue of Ponce's letter (Exh. "10") authorizing DBP to pay MPC which amount will be deducted from the proceeds of ICC's loan from DBP. The balance was paid directly by ICC to MPCC. (Exh. "10-D" and "10-E"). In a nutshell, all the alleged payments for subscription are not supported by any subscription contract to warrant this Commission en banc to uphold the hearing officer. And, as stated earlier, the Ponces have been signing documents showing the stockholders and their respective stockholdings in ICC but never raised any objection thereto. This is tantamount to their admission that the said stockholdings, as reflected in the corporate books and records, are valid and reflects the true ownership of shares subscription. Exh. "A" which is page 9 of ICC's stock and transfer book shows that the first recorded subscription of Vicente Ponce is for 1,591,543 shares and that of Nelia Ponce for 668,457 shares .As correctly found by the hearing officer, these "tally exactly with their subscriptions reflected in Exh. "9-H. From these the hearing officer made the conclusion that; "considering our earlier findings of unrecorded substantial payments made by Vicente Ponce, this Exh. "A" is necessarily inaccurate and grossly misleading. A back accounting in accordance with the aforesaid findings is in order to correct the recorded stockholdings of herein complainants." The conclusion seems to be off-balanced because Vicente and Nelia Ponce are bound by the subscriptions they have attested to which is Exh. "9-H".The alleged payments are shown by the evidence not to have been made. And, even assuming arguendo that some payments were actually made, they cannot be booked as payments for subscriptions because the exhibit shows that ICC common shares were fully issued and subscribed. The Ponces cannot pay for more than the shares they have subscribed. The full number of their subscriptions showing the said exhibit was respected. They cannot advance the argument that they had an agreement with Alcantara, who passed away in March 1983, or before the filing of the complaint, that they will maintain a 50-50 sharing of the company's shares for to do so would transgress the dead man's law. More so, Vicente Ponce was the then President, Nelia Ponce as treasurer and Edgardo Angara as secretary up to 1970, or during the period the alleged subscriptions and payments were made. None of them caused the booking of the alleged subscriptions and payments and only in 1983 did they complain about the entries which they themselves could have made or corrected. They have subsequently signed numerous documents showing the stockholdings in the corporation and as such they cannot, now, come to our rescue for their failure to act earlier and for attesting that such were the stockholdings in the corporation. These records are evidence against their claim. This is so because jurisprudence dictates that: "The records of a private corporation even those required to be kept by statute, are not in any sense public records. However, as a general rule, the books and records of a corporation are admissible in evidence in favor or against the corporation and its members to prove the corporate acts, its financial status, and other matters, including one's status as a stockholder. They are ordinarily the best evidence of corporate acts and proceedings." (18 Am Jur. 20) As against directors and officers, they are competent prima facie evidence as to matters appearing therein. (See Fletcher, Vol. 5-A, 1987 Rev. Ed.,p. 286 citing United States v. Feinberg, 140 F2d 592) "Ordinarily, the books and records of the corporation are not conclusive against members and stockholders. However, where the statute requires that certain matters shall be recorded in specific books and records, the record showing as to such matters in such books is the best evidence and in that sense may be regarded as conclusive." (Fletcher, supra, pp. 289-290, citing Middleton v. Arastraville Min. Co.,146 Cal. 219, 79 p. 889) LLphil Viewed in this light, we are constrained to rule, as we so RESOLVE to REVERSE the decision of the hearing officer dated September 1, 1992 save and except the denial of the appointment of a receiver. The award of damages and attorney's fees are, therefore, and by this Order, unwarranted under the premises. The portion of the same order of the hearing officer granting Ponce the right to object to the decision of the management of the corporation is likewise SET ASIDE. SO ORDERED. (SGD.) ROSARIO N. LOPEZ Chairman (SGD.) RODOLFO L. SAMARISTA (SGD.) MERLE O. MANUEL Associate Commissioner Associate Commissioner (did not participate during the deliberation) FE ELOISA C. GLORIA Associate Commissioner