Conpharm Industries, Inc., et al. vs. Alberto A. Santillana

[SEC CASE NO. 3210. September 7, 1987.] CONPHARM INDUSTRIES, INC., ET AL. , petitioners , vs . ALBERTO A. SANTILLANA , respondent . O R D E R Submitted for resolution is the petitioners' prayer for the issuance of a writ of injunction as well as the respondent's opposition for the denial of the injunctive relief being prayed for. Petitioners alleged that a special meeting of the Board of Directors of CONPHARM Industries, Inc. was held on August 7, 1987 during which meeting the board, by a vote of 3 to 1, allegedly removed respondent Alberto A. Santillana as President and General Manager of the said corporation. In place of respondent, the board voted to elect petitioner Ney S. Chua as President and General Manager. However, respondent, despite his removal as such officer has re-assumed his position and is at present continuously exercising the duties and functions of the President and General Manager of the petitioner corporation. And unless restrained, respondent's continued usurpation of the duties and function of the aforesaid offices would cause grave and irreparable damage and injury not only to the petitioners but also to petitioner corporation as the latter's operation has been disrupted and its image as a reputable company would suffer by the spectacle of two persons occupying and exercising the function of the presidency of said company. Hence, the instant petition for injunction. In opposing petitioners' application for the issuance of the writ of injunction, respondent maintains that petitioners did not come to the Honorable Commission with clean hands; that the alleged rights sought to be protected by the injunction are not existing legal rights since the removal of respondent Alberto A. Santillana was null and void from the beginning; and that the corporation would suffer grave and irreparable injury and damage if the restraining order is not lifted since as a result of petitioners' unfounded petition the operation of the corporation has been suspended and the creditors and supplier as well as the employees' salaries have not been paid. Upon the aforestated facts, the issue clearly revolves as to whether or not petitioners are entitled to the issuance of the injunctive relief being prayed for. We will not concern ourselves on the discussion as to whether respondent's removal was for a valid cause since under the provision of the corporation's by-laws, removal of officers may be or may not be for a valid cause. This Commission, acting upon the petition, issued on August 14, 1987 a temporary restraining order, effective for a period of twenty (20) days, enjoining the respondent from exercising the duties and function of the office of President and General Manager of CONPHARM and set the hearing on the injunction incident on August 21, 1987. After a careful study and consideration of all the facts so adduced and the evidences presented during the hearing, the undersigned Hearing Officer feels constrained to uphold petitioners' right to the injunctive relief being prayed for in the petition. SDTIHA From the evidence prevented, both oral and documentary, the following facts appear to have been established: that a special meeting of the board of directors of CONPHARM, Industries, Inc. was held in Iloilo City on August 7, 1987; that those in attendance were respondent Alberto A. Santillana, Angela Sarosa, Paquito Chua, Nilo Valente, and Ney S. Chua; that said meeting of the board was called by the respondent allegedly for the purpose of discussing the proposal to divide the corporation; that notice of the said meeting was made through a long distance telephone two weeks before the scheduled date of said meeting; that respondent Santillana presided over said meeting; that the minutes of the meeting was taken by Paquito Chua who was then acting as secretary; that in said meeting a motion to terminate the services of respondent Alberto A. Santillana was presented by petitioner Ney S. Chua which was seconded by Mrs. Angela Sarosa; that a long discussion on this motion was had with Mr. Nilo Valente vigorously presenting his objection; that after a long discussion, the motion was carried by the affirmative votes of petitioners Ney S. Chua, Paquito Chua and Angela P. Sarosa; that a resolution to this effect was adopted by the board (Exh. E) that ever since the corporation was organized and prior to August 7, 1987 meeting, only informal meetings were had by the members of the board; that there was never an occasion in the past that formal meetings of the board were called; that matters concerning the affairs of the corporation are usually discussed by the respondent with the other members of the board in an informal meetings; that the respondent and Mr. Nilo Valente, another member of the board, were in Iloilo City on the said August 7, 1987 meeting; and that in this particular meeting, Mr. Nilo Valente, who usually do not attend meetings conducted by respondent with the petitioners in Bacolod City, was present purposely to insure that he is around when the matter about the proposal to divide the corporation is presented for discussion. ITScAE As gleaned from the above recited facts, it is clear that a meeting of the Board of Directors of CONPHARM did indeed take place on the evening of August 7, 1987, and the respondent's removal as President and General Manager appears to be a valid corporate act on the basis of evidence so far adduced. The respondent's claim that there was no valid special meeting held by the Board of Directors of CONPHARM on August 7, 1987 because of failure to comply with the material requirements of the by-laws on sending of notices cannot be given much weight not only because respondent himself was present but more so because said special meeting has been initiated or called by the respondent purposely to discuss his proposal to divide the company. The testimony of petitioner Ney S. Chua on this matter has never been controverted by the respondent. The above circumstances all points to the fact that the meeting of the Board of Directors actually took place on August 7, 1987 and that the actions of the board are all regular. Running on the same vein was the admission of respondent's witness Nilo Valente in his testimony given during the hearing on September 1, 1987 to the effect that a meeting of the Board of Directors of CONPHARM Industries, Inc. did really take place on August 7, 1987 in Iloilo City and that the proceedings thereon were valid and binding same being the acts of the board. Even if the situation be considered in the light of the respondent's argument that no notice was sent to the members of the board insofar as the August 7, 1987 special meeting is concerned, still such an allegation cannot find so much support from a long line of authorities bearing on the matter. The fact that notice of a special meeting was not given, even when it was required by the charter or by-laws is immaterial, if all the directors were present and participated in the proceedings (Minneapolis Times Co., vs. Nimocks, 53 Minn. 381, 55 N.W. 546, Troy Min. Co. vs. White 10 S.D. 475, N.W. 246 42 L.R.A. 459, cited in page 478, Clark on Corporations, Second Edition). A special meeting is valid without notice when the directors are all present, or when they all consent to the meeting (State vs. Manhattan Rubber Co. 149 MO. 181, 50 S.W. 321 cited in page 676, Thompson on Corporations, 3rd Edition). In other words, presence at the meeting waives the want of notice (Clark vs. Mutual Loan & Investment Co. 88 F(2d) 202, Lippman vs. Kehoe Stenograph Co., 11 Del. Ch. 80, 95 ALT. 895) even though the director departs. Thus, it has been held that the fact that the meeting of the directors was held without formal call first being had, and notice thereof given to the members, did not operate to invalidate it or to render the proceedings which were taken at it void, for every member of the board was present, and their joint action has completely bound the corporation as if the meeting had been called with due formality, and everyone of the directors had received proper notice. (Robson v. C.E. Fenniman Co., 83 N.J.L. 453, 85 ALT. 356) Furthermore, where all the directors attend the place fixed for a special meeting of the board, although such attendance be accidental on the part of some of the directors, necessity for giving notice is obviated. (Paducah & Illinois Ferry Co. v. Robertson 161 Ky. 485, 171 S.W. 171) Again, even on the assumption that the August 7, 1987 meeting of the board was an informal one, still respondent's claim that the same is invalid and cannot be considered meritorious because it has been held that, when it is the custom to hold special meetings for the transaction of usual business whenever a quorum is present, and without notice, such meetings are valid. (Gorril v. Greenless, 104 Kan. 693, 180 Cac. 798, following G.V.B. Min. Co. v. First Nat. Bank, 95 Fed. 23, Berman v. Minneapolis Photo Engraving Co., 144 Minn. 146, 174 N.W. 735) in which the business of the company was habitually conducted in an informal manner. It is an undisputed fact that during the meeting held on August 7, 1987 in Iloilo City, all the members of the Board of Directors of CONPHARM Industries, Inc., were present as clearly reflected in the minutes of the meeting. (Exh. C) Notwithstanding said minutes of the meeting, respondent still insist that there was no validly convened meeting. Ironically. from the minutes per se, it can readily be presumed that a formal meeting really took place and the resolution terminating the services of respondent Santillana as President and General Manager of CONPHARM and the election of petitioner Ney S. Chua to replace the respondent as President and General Manager appears to have been validly adopted and approved by the board. It should be borne in mind that under the circumstances obtaining, there was that presumption of regularity of the August 7, 1987 meeting. And in the absence of any proof to the contrary, it appears that the board's action are legal and binding. All told, petitioners were able to establish a clear legal right to the injunctive relief applied for and accordingly, respondent should now desist from exercising the duties of the office of the President and General Manager of the petitioner corporation and allow petitioner Ney S. Chua to assume the office as the newly elected President and General Manager. WHEREFORE, let a writ of preliminary injunction be issued in the above-entitled case upon the petitioner's filing a bond in the amount of TWENTY THOUSAND (P20,000.00) PESOS to answer for damages, if any, that respondent may suffer should the Commission later on decide that petitioners are not entitled thereto, enjoining the respondent Alberto A. Santillana from exercising the duties and function of the office of the President and General Manager of CONPHARM Industries, Inc. until further orders from this Commission. SO ORDERED. (SGD.) ALBERTO P. ATAS Hearing Officer