Antonio B. Coscolluela vs. Heirs of Ildefonso B. Coscolluela, Sr., et al.

[SEC CASE NOS. 2578. December 1, 1987.] ANTONIO B. COSCOLLUELA , petitioner , vs . HEIRS OF ILDEFONSO B. COSCOLLUELA, SR., ET AL. , respondents . [SEC CASE NOS. 2885. December 1, 1987.] COSCOLLUELA BROS., INC., (formerly HEIRS OF ILDEFONSO I. COSCOLLUELA, SR., INC., represented by stockholder ANTONIO B. COSCOLLUELA , petitioners , vs. OSCAR B. COSCOLLUELA, ET AL., respondents . O R D E R For consideration is respondent's Motion for Reconsideration, as well as petitioner's opposition thereto. AaITCS In their Motion for Reconsideration dated August 14, 1987, of the Commission Order of July 21, 1987, respondents theorize that: 1. There is no legal provision by which a corporation or any party, may be compelled to submit a long-form audit report, as respondents cited the right of stockholders provided for under Articles 74 and 75 of the Corporation Code; 2. The original Order merely allowed the right of inspection by the petitioner, through an ex-parte Motion filed by the petitioner and the Order of July 9, 1984 was issued allowing the inspection of documents including the long-form Audit Report for 1983 by S.G.V., obviously on the mistaken belief that there is such a "long-form Audit Report for 1983 by S. G. V.; 3. The Audit Report submitted was in accordance with what was agreed upon by the parties; and 4. The declaration of whether the Audit Report is long-form or not is unnecessary. aSDCIE In the opposition to the aforesaid Motion for Reconsideration, petitioners countered that; 1. Although the respondents have intentionally and conveniently avoided in express terms, they are actually questioning the authority and power of this Commission to Order and compel the parties in the above cases to submit a long-form audit report. If the power and authority of this Commission is being put in issue, then the provisions of Article 74 and 75 of the Corporation Code, which deal with rights of stockholder are totally immaterial and irrelevant to the issue at hand. Respondents cannot deny that this Commission, just like the courts, has an inherent powers to issue any Order as long as it is material and relevant to the case and which will resolve the issues therein. Since under the Rules of this Commission, the provisions of the New Rules of Court are suppletory in character, there can be no doubt that this Honorable Commission just like the courts, has the aforesaid "inherent powers". aDHCAE 2. That the Order of July 21, 1987, specifically referred to a previous agreement voluntarily entered into by both parties to submit a long-form audit report which was supposed to contain the items specified in the Commission's Order of July 9, 1984. However, respondents were not acting in good faith when they made the petitioners and this Commission believe that they would ask their auditor, the S.G.V., to prepare the long-form audit report subject of the controversy, and 3. That since the Examiners and Appraisers Department of this Commission has given the opinion that the report prepared by S.G.V. is definitely not a long-form audit report, then the said report is clearly not in accordance with what was agreed upon by the parties. After a thorough perusal and examination of the records and pleadings at hand, we find no merit in the contention of movants. With respect to movants argument that there is no legal provision by which a corporation or any party, may be compelled to submit a long-form audit report, the same has no basis and should not have been raised at all. cSEDTC Firstly, the issue of producing or making a long form audit report was by agreement of the parties for which the latter will share equally the expenses for doing so. As indeed, an S.G.V. report, dated July 10, 1985 was submitted and a bill of P18,825.00 was presented by S.G.V., and pursuant thereto, respondents had withheld the corresponding amount from the monthly allowances of petitioner Antonio Coscolluela from the respondent corporation for his share of the above expenses. The submission of this S.G.V. Report dated July 10, 1985, which is now being questioned by the petitioners as not a long-form audit report and the subsequent withholding of a portion of petitioners allowances for payment of his share in the S.G.V. billing, negates respondent claim that no agreement was made by the parties on the issue of long-form audit report and that a corporation or any party may not be compelled to submit a long-form audit report. In effect, respondents are already estopped from claiming that such long-form should not have been ordered to be complied with. Secondly, it is not correct to say that there is no legal provision by which a corporation or any party, may be compelled to submit a long-form audit report considering the inherent powers of this Commission to try and decide intra-corporate cases within its original and exclusive jurisdiction, as provided for under Sec. 5 of P.D. 902-A, as Amended. TacSAE It is to be noted, that under Sec. 3 of the same law, the Securities and Exchange Commission has absolutely jurisdiction, supervision and control over all corporations, association and partnership registered with it. As to the respondent's claim that the original Order was merely to allow petitioners the right of inspection of corporate documents, including the Long-form Audit Report for 1983 by S.G.V., obviously on the mistaken belief that there is such a "long-form Audit Report for 1983 by S.G.V, precisely because of the non-existence of this long-form audit report as declared by respondents, precipitated the parties to agree to have one to be performed by the S.G.V. with the expenses to be shouldered equally between the parties, and as a result of which, S.G.V. submitted a Report dated July 10, 1985, which is now being questioned by petitioner's as not a long-form audit report and confirm not be so, by the report of the Examiners and Appraisers Department of this Commission, dated June 16, 1987, and corroborated by the testimony of witness, Carlito Fuentisfina of S.G V., as follows: "Q Is that a long-form audit report? "A This is not a long-form audit report because there is no opinion here. The long-form audit report includes the financial statement. IDAESH (TSN, June 25, 1986, page 65, Emphasis supplied.) As regards the respondents claim that the report submitted was in accordance with what was agreed by the parties, We cannot help but reiterate the definition of the term "long-form audit report" in the Examiners and Appraisers Department's Memorandum dated June 16, 1987 of this Commission, which define the term "as a report by an independent CPA showing in detail, the nature and audit procedures undertaken on each of all the balance sheet accounts and the opinion of the auditor on the fairness of the corresponding amounts presented." Likewise, it is also observed, that whether what was agreed by the parties was a long-form audit report or not, the fact remains that the demands of the petitioners for rendering an audit report which was agreed by the respondents were basically in the nature of a long-form audit report. WHEREFORE, in view of the foregoing, and there being of no cogent reason to disturb the Order of July 21, 1981, the Motion for Reconsideration should be, as it is hereby DENIED, for lack of merit. HSIADc Let the dispositive portion of the Order of July 21, 1987 be complied with, within thirty (30) days from receipt hereof, unless the parties otherwise agreed on a longer period with the approval of this Commission. SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer