Trinidad Malonzo, et al. vs. Isidro Tanagon, et al.

[SEC-SICD * CASE NO. 002839. November 23, 1987.] TRINIDAD MALONZO, FLAVIO G. MACASO, FELINO SANTOS, LEONOR RAMOS AND MAXIMO M. PEREZ , petitioners , vs . ISIDRO TANAGON, JOSE BERMAS, JR., RUBY TANAGON, ROSELLER TANAGON, AND CARMEN TANAGON , respondents . FOR: MANDAMUS WITH PRELIMINARY INJUNCTION D E C I S I O N From the pleadings filed and evidence adduced during the proceedings taken in the above-entitled case, the following facts appear undisputed on record that provide the background to the filing of the present action, to wit: Both petitioners and respondents are stockholders of Filipinas Technical Institute a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines. Herein petitioners Trinidad Malonzo, Felino Santos and Leonor Ramos filed SEC Case No. 1707 against herein respondents Isidro Tanagon, Jose Bermas, Jr., and Ruby Tanagon for declaration of nullity of the increase in the capital stock of Filipinas Technical Institute. The Hearing Officer on the case rendered a decision on October 28, 1982, which he modified in an Order dated November 9, 1983, declaring the increase in the capital stock of Filipinas Technical Institute as null and void and of no force and effect. Respondents in said SEC Case No. 1707 appealed from the Order of November 9, 1983 to the Commission en banc ( Case SEC-AC No. 111 ), which rendered its decision on August 17, 1984, the dispositive portion of which reads: "WHEREFORE, the appeal is dismissed and judgment is hereby rendered as follows: (1) Declaring the increase of capital stock of Filipinas Technical Institute from P45,000.00 to P145,000.00 as null and void and of no force and effect; (2) Revoking the certificate of filing of certificate of increase of capital stock and the certificate of filing of Amended articles of incorporation both issued by the Securities and Exchange Commission; (3) Ordering the corporation to call a special stockholders' meeting as provided for in the by-laws within 30 days upon finality of this decision for the purpose of electing the directors of the corporation." Respondents moved to have the en banc decision of August 17, 1984 reconsidered; but the same was denied in the Order of February 5, 1985. The said decision became final in the course of time. And a writ of execution was issued. To comply with paragraph (3) of the dispositive portion of the above-quoted decision of August 17, 1984, respondent Isidro Tanagon gave notice of a stockholders' meeting for April 26, 1985 at 9:00 o'clock in the morning. The minutes taken at this scheduled stockholders' meeting show pertinent incidents recorded as follows: "PRESENT OUTSTANDING SHARES OF THE CORPORATION-350 shares PRESENT STOCKHOLDERS WITH THEIR NUMBER OF SHARES a. Atty. Isidro Tanagon 7 shares b. Atty. Jose Bermas 1 share c. Mrs. Trinidad Malonzo 100 shares d. Mr. Leonor Ramos 20 shares e. Mr. Felino Santos 16 shares f. Mr. Roseller Tanagon 2 shares g. Mr. Rey Tanagon by proxy of Ruby Tanagon 5 shares SUB-TOTAL NUMBER OF SHARES 151 shares ABSENT STOCKHOLDERS WITH THEIR NUMBER OF SHARES a. Carmen Tanagon 5 shares b. Virginia L. Trinidad 1 share c. Felix David (deceased) 1 share d. David Malonzo (deceased) 192 shares SUB-TOTAL NUMBER OF SHARES 199 shares ========= RESUME: 151 shares total number of shares-present stockholders 199 shares total number of shares-absent stockholders 350 shares grand total number of shares outstanding" With respondent Isidro Tanagon presiding over the meeting and who although having admitted that petitioner Trinidad Malonzo and her daughter, Fely Malonzo, were the surviving spouse and daughter respectively of the deceased David Malonzo, he nevertheless denied the vigorous assertion and claim of petitioner Trinidad Malonzo that she and her daughter, who was also present, were entitled to represent the 192 shares of the late David Malonzo. With this denial, he ruled that there was no quorum and adjourned the meeting to April 30, 1985 which was a Tuesday. (Exhibit "1") llcd On April 30, 1985, the stockholders of Filipinas Technical Institute reconvened at the office of respondent Isidro Tanagon located at the building of said corporation with the attendance taken as follows: Present: Atty. Isidro Tanagon Presiding Officer Mr. Roseller Tanagon Designated Secretary Atty. Flavio Macaso Atty. Maximo Perez Mr. Leonor Ramos Mrs. Trinidad Malonzo Mrs. Fe Malonzo Cuesta Mr. Felino Santos Mr. Abdulhari Pandaog Deputy Sheriff, RTC, Zamboanga City Mr. R. A. Vicente Stenographic Reporter, RTC XVI, Zamboanga City Absent: Atty. Jose Bermas Board Secretary Atty. Jose Go Counsel for the Corporation Mrs. Carmen Tanagon (Exhibit "N") The meeting was called to order and presided over by respondent Isidro Tanagon but who, as in the previous meeting of April 26, 1985, refused to recognize the right of petitioner Trinidad Malonzo and that of her daughter, to represent the shares of stock standing in the Stock and Transfer Book in the name of the late David Malonzo. Thereafter, Isidro Tanagon declared a lack of quorum, adjourned the meeting, and told the stockholders present: "If you like to go you go outside and continue." In accordance with this exhortation, petitioners Trinidad Malonzo. Flavio G. Macaso, Felino Santos, Leonor Ramos, and Maximo M. Perez, together with Fe Malonzo Cuesta (earlier referred to as Fely Malonzo and in other exhibits as Fe Liwayway Malonzo), in the company of Mr. Abdulhari Pandaog, Deputy Sheriff, RTC, Zamboanga City, who was present to enforce the writ of execution with the help of Mr. R. A. Vicente, Stenographic Reporter, RTC, Zamboanga City proceeded to the school library in the same building and continued the meeting. Thereat, Trinidad Malonzo, Leonor Ramos, Felino Santos, Flavio Macaso and Maximo Perez were elected by the stockholders present as members of the Board of Directors (Exhibits "N" to 00-1). With this election of the members of the Board of Directors, the meeting adjourned and was immediately followed by the organizational meeting of the newly elected members of the Board of Directors, at which meeting, petitioners Trinidad Malonzo and Flavio G. Macaso were elected as President and Vice-President respectively; Felino Santos, Secretary; and Leonor F. Ramos, Treasurer. (Exhibit "PP"). With the election of officers of the newly formed Board of Directors, Petitioner Trinidad Malonzo formally communicated in writing with respondents Isidro Tanagon and Jose Bermas, Jr. informing said respondents of the new set of Corporate officers and at the same time requested them to turn over the management of the corporation to the newly constituted Board of Directors. Respondents Isidro Tanagon and Jose Bermas, Jr. in separate replies addressed to petitioner Trinidad Malonzo refused to turn over the management of the corporation as requested (Exhibit "QQ" to "UU-2") despite acts of mismanagement and other acts of mischief attributable to Respondent Isidro Tanagon. (Exhibits "WW" to "EEE-5"). Against the backdrop of all these factual incidents, and with due emphasis on the refusal of respondent Isidro Tanagon and Jose Bermas, Jr. to turn over management of the corporation to the new set of corporate officers, Petitioners instituted the present action and prayed thus: LLjur "WHEREFORE, petitioners most respectfully pray that a restraining order be issued ex-parte before the matter can be heard on notice restraining respondents from holding themselves as officers and directors of the corporation and from interfering with the business and employees of the corporation and to turn over to petitioners the office, moneys, property, and that after trial, the said preliminary injunction be made permanent, and that the respondents be ordered to pay petitioners the sum of P10,000.00 for and as attorney's fee and such an amount as petitioners may prove at the trial of this case for expenses of litigation, and the cost of this proceeding. Petitioners pray for such other reliefs as may be just and equitable in the premises." In accordance with the aforequoted prayer, a temporary restraining order effective for a period of twenty (20) days was issued on July 19, 1985, thereby enjoining respondents from holding themselves as officers and directors of the corporation and from interfering with its business and employees; while at the same time setting the hearing on the application for a writ of preliminary injunction on July 30, 31 and August 1, 1985. On July 27, 1985, respondents filed their answer to the petition praying that the petition be dismissed on the grounds (1) that petitioners have no cause of action for mandamus, and (2) that the hearing of this petition be suspended pending resolution of respondents' petition for nullity ( SEC Case No. 2825 ) of the transfer by deceased David Malonzo of his shares of stock to Trinidad Malonzo. In the hearing of the application for preliminary injunction, the parties presented evidence. Petitioners formally offered Exhibits "A" to "GGG"; while respondents Exhibits "I" to "4-C". In order of August 8, 1985, petitioners were required to put up a bond in the amount of P10,000.00 to answer for damages if any that may be suffered by respondents should this Commission finally decide that petitioners are not entitled thereto. Petitioners having posted the required bond of P10,000.00, the corresponding writ of prohibitory and mandatory injunction was issued on August 15, 1985 enjoining the respondents from acting as directors/officers of the corporation and ordering respondents to turn over to petitioners the office, moneys and records of the corporation until further order from this Commission. Nevertheless, respondents did not formally turn over the office of the corporation to petitioners, nor the property, moneys, books and records of the corporation. They just abandoned the office of the corporation which petitioners occupied on August 16, 1985. Respondents filed a motion for the admission of a counterbond in the amount of P20,000.00 and for the dissolution of the writ of prohibitory and mandatory injunction to which motion, petitioners filed an opposition. This motion was denied. At the pre-conference held on June 4, 1986, respondents and their counsel did not appear. Petitioners moved to declare respondents in default; but this motion was denied. The next time when the pre-conference was held, again respondents and their counsel did not appear. On motion of petitioners' counsel, respondents were declared in default and were duly notified thereof. At the hearing for the reception of evidence ex-parte for the petitioners on November 13, 1986, petitioners' counsel manifested that he was adopting the evidence of petitioners presented during the hearing of the application for preliminary injunction and submitted the petition for resolution. The main issue to be resolved in this petition is whether or not there was quorum in the stockholders' meeting held on April 30, 1985. LLjur In order to determine the issue of quorum, it becomes inescapably imperative to consider the number of shares outstanding in the Stock and Transfer Book of Filipinas Technical Institute, the number of shares recorded in the name of each individual stockholder, as well as, the number of stockholders present during the stockholders' meeting of April 30, 1985 when the election of the new set of members of the Board of Directors took place. From the Stock and Transfer Book of the corporation, it appears that there are 350 shares outstanding, 192 shares of which are recorded in the name of deceased David Malonzo (Exhibit "4"). And for the existence of quorum, the presence of stockholders representing a majority of said outstanding shares (one-half (1/2) plus one (1) or 176 shares is required. This required majority however, is not attainable if due regard is not accorded the status of the 192 shares of stock on the name of David Malonzo. Pertinent to this consideration, the records show that David Malonzo died on August 3, 1974. (Exhibits "Z" to "Z-1"). At the time of his death, he was survived by his spouse, petitioner Trinidad Malonzo, whom he married on December 3, 1964 and by his only daughter Fe Liwayway Malonzo Cuesta. (Exhibit "X"). The fact that petitioner Trinidad Malonzo and Fe Liwayway Malonzo Cuesta are the surviving spouse and daughter of the deceased David Malonzo was admitted by respondent Isidro Tanagon and was never challenged by any of the respondents. (Exhibit "1"). The 192 shares of stock in the name of deceased David Malonzo is conjugal (property) partnership property of said David Malonzo and his wife, the petitioner Trinidad Malonzo. (Exhibit "X-3"). This being the case, the conjugal partnership of the spouses David Malonzo and petitioner Trinidad Malonzo terminated upon the death of David Malonzo on August 3, 1974 pursuant to Art. 175 of the Civil Code of the Philippines; and 1/2 of the 192 shares or 96 shares thereof were transferred by operation of law to the ownership of petitioner Trinidad Malonzo in accordance with Art. 142 of the Civil Code of the Philippines. These 96 shares when added to the 100 shares standing in the name of petitioner Trinidad Malonzo who was present both in the Stockholders' meeting of April 26, 1985 and April 30, 1985, already produced a total of 196 shares or an excess of 20 shares of the required majority which is 176 shares. On this basis alone therefore, a quorum already existed. It appears however, that respondents filed SEC Case No. 2825 to nullify the transfer made by David Malonzo during his lifetime of 100 shares of stock in his name in favor of his wife, petitioner Trinidad Malonzo (as they now appear in the Stock and Transfer Book), thereby giving rise to the natural and logical implication that David Malonzo originally subscribed and fully paid for 292 shares of stock in his name. Be that as it may, David Malonzo during his lifetime, executed his Last Will and Testament (Exhibits "X" to "X-2") which was allowed in probate inter vivos on March 9, 1971 (Exhibit "Y"), by which instrument, he devised and bequeathed in favor of his wife, petitioner Trinidad Malonzo and his daughter, Fe Liwayway Malonzo Cuesta, all of his 292 shares of stock in Filipinas Technical Institute in equal proportion or at 146 shares each. (Exhibits "X-1" par. 4 and "X-3"). Upon his death therefore, or on August 3, 1974 (Exhibit "X-1"), ownership over the 292 shares of stock were transmitted by his Last Will and Testament in favor of his wife, petitioner Trinidad Malonzo and his daughter Fe Liwayway Malonzo Cuesta in equal shares of 146 each under and by virtue of Articles 774 and 783 of the Civil Code of the Philippines. With the presence of petitioner Trinidad Malonzo and her daughter Fe Liwayway Malonzo Cuesta in the stockholders' meeting held on April 30, 1985 as evidenced by exhibits "NN" to "OO-1" for Petitioners, thereby representing a total of 292 shares, the required number of shares present to constitute a quorum was more than satisfied. At the risk of being repetitious, let it be stated that with the allowance of the Last Will and Testament of David Malonzo in probate inter vivos accordingly closed and terminated per court order (Exhibit "EE") his death on August 3, 1974 operated to transmit the ownership over his 292 shares of stock in favor of his wife, petitioner Trinidad Malonzo and his daughter Fe Liwayway Malonzo Cuesta; and all other acts executed by petitioner Trinidad Malonzo and her daughter Fe Liwayway Malonzo Cuesta by way of extrajudicial settlement (Exhibit "FF" to "HH") have now become superfluous. With the ownership of the 292 shares now settled in the names of Petitioner Trinidad Malonzo and Fe Liwayway Malonzo Cuesta at 146 shares each, the deeds of assignment from petitioner Trinidad Malonzo to Flavio Macaso and Maximo Perez at 10 shares each as well as the deed of assignment made by petitioner Trinidad Malonzo in favor of her daughter Fe Liwayway Malonzo Cuesta for 5 shares were transfers effected and validly executed by petitioner Trinidad Malonzo in favor of said transferees in her capacity as the lawful owner of such shares. (Exhibits "II" to "LL-3"). Consequent to all of the above, the election of Directors at the Stockholders' meeting held on April 30,1985 would now reflect the attendance and shareholdings as follows: Present: 1. Trinidad Malonzo 121 shares 2. Flavio Macaso 10 shares 3. Felino Santos 16 shares 4. Leonor Ramos 20 shares 5. Maximo Perez 10 shares 6. Fe Liwayway Malonzo Cuesta 151 shares SUB-TOTAL NUMBER OF SHARES 329 shares Absent: 1. Isidro Tanagon 7 shares 2. Roseller Tanagon 9 shares 3. Jose Bermas 1 share 4. Carmen Tanagon 5 shares 5. Virginia L. Trinidad 1 share 6. Felix David (deceased) 1 share 7. Rey Tanagon by proxy of Ruby Tanagon 5 shares SUB-TOTAL NUMBER OF SHARES 22 shares GRAND TOTAL OUTSTANDING NUMBER OF SHARES 350 shares ======== With the majority shares duly represented at the Stockholders' Meeting of April 30, 1985 as shown above, there was constituted a valid quorum. WHEREFORE, in the light of all the foregoing, judgment is hereby rendered: 1. Declaring the existence of a valid quorum during the Stockholders' Meeting of Filipinas Technical Institute held on April 30, 1985; 2. Making permanent the writ of prohibitory and mandatory injunction contained and issued in the Order of August 15, 1985; and hereby ordering the cancellation and release of the bond in the amount of P10,000.00 in pursuance thereto; 3. Ordering respondents jointly and severally to render an accounting of the corporate funds and to turn over the office, money, records, and other property of Filipinas Technical Institute to herein petitioners. LLjur SO ORDERED. (SGD.) EMMANUEL R. SISON Hearing Officer