M.B.M. Toda, et al. vs. Dante Samson, et al.

[SEC-SICD * CASE NO. 01-00-6518. June 27, 2000.] M.B.M. TODA members, Represented by MANOLO A. MARIANO, Acting Coordinator , complainants , vs .DANTE SAMSON, President, JERRY PANLAQUE, Vice-President, CRISTINA GABRIEL, Secretary, ANDY CASTELO, Treasurer, SONNY PARIAN, Auditor, Meycauayan Bayan Market Tricycle Operators and Drivers Association (M.B.M. TODA) , respondents . Corporation Code ; election of officers . This Commission finds that there is a need to call for an election of officers and trustees of the subject corporation, it appears on record that the regular election of MBM TODA was not held on December 1999, and the respondents are holding office in a hold-over capacity pending the election and qualification of the officers to be elected in the association's regular meeting. Same ; powers of members ; removal of officers and trustees . The ultimate power to remove officers and trustees of the association rests with the general membership of the corporation and that there exists adequate intra-corporate remedies available to the members, such as the removal of the corporate officers and trustees in accordance with Section 28 of the Corporation Code. Same; same ; power to annul ultra vires or illegal acts of officers . As the ultimate source and repository of corporate powers of MBM TODA, the members have the power and right to annul or reverse the acts of the respondents that have been shown to be ultra vires or illegal, either through their concerted action pursuant to the provisions of the corporation's by-laws or through the board of trustees that they may elect. D E C I S I O N Before this Commission is a complaint against the officers of Meycauayan Bayan Market Tricycle Operators and Drivers Association, Inc. (MBM TODA),a non-stock corporation with SEC Registration No. ANO93-000627, praying for the holding of election for a new set of officers, dissolution of the corporation, permission for the creation of a new corporation, removal of the incumbent respondent-officers from their corporate positions and the declaration of all the acts of the respondents as null and void, and for other reliefs. The respondents filed their answer with compulsory counterclaims by way of registered mail on 29 February 2000. However a scrutiny thereof reveals that the same lacks the mandatory requirement embodied in Section 11, Rule 13 of the 1997 Rules of Civil Procedure, the pertinent portion of which reads: "SEC. 11. Priorities in modes of service and filing . . . ., a resort to other modes must be accompanied by a written explanation why the service, or filing was not done personally. A violation of this Rule may be cause to consider the paper as not filed." On account of the respondents' failure to appear at the scheduled preliminary conference of the above-entitled case on 30 March 2000, the said respondents were declared as in default pursuant to Section 3, Rule V of the New Rules of Procedure of the Securities and Exchange Commission. On 14 April 2000, the respondents filed a motion to lift order of default and to admit the enclosed preliminary conference brief, averring that their failure to appear at the scheduled preliminary conference is due to a motion for postponement and extension of time to submit preliminary conference brief allegedly filed by the complainants. The respondents assumed that their attendance to the said preliminary conference would be futile in view of: the alleged complainants' motion, but such presumption on the part of the respondents proved to be a fatal mistake on their part, for the reason that no such pleading has been filed with the Commission. Granting, for the sake of argument, that the same had indeed been filed, the respondents should not have presumed that the scheduled preliminary conference will not be held and that complainants' alleged motion has been granted. The alleged motion which purportedly caused the respondents not to attend the scheduled preliminary conference is a prohibited pleading, as provided under Section 4, Rule III of the SEC Rules, hence the respondents should know that the complainants' motion will be denied in the event that the same be filed with the Commission. TSHEIc In view of the declaration of the respondents as in default, the complainants submitted the case for resolution based on the pleadings thus filed. The present complaint was initiated for and in behalf of the members of the MBM TODA by their acting coordinator, Manolo A. Mariano. The complainants allege that respondents failed to conduct or hold the associations' regular meetings and to make a report on corporate and fiscal matters; that notwithstanding the expiration of term of the respondents as corporate officers, the said respondents failed and refused to call and conduct an election; that the members are being denied their rights: to vote and to be voted upon, to examine the corporate books and records; and that the respondents mismanaged and failed to account for the funds of the corporation. In support of the foregoing allegations, the complainant submitted a Joint-Affidavit by Manolo Mariano and Ramon Janoras, dated 27 March 2000, and the annexes to the complaint, which are: MBM TODA Receipts; MBM TODA Savings Account Statement from Meycauayan Rural Bank, Inc.,and a list of members of MBM TODA. The issues to be resolved are: 1. Whether or not there is a need to call for a members' meeting for the purpose of electing a new set of officers and trustees of MBM TODA; 2. Whether or not the corporation shall be dissolved; 3. Whether or not there is a need for the creation of a new corporation in lieu of the present existing corporation; 4. Whether or not the present incumbent officers, the respondents herein, ought to be removed as corporate officers of the MBM TODA; 5. Whether or not the corporate acts of the respondent-officers are behooved to be declared as null and void. Anent the need to call for an election of officers and trustees of the MBM TODA, this Commission finds that there is a need to call for an election of officers and trustees of the subject corporation, it appears on record that the regular election of MBM TODA was not held on December 1999, and the respondents are holding office in a hold-over capacity pending the election and qualification of the officers to be elected in the association's regular meeting. With respect to the dissolution of the corporation and the complainants' request for a sanction from this Commission relative to the creation of a new corporate entity in place of the existing one, this Commission so holds that the same is not warranted. The complainants failed to substantiate the claim for the dissolution of the MBM TODA and for the creation of a new TODA in its place. Furthermore, this remedy is premature as there is no showing that the complainants have exhausted all remedies within the corporation prior to this request for its dissolution. Regarding the prayer for removal of the officers and trustees of the association and for the declaration of their acts as null and void, this Commission holds that the complainants' application for SEC intervention is likewise premature considering that the ultimate power to do the same rests with the general membership of the corporation and that there exists adequate intra-corporate remedies available to the members, such as the removal of the corporate officers and trustees in accordance with Section 28 of the Corporation Code. Moreover, inasmuch as an election of the officers and trustees of the corporation will be held as prayed for, the power of removal and election of new trustees and officers of MBM TODA may be properly exercised by the MBM TODA members at the general membership meeting. As the ultimate source and repository of corporate powers of MBM TODA, the members have the power and right to annul or reverse the acts of the respondents that have been shown to be ultra vires or illegal, either through their concerted action pursuant to the provisions of the corporation's By-Laws or through the Board of Trustees that they may elect. Additionally, the prayer for the declaration of nullity is too general and all encompassing in such a way that a declaration by this Commission shall necessarily include other corporate acts that may be valid. SICDAa However, the records of this case indeed show that something is amiss regarding the funds of the corporation. Annex "A" to the complaint reveals that receipts issued by MBM TODA bearing the same serial number were issued to tricycle units bearing different sticker numbers, that some receipts does not bear any serial number, and several receipts have been issued without concern to the progression of the serial numbers thereon, resulting to a manifestly chaotic financial profile of the corporation. WHEREFORE, upon the premises, judgment is hereby rendered, to wit: 1. Ordering the calling of a general membership meeting and election of officers and trustees of MBM TODA in accordance with the procedures laid down in the provisions of the By-Laws of the association, to be held on 29 July 2000 at the principal office of the association and to be supervised by the local government of Meycauayan, Bulacan. For this purpose, the local government of the Municipality of Meycauayan, Bulacan is hereby designated and deputized, pursuant to Section 3 of Presidential Decree No. 902-A, to supervise the aforesaid meeting and election and to keep order thereat; 2. Declaring complainants as not entitled to the other reliefs prayed for; and 3. As supplementary equitable remedies, judgment is further rendered. a) Ordering the respondents to allow the complainants and other members of MBM TODA or their duly designated representative/s to inspect the corporate books and records of the association at reasonable hours on business days and to make copies thereof; and b) Ordering the respondents to make an accounting of the funds of the association and to allow the complainants or their duly authorized representative/s to conduct an independent accounting of the said funds; SO ORDERED. City of Mandaluyong. June 27, 2000 (SGD.) NATHANIEL A. LOBIGAS Hearing Officer