Garcia, Jr. v. United Coconut Planters Bank

[SEC-SICD * CASE NO. 01-95-4962. August 27, 1996.] LEON M. GARCIA, JR. , petitioner , vs . UNITED COCONUT PLANTERS BANK, ET AL. , respondents . R E S O L U T I O N (1) This is an action to reinstate the petitioner as member of the Board of Directors of respondents United Coconut Planters Bank ("UCPB"); (2) to declare the withdrawal by the Presidential Commission on Good Government ("PCGG") of his nomination as illegal; (3) to declare the nomination by PCGG or (4) respondent Sevilla as illegal and to declare the elections held on 22 July 1993 by the Board of Directors as illegal. On 17 March 1995, this Commission issued an Order denying the application for a writ of preliminary injunction. Subsequently, all the respondents filed their answer dated 3 April 1995. After the pre-trial conference held on 4 October 1995, presided by Hon Rogelio C. Sescon, the Commission issued a preliminary conference order dated 15 November 1995, which reads in part: "The issues to be resolved are: 1. Whether or not PCGG is the real party in interest; 2. Whether or not the withdrawal by the Presidential Commission of Good Government (PCGG) of its nomination of the petitioner amounted to an expiration of term; 3. Whether or not the petition is already barred under Section 3-A of the SEC Summary Rule of Procedures for petitioner's failure to bring an action within fifteen (15) days from the date of election; 4. Whether or not the removal of the petitioner upon instruction by the President of the Philippines is violative of the By-Laws of UCPB, the Corporation Code and other existing laws." In the order dated 17 March 1995, this Commission ruled that the election herein is "not the election contemplated" under section 3 (a) 1 of the SEC Summary Procedure in Election Cases which the Hearing officer may dismiss outright if the petition is not filed within fifteen (15) days from the date of election. A closer examination of the said provision indicates that the Rules do not distinguish between an election held by stockholders and an election by members of the Board . The petition itself indicates that the ultimate act is at issue is the election by the Board of Directors of respondent Sevilla. Be that as it may, the Hearing Officer exercised his discretion not to dismiss the case outright in the interest of substantial justice. Trial was held and petitioner rested his case after identifying Annexes "A" and "B" of the petition (TSN dated 12 January 1996) and submitting the documents marked as Exhibits A to F, which this Hearing Officer admitted. On the other hand, respondents stated that in view of the fact that the testimony was limited to the identification of the documents attached to the petition, the case is ultimately hinged on questions of law and offered in their defense the documents marked as Exhibits 1 to 6 which this Hearing Officer admitted on 31 January 1996. Petitioner's evidence is as follows: Sometime in June 1990, the PCGG nominated him to the Board of Directors of UCPB. On 26 June 1990, the remaining directors of respondent UCPB which constituted a quorum unanimously elected petitioner. Three years after or on 12 May 1993, petitioner received a letter (Exhibit "A") from Magtanggol C. Gunigundo, Chairman of the PCGG which states: "Dear Mr. Garcia: In view of the approval by the Office of the President of your replacement as director of United Coconut Planters Bank and CIIF Management Company, we would appreciate your tendering your retirement/resignation letter effective as of May 31, 1993. We would like to thank you for the valuable assistance you have extended to the Commission in the discharge of its custodial responsibility over sequestered shares and corporations." In his reply dated 21 May 1993 (Exhibit "B"), petitioner refused to resign. In a letter dated 6 July 1993 (Exhibit "C"), PCGG Chairman Gunigundo reiterated the termination of petitioner's services. A copy of the said letter was sent to the UCPB with letter from PCGG Chairman Gunigundo requesting the "assistance and cooperation" of the Board for the implementation of the said letter (Exhibit "D"). On 22 July 1993, the Board held a special board meeting wherein the Board elected herein respondent Atty. Cesar A. Sevilla as petitioner's replacement. (Exhibit "F") On the other hand, respondents contend that: The Supreme Court has allowed the PCGG "to continue voting the shares of stock under sequestration at the meetings of the United Coconut Planters Bank" (Republic v. Sandiganbayan, et al., G.R. No. 96073, Resolution dated 16 February 1993 * ) A concomitant aspect of PCGG's right to vote the sequestered shares is the right to vote. PCGG's letter to the petitioner (Exhibit "A") terminating his services is akin to the expiration of petitioner's term as petitioner has effectively ceased to be a stockholder. The Commission perceives that no final determination of the matter can be had without examining the action of the PCGG. It is undisputed that the UCPB is a sequestered corporation, where ninety percent (90%) of its shares are conserved and administered by the PCGG. Well-settled is the rule that as conservator and administrator of the sequestered assets, PCGG has the right to appoint its nominees. (Republic v. Sandiganbayan, G.R. No. 108292, September 10, 1993; Bataan Shipyard and Engineering Company, Inc. v. Presidential Commission on Good Government, G.R. No. 75885, May 27, 1987) Petitioner admits that he was a PCGG nominee. (petition, p. 2). It was by virtue of this nomination that the Board of Directors elected him as member of the Board. The withdrawal by the PCGG of its nomination of petitioner terminated petitioner's right to act for and in behalf of the PCGG. However, it is quite obvious that the petitioner does not agree with the decision of the PCGG to terminate the nomination. Unfortunately, even if PCGG were impleaded in the case, the SEC cannot interfere with its appointing power. In Sevilla vs. Court of Appeals, G.R. No. 88498, June 9, 1992. " The power of appointment is essentially discretionary. Its exercise may not be controlled by the courts . The choice of an appointee from among qualified candidates or applicants is a political and administrative decision calling for considerations of wisdom, convenience, utility and the interests of the service which can best be made by the head of office concerned . . ." (emphasis supplied) Thus, the Commission holds that it cannot look into the wisdom the PCGG in terminating the services of the petitioner and in appointing his replacement. In the same manner, the Board of Directors did not commit any patently unlawful act nor did it act in bad faith in electing the replacement of the petitioner. Based on the letter issued by the PCGG upon orders of the President of the Republic, petitioner's term of office as PCGG nominee to the Board of Directors of UCPB has expired. (Exhibit "A"). The word "nominee" ordinarily indicates one designated to act for another as his representative in a rather limited sense. It has no connotation however, other than that of acting for another. (Cisco v. Van Lew, 141 P. 2d 433, 460 cited in CJS p. 600) Thus, the withdrawal by the PCGG of its nomination of petitioner terminated his right to represent PCGG in the UCPB Board of Directors upon which his election was based. This is a tantamount to "a director ceasing to be stockholder, in which case his office shall become vacant", a consequence which is self-executory. (De Beiu vs. Century Cement Products Co., 119 N.J. Eq 472, 183, 188 quoted in 2 Fletcher p. 135) Petitioner's contention that PCGG's right and function and the right to nominate in behalf of the sequestered shares of the respondent UCPB automatically became functus Oficio upon submission of the petitioner's name as its ( sic ) nominee" is without merit. The Supreme Court itself has declared that it is the PCGG which has the right to "continue voting the shares of stock under sequestration at the meetings of the UCPB ." (Republic vs. Sandiganbayan, Supra). This means that the PCGG can exercise its right to vote the shares by choosing the directors who may sit in the UCPB Board. Thus, for all intent and purposes the act of PCGG in terminating petitioner's services and nominating respondent Sevilla has the same effect as PCGG voting the sequestered shares against petitioner and in favor of respondent Sevilla. Verify, petitioners insistence that he can only be removed at a stockholder's meeting is an unreasonable and an impossible proposition, considering that the Supreme Court has issued a restraining order against the holding of stockholders' meeting in the UCPB for the purpose of allowing the sequestered shares to be voted by the registered owners thereof. (Republic v. Sandiganbayan, ibid). Thus, respondents correctly acted on the PCGG nomination of respondent Sevilla. Based on the discussion during the special meeting held on 22 July 1993 (Exhibit "F"), the Board carefully deliberated the matter, viz: "Vice Chairman Jucan J. Carlos submission however to the members of the Board is that a distinction should be made and the facts pertaining to Directors Andanar and Garcia He stressed his observation that the two last mentioned directors were elected to the Board as replacement for their respective predecessors who have already left the Board and their election to the Board was done by the Board to fill existing vacancies. However, in the case of Director Manuel Concordia his election to the UCPB Board was upon nomination and subsequent election at the regular stockholder's meeting of UCPB held in the afternoon of June 30,1986 at the Makati Sports Club. xxx xxx xxx After the discussion which followed, a consensus was reached by the Board that in the case of Director Manual ( sic ) A. Concordia whose inclusion in the UCPB Board was on account of his nomination and election at a regular stockholder's meeting, it would be prudent and proper to make further clarification with the PCGG and obtain well considered legal opinions before the Board acts." Thus, respondents made a distinction between the case herein petitioner who was nominated by the PCGG and elected by the Board and the case of Director Concordia who was elected during a stockholders meeting. Verily, despite the identical request by the PCGG on the termination of the services of petitioner and of Director Concordia, the respondents sought to act within the bounds of judicial pronouncement on the extent of power of the PCGG to nominate and vote the sequestered shares and the power of the Board to act independently of the PCGG. In San Miguel Corporation vs. Khan, G.R. No. 85339, August 11, 1989 , the Supreme Court declared: " From the conceded premise that de los Angeles now sits in the SMC Board of Directors by the grace of the PCGG, it does not follow that he is legally obliged to vote as the PCGG would have him do, that he cannot take a position inconsistent with that of the PCGG, . . . The proposition is not only logically indefensible, non sequitor, but also constitutes an erroneous conception of a director's role and function, it being plainly a director's duty to vote according to his own independent judgment and his own conscience . . . (emphasis supplied) In making a distinction between the circumstances involving petitioner and Director Concordia, respondent action clearly indicates that they did not merely follow the request of the PCGG but voted according to their respective judgment, affirming the law and the principles of good faith. Thus, based on the law and the factual circumstances, respondents cannot be held liable. WHEREFORE, judgment is hereby rendered dismissing the petition with costs against petitioner and ordering him to pay respondents the aggregate sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) as attorney's fees. SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .