Board of Trustees of the Philippine Bodybuilding Sports Federation, Inc. v. Gabriel

[SEC-SICD * CASE NO. 02-94-4687. April 21, 1994.] THE BOARD OF TRUSTEES OF THE PHILIPPINE BODYBUILDING SPORTS FEDERATION, INC. , petitioner , vs .THE SELF-STYLED "ELECTION AND NOMINATIONS COMMITTEE" AND ITS MEMBERS: ARTHUR C. GABRIEL, ET AL. , respondents . D E C I S I O N Before this Commission is a petition dated February 21, 1994 filed by the Board of Trustees of the Philippine Bodybuilding Sports Federation, Inc. This petition prayed for the following reliefs, namely: 1. Upon filing of the petition, an order or writ of preliminary injunction be issued ordering respondents to cease and desist from exercising or usurping the rights, powers and prerogatives of the petitioner and to stop or discontinue from proceeding with the holding of an election on February 27, 1994; cdll 2. After proper proceedings, judgment be rendered: a) confirming and declaring as permanent the order or writ of preliminary injunction; b) ordering respondents to pay petitioner attorney's fees in the amount of P50,000.00 plus other expenses of litigation which may be proven during trial; c) ordering respondents to pay petitioner exemplary damages in such amount as this Commission may deem proper; and d) ordering respondents to pay costs of suit. In support of the foregoing, petitioner alleges that it is the duly elected and constituted Board of Trustees ("Board" for brevity) of the Philippine Bodybuilding Sports Federation, Inc. (hereinafter "PBSF"),the latter being a non-stock, non-profit corporation duly organized and existing under the laws of the Republic of the Philippines; that the Board exercises all of its corporate powers by virtue of the election of its members during the annual PBSF election held on May 15, 1993; that respondent Election and Nominations Committee ("Committee" or brevity) is composed of the following members: Arturo C. Gabriel, Antipas Celerio, Orlando Besa, and Gilbert De Guzman, and that respondent PBSF Election Commission is composed of the following namely: Arthur C. Gabriel, Stan Carbungco, Crispin Perez, and Arturo Sadorra; that sometime in January 1994 respondent Committee sent out copies of its alleged Minutes of the Meeting dated January 11, 1994 to all PBSF members, the contents of which state that an election of the members of the Board of Trustees of the PBSF shall be held on February 27, 1994; that the said minutes also indicate a list of nominees to the board; that on January 27, 1994, respondent Commission circulated copies of a letter dated January 27, 1994 among the PBSF members informing them of a change in venue of the election of PBSF board of trustees to Badminton Court, Rizal Memorial Sports Complex, Pablo Ocampo St.,Malate, Manila; that because of these allegations, petitioner in its petition prayed for the issuance of a temporary restraining order praying that the meeting to be held by the respondents on February 27, 1994 for the purpose of electing the board of trustees of the PBSF be enjoined because the election would unlawfully shorten the petitioner's term of office and would result in confusion and disorder among the members of the PBSF, as well as third parties dealing with the PBSF. Petitioner also alleges that the calling for a meeting on the aforesaid date has no lawful basis and that the respondents have no power or authority to call for the meeting. A temporary restraining order was issued on February 24, 1994 enjoining the respondents from holding and conducting a meeting on February 27, 1994 for the purpose of calling an election of the Board of Trustees of the PBSF, and at the same time setting the case for hearing for the reception of evidence in support of the prayer for a writ of preliminary injunction. During the injunction hearing conducted on March 23, 1994, petitioner presented the testimony of the sole witness Susan Mercado for the purpose of proving that the petitioner is the duly elected Board of Trustees of PBSF; that the petitioner, together with the members of the PBSF were notified of the supposed elections to be held on February 27, 1994, which petitioner states to be illegal, and to prove the allegations in the petition. She testified that she is the duly elected corporate secretary of the PBSF by virtue of the elections held on May 15, 1993 whereat petitioner was duly elected and constituted (Exhibit "A");that the results of the said election was reported to this Commission as shown by Exhibit "B",which is the General Information Sheet of the PBSF for the fiscal year 1993-1994. She further testified the petition was filed because she received communications that an election of new trustees of the PBSF shall be held (Exhibits "C" and "D"),allegedly in accordance with a PBSF Board Meeting held at Mulligan's Restaurant on January 26, 1994; that as attested to in the petition, the petitioner did not hold any such meeting at Mulligan's, nor was any such meeting held at any other time or place; that the filing of the petition was duly authorized by the petitioner as evidenced by Exhibit "C",which is the Minutes of the Meeting of the Board of Trustees of the PBSF held on February 17, 1994, the same minutes being properly identified and marked by witness Mercado. After the presentation of the foregoing testimony and documentary exhibits, and after formal offer thereof in open hearing, the petitioner thereafter rested its case. Respondents, on the other hand failed to present any evidence to refute the claims of petitioner. In fact, several opportunities were given to the former, but nonetheless respondents did not take advantage of these. Thus, respondents were deemed to have waived their right to prevent evidence. On March 28, 1994, this Commission issued and Order declaring the respondents in default, in view of their failure to file an answer within the prescribed period. As such the instant case was now considered submitted for resolution. It was further manifested by the petitioner that any evidence adduced in support of the provisional remedy shall form part of the evidence in chief in support of the main case. In going over the evidence presented by the petitioner, this Hearing Officer finds and so holds that an election of the Board of Trustees on February 27, 1994 is tantamount to a removal of the present board, petitioner, herein, without the required number of votes of the membership of PBSF. Barring this, respondents are without authority to do so. The Corporation Code provides for the procedure in the removal of trustees, to wit: "SECTION 28 Removal of directors or trustees . Any director or trustee of a corporation may be removed from office by a vote of the stockholders holding or representing at least two thirds (2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of at least two thirds (2/3) of the members entitled to vote: Provided, that such removal shall take place either at a regular meeting or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the Corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or, if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as of the intention to propose such removal must be given by publication or by written notice as prescribed in this Code. The vacancy resulting from removal pursuant to this section may be filled by election at the same meeting without further notice or at any regular or at any special meeting called for the purpose, after giving notice as prescribed in this Code. Removal may be with or without cause: Provided, that removal without cause may not be used to deprived minority stockholders or members of the right representation to which they may be entitled under Section 24 of this Code." It is clear, from a reading of the foregoing section, that respondents did not follow the prescribed rules in removal of the petitioner, if that was the intention. They did not muster the prescribed majority to call for a meeting for the purpose of ouster or removal of petitioner. The law provides with clarity that only a majority of the membership entitled to vote of a non-stock corporation can call for a meeting in this regard and only two thirds (2/3rds) thereof can remove a trustee or the entire board for that matter. The number of the respondents is not sufficient to carry out this act. "Res Ipsa Loquitur." Section 23 of the Corporation Code provides that the Board of Trustees, "shall hold office for one (1) year and until their successors are elected and qualified." There being no showing whatsoever that petitioner has been lawfully removed, it can exercise all corporate powers, conduct business and control property, until such time that a new board has been lawfully elected and qualified. Insofar as damages and attorney's fees are concerned, the petitioner failed to prove the same during their presentation of evidence. Thus the Commission deems it the height of prudence not to grant damages, there being no proof shown substantiate any claim for them. WHEREFORE, in the light of the foregoing premises, a judgment is hereby rendered: a) Ordering the respondents to CEASE and DESIST from representing themselves to the PBSF membership and to the public in general as the duly constituted and elected trustees and officer of the PBSF; and b) Enjoining the respondents from usurping the rights, powers and prerogatives of petitioner herein. No pronouncement as to costs. SO ORDERED. (SGD.) EDUARDO P. BAROT Hearing Officer