Atty. Enrique A. Gabriel vs. Bataan Shipyard & Engineering Co., Inc., et al.

[SEC-SICD * CASE NO. 02-97-5570. December 29, 1998.] ATTY. ENRIQUE A. GABRIEL , petitioner , vs .BATAAN SHIPYARD & ENGINEERING CO.,INC.,and ATTY. DANDY TUPAZ , respondents . D E C I S I O N This is a petition filed on February 27, 1997 for the annulment of the special stockholders' meeting, as well as the first meeting of the Board of Directors of respondent Bataan Shipyard and Engineering Co.,Inc. (BASECO) both held on January 20, 1993. BASECO is presently under sequestration by the Presidential Commission on Good Government (PCGG). Respondents filed their Answer dated March 17, 1997 while petitioner had his Reply filed on May 22, 1997. Meanwhile, respondents' Motion(s) to Dismiss and to Cite for Contempt were denied in an Order of June 2, 1997. Thereafter, a preliminary conference was held wherein the parties agreed that the issues to be resolved are whether or not the stockholders' meeting held on January 20, 1993 was valid and whether or not the members of the board of directors were stockholders of BASECO at the time of their election as such on January 8, 1993 and on January 20, 1993. Likewise, during the conference, it was stipulated by the parties that stock certificate No. 688 dated October 5, 1990, representing one (1) share of BASECO was issued to petitioner herein; that petitioner offered to resign as director and vice-president of BASECO before this controversy (cf. Order of January 2, 1998);that on January 8, 1993, there was a stockholders' meeting; that the directors' meeting was held in the afternoon of January 20, 1993; and that the special stockholders' meeting on January 20, 1993 was ordered to be convened by the PCGG Chairman. prLL Hearings were scheduled to receive the evidence of both parties. Petitioner presented himself, Diosdado P. Peralta and Vicente Macatangay as his witnesses. The respondents, on the other hand, presented Perpetuo Virtusio and Dandy Tupaz as theirs. Respondents objected to the manner of petitioner's presentation of his witnesses but this Hearing Officer ruled that technicalities should be set aside. Administrative agencies like this Commission are not strictly bound by rigid rules of procedure (Realty Exchange Venture Corp. vs. Sendino, G.R. No. 109703, July 5, 1994). In an Order of May 18, 1998, the case was deemed submitted for decision after filing their respective memorandum. The facts of the case are as follows: Prior to June 30, 1992, the petitioner herein had been holding the positions of Director, Vice-President and Treasurer of BASECO. Understandably he is also a stockholder of BASECO. Subsequently, all of the eleven (11) members of the board, petitioner herein included, jointly executed a letter dated June 30, 1992 (Exhibit "1-A"),with the following: LLpr 'xxx xxx xxx Gentlemen: 'Following a time-honored tradition upon the assumption of a new government and in consonance with "delicadeza" unanimously adhered to by all of us, we hereby offer to vacate our positions in the BATAAN SHIPYARD ENGINEERING CO.,INC. and such other positions we occupy by virtue of the functions of such positions, effective upon the election and qualification of our respective successors. xxx xxx xxx Respectfully yours, (SGD) DIOSDADO P. PERALTA Chairman/President (SGD) ENRIQUE A B. GABRIEL Director/Vice President (SGD.) PERPETUO M. VIRTUSIO (SGD) LEOCADIO DE ASIS Director/Corp. Secretary Director (SGD) SEBASTIAN SANTIAGO (SGD) DANDY M. TUPAZ Director Director (SGD.) MARCELO MARQUEZ (SGD) VICENTE MACATANGAY Director Director (SGD) REYMANDO FLORES (SGD) JOSE P. TAMBUNTING Director Director (SGD) CARLITO QUINTANILLA Director' In the morning of January 8, 1993, an alleged annual stockholders' meeting was held wherein the following were elected as members of the board: 1. Alejandro Nava 2. Arturo Ventura 3. Domingo Natividad 4. Simeon Valdez 5. Ben Tanedo 6. Vicente Arenas 7. Marcelo Marquez 8. Dandy Tupaz 9. Emmanuel Demetillo 10. Philip Aton and 11. Adrian Jimenez Then, on 19 January 1993, the Chairman of the Presidential Commission on Good Government (PCGG) sent a letter (Exhibit "A" Exhibit "2-A") to BASECO, worded in this wise: "xxx xxx xxx "Gentlemen: "Further to our letter dated January 12, 1993 regarding the election of officers of BASECO during your scheduled board meeting on January 20, 1993, kindly convene a special stockholders' meeting prior to the scheduled board meeting for the purpose of electing Mr. Proceso Fernandez as director to replace Mr. Simeon Valdez. In this regard, you are hereby authorized to vote the sequestered shares of the company to effect the substitution. "In the board meeting that will immediately follow the said stockholders' meeting, the following shall be the new set of officers: Acting Chairman Dandy Tupaz President Proceso Fernandez Secretary Perpetuo Virtusio Vice-President and Treasurer Jorge Ilagan ''Thank you for your kind cooperation. "Very truly yours, (SGD) MAGTANGGOL GUNIGUNDO Chairman" Apparently, in order to comply with the directive of the Chairman of PCGG, a stockholders' meeting was held in the morning of January 20, 1993 "for the purpose of electing Mr. Proceso Fernandez as director to replace Mr. Simeon Valdez ." This fact has been admitted by the respondents in their Answer which is quoted as follows: "2. The allegations in the petition in respect to the holding of a stockholders' meeting and the subsequent meeting of the newly elected board of directors of respondent Bataan Shipyard & Engineering Co.,Inc. ...,which were held on January 20, 1993 are admitted ." (par. 2 of the respondents' Answer, emphasis supplied) LLpr This stockholders' meeting also became the basis of electing said Proceso C. Fernandez as President in the board of directors' meeting in the afternoon of January 20, 1993 (cf. Exhibit "B" & "1-C"). Evidently, petitioner herein was no longer elected in the alleged January 8 and 20, 1993 stockholders' meetings as director of BASECO who is now questioning this matter through this instant petition. Petitioner wishes to declare the special stockholders' meeting held on January 20, 1993 as null and void, allegedly because it was held without observing the proper procedure in calling a meeting of the stockholders of the respondent corporation as provided for in the Corporation Code and its Amended By-Laws and that the board meeting also held in the afternoon of January 20, 1993 be likewise declared null and void because the members thereof, except for two (2), were disqualified as such as they were not stockholders of record at the time of their election on January 8, 1993 and January 20, 1993. The testimonies of petitioner's witnesses, as contained in their Affidavits (Exhibits "C" and "D") that they were stockholders of BASECO and that they did not receive any notice of the stockholders' meeting of January 20, 1993 were not refuted by the respondents. prLL All that the respondents' witnesses said in their testimonies, as contained in their Affidavits also, were that all the members of the board of directors of BASECO sent a letter to the PCGG offering to vacate/quit all their positions and such other positions which they then occupied upon the election and qualification of their respective successors; that during the stockholders' meeting on January 8, 1993, all positions of the board of directors were declared vacant; that petitioner herein was not elected as member of' the board of directors and that on January 19, 1993, the Chairman of the PCGG sent a letter directing Dandy Tupaz to call for a special meeting of the board and to elect a new set of officers of BASECO which he did on January 20, 1993. There was no testimony that the respondents' witnesses received the questioned notice or that the petitioner's witnesses received the same notice. The respondents wish this Hearing Officer to believe that there was no stockholders' meeting held in the morning of January 20, 1993 as this was consistently not mentioned in the testimonies of their witnesses up to the time that they submitted their memorandum. But this is belied by their allegation in their Answer, paragraph 2 thereof (quoted on page 5 hereof).Because if no such meeting was held on that date Proceso C. Fernandez could not have been elected as President per instruction of the PCGG Chairman and as confirmed by the minutes of board meeting held on January 20, 1993 (Exhibit "B"). prLL A party's admission in his answer is conclusive upon him. He cannot take a position contradictory to or inconsistent with that answer. And the facts which are admitted in his answer are to be taken as true for the purpose of the action. (McDaniel vs. Apacible, G.R. No. 17597, February 7, 1922, 44 Phil., 248, 255). It is a basic rule that the president of a corporation must be a director of the corporation (Sec. 25 of the Corporation Code) and that a director must be a stockholder of the same corporation (Sec. 23, Ibid.). In view of these circumstances, this Hearing Officer is of the firm belief that there was a stockholders' meeting held on January 20, 1993 purposely to include Proceso C. Fernandez as a director of BASECO. Thus, the postulate of respondents that petitioner's witness Atty. Diosdado Peralta, who was still a stockholder at that time, was not notified of the January 20, 1993 special meeting because he was no longer a member of the board by virtue of the January 8, 1993 stockholders' meeting, is untenable. The meeting is for the stockholders while the excuse of the respondents is applicable only for directors' meeting. How could a new director, Proceso C. Fernandez replace Simeon Valdez, who was elected in the January 8, 1993 meeting without calling another stockholders' meeting? There was no evidence presented that a vacancy in the office of the director existed so that they could have availed of Sec. 29 of the Corporation Code. In fact, petitioner here alleged that Sec. 28 of the Corporation Code has been violated. dctai Nobody is questioning the January 8, 1993 meeting. Thus, all matters taken up at that time are presumed to be valid and regular. All that respondents were saying on this matter was that Simeon Valdez was replaced by Proceso C. Fernandez by virtue of the instruction of the PCGG Chairman, that the members of the board of directors were duly elected and qualified as such and that it necessarily followed that the election of the officers was legally done without presenting a relevant evidence to support such contentions and to contradict the petitioner's allegations. Section 3 of Article I of the Amended By-Laws of BASECO, which this Hearing Officer is taking judicial notice of, provides that: "SECTION 3. Notice . Notice of the time and place of the annual or special meetings of the stockholders shall be given personally or by registered mail stating thereby the purpose of the meeting" and that the annual stockholders' meeting is every third Friday of April. (By-Laws, Art. I, Sec. 1) Since there is no provision as to the period of giving notice, the Corporation Code should then be consulted and the related provision reveals: "SECTION 50. Regular and special meetings of stockholders or members . ... "Special meeting of stockholders or members shall be held at anytime deemed necessary or as provided in the by-laws. Provided, however, that at least one (1) week written notice shall be sent to all stockholders or members, unless otherwise provided in the by-laws. xxx xxx xxx Although respondent Atty. Dandy Tupaz tried to comply with the instruction of the PCGG Chairman, the same should have been in consonance with the applicable laws. The fact that BASECO is under sequestration by the government is not an excuse not to follow the law. The letter of the PCGG Chairman is not the kind of notice required by law. LexLib It is thus, clear that the procedures in calling a stockholders' meeting were not followed and complied with. This is a special stockholders' meeting and so the procedures should have been complied with. Anent the directors' meeting held in the afternoon of January 20, 1993, petitioner prays that it be nullified because the members thereof, except for two (2);namely: Dandy Tupaz and Marcelo Marquez, were not stockholders of record of respondent BASECO at the time of their election January 8, 1993 and January 20, 1993 for Proceso Fernandez. Respondents argue that although there was a prior attempt to request for the issuance of subpoena duces tecum for the production of the corporate book, petitioner did not push through with it because it simply proved that if produced, the corporate book would indubitably show that the nominees of the PCGG were eligible under the Corporation Code and the By-laws of BASECO. However, during the hearing held on October 29, 1997, the following argument transpired: xxx xxx xxx Atty. Leonidas: At any rate, Your Honor, please, we would like to know what is the purpose of this subpoena duces tecum because I did not receive my copy of that motion. It's only now when I met Atty. Virtusio here that he showed me this. So, if there is no relevancy for these things here, I think it should be dispensed with. Hearing Officer: What is the purpose? Atty. Gabriel: It is very clear, Your Honor, please, that the very purpose of the subpoena duces tecum is to find out whether there was real payments of the subscriptions. Hearing Officer: By whom? Atty. Gabriel: By those persons, members of the Board, whom I consider as not having paid their shares. As the treasurer, I should know. Unless, they have changed the cash receipts book that was being adopted at the time I was the treasurer. So I want to know, I want to have the book. Not just the page because the page can be replaced. I seen ( sic ) to have seen that there were entries on January 8 and I want the booklet. Because it is that piece of document in which you cannot take out. Hearing Officer: Any Comment? Atty. Leonidas At any rate, Your Honor, please, I don't think that payment is very crucial here. In the sense that without payment, a person cannot be shareholder because it depends upon a corporation. The corporation may (inaudible) that by way of a donation or it can suspend the payment of the same. So, at any rate, that is not very important, Your Honor. xxx xxx xxx Hearing Officer: Let me ask your counsel, was there (an) entry made on that book regarding these respondents' payment(s) on their subscription? You cannot answer that because it's on the book. So, the book should be presented. Atty. Leonidas: Alright, Your Honor, please without prejudice to the contention of that book, we should like to proceed to the production. Atty. Gabriel: And also the booklet. Hearing Officer: You will present it during the next hearing? Atty. Leonidas: Yes, Your Honor. ..." (TSN, October 29, 1997, pp. 8-21) And the direct testimony of the petitioner himself as a witness is that : xxx xxx xxx Q. Now, lets go back to the January 8 meeting. You were still a member of the Board of Directors? A. I was still a member of the Board of Directors and treasurer only up to that date for director. Q. So as treasurer, You have knowledge of money transactions within the corporation? A. That is one of my functions, that all of these money transactions passed through me. Q. Were you the officer or were you the person who should be signing receipts of payments made by persons? A. No, it was not me. It was the cashier. But all payments passed through me. Q. There seems to be a question on the payments of the stocks of these several elected members of the Directors, what is your knowledge of this? A. My personal knowledge of this because of my position is the fact that there was only one (1) nominated person for the directorship who paid his share of stock. Q. Who is this? A. This is Mr. Simeon Valdez. Q. What you are trying to say is that all the rest did not pay? A. Did not pay. Q. Their stocks? A. Their stocks. Q. Why do you say so? A. I am on authority to that, because as I was saying, I received all incoming money for the corporation. ..." (TSN October 29, 1997, pp. 47-50) There was no cross-examination made on this witness. There was also no evidence presented to contradict this testimony except for general allegations that the members of the board of directors of BASECO were duly elected and qualified as such. prcd This fact was also confirmed by the Affidavit of Diosdado P. Peralta stating "3. that, except for Mr. Dandy Tupaz and Marcelo Marquez, who were already stockholders, and Mr. Simeon M. Valdez, who paid for one (1) share of stock, the other nominees as far as I know did not subscribe or pay for at least one (1) share of stock of BASECO, and therefore, were not stockholders, on or before the January 8, 1993 special stockholders meeting." The law requires that "every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director. . ." (Corporation Code, Sec. 23, second paragraph). As things stand, petitioner presented certificate of stock to prove his being a stockholder BASECO. Respondents only presented oral testimonies to support their claims that what they have done are in consonance with law. The stock and transfer book was not presented by either of the parties. At this stage, all that can be concluded is that petitioner herein is a stockholder. No conclusion could be made as to the other respondents whose status of being stockholders of BASECO is being questioned. However, with the evidence presented, the question is if there is enough ground to nullify the stockholders' meeting held on January 20, 1993. The answer is in the affirmative. For not complying with the law in calling and sending notices of special stockholders' meeting, the result thereof could be nullified. As mentioned above, there was no notice of special stockholders' meeting sent which should have specified the agenda thereat. And even assuming that the letter of PCGG Chairman is considered a notice of meeting, it should have complied with the one week requirement of Section 50 of Corporation Code. A sequestered corporation is not exempted in complying with the law. As a matter of fact, since such corporation is already under the control of PCGG, a government agency, it should have lead other corporations in complying with the applicable law. Because of these circumstances, this Hearing Officer is constrained to pass a judgment which sends a message to sequestered corporations not to take the law for granted. WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. declaring the special stockholders' meeting of respondent BASECO held on January 20, 1993 as null and void and 2. declaring the Board of Directors' meeting held in the afternoon of January 20, 1993 as well as all subsequent meetings conducted by the same set of board of directors, also as null and void. Cost to be charged against respondents. DAEIHT SO ORDERED. (SGD.) MANOLITO S. SOLLER Hearing Officer