Josefa Dela Rama, et al. Vs. Emerito M. Ramos, Sr., et al.

[SEC-SICD * CASE NO. 03-99-6241. February 23, 2000.] JOSEFA DELA RAMA, EMERITO B. RAMOS, JR.,ANTONIO B. RAMOS, FILOMENA R. LEDESMA, and HEIRS OF EDMUNDO B. RAMOS , petitioners , vs .EMERITO M. RAMOS, SR.,VlCTORIA R. TANJUATCO, JANUARIO B. RAMOS, SUSANA R. MONTERMOSO, ROGERIO H. ESCOBAL, ATTY. LEAH M. IRAO and JONAS KARL PEREZ , respondents . D E C I S I O N In determining the quorum in every stockholders' meeting, is it correct to exclude the shares belonging to a deceased stockholder whose estate is still unsettled from the total outstanding shares where the determination of the quorum can be had? This is the issue for resolution in this case. As alleged by petitioners: Petitioners are all stockholders of E.M. Ramos & Co.,Inc. (EMRACO for short),a corporation duly organized under the laws of the Republic of the Philippines, with petitioners Ma. Elena Ramos, Edmundo M. Ramos, Jr. and Adel Susan M. Ramos being the only heirs of the late Edmundo B. Ramos, who is himself a stockholder of record; that for several years past, the outstanding 92,000 shares of stock of EMRACO were evenly distributed among all the members of the Ramos family, as follows: Name of Stockholder No. of Shares Emerito M. Ramos, Sr. 9,200 Susana M. Ramos 9,200 Josefa R. de la Rama 9,200 Emerito B. Ramos Jr. 9,200 Antonio B. Ramos 9,200 Filomena R. Ledesma 9,200 Victoria R. Tanjuatco 9,200 Edmundo B. Ramos 9,200 Januario B. Ramos 9,200 Susana R. Montermoso 9,200 TOTAL NUMBER OF SHARES 92,000 However, on December 18, 1980, five (5) shares of stocks were apparently transferred from those of Susana R. Montermoso to herein respondent Rogerio H. Escobal, although there is nothing on the record showing how this came about. HSTaEC Last December, 1998, respondent Leah M. Irao, claiming to be the Corporate Secretary of EMRACO, sent notices of an alleged annual stockholders' meeting of EMRACO, to be held on January 05, 1999 at 4:00 P.M. at the residence of the respondent Januario B. Ramos at No. 7, Alta Vista Drive, Aurora Boulevard Extension, Loyola Heights, Quezon City. Since the said stockholders' meeting was contrary to and violative of the explicit provisions of EMRACO's Articles of Incorporation and By-Laws, the petitioners expressed their protest thereto as shown by their letter dated January 04, 1999 (ANNEX "A") Petitioners were allegedly informed that despite such protest, the election was held not on January 05, 1999 but on January 12, 1999 which was attended by respondents Januario B. Ramos, Victoria R. Tanjuatco and Rogerio H. Escobal while stockholders Emerito M. Ramos, Sr.,Susana B. Ramos and Susan R Montermoso were allegedly represented by proxies. Despite the absence of quorum, since only a maximum of 50% of the outstanding shares entitled to vote could then be present or be duly represented by proxies, the said stockholders meeting still proceeded to conduct business and, among others, the following were apparently alleged elected as directors or members of the Board of Directors of EMRACO, as shown by the General Information Sheet of EMRACO, (ANNEX "B"): Emerito M. Ramos, Sr. Januario B. Ramos Victoria R. Tanjuatco Susana R. Montermoso Rogerio H. Escobal Thereafter, the above directors held a meeting of the Board of Directors and, among others, nominated/elected the following as officers of EMRACO: Januario B. Ramos President Victoria R. Tanjuatco Exec. Vice President and Treas. Rogerio H. Escobal Senior Vice President Leah M. Irao Corporate Secretary Jonas Karl Perez Assistant Corporate Secretary The said annual stockholders' meeting, if indeed, it was then so held thereat, is null and void, being contrary to and violative of the explicit provisions of the Amended Articles of Incorporation and the Amended By-Laws of EMRACO (ANNEXES "C" & "D") for among others, the following reasons: a) The said meeting was held without any notice to all stockholders of record of EMRACO, particularly the herein petitioners, given within a reasonable time to enable them to attend the same. b) The said stockholders meeting was held at the private residence of the respondent Januario B. Ramos and not at the principal office of EMRACO. c) The said meeting was held, proceedings were undertaken and corporate business and matters discussed and resolved, despite the absence of the quorum of the stocks outstanding and entitled to vote or be voted. d) In fact, stockholder Susana B. Ramos' proxy, if one was indeed so used thereat, was not valid, as she could not, at the time she was alleged to have executed the same, no longer capable of giving her free and informed consent or conformity thereto. e) Additionally, even assuming the validity of the proxies then available, the alleged Corporate Secretary, the respondent Leah M. Irao, certified as to the presence of quorum only after and arbitrarily and unlawfully excluding the shares in the name of Edmundo B. Ramos (deceased) from being voted at the said stockholder's meeting, which shares, if not having been disqualified, would show the presence of at most, only 50% of all the shares outstanding and entitled to vote as being present either personally or by proxy; and which the said respondent Leah M. Irao also did during the alleged annual stockholder's meeting of EMRACO last February 28, 1998, as shown in the Secretary's Certificate (ANNEX "E") The stockholders meeting allegedly held last January 12, 1999 is thus null and void and all proceedings therein undertaken, all business and matters therein discussed and resolved, including the election of the members of Board of Directors, all resolutions therein and thereafter adopted, are all null and void and of no legal effect or juridical effect whatsoever. ECTSDa The Board of Directors' meeting allegedly held last January 12, 1999 is also thus null and void and all proceedings void and all proceedings therein undertaken, all business and matters therein discussed and resolved, including the election of the members of the Board of Directors, all resolutions therein and thereafter adopted, are all null and void and of no legal effect or juridical effect whatsoever. In their prayer, petitioners moved that this Commission render judgment: 1. Nullifying, setting aside and declaring as null and void the alleged meeting of stockholders of E.M. Ramos & Co.,Inc. held at No. 7, Alta Vista Drive, Loyola Heights, Quezon City last January 12, 1999, as well as all the proceedings undertaken thereat, all business transacted therein, all resolutions adopted thereat, the election of the members of the Board of Directors held therein, and any and all matters taken up therein; 2. Nullifying, setting aside and declaring as null and void any and all meetings of the said unlawfully-elected Board of Directors, held on January 12, 1999 or at any time thereat, as well as all the proceedings undertaken thereat, all business transacted therein, all resolutions adopted thereat, the appointments/election of the officers therein, and any and all matters taken up therein; 3. Declaring the election of the members of the Board of Directors and the officers of E.M. Ramos & Co. Inc. last January 12, 1999 as null and void, and permanently enjoining and restraining the respondents Emerito M. Ramos, Sr.,and Januario B. Ramos, Victoria R. Tanjuatco, Susana R. Ramos Montermoso and Rogerio H. Escobal from exercising their function or position as directors and/or officers of E.M. Ramos & Co. Inc. and the respondents Leah M. Irao and Jonas Karl Perez from exercising their function or position as Corporate Secretary and Assistant Corporate Secretary of E. M. Ramos & Co. Inc. and nullifying, setting aside and declaring as null and void any and all acts heretofore, and hereafter to be, performed by them in such capacity/ies, whether as directors and/or officers thereof. Instead of an Answer, respondents, represented by ONGKIKO KALAW MANHIT & ACORDA Law Offices filed a Motion to Dismiss the instant petition. This Hearing Officer gave each parties sufficient time to file their respective pleadings on the matter. The same was DENIED per Order dated October 11, 1999. Meanwhile, on July 12, 1999, herein respondents represented by their new counsel, filed an Urgent Motion for the Issuance of a Temporary Restraining Order (TRO) alleging that on various dates on the first week of July, 1999, respondents received copies of a Notice of Special Meeting dated 01 July 1999 signed by petitioner Filomena R. Ledesma, representing herself as the Corporate Secretary of E.M. Ramos and Co. Inc. (EMRACO);the Notice stated in part: "Please be informed that upon call by the stockholders owning 40% of the outstanding capital stock of E.M. Ramos & Co. Inc.,a special meeting of the stockholders of the corporation will be held on Thursday, July 15, 1999 at 4:00 P.M. at the principal office of the corporation, 273 Katipunan Avenue, Loyola Heights, Quezon City, to elect directors of the corporation for the current year ( ANNEX "A" Urgent Motion ) In sum, respondents alleged that considering the issue of the validity of the January 12, 1999 election was still unresolved, respondents prayed that petitioners be restrained, enjoined from calling the alleged special stockholders' meeting on July 15, 1999. On July 15, 1999, Chairman Perfecto R. Yasay Jr. issued a 72 hour Temporary Restraining Order (TRO) restraining the petitioners from proceeding with the election set on said date. Thereafter, respondents filed the Application for the Issuance of a Writ of Preliminary Injunction to enjoin the petitioners, their representatives, assigns, or other persons acting for and in their behalf from calling, holding, and/or convoking a meeting of the stockholders of EMRACO for purposes of, among others, electing members of EMRACO's board of directors during the pendency of the above-captioned case and SEC Case No. 08-94-4857 entitled "Josefa dela Rama, et al.,v. Emerito Ramos Sr. et al." During the hearing on the respondents-movants prayer for the issuance of the writ of preliminary injunction, movants presented their lone witness, respondent Rogerio H. Escobal who testified both on direct and on cross that the following appear as the stockholders of EMRACO for the years 1998 and 1999: Name of Stockholder No. of Shares Emerito M. Ramos, Sr. 9,200 Susana M. Ramos 9,200 Josefa R. de la Rama 9,200 Emerito B. Ramos, Jr. 9,200 Antonio B. Ramos, Sr. 9,200 Filomena R. Ledesma 9,200 Victoria R. Tanjuatco 9,200 Edmundo B. Ramos 9,200 Januario B. Ramos 9,200 Susana R. Montermoso 9,195 Others 5 TOTAL NUMBER OF SHARES 92,000 (pages 8-9, 12-33, 38-40, TSN, October 8, 1999) Based on Mr. Escobal's testimony, the only stockholders present in person or by proxy during the January 12, 1999 and February 27, 1998 with their respective stockholdings are as follows: Name of Stockholder No. of Shares Emerito M. Ramos, Sr. 9,200 Susana M. Ramos 9,200 Victoria R. Tanjuatco 9,200 Januario B. Ramos 9,200 Susana R. Montermoso 9,195 Others 5 TOTAL NUMBER OF SHARES 46,000 On the other hand, the following stockholders were not present during both the alleged stockholders' meetings of January 12, 1999 and February 27, 1998 to wit: Name of Stockholder No. of Shares Josefa R. de la Rama 9,200 Emerito M. Ramos, Sr. 9,200 Antonio B. Ramos, Sr. 9,200 Filomena R. Ledesma 9,200 Edmundo B. Ramos 9,200 TOTAL NUMBER OF SHARES 46,000 Meanwhile, on November 12, 1999, Respondents moved for a reconsideration of the Order dated October 11, 1999 which DENIED the Motion to Dismiss. This Hearing Officer denied the Motion for Reconsideration on the ground that it is one of the prohibited pleadings under the New Rules of Procedure of the SICD (Order dated 02 February 2000) After the testimony of respondent Rogerio H. Escobal, respondents formally offered their evidence in support of their prayer for the writ of preliminary injunction which was admitted by this Commission ( Order dated 19 January 2000 ) On the other hand, petitioners through counsel during the hearing on January 28, 2000 manifested that with the admissions made by the respondents' witness during the hearing, they are not anymore presenting evidence in opposition to the respondents' prayer for the writ of preliminary injunction and instead they are filing a memorandum to this effect and moved that the injunction incident together with the merits of the case be now submitted for resolution. The Memorandum for the petitioners was then filed on January 31, 2000. aDcTHE On February 14, 2000, respondents filed their Answer Ad cautelam basically admitting that during the January 12, 1999 stockholders' meeting, stockholders representing 46,000 shares in person or by proxy attended the meeting ( Par. 3.2, Answer ) and thereafter, the directors elected thereat proceeded with the first organizational meeting during which a new set of officers were elected ( Par. 3.6, Answer ).The existence of quorum was based on the certification from respondent Atty. Leah M. Irao that the present stockholders representing 46,000 constitute a majority considering that shares belonging to the deceased Edmundo B. Ramos (9,200 shares) has not been settled between the heirs, hence it was not counted in determining the quorum. Based on the pleadings so far submitted together with the evidences and testimony of respondent Rogerio H. Escobal relative to this case, posed for resolution now is whether the issue of injunction and merits of this case be now resolved as manifested and moved by petitioners' counsel ( Minutes, January 28, 2000 hearing ). We rule on the affirmative. This Hearing Officer takes judicial notice of the proceedings en banc during the summary hearing for the respondents prayer for the issuance of the 72 hours Temporary Restraining Order (TRO) wherein the Chairman ordered: "Atty. Miguel on the basis of this representation of Counsel for petitioners you make a separate directive to SICD to ensure that these cases are promptly resolved with 60 days from date today. As well as the action for contempt that was filed against responsible lawyers or parties for allegedly defying a lawful order of this Commission. I want that resolved within 30 days from today. Having said that, give me additional arguments about why we should not issue the TRO" ( page 24, TSN, July 14, 1999 ) ..." But again, I would like to make sure that the directive is issued out because the issues are very simple. Ano ba namang ididitermine mo lang yong quorum, kasimple simply, you can decide that in twenty four hours ..." (page 37, supra" ..."Okay, and I want that directive and I will hold these hearing officers responsible if it is not completed. I have here the representation of Counsels now, I hope that you will not get into some tactics that will delay the resolution of these cases. " (page 39, supra) ..."On second thought, I want it reduced to 45 days instead of 60 days, Iyong contempt bahala na sila doon sa contempt but I want it resolve in 30 days instead of 60 days" ... (page 42, supra) The New SICD Rules of Procedures provides: "SECTION 10. Effect of Failure to Answer .Should the defendant fail to answer the complaint within the period above provided, he shall be considered in default. The Hearing Officer shall, motu proprio, proceed to render judgment granting the plaintiff such relief as his pleading may warrant, unless the Hearing Officer in his discretion requires the plaintiff to submit evidence which shall be received ex parte ." On the other hand, the Rules of Court which has a suppletory application to the New SICD Rules of Procedures states: RULE 34 JUDGMENT ON THE PLEADINGS. SECTION 1. Judgment on the pleadings . Where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading, the court may, on motion of that party, direct judgment on such pleading. ... Clearly, when respondents' Motion to Dismiss was denied by this Hearing Officer, respondents are then given the remaining period (not less than five days) within which to file their Answer ( Section 4, Rule 16, Rules of Court ).Having filed a Motion for Reconsideration on November 12, 1999, which is a prohibited pleading, it does not stop the running of the period to do the same. On record, respondents received the copy of Order dated October 11, 1999 denying the motion to dismiss on October 28, 1999, thereby, they are given only until November 02, 1999 to file the Answer. Instead, respondents filed the Motion for Reconsideration, which is, aside from being a prohibited one, was also filed out of time. Hence, the respondents are then considered in default and this Hearing Officer can motu proprio render judgment on the case. On the other hand, if the Answer Ad Cautelam be admitted to form part of the records of this case, the same does not tender an issue as it basically admits the allegations in the petition which alleged that the respondents who conducted the meeting of January 12, 1999 represents only a total of 46,000 shares, or exactly 50% of the total outstanding shares (92,000) of EMRACO. ASICDH We now rule on the pending incidents of this case. On the respondents' prayer for the issuance of a writ of preliminary injunction, we held in abeyance ruling on the same until the second issue of the validity of the respondents' election into office is ruled upon. Regarding the validity or invalidity of the January 12, 1999 annual elections and the proceedings, actions taken thereat, this Hearing Officer rules in favor of petitioners. The Corporation Code provides: "SECTION 137. Outstanding capital stock defined . The term outstanding capital stock, as used in this Code, means the total shares of stock issued to subscribers or stockholders, whether or not fully or partially paid (as long as there is a binding subscription agreement), except treasury shares." As alleged by respondents, the quorum was determined by Atty. Leah M. Irao after deducting the shares of the late Edmundo B. Ramos which remains unsettled during the meeting of January 12, 1999, hence, are not entitled to vote. By computation, 9,200 shares deducted from 92,000 shares resulted to a total of 82,800 shares, thereby the total shares represented by respondents on the January 12, 1999 meeting (46,000 shares) already constituted a majority, hence a quorum existed. The same has no basis in fact and in law. It was specifically provided under Section 24 of the Corporation Code that: "SECTION 24. Election of directors or trustees .At all elections of directors or trustees, there must present, either in person or by representative authorized to act by written proxy, the owners of the majority of the outstanding capital stock ".... "SECTION 52. Quorum in meetings . Unless otherwise provided for in this Code, or in the by-laws, a quorum shall consist of the stockholders representing a majority of the outstanding capital stock or a majority of the members in case of non-stock corporations." To declare that the shares belonging to the deceased Edmundo B. Ramos to be excluded from the total outstanding shares and not to be counted in determining a quorum is an error on the part of the respondents. The majority therefore in determining a quorum in this case is fifty (50%) percent plus one share of 92,000 shares or at least 46,001 shares. There is no dispute that the meeting of January 12, 1999 was attended by stockholders representing only a total of 46,000 shares, short of the majority required in order to obtain a quorum. Therefore, the election held thereat was null and void and all proceedings therein are also of no legal effect. The subsequent Board of Directors' meeting held thereat are also null and void for "being the fruit of a poisonous tree". Although the election held on February 27, 1998 was also alleged to have been participated by the same group of respondents with the same questionable quorum and its validity is also raised in this proceedings, this Hearing Officer will not delve on its validity as it was a subject matter of another case ( SEC Case No. 08-94 4857 ) which is still pending before another Hearing Officer. Now, having sufficiently proven that respondents' annual stockholder's meeting and election held on January 12, 1999 is short of the majority required to constitute a quorum, the same election held thereat and the proceedings thereto are all null and void and of no legal effect. Ruling on the injunction issue, we now resolve against the movants. We agree with petitioners' assertion that the application for the issuance of a writ of preliminary injunction is anchored on only one premise: that there had already been an annual stockholders' meeting of EMRACO held on January 12, 1999, during which members of the corporation's Board of Directors had been elected and they have in fact been discharging their duties as such directors, and that a set of corporate officers had been elected by the board ( page 4, Memorandum ) Having clearly found out that the stockholders' meeting and the resultant Board of Directors' meeting held on January 12, 1999 are all null and void, respondents have not sufficiently proven that they are entitled to the relief being prayed for, hence this DENIAL. caIDSH Likewise, the election restrained or enjoined has been rendered moot and academic by the turn of events. The annual stockholders meeting is already due on the 2nd Tuesday of January, 2000 ( Section 1, Article II, A mended By-Laws ) By this time, the election for year 2000 should have been already held and therefore, there is no more election to be restrained as the natural course for the corporation is to conduct the annual stockholders' meeting and election as mandated by its Amended By-Laws. WHEREFORE, judgment is hereby rendered as follows: 1. Nullifying, setting aside and declaring as null and void the alleged meeting of stockholders of E.M. Ramos & Co.,Inc. held at No. 7, Alta Vista Drive, Loyola Heights, Quezon City, last January 12, 1999, as well as all the proceedings undertaken thereat, all business transacted therein, all resolutions adopted thereat, the election of the members of the Board of Directors held therein, and any and all matters taken up therein; 2. Nullifying, setting aside and declaring as null and void any and all meetings of the said unlawfully-elected Board of Directors, held on January 12, 1999 or at any time thereat, as well all the proceedings undertaken thereat, all business transacted therein, all resolutions adopted thereat, the appointment/election of the officers held therein, and any and all matters taken up therein; 3. Declaring the election of the members of the Board of Directors and the officers of E.M. Ramos & Co. Inc. last January 12, 1999 as null and void, and permanently enjoining and restraining the respondents Emerito M. Ramos, Sr.,and Januario B. Ramos, Victoria R. Tanjuatco, Susana R. Ramos Montermoso and Rogerio H. Escobal from exercising their function or position as directors and/or officers of E.M. Ramos & Co. Inc. and the respondents Leah M. Irao and Jonas Karl Perez from exercising their function or position as Corporate Secretary and Assistant Corporate Secretary of E. M. Ramos & Co. Inc. and nullifying, setting aside and declaring as null and void any and all acts heretofore, and hereafter to be, performed by them in such capacity/ies, whether as directors and/or officers thereof. EADCHS 4. Corollary thereto, respondents' prayer for the issuance of a writ of preliminary injunction is hereby DENIED for reasons earlier stated. No pronouncement as to costs. SO ORDERED. (SGD.) JULIETO F. FABRERO Hearing Officer