Parras v. Collado

[SEC-SICD * CASE NO. 06-98-5986. September 23, 1998.] MANUEL P. PARRAS , petitioner , vs .AMBROSIO C. COLLADO, RODOLFO DE LARA, ARIEL MAGNO & ARACELI ALFARO , respondents . D E C I S I O N This is a simple case invoking the power of this Commission to order and direct the holding of a special stockholders' meeting of the Philippine Hospitals and Health Services, Inc., hereafter referred to as "PHHS" for brevity. This Commission has the power to direct the holding of such a stockholders' meeting pursuant to both the Corporation Code of the Philippines and P. D. 902-A when properly invoked in an appropriate petition. PHHS is a duly registered corporation bearing SEC Registration No. 76337 with current office address at No. 19M-3 WT Bldg.,Edsa/Guadalupe, Makati City. Petitioner Manuel P. Parras is a hold-over member of the Board of PHHS and the incumbent Executive Vice President/COO of PHHS and is the registered stockholder in the books of PHHS holding 19,900 fully paid shares. These shares were assigned to petitioner by Northwest Traders Corporation on December 29, 1997 and duly recorded in the books of PHHS on Feb. 10, 1998, by the Corporate Secretary, Atty. Augusto M. Macam. The remaining hold-over directors of PHHS are Ambrocio Collado, Rodolfo de Lara, Araceli Alfaro and Ariel Magno. PHHS never had an annual meeting of stockholders since 1993 contrary to the provisions of its By-Laws which require the annual meetings to be held at 4:00 P.M of the last Thursday of May of each year at its principal office in the Municipality (now City) of Makati (Art. I Sec. 1, of PHHS By-Laws).The By-Laws of PHHS (Art. II, Sec. 1) provide for nine (9) directors. Petitioner herein called attention to the fact that no annual meeting of stockholders has been called since 1993 during a special meeting of the Board of Directors on December 4, 1997 and again on January 23, 1998. As no action was made thereon by the President, Rodolfo de Lara, likewise a member of the Board, petitioner filed a formal letter to the PHHS President on January 30, 1998 requesting the latter to call for a special stockholders' meeting to elect the members of the Board. In their answer to the Petition, Ambrocio Collado, Rodolfo de Lara, Araceli Alfaro and Ariel Magno claimed that petitioner is not proper party to call for a special stockholders' meeting as such special meetings, under Article I, Section 2, of the By-Laws of PHHS may only be called by the President or ordered by the Board or whensoever the holders of at least one fourth of the outstanding capital of PHHS so request in writing. They claimed that the petitioner's 19,900 shares assigned to him by Aurora V. San Jose, President of Northwest Traders Corporation, is null and void as said Aurora V. San Jose executed the assignment in favor of the petitioner without appropriate Board authority from Northwest Traders. They claimed further that the petition will be rendered moot and academic as the President has decided to call a special stockholders' meeting within the last week of June, 1998 upon the issuance of the notices in accordance with the By-Laws. In his reply to respondents' answer, petitioner submitted to this Commission as Annex "A" thereto, a copy of a notarized Deed of Trust covering the 19,900 PHHS shares in trust for Northwest Traders Corporation. Respondent Rodolfo de Lara, indeed, scheduled a special stockholders' meeting of PHHS on June 24, 1998 at his office at Globeland Contractors, 13th Floor, Jaka Bldg.,Ayala Avenue, Makati City without notice to the petitioner for which the petitioner filed for a Temporary Restraining Order which was issued by this Commission on June 24, 1998 and the case was scheduled for a summary hearing to determine whether or not the Temporary Restraining Order may be extended. At the summary hearing, the respondents committed in open court that no special stockholders' meeting will be called until the resolution of the instant petition. Pleadings have likewise been filed by both parties. In synthesis, both parties have agreed that there are no further factual issues and the sole issue is the legal issue respecting the Northwest Traders' 19,900 shares of stock in PHHS earlier assigned to the petitioner. To resolve the sole issue respecting the assigned shares in PHHS of Northwest Traders Corporation numbering 19,900 shares of stock it becomes necessary to set forth the factual backdrop thereof based on the submissions of the parties. The fact of the assignment of the 19,900 shares in PHHS to the petitioner is not denied by respondents. Petitioner has filed along with his petition as Annex "A" thereof a notarized Deed of Assignment dated December 29, 1997 and likewise submitted as Annex "B" to the Petition a Secretary's Certificate of Atty. Augusto M. Macam, Corporate Secretary of PHHS, affirming the registration of the 19,900 shares in the books of PHHS. Respondents on the other hand filed with their Answer as Annex "1",a letter of Aurora V. San Jose dated June 5, 1998 addressed to petitioner declaring the Deed of Assignment dated December 29, 1997 as completely invalid for she has not received any consideration therefor. Respondents subsequently filed with their Rejoinder a copy of an affidavit of Aurora V. San Jose dated June 9, 1998 alleging, inter alia, to the effect that the Deed of Assignment of the 19,900 shares of stock in PHHS shall be for internal matter only and that the shares shall remain in the name of Northwest Traders Corporation. An affidavit of Corporate Secretary Augusto Macam dated June 9, 1998 was likewise submitted as Annex "2" of respondents' Rejoinder. In his affidavit, Augusto M. Macam alleges that he registered in the books of PHHS in the name of the petitioner the 19,900 shares of stock based on the Deed of Assignment dated December 29, 1997 and that he caused the reversal/cancellation of the previous registration of the 19,900 shares of stock of PHHS on the basis of the June 5, 1998 letter of Aurora V. San Jose to the petitioner and a Northwest Traders Corporation Board of Directors resolution of June 9, 1998 appointing Rodolfo de Lara as their proxy to vote at the special stockholders' meeting scheduled on June 24, 1998. This meeting was aborted in view of a Temporary Restraining Order earlier issued by this Commission to petitioner. With the existence and due execution of the Deed of Assignment of the 19,900 PHHS shares of stock between Northwest Traders Corporation, represented by its President, Aurora V. San Jose, as the assignor and the petitioner as the assignee, duly established, we view such Deed of Assignment as a contract between the assignor and the assignee which is fully executed between the parties or from one of them in order to have legal effect. As an executed contract, the assignment was immediately effective as between the parties thereto and will stand as a foundation of the rights acquired under it (Salonga, Phil. Law on Private Corporation p. 229, citing Alabama Consolidated Coal & Iron Co. vs. Baltimore Trust Co. (D. C.) 197 F. 347, 358; Warren, 23 Harvard Law Review 495; Fletcher Sec. 3495).The registration thereof in the Stock and Transfer Book of PHHS by its Corporate Secretary, Augusto M. Macam was, therefore, a lawful consequence of the said Deed and the presentment thereof to the Corporate Secretary. This initial act of the Corporate Secretary pursuant to the By-Laws of PHHS which provides in part "......The Secretary shall have charge of the stock certificate book and such other books and papers as the board of Directors may direct. ....." (Article III, Section 10, PHHS By-Laws).The duties of a Corporate Secretary are normally spelled out in the By-Laws (Guthman & Dougall, Corporate Financial Policy, p. 5). This Commission has earlier held that a corporation and its officers in charge of its books have the duty to record on the books of the Corporation lawful transfers of stocks (Vicente Asuncion, Jr. vs. Olympic International, Inc.,et al.,SEC Case No. 1843, April 11, 1980).Such act of recording is generally held to be a ministerial duty of the Corporate Secretary (2 Fletcher Secs. 636, 637).The registration of the 19,900 PHHS shares of stock in the name of the petitioner, Manuel P. Parras, in the Stock and Transfer Book of PHHS, by Corporate Secretary Augusto M. Macam has, per se, invested in the petitioner all the attributes of a stockholder in PHHS with respect to such shares and all the rights of a stockholder with respect to said shares of stock are exercisable by the petitioner. We now delve into the position of the respondents. It is respondents' position that the Deed of Assignment made by Northwest Traders Corporation through its President Aurora V. San Jose, has become null and void in view of the letter of Aurora V. San Jose to the petitioner and the reversion/cancellation made subsequently by PHHS' Corporate Secretary Augusto M. Macam. Surprisingly, neither Northwest Traders nor Aurora V. San Jose intervened in this case and instead left the entire matter to the respondents. In any event, this case does not involve a direct action for rescission of the Deed of Assignment whose validity, after its registration in the books of PHHS, is now being collaterally attacked. If indeed Northwest Traders, as the original stockholder and now the assignor under the questioned Deed of Assignment has any cause to complain against the petitioner in respect of the PHHS shares, then Northwest Traders Corporation can either demand the re-assignment of the said shares or file a direct action of rescission thereof, neither of which course of action was undertaken. Respondents have merely relied on the letter of Aurora V. San Jose that she has not received any consideration for the assignment and has unilaterally considered the assignment null and void ab initio. It bears pertinence to note that the petitioner, despite the execution of the Deed of Assignment in his favor and the registration thereof in the stock and transfer book of PHHS, has not laid any claim of actual ownership over the shares but only holds said shares in trust for Northwest Traders Corporation. The Deed of Trust dispels any concept that actual ownership has passed to the petitioner. The attempts of respondents in disenfranchising petitioner as a registered stockholder in PHHS are not only belated but are also lame, futile and ineffective. This petition is not the proper case to pass upon the validity or invalidity of the Deed of Assignment between Northwest Traders and the petitioner. As earlier emphasized herein, where a contract is fully executed on both sides, the contract is effective and will stand as a foundation of the rights acquired under it. In this case, the Deed of Assignment over the 19,900 PHHS shares made the petitioner the actual holder of said shares and the registration thereof in the stock and transfer book of PHHS made him, likewise, the registered stockholder. The rule is that a corporation cannot inquire into or pass upon the legality of the transaction by which its shares are transferred from one person to another, or justify a refusal to register the transfer on the ground that the consideration for the transfer was illegal. Nor can a corporation concern itself with matters involving only the transferor and transferee. Hence a corporation or its officers cannot justify refusal to register on the ground that the person seeking it has deluded a third person into believing that the latter had purchased all of his stock and hence is estopped, or because the transfer was in violation of a pooling agreement entered into between the transferor and other stockholders (Salonga p. 513 citing 12 Fletcher, Sec. 5529) The act, therefore, of PHHS Corporate Secretary Augusto Macam in causing a reversion/cancellation in the books of PHHS of the registered 19,900 shares in the name of petitioner, if indeed he has already done such reversion/cancellation as per his affidavit submitted as Annex "2" to respondents' Rejoinder, is completely bereft of any legal basis and is ineffective to disenfranchise the registered stockholder, petitioner herein. It being sufficiently clear that PHHS has had no annual stockholders' meeting since 1993 in violation of the provisions of its By- Laws it, becomes appropriate for this Commission to direct the holding of such a meeting in accordance with the provisions of PD 902-A and Section 50 of the Corporation Code. Respondent Rodolfo de Lara having previously indicated a willingness to call for the stockholders' meeting of PHHS, this Commission finds no need to appoint the petitioner to call such meeting and preside thereat until the majority of the stockholder elect a presiding officer. WHEREFORE, premises considered, judgment is hereby rendered: (a) Ordering respondent Rodolfo de Lara to call for a special stockholders' meeting of PHHS for the purpose of electing the new Board of Directors of PHHS, such meeting to be held at the Makati City office of PHHS not later than October 15, 1998 and instruct the Corporate Secretary of PHHS to issue appropriate notices in accordance with its By-Laws to the stockholders, including the petitioner herein and this Commission; (b) ordering and directing that the votes attributable to the 19,900 shares of stock already registered in the name of the petitioner are exercisable by the petitioner or his duly authorized proxies; (c) ordering and directing that the aforesaid stockholders' meeting shall be held under the supervision of this Commission through its duly authorized representative. SO ORDERED. (SGD.) ROSITA R. GUERRERO Hearing Officer