Vlctor Africa vs. Melquiades Gutierrez, et al.

[SEC-SICD * CASE NO. 07-97-5687. March 9, 2000.] VlCTOR AFRICA , petitioner , vs .MELQUIADES GUTIERREZ, et al. , respondents . D E C I S I O N Before Us is a verified complaint for inspection with application for a preliminary mandatory injunction, praying: WHEREFORE, it is respectfully prayed by herein Complainant, that this Honorable Commission: a. ISSUE a Preliminary Mandatory Injunction addressed to Respondents and to their agents/representatives such that Complainant is not hindered from conducting the inspection he has advised in his letter of June 9 and 19, 1997; b. After hearing, MAKE the Injunction final. c. IMPOSE sanctions on Respondent and his agents/representatives (as well as their other participants/collaborators/counsel) in the refusal/denial of the inspection by Complainant, including but not limited to an Order thereto to pay Complainant: i. P510,000.00 for and as actual damages; ii. P1,000,000.00 for and as moral damages; iii. P2,000,000.00 for and as exemplary damages. Other just and equitable relief are also prayed for." 1 A Motion to Dismiss with Opposition to Application for a Preliminary Mandatory Injunction was filed by the respondents on July 9, 1997. Said Motion was denied in an Order dated May 5, 1998, issued by Hearing Officer Paulino Q. Gallegos. The application for a preliminary mandatory injunction was then set for hearing. Likewise, respondents' Motion for Reconsideration of the Order dated May 5, 1998 was denied in an Order dated May 29, 1998. Respondents filed a Motion to Defer Further Proceedings due to a pending petition for certiorari that they filed before the Commission en Banc. Said Motion was denied in an Order dated September 4, 1998, issued by this Hearing Panel. On February 15, 1999, We issued an Order denying petitioner's application for the issuance of a preliminary mandatory injunction. Said Order also set the preliminary, conference of this case. Petitioner filed a Motion to Declare Respondents in Default on March 4, 1999 based on the ground that the "Respondents have not filed an Answer within the period set forth in Rule VII of the Rules of Procedure ." On March 9, 1999, We issued an Order denying the afore-mentioned motion based on the fact that petitioner has no objection to respondents' prayer that their motion to dismiss be considered as their answer by itself. On March 22, 1999, petitioner filed a Motion for a "Judgment on the Pleadings".An Opposition thereto was filed by the respondents on April 19, 1999. Before we can rule on petitioner's Motion for a "Judgment on the Pleadings",petitioner filed an Omnibus Motion praying: (1) Grant leave for petitioner to withdraw his subject Motion for a Judgment on the Pleadings; (2) Dispense with the preliminary conference; (3) Admit the evidence for petitioner, (4) Set the case for hearing for submission of evidence for respondents on the issue they have proposed; and (5) Grant other just and equitable reliefs. This Hearing Panel issued an Order dated June 16, 1999 granting petitioner's Omnibus Motion, the dispositive portion of which states: "WHEREFORE, as prayed for, this Hearing Panel hereby grants the following: 1. Considers the Petitioner's Motion For Judgment on the Pleadings as withdrawn; 2. Dispense with the submission of petitioner's preliminary conference brief; 3. Considers petitioner to have rested his case; and 4. Let the hearing of the above-entitled case for the reception of respondents' evidence be set for July 6, 1999 at 10:00 o'clock; in the morning." SO ORDERED." 2 On August 12, 1999, petitioner filed a Request for Judicial Notice and Consideration of a Supreme Court Decision, Resolution and Entry of Judgment, particularly. as regards the declaration of non-sequestration of the ETPI shares recorded in the name of and belonging to petitioner Victor Africa. Said Request also prayed for Us to consider said Supreme Court Decision as part of the evidence/circumstances of petitioner vis-a-vis ETPI, particularly as regards the documents submitted and the defense offered by respondents. In an Order dated October 20, 1999, We took judicial notice of the Supreme Court Decision in Republic of the Philippines, et al. vs. Honorable Sandiganbayan and Victor Africa, et al (G.R. No. 106244, promulgated January 22, 1997), and also consider the same as part of the evidence of petitioner. Petitioner filed a Motion for Early Resolution on November 3, 1999 and a Second Motion for Early Resolution on February 29, 2000. Petitioner is a registered stockholder of Eastern Telecommunications Philippines, Inc. (ETPI),who comes to this Commission in view of the alleged refusal of respondents to allow him to inspect the corporate records of, ETPl. According to the petitioner, on June 9 and 19, 1997, he sent letters-advise of his intention to inspect certain transactions of ETPI; that on June 24, 1997 at 2 PM, the date and time of inspection, petitioner and his assistants went to the office of respondents to conduct the previously-advised inspection; that respondents, however, speaking/acting through their counsel, allegedly refused to respect petitioner's right of inspection without giving any reason for such refusal. In their Motion to Dismiss with Opposition to Application for a Preliminary Mandatory Injunction, which was considered as their Answer, the respondents alleged that: a) this Commission has no jurisdiction over the nature of the action or suit; b) the Sandiganbayan has acquired prior and effective jurisdiction over the subject matter of the suit; c) this Commission has no jurisdiction over the person of the respondents being PCGG nominees in ETPI; d) there is another action pending between the parties for the same cause; e) the petitioner is guilty of forum shopping; and f) assuming this Commission has jurisdiction, the inspection sought may be lawfully denied. Respondents further maintains that: a) ETPI is a sequestered company, wherein its Class "A" shares comprising 60% of the total capital structure were sequestered by the PCGG; b) the late Atty. Jose L. Africa and his family holding company, Polygon Investors and Managers, Inc. (Polygon),owned, 20% of said Class "A" shares; c) petitioner Victor Africa is a son of Atty. Jose L Africa, who is a representative or counsel of record for his late father and/or the Africa's family's holding company, Polygon, which holds most of the Africa family's shareholding in ETPI; d) PCGG and the registered owners including Victor Africa have been locked in legal combat to resolve the ownership issue of these sequestered shares, ever since Civil Case No. 009 was filed on July 22, 1987 by the PCGG before the Sandiganbayan, which case still pends; e) Victor Africa and his group have previously petitioned the Sandiganbayan to compel ETPI management to allow them to inspect ETPI's records, the very same records subject of the instant complaint; f) the records which Victor Africa in his complaint is asking to be inspected, are already in their possession having been obtained by his late father thru his auditors Vicente Reyes and Associates when the same were voluntarily furnished by Management. At that time, Management cooperated with Victor Africa and his group by voluntarily making the records available believing that everything was being done in good faith, but as events turned out, ETPI had to protect themselves from further harassment by filing before the Sandiganbayan a declaratory relief motion to request a ruling on the right of inspection vis-a-vis the hostile and harassing circumstances under which Victor Africa and his group sought to exercise such right; g) when Victor Africa sought the same records, e.g. February 29, 1988 to April 30, 1988, he was duly advised that he and his group have not refunded to ETPI the expenses the company incurred in voluntarily allowing a prior examination of the same records, that Victor Africa and his co-minority stockholders in ETPI have already been impleaded in an Amended Complaint in Civil Case No. 009, and that the proposed examination could no longer serve any good or laudable purpose; and h) in his desire to present only his side of the story, petitioner has annexed to the complaint only the copies of his letters to Management completely ignoring the letters and advices of the company's counsel setting forth the reasons why ETPI will not be able to accord him the courtesy or accommodation he presently expects. This Hearing Panel rules to grant Victor Africa's petition to inspect the corporate books and records of ETPI as specified in his letters to said company. "As the beneficial owners of the business, the stockholders have the right to know not only the financial condition of the corporation but also how the corporate affairs are being managed by their elected directors, so that if they find the conditions unsatisfactory, they may be able to take the necessary measures to protect their investment. It is for this reason that the law grants them the right to inspect the records of the corporation to obtain the information they need for this purpose. This right is particularly significant to a minority stockholder." 3 From the provisions of Section 74 of the Corporation Code of the Philippines, it is clear that the stockholder's purpose is material. The clear implication of the provision however is that his purpose is presumed to be a proper one and the corporation cannot refuse to grant him the right on its mere belief that his motive is improper. The burden of proving that the purpose is improper or illegal is thus on the corporation and its officers. In this case, the respondents failed to present evidence as to petitioner's ill-motivated purpose in invoking his right to inspect ETPl's corporate books and records. Thus, it is presumed that petitioner's purpose is a proper one and the corporation cannot refuse to grant him said right. WHEREFORE, judgment is hereby rendered in favor of the petitioner Victor Africa and against respondents Melquiades Guttierrez, et al. directing the latter to allow petitioner Victor Africa to conduct the inspection he has advised in his letter of June 9 and 19, 1997. No costs. SO ORDERED. (SGD.) ALBERTO P. ATAS (SGD.) SUZETTE A. NER Hearing Officer Hearing Officer Footnotes 1. Page 8, Complaint dated June 26, 1997, SEC CASE NO. 07-97-5687 2. Order dated June 16, 1999 issued by Hearing Officers Alberto P. Atas and Suzette A. Ner, SEC CASE No. 07-97-5687. 3. Page 781, Chapter IX, The Corporation C od e, Comments, Notes and Selected Cases, Volume I by Jose Campos, Jr., Maria Clara L. Campos.