Dionisio Asencio, et al. vs. Marica Mondejar, et al.

[SEC-SICD * CASE NO. 07-97-5695. January 31, 2000.] DIONISIO ASENCIO, ET AL. , complainants , vs .MARICA MONDEJAR, ET AL. , respondents . D E C I S I O N This is a complaint for annulment of a board resolution, accounting, injunction, and damages with prayer for the issuance of a writ of preliminary injunction. Complainants allege and pray that Resolution No. 20-96 be annulled to the extent that it provided the then President and Vice President of Planters & Green Revolutionist Association Inc. (PAGRAI) the power to continue in office without election for another two years and an authority for respondent Marica Mondejar to appoint the other corporate officers for being contrary to the provision of the By-laws; that for having been appointed under said resolution and/or having used force and intimidation in preventing complainants from exercising and assuming their duties and functions as duly elected members of the Board, respondents be permanently enjoined from representing and performing as officers of the association; that for having been declared winner in an election or taken their oath of office and having initially convened as Board, complainants be empowered to resume the performance of their duties and function as chairman and members of the board and to have physical possession and control of the association's office, assets, properties and records; that respondent Marica Mondejar, as President, be directed to call a special meeting of the Board consisting of the complainants for the approval of a special election of officers in lieu of those who were appointed under Resolution No. 20-96; and that respondents be made to account all the assets and properties of the association which may have come into their possession during their incumbency or to indemnify the association on such assets that they cannot account for. a On the other hand, respondents denied complainants' claims and contended that complainants had no cause of action for reason that the questioned resolution was valid, binding and adopted in accordance with the By-laws that no less than complainants themselves participated in the adoption and implementation thereof and, in fact, on the basis of which they also claimed to have been duly elected as members of the board; that issuing a directive to respondent Mondejar for her to call a special election of the officers of the association is misplaced because such role is lodged in the Board which has the power to prescribe the time, manner and place of election; that on the basis of the said resolution, the COMELEC which adopted the rules and to which complainants filed their certificates of candidacy was organized; that complainants initially emerged as winners in the election although subsequently dislodged by the COMELEC for their failure to dispute the protest lodged by respondents; that respondents thereby assumed as members and run the affairs of the Board; and complainants thereafter formed their own homeowners association which prompted respondents to remove them as members of PAGRAI. This Commission first heard the application for injunctive writ. The same was granted and on July 8, 1998, a writ was issued enjoining the respondents from representing or acting as officers and members of the Board; from preventing complainants to resume their positions and to perform their duties and functions as duly elected members of the Board; and from administering, transferring or disbursing assets and properties of the association. Under this writ, respondent Marica Mondejar was also ordered to call a special election of the corporate officers upon the approval of the Board consisting of the complainants. The Commission issued the foregoing writ on the basis of the following relevant facts: All of the complainants and respondents are members of Planters and Green Revolutionists Association Inc. (PAGRAI),an association duly registered with the Commission. On December 26, 1996, the then Board and Officers thereof adopted Resolution No. 20-96 whereby they gave respondent Marica Mondejar and complainant Lourdes Cuenco another two-year terms as President and Vice President, respectively. Said resolution similarly authorized respondent Mondejar to choose and appoint the other elective officers of the association. The Board also designated the time and place of the annual membership meeting for the election of the members of the Board of Directors on January 19, 1997 which was actually the third Sunday of January of that year. Said meeting, however, was postponed to and was actually held on February 9, 1997. On January 28, 1997, respondent Mondejar constituted the PAGRAI COMELEC which, on February 2, 1997, also promulgated its rules on the conduct of the election of the members of the Board. Likewise on February 2, 1997 complainant Lourdes Cuenco resigned as Vice President and filed her certificate of candidacy as member of the Board. Claiming authority under the questioned resolution, respondent Mondejar appointed the other officers, namely respondents Romulo Manzanas as Vice President; Tess Chavez as Secretary; Perlina Umiten as Treasurer; and Rosalina Tatel as Auditor. On February 9, 1997, the PAGRAI COMELEC, as constituted, conducted the election of the members of the Board of Directors by units. The election was completed at the end of the day and complainants emerged in their respective units as having garnered the highest number of votes. They, together with the other five(5) respondents who also won in their respective units, were proclaimed by the COMELEC and took oath before the Antipolo Vice Mayor on the same day. The newly elected Board first met and formally convened on February 22, 1997 where it elected its Chairman and Vice Chairman and constituted its working committees. On February 12, 1997 respondents Flora Catabona, Benilda Mariano, Benedicto Bermejo, Juan Veneracion, Gilda Dante, Milagros Fregillana, Myrna Rivera, Juana Marcaida, Tess Chavez, Juan Noynoy and certain Carlito Verzosa filed a joint protest with the COMELEC where they made general accusation of irregularities committed allegedly by the complainants during the election. Complainants were given three days to answer the protest, although they failed to file their answer within the period given. On March 30, 1997 and on the basis-of its mere belief that complainants were not suited to be members of the Board of Directors because they did not answer the protest within the period given to them, the COMELEC and certain Elpidio Mariano who designated himself as legal consultant, proclaimed respondents-protestors, who are at present exercising the powers, as members of the Board in lieu of the complainants. Records show that effort had been exerted by the complainants to have the writ implemented, particularly the order for the calling of a special election of the officers, but to no avail. During the preliminary conference held in this case, complainants and respondents (except Flora Catabona and Romulo Manzanas) to have the association's office temporarily closed in the meantime to submit, in lieu of a hearing on the merit, their respective position papers as basis for the Commission in rendering its decision;. In their position paper, complainants further alleged and substantiated by way of their joint affidavit that they were ousted as members of the Board by the respondents who thereby used intimidation and force; that said intimidation and force continued even when complainants had already resumed their positions as members of the Board by virtue of the injunctive writ issued by this Commission as evinced by respondents' manifest disobedience to its orders; and as consequence of respondents' conspiracy to oust them as members of the Board they suffered mental anguish, embarrassment, social humiliation and wounded feelings which are grounds for awarding moral damages. In support of the relief for accounting complainants also attached the affidavit of the former association's treasurer (Crispin A. Rubrico) who claimed to have been removed by respondents and discovered that respondents are collecting membership fees of P500.00 and monthly dues of P35.00 from members who were issued by respondents with unauthorized receipts. In their position paper, respondents (except Flora Catabona and Romulo Manzanas) basically reiterated the allegations in their answer. They added the argument, nonetheless, that to award complainants with moral damages would mean to sanction their avarice for power and money as shown by their earnest efforts to wrest control of PAGRAI in the meantime that they created their own homeowners association. Respondents further argued that they should be compensated with damages and attorney's fees on account of the injustices and abuse of right employed by the complainants against them. Respondents Flora Catabona and Romulo Manzanas, who submitted a separate position paper, continue to question the jurisdiction of the Commission over the subject matter on the sole ground and upon such argument that it is the association's COMELEC which has the jurisdiction over it. The issues to be resolved are: 1. Whether or not the Commission has jurisdiction over the subject matter of the case; 2. Whether or not PAGRAI Resolution No. 20-96 is contrary to the By-laws of the association insofar as it relates to the portions giving the then President and Vice President a two-year extension of their terms and the said president Marica Mondejar the authority to appoint the other corporate officers; 3. Whether or not complainants were illegally ousted as members of the Board of Directors by the PAGRAI COMELEC and respondents; 4. Whether or not complainants are entitled to an accounting; and 5. Whether or not both parties are liable for moral damages and attorney's fees with respect to each other. The Commission finds the foregoing issues as follows: Relative to the above issue on this Commission's jurisdiction, which two of the respondents, namely Flora Catabona and Romulo Manzanas raised by arguing that it was the PAGRAI COMELEC that had the final say on who between the complainants and the respondents be considered as validly elected members of the Board of PAGRAI, the same is in the affirmative. Doubtlessly, the instant case is within the jurisdiction of the Commission. PD 902-A, as amended, provides: "SECTION 5. In addition to regulatory and adjudicative function of the Securities and Exchange Commission over corporations, partnerships, and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving: a. ... b. Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members and associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; c. Controversies in the election or appointments of directors, trustees, officers, or managers, of such corporations, partnerships or associations; d. ... "SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers: a. To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction and in which cases the pertinent provisions of the Rules of Court shall apply." b. ... c. ... d. ... e. ... f. To compel the officers of any corporation or association registered by it to call meeting of stockholders or members thereof under its supervision." The action to partially annul Resolution No. 20-96, which was adopted by the Board Officers, and members at a meeting held, for allegedly being contrary to the By-laws is a case involving intra-corporate controversy. Similarly, a cause to disregard the appointments of corporate officers under said resolution and to accordingly call a meeting for the election of said officers and/or to determine who between the parties is considered as the duly elected members of the Board is of the same nature which on the basis of the above cited provisions, is within this Commission's jurisdiction. Hence, said respondents' claim that it was their Association's COMELEC which had jurisdiction is bereft of merit. In fact, their association's By-laws does not provide any basis for such a claim. Even then, decisions of association's COMELEC are election cases or intra-corporate controversies which are within this Commission's jurisdiction. The second issue is similarly in the affirmative. As such, Resolution No. 20-96, insofar as the portions which extended the terms of their President and Vice-President for another two years without being elected by the members and which gave said President the blanket authority to appoint the other corporate officers are concerned, is contrary to the corporate By-laws which specifically provides: "ARTICLE VII Election of Officers SECTION 1. A general election shall be held on the 3rd Sunday of January of every one (1) year. If for any reason the association fails to conduct election of officers on the aforecited date, the President shall call for a special election upon approval of the Board of Directors. SECTION 2. The time, place, and manner of election shall be prescribed by the Board of Directors. SECTION 3. The President, Vice President, Secretary, Treasurer, Auditor, Sergeant-at-Arms, and members of the Board of Directors shall be elected by the members. SECTION 4. ..." "ARTICLE VIII Meetings SECTION 1. ... SECTION 2. A general meeting shall be called by the President and held on the third Sunday of January of every one (1) year for the purpose of electing the officers of the association. SECTION 3. ..." Otherwise stated, the association's officers from the President down to the Sergeant-at-Arms, as well as, the members of the Board of Directors of PAGRAI have a term of one (1) year beginning from the date of election on the 3rd Sunday of January and ends on the same date of the following year. Moreover, they are to be directly elected by the members of the association at large. Clearly thus, to extend the term of any of the said officers beyond one year without the benefit of being elected by the members and/or to give the President the sole discretion to appoint other officers who shall act as such for another two years, are not only violative of the foregoing By-laws provisions but also a virtual surrender of the association's management and control to the hands of a single or very few members, thus depriving the whole membership of their inherent corporate right to participate in the management of the association, such as the right to vote and be voted or to choose the leaders/officer who they believe shall work for the best interest of the association. The portion of the questioned resolution which simply allowed and scheduled the election of the members of the Board and upon which complainants relied for their claim as duly elected members thereof, however, cannot be avoided because such is a mere reiteration, hence compliance, of the By-laws requiring the election of the members of the Board by the members on the 3rd Sunday of January of every one year. As regards the third issue above, the same is also in the affirmative. Complainants were illegally ousted. Evidence would show that in the election held on February 9, 1997 which was held in accordance and in compliance of the By-laws and whose validity was not even challenged, complainants won by garnering the highest number of votes in their respective units. They thereby took their oath of office and assumed their functions thereof. They, together with the other respondents, convened the Board by electing complainant Asencio as Chairman and respondent Paz David as Vice Chairman of the Board and/or by forming different working committees thereof. Even respondents themselves had already recognized the authority of the complainants as duly elected members of the Board by participating in its first meeting on February 22, 1997 where no less than respondent Mondejar even acted as temporary chairman. In short they appeared to have been duly elected. The mere belief therefore that complainants were not suited to be Board members because they failed to answer an unsubstantiated general protest lodged by respondents was not sufficient to justify the COMELEC and certain Elpidio Mariano, who claimed to be the legal consultant, in proclaiming and substituting respondents Flora Catabona, Benilda Mariano, Benedicto Bermejo, Juan Veneracion, Gilda Dante, Milagros Fregillana, Myrna Rivera, Juana Marcaida and Juan Noynoy as members of the Board in lieu of the complainants. In effect, said COMELEC with grave abuse of its authority, erroneously or without any factual basis and findings yet of its own and in support of the protest, as there was in fact no investigation made by it as to the truth thereof, ousted the complainants. Said COMELEC, even if complainants were defaulted, should have dug further into the veracity of the protest in order to warrant complainants' ouster from the Board. It did fail nonetheless. Accordingly, the foregoing COMELEC'S only justification in substituting respondents in lieu of the complainants as members of the Board were the fact that the latter failed to answer a protest and its opinion that thereby the complainants were not suited as such. There was no findings on the truth of the protest. Be that as it may, the above findings do not warrant the complainants as well as all the respondents, be they officers or members of the Board, a prolonged stay in their respective positions in the association, for that would result to, as they are now in fact for more than two years, holding over in position which cannot be tolerated both under the law and the By-laws of the association. Noteworthy is the fact that the corporate officers and members of the Board of Directors of PAGRAI have a term of only one year and they are directly elected by the members at the same time on every third Sunday of January. This is true even if there is a pending case involving previous elections, otherwise the same can be exploited by incumbents in prolonging their stay. Considering that third Sunday of January has just recently elapsed for the third time since the inception of this case without proof that an election was ever held in accordance with the By-laws or as so ordered by this Commission in its order of June 26, 1998 that granted an injunctive writ, it becomes imperative for this Commission to order the calling of a meeting for the election of PAGRAI's Officers and its members of the Board under its supervision (P.D. 902-A, Sec. 6 (f)). Finally, the last two issues above are in the negative. Complainants had not established sufficient basis and cause for this Commission in ordering respondents to render an accounting of the funds of the Association nor did their evidence sufficiently warrant the granting of the same. While for this cause complainants relied on the following provision of Sec. 75 of the Corporation Code, to wit: "SECTION 75. Right to financial statements Within ten (10) days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement,.which shall include a balance sheet as of the-end of the last taxable year and a profit and loss statement for said taxable year showing in reasonable detail its assets and liabilities and the result of its operation. At the regular meeting of stockholders or members, the board of directors or trustees shall present to such stockholders or members a financial report of the operation of the corporation for the preceding year which shall include financial statements duly signed and certified by an independent certified public accountant. xxx xxx xxx" they nevertheless, did not make any written demand to respondents for such accounting of the funds before going to this Commission nor did they allege the same in their complaint. Besides, the facts that respondents had removed the former Treasurer and accordingly effected a change of signatories in the bank accounts of the association and/or they have continuously collected association dues from members did not alone sufficiently constitute mismanagement of funds that would warrant a special accounting of said funds by the respondents. Similarly, both parties had not adduced evidence to fully substantiate their respective claim for damages against each other. C WHEREFORE, judgment is hereby rendered: 1. Making permanent and/or affirming the writ of preliminary prohibitory mandatory injunction of July 8, 1998 which was issued per Order of June 26, 1998; 2. Declaring as null and void the portions of Resolution No. 20-96 that which postponed the election of the President and Vice President of PAGRAI and that which authorized respondent Marica Mondejar to appoint the corporate officers under her; 3. Declaring the ouster of the complainants as members of the Board of Directors by the PAGRAI COMELEC as illegal; 4. Ordering respondent Marica Mondejar, as President, to call within fifteen (15) days from the finality hereof a special election of-all the corporate officers and members of the board of directors with the approval of the Board consisting of the complainants and the respondents who garnered the highest number of votes and won in the February 9, 1997 election, who shall determine the time, place and manner of election in accordance with the By-laws and under the supervision of the Commission and; 5. Lifting its order of September 28, 1999 which, on the basis of the parties' agreement, effected temporary closure of the PAGRAI's Office and in effect ordering the parties to open the same beginning at and for the purpose of the meeting/election stated in No. 4 hereof. No pronouncement as to costs of litigation. SO ORDERED. (SGD.) JUANITO B. ALMOSA JR. (SGD.) PAULINO Q. GALLEGOS Hearing Officer Hearing Officer