Almosera v. Lumanang

[SEC-SICD * CASE NO. 08-94-4855. December 9, 1996.] RENATO ALMOSERA, for and in behalf of PACTODA, INC. , petitioners , vs . SGT. NORBERTO LUMANANG, in his capacity as President of PACTODA, INC., etc. , respondents . D E C I S I O N Before the Commission is a verified Amended Petition which prayed for (a) the rendering of an accounting of the funds of the PACTODA Inc. by the respondents; (b) submission of financial statements covering respondents' terms of office; (c) designation of an auditor to audit the funds of the PACTODA, Inc.; suspension of the respondents and the designation of an independent administrator; and the supervision of the incoming election of officers. LLpr The facts of the case which may be considered as concurred in by both parties in the pleadings and evidence presented by them are the following: Both petitioners and respondents are members of PACTODA INC. Respondent Roberto Lumanang had been the President of the association since 1987, while respondent Crisanto Carino was elected as Treasurer only in 1992. Both respondents were dislodged from their respective position at the election which was held and supervised by the Commission on October 8, 1994 or only after the filing of this petition. Petitioners failed to prove their allegations that there were 700 members of PACTODA INC. at the time that respondents were the officers. It was, however, established that the membership thereof was lower than 700, although it had increased gradually from year to year starting in 1986, thus 700 members cannot be used as the base in computing the annual membership fees and daily dues. LibLex Both parties also concurred that funds of the association are sourced from membership fees and daily dues; that membership fees for member operators gradually increased from P300.00 in 1986, P1,500 00 in 1987 and P3,000.00 in 1990 and up to the present; that membership fees for member drivers are limited to P100.00; that membership fees are paid only once (TSN of November 28, 1994); that daily dues had similarly gradually increased from P1.25 in 1986 and 1987, P1.50 in 1988 to 1991, and P3.50 in 1992 up to the present; that only those members who hired their tricycles and joined the "pila" paid daily dues (TSN of Dec. 5, 1994); and that daily dues are collected by field collectors who shared a part thereof by way of commission. It was shown further that petitioners had requested copies of the annual audited financial statements of the association from the respondents (Exh. "A") who however, failed to furnish them with the same; and that petitioners had only obtain copies of the yearly cash flows which were submitted by the respondents with the Commission. In other words, respondents had not shown that they prepared audited financial statements. In the preparation of their consolidated cash flows (Exh. "H" and "J") which indicated that there was Net Cash Inflow of P198,234.59 for the period 1987 to July 31, 1994, petitioners had simply remade those figures that appeared in the cash flows obtained by them from the Securities and Exchange Commission. They did not prepare said consolidated cash flows on the basis that there were 700 members who were paying P3,000.00 membership fees and P3.50 daily dues each. Said consolidated cash flows, however, did not reflect the cash flows of the association for the periods October 1 to December 31, 1988, October 1 to December 31, 1992, and August 1 to October 8, 1994 (Exh. "J"). During these periods, the respondents had shown that the association had incurred net cash outflows (loss) of P18,981.05, P7,097.79 and P110,625.50 respectively, or a total of P136,604.34, as shown in Exh. "1" of the respondents. This indicated that the total net cash inflows as of October 8, 1994 was as much as the actual amount of cash deposited in the bank. The only issues which were left to be resolved after the election of October 8, 1994 and the filing of the Amended Petition are: a) Whether or not respondents can be required to render an accounting of the funds of the association and to submit therefor a financial statement for the period covering their terms of office; and b) Whether or not an independent auditor shall be designated to audit the funds of the association. Petitioners' evidence to the effect that respondents herein did not render an accounting to the general membership of PACTODA INC., or furnish said petitioners with copies of the yearly audited financial statements after a written demand thereof, or file audited financial statements with this Commission, except cash flows, since 1986 up to October 8, 1994 or during the period when they were the officers who are supposedly to be responsible therefor, is sufficient for this Hearing Officer to resolve the aforesaid issues in the affirmative. The fact, that respondents had filed PACTODA INC.'s cash flows during their terms in office and/or had shown in their consolidated cash flows that the net cash inflow of PACTODA Inc. for the period 1986 to October 8, 1994 had almost coincided with its funds in the bank do not exempt the respondents from their legal obligation of render an accounting to the general members in accordance with the generally accepted principles of accounting and/or to furnish petitioners with audited financial statements upon written demand, wherein said statements, a balance sheet, profit or loss statement, details of PACTODA Inc.'s assets and liabilities or the result of its operation are included and reasonably shown. The individual petitioners as members of PACTODA Inc. have a right to demand an accounting from the respondents who were then officers of the association, and said respondents, by reason of their being officers of the corporation, have also the corresponding legal obligation to render an accounting to the general membership during the period that they were officers of PACTODA Inc. These right and obligation of the parties are quite explicit and provided for in Sections 75 and 141 of the Corporation Code, which state: "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, profit or 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 operations of the corporation for the preceding year, which shall include financial statements, duly signed and certified by an independent certified public accountant. However, if the paid-up capital of the corporation is less than P50,000.00 the financial statements may be certified under oath by the treasurer or any responsible officer of the corporation." cdll "SECTION 141. Annual report of corporations . Every corporation, domestic or foreign, lawfully doing business in the Philippines shall submit to the Securities and Exchange Commission an annual report of its operations, together with a financial statement of its assets and liabilities, certified by any independent certified public accountant in appropriate cases, covering the preceding fiscal year and such other requirements as the Securities and Exchange Commission may require. Such report shall be submitted within such period as may be prescribed by the Securities and Exchange Commission." Wherefore, premises considered, judgment is hereby rendered, as follows: 1. Directing the herein respondents to render an accounting of the financial conditions of PACTODA Inc. for and covering the period 1987 to October 8, 1994 and to furnish petitioners with the supposed financial statements during the said period immediately upon receipt hereof; and 2. Thereafter and if said accounting rendered by respondents does not appear satisfactory, ordering the audit of the funds of PACTODA Inc. during the period stated in No. 1 above by the external auditor of the association, if any, or if there is none, by an independent auditor designated by the Commission from a list of four (4) certified public accountants who or accounting offices that shall be proposed by both parties. SO ORDERED. (SGD.) PAULINO Q. GALLEGOS Hearing Officer