Teresa De La Cruz Teng Soat vs. ACME Abrasive Manufacturing Corporation, et al.

[SEC-SICD * CASE NO. 09-94-4885. June 15, 1999.] TERESA DE LA CRUZ TENG SOAT , complainant , vs . ACME ABRASIVE MANUFACTURING CORPORATION, ET AL. , respondents . D E C I S I O N This is a petition for accounting filed by complainant whereby she requires the corporate respondents to render an accounting of the shares of stock, properties, interests, income, and cash or stock dividends held by them and which may be due and owing to her deceased husband Vicente Sy or Khaw Tee. She also prays for such other relief that may be just and equitable under the premises. DITEAc She alleges that she is the surviving spouse and heir of Vicente Sy (Khaw Tee) who died intestate; that her husband was an incorporator/stockholder of Acme Abrasive Manufacturing Corp. (Acme for brevity) and Madison Realty Corp. (Madison for brevity); that her husband did not transfer his shares of stock, interest, or properties in said respondents companies, hence, they held the same in trust for the heirs of Vicente Sy; and that despite demands, respondents refused to account for her husband's properties, shares or interest in them. In their affirmative defense, respondents Acme and Chua Hao Chit contend that the complaint states no cause of action; that the Commission has no jurisdiction over the nature of the action; and that Vicente Sy had already transferred all his shares in Acme. On account of the filing of this case, they also claim for moral and exemplary damages and/or attorney's fees against the complainant. Similarly, respondents Madison and Ong Eh contend that Madison had ceased operation for not less than 20 years ago thereby causing the retrieval of its records quite hard; that complainant is estopped by laches or prescription; and that she has no personality to sue in behalf of the deceased Vicente Sy because she is not the administrator of his estate. The facts as deduced from evidence are: Complainant is the surviving spouse of the deceased Vicente Sy or Khaw Tee (Exh. "D") who died on October 9, 1980 (Exh. "E"). Respondent Acme is a corporation duly registered with the Commission sometime in 1963 add is engaged in the manufacture of sand paper and allied paper products. (Exhs. ''A", to "A-10") It has its office at No. 289 Reparo St., Sta. Quiteria, Caloocan City. Respondent Madison, likewise, is a corporation duly registered with the Commission sometime in 1965 with realty as its primary business. (Exhs. "C" to "C-6") During the existence of their marriage, complainant's husband Vicente Sy or Khaw Tee was an organizing incorporator of and stockholder in both respondent corporations. In Acme, he subscribed to 750 shares worth P75,000.00 (Exhs. "A-2" and "A-2-A"), while in Madison he subscribed to 1,000 shares worth P100,000.00 (Exhs. "C-3-A") On January 31, 1963 Acme issued to Vicente Sy or Khaw Tee two Stock Certificates on his 750-shares subscription which were designated as Nos. 1 and 2 for 675 shares and 75 shares respectively. (Exhs. "I", "J", "K", "1" and "4") In accord with their defense, respondents presented evidence showing that Stock Certificate No. 1, nonetheless, was endorsed by Vicente Sy on September 18, 1964 to Rosita Ong (Exhs. "1-C" to "1-F") who was his common-law wife (TSN, March 5, 1966, page 12); Acme subsequently registered the endorsement by cancelling Stock Certificate No. 1 and accordingly issued to Rosita Ong Stock Certificate No. 19 for the 675 shares on October 24, 1964. (Exhs. "2" to "2-C"); and sometime in 1966 Rosita Ong transferred 50 shares of her share-holding to Chua Yu Po (Exhs "2-E" and "2-F") while on May 21, 1968, she again transferred the remaining 625 shares to Acme as treasury shares (Exhs. "3", "3-E", ""3-F", "6", "6-A", and "6-B") Respondents' evidence also showed that on October 6, 1964, Stock Certificate No. 2 was likewise endorsed by Vicente Sy to Sy Ni (Exhs. "4-E" to "4-G") or his sister (TSN, March 5, 1996, p. 13) to whom a new Stock Certificate No. 20 was accordingly issued on October 24, 1964 (Exhs. "5" to "5-C") and by whom said certificate was endorsed to Acme (Exhs. "5-E" to "5-G") on May 23, 1968. In relation to Madison Realty Corp., complainant Teng Soat testified that Madison is renting out Asuncion Building which she claimed to be owned by Madison; that her husband Vicente Sy was the President of Madison from the time of its organization until his death in 1980; that complainant occasionally help her husband in managing Madison at the time he was the President; that certain Rosario Sy Ng Kay took over as President of Madison after the death of her husband while respondent Ong Eh was the Treasurer; and that until now her husband's estate has not yet been settled among the heirs. (TSN, Feb. 20, 1966, pp. 11 to 25) Respondents' witness (Mr. Manuel A. Camara) testified that he used to be the Corporate Secretary of Madison and keeper of its books of accounts until he became an assemblyman sometime in 1978. He also testified that the only actual business of Madison was its being a mere sub-lessor of one building in Recto Avenue which it leased from other people. Said witness also assumed that Madison had ceased operation because there was no more contact between him and the owners or officers of Madison for the last twenty (20) years (TSN, of Oct. 23, 1996, Dec. 10, 1996, and January 14, 1997) at the time of his death in 1980, Vicente Sy was then the President of Madison (Exh. "I") For the first time on May 7, 1994, complainant made her written request unto respondents for them to render an accounting of the shares of stocks, properties, monies, or interests accruing or belonging to the deceased Vicente Sy. (Exhs. "F", "G" and "H") A verification of the corporate records on file with the Commission, and for which this Hearing Office has to take judicial notice, however shows that respondent Acme Abrasive Manufacturing Corporation has been dissolved on December 5, 1996. The issues to be resolved are: 1. Whether or not Vicente Sy or Khaw Tee or his estate remains to be a stockholder of Acme Abrasive Manufacturing Corporation; and 2. Whether or not the corporate respondents can be ordered to account the shares of stocks, properties or of any interest of the deceased Vicente Sy or Khaw Tee in them. Both issues are answered in the positive. HICSTa While and even if there is no indicia of irregularities on the face of the documents which effected the transfers of Vicente Sy's 750 shares in Acme to certain Rosita Ong and Sy Ni who in turn transferred the same to Acme as treasury shares, said transfers were, however, null and void ab-initio for being contrary to law; (Article 166 of the New Civil Code which is now Article 124 of the Family Code of Philippines) Under the law, the conforme of the complainant, being the legal wife of Vicente Sy, to the transfers made by the latter of his shares of stock in Acme, which appear to be ganancial in character for being acquired during the existence of their marriage, is mandatory, hence, the absence of the complainant's consent makes the dispositions void ab-initio. (Nicolas vs. Court of Appeals, G.R. No. 122857, March 27, 1998) As such, the transfers did not produce any legal effect nor created the corresponding rights and obligations of and between the transferor Vicente Sy and the transferee or successors in interest like Rosita Ong, Sy Ni or respondent Acme even if the said transfers were already recorded in the books of Acme. Although respondents had presented documents showing the transfers of Vicente Sy's 750 shares in Acme, they nonetheless had no evidence to show that complainant gave her consent to the transfers made by her husband or that she was declared a non-compos mentis, spendthrift, or was under civil interdiction or confined in a leprosarium and to rebut the legal presumption to the effect that subject shares were conjugal in nature. (Art. 160 of the New Civil Code) On account of such a nullity and except for the physical recording of the transfers in its books, Vicente Sy did not cease to be a stockholder of Acme. Accordingly, his estate or by anyone of his heirs, particularly herein complainant (his wife) who, thereby owns one-half of Vicente Sy's shares in Acme and Madisons (for being conjugal), has the lawful and real right and interest for the issuance of an order requiring Acme to record back in its books Vicente Sy's 750 shares under his name. In fact, relative to matters on property relations between husband and wife and the administration of the conjugal partnership, the wife, whose consent was not secured, is the real party in interest to question every transaction made by the husband as provided in Article 173 of the New Civil Code of the Philippines. Respondents' defense to the effect that complainant herself has no interest in both the corporate respondents has no leg to stand on because in the meantime that there is no pending special proceeding for the settlement of Vicente Sy's estate and considering that Acme has been dissolved, hence under liquidation, his legal heirs are, by jurisprudence, the parties in interest to commence ordinary actions arising out of the rights belonging to the deceased Vicente Sy even in the absence of a separate judicial declaration as to their being heirs of said decedent and/or to ask for the liquidation of respondent Acme and for the same to account the shares or properties belonging to the estate of Vicente Sy. (Magdalena vs. Benedicto, G.R. No. L-9105, Feb. 28, 1958; Velarde vs. Paez, G.R. No. L-9208, April 30, 1957; Lydia Villegas et al. vs. CA, G.R. No. 82562, April 11, 1997; and Clemente et al. vs. C.A., G.R. No. 82407, March 27, 1995) Moreover, upon Vicente Sy's death in 1980, his heirs (one of whom is herein complainant) became the co-owners of his property rights and obligations which were not extinguished thereby through the process of succession (Arts. 774, 776, 781, 782 and 1078 of the New Civil Code of the Philippines), hence complainant is a real party in interest to file this action for the recovery of the alleged 750 shares in Acme and for the accounting of Vicente Sy's property interests in and/or for the exercise of certain rights belonging to him or to his estate as stockholder of Acme and Madison. Being evident from the foregoing that Vicente Sy or his estate is a stockholder in both respondents Acme and Madison, there can be no reason for the respondents to deny him or his estate, and heirs from exercising the corporate right to be informed of the most recent financial and operational status of these corporate respondents and of Vicente Sy's property rights and interest in them during and for the period following his death in 1980. Sec. 75 of the Corporation Code of the Philippines vests every stockholder who demands in writing a right to be furnished, by the corporation or by its responsible officers or board, of its most recent audited financial statement which includes a' balance sheet, profit or loss statement and reasonable details of its assets and liabilities. Likewise every corporation registered with the Commission is indeed obliged by Sec. 141 of the same law to submit with the Commission annual reports of its operation which includes an audited financial statement of its assets and liabilities. WHEREFORE, judgment is hereby rendered: 1. declaring the subject transfers of the deceased Vicente Sy or Khaw Tee's 750 shares of stock in Acme Abrasive Manufacturing Corp. null and void ab-initio; 2. ordering the liquidation of respondent Acme Abrasive Manufacturing Corp. and requiring it and/or its duly designated officers or agents to account Vicente Sy or Khaw Tee's 750 shares and other interests therein by cancelling in its books the declared void transfers and recording back the said 750 shares in Vicente Sy's name and/or issuing the corresponding certificates of stock to his name; and 3. requiring both respondents Acme Abrasive Manufacturing Corp. and Madison Realty Corp. or their respective duly designated officers to account their financial and operational status by preparing and/or furnishing complainant with copies of their respective, though most recent, audited financial statements which include inter alia, detailed statements of their assets or properties and liabilities. CSIDEc SO ORDERED. (SGD.) PAULINO Q. GALLEGOS Hearing Officer