Reforma v. Piano

[SEC-SICD * CASE NO. 112-93-4640. April 4, 1995.] MARILOU REFORMA, FILPRIDE INDUSTRIAL CORPORATION , petitioners , vs .AMANTE F. PIANO, ANGELO D. TONG, AIDA GERODIA , respondents . D E C I S I O N This is a petition alleging, among others that petitioner Marilou Reforma ("Reforma") is a stockholder of the petitioner corporation, Filpride Industrial Corporation ("Filpride") who owns twenty five (25%) percent of its shares of stocks: that Reforma acquired her shares through a Deed of Assignment dated February 15, 1993 from Antonio T. Mendez and Maurito D. Mendez (Annex "A" of the petition);that since becoming a stockholder, she has never been notified of any of the Board of Directors meetings nor was she ever furnished with any report of management activities; that respondents refused Reforma's access to the records of the corporation; that respondents have shown disloyalty to the corporation by deducting sixty (60%) percent of the gross income from its Taiwan recruitment operation and have used corporate checks for personal purposes; that respondents overcharged recruitment fees from overseas employment applicants which placed the corporation's license to recruit in jeopardy of being revoked; that Reforma demanded to examine and inspect corporate records which respondents illegally refused; and that the consent of the corporation to bring this suit was not secured because the respondents constitute a majority of the members of the Board of Directors. Petitioners were flatly denied access to the records of the corporation despite demand. Hence, this petition with prayer that: 1. respondents be ordered to immediately allow Reforma to examine corporate records of Filpride; 2. that appropriate department conduct investigation for purposes of prosecuting responsible persons for violation of Art. 315 of the Revised Penal Code and p; 3. that respondents be ordered to file the General Information Sheets and audited Financial Statements. In their answer with compulsory counterclaim respondents made admissions of certain allegations in the petition as well specific and general denials of material averments and by of affirmative and special defenses state that the petition filed has no factual or legal basis; that the petitioners had no cause of action against respondents; that the filing of the instant case is premature for failure to exhaust intracorporate remedies; that Reforma has not come to this Commission with clean hands since the filing of the instant petition was made primarily and solely because of the refusal of the respondents to buy out her equity in the corporation. Hearing were held where both parties presented their evidence. As could be gathered from the evidence adduced, it would appear that on September 15, 1993, counsel Jose C. Castro wrote Engr. Amante F. Piano, Mr. Angelo Tong, and Ms. Aida Gerodia, a letter (Exhs. "B" and "B-1") advising them that Reforma would like to exercise her right under the law to examine any and all business records/transactions and legal documents of the corporation. The date to visit the corporation and to examine and copy corporate records was set on September 27, 1993 at 9:00 a.m. Among the other matters to be taken up include the possible buy-out settlement of Reforma's shares. On September 21, 1993, Reforma wrote a letter to Filpride (Exh. "D") informing the latter that she is authorized Atty. Jose L. Sineneng, Jr. to examine and copy the legal and corporate records mentioned in the September 15, 1993 letter of counsel Castro and Waga law office. On September 29, 1993, Atty. Jose L Sineneng wrote a letter to Engr. Amante F. Piano (Exh. "1") advising the latter that the inspection of the corporate records will proceed on October 4, 1993 if there are no concrete results on the proposed buy-out of Reforma's equity in the corporation. On the other hand, it is the submission of respondents that Reforma is merely using her right to inspect corporate records to coerce respondents to buy her equity in the corporation. On October 11, 1993, Edgar S. Asuncion wrote a letter to Atty. Jose L. Sineneng, Jr. (Exh. "3") flatly denying Reforma's right to inspect the corporate records of Flipride contending that Reforma is "using the stockholder's right of inspection of the corporation's books and records to pressure or coerce the corporation to accede to your demand that it buys back Ms. Marilou Reforma's equity. This is plain and simple extortion to say least." The letter also states that the purpose of the exercise of Reforma's right of inspection is improper and unlawful in character. It states further that the right to examine books of the corporation must be exercised in good faith, for specific and honest purpose and not to gratify curiosity or for speculative or vexatious purposes, much less for extortion purposes. prcd To show that Reforma was notified of the November 9, 1993 and December 29, 1993 stockholders' meetings, respondents presented exh."4" and "5",respectively, receipt of which were denied by Reforma. After a careful evaluation of the evidence adduced, both documentary and testimonial, as well as the applicable provisions of the Corporation and existing jurisprudence on the matter, this Hearing Officer is most inclined to support the arguments of the petitioners. Exhaustion of intra-corporate remedies would be futile as the respondents control the organization. As a stockholder of the corporation, Reforma has the right to inspect its corporate records pursuant to and subject to the limitations of the provisions of Section 74 of the Corporation Code. Reforma's desire to exercise her right is to protect her interest as a major stockholder of the corporation. It is difficult to understand that she is motivated by a filthy desire to commit extortion against the corporation as what counsel for the respondents wanted to impress this Commission with the statement in the letter of counsel for the respondent addressed to Atty. Jose L. Sineneng, Jr. (Exh. "3"). It is clearly shown by the testimony of Elena Chua that the respondents had illegally withdrawn a substantial amount from the corporation on at least five (5) different occasions, a valid reason for Reforma to exercise the right of inspection. With reference to their refusal to allow Reforma access to the corporate records, respondents, citing (Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. 3 1980. Ed. p. 554),said that inspection of corporate records may be refused on the following grounds: 1. The person demanding to examine and copy excerpts from the corporation's records and minutes has improperly used any of the records or minutes of such corporation or any other corporation; 2. Such person was acting in bad faith; 3. Such person was not acting for a legitimate purpose. All these, however, are out of context and completely inapplicable to the instant case. Besides, no evidence were ever adduced by the respondents to substantiate these. Firstly, Reforma has not as yet been given access to the corporate records. Hence, she cannot be considered to have improperly used any information obtained from the corporation. Secondly, Reforma cannot be considered in bad faith for what she wanted to exercise is a right guaranteed by the Corporation Code to see the questionable acts being committed by the respondents for the protection of her interest in the corporation. The alleged buy-out of Reforma's equity is just one of the matters to be discussed with the respondents as clearly stated in the letter of counsel Jose Castro to Engr. Amante Plano dated September 15, 1993 which reads: "...Considering the questionable actions which may result in serious violation of the tax, corporate, penal and civil laws, we advise that you allow the aforementioned requests (for inspection).Further, we ask that you explain why sixty (60%) percent of Flipride's earnings are being taken by you from it. Finally, we advise that you forthwith communicate with us for the scheduled meeting, together with our client, to thresh out the issues at hand, including the possible buy-out/settlement of the interest of Ms. Reforma." Notwithstanding the letter of Atty. Jose L. Sineneng, Jr. to Engr. Amante Plano, (Exh."1"),the fact remains that Reforma's intention is to discuss the possibility of a buy-out, a scheme which has to be deliberate upon and the price to be agreed upon by the parties. Neither was any evidence to show that the scheme has been forced upon by the respondents. cdll Furthermore, contrary to the allegations of the respondents contained in the letter of counsel Edgar S. Asuncion to Atty. Jose L. Sineneng, Jr. the proposed examination of the corporate records is for a legitimate and valid purpose, that is to see if the respondents are indeed committing acts of illegal withdrawals of corporate funds. It cannot also be said that it is merely to gratify curiously or for speculative purpose because what is involved is a substantial amount of about millions pesos which as testified to by Elena Chua had been withdrawn by the defendants on at least five (5) occasions. The proposed inspection has a definite purpose and object and not merely for curiosity sake or speculative purpose. In the light of the foregoing consideration and finding, this Hearing Officer is inclined to sustain the position of the petitioner and finds the demand for examination and inspection of the corporate records in order. WHEREFORE, judgment is hereby rendered as follows: 1. commanding respondents to open the corporate records of Flipride Industrial Corporation for inspection by petitioner Reforma or anyone of her duly authorized representatives pursuant to the provisions of Section 74 the Corporation Code, and 2. ordering respondents to pay petitioner Reforma reasonable amount of P50,000.00 as attorney's fees. prcd SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer