Cruz Yuipco, Jr., et al. vs. Nicassi, et al.

[SEC-SICD * CASE NO. 1710. January 15, 1981.] CRUZ YUIPCO, JR.,ET AL. , petitioners , vs .NICASSI, ET AL. , respondents . D E C I S I O N Confronted by the alleged refusal of the Treasurer-in-Trust of respondent corporation to issue the official receipts covering alleged payments made on the subscription on the increase in capital stock to support the report being prepared by an independent auditor/accountant, such being a requirement in the registration of increase of capital stock of respondent corporation, petitioners filed the instant petition on March 12, 1979 to compel respondent Marcos D. Cortes in his capacity as Treasurer, to issue the corresponding receipts covering such payments pursuant to the Treasurer's Certificate he executed on October 3, 1977. LLjur In answer to the petition, respondents, while admitting certain averments therein, claim that the certification (Annex "A" petition) is erroneous because it included subscriptions on the unissued original authorized capital stock of P200,000.00 when the same should only apply to the proposed increase of P400,000.00; that contrary to what appears in said certification, no payment whatsoever was made by the stockholders of record on the increase until March 12, 13, 15 and 17, 1979; that in view of this, respondent Cortes could not legally and validly issue any receipt therefor; and by way of counterclaim, respondent Cortes avers that the petitioners, knowing fully well that they have not paid their subscriptions on the increase of capitalization, with malice and utmost bad faith, instituted the instant petition causing dishonor and injury upon his reputation; hence, petitioners are liable for moral damages in the amount of P900,000.00. At the preliminary conference set on June 25, 1979, the parties stipulated that on September 8, 1977, the stockholders of the respondent corporation representing more than two-thirds of the subscribed capital stock, in a meeting on said date, resolved to increase the authorized capital stock from P200,000.00 to P600,000.00 ( SEC Order dated July 27, 1979 ,p. 51.) The parties also agreed that the issues to be determined are: 1. Whether actual payments made by the stockholders, both petitioners and respondents, on the subscriptions on the proposed increase of capital stock were made in October, 1977 or on March 12, 13, 15 and 17, 1979; 2. Whether or not respondent Cortes refused to issue the corresponding official receipts attesting to his receipt of the amount allegedly paid in by the petitioners on their subscriptions, and 3. Whether or not the holding of the annual stockholders meeting for 1979 be deferred until the Amended Articles of Incorporation of respondent corporation has been approved by the Commission (Ibid) On December 4, 1980, the petitioners by motion sought the admission of a supplemental Petition and in the Order of the Commission on January 10, 1980 the same was admitted for the reason that a contrary conclusion would further delay the processing of the application for registration of the Amended Articles of Incorporation of the respondent NICASSI. Hence, in addition to those raised in the original petition is the issue of whether or not the Board of Directors has unjustifiably refused to sign or execute the Directors' Certificates relative to the Amendment of the Articles of Incorporation and the increase of capital stock from P200,000.00 to P600,000.00 and in the counterclaim whether or not respondent Cortes is entitled to damages as claimed. It appears that respondent corporation was organized sometime in September, 1974 and was registered with this Commission on December 11, 1974. On August 9, 1977 the stockholders met to take up the matter of increasing the authorized capital stock of respondent corporation pursuant to certain requirements prescribed by the Philippine Ports Authority (Exh. "A").At said meeting, it was unanimously agreed by the stockholders representing more than 2/3 of the subscribed capital stock that the corporation shall increase its capitalization by P400,000.00 (Ibid). On September 8, 1977, the stockholders who are also the directors of said corporation met in a "joint meeting" and adopted a resolution creating a committee of three (3),headed by Mr. Eduardo Barotac with Messrs. Bienvenido Zabala and Cruz Yuipco as members, to undertake, among others, the drafting of the Amended Articles of Incorporation (Exh. "C" "17"). Again, on September 12, 1977 the stockholders representing the total outstanding shares of 45,715 shares agreed to amend the Articles of Incorporation of NICASSI and adopted the following: "Wherefore, be it resolved, as it is hereby resolved that the capitalization of the Nickel City Arrastre and Stevedoring Services, Inc.,be increased from TWO HUNDRED THOUSAND PESOS (P200,000.00) to SIX HUNDRED THOUSAND PESOS (P600,000.00).Be it further resolved that the equity sharing of all the stockholders Paid-up capital stock, subscribed capital stock and pre-emptive rights are as follows: Reynaldo O. Yuipco 28% of the P600,000.00 Bienvenido B. Zabal 20% of the P600,000.00 Cruz A. Yuipco 20% of the P600,000.00 Emilio G. Borja 17% of the P600,000.00 Eduardo S. Barotac 6% of the P600,000.00 Marcos D. Cortes 5% of the P600,000.00 Max U. Seda 3% of the P600,000.00 Lamberto O. Danaque 1% of the P600,000.00 Be it resolved further, that all the stockholders affected by the equity sharing distribution shall waive all their pre-emptive rights and conform to the percentage as very clearly shown above. Forty-five Thousand Seven Hundred Fifteen shares of stock or the total subscribed Capital Stock were voted in favor of this resolution. ..." (Exh. "B"). Pursuant to Exh. "C",Mr. Eduardo Barotac, who heads the committee which was given "blanket authority" (TSN, July 31, 1979, p. 42; TSN October 24, 1979 p. 55) to prepare the Amended Articles of Incorporation of NICASSI and other supporting documents necessary for its registration, secured the services of Atty. Rodolfo Sunga. The latter in turn prepared the draft of the Amended Articles of Incorporation, Treasurer's Certificate (Exh. "G") and the Certification of the Board of Directors (Exh. "D") (TSN Feb. 6, 1980, p. 7).Incidentally, the incumbent officers are Emilio G. Borja, as President, Eduardo Barotac as Vice-President, Bienvenido Zabala as Secretary, Dr. Marcos Cortes as Treasurer, who are all members of the Board of Directors together with Cruz Yuipco, Jr.,Atty. Lamberto Danaque and Max U. Seda. The certification (Exh. "D") which was signed by all the directors was subscribed by respondents Emilio Borja and Bienvenido Zabala before Rodolfo Sunga on the 30th day of September, 1977, while the Treasurer's Certificate (Exh. "G") appears to have been subscribed by respondent Cortes before Special Counsel Patrocinio Filoteo on October 5, 1977. LibLex On January 24, 1978 petitioner Cruz Yuipco filed with the Commission the Amended Articles of Incorporation together with the Treasurer's Certification (Exh. "D").The proposed amended articles could not be acted upon because certain documents were still lacking, particularly the official receipts covering payments made on the increased capital stock to support the auditor's report and the Directors Certificate relative to Amendments of the Articles of Incorporation of NICASSI. This prompted the petitioners to file the instant case. Petitioners, particularly Barotac and Zabala, claim that they remitted their respective paid-up contribution in cash before the execution of Exhibit "G" while petitioner Cruz Yuipco, Jr. admitted that his payment for the paid-up capital was to be charged to the amount due to him for his forklift valued at TWENTY THOUSAND PESOS. He was issued an official receipt therefor only on March 12, 1979 (Exh. "1") (TSN July 31, 1979. pp. 65-72).The same is true with Reynaldo Yuipco who is representing the estate of Antolin Yuipco who was issued Official Receipt No. 15653 (Exh. "1-B").Respondents Cortes and Mr. Danaque issued their respective checks while respondent Borja merely endorsed back a NICASSI check issued him for services rendered to pay for his paid-up subscription and Mr. Seda paid in cash on March 13, 15 and 17, 1979 respectively. It is their (Petitioner's) contention that the amount of P14,800.00 corresponding to the paid-up subscription had been remitted to respondent Cortes, long before March 12, 1979 and was only deposited on said date (Memorandum for petitioners, p. 14). Let us examine closely the facts obtaining in the preparation and execution of the Exhibits in question particularly Exh. "G" considering the apparent conflict in the testimonies of the parties. Petitioners claim that the draft of the amended articles and Exh. "G" were prepared by Atty. Rodolfo Sunga; that Barotac, who heads the committee charged with the function of the preparation of all pertinent papers for the increase in capitalization of respondent corporation, allegedly brought Exh. "G" to respondent Cortes and left it with him for his signature and notarization sometime in October 3 or 4, 1977 and that the same was returned to him already notarized by special counsel Filoteo on October 5, 1977 (TSN July 30, 1979, p. 44). Contrary to the foregoing is the testimony of Special Counsel Filoteo, which we find more credible, that he (Filoteo) notarized the document (Exh. "G") which was brought to him by petitioner Barotac even in the absence of the affiant, respondent Cortes. The same credit is likewise given to the testimony of respondent Cortes that he affixed his signature on Exh. "G" in spite of the fact that none of the stockholders has remitted their paid-up capital on the increase. We, shall note, however, that the authenticity and due execution of Exh. "G" is not at issue, but the truthfulness or the falsity of the statements made therein. And, although the same is admissible without proof of authentication and due execution, it being a public document, it is not a perfect document with respect to the veracity of what if contains. Thus, when the validity of an agreement in a public document is at issue, parol evidence may be introduced to establish irregularity or fraud, mistake or imperfection, failure to express the true intent and agreement of the parties, invalidity of the agreement, or to explain an intrinsic ambiguity (Bough and Bough) vs. Cantiveros, G.R. No. 13300, September 29, 1919, 40 Phil. 209 cited in Jovito R. Salonga's Philippine Law on Evidence, pp. 724-725). It is thus clear that albeit Exh. "G" was executed under oath and has become a public document which must be sustained in full force and effect, we could not positively state that what it contains is true, for it has been established that Exh. "G" was signed by respondent Cortes even without the amounts stated therein having been remitted to him. Having been established that Exh. "G" has no basis in fact, at the time it was executed, we see no reason to discuss the circumstances attending the notarization of Exh. "D" any further. All these established the fact that none of the stockholders have paid their subscriptions to the increased capitalization when Exhibits "G" and "D" were executed. However, since there was really a need to increase the authorized capital stock of the corporation as mandated by a circular of the Philippine Ports Authority, the parties agreed to increase their capital from P200,000.00 to P600,000.00 or an increase of P400,000.00. And, considering that at that time it was barely one and one half months after their integration, and their relationship was very harmonious as they were having a "honeymoon",(TSN Nov. 15, 1979, p. 127) the documents needed were prepared by the Barotac Committee without much ado, including minutes of meeting containing resolution of the stockholders relative to the increase, and were signed by them in spite of knowledge of the existence of the flaws in the contents thereof. This amounts to consenting and acquiescing, hence, the parties are estopped from raising any claim or objection thereto (in re: Town Light and Tower Co. 199 Fed 846). Under the situation obtaining herein where no payment on the subscription to the increase in capitalization was actually made when the Treasurer's Affidavit was executed in October 1977, and when the application for its registration was presented to the Commission for approval on January 24, 1978, the provision of law requiring that twenty-five percent (25%) of the amount subscribed has been either paid in actual cash to the corporation or that there has been transferred to the corporation property the fair valuation of which is equal to twenty-five percent (25%) of the subscription (Sec. 17, Corporation Law, R.A. No. 1459 * ) has not been complied with. Evidence has also established the fact that the petitioners as well as the respondents remitted their respective paid-up contribution on March 10, 13, 15 and 17, 1979 for which receipts were correspondingly issued (Exhs. "1" to "1-M" inclusive).In view of this, the question as to the alleged refusal of respondent Cortes to issue the receipts has become moot and academic. However, this does not mean that the requirements of law have been duly satisfied. On the matter of the claim of respondent Cortes for moral damages, the Commission feels that the same could not be given due course. As it has been established that both parties were party to the execution of the documents in question, we leave them to where they have placed themselves, applying the principle of pari delicto the parties are equally guilty of violating Section 17 of the Corporation Law. The petitioners could not insist on their claim, in the manner that respondent Cortes could not claim for moral damages. With respect to the issue of whether or not the annual stockholder's meeting should be deferred until the Amended Articles of Incorporation of respondent corporation is approved, although this was not deliberated on more thoroughly during trial, considering the fact that the increase in capitalization has not yet been passed upon by the Commission, we see no valid reasons for not allowing the holding of the stockholder's meeting as mandated by law, (Sec. 31 Corporation Law, R.A. No. 1459 * ). Let us move on to the issue raised in the supplemental petition of whether or not the Board of Directors had unjustifiably refused to sign or execute the Certificate of Increase of capital stock of respondent corporation. Before we consider the foregoing issue, it is worthy to note that this is a case where the Amended Articles of Incorporation increasing the capital stock of respondent corporation has been presented to the Commission for approval. Unfortunately, however, its processing has been deferred because certain documents have not been submitted in support thereof due to the failure of the subscribers (parties) to remit their respective paid-up contributions at the time of its execution. We stated earlier in this decision that the parties admitted that on September 8, 1977, the stockholders of respondent corporation representing more than two-thirds of the subscribed capital stock, in a meeting held on said date, resolved to increase the authorized capital stock from P200,000.00 to P600,000.00 ( SEC Order dated July 27, 1979 ,p. 5)(Exh. "C") (Exh. "17"). Exh. "C" also respondents' Exh. "17" which is the minutes of a joint meeting of the stockholders and Board of Directors of respondent corporation, indubitably shows the fact that an increase in the capitalization of respondent corporation has been duly passed upon by the stockholders and the Board of Directors. The only thing left to be done under the premises, is to put into effect the covenants contained in said exhibit. In treating therefore the issue raised in the supplemental petition, the Commission feels that it is incumbent upon the Board to execute the Certificates of Increase of Capital Stock and Amendment of Articles of Incorporation pursuant to said stockholders' resolution of September 8, 1977. In the light of all the foregoing, it is thus clear that the stockholders approved for an increase of the capital stock of NICASSI; that there were no payments made in October 1977 hence, no receipts could be issued therefor, not until March 12, 13, 15 and 17, 1979 wherein receipts were correspondingly issued; that the execution of Exhibit "G" and "D" was with the knowledge and consent of both parties and therefore in pari-delicto ,consequently, no damages are awardable; and that pursuant to existing provision of law, we see no valid ground to defer the holding of the annual stockholder's meeting. WHEREFORE, the petitioners as well as the respondents are hereby directed to effect the execution or revision of all documents necessary in the registration of the amended articles of incorporation of the Nickel City Arrastre and Stevedoring Services, Inc.,particularly the Directors' Certificate of increase of capital stock together with the required Treasurer's Affidavit in accordance; with the facts established herein, and amendment of Articles of Incorporation, within thirty (30) days after finality of this Decision. No pronouncement as to costs. (SGD.) DAISY G. CAUTON-BARCELONA Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .