Republic of the Philippines vs. R.l. Umali Construction Corp.

[SEC-SICD * CASE NO. 1739. August 3, 1981.] REPUBLIC OF THE PHILIPPINES , petitioner , vs .R.L. UMALI CONSTRUCTION CORP. , respondent . D E C I S I O N On April 26, 1979, the Office of the Solicitor General, Republic of the Philippines, at the instance of a relator, Atty. Salvador A. Lopez, filed a Petition for Quo Warranto against the R.L. Umali Construction Corporation praying that the latter's Certification of Registration be revoked and/or cancelled on the ground that the corporation fraudulently procured registration of its corporate existence by falsely representing to the Securities and Exchange Commission that it had a paid-up capitalization of P1.5 Million pesos when the truth is that it had no such paid-up capital as the bank certificate presented to the S.E.C. to support its application was by way of an accommodation by the issuing bank. prLL The respondent corporation, through counsel, filed its Answer specifically denying the allegations in the complaint and pointing out that the above-mentioned relator was formerly the respondent's lawyer and as such, is disqualified to be a relator, since all matters and/or transactions known to the relator were learned by him in confidence and may not be revealed without the consent of the client pursuant to Rule 130, Section 21, Revised Rules of Court. Issues having been joined, this Commission set the preliminary conference of the case wherein admissions and stipulations were made and documentary evidence were marked. The parties agreed that the main issue to be resolved is "Whether or not R.L. Umali Construction Corporation misrepresented the fact of its capitalization, particularly the provision in the articles of incorporation that it has a paid-up capital of P1,500,000.00 at the time it applied for registration." Petitioner presented one witness in the name of Rolando Mayo, a manager of the Philippine Banking Corporation, wherein the subject paid-up capital was deposited. Mr. Mayo testified, among others, that he is a bank manager of the Philippine Banking Corporation with 20 years banking experience; that R.L Umali Construction had a deposit with Philippine Banking Corporation 1974 or 1975; that the deposit was in the name of Maria Teresa S. Umali; Treasurer-in-Trust for the R.L. Umali Construction; that the deposit was 1.5 million pesos representing the initial paid-up capital of the corporation; that as shown in the ledger, he confirmed that the deposits representing the initial paid-up capital on September 16, 1974 were in various amounts namely: (1) for P100,000.00 (2) for P50,000.00 (3) for P100,000.00 (4) for P250,000.00 (5) for P250,000.00 (6) for P250,000.00 (7) for P200,000.00 (8) for P100,000.00 and (9) for P200,000.00 for a total of P1,500,000.00; that the said deposits were made with the bank either in check or in cash; and that two days thereafter, or on September 18, 1974, the entire deposits were withdrawn. On cross examination, Mr. Mayo testified that with his experience in the bank for 20 years, he is familiar with the procedure of accounts deposited by the corporations in the process of incorporation. He knows that the SEC conducts an examination for the purpose of determining whether a deposit has, in fact been made. He then identified the signature of Elena P. Leao, Manager, Port Area P.B.C.,who certified that there is a deposit with the bank in the form of current account the sum of PESOS: ONE MILLION FIVE HUNDRED THOUSAND ONLY (P1,500,000.00) in the name of Ma. Teresa S. Umali, Treasurer-in-Trust for R.L. Umali Construction Corporation (in process of incorporation). The respondent adopted the testimony of Petitioner's witness, Rolando S. Mayo, the bank manager. Respondent then presented its own witness, Atty. Eduardo Quintos IV, who testified that he is presently the General Manager of the R.L. Umali Construction Company. In 1976, he was already the legal counsel of the respondent corporation, at the same time the corporate secretary. Prior to 1976, the legal consultant was the relator, Atty. Salvador A. Lopez (Exhibits 7, 8 & 9),who by the way, is the brother in law and uncle of R.L. Umali, the president of the respondent corporation. After a disagreement with R.L. Umali (Exhibits 11 & 12),Atty. Lopez tendered his resignation as legal consultant thru a letter, on September 15, 1975, (Exhibit 10).Thereafter, Atty. Quintos said that the relator filed several denunciations against R.L. Umali before the Department of National Defense, (Exh. 13),Bureau of Internal Revenue, the Department of Public Highways, the Office of the President and the Securities and Exchange Commission under S.E.C. Case No. 1285 which incidentally, as per record, was dismissed by the Commission for lack of legal capacity of Atty. Lopez to sue (Order dated August 13, 1976). Atty. Quintos further testified that respondent corporation is in the business of general engineering, construction of roads and bridges. He then submitted a list of completed projects of the corporation (Exh. 14) and pointed out that they have on-going projects such as widening of Guadalupe Bridge and Nagtahan Bridge; Libmanan-Cabusao project in Bicol; and the Cabusao-Sinait road project in Ilocos. Aside therefrom, respondent corporation was recently awarded a P17 Million project at Cagayan de Oro, Misamis Oriental. The counsel for Petitioner was not able to cross-examine Atty. Quintos IV for lack of material time. Later on, he filed a manifestation waiving the cross-examination. LibLex On the basis of the oral and documentary evidence adduced in the proceedings, together with the public documents on file with the Commission, there is no doubt that the relator, Atty. Salvador A. Lopez, was formerly a legal counsel of the respondent corporation. Atty. Lopez, admittedly the brother-in-law and uncle of Ruben L. Umali, the controlling stockholder of the respondent corporation, has been the legal management consultant thereof (Exh. 8) receiving a monthly remuneration of P5,000.00 plus other benefits. He resigned (Exh. 10) from the corporation after his proposal for profit-sharing was not acted upon by respondent (Exh. 9).Aside from the instant case, Atty. Lopez also filed several cases against the respondent corporation before different forums. The foregoing circumstances appear to be indicative that the relator was motivated by his private grievance against the respondent corporation. Nonetheless, more important, is the fact that sometime ago there existed a lawyer-client relationship between the relator and the respondent corporation, and thus matters learned by him during that period may not be revealed without the consent of the client. Revised Rules of Court, Rule 130, Section 21: "(a) ... (b) An attorney cannot without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of professional employment; On the principal issue, this Commission finds and so holds that Petitioner failed to adduce convincing proof that respondent corporation misrepresented the fact of its capitalization particularly the provision in the Articles of Incorporation that it has a paid-up capital of 1.5 million pesos at the time it applied for registration with the S.E.C. The testimony of petitioner's very own witness belied the claim of the former. Mr. Rolando Mayo, the bank manager of the Philippine Banking Corporation, testified that there was in fact a deposit of 1.5 million pesos with their bank representing the initial paid-up capital of the corporation. As a matter of fact different amounts totalling 1.5 Million pesos were deposited on September 16, 1974, as shown in the ledger (Exh. 6).Moreover, petitioner's Exh. C adopted by respondent as Exh. 2 clearly showed that as of September 16, 1974, Mrs. Theresa S. Umali, as Treasurer-in-Trust for the respondent corporation, deposited with Philippine Banking Corporation the sum of P1.5 Million pesos representing the corporation's paid-up capitalization. A certification of bank deposit, on file with this Commission, was issued by Elena P. Leano, Manager, Philbanking (Exh. C).This deposit was personally verified on September 16, 1974 (as shown in Exh. C) and certified by the Examiners and Appraisal Department of the S.E.C. to be intact as shown by the certification issued by this Commission's duly authorized representative. The burden of proof is on the petitioner to show that the subject bank deposit was merely an accommodation by the bank. By burden of proof is meant the obligation imposed upon a party who alleges the existence of a fact or thing necessary in the prosecution or defense of an action to establish it be proof (2 Jones on Evidence, 2nd Ed.,sec. 481).On this score, petitioner failed. Further, the claim cannot prevail over the disputable presumption of regularity in the performance of public functions by, in this case, the Examiners and Appraisers Department of the S.E.C. It is presumed, in the absence of evidence to the contrary, that public officers have performed their duties in accordance with law. Sec. 5, Rule 131, Rules of Court: " Disputable presumptions The following presumptions are satisfactory if uncontradicted and overcome by other evidence: xxx xxx xxx (M) That official duty has been regularly performed." This Commission takes note that the R.L. Umali Construction Corporation is an on-going entity. From the start of its business, the corporation has already completed numerous projects (Exh. 14) and up to the present is working on several projects. It is significant to note that in a complaint filed by the same relator against respondent corporation before the Department of Public Highways, the then Secretary Baltazar Aquino, stated "it is our considered opinion that the award of contract for the construction of the Nagtahan-Governor Forbes Elevated Highways to the R.L. Umali Construction Corporation, being the lowest bidder and whose bid proposal has been found to be most advantageous to the government, is in order." (Exh. H). This Commission is aware of the doctrine that compulsory dissolution at the suit of the state for corporate wrong-doing is a last resort or remedy and will not be awarded unless good and sufficient reasons are shown (Ballantine, 718) and that, in determining the question of forfeiture, the courts in exercising judicial discretion must consider the interest of the public, shareholders and creditors of the corporation and not the private grievance. WHEREFORE, premises considered, judgment is hereby rendered in favor of respondent as against petitioner by dismissing the above-entitled case. No pronouncement as to costs. SO ORDERED. (SGD.) EMMANUEL R. SISON Hearing Officer