Universal Printers Enterprise, Inc., et al. vs. Peklooc Tan Co., et al.

[SEC-SICD * CASE NO. 1818. December 5, 1990.] UNIVERSAL PRINTERS ENTERPRISE INC., ET AL. , petitioners , vs . PEKLOOC TAN CO., ET AL., D E C I S I O N This is an action for: (a) inspection of corporate books and records of petitioner Universal Printers Enterprises, Inc. (UPEI, for brevity); (b) issuance of Stock Certificates; (c) accounting; (d) payment of dividends; (e) calling of stockholders' meeting with prayer for the appointment of a receiver. LibLex In support thereof, petitioners alleged, inter alia, that petitioners Lolita Lucas and Jaime Lucas, Jr. are incorporators and stockholders of UPEI and had subscribed for 550 shares with a par value of P100.00 per share, fully paid and distributed between them as follows: NAME NO. OF SHARES VALUE Lolita Lucas 400 P40,000.00 Jaime Lucas, Jr. 150 15,000.00 Total 550 P 55,000.00 that on several occasions, petitioners Lolita Lucas and Jaime Lucas, Jr. demanded from the respondents the issuance of their stock certificates but respondents, without just cause, failed and refused and still fail and refuse to do so to the prejudice of petitioner Lolita Lucas and Jaime Lucas, Jr.; that since the execution and filing of UPEI's articles of incorporation on May 12, 1977, respondents have not called for a stockholders' meeting or organizational meeting for the election of officers up to the present despite repeated demands from petitioners Lolita Lucas and Jaime Lucas, Jr.; that since UPEI started its business operation in 1977, respondent failed or refused to declare dividends to the stockholders despite profitable business operation and repeated demands from petitioners Lolita Lucas and Jaime Lucas, Jr.; that the latter, through their duly authorized representatives, demanded inspection of corporate books and records and accounting of company earnings but respondents denied them access to corporate books and records and refused to make accounting of UPEI's earnings; that to preserve and protect the corporate properties and funds of UPEI from being lost, removed or wasted, a receiver, should be appointed; and that petitioners Lolita Lucas and Jaime Lucas, Jr. are willing to file a bond in favor of the respondents in such amount as may be fixed by the Commission to answer for damages that respondents may sustain in case the appointment of a receiver turned out to be without basis. Respondents, in their answer, denied all the material allegation in the petition and, by way of affirmative defenses, averred, among others, that petitioners Lolita Lucas and Jaime Lucas, Jr. have only paid one-fourth of their subscription as follows: NAME NO. OF SHARES VALUE AMOUNT PAID Lolita Lucas 400 P40,000.00 P 10,000.00 Jaime Lucas, Jr. 150 15,000.00 3,750.00 Total 550 P 55,000.00 P 13,750.00 ==== ========= ========== that the amount paid on their subscription is P13,750.00 and UPEI has not called for any additional payment on unpaid subscription since its incorporation up to the present; that UPEI is not obligated to issue any stock certificate to petitioners Lolita Lucas and Jaime Lucas Jr. until the full amount of their subscription has been paid; that respondents had called up a stockholders' meeting on May 27, 1977 for the election of members of the board of directors and officers of UPEI wherein petitioners were present and participated therein; that in said meeting, both individual petitioners were elected as director and petitioner Jaime Lucas, Jr. was elected as Secretary of the Board that respondents are the majority stockholders of UPEI and are duly elected officers thereof; that they have exerted their utmost efforts to manage the business operation of UPEI in a lawful manner and not as alleged by the petitioners; that UPEI had not made any profit in order to declare any dividend; that the corporate books and records of UPEI are open for inspection; and, that the accountant of UPEI was recommended by, and a close friend of, the individual petitioners who have all the means and access to inspect said corporate books and records. LibLex As culled from the records and pleadings submitted by the parties, the issues to be resolved are: 1. Whether or not petitioners were denied their right to inspect UPEI's corporate books and records; 2. Whether or not petitioners Lolita Lucas and Jaime Lucas, Jr. are entitled to the issuance of stock certificates corresponding to their shares; 3. Whether or not respondents are duty bound to make an accounting of UPEI's earnings; 4. Whether or not petitioners are entitled to the payments of dividends; 5. Whether or not respondents have failed to call the stockholders' meeting of UPEI from its inception up to the filing of the instant petition; 6. Whether or not petitioners are entitled to their prayer for the appointment of a receiver. Hearings were conducted where both parties presented their respective evidence. With regard to the first issue, petitioners failed to present substantial proof that they were denied inspection of corporate books and records. Anent the second issue, no sufficient evidence was adduced to show that petitioners Lolita Lucas and Jaime Lucas, Jr. have paid the full amount of their respective subscription in UPEI. Thus, Section 64 of the Corporation Code of the Philippines (Corporation Code, for brevity) provides: "No Certificate of Stock shall be issued to a subscriber until the full amount of his subscription together with interest and expenses (in case of delinquent shares), if any is due, has been paid." On the third issue, this Hearing Officer finds that respondents have not reneged on their duty to render an accounting of all transactions entered into by UPEI. In fact, by filing UPEI's corporate annual income tax return for 1977, 1978, 1979 and 1980 (Exhs. "5", "5-A", "5-B", and "5-C", with accompanying Balance Sheet and Profit and Loss Statement for the aforesaid period, respondents are deemed to have complied with their duty to account for UPEI's earnings. With respect to the payment of dividends, Section 43 of the Corporation Code states: "The board of directors of a stock corporation may declare dividends out of the unrestricted retained earnings which shall be payable in cash, in property, or in stock to all stockholders on the basis of outstanding stock held by them; . . . ." Petitioners failed to present evidence to prove that UPEI has unrestricted retained earnings or surplus profits. On the contrary, respondents have presented evidence (Exhs. "5", "5-A", "5-B", and "5-C") to prove that UPEI had operated at a loss for the first four years of its operation. As regards the fifth issue, although there had been a stockholders' meeting of UPEI in 1977, no evidence, however, was presented to show that a stockholders meeting was held in 1978 or 1979. Hence, there is a need for the calling of a stockholders' meeting in accordance with the By-laws of UPEI. With respect to the appointment of a receiver, petitioners failed to present any evidence which would warrant the appointment of such receiver. It must be noted that the power to appoint a receiver is a delicate one and should be exercised with extreme caution and only under circumstances requiring summary relief or where this Hearing Officer is satisfied that there is imminent danger of loss or dissipation of funds or properties of UPEI. WHEREFORE, judgment is hereby rendered directing the respondents to call a special stockholders' meeting of Universal Printers Enterprises, Inc. in accordance with its By-laws within thirty (30) days from the finality of this decision. No pronouncement as to costs. SO ORDERED. (SGD.) ROLANDO C. MALABONGA Hearing Officer