Antonio C. Gueco, et al. vs. Renato R. Esguerra, et al.

[SEC-SICD * CASE NO. 1965. January 17, 1985.] ANTONIO C. GUECO, ET AL. , petitioners , vs . RENATO R. ESGUERRA, ET AL. , respondents . D E C I S I O N This is a petition filed by Antonio C. Gueco in his dual capacity as a stockholder of Komatsu-Aquatic Product, Inc. and as an authorized representative of Toshiharu Matsui, a Japanese national, who is also a stockholder of the corporation, praying among others, that respondents, who are the majority members of the board of directors, be ordered by this Commission to call for a board meeting in order to issue a call for payment of the unpaid subscription of the stockholders. LLphil On January 29, 1981, respondents filed their motion to dismiss but was denied by this Commission per Order dated March 3, 1981. On May 4, 1981, respondents filed their answer with affirmative and special defenses and counterclaim. Except the allegations on personal circumstances of the respondents and the capitalization of the corporation, respondents specifically deny all the allegations contained in the petition. Respondents alleged in their special and affirmative defenses that the petition states no cause of action that petitioner failed to exhaust intra-corporate remedies; that petitioner has no authority to file the present petition and that he has no right to represent Toshiharu Matsui. Respondents further alleged that they have no more liability with the corporation because their unpaid subscription which the petitioner wanted to be called for payment were already assigned and/or transferred by the respondents to a third person. Hearings were conducted and both parties presented documentary and testimonial evidence. As defined in the pre-trial order dated February 9, 1982, the following are the issues to be resolved in this case: Principal issues: 1. Whether or not the petitioner is a stockholder of the corporation. 2. Whether the deed of assignment in favor of a third person of the unpaid subscription of 3,000 shares worth Three Hundred Thousand (P300,000.00) Pesos by the respondents is valid or not. Secondary issue: If petitioner is not a stockholder, whether or not he is authorized to file this present petition in behalf of his principal, Toshiharu Matsui. As to the first issue, petitioner testified before the commission that not only is he one of the stockholders of Komatsu Aquatic Product, Inc. but also he was elected as one of the members of the board of directors and officers of the said corporation by no less than the respondents. To strengthen his contentions, he presented the following documents (1) Exhibit "F", which is the deed of assignment of 30 shares of stock in favor of the petitioner, Antonio C. Gueco (2) Exhibit "A", which is the minutes of the annual stockholders' meeting held on April 27, 28, 29, and 30, 1979 wherein petitioner was voted as one of the members of the board of Directors and elected as Vice-Chairman and Treasurer of the Corporation. (3) Exhibits "N" and "O", which are the Memorandum Agreement dated, October 5, 1979 and January 4, 1980, respectively, entered into between petitioner and the respondents. These agreements showed that petitioner is not only a stockholder but also an officer of Komatsu Aquatic Product, Inc. Respondents tried to disprove petitioner's contentions by also presenting testimonial and documentary evidence. Respondent Orlando Salvador, who is the corporate Secretary, testified that petitioner could not be considered a stockholder of the corporation because his name does not appear in the book of the corporation and that the deed of assignment covering 30 shares executed by stockholder Toshiharu Matsui in favor of petitioner, Antonio C. Gueco, has not also been registered in the registry of the corporation and therefore binds only the contracting parties. Further, he testified that the alleged election of petitioner Antonio C. Gueco in the board was subject to qualification, that is, to qualify as director, one must own at least one (1) share of stock of the corporation. Respondent Salvador continued that since petitioner never owns a single stock of Komatsu Aquatic Product, Inc. he could not be considered as stockholder nor could have been elected as one of the directors of the corporation. Petitioner's exhibits "A" to "A-9", inclusive, and exhibits "N" to "O" were never disputed by respondents and all these exhibits proved that respondents not only admitted that petitioner is a stockholder, but also a director, Vice-Chairman and Treasurer of the corporation. In fact, respondents were signatories of all these documents. Questioning now the personality of petitioner at this point of time after serving the corporation as director, Vice-Chairman and Treasurer for a considerable length of time is too late and is unfair to the petitioner. It is intriguing to note why it is only now, after petitioner, filed this instant petition, that respondents openly deny in their pleadings filed before this Commission that petitioner is not a stockholder. Respondents are not only guilty of bad faith but are now estopped in challenging the personality of the petitioner. "The parties to an instrument are generally estopped to deny recitals intended as admission of fact" (I CJS p. 328)" "Recitals of matter of fact in a deed are ordinarily binding on the parties thereto, and they are estopped to dispute them" (3) As regards the second issue, petitioner questioned the legality of the deed of assignment (Exh. "1") on the grounds (1) that the sale is simulated (2) that it has no consideration because no written acceptance and assumption of liabilities has been made by the assignee corporation and (3) that what has been assigned by the respondent are their unpaid subscription. Petitioner argued that although the board allowed respondents to alienate or transfer their shareholdings, yet what has been really transferred by them were only their unpaid subscription which is a clear violation of the board authority. On the other hand, respondents contended that Exhibit "1" which is the deed of assignment executed by them covering 3,000 shares of their unpaid subscription is valid and binding for all purposes because the board authorized the respondents to transfer or assign their shares, paid as well as unpaid, to any interested parties. Besides, the questioned deed of assignment was duly recorded in the books of the corporation and likewise reported to the Securities and Exchange Commission. The contention of petitioner that the Deed of Assignment (Exh "1") is not valid because it has no consideration, simulated and that only the unpaid subscription of the respondents were assigned and/or transferred is bereft of any merit. Careful examination of the document itself (Exh "1") shows that it was validly executed in accordance with the formalities required by law. In fact the questioned deed of assignment has never been questioned is invalid because what has been alienated or transferred was only the unpaid subscription which is contrary to the permission given by the board is likewise not tenable. The fact that respondents were given permission to transfer their respective shareholdings as well as their unpaid subscription does not necessarily mean that they could no longer transfer their unpaid subscription separately from the paid portion and neither would it render the Assignment invalid. Well settled is the rule that shares of stock of a corporation is a personal property and that the owner of said shares has an absolute right to transfer the same except if such right is restricted by law and neither is the right of transfer impaired if only part of the subscription has been paid provided no legal call has been made for the payment of the whole or a part of the balance. (Fletcher Vol. 12, pp. 210) "Shares of stock in a corporation are personal property, and it is well settled that the owner, as in the case of other personal property, has an absolute and inherent right, as an incident of his ownership, to sell and transfer the same at will, except in so far as the right may be restricted by the charter of the corporation or the general law, or by a valid by-law, or by a valid agreement between him and the corporation, provided the transfer is in good faith, and to a person capable of assuming the obligations of a stockholder". (Fletcher Vol. 12, pp. 206-207) entitled to transfer the stock before he has made any payment therefore, where the subscription has been accepted by the corporation." (Fletcher Vol. 12, pp. 209) Since there is no valid agreement between the respondents and the corporation or specific law at the time of the consummation of the contract that prohibit them from transferring their unpaid subscription and the fact that the unpaid subscription has not yet been the subject of a legal call, then the act of the respondents in transferring their unpaid subscription could not be considered illegal. On the issue as to whether or not petitioner is duly authorized to file this instant petition in behalf of his principal, Toshiharu Matsui, the Commission, after examination of petitioners' evidence, namely: Exh. "B" which is the special Power of Attorney dated July 16, 1979 executed by Toshiharu Matsui in his own behalf and in behalf of Komatsu Suisan K.K.: Exhibit "B-2", the latest special Power of Attorney dated June 24, 1981, executed by Toshiharu Matsui in his own behalf and in behalf of Komatsu Suisan, K.K., finds that the above-mentioned Exhibits and/or documents all point out that petitioner is authorized to represent Toshiharu Matsui not only on the latter's business dealings but also to institute action in court, if necessary, to defend the interest of his principal. dctai WHEREFORE, in view of all the foregoing, the Commission renders the following rulings, to wit: 1. Petitioner, for all intent and purposes, is hereby considered stockholder of Komatsu Aquatic Product, Inc. With his pronouncement, the corporate secretary is hereby directed to record in the books of the Corporation the deed of assignment dated, April 28, 1979, executed by Toshiharu Matsui in favor of Antonio Gueco. 2. The Deed of Assignment executed by the respondents, dated July 23, 1979, covering their unpaid subscription of 3,000 shares is hereby declared valid and effective. 3. Petitioner is hereby declared the duly authorized representative of Toshiharu Matsui and therefore authorized to file and institute this present action. 4. The Board of Directors of Komatsu Aquatic Product, Inc. is hereby directed to call a board meeting within thirty (30) days from finality of this Order to consider the calling for payment all unpaid subscription of the stockholders. cdll SO ORDERED. (SGD.) JAMES K. ABUGAN Hearing Officer