Florencio O. Molabola, et al. vs. Danilo M. Roy, et al.

[SEC-SICD * CASE NO. 2075. October 10, 1989.] FLORENCIO O. MOLABOLA, ET AL. , petitioners , vs . DANILO M. ROY, ET AL. , respondents . D E C I S I O N This is a petition for mandamus, with a prayer for the issuance of a writ of preliminary mandatory and prohibitory injunction, with damages instituted by the Petitioners to compel the respondents: (1) to turn-over to the Commission or its duly authorized representative, all corporate records, documents, papers, files and books of accounts, including the stock and transfer book; (2) to make an inventory of past, present and future projects and businesses; (3) to render an accounting of all revenues received by the company from all sources within or outside the Philippines, to submit all bank statements for the past 24 months and itemized reports of all disbursements and the financial statements of the company; (4) to turn over to the company all revenues, income, money, goods, chattels and other properties belonging to the company and (a) to enjoin the respondents from preventing the petitioner from performing the functions of their offices; (b) to enjoin respondents from departing from the Philippines; and (c) to enjoin the respondents from committing the acts complained of in the petition. In support thereof, petitioners alleged, inter alia: 1) By reason of the company's business operation and thru the personal involvement of petitioner Benjamin A. Ugaban, the General Manager of Electroen, Inc., the company was able to get and consummate sales contracts from various customers, which with one principal, earned commissions remitted to the company in the total amount of P860,000.00, Philippine currency, and in the other commissions in the total amount of from P2,000,000.00 to P3,000,000.00 which amount petitioners cannot locate, and that respondents, Danilo M. Roy and Reynaldo M. Avelino, who are not only controlling stockholders, but also first cousins and who, being Chairman and President, and Director and Treasurer, respectively are the only persons receiving the remittances of the foregoing: 2) that from September 1980 to the time the petition was filed, the company, thru respondents and against the advise of herein petitioners, received cash deposits ranging from P500.00 to P1,200.00 with and without receipts from hundreds of undeployed applicants/ contract workers for overseas projects, which amount/ money totalling to P400,000.00 more or less, cannot be accounted; that instead of giving priorities to these applicants who paid deposits, respondents again embarked on soliciting deposits more than the rates allowed by the Ministry (now Department) of Labor and Employment; 3) that respondents by means of fraud or deceit, criminal negligence and evident bad faith, conspired wilfully and with the intent to defraud other stockholders of record misapplied and/or diverted corporate assets and funds to their personal and private use without the knowledge and consent of the petitioners; 4) that respondent Danilo M. Roy, without authority from the Board of Directors and using corporate fund purchased one (1) unit of Mercedes Benz (SLC) Model 1973, which purchase resulted to the delay in the processing of contract document and possible cancellation of the company's Iraq projects and likewise resulted to respondent's decision to accept additional applicants for overseas employment in order to collect new cash deposits. 5) that without authority from the Board of Directors nor consent and approval of herein petitioners, respondents opened a bank account in Hongkong to have the advance mobilization fund of the two aforesaid projects remitted thereon in violation of Philippine currency regulations of the Central Bank; 6) that without authority from the stockholders and/or Board of Directors of the company, respondent entered into contract negotiations with Kuwaiti's Trading Company, which respondent Danilo M. Roy is acquiring for himself alone and not for the company, the business opportunity which should belong to the corporation and misusing corporate funds in the venture negotiations; 7) that petitioner Benjamin A. Ugaban, in writing to both respondents, demanded the opening of the books of the company and the production of the result of the accounting/ auditing and actual present standing of the company; said right to financial statement has been denied to the other petitioners; 8) that respondent Danilo M. Roy conducted malicious, malevolent and high-handed tactics and propaganda against the person, honor and integrity of petitioner Benjamin A. Ugaban, in the former's effort to secure for himself all commissions earned and to gain complete control and domination; that against the said background, the other petitioners affixed their vote of approval in effecting the removal of petitioner Benjamin A. Ugaban as Director/ Vice-President for Marketing and General Manager of the Company, but this removal is the subject of SEC CASE No. 2002 before the Honorable Commission; 9) that on the same meeting where removal of petitioner Ugaban was affected, respondent's wife Myrna L. Roy was elected as Director based on the Assignment of Subscription Rights entered between husband and wife without any consideration received by the Company; that since respondent Danilo Roy cannot by law sell, transfer or convey a portion of his paid-up subscription as the book of the corporation does not show that his entire subscription has been fully paid, the same is null and void; hence the director-elect was not qualified under the by-laws and the incumbent petitioner-director Benjamin A. Ugaban cannot be compelled to vacate his office, it being provided in said by-laws that a director shall serve as such for a term of one year until a successor is duly elected and qualified; LibLex 10) that petitioner Gerardo A. del Mundo tendered his resignation as Senior Vice-President, Administration without relinquishing his status as stockholder and director, due to compelling personal and irreconcilable reasons and for lack of confidence in the manner respondent Danilo M. Roy ran the affairs of the corporation; further he also withdrew the services of his law firm in all cases, corporate or personal, of respondents Danilo M. Roy and Reynaldo Avelino. In their answer, respondents traversed the allegations in the petition taking exception to the status of petitioners as bonafide stockholders, and the allegations that petitioner Benjamin A. Ugaban is a director and general manager of the company, countering that the combined subscription of petitioners barely amounting to 25% of the subscribed capital stock, was never even paid by petitioners but instead partially paid for by Danilo M. Roy alone, while petitioner Benjamin A. Ugaban had been ousted for a valid cause from the Board of Directors and relieved of the positions of Vice-President for Marketing and General Manager. The rest of the allegations were duly admitted and denied. Petitioner's application for the writ of preliminary mandatory and prohibitory injunction was set for hearing. Upon the suggestion of the then hearing officer and only for the purpose of the injunction incident, the parties agreed to submit for resolution based on the pleadings thus filed. In the Order dated April 30, 1982, petitioner's application for the injunctive reliefs were denied for lack of merit. However, in the same Order, respondents were directed to: a) file before the Commission, through its Investment and Research Department, the financial statements of Electroen, Inc. covering the period from the time of its initial operation up to the present and to furnish petitioners copies thereof, within ten (10) days from receipt thereof; b) provide petitioners an inventory of the past and present projects of the corporation since its incorporation up to the present, also within ten (10) days from receipt hereof, and (c) transfer the title over the Mercedes Benz car to the corporation likewise within (10) days from the receipt hereof and to submit before the Commission proof of such transfer, . . .". The petition for injunctive relief having been disposed of, the relief of mandamus is the only prayer that remains to be resolved. Several hearing of the case on the merits were scheduled but for some reason or another, none proceeded. At the scheduled hearing on November 10, 1987, only counsel for the petitioner appeared notwithstanding due notice to both parties. In view of the failure of respondents and their counsel to appear, petitioner's counsel manifested that he was submitting the case for decision based on evidence presented at the hearings on the injunction incident. In the Order dated November 10, 1987, respondents were directed to file their comment on petitioner's manifestation submitting the case for decision within ten (10) days. However, up to present, no written comment was filed. Hence this decision. The issues to be resolved in the case at the bar are: whether or not there exists a valid ground for the issuance of a Writ of Mandamus in favor of the petitioners and whether or not petitioners are entitled to attorney's fees and damages. ON THE FIRST ISSUE : Respondents denied that petitioners are bonafide stockholders of Electroen, Incorporated; that the petitioners are mere nominees of respondent Danilo M. Roy who paid for the amount of their subscriptions; petitioners did not put up a single centavo to pay for their subscription and that Danilo M. Roy has kept in his possession the original copies of the receipt evidencing payment of said shares. Petitioner Florencio Molabola, Jr. even testified that he was just given shares of stock by respondent Danilo M. Roy (T.S.N. July 10, 1981, p. 7), therefore a Writ of Mandamus cannot be issued. This Hearing Panel finds that petitioners are stockholders of Electroen Incorporated since they became subscribers of shares of stock of said corporation. (Ballantine, 442, cited in Agbayani Commercial Laws of the Philippines, vol. 3, 1988 ed., p. 76). Although it was only respondent Danilo M. Roy who paid their subscriptions, petitioners are still stockholders and only pecuniarily liable to Danilo M. Roy for the value of shares paid for by the latter in their behalf. Hence, petitioners are entitled to any and all rights available to a stockholder of record as provided under the Corporation Code. ON THE SECOND ISSUE : In the absence of record of any proof to support petitioner's claim for damages, including attorney's fees, no such amount can be granted. WHEREFORE, judgment is hereby rendered in favor of the petitioners and against the respondents: a) directing the issuance of the Writ of Mandamus commanding respondents to render an accounting of all revenues received by the corporation from all sources, within or outside the Philippines, to submit for examination to the petitioners all bank statements from 1980 up to the present as well as an itemized report of all disbursements supported by the corresponding documents, including the financial statements of the company. b) to make the necessary corrections of the entries in the stock and transfer book so as to accurately reflect and set forth the actual stockholdings of the company's shareholders. No pronouncement as to cost. llcd SO ORDERED. (SGD.) SILVINO T. PAMPILO, JR. Hearing Officer (SGD.) KIRTH S. BANSUELO Hearing Officer