Vicente C. Ponce, et al. vs. Iligan Cement Corporation, et al.

[SEC-SICD * CASE NO. 2507. September 1, 1992.] VICENTE C. PONCE, ET AL. , petitioners , vs . ILIGAN CEMENT CORPORATION, ET AL. , respondents . D E C I S I O N This is a stockholders' action filed against the Iligan Cement Corporation (ICC), its corporate secretary and eight (8) members of its Board of Directors. LexLib Basically, the complainants (Ponce Group) contend that they are the rightful majority stockholders of respondent corporation, except that most of their actual shares amounting to more than fifty (50%) per cent thereof have not been duly registered in the stock and transfer book of the respondent corporation. It is alleged that the respondents are the ones responsible for the questioned non-registration of the shares thereby unjustly causing damage and prejudice to herein complainants. To prove their claim, complainants submitted documentary evidence consisting primarily of ICC's official receipts, board resolutions and official financial statements, among others. Respondents, on the other hand, interposed a general defense of denial of complainants' allegation and presented corporate and accounting records consisting mainly of journal vouchers and ledgers to support their denial. Complainants alleged, among other things, that as of March 6, 1970, their combined stockholdings in respondent corporation amounted to P6,472,567.00 broken down as follows: a. Total shareholdings of complainants V.C. Ponce, Nelia C. Ponce, and Levi B. Mariano acquired from L. Leonio, J. Ponce and P. Floro P2,661,799.00 b. V.C. Ponce assigned to respondent corporation the Promissory Note of P. Floro in exchange for shares and duly approved by the Board of Directors of respondent corporation as per Board Resolution on August 10, 1968 P1,160,518.00 c. In the same year, deliveries of cement to respondent corporation by Dy Pico & Sons and payments were made by V. C. Ponce, assigned the said receivable in favor of respondent corporation in exchange of shares which was duly approved by the Board of Directors of said corporation P136,775.00 d. On or about 1969, Mindanao portland Cement Corporation delivered 15,000 bags of cement to Iligan Cement Corporation and payments were made by V. C. Ponce. Later, V.C. Ponce assigned the said receivables in favor of respondent corporation in exchange for shares which was duly approved by the Board of Directors of said corporation P151,475.00 e. Transfer of preferred shares of V. Ponce to common shares of V. C. Ponce as per letter to the Corporate Secretary dated January 30, 1970 P222,000.00 f. On June 22, 1967, Julius Labrador assigned his shares to V. C. Ponce, a fact well known to respondent corporation as the evidence of sale was duly furnished the Corporate Secretary P1,640,000.00 g. As approved in the Stockholders' Meeting held on May 29, 1968 and also by the Board of Directors as per resolution No. 4-68 the amount of P500,000.00 was credited in favor of V. C. Ponce as pre organizational and promotional fees P500,000.00 that out of the authorized capital stock of the respondent corporation in the amount of P15,000,000.00 existing as of July 1, 1977, only P11,000,000.00 has been subscribed and outstanding and out of this P11,000,000.00 the total holdings of complainants amounted to P6,472,567.00 which was about 58.83% of the total subscribed and outstanding shares; that by clever designs, illegal and fraudulent manipulations, and inspite of the demands and insistence of complainants, the respondent corporate secretary, acting upon the direct orders from then Director Conrado Alcantara, respondents Tomas L. Alcantara and Nicasio Alcantara, hereinafter referred to as (Alcantara Group) refused to recognize the Deed of Assignment made by Julius Labrador in favor of complainant V.C. Ponce, inspite of a clear showing that stockholder Julius Labrador had long assigned his shares to complainant V.C. Ponce; that on July 8, 1975, stockholder Julius Labrador and complainant V.C. Ponce wrote respondent corporation secretary, requesting for the transfer of 1,640,000 common shares in the stock and transfer book of the corporation from Julius Labrador to complainant V. C. Ponce; that inspite of the vigorous objection of complainant and a clear proof that the required number of votes necessary to amend the Articles of Incorporation in accordance with law could not be the respondents Alcantara group and some members of the Board on July 1, 1977 railroaded the amendment of the Articles of Incorporation and illegally reduced the par value of the common shares from one (P1.00) peso to twenty-five (P0.25) centavos; that the respondent Alcantara group with the connivance and concurrence of respondent Corporate Secretary, orchestrated the act of not recognizing the valid objections of complainants and worst still allowed the shares of stockholder Julius Labrador to vote for the amendment of the Articles of Incorporation, inspite of the fact that it was of general knowledge that said shares actually belonged to complainant V. C. Ponce; that with the reduction of the par value and the subsequent increase of authorized capital stock, the Alcantara group illegally and fraudulently gained control of the corporation, and with the direct and immediate participation of other respondent members of the Board, the said Alcantara group has devised ways of imposing burdens and onerous contracts on the respondent corporation such as, but not limited to the charging of management fees and other payments which were ultimately used to pay off their subscriptions to the detriment, damage and prejudice of the complainants and other stockholders; that the controlling Alcantara Group assisted and collaborated by the other members of the board has incurred expenses of enormous proportion thereby greatly reducing the income of the corporation; that the stock and transfer book has been so manipulated and falsified to such an extent that it does not reflect the true and accurate holdings of complainants in the respondent corporation; that the certification submitted to the Securities and Exchange Commission to secure the approval of the amendments to the Articles of Incorporation as aforestated did not contain the accurate number of shares held by the complainants; that the illegal and fraudulent acts of respondents are manifested by the fact that it was only in June 1983 that complainants were given Stock Certificate Nos. 002, 003, 022, 033 or almost sixteen (16) years of the existence of respondent corporation and to the surprise of complainants they did not receive their accurate holdings in said corporation; the stock certificate nos. 022 and 023 allegedly being stock dividends, making the shares, of complainants spouses in the amount only of 3,017,757 with par value of P0.25 excluding the stock dividends; that in gross violation of the law and settled jurisprudence, the Alcantara group initiated in the stockholders meeting on November 11, 1982 a resolution to declare stock dividend out of reappraisal surplus or increase in valuation to corporate assets in order to maintain their control of the corporation and by such action the corporation suffered damage and prejudice since the surplus is merely anticipatory of future profits and were not actually realized as an assets of the corporation; that the aforesaid act of respondents directly contravenes the provisions of the Corporation Code that no dividends can be declared except from surplus profits, the rule being explicit that reappraisal surplus cannot be considered as earnings, as the assets are still undisposed and the corporation cannot be said to have earned the surplus; that again, by the same illegal designs in contravention of the legal provisions of the law and inspite of the vigorous objection of complainants, the said Alcantara group and with the connivance and concerted action of the other respondents, forced the approval of the declaration of stock dividend out of the reappraisal surplus in the special stockholders meeting held on May 23, 1983; that in a series of move, designed to favor the Alcantara group and prejudice the respondent corporation and other stockholders, the present management belonging to or acting under the direction and control of the Alcantara group has entered into various anomalous transactions such as but not limited to marketing agreements and sale of real properties, which agreement involving millions must be duly audited in order to protect and safeguard the interest of respondent corporation and other stockholders; that complainants have been opposing the illegal and unjustified acts of respondents as shown by the various minutes and have in fact demanded that the corporate books reflect the true and accurate holdings of complainants but inspite of repeated demands the same have fell on deaf ears and have been completely rejected to the damage and prejudice of complainants; that the facts and circumstances above-detailed surrounding the breaches by respondents of their duties of due care and loyalty to the respondent corporation have caused tremendous losses to the respondent corporation and stockholders and for which respondents should be made directly responsible and liable for the resulting losses that the corporation and stockholders have sustained; that the above-alleged breaches of duties by respondents and the rejection of complainants' demands for extra-judicial correction and remedy also make out a case for recovery of attorney's fees and expenses of litigation in the sum of One Hundred Thousand (P100,000.00) Pesos and of moral damages occasioned by fraud, malicious and willful acts of respondents that have caused anxiety, ridicule, embarrassment, besmirched reputation and loss of financial standing in the community due to their being illegally deprived of their seat as directors of the corporation, all of which complainants are entitled to the amount of Two Million (P2,000,000.00) Pesos and for the malicious acts of respondents and as deterrent to others who would commit similar offenses, the complainants are entitled to exemplary damages in the sum of not less than Two Hundred Thousand (P200,000.00) Pesos as necessary and proper reliefs against respondents willful and obstinate refusal to satisfy complainants plainly valid, just and demandable claims; and that considering that the above-verified recital indubitably reveal the magnitude of respondents Alcantara group and respondent corporate secretary's fraud, dishonest mismanagement, greedy manipulations and/or callous recklessness in the management and direction of the affairs of respondent corporation, to their own exclusive benefit, to the extent that the respondent corporation and its stockholders have incurred and will continue to incur losses and damages, erosive of its goodwill and physical assets and funds, including the risk of its franchise, if not its very corporate existence for flirting with the reprehensible acts above-enumerated coupled with the pervasive control and misuse of power and uninterrupted occupancy of pivotal corporate offices; there is a clear and present danger that unless respondents are immediately ousted from or forthwith sterilized in their control of respondent corporation's corporate affairs, the delicts now complained against will remain unremedied, may be continued and abetted, to the irreparable harm and injury of the respondent corporation and its stockholders, nothing short of immediate and absolute to protect the respondent corporation and its stockholders, and "to preserve the property during the pendency of this action, or to dispose of it according to the judgment or otherwise to carry the judgment into effect", as the fact, situation, dictates that the appointment of a receiver is the most convenient and feasible means of preserving, administering or disposing of the property in litigation, it is respectfully submitted that this Honorable Commission immediately and forthwith come to the aid of the respondent corporation and its stockholders, by placing the respondent corporation under receivership pendente lite, to be managed by a committee or any party which in the discretion of this Honorable Commission would be qualified to handle the corporate affairs of the respondent corporation while this action is pending. In answer thereto, respondents alleged that: "1. They admit the allegations of paragraph 1 of the Complaint concerning the personal circumstances of petitioners and of the individual respondents as well as the corporate circumstances of the corporate respondent, with the qualification, however, that the Directors named in the Complaint constitute only nine (9) of the eleven (11) incumbent members of the Board; 2. They specifically deny the allegations of paragraph 2 of the Complaint, the truth of the matter being that, as of May 8, 1970 (or two months after complainants' reference date) the combined stockholdings of complainants Vicente C. Ponce and Nelia G. Ponce in respect of common shares amounted only to 1,466,500 shares with an aggregate par value of P1,466,500.00; as of said date, complainant Levi B. Mariano was not yet a shareholder; LibLex 3. They specifically deny the allegations in paragraph 3 of the Complaint, the truth of the matter being that: a. As of July 1, 1977, the authorized capital stock of respondent corporation was P23,000,000.00; of this, P15,000,000.00 corresponded to common shares while P8,000,000.00 corresponded to preferred shares; b. Of the P15,000,000.00 authorized common stock, P11,000,000.00 was subscribed and outstanding as of July 1, 1977; c. Of the P11,000,000.00 subscribed and outstanding common stock, the total shareholdings of complainants was only 1,156,500 shares or a mere 10.5% of the subscribed and outstanding common shares; 4. They specifically deny the allegations of paragraph 4 of the Complaint, the truth of the matter being that the non-registration then of the assignment was due to deficiencies in the documentation thereof and the strong objections interposed by a stockholder, Luis M. de Jesus; as regards the allegations in paragraph 4 of the Complaint that, even without the 1;640,000 shares being registered in the name of Vicente C. Ponce, complainants would have 43.93% of the outstanding shares, the same is denied, the truth being that stated hereinabove; 5. They specifically deny the allegations of paragraph 5 of the Complaint, the truth being that the votes which were cast in favor of the reduction of par value even exceeded that required by law; 6. They specifically deny the allegations of paragraph 6 of the Complaint, the truth of the matter being that: a. While complainants objected to any further discussion of the reduction of par value, which incidentally was defeated when put to a vote, no objection was heard from complainants when a motion to reduce the par value was actually presented and seconded; b. Julius Labrador had the perfect right to vote the 1,640,000 shares since those shares were still registered in his name; c. Assuming without admitting that "it was of general knowledge that said shares actually belonged to complainant V. C. Ponce", general knowledge is not sufficient basis to register the transfer thereof in the stock and transfer book; 7. They specifically deny the allegations of paragraph 7 of the Complaint, the truth of the matter being that: a. The reduction in par value was done in accordance with law, complying with all legal requirements, and necessitated by the financial and business needs of respondent Iligan Cement Corporation; b. The subsequent issuance of additional shares and the increases in authorized capital stock fulfilled all the requirements imposed by law and was essential in the financial rehabilitation of the Company; c. The supposed "control of the corporation" gained by the Alcantara Group was but the logical and inescapable consequence of complainants' failure, any refusal, to exercise their pre-emptive rights; d. The alleged "burdens and onerous contracts" supposedly imposed on respondent Iligan Cement Corporation are mere figments of complainant's uncontrollably fertile imagination because all contracts entered into by individual respondents in behalf of Iligan Cement Corporation are fair and above-board and geared toward the best interests of the latter. 8. They specifically deny the allegations of paragraph 8 of the Complaint, the truth of the matter being that all the expenses incurred by respondent Iligan Cement Corporation were not duly reasonable and fair in amounts and in terms and conditions but also necessary for the requirements of the business; 9. They specifically deny the allegations in paragraph 7 of the Complaint, the truth being that the handling of respondent Iligan Cement Corporation's stock and transfer book was and is being done in accordance with law and pursuant to sound corporate practice which inevitably rules out the registration of shares based on fictitious claims; 10. As regards the allegations of paragraph 10 of the Complaint: a. They admit that it was only this year that stock certificates for Class "A" Common Shares were issued to complainants; b. However, they specifically deny that such late issuance is a manifestation of illegal and fraudulent acts, the truth of the matter being that there are no such illegal and fraudulent acts; besides, the delay, which was not only in respect of complainants' stock certificates but also as regards those pertaining to all Class "A" common shareholders, was brought about by a combination factors, among them, the dispute concerning the 1,640,000 shares held by Julius Labrador, the quasi reorganization of respondent Iligan Cement Corporation, the resulting restructuring on its authorized capital stock in several successive stages and, in general, by a consensus among the shareholders to give the matter a low priority; c. They specifically deny the rest of the allegations, the truth of the matter being that certifications concerning shareholdings accurately reflect the number of shares held by complainants; 11. They specifically deny the allegations in paragraph 11 of the Complaint, the truth of the matter being that the stock dividend declaration on November 11, 1982 was not on the reappraisal surplus but on the depreciation of the reappraised assets which was expensed and charged to operations; this stock dividend declaration finds support in this Honorable Commission's letter of October 23, 1975 addressed to United Textile Mills, Inc. where it was opined that "Whenever depreciation on appraisal increase is charged to operations, the income from operations in that period is diminished by the amount of such depreciation. This amount of depreciation is actual income shifted to and lodged in another account which may be declared as dividends in accordance with law." (SEC Bulletin, Vol. X, No. 1, pp. 17-19); in fine, there existed actual income from operations; besides, this declaration of stock dividends also benefited complainants to the extent of their pro-rata holdings; 12. They specifically deny the allegations in paragraph 12 of the Complaint, the truth of the matter being that the stock dividend declaration on May 23, 1983 was effected upon the same grounds as that effected on November 11, 1982 as elucidated in the next preceding paragraph hereof; 13. They specifically deny the allegations of paragraph 13 of the Complaint, the truth of the matter being that all transactions entered into by respondent Iligan Cement Corporation are fair and reasonable, necessitated by business exigencies and designed, formulated and implemented for no other purpose than the best interests of Iligan Cement Corporation; 14. As regards paragraph 14 of the Complaint: a. They specifically deny the allegation that "complainants have been opposing the illegal and unjustified acts of respondents", the truth being that there have been no illegal and unjustified acts; further, the records will show the complainants, after all this time and countless stockholders and directors' meetings, objected only twice-once, on July 1, 1977 when they took exception to any further discussion of the reduction of par value and, the second time, on May 23, 1983 when they questioned the legality of the stock dividend declaration; in both instances, the baselessness of their objections was explained to them and their objections were resoundingly defeated; b. While it is admitted that complainant demanded that additional shares be registered in their names, such demand, very recently made, was devoid of any basis; complainants were even requested to submit documents to substantiate their demands but his request was ignored; c. They specifically deny the allegation that complainants exhausted all intra-corporate remedies, the truth being that such efforts were half-heartedly superficial as it must be so due to the obvious baselessness thereof; 15. They specifically deny the allegations of paragraph 15 of the Complaint, the truth of the matter being that respondents have remained faithful and true to their duties as eloquently attested by the relatively enviable position that respondent Iligan Cement Corporation has attained after several long struggling years notwithstanding the unfavorable economic climate and the distressed condition of the construction industry in general and the cement industry in particular; 16. They specifically deny the allegations concerning attorney's fees, litigation expenses, moral damages and exemplary damages, the truth of the matter being that: a. The complaint is utterly baseless; if any attorney's fees or litigation expenses have been or will be incurred by complainants they have only themselves to blame for instituting this unfounded action. b. As to the moral and exemplary damages, the same is equally bereft of truth. The respondents are not guilty of any wrong doing. SPECIAL AND AFFIRMATIVE DEFENSES 17. Respondent replead and reproduce by ( illegible portion in SEC files ) the foregoing allegations; 18. A close analysis of the complaint will show that the various causes of action embodied therein can be categorized into two i.e. those which are brought in complainants' personal capacities and those which are brought in a derivative manner; 19. All of complaints causes of action are barred by prescription, laches and or estoppel; 20. Additionally, those causes of action which are brought in a derivative capacity are prematurely ( illegible portion in SEC files ) inasmuch as the conditions precedent have not been fulfilled; ( illegible portion in SEC files ) COMPULSORY COUNTERCLAIM 21. Respondents replead and reproduce by ( illegible portion in SEC files ) the foregoing allegations: 22. This unjustified action instituted by complainants is totally without any basis either in fact or in law; inspite of complainants' knowledge of its ( illegible portion in SEC files ) and baseless ( illegible portion in SEC files ) complainants ( illegible portion in SEC files ) instituted the same ( illegible portion in SEC files ) various times that the number of shares to which they are entitled to is limited to that registered in the corporate books; 24. Complainants' claim that the reduction of par value was illegal is equally baseless; the reduction of par value was duly approved by this Honorable Commission; by assailing the par value reduction as illegal, complainants have recklessly accused the Honorable Commission as a conspirator to an illegal act; 25. Complainants' position vis-a-vis the additional issuance of shares and the increases in authorized capital stock is more untenable, if not anomalous; these capital build-up steps not only had the sanction of the Honorable Commission but even had the concurrence of complainants; 26. Complainants' assertion of ( illegible portion in SEC files ) contracts supposedly burdening respondent Iligan Cement Corporation is another indication of complainants' inclination to shoot from the hip; until 1982, complainant Vicente C. Ponce was a member of the Board of Directors; on the other hand, complainant Nelia G. Ponce was a director until 1980; in no instance did any of them take exception to any of the numerous transactions presented to the Board for approval principally because these transactions were all regular, fair and reasonable; 27. Complainants' objection to the stock dividend declarations suffers the same ailment; because of a clear precedent blazed by the Honorable Commission in its letter dated October 23, 1975 to United Textile Mills, Inc. (SEC Bulletin, Vol. X, No. 1, p. 17), complainants had to misrepresent that said stock dividends were declared out of appraisal surplus when they knew for a fact that said dividends were declared out of the depreciation on appraisal increase which had been charged to operations; 28. The willful and malicious filing of this unfounded and unjustified complaint, which is evidently designed to harass, has not only tarnished the reputation of respondents but has also caused upon individual respondents an untold degree of embarrassment, serious anxiety and moral suffering; 29. While no amount of monetary compensation can make good the damage inflicted upon respondents, awards of moral damages in the amount of Five Hundred Thousand (P500,000.00) Pesos for each individual respondent and One Million (P1,000,000.00) Pesos for respondent Iligan Cement Corporation would at least partially indemnify respondents; 30. As a consequence to the filing of the complaint, respondents were constrained to engage the services of undersigned counsel for an agreed fee of Two Hundred Thousand (P200,000.00) Pesos to handle their case before this Honorable Commission; in addition, respondents expect to incur litigation expenses in an amount to be proved during the trial; 31. To deter and discourage others similarly inclined from utilizing this Honorable Commission as a vehicle to further their malicious objectives, exemplary damages should be assessed against complainants; given the gravity and pernicious nature of the act sought to be deterred and the resources of complainants, the amount of One Million (P1,000,000.00) Pesos is neither too big to be oppressive nor too small to be waived away as an insignificant item of expense." In the meantime on October 7, 1983, respondents Andres C. Gatmaitan, J. M. M. Robinson and Joseph Brooker filed a Motion to Dismiss, the resolution of which was deferred until trial on the merits in an Order dated January 3, 1984. The first application for receivership as contained in the complaint was duly opposed by all the respondents. In support of the application, complainants presented three (3) witnesses (Emigdio S. Tanjuatco, Jr., as adverse witness, Eloisa R. Maano and Engineer Vicente C. Ponce) and their documentary exhibits "A" to "W-1". In opposition thereto, respondents relied on their cross-examination of complainants' witnesses (Eloisa R. Maano and Engineer Vicente C. Ponce) and submitted their Exhibits "1" to 4". On March 30, 1987, an Order was issued by then Hearing Officer Antonio M. Esteves, denying the application but qualifying quite significantly that the said denial had not as yet considered "complainants' allegation that not all the shares which belong to them have been registered in their names in the stock and transfer book of the corporation", the reason being that he had made an earlier ruling as spelled out in the Order dated February 29, 1984 to the effect that any evidence of stock ownership should be disallowed during the continuation of the hearing on the incident of receivership. At the trial on the merits, both complainants and respondents (except Gatmaitan Robinson and Brooker) presented evidence in addition to what they have respectively presented during the preliminary hearing on the application for receivership. After the testimony of Engineer Vicente C. Ponce was completed, respondents (except Gatmaitan, Robinson and Brooker) presented their lone witness Victoria Hamoy, an accounting officer of respondent corporation. On November 22, 1991, complainants filed a Second Application for Receivership, in order to preserve their rights during the pendency of this cases, citing Sec. 6(c) of P.D. 902-A as legal basis of their application. This was duly opposed by respondents who claimed that the application for receivership was without merit. The incident was submitted for resolution. Subsequently, an order dated January 8, 1992 was issued dismissing the instant complaint as against respondents Joseph Brooker, Andres Gatmaitan and J. M. M. Robinson. This Order had become final. Complainants then presented rebuttal evidence. After due hearing, the parties submitted their summation of their respective claims and defenses by way of their respective memoranda. It appears that this case is between the two groups of stockholders in Iligan Cement Corporation. The complainants are the recorded minority stockholders who claim to be the rightful majority stockholders, while the individual respondents are the recorded majority stockholders who now stand charged of having cheated complainants of the latter's rightful majority ownership over Iligan Cement Corporation. Complainants represented the Ponce Group led by Vicente C. Ponce, while respondents represented the Alcantara Group led by respondents Tomas Alcantara and Nicasio Alcantara. The latter are the sons of the late Conrado Alcantara. Complainant Nelia Ponce is the wife of complainant Vicente C. Ponce. The Iligan Cement Corporation, hereinafter referred to as ICC, was organized sometime in May, 1967. It has an original capital stock of P10,000,000.00 divided into 6,000,000 common shares with par value of P1.00 per share and 40,000 preferred shares with par value of P100.00 per share. The incorporators with their respective subscriptions of common shares and paid-up shares were: Name Subscription Paid-up Pablo Floro P600,000.00 P150,000.00 Valeriano Floro 200,000.00 50,000.00 Elena Uichico 200,000.00 50,000.00 Nelia Ponce 400,000.00 150,000.00 Lope Leonio 200,000.00 50,000.00 Julius Labrador 200,000.00 50,000.00 T O T A L P2,000,000.00 P500,000.00 The foregoing incorporators apparently were divided into groups. The Floro groups consisting of Pablo Floro, Valeriano Floro and Elena Uichico. The group was led by Pablo Floro. The Ponce group consisted of Nelia Ponce and the rest of the incorporators who were nominees of the actual investor, Engineer Vicente C. Ponce. Initially no preferred shares were subscribed. Nelia Ponce was elected Treasurer of the corporation and acted as such up to 1968. During this period, starting from about 1966, the construction of ICC's physical plant was being undertaken and supervised in Iligan City by complainant Vicente C. Ponce who is a Civil Engineer. The latter, per this Commission's records, appears to have been the President, General Manager and controlling stockholder of Mindanao Portland Cement Corporation (MPCC) from 1963 up to 1967. According to complainant Vicente Ponce, he swapped more than P5,000,000.00 worth of some of his MPCC shares with the Floro Group's total interest in ICC. Obviously, it was the controlling Ponce Group who gave the said Conrado Alcantara some participation in ICC. It seems the then on-going construction of the ICC plant necessitated the immediate infusion of additional cash or property contribution to cover the growing construction expenses. Complainant Vicente Ponce testified that he had a gentlemen's agreement with the late Conrado Alcantara that they will always maintain a 50-50 sharing of ownership over ICC and that no stock certificate shall be issued unless the 50-50 basis is maintained. It would appear from respondents' Exh. "9-H" that there actually was such an agreement on the 50-50 ownership, initially at the least. Said Exhibit which was signed by Vicente C. Ponce as ICC President, Edgardo Angara as Corporate Secretary, and the late Conrado Alcantara as Treasurer, shows the recorded stockholdings in ICC as of August 31, 1988 to be as follows: Name Subscription Paid-Up Balance 1. Julius Labrador P1,540,000.00 P1,640,000.00 2. Julio C. Ponce 40,000.00 40,000.00 3. Lope L. Leonio 50,000.00 50,000.00 4. Nelia G. Ponce 668,457.00 668,457.00 5. Edgardo J. Angara 10,000.00 10,000.00 6. Vicente C. Ponce 1,591,543.00 1,170,000.00 421,025 7. Conrado C. Alcantara 4,000,000.00 2,000,000.00 1,950,000 T O T A L P8,500,000.00 5,628,975.00 2,371,025.00 Clearly, the Ponce Group and the late Conrado Alcantara had as of said date agreed and actually divided ownership over ICC on a 50-50 basis, that is, they had a total subscription of P4,000,000.00 each. Engineer Ponce keeps pointing out that Conrado Alcantara always assured him that their 50-50 sharing shall be implemented regardless of recording to the contrary. It appears further that as of 1968, the Ponce group had paid up much more on its subscription than the late Conrado Alcantara. Hence, while the Ponce group's unpaid balance was then only P421,025.00; Alcantara's was P1,950,000.00. This was organizational and construction investments to ICC for about two (2) years when Conrado Alcantara came in later as stockholder of ICC. In other words, Conrado Alcantara started investing in ICC only in the later or middle part of 1968. According to complainant Vicente C. Ponce. upon completion of the construction of the ICC plant in 1970, he turned over to Conrado Alcantara the corporate books and management of ICC per their previous agreement. Complainant Vicente C. Ponce consistently and persistently insisted that said books, specifically the stock and transfer books, did not reflect or contain any entry in accordance with his 50-50 sharing agreement with Conrado Alcantara which they shall jointly implement before the issuance of any stock certificate. Later, a problem arose from entries made and those which were not made on the said stock and transfer book that ultimately led complainants to institute this present action against the respondents. It fall beyond our comprehension why inspite the considerable income and profit earned by ICC from 1970 when it started operations or current production up to 1982 or a total period of about twelve (12) years, the corporation never issued any stock certificate. That ICC stock certificates were issued and received by complainants only in June 1983 is borne out by the records. And when complainants saw that the stock certificates issued to them were very much less than the actual shares they have already paid ICC per documents in complainants' possession, they sued herein respondents accordingly. Complainants decry the unjust acts committed by the respondents in deliberately not recording a substantial portion of complainants' actual stock payments to ICC. Complainants further claim that respondents have also fraudulently manipulated the records and stock and transfer book of ICC as to result in the ballooning of the Alcantara Group's stockholding in ICC, in converse relation to the undeserved deflation of the Ponce Group's rightful majority stockholdings. To support their claim that they are the rightful majority owners of respondent corporation, complainants submitted in evidence the following material documents, to wit: A. ICC OFFICIAL RECEIPT NOS. DATE AMOUNT 001 (Exh. "DDD") 6-1-1967 P150,000.00 002 (Exh. "EEE") 6-1-1967 50,000.00 003 (Exh. "FFF") 6-1-1967 50,000.00 005 (Exh. "GGG") 6-1-1967 50,000.00 006 (Exh. "HHH") 6-1-1967 100,000.00 007 (Exh. "III") 6-1-1967 50,000.00 008 (Exh. "Y") 6-13-1967 260,000.00 009 (Exh. "Y-1") 6-24-1967 240,000.00 010 (Exh. "X") 8-23-1967 10,000.00 011 (Exh. "Y-2") 8-30-1967 11,000.00 017 (Exh. "JJJ") 2-1-1968 568,457.00 032 (Exh. "NN") 12-3-1968 100,000.00 033 (Exh. "OO") 12-10-1968 60,000.00 050 (Exh. "PP") 7-30-1969 179,024.63 116 (Exh. "QQ") 11-20-1969 200,000.00 117 (Exh. "RR") 11-27-1969 20,000.00 118 (Exh. "SS") 12-22-1969 15,000.00 121 (Exh. "UU") 2-5-1970 9,313.00. 123 (Exh. "VV") 3-6-1970 4.78 SUBTOTAL P2,122,799.41 B. CHECK PAYMENT TO ICC DATE AMOUNT 50476 (Exh. "LL") 12-14-67 P800,000.00 50478 (Exh. "HH") 1-7-68 40,000.00 SUBTOTAL P840,000.00 C. PROMISSORY NOTE OF PABLO FLORO (Exh. "KK-3" ICC BOARD RES. NO. 40-68 (Exh. JJ-1) 8-30-68 P1,160,518.00 D. Letter to ICC Corporate Secretary Edgardo Angara requesting transfer of Vicente C. Ponce's preferred shares to common shares (Exh. "TT") P222,000.00 E. Accountants' Cer- tification Re: Cement delivery (Exh. "KK-1") 5-31-69 P151,000.00 F. ICC Board Res. No. 4-68 (Exh. MM-2) 5-3-68 500,000.00 TOTAL P4,996,792.41 The foregoing documents appear to have been executed and issued within the period beginning June 1, 1967 and March 6, 1970. Complainants' contention is that the non-recording of these payments in the ICC book was intended by respondents in order, among other unjust purposes, that said payments may not be reflected in the stock certificates that would eventually be issued to complainants in 1983. According to complainants, such non-recording was issued by respondents to the latter's advantage in many corporate decision at the expense of complainants who believed and relied on the consistent assurances of Conrado Alcantara that regardless of what may be recorded, no stock certificates shall be issued until the Alcantara Group has equalized the payments already made by the Ponce Group. LibLex Within the period from 1970 to 1982, ICC's capital stock was increased twice. Indeed, had the P4,996,792.41 claimed payments by the Ponce Group as of March 1970 been properly credited to them by way of stock payments, they (complainants) definitely would have majority ownership and control over ICC as the increase in the authorized capital stock would have further increased their actual stockholdings. This is not to mention yet the further doubling effect of the intervening declaration of dividends. From the afore-stated facts, the issue in this case revolves on the question of whether or not the stock and transfer book of respondent Iligan Cement Corporation reflects the true and accurate stockholdings that should be credited in favor of complainants. After a careful and meticulous review of all the facts and evidence, both oral and documentary, that has been adduced and presented, this Hearing Officer feels constrained, for reasons which will be shown below, to rule in the negative. The stock and transfer book of ICC does not reflect the rightful stockholdings that should be credited in favor of herein complainants. Worthwhile considering are the following significant findings, to wit: 1. The Official Receipts (Nos. 001, etc.) presented by complainants were all admitted by respondents. No question or objection was raised as to their authenticity and due execution. Such receipts are, therefore, considered as binding upon the issuing respondent corporation. a. According to respondents, O. R. Nos. 008 (Exhibit "Y"), 009 (Exh. "Y-1") and 011 (Exh. "Y-2") "were ultimately paid back by ICC to Pablo Floro" (Memorandum of the respondents, p. 21) so that the Ponce Group cannot be credited with said payments. Respondent cite Temporary Cash Voucher Nos. 001 (Exh. "8"), 002 (Exh. "8-A"), cash voucher 27 (14) (Exh. "8-H") and Journal Voucher No. 177 (Exh. "8-C") in support of their contention. An examination of these vouchers show, however, that although their total amount of P511,000.00 tallies with the P511,000.00 being claimed by complainants, the breakdown of said two totals do not. There is no showing whatsoever that said vouchers actually pertain to the specific official receipts presented, except that the totals appear the same. Aside from that, the two Temporary Cash Vouchers appear as "subject to liquidation" by Pablo Floro. If these were really payments to Pablo Floro's previous advance cash payments to ICC, there would be no need to require subsequent liquidation by Pablo Floro for the reason that the same would have closed, even if only partially, the transaction on Pablo Floro's advance payments to ICC. It is, therefore, not reasonable to assume that said Temporary Cash Vouchers actually pertain to the admitted official receipts. As to the other two (2) vouchers, suffice it to say that they have the earmarks of spurious documents, the same being unsigned, unchecked and unapproved. They are, therefore, of doubtful reliability. Worse, the testimony on cross-examination of respondents' lone witness, Victoria Hamoy, on these vouchers (T.S.N. of July 10, 1990, pp. 64-81) evinces more doubt than enlightenment specially when she testified that "subject to liquidation means he (Pablo Floro) will have to either pay back or Account for expenses" thereby squarely contradicting respondents' claim that said Temporary Cash Voucher Nos. 001 and 002 were in payment of Pablo Floro's earlier advance cash payments to ICC (Ibid., p. 81). In fact, upon query by the Commission, Mrs. Hamoy could not explain the erasures and superimposition in pencil and ink of the entry "P-Floro", among others, appearing on Temporary Voucher No. 002 (T.S.N. of July 11, 1990, pp. 5-14) or Exh. "8-A". b. As to the alleged absence of evidence regarding the assignment of said credit from Pablo Floro to Ponce, respondents overlook complainants actual possession of the subject official receipts. Such possession is presumed to be in good faith (Art. 527 Civil Code), there being no allegation nor proof of bad faith. Under the rules, the delivery of the said official receipts to complainants gives rise to the legal presumption, unrebutted in this case, that said official credits belong to complainants. (Sec. 3, g, Rule 131, Rules of Court * )It is, therefore, just that the said payment in the total amount of P511,000.00 including its fair increments be credited to the Ponce Group. 2. It is a fact that right before the late Conrado Alcantara joined ICC in 1968, ICC was exclusively owned by the Ponce Group which included Julius Labrador who held P1,640,000 common shares in trust or in behalf of complainant Vicente C. Ponce. As such trustee, however, Julius Labrador appeared to have betrayed Vicente Ponce with respect to said shares by refusing to acknowledge Ponce's rightful ownership over the same, inspite of due demands therefore by Vicente Ponce from 1973 to 1975. It was only after Ponce filed a criminal charge of estafa against him did Julius Labrador again acknowledge in 1975 Ponce's ownership of said P1,640,000 shares. At the time the Ponce Group had 100% ownership of ICC sometime in 1968, the Board of Directors naturally must have actual knowledge that Julius Labrador was a mere nominee of Vicente Ponce. It appears that Julius Labrador began to refuse to acknowledge his nominee status only in 1973. He must have been emboldened to continue his betrayal of his benefactor (Vicente Ponce) when ICC and Conrado Alcantara undertook to jointly and severally, "protect and held Labrador free from, and harmless against, any and all claims to, or that may arise from these 1,640,000 common shares and/or this AGREEMENT," and "to indemnify LABRADOR for any claim or liability mentioned in paragraph (a) above" (Exh. "KKK"). In the said AGREEMENT, Julius Labrador transferred and conveyed to ICC the said 1,640,000 common shares of Vicente C. Ponce, without the knowledge or consent of the latter. Clearly, Julius Labrador and respondent ICC did not act in good faith when they entered into the said unholy AGREEMENT (Exh. KKK). "The essence of good faith lies in the honest belief in the validity of one's right, ignorance of a superior claim and absence of intention to overreach another." (Bernardo v. Bataclan, G.R. No. 44606, November 28, 1938, 96 Phil. SCRA 113). ICC knew thru its Board of Directors, at least in 1968 at the time it was fully owned and controlled by the Ponce Group, that Julius Labrador's 1,640,000 common shares was actually owned by Vicente Ponce. But this notwithstanding, ICC still entered into said AGREEMENT with Julius Labrador. It appears fully contended that said shares were registered eventually in the ICC Stock and Transfer Book in favor of Vicente Ponce only in 1978, so that the credit of 1,640,000 must be reckoned in favor of complainant Vicente Ponce only from the time of such registration. Such feeble contention cannot be sustained. The purpose of such registration is to notify the corporation of said share's actual ownership. Where, as in this case, the corporation already had actual notice of said shares actual ownership, it does not seem fair to allow the corporation to disregard its actual knowledge and resort to the pure technicality of the date of registration on which to base its knowledge of said shares actual ownership. This is particularly so where the corporation had full control over the mechanical act of registration which it withheld very apparently because of its own selfish interest in registering for itself ownership over the said shares at the expense of Vicente Ponce. 3. As to Vicente Ponce's claim of cash payment of P40,000.00 per Prudential Bank and Trust Company (PBTC) Check No. 504478, dated January 7, 1968, suffice it to say that this amount appears to have already been credited in his favor per complainants own Exh "T-1" when this amount appears to have been entered in his favor as of 1968. That this amount is separate and different from the payment on the aforementioned 1,640,000 is indicated by its independent but unexplained entry in the book as of September, 1968. Respondents' claim that the amount of P40,000.00 is part of the P1,640,000.00 worth of shares assigned by Julius Labrador in favor of Vicente Ponce is anchored on the alleged failure of Vicente Ponce to produce his receipts for the 1,640,000 shares. Standing alone, respondents' claim must fall. They have not presented any positive evidence to establish any reasonable identity between the P40,000.00 and the P1,640,000.00 shares. The burden of proof was on them to prove such identity. This they failed to do. Absent such proof, Vicente Ponce's failure to present receipts for the 1,640,000 shares cannot reasonably be taken against him. After all the burden of proof was not on him but on the respondents. 4. As to the claimed payment of P1,160,518.00 as per ICC Board Resolution No. 40-68 dated August 30, 1968 (Exh. "9-4-2") respondents admitted the credit in favor of Vicente Ponce but interposed the defense that such credit had been "reversed" on September 30, 1962 under Journal Voucher No. 106 (Exh. "9-F-4"). The P1,160,518.00 was payment by Pablo Floro in behalf of P. Floro and Sons, Inc. for certain MPCC (Mindanao Portland Cement Corporation) common shares of stock which P. Floro & Sons, Inc. received from Vicente Ponce (T.S.N. of February 22, 1990, pp. 57-61). The latter endorsed this amount to ICC and based on the said Board Resolution No. 40-68, the same was accepted and credited as paid common shares in favor of Vicente Ponce. Examination of said voucher shows, like the two vouchers mentioned earlier (Exhs. "8-H" and "8-C"), that the same is unsigned, unchecked and unapproved. The authenticity of the said document is highly doubtful. Consonant with this voucher, respondents refer to their Exh. "9-I" which appears to be a "Schedule of Paid-Up Capital Common, as of October 15, 1969" allegedly prepared by ICC's Chief Accountant, Ricardo Talusan. Respondents also cite in support of their reversal theory a list of ICC stockholders allegedly prepared by Julio Ponce, brother of Vicente C. Ponce in 1970. It is respondents' submission that since these two (2) documents do not reflect the P1,160,518.00 as payment for Vicente Ponce's subscription, then the said reversal was proper. I cannot fully go along with the respondents' reversal theory for the simple reason that the undisputed fact is that ICC had already accepted as of August 1968 the note in the amount of P1,160,518.00 as payment for common shares in favor of Vicente Ponce. The acceptance was made inspite of the alleged "condition precedent" supposedly contained in Board Resolution No. 40-68 (Exh. "JJ-1"). A close examination of this resolution shows that such acceptance was an accomplished fact insofar as the corporation was concerned. No condition was set on said acceptance. Hence, the use of the word "accepted". The phrase "where the former will supply cement to the latter", to my mind, was merely descriptive of the promissory note. It had nothing to do with ICC's acceptance of said promissory note. Otherwise, the Board could have easily stated so in their resolution. But the Board did not. Therefore, the acceptance by the Board of ICC must be deemed unconditional or unqualified. Now, as against this Board Resolution no legal or accounting authority has been cited by respondents as they probably found none, to give more credence to the combined and doubtful value of Journal Voucher No. 106 (Exh. "9-F-4") and Ricardo Talusan's and Julio Ponce's supposed certification or list. The Board Resolution, being the act of the corporation itself, naturally cannot be reversed simply by the separate acts of its individual officers. Noteworthy is the fact that respondents never presented Messrs. Talusan and Julio Ponce to testify on their alleged certification or list. Noted further is the fact that said certification or list are merely secondary evidence that are understood to be based on other primary evidence which respondents never bothered to present if only to corroborate said certification or lists. Aside from all these considerations, there is another matter that bears significant notice in relation to the foregoing discussion. In respondents' Exh. "9-H", complainant Vicente C. Ponce's paid-up stockholdings total "P1,170,518.00." This was admitted by the late Conrado Alcantara, a predecessor-in-interest of herein respondent Tomas Alcantara and Nicasio Alcantara. Conrado Alcantara joined ICC only in the middle or later part of 1968 (T.S.N. of February 13, 1985 p. 9). It would, therefore, appear that Conrado Alcantara first came into ICC between May and August 1968, and Board Resolution No. 40-68 was issued at a time when Conrado Alcantara had just joined ICC. While this Board Resolution was issued on August 30, 1968, the certification (Exh. "9-11" ) signed by Vicente Ponce as President, Edgardo Angara as Corporate Secretary and Conrado Alcantara appears to have been issued immediately the following day, August 31, 1968. Per complainants' Exh. "T-1", an explained entry in the amount of P10,000.00 was registered in favor of Vicente Ponce as of May 31, 1968. And respondent never offered any explanation as to this entry. It must be noted, however, that among the unrecorded payments claimed by complainant Vicente C. Ponce is the amount of P10,000.00 which is evidenced by ICC Official Receipt no. 010, dated August 23, 1967. It would therefore appear that the P10,000.00 payment which was allegedly unrecorded was actually recorded, except that instead of being recorded in 1967, the same for unexplained cause or causes was recorded only on May 31, 1968. That this P10,000.00 payment of Vicente Ponce and the P1,160,518.00 stock payment accepted by ICC were recognized and accepted by no less than the late Conrado Alcantara himself, not only because he is a signatory of Exh. "9-H" but more so considering the proximity of said transaction in relation to each other, appears indubitable as the sum of these two (2) amounts (P1,160,518.00 plus P10,000.00) is significantly equal to P1,170,518.00 the said paid-up shares of Vicente Ponce as of August 31, 1968 per respondents' Exh. "9-H". for these reasons, respondents reversal theory, perhaps unwittingly, creates another ground for its total rejection, that is, that the reversal and spurious/suspicious documents mixed with it were mere concoctions or manipulations to distort the truth and the correctly recorded facts of this case. The attendant inconsistencies, grave and substantial as they are, cannot invite even the benefit of doubt in favor of respondents' theory. Complainant Vicente Ponce must therefore be credited with the said P1,160,518.00 common shares including all its increments beginning as of the time the same was reversed or cancelled by ICC. prcd 5. As to complainant Vicente Ponce's payment of P800,000.00 for stock subscription per PBTC Check No. 50476, respondents assume that said amount was in payment of stock subscriptions of seven (7) stockholders (Memorandum of the respondents, page 34) as follows: DATE O.R. NO. STOCKHOLDER AMOUNT 06-01-67 001 Pablo Floro P150,000.00 06-01-67 002 Valeriano Floro 50,000.00 06-01-67 003 Edna Uichico 50,000.00 004 Julius Labrador 50,000.00 06-01-67 005 Lope Leonio 50,000.00 06-01-67 006 Nelia Ponce 100,000.00 06-01-67 007 Julio Ponce 50,000.00 012 Julius Labrador 300,000.00 T O T A L P800,000.00 Such assumption appears based on the apparent parity between the P800,000.00 total amount of the paid-up shares of the aforenamed stockholders and the P800,000.00 amount of the check. The ordinary course of business is that an official receipt is issued after payment is made. Following. respondents assumption, it would appear that ICC issued its Official Receipts Nos. 001, 002, 003, 004, 005, 006, 007 (all dated June 1, 1967 NOTE: Although no copy of O.R. No. 004 was presented in evidence, it is reasonable to assume that the same is also dated June 1, 1967 it being in between receipts of said date and there being no evidence to the contrary) before payment with Ponce's PBTC Check No. 50476 which is dated December 14, 1967. In any case, respondents' assumption would suggest that ICC issued its said official receipt not in the ordinary course of business. But respondents made no suggestion nor offered any explanation why ICC would not follow the ordinary course of business. It is therefore more reasonable to assume what the law presumes that the ordinary course of business has been followed. Consequently, respondents' assumption must be rejected as it is contrary to what the law presumes. The P800,000.00 payment of stock subscription evidenced by Exh. "LL", including all its increments, must, therefore, be credited in favor of Vicente Ponce beginning as of December 14, 1967. 6. As to complainant Vicente Ponce's claim of organizational expenses in the amount of P500,000.00 the same appeared to be supported by ICC Board Resolution No. 4-68 (Exh. "MM-2"). Respondents admit that said resolution was prepared and signed by Julio Ponce in his capacity as Acting Corporate Secretary. Since ICC is presumed to have a complete record of all its Board Resolutions or minutes of Board Meetings, it would have been very simple matter for it to have presented copies of its Board Resolutions or minutes of its board meeting spanning the period with which Ponce's Board Resolution No. 4-68 was issued in order to prove that the latter was in fact never issued by the ICC Board of Directors. But the latter did not. It should be noted that respondents' objection to the copy of the Board Resolution No. 4-68 (Exh. "MM-2") presented by Vicente Ponce is that the same is signed only by the Assistant Secretary. Respondents failed to show, however, that the original of said resolution which is presumed to be in respondent ICC's possession does not bear all the necessary signatures. Respondent's objection is, therefore, merely formal and does not serve the interest of substantial justice. Said resolution speak of pre-organization and promotion fees settled in the amount of P500,000.00. Considering that at the time said resolution was issued, ICC was owned only by the Ponce Group and Conrado Alcantara (who joined ICC only in 1968), the Conrado Alcantara (who joined ICC only in 1968), the said pre-organization and promotion fees could have referred only to the Ponce Group. Hence, the said P500,000.00 including all its fair increments should be credited to Vicente Ponce as of the time provided in Board Resolution No. 4-68 (Exh. "MM-2"). 7. As to Vicente Ponce's claim of P250,000.00 payment for his stock subscription, the same is admitted by respondents (Memorandum p. 39.). This amount is evidenced by ICC O.R. Nos. 0116, 0117, 0118, and 0121 (Exhs. "QQ", "RR", "SS" AND "UU", respectively). However, respondents claim that said amount was Ponce's loan with the Bank of Asia which C. Alcantara & Sons, Inc. had fully paid in behalf of Ponce. Respondents would refer to their Exhs. "12", "12-F", and "12-D" to support their claim. A close examination of Exh. "12" materially shows that it is indeed a loan advice by Bank of Asia to Vicente Ponce in the total amount of P250,000.00 but with a net proceeds only P244,313; that the loan is secured by a real estate mortgage valued at P480,868.00; that the promissory note covering said loan is numbered "BD-7035"; that the interest rate is 12%; that the maturity date of the loan is January 19, 1970; that the loan advice appears to be duly signed by the authorized officer of Bank of Asia. Examination of Exh. "12-F" shows that it is a promissory note form of Bank of Asia numbered "256" signed by Conrado Alcantara in behalf of C. Alcantara & Sons, Inc.; that the spaces provided for four (4) other signatories thereto are in blank; that it is for the amount of P250,000.00; that it is dated January 30, 1970; that the amount was released on April 30 1970; that the interest rate is 10 3/4% per annum; that An unsigned or uninitialed rubber stamp "Bank of Asia PAID May 12, 1970" appears on the lower left portion of the note; that the typewritten words, "Please credit proceeds of this Promissory Note to the loan of Vicente Ponce with Your Loan Department" appears to have been cramp or inserted between the last sentence of the body of the note and the typewritten "C. Alcantara & Sons, Inc." appearing on the lower right portion of the note. Exh. "12-D", upon the other hand, appears to be another unsigned, unchecked and unapproved voucher Journal Voucher No. 496, dated January 31, 1970, purporting to prove a transfer to C. C. Alcantara's advances of the cash advance given by Vicente Ponce in the amount of P250,000.00. It mentions that the transfer is per "VCP's Letter dated January 30, 1970". However, no such letter was presented in evidence. We find the above contention of the respondents to be untenable. Firstly, there is absolutely no reasonable proof of identity between Vicente Ponce's Loan No. 80-7035 with Bank of Asia (Exh. "12") and C. Alcantara & Sons, Inc.'s promissory note (Exh. "12-7"). on the other hand, there are considerable incompatibilities between the two: a. The Code Number of the promissory note are very strangely different from each other. While Ponce's promissory note appears as P. N. No. BD-7035, C. Alcantara & Sons, Inc.'s appears simply as P.N. No. 256. No explanation whatsoever was offered for this very strange difference. b. While Ponce's Loan or P. N. matured on January 19, 1970, C. Alcantara & Son's, Inc.'s P. N. appears to have been executed only on January 30, 1970. If the latter P. N. was really in payment of the first, then it (C. Alcantara & Sons, Inc.'s P. N. or Exh. "12-F") should have been executed not on January 30, 1970 but on January 19, 1970 the maturity date of the Ponce's loan, it being presumed that the ordinary course of business is the one followed by the parties thereto and that a person takes ordinary care of his concerns (rule 131, Sec. 3 of the Rules of Court). Secondly, Exh. "12-F" is patently of doubtful reliability. The typewritten entries and unsigned rubber stamp marking thereon cannot be said to have prepared in such a way as to make alteration or falsification difficult. The typewritten entries could have been made after the note was signed; while it is common knowledge that rubber stamps are a common fare even among sidewalk vendors in Metro Manila. Thirdly, it would prove that Alcantara's P. N, (Exh. "12-F') was actually consummated or paid is the unsigned and uninitialed rubber stamp marking thereon. The best evidence of such payment is of course the official receipt of such alleged payment. Such official receipt would naturally be in the possession of respondent ICC who supposedly accepted the credit in favor of the late Conrado Alcantara. Presentation of said official receipt would definitely be in respondents' favor. Why they did not present the same in evidence provokes suspicion that such official receipt probably does not exist and that it is likely that none was ever issued by the Bank of Asia as such payment was in fact, made. Fourthly, Exh. "12-D" clearly does not appear to have been prepared in a manner that makes fabrication or falsification difficult. Except that it appears to be a journal voucher from ICC, the three (3) spaces provided for its required signatories are all in blank. The reliability of this document is doubtful specially in the light of the attending suspicious circumstances. 8. As to Vicente Ponce's claim of P178,000.00 payment for stock subscription, which is evidenced by ICC Official Receipt No. 050, dated July 30, 1969, respondents attempt to explain that such was merely held by Engineer Ponce in trust for H. Weber (Memorandum, p. 38 par. 2). Respondents cite therein Exh. "11-E" which appears to be a Journal Voucher No. 667, dated August 31, 1970 to prove their contention. This voucher is again an unsigned, unchecked and unapproved voucher. It refers to an alleged "Deed of Assignment" by Vicente Ponce in favor of A. Weber, a copy of which is supposedly and conveniently not available as per the unidentified handwritten note appearing on said Exh. "11-E". As no such "Deed of Assignment" was presented in evidence and no explanation whatsoever was offered as to why a copy of the said deed (which would naturally be in ICC's possession) was not available, it results that said Exh. "11-E" is without any legal or factual basis. Respondents' claim that MBC Check No. 183028 was issued by ICC and not by Vicente Ponce (Memorandum, page 37) is belied by ICC's own Official Receipt No. 050 (Exh. "PP") wherein ICC recognized its receipt from Vicente Ponce of the amount of P178,000.00 thru the same check. It does not seem reasonable that ICC would acknowledge in the same official receipt accounts that are inconsistent with each other. The more plausible view is that both accounts contained in O.R. No. 050 which is in the name of Vicente Ponce belonged to the latter. The claim of Trust relationship between Vicente Ponce and H. Weber was therefore not supported by any convincing evidence. Hence, O. R. No. 050 must be held as binding on ICC. It is but just that Vicente Ponce must be credited with the said P178,000.00 payment of stock subscription including all its fair increments, beginning as of the time the same was debited for him. 9. As to Vicente Ponce's claim of P222,000.00 worth of preferred shares, respondents claim that these shares were only held in trust by Eng. Ponce in behalf of H. Weber and Theo H. Davies (Memorandum, p. 41). However, no document or testimony evidencing such trust relation was presented by respondents who failed to carry the burden of proving their assertion of such trust relation. Regarding the vouchers (Exhs. "13", "13-B", "11-E, "H-F", and "13-E-5") on which respondents mainly noted that all these vouchers are, like the several others discussed earlier, unsigned, unchecked and unapproved. They are, therefore, of doubtful reliability. ICC must, therefore, credit back to Vicente Ponce his P222,000.00 worth of preferred shares, including all its increments beginning as of the time the same was debited from him. 10. As to Vicente Ponce's claim of payment in the amount of P151,475.00 as per Exh. "KK-1", it may be noted that while respondents dispute Engineer Ponce's payment of this amount, they nonetheless admit the delivery of the 41,500 bags of cement by MPCC to ICC in 1968. (Memorandum, pp. 31-32). According to respondents, the subject amount was paid not by Engineer Ponce but by: a. Development Bank of the Philippines (DBP as per Exh. "10-A" P127,020.00 b. ICC directly to MPCC 24,455.00 TOTAL P151,475.00 Examination of Exh. "10-A", however, shows that the cement deliveries referred to therein pertain to deliveries made by MPCC to ICC "for the period covering April 18, 1969 to May 15, 1969. It, therefore, has no relation to Engineer Ponce's claim which refers to MPCC cement deliveries to ICC in 1968. With more reason that Exh. "10-D" cannot refer to Engineer Ponce's claim as said exhibit does not even refer to which particular account the same is to be considered as payment in full. llcd Exhibit "A", which is page 9 of ICC's stock and transfer book, relates to Vicente Ponce's recorded stockholdings. Outright, the recording appears disorderly. It would appear that complainant Ponce's first recorded stock subscription totals 1,591,543 shares. No date is indicated of the recording. However, this total subscription jibes exactly with those reflected on Exh. "9-H". Considering our earlier findings of unrecorded substantial payments made by Vicente Ponce, this Exhibit "A" is necessarily inaccurate and grossly misleading. A back accounting in accordance with the aforesaid findings is in order to correct the recorded stockholdings of herein complainants. All subsequent increases in the capital stock as well as subsequent issuances of shares which complainants were not able to avail of should be considered in the aforesaid back accounting as of the time they are supposed to have accrued. It follows, therefore, that the questioned acts of respondent corporation, including the reduction of the par value of its common stock from P1.00 to P0.25 in July, 1977, are void ab initio for failure to muster the required number of votes necessary to amend the articles of incorporation. It is worthy to note that the determination of quorum in the questioned acts of ICC unjustly failed to take into consideration the substantial unrecorded stockholdings of complainants. Anent complainants' second application for receivership, it is the general rule that extreme caution must be observed in granting a petition for appointment of receivers (Tuason vs. Concepcion, G.R. No. 32423, February 7, 1930, 54 Phil. 408). And before the grant of the remedy, the consequences or effects thereof should be considered in order to avoid causing irreparable injustice or injury to others who are entitled to as much consideration as those seeking it. (Lacson v. Hodges, G.R. No. L-1357, Febrero 9, 1948, 80 Phil. 216). While complainants, have been grossly wronged all these years especially by respondent corporations of which they are rightful owners to the extent of at least 50%, I feel that the necessity for the appointment of a receiver who would take over the administration of the corporate business of respondent corporation is not so clear, and that it is rather proper that appropriate precautionary measures be adopted instead for the protection of complainants' right and interest. As regards complainants' claim for damages, it is but just and appropriate that respondents be made liable therefore, not only in terms of actual or compensatory damages but more so in terms of moral damages, considering their malicious and willful acts that have caused not only mental anguish; sleepless nights and anxiety but also social humiliation and shame to complainants due to their having been illegally deprived of their participation in the management of the respondent corporation. WHEREFORE , judgment is hereby rendered, as follows: a) Declaring as null and void ab initio the reduction of the par value of the common shares of ICC from P1.00 to P0.25 in July, 1977; b. Declaring Vicente Ponce as owner of at least 50% of the total authorized capital stock of ICC; c) Directing ICC to make the corresponding correction in its stock and transfer book by recording therein complainant Vicente Ponce's unrecorded payments of 1) P511,000.00, 2) P1,640,000.00, 3) P40,000.00, 4) P1,160,518.00, 5) P800,000.00, 6) P500,000.00, 7) P250,000.00, 8) P178,000.00, 9) P222,000.00; including all its fair and consequent increments of their said unrecorded payments. The equivalent in shares of all these unrecorded payments shall be computed based on a par value of P1.00 per share. d) Denying complainants second application for receivership. However, in order to protect the interest of both complainants and respondents pending finality of the resolution of this case, it is hereby ordered that: 1. Complainant Vicente C. Ponce shall have free access to Iligan Cement Corporation, and all its books and records, personally and/or thru his duly authorized representatives; 2. Decisions of the Board of Directors and/or management of Iligan Cement Corporation shall be made known to complainant Vicente Ponce who shall have the right to object and if so, the matter shall be referred to this Commission for the latter's resolution; in the interim, pending objection, the decision shall not be enforced or made operative. Complainant Vicente C. Ponce shall have a period of five (5) days from notice of the decision of the management within which to submit his objections, otherwise, he shall be deemed to have waived his objection to the decision. 3. Ordering respondents, jointly, severally, to pay complainants the sum of P1,000,000.00 as moral damages, P500,000.00 as exemplary damages, and P500,000.00 as attorney's fees. prLL SO ORDERED. (SGD.) ALBERTO P. ATAS Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .