Marcos Valle, et al. vs. Lino Buhain, et al.

[SEC-SICD * CASE NO. 2521. May 8, 1987.] MARCOS VALLE, ET AL. , petitioners , vs .LINO BUHAIN, ET AL. , respondents . D E C I S I O N This Petition seeks to: (1) annul the By-Laws of petitioner Malabon Fish Brokers Association, Inc. (MFBAI, for short) purportedly adopted on August 18, 1983 and approved by this Commission on September 7, 1983, and recall the Certificate issued in connection thereto; (2) give due course to the By-Laws purportedly adopted on August 13, 1983; (3) declare the petitioners as the duly elected members of the Board of Directors and Officers of MFBAI; and (4) make the writ of preliminary injunction issued in this case permanent and perpetual. Petitioners alleged, inter alia, that as of August 13, 1983, MFBAI has sixty four (64) active and living members; that in a membership meeting held on August 13, 1983 at Malabon, Metro Manila, where a quorum existed, a Code of By-Laws was adopted and approved by the affirmative vote of the majority of the members; that in the same meeting, the following were elected members of the Board of Directors, namely: Marcos Valle, Dominador Cruz, Jr.,Rogelio Vicente, Danilo Tiangco, Restituto Santos, Renato Cruz, Alberto Nepomuceno, Marcos Valle III, Narciso Sunga, Generoso Maquirang and Ildefonso de Guzman; that the following were elected officers, to wit: Marcos Valle-President, Alberto Nepomuceno Vice President, Dedicacion Plata Secretary, Carmelita Manlapaz Treasurer; that, upon the other hand, one Marilou Sales Lim, acting upon the instance and direction of respondent Lino Buhain, sent out notices to some members of MFBAI informing the latter that on September 17, 1983 an organizational meeting will be held to elect the members of the Board of MFBAI that petitioners discovered at said meeting which was, however, postponed or adjourned, that a Code of By-Laws purportedly approved and adopted on August 18, 1983 by the affirmative vote of at least a majority of all the members of MFBAI had been filed with this Commission on August 22, 1983, upon the instance, direction and certification of herein respondents; that respondents Lino Buhain, Brigida Bautista and Linda Sioson had illegally assumed, and are still illegally assuming, the positions of President, Secretary and Treasurer, respectively, of MFBAI. On the other hand, respondents averred, among others, that they are the true members and officers of MFBAI; that the petitioners are the ones illegally assuming and misrepresenting themselves to be members and officers of MFBAI; that MFBAI has only forty two (42) legitimate members; that among the petitioners, only Marcos Valle, Dominador Cruz, Jr.,Rogelio Vicente, Danilo Tiangco and Renato Cruz are members; that sometime in March, 1980, the members of MFBAI held a special meeting and elected petitioner Marcos Valle as President, Brigida Bautista as Vice-President, Felix Siochi as Secretary, Linda Sioson as Treasurer and Lino Buhain as Auditor; that on April 23, 1981, another special meeting for the election of MFBAI's officers was held and the following were elected, namely: Virgilio Sarmiento as President, Lino Buhain as Vice-President, Brigida Bautista as Secretary and Linda Sioson as Treasurer; that on March 5, 1982, a meeting was held where they resolved for the retention of the said officers but elected anew members of the Board; that on May 31, 1983, Virgilio Sarmiento tendered his irrevocable resignation as President of MFBAI and then Vice-President Lino Buhain took over and acted as President from June 1, 1983 up to the present; that Marilou Sales Lim is authorized and legally representing the MFBAI; that the organizational meeting for the election of the members of the Board of Directors and Officers of MFBAI which was called on September 17, 1983 did not materialize due to the presence of non-members who claimed that they were new applicants; that the By-Laws filed by the respondents before this Commission was adopted by the majority of the legitimate members on August 18, 1983. On September 23, 1983, a Temporary Restraining Order was issued, and on October 20, 1983, after several hearings, the Commission issued a Writ of Preliminary Injunction enjoining the respondents from holding any membership or directors' meeting and from assuming the positions of directors and/or officers of MFBAI until further orders from this Commission. On November 15, 1983, however, a petition for certiorari by way of review/reconsideration of the said Order of this Commission, dated October 20, 1983, was filed by the respondents with the Commission en banc. On January 16, 1984 ,the Commission en banc issued an Order enjoining us from enforcing our said Order dated October 20, 1983 and from further proceedings in the instant case, the dispositive portion of which reads: "...enjoining Hearing Officer Rolando C. Malabonga, SICD and petitioners Marcos Valle, Alberto Nepomuceno, Dedicacion Plata and Carmelita Manlapaz from enforcing the Order of October 20, 1983 in SEC Case No. 2521 and further proceedings therein, until further orders of the Commission en banc". On March 9, 1984, the Commission en banc again issued an Order lifting the injunction, but only against further proceedings in the instant case, the dispositive portion of which states: "WHEREFORE, premises considered, petitioners' Motion for Reconsideration and Manifestation should be, as they are hereby, GRANTED, but only insofar as the proceedings in SEC Case No. 2521 are enjoined. The injunction against further proceedings in SEC Case No. 2521, therefore, is hereby LIFTED, and the Hearing Officer hereby directed to proceed with the case". Thereafter, the Commission immediately set the instant case for hearing and resolved the numerous incidents that cropped up from the time this case was elevated to the Commission en banc. At the preliminary conference held on September 19, 1985, the parties stipulated and admitted the membership in MFBAI of the thirty-four (34) original members as contained in the list of members of MFBAI filed before this Commission on April 7, 1980 namely: 1. Ernesto Aquino 18. Renato Cruz 2. Florescinda J. Soyangco 19. Eduardo R. del Rosario 3. Dominador G. Cruz, Jr. 20. Valentin F. Ronquillo 4. Rosalinda Reyes 21. Angelina C. Alcantara 5. Remedios Cacnio 22. Erlinda G. Sioson 6. Felix C. Siochi 23. Jose V. Cruz 7. Belly Symaco 24. Araceli Banaag 8. Norma Symaco 25. Maria Cruz 9. Rogelio A. Vicente 26. Marcos C. Valle, Jr. 10. Rufino C. Vicente 27. Marcos Valle III 11. Ernesto F. del Rosario 28. Edgardo Serna 12. Rosa Mendoza 29. Primitivo Serrano 13. Bidang Bautista 30. Constantino Lopez 14. Lino R. Buhain 31. Rody Symaco 15. Ernesto S. Santos 32. Juanito Olorvida 16. Danilo Oliveros 33. Gener Bautista 17. Danilo Tiangco 34. Ramon L. Luna The parties likewise agreed that the issues to be resolved are: 1. Who are the other legitimate members of MFBAI aside from the thirty-four (34) original members previously acknowledged or admitted by the parties? 2. Who were the legitimate or legally elected directors and officers of MFBAI for the year 1983? 3. Whether or not the meeting of the sixty-four (64) alleged members of MFBAI on August 13, 1983 was valid, and corollary to that is whether or not the by-laws filed by the petitioners has been legitimately approved by the general membership of MFBAI. Another issue posed before us is whether or not the By-Laws filed by the respondents, which was approved by this Commission on September 7, 1983, has been adopted by a majority of its members on August 18, 1983. As culled from the records, it appears that MFBAI was registered as a non-stock corporation on April 17, 1980 with the following as incorporators/directors, namely: 1. Marcos Valle 6. Brigida Bautista 2. Dominador Cruz, Jr. 7. Virgilio Sarmiento 3. Felix C. Siochi 8. Linda Sioson 4. Rogelio Vicente 9. Lino Buhain 5. Ernesto del Rosario 10. Danilo Tiangco 11. Renato Cruz and with respondents Linda Sioson and Felix Siochi as Treasurer and Secretary, respectively. Article NINTH of the Articles of Incorporation of MFBAI reads: "That the persons whose names and signatures appear herein as incorporators of this corporation comprise the original members of the "MALABON FISH BROKERS ASSOCIATION",and that additional list of members hereto shall be filed from time to time or as often as may be required by the Securities and Exchange Commission." From the foregoing, it is thus clear that at the beginning of the existence of MFBAI, it has already thirty-five (35) original members composed of the eleven (11) incorporators and those whose names appear in the aforesaid list of thirty-four (34) members. The names of the incorporators of MFBAI, except Virgilio Sarmiento, are listed in the aforesaid thirty-four (34) members thus making a total of thirty-five (35) original members. Regarding the admission of new members, Article SEVENTH of the Articles of Incorporation of MFBAI provides: "...the membership of the Association shall initially be limited to legitimate fish brokers, formerly operating at the Malabon Central Market, but shall admit new applicants for membership from fish brokers presently operating at the Neptune Fish Market, upon such uniform terms and conditions as may be prescribed by the by-laws or the Board of Directors." It is, therefore, clear that the manner of admitting new members depends upon the terms and conditions which may be prescribed by the by-laws or the Board of Directors. The pertinent provisions on membership are found in Sections 1 and 2, Article II of the By-Laws of MFBAI which states: "SECTION 1. Qualification for Membership . Only Filipino citizens, of legal age and residents of the Philippines can apply as members of the association. He/She must have the necessary license and permit to operate as fish broker and/or ice dealer in Malabon, Metro Manila". prcd "SECTION 2. Limitation as to membership . Members of the association prior to incorporation shall be limited to its original number and the decision of the majority of these members shall prevail regarding the acceptance of new applicants. It shall be the Board of Directors to formulate rules and regulations and additional qualifications which shall govern and cover new member-applicants in case the original members decide on accepting them as such" Verily, the Board of Directors of MFBAI will have to formulate rules and regulations and provide additional qualifications for membership should the thirty-five (35) original members decide to accept new members. And the decision of the majority of the thirty-five (35) original members shall prevail regarding the acceptance of new applicants. Likewise, prospective applicants will have to apply as members of MFBAI. Although the petitioners have manifested during the preliminary conference that they will present, and prove the membership of, at least thirty (30) more persons whom they claimed to be MFBAI's members, only five (5) out of said number, namely: Ildefonso de Guzman, Dedicacion Plata, David Sengco, Narciso Sunga and Dominador Mendoza, were presented by them. However, nowhere from the testimony of these five (5) witnesses will show that the original members of the Board of Directors of MFBAI have met to formulate rules and regulations which shall govern the selection and admission of new members. Moreover, there was no showing that at least a majority of the thirty-five (35) original members of MFBAI have convened and decided to accept applicants for membership, even prior to the approval by this Commission of its By-Laws on September 7, 1983 or before the alleged membership meeting held on August 13, 1983. Furthermore, the evidence does not show that the said five (5) witnesses have applied for membership in MFBAI. Some of these five (5) witnesses had testified that they became members of MFBAI because the petitioner, Marcos Valle, had accepted them as members. Nevertheless, they failed to show proof that petitioner Marcos Valle, who is one of the original members of the Board of Directors of MFBAI, was authorized by the majority of the original members thereof, or the majority of the original members of its Board of Directors, to accept applicants for membership. Fundamental is the rule that a corporation can act only through its board of directors. Section 23 (formerly Section 28 of the Corporation Law, Act 1459) of the Corporation Code of the Philippines (Code, for short) provides that "Unless otherwise provided in this Code, the corporate powers of all corporations formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or trustees . . . ". The admission of members is one corporate power expressly granted under Section 36 (6) of the Code. And membership in a non-stock corporation cannot be acquired except in the particular manner or mode of acquiring the same, as provided for in its valid by-laws. (12-A Fletcher, pp. 579-583-585). Therefore, the act of accepting applicants made by petitioner Marcos Valle will not bind MFBAI. On the other hand, while the respondents claimed that MFBAI has forty-two (42) members, including the thirty-five (35) original members therein, this fact was likewise not proven during the trial. As regards Virgilio Sarmiento, who is one of the incorporators/ directors of MFBAI whose name does not appear in the aforesaid list of members, there was no showing that his membership therein has been terminated in one way or another. Hence, we find that since its incorporation, MFBAI has not accepted any new member and, therefore, it has only thirty-five (35) legitimate members including that of Virgilio Sarmiento. The second and third issues are quite interrelated and thus can be resolved jointly. From the evidence on hand, it appears that there was but one meeting for the election of the members of the board of directors and officers of MFBAI that took place in 1983 and that was the alleged membership meeting conducted by the petitioners' group held on August 13, 1983. Said meeting, however, was not attended by the majority of the aforesaid thirty-five (35)legitimate members of MFBAI; hence, there was no quorum (Section 52, Code). In fact, most of those present then were non-members. Therefore, since there was no quorum, it follows that all actions taken in said meeting, including the alleged adoption of by-laws by the petitioners' group, are not valid. On the contrary, the respondents have categorically stated, in their answer, that the organizational meeting for the election of the members of the Board of Directors and Officers of MFBAI, which was supposed to be held on September 17, 1983, did not proceed. Accordingly, We hold that there were no legally elected directors and officers of MFBAI for the year 1983, and the by-laws purportedly adopted on August 13, 1983, filed by the petitioners, has not been legally adopted and approved by the general membership of MFBAI since the meeting of the sixty-four (64) alleged members held on August 13, 1983 was not valid. Anent the fourth issue, our records show that the By-Laws of MFBAI was adopted by the majority of its members on August 18, 1983, certified to by a majority of the original members of its Board of Directors and countersigned by its Corporate Secretary, Brigida Bautista. Said By-Laws was filed with, and approved by, the Commission on September 7, 1983 pursuant to the provisions of Section 46 of the Code. We do not agree with petitioners' claim that MFBAI's By-Laws which was filed by the respondents has not been approved and adopted by the affirmative vote of at least a majority of all the members of MFBAI. Petitioners would have been correct in their contention had there been either sixty-four (64) or forty-two (42) MFBAI's members at the time of the adoption of said By-Laws. That is so since the signatories in said By-Laws are only twenty-one (21) members. But that is not the case. The Commission has already ruled that from the time of its inception up to this moment, MFBAI has only thirty-five (35) legitimate members and the clear majority of which is eighteen (18) members. Besides, the presumption of the validity and regularity in the adoption of the said By-Laws lies in favor of the respondents. The petitioners failed to disprove said presumption. In the light of all the foregoing and in order to avoid a discontinuity or gap in the management or conduct in the affairs or business of MFBAI, We are now constrained to make a pronouncement on who, in the meantime, should manage the affairs or business of MFBAI pending the holding of the elections of the members of the board of directors and officers of MFBAI which should be held at the earliest possible time. Consistent with our rulings, the Members of the Board of Directors appearing in the Articles of Incorporation of MFBAI shall hold office until their successors are elected and qualified. As regards the officers of MFBAI, respondents Lino Buhain and Brigida Bautista shall act as President and Secretary of MFBAI, respectively, since they were duly recognized by the majority of the said Members of the Board of Directors appearing in the Articles of Incorporation as shown by the Certification accompanying MFBAI's By-Laws and the Minutes of the Meeting held on August 18, 1983, the date when the By-Laws of MFBAI was adopted by the majority of its members. Respondent Erlinda Sioson shall act as Treasurer, being the designated Treasurer whose name appears in the Articles of Incorporation. These three (3) officers shall likewise hold their respective offices until their successors are elected and qualified. WHEREFORE, judgment is hereby rendered, as follows: 1) Dismissing the petition; 2) Dissolving the Writ of Preliminary Injunction issued by this Commission on October 20, 1983, and, 3) Directing the hold-over officers to call for a membership meeting within thirty (30) days from finality of this decision for the purpose of electing the new Board of Directors and Officers of the Malabon Fish Brokers Association, Inc. No pronouncement as to costs. SO ORDERED. (SGD.) ROLANDO C. MALABONGA Hearing Officer