Samcesala vs. Marcelo V. Hernandez, et al.

[SEC-SICD * CASE NO. 2568. May 22, 1986.] SAN MIGUEL CORPORATION EMPLOYEES SAVINGS AND LOAN ASSOCIATION, INC. , petitioners , vs .MARCELO Y. HERNANDEZ, ET AL. , respondents . D E C I S I O N This is a petition alleging, among others, that despite the ouster of respondents Marcelo Hernandez and his son, Roland Hernandez, as President and Secretary, respectively, of the San Miguel Corporation Employees Savings and Loan Association, Inc. (SAMCESALA),they refused and failed to vacate their positions and to render an accounting of the advances given to respondent Marcelo Hernandez by SAMCESALA, which sum should be paid to the developers in connection with the association's housing project. Petitioners, therefore, pray that a preliminary injunction be issued and after trial to make the injunction permanent, for respondents to desist from occupying the positions of President and Secretary and for respondent Marcelo Hernandez to render an accounting. Respondents made material specific denials in their answer and filed a counter-petition. Counter-petitioners Marcelo Hernandez, Rolando Hernandez and Clarita Sese through counsel impleaded eight counter-respondents, namely, Manuel Corrales, Miguel Manuel Garcia, Alfredo Pingol, Antonio de las Alas, Jr.,Mariano Pineda, Antonio Silva, Andres de la Cruz, and Alvarado Simbulan. Counter-petitioners allege the following, among others, that counter-respondents Corrales, Garcia, and Pingol have unlawfully usurped and performed the positions of directors and officers particularly as President as well as Treasurer; that the counter-respondents' claimed election to the Board of Directors of SAMCESALA was without legal basis due to the specific indication in its duly registered Articles of Incorporation and By-laws that the number of its directors shall be five (5) and not seven (7);that there was no duly approved and registered amendment to the Articles of Incorporation and By-laws of SAMCESALA increasing the number of membership of its board of directors from five to seven directors. Neither was there any valid call and meeting for this purpose. Moreover, the patent illegality in the board composition makes such election of directors as well as election of officers by the Board as invalid. On the basis of the foregoing allegations, respondents pray for the dismissal of the petition and as counter-petitioners, they pray that the Commission find the articles of incorporation and by-laws of SAMCESALA as originally filed and recorded in the Securities and Exchange Commission as not amended; declare illegal and without force and effect the constitution, election and membership of the seven-man Board of Directors composed of the herein counter-respondents, and ruling that counter-petitioners Marcelo Hernandez, Roland Hernandez, and Clarita Sese continue to be the legal and incumbent lawful members of the five-man board of directors of said association, entitled to hold the position they had been elected as Chairman and President, Vice-Chairman and Vice President, Secretary and Treasurer respectively. dctai When the provisional remedy of injunction was set for hearing, counsel for petitioners manifested that with the holding of the annual election last January 30, 1984, the prayer for a writ of preliminary injunction has become moot and academic. Consequently, he moved for the cancellation of the hearing for the application for a writ of preliminary injunction. subsequently, the motion was granted. Issues having been joined, a preliminary conference was set. On November 27, 1985, an order was issued declaring the petitioners non-suited for their failure to appear in the preliminary conference despite due notice. As a result, the petition against respondents Marcelo Hernandez and Roland Hernandez was dismissed while the counter-petition together with the evidence presented ex-parte is deemed submitted for resolution. Testimonial and documentary evidence of counter-petitioners show that SAMCESALA has been issued a certificate of registration (Exh. "B") together with the articles of incorporation (Exh. "D"). The sixth article thereof provides that the number of directors of the said corporation shall be five. Moreover, the by-laws, particularly article V thereof (Exh. "E-5 (a)" states that the business and property of the association shall be managed by a board of five directors. The Corporate Secretary's Certificate dated February 3, 1983 indicated the names of the following five directors as incumbent directors and officers of the corporations for the year 1983-1984: Marcelo Hernandez as Chairman of the Board and President, Manuel Corrales as Vice Chairman of the Board and Vice-President, Deodolfo Garcia as Director, Alfredo Pingol as Director-Secretary and Roland Hernandez as Director. The minutes of the meeting held on November 10, 9183 (Exh. A) showed that Manuel Corrales had represented himself as President and Director when in fact he was no longer President and Director on such date for he was actually considered terminated in his position in accordance with the minutes of October 10, 1983 (Exh. I). The said minutes cites Sec. 18-b of the Savings and Loan Act as a ground for his termination having extended a loan to a co-director without Central Bank permission. On the other hand, Alfredo Pingol was no longer a member of the association on May 18, 1983 as indicated in the minutes of the board of directors of the same date (Exh. G). Page 2 of the same minutes states that Alfredo Pingol withdrew his entire capital contribution thereby terminating automatically his membership in the association. Miguel Manuel Garcia was dismissed as Treasurer of the Association as appearing in the minutes of the Board meeting of November 10, 1983 (Exh. J). As to all other counter-respondents, their act of usurpation is reflected in their formal advice to the management of San Miguel Corporation regarding their purported election and appointment on January 13, 1984 and the appointment of a non-member, Atty. Alvaro Simbulan as Secretary of the association contained in a letter dated February 3, 1984 (Exh. E). The issues revolve on, first, who constitute the legitimate set of directors and officers of the association, and secondly, whether or not the original articles of incorporation and by-laws have been amended. LLphil On the matter of the legitimate set of directors and officers, the minutes of the regular meeting of the board held in November, 1983 indicated that Mr. Garcia took the initiative to immediately reconvene the regular directors meeting, which was abruptly adjourned by the then President Hernandez. the pertinent legal provision in point is Sec. 54 of the Corporation Code, which states that "The president shall preside at all meetings of the directors or trustees as well as of stockholders or members unless the by-laws provide otherwise. Going over its by-laws, specifically Article VI par. 20 thereof, succinctly requires that the President shall be the presiding officer of the Board of Directors and at all meetings of the members. The act of counter-respondent Garcia who is not the President, in reconvening the meeting was not in order. He should have filed a petition with this commission for an order to be issued directing him to call a meeting of the corporation after due notice pursuant to law. The petitioning stockholder shall preside thereat until at least a majority of the stockholders or members are present have chosen one of their member as presiding officer. Thus, the election of the counter-respondents as directors and officers in November, 1983 is not in conformity with the law. As a result thereof, the legitimacy of the election of directors and officers last January 30, 1984 becomes doubtful. Vis-a-vis the second issue on whether or not the original articles of incorporation and by-laws remain unamended, corporate records on file with the Commission show that there were amended articles of incorporation and amended by-laws filed on February 14, 1985 as well as earlier amended articles of incorporation filed on May 21, 1984. The Commission through the Corporate and Legal Department made indorsements to the Central Bank of the Philippines requesting the bank for its comments and recommendation thereon. To date, neither comment from the Central Bank nor further action from this commission can be gleaned from the files. Under the Corporation Code, particularly Sec. 48 thereof, it states that the amended by-laws shall only be effective upon the issuance by the Securities and Exchange Commission of a certification that the same are not inconsistent with this Code. Furthermore, Sec. 17 thereof also provides that no articles of incorporation or amendment thereto of a Savings and Loan Association may be accepted or approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency, which in case it the Central Bank to the effect that such articles or amendment is in accordance with law. In the absence of any issuance of a certification by this Commission that the amended articles of incorporation and the amended by-laws are not inconsistent with the Corporation Code, the original articles of incorporation and by-laws are considered unamended. PREMISES CONSIDERED, the reconvening of a meeting for a new president of SAMCESALA on November 10, 1983 as well as the subsequent election of directors and officers therein on January 30, 1984 are not in accordance with law. Moreover, the original articles of incorporation as well as the corporate by-laws of SAMCESALA remain unamended. SO ORDERED. (SGD.) JOSEFINA L. PASAY-PAZ Hearing Officer