John Tan Tiong Ky, et al. vs. Fortune Health Care, Inc., et al.

[SEC-SICD * CASE NO. 2600. March 31, 1987.] JOHN TAN TIONG KY, ET AL. , petitioners , vs . FORTUNE HEALTH CARE, INC., ET AL. , respondents . D E C I S I O N In their petition filed with this Commission on March 29, 1984, petitioners prayed for dissolution of respondent corporation and in support thereof alleged, inter alia, that the respondent corporation was organized under the laws of the Philippines on April 22, 1981, primarily to operate, manage and maintain a hospital; that the petitioners and respondents were the incorporators and the members of the Board of Directors, except Felix Dy, who is only a stockholder but not a director; that in 1981, the respondent corporation incurred a loss of P124,995.57, while in 1982, it made a net income of P1,757.75; that for 1983, the business of the corporation became so bad that the monthly income was not even enough to cover the monthly operational expenses; that in February, 1984, the respondent corporation has yet no money to pay the salaries of the staff and an overdue obligation in the amount of P42,357.64; that respondent Alexander Chan, who owns 42% of the respondent corporation, agreed in principle to the dissolution of the corporation; that on March 24, 1984, petitioner John Tan Tiong Ky U. Chua, Chairman of the Board of Directors, called for a stockholders' meeting but only Alexander Chan attended the meeting and moved for the adjournment of said meeting; that in view of the fact that the respondent corporation could no longer operate for lack of operating funds and considering that no meeting could be held for failure of the respondents to attend meetings called, to prevent further losses and incur more liabilities, petitioners prayed for the dissolution of the corporation. Respondents, aside from making admissions and denials, interposed a counterclaim based on the alleged mismanagement of petitioner John Tan Tiong Ky Chua, consisting of coming to office only once a week and staying only for 15 minutes each visit; finding faults and giving out criticisms against hospital personnel and staff; gross negligence in handling hospital affairs; working in a manner prejudicial to the interest of the corporation; and on February 29, 1984, without the approval of the Board of Directors, padlocked the hospital and stopped the operations of the corporation. Respondents having filed their answer, the case was set for preliminary conference hearing. After several postponements, petitioners filed on November 19, 1985, a motion for leave to amend petition, attaching thereto the Amended Petition. The motion was set for hearing on December 4, 1985. Notwithstanding the fact that counsel for the respondents was furnished copy of the motion for leave to amend petition and the Order setting the motion for hearing on December 4, 1985, he failed to appear. Hence, in the Order dated December 4, 1985, the motion was granted and the Amended Petition admitted. The Amended Petition, aside from reiterating the prayer for dissolution of the corporation, prayed for damages representing expenses incurred by petitioner John Tan Tiong Ky Chua in Civil Case No. 84-23750 of the Regional Trial Court of Manila in a complaint filed by Madonna Maternity Hospital and School of Midwifery against respondent corporation and for authority to compromise actions against the corporation. Since the admission of the Amended Petition on December 4, 1985, and notwithstanding receipt of the Order admitting the Amended Petition, up to April 15, 1986, respondents have not filed any new answer. Upon petitioners' motion, the case was set for hearing on April 29, 1986. Notwithstanding due notice, counsel for the respondents failed to appear. Petitioner John Tan Tiong Ky Chua testified that notwithstanding attempts to dissolve the corporation voluntarily, respondent Alexander Chan and his group sabotaged said attempts; that he cannot obtain the required number of shares or stocks for the dissolution of the corporation because the shares are equally divided between his group and that of the respondents; that because of tremendous losses, the corporation ceased to operate in 1984; that respondent corporation and Madonna Maternity Hospital entered into a management agreement (Exh. "A") for a period of five (5) years beginning March 1, 1981, up to February 28, 1986, whereby, for a graduated monthly fee starting with P2,000.00 to be paid by the former to the latter, respondent corporation undertook the management and operation of the hospital; that because of the cessation of operation, Madonna Maternity Hospital sued the respondent corporation for the collection of P100,000.00 covering the monthly fee for the two years unused portion and other damages; that in defending the suit against the corporation, petitioner has paid his lawyer an attorney's fees in the amount of P50,000.00 (Exh. "C") by way of acceptance fee and the further total amount of P250,000.00 (Exhibits "D" to "B-10") as appearance fees; petitioner Chua further testified that he has to pay his attorney P25,000.00 upon the termination of the civil suit; that he paid the amount of P6,000.00 to a certain Andres Bordilla, as guard fees for the safekeeping of the assets of the corporation (Exh. "B"); P5,000.00 was paid to Reynaldo Batoon of the Regional Trial Court of Manila, for his services in supervising the removal of the corporate assets from the premises of Madonna Maternity Hospital (Exh. "B-1") and another P5,000.00 was paid to Mrs. Clarita P. Marcos as professional fee in the audit of the respondent corporation (Exh. "B-2"); that up to the present, petitioners are suffering damages in the form of warehousing charges, as the assets of the corporation were stored in a warehouse in Binondo, Manila and for guarding fees; that all the expenses incurred by petitioners, as well as public embarrassment and ridicule could have been avoided had respondents voluntarily agreed to the dissolution of the corporation, instead of sabotaging any attempt to dissolve the corporation. The corporation was organized and registered on April 22, 1981, primarily to operate, manage and maintain a hospital, as it did, in fact, manage and operate the Madonna Maternity Hospital but because of lack of funds, it ceased to operate in the month of March, 1984. The corporation has only (8) stockholders and transfer of shares is restricted to existing stockholders. Neither group would want to buy or sell out to the other. The corporation opted to cease operation to prevent further losses. From the above-stated facts, it become apparent that no stockholders' or directors' meeting could be conducted for the purpose of even discussing the dissolution of the corporation in view of the fact that the total shareholdings in the respondent corporation is equally divided between the petitioners' group and that of the respondents. It is likewise a fact that the management contract (Exh. "A") between the respondent corporation and Madonna Hospital expired in the month of March, 1984, and the respondent corporation ceased to operate in 1984. Records of the respondent corporation show that it has not filed its 1) General Information Sheet since 1984, 2) Minutes of Directors Meeting since 1984, 3) Financial Statements since 1982. Under Sec. 6, par. (a) of P.D. No. 902-A, one of the grounds for the revocation of franchise of a corporation is failure to file the required reports with the Commission. For the failure of the respondent corporation to file the required reports above, its franchise should already be revoked. Moreover, it can be safely presumed that even the future reportorial requirements will not be submitted. Adding strength to the revocation of franchise or dissolution of the respondent corporation is the fact that the serious predicament such as, among others, want of operation, committed by the respondent corporation constitutes or threatens to constitute more substantial injury to the public. WHEREFORE, the Fortune Health Care, Inc., is hereby DISSOLVED. Petitioner John Tan Tiong Ky is hereby appointed as the Receiver and to act as such for a period of three (3 years) from the finality of this decision. The Receiver is charged of collecting all that is due the corporation and the payment of its just debts. SO ORDERED. (SGD.) FELIPE S. TONGCO Hearing Officer