Jose P. Rafols, Sr. vs. Sibale Academy, Inc., et al.

[SEC-SICD * CASE NO. 2692. April 21, 1987.] JOSE P. RAFOLS, SR. , petitioner , vs .SIBALE ACADEMY, INC. ET AL. , respondents . D E C I S I O N This refers to the petition filed by Jose Rafols, Sr.,dated September 25, 1984, seeking to cancel and revoke the alleged sale of Five Hundred Seventy (570) unsubscribed shares of stock of respondent Sibale Academy, Inc.,and to exercise the right of pre-emption as stockholder and to disqualify respondent Rev. Fr. Dennis McKillip from holding several positions in said corporation. In his petition, petitioner alleged, among other things, that he was the founder, organizer and the first President of the respondent corporation and thereafter became a member of the Board of Trustees and stockholder at the same time; that sometime in September 1979, respondents fraudulently conveyed and transferred Five Hundred Seventy (570) unissued shares of stock to the Catholic Bishop of Romblon without prior consultation and approval from the stockholders; neither was there a valid resolution duly approved and adopted by the legitimate stockholders nor did respondents secure approval from this Commission; that respondent Rev. Fr. Dennis McKillip, parish priest of Concepcion, Romblon has acquired more than sixty (60%) of the total registered capital stocks of respondent corporation; that the Catholic Bishop of Romblon is a mere dummy of the herein respondents; that Rev. Fr. Dennis McKillip, by virtue of his controlling shares of stock, was able to gain control of the Academy by putting his own men, who composed the members of the Board of Trustees and was able to run the Academy, occupying such positions as school director, treasurer, auditor, principal and member of the Board of Trustees, in clear violation of Section 8, Article 15 of the Philippine Constitution, and Section 9-a * of the Anti-Dummy Law as amended by P.D. 175 *, that the legitimate stockholders had been deprived of their rights under the Corporation Code brought about by the fraudulent sale of the 570 unissued shares of stock by respondents to the prejudice of the former. By way of an answer, respondent corporation categorically admitted having sold, conveyed and transferred the 570 shares of stock referred to in the petition but specifically and vehemently denied that the said sale, conveyance and transfer was fraudulent, the same having been the subject of a resolution duly approved in a lawful meeting of the stockholders and trustees and subject of a letter/application addressed to the Securities and Exchange Commission. Respondent, likewise, denied the allegations that respondent Fr. Dennis McKillip, SVD, was able to gain control of respondent school by putting his own men, who composed the members of the Board of Trustees and was able to run the offices of the school, occupying such positions as school director, treasurer, auditor, principal and member of the Board of Trustees all at the same time, the truth being that he is only a member of the Board of Trustees, having been elected as such in a meeting lawfully convened and conducted. And by way of special affirmative defenses, respondent raised the issue of laches, the petition having been filed after more than five (5) years from the approval of the shares of stock under question. The issues involved in this case as agreed upon by the parties are as follows: a. Whether or not the additional issuance of 570 shares from the unsubscribed capital stock is valid; and, b. Whether respondent Fr. Dennis McKillip can validly hold two or more positions in respondent Sibale Academy. During the reception of evidence for the petitioner, he merely affirmed the contents of his petition and in addition thereto, he testified that he discovered the alleged sale only in March 1980. To believe the testimonies of petitioner, respondent presented three witnesses among whom were the former President and Secretary of respondent Sibale Academy, Inc. at the time the questioned shares were offered for sale sometime in 1978. From the adduced testimonies of the former President, Mr. Prospero F. Fabregas, and the former Secretary, Mr. Cayetano Ferranco, it was established, among other things, that: 1. Out of 570 shares referred to in the petition, only 470 shares were actually classified unsubscribed shares; 2. Petitioner Jose P. Rafols was a member of the Board of Trustees at the time of the sale of the unsubscribed shares (Exhs. 1; 2; 3 TSN, Dec. 12, 1985; pp. 13); 3. In its third regular meeting held on July 1, 1978 which was attended by petitioner, the Board of Trustees proposed the sale of the "unsold shares of Stock" (Exh. 2). 4. The aforesaid proposal was formally approved through a board resolution during the special Board meeting held on July 8, 1978. Noted absent in the said meeting were Jose P. Rafols, the petitioner, and Cayetano Ferranco. (Exh. I); 5. To carry out its intention, the Board drafted and sent a resolution to the SEC seeking permission to sell the unsold shares (Exhs. 1 & 3). 6. The said letter request was received by the SEC on July 29, 1978 but the same was neither approved nor disapproved (Exh. 4). The above uncontroverted facts clearly negate the allegations of the petitioner that he had been deprived of his pre-emptive rights under the law. As evidenced by Exh. 2. petitioner as a member of the Board then, was personally present when the Board conceived for the first time the idea of selling the "unsold shares".As a matter of fact, paragraph 18 of the minutes of the Board 3rd Regular Meeting held on July 1, 1978, reveals that petitioner was quoted to have said that the "Board could not determine the right amount of one share besides, the school is not losing. Why sell the unsold stocks when the school is also gaining? " (Exh. 2).While it cannot be denied that petitioner was absent during the approval of the said sale in a special Board Meeting held on July 8, 1978 (Exh. 1),he (petitioner) was nevertheless present on a subsequent meeting held on August 2, 1978 (Exh. 3) where the minutes of the July 8, 1978 was read before the members of the Board. These factual circumstances clearly show that petitioner, although not notified by a written notice has directly acquired personal knowledge of the questioned sale in the instant case. While we recognize the legal importance of a notice with respect to disposition of unsubscribed portion of the authorized capital stocks in relation to stockholders' right of pre-emption, we are equally aware that notice is not always in a written form and not always indispensable depending on how the notice was communicated to the stockholders concerned. Notice, in its legal conception, is defined as that which imparts information or knowledge of facts, in whatever means it is communicated to the person to be notified, and is divided by law into several classes, such as, actual, constructive, implied or presumptive notice. In the case at bar, the mere presence of petitioner in the July 1, 1978 and August 2, 1978 Board Meetings in his capacity as a member of the Board then is an actual notice on his part and is now estopped from denying having knowledge of the existence of the particular fact in question. Another vital point which we consider as very fatal to petitioner's allegations is petitioner's failure to seek the nullification of the sale of unsubscribed shares until after a lapse of more than six (6) years from 1978 until September 27, 1984, the date of filing of the petition. The inaction of complainant for such a long time is in our humble opinion, a bar against him on grounds of laches and estoppel. His right, if he has any, to question the legality of the alleged sale has already prescribed in accordance with law. We come now to the issue of whether or not respondent Rev. Father Dennis McKillip can validly hold two (2) or more positions in respondent school such as director, principal, etc. The evidence of petitioner shows that respondent Fr. McKillip was member of the Board of Trustees and Auditor sometime in March 1983, Principal sometime in 1982 and Director of Citizen Army Training sometime in 1982, all of which were positions held by him (respondent Fr. McKillip) in the past years. In view of the absence of any evidence, testimonial or documentary, which will show that the alleged positions were occupied by respondent McKillip in the current year, we find this particular issue as moot and academic. PREMISES CONSIDERED this Commission hereby confirms the validity of the disposition of the unsubscribed capital stocks of Sibale Academy, Inc..Consequently, let this case be, as it is hereby, DISMISSED. Respondents' counterclaim is likewise DISMISSED for lack of evidence to support the same. No pronouncement as to cost. SO ORDERED. (SGD.) NAPOLEON M. TUMAMAO Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .