Conrado Calalang, et al. vs. Dominador Aytona, et al.

[SEC-SICD * CASE NO. 2878. May 25, 1989.] CONRADO CALALANG, ET AL. , petitioners , vs . DOMINADOR AYTONA, ET AL. , respondents . D E C I S I O N Petitioners in this case are seeking for a writ of injunction to enjoin the respondents from acting or representing themselves as the Board of Directors and/or officers of National Development Corporation (NADECOR for brevity); to declare null and void the purported election of respondents to the Board of Directors of NADECOR and to declare all acts entered into by respondents as purported directors and officers of NADECOR as null and void and in support thereof, alleged inter alia, that at the 1984 annual stockholders' meeting of NADECOR held on August 20, 1984, petitioners (Calalang et al.) were duly elected to the Board of Directors of NADECOR and at the subsequent organizational meeting, Calalang, et al., were elected officers with Calalang as Chairman of the Board; that on August 19, 1985, the annual stockholders' meeting of NADECOR was called and proceeded with petitioner Calalang, as Chairman of the Board, presiding; that at said meeting, there were present in person or by proxy, 28,248 shares out of NADECOR'S total outstanding shares of 30,000 or 94% of total outstanding shares. Petitioners further alleged that after nominations were made for the Board of Directors, petitioner Calalang announced that the votes of the stockholders would be taken, respondent Aytona announced that there was a restraining order issued by the Regional Trial Court of Quezon City restraining stockholder Sawyer-Adecor International, Inc., as well as petitioners Calalang, Rivera, Antao and Ricafort for voting Sawyer Adecor's 7,000 shares in NADECOR. At that point, a short recess was called and when the meeting was resumed, it was moved and seconded that the meeting be adjourned until the right of Sawyer-Adecor to vote its shares could be resolved. The Chairman adjourned the meeting, at the same time directing the Secretary to note the objection. After the adjournment, NADECOR shareholders owning 12,567 shares, notwithstanding the adjournment and lack of quorum, proceeded to elect as directors respondents Aytona, Pamintuan, Lasquety, Jorge Jose and Baw and then elected themselves as officers of NADECOR. cdll In their answer, respondents specifically denied the material averments of the petition and interposed the following special defenses, to wit: 1. That the individual petitioners hold either in person or by proxy, only 9,281 shares out of 30,000 outstanding shares of NADECOR. Hence, they represent a clear minority and could not have been and were not validly elected as directors and officers of NADECOR in the 1984 annual stockholders meeting without the vote of Sawyer-Adecor shares, which shares were enjoined by the California Court to be voted in said meeting. 2. That the minutes of the 1984 stockholders' meeting was never approved by the stockholders in the August 19, 1985 meeting. As a matter of fact, the minutes of the 1984 stockholders' meeting was never filed with the Commission. 3. That it was the petitioners themselves who called for the August 19, 1985 stockholders' meeting with two (2) representatives of this Commission in attendance. 4. That at the August 19, 1985 stockholders' meeting, presided by petitioner Calalang, respondent Aytona nominated himself, Diosdado Pamintuan, Jr., Armando Z. Lasquety, Jorge W. Jose and Narciso T. Baw while petitioner Ricafort nominated himself, Conrado T. Calalang, Benjamin J. Aritao, Salvador O. Rivera and Edgar de Castro. The nominations were duly seconded. Before the nominations were submitted for votation, Aytona manifested his groups' objection to the voting of the Sawyer-Adecor's 7,000 shares and insisted in the implementation of the injunction order issued by the California Court. Aytona then requested the process server of the Regional Trial Court of Quezon City to serve copy of the restraining order issued by said court enjoining from voting the 7,000 shares of Sawyer-Adecor. The Chairman recessed the meeting and together with his associates and lawyers, huddled for a conference. When the meeting was resumed, Atty. Contreras moved for adjournment. Respondents Pamintuan and Abrogar objected. The Chairman declared the meeting adjourned. Respondents claimed that the adjournment was arbitrary and in violation of the rights of the stockholders; that since there was no valid adjournment, the walk-out by petitioners did not affect the quorum already established and so respondent Aytona and his group proceeded with the meeting and proceeded to elect his group as directors and officers of NADECOR with Aytona as Chairman and President, Lasquety as Vice-President, Pamintuan as Vice-President, Nestor Jose as Treasurer and Romeo H. Barsoto as Secretary. prLL Upon the filing of the petition, a temporary restraining order was issued by then Hearing Officer Emmanuel Sison, enjoining the respondents from acting or representing themselves as the Board of Directors and/or officers of NADECOR, including but not limited to the execution of contracts and agreements in such alleged capacity and set the application for a writ of preliminary injunction for hearing. After the presentation of evidence by both parties, an Order was issued on October 14, 1985, granting the injunctive relief prayed for by the petitioners and upon the posting of the bond, a writ of preliminary injunction was issued on October 17, 1985, enjoining the respondents from acting or representing themselves as the Board of Directors and/or officers of NADECOR, including but not limited to the execution of contracts and agreements in such an alleged capacity. Respondents filed a motion for reconsideration seeking for a reversal of the order dated October 14, 1985 and the lifting of the Writ of Preliminary Injunction dated October 17, 1985. Petitioners filed their opposition to the motion for reconsideration. Both motion for reconsideration and opposition discussed extensively their respective stand on whether or not there was a valid adjournment. In the Order dated January 17, 1986, the motion for reconsideration was denied. From all the pleadings filed by the parties, it becomes crystal clear that the only real issue in this case is whether or not the adjournment declared by petitioner Calalang of the August 19, 1985, annual stockholders' meeting is valid. There is no dispute that a recess was called after respondent Aytona caused the service of the temporary restraining order issued by the Regional Trial Court of Quezon City. There is likewise no dispute that upon the resumption of the meeting a motion to adjourn was made which was duly seconded, but objections were raised to the adjournment. In Exhibit "I" of the respondents, which is their minutes of meeting after the petitioners and their group left the meeting, it was there stated "However, instead of acting on the motion for votation on the motion to adjourn, the Chairman repeated "adjourned", stood up and hurriedly left the meeting together with his associates and lawyers", implying that there was a motion for votation. Unfortunately for the respondents, one of the representatives of this Commission in the person of Atty. Benito Cataran, testified that there was no such motion for votation. Thus, in the cross-examination by counsel for the respondents, Atty. Cataran was asked: "Q. You do not recall whether a certain stockholder Pamintuan asked the Chairman that since there was a pending objection to the adjournment that the matter be put to a vote?" "A. No, there was none" (t.s.n. p. 98 October 8, 1985) Also in Exhibit "1" of the respondents, there was no objection or nobody questioned petitioner Calalang presiding as Chairman. And the very same Exhibit "1" listed the shares of Sawyer-Adecor International, Inc., in determining the quorum. Actually, insofar as the alleged election of respondents is concerned, the same has been rendered moot in view of the petitioners' election as directors for the years 1986 and 1987. However, it is that prayer of the petition to declare all acts entered into by the respondents as null and void and of no force and effect that necessitates the rendering of a decision. Considering that it has been clearly established that the August 19, 1985 annual stockholders' meeting of NADECOR has been validly adjourned, it follows that the election of respondents as directors and officers is void ab initio. As a legal consequence, all acts of the respondents during the period of time that they acted as directors and officers of NADECOR are hereby declared NULL and VOID. Accordingly, the writ of preliminary injunction previously issued is hereby declared permanent. SO ORDERED. (SGD.) FELIPE S. TONGCO Hearing Officer