Juanito Malvarosa vs. Luis L. Parabuac, Sr., et al.

[SEC-SICD * CASE NO. 3271. March 14, 1991.] JUANITO MALVAROSA , petitioner , vs . LUIS L. PARABUAC, SR. ET AL. , respondents . D E C I S I O N This is a petition filed by Juanito Malvarosa against Luis L. Parabuac, Sr., Luis T. Corpuz, Ernesto C. Escorpiso, Felisa U. Ustariz, Romulo A. Durolfo, Rufino C. Soto, Norma Penid, Macario L. Bautista, Thelma H. Baricanosa and Teresita B. Peduche, praying that the assumption of office of all the respondents, as well as their acts done for and in behalf of Iglesia Watawat ng Lahi, Inc. be declared null and void, to render report and accounting of all corporate assets and to direct respondents to call a general meeting for the election of new members of the Board of Directors, with a prayer for the issuance of a restraining order and/or writ of preliminary injunction. Petitioner alleged that all the parties in this case are members of the Church of the Banner of the Race, also known as Iglesia Watawat ng Lahi, Inc., (Iglesia for brevity) a domestic religious corporation duly organized and existing under the laws of the Republic of the Philippines with principal office and business address at Lecheria Hill, Calamba, Laguna, that the respondents are the self proclaimed President, Vice-President, Secretary, Adviser, Taga-suri, 2nd Taga-suri, Auditor, Taga-Ayos, and members, respectively, of the Iglesia Watawat ng Lahi, Inc., that the Articles of Incorporation of the Iglesia Watawat ng Lahi, Inc. on file with the Commission provides for only nine (9) members of the Board of Directors; that the present ten (10) membership of the Board of Directors is clearly and patently illegal, not being sanctioned under the Articles of Incorporation of the religious corporation and the assumption to office of the respondents are likewise illegal and void ab initio because they were not elected by the general membership of Iglesia Watawat ng Lahi, Inc. that upon assumption to office, respondents arbitrarily, capriciously, whimsically and illegally performed notorious acts which are among others, (1) the filing with this Commission for approval the By-Laws of Iglesia Watawat ng Lahi, Inc. which By-laws has never been submitted for approval by the general membership; (2) prohibiting the Priest of Iglesia Watawat ng Lahi, Inc. from using its church and other facilities except to a favored few, which acts are highly damaging to the reputation and ideals of Iglesia Watawat ng Lahi, Inc. Respondents, in their answer dated January 5, 1988, except for paragraphs 1 and 1.1 of the complaint, denied all the material allegations of the complainant and in their Affirmative and Special Defenses, averred that the petitioner has no personality to question the internal affairs of the association, he having failed to renew his membership and register in the new registry of the association; that assuming, in arguendo, that petitioner may still be considered a member of the association despite his failure to register, he is nevertheless estopped from questioning the internal affairs of the association or the actuations of the respondents; that respondents acted in good faith; that petitioner has no cause of action and the petition was filed merely to destroy the association. Hearings were conducted on the petitioner's application for a writ of preliminary injunction. However, upon motion of counsel for the petitioner, resolution on the application for injunctive relief was deferred. As clearly stated in the memoranda submitted by the parties, the only issue to be resolved is whether the respondents are lawfully holding their respective positions. By agreement of the parties, the evidence submitted during the hearings on the injunctive relief were adopted as evidence on the merits. Respondents, however, presented Mrs. Parabuac as additional witness before resting their case. From the records and evidence adduced, the established facts are the following: 1. The Church of the Banner of the Race, otherwise known as Iglesia Watawat Ng Lahi, Inc. is a religious corporation duly organized under the laws of the Republic of the Philippines and registered with the Bureau of Commerce and Industry on May 29, 1944. 2. Since its registration, up to the time respondents assumed their respective positions as members of the "Lupong Tagapagpaganap" or Board of Directors and Officers of Iglesia Watawat ng Lahi, on May 11, 1987, the corporation has no approved By-laws. 3. The By-Laws of Iglesia Watawat ng Lahi, Inc. was duly adopted by the majority of the members on July 22, 1987, certified to by a majority of the Board of Directors countersigned by the Secretary of the corporation and was approved by this Honorable Commission on May 8, 1989. 4. Since its registration, up to the filing of this petition, there is no showing or record that members of the "Lupong Tagapagpaganap" or Board of Directors were elected by the members of the corporation. 5. There are twelve (12) members of the Board of Directors of the corporation (per Certificate of Filing of increase in the number of directors dated August 15, 1961). Evidence likewise show that since its incorporation and registration on May 26, 1944, the Board of Directors and Officers who had run the affairs of the corporation, assumed their respective positions without the benefit of election but were chosen by the "Mahal Na Magulang" based on the doctrine and religious belief of the church, without any complaint from any member. It was only upon the assumption of office of the respondents sometime on May 11, 1987, that a complaint was filed against them. The petitioner was a long time member of the corporation, being a member even during the terms of the past sets of directors and officers of the corporation. The filing of this case by petitioner against the respondents, under the backdrop of the corporation, is already highly suspicious, if not altogether in estoppel. Under the established facts, it is the opinion of this Hearing Officer and so holds that the respondents could be considered de facto directors and officers and as such, their acts for/in behalf of Iglesia for all legal intents and purposes, are valid. "A de facto director holds office under color of right, through designation or election, but fails being a de jure director by some irregularity in his election or by his ineligibility or failure to qualify as required. (Fletcher Cyclopedia Corp. Vol. 2, 374) "Corporate officers exercising the functions of their offices under color and claim of authority even though unlawfully elected, are nevertheless de facto officers insofar as third parties are concerned, their acts are as binding upon the corporation as if they were officers de jure. (Levin v. 37th Street Drug & Liquiors, Inc., 103, III App 2nd 248) As has been previously stated, among the facts established is that the By-laws of Iglesia has been approved by the Commission on May 8, 1989. The validity of the approval of said By-laws was contested in SEC Case 3573. However, in a decision dated September 24, 1990, the validity of the By-Laws of Iglesia was upheld and said decision is now final. There is, therefore, no more legal impediment to the implementation of the By-Laws for the calling of an election to fill up the vacancies in the Board of Directors of Iglesia Watawat Ng Lahi, Inc. pursuant to Sec. 1, Art. VI thereof. As to the prayer for the rendering of a report and accounting of all corporate assets, petitioner miserably failed to establish his entitlement to said relief. WHEREFORE, let this case be, as it is hereby DISMISSED for lack of merit. However, considering that the validity of the By-laws had been settled with finality, the same should be implemented by conducting an election to fill up any vacancy in the Board of Directors, as provided for under Section 1 Article VI of the By-laws within thirty (30) days from finality of this Decision. SO ORDERED. (SGD.) JAMES K. ABUGAN Hearing Officer