Michael Jackson, et al. vs. Angel P. Garcia, et al.

[SEC-SICD * CASE NO. 3639. November 29, 1990.] MICHAEL JACKSON, ET AL. , petitioners , vs .ANGEL P. GARCIA, ET AL. , respondents . D E C I S I O N This is a verified petition praying for, among others, to declare all contracts or agreements, actions and/or resolutions of the Manila Charity Lotto, Inc. (MCL for brevity) as entered into/adopted by respondents or as represented by any of their officers, as illegal, of no force and effect and null and void from the very beginning; recognizing as the legitimate Board of Trustees of the MCL the original directors thereof. The petitioners further prayed for the issuance of a Writ of Preliminary Injunction. The petitioners alleged, among others, that they are members of the Board of Trustees of MCL, that before the registration of MCL respondent Bernadette Joven, was tasked with registering the patent or copyright of the game "LOTTO" as property of the corporation. However, since there was no corporation as yet, the copyright of the game "LOTTO" was registered in her name; that MCL was registered as a non-stock, non-profit corporation of July 18, 1986 with SEC Registration No. 134255 with seven (7) incorporators namely: 1. Michael V. Jackson ) 2. Daniel D. Dunn ) 3. Jose P. Gabriel ) petitioners 4. Cynthia Teresita de los Santos ) 5. Angel P. Garcia ) 6. Bernadette Joven ) respondents 7. Rogelio Joven ) that on January 9, 1989, Nestor Pangilinan, Michelle B. Jackson, together with Joseph Pisano, were taken in as additional Directors/Trustees of MCL; that from January 16, 1989 until July 31, 1989, meetings of MCL were held at the residence of petitioner Michael Jackson where all corporate documents are kept; that in February 1989, the Board of Directors of MCL passed a resolution declaring the game "LOTTO" as corporate property of MCL with respondent Bernadette Joven as one of the signatories thereof; that said "LOTTO" is a property belonging to the corporation as reconfirmed by Bernadette Joven in her affidavit executed on August 8, 1989; that on May 26, 1989 respondent J. Pisano resigned and the Board of Directors as of said date consisted of nine, namely: Petitioners 1. Michael Jackson 2. Daniel Dunn 3. Jose Gabriel 4. Cynthia de los Santos Respondents 5. Angel Garcia 6. Rogelio Joven 7. Bernadette Joven and 8. Michelle Jackson 9. Nestor Pangilinan That on July 31, 1989, respondents without Nestor Pangilinan and Michelle Jackson and while Michael Jackson was out of the country, supposedly met in a special board meeting where a resolution was passed accepting eight persons as members of the Board in violation of the By-Laws of MCL, namely: LibLex 1. Roosevelt Tamayo 2. Pierre P. Joven 3. Hamleth C. Garcia 4. Atty. Per O. Olandesca 5. Alfeo T. Siccuan 6. Joseph Pisano 7. Bienvenido E. Acosta 8. Bienvenido Estrada that said special Board meeting is illegal as it violated the provisions of the By-Laws, hence the membership/directorship of the above-named respondents are illegal; that another meeting supposedly held on August 2, 1989 for the election of the following officers of MCL is illegal being an offshoot of the meeting of July 31, 1989 and the same is a violation of the By-laws: 1. Angel P. Garcia President 2. Rogelio T. Joven Vice-President 3. Bernadette Joven Treasurer 4. Atty. Alfredo Siccuan Secretary; that on August 3, 1989, another special meeting of the Board of Trustees was held where petitioners were summarily ousted illegally as this is in violation of the By-laws, besides being an offshoot of the illegal meetings on July 31, 1989 and August 2, 1989. In their Answer, respondents alleged, among others, that respondent Bernadette P. Joven was already in possession of a copyright to the game "LOTTO" long before she became acquainted with petitioners; that it was Bernadette Joven who actually worked for the registration of MCL; that it is not true that on January 9, 1989 Nestor Pangilinan, Michelle Jackson, as well as Joseph Pisano were allegedly taken in as additional Directors of MCL, there being no minutes to prove the same. Neither was there any minutes to prove petitioners' allegation that "no additional director will henceforth be admitted and neither the present directors can be removed nor sell his shares and/or interest without 100% approval of the Board;" that Bernadette Joven had been in custody of the originals of all corporate documents until she was duped into lending the originals to Michael Jackson who promised to return the same but never did; that the true and lawful owner of the game "LOTTO" as copyrighted in her name is Bernadette Joven; that Michael Jackson, by means of false pretenses and fraudulent misrepresentations, promised to pay said respondent for her copyright to the game "LOTTO" for which she was mislead into signing an alleged resolution conveying and transferring the same to the corporation but up to the present, Michael Jackson had not paid her a single centavo; that the special meeting of the Board on July 31, 1989, the election of officers and removal of the petitioners from the Board are in accordance with law and the By-laws of the corporation. The prayer for the issuance of a Writ of Preliminary Injunction was DENIED as contained in the Order of this Hearing Officer dated January 30, 1989. Likewise DENIED was petitioners' Motion for Reconsideration. The issues having been joined, a preliminary conference was held and it was agreed upon by both parties that the issues to be resolved in this case are: 1. Whether or not the acts of the respondents in calling a special meeting of the Board of Trustees is violative of the provisions of the By-Laws of the corporation and the pertinent provisions of the Corporation Law. 2. Whether or not the alleged charges against the herein petitioner are mere concoctions in order to give a semblance of justification for their ouster from the corporation. 3. Whether or not the illegally constituted Board of Trustees composed of the respondents should be enjoined from exercising corporate acts to prevent confusion and misrepresentation to third parties dealing with the corporation. 4. Whether or not petitioners violated the trust and confidence reposed in them by the respondents. 5. Whether or not the petitioners are entitled to damages including attorney's fees. The case was set for trial on the merits where petitioners presented testimonial and documentary evidence. The respondents however did not present any testimonial or documentary evidence. In addition, respondents did not file any comment/opposition to petitioners' formal offer of exhibits. As a result, the case was considered submitted for decision. In resolving the issues, this Hearing Officer arrived at the following conclusions: As regards the first issue , the provisions of the New Corporation Code and the By-Laws of Manila Charity Lotto, Inc., are quoted hereunder, governing special meetings of the board. Section 53 of the New Corporation Code. "SECTION 53. Regular and Special meetings of directors or trustees .... Special meetings of the Board of Directors or trustees may be held at any time upon the call of the President or as provided in the By-Laws. Meetings of the directors or trustees of corporations may be held anywhere in or outside of the Philippines, unless the By-Laws provide otherwise. Notice of regular or special meetings stating the date, time and place of the meeting must be sent to every director or trustee at least one (1) day prior to the scheduled meeting, unless otherwise provided by the By-Laws. A director or trustee may waive this requirement either expressly or impliedly". Section 2 Article II of the By-Laws. "2. Board meetings The Board of Trustees shall hold regular monthly meetings at such time and place as the Board may prescribe. Special meetings may be called by the President, or upon written request of two parties. Notices of all special meetings shall be given at least one day previous to the date fixed for the meeting". From the evidence on hand and applying the above-quoted provisions of the New Corporation Code and the By-Laws of MCL, show that the respondents have not complied with the above provisions for the purpose of calling the July 31, 1989, August 2, 1989 and August 3, 1989 special board meetings. No evidence was presented by the respondents to substantiate their claim. Provisions of the By-Laws must be complied with since to do otherwise would run contrary to the basic tenet that the By-Laws of the corporation is a rule for the government of the corporation and the stockholders or members in the conduct and management of its affairs. It is well settled that the By-Laws are the private laws of the corporation. They are in effect written into the charter and in this sense, they become part of the fundamental law of the corporation, and the corporation, its director officers and members are bound by and must comply with the same. (8 Fletcher Encyclopedia Corporations) Accordingly, all acts done by the respondents during those meetings were illegal. As regards, the second and fourth issues, considering that the respondents did not present any evidence at all no conclusion would be properly made by relying solely on the evidence presented by the petitioners which are insufficient for purposes of passing upon these issues. As regards the third issue, the same need no longer be passed upon in view of the conclusions arrived at in discussing the first issue. As regards the fifth issue, there being no sufficient proof adduced by the petitioners to entitle them to damages, the same should not be awarded. Likewise, there being no proof as to attorney's fees, the same will not be awarded. WHEREFORE, judgment is hereby rendered as follows: 1. In view of the illegality of the July 31, 1989; August 2, 1989 and August 3, 1989 Special Board Meetings, the respondents and all persons acting in their behalf are hereby enjoined from: a. Meeting as members or as trustees of the Manila Charity Lotto, Inc. and making or adopting resolutions. b. Holding themselves out in public as officers, members of the Board, or trustees of the Manila Charity Lotto, Inc. c. Writing any communication, negotiating on behalf of Manila Charity Lotto, Inc. and/or entering into any contract binding the corporation. d. Suspending the effectivity of, or holding in abeyance compliance with, any contract entered into by any, some or all of the respondents in representation of Manila Charity Lotto, Inc. or anyone given a power of attorney by said respondents. 2. Declaring all acts of the respondents or as represented by their officers from July 31, 1989, as illegal being violative of the Corporation Code and the By-Laws of Manila Charity Lotto, Inc. 3. That a special election of Manila Charity Lotto, Inc. to elect its directors/trustees and officers is hereby ordered in accordance with the By-laws within thirty (30) days from finality of this decision. For this purpose Mr. Michael V. Jackson is hereby authorized to call said special election. During the interim the following original members of the Board as admitted by both parties to be the duly elected trustees of the corporation shall manage the affairs of the corporation: llcd 1. Michael V. Jackson 2. Daniel Dunn 3. Jose P. Gabriel 4. Cynthia Teresita de los Santos 5. Angel Garcia 6. Rogelio Joven 7. Bernadette Joven SO ORDERED. (SGD.) TRINIDAD L. DABBAY Hearing Officer