General Credit Corp. v. Commercial Credit Corp. of Cagayan de Oro

[SEC-SICD * CASE NO. 3831. February 20, 1995.] GENERAL CREDIT CORPORATION , petitioner , vs . COMMERCIAL CREDIT CORPORATION OF CAGAYAN DE ORO , respondent . D E C I S I O N This is an action to compel the respondent, its officers and directors to call a stockholders' meeting under the supervision of the Commission. LibLex In support thereof, petitioner, alleges inter alia, that it owns 47, 492 shares of the respondent's capital stock that respondent has failed and refused and continue to fail and refuse to call for meetings of its board and/or stockholders since 1984 despite repealed demands to do so; that since ( illegible portion in SEC files ) , the respondent likewise failed and refused to submit reports of its operations to the board of directors and annual report thereof to the stockholders; that since 1990 up to present, the respondent has consistently and maliciously violated the reportorial requirements of this Commission. In 1989, when the new management of the petitioner took over, and upon proper scrutiny and investigation as to its financial condition, it was discovered that to evade its various liabilities and responsibilities and to stem of losses due to mismanagement, respondent was actually and still is, dissipating its assets and resources without authority from a duly constituted board of directors in flagrant violation of existing laws, as well as, rules and regulations of this Commission and to the damage and prejudice not only of the petitioner but also of its stockholders: that if the administration, possession and control of the affairs, books, etc. of the corporation are left in the hands of the herein respondent, the remaining assets of the corporation are in danger of being further dissipated, wasted or lost and of becoming ultimately unavailable for distributions among its stockholders. Respondents filed its responsive pleading with special and affirmative defenses specifically denying the material averments of the instant petition. Contrary to the petitioner's assertion, respondent avers that it was the franchise company of the petitioner which had equity investment and exclusive management contract with respondent from its organization in 1972 up to 1984, when petitioner filed suits against respondent and its stockholders before the RTC, Branch 135, Makati, Metro Manila in Civil Case No. 6255; that in view of the various suits against its various franchise companies and its stockholders in 1984, respondent filed before this Commission SEC Case No. 2581; that among the incidents pending in the said case is to enjoin the herein petitioner from obtaining seats in the board of respondent corporation for reasons of adverse and inimical interest; that in view of the pendency of SEC Case No. 2581, this petition should be dismissed and/or held in abeyance until SEC Case No. 2581 is resolved by this Commission. During the preliminary conference of this case, the parties agreed to resolve the following issues: 1. whether or not the petitioner has the right to compel the respondents to call a stockholders' meeting; 2. whether or not the respondent has the right to call the stockholders' meeting inspite the petitioner's demand; 3. whether or not the petitioner holds an adverse and inimical interest against that of respondent; and 4. whether or not petitioner should be barred from obtaining a set in the board of directors or respondent corporation. From the facts obtaining in this case and the evidence on record, it is clear that petitioner has the right to compel the respondent to call a stockholders meeting. prLL Under Article VII (6) of the by-laws of respondent corporation, it expressly provides the following: xxx xxx xxx (6) Special Meeting Special meeting of the stockholders may be called by the President at his discretion or on the demand of the stockholders holding the majority of the subscribe capital stock." It appears that despite repeated demands by the petitioner who holds more than the majority of the outstanding capital stock, the respondent has failed and refused to call for meetings of the stockholders/board of directors since 1984. Basic in the rule that if the annual meeting is not called on the date prescribed in the by-laws as in this case, the directors should call such annual meeting within a reasonable time, particularly where demand therefore has been made by the stockholders pursuant to the by-laws of the corporation. The refusal of the respondent to call a stockholders meeting hinges on its position that there is a pending incident in SEC Case No. 2581 to enjoin the petitioner from obtaining seats in the board of directors and committing an adverse and inimical interest against the respondent corporation. The aforecited SEC Case No. 2581 filed by Avelina G. Ramoso, et al., against General Credit Corporation (petitioner herein) has already been decided by the Commission en banc and the Court of Appeals on October 6, 1992 and October 6, 1993, respectively, without any pronouncement as to the disqualification of the petitioner from obtaining a seat in the board of directors of respondent corporation much less the acts alluded to as adverse and inimical against the respondent. As to the other reliefs prayed for in the petition, petitioner had already waived its cause of action pertaining to accounting and audit of the documents and books of respondent corporation. WHEREFORE, judgment is hereby rendered directing the officers of the respondent corporation to immediately call a stockholders meeting under the supervision of this Commission. Likewise, respondent, its agents and representatives are enjoined from disposing/dissipating its assets and from performing acts inimical to the interest of the corporation. NO COSTS. LibLex SO ORDERED. (SGD.) ENRIQUE L. FLORES, JR. Hearing Officer