Evelyn Fernandez vs. Elizabeth Victoria

[SEC-SICD * CASE NO. 3845. May 13, 1992.] EVELYN FERNANDEZ , petitioner , vs . ELIZABETH VICTORIA , respondent . D E C I S I O N This is a petition seeking to declare the election held on July 25, 1990 null and void and without effect, and that the members of the Board of Trustees and Officers elected in said election be declared and deemed not to have been elected. In support thereof, petitioner alleged, among others, that she is the President of Exclusively Yours, Inc. (Exclusively, for brevity) of which the respondent is the Secretary-Treasurer; that Exclusively is a non-stock non profit corporation organized by civic-oriented professionals based in Metro Manila; that on July 3, 1990, petitioner wrote the respondent asking for the sum of P10,000.00 for the instant funding of an activity to be held on August 19, 1990 which the respondent ignored (copy of the letter request as Annex 'A" of the petition); that on July 21, 1990, a meeting of the incorporators and officers of Exclusively was held where among the matters resolved is the membership of Exclusively which shall be taken up at the next regular monthly meeting; that on July 24, 1990, petitioner received a telegram from the respondent, informing the former that an urgent special meeting will be held on July 25, 1990 to elect the Board of Trustees (copy of the telegram as Annex "C" of the petition); that on July 25, 1990, the meeting was held over the vehement objection of the petitioner on the ground that the meeting is illegal; that as a result of the unjustified election, the Board of Trustees and Officers, in violation of Section 1, Article IV of the By-laws of the Exclusively which provides: "The President shall be the Chief Executive Officer of the Association . . . . He shall preside in all meetings of the Board of Trustees and those of the members of the association." (emphasis ours.) were elected; that the July 25, 1990 meeting was presided not by the President but by a person not authorized to do so; that Section 2, Article 1 of the By-laws of the Exclusively provides: "Special meetings may be called as the need thereof arises by the Board of Trustees, or the President or upon petition of 1/3 of the general membership." that at the time of the questioned election there were only seven (7) members of Exclusively; that there was no petition made by the Board of Trustees, the President nor by 1/3 of the members to call for an urgent meeting to elect the Board of Trustees; that the alleged members who participated in the meeting on July 25, 1990 were not considered as bona-fide members of Exclusively considering that the Board of Trustees has not yet acted upon the qualification of the alleged applicants for membership. Petitioner also prayed for the award in her favor actual, moral and exemplary damages, including Attorney's fees. In her answer, respondent specifically and generally denied material averments in the petition alleging, among others that there is nothing on record show that the petitioner was duly elected either by the interim Board of Trustees or members thereof as President of Exclusively; that as to the purpose or purposes of Exclusively, its Articles of Incorporation's the best evidence; that it is not true that the petitioner vehemently objected to the meeting, the truth being that she appeared at the July 25, 1990 meeting and formally called it to order, but she walked out over the question on membership; that the special meeting on July 25, 1990 was called upon the initiative of the membership; that it was not the respondent who called the meeting but merely issued and sent notices for such special meeting in her capacity as Secretary-Treasurer; that there were thirty seven (37) bonafide members of Exclusively as per the list submitted to the Commission and that there was a need for the election of regular members of the Board of Trustees, considering that its original members were not duly elected but merely designated and to serve only in acting capacity until their successors are elected and qualified; that the real parties in interest were not impleaded as party respondents in the petition; that the petitioner has no personality to file the instant petition as there is nothing in the petition which shows that she was clearly elected as President; that the petitioner is estopped from questioning the elections on July 25, 1990 because she herself attended the meeting; that petitioner is likewise estopped from questioning the status of the members who called for and participated in the July 25, 1990 meeting on the ground that the petitioner herself launched the association's "Big Night" on May 22, 1990 where the said members were openly recognized and accepted as bonafide members of Exclusively; that they were allowed to attend and participate the Friday Socials of the Association; respondents also interposed as counterclaim wherein she prayed for the award of damages and attorneys fees. On October 10, 1990, the preliminary conference was terminated when no amicable settlement was reached by the parties despite the efforts of this Hearing Officer. Hearing on the merits ensued where both parties presented testimonial and documentary evidence in support of the respective theory and position adopted by them. As could be gathered from the evidence presented, the pleadings filed by the parties, as well as the records of Exclusively on file with this Commission will show that it was registered with this Commission on April 10, 1990 together with its By-laws under SEC Reg. No. 175989. The Articles of Incorporation was amended on October 9, 1990, amending Articles II and IV thereof. The new By-laws of Exclusively was filed on September 6, 1990 and approved by this Commission on October 9, 1990. The said By-laws was adopted on August 14, 1990 by the Board of Trustees composed of Elizabeth Victoria Custodio, the respondent, Cesar Clemente, Aurora Gotusco, Zenaida Berroya and Lydia Austria. Article V of the Original By-laws provides that: "Section 1. Qualification for membership The Board shall determine the qualifications of an applicant for membership." while the new By-laws provides that "the members of the association whose names are listed in the original articles of incorporation and in the additional list of members submitted to the Securities and Exchange Commission shall be considered bonafide members of this Association. They should also pay an annual membership fee of Five Hundred Pesos (P500.00). It was the contention of the petitioner that the matter of membership of the club will be taken up during the next regular meeting which appears to be in pursuance of the provisions of the Original By-laws which under Section 1 of Article V thereof provides, that the Board shall determine the qualification of an applicant for membership. Upon the other hand, respondent Elizabeth Victoria-Custodio submitted to this Commission on July 23, 1990 the list of incorporators as the initial members as well as the list of the alleged paid members numbering 31 who paid P500.00 each in accordance with the By-laws' adopted by the Board on August 14, 1990 composed of Elizabeth Victoria Custodio, Cesar D. Clemente, Aurora Gotanco, Zenaida Berraga and Lydia Austria, which Board was elected on the July 25, 1990 alleged organizational meeting. Quite conspicuous from the record of Exclusively on file with this Commission is the fact that Exclusively has an approved By-laws filed with this Commission on April 10, 1990 together with its Articles of Incorporation. The new set of By-laws was adopted and filed with this Commission on September 6, 1990 and registered with this Commission on October 9, 1990 for no valid purpose but to ratify the acts of the respondents, particularly on membership of Exclusively which is being questioned by the petitioner in the instant case. In the new By-Laws, the qualification for membership in Article IV provides: ". . . . They shall also pay an annual membership fee of Five Hundred Pesos (P500.00)." It would seem that the change in the qualification of the membership and the admission of members to the association is qualified by the payment of P500.00 each applicant. Whereas the admission of members under original sets of By-laws has to be determined by the Board, pursuant to Article V thereof. It fits squarely with the position adopted by the respondent that those whose names appear in the list of 31 paid members are considered bonafide members, a majority of which voted for the adoption of the New By-laws. While the validity of the adoption of the New By-Laws is not in question, it cannot be denied that such acts of the respondent is open to question specially her motive and purpose of filing a New By-laws despite the fact that Exclusively has been existing with a valid By-laws which has not been amended nor declared invalid by competent authority. Hence, the adoption of the New By-laws could be interpreted as a means to cure certain flaws in the determination and/or admission of members of the association, including the charging of membership fee of P500.00. After a careful perusal of the evidence adduced at the hearings and the arguments of the parties together with the records of Exclusively on file with this Commission, it would appear that the elections conducted and held on July 25, 1990 which was allegedly called by the respondent upon request of at least 1/3 of its members could be considered valid or invalid depending on whether or not, the members who requested for the calling of the said election are bonafide members in accordance with the By-laws. Another thing to consider is which set of By-laws should be applied the original which has not been amended, or the New By-laws filed by the respondent with this Commission on September 6, 1990 after this case was instituted on August 9, 1990. In the light of the foregoing, it is the considered view of the Hearing Officer that the adoption of the New By-laws is intended to suit the position of the respondent insofar as the qualification of the members is concerned. WHEREFORE, the election of the Board of Trustees held on July 25, 1990, is null and void. Accordingly, this Hearing Officer directs that a new election be called pursuant to the original by-laws of the association within thirty (30) days from receipt hereof. For this purpose, judgment is hereby rendered declaring that the membership of the association should be considered and determined in accordance with the provisions of the original By-laws, particularly Article V thereof. No pronouncement as to cost. LLpr SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer