Benguet Corporation vs. Pantukan Mineral Corporation, et al.

[SEC-SICD * CASE NO. 3858. July 2, 1992.] BENGUET CORPORATION , petitioner , vs . PANTUKAN MINERAL CORPORATION, ET AL. , respondents . D E C I S I O N This is a petition for mandamus, praying that this Commission (1) orders respondents Romeo H. Borsoto and Nestor L. Jose or the incumbent Corporate Secretary and President of Pantukan Mineral Corporation (Pantukan, for brevity) to register/record the deeds of sale of shares (Annexes "A" and "B" of the petition) in the books of Pantukan in the name of the petitioner; (2) enjoin respondents Maximo D. Bustos to perform and comply with his contractual obligation under the deed of sale of shares (Annex "B" of the petition) and order respondents Borsoto, Jose and Bustos to jointly and severally pay the petitioner the amount of P500,000.00 as and by way of exemplary damages and the amount of P100,000.00 as and by way of attorney's fees and expenses of litigation. AEcTCD Petitioner alleged, among others, that on September 20. 1989. Armando Z. Lasquety (Lasquety), Diosdado Pamintuan, Jr. (Pamintuan), Perlito S. Pantaleon (Pantaleon), Felicisimo C. Mercado (Mercado), Ernesto V. Inquillo (Inquillo), Eduviges Ignacio (Ignacio), Ciriaco M. Mantiague (Mantiague), Jaime S. Oliver (Oliver), Julio P. Santos (Santos) and Bustos, as sellers, sold all their shares in Pantukan numbering 1,000 shares each or a total of 10,000 shares in favor of petitioner as evidenced by two (2) deeds of sale of shares both dated September 20, 1989 (Annexes "A" and "B" of the petition); that pursuant to the said deeds of sale, petitioner: (a) paid the purchase price of shares sold; (b) paid the documentary stamps and capital gains tax due; (c) tendered to Pantukan the payment for the unpaid portion of the subscriptions corresponding to the P10,000.00 shares it purchased; and (d) requested Borsoto to register the sales in the books of Pantukan and accordingly issue a stock certificate in the name of the petitioner (Annex "C" of the petition); that Pamintuan and Laquesty for themselves and on behalf of Pantaleon, Mercado, Inquillo, Ignacio, Mantique, Oliver and Santos personally went to Pantukan office, together with the petitioner's representative, Atty. Lina G. Ferrer, and asked Borsoto to register the sale of shares in favor of petitioner in the books of Pantukan but Borsoto refused unjustifiably and unreasonably; that respondent Jose ordered respondent Borsoto not to register any sale or transfer of Pantukan shares which allegedly violated the provisions of the pre-incorporation agreement among the stockholders and the Amended Articles of Incorporation of Pantukan; that Lasquety and Pamintuan challenged the validity of the Amended Articles of Incorporation in their letter-complaint dated March 20, 1990 with associate Commissioner Rodolfo L. Samarista (copy of the letter as Annex "E" of the petition ); that Bustos, in a letter dated March 15, 1990, or almost six (6) months after he received and encashed the check issued by the petitioner representing the purchase price for the shares sold, offered to return to petitioner the same amount previously paid to him by the latter as consideration for the sale of shares thereby in effect cancelling/ rescinding the deed of sale of shares he previously executed; that in reply to Bustos' letter, petitioner informed Bustos that it does not agree to Bustos' cancellation of the sale of the shares, which had been consummated for all intents and purposes; and that in view of the change of heart of Bustos, Pamintuan for himself and on behalf of Lasquety, Pantaleon, Mercado, Inquillo, Ignacio, Mantiague, Oliver and Santos, in a letter dated March 10, 1990, expressed strong objection to Bustos' act of unilaterally cancelling/rescinding the sale to petitioner. In their answer, respondents admitted certain allegations in the petition and generally and specifically denied material averments therein contending , among others, that the petitioner is not a purchaser in good faith; that the two (2) deeds of sale on September 20, 1989 were not validly executed; that while admitting that petitioner paid the capital gains and documentary stamps due in connection with the sales of the shares of stock, respondents questioned the failure of the petitioner to state that the date when the capital gains tax and documentary stamps covering the sale of the shares of stock were paid on February 8, 1990 and that the petitioner paid on the same date penalties and interests for the late filing; that respondents admitted that petitioner tendered to Pantukan the payment for the unpaid portion of the subscriptions corresponding to the P10,000.00 shares it purchased, except that the petitioner conveniently and deliberately failed to state that the date when petitioner tendered payment for unpaid subscriptions to Borsoto was on February 16, 1990; that Borsoto's refusal to register/record the alleged sale of shares of stock in the books of Pantukan is due to the fact that the said sales were in violation of the provisions of the pre-incorporation agreement entered into among all the stockholders in February 1986 and the Amended Articles of Incorporation approved on February 5, 1990; that respondent Bustos admitted having received and encashed the check issued by the petitioner representing the purchase price for the shares sold, except that he actually returned the amount paid to him per cashier's check enclosed to his letter of March 15, 1990; that on the cancellation of the sale, Bustos alleged that the sale is null and void for being in violation of the Amended Articles of Incorporation of Pantukan, that petitioner is a purchaser in bad faith, hence, petitioner has no cause of action to pursue before this Commission; and that the petitioner is not entitled to exemplary damages nor to attorney's fees. Respondents also interposed a counterclaim contending that petitioner acted in wanton, reckless, oppressive and malevolent manner in filing its petition which caused respondents the vexation of being forced to litigate and incur expenses and for which they claim to be entitled to exemplary damages, in addition to actual and compensatory damages and expenses of litigation. In its reply with answer to counterclaim, petitioner argued that not being a party to nor having knowledge or notice of the alleged pre-incorporation agreement, it cannot be bound thereby. Petitioner further alleged that the Amended Articles of Incorporation of Pantukan which was approved by the SEC on February 5, 1990 cannot affect the sale of the Pantukan shares to petitioner considering that the sale to the petitioner was effected as early as September 20, 1989. cdll Preliminary conference; was conducted and terminated on December 4, 1990 where the parties failed to reach an amicable settlement of the instant case Trial on the merits ensued where the arguments of the parties and the evidence presented focused on the pre-incorporation agreement, restriction on the transfer of shares and its deletion from the amended articles of incorporation, the two (2) Deeds of Sale of the shares of stock both dated September 20, 1989 (Exhs "A" and "B") in favor of the petitioner and the refusal of the respondents to enter the said sales in the books of the respondent corporation As could be gathered from the evidence presented, the two (2) deeds of sale mentioned above were in fact executed between aforementioned group of stockholders of the respondent corporation in favor of the petitioner corporation Respondents' refusal to recognize the said sales is based on the ground that prior to the sale or as early as February 13, 1986, all the original stockholders of the respondent corporation entered into a pre-incorporation agreement (Exh "1") allegedly constituting a restriction on stockholders' right to sell his shares of stock which reads: "Any stockholder desiring to sell, transfer or otherwise dispose of his/her shares of stock in the corporation shall first tender his/her written offer to sell to the corporation stating the price desired for his/her share of stock. If within (15) days from receipt of the written offer, the corporation shall fail to act on said offer the right of the first refusal granted to the corporation shall lapse;" and that "upon the expiration of the aforestated option given to the corporation, a written offer shall be made by the stockholder to the stockholders or to at least a majority of them stating the price desired for his/her shares of stock. If the option granted to the stockholders is not exercised by any of them within fifteen (15) days from receipt by any two of said stockholders to whom the written offer of sale was tendered or made, then the stockholder desiring to sell his/her shares of stock in the corporation shall be free to sell, transfer, convey, and/or assign his/her shares of stock in favor of any other party subject to the legal requirement of Filipino citizenship. In case two or more stockholders accepted the offer of sale within the fifteen (15) day option period granted to the stockholders, the shares of stock offered for sale shall be divided equally, as much as practicable, among the stockholders who accepted in writing the offer to sell the shares of stock aforestated". while it is true as alleged by the respondents that the sellers of the shares of stock in question were aware of the existence and due execution of the pre-incorporation agreement embodied in the Agreement of February 13, 1986, it does not necessarily follow that the petitioner was duly notified of the pre-incorporation agreement or was made aware of its existence prior to the execution of the deeds of sale dated September 20, 1989. Besides, no clear evidence were presented to support the said argument. On the SEC approved Amended Articles of Incorporation which provides for restriction on stock transfer found in Article XI thereof, it is noteworthy to emphasize the fact that said amendment was approved on April 5, 199O (Exhs. "B" and "B-1", Rebuttal) by the SEC. The alleged restriction on Stock Transfer in Article Eleventh (Exh. "N-11") of the Amended Articles Of Incorporation of Pantukan dated January 13, 1989 has been crossed out or deleted and hence no such restriction exist at all on the transfer of shares, notwithstanding respondents' contention that the said deletion without authority from the Board of Directors. In fact, the Directors' Certificate itself does not indicate any amendment to Article Eleventh (Exh. "N-1"). Even the Certificate of filing of the Amended Articles of Incorporation (Exh. "N") shows that what has been amended was Article VII of the original Articles of incorporation. Hence, the petitioner could not be considered to be bound by a restriction which does not exist. Upon the other hand, the Amended Articles of Incorporation of Pantukan dated February 5, 1990 particularly Article XI thereof contains in paragraph (b) thereof the restriction on the transfer of stock, which reads: LLpr "In addition to the restriction provided for in the charter of the corporation and applicable laws/rules/regulations, the sale, transfer, conveyance, disposition and/or assignment of the shares of stock owned by the stockholders in the corporation shall be subject to the following restrictions/limitations: (1) Any stockholder desiring to sell, transfer or otherwise dispose of his/her shares of stock in the corporation shall first tender his/her written offer to sell to the corporation stating the price desired for hi/her shares of stock. If within fifteen (15) days from receipt of the written offer, the corporation shall fail to act on said offer, right of first refusal granted to the corporation shall lapse; (2 ) Upon the expiration of the aforestated option given to the corporation, a written offer shall be made by the stockholders to the stockholders or to at least a majority of them stating the price desired for his/her shares of stock. If the option granted to the stockholders is not exercised by any of them within fifteen (15) days from receipt by any two of said stockholders to whom the written offer of sale was tendered or made, then the stockholder desiring to sell his/her shares of stock in the corporation shall be free to sell, transfer, convey and/or assign his/her shares of stock in favor of any other party subject to the legal requirement of Filipino citizenship In case two or more stockholders accepted the offer of sale within the fifteen (15) day option period granted to the stockholders, the shares of stock offered for sale shall be divided equally as much as practicable among the stockholders who accepted in writing the offer to sell the shares of stock aforestated." But then, the restriction on the transfer of the shares embodied the aforesaid amendment to Articles XI was approved by the SEC on February 5, 1990, much later than the date the two (2) deeds of sale of the shares of stock in question were executed by the parties therein. Hence, the petitioner, the other party in the said deeds of sale as vendee, is not and could not be bound by the said amendment particularly the restriction on the transfer of shares. The pre-incorporation agreement among the original stockholders of Pantukan dated February 13, 1986 is an agreement binding only among the stockholders of the corporation, not to a third who is not privy to the agreement, unless the said pre-incorporation agreement is embodied in the charter itself. Considering that the said pre-incorporation agreement was incorporated in the charter on February 5, 1990, it does not cover transactions on transfer of shares executed earlier than the said date. Hence, the Deeds of Sale dated September 20, 1989 were validly executed, notwithstanding respondents' observation that the capital gains tax and documentary stamps covering the sales of shares of stocks dated September 20, 1989 and that the petitioner tendered payment for unpaid subscription to respondents Borsoto on February 16, 1990. Accordingly, respondent Borsoto's refusal to register/ record the sales of shares of stock in question cannot be considered to be legally justified. WHEREFORE, judgment is hereby rendered directing respondents Romeo H. Borsoto and Nestor L. Jose or the incumbent Corporate Secretary and President of Pantukan to record in the books of Pantukan the deeds of sale of shares (Annexes "A" and "B" of the Petition) and to issue the corresponding certificate of stock covering 10,000 shares of Pantukan in the name of the petitioner. Likewise, respondent Bustos is hereby enjoined to perform and comply with his contractual obligation under the deed of sale (Annex "B" of the Petition). Likewise, respondents Borsoto, Jose and Bustos are hereby directed to pay the petitioner jointly and severally reasonable expenses of litigation as well as Attorney's fees in the amount of P100,000.00. SO ORDERED. (SGD.) MANUEL P. PEREA Hearing Officer