Araneta Alumni Association, Inc. v. Gregorio Araneta University Foundation

[SEC-SICD * CASE NO. 4249. March 29, 1994.] ARANETA ALUMNI ASSOCIATION INC. , petitioner , vs .GREGORIO ARANETA UNIVERSITY FOUNDATION, ET AL. , respondents . D E C I S I O N In its petition dated June 15, 1992, petitioner Araneta Alumni Association, Incorporated (Alumni, for brevity) prayed for the following: a) Upon filing of the petition, for the issuance of a Temporary Restraining Order "enjoining the respondents from convening and/or holding a meeting on any date hereafter for the purpose of the removal of Mr. Jose Mar Manglicmot, Sr.,as member of the Board of Trustees of the Gregorio Araneta University Foundation;" b) Upon the expiration of the period of the Temporary Restraining Order, for the issuance of a writ of Preliminary Prohibitory Injunction to maintain the status quo; c) After hearing, for the issuance of a Writ of Permanent Injunction which shall be lifted only when the petitioner shall have selected/named a replacement for its present representative, and that such replacement shall have been duly elected as member of the Board of Trustees of the respondent; and d) Granting unto the petitioner such other reliefs and remedies which the Honorable Commission may deem just and equitable in the premises. In support thereof, petitioner alleged, among other matters, that petitioner is a non-stock corporation, duly organized and existing under and by virtue of the laws of the Philippines, registered in this Commission under Registration No. 21236; that respondent Gregorio Araneta University Foundation (GAUF, for brevity) is a domestic entity organized under the laws of the Philippines under SEC Registration No. 28678; that the other respondents are members of the Board of Trustees of GAUF; that a notice of special meeting of the members of GAUF was served to the petitioner's representative for the purpose of "removal of Mr. Jose Mar Manglicmot, Sr., as member of the Board of Trustees of the Gregorio Araneta University Foundation Inc., pursuant to Section 28 of the Corporation Code of the Philippines," and in reaction thereto, an Ex-Parte Urgent Motion for the Issuance of a Temporary Restraining Order was filed by the Petitioner in SEC Case No. 4186 in which the following substantial points were raised; that the meeting, if held, and the main agenda thereof carried out: llcd a) Is tantamount to depriving the minority member of the GAUF the (petitioner's) right of representation therein; b) Is contrary to the spirit and intent of the By-Laws of the Corporation, which specifically provides; that an additional member of the Corporation, and automatically of the Board of Trustees, shall be selected/nominated by the Board of Directors of the Alumni, who in this particular case, is herein petitioner's representative; c) Will affect, one way or the other, the outcome of SEC Case No. 4186, which is pending final resolution by this Commission; d) Is a plain harassment; a retaliatory measure designed to get even with the petitioner's representative because of his demonstrated intransigent position when it comes to the point of protecting the interests, and upholding the integrity of the Gregorio Araneta University Foundation. that finding the Motion above referred to impressed with merit, this Commission issued an Order dated March 29, 1992, enjoining the respondents from convening and/or proceeding with the meeting on May 29, 1992 at 12:00 noon or any date thereafter for the purpose of the removal of Mr. Jose Mar Manglicmot, Sr., as member of the Board of Trustees of GAUF which Order was served to the parties concerned on the same date; that in their Opposition to the Issuance of a Writ of Preliminary Injunction dated June 4, 1992 also filed in SEC Case No. 4186, the respondents raised the following points or issues, to wit: prcd a) Petitioner will not be deprived of its representation in the board of trustees because immediately upon the removal of Mr. Jose Mar Manglicmot petitioner will be allowed to name and pick his replacement coming from the Alumni, and b) Mr. Jose Mar Manglicmot is being removed as a member of the board of trustees under Section 28 of the Corporation Code, because he has a conflict of interest with GAUF. Petitioner further claimed that the Alumni selects/nominates/designates its representative as member of the Corporation (Sec. 1, Art. 1 of the By-Laws); that this is a prerogative vested exclusively in the Alumni that it can exercise at will, anytime; that the Alumni can withdraw the nomination of its representative anytime, for good reasons, and name a replacement from among its members in good standing; that it is not the prerogative or right of the respondent to remove Mr. Manglicmot, Sr. and immediately upon his removal, petitioner will be allowed to name and pick his replacement coming from the Alumni; that the position taken by the respondent is untenable, highly pretentious, a grave abuse of discretion; that nothing in the By-Laws or in the Corporation Code of the Philippines is this position of the respondent allowed or sanctioned. Furthermore, petitioner alleged that Mr. Manglicmot, Sr. was illegally dismissed from his position as Vice- President for Administration and Finance of GAUF in 1988 because of his liberal stand on diverse issues involving the university which the GAUF perceived are adverse to the University. Firmly believing that the non-renewal of his appointment by the Board of Trustees was in effect, a dismissal in contemplation of law, Mr. Manglicmot filed a case for illegal dismissal with the Department of Labor and Employment against the respondent university on August 2, 1988; that Mr. Manglicmot was selected/elected representative of the petitioner as member of the GAUF on October 2, 1988; that the labor case filed by Mr. Manglicmot is in his personal capacity, and purely his own personal decision while his selection/election as the petitioner's representative as member of the GAUF and automatically and eventually as a member of the Board of Trustees thereof is the collective decision of the Alumni; that there is no conflict of interest involved in this case with regard to the petitioner's representative, Mr. Jose Mar Manglicmot, Sr. and finally, petitioner contended that conflict of interest should be applied rather to respondents Bro. Rolando R. Dizon, Chairman of the Board of Trustees of GAUF and Bro. Andrew Gonzales, member of the Board of Trustees of GAUF who are at the same time President of La Salle University (Bacolod) and President of De La Salle University (Taft Avenue, Manila),respectively. After summons was served to the respondents and upon petitioner's Motion, this Hearing Officer issued a Temporary Restraining Order dated July 2, 1992 enjoining the respondents from "convening and/or proceeding with the meeting on July 3, 1992 at 12:00 noon or any date or time before or thereafter for the purpose of removing Hon. Jose Mar Manglicmot, Sr.,as member of the Gregorio Araneta University Foundation, Inc. (GAUF) Board of Trustees." The respondents, in their Urgent Motion For Postponement dated July 6, 1992, committed that they "undertake to maintain the status quo until such time that the incident of preliminary injunction is resolved." In answer thereto, respondents averred that Jose Manglicmot is being removed as member of the board of trustees under Section 28 of the Corporation Code, because he has a conflict of interest with the GAUF; that he has a pending case against the respondent University for illegal dismissal, and damages and he was able to secure a favorable decision with the Labor Arbiter, wherein he was ordered reinstated with full backwages, damages, and attorney's fees or with a total monetary award of about P800,000.00; that the said decision was reversed and set aside by the National Labor Relations Commission; that Mr. Manglicmot elevated the matter to the Supreme Court where it is now pending resolution; that on top of this, he is actively prosecuting the following cases against the respondent University; SEC Case Nos. 3505, 4050 , 4011 , 4186 and PED Case No. 92-0996 ;that a member of the Board of Trustees has a fiduciary relation with the corporation; that he is obliged to act with utmost candor and fair dealing for the interest of the corporation and without taint of selfish motives; that with Mr. Manglicmot's gargantuan claims intended to enrich himself at the expense of respondent corporation, and the severely strained relationship, common decency should have impelled him to resign. As it is, he has clung like a leech to the position of trustee. Under the circumstances, it will be the height of oppression to compel respondent corporation to trust him and maintain his membership in the board of trustees; that his conflict of interest belies his claim that he is being ousted because of his intransigent position when it comes to protecting the interest of respondent Corporation, and petitioner will not be deprived of its representation in the board of trustees, because immediately upon the removal of Mr. Jose Manglicmot,.petitioner will be allowed to name and pick his replacement coming from the Alumni. prcd The respondent prayed that the petition be dismissed and the prayer for the issuance of a Writ of Preliminary Injunction be denied for lack of merit. At the preliminary conference held on August 25, 1992, the parties agreed that petitioner's application for a Writ of Preliminary Injunction be deemed waived so that the case will be resolved on the merits after the parties shall have simultaneously submitted their respective memoranda. The Corporation Code of the Philippines (Batas Pambansa Bilang 68) provides: "SECTION 28. Removal of directors or trustees . Any director or trustees of a corporation may be removed from office by a vote of the stockholders holding or representing two-thirds (2/3) of the outstanding capital stock, or if the corporation be a non-stock corporation, by a vote of two-thirds (2/3) of the members entitled to vote: Provided, that such removal shall take place either at a regular meeting of the corporation or at a special meeting called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the president or on the written demand of the stockholders representing or holding at least a majority of the outstanding capital stock, or if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote. Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well as, of the intention to propose such removal, must be given by publication or by written notice as prescribed in this Code The vacancy resulting from removal pursuant to this section may be filled by election at the same meeting without further notice, or at any regular or at any special meeting called for the purpose, after giving notice as prescribed in this Code. Removal may be with or without cause: Provided, that removal without cause may not be used to deprive minority stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code." With the foregoing provision of law, the matter of "conflict of interest" as a ground for removal of Mr. Jose Mar Manglicmot as member of the Board of Trustees of GAUF need not be discussed anymore as "removal may be with or without cause." The law does not specify cases for removal of a trustee nor even require that removal should be for sufficient cause or reason. A trustee may be removed by a vote of two-thirds (2/3) of the members entitled to vote without cause subject to the limitation that a trustee cannot be removed without cause if the effect of such removal is to deprive minority members who united in cumulative voting to elect such trustee, of right of representation to which they may be entitled. This is now the claim of the petitioner that its nominee, Mr. Jose Mar Manglicmot, should not be removed as it will deprive the minority of representation in the board. This Hearing Officer is not impressed with the claim of the petitioner. In this case there is no question that cumulative voting was not exercised in the election of Mr. Manglicmot. During the hearing of the instant case the petitioner made such admission: LLjur "Atty. Bilog: Will the petitioner admit that he became a member of the Board of Trustees by virtue of 1 vote that is his lone vote? Mr. Manglicmot: Yes, that is in accordance with the provision of the Corporation Code. Hearing Officer: You let your counsel speak. Atty. Lim: In accordance with the provision of the By-Laws also, You Honor please. Atty. Bilog: And that, therefore, no cumulative voting was made in the case of his election? xxx xxx xxx Atty. Bilog: What is the answer? Atty. Lim: No cumulative, Your Honor." (TSN, 25 August 1992, pp. 21-23) Moreover, the election of the members of the Board of Trustees of GAUF cannot be characterized by cumulative voting because the number of members of the GAUF which is ten (10) is equal to the number of Trustees which the members elect. Hence, any member of GAUF is already assured by his own vote a seat in the Board. The authority of the petitioner to select or elect its nominee as one of the ten (10) members of GAUF and who thereafter, to be elected as a trustee of the GAUF is not in dispute. So too, is the authority of the members of the GAUF to remove any of its trustees after complying with the requirements of law particularly Section 28 of the Corporation Code. (B.P. Blg. 68). When a vacancy occurs in the Board arising of a removal of a trustee, the vacancy shall be filled from among the nominees of the visitator who nominated the trustee who have been removed or as in this case from the Alumni should Mr. Jose Mar Manglicmot be ultimately removed as trustee. As aptly stated by the respondents, the petitioner will not be deprived of its representation in the Board of GAUF for it is free to name another nominee in replacement of Mr. Jose Mar Manglicmot should he be removed. At this point of time, this Hearing Officer cannot predict who will be the Alumni nominee thereafter who is definitely assured of a seat in the Board by his own vote. WHEREFORE, premises considered, the instant case should be, as it is hereby, DISMISSED. LexLib No costs. SO ORDERED. (SGD.) ELPIDIO S. SALGADO Hearing Officer