Elmer Hale Cobb v. Dimagiba

[SEC-SICD * CASE NO. 4299. January 16, 1996.] ELMER HALE COBB, ET AL. , petitioners , vs .DENNIS DIMAGIBA, ET AL. , respondents . D E C I S I O N This is a petition filed by the petitioners-seeking mainly to declare "illegal" and ''void'' the stockholders' meeting of ESCO Hale Shoe Company (hereinafter referred to as ESCO) conducted on July 24, 1992 for allegedly being "contrary to law and the constitution". LexLib Under a claim that petitioners being the majority and Filipino stockholders, directors and officers of ESCO, it is alleged that the July 24, 1992 meeting of stockholders where respondents elected themselves as directors and officers of ESCO was illegal and maliciously held since respondents were not stockholders, aside from ESCO's duly constituted board and majority stockholders. As far as individual respondents are concerned, petitioners question their standing as stockholders of ESCO in this way: "2.06. Following said illegal meeting, said respondents then falsely and maliciously represented themselves and to this date continue to represent themselves as majority stockholders of the company in violation of the New Corporation Code of the Philippines the Constitution and the Anti-Dummy Law, thus: a. Respondents Ruth Cobb Hill, Allan Frank Cobb and Evangeline Cobb Aguilar, while members of the Hale family, are all non-Filipinos and as such do not and cannot own more than 40% of the Company; b. Respondents Dennis Dimagiba, Felisa Baquilat and Maria Legaspi, all members of the same law firm, are not members of the Hale family and have never been stockholders of the company as in fact they are lawyers being utilized as dummies by the aforesaid non-Filipino respondents; c. Respondent Edwin Aguilar, while a Filipino, is not a direct member of the Hale family, has never been a stockholder of the company and being the husband of respondent Angeline Cobb Aguilar, is being utilized as dummy by the same non-Filipino respondents." Respondents, in their Answer uniformly pleaded as special and affirmative defense, the lack of cause of action on the part of the petitioners as against respondents under the following claims to wit: (a) that petitioner Elmer Hale Cobb is not a majority stockholder of the company, he being a stockholder of record of only 2,000 shares or 20% of the capital stock of ESCO; (b) that petitioners Elizabeth Carrascoso Cobb, Jonathan C. Cobb and Joseph Montgomery C. Cobb are neither stockholders, directors and/or officers of ESCO and thus, they have no personality to sue respondents in a purely intra-corporate controversy; (c) that the stockholders of ESCO, as of July 23, 1993 aside from the respondents were petitioner Elmer Hale and Grace H. Cobb; (d) that at the special stockholders meeting on July 24, 1992, respondent Dennis G. Dimagiba was elected Chairman of the Board of Directors while respondents Ruth Cobb Hill, Felisa B. Baquilat, Luisa L. Delfin and Eduardo Aguilar, together with petitioner Elmer Hale Cobb, were elected members; and (e) that after the stockholders' meeting, all the respondents except Luisa L. Delfin were elected officers of the corporation. Likewise, in their Answer, respondents in arguing the regularity and validity of the July 24, 1992 special stockholders meeting, maintained and insisted that: "20. The special stockholders' meeting referred to above is valid and legal, the same having complied with the corporate By-laws specifically Section 1 to 8 of Article I. 21. The election of the Board of directors of the aforestated Special Stockholders meeting is valid and legal in accordance with the Corporate By-laws, the Constitution and the Corporation Code 22. The election of officer held during the aforementioned Board of Directors meeting is valid and legal, the same having complied with the Corporate By-laws, Constitution and the Corporation Code. 23. All of the stockholders of record, including petitioner Elmer H. Cobb, are stockholders of their own right and their being such is not violative of the New Corporation Code, the Constitution and the Anti-Dummy Law; 24. The duly elected members of the Board of Directors and officers of ESCO are not misrepresenting themselves as such but holding their offices by virtue of valid and legal election held at the Special Stockholders' and Board of Directors' meeting duly called for the purpose on July 24, 1992." Stripped of non-essentials, the issue to be ultimately resolved is who were the stockholders of record of ESCO as of July 24, 1994. A factual finding on this score shall also determine the collateral issue as to whether or not the stockholders meeting of July 24, 1992 was validly held. Under paragraph 4 of Section 74, Title VIII of the Corporation Code of the Philippines, stock corporations (like ESCO) are mandated "to keep a book known as the 'stock and transfer book' in which must be kept a record of all stocks in the names of the stockholders alphabetically arranged; the installments paid and unpaid on all stocks for which subscription has been made and the date of payment of any installment; a statement of alienation sale or transfer of stock made, the date thereof, and by and to whom made; and such other entries as the By-laws may prescribe. The stock and transfer book shall be kept in the principal office of the corporation or in the office of its stock transfer agent and shall be open for inspection to any director or stockholder of the corporation at reasonable hours on business days. LLpr The summary/list of stockholders of ESCO's stock and transfer book (Exhibit "1") indicates that as of July 24, 1992, the stockholders of ESCO were: Engracio Cobb (1,000 shares),Ruth Cobb Hill (1,500 shares),Grace Hale Cobb (1,500 shares),Edgardo Aguilar (3,996 shares),Dennis G. Dimagiba (1 share),Melanie L. Zerrudo (1 share),Luisa L. Delfin (1 share) and Felisa B. Baquilat (1 share).Respondent Felisa B. Baquilat, who acted as Corporate Secretary since July 24, 1992 produced at the hearing the stock and transfer book of ESCO which appears to confirm the claim as to who are the stockholders of ESCO per the said stock and transfer book, the authenticity of which petitioner did not even dispute. Petitioner, on the other hand, present a different scenario that does not unfortunately, find confirmation in the records, corporate or otherwise. For instance, petitioner Mark Jonathan Cobb, who claimed to be the Corporate Secretary of ESCO in 1988 and 1989, (a) had not taken any minutes of meetings presumably had either by the Board or the stockholders; (b) that other than the general information sheets for 1988 and 1989 submitted to the SEC, he had no other proof to show that he was a stockholder; (c) that he knew that the stock and transfer book of ESCO was given by his father Elmer to his grandmother Engracia sometime in January, 1992, yet he did not provide any explanation why his name was never placed in the stock and transfer book, which was in his family's possession until January, 1992. A similar observation may be said of petitioner Elizabeth Carrascoso Cobb who despite her claim of being a stockholder of ESCO, does not appear to be so. Her only recorded pieces of evidence with respect to her claim of being stockholder of ESCO were Exhibits "C" and "D".Exhibit "C" was a "resolution" dated November 3, 1992 appearing to authorize certain signatories to open a second current account with the FNCB, Juan Luna, Manila, where said Elizabeth Carrascoso Cobb had affixed her signature as director of ESCO. Exhibit "D" on the other hand, was entitled Directors' Certificate dated November 21, 1975, where the same Elizabeth Carrascoso Cobb had affixed her signature together with petitioner Elmer Hale Cobb, respondent Engracia H. Cobb and a couple of others, i.e. George H. Cobb and one Renato J. Robles. It is worthwhile to observe that except for Engracia H. Cobb and Elmer H. Cobb whose names appear as stockholders in the stock and transfer book, the rest appear to be not stockholders of ESCO. Under the circumstances, we fail to appreciate Exhibits "C" and "D" as adequate evidence to foreshadow the clear fact that petitioner Elizabeth Carrascoso Cobb has never been recorded in the official book for the purpose as a stockholder. It may be true that shares of stock have been given to her but since the transaction was never recorded, much more entered in the stock and transfer book, her claim as stockholder must not be given due course. LexLib "The stock and Transfer Book is a very important corporate book required by law to be kept and maintained by stock corporations. It is designed to enable the corporate secretary and/or duly authorized officer who keeps the book and all interested parties who may deal with the corporation to know who are the stockholders of record, who are entitled to vote at corporate meetings, to receive dividends and to be voted as a directors, as well as for the directors to know how much of the subscription remains unpaid for the Entries made in the stock and transfer book and the stock certificate book, the entries on the former prevails over the latter." ( SEC Opinion dated January 21, 1980, Manuel G. Abello * ) Also, to be able to give a definite accurate information as to the factual transfer of shares, much would depend on the identities of the stockholders as appearing on the stock and transfer book of the corporation. The registration of the transfer of shares in the stock and transfer book of the corporation is a function which pertains to the Corporate Secretary or the transfer agent of the corporation, if one is appointed" (SEC Opinion dated February 1, 1989, Mr. Eli Busa). Sections 50, 51 and 52 of the Corporation Code, prescribe the requirements for a valid stockholders' meeting. "SECTION 50. Regular and Special Meetings of Stockholders or members . Regular meetings of stockholders or members shall be held annually on a date fixed in the by-laws or if not so fixed, on any date in April of every year as determined by the Board of Directors or Trustees. Provided, that written notice or regular meetings shall be sent all stockholders or members of record at least two (2) weeks prior to the meeting, unless a different period is required by the By-Laws. Special meetings of stockholders or members shall be held at any time deemed necessary or as provided in the By-laws; Provided however, that at least one (1) week written notice shall be sent to all stockholder or members unless otherwise provided in the By-laws. Notice of any meeting may be waived, expressly or impliedly by any stockholders or member." The foregoing requirements of the Corporation Code are complemented by Sections 2 and 3, Article 1 of ESCO's By-laws, which provide: "SECTION 2. Special Meeting . Special meetings of stockholders may be called by the President, or by order of the Board of Directors, whenever he or they shall deem it necessary, and it shall be the duty of the President to order and call such meetings whenever the holders of records of not less than one-fourth of the outstanding capital stock of the company with voting privilege shall in writing so request. "SECTION 3. Notices . Notice of the time and place of holding any annual meeting, if held otherwise than as provided in the first sentence one of this article or any special meeting of stockholders, shall be given other posting the same enclosed in a postage prepaid envelope, addressed to each stockholder of record with voting privilege at the address left by such stockholder with the secretary of the company or his last known past office address, or by delivering the same to him in person, or radiogram or telegram, at least thirty (30) days before the date set for such meeting. The notice of every special meeting shall state briefly the objects of the meetings, and no other business be transacted at such meeting except by consent of all the stockholders with voting privilege. These By-laws shall be sufficient notice of the annual meetings and no further notice need to be given. No notice of any meeting need to publish in any newspaper or in any other medium. Failure to give or any defect or irregularity in giving the notice of any regular meeting shall not affect or invalidate any action taken at such meeting." Quite clearly, the requirements of the Corporation Code in order that a stockholders' meeting may be viewed as valid have been adequately met in the case at bar. 1. Notices (Exhibit "2") to stockholders of record, including petitioner Elmer Cobb had been seasonably sent by acting corporate Secretary Allan Frank F. Cobb. The evidence show that all the stockholders of record were sent a month before respective copies of a notice that a stockholder meeting was going to be held on July 24, 1992 at 10:00 o'clock in the morning at the Army and Navy Club at T.M. Kalaw St.,Manila; prLL 2. The stockholders' meeting was held in the City of Manila; and 3. In the said July 24, 1992 meeting, only petitioner Elmer Cobb, who holds 20% of ESCO's Capital stock, was absent, thereof ensuring the presence of a quorum.. On another front, petitioner have kept on insisting that a quorum could not have been met on the July 24, 1992 meeting since they (petitioners) constitute the majority stockholders. But beyond bare claims petitioners have not really come up with competent evidence that could sustain their position. The reference to the so-called Tiongson shares that were allegedly transferred to petitioner Elmer Cobb borders on the nebulous: no deed, whether of assignment or sale, was ever offered in evidence, and neither were there stock certificates endorsed in favor of petitioner Elmer Cobb that came up in the course of the proceedings. In other words, other than what petitioner Elmer Cobb held as shares as reflected in the stock and transfer book, there is in reality nothing else that would impress belief on the other petitioners' claim as stockholders, too, of ESCO. As opposed to petitioners' vague and unsubstantiated assertions, respondents presented the Stock and Transfer Book of ESCO where their respective shareholdings are reflected. Absent a showing of irregularities in the entries, thereof, these stockholders of record contained in the Stock and Transfer Book must prevail since this is the very record of all the stockholders, the installments paid or unpaid, as well as all alienation, sale or transfer. (Section 63 and 74 Corporation Code of the Philippines). WHEREFORE, premises considered, the petition should be, as it is hereby DISMISSED. No pronouncements as to costs. With the dismissal of the above entitled case, resolution of the Omnibus Motion To Cite Respondents In Contempt has therefore, become moot and academic. cdll SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer * Copied verbatim from documents obtained directly from the Securities and Exchange Commission .