Mariano Corvera, et al. vs. Tranquilino Calo, Jr., et al.

[SEC-SICD * CASE NO. C-0093. March 16, 1989.] MARIANO CORVERA, ET AL. , petitioners , vs . TRANQUILINO CALO, JR., ET AL. , respondents . [SEC-SICD * CASE NO. C-0099. March 16, 1989.] JOSE JARAMILLO, ET AL., petitioners, vs. TRANQUILINO CALO, JR., ET AL., respondents . [SEC-SICD * CASE NO. 3208. March 16, 1989.] NASIPIT INTEGRATED ARRASTRE and STEVEDORING SERVICES, INC., petitioner, vs. MARIANO CORVERA, ET AL., respondents . D E C I S I O N This is the decision in the three (3) above-entitled cases in view of the fact that all said cases involved one and the same corporation, the parties are practically the same and the evidence adduced in one (1) case was, by agreement of the parties, adopted as evidence in the two (2) other cases. LibLex The first two (2) cases, SEC Case Nos. C-0093 and C-0099 were initially filed with and partially heard by the Cebu Extension Office. In SEC Case No. 0093, the petitioners, Mariano C. Corvera and Filemon B. Kuizon, in their capacity as stockholders, directors and officers of the respondent corporation, Nasipit Integrated Arrastre and Stevedoring Service, Inc., (NASIPIT for brevity) brought the action against the respondents seeking for annulment of the January 13, 1986 election of NASIPIT, with a prayer for a writ of preliminary injunction. In support thereof, petitioners alleged, inter alia, that they owned 600 shares each in NASIPIT, representing 40% of the total outstanding shares of the corporation; that on January 13, 1986, NASIPIT held an annual stockholders' meeting wherein only one stockholder, respondent Jose Jaramillo, Sr. was absent; that respondent Benjamin Jaramillo, son of Jose Jaramillo Sr., who was not yet a stockholder then and without any proxy but presented a Deed of Transfer of Shares from his father, stood up and moved to declare all the positions of members of the Board and Officers of the corporation as vacant: that respondent Tranquilino Calo, Jr. stood up and to the surprise and frustrations of petitioners, declared that since they were the majority stockholders, the following were the new sets of directors and officers of the NASIPIT: Tranquilino Calo, Jr. Director-President Benjamin Jaramillo Director-Vice President Jesus Calo Director-Secretary Jose Jaramillo Sr. Director-Secretary Jose Jaramillo Sr. Director-Treasurer Ramon Calo Director-Auditor that such act and conduct of respondents are clear violations of the Corporation Code and the By-Laws of the corporation and for the respondents to continue acting as directors and officers, particularly the issuance of shares of stock of the corporation, will result to the great damage and prejudice of the petitioners. Petitioners further prayed that pending the holding of another election, they be allowed to perform their functions as directors and officers of the corporation. Respondents denied the material averments of the complaint and alleged that the election held on January 13, 1986, was legal and valid, as they did not violate the Corporation Code or the By-Laws. After long and protracted hearings on the petitioners' application for a writ of preliminary injunction, the Hearing Officer of the Cebu Extension Office issued an Order dated May 29, 1987, granting the injunctive relief prayed for by the petitioners and directed the calling of another election. However, in a petition for review by the respondents, the Commission en banc issued a restraining order dated July 2, 1987, enjoining the enforcement of the Order dated May 29, 1987, enjoining the holding of any meeting until after the shareholdings of each every stockholder is determined and remanded the case to the Hearing Officer for further proceedings. In SEC Case No. C-0099, petitioners Jose Jaramillo, Sr. and Benjamin Jaramillo alleged that they are stockholders, members of the Board and Officers of NASIPIT; that in the stockholders' meeting held on January 13, 1986, they were among those elected members of the Board and Officers of the corporation; that in view of the petition filed and docketed as SEC Case No. 0093, the respondents were enjoined to hold board sessions, as well as to issue shares of stock of the corporation; that on March 23, 1987, respondent Tranquilino Calo, Jr., without any proper notice and in the absence of a quorum, conducted a special stockholders' meeting; that as a result of said stockholders' meeting, respondent Calo, Jr. issued a Memo Order to the effect that Jose Jaramillo, Sr., should not be recognized as Treasurer and Benjamin Jaramillo as Vice-President and Office Manager; that the said Memo Order is in gross violation of the order in SEC Case No. C-0093 dated March 31, 1987, restraining the effects of the special stockholders' meeting of March 23, 1987 and of the by-laws of the corporation, specially Section 7 thereof, which provides that officers can only be removed by the Board of Directors; that petitioners are still recognized as directors and officers by virtue of the en banc restraining order dated July 2, 1987, allowing the hold over board to function; that petitioners are being prevented by respondent Calo, Jr., from performing their functions as directors and officers of the corporation; that respondent Calo, Jr. now run and control the corporation alone, and has not deposited collections with the corporation's depository banks, all in gross violation of the Corporation Code and the Orders of the Commission, to the great damage and prejudice of petitioners. In their answer, respondents denied the material allegations of the petition and maintained that notices were sent to all stockholders for the March 23, 1987 special stockholders' meeting; that the resolution adopted in said meeting removing the petitioners was valid and legal; that what was enjoined by the restraining order in SEC Case No. C-0093 is the holding of a board meeting; that the life of the restraining order is only twenty (20) days; that it is within the power of the stockholders to elect and remove directors and until the resolution of March 23, 1987 is finally declared illegal, the same stands legal; that the rights of the petitioners to be recognized as hold over members of the board begun only on July 2, 1987, when the en banc restraining order was issued; that the corporation is being run by the Board of Directors and that the collections were not deposited in the depository banks because obligations of the corporations are paid in cash. llcd In SEC Case No. 3208 filed with the main office of this Commission, petitioner NASIPIT prayed that Jose Jaramillo Sr. and Benjamin Jaramillo be enjoined from performing their functions as treasurer and Vice-President, respectively, of the corporation and in support thereof, alleged that on January 14, 1986, the Board of Directors of NASIPIT passed a resolution to sell the unsubscribed stocks of the corporation to the stockholders; that copy of said resolution was sent to respondents Mariano Corvera and Filemon Kuizon on January 16, 1987; that aside from the resolution duly received by the respondents, the President of the corporation requested personally Corvera and Kuizon to exercise their pre-emptive rights for the unsubscribed stocks but despite said request, said respondents did not exercise their pre-emptive rights; that pursuant to the resolution of January 14, 1987, respondents Jaramillo Sr. and Benjamin Jaramillo were able to buy 329 shares worth P32,900.00 and 340 shares worth P34,000.00, respectively; that of the original 250 shares of Jaramillo Sr., he sold 200 shares to his son, Benjamin Jaramillo and the pre-emptive rights of both respondents should only be to the extent of 500 shares; that pursuant to the restraining order of the Commission en banc dated July 2, 1987, the members of the board elected on January 13, 1986, who are to function in a hold over capacity are: Tranquilino Calo, Jr. Jose Jaramillo, Sr. Jesus Calo Ramon Calo Benjamin Jaramillo that pursuant to the aforesaid restraining order of July 2, 1987, the Corporate Secretary called for a board meeting on July 18, 1987 and notices were sent to all board members but respondents Jaramillos, instead of attending the meeting, sent a letter to the Secretary informing him that they (Jaramillos) will not attend. In said meeting, the board of directors present passed a resolution to elect the officers of the corporation and the following were elected officers: Tranquilino Calo, Jr. President Ramon Calo Vice-President Jesus Calo Treasurer Narciso Mondejar Auditor Despite the result of said election, respondents Jose Jaramillo Sr., and Benjamin Jaramillo insisted in performing the functions of treasurer and vice-president, respectively. Hence, the prayer for a writ of preliminary injunction to enjoin said respondents from interfering with the operations of the corporation and from representing themselves as officers. Respondents denied the allegations of the petition, alleging that by virtue of the restraining order of the Commission en banc dated July 2, 1987, they (the Jaramillos) were to function as directors and officers in a hold-over capacity; that the issue raised in the present petition is the same in SEC Case No. C-0093, which was raised by the petitioners in a petition for review before the Commission en banc; that the issue of whether respondents Jaramillos are lawful directors and officers of NASIPIT is the same subject matter of SEC Case No. C-0099. From the pleadings submitted by the parties in the three (3) cases and having in mind the restraining order of the Commission en banc dated July 2, 1987, it is quite clear that the issues to be resolved in these cases are: 1. In SEC Case No. C-0093, whether or not the meeting and election of the members of the Board of Directors of NASIPIT on January 13, 1986, is valid and legal and whether or not the issuance of shares of the Corporation on January 14, 1986 is valid and legal. 2. In SEC Case No. C-0099, whether or not the Special Stockholders' Meeting of March 23, 1987 is valid and legal; and 3. In SEC Case No. 3208, (1) the entitlement of respondents to pre-emptive rights to the issuances of shares and (2) whether or not the removal of the respondents Jaramillos as Officers pursuant to the July 18, 1987 board meeting was valid and legal. From the evidence submitted by the parties, it was clearly established that NASIPIT had an authorized capital of FIVE HUNDRED THOUSAND (P500,000.00) PESOS, representing 5,000 shares at P100.00 per share, out of which, 3,000 shares valued at THREE HUNDRED THOUSAND (P300,000.00) PESOS had already been subscribed and paid up, as of January 13, 1986, distributed as follows: Tranquilino Calo, Jr. Original & Stock Dividend 870 Jose Jaramillo, Sr. Original & Stock Dividend 550 Mariano Corvera Original & Stock Dividend 600 Filemon Kuizon Original & Stock Dividend 600 Narciso Mondejar Original & Stock Dividend 150 Jesus Calo (Acquired on July 6, 1983) 20 Ramon Calo (Acquired on Jan. 7, 1986) 10 Benjamin Jaramillo (Acquired on Oct. 24, 1985) 200 _____ Total 3,000 (Exhibits "8", "11", "C" and "D") At the stockholders' meeting held on January 13, 1986, all the eight stockholders representing the entire outstanding capital stock of the corporation were present, as reflected in the minutes of the aforesaid stockholders' meeting (Exh. "7"). After the secretary announced that there was a quorum, Benjamin Jaramillo stood up and moved that all positions in the corporation be declared vacant. Petitioner Corvera objected and moved that the old members of the board be retained. Corvera's objection was overruled, his motion for the retention of the old board not seconded and Jaramillo's motion was carried. At that juncture, petitioner Kuizon walked out of the meeting. Hence, he was not nominated and elected. Benjamin Jaramillo then presented a list containing the names of the persons to be elected members of the board and moved for the approval of said list. His motion was carried and approved by the majority of the stockholders. While it may be true that the procedure in the holding of an election was not strictly complied with, the Hearing Panel believes and so holds that there was substantial compliance of the law, The Hearing Panel likewise takes judicial notice of the admission of counsel for the petitioners during the hearing before the Commission en banc in SEC Case EB - 161 (NIASSI, Et Al. vs. Chan, Et Al.) that the issue of the legality of the January 13, 1986, has been rendered academic with the expiration of the term of the members of the board of NASIPIT. In SEC Case No. C-0099, petitioners contend that by virtue of the restraining order issued in SEC Case No. C-0093, restraining the effects of the March 23, 1987 special stockholders' meeting, and the restraining order of the Commission en banc dated July 2, 1987, the petitioners were in effect allowed to continue performing their functions in a hold over capacity. On the 23 March, 1987 meeting, the stockholders owning the majority of the outstanding capital stock of the corporation were present except stockholders Mariano Corvera, Filemon Kuizon, Jose Jaramillo Sr. and Benjamin Jaramillo. The petitioners were duly notified of the March 23, 1987, special stockholders' meeting (Exhibits "34" and "34-A"). However, notwithstanding due notice, petitioners did not attend and were not elected as members of the board. After the election, respondent Calo, Jr., in his capacity as President, issued the Memo Order not to recognize the petitioners as Treasurer and Vice-President. It would appear that the Memo Order being questioned by the petitioners is a superfluity in view of the fact that in the March 23, 1987 special stockholders' meeting, they were not elected as board members. On the restraining order issued on March 31, 1987, in SEC Case No. C-0093, as correctly pointed out by the respondents, said restraining order is good only for twenty (20) days. As to the restraining order issued by the Commission en banc dated July 2, 1987, in the first place, said restraining order was issued in connection with the January 13, 1986 election and not for the March 23, 1987, special stockholders' meeting. In the second place, even assuming that the restraining order of July 2, 1987 is to extend to the March 23, 1987 special stockholders' meeting, the hold over board of which the petitioners are members, held an organizational meeting in July 18, 1987, wherein the petitioners were not elected officers of the corporation. The Hearing Panel believes and so holds that the reorganizational meeting conducted by the hold-over board is sanctioned not only by the Corporation Code but also by the by-laws of the corporation. LLphil On the issue of determination of the entitlement of the stock holders to their respective pre-emptive rights, we have to fall back to their shareholdings at the time said rights arose. As discussed previously, out of the original 5,000 shares of the corporation, 2,000 shares remained unissued as of January 13, 1986. The resolution authorizing the disposition of the 2,000 unissued shares was dated January 14, 1986. The stockholders, therefore, as of January 13, 1986, are the only ones entitled to exercise pre-emptive rights. Out of the 2,000 unissued shares 1,980 shares were distributed to the following persons: Tranquilino Calo, Jr. 779 shares Jose Jaramillo, Sr. 329 shares Jesus Calo 200 shares Benjamin Jaramillo 340 shares Ramon Calo 242 shares Alan Calo 30 shares Sarah Calo Lumanlan 30 shares Alma Calo Misa 30 shares __________ Total 1,980 shares As earlier stated, the stockholders as of January 13, 1986, together with their respective shareholdings, are as follows: Tranquilino Calo, Jr. 870 shares Jose Jaramillo, Sr. 550 shares Mariano Corvera 600 shares Filemon Kuizon 600 shares Narciso Mondejar 150 shares Jesus Calo 20 shares Ramon Calo 10 shares Benjamin Jaramillo 200 shares __________ Total 3,000 shares From the above tabulation, it is therefore, clear that Jesus Calo has over-subscribed by 180 shares; Benjamin Jaramillo by 140 shares, Ramon Calo by 232 shares and the subscription of 30 shares each by Alan Calo, Sarah Calo Lumanlan and Alma Calo Misa were void as they were not entitled to any pre-emptive rights since they were not yet stockholders as of January 13, 1986. The total of all these subsequent subscriptions amount to 642 shares. The present stockholders of NASIPIT, together with their respective shareholdings, how and when they acquired the same, are the following: Name of Original/ Acquired from Sub- Stockholder Stock 2,000 unissued Total Dividend shares 1. Tranquilino Calo, Jr. 830 779 = 1,609 2. Jose Jaramillo, Sr. 550 329 = 879 3. Mariano Corvera 550 = 550 4. Filemon Kuizon 200 = 200 5. Narciso Mondejar 150 = 150 6. Benjamin Jaramillo 200 200 = 400 (Acquired from father Oct. 24, 1985) 7. Jesus Calo 20 20 = 40 (Acquired from father July 6, 1983) 8. Ramon Calo 20 10 = 30 (Acquired from father dated May 15, 1986 & Certificate of Stock 006) 9. Alan Calo 10 = 10 (Acquired from father May 15, 1986) 10. Sarah Calo Lumanlan 10 = 10 (Acquired from father May 15, 1986) 11. Alma Calo Misa 10 = 10 (Acquired from father May 21, 1986) 12. Teodoro Luneta 50 = 50 (Acquired from Corvera May 21, 1986) 13. Leovigildo Banaag 200 = 200 (Acquired from Kuizon December 1, 1986) 14. Tomas Trillo 200 = 200 (Acquired from Kuizon December 1, 1986) __________ Total 4,338 shares The stockholders who were not able to avail of their pre-emptive rights are Mariano Corvera, Filemon Kuizon and Narciso Mondejar. However, on March 21, 1986, Corvera transferred 50 shares of his shareholdings to Teodoro Luneta (Exh. "19") and by virtue of a Compromise Agreement dated December 4, 1985, but to take effect December 1, 1986, Filemon Kuizon ceded 200 shares each to Leovigildo Banaag and Tomas Trillo. While strictly speaking, it may be true that Luneta, Trillo and Banaag were not yet stockholders as of January 13, 1986, it would not be fair and equitable for them if they would not be allowed now to exercise their pre-emptive rights proportionate to their original stockholdings, together with Corvera and Kuizon, since they were already part-owners of the original stockholdings of Corvera and Kuizon. Justice and equity dictates that all of them Corvera, Kuizon, Mondejar, Luneta, Trillo and Banaag be allowed to exercise their pre-emptive rights to the 662 remaining shares in proportion to their present shareholdings. WHEREFORE, judgment is hereby rendered as follows: 1. The election held on January 13, 1986 is hereby declared legal and valid. Consequently, the resolution adopted on January 14, 1986, authorizing the distribution of the remaining 2,000 unissued shares is likewise valid and legal. 2. That the special stockholders' meeting held on March 23, 1987 is valid and legal, there being substantial compliance of the requirements of the law. 3. The exercise of pre-emptive rights by Alan Calo, Sarah Calo Lumanlan and Alma Calo Misa are hereby declared null and void. In the event said stockholders have paid for their respective shares in exercise of the pre-emptive rights now hereby declared null and void, they should be reimbursed by the corporation for the amounts paid. As to the excess in the exercise of pre-emptive rights by Jesus Calo by 180 shares, Benjamin Jaramillo by 140 shares and Ramon Calo by 232 shares, the excess subscriptions are likewise declared null and void and in the event said stockholders have paid for the excess, said payments should likewise be reimbursed to them. Of the total number of subscribed shares in excess of those allowable numbering 642 and the remaining 20 shares unissued, the same should be distributed proportionately to stockholders who were not able to exercise or avail of their pre-emptive rights as follows: Mariano Corvera 269 shares Narciso Mondejar 74 shares Filemon Kuizon 98 shares Leovigildo Banaag 98 shares Tomas Trillo 98 shares Teodoro Luneta 25 shares _________ Total 662 shares They are given fifteen (15) days from finality of this decision to subscribe and pay for their respective shares. In the event, any of the above-named stockholders fail to exercise his/their rights and pay within the given period, the same shall be offered to any of the stockholders of record of the corporation. Further, the removal of Jose Jaramillo Sr. and Benjamin Jaramillo as Treasurer and Vice-President, respectively, pursuant to the July 18, 1987, board meeting is hereby declared valid and legal. LLphil Finally, the respective shareholdings of each and every stockholder having been determined and considering that the last stockholders' meeting was in 1987, NASIPIT, through its duly authorized officials, is hereby directed to call for a stockholders' meeting within thirty (30) days from finality of this decision. SO ORDERED. (SGD.) JAMES K. ABUGAN (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer Hearing Officer (SGD.) ENRIQUE L. FLORES, JR. Hearing Officer