Ilocos Norte Electric co., Inc., et al. vs. Mariano H. Agcaoili, et al.

[SEC-SICD * CASE NO. 1494. September 7, 1988.] ILOCOS NORTE ELECTRIC CO., INC., ET AL. , complainants , vs . MARIANO H. AGCAOILI, ET AL. , respondents . [SEC-SICD * CASE NO. 1503. September 7, 1988.] ALBERTO S. SUGUITAN, ET AL. , complainants , vs. MARIANO H. AGCAOILI, ET AL. , respondents . D E C I S I O N This is a verified amended complaint for mismanagement, illegal acquisition of shares of stock, illegal disbursement of funds, non-issuance of financial statements, injunction and receivership and dissolution of the corporation, filed with this Commission on July 20, 1977. prcd In their Amended complaint, petitioners allege, inter alia: that complainants are minority stockholders of Ilocos Norte, Inc. (INELCO, for short), a corporation duly organized and existing under and by virtue of the laws of the Philippines; that the respondents are the incumbent majority stockholders of the complainant corporation; that ever since the latter part of April 1970 up to the present, the respondents Julio H. Agcaoili, Jr., Paz Vda. de Agcaoili and Andremalic S. Monroy became the absolute and controlling majority of the Board of Directors of the Complainant Corporation, and as such, have held and exercised the complete power to control and manage the business of the Corporation; that by a presidential directive to transfer public utilities to cooperatives, the respondents sold all of the operating equipment and facilities in the electric light, heat and power systems of the complainant in favor of Ilocos Norte Electric Cooperative Co., Inc. for a total consideration of Four Million (P4,000,000.00) Pesos, of which P2,459,773.33 was deducted as payment to the National Power Corporation and the amount of P359,067.36 as payment to the National Electrification Administration; and the balance of P1,181,159.31 was paid in cash in favor of petitioner corporation INELCO, but were received by and presently in the custody or disposition of the respondents; and that in addition thereto, there are likewise in the custody or disposition of the respondents, accounts receivables from customers in the form of uncollected customers' bills, to form part of the corporate assets, a total of not less than P829,265.92; that respondents, acting as a board, recklessly, imprudently and negligently, without regard to the welfare and interest of the corporation, incurred unreasonable and unconscionable expenses, granted undue allowances, bonuses and other emoluments and benefits in favor of themselves to include oil, gasoline and vehicle maintenance service for their personal vehicles at the same time neglecting payments of due debts in favor of the National Power Corporation and other creditors, so much so that the accumulation of interest and penalties and the diminution of profits and assets have greatly damaged and prejudiced the corporation causing it to suffer financial distress, leading it to a virtual insolvency as shown by the financial statements of the corporation for the period 1973 to 1975; that respondents taking advantage of their official positions, regularly collected from the corporation payments, compensation and other emoluments for themselves as directors, particularly the following: P3,000.00 for each respondent, collected and received by them in the guise of directors' bonuses, allegedly approved by the Board of Directors as of December 10, 1973, P12,000.00 for each respondent, collected and received by them for similar excuse, allegedly approved by the Board of Directors of the Corporation as of December 9, 1974; that by reason of the evident pre-disposition of the respondents to misappropriate funds of and properties of the corporation as herein explained, the amount actually realized from the sale of the corporate assets, i.e. the amount of P1,181,159.31 in cash and the receivables of P829,205.72, as well as the income derived from operations from January 1, 1976 up to January 19, 1977 (presently unaccounted for) when the Cooperative took over the operations and business of electric light, heat and power service business of the corporation, are presently in imminent danger of being lost and/or squandered, thereby liable to cause serious and irreparable losses and damages to the corporation and the rights of the minority stockholders; and that there is no other proper and more expeditious remedy to stop the respondents than a writ of preliminary injunction to restrain them and/or their agents from causing further harm to the funds, assets, properties and affairs of the corporation. Respondents, in their answer in SEC Case 1503 denied and disputed complainants' claims and instead aver the following: that they were given or allowed access to the books, records and papers of the Ilocos Norte Electric Company, Inc.; that stockholders' and directors' meetings of the INELCO have been called and have always been held in accordance with law and the by-laws of the corporation; that while it is admitted that the corporation has accumulated surplus earnings, said surplus have been invested in wires, poles, distributions transformers, watt-hours meters and other materials and equipment pursuant to and utilized for its expansion programs, and that it has been the honest judgment of the respondents-officers and the other members of the Board that during these times of inflation, recession and high costs the profits should be kept in the business of the Corporation for maintenance expansion and reserves. Records show that only the complainants were able to present evidence in SEC Case No. 1503, which is consolidated with SEC Case No. 1494, considering the fact that the two actions involve the same question of law or facts and that the said actions are pending before the same Hearing Officer. prcd On June 3, 1986, Complainants filed an Ex-parte Motion for Appointment of a Receiver requesting for the appointment of Antonio M. Abadilla, c/o First Integrated Machinery Corporation with office at No. 959 J.P. Rizal Avenue, Makati, Metro-Manila, alleging, among other things, that in view of the fact that there is no other legally feasible act that may be done due to the failure of the Board of Directors of the Corporation to convene, act or transact any business or to report any activity for more than eight (8) or ten (10) years now, it is imperative that a receiver of confidence be appointed and that the dissolution be forthwith ordered simultaneous to the appointment of the receiver. On October 2, 1987, Complainant, also, filed a Motion for substitution of receiver, alleging, inter alia: that the originally proposed receiver, complainant Alberto Suguitan, Sr., has passed away and Commission has not yet acted on the dissolution of the corporation and the prayer for accounting by the respondents, all these despite lapse of considerable length of time; that in order to obviate further delays, it is indispensable that the proposed receiver aforenamed be substituted by his son, complainant Alberto Roxy Suguitan, Jr., who is duly licensed Engineer and proprietor of business enterprises, and qualified to be the receiver; that the order of dissolution of the corporation be immediately issued and the new receiver appointed; and that complainant prays that the dissolution of the corporation be forthwith ordered and the proposed receiver be substituted by Engr. Alberto Roxy S. Suguitan, Jr., of 969 J.P. Rizal corner P.P. Roxas, Makati, Metro-Manila. In the meantime, the Commission through the then Officer-In-Charge of the Supervision and Monitoring Department issued an Order dated March 21, 1985, for Revocation of Certificate of Registration pursuant to P.D. 902-A of subject corporation, Ilocos Norte Electric Company (INELCO), which is quoted hereunder as follows: "The records of this Commission show that Ilocos Norte Electric Company, a duly registered corporation, has failed to file the following documents as required under the regulations of this Commission: LibLex NATURE OF DOCUMENTS YEARS COVERED General Information Sheets 1971-1984 Minutes of Stockholders' Annual Meeting 1971-1984 Minutes of Directors' Annual Meeting 1971-1984 Financial Statement 1980-1983 Stock and Transfer Book not registered Likewise, since 1947, the Corporation has failed to secure the approval of this Commission with regard to its by-laws. Due to such failure, the corporation is considered to have ceased to operate since November 1, 1973 pursuant to R.A. 5050 and P.D. 902-A, this Commission is empowered to initiate the dissolution of the corporation, and to revoke or suspend, respectively, after proper notice and hearing, the certificate of registration of corporations which have been in continuous inoperation for at least five (5) years. In view of the foregoing, the Ilocos Norte Electric Company is hereby directed to show cause, within fifteen (15) days from receipt hereof, why its certificate of registration should not be revoked for continuous inoperation." Records also show that subject corporation did not file any comment and/or Opposition to the above show-cause order of the Commission. On January 14, 1988, the Commission issued another Order of even date, which was published in the Malaya Newspaper issue of January 20, 1988, setting the hearing on the revocation of the certificate of registration of subject corporation on February 16, 1988. dctai During the above-hearing, no representative of respondent subject corporation appeared and contested the revocation of its franchise. This Commission, after finding the facts that; subject corporation (INELCO); has been in continuous inoperation for a period of five (5) years; has failed to file its by-laws within the required period; and has failed to file required reports in appropriate forms as determined by the Commission within the prescribed period (Sec. 6, i, Nos. 4, 5 & 6, P.D. 902-A, as Amended), coupled with the fact that it is already considered a paper corporation considering the sale or disposition of all its assets in favor of the Ilocos Norte Electric Cooperative, Inc., hereby declares and considers INELCO DISSOLVED. With the dissolution of INELCO, the only issue left to be tackled in this case is the question of the accounting of funds and its remaining assets, particularly the alleged balance of One Million One Hundred Eighty One Thousand One Hundred Fifty Nine Pesos and Thirty One Centavos (P1,181,159.31) out of the total consideration of Four Million Pesos (P4,000,000.00), as payment of INELCO's ASSETS by the Ilocos Norte Cooperative, Inc. Relative thereto, it is imperative with this Commission that a receiver be appointed for the purpose of preserving whatever is left in the assets and funds of the corporations. WHEREFORE, in view of the foregoing, subject corporation INELCO is hereby considered DISSOLVED, and is now subject for LIQUIDATION. FURTHER, Engr. Alberto Roxy S. Suguitan is hereby appointed as RECEIVER and upon the posting of the bond in the amount of TEN THOUSAND (P10,000.00) Pesos, may take his oath and immediately perform his functions and duties, as provided for under Sec. 7, Rule 59 of the Revised Rules of Court. FURTHERMORE, the Receiver is hereby directed to report to the Commission from time to time the status of the liquidation of the subject Corporation. SO ORDERED. (SGD.) JUANITO B. ALMOSA, JR. Hearing Officer