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[G.R. No. 146006.� August 22, 2005]
LEE vs. QUEZON CITY RTC
THIRD DIVISION
Sirs/Mesdames:
Quoted hereunder, for your information, is a resolution of this Court dated AUG 22 2005.
G.R. No. 146006 (JOSE C. LEE AND ALMA AGGABAO, in their capacities as President and corporate Secretary, respectively, of the Philippine International Life Insurance Company, and FILIPINO LOAN ASSISTANCE GROUP, vs. REGIONAL TRIAL COURT OF QUEZON CITY, BRANCH 85 presided by JUDGE PEDRO M. AREOLA, BRANCH CLERK OF COURT JANICE Y. ANTERO, DEPUTY SHERIFFS ADENAUER G. RIVERA and PEDRO L. BORJA, all of the Regional Trial Court of Quezon City Branch 85, MA. DIVINA ENDERES claiming to be Special Administratrix, and other persons/public officers acting for and in their behalf.)
This resolves the motion for reconsideration filed by petitioners Jose C. Lee and Alma Aggabao of our resolution dated April 22, 2005 [1] cralaw finding the petitioners guilty of indirect contempt.
Petitioners were cited for contempt for their refusal to comply with the final and executory decision of this Court dated February 23, 2004. Petitioners' non-compliance, as president and corporate secretary, respectively, of Philippine International Life Insurance Company (Philinterlife), with the directives stated in the orders we affirmed in our February 23, 2004 decision was evident from the sheriff's report [2] cralaw and the dilatory motion to suspend execution/period of compliance by reason of alleged "supervening events" which they filed [3] cralaw with the probate court.
Petitioners now come to us again, raising arguments which have already been passed upon. Therefore, this motion for reconsideration must be denied with finality.
At the outset, we must emphasize that petitioners have already paid the fine imposed on them. [4] cralaw They are bound by such payment which was made unconditionally.
Petitioners dispute the following statement in our April 22, 2005 resolution:
We call particular attention to the fact that in our February 23, 2004 decision, we noted that petitioners, with the rest of the FLAG-controlled directors and stockholders, increased the authorized capital stock of Philinterlife, diluting in the process the 2,029 shares of the estate representing 50.725% of Philinterlife. We observed that this was obviously calculated to make it difficult for the estate to reassume its controlling interest in Philinterlife. Thus, we ruled that, considering the nullity of the sale of the 2,029 shares to FLAG, the increase in Philinterlife's authorized capital stock was void ab initio. Consequently, any approval by the Securities and Exchange Commission of this increase would likewise be void ab initio. [5] cralaw
Petitioners take issue with the "50.725%" [6] cralaw figure and claim that this is an "additional declaration" which still has to be proved. This claim is incorrect. This figure [7] cralaw is not an "additional declaration" as it was mentioned in our February 23, 2004 decision. [8] cralaw It was never challenged nor disputed.
Next, they assail our ruling that the increase in Philinterlife's authorized capital stock was void ab initio. Again, this is not the first time this matter was taken up. As stated in our April 22, 2005 resolution, our February 23, 2004 decision held that:
It goes without saying that the increase in Philinterlife's authorized capital stock, approved on the vote of petitioners' non-existent shareholdings and obviously calculated to make it difficult for Dr. Orta�ez's estate to reassume its controlling interest in Philinterlife, was likewise void ab initio. [9] cralaw
In fact, petitioners questioned this when they sought a reconsideration [10] cralaw of our February 23, 2004 decision. We denied their motion for reconsideration for lack of merit in a resolution dated May 26, 2004. [11] cralaw
Petitioners argue that the nullification of the increase in authorized capital stock of Philinterlife will adversely affect the interests of stockholders who were not parties to this case and are independent of petitioner Filipino Loan Assistance Group (FLAG). [12] cralaw To nullify the increase will deprive them of their property without due process. [13] cralaw In addition, they assert that the increases in authorized capital stock in 1987 and 2001 were done in compliance with governmental requirements for insurance companies. [14] cralaw
By petitioners' own allegation, the so-called "independent stockholders" [15] cralaw acquired their shares in 1983. [16] cralaw Petitioners named the following as stockholders independent and separate from FLAG: Jose C. Lee, Rodrigo Gatchalian (predecessor of Carmelita Tan), Benjamin Lee, Angel Ong, Amparo Sarmiento, Jose Gachalian, Antonio Gatchalian, Luis Gatchalia, Brenda Orta�ez, Manuel Hizon and Ma. Paz Lee.
Obviously, Jose C. Lee is a party to this case and cannot escaped its effects. [17] cralaw The others, although not parties to this case, cannot claim to be unaware of the probate proceedings which commenced in 1980 and which involved a big chunk of Philinterlife's shares. Petitioners themselves admit that in 1983, the estate's 2,029 shares represented 40.58% interest in the company. [18] cralaw Moreover, these stockholders participated in the management of the company: in 1983, Rodrigo Gatchalian was Philinerlife's president and chairman of the board of directors while Amparo Sarmiento was its corporate secretary and Benjamin Lee, Jose Gatchalian and Brenda Orta�ez were members of the board [19] cralaw ; in 1989, Angel Ong and Ma. Paz Lee were also members of the board. [20] cralaw
It is incredible that they now claim to have no knowledge of this case.
Even if they were not part of Philinterlife's management, it is difficult to believe that they, as stockholders, never bothered to inquire from their board and corporate officers, who were all embroiled in the controversy (nor were they apprised by these officers) of the circumstances surrounding the 2,029 shares under litigation. In any case, the information could have been easily obtained by them since these facts appeared in public judicial records. They were charged with knowledge and could not feign ignorance of these facts so as to escape the legal effects of the eventual outcome of the controversy.
Besides, the time-honored legal maxim of caveat emptor [21] cralaw should have placed these stockholders on guard. They bought their shares, which could be affected by the litigation embroiling Philinterlife, at their own risk. It is safe to presume that, as prudent business investors, they bought into the company only after a due diligence audit and therefore should have been aware of the legal consequences that could normally come with the purchase of shares in a corporation entangled in a bitter suit. Since they claim to be stockholders since 1983, they cannot now belatedly protest after the case, which they had knowledge of, has been finally resolved.
The declaration that the increase in authorized capital stock was void ab initio flows naturally from our ruling that the ownership of the 2,029 shares never left the estate. Throughout the pendency of these proceedings which commenced in 1980, the estate of Dr. Orta�ez, including the 2,029 shares of stock in Philinterlife, was in custodia legis or under the custody and jurisdiction of the court. [22] cralaw Where the estate of the deceased person is already the subject of a testate or in testate proceeding, the administrator cannot enter into any transaction involving it without prior approval of the probate court. [23] cralaw Clearly, the intention is to protect the interests of the estate while the respective rights of the parties are being litigated.
As shown by the figures provided by the petitioners, the
increases in authorized capital stock in 1987 and 2001, both carried out without
the approval of the probate court, diluted the interest of the estate in
Philinterlife. For still unexplained reasons, the shares of the estate of Dr.
Orta�ez in Philinterlife went down from 50.725%
[24]
cralaw
in 1980 to 40.58% in 1983.
[25]
cralaw
Philinterlife's authorized capital stock was increased from P5 million
to P10 million in 1987. Consequently, in 1989, the estate's interest
went down to 20.29%.
[26]
cralaw
In 2001, the authorized capital stock was again increased to P50
million. As a result, the estate now owns a miniscule 4.05%.
[27]
cralaw
The law provides a mechanism by which the estate could have preserved its proportionate interest in the company. [28] cralaw For unexplained reasons, the estate's interest was wittingly or unwittingly allowed to shrink. To tolerate this situation will not only negate the control of the probate court over assets brought into custodia legis but will also frustrate the protection given them.
We need not discuss the other issues raised for they have already been exhaustively discussed in our April 22, 2005 resolution.
ACCORDINGLY, the motion for reconsideration is hereby DENIED WITH FINALITY. No further pleadings shall be entertained.
SO ORDERED.
Very truly yours,
(Sgd.) LUCITA ABJELINA-SORIANO
Clerk of Court
Endnotes:
[1] cralaw Rollo, pp. 930-950.
[2] cralaw Dated October 13, 2004; Id., p. 853.
[3] cralaw Dated October 15, 2004; Id., pp. 854-856.
[4] cralaw These payments were noted in our June 29, 2005 resolution; Id., p. 953.
[5] cralaw Supra at note 1, p. 943.
[6] cralaw This is the percentage of interest of the estate in Philinterlife in 1980, upon the death of Dr. Orta�ez; Rollo, p. 287.
[7] cralaw This appears in the documents submitted to this Court; Id., pp. 92, 173, 709.
[8] cralaw G.R. No. 146006, 423 SCRA 497, 500, 503.
[9] cralaw Id., p. 516.
[10] cralaw Filed on April 27, 2004; Rollo, p. 811.
[11] cralaw Id., p. 816.
[12] cralaw Id., p. 962.
[13] cralaw Id., pp. 962-963.
[14] cralaw They allege that in 1987, Philinterlife's authorized capital stock was increased from P5 million to 10 million in compliance with Ministry Order No. 2-84 issued by the Ministry of Finance. In 2001, this was further increased to P50 million as ordered by the Department of Finance in Department Order No. 31-01; Rollo, pp. 960-961, 978-979.
[15] cralaw Rollo, p. 962.
[16] cralaw Id., p. 959.
[17] cralaw Specifically, Jose C. Lee represented FLAG as its president in the nullified deeds of sale of shares; supra at note 8, pp. 500-501.
[18] cralaw Rollo, pp. 960, 976.
[19] cralaw Philinterlife's General Information Sheets as of March 31, 1983; Rollo, p. 992.
[20] cralaw Philinterlife's General Information Sheets as of April 15, 1989; Id., p. 993.
[21] cralaw Literally meaning "let the purchaser beware or look for himself." See Lee, Jr., Handbook of Legal Maxims, p.28 (1998).
[22] cralaw Domingo v. Hon. Garlitos, et al., 118 Phil. 456, 459 (1963); Sandoval v. Santiago, 83 Phil. 784 (1949).
[23] cralaw Estate of Amadeo Matute Olave, et al. v. Hon. Reyes, et al., 208 Phil. 678, 683 (1983); Manotok Realty, Inc. v. Court of Appeals, G.R. No. L-35367, 9 April 1987, 149 SCRA 174, 180; Dollena v. Court of Appeals, G.R. No. L-77660, 28 July 1988, 163 SCRA 630, 636.
[24] cralaw Supra at note 7.
[25] cralaw Rollo, p. 960.
[26] cralaw Id., pp. 960, 975.
[27] cralaw Id., p. 974.
[28] cralaw Under section 39 of the Corporation Code (Batas Pambansa Blg. 68), "(a)ll stockholders of a stock corporation shall enjoy pre-emptive right to subscribe to all issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by the articles of incorporation or an amendment thereto:.."
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