G.R. Nos. 172222, 11 November 2013
In 1972, Eastern Extension Australasia and China Telegraph Company, Ltd. (Eastern Extension), a subsidiary of foreign-owned Cable & Wireless, Ltd., got instructions from the Marcos government to reorganize its telecommunications business in the Philippines into a 60/40 corporation in favor of Filipinos. This prompted Eastern Extension to negotiate with Philippine Overseas Telecoms Corporation, a company controlled by Manuel Nieto, Jr. and represented by Atty. Jose Africa, for the formation of Eastern Telecommunications Philippines, Inc. (ETPI), 60% of the capital stock of which went to the group consisting of Roberto Benedicto, Atty. Africa, and Nieto (at times referred to as the BAN group) while 40% remained with Cable & Wireless. The latter company took charge of operations pursuant to a management contract with ETPI. In the aftermath, ETPI generated substantial dividends for the BAN group. Eventually, the latter spread its shares to three corporations: a) Aerocom Investors, b) Universal Molasses, and c) Polygon Investors and Managers. With their combined holdings, the BAN group managed to fill up key management positions and issue shares to relatives and associates.
On March 14, 1986, following the fall of the Marcos government, the Presidential Commission on Good Government (PCGG) sequestered the ETPI shares of the BAN group and their corporations, relatives, and associates upon a prima facie finding that these belonged to favored Marcos cronies. On July 22, 1987, PCGG filed with the Sandiganbayan Civil Case 009 to recover these shares.
Petitioner Victor Africa (Africa), who took the cudgels for his fellow registered stockholders, filed a motion with the Sandiganbayan for the holding of ETPI’s 1992 annual stockholders’ meeting to settle the conflict between two sets of ETPI Board of Directors: one elected on August 7, 1991 in which the PCGG voted the sequestered shares and the other on a subsequent date where the registered stockholders elected a second board. Apparently, however, the PCGG Board acquired control of ETPI’s operations.
On November 13, 1992 the Sandiganbayan granted Africa’s motion and ordered the holding of a stockholders’ meeting to elect a new Board of Directors, at which meeting the PCGG was to vote only (a) the Benedicto shares (12.8% of total) that were voluntarily ceded to the Government; (b) the shares seized from Malacañang (3.1%), and (c) the shares that Nieto admitted as belonging to President Marcos (8.0%). On November 26, 1992, however, upon the PCGG’s petition in another case, this Court temporarily enjoined that stockholders’ meeting. Meantime, because of the need to comply with Executive Order 109 and Republic Act (R.A.) 7925, on December 13, 1996 the PCGG, acting on referral from this Court, granted its petition to hold a special stockholders’ meeting to increase ETPI’s authorized capital stock. PCGG voted the sequestered shares of stock in the meeting held on March 17, 1997 to approve the increase in ETPI’s authorized capital stock. Africa contested the validity of PCGG’s vote in that stockholders’ meeting before this Court.
Four years later on January 8, 2001 Aerocom Investors and Managers, Inc. (Aerocom) served notice on ETPI of its intent to sell its Class “B” shares to A.G.N. Philippines, Inc. (AGNP) as to enable ETPI to decide whether to exercise its option of first refusal. On January 25, 2001 the ETPI Board decided to waive the option. Upon notice to the shareholders, the Africa-led group wrote ETPI a letter, reserving the exercise of their own options until after a validly constituted ETPI Board could waive the company’s option. This notwithstanding, Aerocom transferred its shares to AGNP in the Stock and Transfer Book (STB) which was delayed by the need to secure the Bureau of Internal Revenue Certificate Authorizing Registration and Tax Clearance which was issued only on September 27, 2005 more than four years after the sale. To complete the transfer, the ETPI’s corporate secretary filed with the Sandiganbayan a motion dated October 10, 2005, for the issuance of new stock certificates and the recording of entries in its STB. On February 1, 2006 the Sandiganbayan granted the motion upon a finding that there had been “due compliance with the requirements of the ETPI’s Articles of Incorporation.” But petitioner Africa filed a motion for reconsideration alleging that the Sandiganbayan should first determine, before allowing the transfer in its book, whether the PCGG validly voted the sequestered shares that elected the ETPI’s board. He reasoned that if the votes were invalid, the board’s waiver of its right of first refusal would be void. The Sandiganbayan denied the motion. Hence, the petition.
Whether the Sandiganbayan acted with grave abuse of discretion in allowing the transfer of Aerocom’s shares to AGNP in its book and in issuing new stock certificates to the latter.
No, Sandiganbayan was correct in allowing the transfer of Aerocom’s shares to AGNP in its book and in issuing new stock certificates to the latter.
As this Court found above, the PCGG voted the sequestered shares during the 1991 stockholders’ meeting, having assumed that this could be implied from the order of this Court which allowed it to hold that meeting in order to elect a new Board of Directors. And, since neither the Sandiganbayan nor this Court enjoined that Board from performing its functions, no legal impediment prevented it in 2001 from waiving ETPI’s right of first refusal when Aerocom gave notice of its intent to sell its shares to AGNP. For the same reason, the Sandiganbayan committed no error in allowing the subsequent registration of the sale in the book of the corporation in 2006 following some delays.
The fact that the corporate secretary asked for leave to register the transfer five years after the sale did not make the transfer irregular. This Court held in Lee E. Won v. Wack Wack Golf & Country Club, Inc.,21 that since the law does not prescribe a period for such kind of registration, the action to enforce the right to have it done does not begin to toll until a demand for it had been made and was refused. This did not happen in this case.
WHEREFORE, the Court DENIES the petition in G.R. 172222 for lack of merit and AFFIRMS the Resolution of the Sandiganbayan dated February 1 and 27, 2006 that allowed the registration in the books of Eastern Telecommunications Philippines, Inc. (ETPI) of the transfer of the shares of stock of Aerocom Investors and Managers, Inc. to A.G.N. Philippines, Inc
*Case Digest by Rezeile S. Morandarte, Refresher, Andres Bonifacio College, SY 2019 – 2020