Ponente: Relova, J.
SUMMARY:
Datu Tagoranao Benito, a shareholder of Jamiatul
Philippine-Al Islamia, Inc., filed a petition before the SEC seeking to: (a)
render invalid the corporation’s issuance of its unissued shares, which he
alleged to have been made in violation of his pre-emptive rights; and (b)
nullify the SEC's authorization allowing the corporation to increase
its capital stock from P200k to P1M, which he alleged to have been decided without
the prior consent of the stockholders. The SEC held that: (a) the issuance of
the unsubscribed portion of the capital stock was not invalid even if assuming
that it was made without notice to the stockholders because the power to issue
shares of stocks in a corporation is lodged in the board of directors and no
stockholders' meeting is necessary to consider it; (b) Tagoranao did
not have the right of pre-emption over the unissued shares because as a general
rule, pre-emptive right is recognized only with respect to new issue of shares;
and (c) contrary to Tagoranao’s claim, the increase in the capital stock of the
corporation was in fact preceded by a stockholders' meeting where such
increase was part of the meeting's agenda. The SC affirmed the SEC’s
ruling.
FACTS:
The Articles of Incorporation of Jamiatul Philippine-Al
Islamia, Inc. (originally Kamilol Islam Institute, Inc.) were filed with the
Securities and Exchange Commission (SEC) on February 6, 1959 and were approved
on December 14, 1962.
The corporation had an authorized capital stock of
P200,000.00 divided into 20,000 shares at a par value of P10.00 each. Of the
authorized capital stock, 8,058 shares worth P80,580.00 were subscribed and
fully paid for.
Datu Tagoranao Benito subscribed to 460 shares worth
P4,600.00.
In 1975, the corporation filed a certificate of increase of
its capital stock from P200,000.00 to P1,000,000.00. It was shown in said
certificate that P191,560.00 worth of shares were represented in the
stockholders’ meeting held on November 25, 1975 at which time the increase was
approved. Thus, P110,980.00 worth of shares were subsequently issued by the
corporation from the unissued portion of the authorized capital stock of
P200,000.00. Of the increased capital stock of P1,000,000.00, a total of P160,000.00
worth of shares were subscribed by Mrs. Fatima A. Ramos, Mrs. Tarhata A. Lucman
and Mrs. Moki-in Alonto.
The following year, Tagoranao filed with the SEC a petition
alleging that the additional issue (worth P110,980.00) of previously subscribed
shares of the corporation was invalid because:
o the issuance was in
violation of his pre-emptive right to said additional issue; and
o the stockholders of record were not notified of the
meeting wherein the proposed increase was in the agenda.
Tagoranao prayed that the additional issue of shares of
previously authorized capital stock as well as the shares issued from the
increase in capital stock of the corporation be cancelled; that the secretary
of the corporation be ordered to register the 2,540 shares acquired by him
(Tagoranao) from Domocao Alonto and Moki-in Alonto; and that the corporation be
ordered to render an accounting of funds to the stockholders.
Corporation’s defenses: (a) Denial of the material
allegations of Tagoranao; (b) Tagoranao had no cause of action; and (c) the
stock certificates covering the shares alleged to have been sold to Tagoranao
were only given to him as collateral for the loan of Domocao Alonto and Moki-in
Alonto.
SEC: (a) The issuance by the corporation of its unissued
shares was validly made and was not subject to the pre-emptive rights of
stockholders, including Tagoranao; and (b) there is no sufficient legal basis
to set aside the certificate issued by the SEC authorizing the increase in
capital stock of the corporation from P200,000.00 to Pl,000,000.00.
Hence, the instant petition.
RULING:
Whether the issuance
of the unsubscribed portion of the capital stock of the corporation is valid. –
YES.
The questioned issuance of the unsubscribed portion of the
capital stock worth P110,980.00 is not invalid even if assuming that it was
made without notice to the stockholders as claimed by Tagoranao.
The power to issue shares of stocks in a corporation is
lodged in the board of directors and no stockholders' meeting is
necessary to consider it because additional issuance of shares of stocks does
not need approval of the stockholders.
Even the by-laws of the corporation itself states that the
Board of Trustees shall, in accordance with law, provide for the issue and
transfer of shares of stock of the Institute and shall prescribe the form of
the certificate of stock of the Institute.
Whether the increase
in the authorized capital stock of the corporation is valid. – YES.
Whether the consent,
expressed or implied, of the stockholders was obtained prior to the increase of
the corporation's authorized capital stock? -- YES.
It was the finding of the SEC that a stockholders’ meeting
was held on November 25, 1975, presided over by Mr. Ahmad Domocao Alonto,
Chairman of the Board of Trustees and, among the many items taken up then were
the change of name of the corporation from Kamilol Islam Institute Inc. to
Jamiatul Philippine-Al Islamia, Inc., the increase of its capital stock from
P200,000.00 to P1,000,000.00, and the increase of the number of its Board of
Trustees from five to nine.
Tagoranao had not sufficiently overcome the evidence of the
corporation that such meeting was in fact held. Findings of facts of
administrative bodies will not be interfered
with by the courts in the absence of grave abuse of discretion on the part of
said agencies, or unless the aforementioned findings are not supported by substantial
evidence.
What Tagoranao successfully proved, however, was the fact
that he was not notified of said meeting and that he never attended the same as
he was out of the country at the time. The documentary evidence of Tagoranao
conclusively proved that he was attending the Mecca pilgrimage when the meeting
was held on November 25, 1975.
Whether Tagoranao had
a right of pre-emption over the unissued shares. – NO.
The general rule is that pre-emptive right is recognized
only with respect to new issue of shares, and not with respect to additional
issues of originally authorized shares.
This is on the theory that when a corporation at its
inception offers its first shares, it is presumed to have offered all of those
which it is authorized to issue. An original subscriber is deemed to have taken
his shares knowing that they form a definite proportionate part of the whole
number of authorized shares. When the shares left unsubscribed are later
re-offered, he cannot therefore claim a dilution of interest.
Nevertheless, as far as Tagoranao is concerned, he had not
waived his pre-emptive right to subscribe to the new issued shares as he could
not have done so for the reason that he was not present at the meeting and had
not executed a waiver, thereof. Not having waived such right and for reasons of
equity, he may still be allowed to subscribe to the increased capital stock
proportionate to his present shareholdings.
DOCTRINE:
The power to issue shares of stocks in a corporation is
lodged in the board of directors and no stockholders’ meeting is necessary to
consider it because additional issuance of shares of stocks does not need
approval of the stockholders.