Rodolfo M. Cuenca v. Philippine National Construction Corporation (PNCC), et al.

Ruling

WHEREFORE, plaintiffs Complaint is hereby dismissed for lack of merit and the Orders dated April 14, 1998 and September 8, 1998 are hereby revoked and set aside. [25] The Hearing Panel found that the evidence presented by PNCC and GFIs constituted substantial proof of the implementation of LOI 1295. It reasoned that not only did PNCC issue the shares of stock as shown in its stock ledger cards but such fact was corroborated by Caval Securities Registry, Inc., PNCCs stock transfer agent, which prepared PNCCs September 15, 1987 Schedule of Subscription. [26] Moreover, prior to the filing of the instant case, the GFIs have been nominating their representatives to PNCCs Board of Directors which is an attribute of ownership of shares of stock in PNCC. The Hearing Panel also took cognizance of the April 14, 2000 Deed of Confirmation [27] and the June 7, 2000 Supplement to Deed of Confirmation [28] executed by the GFIs, which erased all doubts on the implementation of LOI 1295 by the conversion of the GFIs loan receivables from PNCC into the latters equity. Thus, with the clear consideration of loan receivables for the shares of stock, the shares issued to the GFIs cannot in any way be considered watered stocks. It cited Section 62 of the Corporation Code which expressly allows the issuance of shares of stock in consideration for previously incurred indebtedness. Moreover, the Notes to the Financial Statements [29] on the Report on Examinations of Financial Statements [30] for comparative periods of December 31, 1982 and December 31, 1983 prepared by independent auditors from Carlos J. Valdes & Co., Certified Public Accountants, clearly show the reduction of PNCC loan obligations. Specifically, Note No. 11 [31] stated that as of December 31, 1983, total obligations already converted into equity amounted to PhP 1,382,202 or roughly 1.4 billion representing the increase of authorized capital stock of PNCC. On the other hand, the Hearing Panel found the pieces of evidence presented by petitioner, most of which were the same ones presented by respondents, to be inconsequential and insufficient to overthrow the weight of the evidence presented by respondents that a conversion of PNCCs debt into equity was implemented. It ratiocinated that the badges of fraud pointed out by petitioner are inconsequential as no clear and convincing evidence was presented by petitioner, and that allegations cannot take the place of proof. Likewise, the lack of a subscription agreement was not fatal to the shares of stock issued to the GFIs as LOI 1295 in no uncertain terms mandated such conversion of debt-to-equity which was duly approved by the stockholders of PNCC in increasing its authorized capital stock precisely pursuant to LOI 1295. Anent the August 15, 1995 Memorandum of Agreement [32] executed by the Department of Finance (DOF), APT, and PNCC, whereby PNCC assigned to APT and the DOF Lot 3, Block 1, RL-04-000001 covered by TCT No. 34996, such did not by far