CO IT a.k.a GONZALO CO
“We find Co It’s positive and categorical statements more consistent with logic and common human experience.”
Department of Justice

My Dear Friends,

Based on the NBI Report on GREEN CROSS and ZONROX, the Department of Justice resolved my Complaint against my siblings. I wish to share with you excerpts from the DOJ Resolution.

Republika ng Pilipinas

KAGAWARAN NG KATARUNGAN

Department of Justice

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RESOLUTION

This resolves the above-captioned case for violations of Article 315, par. l(b), Article 172 in relation to Article 171(2), both of the Revised Penal Code, and Section 255 of the National Internal Revenue Code (“NIRC”) against respondents Anthony A. Co, Mary Co Cho, Peter A. Co, Nancy D. Co, So Hua T. Co, Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho.

On April 2, 2007, the National Bureau of Investigation (“NBI”) recommended the above-captioned case for preliminary investigation. Respondents herein are siblings, in-laws, nephews and nieces of complainant, and are currently the directors and shareholders of Green Cross, Inc. The NBI likewise recommended that respondents be further investigated by the Anti-Money Laundering Council (“AMLC”) for alleged diversion of Green Cross Inc. funds to Common Goal Real Properties Inc.

Private complainant Co It alleges that sometime in 1952, he single-handedly put up Gonzalo Laboratory (“Gonzalo Lab”) and introduced the brands “GREEN CROSS” rubbing alcohol and “ZONROX” bleaching liquid. In 1971, through his brother Joseph’s persuasion, he converted the single proprietorship into a corporation known as Gonzalo Laboratories, Inc. (“GLI”), which was registered on August 11, 1971. He claims that since a corporation requires at least five (5) incorporators, he assigned to his siblings Anthony, Joseph, Mary, and mother Ang Si, shares that he placed and paid in their names by way of implied trust. Later, also by implied trust, he placed 10% share in the name of his father, Co Ay Tian. However, on February 11, 1978, his shares were reportedly reduced to 25% without any supporting deed of assignment.

In December 1986, Co It’s shares in GLI were reduced once more to 17.5%, and on December 15, 1986, he was forced to sign a deed of absolute sale on his 874 shares under moral duress. All the shares that were reduced from him were gradually distributed over the years to Ang Si, Joseph, Peter, Mary and Co Ay Tian.

On August 22, 1989, the corporate name of GLI was amended to Green Cross, Inc. By 1991, he did not even own a single share.

Co It alleges that he entrusted the 50% shares in the name of Anthony, Peter and Mary, who misappropriated these shares by transferring them to their respective children, respondents Michael Anthony Co, Ann Marie Y. Co Imperial, Nessie Pearl C. Chan, Mark David C. Cho, Dick Milton C. Cho, Joanna Liza Co Yap, Jim Lewis T. Co, and in-laws Sandy L. Chan, Nancy D. Co and So-Hua T. Co. Likewise, Anthony, Peter and Mary misappropriated the 33.4% shares that Co It entrusted to his parents, in violation of Article 315, par. l(b) of the Revised Penal Code.

He presented one witness, Raymundo D. Dig, who supported his allegations and accusations against respondents.

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In his reply-affidavit, Co It clarifies that it was him alone who paid the entire paid-up capital of GLI, because during that time, his parents and siblings did not have financial capacity to pay the capital. To prove his point, he presented a copy of the treasurer’s affidavit, which shows that the 700 shares consisted of P66,700.00 worth of properties from Gonzalo Lab, and P3,300.00 in cash. Noticeably, in the deed of assignment of properties executed by Gonzalo Lab in favor of GLI, Co It, not his father, was the signatory, because he owned it. This is also the reason why Co Ay Tian is not an incorporator of GLI. He also denies that he ever conveyed a total of 225 shares in favor of Ang Si, Joseph and Peter. On the contrary, he merely signed the stock certificates in his capacity as president of GLI. Otherwise, these transfers should have been reflected in the stock certificate themselves, as well as in the stock and transfer books.

Co It further claims that even if he allegedly sold 874 shares, he should still have 2,391 shares left, covering the 70% of the paid-up capital. Lastly, he alleges that the brands “GREEN CROSS” and “ZONROX” belong to him and were originally registered in his name. The deliberate failure to return to him the brands after he allegedly retired from GLI is misappropriation.

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The undisputed facts are: (1) Co It founded Gonzalo Laboratory in 1951, a single-proprietor business entity, using his own funds and properties; and (2) Gonzalo Laboratories Inc., now Green Cross, Inc., is a continuation of Gonzalo Laboratory.

When GLI was incorporated, it had an authorized capital stock of Five Hundred Thousand Pesos (P500,000.00), divided into five thousand (5000) shares with a par value of 100 pesos. Paid-up capital amounted to Two Hundred Thousand Pesos (P200,000.00), with an outstanding capital stock of two thousand shares (2000).

Co It claims that he owns all of the 2000 shares (100%) of GLI. His basis for claiming this is that 70% of its paid-up capital came from the properties of Gonzalo Lab, and 30% thereof was paid by him in cash. In filing the instant case, he anchors his allegations on the 1000 shares (50%) he bestowed by implied trust upon respondents Anthony and Mary, his deceased sibling Joseph and mother, Ang Si; and the other 1000 shares (50%) he conveyed and sold under moral duress to Anthony, Mary, Peter, Joseph, Ang Si and Co Ay Tian.

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In re: Co It’s right over his parents’ 33.4% shares in GLI

We agree, and there is no gainsaying that Co It has a right, by way of inheritance, over the shares left by his parents, Ang Si and Co Ay Tian, when they passed away on August 27, 1989 and March 4, 1991, leaving behind 3,639 and 3,033 shares, respectively, or a total of exactly 33.36% shares.

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However, respondents’ allegation that Co It conveyed 225 shares or 75 shares each to Ang Si, Joseph and Peter on March 20, 1982 as reflected on stock certificate nos. 15, 16 and 17 cannot be held valid, considering that what respondent submitted do not contain the dorsal portion of the said stock certificates. The law is clear that in order that a transfer of stock certificate is to be effective, the certificate must be properly indorsed and that title to such certificate of stock is vested in the transferee by the delivery of the duly indorsed certificate (Razon vs. I.A.C., 207 SCRA 234 [1992]) (emphasis ours)

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In re: Conveyances made by respondents Anthony, Mary, and Ang Si of the shares of stocks despite non-payment in full over the subscription thereof

While it is usual to effect the transfer of shares by indorsement on the certificate, a conveyance may be made by an assignment in a separate instrument (Uy Piaco vs. McMicking, 10 Phil. 286 [1997], Rivera vs. Florendo, 144 SCRA 643 [1986]). However, it is necessary to secure the consent of the corporation, by way of resolution of the board of directors to the transfer or assignment of shares which are not fully paid so that the transfer may be recorded in the stock and transfer book of the corporation (SEC Opinion, July 22, 1965).

In this case, respondents were not able to present that the conveyances in question were authorized by the board of directors through a resolution that would show that the conveyances were duly recorded in the stock and transfer book. Inasmuch as respondents submitted photocopies of stock certificate nos. 01-10 and the corresponding entry in the stock and transfer book, the same are not certified true copies.

In re: The one (1) share of stock Co It returned to Green Cross, Inc.

Akin to the 33.4% shares of Ang Si and Co Ay Tian, there is likewise much unsaid about the one share of stock that complainant allegedly returned to Green Cross, Inc. as a consequence of his retirement in 1997. One would wonder: Where did that share go? Who benefited from that one share that was returned to the corporation? Why, as far back as 1991, Co It was not registered anymore as a stockholder of Green Cross, Inc. when his retirement came into existence only in January 1997? Again, this casts a shadow as to the probable deceitful innuendos committed by them.

In re: Implied trust over the 1000 shares (50%) Co It bestowed unto Anthony (400), Mary (200), Ang Si (200) and Joseph (200)

We believe that there is an implied trust created in the name of Anthony, Mary, Ang Si and Joseph upon the incorporation of GLI. Trust is defined as the fiduciary relationship concerning property, which obliges the person holding it to deal with the property for the benefit of another (Pacheco vs. Arro, 85 Phil 505). Implied trust comes into existence by operation of law, either through implication of an intention to create a trust as a matter of law, or through the imposition of the trust irrespective of, and even contrary to any such intention (Article 1444, Civil Code). The doctrine of implied trust is founded on equity.

As mere trustees of the 1000 shares, Anthony, Mary, Ang Si and Joseph are bound to protect and preserve the trust property and to see to it that it is employed solely for the benefit of the cestui que trust (Co It). Hence, it is not within their rights to transfer the 1000 shares to Peter and Co Ay Tian, and later to respondents Nancy D. Co, So Hua T. Co, Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho.

Anthony and Mary posit that they paid for the subscription of the 600 shares in their names in 1971 (TSN p. 10, August 10, 2007). However, according to Co It, they did not have the capacity to pay for those shares, because they were not financially able then. We agree with Co It. Indeed, Anthony and Mary never showed evidence to establish payment; unlike Co It, who submitted evidence to substantiate his claim (cf. Annex “A” Deed of Assignment, dated October 29, 1970). He who alleges a fact has the burden of proof and mere allegation is not evidence (Pedrano vs. Pedrano, G.R. No. 159666, December 4, 2007).

Even assuming arguendo that Anthony and Mary indeed paid for it, nonetheless, the fact that they may have paid for these shares do not make Co It less of a beneficial owner of the said shares. Such payment is not a mode of acquiring ownership.

Respondents’ position that GLI was a family corporation cannot be sustained. In fact, their argument is belied by their own admission that GLI was a continuation of Gonzalo Lab, which is owned by Co It. When the decision to convert Gonzalo Lab into a corporation was made, the clear intention was for Gonzalo Lab to earn more profit than what it was generating. In other words, when Joseph suggested that Gonzalo Lab be converted into a corporation, he was thinking of the better business opportunities his brother would gain. Nowhere in respondents’ statements will show that they converted Gonzalo Lab into a corporation because the latter was a family corporation in the first place.

Naturally, in order to effectuate the conversion of Gonzalo Lab to GLI, Co It would need five (5) persons, including him to comply with the requirements of the Corporation Code. And who would better fill in these positions than this own family: Anthony, Joseph, Mary and Ang Si? Verily, the shares placed in their names were for no other purpose but to comply with the requirements of the law. Therefore, Co It has the beneficial interest over these disputed shares.

Again, lest it be overlooked, respondents have acknowledged that Co It is the registered owner of Gonzalo Lab (cf. TSN pp. 7 & 8, August 10, 2007).

The elements of estafa with abuse of confidence under Article 315, par. l(b) of the Revised Penal Code are: (1) that money, goods or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion of such money or property by the offender, or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; and (4) that there is demand made by the offended party to the offender.

The essence of estafa under this paragraph is the appropriation or conversion of money or property received, to the prejudice of the owner thereof. It takes place when a person actually appropriates the property of another for his own benefit, use and enjoyment (Filadams Pharma, Inc. vs. Court of Appeals, 426 SCRA 460, 468 [2004]).

All the elements of estafa under Article 315, par. l(b) of the Revised Penal Code are established in the instant case, viz:

1. Anthony, Mary, Joseph and Ang Si received the shares of stocks in trust. The absence of a written document showing receipt of such shares in trust does not necessarily mean that no such contract exists among the parties (Delos Santos vs.Jebsen Maritime, Inc 475 SCRA 656, 669 [2005]).
2. There is misappropriation of the subject shares of stocks when Anthony, Mary, Joseph and Ang Si used or disposed of these shares held in trust, as if they were their own.
3. That such misappropriation was to the damage and prejudice of Co It.
4. There is demand.

In a prosecution for estafa, demand is not necessary where there is evidence of misappropriation or conversion; and failure to account upon demand for funds or property held in trust, is circumstantial evidence of misappropriation (Lee vs. People, 455 SCRA 256, 266-267 [2005]). Failure to account upon demand for the return of the thing delivered in trust raised a presumption of misappropriation. (Manantan vs. People, G.R. No. 156248, August 28, 2007).

Respondents question the intent of Co It in filing the instant case. They are of the belief that Co It only wanted more money, and that his silence all these years should bar him from claiming what he does not own anymore. This cannot be sustained.

In the case at hand, Co It was clearly deprived of the 1000 shares that he entrusted to Anthony, Mary, Joseph and Ang Si. He cannot be faulted for filing the instant case belatedly, as he only found out about the fraudulent acts of his siblings only recently, i.e. during the 35th anniversary celebration of Green Cross, Inc. When he found out that he was unjustly ousted from the company and deprived of his 1000 shares, he wasted no time in demanding the return of these shares by filing the instant case with the NBI. For this reason, laches or estoppel has not set in. Even then, laches cannot be invoked when it will cause injustice to the vested rights of the complainant.

Moreover, the intent to renounce Co It’s beneficial ownership over the 1000 shares cannot reasonably be drawn from his mere silence or inaction. The intention to waive a known right must be clear and unequivocal. It bears to emphasize that the respondents here are not strangers nor ordinary litigants, but family members, to whom Co It bestowed his trust and confidence. Besides, the allegation that Co It only wanted more money is beyond sensibilities for the man is at the twilight of his life, pained by the truth that his own brothers and sister betrayed him.

As regards respondents Peter A. Co, Nancy D. Co, So Hua T. Co, Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho, inasmuch as they are not those persons to whom Co It personally placed in implied trust the shares of stocks owned by him, Articles 1455 and 1456 of the Civil Code are clear, viz:

“Article 1455. When any trustee, guardian or other person holding a fiduciary relationship uses trust funds for the purchase of property and causes the conveyance to be made to him or to a third person, a trust is established by operation of law in favor of the person to whom the funds belong.

Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.”

When Anthony, Mary and Ang Si conveyed 100 shares each to Peter in 1974 and 1976, respectively, Peter acquired these shares through the fraudulent acts of the former; thereby creating, by force of law, an implied trust for the benefit of Co It from whom the shares came (Article 1456, Civil Code). Further, Peter’s own admission that he acquired 100 shares from Co It in 1976, 75 shares in 1982 albeit unconfirmed, and 185 shares in 1986, flawed his brazen assertion that he acquired shares to GLI only by reason of a donation from his mother, Ang Si.

Likewise, when Anthony, Mary, Peter, Joseph, Ang Si and Co Ay Tian used part of the trust funds to subscribe to additional shares in 1986, when GLI increased its authorized capital stock, and caused such subscription to be made unto them, a trust was established by operation of law in favor of Co It to whom the funds belong (Article 1455, Civil Code). The same raison d’etre applies to the subsequent additional subscriptions, particularly in 1997 and 2004, when Green Cross, Inc. increased its authorized capital stock to 100 Million Pesos and 600 Million Pesos, respectively (cf. Green Cross, Inc. General Information Sheets, CY 1997 and CY 2004).

By 2004, the stockholders on record of Green Cross, Inc. dramatically increased to include Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho.

Without meaning to question the resources of respondents in subscribing to said shares, the report of the Bureau of Internal Revenue (“BIR”) dated February 23, 2007 cannot be disregarded. Except for respondent Ann Marie Co-Imperial who filed her income tax return (“ITR”) in 2000 and 2004, none of the respondents religiously filed their ITRs from the time GLI was incorporated. This brings us to no other conclusion than this – part of the funds used to subscribe to the shares of Green Cross, Inc. when it increased its authorized capital stock in 1997 and 2004 are trust funds; as such, a trust was established by operation of law in favor of Co It, to whom the funds belong.

In the same manner, we cannot completely disregard the fact that two years after respondents Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho became shareholders of Green Cross, Inc., the authorized capital stock of Common Goal Real Properties Inc., owned by herein respondents, significantly increased from 500 Million Pesos to One Billion Pesos. Taking into consideration the BIR report, respondents do not have proof of income during those times, which made the subscription dubious.

Consequently, when Co It demanded that these shares be returned to him, and respondents refused to acknowledge receipt of, much less surrender, these shares, probable cause arose to indict them for estafa under Article 315, par. 1(b), thus:

1. Peter A. Co, Nancy D. Co, So Hua T. Co, Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho received the shares of stocks in trust, by operation of law.
2. Denial on their part of such receipt.
3. Such denial is to the prejudice of complainant.
4. There is demand.

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Finally, respondents strongly challenge the truthfulness of the accusations made by Co It in narrating his grievances. Yet, it is axiomatic that truth is established not by the number of witnesses but by the quality of their testimonies (People vs. Ramos, 427 SCRA 299, 308 [ 2004]).

We find Co It’s positive and categorical statements more consistent with logic and common human experience.

WHEREFORE, the foregoing considered, it is respectfully recommended that:

1. Informations for violation of Article 315, par. l(b) of the Revised Penal Code be FILED against Anthony A. Co, Mary Co Cho, Peter A. Co, Nancy D. Co, So Hua T. Co, Michael Anthony Co, Ann Marie Y. Co-Imperial, Joanna Liza Co Yap, Jim Lewis T. Co, Nessie Pearl C. Chan, Sandy L. Chan, Mark David C. Cho and Dick Milton C. Cho before the appropriate court;

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3. For violation of Section 255 of the NIRC, a copy of the records be forwarded and indorsed to the Bureau of Internal Revenue for further investigation.
4. As to the alleged diversion of Green Cross, Inc. funds to Common Goal Real Properties, Inc., a copy of the records be forwarded and indorsed to the Anti-Money Laundering Council for further investigation.

Padre Faura, Manila, January 07, 2008

Signed
PHILLIP I. KIMPO
Senior State Prosecutor
Chairman

Signed
PHILIP L. DELA CRUZ
State Prosecutor
Vice-Chairman

Signed
ROMEO D.C. GALVEZ
State Prosecutor
Member

Signed
MARY JANE W. SYTAT
Associate Prosecution Attorney
Member

Recommending Approval:

Signed
RICHARD ANTHONY D. FADULLON
Assistant Chief State Prosecutor

Approved:

Signed
JOVENCITO R. ZUÑO
Chief State Prosecutor

LUKE 17:3

“Take heed to yourselves: If thy brother trespass against thee, rebuke him; and if he repent, forgive him.”
My siblings have not repented. I reach out but they refused to talk to me. How can I forgive?