Montessori Child vs. Sps. Enrico Zamora, et al.

[SEC-AC NO. 252. March 27, 1991.] MONTESSORI CHILD, INC. & DANILO CUSTODIO , plaintiffs-appellees , vs . SPS. ENRICO ZAMORA & MELISSA I. ZAMORA , defendants-appellants . D E C I S I O N This is an appeal from the decision dated February 16, 1989 in SEC Case No. 3006 rendered by Hearing Officer Juanito B. Almosa, Jr. The following facts are not controverted: The plaintiff-appellee Danilo A. Custodio together with Belinda Custodio, Edgardo Custodio and defendants-appellants Enrico and Melissa Zamora became stockholders of Montessori Child, Inc. on May 9, 1984. Since then, all of them became members of the Board of Directors with Enrico Zamora as President, Danilo Custodio as Vice President, Melissa Zamora as Secretary/Head Directress and Benilda Custodio as Treasurer. Due to conflicts in the business operation, the spouses Zamora tendered their resignations to the Board on April 14, 1986 as President and Secretary/Head Directress respectively. On March 21, 1989, the spouses Zamora established their own school called the Montessori de Manila a preparatory school like the Montessori Child and had it registered with the Bureau of Domestic Trade under the name of Enrico Zamora, in a nearby place where plaintiff-appellee school is located. When Montessori de Manila became operational on May 15, 1986, all the personnel staff of Montessori Child, Inc. including the teaching staff resigned and were absorbed by the former and as a consequence thereof, the latter ceased operation, there being no more enrollees as both the new and old were accommodated by the former. After due hearing, the hearing officer disposed of the case in favor of the plaintiffs a quo . The decision is based on the following findings: 1. Defendants made an act of disloyalty as directors of plaintiff corporation; 2. The actuations of defendants-spouses were tainted with malice and bad faith and brought about the closure of plaintiff corporation; cdlex 3. The animosities between Danilo Custodio and the Zamoras are no justifications for the latter to abandon plaintiff-school and operate a new school of their own; 4. The spouses Zamora violated their fiduciary obligation when they seized the corporate opportunity that rightly belongs to Montessori Child, Inc.; and 5. The spouses have not made an accurate accounting of the corporate funds. Dissatisfied with the decision, defendants a quo filed this instant appeal. The issues in the proceedings before us can be summarized into two: 1. Whether or not defendants-appellants in operating another school and accepting enrollees therein, committed act of disloyalty to the plaintiff-appellee school and to the other appellees, and 2. Whether or not plaintiffs-appellees have the right to ask for an accounting of corporate funds for the school-years 1984-1985 and 1985-1986. 3. Whether or not defendants-appellants have made unauthorized disbursements in the sum of P173,463.10 out of the total amount of P189,552.00 representing several transactions for the school year 1985-1986 which is claimed to be without supporting receipts therefor. Anent the first issue, defendants-petitioners alleged that contrary to the findings of the Hearing Officer, they have committed no act of disloyalty to the Montessori Child, Inc. and/or to the plaintiffs-appellees because prior to their putting up Montessori de Manila, defendants-appellants had resigned from appellee corporation not only as officers but also as directors. Documentary evidences, however, submitted to this Commission negate such assertion. Exhibit C bears that Enrico Zamora registered with the Bureau of Domestic Trade (BDT) now Department of Trade and Industry, Montessori de Manila on March 21, 1986. The claimed letters of resignation by the spouses Zamora were filed on April 14, 1986 (Exhs. 1 and 2). In other words the spouses first established their private school before they tendered their letters of resignation. Assuming, ex argumenti gratia , that resignation preceded establishment of their school, their letters of resignation however do not sustain their contention that they have resigned as officers and directors of Montessori Child, Inc. as these letters clearly spelled out positions they are resigning from, i.e. as President for Enrico Zamora and as Secretary/Head Directress for Melissa Zamora. No mention whatsoever of the word "Director". With these facts obtaining, it is beyond doubt that defendants-petitioners have committed acts of disloyalty. Sec. 34 of the Corporation Code states, thus: Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same , unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture . (Emphasis supplied) Officers and directors of corporations are trustees or quasi-trustees of corporate assets and occupy fiduciary relation to corporation and its stockholders which require them to act in utmost good faith and not for their own personal interest; it is the policy of the law to put fiduciaries beyond the reach of temptation by making it unprofitable to yield to it . . . (Schildberg Rock Products Co., Inc. v. William R. Brooks and Lestic H. Kinsel, Jr., Supreme Court of Iowa, Feb. 8, 1966, North Western Reporter, 2d Series) Be this as it may, we feel the need to limit the liability of the spouses Zamora for their act of disloyalty to one school year (1986-1987) only. The reason being that "a business opportunity ceases to be a 'corporate opportunity' and becomes 'personal' when the corporation is definitely no longer able to avail itself of the opportunity" [Fletcher citing United States Toledo Trust Co. v. Nye, 392 F Supp. 484 (ND Ohio, 1975)] The inability of Montessori Child to avail itself of a business opportunity arose from the failure of the remaining directors (still constituted a quorum as such can still transact favorable business for the corporation) to renew the contract of lease with the owner of the premises rented which thus expired on April 1986 and to assure the teaching and personnel staff and the students that the school will continue operation (Memorandum on Appeal, p. 4). Thus it can be said that the closure of Montessori Child should be attributed not only to the disloyalty of the spouses Zamora but to the negligence of the remaining directors as well. LexLib Anent the second issue, there is no dispute that plaintiff Custodio is a stockholder and director of plaintiff corporation. Sec. 75 of the Corporation Code states, thus: Within ten (10) days from receipt of a written request of any stockholder or member, the corporation shall furnish to him its most recent financial statement, which shall include a balance sheet as of the end of the last taxable year and a profit or loss statement for said taxable year, showing in reasonable details its assets and liabilities and the result of its operations. xxx xxx xxx With respect to the third issue, we find that there is absolutely no evidence to support what plaintiffs-appellees hint or insinuate that said amount of P189,552.00 was converted by the defendants-appellants for their own use. On the contrary, there is abundant evidence that the disbursements of the corporate funds by defendant-appellant Enrico Zamora were duly accounted for pursuant to the documents consisting of vouchers and receipts and testified to by the corporation's accountants Mrs. Elizabeth Luces and Liberty Devanadera. In fact, the Hearing Officer credited the defendants-appellants with the sum of P16,088.90 as fully authorized disbursements out of the total amount of P189,552.00 and ordered defendants-appellants to render an accounting of the amount of P173,463.10 only. We believe that such an accounting should be made complete with an itemization of the disbursements of said sum of P173,463.10 and the receipts in support thereof together with the proper authorization from the corporation in order that said disbursements may not constitute ultra-vires acts by the defendant-appellant Enrico Zamora. WHEREFORE, premises considered, the appealed decision of the hearing officer is hereby AFFIRMED subject to the following modifications: 1. The defendant spouses are ordered to account to plaintiff Montessori Child, Inc. all the profits obtained in the operation of Montessori de Manila for the school-year 1986-87 by refunding such profit to the former within thirty (30) days from receipt hereof, and 2. The defendants Zamoras are directed and/or ordered to render an accounting of corporate funds starting from school-year May 1984-1985, and to provide an itemized disbursement of the P173,463.10 out of the total amount of P189,552.00 representing several transactions which were found to be unauthorized disbursement of corporate funds for the school-year 1985-1986 and supporting receipts thereof, and to account if it cannot be accounted, within thirty (30) days from receipt thereof. LexLib SO ORDERED. (SGD.) ROSARIO N. LOPEZ Chairman (did not participate) (SGD.) GONZALO T. SANTOS, JR. (SGD.) RODOLFO L. SAMARISTA Associate Commissioner Associate Commissioner (SGD.) ARMANDO Z. GONZALES (SGD.) MERLE O. MANUEL Associate Commissioner Associate Commissioner