Panlilio v. Zapanta

[SEC-SICD * CASE NO. 01-94-4657. February 13, 1996.] PABLO D. PANLILIO, ET AL. , petitioners , vs . JUAN R. ZAPANTA, ET AL. , respondents . D E C I S I O N This is a case for accounting of corporate funds and assets and dissolution of corporation. The facts of the case which, from the pleadings and evidence presented by the petitioners and the respondents, may be considered as concurred in by both parties are the following: In the early part of the first quarter of 1971, TPZ Realty Development, Inc. (TPZ for brevity) was incorporated and registered with this Commission, (Par. 3 of Petition, par. 1.3 of Answer and Exh. 1). On April 20, 1971, the corporate name of TPZ was changed or amended to Cattleya Realty Corp. (CRC for short) (Par. 5 of Petition, par. 1.5 of Answer, Exh. B and Exh. 3). In late 1976, CRC was phased out. (Par. 12 of Petition, par. 1.7.1 of Answer). On February 23, 1977, Cattleya Gardens Makati, Inc. (CGM for short) was registered with this Commission. (Par. 1.2 of Petition, par. 1.7.2 of Answer, and Exhibit C). According to the petitioners, CRC acquired several real properties, constructed buildings thereon, and thereafter they were sold. The description of these real properties were summarized on pages 2-3 and 5 of the Memorandum for petitioners as follows: "1. CRC first acquired a vacant lot with an area of 2,247 square meters, more or less, located at Salcedo St., Legaspi Village, Makati, Metro Manila, covered by Transfer Certificates of Title Nos. 373884, 373885 and 373886 as shown in the Master Deed of Cattleya Realty Condominium (Exhibit "T"). This Master Deed was signed by respondent Zapanta as President of CRC as could be seen on Page 13 of the Deed (Exhibit "T-12"). On these three parcels of land, a seven-storey building was constructed with a total of sixty seven (67) separate condominium units (Exhibit "T-12"). prLL 2. In 1974, CRC still acquired another lot in Baguio City and constructed a 12-unit apartment thereon which apartment is known as Cattleya Garden Baguio and were later sold or disposed (TSN dated July 6, 1994, pages 7 and 8, Testimony of Pablo D. Panlilio). 3. A parcel of land covered by TCT No. S-35690 of the Register of Deeds of Metro Manila, District VI, with an area of 869 square meters, more or less (Exhibit "K" to "K-3"). A building was also constructed on this parcel of land. 4. A parcel of land covered by TCT No. S-18876 of the Register of Deeds of Rizal, with an area of 925 square meters, more or less. A building was likewise constructed therein. (Exhibit "L" to "L-2"). xxx xxx xxx With the accumulated profit of CRC, CGM acquired a lot located at 111 Alvarado St., Legaspi Village Makati, Metro Manila, and constructed a building thereon, which came to be known as Cattleya Gardens Apartment. When the construction of the Cattleya Garden Apartment was finished, it contained thirty-three (33) condominium units, some of which were sold to third parties by respondent Zapanta. In essence, the petitioners claim that the above-described properties were sold under the direction of respondent Zapanta and that both respondents Zapanta and Tan as the responsible corporate officers did not account for the proceeds of the sale. In their defense, respondents Zapanta and Tan contend that this action has prescribed because they ceased to act or function as corporate officers of CRC in 1976 when the corporation was phased out and as corporate officers of CGM in 1981, but the action was filed only on January 6, 1994. They further argue that this action is barred by laches and that the petitioners have no cause of action. The issues to be resolved in this case are the following: 1. Whether or not petitioners have a right of action for accounting against respondents; 2. Whether or not petitioners' right of action for accounting, if any, has prescribed; 3. Whether or not petitioners' right of action for accounting, if any, is barred by laches, and; LLphil 4. Which of the parties are entitled to damages, attorney's fees and cost of suit? Insofar as the first three issues are concerned, considering that they are interwoven or closely related with each other this Hearing Officer deems it proper to discuss them jointly. With respect to the issue of prescription, it has to be remembered that the petitioners admitted in paragraph 12 of the Petition that CRC was phased out in 1976. The respondents also admitted this fact in paragraph 1.7.1 of their Answer. Having been phased out in 1976, the respondents ceased as corporate officers as well as in the performance of their functions as officers of said corporation also in 1976. (Pages 12-14, September 6, 1995, transcript). Under Article 1149 of the Civil Code, the prescription for actions whose prescriptive period are not fixed, such as action for accounting, is five (5) years and under Article 1153 of the Civil Code, the prescriptive period runs from the day the persons who should render the same cease in their functions. Given the foregoing facts, the filing of their action on January 6, 1994 was beyond the five (5) years prescriptive period which expired in 1981, with respect to CRC. The same thing may be said of CGM. Respondents ceased as corporate officers and in their functions as corporate officers of CGM sometime in 1981. (Transcript, September 6, 1995, pages 16-19). The filing of this action on January 6, 1994 was also beyond the five (5) year prescriptive period. In a related manner, this action is barred by laches. There is nothing in the records that explains or justifies the petitioners' failure to demand for accounting within almost eighteen (18) years in the, case of CRC (from 1976 to 1994) and almost thirteen (13) years in the case of CGM (from 1981 to 1994). Petitioners were sufficiently represented in the board of directors of CRC and CGM and had ample opportunity to demand the accounting that they now seek. (Transcript, August 25, 1994, pages 73-75, 80-81, 92-93; Transcript, September 6, 1995, pages 22-25). Their silence for so long a period of time to demand accounting indicates that they slept on their right and they cannot be allowed to step forward at this late stage in the day to compel the respondents to render an accounting when the relevant records are difficult to be located, or may not be located at all. Furthermore, what defeats the petitioners cause of action for accounting is that, from the testimony of petitioner Panlilio himself, the petitioners approved the sales of the subject real properties acquired by CRC and CGM and they continuously re-elected respondent Zapanta as President by unanimous vote even after the sales were made and they did not protest the sales in any board meeting. (Transcript, August 25, 1994, pages 56-59, 65-72, 89-91, 93-94). This casts serious doubts on the petitioners' cause of action which they brought only after eighteen (18) years in the case of CRC and thirteen (13) years in the case of CGM despite the fact that they approved the sales and did not protest against said sales. Insofar as the issue of damages (moral and exemplary) is concerned, this Hearing Officer finds no compelling reason to award the same. But, insofar as the issue of attorney's fees is concerned, considering that respondents herein, because of this instant petition filed against them by petitioners, were compelled to litigate and incur expenses for attorney's fees in the process in order to defend themselves, this Hearing Officer deems it proper to award respondents an attorney's fees. On the matter of dissolution, aside from the fact that it was not one of the issues agreed upon by the herein parties at the preliminary conference, the petitioners failed to comply with the substantive and procedural requirements and to present supporting evidence to justify dissolution. Wherefore, premises considered, judgment is hereby rendered as follows: 1. Dismissing petitioners' petition for accounting against the respondents for the same has already prescribed and/or barred by laches; 2. Dismissing respondents' counterclaim for moral and exemplary damages against the petitioners for lack of merit; 3. Ordering petitioners to pay respondents the amount of Two Hundred Thousand Pesos (P200,000.00) for and as attorney's fees. SO ORDERED. (SGD.) ROGELIO C. SESCON Hearing Officer