Maky Marine Corporation, et al. vs. Kojiro Atsuta, et al.

[SEC-SICD * CASE NO. 02-96-5251. July 15, 1998.] MAKY MARINE CORPORATION, AKIRA HEMMI, ADELlA BALAJADIA, IKE MANGONON, and SHIRLEY BALAJADIA , petitioners , vs . KOJIRO ATSUTA and MAXCLAIRE ATSUTA , respondents . D E C I S I O N This is a petition filed by the above named petitioners seeking the issuance of a Writ of Mandamus for specific performance, accounting, production of corporate documents, damages, with a prayer for the issuance of a Writ of Preliminary Injunction/Restraining Order against the respondents. The records showing the pieces of evidence presented establish the following: Petitioner Maky Marine Corporation (MMC), a corporation engaged in the fishery business, was incorporated on August 11, 1994. MMC's Articles of Incorporation (Exh. D) show that MMC's incorporators and original directors consisted of four (4) Japanese Nationals, including herein respondent Kojiro Atsuta (Kojiro), and five (5) Filipinos, including respondent Maxclaire Atsuta (Maxclaire). The authorized capital stock of MMC is P2,000,000.00 consisting of shares at P100.00 par value per share. Twenty-five percent or P500,000.00 of said authorized capital stock was subscribed by the incorporators in the following proportions: P200,000.00 was equally allocated among and paid for by the 4 Japanese nationals, another P200,000.00 by Maxclaire, and P100,000.00 equally allocated among and paid for by the rest. The Articles of Incorporation show that Kojiro was elected Treasurer of MMC and thus authorized to receive the paid-up capital stock of the incorporators during the pre-incorporation stage of MMC in the amount of P500,000.00. Petitioners claim that petitioner Akira Hemmi (Hemmi) was informed by a certain Koki Mizuchi that Kojiro, who manages MMC, was looking for financing or additional investors because of cash problems. Said Koki Mizuchi then set up a meeting between Hemmi and Kojiro. Petitioners claim that Kojiro proposed to sell to Hemmi fifty-one percent (51%) of the shares of MMC and for Hemmi to grant loans to MMC in order for it to start its operations and settle its obligations with third persons (TSN, 25 March 1996, pp. 14-15, 26). Hemmi, with his co-investors, herein individual petitioners Adelia Balajadia, Ike Mangonon and Shirley Balajadia, agreed to Kojiro's proposal (TSN, 25 March 1997, p. 27). Petitioners have shown receipts (Exhs. G, G-1, Q and Q-1) signed by Kojiro evidencing Hemmi's payments in pursuant of their agreements. Respondents' Answer does not deny that said meeting and agreement took place; and, it also do not deny the authenticity and due execution of the receipts. Respondents claim, however, that it was Hemmi himself who sought to be introduced to Kojiro and that the receipts do not honestly reflect the amount actually received because Hemmi allegedly misled Kojiro into signing them. During the negotiations, respondent Kojiro represented to individual petitioners that MMC owned several parcels of land in Batangas (Exhs. JJ, KK, LL, MM, NN and OO; TSN 25 March 1996, pp. 19-21). Said assets of MMC were contained in a List (Exhs. E, E-1, and E-2) and Outline of MMC's assets, distribution of shares of stock and roster of corporate officers (Exhs. F, F-1, F-2). As a consequence of individual petitioner's investment in and loan to MMC, several Deeds of Assignment were executed by several incorporators in favor of petitioners transferring to the latter's names shares of stock in MMC (TSN, 25 March 1996; pp.; 31-36, 45-46, 17 April 1996 pp. 3-5, 11, 13-16, 22-23; Exhs. G, G-1, H, I, J, K, L, M). These loans to MMC are evidenced by the receipts signed by Kojiro (Exhs. Q Q-1, R, S, T, U and V). Respondents admit in their Answer that shares of stock were assigned to petitioners although said transfers were not recorded in the Stock and Transfer Book. The individual petitioners claim that the investment and amounts they have released were conditioned on the undertaking made by Kojiro that he will transfer to MMC's name the aforementioned parcels of land and several vehicles acquired by Kojiro with corporate funds but currently registered in the name of Maxclaire and that he will turn over corporate documents, licenses, permits, contracts and accounting books but with which undertakings Kojiro failed to comply (TSN, 25 March 1, 1996, pp. 36-37, 40-42). Said undertakings were formalized in writing by Kojiro and submitted as evidence by petitioners (Exhs. W and W-1; TSN, 17 April 1996 pp. 60-61). Respondents answer that said properties were bought with personal funds prior to the incorporation of MMC. With respect to the undertakings allegedly made by Kojiro, respondents failed to deny in their Answer the existence and due execution of the document (Exh. W) but merely claim that the translation thereto (Exh. W-1) misinterpreted the true intent and spirit of their agreement. The petitioners alleged that Kojiro refused to reveal the expenses made with their investment and to render an accounting thereof , (TSN, 19 March 1996, p. 43). On August 7, 1995, a Board of Directors' meeting was duly held at MMC's principal address at Blk. 8 Lot 2 Jalandoni Street, West Executive Village, B. F. Homes, Paraaque. Those present were Yukio Saigan, Kojiro, Yoshihisa Mitzuguchi, Maxclaire, Toshinobu Iwahashi and Katrine Soriano. In said meeting, HEMMI, SHIRLEY BALAJADIA, ADELIA BALAJADIA, IKE MANGONON, YUKIO SAIGAN AND KOJIRO were elected Directors for 1995; and Hemmi, Shirley Balajadia and Maxclaire were elected Chairman of the Board, Treasurer and Secretary of MMC, respectively (Exh. O). The said election was duly attested by Katrine Soriano, then acting as Corporate Secretary (Exh. N). On September 16, 1995, a special meeting of the Board of Directors, with proper notices sent (Exh. Y), was held wherein Kojiro Atsuta and Maxclaire Atsuta were removed as MMC's President and Secretary, respectively, and the election of Hemmi and Abraham Espartero were elected in their stead, respectively (Exh. Z). Kojiro, however, never recognized the election of Hemmi as new President of MMC and continued exercising the duties and functions of his former position (TSN, 17 April 1997, pp. 46-50). This dispute between the individual petitioners and respondents has led to the filing of the instant Petition on February 1, 1996 for mandamus, specific performance, accounting, production of corporate documents, damages with prayer for preliminary injunction/restraining order against Kojiro and Maxclaire Atsuta arising from respondents' non-compliance with their undertakings with respect to the sale of 51% percent of the shares of MMC to individual. While petitioners have presented testimonial and documentary evidence to support their claims and allegations, the same can not be said of respondents who were given several opportunities by this Office in the interest of fair play and justice. Petitioners have presented the oral testimonies of Yukio Saigan on March 19, 1996 and Hemmi on March 25 and April 17, 1996. Respondents failed to appear on said dates. Thus, as prayed for by petitioners, in the Orders issued by this Office on May 9 and June 4, 1996, they were deemed to have waived their right to cross-examine the witnesses. Respondents moved to reconsider said Orders and the motion was granted on July 26, 1996 but allowing respondents to cross-examine Hemmi only and not Saigan who already returned to Japan. In the hearing set on November 7, 1996 for the cross-examination of Hemmi, respondents' counsel again failed to appear. Respondents again moved to reconsider and such was granted. Hearing dates were set on March 17, April 7, May 6 and July 1, 1997 but still, respondents' counsel failed to appear. Thus, on motion of petitioners' counsel, the respondents were declared to have waived their right to present evidence in the September 17, 1997 Order earlier cited therein. The petitioners, in their Memorandum, present the following issues: "1. Whether or not petitioners are stockholders of record of petitioner corporation? 2. Whether or not petitioner Hemmi was duly elected as Chairman and President of the Corporation and consequently exercise the powers appurtenant thereto? 3. Whether or not respondents Kojiro and Maxclaire should be ordered to turn over possession of corporate records, books, and documents to petitioners and render an accounting of corporate funds? 4. Whether or not respondent Kojiro and Maxclaire should be ordered to transfer title of the real properties covered by TCT Nos. 84360, 84361, 84362, 84363, 84364 and 84365 of the Registry of Deeds of Batangas and of the vehicles aforementioned to the name of the petitioner corporation? 5. Whether or not respondents are liable for moral, exemplary damages and attorney's fees?" Petitioners are stockholders of MMC From the evidence on record, there is no doubt that individual petitioners are stockholders of record of MMC Respondents themselves admit in their Answer that shares of stock were transferred to petitioners and that petitioners have become stockholders of MMC in the meeting of the Board of Directors duly held on August 7, 1997. The Secretary's Certificate (Exh. N) attests to the validity of said meeting where all petitioners were elected as Directors of MMC. Also, the Minutes of the meeting (Exh. O) was signed by respondents thereby signifying their approval that the events described therein conforms to what actually transpired. Indeed, respondents are now estopped from questioning the status of petitioners as stockholders of record and Directors of MMC and the latter's right to bring the instant action against them. Petitioners have shown their certificates of stock (Exhs. DD, EE, FF, GG, HH, II) to prove their ownership of MMC's shares of stock. A certificate of stock is not even a "condition precedent to the acquisition of the rights and status of a stockholder" but "is nevertheless the best evidence thereof and is convenient for purposes of transfer, either by way of collateral or by absolute sale." (Campos, Jr. and Maria Clara Campos, the Corporation Code, Volume II, p.206.) Petitioner Hemmi is the duly elected Chairman and President of MMC . It being established that petitioners are stockholders of record of MMC, Hemmi had become eligible and qualified to be elected as a Director and President upon transfer to him of shares of stock of the corporation. Section 23 of the Corporation Code requires that every director must own only at least one share of the capital stock of the corporation of which he is director. Petitioners' election as Directors of MMC was validly held during the August 7, 1995 Board of Directors' Special meeting, as shown by the Minutes (Exh. O) and the Secretary's Certificate (Exh. N). Hemmi's election as President of MMC during the Special Meeting of the Board of Directors on September 9, 1995, in replacement of Kojiro, was likewise validly held, as shown by the Minutes (Exh. Z) and the appropriate Notice of the said meeting (Exh. Y). It is noted that the Minutes for the September 16, 1995 Special Meeting was also signed by the respondents, thus, signifying their conformity that the events described actually happened. Therefore, with Hemmi as duly elected president, Kojiro has lost the right to continue exercising and performing the functions and duties of his former position which he continued to exercise even after his valid removal as President, as testified to by Hemmi (TSN, 17 April 1996, pp. 45-50). Hemmi, by virtue of his position, sent a letter (Exh. AA) to the security agency previously commissioned by Kojiro to guard MMC's premises in Batangas saying that MMC was terminating its services. The security agency, however, refused to receive said letter (Exh. AA-1) and continued to post security guards on said premises allegedly on orders of Kojiro. Respondents Kojiro and Maxclaire are obliged to turn over to the management of MMC the corporate records, books and documents and to render an accounting of corporate funds . It is true, as petitioners alleged, that the duly elected officers must gain possession of the corporate records, books and documents of MMC so they may be able to run and manage the corporation. Hemmi has testified that Kojiro and Maxclaire Atsuta deliberately withheld said corporate books and documents despite their having been removed as corporate officers of MMC (TSN, 7 April 1996, pp. 60-61). Petitioners' position is firmly anchored on Section 74 of the Corporation Code which provides that ". . . every corporation shall, at its principal office, keep and carefully preserve a record of all business transactions, and minutes of all meetings of stockholders or members, or of the board of directors or trustees . . . " And the term "records of all business transactions" would include those which the Code of Commerce requires all merchants to keep, such as a book of inventories and balances, a journal, a ledger, and a book for copies of letters and telegrams, and those under Section 59 of the Corporation Code, such as financial statements, income tax returns, vouchers and receipts, contracts and all pertaining to such contracts. (Campos and Campos, Volume I, p. 783.) It is clear that respondents have not made a proper accounting of all corporate finances from the time the latter became officers. Petitioners' witness, Yukio Saigan, a Director of MMC, testified that he remitted to Kojiro for the account of MMC the amount of Y5,000,000.00 in May, 1994, and the amount of Y4,000,000.00 in October, 1994 (TSN, 19 March 1997, pp. 23-24; 19 March 1997, pp. 34-37, 39-40; Exhs. A, A-1, B and B-1) as investment in MMC's purchase of real property and for expenses of MMC's management. Respondents have not explained to petitioners how the money was spent. Worse yet, petitioners were informed by Kojiro that Maxclaire several parcels of land (Exhs. JJ, KK, LL, MM, NN and OO) and a Mitsubishi Pajero with plate number TNG-366, which respondents have admitted were owned by MMC. Thus, it is imperative for respondents to render a proper accounting and to surrender all corporate books and records to the new executive officers for them to be able to discharge their duties and manage MMC's operations efficiently. Evidence adduced by petitioners would show that respondents have indeed used corporate funds to purchase in their names the aforementioned parcels of land property covered by TCT Nos. 84360, 84361, 84362, 84363, 84364 and 84365 of the Registry of Batangas. As testified to by Hemmi, Kojiro promised to transfer ownership and possession of all corporate assets in the name of the corporation but which promise Kojiro failed to fulfill (TSN, 2 March 1996, pp. 3642; 17 April 1996, pp. 58-59). There is sufficient evidence also to show that MMC's factory was constructed on said parcels of land but which are still in the name of Maxclaire, married to Kojiro. Respondents are legally obligated, as trustees for MMC, to transfer the said titles to petitioner corporation. Under Article 1455 of the New Civil Code, where a trustee [herein respondents] "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 [Maxclaire], a trust is established by operation of law in favor of the person to whom the funds belong [MMC]".A director, holding a position of trust, is a fiduciary of the corporation. In cases of conflict of his interest with those of the corporation, he cannot choose his own without incurring liability. So, where a director converts for his own use funds or property belonging to the corporation, "no court will allow him to keep the profit he derives from it wrongfully." (Campos and Campos, Volume I, p. 686). There is substantial evidence to show that individual petitioners have suffered mental anguish, serious anxiety, wounded feelings and moral shock. They have invested a considerable amount in the corporation by purchasing its shares and granting sums of money received by respondents to liquidate the loan accounts and expenses of MMC (Exhs. Q Q-1, R, S, T, T and V; TSN, 25 March 1996, p. 56; 17 April 1996, p. 9, 12-13, 15, 17 and 23). As stockholders and Directors of MMC, they have the right under the Corporation Code to know how their investments are being managed. Without the corporate books, papers and documents, they would be kept in the dark on how to operate the corporation into a profitable enterprise. This Office finds the amount of P2,000,000.00, as prayed for, sufficient and justified as award for moral damages. Likewise, the amount of P500,000:00 as award for exemplary damages is just and equitable for respondents' clear, wanton and malicious refusal to comply with their legal obligations and promises. As to petitioners' attorney's fees, the amounts of P200,000.00 plus P2,000.00 per counsel's appearance before this Office are justified under the circumstances. WHEREFORE, premises considered, this Office grants the instant Petition. Respondents are hereby ordered to refrain from exercising the powers appurtenant to the President and Chairman of petitioner corporation, to turn over possession of corporate records, books and documents to petitioners and render an accounting of corporate funds. Respondents are further ordered to cause the transfer of title of the real properties covered by TCT Nos. 84360, 84361, 84362, 84363, 84364 and 84365 of the Registry of Deeds of Batangas and all other personal properties of petitioner corporation, specifically the Mitsubishi Pajero vehicle with plate number TNG-366, and to pay jointly and severally the petitioners P200,000.00 as attorney's fees. SO ORDERED. (SGD.) C A. GERARD M. LUKBAN Hearing Officer