Santiago v. Parra

[SEC-SICD * CASE NO. 03-98-5927. January 29, 1999.] ROMEO S. SANTIAGO , petitioner , vs .EDUARDO A. PARRA , respondent . D E C I S I O N This is a petition seeking for a permanent injunction to issue against respondent Eduardo Parra and/or his agents, allies, cohorts or anybody acting for or on his behalf, to restrain and enjoin them from withdrawing the deposits, funds or monies of petitioner corporation Conventional Construction Company, Inc. (Company) from its depository bank, Metro Bank, Sta. Elena Branch, Marikina City; for nullification of the stockholders' meeting held on January 31, 1998; for the production of the company's annual report of its operation; for the opening of the company's books of accounts for inspection by the petitioners or their duly authorized representatives; for submission of the company's financial statements for the year 1995, 1996 and 1997, and to account for and return all properties, funds and assets of the company which respondent and his cohorts acquired or dissipated. Substantially, the petition alleges, among others, that: petitioner company has an authorized capital stock of One Million Five Hundred Thousand Pesos (P1,500,000.00) divided into fifteen thousand (15,000) shares with a par value of One Hundred Pesos (P100.00) per share, with Four Hundred Sixty Thousand Pesos (P460,000.00) representing Four Thousand Six Hundred shares (4,600) have been subscribed; that petitioners Romeo S. Santiago, Amado C. Guinto, Honorio Pacis, Jr. and respondent Eduardo Parra are all stockholders of the Company; that as of November 18, 1997, the outstanding shares and stockholders of Conventional Construction Company Inc. are as follows: 1. Eduardo A. Parra 1,000 shares 2. Romeo S. Santiago 900 shares 3. Amado C. Guinto 400 shares 4. Honorio E. Pacis, Jr. 400 shares 5. Rosalina Q. Parra 300 shares 6. Gerard Q. Parra 300 shares 7. Heide Q. Parra 300 shares 8. Treasury Stocks 1,000 shares Total 4,600 shares while the members of the Board of Directors and officers of the Company are, namely: Eduardo A. Parra President Romeo S. Santiago Treasurer Honorio E. Pacis, Jr. Secretary Gerard Q. Parra Director Rosalina Q. Parra Director On January 20, 1998, petitioners alleged that a notice was sent by respondent as president to petitioners informing them that the annual meeting of the Company would be held on January 31, 1998 at 3:00 P.M. at Milflores Street, Twinville Subdivision, Nangka Marikina City, to elect the five (5) directors for 1998-1999, notwithstanding the fact that Article VII, paragraph 1 of the Company's by-laws provides that all meetings of the stockholders shall be held at the principal office of the company, that is in Quezon City. On the day of the meeting, petitioner Romeo Santiago was allegedly denied entry and was merely told by the housekeeper that the meeting was over. Petitioner Santiago waited for several days to be informed of the outcome of the meeting, to no avail. On February 7, 1998 he sent a letter to the respondent demanding that the minutes of the 31 January 1998 meeting be produced, and that petitioners be furnished the President's Report as to the financial status of the company and to render an accounting of its funds, property and assets for the past three years. However, despite the period given, respondent failed to produce the documents. Unknown to the petitioners, respondent, allegedly in conspiracy with the other stockholders who are all members of his immediate family surreptitiously organized on July 23, 1996 a corporation which is of the same nature and in the same business as Conventional Construction Company, Inc. The name of this new corporation is UNIPARR CONSTRUCTION & DEVELOPMENT CORPORATION, and it directly competes with the business of the petitioner corporation to the detriment and prejudice of the latter. It is claimed further that respondent, acting as President of the two corporations has in fact systematically given the business transactions and contracts of the petitioner corporation to UNIPARR. Respondent as director and officer of the Company thus, committed acts of disloyalty which are violative of his duties to the Company and should therefore account for the profits which should have otherwise accrued to the petitioner corporation by refunding the same to the latter. Records of this case will show that although respondent through his counsel opposed petitioners' application for a writ of preliminary injunction, he nevertheless failed to file his answer to the petition within the reglementary period despite the fact that his two or three motions for extension of time to file an answer were all granted. Consequently, respondent was declared in default in accordance with the rules and petitioners were allowed to present their evidence ex-parte. To prove their allegations, and to support their prayer for the relief sought for, petitioners offered the following documentary evidence: Letter of petitioners Romeo Santiago and Honorio Pacis, Jr. dated 03 March 1998 addressed to the Manager of Metro Bank, Marikina Branch (Exh. "A");Answer letter dated 16 March 1998 of the law division of Metro Bank (Exh. "B");letter of Heide A, Parra-Lozari addressed to the Branch Manager of Metro Bank Marikina dated 23 February 1998 (Exh. "C");Secretary's Certificate dated 20 February 1998, of Conventional Construction Company, Inc. (Exh. "C-1");Metro Bank's check under the account name of Conventional Construction Company, Inc. dated 13 March 1993 payable to Hilario delos Santos (Exh. "D");affidavit of Honorio Pacis ,Jr. dated 12 July 1998 (Exh. "E");letter of demand dated February 1998 of petitioners Santiago and Pacis, Jr. addressed to respondent Eduardo A. Parra (Exh. "G");and certificate of filing of articles and By-Laws of UNIPARR Construction and Development Corporation issued on July 23, 1996 (Exh. "H"). From the oral and documentary evidence adduced by petitioner and witnesses, namely, Romeo Santiago; Jesus Canicula, Accountant of Metropolitan Bank and Trust Company, Marikina Branch Mario Dizon, Metro Bank Marikina Branch Manager; Honorio Pacis Jr. and Honorio Pacis, Sr.,the following material facts are established: that respondent Parra, in conspiracy with other stock holders of the Company who are all members of his immediate family, held a meeting on 31 January 1998 in a place outside Quezon City, in violation of the By-laws of the company, and without the participation or to the exclusion of petitioners who are likewise stockholders of the Company; that after the meeting, respondents and hi cohorts changed the signatories of the corporation and attempted to withdraw the funds of the corporation; that it was through the timely action of the petitioners who sent a letter to the manager of Metro Bank Marikina Branch asking to hold in abeyance the withdrawal the company funds by the petitioner and his cohorts, that the bank in the meantime disallowed the withdrawal of the company's deposits by the new signatories. It has been likewise shown that one of the new signatories, Enrique Lozari, who was also allegedly voted & company president, is actually not a stockholder of record of the corporation. The oral and documentary evidence also established the facts that despite the demands to produce the minutes of the meeting of January 31, 1998, financial records, statements and other pertinent papers relative to the Company's operation, respondent failed to comply with said demands. Upon the other hand, documentary and testimonial evidence show that respondent committed acts of disloyalty to the company when he, in collusion with other stockholders who are all members of his immediate family, 7organized a corporation that directly competes with the business of Conventional Construction Company, Inc. Not only was UNIPARR Construction and Development Corporation organized by respondent and his group competing with the business of the petitioner company. Worse, the transactions and business contracts of the latter were systematically given to the competing corporation. and carried out so easily because of the fact that respondent is the Chief Executive Officer of both corporations which are housed in the same compound also owned by him. prcd These acts of disloyalty violate Section 34 of the Corporation Code which provides: "SECTION 34. Disloyalty of a director . 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." Aside from being uncontroverted, the evidence adduced by the petitioners, as well as their supporting arguments clearly establish their entitlement to the relief sought. Respondent's lack of interest in opposing the petition despite the Commission's leniency of granting him several periods of extension to submit his answer may only be taken to mean that he considers the matters alleged in the petition as incontrovertible. WHEREFORE, in view of the foregoing considerations, the petition is hereby GRANTED, and judgment is rendered as follows: 1. The meeting/proceedings held on January 31, 1998 is declare null and void for having been called and carried out in violation of the corporation's By-laws and of the petitioners' right to be present thereat; 2. Respondent Eduardo Parra is hereby ordered: a) to submit the annual report of the operation of corporation, as well as the financial statements of corporation for the years 1995, 1996 and 1997; b) to open the books of accounts of the corporation for inspection by the petitioners or their duly authorize representatives; c) to account for and to return all assets, property and funds of the corporation that may have been acquired and dissipated by him and his cohorts. 3. Respondent Eduardo Parra, his agents, representatives, allies, cohorts or anybody acting on his behalf, are enjoined from withdrawing the funds, deposits or money of the Conventional Construction Company, Inc. from its depository bank, Metro Bank Sta. Elena Branch, Marikina City, until a new set of officers shall have been elected in a general stockholders' meeting called is accordance with the Corporation Code or the By-laws of the corporation. prcd SO ORDERED. (SGD.) MALTHIE G. MILITAR Hearing Officer